Morning Report Jan - 11

Good Morning. This is your morning report for Wednesday January 10, 2007. U.S. Equities have started the morning solidly higher, as geopolitical issues fade and on a strong weekly jobless claims report.

Asia:
Hang Seng Index -0.94%; Shanghai/Shenzhen 300 -1.08%; NIKKEI 225 -0.62%; BSE SENSEX 30 % +2.01%; Ho Chi Minh +2.28%; SET +2.47%

U.K. & Europe:
DJ STOXX 50 Index +0.68%; FTSE 100 -0.03%; CAC 40 +1.16%; DAX +0.79%; Russian RTX Index +1.07%


KEY HEADLINE NEWS

• Crude oil futures are testing the $53 mark today, after yesterday's distillate inventory build sent prices lower, a trend that continued overnight. OPEC's recent production cuts have not been fully complied with, and the group's leadership is urging its members to fully comply before it would consider initiating new production cuts. Crude oil inventory yesterday showed a draw, but the warm weather trends in North America and Europe have driven an unseasonable build in distillates. The reality that demand is weak, has led oil traders to the exits, and a strong technical base cannot be found until $50 to $49, in our view.
• The Bank of England unexpectedly raised interest rates 25 basis points today and the European Central Bank held rates steady. The Bank of England cited inflationary concerns, as a recent report showed consumer inflation at 2.7% in November. The Bank stated that it anticipated inflation would increase in the near term, before coming under control. The ECB held rates steady after raising them six times since December 2005, but it appears that economic growth in the region and wage pressures will lead the group to raise rates in this first quarter, in our view.
• President Bush's Iraq is not our fathers' Iraq. Last night, the president outlined his intensification plans for the country, which include troop build and military pressure on troublesome neighbors Iran and Syria. Those who argue to remove the troops as soon as possible, base that opinion on a view that Iraq's democracy will never be a Jeffersonian democracy. I don't know about that, but my father, an old carpenter/contractor, always told me, when you start a job, no matter how complicated it gets, you have to finish it, and finish it well. You owe that to the customer and to your own reputation. I draw similarities here, and I believe that despite the cost, America must see this effort through and properly.
• The new and enthused House of Representatives is hard at work. The House passed a minimum wage increase for the working class that would be implemented over a three year period. The legislative branch is expected to pass a bill for stem cell research, though the president vetoed a similar bill last year.
• Jobless claims for the week ended January 6 came in well below expectations at 299,000, signaling strength in employment. This confers with last week's Labor Department report showing 167,000 job additions in December.

We urge you to read our section within the sidebar, entitled "Headline News", for further important information for traders. (disclosure)