Italian government collapsed – EUR/USD could start lower

The Italian crisis deteriorated fast: ex-PM Silvio Berlusconi pulled his ministers out of the coalition government led by Enrico Letta, leaving it hanging in the air. With political parties blaming each other for the cause to the crisis, the ball returns to the court of president Giorgio Napolitano, who is trying to negotiate a new government and avoiding fresh elections.

Italy is the euro-zone’s third largest economy. EUR/USD could certainly open lower with a Sunday gap after this development.

Italy did not manage to pass new economic measures on Friday, and the government collapsed on Saturday, but PM Letta says the reason is not the economic differences, but rather Berlusconi’s personal status.

The Italian crisis was on the back burner for quite a while, and now it is on the front page, trying to take away the spotlight from the potential US government shutdown.

Read More

Forex - Dollar falls to 1-month low versus yen

The dollar fell to a one-month low against the yen on Monday as the risk of a looming U.S. government shutdown bolstered investor demand for the safe haven yen.

USD/JPY hit 97.69 during late Asian trade, the lowest since August 29; the pair subsequently consolidated at 97.85, shedding 0.39%.

The pair was likely to find support at 96.97, the low of August 27 and resistance at 99.03, Friday’s high.

Political wrangling in Washington over funding for President Barack Obama’s healthcare law continued over the weekend, fuelling fears over the prospect for a U.S. government shutdown 

Congress must pass a short-term budget by midnight on Monday in order to keep the government open.

Republican opposition to the funding of the Affordable Care Act has created a standoff with the White House and the Democratic-controlled Senate, which have both said they will not support any budget bill that defunds or amends Obamacare.

Market sentiment was also hit after data released on Monday showed that China’s HSBC manufacturing index was revised down to 50.2 from an initial reading of 51.2 this month, indicating that the recovery in the world’s second largest economy remains fragile. 

Economists had expected an unchanged reading.

Elsewhere, the euro fell to two-week lows against the yen, with EUR/JPYdown 0.65% to 131.96, as concerns over fresh political instability in Italy weighed.

Silvio Berlusconi announced Saturday that he was pulling his ministers out of Prime Minister Enrico Letta’s coalition government and called for fresh elections to be held.

Read More

Forex - Euro slips lower vs. dollar

The euro slipped lower against the dollar on Monday as fresh political instability in Italy weighed, while the risk of a looming U.S. government shutdown also hurt market sentiment.

EUR/USD hit 1.3478 during late Asian trade, the session low; the pair subsequently consolidated at 1.3489, sliding 0.24%.

The pair was likely to find support at 1.3460, the low of September 25 and resistance at 1.3536, the high of the same day.

The euro came under pressure after Silvio Berlusconi announced Saturday that he was pulling his ministers out of Prime Minister Enrico Letta’s coalition government and called for fresh elections to be held.

Meanwhile, political wrangling in Washington over funding for President Barack Obama’s healthcare law continued over the weekend, fuelling fears over the prospect for a government shutdown 

Congress must pass a short-term budget by midnight on Monday in order to keep the government open.

Republican opposition to the funding of the Affordable Care Act has created a standoff with the White House and the Democratic-controlled Senate, which have both said they will not support any budget bill that defunds or amends Obamacare.

Elsewhere, the euro was weaker against the pound and the yen, withEUR/GBP down 0.32% to 0.8350 and EUR/JPY losing 0.58% to trade at 132.06.

Also Monday, data showed that China’s HSBC manufacturing index was revised down to 50.2 from an initial reading of 51.2, indicating the recovery in the world’s second largest economy remains fragile. Economists had expected an unchanged reading.

Read More

GBP/USD Outlook – Sep. 30-Oct. 4

GBP/USD continues to move higher and broke through the 1.61 line this week. The pair closed the week at 1.6136. This week’s key events are Manufacturing, Services and Construction PMIs. Here is an outlook of the events and an updated technical analysis for GBP/USD.

The pound continues to shine, although this week’s UK numbers were uneventful. In the US, Unemployment Claims looked sharp, but key manufacturing and housing data disappointed the markets and weighed on the greenback.

GBP/USD graph with support and resistance lines on it. Click to enlarge: 

1. Net Lending to Individuals: Monday, 8:30. An increase in lending reflects stronger consumer confidence and spending. The July reading dropped to 1.5 billion pounds, falling short of the estimate of 1.7 billion. The estimate for August stands at 1.6 billion.
2. Manufacturing PMI: Tuesday, 8:30. This PMI has been steadily rising and the index has been above the 50-point level, indicating expansion, for the past four releases. Little change is expected in the upcoming release, with an estimate of 57.5 points.
3. Halifax HPI: Wednesday, 2nd-4th. This housing inflation indicator provides a snapshot of the health of the UK housing sector. The index dropped to 0.4% in July, falling short of the estimate of 0.7%. The forecast for the August release stands at 0.6%.
4. Construction PMI: Wednesday, 8:30. Construction PMI has been on a steady upward rise, and hit 59.1 points in the August reading. The markets expect the rise to continue, with an estimate of 60.1 points.
5. Services PMI: Thursday, 8:30. This index continues to look sharp, and has been above the 60-point line for the past three readings. The markets are not expecting much change in the September release, with an estimate of 60.4 points.
6. 10-y Bond Auction: Thursday, Tentative. British 10-year bond yields have been rising, and the previous average yield came in at 2.98%. If this week’s auction produces an average yield above 3.0%, it will be the first time we’ve seen this in over two years.

Live chart of GBP/USD: 

GBP/USD Technical Analysis

GBP/USD opened the week at 1.6016. The pair dropped to a low of 1.5955, as 1.5936 (discussed last week) held firm. The pair then rebounded sharply, crossing above 1.61 as it touched a high of 1.6147. GBP/USD closed the week at 1.6136.

Technical lines from top to bottom:

We begin with resistance at 1.6694. This line saw some activity in June 2011, but has remained intact since then.

This is followed by 1.6475, which has held firm since August 2011. Next is 1.6343. This line was last breached when the pound dropped sharply in August 2011.

We next encounter resistance at 1.6247. This was a key resistance line in October and November 2012.

Next, 1.6125 had held firm since January, but as breached this week as the pound continues to hammer away at the US dollar. It starts the week as a weak support level, and could face strong pressure early in the week.

1.60, a key psychological barrier, continues to provide support. This line had remained intact since mid-January, when the pound went on a sharp slide that saw it fall below the 1.49 line. This line has some breathing room as the pair trades above the 1.61 line.

1.5936 saw a lot of activity in November 2012 and this past January.

1.5832 continues to provide the pair with support. It has some breathing room as GBP/USD trades at higher levels.

1.5752 was breached earlier in the month by the surging pound, and has strengthened as a support level.

1.5648 was an important resistance line since June, but as reverted to a support role since early September as the pound has rallied sharply against the retreating US dollar.

The final line for now is 1.5550, which continues to provide GBP/USD with strong support. This line last saw action in mid-June.

I am bullish on GBP/USD.

The pound enjoyed a super September, gaining about six cents against the retreating US dollar. Will the rally continue? UK PMIs have looked very sharp over the past few months, and strong releases this week could give the pound a boost. The US could face a government shutdown this week as the Democrats and Republicans play political hardball, and how this event plays itself out could have a major impact on the currency markets.

Read More

EUR/USD Forecast Sep 30. – Oct 4.

EUR/USD consolidated its gains from the previous week, unable to pick a new direction just yet. The rate decision and its accompanying press conference, as well as final PMIs are the highlights of this week. Check out these events and more as well as an updated technical analysis for EUR/USD.

The German elections saw a victory for Merkel, but the lack of a clear majority now puts the euro-zone’s locomotive in a long period of coalition negotiations and uncertainty. Positive news came from climbing services PMI’s but the disappointing German business confidence reading. With somewhat tighter conditions in financial markets, will Draghi follow through and announce a new liquidity program (LTRO) for European banks? In the US, the due dates for a government shutdown and even a technical default due to the debt ceiling are getting closer, and this weighs on the dollar. What’s the next move for the pair? Let’s start.

Updates:

EUR/USD daily graph with support and resistance lines on it. Click to enlarge:

1. German Retail Sales: Monday.6:00. German retail sales unexpectedly narrowed by 1.4% in July, following another decline of 0.8% in the previous month, signaling a shaky recovery in Europe’s largest economy. Economists projected an increase of 0.5%. However on a yearly base, sales climbed 2.3% from a year earlier. However despite this decline which could be explained by higher food prices, everything else looks positive and German business sentiment constantly improves. A rise of 0.9% is expected.
2. CPI Flash Estimate: Monday, 9:00. CPI flash estimate in the Eurozone retreated to 1.3% in August from 1.6%, in the previous month, remaining below the ECB’s 2.0% target. However despite the encouraging signs of recovery in the Eurozone, investors are awaiting to see the outcome of Germany’s elections and its effect on the Euro. The CPI flash estimate is predicted to remain at 1.3%.
3. Manufacturing PMIs: Tuesday. Markit release of the Euro-area manufacturing sector in August revealed an improvement. Italy and Spain showed higher activity, following nearly two years of contraction. Final manufacturing PMI in the Euro zone reached 51.4 in August from 51.3 in July. Italian manufacturing PMI came in at 51.3 in August from 50.4 in July, while the Spanish manufacturing crossed the 50 point line to expansion, reaching 51.1 in August, following 49.8 a month ago. These positive results provide further backing that Euro zone’s economy, has pulled out of recession. Manufacturing sector in Spain is expected to expand to 51.6, Italian manufacturing to 51.2, and the Eurozone manufacturing to 51.1.
4. German Unemployment Change: Tuesday, 7:55. German unemployment increased by seven thousand in July, missing predictions for a 5,000 contraction. Nevertheless, unemployment rate remained at 6.8% in August. German economy reported a 0.7% growth in the second quarter; however, the Bundesbank cut the annual growth forecast for 2013 in June to 0.3%, despite predicting a gradual recovery for the rest of the year. A drop of 5,000 claims is expected now.
5. Unemployment Rate: Tuesday, 9:00. Despite growing optimism in the Eurozone’s economy, unemployment rate remained stubbornly high in the bloc’s weaker countries, highlighted the gap between north from the struggling south. Overall unemployment remained at a record high of 12.1%. There is a huge difference in jobless rates between countries such as Germany, where the job market is robust, and Greece or Spain where more than one in four workers have no job. Therefore, despite the recovery trend in the Euro-area, the central bank must remain in strongly accommodative mode for the foreseeable future. No change in unemployment rate is expected.
6. Spanish Unemployment Change: Wednesday, 7:00. Spanish unemployment remained nearly unchanged in August at 4.7 million, while economists projected a 5,200 contraction. The slight improvement was due to an increase in the number of tourist visits in July. Growth rate is expected to be flat or may reach 0.2% in the third and fourth quarters. Unemployment in Spain is projected to grow by 12,300 this time.
7. Rate decision and press conference: Wednesday, 11:45. European Central Bank President Mario Draghi is ready to deploy another long-term refinancing operation to provide funding to Europe’s banking system if required. Excess liquidity in the financial system is approaching the 200 billion-euro ($270 billion) level the ECB has previously signaled as a lower limit. The ECB has also tried to keep money-market rates unchanged by issuing forward guidance on its official interest rates, saying that they will remain where they are or lower for an extended period. No change in rates is expected.
8. Services PMIs: Thursday. Italy’s service sector edged up less than expected in August reaching 48.8, from 48.7 in July, still in contraction, despite the sign of recovery reflected in the manufacturing sector’s PMI. The data indicates weak domestic demand is weighing on service sector. Meanwhile, Spanish service sector climbed to 50.4 crossing to expansion, following 48.5 in the previous month. Spain’s economy has been in recession since mid-2011, the second since a decade-long property bubble burst in 2008, though the government has said it expects to see quarterly growth in the second half of 2013. Meanwhile, Eurozone Service sector edged up to 50.7 in August, from 49.8 in July, indicated a return to growth for the Eurozone service sector, ending a one-and-a-half year sequence of contraction. Service sector in Spain is expected to reach 50.9, Italian to 49.3 and the Eurozone service sector to 52.1.
9. Retail Sales: Thursday, 9:00. Retail sales in the Eurozone increased 0.1% month in July following a 0.7% contraction in the previous month. From July 2012, retail sales declined 1.3% in the 17-member currency union. Among reporting countries, retail sales dropped in eight countries and rose in 14. A rise of 0.3% is anticipated.
10. German PPI: Friday, 6:00. Price inflation weakened unexpectedly in July, missing economists’ forecast for an increase of 0.2%. The producer price index moved up 0.5% on an annual basis in July, following a 0.6% gain in the previous month. The drop occurred due to a fall in the prices of in intermediate goods, which decreased by 1% from July 2012. A small increase of 0.1% is expected now.

*All times are GMT

EUR/USD Technical Analysis

Euro/dollar kicked off the week with an initial move higher, but eventually fell into range trading, between 1.3460 and 1.3570 (mentioned last week). It finally closed at 1.3520, slightly lower than the previous close.

Technical lines from top to bottom:

1.3940 was a peak in September 2011, two years ago, and is just before the round number of 1.40. 1.3870 capped the pair during the fall of 2011 and served as the “shoulders” in a H&S pattern. 1.38 is a round number and also worked as a temporary cap during that period of time.

1.3710 was the 2013 peak, and is getting closer. The line is the next big target.1.3650 temporarily capped the pair during that period of time.

1.3570 is the swing high of September 2013 and also proved itself as resistance afterwards. 1.35 is a nice round number and a pivotal line or “magnet” within the range.

1.3460 worked as support in late September and should be watched for any downside moves. 1.3415 was the peak back in June and works as another line of support.

1.3325 worked as a double top in early September and it was crossed only with a Sunday gap. It remains a clear separator of ranges. It is followed by 1.3240, which capped the pair in April and also had a role in August. It worked as support in September.

1.3175 capped the pair during July 2013. 1.3100 is worked as temporary resistance in December 2012 and is becoming more important once again, after capping a recovery attempt in June and then in July and providing support in September.

It is followed by 1.3050, which proved be strong support in May 2013, defending the round number in more than one occasion, but it is less significant now. The very round 1.30 line was a tough line of resistance. In addition to being a round number, it also served as strong support and recently worked as a pivot line.

EUR/USD holding above broken uptrend resistance

The line accompanying the pair since early June was broken by the big surprise and the pair managed to stay on top of it.

I remain bearish on EUR/USD

There is a lot of uncertainty about the economic situation in the euro-zone: cautious talk about a “green’ recovery” was replaced with an option to supply new liquidity to banks. In Italy, the never-ending political crisis is now accompanied with missed deficit targets. And uncertainty over the German government also looms. A lot depends on Mario Draghi. If we judge from his recent testimony, he could lean to the downside.

In the US, the chances of QE tapering in October don’t seem so high either (despite initial hints), but the recent USD weakness is more related to fears of a government shutdown and the US reaching its debt ceiling. The past tells us that politicians will do what they always do: cut a deal in the last moment, and this would serve as a relief for the dollar.  However, some fear it could be different this time. All in all, euro-zone economic weakness could trump US political hurdles.

Read More

Forex Weekly Outlook Sep. 30- Oct. 4

Markets were looking for a direction after the FOMC decision. As a new quarter begins, the calendar is packed with important events. In the US, we PMIs and employment indicators culminating in the Non-Farm Payrolls on Friday, Ben Bernanke’s speech and rate decisions in Australia, the Eurozone and Japan are are also key events. Here is an outlook on the major events ahead.

Last week, new concerns about the impending debt ceiling imposed on the greenback’s gains as Republicans in the US House of Representatives refused to okay raising the debt ceiling limit, unless Obama delays the full implementation of the national healthcare law known as “Obamacare”. An ongoing standoff could lead to a government shutdown on October 1 and a default in mid-October. Will the repeated crisis be resolved in time? Markets seem calm and perhaps complacent for now, but the clock is ticking. Economic data seems mediocre, apart from jobless claims, which provide hope for some, and confusion for others. In the euro-zone, Draghi floated the option of a new LTRO, while Britain’s Carney seemed to close the door on new QE. Let’s start:

Updates:

1. Canadian GDP: Monday, 12:30. Real GDP by industry declined 0.5% in June due to severe flooding in southern Alberta affecting many sectors of the economy. Economists expected a smaller decline of 0.4%. This was the weakest reading since March 2009. However the impact of the flood is likely to be short-term since growth is expected to improve in the third quarter, at around 2-2.5 %. GDP is expected to expand by 0.6%.
2. Australian rate decision: Tuesday, 4:30. The Reserve Bank of Australia (RBA) maintained its official cash rate at the historically low of 2.5 % despite calls for further rate cuts. The Housing Industry Association asked for further reductions in order to stimulate growth and residential development. No change in rates is expected this time. Technical: AUDUSD downwards correction could be near completion.
3. US ISM Manufacturing PMI: Tuesday, 14:00. The U.S. manufacturing sector expanded at its fastest pace in more than two years in August, rising to 55.7 from 55.4 in the previous month, indicating a solid improvement in the US manufacturing activity. However, employment, declined to 53.3 from 54.4. Demand picked up in the U.S. manufacturing sector in August, and a drop in inventories pointed to faster growth in the coming months. A drop to 55.3 is anticipated now.
4. Eurozone: rate decision: Wednesday, 11:45, press conference at 12:30. The ECB will probably leave policy unchanged at the upcoming meeting. Changing the forward guidance at this point would be pre-mature and would undermine the credibility of the central bank. Draghi could repeat the forward guidance pledge and express caution about the recovery, like in the previous meeting. In his recent testimony in the European Parliament, Draghi clearly left the door open for another LTRO. While he is unlikely to introduce one at this moment, repeating the LTRO option could weaken the euro as it reflects economic weakness that calls for action. If he dismisses this option in the near future, the euro could benefit.
5. US ADP Non-Farm Employment Change: Wednesday, 12:15. US private sector increased by 176,000 jobs from July to August, according to the August ADP National Employment Report, broadly in line with market expectations, following 198,000 gain in the preceding month. In light of this reading, the US job market is advancing steadily. US private sector  is expected to add 177,000 jobs this time.
6. Ben Bernanke speaks: Wednesday. 19:30. Federal Reserve Chairman Ben Bernanke is scheduled to speak in St Louis. He will probably refer to the renewed Debt Ceiling crisis causing volatility in the markets. Will he release hints about future policy?
7. US Unemployment Claims: Thursday, 12:30. Americans filed fewer claims for unemployment benefits in the preceding week, dropping 5,000 to 305,000, indicating the labor market continues to strengthen. Employers are confident sales will continue to increase sustaining growth in the US economy despite budget cuts in Washington. A rise of 315,000 claims is expected.
8. US ISM Non-Manufacturing PMI: Thursday, 14:00. The US service sector advanced in August at the fastest rate in almost eight years, reaching 58.6 from 56 in July, amid a spike in demand which boosted hiring in the non – manufacturing sector. This rise indicates the US economy is marching forward and it raised expectations for the NFP – expectations that didn’t materialize. A small decline to 57.2 is predicted.
9. Japan rate decision: Friday. The Bank of Japan maintained its monetary policy unchanged in September and revised up its assessment of the economy, amid growth signs resulting from its stimulus policy. The BOJ announced Japan’s economy is recovering moderately and will continue to grow in the coming months.rates are expected to remain unchanged.
10.  US Non-Farm Payrolls and Unemployment rate: Friday, 12:30. The US economy added 169,000 jobs in August, missing predictions for a larger gain of 178,000 and following a downgraded 104,000 increase in the previous month. Unemployment rate declined to 7.3% for the wrong reasons, due to lower participation rate. The number of people unemployed in August declined to 11.3 million. But about four in 10 were ranked long-term unemployed – people officially seeking jobs who had been jobless for at least 27 weeks. US job market is expected to grow by 179,000 positions, while unemployment rate is predicted to remain unchanged at 7.3%.  After the No-taper decision in September, the bar is higher for such a move in October, and despite the possibility of calling an unscheduled press conference in October, there are better chances that the Fed will wait until December. It seems that only an outstanding NFP report showing gains of more than 200K and significant positive revisions can convince markets that tapering is coming in October. The improvement in jobless claims provides hope, but this number could certainly be an outlier.

Read More

U.S. stocks drop as fiscal impasse frays nerves; Dow down 0.46%

U.S. stocks fell on Friday as a congressional deadline to pass a spending package and avoid a government shutdown grew closer with little compromise in sight by the closing bell.

At the close of U.S. trading, the Dow Jones Industrial Average finished down 0.46%, the S&P 500 index fell 0.41%, while the Nasdaq Composite index slid 0.15%.

Congress must approve a spending package by Oct. 1 or risk partial government shutdown afterwards.

While markets are expecting a last-minute deal, uncertainty steered investors away from the U.S. stocks on Friday. 

The Democratically-controlled Senate earlier Friday approved a stop-gap spending bill to fund the government through Nov. 15.

The bill was stripped of language defunding President Barack Obama's healthcare reform law, though the legislation will go back to the Republican-controlled House of Representatives, which called for defunding the president's healthcare law in the first place.

On Friday afternoon, President Obama urged Congress to come to an agreement and prevent a shutdown.

Mixed data sent stocks falling as well.

Elsewhere, the Thomson Reuters/University of Michigan consumer sentiment index fell to 77.5 in September from a reading of 76.8 the previous month. 

Analysts were expecting the index to rise to 78.0 this month. 

Separately, official data showed that U.S. personal spending rose 0.3% in August, in line with expectations, after an upwardly revised 0.2% increase the previous month. 

Data also showed that personal income in the U.S. rose 0.4% last month as expected after an upwardly revised 0.2% gain in July, also in line with expectations. 

Core personal consumption expenditures, which exclude food and energy, rose 0.2% in August, more than the expected 0.1% gain after a 0.1% increase in July. 

The data continued to cloud market expectations as to when the Federal Reserve will begin taper its USD85 billion monthly bond-buying program, which bolster stocks prices by driving down interest rates to spur recovery. 

Leading Dow Jones Industrial Average performers included Nike, up 4.68%, Microsoft, up 1.53%, and Pfizer, up 1.30%.

The Dow Jones Industrial Average's worst performers included Intel, down 1.88%, Cisco, down 1.85%, and IBM, down 1.76%.

European indices, meanwhile, finished largely lower.

After the close of European trade, the EURO STOXX 50 fell 0.20%, France's CAC 40 rose 0.07%, while Germany's DAX 30 fell 0.03%. Meanwhile, in the U.K. the FTSE 100 finished down 0.81%.

Read More

Forex - GBP/USD falls on U.K. growth data, U.S. jobless claims

Softer-than-expected U.K. growth numbers coupled with a better-than-expected report on U.S. jobless claims sent the pound weakening in front of the dollar on Thursday.

In U.S. trading on Thursday, GBP/USD was trading at 1.6038, down 0.26%, up from a session low of 1.6000 and off from a high of 1.6096.

Cable was likely to find support at 1.5980, Wednesday's low, and resistance at 1.6163, the high from Sept. 18.

The pound softened after official data revealed that the U.K.'s gross domestic product expanded by 0.7% in the second quarter, in line with market expectations. 

On a yearly basis, however, the U.K. economy rose 1.3% in the three months to June, missing expectations for a 1.5% increase. 

A separate report showed that the U.K. current account deficit narrowed less than expected in the last quarter, coming in at GBP13 billion from a GBP21.8 billion deficit in the three months to March. 

Analysts had expected the current account deficit to narrow to GBP12 billion in the second quarter.

Meanwhile in the U.S., the U.S. Department of Labor said that the number of individuals filing for initial jobless claims in the U.S. in the week ending Sept. 20 fell by 5,000 to a seasonally adjusted 305,000, from a downwardly revised 310,000 the previous week. 

Analysts were expecting the figure to rise to 325,000, which gave the dollar support by rekindling expectations for the Federal Reserve to begin tapering the pace of its monthly bond purchases, which weaken the dollar by driving down interest rates to spur recovery.

Capping the greenback's advances, however, was an industry report released earlier showing that U.S. pending home sales dropped 1.6% in August, more than an expected 1.0% decline following a downwardly revised 1.4% contraction the previous month. 

Also on Thursday, official data showed that the U.S. economy expanded by 2.5% in the second quarter, just shy of expectations for a 2.6% expansion. 

The pound, meanwhile, was up against the euro and up against the yen, with EUR/GBP down 0.05% at 0.8407 and GBP/JPY up 0.14% at 158.51.

On Friday, the U.S. is to round up the week with revised data on consumer sentiment and inflation expectations from the University of Michigan as well as data on personal income and expenditure.

Read More

U.S. stocks dip on Washington fiscal impasse; Dow down 0.40%

U.S. stocks fell on Wednesday as budget talks continued in the U.S. Congress with fears growing that the impasse could prompt a government shutdown.

Lackluster U.S. data dampened stock prices as well.

At the close of U.S. trading, the Dow Jones Industrial Average finished down 0.40%, the S&P 500 index fell 0.27%, while the Nasdaq Composite index fell 0.19%.

Congress must approve of a spending package to fund the federal government by October or risk forcing the government to partially shut down as it hits its debt ceiling.

The House of Representatives recently approved legislation to fund the government through Dec. 15, however, lawmakers also voted to defund President Barack Obama's healthcare bill, the Affordable Care Act.

While the bill faces little chance of survival, concerns that both parties will go back and forth crafting and rejecting spending proposals as the U.S. approaches its debt ceiling repelled investors away from stocks.

The bill remained in the Senate on Wednesday.

Spotty data in the U.S. also managed to convince investors to spend the day elsewhere.

In a report, the Census Bureau said that U.S. new home sales rose 7.9% to a seasonally adjusted 421,000 units in August from a downwardly revised 390,000 in July. Analysts were expecting new home sales to rise to 420,000 units last month. 

A separate report showed that U.S. core durable goods orders, excluding transportation items, fell 0.1% in August, disappointing expectations for a 1% increase, after an upwardly revised 0.5% contraction the previous month. 

Overall durable goods orders in the U.S. rose 0.1% last month, short of expectations for a 0.2% increase following a downwardly revised 8.1% decline in July.

Elsewhere, a report that Wal-Mart Stores was planning to cut orders to deal with rising inventories added to losses as well, though Wal-Mart later labeled the report as misleading.

Leading Dow Jones Industrial Average performers included JPMorgan Chase, up 2.74%, Cisco, up 1.28%, and Merck, up 0.40%.

The Dow Jones Industrial Average's worst performers included Wal-Mart Stores, down 1.44%, Johnson & Johnson, down 1.29%, and Procter & Gamble, down 1.14%.

European indices, meanwhile, finished mixed.

After the close of European trade, the EURO STOXX 50 rose 0.08%, France's CAC 40 fell 0.01%, while Germany's DAX 30 rose 0.01%. Meanwhile, in the U.K. the FTSE 100 finished down 0.30%.

On Thursday, the U.S. is to release its weekly report on initial jobless claims, as well as final data on second-quarter growth and private-sector data on pending home sales.

Read More

Forex - Dollar falls on lackluster data, U.S. fiscal jitters

The dollar edged lower against most major currencies on Wednesday as fears brewed that a fiscal impasse in Washington could potentially shut down the government and roil markets, while soft data clouded expectations as to when the Federal Reserve will begin tapering stimulus programs.

Improving German sentiment data sent investors chasing the euro on Wednesday, which further weakened the U.S. currency.

In U.S. trading on Tuesday, EUR/USD was up 0.39% at 1.3525.

The House of Representatives recently approved legislation to fund government through Dec. 15, however, lawmakers also voted to defund President Barack Obama's healthcare bill, the Affordable Care Act, which set the stage for a fiscal showdown between Democrats and Republicans.

While the bill faces little chance of survival, concerns that both parties will go back and forth crafting and rejecting spending proposals as the U.S. runs close to hitting its debt ceiling repelled investors away from the greenback.

Failure to agree on a solution could result in a government shutdown in October.

Spotty data in the U.S. weakened the greenback by leaving investors unable to guess when the Federal Reserve will begin to taper the size or pace of its USD85  billion asset-purchasing program, which seeks to spur recovery by driving down interest rates, weakening the dollar in the process.

In a report, the Census Bureau said that U.S. new home sales rose 7.9% to a seasonally adjusted 421,000 units in August from a downwardly revised 390,000 in July. Analysts were expecting new home sales to rise to 420,000 units last month. 

A separate report showed that U.S. core durable goods orders, excluding transportation items, fell 0.1% in August, disappointing expectations for a 1% increase, after an upwardly revised 0.5% contraction the previous month. 

Overall durable goods orders in the U.S. rose 0.1% last month, short of expectations for a 0.2% increase following a downwardly revised 8.1% decline in July.

Meanwhile in Europe, solid German consumer confidence bolstered demand for the euro.

The forward looking GfK index of German consumer confidence rose to 7.1 for October, while September’s reading was revised up from 6.9 to 7.0.

Analysts were expecting the October figure to come in at 7.0

The greenback was down against the pound, with GBP/USD up 0.49% at 1.6082.

The pound saw support after the Confederation of British Industry reported that its retail sales index rose to 34.0 in September from 27.0 in August, the highest level since June 2012. Analysts were expecting the index to decline to 24.0.

The dollar was down against the yen, with USD/JPY down 0.31% at 98.44, and down against the Swiss franc, with USD/CHF trading down 0.45% at 0.9088.

The dollar was up against its cousins in Canada, Australia and New Zealand, with USD/CAD up 0.12% at 1.0313, AUD/USD down 0.26% at 0.9367 and NZD/USD trading down 0.40% at 0.8248.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.36% at 80.40.

On Thursday, the U.S. is to release the weekly report on initial jobless claims, as well as final data on second quarter growth and private sector data on pending home sales.

Read More

Forex - GBP/USD gains on U.K. retail data, U.S. fiscal jitters

The pound firmed against the dollar after U.K. industry data on retail sales beat expectations, while U.S. fiscal uncertainties repelled investors away from the greenback.

In U.S. trading on Wednesday, GBP/USD was trading at 1.6074, up 0.44%, up from a session low of 1.5980 and off from a high of 1.6082.

Cable was likely to find support at 1.5956, Tuesday's low, and resistance at 1.6163, the high from Sept. 18.

The pound saw support after the Confederation of British Industry reported that its retail sales index rose to 34.0 in September from 27.0 in August, the highest level since June 2012. Analysts were expecting the index to decline to 24.0.

Fiscal uncertainty in the U.S., meanwhile, pressured the dollar lower.

The House of Representatives recently approved legislation to fund government through Dec. 15, however, lawmakers also voted to defund President Barack Obama's healthcare bill, the Affordable Care Act.

While the bill faces little chance of survival, concerns that Democrats and Republicans will go back and forth crafting and rejecting spending proposals as the U.S. runs close to hitting its debt ceiling sent investors moving away from the greenback.

Failure to agree on a solution could result in a government shutdown in October.

Spotty data in the U.S. weakened the greenback by keeping investors unable to guess when the Federal Reserve will begin to taper the size or pace of its asset-purchasing program, which seeks to spur recovery by driving down interest rates and softens the greenback in the process.

In a report, the Census Bureau said that U.S. new home sales rose 7.9% to a seasonally adjusted 421,000 units in August from a downwardly revised 390,000 in July. Analysts were expecting new home sales to rise to 420,000 units last month. 

A separate report showed that U.S. core durable goods orders, excluding transportation items, fell 0.1% in August, disappointing expectations for a 1% increase, after an upwardly revised 0.5% contraction the previous month. 

Overall durable goods orders in the U.S. rose 0.1% last month, short of expectations for a 0.2% increase following a downwardly revised 8.1% decline in July.

The pound, meanwhile, was up against the euro and up against the yen, with EUR/GBP down 0.08% at 0.8412 and GBP/JPY up 0.20% at 158.36.

On Thursday, the U.K. is to produce a report on the current account, as well as revised data on second quarter economic growth.

The U.S. is to release the weekly report on initial jobless claims, as well as final data on second quarter growth and private sector data on pending home sales.

Read More

European stocks remain lower amid Fed jitters; Dax down 0.38%

European stocks remained lower on Wednesday, despite positive German data as uncertainty over the future of the Federal Reserve's bond-buying program continued to dominate market sentiment. 

During European afternoon trade, the EURO STOXX 50 declined 0.31%, France’s CAC 40 retreated 0.45%, while Germany’s DAX 30 slid 0.38%. 

Data showed that German consumer confidence is seen rising to the highest level since June 2007 in October. The GfK index of German consumer confidence rose to 7.1, while this month’s reading was revised up from 6.9 to 7. 

But markets were jittery amid uncertainty over the future direction of U.S. monetary policy after New York Federal Reserve President William Dudley defended last week’s decision by the Fed to keep its stimulus program on track.

European equities had found some support on Tuesday after senior European Central Bank official Ewald Nowotny said it was too soon for the bank to exit from crisis measures. 

Financial stocks were mixed, as BNP Paribas climbed 0.61% and Societe Generale slipped 0.17% in France, while Germany's Deutsche Bank retreated 0.69%. 

Among peripheral lenders, Spanish banks Banco Santander and BBVA rose 0.22% and 0.31% respectively, while Italy's Intesa Sanpaolo slid 0.41%. 

Elsewhere, Nordea Bank plummeted 2.78% as Sweden started selling its remaining 7% stake in the Nordic region’s largest lender. 

On the upside, Gas Natural and Enagas rallied 3.57% and 1.19% after Goldman Sachs raised both stocks to "buy" from "neutral", citing the impending review of gas regulation in Spain as positive for both companies. 

In London, FTSE 100 shed 0.46%, led by sharp losses in Carnival shares, down 6.73% after the cruise company' said its profit dropped 30% in the third quarter and that bookings so far for the next nine months are lower than in previous years. 

Meanwhile, mining stocks remained on the upside, with BHP Billiton and Rio Tinto gaining 0.51% and 0.45% respectively, while Fresnillo jumped 1.85%. 

Financial stocks were also mostly higher. The Royal Bank of Scotland saw shares surge 3.27% and Lloyds Banking advanced 0.97%, while Barclays rallied 1.68%. HSBC Holdings was little changed on the other hand, dipping 0.01%. 

In the U.S., equity markets pointed to a steady open. The Dow Jones Industrial Average futures pointed to a 0.06% dip, S&P 500 futures signaled a 0.11% fall, while the Nasdaq 100 futures indicated a 0.05% loss. 

Later in the day, the U.S. is to release data on durable goods orders, in addition to a report on new home sales.

Read More