DARTLINE INVESTOR

November 20, 2009, 6:30 am … The Standard & Poor’s 500 index down  3.60 to 1090.70, while the FTSE 100 index of leading British shares was up 40.17 to 5,307.87, Germany’s DAX up 39.63 points to 5,741.81 and the CAC-40 in France up 24.82 points to 3,785.04.Earlier, Japan’s Nikkei 225 stock average lost 51.79, or 0.5 percent, to 9,497.68 even though the Bank of Japan revised up its forecasts for the world’s second largest economy. Hong Kong’s Hang Seng dropped 187.32, or 0.8 percent, to 22,455.84 and Australia’s benchmark fell 1.3 percent. South Korea’s Kospi was flat while China’s Shanghai index shed 0.4 percent.

Financial Times reports the Bank of Japan moved towards a neutral stance on inflation risks on Friday even as the government formally declared that Japan is in deflation for the first time since 2006. The government’s declaration sets the scene for heightened tension between the two, with the Bank resisting public calls by politicians for greater aggression in the fight against deflation. “We want the BoJ to extend support on the monetary policy front in overcoming deflation,” said deputy prime minister Naoto Kan according to Reuters. Finance minister Hirohisa Fujii and financial services minister Shizuka Kamei have also called on the BoJ to do more. The BoJ’s policy board kept interest rates on hold at 0.1% on Friday, but said “there is a possibility that inflation will rise more than expected” due to higher commodity prices, offset by a risk it could fall due to lower public expectations for medium- to long-term inflation. In previous statements it has only mentioned the downside risk to inflation. … Meanwhile, benchmark crude for December delivery fell 46 cents to $77 a barrel, and gold prices rose $2.20, or 0.2 percent, to $1,144.1 an ounce. Earlier this week, gold prices rose above $1,150 an ounce for the first time ever. … Standard & Poor’s 500 index futures at 1090.70 suggests further weakness and a test at 1081.10 to determine extent of the current decline. Inded, traders are closely eyeing the 1,100 level for the S&P 500. Earlier this week, it managed to close above 1,100 for the first time in over a year but its failure to sustain the level is stoking market talk that the rally since March has dried up ahead of the year end. A sustained move above that number would be required to confirm that this is not just a bear market rally. Since fundamentals are still lacking and the economic data appears misplaced and manipulated, it would be prudent to step back, reduce laggards, take profits and trade both sides with very short fuse.