CommStock Israel Investor Insights Newsletter
Monday, April 20th, 2009

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1) Dollar weak after jobs report

Euro jumps to one-month high as investors see signs of a recovery and seek higher yielding currencies.

Last Updated: May 8, 2009: 11:50 AM ET

NEW YORK (Reuters) -- The euro hit a one-month high above $1.35 Friday after better-than-expected U.S. payrolls data bolstered hopes for an economic recovery and dented safe-haven demand for the dollar.

The euro climbed to $1.3516 after government data showed U.S. employers cut 539,000 jobs in April. While still high, that was below March's upwardly revised tally of job losses of 699,000 and the 590,000 economists polled by Reuters had expected.

The jobless rate hit a 25-year peak of 8.9%, tempering some optimism, but a bevy of improved global data this week kept risk appetite high and weighed on the dollar.

The dollar tends to suffer when risk aversion rises and investors feel they no longer need to buy it as a safe haven. It fell to a six-week low on Friday against a basket of major currencies and was on track for its third consecutive weekly decline.

"The market is positioning for recovery over the next few months, which means the dollar will clearly see considerable weakness as this plays out," said Melvin Harris, chief market strategist at Advanced Currency Markets in New York.

"The jobs data was encouraging, and any trader would tell you they've expected to see unemployment at 9 to 10% before this thing was over, so that's not a shock."

The euro was last at $1.3505, up 0.8% from late Thursday and up 1.7% this week, en route to its best weekly performance since early April.

The dollar dipped 0.3% to 98.91 yen while sterling rose 0.4% to $1.5095.

The greenback also fell to a six-month low against the Canadian dollar and toward its worst week since late March after Canada also reported an unexpected jump in jobs last month.

Another sign of revived risk appetite was the U.S. yield curve, which measures the difference between yields on 2- and 10-year government debt. This reached its widest spread since November, reflecting falling demand for safe-haven Treasuries.

The euro, meanwhile, was boosted this week on hopes that the European Central Bank's plan to boost credit through purchases of covered bonds -- which are backed by a pool of assets that remain on a bank's balance sheet -- would help the ailing euro-zone economy.

But analysts warned that the global economy was still mired in recession and faced a number of threats. On Thursday, U.S. regulators said 10 of the nation's biggest banks must raise $74.6 billion in equity to shore up their capital cushions.

"While the economy may be getting worse at a slower rate, it is still in recession and unemployment is rising," Mizuho Corporate Bank currency strategist Nicole Elliott wrote in a note to clients, adding markets may have to face "the possibility of things not getting significantly worse but not improving much either for a very long time."

2) Commentary by David Zwebner, CEO of CommStock Trading

U.S. Economy - Post Stress Test
The U.S, Labor Department said that the unemployment rate increased from 8.5% to 8.9% in April, the highest since 1983. April posted a loss of 539,000 jobs, the fewest since October. In March, job losses were revised higher, from 663,000 to 699,000, and in February, job losses were revised up, from 651,000 to 681,000. The March eurodollars were unchanged at 98.745.

The U.S. Census Bureau said that wholesale sales were down 2.4% in March and down 18.1% from a year ago. Inventories were down 1.6% in March.

There was optimism today since the government's stress test was not as bad as feared. The June U.S. dollar index fell 1.465 to 82.64, the lowest close this year, and most commodities were higher.

Grains and Cotton
The USDA said that 120,000 tons of U.S. corn were sold to unknown destinations this season and another 176,000 tons were sold for 2009-2010. July corn closed up 9 cents at $4.21, the highest close in nearly four months.

Yesterday's 6 to 10 day forecast from the National Weather Service continues to expect above average precipitation over much of the Midwest, adding to this year's slow planting progress. July wheat jumped up 20.75 cents to $5.91, the highest close in three months, with ongoing concerns that much of the Dakotas are still too wet to plant the spring crop.

Statistics Canada reported that there were 15.54 million tons of wheat on hand on March 31st, up 36% from a year ago, but less than expected. Corn stocks totaled 6.04 million tons, up slightly from a year ago.

Livestock
Mexico's Ag Minister said that there is no evidence of any disease among Mexico's hog population. August hogs finished up 1.10 at 71.05 as concerns about the H1N1 virus continue to ease off.

After the close, the USDA estimated this week's beef production at 502.8 million pounds, down 6.5% from a year ago. Pork production was estimated at 410.9 million pounds, down 1.8% from a year ago. August cattle closed up 1.02 at 83.55, the highest close in two weeks.

Lumber
Canada's Mortgage and Housing Corporation said that housing starts were at an annual rate of 117,400 units in April, down 20% from a month ago and much less than expected. July lumber up $9.10 at $187.00, the highest in two weeks.

Cocoa
July cocoa closed up $45 at $2,507, the highest close in three weeks, helped by today's weaker U.S. dollar.

Metals
Vehicle sales in China were up 25% in April, helped by temporary government subsidies. July copper closed down 1.90 cents at $2.1455.

Currencies
Statistics Canada said that the unemployment rate was unchanged in April at 8.0%, but the economy added 36,000 new jobs, the first increase in six months. The June Canadian dollar closed up 1.68 cents at 86.87, the highest close in six months.

The U.K.'s Office for National Statistics said that producer prices were up .6% in April, more than expected