Broker's notes: German unemployment falls in August; gold trading firm

German unemployment data

German unemployment fell in August to its lowest since November 2008, encouraging consumers to spend more and adding to evidence that the export-led economy is outstripping its euro zone peers. The Federal Labour Office said on Tuesday that unemployment had fallen by a seasonally adjusted 17,000 to 3.193 million. The decline, while slightly less than the median 20,000 forecast by economists, could encourage Germans to spend more freely after some of its euro zone neighbours complained Germany was importing too.

Yen

The yen continued to trade firm, around the 15-year high against the dollar, as investors shrugged off the Bank of Japan's latest policy easing policy. With mounting US economic worries likely to keep investors away from riskier assets such as stocks and high-yielding currencies, the market is likely to push up the low-yielding yen. That could eventually prompt Japan to sell its currency in the markets for the first time in more than six years. Japanese Finance Minister Yoshihiko Noda repeated on Tuesday that the government would take decisive action, usually seen as code for intervention, on currencies when necessary. But the reaction in the market was limited.

UK sterling

UK’s sterling fell against the dollar and the euro on Tuesday as mounting concerns about the global economic outlook kept investors away from perceived higher-risk currencies. The UK currency seems to have been driven by wider developments in financial markets, with concern that a flagging US economy will hamper the global recovery weighing on stocks and lifting the likes of the dollar, the yen and the Swiss franc. Bank of England data showed mortgage approvals numbered 48,722 in July, just above an upwardly revised 48,562 in June. However, they were still well below the November's 21-month peak of 59,117, while mortgage lending was much weaker than expected -- at just ₤86 million (Dh109.17 million) versus ₤700 million forecast.

US data due today

In the US, the focus has turned to the Chicago PMI report and the Consumer Confidence numbers, due later today. The markets are likely to remain cautious ahead of the data given the very weak readings from the Philly Fed and the University of Michigan releases last week. With sentiment skewed on the downside, any data that beats expectations may add fuel to the nascent relief rally stocks. However, if the news proves more negative than forecast, the risk aversion flows, that were so dominant, are likely to return and could make the dollar index stronger.

Crude oil

Crude oil futures fell below $74 (Dh271.78) a barrel on Tuesday pressured by bulging stockpiles and concern about the strength of economic growth and future demand. Crude oil stocks in the United States, the world's largest consumer, were expected to rise for a second week. Total petroleum inventories are already at their highest since at least 1990 according to government data. Gloomy reports on the US gross domestic product and housing last week raised fears that the economy could be at risk of another downturn, which would weigh on oil demand.

Gold

Gold continued to trade firm and seems to be set for the biggest monthly advance since April, as signs that the global economic recovery may be faltering prompt investors to boost their holdings to try to preserve their wealth. Bullion gained 13 per cent since January, beating an 8.4 per cent return on treasuries, an eight per cent decline in the MSCI World Index of shares and the10 per cent slump in the S and P GSCI Total Return Index of 24 raw materials.

Source: Richcomm Global, Dubai