February 9, 2010
STOCK INDEX FUTURES
Asian stock markets were higher for the first time in four days, which helped European and North American equity markets to advance.
Much of the overnight gains were linked to a possibly better situation concerning the Greek budget problems. This feeling was enhanced when European Central Bank President Trichet left a central bankers' meeting in Sidney a day earlier than planned. This caused traders to believe that a budget rescue plan for Greece is being worked on and a resolution could be near.
The 9:00 Central Time December wholesale inventories report is expected to show a .5% increase.
Our analysis is telling us that we will see recovery in the economy and that the majority of economic reports and corporate earnings reports will be stronger than the median estimates.
As opposed to what we have seen over the last two and a half weeks, we are starting to see futures beginning to ignore bearish news. This could be a sign that the recent correction is nearing an end.
CURRENCIES
The "safe haven" currencies, the U.S. dollar and the Japanese yen, are lower on ideas that progress is being made in addressing the budget deficit problems in Greece.
Much of the prior strength in the greenback and the yen was due to the feeling that a resolution of the budget situation surrounding Greece will take more time. Some of the pessimism was also linked to news that the Greek civil servants union may join a February 24th strike being planned by the largest private sector union in Greece.
The Australian dollar and the Canadian dollar firmed due to rising commodity prices. Australia's currency was also supported when the Reserve Bank of Australia President Glenn Stevens warned that keeping interest rates too low for too long could impede efforts to prevent future asset bubbles.
INTEREST RATES
There are no Federal Reserve speakers scheduled for today.
There is a 30% probability that the Federal Open Market Committee will increase the fed funds target by 25 basis points to 50 basis points at or before their August 10th meeting and a 56% chance that they will increase the rate at their September 10th meeting, according to the financial futures markets.
Over the last six months prospects of tighter credit from the Federal Reserve continue to get pushed farther out into the future.
We believe that the next tightening of credit from the Federal Open Market Committee will not take place until after the mid-term elections or even not until 2011.
The Treasury will auction $40 billion in three year notes today, $25 billion in ten year notes tomorrow and $16 billion in thirty bonds on Thursday.
We are in the early stages of a new bear market, especially for the longer dated issues.
Questions or comments? I can be reached at 312.242.7911 or via email at alan.bush@archerfinancials.com. Additional research can be found at www.archerfinancials.com/research.aspx.
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