Morning Call

0 CommentsTuesday • March 30, 2010 • by avickery

“Powerful indeed is the empire of habit.”

Publilius Syrus

Morning Call
March 30, 2010

Gold Update

Gold has been trading higher on light volume as the Dollar rally begins to lose steam. Sentiment remains essentially neutral and the technical range in the near term is anywhere from $1080 to about $1130 on the upside. Prices are unlikely to reach either end, but rather stay in a much tighter range as investors are distracted by fluctuations on the Dollar and ambiguity in the equity markets.
On the upside, an industry report recently suggested that China’s gold consumption could double in the next decade if its economy continues to grow at a rapid pace and living standards improve. China is the world’s second-largest consumer of gold after India. With investment demand and jewelry consumption expected to continue growing, China could deplete its domestic supply within six years unless it ramps up investment in exploration. China has downplayed interest in increasing its gold reserves recently, but many believe this is a ploy to wait for a market pullback.

Hot Stocks

Keep an eye on LDK Solar (LDK) this morning. LDK will release its latest earnings numbers today and analysts are expecting a turnaround from losses in the last report. LDK, and most of the solar sector, could surprise this year and have a lot of room to move. Shares are presently trading at only half of their 52 week high.

Public Finance Update

President Obama reportedly will announce two appointments to the Treasury Department during the congressional recess, citing “months of Republican obstruction to administration nominees” as the reason for bypassing the Senate.

Subprime-mortgage securities are rising at an accelerating pace as the U.S. begins to encourage reductions to homeowners’ balances, which may lead to fewer foreclosures and a quicker end to the housing slump.
In California, less than three years after completing a private toll highway in San Diego County, the South Bay Expressway finds itself in bankruptcy court. The group cited low traffic levels and ongoing litigation with its primary construction contractor as contributing to its inability to meet its debt-service demands.
In New York State, the Senate passed emergency spending bills to keep the government functioning as it appears unlikely the state will have a new budget approved in time for the start of the new fiscal year on Thursday. Meanwhile, Governor David Paterson signed appropriations for $4.41 Billion of debt service.

Market Outlook

The Dow jumped early in the trading day, yesterday, and held on to finish the day higher by 45 points. This morning futures are running flat and we may stay in that tight range all day. Every sector is trading relatively mixed in the pre-market as ambiguity in the economic outlook has investors bargain hunting rather than committing any sector.
As has been the case, lately, incoming data has been a mixed bag of good and bad news. On the positive side, Consumer Spending in the U.S. increased in February for a fifth straight month. The South Korean central bank said confidence in the manufacturing sector is at its highest level in at least seven years. European sentiment is at its highest in almost two years.
A sobering reminder, however, came from Federal Reserve Bank of Chicago President Charles Evans, who said the U.S. jobless rate is likely to remain higher than 9% through the end of this year. It is also expect to remain above 7% by the end of 2011. Such a prolonged period of high unemployment will make any economic recovery tenuous, at best.
In Asia last night, stocks rose by an average of about 1%. Financial stocks were somewhat mixed, but several technology and industrial shares more than made up for it. In Japan, the statistics bureau showed the country’s jobless rate held in February at the lowest in about a year. This brought the Nikkei to its highest close since October 2008.
After a strong start in Europe this morning, stocks there have since pared their gains and the major indexes are all near even on the session. A majority of the higher volume trades have been to the downside with the banks and several industrial stocks weighing down the greater averages. In Europe, as elsewhere, the economic news has been mixed. A Bank of England report showed that net lending to consumers in the United Kingdom rose higher than expected in February. A separate report from the central bank, however, showed that British mortgage approvals fell to their lowest level in nine months in February.

Commodities are somewhat mixed this morning, with some weakness in energy and industrial metals. Oil is down by only a few cents; still comfortably above the $82 mark. This is close to the upper end of its expected range so we will watch for any signs of retracement. Gold is running flat as well. Prices have swung higher and lower in a $3 range throughout the morning so we will likely see some tightening during the day.
New economic data today includes the Case Shiller Home Price Index and Consumer Sentiment. On the earnings side, we will hear from Cobalt International Energy, Landec, LDK Solar, Sealy, and a few others.

Today’s economic data focuses on the consumer. Of the entire universe of numbers available to economists, consumer sentiment acts as the trump card. If consumers do not join in on economic growth, the train can’t leave without them.

The assembled information disseminated in the Morning Call is for information purposes only, and is neither a solicitation to buy nor an offer to sell securities. All assembled information within the Morning Call is subject to change without notice. The assembled information within the Morning Call is based on information believed to be reliable as of the date of the report but no representation, expressed or implied, is made as to its accuracy, completeness or correctness.
Forward Looking Statements:
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