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Minyanville's Before The Bell: ECB Signals Rate Increase, U.S. Futures Lower


ECB signals rate increase, Scary talk from Alan Greenspan, Futures are pointing lower...

Stock futures are down this morning. As of 7:20 AM EST, S&P futures are down by 4.9 points to 1474, and Nasdaq futures are lower by 9.5 points 1994.

Starting in Asia, equity markets closed mostly in the red. The Nikkei ended down -0.83% as Japan's leading economic indicators fell to 70.0 inline with estimates. In addition, the yen rose to 115.15 against the U.S. dollar advancing against all but two of the 16 most active currencies. (From Bloomberg) Please read Professor Bloudek's The Duration Carry Trader for more insight into the importance of this foreign currency.

China's Shanghai Composite fell -2.16% a day after the central bank raised the bank's reserve requirement by 50 basis points. Also adding to tensions, China's President Hu Jintao sent his strongest warnings to the U.S. saying the situation in the Taiwan Straits has become a "highly dangerous period." (From China Daily).

In other parts, Hong Kong's Hang Seng Index fell -0.28%, Australia's ASX 200 gained 0.44%, and Taiwan's Taiex managed to shrug off China's warnings by adding +0.01%.

In Europe, markets are trading lower with the CAC down -0.54%, DAX down -0.55%, but the FTSE is in positive territory up +0.06%.

European Central Bank's Jean-Claude Trichet said the ECB will ensure price stability but needed more data to clarify correct monetary policy direction. However, investors interpreted future rate increases with comments from ECB's Yves Mersch saying current rates still support economic growth and ECB's Erkki Liikanen current conditions still contain "upside risks to price stability." (From Bloomberg)

In the U.S, former Fed Chairman Alan Greenspan was making headlines telling a group of economists that the current market turmoil reminded him of the 1987 and 1998 markets. (From WSJ) The view is consistent with Professor Cooper's and Professor Sedacca's talk on the Buzz and Banter. Have a look at our Economy page for more of our views on current market conditions.

Financials may be under a little bit of pressure this morning. Bear Stearns (BSC) was downgraded by Bank of America (BAC) from "Buy" to "Neutral" on valuation. The target price of $126, however, still remains well above BSC's current market price at $107.67. Please look at our Stocks to Watch for more company-specific news.

Adding to the sentiment, National City Corp (NCC) announced it would lay off 2,150 mortgage jobs. The move will result in a $200 mln pre-tax charge in the third quarter. Just yesterday, Lehman Brothers (LEH) announced it was laying off 850 employees in its mortgage business. Please review our Supbrime Slime lander page as the effect of the housing sector continue.

The monthly jobs report by the Labor Department is expected at 8:30 AM EST. estimates suggest employers added 120,000 jobs with the unemployment rate holding at 4.6%. Also at 10:30 AM EST, Wholesale Inventories data is due with consensus estimates at 0.5%.

Hope you're having a Happy Friday! Good Luck and Good Trading!
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