Seeking Safe Havens
The markets are reacting as many have predicting in
the aftermath of the worst terrorist attack ever. Stock index futures are
selling off as traders flee into perceived “safe-havens” such as
gold and non-dollar-denominated asset classes. Â
But rate cuts by the Federal Reserve and the European
Central Bank (ECB) are tempering the downside action flight to safety. The
Fed cut the federal funds target by .50 to 3.00%. This has worked to ease
selling, although stock index futures opened down their daily limit. The
December Nasdaq 100 futures
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S&P futures
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encountering resistance at the 38.2% and 50% level of this morning’s
decline. Dow futures, both December
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index.
The
euro FX futures
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Swiss francs
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dollar-denominated assets, but are sinking after the ECB announced
mid-session that it too would lower interest rates, in an apparent
coordinated move with the Fed to enhance liquidity. This has sent the ECZ1
back to breakeven levels. Still, the Swiss futures is remaining at a
multi-month high. Interest rates in Switzerland remain slightly higher and
their currency and banking system has long been considered a safe haven in
times of uncertainty. The Swiss franc is the #2 contract on the Momentum-5
List.Â
Energies resumed open outcry trading at 11:45 AM ET
at the NYMEX. Access to the NYMEX is by ferry boat only and is located near
ground zero. October crude oil
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and heating oil
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contract highs and unleaded gasoline
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out to a contract high.Â
 December gold
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has rallied off its highest levels and gave some indication that it could
come down due to the small spread between the cash and December contracts.
Both were priced nearly the same at the 11:45 AM ET opening. In this
instance you expect the futures to drop — or the cash to rise vs. the
futures — to account for the “carrying cost” of gold (security,
storage, interest, etc) required from now until December.
In abbreviated trading where each contract is open
for 90 minutes, one after the other, softs contracts, trading at the New
York Board of Trade’s alternate trading site in Long Island City, are still
collectively going through price discovery. Dec cocoa
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higher but sold off from its highest levels. British pounds were higher
before the ECB cut rates. Cocoa is predominantly priced in pounds, so a rally
in pounds makes cocoa relatively more expensive.