- Honda Motor Co., the world’s largest motorcycle maker, and manufacturers of industrial goods and electronics in Brazil plan to trim output as demand slows and a plunge in the value of the local currency boosts costs, a union official said.“We expect other companies to make similar decisions,” Sena said.“I haven’t seen anything like this in at least seven years.”The Brazilian real has lost 27% against the US dollar since the start of August, the biggest loser among the 16 most-traded currencies tracked by Bloomberg.Consumer demand will probably cool in coming months as the weaker currency hurts confidence, said Roberto Padovani, chief economist at Banco WestLB do Brasil in Sao Paulo.
- Abu Dhabi continues to be interested in investing in Europe and the US in spite of the current financial crisis, citing Khaldoon Al Mubarak, head of Mubadala, an investment arm of Abu Dhabi.Abu Dhabi is also still interested in possibly investing in the banks of the regions, citing Mubarak.
- The Monthly Budget Surplus for September is estimated to fall to $45.0 billion versus $112.9 billion in August.
Upcoming Splits - None of note
Other Potential Market Movers - The weekly retail sales reports, Lazard Alternative Energy Conference, Wachovia Consumer Growth Conference, IBD/TIPP economic optimism index and (JCI) analyst presentation could also impact trading today.
BOTTOM LINE: Asian indices are sharply higher, boosted by financial and commodity stocks in the region. I expect US equities to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 100% net long heading into the day.
BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Biotech longs, Internet longs, Computer longs and Medical longs. I took some profits in a few technically extended trading longs and added to some laggard longs today, thus leaving the Portfolio 100% net long. The tone of the market is very positive as the advance/decline line is substantially higher, almost every sector is rising and volume is above average. Investor anxiety is still very elevated. Today’s overall market action is very bullish. The VIX is falling 18.43%, but is still historically elevated at 57.48. The ISE Sentiment Index is low at 99.0 and the total put/call is around average at .90. Finally, the NYSE Arms has been running high most of the day, hitting 1.5 at its intraday peak, and is currently 1.16. The Euro Financial Sector Credit Default Swap Index is falling 10.15% today to 95.24 basis points. This index is up from a low of 52.66 on May 5th, but down from 157.81 on Sept. 16th. The North American Investment Grade Credit Default Swap Index is falling 3.8% to 186.0 basis points. The TED spread is falling 1.43% to 4.57 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is rising 11 basis points to 1.04%, which is down 159 basis points in just over three months and at the lowest level since February 1999.Many growth stock leaders are up 12-20% today, significantly outperforming the broad market.The best growth stocks that can grow at a relatively high rate even during a recession have very likely already seen their lows and will be substantially higher over the next year.I also suspect the major averages have at the very least bottomed for this year.How quickly credit markets improve will likely determine if a retest of the broad market lows occurs at some point next year.As of now, I see a full retest as an unlikely scenario. We are getting very extended short-term, but another surge is likely deeper into earnings season as investors buy the bad news.Forward earnings guidance will be very poor, but an extreme amount of bad news has already been factored into most stock prices at current levels, in my opinion.Given extreme economic fears of late and so much talk of “re-inflating” the economy, gold trades very poorly.As credit markets return to more normal behavior and fear subsides, I expect gold to see a meaningful decline in gold over the intermediate-term as the US dollar continues to firm, demand falls and the secular trend of disinflation remains firmly in tact.Nikkei futures indicate an +725 open in Japan and DAX futures indicate an +157 open in Germany tomorrow. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, less financial sector pessimism, diminished forced selling, bargain-hunting and technical buying.
- The cost of protecting bank bonds from default fell as the U.K. bailed out Royal Bank of Scotland Group Plc, HBOS Plc and Lloyds TSB Group, and governments across Europe announced coordinated action to avert financial collapse. Credit-default swaps on the Markit iTraxx Financial index of 25 European banks and insurance companies dropped 11 basis points to 98, the lowest in three weeks, according to JPMorgan Chase & Co. prices at 10:45 a.m. in London.The U.S. Federal Reserve, European Central Bank and the Bank of England will offer financial institutions unlimited dollar funds for the first time in an attempt to ease tensions in money markets. The Group of Seven finance chiefs, meeting in Washington over the weekend, vowed to take ``all necessary steps to unfreeze credit and money markets.'' Germany is preparing its own rescue plan that may total as much as 400 billion euros ($540 billion).Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-risk, high-yield credit ratings decreased 30 basis points to 700, having reached a record 750 last week, JPMorgan prices show. The Markit iTraxx Europe index of 125 companies with investment-grade ratings fell 7 basis points to 131.The Markit iTraxx credit-default swap index of 50 investment-grade Asian borrowers outside Japan was down 35 basis points at 295 as of 5:30 p.m. in Hong Kong, Barclays Capital prices show. The Asian high-yield benchmark declined 75 basis points to 875.
- The European bank rescue plan laid out yesterday in Paris should enable confidence to be restored, Dominique Strauss-Kahn, the chief of the IMF, said.“What has been done over the last three days should provide elements of reassurance,” Strauss-Khan said.The worst of the financial crisis “may be behind us,” he added.The IMF will submit proposals to reform the financial system, including tighter control of hedge funds through the banks that provide them with debt, he said.
- Eastern European countries, already financially overstretched, are facing a pullback by lenders and investors, which may threaten to burst economic bubbles in the Balkans and trigger a major slump in Hungary and the Baltic states, citing fund managers and economists.Many of those countries had borrowed heavily from overseas lenders to finance business activity and consumer spending.
- Chinese coal demand is falling and will probably cut hiring ships that haul the fuel, citing an official at China’s Ministry of Communications.Demand for electricity, coal and crude oil peaked in July and has weakened since August, citing Jia Dashan, director of the transportation research and consultant department at the Waterborne Transportation Institute.Qinghuangdao port has 8.3 billion metric tons of coal, close to its capacity of 9 million tons.
Rzeczpospolita: - Polish central bank Governor Slawomir Skrzypek said the European Union’s largest eastern member may have to change its 2011 target date for euro-adoption due to the global financial crisis.“The current situation inclines us to rethink the euro-adoption data,” Skrzypek said.
Interfax:
- Russia’s trade surplus shrank 26% in September to $13.7 billion.Exports in September dropped 9% from the month before to $41.3 billion and imports rose 3% to $27.6 billion, citing an official.
Valor Economico: - Brazilian consumers are cutting back on spending and credit-card use, citing a survey by Qualibest.55% of respondents said the global credit crisis affected their spending patterns, according to the survey.
