Morning Call

0 CommentsThursday • March 11, 2010 • by alwaters

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“In difficult and hopeless situations the boldest plans are the safest.”

Titus Livy

Morning Call
March 11, 2010

Gold Update

We may see a considerable pullback for gold as several factors are in play against it. The currency market has had some effect as the Dollar continues to make short runs in either direction as traders continually adjust to news in Europe. More importantly, word that China is paring its gold holdings and will not be at the table to pick up gold being sold off by the International Monetary Fund, is adding even more pressure on prices. If gold investors get the jitters, we could see a return close to $1000 again before the dust settles.

Hot Stocks

Once again, we are taking a look at dividend yields as equity prices lumber along. Vector Group (VGR) is a holding company engaged in the manufacture and sale of low-end cigarettes in the United States as well as real estate. Share price is just over $15 and has remained relatively stable. Equally important is the dividend yield of more than 10%.

Public Finance Update

The Senate approved legislation that would extend bond-related and other expiring tax provisions. Market participants are pushing Congress to make permanent two stimulus provisions that give banks more incentive to buy tax-exempt debt.
Wall Street is up in arms over reports that U.S. and European governments are eager to place new curbs on the use of credit-default swaps. While most acknowledge that changes are inevitable, new regulatory efforts will go too far in search of a scapegoat for the financial crisis. Financial derivatives are seen by European officials as dangerous instruments that helped spur Greece’s debt crisis. On Wall Street, however, derivatives are seen as helpful tools that mitigate risk.

Market Outlook

Once again, the Dow finished almost perfectly flat yesterday and, once again, futures indicate a fractional downside at today’s opening bell. It is simply a difficult task to find any movement among equities, as the biggest positive change was in Consumer Discretionary and Energy stocks which gained about a half-percent. Consumer Staples moved lower by a similar amount. Some hesitation can be attributed to the fact that new Jobless Claims numbers are due before the open today. The financial sector moved higher yesterday, but trading is mixed in the pre-market this morning.

In Asia, the major indexes managed gains approaching 1%, with an exception on the Hang Seng in China which finished flat on the session. China’s inflation reached a 16- month high, industrial output was up, and new loans exceeded forecasts, adding concern that the government will have to further pare its stimulus measures. Further tightening and a slowing of growth in China are seen as having a negative effect on the entire global economy.
In a somewhat volatile session, stocks in Europe are slightly lower at mid-session. The technology sector has been relatively strong while the banks are a little more mixed. Metals and industrial stocks are falling on concerns over reduced demand from China. In the country’s second general strike this year to Greece’s unions will shut down hospitals, airports and schools today. The unions are protesting Prime Minister George Papandreou’s latest round of budget cuts to reduce Europe’s biggest deficit.
Commodities are mostly lower this morning; also the result of concerns over tightening in China. Despite growing supply, crude oil continues to tick higher; a few cents higher above $82. Selling pressure should begin to build at this level and we could see a quick return to $80 or lower. After a sharp drop yesterday, gold is lower by another $2 at $1106 this morning. The Dollar stopped its slide against the Yen, but is lower today on the Euro and Pound.
In addition to Initial Jobless Claims, today’s data also includes US Trade Balance numbers. Earnings reports will be coming from Aeropostale, Ballard Power Systems, China Sunergy, IMAX, National Semiconductor, Pall Corp., and a few others.

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

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