News regarding the Dubai World debt debacle continued to dictate the price action in NY trading. While the tone early in the session was one of uncertainty as to whether the state-run bank would be bailed out, the tide changed in the closing hours. Headlines that the beleaguered bank will be restructuring $26 billion in debt gave the bulls something to cheer about and the beaten down risk trade was once again back in vogue. US equities managed to close the day about 0.4% higher after being down more than -0.5% early on.
Better economic data out of the US proved constructive for stocks, but the knee-jerk reaction faded as traders feared a potential domino effect from the DW predicament. Chicago PMI came in much better than expected at 56.1 in November on the heels of a 54.2 print the prior month. The details of the report were encouraging as well with new orders holding above the 60 mark while the employment component managed to tick up.
The correlation between stocks and EUR/USD was very robust in NY trading and this made for a very choppy session. The pair dove down to a session low near 1.4975/70 before scurrying back above the 1.50 mark as the close approached. Gold found some footing once again. The precious metal bounced from a session low near $1165 to trade just below $1180 at last look. There was apparently some profit taking from the macro community into that $1180 area but the path of least resistance still looks to be $1200, in our view.