Commodities Rise, While We Wait for Europe

Continued economic uncertainty regarding a final European solution towards supporting banks and the leveraging of the European Financial Stability Facility (ESFS) to mend the European debt crisis, did not prevent the euro from maintaining its strength over the U.S. dollar.

Late in New York, the euro is 47 points higher to 1.3944 to the dollar.  Over the next few days, German Chancellor Angela Merkel will try to convince the Bundestag to approve what course of action she agreed upon with French President Nicolas Sarkozy.  The euro zone is expected to raise the amount of capital in the EFSF and provide insurance for new holders of debt.  With insurance provided for new debt, foreign capital could come from the BRIC nations.  Other important notes are: Haircuts of Greek debt could be around the 50 percent level.  Contagion was addressed and it is expected for Italy to provide great measures of austerity.

The strong surge in commodities and risk-on trading was spurred by Markit Economics’ report of Chinese manufacturing output having its strongest rise since April.

Flash China Manufacturing PMI at 51.1 (49.9 in September). 5-month high.

Flash China Manufacturing Output Index at 51.7 (50.3 in September). 6-month high.

 

Concerns of a slowdown in China were alleviated after last night’s release.  The rally in commodities is across the board, West Texas Intermediate crude is $4.26 higher to $91.66. and gold is $19.00 stronger to $1,655.10.

Edward J. Moya is the Chief Market Strategist for edmoya.com, an educational website for foreign exchange and commodity traders. He has over 15 years of investment industry experience in forex, stocks, options and futures. At edmoya.com, Mr. Moya writes daily currency and commodity analysis and has authored numerous articles on trading using both technical and fundamental analysis for major financial publications. He is a contributor of technical and fundamental analysis in currencies and commodities to SFO, Market News International, and Forex Factory.

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