U.S. Durable Goods Data

Data from the U.S. and Europe was disappointing on Tuesday, but Wall Street promptly turned in a very positive day of gains across the major indexes. The EUR/USD pair managed to turn in a broad range underlying that investors remain worried about the fundamentals of both currencies. The GBP and AUD also turned in range trading sessions against the Greenback. Asia got a jolt this morning when Moody’s rating service downgraded the Japanese Sovereign Debt, which essentially turned many of the Asian bourses negative. The data from the U.S. and Germany yesterday will not allow investors to rest. New Home Sales from the States missed its estimate and the German ZEW Economic Sentiment reading also was far below its forecast as it came in with a result of minus -37.6 compared to the predicted number of minus -24.8. Today the States will release Core Durable Goods Orders and Germany will publish the Ifo Business Climate marks. Both set of numbers are expected to be below last month’s outcomes. Investors are likely braced for relatively poor results, the question is what would happen if the numbers fall off the proverbial cliff – or somehow surprise to the upside (which seems unlikely).

Investors have shown that they still have a taste for risk taking on occasion. Yesterday’s gains in the bourses internationally were received well, but there are many questions that still have to be answered about fundamental concerns regarding the global economy.  Gold did come off of its highs on Tuesday and as of this morning is around 1841.00 USD per ounce. Speculation is certainly rampant in the precious metal and traders should expect Gold to remain swift as sentiment shifts in what is clearly an uncertain broad marketplace. The Forex markets have been largely stable as the major currencies have hovered around known values. The JPY and CHF continue to foster safe haven action, but their respective Central Banks continue to rattle their swords as they claim they will defend their currencies against being overvalued.

Fed Chairman Bernanke is expected to speak about the American economy on Friday and Saturday. Many investors believe Bernanke will unveil a new stimulus package, but this remains unclear and unproven. Typically major policy moves by the Federal Reserve are the domain of its own institutional meetings in Washington and not symposiums like the one that is about to be held in Jackson Hole, Wyoming this weekend. If investors become unhappy with the results from Jackson Hole it is likely that this will bring about a fresh wave of volatility in the equity markets. Corporate earnings which will begin to come out in October with third quarter results will weigh heavily in the midterm. The prospects that companies will say that they have achieved good earnings, but are revising their outlooks downward seems a possibility at this point taking into consideration the amount of rather negative economic data that has recently come to light.

Thus today’s Core Durable Goods Orders could prove an interesting lynchpin in today’s markets. The German Ifo outcome will certainly be watched closely too considering that Germany is a major factor in the European economic environment. On Friday it should not be forgotten that the U.S. will bring forth its Preliminary GDP numbers.

Investors saw gains on Wall Street on Tuesday and the two day winning streak will be embraced. The question is how long can the winning ways be sustained in this nervous market.