Morning Market Update July 18: The Ben Show Hits Senate

Gold gained slightly overnight in European trading, with a blip upwards in early New York trading as we see a corrective bounce after Wednesday’s late selloff in thin volume. Part of Wednesday’s afternoon selloff was due to disappointment that gold couldn’t break the $1,300 mark with all the tailwind it had.

Stocks are also being affected by light volumes, as large trades are having outsized effects on indexes. The dollar is gaining this morning on good jobless data, after a slight sag in European trading.  The 10-year Treasury note has improved, with the yield dropping to 2.5%.

The world is watching as the Ben Bernanke Show hits the U.S. Senate today, after the Fed chairman testified to the House yesterday. Nothing different is expected from today, but the market seems to love reasons to react lately, and will be looking for an excuse to do so.

First-time jobless claims plummeted last week, with 25,000 fewer people filing for unemployment. Applications totaled 334,000, against expectations of 345,000. The drop is attributed to automobile plants reopening after shutting down last week for retooling, in preparation for building the new model year’s cars. The four-week moving average on first-time claims was down 5,250 to 346,000. Continuing claims rose 91,000 to hit 3.11 million.

In Asia, the Nikkei rose a beefy 1.3% to an eight-week high, as Japan prepares for weekend elections that are expected to strengthen the party of Prime Minister Abe, and increase the likelihood of the world’s largest quantitative easing policy continuing. Hong Kong stocks were barely down , posting a loss for the first time in four sessions. China stocks were down 1% as the government continues reforms aimed at curbing the grey market economy, and trimming capacity in overbuilt industries.

European stocks closed up slightly in light, mixed trading, as the good news of Fed QE measures continuing was balanced by a no confidence vote being called in Portugal’s government over austerity measures. German bunds strengthened to a five-week high.

The G-20 group of nations meets again in Moscow this Friday and Saturday, where the emerging nations are expected to voice complaints/concerns over the strong dollar hammering their currencies. A weaker dollar helps gold, so precious metals traders will be keen to see what, if anything comes of the meetings.

 

 

by David Peterson

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