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U.S. Market Update
Dow +65 NASDAQ +28 S&P +6
- A firmer US Dollar and respite in the rise in June crude led to better open
for U.S. stock prices. Strong earnings in the
tech sector are lifting the Nasdaq this morning, with chipmaker Broadcom
leading the way. BRCM is up sharply after reporting strong Q1 results and
providing guidance that surpassed analyst estimates. After opening nearly 10%
above yesterday's close, virtualization software maker VMW was trading well in
heavy volume this morning after saying it expected strong revenue growth
throughout the rest of the year. Software giant EMC was performing well after
reporting lower earnings from acquisition charges and a double-digit revenue
gain that beat expectations. Healthcare names were doing well in the face of
more bad news: shares of WLP have made an impressive reversal, climbing into
positive territory after opening down more than 2.5% on lower Q1 earnings and
full-year EPS guidance, and while GSK's earnings were down more than 10% y/y on
increased generic competition in the US shares in the company were shrugging
off the news, trading above yesterday's close. FCX opened up around 5% after
more than doubling its earnings q/q and beating expectations by wide margins,
but fell into negative territory after markets digested its statements that
rising copper prices in the remainder of 2008 would negatively impact its
operating cash flows. BA was seen up about 3% this morning after reporting
earnings up 30% y/y, and reassuring the market that there recently revised 787
delivery schedule remains on track. DAL reported a large Q1 loss due to a $6.1B
one-time charge related to its decline in market cap and the sky- high cost of
fuel; revenue exceeded analysts' expectations. Troubled bond insurer ABK fell nearly
30% this morning after a giant miss on earnings, noting that it had booked
$1.73B in mark-to-market losses in Q1.
- Oil futures attempted to back off following weekly inventory data but nearly
insatiable underlying demand seems to remain. June crude rallied all the way
back towards the unchanged mark and now trades marginally lower at $117.60.
Natty gas has exhibited relative strength throughout the session and remains
near highs at $10.68. Metal futures have given back some ground with a stronger
Greenback as June Gold briefly traded below $900 for the first time in more
than two weeks. Treasuries have seen some selling across the board with yields
rising marginally faster at the long end of the curve. The 30-year yield has
climbed back above 4.50%, while the 10-year offers 3.75%.
- The dollar was exhibiting broad-based strength throughout the New York morning. Verbal intervention near the
1.60 level from various German names provided a pause to the overall trend of
dollar weakness. The German BGA chief noted that the speed of the euro's rise
is of concern and added that the "the air is getting thinner" for
exporters. German Economy Minister Glos added that although German industry is
weathering the strong euro, there are limits in coping with the currency's
strength. ECB members also sought to clarify recent hawkish interest rate
comments during pre-European trading.
- Euro sentiment was also being hit by rumors that the European financial
sector remains vulnerable to losses. Dealers noted of chatter of a
"large" value adjustment at a European bank. Unicredit's German
banking unit stated that it expected â€śsignificantâ€ť writedowns related to the
credit crisis. Unicredit will report earnings on May 8, but its parent company
stated it expects a profit of around â‚¬1B. Profit taking on the recent lofty
levels was seen in the EUR/USD pair after Belgium's April Business Confidence Index
registered its lowest reading since Aug 2005 with a -7.9 against a 0. 5e. This
is seen as a precursor to the German IFO Business Climate sentiment, which is
scheduled for release on April 24th.
- GBP turned lower in early New York trading as dealers focused on the BBA
loans data for March as it registered its lowest reading ever at 35.4K. GBP/USD
was off 150 pips at 1.9805. In pre-US market GBP was firmer on the back of the
publication of the BoE's April 10th policy minutes. The market had been
expecting a unanimous BOE decision when it lowered rates by 25bps to 5.00%.
However, the 6-2-1 split outcome contained concerns about
the potential inflationary effects of lower rates and firming commodities.
- The USD/SEK is off its fresh 16-year lows of 5.8171 following the Riksbank
interest rate decision to keep rates steady. The Norway Central Bank raised its
deposit rates by 25bps to 5.50%, as expected. USD/NOK hold just above the 5.0
- The CAD was softer following the release of its February retail sales data.
USD/CAD is holding above the 1.02 level, but continues to consolidate in the
1.00-1.03 range for 2008. Canadian Finance Minister Flaherty noted that the BoC
has room to cut rates further after lowering rates by 50bps yesterday to 3.00%.
He also noted that the G7 did not discuss intervention on USD at its April 11th
summit meeting. Spot Gold was softer in the session and currently testing its
100-day moving average at 898.35.
- - In European fixed-income futures, the June Bund was higher by 15 ticks at
113.91, while June Gilts were up 14 ticks at 108.46. June Bunds largely
benefited from sell-offs in equity markets, which prompted some risk aversion
from the vague rumors of losses at European financial institutions.
- European equities were moving back towards their best levels after Unicredit
commented on credit markets, noting that it would likely see a first-quarter
trading loss of â‚¬675M coupled with a ABS portfolio writedown of â‚¬650M. However,
this amount was much below the rumors circulating at the bank's German unit.
The CEO of Unicredit added that he saw consolidated profit of â‚¬1B when the bank
reports earnings on May 8th. Euro Stoxx 50 +0.6% at 3,760; FTSE 10 Index +0. 4%
at 4,941; CAC 40 +1.5% at 4,942 and DAX +1% at 6,798.
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