Futures Point To A Weaker Open
INTEREST RATES
OVERNIGHT
CHANGE to
AM
BONDS
+8 — We have to think that the generally accepted view is that the war is going
to last "a while". If in fact, the war is going to last well into April, the
bond and notes should be able to feed off macro economic concerns. Already we
see signs that American Airlines might declare bankruptcy over the weekend and
that is just the tip of the ice burg when it comes to supportive anecdotal
evidence that is to be expected off the extension of the war.
STOCK INDICES
OVERNIGHT
CHANGE to
4:15 AM
S&P
-410, DOW -37,
NIKKEI -88, FTSE -20 — It would
appear that the US Administration has slowly begun to lower expectations for a
quick end to the war and the stock market has reacted accordingly. If it ends up
taking months to end the war, we have to think that massive job losses will be
seen and that the
economy will more than likely fall back into
recession. The fear that American Airlines will file bankruptcy over the weekend
combines with the extending duration of the war for a pretty negative start
today.
FOREIGN EXCHANGE
DOLLAR: There is very little in the way of positive factors for the
Dollar. In fact, the Dollar will be lucky if it can avoid some extreme negatives
in the coming weeks. Because Euro zone numbers continue to soften that tends to
take away some of the selling interest from the Dollar but doesn’t alter what
seems to be a downtrend. Near term downside targeting in the Dollar comes in at
100.00 but a slide to the March lows shouldn’t be ruled out if the UN attempts
to order the attacks halted. We doubt that the
will stop attacking but it could take a public relations pounding in the
process. This morning we would not expect US numbers to be surprisingly weak,
but soft enough to put the June Dollar down to 100.56 before the end of the
session. In order for the Dollar to avert a slide,
has to use chemical weapons, or there has to be verification that Saddam is
dead.
EURO: Even though the trade saw some weaker
than expected Euro zone numbers this morning it would appear that money is
flowing to European bonds in a flight to quality move. Therefore, we have to
think that the Euro will continue to rise with a near term target of 108.00. If
the pressure to stop the war at the UN finds footing, that could really
stimulate buying in the Euro and put the June contract back to the March highs.
YEN: Already Japanese officials are bracing
for another economic threat. We have already seen BOJ officials expressing
concern over the inflationary spiral resuming in the event of a long war and
that should prevent the Yen from forging a strong upside bid on Dollar weakness.
In other words, the June Yen might be a sale on a rally to 84.00.
SWISS: As we suspected, the Swiss just isn’t
getting the type of high anxiety that results in aggressive flight to quality
buying. However, we still think the trend in the Swiss is up and that 74.00 will
be seen in the coming week.
POUND: While confidence readings in the
appeared to hold together, it would seem that the bulls have given up on the
Pound and that a down side breakout is possible in the coming week. We at least
see a slide to the March low of 154.48.
CANADIAN: We are a little shocked that the
Canadian hasn’t already forged a new contract high, considering the extension of
the war and the ever-expanding disdain for US policy. The fact that the Euro
zone economy is weakening should mean that the Canadian economy is viewed in
even more favorable light. Considering the potential for economic differential
buying and flight to quality buying, the Canadian should make a solid bid at
68.50 next early week.
METALS
OVERNIGHT CHANGE to 4:15 AM:
GLD +1.60, SLV
-0.3, PLAT -9.90; London
Gold Fix $330.15, -$2.85; LME Copper
Warehouse
stks
815,700 ton, -2,175 tns;
Comex Gold stocks 2.358 ml, -2,016 oz;
COMEX Silver stks
108.7 ml oz, -122,677 oz; OVERNIGHT: More light buyers in Asia, short sellers
apparently fear the weekend.
GOLD: We suspect that some shorts are
uncomfortable with the idea of being short into the weekend when it is possible
that an offensive could be launched against
We also think that some light buying is being undertaken off the concern that
might use chemical weapons on the invaders. Apparently there are mixed opinions
on when the offensive might be launched, with some thinking 72 hours and others
thinking as much as a month.
SILVER: So far, the silver market has
managed to respect the consolidation low of $4.35 and that would appear to be a
solid low unless the economy is thought to be falling back into a recession. The
current range in the May silver is 443 to 435 but long term value players
probably have to risk long positions to the October low of $4.32 in the event
that the war is expected to last a couple months. The biggest hurdle in being
long silver, might be the need for patience.
PLATINUM: The fear that war might last for
at least another month has apparently undermined platinum and seems to have
pushed the platinum into a downside breakout that might have a downside target
of $607. Initial support of $620 already looks to have failed, especially since
the trade is giving no consideration to the potential for labor problems in
We suspect that April platinum will settle into the consolidation formed back in
mid January and that zone is bound by $607-$617 in the April contract.
COPPER: The copper market saw the small spec
and fund long throw in the towel yesterday and we suspect that more losses are
ahead, as the outlook for the economy continues to deteriorate. The next
downside target is seen at the December lows just above 70.00. However, if the
war in
does take two months that could leave the world economy in shambles and demand
for copper seriously pinched.
CRUDE COMPLEX
OVERNIGHT
CHG to 4:15 AM: CRUDE +40,
HEAT +111, UNGA
+79 — The energy complex for some reason is set to firm prices off the theory
that oil prices will remain firm and above $30.00 because the duration of the
war is expected to be long. We can understand that philosophy in the early
stages of the war but we suspect that victory and changing the regime are much
further down the time line than is achieving security for the oil fields.
NATURAL GAS
The
natural gas market had to weather an injection to the weekly inventory levels on
Thursday but because the regular energy complex was so firm, buyers were easy to
find in the natural gas market. However, overall storage levels do remain
historically tight and that should provide direct support to natural gas prices.