Trade the News US Market Update

Dow -140 S&P500 -15 Nasdaq -4

***Economic Data***

– (PO) Portugal July Trade Balance: -€1.2B v -€1.0B prior
– (RU) Russia July Trade Balance: $16.7Be v 17.4B prior
– (CA) Canada Aug Net Change in Employment:-5.5K K v +21.5Ke; Unemployment Rate: 7.3% v 7.2%e
– (CA) Canada Aug Housing Starts: 184.7K v 200.0Ke prior
– (CA) Canada Q2 Labor Productivity Q/Q: -0.9% v -0.7%e
– (MX) Mexico July Final Trade Balance: -$1.2B v +$0.1B prelim
– (US) July Wholesale Inventories: 0.8% v 0.7%e

– The Greek debt crisis is driving sentiment in New York this morning as major indices plunge on a confluence of negative reports. With Greece’s fiscal reforms apparently on the rocks, peripheral spreads widened out dramatically and various rumors made the rounds that Greece was mulling an immediate default on its debts (which were vociferously denied by the Greek government). Recall that today is the deadline for the Greek debt swap; reports say that participation rate among private lenders will be 75%, below the 90% target. Then in the US premarket ECB Chief Economist Jurgen Stark resigned from the ECB, ostensibly for “personal reasons,” although the word is that he is fed up with the ECB’s policy of buying the debt of peripheral euro zone nations to keep down their borrowing costs. The G7 finance ministers are meeting in France this weekend, and ahead of the conference IMF Director Lagarde called on nations to act boldly to sustain the recovery while suggesting austerity can wait. Some are wondering whether coordinated monetary policy easing would be announced at the G7 conference, although Treasury Secretary Geithner noted earlier that he does not expect any dramatic developments at the meeting. Gold zigzagged in the premarket, plunging $60/oz on word that the CME had adjusted an OTC margin requirement – although traders said the move was just housekeeping. Spot gold is around $1,850, regaining about half its losses from earlier.

– The major US airline stocks were one of the few market sectors to make gains this morning. United Continental jumped 4% in the first 30 minutes of trade, leading other airline stocks higher. Note that yesterday after the close, the carrier reported a 2.5% drop in August revenue passenger miles and a 1.6% drop in load factor compared with a year ago, with much of the blame placed on Hurricane Irene. Traders suggest that the decline in front-month crude prices helped. Shares of Kroger are down 7% after the firm slightly missed on its Q2 profits and stuck with sub-par FY11 guidance. Shares of SWY are down 5% in sympathy. Cult stock Lululemon was down as much as 7% before retracing to -5%, despite slightly better-than-expected quarterly results. Travelzoo is up 4% after ChaPaVe Partners said that it was planning a tender offer for up to 1.5M of company’s shares at $40/shr in strategy to enable a going private operation. Travelzoo declined to comment on the report.

– EUR/USD remained under pressure in the New York session on reports that Stark had confirmed his retirement. The deadline for participation in the Greek debt agreement drove FX caution given the recent shift in focus to support for the European banking system, plus the timing of the Swiss move set a floor in its currency and the absence of the Chinese in buying euros this week. EUR/USD dipped the 1.3720 level by the mid-NY morning.

***Looking Ahead***

– G7 Finance Minister meeting in in Marseille, France
– 11:00 (US) Fed to purchase $2.75-3.50B in Notes/Bonds
– 11:30 (US) Fed’s Williams speaks at Symposium in San Francisco

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