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Trade the News - U.S. Market Update
Dow +205 S&P +20 NASDAQ +25.5
- Indices catch a bid after Warren Buffet reveals details of his offer to insure $800B worth of municipal bonds. He noted his plan has already been rejected by one of major U.S. bond insurers and would do nothing to mitigate CDO exposure, but nevertheless the news did provide some overall relief to equity markets around the world. Interestingly ABK and MBI are hovering near session lows in negative territory on the day. Shares of Monsanto raised guidance again pushing other fertilizer names higher. MON +3.7% POT +5.5% MOS +5% With Indices holding near session highs Treasury prices are substantially lower. The long bond future is down more than a point while the 10-year is off 22 ticks. The benchmark yield has climbed back to 3.70%. Expectations for a 75 basis point cut by April have slipped to 12% in the fed fund futures market. March crude has made new highs at $94.15 after Saudia Aramco CEO said he sees considerable risk that global oil expansion could be significantly compromised without stable policies.
- The USD remained in the lower end of its Jan consolidation range against the European currencies. The USD steadily maintains a softer tone as the US morning session wore on. Various European officials were vocal in stressing that the European situation is different from the US. Most notably the German Fin Min said that he did not see ECB''s Trichet stance shift towards a more neutral stance and that an ECB interest rate cut was not necessary. The comments helped to push the EUR/USD towards the 1.4600 level and sent the March Bund contract below the 117 handle. However, European officials added that although the baseline scenario remains robust, risks remain on the downside in Euro-Zone. The ''positive'' Jan ZEW survey aided the rhetoric. EUR/USD is maintaining a 1.4480 to 1.4630 trading range, while USD/CHF continues its 1.0950 to 1.1100 holding pattern. The GBP was generally softer following the release of Jan CPI and RPI data. The headline numbers were below expectations, but dealers noted the YoY RPI-X helped to offset the headline euphoria. GBP/USD is at 1.9600, and EUR/GBP at 0.7440. Risk aversion theme remained prevalent throughout the European morning as the iTraxx Crossover opened at elevated levels of 570+bps as European insurance names were thrown as potential candidates of CDO related writedowns. Russian Central Banker says more FED rate cuts could threaten global financial system by prompting huge financial flows. However, comments from US Investor Warren Buffet during an CNBC interview about his offer to Muni bond insurers helped to sooth credit market jitters and propel equities towards session highs. Carry related currencies were weaker on the higher equity markets. EUR/JPY up 125 pips to 156.20, GBP/JPY at 209.40 (up 100 pips) and USD/JPY firmer by 50 pips to 107. 50
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