Morning Call

0 CommentsThursday • November 5, 2009 • by alwaters

I cannot teach anybody anything; I can only make them think.
Socrates

Morning Call
November 5, 2009

Gold Update

After a two day run that brought gold to new highs once again, we can expect some consolidation. Some buyers will be looking to get in on the dips, and some will be looking to take profits. This dynamic may lead to a day of little movement for gold, but today’s economic news, and the effect it ends up having in the equities arena, could easily reignite the rally for gold.

What to Buy

A little known stock, but one that we have traded in for two years is Fuel Systems Solutions (FSYS). Fuel Systems designs, manufactures and supplies alternative fuel components and systems for use in the transportation, industrial and power generation industries on a global basis. This stock can be volatile at times, but has been on a strong general trend. More than 70% of available shares are held by institutions and has shown stable growth over the long run.

Market Outlook

The Dow barely held on to positive territory after selling off at the end of the day. This morning, futures are pointing slightly higher, but are essentially non-committal ahead of this morning’s jobless claims announcement. As expected the Bank of England and European Central Bank formally announced they would hold interest rates at their present levels. Other measures, however, have shown a slow move toward withdrawing from certain policies. The Bank of England slowed the pace of bond purchases as signs of an economic recovery give policy makers scope to wind down their money-printing program next year. The pound rose as much as 0.7 percent to $1.6617 after the decision. The European Central Bank may signal it’s moving closer to withdrawing emergency stimulus measures. Investors will be listening carefully to President Jean- Claude Trichet, who holds a press conference at 2:30 p.m., for clues on when the ECB will start scaling back lending to banks.

Stocks in Asia slid overnight by an average close to 1%. Many of the bank stocks held up during the day, but the technology and industrial stocks weighed down the broad indexes. Stocks are also slightly lower in Europe this morning, although the story for the banks is much different, with losses of about 3%. Most US banks are slightly higher in pre-market trading.

Trading in commodities is mixed this morning. Oil is lower by a small fraction, but remains above the $80 mark. Gold has leveled off a bit, but has added $3 to $1090 in early trading. We may see a tight trading range for gold after two strong days in a row. The Dollar is, once again, lower against the major currencies this morning.

Besides the Initial Jobless Claims numbers, we will also have Productivity and Costs and Public debt figures. For earnings news, we will hear from BioLase Technology, BNP Paribas, Blackrock Kelso, Boston Beer, Cardinal Health, CBS Corporation, Cigna, CVS Caremark, Denbury Resources, Dr Pepper, King Pharmaceuticals, NVIDIA, Starbucks, Time Warner, and several others.

Some investors are seeing yesterday’s Fed decision, or lack thereof, as a disappointment. There were no substantive changes to the Federal Reserve’s policy statement today after the central bank concluded two days of deliberation. The markets reacted as one might have expected – the dollar went down and just about everything else went up. Gold moved up about $6 an ounce within minutes. So what we have is a “recovery” in asset prices that looks a lot like the last one. The only thing is that asset prices don’t really start to move until they start raising interest rates – that seems to be many, many months away. We have known for some time that the Central Banks faced their biggest challenge yet in withdrawing at the right time – Not too soon and risk stifling recovery, but not too late to lose control of inflation. Investors are beginning to get a little impatient to hear more specific plans, rather than the same carbon copy statements that amount to nothing.

Posted in: Morning Call: Daily Analysis of the Global Markets and Economy

Tagged with: bonds, economy, gold, oil, stocks