U.S. Market Update

Dow -51 S&P -7.25 NASDAQ -13.9

U.S. equity markets hold close to unchanged but remain heading lower to start the week. Equity futures moved higher ahead of the open when a Goldman Sachs analyst noted he could not rule out the possibility the Fed could cut rates as early as today. Similar to Friday''s premarket session the notion the Fed would move just a week before their scheduled FOMC meeting failed to gain any traction. 2-year year notes are under-performing the longer end of the curve contracting the benchmark Treasury spread below 200 basis points. The April fed fund future still sees nearly 100% odds of cuts of 75 basis points and August projects a similar probability of 1.75% fed funds rate. The Dow is getting a supersized boost from MCD+2% after the Co. reported strong Feb comparable sales figures. Nationwide Financial has surged 25% after getting a takeover offer from its parent company. Financials showed some decent early momentum but the tone has turned decidedly negative again after CNBC reported Lehman would be cutting their global workforce by 5%. Commodity futures began the week with some more profit taking but oil has rebounded and surged to a new all-time high. April crude is up around $107. Metals remain noticeably lower but have bounced from their worst levels as crude pushed back into positive territory.

In currencies, the USD firmed during the NY morning following comments from ECB''s Trichet noting he is concerned about excessive exchange rate moves, but reiterated the view that he pays extreme attention to that the US favors a strong USD. However, Trichet did reaffirm the standard hawkish line that Central banks must anchor inflationary expectations. Lastly, Trichet noted that today''s meeting had no technical discussions on new central bank coordination, but existing cooperation continues. EUR/USD retested Friday''s post-payroll lows of 1.5313 before consolidating. Later, EU''s Regling reiterated that the EU remains permanently vigilant on Euro but does not desire excessive volatility. USD is also receiving help from softer metal prices following China''s lower Feb trade balance released in Pre-European trading, which suggested a cooling of the global economy. Gold continues to struggle to break the $1,000 barrier. USD paid little initial attention to comments out of the UAE highlighting the possibility of setting up a USD peg task force in response to the growing expectation that the Fed may cut rates by as much as 75bps by the end of March. CAD and AUD weakened on the lower metal prices. USD/CAD traded at 0.9935 while AUD/USD ticked at 0.9120.

European equities were mixed and off their best levels of the session. Stocks tested pre-US highs following a Goldman Sachs analyst note that they saw a possibility of an emergency Fed rate cut during the NY morning on Monday. However, equity markets drifted lower as the usual Fed action time came and went. Euro-Stoxx 50 +0.1% at 3,578; FTSE 100 -0.2% at 5,688; CAC 40 -0.1% at 4,613 and DAX +0.1% at 6,522. June Bunds +39 ticks at 117.80; June Gilts -12 ticks at 111.56

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