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Trade the News - U.S. Market Update
Dow -54 S&P -5 NASDAQ -1
- U.S. equity markets opened for trade with a decidedly cautious tone. Noticeably higher November CPI readings piggybacked yesterday's hotter PPI figures. Headline CPI was reported at the highest level in more than 2-years. U.S. yields moved higher and equity futures dropped on the news. The 10-year note future is lower by half a point yielding 4.24%. The 2-year yield has climbed back to 3.30%. The Feb fed fund future has seen the odds of a 25bp cut at the Jan meeting slip back towards 85% from 100%. In early trade all 30 of the Dow components traded lower. Shares of Citigroup were pressuring some of the other financials after a Moody's downgrade which followed news the Co. would be bringing more than $45B worth of SIVs onto their balance sheet. A mid-morning Citigroup debt upgrade by Goldman Sachs has provided a boost helping equity markets pare some losses. BDK is down 7% after the company lowered guidance putting pressure on some of the other tool stocks. Goldman cut their outlook on the European mining sector before the opening which in turn has pressured the stocks. BHP -4.3% RTP -4.5% RIO -2% Solar stocks are one bright spot after Pacific Crest initiations and a polysilicon supply agreement announcement by ESLR. ESLR +12% JASO +12% SCUN +13% FSLR +1% Front month crude has spent the session lower by nearly 1% after a Petrologistics report indicated they see OPEC pumping 500K more BPD in December than November. Feb gold is also down 1% as the Greenback firms following the inflation data.
- The USD again exhibited broad base strength during the session as it made fresh 6 weeks highs against the EUR, CHF and CAD currency pairs. Dealers noted that some technical momentum is now contributing to the USD gains as continued buying that that began with Thursday's better-than-expected US retails sales data and higher PPI. Dealers note that thinning market conditions in the inter-bank as year-end approaches also contributing to the USD's positive tone. Despite the usual hawkish ECB rhetoric, the market seems to focus on comments from the German Dep Fin Min that he is not unconcerned about elevated Euro FX rate. This helped to push the Euro below the 1.4590 area. In technical talk FX chartists took notice of potential Head and Shoulder Chart pattern underway in EUR/USD with a break below the 1.4520 level and cite that a theoretical measured move could take the pair towards the 1.4050 area. The GBP/USD drops 200+pips to retest its 20 month uptrend line as BOE member Barker noted that a Weaker GBP would be good for manufacturing sector. Barker also said that the economy is not returning to high inflation conditions. JPY was firmer on European crosses but softer against the USD. USD/JPY approaching the 30 week moving average at 113.31. CAD was soft as oil and gold traded lower in the session. OPEC maintained their 2008 world oil demand growth steady at 1.3M BPD, but noted its December Outlook "Worsened" Particularly in US. Overnight the FT reported that the probability of any Coordinated Central Bank Currency intervention remained remote, the odds are higher than a year ago. European fixed income futures retained their heavy tone aided by hawkish ECB talks and fueled by firmer both EU German CPI data for Nov. ECB's Leibscher stated that one must be careful not to inject too much liquidity, and added that he sees risk of a wage-price spiral.
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