- Traders returned to their desks this morning to find various asset classes breaking out of their August ranges, led by gold, which remains above the $1,000/oz level and has its sights set on the March 17, 2008 all-time high of $1,032/oz. Skyrocketing spot gold has pumped up the euro, helping EUR/USD break out of its August range to a new high on the year. US equity indices were also in the black, headed up as more normal volume levels return. Treasury yields are little changed from where they ended last week with the 10-year at 3.45%.


- Front-month NYMEX crude is back over $70 this morning as OPEC member prepare for their September conference in Vienna tomorrow. Indications are that the cartel will stress compliance instead of supply reduction and had no plans to alter current quotas. During the European session, OPEC President Vasconcelos said compliance with current quota is around 70% and pricing is in a "satisfactory range." Saudi Oil Minister Al-Naimi stated oil stockpiles are a bit too high and claimed Saudi Arabia is complying with OPEC cuts "as best we can," and was quoted as saying "with the price ranging between $68 and $73, what else do you want?" The Kuwaiti Oil Minister said he expects demand for crude to grow in Q1 and Q2 of 2010 and reiterated that OPEC is unlikely to change output quotas in Vienna.


- The healthcare reform debate is lurching toward a decisive turning point this week. Managed care names drifted lower from the open as investors reacted to the latest moves: yesterday news emerged from the Hill that Senate Finance Committee Chairman Max Baucus (D-MT) had finalized his reform proposal (the fifth and final healthcare proposal circulating in Congress). Baucus's plan, which some are calling last best hope for a bipartisan bill, would make up for healthcare funding shortfalls by taxing health insurance companies. AET, CI, UNH and WLP were down as much as 4% in the first hour of trading, before improving somewhat on takeover chatter in the sector.

- In other equity news, Cadbury's US ADRs are up nearly 40% after Kraft offered to acquire the UK firm for £10.2B. Cadbury's board rejected the offer, noting that it is confident in Cadbury's standalone strategy and growth prospects. Shares of Kraft are down 5%. Smithfield opened down 4% after another substantial quarterly loss, but then popped into positive territory in the first hour of trade.

- In currencies, the greenback maintained its soft tone but has come off its worst level in the New York session against the major pairs and commodity-related currencies as spot gold remained strong. EUR/USD moved above the alleged option barrier at 1.4450 to test 1.4500 just ahead of the NYMEX crude pit open. The dollar is just off its worst levels for the session but thus far there has been little evidence of any profit taking offers just yet. Dealers are citing solid funding demand and macro account interest as support for EUR/USD on the dips. Rumors that the Swiss Central Bank (SNB) was "checking rates" provided the dollar with a bit more momentum.

- In other currency news, Canadian building permit values fell more than the consensus in July, although USD/CAD was hovering around the 1.07 handle. The UK Aug GDP estimate registered a positive 0.2% reading, first positive MoM reading since May 2008. With USD weakness so broad-based, there has been plenty of dealer chatter circulating that the USD is becoming a carry trade financing currency, adding a new dimension to trading and a better explanation for why the USD falls on so-called "good news." One currency dealer backs up this argument noting that the USD LIBOR rates having fallen below EUR/JPY interest rates.

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