Equity & Commodity markets are seeing a pause or a modest corrective pullback and some chart consolidation following a big trading day on Friday, last week. The European Central Bank (ECB) decision on interest rates or its announcement of any new measures on Thursday 5 July 2012 likely will be an indicator of whether central bankers think European leaders have done enough to stem the ongoing debt crisis. The Euro-group will discuss recapitalization plans for the Spanish banking sector July 9. The first half of the week is likely to see a quieter trading, as the U.S. Independence Day holiday falls on Wednesday. Markets may pick up momentum from Thursday 5 July when ECB is expected to make important announcements.
On Friday, European Union leaders at their summit meeting agreed upon several significant measures to confront the EU debt crisis. The EU summit was considered a success given the scant progress that was expected. The near-term direction of the gold and precious metals in the Commodity markets could be influenced greatly by euro-zone events and the direction of the euro. Gold prices eased on Monday after the previous session’s sharp rally, surrendering gains along with the euro and other commodities as a bounce lent to the financial markets by European Union plans to tackle the debt crisis petered out.India, the World’s largest gold consumers’, exports of Gems & Jewelry, dropped sharply by 12% to $3.2 billion in May. According to the Gems and Jewelry Export Promotion Council (GJEPC) exports dropped from $3.7 billion due to slow demand in major markets like Europe. As long as the gold market holds above the $1,540 zone, the longer-term uptrend remains intact. That is a major technical support floor that traders should monitor. If the floor breaks in the days or weeks ahead, it would unleash a flurry of selling pressure. On the upside, if the bulls can crack the $1,652.50 ceiling that would trigger a re-awakening of the longer-term bullish outlook. The level of $1652.50 is now crucial in Gold for further yearly Bullishness. Our final long term Target of close to $2200 may soon be seen then.
Indian Import tariff value of Gold lowered to $507 /10 grams, Silver to $871 a kg.(from $524 / 10 grams Gold and silver at $938 a kg.) In the commodity markets, crude oil and industrial metals prices slipped following weak factory data from Europe and Asian economies including China, the world’s top energy consumer. There was a weak manufacturing report coming out of China, which showed the worst reading for that report since November. Also, reports overnight showed manufacturing activity in the European Union was weak, with EU unemployment also reported at a record high rate of 11%.
Not so good News for the industrial metals trade in the Commodity Markets. The manufacturing sector shrank unexpectedly in June for the first time in nearly three years as new orders tumbled, one of the starkest signs to date of the extent of the slowdown in the economy. The US manufacturing Purchasing Managers Index, fell to 49.7 in June from 53.6 in May, its first time below the key 50 level since July 2009. Very poor numbers and with the manufacturing number coming in under 50, the United States may be on the edge of economic contraction. The forward-looking new orders component dropped to its lowest since April 2009 at 47.8 from 60.1. It was the largest monthly drop since October 2001, ISM said, shortly after the September 11 attacks. Exports fell to 47.5 from 53.5 and ISM said companies expressed concerns that “demand may be softening due to uncertainties in the economies in Europe and China.” Separately, U.S.construction spending rose to its highest in nearly 2-1/2 years in May as investment in residential and federal government projects gained.U.S.companies are showing signs of concern about a “fiscal cliff” of $4 trillion in tax hikes and spending cuts due to kick in at the end of the year unless lawmakers act to delay or offset them.
It was a rather quiet start to the week for equities, with Indian benchmarks taking some time off to catch their breath after the stellar rally last week. The Sensex and Nifty gained 1.5% on Friday, and over 2.7% for the week, as strong global and domestic cues helped push the Nifty over the 5200 mark. For Monday, however, the Sensex fell 31 points to close at 17,398, and the Nifty closed flat at 5,278. July brings with it earnings season, and a whole host of macro economic data like the inflation, industrial growth (IIP) etc.India’s May trade deficit narrowed to $16.3 billion from $18.5 billion.