US and European markets rally ahead of FOMC minutes

Wednesday, November 19, 2014

Both US and European equity indices rebounded strongly yesterday as stronger than expected economic data encouraged a fresh round of buying among investors. Germany kicked off proceedings with a better than expected ZEW survey as both the current situation and expectations readings exceeded expectations, coming in at 3.3 and 11.5 respectively for November. Confidence among German investors pushed higher for the first time this year, surprising most market participants who had expected a month-on-month slowdown and prompting a 1.6% gain in the DAX. The positive mood spilled over to the US session with producer prices increasing by 0.2% m/m in October against expectations of a -0.1% decline, calming fears of slowing manufacturing sector. Capping the session was a stronger than anticipated NAHB housing market index  which increased 4 points month-on-month to 58 in November, outstripping market expectations of a 55 point reading. Today sees the release of the FOMC meeting minutes and US housing starts data which will hopefully offer further buoyancy to risk assets.

Three month LME zinc prices headed lower for a second session yesterday, closing below $2,250/tonne as investors re-positioned themselves ahead of housing data due out later today. Prices have consolidated sideways to lower in recent weeks with near term resistance at the 50 day MA proving difficult to breach despite intraday moves testing levels towards $2,300/tonne just last week. Zinc prices continued to exhibit downward pressure early on this morning as prices traded back below $2,250 despite opening up slightly higher than yesterday’s close.

Three month nickel futures also experienced further sideways trading as prices remained resistance once more to protracted moves above $15,800/tonne. Trend support  on the downside towards $15,500/tonne could squeeze daily trading ranges tighter still and a breakout on the upside remains a possibility on any positive surprise to today’s data. Market participants expect October housing starts to have improved slightly to 1025K from 1017K the previous month while building permits are anticipated to show modest improvement from 1031K in September to 1040K in October. Investors will also be paying close attention to the FOMC meeting minutes which could see the dollar index breakout above 88.00 on a supportive market outlook. Advances against major peers have been crimped in recent sessions with brief intraday moves above 88.00 struggling to gain traction.

US PPI accelerates in October

FDIDFDMO Index US PPI Final Dem 2014 11 19 07 23 30

LME 3-M zinc futures trade lower ahead of housing data

LMZSDS03 Comdty LME ZINC 3 2014 11 19 07 28 21

3-M LME nickel futures extend sideways consolidation

LMNIDS03 Comdty LME NICKEL 3 2014 11 19 07 34 51

Events for today

0930

UK

Nov

BOE minutes

1000

EZ

Sep

Construction Output

1330

US

Oct

Housing starts

1330

US

Oct

FOMC minutes

1530

US

w/e

EIA Energy Stocks

Topics: US Fed, DXY, LME, Nickel, Zinc
More from: Kash Kamal