Futures Point To A Slightly Stronger Open
INTEREST RATES
OVERNIGHT
CHANGE to
4:15 AM
BONDS
+4 — Despite seeing slightly firmer opening indications from the
equity market, the
international equity markets were down because of the SARS issue. With a number
of countries moving more aggressively to contain SARS, we have to think that the
economic outlook is going to suffer and that should continue to favor the bull
camp in Treasuries. While some
numbers today would undermine
prices early, we have to think that bonds and notes will continue to climb
toward the March highs.
STOCK INDICES
OVERNIGHT
CHANGE to 4:15 AM: S&P
+190, DOW
+22, NIKKEI
-91, FTSE
+7.5 — According to a late flash, the WHO (World Health Organization) suggested
that the worst of the SARS outbreak is over in Canada and Vietnam and they also
seemed to suggest that the spread of the outbreak might have peaked in Hong Kong
and Singapore. Therefore, we can at least understand the partially favorable
overnight action in the
markets, following the mostly
weaker equity market action in
. While the market might pay
attention to the McDonalds earnings report today, we suspect that the overriding
attention will be given to the state of the world economy and that outlook is
unclear.
FOREIGN EXCHANGE
DOLLAR:
The Dollar is helped today because the news from the Euro zone is worse than the
news from the
. That German
Ifo survey serves to set the Euro off balance to
start the week and with the Dollar so close to longer-term technical support we
can understand a minor bounce off the recent lows. It is also possible that
early
economic news provides a
little incentive to bounce, especially if US corporate earnings reports can pick
up where they left off last week. In the near term, we would be surprised to see
the Dollar get back above a critical pivot point around 99.00. If fact, with a
rise back above 98.68, in the June Dollar, we would become an interested buyer
of July Dollar Index puts.
EURO:
The German Ifo survey showed surprising weakness,
with the Ifo suggesting that they see no near term
signs of a turnaround and that should dampen the outlook for the Euro. It should
also be noted that the Ifo indicated that the
relatively high value of the Euro has hurt sentiment and might be hurting
exports from the EU. Therefore, the bulls in the Euro see the risk of being long
increased slightly. It is still surprising that the SARS issue is seen as a
supportive development for the Euro and that is probably because the
has close to 50 reported cases
and because the
is in closer proximity to
. Critical support in the Euro
is seen at 109.42 and we would become a buyer at that level.
YEN:
It would seem that the Yen will come into the week with slightly less anxiety
toward the SARS virus and that is because the WHO suggested that
was able to contain the spread
of the virus, after its initial infection. Therefore the Japanese don’t have as
much to fear off the epidemic. However, the Yen might see buying interest
limited to short covering, as March retail sales readings were less than
impressive overnight. Near term resistance is seen at 83.82 and support is seen
at 83.01.
SWISS:
The trend is up in the Swiss but we doubt that the Swiss will see as much flight
to quality buying as it did last week. Therefore, traders might have to wait for
a correction to 73.16 to get long the Swiss. However, a buy in the Swiss at
current levels, off the current fundamental mix, doesn’t appear to be a strong
trade.
POUND:
The Pound broke out to the upside overnight and looks to make a run at the March
high of 160.58. The CBI report showed a decline in demand and that should limit
the recent pattern of strength in the currency.
CANADIAN:
We suspect that the WHO statement about the SARS virus coming under control in
, will serve to lift the
currency. If the outbreak really is under control, the break last week should
set the Canadian up for a stronger rise, off a more balanced technical
condition. A breakout of the up trend pattern comes in on a trade above 69.22 in
the June contract.
METALS
OVERNIGHT CHANGE to 4:15 AM:
GLD
+0.20, SLV
-1.7,
PLAT
-3.00, CP
+10; London Gold Fix
$333.70, +$.30; LME
Copper Warehouse
stks
775,000 ton,
-1,900 tons;
Comex Gold stocks
2.380, -64 oz; COMEX
Silver stks
108.1 ml oz, Unchanged; OVERNIGHT: Higher action prompted by Japanese buying but
volumes were thin.
GOLD:
The gold market comes into the week with 52,000 spec longs, a 4,000-contract
increase over the prior week. However, we classify the positioning in gold to be
only slightly overbought. The fact that the gold remains weak, with the SARS
issue still grabbing the headlines should give the bulls only a slight edge.
SILVER:
The net spec long in silver is 27,000 contracts, which is only a moderately long
position. The overnight action in silver is somewhat bearish with a minor gap
down move. While US equities were showing signs of opening higher, the
international markets were showing weakness.
PLATINUM:
A major probe down overnight highlights the potentially negative Asian demand
threat. In fact we would be surprised to see the platinum respect support of
$598.5 in the July contract. Considering the historically high price that
platinum is trading at, one can hardly argue against a moderate liquidation,
especially if the Asian containment procedures serve to contract economic
activity. The bears have the edge until equities signal the all clear.
COPPER:
Chinese copper futures were slightly higher overnight and that should discourage
the
session from forging more
downside action. The funds were short some 10,000 contracts as of last Tuesday
and since then, the market has declined another 50 points. Therefore, the market
is marginally short and that is a thin support against ongoing Chinese demand
concerns.
CRUDE COMPLEX
OVERNIGHT
CHG to 4:15 AM: CRUDE
-39, HEAT
-33, UNGA
-97 — There was a clear divergence between crude oil and unleaded late last
week, as the news that Venezuela might have trouble restarting unleaded
production rekindled the fear of summer gasoline tightness. In other words, it
would appear that we are right back to the age-old problem of getting product
supply, even though the supply of crude might be on the rise.
NATURAL GAS
The net
spec long reached up to 31,647 contracts and that is a very over extended long
position, in a market that is seeing negative weather, negative macro economic
conditions and negative influence from the regular energy complex. Considering
that the last inventory report showed a large injection, instead of a draw,
would seem to turn the seasonal pattern against the bulls.