Morning Report: Global Gobaldiguk!

(Stocks in this article: NYSE: SPY, NYSE: DIA, Nasdaq: QQQQ, NYSE: VMW, NYSE: MRK, NYSE: FNM, NYSE: HMC, NYSE: TM, NYSE: GM, NYSE: F, Nasdaq: YHOO, Nasdaq: EBAY, NYSE: RTP, NYSE: NOK, NYSE: WMT)

If your most important customer stopped spending as much as he use to because of his own financial distress, how would your business be impacted? Thus, I continue to pound the table on this global gobaldiguk I hear too many pundits reaching for. Yes, the global economy softened the blow to U.S. multinationals, but in the end, even the multinationals butter there bread here at home. And so does the world! America remains the most important customer of the world economy. No matter how progressed Europe and Asia have become, or how much potential they hold, the current global situation remains one not dependent, but reliant on American economic health.

• European Distress - European finance ministers mostly agree with the IMF that the euro-zone will see sub-2% economic growth in 2008. While you would expect this to pressure the ECB to cut rates, eurobankers are currently more concerned about inflation in the region. With economic softness at hand, this handcuff Europe wears now is good for the dollar, since rising rates (to combat inflation) in Europe alongside declining rates here at home would further stress our currency. Regarding inflation, the signs are all too clear and all too common. After a recent scare on consumer prices, producer prices were reported today up 3.3% in Europe, ahead of consensus. The result also marked the fastest growth in a year's time. The culprits are well-known to us, food and energy. European bankers are on guard now, so the future direction of rates in the region will have much to do with economic health and prices. Oil slippage could lead European hawks into control of the situation, depending on timing as compared to economic softening.



• ICSC-UBS Weekly Same-Store Sales - Weekly same-store sales jumped 3.1%. Both periods exclude Black Friday, which I am fairly certain of, but please comment if I'm wrong. Depending on whether the ICSC uses the general final week of November, or uses exact dates, would play a role in driving the week's strength. Exact dates would mark the measured period as inclusive of November 25th to December 1st. It would seem to favor 2006, since it included the Saturday after Black Friday. Barring weather differences, I would have to attribute this strength to a tight consumer waking up to the holiday season having not spent much ahead of the unofficial start to the shopping period. As I presented on earlier occasion, it's the holidays and things have not gotten bad enough yet to prevent gift buying significantly, in my opinion. However, the retail environment is saturated in light of the stressed consumer situation in my view, and therefore competitively fighting for each retail dollar. Thus, discounting is more widespread, more aggressive and longer-lasting. Still, the main factor seems to be a late start to shopping. This data indicates to me that November's retail sales report will be weak. However, December's should present an upside surprise in my view. The market will not look ahead to that though, so I expect retailers to be again impacted by November's data, which will be released on December 13th. Individual retailers will report for the most part this Thursday.



• Tracking Oil - What's that song about "nothing else matters?" It's all about OPEC and inventory right now, and both news items break tomorrow. So, today oil trades on speculation, mostly that inventory might be in a beneficial trend (therefore bearish oil price trend), while OPEC might hold back production increases with oil price softening. These are offsetting factors, but maybe OPEC doesn't matter either over the longer term if demand is softening and inventory seems to be benefiting.



• Detroit's Distress - November Motor Vehicle Sales slightly exceeded consensus, but were far from healthy. General Motors (NYSE: GM) posted a big decrease, but it was related to its decision to cut fleet sales to rental companies and others. Ford (NYSE: F) and GM have cut production plans for '08 as a result. Fuel efficient vehicles are selling better than others, and this was likely behind Honda's (NYSE: HMC) sales rise of 4.7%. Toyota (NYSE: TM) also posted a slight increase.

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