CFD Markets News and Forecasts — 11-03-2011

EUR/USD has marginally higher for trade to $1.3895 in current dealings as USGS confirms a 6.2 temblor on Japan's west coast now, near Honshu. Euro expected to find resistance at $1.3925 area that was Thursday's high.

Stocks have recovered from a recent slip, but they aren't quite back at session highs, which were set shortly after noon ET.
Shares of retailers have jumped out to a 0.8% gain, even though apparel and accessories retailer Aeropostale (ARO 23.08, -1.55) issued downside guidance for the current quarter and for fiscal 2012. Disappointment over ARO's announcement has the stock on pace for its worst single-session performance in three months. The stock is now down close to 6% this year, while the rest of the retailer space is flat for the year.

The yen gained the most since August against the dollar after the worst earthquake in at least a century struck Japan, spurring domestic investors to buy the currency as a haven.

The Japanese currency strengthened after the 8.9-magnitude temblor and as a tsunami of 10 meters (33 feet) engulfed towns along the northern coast, increasing speculation insurance companies and investors will buy back yen to pay for damages.
Prime Minister Naoto Kan’s government set up an earthquake response team as buildings shook violently in Tokyo. The quake struck at 2:46 p.m. local time at 130 kilometers (81 miles) off the coast of Sendai, north of Tokyo, at a depth of 24 kilometers, the U.S. Geological Survey said.
The yen strengthened about 20% versus the dollar in three months after the 6.9 magnitude Kobe earthquake in January 1995, which claimed more than 6,000 lives. The Japanese currency is trading within 2 yen of 80.22 yen per dollar reached Nov. 1, the lowest since April 1995.
"Today’s earthquake may not have the same affect on the currency and growth as the Kobe earthquake did," according to Mamoru Arai, a senior currency trader at Mizuho Financial Group Inc.
“At that time, the yen went higher to a historical level, but we had a very strong trade war between the U.S. and Japan,” Arai said. “There is no economic disturbance between the U.S. and Japan, so I doubt this will lead to severe appreciation in the yen.”
Canada’s dollar touched the lowest in two weeks versus its U.S. counterpart after the nation added fewer jobs than forecast in February. Canada’s employers added a net 15,100 jobs after a gain of 69,200 in January, Statistics Canada said.
The euro has fallen 1% this week against the greenback, after rising for three straight weeks.
The U.S. currency remained lower versus the Japanese currency after a report showed U.S. retail sales gained the most in four months in February. U.S. retail sales rose 1%, following a revised 0.7% increase in January, figures from the Commerce Department showed. Economists forecast a 1% gain, according to estimates in a survey.

Shares of airlines have ascended to a 1.1% gain, which makes for the group's fourth advance in five sessions. During that time the Amex Airline Index has climbed 4.7%. In contrast, the S&P 500 is actually down 1.5% this week.
Strength among airline stocks is largely underpinned by the pullback in oil prices, which had started the week near $107 per barrel, but are now a bit below $101 per barrel as the flow of headlines related to social unrest and political instability in the Middle East and North Africa slow.

Economist Ellen Beeson Zentner at BTM-UFJ says turmoil in Mideast and rising gas prices sank Univ Michigan's consumer sentiment 9.3 pts in prelim Mar reading. She also says that's why short-term infl expectations jumped, 1y measure at 4.6% from 3.4% in Feb, and why households said expectations of the health of future finances fell.

USD/JPY fell under Y82.00 lows seen overnight. Focus still on the earthquake, worth noting that the smaller but still devastating earthquake of 1995 caused about $100 bn in damages. No estimates yet of damages from today's quake. Dollar remains around Y81.95.

U.S. stocks were set to drop at Friday's open, extending a loss from the previous session, as news of a massive earthquake and tsunami in Japan added to concerns over conflict in North Africa and the Middle East.
An 8.9-magnitude earthquake hit northern Japan on Friday, triggering tsunamis and sending a massive wave filled with debris that included boats and houses inching toward land. The death toll was more than 59, according to the Kyodo News Agency.
U.S. markets fell sharply Thursday, as economic data both domestically and abroad put a damper on investor sentiment. Investors' moods were darkened further by more reports of unrest in the Middle East, specifically news reports that Saudi Arabian police fired shots on anti-government protestors.
World markets:

Companies: The Japanese disaster had an impact on stateside insurance companies such as Aflac (AFL), which experienced a premarket stock drop of 3%. Three-quarters of Aflac's revenue come from Japan.
Economy: Retail sales rose 1% in February, matching expectations. Excluding automobile sales, retail sales rose 0.7%, only slightly higher than the projected increase of 0.6%.
Two economic reports are due out after the opening bell. The University of Michigan releases its March consumer sentiment survey at 14:55 GMT and the Commerce Department issues its January business inventories report shortly afterwards.
Economists, on average, are looking for the University of Michigan survey to come in at a reading of 76.5, down from 77.5 in February. Business inventories are expected to have risen 0.8%.
Oil for April delivery fell $2.76 to $99.94 a barrel
Gold futures for April delivery rose $1.20 to $1,413.70 an ounce, recovering from an earlier slump.
The price on the benchmark 10-year U.S. Treasury dropped, pushing the yield up to nearly 3.39% from 3.37% late Thursday.

The euro is headed for its biggest weekly drop against the dollar since January on speculation policy makers meeting today will struggle to agree on measures to combat the region’s debt crisis. The European leaders scheduled to meet in Brussels have set a March 25 deadline to approve a comprehensive package.
The European Union should set up a new agency to sell bonds on behalf of member countries and eventually issue European-wide debt, European Central Bank Executive Board member Lorenzo Bini Smaghi said today in Lucca, Italy.
The yen strengthened against all of its 16 major counterparts after an 8.9-magnitude earthquake struck the north coast of Japan, boosting domestic demand for the currency as a haven.
Japan’s currency rebounded versus the dollar after earlier weakening to a two-week low against its U.S. counterpart. A tsunami of more than 10 meters (33 feet) was reported in northern Japan and the quake registered 7 on the Japanese seismic scale, the highest level, in some areas north of Tokyo. The euro reached a one-week low against the dollar.
“The yen may be strengthening on some domestic repatriation of the currency,” said Jane Foley, a senior foreign-exchange strategist at Rabobank International in London. “The yen generally benefits in times of uncertainty created by natural disasters. The yen hasn’t fully given up its safe-haven status, despite the fact that Japan has been hit by this crisis.”
“Japanese investors are cutting back overseas risk,” said Neil Jones, head of European hedge-fund sales at Mizuho Corporate Bank Ltd. in London. “Overseas assets are being sold and the proceeds converted back into yen. Repatriation’s the key and is behind the stronger yen.”
“Natural disasters can have an inflationary impact,” Foley said. “As the rebuilding effort commences, growth may rebound significantly. Authorities have tried to create inflation in Japan for a couple of decades. If we did have inflation then this could set Bank of Japan policy back on a more normal route,” boosting the currency, she said.

Holding up well despite a pounding from the aussie-yen this morning with the 100 day MA ($0.9972) proving to be some sort of support around $0.9970/75, with next target below of $0.9967 (Feb 22 low) and $0.9944 (Feb 15 low).

• Portugal measures to help control debt, end uncertainty;
  
• New measures should be enough to hit deficit targets;
  
• Welcomes Portugal's new fiscal measures.

Extends slippage to $1.3750, seen meeting demand placed between $1.3750/40 (around Mar 2 low). Recovery off lows extend above $1.3765. Spec shorts seen covering back ahead of the NY open. Resistance now seen at $1.3775/80. Support into $1.3750/40 with stronger demand reported into $1.3730, with stops below.

EUR/USD $1.3725, $1.3800, $1.3835, $1.4000 
USD/JPY Y82.25, Y82.70, Y83.15, Y83.50
EUR/JPY Y113.25
GBP/USD $1.6100, $1.6225
AUD/USD $0.9965, $1.0000, $1.0050
GBP/NZD NZ$2.1950

The euro fell to the lowest level in a week against the dollar after Moody’s Investors Service lowered Spain’s credit rating, increasing pressure on European leaders to find a solution to the region’s debt crisis.
The shared currency weakened against most of its major peers as Spanish debt was downgraded to Aa2 by Moody’s, which also cut Greece’s ranking this week. Currencies of commodity- exporting countries weakened after China reported an unexpected trade deficit and crude oil prices fell. The pound stayed lower versus the greenback after the Bank of England left interest rates at a record low.
The euro may decline to as low as $1.3538 should it break below the key support level of $1.3978, the 78.6 percent Fibonacci retracement from its November peak, according to Karen Jones, head of fixed-income, commodity and currency technical analysis at Commerzbank AG in London.
European leaders are due to meet tomorrow having set a March 25 deadline to approve a “comprehensive” package of measures to end the sovereign-debt crisis. Moody’s said the outlook for the Spanish rating is “negative,” meaning the next change is most likely to be another cut.