Central Bankers Kick into Action

[Excerpted from Bill Cara's Daily Report]

If Tuesday stemmed the global flood tide of equity prices, Wednesday will be even better. Surprised at the extreme negative reaction to the World Bank report on recession, and its likely impact on commodity prices, central bankers kicked into action. The European Central Bank unveiled a Euro443 billion one-year re-fi program at 1%, which will provide the funds needed to relieve pressures in the credit markets. Equity prices and commodity prices are now expected to lift.

Tuesday, however, as traders were tentatively awaiting the ECB and FOMC reports, there was little action in equity markets. At the close, the DJIA (8,322.91 -16.10 -0.19%), S&P 500 (895.10 +2.06 +0.23%), and the NASDAQ (1,764.92 -1.27 -0.07%) were flat.

The Toronto Composite (9,896.72 +62.54 +0.64%) managed a gain, but the Toronto Venture Board (1,074.18 -4.48 -0.42%) traded lower.

Earlier in the day Wednesday, Austral-Asian markets were strong however as traders sensed the central bank easing to come today. Japan’s Nikkei 225 (9,590.3 +0.43%), Hong Kong (17,892.2 +2.02%), Shanghai (2,922.3 +1.02%), Aussie All Ordinaries (3,802.2 +0.24%) and India’s BSE 30 (14,422.7 +0.69%) were all higher.

Later on the European equity bourses, prices are also higher. The French CAC (3,138.8 7:00AM ET +0.70%), German DAX (4,745.4 6:45AM ET +0.81%) and UK FTSE 100 (4,236.5 6:44AM ET +0.15%) were up, but tentatively so as it will not be until 2:15pm ET (ie, with markets closed in Europe) until FOMC reports.

In quiet US trading Tuesday, all sectors and industries were unremarkable. The best performing sectors were Basic Materials and Financials (XLB+1.3%, XLF+1.2%), while the loser was Consumer Discretionary (XLY -1.2%).

The leading industry group was the Goldminers ($XAU +4.1%), while Retailers ($RLX -1.8%) were losers.

Cara 100s that gained the most were the usual high-beta group of Russia’s Vimpel-Communications, Peruvian goldminer Buenaventura, and Canada’s Teck Corp (VIP+8%, BVN+7.1%, and TCK+6.5%). These winners were the prior day’s losers (VIP -12.9%), (TCK -11.9%), and (BVN -9.2%). Yesterday’s losers were Boeing, with a nightmarish Dreamliner that can’t yet fly (BA-6.5%), and Myriad Genetics (MYGN-3.5%) and Indian bank HDFB (HDB-3.2%).

The $USD tumbled against all the major currencies Tuesday (79.84 -0.94 -1.16%). The Yen (105.05 +0.75 +0.72%), Cdn Dollar (86.95 +0.31 +0.36%), the Euro (140.81 +2.24 +1.62%), and British Pound (164.56 +1.16 +0.71%) were all very strong against the Dollar as the Fed moved in to support the huge Treasury offering of 2-year notes. Today and tomorrow will be more huge offerings of 5- and 7-year notes.

In US bond market trading, the US Treasuries followed up the gains on Friday and Monday with another gain. Tuesday, the US long Bond were strong ($USB 117.20 +0.84 +0.73%). The yields for 30-year (4.373 -0.56 -1.26%), 10-year (3.640 -0.53 -1.44%), and 5-year (2.685 -0.24 -0.89%) pulled back even further from last Thursday’s strong gains. Treasury bill yields lifted even more to 0.195, as traders sold some in order to raise cash to buy the longer-term notes this week, reflecting the easing in credit markets and the less need to hold liquid paper.

$GOLD stemmed the losses of the prior day (925.40 +2.50 +0.27%). That was not much, but enough to spur buying among the miners ($XAU +4.1%).

With the weaker $USD, Crude Oil was stronger (69.24 +1.74 +2.58%).

The Euro was a tad softer Wednesday morning (1.4035 -0.0041 -0.29% 07:40am ET), but still higher than this time yesterday.

Spot gold, palladium, platinum and silver are presently stronger at: (926.73 +2.68 +0.29% 07:54am ET); (235 +2 +0.86% 07:52am ET); (1162.0 +3.0 +0.26% 07:54am ET); and (13.91 +0.06 +0.43% 07:54am ET), respectively, with silver again leading the move higher.

US equity futures for the DJIA are indicating a higher opening this morning (8293 +36 +0.44% 07:40am ET).

Comments

[Prudent Man...:]

What do Central Bankers produce? Profits for their Cronies and inflation and higher taxes for the middle class.

It is a pathetic World Economy if it depends upon a bunch of statists, plutocrats, political economists and collectivist academics. Where have all of the entrepreneurs gone who graduated from the school of hard knocks?

Is at any wonder why we have become a country of entitlement hungry, unproductive spoiled brats who are over-degreed and under-educated?

Jun 24 12:34 PM

[sarge 907:]

Who can say it better than "Prudent Man."

Jun 25 09:43 AM