Gold drops under $900

·       Markets attached more importance to the personal consumption component of the GDP data, which rose by 2.2%.

·       S&P500 has risen +9.5% in April, best monthly gain since March 2000.

·       68% of companies that have released first quarter results have beaten estimates.

·       Asian markets rallied: Nikkei +3.9%, Hang Seng +3.2%. Japanese industrial production data showed output rose for the first time in 6 months.

·       Oil price rises to $51.50. Optimism that the global economy and fuel demand will recover soon.

·       Gold drops under $900. Equity rebound reduces appeal of the metal. $900 is a psychological barrier, some profit taking seen above this level.

 

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CHRYSLER: agreement with unions - the alliance with FIAT remains feasible

·         CAR INDUSTRY : CHRYSLER has reached an agreement with unions and therefore the alliance with FIAT remains feasible. Not so long ago, no one would have bet on FIAT’s survival. This story illustrates today’s top priorities. Beyond the economy, the transition that the car industry is going through is a reflection of what is at stake in the society itself: reducing the excesses and protecting the environment.

·         BANKS : GOLDMAN SACHS seems to have a short memory. In the 1Q, the VaR of their investment portfolio jumped 22% and is now twice the amount at MORGAN STANLEY. Difficult to keep a low profile when performance standards by the financial markets remain the same: profit, profit and … profit. Rumour has it that solvency amongst the biggest US banks is above requirements and that only one failed (to be confirmed).

·         FORTIS : the Belgian government stated that a nationalisation is very likely if the no comes out. PING AN is not favourable to the BNP deal. Easy to imagine that our Chinese friends don’t really understand the subtleties of our economic policy. Not sure they will rush towards the door again very soon.

·         VIX is slightly down at 36.8. Gold is up at 915 USD per oz as the oil price (BRENT CRUDE SPOT) at 50.1 USD. The USD is stable against the EUR at 1.31. 10-2 years spread is at 1.53. The 5y CMS stands at 2.686 and the 3y at 2.193.

 

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MADOFF : strange practices at LUXALPHA

·         WORLD ECONOMY : Mr Strauss-Kahn has no time left for distractions. The IMF has once revised its growth forecasts downwards. This year, the world global output is likely to retreat by 1.3% (by 3.8% among the mature economies with -2.8% in the US, -4.2% in Euroland and -6.5% in Japan). China should see a +6.5% growth and India a +4.5%. The overall GDP is expected to rebound by 1.9% in 2010.

·         CONMPANY RESULTS : very good resultants at CREDIT SUISSE, in line at NOVARTIS, disappointing for AKZO and ABB.

·         MADOFF : the French press has reported strange practices at LUXALPHA.

·         VIX is up at 38.1. Gold is up at 892 USD per oz and the oil price (BRENT CRUDE SPOT) is slightly down stable at 48.8 USD. The USD is weaker against the EUR at 1.30. 10-2 years spread is at 1.50. The 5y CMS stands at 2.815 and the 3y at 2.325.

 

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Toyota's production will be downsized to the level of 1978

o        The US banks reversed trend yesterday in NY despite the huge depreciations still to come. Is that al bad news already priced in? It appears so as the recent correction was shortlived.

o        TOYOTA : the production of the biggest Japanese car maker (who was expected to top GM as the first producer worldwide) will be downsized to the level of 1978. The crisis is apparently affecting every company, even the most resilient ones. The fact that TOYOTA produces small, reliable and fuel-efficient cars won’t change the situation for the time being but the future may not be fully compromised.

o        Redemptions within the hedge fund industry are slowing down as positive returns are back.

o        VIX is down at 37.1. Gold as well at 885 USD per oz and the oil price (BRENT CRUDE SPOT) is stable at 49.3 USD. The USD is stable too against the EUR at 1.29. 10-2 years spread is at 1.50. The 5y CMS stands at 2.797 and the 3y at 2.305.

 

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Stabilisation within the housing market

·         US ECONOMY : stabilisation within the housing market (at a very low level) coupled with a slight tendency to destocking and possibly a price stabilisation or even a slight recovery. This parameter is psychologically crucial as all that misery started with the real estate. On the production front, companies are still reducing their output and destocking. When this phenomenon is over and consumers are building inventories again, there might be a dramatic surge in output and some mismatch. Hence don’t neglect heavy cyclicals but it is probably to early to step in.

·         INTEREST RATES : India has cut rates for the 6^th consecutive time and they are at historical lows. In Europe, the ECB is likely to reduce leading rates by another 25bps. It seems that those measures have not had any significant impact on consumption so far as banks are still very found of cash. Some can even get a temporary 7% in the Netherlands.

·         REBOUND : markets are in a good mood again. Nothing abnormal with profit taking after 6 weeks of positive correction. Today’s session will be decisive for the trend over the coming weeks.

·         VIX is bouncing back at 39.2. Gold as well at 890 USD per oz and the oil price (BRENT CRUDE SPOT) is down at 49.4 USD. The USD is stable against the EUR at 1.29. 10-2 years spread is stable at 1.50. The 5y CMS stands at 2.746 and the 3y at 2.242.

 

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Credit losses growing at a rapid pace at CITIGROUP

o        POLITICS ARE  BACK : G20, Americas Summit, Durban II, Trip to California. There is more than only economics but Strauss-Kahn stated recently that means are not sufficient nor swift enough to get the world economy back on tracks before some time. The coming weeks could be kind of hectic as company results are to be released. Profit takings may be in the air.

o        TOP STORIES ON BLOOMBERG : ”Credit losses growing at a rapid pace at CITIGROUP” and “Obama can’t pick up the phone when the mortgage refinancing customer gets no answer”. In the US, there were more banks going bankrupt so far in 2009 than in 2008. Stay cool in spite of the huge rebound!

o        VIX is further down at 33.9. Gold is down as well at 868 USD per oz and the oil price (BRENT CRUDE SPOT) is stable at 51.8 USD. The USD has been strengthening the EUR at 1.29. CMS 10-2 years spread is stable at 1.56. The 5y CMS stands at 2.83 and the 3y at 2.33.

 

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ECB speculation: intervene on the currency markets and sell the euro to protect exporters for a rising currency?

·       US markets take a breather after 5 days of gains: DJIA -0.52%, S&P -0.83%, NSDQ -0.93%. Financials in the S&P drop 2.9%: an analyst at Calyon Securities advises selling bank shares.

·       IBMs purchase of Sun Microsystems could collapse: Sun shares tumble 23%

·       Q1 earnings reports kick off this week. First up is Alcoa Inc, followed by Dow Chemical.

·       Asian stocks lower: Nikkei -0.28%, Hang Seng -0.46%. Bank of Japan keeps overnight lending rate at 0.1%.

·       Oil price lower @ $51.38: declines in equity markets bring back extended recession fears and therefore lower demand for oil.

·       Gold recovers ($878) from its recent low. Price level attracts buyers.

·       Australian Central Bank cuts rates less than expected: -0.25% vs 0.5% expected. Benchmark rate is now at % (49 yr low).

·       € weaker vs $: 1.3362. Some speculation that ECB could intervene on the currency markets and sell the euro to protect exporters for a rising currency.

·       VIX back up: 40.93

·       10-2yr spread 158bps. 5yr CMS @ 2.90%, 3yr @ 2.39%

·       Europe flat this morning: US futures currently negative.

 

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USA: Since Dec07, 5.1 million jobs have been lost

·       US stocks end the week in positive territory (DJIA +0.50%, S&P +0.97%, NSDQ +1.20%) despite a dismal unemployment report on Friday : the economy lost 667k jobs in March and the unemployment rate climbed to 8.5% (highest since 1983). Since Dec07, 5.1 million jobs have been lost.

·       The VIX index closed under 40 (39.70) for the first time since January.

·       Asian stocks also close higher: Nikkei +1.24%, Hang Seng +2.76%. HSBC shares up 2.9% in Hong Kong after the company raises $17.7 billion from a rights issue.

·       Japanese exporters rose after the YEN weakened to a five month low vs $ and €.

·       Crude oil climbed above $53: investor appetite returned for commodities.

·       Gold drops to its lowest level since Jan 23 ($878): rising equity prices reduce its appeal as a haven. Gold price has dropped 5% in 3 days.

·       € remains firm vs $ @ 1.3520. Investors seem to be focusing on interest rate differentials. The ECB rate cut by just 0.25% last week looks positive for the euro.

·       10-2 yr spread @154bps. CMS 5yr @ 2.92%, CMS 3yr @ 2.44%.

·       Strong start in Europe this morning: DJ €stoxx50 +1.4%

 

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ECB: shy 0.25% rate cut

·         Still some moderate optimism ahead of 1Q results: DJ +2.8%, S&P500 +2.9%, NASDAQ +3.3%, NIKKEI +0.3% and EUROSTOXX +5.7% and retreating by 0.32% right now.

·         G20 : kind of an agreement (still to be confirmed on the field) but one common voice was enough to convince the financial markets.

·         US : the FASB has given more leeway to the banking sector in the application of mark to market accounting rules. No clear details so far but we can’t exclude any reversal write-downs soon. This is good news for the banks anyway.

·         ECB : a shy 0.25% rate cut, which took every by surprise. Mr Trichet is definitely the new Hitchcock of the European finance.

·         Oil : nice rebound.

·         VIX is down to 42. Gold is down at 906.5 USD per oz while the oil price (BRENT CRUDE SPOT) is up at 52.7 USD. The USD is bouncing back a bit against the EUR at 1.34.3. CMS 10-2 years spread is stable at 1.57. The 5y CMS stands at 2.822 and the 3y at 2.338.

 

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G20 continues today in London

·       No April Fools joke.. the markets are really going up ! DJIA +2.01%, NSDQ +1.51%, S&P500 +1.66%.

·       Better than expected home sales data and ISM factory index boost confidence that the worst of the recession is over.

·       Report shows US car sales in March have rebounded from a 27yr low.

·       US Treasury Secretary Geithner also in a positive mood "You're seeing encouraging signs of improvement in our markets".

·       House prices in UK unexpectedly rose for the first time since Oct 07. Interest rate cuts in the UK are attracting buyers.

·       Asian markets explode: Nikkei +4.4%, Hang Seng +5.3%.

·       ECB expected to cut rates by 0.5% today. Benchmark rate would then be 1%. € rises slightly vs $ (1.3264) on speculation that Trichet will signal an end to the ECB rate cutting cycle.

·       Yen weaker as investors move to higher yielding currencies.

·       Oil price firm @ $49.40. Gold stable @ $922. VIX lower @ 42.20

·       10-2yr spread @ 162bps. 5yr CMS @ 2.66%, 3yr @ 2.12%.

·       G20 continues today in London…not fun being a banker in the City at the moment!

 

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The average prices for houses in the big US cities has dropped by 19% over 12 months

Positive return for the bourses in March -  Yesterday : DJ +1.2%, S&P500 +1.3%, NASDAQ +1.8%, NIKKEI +3% and EUROSTOXX -1.3% and retreating by 1,7% right now.

CASE-SHILLER: the average price for houses in the big US cities has dropped by 19% between 01/08 and 01/09, a further deterioration

US ECONOMY: the PMI came out  worse than expected at 31.4 against 34.2 but the Consumer confidence index was better than expected at 57.3 against 56.8.

LAFARGE: a 1.5 bn EUR capital increase (6 for 13 at 16.65 EUR).

BNP PARIBAS: 1.5 bn EUR capital increase via preferred shares underwritten by the French State.

VIX is down to 44.1. Gold is down at 918 USD per oz while the oil price (BRENT CRUDE SPOT) is up at 48.6 USD. The USD is up against the EUR at 1.318. CMS 10-2 years spread is stable at 1.57. The 5y CMS stands at 2.658 and the 3y at 2.133.

 

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