Barchart Morning Call
Overnight Developments
Global Financial Calendar
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- Global stocks this morning are lower with the Euro Stoxx 50 down -1.02% and Dec S&Ps down -3.40 points. Commodities fell and the dollar gained after China's economy grew at the slowest pace in 2 years and after the Oct German ZEW economic sentiment survey fell -5.0 to -48.3, more than expected and its lowest level in nearly 3 years. The euro weakened and BNP Paribas SA and Societe Generale, France's biggest banks, tumbled more than 5% after Moody's Investors Service warned that France's Aaa credit rating is under pressure from deterioration in debt metrics and the potential for additional liabilities from Europe's debt crisis. The extra yield investors demand to hold French 10-year bonds instead of benchmark German bunds widened over 100 bp for the first time since the introduction of the euro in 1999. Treasuries rallied as stocks weakened and after Chicago Fed President Evans late yesterday said the U.S. faces "massive shortfalls" in output and job creation and reiterated his proposal to keep the Fed funds rate near zero until either the unemployment rate falls below 7% or the medium-term inflation outlook rises above 3%. U.S. stock futures were also under cut as IBM fell 4% in European trading after the company reported late yesterday Q3 sales of $26.2 billion, below analysts' estimates of $26.3 billion.
- Asian stocks today closed weaker with Japan down -1.55%, China -2.80%, Australia -2.07%, South Korea -1.48%, Inida -1.63%. China's economy grew at a +9.1% y/y pace in Q3, weaker than the +9.3% y/y expected and the slowest pace of growth since 2009 amid tighter credit and slower demand from Europe. Asian banks declined after German Chancellor Merkel dampened speculation of a quick resolution to the European debt crisis, while Japanese consumer-electronics makers closed lower after Goldman Sachs cut ratings and price targets on concern a strong yen and falling prices for televisions will hurt earnings. Asian mining companies and energy and raw-material producers also fell on demand concerns, while Chinese steel producers tumbled as steel prices in China dropped to their lowest level in 10 months amid the slowing economy.
- December S&Ps this morning are trading down -3.40 points. The US stock market yesterday slumped after Germany dampened optimism of a quick fix to the European debt crisis and bank stocks tumbled after Wells Fargo reported disappointing Q2 revenue results: Dow Jones -2.13%, S&P 500 -1.94%, Nasdaq Composite -1.98%. Bearish factors included (1) carry-over weakness from a slide in European stocks after comments from German Chancellor Merkel's chief spokesman that threw cold water on expectations for a quick resolution to the European sovereign debt crisis when he said that European leaders won't fulfill any "dreams" of a quick end to the European debt crisis at their Oct 23 summit, (2) the smaller-than-expected increase in the Oct Empire manufacturing index (+0.3 to -8.5 versus expectations of +4.8 to -4.0), (3) comments from ECB Council member Stark who said the consequences of Greece leaving the Euro-Zone would be "incalculable," and (4) the slump in bank stocks after Wells Fargo tumbled after it reported Q2 revenue of $19.6 billion, below estimates of $20.2 billion.
- Bullish factors included (1) increased M&A activity as El Paso surged after Kinder Morgan agreed to buy the company for $21.1 billion and (2) the Sep U.S. industrial production which rose +0.2% as-expected and the Sep capacity utilization which rose +0.1 and matched a 3-year high at 77.4%.
- International Business Machines (IBM) slipped 4.1% in European trading after the company reported late yesterday Q3 sales of $26.2 billion, below analysts' estimates of $26.3 billion.
- December 10-year T-notes this morning are up +10.5 ticks. T-note prices yesterday shed early losses and settled higher on weak U.S. manufacturing data along with increased safe-haven demand after stocks fell on concern Europe may take longer to contain its sovereign debt crisis: TYZ11 -10, FVZ11 +0.7, EDH12 +1.5. Bullish factors included (1) the smaller-than-expected increase in the Oct Empire manufacturing index (+0.3 to -8.5 versus expectations of +4.8 to -4.0) and (2) increased safe-haven demand for Treasuries as equity markets tumbled when Germany threw cold water on expectations for a quick resolution to the European sovereign debt crisis after Chancellor Merkel?s spokesman said that European leaders won't fulfill any "dreams" of a quick end to the European debt crisis at their Oct 23 summit. Bearish factors included (1) the Sep U.S. industrial production which rose as-expected +0.2% and the Sep capacity utilization which rose +0.1 and matched a 3-year high at 77.4% and (2) reduced foreign demand for Treasuries after Fed data showed that its holdings of U.S. government debt on behalf of foreign central banks and institutions fell -$76.5 billion in the last 7 weeks, the most in 4 years.
- The dollar index this morning is stronger with the dollar/yen -0.13 yen and the euro/dollar -0.55 cents. The dollar index yesterday rebounded from a 1-month low and settled higher on increased safe-safe haven demand after the euro and equity markets tumbled when Germany expressed doubts about a quick resolution to the European debt crisis: Dollar Index +0.523, USDJPY -0.379, EURUSD -0.01433. Bullish factors included (1) euro weakness after German Chancellor Merkel's chief spokesman said that European leaders won't fulfill any "dreams" of a quick end to the European debt crisis at their Oct 23 summit, (2) the statement from the German Institute for Economic Research that said enlarging the EFSF may lead to France "losing its top AAA rating," (3) comments from ECB Council member Stark who said the consequences of Greece leaving the Euro-Zone would be "incalculable," and (4) increased safe-haven demand for the dollar as equity markets slid and after Canadian Finance Minister Flaherty said "time is running out" for European leaders to solve the debt crisis that has begun to spread as Europe risks a banking crisis if it doesn't dedicate more funding or an "adequate restructuring" of Greek debt. Bearish factors included (1) the weaker than expected Oct Empire manufacturing index, which indicates economic weakness and is dollar negative and (2) the action by G-20 leaders meeting in Paris over the weekend to endorse parts of plan to bolster banks and avoid a Greek default which temporarily boosted stocks and reduced safe-haven demand for the dollar in early trade.
- Nov crude oil prices this morning are down -22 cents a barrel and Nov gasoline is -1.96 cents per gallon. Crude oil and gasoline prices yesterday fell back from an early rally and closed lower after Germany dampened optimism for a quick fix to the European debt crisis and after manufacturing data in the New York region contracted more than expected: CLX11 -$0.42, RBX11 -8.18. Nov crude posted a 1-month high and Nov gasoline climbed to a 1-1/4 month high before both contracts shed their gains and closed lower. Bearish factors included (1) a reversal in the dollar after the dollar index rebounded from a 1-month low and settled higher, which reduced investment demand for commodities, (2) comments from German Chancellor Merkel's chief spokesman who said expectations that the European debt crisis will be resolved at the Oct 23 summit were "dreams," and (3) the larger-than-expected contraction in the Oct Empire manufacturing index, which signals reduced energy demand. Bullish factors included (1) early optimism that G-20 leaders would come up with a plan avoid a Greek default and bolster European banks and (2) speculation that Chinese energy demand will remain strong on optimism Q3 China GDP, to be released late Monday, will show China's economy expanding above +9.0% y/y for the ninth straight quarter.
Global Financial Calendar
| Tuesday 10/18/11 | |
|---|---|
| United States | |
| 0745 ET | ICSC (Int?l Council of Shopping Centers) weekly retailer sales. |
| 0815 ET | Boston Fed President Eric Rosengren delivers opening remarks at the Boston Federal Reserve Conference titled ?Long-Term Effects of the Great Recession.?. |
| 0830 ET | Sep PPI expected +0.2% m/m and +6.4% y/y, Aug unchanged m/m and +6.5% y/y. Sep PPI ex food & energy expected +0.1% m/m and +2.4% y/y, Aug +0.1% m/m and +2.5% y/y. |
| 0855 ET | Redbook weekly retailer sales. |
| 0900 ET | Aug net long-term TIC flows expected -$20.0 billion, Jul +$9.5 billion. |
| 1000 ET | Oct NAHB housing market index expected +1 to 15, Sep -1 to 14. |
| 1130 ET | Weekly 4-week and monthly 1-year T-bill auctions. |
| 1315 ET | Fed Chairman Ben Bernanke speaks at the Boston Federal Reserve Conference. |
| 1830 ET | Atlanta Fed President Dennis Lockhart speaks on the economic outlook in Chattanooga, TN. |
| Japan | |
| 0130 ET | Sep Japan nationwide department store sales, Aug -1.7% y/y. |
| 0200 ET | Revised Sep Japan machine tool orders, previous +20.3% y/y. |
| United Kingdom | |
| 0430 ET | Sep U.K. CPI expected +0.4% m/m and +4.9% y/y, Aug +0.6% m/m and +4.5% y/y. |
| 0430 ET | Sep U.K. core CPI expected +3.2% y/y, Aug +3.1% y/y. |
| 0430 ET | Sep U.K. RPI expected +0.5% m/m and +5.4% y/y, Aug +0.6% m/m and +5.2% y/y. |
| 0430 ET | Sep U.K.RPI ex-mortgage interest payments expected +5.5% y/y, Aug +5.3% y/y. |
| Germany | |
| 0500 ET | Oct German ZEW economic sentiment survey expected -1.7 to -45.0, Sep -5.7 to -43.3. Oct ZEW current situation survey expected -3.6 to 40.0, Sep -9.9 to 43.6. |
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