Strong Open Being Forecast
In spite of a dearth of corporate news in the air
Tuesday, a strong open is being forecast by the futures markets, which are
trading near their highs for the Globex session.
Retailers have been upgraded at SG Cowan, several
to strong buy, including Hot Topic
(
HOTT |
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Chart |
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PowerRating), The Limited
(
LTD |
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PowerRating) and
Chico’s FAS
(
CHS |
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PowerRating), while Deutsche Securities is bullish on casinos, with
Starwood Hotels and Resorts
(
HOT |
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PowerRating) and MGM Mirage
(
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News |
PowerRating) rated strong
buys.
Tuesday’s pre-opening outlook:
August
06, 2002
INTEREST RATES
OVERNIGHT
CHANGE to
4:15 AM
:BONDS -9 Rumors
are circulating that the Fed is set to cut
interest rates and that is what is making the international equity market
so firm overnight. However, the bond market is not necessarily sensing a move by
the Fed. We would think a cut by the central bank would be out of character for
the Fed, without the Fed throwing up some signals in various speaking
engagements.
STOCK INDICES
OVERNIGHT
CHANGE to
4:15 AM
:S&P+980 NIKKEI
-203 FTSE -15 The stock market has forged a moderate recovery following the weak
pricing seen in the
market overnight. The trade seems to be benefited by the upgrade in auto and
food company stocks. Seeing Nestle put in an offer to buy Chef
and seeing a European automaker, upgraded, seems to countervail extremely
negative overnight Asian equity market action.
FOREIGN EXCHANGE
Dollar: The Dollar is
garnering support from the idea that the
is about to cut interest rates and that the Euro zone and the
are just now coming into their own slowdown. Few traders would have expected the
Dollar to have maintained its bounce off the recent lows, into the extremely
weak economic numbers of the last week but the world simply thinks the
has greater capacity to fight off slowing, than do other economic zones. The gap
up action in the Dollar clearly shows a confidence gain toward the Dollar. If
the US Fed kills off the rate cut rumor mill, with its dialogue then the Dollar
will quickly lose momentum and slide back toward support of 107.00. In the mean
time, the Dollar looks set to climb toward the 110.00 level.
EURO: The
euro zone unemployment rate upticked by .1%, which
was about what was expected but the fact that economists predicted a steady
climb in that rate in the months ahead clearly undermines recent bullishness
toward the Euro zone and the currency. Initially it appeared as if the Nestle
buyout would support the Euro and the Swiss but in the end the market prefers to
favor the Dollar and the US Fed, to the ECB. A very bad trade overnight in the
Euro, now projects a slide down to 95.94 and significantly lower if the US Fed
does act.
YEN: The
Japanese are clearly concerned about the residual impact of the slowing
economy on their recovery and suggested that public works spending cuts are in
line with reforms. Sales of imported autos in
continued to decline, suggesting that the economy is weak. Furthermore, the risk
off the
economy is enough of a burden on sentiment that some money is flowing back out
of the Yen and toward the Dollar. We would project a downside target in the Yen
of 82.31.
SWISS:
Downside targeting in the Swiss, on the coming move, is now seen at 65.94 after
initial support at 66.35 is encountered. The Nestle buyout appears to be only a
minor barrier to ongoing selling in the Swiss.
POUND:
The sharp decline in industrial activity has sentiment reeling in the
and investors fleeing the currency. While some want to blame the decline on
anomalies within the reporting period such a steep drop is hardly to be
discounted. Near term downside targeting in the Pound comes in at 153.18.
CANADIAN:
We suspect that the washout overnight is getting close to a major bottom in the
Canadian. We have to think that improved sentiment toward the Dollar will begin
to diffuse the selling interest in the Canadian especially if the
rate cut threat expands. The Canadian jobs report at the end of the week could
come in much better than the
if expectations are met and that should lend some support to the currency.
METALS
OVERNIGHT CHANGE to 4:15
AM:GLD-1.40 ,SLV-0.3 ,PLAT+3.30 London Gold Fix $306.75 -$.85 LME Copper
Warehouse
stks
891,900 tns -775 tns Come
Gold stocks 1.832 Unchanged COMEX Silver stocks 106.0 ml oz +508,324 oz
OVERNIGHT: Weaker gold pricing because weaker economics isn’t causing a weak
GOLD:
Evidently the poor economic numbers isn’t going to throttle the Dollar and that
in turn disappoints recent longs in gold. We certainly have a better technical
position in gold and silver but that apparently isn’t enough to continue the
recent buying cycle. Near term support is seen back down around $305.
SILVER:
Like gold the silver needs a better equity market and more upbeat dialogue from
business. The silver market continues to be weighed down concerns that high tech
and communications spending will remain slack and therefore a decline back to
the deflated levels seen at the first of the month are possible. At this point
we see no reason for silver to slide to the April lows below $4.45 but a slide
to $4.55 is probable.
PLATINUM:
The platinum gapped higher overnight, which is probably a reaction to the
recovery in stock prices. We would maintain the desire to sell the Platinum on a
rally to $528 in the October
COPPER: A
retest of the contract low was seen overnight as the economic story is not such
that buyers feel pressured to pick a bottom. Asian prices were soft again which
certainly suggests that
isn’t an interested buyer even at there low values. The Asian trade reported
fund selling overnight and that could suggest that the fund position in the
is getting a little overly extended.
CRUDE COMPLEX
OVERNIGHT
CHG to
4:15 AM
-3 ,HEAT+8 ,UNGA+13 83 The confluence of increasing supply and shrinking
demand appears to be in the near term future of the energy markets. Evidently,
the Russian and OPEC Oil Ministers meeting failed to reach an agreement on oil
exports, which could be taken as a bull or a bear sign.
NATURAL GAS
We are
surprised that the natural gas managed a higher overnight indication for the
opening as
temps have fallen and the economic outlook remains suspect. The annual surplus
looks to continue to build through the remainder of the cooling season setting
the natural gas up for a softer winter pricing scheme.