Daily Market Outlook

Daily Market Outlook

Regarding Monday 10 Nov, 2008:

Market Sentiment
Positive Side:
• The health of auto industry in the U.S., especially in the case of the GM which facing even bankruptcy, was a big source of concerns last week but it may work in the opposite direction considering a letter from the democrat leaders Pelosi and Reid to the Treasury's Paulson urging him to use some of his $700B to solve the problem.
• G20's members gathered in Sao Paulo on Friday pledged to use monetary and fiscal policies to stimulate economic growth and help to increase the international trade and capital flow. Ahead of the Washington on Nov 15 it may improve the sentiment or at least help investors to be less worried if not optimistic.
• President-elect Barak Obama expressed its support for a second round of stimulus package appearing in his first news conference on Friday.

Negative Side:
• News of heavy job losses in the U.S. may affect Asian markets negatively on Monday. Last Friday's report showed that the economy has lost 240K jobs in October when the unemployment rate reached 6.5 percent, both came more than analysts' estimates. Dow Jones rose near 200 points that day but after two consecutive 400 decline in the previous two days.
• Allianz may report its first quarterly loss since 2001 which could again raise questions about the health of financial system.

Currencies
USD
Demand side:
• Allianz may report its first quarterly loss since 2001 which could again raise questions about the health of financial system, raising demand for liquid assets such as the greenback.
• Lack of significant economic data on Monday
Supply side:
• Any improvement in overall market sentiment
• Improvement in money market rates, such as the 3M USD LIBOR, if continues could reduce demand for the dollar.
• Speculation about the possibility of more production cut by the OPEC's could affect dollar if it help oil prices to rise.

JPY
Demand side:
• All negative forces of the market sentiment
Supply side:
• All positive forces of the market sentiment

GBP
Demand side:
• Decline in PPI may reflect improvement in the inflationary pressures making it easier for the BOE to support the economy.
Supply side:
• The same force, decline in PPI, increases the possibility of both sooner and larger interest rate cuts.

EUR
Demand side:
Supply side:
• Generally, ECB has much more room to cut interest rate and it might not be fully priced in the currency.
• Reports this week are to show that the GDP in euro-zone probably shrank in the third quarter.
• Specifically, Monday's reports on Italian Industrial Production and French Manufacturing Production probably shows decline in September.