Futures Point To A Weak Open
INTEREST
RATES
OVERNIGHT
CHANGE to
4:15 AM
BONDS
+0 — Today could the most significant day of the last two years in the bond
market. Following a devastating break off the October highs, the bonds have
managed to claw their way almost three points off the last two months lows and
now they are presented with a major set of developments. Certainly the threat of
war and the weakness in the equity market
are giving bonds a lift, but it is entirely possible that the “numbers”
continue to show recovery.
STOCK
INDICES
OVERNIGHT
CHANGE to
4:15 AM
S&P +90,
NIKKEI -54, FTSE -13
— In following the S&P since the early ’80s,
we can suggest that the market rarely turns sharply higher after a series of
minor declines. Historically, the stock market seems to mount its best recovery
moves shortly after seeing prices take a severe pounding. In looking back at the
major bottoms of 2002, the same theory applies with the July low coming after a
four-day wash of 133 points in the S&P.
FOREIGN
EXCHANGE
DOLLAR:
While the dollar might not be in as critical of a junction as the
US
stock
market it would not be a good thing for the payrolls to be soft and for the
US
to
hurtle toward war. In other words, the dollar either slides
slowly down toward the November lows, or it falls to that level quickly. If the
dollar is going to avert the decline to the November lows it has to start that
process this morning. It might be that both the dollar and the pound come under
pressure as a result of the impending military action, but in the past we have
seen war provide the dollar with a flight to quality lift. We don’t get the
sense that the dollar is in a position to get the flight to quality lift,
especially with the Euro zone seen as an uninvolved party in
Middle
East
affairs. Economically, it would seem that the
US
economy
is strong enough to discourage aggressive selling, but only if one can assume
that the
US
is
still moving forward after the reports this morning. Initial downside targeting
in the December dollar is seen at 105.74.
EURO:
The Euro zone rate cut didn’t provide as much support to the euro as the trade
would like to have seen. With the ECB indicating that their recent rate cut was
a consensus decision and that “there continues to be a persistently high
degree of uncertainty” the euro is not going to bid aggressively higher. In
fact, we see the euro hovering in a range bound by 63.89 to 64.21.
YEN:
Japanese leading indicators were soft overnight as were figures on household
spending. Therefore, the yen sees little deviation from the recent pattern of
weakness. Looking on a weekly basis, the yen could easily slide toward 79.40 and
then find temporary support.
SWISS:
It would certainly seem like the war threat is high enough to support the Swiss
to the top of the November consolidation, unless something distinct changes
before the close today.
POUND:
Economic numbers from the
UK
overnight were mixed, with the October manufacturing output total declining 0.7%
and the three-month total managing only a slight rise. In total the bloom of the
UK
economy
is wilting slightly. We fear that the Pound is without fresh buying incentive
and is sitting almost dead center of the expected trading range.
CANADIAN:
The Canadian jobless rate fell to 7.5%, with 42,300 jobs gained and the labor
force increasing by 30,300. Total full time jobs rose by 55,300 jobs, which is a
very impressive reading. In other words, the Canadian job gain could end up
being larger than the
US
, off a
much smaller economy! Some might take the Canadian numbers as a sign that US
numbers might come in better than expected. Canadian payrolls should give
confidence to the bulls but we still fear volatility and would suggest that
Canadian Dollar stay long but assume some put coverage.
+
METALS
OVERNIGHT
CHANGE to 4:15 AM: GLD +0.20,
SLV +3.0, PLAT -1.70;
London Gold Fix $325.30, +$3.20;
LME Copper Warehouse
stks
868,400 tons, +2,350 tns; Comex
Gold stocks 2.03 ml, -12,249 oz; COMEX Silver stocks 106.9 ml oz, -434,113 oz;
OVERNIGHT: War concerns failed to support gold in Asia but ranges were tight.
GOLD:
While the Asian action didn’t show too much direction, the minor gain in the
early
US
action
would seem to put the gold into another upside breakout. In taking out the
$326.2 highs, the next resistance level becomes $330. It would seem that the
Iraqi situation is driving the metals with the White House turning up the
dialogue Thursday, with suggestions that
Iraq
is lying
and that they have proof.
SILVER:
The market is now close to 30 cents above the December low and that means that a
moderate portion of a war premium has already been factored into prices. While
we feel that silver is getting a mix of buyers, one has to conclude that the
majority are buying in for the threat of an Iraqi attack. Like gold, silver
traders need to be long, but now have to carry some protection.
PLATINUM:
The platinum would seem to have discarded its physical commodity status and its
positive correlation with the stock market to become more of a precious metal.
In other words, platinum is now tracking as a flight to quality commodity
instead of being driven by the fundamentals of supply and demand.
COPPER:
With the copper now 230 points off the week’s high and closing in on trend line
support the downside pressure might slow. However, if the stock market comes
under significant pressure off the US payroll report that could yank support out
from under the copper market. Providing some support against further losses this
morning is evidence that Shanghai copper stocks declined by 9,716 tons.
CRUDE
COMPLEX
OVERNIGHT
CHG to 4:15 AM:
CRUDE +18, HEAT +105,
UNGA +73 — The information from the White House Thursday is somewhat
disconcerting considering that the US says they have evidence that Iraq will be
lying if they declare no weapons in the 13,000 page document to be filed with
the UN over the weekend. With a battleship group deploying and Saudi Arabia
indicating they would allow the US to use a US command center located in Saudi
Arabia to attack Iraq, it is clear that the US is moving toward the brink
of war.
NATURAL
GAS
The
weekly inventory report showed a draw of 91 bcf, which brings the deficit to 298
bcf compared to last year. Tempering the upside in natural gas is the fact that
current
US
gas inventories are right on
long term average levels.