Friday, August 19, 2011

Market Morning Overview - August 19, 2011

Previous session overview
Stock market declines around the globe sent the safe-haven yen higher and the euro lower in Asian trading Friday, with no signs that the equities sell-off was running out of steam. 

Asian markets fell sharply after Wall Street tumbled 3.7% on Thursday amid heightened concerns about U.S. growth and the potential for a credit freeze in Europe. The Nikkei Stock Average lost 2.2% in the morning session. 

FX trading was relatively subdued, however. The dollar fell to JPY76.50 as of 0300 GMT from JPY76.57 in late New York trade. The euro fell to USD1.4327 from USD1.4334, and JPY109.60 from JPY109.75. The dollar was at CHF0.7940 from CHF0.7941.

The European woes come amid growing concerns the U.S. economy is headed back into recession. Overnight, the Philadelphia Federal Reserve reported regional manufacturing activity contracted in its August survey.

Despite moves to stall its rise by the Swiss central bank, the Swiss franc strengthened against the euro, although it fell against the dollar.

The Australian dollar tumbled Friday amid a mix of concerning U.S. economic data and escalating worries about European banks' access to funding. Coupled together, the developments weighed on all risk-sensitive assets like the Australian dollar, and fueled another run higher on both ends of Australia's bond curve. 

At 0610 GMT, the Australian dollar was at USD1.0338, down from USD1.0500 late Thursday. Against the Japanese yen, the Australian dollar was at JPY79.115, down from JPY80.49.
Market expectation
Comments by Lars Frisell, chief economist at Sweden's financial regulator, that the European interbank market could easily collapse dented confidence and fed fears that credit taps could be turned off, traders said.

Market is still wary of SNB action. The franc will remain under upward pressure on the renewed nervousness in financial markets. Buying of the franc could accelerate if the SNB doesn't use more effective measures like intervention soon, say analysts.

European stocks are seen opening slightly lower Friday with investors increasingly disillusioned with efforts by euro-zone authorities to tackle the issue of sovereign debt within the region and worries about a potential double-dip global recession.