FOREX IN REVIEW

Worsening economic data was not enough to disparage European equities which have witnessed better-than-expected earnings announcements. Italy's economy is continuing to contract as noted in the GDP figures while German factory displayed a marked decline that was larger than anticipated by forecasters. British Bank Standard Chartered fell over 16% yesterday as allegations of trade with Iran surfaced, bringing into jeopardy their American banking license and ending the optimism of 8-years of record profits. Equity markets were led higher by the 2.23% rally in the Spanish IBEX followed by the 2.19% gain in the Italian MIB. The Swiss SMI and Swedish OMX were marginally weaker, falling -0.08% and -0.07% respectively. EURUSD is back below the 1.24 handle at 1.2396..

As Asian equities continue to strengthen, the Bank of Japan enters a two-day meeting aimed at discussing a variety of issues including the yen, inflation, and monetary easing. One topic that will certainly be discussed is the recent system error at the Tokyo Stock Exchange which took down derivatives trading for over an hour. USDJPY did have a major rally yesterday, driving as high as 78.670 before pulling back to 78.530. The Nikkei is trading 1.63% higher, trailed by a 0.67% rise in the Australian ASX and a 0.26% increase in the Hang Seng. The slowdown in Chinese electricity usage, an important indicator of growth which some have used to forecast a slowdown, might be more indicative of a shifting growth pattern as services become an increasingly important piece of the economy.

American equities continued to strengthen along with global markets as Bernanke comments on banking regulations failed to offset concern following the Standard Charted debacle. The Securities and Exchange Commission (SEC) is considering new rules following the Knight market-making disaster which nearly cost the company bankruptcy. Automated trading strategies will likely face further scrutiny by regulators in the coming months. The Nasdaq rose 0.87% and the S&P 500 climbed 0.51% as the Dow Jones strengthened moderately by 0.39%. Soft commodities have been led by Cocoa's 1.70% gain and WTI crude has retraced yesterday's move higher, falling 0.38% on concerns of lower Asian consumption. Crude is presently trading at $93.31 per barrel.


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