Global stock markets are mixed on Wednesday although European bourses are
called higher in catching up with Wall Street’s gains. Government debt is
seen under pressure to start, with the euro up, spot gold steady and the oil
lower.

STOCKS:
======

European stock markets are seen starting higher on Wednesday, as investors
test the upside again after a short period of consolidation of prior gains.
Yet lower Wall Street futures may temper the gains.
For Europe’s opening on Wednesday, One Financial is calling the FTSE up 40
at 3897, the DAX up 56 at 4044, and the CAC up 38 at 2805.
Europe stocks ended lower on Tuesday, bringing a winning streak that has
stretched to five sessions to a halt, led by a retreat in the metals sector
on a clutch of negative news for the sector.
Peter Dixon, strategist at Commerzbank, said he’s unconvinced the rally seen
over the past week or so was at all justified. “It was overdone. My view is
that there is an awful lot more bad economic news to come, an awful lot of
bad earnings news to come. For that reason, I was very surprised when
markets rallied over the course of last week.”
“The markets have overdone the optimism and are maybe rewinding a bit,”
Dixon said.
Wall Street futures are lower on Wednesday as U.S. markets continue to show
an ill-defined trend.
On Tuesday, unexpected strength in the housing market helped JPMorgan Chase
and other banks continue their rebound.
A surprising jump in housing starts in February and signs of inflation eased
worries about the worst-case scenario of another deflationary “depression.”
“Structurally,” the rally looks sound, said Ryan Detrick, senior technical
strategist at Schaeffer’s Investment Research. The fashion in which the
market has steadily moved higher in the last week and a half is usually a
sign of a sustainable rally.
Still, Detrick is skeptical about claims that the stock market has reached
the “bottom.” He anticipates a long grinding process before the market turns
up consistently.
“It doesn’t mean the S&P 500 index won’t go to 500 eventually, but single
stocks don’t make new lows all at once…as the market goes lower and lower,
less and less stocks make new lows, and it becomes easier to pick good
stocks,” an analyst said.
“Suppose the S&P 500 goes to 500, there will be stocks that will be 50%
higher than the low on March 9 when the S&P hits 500, and there will be more
of them [than on previous lows],” he said.
“There is nothing like buying the right things when the market panicked like
it did.”
Asian shares are mixed Wednesday with most markets off their initial highs
despite an upbeat session in the U.S.
“Last night’s (U.S.) economic news has certainly gone some way to shoring up
confidence. But risk appetite is fickle and could easily turn on a dime,”
said Danica Hampton, a strategist at Bank of NZ in Wellington.
Goldman Sachs analysts said the key question remained whether the equity
rally of the past week – and the resumption of some risk appetite – would be
sustained, or “whether this is simply a squeeze after a sharp deterioration
in sentiment.”
“There is not enough new information yet to feel too confident that the
world looks different. And until there is, we will continue to focus more on
positioning for the easing that is still needed, than on straight exposure
to risk and growth. But we think it is wrong to argue that nothing has
changed.”
A source at Reuters said, “We really have to wait and see what the U.S. does
tonight before we can go higher. We really don’t have a lead. I’m still
calling it a bear market rally, I still think it’s got legs, but if it goes
up another couple of hundred points, I’d be looking to go short.”

FOREX:
======

The euro gained against the dollar and yen on Wednesday after the Bank of
Japan said it will boost purchases of government debt.
Traders are awaiting word on whether the Fed will go ahead and buy
Treasurys. Most aren’t expecting policy makers to start this process of
quantitative easing just yet. Nevertheless, traders didn’t appear willing to
take on much risk.

BONDS:
=====

European government bond prices are seen testing minor supports on
Wednesday, after markets gained Tuesday when equities fell.
Market attention turns to Wednesday’s supply offerings.
U.S. Treasury bond prices are higher on hopes the Fed will buy government
debt issues.
Treasury prices declined Tuesday, with traders on edge as the Federal
Reserve started its two-day meeting.
The key question for the bond market involves what the U.S. central bank
will say on Wednesday about possibly buying Treasurys directly from the
market in order to lower borrowing costs and stimulate economic activity.
The idea was first floated in December.
In Japan on Wednesday, prices of government bonds improved after the bank of
Japan’s decision to step up buying of JGBs.
With Japan’s recession deepening and corporate financing conditions still
tight, Bank of Japan policy board members held interest rates steady at
ultra-low levels Wednesday but boosted the central bank’s purchases of
government bonds to pump more funds into the market.

COMMODITIES:
======

Spot gold languishing at lower levels, down $3.90 from New York close at
$911.00 a troy ounce. “Gold had a good start to the year, based on
exchange-traded funds, but now interest is slowing together with improving
risk appetite as equities rebound,” says Sydney-based trader.
The outcome of the FOMC meeting is unlikely to have an impact on gold.
London Metal Exchange copper settled down $30.50 at $3.799.50 a metric ton
at Tuesday’s afternoon kerb, pulling back from a five-month high. The
unexpected U.S. housing starts rebound for February failed to provide enough
bullish momentum for prices to move above key resistance levels with profit
taking evident, said a Sydney-based trader.

ENERGY:
=======

World oil prices are lower Wednesday after topping a two-month high
overnight on concerns over weak global energy demand amid the economic
downturn, analysts said.
New York’s main futures contract, light sweet crude for delivery in April,
fell 65 cents to $48.51 a barrel in morning trade.
It had jumped from $41.81 in New York trade Tuesday to close at $49.16 after
hitting $49.82, its highest level since January 6.
Brent North Sea crude for May delivery was down 47 cents to $47.77.
“Demand is still the key. Yet we still have to see the demand for oil and
natural gas increase before we get too excited about a change in trend,”
Bloomberg analysts said.
“Oil demand in the U.S. is weak and we need to see that change…If oil
closes above $50 a barrel we may need to start getting a bit bullish.

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