Expert Analysis of Today's Market

• The dollar was mostly lower in volatile trading Thursday. US stocks rallied from an earlier collapse in which stocks fell below lows posted on October 27. The yen dropped versus most key currencies on renewed risk appetite. Sterling took another hammering, dropping to a 6½-year low against the dollar and hitting a record low against the euro. The Canadian dollar rose as crude oil rose the most in two weeks. The Australian dollar advanced on improved risk appetite and reports the Reserve Bank of Australia intervened to defend its currency.


• The EUR/USD rose in volatile trading after successfully testing the 1.24-area support. The German Q3 2008 GDP contracted 0.5% q/q, the second consecutive quarterly contraction, indicating Germany is in recession. The EUR/USD fell to a 2-week low following the German GDP report but reversed losses after US stocks rallied following a successful test of the October 27 stock-market low. The successful test of the 1.24-area support and the important stock-market test may indicate a short covering rally toward the long-term downtrend. Resistances exist in the 1.30 and 1.35 areas.

Financial and Economic News and Comments

US & Canada

• The US trade deficit in goods and services in September narrowed 4.4% m/m to $56.47 billion, the smallest deficit since $56.33 billion in October 2007, following August’s revised $59.08 billion, the Commerce Department said. Exports fell 6.0% m/m to $155.40 billion in September, led by petroleum and civilian aircraft, from $165.28 billion in August. Despite the big drop in exports, the trade deficit still got smaller, with imports declining 5.6% m/m to $211.87 billion from $224.36 billion. Oil accounted for most of the drop in imports in September, due to both lower volume and prices.

• US initial jobless claims surged past the half-million mark, soaring 32,000 to a seasonally adjusted 516,000 in the week ending November 8, the highest since September 2001, the Labor Department said. The 4-week moving average of new jobless claims rose 13,250 to 491,000, the highest since 1991 and well above recessionary levels typically associated with further rises in the jobless rate. Continuing jobless claims in the week ending November 1 were closer to the four-million mark, soaring 65,000 to 3,897,000, the highest since January 1983. The unemployment rate for workers with unemployment insurance remained at 2.9%. The dismal labor figures suggest further large drops in employment in a prolonged US recession.

• The US federal government ran a record budget deficit of $237.18 billion in October, an all-time high for any one month, sharply higher than the October 2007 deficit of $56.84 billion, and higher than the entire fiscal 2007 deficit of $162 billion, data from the Treasury Department showed. Revenue declined 7.5%, while spending soared 71%.


• Canada’s international merchandise trade surplus dropped to $4.5 billion in September, its lowest level since the beginning of the year, following August’s downwardly revised $5.6 billion, Statistics Canada reported. Exports declined 1.0% m/m to $42.5 billion while imports rose 1.9% m/m to $38 billion.

Europe

• Germany’s GDP fell a seasonally adjusted 0.5% q/q in Q3 2008, contracting more than expected, following an upwardly revised 0.4% q/q contraction in Q2 and an upwardly revised 1.4% q/q growth in Q1, data from the Federal Statistics Office showed. The contraction over two consecutive quarters substantiates that the German economy has entered a technical recession with the biggest contraction since 1996.

• According to the European Central Bank’s monthly report for November, the outlook for price stability has improved further with inflation likely to reach the target level of 2% over 2009. GDP growth for 2009 was revised down to 0.3% from an initial estimate of 1.3%, while 2010 will see GDP rise 1.4%, down from an initial estimate of 1.8%.


• ECB Governing Council member Ewald Nowotny said the ECB has more room for further interest-rate cuts with inflationary expectations falling and the eurozone already in a recession.

Asia-Pacific

• Japan’s wholesale inflation rate slowed for a second month in October, with the domestic corporate goods price index climbing a less-than-expected 4.8% y/y after September’s 6.8% y/y increase, according to data from the Bank of Japan.


• Japan’s final industrial production figures for September were downwardly revised to a 1.1% m/m increase and a 0.2% y/y increase, the Ministry of Economy, Trade and Industry reported. The final number for capacity utilization for September was revised to a 1.6% m/m gain versus a preliminary 3.5% m/m decline.


• Japan’s machine tool orders were upwardly revised to a 40.0% y/y drop in October, according to revised estimates from the Japan Machine Tool Builders’ Association. Domestic demand for Japanese machine tools contracted 42.1% y/y in October, following September’s 32.1% drop, while foreign orders for machine tools fell 38.2% y/y in October, more than triple a 10.0% y/y decline in September.


• The Japanese economy may deteriorate further amid the global financial turmoil, Bank of Japan board member Seiji Nakamura said. “Japan could be on the verge of long-term economic adjustments and the downside risks to the economy are increasing further,” Nakamura said.


• China’s industrial production rose a less-than-expected 8.2% y/y in October, the smallest increase in seven years, after gaining 11.4% y/y in September, the statistics bureau said. The data suggests China will experience a deeper economic slowdown.


• Australia’s average weekly wages rose 1.6% q/q in August, following July’s upwardly revised 0.9% q/q increase, the Australian Bureau of Statistics reported. Private sector wages rose 1.9% q/q, while public sector wages increased 0.8% q/q. Average weekly wages climbed 4.7% y/y in August, up from July’s upwardly revised 4.0% y/y gain.

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