Retail Cools The Market
INTEREST
RATES
OVERNIGHT CHANGE to
4:15 AM
BONDS +13 — There continues to be enough economic uncertainly to underpin
bonds, even in the face of rising inflation pressures. With today’s CPI
reading, one can probably expect to see another fleeting bout with
inflationary concerns, but given the market’s ability to shake off the PPI
reading last week, it shouldn’t take long for the bond market to find
support. In fact, following the CPI report, we would suggest that buyers
get long bonds, as whatever negative news is expected today should be
seen in the early going.
STOCK
INDICES
OVERNIGHT CHANGE to
4:15 AM
S&P -250,
NIKKEI +19, FTSE -16 — Ford
Motor and Wal-Mart are showing weaker indications
from the European trade and that goes along with general weakness in many
other stock sectors. The fact that Euro zone industrial production
readings were softer this morning adds to that pattern of declining
optimism toward the global recovery. Fading hopes of a near-term recovery
simply serves to push longs to take profits on the last month’s rally.
FOREIGN
EXCHANGE
DOLLAR: A quasi gap down
move in the dollar suggests that the recent recovery bounce is over. Even
in the face of weak Euro zone numbers this morning, the dollar appears to
be out of favor and under selling pressure. Evidently, the chance for
rising inflation in the
is not something that attracts capital. Ultimately the trade seems to be
fixated on the
war track. Even though
has allowed weapons inspectors back in the country, there continues to be
a large portion of the trade expecting war to erupt because of what the UN
team may find. Therefore, unless the
stock market can reverse recent weakness in the first hour of trade today,
we suspect that prices might slide to 104.70 in the December Dollar.
EURO: Euro zone September industrial production figures declined by 0.2%,
and the August figures were revised downward and that is simply detracting
from the recovery action in the euro this morning. Evidently, the market
is willing to grasp onto the theme that the euro zone is managing to hold
onto weak growth. There is also some hope than an increase in intermediate
goods figures shows some promise for the future in the Euro zone recovery.
In any regard, the trade is trying to stay away from the dollar and the
euro is a benefactor of that pattern. Near-term support comes in at 101.11
and a new high for the move would not be surprising.
YEN: News that Japanese Department stores posted their 11th straight
monthly contraction was partially offset by a leveling out of the Japanese
corporate bankruptcy-filing rate. The downside pattern in the yen should
continue, especially if the
stock market manages a moderate correction. Near-term downside targeting
in the yen comes in at 82.25.
SWISS: The Swiss would appear poised for an upside breakout. Given that
the sideways consolidation in the Swiss has been in effect since late
June, an upside breakout might be a historic event. It would seem that the
dollar is permanently losing premium as investors seek to avoid the
principle force in the battle against terrorism. In looking at a monthly
chart, the Swiss might be headed toward a trading range of 70.00 to 80.00
over the coming eight months!
POUND: Decent claims data and average earnings confirm the
pound’s role as
a leadership currency, especially given the residual weakness in the
dollar. We even see the inflation readings from the
as a supportive issue as those readings were very much under control.
Therefore, the pound looks to be headed to new high ground possibly in the
next 24 hours.
CANADIAN: The chart certainly doesn’t look like its prepared to bottom and
the Canadian certainly isn’t getting any positive response to recent
Canadian numbers. Maybe a full failure to 62.79 in the Dec is needed to
forge a low.
METALS
GOLD: It would appear that the Asian trade will remain interested in gold
until there is definitive information proving all-out compliance by
However, the
gold market is certainly holding a large long for the same reasons,
although we suspect that some
longs are in as a hedge against recession or stagflation. With the dollar
sharply lower today, one might expect gold to start the session off on a
more positive note than was seen Monday, especially since the equity
market looks to open weaker.
SILVER: Short-term technicals are still in sell mode, but silver should be
capable of balancing its overly long position with a much smaller break
than might be required in gold. However, silver does carry an additional
burden in that it might correlate with the stock weakness in the near
term. We still expect to see a correction in the May contract that brings
prices down to the 449 and possibly to 446.
PLATINUM: Long-term platinum supply and demand forecasts continue to
justify further price gains. For instance, Chinese platinum demand in 2001
was found to have increased by 13%, while platinum demand growth in
was equally impressive. Long-term reports also suggested supply growth
from
but also suggested that supply contraction from
would more than offset the increase totals from African sources.
Therefore, platinum continues to be confronted with tightening supply and
demand conditions and that should continue to send nearby platinum prices
toward the next price targeting of $614.
COPPER:
copper futures were higher overnight, suggesting that Chinese buyers are
not turned off by higher prices. The macroeconomic case would seem to be
a little limited for copper, unless the stock market manages to turn back
on the pattern of buying seen off the October low. However, the return of
bin Laden fears, concerns over the
recovery pace and the threat of war with
are holding back copper from making more gains.
CRUDE
COMPLEX
OVERNIGHT CHG to 4:15 AM: CRUDE +23,
HEAT +42, UNGA +46
— The big news
during the session Monday was that inspectors were on the ground in Iraq
and that led some traders to think that an infraction was more likely to
be uncovered. Also supporting prices Monday were stories that OPEC would
begin to police over-production by its members before any winter increase
was discussed.
NATURAL GAS
Given the below normal temps of the last two weeks and the cold in the
East this weekend, we suspect that the coming draw on inventories will
support natural gas prices. Furthermore, with
reporting some transportation problems due to wind and weather, it is
possible that natural gas supplies tighten ahead.