Tuesday, March 17, 2009
Thursday, March 12, 2009
Tuesday's News Recap: Geithner Says U.S. Will Protect Banks, IBD TIPP Rebounds
(CEP News) • Bernanke Calls for Regulatory Reforms • U.S. Wholesale Inventories Fall 0.7% • U.S. Economic Optimism ReboundsU.S. Treasury Secretary Says Banks will be Capitalized and Protected
U.S. Treasury Secretary Timothy Geithner pledged to protect the United States' top 20 banks on Tuesday, and said some banks are going to need "significant" capital. Speaking in a PBS interview with Charlie Rose to be aired Tuesday night, he said the government cannot just let the crisis "burn itself out," and that it is essential to stabilize the banking system. "It is our obligation to clean it up and to fix it," he said. "We're going to keep at it."
Geithner said the government is going to act as a catalyst to attract private funding. Once the banks have funding, more private investors will return, he said. However, Geithner noted the government's intervention in the crisis is "short-lived," and that the government should not pay inflated prices for toxic assets.
Fed's Bernanke Says Banking Needs Reform
Federal Reserve Chairman Ben Bernanke stressed the need to overhaul operating rules for "too big to fail" institutions. Speaking in Washington, D.C., Bernanke said the U.S. government remains committed to ensuring major banks have the capital necessary to weather the recession and to meet their commitments.
"Government assistance to avoid the failures of major financial institutions has been necessary to avoid a further serious destabilization of the financial system, and our commitment to avoiding such a failure remains firm," he said. In a question and answer session following his speech, Bernanke said he thinks bank capital has been well used and has reduced the deleveraging process.
Going forward, Bernanke said the U.S. government needs to consider creating an authority whose main responsibility is to oversee and prevent systemic risks in the financial structure, and called on Congress to create such a regulatory body.
U.S Wholesale Inventories Slide Less Than Expected
U.S. wholesale inventories continued their downward trend in January, falling for the fifth consecutive month. Wholesale inventories fell 0.7% compared to expectations for a 1.0% decline, while the December data was revised down to a 1.5% fall from a previously reported 1.4% contraction, according to a report released Tuesday by the Department of Commerce.
Since January 2008, inventories have increased by 1.0%, compared to the prior month's annual advance of 6.8%. Durable goods inventories posted a 1.3% decline following the previous month's 1.5% drop, while non-durables increased by 0.2% in the month, after falling by 1.5% in December.
IBD/TIPP Economic Optimism Index Unexpectedly Rebounds
Economic sentiment in the United States unexpectedly rebounded in March compared to February, according to a report from Investor's Business Daily and TechnoMetrica Market Intelligence.
The IBD/TIPP index of economic optimism rose to 45.3 from the 44.6 reading in February. Economists had expected a reading of 43.0. The economic outlook index declined to 40.2 from the previous month's reading of 42.6, while the personal outlook index rebounded to 51.1 from 50.2 and the federal policies index advanced 3.7 points to 44.7.
U.S. Retail Sales Rise Slightly from Previous Week
U.S. retailers noted some respite in chain store sales for the week ending March 7, according to a survey from ICSC that pointed to more spending compared to the previous week. The ICSC-Goldman Sachs survey reported that chain store sales fell by an annual pace of 0.9%, compared to the previous week's 0.8% contraction. But on a weekly basis, sales rose 0.2%, partially reversing the previous week's 0.6% decrease.
Meanwhile, the Johnson Redbook retail survey recorded a 1.4% decline in the week compared to the same period last year. In addition, sales-to-date in March were down 0.2% compared to February.
Canada's Harper Says $20 Billion Will be Pumped into Economy by April
Canadian Prime Minister Stephen Harper said Tuesday that the bulk of stimulus funding, $20 billion, will hit the economy by April 1, with the rest being delivered within the next five months.
Speaking in Brampton, Ont., Harper said Canada will not experience a prolonged period of deficits, and that his Conservative government will ensure the recession does not hit Canada as hard as in other developed economies. Nevertheless, he said Canada will not emerge from recession until the United States fixes its financial sector.
Harper also said Canada is committed to strict bank regulation and that the country is not going to drift towards nationalizing banks and micro managing them, as has been done in the United States.
Regulators to Focus on Bank Compensation Packages, Canadian Official Says
Executive compensation packages withing the financial sector will be the focus of global regulators, who will also work to limit excessive risk-taking, the head of Canada's banking regulator said on Tuesday.
According to a report by Reuters, Julie Dickson, head of the Office of the Superintendent of Financial Institutions, said, "The G20 has yet to meet to talk about this issue but regulators, in focusing very narrowly on risk, have agreed that we should be looking at compensation programs of international institutions ... to see whether they do create incentives to take risk."
G20 Will Look to Canada for Help on Financial Reforms
A senior Canadian finance ministry official said Canada will share its secrets with the G20 on March 14 as to how its banking system has shown resilience in face of the financial crisis. The official said "it's no coincidence" that Canada was asked to lead one of the four working groups on financial reform at the meeting in Horsham, United Kingdom.
Canada has weathered the recession well because it has higher capital requirements for banks than the minimal international standard and a cap on leverage, he said. The official said the general emphasis of the meeting will be on the actual implementation of financial reform, and assuring that international agencies, such as the International Monetary Fund and World Bank, have the necessary resources to aid countries in need.
By Ernest Hoffman, ehoffman@economicnews.ca and Stephen Huebl, shuebl@economicnews.ca, with contributions from Erik Kevin Franco, efranco@economicnews.ca and Megan Ainscow, mainscow@economicnews.ca, edited by Sarah Sussman, ssussman@economicnews.ca
U.S. Treasury Secretary Timothy Geithner pledged to protect the United States' top 20 banks on Tuesday, and said some banks are going to need "significant" capital. Speaking in a PBS interview with Charlie Rose to be aired Tuesday night, he said the government cannot just let the crisis "burn itself out," and that it is essential to stabilize the banking system. "It is our obligation to clean it up and to fix it," he said. "We're going to keep at it."
Geithner said the government is going to act as a catalyst to attract private funding. Once the banks have funding, more private investors will return, he said. However, Geithner noted the government's intervention in the crisis is "short-lived," and that the government should not pay inflated prices for toxic assets.
Fed's Bernanke Says Banking Needs Reform
Federal Reserve Chairman Ben Bernanke stressed the need to overhaul operating rules for "too big to fail" institutions. Speaking in Washington, D.C., Bernanke said the U.S. government remains committed to ensuring major banks have the capital necessary to weather the recession and to meet their commitments.
"Government assistance to avoid the failures of major financial institutions has been necessary to avoid a further serious destabilization of the financial system, and our commitment to avoiding such a failure remains firm," he said. In a question and answer session following his speech, Bernanke said he thinks bank capital has been well used and has reduced the deleveraging process.
Going forward, Bernanke said the U.S. government needs to consider creating an authority whose main responsibility is to oversee and prevent systemic risks in the financial structure, and called on Congress to create such a regulatory body.
U.S Wholesale Inventories Slide Less Than Expected
U.S. wholesale inventories continued their downward trend in January, falling for the fifth consecutive month. Wholesale inventories fell 0.7% compared to expectations for a 1.0% decline, while the December data was revised down to a 1.5% fall from a previously reported 1.4% contraction, according to a report released Tuesday by the Department of Commerce.
Since January 2008, inventories have increased by 1.0%, compared to the prior month's annual advance of 6.8%. Durable goods inventories posted a 1.3% decline following the previous month's 1.5% drop, while non-durables increased by 0.2% in the month, after falling by 1.5% in December.
IBD/TIPP Economic Optimism Index Unexpectedly Rebounds
Economic sentiment in the United States unexpectedly rebounded in March compared to February, according to a report from Investor's Business Daily and TechnoMetrica Market Intelligence.
The IBD/TIPP index of economic optimism rose to 45.3 from the 44.6 reading in February. Economists had expected a reading of 43.0. The economic outlook index declined to 40.2 from the previous month's reading of 42.6, while the personal outlook index rebounded to 51.1 from 50.2 and the federal policies index advanced 3.7 points to 44.7.
U.S. Retail Sales Rise Slightly from Previous Week
U.S. retailers noted some respite in chain store sales for the week ending March 7, according to a survey from ICSC that pointed to more spending compared to the previous week. The ICSC-Goldman Sachs survey reported that chain store sales fell by an annual pace of 0.9%, compared to the previous week's 0.8% contraction. But on a weekly basis, sales rose 0.2%, partially reversing the previous week's 0.6% decrease.
Meanwhile, the Johnson Redbook retail survey recorded a 1.4% decline in the week compared to the same period last year. In addition, sales-to-date in March were down 0.2% compared to February.
Canada's Harper Says $20 Billion Will be Pumped into Economy by April
Canadian Prime Minister Stephen Harper said Tuesday that the bulk of stimulus funding, $20 billion, will hit the economy by April 1, with the rest being delivered within the next five months.
Speaking in Brampton, Ont., Harper said Canada will not experience a prolonged period of deficits, and that his Conservative government will ensure the recession does not hit Canada as hard as in other developed economies. Nevertheless, he said Canada will not emerge from recession until the United States fixes its financial sector.
Harper also said Canada is committed to strict bank regulation and that the country is not going to drift towards nationalizing banks and micro managing them, as has been done in the United States.
Regulators to Focus on Bank Compensation Packages, Canadian Official Says
Executive compensation packages withing the financial sector will be the focus of global regulators, who will also work to limit excessive risk-taking, the head of Canada's banking regulator said on Tuesday.
According to a report by Reuters, Julie Dickson, head of the Office of the Superintendent of Financial Institutions, said, "The G20 has yet to meet to talk about this issue but regulators, in focusing very narrowly on risk, have agreed that we should be looking at compensation programs of international institutions ... to see whether they do create incentives to take risk."
G20 Will Look to Canada for Help on Financial Reforms
A senior Canadian finance ministry official said Canada will share its secrets with the G20 on March 14 as to how its banking system has shown resilience in face of the financial crisis. The official said "it's no coincidence" that Canada was asked to lead one of the four working groups on financial reform at the meeting in Horsham, United Kingdom.
Canada has weathered the recession well because it has higher capital requirements for banks than the minimal international standard and a cap on leverage, he said. The official said the general emphasis of the meeting will be on the actual implementation of financial reform, and assuring that international agencies, such as the International Monetary Fund and World Bank, have the necessary resources to aid countries in need.
By Ernest Hoffman, ehoffman@economicnews.ca and Stephen Huebl, shuebl@economicnews.ca, with contributions from Erik Kevin Franco, efranco@economicnews.ca and Megan Ainscow, mainscow@economicnews.ca, edited by Sarah Sussman, ssussman@economicnews.ca
Closing Market Recap: Huge Gains For Stocks But Dollar Suggests More Trouble
(CEP News) • S&P 500 Jumps 6.4% • Late-Day Gains in U.S. Dollar Cast Doubt on Equity Rally • Gold Falls to One-Month Low • Oil Turns Lower After Early Rally • Treasury Yields Higher by 8-12 Basis PointsStocks Jump Most in 2009 as Financials Rebound
The U.S. financial sector led a mammoth stock market rally on Tuesday in the biggest one-day gain since November 2008.
The Dow Jones industrial average closed up 379 points, or 5.8% to 6926, the S&P 500 closed up 43 points, or 6.4%, to 720 and the Nasdaq closed up 90 points, or 7.1%, to 1358. The gain in the S&P 500 was the largest since Nov. 24.
The positive sentiment was ignited by a leaked memo from Citigroup CEO Vikram Pandit, in which he says the bank became profitable in the first two months of 2009 after five consecutive quarterly declines. He said the firm earned more than $19 billion.
The combination of improving sentiment on the financial sector and a round of short covering sparked huge gains in banking shares.
Citigroup was up 38% on the day, closing at $1.45 per share. Shares of Bank of America were up 28% to $4.79 per share, those of JPMorgan were up 22.6% to $19.50 per share, those of Wells Fargo were up 18.5% to $11.81 per share and those of Morgan Stanley were up 26.5% to $20.84 per share.
Equity sentiment was also boosted by comments from Fed Chairman Ben Bernanke. He said the U.S. government remains committed to ensuring major banks have the capital necessary to weather the recession and meet their obligations.
"Government assistance to avoid the failures of major financial institutions has been necessary to avoid a further serious destabilization of the financial system, and our commitment to avoiding such a failure remains firm," he said.
Stocks also benefited from speculation the uptick rule will be reinstated. The rule prevents initiating a short position when the most recent trade is to the downside. Some market watchers believe it has made it easier to 'raid' stocks.
House Financial Services Committee Chairman Barney Frank called for the reinstatement of the rule, which was abolished in 2007. He said he's hopeful it can be restored "within a month."
There are concerns that the equity rally could fade just as quickly as it began. According to some strategists, both the S&P 500 and DJIA are below key resistance levels.
Fausto Pugliese, president of Cyber Trading University, said that although there are signs that the banking sector is improving, there are concerns looming in the background.
"The banks still have a lot of bad debt that they have to unload," he said. "But right now there are a lot of cheap prices and if you're looking long-term, now might be a time to buy."
"Short-term traders need to be careful. In a bear market what goes up fast comes back down twice as fast," he added.
Colin Cieszynski, market analyst at CMC Markets Canada, said he is also questioning whether Tuesday's rally will last or quickly give up its gains. Concerns over the financial sector have been dragging markets lower and investors are looking for reasons to buy.
"The rally is encouraging but I don't know if it can be sustained," he said. "There are still a lot of concerns that there could be more writedowns. I don't think we are out of the woods yet."
Cieszynski said he would need to see the S&P 500 close above 725 to break the current downtrend.
Canadian banking stocks also received a boost from the positive sentiment. The S&P/TSX composite index closed up 312 points, or 4.1%, to 7879.
In Europe, the Stoxx 50 closed up 88 points to 1703, the UK FTSE 100 closed up 173 points to 3715 and the German DAX closed up 195 points to 3887.
Strategists Say Late-Day U.S. Dollar Rally a Troublesome Sign
Market watchers say a late-day rally in the U.S. dollar against the Canadian dollar and other currencies is a sign of skepticism in Tuesday's massive equity rally.
Risk appetite rose in markets following positive news on the U.S. banking sector. Early in the session, the sentiment spilled over to foreign exchange and dragged USD/CAD as low as 1.2726. But the U.S. dollar rebounded late in the North American session to 1.2822.
A similar pattern played out in most U.S. dollar currency crosses as the greenback made gains against the euro, sterling and Japanese yen.
"I just don't think currency markets are convinced that this rally will last," said George Androulidakis, director of FX trading at the National Bank of Canada. "It just takes one piece of bad news tomorrow for equities to give up all these gains."
Although USD/CAD remains well below yesterday's four-and-a-half-year high at 1.3066 CAD, Androulidakis said there is still a lot of room for the cross to move higher.
Looking at the short term, he said he would look for a close above 1.3017 CAD, which could signal a move to 1.3250.
"I don't want to look further beyond that because I think the volatility will provide enough opportunities for more short and long positions," he said.
George Davis, senior technical strategist at RBC Capital Markets, said he is also skeptical that the gains made on Tuesday can be sustained.
"If you look at previous rallies, they haven't lasted more than one to three days," he said. "I think that skepticism is reflected in currency markets."
Davis said he is expecting USD/CAD to trade in a range, with support near 1.27 CAD and resistance at 1.31 CAD. Looking at the short term, he said there is an opportunity for the cross to remain near the bottom of the range. However, in the mid-term, he is expecting a break through the recent highs of 1.3066.
"I think in the longer term any pullback in USD/CAD is an opportunity to establish a long position," he said.
The U.S. dollar was down 0.19 to 98.66 against the yen and the Dollar Index was down 0.082 to 88.927.
The euro was up 0.0070 to 1.2681 against the U.S. dollar, down 0.0134 to 1.6278 against the Canadian dollar, up 0.0064 to 0.9217 against the pound sterling and was higher by 0.46 to 125.10 against the yen.
The pound sterling was down 0.0019 to 1.3758 against the U.S. dollar and down 0.0261 to 1.7658 against the Canadian dollar.
Gold Prices Tumble as Risk Appetite Grows
A rise in risk appetite sent gold prices to a one-month low as investors jumped back into equity markets on Tuesday.
The front month gold contract at the Chicago Board of Trade was most recently down $25.30 to $898.00 per ounce. It's the first dip below $900 since Feb. 10.
Upbeat news from Citigroup helped boost positive sentiment and hurt safe haven investments, such as gold.
Mike Glaser, futures broker at LaSalle Futures, said although the strong rally in equity markets is a good sign that confidence is reemerging in markets, the rally is unsustainable. He pointed out that there are still a lot of concerns regarding the U.S. and global economy that will continue to support the precious metal.
With gold breaking through $900, Glaser expects $880 to hold as a major support level. A break through $880 could lead to a sharp fall, with prices finding support at the 100-day moving average of $840.
Commodity strategists from Barclays Capital are looking for more weakness in gold. Lower interest in gold as an investment tool and weaker demand in jewelry markets are bearish signs for the precious metal, they said.
Lower Forecast from EIA Hurts Oil Prices
Oil prices are under pressure after the Energy Information Administration (EIA) lowered its forecast for crude prices for 2009 and 2010.
Crude oil prices will average about $42 a barrel in 2009 and $53 a barrel in 2010, according to the report released on Tuesday. The revised forecast is down from last month's expectation that prices will average $43 in 2009 and $55 dollar the following year.
The agency also released more grim news about the U.S. economy and global demand.They expect U.S. economic growth to decline by 2.9% in 2009 and forecasts a modest recovery in 2010, with GDP anticipated to rise 1.9%.
"EIA's projection for 2009 global oil consumption is now 3 million barrels per day lower than it was in the September 2008 Outlook. World oil consumption is expected to rebound in 2010, growing by 900,000 barrels per day, in response to an economic recovery which is projected to begin at the end of 2009," the report said.
Near the start of the North American trading session, WTI crude hit session highs at $48.30, but soon started trending lower. The sell-off picked up speed after the lower forecast from the energy agency. Late in the session, prices fell into negative territory and most recently WTI crude was down $1.29 to $45.78 per barrel.
Despite today's declines, strategists see some room for oil to move higher ahead of the March 17 OPEC meeting. Expectations for another production cut range from 500,000 to 1,000,000 barrels per day.
Andrew Lebow, senior vice-president at MF Global Energy, said he thinks oil prices will move higher and reach $50 a barrel. However, he pointed out that the higher oil prices move, the less chance there is that OPEC will cut production.
He said prices would have to fall to about $43.50 in order to call an end to the recent rally.
"Oil prices have been on a month-long rally and I don't think we have seen the end of it yet," he said.
Lebow added markets will be sensitive to Wednesday's weekly inventory report from the Department of Energy. He noted that another build in crude inventories could put pressure on prices.
Markets are expecting the inventory report to show a withdrawal of 500,000 in crude oil, a 1,000 000 barrel withdrawal in gasoline inventories and a 200,000 barrel build in distillates.
Record $34 Billion U.S. Three-Year Note Auction Draws Yield of 1.489%
Demand in a record-sized $34 billion, U.S. three-year auction was slightly higher than market participants were anticipating, and the notes sold with a yield of 1.489%.
The yield was slightly lower than the 1.492% 'when issued' bid, which represents the expected yield.
The 1.489% yield was tendered to 10.54% of bidders and the bid-to-cover ratio was 2.26. At the previous three-year auction on Jan. 10, the yield was 2.419% and the bid-to-cover was 2.67. The average bid-to-cover ratio in the past four auctions was 2.52.
The median discount rate was 1.419% and the low yield was 1.33%. Non-competitives took $99,457,500. Primary dealers took $19,636,050,000, with direct bidders receiving $617,000,000 of competitives and indirect bidders taking $13,647,521,000.
The indirect allotment of 40.3% was slightly higher than the 36.1% average in recent auctions.
On the spot market, benchmark U.S. three-year yields showed little reaction to the auction. On the session, they were higher by 7 basis points to 1.44%.
On Wednesday, the Treasury will auction $18 billion in 10-year notes, and it will sell $11 billion in 30-year notes on Thursday.
Most recently, U.S. two-year yields were up 6.4 bps to 1.02%, with five-year yields up 11.9 bps to 1.99%, 10-year yields up 13.2 bps to 2.99% and 30-year yields up 15.1 bps to 3.72%. The Eurodollar September 09 contract was up 2.0 ticks to 98.46. The yield curve was steeper, with the 10/2-year spread up 6.9 bps to 197.06 bps.
Yields on two-year Canadian government bonds were up 3.3 bps to 0.99%, with five-year yields up 5.6 bps to 1.93%, 10-year yields up 5.3 bps to 2.99% and 30-year yields up 6.2 bps to 3.70%. The September 09 BAX contract was down 2.0 ticks to 99.50.
In Germany, returns on two-year German bonds were up 4.6 bps to 1.31%, with five-year yields up 8.9 bps to 2.21%, 10-year yields up 6.4 bps to 3.00% and 30-year yields up 5.3 bps to 3.73%.
Yields on UK two-year bonds were down 1.8 bps to 1.33%, with five-year yields down 2.3 bps to 2.17%, 10-year yields down 1.4 bps to 3.11% and 30-year yields up 4.4 bps to 4.08%.
All data taken at 4:10 p.m. EST
By Adam Button, abutton@economicnews
The U.S. financial sector led a mammoth stock market rally on Tuesday in the biggest one-day gain since November 2008.
The Dow Jones industrial average closed up 379 points, or 5.8% to 6926, the S&P 500 closed up 43 points, or 6.4%, to 720 and the Nasdaq closed up 90 points, or 7.1%, to 1358. The gain in the S&P 500 was the largest since Nov. 24.
The positive sentiment was ignited by a leaked memo from Citigroup CEO Vikram Pandit, in which he says the bank became profitable in the first two months of 2009 after five consecutive quarterly declines. He said the firm earned more than $19 billion.
The combination of improving sentiment on the financial sector and a round of short covering sparked huge gains in banking shares.
Citigroup was up 38% on the day, closing at $1.45 per share. Shares of Bank of America were up 28% to $4.79 per share, those of JPMorgan were up 22.6% to $19.50 per share, those of Wells Fargo were up 18.5% to $11.81 per share and those of Morgan Stanley were up 26.5% to $20.84 per share.
Equity sentiment was also boosted by comments from Fed Chairman Ben Bernanke. He said the U.S. government remains committed to ensuring major banks have the capital necessary to weather the recession and meet their obligations.
"Government assistance to avoid the failures of major financial institutions has been necessary to avoid a further serious destabilization of the financial system, and our commitment to avoiding such a failure remains firm," he said.
Stocks also benefited from speculation the uptick rule will be reinstated. The rule prevents initiating a short position when the most recent trade is to the downside. Some market watchers believe it has made it easier to 'raid' stocks.
House Financial Services Committee Chairman Barney Frank called for the reinstatement of the rule, which was abolished in 2007. He said he's hopeful it can be restored "within a month."
There are concerns that the equity rally could fade just as quickly as it began. According to some strategists, both the S&P 500 and DJIA are below key resistance levels.
Fausto Pugliese, president of Cyber Trading University, said that although there are signs that the banking sector is improving, there are concerns looming in the background.
"The banks still have a lot of bad debt that they have to unload," he said. "But right now there are a lot of cheap prices and if you're looking long-term, now might be a time to buy."
"Short-term traders need to be careful. In a bear market what goes up fast comes back down twice as fast," he added.
Colin Cieszynski, market analyst at CMC Markets Canada, said he is also questioning whether Tuesday's rally will last or quickly give up its gains. Concerns over the financial sector have been dragging markets lower and investors are looking for reasons to buy.
"The rally is encouraging but I don't know if it can be sustained," he said. "There are still a lot of concerns that there could be more writedowns. I don't think we are out of the woods yet."
Cieszynski said he would need to see the S&P 500 close above 725 to break the current downtrend.
Canadian banking stocks also received a boost from the positive sentiment. The S&P/TSX composite index closed up 312 points, or 4.1%, to 7879.
In Europe, the Stoxx 50 closed up 88 points to 1703, the UK FTSE 100 closed up 173 points to 3715 and the German DAX closed up 195 points to 3887.
Strategists Say Late-Day U.S. Dollar Rally a Troublesome Sign
Market watchers say a late-day rally in the U.S. dollar against the Canadian dollar and other currencies is a sign of skepticism in Tuesday's massive equity rally.
Risk appetite rose in markets following positive news on the U.S. banking sector. Early in the session, the sentiment spilled over to foreign exchange and dragged USD/CAD as low as 1.2726. But the U.S. dollar rebounded late in the North American session to 1.2822.
A similar pattern played out in most U.S. dollar currency crosses as the greenback made gains against the euro, sterling and Japanese yen.
"I just don't think currency markets are convinced that this rally will last," said George Androulidakis, director of FX trading at the National Bank of Canada. "It just takes one piece of bad news tomorrow for equities to give up all these gains."
Although USD/CAD remains well below yesterday's four-and-a-half-year high at 1.3066 CAD, Androulidakis said there is still a lot of room for the cross to move higher.
Looking at the short term, he said he would look for a close above 1.3017 CAD, which could signal a move to 1.3250.
"I don't want to look further beyond that because I think the volatility will provide enough opportunities for more short and long positions," he said.
George Davis, senior technical strategist at RBC Capital Markets, said he is also skeptical that the gains made on Tuesday can be sustained.
"If you look at previous rallies, they haven't lasted more than one to three days," he said. "I think that skepticism is reflected in currency markets."
Davis said he is expecting USD/CAD to trade in a range, with support near 1.27 CAD and resistance at 1.31 CAD. Looking at the short term, he said there is an opportunity for the cross to remain near the bottom of the range. However, in the mid-term, he is expecting a break through the recent highs of 1.3066.
"I think in the longer term any pullback in USD/CAD is an opportunity to establish a long position," he said.
The U.S. dollar was down 0.19 to 98.66 against the yen and the Dollar Index was down 0.082 to 88.927.
The euro was up 0.0070 to 1.2681 against the U.S. dollar, down 0.0134 to 1.6278 against the Canadian dollar, up 0.0064 to 0.9217 against the pound sterling and was higher by 0.46 to 125.10 against the yen.
The pound sterling was down 0.0019 to 1.3758 against the U.S. dollar and down 0.0261 to 1.7658 against the Canadian dollar.
Gold Prices Tumble as Risk Appetite Grows
A rise in risk appetite sent gold prices to a one-month low as investors jumped back into equity markets on Tuesday.
The front month gold contract at the Chicago Board of Trade was most recently down $25.30 to $898.00 per ounce. It's the first dip below $900 since Feb. 10.
Upbeat news from Citigroup helped boost positive sentiment and hurt safe haven investments, such as gold.
Mike Glaser, futures broker at LaSalle Futures, said although the strong rally in equity markets is a good sign that confidence is reemerging in markets, the rally is unsustainable. He pointed out that there are still a lot of concerns regarding the U.S. and global economy that will continue to support the precious metal.
With gold breaking through $900, Glaser expects $880 to hold as a major support level. A break through $880 could lead to a sharp fall, with prices finding support at the 100-day moving average of $840.
Commodity strategists from Barclays Capital are looking for more weakness in gold. Lower interest in gold as an investment tool and weaker demand in jewelry markets are bearish signs for the precious metal, they said.
Lower Forecast from EIA Hurts Oil Prices
Oil prices are under pressure after the Energy Information Administration (EIA) lowered its forecast for crude prices for 2009 and 2010.
Crude oil prices will average about $42 a barrel in 2009 and $53 a barrel in 2010, according to the report released on Tuesday. The revised forecast is down from last month's expectation that prices will average $43 in 2009 and $55 dollar the following year.
The agency also released more grim news about the U.S. economy and global demand.They expect U.S. economic growth to decline by 2.9% in 2009 and forecasts a modest recovery in 2010, with GDP anticipated to rise 1.9%.
"EIA's projection for 2009 global oil consumption is now 3 million barrels per day lower than it was in the September 2008 Outlook. World oil consumption is expected to rebound in 2010, growing by 900,000 barrels per day, in response to an economic recovery which is projected to begin at the end of 2009," the report said.
Near the start of the North American trading session, WTI crude hit session highs at $48.30, but soon started trending lower. The sell-off picked up speed after the lower forecast from the energy agency. Late in the session, prices fell into negative territory and most recently WTI crude was down $1.29 to $45.78 per barrel.
Despite today's declines, strategists see some room for oil to move higher ahead of the March 17 OPEC meeting. Expectations for another production cut range from 500,000 to 1,000,000 barrels per day.
Andrew Lebow, senior vice-president at MF Global Energy, said he thinks oil prices will move higher and reach $50 a barrel. However, he pointed out that the higher oil prices move, the less chance there is that OPEC will cut production.
He said prices would have to fall to about $43.50 in order to call an end to the recent rally.
"Oil prices have been on a month-long rally and I don't think we have seen the end of it yet," he said.
Lebow added markets will be sensitive to Wednesday's weekly inventory report from the Department of Energy. He noted that another build in crude inventories could put pressure on prices.
Markets are expecting the inventory report to show a withdrawal of 500,000 in crude oil, a 1,000 000 barrel withdrawal in gasoline inventories and a 200,000 barrel build in distillates.
Record $34 Billion U.S. Three-Year Note Auction Draws Yield of 1.489%
Demand in a record-sized $34 billion, U.S. three-year auction was slightly higher than market participants were anticipating, and the notes sold with a yield of 1.489%.
The yield was slightly lower than the 1.492% 'when issued' bid, which represents the expected yield.
The 1.489% yield was tendered to 10.54% of bidders and the bid-to-cover ratio was 2.26. At the previous three-year auction on Jan. 10, the yield was 2.419% and the bid-to-cover was 2.67. The average bid-to-cover ratio in the past four auctions was 2.52.
The median discount rate was 1.419% and the low yield was 1.33%. Non-competitives took $99,457,500. Primary dealers took $19,636,050,000, with direct bidders receiving $617,000,000 of competitives and indirect bidders taking $13,647,521,000.
The indirect allotment of 40.3% was slightly higher than the 36.1% average in recent auctions.
On the spot market, benchmark U.S. three-year yields showed little reaction to the auction. On the session, they were higher by 7 basis points to 1.44%.
On Wednesday, the Treasury will auction $18 billion in 10-year notes, and it will sell $11 billion in 30-year notes on Thursday.
Most recently, U.S. two-year yields were up 6.4 bps to 1.02%, with five-year yields up 11.9 bps to 1.99%, 10-year yields up 13.2 bps to 2.99% and 30-year yields up 15.1 bps to 3.72%. The Eurodollar September 09 contract was up 2.0 ticks to 98.46. The yield curve was steeper, with the 10/2-year spread up 6.9 bps to 197.06 bps.
Yields on two-year Canadian government bonds were up 3.3 bps to 0.99%, with five-year yields up 5.6 bps to 1.93%, 10-year yields up 5.3 bps to 2.99% and 30-year yields up 6.2 bps to 3.70%. The September 09 BAX contract was down 2.0 ticks to 99.50.
In Germany, returns on two-year German bonds were up 4.6 bps to 1.31%, with five-year yields up 8.9 bps to 2.21%, 10-year yields up 6.4 bps to 3.00% and 30-year yields up 5.3 bps to 3.73%.
Yields on UK two-year bonds were down 1.8 bps to 1.33%, with five-year yields down 2.3 bps to 2.17%, 10-year yields down 1.4 bps to 3.11% and 30-year yields up 4.4 bps to 4.08%.
All data taken at 4:10 p.m. EST
By Adam Button, abutton@economicnews
Bernanke Says Banks Will Remain Capitalized, but "Too Big to Fail" Needs to End (Update)
(CEP News) - Federal Reserve Chairman Ben Bernanke stressed the need to overhaul operating rules for "too big to fail" institutions on Tuesday.Speaking to the Council on Foreign Relations in Washington, D.C., Bernanke said the U.S. government currently remains committed to ensuring major banks have the capital necessary to weather the recession and to meet their commitments.
"Government assistance to avoid the failures of major financial institutions has been necessary to avoid a further serious destabilization of the financial system, and our commitment to avoiding such a failure remains firm," he said.
In a question and answer session following his speech, Bernanke said he thinks bank capital has been very well used and has reduced the deleveraging process.
But going forward, Bernanke said the U.S. government needs to consider creating an authority whose main responsibility is to oversee and prevent systemic risks in the financial structure, and called on Congress to create such a regulatory body.
The idea that some firms are "too big to fail" and will be bailed out by government reduces market discipline, he said, and creates an unlevel playing field for smaller companies.
It has also been proven to be very costly for taxpayers, he said.
Bernanke said current bankruptcy law and framework in the United States is not effective enough when it comes to large non-bank financial firms, and that the range of financial crisis situations that necessitate government intervention should be narrowed.
He said accounting methods need to be adjusted so that they "do not overly magnify the ups and downs in the financial system and the economy."
However, Bernanke said he does not support suspending mark-to-market accounting. He said while it can aggravate market swings, it is a transparent accounting method.
He also said money market mutual funds - as a key source of funding for some businesses - need tighter restrictions, "to increase the resiliency of those funds that are susceptible to runs."
Bernanke said the Fed is a good candidate for his proposed grand systemic risk overseer. "A good case can be made for granting the Federal Reserve explicit oversight authority for systemically important payment and settlement systems," he said. Still, he recognized this responsibility could overburden the central bank.
Overall, the downside of capitalism is that it is prone to booms and busts, Bernanke said, but noted the model helps improve living standards. The central banker also disagreed with the statement that capitalism is "self destructive."
By Megan Ainscow, mainscow@economicnews.ca, edited by Stephen Huebl, shuebl@economicnews.ca
"Government assistance to avoid the failures of major financial institutions has been necessary to avoid a further serious destabilization of the financial system, and our commitment to avoiding such a failure remains firm," he said.
In a question and answer session following his speech, Bernanke said he thinks bank capital has been very well used and has reduced the deleveraging process.
But going forward, Bernanke said the U.S. government needs to consider creating an authority whose main responsibility is to oversee and prevent systemic risks in the financial structure, and called on Congress to create such a regulatory body.
The idea that some firms are "too big to fail" and will be bailed out by government reduces market discipline, he said, and creates an unlevel playing field for smaller companies.
It has also been proven to be very costly for taxpayers, he said.
Bernanke said current bankruptcy law and framework in the United States is not effective enough when it comes to large non-bank financial firms, and that the range of financial crisis situations that necessitate government intervention should be narrowed.
He said accounting methods need to be adjusted so that they "do not overly magnify the ups and downs in the financial system and the economy."
However, Bernanke said he does not support suspending mark-to-market accounting. He said while it can aggravate market swings, it is a transparent accounting method.
He also said money market mutual funds - as a key source of funding for some businesses - need tighter restrictions, "to increase the resiliency of those funds that are susceptible to runs."
Bernanke said the Fed is a good candidate for his proposed grand systemic risk overseer. "A good case can be made for granting the Federal Reserve explicit oversight authority for systemically important payment and settlement systems," he said. Still, he recognized this responsibility could overburden the central bank.
Overall, the downside of capitalism is that it is prone to booms and busts, Bernanke said, but noted the model helps improve living standards. The central banker also disagreed with the statement that capitalism is "self destructive."
By Megan Ainscow, mainscow@economicnews.ca, edited by Stephen Huebl, shuebl@economicnews.ca
ECB Monthly Bulletin Notes Below-Target Inflation, Deteriorating Global Demand
(CEP News) Frankfurt - Euro zone inflation is expected to remain "well below 2%" this year and the next, while both global and domestic demand will continue to deteriorate in 2009 before gradually recovering, the European Central Bank said in its monthly bulletin, echoing ECB President Jean-Claude Trichet's introductory remarks.At its March 5 policy meeting, the ECB Governing Council voted to cut its main refinancing rate 50 basis points to a record low 1.5%. The central bank also released its updated staff projections for both inflation and growth.
According to the projections, price growth is expected at between 0.1% and 0.7% for 2009 before picking up to between 0.6% and 1.4% in the following year.
"Owing mainly to base effects stemming from the past behaviour of energy prices, headline annual inflation rates are projected to decline further in the coming months, possibly temporarily reaching negative levels around mid-year," the bulletin read.
Regarding economic growth, the projections suggested an overall range from -3.2% and -2.2% this year. By 2010, the central bank expects a gradual recovery and look for a growth rate of between -0.7% and +0.7% for the year.
"In both 2009 and 2010, the annual GDP growth rate will be significantly reduced by negative carry-over effects from the previous year," the bulletin added.
However, the report also said that the economy "continues to be surrounded by uncertainty."
Written by CEP News European Staff, eunews@economicnews.ca
According to the projections, price growth is expected at between 0.1% and 0.7% for 2009 before picking up to between 0.6% and 1.4% in the following year.
"Owing mainly to base effects stemming from the past behaviour of energy prices, headline annual inflation rates are projected to decline further in the coming months, possibly temporarily reaching negative levels around mid-year," the bulletin read.
Regarding economic growth, the projections suggested an overall range from -3.2% and -2.2% this year. By 2010, the central bank expects a gradual recovery and look for a growth rate of between -0.7% and +0.7% for the year.
"In both 2009 and 2010, the annual GDP growth rate will be significantly reduced by negative carry-over effects from the previous year," the bulletin added.
However, the report also said that the economy "continues to be surrounded by uncertainty."
Written by CEP News European Staff, eunews@economicnews.ca
Aussie Dollar Weaker After Mixed Employment Report
(CEP News) - The Australian dollar was weaker on Thursday in the aftermath of a mixed employment report, with the economy creating jobs, but the unemployment rate rising further than expected.According to the Australian Statistics Bureau, the employment sector created 1,800 jobs while the number of unemployed persons rose 47,100, boosting the unemployment rate to 5.2% from 4.8% last month.
Economists were expecting a rise in the unemployment rate to 5.0% and 20,000 jobs lost.
Data taken at 7:10 a.m. EDT,
The euro was up 0.0133 to 1.9815 against the Australian dollar.
The Australian dollar was down 0.0073 to 0.6449 against the greenback.
The Canadian dollar was up 0.0085 to 1.2017 against the Australian dollar.
The Australian dollar was down 1.3700 to 62.075 against the yen.
The Australian dollar was up 0.0092 to 1.2609 against the New Zealand dollar.
By Erik Kevin Franco, efranco@economicnews.ca, edited by Stephen Huebl, shuebl@economicnews.ca
Economists were expecting a rise in the unemployment rate to 5.0% and 20,000 jobs lost.
Data taken at 7:10 a.m. EDT,
The euro was up 0.0133 to 1.9815 against the Australian dollar.
The Australian dollar was down 0.0073 to 0.6449 against the greenback.
The Canadian dollar was up 0.0085 to 1.2017 against the Australian dollar.
The Australian dollar was down 1.3700 to 62.075 against the yen.
The Australian dollar was up 0.0092 to 1.2609 against the New Zealand dollar.
By Erik Kevin Franco, efranco@economicnews.ca, edited by Stephen Huebl, shuebl@economicnews.ca
FOREX Swiss 20 Franc Gold Coins: Classic Swiss Gold Coins
by Christina GoldmanThe Swiss 20 Franc gold coin, also identified as the Swiss 20 Franc Vreneli, is without doubt among the world’s most elegant and classically designed Swiss gold coins. Because Switzerland has always supported its currency with gold, Switzerland has long been personified as one of the most financially sound and strong countries in the world.The Swiss gold coin most commonly known as the Swiss 20 Franc is a well-crafted and lovely piece that displays the profile of a Swiss woman, more commonly known as Vreneli, with braided hair, wearing flowers and facing left.Above her head are the words “Helvetia”, another common name for this particular coin. The opposite side of the coin displays the familiar Swiss shield over an oak branch that has been tied with ribbons and includes the denomination and the date.The Swiss 20 Franc Gold coin was minted in Bern and consists of 90% gold. Altogether, 29 pieces were struck in 1879, a small cross imprinted in the center of the Swiss cross on the obverse side distinguishing these from others.The coin, measuring 21 mm across, has been minted in various years, the most typically recognized being:When it comes to collecting or investing in Swiss gold coins, genuine Swiss gold coins are some of the most beautiful ever minted. The first-ever striking of gold coins in Switzerland occurred in about 1492, although the Swiss 20 Franc gold coins are the most famous and were issued in Switzerland from 1897 to 1935.
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