Tuesday's Brew - Nov 21

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. Stock futures across the Dow, S&P 500 and NASDAQ indices are indicating a higher open today.

OVERSEAS MARKETS

The Hang Seng Index edged up 0.28% on strong 6.8% GDP growth in the Hong Kong market, driven by consumer spending and corporate investment. The growth exceeded expectations, and may perhaps be partially responsible for the rise in oil prices today. In Japan, the NIKKEI was relatively unchanged after the release of the most recent Bank of Japan meeting minutes. The report indicated the Bank's Board intends to raise rates steadily to cool economic growth and speculation in lending and land acquisition.

ECB President Jean-Claude Trichet said yesterday that economic growth in Europe and Japan is helping to rebalance the global economy. I'm not sure if he is speaking about a return to pre-industrial revolution times economic balance or what, but I'm sure growth in emerging markets like China and India are doing more for the "rebalancing" than is Europe and Japan. He more accurately views Japanese and European market growth as stabilizers to U.S. economic cyclicality and hyper growth from China/India. Markets across Europe were mostly moderately higher today.

The former premier of Italy, Silvio Berlusconi goes on trial in Milan on charges of false accounting, embezzlement and tax fraud related to the purchase of TV rights. Also, the dispute-settlement body of the World Trade Organization meets today in Geneva, likely amid usual protests.

ECONOMIC DATA & NEWS

The holiday week is light on economic news. However, today, Fed Governor Kevin Warsh addresses a group in New York on "market discipline and the Fed." Richmond Fed Head Jeffrey Lacker, the guy who wanted to raise rates, will speak to the Richmond Association for Business Economics. Also on Tuesday, the Treasury will announce two and five-year note sales.

COMMODITY MARKETS

Crude is rising today 0.65%, with headline media pointing toward weather disruption in Alaska, but we believe strong economic growth in Hong Kong and Japan, reinforced by recent data release, is a significant factor as well. We believe our theory is supported by the fact that Natural Gas is lower by 1.36% this morning, impacted by decline in U.S. markets. Natural gas is a more localized commodity trade, whereas oil prices are based on global demand. The divergence of the two today provides evidence that Asian economic growth may be behind the rise in oil, rather than a problem in Alaska, because such a problem, if serious, would raise demand for natural gas and pressure prices to rise.

Also impacting oil today, OPEC members are rumored to be in favor of a further production cut, but we view this as likely propaganda to impact the price of crude without action. Also, distillate inventories are expected to show a decline in supply again this week, by a Bloomberg survey of analysts.

Metals are mostly higher today, led by an increase in plutonium, which is rising on speculation that a new investment fund for the metal will make it more accessible to investors, and squeeze supply.

STOCKS IN THE NEWS
Reporting earnings on Tuesday are Dollar Tree Stores, Fred's, Genesco Inc., Gamestop Corp., Tech Data Corp., United Natural Foods, Brown Shoe Co., Eaton Vance Corp., Jack in The Box Inc., Mesa Air Group, Borders Group, Coldwater Creek and Payless Shoesource. Also Tuesday, Jacobs Engineering will hold an analysts' day and the lockup period on Loews' March secondary offering expires. (disclosure)