Markets Set To Open Higher
INTEREST
RATES
OVERNIGHT
CHANGE to
4:15 AM
BONDS
+3 — Entering the session today the bonds would seem to have slightly less
supportive conditions than were seen early in the week. Not only did the
scheduled numbers yesterday weaken the bull case, but with the equity
market bouncing back aggressively from the recent lows, anxiety is
significantly reduced. The economic report slate today contains a very
short-term initial claims reading and a very broad based Industrial
Production revision from the Fed.
STOCK
INDICES
OVERNIGHT
CHANGE to 4:15 AM: S&P +160,
NIKKEI -89,
FTSE +56 — The news from the
corporate guidance world would seem to be negative enough to send stock
prices down, but the overnight action is showing “no”
weakness. In fact, despite a major brokerage stock downgrade, a loan
request rejection for United Airlines, potentially worrisome dialogue
from Intel and negative guidance from Gateway, the market is mounting
gains in the European action and is showing positive opening indications
for the
US
session. For the market to discount the potential that United is poised
to file bankruptcy, is indicative of a market
with a solid core.
FOREIGN
EXCHANGE
DOLLAR:
The Dollar was attempting to mount some gains early, but with the ECB
rate cut hanging over the market, we are doubtful that the gains will
hold into the close. We have to think that some Dollar sellers were
banking on a 50 basis point cut. The jobless claims reading in the
US
could be a pivot point for the Dollar as many suspect that the economy
is showing recovery in the overall trend of the claims. Therefore, the
Dollar might be able to hold support above the 106 level but only if the
US can get by the Friday morning payroll report without rekindling
concern over the recovery.
EURO:
With the German Manufacturing orders report showing a better than
expected reading this morning, the whole rate cut issue is slightly less
critical to the direction of the Euro. However, the Euro was pent up to
see a 50 basis point cut and anything less than that might be
disappointing to recent buyers of the Euro. Critical support of 99.44
must not be violated in the December Euro or that could signal a washout
to 98.82. On the other hand, a rise above 100.31 could turn up the short
covering interest and pull in fresh buying.
YEN:
Another Japanese central bank official suggested that the Yen should
fall, given the fundamentals and that has fostered a massive downside
breakout. Trades must go to a weekly chart to find support in the Yen,
which comes in all the way at 79.01. Adding to the downside momentum in
the Yen were statements from officials that the deflation problem is
proving to be difficult to defeat and therefore money is leaving the
Yen. We would not be surprised to see the Yen return to the 77 to 78
range in the coming month.
SWISS:
The Swiss isn’t showing positive extension off the recent rally, which
leads us to conclude that it has run into significant resistance around
68.03. There doesn’t seem to be enough anxiety to fuel the Swiss through
the recent highs.
POUND:
The BOE left interest rates unchanged but the market wasn’t really
expecting a change in that rate structure.
Trend line resistance in the Pound comes in at 157.34 and that
could hold the Pound down over the next 48 hours.
CANADIAN:
As we suggested yesterday, the Canadian is entering an extremely
critical decision stage. We have to think that the Canadian is
vulnerable to a profit-taking setback, especially if US economic numbers
over the next 24 hours don’t favor the recovery view. Those that are
long the Canadian should quickly seek protection through long puts. +
METALS
OVERNIGHT
CHANGE to 4:15 AM: GLD +0.00,
SLV +1.3, PLAT -3.00;
London Gold Fix $322.10, +$1.40;
LME Copper
Warehouse stks
866,050 tons, -3,625 tns;
Comex
Gold stocks 2.04 ml, Unchanged; COMEX Silver stocks 107.3 ml oz, +250,000
oz; OVERNIGHT: Minor currency pressure from a sagging Yen, generally
tight range
GOLD:
Given recent information, both gold and silver have been overachieving!
The Dollar has been soft and the equity markets have
generated some anxiety, but in general for gold and silver to mount such
runs off war talk, indicates that the metals are getting a lot of
mileage from minor fundamental developments. While a war wouldn’t be a
minor event, fundamental changes in the Iraqi situation since the
December 2nd low in gold have been minimal. In fact, the bears could
even argue that
Iraq
has complied more than most expected and has even allowed unannounced
inspection of a royal palace.
SILVER:
We are less inclined to suggest that silver is overachieving as it
should be getting support from the promise of reduced copper production
as that should mean less silver production. Furthermore, the economy is
recovering and a major brokerage house has even touted high tech and
communication stocks, which could mean that industrial silver demand is
in position to improve. Certainly, having gold lead the way, adds to the
silver upside punch, especially since we consider silver prices to be
deflated in the 4.30 to 4.70 range.
PLATINUM:
An impressive overnight probe in platinum leaves the market poised to
benefit if world equity markets can manage to provide positive
leadership for platinum on the recovery front. Platinum hasn’t been that
negatively impacted by the weak equity market action early this week, so
it must be underpinned by supportive internal fundamentals. Tight supply
and firm Asian demand leaves the market poised for a breakout up, once
global recovery is a widely accepted view.
COPPER:
The copper market showed its resilience Wednesday, as it managed a
positive close in the face of equity market weakness. An Australian Bank
analyst is suggesting that production cut promises by BHP has allowed
them to raise their 2003 price estimates for copper, to around 80 cents
for the average cash price. As we have been suggesting for the past two
weeks, nearby copper prices appear to be headed to 80 cents, but copper
will need consistently optimistic economic conditions and a positive
equity market to reach that level.
CRUDE
COMPLEX
OVERNIGHT
CHG to 4:15 AM:
CRUDE +21, HEAT +85,
UNGA +53 — The DOE reports released Wednesday morning showed
were less bearish than the API reports but not enough to alter the liquidative
tone in the energy complex. In fact, the technical outlook
in the energy complex is deteriorating with the losses posted Wednesday.
NATURAL
GAS
Expectations
for the weekly inventory report call for a 70 to 90 bcf
draw, with some in the trade expecting the annual deficit to rise toward
400 bcf following the weekly report.
Slightly warmer
US
temps should limit
the markets ability to rally, unless of course the regular complex is
making some stellar gains.