What Impact Is SARS Having On The Global Markets Today?
SARS was the catalyst for
financial market direction today, as Treasuries were up and industrial metals
were down. The disease forced the World Health Organization to issue a travel
alert to Toronto and the Central Bank of New Zealand to cut short-term interest
rates by 25 basis points.
Equities
Although the economic data was mixed today, the
markets were lower on profit taking after the recent run up. The SARS virus also
added some downward pressure, as AIG, one of the largest global insurance
companies, said sales in Asia are being impacted on the developments. The S&P contract
(
SPM3 |
Quote |
Chart |
News |
PowerRating) was
down 7.70 to finish at 909.80,
and the Dow
(
DJM3 |
Quote |
Chart |
News |
PowerRating) was down by .82 to
finish at 8409. The Nasdaq
(
NDM3 |
Quote |
Chart |
News |
PowerRating) also was also down, finishing lower by
5.5 to close at 1113.50.
Fixed Income
The Treasury markets were pushed higher in
overnight trading in Asia, on the back of lower equities and SARS
concerns, and stayed strong for the rest of the day on light volume.
Today’s economic news was mixed, as jobless claims unexpectedly rose 8,000 to an
aggregate level of 445,000(the highest reading this year). And, the highly
volatile durable goods order came in higher than expected at a positive 2%. The 10 year
futures contract
(
TYM3 |
Quote |
Chart |
News |
PowerRating) was up -205 to close at 114-195; the 30 year
(
USM3 |
Quote |
Chart |
News |
PowerRating) finished at 113-09, up
1-05; and the five year note
(
FVM3 |
Quote |
Chart |
News |
PowerRating) finished
up 0-155 to close at 113-090. Most Treasuries still remain within
their recent ranges, however
Metals
The Bank of Portugal said it sold 45 tons of its
gold reserves in March and April, and the Banks sold another 30 in Feb and 15
tons at the end of last year. This concludes their expected gold sales for the
remainder of 2003, and some market players believe that gold will start to move
higher now that this selling pressure has been removed. Gold
(
GCJ3 |
Quote |
Chart |
News |
PowerRating) was up 3.2,
to finish at 335.1, and silver
(
SIK3 |
Quote |
Chart |
News |
PowerRating) was up 2.0 to finish at
4.6450. SARS fears continue to add pressure to the industrial metals, as
the Central Bank of New Zealand held an emergency meeting today to cut short-term rates by 25bps, citing SARS as the reason for the move. Copper
(
HGK03 |
Quote |
Chart |
News |
PowerRating)
was down .80
to finish at 71.55 and aluminum
(
ALJ03 |
Quote |
Chart |
News |
PowerRating) was down .0050,
closing at .6410.
Energy
Crude oil was little changed today after OPEC’s
long awaited meeting. The oil cartel agreed to reduce output by 2 million
barrels a day while raising member quotas–in an effort to give currently active
members more market share ahead of Iraq’s resumption of oil production. However,
any cuts won’t take effect until June, so there will be no reduction in supplies
anytime soon. Moreover, demand for oil usually falls this time of year, as the
weather improves, which should help keep a lid on prices. Crude
(
CL03M |
Quote |
Chart |
News |
PowerRating) for June
delivery fell .01 to 26.64. Natural
gas
(
NG03K |
Quote |
Chart |
News |
PowerRating) was down by .0095 to close at 5.474 .
Currencies
The US dollar was down against most major
currencies today except the Canadian dollar and the New Zealand dollar–both
affected by SARS worries. The euro is resting near its last month’s highs, but
it is doing so on weakening momentum, suggesting a pullback into its recent
range; there is a bearish divergence developing on the daily price charts, as
prices are making higher highs but the MACD indicator is making significantly
lower highs. Moreover, from a fundamental point of view, the interest rate
differential–currently favoring the euro–looks set to narrow, as short-term
interest rate futures in Europe are pricing in a 50 bp cut in the months ahead,
whereas Fed Fund futures are pricing in a slim probability of a 25bp cut in the
fall. The USD index
(
DX03H |
Quote |
Chart |
News |
PowerRating) was down .46 and
finished at 98.56 on the day.