Barchart Morning Call
Overnight Developments
Global Financial Calendar
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- Global stocks are mixed with the European Euro Stoxx 50 down -1.00% at a 2-1/3 year low and Sep S&Ps up +14.50 points, as they rebounded from an 11-month low posted in the overnight Globex session. The dollar is weaker and Treasuries retreated from a 2-1/2 year high ahead of today's FOMC meeting. Commodities are mixed as crude oil slid to a 10-1/2 month low after OPEC cut its global demand forecasts and gold prices posted yet another nearest-futures record high of $1,779.00 an ounce. The euro gained against the dollar after the ECB bought Spanish and Italian government bonds for a second day and ECB Council member Nowotny said there is "fear" that the global economy could enter a downturn again and that the current situation had "parallels" to the period after Lehman Brothers collapsed with banks parking funds at central banks. Helping to keep European stocks in negative territory was the larger-than-expected -1.2% decline in Jun German exports along with the unexpected stagnation in Jun UK industrial production which was unchanged m/m, weaker than expectations of +0.4% m/m.
- The Asian stock markets today closed mixed with Japan down -1.68%, China +0.15%, Australia +1.22%, South Korea -3.68%, India -0.78%. Asian markets tumbled as they followed US and European markets lower on concern a slowing global economy will limit demand for Asian exports. Australian stocks reversed losses and closed higher on speculation the Fed will announce measures to support markets and after other Asian markets rebounded from their worst levels. South Korea's Kospi Stock Index pared a 9.9% decline after the Korea Teachers Pension, South Korea's second-largest pension fund, said it bought Korean stocks during recent market sell-offs and plans to buy more if prices fall further. China's Shanghai Stock Index fell to a 1-year low after Jul China CPI rose +6.5% y/y, stronger than expectations of +6.4% y/y and the fastest pace of increase in 3 years, which may limit any Chinese policy response to support growth. Jul China industrial production rose +14.0% y/y, weaker than expectations of +14.6% and Jul China retail sales rose +17.0% y/y, also weaker than expectations of +17.7% y/y.
- September S&Ps this morning are trading up +14.50 points in extremely volatile trade as they rebound from an 11-month low posted earlier in overnight trade. The US stock market plunged yesterday and settled with enormous losses after the action by Standard & Poor's to cut the credit rating of the US fueled concern the US economic slowdown may worsen: Dow Jones -5.55%, S&P 500 -6.66%, Nasdaq Composite -6.90%. The S&P 500 fell to a 10-1/2 month low, the Dow sank to a 10-month low, and the Nasdaq slipped to a 9-1/2 month low. Bearish factors included (1) the action by Standard & Poor's to cut the AAA credit rating of the US one level to AA+ and to keep its outlook on US debt "negative," (2) weakness in bank and financial stocks after S&P also cut the credit ratings on Fannie Mae, Freddie Mac, and other lenders with a "direct reliance on the US government," which spurred concern over the ripple effects of the loss of America's AAA rating, (3) the sell-off in raw material and energy producers on concern the cut in the US credit rating will dampen the global economy and erode demand for commodities, and (4) the action by Goldman Sachs to cut its 2011 target for the S&P 500 to 1,400 from a previous forecast of 1,450 saying "uncertainty and fear trump fundamentals and valuations."
- Bullish factors included (1) the statement from the G-7 that said it will "take all necessary measures to support financial stability and growth," (2) the action by the ECB to purchase Italian and Spanish government bonds, which may stem the contagion of the European sovereign-debt crisis, and (3) a rally in gold producers and mining stocks after the price of gold surged to a record high.
- September 10-year T-notes this morning are trading down -5.5 ticks. T-note prices yesterday rallied sharply due to strong safe-haven demand after global equity markets plunged following S&P's decision to cut the long-term credit rating of the US: TYU11 +1-17/32, FVU11 +20.2, EDZ11 -7.5. Sep T-notes posted a 2-1/2 year nearest-futures high and the yield on the 10-year T-note fell to a 2-1/2 year low of 2.324%. Bullish factors included (1) increased safe-haven demand for Treasuries as global stock markets plunged after Standard & Poor's cut the AAA credit rating on America's debt one level to AA+ and kept its outlook at "negative," (2) the statement from Japanese Finance Minister Noda who said that US Treasuries were "attractive," and (3) that statement from Moody's Investors Service that said it reaffirms its top AAA credit rating for the US because "the dollar's status as the main reserve currency allows it to support higher debt levels than other countries," which may signal Moody's will not cut the credit rating of the US anytime soon. Bearish factors included (1) reduced safe-haven demand for Treasuries after the ECB purchased Italian and Spanish government bonds to stem the contagion of the European debt crisis and (2) supply pressures ahead of the Treasury's $32 billion auction of 3-year T-notes on Tue.
- The dollar index this morning is lower with the dollar/yen -0.68 yen and the euro/dollar +0.91 cents. The dollar index yesterday shook off early losses from the downgrade of US sovereign debt by Standard & Poor's and closed higher as global stock markets plunged, which fueled safe-haven buying of the dollar and after Moody's Investors Service reiterated its top AAA credit rating for the US because of the dollar's role as a reserve currency: Dollar Index +0.193, USDJPY -0.667, EURUSD -0.01029. Bullish factors included (1) the plunge in global equity markets, which fueled safe haven demand for the dollar, (2) the statement from Moody's Investors Service that it reaffirms its top AAA credit rating for the US because "the dollar's status as the main reserve currency allows it to support higher debt levels than other countries," and (3) the larger-than-expected decline in the Aug Euro-Zone investor confidence to a 22-month low, which is euro negative. Bearish factors included (1) strength in the yen and the Swiss franc which rose to a record against the dollar after S&P's cut of the US credit rating prompted strong safe-haven demand for the Japanese and Swiss currencies and (2) reduced safe-haven demand for the dollar after the statement from the G-7 that it will "take all necessary measures to support financial stability and growth."
- Sep crude oil prices this morning are down -$1.09 a barrel at a 10-1/2 month low and Sep gasoline is +0.37 of a cent per gallon. Crude prices were undercut in overnight trade on global equity market weakness and OPEC's action to cut its global oil demand forecast. Sep crude oil and gasoline prices yesterday tumbled after S&P's action to downgrade the US credit rating fueled a broad-based commodity sell off: CLU11 -$5.57, RBU11 -11.32. Sep crude sank to an 8-1/2 month low. Bullish factors included (1) a reversal in the dollar after the dollar index shook off early losses and closed higher, which reduces the investment demand for commodities, (2) a broad-based sell-off in most commodities after Standard & Poor's downgraded the credit rating of the US for the first time, and (3) the slump in global equity markets, which dampened confidence in the economic outlook and energy demand. Bullish factors included (1) the statement from the G-7 that said it will "take all necessary measures to support financial stability and growth" and (2) data from the IEA that shows that Saudi Arabia may use a record 1.2 million barrels a day this summer to generate electricity for domestic use which will cut the country's oil surplus oil capacity by 33% this year to 2.3 million barrels a day, the lowest in 2-1/2 years.
Global Financial Calendar
| Tuesday 8/9/11 | |
|---|---|
| United States | |
| 0745 ET | ICSC (Int?l Council of Shopping Centers) weekly retailer sales. |
| 0830 ET | Q2 nonfarm productivity expected -0.8%, Q1 +1.8%. Q2 unit labor costs expected +2.3%, Q1 +0.7%. |
| 0855 ET | Redbook weekly retailer sales. |
| 0900 ET | FOMC begins 1-day monetary policy meeting, |
| 1000 ET | Aug IBD/TIPP economic optimism, Jul -3.2 to 41.4. |
| 1130 ET | Weekly 4-week T-bill auction. |
| 1300 ET | Treasury auctions $32 billion 3-year T-notes. |
| 1415 ET | FOMC announces interest rate decision (expected no change to the 0.00% to 0.25% Fed funds rate). |
| Japan | |
| 0100 ET | Jul Japan consumer confidence expected +1.7 to 37.0, Jun +1.1 to 35.3. |
| 0200 ET | Preliminary Jul Japan machine tool orders, Jun +53.5% y/y. |
| 1950 ET | Jun Japan tertiary industry index expected +1.0% m/m, May +0.9% m/m. |
| 1950 ET | Jul Japan domestic CGPI expected unchanged m/m and +2.6% y/y, May -0.1% m/m and +2.5% y/y. |
| Germany | |
| 0200 ET | Jun German trade balance expected +14.0 billion euros, May +14.8 billion euros. Jun exports expected -1.0% m/m, May +4.4% m/m. Jun imports expected -1.5% m/m, May +3.8% m/m. |
| United Kingdom | |
| 0430 ET | Jun UK industrial production expected +0.4% m/m and +0.2% y/y, May +0.9% m/m and -0.8% y/y. |
| 0430 ET | Jun UK manufacturing production expected +0.2% m/m and +2.8% y/y, May +1.8% m/m and +2.8% y/y. |
| Canada | |
| 0815 ET | Jul Canada housing starts expected +193,200, Jun +200,800. |
| CHI | |
| 2200 ET | Jul China trade balance expected +$27.4 billion, Jun +$22.27 billion. Jul exports expected +17.0% y/y, Jun +17.9% y/y. Jul imports expected +22.0% y/y, Jun +19.3% y/y. |
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