Opening Commentary
World equity indices are lower this morning with few buying into the notion that the Bernanke/Bush double on Friday will lead to home run for either homeowners or institutions suffering under the subprime debacle. Japanese data included a rout in Capex which fell 4.9% in Q2 versus a 13.6% surge previously. Capex excluding software was down 5.7% versus a 10.3% consensus figure and against 14.2% last outing. These data suggest Japanese Q2 GDP will be revised downward. Add to this the fact that Y-O-Y Labor Cash Earnings and Overtime Earnings both fell; the former off 1.9%, the latter off 0.2%- suggesting a fall in consumer spending. USD/JPY jumped over 116 on the data. JGBs are yielding 1.603%, down 2bps.
German PMI manufacturing came in slight better than expected at 56.2 versus 56.0 consensus and against the July reading of 56.8. The U.K. PMI Manufacturing for August came in better than expected at 56.3 versus 55.7 for July. U.K. August PMI Construction came in at 64.8 versus a 60.4 consensus estimate and against a 61.8 reading in July. The BOE meets Sept. 5 with the market asking for no increase due to subprime woes but, as with the FED, the BOE is likely to stay the course focusing on inflation fighting rather than responding to market volatility.
USD/JPY is pulling back below 116, EUR/USD fell decisively below 1.36 overnight and CABLE could not hold the 2.02 handle falling back to the mid to low 2.01s.
Brent Crude and WTI are trading higher in London although hurricane Felix looks likely to wind down over land in the next 24 to 48 hours leaving Gulf rigs untouched.
Gold and Silver are both tracking higher again this morning with Gold up better than $1.00 at this writing, Silver is up fractionally thus far. The bid to metals is likely to continue on uncertainty in the equity and bond markets and is supported by the rally through a month long downtrend last week.
U.S. Treasuries continue to gain ground with a Bernanke bid firmed up by flight to quality pulses emanating from the corporate and asset backed paper markets.
U.S. Data at 10:00am EST includes AUGUST ISM Manufacturing, expected at 53 versus 53.6 in July; AUGUST ISM Prices Paid are estimated at 63 versus 65 last time. Also at 10:00 am July M-O-M Construction Spending which is expected to come in flat versus a .3% drop in June. Vehicle Sales will be announced throughout the day.