Forex Blog - US Market Update Dow -89 S&P -13 NASDAQ -34
US Market Update
Dow -89 S&P -13 NASDAQ -34
Rising crude prices and dollar weakness is putting pressure on equity
trading this morning, with all three major US indices making fresh
lows. OPEC meets in Algeria on Wednesday, and the organization's big
players have been on the wires all weekend talking up crude. OPEC
Secretary General El-Badri noted there is â€śno doubtâ€ť about oversupply
in oil markets, demanding a â€śsizableâ€ť output cut. OPEC President Khelil
said he believed non-OPEC producers would cut output by 300-500K
bbl/per day; remember that Russia has repeatedly emphasized that it is
attending the conference. For its part, Lukoil said it expects Russia
to cut output by up to 300K BPD.
- Going into the
weekend, the White House had made some noises indicating that President
Bush could make a final decision in regards to a Treasury-funded
bailout of the Big Three in the short term. No announcements have been
forthcoming, with Bush noting he's "not quite ready" to announce a
decision on auto bailout while also confirming that using TARP funds is
still a possibility. According to this morning's Wall Street Journal,
the administration is trying to determine how much money it will take
to help the automakers, with a total figure somewhere between $10-40B
or eveb more. The WSJ article noted that the administration spent the
weekend poring over the automakers' books to assess their financial
needs. On Sunday, a senior administration official said "the one thing
that concerns us is a disorderly bankruptcy and every other option is
open." The UK is expected to launch its own limited financial
assistance package for the auto industry later today, including loan
guarantees for domestic units doing business in the UK. France also
announced that it would be spending up to â‚¬1.0B to aid it auto
manufacturers. Ford and GM were both up about 5% in mid-morning trading
Weekend news from Hexion and General Growth Properties showed the
credit crisis bull is still very much loose in the china shop. Late on
Sunday evening Huntsman terminated its bid for Hexion and settled with
the firm and Apollo for $1.0B, as the credit crisis finishes off one
more gargantuan merger deal. Huntsman has filed a suit against Credit
Suisse and Deutsche Bank claiming they conspired with Apollo to
interfere with Huntsman's prior merger agreement with Basell, as well
as with the later deal with Hexion. A jury trial on those claims
currently is set to begin on May 11, 2009. General Growth Properties is
still holding talks with its lenders regarding debt extensions, but
Citigroup seems disinclined to really work things out with the real
estate firm. The Journal reported overnight that GGP has once again
found its efforts to win an extension on its $900M loan stymied by
Citigroup. Two weeks ago, Citigroup prevented GGP's bid for a long-term
extension by demanding changes to terms on an unrelated $2.6B credit
line and term loan.
- Stock trading is generally mixed
with some sectors like energy and mining benefiting from higher
commodity prices, while others like technology and financials continue
to struggle under the dismal economic environment. OIH +3.5% XAU +5.5%
SMH -4% MGM Mirage signed a deal to sell its Treasure Island property
to Phil Ruffin for $775M, noting it expects a substantial gain on the
sale, taking its stock up more than 20% in early trading. Honeywell
reaffirmed its 2008 guidance from back in mid-October and offered a
broad potential range for its 2009 earnings and revenue forecast. Aetna
also reaffirmed its 2008 earnings outlook, last provided back on Oct
29. On the downside, Progressive confirmed that it would not pay an
annual dividend in 2008, while pre-market downgrades for AT&T and
Apple took shares of the two firms down about 4% a piece.
In currency trading, the greenback was weaker throughout the New York
morning thanks to the higher commodity prices. EUR/USD tested the 1.36
level as technical factors fueled a weaker USD against the majors, with
GBP/USD testing the 1.53 area while USD/CHF moved toward the 1.1630
area. Euro strength was also seen among numerous non-dollar pairs, with
EUR hitting all-time highs against the SEK, NOK and GBP pairs. The
higher energy and metal prices are also helping the commodity related
pairs, with USD/CAD lower by 150+ pips testing 1.2270 and AUD/USD above
the 0.67 level.
- US Treasury prices are inching
higher once again but the curve has seen bit of flattening. The long
bond yield remains pinned just above the 3% level while the 10-year
continues to gravitate towards 2.5%. Market pundits and fed fund
futures contracts continue to point to a 50 basis point cut at
tomorrow's FOMC announcement with a move of 75 basis points still a
real possibility. European yield curves steepened as the day wore on,
with March bunds rising 83 ticks at 122.39 and March gilts up 110 ticks
at 119.38. European equities saw opening gains erode, with indices
probing negative territory ahead of their respective closes. Euro Stoxx
50 -0.35 at 2,412; FTSE 100 Index unchaged at 4,280; CAC 40 Index -0.45
at 3,200 and Dax +0.3% at 4,680.
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