Early Green
INTEREST RATES
OVERNIGHT
CHANGE to
BONDS +5 — Another new high for the move overnight shows that investors and traders are
still pretty concerned about the
falling back into a double-dip recession. Massive layoffs and soft ISM
manufacturing readings yesterday leave the bonds firmly entrenched in the up
trend. The question that one has to ask now is how high is too high for bond
prices.
STOCK INDICES
OVERNIGHT
CHANGE to 4:15 AM:
S&P +560;
NIKKEI -141; FTSE -4.3 — While the 875 level might appear to be solid support, it
really is nothing of the sort. As long as the press is playing up the idea of a
double-dip recession and downgrades of stocks are commonplace, we have to think
that the path of least resistance is down. However, to have had the biggest down
day since the re-opening of the stock market (following the September attacks)
seems to be a little overdone.
FOREIGN EXCHANGE
Dollar: Traders should prepare
to shift to the December contracts when implementing fresh positions. It would
seem as if the Dollar is attempting to form a temporary bottom around the 105.53
low, but in order for a permanent low to form, the attitude toward the
economic outlook will have to improve or the outlook toward the Euro zone will
have to deteriorate. For today, the US dollar might get a little lift from the
construction spending report or from some of the automakers sales figures. We
are not sure what impact the overnight war talk will have on the dollar, but it
would not seem to be supportive. In the end, attacking and succeeding quickly
might serve to drive the dollar higher, but until the outcome is predictable, we
have to assume that the dollar would suffer more selling. Currently, the
odds of a double-dip recession are growing with
equity market losses once again damaging consumer and investing sentiment.
Without some clear-cut better than expected US numbers in the coming three
sessions, the dollar should trade between 105.89 and 105.00 with a downward bias.
EURO: The
Euro zone might have set a low hurdle for the
economy with its July jobless rate unchanged. Furthermore, the euro zone posted
a moderate decline in August services PMI (from 52.3 to 50.8) and that at least
takes away some of the buying interest from the euro. There is also the
expectation that Euro zone unemployment will rise in the coming months and that
is another limiting development on the currency. Unless US numbers fail to come
in positive today, we see the recent high in the euro holding and the euro
sliding toward 98.58.
YEN: The
concern toward Japanese banks reached the point where a bailout is once again
expected. With expectations of a double-dip recession in the
soaring, we suspect that the yen will come under temporary pressure with a dip
down to 84.24.
SWISS: A
new high for the move overnight, suggests that the Swiss might be divorcing
itself from the ebb and flow of European growth and possibly getting a little
lift from the war threat. With the US Navy booking ship space (possibly for
armor shipments), it’s logical that some traders buy the Swiss.
POUND: A
flurry of negative macroeconomic news overnight would initially seem to
undermine the pound’s attempt to rally. Many of the CBI readings showed
extremely weak retail and services sector developments. However, the actual PMI
reading in August rose to 55.1 from 54.7 and without an offsetting strong
number, the
economy is once again garnering the title of the strongest in the G7! Therefore,
the pound looks set to rise to 157 and possibly even 157.60 if the
posts some bad numbers.
CANADIAN:
A gap up move yesterday in the December contract is being extracted slightly
today, hinting at the market’s indecision. Interest in Canadian bonds should
continue to provide a lift to the currency, but seeing the
economic situation leveled out, would be the best thing for the bull camp in the
Canadian. On any 30-40 point correction those that
bought multiple calls and sold
futures should be exiting the short
futures position, leaving on the calls.
METALS
OVERNIGHT CHANGE to 4:15 AM:
GLD-0.80, SLV+0.5, PLAT-1.10; London Gold Fix $312.70 -$.80; LME Copper
Warehouse
stks
895,600 tns -100 tns Comex
Gold stocks 1.914 +88,589 oz COMEX Silver stocks 108.0 ml oz Unchanged
OVERNIGHT: Surprisingly Asian players sold gold in the face of equity
losse
GOLD:
Instead of gold seeing extended flight-to-quality buying in
the trade took profits off recent gains, which would suggest that players have
low expectations for gold in the near term. We were somewhat worried that gold
and silver would take the deflationary track in the latest deterioration of
economic sentiment. The fact that Aussie traders were sellers is very damaging
to near-term sentiment and that is eclipsed by the Japanese selling in the wake
of 19-year lows in the Nikkei.
SILVER:
If gold is going to miss out on the current financial market anxiety we have to
be concerned that silver is going to slide to the August lows. Fortunately for
silver longs, the stock market is higher in the
and the dollar is firmer, otherwise the concern of a double-digit recession could
cause aggressive selling in silver. We still think that December silver will be
able to hold above $4.40 unless things really deteriorate and the S&P falls
below 875 on a close basis.
PLATINUM:
Another automaker is expected to release strong sales figures and that should
provide a measure of confidence that platinum demand will remain steady. We have
to think that part of the gains off the July lows was specifically off the
result of world recovery expectations. With the outlook toward recovery cloudy
at best, we have to assume that platinum prices will correct a little lower in
the range.
COPPER:
After being supported by theories that the Chinese would pare production to
support copper prices, the Chinese were noted buyers in the overnight action.
Therefore, one of the big players is showing specific interest in prices under
67.00 cents basis the December contract. We are actually surprised that the
copper market held together as well as it did given that the US stock market had
the worst day since the re-opening day following the attacks.
CRUDE COMPLEX
OVERNIGHT
CHG to 4:15 AM: CRUDE +9, HEAT+74, UNGA+53 — The energy complex came into the first meaningful liquidation since mid July
when crude oil fell $2.00 a barrel. In that July correction, unleaded fell 520
points and therefore the current break has already surpassed the July drop in
magnitude.
NATURAL GAS
The
natural gas certainly suffered the full brunt of the fundamentals turning
negative Tuesday. Lower regular energy complex prices, muted n-gas demand off
mild weather, sagging economics and a reduced threat to gulf shipping off the
Easterly track of the Atlantic hurricane, all conspired to send prices down.