Overnight Developments
- Dec E-mini S&Ps are mildly higher by +0.32% with support from this morning's better-than-expected earnings report from JPMorgan. The Euro Stoxx 50 index is slightly lower by -0.06% this morning and Asian stocks today closed mixed. Commodity prices this morning are down -0.26% with Nov crude oil +0.09%, Dec gold down -0.08%, Dec copper down -0.76%, grains trading lower, and livestock/softs mixed. The dollar index is down -0.21% while EUR/USD is up +0.35% on hopes that Spain will soon formally request a bailout. USD/JPY is up +0.13% as Japanese officials this week have complained about strength in the yen and have implicitly threatened intervention. Dec 10-year T-notes are down 5 ticks.
- China's new bank lending of 623.2 billion yuan ($100 billion) was below the market consensus of 700 billion yuan. The slower level of new lending is another sign of the slower Chinese economy.
- Aug Eurozone industrial production rose +0.6% m/m, which was much stronger than market expectations for a -0.4% decline. Germany reported a decline of -0.4% while France reported an increase of 1.5% and Italy reported an increase of +1.7%.
- Japan agreed to talks with China over the disputed group of islands in the East China Sea, which was a positive step to blunt the ongoing economic damage caused by Japan's refusal to budge on its claim to sovereignty over the islands. China's finance minister and central bank chief both boycotted this week's IMF meetings in Tokyo to protest Japan's handling of the territorial dispute.
- JPMorgan Chase this morning reported Q3 EPS of $1.40, which was significantly stronger than the market consensus of $1.20. JPMorgan's stock is up about 1.5% in European trading this morning.
- Japan's Cabinet Office today in a
monthly report downgraded its assessment of the economy and said that the
economy has a weak tone due to the deceleration of the world economy.
Market Comments- Dec E-mini S&Ps this morning are trading +0.32% on the positive JPMorgan earnings report and on a more positive tone after yesterday's drop in initial unemployment claims, although most of that drop may have been due to seasonal adjustment problems in one particular state. The S&P 500 index on Thursday closed little changed after an early rally faded: S&P 500 +0.02%, Dow Jones -0.14%, Nasdaq 100 -0.34%. Bullish factors included (1) the sharp 30,000 drop in initial unemployment claims to a new 4-3/4 year low, although much of that decline may have been due to seasonal adjustment problems tied to end-quarter in one state, (2) Citigroup's upgrade of U.S. equities to overweight, and (3) Italy's successful 3-year bond auction and the 9 bp drop in the 10-year Italian bond yield. Bearish factors included (1) S&P's downgrade late Wednesday of Spain's credit rating by two notches to BBB-, leaving it just one notch above junk, and (2) underlying market concerns about slow global economic growth and the Q3 earnings season that picks up steam next week.
- Dec 10-year T-notes this morning are down 5 ticks on higher E-mini S&Ps and some improved confidence in Europe. Dec 10-year T-note prices on Thursday closed higher: TYZ2 +2.5, FVZ2 +0.5. T-note prices closed slightly higher on some post-refunding relief after the conclusion of Thursday's 30-year bond auction and the week's $66 billion coupon package. Demand was very solid for the 3-year and 10-year securities, although demand for the 30-year was a little disappointing.
- The dollar index this morning is mildly lower by -0.17 points (-0.21%). EUR/USD is up +0.0045 (+0.35%) on the +0.6% increase in Eurozone industrial production and continued hopes that Spain will soon ask from a bailout. USD/JPY is slightly higher by +0.10 (+0.13%). The dollar index on Thursday closed mildly lower: Dollar index -0.14 (-0.17%), EUR/USD +0.0053 (+0.41%), USD/JPY +0.16 (+0.20%). EUR/USD was supported on Thursday by the successful Italian 3-year bond auction and the 9 bp decline in the Italian bond yield.
- Nov WTI crude oil prices this morning are slightly higher by +0.08 (+0.09%) while Nov gasoline is sharply lower by -0.0385 (-1.30%). Nov crude oil and gasoline prices closed mixed on Thursday: CLX2 +0.82 (+0.90%), RBX2 -0.0037 (-0.13%). Crude oil prices received support from the sharp drop in initial unemployment claims, which was a positive indicator for the economy. The weekly DOE report was mixed and showed a slightly bearish +1.672 million barrel increase in crude oil inventories (versus expectations of +1.5 million barrels), a mildly bullish -534,000 barrel decline in gasoline inventories (versus expectations of -250,000), and a bullish -3.177 million barrel decline in distillate inventories (versus expectations for a -1 million barrel decline). The refinery operating rate fell by 1.5 points to 86.7%, where it was still 2.5 points above the 5-year average and indicated that even with the recent refinery disruptions, the overall U.S. refinery operating rate is still relatively high as refiners take advantage of profitable crack spreads. On the bearish side, the DOE also reported that U.S. oil production in the latest reporting week rose sharply by 1.2% to a new 17-1/2 year high and that gasoline consumption fell by -0.5% and is well below the 5-year average.
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Today's U.S. Earnings Reports Earnings reports (ranked by market cap): WFC-Wells Fargo (Consensus:$0.87), JPM-JPMorgan ((1.20), WBS-Webster Financial (0.46).
Global Financial Calendar
Barchart.com provides Financial Quotes, Charts and Technical Analysis for Stock and Commodity Traders.Friday 10/12/12 United States 0830 ET Sep PPI expected +0.8% m/m and +1.8% y/y, Aug +1.7% m/m and +2.0% y/y. Sep core PPI expected +0.2% m/m and +2.5% y/y, Aug +0.2% m/m and +2.5% y/y. 0955 ET Early-Oct U.S. consumer confidence (University of Michigan) expected -0.3 to 78.0, Sep +4.0 to 78.3. 1235 ET Richmond Fed President Jeffery Lacker speaks on "Challenges to Economic Growth" at University of Virginia in Charlottesville, VA. Euro-Zone 0500 ET Eurozone Aug industrial production expected -0.4% m/m and -4.1% y/y, July +0.6% m/m and -2.3% y/y.
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