Intraday Thoughts – November 17, 2008

The trouble with growing polarity in global politics is that nothing substantial comes out until crises become either worse or things are too late. The G20 meetings over the weekend may be hailed for its inclusion of the leading developing economies but came up short of specifics and substance merely calling for ‘broader policy response’ and coordination of monetary and fiscal action between the countries. For the markets the lack of strong leadership to push through binding commitments means continued uncertainty which suggests a risk averse gapping open in Asia that will favor the Yen and the dollar. At this point we note the final hour collapse of US equities Friday suggesting bearish smart money and the corresponding sharp response of a stronger Japanese Yen and US Dollar. This follows what was another whippy trade through much of the New York session despite some numbers that underscored weakening end demand in the US as Retail Sales fell -2.8% for the headline rate in October far worse than the -2.0% consensus and downwardly revised prior read of -1.3% while preliminary figures from the University of Michigan Sentiment Index read 57.9 still within striking distance of its lows for the cycle.