Monday Morning Cheat Sheet: 3 Stories Moving Markets

The markets were mixed in Asia overnight. Japan’s Nikkei soared 2.09 percent to close at 11,407.90 after G20 finance ministers ostensibly gave their seal of approval to the nation’s economic recovery strategy. The Hang Seng fell 0.27 percent, while the S&P/ASX 200 increased 0.59 percent.

In Europe, Germany’s DAX advanced 0.19 percent around mid-day. London’s FTSE 100 was off 0.18 percent, while the STOXX 50 was off 0.20 percent.

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The U.S. equity markets are closed on Monday in observance of President’s Day.

Here are three stories to keep an eye on:

1) Currency war may be a fiction, but tension between major economies jockeying for recovery mechanisms remains a reality. G20 finance ministers made it clear that they would not publicly interfere with the value of their currencies or engage in aggressive devaluation, and they urged Japan to do the same. Japan is pursuing bold stimulus and monetary packages aimed at reversing stagflation and spurring a long-struggling economy back to life. One of the major side effects of this has been the rapid weakening of its currency, the yen, which currently trades at 93.95 to the dollar, and 125.52 to the euro. Some nations see this rapid weakening as a threat to their own recovery efforts.

2) Gold is the worst-performing precious metal in 2013, and it may drop below $1,600 per ounce over the next couple of weeks, according to Commerzbank AG. Technical analysts at the firm suggest that $1,625.85 is the key level to watch. If the price falls below this, the analysts expect selling pressure to bring gold down below the $1,600 level.

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This type of bearish thinking on the commodity is framed by a recent Bloomberg survey, which shows that a majority of analysts polled expect the price of gold to fall next week, while hedge funds have cut bullish bets on the metal by about 56 percent since October. George Soros and Louis Moore Bacon also reported reducing their stakes in gold, as increasingly positive economic sentiment begins to signal the possible end of the rally.

But while 2013 has been unkind to gold, Central Banks bought more of the precious metal in the fourth quarter of 2012 than at any other time since 2009. The World Gold Council reported that central banks purchased 145 tonnes for the quarter, with total purchases surging 17 percent for the year… (Read more.)

3) The Bureau of Labor Statistics will release the January reading of the Producer Price Index on Wednesday. Economists are looking for this key indicator of inflation to increase 0.3 percent month-over-month in January, compared to a 0.2 percent contraction in December. Less food and energy, economists are looking for 0.2 percent growth in January, compared to 0.1 percent growth in December.

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The energy component of the index fell 4.6 percent in November and another 0.3 percent in December, but this downward movement may end in the January report. The price of gasoline, which fell in December and November, crept up every week in January, following the price of oil, which increased over $4 per barrel for the period.

The January PPI report isn’t the only economic indicator to watch out for this week. On Tuesday, the National Association of Home Builders will release the February figure for its housing market index, which is expected to move up one point to 48. Any level below 50 means home builders still think that conditions are more bad than good.

Also on deck this week is housing start and existing home sales data.

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