- Global stocks this morning are mixed with the Euro Stoxx 50 down -0.21% and Jun S&Ps up +2.80 points. The dollar and Treasuries are little changed, while commodities and European stocks weakened after the French and British economies grew less than expected last quarter. Q4 French GDP was revised down to +1.3% annualized from +1.4% y/y and Q4 U.K. GDP was revised down to -0.3% q/q and +0.5% y/y, weaker than the previously reported -0.2% q/q and +0.7% y/y. European and U.S. stocks were also pressured after a transcript of an interview with ABC News anchor Diane Sawyer revealed that Fed Chairman Bernanke said the U.S. recovery isn't assured and "it's far too early to declare victory." The euro rose against the dollar after Italian Prime Minister Monti said during a visit to Tokyo that the Euro-Zone's debt woes are "almost over" after a slow initial response by policy makers. Natural gas prices posted another fresh 10-year nearest-futures low in overnight trade and metals prices weakened after Goldman Sachs Group cut its 3-month outlook on commodities to neutral from overweight.
- Asian stocks today closed mostly lower with Japan down -0.71%, China -2.84%, Australia +0.98%, South Korea -0.40%, India -0.79%. Asian stocks fell after Chinese companies reported slumping profits and Societe Generale said consensus earnings expectations for some Chinese companies are "far too optimistic." China's Shanghai Stock Index tumbled to a 1-1/2 month low led by a 21% plunge in Gome Electrical Appliances Holdings Ltd. after China's second-largest electronics retailer said net income last year dropped to 1.84 billion yuan, weaker than analysts' estimates of 2.42 billion yuan. Chinese metal producers also fell as Jiangxi Copper, China's biggest copper producer by market value, fell 2.4% after it reported an 18% fall in profit and Angang Steel dropped 2.2% after reporting a wider-than-expected loss.
- June S&Ps this morning are trading up +2.80 points. The U.S. stock market Tuesday fell back from an early rally and settled lower as profit-taking set in after the S&P 500 and the Nasdaq posted new yearly highs: Dow Jones -0.33%, S&P 500 -0.28%, Nasdaq Composite -0.07%. The S&P 500 posted a 3-3/4 year high, the Dow climbed to a 1-week high and the Nasdaq rallied up to an 11-year high, but they all gave up their gains and closed lower. Bearish factors Tuesday included (1) the larger-than-expected decline in the Mar Richmond Fed manufacturing index to its weakest level in 4 months (-13 to 7 versus expectations of -2 to 18), (2) concern over contagion of the European sovereign-debt crisis to Portugal after Fitch Ratings said Portuguese banks remain on "shaky ground," and (3) late afternoon comments from Fed Chairman Bernanke that prompted profit-taking and long liquidation when he said its "too early to declare victory" on the U.S. recovery as unemployment remains too high.
- Bullish factors Tuesday included (1) strength in homebuilders after a smaller-than-expected decline in Jan S&P/CaseShiller composite-20 home prices (unchanged m/m versus expectations of -0.3% m/m), (2) the stronger than expected Mar U.S. consumer confidence (-1.4 to 70.2 versus expectations of -0.7 to 70.1), and (3) comments from the first managing director of the IMF who said "We expect modest growth in the U.S., mild recession in Europe and a continuation of a comfortable level of growth in Asia with a soft landing in China."
- June 10-year T-notes this morning are down -2.5 ticks. T-note prices Tuesday rallied up to a 1-1/2 week high and settled higher after the Fed bought long-term Treasuries as part of its Operation Twist program, the Mar Richmond Fed manufacturing index weakened more than expected and strong demand was seen for the Treasury's $35 billion auction of 2-year T-notes: TYM2 +17.0, FVM2 +9.5, EDU2 +2.0. Bullish factors Tuesday included (1) the Fed's purchase of $1.969 billion of Treasuries as part of its Operation Twist program to replace $400 billion of short-term debt in its portfolio with longer-term Treasuries in an attempt to keep borrowing costs low, (2) the larger-than-expected decline in the Mar Richmond Fed manufacturing index to its weakest level in 4 months (-13 to 7 versus expectations of -2 to 18), (3) strong demand for the Treasury's $35 billion auction of 2-yer T-notes that had a bid-to-cover ratio of 3.69, higher than the 12-auction average of 3.46, and (4) dovish comments from Boston Fed President Rosengren who said "if real GDP does not grow more rapidly and unemployment remains at its current unacceptably high level, monetary policy may need to be more accommodative." Bearish factors included (1) the stronger-than-expected Jan S&P/CaseShiller composite-20 home prices (unchanged m/m versus expectations of -0.3% m/m), (2) the stronger than expected Mar U.S. consumer confidence (-1.4 to 70.2 versus expectations of -0.7 to 70.1), and (3) supply pressures ahead of the Treasury's $35 billion auction of 5-year T-notes on Wed.
- The dollar index this morning is lower with the dollar/yen -0.19 yen and the euro/dollar +0.43 cents. The dollar index Tuesday declined early to a 3-week low but erased its losses and settled higher after stronger than expected U.S. economic data reduced speculation the Fed will increase stimulus measures: Dollar Index +0.174, USD/JPY +0.327, EUR/USD -0.00426. Bullish factors included (1) the stronger-than-expected Mar U.S. consumer confidence and the smaller-than-expected decline in Jan S&P 500/CaseShiller home prices, which signals economic strength that reduces the chances of further Fed stimulus measures, and (2) weakness in the euro which fell back from a 3-1/2 week high against the dollar and closed lower on weak demand for European sovereign debt after Italy sold 3.82 billion euros of bonds, below the maximum target of 4 billion euros, and Spain sold 2.58 billion euros of debt, below its maximum target of 3 billion euros. Bearish factors included (1) the unexpected increase in the Mar French consumer confidence indicator which matched its highest level in 15 months (+5 to 87) and is euro positive, (2) comments from ECB Council member Makuch that reduced expectations of additional ECB stimulus measures when he said he sees no reason for further 3-year loans for now because "the central bank considers as sufficient what it has done so far," and (3) strength in the British pound against the dollar after the pound climbed to a 4-1/4 month high against the dollar after Mar U.K. CBI reported sales rose more than expected.
- May crude oil prices this morning are down -98 cents a barrel and May gasoline is -4.28 cents per gallon. Crude oil and gasoline prices Tuesday settled mixed after dollar strength and comments from DOE officials about a possible release of Strategic Petroleum Reserves offset the bullish aspects of stronger than expected U.S. economic data on Mar U.S. consumer confidence and Jan S&P/CaseShiller home prices: CLK12 +$0.30, RBK -1.23. Bearish factors included (1) the rebound in the dollar as the dollar index recovered from a 3-week low and settled higher, which diminishes investment demand in commodities, (2) comments from the acting assistant secretary for fossil energy at the DOE who said that a release of oil from the Strategic Petroleum Reserve is "being considered," and (3) the larger-than expected decline in the Mar Richmond Fed manufacturing index, which indicates reduced energy consumption. Bullish factors included (1) the stronger-than-expected Mar U.S. consumer confidence, which is positive for fuel demand and (2) the smaller than expected decline in the Jan S&P/CaseShiller composite-20 home prices, which signals economic strength and may lead to increased energy demand. Expectations for Wednesday's weekly DOE inventory report are for crude oil supplies to increase +2.7 million bbl, gasoline stockpiles to fall -1.55 million bbl, distillate inventories to drop -500,000 bbl and the refinery utilization rate to increase +0.3 to 82.5% of capacity.
Global Financial Calendar
|0700 ET||Weekly MBA mortgage applications, previous -7.4% with purchase mortgage sub-index -1.0% and refinancing sub-index -9.3%.|
|0830 ET||Feb durable goods orders expected +3.0% and +1.7% ex transportation, Jan -3.7% and -3.0% ex transportation.|
|1300 ET||Treasury auctions $35 billion 5-year T-notes.|
|0130 ET||Revised Q4 French GDP expected no change at +0.2% q/q and +1.4% y/y.|
|0400 ET||Feb Euro-Zone M3 money supply (seasonally adjusted) expected +2.2% 3-mo avg and +2.4% y/y, Jan +2.0% 3-mo avg and +2.5% y/y.|
|0430 ET||Revised Q4 U.K. GDP expected no change at -0.2% q/q and +0.7% y/y.|
|0430 ET||Revised Q4 U.K. total business investment expected -5.6% q/q and -1.9% y/y, previous -5.6% q/q and -2.0% y/y.|
|0800 ET||Mar German CPI (EU harmonized) expected +0.4% m/m and +2.3% y/y, Feb +0.9% m/m and +2.5% y/y|
|0900 ET||Jan Canada Teranet/National Bank home price index, Dec -0.2% m/m and +6.8% y/y.|
|1950 ET||Feb Japan retail trade expected unchanged m/m and +1.4% y/y, Jan +3.1% m/m and +1.8% y/y.|