7:30am Sept Challenger Job Cuts y/y (last -13.8%)
8:30am Aug Personal Income (last 0.0%), Aug Personal Spending (last 0.2%), Aug PCE Deflator y/y (last -0.8%), Aug PCE Core (last m/m 0.1%, y/y 1.4%), Initial Jobless Claims (last 530K), Continuing Claims (last 6.138M)
10:00am Sept ISM Manufacturing (last 52.9), Sept ISM Prices Paid (last 65), Aug Construction Spending m/m (last -0.2%), July Pending Home Sales (last m/m 3.2%, y/y 12.9%)
10:30am Natural Gas Inventories
Todays Headlines
8:30:12 AM
*(CA) CANADA AUG INDUSTRIAL PRICE INDEX M/M: 0.5% V 0.4%E; RAW MATERIAL PRICE INDEX M/M: 3.7% V 3.0%E
- Prior Industrial Product Price M/M revised from -0.5% to -0.6%
- Prior Raw Material Price Index revised from -3.8% to -3.9%
9:00:59 AM
(PD) Polish Central Bank: Retains informal easing bias; main risk of inflation below 2.5% target
- Approves 2010 monetary policy guidelines
- Q3 data to show continued improvement
- Employment outlook and loan situation remain unfavorable
9:45:00 AM
*SEPT CHICAGO PURCHASING MANAGERS INDEX: 46.1 V 52E
**sub-indices:
- Prices Paid: 51.3 v 50.0 last
- New Orders: 46.3 v 52.5 last
- Employment: 38.8 v 38.7 last
- Inventories: 38.9 v 27.5 last
- Supplier Deliveries: 49.3 v 54.6 last
- Production: 47.2 v 52.9 last
- Order Backlogs: 36.7 v 45.8 last
9:48:25 AM
(US) Fed's Lockhart: Would like to see more evidence of private sector activity before altering Fed policy stance
- Current conditions dictate measured optimism, too early to sound the all clear signal on the economy.
- Banking system is healing, US economy is improving but vital signs are mixed.
- Sees risks to economic growth from commerical real estate, worst is still ahead for commercial real estate sector.
- More healing is needed in US banking system.
11:11:26 AM
Fed's Lockhart: First time home buyer tax credit has shown results; decision on extending it should be based on the health of the housing market - Q&A
- First-time homebuyers indicate results.
- Lenders still hesitant on real estate loans.
- Possible home buyers have turned towards renting.
- FDIC fees are necessary.
- Expect to see more bank failures.
12:19:03 PM
Fed's Lockhart: FOMC members differ on exit strategy timing and pace
- Credit programs are winding down; credit markets showing healthy signs
- Concerned about potential for relapse
- Sees a comprehensive review of methodolgies regarding regulations
- To address imporvements in banking supervision
12:23:58 PM
(US) Former Fed Chairman Greenspan: no return to recession in 2010; $2T balance sheet "not sustainable"
- U.S. growth to average 3-4% in next six months and is currently in "disinflationary" period
- Concerned about political pressure on Fed
- Stocks may "flatten out"
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
- Markets opened somewhat higher this morning despite the surprisingly high ADP employment numbers, which provided a troubling preface to Friday's payrolls data. The final Q2 GDP numbers were slightly better than expected, and numerous speakers, including many Fed governors, have already predicted that GDP will turn positive in Q3. But it was the Chicago PMI that really upset the applecart, with the widely watched regional manufacturing survey registering a much lower-than-expected reading, spooking investors just after the open. Front-month NYMEX crude moved higher after weekly DOE inventories, but the biggest mover was heating oil after distillate inventories saw a smaller than expected build. Bond prices remain firm with yields looking to finish out at or near their lowest levels in months.
- The banks are heading lower with overall markets this morning, however comments from the IMF on global finance minimizing potential declines this morning. Overnight the IMF reduced its estimates for writedowns faced by the industry on a global basis by $600B, while also warning that up to $1.5T in writedowns are still expected through 2010. The IMF also cautioned that while bank capital positions have improved, earnings will not offset or prevent more writedowns. In other finance sector news, Bank of America sold its long-term asset management unit Columbia Management to Ameriprise for $1B in cash, far less than the $2-3B pricetag speculated several months ago. Note that earlier price may have included short-term asset management business as well, which was apparently not part of the deal announced today. The WSJ reported that CIT is preparing to cede control to bondholders, who are facing a 30-40% haircut.
- More tech firms crushed analysts' estimates and offered much improved guidance in quarterly reports yesterday after the close. DRAM market power Micron Tech's loss was half the expected amount, while revenue came in a hair above expectations. Its DRAM sales were notably higher, up 28% sequentially. Custom electronics manufacturer Jabil Circuit reported double the expected profit and guided well above the consensus for next quarter. Shares of JBL are up 8% in early trade, although investors are not impressed with MU, which is down 2%. Nike is up 8% after beating earnings projections in its Q1 report, although sales numbers were weak. Iconix is down 20% after cutting its 2009 view and guiding Q3 below par. PSYS is down a few percent after reducing its full year guidance. The mover of the day is certainly Discovery Labs, which was up 50% after announcing that it had worked out an approach for resolving issues with Surfaxin with the FDA. Shares of DSCO are up 30% mid morning.
- In currencies, greenback sentiment was soft on fresh risk appetite in the early going. EUR/USD surged to 1.4675 following the results of the ECB 12-month tender operation, which saw less demand than expected, prompting optimism that balance sheet stresses in the Euro Zone and emerging market countries have fallen significantly. However, the dire Chicago PMI number turned market sentiment around and sparked risk aversion, helping the dollar move into positive territory against the European pairs and recoup most earlier losses against the commodity currencies as energy commodities dipped into the red. EUR/CHF continued to test its 200-day moving average, as has been the case since mid-August. Dealers were watching for any CHF demand from Swiss institutions taking advantage of the cheap euros available from the ECB 12-month tender, pointing out that the last round of SNB intervention had coincided with an initial 12-month tender. Intervention rumors made the rounds, sending the cross from 1.5080 to test above 1.52. The South African Rand exhibited weakness after's India's Bharti disengaged merger talks with MTN [MTN.SA], noting that the South African gov't said it could not accept terms offered.
More Headlines
8:30:12 AM
*(CA) CANADA AUG INDUSTRIAL PRICE INDEX M/M: 0.5% V 0.4%E; RAW MATERIAL PRICE INDEX M/M: 3.7% V 3.0%E
- Prior Industrial Product Price M/M revised from -0.5% to -0.6%
- Prior Raw Material Price Index revised from -3.8% to -3.9%
9:00:59 AM
(PD) Polish Central Bank: Retains informal easing bias; main risk of inflation below 2.5% target
- Approves 2010 monetary policy guidelines
- Q3 data to show continued improvement
- Employment outlook and loan situation remain unfavorable
9:45:00 AM
*SEPT CHICAGO PURCHASING MANAGERS INDEX: 46.1 V 52E
**sub-indices:
- Prices Paid: 51.3 v 50.0 last
- New Orders: 46.3 v 52.5 last
- Employment: 38.8 v 38.7 last
- Inventories: 38.9 v 27.5 last
- Supplier Deliveries: 49.3 v 54.6 last
- Production: 47.2 v 52.9 last
- Order Backlogs: 36.7 v 45.8 last
9:48:25 AM
(US) Fed's Lockhart: Would like to see more evidence of private sector activity before altering Fed policy stance
- Current conditions dictate measured optimism, too early to sound the all clear signal on the economy.
- Banking system is healing, US economy is improving but vital signs are mixed.
- Sees risks to economic growth from commerical real estate, worst is still ahead for commercial real estate sector.
- More healing is needed in US banking system.
11:11:26 AM
Fed's Lockhart: First time home buyer tax credit has shown results; decision on extending it should be based on the health of the housing market - Q&A
- First-time homebuyers indicate results.
- Lenders still hesitant on real estate loans.
- Possible home buyers have turned towards renting.
- FDIC fees are necessary.
- Expect to see more bank failures.
"Character is doing the right thing when nobody's looking. There are too many people who think that the only thing that's right is to get by, and the only thing that's wrong is to get caught."
8:15am Sept ADP Employment Change (last -298K)
8:30am Final Q2 Annualized GDP q/q (last -1.0%), Q2 GDP Price Index (last 0.0%), Q2 Personal Consumption (last -1.0%), Q2 Core PCE q/q (last 2.0%)
9:45am Sept Chicago Purchasing Manager Index (last 50)
10:00am Sept NAPM-Milwaukee (last 56)
10:30am DoE Crude Oil/Gasoline/Distillate Inventories
Todays Headlines
7:49:11 AM
Analysts at UBS look at US S&P 500 Index; See index as most overbought since 1983, overall technical levels remain unchanged
- Continue to see 1037 as key support level, as long as this level holds, market seen as capable of pushing new highs
- See upside to any future run limited due to deterioration in July rally
- Analysts suggest eyeing German blue chip index DAX versus the MSCI Index as follow through from German Federal elections could either post an upside break, which could trigger further outperformance in 2010
9:00:03 AM
*CASE SHILLER JULY HOME PRICE INDEX: 144.23 V 141.94 PRIOR; COMPOSITE-20 Y/Y: -13.30% v -15.40% PRIOR
- Shiller notes that 18 of 20 metro areas showed monthly house price rises in July**
- Prior Home Price Index revised from 141.86 to 141.94
- Prior Composite-20 revised from -15.44% to -15.40%
9:32:28 AM
(BR) Brazil Aug Total Outstanding Loans: $1.3Bv $0.5B prior; Private Banks Lending: $0.8B v $0.8B prior
- Aug Default Rate at 5.9% v 5.9% prior
- Followup: Lopes: Personal default rate seen falling in Sept-Oct period
- Prior Total Outstanding Loans revised from $1.3B to $0.5B
9:59:33 AM
Moody's changes outlook on US Retail Industry Sector to Stable from Negative
- The change in outlook to stable reflects Moody's belief that the fundamental credit conditions across the broad retail industry will be generally stable over the next 12-18 months, and are unlikely to either materially erode nor improve.
-While the many pressures on the consumer may result in the U.S. retail industry having further sales and earnings declines in the current quarter, Moody''s believes that the overall credit profile of the broad retail industry will remain relatively stable for the remainder of 2009 and for 2010.
10:28:39 AM
FDIC Board: Approves new 3 year prepay fees
- Earlier in session: Propose that banks prepay 3 years in FDIC protection; Will raise $45B through prepayments; FDIC insurance fund to be in the red by Sept 30.
10:53:44 AM
World Bank's Zoellick: Role of the USD "remains very significant"
***Reminder: On Sept 27th Zoellick stated that the US should not 'take for granted' the dollar's status as the world's main currency.
2:53:50 PM
(US) Senate Finance Panel rejects public health insurance option
- Public option would have created competition for insurers.
- Baucus and four other Democrats joined Republicans in voting for public option.
- Senator Schumer (D) is planning to offer second amendment on public option.
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
- US equity markets are trending to the downside this morning as investors err on the side of caution in the wake of the confidence data, although other news has been generally positive. The September Consumer Confidence data has caught markets off guard, as the reading declined over August levels and came in much lower than expected. Various analysts pointed out that the reading was a stark contrast to last week's stronger-than-expected University of Michigan consumer figure. The July S&P/Case-Shiller home price index racked up its third consecutive monthly gain, while the composite showed that y/y declines have slowed in all 20 cities for the sixth straight month. Fed Governor Fisher commented that the US house market is bottoming but remains on life support, warning that housing needs the Fed to exit its support before it can return to full health. Front-month crude is in a holding pattern between $66.50 and $67 this morning, while gold has slipped a bit to $991. Investors are also keeping an eye on US Treasury yields. Prices remain firmer with better performance seen at the long end curve narrowing spreads. The long bond is approaching 4% for the first time since March while the benchmark spread is back below 230 basis points.
- The FDIC has approved proposals that banks should pre-pay their insurance fees three years in advance, in an effort to raise $45B to pad the corporation's deposit insurance fund, warning that the fund could be in the red by the end of the month without the infusion. FDIC Chairwoman Bair said banks need to "step up" and tap their ample resources to help protect their industry. FDIC staff added that they do not see asset problems in the US banking system abating in the near term. In other financial sector news, China's CIC sovereign wealth fund said it would invest $2B in distressed asset funds in the US, including funds managed by Goldman Sachs and Oaktree Capital. Shares of CIT shot up more than 16% on a report in the NY Post that investor John Paulson was mulling a CIT/IndyMac merger, also noting that it was one of several plans being discussed. Sources involved later denied the report, sending CIT down to 13%.
- Walgreen beat top and bottom line estimates in its Q4 report this morning, sending shares of WAG up more than 10%. Competitors CVS and RAD were both up 4% as well on the news. In other equity news, pre-earnings guidance from two firms are shaking up newspaper and steel stocks. Gannett pre-announced Q3 results: EPS blew out analysts' expectations, while revenue was distinctly sub par. Note that earnings still beat estimates after taking account of special charges for restructuring. Investors like the results, despite the absence of strength in sales and the well-known travails of the newspaper industry. Shares of GCI are up 16%, while other print media names are catching a bid as well, with thinly-traded WPO up 4% and NYT is up 9%. MNI is up 8%, well off its best levels. Reliance Steel's guidance also soundly beat the Street by a wide margin, although comments from the company were less bullish, with the company warning it has not seen any meaningful improvement in demand, although average shipping volumes per day have improved slightly from lows in July. Shares of RS are up 3%, while industry ETF SLX and competitor STLD were both up 2% before trading off again. Note that comments from the China State Council, which approves plans to curb overcapacity in cement, steel, flat glass and aluminum industries (confirming proposals launched back in late August.
- In currencies, New York trading saw plenty of data and comments that spurred choppy price action in numerous pairs. Sterling soared over a big figure as New York desks were coming in following the release of the CBI data, as the move corresponded with comments leaking out from an emergency meeting between the BoE and economists. There was some speculation that the BoE could lower its deposit rate in a manner similar to Sweden. However, it seems more likely that the BoE was rather airing its displeasure with the market interpretation of Governor King's comments on the pound last week. GBP/USD probed the 1.60 neighborhood before consolidating its session gains. The greenback was firmer against the other majors on renewed risk aversion concerns aided by the weaker-than-expected US consumer confidence data. The Fed's Fisher said any reversal in policy by the Fed could be equal in speed as that seen in its easing actions of 2007/08 period.
- The Russian Central Bank's First Deputy Chairman once again shared his opinion on the reserve currency issue, reiterating Russia's desire to diversify away from the dollar. This time around, the Russians mentioned that the CAD and AUD pairs could be added to its reserves. USD/CAD briefly dipped below 1.0800 on the comment but retested the 1.09 area as the NY morning wore on.
More Headlines
7:49:11 AM
Analysts at UBS look at US S&P 500 Index; See index as most overbought since 1983, overall technical levels remain unchanged
- Continue to see 1037 as key support level, as long as this level holds, market seen as capable of pushing new highs
- See upside to any future run limited due to deterioration in July rally
- Analysts suggest eyeing German blue chip index DAX versus the MSCI Index as follow through from German Federal elections could either post an upside break, which could trigger further outperformance in 2010
9:00:03 AM
*CASE SHILLER JULY HOME PRICE INDEX: 144.23 V 141.94 PRIOR; COMPOSITE-20 Y/Y: -13.30% v -15.40% PRIOR
- Shiller notes that 18 of 20 metro areas showed monthly house price rises in July**
- Prior Home Price Index revised from 141.86 to 141.94
- Prior Composite-20 revised from -15.44% to -15.40%
9:32:28 AM
(BR) Brazil Aug Total Outstanding Loans: $1.3Bv $0.5B prior; Private Banks Lending: $0.8B v $0.8B prior
- Aug Default Rate at 5.9% v 5.9% prior
- Followup: Lopes: Personal default rate seen falling in Sept-Oct period
- Prior Total Outstanding Loans revised from $1.3B to $0.5B
9:59:33 AM
Moody's changes outlook on US Retail Industry Sector to Stable from Negative
- The change in outlook to stable reflects Moody's belief that the fundamental credit conditions across the broad retail industry will be generally stable over the next 12-18 months, and are unlikely to either materially erode nor improve.
-While the many pressures on the consumer may result in the U.S. retail industry having further sales and earnings declines in the current quarter, Moody''s believes that the overall credit profile of the broad retail industry will remain relatively stable for the remainder of 2009 and for 2010.
10:28:39 AM
FDIC Board: Approves new 3 year prepay fees
- Earlier in session: Propose that banks prepay 3 years in FDIC protection; Will raise $45B through prepayments; FDIC insurance fund to be in the red by Sept 30.
10:53:44 AM
World Bank's Zoellick: Role of the USD "remains very significant"
***Reminder: On Sept 27th Zoellick stated that the US should not 'take for granted' the dollar's status as the world's main currency.
9:00am July S&P/CS Home Price Index (last 141.86), July S&P/CS Composite-20 y/y (last -15.44%)
10:00am Sept Consumer Confidence (last 54.1)
4:30pm API Crude Oil/Gasoline/Distillate Inventories
Todays Headlines
7:04:10 AM
(UK) Chancellor Darling: "Too early to say with confidence" whether the UK is actually emerging from recession, expects UK recovery to be underway by turn of the year
- Spending cuts must be "rational," believes growth is the best way to cut debt.
- Steps taken to boost revenue have not been enough.
- "It is correct" for the rich to pay a greater share of taxes.
- "Greed and recklessness" will be prevented at banks, bonuses will be deferred or clawed back in necessary.
8:24:10 AM
(IR) Irish PM Lenihan: A no vote on the EU Lisbon treaty on Oct 2 would break confidence in Ireland
*Reminder: On 9/26 a Red C/Sunday Business Post poll, 55% of Irish voters are in favor of the Lisbon Treaty v 62% two weeks ago.
**The failure of the first public referendum on the Lisbon Treaty on June 12, 2008 in Ireland touched off a crisis in the European Union over further integration of governmental responsibilities.
***In December 2008, the Irish govt sought legal guarantees from the EU on tax neutrality as condition of a second referendum to Lisbon treaty.
11:06:28 AM
(EU) ECB's Trichet: Committed to price stability to prevent inflation from pushing up market rates
- ECB will not allow its extraordinary measures to feed into inflation.
- Low demand is the main reason for slow credit growth.
- Now is not the time to exit support for markets.
- Says banks must continue to strengthen their capital bases, use govt support measures when necessary; urges banks to resume lending; notes that there is still 45% of the govt support for banks that has not been claimed.
11:06:28 AM
(EU) ECB's Trichet: Committed to price stability to prevent inflation from pushing up market rates - Q&A
- Reiterates now is not the time to exit support for markets, but ECB will not allow its extraordinary measures to feed into inflation.
- Low demand is the main reason for slow credit growth.
- Banks must continue to strengthen their capital bases, use govt support measures when necessary; urges banks to resume lending; notes that there is still 45% of the govt support for banks that has not been claimed.
- Opposed to any Tobin Tax (tax on trading transactions).
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
- US equity indices are making strong gains this morning thanks to multiple big merger deals and strength in the leading bank stocks. Other asset classes are ascending with equities, as Treasuries, the greenback, front-month crude and gold are all posting gains. One notable exception to the bullish environment includes natural gas, which is down 5%, and industrial metals like copper and aluminum. Note that Former Fed Chairman Greenspan said last night that in the next two to three years we are going to have serious problems, warning that inflation will be a "great cost for the US and its trading partners." These comments have had no effect on higher bond prices. Goldman Sachs analysts have forecasted the 10-year benchmark yield to fall below 3.25% while the long bond future trades up 20 ticks this morning with the cash yield heading back towards 4%.
- Financials are leading the gains in equity markets this morning following a raft of moderately positive press for the industry over the weekend. The FT wrote that the recent rally in markets for "toxic securities" could help boost the banks' Q3 earnings, if they choose to book gains on mortgage-backed securities. The Wall Street Journal wrote that the US Treasury is planning new liquidity and mortgage bond purchase program tailored for state finance agencies. Under the plan, the Treasury would provide as much as $15B in new liquidity to help low-income home buyers. The program may be run by the US GSEs. Goldman Sachs may hire as many as 200 asset managers. "We are moving back on the offensive," Goldman's Marc Spilker told the Financial Times.
- A burst of deals announced over the weekend and this morning has some saying that Merger Monday is back. Xerox said it would acquire Affiliated Computer Services for $63.11/shr, in a deal valued at $6.4B in cash and stock deal. Xerox sees the deal as accretive in year one and believes the deal will accelerate its growth in an expanding market for business process management. Share of ACS are up 15%, while shares of XRX are down by 15%. After earlier speculation in the weekend paper, Abbott said it would buy Solvay's prescription drug unit and vaccines business for €4.5B in cash. Abbot sees the deal as $0.10 accretive to EPS in 2010 and more than $0.20 by 2012; shares of ABT are up 4%.. The transaction also includes payments of up to €300M to Solvay if certain sales milestones are met between 2011 and 2013. GenTek agreed to be acquired by private equity firm American Securities for $38/shr in deal valued at $673M; GETI is up a whopping 40% on the news. Aspect Medical said it was being acquired by Covidien for $12/shr in cash, in deal valued at $210M. ASPM is up 55%.
- In currencies, price action in the greenback continues to be heavily influenced by equity movements. EUR/USD tested the 1.4660 area as the S&P Dec futures went over the 13 handle higher at 1,054. The Euro ignored commented from Germany's Chancellor Merkel, who noted that there would not be no new tax cuts before 2011. The ECB's Nowotny reiterated the view that the region's growth would remain sluggish, but did note that the dramatic decline seen in Eastern Europe had bottomed out. Canada's Liberal Party said it would submit a no confidence letter on Monday related to a budget issue and would hold the vote later this week once the new month begins. Liberals need the support of both the NDP and the Bloc Quebecois to topple the government and it remained unclear that it will get that support.
More Headlines
6:30 AM
*(GE) GERMAN SEP CPI- BADEN WUERTTEMBURG M/M:
-0.4% V 0.4% PRIOR
-Y/Y: -0.3% V 0.1% PRIOR
- No revisions
7:04:10 AM
(UK) Chancellor Darling: "Too early to say with confidence" whether the UK is actually emerging from recession, expects UK recovery to be underway by turn of the year
- Spending cuts must be "rational," believes growth is the best way to cut debt.
- Steps taken to boost revenue have not been enough.
- "It is correct" for the rich to pay a greater share of taxes.
- "Greed and recklessness" will be prevented at banks, bonuses will be deferred or clawed back in necessary.
8:24:10 AM
(IR) Irish PM Lenihan: A no vote on the EU Lisbon treaty on Oct 2 would break confidence in Ireland
*Reminder: On 9/26 a Red C/Sunday Business Post poll, 55% of Irish voters are in favor of the Lisbon Treaty v 62% two weeks ago.
**The failure of the first public referendum on the Lisbon Treaty on June 12, 2008 in Ireland touched off a crisis in the European Union over further integration of governmental responsibilities.
***In December 2008, the Irish govt sought legal guarantees from the EU on tax neutrality as condition of a second referendum to Lisbon treaty.
11:06:28 AM
(EU) ECB's Trichet: Committed to price stability to prevent inflation from pushing up market rates
- ECB will not allow its extraordinary measures to feed into inflation.
- Low demand is the main reason for slow credit growth.
- Now is not the time to exit support for markets.
- Says banks must continue to strengthen their capital bases, use govt support measures when necessary; urges banks to resume lending; notes that there is still 45% of the govt support for banks that has not been claimed.
"Living with regret is much harder than living with defeat."
Market Week Wrap-up
- Trading this week pivoted around the FOMC decision on Wednesday, with investors bidding equities higher early in the week, waiting to see how upbeat the Fed would be on the economy and whether it would offer more detail on exit strategies (a rumor even made the rounds that the Fed might increase rates).
Just after the moderately upbeat but still cautious report, the DJIA pushed above the 9900 handle, prompting many to bring out their Dow 10,000 hats. But the Fed fueled sugar high was short lived, and equities traded off hard though Friday, with the three leading indices losing ground for the first time in three weeks. For the week, the DJIA fell 1.6%, the S&P 500 dropped 2.3% and the NASDAQ Comp declined 2%. The annual UN assembly in New York and the G20 summit in Pittsburg provided entertaining side shows of little practical consequence, as world leaders apparently failed again to set specific targets for their initiatives, including plans to taper off fossil fuel subsidies and limit bankers' pay. Crude and gold fell apart after getting smacked by dollar strength and less sanguine data. After opening the week above $72, the front month crude contract closed on Friday around $66. Gold peaked on Thursday just above $1,020, then fell rapidly to close out the week just above $990. Natural gas has moved in the opposite direction, making steady progress up to $4 through Friday, closing some of the gap that has built up between the relative prices of gas and crude.
- Ahead of the FOMC meeting, there was chatter that the NY Fed had made overtures to primary dealers about conducting reverse repos, which sent the rumor mill into overdrive. But the Fed ultimately maintained its commitment to keeping rates "exceptionally low for an extended period" and maintained the sizes of its MBS and Agency $1.25T and $200B respectively, extending the duration of the programs until the end of March 2010. In its statement, the Fed noted that economic activity has "picked up" but reaffirmed its conclusion that "inflation will remain subdued for some time." The Fed also reiterated it continues to monitor "the size and composition of its balance sheet and will make adjustments to its credit and liquidity programs as warranted," leaving the door open for more unwinding. Later in the week, the Fed said it would reduce the amount of money available to banks in short-term loans under the TSLF and TAF, while also noting it may make the latter program permanent. Note that back in June the Fed extended the duration of many of its other emergency loan programs, including the TSLF.
- The housing market was an area of concern this week, as green shoots that had been in evidence in the sector through the summer were seen turning brown. Although the July House Price Index came in modestly higher, lower numbers for new and existing home sales spooked investors, as did terrible quarterly results from homebuilders KB Home and Lennar. August existing home sales missed expectations and declined relative to July numbers. The August new home sales data was a bit below expectations and more or less in line with last month's reading. Both Lennar and KB reported quarterly losses that were considerably greater than expected, and both companies recorded shrinking backlogs and declining new orders. But what really rattled investors was a comment from an NAR official, who said there was a risk of a "double-dip housing recession" in the US if the first time homebuyer tax credit was not renewed.
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
- US equity indices are more or less flat on the day, with conflicting economic data providing a mixed theme for end of the week trading. The final September U of Michigan consumer confidence reading was better than expected and well above the initial reading (final 73.5 v prelim 70.2), with the headline data reaching levels last seen in January, 2008. Both the headline and ex transport August durable goods data came in dramatically lower than expected. Durable goods orders declined 2.4% in August, after increasing around 5% in July, although August totals are still higher that June data. The August new home sales data was a bit below expectations and more or less in line with last month's reading. Commodities continued to give up ground before the open this morning as USD strengthened, although there has been a bit of a reversal in some commodities in mid-morning trading. Front-month NYMEX crude probed the $65 handle before heading back above $66. Gold prices dipped below $990 briefly, on chatter of fund liquidations before paring back losses.
- Treasury prices are flat to slightly higher as markets appear to have digested another $112B in supply without too much trouble. The long bond yield is below 4.15% despite quite a bit of attention being paid to commentary from Fed Governor Warsh. In a WSJ op-ed, Warsh noted the Fed will likely have to be more aggressive in the timing and severity of their exit programs than was indicated in the FOMC statement earlier in the week.
- KB Home's quarterly losses were significantly worse than expected in its Q3 report this morning, although revenue beat expectations. Like Lennar earlier this week, KB did not see any sequential growth in new orders, its cancellation rate increased and its backlog fell, contradicting trends seen out of some other homebuilders. Shares of KBH are down 7%, although the other homebuilders are back around even after some initial weakness. Investors are dumping Research in Motion this morning despite a solidly in line report yesterday afternoon, with earning a bit ahead of consensus and revenue missing by just a hair. The firm's revenue outlook for next quarter was a little weak, prompting multiple analysts to downgrade the name. RIMM is down 15%.
- In other equity news, HP said it would grow faster than the rest of the IT sector, insisting its best days are ahead of it at an analyst meeting. The company's initial 2010 guidance was solidly in line with expectations. Shares of Sara Lee are up 6% after the firm said it would sell its personal care business to Unilever for $1.9B in cash and authorized a sizable share buyback program. Visa and Mastercard are both down sharply (nearly -5%) on reports a draft bill on the Consumer Financial Protection Agency was making the rounds in the House. Goldman Sachs upgraded the refining sector this morning, adding APA HOC and OXY to their America's Buy List. Shares of HOC are up 8%. The DoD released draft requirements for the KC-X tanker program, and in Europe an EADS official said its A400M military transport program has been an "absolute disaster" for Airbus.
- The greenback is firmer against European and commodity pairs following the durable goods data, which highlighted the fragility of the economic recovery. Spot gold moved under $990, with some traders citing talk that the German Bundesbank had selling interest, which added to the heavier tone from the firmer dollar. In any case, the dollar seems to be unable to sustain its momentum as market participants awaiting the final G20 communiqué, which will likely include pledges not to withdraw stimulus support and include potential comments about global imbalances.
- EUR/USD is just below the 1.47 level in mid-New York session trading. USD/JPY has been testing below the 90 handle following comments from former Japanese official Sakakibara (aka Mr. Yen), who said the Obama administration was not likely very concerned about the dollar's downtrend at the moment. USD/CAD is above its former downtrend line around the 1.09 level, but a mid-morning surge in NYMEX oil futures aided the commodity-related pairs. Energy prices are helping CAD offset earlier comments from BoC member Carney in the Asian session that the central bank gets concerned when CAD moves away from underlying fundamentals.
More Headlines
5:30:07 AM
*(SZ) SWISS KOF SEPT FORECASTS: TRIMS 2009 GDP TO -3.4% V -3.3% PRIOR , RAISES 2010 GDP +0.1% V -0.6% PRIOR
***Note: On Sept 17th the SNB revised its forecast for 2009 up, seeing a contraction of 1.5% to 2.0% from its prior view of a 2.5% to 3% contraction
6:00:29 AM
(UK) BoE Monetary framework: Announces changes to haircut policy on collateral securities
- Increases the number of haircut categories
- Some margin ratios and haircuts reduced
- Will keep margin ratios and haircuts under review
- Amends USD repo operations and special liquidity scheme, long-term repo operation and discount window facility
6:52:56 AM
USD 3 Month Libor fixes at 0.28% v 0.28% prior
- Overnight USD: 0.21% v 0.21% prior
- Overnight GBP: 0.50% v 0.50% prior
- 3M GBP: 0.55% v 0.56% prior
- 3M EUR: 0.70% v 0.70% prior
- 3M JPY:0.35% v 0.35% prior
8:30:03 AM
*AUG DURABLE GOODS ORDERS: -2.4% V 0.4%E; DURABLES EX-TRANSPOTATION: 0.0% V 1.0%E
- Prior Durables revised from 5.1% to 4.8% (second revision)
- Prior Durables Ex Transportation revised from +1.1% to 0.9% (second revision)
- Durable ex-defense registered its first drop since Mar
8:44:26 AM
(US) President Obama: Confirms that US, UK and France have evidence of secret Iranian nuclear program
- Expects IAEA to immediately investigate and inspect the newly revealed Iranian uranium enrichment program (in line with earlier leaks)
- Reiterates that the US remains committed to engagement with Iran.
9:55:05 AM
*SEPT FINAL UNIVERSITY OF MICHIGAN CONFIDENCE: 73.5 V 70.5E
- 1 yr median inflation expectations at 2.2% v 2.8% Aug final.
- 5 yr median inflation expectations at 2.8% v 2.8% Aug final.
10:52:15 AM
(RU) Russian Official: A concerned regarding reports of new Iranian nuclear facility
- States that Pres Medvedev will be making official comments later
- Note: on Wednesday a Russian Diplomat commented that they will discuss sanctions on Iran when IAEA provides proof of nuclear violations
; Also Russian Pres Medvedev, notedat the UN in New York that "sanctions are seldom productive but they are sometimes inevitable".
11:15:23 AM
(CH) China Pres Hu: Against any forms of protectionism; all countries should maintain intense stimulus
- FX reserves nations should be aware of their role in the world.
- says G20 summit will consider a "mutual assessment system" for macroeconomic policies.
11:27:05 AM
(UK) UK Fin Min Darling: Govt has no policy to weaken Sterling deliberately; BoE's comments earlier this week highlighted exporters benefit only
- G20 summit will not fully resolve IMF disputes
- comments that no G20 Govt has argued to bring down stimulus in 2010; there are clear signs confidence returning to the economy
- Note: Comments appear aimed in response to earlier comments from BoE's King that noted that the decline in the GBP were helping to rebalance the UK economy
8:30am Aug Durable Goods Orders (last 5.1%, ex-transport 1.1%)
9:55am Aug Final U. of Michigan Confidence (last 70.2)
10:00am July New Home Sales (last 433K, m/m 9.6%)
Todays Headlines
8:30:02 AM
*INITIAL JOBLESS CLAIMS: 530K V 550KE; CONTINUING CLAIMS: 6.138M V 6.183ME
- Prior Jobless Claims revised from 545K to 551K
- Prior Continuing Claims revised from 6.230M to 6.261M
9:26:38 AM
(BR) Brazil Trade Min Jorge: 2010 exports may rebound to 2008 levels
- Guides 2009 exports at $165B
- Guides 2009 trade surplus at $27B, up from previous of $20B
- Sees FDI in 2009 at $25B
9:37:17 AM
(US) Mass. Governor selects Paul Kirk Jr to fill former Senator Kennedy's seat
*Note: Paul Grattan Kirk Jr. (born January 18, 1938) was chairman of the Democratic National Committee (DNC) from 1985 to 1989. He currently co-chairs the Commission on Presidential Debates
10:00:59 AM
(US) Fed: Will weigh continuing TAF and TSLF past Jan 2010; seeking public comment; Action has been prompted by improvements in the market
- Are considering making TAF a permanent operation
- Will gradually scale back the size of both facilities
- Future auction schedules will take into account expected increased market pressures seen at the end of year
10:16:40 AM
US House Committee postpones hearings on credit ratings agencies to Sept 30; had been scheduled for this morning
- US Rep Issa's Aide comments that the postponement of the hearing was due to new information retrieved about Moody's; and Congress needs additional time to review
11:30:09 AM
(KS) South Korea Fin Min: Talks of timing of exit strategy is 'premature'
- notes that the end of loan rollover and credit guarantee to small companies would be first element of exit
- calls for the imbalance in spending and savings between America and Asian economies to be fixed
- sees fiscall challenges in 2010; but Korea is in a better situation than most
1:01:46 PM
*TREASURY'S $29B 7-YEAR NOTE AUCTION DRAWS 3.005% WITH BID-TO-COVER RATIO: 2.79 V 2.63 PRIOR AND 2.48 OVER THE LAST SEVEN
- indirect bidders take 61.2% of competitive bids
- 30.2% alotted at the high
- median 2.937%, low 2.85%
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.
- A theme of a firmer dollar and declining stock and commodities prices took hold yesterday following the FOMC statement and has carried through to today. Weekly unemployment data helped goose US indices a bit higher before the open after initial claims were seen falling for the fourth week in a row (and more than expected). But the decline in August existing home sales spooked investors, as the data came in lower than expected for a 2.7% decline from July totals. Adding to jitters, an NAR official said there was a risk of a "double-dip housing recession" in the US if the first time homebuyer tax credit was not renewed. Debt and equity offers continue to flood the market in what is likely the most active IPO calendar in more than a year. Commodities are under assault, with major reversals seen in oil and gold. Front-month NYMEX crude has moved to levels not seen since early July, with the contract sinking below $67. Gold is off more than $15, testing below $1,000 while Dec copper has made fresh one-month lows below $2.75. Natural gas is a notable exception, with prices trading higher after the EIA inventory data was in line with expectations. Treasury markets continue to find bids pushing the benchmark yield back below 3.4%.
- The Federal Reserve is further scaling back lending in two emergency lending programs as the economy improves. The Fed plans to reduce the amount of money available to banks in short-term loans under the TSLF and TAF, while also noting it may make the latter program permanent. Note that back in June the Fed extended the duration of many of its other emergency loan programs, including the TSLF.
- Bed Bath & Beyond is down 5% despite a better-than-expected Q2 report yesterday after the close. Executives called analysts' consensus estimates for next quarter and the full year "reasonable" on the conference call, but warned the rest of the year would be challenging. Paychex is down more than 6% after a dismal full-year revenue forecast (quarterly results were in line). American Greetings is up more than 20% on blowout Q2 earnings, which crushed estimates thanks to a big insurance payout. Red Hat is up nearly 12% on solid earnings and guidance.
- Today is the biggest day for IPOs in years, with five initial offerings on the docket. Artio Global (ART), Apollo Commercial Real Estate (ARI) and Colony Financial (CLNY) began trading just after the bell this morning. ART, an asset management firm catering to institutional clients and mutual funds, was priced at $26 and opened at $27.30. Commercial real estate REITs ARI and CLNY were both priced at $20 and both opened at $19.50. Over at the NASDAQ, electric car battery manufacturer A123 Systems (AONE) should begin trading later this morning. The offer was priced at $13.50. Online health products retailers VicaCost.com (VITC) opened right at its pricing level of $12.
- In currencies, the greenback has managed to recover losses against European currencies and most of its losses against the yen. Initially the dollar was softer as dealers speculated the Obama administration's dollar policy might mirror BoE Governor King's position (that a weaker currency could aid the economy). EUR/USD retested the 1.48 handle, but then retreated toward the 1.4700 handle. The Federal Reserve and other major central banks extended most USD liquidity operation through Jan 2010. The central banks did note some scaling back on such programs, as improvements in financial markets have reduced demand for this type of credit. Sterling continued its weak tone and sank further against the major pairs. GBP/USD tested below the 1.6070 level while EUR/GBP touched the 0.9150 level.
- The G20 summit begins later today and dealers are noting that EUR/CHF (whose price action has mirrored the global equity rebound from last March) is testing the 200-day moving average at 1.5097 and has been unable to sustain any rallies from SNB verbal/stealth intervention
.
More Headlines
8:30:02 AM
*INITIAL JOBLESS CLAIMS: 530K V 550KE; CONTINUING CLAIMS: 6.138M V 6.183ME
- Prior Jobless Claims revised from 545K to 551K
- Prior Continuing Claims revised from 6.230M to 6.261M
9:26:38 AM
(BR) Brazil Trade Min Jorge: 2010 exports may rebound to 2008 levels
- Guides 2009 exports at $165B
- Guides 2009 trade surplus at $27B, up from previous of $20B
- Sees FDI in 2009 at $25B
9:37:17 AM
(US) Mass. Governor selects Paul Kirk Jr to fill former Senator Kennedy's seat
*Note: Paul Grattan Kirk Jr. (born January 18, 1938) was chairman of the Democratic National Committee (DNC) from 1985 to 1989. He currently co-chairs the Commission on Presidential Debates
10:00:59 AM
(US) Fed: Will weigh continuing TAF and TSLF past Jan 2010; seeking public comment; Action has been prompted by improvements in the market
- Are considering making TAF a permanent operation
- Will gradually scale back the size of both facilities
- Future auction schedules will take into account expected increased market pressures seen at the end of year
10:16:40 AM
US House Committee postpones hearings on credit ratings agencies to Sept 30; had been scheduled for this morning
- US Rep Issa's Aide comments that the postponement of the hearing was due to new information retrieved about Moody's; and Congress needs additional time to review
8:30am Initial Jobless Claims (last 545K), Continuing Claims (last 6.23M)
10:30am Natural Gas Inventories
10:00am Aug Existing Home Sales (prior 5.24M, m/m 7.2%)
1:00pm Treasury's 7-yr note auction
Todays Headlines
8:23:14 AM
(RU) Russia Aug GDP unchanged from July level (+0.5% m/m) - RIA Novosti
***Reminder: On 8/24 the Russian Econ Ministry said July GDP M/M: +0.5%, Y/Y: -9.3% v -10.1% prior month
- Jan-Aug Trade Surplus $67B
8:00:08 AM
*(NO) NORWAY'S NORGES LEAVES INTEREST RATES UNCHANGED AT 1.25%; AS EXPECTED; DID CONSIDER RAISING INTEREST RATES AT TODAY'S MEETING
- Inflation now below the 2.5% target
- NOK currency appreciation will hold inflation below target over the next year
- Economy has faired well in crisis
- Employment is stable and unemployment is lower than expected
8:10:31 AM
(UK) BOE's Barker: Recovery may falter with uneven output path, unclear whether improvement can be maintained, UK equity prices not out of line with past average
- UK inflation has tended to be higher than expected
- Balance sheet issues to play major role in UK outlook
- UK jobless to continue to rise, adding pressure to households
9:51:43 AM
(GE) German Central Banks Weber: Economy is still far off from a sustainable recovery; unemployment to weigh on consumption
- Sees no need for ECB to make further monetary policy actions
- ECB must act when economy recovers, when prices resume rise
- Inflation rates are seen rising in next 1-2 months
- sees German public deficit of 6% of GDP.
10:04:02 AM
(US) Treasury Sec Geithner: Banning naked credit defaults is not necessary or 'prudent''; Key goal is to make financial sector strong enough to survive a collapse of major player
- Remains supportive for revisions to consumer protection agencies.
- Wants to eliminate the choice for financial companies between losing customers and loosening risk standards to match competitors who adopt risky practices.
10:30 AM
*DOE CRUDE: +2.85M V -1.4ME
- GASOLINE: +5.41M V +500KE; DISTILLATE: +2.96M V +1.5ME; CAPACITY UTILIZATION: 85.5% V 85.9%E.
- Distillate demand -52K bpd to 3.3M bpd
- Gasoline demand -211K bpd to 8.79M bpd
12:27:45 PM
(US) Rep Frank (D): TARP will be extended beyond this year
- Comment to reporters after committee hearning.
- says proposal for single bank regulator is not enough.
- says he prefers FDIC replenish its fund with credit line from the Treasury rather than loans from banks.
1:01:44 PM
*TREASURY'S $40B 5-YEAR NOTE AUCTION BID-TO-COVER RATIO: 2.40 V 2.51 PRIOR AND 2.23 AVG OVER THE LAST 10 AUCITONS
- indirect bidders take 44.8% of competitive bids
- notes draw 2.57% with 39.8% alloted at the high
- median 2.39%, low 2.295%
3:27:05 PM
Financial Accounting Standards Board (FASB) approves new accounting rules for revenue recognition at tech firms
- vote 5-0 (as expected)
- Earlier today, the WSJ speculated that the rule change would most benefit HPQ, CSCO, IBM, DELL, AAPL, PALM and XRX.
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
- US equity markets are having a hard time finding something to focus on ahead of the FOMC meeting this afternoon. President Obama is addressing the United Nations, calling for an era of global engagement. Treasury Secretary Geithner said the key goal of economic reforms is to make the financial sector strong enough to survive the collapse of a major player, and warned against declaring certain firms as "systemically important." The most evident driver in stocks has been a reversal in oil and along with it the energy complex. Commodities have moved lower with the return of some firmness in the dollar, and a build across all three products in the latest DOE inventory reading. Treasury prices have rallied from a lower open to the pit trading session. The 10-year yield inched back towards 3.5% before retreating back below 3.45%. All eyes will be focused on the $40B 5-year auction results leading into the FOMC statement.
- In earnings, General Mills reported very strong Q1 results, beating top- and bottom-line estimates and raising its earnings guidance for 2010. Executives were upbeat on the conference call, saying FY10 is off to a good start, with US retail sales ahead of target and FX impact less negative than planned. GIS is steady around +5%. AutoZone is not comparing well with quarterly results from competitor Carmax out yesterday. AutoZone was largely in line with estimates, with shares down 4% in the early going. Shares of AZO are down 4%.
- Computer hardware manufacturers Seagate and Xilinx have both increased guidance. Hard drive maker Seagate said its full-year revenue would beat its prior view slightly as OEM demand has been stronger than anticipated. Xilinx increased its Q2 revenue guidance thanks to strength in nearly all its end markets. STX was up nearly 3% just after the open, but has fallen into the red, while XLNX is well of its highs, trading around +5%. European solar name Renesola cut its 2009 outlook considerably, warning that better solar product prices may take longer to arrive than anticipated. SOL is up 2%. Financial software name Intuit reaffirmed its outlook for the quarter and the year ahead of its investor day today. Shares of INTU are in the red.
- The Financial Accounting Standards Board (FASB) is expected to approve new accounting rules today that could boost sales and profits reported by tech firms. The move would allow firms that sell products that include hardware and software (like smartphones) to book a larger portion of revenue upfront. According to the WSJ, two big beneficiaries of the move would be Palm and Apple, as they would be able to significantly boost their revenue recognition from sales of their popular Pre and iPhone products. Shares of AAPL are up 2%, while PALM is up 4%. Note that PALM is well above the pricing level of its secondary offer announced this morning.
- A flood of share secondaries have washed over markets this morning. American Airlines parent AMR is trading below the pricing of its 48.5M secondary, while shares of US Airways are down more than 12% after the company said it would sell 26.3M shares. Old National Bankcorp is holding above its pricing of $10/shr. Shares of ATP Oil are down 6%, but off their worst levels after the company said it would sell more than 5M shares.
- As the G20 summit gets ready to discuss possible exit strategies on fiscal and monetary stimulus measured enacted over the last year, the Norwegian Central Bank (Norges) moved up its expected interest rate hike from mid-2010 to its next policy meeting in Oct. The Norges maintained their deposit rate at 1.25% but noted that it did debate a rate hike to today's policy meeting. The NOK was sharply firmer on the bank of the Norges statement on interest rates. German Central Banker Weber reiterated the standard ECB view that the economy was still far away from any sustainable recovery and that unemployment would weigh on consumption. EUR/USD has been focused on the 1.48 level all morning and the digital option appeared to have expired below that level. The Weber comments in seemed to settle the bet where the euro would close at the New York option cut.
More Headlines
8:23:14 AM
(RU) Russia Aug GDP unchanged from July level (+0.5% m/m) - RIA Novosti
***Reminder: On 8/24 the Russian Econ Ministry said July GDP M/M: +0.5%, Y/Y: -9.3% v -10.1% prior month
- Jan-Aug Trade Surplus $67B
8:00:08 AM
*(NO) NORWAY'S NORGES LEAVES INTEREST RATES UNCHANGED AT 1.25%; AS EXPECTED; DID CONSIDER RAISING INTEREST RATES AT TODAY'S MEETING
- Inflation now below the 2.5% target
- NOK currency appreciation will hold inflation below target over the next year
- Economy has faired well in crisis
- Employment is stable and unemployment is lower than expected
8:10:31 AM
(UK) BOE's Barker: Recovery may falter with uneven output path, unclear whether improvement can be maintained, UK equity prices not out of line with past average
- UK inflation has tended to be higher than expected
- Balance sheet issues to play major role in UK outlook
- UK jobless to continue to rise, adding pressure to households
9:51:43 AM
(GE) German Central Banks Weber: Economy is still far off from a sustainable recovery; unemployment to weigh on consumption
- Sees no need for ECB to make further monetary policy actions
- ECB must act when economy recovers, when prices resume rise
- Inflation rates are seen rising in next 1-2 months
- sees German public deficit of 6% of GDP.
10:04:02 AM
(US) Treasury Sec Geithner: Banning naked credit defaults is not necessary or 'prudent''; Key goal is to make financial sector strong enough to survive a collapse of major player
- Remains supportive for revisions to consumer protection agencies.
- Wants to eliminate the choice for financial companies between losing customers and loosening risk standards to match competitors who adopt risky practices.
10:30 AM
*DOE CRUDE: +2.85M V -1.4ME
- GASOLINE: +5.41M V +500KE; DISTILLATE: +2.96M V +1.5ME; CAPACITY UTILIZATION: 85.5% V 85.9%E.
- Distillate demand -52K bpd to 3.3M bpd
- Gasoline demand -211K bpd to 8.79M bpd
(RU) Russia Aug GDP unchanged from July level (+0.5% m/m) - RIA Novosti
***Reminder: On 8/24 the Russian Econ Ministry said July GDP M/M: +0.5%, Y/Y: -9.3% v -10.1% prior month
- Jan-Aug Trade Surplus $67B
8:30 AM
*(CA) CANADA JULY RETAIL SALES M/M: -0.6% V 0.7%E
EX AUTOS M/M: -0.8% V 0.1%E
- Prior Ex Autos MoM revised from 1.0% to 1.1%
- No revisions
9:02:49 AM
(SA) South Africa Central Banker Mboweni: Inflation to hit target in Q2 2010
- Break into inflation target to be sustained through 2011
- Inflation outlook for 2009 and into 2010 remains unchanged
- Recovery by end of 2009 but will be slow; global recovery may be short lived.
- ZAR currency placing downward pressure on inflation
- Consumption expenditure expected to remain constrained
9:15:51 AM
(SA) South Africa Central banker Mboweni: Concerned about the ZAR currency appreciation; but firmer currency is helpful to inflation outlook
- Risks to inflation outlook remain.
- Q1 of 2010 will show the beginnings of strong economic turn around
9:59 AM
*SEPT RICHMOND FED MANUFACTURING INDEX: 14 V 16E
- no revision
10:00 AM
*JULY HOUSE PRICE INDEX M/M: 0.3% V 0.5%E
- Prior MoM revised from 0.5% to 0.1%
11:25:05 AM
(US) FDIC "not giving serious consideration" to plan to borrow from banks to shore up insurance fund - CNBC
- Note that earlier in the session, the NY Times reported that senior regulators were mulling a plan to have healthy US banks lend billions of dollars to rescue the FDIC's insurance fund
- The FDIC's insurance fund has a balance of about $10B. The fund stands behind $4.8T in insured deposits.
1:01:46 PM
*TREASURY'S $43B 2-YEAR NOTE AUCTION BID-TO-COVER RATIO: 3.23 V 2.68 PRIOR AND 2.65 AVE OVER LAST 10 AUCTIONS
- indirect bidders take 45.2% of competitive bids
- notes draw 1.034% with 27.2% alotted at the high
- median bid 0.99%, low bid 0.92%
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.
- Equities are holding onto modest gains in the early going as investors position themselves ahead of tomorrow's FOMC decision. Commodities are moving higher with equities as the USD continues to make one-year lows against the euro. Data has been light, with a regional industrial production index from the Richmond Fed lower than expected and the July house price index very modestly higher. After trading back below $69 in the Asia and European sessions, November crude has zipped right back to test above $71.50. Treasury prices have firmed from a flat open with the 2-year yield slipping back towards 0.95% ahead of this afternoon's $43B auction. The when issued note is trading at a noticeable discount ahead of the results yielding 1.02%.
- The financials are out in front this morning after Bank of America closed a deal that could end its loss sharing agreement with the Treasury. Back in January, BoA struck a deal with the government for loss protection on $118B of Merrill Lynch assets, but the bank has been trying to get out of the arrangement since May. Rochdale's Dick Bove increased his BoA price target to $25 from $19 on the news. Singapore's sovereign wealth fund (GIC) said it has cut its stake in Citigroup below a 5% threshold though open market sales. As of Sept 11th, GIC had a 9% stake. Shares of BAC are up 2.5%, while Citi is up 4%. Also note that the New York Times is reporting that regulators are mulling a plan to have healthy banks lend billions of dollars to rescue the FDIC's insurance fund. Recall that back in May, the FDIC proposed a one-time special assessment fee on assets held by banks in a plan to raise $5.6B for the fund.
- Three consumer-oriented names reported mostly solid quarterly numbers this morning. Carmax positively crushed profit and revenue targets and its business metrics were up across the board. Executives said traffic has steadily increased from the start of 2009, and said this was only partially due to cash-for clunkers. KMX is up nearly 8%. Carnival Corp beat estimates, although guidance for next quarter was notably lower than estimates. The company's full-year forecast is still beating the Street. Executives said pricing has been lower due to late booking, but said additional deterioration in pricing is not expected. Shares of CCL are up more than 7%. ConAgra was a bit ahead of earnings targets and slightly below revenue targets, and also raised its 2010 earnings forecast. On the conference call, the CEO said 2010 is off to a good start, with better profits across the consumer portfolio. Investors expected more, evidently, as CAG is in the red. In other earnings, railcar manufacturer FreightCar America destroyed estimates, helped by increased orders for new railcars and lower expenses. RAIL is up 18%.
- In pre-earnings guidance, home renovation name Lowe's reiterated its 2009 guidance range and offered a first glimpse at its 2010 forecast. Earnings ranges for both periods were lower than analysts' expectations, although revenue goals were largely in line. Executives at Lowe's continue to point to more DIY projects as a positive sign for the business. LOW is down a few percent, while rival HD is down as well. At the UBS healthcare conference, Biogen Idec guided 2009 largely in line with expectations. PAETEC Holdings said full-year revenue would meet Wall Street's expectations.
- The greenback maintained its soft tone during the early part of the New York session as dealers continued to speculate about the possible implications for the dollar of the G20 summit later this week. The summit, set for Sept 24-25, may address the issue of global currency imbalances, and dealers believe this could prompt more bearish USD momentum. Current speculation has it that a concerted effort to re-balance the global economy might "talk down" the USD. This morning EUR/USD is holding near its recent one-year highs of 1.4822 made earlier in the session but retracing a bit following the softer than expected US housing price data for July. The Loonie moved off its best levels following negative surprise in Canada's July retail sales data for both the headline and the ex-auto component. The South Africa Reserve Bank (SARB) maintained its interest rates at 7.00%, as expected. SARB Chief Mboweni noted that there has been some concern about appreciation of the ZAR but added that a firmer currency was helpful to the inflation outlook.
More Headlines
8:23:14 AM
(RU) Russia Aug GDP unchanged from July level (+0.5% m/m) - RIA Novosti
***Reminder: On 8/24 the Russian Econ Ministry said July GDP M/M: +0.5%, Y/Y: -9.3% v -10.1% prior month
- Jan-Aug Trade Surplus $67B
8:30 AM
*(CA) CANADA JULY RETAIL SALES M/M: -0.6% V 0.7%E
EX AUTOS M/M: -0.8% V 0.1%E
- Prior Ex Autos MoM revised from 1.0% to 1.1%
- No revisions
9:02:49 AM
(SA) South Africa Central Banker Mboweni: Inflation to hit target in Q2 2010
- Break into inflation target to be sustained through 2011
- Inflation outlook for 2009 and into 2010 remains unchanged
- Recovery by end of 2009 but will be slow; global recovery may be short lived.
- ZAR currency placing downward pressure on inflation
- Consumption expenditure expected to remain constrained
9:15:51 AM
(SA) South Africa Central banker Mboweni: Concerned about the ZAR currency appreciation; but firmer currency is helpful to inflation outlook
- Risks to inflation outlook remain.
- Q1 of 2010 will show the beginnings of strong economic turn around
9:59 AM
*SEPT RICHMOND FED MANUFACTURING INDEX: 14 V 16E
- no revision
10:00 AM
*JULY HOUSE PRICE INDEX M/M: 0.3% V 0.5%E
- Prior MoM revised from 0.5% to 0.1%
"Pain is temporary. It may last a minute, or an hour, or a day, or a year, but eventually it will subside and something else will take its place. If I quit, however, it lasts forever."
10:00am July House Price Index m/m (last 0.5%), Sept Richmond Fed Manufacturing Index (last 14), TAF results
1:00pm Treasury's 2-yr note auction
4:30pm API Crude Oil/Gasoline/Distillate Inventories
Todays Headlines
6:41:59 AM
USD 3 Month Libor fixes at 0.29% v 0.29% prior
- Overnight USD: 0.22% v 0.22% prior
- Overnight GBP: 0.50% v 0.50% prior
- 3M GBP: 0.57% v 0.58% prior
- 3M EUR: 0.72% v 0.71% prior
- 3M JPY:0.35% v 0.35% prior
6:56:58 AM
Analysts at Morgan Stanley cut US Commodity Shipping sector to In-line from Attractive (timing uncertain)
- See lower than initially expected recovery in tanker and dry bulk rates
- See growing oversupply rates to overwhelm recovery in sector
9:04:51 AM
(RU) Russia's First Deputy PM Shuvalov: Planning to build up RUB as regional reserve currency, but still plans to rely on USD in part
- While Russia is not against the USD, it seeks to diversify its holdings away from one principle denomination
- Reiterates that more reserve currencies are needed
10:00:01 AM
*AUG LEADING INDICATORS: 0.6% V 0.7%E
- prior revised from 0.6% to 0.9%
- Conference Board Economist: "Data suggests that the recession is bottoming out. These numbers are consistent with the view that after a severe downturn, a recovery is very near. But the intensity and pattern of that recovery is more uncertain,"
11:04:27 AM
NY Fed: Purchased $4.05B in $300B outright coupons purchase; Dealers submitted $15.3B for consideration (bid to cover 3.78)
- Heaviest purchase was $2.49B in the 07/31/14 maturity
- Note: Avg bid to cover for prior four auctions is 4.6
3:32 PM
(MX) Mexico Q2 Aggregate Supply & Demand:
-14.8% v -13.8%e
- No revisions
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.
- Traders are taking a break this morning after last week's stretch of solid gains for stocks. US equity indices are below Friday's closing levels, with little data and some downbeat corporate news from homebuilder Lennar and Caterpillar keeping things on the weak side. Note that well-known skeptics Paul Krugman and Bill Gross both spoke before the open. Krugman warned that the US has $1.1T annual capacity staying idle and said unemployment could keep rising into 2011. PIMCO's Bill Gross once again insisted that stocks are due for a pullback, and said bond markets heading for consolidation. A firmer Greenback is helping NYMEX crude move lower, down nearly $3 around $69.30. Earlier this morning a BP Economist said that OPEC will struggle to maintain quota discipline as spare capacity is weakening the cartel's grip on oil prices. Treasury prices remain stubbornly bid heading into this week's $102B in supply. The 10-year note is up close to half a point pushing the yield back down towards 3.4%.
- Homebuilder Lennar reported dire Q3 numbers this morning, missing earnings and revenue estimates by wide margins. In opposition to trends seen out of other homebuilders, Lennar did not see growth in new home orders on a sequential basis, and the cancellation rate grew somewhat over last quarter. Shares of LEN are down more than 5% in early trading, with PHM, TOL and KBH down 2% in sympathy. Caterpillar disclosed three-month dealer statistics for the June-August period that were essentially flat on a sequential basis, echoing news from Deere a week and a half ago. Both DE and CAT are -2%. In merger news, Dell announced it would acquire Perot Systems for $30 a share in cash, in a deal worth $3.9B. Dell expects the deal to be accretive to GAAP earnings by FY12. Perot sees Dell global exposure as net benefit to expand operations into Asian and European markets. Shares of DELL are down 3%, while PER is up more than 65%. Cap Gemini is up a few percent on an RBS analyst note speculating that this deal may fire up speculation on suitors for the name.
- In pre-earnings guidance, Potash slashed its 2009 earnings outlook, citing weak sales volume, and also said its Q3 EPS would come in at the low end of its prior guidance range. The change primarily reflects lower than forecasted potash sales volumes due to continued slow demand and limited restocking by fertilizer distributors around the world. Shares of POT are down more than 5%, while competitors MOS, AGU and IPI are down 4-5%. Activision Blizzard reaffirmed its 2009 view, but also cautioned that the overall environment is shaky. Shares of ATVI are up on the news, while other video game names are in the red.
- In currencies, the greenback initially extended gains against the major pairs as the New York session began, until comments from Russia about reserve currencies added weight to the dollar. Russia's First Deputy PM Shuvalov reiterated that more reserve currencies were needed and that Russia would like to build up the ruble as regional reserve currency. He did note that the country still planned to rely on dollar in part. The official noted that while Russia was not against the USD, it sought to diversify its holdings away from one principle denomination. EUR/USD tested 1.4610 ahead of the comment but retreated toward the middle part of the 1.46 handle to consolidate its recent gains since the Asian open.
- Overall dealers commented that the price action has been driven by technical’s. GBP/USD is off its worst levels following the BoE's Quarterly Bulletin, which was released during the Asian session. The BoE said the depreciation of the pound reflects a perceived deterioration in the relative strength of the UK's economy and an increase in the premiums required by investors to hold UK assets. GBP/USD was at 1.6175 midway through the New York morning, off 80 pips from opening levels in Asia but consolidating from lows of 1.6135.
- Treasury supply will a focal point this week as over $200B in bills and notes on the auction block during the week. During the European morning, dealers noted that foreign appetite for US Treasuries remained strong ahead of record auction calendar this week. US Treasury data showed that foreign investors purchased 43.1% of the $1.41 trillion of notes and bonds sold in 2009 compared with 27.1% of the $527B issued at this point in 2008.
More Headlines
6:41:59 AM
USD 3 Month Libor fixes at 0.29% v 0.29% prior
- Overnight USD: 0.22% v 0.22% prior
- Overnight GBP: 0.50% v 0.50% prior
- 3M GBP: 0.57% v 0.58% prior
- 3M EUR: 0.72% v 0.71% prior
- 3M JPY:0.35% v 0.35% prior
6:56:58 AM
Analysts at Morgan Stanley cut US Commodity Shipping sector to In-line from Attractive (timing uncertain)
- See lower than initially expected recovery in tanker and dry bulk rates
- See growing oversupply rates to overwhelm recovery in sector
9:04:51 AM
(RU) Russia's First Deputy PM Shuvalov: Planning to build up RUB as regional reserve currency, but still plans to rely on USD in part
- While Russia is not against the USD, it seeks to diversify its holdings away from one principle denomination
- Reiterates that more reserve currencies are needed
10:00:01 AM
*AUG LEADING INDICATORS: 0.6% V 0.7%E
- prior revised from 0.6% to 0.9%
- Conference Board Economist: "Data suggests that the recession is bottoming out. These numbers are consistent with the view that after a severe downturn, a recovery is very near. But the intensity and pattern of that recovery is more uncertain,"
11:04:27 AM
NY Fed: Purchased $4.05B in $300B outright coupons purchase; Dealers submitted $15.3B for consideration (bid to cover 3.78)
- Heaviest purchase was $2.49B in the 07/31/14 maturity
- Note: Avg bid to cover for prior four auctions is 4.6
"If it's in you to be of service to your fellow man, then you have an obligation to God to do it. Be it a policemen, a fireman, a soldier, a king. If it's in your DNA, if the job fits, you must do it."
Weekly Wrap-up
- The bull market in equities continued this week, with the key US indices pushing out to year-to-date highs each day through Thursday morning.
Fed Chairman Bernanke added fuel to the fire early in the week, telling an audience at the Brookings Institution that the recession is "technically" over (though warning that the economy will feel weak for some time). Data has supported the bullishness. On the supply side, industrial production data was robust: the Commerce Department's August index was stronger than expected, while the Empire State and Philly Fed regional surveys were sharply higher than the consensus. On the demand side, August retail sales rose by the largest amount in more than three years, completely reversing July's very modest decline, spurred by gains that went beyond just the expected increases of auto sales due to Cash for Clunkers. Some economists appear to be at odds over the economic outlook, however. Goldman Sachs' Chief Economist Jim O'Neill said the global recovery is "beyond a V shape" and insisted the recovery will positively surprise markets, while Morgan Stanley's Stephen Roach said the weak consumer recovery in the United States guarantees there will not be a V-shaped recovery. Not even concerns of a brewing trade war between the US and China could shake the markets. In any case, late summer theories that September would follow its track record of poor performance have been left in the dust. For the week, the DJIA rose 2.2%, the S&P 500 climbed 2.4% and the NASDAQ Comp added 2.5%.
- Protectionism flared up in Asia as the US and China traded accusations early this week, raising fears that trade war could extinguish a fragile economic recovery. Following the move by the Obama administration to authorize new tariffs on tire imports, officials in China retaliated with an accusation that US autos and chicken products are being dumped unfairly in local markets. President Obama defended his decision during an appearance on Wall Street, suggesting the tariffs represent an enforcement of existing WTO rules but downplaying market worries over a potential US-China trade war. On Wednesday, US Steel filed its own anti-dumping petition with the International Trade Commission, prompting China's Commerce Ministry to decry protectionism once again, followed by a threat to sell off some holdings of US treasuries at moments of strength in the US Dollar.
- This week marked the anniversary of Lehman Brothers' collapse, the government takeover of AIG, and the inception of the Troubled Assets Relief Program. Today the financials are leading the rally in equity markets, and stability if not fiscal health seems to have returned to the sector. There were reports this week that the Treasury may choose to sell its 34% stake in Citigroup beginning as early as October, although there was no official confirmation of these reports. Citigroup CEO Pandit said he wouldn't be surprised if the Treasury began selling down its stake, insisting that Citi's main goal was to return to profitability, while paying back TARP was a secondary priority. Rochdale's Dick Bove questioned Citi's ability to turn a profit, saying he expects Citi to lose money in Q3, while analysts at BoA/Merrill Lynch see the sale of US government's stake in Citi as having only a small dilutive effect as there is little chance the government would exit its equity position in a disorderly fashion. Respected academic economist Joseph Stiglitz dismissed all the industry sunshine and warned that the banking industry's problems are bigger now than before Lehman's demise, saying that "in the US and many other countries, the too-big-to-fail banks have become even bigger."
- Various legislators and regulators ratcheted up their rhetoric on the process of clamping down on the financial industry, a subject which is expected to be a major theme at next week's G20 meeting in Pittsburgh. The Fed is in the process of developing proposals to regulate pay for bankers, including guidelines on incentive compensation (rather than hard caps) across all firms it regulates, with final proposals due in a matter of weeks. Rep. Barney Frank reiterated that Congress was committed to imposing "very tough" regulations on derivatives. FDIC Chief Bair warned that excessive application of mark-to-market standards can exacerbate losses in times of stress and reiterated once again that the "too big to fail" issue must be addressed.
- Another batch of firms offered pre-earnings season guidance this week. Steelmaker Nucor, which offered dire guidance for its Q3, saying it expects a sizable loss in the quarter that would be three or four times the expected amount. The company said it sees little improvement in real demand and warned uncertainty in the US economy remains high, and said the unexpected loss stems from high-cost inputs. Manufacturer Rockwell Automation and Illinois Tool Works raised 2009 and Q3 guidance, respectively, while agricultural machinery manufacturer AGCO slashed its 2009 revenue and earnings guidance.Semi names Rambus and Silicon Labs joined the rest of the industry and hiked guidance for Q3. Health insurance name Amerigroup cut its 2009 earnings forecast on higher-than-expected medical costs in the second half of the year. Auto parts manufacturers Autoliv and American Axle both offered guidance: Autoliv raised its revenue forecast for Q3 slightly while American Axle's revenue outlook for the quarter was a bit soft. Fortune Brands reaffirmed its full-year view, noting that rising consumer confidence and improving home sales were encouraging for its business.
- In M&A action, Adobe said it would acquire business software firm Omniture for $21.50 per share in cash, in a deal worth $1.8B. Some commentators have pooh-poohed the deal, saying there are scarcely any synergies between the two firms, but the management of both firms are enthusiastic about the deal.
- Treasury market prices have held up surprisingly well in the face of improving economic data, strong performance in equity and commodity markets, and another announcement of increasing notes supply. Yields did make a move to the upside midweek, only to retreat in the face of key psychological levels. Gold prices neared all time highs, which stoked talk of inflation hedging, but in the end this also had little effect on bond trader psyche. The 2-year note was unable to sustain a move above 1%, the 10-year Note found the 3.50% level insurmountable and the Long Bond, which has outperformed all week, found support above 4.25%. That a sizeable portion of the ample liquidity provided by central banks has made its way into government debt now goes without saying, and the expiration of the Treasury's Temporary Guarantee Program for Money Market Funds on Friday was offered up as another plausible explanation (notably, late Friday, reports emerged that a privately run backstop is being contemplated). The question is whether next week's $112B in 2-, 5- and 7-year supply will be the will be a catalyst for the hibernating Treasury bears or another quiet success for the resilient bulls.
- Almost a year to the day from Lehman's demise, two British banks provided a major wake up call to a market that appears to be ignoring the significant amounts of toxic debt yet to be purged from the global banking system. Barclays' Bank announced the "sale" of $12.6B in illiquid mortgage assets to a vehicle controlled by two former employees. The bank provided $12.3B in debt financing for the fund's purchase, and will retain the assets on its balance sheet, but crucially, will no longer be required to carry the assets on its books at market value. Meanwhile British regulatory authorities determined that Lloyd's is not of sufficient health to avoid participation in the government's insurance scheme for toxic assets, with the likely endgame for the company dilution via an increased Government stake. In the United States, many of the key financial institutions that were so prevalent in headlines in the lead-up to financial Armageddon just a year ago continue to take advantage of dramatically improved credit markets. The likes of GE Capital, JP Morgan, Citigroup, HSBC, Morgan Stanley and Bank of America all raised money through debt sales in a variety of currencies.
- In currency trading this week, the greenback continued to hit fresh year-to-date lows against the euro and Swiss Franc and seven-month lows against the yen. The overall market sentiment is that the weaker dollar trend is being driven by reserve diversification, encouraging more commentary that the dollar is becoming a "carry trade" financing currency. Many dealers say this is a good explanation for why the dollar seems unable to recover, even on positive economic data. The shaky dollar was further rattled by comments from former Fed Chairman Greenspan, who said lawmakers could hamper Fed's ability to rein in monetary stimulus, causing inflation to swamp the bond market. The very mention of inflation sent spot gold to fresh 18-month highs and fed right back into the weak dollar theme.
- Looking ahead, dealers are wondering whether a shift in US interest rate expectations could support the dollar. A think tank report out midweek asserted that two Fed members have been discussing the removal of accommodation sooner rather than later and claimed the members are moving from a neutral to a hawkish bias. One dealer pointed out that the widespread thinking that interest rates would stay low "forever" might provoke some sort of upwards adjustment in the near future. Commentator Dennis Gartman observed that the USD may be headed for a technical correction soon, given that markets are overwhelmingly short the USD.
- EUR/USD moved above 1.47 for the first time since last December. Sterling lagged its European counterparts and actually weakened against the USD after the BoE's King said he did not believe bank reserves remain unnecessarily high, noting that he is looking at ways to reduce reserves, including a cut in its deposit rate. There was some press commentary that GBP was also looking ripe for the carry trade, which weighed upon sentiment. GBP/USD was hovering near 1.6300 as the week ended. The Swiss National Bank maintained its 3-month LIBOR target at 0.25% (as expected) and vowed to continue to fight any CHF currency appreciation. The Russian Central Bank cuts its refi rate by 25%, in line with earlier statements. The Mexican Central Bank maintained its overnight rate unchanged at 4.50% and removed "rate pause" comment in its post-decision statement.
- In specific price action, JPY began on a firm tone as traders speculated the new Japanese government would adopt a fresh approach to currency policy. Incoming Finance Minister Fujii reiterated his post-election position that a strong JPY had merits for the Japanese economy and insisted there was no need for currency intervention if moves were gradual. The BoJ's Shirakawa echoed Fujii's position, saying JPY appreciation could support the economy in the long run. The market noted the new government's official stance, with USD/JPY probing toward 90.00, where option barriers were said to be lurking.
On Friday, the Bank of Japan raised its assessment for the economy for the first time since July, citing improvement in exports and manufacturing output. However, policymakers allowed for further downside risks on deteriorating employment and consumption, while calling for inflation to decline faster than previously expected. Japan's new finance minister said the incoming administration is looking to suspend a portion of its extra budget under its plan to eliminate wasteful spending and possibly cut issuance of new government bonds. The minister estimated savings of several trillion yen but declined to provide more details before next month.
Week of 9/21/2009 thru 9/25/2009
Monday, September 21, 2009
10:00am Aug Leading Indicators (last 0.6%), TAF auction
Tuesday, September 22, 2009
10:00am July House Price Index m/m (last 0.5%), Sept Richmond Fed Manufacturing Index (last 14), TAF results
1:00pm Treasury's 2-yr note auction
4:30pm API Crude Oil/Gasoline/Distillate Inventories
Wednesday, September 23, 2009
10:30am DoE Crude Oil/Gasoline/Distillate Inventories
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
-Equities rose in the premarket as buyers stepped in following the previous day's hiatus, but equity indices sagged back to yesterday's closing levels after the open.
Before the open, Morgan Stanley Chief US Economist Berner told CNBC the recovery is likely to be moderate and expressed some concern that the US economy could possibly lapse back into recession after stimulus is withdrawn. Yesterday front-month crude probed $73, but this morning oil is just holding above $72, while gold is off overnight highs, trading just above $1,012. Note that the IMF's board is reportedly discussing the sale of up to 13M oz of gold today. Treasury prices are a little lower but yields appear to set to finish the week only marginally higher despite the strong performance in stocks and another $112B in announced supply.
- There were reports overnight that the Fed is in the process of developing proposals to regulate pay for bankers.
The Fed is working on guidelines for incentive compensation (rather than hard caps) across all firms it regulates as part of a proposal to curb risk-taking at financial institutions, with final proposals due in a matter of weeks. Financial industry compensation reform is expected to be a major point of debate at the G20 conference next week. FDIC Chief Bair also weighed in proposals to reform the financial sector, noting that excessive application of mark-to-market standards can exacerbate losses in times of stress and reiterating once again that the "too big to fail" issue must be addressed.
- Overnight the WSJ wrote that Treasury-backed entities are guaranteeing about 85% of new mortgages in the US, while the Fed is buying 80% of the securities that are made up of packaged taxpayer-backed mortgages.
This news is likely good for banks, which are essentially offloading risk onto the taxpayer, but some institutions on the government side are showing strain. Overnight, the Washington Post reported that the Federal Housing Administration (FHA) reserves are under serious stress, and cash reserves could fall below Congressionally mandated floor of 2%. This morning the FHA rolled out plans to strengthen reserves. FHA Chief Stevens said the organization doesn't need taxpayer assistance or Congressional action.
- In other news, Palm reported a much smaller-than-expected loss in its Q1, while revenues crushed estimates. Shipped smartphone volume grew 134% on a sequential basis, thanks to the launch of the Palm Pre smartphone.
On the conference call, executives said Palm would roll out the Pre with other carriers in 2010, and expects to return to profitability before the end of 2009. Investors are having none of it, and PALM is down 5%. Shares of Arena Pharmaceuticals are down more than 10% after the firm's much heralded lorcaserin results failed to impress investors, even after the drug met primary endpoints in a Phase III study. Close competitor Vivus is up more than 10%; note that last week it released details from Phase III studies its own weight loss candidate, Qnexa, that appeared stronger than lorcaserin.
- In currencies, the greenback began the New York session under modest pressure but continued to maintain its consolidation with the ranges seen over the last 24 hours.
EUR/USD probed the 1.4730 level, where there was chatter a "quasi official" name was selling euros above the 1.4720 level for smoothing action. Sterling hit fresh session lows against its major pairs as the new "funding" sentiment for the currency continued to grow. GBP/USD is back below 1.6300 while EUR/GBP tested above 0.9030. The Central bank of Mexico left its overnight interest rate unchanged at 4.50%, as expected. The bank dropped any mention of a pause in its easing cycle in their statement and noted that future monetary policy would depend on fiscal package, with future decisions taking growth into account
More Headlines
4:00:04 AM
*(EU) ECB EURO-ZONE JULY CURRENT ACCOUNT: €6.6B V -€5.4B PRIOR, CURRENT ACCOUNT NSA: €8.8B V €0.8B PRIOR
- Prior Current Account revised from -€5.3B to -€4.3
- Prior Current Account NSA revised from -€0.3B to +€0.8B
4:03:42 AM
(EU) EU's Almunia: Concept of using SDR's as replacement for USD as reserve currency is not viable
- Europe would not desire too much Chinese reserve diversification into Euros
- Sees more work needed to make a Tobin tax more viable, believes the concept is a good idea
4:28:02 AM
*(UK) BOE TRENDS IN LENDING SEPT REPORT: GROSS MORTGAGE LENDING: £9.7B v £9.4B M/M, NET LENDING TO BUSINESS: -3.3% y/y
- Net Lending to business: -3.3% y/y or -£15.5B (weakest reading since series began)
- Gross Mortgage Approvals : -13% y/y ( CML)
- Lenders reported weak demand for loans
- Lenders still cautious on house prices, jobs
6:47:05 AM
USD 3 Month Libor fixes at 0.29% v 0.29% prior
- Overnight USD: 0.22% v 0.22% prior
- Overnight GBP: 0.50% v 0.50% prior
- 3M GBP: 0.58% v 0.59% prior
- 3M EUR:0.71% v 0.72% prior
- 3M JPY: 0.35% v 0.35% prior
10:38:09 AM
(EU) EU Commission Document: EU should begin 'substantial' fiscal consolidation to avoid debt to GDP ratio at 100% in 2016, 120% in 2010
- Recommends EU states trim deficits by 0.5% of GDP per year, with some states recommended to cut deficits by over 1%
- Financial institutions require access to debt offering guarantees and recapitalization options through to end of Q210
- Pension reforms should be undetaken along with structural reform to assist potential growth
- calls for coordination among world central banks with regards to exit strategies; which may mitigate FX volatility
*(US) INITIAL JOBLESS CLAIMS: 545K V 557KE; CONTINUING CLAIMS: 6.23M V 6.10ME
- Prior Jobless Claims revised from 550K to 557K
- Prior Continuing Claims revised from 6.088M to 6.101M
8:30:32 AM
*(US) AUG HOUSING STARTS: 598K V 598KE
-BUILDING PERMITS: 579K V 583KE
- Prior Housing Starts revised from 581K to 589K
8:58:08 AM
(RU) Russia Energy Minister Shmatko: OPEC has agreed to attend special oil summit with Russia later in 2009
- Will continue to work with OPEC to continue protecting interests
- Note that on 9/16, Iran's OPEC governor said that OPEC is concerned non-OPEC nations could capture share on rising demand for oil.
10:30:43 AM
*EIA NATURAL GAS INVENTORIES:
+66 BCF V +75 TO +80 BCF ESTIMATE RANGE
12:00:59 PM
(US) Fed reports Q2 Flow of Funds: Household wealth +$2T, to $53.1T in total (first gain in US household wealth since Q3 2007)
- Home mortgage debt -1.5% v unchanged q/q
- Consumer credit -6.5% v -3.5% q/q
- Household debt -1.75% v -1.1% q/q
- Domestic non financial debt +5% v +4% q/q
- Non financial business debt -1.75% v -0.25% q/q
12:08:27 PM
(TU) Turkey Central bank cuts benchmark rate 50 bps to 7.25%; as expected
- says size and duration of any future cuts will depend on economy; data show the recovery will be slow.
- says to maintain easing bias for a long time to come.
1:27:41 PM
(US) California AG issues subpoenas to Moody's, Fitch and S&P
- subpoenas surround the investigation of ratings agencies' role in the financial crisis; AG says the ratings agencies gave "stellar ratings to shaky assets."
2:16:43 PM
US House passes Obama plan to end subsidies to private lenders making student loans; votes 253-171
- Bill aimed at saving US Govt money and increasing Pell grant program for needy students
- Measure allows private lenders to make loans; yet without subsidies from the US taxpayer
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
- The slow but steady equity market rally continues this morning, spurred on by solid housing and manufacturing data. August housing starts pushed out to a nine-month high, rising 1.5% sequentially, and building permits rose 2.5% sequentially; both data sets were largely in line with expectations. Commentators noted that growth in both series was overwhelmingly in multi-family units. The very strong Philadelphia Fed data is also fuel for the rally, although the miss in the employment sub-index remains concerning. Verizon's CEO offered a contrarian dose of skepticism in comments out after the open, noting that the US economy is still contracting and that no new job creation is taking place. Front-month crude continues to gain on growing economic optimism, with the front-month contract over $72. Gold is above $1,015, off its best levels but still not far below fresh all-time highs made overnight. Treasury prices have moved higher since the open of pit trade, despite the $112B in supply announced to come on the market next week.
- FedEx disclosed its official Q1 results today, with earnings right in line with estimates after its pre-announcement last week. Revenue was a bit of a surprise, as it missed higher targets. The company also said it would raise rates for 2010, a move that would be partially offset by lower fuel surcharges. FDX's CEO said the pricing environment is becoming more favorable. Oracle disappointed investors with in-line earnings and lackluster revenue in its Q1 report yesterday. The firm's revenue outlook for next quarter missed analysts' targets. Both FDX and ORCL are down in the low single digits.
- Auto parts manufacturers Autoliv and American Axle both offered guidance this morning. Autoliv raised its revenue forecast for Q3 slightly on what the company called a faster-than-expected recovery in vehicle output. American Axle's revenue guidance for the current quarter was a bit soft, although this news is being offset by the receipt of yet another credit waiver, giving the company more time to negotiate with its creditors and avoid bankruptcy. Shares of AXL spiked 8% on the news, before giving up all their gains on the guidance component of the news. AXL is up 3% mid morning, while ALV is in the red. Note also that BWA rose 4% after being cut to a hold from buy at KeyBanc.
- In other pre-earnings guidance, manufacturer Rockwell Collins adjusted its FY09 earnings and revenue guidance ranges downwards on special charges taken to reduce output. The company also provided an initial range for its 2010 forecast that was solidly in line with expectations. Health insurance name Amerigroup cut its 2009 earnings forecast on higher-than-expected medical costs in the second half of the year. Pharmaceutical name Hospira raised its full-year view. Share of AGP are down 4%, COL is up more than 4% and HSP is up 2%.
- In currencies, the price action in the dollar during the New York session tracked overall equity price moves, although it was contained within its Asian and European ranges. Dealers expressed concern over the Philly Fed data, which echoes some overseas numbers that have raised concerns about private demand once the effect of stimulus spending fades. The yen saw its gains evaporate as the NY morning commenced, with USD/JPY unable to break below the 90.00 handle despite the earlier comments from the BoJ that a stronger JPY might benefit Japan in the long run. USD/JPY tested its five-week downtrend line at 91.60 but failed to trigger the large amounts of dollar buy stops building above the level from shorter-term traders. The SNB left its 3-month LIBOR target unchanged at 0.25%, as expected, and reiterated that the central bank would continue to curb the Swiss Franc's appreciation.
More Headlines
8:30:01 AM
*(US) INITIAL JOBLESS CLAIMS: 545K V 557KE; CONTINUING CLAIMS: 6.23M V 6.10ME
- Prior Jobless Claims revised from 550K to 557K
- Prior Continuing Claims revised from 6.088M to 6.101M
8:30:32 AM
*(US) AUG HOUSING STARTS: 598K V 598KE
-BUILDING PERMITS: 579K V 583KE
- Prior Housing Starts revised from 581K to 589K
8:58:08 AM
(RU) Russia Energy Minister Shmatko: OPEC has agreed to attend special oil summit with Russia later in 2009
- Will continue to work with OPEC to continue protecting interests
- Note that on 9/16, Iran's OPEC governor said that OPEC is concerned non-OPEC nations could capture share on rising demand for oil.
10:30:43 AM
*EIA NATURAL GAS INVENTORIES:
+66 BCF V +75 TO +80 BCF ESTIMATE RANGE
"The world is waiting for you to figure out what only you can contribute. Take as much time as you need to find the answer, and then get started on it."
8:30am Aug Housing Starts (last 581K), Aug Building Permits (last 564K), Initial Jobless Claims (last 550K), Continuing Claims (last 6.088M)
10:00am Sept Philadelphia Fed (last 4.2)
10:30am Natural Gas Inventories
11:00am Treasury note announcement
Todays Headlines
8:00:23 AM
*(PD) POLISH AUG EMPLOYMENT M/M: -0.1% V -0.2%E
-Y/Y: -2.2% V -2.4%E
- Avg Gross wage M/M: -2.8% v -2.6%e
-Y/Y: 3.0% v 3.5%e
8:30:09 AM
*AUG CONSUMER PRICE INDEX M/M: 0.4% V 0.3%E
-CPI EX FOOD&ENERGY M/M: 0.1% V 0.1%E
- CPI NSA: 215.83 V 215.620E
- CPI Y/Y: -1.5% v -1.7%e
- Core CPI Y/Y: 1.4% v 1.4%e - No revisions
9:15:02 AM
*AUG INDUSTRIAL PRODUCTION: 0.8% V 0.6%E; CAPACITY UTILIZATION: 69.6% V 69.0%E
- prior Industrial Production revised from 0.5% to 1.0%
- prior Capacity Utilization revised from 68.5% to 69.0%
9:29:49 AM
(US) Senator Baucus (D) formally releases $856B Senate Finance Committee healthcare reform bill
- Baucus bill would require everyone to purchase health insurance; has no Govt run insurance option
- Bill to include excise tax on costly insurance programs
- Bill to include fees on insurance, drug makers and medical device makers ($2.3B fee on drug companies based on market share beginning 2010, $4B fee on medical device makers based on market share, insurers face $6B fee based on market share)
10:30:42 AM
*DOE CRUDE: -4.7M V -2.5ME
- GASOLINE: +547K V +750KE
- DISTILLATE: +2.25M V +1.5ME
- CAPACITY UTILIZATION: 86.9% V 86.7E.
- Distillate demand -127K bpd to 3.35M bpd
- Gasoline demand -282K bpd to 9M bpd
11:05:07 AM
NY Fed: Purchased $1.8B in $300B outright coupons purchase; Dealers submitted $16.39B for consideration (bid to cover 9.11)
- Heaviest purchase was $667M in the 02/28/11 maturity
- Note: Avg bid to cover for prior four auctions is 3.16
12:17:16 PM
(JP) Japan Fin Min Fujii: Stance on FX intervention is unchanged; has no comment on appropriate FX levels
- Notes will not drive Yen lower just to help exports.
- could be a meaningless move to set a limit on new JGB issuance when the economy is weak.
- too early to determine whether or not more stimulus steps are to be taken.
- says govt should avoid intefering with BoJ policy; says BoJ Gov Shirakawa is doing a good job, BoJ policy is sensible.
1:00:01 PM
*SEPT NAHB HOUSING MARKET INDEX: 19 V 19E (highest since May 2008, third consecutive up month)
- No revisions to prior 18
- All four regions of the country showed some degree of improvement the NAHB stated.
1:55:32 PM
Rep. Stephanie Herseth Sandlin (D-SD), a co-chairwoman of the Blue Dog Coalition, gives her blessing to the Baucus healthcare reform bill - TheHill.com
- the 52-member Blue Dog coalition is a group of moderate Democrats who are seen as an important voting block in the healthcare debate.
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
- US equity indices are trending upwards in early trading this morning after The August industrial production report rose a bit more than expected and August CPI came in flat (ex fuel and food). Note that the Fed also revised the July industrial production figure to +1%, twice as much as originally reported. Senator Baucus has formally released the fifth and final Congressional proposal for healthcare reform, with no public option and new fees on insurance companies, as expected. NYMEX crude continues to creep up from lows under $69 over the weekend, with the front-month contract looking to break $71.50 after nearly double the expected decline in the DoE's crude inventories report.
- Citigroup's stock has been on a rollercoaster since the government announced on 9/14 that it would sell down its stake in the firm. Rochdale's Dick Bove questioned Citi's ability to turn a profit, saying he expects Citi to lose money in Q3. Note that back in late August Bove said US banks earnings would be dismal for the rest of 2009. Analysts at BoA/Merrill Lynch see the sale of US government's stake in Citi as having little dilution as there is little change the government would exit its equity position in a disorderly fashion. Shares of Citi are nearly 4%. In a wide-ranging interview with the WSJ, Wells Fargo's CEO Stumpf declined to specify when the firm would repay its $25B in TARP funds and insisted that losses at Wachovia are manageable. Stumpf said a rebound in US banking industry profits depends on the consumer.
- Adobe was more or less in line with expectation in its Q3 earnings and Q4 guidance, but the software company's acquisition of business software firm Omniture is really grabbing attention this morning. Adobe said it would acquire OMTR for $21.50 per share in cash, in a deal worth $1.8B. Some commentators have pooh-poohed the deal, saying there are scarcely any synergies in the deal. Shares of ADBE are down 5% this morning, while shares of OMTR are up 25%.
- There has been another spurt of pre-earnings season guidance out since yesterday's close. Agricultural machinery manufacturer AGCO slashed its 2009 revenue and earnings guidance due to softening market conditions and lower margins. AGCO is down 10%. Semi names Rambus and Silicon Labs joined the rest of the industry and hiked guidance for Q3. RMBS is up 2%, SLAB is down 2%. Fortune Brands is up nearly 7% after reaffirming its full-year outlook, noting that rising consumer confidence and improving home sales were encouraging for their business. Medical testing firm Meridian Bioscience provided an initial look at 2010 earnings that was a bit ahead of expectations and reaffirmed its 2009 view; shares of VIVO are flat. Manufacturer Rockwell Automation and wireless communications firm SBA Communications each reaffirmed their 2009 outlooks. Among other guiders were Rogers Corp (raised EPS view for Q3 considerably; ROG+8%), Littlefuse (blew out Q3 estimates on big jumps in sales; LFUS+12%) and Kulicke & Soffa Industries (hiked revenue estimates for its Q4; KLIC+2%).
- In currency trading the greenback has continued its recent habit of hitting fresh 2009 lows against most currencies and then consolidating its losses, and the yen remained the dominant theme as it tried to break below the option barrier said to be in placed at 90.00. Dealers observed a good amount of smoothing operations as the New York session commenced. Many are pondering whether or not these moves were officially sanctioned, although the price action has been similar to other pairs. Overall sentiment continues to be that the market believes the weaker USD trend is being driven by reserve diversification, with central banks playing both sides of the trend. USD/JPY held the 90.0 handle and moved back above the 90.70 level in mid-morning trading in New York. EUR/USD also failed to breech its mid-December intra-day high of 1.4719 but did give it a good college try initially. Spot gold is holding below its all-time high of $1,032.40/oz.
- Note that dealers were chatting that a US think tank report on Fed accommodation claimed two Fed members have been discussing removing accommodation sooner rather than later and noted these members moving from neutral to hawkish in bias. This news briefly transformed into a vague rumor that the Fed might raise interest rates in the near future, but was quickly dismissed as pure nonsense.
More Headlines
8:00:23 AM
*(PD) POLISH AUG EMPLOYMENT M/M: -0.1% V -0.2%E
-Y/Y: -2.2% V -2.4%E
- Avg Gross wage M/M: -2.8% v -2.6%e
-Y/Y: 3.0% v 3.5%e
8:30:09 AM
*AUG CONSUMER PRICE INDEX M/M: 0.4% V 0.3%E
-CPI EX FOOD&ENERGY M/M: 0.1% V 0.1%E
- CPI NSA: 215.83 V 215.620E
- CPI Y/Y: -1.5% v -1.7%e
- Core CPI Y/Y: 1.4% v 1.4%e - No revisions
9:15:02 AM
*AUG INDUSTRIAL PRODUCTION: 0.8% V 0.6%E; CAPACITY UTILIZATION: 69.6% V 69.0%E
- prior Industrial Production revised from 0.5% to 1.0%
- prior Capacity Utilization revised from 68.5% to 69.0%
9:29:49 AM
(US) Senator Baucus (D) formally releases $856B Senate Finance Committee healthcare reform bill
- Baucus bill would require everyone to purchase health insurance; has no Govt run insurance option
- Bill to include excise tax on costly insurance programs
- Bill to include fees on insurance, drug makers and medical device makers ($2.3B fee on drug companies based on market share beginning 2010, $4B fee on medical device makers based on market share, insurers face $6B fee based on market share)
10:30:42 AM
*DOE CRUDE: -4.7M V -2.5ME
- GASOLINE: +547K V +750KE
- DISTILLATE: +2.25M V +1.5ME
- CAPACITY UTILIZATION: 86.9% V 86.7E.
- Distillate demand -127K bpd to 3.35M bpd
- Gasoline demand -282K bpd to 9M bpd
8:30am Aug CPI (last m/m 0.0%, y/y -2.1%; ex food & energy last m/m 0.1%, y/y 1.5%), Aug CPI Core Index SA (last 219.344), Q2 Current Account Balance (last -$101.5B)
9:00am July Net Long-Term TIC Flows (last $90.7B), July Total Net TIC Flows (last -$31.2B)
9:15am Aug Industrial Production (last 0.5%), Aug Capacity Utilization (last 68.5%)
10:30am DoE Crude Oil/Gasoline/Distillate Inventories
1:00pm Sept NAHB Housing Market Index (last 18)
Todays Headlines
2009 8:29:20 AM
*AUG EMPIRE MANUFACTURING: 18.9 V 15.00E
- No revisions
Components
- Prices Paid: 20.24 v 13.83 prior
- New Orders: 19.84 v 13.43 prior
- Employment: -8.33 v -7.45 prior
8:30:05 AM
*AUG ADVANCE RETAIL SALES: 2.7% V 1.9%E; EX AUTOS: 1.1% V 0.4%E
- Prior Advance Retail Sales revised from -0.1% to -0.2%
- Prior Ex autos revised from -0.6% to -0.5%
10:00 AM
*JULY BUSINESS INVENTORIES:
-1.0% V -0.9%E- prior revised from -1.1% to -1.4%
10:00 AM
*SEPT IBD/TIPP ECONOMIC OPTIMISIM INDEX:
52.5 V 51.0E- no revisions
10:36:32 AM
(US) Fed's Bernanke: technically recession is likely over but economy will continue to feel weak; Shadow banking will continue to be a big part of the credit system - Q&A
- does not expect shadow banking system to be as big as it was pre-crisis
- Expects banks to closely examine what sorts of securitization should be taking place. Plain vanilla securitization is viable.
- Seeing increasing activity beyond Fed-supported credit programs.
11:02:57 AM
NY Fed: Purchased $2.05B in $300B outright coupons purchase; Dealers submitted $7B for consideration (bid to cover 3.42)
- Heaviest purchase was $871M in the 05/15/21 maturity
- Note: Avg bid to cover for prior four auctions is 3.51
12:58:59 PM
Berkshire's Buffett: Berkshire is buying stocks at the moment; getting 'a lot' for the money in equities
- No seeing the economy getting better or worse at the moment.
- Economy "hasn't turned up, but will."
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
- US equity indices have been volatile in early trading as traders balanced some mixed economic figures against some worrisome master trust data from the banks. August retail sales rose by the largest amount in more than three years, completely reversing July's very modest decline, spurred by gains that went beyond just the expected increases of auto sales due to Cash for Clunkers. August PPI data showed wholesale prices rose 1.7%, more than double the 0.8% rise economists expected (PPI was -0.9% in July). Both months were heavily affected by energy prices. The Empire State Manufacturing data was also sharply higher than consensus. Leading private-sector economists dueled over the shape of the emerging recovery earlier this morning. Goldman Sachs' Chief Economist Jim O'Neill said the global recovery is "beyond a V shape," and insisted the recovery will positively surprise markets. Later Morgan Stanley's Asia Chief Economist Stephen Roach said the weak consumer recovery in the US guarantees there will not be a V-shaped recovery. Front-month NYMEX crude is up very slightly over levels from the last two days, trading around $69.50, after OPEC's September report left the cartel's 2009-10 demand outlook unchanged from last month. Treasury prices remain a bit lower as the PPI data offered little in the way of support. The long bond yields sit just below 4.25% after the NY Fed purchased just over $2B in longer dated maturities.
- The Wall Street Journal is reporting that the Treasury may sell its stake in Citigroup beginning as early as October. According to the piece, the Treasury would take six to eight months to sell off its 34% stake. The Treasury has declined to comment on the piece, and shares of Citi are down 5% in the early going. The leading credit card issuers have been disclosing their August Master Trust data this morning, with notable increases in net charge offs reported by JP Morgan (10.07% v 9.02% m/m), Bank of America (14.54% v 13.82% m/m) and Discover (9.16% v 8.43% m/m). Charge offs declined at Capital One.
- Electronics retailer Best Buy missed bottom line estimates slightly while beating top-line targets by a hair. The company also raises its FY10 guidance range on improving customer traffic. BBY fell more than 4% before recovering somewhat. Supermarket name Kroger missed top- and bottom-line estimates and trimmed its FY09 oulook, citing changes in customer behavior and the overall economic environment. Shares of KR are down a 8%, while competitor SWY is down 4%. Multiple analysts have raised their ratings on Las Vegas Sands thanks to better earnings strength at the firm's Macau operations. Shares of LVS were up as much as 6% this morning, along with Macau rival MGM, while WYNN was up 3%. Shares of all three have lost some of this ground.
- Leading US steelmaker Nucor offered dire guidance for its Q3, saying it expects a sizable loss in the quarter that would be three or four times the expected amount. The company said it sees little improvement in real demand and warned uncertainty in the US economy remains high, and said the unexpected loss stems from high-cost inputs. Illinois Tool Works raised its Q3 guidance range while also warning it has seen a significant decrease in operating revenues over last three months. Monsanto reiterated its FY10 guidance given just last week.
- In currencies, the greenback maintained a constructive tone during the NY morning after US retail sales beat expectations, and despite the firmer PPI data. Note that the regional Empire State headline was also sharply higher than the consensus. Such data readings typically raises the risk appetite sentiment but dealers noting that a 1.4560 option expiration has acted like a magnet for the price action. USD did try to move lower post data, but the 1.4630 area was reported as attractive to some quasi-official names offering euros, which capped the upside momentum for the time being.
- Sterling was soft in the NY morning on follow-through selling from earlier comments by the BoE's King on the deposit rate outlook. GBP/USD moved below the 1.6450 level while EUR/GBP tested 0.8870. USD/ JPY was firmer in the NY morning but met some decent offers above the 91.50 level. The price action appeared to a bit hectic around that level, with some short-term prop players "scrambling" to cover prior JPY longs. Canada's Murray outlined various factors that were supporting its economic recovery. He did note that the economy was supported by confidence, but added that the strong CAD was a headwind. USD/CAD was hovering around the 1.08 area, with CAD firmer by 30 pips from its opening level in Asia.
More Headlines
2009 8:29:20 AM
*AUG EMPIRE MANUFACTURING: 18.9 V 15.00E
- No revisions
Components
- Prices Paid: 20.24 v 13.83 prior
- New Orders: 19.84 v 13.43 prior
- Employment: -8.33 v -7.45 prior
8:30:05 AM
*AUG ADVANCE RETAIL SALES: 2.7% V 1.9%E; EX AUTOS: 1.1% V 0.4%E
- Prior Advance Retail Sales revised from -0.1% to -0.2%
- Prior Ex autos revised from -0.6% to -0.5%
10:00 AM
*JULY BUSINESS INVENTORIES:
-1.0% V -0.9%E- prior revised from -1.1% to -1.4%
10:00 AM
*SEPT IBD/TIPP ECONOMIC OPTIMISIM INDEX:
52.5 V 51.0E- no revisions
10:36:32 AM
(US) Fed's Bernanke: technically recession is likely over but economy will continue to feel weak; Shadow banking will continue to be a big part of the credit system - Q&A
- does not expect shadow banking system to be as big as it was pre-crisis
- Expects banks to closely examine what sorts of securitization should be taking place. Plain vanilla securitization is viable.
- Seeing increasing activity beyond Fed-supported credit programs.
11:02:57 AM
NY Fed: Purchased $2.05B in $300B outright coupons purchase; Dealers submitted $7B for consideration (bid to cover 3.42)
- Heaviest purchase was $871M in the 05/15/21 maturity
- Note: Avg bid to cover for prior four auctions is 3.51
8:30am Aug PPI (last m/m -0.9%, y/y -6.8%, ex food & energy last m/m -0.1%, y/y 2.6%), Aug Advance retail sales (last -0.1%, ex autos -0.6%), Sept Empire Manufacturing (last 12.08)
10:00am July Business Inventories (last -1.1%)
Todays Headlines
5:31:44 AM
*(RU) RUSSIAN CENTRAL BANK (CBR) CUTS REFI RATE BY 25BPS TO 10.50%; In line with expectations
- Cuts credit rate to 10.5% from 10.75% prior
***Reminder: Back on Jun 30th Russian Central Bank stated that it might lower interest rates by another 150 bps in 2009 without large risks and that the discussions were whether to cut rate in increments of 25bps or 50bps
- The CBR cut by 50bps on July 10th and by 25bps on Aug 7th
*** This is the sixth monetary easing since April for the CBR and a total of 100bps since that period
6:01 AM
(EU) EU's Almunia:
-Reiterates that now is Not the time to implement exit strategies
6:22:05 AM
(CH) China's Ministry of Commerce (MOFCOM) seeks WTO negotiation over US tire tariffs, calls tarriff decision a "mistake" and an abuse of trade practices
- Earlier in the session: China initiated a trade investigation of allegations that US autos and chicken products are being dumped into the Chinese market
- Reminder: President Obama authorized new tariffs on all car and light truck tire imports from China on Friday.
6:52:42 AM
USD 3 Month Libor fixes at 0.30% v 0.30% prior
- Overnight USD: 0.22% v 0.22% prior
- Overnight GBP: 0.50% v 0.50% prior
- 3M GBP: 0.62% v 0.63% prior
- 3M EUR: 0.72% v 0.73%prior
- 3M JPY: 0.36% v 0.36% prior
12:00:09 PM
(US) President Obama: Full recovery of the financial system will take "a great deal more time," system is returning to normalcy; Wall Street can not count on another rescue by taxpayers
- Praises Treasury Sec Geithner for his leadership during the crisis.
- Vows not to undertake any further financial industry bailouts.
- Calls for stronger capital and liquidity requirements for financial institutions
- Some in financial industry are not learning the lessons from the financial crisis; can not count on taxpayers for another rescue of the financial system.
12:30:54 PM
Fed's Lacker: Next expansion may lead to excessive risk taking; stronger capital standards should be implemented
- Comments that resolution proposals that use public funds will limit benefits
- Notes that an expansion of safety new will create more risk of regulation is not increased; trimming safety net is only way to being private and public interests together
- should not prevent failure of all large and complex financial companies
3:50:24 PM
Fed's Yellen: Unemployment to remain elevated for a few years; sees U shaped recovery; commercial real estate defaults are rising
- Comments that higher savings and unemployment levels will limit growth
- housing, consumer spending, and manufacturing are showing signs of recovery; but there are slim odds of a strong recovery in consumer spending
- foreclosures have yet to shows signs of turnaround
- Govt debt monetization fears are disruptive
- Disinflation poses bigger threat than 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.
- Follow-through weakness in Asian and European trading forced US equity futures into the red before the open this morning, as risk aversion spiked over fears of the emerging US-China trade conflict. However, the major US indices have recouped losses most of their losses, with the DJIA nearly flat on the day after the first hour of trade. Most of the leading financial stocks are in negative territory after Rep. Frank reiterated that Congress was committed to imposing "very tough" regulations on derivatives, with Citi the laggard. Over the weekend, respected academic economist Joseph Stiglitz warned that the problems of the US financial system have only grown since last fall's crisis, saying that "in the US and many other countries, the too-big-to-fail banks have become even bigger." Front-month crude remains around where it settled after Friday's slide, just above $69. Treasury prices are marginally lower with the 10-year note off about a quarter of a point. The long bond yield has regained 4.2% ahead of expected speeches from the FOMC's Lacker and Yellen scheduled for later this afternoon.
- The possibility of trade war brewing between the US and China is in the front on many traders' minds this morning. Before the open, the Chinese Commerce Ministry called the US tire tariffs a "mistake," and said China is moving to begin negotiations at the WTO over the tariffs. US tire manufacturers are gaining on the news, with Goodyear up 6% and Cooper up more than 10%. Goodyear noted that less than 2% of its North American sales come from tires made in China.
- Shares of Sprint are up around 12% this morning after the UK Telegraph reported that T-Mobile operator Deutsche Telekom may be mulling a takeover bid for Sprint Nextel. The article noted that DT has discussed a potential bid with its investment bankers; later in the session, sources told CNBC's David Faber that Sprint is not engaged in any talks with DT. Sprint, which has a market cap of nearly $11B, is in the process of taking over Virgin Mobile USA in an all-stock deal valued at $483M.
- Visa reported that its y/y aggregate payment volume growth was -1.0% in August (v -2.0% in July), credit payment volume growth was -10% (v -9% in July) and debit payments volume growth was +7% (v +4% in July). Shares of Visa and the other leading credit card issuers are down 1-2% in the early going. Two major companies announced corporate restructuring plans this morning. Eli Lilly will eliminate around 5,000 jobs and reorganize into five business units to slash costs and speed development of new drugs. Intel plans to consolidate all of its major product divisions into single unit and shuffle its top executives.
- In currencies, initial concerns over the China-US trade developments were not fulfilled in the early part of the NY morning. Dealers pondered whether the situation would derail the euphoric mood of recent weeks as stocks probe recent recovery sugar highs. The yen was the primary focus during the New York session, as the currency saw its best levels from the latter part of the Asian session whittled away. The failure of USD/JPY to break below the 90.00 level prompted some short-term covering of long JPY positions, while the EUR/JPY cross moved off its best level of 131.30 to move towards the upper portion of the 132 neighborhood.
- EUR/USD recovered all of its Asian and European losses, moving back toward fresh 2009 highs around the 1.4630 area. The price action seemed to echo currency advice by USD ahead of the European morning as market participants seemed to take advantage of the USD strength and sold the currency on spats of strength. The dollar's softer tone prompted renewed commentary that the dollar was becoming a "carry-trade" financing currency, which many dealers feel provides a good explanation for why the USD seems unable to recover. Chatter of European names borrowing in USD in the session seemed to re-enforce this emerging theme.
More Headlines
5:31:44 AM
*(RU) RUSSIAN CENTRAL BANK (CBR) CUTS REFI RATE BY 25BPS TO 10.50%; In line with expectations
- Cuts credit rate to 10.5% from 10.75% prior
***Reminder: Back on Jun 30th Russian Central Bank stated that it might lower interest rates by another 150 bps in 2009 without large risks and that the discussions were whether to cut rate in increments of 25bps or 50bps
- The CBR cut by 50bps on July 10th and by 25bps on Aug 7th
*** This is the sixth monetary easing since April for the CBR and a total of 100bps since that period
6:01 AM
(EU) EU's Almunia:
-Reiterates that now is Not the time to implement exit strategies
6:22:05 AM
(CH) China's Ministry of Commerce (MOFCOM) seeks WTO negotiation over US tire tariffs, calls tarriff decision a "mistake" and an abuse of trade practices
- Earlier in the session: China initiated a trade investigation of allegations that US autos and chicken products are being dumped into the Chinese market
- Reminder: President Obama authorized new tariffs on all car and light truck tire imports from China on Friday.
6:52:42 AM
USD 3 Month Libor fixes at 0.30% v 0.30% prior
- Overnight USD: 0.22% v 0.22% prior
- Overnight GBP: 0.50% v 0.50% prior
- 3M GBP: 0.62% v 0.63% prior
- 3M EUR: 0.72% v 0.73%prior
- 3M JPY: 0.36% v 0.36% prior
"Strive not to be a success, but rather to be of value."
Market Week Wrap-up
- Equity indices regained bullish momentum this week, building up a head of steam in tandem with higher crude and much higher gold as traders bet on economic recovery and the return of inflation. The leading US equity indices pushed out to year-to-date highs on Friday morning in a week highlighted by commemorations of the 9/11 attacks and the anniversary of the US financial system meltdown. In testimony before the TARP Oversight Panel, Treasury Secretary Geithner called the banks stronger than on the eve of the collapse a year ago and stated the government would begin winding down its rescue programs. Investors took heart from the Beige Book report on Wednesday, which indicated that all but one of the Fed's 12 regions were seeing economic activity that is "stable," showing "signs of stabilization" or "firming." For the week, the DJIA rose 1.7%, the S&P 500 climbed 2.6% and the NASDAQ Comp added 3.1%.
- The prime vacation season has ended and the lead-up to Q3 earnings season has begun as companies race to manage investor expectations on earnings and revenue performance. The biggest guidance bellwether this week has been FedEx, which hiked its outlook for the current quarter and crushed estimates for next quarter, lending more ammunition to proponents of green shoots. The semiconductor industry has seen another round of firms raise short-term views, chief among them Texas Instruments, which raised both top- and bottom-line guidance over levels offered back in late July, citing improving chip demand in China and India. ASML, Skyworks Solutions, Microchip Tech and Diodes also raised their outlooks for the current quarter.
- Monsanto offered an initial look at its FY10, guiding well below expectations on lower sales projections for its glyphosate-based herbicides. Procter & Gamble adjusted its FY10 outlook, trimming its EPS and revenue ranges slightly. Steel Dynamics boosted its guidance range for its Q3 significantly. In the energy sector, oil transport firm NuStar Energy slashed its Q3 earnings outlook on falling profit margins while natural gas name Williams Companies slightly raised its full-year view. Health Care REIT trimmed its 2009 guidance while Sun Healthcare cut its full-year outlook on expectations of lower Medicare reimbursement rates.
- In other news, fast food titan McDonald's reported its smallest monthly same-store sales gain since back in March. August comps were up a mere 2.2% (half the expected amount), and only up 1.7% in the US. The OPEL soap opera crept closer to final resolution, as GM officially selected Magna's bid for its European arm. The German government confirmed that it would supply financing for a portion of the deal, which involves a Magna and its Russian partners Sberbank and Gaz taking 55% of OPEL, with GM retaining a 35% stake. The other big M&A story of the week was Kraft's ambitious £10.2B hostile offer for the UK's Cadbury. Hersey is more than a bit player in the deal, due to its exclusive rights to make and sell well known Cadbury brands in the US, ensuring negotiations will provide plenty of fireworks in the weeks and months ahead.
- The vicious cycle of higher gold/oil and a weaker dollar kept rolling all week long. The greenback weakened against its major pairs and commodity-related currencies as spot gold moved above the $1,000/oz mark to hit fresh 2009 highs, although the yellow metal managed to hold below the March 17, 2008 all-time high of $1,032/oz. Technical indicators support more strength in spot gold in the medium term, particularly given this week's close above $1,000. Barrick Gold Corp. was another factor aiding gold, as the company announced plans to raise nearly $2B to eliminate its gold hedges over the next 12 months. Note that former Fed Chairman Alan Greenspan called the rising trend in gold prices "strictly a monetary phenomenon." In the energy market, OPEC's September meeting in Vienna on Wednesday had little impact, as the cartel kept quotas unchanged as expected and gave some lip service to better compliance. Oil managed a modest gain on the week, even after a nearly $3 drop on profit taking in the Friday session. Natural gas had a wild week, whipping 28% from trough to peak in four days, and ending up about 10% as energy investors continue to wonder about the growing gap between the price ratio of oil to gas.
- Treasuries continue to defy conventional wisdom with yields still comparatively low in light of the ongoing risk rally in stocks and broad based dollar weakness. Whether the government bond buying has been motivated by fears of a double dip recession or a variety other factors remains a debate within the bond community. The rising US savings rate has been put forth as one explanation, and with money market rates set to stay at or near zero for the foreseeable future it seems returns offered in longer maturities are still attractive for ultra cautious investors. Hedge related flows are another likely contributor after another sizeable week of corporate issuance, with the likes of Prudential, CVS and Metlife all coming to market, and dollar-denominated issuance from Spain and Germany also imminent. Overall, it was a good week for the US taxpayer with another $70B borrowed relatively cheaply, with 3-year notes attracting the best bid-to-cover ratio since last November, and 10 and 30-year paper drawing yields not far from the lows of the summer. Some outperformance at the long end has flattened the curve, narrowing the benchmark spread below 245 basis points.
- The dollar began the week within its recent two-week consolidation range, but rising risk appetite weighed on dollar sentiment, spurred on by comments from global leaders that the worst of the crisis is probably over (plus anticipation of a soft recovery in the US economy). A series of Chinese data on Friday kept the risk appetite euphoria rolling, as loan growth, industrial production, retail sales and investment growth rose on a sequential in August. Ahead of the releases, Chinese Premier Wen warned that the impact of global stimulus policies was fading, but markets participants are ignoring this and other calls for prudence, raising fears in many quarters that the recovery will be bumpy.
- In specific price action, EUR/USD moved above the alleged option barrier at 1.4450 for fresh 2009 highs of 1.4635 this week. Early on dealers zeroed in on a large one-week euro call option with a mid-1.45 strike, hinting that the market wanted to test the upside and provoke official comment/action on the weak USD trend. The pair did encounter some sharp spats of retracement with Far Eastern names being suspected sellers of the pair. USD/JPY probed last week's support zone of 92.00 and tested fresh seven-month lows when quasi-official interest failed to emerge under the 92 handle. Heavy September corporate Japanese repatriations apparently continue to provide its source of strength. In USD/CHF, dealers continued to ponder whether the Swiss Central Bank SNB would react to the strong CHF against the greenback. Recurring rumors that the SNB was "checking rates" provided the dollar with moments of reprieve, but the price movement was later attributed to Far East order flows rather than any central bank tweaking. USD/CHF probed a quarterly pivot point at 1.0350 as the week ended. GBP/USD was firmer during the week. The BoE left its key interest rate unchanged at 0.5% and maintained its asset purchase facility at £175B (both as expected). Sterling moved higher after the decision, on chatter that the central bank might also cut its deposit rate to negative territory (like Sweden did back in July), but the move never materialized. The Eastern European states helped to maintain the rising risk appetite sentiment after the IMF extended Hungary's current loan structure by six months through early Oct 2010. The IMF affirmed that Hungary's economic and fiscal policies are on track.
- With the USD weakness so broad-based, there has been increasing commentary that the dollar is becoming a "carry-trade" financing currency, adding a new dimension to trading and a better explanation for why the USD seems unable to recover on so-called "good economic news." The funding argument is backed by comments from dealers, who have noted that dollar LIBOR rates have fallen below EUR/JPY interest rates.
- With the greenback at multi-quarter lows, the reserve currency issue has popped up again (adding even more weight to dollar sentiment). The United Nations commented on the topic this week, lending its support to a new currency accord designed to stabilize FX markets. The UN said the role of the USD must be reduced to protect emerging markets from the "confidence game" played in global financial markets, and backed the idea of increasing the role of SDRs. A former vice-chairman of a key committee in China's National People's Congress Cheng said he believed the USD would "fall hard" if the US continued to print money to buy back government bonds. By design or default, a mid-level US Treasury official's view on China indirectly hinted that the US might be seeking a weaker dollar policy. David Dollar, the Treasury's economic and financial emissary to China, said it made sense for China to diversify its reserves and have a variety of currencies in reserve. Russian Central Banker Ulyukayev commented that Russia maintains around 1/3 of its reserves in US Treasuries but added that the bank would like to diversify its portfolio with two or three new currencies. Ulyukayev admitted, however, that many currencies are not liquid enough play a role as a reserve.
- Another theme raising plenty of discussion on trading desks is that market participants are apparently ignoring structural data in favor of cyclical data, which appears to be driving the price action in stocks, bonds, commodities and currencies - but only when the data is positive. This raises several questions, among them when will markets take heed of cautious comments from countless government and central bank officials? After all, there will come a time when cyclical figures move back into sync with structural data. Note that the ECB's Weber warned that Germany might need 20 years to return to 2008 debt-to-GDP levels, highlighting the fiscal damage that will linger for a long time after the "Great Recession."
Week of 9/14/2009 thru 9/18/2009
Monday, September 14, 2009
President Obama to speak on the financial crisis in New York.
Tuesday, September 15, 2009
8:30am Aug PPI (last m/m -0.9%, y/y -6.8%,
ex food & energy last m/m -0.1%, y/y 2.6%),
Aug Advance retail sales (last -0.1%, ex autos -0.6%),
Sept Empire Manufacturing (last 12.08)
10:00am July Business Inventories (last -1.1%)
10:00am Fed Chairman Bernanke speaks on the financial crisis.
Wednesday, September 16, 2009
8:30am Aug CPI (last m/m 0.0%, y/y -2.1%;
ex food & energy last m/m 0.1%, y/y 1.5%),
Aug CPI Core Index SA (last 219.344),
Q2 Current Account Balance (last -$101.5B)
9:00am July Net Long-Term TIC Flows (last $90.7B),
9:15am Aug Industrial Production (last 0.5%),
10:30am DoE Crude Oil/Gasoline/Distillate Inventories
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
8:30am Aug Import Price Index (last m/m -0.7%, y/y -19.3%)
9:55am Sept prelim Univ of Michigan confidence (last 65.7)
10:00am July Wholesale Inventories (last -1.7%)
2:00pm Aug Monthly Budget Statement (last -$111.9B)
Todays Headlines
6:44:46 AM
USD 3 Month Libor fixes at 0.30% v 0.30% prior
- Overnight USD: 0.22% v0.22% prior
- Overnight GBP: 0.50% v 0.50% prior
- 3M GBP: 0.63% v 0.64% prior
- 3M EUR: 0.74% v 0.75% prior
- 3M JPY: 0.37% v 0.37% prior
8:30:02 AM
*(US) INITIAL JOBLESS CLAIMS: 550K V 560KE; CONTINUING CLAIMS: 6.088M V 6.200ME
- Prior jobless claims revised from 570K to 576K
- Prior Continuing Claims revised from 6.234M to 6.247M
8:30:03 AM
*(US) JULY TRADE BALANCE: -$32B V -$27.3BE
- Prior revised from -$27.0B to -$27.5B
Components:
- Imports M/M $159.6B v $152.4B prior
- Exports M/M: $127.6 v $124.8B prior
- China: -$20.4B v -$18.43B prior
- Japan: --$3.9B v $3.7B prior
- Canada: -$2.2B v -$1.5B prior
- OPEC: -$6.9B v -$5.86B prior
- Mexico: -$2.9B v -$3.42B prior
- Euro Area: -$9.8B v -$5.4B prior
8:30:13 AM
*(CA) CANADA JULY INTL MERCHANDISE TRADE BALANCE: -C$1.4B V C$100ME (4th straight deficit)
- Prior revised from -C$100M to C$0.0 (flat)
Components
- Exports C$30.3B v C$29.3B prior
- Imports: C$31.7B v C$29.3B prior
- Trade Balance with US: C$1.9B v C$3.1B prior
- Trade Balance non-US: -3.4BC$ v -C$3.2B prior
8:31 AM
(EU) ECB's Weber:
Germany could require 20 years to return to 2008 debt to GDP level
Not clear if German 2009 budget deficit is over 3%
10:30 AM
*EIA NATURAL GAS INVENTORIES:
+69 BCF V +70 TO +75 BCF ESTIMATE RANGE
11:02:23 AM
(US) Treasury Official: Expecting $50B in TARP repayments in next 18 months
- Will address FNM and FRE in 2010
- Treasury to start operation of PPIP next month; evaluating additional help for small banks
1:01:59 PM
TREASURY'S $12B 30-YEAR BOND REOPENING BID-TO-COVER RATIO: 2.92 V 2.36 PRIOR AND 2.46 AVE OVER THE LAST 5 REOPENINGS
- indirect bidders take 46.5% of competitive bids
- bonds draw 4.238% with 85.35% alloted at the high
- median 4.210%, low 4.100%
1:50:36 PM
US Treasury's Geithner: Banking system has a lot more capital now; financial system now is stronger than on the eve of the collapse - testimony Q&A
- Notes that the financial system is less likely to be a headwind due capitalization.
- Reduction in number of banks is a necessary process.
- Have not decided whether or not to extend financial bailouts past end of 2009.
- Says unemployment could remain high for some period of time.
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
- US equity indices are basically treading water this morning. Investors continue to digest yesterday's Beige Book report, which indicated that all but one of the Fed's 12 regions were seeing economic activity that is "stable," showing "signs of stabilization" or "firming." The one exception was the St. Louis region, which reported the economic decline is "moderating." The US posted a wider-than-expected trade deficit in July. Initial and continuing jobs claims fell somewhat from last week's levels. Dismal housing data came from RealtyTrac, which reported that US foreclosure activity in August was 18% y/y and down less than 1% m/m. Financial names were in the red on the news, in addition to more doom and gloom from Meredith Whitney, who said fundamentals at the banks have not improved and Q3 results at banks should be broadly similar to Q2 results. Note that Goldman Sachs is up somewhat after Meredith Whitney reiterated her bullish view on the bank. Bond prices are rallying ahead of this afternoon's 30-year bond reopening. The long bond has added nearly a full point and its yield has slipped back towards 4.25%.
- Two more semi names followed in the footsteps of competitors and raised near-term earnings forecasts. Pn its mid-quarter update yesterday after the close, Texas Instruments raised both top- and bottom-line guidance over levels offered back in late July, citing improving chip demand in China and India. Dutch semi name ASML raised its Q3 and Q4 revenue targets on higher orders. Shares of both companies are up in the low single digits. Skyworks Solutions increased its Q4 guidance on higher guidance.
- More pre-earnings guidance was seen out of a broad spectrum of companies. Monsanto offered an initial look at its FY10, guiding well below expectations for the coming year, citing lower expected sales of glyphosate-based herbicides. Monsanto also reaffirmed its 2009 guidance for at least the sixth time. Procter & Gamble adjusted its FY10 outlook, trimming its EPS and revenue ranges slightly. Natural gas name Williams Companies slightly raised the end of its 2010 view.
- Vehicle manufacturer Navistar missed earnings and revenue estimates in its Q3 report, and said margins fell by nearly one third. The company also slashed its 2009 guidance. Men's Warehouse crushed earnings estimates and came in ahead on revenue as well, although its outlook for next quarter was tepid. In other equity news, German Chancellor Merkel confirmed rumors that circulated in the European session that GM's board supports Magna's bid for OPEL. Also note that Fortress Investment Group is up nearly 20% on a pre-market upgrade at Barclays.
- In currencies, early in the New York session the greenback encountered some initial selling pressure and pushed out to fresh 2009 lows against the euro and Swiss Franc pairs and seven-month lows against the yen in choppy and erratic trading. The US posted a wider than expected trade deficit in July prompted by an uptick in imports, which helped sooth some of the risk aversion raised by Chinese PM Wen's warnings that the impact from stimulus programs was waning.
- The BoE left its key interest rate unchanged at 0.5% (as expected) and maintained its asset purchase facility at £175B. Sterling moved higher after the decision, on chatter that the central bank might also cut its deposit rate to negative territory (like Sweden did back in July), but the move never materialized. GBP/USD moved from 1.6520 to test above 1.66 in the aftermath of the rate decision. The BoC also left its key rate unchanged at 0.25% (as expected) and reiterated that it would maintain a steady monetary policy through mid-2010 period.
- The dollar staged a moderate comeback just as US equity markets opened, which prompted the usual Swiss National Bank (SNB) rumors. USD/CHF moved from its historical pivot point of 1.0350 area to test above the 1.0460 in a flash while EUR/USD slumped from 1.4600 to test 1.4505. In the end, dealer surmised that the catalyst for the central bank rumors was a Far Eastern name selling around €500. Note also that the ECB's Weber said Germany may need 20 years to return to 2008 debt-to-GDP levels, noting it was unclear if German's 2009 budget deficit was over the 3% Maastricht limit.
More Headlines
6:44:46 AM
USD 3 Month Libor fixes at 0.30% v 0.30% prior
- Overnight USD: 0.22% v0.22% prior
- Overnight GBP: 0.50% v 0.50% prior
- 3M GBP: 0.63% v 0.64% prior
- 3M EUR: 0.74% v 0.75% prior
- 3M JPY: 0.37% v 0.37% prior
8:30:02 AM
*(US) INITIAL JOBLESS CLAIMS: 550K V 560KE; CONTINUING CLAIMS: 6.088M V 6.200ME
- Prior jobless claims revised from 570K to 576K
- Prior Continuing Claims revised from 6.234M to 6.247M
8:30:03 AM
*(US) JULY TRADE BALANCE: -$32B V -$27.3BE
- Prior revised from -$27.0B to -$27.5B
Components:
- Imports M/M $159.6B v $152.4B prior
- Exports M/M: $127.6 v $124.8B prior
- China: -$20.4B v -$18.43B prior
- Japan: --$3.9B v $3.7B prior
- Canada: -$2.2B v -$1.5B prior
- OPEC: -$6.9B v -$5.86B prior
- Mexico: -$2.9B v -$3.42B prior
- Euro Area: -$9.8B v -$5.4B prior
8:30:13 AM
*(CA) CANADA JULY INTL MERCHANDISE TRADE BALANCE: -C$1.4B V C$100ME (4th straight deficit)
- Prior revised from -C$100M to C$0.0 (flat)
Components
- Exports C$30.3B v C$29.3B prior
- Imports: C$31.7B v C$29.3B prior
- Trade Balance with US: C$1.9B v C$3.1B prior
- Trade Balance non-US: -3.4BC$ v -C$3.2B prior
8:31 AM
(EU) ECB's Weber:
Germany could require 20 years to return to 2008 debt to GDP level
Not clear if German 2009 budget deficit is over 3%
7:00am BoE Rate Decision
8:30am July Trade Balance (last -$27B), Initial Jobless Claims (last 570K), Continuing Claims (last 6.234M)
9:00am BoC Rate Decision
10:30am DoENatural Gas Inventories
11:00am DoE Crude Oil/Gasoline/Distillate Inventories
1:00pm Treasury's 30-yr bond auction
Todays Headlines
8:00:18 AM
(US) Fed's Evans: Reiterates too soon to begin removing accomodation, central banks must be ready for unpopular policy moves when they are required
- It is crucial that the Fed's policy independence not be compromised
- The output gap remains large but deflation has been prevented thanks to stimulative policy
- Neither substantial deflation nor inflation are very likely.
- FOMC members have different opinions on the causes of inflation
- The sorts of rapid increases in bank lending that could trigger inflation are absent.
- Debt monetization fears could spark inflation
- Large debt levels could compromise Fed's independence
8:15 AM
*(CA) CANADA AUG HOUSING STARTS:
150.4K V 139.5KE- +12.1% m/m
8:29:08 AM
(US) Fed's Evans: Watching inflation for signal that rates must rise, recovery has begun in the US, expects unemployment to rise over 10% - Q&A
- Unemployment will continue rising for six months
- Evans states the Fed will be more aggressive with tightening relative to 2004 period. (echoing other members plans)
-However, exit is "some time down the road"
- Confident the Fed will pursue its dual mandate.
- Would like to see inflation around 2%
9:01 AM
(US) Former Fed Chairman Greenspan:
Rising gold prices is strictly a "monetary phenomenon," gold "still reigns" as a payment source
10:48:53 AM
(US) Senate Defense Appropriations panel: Rejects funding for secondary/backup F-35 engines; Does not provide funding for Pres helicopter program
- Adds $2.5B of funding for additional 10 Boeing C-17's.
- Reminder: On Aug 31 -US Defense Sec Gates: Funding for new presidential helicopter will be vetoed by the President; calls program a 'poster child' for defense spending gone wrong.
- Note: On 7/30 US House passed defense appropriations bill that retained funding for presidential helicopter and GE engine.
1:01:37 PM
*TREASURY'S $20B 10-YEAR NOTE REOPENING BID-TO-COVER RATIO: 2.77 V 3.28 PRIOR AND 2.59 OVER THE LAST 5 REOPENINGS
- indirect bidders take 55.3% of competitive bids
- notes draw 3.51% with 78.4% alloted at high
- Median 3.45%, Low 3.34%
1:55:25 PM
(US) Fed's Fisher: Lack of pricing power keeping inflation lower; Fed should not buy more treasuries
- Comments that deflation is biggest risk to price stability; financial headwinds will take some time to subside; markets are still a long distance from normality
- Fed will be vigilant on potential for inflation due to balance sheet growth
- economic recovery may be shaped in the form of a 'check mark'
2:49:26 PM
(US) Fed's Fisher: Expects positive economic growth (+2% or more) in Q3 and Q4 of 2009, but warns that 2010 remains unclear on growth
- Refrains from commenting on the USD, noting only that it "comes and goes"
- Does not expect a "dramatic jump" in consumption.
- Fed needs to be able to "look around the corner," act in advance on policy.
- strength of recovery depends on exports
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
- US equity indices are making modest gains this morning in the absence of any significant economic data, while the dollar continues to test new lows on the year. The weak dollar continues to aid oil: front-month crude traded off a bit in the European session, but is back above $72 as it become clear OPEC will leave output levels unchanged later today in their schedule meeting in Vienna, while. Gold is hesitating around $1,000, after former Fed Chairman Greenspan commented that the rising trend in gold prices were strictly a "monetary phenomenon." Greenspan also added that it could take until the end of 2009 before inventories were fully exhausted and expected a "fairly pronounced" recovery in US and globally thereafter. Treasury prices are lower with more pronounced selling seen at the long end of the curve ahead of this afternoon's 10-year reopening. The US benchmark spread has widened out back above 250 basis points.
- Fast food giant McDonalds reported is smallest monthly same-store sales gain since back in March. August comps were up a mere 2.2% (half the expected amount), and only up 1.7% in the US. Shares of MCD are down 2% in the early going, with fellow fast-food name YUM down as much as 3%, while WEN and BKC are in the red. A raft of debt and stock offerings hit markets and are moving names this morning. Barrick Gold increased its big share secondary to $4B from its initial $3.45B proposal, and also said it would take a $5.6B charge to Q3 earning to liquidate gold hedges (in the face of the relentless rise in gold). Shares of ABX were down 4% on the news. AEE, CREE and PAA are all down slightly on share secondaries. Candela is up 35% after announcing it would merge with Syneron Medical in an all-stock deal; ELOS is down 10%. VIVUS is up 70% after two Phase III studies in Qnexa met all primary endpoints.
- Vacation has ended and the lead-up to third-quarter earnings season has begun as companies attempt to manage investor expectations on earnings and revenue performance. Conglomerate Textron reaffirmed its full-year forecast (TXT+3%). Semi manufacturers Microchip Tech and Diodes echoed moves by many other chip makers and modestly raised guidance for the current quarter (MCHP+2%, DIOD flat). Radio hardware manufacturing name Endwave warned that its Q3 revenue would be very sharply lower and would miss estimates by very large margins on weak demand and supply chain issues (ENWV-8%). ISTA Pharma raised its 2009 revenue outlook following FDA approval of its Bepreve drug (ISTA+10%). NuStar Energy slashed its Q3 earnings outlook on falling profit margins (NU flat). Health Care REIT trimmed its 2009 FFO guidance while Sun Healthcare cut its full-year outlook on expectations of lower Medicare reimbursement rates (HCN+1%, SUNH+4%).
- In currencies, the greenback continued its soft tone, testing fresh 2009 lows against EUR and CHF pairs and seven-month lows against the JPY. There has been continued dealer chatter that the dollar has become the new funding currency, while lingering chatter of reserve diversification weighed on the dollar sentiment. In early New York trading euro strength was attributed to Middle Eastern names purchasing for possible reserve diversification purposes. EUR/USD fell just shy of the 1.4600 level, which was the measured move target of the break above the 1.3460 level back in May. USD/JPY tested below summer lows of 91.70 despite dealer chatter of good dollar bids ahead of the level (rumored to be Japan's Kampo). CAD managed to shake off its soft tone in early European morning and managed to end the NY morning little changed from its Asian opening levels of 1.0780.
More Headlines
8:00:18 AM
(US) Fed's Evans: Reiterates too soon to begin removing accomodation, central banks must be ready for unpopular policy moves when they are required
- It is crucial that the Fed's policy independence not be compromised
- The output gap remains large but deflation has been prevented thanks to stimulative policy
- Neither substantial deflation nor inflation are very likely.
- FOMC members have different opinions on the causes of inflation
- The sorts of rapid increases in bank lending that could trigger inflation are absent.
- Debt monetization fears could spark inflation
- Large debt levels could compromise Fed's independence
8:15 AM
*(CA) CANADA AUG HOUSING STARTS:
150.4K V 139.5KE- +12.1% m/m
8:29:08 AM
(US) Fed's Evans: Watching inflation for signal that rates must rise, recovery has begun in the US, expects unemployment to rise over 10% - Q&A
- Unemployment will continue rising for six months
- Evans states the Fed will be more aggressive with tightening relative to 2004 period. (echoing other members plans)
-However, exit is "some time down the road"
- Confident the Fed will pursue its dual mandate.
- Would like to see inflation around 2%
9:01 AM
(US) Former Fed Chairman Greenspan:
Rising gold prices is strictly a "monetary phenomenon," gold "still reigns" as a payment source
10:48:53 AM
(US) Senate Defense Appropriations panel: Rejects funding for secondary/backup F-35 engines; Does not provide funding for Pres helicopter program
- Adds $2.5B of funding for additional 10 Boeing C-17's.
- Reminder: On Aug 31 -US Defense Sec Gates: Funding for new presidential helicopter will be vetoed by the President; calls program a 'poster child' for defense spending gone wrong.
- Note: On 7/30 US House passed defense appropriations bill that retained funding for presidential helicopter and GE engine.
10:00am TAF results
1:00pm Treasury's 10-yr note auction
2:00pm Fed's Beige Book
4:30pm API Crude Oil/Gasoline/Distillate Inventories
Todays Headlines
8:30 AM
*(CA) CANADA JULY BUILDING PERMITS
- M/M: -11.4% V 0.4%E
- Prior MoM revised from 1.0% to 1.2%
8:35:58 AM
Greenlight Capital's Einhorn: Damages related to court ruling regarding the ratings agencies "could run into the billions" - CNBC
- Notes that he has been short Moody's "for a long time"
- Reminder: Back on 9/4, Einhorn said the recent federal district court ruling on free speech was a "game changing decision" for Moody's and S&P.
***Note that on 9/2, a Manhattan federal district court judge ruled that First Amendment protections do not apply when a rating agency has disseminated their ratings to a select group of investors rather than to the public at large. This is despite the well established legal principle that the First Amendment protects credit-rating agencies in many cases.
8:52:27 AM
(GE) German Fin Min Steinbrueck:2010 Federal net borrowing around €100B
- Sees 2009 GDP contracting in range of 5-6% v official German target is -6%
- Earlier in session: German Chancellor Merkel: German GDP may decline by 5.5% in 2009
** Note: Back on Aug 10th; Fin Min noted that 2010 Gross borrowing expected at €330B
***Germany to sell €329B in bonds in 2010
10:00 AM
*(UK) AUG NIESR GDP ESTIMATE: 0.2% V -0.3%
- PRIOR; first positive MoM reading since May 2008
- Prior revised from -0.4% to -0.3%
11:04:00 AM
NY Fed: Purchased $4.95B in $300B outright coupons purchase; Dealers submitted $14.48B for consideration (bid to cover 2.93 )
- Heaviest purchase was $1.86B in the 05/15/16 maturity (shortest dated)
- Note: Avg bid to cover for prior four auctions is 4.03
1:01:40 PM
*TREASURY'S $38B 3-YEAR NOTE AUCTION BID-TO-COVER RATIO: 3.02 V 2.89 PRIOR AND 2.58 AVG OVER THE LAST 10 AUCTIONS
- indirect bidders take 54.2% of competitive bids
- notes draw 1.487% with 54.6% allotted at high
- Median 1.43%; Low 1.35%
3:00:05 PM
*JULY CONSUMER CREDIT: -$21.6B V -$4.0BE
- prior revised from -$10.3B to -$15.5B
- annual growth rate -10.37% v -7.4% (revised) m/m
- sixth straight month of decline
- note: -$21.6B is another record drop after the record drop of -$17.3B in April.
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.
- Traders returned to their desks this morning to find various asset classes breaking out of their August ranges, led by gold, which remains above the $1,000/oz level and has its sights set on the March 17, 2008 all-time high of $1,032/oz. Skyrocketing spot gold has pumped up the euro, helping EUR/USD break out of its August range to a new high on the year. US equity indices were also in the black, headed up as more normal volume levels return. Treasury yields are little changed from where they ended last week with the 10-year at 3.45%.
- Front-month NYMEX crude is back over $70 this morning as OPEC member prepare for their September conference in Vienna tomorrow. Indications are that the cartel will stress compliance instead of supply reduction and had no plans to alter current quotas. During the European session, OPEC President Vasconcelos said compliance with current quota is around 70% and pricing is in a "satisfactory range." Saudi Oil Minister Al-Naimi stated oil stockpiles are a bit too high and claimed Saudi Arabia is complying with OPEC cuts "as best we can," and was quoted as saying "with the price ranging between $68 and $73, what else do you want?" The Kuwaiti Oil Minister said he expects demand for crude to grow in Q1 and Q2 of 2010 and reiterated that OPEC is unlikely to change output quotas in Vienna.
- The healthcare reform debate is lurching toward a decisive turning point this week. Managed care names drifted lower from the open as investors reacted to the latest moves: yesterday news emerged from the Hill that Senate Finance Committee Chairman Max Baucus (D-MT) had finalized his reform proposal (the fifth and final healthcare proposal circulating in Congress). Baucus's plan, which some are calling last best hope for a bipartisan bill, would make up for healthcare funding shortfalls by taxing health insurance companies. AET, CI, UNH and WLP were down as much as 4% in the first hour of trading, before improving somewhat on takeover chatter in the sector.
- In other equity news, Cadbury's US ADRs are up nearly 40% after Kraft offered to acquire the UK firm for £10.2B. Cadbury's board rejected the offer, noting that it is confident in Cadbury's standalone strategy and growth prospects. Shares of Kraft are down 5%. Smithfield opened down 4% after another substantial quarterly loss, but then popped into positive territory in the first hour of trade.
- In currencies, the greenback maintained its soft tone but has come off its worst level in the New York session against the major pairs and commodity-related currencies as spot gold remained strong. EUR/USD moved above the alleged option barrier at 1.4450 to test 1.4500 just ahead of the NYMEX crude pit open. The dollar is just off its worst levels for the session but thus far there has been little evidence of any profit taking offers just yet. Dealers are citing solid funding demand and macro account interest as support for EUR/USD on the dips. Rumors that the Swiss Central Bank (SNB) was "checking rates" provided the dollar with a bit more momentum.
- In other currency news, Canadian building permit values fell more than the consensus in July, although USD/CAD was hovering around the 1.07 handle. The UK Aug GDP estimate registered a positive 0.2% reading, first positive MoM reading since May 2008. With USD weakness so broad-based, there has been plenty of dealer chatter circulating that the USD is becoming a carry trade financing currency, adding a new dimension to trading and a better explanation for why the USD falls on so-called "good news." One currency dealer backs up this argument noting that the USD LIBOR rates having fallen below EUR/JPY interest rates.
More Headlines
8:30 AM
*(CA) CANADA JULY BUILDING PERMITS
- M/M: -11.4% V 0.4%E
- Prior MoM revised from 1.0% to 1.2%
8:35:58 AM
Greenlight Capital's Einhorn: Damages related to court ruling regarding the ratings agencies "could run into the billions" - CNBC
- Notes that he has been short Moody's "for a long time"
- Reminder: Back on 9/4, Einhorn said the recent federal district court ruling on free speech was a "game changing decision" for Moody's and S&P.
***Note that on 9/2, a Manhattan federal district court judge ruled that First Amendment protections do not apply when a rating agency has disseminated their ratings to a select group of investors rather than to the public at large. This is despite the well established legal principle that the First Amendment protects credit-rating agencies in many cases.
8:52:27 AM
(GE) German Fin Min Steinbrueck:2010 Federal net borrowing around €100B
- Sees 2009 GDP contracting in range of 5-6% v official German target is -6%
- Earlier in session: German Chancellor Merkel: German GDP may decline by 5.5% in 2009
** Note: Back on Aug 10th; Fin Min noted that 2010 Gross borrowing expected at €330B
***Germany to sell €329B in bonds in 2010
10:00 AM
*(UK) AUG NIESR GDP ESTIMATE: 0.2% V -0.3%
- PRIOR; first positive MoM reading since May 2008
- Prior revised from -0.4% to -0.3%
8:30am Aug Nonfarm Payrolls (last -247K),
Aug Unemployment Rate (last 9.4%),
Aug Manufacturing Payrolls (last -52K),
Aug Average Hourly Earnings (last m/m 0.2%, y/y 2.5%)
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
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.
