Treasury Auction and Fed Fund Rates

123jump.com Staff
30 Nov, -0001
New York City

Market is in the last week of heavey earnings season with 800 companies to release earnings. Dell, Cisco, Target, Federated Stores, Disney, Kohl's, Nortel, Mittal Steel, Four Seasons Hotels, Deutsche Telekom and others. The treasury auction this week will be closely watched for the level of participation from Central Bankers around the world.

U.S. MARKET

The stock market in the coming week will focus its attention on earnings and Fed’s treasury auction and Governors’ meeting on Wednesday.

The U.S. budgetary shortfall of at least $57 billion in July is expected to be met with 5 and 10 year government bonds. The nature and level of participation from central banks around the world will be closely watched by the market.

The market after a two week rally and trading close to 4-year highs appears to be in the mood to take profit. The rise in employment wages, dollar and commodities prices such as oil and copper has stoked fears of inflation.

Several tech stocks are scheduled to release earnings this week. Dell, Cisco, Analog Devices and Nvidia. Other companies to release earnings include, Disney, Delphi, Visteon, Federated Department Stores, Target, Kohl’s and DreamWorks Animation.


U.S. ECONOMY

Economists expect that in three of the four remaining Fed meeting in the year 2005, central bank is likely to raise interest rate by a quart point per meeting. The next U.S. Fed meeting of Governors is on August 9th.

While the U.S. unemployment level remained low and stable at 5% according the Department of Labor, vast number of new jobs created in the economy remained in the low paying industrial sectors such as retail and low-end manufacturing jobs. The U.S. economy has not created more than 2.5 million annual jobs since the early eighties.

For the month of July 2005, lowest unemployment was reported in professional, managerial and office occupation category of 2.3% and highest unemployment was reported in production category of 7.1%.

The July job creation of 207,000 is not likely to be sustained in the rest of the third and fourth quarter of this year.


INTERNATIONAL TRADE

Asian currencies appreciated from 0.4% in Philippines, to 0.6% in Singapore, 0.7% in Indonesia, 1.2% in Thailand, and 1.3% in Korea. The Chinese Yuan appreciation of 2.2% on July 21, led other Asian currencies to rise and futures market expect Chinese Yuan to rise 4.1% more by the end of the year.

Chinese government plans to spend between $25 and $30 billion a year for the next five years to meet the gap between demand and supply for electric power. The plan demands new facilities for power generation and copper cable plants. However, to cool the economy, China plans to slow the growth in copper smelting capacity of the expected new 18 plants with the total capacity of 2.49 tons. China produces 13% of the world’s refined copper.

Chilean government may generate 3% budget surplus after generating 2.2% surplus last year. The world’s largest copper producer is benefiting from the Chinese demand for Copper. Peso, Chilean currency has appreciated 17% in the last 12 months and inflation has been rising steadily to 3.1% during the same period. Central Bank may raise the rated to 3.5% in the coming weeks.

Brazil registered July trade surplus of $11.1 billion rise of 9% from June surplus and total of $39.9 billion in the last 12 months. Real, Brazilian currency has appreciated 15% since the beginning of the year.

Brazil’s industrial production jumped 6.3% in June due the strength in steel, auto and mining production in the country. The latest rise was followed by a growth of 5.5% in May from a year ago. The Trade Ministry is targeting trade surplus of more than $10 billion in the second half of this year.

Canadian unemployment rose to 6.8% in July from 6.7% in June. Manufacturers are trimming payroll and added less than 6,000 jobs as manufacturing input costs rise. The Canadian dollar has advanced 31% in the last three years.