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U.S. Market Update
U.S. Market Update
Dow +95 S&P +10 NASDAQ +34
- Indices are posting some moderate gains after two straight down sessions.
Weekly initial jobless claims helped todays sentiment by falling to 357K after
last weeks spike above 400K. Retailers rose despite soft March same-store
sales, as traders focused in on a surprisingly stonger outlook. WMT COST and
FDO indicated the low end consumer is holding in despite crude at $110. Higher
end markets received to boost when the TIF President indicated he still expects
a rebound in its U.S. business in the second half and will be
following through with expansion plans. Advancers are handily beating declinere
within the goup pushing the RTH up 2% on the day.
- Biotech and pharmaceutical names rose this morning on FDA approval for HITK's
glaucoma generic and encouraging results from TEVA's Copaxone trials.
Millennium Pharmaceuticals agreed to be bought out by Takeda for $25/shr in a
$8.8B deal buyout. GENZ was also up, despite announcing that it had voluntarily
recalled three lots of its thymoglobulin product. BBH +3%, approaching highs
- Financials opened lower this morning on the WSJ article highlighting Lehman
Brother's disclosure it has liquidated three investment funds. The financials
reversed course in late morning trade after Lehman rallied more than $2 from
session lows to move into positive territory.
- AMR canceled another 900 flights this morning, or approx 40% of its daily
total of 2,300 flights, after making only slight progress in getting its 300 MD-80s
flying again. Yesterday after the close the airline said it had so far found no
safety issues with the aircraft, projecting that operations would return to
normal on Saturday.
- Yahoo turned to arch-rival Google for help fending off Microsoft yesterday,
announcing that it would display GOOG ads on its search results in a two- week
trial. MSFT responded by calling the potential alliance anticompetitive.
- As equity markets have run to new highs Treasury prices have retreated
sending yields back above some key levels. The10- year yield has gone back
above 3.50% and two year is above 1.75%.
- Currencies have been hit by a whirlwind of news, data and decisions with
broad implications for increasing FX volatility. Overall, inflation concerns
remained the dominant theme ahead of tomorrow's G7 meeting in Washington, DC.
- The ECB held interest rates steady at 4.00%, as expected. ECB Chief Trichet
maintained his hawkish tone during the post- decision press conference, adding
little new in terms of actual substance. Trichet did note that the ECB
Council's sentiment has remained the same as the March policy meeting, warning
market speculators that any other interpretation was simply false. He also
stated that verbal discipline on FX is â€śof the essenceâ€ť and reiterated that
excessive FX volatility is undesirable. He concluded by indicating that US
authorities believe a strong dollar is in their country's best interest. The
EUR/GBP hits fresh all-time highs at 0.8030 (the ECB implied that the BoE
doesn't welcome FX volatility either). EUR/USD hit fresh all-time highs at
1.5914 ahead of the ECB rate decision before settling back at 1.5820 area after
seeing little change from earlier hawkish central bank speak.
- The GBP recovered from session lows after the BoE lowered the key rate by
25bps, as expected. The bank noted it sees some inflationary concerns in the
coming months, but was confident that the 2.0% target will be met in 2009.
- The JPY was broadly firmer through the trading day after the Singapore Central
Bank applied an â€śupward shiftâ€ť to its currency band in order to fight
inflation. This move was geared to spur the appreciation the Singapore dollar. Other Far Eastern currencies
firmed as well in the aftermath of the central bank action, led by the yen. USD/JPY
probed below the 100 level, EUR/JPY was off almost 200 pips at 159.20 and
GBP/JPY was lower by 160 pips at 199.20. Unwinding of carry-related crosses
also benefiting the JPY as some concerns resurfaced about the finance sector.
Overnight press coverage of LEH and MER provided enough reason to take the
European bourses lower by 1.7% during the US morning. CHF also benefiting from the
risk aversion as it firms over 100 pips in the EUR/CHF cross at 1.5750 level
- USD/CAD maintains its current consolidation range of 1.01 to 1.03 and showed
little momentum to CAD trade data or energy prices in the session.
- There were a few other interest rate surprises as both the Icelandic and
South African central banks raised rates by 50 bps each to combat inflationary
- European fixed-income futures were broadly firmer as elevated energy prices
will impede global economic growth. June Bunds +56 ticks at 115.48 and June
Gilts +47 ticks at 110.31
Euro-Stoxx 50 index -1.1% at 3,732; FTSE -0.8% at 5,934; CAC-40 index -1% at
4,825 and DAX -1% at 6,654
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