“When you encounter difficulties and contradictions, do not try to break them, but bend them with gentleness and time.”
rules
Market Week Wrap-up
- Friday's closing bell ends one of the worst months for markets since the precipitous declines of early 2009. Faced with a spiraling debt situation in Europe, the euro plumbing five-year lows, North and South Korea tensions escalating, questions about the sustainability of the US recovery, the biggest one-month decline in crude since 2008 and to top it off an ecological disaster that is shaping up to the biggest oil spill in history, there is little doubt that most investors are glad to see May go away. The extreme volatility that characterized last week's trading continued through Wednesday, with inflammatory headlines playing havoc with all asset classes. In Europe, Spanish flu took the place of Greek tragedy: the week opened with news that Spain had seized one troubled bank and forced several more to merge, while Spanish unions firmed up plans for general strikes in June to protest government austerity measures. Markets swooned on Tuesday morning on more Spain jitters, Germany's decision to further clamp down on "speculators" (proposing a ban on naked short sales on all German stocks after banning naked shorts on selected names and Euro Zone debt last week), and moves by South Korea to ramp up pressure on the North over the sinking of a patrol vessel back in late March. Equity markets regained their footing on Wednesday, only to be knocked down again by a report in the Financial Times that China was evaluating its Euro Zone bond holdings. Chinese officials took pains to deny the report, and trading in the back half of the week was relatively calm. The second reading of US GDP was lower than expected, at 3.0%, down slightly from the 3.2% advance figure, while weekly claims disappointed for a second consecutive week. However, appetite for risk has overcome the down data, buoyed by China's supportive commentary and a very strong University of Michigan May confidence reading. In a volatile week that ultimately saw the VIX volatility index drop 20%, the DJIA fell 0.7%, the Nasdaq gained 1.2% and the S&P500 rose 0.1%.
- In Washington the financial regulation overhaul bill is heading into a conference committee, to be chaired by Rep Frank. The New York Times wrote that when the bill goes into effect it could pressure ratings of the US banks, which would leave banks with billions of dollars in additional financing costs. However S&P commented that it would not immediately downgrade major US banks following the passage of the financial overhaul bill, as "several months" would be needed to determine the impact of the complex new legislation. Nevertheless, S&P believes that the bill will affect most of the larger banks it rates. Separately, according to widespread press reports, AIG and the UK's Prudential are negotiating revised pricing for Prudential's purchase of AIG's AIA unit. The original transaction agreed to back in March was $35.5B; the FT reported that the new price could be as low as $30B.
- Economic data and corporate reports offered conflicting reads on the health of the American consumer. Several mid-range retail names offered a cautious look at the second quarter of 2010. On Friday, the April personal spending data showed no growth, disappointing analysts who had expected another slight uptick in line with the growth seen in the March data. American Eagle, Guess and J. Crew met or exceeded estimates in the March quarter, but all three offered guidance for the June quarter that missed expectations, suggesting more declines to come in consumer spending. Tiffany showed that high end retailers may be faring better, beating expectations handily and raised its 2010 outlook as well. May consumer confidence data crushed expectations and moved out to levels last seen back in early 2008.
- April housing data out this week was very strong, thanks to a final surge in buying ahead of the expiration of the first-time homebuyer tax credit on April 30th, as well as better levels of consumer confidence. April existing home sales beat expectations comfortably. Nevertheless, the NAR warned of a temporary pullback in home sales in the months ahead due to the expiration of the tax credit. April new home sales data were very strong, with the month's data up nearly 15% over March levels and sales stronger than any time since May 2008. Leading homebuilder Toll Brothers offered dismal quarterly results, including a miss on top-line revenue. In regards to higher sales, Toll executives stated that the tax credit wasn't the determining factor for improved sales, insisting that the past few months' activity has been driven by an increase in confidence among buyers. Toll and most of the other leading US homebuyers made modest gains this week on the positive data.
- The disaster that has resulted from the explosion and sinking of the Deepwater Horizon in the Gulf of Mexico crept closer to becoming the largest oil spill in history this week. On Wednesday the Administration officially revised its estimate of the flow rate from the leaking well to 12-25K bpd. In an extended press conference late in the week, President Obama reiterated that he is holding BP Plc responsible for the oil spill and confirmed the six-month moratorium on issuing new deepwater drilling permits. In addition, 37 or so ongoing deepwater operations will have to shut down for thorough inspections. After the failure of several previous efforts to staunch the leak, BP began a "top kill" procedure that will attempt to cap the well. It remains unclear whether the effort has any chance of success.
- Government bond markets on both sides of the Atlantic opened the week with yields at or near their lowest levels of the year, at all-time lows in Germany's case. Fear emanated out of European financial markets, driven by steady increases in LIBOR and associated concerns that banks were becoming less willing to lend fueled safe haven flows. These flows enabled both Germany and the United States to sell new debt in multiple auctions, though the lower rates were certainly seen affecting demand. By Thursday investors were embracing risk globally after China and officials from various other governments expressed confidence in European investments. Treasury prices came under pressure and yields quickly shot up to their highest levels in more than a week. The 10-year benchmark Treasury yield after trading below 3.1% earlier this week climbed back above 3.3%. The 2-10 year spread narrowed below 240 basis points before heading back towards 250 on Friday.
- Risk aversion was never far from currency traders' minds as headline after headline kept up the volatility this week, to the benefit of USD and JPY. The euro opened the week relatively strong, with EUR/USD just below 1.2600, although the pair was down to 1.2200 by Tuesday afternoon, while EUR/JPY hit fresh nine-year lows below 109 level. EUR/USD hit its lowest levels of the week below 1.2200 in the wake of an inflammatory Financial Times article published late on Wednesday. The article suggested China was reviewing its holdings of Euro Zone debt; Chinese officials vigorously denied the story, helping improve risk appetite on Thursday. With Greece in the rear view mirror, the peripheral debt story is now focused on Spain, where worries about the stability of the banking system and credit risk contagion drove trading. EUR/CHF reflected continued chatter that the SNB might have sold EUR/USD to diversify into dollars and offload some of its steady accumulation of euros over the last few months. There is chatter that other central banks might pursue a similar course, with even Russia mentioned as a dollar buyer.
- Europe's' Age of Austerity' is well under way. Governments across the Euro Zone rushed to cut, cut, cut this week, and details of various austerity programs made headlines all week. The FT reported that Germany would slash its government budget by €10B annually until 2016 in order to set an example for the EU and to comply with budget deficit rules in the constitution. The newly minted UK coalition government unveiled over £6B in spending cuts. The Italian and Spanish Parliaments approved spending cut measures during the week, and France made headway in rolling out a plan to raise its retirement age. Labor unions across the continent responded in kind, planning general strikes across Europe in the month of June.
- News that the Bank of Spain took receivership of Spanish savings bank CajaSur over the weekend and four other banks with combined assets of more than €135B were forcibly merged made Spain the new poster child for European peripheral troubles. In addition, chatter circulated about hedge funds in trouble and Spanish banks using the discount window. The IMF expressed concerned about Spain's economy, particularly its labor market and banking sectors, forcing the spread between 10-year Spanish and German debt back above 150, to levels last seen before the announcement of the Euro Zone debt rescue package. On Friday, the Spanish Finance Ministry updated its economic forecasts, maintaining its 2010 GDP view of -0.3% but lowering 2012 and 2013 GDP growth estimates. Later on Friday, the Spanish story culminated in Fitch downgrading Spain's sovereign ratings to AAA from AA+. This leaves Moody's as the only major ratings agency to maintain a AAA rating on Spanish government debt.
- After weeks of euro softness, there was widespread market chatter this week about central banks moving reserves back into the dollar, with the SNB and Russian central banks cited as the main culprits. Risk appetite received a reprieve aided by China's commitment to European investment. This sentiment was echo by some Japanese life insurance firms who implied that they were not considering changing their investment outlooks despite the euro's recent declines. Central banks in Russia and Korea also commented that there were no plans to cut holdings of euro-denominated FX reserves.
- USD/JPY moved higher following the continued uptrend in the 3-month USD Libor fixings and tested above 91 late in the week. However, sentiment remained fixated on the European peripheral situation ahead and the sustainability of the global economic recovery. The BoJ monthly report noted that the economic activity was picking up steadily, but kept its assessment unchanged in its May report. The BoJ reiterated that it remains cautious primarily due to the risk from overseas economies.
- On the data front, Japan saw a setback from recent successes in clawing its way out of a deflationary spiral. April headline CPI fell to -1.2% from -1.1% and core CPI declined to -1.5% from -1.2%, making for the first increase in monthly inflation metrics since mid 2009. In addition, April unemployment rate unexpectedly rose to a 4-month high of 5.1%, while household spending contracted at its highest pace in nine months. Disappointing data prompted Finance Minister Kan to call for greater cooperation between the government and the central bank to deal with lingering deflationary pressures, just as Bank of Japan continued to resist a move to a specific inflation target.
- Brewing conflict between the North and South Korea was in the background all week. The faceoff between the two nations has been escalating since the South uncovered evidence of the North's involvement in the sinking of one of its naval ships in late March. On Monday, South Korean President Lee suspended trade relations with the North, prohibited its ships from entering South Korean waters, demanded a formal apology and promised to take the case to the UN security council. In response, North Korea made threatening remarks against the South throughout the week. The rising tensions caused the Korea market to slip significantly, prompting the finance ministry to intervene verbally for the remainder of the week.
- Mining companies Down Under dug in for a protracted campaign against the "super-profits" tax proposed by Australian Treasury. With the largest exposure to the country's mining operations, Rio Tinto clearly emerged as the most vocal opponent, as CEO Tom Albanese called the tax Australia's "biggest sovereign risk". Moreover, Rio Tinto chief said the tax clouded further capital expenditures on company's projects - a view expressed by BHP CEO last week when he said the government proposal reduces the value of the coveted Pilbara JV. A report from The Australian on Thursday, suggesting that the government may adjust the super-profit threshold from the proposed 6% to as high as 11-12%, helped mining shares recover some of their lost ground. However, Australia's Treasury Secretary Henry rejected those rumors, stating he was not aware of any changes to be made to the tax.
Week of 5/31/2010 thru 6/04/2010
Monday, May 31, 2010
Economic
None Seen
Tuesday, June 01, 2010
Economic
08:00 Brazil April Industrial Production, May Manufacturing PMI
09:00 BoC rate decision
10:00 US May ISM Manufacturing, ISM Prices Paid, April Construction Spending
10:30 US May Dallas Fed Manufacturing Index
Wednesday, June 02, 2010
Economic
07:30 US May Challenger Job Cuts
10:00 US April Pending Home Sales
16:30 US API Crude Oil/Gasoline/Distillate Inventories
Thursday, June 03, 2010
Economic
08:15 US May ADP Employment Change
08:30 US Q1 Final Nonfarm Productivity, Q1 Final Unit Labor costs, Initial Jobless Claims, Continuing Claims
10:00 US May ISM Non-Manufacturing, April Factory Orders, Mexico May Consumer Confidence
10:30 US Natural Gas Inventories
11:00 US DoE Crude Oil/Gasoline/Distillate Inventories
13:00 US Treasury note announcement
Friday, June 04, 2010
Economic
08:30 US May Unemployment Rate, Nonfarm Payrolls, Manufacturing Payrolls, Private Payrolls, Average Hourly
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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 April Personal Income, April Personal Spending, April PCE Deflator, April PCE Core
09:00 Chile April Industrial Production, April Copper Production
09:45 US May Chicago Purchasing Manager
09:55 US May Final University of Michigan Confidence
10:00 US May NAPM Milwaukee
Today’s Headlines
3:45:48 AM
(EU) German Fin Min Schaeuble: The EU will look at implementing short selling ban in Oct
- Claims that Germany needed to act faster than the EU on implementing a short selling ban.
- EU memeber states know, agree that they must cut deficits.
5:30:04 AM
*(US) INITIAL JOBLESS CLAIMS: 460K V 455KE; CONTINUING CLAIMS: 4.61M V 4.61ME
- Prior initial claims revised higher from 471K to 474K
- Prior continuing claims revised higher from 4.625M to 4.656M
5:50:54 AM
(EU) ECB's Gonzalez-Paramo: Reiterates euro is solid, ECB has anchored inflation expectations
- Current level of overnight deposits it showing the lacking confidence within the banking sector.
- Notes that the Euro could not survive if faced with an additional Greece type issue.
- Reiterates G7 view that abrupt currency moves were not desirable and bad for growth
6:37:31 AM
Citi updates global equity strategy, sees opportunities as some dividend yields exceed bond yields
- Sees global equities 16% off April highs, with global equity market correlations are at their highest level in 30 years
- Global forward PE ratios are approaching single digits.
- European dividend yields are back above government bond yields. This extreme valuation event last occurred back around global market lows in 2003 and 2008.
- Sees opportunities where equity/bond yield crossover has occurred, dividends are forecast to grow and earnings momentum remains solid. They include ABB, BAE Systems, BASF, CEZ, China Mobile, Cielo, Honda, Insurance Australia Group, Johnson & Johnson, Mattel and Vodafone.
7:03:41 AM
(US) NOAA issues forecast for 2010 hurricane season: Sees 70% chance for 14-23 named storms, 8-14 hurricanes and 3-7 major hurricanes
- National Oceanic and Atmospheric Administration (NOAA) sees 85% chance for an "above normal" normal Atlantic hurricane season; 5% chance for a below normal season. If season reaches upper end of forecast, would be the most active hurricane season on record.
9:00:33 AM
(EU) ECB's Noyer: Not hearing any concerns from the Chinese regarding Euro Zone debt
- Current level of the euro will aid European exports.
- Euro is now close to its long-term average level.
- France requrires structural reforms in order to avoid austerity measures.
- ECB bond purchases are designed to restore monetary policy efficiency.
- The impact of bank levy and new capital rules needs to be looked at carefully.
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.
“Surely there comes a time when counting the cost and paying the price aren't things to think about any more. All that matters is value - the ultimate value of what one does.”
08:00 Brazil April Unemployment Rate
08:30 US Prelim Q1 GDP, Q1 GDP Price Index, Q1 Personal Consumption, Q1 Core PCE, Initial Jobless Claims, Continuing Claims
10:30 US Natural Gas Inventories
13:00 US Treasury $31B 7-year note auction
Today’s Headlines
3:15:59 AM
(EU) EU Commission: Proposes common EU bank levy to fund bank bailouts, plans to adopt legislation in 2011
- Failure to develop a common European approach to funding bank bailout funds risks member states imposing fees unilaterally, which would distort banking market.
- A common EU resolution fund would help in ensure the "orderly failure" of distressed financial entities in the future, levy does not seek to recoup funds already committed in the crisis.
5:30:03 AM
*(US) APR DURABLES GOODS ORDERS: 2.9% V 1.3%E; DURABLES EX TRANSPORTATION: -1.0 % V 0.5%E
- Prior Orders revised higher from -1.2% to 0.0% (2nd revision)
- Prior Ex-Transportation revised higher from 3.7% to 4.8% (2nd revision)
6:10:43 AM
(UK) US Treasury Secretary Geithner: Principles of the European stability program are solid but markets want action
UK Chancellor Osborne:
- Says Finacial market stability is in everyone's interest
- Happy to see Europe heading towards bank levy
- UK continues to favour Volcker-style bank rules
6:30:41 AM
(GE) German Bundesbank: Germany needs to consolidate its budget quickly, decline in the euro has not fully restored competitiveness
- Calls on policymakers to resist the temptation to delay budget reforms.
- German economy showing strong growth in Q2, continues to be boosted by exports.
- Germany exports are benefitting from rapidly shifting FX rates.
- Seeing no signs of a credit crunch in Germany.
6:48:59 AM
(PO) Portugal Fin Min Dos Santos: Would not be surprised to see some bank consolidation, Portugal is stress testing some banks - CNBC
- Portugal is already conducting its own bank stress tests, results show our banks are resilient.
- Fiscal measures to be approved by parliament next week
with 2011 measures to cut deficit to GDP by 4.6%; privatizations also planned for 4% of GDP
- follow up: not concerned about the euro exchange rate; EU backstop package is the appropriate size.
9:24:15 AM
(BR) Brazil Fin Min Mantega: Brazil economy grew 2-2.5% in Q1, will grow 5.5-6% in 2010
- inflation appears to be slowing
- budget deficit to be 3.3% of GDP in 2010.
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 March S&P/CS Home Price Index, Feb S&P/CS Composite-20
09:30 Brazil April Foreign Investment
10:00 US May Consumer Confidence, May House Price Index, May Richmond Fed Index, Mexico Q1 GDP, Mexico April Unemployment
13:00 US Treasury $42B 2-year note auction
16:30 US API Crude Oil/Gasoline/Distillate Inventories
19:50 BoJ minutes
Today’s Headlines
11:49:55 PM
(JP) Japan Fin Min Kan: Cannot call current economic recovery sustainable; direct impact from Greece on Japan is limited
- Need to consider curency issues in broad framework under international cooperation.
- No gaps in view on economy with BoJ.
- Believes that impact from Europe debt probelms on Japan seen 'limited'.
- Reiterates view that closely watching US and China discussion on yuan.
12:15:15 AM
(CH) China Commerce Ministry (MOFCOM): US high tech exports at the core of trade imbalance
- Tough to balance trade without US lifting high-tech export restrictions.
- Recognizing that China as a market economy will benefit trade; says definition of market economy continues to evolve.
- Two thirds of countries consider China as a market economy.
- Concerned over the European debt crisis and is monitoring the developments there.
1:22:50 AM
(CH) PBoC Zhou: Mainly considers domestic factors in deciding on monetary policy; US and China discussed yuan issue in speeches
- Pace of global recovery will continue amid EU crisis.
- Europe debt crisis will not change global recovery trend, "lengthy" time spent in session discussing EU crisis.
- US and China discussed reform of rating agencies, agree to support European efforts to overcome debt crisis.
- To push ahead with financial reforms, to prevent blind and careless actions in financial markets.
2:36:47 AM
(UK) BoE's Miles: Inflation to fall towards target during next 6 months; higher inflation caused by external influence in the UK
- Euro Area problems are a risk to the UK.
- Higher rates are a good sign for business; suggest that economy is improving.
- Enhanced BoE regulatory roles means wider range of policy tools.
7:01:52 AM
(SP) IMF: Spain economy needs comprehensive reforms, including labor and pension reform
- Spain's large fiscal deficit is beginning to decline as consolidation begins
- Forecasts subdued inflation despite rebound in energy prices
- Forecasts a weak and fragile economic recovery with growth between 1.5% to 2.0% in the medium term
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
08:30 US Initial Jobless Claims, Continuing Claims
10:30 US Natural Gas Inventories
10:00 US May Philadelphia Fed, April Leading Indicators, Mexico Q1 GDP
13:00 US Treasury note announcement
Today’s Headlines
6:08:45 AM
(EU) ECB declines comment on FX speculation circulating in markets
***Note that chatter has been heard regarding action to support the euro from leading central banks.
6:11:41 AM
(US) Treasury Sec Geithner: Confident Europe can manage through its difficulties; US in a much stronger recovery than expected - CNBC interview
- When asked about German short selling ban, Geithner comments that the history of trade restrictions is "not good."
- Chinese currency issue is a global issue, not just between China and the US; China needs to keep moving on the currency issue.
7:00:05 AM
*(US) Q1 2010 MORTGAGE DELINQUENCIES: 10.06% V 9.47% PRIOR
- Mortgages in foreclosure at 4.63% v 4.58% q/q
- Total Prime mortgage delinquency rate 7.08% v 7.01% q/q
- percentage of loans on which foreclosure actions were started at 1.23% v 1.20% q/q
7:44:50 AM
*(GR) GREECE GOVT DENIES REPORTS THAT IT WOULD CONSIDER LEAVING EUROZONE
- Note: Earlier reports circulated that the Greece Fin Min had noted Greece's consideration for leaving the Eurozone
8:32:21 AM
(GE) Germany has reportedly suggested an 'orderly' insolvency program for members of Euro Zone
- Note: earlier reports circulated that the Merkel Govt was seeking to increase monitoring of Euro members budgets; with stiff sanctions for those who had failed; along with proposals to establish bankruptcy proceedings for countries in the Eurozone
7:04:42 AM
(EU) ECB's Bini Smaghi: The new phase of the crisis has impacted the ECB's exit strategy and impaired financial markets
- Sees no dangers to price stability, inflation expectations remain well anchored.
- Bond purchases entail risk
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 April CPI, CPI Ex Food & Energy, CPI Core Index SA, Canada March Wholesale Sales
10:00 US Q1 Mortgage Delinquencies
10:30 US DoE Crude Oil/Gasoline/Distillate Inventories
14:00 Fed minutes
17:00 Colombia March Retail Sales, Industrial Production
Today’s Headlines
4:52:11 AM
(GR) Greece Fin Min Papaconstantinou: Markets are stabilizing, fiscal consolidation plan is on schedule, hopes to return to the market before Q1 of 2012
- Says wants to return to the financial markets before Q1 of FY12
- Markets see that Euro region willing to assist other countries facing difficulties
5:30:03 AM
*(US) APRIL HOUSING STARTS: 672K V 650KE; BUILDING PERMITS: 606K V 680KE
- Prior Housing Starts revised higher from 626K to 635K
- Prior Building Permits revised higher from 680K to 685K
6:31:12 AM
(UK) UK Fin Min Osborne: UK will impose a bank tax; opposes EU budget regulation proposals, believes shape of national budgets remain the prerogative of each EU member state
- Wants to see a "cash freeze" in UK (aka a freeze in benefits, public sector pay, cancellation of defence and huge infrastructure projects).
- Notes UK informed the EU about its concerns over new hedge fund regulation proposals, believe UK has almost "no allies" on its concerns over new EU hedge fund regulations.
- Is skeptical about an tax levied on financial transactions.
7:31:16 AM
(US) US Treasury plans to announce new initiative to spur lending
- Note that this new credit initiative includes $20B in lending aid.
- More details to be announced at 13:00ET during a House hearing.
8:10:49 AM
(US) US Senate Democrats considering amending legislation to allow for unlimited liability in oil spills
- Note: Yesterday US Senate leader Reid called the $10B liability in economic damages proposal authored by US Senator Menendez 'inadequate'
9:25:45 AM
(US) Fed's Pianalto: Reiterates Inflation will remain subdued; unemployment rate may decline in a gradual fashion; reiterates rates to remain low for 'extended period'
- inflation will also slowly increase; yet there are indications of a possibility for short term disinflation
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 April PPI, Core PPI, April Housing Starts, April Building Permits, Chile Q1 GDP
16:30 US API Crude Oil/Gasoline/Distillate Inventories
Today’s Headlines
1:07:14 AM
(UK) UK Fin MIn Osborne: Reiterates that deficit reduction was most urgent for Britain; scale of government debt poses a threat to UK economic recovery
- Public and private markets have completely lost confidence in UK Govt economic forecasts.
- UK borrowing unsustainable amounts of money.
- Most of £6B in savings will be used to cut deficit.
- 80:20 ratio of budget cuts and tax increases good rule of thumb.
3:21:01 AM
(EU) ECB's Stark: We are facing a "severe crisis," but Euro Zone breakup is not an issue
- "Nobody" questions the viability of the euro.
- National policies need to be better coordinated.
- Corrective measures are needed when budgets get out of control, need to be more "automatic" measures to deal with budget problems.
- US Federal budget office could be a model for the EU.
6:00:06 AM
*(US) MARCH NET LONG-TERM TIC FLOWS: $140.5B V $50BE; TOTAL NET TIC FLOWS: $10.5B V $9.0B PRIOR
- Prior Total TIC Flows revised from $9B to $9.7B
- Foreign Net purchases of US Treasuries (notes & bonds) $108.5B v $48.1B prior
- China Total holding of US Treasuries: $895.2B v $877.5B prior
- Japan Total Holdings of US Treasuries: $784.9B v $768.5B prior
- Russia holdings of US Treasuries: $120.1B v $120.2B prior
- Oil Exporters total Holdings of US Treasuries: $229.5B v $128.8B prior
6:42:23 AM
(BR) Brazil Central Bank's Meirelles: Brazil is prepared for the European crisis, with plenty of reserves and liquidity
- Has confidence that European policy makers know what they are doing.
- Moves in BRL reflect global volatility in FX markets.
9:00:16 AM
(SZ) SNB's Hildebrand: CHF strength jeopardizes economic recovery, SNB will react "flexibly and decisively" to market shocks
- European crisis has had a direct impact on Swiss economy.
- notes the drop in the euro is putting strong upward pressure on the franc, threatening price stability and the Swiss recovery.
- SNB is only able to react to the European situation.
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.
“I like living. I have sometimes been wildly, despairingly, acutely miserable, racked with sorrow, but through it all I still know quite certainly that just to be alive is a grand thing.”
rules
Market Week Wrap-up
- Equity markets worldwide surged on Monday after the European Union agreed to a €750M "shock and awe" emergency aid backstop for the entire Euro Zone, the ECB said it would buy European sovereign and corporate debt and Fed reopened swap lines with key European central banks. The DJIA rose nearly 450 points before the opening bell on Monday, while markets in Europe experienced an even sharper rise. Skepticism emerged early from market experts of every stripe, while investors expressed their doubts by dumping the euro, which fell to October 2008 lows, below 1.24 to the USD on Friday. Much of equity gains in seen in European indices vaporized on Friday, while US equities were hit hard as risk aversion exploded in the wake of fears over the sustainability of Spain's budget austerity measures and an inflammatory press report in Madrid's El Pais newspaper, suggesting that at a conference on Greece last Friday, French President Nicolas Sarkozy threaten to pull France out of the euro if Germany did not agree to fund the big backstop package (France has since denied the report). In a sign of returning volatility, the VIX index jumped back above 33 on Friday, but well below the heightened levels seen late last week. For the week the DJIA gained 2.3%, the Nasdaq rose 3.6% and the S&P500 added 2.2%.
- More US and European banks were pasted with fraud allegations this week surrounding their behavior during the housing boom. On Wednesday the Wall Street Journal reported that Federal investigators are probing Morgan Stanley to determine whether the bank misled investors about CDO deals and whether the firm fully disclosed its roles in setting up and then shorting the deals (Morgan Stanley flatly denied the report). Then on Thursday, the New York Times reported that New York Attorney General Cuomo is probing eight banks - including Goldman Sachs, Morgan Stanley, UBS, Citi, Deutsche Bank, Credit Agricole and Merrill Lynch - in regards to alleged improper influence over the ratings agencies. The investigation seeks to determine whether the banks provided misleading information to the agencies in order to inflate the grades of certain mortgage securities.
- In the US Senate debate and voting on the financial reform bill got underway after months of posturing and negotiations. There are nearly 75 proposed amendments to the bill, many of which hold unpleasant surprises for both publically traded corporations and markets as a whole. A controversial one-time audit of the Fed's balance sheet was approved in one amendment. Another amendment that would require the government to relinquish control of housing finance giants Fannie Mae and Freddie Mac within two years failed to gain approval. Card issuers Visa and MasterCard plunged on the passage of an amendment requiring "reasonable" debit card interchange fees. One analyst noted that 57% of Visa's US purchase volume and 41% of MasterCard's volume is from debit cards. Voting on amendments will continue next week, although it is worth noting that the final shape of the bill is far from certain.
- News of the European Union rescue package kicked off a rush by investors to add risk to their portfolios early on in the week. Government bond markets, especially in the US and Germany, saw prices decline sharply on Monday, sending yields higher. The US benchmark 10-year yield moved above 3.5% heading into the US Treasury's $78B in quarterly refunding auctions, which concluded on Thursday with the sale of $16B in 30-year bonds. Buyers were rewarded when the fresh bout of risk aversion permeated markets on Friday, as bond prices surged and money flooded the relative safety of US government debt. Credit spreads widened for both investment and speculative grade corporate debt while issuance dropped off precipitously throughout May. The US 10-year yield ended the week below 3.45% while the 2-year nears 0.75% once again. Fed fund futures markets are ticking higher as the problems in Europe give support the Fed's decision to keep rates low. The Dec contract now prices in less than a 40% chance the fed hikes rates at the end of this year.
- European sovereign CDS spreads tightened and cash yields were broadly lower, which is only to be expected following the massive EU bailout. In the first major test of investors' appetite for peripheral debt post bailout, Italy successfully sold €5B in 5- and 15-year BTPs on Thursday. But the supply was overshadowed by Greece, which reported an unemployment rate of 12.1%, the highest reading in over five years. Encouragingly for bond markets, the wave of austerity continued across Europe as both Spain and Portugal both announced deficit reduction packages worth €15B and €2B, respectively.
- Currency trading was highly volatile, as investors watched the euro recover early on and then plunge to record lows by the week's end on concerns the bailout plan would lead to slower growth, monetized debt and ultimately only delay the inevitable. By Friday, EUR/USD pair moved below 1.24 for the first time since Oct of 2008, but was unable to take out the 2008 low of 1.2330. EUR/JPY remained above last week's low of 110.56 as speculation continues that the SNB was deliberately holding EUR/CHF above 1.40. Waves of risk aversion have been preceded by run-ups in the yen, particularly against the US and Australian dollar. Sterling rebounded early after a compromise was finally reached and a government was formed following the election on the 6th, but cable could not escape the risk aversion flows driving up the greenback. GBP/USD remains not far from one-year lows, trading just above 1.4560.
- Gold prices soared to fresh highs this week, sending in what might be the strongest signal yet that contagion is inevitable in the European debt crisis. A report out of the Austrian mint stated there were signs of "panic buying" in Europe, with total gold coin and bar sales over the last two weeks equaled sales in the entire first quarter. Note that on Monday the EU bailout announcement did little to check gold's upward momentum, with the front-month contract taking out fresh all-time highs in three of the next four sessions. The June contract finished the week above $1,230 after nearing $1,250. Silver prices have also reached levels not seen in over a year, trading above $19.
- Unfortunately for a basket of other commodities the stronger dollar and unwillingness to take on risk has led to steep declines. June crude prices are down almost $7 from the highs of the week trading below $72. The selling has been less pronounced in the July contract ahead of next week's role but that contract is still down roughly 6% on the week to finish just above $75. It is also worth noting that this decline comes as many anticipate increased regulation in the United States, as BP has been unsuccessful in plugging the leak in the damaged Horizon rig in the Gulf of Mexico, worsening the environment disaster. The CRB commodities index closed out the week at three-month lows. OPEC officials appeared calm in the face of the price drop, with the Libyan oil minister stating the cartel is not likely to call an emergency meeting before October unless oil hits $60/barrel.
- The UK's post election stalemate has been resolved sooner than many Westminster observers had anticipated. Following the resignation of Gordon Brown, Queen Elizabeth appointed Conservative leader David Cameron Prime Minister on Tuesday evening. Governing in a coalition with the Liberal Democrats, Cameron is the youngest UK Prime Minister in almost 200 years, with the Lib Dem leader Nick Clegg his new deputy. The Conservatives' George Osborne has assumed the role of Chancellor of the Exchequer, but the Liberal Democrats' Vince Cable (a former BP chief economist) is expected to be an influential figure on economic policy within the new administration in his role as Business Secretary. An emergency summer budget is expected in a matter of weeks. In leading the first coalition government since World War II, Prime Minister Cameron is faced with the daunting task of reigning in the UK's massive budget deficit, while simultaneously managing the competing aims of two parties diametrically opposed on the ideological spectrum. The reaction in currency and debt markets to the new administration could not have been more mixed. While sterling has suffered amidst renewed USD strength, Gilt markets expressed relief, with yields drifting lower on the week, particularly in the fiscally sensitive long end of the curve.
- China's April economic data revealed a mixed picture: consumer inflation was hotter than expected while industrial production was lower than forecasted. Lending activity recovered, as new yuan loans rose to a 3-month high of CNY774B. Speaking after the report, China's National Bureau of Stats said that CPI growth has been relatively mild, affirming 3% inflation target for 2010. The bureau also warned that strong inflationary pressure in the near term will likely result from higher food, housing, and commodity prices, and then decline to a slower rate later in the year.
- Australia reported another strong month for employment in April, with the numbers hitting a three-month high at 33.7K new jobs created. For the third consecutive month the data was also heavily tilted in favor of full-time rather than the seasonal part-time job creation. Despite the solid growth, the national unemployment rate unexpectedly rose to 5.4%. Subsequently, several analysts noted that population growth is outpacing job creation. AUD was supported by the jobs report, with the currency briefly testing the 0.90 handle against the dollar and also rising to a record high against the euro. Government bond yields were also higher, even as expectations for another round of RBA tightening remain extremely low.
- The Bank of Korea left interest rates unchanged at 2.00% as widely expected, removing the reference to easy policy "for the time being" clause with a move to less defined timing. Speaking after the decision, BoK Governor Kim said the passage was dropped to reflect a change in underlying conditions, also pledging not to yield to external pressure for higher rates. Despite the unemployment rate falling to 4-month low earlier, BOK also said a considerable degree of uncertainty over the economy is still present, specifically pointing to fiscal constraints in Europe and monetary risks in China.
Week of 5/17/2010 thru 5/21/2010
Monday, May 17, 2010
Economic
08:30 US May Empire Manufacturing, Chile April Copper Exports
09:00 US March Long-Term TIC Flows
13:00 US May NAHB Housing Market
17:00 Colombia March Trade Balance
Tuesday, May 18, 2010
Economic
08:30 US April PPI, Core PPI, April Housing Starts, April Building Permits, Chile Q1 GDP
16:30 US API Crude Oil/Gasoline/Distillate Inventories
Wednesday, May 19, 2010
Economic
08:30 US April CPI, CPI Ex Food & Energy, CPI Core Index SA, Canada March Wholesale Sales
10:00 US Q1 Mortgage Delinquencies
10:30 US DoE Crude Oil/Gasoline/Distillate Inventories
14:00 Fed minutes
17:00 Colombia March Retail Sales, Industrial Production
Thursday, May 20, 2010
Economic
08:30 US Initial Jobless Claims, Continuing Claims
10:30 US Natural Gas Inventories
10:00 US May Philadelphia Fed, April Leading Indicators, Mexico Q1 GDP
13:00 US Treasury note announcement
Friday, May 21, 2010
Economic
07:00 Canada April CPI, Core CPI
08:30 Canada March Retail Sales
10:00 Mexico rate decision, Mexico March Retail Sales
15:00 Argentina April Industrial Production, March Economic Activity
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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.
“Guard well within yourself that treasure, kindness. Know how to give without hesitation, how to lose without regret, how to acquire without meanness.”
17:00 Colombia March Trade Balance
08:30 US April Advance Retail Sales
09:15 US April Industrial Production, April Capacity Utilization
09:55 US May Prelim Univ of Michigan Confidence
10:00 US March Business Inventories
Today’s Headlines
3:31:53 AM
(VZ) Venezuela Pres Chavez: States Aban Pearl natural gas platform has sunk - Update
- According to reports, the rig was drilling about 16 gas wells in the Mariscal Sucre offshore natural gas project
- The natural gas project is being led by PDVSA
5:29:50 AM
(PO) Portugal Gov’t confirms additional austerity measures have been approved
- Will raise VAT tax by 1%; corporate tax rises 2.5%; personal income taxes +1-1.5%
- Pay for holders of political office and top level public positions to be reduced 5%
- Measures will trim 2010 budget deficit as % of GDP to7.3%; 2011 deficit to 4.6%
- Notes that approx half of Portugal's deficit cuts will come from tax increases and the other half from spending reductions
5:30:03 AM
*(US) APRIL IMPORT PRICE INDEX M/M: 0.9% V 0.8%E; Y/Y: 11.1% V 11.3%E
- Prior MoM revised lower from 0.7% to 0.5%
- Prior YoY revised lower from 11.4% to 11.3%
- Ex fuel +0.3% v -0.1% m/m (revised)
6:14:38 AM
*(SA) SOUTH AFRICA RESERVE BANK (SARB) LEAVES RATES UNCHANGED AT 6.50%: AS EXPECTED
- Decision was unanimous
- Statement: Concerns exist about the possible impacts from wage growth on the economy; Rand currency difficult to adjust in a pre determined manner
7:19:24 AM
(BR) Brazil Fin Min Mantega: Planning to trim budget by an additional BRL10B, not considering interest rate adjustments to TJLP long term rate
- highlights that cutting Govt spending is one way to help slow demand as the economy is 'heating up'; while rate hikes take time.
- slower Q2 growth attributed to the end of certain stimulus programs.
- Will take measures to ensure economic growth will be limited near 7%.
- BRL10B in cuts in addition to the BRL21B in govt spending cuts announced in March.
10:00:35 AM
(US) Fed's Kocherlakota: Does not expect unemployment to drop below 9% before end of 2010, below 8% in 2011
- "Most or even all" Fed member agree current conditions justify zero bound rates.
- Lack of inflation currently is good news, sees core CPI at 1.5% in 2010.
- Believes slower European growth will impact US GDP; sees US GDP averaging +3.5% in 2010-11.
- Fed swap lines are useful for heading off the threats to the US economy.
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.
17:00 Colombia March Trade Balance
08:30 US Initial Jobless Claims, Continuing Claims, April Import Price Index
10:30 Natural Gas Inventories
13:00 US Treasury's $16B 30-year auction
18:00 Chile rate decision
Today’s Headlines
3:47:54 AM
(SP) Spanish Union Leader: Rejects government austerity efforts, does not rule out any type of action
***Reminder: Earlier today Spain's PM Zapatero commented on austerity measures and forecasted 6% deficit to GDP ratio in two years with planned measures which included lower civil service salaries by 5% in 2010; freeze public-sector wages in 2011.
-The announced cuts would save an added €15B in 2010 and 2011. (refer to our 3:23am ET headline)
5:30:04 AM
*(CA) CANADA MAR INTL MERCHANDISE TRADE: C$300M V C$1.6BE
- Prior revised lower from C$1.4B to C$1.2B
Components
- Exports C$33.5B v C$34.0B prior; first m/m decline in 6 months
- Imports: C$32.6B v C$32.3B prior
- Trade Balance with US: C$3.8B v C$4.3B prior
- Trade Balance non-US: -C$3.6B v -C$3.0Bprior
6:20:14 AM
(UK) UK Coalition Govt to introduce a bank levy, to set carbon floor price; PM Cameron says the coalition plans to "tackle" the debt crisis
- Lib Dems agree to abstain from voting on national planning statement for nuclear power.
- To attempt to bring non-business capital gains tax rates in line with income tax rates.
- Agrees to raise income tax threshold for low income people.
- Agrees to tax airlines on a per plane basis rather than per passenger basis.
- To propose fixed five-year terms for parliament, set next election for 2015.
7:33:52 AM
(US) April Ceridian-UCLA Pulse of Commerce Index (PCI) m/m: -0.3% v +1.0% prior
- Chief Economist Leamer: "The latest PCI numbers are disappointing and cast considerable doubt on the strength of the recovery and the strength of GDP numbers for 2010.
- The next two months will tell if the first quarters healthy consumer spending will help lift the PCI and propel stronger GDP growth for the year."
7:42:12 AM
(US) US administration proposes tax of $0.01/bbl on US oil to bolster fund for oil spill clean up operations; would raise tax to $0.09 from current $0.08/bbl tax
- seek to retroactively raise BP's liability.
- reminder: Legislation authored by Sen Menendez seeks to raise of cap to $10B in economic damages.
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.
08:00 March Brazil Retail Sales
08:30 US March Trade Balance
10:00 Mexico March Industrial Production
10:30 DoE Crude Oil/Gasoline/Distillate Inventories
13:00 US Treasury's $24B 10-year auction
14:00 US April Budget Statement
15:00 Argentina April CPI
Today’s Headlines
5:01:01 AM
(NO) Norway Central Bank (Norges): Financial stability outlook is unchanged from December view
- Lenders are more solid than year ago levels
- To contribute to maintaining a smootly functioning market
5:22:19 AM
(EU) ECB's Wellink: European rescue plan is insufficient to save the Euro Zone without deficit cuts
- Confirms that the ECB has commenced 'substantial' government bond purchase program for Euro stability
5:30:30 AM
(US) Fed's Lacker: Should not wait too long to raise rates, economic recovery gaining momentum
- Expects real estate and construction sector to remain weak in near term.
- Latest GDP figures indicate a sustainable recovery, decline in unemployment will take time.
- Consumer spending and business investment is driving the recovery.
- Inflation is low at the moment but it is unlikely to remain as such; the public clearly expects inflation to rise.
9:05:44 AM
(US) US Senate approves Sanders amendment on GAO audit of the Fed's financial records; vote 96-0
- Amendment allows a look at recipients of emergency aid during the financial crisis; and contains no language permitting a regular audit
- Follow up 12:26ET: Senate rejects Vitter (R-LA) amendment seeking multiple Fed audits in 62-37 vote
8:54:24 AM
(UK) Deal has been reached between Convervatives and Liberal Democrats on a coalition agreement - CNBC citing sources
- Note: Earlier reports circulated that the Liberal Dems and Convervatives were in the final stages of talks on forming a new Govt.
10:01:41 AM
*(US) TREASURY'S $38B 3-YEAR NOTES DRAW 1.414%; BID-TO-COVER RATIO: 3.27 V 3.10 PRIOR AND 2.96 AVG OVER THE LAST 10 AUCTIONS
- indirect bidders take 50.7% of competitive bids
- direct biddres take 16.54% of competitive bids, dealers take 32.7%
- 22.27% allotted at high
- Median 1.37%; Low 1.307%
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.
10:00 US March Wholesale Inventories, May IBD/TIPP Economic Optimism
13:00 US Treasury's $38B 3-year auction
16:30 API Crude Oil/Gasoline/Distillate Inventories
Today’s Headlines
4:41:37 AM
(GE) Germany Chancellor Merkel: No plans for tax cuts for at least two years, may simplify tax regime at best
- No need to reshuffle cabinet
- Believes there is a chance to win back majority in upper house of parliament next year
5:26:03 AM
(JP) Analysts at Barclays comment on Japan banks: sector's guidance update was already priced in by the market
- Analysts have poor sentiment on low rates and recommend focusing with profit growth despite the recent increase in guidance by almost one-third of the names in the sector.
- Upgrade 8411.JP to Overweight from Equalweight, 8411.JP to Equalweight from Underweight
- Downgrade 8306.JP to Equalweight from Overweight
5:45:35 AM
(EU) ECB's Trichet: Bond purchase decision was not unanimous, ECB was not pressured into market intervention
- ECB decisions will not change monetary policy stance.
- Confirms bond purchases began this morning; Declines to comment on size of intervention.
- Reiterates that ECB is "fiercely and totally" independent.
7:03:47 AM
(US) President Obama formally nominates Elena Kagan for US Supreme Court
- note: Kagan, age 50, already passed through a Congressional confirmation hearing for her current position as Solicitor General, a position she has served in since March 2009.
- follow up: Senate Judiciary Chairman Leahy targets early August confirmation of nominee Kagan.
7:52:09 AM
(US) Fed's Plosser: Europe has severe challenges, new EU package may alleviate concerns - CNBC interview
- Major concern of the US prompting reopening of swap lines was contagion. Unclear whether package will be enough to halt contagion.
- Outlook on US economy is "still pretty upbeat," recovery is becoming more broad based, believes job market has turned.
- Not surprised by near-term performance of inflation. Concern on inflation is over mid to long term, does not believe we are "out of the woods" on inflation.
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.
“Don't rule out working with your hands. It does not preclude using your head.”
rules
Market Week Wrap-up
- Investors dove head first into crisis mode this week as the European peripheral debt situation spun completely out of control. Speculation, rumors and finally Thursday's as-yet unexplained market meltdown cranked up the risk aversion, sending the VIX volatility index spiking above 40 on Thursday and then again on Friday, to its highest levels since the market bottom in the Spring of 2009. EUR/USD fell 4.5% over the course of the week, down six big figures. On Tuesday there were rumors that Spain would ask for an aid package twice the size of Greece's backstop, forcing Spanish PM Zapatero to call the speculation "complete madness." Street protests in Athens turned violent as Greek citizens showed their disdain for the proposed austerity measures, even as the tranches of the aid package made slow progress through reluctant EU parliaments. ECB Chief Trichet gave an unresponsive performance in the ECB's post-rate decision press conference on Thursday, sustaining the risk aversion and the euro slide. US indices were falling all week with most other asset classes except gold and German and US government debt. Crude oil dropped over 12% on the week, ending just above $75. Friday's better than expected US employment data were totally overshadowed by the events of Thursday afternoon and another bout of panic selling on Friday morning. The headline payrolls data showed a strong 290K in new jobs in April, however the data looked fairly modest after backing out the birth/death adjustment and the gain from part-time census hiring, and it was hard to ignore the fact that the unemployment rate rose in April over March levels, to just shy of 10%. Equity markets suffered big losses, with all three major US indices falling into negative territory year to date. For the week the DJIA declined 6%, the Nasdaq fell 8% and the S&P500 dropped 6.5%.
- Unprecedented scenes unfolded in markets late Thursday afternoon as the DJIA inexplicably and rapidly plunged nearly 1,000 points on no fresh news. In a matter of minutes the Dow witnessed its largest intraday point decline ever, briefly dipping below 10,000 for the first time since mid February, spreading fear a repeat of a 1987-style crash. Half an hour later the pullback had been largely retraced, and the major indices ended the session down more than 3%. Names such as Procter and Gamble, which was at one point was down 30%, and Accenture, a $40 stock which printed at a penny, were subject to bizarre gyrations. Initial rumors pointed to a large fat finger trade on the S&P e-mini's, but that theory has since been discounted and regulators are still searching for a definitive cause. High frequency trading is suspected to be a contributing factor. The whole episode seems to have dealt a huge blow to the credibility of US capital markets, and the timing couldn't have been worse, with investor confidence already shaky as a result of developments in Europe.
- European leaders failed to get the peripheral debt catastrophe under control this week, heightening fears that contagion is becoming reality. In a chilling reminder of Fall 2008, uncertainty over counterparty exposure - this time to sovereigns - and USD strength on risk aversion have combined to send interbank lending rates sharply higher, elevating the prospects of another short term liquidity crisis in the banking sector. Earlier in the week peripheral bond yields registered new highs amidst unfounded rumors of IMF aid packages and/or credit rating downgrades on the Iberian Peninsula. Markets were hoping ECB President Trichet would at least attempt to calm things down with the announcement of outright sovereign debt purchases or a reopening of emergency liquidity facilities during his monthly press conference on Thursday, but investors were left high and dry when only the empty pledge that "default is not an option for Greece" was forthcoming. Adding to the drama, riots erupted on the streets of Athens after the Greek government passed a range of austerity measures, a necessary precondition to receiving the €110B in aid pledged by EU member states and the IMF last week. With the German legislature having approved its contribution, the final obstacle to deployment of the package appears to have been removed ahead of coupon payments on May 19th. But market remains unconvinced and default or restricting remains highly possible. Heading into the weekend, rumors of emergency central bank liquidity injections have reached fever pitch.
- UK voters went to the polls on Thursday and projections of a hung parliament have proved to be well founded. The Conservatives won both the popular vote and the most seats in the House of Commons, but have fallen short of the 326 seats required to form Government alone. A Conservative/Liberal-Democrat pact appears imminent, meaning Tory leader David Cameron will almost certainly be the next UK Prime minister. Whether the new UK Government will take the form of a bona-fide coalition or a minority Conservative administration governing with the consent of the Liberals remains to be seen. Whatever the case, the next PM and chancellor's will be immediately confronted with the daunting task of fiscal consolidation. With an EU Commission report earlier in the week forecasting a UK 2010 deficit worse than Greece's, UK markets will be watching the new government's efforts with great interest.
- The March quarter earnings season is winding down at this point, with the bulk of the most anticipated quarterly reports now out of the way. In any case, the spotlight this week was decidedly not on equities. Among noteworthy earnings MasterCard beat expectations handily, although the firm's CFO warned that volume headwinds to continue through rest of 2010 due to loss of bank customers. Media names Time Warner and News Corp both turned in strong earnings performances, with both firms outperforming expectations. Fertilizer name CF Industries surprised investors with a loss, versus expectations for a significant profit, with Archer-Daniels-Midland missed estimates across the board.
- First quarter earnings results from Transocean were relatively strong, although revenue missed by a bit. On the conference call Transocean executives reiterated that they do not know what caused the explosion at the Deepwater Horizon rig and warned that Q2 results would be impacted by the disaster. BP remains in the media hot seat as the Gulf oil spill grows, although the firm has managed to nearly complete the process of capping one of the major leaks resulting from the Deepwater Horizon accident. Midcap Energy names Marathon and Anadarko crushed earnings and revenue targets, citing higher crude prices and demand recovery. Murphy Oil missed expectations, blaming lower margins and mechanical issues at its refineries.
- The April same-store sales data indicated the American consumer may have taken a break from the robust spending levels seen over the first three months of the year, although it's worth keeping in mind that the early Easter holiday substantially helped March comps at the expense of April sales. A majority of retailers reported comp sale declines, and nearly all missed analysts' targets.
- There were significant developments in several high-profile merger dramas this week. The boards of United Airlines and Continental agreed to a merger of equals, creating the world's biggest airline. The new entity to be 55% owned by UAL holders and 45% by Continental holders, with each Continental share exchanged for 1.05 United shares in an at-the-market stock swap. Simon Property increased its offer for bankrupt mall operator General Growth Properties to $20/shr on Thursday, noting that it would be its final offer for GGP, but then withdrew the offer after a judge approved an alternative deal with Brookfield on Friday.
- The perceived safety of German and US government bond markets served as a magnet for capital as investors rushed to exit riskier assets this week. At one point Germany's 2-year shatz yield was down more than 40% to trade below 0.5% before closing just above that mark. Prices surged in the US as well sending the 2-year yield below 0.75% and the long bond toward 4.25%. The US benchmark 10-year rate touched levels not seen since early January, finishing the week below 3.45%. Bond guru Bill Gross even admitted to buying US long bonds during the market mayhem Thursday afternoon. A major question left for investors to ponder is will these lower rates affect the US Treasury's ability to raise another $78B in coupon supply next week.
- Currency trading reflected the slow build in risk aversion this week, driven by the deepening European debt crisis. The week began with the ECB suspending the minimum rating threshold on Greek debt, as well as a CFTC report on futures positions showing a record number of euro short positions, suggesting more downside in EUR/USD, especially given the key 8-year uptrend line around the 1.3070 area. Upside potential seemed limited to short covering rallies, with 1.3400 cited as a key level. Once the key 1.3070 level gave way the euro entered a downward spiral and ended up testing 1.2530 during Thursday's wild market action. The pair managed to rebound modestly amid speculation that the ECB would hold a conference call with 47 of the largest banks in Europe to stabilize money markets. Other rumors circulated that swap lines between the Fed and major central banks might be reinstated. Dealers believe the overall euro problems will not be going away anytime soon, and see any central bank intervention as a means to re-establish shorts.
- Sterling was volatile as the election results trickled in on Friday. The confirmation of a hung parliament couple with Moody comments that fiscal consolidation must begin right away sent the GBP/USD down to test fresh one-year lows below 1.4495 level before stabilizing. USD/JPY approached five-week highs at 94.98 based on interest rate expectations that are growing out of more positive US economic data. But there was also a taste of mid 2008 in USD/JPY as the pair dipped to retest the pivotal 88.20 level on risk aversion flows on Thursday. The pair managed to retest 93 following the strong US payroll numbers but more risk fears continued to drive safe haven flows into JPY. Note too that the SNB appears to have given up defending EUR/CHF, as the pair tested all-time lows just above the 1.4000 level.
- Some of the risk aversion this week also stemmed from Far East factors as the nations with the most growth momentum took additional measures to curb their economies from overheating. In China the PBoC raised its Reserve Requirement Ratio (RRR) by another 50 bps to 17.00%, for its third hike in 2010. The Australian central bank raised its interest rates on Tuesday and the Australian government confirmed plans for a 40% resource tax on mine operators.
Week of 5/10/2010 thru 5/14/2010
Monday, May 10, 2010
Economic
07:00 BoE rate decision
08:15 Canada April Housing Starts
10:00 Mexico March Trade Balance
Tuesday, May 11, 2010
Economic
10:00 US March Wholesale Inventories, May IBD/TIPP Economic Optimism
13:00 US Treasury's $38B 3-year auction
16:30 API Crude Oil/Gasoline/Distillate Inventories
Wednesday, May 12, 2010
Economic
08:00 March Brazil Retail Sales
08:30 US March Trade Balance
10:00 Mexico March Industrial Production
10:30 DoE Crude Oil/Gasoline/Distillate Inventories
13:00 US Treasury's $24B 10-year auction
14:00 US April Budget Statement
15:00 Argentina April CPI
Thursday, May 13, 2010
Economic
17:00 Colombia March Trade Balance
08:30 US Initial Jobless Claims, Continuing Claims, April Import Price Index
10:30 Natural Gas Inventories
13:00 US Treasury's $16B 30-year auction
18:00 Chile rate decision
Friday, May 14, 2010
Economic
08:30 US April Advance Retail Sales
09:15 US April Industrial Production, April Capacity Utilization
09:55 US May Prelim Univ of Michigan Confidence
10:00 US March Business Inventories
< BR>
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.
08:00 Chile April CPI, Chile April Trade Balance
08:30 April Unemployment Rate, April Nonfarm Payrolls, April Manufacturing Payrolls, April Average Hourly Earnings
15:00 March Consumer Credit
Today’s Headlines
5:36:48 AM
(EU) ECB's Trichet: Rates are appropriate, latest data confirms recovery in the Euro Zone is ongoing but still could be bumpy, uneven
- Reiterates that inflation expectations are well anchored, pledges again to take all necessary actions to maintain price stability; domestic price pressures are still contained.
- Renewed tension in certain financial sectors a downside risk.
5:52:35 AM
(EU) ECB's Trichet: Did not discuss buying govt bonds or a orderly default proceedure; default is "not an issue" for Greece - Q&A
- Collateral decision reflected indepedent judgment of Greece program
- Decided that loans and aid to Greece were warranted after taking government's recovery program fully into consideration.
- Needed to alter collateral rules in order to remain consistent
- Reiterates that price stability is primary responsibility of ECB
- ECB permanently reviews what it does
6:16:52 AM
(EU) ECB's Trichet: differences between Portugal, Greece "absolutely obvious"
- Growth differential are absolutely clear
- Euro economies are not growing at same pace; also different speeds of recovery
- Cites today's better-than-expected factory orders data as an example of encouraging economic developments
- Discussions on ratings agencies around the world are progressing
6:55:56 AM
(US) Fed's Bullard: There is no indication that countries such as Spain are reporting incorrect figures
- Considers it a 'tragedy' that GSEs have not been addressed in recent financial reform debate.
- Unwind should begin with assets sales before rate are increased; Fed can sell securities very slowly over time as the economy recovers; gradual sale of MBS would act as a "very modest" tightening.
7:22:57 AM
(US) Fed's Bullard: Discount rate normalization should be done before fed funds rate hikes to clearly separate discount rate normalization from monetary policy
- reminder: after a 25 bps discount rate hike earlier this year, the discount rate is currently 50 bps above the base rate; historically the spread sits at 100 bps.
7:48:52 AM
(US) US Fed's Hoenig: Low interest rates for extended period of time acts to encourage credit; in favor of a derivatives clearing house
- Note: Hoenig has dissented at Fed meetings requesting a change in the language away from 'rates low for extended period'
- notes that if the deficit is not addressed soon there will be pressure on the Fed to monetize debt which will impact the USD
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.
07:45 ECB rate decision
08:30 Q1 Prelim Nonfarm Productivity, Q1 Prelim Unit Labor costs, Initial Jobless Claims, Continuing Claims, Canada March Building Permits
10:00 Canada April Ivey Purchasing Managers Index
10:30 Natural Gas Inventories
Today’s Headlines
5:00:18 AM
*(NO) NORWAY CENTRAL BANK RAISES DEPOSIT RATE BY 25BPS TO 2.00%; AS EXPECTED
- Did consider leaving Deposit Rate unchaged at today's policy meeting
- Sees rate between 1.50% to 2.00% until June report
- Consumer price inflation slowed as expected while growth picked up as projected
- Expects inflation to move up again
5:16:35 AM
(PO) Moody's puts Portugal "AA2" sovereign rating on review for possible downgrade
- Rating might be revised lower by one or two notches at most
- Moody's believes that increased risk discrimination in the financial markets may raise Portugal's financing costs for some time to come.
5:27:35 AM
US Coast Guard: Valve leakstopped on top of well assembly at BP site in Gulf; estimated rate of spillage unchanged
- Reminder: this move was expected, as BP moves to plug the three leaks at the well site. The two larger leaks are expected to be capped with domes in the next two weeks.
- follow up 09:42ET: BP confirms the first of three leaks has been stopped. First containment dome expected to be lowered into position over the second leak in approx three days.
6:46:09 AM
(EU) ECB's Weber: Greece Containing contagion does not justify all and any means, cannot violate basic principles of Maastrict treaty
- One lesson from the Greek crisis is that an "insolvency regime" would increase market discipline and national responsibility
- Warns that instituting an insolvency regime or debt restructuring right now would worsen the crisis.
- Crisis calls for measures that were "unthinkable" previously, however there are "limits."
- Greek crisis is primarily due to domestic problems, Greek austerity measures are painful but necessary.
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 April Challenger Job Cuts
08:15 April ADP Employment Change
08:30 Chile March Economic Activity
10:00 April ISM Non-Manufacturing
10:30 DoE Crude Oil/Gasoline/Distillate Inventories
20:00 Colombia April Consumer Price Index
Today’s Headlines
3:20:17 AM
(SP) Moodys: Taking no rating further actions on Spain at the moment
***Note: Earlier in the session vague rumors of a potential sovereign downgrade were making the rounds. Fitch reaffirmed AAA rating and stable outlook on Spain.
4:59:07 AM
(GR) EU/Greece comment on loan package; Sets quarterly goals for loan disbursement
- Greece to cap pension spending to 2.5% of GDP
- Pension benefits to be indexed to prices
- Normal retirement set to 65 years
5:49:22 AM
Analysts at Societe Generale comment on Spain and remain tactically bullish
- Analysts argue that country is not the next to fall as its cyclical outlook and productivity is improving.
- Furthermore, its competitiveness could agreeably surprise sceptical investors.
- Analysts note the beneficial exposure to Latin America growth and argue that markets underestimate the growth from that area while overestimating the concerns on debt environment.
6:25:41 AM
(BR) Brazil Fin Min Mantenga: Sees FY10 Current account deficit of 2.2-2.3% of GDP
- Current account gap widening on profit remittances; current account gap is 'comfortable.'
- Brazilian exporters need stimulus measures.
7:00:02 AM
*(US) MARCH PENDING HOME SALES M/M: 5.3% V 5.0%E; Y/Y: 23.5% V 19.5%E
- prior M/M revised higher from 8.2% to 8.3%
- prior Y/Y revised higher from 17.3% to 17.4%
7:07:19 AM
(US) Fed's Bullard: No impact would be expected if the Fed decided to start selling MBS this year; Fed could use a 'reverse taper' on unwinding balance sheet size
- Reminder: on 4/15 Bullard mentioned that rates would have to increase substantially for there to be significant rate risk to the Fed's MBS portfolio; and Holdings of MBS do not increase the risk on the balance sheet
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.
“An idea isn't worth that much. It's the execution of the idea that has value. If you can't convince one other person that this is something to devote your life to, then it's not worth it.”
08:00 Brazil March Industrial Production
10:00 March Factory Orders, March Pending Home Sales, Mexico April Consumer Confidence
16:30 API Crude Oil/Gasoline/Distillate Inventories
Today’s Headlines
3:04:26 AM
(FR) France Fin Min Lagarde: Will have to increase its debt issuance for an additional €12.9B in 2011, 2012 and 2013 to help finance Greek loans - newspaper interview
- There is no austerity plan for France; the aid package will protect Greece for 2.5 years
- Financial stability and competitiveness should be part of the Euro pact.
4:49:39 AM
(GR) German Fin Min Schaeuble: German Cabinet approve Greek aid bill, as expected
***Earlier today German draft bill estimated Greece aid package at a max of €22.4B over 3 years, aid is not expected to exceed €14B after first year (refer to our 5:19 headline)
- The draft bill also asks parliament to approve €8.4B for the first year of the program.
5:30:02 AM
*(US) MAR PERSONAL INCOME: 0.3% V 0.3%E; PERSONAL SPENDING: 0.6% V 0.6%E
- Prior Personal Income revised higher from 0.0% to 0.1%
- Prior Personal Spending revised higher from 0.3% to 0.5%
5:55:09 AM
(GR) Germany's Merkel: Bill expected to stabilize Greece and Eurozone
- Confirms German portion of the Greece rescue package at €22.4B over the next 3 years
- Expects German lawmakers to approve the rescue package by the end of the week May 7th)
- Notes Maastricht stability and growth pact needs to be reformed
7:00:02 AM
*(US) APRIL ISM MANUFACTURING INDEX: 60.4 V 60.0E (highest since June 2004); PRICES PAID: 78 V 73E
**sub-indices:
- New Orders Index: 65.7 v 61.5 prior
- Production index: 66.9 v 61.1 prior
- Employment Index: 58.5 v 55.1 prior
- Inventories index: 49.4 v 55.3 prior
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.
“One's dignity may be assaulted, vandalized and cruelly mocked, but cannot be taken away unless it is surrendered.”
Market Week Wrap-up
- Positive sentiment driven by strong corporate earnings won out over yet another round of Greek drama this week as the Dow pulled off its eighth consecutive week of gains for the first time since 2004. The signature events were blowout earnings from Goldman Sachs and Apple, and Greece's request to activate its package of emergency EU/IMF loans. Weekly employment claims saw mild improvements, while the March existing and new home sales data returned strongly to growth, aiding homebuilders and overall sentiment. On Monday Chicago Fed President Evans said the recession is "definitely over" and the odds of a "double-dip" are low, although the IMF is warning that a new phase of the economic crisis could grow out the sovereign debt situation. For the week the the DJIA rose 1.7%, the Nasdaq gained 2% and the S&P500 increased 2.1%.
- Markets opened on Monday in a wary mood as uncertainty over Europe's Greece trap persisted and financial names headed lower on speculation about a harsher US financial reform bill. Fears of debt crisis contagion metastasized midweek on a trio of S&P sovereign downgrades, as the firm cut Spain one notch, Portugal two notches and Greece three notches (to junk). These moves fired up risk aversion and drove triple-digit losses on DJIA, which tested below 11,000 on both Tuesday and Wednesday. Goldman executives were grilled all day long in Congressional testimony on Tuesday, as representatives delighted in reading profanity laced emails from Goldman traders regarding the low-quality mortgages they packaged into the now notorious Abacus CDO deal and others. Sentiment improved somewhat on Thursday, but an article in the Wall Street Journal on Friday morning stating that the DoJ had launched a preliminary criminal probe based on the SEC's allegations reignited risk aversion. Shares of Goldman were down around 7% on the week, with the other leading bank stocks down in the mid single digit range. The FOMC altered its statement only very slightly upgrading its outlook on the economy by a hair, while US economic data was relatively strong. The first reading of Q1 GDP was only a bit below expectations at +3.2% and the April Consumer Confidence reading moved out to its highest level since September 2008. The Chicago PMI survey marked its highest level since April 2005 and the prices paid component reached levels not seen since oil prices surged in late 2008. The US benchmark 10-year yield declined some 16 basis points on the week settling below 3.7%. For the week the the DJIA declined 1.2%, the Nasdaq fell 2.7% and the S&P500 dropped 2.5%.
- With front-month crude at or near post-crisis highs for most of the first quarter of 2010, leading energy producers and refiners have offered surprisingly mixed quarterly reports. Exxon missed top- and bottom line expectations. The company noted that lower refining margins offset the benefit of higher oil prices, while downstream results appear to be turning around. Chevron offered strong earnings and weak revenue; executives noted that profits benefitted from higher prices and higher production levels. Conoco's earnings exceeded expectations, although its refining business operated in the red in the quarter. Valero's top-line revenues crushed expectations and reported its fifth consecutive quarterly loss, although the loss was smaller than expected. Valero said it would return to profitability next quarter. In Europe, BP's quarterly profit was way ahead of expectations, while France's Total was in line.
- Industrial and manufacturing names offered strong earnings, although revenue results are still not showing the broad-based strength investors have been waiting for. Caterpillar lifted markets on Monday with very robust earnings. Cat's CEO said that activity and orders are significantly higher than last year and are at record levels in some areas. Chemical processors 3M and Du Pont both beat expectations in their first quarter reports and raised 2010 guidance. Du Pont cited particularly strong demand in Asia Pacific. Auto sector names had a very good quarter: Ford nearly doubled its quarterly profits on a sequential basis, while engine manufacturer Cummins reported twice the quarterly profit expected.
- A handful of tech names did not live up to Wall Street's expectations in quarterly reports this week, although the results can hardly be described as poor. Broadcom missed earnings targets, although its profits were up significantly on a sequential and y/y basis. Texas Instruments was largely in line with expectations; executives said demand has remained strong so far. MEMC Electronics reported a loss, instead of the small profit expected, and also guided well below par for next quarter. Two bright spots in tech were Corning, which beat estimates and once again increased its forecast for LCD glass industry demand, and First Solar, which crushed expectations, guided higher and said it would further expand manufacturing capacity. Sprint's quarterly loss was in line with expectations this morning, and it also reaffirmed that it would beginning stemming losses in post-paid and total subscriber losses this year.
- On the M&A front, Hewitt-Packard ended months worth of speculation about who would buy Palm, announcing that it would acquire the firm for $5.70 a share in cash, for a total deal worth $1.2B. Industry commentators expect HP integrating Palm's highly regarded WebOS operating system into tablet and netbook products. Reports circulated early in the week that United Airlines was negotiating terms of a tie-up with Continental, with other reports asserting that a deal was very close and could be finalized over the weekend. Airline industry consolidation has been widely expected in recent years, and United Airlines had been pursuing Continental back in 2008. The board of United Airlines is meeting on Friday and Sunday to discuss term, according to reports in the Wall Street Journal.
- US Treasury prices finished the week at their highest levels. A steady bid buoyed by risk adverse investors eyeing the Greek saga, more than offset any potential supply jitters that could have accompanied another $118B in coupon supply. The auction results were stellar especially in the context of the sharply declining yields/higher prices participants were forced to accept. By week's end those investors we rewarded as prices continued to climb and yields finished at the lowest levels in more than a month. US 10-year paper saw yields decline by more than 15 basis points for the week, while the 2-year note yield has dropped back below 1%. The spread between the US 2 and 10-year note narrowed towards 270 basis points.
- The European peripheral debt situation dictated FX trading again this week. Ten-year spreads and credit default swaps remained highly elevated as negotiations continued among the EU, IMF and Greek officials for a larger bailout fund. Following the midweek sovereign debt downgrades of Greece, Portugal and Spain, spreads between 10-year Portuguese/German and Greek/German bonds widened to post euro-launch records. The premium for 10-year Greek government bonds over euro zone benchmark German Bunds blew out to 1,000 basis points. Two-year Greek paper opened the week with a yield of 10.7% and then proceeded to climb above 13%, then approach 20%, nearly six times the level at which the EU plans to lend to Greece.
- In negotiations over the bailout package the focus remained on the German political scene, as officials tried to stall disclosure of an agreement (and the all important price tag) until after a key German state election on May 9th. Germany insisted that Greece firm up plans for multiple years' worth of deficit reductions before qualifying for aid. Bond markets felt anxious ahead of the next key date for Greece, namely the maturity of €8.5B of Greek debt on May 19th, with fears growing that the situation might shift to full contagion mode. Overall the market speculators continued to push Greece to provide detailed plans on its austerity measures.
- EUR/USD began the week approaching the 1.34 neighborhood, but turmoil in the European peripherals sent the pair back towards 1.3110 for fresh one-year lows early on. As the week ended and the likelihood a bigger bailout deal would be signed, sealed and delivered by EU governments in time for the above-mentioned debt maturity provided a muted relief rally in the euro and narrowed the related peripherals. The Greek/German 10-year spread dipped back below 500bps. Note that the EU confirmed it would hold a summit on May 10th to discuss Greece.
- In other FX news there was vague chatter circulating that the UK could lose its "AAA" sovereign rating due to the growing possibility of a hung Parliament emerging from the May 6th elections. GBP/USD tested the 1.5130 area during the week but found support from Far East and Middle-East sovereign names.
- USD/JPY maintained a footlhold over the 92 handle all week. Japanese Minister Haraguchi noted that Japanese Post Bank would invest ¥10T in foreign assets. Dealer sentiment noted that with Golden Week looming the prospect of a sub-90 reading appeared to be fading from the charts. There were moments of yen strength on risk aversion flows but dealers use the opportunity to sell JPY ahead of a flurry of investment trust launches.
- A Bank of Japan rate decision and subsequent statement offered little in fresh policy developments aside from calling for greater attention on higher bank capital needs. Bank of Japan Gov Shirakawa also reiterated that improving conditions do not require additional easing, and that a gradual rise in commodity prices is filtering through CPI, with inflation expected to keep narrowing in months to come. To that end, Japan's central bank also boosted its FY11/12 CPI forecast as part of its semiannual economic outlook report to 0.1% from -0.2%, and raised its current year GDP target to 1.8% from 1.3%.
- Ahead of the Reserve Bank of Australia interest rate decision next week, quarterly inflation data for Q1 topped estimates on both wholesale and retail metrics, tilting the even-split sentiment slightly in favor of yet another hike. Q1 PPI Q/Q figure of 1.0% marked the highest increase since Q4 of 2008. Likewise, Q1 CPI Y/Y headline saw the biggest rise since Q4 of 2008 at 0.9%. And although the RBA trimmed mean y/y rose at the slowest rate since Q3 at 3%, that figure is still on the cusp of the central bank target band, boosting the rate hike probabilities from around 25% to above 55% by the end of the week.
- Reserve Bank of New Zealand left interest rates unchanged at 2.50% as widely expected, reiterating commitment to tightening in the coming months, but also said inflation is expected to be in target range. RBNZ statement also suggested that credit growth is contained, business spending still weak, and household spending cautious. Kiwi Dollar sold off following the decision, with markets anticipating a firmer commitment to higher rates to come as early as the next decision in mid-June.
Week of 5/3/2010 thru 5/7/2010
Monday, May 03, 2010
Economic
08:30 March Personal Income, Personal Spending, PCE Core, PCE Deflator
09:00 Brazil April Manufacturing PMI, Brazil April Trade Balance
10:00 April ISM Manufacturing, April ISM Prices Paid, March Construction Spending
Tuesday, May 04, 2010
Economic
08:00 Brazil March Industrial Production
10:00 March Factory Orders, March Pending Home Sales, Mexico April Consumer Confidence
16:30 API Crude Oil/Gasoline/Distillate Inventories
Wednesday, May 05, 2010
Economic
07:30 April Challenger Job Cuts
08:15 April ADP Employment Change
08:30 Chile March Economic Activity
10:00 April ISM Non-Manufacturing
10:30 DoE Crude Oil/Gasoline/Distillate Inventories
20:00 Colombia April Consumer Price Index
Thursday, May 06, 2010
Economic
07:45 ECB rate decision
08:30 Q1 Prelim Nonfarm Productivity, Q1 Prelim Unit Labor costs, Initial Jobless Claims, Continuing Claims, Canada March Building Permits
10:00 Canada April Ivey Purchasing Managers Index
10:30 Natural Gas Inventories
Friday, May 07, 2010
Economic
08:00 Chile April CPI, Chile April Trade Balance
08:30 April Unemployment Rate, April Nonfarm Payrolls, April Manufacturing Payrolls, April Average Hourly Earnings
15:00 March Consumer Credit
< BR>
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.
