Morning Call: Speculation that the global recovery will extend into next year is leading world stock markets higher; Mar S&Ps up +4.20 at a 14-3/4 month high.

Overnight Developments

• The European DJ Stoxx 50 this morning is up +0.28% and Mar S&Ps are up +4.20 points, both rising to 14-3/4 month highs. Most global stock markets are higher today and are being led by gains in basic-resource companies and energy producers. Treasuries are weaker ahead of today's $42 billion 5-year T-note auction and the dollar index slid to a 1-week low, although profit-taking in most commodities from their recent rallies has them trading lower today. ECB Council member Marko Kranjec said in an interview on TV Slovenija that "the year 2010 will be a difficult year, though the economy will be growing."• The Asian markets today closed mostly higher with Japan up +0.04%, Hong Kong +0.09%, China +0.64%, Taiwan -0.05%, Australia +1.13%, Singapore +0.49%, South Korea -0.76%, India +0.24%. Asian mining companies led a rally today on speculation of increased metals demand from China and on labor strife in Chile's copper industry. Limiting gains in the Asian markets was weakness in Japanese bank stocks that closed lower on concerns they may have to raise more capital after Sumitomo Mitsui Financial Group fell 2.8% when it said it was considering a stock sale to raise more funds.

Overnight U.S. Stock News

• March S&Ps this morning are trading up +4.20 points and posted a fresh 14-3/4 month high. The US stock market yesterday rallied early but shed most of its gains and closed the day slightly higher (Dow Jones +0.26%, S&P 500 +0.12%, Nasdaq Composite +0.24%). The S&P 500 Index posted a 14-3/4 month high, the Dow Jones posted a 15-month high, and the Nasdaq Composite posted a 15-3/4 month high.

Bullish factors included:
(1) carry-over support from a rally in European and Asian stock markets after China on Dec 25 raised its 2008 GDP estimate to 9.6% from 9.0% and said this year's quarterly figures will improve, while Japan's Cabinet Office said its economy will expand for the first time in three years in the fiscal year starting April,

(2) strength in retailers after the report from MasterCard Advisors' SpendingPulse said US retail sales rose an estimated +3.6% this holiday season from last year due to stability in consumer spending and as retailers held less inventory whi ch led to fewer unexpected markdowns,

(3) a rally in energy producers after crude oil climbed to a 5-week high, and (4) the prediction from the chief economist at Barclays Capital that the US economy will expand by 3.5% in 2010 and turn in its best performance since 2004 as consumer spending picks up and companies increase investment.

• Bearish factors included

(1) interest rate concerns which weakened banking and financial stocks after the yield on the 10-year T-note rose to a 4-1/2 month high of 3.85% and fueled speculation that higher borrowing costs will stifle the economic recovery,

(2) weakness in airline stocks after President Obama asked the Homeland Security Department to review airport screening capabilities, which may lead to changes in procedures that increase security costs for the airlines, and

(3) a pessimistic business forecast from Burlington Northern Santa Fe, which according to Barron's, may mean US industrial activity will be less robust in 2010 than many on Wall Street anticipate.

Today's U.S. Market Focus

• March 10-year T-notes this morning are trading down -5 ticks ahead of today's $42 billion 5-year T-note auction. Mar T-note prices yesterday slumped for the sixth consecutive session and settled down 6.5 ticks at 115-165. TYH posted a 4-1/2 month nearest-futures low and the 10-year T-note yield rose to a 4-1/2 month high of 3.85%.

Bearish factors yesterday included
(1) reduced safe-haven demand for Treasuries after the S&P 500 Index climbed to a 14-3/4 month high,

(2) the prediction from Morgan Stanley that the yield on the 10-year T-note will rise to 5.5% next year as the US faces increased competition from other debt issuers which will spur investors to demand higher yields as the Fed ends its $1.6 trillion asset-purchase program,

(3) weak demand for the Treasury's $44 billion 2-year auction, which had a bid-to-cover ratio of 2.91 compared with the 2.96 average at the last 10 auctions and weak foreign demand after indirect bidders purchased only 34.8% of the auctio n compared with the 45% average of the last 10 auctions, and

(4) supply pressures ahead of Tuesday's $42 billion 5-year T-note auction. A bullish factor yesterday was the prediction from Goldman Sachs that the yield on the 10-year T-note will drop to 3.25% next year as unemployment in the US averages 10.3% and hinders the economic recovery.

• The dollar index this morning is weaker and trading at a 1-week low with the dollar/yen +0.06 yen and the euro/dollar +0.68 cents. The dollar index yesterday ended a lackluster session by closing -0.101 points at 77.633.

Bearish factors yesterday included
(1) the larger-than-expected increase in Nov Japan industrial production, which was positive for the yen, and

(2) the prediction from Brown Brothers Harriman & Co. that the recent strength in the dollar is a "head fake" and is due to short-covering and is not the start of a bullish trend.

Bullish factors included

(1) a possible increase in demand for US assets after the chief economist at Barclays Capital predicted that the US economy will expand by 3.5% in 2010 and turn in its best performance since 2004, and

(2) an improvement in the dollar's interest rate differentials after the yield on the 10-year T-note rose to a 4-1/2 month high of 3.85%.• February crude oil prices this morning are trading down -39 cents a barrel and Feb gasoline is -0.37 cent a gallon. Feb crude oil yesterday rallied and closed 72 cents higher. Feb gasoline closed up 0.21 cents a gallon. Feb crude posted a 5-week nearest-futures high and Feb gasoline posted a 3-week high.

Bullish factors included

(1) the weaker dollar,

(2) the prediction from Shanghai Securities that China's 2010 energy demand may rise by 3.6% y/y,

(3) the jump in the S&P 500 Index to a 14-3/4 month high which signals increased confidence in the US economy that may lead to an improvement in energy demand, and

(4) the prediction from Weather Derivatives that the current cold weather will raise US consumption of heating fuels by 6.7% in the next seven days. A bearish factor was the -4.5% y/y drop in Nov Japan crude oil imports, which signals weakened energy demand in the world's second-largest economy. Expectations for Wednesday's weekly DOE inventory report are for crude oil stockpiles to fall -2.2 million bbl, gasoline inventories to rise +1.0 million bbl, distillate supplies to fall -2.25 million bbl, and the refinery capacity rate to rise +0.2 to 80.2%.

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Gold's Prospect Still Depends on US' Rate and Inflation Outlook

Gold price slides to 1103 in European session as investors take profit after the 3-day rebound.

The outlook for gold price depends heavily on US inflation and interest rates. Fed funds futures yesterday showed a 60% probability (around 36% in November) that the Fed will hike hikes by at least 0.25% by 2H10.

While the market has rigorously speculated the Fed will raise the policy rate earlier than previously expected, the Fed and analysts in the street remain cautious and forecast the Fed funds rate will stay unchanged at 0-0.2% for most of the time in 2010.

Source:
http://www.oilngold.com

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Foreign Exchange Closing

MARKETS DATA CENTER
from The Wall Street Journal Online

MAJOR CURRENCIES
Monday, December 28, 2009

Americas

Country
Last
in US$ per US$ US$ vs. % chg

Argentina peso*
0.2639 3.7893 -0.11

Brazil real
0.5742 1.7416 -1.18

Canada dollar
0.9591 1.0426 -0.71

1-mos forward
0.9591 1.0426 -0.71

3-mos forward
0.9591 1.0426 -0.72

6-mos forward
0.9590 1.0428 -0.71

Chile peso
0.001975 506.33 0.05

Colombia peso
0.0004910 2036.66 -0.57

Ecuador US dollar
1 1 unch

Mexico peso*
0.0769 13.0107 0.91

Peru new sol
0.3470 2.8818 unch

Uruguay peso†
0.05120 19.53 unch

Venezuela b. fuerte
0.46570111 2.1473 unch

Asia-Pacific

Last
in US$ per US$ US$ vs. % chg

Australian dollar
0.8873 1.1270 -0.27

China yuan
0.1464 6.8302 unch

Hong Kong dollar
0.1290 7.7546 unch

India rupee
0.02152 46.4684 -0.09

Indonesia rupiah
0.0001059 9443 -0.38

Japan yen
0.010915 91.62 0.32

1-mos forward
0.010917 91.60 0.47

3-mos forward
0.01092 91.58 0.47

6-mos forward
0.010931 91.48 0.46

Malaysia ringgit§
0.2915 3.4305 unch

New Zealand dollar
0.7086 1.4112 -0.31

Pakistan rupee
0.01191 83.963 -0.42

Philippines peso
0.0216 46.382 -0.28

Singapore dollar
0.7114 1.4057 -0.14

South Korea won
0.0008551 1169.45 -0.48

Taiwan dollar
0.03097 32.289 unch

Thailand baht
0.02996 33.378 0.13

Vietnam dong
0.00005 18474 unch

Europe

Last
in US$ per US$ US$ vs. % chg

Czech Rep. koruna**
0.05445 18.366 0.13

Denmark krone
0.1932 5.1760 0.26

Euro area euro
1.4378 0.6955 0.13

Hungary forint
0.005271 189.72 0.17

Norway krone
0.1725 5.7971 unch

Poland zloty
0.3455 2.8944 0.29

Romania leu
0.3422 2.9221 unch

Russia ruble‡
0.03364 29.727 0.59

Sweden krona
0.1386 7.2150 -0.87

Switzerland franc
0.9664 1.0348 -0.10

1-mos forward
0.9666 1.0346 -0.10

3-mos forward
0.9670 1.0341 -0.11

6-mos forward
0.9679 1.0332 -0.10

Turkey lira**
0.6615 1.5118 unch

UK pound
1.6002 0.6249 -0.24

1-mos forward
1.5999 0.6250 -0.26

3-mos forward
1.5993 0.6253 -0.24

6-mos forward
1.5985 0.6256 -0.24

Middle East/Africa

Last
in US$ per US$ US$ vs. % chg

Bahrain dinar
2.6525 0.3770 unch

Eqypt pound*
0.1819 5.4969 -0.05

Israel shekel
0.2638 3.7908 -0.23

Jordan dinar
1.4129 0.7078 unch

Kenya shilling
0.01317 75.950 0.33

Kuwait dinar
3.4861 0.2869 unch

Lebanon pound
0.0006656 1502.40 -0.33

Saudi Arabia riyal
0.2666 3.7509 unch

South Africa rand
0.1334 7.4963 -0.45

UAE dirham
0.2722 3.6738 unch

SDR††
1.5674 0.6380 0.08

__________________________________
Footnotes
*Floating rate
† Financial
§Government rate
‡Russian Central Bank rate
**Commercial rate
††Special Drawing Rights (SDR); from the
International Monetary Fund; based on
exchange rates forU.S., British and
Japanese currencies.
Note: Based on trading among banks of
$1 million and more, as quoted at 4 p.m. ET by Reuters.

Source: Reuters

The "US$ vs. % chg" column reflects
the percentage change in the value
of the U.S. dollar vs. each currency.

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Fundamental On Precious Metal

So far, no fundamentals are being released today from the world's economical superpower and throughout this week no major releases are actually being scheduled, while investors returned from their long Christmas holiday to the market and are in fact still closing their positions within markets ahead of the New Year, which caused overall trading movements to be narrow and calm.‬‪

However, the U.S economic recovery path may be taking a short break presently to continue throughout next year, knowing that the labor market still remains deeply deteriorated along with obstacles witnessed within the financial sector, which continue on delaying a full revival of the nation's economy, nevertheless other sectors are improving gradually despite the ongoing downside pressures of the recession.‬‪

Accordingly, amid holidays ahead of the year-end, the dollar along with the yen plunged versus other currencies due to technical movements and since overall markets are calm today, having therefore the dollar index, which tracks the strength of the green Benjamin in front of a basket of currencies, is plummeting on the daily scale to trade at 77.58 recording a high of 77.85 and a low of 77.53.‬‪

As for the precious metal, it is currently narrow trading due the present weakening of the dollar and overall volatile movements, knowing that these two have an inverse relation, having accordingly the gold trading so far $1103.54 an ounce recording a high of $1113.70 an ounce and a low of $1101.41, while the commodity indices REUTERS/JEFFERIES CRB INDEX gained 1.39 points to 282.23.


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U.S. Morning Call for Monday, December 28, 2009

Overnight Developments

• The European DJ Stoxx 50 this morning is up +0.55% and Mar S&Ps are up +1.40 points, both at 14-3/4 month highs. Global stock markets received a boost when China on Dec 25 raised its 2008 GDP estimate to 9.6% from 9% and said this year's quarterly figures will increase, while Japan's Cabinet Office said the economy will expand for the first time in three years and that industrial production gained for a ninth month in Nov. Treasuries and the dollar are weaker while most commodities are higher, with copper surging to a 15-month high and crude climbing to a 3-week high, which has prompted a rally in European basic-resource companies and energy producers. The chief economist at Barclays Capital predicts that the US economy will expand by 3.5% in 2010 and turn in its best performance since 2004 as consumer spending picks up and companies increase investment.

• The Asian markets today closed mostly higher with Japan up +1.33%, Hong Kong -0.17%, China +1.57%, Taiwan +1.06%, Singapore +0.63%, South Korea +0.16%. Japan's Nov industrial production rose a larger-than-expected +2.6% m/m for its biggest gain in six months and helped Japanese stocks to gain on signs that Japan's exporters are coping with the impact of a stronger yen. Japan's Cabinet Office on Dec 25 predicted that the Japanese economy "will probably recover gradually" next year with a 1.4% expansion in the year starting in April. Consumer spending in Japan may be limited after Nov Japan monthly wages fell -2.8% y/y, their biggest decrease in the last four months and the 18th consecutive monthly year-over-year decline. Chinese stocks closed higher after Chinese Premier Wen Jiabao said the government will cool property prices, resist pressure for the yuan to appreciate and keep inflation at "reasonable" levels. Overnight U.S. Stock News

• March S&Ps this morning are trading up +1.40 points and posted a fresh 14-3/4 month high. The US stock market last Thursday settled with moderate gains and closed higher for the fifth consecutive session (Dow Jones +0.51%, S&P 500 +0.53%, Nasdaq Composite +0.71%). The S&P 500 Index and the Dow Jones posted 14-3/4 month highs while the Nasdaq Composite climbed to a 15-1/2 month high. Bullish factors included (1) an improvement in the labor market after weekly initial unemployment claims fell to their lowest level in 15 months (-28,000 to 452,000 versus expectations of -10,000 to 470,000), (2) an increase in economic optimism after the less volatile ex-transportation component of the Nov durable goods orders rose more than expected (+2.0% ex-transportation versus market expectations of +1.0%), (3) Morgan Stanley's hike in its US Q4 GDP estimate to a 5.1% annual rate from an earlier prediction of a 4.1% annual rate, and (4) the prediction from Fortis Global Markets that "growth in Q4 of this year and Q1 of 2010 will be particularly strong because inventories will correct to the upside," and government stimulus measures will still support the economy in that period.

• Bearish factors included (1) weakness in health-care stocks after the US Senate approved legislation that would make the broadest changes to the US health-care system in decades, and (2) a continued rise in interest rates that may dampen consumer and business spending after the 10-year T-note yield climbed to a 4-1/2 month high of 3.80% and has now risen sharply by 34 bp in the past week.

• Exxon-Mobile (XOM) rose 1% in pre-market trading after crude oil prices jumped to a 3-week high

Today's U.S. Market Focus

• March 10-year T-notes this morning are trading down -9.5 ticks. Mar T-note prices last Thursday closed lower for the fifth consecutive session and settled down -13 ticks at 115-230. TYH posted a 4-1/2 month nearest-futures low and the 10-year T-note yield rose to a 4-1/2 month high of 3.80%. Bearish factors included (1) the larger-than-expected decline in weekly initial unemployment claims which fell to their lowest level in 15 months (-28,000 to 452,000 versus expectations of -10,000 to 470,000), (2) the larger-than-expected increase in the less volatile ex-transportation component of the Nov durable goods orders report (+2.0% ex transportation versus market expectations of +1.0%), (3) reduced safe-haven demand for Treasuries after the S&P 500 Index rose to a 14-3/4 month high, (4) supply pressures ahead of this week's $118 billion in Treasury auctions that begin with Monday's $44 billion 2-year T-note auction, and (5) the prediction from Barclays Plc that the 10-ye ar T-note yield will climb to 4.50% in 2010 as a strengthening economy prompts the Fed to unwind programs put in place to revive growth. A bullish factor last Thursday was the prediction from RBS that 10-year T-notes will see an influx of demand from mutual funds, pension finds and individuals when the yield on the 10-year T-note nears 3.90%.

• The dollar index this morning is weaker with the dollar/yen +0.23 yen and the euro/dollar -0.08 cents. The dollar index last Thursday finished slightly lower. Bearish factors included (1) the report from Barclays that said global central banks in Q3 cut their purchases of dollars to a record low of less than 30% of new foreign-exchange reserves, and (2) reduced safe-haven demand for the dollar after the S&P 500 Index rose to a 14-3/4 month high. Bullish factors for the dollar last Thursday included (1) better-than-expected US economic data that may prompt the Fed to increase interest rates sooner-than-expected after US weekly initial unemployment claims fell to a 15-month low and Nov durable goods orders ex-transportation rose more than expected, and (2) the prediction from the Diawa Institute of Research that the yen may fall to 100 yen per dollar by Q3 of next year as deflation keeps the BOJ from following interest rate increases by the Fed.

• February crude oil prices this morning are trading up +68 cents a barrel and Feb gasoline is +2.21 cents a gallon. Feb crude oil last Thursday rallied for a third day and closed up +$1.38 a barrel. Feb gasoline closed up +2.38 cents a gallon. Both Feb crude and Feb gasoline posted 2-week highs. Bullish factors included (1) dollar weakness, (2) better-than-expected US economic data that may portend an increase in fuel demand after US weekly initial unemployment claims fell to a 15-month low and Nov durable goods orders ex-transportation rose more than expected, and (3) carry-over strength from a rally in gasoline after a refinery fire in Texas City, Texas closed a Valero Energy refinery with a capacity of 230,000 bbl a day. A bearish factor was the resumption of crude exports through Iraq's 450,000 bbl a day oil export pipeline to Turkey after an explosion had forced its closure on Dec 20.

U.S. Earnings ReportsEarnings reports (confirmed releases, sorted by mkt cap) NSM-National Semiconductor (BEST earnings consensus $0.18), CALM-Cal-Maine Foods (0.71), FIZZ-National Beverage (0.10), NWPX-Northwest Pipe (-0.11), LTRE-Learning Tree International (0.14)Global Financial CalendarMonday 12/28/2009 United States 1130 ETWeekly 3-mo and 6-mo T-bill auctions. 1300 ETTreasury auctions $44 billion 2-year T-notes.

United Kingdom n/a

Markets and government offices closed for Boxing Day Holiday. Canada n/a

Markets and government offices closed for Boxing Day Holiday.

Morning Quote Board

Morning Quotes (ET)LastChg%chgUpdated US Stock Futures S&P (Globex) (H0)1123.405.000.45%07:05:37 DJIA (CBOT) (H0)1047370.07%07:05:37 European Stocks Europe DJ Stoxx 502586.9614.070.55%07:10:00 London UK FTSE Index5402.410.000.00%12/24/2009 German Dax Index6001.6844.240.74%07:10:07 French CAC 40 Index3941.5828.850.74%07:10:00 Asian-Pacific Stocks Japan Nikkei Index106341401.33%02:00:13 Hong Kong Hang Seng21480-37-0.17%03:01:30 China CSI 300 Index3478541.57%02:01:43 Taiwan TAIEX Index8057851.06%00:46:01 Australian S&P 2004790.900.00%12/23/2009 Singapore Str. Times2855.6817.980.63%04:10:01 South Korea KOSPI 200222.030.360.16%04:03:28 Bombay Sensex 301736100.00%12/24/2009 Karachi KSE-100942200.00%12/24/2009 US Interest Rates 10yr T-notes (CBT)(H0)115.135-0.095-0.26%07:15:02 Cash 10yr T-note Price96.050-0.110-0.36%07:25:00 Cash 10yr T-note Yield3.8460.0431.13%07:24 5yr T-note (CBT)(H0)114.175-0.075-0.20%07:15:01 Cash 5yr T-note Price97.285-0.070-0.22%07:24:01 Cash 5yr T-note Yield2.5840.0481.91%07:23 30-yr T-bond (CBT)(H0)114.29-0.10-0.27%07:15:00 Cash 30yr T-bond Price94.225-0.115-0.38%07:23:00 Cash 30yr T-bond Yield4.7070.0230.50%07:22 Eurodollars (CME)(H0)99.625-0.015-0.02%07:14:06 Eurodollars (CME)(M0)99.330-0.010-0.01%07:10:50 Asian & European Rates 10-yr JGBs (TSE) (H0)139.38-0.36-0.26%01:00:00 EuroyenTibor(SGX)(H0)99.6250.0000.00%12/28/2009 Bunds (Eurex) (H0)121.57-0.32-0.26%07:09:53 Euribor (Eurex) (H0)99.230.00-0.01%06:08:27 UK Gilts (Liffe) (H0)114.520.000.00%12/24/2009 Short Stlg (Liffe) (H0)99.310.000.00%12/24/2009 Forex U.S. Dollar Index77.60-0.14-0.17%07:15:06 US Dollar-Japanese Yen91.530.230.25%07:25:07 EuroFX-US Dollar1.4403-0.0008-0.08%07:25:07 US Dollar-Swiss Franc1.0340-0.0021-0.21%07:25:07 British Pound-US$1.59780.00110.11%07:25:07 US$-Canadian Dlr1.0484-0.0015-0.15%07:25:07 Yen (Globex) (H0)1.09280.00080.08%07:14:39 Euro FX (Globex) (H0)1.44050.00460.32%07:13:46 SwissFranc (Globex)(H0)0.96790.00490.51%07:14:30 British Pound(Glbx)(H0)1.59670.00220.14%07:14:55 Canadian$ (Globex)(H0)0.9540.00180.19%07:14:39 Commodities Gold (Comex) (G0)1111.85.20.47%07:14:34 Silver (Comex) (H0)17.5700.0550.31%07:14:40 Copper (Comex) (H0)332.22.80.85%07:14:42 Crude Oil (Nymex) (G0)78.430.680.87%07:15:04 Gasoline (Nymex) (G0)202.462.211.10%07:11:31 Heating Oil(Nymex) (G0)207.361.910.93%07:00:50 NaturalGas(Nymex)(G0)5.8670.1522.66%07:15:06 Corn (CBOT) (H0)415.757.251.77%07:14:25 Soybeans (CBOT) (F0)1012.0012.501.25%07:15:01 Wheat (CBOT) (H0)534.259.751.86%07:07:35

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Fundamental Oil

Crude prices rose slightly today as on one hand the black gold opponent; the dollar, lost some momentum throughout the currencies market today on technical and volatile movements, knowing that the dollar index, which tracks the strength of the green Benjamin in front of a basket of currencies, is plummeting on the daily scale to trade at 77.58 recording a high of 77.85 and a low of 77.53.

Accordingly, since oil is a dollar denominated asset, it seems therefore cheaper for international traders to buy, having the black gold appeal as an alternative investment boosted on the current weakening of the Federal currency.

On the other hand, the demand on oil, natural gas and heating oil rose throughout this past period mainly within the top oil consumer country and other major economies due to a colder winter, knowing that around 50% of the United States is covered with snow.In fact, 13 to 30 inches of snow covering Virginia, Maryland and Washington, D.C according to the National Weather Service, which pushed actually the Washington DC federal government to close along with the closing of schools and various companies and business around the country.

As a result, optimism is detected throughout the black gold market oil seems cheaper to international traders as it is as we know a dollar-priced commodity, having crude prices accordingly opening at $77.92 a barrel recording a high of $78.12 per barrel and a low of $77.76 per barrel along with a considerable $0.68 gain witnessed within the oil contract, plus the S&P GSCI rose actually by 6.72 points to 522.57.
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