Market update: Morning coffee brief

Overnight most markets carried forward the pain of risk-off trading on renewed worries of Spain and Greece, and now Italy too. Spain and Italy’s bond yields surged once again as both countries attempt to sell their debt on the open market.Image courtesy Willie Cloete: http://www.sxc.hu/profile/PulpdtpTraders around the world are running to safe-haven assets like the U.S. dollar and U.S. Treasuries in this market update. Adding to the fear was another sign of euro zone contagion spreading, this time from India. The country reported disappointing quarterly GDP results last night  of 5.3% for January through March. Analysts were expecting 6.1% – a 0.8% miss.

The Taiwan Taiex was the only bright spot for the bulls closing up roughly 0.55%. 

The overnight session concluded one of the more ugly months of May with Japan’s Nikkei Index losing more the 10% for the month, followed closely behind by the S&P/ASX 200’s 7.3% drop, the KOSPI’s 2.7% drop and a 1% drop for the Shanghai Composite. Topping the list for May is Hong Kong’s Hang Seng Index, dropping a whopping 11.7% for the month, leaving the index up only 1.1% for the year.  

Australian traders saw yet another round of mixed economic numbers with retail sales dropping to -0.20% when analysts were looking for +0.20% over the previous month of +1.1%. However, construction work jumped to 5.5% quarter over quarter, easily beating expectations of 3.0% and the previous month of -3.4%, which gave the Aussie dollar some strength during the Asian and European currency sessions.

Looking to the U.S., traders are looking forward to putting May out of its misery – I know I am. As of right now U.S. futures are suggesting a flat to slightly down opening, putting the Dow on track for the biggest monthly loss from a point standpoint since May 2010. The NASDAQ is on track for the largest monthly point decline since October 2008.

As we noted at the beginning of the week, the economic calendar this week is packed and today’s market update will see a slew of data points. A few of the key ones are:

ADP will release private sector employment figures at 8:15 a.m. EDT. Although this number seems to always be off compared to the Non-Farm Payroll numbers tomorrow, it has a tendency to move markets.  Analysts are looking for payrolls to grow by 150,000 for May, compared with April’s increase of 119,000.

Then at 8:30 a.m. EDT the Labor Department will release first-time jobless claims. Analysts are expecting first-time jobless claims to be at 370,000.

Also at 8:30 a.m. EDT comes the U.S. government’s second estimate of first quarter GDP. Analysts are looking for a 1.9% annual rate increase, compared with the prior Q1 estimate of 2.2% growth.

For a full list of economic data, please check the calendar below.


Live Economic Calendar Powered by Forexpros – The Leading Financial Portal

Commodity Marker – Electronic Trading

Crude oil

$88.07

+0.25

+0.28%

Nat Gas

$2.389

-0.029

-1.2%

RBOB-Gasoline

$2.8495

-0.0087

-0.30%

Gold

$1,567.90

+2.20

+0.14%

Silver

$28.06

+0.077

+0.28%

Copper

$3.391

+0.001

+0.03%

U.S. dollar index

82.93

-0.1875

-0.13%

as of 7:18 a.m. EDT

Precious metals corner

Both gold and silver traded lower on the open until both metals reversed in last afternoon trading on high volume. Gold traded as low as $1531.60 and then rallied to $1571.00. Silver traded in a similar manner with a low for the day of $27.34 only to turn and move as high as $28.15

ETF holdings

Holdings in the world’s largest gold-backed ETF, the SPDR Gold Trust (GLDquote) remains unchanged in its holdings at 1,270.26 tons as of May 30 from the previous trading day.

The iShares Silver Trust (SLV, quote) holdings moved slightly higher to 9,643.17 tons on May 30 from the previous trading day. SLV is the world’s largest silver backed ETF.

Fundamental outlook

Precious metals are ticking higher in the pre-market but that could be short lived as Spain struggles with its banking system and finances along with Italy’s issues becoming prominent. As the euro zone crisis spreads the U.S. dollar could see renewed money flow, pressing gold and silver lower on the day.

Looking at the pre-market we find:

Pre-markets are quiet ahead of the Non-Farm Payroll report with no activity in the ADRs.

Bottom line: U.S. markets are suggesting a higher open at the moment but could be moved on the ADP jobs market report. Look for the big money to start to jockey for positions ahead of the Non-Farm Payroll report. Emerging markets are taking their cues from the euro zone, but if the U.S. boasts a solid or upside Non-Farm Payroll result it could shift focus away from the euro zone to the U.S. in the very short term.