MORNING BRIEFING
Stocks Seen Up Before Vote; Data Eyed
DJIA Futures 10604.0 +47.0 +0.4%
S&P 500 Futures 1131.7 +7.3 +0.6%
Nasdaq Futures 1518.0 +7.5 +0.5%
Above are as of 0556 ET
FTSE 100 4865.4 -4.9 -0.1%
Xetra DAX 5677.9 +17.2 +0.3%
CAC40 3960.5 -2.8 -0.1%
Above are as of 0556 ET
Nikkei 225 214.7 -5.9 -2.7%
Hang Seng 17682.4 -528.7 -2.9%
Above are closing prices
SNAPSHOT:
-Stocks seen higher; dollar lower; Treasurys seen higher; ICE Brent crude higher at $91.38; gold higher.
-Watch for Employment at 0830 ET; Treasury Undersecretary McCormick speaking on financial market turmoil in Philadelphia at 0930 ET; Treasury Assistant Secretary Swagel holding economic briefing in Washington at 1000 ET; ISM Non-Manufacturing Composite Index at 1000 ET; Treasury Undersecretary Kimmitt speaking at German unity day reception in Washington at 1900 ET.
U.S. MARKETS OUTLOOK: Stock futures are moderately higher ahead of the open with spreadbettors in the U.K. expecting some modest buying following Thursday's sharp selloff. "However, with non-farm payrolls due before the open it's going to be a difficult market to call," said Ian Griffiths, dealer at CMC Markets. "We're also waiting on progress of the Fed's bailout plan through the lower house but even if this is passed there's mounting concerns that the numbers involved might not be enough to get banks lending to each other again," Griffiths said.
EQUITIES: All eyes are on Washington with the House of Representatives set to vote again on the $700 billion rescue package.
According to The Wall Street Journal, Congressional leaders suggested lawmakers now appear more receptive to the rescue package, especially after witnessing the free-fall in financial markets that followed the collapse of the initial bill. However, few in House leadership were willing to predict passage when the bill comes to the floor.
Elsewhere on Wall Street, JP Morgan Chase & Co. (JPM) is emptying out the executive floor of Washington Mutual Inc.'s (WM) Seattle headquarters just a week after purchasing WaMu's banking assets, while American International Group (AIG) is scheduled to hold a conference call to discuss what business it will put up for sale and how it will repay government loans. JP Morgan stock is up 4.5% in Frankfurt, with WaMu 5.1% higher.
FOREX: Worries about a U.S. recession and concern that the U.S. House of Representatives could still reject the bank bailout package when it votes later in the day are pushing the dollar lower in Europe Friday. At 0530 ET, the dollar was down in Europe at Y105.10, while the euro had risen to $1.3861 and the pound rose to $1.7680.
BONDS: U.S. Treasurys trade higher in London Friday, buoyed by growing expectations of monetary easing of central banks. The move higher is limited ahead of the key September labor market report and the House of Representatives' vote on the government's revamped financial sector bailout bill. Non-farm payrolls are forecast to fall by 105,000, with the unemployment rate seen unchanged at 6.1%, due at 0830 ET. September non-manufacturing ISM, forecast 50.0, is due at 1000 ET. The benchmark Treasury yield curve steepens, with the 2-year/10-year benchmark yield spread widening to +202.5bp from +200.5bp Thursday. The 2-year note is up 2/32 at 100 26/32, yielding 1.58%, the 10-year note up 5/32 at 103 7+/32, yielding 3.605%, and the 30-year bond up 19/32 at 106 16+/32, yielding 4.115%.
Corporate bonds: European credit derivative indexes are weaker again Friday. After widening 20 basis points to close at 595 basis points Thursday, the Markit iTraxx Crossover index is at 608/612 basis points at 0515 ET. "We're another 15 basis points wider and the move is a continuation of yesterday's negative sentiment," says one high-yield trader. Cash markets are also "very weak." Deutsche Bank AG credit strategists say in a note that "the market is finally waking up to the fact that the real economy is in very deep trouble if the financial market stress continues." The progress of the TARP bill and U.S. non-farm payroll reading will be in focus.
COMMODITIES: Crude ticks higher in London Friday, after trading in negative territory for much of the session, gaining strength from a slightly weaker U.S. dollar. But traders remain cautious and the market is focusing its attention on U.S. employment data at 0830 ET, which may drive the dollar lower. Global markets will also have to price-in the House of Representatives "vote saga," says Olivier Jakob, analyst at Petromatrix, which might be pushed to a close early enough for the markets "not to have to go through another weekend of uncertainty."
At 0532 ET, ICE November Brent was trading up 82 cents at $91.38 a barrel, while Nymex November WTI traded up 83 cents at $94.80 a barrel.
Spot gold is trading between $830 a troy ounce and $845/oz and the day ahead is likely to be extremely volatile with traders again keeping a close eye on the dollar, says TheBullionDesk analyst James Moore. He says, however, that a sharp fall in U.S. payrolls could see the greenback reverse some of its recent gains, giving gold an end of week boost, adding that chart indicators show negative momentum, with a failure to hold the $830/oz level likely to see gold testing $820/oz, then $818/oz and below that $805/oz.
At 0529 ET, spot gold traded at $840.40 an ounce, up 0.6% from late Thursday in New York, while silver was at $11.21, up 3.9% from Thursday's close.