Need To Know News

US equity futures are narrowly mixed behind modest losses in Asian equity markets and firmer gains in European bourses. Overnight, the BOE cut rates a full point to 2%, the lowest since 1951. Bankruptcy for US auto companies is being floated in Washington as an alternative to a bailout. Heads of the big 3 auto companies will appear before the Senate Banking Cmte at 10am EST. GS Liquidity Hedge fund is down 55% according to the FT.  GS is considering setting up an online banking facility, its first foray into Commercial Banking. Expectations for a continued US equity market continue to fade.

O/N Dollar/Libor fell 36bps to 0.52%. The U.S. bond futures curve is bid this morning with the long end firming up well behind talk of Tsy driving mtg rates down to 4.5% in an effort to kick start the housing market.

The Oil downtrend is intact with Crude breaking down through $45.50 overnight. Metals are near unchanged tho Gold futures are consolidating in the low end of recent ranges w/ hourly resistance at $774.

Today’s data includes Initial Jobless Claims at 8:30am EST; Claims are expected at 550k with Continuing Claims at 4.04mln.

At 9:15am, Atlanta FED President Lockhart speaks at an energy conference in Louisiana. At 10am, October Factory Orders are predicted to fall 4.7%.

At 10am, ‘Big 3′ reps will ask to the US Senate Banking cmte for $34bln in loans to the auto industry. EIA Natural Gas storage change follows at 10:35am.

At 10:45am, Chicago FED President talks in Michigan. Treasury’s Kashkari gives an update on the TARP to the Senate Appropriations Committee at 11am. At 11:15am, FED Chairman Bernanke speaks on housing in Washington.

European equity indices are lower across the board following a weak round of European data overnight which included a much worse than expected 2.1% drop in October Euro-Zone Retail sales. US equity indices are trading lower across the board with all major equity index futures down over 1%.

MBA Mortgage applications for the week ending November 28th surged by 112% following a 1.5% increase last week and a 6.2% drop the week before. November Challenger Job cuts increased a whopping 148.4% year-over-year in November following a 78.9% increase in October. Other US releases today include November ADP Employment change at 8:15e, final Q3 Non-Farm Productivity at 8:30e, the November ISM Non-Manufacturing Index at 10:00e and the Fed’s Beige book at 2:00e.

The US bond market is facing modest selling pressure early on, reflecting similar weakness overseas, with the 10yr just off overnight lows at 122-15. The bond market could potentially see a sharp pickup in interest today, especially with worse than expected US data. The short end of the curve continues to offer abysmally low rate with the 4week bill yield stuck at 0.02% and the 3month yield at 0.05%. Fed Fund have opened below target once again at 0.4375%, reverse overnight repos are anticipated.

USD is trading higher vs. most of the majors, with Cable down over 1% to below the 1.48 handle after peaking out at 1.4922 overnight. HSBC revised its ECB rate forecast to reflect a 75bps from the ECB tomorrow. EUR and GBP are both trading lower vs. most major currencies ahead of tomorrow’s ECB and BoE rate decisions, while EUR/GBP is up 0.5%.

Energies are mixed, with Crude trading 20 cents above the 47 handle after bottoming out at 46.87 overnight. Unleaded is down 0.75% to 105 and Heating Oil is down 0.2% to 158 ahead of DOE petroleum inventories released at 10:35, which are expected to reveal a 1mln build in both Crude and Unleaded inventories.

US equities are headed for a stronger open after yesterday’s sell-off. European markets added 1-2% overnight but Asian markets tumbled over 6%. Dow futures are currently up 1.6%, S&Ps are up 1.7%, and Nasqdaq futures are up 1.7%. The Big 3 automakers today are expected to send plans to Congress that stress downsizing, lower costs, and more environmentally friendly vehicles. November auto sales figures are due today as well.

The 30yr has retraced some of yesterday’s huge gains, made after FED chairman Ben Bernanke said the central bank is considering buying longer-dated Treasuries in nonconventional efforts to boost the slumping US economy. The 10yr is off 8 ticks, but the rest of the curve is in positive territory this morning. The 2yr yield is down to a measly 0.85%. Fed funds are trading 0.50% at 0.75%.

USD is mixed against the majors with EUR/USD and Cable each up 0.3%, USD/JPY up 0.15% and USD/CAD down 0.2%.

In the energy complex, Crude is up about 3 cents at 49.31, still firmly under the $50 mark taken out in yesterday’s sell-off. Other energies are higher as well. Gold is up about $2 at 779.

Johnson Redbook Retail Sales are today’s only economic data and will be released at 8:55am. At 12:00, Treasury Secretary Paulson speaks on US-China relations ahead of his trip to Bejing. Philadelphia FED President Plosser follows at 12:30 with remarks on the economy in New York.

Taking their cues from overseas markets, US equities are pointing to a lower open with Dow futures off 2.3% and S&Ps down more than 2.7%. Nasdaq futures are off 2.5%. Shopping over the Thanksgiving holiday weekend wasn’t as bad as feared, but dropped off sharply after the early Black Friday craze. The NY FED’s Geithner — nominated for TSY secretary last week — has left the FOMC and will be replaced by deputy Christine Cumming at the committee’s next meeting in 2 weeks.

Bonds are at their highs ahead of the NY open, particularly the long bond, currently up 1%. The 10yr has added 0.6% and the 5yr is up 0.35%. On the short end, yields are flat. Fed funds are trading 5/8 at 7/8.

The dollar is faring well against most of the majors with the USD Index up 0.4%. EUR/USD is down 76 pips to 1.2103 and Cable has tanked over 400 pips to 1.4971. USD/CAD is up 73 pips at 1.2472 as Crude’s 5% loss this morning takes a bite out of CAD after OPEC decided to postpone an output decision another 2 weeks. Other energies are lower as well. Gold is off $29 this morning, back under the $800 mark at $790.30.

Today’s data include October Construction Spending, expected to plunge another 1% after a 0.3% drop in September. Also out at 10:00am EST is November ISM Manufacturing, forecast to fall to 37 from 38.9 in October. FED chairman Ben Bernanke speaks on central bank policy in the financial crisis at 1:45pm EST, and TSY secretary Hank Paulson follows at 3:00 with an update on the economy and markets.

US equity indices are lower across the board, following a mixed to lower session in Europe, with low volume expected today ahead of the early close. US equity markets may struggle to post their fifth consecutive winning session today, though lower volume could mean some volatile swings. S&P futures are down 1.25% to 878 after slipping below the 21-Day MA (889) overnight. Today’s economic calendar is nearly blank, save for November NAPM Milwaukee, released at 10:00am EST.

The bond market is catching an early bid with the 30yr leading the charge, up 0.6% to 128-27 knocking its yield down 4bps to 4.43%. The 10yr is up 0.4% with its yield also down 4bps to 3.48%. The short end of the curve is nearly unchanged with the 4week bill yield stuck at 0.01% and the 3month yield at 0.04%. Fed funds opened at 0.75%. Reverse weekend repos are anticipated. European bond markets are also catching a firm bid after Eurozone inflation fell to 2.1% in November from 3.2% in October, the largest drop in nearly 20 years.

USD is well bid, with the USD Index up 0.8% to 86.280. EUR/USD is off 1.15% to 1.2755 after trading as high as 1.2957 overnight. Cable is down 0.9% to 1.5270, USD/JPY is up 0.25% to 95.43 and USD/CHF is up 1.15% to 1.2136.

Energies are lower across the board with Crude off 1.25% to 53.75 and Unleaded down 1.7% to 116. Metals are mixed to lower, with Gold clinging to positive territory at 811.80. Silver is down 1.15% to 10.15 and Copper is down 3.2% to 163.75. Alcoa, the biggest aluminum producer in the US, is not expected to boost its stake in Rio Tinto after the failed hostile takeover attempt from BHP Billiton.

Asian Equity Markets were mixed with Japanese stocks under pressure from a Toyota Downgrade and Chinese Markets bid behind a 108bp rate cut. European Markets are under pressure on worse than expected German CPI, lower than expected U.K. GDP.

EUR sold off against USD and JPY and the Greenback is mostly higher heading into the U.S. session. Gold is slightly lower than y/day NY close and Oil is still trading over the 52 handle despite macro indicators suggesting demand is still under pressure.

There is a flurry of data today 8:30am today. Initial Jobless Claims are expected at 530k with Continuing Claims at 4.05mln. October Durable Goods ex-Transports are forecast to fall 1.4% with the headline number dropping 2.8%. October Core PCE is predicted to decline 0.1% m-o-m with Personal Spending falling 1.1%.

November Chicago PMI comes out at 9:45am and November Final University of Michigan Consumer Confidence follows at 9:55am. At 10am, October New Home Sales are forecast at 445k. At 10:35am, EIA Petroleum Inventories are released. At 10:45am, President-elect Obama is expected to speak. And at noon, EIA Natural Gas storage change comes out.

Treasury Secretary Hank Paulson is expected to pledge between $25-$100bln of TARP money towards a new lending facility to boost the consumer loan market. In M&A news, BHP Billiton pulled its Rio Tinto hostile takeover bid because of the economic crisis and falling commodity prices.

Equities are set for a moderately higher open with Dow futures up 0.4%, S&P futures rising 0.6% and Nasdaq futures gaining 0.1%. Bonds are also higher with the 30yr up 0.4%, the 10yr adding 0.6% and the 2yr increasing 0.1%. 3-month Libor sits at 2.196%.

In Germany, GDP fell 0.5% for the second straight quarter, officially putting the country in a recession. The dollar is higher against most major currencies with EUR/USD down 0.8%, Cable shedding 0.7%, USD/CHF rising 0.8%, USD/CAD gaining 0.9%, but USD/JPY tumbling 1.2%.

In energies, Crude is down 3.4% and Natural Gas has fallen 1.9%. In metals, Gold held support at the 800 level but is still off 1.1% on the session.

At 8:30am today, Preliminary Q3 GDP is expected to fall 0.6%. At 8:55am, Redbook Retail Sales will be released. The September Case-Shiller Index follows at 9am. At 10am, November Consumer Confidence is forecast at 40. Also at 10am, Treasury Secretary Paulson will provide an update on TARP. Richmond FED comes out at 10 as well. At noon, President-elect Obama will speak.

Energies have caught an early bid, with Crude re-taking the $50 handle after trading as low as $48.80 overnight. Unleaded is up 1.8% to 108.36 and Natural Gas is up 3% to 6.675. GS lowered its US Natural Gas forecast by $0.40 to $6.20 BTU, and also lowered its UK Natural Gas forecast to $10.40 from $11.50.

Metals are catching an early bid of USD selling pressure: Gold is up over 3.5% to just below $820, Silver is up 5% to 9.98 and Copper is up over 7% to $169.30.

European and US bond markets are facing selling pressure off the news of the $300bln loan guarantee to Citi plus Barclays shareholder approval to raise over $10.5bln from funds in the Persian Gulf. Bonds should continue to face selling pressure going into the Wall Street open , though losses may be limited given the fragility of the current market environment. Today’s light US economic calendar could also keep focus away from fixed income, though the October Existing Home Sales at 10:00e could provide a subtle reminder of the state of the US economy.

The 10yr is off 16 tics to just below the 120 handle after bouncing off Thursday’s high at 119.70. Short end yields are for all intensive purposes are higher, though the 4week yield at 0.03% and 3month yield at 0.01% continue to see very limited interest. Fed Funds are trading at 0.75%, reverse overnight repos are anticipated. Today’s auction calendar includes $56bln in 3 and 6month bills and $36bln in 2year notes.

Japanese Equity markets were closed overnight but other Asian indexes rallied sharply on the news the U.S. Government would bailout Citigroup.  European equities are rallying in response to the aggressive U.K. bailout including a 45% tax rate on the highest earners and a VAT tax reduction to 15%.  DAX is up despite a sharply lower IFO Business Climate reading, at 85.8, worse than even the most pessimistic forecasts had called for.

President-elect Barack Obama’s weekend address included a request that the current administration sign off on a stimulus package to underpin the U.S. economy.  Obama promised that should Bush decline such a request from Congress, it would be the first order of business for the Obama presidency.

U.S. equity futures are sharply higher at this writing with the Dow up over 100pts, S&P futures up better than 20 handles and the Nasdaq up about 18 handles.