Market Sentiment Improved Slightly On Europe’s Action Hopes - 27.9.2011

Japanese stocks advanced, with the Nikkei Stock Average rebounding from its lowest level since April 2009 by 2.82%, following a rebound on Wall Street, with S&P 500 index rising yesterday by 2.33%, on speculation European leaders will act to prevent the region’s sovereign-debt crisis from getting worse. US Dollar The dollar held a two-day drop against all its major counterparts, sending the dollar index below 78 from 78.86 yesterday, as Asian stocks extended a rally in global equities, damping demand for the US currency as a refuge. Commerce Department data showed yesterday that sales of new homes in the US dropped in August by 2.3% to 295000 units in annual figures. The Fed warned that “The housing sector remains depressed,” and there is “continuing weakness in overall labor market conditions.” Today the data may show that US consumer confidence index stood at 46 this month, according to estimations, after falling to the lowest level since April 2009 – 44.5. Euro The euro managed to rebound from its lowest level since January 2011 that was touched yesterday morning (1.3362) against the dollar as European policy makers are putting together a plan to stabilize the region’s debt crisis. Greek Parliament is scheduled today to vote on the Prime Minister’s property tax increase plan, expected to accumulate about 2 billion euros this year, that is a key to persuading the European Union and International Monetary Fund to release an aid installment and avert default. At the same time European Central Bank executive board member Lorenzo Bini Smaghi said yesterday, supporting the euro’s exchange rate that euro zone policy makers are already looking at ways to increase the capabilities of the European Financial Stability Facility. Finally, as information agencies inform, ECB officials signaled they would consider lowering the ECB’s main policy rate at the next week’s meeting if the economy worsens to spur growth. Officials have also said they would weigh making unlimited loans available to commercial banks for up to one year to ease concerns over Europe’s banks. “In terms of liquidity, there is really the ability to refinance. We are ready to do what is needed to ensure to get to the final demand,” ECB board member Lorenzo Bini Smaghi said. The euro meanwhile rose slightly in Asian trading hours today from 1.3479 to 1.3569. Australian, Canadian Dollar The aussie and the loonie both advanced versus the US currency and the yen, reversing their previous declines on higher prices for commodities, which represent a strategic resource for the two nations in terms of exports. The Australian dollar rebounded from its lowest level since November 2010 against the greenback (0.9621) as Asian shares extended a global rally, supporting demand for higher-yielding assets, while the Canadian currency rose back toward parity, touching before that its lowest level since September 2010 as crude oil contracts for November delivery rose above 82.50 dollars per barrel.