Futures Point To A Slightly Stronger Open

May
29, 2003

 

INTEREST
RATES

OVERNIGHT
CHANGE to   Minute=”15″>
4:15 AM
:BONDS
-10 Some of the heart is taken out of the bond bull camp by the persistently
bullish action in the stock market. Furthermore, Wall Street is attempting to
talk up the potential positive influence that persistent stock market gains
might have on consumer sentiment and the economy. Therefore, what we have here
is a situation where bond prices were assuming too much slowing and in effect
got a reality check, in the form of the recent break.

STOCK
INDICES

OVERNIGHT
CHANGE to 4:15 AM:S&P+250 DOW +28  NIKKEI
+141 FTSE +2 The recent trend is difficult to discount considering that
more and more investors are showing a willingness to discount near term
economic weakness (like the durable goods report Wednesday). In fact,
considering the moderate increase in volume seen Wednesday, on the push to new
highs for the move, the market seems to be benefiting from momentum. This
morning a corporate profits report is thought to be a positive toward stock
prices, especially with the US Dollar showing signs of bottoming.

FOREIGN
EXCHANGE

DOLLAR:
The Dollar still hasn’t managed to climb above the critical pivot point of
94.11 but conditions appear to be ripe for a further rise in the Dollar. US
economic numbers don’t really justify the rise in the Dollar but with open
interest sliding in the Dollar Index,
it is possible that some short covering taking place. With the G8 meeting
looming ahead some traders are concerned that the combination of consistently
higher

US


equities and the G8 meeting could foster additional upside gains in the
Dollar. With the

US


passing the stimulus plan and seeing the IRS move to implement new withholding
tables, one might concede that the

US

is
doing more to countervail slowing than the Euro zone. There are expectations
that the ECB is close to cutting interest rates and that could serve to dampen
the recent rise in the Dollar. Some might argue that a Euro zone rate cut
would in fact support the Dollar but we think that the market is looking for
the best chance of economic growth because that will lead to higher rates down
the road. Right now, the interest rate differential is so narrow and not
expected to change by much, so the growth potential is really the issue to
monitor. 

EURO:
The rumor mill is attempting to throw off ideas that the ECB is poised to cut
interest rates and that could certainly undermine the Euro initially but in
the longer term we think that would foster interest in the Euro, as that shows
the ECB to be steering the economy instead of being mired in managerial policy
debate. Considering the technical overbought status of the Euro, it would not
be surprising to see a slide to fill the gap at 115.69 and then for the market
to find support.

YEN:
On one hand, the Nikkei rose and on the other hand, the trade is concerned
that the Japanese economy is preparing to fall into a 4th recessionary period
without an interim period of growth. The Yen has already corrected
significantly off the recent highs and is now supported by solid consolidation
just under 84.00. Considering the poor economy it would not be surprising to
see the June Yen slide to 83.50.

SWISS:
A probe down into the gap area suggests that the Swiss is still in a weak
posture. With the

US


equity market rising consistently and the Euro undermined technically, its
understandable that the Swiss is showing weakness. Near term downside target
in the Swiss is 76.32.

POUND:
The fact that the Pound has managed to hold support and move toward an upside
breakout suggests that the trade is poised to buy. A slight improvement in May
consumer confidence, attracts some long interest
but the overall index of consumer confidence remained in negative territory.
Therefore, the risk and reward of buying the Pound at current levels, isn’t
exactly a great trade.

CANADIAN:
The combination of improving attitudes toward the

US

stock
market and the

US


economy is part of the reason why the Canadian is falling and we are sure that
the SARS issue is also prompting some selling. However, we don’t get the sense
that the Canadian up trend is over, but it could be temporarily stalled if the
US Dollar manages to close above 94.11 today. If the US Dollar shows signs of
an upside breakout, that could mean a Canadian Dollar slide to 71.07 in the
June contract.

METALS

OVERNIGHT
CHANGE to   4:15 AM:GLD-3.60
,SLV-1.5  ,PLAT-14.70 +30  London
Gold Fix $361.10 -$3.45 LME Copper Warehouse stks
746,875 tns -8,275 tns
Comex Gold stocks 2.475 +3,335 oz COMEX Silver
stocks 110.7 ml oz +816,851 oz OVERNIGHT: International gold lost ground but
then managed to consolidate.

GOLD:
While the gold market managed to bounce up off the low yesterday, it would
seem like the market is in the process of retesting that low area again in the
session today. Considering outside market influences, it is understandable
that the gold feels some pressure. After all, the stock market is pulling off
investment capital and the gold trade is very concerned about a bottoming in
the US Dollar.

SILVER:
We suspect that silver will follow gold down because of the improving
investment outlook in the stock market. However, silver is somewhat cushioned
against the selling pressure currently being seen in gold because of the hope
for improved physical demand for silver. We also note the recent rise in COMEX
warehouse stocks as that in a way countervails the optimism that might be
expected off improving demand hopes.

PLATINUM:
From the overnight action, it is clear that the positive view toward the
economy, the rising Dollar and the sagging gold market are negative toward
platinum prices. However, the trend remains up in platinum until the July
contract falls back below $628. It should be noted that open interest is
rising into the weaker price action and that could indicate good buying
interest will be found at cheaper prices. More downside expected ahead.  

COPPER:
The market sagged on profit taking Wednesday and because a high Chinese
official indicated that the SARS disease might have cut Chinese GDP by as much
as 2%. However, overnight the LME documented yet another decline in LME copper
stocks and that continues a torrid pace of declines in that key supply
measure. Chinese copper prices were lower overnight as well as

London

prices
and that would seem to be a reaction to the lower

US

action
the day before.

CRUDE
COMPLEX

OVERNIGHT
CHG to   4:16 AM  
:CRUDE -24  ,HEAT-29 
,UNGA-62  The energy complex faded Wednesday because of the Wall
Street Journal article about Iraqi oil coming to export status with 1 week to
10 days. In fact,

Iraq

is thought to be ready to
increase its production to 1.5 million barrels per
day which would leave some extra available for export.

NATURAL
GAS

Expectations
for the weekly inventory build are for an increase of 85 to 110 bcf, with any
number at the upper end of the expected range probably capable of applying
some additional liquidation pressure. However, the trade did note some
stronger interest in the prompt market and that could be because of the rising
temperature forecast for next week.