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U.S. Market Update
Dow +178 S&P +21.4 NASDAQ +48.8
- U.S. equity markets post strong gains along with overseas bourses. Equity futures were already higher heading into this morning's data. Better than expected ADP employment gains along with higher Q3 nonfarm productivity and lower labor costs have kept the Bears in hibernation. Financials have rallied around comments from AIG's management indicating the Co. will be able to successfully navigate the credit crunch. AIG +5% XLF +1.5% Semis have been rallying from the open after a pre-market upgrade of INTC +3.5%. SMH +3% Technology also received a boost from the disk drive names after WDC raised guidance before the open. WDC +8% STX +6% HTCH +2.5% MCD -1.5% is seeing some selling after it was disclosed Ackman's Pershing Square decreased their stake. U.S. yields have inched higher on the better data and stock prices. The 2-year remains below 3% at 2.93% while the benchmark yield stands at 3.93%. Fed fund futures prices have retreated only slightly and still see roughly 50-50 odds of a 50bp cut next week. Weekly oil inventory data revealed a large draw down in crude inventories, but the front month contract is below were it was trading ahead of the data. OPEC 's decision to leave output levels unchanged has done little thus far to curb the recent trend lower. Jan crude is up close to 1% just above $89. Feb gold has been lower throughout the session on the back of a stronger Greenback.
- The USD is firmer against the major pairs aided by the release of better ADP employment data and strong mortgage applications for w/e Nov 30th. This set up for some optimism regarding Friday's non-farm payroll data. The ADP employment change rose by 189K against expectations for a 50K increase. Currently the market sees Nov NFP adding 70K jobs against a prior release +166K. The EUR/USD is holding above its recent pivot point of 1.4220 ahead of the European equity close. The British Pound was the overall loser in the session as the sentiment for a possible BOE interest rate cuts grows following the soft HBOS House price data for Nov. GBP/USD off over 275 pips and approaching the 2.03 level. EUR/GBP cross hit fresh 4 Â½ year highs above the 0.7230 level. GBP/JPY dropped by 100 pips to probe below the 225 handle. The CAD was initially softer ahead of the US open as it tested the 1.02 level but CAD firmed through the US morning as OIL climbed back towards the $90 per barrel level. Initially, Dealers cited follow-through selling of CAD following Tuesday's surprise BOC interest rate cut. Again the surprise move by the BOC is increasing speculation that the BOE will follow suit at its MPC meeting on Thursday. JPY is softer overall in its tone as global equities are rising. Traders cite the possibility that the UK could nationalize Northern Rock and calm the global credit jitters. Again The credit market concerns remain fixed to the market's pulse as the Libor fixing rates remained elevated and stressed, but the chatter that UK's Northern Rock could be nationalized help calm the overall fear of any prolonged credit crunch.
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