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Friday, February 12, 2010

Morning Market Report

It was a big day in the markets yesterday with the Dow gaining more than 100 points, but the early returns look down following this news about China.

Stock index futures dropped as world markets were rattled over China's decision to tighten capital requirements for banks.

Though the China has been long expected to continue its tightening measures, the timing of the measure caught markets off guard. China raised capital requirements by 50 basis points, or 0.5 percentage points.

The Dow has lost most of its gains from yesterday in early trading. Meanwhile, bonds are showing strength. They were even yesterday despite strength from equities yesterday. This morning, the ten year U.S. Treasury bond is better by five points and is trading at 3.66%. The yield spread has extended slightly to 2.84% and continues to push all time highs. The three month t bill is slightly better as well at .086%.

Oil is off by a dollar and a quarter to $74.26 a barrel, and gold is off by $8 an ounce to $1087 an ounce. The Dollar is also showing strength this morning. It's up .89% against the Euro, up .62% against the British Pound and up .27% against the Japanese Yen. So, we generally continue to have the inverse relationship between equities and the dollar. That indicates that there's more and more evidence that we are on the verge of the dollar asset bubble.

Finally, the recovery in Europe is slowing down.

Europe’s recovery almost stalled in the fourth quarter as waning spending and investment in Germany unexpectedly brought growth in the region’s largest economy to a halt.

Gross domestic product in the 16-nation euro region rose 0.1 percent from the third quarter, when it gained 0.4 percent, the European Union’s statistics office in Luxembourg said today. Economists forecast expansion of 0.3 percent, the median of 34 estimates in a Bloomberg survey showed. The recession in Greece deepened, with GDP falling 0.8 percent in the fourth quarter after a 0.5 percent slump in the previous three months.


European stocks were generally down due to fears over Greece and China's tightening.

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