Barchart Morning Call 8/23

Barchart Morning Call

BC - 1 hr 27 mins ago

Overnight Developments

• Sep E-mini S&Ps this morning are trading slightly higher by +0.23%, supported by continued optimism about yesterday's FOMC minutes and dovish comments today by Chicago Fed President Evans on his visit to China. The Euro Stoxx 50 index this morning is up +0.16%. Commodity prices are up by an average +0.45% this morning. The stock and commodity markets today have been able to shake off the weaker-than-expected chinese PMI report of 47.8, which was down by 1.5 point from July.
• Asian stock markets today closed higher: Japan +0.51%, Hong Kong +1.23%, China +0.29%, Taiwan +0.11%, Australia +0.18%, Singapore +0.23%, South Korea +0.42%, India +0.02%, Turkey +0.11%.
• German Chancellor Merkel meets today in Berlin with French President Hollande with the main topic of discussion being the Spanish and Greek bailouts. Greek Prime Minister Samaras will then meet with Ms. Merkel on Friday and with Mr. Hollande on Saturday.
• Chicago Fed President Charles Evans told reporters in Beijing today that he has already decided that the Fed needs to take more easing action and he urged other central banks around the world to do the same. He said, "I don't need to see any more data to know that I think we should have more accommodation. I certainly would applaud anybody who takes action in order to strengthen their economies" around the world, including China. He added that QE3 would "provide confidence to the markets that we are intending to be accommodative for quite some time." Mr. Evans is not currently a member of the FOMC although he is an alternate member and attends FOMC meetings.
• China's flash estimate for the Aug PMI from HSBC/Markit fell by 1.5 point to 47.8 from 49.3 in July, which was the weakest level since November and the tenth consecutive month below the expansion-contraction level of 50.0.
• Today's German and Eurozone PMI reports were all below the expansion-contraction level of 50.0. The manufacturing PMI reports were stronger than expected while the services PMI reports were weaker than expected.
• The German Aug manufacturing PMI report of 45.1 rose by 2.1 points from July's 43.0 and was much stronger than market expectations for a 0.4 point increase to 43.4. However, the German Aug services PMI of 48.3 was down by 2.0 points from July's 50.3 and was weaker than market expectations for a 0.2 point drop to 50.1.
• The Eurozone Aug manufacturing PMI report 45.3 was up by 1.3 point from July's 44.0 and was stronger than market expectations for a 0.2 point increase to 44.2. However, the Aug Eurozone services PMI of 47.5 was down by 0.4 points from July's 47.9 and was weaker than market expectations for a 0.2 point drop to 47.7.
  Market Comments
  • Sep E-mini S&Ps this morning are up +3.25 points (+0.23%) on higher European stocks, dovish comments by Chicago Fed President Evans, and carry-over optimism from yesterday's FOMC minutes that raised hopes for a QE3 announcement at the FOMC's next meeting on Sep 12-13. The stock market on Wednesday showed weakness early on the poor Japanese export report and nervousness about this week's European crisis meetings, but then rallied after the FOMC minutes and closed mixed: S&P 500 +0.02%, Dow Jones -0.23%, Nasdaq 100 +0.40%.
  • Sep 10-year T-notes this morning are up by another 6 ticks on hopes for QE3 by September. T-note prices on Wednesday closed sharply higher after the July 31-Aug 1 FOMC minutes said that "many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery:" TYU2 +22.5, FVU2 +12.25. The FOMC minutes made QE3 a very real possibility for as soon as September.
  • The dollar index this morning is trading slightly lower by -0.03 (-0.04%) and EUR/USD is up +0.0011 (+0.09%). USD/JPY is up +0.07 (+0.09%). The dollar index on Wednesday extended Tuesday's technical breakdown to a new 1-1/2 month low: Dollar index -0.42 (-0.51%), EUR/USD +0.0056 (+0.45%), USD/JPY -0.71 (-0.90%). The dollar index was undercut on Wednesday by the FOMC minutes, which made further Fed easing appear more likely over the near-term, which would be bearish for the dollar index.
  • Oct WTI crude oil prices this morning are up +0.49 (+0.50%) and Oct gasoline is up +0.0246 (+0.84%) on general commodity strength and on Tropical Storm Isaac, which is expected to grow into a hurricane and move into the eastern part of the Gulf of Mexico by Monday. Oct crude oil prices on Wednesday rallied to a new 3-month high and Sep gasoline rallied to a new 4-month high: CLV2 +0.58 (+0.60%), RBU2 +0.0339 (+1.18%). Bullish factors included the sharp drop in the dollar index, economic optimism if the Fed goes ahead with QE3 in September, and the sharp 5.4 million barrel drop in U.S. crude oil inventories, which was much larger than expectations for a small drop of 300,000 barrels.
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    Today's U.S. Earnings Reports Earnings reports (ranked by market cap): CRM-Salesforce.com (Consensus $0.39), ADSK-Autodesk (0.49), HRL-Hormel Foods (0.41), SIG-Signet Jewelers (0.83), PDCO-Patterson (0.49), MCRS-Micros Systems (0.60).
    Global Financial Calendar
    

    Thursday 8/23/12
    United States
    0830 ET	Weekly initial unemployment claims expected -1,000 to 365,000, previous +2,000 to 366,000. Weekly continuing claims expected -5,000 to 3.300 million, previous -31,000 to 3.305 million.
    0830 ET	USDA weekly exports.
    1000 ET	July new home sales expected +4.3% to 365,000, June -8.4% to 350,000.
    1000 ET	June FHFA house price purchase only index expected +0.6% m/m, May +0.8% m/m. Q2 FHFA house price purchase only index expected +2.6% q/q, Q1 +0.6% q/q.
    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 Aug 28-30.
    1300 ET	Treasury auctions $14 billion 5-year TIPS.
    1630 ET	Weekly money supply report and Fed balance sheet.
    Germany
    0200 ET	Revised German Q2 GDP, previous +0.3% q/q and +1.0% y/y.
    0330 ET	German Aug PMI manufacturing expected +0.4 to 43.4, July -2.0 to 43.0.
    0330 ET	German Aug PMI services expected -0.2 to 50.1, July +0.4 to 50.3.
    Euro-Zone
    0400 ET	Euro-Zone Aug PMI composite expected unchanged at 46.5, July +0.1 to 46.5.
    1000 ET	Euro-Zone Aug consumer confidence expected -0.5 to -22.0, July -1.7 to -21.5.
    United Kingdom
    0600 ET	U.K. Aug CBI reported sales expected 18, July 11.
    Japan
    1950 ET	Japan July corporate service price index expected -0.2% y/y, Jun -0.3% y/y.

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