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U.S. Market Update Dow -119 S&P -11.1 NASDAQ -20
- U.S. Indices open 2008 relatively flat but sellers step in after the lowest ISM manufacturing data in more than 4 years. The Dec reading slipped to 47.7, below the all import 50 level that signifies growth. Treasury prices have surged on the news sending the 10-year yield below 4% and the 2-year sub 3%. The Feb fed fund future fully prices in another 25%bp cut later this month, and has seen the odds of a 50bp cut move above 20%. Equity markets are under pressure following this morning's data which showed a higher than expected prices paid component accompanying the headline ISM weakness. Semis have been under pressure from the get go after cautious pre-market comments at BofA. INTC -4.5% SMH -2.5% AMD -3.7% NSM -4% Financials have also moved lower regardless of the lower yields. NCC -4% cut its dividend in half while BSC and MER each trade down another 2.5%. Also adding to the cloud over the group was news from PHH that the $1.8B merger agreement with Blackstone has been terminated because BX -2.5% failed to obtain the required financing. Gold stocks are one bright spot with ABX, AU and NEM all up 3+% helped by the Feb gold future that has climbed to a new all time contract high of $858.60. Front month crude is little more than a $1 from all-time highs trading up 2% at $98.20. The OIH is down from early session highs but has added $1.50 on the session.
- The USD was broadly softer against most of the majors following the release of the Dec ISM manufacturing data. JPY related pairs were softer as JPY was purchased as global equity markets started the year on a negative note. Carry trades were also softer as CDO-related concerns continue to surface. Sanford Bernstein analysts noted that a few US financial firms could see additional write downs. GBP was the weakest of the major currencies as it tested all-time lows against the Euro above 0.74 and probed below its Aug 2007 subprime lows of 219.27. Fixed-income futures were at their best levels on US recession fears and safe-haven buying due to continued geopolitical jitters in Pakistan. March Bunds are up 71 ticks at 113.83. Gilts are firmer by 21 ticks at 110.44. European Equities reversed earlier gains following the US ISM data release. Euro-Stoxx off 1.25% at 4,345, DAX lower by 1.4% to 7956, CAC down 0.8% to 5566 and FTSE down 0.25% at 6,442
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