Futures Point To A Weak Open
INTEREST RATES
OVERNIGHT
CHANGE to
AM
BONDS
+27 — Without even measuring the ebb and flow of war sentiment we can look at
the cover of the Wall Street Journal see rational for higher bond prices today.
Last week the market was aware of the deterioration in the macro economic
condition of the economy but that was discounted because sentiment suggested
that the war could be over by the opening today. Now it would seem that the
battle will extend at least through the coming week, with the most difficult
portion of the attack still to come.
STOCK INDICES
OVERNIGHT
CHANGE to
4:15 AM
S&P
-1520, DOW -142,
NIKKEI +240, FTSE -99 — Just as
everything was "all positive" last week, the outlook to start this week is "all
negative". The fact that the war didn’t end over the weekend is a disappointment
to the market. The fact, that the coalition forces have had some unfortunate
accidents is also serving to undermine sentiment.
FOREIGN EXCHANGE
DOLLAR: What the market put in place last week begins to come back
out early this week. While the progress of the war coming is generally what was
expected by coalition officials we have to think that the market had a different
opinion. We think that the market was expecting the war to end over the weekend,
with mass surrenders and subsequently the trade has temporarily changed its
opinion toward the Dollar. With US economic stats worsening significantly and
the worst stage of the war directly ahead, the Dollar could come under very
heavy attack. Furthermore, we suspect that anti war demonstrations will reach a
zenith in the coming two days. In fact, the
will never get credit for putting its soldiers in harms way just to reduce
civilian losses in
in turn will use any method to repel coalition forces including human shields,
fake surrenders and who knows what else. In short, the
and US are now set to suffer every public relations
setback conceivable. Therefore, we expect the Dollar to slide to 100.95 and
possibly to 100.51 if the war isn’t effectively wrapped up by the opening
Wednesday.
EURO: We are not sure why the Euro is seen
as a flight to quality instrument, as their economy looks to take the same hit
as the
In any regard, the Euro is at least temporarily seen as a flight to quality
instrument. The coming 24 hours is a moment of truth for the Euro bulls, as
seeing two closes back above 106.37 could effectively discourage the liquidation
pattern entrenched last week.
YEN: The flight to quality status of the Yen
is back in play today, as the world might want to get as far away from the
political wrangling as possible. Furthermore, the world might also want to see
the solitude of the
as opposed to
and
which are in the political cauldron. Near term upside targeting is seen at
83.47.
SWISS: Initially we are not seeing the type
of buying in the Swiss as one would expect to see in the face of the Dollar
slide overnight. In fact, the Swiss is really disappointing considering the news
and the potential ugliness for the coming two days. We expect a minor bounce to
72.70 and then a major decision will have to be made.
POUND: The Pound appears to have shed its
surprise selling pressure seen for most of last week. However, massive overhead
resistance around 156.90 could restrain the gains today.
CANADIAN: The flight to quality tilt is back
on in the Canadian and we suspect that a run back to the March highs is very
possible in the coming two days. The Canadian needs to stay above 66.89 to
present an aggressive bull posture.
METALS
OVERNIGHT CHANGE to 4:15 AM:
GLD +4.00, SLV
+3.7, PLAT +4.90; London
Gold Fix $330.15, -$2.40; LME Copper
Warehouse
stks
824,625 ton, -2,800 tns;
Comex Gold stocks 2.334 ml, -482 oz;
COMEX Silver stks
109.1 ml oz, Unchanged; OVERNIGHT: Slightly higher Asian prices as the war drags
and concerns rise.
GOLD: Apparently the market is seeing
increased long interest because of the resistance being encountered by the
coalition forces. The gold market might also get a lift from weakness in the
stock market and concerns for the airline industry. Apparently a Wall Street
Journal article this morning suggests that the airline industry could see an
additional $10 billion Dollar loss.
SILVER: The silver market has bounced off
the $4.34 low, but the momentum of the rally off that low hasn’t been very
impressive. We just don’t get the sense that the metals will rally much, off the
concerns that the coalition forces will encounter heavier than expected
resistance around
In fact, if the war looks to drag out a week or two, we suspect that deflation
and recession will begin to provide an undertow.
PLATINUM: It is unclear whether platinum
will have to continue to slide, as April chart support is still another $4 below
the opening peg this morning. We continue to think that platinum is a physical
demand driven commodity and is not being driven by flight to quality. Therefore,
prices might slide until the war is over and equity prices are consistently on
the rise.
COPPER: The fact that macro economic reports
continue to weaken means that copper will be overtly impacted by the slide in
the stock market overnight and the idea that the war will drag on. In fact,
considering that the copper spec long position might have been as high as 30,000
contracts around its highs last week, means that copper could be vulnerable to
moderate selling early this week.
CRUDE COMPLEX
OVERNIGHT
CHG to
AM
CRUDE +51,
HEAT +264, UNGA +171 — The
energy complex should have little remaining concern for massive uncertainty
arising from the Iraqi supply condition. However, because the war goes on there
might be less pressure on energy prices than was seen last week.
NATURAL GAS
The
natural gas market showed a moderately large small spec long position in the
last COT report and therefore we have to think gas prices remain vulnerable to
liquidation. However, as long as the Nigerian situation bolsters overall energy
prices, the May gas contract should find support above $5.12.