Futures Point To A Weaker Open
INTEREST RATES
OVERNIGHT
CHANGE to
AM
BONDS +9 — There would seem to be ashift in
macro economic sentiment. Early this week, the market was putting on an
optimistic stance but today it would appear that sentiment toward the economy
has soured slightly. The combination of an overbought equity market, SARS
headlines and recession talk by the OECD, could give the market enough long
interest to return Treasuries to last weeks highs.
STOCK INDICES
OVERNIGHT
CHANGE to
4:15 AM
S&P -230, DOW
-26, NIKKEI +61,
FTSE -5.7 — This could be an important session for the equity
market, as fundamentals appear to be dimming and the market is certainly over
extended technically off the recent rise. We continue to see enough
disconcerting headlines on the SARS issue to think that the global economic
outlook is being impacted. Since there is little one can do to forecast the odds
of containment of the SARS virus, one can only keep a very close eye on the
number of new cases.
FOREIGN EXCHANGE
DOLLAR: There would appear to be no stopping the Dollar slide. If the
equity market mounts a little profit taking slide that could simply add to the
already weak posture of the Dollar. While the trade hasn’t mentioned it, we have
to think that the
standing in the international community will remain negative for a long time
unless coalition forces turn up weapons of mass destruction. With the OECD
hinting at a recession threat in the Euro zone and calling for a 50 basis point
rate cut, that could serve to dampen the selling interest in the Dollar but that
certainly won’t halt the slide. In conclusion, the Dollar looks set to re-test
the March lows down around 98.05. We still don’t see the scope for a break below
the 98.00 level, especially with the SARS issue potentially a major global
problem. If SARS spreads throughout
and doesn’t spread in the
that could make the Dollar a flight to quality issue. Therefore, fresh shorts in
the Dollar, from current levels, should keep abreast of the progress of the
disease.
EURO: The OECD comments that they could not
rule out a recession for the Euro zone, tempers some of the buying interest in
the Euro but doesn’t alter the trend. In fact, the SARS disease would appear to
pose a greater threat to North America than it does to Europe and that might be
why the Euro is poised to make an upside breakout on the charts. A narrower
trade surplus than was expected is a minor issue that shouldn’t impact the
desire to rally the Euro. Next resistance is 110.43.
YEN: It is quite clear that the SARS issue
is limiting the Yen and altering what has been a positive flight to quality flow
of capital toward
With Industrial activity in
declining 0.8% the pressure would seem to be on the Japanese economy and
subsequently the Yen. We see the risk to longs in the Yen rising in the coming
sessions. Seeing a close below 80.00 could now project a slide to 82.68.
SWISS: The Swiss has a new anxiety issue in
the SARS issue and if the disease becomes a global threat, that could easily
lift the Swiss toward the 75.00 level. In the mean time, the Swiss would seem to
have little resistance until the 74.22 level is encountered.
POUND: One can’t argue with the upside
breakout on the charts. Maybe one can suggest that the Dollar and Canadian are
much more vulnerable to the SARS issue and that could be why the Pound appears
to be on its way to the early March consolidation highs of 160.00 to 160.58.
CANADIAN: The WHO warning appears to have
sunk the Canadian. We suspect that more losses are ahead and that the June
Canadian might be capable of falling all the way down to the 67.00 even level.
METALS
GOLD: The gold market is simply not showing
a tight correlation to the ebb and flow of the SARS issue and it isn’t showing
signs of correlating closely with the Dollar. While the Dollar was softer
overnight and Asian action bid up gold prices, we would not expect gold to rise
sharply today unless there is a new fundamental development. The SARS issue will
remain the most logical force to drive gold prices up, but only if that disease
begins to shows signs of a serious global spread.
SILVER: As opposed to the gold market, the
silver market is showing sustained positive price action but that would appear
to be correlated to gains in the equity market. Therefore, silver seems to be
feeding higher off the hope for improving physical demand but that view might
take a hit today, off the ongoing fear of SARS and because of potentially weak
US economic numbers. A number of calls for lower interest rates in the
and Euro zone clearly suggest that the overall economic pace remains suspect and
that could make additional gains in the silver unlikely.
PLATINUM: The overnight slide in platinum
prices was rejected but that still shows the platinum markets vulnerability. In
fact, if the stock market were to slide aggressively today, that could mean a
correction back into the $615 to $622 trading range for July platinum. All the
talk about recession risk and the SARS spread has to be undermining the bull
sentiment in platinum.
COPPER: The copper market might retest the
April lows in the coming 24 hours, as the SARS issue just won’t die down. The
Chinese market was moderately lower overnight off stop loss selling and that
should start the
session off on a weak note. Those that took our suggestion to buy Sept copper,
buy a 70 put and sell a 78 call should easily be able to ride through the coming
slide in prices but if the equity market gives in to profit taking and mounts a
hard slide, that could project nearby copper prices to retest the December lows.
CRUDE COMPLEX
OVERNIGHT
CHG to
AM
CRUDE -10, HEAT +43,
UNGA +20 — Massive crude stock builds certainly gets the attention
of the OPEC members into the meeting today. While a one week rise in inventories
doesn’t guarantee a trend toward stock rebuilding, the magnitude of the
inventory gains is quite surprising.
NATURAL GAS
Expectations for the weekly inventory report are for a draw of 30 to 55 bcf and
that will certainly expand the annual deficit. We have to think that recent cool
weather will continue the draw season and that is supportive to prices.