Futures Point To A Slightly Weaker Open
INTEREST
RATES
OVERNIGHT
CHANGE to  4:15 AM :BONDS -7
The Treasury rally ran into a wall Monday, as the US stock market rallied and
the Kansas City Fed Manufacturing Index showed a massive improvement. We also
have to think that a weakening Dollar and a rising interest in gold is negative
to Treasuries. In fact, there would seem to be quite a bit of international
concern toward the US budget deficit, with the President asking for $87 billion
Dollars of spending for Iraq and Afghanistan.
STOCK
INDICES
OVERNIGHT
CHANGE to  4:15 AM:S&P-60Â
DOW -5 NIKKEI +238 FTSE -28Â The stock market is doing a stellar job
of discounting potentially damaging stories. For instance, the post unemployment
report reaction is simply astounding and is only surpassed by the markets
reaction Monday to the idea that the US will add another $87 billion Dollars (of
deficit spending) to finish the job in Iraq and Afghanistan. Certainly the stock
market has been helped by favorable Fed manufacturing readings, an IBM upgrade
and a favorable investment weighting increase for Japanese stocks, but the fact
remains, the market is putting on an impressive show in the face of some
potentially disconcerting developments.
FOREIGN
EXCHANGE
EURO:
With the Dollar so weak and poised to fall even further, all the Euro zone had
to do was post some decent numbers and the upside pace could have quickened.
However, the euro zone GDP contracted by 0.1% and that disappoints would be
buyers. Some traders will suggest that the GDP was in line with expectations but
in the end there isn’t enough growth in the Euro zone to capture all the money
that may want to leave the Dollar. In
other words, the path of least resistance is up in the Euro but not as
aggressive as it could have been with good numbers.
YEN:
The BOJ has a problem, the world is now seeing strong recovery potential in
Japan and investors are snapping up undervalued investments. In other words,
money is moving in the Yen and the BOJ efforts might be unable to stop the rise
in the Currency. With the Nikkei gaining significantly overnight and a major
brokerage firm upgrading Japanese stocks, more money is expected to flow to the
Yen. Expect a return to the August highs of 86.41 soon.
SWISS:
The talk about the US deficit exploding is making gold rally and could also
reinvigorate interest in the Swiss from a flight to quality standpoint. Near
term upside targeting in the September Swiss becomes 73.00, with a chance to
return to a 73.00 to 74.50 trading range.
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POUND:
Despite seeing vulnerability in the Dollar, the Pound doesn’t seem primed to
rally. We have to wonder if making more troop commitments to Iraq doesn’t lump
the Pound in with the Dollar in an uncertain political standing. However, we
would expect 157.50 to hold unless the UK posts some discouraging numbers.
CANADIAN DOLLAR: Today is the day for the Canadian, as it needs to capitalize on
the potential weakness in the US Dollar. If the Canadian slides along with the
Dollar, we might see a failure back to 72.00.
METALS
GOLD:
While the gains in the Japanese market overnight would seem to fly in the face
of flight to quality theme, seeing fresh buying off physical buying is actually
another manifestation of flight to quality. In fact, it seems that the trade is
fixating on the idea that US deficit spending on Iraq, is going to cause
problems for the worlds largest economy. Furthermore, it would seem that the US
Dollar is technically damaged and headed down to at least 96.00.
SILVER:
Seeing the gold peaking out to the upside, a Dollar weak and world equity
markets showing signs of strength would seem to point to an upside breakout in
silver today. Like gold, the silver market could see another 2,000 spec longs
added before the old record level is breached and as mentioned in gold, it
shouldn’t be a difficult case to see even more long fund action migrate into
silver. In the end, if silver is any good, it should make an upside breakout bid
in the near term.
PLATINUM:
Trend line support in the October platinum contract comes in down at $701.3 but
the coming two sessions might be a critical junction for platinum, as the market
might be confronted with a decision on the macro economic front and it might
also see strong upward appreciation in other precious metals. In many respects,
we think platinum prices have been fueled higher off expectations that physical
demand is rising against a crimped supply flow. If investment demand for
platinum also continues to rise that could really begin to fuel prices. However,
it should be noted that platinum is already extremely over extended technically
and needs a fresh dominating fundamental story to propel it up.Â
The
copper market will have to decide if the investment interest in precious metals
is going to be a benefit or a detriment. Overnight the COPPER: Chinese market
ended slightly higher, possibly off news that Russia reduced its January through
July exports of copper. With the US stock market strong Monday and the Japanese
market sharply higher overnight, it would seem that copper prices have an upward
bias today.
CRUDE
COMPLEX
OVERNIGHT
CHG to    4:15 AM Â
:CRUDE -1Â Â ,HEAT+24Â
,UNGA+27Â The EIA suggested that August OPEC production increased by
445,000 barrels per day versus July, but also suggested that Iraqi production
was a large portion of the increase. The EIA indicated that Iraqi production was
currently 1.3 million barrels per day but that production level was reduced by
35,000 barrels per day, due to the recent Iraqi pipeline explosion.
NATURAL
GAS
The
failure into the close highlights the potential for seasonal weakness in natural
gas prices. We also have to think that the reversal in the regular energy
complex Monday figured into the weakness in natural gas.