Barchart Morning Call
Wed, 9 May 2012 07:00:00 -0500
Overnight Developments- E-mini S&Ps are down 11.25 points (-0.83%) this morning and commodity
prices are mostly lower as the markets wait to see if the anti-bailout Greek
Radical Left Syriza party will be able to form a government. Gold is down $19.50
this morning, copper is down 1.07%, and crude oil is down 79 cents. Grains are
lower while meats and softs are mixed. The dollar index is up 0.32% this morning
and EUR/USD is down 0.24% on the Greek uncertainty. European stocks are trading
lower with the Euro Stoxx 50 down 1.03%. Syriza Radical Left leader Alexis
Tsipras will meet later today with other Greek party leaders in an attempt to
form a government. Mr. Tsipras is scheduled to meet with Pasok leader Venizelos
at 11 AT ET and New Democracy leader Samaras at Noon ET. Mr. Samaras yesterday
refused to agree to Mr. Tsipras' demand that he send a letter to Eurozone
officials renouncing the written promises he made earlier to uphold the terms of
the bailout agreement. Mr. Samaras said he was being asked "to put my signature
to the destruction of Greece," which indicates that he is not amenable to
participating in a coalition government with Syriza. If a coalition government
cannot be formed, then new Greek elections will have to be held in June. The
Greek finance ministry has said the country may run out of cash by the end of
June if a new government is not in place to meet the conditions for the next
Eurozone bailout payment. The Greek situation is raising the risks for other
troubled European countries. The 10-year Spanish bond yield today rose by 17 bp
and the Italian yield rose by 10 bp. 5-year credit default swaps on Spanish debt
rose by 8 bp to 506 bp, just below the recent record high of 510.5 bp on April
16. In some good news for Europe, Germany today reported that its March trade
surplus of 17.4 billion euros was larger than expectations of 14.3 billion euros
and that March exports rose +0.9% m/m, much stronger than expectations of -0.5%
m/m. Asian stock markets today closed lower across the board on the European
travails: Japan -1.49%, Hong Kong -0.75%, China -1.91%, Taiwan -0.93%, Australia
-0.91%, Singapore -1.06%, South Korea -0.89%, India -0.40%. Japan reported its
March leading index at 96.6, which was weaker than the consensus of 96.9 but was
up from Feb's revised 96.0 (preliminary 96.3). The coincident index rose to 96.5
from 95.2 in Feb and was stronger than the consensus of 96.2. In some good
economic news for China, April passenger-vehicle sales rose by 13% to 1.28
million units, which was stronger than the market consensus of +11.3%. An
official of the China Association of Automobile Manufacturers said that the
association sees "signs of recovery" after the Chinese vehicle sales in Jan-Feb
had their worst 2-month start to the year since 2005. China today announced a
3.5% cut in maximum retail gasoline and diesel prices effective tomorrow. That
was the first fuel price cut since last October and will be welcome by Chinese
businesses and consumers.
- June E-mini S&Ps this morning are down -11.25 points (-0.83%) on the
1.03% sell-off in European stocks. There are earnings reports today from
CSCO-Cisco (consensus $0.47), NWSA-News Corp (0.31), and PCLN-Priceline.com
(3.90), among others. US stocks on Tuesday closed moderately lower: S&P 500
-0.43%, Dow Jones -0.59%, Nasdaq 100 -0.36%. The U.S. stock market fell on the
Greek political uncertainty combined with the 2.06% decline seen in the Euro
Stoxx 50 on Tuesday. The hard line being taken by the Greek Radical Left Syriza
party in trying to forge a coalition government caused fresh market worries
since the Syriza party leader is explicitly saying his government would default
on Greek debt, nationalize banks, and renege on austerity and reform measures.
- June 10-year T-notes this morning are up 5 ticks on increased safe-haven
demand with the global sell-off in stocks on the Greek political uncertainty.
The Treasury today continues its $72 billion coupon package with the sale of $24
billion in 10-year T-notes. T-note prices on Tuesday closed higher: TYM2 +9,
FVM2 +3.5. T-note prices saw strength from continued safe-haven demand with the
moderately lower close in U.S. stocks, the 2% sell-off in European stocks, and
the rout in commodity prices. The dollar index this morning is trading mildly
higher by 0.25 points (+0.32%) with EUR/USD down 0.31 cents (-0.24%) and USD/JPY
down -0.25 yen (-0.31%). The dollar index is getting a safe-haven boost again
today from the European turmoil. The dollar index on Tuesday closed mildly
higher: Dollar Index +0.135, EUR/USD -0.0015, USD/JPY +0.01. The dollar index
continues to see support from the political uncertainty in Europe and the threat
of a downward spiral in events if hardliners gain control of the government in
Greece. The euro at least received some underlying support from the report that
German March industrial production rose +2.8% m/m and +1.6% y/y, which was
substantially stronger than the market consensus of +0.8% m/m and -1.2% y/y. The
German Economy Ministry said that Germany “industrial activity is gathering pace
and the outlook has improved markedly.” June crude oil prices this morning are
down -0.79 cents (-0.81%) and June gasoline is down 0.66 cents (-0.22%) on the
European political uncertainty and the general sell-off in stocks and
commodities. Crude oil is also lower ahead of today's weekly DOE report. Crude
oil and gasoline prices on Tuesday closed mixed: CLM12 -0.93, RBM2 +0.0203.
Crude oil prices were hurt by continued doubts about global growth, expectations
for a new 21-1/2 year high in today's weekly DOE report, and the Saudi Oil
Minister's comment that oil prices are "still a bit too high." Gasoline prices
were boosted by the DOE's hike in its forecast for U.S. gasoline demand this
year to 8.67 million bpd, although that would be down by 0.8% from 8.74 million
bpd in 2011. The market consensus for Wednesday's weekly DOE report is that
crude oil inventories will increase by another 1.9 million bbls to a new 21-1/2
year high, gasoline inventories will increase by +250,000 bbls, distillate
inventories will increase by +750,00 bbls, and the refinery utilization rate
will rise by 0.5 point to 86.5%. The Seaway pipeline between the key oil hub at
Cushing, Oklahoma and the Gulf coast is scheduled to be reversed late next week,
which should lead to a gradual drawdown in crude oil inventories at Cushing.
Global Financial Calendar
| Wednesday, May 9 | |
|---|---|
| United States | |
| 0700 ET | Weekly MBA mortgage applications, previous +0.1%, purchase sub-index +2.9%, refinancing sub-index -0.7%. |
| 1000 ET | Mar wholesale inventories expected +0.6%, Feb +0.9%. |
| 1000 ET | Minneapolis Fed President Narayana Kocherlakota speaks to the Economic Club of Minnesota in a speech titled “Toward a More Transparent Monetary Policy.” |
| 1030 ET | DOE Weekly Petroleum Status Report. |
| 1045 ET | Cleveland Fed President Sandra Pianalto speaks on leadership in Lexington KY. |
| 1200 ET | Philadelphia Fed President Charles Plosser speaks in Philadelphia on community development. |
| 1300 ET | Treasury auctions $24 billion in 10-year T-notes. |
| Germany | |
| 0200 ET | German Mar trade balance expected 14.3 billion euros, Feb 14.7 billion euros. Mar current account balance expected 18.0 billion euros, Feb 11.1 billion euros. Mar exports expected -0.5% m/m, Feb +1.5% m/m. Mar imports expected +1.0% m/m, Feb +3.9% m/m. |
| Japan | |
| 0100 ET | Japan Mar leading index expected 96.9, Feb 96.3. Mar coincident index expected 96.2, Feb 95.0. |
| 1950 ET | Japan Apr bank lending including trusts, Mar +0.8% y/y (+0.9% y/y ex-trusts). |
| 1950 ET | Japan Mar adjusted current account balance expected 650 billion yen, Feb 854.1 billion yen. Mar current account balance BOP basis expected -42.8 billion yen, Feb 102.1 billion yen. |
| 2200 ET | Japan Apr Tokyo average office vacancies, Mar 9.04%. |
| CHI | |
| n/a | China Apr trade balance expected $9.9 billion, Mar $5.35 billion. Apr exports expected +8.5% y/y, Mar +8.9% y/y. Apr imports expected +10.9% y/y, Mar +5.3% y/y. |
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