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Looking Ahead: NY's Morning Headlines

Big Slide in 401(k)s Spurs Calls for Change WSJ http://online.wsj.com/article/SB123137714796462913.html?mod=todays_us_page_one For Pittsburgh, Thereâ��s Life After Steel NYT http://www.nytimes.com/2009/01/08/business/economy/08collapse.html?_r=1&ref=todayspaper Indexes Tumble As More Leading Stocks Come Under Selling, Jeopardizing Rally IBD http://license.icopyright.net/user/viewFreeUse.act?fuid=MjM1NTk0NA== Job Losses In Dec. Worse Than Feared, Labor Data Suggest IBD http://license.icopyright.net/user/viewFreeUse.act?fuid=MjM1NTk0OQ==

FX Summary: Asia

The dollar continued to add to gains in Asia after recovering ground in NY on Wednesday. The fall in US stocks and subsequent losses in Asian stock markets fueled risk aversion, keeping pressure on JPY crosses and weighing on currencies such as AUD, NZD and GBP. AUD & NZD also succumbed to the pressure of lower commodities after the CRB slide over 3% Wednesday and the 12.2% slide in oil and fall in gold prices. Oil saw little change in Asian trading though gold bounced in a correction but base metals were broadly lower. USD/JPY was pressured by the fall in crosses as the Nikkei dropped 3.93%. The weak US Monster jobs index at 131 continued to fuel fears over US employment and kept USD/JPY heavy too with a fall to 92.38 from morning highs of 92.93. EUR/USD fell to lows of 1.3559 but recovered to 1.3635 on an FT report suggesting the ECB may not cut rates and a NY Times report that China is losing interest in US debt.

Bonds Lower as Details of Auto Bailout Emerge

The 30yr is now down 24 ticks at 140-20, and the 10yr is down 17 at 127-14. The 5yr is down 15 at 119-18.

German State, National Dec CPI Schedule

The statistics offices in the six German states that release CPI data prior to the announcement of the national inflation rate said they plan to provide the information on the following dates and times, which are subject to change: *Saxony: Dec 29, sometime in the morning *Hesse and Brandenburg: Dec 30, 0900 GMT *Bavaria and Baden-Wuerttemberg: Dec 30, 1100 GMT *North-Rhine Westphalia: Dec 30, no time given According to this information, German national CPI can be expected December 30 after the last state has reported.

Fixed Income Update

Bonds remain well-bid in a quiet day that brought slightly better-than-expected Initial Claims (for a change). The 30yr is still up nearly 2 handles but is off its best level o the day (141-13) at 141-07. The 10yr is up 27 ticks at 128-12, while the 5yr is up 17 and the 2yr is up 5. On the short end, the 4wk bill yield is up 2bps at 0.04%, but the 3-month yield is back in negative territory, down 6bps to -0.05%. The 6-month yield is off 3bps at 0.15% and the 1yr is down 4 at 0.41%.

Quantitative Easing Now Embedded in Monetary Policy

In today's curveball FOMC statement, the FED included several lines about potential purchases of mortgage-backed securities, long Treasuries, and other securities (to get more money into the system). It marks the first time in the current mess that the normally succinct FED added details of potential actions to its typical assessment of economic conditions -- and certainly indicates that quantitative easing, the more effective weapon these days, is a definitive part of monetary policy.

Canadian October Manufacturing Sales Fall 0.5%

Canadian October manufacturing sales fell 0.5% to C$51.5bln in October from a revised 0.3% decrease, (previously reported 0.1% rise), beating the consensus estimate for a 1.7% drop. This was largely owing to the 23.7% increase in the Aerospace industry. Change in Inventories excluding petroleum, rose 2.3% from a 0.3% increase in September. Change in inventories increased 1.3% from a revised fall of 0.1% (previously reported 0.3% decrease), a result of 16 out of 21 industries reporting higher inventory levels. The Inventory-to-sales ratio advanced to 1.33 from 1.29 in September, marking the highest level since January 2008 and the seventh increase in eight months. The Canada/US exchange rate, along with a sizable decrease in the price of petroleum and coal products, both impacted October's manufacturing results, partially offset by the volatile transportation industry led by aerospace.

Misys launches Quick Start initiative

December 16th, 2008 - Misys introduces Quick Start initiative to reduce cost and length of implementations for financial institutions

UK Household Income Gap Still At 30-Year Levels -- ONS

The gap between top earners having more disposable income than lower earners remains as wide as it did when the pattern first emerged in the 1980s, according to analysis published today by the Office of National Statistics (ONS). Such inequality has changed very little despite tax changes and government benefits. "While the effect of cash benefits varies according to the economic cycle, there is no evidence of any long-term change in the effect on income inequality," the ONS said. From 1977 to 1991, the share of total disposable income in the top fifth of households increased to 42% from 36%. The share for the bottom fifth fell to 7% from 10%. In 2006-2007, the top fifth still received 42% and the bottom fifth 7%, the ONS said. The UK ranked ninth of out 27 member EU states in household inequality, according to the ONS.

FOMC Meets Next Week, 50bps Cut Widely Expected

Note the FED added an extra day to this meeting to give more time for discussion. At least a half-point reduction in the benchmark target rate to 0.50% is nearly universally expected, though forecasts vary from no change to a 100bps reduction. However, the rate is largely irrelevant in the current quantitative easing environment where the FED is paying interest on reserves and the effective rate is trading in the 0.10-0.15% area. With virtually no downside room left for interest rates, traders will be anxious to hear other potential tactics. In that context, the policy statement will take on more importance than ever. Bernanke has already stated the FED will "do what it takes" to free up the financial markets.