Barchart Morning Call
Overnight Developments
Global Financial Calendar
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- Global stocks this morning are weaker with the Euro Stoxx 50 down -0.85% and Dec S&Ps down -11.00 points. The dollar and Treasuries rose while commodities declined on concern that European leaders will struggle to raise funds to contain the region's debt crisis. The euro fell and credit default swaps to insure European government debt rose after the yield on Italian 5-year notes surged 17 bp to 5.92%, the highest in 14 years. The euro also weakened after the Xinhau news agency reported that China can't play the role of "savior" in Europe's debt crisis. European banks led stock losses with BNP Paribas SA, Societe Generale SA and Credit Agricole SA all dropping more than 5%. Stock prices remained under pressure after the Oct Euro-Zone CPI estimate unexpectedly remained at a 3-year high of 3% and after the Sep Euro-Zone unemployment rate unexpectedly increased +0.1 to match a 13-year high of 10.2%. European debt concerns seemed to have affected Sep German retail sales which rose +0.4% m/m and +0.3% y/y, weaker than expectations of +1.0% m/m and +1.6% y/y. The OECD urged G-20 governments and central banks to "act decisively" to restore confidence as it cut its growth estimates for the U.S. economy to 1.7% this year and 1.8% next year from a May projection of 2.6% and 3.1% this year and next. The OECD also lowered its Euro-Zone GDP estimates to 1.6% in 2011 and +0.3% in 2012 from a previous estimate of 2.0% for each year.
- Asian stocks today closed lower with Japan down -0.69%, China -0.51%, Australia -1.27%, SOuth Korea -1.03%, India -0.56%. The yen plunged to a 2-3/4 month low against the dollar after Japan intervened in the currency market for the third time this year in a unilateral intervention. Japanese Finance Minister Azumi said the move was carried out to combat "one-sided speculative moves that don't reflect the economic fundamentals of our economy." Japan had sold 4.51 trillion yen in Aug to combat the yen's strength, the largest monthly amount since Mar 2004. Chinese stocks closed lower, led by losses in producers of property materials and property developers, after Premier Wen Jiabao said the government should "firmly" maintain property curbs.
- December S&Ps this morning are trading down by -11.00 points. The US stock market last Friday traded in the red most of the day and settled mixed as concern EU leaders haven't done enough to stem the region's debt crisis offset an increase in consumer confidence: Dow Jones +0.18%, S&P 500 +0.04%, Nasdaq Composite -0.05%. Bullish factors included (1) reduced labor costs with the smaller-than-expected increase in the Q3 U.S. employment cost index which posted its smallest gain in 10 months (+0.3% versus expectations of +0.6%), (2) the smaller-than-expected increase in the Sep PCE core deflator (unchanged m/m and +1.6% y/y versus expectations of +0.1% m/m and +1.7% y/y), (3) the as-expected +0.6% increase in Sep personal spending, which shows consumer spending remains relatively healthy, and (4) the larger-than-expected increase in the final Oct U.S. University of Michigan consumer confidence which climbed to a 3-month high (+3.4 to 60.9 versus expectations of +0.5 to 58.0).
- Bearish factors included (1) carry-over weakness from a slide in European stocks after weak demand for an Italian bond auction drove up 10-year Italian bond yields 15 bp, (2) the statement from Fitch Ratings that the European agreement on a 50% haircut on Greek bonds "would be viewed by the agency as a default event under its Distressed Debt Exchange criteria," and (3) the smaller-than-expected increase in Sep U.S. personal income, (+0.1% versus expectations of +0.3%), which may prompt a decline in consumer spending as income growth remains stagnant.
- Chevron (CVX) slipped 1.3% in pre-market trading as crude oil fell and after Bank of America cut the stock to "neutral" from "buy."
- December 10-year T-notes this morning are up +11.5 ticks as stocks slide. T-note prices last Friday settled higher on reduced price pressures along with an increase in safe-haven demand on concern European officials may need to take further steps to stem the region's debt crisis: TYZ11 +25, FVZ11 +12, EDH12 +3.0. Bullish factors included (1) the smaller-than-expected increase in the Q3 U.S. employment cost index which posted its smallest gain in 10 months (+0.3% versus expectations of +0.6%), (2) the smaller-than-expected increase in Sep U.S. personal income (+0.1% versus expectations of +0.3%), which may prompt a decline in consumer spending as income growth remains stagnant, (3) the smaller-than-expected increase in the Sep PCE core deflator (unchanged m/m and +1.6% y/y versus expectations of +0.1% m/m and +1.7% y/y), and (4) increased demand for Treasuries after Fitch Ratings said that part of the European plan to stem the region's debt crisis amounts to a Greek default. Bearish factors included (1) the as-expected +0.6% increase in Sep personal spending, which shows consumer spending remains relatively healthy and (2) the larger-than-expected increase in the final Oct U.S. University of Michigan consumer confidence which climbed to a 3-month high (+3.4 to 60.9 versus expectations of +0.5 to 58.0).
- The dollar index this morning is stronger with the dollar/yen +2.07 yen and the euro/dollar -1.40 cents. The yen plunged to a 2-3/4 month low against the dollar following Japan's intervention in the currency market to stem the yen's strength. The dollar index last Friday settled slightly higher as the euro weakened after an increase in Italian borrowing costs raised concern EU leaders haven't done enough to stem the region's debt crisis: Dollar Index +0.188, USDJPY -0.153, EURUSD -0.00416. Bullish factors included (1) a weaker-than-anticipated Italian bond auction after only 7.93 billion euros out of a maximum target of 8.5 billion-euros were purchased, (2) weaker-than-expected Sep French consumer spending, and (3) the weaker than expected Sep Japan industrial production, which is yen negative. A bearish factor was the weaker-than-expected Sep U.S. personal income, which may inhibit growth as weak income growth prompts consumers to cut back on spending.
- Dec crude oil prices this morning are doen -68 cents a barrel and Dec gasoline is -1.14 cents per gallon. Crude oil and gasoline prices last Friday settled lower on global economic growth concerns along with dollar strength: CLZ11 -$0.64, RBZ11 -5.98. Bearish factors included (1) the -4.0% m/m decline Sep Japan industrial pr0duction, nearly double the decline that was expected and an indication of weak energy demand in the world's third-largest oil consumer and (2) the stronger dollar, which diminishes investment demand for commodities. A bullish factor was the larger-than-expected increase in the final Oct U.S. University of Michigan consumer confidence, which may signal that consumer spending and fuel demand may be sustained.
Global Financial Calendar
| Monday 10/31/11 | |
|---|---|
| United States | |
| 0945 ET | Oct Chicago purchasing managers index expected -1.4 to 59.0, Sep +4.1 to 60.4. |
| 1130 ET | Weekly 3-mo and 6-mo T-bill auctions. |
| Japan | |
| 0100 ET | Sep Japan construction orders, Aug +9.3% y/y. |
| 0100 ET | Sep Japan housing starts expected +8.6% y/y to 906,000, Aug +14.0% y/y to 934,000. |
| 2130 ET | Sep Japan labor cash earnings expected -0.4% y/y, Aug -0.4% y/y. |
| Germany | |
| 0300 ET | Sep German retail sales expected +1.0% m/m and +1.6% y/y, Aug -2.7% m/m and +2.2% y/y. |
| France | |
| 0345 ET | Sep French producer prices expected +0.1% m/m and +6.1% y/y, Aug unchanged m/m and +6.3% y/y. |
| United Kingdom | |
| 0530 ET | Sep U.K. net consumer credit expected +0.4 billion pounds, Aug +0.5 billion pounds. |
| 0530 ET | Sep U.K. mortgage approvals expected +50,600, Aug +52,400. |
| 0530 ET | Sep U.K. M4 money supply, Aug -0.2% m/m and -0.5% y/y. |
| Euro-Zone | |
| 0600 ET | Oct Euro-Zone CPI estimate expected +2.9% y/y, Sep +3.0% y/y. |
| 0600 ET | Sep Euro-Zone unemployment rate expected unchanged at 10.0%, Aug unchanged at 10.0%, |
| Canada | |
| 0830 ET | Sep Canada industrial product prices expected +0.1% m/m, Aug +0.5% m/m. |
| 0830 ET | Sep Canada raw materials price index expected -1.9% m/m, Aug -3.2% m/m. |
| CHI | |
| 2100 ET | Oct China PMI manufacturing expected +0.6 to 51.8, Sep +0.3 to 51.2. |
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