Morning Call

0 CommentsWednesday • March 3, 2010 • by alwaters

“You can not teach a crab to walk straight.”

Aristophanes

Morning Call
March 3, 2010

Gold Update

Ongoing budget cuts in Greece and rising optimism that the European Union will step in with some level of aid is putting the breaks on the Dollar’s upward momentum. This should start to feed into the gold trade, although we believe much of it is priced in after a sharp rally last night. There is still some room to move, however, and the long term trend is still relatively strong. Currently, gold is trading at $1135.

Hot Stocks

Canadian Solar (CSIQ) releases earnings just before the bell today. The company has outperformed many its peers in recent quarters and is likely to continue to do so. Net and operating margins have grown and its return on assets is strong. Shares jumped yesterday in anticipation of a positive report today but there is still room to move higher today.

Public Finance Update

In a broad statement yesterday, The Securities and Exchange Commission and the Internal Revenue Service announced yesterday they will work together more closely to monitor and regulate the municipal marketplace.
A survey of economists shows some confidence in a stable municipal market this year despite fiscal woes at the state and local level.
Meanwhile, New York’s projected deficit in the current fiscal year and fiscal 2011 was revised upwards by $850 Million in revenue projections released by the Legislature and governor’s office late last night.
The New York City Housing Authority’s is hoping for tens of millions of dollars in additional annual federal subsidies, as it tries to shore up its financially troubled public housing. The Authority will issue about $500 Million of bonds. Most of that debt, to be issued or reoffered as taxable and tax-exempt bonds by the New York City Housing Development Corporation, is scheduled to begin next week, and will be redeemed in just four years under a complicated financing structure.

Market Outlook

The Dow started the day on an upswing yesterday, but a slow and steady selloff in the afternoon left it flat. This morning, futures indicate that the downward momentum may continue at the opening bell. What little movement there was in stocks included the same energy and consumer stocks that have seen strong volume recently. Consumer Discretionary shares moved slightly lower, while Consumer Staples and the energy sector moved fractionally higher. Bank shares were mostly mixed in the US yesterday and look to be so again today. This will also be a busy day for economic data, which will drive market sentiment in the early hours.
European shares have drifted lower as traders say most of the news has been priced in and ahead of U.S. jobs data, though world stocks drifted higher, on track to gain for the fourth consecutive day and near their five-week high. A government source said Greece’s cabinet decided on Wednesday to take extra austerity measures totaling 4.8 Billion Euros ($6.49 Billion) to ensure it meets key fiscal targets this year. The measures include higher tobacco, alcohol and sales taxes. The government will also cut by 30% three additional salary payments civil servants receive at holiday times, a move union leaders have already warned will spark new protests.
Asian equities were flat to slightly higher during the night. Very selective trading was seen within sectors as is the case in Europe today. The Reserve Bank of Australia raised its overnight cash rate by 25 basis points to 4.0%. RBA Governor Glenn Stevens insists, “Interest rates to most borrowers nonetheless remain lower than average. The Central Bank believes that growth will likely be close to trend and inflation close to target over the coming year. Australia was the first to hike interest rates back in October.
In the commodity market, copper prices pulled back from a six-week high hit on Monday as Chile’s production returned to normal after a massive earthquake over the weekend. Crude and gold prices firmed as dollar has slipped. Oil is up by a small margin; approaching the $80 mark once again. Gold surged in the early hours, only to retrace back close to even at $1135. The Dollar has lost its momentum and is lower against all of the major currencies this morning.
Economic data coming out this morning include Mortgage Applications, the Challenger Job-Cut Announcements, the Non-Manufacturing Index, the Federal Reserve Beige Book, and the EIA Petroleum Status Report. Earnings news will be coming from Alliance Healthcare, American Railcar Industries, BJ’s Wholesale, Canadian Solar, Costco Wholesale, Jazz Pharmaceuticals, Royal Bank of Canada, Progressive, Yamana Gold, and few others.

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

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