Morning Call: Monday, June 22, 2009
Good morning.
Toronto closed higher with Banks leading the way but we still lost ground for the week. The US markets closed little changed as worries over the green shoots increased. We are up 40% on the S&P and 40% down from the Oct /07 peak of 1565.
The markets normally rally into long weekends but that's next week's story. When Bernanke speaks on Wednesday it will tell the tale. Are rates going up soon? No. The real return bonds are yielding more than 5% - a crucial level. Is Inflation a problem with the CPI coming in at a minus 1.3%? No. Will he keep buying bonds? Yes. The only thing he won't be able to answer is whether he will get a second term. Yes. Having successfully averted the media inspired spectre of another Depression, Obama won't want a needless fight or the unnecessary uncertainty of a new Chairman. In setting up for this the Gold chart looks precarious and the US $ is ready for a relief rally. If markets like the FEDspeak we would expect both to move.
Outside the US, the business confidence indicator came in at 85 in Germany, up from 84.2 last month. So, despite the forecast that GDP will be down more than 6%, there is evidence that the pessimism is abating. China is confident enough to call for a moderately loose monetary policy.
The best charts in commodities are Nickel and Zinc which are still very strong. The CRB is rolling over and maybe forecasting that US$ move.
One of the best stock charts is our very own National Bank. Every quarter they are told their trading profits are too high and so a negative. The market isn't taking notice. And, one of the Bank owned brokers is saying this is a new bull market. Maybe it’s because their Economist has said the Recession is over. (oh dear!)
The markets normally rally into long weekends but that's next week's story. When Bernanke speaks on Wednesday it will tell the tale. Are rates going up soon? No. The real return bonds are yielding more than 5% - a crucial level. Is Inflation a problem with the CPI coming in at a minus 1.3%? No. Will he keep buying bonds? Yes. The only thing he won't be able to answer is whether he will get a second term. Yes. Having successfully averted the media inspired spectre of another Depression, Obama won't want a needless fight or the unnecessary uncertainty of a new Chairman. In setting up for this the Gold chart looks precarious and the US $ is ready for a relief rally. If markets like the FEDspeak we would expect both to move.
Outside the US, the business confidence indicator came in at 85 in Germany, up from 84.2 last month. So, despite the forecast that GDP will be down more than 6%, there is evidence that the pessimism is abating. China is confident enough to call for a moderately loose monetary policy.
The best charts in commodities are Nickel and Zinc which are still very strong. The CRB is rolling over and maybe forecasting that US$ move.
One of the best stock charts is our very own National Bank. Every quarter they are told their trading profits are too high and so a negative. The market isn't taking notice. And, one of the Bank owned brokers is saying this is a new bull market. Maybe it’s because their Economist has said the Recession is over. (oh dear!)
We will be waiting for the FED and…….. Investing the money.
DXY(Bloomberg): the US Dollar Index (USDX) indicates the general international value of the US$. The USDX does this by averaging the exchange rates between the US$ and 6 major currencies. The FINEX computes this by using the rates supplied by some 500 banks.
Quote of the Day:
It wasn't raining when Noah built the ark. --Howard Duff
Ed Pennock, CFA, Managing Director
416-369-6921, epennock@dominick.ca
Graham Farrell, Institutional Equity Trading
416-369-4208, gfarrell@dominick.ca
The above note is prepared by an Institutional Salesperson based on morning meeting comments and general Institutional desk discussion and should not be construed as a research report or a solicitation. For information purposes only. D&D Securities, its clients, and principals may have positions in these securities.
