Wednesday's Brew - Oct 11
Enjoy your fresh morning coffee with our summary of the market outlook for the day and a medley of important information you should find useful today. Stock futures were down significantly in pre-market trading as concerns about a crisis in Korea intensify. As the U.N. prepares to impose a quick set of influential sanctions, Korea has responded with aggression and threats of retaliation. Besides this news, after a strong report from Genentech and a weak report by Alcoa last night, with both companies indicating a weak open, U.S. markets appear concerned on several fronts.
OVERSEAS
North Korea proves more than a passing problem. The yen made a 10-month low against the dollar on Wednesday before recovering. Concerns intensified regarding a second potential nuclear test. Japan's Foreign Minister Taro Aso told a parliamentary panel that Japan had unconfirmed information that Pyongyang might carry out another nuclear test on Wednesday, two days after the first. Pyongyang added to concern with hard-line rhetoric of its own, saying an imposition of strict sanctions on North Korea would be tantamount to an act of war. It threatened that it would respond physically, with a series of actions. This portends to shake global markets today. Tokyo's Nikkei closed down 0.47 percent after paring early gains, while MSCI's broadest index of shares in Asia, excluding Japan, edged up 0.19 percent by 06:25 GMT. Following suit and after reaching its highest close since June 2001, the FTSEurofirst 300 index of top European shares was 0.2 percent lower at 1,420.57 points in early trading.
COMMODITIES
Oil prices are likely to solidify or rise today, after OPEC provided more clarity on its planned production cut. "The cut itself is agreed," said Nigerian oil minister and OPEC president Edmund Daukoru. The cartel is currently working out the details of how the cuts will be shared by the members. Daukoru also stated that the cuts would be effective by early November. There was some concern earlier this week that Saudi Arabia's output might not be cut in the near-term, as representatives of the nation's oil company expressed to its customers that they would continue to receive planned deliveries through November. Today's move appears to be strategically planned to clear up any confusion as to whether a cut was in question. We anticipate oil prices will hold current levels or rise higher today and in the near term. We also anticipate gold to find a second wind, following its initial rise on the North Korean test. As it appears North Korea will not go away easy or quickly, the markets must appreciate the safe-haven gold offers and asset allocation is likely to include holdings whether broader markets rise or fall. We believe capital sources will alter if stock markets are to rise broadly, with negative correlation to gold moving toward zero.
ECONOMIC & OTHER MARKET MOVERS
The most important economic data meeting markets today is the 2:00 p.m. EDT release of the minutes from the Federal Open Market Committee's September 20 meeting. Also, Richmond Fed President Jeffrey Lacker is scheduled to speak today.
STOCKS
The key company specific stories driving the market today are the reports from Alcoa and Genentech. Alcoa (AA), the first Dow component to report, posted EPS of $0.61 versus analysts' consensus of $0.77. Alcoa shares were down roughly 6% in pre-market trading. The shares' are pressuring the market due to their sensitivity to the economy, and the company's impact as an economic indicator. Genentech (DNA) posted EPS better than consensus estimates, but its shares were lower pre-market approximately 1.5%. We speculate the shares are lower due to lower than expected revenue from one promising drug, which was priced into the P/E of DNA. Companies scheduled to report earnings today include restaurant chain and broad industry indicator, Yum! Brands, Inc.
Today, we again recommend investors consider entry into energy and gold equities at what we view as bargain points. Our view is based on the valuation of industry shares, and the illusion of an improved geopolitical situation where recent evidence points to a resurgence of market moving news coming to the forefront. Soon, we plan to offer our "Sector Weightings" to our readers for free. We hope you enjoyed Today's Morning Coffee, and wish you a good day trading.
(disclosure)
OVERSEAS
North Korea proves more than a passing problem. The yen made a 10-month low against the dollar on Wednesday before recovering. Concerns intensified regarding a second potential nuclear test. Japan's Foreign Minister Taro Aso told a parliamentary panel that Japan had unconfirmed information that Pyongyang might carry out another nuclear test on Wednesday, two days after the first. Pyongyang added to concern with hard-line rhetoric of its own, saying an imposition of strict sanctions on North Korea would be tantamount to an act of war. It threatened that it would respond physically, with a series of actions. This portends to shake global markets today. Tokyo's Nikkei closed down 0.47 percent after paring early gains, while MSCI's broadest index of shares in Asia, excluding Japan, edged up 0.19 percent by 06:25 GMT. Following suit and after reaching its highest close since June 2001, the FTSEurofirst 300 index of top European shares was 0.2 percent lower at 1,420.57 points in early trading.
COMMODITIES
Oil prices are likely to solidify or rise today, after OPEC provided more clarity on its planned production cut. "The cut itself is agreed," said Nigerian oil minister and OPEC president Edmund Daukoru. The cartel is currently working out the details of how the cuts will be shared by the members. Daukoru also stated that the cuts would be effective by early November. There was some concern earlier this week that Saudi Arabia's output might not be cut in the near-term, as representatives of the nation's oil company expressed to its customers that they would continue to receive planned deliveries through November. Today's move appears to be strategically planned to clear up any confusion as to whether a cut was in question. We anticipate oil prices will hold current levels or rise higher today and in the near term. We also anticipate gold to find a second wind, following its initial rise on the North Korean test. As it appears North Korea will not go away easy or quickly, the markets must appreciate the safe-haven gold offers and asset allocation is likely to include holdings whether broader markets rise or fall. We believe capital sources will alter if stock markets are to rise broadly, with negative correlation to gold moving toward zero.
ECONOMIC & OTHER MARKET MOVERS
The most important economic data meeting markets today is the 2:00 p.m. EDT release of the minutes from the Federal Open Market Committee's September 20 meeting. Also, Richmond Fed President Jeffrey Lacker is scheduled to speak today.
STOCKS
The key company specific stories driving the market today are the reports from Alcoa and Genentech. Alcoa (AA), the first Dow component to report, posted EPS of $0.61 versus analysts' consensus of $0.77. Alcoa shares were down roughly 6% in pre-market trading. The shares' are pressuring the market due to their sensitivity to the economy, and the company's impact as an economic indicator. Genentech (DNA) posted EPS better than consensus estimates, but its shares were lower pre-market approximately 1.5%. We speculate the shares are lower due to lower than expected revenue from one promising drug, which was priced into the P/E of DNA. Companies scheduled to report earnings today include restaurant chain and broad industry indicator, Yum! Brands, Inc.
Today, we again recommend investors consider entry into energy and gold equities at what we view as bargain points. Our view is based on the valuation of industry shares, and the illusion of an improved geopolitical situation where recent evidence points to a resurgence of market moving news coming to the forefront. Soon, we plan to offer our "Sector Weightings" to our readers for free. We hope you enjoyed Today's Morning Coffee, and wish you a good day trading.
(disclosure)
posted by The Greek | 7:58 AM
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