"We may go to the moon, but that's not very far. The greatest distance we have to cover still lies within us."
Market Week Wrap-up
- Market action this week all a lead up to Friday's US Q3 GDP data, which came in line with the 2.0% expectation, representing a final signpost on the road to QE2. Most earnings and data were subordinated to questions about the scope of new asset purchases expected to be announced by the FOMC at its policy meeting next week. Goldman Sachs Chief Economist Jan Hatzius commented that the Fed might announce a $2T asset purchase program and was "almost certain" to announce further measures at the November meeting, starting with an initial $500B allotment (Note that back in early October, St. Louis Fed Governor Bullard stated that he considered a $250B tranche of Fed bond purchases equivalent to a 25-basis point rate cut). All week better-than-expected data drops knocked equity indices lower as investors guessed that stronger data could impede more Fed largesse. On Monday, September home sales and the October Dallas Fed index were better than expected, with the latter beating estimates by a wide margin. On Tuesday, the Q3 UK GDP beat most analysts' predictions. On Wednesday, the September Durable Goods report came in much better than expected. Thursday's weekly continuing jobless claims data hit levels not seen since late 2008. Some positive tech earnings kept the NASDAQ in positive territory, but a mixed bag of other corporate earnings weighed on the S&P500 and the DJIA. For the week, the Nasdaq gained 1.1%, the DJIA fell 0.1% and the S&P500 was up less than 0.1%.
- There were mixed results out of the oil patch this week. Exxon's quarterly profit beat expectations and rose more than 50% on a y/y basis. However, revenue was below the consensus view. Chevron missed Wall Street's earnings and revenue targets. The company blamed a strong negative FX impact and also disclosed that its US output fell 7% y/y. Valero and Conoco topped estimates. Among second-line energy names, Dominion Energy cut its 2010 earnings outlook and Sunoco's quarterly operating profit was half the expected amount. Overseas, quarterly results from Total and Royal Dutch Shell posted solid y/y gains.
- Profits at leading chemical and agricultural names Dow Chemical and DuPont roundly beat expectations, while revenue performance was more subdued. Dow executives said broad-based price gains were seen in all geographic areas, with almost all operating segments seeing y/y price increases. Potash Corp helped push fertilizer stocks to fresh 52-week highs by blowing out quarterly estimates, and declaring it has seen a "major turning point in the potash market."
- Steel names US Steel and AK Steel both surprised investors with larger-than-expected quarterly losses. US Steel's loss would have been even greater if not for a $0.96 gain on FX. Both AK and US Steel blamed their terrible quarters on a combination of higher iron ore costs and lower shipments. Neither expects conditions to improve much in Q4.
- The US automobile manufacturing sector continues to experience a solid turnaround. Ford continues to recover from its near-death experience in the financial crisis. In Q3 Ford beat earnings targets and met revenue expectations, on very strong net income growth. Truck engine maker Cummins was more or less in line with the Street in its Q3 report and raised its full-year EBIT forecast slightly. Results from parts makers Johnson Controls and American Axle crushed both exceeded expectations.
- Good results from a variety of tech firms helped keep the NASDAQ in positive territory this week. Microsoft beat Wall Street's expectations with a 51% jump in quarterly profit, as higher sales of Windows and Office software boosted results. Profits from computer security firm Symantec were strong, although revenue was just in line. The company attributed the performance to better-than-expected results from three recently acquired security companies. Broadcom reported better than expected revenue. Novellus's results were well ahead of expectations. NYSE listed tech stocks offered decent results as well: Texas Instruments came in a hair ahead of the consensus although it expects sequentially lower revenue in Q4 thanks to slowing growth in the industrial market. STMicro beat expectations and LCD maker AU Optronics reported a profit against expectations for a loss. Motorola crowed that its cellphone unit turned a profit for the first time in three years.
- Among insurance names, MetLife disclosed very modest y/y growth and only just met analysts' estimates. Allstate's earnings fell from last year's Q3 and missed expectations. In the pharma sector, quarterly results from Dow component Merck were right in line with expectations, although the firm's earnings were half the amount seen a year ago. Amgen, Bristol Meyers and Biogen all modestly exceeded estimates in their Q3 reports.
- By midweek benchmark US Treasury yields moved out to their highest levels in more than a month as investors took profits and rethought the likely magnitude and impact of next week's anticipated QE2 announcement. With the 10-yield yield briefly climbing above 2.7%, the 2-yr/10-yr spread widened out above 230 basis points. Both the 2- and 5-year note auctions drew yields that were at the high end or above where the when issued had been trading, which also weighed on prices before a solid $35B 7-year auction lifted brought in bids late in the week. Monday's 5-year TIPS auction drew the most interest though, as for the first time ever an inflation protected Treasury note was auctioned off with a negative yield. Buyers of this security will only have a positive return if consumer prices rise more than the 0.55% the TIPS drew, suggesting investor confidence the Fed will successfully stimulate the economy and ward of the risk of deflation through another round of large scale asset purchases.
- Corporate bond markets remained quite active, with Goldman Sachs's 50-year bond auction drawing much interest. For the first time ever, the investment bank sold senior debt with a duration longer than 30 years primarily targeted at retail, or private, investors. The $1.3B offering was five times larger than originally planned and was priced to yield 6.125%. A plethora of firms continue to tap debt markets in a variety of ways, in particular after reporting quarterly results. Colgate-Palmolive, Broadcom, Travelers and Arrow Electronics were just a few S&P500 components announcing multi-part benchmark offerings. Carmax, Volkswagen and Honda Motors sold bonds backed by auto loans while Alon Energy and Cubist Pharmaceuticals sold convertible notes.
- In FX trading, the week began with a greenback sell off after the G20 Finance Ministers' summit produced no breakthroughs that might help tamp down the currency war. The chief victim of the weaker dollar was the yen, with USD/JPY plumbing fresh 15-year lows below 80.50 on Monday. EUR/USD made weekly highs above 1.4050 on Monday. However, the dollar recovered as speculation about the shape of the Fed's QE2 program heated up following the better-than-expected UK Q3 GDP reading on Tuesday, which provided a reason to believe US GDP would be relatively strong and potentially delay more Fed easing. In addition, there was a brief spat of European sovereign debt jitters after the Portuguese government's negotiations with the opposition over the 2011 budget fell apart and the Bank of Greece offered cautious comments. The dollar softened right up again late in the week, especially as the post-US Q3 GDP consensus indicated that QE2 was on track for next week's FOMC meeting.
- With the main G20 summit just around the corner, rhetoric surrounding the emerging currency war heated up. There were renewed rumors that China might revalue the yuan, driven by comments from PBoC adviser Li Daokui, who said the US and China already have the basis for an agreement to be settled at the G20 summit following constructive talks at the recent finance ministers meeting. The advisor also stated that gradual yuan appreciation means a 3-5% annual gain.
- The European peripheral situation kept EUR/USD from capitalizing on improvements in the German unemployment data out midweek. The breakdown in budget negotiations in Portugal drove a widening of key peripheral government debt spreads. The Bank of Greece warned that not all of the country's problems have been solved and called on the government to make additional tax hikes and to seek more foreign investment. In addition, BoG also said it did not possess the liquidity needed to increase economic activity. The situation prompted ECB purchases of Irish debt using both US and European banks, which was described as the largest round of ECB buying since late spring, with maturities ranging from one thru ten years. Meanwhile, at an EU summit meeting, European Union officials and national leader pledged to ratify planned treaty changes by mid-2013 and promised a final decision on a basic Eurozone crisis resolution mechanism in December.
- Down under, Australia and New Zealand saw a reversal of trend that favored the former up until this week. Disappointing Australia quarterly CPI figure severely damaged expectations for renewed RBA tightening next Tuesday, surprising markets looking for confirmation of a much better than expected PPI reported earlier. Third quarter y/y consumer inflation of 2.8% - the lowest level since Q4 of 2009 and below the 2.9% expected - was well within the RBA target range. Treasurer Swan attributed slowing consumer inflation to the impact of strong Australian Dollar, as fixed income market probability for a 25bps rate hike fell from around ahead of data 50% all the way below 20%. In contrast, New Zealand dollar was boosted by a more hawkish than expected RBNZ decision, citing high export prices and post-earthquake reconstruction supporting economic activity. RBNZ Gov Bollard concluded that "further removal of monetary policy support will be required at some stage," sending NZD/USD toward a 1-week high, and the AUD/NZD cross to a 3-week low.
- Bank of Japan released the details of a ¥5T asset purchase program announced at its last decision in early October, while voting unanimously to maintain the ultra-low 0.0% to 0.1% overnight call rate target. In several stages of purchases lasting through the end of 2011, BOJ will buy ¥2T in short term JGBs, ¥500B commercial paper rated A2 or higher, ¥500B asset backed commercial paper rated A1 or higher, ¥500B corporate bonds rated BBB or higher, and ¥1.5T in long term JGBs. Moreover, BOJ signaled it was pushing its next rate decision to next week immediately following the FOMC, in the event of "shock and awe" Fed action requiring a more concentrated easing. Despite the new BOJ injection, markets continued to test Japan's willingness to tolerate falling USD/JPY, pushing the pair to fresh 15-yr low of ¥80.40.
Week of 11/1/2010 thru 11/5/2010
Monday, November 01, 2010
Economic
08:30 US Sept Personal Income, Personal Spending, PCE Core
10:00 US Oct ISM Manufacturing, ISM Prices Paid, Sept Construction Spending
11:00 US Treasury's 10-year TIPS announcement
15:00 US Treasury quarterly financing estimates
Tuesday, November 02, 2010
Economic
16:30 API Crude Oil/Gasoline/Distillate Inventories
Wednesday, November 03, 2010
Economic
07:30 US Oct Challenger Job Cuts
08:30 US Oct ADP Employment Change
09:00 US Treasury quarterly financing announcement
10:00 US ISM Non-Manufacturing, Sept Factory Orders
10:30 DoE Crude Oil/Gasoline/Distillate Inventories
Thursday, November 04, 2010
Economic
08:30 Preliminary Q3 Nonfarm Productivity, Q3 Unit Labor Costs, Initial Jobless Claims, Continuing Claims
10:30 Natural Gas Inventories
13:00 US Treasury's 10-year TIPS auction
Friday, November 05, 2010
Economic
08:30 US Oct Nonfarm Payrolls, Unemployment Rate, Manufacturing Payrolls, Private Payrolls, Average Hourly
10:00 US Sept Pending Home Sales
15:00 US Sept Consumer Credit
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
08:30 US Advance Q3 GDP/Price Index/Personal Consumption/Core PCE; Canada Aug GDP
09:45 US Oct Chicago Purchasing Manager Index
10:00 US Oct University of Michigan Confidence, Oct NAPM-Milwaukee
Todays Headlines
8:43:57 AM
ECB's Trichet: Monitoring the currency markets closely and would cooperate as appropriate - EU Summit Statement
- Reiterates G7 view that excessive volatility and disorderly currency movements hurt financial and economic stability.
- Proposes G20 leaders reaffirm fx rates should reflect the economic fundamentals.
8:30:03 AM
*(US) INITIAL JOBLESS CLAIMS: 434K V 455KE (lowest reading since July 10th); CONTINUING CLAIMS: 4.356M V 4.430E (lowest continuing claims since Nov 2008)
- Prior Initial Jobless Claims revised higher from 452K to 455K
- Prior Continuing Claims revised higher from 4.441M to 4.478M
10:01:25 AM
(DE) Denmark Central Bank Maintains Benchmark Lending Rate at 1.05%; Raises current account and CD rates by 10bps respectively
- Raises CD rates by 10bps to 0.7%;
- Raises current account rate to 0.6%.
- Maintains Discount rate at 0.75%
10:30:23 AM
(SZ) SNB's Hildebrand: Expansive monetary policy is appropriate but low interest rates over the long term could lead to domestic imbalances
- Notes that the SNB may need additional tools to handle property market, some warning signs have come up in real estate
- No reason to panic on Swiss housing;
- SNB will not hesitate to act if necessary
11:01:57 AM
NY Fed: Purchased $1.66B in outright coupon purchase; dealers submitted $39.15B for consideration (bid to cover 23.5)
- Heaviest purchase $1.16B in the 03/15/13 maturity
- Avg bid to cover over prior four auctions is: 7.5
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
08:30 US Initial Jobless Claims, Continuing Claims
10:30 US Natural Gas Inventories
13:00 US Treasury's 7-yr note auction
Todays Headlines
9:16:53 AM
(GE) Germany Oct -3K v -30Ke, Adj unemployment rate at 7.5% v 7.4%e - Labor Min
- Oct unemployment at 2.94M v 3.03M prior unadjust m/m (Sept adj number was 3.19M); Lowest since 1991
- Oct Net Seasonally Adj (NSA) Unemployment -86K, rate 7.0%
10:00:01 AM
*(US) SEPT NEW HOME SALES: 307K V 300KE (+6.6% M/M)
- no revisions to prior 288K
- Median price $223.8K v $220.5 (revised from $204.7K) in Aug , $216.6K y/y (+1.4% m/m; +3.3% y/y)
- Months supply: 8.0 v 8.6 in Aug
- Homes for sale: 205K v 208K in Aug (revised from 206K)
10:01:28 AM
(PD) Poland Central Bank Gov Belka: Maintained Base Rate at 3.50% due to limited CPI and wage pressures - press conf
- Rates also maintained as emerging markets might see high inflows
- CPI could rise due to food and energy prices but other measures are back to 'normal'
- Core inflation and CPI have diverged
12:05:42 PM
(EU) ECB's Trichet: Encountering more volatility in FX, there is no quick fix to FX policy for all the countries in the southern mediterranean
- Reiterates inflation expectations are anchored. Expects price stability to continue for the next 10 years.
12:31:48 PM
Preview: (US) Treasury's $35B 5-year note auction results due just after 13:00 ET
- $35B is unchanged from the Sep auction.
- prior bid-to-cover ratio 2.96 with an average of 2.76 over the last 10 auctions.
- indirect bidders took 50.77% of competitive bids at last auction with 58.3% allotted at the high.
- When issued notes currently yield 1.30% which is roughly 2 basis points above the cash market.
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
"The problem is never how to get new, innovative thoughts into your mind, but how to get old ones out. Every mind is a building filled with archaic furniture. Clean out a corner of your mind and creativity will instantly fill it."
06:00 Brazil Oct Consumer Confidence
08:30 US Sept Durable Goods Orders
10:00 US Sept New Home Sales
10:30 DoE Crude Oil/Gasoline/Distillate Inventories
13:00 US Treasury's 5-yr note auction
Todays Headlines
9:31:03 AM
(US) CFTC releases update on 'market manipulation'; no specific rules on high frequency trading, open to public comment
- In investigation, finds evidence that efforts have been made to affect silver prices, feels position limits can improve metal markets
- Could remove credit rating references from regulations in efforts to cut reliance upon the standard
10:31:22 AM
European Market Internals update at 10:30 ET
- FTSE100 volume at 487.8M, which is approx 41% below its 10-day moving average
- DAX volume at 62.7M, which is approx 39% below its 10-day moving average
- CAC40 volume at 69.0M, which is approx 44% below its 10-day moving average
11:03:05 AM
NY Fed: Purchased $2.5B in outright coupon purchase; dealers submitted $11.3B for consideration (bid to cover 4.5)
- Heaviest purchase $760M in the 08/15/39 maturity
- Avg bid to cover over prior four auctions is: 7.5
12:01:05 PM
Market Internals update at 12:00ET
- NYSE volume 373M shares, about even to its three-month average; advancers lead decliners by 1.1:1.
- NASDAQ volume 780M shares, about 8% below its three-month average; decliners and advancers are about even.
- VIX index +2.3% to just above 20.00
12:08:54 PM
(UK) BoE's Posen: Easy monetary policy does not cause asset bubbles, FX appreciation does not increase asset bubbles
- Raising interest rates in an open economy can fuel asset bubbles by attracting capital inflows.
- Calls on current account surplus nations and central banks in such nations to boost domestic demand.
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
09:00 US Aug S&P/CS Home Price Index, Aug S&P/CS Composite-20
10:00 US Oct Consumer Confidence, Oct Richmond Fed Manufacturing
13:00 US Treasury's 2-yr note auction
16:30 US API Crude Oil/Gasoline/Distillate Inventories
Todays Headlines
6:09:12 AM
*(BE) BELGIUM DEBT AGENCY SELLS TOTAL €2.75B VS €2.5-2.8B (INDICATED) IN 2013, 2016 AND 2020 BONDS
- Sells €752M in Sept 4.25% 2013 OLOs; avg Yield 1.599% v 0.933% prior; Bid-to-cover: 3.09x v 3.39x prior
- Sells €805M in Mar 2.75% 2016 OLOs; avg Yield 2.503% v 2.322% prior; Bid-to-cover: 2.79x v 2.69x prior
- Sells €1.19B in Sept 3.75% 2020 OLOs; avg Yield 3.260% v 3.137% prior; Bid-to-cover: 2.39x v 2.55x prior
7:44:57 AM
(UK) BoE's Tucker: Exiting ultraeasy monetary policy early looks less likely at this time - addressing CBI conference
- Reiterates UK economic performance as about is well as can be expected, begining to recover
- More needs to be done on the recovery.
- Headwinds to recovery remain strong, and recovery it will be bumpy and uneven.
- Credit conditions are better, though too tight for comfort.
9:04:29 AM
(HU) Hungary Central Bank Gov Simor: Considered three options at today's MPC meeting - press conf
- MPC considered 0.25% rate hike, cut and hold.
- Interest rate increase might be necessary if CPI worsens or sustained increase in perceptions of the risks associated with the economy
- GDP growth still driven by external effects as consumption recovery has yet to materialize
- Gov't steps to raise CPI in short run but lack of demand and competition also to affect inflation.
10:08:42 AM
(HU) IMF Hungary mission: Did not discuss financing issues but uncertainties over the country's fiscal steps mount
- Labels the country's economic plans as 'bold and risky'
- Fiscal steps are negative on investment but might aid growth; Govt should trim spending in the public sector
- 2011 Hungary GDP growth close to 2.5%
11:15:10 AM
(EU) ECB's Weber: Does not agree with rules for Eurozone proposed by Van Rompuy as they are too soft
- Calls for "verbal disarmament" on the currency front. Calls on emerging market countries to take more initiative on FX issues.
- Reiterates that FX rates need to be freely deterimined by markets, protectionist tendencies must be avoided.
- There is no point in commenting on the level of the EUR; reiterates volatile exchange rates are not welcome.
- Price stability remains the ECB's primary objective.
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
"Hard work spotlights the character of people: some turn up their sleeves, some turn up their noses, and some don't turn up at all."
Market Week Wrap-up
- Traders have been buffeted by strong cross currents from earnings, economic data and further housing market fallout this week, but in the end risk is still being supported by expectations for more Fed quantitative easing. Markets eagerly awaited first the minutes of the September FOMC meeting and then a speech by Fed Chairman Bernanke on Friday for more hints about when QE2 might begin and how much the Fed might buy (little detail emerged from either source). The FOMC minutes merely reinforced the September statement and on Bernanke's speech did nothing to shake the conviction that the Fed will embark on a QE program later this year. In the meantime, a rising choir of skeptical voices from inside the US and abroad were heard insisting that further easing would be useless, or worse. Fed dissident Hoenig once again insisted that the economy would not really benefit from more liquidity and said that more easing would only boost uncertainty. The data out this week certainly did not paint a very bad picture: the October Empire manufacturing survey crushed expectations, September retail sales strengthened for the third consecutive month. Then again the weekly claims numbers slipped and the trade numbers were grim. Supported by Google's blowout earning the Nasdaq rose 2.8% this week, the DJIA gained 0.5% and the S&P500 was up 0.9%. A weaker dollar helped agricultural and precious metals futures forge higher, sending the CRB index to 300 for the first time since October 2008. At the same time the commodity currencies, the Australian and Canadian dollars, approached parity with the greenback.
- US corporate earnings and China's surprise rate increase were the two main factors that drove trading this week. With investors looking forward to a couple of days of positive blue chip earnings reports and few big data points, the Chinese central bank's surprise 25 basis point hike to the one-year benchmark rate shocked markets on Tuesday. The dollar benefitted momentarily from China's move as short positions were taken off, but the overall trend of dollar weakness was essentially left intact. There was plenty more analysis, commentary and counter commentary about the Fed's intentions in regards to QE2, including an influential think tank report that suggested the Fed would aggressively increase bond purchases. In US data, the September housing starts report was the best in the series since April, with strength seen in single home starts. However Sept building permits missed expectations and fell on a m/m basis, with many analysts troubled by the widening spread between the two key forward-looking indicators. The US Treasury presented the G20 with a proposal to rebalance the global economy via a Current Account/GDP statistical method, which will be a central topic at the G20 finance ministers' meeting this weekend. For the week, the leading US equity indices were eked out modest gains, with the Nasdaq up 0.4%, the DJIA rising 0.6% and the S&P500 gaining 0.6%.
- The rest of the top-tier banks disclosed earnings this week. Citigroup met analysts' expectations more or less, but like JP Morgan last week, the bank said it sustained its bottom line in part by releasing money it had set aside to cover bad loans. Bank of America posted a $10.4B write-down tied to new financial regulations in Q3, leading to another quarter of losses. On an operating basis, the bank earned $0.27/share, well ahead of expectations, while revenue was in line. Goldman Sachs came in ahead of expectations, although the firm's trading revenue fell on a q/q and y/y basis for a second quarter in a row. Morgan Stanley reported a net loss during the third quarter as revenue fell sharply and earnings were diluted by special one-time charges, although on an operating basis the firm beat expectations. Morgan's trading revenue was a shadow of last quarter's results.
- On a different note, there were media reports that bankers are putting the finishing touches on the largest commercial real estate-backed debt deals seen since before the financial crisis began. The offerings are said to include loans tied to the Hilton Worldwide LBO and Extended Stay's exit from bankruptcy. Around one third of the DJIA component companies reported quarterly results this week. By and large the blue chips satisfied investors by meeting expectations, with no standouts and more than a few troubling details buried in performance metrics. American Express's Q3 results beat expectations and rose a whopping 70% over last year's Q3. Coca Cola and Johnson & Johnson both disclosed relatively staid results, with profits and revenue right in line. United Technology missed revenue expectations. IBM came in modestly ahead of Q3 estimates and raised its 2011 outlook although signed service contracts fell on a y/y and q/q basis and outsourcing revenues down sharply over year-ago levels. Caterpillar once again beat earnings expectations and merely met revenue targets. McDonalds reported very good comps across all its regions. AT&T matched estimates and also improved many of the metrics that raised some eyebrows over the last several quarters (notably net wireless adds and iPhone activations were much higher). Verizon's earnings were a touch higher than estimates and quarterly metrics for its FiOS service continue to improve incrementally. However, wireless net adds slipped below the 1 million level and churn levels rose.
- In other earnings, UPS topped profit expectations but missed by a hair on the top line. On the conference call, UPS executives said they believe there may be additional room for more restocking in the US. Apple delivered another quarter of impressive earnings outperformance in its Q4 report. The firm's top and bottom lines predictably exceeded analysts' expectations, but analysts were disappointed that iPad shipments were lower than expected, and the stock retreated from the all time highs it hit earlier in the week. Yahoo crushed earnings expectations and reported its first y/y revenue increase in the last two years. United Health, the first major managed care name to report, did very well, crushing EPS targets, beating on revenue and raising its 2010 outlook. Oil services giant Halliburton modestly exceeded the consensus view. The company said its North American business generated record revenue, benefiting from robust activity in shale gas fields and higher oil prices. Competitor Schlumberger was in line, citing better revenue from onshore plays in the US and Canada that more than offset sharp declines from the Gulf of Mexico.
- Treasury prices ended little changed for the week. Prices were underpinned by the belief the Fed will step in with another round of quantitative easing in the very near future, but also held back by the $99B in coupon supply coming onto the market next week. The 10-year yield is holding above 2.5%, and the curve overall is bit steeper. The 30-10 year spread widened out to its highest levels on record, above 140 basis points, before narrowing toward the end of the week.
- Corporate issuance picked up a bit as companies looked to take advantage of low rates after earnings were out the door. eBay priced a $1.5B three-part benchmark offering at some of the lowest rates on record. Other investment grade corporations to come to the market after Q3 results included UNH, URI, PEP and CSX. Wal-Mart also priced a $5B four-part offering at extremely favorable marks. Asset-backed offerings were also in the news as both Ford and Honda Motor sold bonds backed by auto loans.
- The greenback has experienced a week of corrective price action following Fed Chairman Bernanke's key speech last Friday, as traders squared accounts in the wake of recent moves. Now the market is focusing on the weekend G20 finance ministers' meeting in Korea for word on how global leaders might head off all-out currency war. Notably, this week both Korea and Brazil inched closer to announcing capital controls to curb inflows into their respective currencies. The rift between US and Chinese monetary policies deepened after the PBoC surprised markets with its quarter point interest rate hike on Tuesday, its first move to tighten monetary policy since the onset of the global financial crisis. Markets were disappointed to find that the rate hike was not a pre-emptive move against re-accelerated economic activity, but rather a response to rising consumer costs seen in the data later in the week. Note that one Chinese government economist said more hikes were probable in 2010, asserting that the move was the beginning of a rate hike cycle.
- China's Q3 GDP came in at +9.6%, a one-year low, although GDP remains above 10.5% year to date. China's September Industrial production hit a one year low, while CPI data came in at 3.6%, as expected, which is near two-year highs. Speaking after the data release, China's National Bureau of Stats spokesman attributed the slowdown in industrial output to government curbs on energy and the overall slowing of GDP growth to high base-year affect as well as waning impact of fiscal stimulus.
- There was plenty of verbal intervention ahead of the G20 finance ministers' meeting. In an interview with the Wall Street Journal, Geithner insisted the dollar was in alignment with the yen and the euro and insisted there was no reason for further dollar weakness. The European Central Bank's Nowotny commented in a press interview that the central bank did not have any FX target nor plans to intervene. Bank of Japan Chief Shirakawa reiterated that the central bank was closely monitoring the impact of strong Yen on its economy. Dealers took every opportunity to test official resolve; any decline in the euro, aussie, or loonie had the usual Far East sovereign names countering with demand for EUR, AUD and CAD. Note that the euro carried the main burden of the fall in USD/CNY, with euro sentiment based on positive German growth as markets ignored a flurry of European peripheral debt issues and even the ongoing strikes in core European nations. Meanwhile, any spat of renewed dollar strength ran into interest rate differentials. The three-month Euriobor rate continued its upward path, moving firmly above the key ECB Refi rate of 1.00%.
- In the UK, Chancellor Osborne presented the government's review of the budget announced in June, with little change from the original. The minutes of the BoE's September meeting detailed the spilt over policy. Member Posen voted to raise the bond purchase program by £50-250B while member Sentance voted to raise interest rates by 25 basis points. The minutes showed that some in the majority saw an increased likelihood of instituting new stimulus measures. Weak economic data also weighed upon the GBP/USD pair which tested below 1. 57 on several occasions.
- In Japan, the environment seemed ripe for possible BoJ currency intervention as USD/JPY approached the 82 level early in the week, but no signs of action were even remotely seen. USD/JPY hovered around the 81.00 level throughout most of the week with continued chatter that the Japanese Post Office was support the pair just above 15-year lows. Also dealers were hearing vague chatter that the BoJ was inquiring about 'staffing levels' at local units, surmising that a second round of solo intervention might be launched at some point.
- Down under, the RBA policy board stuck to the script seen in the surprise rate hold on October 5th, linking caution over further tightening with uncertainty in the global economy and weak financial sector. The RBA acknowledged a robust Australian labor market and rising wages driven by surging terms of trade. Policymakers also pointed to a strong AUD doing some of their legwork in containing inflation ahead of quarterly inflation data on tap for next week, noting Q3 core inflation of 2.5%-2.75% would be consistent with its central forecast.
Week of 10/25/2010 thru 10/29/2010
Monday, October 25, 2010
Economic
08:30 US Chicago Fed Index, Brazil Sept Current Account
10:30 US Oct Dallas Fed Manufacturing
13:00 US Treasury's 5-yr TIPS auction
Tuesday, October 26, 2010
Economic
09:00 US Aug S&P/CS Home Price Index, Aug S&P/CS Composite-20
10:00 US Oct Consumer Confidence, Oct Richmond Fed Manufacturing
13:00 US Treasury's 2-yr note auction
16:30 US API Crude Oil/Gasoline/Distillate Inventories
Wednesday, October 27, 2010
Economic
06:00 Brazil Oct Consumer Confidence
08:30 US Sept Durable Goods Orders
10:30 DoE Crude Oil/Gasoline/Distillate Inventories
13:00 US Treasury's 5-yr note auction
Thursday, October 28, 2010
Economic
08:30 US Initial Jobless Claims, Continuing Claims
10:30 US Natural Gas Inventories
13:00 US Treasury's 7-yr note auction
Friday, October 29, 2010
Economic
08:30 US Advance Q3 GDP/Price Index/Personal Consumption/Core PCE
09:45 US Oct Chicago Purchasing Manager Index
10:00 US Oct University of Michigan Confidence, Oct NAPM-Milwaukee
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
*(US) INITIAL JOBLESS CLAIMS: 452K V 455KE; CONTINUING CLAIMS: 4.441M V 4.420ME
- Prior Initial Jobless Claims revised higher from 462K to 475K
- Prior Continuing Claims revised higher from 4.399M prior to 4.45M
9:23:42 AM
(GR) Greece Minister: Target savings of €1.5B via local government reforms
- Plans to cut 25K local government jobs, close 4.5K local government enterprises
10:00:07 AM
*(US) OCT PHILADELPHIA FED: 1.0 V 2.0E
Sub-Indices:
- Prices Paid: 31.5 v 9.8 prior (highest since May 2010)
- New Orders: -5.0 v -8.1 prior
- Employment: 2.4 v 1.8 prior
- Inventories: -18.6 v -16.7 prior
10:52:42 AM
(IR) Ireland Opposition Party agrees to €15B fiscal adjustment in 4 year period; sees GDP in 2011 at 2%
- Does not rule out cutting social welfare among other job cuts, but not in favor of cut to public wages
10:47:50 AM
Preview: (US) Treasury to announce coupon and TIPS auctions at 11ET
- Analysts are calling for $1B reduction in the 2, 5, and 7-year auctions next week. Look for $35B 2-year, $34B 5-year and $29B 7-year totaling $97B which would include more than $63B in new money.
- 5-year TIPS reopening likely raised by $2B to $9B though a bigger increase cannot be ruled out.
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
08:30 Initial Jobless Claims, Continuing Claims
10:00 US Oct Philadelphia Fed, Sept Leading Indicators
10:30 Natural Gas Inventories
11:00 US Treasury's note announcement, 5-yr TIPS announcement
Todays Headlines
9:33:46 AM
(GE) Germany Chancellor Merkel: 2010 GDP could exceed 3%; sees 2010 net new borrowing at approx €50B
- German unemployment could move below 3M in this Fall
- Says 2010 net new borrowings could be just above €50B
- Euro currency must not always move upwards
- Euro currency is shielded by EU rescue package
10:30:15 AM
(CA) Bank of Canada Monetary (BOC) Policy Report: Reiterates view that further interest rate hikes would be carefully considered
- Global recovery could be more gradual than previously expected.
- Reiterates exceptional monetary stimulus is still in place.
11:03:19 AM
NY Fed: Purchased $660M in outright TIPS purchase; dealers submitted $10.25B for consideration (bid to cover 15.5)
- Heaviest purchase $162M in the 01/15/19 maturity
- Prior bid to cover for TIPS purchase stood at 12.3
11:15:39 AM
(US) US Treasury Official: G20 should deal with econ policies that resist currency appreciation, no timing yet for semi annual currency report
- G-20 should address best ways to reach currency account balances
- Countries with surpluses must increase domestic demand
11:17:29 AM
(CA) BoC's Carney: Believes global economic recovery is entering a new phase
- Expecting household spending moving forward to be more restrained, Canada's economic outlook has changed.
- BoC assumes that there will be more stimulus in the US.
- Concerned tensions in FX markets and could impact global recovery
- Canada domestic demand is running twice the rate of the US, external demand is Canada's biggest trouble.
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
"The path to our destination is not always a straight one. We go down the wrong road, we get lost, we turn back. Maybe it doesn't matter which road we embark on. Maybe what matters is that we embark."
10:30 DoE Crude Oil/Gasoline/Distillate Inventories
14:00 Fed's Beige Book
Todays Headlines
8:41:16 AM
(EU) ECB's Trichet: Warns that not all EU govt statistics are reliable
- Member states must continue to upgrade their statistics as not all statistics are "reliable
- Financial crisis revealed gaps in information that must be closed
- New powers for Eurostat must be fully applied
- Reiterates that inflation expectations are firmly anchored
8:30:04 AM
*(US) SEPT HOUSING STARTS: 610K V 580KE; BUILDING PERMITS: 539K V 575KE
- Prior Housing Starts revised higher from 598K to 608K
***Insight: Building permits at lowest level since Apr 2009
7:03:23 AM
*(CH) CHINA CENTRAL BANK (PBOC) RAISES KEY 1-YEAR BENCHMARK RATES BY 25BPS; EFFECTIVE OCT 20TH (not expected)
- 1 year deposit rate raised by 25bps to 2.50% from 2.25% prior
- 1-year lending Rate raised by 25bps to at 5.56% from 5.31% prior
9:40:28 AM
(US) Fed's Evans: Expects 2H GDP To reach 2.0-2.5%, sees 3.0-3.5% in 2011; there is evidence the US has entered a 'liquidity trap'
- There is a strong chance that inflation may be below 1.5% in 2013, with 2012 inflation at 1%
- Notes that if there becomes price level targeting, large scale asset purchases would be necessary
- Unemployment rate expected to remain over 8% through 2012
10:17:56 AM
(US) Fed's Evans: Fed more likely to lease assets through repos rather than sale during an exit policy - Q&A
- If QE2 and inflation targeting is adopted, extended period accommodation would continue.
- Japan's lost decade experience is sobering, but not expecting the US to encounter the same path.
- No comment on potential size of QE2 asset purchases
12:30:33 PM
(EU) ECB's Stark: Does not see a currency war occuring yet; sees risks of defensive moves like capital controls becoming a "protectionist spiral" - newspaper interview
- Believes the ample liquidity in markets could trigger defensive responses.
- Maintaining non-standard policy instruments longer than needed gets in the way of normalization, has negative side effects.
- Sees no short- or medium-term inflation or deflation risks.
- Seeing clear signs of normalization in money markets, growing trust among banks.
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
08:30 US Sept Housing Starts, Sept Building Permits
16:30 API Crude Oil/Gasoline/Distillate Inventories
Todays Headlines
8:06:22 AM
(US) Fed's Fisher: Reiterates that Fed is on watch, will take action if necessary, no decision on QE2 will made until the November FOMC meeting - CNBC interview
- US will not end up like Japan.
- Fed may or may not decided to carry out QE2.
- Fed is not a substitute for fiscal authorities
8:55:19 AM
(FR) France Debt Agency (ATF) sells total €8.5B vs. €8.5B targeted in 13-week, 26-week and 52-Week Bills
- Sold €4.5B in 13-week Bills; avg yield 0.569% v 0.365% prior
- Sold €2.0B in 26-week Bills; avg yield 0.711% v 0.479% prior
- Sold €2.0B in 52-week Bills; avg yield 0.817% v 0.662% prior
9:00:08 AM
*(US) AUG NET LONG-TERM TIC FLOWS: $128.7B V $61.2B PRIOR; TOTAL NET TIC FLOWS: $38.9B V 63.3B PRIOR
- Prior Total Net TIC Flows revised lower from $63.7B to $63.3B
- Foreign Net purchases of US Treasuries (notes & bonds): $27.7B v $30.0B prior
- China Total holding of US Treasuries: $868.4B v $846.7B prior
- Japan Total Holdings of US Treasuries: $836.6B v $821.0B prior
- Russia holdings of US Treasuries: $129B v $130.9B prior
10:30:24 AM
Market Internals update at 10:30ET
- NYSE volume 210M shares, about even to its three-month average; advancers lead decliners by 1.6:1.
- NASDAQ volume 430M shares, about 6% below its three-month average; advancers lead decliners by 1.3:1.
- VIX index +4.7% at just above 19.00
11:01:47 AM
NY Fed: Purchased $6.26B in outright coupon purchase; dealers submitted $21.84B for consideration (bid to cover 3.5)
- Heaviest purchase $984M in the 12/31/16 maturity
- Avg bid to cover over prior four auctions is: 6.4
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
"Make sure to be in with your equals if you're going to fall out with your superiors."
Market Week Wrap-up
- Traders have been buffeted by strong cross currents from earnings, economic data and further housing market fallout this week, but in the end risk is still being supported by expectations for more Fed quantitative easing. Markets eagerly awaited first the minutes of the September FOMC meeting and then a speech by Fed Chairman Bernanke on Friday for more hints about when QE2 might begin and how much the Fed might buy (little detail emerged from either source). The FOMC minutes merely reinforced the September statement and on Bernanke's speech did nothing to shake the conviction that the Fed will embark on a QE program later this year. In the meantime, a rising choir of skeptical voices from inside the US and abroad were heard insisting that further easing would be useless, or worse. Fed dissident Hoenig once again insisted that the economy would not really benefit from more liquidity and said that more easing would only boost uncertainty. The data out this week certainly did not paint a very bad picture: the October Empire manufacturing survey crushed expectations, September retail sales strengthened for the third consecutive month. Then again the weekly claims numbers slipped and the trade numbers were grim. Supported by Google's blowout earning the Nasdaq rose 2.8% this week, the DJIA gained 0.5% and the S&P500 was up 0.9%. A weaker dollar helped agricultural and precious metals futures forge higher, sending the CRB index to 300 for the first time since October 2008. At the same time the commodity currencies, the Australian and Canadian dollars, approached parity with the greenback.
- It's been a rough week for the financial sector. The outlook for the banks heading into earnings season was not especially bright, with many analysts trashing the industry and slashing estimates, but two emerging scandals have inspired some apocalyptic commentary this week. In the first case, all 50 state AGs have now signed on to an investigation of questionable bank foreclosure processes, more specifically to what extent the banks will be able to provide viable paperwork to support the tidal wave of foreclosures they are undertaking. Note that monthly data from RealtyTrac on Thursday showed that the number of homes taken over by banks topped 100K for the first time in September. The second somber story to emerge was that of the very large percentage of mortgage-backed securities sold in 2005-07 that may have been improperly marketed due to the withholding or misrepresentation of critical information about the quality of the mortgagees that underlay the notes. The end result could be billions in buyback by the leading issuers, with an especially heavy burden seen for Bank of America (although it's worth keeping in mind that any discussion of these issues remains highly speculative). JP Morgan's quarterly results were mixed, with earnings well above expectations thanks to lower loan loss provisions but revenue below par. CEO Dimon said he expects charge offs to further improve next quarter, and also insisted that the emerging foreclosure scandal would have only an "incremental" impact on earnings. Citigroup, BoA, Goldman Sachs and several superregional banks are set to report quarterly results next week.
- Contrasting results from leading industrial and transport names did not offer a very clear picture of the economy in the September quarter. General Electric's revenue miss overshadowed its slight earnings outperformance. GE's top-line trouble was reflected in lower energy infrastructure revenue, which declined on both a sequential and y/y basis. However, CEO Immelt said that the company saw growth in both equipment and service orders during the quarter. Rail name CSX met the Street's expectations and indicated that its freight volume growth remains strong, in double digit growth territory. In addition, executives said that business has remained robust in a quarter that is seasonally slow.
- In tech, shares of Google were up sharply on Friday after the search giant crushed earnings expectations and delivered excellent revenue growth. Google said that ad pricing has remained healthy and stated that it is gaining significant diversified sources of revenue outside search. Intel was only a bit ahead of expectations in its Q3 report, while the firm's outlook for Q4 revenue was in line. Intel CEO Otellini said he is expecting customers to pare inventories in Q4 ahead of the release of the widely anticipated Sandy Bridge processors even as the corporate IT refresh cycle continues. AMD's profit was nearly twice the expected amount although revenue was just in line. AMD said next quarter's results would be flat and echoed comments from Intel by stating that the supply chain would not build inventories in Q4.
- Merger action seemed to pick up a bit again this week, although there were a number of questionable calls from the rumor mill. Prime among the former was a report that AOL was said to be teaming up with private equity firms to buy Yahoo, though the story boosted shares of Yahoo 15% on the week. Shares of Avon headed higher after the UK's Daily Mail reported that that L'Oreal may be considering acquiring the company for $44/share. A L'Oreal spokesperson refused to comment on the rumor and no deal has been announced as of yet. Among actual deals, Pfizer said it would acquire King Pharma for $14.25/share in cash, for a total deal value of $3.65B, and Gymboree announced that it would sell itself to Bain Capital for $64.40/share in cash in a deal worth $1.8B. Seagate jumped 16% after the firm received a preliminary going-private proposal from an unnamed group of investors.
- Treasury markets experienced some selling during the holiday shortened week, particularly at the long end of the curve. Yields entered the week at all time lows on the short end and levels not seen since early 2009 for longer dated maturities. Traders had become increasingly comfortable with the expectation the Fed will resume asset purchases next month and the FOMC minutes and Bernanke's speech on Friday only solidified that belief. Disappointing results for both the 10- and 30-year reopenings resulted in some initial selling midweek, and Bernanke's unwillingness to offer anything novel that might clarify the shape of QE2 led to more aggressive profit taking. The 10-year yield has reclaimed 2.5% while the long bond briefly traded back to 4%. The curve is noticeably steeper with the 10-30 year spread at new all-time highs above 143 basis points and the 2-10 year spread widening out to above 220 basis points. On Friday, the yield gap between 10-year TIPS and 10-year cash Treasury notes--tracked by economists as a gauge of the market's long-term inflation expectations--hit 2.14%, the widest level since mid-May, after running as low as 1.50% in August on fears of a slowing recovery.
- FX markets remained fixated on the potential for currency war this week, an outcome last weekend's IMF meeting did little to resolve. The central front in the conflict is the level of the Chinese Yuan, and the midweek release of US and Chinese trade balance and Chinese FX reserves data only cranked up the volume of calls for Beijing to accelerate currency reform. The China September trade data came in lower than numbers seen in recent months, although the August US trade data showed that China's trade deficit with the United States hit record levels. The other major FX catalyst was the anticipation for more Fed quantitative easing, the effects of which will likely continue despite Bernanke's remarks on Friday. Other factors included contrasting ECB and Fed policies coupled with big funding flows into emerging currencies. Notably, on Friday, the US Treasury again chose to delay the release of its semi-annual currency report, which can be used to name currency manipulators as Congress has urged. As explanation, Treasury officials said it would publish the currency report after the November G20 meeting to "take advantage of the opportunity provided by the G20 discussions."
- The dollar remained vulnerable to key psychological issues, as highlighted by CFTC data that showed speculative dollar shorts are at their highest levels since mid-2008. Nevertheless the Chinese Yuan firmed ahead of the US Treasury's pivotal semi-annual currency manipulators report that was originally scheduled for release on October 15th (before it was delayed). The greenback's soft tone was reinforced mid-week via the combination of the FOMC minutes and hawkish comments from ECB Governor Weber. The Fed minutes further focused markets on the Fed's assertion, first issued with the September rate decision, that further easing is under consideration. Euro strength was supported by Weber, who said that ECB bond buying should be phased out permanently and interest rates could rise before exit measures were completed.
- Singapore garnered attention for its currency on Thursday after the central bank widened its currency trading bands. Dealers feel that pressure on Asian and emerging market currencies continue to drive anti-dollar diversification pressures, and some saw Singapore's move as a precursor to China pursuing a similar strategy. Later in the week, a rumor made the rounds that the US and China had secretly agreed that China would allow the yuan to appreciate at a faster pace if the US took a less aggressive stance on quantitative easing. By week's end EUR/USD tested nine-month highs above 1.4150, USD/JPY hit fresh 15-year lows below 80.90, The USD/CHF exhibited fresh all-times lows at 0.9461 and the USD/CAD and AUD/USD finally tested parity.
- With the dollar testing nine-month lows against the euro, commodities have been a prime beneficiary. Besides the weak greenback, gold and silver benefitted from vague chatter that China was buying precious metals as part of its reserve diversification process. Spot gold spiked back toward all-time highs of $1,387.15/oz while spot silver tested its best level in three decades at $24.83/oz. The energy complex did not join in the euphoria. Crude oil moved sideways, ending the week around $81, while natural gas continued to slide to multi-year lows below $3.60. OPEC ministers meeting this week seemed largely content with the price of oil and made no change to quotas. The squeaky wheels at OPEC - Iran, Venezuela, and Libya - called for $100 oil and were awarded with some grease. OPEC members elected the Iranian minister to the rotating presidency of the cartel and agreed to hold an extraordinary meeting in December to revisit quotas.
Week of 10/18/2010 thru 10/22/2010
Monday, October 18, 2010
Economic
09:15 US Sept Industrial Production, Sept Capacity Utilization
10:00 US Oct NAHB Housing Index
Tuesday, October 19, 2010
Economic
08:30 US Sept Housing Starts, Sept Building Permits
16:30 API Crude Oil/Gasoline/Distillate Inventories
Wednesday, October 20, 2010
Economic
10:30 DoE Crude Oil/Gasoline/Distillate Inventories
14:00 Fed's Beige Book
Thursday, October 21, 2010
Economic
08:30 Initial Jobless Claims, Continuing Claims
10:00 US Oct Philadelphia Fed, Sept Leading Indicators
10:30 Natural Gas Inventories
11:00 US Treasury's note announcement, 5-yr TIPS announcement
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
8:30 Sept CPI, CPI ex food & energy, Sept Advance retail sales, Oct Empire Manufacturing,
9:55 Oct preliminary Univ of Michigan Confidence
10:00 Aug Business Inventories; Mexico Overnight Rate
Todays Headlines
7:33:56 AM
(IT) Italy Cabinet Approves 2011 Budget
- Italy Fin Min Tremonti: Growth policies can begin now.
- To begin discussion with unions and employers on tax overhaul next week.
- To cut 2011 spending budget by €11.6B.
7:58:25 AM
Morgan Stanley downgrading the shipping industry view to Cautious from Inline
- Morgan Stanley Cuts OSG to Underweight from Equal Weight, price target: $25
- Morgan Stanley Cuts GMR to Underweight from Equal Weight, price target: $4
8:30:02 AM
*(US) INITIAL JOBLESS CLAIMS: 462K V 445KE; CONTINUING CLAIMS: 4.40M V 4.45ME
- Prior Initial Jobless Claims revised higher from 445K to 449K
- Prior Continuing Claims revised higher from 4.462M prior to 4.51M
9:01:43 AM
(EU) ECB: Cannot exclude rapid acceleration in growth of money and credit supply
- Monetary policy is not the best tool to address financial imbalances
- EMU banks are not engaged in exceptional deleveraging
- Reiterates central bank view that medium term price developments are in line with expectations
10:01:09 AM
(DE) Denmark Central Bank Maintains Benchmark Lending Rate at 1.05%; Raises current account and CD rates by 10bps respectively
- Raises current account rate to 0.5% from 0.4% prior
- Raises CD rate to 0.6% from 0.5% prior
- Discount Rate unchanged at 0.75%
12:02:10 PM
(TU) Turkey Central Bank leaves Benchmark Interest Rate Unchanged at 7.00%; As Expected
- Overnight borrowing rate cut to 5.75% from prior 6.25% level
- Overnight lending rate left at 8.75% level
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
8:30 Aug Trade Balance, Sept PPI, PPI ex food & energy, Initial Jobless Claims, Continuing Claims
10:30 Natural Gas Inventories
11:00 DoE Crude Oil/Gasoline/Distillate Inventories
13:00 US Treasury to sell 30-year bonds
Todays Headlines
5:00:03 AM
*(EU) EURO-ZONE AUG INDUSTRIAL PRODUCTION M/M: 1.0% V 0.8%E; Y/Y: 7.9% V 7.4%E
- Prior MoM revised higher from 0.0% to 0.1%
- Prior YoY revised higher from 7.1% to 7.2%
7:00:03 AM
*(US) MBA MORTGAGE APPLICATIONS W/E OCT 8TH: +14.6% V -0.2% PRIOR
- Refi's: +21.0% v -2.5% prior
- Avg Rate on 30y mortgage: 4.21% v 4.25% prior
- Purchase Index: (Seasonally adj): -8.5 % v +9.3% prior
9:47:47 AM
(HU) Hungary's PM Orban: Reiterates that the country must be financed through markets
- Reiterates country will meet its target of 3.8% 2010 deficit and 3% 2011 deficit
- To levy special taxes on telecom sector as well as energy and retail chains. Taxes to be in place for 3 yrs
- Expects HUF700B from the energy sector in the next 3 yrs as a result of the new tax
10:17:57 AM
Nomura initiates Electical Equipment and Mulit-Industry with a Neutral rating
- Notes there may be a gap in demand in early 2011.
- Believes we may follow a similiar pattern as 12/04 to 5/05, where the ISM declined from 57.2 to 51.
10:00:32 AM
(US) EIA Short Term Energy Outlook: Sees 2010 world oil use +2.1% at 86M bpd, 2011 +1.6% 87M bpd
- expects Q4 2011 oil significantly higher than $85 without OPEC hike
- China 2010 use seen +8.4%, 2011 +5.9%
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
8:30 Sep Import Price index (m/m, y/y); Canada Aug new housing price index m/m
13:00 US Treasury to sell 10-year notes
16:30 API Crude Oil/Gasoline/Distillate Inventories
Todays Headlines
6:30:33 AM
OPEC Oct Report: Increases 2010 world oil demand by 110K bpd, sees 2010 non-OPEC supply 100K bpd higher than prior view
- OPEC member output fell 30K bpd in Sept
- Sees 2010 demand for OPEC crude 300K bpd lower y/y
- Sees 2010 global demand at 85.6 bpd
- OPEC met 56.5% of pledged quotas in Sept v 53% in Aug
8:00:58 AM
*(PD) POLAND AUG CURRENT ACCOUNT: -€1.1B V -€1.BE; TRADE BALANCE: -€786M V -€628ME
- Exports: €9.6B v €9.4Be
- Imports: €10.4B v €10.1Be
- Prior Trade Balance revised better from -€865M to -€606M
9:44:35 AM
Hearing Citi positive on Oil services especially deepwater names
- Analysts have learned that Petrobras plans on hiring 12-15 additional deepwater rigs for 2011 which were not in the original plans.
- Expect contracting to begin as early as next month which would be positive for for deepwater companies
10:00:43 AM
European Market Internals Update at 10:00 ET
- FTSE100 volume at 351M, which is approx 57% below its 10-day moving average
- DAX volume at 59.9M, which is approx 46% below its 10-day moving average
- CAC40 volume at 77.1M, which is approx 42% below its 10-day moving average
10:32:14 AM
Market Internals update at 10:30ET
- NYSE volume 195M shares, about 10% below its three-month average; decliners lead advancers by 2.4:1.
- NASDAQ volume 430M shares, about 6% below its three-month average; decliners lead advancers by 1.8:1.
- VIX index +4.5% at just above 19.00
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
*(DE) DENMARK AUG CURRENT ACCOUNT (DKK): 7.5B V 8.5BE; TRADE BALANCE EX-SHIPPING: 5.2B V 7.0BE
- Prior Current Account revised from 10.6 to 10.0B
- Prior Trade Balance Ex-Shipping revised from 8.0B to 7.7B
4:00:04 AM
*(IT) ITALY AUG INDUSTRIAL PRODUCTION M/M: 1.6% V 0.1%E; Y/Y: 12.8% V 9.6%E; INDUSTRIAL PRODUCTION WDA Y/Y: 9.5% V 6.4%E
- Prior Industrial Production MoM revised from 0.1% to 0.3%
- Prior Industrial Production YoY revised from 1.7% to 2.5%
- Prior Industrial Production WDA YoY revised from 4.8% to 5.6%
6:00:25 AM
*(EU) OECD AUG LEADING INDICATOR M/M: 102.9 v 103.0 PRIOR
- August leading indicator for G7 area unchanged at 103.0
- August leading indicator points to continued slowing economic expansion.
- Sees signs of peak emerging in US with economic expansion continuing in Japan, Germany and Russia.
6:00:46 AM
*(IR) IRELAND AUG INDUSTRIAL PRODUCTION M/M: -13.6% V +3.8% PRIOR; Y/Y: 9.6% V 12.8% PRIOR
- Prior MoM revised higher from 3.2% to 3.8%
- Prior YoY revised higher from 12.1% to 12.8%
10:02:51 AM
European Internals Market Update at 10:00 ET
- FTSE100 volume at 225.1M, approx 73% below its 10-day moving average
- DAX volume at 42.9M, approx 61% below its 10-day moving average
- CAC40 volume at 61.1M, approx 55% below its 10-day moving average
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
08:30 US Sept Unemployment Rate, Nonfarm Payrolls, Manufacturing Payrolls, Private Payrolls, Hourly Earnings
10:00 US Aug Wholesale Inventories
Todays Headlines
7:13:33 AM
(US) UBS analysts: Maintains cautious outlook on US Regional Banks
- Outlook comes ahead of Q3 earnings.
- Though fundamentals improving, consensus expectations over-estimating pace of improvement in next 1-2 years.
7:45:28 AM
*(EU) ECB LEAVES MAIN REFI RATE TO REMAIN UNCHANGED AT 1.00%; AS EXPECTED
- Deposit and Marginal Lending rates unchanged, as expected at 0.25% and 1.75% respectively
***Reminder: ECB press conference to begin shortly after 8:30am ET (12:30 GMT)
8:30:03 AM
*(US) INITIAL JOBLESS CLAIMS: 445K V 455KE; CONTINUING CLAIMS: 4.46M V 4.45ME
- Prior Initial Jobless Claims revised higher from 453K to 456K
- Prior Continuing Claims revised higher from 4.457M prior to 4.510M
8:31:48 AM
(EU) ECB's Trichet: Reiterates interest rates are appropriate; price developments remain moderate and expectation remain anchored - Prepared remarks
- Monitoring all developments closely
- To adjust liquidity provisions as appropriate
- Reiterates ECB view that monetary policy is appropriate
- Underlying momentum of EMU recovery remains in pace
8:44:34 AM
(EU) ECB's Trichet: Central Bank has NOT engineered the rise in short term rates; Reiterates that such moves have no policy signal - Q&A session
- Banks have asked for less refinancing in its refi operation
- Progressive normalization has been interpreted by market participants as a result
- FX rate should reflect fundamentals (standard G7 view)
11:35:00 AM
(BR) Brazil Central Bank's Meirelles: Most of fiscal stimulus has been withdrawn, Brazil has emerged from crisis strongly
- Currently discussing what is considered a 'neutral interest rate'; economic activity is increasing.
- Notes Brazil industrial output is back to pre-crisis levels.
- Says US policy has created liquidity, resulting in currency market distortions. Believe every country should have a floating currency.
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
08:30 US Initial Jobless Claims, Continuing Claims
10:30 Natural Gas Inventories
11:00 US Treasury note announcement
15:00 US Aug Consumer Credit
Todays Headlines
7:13:33 AM
(US) UBS analysts: Maintains cautious outlook on US Regional Banks
- Outlook comes ahead of Q3 earnings.
- Though fundamentals improving, consensus expectations over-estimating pace of improvement in next 1-2 years.
7:48:18 AM
US Treasury's Geithner has called for emerging nations to coordinate more on FX and let markets determine exchange rate values - CNBC
- Currency markets are in a 'competitive non appreciation'
- Note: Geithner is scheduled to speak at 9am
9:00:41 AM
(US) US Treasury Sec Geithner: important to see more progress by key emerging market economies towards market-oriented FX rates (standard G7 speak)
- Competitive currency non-appreciation is a dangerous dynamic
- Need to establish a multi-lateral mechanism for cooperative rebalancing for countires with trade surplus to abandon export-oriented policies, and let currencies appreciate
- Currency battles risks inflation and asset bubbles
10:37:33 AM
(FR) Striking union CGT at Marseille oil terminal calls for rolling, open ended strikes against energy sector starting Oct 12 to protest pension reform
- Reminder: A French refinery industry group yesterday noted that the strikes could cause a shutdown of 7 refineres within a week assuming continuing strikes.
- Follow up: union says the strike at Marseille oil terminal will continue tomorrow.
11:02:10 AM
NY Fed: Purchased $2.07B in outright coupon purchase; dealers submitted $25.2B for consideration (bid to cover 12.1)
- Heaviest purchase $785M in the 06/15/13 maturity
- Avg bid to cover over prior four auctions is: 6.5
- Purchased maturities dated 03/15/2013 - 08/31/2014
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
08:15 US Sept ADP Employment Change
10:30 DoE Crude Oil/Gasoline/Distillate Inventories
Todays Headlines
4:31:01 AM
*(HK) HONG KONG AUG RETAIL SALES VALUE Y/Y: 16.9% V 16.3%E; RETAIL SALES VOLUME Y/Y: 14.7% V 13.4%E
- Prior Retail Sales Value revised higher from 18.9% to 19.2%
- Prior Retail Sales Volume revised higher from 16.0% to 16.2%
4:40:12 AM
(GE) German Sept New Car Registration Y/Y: -18% v -27% prior - VDIK
- YTD Car Registrations Y/Y: -28% v -29% prior
- Sept new passenger car registration at 260k vehicles; YTD (9-months) registration at 2.17M vehicles
5:27:22 AM
(EU) ECB's Costa: Reiterates that global recovery continues to remain weak; Portugal's economic recovery remains bumpy and uneven
- Portuguese banking systems requires alternative access to funding other than ECB.
- Top priority is to consolidate public accounts and the second is to increase private savings.
- Portugal's austerity measures are not enough and need political consensus on 2011 budget.
6:01:09 AM
(IR) Ireland Central Bank: Lowers 2010 and 2011 GDP growth forecasts for Ireland; Global uncertainty has increased
- Cuts 2010 GDP to +0.2% from +0.8% prior view
- Cuts 2011 GDP to +2.4%. from +2.8% prior view
- 2011 budget needed to demonstrate a new tougher stance on cutting the deficit
9:33:36 AM
(EU) ECB bond purchases totaled €63.5B as at Oct 1st vs. €61.5B prior week
- Settled €1.384B in Govt Bond Purchases in latest week v €134M prior (highest level of purchases since the last week of June)
- To drain €63.5B at 7-day Term deposit auction on Tuesday, Oct 5th
- To hold quick tender to drain excess liquidity
11:25:36 AM
(US) Fed's Sack: Expecting unemployment rate to decline over time; additional asset purchases not expected to complicate policy
- Expecting inflation to move higher towards a more desirable level; economy still vulnerable to downside
- Notes could purchase more MBS is spreads widen; monthly treasury purchases to move to $30B from $27B
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
“Know how to listen, and you will profit even from those who talk badly.”
Market Week Wrap-up
- The dreaded month of September and the fourth quarter came to a close this week after four weeks of sustained equity rally. All in all, the S&P500 had its best September in seventy years and leading equity indices are near their best levels since mid- May low trading volume remains disappointingly low. In a telling sign, gold has pushed out to fresh all-time highs both this week and last, despite the mild risk-on environment, closing out this week just shy of $1,320. On the data front, the focus was on mixed views of the global recovery offered by September industrial performance reports. In the US, four reports offered a mixed view of manufacturing, the very sector that has led the flawed recovery forward over recent months. Two glum regional Fed manufacturing surveys offered a negative take early on in the week: the Dallas and Richmond manufacturing indices both missed expectations by wide margins (the former has been weak for a while and the latter had been relatively strong in recent months). On the other hand, the Chicago PMI and the ISM Manufacturing Index met or beat expectations, and sustained the prior strong readings seen over the summer. China's September Manufacturing PMI beat the upper end of analyst forecasts helping to push industrial commodity prices higher on Friday. In Europe, September PMI readings hit troubling multi-month lows, while Spanish September PMI indicated contraction. As investors debate the validity of the so-called "Bernanke put," Fed governors continue their public tug of war over the Fed's next steps. This week Dallas Fed President Fisher questioned the efficacy of more asset purchases and Philadelphia Fed President Plosser warned that another round of Fed buying would be unlikely to have an impact on jobs, saying he would only support renewed quantitative easing (QE) if deflation arrives. The New York Fed's Dudley countered these remarks by stating that more Fed action to support the economy is likely (and also said no one should assume that more action will come at the November FOMC meeting). Major indices were more or less flat on the week, with the Nasdaq down 0.4%, the DJIA slipping 0.3% and the S&P500 off 0.2%.
- The big banks were back in the news this week after a relatively quiet summer season. Banking analyst Meredith Whitney went on CNBC on Thursday to reiterate here bearish view on the banking industry as a whole, reiterating many of her well-known positions and also adding a new wrinkle, warning that fiscal challenges facing US states are a major risk the regional banks due to issues with state budgets. In a separate story, it was reported that G20 members are considering a proposal to set capital standards 2-3% higher for the world's largest banks at the upcoming G20 meeting in November. The proposal comes in response to criticism that the recent Basel III bank capital rules did little to deal with the 'too big to fail' issue. Citigroup rose higher than the other leading banks after the Treasury disposed of another chunk of its holdings in the bank.
- Walgreens came in ahead of expectations in its Q4 report, with comps looking fairly decent. Western Union provided an update on its Q3 results. It noted that revenue was up 1% in the quarter and reaffirmed its 2010 guidance. Prepared foods name McCormick beat earnings targets but fell short on revenue, and slightly increased its 2010 outlook. MetLife warned that the firm could see a $0.20/share impact on FY11 earnings if interest rates remain at the extremely low current levels (note that MetLife has not offered FY11 guidance as of yet, and won't do so until early December). Consultancy Accenture offered Q4 results that were slightly ahead of expectations and raised its semi-annual dividend. Company executives said that the demand environment shows even more momentum than they had hoped for at this point.
- Tech investors focused on three key stories this week. First off was Research in Motion's new Playbook tablet computer, offering a 7-inch screen and strong specs, but analysts are very skeptical of the firm's decision to launch in 2011 at the earliest, just in time to compete with Apple's second-generation iPad. On Tuesday shares of Apple tumbled around $15 just after the open, apparently on a retread of rumors that Apple COO Cook could take the helm at Hewlett-Packard. Hewlett Packard put that rumor to rest when it appointing former SAP chief Leo Apotheker to the CEO spot, disappointing some investors who were looking for another "rock star" chief executive to replace the disgraced Mark Hurd. Recall that Apotheker lost his job running SAP earlier this year after he didn't live up to expectations. Earlier in the week, H-P offered an initial look at its FY11 guidance at an analyst event, with targets just a bit higher than the Street's expectations.
- Dealmaking has continued apace, with deals in the airline and beauty industries. In one of the larger transactions, AIG agreed to sell to Asian units to Prudential Financial for $4.8B. Southwest Airlines landed AirTran for $1.4B in cash and stock, valuing the shares at a premium of 69% over the prior day's closing price. European consumer products giant Unilever checked out beauty care name Alberto Culver for $3.7B in cash.
- Government bond markets ended the week little changed as investors acclimatized to the prospect of QE2. Bond yields in both the US and UK are not far from the lows of the summer. The US 10-year yield is holding near 2.5% following a week that included $100B in coupon auctions. The UK 10-year GILT yield slipped back below 3% after the Bank of England's Posen suggested inflation could fall well short of targets without additional quantitative easing.
- Weak dollar sentiment continued this week, goaded on by more QE2 speculation. An article in the Wall Street Journal suggested that the Fed may engage in small-scale buying on an ad-hoc basis rather than announcing a large asset purchase program up front, which pressured the greenback against riskier currencies. The euro rallied steadily on a stream of moderately positive economic data and in spite of resurfacing European peripheral debt woes. Early in the week, Moody's downgraded Anglo Irish Bank's subordinated debt, briefly pushing EUR/USD down to weekly lows under the 1.34 level. Gaming the anticipated costs of the Anglo Irish bailout was a major sideshow, but it hardly got in the way of euro strength. The Irish government said the bailout would cost €34.9B in the worst case scenario, only slightly below S&P estimates of more than €35B. The news may have been grim (the costs amount to nearly 35% of Irish GDP) but markets had largely anticipated them. On the plus side, China offered supportive rhetoric for Eurozone debt, pledging to buy Greek paper, while the ECB stepped in and bought Irish bonds. Encouraging German confidence data out mid-week further buoyed the single currency while peripheral spreads narrowed following new austerity measures from Portugal.
- Competitive currency devaluation has come into focus in the weeks following Japan's dive into FX markets. On Monday Brazilian Finance Minister Mantega offered unambiguous commentary on the state of currency markets, warning that the world is engaged in an international "currency war" and reiterated that Brazil will not allow the Real to over appreciate. Evidently the London Telegraph's Ambrose Evans-Pritchard feels Mantega's pain. In a column this week, Evans-Pritchard commented that considerable amounts of stimulus spending and easy money from industrialized Western countries is flowing into emerging markets, forcing emerging market nations to set up direct capital controls in order to slow inflows and keep their currencies from strengthening. Meanwhile, after the US House of Representatives passed a bill seeking to punish China for its weak renminbi, Treasury Secretary Geithner tried to calm the waters by stating the US will not engage in currency war or start a trade war with China.
- Sterling was mostly stable, with trading pivoting around the 1.5820 level as UK economic data was mixed but low-impact. Cable reached weekly highs around 1.5902, just before being knocked down to its lows on the week at 1.5670 as BoE Gov Posen offered very dovish commentary, noted that monetary policy must remain aggressive and pledged his support for more QE. The Aussie was capped at the 0.9725 after having reached multi-year highs at 0.9733.
- The yen gradually strengthen all week, with USD/JPY bottoming out around 83.1499 at post-intervention lows (recall that the initial BoJ intervention on Sept 15th came after the yen traded below the 83 level). In typically candid comments, former MoF official Sakakibara (aka Mr Yen) declared Japan's currency intervention unsuccessful and noted that the greenback would fall below ¥80 regardless of any action by the MoF. The BoJ will meet next week for its October policy meeting and is expected to announce additional easing steps that will not include intervention.
Week of Monday, October 4th, 2010 thru Friday, October 8th, 2010
Monday, October 04, 2010
Economic
10:00 US Aug Factory Orders, Aug Pending Home Sales
Tuesday, October 05, 2010
Economic
10:00 US Sept ISM Non-Manufacturing
16:30 API Crude Oil/Gasoline/Distillate Inventories
Wednesday, October 06, 2010
Economic
08:15 US Sept ADP Employment Change
10:30 DoE Crude Oil/Gasoline/Distillate Inventories
Thursday, October 07, 2010
Economic
08:30 US Initial Jobless Claims, Continuing Claims
10:30 Natural Gas Inventories
11:00 US Treasury note announcement
15:00 US Aug Consumer Credit
Friday, October 08, 2010
Economic
08:30 US Sept Unemployment Rate, Nonfarm Payrolls, Manufacturing Payrolls, Private Payrolls, Hourly Earnings
10:00 US Aug Wholesale Inventories
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
08:30 US Aug Personal Income, Personal Spending, PCE Core, PCE Deflator
09:55 US Sept Final University of Michigan Confidence
10:00 US Sept ISM Manufacturing, Aug Construction Spending
Todays Headlines
8:05:02 AM
G-20 ministers to propose to set capital standards 2-3% higher for world's largest banks at upcoming G-20 meeting in November in South Korea - CNBC
- Proposals to be referred to as 'systemic capital charges'
- Reminder: on 9/29 ECB's Weber referred to recent Basel 3 agreement as needing more work including dealing with "too big to fail"
8:30:02 AM
*(US) INITIAL JOBLESS CLAIMS: 453K V 460KE; CONTINUING CLAIMS: 4.457M V 4.473ME
- Prior Initial Claims revised higher from 465K to 469K
- Prior Continuing Claims revised higher from 4.489M to 4.540M
- 4 week average for claims at 463K v 463K prior
9:28:24 AM
(PD) Poland's Central Bank issues 2011 policy guidelines: Fiscal expansion may require higher interest rates
- Aiming for 2.5% CPI lower global growth could slow CPI rate; may see an incremental inflation impact due to 2011 increase in VAT
- Want to enter the EMU as soon as possible
11:03:34 AM
NY Fed: Purchased $2.2B in outright coupon purchase; dealers submitted $11.5B for consideration (bid to cover 5.2)
- Heaviest purchase $1.247B in the 11/15/21 maturity
- Avg bid to cover over prior four auctions is: 10.1
11:11:38 AM
(US) Dept of Interior Sec Salazar: Will publish offshore drilling rules in the coming days; implementing new drilling safety rules today
- New regulations deal with blowout preventers, cementing and well design; oil industry should expect a dynamic rules environment, CEOs will have to certify that their plans will meet safety regulations
- The industry should expect "dynamic regulations"
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
SchoolOfTrade.com and United Business Servicing, Inc. are not registered investment or trading advisers. The services and content provided by SchoolOfTrade.com and United Business Servicing, Inc. are for educational purposes only, and should not be considered investment advice in any way. U.S. Government Required Disclaimer - Commodity Futures Trading Commission. Futures and Options trading have large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don't trade with money you can't afford to lose. This is neither a solicitation nor an offer to Buy/Sell futures or options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this web site. The past performance of any trading system or methodology is not necessarily indicative of future results. cftc rule 4.41. These results are based on simulated or hypothetical performance results that have certain inherent limitations. Unlike the results shown in an actual performance record, these results do not represent actual trading. Also, because these trades have not actually been executed, these results may have under-or-over-compensated for the impact, if any, of certain market factors, such as liquidity. Simulated or hypothetical trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to these being shown. Testimonials may not be representative of the experience of other clients. Testimonials are not a guarantee of future performance or success. No compensation is ever paid in exchange for any testimonials. Testimonials have not been independently verified.
