Futures Point To Slightly Lower Open
INTEREST RATES
OVERNIGHT
CHANGE to
AM
BONDS
+2 — In looking back on the week, one has to concede that the scheduled
economic numbers certainly justified the rally in bonds. In fact, when one looks
at the totality of the numbers released this week on the global economy, it
would seem like the fixed income markets could even add to the recent gains. The
fact that some Fed members have hinted that the Fed might buy long term bonds,
as a way to stimulate the economy, explains the action in the yield curve and in
reality might give the US economy the biggest bang for the buck.
STOCK INDICES
OVERNIGHT
CHANGE to 4:15 AM: S&P +150,
DOW +7, NIKKEI
-6.11, FTSE +54 — The stock market
continues to reject the bear tilt and is simply much more balanced than at any
time in the last two years! This week the stock market has discounted terrorist
attacks, terrorist warnings, soaring deflation fears, weak retail sales
readings, soft industrial production figures and more watering down of the tax
cut plan. On the positive side of the equation, the Fed is apparently poised to
stimulate, by buying Treasury bonds (that in effect would lower long term interest
rates), SARS appears to be coming under control and the high tech and internet
stocks have shown strong leadership this week. In conclusion, the stock market
has become a two-sided market, instead of a seller-dominated market.
FOREIGN EXCHANGE
DOLLAR: One has to wonder if the recent strength in the Dollar is
merely technical in nature, or if the overt economic weakness and budget
problems in
are causing traders to alter their long-term opinions. The G8 meeting this
weekend in France, is not expected to yield anything significant, except that
the US Treasury Secretary will have to defend his strong Dollar statements made
early in the week. We also have to think that the incidence of terrorist attacks
outside of the US and increased terrorist warnings in Saudi Arabia, make those
that have been selling the Dollar (because the US is seen as a prime terrorist
target) more inclined to temper their selling interest. Some
analysts think that the
is already exporting deflation to other countries and that might propagate the
short covering in the Dollar. It makes sense for recent aggressive shorts in the
Dollar to take some profits ahead of a G8 meeting. Until the Dollar climbs above
a downtrend channel resistance line at 95.78, we assume that the trend is down.
EURO: With the April Euro zone CPI showing a
slight increase, the issue of deflation isn’t nearly as negative toward the Euro
this morning. We still see the Euro weakening into the weekend G8 meeting, as
longs take profits in an effort to reduce risk ahead of an uncertain event. More
than likely, the June Euro is going to respect support of 113.58.
YEN: Overnight the Japanese posted some
decent industrial output readings even if the shipments component was soft. We
suspect that the Yen will hold under the recent highs, as many traders fear talk
of coordinated intervention from the G8 meeting. Press reports overnight have
also rekindled the fear of run away deflation and recession in
and that could serve to push the Yen away from the recent consolidation highs.
In fact, considering the talk that the
is exporting deflation, we suspect that the Yen could be in for a moderate
decline in the week ahead.
SWISS: We see no clear trends in the Swiss
but we do think that the recent low (75.20), is about
as far as the Swiss will slide in the near term. The Swiss needs positive
leadership from the Euro to manage a return to the recent highs.
POUND: The Pound might find itself in a
favored position as the euro zone has lost some luster and the
economy might be hanging in against the slowing threat, better than any economy
in the G7. Critical pivot point support in the June Pound comes in at 161.42.
CANADIAN: The trend remains up and with the
US Dollar not showing strength today and that could make it easier for the
Canadian to rise to a new contract high later today.
METALS
OVERNIGHT CHANGE to 4:15 AM:
GLD +0.40, SLV
+2.5, PLAT +4.00,
CP +.45; London Gold Fix $352.55,
-$1.30; LME Copper Warehouse
stks
778,225 tns, -1,700 tons;
Comex Gold stocks 2.461, +3,954 oz;
COMEX Silver stocks 108.2 ml oz, +508,425
oz; OVERNIGHT: Slight weakness in Asia, as the market lacks a dominate
opinion.
GOLD: The Dollar appears to be weak this
morning but that is only the second time this week that it has been soft.
Therefore, gold might be slightly better off into the opening this morning than
it was coming into the opening yesterday. We are not sure how many longs were
into the market for an inflation play but the sharp decline in the PPI Thursday
dampens the inflation hope and fosters deflation concerns.
SILVER: July silver rejected a move below
critical support of $4.77 yesterday but we see near term conditions in silver as
less than perfect. With the fear of slumping physical demand and deflation we
think the silver sees a moderate countervailing force to the new found
investment interest in silver. Fresh longs in July silver might have to risk
positions to at least $4.70.
PLATINUM: Apparently platinum is not
influenced significantly by the threat of deflation, or concern over the world
economy, as both of those developments could easily have been a negative force
toward platinum. Traders suggest that the platinum broke off the March highs,
because of fears that the war would slow the world economy and then platinum was
impacted by the fears of the SARS outbreak in early May and therefore it makes
sense that platinum tries to fight its way back to the March highs. However,
given the deterioration of the macro economic outlook this week, it is really
surprising that platinum posted such impressive gains this week. In other words
the market thinks platinum is insulated from economic weakness! Maybe July is
headed to $690 but risk and reward seems to be unfavorable.
COPPER:
copper stocks rose by slightly less than 5,000 tons in the last week and that is
a minor negative but something that was expected considering the SARS disease.
Chinese copper futures were higher overnight and that gives the
market some needed support. The Copper market is overbought; the world macro
economic case has deteriorated and the Chinese copper market hasn’t providing
strong leadership, which could make a continuation of the upside swing uneven
and volatile.
CRUDE COMPLEX
OVERNIGHT
CHG to
AM
CRUDE -37,
HEAT -56, UNGA -73 — The energy
complex must have been overbought because it failed to extend the gains posted
Wednesday following another supportive weekly inventory reading. In fact, crude
oil even failed to rally after the
Secretary of Defense, in a round about way threatened
NATURAL GAS
We still
think that the natural gas market is overbought, as the trade took a middle of
the road forecast for the weekly inventory injection and made it into a bearish
reading. In other words, the bull camp isn’t nearly as bullish, as it has been
recently and that could be because prices are overextended, or that the regular
energy complex has softened slightly.