Opening Comments
Asian equities were mixed this morning. While the Hang Seng gained 0.05% to continue its upward climb, the Nikkei fell by 0.33% on weaker than expected Q3 Capital Spending data. Shares of exporters were down as the JPY rose 0.75% against the dollar and .5% against EUR. BOJ Governor Fukui cautioned against holding down interest rates and the effect it could have on Japan’s growth, but market expectations for a rate hike were unchanged. JGBs shed 2bps to yield 1.436%.
European Equity Indices are all marginally lower this morning as short rates in the U.K. continue higher with 1 month Sterling Libor at its highest level since 1998 at 6.72%. Thursday’s MPC meeting results are still up in the air with some notion the bank will cut the bank rate from 5.75 to 5.5% with the BOE worried about the U.K. (in addition to the U.S.) housing market, skyrocketing Oil prices against tightening credit markets. EUR/USD is higher this morning but remains well below recent highs with Gold still under pressure from Central Bank sales (ECB announced it sold 42 metric GOLD, completing the sale at the end of last month).
Crude oil continued to sell off this morning and is trading under $88/barrel at present. Expectations of falling demand in the U.S. are weighing in on energy markets, making any supply decision at this week’s OPEC summit uncertain. Chavez’ election loss this weekend has also taken some pressure off Oil markets.
Closer to home, Equity Indices are narrowly mixed ahead of the U.S. open despite lower Oil prices in Europe as the notion of a 50bps cuts at next week’s FOMC recedes. Today’s releases include the November ISM Manufacturing Index at 10:00am, expected to be 50.7 after an October reading of 50.9. At 10:30am, Treasury Secretary Paulson will be addressing government to stem the fallout from the subprime crisis. San Francisco FED President Janet Yellen will be speaking in Seattle at 3:30pm. Finally, November Motor Vehicle Sales will be reported throughout the day and all numbers will be in by 4:00pm.