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Traders' focus was locked on events later this week, including Tuesday's midterm elections and Wednesday's conclusion of a meeting of the Federal Reserve's policy-making committee.
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Date Posted: 1/11/10 16:12:24
ASIAN MORNING BRIEFING: US Blue-Chips Eke Out Gains Ahead Of Elections
02/11/2010 9:07AM
DJIA 11124.62 +6.13 +0.06%
Nasdaq 2504.84 -2.57 -0.10%
S&P 500 1184.38 +1.12 +0.09%
FTSE 100 5694.62 +19.46 +0.34%
Xetra DAX 6604.86 +3.49 +0.05%
2Y Tsy 100 2/32 flat 0.34% +0.0BP
5Y Tsy 100 13/32 +2/32 1.17% -1.1BP
10Y Tsy 99 30/32 -5/32 2.63% +1.8BP
USD/JPY 80.51-53 +0.24%
Range 81.36-80.25
EUR/USD 1.3891-96 -0.51%
Range 1.4011-1.3863
AUD/USD 0.9864-69 +0.13%
Range 0.9914-0.9827
USD/JPY 1M Vol 12.10/12.40%
EUR/USD 1M Vol 14.15/14.45%
AUD/USD 1M Vol 15.70/16.00%
Comex Gold $1,350.60 -$7
Comex Gold Range $1,349.10-$1,366.40
Nymex Crude (NY) $82.95 +$1.52
U.S. SUMMARY & ASIAN OUTLOOK:
STOCKS:
U.S. blue-chip stocks squeaked out a slim gain Monday amid jitters ahead of U.S. midterm elections and expected moves from the Federal Reserve.
The Dow Jones Industrial Average closed up 6.13 points, or 0.06%, to 11124.62, reversing an earlier triple-digit climb. Kraft Foods was the measure's worst performer, falling 49 cents, or 1.5%, to $31.78. Chevron slid 1.15, or 1.4%, to 81.45.
Limiting the measure's losses, technology stocks rose after the Semiconductor Industry Association said global chip sales rose 2.9% in September from a month earlier. Intel gained 52 cents, or 2.6%, to 20.57, while Hewlett-Packard rose 45 cents, or 1.1% to 42.49.
Traders' focus was locked on events later this week, including Tuesday's midterm elections and Wednesday's conclusion of a meeting of the Federal Reserve's policy-making committee. The stock market has rallied since early September on expectations that the Fed will resume purchasing bonds in order to stimulate the economy.
Investors said they wouldn't be surprised to see a selloff after the election and Fed meeting given the market's steady climb since September amid a surge of market optimism.
"The market's been rallying almost straight up for a long, long time," said Hank Camp, founder of HL Camp & Co, who predicted the market would take a turn down next week. "It's way overdone."
The market climbed earlier Monday, fueled by encouraging manufacturing reports from the U.S. and China, as well as an unexpected rise in U.S. construction spending.
The Nasdaq Composite closed down 2.57, or 0.10% to 2504.84. The Standard & Poor's 500-share index edged up 1.12, or 0.09% to 1184.38.
The market's climb cooled when financial stocks slid into the red after a ProPublica report said the Securities and Exchange Commission is investigating whether J.P. Morgan Chase allowed Magnetar Capital, a hedge fund, to improperly select assets for a $1.1 billion deal backed by subprime mortgages. J.P. Morgan shed 21 cents, or 0.6% to 37.42.
Utilities also lagged. NextEra Energy fell 1.12, or 2%, to 53.92, after it said it expects the year's profit will come in "the lower half" of its prior forecast.
China's shares end higher Monday, reversing four consecutive sessions of losses, after official data showed manufacturing activity rose in October from September.
Analysts said the Shanghai index will likely face resistance at the psychologically important 3100 level this week, as the market awaits details of a possible new round of bond purchases by the U.S. Federal Reserve, which is due to hold a meeting Tuesday and Wednesday.
"Strong manufacturing data, hot money inflows and expectations of strong quantitative easing measures from the Federal Reserve this week are lending strength to the index," said Zhang Gang, an analyst at Southwest Securities.
"We anticipate the market will perform well this week, partly because foreign stocks are showing uptrends, encouraged by the potential quantitative easing measures from the U.S. Fed," said Li Daxiao, an analyst at Ying Da Securities.
Tokyo stocks fell Monday as blue chip shares were hit by earnings concerns.
While the yen's rise has dented sentiment for full fiscal year corporate earnings, traders say investors are increasingly growing cautious on expectations that the U.S. Federal Reserve will announce more easing measures at this week's meeting, which may cause the dollar to fall further.
"There are concerns about the outcome of the FOMC meeting, but at the same time, there are hopes that the Bank of Japan may react accordingly if the yen rises sharply (against the dollar)," said Hikaru Sato, senior technical analyst at Daiwa Securities Capital Markets.
Sato said that the Nikkei may fall below the psychologically important 9000 line if the dollar falls below Y80.
Crude futures finished higher in U.S. trading Monday after Saudi Arabia's oil minister suggested he was comfortable with higher oil prices, while a rapidly expanding Chinese manufacturing sector signaled that demand will continue to rise.
Upbeat U.S. economic data and a stronger dollar weighed on Comex gold prices Monday, as some traders worried the positive news will reduce long-awaited Federal Reserve stimulus.
Base metals on the London Metal Exchange ended up Monday but off their highs, as the U.S. dollar recovered after stronger-than-expected manufacturing data.
FOREX:
The dollar sharply reversed early losses against the yen and the euro Monday, spurred on by optimistic U.S. manufacturing data.
The more-encouraging economic snapshot gave pause to the more-aggressive bets on expected Federal Reserve stimulus in recent weeks.
The manufacturing side of the U.S. economy continued growing in October with an Institute for Supply Management purchasing managers' index rising to 56.9 from 54.4 in September.
"U.S. data has been recently strong," said Aroop Chatterjee, chief foreign-exchange quantitative strategist at Barclays Capital in New York. "People may be right to think that the Fed [thus] makes a much more data-dependent decision" on a bond-purchasing program widely expected to be announced Wednesday.
The scale of the program may be more modest than once thought, said Chatterjee and Joe Manimbo, market analyst at Travelex Global Business Payments in Washington.
Manimbo added, "I'm sure they are going to collect all the data they can before they go ahead and pull the trigger" on more stimulus, and a recent inflow of decent data will be considered.
Shortly after the PMI data, the euro hit an intraday low, falling back below $1.39. In New York trading, the dollar reversed all euro gains garnered overnight from strong Chinese manufacturing data that led to a return to riskier assets.
The greenback further retreated from a new 15-year low reached overnight against the yen after the data.
Late Monday afternoon in New York, the euro was at $1.3885, down from $1.3947 late Friday, according to EBS via CQG. The dollar was at Y80.60, up from Y80.40, while the euro was at Y111.91 down from Y111.99. The U.K. pound was at $1.6038 compared with $1.6039. The dollar was at CHF0.9931, up from CHF0.9824.
The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was at 77.294, up from 77.047.
Investors have been betting on the possibility of the resumption of quantitative easing for the last several months. Since the PMI Monday was the last important U.S. indicator before Wednesday's Federal Open Market Committee's anticipated decision on QE, it seems likely the currency markets will now take a breather until Wednesday, said analysts.
"I think the dollar is likely to stay strong within very tight ranges," until then, said Manimbo.
An immediate effect on currency markets is not expected from U.S. midterm elections Tuesday, barring any surprises beyond the scope of large expected gains by Republicans in the U.S. House of Representatives, he said.
Beyond the Fed's decision, the market is already turning its attention to how other central banks react to a Fed stimulus move that would serve to flood the market with dollars.
The Bank of England and the European Central Bank will make policy decisions this week, but most intriguing could be moves made by the Bank of Japan following the Fed's decision, analysts said.
The Bank of Japan last week brought forward its next policy-board meeting to this Thursday and Friday from Nov. 15-16.
The new meeting days fall just after the FOMC's decision, and analysts predict the BOJ could respond to any new dollar weakness.
Early Monday, the dollar fell to Y80.21, its lowest level in 15 years.
Separately, the White House Monday played down hopes for a breakthrough in a dispute over China's currency policy later this month at Group of 20 talks in South Korea.
While President Barack Obama will press China to continue moving its currency toward a market-determined rate at the G-20 summit in Seoul, he will largely focus his efforts on getting leaders to outline policies targeting a range of external surpluses and deficits that allow sustainable global economic growth.
"We do not expect the China currency issue, or the imbalance issue, to be solved once and for all in Seoul," said Michael Froman, Deputy National Security Advisor for International Economic Affairs.
BONDS:
After spending most of the day in modestly negative territory, U.S. Treasury prices glided to a mixed close Monday, as investors settled in to see what the Federal Reserve will do Wednesday.
Prices had been under pressure in earlier trading following some optimistic economic data. Treasurys slipped after a report showed the U.S. manufacturing sector expanded at a much faster-than-expected pace last month. Government bond prices had been higher early Monday after data that showed U.S incomes fell in September for the first time in over a year.
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(MORE TO FOLLOW) Dow Jones Newswires
November 01, 2010 18:07 ET (22:07 GMT)
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