Stocks are sitting at session lows as more than 90% of the names in the S&P 500 reside in the red. Such widespread weakness has begun to bleed into the tech sector, which has pulled back to a 0.2% gain after it had been up as much as 1.5%.
The Swiss franc rose against all of its 16 most-traded counterparts as violence in Libya boosted demand for the currency as a refuge.
The euro pared its drop versus the dollar after Yves Mersch, a European Central Bank council member, said the ECB may toughen its stance on inflation as soon as next week.
“I would not be surprised at most colleagues concluding that we have upside risks to price stability,” Mersch said in an interview in Luxembourg yesterday. With the economy strengthening and inflation in breach of the ECB’s 2 percent limit, policy makers will “inevitably” have to “rebalance our monetary policy stance,” he said, without giving a time frame.
The Frankfurt-based ECB is scheduled to hold its next policy meeting on March 3.
“The governing council is turning more focus on inflation,” said David Watt, senior currency strategist at Royal Bank of Canada’s RBC Capital Markets unit in Toronto. “It’s a gentle reminder that there are hawkish elements on the ECB.”
Oil climbed on concern turmoil in North Africa and the Mideast will disrupt supplies. Crude oil for April delivery gained as much as 2.7% to $108.57 a barrel in London, the highest since September 2008.
Stocks fell, with the Standard & Poor’s 500 Index dropping 1.5% and the MSCI World Index losing 1.1%.
The dollar briefly gained versus the euro after the S&P/Case-Shiller index of home values in 20 U.S. cities fell 2.4% in December, the biggest year-over-year decrease since December 2009, according to figures from the group. The median forecast of economists was for a 2.3% drop.
The Conference Board’s index of sentiment increased to 70.4, the highest since February 2008, from 64.8 the prior month, figures from the private research group showed today.
New Zealand’s dollar slumped after an earthquake struck the nation’s second-largest city, killing at least 65, while the yen gained versus the greenback as U.S. Treasury yields fell to almost three-week lows.
Stocks have extended their recent downturn so that the S&P 500 is now at a fresh session low. The backslide comes in the wake of comments from Libya's Gadhafi, who has stated that he has no intentions of resigning his leadership role. Although weakness is widespread, financials have been hit the hardest this session. The sector has fallen to a 2.4% loss. Within the sector, banks and diversified financial services plays are in the worst shape -- both groups are down in excess of 3%.
As for energy, it continues to trade in positive territory. However, the sector's 0.5% gain is only a third of what it had sported at its session high
The crisis in Libya is currently keeping energy markets higher this morning, excluding natural gas. Despite a notable pull-back in crude oil (continuous contract), the energy component is still 6.4% higher at $91.75 per barrel.
March natural gas fell into negative territory shortly after the open of pit trade, hitting new session lows of $3.85 per MMBtu. Currently, its down 0.5% at $3.86 per MMB tu.
Precious metals have been in positive territory all session, but are off overnight highs. Currently, April gold is 0.9% higher at $1400.6 per ounce, while March silver is up 1.7% at $32.85 per ounce.
Cotton futures fell the exchange limit today on concerns China demand will now slow. Currently, May cotton futures are down 3.6% at $1.8793/lb. Cocoa futures are in the top three best performers in the CRB Index after pushing to a 32-year high on more supply concerns from the Ivory Coast, which arose due to escalating violence in the area.
Present situation 33.4 vs 31.1; Expectations 95.1 vs 87.3.
Assessments of business and labor mkts improved moderately and buying plans improved for autos, homes, and appliances. 1y inflation expectation is 5.6%, absurdly high. Confidence improved for most income groups. Jobs Plentiful 4.9 vs 4.6; Jobs Hard to Get 45.7 vs 47.0, both improving. Conference Bd notes this level of confidence is at at 3-yr high as optimisim grows about the short-term future. They gave no reasons but perhaps this is related to rising stocks, reduced Social Sec. taxes and better headlines about the outlook. Offsets of higher gas prices and Mideast tensions might not have worked into the index, whose polling closed on Feb. 10.
GBP/USD holds tight amid strong recovery in euro-sterling after hawkish ECB Mersch comments. Cable holds between $1.6150/60, off early Europe lows of $1.6131. Focus on Wednesday's key release of BOE MPC Minutes.
U.S. stocks were set for an early sell off Tuesday, as oil prices continued to skyrocket and overseas markets faltered on the escalating political crisis in Libya.
U.S. markets were closed on Monday for the President's Day holiday. But oil prices surged more than 6%, as anti-government protests in the Middle East and Africa intensified - raising worries about possible supply disruptions.
Oil prices rose another 7% Tuesday as the chaos in Libya entered an eighth day. The turmoil in North Africa and the Middle East has roiled world financial markets, with stocks plunging across Asia and markets in Europe under pressure.
In Tripoli, protesters have been demanding freedom and decrying high unemployment under Libyan leader Moammar Gadhafi's nearly 42-year-old regime. Gadhafi asserted Tuesday that he is still in control of the country, while witnesses and sources in the Libyan capital report a food shortage, gunfire and violence by security forces.
Economy: The Conference Board will release its February consumer confidence report at 15:00 GMT. Economists expect it to rise slightly from January to 67.
Companies: A flurry of retail earnings are due before the market opens, giving investors a fresh read on the U.S. consumer's situation.
The world's largest retailer Wal-Mart (WMT, Fortune 500) said it earned of $1.41 per share in the fourth quarter, including tax benefits amounting to 7 cents per share. Analysts were expecting earnings of $1.31 a share. Sales rose 2.5% to $115.6 billion in the quarter. Wal-Mart's stock was down nearly 2% before the bell.
Shares of Home Depot (HD, Fortune 500) were up about 3% in premarket trading after the home improvement retailer reported quarterly earnings and sales that beat analysts' expectations.
Macy's (M, Fortune 500) also reported fourth-quarter earnings that were better than analysts' had expected.
Shares of Mentor Graphics (MENT) jumped 15% before the bell, after billionaire investor Carl Icahn offered to buy the company for $17 per share. The stock closed Friday at $14.52 per share.
Hewlett-Packard (HPQ, Fortune 500) will report its earnings after the closing bell.
EUR/USD holds below earlier high at $1.3690 amid light flows. Rate currently trades at $1.3675. Area of $1.3700 said to hold supply. Light stops atop $1.3700 area with more offers in place at $1.3725/30.
09:00 Italy Consumer confidence (February) 106.4 - 105.9
09:30 UK PSNCR (January), bln -14.4 - 25.5
09:30 UK PSNB (January), bln -5.3 -0.1 16.8
The yen and the Swiss franc rose against most of their major counterparts as violence in Libya boosted demand for the currencies as a refuge.
The dollar also advanced versus the majority of its peers. The Libyan government attacked protesters.
The euro pared its drop after European Central Bank council member Yves Mersch said the ECB may toughen its stance on inflation as early as next week.
“I would not be surprised at most colleagues concluding that we have upside risks to price stability,” Mersch said yesterday. With the economy strengthening and inflation in breach of the ECB’s 2% limit, policy makers will “inevitably” have to “rebalance our monetary policy stance,” Mersch said, without giving a timeframe. The Frankfurt-based ECB is scheduled to hold its next policy meeting on March 3.
The yen headed for its longest run of gains against the dollar this year even as Moody’s Investors Service lowered the outlook on Japan’s debt rating.
S&P cut Japan’s credit rating for the first time in nine years last month, citing a lack of a “coherent strategy” to address the nation’s debt burden.
New Zealand’s dollar slid versus all its major counterparts, dropping 2.4% versus the Swiss franc, after the 6.3 earthquake caused multiple deaths and toppled buildings.
EUR/USD regained its rise after it fell earlier to $1.3522 lows. Rate recovered to $1.3585 and remains a bit lower.
GBP/USD holds within the $1.6130/80 range.
USD/JPY recovered from Y82.80 to Y83.23.
EUR/GBP retreats from highs on stg0.8468, holding currently at stg0.8456. Offers have been reported in place at stg0.8475/80, a break to open a move on toward stg0.8500. Support now seen back at stg0.8435/30.
EUR/USD holds higher with rate so far countered by offers placed around the overnight Asian high at $1.3685. Talk of further offers placed between $1.3695/00 ($1.3696 61.8% $1.3862/1.3428), a break to open a move toward $1.3710 (Europe high Monday) ahead of stronger interest at $1.3725/30.
Gold corrects following large gains yesterday as it tested resistance seen from the Dec 7 resistance line at $1410.50. However gold failed to sustain break above and sank to support near the 5-DMA (at $1391.00). Daily studies turn a little lower however still trending upwards. Further support seen at $1384.6/1386.9.
The pound fell the most against the dollar in almost a week and gilts rose as escalating political instability in the Middle East and North Africa curbed investor demand for all but the safest assets.
Sterling also weakened against the Swiss franc and the Japanese yen as oil prices surged to the highest in more than two years amid concern that production in the holder of Africa’s biggest crude reserves will be disrupted.
The pound strengthened against the euro as a report showed the U.K.’s budget deficit shrank more than forecast last month.
Government bonds rallied across the world while stocks and U.S. index futures declined as the Libyan unrest hurt investor demand for assets perceived as being more risky. Al-Jazeera reported that at least 250 people have died in the Libyan capital of Tripoli alone during anti-government protests, which mirror those that toppled regimes in Tunisia and Egypt.
Minutes from the central bank’s Feb. 10 meeting, when it kept its benchmark rate unchanged at a record low 0.5%, will be released tomorrow. A small increase in the key interest rate may prevent a more rapid tightening later, Weale said in a BBC Radio 4 interview broadcast yesterday.
Policy makers have been split three ways since October, with Adam Posen calling for an expansion of the bank’s bond- purchase plan and Andrew Sentance voting to raise the key rate by 25 basis points to 0.75%. Sentance was joined by Martin Weale at the central bank’s Jan. 13 rate decision.
Calls for higher interest rates in the U.K. come at the same time that Britain attempts to implement the deepest budget cuts since World War II. Prime Minister David Cameron’s coalition government is trying to reduce the fiscal deficit from an estimated 10% of gross domestic product in the year through March to 1.9% by 2015.
Britain posted the biggest budget surplus since July 2008 as government revenue surged in the biggest tax-collection month of the year.
AUD/USD probing offers again in the $1.0025/30 region as comments from ECB's Mersch fuel a sharp euro-dollar rally. Aussie rallies to $1.0027 from $1.0006 and currently trades $1.0020/22.
EUR/USD breaks back above $1.3600, trying to recover off earlier lows of $1.3529 amid hawkish comments from Mersch. Offers seen to $1.3610, a break to open a move toward $1.3625.
Japan’s currency rose from a three-month low against the euro as stocks fell in Europe and Asia. Libyan leader Muammar Qaddafi’s son Saif said the country may have a civil war.
The euro dropped after German Chancellor Angela Merkel’s Christian Democratic Union suffered an election defeat in the country’s richest state, fuelling concern that European Union attempts to deal with the sovereign debt crisis will be derailed.
Europe’s common currency pared losses after a report showed German business confidence unexpectedly rose to a record in February. The Munich-based Ifo institute said its business climate index increased to 111.2 from 110.3 in January. That’s the highest since records for a reunified Germany began in 1991.
New Zealand’s dollar climbed on speculation Fonterra Cooperative Group Ltd. will raise its forecast for payouts to farmers.
The board of Auckland-based Fonterra, the world’s largest dairy exporter, meets tomorrow after whole milk powder prices climbed to a 31-month high. The dairy exporter raised its forecast payment to farmers by 4.5% on Dec. 10, citing higher international prices.
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