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OPTIMA RESEARCH INVESTMENT, INC.
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Wednesday 7/8/98 -- Americas Comment -- The US markets today
will focus on (1) any overnight events in the Asian and Russian
financial markets, (2) today's US May wholesale trade report, and
May consumer credit report, (3) the US Treasury market which
settled mildly weaker yesterday as long liquidation pressures
emerged in dull trade, (4) the dollar which settled little changed
overall, but sharply weaker against the yen amid growing sentiment
for aggressive government action following Sunday's Upper House
elections, (5) the stock market which settled mildly softer, and
(6) the CRB index which closed mildly stronger yesterday. The
Treasury today will auction $8.0 billion in re-opened 30-year
indexed bonds.
Today's US May wholesale trade report will be closely watched
for the behavior of inventories at the wholesale level. In April,
wholesale stocks fell by -0.6%, underscoring the effort to pare
inventory growth in the US economy. That pushed the wholesale
inventories-to-sales ratio down -0.01 point to 1.29 months where it
fell back from the 2-year high of 1.30 months (Nov, Dec, Feb &
March). Still, at 1.29 months, the ratio remains mildly above the
Fed 1997 13-3/4 year low of 1.24 months.
US June weekly retailer sales are mixed -- The Redbook
yesterday reported that through the fifth and last week of June,
its index of retailer sales fell by -0.7% from May. That was
unchanged from the -0.7% drop seen through the first 4 weeks of the
month. On a year-on-year basis, sales climbed by +7.9%, also
unchanged from the previous week. The Redbook reported that sales
in the latest week were "on to slightly better than plan" at most
retailers.
BTM/Schroders reported that in the week ended last Saturday,
its index of same-store retail chain sales climbed by +0.3% from
the previous week. That reversed most of the previous week's -0.4%
(wk-wk) drop. On a year-on-year basis, sales climbed by +9.3%, a
bit stronger than the +9.1% increase seen a week earlier. Despite
the rebound in sales in the latest week, Schroders reported that
sales remained below the 16-week moving average. Still, most
retailers reported that sales in the latest week were in line with
expectations and that June retail sales will likely post a +4.5%
(yr-yr) gain. June same-store retail sales reports are scheduled
for release tomorrow.
Looking ahead to July, sales are likely to soften as July is
usually an off month for retailers. Most demand for summer and
other seasonal apparel and goods has been exhausted, while back-to-
school and fall seasonal shopping has yet to shift into high gear.
Therefore, any softness in the retailer sales series over the
coming weeks should be taken with a grain of salt.
US Interest Rates -- US credit market settles mildly weaker as
dull trade continues -- Sep T-bonds yesterday sold off throughout
most of the session and finally settled mildly weaker. Futures
closes: USU98 -0-12 at 123-25; TYU98 -0-05 at 114-01; FVU98 -0-035
at 109-275; TUU98 -0-012 at 104-087; TBU98 -.005 at 94.965; EDZ98
-.015 at 94.295. Cash closes (3PM NY): cash 30-yr -0-11 at 107-19;
cash 30-yr yield +.022 at 5.595; cash 10-yr -0-06 at 101-19; cash
10-yr yield +.025 at 5.415; cash 5-yr -0-03 at 99-26; cash 5-yr
yield +.022 at 5.419; cash 2-yr -0-005 at 99-295; cash 2-yr yield
+.008 at 5.408; 3-mo T-bill +.047 at 4.972.
Sep T-bonds yesterday held below last Thursday's 2-1/2 week
high of 124-10 where they held just 4 ticks below the contract high
of 124-14 (6/16/98). The cash 30-year bond yield yesterday closed
at 5.595% and held above Monday's all-time low of 5.570%. On that
5.570% low, the yield fell by a total of 52.3 bp from the 3-month
high of 6.093% (4/29/98). Dec Euros yesterday held below last
Thursday's 2-1/2 week high of 94.335 where, in turn, it held below
last Tuesday's 2-1/2 month high of 94.370.
Bearish factors included (1) long liquidation pressures
following this week's slide to new all-time low yields, (2) the
drop in the dollar/yen, (3) some supply pressures tied to the
expected $5 billion in corporate issues set for this week, as well
as today's TIPS auction, (4) continued strength in US domestic
demand, and (5) lingering concerns about BOJ FX intervention.
Bullish factors yesterday included (1) continued hopes for a sharp
slowdown iun US economic activity, (2) renewed mortgage-backed
demand as the long-bond yield fell to new all-time lows this week,
8
(3) underlying flight-to-quality bid due to Russian, Japanese and
Asian financial instability, and (4) anticipation of a favorable
June PPI report on Friday.
Fed may conduct a supplemental system repo -- The Fed today
may conduct a supplemental system repo operation if upward pressure
on the funds rate resumes. Although the Fed has Monday's fixed
$5.363 billion 4-day system repo operation in place until Friday,
that operation probably fell a bit short of addressing the Fed's
$6-$8 billion per day add need. That add need stems mostly from
rising currency in circulation associated with the holiday weekend
and the summer seasonal add requirement. The Fed yesterday
remained out of the open market with the funds rate trading at the
5-1/2% target.
US Stock Market -- The US stock market yesterday opened
slightly lower and then moved sideways to lower for the rest of the
day to finally settle with modest losses. Settlements: Dow
Industrials -6.73 at 9085.04, DJU98 -11 at 9179, Dow Utilities
-2.67 at 292.73, OEX -.53 at 563.29, S&P 500 -2.65 at 1154.66,
SPU98 -2.10 at 1167.30, NASDAQ Composite -1.36 at 1908.11, and the
Russell 2000 -.93 at 459.04.
Stock market breadth yesterday was slightly bullish with
advancing issues (1,530) leading declining issues (1,477) by a
narrow 53 issue margin. Yesterday's volume was average at 624
million shares with declining volume accounting for half of the
total. The percentage of NYSE stocks above their 200-day averages
rose to a 1-month high of 51% after touching a 3-1/2 year low of
42% last Monday. The number of shares posting new 52-week highs
(335) exceeded the number posting new 52-week lows (286) in a
reversal from the action seen over the past 1-1/2 months.
The S&P 500 led yesterday's decline with a .23% loss while the
Russell 2000 fell .2%. The Dow and the NASDAQ both fell .07%. For
the year-to-date, the NASDAQ is in first place with a 21.51% gain
which is followed by the S&P 500 at +18.98% and the Dow at +14.88%.
The Russell 2000 continues to lag with a 5.04% year-to-date gain.
Bearish factors for the stock market include (1) profit taking
as the cash S&P 500 extended its 3-week upmove to a total of 7.92%
on yesterday's all-time high, (2) weakness in the oil related
stocks yesterday as August crude oil futures extended their 2-day
loss to a total of 6.07%, (3) weak market breadth with the broader
Russell 2000 index remaining well below its all-time high and with
the S&P 500 rising on the strength of only the largest-cap stocks,
and (4) the growing realization that operating earnings for the S&P
500 have virtually no chance of showing a double digit gain in 1998
and will instead log their slowest growth rate since 1991.
Bullish factors yesterday included (1) a rebound in the
semiconductor shares, (2) technical factors as the S&P 500 and the
OEX rose to new all-time highs, (3) the .82% gain in General
Electric which placed its market capitalization above $300 billion
for the first time, and (4) the drop in 30-year bond yields to an
all-time low of 5.570% on Monday which should eventually filter
into lower corporate borrowing expenses.
Internet stocks dominated the most active list again yesterday
as they did on Monday. Egghead.com, up 65% on Monday, added 4.64%
yesterday on volume of 26.44 million shares. Yahoo, up 15% on
Monday, fell 4.14% yesterday and changed hands 12.4 million times.
Lycos (-14.6%) traded 9.66 million shares and gave back a portion
of Monday's 26% gain.
As an indication of the amount of gross speculation going on
in the Internet sector, Zapata, a processor of fish meal and fish
oil, rose 117% on Monday after announcing that it would split
itself into two companies, one of which will invest in the
Internet. The other presumably will still process fish. The
shares fell back 18.6% yesterday, on volume of 9.89 million shares
(76 times its 3-month daily average), but are still up 77% since
Monday's announcement. The company is planning to build its
Internet business through acquisitions. On May 21, the fish monger
(with a market cap of $260 million) failed in its bid to acquire
Web search directory Excite ($1.4 billion) in what was billed by
the market as a publicity stunt.
Of the S&P 500's 89 sub-groups 53 fell yesterday while 36
rose. Market breadth was bearish as 313 of the S&P 500 stocks
closed lower while 176 rose. The oil company sub-index (Royal-
Dutch Petroleum -2.49%, Exxon -.77%, Mobil -2.07%, Chevron -2.29%)
was yesterday's worst performer as crude oil prices continued to
fall. The group has the heaviest weighting in the S&P 500 (5.25%)
and the 57% drop in crude oil prices over the past 1-1/2 years to
a 12-year low is having a negative effect on earnings.
Of the 30 Dow stocks, 17 fell yesterday while 12 rose. Union
Carbide (-2-1/8) fell back as speculation that it was a takeover
target eased. The shares had risen 16% in the past 1-1/2 weeks as
investors bet that the company would be forced to merge as chemical
prices plunge. JP Morgan (+4-1/8) was the Dow's best performer.
The cash S&P 500 posted a new all-time high of 1159.81
yesterday where it continued to break out above its 3-month
sideways trading range that existed between 1133 and 1075. On
yesterday's high, the index extended its 3-week upmove to a total
of 7.92%. On yesterday's all-time high of 566.10, the OEX also
continued to leap above the top of its 3-month trading range
defined as 548.
The Dow Industrials index continues to trend lower in a
2-month pattern of lower major highs and low major lows after
posting an all-time high of 9311.98 on May 4. On its recent (Jun
16) 3-1/2 month low of 8569.88, the index was down 742.10 points
(7.97%) from that high. Only a close above 9105 will break the
downward pattern. The NASDAQ composite index rose to a 2-1/2 month
high of 1914.46 last Wednesday where it held just 6.64 points below
its all-time high of 1921.10 (April 22). On last Wednesday's high,
the index was up 11.62% from the Jun 15th 4-month low of 1715.19.
Commodities -- CRB closes higher as grains surge -- The CRB
index yesterday closed up +.43 points at 213.82 as it continued to
consolidate just below last Tuesday's 5-week high of 216.75. The
major lows on the downside are the recent 5-year low of 208.54
(6/15/98), the 12-year low of 198.17 (Aug 1992), and the 20-2/3
year low of 196.16 (July 1986). The CRB index is down -.10% on a
month-on-month basis and down -7.92% on a year-on-year basis.
Closes: Energy: CLQ98 -.26 at 13.62; HUQ98 -.0118 at .4692;
HOQ98 -.0021 at .3780; NGQ98 unch at 2.365. Precious Metals: GCQ98
+1.6 at 295.9; SIU98 +6.8 at 540.8; PLV98 +8.7 at 381.0. Grains:
S X98 +19-6 at 614-0; SMZ98 +5.90 at 162.50; BOZ98 +.46 at 26.50;
C Z98 +7-2 at 251-0; W Z98 +3-0 at 301-2. Livestock: LCQ98 unch at
64.30; FCQ98 -.80 at 71.92; LHQ98 +.03 at 55.10; PBQ98 -.20 at
57.42. Softs: SBV98 -.14 at 8.40; KCU98 -.30 at 110.45; CCU98 -6.
at 1624.; JOU98 -7.65 at 101.45. Industrials: CTZ98 +.97 at 77.32;
HGU98 +.25 at 72.40; LBN98 -3.20 at 284.50.
Nov soybeans were the CRB's biggest winner yesterday as the
contract rose +19-6 to close at 614-0. On yesterday's high at
619-4, the contract rose 33-0 cents (5.62%) from the 3-week low of
586-4 posted on Monday. The National Weather Service's 6-10 day
forecast calls for dry and hot weather beginning on July 12th which
would put the soybean and corn crops at greater risk. Soybeans
should complete pollination by the end of July and have recently
enjoyed wet weather along with above-average temperatures. The
USDA reported after the close on Monday that 59% of the soybean
crop is in good to excellent condition compared to 62% one week
ago.
Aug crude oil fell -26 cents yesterday to close at $13.62. On
June 15th, crude oil futures touched a 12-year low of $11.40 on the
weekly-nearest chart (Jul 98 contract). Venezuelan oil company
president Guisti claimed that Iran has broken its agreed-upon
production limits by 230,000 barrels per day since March. At the
same time Iraq has increased production capabilities by 425,000
barrels per day. The recent production cuts of nearly 2 million
barrels are not expected to reduce global supplies before the
August contract expires. Oil producers began to notify customers
last Thursday of output reductions related to the recent OPEC
production cuts. OPEC production cuts for the year now total 3.2
mln barrels per day, or 4.3% of global demand.
August gold yesterday closed up +1.6 at $295.9 as it remained
below the psychologically important $300 level. The ECB's
Duisenberg is expected to make an announcement on European gold
policy following the conclusion of meetings today in Frankfurt.
The European Central Bank will initially have access to reserves of
13,000 tons, which equates to five years of global gold production.
Aug gold posted a 5-1/2 month low of $285.6 on June 16th where it
extended its 2-1/2 month downmove to a total of $32.6 (10.25%).
The next major line of support is $283.9, the 18-2/3 year
weekly-nearest low. On that low, August gold was down $60 (17.45%)
from its 1-year high of $343.9 (9/30/97).
Canada -- Canadian May building permits fell by -5.9% (mo-mo),
but climbed by +11.7% (yr-yr) to C$2.699 billion. That was much
weaker than expectations for a -0.5% (mo-mo) decline. The drop in
permits was fueled by a -8.6% (mo-mo) slide in residential building
permits, while non-residential permits fell by -2.8% (mo-mo).
Despite the weakness in yesterday's May report, Canadian building
permits through the first 5 months of the year climbed by +13.2%
from a year-earlier.
The Canadian dollar yesterday closed .03 cents stronger at
C$1.4730/US$, but held above the all-time low of C$1.4763/US$
(6/16/98). The Canadian dollar has been pressured by the resurgent
Asian crisis and the subsequent collapse in commodity prices.
The Sep Canadian bond yesterday settled +.29 points at 125.93
but held below the contract high of 126.03 (6/15/98). On the
126.03 high, the Sep bond had climbed by a total of 1.13 points
from the 4-1/2 week low of 124.90 (6/5/98). The Canadian 10-year
cash yield yesterday settled -4.0 bp at 5.239% as it fell to a new
3-month low of 5.233% (6/15/98), where it was 4.3 bp above the
all-time low of 5.190% which was established on Apr 3. The Sep
3-month bankers acceptance yesterday closed +1 bp at 94.88, holding
below last Friday's 2-1/2 month high of 94.93. On last Friday's
high, the contract rebounded by a total of 38 bp from the 6-month
low of 94.55 (6/11/98), but held 21 bp below the 5-1/2 month high
of 95.14 (4/3).
The Toronto-300 stock index yesterday closed +20.10 points at
7454.60, moving farther above the 3-month low of 7094.60 (6/15/98).
On that 3-month low, the index was down by 743.10 points (9.5%)
from the all-time high of 7837.70 (3/23/98).
Forex -- Dollar settles little changed as consolidation sets
in -- The dollar yesterday edged higher in European trading before
tailing off through mid-day in the US to finally settled little
changed overall. Dollar closes (3PM NY): cash dollar index -.08 at
101.67; dlr/yen -1.48 at 138.72; dlr/mark +.0015 at 1.8143;
dlr/Swiss +.0025 at 1.5265; stlg/dlr +.0020 at 1.6378; USD/CAD
-.0 003 at 1.4730. Mark closes: mark/yen -.88 at 76.45; stlg/DM
+.0061 at 2.9722; mark/FRF +.0013 at 3.3519; mark/lira +.09 at
984.59; mark/Swiss +.0006 at .8412. Futures closes: DXU98 -.05 at
101.50; JYU98 +.0073 at .7277; DMU98 -.0004 at .5535; SFU98 -.0013
at .6593; BPU98 +.0020 at 1.6316; CDU98 unch at .6795; ADU98 +.0036
at .6201.
The dlr/yen yesterday closed -1.48 yen, as it consolidated in
the middle of the range established by the recent sell-off from the
7-3/4 year high of 146.73 yen (6/17/98) to the 2-month low of
133.73 yen (6/19/98). The dlr/mark yesterday closed +.15 pfennigs
at 1.8143 DM, mildly below last Thursday's 2-1/2 month high of
1.8254 DM.
Bullish factors for the dollar included (1) continued waffling
by Japanese officials concerning a permanent tax cut, (2) the
continued market uncertainty in Russia which pressured the mark,
and (3) the underlying strength in US domestic demand.
Bearish factors for the dollar included (1) speculation that
Japanese action on the economy may grow more aggressive following
Sunday's Upper House election, (2) some continued long liquidation
pressures, and (3) worries about a sharp slowdown in US economic
activity in the second half of the year.
The dollar/yen is still whipsawing around on consolidation as
the market awaits further details on the chances for a permanent
tax cut. There was no fresh significant news on the tax issue
today. The greenback got a short-lived boost against the yen when
Treasury Secretary Rubin fired another shot at Japan. He said
Japan needs a "clear sense of stability" regarding its economic and
banking reforms. That may point to continued frustration on the
part of US officials even after last week's bridge bank plan from
the LDP.
The FX market continues to watch the Russian situation as
Russian T-bill yields yesterday rose further to 109% from 90% on
Monday. The high interest rates are making it difficult for the
government to fund its financing needs. The government raised its
refinancing rate by 20 percentage points to 80% on June 26 and may
need to hike the rate another notch to boost confidence in the
ruble. Market uncertainty surrounding Russia is likely to grow
even further ahead of today's scheduled auction of 10 bln rubles in
T-bills. Last week only 2.4 billion rubles in bills were sold from
the 16.0 billion offered.
European Comment -- The European markets today will focus on
(1) today's release of the French June household confidence survey,
(2) anticipation of the 2-day UK MPC meeting that begins today and
tomorrow's Bundesbank and Bank of France meetings, (3) the European
credit markets which closed mostly lower yesterday, and (4) the
European stock markets which closed mildly stronger yesterday.
Germany -- The German May industrial production report of
+0.9% (mo-mo) was much stronger than market expectations of +0.3%
but didn't fully reverse April's -1.3% decline. The series was up
+6.2% in year-on-year terms (nsa). In the west German
manufacturing sector, production was up +0.9%, reversing most of
April's -1.1% decline. On a smoother 2-month basis, April-May pan-
German industrial production fell by -0.5% from Feb-March, but
climbed by +3.2% from a year-earlier. Yesterday's stronger than
expected report was encouraging but the German manufacturing sector
still faces the problems of lackluster domestic demand and
uncertainty from the Asian crisis.
German June unemployment (seasonally adjusted) fell by -49,000
workers to 4.269 million. That was in line with market
expectations and was similar to May's decline of a slightly-revised
-63,000 workers. June west German seasonally-adjusted unemployment
fell by -12,000 workers, adding to May's -29,000 worker decline.
East German seasonally-adjusted unemployment fell by -37,000
workers, matching May's -34,000 worker drop.
On a non-seasonally adjusted basis, German June unemployment
fell by -122,000 workers to 4.075 million persons. That pushed the
pan-German unemployment rate down -0.4 points to 10.5%. The report
had little market impact since it was very close to last week's
news leak of a -126,000 worker decline.
The drop in German unemployment last month was bloated by the
impact of job creation programs in the eastern states. Those
programs added some 30,000 workers to the payrolls, thereby
explaining most of the decline in eastern unemployment. The
eastern labor market continues to suffer from high wages which are
not justified by the laggard productivity levels of eastern
workers. That, in turn, undermines export growth which remains the
chief engine of German economic activity.
Still, regarding western Germany, yesterday's unemployment
report provided evidence that the western labor market continues to
slowly improve with the stronger economy. The slow rebound in the
labor market also underpins expectations for a slow rebound in
domestic demand.
The BBK yesterday called for tenders on today's regular repo
operation. A total of 71.1 billion DM in repos expire today.
Expectations call for a neutral operation.
The German credit market closed slightly lower yesterday.
Bearish factors included some long liquidation after new contract
highs and the stronger than expected German May industrial
production report of +0.9%. German June unemployment was in line
with market expectations. The German credit market is focussed on
Jun pan-German CPI and tomorrow's Bundesbank Council meeting.
The 10-year Bund yield yesterday closed +1.1 bp at 4.717%
after posting an all-time low yield of 4.691% yesterday. Liffe Sep
Bunds yesterday closed down -.11 at 108.82 after posting a contract
high of 109.06. The Liffe Sep Euromark yesterday closed down -.005
at 96.370 after posting a contract high of 96.385 on Monday.
The Dax index yesterday closed up 43 points (+.72%) at an all-
time high settlement of 5961 after posting a new all-time high of
5995. The Dax is up +40.27% for the year to date in mark terms and
+39.10% in US dollar terms. Deutsche Lufthansa (+7.58%) led the
rally after Salomon Smith Barney raised its 1998 and 1999 earnings
estimates.
France -- French May M3 climbed by +0.6% (mo-mo). March-May
M3 money supply climbed by +4.9% (yr-yr), nearing the BOF's target
of +5% growth. The M3 money supply report has lost most of its
credibility in the markets as it has been distorted by the impact
of privatization efforts and the issuance of so-called Balladur
bonds.
The French franc yesterday closed +.13 centimes weaker at
3.3519 francs/DM. The franc has been trading sideways in a narrow
range for the past 6-months, below the all-time high of 3.3297
FF/DM (2/16). On that all-time high, the franc was 2.42 centimes
above the franc's ERM parity rate of 3.3539 FF/DM.
The French credit market closed slightly lower yesterday.
Bearish factors included long liquidation in the wake of contract
highs. The Bank of France is not expected to alter interest rates
at tomorrow's Monetary Policy Council meeting. The French credit
market is focussed on today's Jun INSEE household confidence survey
and tomorrow's final Q1 GDP (prelim +0.6% q/q) and BOF Monetary
Policy Council meeting.
The 10-year Notional yield yesterday closed up +1.8 bp at
4.795% after posting an all-time low yield of 4.764%. The Sep
Notional bond yesterday closed -.06 at 104.94 after posting a
contract high of 105.13. The Sep Pibor yesterday closed -.005 at
96.365 after posting a contract high of 96.385.
The CAC40 stock index yesterday closed up 22 points at an all-
time high settlement of 4333 (+.51%). The CAC40 is up 44.49% for
the year-to-date in franc terms and up 42.35% in US dollar terms.
A drop in French bond yields to an all-time low yesterday boosted
financial shares like Axa (+2.66%), Paribas SA (+1.08%) and Banque
Nationale de Paris (+.76%). Oil shares, however, fell as crude oil
prices continued to slump, Elf Aquitaine and Total lost .57% and
1.5% respectively.
UK -- The British markets are focussed on the 2-day BOE
Monetary Policy Committee meeting which begins today. Speculation
about a tightening was dented by Monday's weaker-than-expected May
industrial production report of -1.2% (mo-mo) as manufacturing
output fell by -0.4% (mo-mo). Still, the market is discounting the
chance of a 25 bp rate hike at this week's meeting at about one-
third. The MPC last month surprised the market with a 25 bp rate
hike which pushed the base rate up to 7.5%.
Speculation about a follow-up tightening centers on (1)
worries about a loose fiscal policy following Chancellor Brown's
plan to accelerate growth in real public spending, (2) the tight
labor market as earnings growth continues to accelerate (March
underlying average earningsstrengthened to +5.2% (yr-yr) from Feb's
+4.9% (yr-yr) gain which was already stronger than the Bank's
professed limit of +4.5%), (3) the government's planned
introduction of a minimum wage which may put even more upward
pressure on earnings, and (4) the fact that price pressures are
running well above the Bank's target of +2.5% (yr-yr) for the
underlying RPIX (the May RPIX climbed by +3.2% y/y).
Sterling yesterday settled +.61 pfennigs at 2.9722 DM, still
well below last Thursday's 2-1/2 month high of 3.0271 DM. On last
Thursday's high, sterling rebounded by a total of 16.54 pfennigs
from the May 22nd 7-1/2 month low of 2.8617 DM but remained 8.29
pfennigs below the 8-3/4 year high of 3.1100 DM (4/3/98). The
sell-off seen since last Friday was attributed to some long
liquidation pressures as well as the weak UK May industrial
production report which cast some doubts on speculation for another
tightening at this week's MPC meeting.
The UK credit market closed lower yesterday. Bearish factors
included nervousness ahead of tomorrow's BOE Monetary Policy
Committee announcement. The UK credit market is focussed on
today's and tomorrow's BOE Monetary Policy Committee meeting.
The 10-year gilt yield yesterday closed +4.4 bp at 5.839% and
held below its 1-1/2 month high yield of 5.931% that was posted on
June 19th. Sep gilts yesterday closed down -.28 points at 108.83
where they remained within the 2-week trading range. Sep short
sterling yesterday closed down -.020 at 92.090 where it held above
the Jun 19th 5-1/2 year low of 92.020.
The FTSE stock index yesterday closed up 13.1 points at a 1-
month high settlement of 6003.4 (+.22%) as it moved to the top of
its 2-1/2 month long tradingrange between approximately 6065 and
5650. The FTSE is up 16.90% for the year-to-date in sterling terms
and up 16.41% in US dollar terms.
Asian Comment -- Japan -- Japan June city bank lending was up
+2.9% (yr-yr), strengthening from May's +1.9% increase. Loan
demand was reportedly boosted by corporate borrowing to cover
summer bonuses.
The Nikkei index yesterday closed up 66 points at 16,416
(+.40%), still consolidating mildly below last Thursday's 3-month
high of 16,743. The stock market is waiting for Sunday's upper
house election and for further details on the bridge bank plan and
whether the LDP will recommend permanent tax cuts. On last
Thursday's high, the Nikkei index recovered sharply by 14.6% (2,218
points) from the recent 5-month low of 14,615 (6/16/98). Nikkei is
up 7.59% for the year-to-date in yen terms and is up 1.22% in US
dollar terms.
Tokyo Sep JGBs yesterday closed +.02 points at 132.86, still
consolidating mildly above last Wednesday's 1-1/2 month low of
131.96. JGBs saw a little pressure due to bond issues by NEC and
Toyota. In London, Sep JGBs settled at 132.64, down -.22 points
from the Tokyo close. The benchmark No. 182 10-year JGB closed +.5
bp at 1.305%, well above the recent all-time record low closing
yield of 1.130% (6/2/98). The Dec Euroyen yesterday closed -3.0 bp
at 99.255, still retaining most of last week's recovery rally.
Asian Stock Market Closes: Hong Kong Hang Seng -.47%,
Australia All-Ordinaries +.57%, Singapore Straights Times
Industrials -1.09%, South Korea Composite Index +2.55%, Thailand
Stock Exch +.47%, Taiwan weighted index -.62%, Philippines
composite index +.32%, Malaysia composite index -1.31%, China SE
Shanghai A +.70%, Indonesia Jakarta composite index +2.85%.
OPTIMA FINANCIAL NEWS SCHEDULE^ Wednesday 7/8/98
A. Today's News (local & GMT release times shown)
Wed US 1000 ET 1400 May wholesale trade: April inventories -0.6%;
April sales +0.1%; April inv-to-sales ratio
-0.01 point to 1.29 mos.
1200 ET 1600 Deputy Treasury Secretary Summers and
BOF Governor Trichet participate in a satellite
link-up on financial markets.
1300 ET 1700 Treasury auction of $8.0 bln in re-opened
30-year indexed bonds (mature in April 2028).
1500 ET 1900 May consumer credit expected +$4.5 bln,
April +$5.5 bln.
1830 ET 2230 ABC/Money Magazine weekly consumer
confidence, last -2 points to 23.
UK N/A 2-day BOE MPC meeting begins.
GER N/A Finance Minister Waigel presents the 1999
budget proposal to the cabinet.
FRA 0845 CET 0645 INSEE releases its June household
confidence survey.
EUR 1100 CET 0900 ECB President Duisenberg holds press
briefing following Tuesday's ECB meeting.
JPN N/A LDP expected to release its latest plan for
dealing with the bad loans problem.
N/A June wholesale prices expected -0.4% m/m,
May -1.7% y/y; June domestic WPI, May
-2.3% y/y.
B. Future News
Sometime this week:
GER N/A June pan-German CPI, May +0.3% m/m &
+1/3% y/y.
N/A May retail sales, April real sales -2% y/y
(unadjusted).
Thu US 0830 ET 1230 Initial unemployment claims for the week
ended July 4th, last +24,000 to 390,000.
1630 ET 2030 Money supply report for week ended June
30th; June money supply; 1st-week
reserves.
UK 1200 UK 1100 2-day BOE MPC meeting ends,
announcement expected at noon UK.
GER N/A Regular bi-weekly Bundesbank meeting, press
conference to follow.
N/A Finance Minister Waigel presents 1999
federal budget.
FRA 0845 CET 0645 Final Q1 GDP expected unrevised from the
preliminary report of +0.6% q/q & +3.4% y/y.
N/A BOF Monetary Policy Council meeting.
RUS N/A Prime Minister Kiriyenko to unveil government
financial plan.
Fri US 0830 ET 1230 June PPI expected unch, May +0.2%; June
core PPI expected +0.1%, May +0.2%.
1430 ET 1830 Treasury announces the details of next
Thursday's 52-week bill auction.
CAN N/A June unemployment expected unch at 8.4%.
FRA 0845 CET 0645 April current account balance expected FFR
17.5 bln surplus, March FFR 13.3 bln surplus.
0850 CET 0650 Preliminary June CPI expected unch m/m &
+1.0% y/y, May +0.1% m/m & +1.0% y/y.
JPN N/A June bank lending, May -2.2% y/y.
Sun JPN N/A Japanese Upper House elections: 126 of 252
seats contested, LDP now holds 118 seats.
Week of July 13-17:
Mon US 1000 ET 1400 Q1 retailers' profits, Q4 after-tax profits
averaged 2.9% of sales.
1300 ET 1700 Weekly Treasury auction of $13.0 bln in 3 &
6-month bills, unch from last week (pay down
$900 mln).
Tue US 0830 ET 1230 June retail sales, May +0.9%; excluding
autos, May +0.4%.
0830 ET 1230 June CPI, May +0.3%; June core CPI, May
+0.2%.
0900 ET 1300 BTM/Schroder weekly retail sales, last +0.3%
w/w.
0900 ET 1300 Atlanta Fed releases its June economic
survey, May -1.6 points to 18.6.
1000 ET 1400 June real earnings, May +0.6%.
1440 ET 1840 Redbook retailer sales survey for week ended
July 11th, June -0.7%.
Wed US 0830 ET 1230 May business inventories, April +0.2%; May
business sales, April -0.1%, May inv-to-sales
ratio, April +0.01 point to 1.38 mos.
1000 ET 1400 June import prices, May -0.1%; June export
prices, May +0.1%.
1830 ET 2230 ABC/Money Magazine weekly consumer confidence.
UK N/A BOE publishes minutes from June MPC
meeting.
Thu US 0830 ET 1230 Initial unemployment claims for week ended
July 11th.
0915 ET 1315 June industrial production, May +0.5%; June
capacity utilization rate, May +0.1 point to
82.2%.
1000 ET 1400 July Philadelphia Fed manufacturing survey,
June +10.7 points to 28.2.
1300 ET 1700 Treasury auction of 52-week bills.
1630 ET 2030 Money supply report for week ended July 6th;
June money supply; 2nd-week reserves.
JPN N/A BOJ Policy Board meeting.
Fri US 0830 ET 1230 May goods & services trade deficit, April
-$14.5 bln.
Future News:
July 22: Japanese Prime Minister Hashimoto meets President Clinton in
Washington.
Sep 27: German general election.
Upcoming Central Bank meetings:
FOMC: Aug 18, Sep 29, Nov 17, Dec 22.
Last G7 monetary policy changes:
US Federal funds target raised +25 bp to 5.5% on 3/25/97; discount
rate cut -25 bp to 5.0% on 1/31/96.
CAN Overnight rate target band +50 bp to 4.5-5.0% on 1/30/98.
UK Base rate +25 bp to 7.50% on 6/4/98.
GER Discount rate -50 bp to 2.50% and Lombard rate -50 bp to 4.50%
on 4/18/96 (effective 4/19/96).
2-wk repo rate +30 bp to 3.3% on 10/9/97 for 10/15/97 wkly repo;
after 13-1/2 months at fixed-rate 3.0%.
FRA Intervention rate +20 bp to 3.30% on 10/9/97; 5-10 day repo rate
-15 bp to 4.60% on 12/17/96.
ITA Discount rate -75 bp to 5.50% on 12/23/97; Lombard rate -75 bp
to 7.0% on 12/23/97.
JPN Discount rate -50 bp to .50%, unsecured overnight call loan rate
-40 bp to .45-.50% from .85-.90% on 9/8/95.
Times: US Eastern Time ET=GMT-5; British Time UK=GMT; Continental
European Time CET=GMT+1; Japan Time JT=GMT+9.
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