Market Outlook for January 25, 2012 ~ eToro

Text goes here

In this Issue...

Get up to date - Breaking News

Read what our Top Contributors are saying

Recap of the Latest Global News

By Cory Vi & Andrew Su on Jan 25, 2012

Investor optimism was dented yesterday after European finance ministers failed to agree on the Greek debt swap deal and called for a greater contribution from debt holders. Finance ministers are pushing bondholders for greater debt relief by asking them to accept lower interest returns in the proposed debt swap deal. The stalling of negotiations has fuelled concerns that Greece will fail to make a bond payment due in late March. The EUR fell from a high of 1.3065 during the Asian session yesterday to as low as 1.2948 in early European trade today.

In more sobering news, the IMF has cut global growth forecasts and warned that the "epicentre of the danger is Europe but the rest of the word is increasingly affected." It cut global growth for 2012 from a September forecast of 4 percent to 3.3 percent and predicted a recession in Europe. The IMF called for an increase in the eurozone's rescue fund and a more active role from the ECB to address the crisis. In a dire warning, the IMF warned of a 1930's style worldwide depression unless more countries play their part and identified a possible global financing need of over $1 trillion in the next few years. Inflation in the UK for December fell to its lowest level in 6 months at an annual rate of 4.2% and the economy contracted in the fourth quarter which saw the GBP fall to as low as 1.5528.

Yesterday, US equities fell after advancing for five consecutive sessions as negotiations stalled in the proposed Greek debt swap deal. Furthermore, the IMF warned that there was potential for "political paralysis" in the United States that could lead to an unwinding of stimulus spending. Asian markets there were opened today closed higher while European shares are down about 1% mid session, falling for the second day, as Ericsson and Novartis missed earnings estimates.

Commodities News

Commodity prices managed modest rises yesterday despite growing global growth concerns. However, prices are falling during European trade. WTI crude is down 0.7% to $98.20 on Greek debt concerns expectations of rising stockpiles. Precious metals have also eased slightly with gold lower by 0.55% to $1,656 while silver has lost 0.48% to $31.80. Soft commodities were mixed while copper has lost 0.91%. The market now awaits the latest FOMC statement.

FX News

Today the currency markets preferred to shift its focus on the broader economic outlook rather than the Greek saga.  On the radar are German IFO Business Climate (Jan), Bank of England Minutes, UK GDP and US FOMC rate decision.

EUR/USD

EUR/USD traded within a narrow range during Asian session (1.3014 - 1.3041) today perhaps due to the Lunar Year celebration. The same could be expected for the rest of the week for Asia if no surprises hit the market. At the time of writing, euro spiked up to 1.5050 as German IFO was released. Market was expecting 107.6 but actual came out as 108.3 (last 107.3). But the spike was very short-lived as it pulled back to the comfortable 1.3020 - 1.3040 zone awaiting for the US FOMC rate decision. Economists expect no change from 0.25% but the risk may be that if the Fed is more dovish than what the market thinks, then you may see dollar selling in the pipeline. For the rest of London and New York session, we are still waiting for 1.3145 and support at 1.2983.

USD/JPY

USD/JPY reached the highest level since Dec 28 at the time of writing to 78.10 in London time. The headline news was that Japan reported its first annual trade deficit in 30 years raising concerns about its fiscal health. The data also showed Japan's exports declined for the third consecutive month - dropped 8% in Dec from a year earlier. JPY traders no doubt will now monitor if the deficit will continue to rise or if Japan's sovereign rating is in question. Any hint of that should result in shorting the JPY. For the rest of the day and subject to FOMC release expect 77.60 (61.8% fib) to 78.25 trading range.

Compass Global Markets

DISCLOSURE AND DISCLAIMER
Compass Global Markets Pty Ltd ("Compass Global Markets") ACN 144 657 885, Authorised Representative No. 377377, is a Corporate Authorised Representative of Calibre Investments Pty Ltd (Australian Financial Services License No. 337927). Please refer to the Financial Services Guide which is available through our website www.compassmarkets.com for more information regarding the financial services that we offer.
All references to prices, amounts and currency are in Australian dollars unless otherwise noted.
This report is provided for Australian residents only and is not intended for use by residents of any other country.
GENERAL ADVICE WARNING: The advice provided in this report has been prepared without taking into account your particular objectives, financial situation or needs. You should, before acting on the advice, consider the appropriateness of the advice having regard to these matters and, if appropriate, seek independent financial, legal and taxation advice before making any financial investment decision.
This report has been prepared for the general use of Compass Global Markets clients and must not be copied, either in whole or in part, or distributed to any other person. This report and its contents are not intended to be construed as a solicitation to buy or sell any security, product or asset, or to engage in or refrain from engaging in any transaction.
Compass Global Markets does not guarantee the performance of any investment discussed or recommended in this report. This report and the information used within may include estimates and projections which constitute a forward looking statement that express an expectation or belief as to future events, results or returns. No guarantee of future events, results or returns is given or implied by Compass Global Markets. Such statements are made in good faith and based on reasonable assumptions at the time of publication. However, such statements are also subject to risks, uncertainties and other factors which could cause actual results to differ substantially from the estimates and projections contained in this report or otherwise provided by Compass Global Markets.
Any information referencing past performance is not indicative of future performance. All information in this report has been obtained from sources believed to be accurate. Compass Global Markets does not give any representation or warranty as to reliability, accuracy or completeness of information contained in this report and therefore all responsibility is expressly disclaimed, whether due to negligence or otherwise. The information presented and opinions expressed in this report are given as of the date hereof and are subject to change without notice. We hereby disclaim any obligation to inform you of any changes after the date hereof in any matter set forth in this report.
Global Compass Markets, its affiliate and their employees may hold positions in the financial products, or securities or derivatives of, in the companies referred to in this report from time to time.
Analyst Certification: The views or opinions expressed in this report accurately reflect the personal views of the analyst(s) and no part of the remuneration of the analyst(s) was, is, or will be directly or indirectly related to the inclusion of specific recommendations or views in this report. Any views or opinions expressed are the author's own and may not reflect the views or opinions of Compass Global Markets unless specified otherwise.