- Global stock and commodity prices retreated with June E-mini S&Ps down -14.25 points and the Euro Stoxx 50 down -1.77%. Weakness in global manufacturing sent stocks and commodities lower, with gold at a 2-week low, while the euro fell and 10-year T-note yields tumbled to a 1-3/4 month low on political uncertainty after the Dutch government split and French President Sarkozy lost ground in elections. Apr Chinese manufacturing activity contracted for a sixth month according to the Apr HSBC manufacturing PMI, while the Apr Euro-Zone PMI composite unexpectedly fell -1.7 to 47.4, weaker than expectations of a +0.2 increase to 49.3 as it contracted by the most in 5 months. The extra yield investors demand to hold Dutch 10-year bonds over German bunds rose to a 3-year high on speculation the Netherlands ill need to hold early elections after Dutch Prime Minister Rutte failed to reach an agreement with a coalition party over austerity measures. Credit-default swaps to insure French government debt rose to a 3-month high after French President Sarkozy failed to win the first round of elections that forces him to a run-off May 6 with challenger Francois Hollande. The rise in popularity with the anti-euro National Front, which came in third in elections, suggests that negative-Europe sentiment may intensify ahead of the final round of elections next month. The euro also weakened against the dollar after IMF Managing Director Lagarde raised only $430 billion in pledges to help safeguard the global economy at the IMF spring meetings over the weekend, lower than her $600 billion goal as the U.S. declined to participate and Canada proposed making it harder for Europe to tap aid.
- Asian stocks today closed lower with Japan down -0.20%, China -0.79%, Australia -0.32%, South Korea -0.07%, India -1.60%. Asian stocks fell on weak earnings results from companies such as South Korea's Daewoo Engineering and Japan's Tokyo Steel Manufacturing, while a manufacturing survey pointed to a deepening economic slowdown in China. The Apr HSBC flash manufacturing PMI rose +0.8 to 49.1, which suggests Chinese manufacturing activity will contract for a sixth month. Japanese power companies slumped after the Nikkei newspaper reported that 54% of the population was critical of the government's assessment that it was safe to restart 2 of Kansai Electric's idled nuclear reactors. Chinese oil companies fell after China National Radio reported that the government may cut gasoline and diesel prices next month because a slowing economy has cut fuel demand, which would reduce refiners' earnings. Losses in Chinese stocks were limited however; on speculation government officials will adopt more policies to stimulate economic growth along with the prospects of additional PBOC easing measures.
- June E-mini S&Ps this morning are trading down -14.25 points as Chinese and European manufacturing activity contracted along with political uncertainty in France and the Netherlands. The U.S. stock market on Friday settled mostly higher after an unexpected jump in German business sentiment to a 9-month high boosted confidence in Europe's largest economy, while positive earnings results from Microsoft, McDonalds and General Electric kept equity gains intact, but the Nasdaq finished lower as a slump in Apple and IBM dragged down technology stocks: Dow Jones +0.50%, S&P 500 +0.12%, Nasdaq Composite -0.24%. Another positive for stocks was speculation that the IMF would receive additional funding to help contain the European debt crisis when Russian Deputy Finance Minister Storchak said that the G-20 will announce new funding for the IMF's European reserves that will "satisfy" requests from IMF Managing Director Lagarde. Limiting stock gains is the ongoing European debt crisis after credit-default swaps to insure Spanish government debt climbed to a record high 503 bp and the cost of insuring Italian debt increased to 474 bp, a 3-month high.
- June 10-year T-notes this morning are up +13.5 ticks on renewed safe-haven demand as global equity markets slide. T-note prices Friday settled lower on reduced safe-haven demand after global stocks rallied when Apr German IFO business sentiment unexpectedly rose to a 9-month high: TYM2 -3.0, FVM2 -1.0. Losses in Treasuries were limited however, on concern the European sovereign-debt crisis may worsen after credit-default swaps to insure Spanish government debt rose to an all-time high.
- The dollar index this morning is higher with USD/JPY -0.47 yen and EUR/USD -0.46 cents. The dollar index on Friday tumbled to a 2-1/2 week low and settled lower as an unexpected increase in Apr German IFO business climate to a 9-month high boosted stocks and the euro and reduced the safe-haven demand for the dollar: Dollar Index -0.367, USD/JPY -0.073, EUR/USD +0.00805. Other bearish factors for the dollar included the fall in dollar funding costs for European banks to an 8-1/2 month low along with expectations that the IMF will get additional funds from member countries to help it protect the world economy against more fiscal turmoil in Europe after IMF Managing Director Lagarde said she expects the IMF's firepower to be "significantly" increased. Bullish factors for the dollar were continued weakness in the yen which fell to a 1-1/2 week low against the dollar on the prospects for additional asset-purchases by the BOJ along with concerns the European sovereign-debt crisis may worsen after credit-default swaps to insure Spanish government debt soared to an all-time high.
- Jun crude oil prices this morning are trading down -85 cents a barrel and Jun gasoline is down -1.15 cents per gallon. Crude oil and gasoline prices on Friday settled mixed as crude closed higher after the dollar fell, German business confidence rose to a 9-month high and as global equity markets strengthened, but a narrowing of crack spreads fueled liquidation of long gasoline positions and led gasoline lower: CLM12 +1.16, RBM2 -0.58. Another positive factor for the energy markets was the report from the API that said deliveries of gasoline, a measure of consumption, rose for a second month in Mar as they climbed +3% y/y to 9.01 million barrels a day. A bearish factor that limited gains in crude was the increase in credit-default swaps to insure Spanish government debt to a record, which signals the European debt crisis may worsen and slow economic growth and energy demand.
Global Financial Calendar
|1130 ET||Weekly 3-mo and 6-mo T-bill auctions.|
|0100 ET||Revised Feb Japan coincident index CI, previous 93.7. Revised Feb leading index CI, previous 96.6.|
|1950 ET||Mar Japan corporate service price index expected -0.6% y/y, Feb -0.6% y/y.|
|0245 ET||Apr French business confidence indicator expected unchanged at 96, Mar +3 to 96.|
|0300 ET||Apr French PMI manufacturing expected +0.7 to 47.4, Mar -3.3 to 46.7.|
|0300 ET||Apr French PMI services expected unchanged at 50.1, Mar +0.1 to 50.1.|
|0330 ET||Apr German PMI manufacturing expected +0.6 to 49.0, Mar -1.8 to 48.4.|
|0330 ET||Apr German PMI services expected +0.2 to 52.3, Mar -0.7 to 52.1.|
|0400 ET||Apr Euro-Zone PMI composite expected +0.2 to 49.3, Mar -0.2 to 49.1.|
|1145 ET||ECB Council member and Bundesbank President Jens Weidmann speaks at the Economic Club in New York.|
|0830 ET||Feb Canada wholesale sales expected -0.5% m/m, Jan -1.0% m/m.|