Broker's Notes: Sterling jumps to session high on encouraging UK numbers

Sterling jumped to a session high against the US dollar and cut losses against the euro on Wednesday after data showed British manufacturing activity unexpectedly expanding to a 16-year high. The UK manufacturing PMI headline index rose to 58.0 in November, from 55.4 in October and way above forecasts of 54.6. The index also showed the fastest employment growth since the survey began in 1992. Sterling rose 0.43 percent against the dollar to $1.5618, having hit a session high of $1.5639 after the PMI numbers were released. It had fallen to a two-month low of $1.5485 on Tuesday. The euro zone debt crisis and worries that Europe could slow due to fiscal austerity do not bode well for the UK economy.

Rupee

The Indian rupee posted its biggest single-day gain in two months on Wednesday tracking a sharp rebound in the euro, while dollar sales by exporters and a couple of large corporates also helped. Rupee closed at 45.37/38 per dollar, after hitting 45.3350, its highest since Nov. 22. The unit closed at 45.88/89 on Tuesday, when it had dipped to 46.12, its weakest since Sept. 17. On the day, the rupee rose 1.1 per cent, its biggest single-day rise since Oct. 1. Manganese Ore India, a Nagpur-based firm, the largest producer of manganese ore in India, is planning to raise up to $276 million through an initial public offering closing on Wednesday.

Euro

The euro rose on Wednesday as a three-day selling spree lost steam, but doubts about whether the euro zone can contain debt problems facing some states kept the single currency in range of a 2 1/2-month low versus the dollar. A slight narrowing of yield premiums of government debt in Portugal, Spain and Italy over safe-haven German bonds supported the euro, but market participants said the single currency remained vulnerable to more selling. Investors awaited a European Central Bank policy meeting on Thursday at which some expect the central bank to keep its three-month liquidity operations unlimited to help banks struggling for cash, which analysts said also helped the euro. ECB President Jean-Claude Trichet on Tuesday suggested the central bank may expand purchases of government bonds to help drive down rocketing yields. An auction of 12-month Portuguese Treasury bills went relatively smoothly, although Lisbon was required to pay a premium on its borrowing.

Crude

Oil rose to above $85 a barrel on Wednesday as rising factory output in China and a report saying U.S. inventories declined countered lingering concern about Europe's debt problems. China's official purchasing managers' index (PMI) climbed to a seven-month high in November. In top consumer the United States, crude inventories fell by 1.1 million barrels in the week through Nov. 26, the American Petroleum Institute (API) reported on Tuesday, compared with expectations for a 900,000-barrel decline. Inventories of distillates including heating oil and diesel unexpectedly rose by 224,000 barrels and gasoline stockpiles rose 1.1 million barrels, more than forecast. Investors will be looking to the US Energy Information Administration's weekly supply report due at 1530 GMT for confirmation of the inventory changes.

Gold

Gold rose above $1,395 an ounce in Europe on Wednesday and hit record highs in euro and sterling terms as concerns over the spread of the euro zone debt crisis prompted buying of the precious metal as a haven from risk. While the euro's recovery from 11-week lows versus the dollar would usually also lend support to the gold price, safe-haven buying was firmly in the driving seat for the precious metal. While a weaker euro and consequently stronger dollar would usually weigh on the precious metal, both can rise in times of extreme risk aversion, as both can be bought as a safe store of value. This was most clearly seen in the second quarter of 2010.

Source: Richcomm Global Services DMCC, Dubai

Price Update

GOLD

1392.8

SILVER

28.65

EURO

1.3101

GBP

1.5604

YEN

84.08

RUPEE

45.35

AED / INR

12.349

AUD

0.964

CHF

1.0047

CAD

1.0191

OIL - WTI)

85.51

Date

December 1, 2010

Time

5:03:30 PM