Futures Point To A Flat Opening
INTEREST
RATES
OVERNIGHT
CHANGE to
4:15 AM:
BONDS
+7 — It is pretty clear that the financial markets had become overly
pessimistic on the economy with the bond market throttled lower Thursday
following the surprise strength in the December ISM Manufacturing Index.
With bonds failing to take out contract highs earlier in the week, a
lack of fresh political news since the New Year and an upbeat Wall
Street Journal report on improved capital spending by businesses this
year all converged to trigger mass profit taking in the bond market. A
lull in the political anxiety certainly cools the bond’s safe-haven
attraction, but geopolitical tensions remain a wild card.
STOCK
INDICES
OVERNIGHT
CHANGE to
4:15
AM:
S&P -90,
DOW -24,
FTSE -85 — In
overnight action stocks had a quiet trade holding on to most of their
gains. Indications
that the manufacturing sector may be turning around and a WSJ survey of
economist’s expecting improved business spending this year provided
enough of a catalyst to send bears racing for the sidelines Thursday. In
today’s action we would not be surprised to see stocks probe lower ahead
of the weekend after yesterday’s gain.
FOREIGN
EXCHANGE
DOLLAR:
Traders scrambled to cover short Dollar positions Thursday as a
surprising jump in the December ISM Manufacturing Index shed new light
on an economy thought to be in an economic quagmire. However, overnight
the Dollar lost ground, as the trade remains skeptical that the
US
economy is in fact improving while political conflicts keep the currency
a less desirable investment. The ISM report suggests a strong pick-up in
the manufacturing sector which was backed by an article in the Wall
Street Journal indicating business are likely to replenish inventories
and raise capital spending this year. While traders have to be concerned
about reading too much into one month’s numbers, more evidence of an
economic turnaround could go a long way in lifting the black cloud
hanging over the Dollar for the past year. However, the other main
factor pressuring the Dollar has not gone away, although a lull in the
political headlines has likely given traders more confidence to book
profits. With the Dollar failing to follow through to the upside
overnight, further gains may be hard fought until there is either more
evidence of an economic recovery or political uncertainties subside.
Resistance comes in at 103.68 then 104 area with support at 102.93
EURO:
The complete polar readings of the Purchasing Manufacturers Index with
the Euro-zone weaker than expected and the
US
number much stronger has to raise concerns that the Euro currency has
become over valued, at least on a pure economic basis. If the Euro
continues to hold above 103 it would suggest the political risk has
outweighed economic differences.
YEN:
The break below 83.50 support begins to turn
the chart pattern negative and so this would be good timing for the BOJ
to intervene, since the market direction is going their way. Next
support areas are 83 then 82.50, resistance at 84.
SWISS:
A lack of fresh political developments and weaker gold prices helped to
trigger a sharp break in the Swiss.
However, with the
US
preparing for war by sending troops to the
Middle
East
,
safe haven buying can return to the Swiss at any time. The risk/reward
ratio is too high to be short Swiss.
POUND:
The currency was pressured by weak economic reports and maybe the Pound
is finally feeing some of the negativity of the
Iraq
war threat. 157.75 will be a critical support area.
CANADIAN:
The sharp rise in the US ISM manufacturing Index is bullish for
Canada
since if the
US
economy is beginning to show signs of a more robust recovery,
Canada
stands to benefit the most being the largest trading partner of the
US
.
Resistance at 63.67 then 64, with support at 63.53
to 63.38. In a position to firm back to 64
METALS
OVERNIGHT
CHANGE to 4:15 AM: GLD -1.90,
SLV -1.8, PLAT +1.50;
London Gold Fix
$344.00, +$.20;
LME Copper
Warehouse stks
856,275 ton, + 650 tons; Comex Gold stocks
2.05 ml, + 2,798; COMEX Silver stks 107.3 ml
oz, -594,014; OVERNIGHT: The jump in the ISM manufacturing index combined
with the higher dollar helped trigger more weakness in Asia overnight.
Profit-taking has been active on fears of increased producer hedging,
calmer world politics and the firm
US
stock market.
GOLD:
A temporary shift in the psychology about war, the economy, the US
dollar and the stock market all combined to pressure the gold market,
but the key word here is temporary. The key reasons for investors to
remain long gold are still in place. A possible anthrax scare in
Canada
this morning and a resumption of the weakness in the US dollar are
positive forces today.
SILVER:
The strength in the stock market had more of a positive influence on
silver and it showed with the upside breakout this week. While
overbought, the possible turn higher in the
US
economy, hefty money supply increases, solid industrial usage and
support for silver as a precious metal are all positive factors. Shorts
are beginning to feel the heat and the upside breakout to new 6-month
highs this week could attract active speculative buying in the days
ahead.
PLATINUM:
With
Japan
still absent for the holidays and uncertainty regarding supply, the
uptrend in platinum looks to continue. Russian news is harder to come
by. April Platinum buying support moves up to 596.20 with 613.20 as next
upside objective.
COPPER:
Copper is hyper sensitive to the developments in the stock market and
holds additional longer-term values as a commodity and a metal so the
sellers were hard to find in the past few sessions. Funds and specs have
been in a long liquidation mode since early December. It will take
evidence that the stock market rally is for real to keep the minor trend
up.
CRUDE
COMPLEX
OVERNIGHT
CHG to 4:15 AM:
CRUDE +40, HEAT +116,
UNGA +85 — Private weather forecasters are calling for a significant
Arctic blast for the second week of January across the US, the coldest
so far this year and colder than anything last winter. The National
Weather Service calls for below normal temperatures in its recent 8-14
day forecast, which is in sharp contrast to the 6-10 day forecast
calling for a normal to above normal temperature pattern.
NATURAL
GAS
The
colder weather forecast is the main factor behind the market’s strength
and recent highs at 5.47 in Feb natural gas should be tested. Estimates
for this morning’s EIA gas storage report call for a draw of 120-125 bcf
versus a 126 bcf draw last week and an
average draw for this week of 156 bcf over
the past 5 years.