Poor Housing Starts Weighing on Equity Markets
James Hyerczyk from ForexHound.com at 11/18/09
This morning’s decline in U.S. Housing Starts is weighing on U.S. equity markets at the mid-session. Traders are beginning to question stock valuations given the current weak state of the economy. A break through 1100.00 in the December E-mini S&P 500 could trigger a massive break late in the session.
Treasury futures are trading surprisingly lower given the weak housing number and the lower stock market. Today the U.S. reported that the Core CPI rose. This could be putting fear in traders as it serves as a reminder that inflation is still out there. It is going to take a huge break in equities today to force T-Bond and T-Note to flee to the safety of the Treasuries.
At the mid-session, the December Euro is posting a large gain. Yesterday’s supportive comments from European Central Bank President Trichet were not enough to stop the Dollar’s slide. Matters weren’t helped after Luxembourg premier Jean-Claude Juncker said that the Euro’s rally hasn’t hurt the Euro Zone recovery. This comment gave traders the green light to drive the currency higher.
The December British Pound is trading lower at the mid-session. This is either being triggered by a negative reaction to the Bank of England minutes or overbought technical conditions. The major news from the BoE minutes was the fact that the vote was split regarding the expansion of the central bank’s quantitative easing program. The initial reaction to the split vote was positive as it suggested the bank would not expand further. The market, however, broke after a follow-through rally failed.
The Dollar seems to be gaining strength and could reverse to the upside if equity markets fail to hold support.
December Gold is trading higher because of the weaker Dollar and today’s inflation report. Gains could be limited or this market could reverse to the downside if the Dollar picks up strength late in the trading session.
January Crude Oil is trading higher on speculation and the lower Dollar. Today’s oil inventory report suggested that consumer demand is still falling. If the Fed’s assessment of the economy is right, then demand should continue to drop because of the fragile economy and high unemployment.
