Morning Call

0 CommentsMonday • March 29, 2010 • by avickery

“No man is wise enough by himself.”

Titus Maccius Plautus

Morning Call
March 29, 2010

Gold Update

Gold had been trending along in a tight range as the Dollar enjoyed some relative strength on the back of European woes in Greece and elsewhere. We knew this couldn’t last because there will little else supporting what was a strong rally for the greenback. Now that the Dollar is losing ground, gold has benefitted with some positive movement. We will not see a major uptrend develop because broad economic sentiment is still weak, but gold should make a slow and steady move higher in the coming weeks.

Hot Stocks

It may be a good time to take a look at the drilling companies. Those in a good position will benefit as production and exploration begins to grow. Noble Energy (NE) is able to command a premium over many of its peers; including in deep water which is where the industry trend is heading. Shares have considerable room to move toward their 52 week high and it shouldn’t be long before we see this level.

Public Finance Update

The U.S. and European governments are moving closer to a consensus on taxing large banks to cover the cost of any future bailouts rather than asking taxpayers to foot the bill. The proposals face opposition from banks, which say it will inhibit lending. Sentiment is divided in the US where the Obama administration is said to favor a post-crisis option, while Congress is moving toward a pre-crisis levy to build a reserve fund ahead of any future need.
A debate continues at the Federal Reserve which is considering ongoing stress tests for the banks and public disclosure of results. Some fear that such disclosure, if the test is negative, could create a self-fulfilling crisis if public view of a bank is negative.
Meanwhile, Brian Sack, head of the markets group at the New York Fed, said the financial system can’t operate well without leverage and signaled that he supports the return of a “properly” structured securitization market. The statement comes as lawmakers in Washington fine tune regulatory overhaul and will need to address the securitization market which some blame for the severity of the global financial crisis.
Locally, The Massachusetts Bay Transportation Authority last week appointed Richard Davey as general manager. In Louisiana, Governor Bobby Jindal has ordered state agencies and departments to halt non-essential spending in as the state faces a strong revenue shortfall in fiscal 2010.

Market Outlook

After another flat finish on Friday, some momentum is building to the upside for the Dow. Futures indicate as much as a half-percent gain at the opening bell this morning. Bank shares look like they will lead the way higher today on the back of some positive economic sentiment in the marketplace. Business and Consumer Confidence in Europe came in higher than expected, concerns over the Greek budget crisis have abated somewhat, and more investors are taking comfort in the slowly improving earnings climate.
Stocks in Europe have also turned higher today, by an average of nearly 0.5% on the indexes. Bank shares are somewhat mixed, but technology and several industrial stocks have pulled up the broader market. Although the Euro-Wide sentiment has been stronger, it really breaks down to individual member nations. Confidence levels in Germany are among the highest, but the view is much more pessimistic in Greece, Portugal, Spain, and Italy. Consumer Inflation Expectations have also ticked higher considerably. Greece will enter the market with 7-year bonds; its first issue since the EU and IMF came to terms on support for the member nation.
Stocks were much more mixed in Asia last night, but positive momentum was building by the end of the trading day. The Nikkei fought its way back to even, while the Hang Seng pulled off a gain of nearly 1%. A wide range of stocks moved higher on strong volume, including bank shares, technology and industrial companies.
Commodities have begun to rally as economic optimism increases. Oil has risen steadily and added nearly 1% in early trading; well above the $80 mark once again. Gold sold lower last night but has begun trending higher once again; gaining $4 to $1110 this morning. A lower Dollar has helped the gold trade today, as the greenback finds itself down against the major currencies.

The economic calendar today includes Personal Income and Consumption Expenditure figures. On the earnings side, we will hear from Apollo Group, Cal-Maine Foods, Universal Power Group, and just a few others.

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Information in the Morning Call will contain “forward looking statements” as defined under Section 27A of the Securities Act of 1933 and Section 21B of the Securities Exchange Act of 1934. All readers are advised to conduct their own independent research into individual stocks before making a purchase decision. In addition, investors are advised that past stock performance or portfolio performance is no guarantee of future price appreciation or performance.

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

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