CommStock Israel Investor
Insights Newsletter
Monday, May 18th, 2009
The following report has been prepared as a courtesy
to clients of CommStock Trading Ltd. for general informational
purposes only and is not intended to, and should not, be construed
as any recommendation or advice for any specific investment decisions.
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1) Dollar climbs against rivals
Investors seek shelter
in U.S. currency as the economic outlook remains
grim despite improved readings Friday.
May 15, 2009: 12:20 PM ET
NEW YORK (Reuters) -- The dollar and yen rose Friday as worries
persisted about global economic prospects despite a batch of better-than-expected
U.S. economic data, prompting investors to seek shelter in these
two currencies.
Data showing a rise in a key manufacturing gauge for
the New York area in May and a net inflow of capital into the United
States in March after outflows the previous month increased growth
expectations.
But currency investors stayed wary, discouraged by reports
showing the euro-zone economy contracted at its fastest pace on
record as they remained inclined to buy the dollar and yen. Both
currencies typically rise when investors turn risk averse and slip
when risk appetite improves.
"Overall risk appetite is still down because of the
bad numbers from Europe," said Matthew Strauss, senior currency
strategist at RBC Capital, in Toronto. "The data out of the U.S.
were positive for growth, but they're second-tier reports and their
impact is not likely to be sustained for the rest of the day."
In midday New York trading, the euro fell 0.4% to $1.3581.
The euro also was down 1.2% against the yen at 129.11 yen after
sliding to a two-week low around 128.40 earlier, Reuters data show.
The single euro-zone currency was well on track for
its biggest weekly loss against the yen since late January.
The euro's losses were earlier triggered by data showing
the euro-zone economy shrank 2.5% in the first quarter from the
previous quarter and 4.6% from the same period a year ago, driven
by a plunge in German output.
"While we all know this (report) is backward-looking
data, it's first and foremost a pretty lousy health check on European
activity," said Andrew Wilkinson, senior market analyst at Interactive
Brokers, in Stamford, Connecticut. "Today's data pulls the rug
from the recent euro recovery story."
The dollar dropped 0.9% to 95.08 yen, having hit a two-month
low of 94.78 yen on trading platform EBS. A close below the 100-day
moving average of 95.14 yen will be the first for three months,
according to Reuters charts.
Dollar/yen was also on pace for its steepest weekly
decline since its collapse late in October.
Analysts said the yen's outperformance suggests the
recent evidence of Japanese investors looking toward their domestic
markets is now translating into yen strength.
In interviews with Reuters late last month, many of
the top nine Japanese life insurers said they would increase their
holdings of yen bonds as uncertainty about a global economy deep
in recession leaves them in defensive mode.
More positive data for the U.S. economy such as a modest
drop in industrial production for April and a rise in consumer
confidence supported U.S. equities and helped trim gains in the
dollar and yen.
But these were not enough to shake the market's bearish
stance on risky trades in higher-yielding currencies such as Australian
and New Zealand dollars, which posted sharp losses on Friday. The
Australian dollar fell 0.6% to $0.7554 , while the New Zealand
dollar plunged 1.2% to $0.5895.
2) Commentary by David Zwebner, CEO
of CommStock Trading
U.S. Economy
The U.S. Labor Department said that consumer prices were unchanged
in April and down .7% from a year ago, the biggest annual decline
in 53 years. Excluding food and energy, prices were up .3% in
April and up 1.9% from a year ago. The March eurodollars ended
up .035 at a new contract high of 98.935.
The Federal Reserve said that industrial production
was down .5% in April, a little better than expected. The June
U.S. T-bonds were down 12/64ths at 122.59/64ths.
The University of Michigan's consumer sentiment index
increased from 65.1 to 67.9 in May, a little better than expected.
The Federal Reserve of New York's regional index of
manufacturing increased from -14.65 to -4.55 in May, much better
than expected.
Grains and Cotton
Rain keeps falling in the midwestern U.S. - today in Iowa, Missouri,
Illinois, and Indiana. July corn closed down 11 cents at $4.172
with concerns ahead of the weekend that one good stretch of dry
weather could still help farmers get the crop planted.
Spring weather has not been favorable for the U.S. cotton
crop, but July cotton dropped 2.76 cents to 56.30 today, hit by
profit-taking after prices rallied almost 20 cents in nine weeks.
Sugar
The International Sugar Organization (ISO) said that world production
of sugar will fall short of consumption in 2008-2009 by 7.8 million
tons, a bigger deficit than earlier expected. For 2009-2010,
the ISO expects a world production deficit of roughly 4.75 million
tons. July sugar closed down .52 at 14.95.
Orange juice
The citrus groves in Florida are still dry, but Weather.com shows
several chances for rain in the next ten days. Today's 6 to 10
day forecast from the National Weather Service is also calling
for above average precipitation in Florida. July orange juice
was up .40 at 93.50.
Energies
July crude oil fell $2.42 to $57.00, discouraged by today's weaker-than-expected
GDP numbers in Europe.
Metals
The world's third largest gold producer, AngloGold Ashanti, said
that they produced 1.1 million ounces of gold in the first quarter
of 2009, down 13% from the previous quarter. August gold ended
up $2.80 at $933.10, the highest close in seven weeks.
Currencies
Eurostat said that real GDP in the EU-27 was down 2.5% in the first
quarter and down 4.4% from a year ago, weaker than expected.
It was the worst quarterly drop since records began in 1995.
Consumer prices were up 1.2% in April from a year ago. The June
euro closed down 1.79 cents at $1.3471, the lowest close in a
week.
Statistics Canada said that manufacturing sales were
down 2.7% in March to C$41.4 billion, the lowest in almost ten
years. The June Canadian dollar fell .71 to 84.79.
Real GDP in
Germany was down 3.8% in the first quarter, weaker than expected.
Real GDP in France was down 1.2% in the first quarter, as expected.
Real GDP in Hong Kong was down 4.3% in the
first quarter and down 7.8% from a year ago.
David Zwebner, CEO
CommStock Trading Ltd.
Tel: +972-(0)2 624-4963
Fax: +972-(0)2 624-4876
www.ecommstock.com
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