I'm back from Vegas-and Stocks Ready To Plunge

Greenback a cure for commodities?

Thursday, December 11, 2008
Here's Allan Robinson's At The Bell which you'll find in Friday's newspaper:The U.S. dollar tumbled yesterday between 1 and 4.7 per cent against the world's major currencies and that could be good for U.S.-dollar-denominated commodity prices.

The main beneficiary of the swing during the past few days has been gold, which is once again trading above $800 (U.S.) an ounce. Oil prices have also shown some signs of strength.WHAT ARE THE EXPECTATIONS?But the question shell-shocked investors in commodities must be asking is whether the flight to safety that has pushed the U.S. dollar higher, and commodities lower, over the past few months is over?

“This has been the sharpest and steepest downturn in aggregate in commodity and energy prices ever,” said Bart Melek, global commodity strategist for BMO Nesbitt Burns Inc. “In terms of magnitude it's not much different; it's the speed of it.”Much of the pullback is a result of the trade finance cutbacks and de-leveraging by banks and hedge funds as a result of the credit crisis because the commodity price declines are far in excess of the supply and demand fundamentals, he said.

“We still have more pain coming, but I don't see a lot of downside remaining.”However, base metals and bulk commodities could remain under pressure for much of 2009 with only a modest turnaround expected in the latter part of the year, according to BMO Nesbitt Burns. Large segments of the nickel, zinc, aluminum and copper markets are operating below their cost of production, it said.

The rise in oil during the past few days is a result of the stronger dollar and talk of production cuts by the Organization of Petroleum Exporting Countries, said Robert Tebbutt, vice-president of Peregrine Financial Group Canada Inc.As far as the equity markets' ability to look ahead goes, the only major index up strongly during the past month is China's CSI 300 index, which has climbed 13.6 per cent.

That could bode well for commodities.So it looks like the beleaguered manufacturing sector at least can expect continued relief from declining costs. The producer price index scheduled for release today is forecast to have declined 2 per cent in November, compared with a 2.8-per-cent drop in October, according to a survey of economists by Bloomberg.

That would mark the fourth consecutive monthly decline.



Wall Street poised to plunge

SARA LEPRO
Friday, December 12, 2008
NEW YORK — A dejected stock market headed for a plunge at the opening of trading Friday as the Senate's rejection of a $14-billion (U.S.) lifeline for the auto industry intensified investors' concerns about a deepening recession.

The defeat of the bailout bill late Thursday has prompted calls from lawmakers for the Bush administration to use a portion of the $700-billion financial rescue package to prop up the struggling companies. The bill failed after the United Auto Workers refused to meet Republican demands for big wage cuts.

General Motors Corp. and Chrysler LLC have said they could run out of cash within weeks without government help. Ford Motor Co., which would also be eligible for aid under the bill, has said it has enough cash to make it through next year.

The failure of the bill is feeding investors' concerns about job losses. More evidence of the ravaged labour market came late Thursday, as Bank of America Corp. said it expected to cut as many as 35,000 jobs over the next three years, including some from investment bank Merrill Lynch & Co., which it agreed to buy in September.

Dow Jones industrial average futures dropped 310, or 3.61 per cent, to 8,287. Standard & Poor's 500 index futures fell 40.40, or 4.62 per cent, to 834.10, while Nasdaq 100 index futures fell 45.00, or 3.78 per cent, to 1,145.00.

Meanwhile, more glum economic data is expected Friday. The Commerce Department will release its retail sales report for November at 8:30 a.m. (ET). The Labour Department is expected to release the producer price index for November at the same time. Later Friday morning, the Commerce Department will issue its report on business inventories for October.

The Commerce Department is expected to report that retail sales fell in November for a fifth straight month despite a surge of shoppers over the Thanksgiving weekend. The report is a closely watched gauge considering that consumer spending drives more than two-thirds of the U.S. economy.

The reports will follow a bleak report from the Labour Department Thursday that said initial jobless claims rose to the highest level in 26 years last week.

Job losses have become investors' primary concern in recent weeks, as companies across many sectors, including AT&T Inc., DuPont, Dow Chemical Co., and Freeport-McMoRan Copper & Gold Inc., have announced thousands of layoffs. Analysts don't expect the announcements to end any time soon.

If one of the automakers declared bankruptcy, some estimate as many as 3 million U.S. jobs could be lost next year.

In premarket trading, Ford shares dropped 44 cents, or 15 per cent, to $2.46, while GM plummeted $1.31, or 32 per cent, to $2.81.

Bond prices were mixed Friday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 2.51 per cent from 2.63 per cent late Thursday. The yield on the three-month T-bill was unchanged from late Thursday at 0.02 per cent. The bill has been in great demand because of the safety it offers investors.

The U.S. dollar rose against other major currencies, while gold prices fell.

Light, sweet crude fell $2.58 to $45.40 in electronic premarket trading on the New York Mercantile Exchange.

Overseas, Japan's Nikkei stock average plunged 5.56 per cent. In afternoon trading, Britain's FTSE 100 was down 3.92 per cent, Germany's DAX index was down 4.80 per cent, and France's CAC-40 was down 5.35 per cent.

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