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Market Analysis - 20 November 2012

European markets appear to be opening weaker as France has now lost its AAA credit rating. In Britain, the FTSE is looking to open unchanged, the CAC is down 10 points and the German DAX is lower by 4 points at the time of this report.

Yesterday, the European markets saw their best gains in 10 weeks as investors are seeing some progress with the U.S. averting a $600 billion fiscal cliff. However, today, Moody’s Investor 
Services cut France’s AAA credit rating to AA1. They cited a weakening growth outlook and loss of competiveness as the reason for the downgrade. This downgrade is strengthened the possibility of more downgrades to the U.S. and Germany. The outlook for France is “Negative” from Moody’s.

Finance ministers from the Euro zone are set to meet in Brussels today as they are approaching a consensus to give Greece its next tranche of aid to avert a default. If the deal is approved, Greece will receive €44 billion. This deal has been delayed by how Greece is handling its debt reduction.

Looking at business today, mining company Glencore (GLEN-LN) is close to taking over Xstrata (XTS-LN) after 9 months of negotiations. The deal is worth $31 billion and will form one of the largest mining companies in the world. Schroders Real Estate (SREI-LN) and Telcom Plus (TEP-LEN) are expected to deliver earnings today.

The EUR/USD fell after Moody’s downgraded France but recovered. We see resistance at 1.2900 and then at 1.3000. Crude oil is now trading above $89 per barrel and could now test 93.00.

Asian markets rose today as more signs of a compromise emerged from the U.S. on the fiscal cliff. However, Sentiment changed a bit after the Bank of Japan (BoJ) kept rates steady.

After easing for 2 straight months, the BoJ left things as is. They preferred to hold onto its limited options for now as political pressures for even greater expansion of the monetary system grows.

For the fifth day in a row, the Nikkei was 0.0 percent higher on U.S. fiscal hopes. Mitsui OSK Lines was up 1.9 percent and Nippon Yusen jumped 4.1 percent. Exporters were weak as Honda fell 0.1 percent and Cannon was off by 0.7 percent. Shares of Nintendo surged 2.6 percent after releasing the latest Wii U Home Game Console in the U.S.

Hong Kong posted a third straight day of gains. The Hang Seng rose 167.37 points and the Shanghai was a bit lower losing 5.93 points.

Turning to Korea, the South Korean Kospi edged up higher by almost 10 points. LG display which sells panels to Apple for their iPhone and iPad was the top performer. Samsung Electronics rose 1.9 percent and LG Electronics was also up 1.4 Percent.

The Australian S&P/ASX rose by 26.1 points today.

Looking at the Yen today, the USD/JPY looks to be in a range trade, and might test the resistance at 83.00 and then 84.00 this week.

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