Forex Investment and Currency Trading

The Nikkei fell 1.29%, the HSI dropped 0.73% and European markets were weak also with the FTSE off 1.52%.

US stocks fell, with the S&P off 5.19% and the NASDAQ falling 5.17%, closing near the lows for the day but just above the October lows.  GE stock was down 9%, as one of the last few triple AAA rated firms, announced that the US government had agreed to insure USD139bn in debt for its lending arm GE Capital Corporate. This was possible as GECC owns a federal savings bank. The coverage starts Nov 14th and runs through to June 30th 2012.

WTI fell $3.49 to $56.24. The 3 month LIBOR fix fell 4 bps to 2.13% while 3 month T bill yields fell 26 bps to 17 bps, taking the TED spread up 23 bps to 1.96%. Fed Fund futures were virtually unchanged pricing in a slightly greater chance of a 50 bps cut in December, at 94% vs. 92% on Monday.

The dollar rose vs Europe but fell vs Japan. At 4 pm it traded at EUR 1.2507, GBP 1.4949 and JPY 95.07.

Thursday in the US brings the Initial Jobless Claims (w/e Nov 8), Continuing Claims (w/e Nov 1), the Trade Balance (Sep) and the Monthly Budget Statement (Oct).  The highlight of the week comes on Friday with Retail Sales (Oct) and U. of Michigan Confidence (Nov P), both of which should give us more insight into Q4 GDP.

In Fedspeak we have Philly Fed Pres. Plosser (voter) speaking on the economy and Minn. Fed Pres. Stern (Voter) speaking on a topic TBA.

Initial Jobless Claims (w/e Nov 8), are expected to print 480k vs. 481k prior, with Continuing Claims (w/e Nov 1), expected to print 3,825k vs. 3,843k prior. The 4wkma for IJC is expected to print 481k vs. 477k prior.

Continuing claims have increased by over a million in the last year (nearly 400k in the two months alone) and we see no sign of this decline reversing given the deepening recession. Market is looking for monthly payrolls to reach minus 300k or worse before long and unemployment to approach 9% eventually. There has been a general increase in jobless claims since August due to the extended benefits scheme, making it difficult to interpret this data, but there can be no doubt that the labor market is weakening.

Trade Balance (Sep) is expected to print -$57.0 bn vs -$59.1 bn in August. The trade balance should now be on a declining trend, reflecting both US economic weakness (reduced imports) and the fall in the oil price (which fell 11% m/m from August to September). Interestingly the trade balance excluding Petroleum was down 23.90% y/y in August.