Friday, October 2, 2009

GLOBAL OUTLOOK Friday Oct 2: Markets Down Ahead of Pre-NFP Caution

Stocks: Thursday y: Asia, Europe, US down, Friday morning Asia near close down, Europe down mid-day

- FX: Equities lower clear bias to safety currencies [JPY, USD, CHF in order of safety appeal] vs. risk currencies [AUD, NZD, CAD, EUR, GBP in order of risk appetite appeal], USD up against all majors Friday except JPY, overall

- Main events today: GPB: Nationwide HPI, USD: Non Farms Employment Change, Unemployment Rate, Average Hourly Earnings [Sat: All: G7 Meetings, USD: Geithner Speaks

- Big Theme: Risk assets and fx down against safer ones. News will be climaxing in Friday's US jobs data, Leading indicators thus far suggest result below expectations. Stocks, Gold, Oil still in extended rallies. Gold long futures at 12 mo. High INITIAL NFP INDICATORS NEGATIVE – SEE NFP SPECIAL REPORT LAST PART


US: Down as traders turn cautious ahead of NFP, poor economic data Thursday

Asia & Europe: Down as traders turn cautions ahead of US NFP and related unemployment, poor US economic data Thursday

EUROPE - DOWN FTSE -0.06 % DAX +0.58% CAC -0.17 %

US- DOWN S&P -2.53% DOW -2.09% NASDAQ -3.06%

FRI. MORNING N225I -2.47% HS -2.77 % SSEC +0.90% FTSTI -1.99%

AORD -2.04% FTSE -0.80 % DAX -0.67% CAC –1.33 %

COMMODITIES: Down as stocks fall

Oil: Oil prices slid below $70 a barrel Friday as signs of a sluggish U.S. economic recovery discouraged stock and crude investors. At $70 a barrel, investors have priced in a fairly sharp economic recovery," said Victor Shum, an energy analyst with consultancy Purvin & Gertz in Singapore. "That makes it vulnerable to bad economic news."

Gold : Down with stocks

CURRENCIES: clear bias to safety currencies over risk currencies,

USD: USD up against all except JPY, firmer on expected verbal G7 support, most expect NFP to beat expectations despite disappointing ADP figure since ADP has been underestimating employment over prior months. Other data was mixed.

EUR- Down against safer currencies, especially the USD, up against higher yielding, commodity currencies. Hurt by lower German retail sales data

JPY - up against all majors

GBP – Down against EUR, up against higher yielding, commodity currencies

AUD – Down following stocks against the USD and other lower yielders

NZD – Down following stocks against USD. Other lower yielders

CAD – Tracking oil first, stocks and risk appetite second, down against most majors.

CHF – up against most majors

CONCLUSIONS Potentially an unusually volatile week full of news and climaxing in US Non Farms Payrolls and Unemployment Rate Reports. With so many trends extended, safest bet appears to be range trading at strong multi-month support or resistance once a bounce begins. See Crude oil for Tuesday as an example as it begins to bounce. Keep close watch on stocks, especially the S&P 500 for direction of other risk assets. Long gold futures are at 12 month highs among traders small and large, short gold futures are at a 12 month high for commercial traders. This implies extreme risk appetite/bullish sentiment, which is considered bearish. See report: What Pro Traders Think of Gold: COT Report of Sept. 22, also, How to Trade The World's Biggest Trading Day of the Month

Trading Opportunities: 1. be prepared to play a pullback in risk assets and get ready to sell stock indexes, commodities, and risk currencies, buying USD, JPY. 2. Trade the near term horizontal trading ranges that should hold until major news causes a change in risk appetite. 3. Those continuing to take long positions in risk assets should consider tight sell stops, though gold and crude may be approaching new breakouts. Always use sell stop orders. Near term favors higher yielding and commodity currencies, but that could change fast if equities pull back.

Near term favors higher yielding and commodity currencies, but that could change fast if equities pull back.



CIT Swaps Bonds in Effort to Reduce Debt by $5.7 Billion, Avoid Bankruptcy

•Stocks Fall Around World, Copper Drops; Yen Rises Before U.S. Jobs Report

•Unemployment in U.S. Probably Rose, Payrolls Fell, Signaling Slow Recovery

•Banks With 20% Unpaid Loans at 18-Year High as Doubts Over Recovery Deepen

•G-7 Officials May Break With Tradition on Currency as Club's Status Fades

( Just one but really worth the read:


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