Barchart Morning Call
Overnight Developments
Global Financial Calendar
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- Global stocks are mostly higher with the European Euro Stoxx 50 up +1.46% and Sep S&Ps up +8.30 points at a 3-week high. The dollar is weaker and most commodities are higher amid speculation that Greek lawmakers will pass austerity measures later today to avoid default. The euro rose against the dollar and the yield on Greece's 10-year bond slipped 11 bp. Mining companies and raw-material producers are higher as metals gained and Allianz, Europe's biggest insurer, rose 3.3% after the stock was upgraded to "overweight" from "equal weight" at Morgan Stanley. Limiting gains in European stocks was the -0.4 decline in Jun Euro-Zone economic confidence to an 8-month low of 105.1, slightly stronger than expectations of -0.5 to 105.0. ECB Executive members Stark told Germany?s Zeit newspaper that a restructuring of Greek debt would lead to a collapse of the country?s economy and damage the EU's reputation and may prompt investors to question the creditworthiness of other Euro-Zone countries.
- The Asian stock markets today closed mostly higher with Japan up +1.54%, Hong Kong unchanged, China -1.37%, Taiwan +1.11%, Australia +1.23%, Singapore +0.95%, South Korea +1.55%, India +1.09%. Japan's Nikkei 225 Stock Index rallied to a 7-week high as bank stocks rallied and exporters gained as concern over the Greek debt crisis ebbs. May Japan industrial production surged +5.7% m/m, stronger than expectations of +5.5% m/m and the biggest increase since 1953, a sign that the economy is recovering from the March quake crisis. Chinese stocks closed lower, led by declines in bank stocks, on speculation some local governments may default on their bank loans. The Hong Kong Economic Journal reported the investment company in Shanghai for property and highway construction may not be able to repay current loans from this month and has asked for an extension.
- September S&Ps this morning are trading up +8.30 points at a 3-week high. The US stock market yesterday moved higher on speculation European nations will take action to prevent a Greek default along with strength in energy producers as crude oil rallied: Dow Jones +1.21%, S&P 500 +1.29%, Nasdaq Composite +1.53%. The Nasdaq posted a 3-week high. Bullish factors included (1) reduced Greek default concerns after Bloomberg News reported that Germany's biggest banks and insurers will meet with the German Finance Ministry on Wed to reach an agreement on their contribution to a Greek aid package, (2) a rally in energy producers as crude oil rose, (3) the stronger-than-expected Jun Richmond Fed manufacturing Index (+9 to 3 versus expectations of +3 to -3), and (4) comments from Dallas Fed President Fisher who said he sees "much stronger" growth in the 2nd half of this year as falling energy prices may spur growth up to 4%.
- Bearish factors for stocks included (1) the unexpected decline in Jun US consumer confidence which fell to a 7-month low (-3.2 to 58.5 versus expectations of +0.2 to 61.0), the Apr S&P CaseShiller composite-20 home price index which fell an as-expected -4.0% y/y, the biggest annual decline in 17 months, which indicates the US housing crisis has yet to bottom, and (3) the statement from Fitch Ratings who said a "voluntary rollover" of Greek bonds, as they mature, into bonds with similar terms would "very likely" be viewed by Fitch as a sovereign default, which may hinder German and French plans to rollover Greek's debt.
- Citigroup (C) rose 1.2% in European trading after BofA Merril Lynch upgraded the stock to "buy" from "neutral."
- September 10-year T-notes this morning are down -10.5 ticks. T-note prices yesterday moved lower on reduced concern Europe's sovereign-debt crisis will undermine the global economy and they extended their losses in the afternoon due to tepid demand for the Treasury's $35 billion 5-year T-note auction: TYU11 -1-2.5, FVU11 -24.5, EDZ11 unchanged. Bearish factors included (1) reduced safe-haven demand for Treasuries on optimism that Greece's parliament will approve austerity measures to help it avert a default, (2) comments from Dallas Fed President Fisher who said he sees "much stronger" US growth in the 2nd half of this year as falling energy prices may accelerate growth to 4%, (3) slack demand for the Treasury's $35 billion auction of 5-year T-notes that had a bid-to-cover ratio of 2.59, below the 12-auction average of 2.83, and (4) supply pressures ahead of the Treasury's $29 billion auction of 7-year T-notes on Wed. Bullish factors included (1) the unexpected decline in Jun US consumer confidence which fell to a 7-month low (-3.2 to 58.5 versus expectations of +0.2 to 61.0), and (2) the Fed's purchase of $4.62 billion of Treasuries as part of its QE2 asset-purchase program.
- The dollar index this morning is weaker with the dollar/yen -0.90 yen and the euro/dollar +0.59 cents. The dollar index yesterday erased an early rally and closed lower on hawkish comments from ECB President Trichet along with speculation that Greece's parliament will pass austerity measures needed to ensure more financial aid: Dollar Index -0.365, USDJPY +0.234, EURUSD +0.00837. Bearish factors included (1) hawkish comments from ECB President Trichet who said policy makers are in "strong vigilance mode," which signals they intend to raise interest rates at next week's ECB policy meeting, (2) optimism that Greek lawmakers will pass austerity measures needed to ensure future aid from the EU and IMF to avoid a default, (3) the unexpected decline in US Jun consumer confidence along with the unexpected increase in Jul German GfK consumer confidence, and (4) reduced safe-haven demand for the dollar as the stock market rallied. Bullish factors included (1) comments from ECB Executive Board member Stark who said the international community may not finance Greece further after July if its austerity plan isn't implemented, and (2) the euro negative statement from Fitch Ratings that a "voluntary rollover" of Greek bonds, as they mature, into bonds with similar terms would "very likely" be viewed by Fitch as a sovereign default.
- Aug crude oil prices this morning are trading up +$1.17 a barrel and Aug gasoline is +4.29 cents per gallon. Crude oil and gasoline prices yesterday moved higher as the dollar fell along with speculation that US fuel demand will rise before the Fourth of July holiday: CLQ11 +$2.28, RBQ11 +7.12. Bullish factors included (1) the weaker dollar, which encourages investment demand in commodities, (2) optimism for increased US gasoline demand ahead of the US Independence Day weekend, a typically strong fuel consumption period for US motorists, and (3) the outlook for US crude supplies to decline when the DOE releases its inventory figures on Wed. Bearish factors included (1) the statement from the director of the IEA that he's "confident" that Saudi Arabia will boost its crude output, and (2) the unexpected decline in Jun US consumer confidence which fell to a 7-month low and is negative for fuel demand and consumption. Expectations for Wednesday's weekly inventories from the DOE are for crude oil stockpiles to fall -1.5 million bbl, gasoline supplies to increase +775,000 bbl, distillate inventories to rise +1.05 million bbl and the refinery capacity rate to remain unchanged at a 10-month high of 89.2%.
Global Financial Calendar
| Wednesday 6/29/11 | |
|---|---|
| United States | |
| 0700 ET | Weekly MBA mortgage applications, last market index -5.9% with purchase mortgage sub-index -2.8% and refinancing sub-index -7.2%. |
| 1000 ET | May pending homes sales expected +3.0% m/m, Apr -11.6% m/m and -26.8% y/y. |
| 1200 ET | Fed Governor Sarah Raskin speaks on ?Economic Inclusion? at the New America Foundation Forum. |
| 1300 ET | Treasury auctions $29 billion 7-year T-notes. |
| France | |
| 0130 ET | Revised Q1 French GDP, previous +1.0% q/q and +2.2% y/y. |
| United Kingdom | |
| 0430 ET | May UK net consumer credit expected +0.4 billion pounds, Apr +0.5 billion pounds. |
| 0430 ET | May UK mortgage approvals expected 46,300, Apr 45,200. |
| 0430 ET | May UK M4 money supply, Apr +0.1% m/m and -0.9% y/y. |
| 1901 ET | Jun UK GfK consumer confidence survey expected -3 to -24, May +10 to -21. |
| Euro-Zone | |
| 0500 ET | Jun Euro-Zone business climate indicator expected -0.09 to 0.90, May -0.29 to 0.99. |
| 0500 ET | Jun Euro-Zone economic confidence expected -0.5 to 105.0, May -0.6 to 105.5. |
| Canada | |
| 0700 ET | May Canada CPI expected +0.3% m/m and +3.3% y/y, Apr +0.3% m/m and +3.3% y/y. |
| 0700 ET | May Bank of Canada core CPI expected +0.2% m/m and +1.5% y/y, Apr +0.2% m/m and +1.6% y/y. |
| 0900 ET | Apr Canada Teranet/National Bank house price index, Mar +0.6% m/m and +4.1% y/y. |
| Japan | |
| 1915 ET | Jun Japan Markit/JMMA manufacturing PMI, May +5.6 to 51.3. |
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