Weaker-than-expected U.S. housing sales and durable goods orders on Friday drove U.S. stocks lower, and world and European stocks followed that trend on Monday.

Leaders of the Group of 20 rich and developing nations pledged on Friday to bring the global economy back into balance but their statement contained few surprises and investors are already looking ahead to U.S. employment data at the end of this week.

Global equities and other higher risk assets have risen sharply in the last six months on growing optimism about the economic outlook, but markets are starting to run out of impetus, analysts say.

“Investors are a little bit reluctant to add to their risk positions,” said Koen De Leus, economist at KBC Securities.

“The market is going to have a very good look at macroeconomic numbers this week. If some of these figures disappoint, then the market is going to go down further.”

Analysts are starting to question whether the global recovery is V-shaped, or if it could be W-shaped, with a second dip to come.

The MSCI world equity index <.MIWD00000PUS> was down 0.52 percent at 282.94, bringing losses since Sept 22 to 3 percent.

U.S. stock index futures , however, were indicating a slightly stronger open on Wall Street after the market scored a third consecutive day of losses on Friday.

The FTSEurofirst 300 index <.FTEU3> hit its lowest in nearly three weeks before trimming losses to 982.53, down 0.14 percent from the U.S. close.

GERMAN STOCKS UP

German stocks <.GDAXI>, however, rose 1.3 percent with particularly strong gains in utilities E.ON and RWE , on expectations of longer lifetimes for German nuclear power plants as a result of the German election.

German Chancellor Angela Merkel’s conservatives won a weekend parliamentary election with the pro-business Free Democrats (FDPP), enabling her to end her awkward four-year-old partnership with the Social Democrats (SPD).

“(This) government provides the greatest opportunities for equity market-friendly reforms compared to other party combinations,” said Tammo Greetfeld, equity strategist at Unicredit, in a client note.

The yen, typically regarded as a safe-haven currency, surged to an eight-month high against the dollar as Japanese officials waved off any plans to stem the currency’s rise.

The yen later gave up some gains as Finance Minister Hirohisa Fujii changed gear on his comments during the course of the day, saying yen gains were becoming one-sided just hours after saying the rise was “not abnormal”.

The dollar fell as far as 88.26 yen before trimming losses to 89.35, down 0.31 percent.

However, the dollar hit a 2-1/2 week high against an index of currencies <.DXY> and a 13-day high against the euro as the U.S. currency also attracted safe-haven flows.

Funds are starting to shift money home ahead of the quarter-end later this week, analysts say.

Crude oil dipped 20 cents to $65.82 a barrel .

Euro zone government bonds also benefited from safety trades, with 10-year yields briefly hitting a one-month low.

December Bund futures were up 5 ticks, trimming earlier gains.

Sept 28 (Reuters)

Euro zone economic sentiment improved more than expected in June, data showed on Monday, as the European Commission predicted the worst could be over for the 16-country currency area.

“The ECB will find themselves affirmed that the economy is bottoming out and that the worst is over,” said Joerg Angele, analyst at Bayerische Landesbank.

“It’s bad, but it’s not getting worse.”

The FTSEurofirst 300 index rose 1 percent, led by energy companies and financials.

The MSCI world equity index edged up 0.12 percent towards 12-day highs hit on Friday. However, the index is down over 4 percent from the year’s highs set earlier this month.

U.S. stock index futures indicated a slightly higher open on Wall Street.

World stocks have shuffled sideways in the past few weeks as investors have questioned how quickly the global economy will return to growth, giving a boost to battered government bonds and pushing yields lower.

U.S. employment data are due on Thursday ahead of a U.S. holiday on Friday, and the European Central Bank and Sweden’s Riksbank issue policy statements this week.

“With the payrolls coming up, and the ECB and Riksbank, I don’t think there’s a great appetite to take on big risk this week,” said Maurice Pomery, managing director of Strategic Alpha.

Many investors are also sticking to the sidelines as the second quarter winds down and ahead of U.S. and European summer holidays.

CHINA WATCH

The dollar index, a gauge of its performance against six major currencies, dipped 0.05 percent to 79.833, but held off a two-week low struck on Friday.

The euro inched up 0.07 percent to $1.4059 , recouping losses earlier in the session, and the dollar was up 0.16 percent against the yen at 95.35 .

The dollar fell last week after China, which holds nearly $2 trillion of reserves believed to be concentrated in dollars, repeated its calls for an end to the dominance of a single currency in global finance.

China and Brazil said on the sidelines of a weekend meeting of central bankers in Basel they were discussing a currency arrangement to allow exports and importers to settle deals in local currencies, thereby avoiding the dollar.

Pressure from emerging market countries to seek an alternative to the dollar as reserve currency has contributed to weakness in the U.S. currency in recent weeks.

Crude oil rose 0.74 percent to $69.89 a barrel on supply concerns after Nigeria’s main militant group said it attacked a Royal Dutch Shell oil platform.

Euro zone government bond futures rose 20 ticks , helped by strong gains in UK gilts on month-end buying and weak UK data.

LONDON, June 29 (Reuters)

I don’t think I have to tell you how bad this could be. The market is already on shaky ground, and a week full of disappointing reports could plunge us back below the 7200 level.

With such a full week, I will briefly touch on a few of the more important reports.

Both the ISM Index and ISM Services reports are expected to show a drop for February. With a reading of 34 on the ISM, and 41.3 on the Services, both are indicating further contraction.

On Tuesday, the Pending Home Sales report for January is released, and is expected to show a decline of three percent. I actually expect this report to beat expectations with all the foreclosures and distressed sales in the markets.

The Fed Beige Book comes out Wednesday. While this only gives an overview of labor markets, wages, manufacturing, etc, in each of the Fed regions, it could give an early insight into whether any regions are seeing any sort of turnaround.

January Factory Orders are announced on Thursday, and no real surprise here. The decline is expected to continue, albeit less than the December report. Plain and simple, manufacturing is getting decimated.

The real blow this week could come on Friday when the Non-Farm Payroll report for February is announced. Expectations are for a loss of 615k jobs. If this is an accurate reading, that means that in the first two months of the year, the economy will have shed over 1.2 million jobs. That means in the first two months of the year, we will have lost half the amount of jobs the country lost all of last year.

Source: Employment Data Could End A Scary Week Of Reports

Tomorrow morning the Factory Orders report for November is released, and things might get better. The report is expected to show a decline, but not as large of a decline as the previous month. Whether or not this means that factories are starting to get more orders on a consistent basis remains to be seen, but anytime a decline is shrinking, it seems like a small victory.

The final report I wanted to touch on this week is the December Non-Farm Payrolls report. This will be the final report for 2008, and will allow us to look at the overall loss for the year. As it stands, the country has lost just over 1.3 million jobs this year. The expected loss for December is another 475k jobs, which will put us over 1.8 million jobs lost for the year. The scary thing is that the job losses have increased every month for the last four months, so December may be worse than expected. I remember back in mid-summer when some of us were wondering if we would see one million jobs lost this year. Now we are looking to nearly double that amount.

Earnings:
Wed: BBBY, MON

Thurs: BLK, MER

Source: Employment Data Dominates Calendar, Earnings Season Starts Again

But… Then the trading theme entered the picture once again… What brought it back this time, Chuck? Ahhh grasshopper, it was the ADP Employment data that I talked about yesterday morning as a piece of data that gives us a good indication of what the national Jobs Jamboree will look like. And… Unfortunately the ADP printed worse than expected! Stocks immediately began to give back the election day 300 point rally, and the deep, dark, dangerous clouds hovered over the U.S. economy once again. And the rest of the day, the dollar took over the driving duties…

This morning, the Bank of England (BOE) and European Central Bank (ECB) both meet and will both cut rates. So… The thought of lower rates in Europe has added to the weight on the euro this morning, and we’re right back to the trading levels we saw yesterday morning, when I hit the send button!

There are two camps screaming their theories about the ECB rate cut today… In one camp we have the old stick in the mud, “a rate cut debases the currency” crowd. (of which I’m on board with 90% of the time) And in the other camp we have the risk taking “a rate cut will allow the Eurozone to shorten the recession and will be good for the euro” crowd. Hmmm… You know, I’ve seen this kind of perverse way of thinking about rate cuts before… In 2000 and 2001, when the economies of the world were trying to recover after the brief recession in the U.S. that was cut short by the Fed sticking their hands in the cookie jar and acting like they knew what they were doing… Cutting rates to 1% and providing enough liquidity to choke the proverbial horse!

You know… I don’t think I can ever mention the last U.S. recession without going on that tirade about the Fed… Anyway… What I was saying is that during that time the currency markets were rewarding currencies that had Central Banks cutting rates to provide the chance of economic growth. It was the first time I had ever seen that, and I remember my editor of the Review & Focus at that time thought I had “lost it” when I wrote about cutting rates being good for a currency…

The boys and girls over at Citgroup are waving the euro flag again… They issued a letter to clients that said they believed the ECB would cut rates 1% (100 BPS) today, and bring the official rate to 2.75%… They also said that should the ECB cut rates to 2.75%, to buy the euro, as it may rally to 1.33… Of course it’s important to note that the ECB has NEVER moved rates more than 50 BPS before… So, 100 BPS would be a large pile of wood to chop for the ECB, eh?

The euro isn’t the only currency to get whacked by the Trading Theme yesterday… A$ were looking perky at 70-cents before falling back to .6750… And C$ were pushing the envelope on 87-cents only to see their fortunes fade to .8540… And just to prove that the Trading Theme was in play… The only two currencies to gain yesterday… Dollars and Japanese yen!

OK… I know you’ve been waiting patiently for me to discuss the title of today’s discussion… Change… What Change? I was doing some research on the Obama plans yesterday, and just don’t see anything that points to any change in the debt creation. Yes, I know about the gradual withdrawal in Iraq… But that debt isn’t on the radar screen… I’m strictly talking about the Budget Deficit remaining in place and maybe even widening. The research I was reading had this all going on until around 2013… Oh, and the 2009 Budget is forecast right now to be around $800 Billion! Oh, and before any one accuses me of throwing stones at someone who hasn’t even taken oath yet, let me say that I’m just talking about the Budget Deficit, and the economic plans… The public debt is going to get pretty ugly too, all the stuff now in place will be taking the public debt to GDP ratio up to 52% from 37% before the crisis. And that’s on this administration’s bill… With thanks to the Treasury Dept and the Fed!

So… If Change is in order… This is where it need to start! Because, every time we rack up a Budget Deficit, it adds to the National Debt… Which is now $10 Trillion! And yes, the current administration was responsible for adding $4 Trillion to that total!

OK… Enough of thinking about debt… Let’s turn our attention to Gold and Silver, the precious metals… I’ve been talking about the shortage of physical precious metals for some time now. The minters aren’t minting… (except the Perth Mint in Australia, announced about 10 days ago that they were going to double their production of physical coins and bars. I guess that should put to bed all that internet talk about how the Perth Mint didn’t have the bullion to back up their pooled holdings… I wonder what that guy, I won’t even mention his name, because he’s been so wrong about all of this, but I wonder what he has to say now?)

Again, off on a tangent… Where was I? Oh! The minters aren’t minting, and suppliers don’t have any supply, etc. The only time a supplier comes up with some physical metals, it’s because a customer has sold their holdings. We have a list of names of people that want physical metals… And we’ve got nothing to show them… BUT! I put my thinking cap on… And thought… Hey, Chuck! You always tell crowds when you speak at Conferences that they can buy pooled and always have it fabricated to coins and bars later… Well… This is what we should be doing right now! Buy pooled so that you lock in your price now, and when (someday this will happen, when? I don’t know! But someday!) the supply is back to normal… Fabricate the holding then… You’ll have to pay the fabrication costs at that time, but if you had bought allocated coins and bars in the beginning you would have paid for fabrication, so there’s no difference! (fabrication is the actual minting of the coin or bar, and runs about 5% for Gold, and 18% for Silver… It doesn’t cost any more to mint a Silver coin that it does Gold… It’s simply the math in the price difference between the two and the amount of Silver you can buy for the same amount of money in Gold)

So, how about that idea? WOW! It sure pays to put the thinking cap on, eh?

OK… I’m getting near the time to go the Big Finish, and the BOE or ECB hasn’t announced their rate cuts yet. This always happens… I get the Pfennig out at its normal time, and the BOE and ECB haven’t announced yet. That’s OK… Because you read the Pfennig, and your neighborhood friendly Pfennig writer tells you that the BOE will cut rates by 1% today, while the ECB will opt for 50 BPS… That’s my call… We’ll see if I was right, and of course if I’m wrong, I’ll get 50-100 emails telling so! That’s OK… I deserve it, as long as the email isn’t nasty, it’s fine…

Currencies today 11/6/08: A$ .6810, kiwi .5980, C$ .8515, euro 1.2830, sterling 1.5850, Swiss .8540, ISK (no quote) rand 9.75, krone 6.7890, SEK 7.80, forint 203.25, zloty 2.7750, koruna 19.28, yen 97.90, baht 35, sing 1.4840, HKD 7.75, INR 47.68, China 6.8250, pesos 12.73, BRL 2.1350, dollar index 85.44, Oil $64.25, Silver $10.40, and Gold… $741.67

That’s it for today… Risk takers one day, gone the next day… This is driving me crazy, all this volatility! WOW! The Bank of England just slashed interest rates by 150 BPS! 1.50%! To 3%! WOW! What a cut! I guess that desperate times call for desperate measures, eh?

Source: Change… What Change?