Barchart Morning Call
Thu, 17 May 2012 07:00:00 -0500
Overnight Developments- E-mini S&Ps are slightly higher by 1.00 point today, shaking off the
0.79% sell-off in European stocks and gaining some confidence from last night's
stronger-than-expected Japanese Q1 GDP report of +4.1% (q/q annualized). T-notes
are down 2.5 ticks on the stable trade in E-mini S&Ps. The dollar index as
usual is trading higher and is up 0.17 points (+0.21%). Commodity markets are
mixed. Gold is up $10.00 while copper and WTI crude oil are showing small gains.
European stocks today are trading lower again with the Euro Stoxx 50 down
-0.79%. The markets are concerned about yesterday's decision by the ECB to halt
direct lending to some troubled Greek banks until they get recapitalized. The
ECB temporarily transferred the lending responsibility to the Greek central
bank. Eurozone and Greek officials are working on the Greek bank
recapitalization with 50 billion euros of funding provided by the recent bailout
agreement, but the recapitalization process is moving slowly. The ECB's action
to step away from direct lending to some Greek banks is move to protect its
balance sheet and is also a warning shot to Greek politicians that the ECB alone
is propping up the Greek banking system at the moment. Markets are closed today
for Ascension Day in Switzerland, Norway, Sweden, Denmark, Finland, Austria, and
Luxembourg. Spain today successfully sold 2.5 billion euros of 3-year bonds but
had to sell the bonds at 4.876%, up sharply from 4.037% at the last auction just
2 weeks ago. In Spain, Bankia SA plunged by 19% today on a report by El Mundo
that depositors have withdrawn 1 billion euros from the bank since May 9 when
the Spanish government took over the troubled bank. Bankia is the lender with
the largest asset base in Spain. Spain today reported its Q1 GDP at -0.3% q/q
and -0.4% y/y, which was right in line with market expectations. In Greece, head
of Greece's Council of State Panagiotis Pikrammenos was named head of a
caretaker government yesterday. The government today is expected to announce
June 16 as the date for the new election. The new election is not likely to
result in a major shift in parliamentary seats among the political parties with
anti-bailout Syriza winning a few extra seats and the traditional New Democracy
and Pasok parties losing a few seats. In a sign that Syriza leader Tsipras is
not about to let up on his strident rhetoric, he demanded that the caretaker
government freeze the implementation of wage and pension cuts and other
austerity measures until after the election. Greece will run out of cash by
early July if it does not qualify for another bailout tranche from the Eurozone.
Asian stocks today closed mixed: Japan +0.86%, Hong Kong -0.31%, China +1.53%,
Taiwan +1.69%, Australia -0.19%, Singapore -0.30%, South Korea +0.23%, India
+0.25%, Turkey +0.23%. Japan's Q1 GDP rose +4.1% (q/q annualized), which was
stronger than market expectations of +3.5%. The Q1 deflator of -1.2% y/y was
stronger than expectations of -1.5% y/y but showed that Japan is still in a
deflationary situation. While the 4.1% GDP increase was welcome, part of the GDP
increase was due to the earthquake reconstruction effort, which will not last.
Japan is also worried about lower exports to Europe with the Greek situation
likely dampening European economic growth in Q2. Japan this summer is also
expected to experience rolling blackouts and reduced electricity usage since all
its nuclear power plants are now offline, which may reduce business output. A
Japanese survey of economists found a consensus that Japan GDP will ease to
+2.2% in Q2 and Q3 and to +1.7% in Q4. Singapore today reported Q1 GDP at +10%
(q/q annualized), which was a positive development for Asia.
- June E-mini S&Ps this morning are trading up +1.00 point on some support
from the Japan Q1 GDP report of +4.1%, although the European situation continues
to undercut confidence. There are earnings reports today from Wal-Mart
(consensus $1.04), PCP-Precision Castparts (2.27), CRM-Salesforce.com (0.34),
and INTU-Intuit (2.48). US stocks on Wednesday closed lower once again: Dow
Jones -0.50%, Nasdaq 100 -0.74%. The Greek situation is becoming even more
dangerous with a slow bank run on Greek banks. The Euro Stoxx 50 on Wednesday
closed slightly lower by -0.15%. U.S. stocks were also hurt after two ECB
officials said the ECB has no immediate plans for more stimulus. U.S. stocks
received some underlying support from stronger-than-expected April housing
starts data (+2.6% to 717,000 versus expectations of 685,000) and April
industrial production data (+1.1% versus expectations of +0.6%). Q1 mortgage
delinquencies fell to 7.40% from 7.58% in Q4, although Q1 mortgage foreclosures
rose slightly to 4.39% from Q4’s 4.38%
- June 10-year T-notes this morning are trading slightly lower by 2.5 ticks
due to the slightly higher trade in E-mini S&Ps. T-note prices on Wednesday
closed narrowly mixed: TYM2 +1.5, FVM2 -1.25. T-note prices on Wednesday
received continued underlying support from the Greek situation, but were
undercut by the stronger-than-expected U.S. housing starts and industrial
production reports. The 10-year T-note yield on Wednesday closed unchanged at
1.76%, which was only 10 bp above the record low of 1.67% posted last September.
The dollar index this morning is up 0.17 points as safe-haven demand continues.
EUR/USD is down -0.0025 and USD/JPY is down 0.14 yen. The dollar index on
Wednesday closed mildly higher: Dollar Index +0.15, EUR/USD -0.0013, USD/JPY
+0.15. The dollar index on Tuesday posted a new 4-month high and EUR/USD fell to
a new 4-month low on continued worries about the Greek situation. The dollar
index also received some support from the stronger-than-expected U.S. housing
starts and industrial production reports. The euro received some underlying
support from ECB President Draghi's statement that that while the ECB's "strong
preference" is for Greece to stay in the Eurozone, the ECB will continue to
preserve "the integrity of our balance sheet." In addition, two ECB officials
said that no immediate stimulus measures were under consideration, which
provided support for the euro's interest rate differentials. July WTI crude oil
prices this morning are trading slightly higher by 5 cents but July gasoline is
down 0.95 cents. Crude oil and gasoline prices on Wednesday closed sharply
lower: CLN12 -1.16 (-1.23%), RBN2 -0.0265 (-0.92%). Crude oil prices on
Wednesday were undercut again by the stronger dollar and worries about global
growth. In addition, the weekly DOE report showed a 2.13 million barrel increase
in U.S. crude oil inventories, which was stronger than market expectations of
1.5 million barrels. The report put U.S. oil inventories at a new 21-3/4 year
high, the highest level since August 1990. U.S. oil inventories are now 7.8%
above the 5-year seasonal average, the highest such level in a year. Crude oil
inventories at Cushing rose by 1.0 million barrels to a new record high of
45.127 million barrels. The Seaway Pipeline is expected to start up in reverse
direction today, which means oil will start flowing from the hub at Cushing,
Oklahoma to the Gulf of Mexico coast. That should cause a slow drawdown in crude
oil inventories at Cushing, which is where the Nymex WTI futures contract is
priced. Meanwhile, the DOE report was bullish for the products. U.S. gasoline
inventories fell by -2.797 million barrels versus expectations for an increase
of +800,000 barrels. Distillate inventories fell by 969,0090 barrels versus
expectations of +300,000 barrels. Those reports left gasoline 1.9% below its
5-year seasonal average and distillate inventories 10.6% below the 5-year
average. Distillates are now at the tightest level relative to the 5-year
average since July 2003. Meanwhile, the refinery utilization rate jumped by 1.9
points to 88.3% versus expectations of +0.5 points to 86.9%. The increase in the
refinery utilization rate is good news because it means refineries will be using
more crude oil and producing more products, thus putting some downward pressure
on U.S. crude oil inventories and boosting product inventories.
Global Financial Calendar
| Thursday 5/17/12 | |
|---|---|
| United States | |
| 0830 ET | Weekly initial unemployment claims expected -2,000 to 365,000, previous -1,000 to 367,000. Weekly continuing claims expected +6,000 to 3.235 million, previous -61,000 to 3.229 million. |
| 0830 ET | USDA weekly exports. |
| 1000 ET | Apr leading indicators expected +0.1%, Mar +0.3%. |
| 1000 ET | May Philadelphia Fed manufacturing index expected +1.5 to 10.0, Apr -4.0 to 8.5. |
| 1030 ET | DOE natural gas storage. |
| 1100 ET | Treasury announces amounts of 2-year T-notes (previous $35 billion), 5-year T-notes (previous $35 billion) and 7-year T-notes (previous $29 billion) to be auctioned May 22-24. |
| 1235 ET | St. Louis Fed President James Bullard speaks to the Rotary Club of Louisville, KY. |
| 1300 ET | Treasury auctions $13 billion in 10-year TIPS. |
| 1630 ET | Weekly money supply report and Fed balance sheet. |
| Japan | |
| 0000 ET | Japan Apr Tokyo condo sales, Mar -6.1% y/y. |
| 0030 ET | Japan Mar final industrial production, prelim +1% m/m and +13.9% y/y. Japan Mar final capacity utilization, prelim -1.7% m/m. |
| CHI | |
| 2130 ET | China Apr property prices. |
| 2135 ET | China May MNI flash business sentiment survey. |
No comments:
Post a Comment