Morning Meeting 24/08/12

Asian stocks turned south today, as investors scaled back their expectations of strong stimulus from the US Federal Reserve and worried about economic growth after manufacturing surveys from the euro zone and China depicted a bleak outlook.

A Reuters poll showed on Friday that big Japanese manufacturers' sentiment worsened in August, with Europe's debt crisis, a global slowdown and a stubbornly strong yen taking their toll on the export-reliant economy.

Japan's Nikkei Stock Average fell 1.27% to 9,061.80, South Korea's Kospi declined 1.44% to 1,914.53, Hong Kong's Hang Seng Index dropped 1.13% to 19,904.08 while the Shanghai Composite Index slipped 0.72% to 2,097.81. It's worth to remember that Asian equity benchmarks climbed 12 percent from a June low through yesterday on bets monetary authorities in the U.S., Europe and China would take action to boost slowing economic growth.

Oil fell for a second day, futures for October delivery dropped as much as 61 cents to 95.66$ a barrel in electronic trading on the NYME. The contract yesterday fell 1% to 96.27$, the lowest close since August 20.  Prices are down 0.3 percent this week and 3.1 percent this year.

For what it may concern the precious metal, twenty-nine of 35 analysts surveyed by Bloomberg expect prices to rise next week and three were bearish. A further three were neutral, making the proportion of bulls the highest since Nov. 11. Investors bought 46.9 metric tons valued at $2.5 billion through gold-backed ETF products this month, the most since November. Gold rose 6.2 percent to $1,661.35 an ounce in London this year, reaching a 16-week high yesterday and extending 11 consecutive annual gains. The Standard & Poor's GSCI gauge of 24 commodities advanced 5.4 percent and the MSCI All-Country World Index of equities added 8.8 percent. Treasuries returned 1.8 percent, a Bank of America Corp. index shows. This morning the precious metal is taking a break, it traded  0.23% lower to 1,668.90$ an ounce, as traders who bought the precious metal as a proxy for the QE3 trade booked some gains.

The euro traded at $1.2560, near a seven-week high of $1.2590 hit on Thursday. The dollar inched up 0.2 percent to 78.61 yen compared to 78.49 yen late on Thursday. But this was not enough to lift exporters in Japan.

If you have been following our briefings you  already know that we are having some doubts on what's going on in China amid the lackluster Chinese market performance following Central Bank intervention. And today we had another piece of information reinforcing our “time bomb” hypothesis:

China may have overstated 2012 industrial production data to mask the economy's weakness, Federal Reserve Bank of Dallas economists Janet Koech and Jian Wang wrote in a paper. The country's industrial electricity consumption suggests industrial production growth may be less than official government data stated.

Bloomberg reported;  separately HSBC Holdings reduced its 2012 growth forecast for China to 8 percent from 8.4 percent.

Looking to benchmark's component,  Bank of China, the third-biggest lender by total assets, dropped 0.7 percent to 2.76 yuan. The bank said second-quarter profit rose 5.3 percent, the slowest pace since 2009.

Will Chinese worries weigh on European indexes' performance today? Will “the threat policy”, put in place by Mr Draghi, be able to buy another day in the market?

Greece will be in the spotlight again over the weekend as Greek Prime Minister Antonis Samaras will meet French President Francois Hollande and German Chancellor Angela Merkel over the next two days.  As we said yesterday, no big news are expected from these meetings as European leaders agreed that any decisions on Greece will depend on a report next month on its progress by the “troika”.

Around 8.45 AM GMT newswires will give plenty of room to  Bank of Japan Governor Shirakawa speech, therefore keep an eye for hints.  Today, the real test for the US economy will come from  the Durable Good Orders expected at 2.4% (MoM) versus  1.3% at a previous reading, analysts estimate that Core Durable Goods Order rose 0.5% versus minus 1.4% a month before.

There is enough food for our brain in this morning meeting, it's time to build our plan.

Have a great one.

Originally posted at www.77sigmatrading.com