Barchart Morning Call
Wed, 16 May 2012 07:00:00 -0500
Overnight Developments- The E-mini S&P this morning is little changed despite the fact that
European stocks are down another 0.62% on the Greek political impasse. Commodity
prices are mostly lower again this morning with July crude oil down 1.7%, gold
down 1.4%, copper down 1.7% and most agricultural commodities trading lower. The
dollar index is mildly higher by +0.26% and EUR/USD is trading slightly lower by
-0.13%. Greek political leaders will meet later today to name an interim
government that will call new elections, likely for either June 10 or 17. The
anti-bailout party Syriza is likely to gain a few percentage points of votes in
a new election and the traditional Pasok and New Democracy parties are likely to
lose 1-3 percentage points of votes. Syriza right now has 20.5% support in the
polls versus 19.4% for Pasok and 11.8% for Pasok. However, the political
situation will not be much different after the election than it is now, meaning
that there is no obvious path forward for Greece at present unless Radical Left
Syriza leader Tsipras eases up and agrees to join a government. The only good
news was that Greece yesterday paid in full its 435 billion euro floating-rate
note debt, thus preventing a default cascade from the trigger of
cross-collateral default provisions in other Greek notes not covered by Greek
law. The debt payment at least bought Greece some time to figure out how to get
through the next couple of months of political turmoil. Greece has only enough
cash to survive through early July without another bailout tranche payment from
the Eurozone. The main point that came out of last night's Merkel-Hollande
meeting was that the new Greek vote in June will be a referendum on whether
Greece wants to stay in the euro. German Chancellor Merkel and French President
H Hollande both made concessionary remarks of concern for Greece, but basically
said that Greece will have to live up to the main tenets of the bailout
agreement. Ms. Merkel said requests for measures to bolster growth will be
"considered" and that the EU may "approach Greece with proposals." She added,
"Greece can stay in the euro area," and "Greek citizens will be voting on
exactly that." Mr. Hollande said, "The Greeks need to know we'll come with
growth measures that will allow them to stay in the euro zone." The Bank of
England today lowered its growth and inflation forecasts and said that UK
officials are tuning up their contingency plans for weaker growth being caused
by the European debt crisis. The BOE in its quarterly Inflation Report forecast
that UK inflation will remain above 2% longer than last forecast but will drop
to +1.6% in two years, below the 2% inflation target. The BOE last week voted to
halt its quantitative easing program and said that the inflation risks are
"broadly, evenly balanced." The BOE forecast that GDP will be at +2.6% in two
years. Today's UK March ILO unemployment rate fell to 8.2% from 8.3% in Feb and
was more favorable than expectations for an increase to 8.4%. In addition, April
jobless claims fell by 13,700 versus expectations for a 5,000 rise. For the
Eurozone, the April CPI was reported at +2.6% y/y and the core CPI at +1.6% y/y.
The March Eurozone seasonally-adjusted trade balance rose to 4.3 billion euros
was larger than the market consensus of 3.8 billion euros and up from Feb's
revised 4.0 billion euros. Asian stocks fell nearly across the board today:
Japan -1.12%, Hong Kong -3.19%, China -1.63%, Taiwan -2.18%, Australia -2.36%,
Singapore -1.58%, South Korea -3.33%, India -1.83%, Turkey +0.11%. Chinese
stocks today fell 1.2% and were down for the fourth consecutive day on continued
concern about weaker Chinese economic growth and weaker export prospects to
Europe, which is China's biggest export market with an 18% share of Chinese
exports. The market consensus shifted downward for Chinese Q2 GDP after last
Thursday night's weaker than expected Chinese industrial production report of
+9.3% y/y. Japan's JGBs today rallied and 10-year yields fell to 0.82% to match
the lowest level since 2003 on safe-haven demand. The Bank of Japan in today's
purchase program was unable to get enough offers to fill its bid since JGBs are
in high demand as a safe-haven asset. Japan March machine orders fell -2.8% m/m,
which was better than the market consensus of -3.5%.
- June E-mini S&Ps this morning are trading -0.25 points, which could be
considered a sign of strength considering that the Euro Stoxx 50 this morning is
down by another 0.62%. Due to strong demand, Facebook raised the size of its IPO
by 25% to 421.2 million shares with existing holders boosting their sales to
241.2 million shares from 157.4 million. There are earnings reports today from
Target, Deere and Limited Brands. US stocks on Tuesday closed moderately lower:
S&P 500 -0.57%, Dow Jones -0.98%, Nasdaq 100 -0.37%. The U.S. stock market
on Tuesday fell on the collapse of Greek talks to form a new government, which
substantially increased the chances that Greece may eventually be forced to exit
the Eurozone. However, the stock market received support from
better-than-expected U.S. economic news as the May U.S. NAHB housing market
index rose by 4 points to a new 5-year high of 29 and the May Empire
manufacturing index rose to 17.09 from 6.56. In addition, the Eurozone Q1 GDP
report of unchanged was stronger than market expectations of -0.2% q/q and the
German Q1 GDP report of +0.5% q/q (+2.0% annualized) was stronger than market
expectations of +0.1% q/q. The U.S. retail sales report of +0.1% m/m overall and
ex-autos, however, was slightly weaker than market expectations of +0.2%.
- June 10-year T-notes this morning are trading -1 tick as the market awaits
this morning's housing starts and industrial production reports and the FOMC
minutes. T-note prices on Tuesday closed slightly lower: TYM2 -1.5, FVM2 -2.75.
There was still safe-haven demand from the Greek situation, but T-note prices
closed lower on long liquidation pressure, and stronger-than-expected U.S. and
European economic data. The 10-year T-note yield yesterday closed little changed
at 1.77%, which was just 10 bp above the record low of 1.67% posted last
September. The question is whether the rally in T-note prices can continue now
that the markets have to wait a month for Greek elections and further
developments on whether Greece will eventually exit the Eurozone. The dollar
index this morning is trading mildly higher by +0.21 points on continued support
from safe-haven demand with the Greek political impasses. EUR/USD is down 0.17
cents and USD/JPY up 0.26 yen. The dollar index on Tuesday closed moderately
higher: Dollar Index +0.62, EUR/USD -0.0094, USD/JPY +0.33. The dollar index on
Tuesday broke out to a new 4-month high and EUR/USD fell to a new 4-month low on
the breakdown in Greek political talks and the need for new elections. The
dollar index has rallied sharply by 3% in the past two weeks, but the dollar
index could soon run out of fuel as the markets wait for the new Greek election
and further developments on whether Greece will exit the Eurozone. July WTI
crude oil prices this morning are trading sharply lower by $1.58 (-1.57%) and
July gasoline is down 2.63 cents (-1.08%) on global economic doubts, this
morning's stronger dollar, and ahead of this morning's DOE report, which is
expected to show inventory increases for crude oil and products. Crude oil and
gasoline prices on Tuesday closed moderately lower: CLN12 -0.78 RBN2 -0.0100.
Crude oil prices were pressured once again by the rally in the dollar index to a
new 4-month high and concerns about the global economy, although there was a
least some better than expected U.S. economic data (NAHB market index and Empire
manufacturing index) and European GDP data. Crude oil prices yesterday were also
pressured by expectations that today's weekly DOE report will show another
increase in crude oil inventories to a new 21-3/4 year high.
Global Financial Calendar
| Wednesday 5/15/12 | |
|---|---|
| United States | |
| 0700 ET | Weekly MBA mortgage applications, previous +1.7%, purchase sub-index +3.4%, refinancing sub-index +1.3%. |
| 0830 ET | Apr housing starts expected +4.7% to 685,000, Mar -5.8% to 654,000. Apr building permits expected -4.7% to 728,000, Mar +6.4% to 764,000. |
| 0915 ET | Apr industrial production expected +0.6%, Mar unchanged. Apr capacity utilization expected +0.4 to 79.0%, Mar -0.1 to 78.6%. |
| 1000 ET | Q1 mortgage delinquencies, Q4 7.58%. Q1 foreclosures, Q4 4.38%. |
| 1030 ET | DOE Weekly Petroleum Status Report. |
| 1230 ET | St. Louis Fed President James Bullard speaks about the U.S. economy and monetary policy at an event in Louisville, KY. |
| 1400 ET | Minutes of the Apr 24-25 FOMC meeting. |
| Euro-Zone | |
| 0200 ET | EU Apr 25 new car registrations, Mar -7.0%. |
| 0500 ET | Eurozone Apr CPI expected +0.5% m/m and +2.6% y/y, Mar +1.3% m/m. Apr core CPI expected +1.5% y/y, Mar +1.6% y/y. |
| 0500 ET | Eurozone Mar trade balance (sa) expected 3.8 bln euros, Feb 3.7 bln euros. |
| United Kingdom | |
| 0430 ET | UK Mar ILO unemployment rate expected 8.4%, Feb 8.3%. Apr claimant count expected 5.0%, Mar 4.9%. Apr jobless claims change expected +5,000, Feb +3,600. |
| 0430 ET | UK Mar weekly earnings expected +1.0% 3M/yoy, Feb +1.1% 3M/yoy. UK Mar weekly earnings ex-bonus expected +1.4% 3M/yoy, Feb +1.6% 3M/yoy. |
| 0530 ET | UK Bank of England Inflation Report. |
| Japan | |
| 1950 ET | Japan Q1 housing loans, previous +2.2%. |
| 1950 ET | Japan Q1 GDP expected +3.5% q/q annualized, previous -0.7%. Q1 GDP deflator expected -1.4% y/y, previous -1.8%. |
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