Pete

where do you pull these Roundups from?

Cheers

HIGHLIGHTS

US President Bush: Confident G20 can overcome financial crisis
Reuters / Michigan November preliminary consumer sentiment up 57.9 from 57.6 – better than expected
US October retail sales drop 2.8% – record weakness – worse than expected
FED Chairman Bernanke – Global central banks ready to act if needed
China Deputy Governor Sun Ning: China vulnerable to international financial crisis, will be pre-emptive

COMMENTS

This was another gunfight day – with the bears faster to the trigger – and the week ending with shares down again (S+P down over 6% on the week when the bell finally rang). US markets saw S&P500 drop 4% on the day – over 2% in the last ½ hour. This came despite a bevy of headlines about the G20 meeting and hopes that discussion of global stimulus would repair financial confidence. Credit squeezes were noted in a number of places today – with the year-end money rate in USD a notable topic of discussion. The rise in Libor, the drop in TBILL yields and the move in long end rates suggest many see deflation -14 bps off 30Y to 4.21% worth thinking about after the auction yesterday. Among the sillier movements on the day – Gold rallied almost $40 on back of talk that the G20 would restart the Gold standard harkening back to Bretton Woods. The original hotel for which the 1946 conference started the post WWII global financial framework was sold in foreclosure in 1991. The original Bretton Woods died in 1971 when Nixon pulled the US from the Gold Standard. So its hard to see how one weekend meeting in Washington with a lame-duck US President will reset the global financial framework. Rather the goal of doing something – anything – is what seems to be the agenda as global officials face what one FED speaker noted “ not your garden variety” of recession. The risk of social unrest should start to be an issue in 2009 particularly for the less wealthy nations – and this topic will surely be an issue for stability and the G20. But today wasn’t about fairness – rather it was about fear – and we had plenty of that with US retail sales very weak and US consumer sentiment surprisingly strong – the mix should be upbeat for the week but many recognize the burden now rests with the new Administration. Much of the bounce in the Reuters/University of Michigan can be linked to the election – leaving the Obama team a very short time to make a difference. Many fear that ignoring this weekend’s events is the first big missed opportunity for leadership and others note this is smart political positioning as it leaves the troubles for history books and Bush. Unclear who will be buying those books and with what sort of money – and we hope that they have cash. For the USD – notable day in equities didn’t translate into much new for EUR or JPY or the combination. EUR range has been defined 1.25-1.28 – and now a break of either will be needed to spark interest – JPY 95.50-98.50 appears to be the same. Focus on the emerging markets – with the risks of more downside dominate. This week was like a bad Western – with the grainy film ripped in the good parts and the gunfights always ending with more dead than alive. Lets hope for a better movie next week. Expect the US PPI, CPI, Philly FED and housing data to confirm that deflation forces aren’t helping to inspire new buyers – or better cinema.

CURRENCIES
Cross Low High
EUR/USD 1.2611 1.2800 Close: 1.2793
USD/JPY 96.09 97.76 Close: 97.58
EUR/JPY 121.35 125.05 Close: 124.83
GBP/USD 1.4660 1.4960 Close: 1.4945
EUR/GBP 0.8529 0.8635 Close: 0.8560
USD/CHF 1.1850 1.1940 Close: 1.1859
EUR/CHF 1.5045 1.5185 Close: 1.5171
AUD/USD 0.6515 0.6662 Close: 0.6657
USD/CAD 1.2145 1.2315 Close: 1.2181
NZD/USD 0.5555 0.5650 Close: 0.5645