Barchart Morning Call
Overnight Developments
Global Financial Calendar
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- Global stocks this morning are up sharply with the Euro Stoxx 50 up +2.68% and Dec S&Ps up +32.30 points. The dollar and Treasuries are sharply lower and commodities rose, with crude oil back up over $100 a barrel at a 1-week high, after U.S. retail sales during the Thanksgiving weekend increased +16% to a record $52.4 billion, according to National Retail Federation data. The euro rallied and credit default swaps to insure the debts of European nations fell after Italian Prime Minister Monti said he will propose more austerity measures this week to balance the country's budget by 2013, while the German newspaper Welt am Sonntag reported that German Chancellor Merkel and French President Sarkozy are discussing an agreement under which member states will commit to tighter budget discipline without waiting for treaty changes. An unexpected increase in German consumer confidence also boosted stocks after the Dec German GfK consumer confidence survey rose +0.2 to 5.6, stronger than expectations of -0.2 to 5.1 and its best level in 6 months. Undercutting the euro and stocks was the warning from Moody's Investors Service that the "rapid escalation" of the crisis threatens all of the region's sovereign ratings, along with the action by the OECD to cut its 2011 GDP forecast for its 34-member countries to 1.9% from 2.3% predicted in May and the cut to its 2012 GDP forecast to 1.6% from 2.8%, saying "the euro-area crisis represents the key risk to the world economy."
- Asian stocks today closed stronger with Japan up +1.56%, China +0.13%, Australia +1.85%, South Korea +2.41%, India +3.01%. Asian stocks advanced as exporters gained on the prospects for increased earnings after Black Friday retail sales in the U.S. rose to a record, while shipping companies rose on bargain hunting after the sector had plunged over the past month. Stocks in China came off of their best levels after a report from the OECD warned that property risks are "overshadowing" China's economic outlook as a slowdown in sales threatens to trigger developer collapses. The OECD also warned that Japan risks seeing a spike in government bond yields unless it controls a debt load set to approach 230% of GDP in 2013.
- December S&Ps this morning are trading up sharply by +32.30 points. The US stock market last Friday was whipsawed lower and higher on several European debt headlines and finally finished lower after a report from Reuters said Greece is demanding private investors accept larger losses on their holdings of Greek debt: Dow Jones -0.23%, S&P 500 -0.27%, Nasdaq Composite -0.75%. The S&P 500, the Dow and the Nasdaq all posted 1-1/2 month lows. Bearish factors included (1) concern eh European debt crisis is worsening after Italian borrowing costs rose to a 14-year high and credit default swaps to insure European government debt rose to a record, (2) the action by Fitch Ratings to cut Portugal's credit rating to junk, the action by Moody's Investors Service to downgrade Hungary's credit rating to junk, and Standard & Poor's cut to Belgium's credit rating by one step to AA with a negative outlook, (3) weakness in bank stocks after the Financial Times reported the European Financial Stability Facility may fail to raise enough funds to increase its capacity to more than 1 trillion euros as planned because of deterioration in market conditions over the past month, and (4) a report from Reuters that Greece is demanding new bonds issued to investors as part of a debt swap have a net present value of 25%, lower than the "high 40s the banks have in mind."
- Bullish factors included (1) a Reuters report that cited EU officials saying Euro-Zone nations are considering dropping private-sector involvement from their permanent bailout fund, which bolstered speculation European leaders will have an easier time implementing further bailouts and (2) speculation European leaders will do more to stem the region's debt crisis after Italian Prime Minister Monti said that German Chancellor Merkel and French President Sarkozy "confirmed their support for Italy."
- JPMorgan Chase (JPM) rose 3.1% and Bank of America (BAC) jumped 4.8% in pre-market trading on carry-over support from a rally in European banking stocks.
- December 10-year T-notes this morning are down -25.5 ticks. T-note prices last Friday retreated on carry-over weakness from a fall in German bunds along with reduced safe-haven demand after European officials said they are considering dropping private-sector involvement from their permanent bailout fund: TYZ11 -18, FVZ11 -7.0, EDH12 unchanged. Bearish factors included (1) carry-over weakness from a slide in German bunds to a 3-1/4 month low and (2) reduced safe-haven demand for Treasuries after a Reuters report cited EU officials saying Euro-Zone nations are considering dropping private-sector involvement from their permanent bailout fund, which fueled speculation European leaders will have an easier time implementing further bailouts. Bullish factors included (1) increased safe-haven demand for Treasuries on concern the European debt crisis is worsening after credit default swaps to insure European government debt rose to a record and EU Economic Monetary Affairs Commissioner Rehn said it looks like contagion is spreading to core countries and (2) increased safe-haven demand for Treasuries after Fitch Ratings cut Portugal's credit rating to junk and Moody's Investors Service downgraded Hungary's credit rating to junk.
- The dollar index this morning is weaker with the dollar/yen +0.01 yen and the euro/dollar +1.26 cents. The dollar index last Friday posted a 1-1/2 month high and settled higher on signs the European sovereign-debt crisis has worsened after Italy's borrowing costs rose to a 14-year high and as French consumer confidence fell more-than-expected to a 2-3/4 year low: Dollar Index +0.545, USDJPY +0.628, EURUSD -0.01143. Bullish factors for the dollar included, (1) the slump in the euro to a 1-1/2 month low against the dollar on concern Europe's debt crisis is worsening after credit default swaps to insure European government debt rose to yet another record high and Italy's borrowing costs soared after it sold 8 billion euros of 6-month bills at a rate of 6.504%, a 14-year high, (2) comments from EU Economic Monetary Affairs Commissioner Rehn who said it looks like contagion is spreading to core countries, (3) euro negative comments from ECB Council member Coene who said an additional interest rate cut by the ECB is probable if current trends continue, (4) the action by Fitch Ratings to cut Portugal's credit rating to junk along with the action by Moody's Investors Service to downgrade Hungary's credit rating to junk, (5) the bigger-than-expected decline in the Nov French consumer confidence indicator to a 2-3/4 year low, which is euro negative, and (6) the fall in the yen to a 2-week low against the dollar after Standard & Poor's said Japan hasn't made progress in tackling its public debt burden, a sign the ratings company may be preparing to downgrade Japan's sovereign debt. Bearish factors included (1) reduced safe-haven demand for the dollar as stocks rallied after Italian Prime Minister Monti said that German Chancellor Merkel and French President Sarkozy "confirmed their support for Italy," and (2) a report from Reuters that cited European officials who said there may be changes to the European Stability Mechanism due to come into force in 2013 that would eliminate the clause on private-sector involvement in future bailouts, which is euro supportive as it should make it easier for European leaders to pass additional bailout measures.
- Jan crude oil prices this morning are up +$2.99 a barrel at a 1-week high and Jan gasoline is +7.41 cents per gallon. Crude oil and gasoline prices last Friday gyrated betweens gains and losses and finally settled mixed as speculation European leaders will do more to stem the region's debt crisis offset strength in the dollar: CLF12 +$0.60, RBF12 -6.63. Jan crude posted a 2-week low but erased its losses and finished higher. Bearish factors included (1) the rally in the dollar index to a 1-1/2 month high, which reduces investment demand in commodities, (2) concern the European debt crisis will worsen after credit default swaps to insure European government debt rose to a record, and (3) comments from EU Economic Monetary Affairs Commissioner Rehn who said it looks like contagion is spreading to core countries, which could further hamper European fuel demand. Bullish factors included (1) a rally in stock prices, which bolsters confidence in the economic outlook and energy demand, on speculation European leaders will do more resolve the debt crisis after Italian Prime Minister Monti said that German Chancellor Merkel and French President Sarkozy "confirmed their support for Italy," and (2) an increase in geopolitical risks after France called for a European embargo on crude supplies from Iran over objection to Iran's nuclear program.
Global Financial Calendar
| Monday 11/28/11 | |
|---|---|
| United States | |
| 1000 ET | Oct new home sales expected -1.0% to 310,000, Sep +5.7% to 313,000. |
| 1130 ET | Weekly 3-mo and 6-mo T-bill auctions. |
| EUR | 0400 ET |
| 0500 ET | OECD releases its economic outlook for Nov. |
| United Kingdom | |
| 0600 ET | Nov U.K. CBI reported sales expected -12, Oct -11. |
| Germany | |
| 0700 ET | Dec German GfK consumer confidence survey expected -0.2 to 5.1, Nov +0.1 to 5.3. |
| n/a | Nov German CPI (EU harmonized) expected -0.1% m/m and +2.7% y/y, Oct +0.1% m/m and +2.9% y/y. |
| France | |
| 1200 ET | Oct French jobseekers-net change expected +13,000, Sep +26,000. Oct total jobseekers expected 2,796,500, Sep 2.780,500. |
| Japan | |
| 1830 ET | Oct Japan jobless rate expected +0.1 to 4.2%, Sep -0.2 to 4.1%, Oct job-to-applicant ratio expected 0.68, Sep 0.67. |
| 1830 ET | Oct Japan overall household spending expected -1.5% y/y, Sep -1.9% y/y. |
| 1850 ET | Oct Japan retail trade expected +0.6% m/m and +0.7% y/y, Sep -1.4% m/m and -1.1% y/y. |
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