Overnight Developments
- Dec E-mini S&Ps are mildly higher by +0.40% on support from the +0.40% rally in European stocks and positive regional election results in Spain for Prime Minister Rajoy. EUR/USD is up +0.33% on the Spanish election results, while the dollar index is down -0.16%. Global stocks have been able to shake off the negative news of the 10.3% y/y decline in Japanese exports. However, the export report hurt the yen with USD/JPY up +0.66% this morning. Asian stocks today closed mixed with Japanese stocks closing slightly higher by +0.09%. Chinese stocks closed +0.39% on continued hopes for stock market support measures before the Chinese leadership change in November. Commodity prices are up +0.26% this morning with Nov crude oil +0.68%, Dec gold +0.12%, Dec copper +0.11%, and agriculture prices trading mostly higher.
- European stocks and the euro were supported today by favorable election results for Spanish Prime Minister Rajoy's People's Party in regional elections yesterday in Galicia and the Basque Country. Mr. Rajoy's party said the results were a mandate for Mr. Rajoy's efforts to impose austerity and maintain the confidence of international investors. Market participants are hoping that Mr. Rajoy will now be more amenable to requesting a bailout since the regional elections are over.
- German Chancellor Merkel over the weekend said Ireland was a "special case" and thereby left open the possibility that Ireland may yet receive some relief from the Eurozone or the ESM on the massive bank bailout that has so far been covered solely by Irish taxpayers. ECB and Eurozone officials prevailed upon Ireland during the crisis to cover all creditors of Irish banks, thus making the bailout extremely expensive.
- Japan's Sep export shipments fell -10.3% y/y, which was weaker than market expectations of -9.9% y/y and was the biggest decline since last year's earthquake. Sep imports were up +4.1% y/y. Japan posted a trade deficit of -559 billion yen. The export breakdown was that exports to China fell -14.1% y/y, exports to Europe fell -21.1% y/y, and shipments to the U.S. rose +0.9% y/y. Japan's exports to China and indeed Japan's GDP figure overall is clearly being hurt by the territorial dispute over the islands in the East China Sea, which sparked public protests and boycotts against Japanese goods including vehicles. Japan's auto exports plunged by 14.6% in September.
- OPEC governors began a 2-day meeting
today to select a new secretary-general. There are nominees from four countries
including Iran, Iraq, Saudi Arabia and Ecuador. OPEC ministers will make a final
decision in December. The current OPEC secretary-general, Abdalla el-Badri of
Libya, is stepping down at the end of this year after serving two 3-year terms.
Market Comments- Dec E-mini S&Ps this morning are up by 5.75 points (+0.40%) on the +0.40% rally in European stocks and the Spanish election results that boosted the chances that Spain will soon request a bailout. The S&P 500 index on Friday sold off the entire day and closed sharply lower: S&P 500 -1.66%, Dow Jones -1.52%, Nasdaq 100 -2.40%. The Nasdaq posted a 2-1/2 month low. Stock prices were undercut last Friday by (1) carry-over weakness from a slide in European equities after EU leaders at a summit failed to come up with concrete financial aid solutions for Spain, (2) disappointing earnings reports from the bellwether stocks of Microsoft, McDonald's and GE, and (3) concern over growth in China after Sep Foreign Direct Investment in China fell -6.8% y/y, more than expectations of -3.5% y/y.
- Dec 10-year T-notes this morning are down 11 ticks on the higher trade in global stocks. Dec 10-year T-note prices on Friday settled higher as a fall in stocks fueled demand for the safety of Treasuries: TYZ2 +13, FVZ2 +3.5. After the decline over the past week, T-note prices bounced higher on short-covering as stocks weakened on increased concern the European debt crisis may worsen.
- The dollar index this morning is down -0.13 points (-0.16%) and EUR/USD is up +0.0043 (+0.33%) on the favorable Spanish regional election results. USD/JPY is up +0.52 (+0.66%) due to the weak Japanese exports report. The dollar index on Friday closed higher on increased safe-haven demand after equity markets plunged on increased concerns about the European debt crisis after the contentious EU Summit: Dollar index +0.254 (+0.32%), EUR/USD -0.00366 (-0.28%), USD/JPY +0.71 (+0.09%). The dollar index found support on (1) weakness in the euro after Spanish Prime Minister Rajoy said he doesn't feel his nation is under any pressure to ask for a bailout, (2) weakness in U.S. stocks, and (3) disappointment that the EU summit failed to provide clarity on potential financial aid to Spain.
- Nov WTI crude oil prices this morning are up +0.61 (+0.68%) and Nov gasoline is up 0.0099 (+0.37%) on the lower dollar index this morning and the higher trade in global stocks. Nov crude oil and gasoline prices on Friday closed lower as equity markets slumped and U.S. fuel demand weakened: CLX2 -2.05 (-2.23%), RBX2 -0.0488 (-1.78%). Bearish factors included dollar strength, the slide in the stock market and the report from the API that showed total U.S. Sep petroleum deliveries, a measure of demand, fell -3.8% y/y to 18.2 million barrels a day, the lowest level in 4 years.
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Today's U.S. Earnings Reports Earnings reports (ranked by market cap): CAT-Caterpillar (Consensus:$2.22), FCX-Freeport-McMoran (0.73), TXN-Texas Instruments (0.47), YHOO-Yahoo! (0.26), VFC-VF Corp. (3.49), STI-Suntrust Banks (0.21), WYNN-Wynn Resorts Ltd. (1.34), NLSN-Nielsen Holdings (0.50), WDC-Western Digital (2.30), BTU-Peabody Energy (0.34), CE-Celanese (0.90), WRB-WR Berkley (0.54), HAS-Hasbro (1.20), GNC-GNC Holdings (0.58), ACC-American Campus Communities (0.10), ZION-Zions Bancorp (0.34).
Global Financial Calendar
Barchart.com provides Financial Quotes, Charts and Technical Analysis for Stock and Commodity Traders.Monday 10/22/12 United States 1100 ET USDA weekly grain export inspections. 1130 ET Weekly 3-mo and 6-mo T-bill auctions. 1500 ET USDA Cold Storage report. 1600 ET USDA Crop Progress 2100 ET Obama-Romney debate at Lynn University in Boca Raton, Florida. Focus on foreign policy. Japan 0100 ET Japan Sep supermarket sales, Aug -1.3% y/y. 0130 ET Tokyo Sep department store sales, Aug +0.2% y/y. 0300 ET Japan Sep convenience store sales, Aug -1.3% y/y.
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