Intraday Market Thoughts Archives

Ashraf's CNBC interview previewing the ECB meeting, the anticipated increase in LTROs & the falling correlations between the euro and equities. http://video.cnbc.com/gallery/?video=3000060403

Catch Ashraf on CNBC this evening at 15:30 EST, 20:30 GMT with Maria Bartiromo in London discussing currencies & the Eurozone.

Merkel calls for a fiscal union; Swiss retail sales declined; UK construction PMI lower but still expanding; Eurozone PPI lower; Canadian labor market data disappointed. Focus turns to NFP and the unemployment rate. Pre-US Jobs Premium Trades are below.

The USD is mixed today but trades within narrow ranges. The relative strength winners are NZD and AUD while JPY is the biggest loser. European equity indices trade higher by about 1.5%.

German chancellor Angela Merkel who spoke to the German parliament today called for an enforceable fiscal union and again reiterated her dissenting stance towards the introduction of Euro bonds. She maintained her attitude that only budget discipline and lower government borrowing could solve the root of the crisis. France and Germany will propose changes for the EU on Monday.

Swiss fundamentals are firmly on the deterioration path as retail sales declined in October -0.2% y/y after dropping -1.4% in September. CHF is weaker against the Euro trading around 1.2350.

UK construction PMI declined in November to 52.3 from 53.9. Despite the slowdown it remained in the expansionary territory.

Eurozone PPI rose 0.1% in October, less than 0.3% seen a month earlier. On annual basis PPI rose 5.5% which is considerably lower compared to previous 5.8%. The ECB meets next Thursday and the probability that rates will be lowered is high.

FRIDAY PREMIUM TRADES ARE HERE: http://ashraflaidi.com/products/sub01/access/?a=562 Nonmembers click here to join http://ashraflaidi.com/products/

The loonie declined sharply after Canada lost 18.6K jobs in November after -54K in October. Market expected employers to add 18K jobs. The unemployment rate ticked up to 7.4% from previous 7.3%. USDCAD rose from 1.0096 to 1.0140 immediately after the release.

The NY session will bring the eagerly awaited labor market data at 8:30 am ET. November NFP is expected to rise to 126K from previous 80K and the unemployment rate is seen steady at 9.0%.

Wednesday's ADP figure exceeded expectations as it printed a solid 206K growth in private jobs which was the best result since 3/2011 and nearly double of the gain seen in the previous month. Positive surprise that would fuel risk appetite is therefore likely to a degree. However, keep in mind that jobless claims rose back above 400K and that the employment component of ISM manufacturing decreased to 51.8 from previous 53.5.

Merkel to outline treaty change proposals to Bundestag after last nights Sarkozy speech, Swiss retail sales set to improve, UK Construction PMI slips but remains in expansion territory, Eurozone PPI set to fall, US and CAD employment reports. 5 of Wednesday's 17 Premium trades hit all targets, 1 unfilled, the rest in progress.

Last nights speech by President Sarkozy to the French people outlined the stakes of further economic integration in Europe, saying that without it the Eurozone may break down. He proposed tighter fiscal discipline and oversight of national budgets as a necessary measure to keep the euro together at a time when the French people are deeply suspicious of creeping sovereignty by Brussels. Sarkozy will meet UK PM David Cameron later today.

Angela Merkel appears to hold all the cards here and even though she continues to come under increasing pressure to yield to demands for Eurobonds and ECB intervention she knows that if she were to do so she would be committing political suicide at home, notwithstanding the fact she doesnt have the power to do so, given that any such measures would be illegal under the German constitution. Today the German Chancellor is due to outline her proposals to the German Bundestag with respect to the crisis in Europe and future fiscal integration, treaty changes to ensure budget restraint and penalties, as well as how the ECB and the IMF could be involved in any final solution.

5 of our 17 Wednesday Premium Trades hit all targets, 1 remain unfilled, the rest are in progress. For Direct Access to these trades is found here: http://ashraflaidi.com/products/sub01/access/?a=560 NonSubscribers can join here: http://ashraflaidi.com/products/sub01/

UK November construction PMI slipped to 52.3 from Octobers 53.9.

The figure remains better than yesterdays disappointing manufacturing PMI at 47.6, yet these 2 sectors make up only 20% of the UK economy. Next weeks services PMI will matter greatly.

In more evidence of slowing Swiss figures, October retail sales fell 0.2% y/y from -1.4%.

Due at 10 am GMT, Eurozone October producer prices are expected to weaken further, coming in at 5.6%, down from 5.8%, and raise expectations for further easing next week from the ECB at their last meeting of 2012.

The main focus of the day will be on jobs reports in Canada (Noon GMT) and US (13:30 GMT).

Ashraf's 2-hr webinar on Forex & Intermarket Set-ups is now available. Topics dicussed; LIBOR spreads, EURUSD technicals & fundamentals, S&P500 cyclical patterns, gold dynamics, GBPCAD, GBPAUD, EURCHF, USDCHF & trading insights ahead of Friday's CANADA & US jobs reports.

DOWNLOAD WEBINAR HERE: http://www.hamzeianalytics.com/Educational_Webinars.asp

Ashraf will give a webinar on Thursday @ 16:00 Chicago Time, 17:00 EST, 22:00 GMT on "FX Ideas & Latest Intermarket Setups" via Hamzei Analytics. CLICK HERE TO REGISTER https://www1.gotomeeting.com/register/787802921

French and Spanish auctions well received; Swiss Q3 GDP disappointed; Swiss PMI declined; German and Eurozone PMIs as initially estimated; UK PMI declined. Focus turns to jobless claims, November ISM manufacturing and construction spending. 4of the 17 Premium Trades hit all targets. See details below.

Risk assets are consolidating after yesterday's "central banks coordinated liquidity injection" rally. USD has a negative bias but is losing only slightly against other majors. Relative strength winners are CHF, EUR and NZD but not by a significant amount. Major European equities are mixed between -0.7% to and 0.4%.

Euro is underpinned by well received French and Spanish debt auctions of various maturities. Spain reached its full target of EUR 3.75 bln with yields only slightly higher and improved cover ratios. France sold EUR 4.35 bln out of EUR 4.5 bln target and saw some yields actually lower compared to the previous auction. Bid to cover for all French bonds that were offered today improved rather significantly. EURUSD continues to trade just under the 1.35 mark.

Final November manufacturing PMI's from Germany and the Eurozone were unchanged compared to their initial estimates at 47.9 and 46.4 respectively.

Swiss Q3 GDP disappointed when it printed 0.2% q/q from previous 0.5% which translates to a mere 1.3% growth y/y from 2.2%. This is the weakest quarterly print since Q2 2009 and reinforces fears of a Q4 recession. A significant decline in exports is blamed for the slowdown which could pressure the SNB to increase the EURCHF floor, perhaps on SNBs meeting on December 15th. Swiss SVME PMI declined in November to 44.8 from 46.9. CHF has ignored this news and trades at 1.2275 against the EUR.

In the UK, November PMI printed 47.6 which is the weakest result since June 2009 and slightly lower than October's 47.8. Outlook is bleak as export orders fell after the crisis curtailed demand which subsequently prompted additional job cuts. Continued contraction is likely to increase pressure on the BOE to enlarge the Asset Purchase Facility further.

BoE released its Financial Stability Report that stated that the current environment is exceptionally threatening for UK banks and Eurozone sovereign and banking risks pose the biggest threat to UK financial stability.

4 of our 17 Wednesday Premium Trades hit all targets, 1 remain unfilled, the rest are in progress. For Direct Access to these trades is found here: http://ashraflaidi.com/products/sub01/access/?a=560 NonSubscribers can join here: http://ashraflaidi.com/products/sub01/

The New York session starts with jobless claims at 8:30 am that are expected to remain for the fourth week below the 400K mark and print 390K from previous 393K.

November ISM manufacturing is due at 10:00 am and is anticipated to rise to 51.5 from 50.8. Construction spending in October is seen higher at 0.4% from previous 0.2%.

Eurozone final PMIs seen confirming the upcoming contraction, France and Spanish bond auctions due, Sarkozy to outline treaty change proposals, UK manufacturing PMI expected to weaken further, China manufacturing PMI also slips back into contraction, Swiss GDP nears contraction territory, US ISM and weekly jobless. There are 17 new Premium Trades from last night w/ new multi-time frame charts in EURUSD.

The state of the European economy comes back into focus this morning after yesterdays strong rally on the back of the central bank measures to prevent another credit crunch, amongst Europes banks.

The joint action shows that even if politicians cant act in a co-ordinated manner at least central banks can. It is no silver bullet however and in some respects makes the problems worse for the Southern European economies as it sends the overvalued euro higher, making the road to recovery much more difficult as their economies struggle to grow.

There are 17 new Premium Trades from last night w/ new multi-time frame charts in EURUSD. One of the two EURJPY longs has already hit all targets. There are also new trades on GBPCAD after the 2-week old positions hit all targets. New Trades on EURUSD, EURJPY, GBPCAD, USDCAD, ES, Silver, Gold, CL_F Direct Access to these trades is found here: http://ashraflaidi.com/products/sub01/access/?a=560 NonSubscribers can join here: http://ashraflaidi.com/products/sub01/

The final manufacturing PMI readings for France, Germany, Italy and the Eurozone are all expected to confirm that the core countries in Europe are firmly in contraction territory, with concerns that Europes second largest economy could be vulnerable to a ratings downgrade from one of the big three very soon. Egan Jones, one of the smaller agencies downgraded France last night citing a disastrous trend.

With concerns about borrowing costs front and centre todays French bond auction will be closely monitored for demand and the yields returned. France is looking to sell 2017, 2021, 2026 and 2041 bonds, totalling 4.5bn in a key test of investor confidence.

Spain is also looking to sell 2015, 2016 and 2017 bonds totalling 3.75bn.

Meanwhile in Switzerland, Swiss Q2 GDP slowed to 0.2% from 0.5%, the weakest growth since Q2 2009.

President Sarkozy is expected to outline proposals for treaty changes in Toulon, in order to enforce fiscal discipline.

In the UK the latest November manufacturing PMI is expected to show that the UK manufacturing sector remains in the doldrums, especially given the downbeat tone of the Chancellor earlier this week and this weeks depressing OECD assessment of the UK economy over the next two quarters. It is expected to come in at 47, down from 47.4 in October.

Yesterday's RRR cut by China soon emerged last night after the latest HSBC and official manufacturing PMI numbers showed that the Chinese economy remained fairly lacklustre in the face of the problems in Europe. The official measure of manufacturing PMI fell below 50 for the first time since Feb 2009, while the HSBC measure came in at 47.7, down from a previous 51.

US weekly jobless claims and the latest ISM manufacturing data will also be closely waited to see if they continue this weeks trend of much better than expected US economic data.

Ashraf will give a webinar on Thursday @ 16:00 Chicago Time, 17:00 EST, 22:00 GMT on "FX Ideas & Latest Intermarket Setups" via Hamzei Analytics. CLICK HERE TO REGISTER https://www1.gotomeeting.com/register/787802921

With the EURUSD looking likely to close NY Wednesday session above 1.3380s, finally breaking above the 6-wk trendline resistance, the pair is set for next key target beyond 1.35; Find out in our DOUBLE EURUSD charts the significance of the DMA & WMA resistance on today's Premium piece. New Trades on EURUSD, EURJPY, GBPCAD, USDCAD, ES, Silver, Gold, CL_F Direct Access to these trades is found here: http://ashraflaidi.com/products/sub01/access/?a=560 NonSubscribers can join here: http://ashraflaidi.com/products/sub01/

Our latest piece illustrates how global Inflation rates shall continue to decline, reflecting falling growth rates in BRICS & developed nations. Meanwhile, global stock markets have already peaked in the current cycle.

http://ashraflaidi.com/articles/tackling-liquidity-policy-geopol-solvency-conc.asp

China cuts RRR by 50 bps; ECB to be more flexible (QE, rate cuts, lower quality collateral); Eurozone CPI remained at 3%, unemployment ticked up to 10.3%; Italian unemployment rose sharply to 8.7%; Swiss KOF hits 2-yr low. Market turns to ADP, Canadian GDP, Chicago PMI and pending home sales.

USD is down across the board as risk appetite returns to markets. NZD, CAD and GBP are the relative strength winners and major European indices are up by about 1%.

Risk appetite returned to markets after China cut its bank reserves ratio for the first time in three years. The RRR was cut by 50 bps to 21%. Risk trades are also supported by MNI report that quoted sources within the ECB that it is open to more rate cuts and that 1% is no longer seen as a rate floor. The ECB also wants to be more flexible, it may widen collateral framework and increase bond purchases.

On the data front, Eurozone CPI estimate remained at 3.0% in November and Eurozone unemployment rate ticked up to 10.3% in October from 10.2%.

Italian unemployment rate was declining throughout most of 2011 from 8.7% to Augusts' 7.9%. However, as conditions started to deteriorate it has risen sharply over the past two months and reached 8.5% in October from 8.3% in September.

Swiss KOF leading indicator index has been declining steadily over the past seven months and dropped again in November, this time to 0.35 from October's 0.75 (2-yr low) CHF first came under pressure but rose significantly as risk aversion disappeared.

Eurozone has also agreed to release the sixth tranche or financial aid to Greece and the funds should start arriving to Greece by the middle of December. EURUSD did not react much to this news as the attention has shifted away from Greece to Italy and other core Eurozone countries.

The New York session will start at 8:15 am ET with November ADP report that is expected to improve to 131K from previous 110K. Chicago PMI is due at 9:45 and is seen marginally higher in November at 58.5 from October's 58.4. October pending home sales are due 15 minutes later at 10:00 am and are anticipated to rise 1.4% after falling -4.6% in September.

Market volatility is likely to also increase at 2:00 pm when FED's Beige book is due.

CAD traders await September GDP due at 8:30 am which is expected to remain at 0.3% m/m and rise 2.7% from 2.4% y/y.

See how our Monday Premium trades aim at exploiting the improvement in risk appetite including the CAD longs (short GBPCAD & USDCAD) The combination of CAD impact and modest risk-on trades is implicated in today's trades. DIRECT ACCESS to today's trades is found here http://ashraflaidi.com/products/sub01/access/?a=558 Nonsubscribers can get 1-week access here: http://ashraflaidi.com/products/sub01/

EFSF leverage framework outlined, German unemployment falls by more than expected, UK Gfk consumer confidence slides again. Expecting Eurozone flash Nov CPI. More downgrades overnight as S&P downgrades US banks, US ADP expected as well as Canada Q3 GDP.

Eurogroup ministers unveiled their plan for leveraging the EFSF without much detail with respect to how much it would be leveraged and on the extent of IMF involvement would have in respect of the part of the CIF tranche. Both Rehn and Junckers were deliberately evasive on that point. Estimates of the total leverage range from between 250bn and 600bn, as EU ministers start the second day of their meeting.Up to now, the EFSF shall insure 20-30% of sovereign bonds and will be able to leverage resources up to EUR 250bn, starting early 2012.

German November unemployment falls by 20k vs exp -8k, unemployment rate at 6.9% vs exp 7.0%), Italy October unemployment rose to 8.5% from 8.3%.

UK November Gfk consumer confidence came in at -31 from -32. Yesterdays Autumn Statement made pretty grim reading and Fitch certainly thought so warning on the sustainability of the UK outlook given the current growth dynamics.

Due at 10 GMT, Eurozone Nov flash CPI expected to remain at 3.0%. A lower than exp figure would escalate expectations for more ECB easing and potentially unsterlilised purchases.

The latest Premium trades include DUAL trades in EURUSD, EURJPY and ES (S&P Minis) as well as 2 new trades in US Crude. Our Gold long hit all targets. The combination of CAD impact and modest risk-on trades is implicated in today's trades. DIRECT ACCESS to today's trades is found here http://ashraflaidi.com/products/sub01/access/?a=558 Nonsubscribers can get 1-week access here: http://ashraflaidi.com/products/sub01/

Sentiment could well suffer a setback today after S&P downgraded a number of major US banks, including Citigroup, BOA and Goldman long term credit ratings, on concerns about exposure to European debt.

This afternoon we the precursor to the latest US payrolls report with November ADP numbers while soon after we have Canadian Q3 GDP numbers.

ECB fails to fully sterilize bond purchase, US consume confidence hits 4 mth high, S&P downgrades US banks, upgrades Chinese banks, Premium Trades in progress. EURUSD nearing the top of the wedge identified in today's Premium trades

The EFSF's top official Klaus Regling said EFSF will borrow short-term funds in December, but not to expect investors to commit substantial funds any time soon. He added that investment funds could help banks recapitalize. The EFSF shall insure 20-30% of sovereign bonds and will be able to leverage resources up to EUR 250bn, starting early 2012.

Rumblings of ECB QE

There were some questions as to whether the ECB may be finally embarking on quantitative easing on Tuesday when the amount it from the banking system in a 7-day liquidity-absorbing operation intended to sterilize the ECB's bond purchases fell short of the EUR 203.5 billion total spent in bond buys since program began in May 2010. The ECB drained only EUR 194.1986 bln.

Whether a full-fledged QE from the QE would be positive or negative for the euro remains to be seen. Our assessment is that it will be mainly negative for the single currency, especially as it is combined with the likelihood of further rate cuts.

The latest Premium trades include DUAL trades in EURUSD, EURJPY and ES (S&P Minis) as well as 2 new trades in US Crude. Our Gold long hit all targets. The combination of CAD impact and modest risk-on trades is implicated in today's trades. DIRECT ACCESS to today's trades is found here http://ashraflaidi.com/products/sub01/access/?a=558 Nonsubscribers can get 1-week access here: http://ashraflaidi.com/products/sub01/

US Nov consumer confidence hit a 4-month high of 56 from 40.8, exceeding expectations of 44. Whether the jump was attributed to rushed holiday buying remains to be seen.

In Japan, preliminary Oct Industrial production rose 2.4% m/m from -3.3% and +0.4% y/y from -3.3%. The figures will be confirmed next month.

S&P cut the ratings of Bank of America Corp, Goldman Sachs, Citigroup, Morgan Stanley and Bank of Americas Merrill Lynch unit after it revised the criteria for worlds biggest lenders. Meanwhile, S&P upgraded 2 Chinese banks; Bank of China and China Construction Bank.

Ashraf Laidi

Ashraf's interview on AlArabiya discussing the threats of further downgrades in the Eurozone, the prospects of a downgrade on France and the currency impact http://www.youtube.com/watch?v=fC-KUQwEZT4

We have new Premium trades in EURUSD, EURJPY and ES (S&P Minis) as well as 2 new trades in US Crude amidst the STORMING OF THE UK EMBASSY in TEHRAN. The combination of CAD impact and modest risk-on trades is implicated in today's trades. DIRECT ACCESS to today's trades is found here http://ashraflaidi.com/products/sub01/access/?a=558 Nonsubscribers can get 1-week access here: http://ashraflaidi.com/products/sub01/

Euro struggles around 1.33 despite recovering risk appetite following higher than expected-yielding Italian bond auctions. UK nationwide house prices and mortgage applications both increased; Eurozone economic confidence fell. Market turns to Canadian trade balance data, housing data and consumer confidence. Tuesdays latest Intermarket Insights are due at approx. 10:00 EST, 15:00 GMT.

The greenback is weaker across the board again today as riskier assets continue to push higher. Relative strength winners are GBP, AUD and NZD. Major European equities are higher by about 0.5%.

Eagerly awaited Italian bond auction saw yields soar to the highest levels since the Euro inception but the bid to cover ratio improved slightly. Italy sold EUR 7.5 bln and the target was EUR 5-8 bln. The Italian treasury sold 2014 BTP with average yield 7.89% from 4.93%, 2020 BTP with avg. 7.28% from 5.47% and 2022 BTP with avg. 7.56% from 6.02%. The inverted yield curve not only implies higher risk of upcoming recession but also the fact that investors are concerned about the possibility of a haircut on their holdings. Considering the size of Italian debt, any additional yield increases would considerably worse Italian fiscal situation.

Italian 10 year yields 7.40% and the 10 year German-Italian spread sits firmly above 5% at 5.12%. At the opposite end of the bond spectrum one can find Switzerland with 10 year yielding less than 1% since the beginning of November. EURUSD fell sharply to 1.3335 after hitting 1.3440 earlier during the session.

Tuesdays latest Intermarket Insights are due at approx. 10:00 EST, 15:00 GMT. Click here to view Mondays trades http://ashraflaidi.com/products/sub01/access/?a=557 Non subscribers can go here http://ashraflaidi.com/products/sub01/

In the UK, nationwide house prices rose 1.6% in November y/y from previous 0.8% and October mortgage approvals surprisingly rose to 52.7K from 51.2K reaching their highest print since 12/2009.

Eurozone economic confidence fell in November to 93.7 from previous 94.8 and final Eurozone consumer confidence was confirmed at -20.4, unchanged from the flash estimate.

The NY session will start at 8:30 am ET with Canadian Q3 current account deficit which is expected to narrow to CAD -11.1 bln from previous CAD -15.3 bln.

S&P Case-Shiller home price index due at 9:00 am ET is seen at -3% in September, slightly higher from previous -3.8%. November consumer confidence due at 10:00 am is expected to rise to 44 from 39.8 and September house price index that is also due at 10:00 am is anticipated at 0.1% from previous -0.1%.

Market volatility could also increase at 11:30 am and at 12:15 pm when FED governors and FOMC members Janet Yellen and Sarah Bloom Raskin speak at FED's Annual Asia Economic Policy Conference in San Francisco.

All eyes on Italian bond auctions, UK in focus as Autumn Statement looms, Italy bond auction due, S&P said to downgrade France in 10 days according to La Tribune, after Fitch puts US on negative outlook, US consumer confidence expected to rebound.

Italy returns to the bond markets for another 8bn of 2014, 2020 and 2022 (3, 5 and 7 year BTPs) with yields stubbornly above 7% as European finance ministers meet to discuss the release of the next aid tranche to Greece, and whether Greece has complied with all conditions. Yields on Italian 10- yr BTPs hit 7.38%, nearing the 7.43% high reached on Nov 9.

The UK is back in the spotlight after yesterdays downgrade of UK growth forecasts for 2012 by the OECD to 0.6%. The organisation also said that it was likely that the UK was already in recession for Q4, and would post negative growth for Q1 next year as well. Compared to Europe the UK may be in better shape, growth wise but thats not much comfort given that the EU is one of the UKs biggest export markets.

The Office of Budget Responsibility will have no choice but to downgrade its UK growth forecasts as well, making the Chancellors job much more difficult and have to redo his sums as the income expected over the next 5 years will be not as much as expected with some estimates that the shortfall could be as much as 50bn.

Yesterdays warning about ratings from Moodys proved remarkably prescient after Fitch put the USs triple A rating on a negative outlook after the US market close, citing declining confidence that timely fiscal measures necessary to place U.S. public finances on a sustainable path will be forthcoming following failure of the Congressional Joint Select Committee on Deficit Reduction (JSCDR) to agree at least USD1.2 trillion of measures to cut the federal budget deficit.

This above news was followed by a report in La Tribune that S&P could downgrade France in the next 10 days as we head towards a key French auction this week. Any move on the French rating would effectively kill whats left of the EFSF.

US consumer confidence for November is expected to improve from Octobers number in the wake of last weeks post Thanksgiving retail Black Friday pop.

Most of Mondays Premium Intermarket Insights remain in progress, EURUSD & oil longs were stopped out, 1 of EURJPY longs hit all targets, while the other 2 remain in progress. ES, gold, silver and GBPCAD remain in progress. Direct access to the trades is found here: http://ashraflaidi.com/products/sub01/access/?a=557 Non subscribers can go here http://ashraflaidi.com/products/sub01/

EUR Rebound Stalls, Fitch Lowers US Outlook, Japanese jobs up next

The early euro optimism ebbed in US trading even as the broad risk rally continued. NZD and AUD were the top performers with USD and JPY lagging. Japan retail sales rose in Oct but so did the unemployment rate. See status on Mondays Premium trades below and how EURUSD fails to close NY above the key level,

The euro rose high into US trading, as it flirted with 1.34 but was beaten back on two occasions, forming a double-top on the intraday chart. The sellers piled in, driving the pair to a close at 1.3313. Although EUR/USG gained 75 pips on the day, its performance badly lagged other risk trades.

Late in the session, Fitch lowered its outlook on US debt, saying a failure of meaningful deficit reduction by 2013 will result in a downgrade. The lone US economic data point was new home sales, which rose 307K compared to the 312K expected.

Most of Mondays Premium Intermarket Insights remain in progress, EURUSD & oil longs were stopped out, 1 of EURJPY longs hit all targets, while the other 2 remain in progress. ES, gold, silver and GBPCAD remain in progress. Direct access to the trades is found here: http://ashraflaidi.com/products/sub01/access/?a=557 Non subscribers can go here http://ashraflaidi.com/products/sub01/

The weekly CFTC positioning data showed EUR traders holding a net -85K short position compared to -76K the week before. It is somewhat surprising that Mondays euro rally didnt spark a short squeeze but it also demonstrates that the bears have a high conviction level.

The S&P 500 surged 2.9% to 1193

Asia-Pacific Preview

Japan Oct unemployment rate rose to 4.5% from 4.1% vx exp 4.2%. Retail trade rose 1.9% y/y in Oct from -1.1%. The market is increasingly concerned about Japanese economic malaise and a round of soft data points here will put pressure on the government and BOJ to stimulate growth.

EUR 600 bln IMF loan rumor denied; Italian business confidence higher; German GfK consumer confidence rose; UK CBI sales decline; OECD calls for action and expects further QE by BOE. Market turns to October new home sales and Dallas FED manufacturing. Added charts & commentary to Intermarket Insights.

Markets saw a complete reversal of sentiment since Friday. The greenback was sold across the board and riskier assets show significant gains. NZD, CHF and GBP are the relative strength winners. Major European equity indices rose 2-2.5%.

Risk rally was sparked by earlier reports that the IMF is preparing a EUR 600 bln loan for Italy. This news was later denied by the IMF spokesperson that confirmed that the IMF is not in discussions with Italian authorities. Despite the denial, EURUSD holds most of the gains and trades near 1.3370 after reaching 1.3398.

On the European data front, Italian business confidence improved slightly in November from 94.2 to 94.4 and German GfK consumer confidence rose to 5.6 from previous 5.3.

We Added 2 charts on EURUSD, identifying the ley level to watch for today & tomorrow in order to preserve the 4-week trendline. Latest Premium Trades for today include on EURUSD (2), EURJPY (2), USDCAD (2) ES (2), US crude (2) and ongoing trades in GBPCAD and silver. Direct Access to today's trades is found here: http://ashraflaidi.com/products/sub01/access/?a=557 To get a 1-week trial, click here: http://ashraflaidi.com/products/sub01/

Even though the common currency is strengthening, the Italian 2 year yield continues to rise and for the first time crossed above the 8% level. The high so far has been 8.12% but reports of ECB buying have helped to push yield back below 8% towards 7.2%.

The OECD called for an action to boost global economy after it lowered world growth projection for 2012 to 3.4% from 4.6%. The US growth estimate was lowered to 2% from 3.1% and Eurozone GDP is seen to grow only 0.2% in 2012. The OECD has also noted that further QE by the BOE is warranted and estimates that the BOE will buy GBP 400 bln of debt.

CBI reported sales declined to -19 in November from -11 in September which is the weakest result since 3/2009. Reported orders dropped -25% and expected sales for December are seen at -6%. The GBP is holding onto its gains and trades around 1.5575

The economic calendar for the NY session is short today as it includes October new home sales due at 10:00 am ET that are expected to remain at 313K and November Dallas FED manufacturing due at 10:30 am seen higher at 5.0 from previous 2.3.

Risk appetite broadens into the European session even as the IMF continues to deny La Stampa story of a EUR 600 bln loan to Italy. We have new trades on EURUSD (2), EURJPY (2), USDCAD (2) ES (2), US crude (2) and ongoing trades in GBPCAD and silver. Direct Access to today's trades is found here: http://ashraflaidi.com/products/sub01/access/?a=557 To get a 1-week trial, click here: http://ashraflaidi.com/products/sub01/

AL

Euro buoyed by reports of IMF EUR 600 bln loan to Italy, German inflation set to drop, sterling weaker ahead of UK inflation report hearings.Turning to todays auctions from Belgium and Italy,

Euro boosted by weekend reports of a 600bn IMF bailout of Italy, following late Fridays Belgium downgrade by Standard and Poors to AA from AA+, with a negative outlook, implying the risk of a further ratings cut. There were also reports that France and Germany considering options outside the bounds of the existing treaty with talk of a tighter stability pact, involving a core of 8-10 nations to attain unilateral fiscal measures in an attempt to try and speed up fiscal consolidation.

Rising bond yields in the PIIGS as well as Germany have sparked concerns that Europe is fast approaching the fiscal buffers so to speak unless the impasse is broken with respect to next steps.

Against the backdrop of rising yields, Belgium is due to raise 2bn today in 5 and 10 year bonds, while Italy is to raise 1bn in 10-year bonds.

German CPI data for November due out today is expected to show a slowing in inflationary pressures from 2.9% to 2.7%, with monthly prices expected to slip back 0.7%, raising the possibility of a much larger rate cut than 0.25% at the next rate meeting.

GBP traders focus on this afternoons treasury committee and Bank of England governor Mervyn Kings attendance where he will go through last weeks inflation report, prior to tomorrows Autumn statement by the Chancellor of the Exchequer. Given that the OBR will have to once again downgrade its growth forecasts for 2011 and 2012 the Chancellors room for manoeuvre would appear somewhat limited given the events in Europe.