Overseas Weighing In….And Down
INTEREST RATES
OVERNIGHT
CHANGE to 4:15 AM:
BONDS +2 — As we
suggested yesterday, the bonds are getting a very steady diet of supportive
economic information, with the trade expecting every reading on the economy to
show weakness. We would think that the Construction spending report yesterday
was the report most capable of sinking bond prices. In other words, now that the
construction spending report is past, we expect the bond market to finish the
week out with mostly supportive information.
STOCK INDICES
OVERNIGHT
CHANGE to
S&P -1000;
NIKKEI +147; FTSE -48 — Now that the stock market has corrected its oversold
status with the bounce Wednesday, it can probably resume the downside break in
earnest. With the 875 level extremely thin support,
it is possible that prices make an even bigger failure down to 850. In fact,
with the near-term slate of economic information, we find it hard to come up
with a scenario where the sellers are challenged.
FOREIGN EXCHANGE
Dollar: The dollar falls to
the vicinity of six-week lows this morning, partially in anticipation of another
series of weak numbers. However, the dollar slide is partially offset by the
fact that other economic zones are posting weak numbers. In the near term, the
market is going to discount the dollar harder because of its war track with
and because the US Fed remains on hold. If the US Fed speech today were to
contain references to a rate cut, that might provide a temporary reprieve
against the selling, but with another set of big figures Friday, any bounce in
the dollar is probably a sell. We still don’t see the need to take the dollar
to a new contract low, but we do see the chance of retesting July low area.
Fortunately for the dollar, some weak German numbers this morning deflected the
initial selling wave, but into the early numbers today, traders should be looking
to sell any attempt to rally. If by chance McTeer,
from the Fed, bandies about rate cut talk, that could result
in the dollar roaring back. Be short but aware of the Fed!
EURO: A
German July manufacturing orders report declined -0.9% while the jobless increase
was less then expected. Therefore, the numbers might restrain the euro rise, but
they should not halt the gains. In short, just seeing positive jobs progression
in
might look pretty good after the
numbers today and Friday. The march toward parity in the September euro should
gather momentum over the next two sessions with a two-day target seen at 101.34
and possibly 101.85.
YEN: The
BOJ ruled out cutting rates and the government is once again considering a
supplementary budget to head off continued deflationary patterns. Therefore, the
yen is supported by political dialogue but undermined because of the ongoing
concern toward the Japanese stock market. We have to think that the BOJ would
like to intervene except for the fact that they are concerned the market will
run over them. A major decision point is ahead in the yen.
Go with a breakout of 85.65 and 84.24.
SWISS: A
new high for the move overnight comes with plenty of
flight-to-quality concerns around the globe. If the
war against
doesn’t lift the Swiss, the return to a double dip recession in the
might. In any regard, we see the Swiss climbing toward the July highs in the
coming two sessions.
POUND:
The BOE held steady on interest rates as was largely expected and that should
mean that the pound continues to gain at the expense of the dollar.
August shop prices declined on the month and that is only a minor negative to a
currency focusing on bigger developments. Like the Swiss, the pound appears
headed toward the July highs of 159.00.
CANADIAN:
The failure to hike interest rates deals the Canadian a major disappointment
blow and the selling seems to be prepared to extend in the session today. Given
that the dollar is sliding sharply and the outlook toward the North American
recovery is deteriorating daily and more declines are possible ahead, near-term
downside targeting in the December contract is 63.27.
METALS
OVERNIGHT CHANGE to 4:15 AM:
GLD +1.30; SLV +3.5; PLAT +2.40; London Gold Fix $316.20 +$3.50; LME Copper
Warehouse
stks
894,125 tns, -1,475 tns; Comex
Gold stocks 1.912, -2,933 oz; COMEX Silver stocks 108.2 ml oz, +201,953 oz;
OVERNIGHT: The Japanese were light buyers despite a recovery in the
Nikkei.
GOLD:
Evidently the trade is postured for the threat of war, as Asian investors
bought gold, even in the face of a strong equity market bounce. Certainly, the
dollar is weak enough to create some buying interest, especially with the dollar
close to forging a downside breakout and the euro nearing parity. Gold had to be
somewhat happy with the BOC decision yesterday to hold steady on interest rates,
as that at least leaves open the potential for inflation.
SILVER:
If gold is going to make a little run, that might drag silver up away from the
recent lows. Certainly short-term technicals in
silver are supportive given the
consolidation of the last month. However, silver will have to
continue to fight the negative drag off the economy.
PLATINUM:
Despite better than expected world
auto sales totals and the hope for continued platinum demand from
that sector, platinum appears to be in a liquidation tilt. We would expect to see
October platinum decline to $530, but for the market to find solid support above
the July
consolidation range of $510 to $530. The 510-530
range is a range that factors in a double dip recession
and that is currently unlikely, but extremely possible. More downside is seen
ahead.
COPPER:
The pressure should remain on copper as the
economy continues to post some very disconcerting numbers. The threat of war and
rising energy prices suggest that manufacturing and consumer activity could come
into another pinch in the coming months and that really disappoints copper
bulls. We would not be surprised to see copper venture down into new low ground
even if there is periodic supported by Chinese buying and other bargain hunting
efforts.
CRUDE COMPLEX
OVERNIGHT
CHG to 4:15 AM:
CRUDE +46, HEAT +92, UNGA +83 — The energy complex
showed that it will tend to expect a war as opposed to discounting the threat of
war. While it would appear that the
will not attack until after the Sept. 12 United Nations meeting.
NATURAL GAS
The
weekly natural gas inventory report due out this morning calls for a moderately
large injection of 50 to 65 bcf. The natural gas market is watching another
tropical depression and could remain on edge from the storm front and because of
the added tensions off the Iraqi situation.