CommStock Israel Investor
Insights Newsletter
Monday, July 6th, 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 drops to 3-week
low against euro
China to
debate a new global reserve currency at next week's Group
of Eight meeting, sources say
NEW YORK -- The dollar fell to a three-week low against
the euro Wednesday, pressured by news China has asked to debate
proposals for a new global reserve currency at next week's Group
of Eight summit.
Gains in global stocks as well as improved manufacturing
activity data in Europe and China have also hurt demand for the
dollar as a safe haven.
But it was the report on China, citing sources, that
fueled a steep round of dollar selling, adding to the currency's
earlier losses in Asia and London.
"The dollar has been hit in a knee-jerk reaction to
the news headlines but we are skeptical of the merits," said Marc
Chandler, head of global currency strategy at Brown Brothers Harriman
in New York.
"We are struck by the gap between China's declaratory
policy -- what they say -- and their operational policy -- what
they do."
What China says sounds like they want to end the dollar's
role as the top reserve currency, Chandler said, but the world's
third largest economy has not backed its rhetoric as it continues
to accumulate dollars and Treasurys.
China remains the biggest holder of U.S. Treasurys with
about $763.5 billion in holdings. It has $2 trillion in currency
reserves and some estimates from analysts suggested that China
holds about 65-75% of its reserves in U.S. dollars.
The euro was up 0.8% on the day at $1.4147, after earlier
trading as high as $1.4201 in the wake of the China news, its highest
since June 5, according to Reuters data.
The ICE Futures' dollar index a measure of the greenback's
value against a basket of six major currencies, fell 0.8% to 79.483.
Earlier in the session, positive data on manufacturing
in Europe and China boosted economic optimism around the world.
That helped U.S. stocks and commodity currencies such as the Canadian
dollar and the Australian dollar.
Markets now await the all-important U.S. non-farm payrolls
report on Thursday.
Economists expect the U.S. economy to have shed 363,000
jobs in June after losing 345,000 in May. Also on Thursday, the
European Central Bank holds its policy meeting.
The ECB is expected to leave rates unchanged and give
more details on its asset buying program.
2) Commentary by David Zwebner,
CEO of CommStock Trading
U.S. Economy - Disappointing
Job Losses
The U.S. Labor Department said that the unemployment rate increased
from 9.4% to 9.5% in June with a loss of 467,000 jobs, a bigger
loss than expected. The December 2010 eurodollars jumped .14 to
97.90.
In May, the job loss figures were revised from -345,000
to -322,000. In April, the job loss figures were revised from -504,000
to -519,000.
The Labor Department also said that jobless claims were
down 16,000 last week to 614,000.
The U.S. Commerce Department said that factory orders
were up 1.2% in May, stronger than expected.
Grains and Cotton
The USDA said that, as of last week, 2008-2009 exports of:
Corn remained down 32% from a year ago.
Soybeans slipped from up 11% to up 10% from a year ago.
Cotton slipped from up 4% to up 3% from a year ago.
The USDA said that 2009-2010 exports of wheat improved
from -36% to -31% from a year ago. December wheat closed down 6.5
cents at $5.55, the lowest close in almost seven months.
The USDA said that 660,000 tons of U.S. soybeans were
sold to China for 2009-2010. Also, 152,400 tons of U.S. corn were
sold to unknown destination for 2009-2010. November soybeans were
down 9.5 cents at $10.06.
December corn closed down 11.75 cents at $3.575, the
lowest close in nearly seven months with good growing weather in
the midwestern U.S. Also, Tuesday's bearish acreage report continues
to weigh on prices.
Coffee
According to Dow Jones Newswires, weather for Brazil's coffee harvest
should remain favorable for at least the next week. September
coffee finished down 1.25 cents at $1.1780, the lowest close
in eight weeks.
Energies
The U.S. Department of Energy said that underground supplies of
natural gas were up 70 billion cubic feet at 2.721 trillion cubic
feet. Supplies are now up 29% from a year ago. September natural
gas dropped 18.7 cents to $3.757, the lowest close in nine weeks.
September crude oil fell $2.53 to $67.74, the lowest
close in four weeks, pressured by yesterday's increase in gasoline
supplies and today's weak U.S. jobs report.
Metals
Some might think that gold would be up on today's poor economic
news, but October gold closed down $10.50 at $932.30, pressured
by strength in the U.S. dollar.
Currencies
Eurostat said that the unemployment rate in the EU-27 increased
from 8.7% to 8.9% in May, the highest in almost four years. Also,
producer prices were down 5.7% in May from a year ago. The September
euro closed down 1.22 cents at $1.4025.
The European Central Bank (ECB) met and kept its interest
rate unchanged at 1.0%, as expected. ECB President Trichet said
that he expects positive growth by the middle of next year.
Australia's exports totaled A$20.4 billion in May, the
lowest in over a year. The September Australian dollar closed down
1.37 cents at 79.12.
Several markets will close early tomorrow, ahead of
the July 4th holiday.
David Zwebner, CEO
CommStock Trading Ltd.
Tel: +972-(0)2 624-4963
Fax: +972-(0)2 624-4876
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