Today Goldman Sachs will announce its profits and it comes at a time when various governments around the world are taking a hard look at how those profits came to be. The UK’s Financial Services Authority has begun a formal investigation into Goldman Sachs fraud allegations and will ask the SEC for cooperation.
Greece’s Premier has yet to activate the EU rescue and the market believes he is hoping to extract better terms by stalling. It is debatable is this is the best decision as Germany and China have both made strong statements about the rescue. Germany could be caught in a constitutional battle if the German professors suing to stop the aid package are successful.
The US$ is mixed in the O/N trading session. Currently it is higher against 7 of the most actively traded currencies in a Ã¢â‚¬ËœwhippyÃ¢â‚¬â„¢ trading range. The USD$ is higher against the EUR -0.06%, CHF -0.08%, JPY -0.50% The commodity currencies are a stronger this morning, CAD +0.35%% and AUD +0.79%%. The AUD appreciated 28% in the past 12 months but as global central banks are unwilling to increase rates and the threat of China revaluation are looming. The market expects the RBA to increase rates in their next meeting in May (0.9311).
Crude is higher in the O/N session ($82.57 up 112c). As the market digests the continuing Goldman saga, a lower forecast of this week’s oil inventories has boosted the price of the black stuff. The crude rally is being threatened by OPEC members breaking the agreed production quotas. This coupled with the lower demand for oil. OECD nations have decreased their demand 8% compared to 2006 numbers. US Dollar strength has put downward pressure on oil as the Greek tragedy has a new player in Goldman. The combination of US Dollar strength and US growth weakness paints a negative picture for crude demand.
Commodities prices could fall if the current Goldman debacle leads governments on a regulatory path that would limit trading . Inflation signs around the globe have given Gold some of its luster back as an inflation hedge USD$ ($1,142). Platinum and palladium have outperformed Gold as jewelry demand and Chinese auto industry demand have picked up. Yuan revaluation is also expected to boost gold as its price would become more attractive to Chinese buyers of the metal.
The Nikkei closed at 10,900 down -8. The DAX index in Europe was at 6,198 up +36; the FTSE (UK) currently is 5,756 up +30 The early call for the open of key US indices is higher.
Note: Dean will be away traveling for the next two week’s and will return to publication on April 29th.
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