Futures Point To A Weak Open
INTEREST RATES
OVERNIGHT
CHANGE to
AM
BONDS
+1 — June bonds pushed to fresh contract highs amid more evidence that the
economic growth seen in the 4th quarter is slowing significantly this quarter.
The sharp decline in the Feb ISM survey is an indication that the manufacturing
sector is barely expanding. The survey’s other components, particularly in the
new orders and jobs area, suggests Friday’s employment report will be weaker
than last month’s.
STOCK INDICES
OVERNIGHT
CHANGE to
AM
S&P
+10, DOW -4, FTSE
-245 — Stocks continued to be plagued by war and economic fears. Weekend news
that Saddam was destroying illegal missiles and made a pledge to deliver an
accounting of his biological & chemical weapons combined with the capture of a
key al Qaeda mastermind had little lasting impact,
since these developments will not likely impact the Bush Administration’s
decision to oust Saddam. The weekend developments do in fact make it tougher for
the US-UK-Spain coalition to persuade other Security Council members to support
a war, which means anti-war sentiments remains strong, which is a negative for
stocks.
FOREIGN EXCHANGE
DOLLAR: This market continues to be mired in political negativism
which drove the June dollar index back below the Feb lows yesterday and to its
lowest level in four years overnight. Weak economic report readings showing the
economy may be losing steam on the consumer front and in the manufacturing
sector combined with anxiety over the
situation continues to erode confidence in the dollar. The dollar garnered no
support from news that a top ranking al Qaeda member
had been captured, instead focusing on indications
the
will be waging a war with
with only limited world political backing. We would expect the pressure on the
dollar to continue to at least the start of the war, but once it becomes
apparent that the
has control, the war discount in the dollar should start to reverse. Until that
occurs, June’s next downside target is around 98.87.
EURO: With dollar negative sentiment raging,
June Euro looks to be headed back to test contract highs. A rise in the
Euro-zone PMI in January and expectations for a ECB
rate cut later this week gave the currency support on ideas the economy could
soon show improvement. However, we think that is a long way off and that the
Euro’s safe haven premium will start to deflate once
the
gets control of
We still like buying June Euro put options to position for a break.
YEN: We feel the general negative dollar
sentiment is too strong and will override fears of Japanese central bank
intervention to keep the yen supported. However, the threat of intervention will
keep volatility high in this currency.
SWISS: The market was pushed to a new
contract high over war anxiety and negative dollar sentiment. The Swiss National
Bank has yet to actually intervene to stem the Swiss rise, which would likely be
ineffective given the deep negativism against the Dollar. Therefore, there is
little there SNB can do until the war uncertainty is resolved.
POUND: The pound may have garnered support
from ideas the latest compliance by Saddam may delay the war. Also, the currency
was extremely oversold and a test of support at 156 in the June contract held.
However, the upside looks limited to 158 as we don’t think weekend developments
measurably delay an attack.
CANADIAN: The June Canadian looks to be
setting up for a classic "buy the rumor, sell the fact" scenario. A lot of the
move higher has been on expectations that the Canadian central bank will raise
rates today, thereby widening the interest rate differential with the
We feel the market is overbought to the point that whatever the BOC decides on
rates, traders will take profits in the Canadian. Longs need downside
protection, as a volatile trade session looks likely. Support for June Canadian
at 66.50 then 66.00.
METALS
OVERNIGHT CHANGE to 4:15 AM:
GLD +3.70, SLV
+2.3, PLAT +3.50;
London Gold Fix $352.40, + $6.90; LME Copper
Warehouse
stks
822,825 ton, -2825 tns;
Comex Gold stocks 2.262 ml,
unch; COMEX Silver
stks 109.1 ml oz, + 21.8K oz; OVERNIGHT:
The gold market was strong in overnight trade as the US dollar pushed sharply
lowe
GOLD: Fears on the negative impact of the
crisis on the world economy, especially if the war concerns are dragged out in
the weeks ahead due to hesitation, helped gold recover overnight. There seems to
be more than enough uncertainty on the economy, the US dollar movement (a drop
to a 4-year low this morning) and the potential inflationary impact on
commodities to drive investors back to gold for at least the short-term. The
reversal down in the
stock market due to weak manufacturing data and the news of a 6-year low in
consumer confidence in
does not bode well for world stock markets, but it should support gold buying.
SILVER: With a strong stopper on 1st notice
day, Silver seems to have found solid support near 4.60 for May. Buying support
for May silver moves up to 464 today with 480.60 and possibly 517 as upside
objectives. PLATINUM: The market appears poised for another upside breakout.
PLATINUM: The market appears poised for
another upside breakout. Buying support for April platinum moves up to 670.10
with 713.30 as next upside objective.
COPPER: The market surged higher yesterday
to recover all of the losses from Friday, as it seemed to once again disregard
the poor economic news and looked to solid import demand from
as the driving force of the bull trend.
stocks today and strength in the other metals may support a test of last week’s
highs, but it may take more than technical buying to support new highs. Buying
support for May copper at 78.10 held yesterday and the market could struggle to
move over 80.10 without some headline news for copper.
CRUDE COMPLEX
OVERNIGHT
CHG to 4:15 AM: CRUDE +12,
HEAT +70, UNGA
-7 — Crude oil futures broke for the third consecutive session as political
developments give reason to believe that a US led military action against Iraq
may be delayed. The market is taking some of the war premium out of prices since
Iraq is beginning to comply with UN demands to destroy illegal missiles and
promises to submit a report next week that would account for their stocks of
biological & chemical weapons.
NATURAL GAS
The break
in crude prices and a new longer range forecast expecting more normal
temperatures for the last half of March and for temperatures to moderate
slightly by week’s end drove April natural gas prices sharply lower. No doubt
the market was overdue for a profit-taking break, but stocks are extremely low
and are likely to end the withdrawal season (which has about 5 weeks left) at or
below the lowest level in at least 9 years.