Daily Market Review – 06/05/2015

Daily Market Review for Wednesday, May 6th, 2015

FTSE 100 drops as HSBC shares turn lower

UK stocks dropped with shares in HSBC PLC among those affected after investors returned from a long holiday weekend. The FTSE 100 fell 0.8% to 6,927.58, losing grip of earlier gains as all sectors turned lower. British shares were down alongside the broader European stock markets as a uptrend in the Euro and European bond yields jiggled a stock market rally that has been built on both being lower, says Oscar Duval, Chief Trader at TitanTrade.

HSBC shares had traded higher after the firm posted better-than-expected first-quarter results. Net profit came in at $5.3 billion versus $5.2 billion a year ago. But HSBC shares eventually fell 3.2% as regulatory uncertainty over currency rigging and a possible relocation hit the investor’s sentiment. HSBC said it would decide by the end of the year on whether it will move its headquarters out of London. Royal Bank of Scotland Group rating was upgraded by Nomura, the top Japanese rating firm  to neutral from downward. Lloyds Banking Group PLC shares turned lower as well, falling almost 0.6%. Lloyds was upgraded to buy from hold at Jefferies, say TitanTrade analysts.

All in all, the FTSE 100 still outperformes other European indices and head to a positive territoru – the upward move and the rise in investor confidence make FTSE one of the best choices over the medium to long time frames, say TitanTrade experts.

USD seem to be the all-powerful, all-encompassing solution

The almighty dollar deserves quite a bit of blame for the lowly state of the U.S economy early in the year, say MarketWatch journalists. From July 2014 through March 2015, the value of the dollar jumped 14%. That made U.S. made goods and services more expensive around the world at a time when many other countries are also struggling to cope with slowing economies of their own, lack of growth, unemployment issues, Quantitative Easing programmes, global slowdown and decreasing investor confidence, says Oscar Duval, Chief Trader at TitanTrade.

As a result, the American exports fell 5% over the same 12-month span, the biggest year-over-year decline since late 2009 as the U.S. was emerging from the Great Recession. The powerful dollar has also contributed to a decline in U.S. corporate profits and pushed manufacturers to scale back production and hiring. With exports down in the first quarter, the U.S. economy is likely to show contraction when the government revises gross domestic product later in the month, say TitanTrade specialists.

The dollar has surged in value thanks to a number of factors, including the expectation that the Federal Reserve will raise interest rates later this year. Investors bought the U.S. currency to benefit from the dollar’s appreciation. And some of them wanted a place to safely keep their money in an uncertain world- this is what the USD is offering now – a safe haven currency that provides lowe returns but, on the other hand, low risks, say TitanTrade analysts.

Gold settles higher

Gold futures advanced, as a weaker U.S. dollar helped the metal build on its gain a day earlier, but prices failed to break back above the resitance level of $1,200. Gold for June delivery $6.40, or 0.5%, to settle at $1,193.20 an ounce after tapping an intraday high of $1,199.30. July silver also added 13.8 cents, or 0.8%, to $16.579 an ounce, say TitanTrade analysts. Weakness in the dollar was one reason for gold’s gain. The greenback fell in the wake of data showing the U.S. trade deficit soared 43% in March.

Gold climbed on the back of technical buying and short covering, said Oscar Duval, Chief Trader at TitanTrade. Traders were also closing short gold positions before the U.S. April employment numbers due out Friday. The current trading range of $1,160-$1,230 should be broken soon but investors fear that gold will not rise in the short term. On the medium to long time frames the situation changes in favour of pretious metals bulls.

The market will need to see sustained higher prices in order for retail investors to invest in gold. In a sign of growing interest in gold, there are reports the appetite rose to 53.6 in April from 53.1 in March. The figure measures the number of people growing or starting their gold holdings against those who sold, with a reading of 50 being a perfect balance.