European Closing Thoughts 23/08/12

US macroeconomic data were unable to push higher equity benchmarks.

The numbers of Americans filing new claims for jobless benefits unexpectedly rose last week: initial claims for state unemployment benefits rose 4,000 to a seasonally adjusted 372,000, the Labor Department said on Thursday.The median forecast of 41 economists surveyed by Bloomberg called for 365,000.

A separate report by Markit showed some of the weakest growth in the manufacturing sector in the last three years, held back by a slowdown in hiring and sluggish overseas demand for American goods. Markit said its U.S. “flash” manufacturing Purchasing Managers Index edged up to 51.9 in August from 51.4 in July. A reading above 50 indicates expansion.Despite the weakness, the August reading beat analysts' expectations and marked the first monthly increase since March.

Purchases of new U.S. homes rose more than projected in July to match a two-year high, a sign the industry that helped trigger the recession is recovering. Sales climbed 3.6 percent to a 372,000 annual pace, figures from the Commerce Department showed today. The median estimate of 72 economists surveyed by Bloomberg called for a rise to 365,000.

The “iced shower” came from James Bullard, the Fed Bank of St. Louis President, who said today on CNBC: the minutes of this month's meeting were no longer relevant because the US economy has picked up in the past month, denying the call for more stimulus in the US made earlier in the day by Fed Bank of Chicago President Charles Evans. The lack of agreement between Fed members led investors to take some chips out from the table.

The Dow Jones industrial average was down 0.63 percent, at 13,089.20. The Standard & Poor's 500 Index was down 0.48 percent, at 1,406.67. The Nasdaq Composite Index was down 0.26 percent, at 3,065.80.

In Europe, the Stoxx50 fell 0.96% to 2,429.26, the German Dax was entering into the closing auction 0.91% lower at 6,953.75. But while we writing a  Reuters news caught my attention:  Reuters Exclusive, Spain in talks with euro zone over sovereign aid.

(Reuters) – Spain is negotiating with the euro zone over conditions for international aid to bring down its borrowing costs though the country has not made a final decision to request a bailout, three sources with knowledge of the matter said on Thursday.The favored option being discussed is that the existing European rescue fund, the EFSF, would purchase Spanish government bonds at primary auctions while the European Central Bank would intervene in the secondary market to lower yields, the sources said.

Spain's prime minister's office declined to comment.  A spokeswoman for the economy ministry said there was no change in the Spanish position, which is that it would wait until the next meeting of the governing council of the ECB on September 6, hoping for details on how the ECB plans to intervene, before deciding on any move. The three sources who spoke with Reuters on Thursday said the negotiations were focusing on conditions attached to the aid, which will be included in a memorandum of understanding. Reuters reports.

This news can be a really turning point cause we know already that the condicio sine qua non the Central Bank could intervene to lower painfully high yields, is for the country to ask for similar help from the bloc's rescue fund first.

The ICE dollar index DXY, which measures the U.S. dollar against a basket of six other major currencies, fell to 81.283 from 81.475 in North American trade late Wednesday. The euro EUR/$ rose to $1.2583 or 0.43% higher, from $1.2535 Wednesday. The euro hasn't closed above that level since early July .The dollar fetched 78.42 Japanese yen $/Yen, falling from its highs of the day and little changed from ¥78.43.

Oil for October delivery advanced 0.47 cents or 0.48% to $97.73 a barrel on the New York Mercantile Exchange.  The black gold, traded as high as 98.17$ after the HSBC China manufacturing data  was released before easing after the US macros were published.

Gold futures skyrocketed today, futures on the precious metal for December delivery gained 36.20$ or 2.19% to $1.676,40 an ounce on the New York Mercantile Exchange.  A close around these levels would be gold's highest since mid-April.

The question now is: Is the move mainly due to “QE3″ anticipation or it has to be seen as a risk off indication??

Let's think about it..

Have a pleasant evening.

Originally posted at www.77sigmatrading.com