Stock Market Update - Monday, October 11, 2010 Cautious Upward Trend

Stock Market Update
Monday, October 11, 2010

Latest US Economic News Headlines:

USA EQUITY INDEXES: (Oct. 11, 4:00 PM EDT)
Dow Jones 11,008.59      +2.11     (0.02%)
S&P 500    1,165.05       -0.10     (-0.01%)
Nasdaq     2,402.33        +0.42     (0.02%)

Dow Jones Averages: DJIA 11,008.59 UP 2.11 (Oct. 11, 4:00 PM EDT)
  30 INDUS     11,008.59 UP    2.11 OR    0.02%
  20 TRANSP     4,629.51 UP    1.12 OR    0.02%
  15 UTILS        403.96 UP    0.05 OR    0.01%
  65 STOCKS     3,811.69 UP    0.76 OR    0.02%

                   Advancing        Declining
NYSE        359,951,908     417,438,769
AMEX          8,929,506       5,096,202
NASDAQ      874,495,602     647,374,570

US DOLLAR FUTURES INDEX DXY: 4:00 PM EDT: 77.53  Up 0.47  (0.61%)

US COMMODITY PRICES: (Oct. 11, 4:00 PM EDT)
Crude Oil     81.94     - 0.33%
Natural Gas     3.60     -
Gasoline     2.15     - 0.49%
Heating Oil     2.27     - 0.22%
Gold     1353.49     + 0.44%
Silver     23.28     + 0.30%
Copper     3.78     + 0.34%


US STOCKS UP ON EARNINGS OUTLOOK
Stocks Lose Steam Ahead of Closing Bell - US Stocks Rise Modestly As Earnings Optimism Mounts

US stocks drifted between gains and losses as investors awaited the next batch of earnings reports. U.S. stocks rose modestly Monday in early morning trading, boosted by optimism heading into a week of high-profile companies reporting third-quarter earnings against a backdrop of further support expected from the Federal Reserve.

Stocks are higher as investors' confidence mounts ahead of several bellwether third-quarter earnings reports later this week. Technology stocks climb, with shares of Apple and IBM both hitting record highs.
JPMorgan & Chase led advancers on the Dow Jones industrial average with J.P. Morgan, up 1.14%.
JP Morgan reports Wednesday.

Private equity firm agrees to buy the seller of accessories for young children for $64.50 a share, a 22% premium to Gymboree's $52.95 closing price Friday. Gymboree shares jump more than 22%.

Cnooc will buy a stake in Chesapeake Energy's shale oil and gas acreage in south Texas for $1.08 billion cash, the first Chinese state-run oil company to invest in the booming shale hydrocarbons business in the U.S. Chesapeake shares rise 4%.

The McGraw-Hill Companies (NYSE: MHP) announced today that its third quarter 2010 results will be issued via news release before the start of NYSE trading on Tuesday, October 26, 2010. Harold McGraw III, Chairman, President and Chief Executive Officer, and Robert J. Bahash, Executive Vice President and Chief Financial Officer, will host a conference call that morning at 8:30 AM Eastern Time.

Ford Posts Record Sept And Yr-To-Date Sales In Asia Pacific And Africa Region

Hedge-fund industry sees estimated inflows of $11.3 billion in August, the biggest inflow the industry has seen since February after about $3.1 billion of total redemptions in June and July, according to TrimTabs and Barclays.

A greater number of Chinese companies are expected to come knocking on the door of U.S. markets, Sue Chang writes, emboldened by a spate of successful deals and with an eye on U.S. investors hungry for high returns.

The Dow Jones Industrial Average rose 11 points, or 0.1%, to 11017. On Friday the Dow closed above 11000 for the first time since May 3, as a bleak jobs report increased investors' confidence that the Fed will take renewed action to support the economy when it meets in early November.

Until then, market watchers are expected to zero in on third-quarter earnings, which kicked off last week with a better-than-expected report from aluminum giant Alcoa. On Monday, Alcoa was the Dow's top performer, rising 0.7%.

This week, chip maker Intel releases quarterly filings on Tuesday, J.P. Morgan Chase reports on Wednesday, Google on Thursday and General Electric on Friday. In early trading, General Electric was up 0.5%, Intel rose 0.5% and J.P. Morgan Chase gained 0.4%.

The Nasdaq Composite edged up 1% to 2403. The Standard & Poor's 500-share index gained 0.1% to 1166, led by its telecommunications and materials sectors. Industrials and utilities lagged.

Bond markets and federal offices are shut in the U.S. Monday for the Columbus Day holiday. There are no economic data due for release.


OIL FALLS AS DOLLAR REGAINS
Crude oil futures slip on a slight rebound in the dollar, as investors await economic reports later this week and signs on how central banks will act to bolster the flagging recovery. Oil dropped to $82.65, as the dollar recovered in light trading.

Crude futures settled down Monday, though rising gasoline futures prevented a larger drop due to the strengthening dollar.

Front-month November reformulated gasoline blendstock, or RBOB, settled 1.43 cents, or 0.7%, higher to $2.1655 a gallon, the highest settlement price in two months.

Higher gasoline prices provided a floor for crude on an light day of trading due to the Columbus Day holiday in the U.S. and holidays in Canada and Japan as well.

Light, sweet crude for November delivery settled 45 cents, or 0.5% lower at $82.21 a barrel on the New York Mercantile Exchange.

Brent crude on the ICE futures exchange settled down 32 cents at $83.71 a barrel. 

US OIL FUTURES: Nymex Crude Closes Down 38c At $82.28/Bbl

OPEC: The Saudi Oil Minister said 'The price between $70-$80 is an ideal price`
Saudi oil minister Ali Al-Naimi said Monday he is satisfied with oil markets and prices, hinting no action is necessary when OPEC meets Thursday.



US NATURAL GAS - ONE-YEAR LOW
Futures Close Down 1.3% At $3.604/MMBtu

Natural gas futures fell to a one-year low Monday as high inventories, weak demand and temperate weather continued to pressure prices.

Natural gas for November delivery settled down 5 cents, or 1.4%, at $3.601 a million British thermal units on the New York Mercantile Exchange, the lowest ending price since September 2009. The benchmark contract is down about 7% in October. 



US GOLD PRICES PAUSE AS DOLLAR RISES
U.S. Gold and Silver prices relaxed in light trading Monday as the US dollar regained its Friday trading range.
The most actively traded gold contract, for December delivery, gained $9.10, or 0.7%, to settle at $1,354.40 an ounce on the Comex division of the New York Mercantile Exchange.

Dec gold $1,354.40, up $9.10; Range $1,341.10-$1,356.30
Dec silver $23.349, up 24.4 cents; Range $23.055-$23.675
Jan platinum $1,690.80, down $17.90; Range $1,685.20-$1,714.40
Dec palladium $588.75, up $1.15; Range $582.10-$592.00 

GOLD:    $1,352
SILVER: $23.31

Engelhard Corp's base price for industrial gold bullion was $1354.45 per troy ounce, up $10.02 from previous. It's selling price for gold in fabricated form was $1456.03, up $10.77.

Handy & Harman's base price for gold was $1351.50 per troy ounce, up $10.00. The fabricated form price was $1459.62, up $10.80.

Gold rose modestly Monday in New York as the dollar traded near an eight-month low against the euro, boosting demand for precious metals as an alternative investment. Silver gained for a second session.

Gold futures for December delivery rose $6.50, or 0.5 percent, to $1,351.80 an ounce at 10:16 a.m. on the Comex in New York. The metal earlier dropped as much as 0.3 percent.

Silver futures for December delivery advanced 23 cents, or 1 percent, to $23.335 an ounce on the Comex, after earlier rising to $23.675, the highest since September 1980.

Platinum futures for January delivery fell $11.70, or 0.7 percent, to $1,696 an ounce on the New York Mercantile Exchange, and palladium futures for December delivery gained 85 cents, or 0.1 percent, to $588.45 an ounce.

WORLD FOOD CRISES
SOFT COMMODITIES ON THE RISE - US FOOD GOES HIGHER

Soft commodities rose this morning  as corn, soybeans, wheat all called higher futures contracts as supplies decline. U.S. corn and soybean futures rally as a surprising crop report from last week continues to drive supply fears. Rally could affect things from global food prices to U.S. ethanol policy. USDA issued sharper-than-expected cuts in crop estimates.

Confidence in U.S. government crop estimates has been “shaken to the core” after the country’s Department of Agriculture cut its outlook for corn production, economist Dennis Gartman said.

Corn futures are called to open 40 cents to 45 cents a bushel higher on the Chicago Board of Trade after the government said U.S. production will be less than forecast a month ago, said Greg Grow, the director of agribusiness for Archer Financial Services Inc. in Chicago.

Soybean futures may open 40 cents to 50 cents a bushel higher in Chicago after the U.S. government reduced its crop forecast and dry weather threatens yields in South America, Grow said. Soybean-meal futures may open $15 to $17 higher per 2,000 pounds, and soybean oil is expected to open up 0.75 cent to 0.85 cent a pound.

Wheat futures may open 6 cents to 8 cents a bushel higher on the CBOT, the Kansas City Board of Trade and the Minneapolis Grain Exchange as surging corn prices increase demand for wheat in feed rations and dry weather may curtail acreage in the southern Great Plains in the U.S., Grow said.

Meat prices are poised to extend a 14 percent rally this year that drove U.S. retail costs to the highest levels since the 1980s as surging corn futures prevent livestock producers from expanding their herds.


WORLD FOOD PRICES GOING HIGHER

US Corn Crop Shrinks, Smallest Stocks in 14 Years

Ukraine’s economy ministry wants to cap exports of barley at 200,000 metric tons. The ministry said wheat shipments should be limited to 500,000 tons with corn at 2 million tons.

China will allow the two largest state-owned grain- and oilseed- trading companies to import soybean oil from Argentina, easing restrictions imposed in April, two traders said. Corn, soybean and cotton futures in China surged by exchange limits today, tracking gains in U.S. markets.

Russia, which banned grain exports this year following the country’s worst drought in 50 years, will return to global markets as a leading exporter in the “foreseeable future,” Prime Minister Vladimir Putin said

Ukraine harvested 7.5 million tons of corn as of Oct. 8, UkrAgroConsult said. Yields are rising, and the harvest probably will total 11 million tons, the Kiev-based researcher.

Palm-oil futures in Malaysia surged to the highest level in more than 26 months, tracking gains in soybeans.

Rice may peak at $18 per 100 pounds in Chicago on concerns that U.S. supplies will decline, according to Milo Hamilton, president of Firstgrain.com.

Canada's Wheat Crop to Shrink 17% from Last Year

Indonesia, the Philippines and Bangladesh will dominate the rice-import market in the fourth quarter, said Tom Slayton, the former publisher of the Rice Trader.

Sugar rose to the highest price in more than seven months on concern that adverse weather may limit supplies from Brazil, the world’s largest producer.

India stopped registering cotton-export contracts after Cargill Inc., Louis Dreyfus Commodities and other trading companies filled the quota within 10 days after bookings opened amid a global shortage.

The ICCO is closely monitoring the potential for larger-than-expected damage from the cocoa black pod disease in West Africa and the potential for cocoa transportation disruptions depending on the outcome of the upcoming Ivory Coast elections.



NABE Survey: Forecasters Cut Growth Outlooks For 2010, 2011
By Michael S. Derby
DOW JONES NEWSWIRES

NEW YORK (Dow Jones)--Top economic forecasters have lowered their expectations for U.S. economic growth over this year and next, and foresee continued high rates of unemployment.

According to a study released by the National Association of Business Economics Monday, analysts now expect to see the U.S. gross domestic product rise by 2.6% this year, versus the 3.2% expectation held back in May. They expect growth to move forward at a modest 2.6% next year as well, cutting that estimate by the same amount. Consumer spending levels are expected to be modest as unemployment weighs, with the upcoming holiday spending season seen rising by an "especially weak" 2.5%.

"Confidence in the expansion's durability is intact, but recent economic weakness has prompted many panelists to scale back expectations for the year ahead," said incoming NABE president Richard Wobbekind, of the University of Colorado-Boulder. "This summer's slowdown has exposed the economy's sensitivity to wealth losses, the unwinding of debt, and the reductions in economic stimulus," he said.

The report said company-related activity is the "bright spot" in the outlook. "The outlook for real spending on equipment and software calls for sustained double-digit growth over the forecast horizon," NABE said.

The survey was released in conjunction with the NABE meeting held in Denver. The group is gathering at a pivotal time for the economy. Over recent weeks U.S. central bank officials have become more concerned that inflation levels are weakening toward outright deflation, and that modest activity gains aren't enough to bring down very high levels of unemployment.

September jobs data Friday did nothing to brighten the story despite small gains in private sector hiring. The jobs data helped bolster the case for the Federal Reserve to soon restart its asset buying program, which officials hope will lower borrowing costs and spur better growth levels.

The forecasters predict a slow recovery in hiring, with payroll gains to rise an average 150,000 or less into the latter half of 2011, before moving up into the 170,000 to 175,000 range. The jobless rate, which was at 9.6% in September, is seen hanging around 9.5% through the middle of the next year before moving down to a still-weak 9.2% by the close of the coming year.

NABE described respondents as "sanguine" price deflation will be avoided, with the personal consumption expenditures index stripped of food and energy costs seen bottoming out at 1% this year before moving to a 1.4% gain next year. "NABE panelists continue to rank 'inflation' as a slightly greater worry than 'deflation,' but both concerns are overshadowed by other issues," the report said.

The NABE forecasters found forecasters in "greater appreciation" of the importance of stimulus policies, even though the survey did not having anything to say about forecasters' view on Fed asset buying. The report found 17% of respondents describing the expansion thus far seen as "dominated by stimulus policies," up from 5% who held that view in May. The survey found forecasters expecting the Fed to hold its 0% interest rate forecast in place until "late" 2011, with a modest move to 0.50% by year's end.

The NABE survey was more upbeat on housing, with respondents expecting a "a sizable advance" in housing starts next year. The decline in house prices is not expected to continue, but that does not mean all is well. The survey said "next year's projected home price gain of 1.2%, however, will not keep up with broad measures of inflation."

The federal budget deficit is seen undergoing a modest $100 billion reduction in the new year, but it will still likely come in at an "extreme" $1.2 trillion. "NABE panelists continue to characterize excessive federal indebtedness as their single greatest concern going forward, even exceeding worries about high unemployment, and far greater than either inflation or deflation," the report said.

The survey was conducted between Sept. 2 and Sept. 21, and the findings are based on the responses of 46 NABE members.

HOLIDAY TRADING SEEN LIGHT
The US Bond Market is Closed Monday-US Holiday

Trading volume has historically been about 30% lower on Columbus Day than on the trading days before and after it, according to a Credit Suisse analysis.


US DOLLAR TOUCHES LOW - RECOVERS
US Dollar Drifting

The U.S. dollar touched a 15-year low against the yen on Monday, before recovering. The dollar also rose against the euro. The euro was trading recently at $1.3931, up from $1.3929 late Friday in New York. The euro got a boost after ministers attending the International Monetary Fund Conference this weekend failed to come up with any new currency coordination.

The dollar fell against a basket of six major currencies, extending four consecutive weeks of losses. Hedge funds and other large speculators hold their most-bullish position in New York gold futures in almost a year. Before today, gold climbed 23 percent this year, touching a record $1,366 an ounce on Oct. 7.



BEFORE THE BELL:

US Stock Futures Drifting with Fed and Earnings in Focus

The Dow Jones Industrial Average (DJIA) is headed for an opening gain of about 16 points , while the S&P 500 Index (SPX) is trading 1.2 points above fair value. With no pre-market earnings or economic data to drive trading, US crude oil futures were slightly lower Monday after earlier hitting an early peak above $83 a barrel.

Economy, Currencies On IMF, World Bank Agenda

Finance leaders are trying to reconcile their differences over deep imbalances in the global economy and reduce the risk of a currency war.

At the International Monetary Fund and World Bank's annual meetings in Washington, D.C., this weekend, world financial leaders are grappling with how to fuel a more balanced global economic recovery and avoid a possible global currencies war. The meetings are a stepping stone toward a major gathering of Group of 20 political leaders next month in Seoul.

EQUITIES WEEK AHEAD

Stocks will continue their uptrend this week into the end-of-week options expiration on the falling US dollar. Earnings reports and mergers news will continue to dominate the financil press, as the banking cartels continue to make "official" statements about non-sense, as China plays its hand at slowly moving into a major world player. What is at stake is the US dollar as the world currency.

Stock markets and most commodity markets are open Monday, but bond markets and government offices will be closed for the Columbus Day holiday.


COMMODITIES WEEK AHEAD
Commodities Poised to Ride Central Bank Cash Register Higher

Commodities could extend a rally that has lifted prices more than 10 percent since late August, if central banks pump billions more dollars into the global economy to prop up the sputtering recovery.

Raw materials prices surged after U.S. Federal Reserve Chairman Ben Bernanke said on August 27 the Fed was prepared to use "unconventional" policies such as buying more long-term securities to drive down interest rates, if necessary.

"Increasing liquidity in money markets invariably finds its way into commodity markets. Anticipation of higher liquidity is already supporting oil markets as can be seen from the impact of the Japanese action," said Credit Agricole energy analyst Christophe Barret.

The Bank of Japan on Oct 5 cut its benchmark interest rate to zero and pledged to step up asset purchases to help the struggling economy. Many economists expect similar action by the Fed.

U.S. crude oil futures broke through to a two-month high that day, extending a rally that has taken them out of a five-month trading range between $70 and $83 a barrel.

Industrial metals also surged in the wake of the speech, led by copper's 13 percent rise, despite the economic weakness prompting central banks to mull another round of unconventional monetary policy they call "quantitative easing."

Gold has smashed records in recent weeks as investors piled into the yellow metal to protect themselves from weaker currencies, expected to decline as the quantitative easing policies essentially amount to printing money.

"The fact that (quantitative easing) debases currencies is good for gold, the fact that it raises the prospect of inflation is good for commodities in general," said David Hufton, managing director of PVM Oil Associates in London.

In the first round of quantitative easing sparked by the collapse of Lehman Brothers, the Federal Reserve pumped $1.7 trillion into the economy, buying various credit instruments.

The action reflated asset prices, contributing to a 15 percent annual gain in oil and similar gains in copper and precious metals, according to Bank of America Merrill Lynch.

Upward pressure on commodities is not solely due to flows of funds, many analysts say, pointing, to capacity constraints that sent prices soaring this decade before the U.S. housing bubble burst and the world's top economy slid into recession.

"Although capacity utilization remains depressed in many sectors of the economy, capacity utilization in commodity sectors -- mining and petroleum in particular -- are at or above pre-crisis levels," Merrill said on Thursday in a research note titled "The Liquidity Supernova".

The next round of quantitative easing, which many financial professionals refer to as QE2, could well lead to big price gains in capacity constrained sectors and will likely lead to gains even if it fails to stimulate broader economic growth.

"The introduction of QE2 should provide great support for commodities prices even if demand stays weak," the Merrill research note said.

Rest of Article at Reuters:
http://www.reuters.com/article/idUSTRE6964LC20101007


US DOLLAR OUTLOOK
Another Down Week Ahead

As World Finance leaders at the IMF banking cartel try to reconcile their differences, deep imbalances continue in the global economy.  Both the Fed and the IMF are saying that that they also want reduce the risk of a currency war. But while the media is reporting every press statement they issue, the US dollar is falling like a stone toward the 75 DXY area in anticipation of further quantitative easing (QE) by the US Federal Reserve.

A number of Fed officials have recently stated their support for further accommodation. I agree with Joseph Stiglitz, however, that the $1.5 trillion the Fed has injected into the economy so far has done little to boost domestic investment. The money is instead being channeled into Treasurys, government-backed MBS and interest-bearing deposits with the Fed, or is leaking offshore in search of higher returns.

Given that QE has so far been ineffective, why should the Fed believe that a second tranche would be any different? Or is this merely posturing to ratchet up pressure on China ahead of the upcoming G20 meeting on exchange rates?

US Dollar Index

The US Dollar Index DXY is headed for a test of its 2009 lows of 75.   Declining below its 2009 low, would  confirm the continued down-trend ahead this week ending at the 75 area.

Gold

Gold is close to its target of $1360. Reversal below the rising trend-line on 21-day Twiggs Momentum would signal retracement to test short-term support at $1300. Failure of support is unlikely and respect would signal another test of $1360.

Crude Oil

Crude also responded to the falling dollar, breaking out strongly above $80 per barrel. Twiggs Momentum (63-day) also broke out of its narrow range, signaling a new up-trend. Expect a test of the 2010 high at $90.

Visit Incredible Charts for charts and commentary:
http://www.incrediblecharts.com/tradingdiary/trading_diary.php




IMF Fails to Ease Currency Conflict
Global Bank Cartels Fail to Resolve Deep Differences - Threaten Full-Blown Currency War

The International Monetary Fund's annual meeting this weekend failed to ease currency battles roiling markets, pushing the dispute off to a summit next month of leaders of Group of 20 countries.

Various nations are seeking to devalue their currencies as a way to boost exports and jobs during hard economic times. The concern is that such efforts could trigger a repeat of the trade wars that contributed to the Great Depression of the 1930s as country after country raises projectionist barriers to imported goods.

The International Monetary Fund wrapped up two days of talks with a communique that pledged to "deepen" its work in the area of currency movements, including conducting studies on the issue.

World Bank President Robert Zoellick said the rising economic tensions reflected a weak global recovery.

"A lack of growth accompanied by high unemployment is having consequences," Zoellick told reporters at a news conference concluding the IMF-World Bank meetings. "There is a danger that countries will turn inward and, as a result, international co-operation falters. This could be dangerous."

The communique essentially papered-over sharp differences on currency policies between China and the United States.

The Obama administration, facing November elections where high U.S. unemployment will be a top issue, has been ratcheting up pressure on China to move more quickly to allow its currency to rise in value against the dollar.

American manufacturers contend the Chinese yuan is undervalued by as much as 40 per cent and this has cost millions of U.S. manufacturing jobs by making Chinese goods cheaper in the United States and U.S. products more expensive in China.

China has allowed its currency, the yuan, to rise in value by about 2.3 per cent since announcing in June that it would introduce a more flexible exchange rate. Most of that increase has come in recent weeks after the Obama administration began taking a more hard line approach and the U.S. House passed tough legislation to impose economic sanctions on countries found to be manipulating their currencies.

Chinese officials continued to insist that their gradual approach to revaluing their currency was best, and that faster movements risked destabilizing the Chinese economy.

Various other nations, including Japan, Brazil and South Korea, also have taken steps to keep their currencies weaker in an effort to increase their exports. And in the United States, expectations of further monetary easing by the Federal Reserve have driven the dollar down significantly against the euro and other major currencies.

To read the entire story visit:

http://ca.news.finance.yahoo.com/s/09102010/2/biz-finance-global-finance-leaders-fail-resolve-deep-differences-threaten.html


ANOTHER WEEK TO GO
Forex Traders Have A Little More Time
Posted by Robert Green

Last week, we continued our series of podcasts on the new CFTC forex rules. We focus on how these new rules affect investment managers (CTA and CPO), introducing brokers (IB) and foreign banks.

http://blogs.forbes.com/greatspeculations/2010/10/08/forex-traders-have-a-little-more-time/?partner=yahootix


FOREX WEEKLY TRADING FORECAST - 10.11.10

* US Dollar: Coming Week May Decide if it Has Set Important Bottom

* Euro is as Strong as EURUSD, But is This Pair Set to Reverse?

* Japanese Yen May Target All-time High If FOMC Signals QE

* British Pound Caught in QE Rumors, Central Bank Chatter in Focus

* Canadian Dollar Outperforms, Outlook For Crude Oil Remains Bullish

* Australian Dollar Primed for Reversal on Failure to Set Fresh High

* New Zealand Dollar Stumbling, But Not against the Greenback

* Gold Poised To Push Higher As U.S. Dollar Weakness Persists


Read more at: Forex At DailyFX:
Currency Trading News, Forex Trading News, FX News, Forex News: http://www.dailyfx.com/
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Canadian Market: 
* Canadian Market will be closed for Thanksgiving holiday
Canadian Stock & Bond Markets will be closed Monday holiday.
Markets, Banks, Government Offices Closed In Canada
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South American Markets:

BRAZIL:

Brazil Real Opens Stronger

The Brazilian real opened slightly stronger early Monday after economists boosted inflation forecasts for a fourth consecutive week, increasing expectations of interest rates increases coming earlier next year.

The over-the-counter real opened at BRL1.6640 to the dollar, after closing on Friday at BRL1.6680. The benchmark spot market on the mercantile exchange hasn't begun trading yet Monday.

Brazil's Central Bank Continues to Buys US Dollars For BRL1.6662 At 2nd Auction.

Brazil's central bank bought U.S. dollars at Monday's second auction for BRL1.6662 to the dollar, the bank said. The central bank didn't reveal the volume of dollars purchased. Before the auction the real was trading at BRL1.6660 to the dollar. The rate held steady throughout the auction.

Brazil's central bank has been purchasing dollars at spot market auctions twice a day in recent weeks. It restarted near-daily purchases in May 2009 to build foreign reserves after suspending such auctions in September 2008.



BRAZIL TRADE SURPLUS
Brazil Oct 4-10 Weekly Trade Surplus Totals $1.34 Billion

Brazil's trade surplus totaled $1.34 billion in the second week of October, the Trade and Development Ministry said Monday, although year-to-date the numbers continue to lag behind those from last year.

Brazil's year-to-date trade surplus totaled $14.5 billion, compared with a surplus of $22 billion in the same period of 2009.

Brazil's trade surplus is lower this year because of a huge rise in imports, which have been increasing because of Brazil's robust economic recovery. Brazilians are importing everything from consumer goods to capital goods. Brazil's economy is expected to expand by about 7% this year.

Brazil Stocks Open Higher On Expectation Of US Fed Action
Most Brazilian blue chips gained in early trading. 

Brazilian stocks opened higher Monday on speculation Latin America's biggest economy will benefit from expected action by the U.S. Federal Reserve to boost growth.

The benchmark Ibovespa stock index opened at 70,949 points, up 0.2% from Friday's close of 70,809.

Markets were quiet ahead of a holiday in Brazil Tuesday and due to the Columbus Day holiday in the U.S. Yet investors are expecting further action by the U.S. after non-farm payrolls data disappointed on Friday and put the possibility of debt-buying by the Fed back in the spotlight.

The outlook for additional central bank stimulus measures outweighed inflation concern in Brazil after a central bank survey showed increasing estimates for inflation this year and the next.

Brazilian economists raised their estimates for 2010 inflation for a fourth consecutive week, to 5.15%, and increased the inflation outlook for next year as well, to 4.98%, according to a weekly survey released Monday by the central bank. Both are above the bank's inflation target.



MEXICO:

Mexico's Stocks Open Higher
Mexico Stocks Build On Recent Record Gains

Mexican shares were moving higher early Monday after recent record gains, led by benchmark America Movil (AMX), as shares in the U.S. struggled to tack on modest advances.

At 10:30 a.m. EDT, the IPC index of Mexico's 35 most-traded shares was up 0.3% to 34,565 on volume of 675.5 million pesos ($54.5 million).

Mexico's peso fluctuated between gains and losses as speculation the Federal Reserve will ease.

The peso was quoted trading in Mexico City early Monday at MXN12.4042 to the dollar versus MXN12.4110 at the close Friday.



ECUADOR:
Ecuador Jan-August Trade Deficit $863M Vs Deficit Of $313M Yr Ago
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European Markets:

European shares edge higher, tracking U.S. gains
FTSEurofirst 300 rises 0.2 pct

In Europe, markets had broad-based gains, with financial stocks higher and autos also gaining on hopes of further stimulus by central banks.  European shares edged up in early trade on Monday, tracking gains on Wall Street, after Friday's weaker than expected U.S. jobs data reinforced hopes that the Federal Reserve would inject fresh money into the economy.

Across Europe, Britain's FTSE 100 .FTSE, Germany's DAX .GDAXI and France's CAC40 .FCHI rose between 0.2 and 0.3 percent.

Trading was set to be subdued, due to the Columbus day holiday in the United States, where stocks will trade but the bond market will be closed.

Intel (INTC.O) and JP Morgan (JPM.N) are among companies reporting later in the week, as the U.S. earnings season gathers pace.


GERMANY:

German exports decline in August

Germany's exports fell back for the second month in a row in August adding to fears the stronger euro is harming Europe's economy.



FRANCE:

PENSION PROTESTS FAIL TO STOP REFORM
Another proposal is to raise the full state pension age to 67

Amid national protest that have shut French shipping ports, the French Senate voted late Friday to raise the country's retirement age from 60 to 62, just part of the government's sweeping pension reform plans.

The package, designed to cut France's pension costs, has prompted union leaders to call for a national day of strikes on 16 October.

A French labor union warned Monday that power grid supplies may be reduced and in some cases cut on Oct. 12 due to nationwide strike action to protest planned changes in the French state pension system.

ELECTRICAL POWER OUTAGE WARNING
Many workers in the gas and electricity industries are expected to follow calls by five labor unions to strike, the Confederation General du Travail said in a statement.

Although the lower house of parliament has already backed the change, further reforms are still to be voted on. The planned reforms will require employees to work for a minimum of 41.5 years to qualify for state pensions, a year longer than is currently the case.

The government hopes the package will be passed in its entirety by the end of October.Workers have already staged strikes in protest at the proposals. Along with all major economies, France is looking to reduce its borrowing levels, which have increased sharply as a result of the global financial crisis.

France's budget deficit currently stands at more than 7% of GDP - far above the 3% target set by the EU, but much lower than some EU members including the UK, Greece, Portugal, Ireland and Spain.


GREECE:
Greek 9-Month Central Government Deficit Falls 31.1%, Beats Target

Greece's nine month central government budget deficit fell 31.1%, which beat expectations of a 26.9% drop demanded by its international lenders, the Finance Ministry said Monday.

The ministry said according to provisional data, the January to September budget deficit fell to EUR16.2 billion compared to EUR23.5 billion for the same time last year.

Net revenues rose only 3.7% on the year but in September VAT revenues recovered from the previous two months.

Budget expenditures fell 7.1% over the nine months, and primary budget expenditures have fallen 11.6% against an annual target of 9.2%.

The Finance Minister George Papaconstantinou has previously said revenues remain a "concern" while the easier-to-determine cuts to expenditure are being brought under strict control and offsetting revenue shortfalls.

Under the terms of the 2011 draft budget, Greece aims to slash the budget deficit from 13.6% of gross domestic product in 2009 to 7.8% this year, better than the corresponding 8.1% target under the IMF-EU memorandum.



Asian Pacific Markets:


CHINA:

CHINA TRADE SURPLUS SEEN BREAKING RECORDS
China Trade Surplus Poised to Cap Biggest Quarter Since Crisis.

China may tomorrow report a $17.8 billion trade surplus for September that would cap the biggest quarterly excess since the financial crisis in 2008, adding fuel to U.S. calls for import protection, reports Bloomberg.

The median estimate of 24 economists surveyed by Bloomberg News compares with an August surplus of $20 billion. That would take the third-quarter total to $66.5 billion, the largest since the fourth quarter of 2008.

The U.S. Senate will consider legislation that would allow duties to be imposed on Chinese imports because of the nation’s failure to allow bigger currency gains, according to Senator Charles Schumer of New York. Yuan forwards surged to the highest level in more than two years yesterday on speculation that Premier Wen Jiabao’s government will yield to U.S. and European pressure.

“China’s trade surplus may reach $200 billion this year, giving the U.S. and Europe more ammunition,” said Shen Jianguang, a Hong Kong-based economist at Mizuho Securities Asia Ltd. who formerly worked for the International Monetary Fund and the European Central Bank. Policy makers should speed gains by the yuan “because a currency war would be most damaging to China,” Shen said.

Read the entire en-depth article at Bloomberg News:

http://www.businessweek.com/news/2010-10-11/china-trade-surplus-poised-to-cap-biggest-quarter-since-crisis.html


CHINA INCREASES  BANK RESERVE REQUIREMENT
China is moving to add more emerging-market currencies to its foreign-exchange reserves, a strategy that central banks around the world are following to diversify their $8.7 trillion in holdings.

China’s foreign-exchange reserves, the world’s largest, may have climbed to a record $2.5 trillion, adding fuel to complaints that the nation’s currency intervention is undermining the global economic recovery.


China's surprise increase of reserve requirements for its biggest banks is a response to rising capital inflows.
It also serves as a warning to domestic banks to keep a firm grip on credit as more ample liquidity tempts them to shake off government-imposed restrictions and expand their loan books. But in a sign of China's wariness about the global outlook, the move is limited in both scope and time.

China's three previous increases in banks' required reserves hit global markets and weighed heavily on domestic share prices, but the impact will likely be more limited this time. The temporary, restricted nature of the move shows that the People's Bank of China (PBOC) is trying to stave off more stringent tightening.

The Australian dollar, stock prices in Hong Kong and oil futures, all of which are sensitive to Chinese demand, came under pressure after the news broke, but quickly returned to a market uptrend status. 

China stands firm over yuan move

China will let its currency appreciate, but there will no "shock therapy", says central bank governor Zhou Xiaochuan.

AUSTRALIA:

AUSTRALIA FOOD PRICES FORCED HIGHER - WATER THREAT
Plans to cut irrigation by as much as 37 percent in Australia’s Murray-Darling Basin, home to almost half of the nation’s farms, will raise fresh-food prices, the country’s main farming organization said.


Australia 'well placed in global growth report'
AUSTRALIA is in the right place at the right time to take advantage of a predicted lift in global growth, Federal Treasurer Wayne Swan says. Australian share market closed at a five-month high after firmer commodity prices drove gains in the resources sector.


NEW ZEALAND:

NZDAUD 0.77
New Zealand Dollar Stumbling

When you set the New Zealand against currencies like the Australian dollar, euro, British pound or Japanese yen; we see that it has actually stalled or lost ground over the past weeks. Most traders make reference to the kiwi dollar’s strength or weakness just as it is reflected in NZDUSD.

An advance for the US dollar would likely drag most of its counterparts down (with perhaps the exception of the Japanese yen and Swiss franc).

A natural side effect of such a development would be a wholesale desertion of yield demand that will completely undermine the kiwi and its other high-yield counterparts.

For this particular currency, however, such a shift would be more severe. Whereas the Aussie and Canadian dollars have otherwise steady economies, New Zealand has actually seen its pace slow with notable troubles in domestic consumption, growing housing sector instability and tremors in the banking system.

What’s more, the kiwi will be exposed for a significant lack of potential through future interest rate growth. New Zealand’s Prime Minister summarized this situation well when he said last week that he expects the currency will not fall even as growth and interest rate expectations slow.

This is probably true – so long as risk appetite itself holds up. What could spark a collapse in self-sustained investor confidence? There are a number of potential catalysts; but the most remarkable driver would be one that sees a loss of faith in stimulus expansion.




WORLD CURRENCIES SNAPSHOT:
(MONDAY, OCT 11, 2010 4:00 PM EDT)

EUR/USD     1.3888     -0.0021 (-0.15%)
USD/JPY     82.0600  0.0000 (0.00%)
GBP/USD     1.5886     -0.0060 (-0.38%)
CAD/USD     0.9870     +0.0001 (0.01%)
USD/HKD     7.7582     +0.0005 (0.01%)
USD/CNY     6.6679     -0.0031 (-0.05%)
AUD/USD     0.9857     -0.0003 (-0.03%)



WORLD MARKETS SNAPSHOT:
(MONDAY, OCT 11, 2010 12:30 PM EDT)

Shanghai     2,806.94     +68.20 (2.49%)
Nikkei 225     9,588.88     -95.93 (-0.99%)
Hang Seng Index     23,207.31     +263.13 (1.15%)
TSEC     8,176.76     -67.43 (-0.82%)
FTSE 100     5,672.40     +14.79 (0.26%)
DJ EURO STOXX 50     2,789.72     +4.29 (0.15%)
CAC 40     3,768.49     +5.31 (0.14%)
S&P TSX     12,535.59     +89.66 (0.72%)
S&P/ASX 200     4,697.50     +16.10 (0.34%)
BSE Sensex     20,339.89     +89.63 (0.44%)

MONDAY'S US ECONOMIC CALENDAR:

12:00 p.m.
New York Federal Reserve President Dudley speaks in Washington

Market Notes:
* US Columbus Day holiday; Stock, most commodity markets open, bond markets and govt offices closed.
* Federal Reserve Vice-Chair Janet Yellen at NABE Annual Meeting

* Canadian markets will be shut Monday for Thanksgiving Day holiday

Conferences:

Among the significant conferences next week are the Bank of America Merrill Lynch Global Emerging Markets Investor Conference from Saturday through Monday in Washington, D.C.; Independent Petroleum Association of America Oil & Gas Investment Symposium from Tuesday through Thursday in San Francisco; and Canaccord Genuity Healthy Living Conference on Wednesday in Boston.

MARKET SUMMARY, FRIDAY OCT. 8, 2010:

Stocks:
Shares rose broadly and the Dow Jones Industrial Average closed above 11000 for the first time since May as a bleak jobs report boosted expectations that the Federal Reserve will move to stimulate economic growth. "The Fed is essentially giving everyone a put option with quantitative easing on the table," said Charles Mercer, portfolio manager of the Aston/Todd-Veredus Select Growth Fund.

Treasurys:
Most Treasury prices rose, leaving the market with a weekly gain, after a bleak U.S. jobs report that added to investors' already lofty expectations that the Federal Reserve will have to lend more support to the economy this year. The two- and five-year yields fell to record lows once again in the wake of the report.

Forex:
The dollar weakened against its major rivals and hit a 15-year low against the yen after a weak US jobs report. Though in the initial wake of the jobs numbers the dollar fell steeply against the euro, it recouped its losses after an EU official talked down the common currency's strength.




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