5/10/2009 - The current market sentiment



The negative performance of the US labor market is still weighing on
the recovery in an unexpected increased pace as we have seen last
Friday from the US labor report of September which has shown rising of
the US unemployment rate to 9.8% from 9.7% in August and a bigger than
expected number of lost jobs out of the farming sector reached to 263k
and this number was widely expected to be around 175k. The negative
number has affected badly on the US stocks driving Dow further below
9500 to close the week down by 177 points at 9487 in spite of the
rebound which came after the jobs data. The Japanese yen and the
greenback has been boosted up directly with the release of these
dovish data but the market has managed to push them down later in the
session in a wave of the investors' risk appetite rebound after 2
weeks of losing in the equities market.
It looks as the Fed has repeated several times that the recovery of
the labor market is to be in a gradual pace and keeping the easing
steps of the fed on is essential until a crucial change in this weak
performance of the labor market and the market believing in this can
put weights on the stocks in the next period. In the recent fed's
assessment, we have seen reference to a diminishing of the recession
pressure but this was in a cautious way preferring keeping of all the
taken easing steps in the same time waiting for a solider growth can
trigger jobs asking as the economic conditions are still fragile and
in need of the fed's reinforcement to store the market confidence in
consuming and investing but this recovery has been hit last week by
several weak data starting with the release of Sep US Broad Consumers
confidence number which came back to 53.1 from 54 in August and it was
expected to be 56.5 and US Sep ISM Manufacturing index which came down
to 52,6 from 52.9 in August while the market was waiting for 54 and
ending on the Friday with the release of weaker than expected demand
of the US durable goods of August which declined broadly by 2.6%% m/m
while the core figure declined by .3% and also we have had an
unexpected drop of the US factory orders of August by .8% while the
market was waiting for an increasing by 1.1% and surely, the
persisting weakness data of the US labor market which we have
aforementioned which can cause a second round of negative effect on
the consuming and business confidence which are required for
underpinning the recovery.

The British pound has found recently some underpinning last week from
the release of the CBI retail sales figure of September which came up
in an unexpected way at 3 while the market was waiting for just -14
from -16 in August. The cable has found a support at 1.58 again. The
cable has started last week as expected in a very dovish way after a
weak closing below 1.60 reaching 1.577 before trying again to get
above 1.61 underpinned by these data. The British pound was under
pressure recently by Marvin King's comments in front of the
parliamentary committee when he said that further deposit interest
rate cut might be a useful supplement and his reference to the use of
a weaker British pound for increasing the exports and getting out of
this recession last and his dovish which could contain the current
market sentiment pushing the British pound down in spite of the recent
MPC minutes release which were much more optimistic than the market
expectations and discounting showing that the MPC decision of this
month of holding the buying bonds plan unchanged at 175 Bln Stg was
unanimously this time with no opposing from king again.

By god's will, we wait today for the release of the services data of
September. We wait EU PMI Services index to be 50.6 again as it was in
August and UK to be 54.1 from 54.6 in August and also US non-
manufacturing index to be 50 from 48.4 in August.

Best wishes

FX Consultant
Walid Salah El Din
E-Mail: (e-mail address removed)


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