Morning Meeting 23/08/12

Good Morning.

Hopes got another boost after the release of the FOMC meeting minutes, Federal Reserve policy makers signaled readiness to boost record stimulus unless they are convinced the economy is poised to rebound. Many members of the policy-setting Federal Open Market Committee said further action would probably be needed “fairly soon” without evidence of “substantial and sustainable” improvement in the recovery, according to minutes of the July 31-Aug. 1 meeting released yesterday in Washington.

U.S. stocks reversed losses yesterday and gold rose to a 16-week high on expectations of further easing by the central bank. Attention now turns to Fed Chairman Ben Bernanke's Aug. 31 speech in Jackson Hole, where he may clarify his thinking on the need for stimulus in view of recent reports showing gains in retail sales and housing.  The S&p500 added 0.02% to 1,413.49 at the close of trading in New York after falling as much as 0.5 percent before the release of the minutes. The yield on the 10-year Treasury note tumbled 11 basis points, or 0.11 percentage point, to 1.69 percent in the biggest decline since June 1. Gold futures for December delivery rose to $1,656.20 an ounce.

HSBC said its preliminary or “flash” reading of its China manufacturing Purchasing Managers' Index (PMI) for August fell to a nine-month low of 47.8 on a 100-point scale, dropping from July's final print of 49.3. The result suffered a drag from weakness in new orders and shipments, and marked the 10th straight month that Chinese manufacturing conditions have remained below the 50-point level, which separates contraction from expansion.

The “flash” reading came the day after People's Bank of China Governor Zhou Xiachuan said adjustments to interest rates and banks' reserve requirements are still possible after the central bank stepped up temporary cash injections this month, therefore increasing the likelihood of  more monetary easing ahead. Speculation on further stimulus at home and in US drove the China's yuan to seven-week high versus the dollar 0.1574$.

China stocks reversed from modest gains in the wake of the PMI data, with the Shanghai Composite Index trading 0.16% lower to 2,103.63, supporting our hypothesis that the “time bomb” is far from being deactivated.  Japan's Nikkei stock average traded 0.40% higher as sentiment was weighed by the yen. The dollar  traded at 78.55 yen, off Wednesday's low of 78.27 yen.

“The risk” to see the FED flooding the market with dollars sent the greenback lower versus all major cross. It was at $1.2549 per euro after earlier touching $1.2553, the weakest since July 4.

Oil rose, with Brent crude rising 0.7 percent to $115.73 a barrel and U.S. crude up 0.6 percent to $97.86.

From the Macro stand point of view, it will be quite interesting to see the German GDP to be released at 7.00 AM GMT, the reading is expected at 0.5% (YoY) unchanged versus the previous release. At 9.00 AM GMT the European Manufacturing PMI number is seen to increase to 44.2 versus 44, while the Service PMI is expected to fall to 47.7 versus 47.9 at previous reading. In US: Manufacturing PMI number is seen slightly lower to 51.30 versus  51.40 while Jobless Claims numbers are expected to come unchanged versus the previous month at 365k.

It will be an interesting day on the macro point to take the economic's pulse in Europe and in US,  therefore draw your plan and stake with it do not trade on emotions.

Have a pleasant day.

Originally posted at www.77sigmatrading.com