07:30 US Nov Challenger Job Cuts
08:15 US Nov ADP Employment Change
08:30 US Final Q3 Non-Farm Productivity, Final Q3 Unit Labor Costs
10:00 US Nov ISM Manufacturing, Oct Construction Spending
10:30 DoE Crude Oil/Gasoline/Distillate Inventories
14:00 Fed's Beige Book
Todays Headlines
7:30:20 AM
*(BR) BRAZIL OCT PRIMARY BUDGET (BRL): 9.7B V 13.3BE; NOMINAL BUDGET: 6.4B V 2.0BE
- Net Debt to GDP Ratio: 41.3% v 40.7%e
- Comments: Central bank: results did not include figures from state-owned Eletrobras
8:32:19 AM
(US) Nov Intuit Small Business Employment Index +0.24% v +0.22% m/m
- Nov employment growth index translates to approximately 49,000 new jobs created nationwide.
- Nov average monthly pay for all small business employees -0.3% m/m
- Nov average hours worked flat m/m
10:45:39 AM
(EU) ECB's Trichet: FX volatility can negatively impact economies; inflation in the eurozone to remain at current levels near 1.9% and moderate next year
- Would like to see added flexibility in currencies in emerging economies.
- Recent EU data shows positive economic momentum.
- It is inappropriate to categorize the current situation as a 'currency war'
- The financial stability of the monetary union is not in question; Ireland and Greece are solvent.
11:04:09 AM
NY Fed: Purchased $6.81B in outright coupon purchase; dealers submitted $23.5B for consideration (bid to cover 3.45)
- Avg bid to cover over prior four QE2 auctions is: 4.9
- Heaviest purchase $2.01B in the 07/31/15 maturity
11:36:40 AM
(EU) ECB's Trichet: Asked about Belgium, Trichet notes the ECB is monitoring all nations in the eurozone - Q&A
- Some EMU economies are not functioning as well as they should, but overall EMU economy is growing faster than forecasts.
- Better coordination is needed among communications from European political figures.
- Calls on Portugal to begin making structural reforms, including those in the labor market.
- Clarifies that ECB debt purchases are not quantitative easing.
12:02:08 PM
(US) Fed releases results of $5B 28 day term deposit facility
Competitive Amount Offered: $5,000,000,000
Competitive Amount Tendered: $14,664,090,000
Competitive Amount Awarded: $5,000,030,000
Non-Competitive Amount Awarded: $113,260,000
Total Amount Awarded: $5,113,290,000
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 Sept S&P/CS Home Price Index, Sept S&P/CS Composite-20
09:45 US Nov Chicago PMI
10:00 US Nov Consumer Confidence
11:30 US Treasury's 4-week bill auction
14:00 Fed's Discount Rate Minutes
16:30 API Crude Oil/Gasoline/Distillate Inventories
Todays Headlines
6:42:13 AM
(GR) Greece Fin Min Papaconstantinou: Repayment period for bailout loans extended to 2021 from 2015
- Fixed interest rate on Greek bailout loans to be increased to 5.8% from 5.5%.
- Greek fiscal plans unchanged by bailout repayment extension.
- Greece intends to return to markets next year
8:00:05 AM
*(HU) HUNGARY CENTRAL BANK RAISES BASE RATE BY 25BPS TO 5.50%; NOT EXPECTED
- Was expected to maintain the Base Rate at 5.25%
***Represents Hungary's first interest rate hike since the onset of the global financial crisis that began in 2008
8:30:06 AM
*(CA) CANADA OCT INDUSTRIAL PRODUCT PRICE M/M: 0.5% V 0.3%E; RAW MATERIALS PRICE INDEX M/M: 1.7% V 0.9%E
- Prior Industrial Product Price MoM revised higher from 0.2% to 0.3%
- Prior Raw Materials Price Index MoM revised lower from -0.4% to -0.5%
9:02:13 AM
(HU) Hungary Central Bank Simor: More interest rate hikes might be necessary in coming months in order to control inflation - press conf
- Monetary Council decided to raise interest rates with regard to inflation consistently above the 3% target and the upside inflation risks.
- In order to meet the inflation goal more rate hikes may be necessary in the next months.
- Sees no economically compelling reason to raise inflation target. Hopes that news the government plans to raise CPI target is untrue.
9:41:36 AM
UBS updates global equity strategy; initiates Japan equities with overweight
- Trim overweight in US equities and shift to small underweight in EU apart from UK citing EU debt concerns.
- Upgrade Industrial to Neutral from Underweight.
- Upgrade Healthcare to Overweight from Neutral.
- Downgraded Discretionary to Underweight to accomodate upgrade of Industrials and due to valuations and rising food and energy prices.
- Brazil, China and Russia are most preferred countries.
10:32:16 AM
(UK) Fin Min Osborne: OBR shows the deficit is falling and the economic recovery is on track; affirms expectations that there will be no double dip recession
- Sees slowest quarter of growth for 2011 at 0.3%.
- EMU crisis clearly shows actions must be taken to handle deficits.
- Notes UK will lower new patent profit tax rate to 10% starting in 2013.
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.
(SP) Spain delays auction of $18B in power revenue bonds - Businessweek, citing sources (update)
- Spain has frozen the start of its €13.5B program to sell state-guaranteed power revenue bonds until government debt-market volatility abates, people with direct knowledge of the transaction said.
- Note that the Spanish government has not sold this type of power revenue bond in two years.
8:30:03 AM
*(US) OCT PERSONAL INCOME: 0.5% V 0.4%E; PERSONAL SPENDING: 0.4% V 0.5%E
- Personal Savings 5.7% v 5.6% m/m (revised from 5.3% prior)
- Prior Personal Income revised higher from -0.1% to 0.0%
- Prior Personal Spending revised higher from 0.2% to 0.3%
9:55:04 AM
*(US) NOV FINAL UNIVERSITY OF MICHIGAN CONFIDENCE: 71.6 V 69.5E
- 1 yr median inflation expectations at 3.0% v 2.7% Oct final.
- 5 yr median inflation expectations at 2.8% v 2.8% Oct final.
10:42:09 AM
(IR) S&P: Ireland's budget deficit forecasts differ materially from that of S&P's own predictions
- highlights the Ireland's ratings could be trimmed further if banking outflows continue at current pace
- low probability of leaving Euro area
1:01:50 PM
*(US) TREASURY'S $29B 7-YEAR NOTE AUCTION DRAWS 2.253%; BID-TO-COVER RATIO: 2.63 V 3.06 PRIOR AND 2.89 OVER THE LAST 10
- Indirect bidders take 42.2% of competitive bids, with 40.23% allotted at the high
- Direct bidders take 8.5%, primary dealers 49.3%
- Median 2.186%, low 2.10%
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 USOct Personal Income, Personal Spending, PCE Deflator, PCE Core, Oct Durable Goods Orders, Initial Jobless Claims, Continuing Claims
09:55 US Nov University of Michigan Confidence
10:00 US Oct New Home Sales, Q3 House Price Index
10:30 DoE Crude Oil/Gasoline/Distillate Inventories
11:00 US Nov Kansas City Fed Manufacturing
12:00 DoE Natural Gas Inventories
13:00 US Treasury's 7-yr note auction
Todays Headlines
8:30:03 AM
*(CA) CANADA SEPT RETAIL SALES M/M: 0.6% V 0.7%E; RETAIL SALES LESS AUTOS M/M: 0.4% V 0.3%E
- Prior Retail Sales MoM revised higher from 0.5% to 0.7%.
- Prior Ex Autos MoM revised higher from 0.4% to 0.6%
10:09:18 AM
(US) FDIC Q3 Troubled Bank List: 860 v 829 q/q (update)
- Total assets of problem institutions $379.2B v $408B q/q
- Deposit insurance fund now -$8B v -$15.2B q/q
- FDIC insured institutions net income $14.5B v $21.6B q/q
11:05:09 AM
NY Fed: Purchased $1.63B in TIPS purchase; dealers submitted $8.6B for consideration (bid to cover 5.2)
- Avg bid to cover over prior four QE2 purchases of outright coupon purchases is: 4.2
- Heaviest purchase $350M in the 01/15/15 maturity
12:40:00 PM
Preview: (US) Treasury's $35B 5-year note auction results due just after 13:00 ET
- $35B is unchanged from the Oct auction.
- prior bid-to-cover ratio 2.82 with an average of 2.78 over the last 10 auctions.
- indirect bidders took 39.5% of competitive bids at last auction with 83.8% allotted at the high.
- When issued notes currently yield 1.405% which is roughly 3 basis points above the cash market.
12:44:15 AM
(IR) Ireland PM Cowen: Must move ahead with FY11 budget plan; best way to inspire confidence would be to pass the budget on Dec 7th
- Insists he is not trying to 'cling' to his position.
- Says vote should remain as scheduled on Dec 7, after opposition leader asks Cowen to move the vote up to next week.
- Expects budget to be enacted by Feb of 2011.
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 Preliminary Q3 GDP, Q3 GDP Price Index, Q3 Personal Consumption, Q3 Core PCE, Canada Sept Retail Sales
10:00 US Oct Existing Home Sales, Oct Richmond Fed Business Activity
11:30 US Treasury's 4-week bill auction
13:00 US Treasury's 5-yr note auction
14:00 FOMC Minutes
16:30 API Crude Oil/Gasoline/Distillate Inventories
Todays Headlines
5:30:35 AM
(IR) Moody's: Multi-notch downgrade will be the most likely be the outcome in Ireland but to maintain investment grade rating
- Increase burden in Irish banking sector is a credit negative.
- Discussions between Ireland, EU and IMF are significant steps for banks in Ireland.
- Sees aid coming in for Ireland in €80-95B range.
5:33:12 AM
(IR) German Finance Ministry Spokesman Kreienbaum: Ireland has now formally requested aid; No need for German Parliament decision on request
- Aid to Ireland depends on austerity measures and if the euro is threatened.
- Sees no risk to the euro from other member states.
- Reiterates German view that creditors must participate in future EMU bailouts.
- Aware that Germany's domestic banks are involved in problems related to Ireland's debt.
10:24:43 AM
(BR) Brazil National Development Bank (BNDES): Preparing to develop methods to stimulate private lending
- Aims to maintain investment at 24%/GDP for economic growth to contine at 5%/annum; will target methods to keep infrastructure investments high
10:30:41 AM
*(IS) ISRAEL CENTRAL BANK LEAVES BASE RATE UNCHANGED AT 2.00%; AS EXPECTED
- Widens the interest rate corridor in banks deposit window from +/-0.25% to +/- 0.5%
- Sees 1H 2011 inflation slightly above 3%, and then moving back into 1-3% range.
11:02:57 AM
NY Fed: Purchased $8.26B in outright coupon purchase; dealers submitted $33.5B for consideration (bid to cover 4.1)
- Avg bid to cover over prior four QE2 auctions is: 4.7
- Heaviest purchase $2.1 in the 02/15/18 maturity (earliest dated)
1:01:51 PM
*(US) TREASURY'S $35B 2-YEAR NOTE AUCTION DRAWS: 0.52%; BID-TO-COVER RATIO: 3.70 V 3.43 PRIOR AND 3.25 AVG OVER LAST 10 AUCTIONS
- 2.46% allotted at the high
- Indirect bidders take 38.26% of competitive bids, direct bidders take 14.4%, primary dealers take 47.35%.
- Median bid 0.50%, low bid 0.443%
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, Canada Oct Leading Indicators, Canada Sept Wholesale Sales
10:00 Sept Leading Indicators, Nov Philadelphia Fed
10:30 Natural Gas Inventories
Todays Headlines
7:00:03 AM
*(US) MBA MORTGAGE APPLICATIONS W/E NOV 12TH: -14.4% V +5.8% PRIOR
- Refi's: -16.5% v +6.0% prior
- Avg Rate on 30y mortgage: 4.46% v 4.28% prior
- Purchase Index: (Seasonally adj): -5.0% v +5.5% prior
8:30:03 AM
*(US) OCT HOUSING STARTS: 519K V 598KE (lowest since April 2009); BUILDING PERMITS: 550K V 568KE
- Prior Housing Starts revised lower from 610K to 588K
- The decline in overall starts was almost entirely due to a 44% plunge in multi-family starts. Single-family permits rose by 1.0% to 406K
11:03:03 AM
NY Fed: Purchased $8.15B in outright coupon purchase; dealers submitted $29.9B (bid to cover 3.6)
- Note: This was the fourth QE2 operation
- Heaviest purchase $2.31B in the 08/15/19 maturity
- Purchased maturities dated 02/15/2018 - 08/15/2020
11:50:36 AM
(US) Fed's Bullard: Removing the dual mandate and moving towards single mandate of price stability is an 'interesting idea'; it is important to fight too low inflation
- Housing market 'bouncing on the bottom', there is a danger if GSEs continue without reform
- Interested in debate for Fed having only a single mandate
- Reminder: in recent days some Congress members have called for the Fed to focus solely on price stability rather than both price stability and full employment
12:01:48 PM
(NO) Norway Central Bank: Satisfied with economic activity, inflation remains stable
- Feels Norwegian Crown remain strong, Fed's QE2, assuming it is positive for the US is a good thing for Norway
- There is no evidence of a bubble in the Norwegian housing market
12:28:51 PM
(US) Senator Corker (R-TN): Fed says it is not trying to manipulate the level of the USD
- Senator Bayh (D-IN): Fed is still committed to controlling inflation.
- Senator Shelby (R-AL): Fed believes QE2 will create 700K to 1M jobs over the next two years.
-Comments come after Fed Chairman Bernanke breifed the Senate Finance Committee on QE2.
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 Oct PPI, Oct Core PPI, Canada Sept Manufacturing Sales
05:00 Brazil Nov Inflation
08:30 US Oct CPI, Oct CPI Core Index SA, Oct Housing Starts, Oct Building Permits
10:30 DoE Crude Oil/Gasoline/Distillate Inventories
Todays Headlines
9:08:41 AM
(EU) S&P cuts Cyprus sovereign ratings one notch to A from A+; outlook negative
- The downgrade reflects our opinion of increased vulnerabilities from embedded credit risk of the Cypriot financial system's external assets and domestic loan book, and the impact these could ultimately have on public finances.
- The negative outlook reflects the risks we see that the large financial sector contingent liabilities could migrate to the government's balance sheet.
- Note: Cyprus is a member of the EU and euro zone (EMU).
9:15:03 AM
*(US) OCT INDUSTRIAL PRODUCTION: 0.0% V 0.3%E; CAPACITY UTILIZATION: 74.8% V 74.9%E
- No revisions to prior Industrial Production at -0.2%
- Prior Capacity Utilization revised higher from 74.7% to 74.8%
10:39:41 AM
(UK) BoE's King: Current CPI levels are concerning given it is higher than target; GBP decline and VAT tax are partially to blame
- Reasonable to expect medium term inflation will fall; need to ensure it stays consistent with 2% target.
- It is possible BOE will conduct additional QE if deemed necessary; QE is a normal monetary policy tool.
- Says its a mistake to think debt could be inflated away.
- Notes UK exposure to the Irish economy is "not trivial."
- There are signs that export activity is increasing
11:02:25 AM
NY Fed: Purchased $5.42B in outright coupon purchase; dealers submitted $33.5B for consideration (bid to cover 6.2)
- Note: This was the third QE2 operation
- Heaviest purchase $1.58B in the 08/31/12 maturity
- Purchased maturities dated 05/31/2012 - 05/15/2013
12:02:15 PM
(IR) Ireland PM Cowen: Will do everything necessary to help stabilize the Euro; public finances are under control
- Will stabilize the budget at the underlying target in 2010; the sense of 'crisis' is not a fair reflection on the country.
- Sees 2010 gross general debt around 98.5% of GDP.
- Committed to a deficit target of 3%/GDP.
- Pledges to protect deposits at banks.
- Reiterates that ECB is meeting funding requirements of Irish banks.
- Notes the Eurogroup will discuss market developments
12:38:55 PM
(US) Fed's Bullard: QE2 has spurred a "significant" market reaction; it is possible Fed will not buy all $600B in authorized purchases under QE2 - radio interview
- Cautiously optimistic about the economy; policy will be adjusted as data arrives.
- Believes the new round of Fed asset purchases has already been successful.
- Reminder: on 11/8 Bullard reiterated that the FOMC could adjust QE2 spending higher or lower, depending on conditions; program will be contingent.
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 Oct PPI, Oct Core PPI, Canada Sept Manufacturing Sales
09:00 US Sept Net Long-Term TIC Flows, Sept Total Net TIC Flows
09:15 US Oct Industrial Production, Oct Capacity Utilization
11:30 US Treasury's one-month bill auction
13:00 US NAHB Housing Market Index
16:30 API Crude Oil/Gasoline/Distillate Inventories
Todays Headlines
8:30:04 AM
*(US) OCT ADVANCE RETAIL SALES: 1.2% V 0.7%E (largest rise in 7 months); RETAIL SALES LESS AUTOS: 0.4% V 0.4%E V
- Retail Sales Ex Auto & Gas: 0.4% v 0.3%e
- Prior Advance Retail Sales revised higher from 0.6% to 0.7%
- Prior Ex Auto revised higher from 0.4% to 0.5%
8:54:28 AM
(FR) France Debt Agency (ATF) sells total € 7.5B vs. €7.5B indicated in 13-week, 26-week and 52-week Bills
- Sells €4.0B in 13-week Bills, avg yield 0.660% v 0.687% prior
- Sells €2.0B in 26-week Bills, avg yield 0.758% v 0.820% prior
- Sells €1.5BB in 52-week Bills, avg yield 0.929% v 0.897% prior
11:03:22 AM
NY Fed: Purchased $7.9B in outright coupon purchase; dealers submitted $28B for consideration (bid to cover 3.5)
- Note: This was the second QE2 operation
- Heaviest purchase $1.38B in the 11/15/17 maturity (longest dated)
- Purchased maturities dated 05/31/2016 - 11/15/2017
11:46:56 AM
(IR) EU's Juncker: Ireland has not requested aid, does not expect any imminent agreement on an Ireland bailout
- Sees major differences between Ireland and Portugal.
- Believes markets are overestimating eurozone problems, asserts that bondholders will not be involved in near-term bailouts.
12:05:55 PM
Sangart, Inc. Receives U.S. Orphan Drug Designation for use of MP4CO in Patients with Sickle Cell Disease
- MP4CO is designed to deliver therapeutic levels of carbon monoxide (CO) to patients suffering from a sickle cell crisis. CO stabilizes hemoglobin S, an abnormal type of hemoglobin, and prevents sickling of red blood cells.
- The addition of MP4CO to existing treatment protocols may alleviate pain associated with a sickle cell crisis and potentially reduce the duration of a crisis.
-Clinically, this could mean preventing hospitalization or shorter hospital stays, reducing the need for addictive narcotic analgesics, and an improved quality of life for patients with sickle cell disease.
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.
"Success is a journey, not a destination. The doing is often more important than the outcome."
Market Week Wrap-up
- Global equity and commodity markets have surged this week thanks to the widely anticipated launch of the Fed's second round of quantitative easing - so-called QE2. At its policy meeting on Tuesday, the Fed committed to purchasing $600B in US Treasuries in the belly of the curve, in increments of $110B in buys a month (when combined with the roughly $30B per month already being reinvested from maturing MBS holdings). The Fed's big splurge was only one of several very significant developments sending things higher this week. On Tuesday the mid-term elections delivered the US House of Representatives into the hands of the Republican Party, although the GOP fell short of achieving a majority in the Senate. Economic data worldwide continues to improve incrementally. Europe, China and India PMI readings for October helped further weaken the dollar early on in the week, while in the US the October ISM manufacturing report roundly beat expectations. On Friday, the US non-farm payrolls report showed 151K net growth in jobs in October, and the new private payrolls component indicated 159K net growth in jobs. Both results were far ahead of expectations, and bolstered further by each of the last two months being revised higher by about 50K jobs. Stocks had a strong week, with the DJIA rose 2.9%, the S&P500 gained 3.6%, and the Nasdaq was up 2.9%.
- For nine weeks global equity markets gained steadily as investors awaited the exercise of the so-called "Bernanke put," assisted by a handful of better economic data. With the Fed now implementing QE2, the asset unwind has begun and market participants are waking up to the economic realities that prompted more Fed easing in the first place. Asset classes that have enjoyed a steady run higher on growing risk appetite fell as money flowed into the dollar and longer-duration government debt (even gold managed to go a few days without logging all-time highs). Commodities traded off despite a series of macro reports from OPEC, the USDA and the IEA that showed oil and food demand would be higher than prior forecasts moving into 2011. Further risk aversion was driven by a G20 summit that showcased rather than solved the intense divisions among developed and developing nations over trade policy and currency imbalances. And then there was Ireland, where parliamentary bickering over the 2011 austerity budget drove yet another round of European peripheral debt worries, replete with the usual rumors and denials. For the week the DJIA lost 2.2%, the S&P500 dropped 2.2%, and the Nasdaq fell 2.4%.
- In tech, investors dumped shares of Cisco Systems after the company offered Q2 revenue guidance that was nearly 10% below the consensus view and a profit outlook that was even further off the mark. CEO Chambers warned that the challenges, including a big drop in public sector sales (hello, austerity), could persist for a few more quarters and that growth will not be as fast as desired. Nvidia's quarterly report was right in line with expectations. The chipmaker forecasted higher sales for the current quarter and said its mobile business would take off next year when tablets and smartphones will begin using its Tegra chips.
After the scare over an engine failure on an Airbus superjumbo last week, the global aerospace industry's next generation of aircraft received another black mark as a Boeing 787 Dreamliner on a test flight was forced to make an emergency landing due to an electrical fire on board. Management tried to massage the incident by noting the 787 emergency systems "worked perfectly," but had no comment on whether it would lead to another push back on 787 delivery dates. Boeing shares nosedived more than 10% on the week, and the company noted the cancellation of an order for eight 787's in its weekly business update.
- Poor overall economic conditions hurt two major food companies in Q3. Dean Foods missed earnings targets, citing adverse conditions in its milk and dairy related businesses. Campbell Soup cut its 2011 outlook, citing higher promotional spending, weak economic conditions and intense competitive pricing. Fast food name Wendy's had a mixed Q3 report and cut its FY10 EBITDA guidance, citing a bearish outlook for comps through the end of the year. Sara Lee came in comfortably ahead of expectations in its first quarter report. The company also announced that it would divest its North American fresh bakery business to Grupo Bimbo for $959M and concentrate its business on core coffee and protein categories.
- In retail, Macys reported slightly better than expected results and increased FY10 guidance. Executives said the company is looking forward to a relatively strong holiday season. Apparel name Ralph Lauren beat profit and revenue targets and improved its outlook for 2011 and also projected a good holiday season performance. JC Penny and Kohl's offered largely in-line Q3 results, although Kohl's did post subpar revenue guidance for Q4. Shares of wholesale warehouse name BJ's jumped after a report that the company was looking to hire an advisor to explore strategic alternatives.
- Monoline mortgage insurance providers Ambac and MBIA had a bad week. MBIA reported a quarterly loss that was twice the expected amount, just a day after competitor Ambac filed for bankruptcy. MBIA's loss was primarily from a $492M pre-tax net loss on the fair value of insured credit derivatives. Specialty insurer Assurant was hit hard after an article in periodical American Banker examined allegations of ingrained fraudulent behavior at one of the firm's subsidiaries.
- Yields on US Treasuries were hitting some of their highest levels since mid September by week's end. The 30-year bond was outperforming the rest of the curve by a noticeable margin on Friday. Throughout the week investors appeared to be unwinding the QE2 trade that had sent 30-year rates up and pressured yields along the belly of the curve, where the Fed intends to do the majority of their large scale asset purchases. The official start of QE2 with the Fed's purchase of more than $7B securities offered an opportunity to take profits for investors who believed this round of quantitative easing was largely priced in. The 7-year note traded down a full point while the 10-year yield rose as much as 10 basis points to approach 2.75%. Interestingly the long bond is holding right near 4.25% after the market digested $72B in supply this week, culminating with a shaky $16B 30-year auction on Wednesday. Traders appear willing to unwind some of the steepening positions put on ahead of the official start of QE2.
- The eurozone's unending peripheral debt crisis killed the euro and dictated FX sentiment this week. EUR/USD bottomed out on Friday at lows last seen at the very end of September, just under the 1.36 handle, before finishing the week a little higher. Things had been looking better early on after local elections provided the Greek government with a mandate to continue deep reforms and allowed the PM to drop his warning that he might call early parliamentary elections. As soon as the heat was off Athens, traders shifted their attention to Ireland where the parliamentary opposition threatened to torpedo the government's 2011 austerity budget. Following the now familiar pattern, spreads between Irish and German 10-year government debt widened out to record levels, the euro plunged and speculation built that Ireland would imminently be forced to request as much as €80B in aid from the EU/IMF backstop, the European Financial Stability Fund (EFSF). Spreads on debt of the other PIIGS nations widened markedly, and worries arose that Portuguese bonds were trading above levels that could trigger higher margin requirements at LCH Clearnet, after Clearnet confirmed it would raised bond margins on Irish goverment bonds to 15% of net exposure.
- There were hopes that the leaders attending the G20 summit in South Korea might reach a truce in the ongoing currency wars, but those hopes were dashed by infighting and divisions. In the end, the summit merely served to showcase yawning policy gaps between emerging and developed economy nations. The US had gone into the meeting with proposals to set quantitative limits on nations' current accounts, but the plan ran straight into opposition from BRIC exporting nations, led by China. The Chinese hammered away at what they called irresponsible US monetary policies, and insisted that issuers of reserve currencies should keep their exchange rates stable and avoid competitive depreciation. BRIC officials stressed that new Fed policy was to weaken the greenback (ironically former Fed Chairman Greenspan also wrote that the Fed was deliberately devaluing the dollar, in a well-timed FT op-ed). In a sign of the growing tension between the US and China, Chinese rating agency Dagong Global Credit downgraded the US sovereign credit rating one notch, to A+ from AA, citing fresh Fed easing.
- The highlight of China's October data dump was the consumer price index, which printed a 25-month high of +4.4%, four-tenths higher than expected. China's National Bureau of Statistics attributed the increase to high food costs and excessively easy monetary policy in the US, just as the Fed commenced its first purchase of QE2 treasuries on Friday. New yuan loans were also well above consensus at CNY588B, and both data points are pinning the China State Council against its 2010 forecasts of 3.0% CPI and CNY7.5T in loans. These targets will become increasingly more difficult to meet if recent trends hold up in November and December. Given that, the PBoC announced a 50bp rate hike in reserve requirement ratio - the fourth RRR hike this year - boosting requirements for the top four Chinese banks to 18.0% and for other large lenders to 17.5%. Speculation of additional PBoC tightening measures in one-year lending and deposit rates continued to percolate going into the weekend, sending the Shanghai Composite down over 5% on Friday.
- In Australia, October employment data showed the economy created almost 10K more jobs than the 20K thousand, but the unemployment rate spiked to 5.4%, spoiling expectations of a 0.1% decline to 5.0%. The primary driver in the unemployment rise was a greater participation rate, which rose to a record high of 65.9% as more workers returned to the labor force. However, the figures also dampened expectations for further upside wage pressure as communicated by the Aussie central bank following its recent surprise rate hike, and should result in a more cautious stance toward excessive tightening going forward. Implied probabilities for another tightening next month fell to virtually zero, with markets now expecting RBA to keep rates on hold well into Q1.
Week of 11/15/2010 thru 11/19/2010
Monday, November 15, 2010
Economic
08:30 US Nov Empire Manufacturing, Oct Retail Sales
10:00 US Sept Business Inventories
11:30 US Treasury's three- and six-month bill auctions
Tuesday, November 16, 2010
Economic
08:30 US Oct PPI, Oct Core PPI, Canada Sept Manufacturing Sales
09:00 US Sept Net Long-Term TIC Flows, Sept Total Net TIC Flows
09:15 US Oct Industrial Production, Oct Capacity Utilization
11:30 US Treasury's one-month bill auction
13:00 US NAHB Housing Market Index
16:30 API Crude Oil/Gasoline/Distillate Inventories
Wednesday, November 17, 2010
Economic
05:00 Brazil Nov Inflation
08:30 US Oct CPI, Oct CPI Core Index SA, Oct Housing Starts, Oct Building Permits
10:30 DoE Crude Oil/Gasoline/Distillate Inventories
Thursday, November 18, 2010
Economic
08:30 Initial Jobless Claims, Continuing Claims, Canada Oct Leading Indicators, Canada Sept Wholesale Sales
10:00 Sept Leading Indicators, Nov Philadelphia Fed
10:30 Natural Gas 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.
06:00 Brazil Sept Retail Sales
09:55 US Nov University of Michigan Confidence
14:00 Argentina Oct CPI
16:00 Colombia Sept Trade Balance
Todays Headlines
6:23:34 AM
(GE) German Fin Min: Dismisses earlier press speculation that EMU members were preparing aid for Ireland, the country has NOT requested aid
- Germany is confident that Ireland will successfully implement there budget.
-Earlier in the session today: German press reported thatt EMU members were considering possible aid for Ireland as concerns over rising yields mounted. The press article also noted that Ireland had not requested any aid (see our 4:18am ET (9:18 GMT headline)
7:17:18 AM
(EU) European steel market remains uncertain due to EUR/USD fx rate, expectations are muted - Steel Business Briefing
- "Virtually all business over the last six weeks has been dependent on currency movements, but even the bankers do not know which way the dollar will go," one trader told SBB
- SBB states that the weaker dollar has cut European raw material import costs by about 15%. In addition, the quarterly iron ore price for European buyers is down by about a similar amount, resulting in an approximate 30% reduction in some key costs for integrated producers.
- Oversupply remains an issue. Until the producers close a lot more blast furnaces, prices will likely remain weak.
8:00:25 AM
(HU) Hungary Central Bank Simor: Committed to reaching CPI objective of 3% and will use all available tools necessary.
- State of budget to deteriorate greatly in 2011
- The 2011 Budget preserves a bad budget structure and raises inflationary forces; Lacks necessary spending cuts
- Gov't fiscal stimulus makes up 2% of 2011 growth; funded via pension funds
- The budget finances a long-term personal income tax cut from temporary revenues
- Says Hungary 2011 structural deficit is 4% of GDP vs. 2.5% in 2010; look beyond the headline defcit
10:04:53 AM
USD making fresh session highs against many of the major pairs
- USD/CHF fresh session highs, EUR/USD fresh session lows
- NOTE: Dealers attributing the strength in the USD to a supposed positive ThinkTank/private consultancy report on the Fed. Medley reportly says the Fed could curtail asset purchases under QE2 if it sees strong evidence that the output gap is closing faster than expected.
11:41:40 AM
(TU) Turkey Central Bank Interest Rate Decision expected at 12:00 ET (17:00 GMT)
- Expected to maintain the Benchmark Repo Rate at 7.00%
- Note: the central bank has adjusted other rates in recent policy meeting
- The Overnight Borrowing Rate currently stands at 5.75% (cit last back on Oct 14th by 50bps)
- The Overnight Lending R is currently at 8.75% level (Last cut on Sept 16th by 25bps)
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.
*(CA) CANADA SEPT INT'L MERCHANDISE TRADE: -C$2.5B V -C$1.6BE
- Prior revised wider from -C$1.3B to -C$1.5B
- Exports C$33.1B v C$34.0B prior
- Imports: C$35.6B v C$35.3B prior
- Trade Balance with US: C$1.6B v C$2.9B
- Trade Balance non-US: -C$2.5B v -C$4.3B prior
8:30:05 AM
*(US) INITIAL JOBLESS CLAIMS: 435K V 450KE (lowest level since July); CONTINUING CLAIMS: 4.30M V 4.30ME (Lowest level since Nov 2008)
- Prior Initial Jobless Claims revised higher from 457K to 459K
- Prior Continuing Claims revised higher from 4.340M to 4.387M
- 4 week Avg claims: 447K v 456K prior
8:30:05 AM
*(US) SEPT TRADE BALANCE: -$44.0B V -$45.0BE
- Prior revised lower from -$46.3B to -$46.5B
- Imports M/M: $198.1B v $200.2B prior
- Exports M/M: $154.1B v $153.8B prior
- China: -$27.83B v -$28.04B prior
- Japan: -$5.04B v -$5.82B prior
- Canada: -$1.09B v -$2.19B prior
- OPEC: -$8.88B v -$9.01B prior
- Mexico: -$5.77B v -$6.04B prior
- Europe: -$7.6B v -$9.7B prior
9:49:26 AM
(BR) Brazil Central Bank: Brazil's financial system is stable; Banco Panamericano has more than enough funds to meet obligations
- Central bank notes it its probing possible fraud at Banco Panamericano, asserts that the institution does not pose any risks to other Brazilian banks.
-Note that earlier in the session, Brazil's Bovespa traded off on news that Brazil Central Bank is probing Banco Panamericano regarding accounting errors following a $1.5B bailout.
9:58:04 AM
(IR) Ireland Central Bank Chief: Yields will not continue at these crisis levels; yet Ireland will not get back to the 2005-2006 levels
- Comments that it could be necessary that the bank guarantee be extended for a couple more quarters
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, US Sept Trade Balance, Oct Import Price Index
10:30 DoE Crude Oil/Gasoline/Distillate Inventories
12:00 Natural Gas Inventories
13:00 US Treasury's 30-yr auction
14:00 US Oct Monthly Budget Statement
Todays Headlines
8:31:32 AM
(US) USDA monthly crop report: US 2010 corn crop 12.54B bushels v 12.66B bushels prior
- US 2010 soybean crop 3.38B bushels v 3.41B bushels prior
- US 2010-11 all wheat crop 2.21B bushels
- Russia 2010-11 wheat crop 42M tons v 42.5M tons prior
- World 2010-11 cotton stocks 42.2M bushels v 31.5M bushels prior
9:01:05 AM
(US) FDIC staff proposes charging large banks more for deposit insurance fund; Would take effect in April 1st 2011
- Proposing to base the fees on a measure of banks' assets (formula would favor smaller banks)
- Banks with $10B or more in assets would pay 80% of total insurance fund fees from the 70% prior
- Under the FDIC's proposal, those fees will be calculated based on a bank's average total consolidated assets, minus tangible equity, such as common stock.
12:02:12 PM
Market Internals update at 12:00ET
- NYSE volume 380M shares, about even to its three-month average; decliners lead advancers by 1.5:1.
- NASDAQ volume 930M shares, about 10% above its three-month average; decliners lead advancers by 1.4:1.
- VIX index -1.5% to just above 18.00
12:03:56 PM
(US) EIA Short Term Energy Outlook: Raises 2011 world oil demand estimate by 1.44M bpd y/y; non-OPEC 2011 oil output to decline 250K bpd y/y
- Expects the price of WTI crude to average about $83 per barrel this winter (October 1 to March 31), a $5.50-per-barrel increase over last winter and $3 per barrel more than in last month's Outlook. Projected WTI prices rise gradually to $87 per barrel by Q4 as US and global economic conditions improve.
- Expects regular-grade motor gasoline retail prices to average $2.84 per gallon this winter, 19 cents per gallon higher than last winter. Retail diesel fuel prices are expected to average $3.09 per gallon this winter, an increase of 29 cents per gallon over last winter. In 2011, higher crude oil prices combined with strengthening refiner margins push annual average prices for motor gasoline and diesel fuel to $2.97 and $3.19 per gallon, respectively.
12:16:01 PM
(CA) BoC's Carney: Expecting the global financial system to begin to look more like Canada's; no comment on monetary policy
- Highlights G20 members feel management and shareholders of banks must endure the loss of financial crises and not the taxpayers of a country.
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.
"Keep away from people who try to belittle your ambitions. Small people always do that, but the really great make you feel that you, too, can become great."
06:00 Brazil Oct Inflation
10:00 Mexico Oct Consumer Prices, Sept Trade Balance
13:00 US Treasury's 10-yr auction
16:30 API Crude Oil/Gasoline/Distillate Inventories
Todays Headlines
6:01:38 AM
*OECD SEPT LEADING INDICATOR M/M: 0.0% (flat); Y/Y +4.4%
- Industrial output seen falling below trend in Brazil and China
- Moderate downturn seen in Canada, UK, France, Italy and India
- Expansion seen in US, Japan, Germany and Russia
8:16:04 AM
(US) Fed's Bullard: Reiterates view that FOMC could adjust QE2 spending higher or lower, depending on conditions; program will be contingent
- There are no numerical targets or trigger points for QE2 but pace of economic progress will be the guides
- Oct Nonfarm payroll data is encouraging but does not affect forecast too much; Unemployment to stay high for a while; Inflation to remain low
- When the time comes Fed would sell assets first to shrink balance sheet
- Could lengthen the average duration of Treasury purchases
9:02:05 AM
(IR) EU's Juncker: Ireland can avoid emergency funding if it meets budget goals; Greece budget plan is credible
- Eurozone has mediocre growth right now.
- Confident in Ireland's ability to reach its budget targets by 2014.
- Expects Greece to achieve deficit goals.
- Reiterates that currency rates should reflect fundamentals but main debate has moved to the G20 summit
10:00:37 AM
(US) NY Fed: Q3 report on Household Debt and Credit: Total consumer debt at $11.6T, -0.9% q/q; -7.4% from peak
- Total Household mortgage debt -7.4% from peak
- Share of total household debt in some stage of delinquency 11.1% v 11.4% on June 30, and 11.6% in year ago period.
- number of people with a new bankruptcy noted on their credit reports -16% during the second quarter
11:02:55 AM
NY Fed: Purchased $6.26B in outright coupon purchase; dealers submitted $27.4B for consideration (bid to cover 4.3)
- Heaviest purchase $1.65B in the 11/15/17 maturity
- Avg bid to cover over prior four auctions is: 10.4
- Purchased maturities dated 10/31/2016 - 08/15/2020
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.
"Our greatest pretenses are built up not to hide the evil and the ugly in us, but our emptiness. The hardest thing to hide is something that is not there."
Market Week Wrap-up
- Global equity and commodity markets have surged this week thanks to the widely anticipated launch of the Fed's second round of quantitative easing - so-called QE2. At its policy meeting on Tuesday, the Fed committed to purchasing $600B in US Treasuries in the belly of the curve, in increments of $110B in buys a month (when combined with the roughly $30B per month already being reinvested from maturing MBS holdings). The Fed's big splurge was only one of several very significant developments sending things higher this week. On Tuesday the mid-term elections delivered the US House of Representatives into the hands of the Republican Party, although the GOP fell short of achieving a majority in the Senate. Economic data worldwide continues to improve incrementally. Europe, China and India PMI readings for October helped further weaken the dollar early on in the week, while in the US the October ISM manufacturing report roundly beat expectations. On Friday, the US non-farm payrolls report showed 151K net growth in jobs in October, and the new private payrolls component indicated 159K net growth in jobs. Both results were far ahead of expectations, and bolstered further by each of the last two months being revised higher by about 50K jobs. Stocks had a strong week, with the DJIA rose 2.9%, the S&P500 gained 3.6%, and the Nasdaq was up 2.9%.
- QE2 has been greeted by three days of skepticism. The press has repeated referred to the move as a gamble. BoJ Governor Shirakawa warned the effort does not immediately remove economic uncertainty in the US. German Finance Minister Schaeuble said QE2 will have the same effect as China's currency manipulation and called the measures "clueless." Brazil's finance minister said he planned to question US officials about the policy at the upcoming G20 meeting in Korea. Fed dissident Hoenig accused the Fed of monetizing the debt. A Chinese Vice Foreign Minister commented that the US owed China an explanation for a policy that amounts to indirect manipulation of the dollar. ECB Chief Trichet at least offered that he did not believe that the US was pursuing a weak dollar policy. Most analysts believe the new policy will in fact weaken the greenback, drive dollar exports to non-dollar countries and stoke the commodities inflation cycle. Many countries may resort to capital control measures to fend off the flood of dollars. Asia watchers believe China will likely speed up bilateral currency trade pacts with major trading partners. And everyone wonders how much more Fed might spend if QE2 does not help strengthen the US economy.
- Most financial stocks gained sharply this week on QE2 as well as reports that the Fed will shortly announce plans to allow banks to raise their dividends now that the TARP funds are largely repaid. In earnings, MasterCard's profit beat expectations by a wide margin. The firm showed healthy growth in its operational metrics, emphasizing that international growth was driving the business. Hartford Financial was right in line with the consensus view and raised its 2010 guidance. Government ward AIG continues to lose very large amounts of money on a quarterly basis. The firm's third quarter loss was $2.4B, driven by pre-tax losses racked up on the sale of American General Finance and its Japanese life insurance businesses.
- Health insurance names reporting this week widely outperformed the Street's expectations. Third quarter results from Aetna, Wellpoint and Humana all beat estimates, and Wellpoint also hiked its guidance. CVS met expectations in its third quarter and reported solid +2.5% comps. CVS's guidance for the fourth quarter and the full year was on the soft side, however. Starbucks and Kraft reported quarterly results - Starbucks's profit and revenue was strong, Kraft merely met expectations - and also ended a key retail coffee distribution agreement.
- Casinos Wynn and MGM have gained sharply on decent third quarter results. Wynn's report was in line and the firm also announced an $8/share special dividend. Wynn said it believes the Vegas market has reached a bottom. MGM's quarterly losses narrowed over the prior quarter. Meanwhile, the private equity owners of Harrah's Entertainment began the process of launching a public offering of shares in the casino company.
- Media names CBS and News Corp beat Wall Street's targets in quarterly results. News Corp executives said they are seeing no signs of advertising spending getting weaker. CBS said broadcast advertising remains strong both nationally and locally, with robust pacing increases across the board. Note that after reporting strong Q3 results, AOL's CEO said domestic ad sales were declining in Q4. Time Warner Cable beat on earnings handily and launched a huge $4B share buyback, sending shares of TWC up 6%. Cablevision missed slightly. DirectTV was right in line with expectations. Videogame firms Electronic Arts and Activision offered quarterly results that were much better than expected thanks to surprising boosts in sales of key blockbuster games.
- Midsized oil and gas companies offered mixed results. Including hedging for possible losses connected with the BP oil spill, Anadarko lost money in the quarter, although on an adjusted basis the firm was profitable. Both Chesapeake and Marathon beat top- and bottom-line expectations. Apache's results were up sharply from year-ago levels, although bottom-line profits slightly missed expectations.
- There were some ugly parts to this week's October same-store sales reports: key mall chains and department stores missed estimates, sometimes by wide margins, with comps slowing noticeably from September levels. Many executives blamed more difficult y/y comps for some of their issues. Apparel chains American Eagle, Abercrombie and Aeropostale all missed market SSS expectations by very wide margins. JC Penny and Kohls reported unexpected SSS declines. Not everything was terrible among apparel names, and The Limited, Gap and TJX all managed to surprise to the upside. Discount warehouse names BJs and Costco also reported very strong comp store sales. Luxury department store Saks crushed expectations, with Oct SSS up more than 8%.
- Fixed income markets were directly impacted by the Fed's $600B package of easing this week. Although the total package was more or less in line with expectations, the notion that initially the Fed would concentrate purchases on 2.5- to 10-year maturities created a fair amount of volatility. Some had been expecting the Fed would commit to purchasing coupons farther out on the curve, forcing traders to unwind some trades. Immediately after the Fed announcement the long bond dramatically underperformed, sending 5-yr/30-yr and 10-yr/30-yr spreads to new lifetime highs. On Thursday the Treasury also announced $72B in new coupon supply scheduled for sale next week, culminating in $16B in long bond sales. Regardless, the Fed appears to have made its point, as other benchmark yields remain lower on the week with the 10-year holding around 2.5% and the 5-year yield hitting a record low below 1.02%. The market is clearly focused on the fact that over the next eight months the Fed is going to buy almost as much Treasury debt as the US government is planning to issue. Even the surprisingly strong Oct employment report did little to alter trading sentiment; after the payroll report on Friday, initial selling was met by buyers who believed the Fed would need more proof of sustained employment gains before considering changing course.
The US Fed was not the only central bank making news this week. The ECB, Bank of Japan, and Bank of England all left rates unchanged like the Fed, but differed in that they chose not to expand stimulus measures through another round of quantitative easing. Interestingly though, President Trichet did confirm the ECB has recently restarted purchases of sovereign bonds. After nearly three weeks of staying on the sidelines there were multiple reports indicating the ECB stepped in to buy mostly Irish 2- and 5-year bonds as well as small amounts of Greek and Portuguese paper. Renewed tensions surrounding the possibility of debt restructuring pressured Greek bonds lower for their tenth straight session on Friday, while Portuguese and Irish bond spreads reached all time highs relative to German Bunds. The 10-year Bund declined almost 10 basis points on the week to finish at 2.41%.
- In FX trading, all seemed quiet on the European peripheral front after the main Portuguese political parties reached an agreement over the weekend to pass the 2011 budget and several Greek banks returned to the interbank market for the first time since March (implying that their lines of credit had been restored). EUR/USD headed higher before and then after the Fed decision, peaking just shy of 1.4282 on Thursday, before renewed peripheral jitters blew up. Late in the week Irish bond spreads began heading in the wrong direction, widening to a record 540 bps spread against the 10-year German Bund as markets fretted about the nation's budget outlook through 2014. In Greece, PM Papandreou commented on Friday that he could not rule out early general elections in late October if his party lost too many seats in the November 7th local polls and had trouble enacting a debt reform plan. Dealers were watching for any break of the three-week consolidation trend with a ceiling of 1.4060, and this key level continued to provide resistance towards ahead of the FOMC.
- USD/JPY came precariously close to testing below 80 after a trading glitch sent the pair towards 81.40 early on in the week. Japanese officials offered no comment on intervention in connecting with the incident, and USD/JPY tested 81.50 two more times during the week. Participants sought the path of least resistance with the 80.00 barrier proving formidable. Dealers note that 81.50 was key resistance ahead of US payroll data as it represented the hourly downtrend line in the pair since the BoJ embarked on its solo currency intervention back on Sept 15th. Sterling began the week on a firm note following the strong UK PMI data and managed to gain additional momentum from QE2. GBP/USD tested its best level since late January, near 1.6300 level. In marked contrast to the Fed, the BoE maintained its asset purchase target at £200B.
- In Asia, the reinvigorated recovery in China was highlighted early this week, as leading manufacturing data further showed that concerns about an economic slowdown have been overblown. October PMI hit a 6-month high on both the national and HSBC assessments at 54.7 and 54.8 respectively - both above consensus expectations (Monthly China metrics on tap for next week could signal further overheating, with analysts speculating October CPI could extend well beyond the 23-month high of 3.6% seen in September). Meanwhile, Chinese government officials and state media expressed their discontent with dollar debasement in the wake of QE2. Friday's front-page editorial in the China Securities Journal contended Fed policy will force the PBoC to continue tightening policy to slow the appreciation of domestic asset prices.
- The Reserve Bank of Australia shocked the markets with a surprise 25 basis point rate hike to 4.75% despite the softer than expected Q3 CPI data reported last month. The policy board attributed the tightening to the diminishing likelihood of slowing in Chinese growth, a 60-year high in terms of trade, and expectations of a strengthening labor market. Subsequent economic data has overshadowed the timing on further tightening, with both retail sales and trade data for September coming in below expectations. Later in the week, RBA quarterly policy statement singled out gains in AUD as the key factor to cut its H2 2010 CPI forecast to 2.5% from 2.75%, warning the currency could appreciate even further in current environment.
Week of 11/8/2010 thru 11/12/2010
Monday, November 08, 2010
Economic
08:15 Canada Oct Housing Starts
10:00 US Q3 New York Fed Household Debt
13:00 US Treasury's 3-yr auction
Tuesday, November 09, 2010
Economic
06:00 Brazil Oct Inflation
10:00 Mexico Oct Consumer Prices, Sept Trade Balance
13:00 US Treasury's 10-yr auction
16:30 API Crude Oil/Gasoline/Distillate Inventories
Wednesday, November 10, 2010
Economic
08:30 US Sept Trade Balance, Oct Import Price Index
10:30 DoE Crude Oil/Gasoline/Distillate Inventories
13:00 US Treasury's 30-yr auction
14:00 US Oct Monthly Budget Statement
Thursday, November 11, 2010
Economic
08:30 Initial Jobless Claims, Continuing Claims
10:00 Mexico Sept Industrial Production
10:30 Natural Gas Inventories
Friday, November 12, 2010
Economic
06:00 Brazil Sept Retail Sales
09:55 US Nov University of Michigan Confidence
14:00 Argentina Oct CPI
16:00 Colombia Sept Trade Balance
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 Oct Nonfarm Payrolls, Unemployment Rate, Manufacturing Payrolls, Private Payrolls, Average Hourly Earnings
10:00 US Sept Pending Home Sales
15:00 US Sept Consumer Credit
Todays Headlines
8:30:03 AM
*(US) INITIAL JOBLESS CLAIMS: 457K V 442KE; CONTINUING CLAIMS: 4.340M V 4.378ME
- Prior Initial Jobless Claims revised higher from 434K to 437K
- Prior Continuing Claims revised higher from 4.356M to 4.382
8:45:12 AM
*(EU) ECB LEAVES MAIN REFI RATE 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 9:30am ET (13:30 GMT)
9:02:26 AM
IMF Fiscal Monitor Report: Urges clarity on global exit plans from special measures to ensure market confidence; Risks remain elevated with advanced economies public debt ratios
- Pace of fiscal adjustment in advanced economies is appropriate and might need to delay 2011 planned exit if growth slows
- Near term concern include that debt might stabilizing at high levels and threaten global growth
- Debt rollover problems, or even a full-blown sovereign debt crisis, "could emerge as a result of solvency concerns in the short or medium term
9:31:03 AM
(EU) ECB's Trichet: Reiterates that current rates are appropriate; price developments remain moderate and expectations remain anchored
- Expects further real GDP growth in the second half of 2010, with private sector contributing to growth.
- There are upside risks to growth from exports; commodity prices and protectionism are also downside risks.
- Inflation rates should hover around current levels, and should moderate in 2011. Inflation risks are tilted to the upside.
- Banks should retain earnings in order to strengthen their capital bases, banks need to make credit more easily obtainable.
9:45:33 AM
(CZ) Czech Central Bank Gov Simor: Board voted 5-1 to maintain rates at 0.75% earlier today - press conference
- New forecasts consistent with market rates around current levels followed by moderate rise towards the end.
- Raises 2010 GDP forecasts, lowers for 2011 and 2012
11:04:14 AM
NY Fed: Purchased $4.76B in outright coupon purchase; dealers submitted $18.58B for consideration (bid to cover 3.9)
- Heaviest purchase $1.79B in the 05/31/15 maturity
- Avg bid to cover over prior four auctions is: 10.3
- Purchased maturities dated 10/31/2014 - 09/30/2016
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.
07:30 US Oct Challenger Job Cuts
08:00 Bank of England Rate Decision
08:30 Preliminary Q3 Nonfarm Productivity, Q3 Unit Labor Costs, Initial Jobless Claims, Continuing Claims
08:45 ECB Interest Rate Decision
10:30 Natural Gas Inventories
13:00 US Treasury's 10-year TIPS auction
Todays Headlines
8:35:52 AM
(PO) Portugal opposition party PSD leader confirms to abstain from budget vote; allowing bill passage
***Reminder: On Oct 30th The opposition Social Democratic Party (PSD) had agreed to help pass the budget bill by abstaining in the first reading of the vote on Nov 3rd. All other parties have said they will vote against the bill
9:39:52 AM
(BR) Brazil President Elect Rousseff: No plans to revive financial tax; calls on Congress to discuss new oil laws
- Evaluating possibilities of modifying calculation of annual minimum wage increases.
- In no rush to name cabinet ministers.
- Brazil cannot be exporter of crude oil
- Needs new refineries to process crude
- Pledges to continue agrarian reform process
- Suports Rio Sao Paulo bulet train
9:41:08 AM
(HU) S&P affirms Hungary "BBB-" sovereign rating; Outlook remains negative
- Budget plans might hurt medium term growth and does not improve the structural deficit
- S&P stated that it understood the Fidesz government remains committed to reducing the headline government deficit to 3.8% of GDP in 2010 and 2.9% in 2011 but levies imposed do little to address the structural deficit.
10:00:04 AM
*(US) SEPT FACTORY ORDER: 2.1% V 1.6%E (largest rise since Jan 2010)
- Factory Orders ex transportation: +0.4% v +0.9% in Aug
- Prio Factory Orders revised higher from -0.5% to 0.0% (flat)
- Follow Up: Sept Durable Goods revised higher from +3.3% to +3.5% prior
10:17:11 AM
(US) Treasury's Miller: If auctions sizes are reduced, will be done in a gradual manner
- Notes currently not considering the issuance of additional coupons to respond to any Fed easing.
1:15:59 PM
(US) President Obama: Sympathetic with Americans who believed the Govt was 'overreaching' its bounds in recent years, yet must know that the policies were a response to an emergency rather than an 'agenda' - news conferece
- Healthcare issues will come up, but believes Americans don't want Congress to 'relitigate' the healthcare bill.
- Would like to use tha lame duck session to work on the tax cut issue, and on whether or to extend it.
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.
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
14:15 FOMC Rate Decision
Todays Headlines
7:48:54 AM
(IT) S&P reaffirms Italy A+ sovereign ratings, outlook Stable
- S&P believes potential political instability could be a key risk for future fiscal and economic policy.
- The stable outlook reflects our baseline expectation that Italy's debt burden should stabilize by 2011.
- S&P anticipates that the Italian government will follow through with its expenditure-led deficit-reduction program in 2011 to 2013.
- Italy has low job growth creation capacity; long term prospects could dim.
9:56:14 AM
(FR) France Debt Agency (ATF) sold total €8.0B vs €8.0B Targeted in 13-week, 20-week, 24-week and 50-week Bills
- Sold €4.0B in 13-week Bills, avg yield 0.674% v 0.365% prior; Bid-to-cover: x v 2.93x prior
- Sold €1.0B in 20-week Bills, avg yield 0.761% v 0.216% prior; Bid-to-cover: x v 4.75x prior
- Sold €1.5B in 24-week Bills, avg yield 0.798% v 0.435% prior; Bid-to-cover: x v 2.93 prior
- Sold €1.5B in 50-week Bills, avg yield 0.910% v 0.550% prior; Bid-to-cover: x v 3.77x prior
10:35:13 AM
European Market Internals at 10:35 ET
- FTSE100 volume at 462.9M, which is approx 40% below its 10-day moving average
- DAX volume at 38.3M, which is approx 58% below its 10-day moving average
- CAC40 volume at 52.3M, which is approx 54% below its 10-day moving average
11:46:43 AM
(IR) Ireland NAMA auditor reportedly finds the bad bank paid approx €1.7B in excess of market value for the first segment of loans
- estimates that approx 30% of the acquired loans have been performing
11:59:32 AM
(IR) ECB reportedly purchased some of Ireland's bonds today - unconfirmed report
- Reminder: Earlier reports circulated that the ECB has pumped an estimated €260B into Ireland via the gov't bond purchases as premium of the Irish
-10-year bonds over German bunds hit a fresh record above the 455bps level on Nov1st
2:33:58 PM
(NO) Norway Central Bank: Oil sovereign wealth fund may begin purchases of real estate and infrastructure
- Could adjust basket and weighting of the fund; could lower European holdings and increase Americas and Asia holdings
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.
16:30 API Crude Oil/Gasoline/Distillate Inventories
Todays Headlines
6:44:29 AM
(US) Oct Intuit Small Business Employment Index +0.22% v +0.14% m/m
- Prior Aug figure revised higher to +0.26% from +0.14%
- October employment growth translates to approximately 44,000 new jobs nationwide compared to a revised estimate of 52,000 jobs added in September.
8:30:02 AM
*(US) SEPT PCE CORE M/M: 0.0% V 0.1%E; PCE CORE Y/Y: 1.2% V 1.3%E; PCE DEFLATOR Y/Y: 1.4% V 1.4%E
- Prior PCE Core YoY revised lower from 1.4% to 1.3%
- Prior PCE Deflator YoY revised lower from 1.5% to 1.4%
9:01:06 AM
(CZ) Czech Finance Ministry (MOF) revises 2010 and 2011 GDP view; Cuts inflation outlook
- Raises 2010 GDP to 2.2% from 1.6% prior
- Lowers 2011 GDP to 2.0% from 2.3% prior
- Trims 2010 CPI view to 1.5% from 1.6% prior
- Lowers 2011 CPI view to 2.2% from 2.5% prior
8:33:20 AM
(SR) Saudi Arabia Oil Min: Energy demand expected growth 40% within 20 years; Asia to constitute 60% of that increase in demand
- Estimates the country has 80 years worth of crude assuming production at current rates (Note: approx ~9M bpd)
- Expects the current "very comfortable" price zone to continue for some time; consumers looking for oil to stay in a range of $70-90/bbl.
9:30:42 AM
(EU) ECB's Bini Smaghi: Should be aware that calling for an orderly debt restructuring mechanism
- Although such a mechanism sounds nice and is costless , designing and implementing it is somewhat different
- German-led plans to create a euro zone sovereign default mechanism may not work in reality
- Warned that a default mechanism had never been tested in an advanced economy; IMF efforts to draw up such a mechanism had failed
- Might be more sensible to push for a Europe-wide framework to make it easier for debtors and creditors to revise lending terms.
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.
"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.
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.
