USD is trending higher again to start the week, with the US Dollar index testing 100 again building on hawkish comments made by San Francisco Fed President Williams over the weekend. He noted that the October meeting was a close call on a rate hike and that there is a strong case for liftoff in December with the economy on a strong track and employment growing. Gold and major commodities have been trading lower to start the week on this news. Gold has dropped back under $1,070 with a test of $1,000 still possible at some point. Copper and grains like wheat and soybeans are also falling. Crude oil has been particularly active today. WTI crude oil started out weak, breaking down under $40.00 to signal a new downleg, but more recently has shot up from $39.20 toward $41.60. $35.00 to $40.00 has emerged as a heavily defended support zone with $40.00 a big psychological break point in the ongoing price war among suppliers. It’s amazing how as soon as WTI looked like it could stay under $40 and potentially head even lower, Saudi Arabia came out of left field and suddenly decided it is willing to work with OPEC and non-OPEC countries to stabilize the market. Unless they are willing to back up talk with serious action soon, however, this bounce may not last and the oil market could remain volatile, creating trading opportunities. The rout in commodity markets has had wider implications as well Resource currencies are taking a hit today, particularly NZD and AUD with the Kiwi Dollar sitting on $0.6500. Oil sensitive currencies like CAD, NOK and RUB have also come under renewed pressure with CADUSD breaking down below $0.7500. Commodity weakness has also been pulling down mining and energy stocks and dragging on indices which were already ripe for a correction after several days of gains. Today is the first of three busy mornings for US news ahead of the Thanksgiving holiday on Thursday. Flash PMI and existing home sales headline and could influence trading mid-morning. The Pfizer-Allergan mega merger proposal announced this morning could spark a round of takeover speculation in the pharma/biotech sector. The recent parade of big mergers across multiple industry groups indicates that managements are still finding value out there. The Fed has scheduled a closed meeting for 11:30 am EST today to discuss the discount rate. Should a change (an increase would be more likely if any move is made) be announced, we could see significant moves in US markets later today. Corporate News Pfizer has agreed to acquire Allergan for $363.63 per share, a 30% premium to recent trading in a $160B friendly deal. Lions Gate Final Hunger Games movie opened with box office of $101M in the US and $247M worldwide but will this be enough to meet high expectations? Economic News Significant announcements released overnight include: France flash manufacturing PMI 50.8 as expected France flash service PMI 51.3 vs street 52.6 Germany flash manufacturing PMI 52.6 vs street 52.0 Germany flash service PMI 54.4 vs street 53.9 Eurozone flash manufacturing PMI 54.4 vs street 53.9 Eurozone flash service PMI 54.1 vs street 54.6 Upcoming significant announcements include: 9:45 am EST US flash manufacturing PMI street 53.9 10:00 am EST US existing home sales street 5.4M
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