Euro Banks Crash

European bank Deutsche Bank AG fell 11 percent while BNP Paribas SA was down 13 percent. This sent equity returns to over two percentage points lower compared to the broad market.

The European Central Bank is expected to review some 130 balance sheets In the Asset Quality Review as part of the assessment of lenders’ preparedness for theoretical interference. Positive results from this third exam in the euro region since the 2010 sovereign-debt crisis can help banks avoid significant losses.

Meanwhile, European lenders rose 123 percent since the middle of 2012 when the ECB announced that it was doing everything to sustain the single currency. The rally hit the highest point even as both BNP Paribas and Credit Suisse Group AG were imposed fines

On the other hand, UBS AG and Deutsche Bank were hard pressed to boost revenue in the wake of regulatory investigation.

This Comprehensive Assessment began in October of last year. It was one means of ensuring that the ECB knows what it is doing business with.

Eight banks did not pass this stress test when it was held in July of 2011. There was a collective capital deficit of 2.5 billion euro. Lenders gauge dropped 14 percent the following month.

Most-owned options on the index of these banking institutions look positive though.

NZD/USD Pair Update

NZDUSD FOREXFour points were added to NZD/USD as it went versus the frailer US dollar following the printed PMI forecast of NZ business. As the kiwi accelerated to trading 0.7990, it touched high for 3-weeks despite anxiety for global growth of economy, as the prices of dairy products rose to the latest auction. The dollar index measured the greenback against major currencies dropping to lowest a month following a US sales of retail that came weaker than its expectation. The prices data of producers revitalized concerns about the expanding world’s biggest economy.

Concerns about the growth of global economic were increased after a report of China’s consumer prices slackened more than its expectation in September at a low of five-years. Fortnightly, the Global Dairy Trade of Fonterra Cooperative Group auctioned Dairy product prices rose and recovered from the lowest level within the last five years, as lesser products was placed for sale.

Although, the increased of kiwi dairy prices is positive, it was not able to explain the gain of local currency overnight due to New Zealand demand for dairy products that was affected by the weakening global growth.

The NZD was the best performer as it upped1.9% to 79.90 cents. Global Trade said that whole milk powder average price increased to $2,503 a metric ton from $2,443 at the previous auction.

S&P 500 Index Rallies

Instability of stock markets ended after five days as the index of Standard & Poor’s rallied 1.3 percent to 1,886.76. This negated the decline since October 10 by one percent and gave traders a fourth straight weekly retreat. Benchmark index declined three percent last October 15 before it finally recovered.

Stocks fell, recovered and staggered once more as concerns escalated that the Euro region will fall into recession as Fed bond buying comes to an end. The Chicago Board Options Exchange index for volatility went up. The rate was above 26 last October 15 which is a two-year high.

JPMorgan Chase slipped 4 percent which was the most since August right after net income wavered short of projections.

Canada’s Composite Index was basically unchanged although it incurred two days of losses which was a meagre one percent. It was reversed after two days with gains of one percent.

Stocks in the Russell 1000 index stumbled 8.4 percent at the start of October. It was the rate of the full index.

Small-cap stocks had the most significant rally since June following a slide of 13 percent from March 4 to October 13. On the other hand, Russell 2000 Index got back and showed three days of more than one percent gains. The index finished this week with a rating of 2.8 percent.

Euro and Norwegian Currency Falls

euro forexThe EU currency suffered losses along with the Aussie dollar and Norwegian crown. Sell-off of debts in Italy and Spain contributed to more apprehensions in financial markets.

European stocks have been adversely affected by negative issues in Greece as well as the dilemma of the Spanish government which is struggling to implement an intended sale of bonds. US stock futures showed a poor opening as well.

Market investors are opting for the US dollar and Japanese yen after the Australian and Norwegian currencies both waned by over 1.5 percent versus the dollar.

The move of Japanese investors to pull out from the euro zone caused the common currency to plunge to an 11-month slump against the Japanese yen. The euro also decreased more than ½ percent against the US currency to $1.2720.

The single month euro and dollar implied volatility went up to the highest mark since September of 2013. It indicated that there were indications of more abrupt swings.

The US dollar almost attained a five-year high (C$1.1385) versus the Canadian dollar. It was also 1.1 percent higher compared to the New Zealand dollar.

The primary trigger for this chaos was a retraction in expectations for increase in US interest rates scheduled for next year. This drove two-year treasury yields down in over one year.

Several major banks forecasted that the dollar will be up by 20 percent or even more against the euro within the next couple of years.

This will be caused by the variance in economic fortunes and interest rates factors.

US and CAD

The US dollar soared close to a five-year peak versus the Canadian currency. The negative report about the manufacturing industry weighed down on Canada’s dollar. On the contrary, positive jobless figures in the US as well as industrial production data contributed to this increase.

The USD/CAD currency pair reached 1.1361 during initial trading in the US markets. The pair later consolidated at 1.1331 and advanced 0.72 percent.

The pair was inclined to obtain support at 1.1222. Resistance was estimated at 1.1386.

The dollar increased after the US Labor Department publicized that Americans seeking jobless claims went down by 23,000 to only 264,000 from last week’s total of 287,000.

Analysts thought unemployment claims would have went up by 3,000 to 290,000 during the previous week.

US industrial production intensified 1.0 percent in September and overcome expectations for a 0.4% percent growth. The figure slid 0.2 percent slip from the projected 0.1 percent downtrend.

Statistics Canada revealed that manufacturing sales dropped by 3.3 percent last August as against expectations of a 2.0 percent wane.

The Canadian note was steady against the single currency. EUR/CAD went up 0.02 percent to 1.4443.

Decreasing Oil Prices to Cause Economic Stimulus

Petroleum Industry MexicoSharp price cuts in crude oil and feeble demand are taking place in the market. Supply is also one major reason for low prices. Saudi Arabia has started a price war while the boom of US shale oil and gas has displaced petroleum products in the world markets.

Oil-consuming countries will likely feel two major impacts due to a continuous fall of crude prices. The first is economic stimulus which can get to the real economy.

The second effect will be deflationary. Central banks will pick it up to fire up slight inflation in their respective economies. This can trigger the European Central Bank to become more assertive. On the other hand, the Bank of Japan can prolong its program of quantitative easing.

In other words, this can be negative for the EUR and JPY currencies once markets move to the “risk on” manner.

For the United States and United Kingdom, this can mean delays in increase of interest rates. However, both economies are better off than the EU and Japan.

There will be a big impact on primary major markets especially FOREX. Participants will be looking at expectations of rate increases in the US and the UK.

Meanwhile, the yen is stronger while the US dollar dipped because of interest rate speculations.

Termination of the Federal Reserve’s QE program this month can be another factor to include the Ebola epidemic and protests in the island city of Hong Kong.

US Cautions ECB on Deflation

United States officials issued another warning about the possibility of Europe plunging into a spiral of declining salaries and prices.

The federal government also believes that the latest moves made by the European Central Bank may not be sufficient to keep deflation at bay.

A report by the US Treasury Department to Congress mentioned that the German Government can do more to assist the euro area by enhancing economic demand in the country which is the largest economy in Europe.

According to the US, Europe is confronted with the possibility of a long-drawn-out period of significantly lower target inflation or complete deflation.

The ECB has reduced cut interest rates to exceptional lows. It offered fresh long-term loans and announced plans to acquire assets from the private sector.

This is meant to sustain EU economy which borders on the brink of another possible downturn. Europe remains the primary trading partner for China and the United States.

Speaking for the Obama administration, the Treasury said the ECB’s actions “should help combat deflationary risks,” but that “further policy support for demand may be needed.”

The report was carefully worded to avoid sounding pushy over what Washington thinks Germany should do. Berlin has been a key American ally for some decades.

Still, Washington appears to see Germany as a missing link in Europe’s elusive recovery from what in many corners of the continent has looked like an economic depression.

“Measures to increase domestic demand, particularly in surplus countries like Germany, can help further European and global rebalancing,” the Treasury said.

In economist speak, that means that Berlin could help the world if it fostered more German consumer spending, which could then increase imports from Europe’s weaker economies.

Precious Metal News

Precious MetalsDue to lifeless data shown around the world of lessening demands of the industrial metals, silver continued plunging down.

On the other hand, copper eased by around 26 pips trading at around 3.064 following the decline of inflation in China and the missed expectation of Japan’s industrial productions. Copper was deducted as much as 0.5% after its close at a a three-week high yesterday while the zinc fell even lower than 0.9%. The National Bureau of Statistics stated that last September the rise of the consumer-price index to 1.6% was lower than the estimates of 1.7%, after the 2% increase in August. There was no increase shown since January 2012 as a measure of producer prices dropped more than forecast.

The euro-area factory output missing analyst estimates from China data followed.

However, the metal was sold following the data of the Chinese CPI for September showed only moderate price pressures. In September, the Chinese CPI went up 1.6% that was below the estimates of a 1.7% profit. However, the reading of the marker shows the lower inflation number as indicated by a weakening demand coming from the World’s largest consumer of Copper.

Aussie Dollars Update

Assistant Governor Guy Debelle of the Reserve Bank of Australia stated last Tuesday that following its decline for the last weeks, the Aussie stays higher than the suggestions of economic fundamentals.

Debelle continued that this challenged both policy makers and markets; including Australia, in creating an environment that is complicated for monetary policy set-up; to include other parts of the globe.

Although USD/JPY is trading at 107.23, up 0.36%, and AUD/USD is changing its gears at 0.8787, and even up 0.14%, the AUD is still higher than the suggestions of economic fundamentals despite its reduction in recent weeks.

Debelle of RBA added that AUD stands higher than economic fundamentals; a good way showing that the Aussie stays higher than expected. This is beneficial in many ways: while depreciation will encourage more equitable growth in the Australian economy, it will return the trade-weighted index back to the levels attained earlier in the year. Challenging both markets and policy makers, it will create the right kind of environment placing Australia’s monetary policy in other parts of the world.

EUR and USD

Eur/USD FXThe single currency retained gains versus its US counterpart in quiet trading as reduced expectations for early rate increases continued to affect the dollar although international growth concerns dulled market outlook.

The currency pair reached 1.2697 in European market trade and later strengthened at 1.2692 and gained 0.51 percent.

The EUR/USD will possibly find support at 1.2582 with resistance at 1.2792.

Sentiments on the euro currency were weak following apprehensions of the possible waning of German economy.

Outlook was also affected after the IMF cut back projections for global growth this year and in 2015. It also cautioned that global growth may not achieve pre-crisis stages once again.

IMF modified growth forecasts for the three biggest economies in the European Union.

The US dollar tried to recover after the minutes of the US Central Bank’s September conference impelled investors to drive back the anticipated timing of a US Fed rate increase.

The euro was up against the GBP increasing 0.30 percent to 0.7880.