CommStock Israel Investor
Insights Newsletter
Monday, June 15th, 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.
1) Dollar moves higher after trouncing
Dour reading on European
industrial production weighs on the euro, giving the dollar
a leg up at the end of a down week.
June 12, 2009: 11:41 AM ET
NEW YORK (Reuters) -- The dollar rose Friday, rebounding
from vicious selling earlier this week, while data showing a plunge
in euro-zone industrial production highlighted economic weakness
in the region and pushed the euro lower.
Other recent top performers, including sterling and
the Canadian and Australian dollars, also fell as oil prices dipped
and G8 finance ministers prepared to start a meeting in Italy.
The dollar had spent most of the week under pressure
as investors betting on a global recovery bought higher-yielding
currencies and assets such as stocks and commodities, and traders
said investors were largely taking profits on Friday.
"We're seeing a classic correction," said Brown Brothers
Harriman currency strategist Meg Browne. "The top performers on
the week are the worst performers today, suggesting the move is
largely corrective in nature and will not be sustained."
The euro was down 0.9% at $1.3973 while sterling fell
1.1% to $1.6388 after having moved above $1.66 on Thursday. The
dollar was up 0.6% at 98.18 yen and surged 1.7% against the Canadian
dollar to to 1.1208.
Profit-taking on the euro accelerated after data showed
industrial production in the 16-country euro zone plunged 21.6%
in the year to April, a record fall that was steeper than economists'
forecasts.
"I'm not surprised the figures are poor. The euro zone
.... will suffer more than the rest of the world, ergo my view
that the euro will underperform for quite some time," said Maurice
Pomery, managing director at Strategic Alpha in London.
G8 on tap
Exchange rates are not on the agenda at a two-day G8
meeting that starts on Friday, but analysts said they may come
up in light of the dollar's recent slide, which has undermined
euro-zone exports by making them more costly.
A French official told Reuters on Thursday that authorities
were watching currency fluctuations closely. "What is damaging
for the economy is the volatility of the currency markets."
Safe-haven demand boosted the dollar during the bleakest
days of the financial crisis last year, but the euro rose 7% last
month and is up 5.5% this quarter.
2) Commentary by David Zwebner, CEO of CommStock
Trading
U.S. Economy
The University of Michigan's consumer confidence index increased
from 68.7 to 69.0 in June, the highest in nine months, but less
than expected. The June 2010 eurodollars jumped up .11 to 98.16.
The September U.S. T-bonds closed up 48/64ths at 114.20/64ths
with unofficial talk that the Federal Reserve may eventually have
to buy more long-term treasuries.
Grains and Cotton
The USDA said that South Korea bought 275,000 tons of U.S. corn
for 2009-2010. December corn dropped 15.5 cents to $4.477, the
lowest close in three weeks.
Lumber
Market observers still aren't sure about the housing market, but
investors pushed September lumber up its $10 limit today to $224.80,
the highest close in six months.
Orange juice
Yesterday's 6 to 10 day forecast from the National Weather Service
expects above average temperatures for the southeastern U.S.
and above average precipitation for Florida. September orange
juice was down 2.10 cents at 85.80.
Coffee - USDA Report
According to Dow Jones Newswires, Brazil's coffee harvest will
be interrupted by scattered showers and colder, but not damaging
temperatures. September coffee closed down 2.05 cents at $1.3165.
After the close, the USDA estimated 2009-2010 world
coffee production at 127.4 million (60 kg) bags with implied use
of 132.2 million bags. That puts 2009-2010 ending coffee stocks
at 35.3 million bags, or 27% of annual use which is historically
on the low end. In producing countries, the USDA said that 2010
ending stocks will fall to 13 million bags which would represent
nearly the lowest ending stocks to use ratio of the past three
decades or more.
Energies
OPEC said in their June Report that they expect world oil demand
to average 83.8 million barrels per day (mbd) in 2009, down from
last month's estimate of 84.0 mbd. Also, they expect world GDP
to be down 1.3% in 2009. August crude oil was down .73 at $72.75.
Currencies
In the EU-16, industrial production dropped 21.6% from a year ago,
the biggest monthly decline on record. Industrial production
in the EU-27 was down .9% in April and down 19.4% from a year
ago, weaker than expected. The September euro closed down 1.17
cents at $1.3998.
At a speech in Montreal, the Bank of Canada's Governor
Carney cautioned: "Although global demand and trade levels appear
to be approaching bottom... there is still more to come." He explained
that unemployment will continue to rise and "global investment
growth is likely to remain negative well into 2010." The September
Canadian dollar fell 1.72 cents to 89.44.
China's Bureau of Statistics said that retail sales
were up 15.2% in May from a year ago.
Industrial production in India was up 1.4% in April
from a year ago, better than expected and the first positive gain
in three months.
News.com.au reported that the International Monetary
Fund is raising its 2010 growth forecast for the global economy
from 1.9% to 2.4%. They still expect a 1.3% contraction in 2009.
Retail sales in New Zealand were up .5% in April.
David Zwebner, CEO
CommStock Trading Ltd.
Tel: +972-(0)2 624-4963
Fax: +972-(0)2 624-4876
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