European Closing Thoughts 16/07/12

July 16, 2012 11:34 AM

The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

First of all let's have a look at the U.S macro data:

U.S. Retail Sales dropped 0.5 percent in June, following a 0.2 percent decrease in May, Commerce Department figures showed today in Washington. The decline was worse than expectations which were pointing to 0.2 percent rise in Bloomberg News Survey.

Manufacturing in the New York region expanded in July at a faster pace than anticipated. The Federal Reserve Bank of New York's general economic index rose to 7.4 from 2.3 in June. The median forecast of 51 economists surveyed by Bloomberg News called for an increase to 4.0.

Business inventories, a measure of the change in the worth of unsold goods held by manufacturers, wholesalers, and retailers, came at 0.3% versus 0.2% expected and previous reading was 0.3%.

From the earnings stand point:

Citigroup beats analyst's estimates on revenue from advising on mergers and underwritings.

“Net income declined to $2.95 billion, or 95 cents a share, from $3.34 billion, or $1.09, a year earlier. Excluding accounting adjustments and a loss from the sale of a stake in a Turkish bank, earnings were $1 a share, compared with the average estimate of 89 cents in a Bloomberg survey of 18 analysts.”Bloomberg reports.

Meanwhile, the IMF cut its global growth forecast and warned that the outlook could worsen, if policymakers in Europe do not act with enough force and speed to tackle their region's debt crisis.

“The IMF shaved its 2013 forecast for global economic growth to 3.9 percent from the 4.1 percent it projected in April, trimming projections for most advanced and emerging economies. It left its 2012 forecast unchanged at 3.5 percent.” Reuters news reports.

On the US open European markets drifted lower breaking the morning range: the Eurostoxx50 futures traded at 2232, the German Dax at 6510.5. The shakeout in the equities have been followed by the Eur/$ cross which drifted lower to 1.2220$ from 1.2260$ earlier in the morning.

Once the shakeout was over the market regained the morning range with the German Dax braking previous high, just minutes before the cash closing auction the DJ Eurostoxx50 Sept future traded to 2252 or up 0.13%, the German Dax higher 0.50% to 6575.6. Spanish government bond yield rose to 6.809 or 2.19%, the Italian peer followed the same path higher 0.97% to 6.117 below the 6.162 mark touched earlier.

The Eur/$ cross is inching higher to 1.2276$, it traded as low as 1.2184$ in the morning. The move in the equities and in the currency has been followed by the Gold and Crude, Gold up 0.13% to 1594, Crude up 0.40 to 87.425.

To us, it looks like a “QE” trade is in place.

For what it may concern our daily game plan:

We took advantage of the range in the morning. Still we do not understand the price action just after the US opening. After being stopped out of the daily range we traded the long side on the 35 level to close the trade at the first sign of weakness around the 42/44 levels.

We have been frightened by the early short move and we were unable to trade in the now moment, therefore we were unable to follow the entire move.

Hoping you had a great day. I wish you a pleasant evening.

Originally posted at www.77sigmatrading.com