Today's Market Focus

[setravis]

Friday, October 15, 2010...

Today's Market Focus

•   December 10-year T-notes this morning are down -1 tick. Dec 10-year T-note prices yesterday slipped to a 1-week low and settled down -17.5 ticks at 126-215. Bearish factors included (1) the larger-than-expected increase in Sep producer prices (PPI +0.4% m/m and +4.0% y/y versus expectations of +0.1% m/m and +3.7% y/y), (2) hawkish comments from Richmond Fed President Lacker who said that a Fed policy devoted primarily to reducing unemployment risks damaging the central bank's credibility in containing inflation, which suggests he will not support any further Fed easing measures, and (3) weak demand for the Treasury's $13 billion auction of 30-year T-bonds that had a bid-to-cover ratio of 2.49, the lowest in 8 months and below the 2.70 average of last 10 auctions. Bullish factors included (1) the unexpected increase in weekly initial US unemployment claims (+13,000 to 462,000 versus expectations of unchanged at 445,000), and (2) the larger-than-expected widening of the Aug US trade balance which is negative for US Q3 GDP (-$46.3 billion versus expectations of -$44.0 billion).

•   The dollar index this morning is weaker with the dollar/yen -0.29 yen and the euro/dollar -0.08 cents. The dollar index yesterday sank to a 10-month low and finished lower. Bearish factors included (1) strength in the euro which climbed to an 8-1/2 month high against the dollar after Germany's leading economic institutes revised up their German growth forecasts for 2010 and 2011, (2) the unexpected increase in weekly initial US unemployment claims, which adds to speculation the Fed will increase its quantitative easing measures, and (3) the larger-than-expected widening of the Aug US trade balance. Bullish factors included (1) comments from Richmond Fed President Lacker who said that a Fed policy devoted primarily to reducing unemployment risks damaging the central bank's credibility in containing inflation, which suggests he will not support any further Fed easing measures, and (2) speculation that Japan is closer to further intervention in the currency market to sto p the rising yen which rallied to a 15-year high against the dollar.

•   November crude oil prices this morning are trading -2 cents a barrel and November gasoline is +0.31 of a cent per gallon. Nov crude oil prices yesterday erased an early rally and closed lower by -$0.32 a barrel. Nov gasoline closed lower by -2.06 cents per gallon. Bearish factors included (1) the unexpected increase in weekly US initial unemployment claims, which suggests that the labor market and fuel demand will struggle to recover, (2) weakness in equities which dampened optimism for the economic outlook and energy demand, and (3) slack demand after the DOE reported that fuel consumption decreased -0.7% to 18.3 million barrels a day in the week ended Oct 8, the lowest level in 10 months. Bullish factors included (1) the slump in the dollar index to a 10-month low, (2) the action by OPEC to leave its production levels unchanged following the conclusion of its meeting, (3) comments from Saudi Oil Minister Ali al-Naimi who said demand for oil is "very healthy,&q uot; and (4) the unexpected decrease in weekly crude oil inventories (-416,000 bbl versus expectations of +1.45 million bbl).

[setravis]

Monday, October 18, 2010...

Today's Market Focus

•   December 10-year T-notes this morning are up +3.5 ticks. Dec 10-year T-note prices last Friday declined to a 2-week low and settled down -14 ticks at 126-215. Bearish factors included (1) the larger-than-expected increase in Sep retail sales and the upward revision to Aug (Sep +0.6% and +0.4% less autos versus expectations of +0.4% and +0.3% less autos and Aug revised up to +0.7% and +1.0% less autos from the previously reported +0.4% and +0.6% less autos), (2) the larger-than- expected increase in the Oct Empire manufacturing index which expanded at its fastest level in 4 months (+11.6 to 15.7 versus expectations of +1.9 to 6.0), and (3) an increase in inflation expectations on speculation that Fed efforts to spur the economy will reignite inflation. Bullish factors included (1) slack inflation pressures with the smaller-than-expected increase in Sep CPI (+0.1% m/m and +1.1% y/y versus expectations of +0.2% m/m and +1.2% y/y), (2) the smaller-than-expected increa se in core inflation (core CPI unchanged m/m and +0.8% y/y versus expectations of +0.1% m/m and +0.9% y/y) with the +0.8% y/y increase in Sep core CPI the smallest y/y gain since 1961, (3) comments from Fed Chairman Bernanke that additional stimulus may be warranted because inflation is too low and unemployment is too high, which signals the Fed will take additional easing measures as soon as the next FOMC meeting in Nov, (4) the unexpected decline in the Oct US University of Michigan consumer confidence (-0.3 to 67.9 versus expectations of +0.8 to 69.0), and (5) comments from Atlanta Fed President Lockhart who said that more quantitative easing "or another round of monetary stimulus at least would provide some certainty that the central bank is on the job and intends to take the necessary action to avoid" possible deflation.

•   The dollar index this morning is stronger with the dollar/yen -0.17 yen and the euro/dollar -0.81 cents. The dollar index last Friday fell to a 10-month low but erased its losses mid-morning and rallied sharply the rest of the day and finished higher. Bullish factors included (1) the stronger-than-expected Sep US retail sales and Oct Empire manufacturing index which signals a reduced need for further Fed easing and prompted short-covering in the dollar, and (2) the prediction from former Japanese vice finance minister Utsumi that the yen's gains against the dollar may be "coming to an end" as the market has already priced in another round of Fed easing. Bearish factors included (1) comments from Fed Chairman Bernanke that added to speculation the Fed will increase its asset purchases and embark on its second round of quantitative easing when he said "there would appear -- all else being equal -- to be a case for further action" because inflation is too low and unemployment is too high, (2) the prediction from Aviva Investors that the euro may rally to $1.45 per dollar by year-end on increased confidence that the ECB has succeeded in stabilizing financial markets from the sovereign-debt crisis.

•   November crude oil prices this morning are trading -14 cents a barrel and November gasoline is +0.81 of a cent per gallon. Nov crude oil prices last Friday fluctuated on either side of unchanged until the dollar rallied mid-morning which prompted a sell-off in crude the rest of the day and it finally settled down -$1.44 a barrel. Nov gasoline closed lower by -3.27 cents per gallon. Bearish factors included (1) a rebound in the dollar after the dollar index recovered from a 10-month low and closed higher, and (2) weakness in the stock market which dampens optimism in the economic outlook and energy demand. Bullish factors included (1) strong US economic data which eases concern that consumer spending will weaken and endanger the economic recovery and energy demand after Sep retail sales rose more-than-expected and the Oct Empire manufacturing index increased more than expected and expanded at its fastest pace in 4 months, (2) the prediction from Goldman Sachs for &quo t;substantially higher prices" for oil in the second half of 2011 and 2012 as the global inventory surplus is exhausted, (3) the prediction from Nomura International that crude oil prices may rise above $100 a barrel within the next year if the Fed enacts a second round of quantitative easing, and (4) data from the API that showed Sep US consumption of refined products rose +1.8% y/y, which signals that demand in recovering as the economy rebounds.

[setravis]

Tuesday, October 19, 2010...

Today's Market Focus

•   December 10-year T-notes this morning are down -2.5 ticks. Dec 10-year T-note prices yesterday moved higher and closed up +21 ticks at 126-285. Bullish factors included (1) the unexpected fall in Sep industrial production which posted its first monthly decline in 15 months (-0.2% versus expectations of +0.2%), (2) dovish comments from Chicago Fed President Evans who said the US is in a "bona fide liquidity trap" and needs "much more" monetary accommodation in the face of high unemployment and inflation that's too low, along with comments from Boston Fed President Rosengren who said "insuring against the risk of deflation may be much cheaper than" trying to eradicate it after it takes hold, which signals both Fed members would support further quantitative easing measures, (3) strong foreign demand for US Treasuries after data from the Treasury Department showed total foreign purchases of US T-notes and bonds were $117 billion in Aug com pared with $30 billion of purchases in July, (4) the Fed's action to buy $6.26 billion of Treasuries as part of its program to reinvest the principal payments on its mortgage holdings into long-term US debt to prevent money from being drained from the financial system, and (5) the prediction from Bank of America Merrill Lynch that 10-year T-note yields may fall as low as 2% after the Nov Congressional elections prompt a Republican takeover of Congress and force gridlock that will restrain government spending. Bearish factors included (1) the larger-than-expected increase in the Oct NAHB housing market index (+3 to 16 versus expectations of +1 to 14), and (2) reduced safe-haven demand for Treasuries after the 3-month Euribor rate increased to a 15-month high of 1.00%, the same level as the ECB's 2-week refinancing rate, which signals greater willingness by financial institutions to lend to each other.

•   The dollar index this morning is higher with the dollar/yen +0.24 yen and the euro/dollar -0.47 cents. The dollar index yesterday rallied off of its low late in the day and closed slightly lower. Bullish factors included (1) comments from Treasury Secretary Geithner who said the US will preserve confidence in a "strong dollar" and "will not engage" in currency devaluation, (2) euro negative comments from ECB President Trichet who said he rejects fellow ECB Member Weber's call to end the central bank's bond purchase program when he said that Weber's opinion "is not the position of the Governing Council with an overwhelming majority," (3) strong foreign demand for US dollar assets after the Aug net long-term TIC flows increased by the most in 5 months, and (4) the recommendation from Royal Bank of Scotland for investors to cover dollar shorts on their prediction that the dollar might rebound because the Fed may add less monetary stimulus tha n the market is expecting. Bearish factors included (1) strength in the euro on comments from ECB Council member Nowotny who said "the ECB has no exchange rate goal, therefore there also isn't any intention to intervene" in the foreign-exchange markets, which signals the ECB will allow further strength in the euro, (2) strength in the yen on speculation Japan will refrain from intervening to weaken its currency ahead of this week's G-20 policy meeting in South Korea, and (3) dollar negative comments from Chicago Fed President Evans who said the US is in a "bona fide liquidity trap" and needs "much more" monetary accommodation in the face of high unemployment and inflation that's too low, along with comments from Boston Fed President Rosengren who said "insuring against the risk of deflation may be much cheaper than" trying to eradicate is after it takes hold, which signals both Fed members would support further expansion of the Fed's balance sheet.

•   November crude oil prices this morning are trading -83 cents a barrel and November gasoline is -2.88 cents per gallon. Nov crude oil prices yesterday fell to a 1-week low but erased their losses mid-morning and rallied the rest of the day and settled up +$1.83 a barrel. Nov gasoline dropped to a 1-1/2 week low but shed its losses and closed higher by +4.77 cents per gallon. Bullish factors included (1) the weake rdollar, (2) the 2-week long strike by refinery workers in France which has led to 15% of France's service stations without fuel, and (3) the prediction from Bank of America Merrill Lynch that quantitative easing by the Fed may weaken the dollar further and push crude oil prices to $100 a barrel in 2011. Bearish factors included (1) the unexpected-decline in Sep US industrial production which indicates weakened fuel consumption, and (3) the prediction from Bache Commodities Ltd. that "energy demand hasn't returned sufficiently to ensure prices stay above $80 a barrel."

[setravis]

Wednesday, October 20, 2010...

Today's Market Focus

•   December 10-year T-notes this morning are down -6 ticks. Dec 10-year T-note prices yesterday traded weaker into early afternoon and then rallied into the close and settled up +4.5 ticks at 127-010. Bullish factors included (1) the unexpected decline in Sep US building permits which tumbled to a 17-month low (-5.6% to 539,000 versus expectations of +0.7% to 575,000), (2) comments from Atlanta Fed President Lockhart who said he is "leaning in favor of support" for further quantitative easing as the economy remains in a "touch-and-go" mode, (3) comments from Dallas Fed President Fisher who said the US economy is operating at close to "stall speed," and (4) increased safe-haven demand for Treasuries after the stock market slumped. Bearish factors included (1) the unexpected increase in Sep US housing starts which rose to their best level in 5 months (+0.3% to 610,000 versus expectations of -3.0% to 580,000), (2) weakness in the long-end o f the curve (i.e., 10-year T-notes and 30-year T-bonds) on concerns that Fed action to stimulate economic growth will increase inflation, and (3) comments from Chicago Fed President Evans who said he is in favor of raising inflation temporarily buy increasing asset purchases.

•   The dollar index this morning is weaker with the dollar/yen -0.29 yen and the euro/dollar +0.97 cents. The dollar index yesterday rallied to a 2-week high and finished sharply higher. Bullish factors included (1) reduced investor demand for riskier assets and increased safe-haven demand for the dollar on concern that China's action to increase interest rates will lead to a slowdown in global economic growth, (2) weakness in the euro which dipped to a 2-week low against the dollar after the Oct German ZEW economic sentiment survey fell more-than-expected to a 21-month low, and (3) the prediction from JPMorgan Asset Management that any further strength in the euro is unlikely because a stronger euro will reopen divisions between Euro-Zone nations and put political pressure on the ECB. Bearish factors included (1) dollar negative comments from EU Economic and Monetary Affairs Commissioner Rehn who said the recovery in the US "appears to be running out of steam," ; (2) comments from Atlanta Fed President Lockhart who said he is "leaning in favor of support" for further quantitative easing as the economy remains in a "touch-and-go" mode, (3) comments from Chicago Fed President Evans who said the Fed would need to buy securities on a large scale several times to carry out his preferred strategy of aiming to raise inflation temporarily, and (4) the prediction from Bank of Tokyo Mitsubishi UFJ that dollar strength will be limited while speculation about a second round of quantitative easing from the Fed persists.

•   November crude oil prices this morning are trading +77 cents a barrel and November gasoline is +1.57 cents per gallon. Nov crude oil prices gave back Monday's gains and then some as they finished sharply lower by -$3.59 a barrel. Nov gasoline closed lower by -10.32 cents per gallon. Both Nov crude oil and Nov gasoline fell to 2-week lows. Bearish factors included (1) the rally in the dollar index to a 2-week high, (2) the action by China to raise its benchmark lending and deposit rates for the first time since 2007, fueling speculation the action will reduce economic growth and energy demand in the world's biggest energy-using country, (3) weakness in global equity markets which dampens optimism in the economic outlook and energy demand, and (4) the outlook for weekly crude stockpiles to climb in Wednesday's weekly DOE inventory report. Bullish factors included (1) the unexpected increase in Sep US housing starts, which may boost the economic outlook and fuel demand , and (2) the prediction from UBS AG that commodities, including crude oil, will rally if the Fed expands its quantitative easing program next month. Expectations for Wednesday's weekly DOE inventory report are for crude oil supplies to increase +1.5 million bbl, gasoline stockpiles to fall -1.5 million bbl, distillate inventories to draw down -1.0 million bbl and the refinery capacity rate to rise +0.3 to 82.2%.

[setravis]

Thursday, October 21, 2010...

Today's Market Focus

•   December 10-year T-notes this morning are down -4 ticks. Dec 10-year T-note prices yesterday traded mixed throughout the day and finally settled up +0.5 of a tick at 127-015. Bullish factors included (1) the Fed's Beige Book that said the economy expanded at a "modest pace" in Sep and early Oct with overall US "hiring remaining limited, with many firms reluctant to add permanent payrolls given economic softness," and that housing markets were "weak," with "sluggish or declining" sales in many regions, (2) the prediction from Mitsubishi UFJ Asset Management that "QE2 is a done deal" and that the yield on the 10-year T-note will fall to a record low 1.75% this year when the Fed signals that it will keep its bond purchases to $100 billion a month or less to prevent inflation from picking up, and (3) speculation that the Treasury will announce on Thursday that it intends to sell $97 billion in 2, 5, and 7-year T-notes n ext week, its smallest monthly offering of the securities since Feb 2009 which reduces supply pressures. Bearish factors included (1) comments from Philadelphia Fed President Plosser who said he sees the inflation rate moving up in 2011 and he doubts the benefits of further easing will outweigh its costs, and (2) reduced safe-haven demand for Treasuries as the stock market strengthened.

•   The dollar index this morning is weaker with the dollar/yen -0.05 yen and the euro/dollar +0.68 cents. The dollar index yesterday sold-off and finished sharply lower. Bearish factors included (1) strength in the euro after ECB Executive Board member Stark was reported in the German newspaper Die Welt as saying the ECB shouldn't buy government bonds in markets that are functioning and that too loose a monetary policy can reduce incentive for governments to implement fiscal consolidation, (2) the prediction from Deutsche Bank AG that the dollar may depreciate to $1.50 per euro in the next 3 to 6 months as the "contrast between the ECB and the Fed keeps pressure on the dollar," (3) a report by Medley Global Advisors, a consulting firm used by hedge funds, that said the Fed will buy back more assets than expected, and (4) the recommendation by Citigroup for investors to go long the euro against the dollar with its prediction that the euro will retest its Nov 2009 high of $1.5145. Bullish factors included (1) comments from the Acting Director of the IMF that the strengthening euro is bringing the currency close to "overvaluation" and may begin to hurt the Euro-Zone economy, and (2) the assumption from Bank of New York Mellon that China's action to hike its lending and deposit rates along with "strong dollar" comments from Treasury Secretary Geithner may indicate the nations have reached a currency accord.

•   December crude oil prices this morning are trading -21 cents a barrel and December gasoline is -0.02 of a cent per gallon. Dec crude oil prices yesterday moved higher and finished up +$2.38 a barrel. Dec gasoline fell to a 3-week low but recovered its losses and closed higher by +4.02 cents per gallon. Bullish factors included (1) the plunge in the dollar, (2) the smaller-than-expected increase in weekly crude inventories (+667,000 bbl versus expectations of +1.5 million bbl), (3) the larger-than-expected decline in weekly distillate inventories (-2.15 million bbl versus expectations of -1.5 million bbl), and (4) the rally in the stock market which boosts confidence in the economic outlook and energy demand. Bearish factors included (1) the unexpected increase in weekly gasoline inventories (+1.15 million bbl versus expectations of a -1.5 million bbl draw), and (2) the prediction from Cameron Hanover Inc. that technical studies point to crude prices extending their r ecent decline below $80 a barrel after prices dropped out of a "consolidation range."

[setravis]

Friday, October 22, 2010...

Today's Market Focus

•   December 10-year T-notes this morning are trading unchanged. Dec 10-year T-note prices yesterday ratcheted lower throughout the day and settled down -13 ticks at 126-205. Bearish factors included (1) the larger-than-expected drop in weekly initial unemployment claims (-23,000 to 452,000 versus expectations of -7,000 to 455,000), (2) early strength in the stock market after the S&P 500 rallied to a 5-1/2 month high, which reduced the safe-haven demand for Treasuries, and (3) hawkish Fed commentary which reduces the chance of additional quantitative easing after Richmond Fed President Lacker said a new round of quantitative easing "would be a hard case to make," while Philadelphia Fed President Plosser said he's "less concerned about deflation risks" than some policy makers. Bullish factors included (1) the weaker-than-expected Oct Philadelphia Fed manufacturing index (+1.7 to 1.0 versus expectations of +2.7 to 2.0), and (2) reduced supply pr essures after the Treasury cut the sizes of its monthly 2-year, 5-year and 7-year T-note auctions, the sixth straight month the Treasury has reduced the offering size of the 3 maturities.

•   The dollar index this morning is slightly higher by +0.05 points with the dollar/yen down 0.11 yen and the euro/dollar up 0.12 cents. The dollar index yesterday recovered from early losses and finished higher. Bullish factors included (1) short-covering in the dollar ahead of this weekend's G-20 meeting in South Korea, (2) comments from Treasury Secretary Geithner who said the major currencies are "roughly in alignment now," and (3) comments from Richmond Fed President Lacker who said a new round of asset purchases by the Fed "would be a hard case to make" with economic growth in line with his outlook. Bearish factors included (1) strength in the euro after the Oct Euro-Zone manufacturing PMI unexpectedly increased (+0.4 to 54.1 versus expectations of -0.5 to 53.2), along with the action by the German government to raise its GDP projections for Germany this year and next year, and (2) the prediction from Deutsche Bank AG that the 3-6 month outlook for the dollar is "clearly negative" as it raised its year-end estimate for the euro to $1.45 from an earlier estimate of $1.30.

•   December crude oil prices this morning are trading up 53 cents a barrel and December gasoline is up 1.93 cents per gallon on some short-covering after yesterday's steep losses. Dec crude oil prices yesterday weakened throughout the day and settled down -$1.98 a barrel. Dec gasoline closed lower by -4.29 cents per gallon. Bearish factors included (1) strength in the dollar which rebounded from early losses and finished higher, (2) a slowdown in Chinese refinery demand growth after Chinese refiners processed about 8.5 million barrels of crude oil a day in Sep, up +6.6% y/y, but the smallest increase in 1-1/2 years, and (3) the weaker-than-expected Oct Philadelphia Fed index which shows manufacturing activity on the US east coast barely expanding and signals weakened energy consumption. Bullish factors included (1) the early rally in the S&P 500 to a 5-1/2 month high, which boosted confidence in the economic outlook and energy demand, and (2) the action by the Germ an government to raise its economic growth forecast for this year to 3.4% annualized from a previous forecast of 1.4% and to raise its 2011 growth estimate to 1.8% annualized from a prior projection of 1.6%, which signals increased fuel consumption in Europe's largest economy.

[setravis]

Tuesday, 26 Oct 2010...

Today's Market Focus

December 10-year T-notes this morning are trading down -11 ticks. T-note prices yesterday traded higher early but shed their gains throughout the day and setled unchanged: TYZ10 unchanged, FVZ10 -4.7, EDH11 +1.5. Bullish factors included (1) increased speculation the Fed will expand its balance sheet and announce a second round of quantitative easing at next week's FOMC meeting, (2) the prediction from Goldman Sachs that the Fed may purchase $2 trillion of assets in its QE2 program which will start when it announces $500 billion of asset purchases on Nov 3, and (3) strong demand for the Treasury's $10 billion auction of 5-year TIPS that had a bid-to-cover ratio of 2.84, much better than the 2.38 average of the last 10 auctions. Bearish factors included (1) the larger-than-expected Sep existing home sales (+10% to 4.53 million versus expectations of +4.1% to 4.30 million), and (2) reduced safe-haven demand for Treasuries as the stock market rallied.


The dollar index this morning is trading higher with the dollar/yen +0.34 yen and the euro/dollar -0.37 cents. The dollar index yesterday slumped to a 1-week low and settled moderately lower: Dollar Index -0.334, USDJPY -0.542, EURUSD +0.00374. Bearish factors for the dollar included (1) the surge in the yen to a 15-year high against the dollar on skepticism the Group of 20 pledge to refrain from "competitive devaluation" and to let markets set foreign-exchange values will halt the dollar's decline, and (2) the prediction from Goldman Sachs that the Fed may purchase $2 trillion of assets in its QE2 program which will start when it announces $500 billion of asset purchases on Nov 3. Bullish factors included (1) euro negative comments from Bundesbank President and ECB Council member Weber who said "it will take at least until next year, if not 2012, for the German economy to reach pre-crisis levels," and that German GDP growth will be about 0.5% in Q3 and Q4 this year, considerably weaker than the 2.2% rate reached in Q2, and (2) comments from ECB Executive Board member Tumpel-Gugerall who said the ECB's monetary policy is "still appropriate," which suggests she favors no tightening of ECB monetary policy anytime soon.


December crude oil prices this morning are trading -2 cents a barrel and December gasoline is -0.21 of a cent per gallon. Crude oil and gasoline prices yesterday settled higher for a second day: CLZ10 +$0.83, RBZ10 +1.330. Bullish factors included (1) the slump in the dollar index to a 1-week low, (2) the rally in the S&P 500 Stock Index to a 5-3/4 month high, which bolsters confidence in the economic outlook and energy demand, the statement from union officials in France who said that strikes at French refineries will extend at least until Oct 28, which may curtail European fuel exports to the US. Bearish factors included (1) the prediction from tanker-tracker Oil Movements that OPEC will increase crude shipments by +1.2% to 23.33 million barrels a day in the four weeks to Nov 6, and (2) concerns that Chinese energy demand may wane after the statement from China's National Energy Administration that said China's energy demand may slow further as the government takes steps to meet conservation targets and slows power consumption by heavy industries.

[setravis]

Wednesday, October 27, 2010...

Today's Market Focus

•   December 10-year T-notes this morning are trading -13.5 ticks after a WSJ report fueled speculation the Fed may announce a much smaller-than-expected asset-purchase program next week. T-note prices yesterday slumped to a 3-week low and finished near their lows: TYZ10 -22.5, FVZ10 -11.7, EDH11 -2.0. Bearish factors included (1) the larger-than-expected increase in Oct US consumer confidence (+1.6 to 50.2 versus expectations of +1.4 to 49.9), (2) the unexpected increase in the Aug FHFA house price index which gained for the first time in 3 months (+0.4% m/m versus expectations of -0.2% m/m), (3) hawkish comments from Kansas City Fed President Hoenig who said he opposes the idea of additional quantitative easing by the Fed because it may accelerate inflation and create asset price bubbles, and (4) supply pressures ahead of the Treasury's $35 billion auction of 5-year T-notes on Wed. Bullish factors included (1) the weaker-than-expected Aug S&P/CaseShiller compos ite-20 home price index (-0.3% m/m and +1.7% y/y versus expectations of -0.2% m/m and +2.1% y/y), (2) dovish comments from New York Fed President and Fed Vice Chairman Dudley who said that there is a powerful case for additional "quantitative easing," and (3) decent demand for the Treasury's $35 billion auction of 2-year T-notes that had a bid-to-cover ratio of 3.43, higher than the 3.23 average of the last 12 auctions.

•   The dollar index this morning is trading higher with the dollar/yen +0.15 yen and the euro/dollar -0.60 cents. The dollar index yesterday finished higher: Dollar Index +0.570, USDJPY +0.619, EURUSD -0.0107. Bullish factors for the dollar included (1) weakness in the yen after Japanese Vice Finance Minister Igarashi said currency-market intervention is most effective when it's a "surprise," which suggests that Japan may be prepared to act again to stem the yen's advance, (2) weakness in the euro on renewed sovereign-debt concerns after the CEO of PIMCO said Greece is likely to default over the next 3 years because budget-cutting won't be enough to reduce the nation's debt burden, and (3) comments from Kansas City Fed President Hoenig who said he opposes the idea of additional quantitative easing by the Fed because it may accelerate inflation and create asset price bubbles. Bearish factors included (1) euro supportive comments from ECB Council member Quaden who said a stronger euro is helping to ease inflation risks in the Euro-Zone, (2) comments from the CEO of the European Financial Stability Facility who said "the worst of the crisis in Europe is behind us" and that budget-austerity policies are "in place" across the region, (3) comments from ECB Council member Mersch who said the ECB may revise up its forecasts for economic growth in the Euro-Zone when it issues new projections in Dec, and (4) comments from Fed Vice Chairman Dudley who said there is a powerful case for additional "quantitative easing" as the economy is growing too slow to reduce unemployment significantly and inflation is low and falling.

•   December crude oil prices this morning are trading -77 cents a barrel and December gasoline is -1.47 cents per gallon. Crude oil and gasoline prices yesterday fluctuated on either side of unchanged the entire day and finally settled higher for a third day: CLZ10 +$0.03, RBZ10 +0.990. Bullish factors included (1) the better-than-expected Oct US consumer confidence, which may lead to increased fuel demand, and (2) the larger-than-expected expansion of Q3 UK GDP which indicates greater-than-expected energy consumption in Great Britain. Bearish factors included (1) the stronger dollar, (2) the action by the Chinese government to raise retail gasoline and diesel prices by 3%, which may lead to reduced demand and consumption of crude oil and its products, and (3) the outlook for an increase in US crude and gasoline supplies when the DOE reports its weekly inventories Wednesday. Expectations for Wednesday's weekly DOE inventory report are for crude oil supplies to increase +1.0 million bbl, gasoline inventories to climb +500,000 bbl, distillate stockpiles to fall -1.5 million bbl and the refinery capacity rate to increase +0.3 to 82.8%.

[setravis]

Thursday, October 28, 2010...

Today's Market Focus

•   December 10-year T-notes this morning are trading up +8.5 ticks. T-note prices yesterday fell to a 1-1/4 month low and finished with moderate losses: TYZ10 -16, FVZ10 -7.5, EDH11 unchanged. Bearish factors included (1) reduced expectations for the amounts of additional Fed quantitative easing after the WSJ reported the Fed next week is likely to offer a program of Treasury purchases worth only a few hundred billion dollars over several months, lower than some market estimates of Fed bond purchases up to $2 trillion, (2) the stronger-than-expected Sep new home sales (+6.6% to 307,000 versus expectations of +4.2% to 300,000), and (3) supply pressures ahead of the Treasury's $29 billion auction of 7-year T-notes on Thursday. Bullish factors included (1) the unexpected decline in Sep durable goods orders ex transportation (-0.8% versus expectations of +0.5%), and (2) decent demand for the Treasury's $35 billion auction of 5-year T-notes that had a bid-to-cover ratio of 2.82, higher than the 2.75 average of the last 12 auctions.

•   The dollar index this morning is trading lower with the dollar/yen -0.45 yen and the euro/dollar +0.79 cents. The dollar index yesterday closed higher for a second day: Dollar Index +0.441, USDJPY +0.321, EURUSD -0.0894. Bullish factors for the dollar included (1) speculation that the Fed may limit its quantitative easing measures after the WSJ reported the Fed next week is likely to offer a program of Treasury purchases worth only a few hundred billion dollars over several months, lower than some market estimates of Fed bond purchases up to $2 trillion, (2) weakness in the euro after the yield on the 10-year Greek bond surged 58 bp to a 3-week high of 10.33% after Greek Finance Minister Papconstantinou said a tax-revenue shortfall is hampering government efforts to reduce Greece's budget deficit, and (3) comments from the head of the Euro-Zone finance ministers, Jean-Claude Juncker, who said the US dollar is "undervalued" against the euro. Bearish factors included (1) euro supportive comments from ECB President Trichet who said banks in the Euro-Zone have asked for less liquidity from the ECB, and (2) the unexpected decline in Sep US durable goods orders ex transportation, which may prompt the Fed into additional easing measures to stimulate the economy.

•   December crude oil prices this morning are trading +16 cents a barrel and December gasoline is +0.48 of a cent per gallon. Crude oil and gasoline prices yesterday weakened and settled lower: CLZ10 -$0.61, RBZ10 -0.180. Bearish factors included (1) the stronger dollar, (2) the larger-than-expected increase in weekly crude oil inventories (+5.01 million bbl versus expectations of +1.0 million bbl), and (3) the unexpected decline in Sep US durable goods ex transportation, which signals that the economy may slow and fuel demand may weaken. Bullish factors included (1) the unexpected decline in weekly gasoline inventories (-4.39 million bbl versus expectations of a +500,000 bbl increase), and (2) increased fuel demand after US gasoline demand increased 5.3% to 9.36 million barrels a day in the week ended Oct 22.

[setravis]

Friday, October 29, 2010...

Today's Market Focus

•   December 10-year T-notes this morning are trading up +0.5 of a tick. T-note prices yesterday traded in positive territory throughout the day and finished higher: TYZ10 +20.5, FVZ10 +15, EDH11 +3.0. Bullish factors included (1) a survey released by the New York Fed to bond dealers on how the Fed's asset purchases will influence yields, which suggests the Fed may be more open to a large round of quantitative easing, and (2) strong demand for the Treasury's $29 billion auction of 7-year T-notes that had a bid-to-cover ratio of 3.06 compared with the 2.86 average of the past 12 auctions. Bearish factors included (1) the unexpected decline in weekly initial unemployment claims which tumbled to a 3-1/2 month low (-21,000 to 434,000 versus expectations of +3,000 to 455,000), and (2) reduced safe-haven demand for Treasuries after the ECB's quarterly Bank Lending Survey said net demand for business loans in Europe turned positive in Q3 for the first time in more than 2 ye ars, which signals an improvement in liquidity.

•   The dollar index this morning is trading higher with the dollar/yen -0.25 yen and the euro/dollar -0.76 cents. The dollar index yesterday weakened throughout the day and finished moderately lower: Dollar Index -0.841, USDJPY -0.738, EURUSD +0.0162. Bearish factors for the dollar included (1) speculation that the Fed will expand its balance sheet at next week's FOMC meeting and debase the dollar, (2) the larger-than-expected increase in Oct Euro-Zone economic confidence which climbed to a 2-3/4 year high, and (3) the ECB's quarterly Bank Lending Survey that said net demand for business loans in Europe turned positive in Q3 for the first time in more than 2 years, which is euro positive. Bullish factors included (1) the action by the BOJ to expand its asset purchase program to include corporate debt with lower credit ratings than it previously purchased, including BBB rated corporate bonds and a-2 commercial paper, which is negative for the yen, and (2) comments from E CB Executive Board member Stark that may increase the safe-haven demand for the dollar when he said the financial crisis "is not yet over and will have long-term implications on growth rates and potential" for years to come.

•   December crude oil prices this morning are trading -53 cents a barrel and December gasoline -0.92 of a cent per gallon. Crude oil and gasoline prices yesterday fluctuated on either side of unchanged and finally settled slightly higher: CLZ10 +$0.24, RBZ10 +0.740. Bullish factors included (1) the weaker dollar, and (2) the unexpected decline in weekly initial unemployment claims to a 3-1/2 month low, which may boost confidence in the economy and energy demand. Bearish factors included (1) the report from the National Oceanic and Atmospheric Administration that predicts temperatures may be above-normal in the US Midwest in Dec, Jan and Feb, which may lead to reduced heating fuel demand, and (2) comments from ECB Executive Board member Stark who said the financial crisis "is not yet over and will have long-term implications on growth rates and potential" for years to come.

[setravis]

Monday, 01 November 2010...

Today's Market Focus
•December 10-year T-notes this morning are trading up +4.5 ticks. T-note prices last Friday pushed higher early and continued higher the rest of the day and settled with moderate gains: TYZ10 +13.5, FVZ10 +8.7, EDH11 unchanged. Bullish factors included (1) slack inflation pressures after the Q3 core PCE deflator rose at its slowest pace in 1-3/4 years (+0.8% q/q versus expectations of +1.0% q/q), (2) slack wage pressures after the Q3 employment cost index rose less than expected and matched its smallest increase since data began in 1996 (+0.4% versus expectations of +0.5%), (3) the unexpected decline in the Oct US University of Michigan consumer confidence which fell to an 11-month low (-0.2 to 67.7 versus expectations of +0.1 to 68.0), and (4) reduced supply pressures after the survey from the Securities Industry and Financial Markets Association (SIFMA) showed the Treasury will issue a net $387 billion of securities this quarter, down from net issuance of $395.8 billion in Q3. Bearish factors included (1) the larger-than-expected increase in Q3 US personal consumption, which rose at the fastest pace in 3-3/4 years (+2.6% versus expectations of +2.5%), and (2) the unexpected increase in the Oct Chicago purchasing managers index (+0.2 to 60.6 versus expectations of -2.4 to 58.0).


•The dollar index this morning is trading lower with the dollar/yen unchanged and the euro/dollar +0.03 cents. The dollar index last Friday traded mixed the entire day and settled little changed: Dollar Index -0.042, USDJPY -0.580, EURUSD -0.0050. The Japanese yen rose to a 15-year high against the dollar. Bearish factors for the dollar included (1) the smaller-than-expected +0.8% q/q increase in the Q3 US core PCE deflator, the smallest increase in 1-3/4 years, which fuels speculation the Fed will expand its asset purchases, and (2) the action by Morgan Stanley to cut its year-end dollar forecast against the euro to $1.46 from a previous estimate of $1.36 and cut its year-end yen forecast to 81 from an earlier estimate of 93. Bullish factors included (1) euro negative comments from ECB Executive Board member Tumpel-Gugerell who said "budget problems in individual member states of the Euro-Zone can weaken the euro structurally," (2) the unexpected decline in Sep German retail sales which posted its biggest monthly drop in 2-1/2 years and is euro negative, and (3) a European Union summit in Brussels that discussed a permanent mechanism to deal with nations facing default, which renewed concern that the European sovereign-debt crisis may resurface.


•December crude oil prices this morning are trading +74 cents a barrel and December gasoline is +2.52 cents per gallon. Crude oil and gasoline prices last Friday moved lower and settled with modest losses: CLZ10 -$0.75, RBZ10 -0.940. Bearish factors included (1) data from Bloomberg that shows OPEC crude oil output increased +65,000 barrels to an average 29.01 million barrels a day in October, up +0.2% from 28.945 million barrels day in Sep, (2) the unexpected decline in the Oct US University of Michigan consumer confidence to an 11-month low, which may lead to a slowdown in consumer spending and fuel demand, and (3) the unexpected decline in Sep German retail sales which posted its biggest monthly drop in 2-1/2 years and may lead to reduced energy demand in Europe's largest economy. Bullish factors included (1) the +2.6% increase in Q3 US personal consumption, the biggest increase in 3-3/4 years, which bodes well for energy consumption and demand, and (2) the unexpected increase in the Oct Chicago purchasing managers index, which signals stronger-than-expected fuel consumption.

[setravis]

Tuesday, November 2, 2010...

Today's Market Focus

•   December 10-year T-notes this morning are trading up +2 ticks. T-note prices yesterday rallied after the Sep PCE core deflator rose less than expected but then weakened after the Oct ISM manufacturing index unexpectedly accelerated and finally settled little changed: TYZ10 +1, FVZ10 +2.7, EDH11 -1.5. Bullish factors included (1) the smaller-than-expected increase in Sep personal spending (+0.2% versus expectations of +0.4%), (2) the unexpected decline in Sep personal income which posted its first monthly decrease in 14 months (-0.1% versus expectations of +0.3%), and (3) the weaker then expected Sep PCE core deflator (unchanged m/m and +1.2% y/y versus expectations of +0.1% m/m and +1.4% y/y), with the +1.2% y/y increase the smallest year-over-year gain in 9 years and increases the risk of deflation. Bearish factors included (1) the unexpected increase in the Oct ISM manufacturing index, which expanded at its fastest pace in 5 months (+2.5 to 56.9 versus expectat ions of -0.4 to 54.0), and (2) reduced safe-haven demand for Treasuries after the stock market rallied.

•   The dollar index this morning is trading weaker with the dollar/yen +0.28 yen and the euro/dollar +0.68 cents. The dollar index yesterday rebounded from early losses and moved higher following the release of the Oct ISM manufacturing index and closed with slight gains: Dollar Index +0.030, USDJPY +0.065, EURUSD -0.0033. The Japanese yen rose to a 15-year high against the dollar before falling back and closing lower. Bullish factors for the dollar included (1) the unexpected increase in the Oct ISM manufacturing index, which expanded at its best level in 5 months and signals reduced need for further Fed easing, (2) increased safe-haven demand for the dollar after the extra yield investors demand to hold 10-year Irish government bonds instead of benchmark German bunds widened to a record 462 bp, which increases sovereign-debt concerns, and (3) the prediction from Barclays Plc that the money market is pricing in too high a chance the that the ECB will start raising inte rest rates next year, and that the ECB will wait until 2012 to start raising rates, which is euro negative. Bearish factors included (1) the unexpected decrease in Sep US personal income for the first time in the last 14 months, which may lead to further Fed easing, and (2) the prediction from Fukoku Capital Management that the yen will rise to a postwar record of 75 yen per dollar if the Fed goes ahead with additional quantitative easing.

•   December crude oil prices this morning are trading +32 cents a barrel and December gasoline is +1.09 cents per gallon. Crude oil and gasoline prices yesterday pushed up to 1-1/2 week highs on strong global manufacturing data and settled sharply higher: CLZ10 +$1.52, RBZ10 +3.350. Bullish factors included (1) the larger-than-expected increase in the Oct China PMI manufacturing index which expanded at its best level in 6 months, (2) the unexpected increase in the Oct ISM manufacturing index which expanded at its fastest pace in 5 months and signals increased energy consumption, (3) the reiteration by Morgan Stanley that crude oil will end this year at $95 a barrel and its prediction that crude prices will rally to $105 a barrel by 2012 as spare capacity drops to "untenable levels, and (4) expectations that the Fed will implement QE2 this week that may undercut the dollar and prompt increased demand for commodities as an inflation hedge. Bearish factors included (1 ) the unexpected decline in Sep personal income which declined for the first time in the last 14 months and questions the sustainability of the economic recovery and fuel demand, and (2) the recovery in the dollar which rebounded from early losses and finished higher.

[setravis]

Wednesday, November 3, 2010...

Today's Market Focus

•   December 10-year T-notes this morning are trading up +6.5 ticks. T-note prices yesterday traded in positive territory the entire day on speculation the Fed will signal an expansion of its quantitative easing program when the FOMC meeting concludes on Wednesday: TYZ10 +7, FVZ10 +2.7, EDH11 +0.0. Bullish factors included (1) speculation the Fed will expand its quantitative easing program and announce plans to purchase at least $500 billion of long-term securities on Wed, and (2) the outlook for Republicans to retake the House of Representatives in the mid-term elections, which reduces the likelihood of additional fiscal spending and government borrowing. Bearish factors included (1) increased supply pressures on speculation the Treasury will announce on Wed it will sell $71 billion of notes and bonds next week in the Nov quarterly refunding, and (2) reduced safe-haven demand for Treasuries as the equity market rallied.

•   The dollar index this morning is trading weaker and posted a fresh 2-1/2 week low with the dollar/yen +0.20 yen and the euro/dollar +0.18 cents. The dollar index yesterday fell to a 2-week low and finished with moderate losses on speculation the Fed will announce more asset purchases on Wednesday: Dollar Index -0.574, USDJPY +0.125, EURUSD +0.0141. Bearish factors for the dollar included (1) speculation the Fed will announce more government-debt purchases in their post-FOMC meeting statement on Wed, (2) strength in the euro after Oct German and Euro-Zone PMI manufacturing indexes were both revised upward, and (3) strength in the Australian dollar which rose to parity with the US dollar for the first time since the Aussie dollar was allowed to float in 1983 after the RBA unexpectedly raised interest rates. Bullish factors included (1) the increase in credit-default swaps on Irish debt to a record 507 bp and on Greek debt to a 5-week high of 839 bp, which signals an i ncrease in European sovereign-debt risk and is negative for the euro, and (2) the prediction from Commerzbank AG that the euro may drop against the dollar after the Fed meeting as investors shift their focus to European countries' budget deficits.

•   December crude oil prices this morning are trading +79 cents a barrel at a 3-week high and December gasoline is +1.54 cents per gallon. Crude oil and gasoline prices yesterday rallied on the back of a weaker dollar and closed higher: CLZ10 +$0.95, RBZ10 +1.650. Dec crude posted a 3-week high. Bullish factors included (1) the slide in the dollar index to a 2-week low, (2) expectations the Fed will increase stimulus measures to stimulate the economy, which may increase fuel demand, and (3) comments from Saudi Arabian Oil Minister Ali al-Naimi that consumers are happy with oil between $70 and $90 a barrel and that the market is "very well supplied," which hints of no OPEC output increases anytime soon. Bearish factors included (1) the increase on Oct crude oil production in Russia, the world's largest oil producer, by +0.7% m/m and +1.9% y/y to 10.26 million barrels a day, a post-Soviet record, and (2) the outlook for an increase in crude inventories when the DOE reports on weekly supplies Wednesday. Expectations for Wednesday's weekly DOE inventory report are for crude oil stockpiles to increase +1.5 million bbl, gasoline supplies to remain unchanged, distillate inventories to fall -1.0 million bbl and the refinery capacity rate to rise +0.3 to 84.0%.

[setravis]

Thursday, November 4, 2010...

Today's Market Focus

•   December 10-year T-notes this morning are trading up +21.5 ticks on carryover support from yesterday's announcement from the Fed that it will increase its bond purchases. T-note prices yesterday traded higher into early afternoon and then whipsawed higher and lower into the close and finished little changed: TYZ10 +1.5, FVZ10 +5, EDH11 +1.5. Bullish factors included (1) the mid-term elections in which Republicans took control of the US House and narrowed the Democratic majority in the Senate, which bolstered speculation that a gridlocked Congress will keep government spending in check, and (2) the Fed's action to announce a plan to purchase $600 billion in US debt securities in its "QE2" program, higher than market expectations for a $500 billion asset-purchase program. Bearish factors included (1) the larger-than-expected increase in the Oct ADP employment change which posted its biggest increase in 5 months along with the upward revision to Sep (Oct + 43,000 versus expectations of +20,000 and Sep revised up to -2,000 from the previously reported -39,000), (2) the larger-than-expected increase in the Oct ISM non-manufacturing index (+1.1 to 54.3 versus expectations of +0.3 to 53.5), (3) the large-than-expected increase in Sep factory orders which posted their biggest increase in 8 months along with the upward revision to Aug (Sep +2.1% versus expectations of +1.6% and Aug unchanged versus the previously reported -0.5%), and (4) disappointment that the Fed is concentrating most of its announced $600 billion of debt purchases in the 6-8 year sector, which prompted a sharp steepening of the yield curve.

•   The dollar index this morning is trading lower and posted a 10-3/4 month low in overnight trade with the dollar/yen -0.10 yen and the euro/dollar +0.88 cents. The dollar index recovered from early losses and traded in positive territory until the post-FOMC announcement when it tumbled into the close: Dollar Index -0.241, USDJPY +0.464, EURUSD +0.1058. The dollar index posted a 2-1/2 week low. Bullish factors for the dollar included (1) the mid-term elections in which Republicans took control of the US House and narrowed the Democratic majority in the Senate, which fueled speculation that future legislation will favor economic growth and reduced budget deficits, and (2) increased European sovereign-debt concerns after the cost of insuring Irish sovereign-debt against default surged to a record, with credit-default swaps on Irish debt rising to 545 bp. Bearish factors included (1) the action by the Fed to announce a $600 billion "QE2" asset-purchase program, bigger than market expectations for a $500 billion program, which raises concern the Fed is debasing the dollar, and (2) strength in the British pound which rallied to a 9-month high against the dollar after the Oct UK PMI service index unexpectedly expanded to its best level in 4 months, which may keep the BOE from further easing measures.

•   December crude oil prices this morning are trading +$1.08 a barrel at a 6-month high and December gasoline is +2.35 cents per gallon. Crude oil and gasoline prices yesterday moved higher after the release of the weekly DOE inventory figures and remained firm into the close as the dollar weakened: CLZ10 +$0.79, RBZ10 +2.840. Dec crude rallied to a 6-month high and Dec gasoline climbed to a 2-1/2 week high. Bullish factors included (1) the slump in the dollar index to a 2-1/2 week low, (2) the unexpected plunge in weekly gasoline inventories which fell to their lowest level in 11 months (-2.69 million bbl to 212.3 million bbl versus expectations of no change), (3) the larger-than-expected decline in weekly distillate supplies (-3.57 million bbl versus expectations of -1.0 million bbl), (4) the unexpected decline in the refinery capacity rate which fell to its lowest level in 7 months and may lead to further decreases in fuel supplies in the weeks ahead (-1.9 to 81.8% v ersus expectations of +0.3 to 84.0%), (5) the action by the World Bank to hike its GDP forecasts for China for this year and next, which may lead to stronger fuel demand, and (6) strong US economic data after Sep US factory orders and the Oct ISM non-manufacturing index rose more than expected, which signals a strengthening economy that is conducive to increased energy demand. Bearish factors included (1) the larger-than-expected increase in weekly crude oil inventories (+1.95 million bbl versus expectations of +1.5 million bbl), and (2) the post-FOMC statement that said the pace of recovery in output and employment is slow and that housing starts "continue to be depressed," which may lead to reduced energy demand.

[setravis]

Friday, November 5, 2010...

Today's Market Focus

•   December 10-year T-notes this morning are trading little changed and up +0.5 of a tick. T-note prices yesterday moved higher throughout the day on bond-friendly economic data along with inflation-soothing comments from Fed Chairman Bernanke and settled sharply higher: TYZ10 +1-5.5/32, FVZ10 +12.2, EDH11 unchanged. Dec T-notes rallied up to a contract and 1-3/4 year nearest-futures high. Bullish factors included (1) carry-over support from Wednesday's Fed announcement that it will purchase an additional $600 billion of government debt in its QE 2 program, (2) a Washington Post opinion piece in which Fed Chairman Bernanke said that concern the Fed's expansion of its balance sheet will cause inflation to surge is "overstated," (3) the larger-than-expected increase in weekly initial unemployment claims (+20,000 to 457,000 versus expectations of +8,000 to 442,000), (4) the larger-than-expected increase in Q3 nonfarm productivity (+1.9% versus expectations of +1.0%), and (5) the unexpected decline in Q3 unit labor costs that have fallen in 4 of the past 5 quarters and signal slack wage pressures (-0.1% versus expectations of +0.7%). Bearish factors included (1) reduced safe-haven demand for Treasuries after global stock markets rallied sharply, and (2) apprehension and position squaring ahead of Friday's all-important monthly employment report.

•   The dollar index this morning is trading higher with the dollar/yen +0.16 yen and the euro/dollar -1.03 cents. The dollar index yesterday sank to a 10-3/4 month low and finished moderately lower on carry-over weakness from Wednesday's announcement by the Fed that it will buy an additional $600 billion of Treasuries: Dollar Index -0.599, USDJPY -0.354, EURUSD +0.00672. Bearish factors for the dollar included (1) concern that the Fed's QE 2 program of an additional $600 billion in asset purchases will debase the dollar, (2) strength in the euro which climbed to a 9-1/4 month high against the dollar after the Oct Euro-Zone PMI composite was revised upward along with hawkish comments from ECB President Trichet who said the ECB "could move rates before withdrawing all stimulus measures," and (3) strength in the British pound which also rallied to a 9-1/4 month high against the dollar when the BOE refrained from following the Fed's action to increase its balance sh eet. Bullish factors for the dollar included (1) an increase in European sovereign-debt risk concerns after credit-default swaps on Irish government debt rose 21 bp to a record 581 bp, and (2) the prediction from BNP Paribas that the euro's gains are likely to stall as investors focus on the region's sovereign-debt crisis.

•   December crude oil prices this morning are trading -23 cents a barrel and December gasoline is -0.87 of a cent per gallon. Crude oil and gasoline prices yesterday moved higher due to dollar weakness and finished with sharp gains: CLZ10 +$1.80, RBZ10 +3.870. Dec crude rallied to a 6-month high and Dec gasoline climbed to a 4-week high. Bullish factors included (1) the slump in the dollar index to a 10-3/4 week low, (2) the rally in global stock markets after the Fed announced additional stimulus measures, which bolsters confidence in the economic outlook and energy demand, and (3) the action by OPEC to raise their global oil consumption estimates to increase 5.1% to 89.9 million barrels a day by 2014 from this year, 800,000 barrels a day more than it predicted last year. Bearish factors included (1) comments from OPEC Secretary-General Abdullah El-Badri who said "OPEC doesn't see oil prices rising to $100 a barrel next year," and (2) the larger-than-expecte d increase in weekly US initial unemployment claims, which suggests that fuel demand may remain constrained as the labor market struggles to recover.