Barchart Morning Call 11/2

Barchart Morning Call

BC - Fri Nov 02, 7:00AM CDT

Overnight Developments

• Dec E-mini S&Ps this morning are unchanged ahead of this morning's Oct U.S. unemployment report (payrolls expected +125,000; unemployment rate expected +0.1 to 7.8%). The Euro Stoxx 50 index is virtually unchanged. Asia stocks today closed higher on support from yesterday's positive U.S. economic data with Japan up +1.17%, Hong Kong up +1.33%, and China up +0.39%. Commodity prices are mildly lower by -0.20% due in part to this morning's 0.35% rally in the dollar index. Dec crude oil is down -0.83%, Dec gasoline is down -0.05%, Dec gold is down -0.35%, Dec copper is down -0.62%, corn and soybeans are lower while the rest of the agriculture sector is higher. EUR/USD is down -0.51% on worries about whether the Greece coalition will be able to hold together to approve austerity measures. Dec 10-year T-notes are down 1 tick.
• The Eurozone final-Oct manufacturing PMI was revised slightly higher by 0.1 point to 45.4 from the preliminary report of 45.3. That left the Oct index down by 0.7 points from 46.1 in September and indicated that the Eurozone manufacturing sector contracted at a faster rate in October than in September.
• The German final-Oct manufacturing PMI was revised slightly higher by 0.3 points to 46.0 from the preliminary report of 45.7. That left the index down by 1.4 points from 47.4 in September.
• The UK Oct construction PMI report of 50.9 was up by 1.4 points from 49.5 in Sep and was substantially stronger than market expectations for a 0.5 point drop to 49.0.
• The Chinese central bank (People's Bank of China or PBOC) said in its third-quarter monetary report that the Chinese economy will maintain stable, relatively fast growth. The PBOC said it will continue to pursue a prudent monetary policy but that China will continue to firmly curb housing speculation.
• China's Securities Journal reported that China will allow small banks to have lower reserve requirement ratios in order to encourage those banks to step up their lending to smaller companies.
  Market Comments
  • Dec E-mini S&Ps this morning are unchanged as the market treads water ahead of today's Oct unemployment report. There has been little news overnight to impact the markets. The S&P 500 index on Thursday closed with a fairly sharp gain: S&P 500 +1.09%, Dow Jones +1.04%, Nasdaq +1.50%. The market was boosted by stronger-than-expected U.S. economic data and a rise in both of China's manufacturing PMI reports. The Oct U.S. ISM manufacturing index rose by +0.2 to 51.7, which was stronger than market expectations for a -0.5 point drop to 51.0. Moreover, the Oct ISM new orders sub-index rose by 1.9 points, adding to Sep's +5.2 point rise and posting a new 5-month high. Initial unemployment claims fell by 9,000 to 363,000, which showed a slightly stronger labor market than expectations for a decline to 370,000. Continuing claims rose by +4,000 to 3.263 mln. Oct ADP jobs rose +158,000, which was above expectations of +131,000, although Sep was revised lower by 48,000 to +114,000 from +162,000. The only weak U.S. report was the decline in U.S. Oct vehicle sales to 14.22 million units from 14.88 million in September, which was weaker than market expectations for a rise to 14.90 million units. China's Oct PMI from the China Federation of Logistics and Purchasing rose +0.4 points to 50.2 from 49.8 in Sep, which was in line with market expectations. Meanwhile, the Chinese Oct manufacturing PMI from HSBC rose 1.6 points to 49.5 from 47.9 and was 0.4 points stronger than the flash report and market expectations of 49.1.
  • Dec 10-year T-notes this morning are down 1 tick. Dec 10-year T-note prices on Thursday closed lower: TYZ2 -6.5, FVZ2 -0.25. T-note prices fell on the stronger-than-expected U.S. economic data and on reduced safe-haven demand with the rally in stocks.
  • The dollar index this morning is up +0.28 (+0.35%) on continued support from yesterday's firm U.S. economic data. EUR/USD is down -0.0066 (-0.51%) on cracks in the Greek coalition and squabbling among Eurozone officials about how Greece's debt load can be reduced to more realistic levels. USD/JPY is mildly higher by +0.15 (+0.19%). The dollar index on Thursday closed slightly higher: Dollar index +0.02 (+0.15%), EUR/USD -0.0017 (-0.13%), USD/JPY +0.35 (+0.44%). The dollar index received support from the stronger-than-expected U.S. economic data but was undercut by reduced safe-haven demand with the rally in stocks. EUR/USD closed slightly lower and was undercut by fresh doubts about whether the Greek parliament will be able to approve the austerity measures that are necessary to qualify for the next tranche of bailout aid.
  • Dec WTI crude oil prices this morning are down -0.72 (-0.83%) and Dec gasoline is down -0.0012 (-0.05%). Dec crude oil and gasoline prices on Thursday closed higher: CLZ2 +0.85 (+0.99%), RBZ2 +0.0033 (+0.13%). Bullish factors included the stronger-than-expected U.S. economic data and the unexpected -2.0 million barrel drop in DOE U.S. crude oil inventories versus expectations for a +1.75 million barrel increase. Meanwhile, gasoline inventories rose by +935,000 barrels and distillate inventories fell by -93,000 barrels. The refinery utilization rate rose by +0.5 points to 87.7% were it was 3.2 points above the 5-year seasonal average. On the bearish side, U.S. crude oil production rose by 0.9% to a new 17-3/4 year high of 6.669 million barrels per day.
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    Today's U.S. Earnings Reports Earnings reports (ranked by market cap): CVX-Chevron (Consensus:$2.84), HES-Hess (1.19), ED-Consolidated Edison (1.38), PPl-PPL Corp (0.67), MHP-McGraw Hill (1.31), RL-Ralph Lauren (2.15), BEAM-Beam Inc (0.55), NI-Nisource (0.04), VMC-Vulcan Materials (0.16), PNW-Pinnacle West (2.24), XEC-Cimarex Energy (0.95), LNT-Alliant Energy (1.30), NRG-NRG Energy (0.44), BPL-Buckeye Partners (0.73), NVE-NV Energy (0.88), IT-Gartner (0.35), VHI-Valhi (na), IEP-Icahn Enterprise (na), OZM-Och-Zill (0.13), DRC-Dresser-Rand (0.68), HUN-Huntsman (0.51), WTR-Aqua America (0.35), SEE-Sealed Air (0.31), USM-US Cellular (0.61), MSG-Madison Square (0.20).
    Global Financial Calendar
    

    Friday 11/2/12
    United States
    0830 ET	Oct non-farm payrolls expected +125,000, Sep +114,000. Oct private payrolls expected +124,000, Sep +104,000. Oct mfg payrolls expected -3,000, Sep -16,000. Oct unemployment rate expected +0.1 to 7.9%, Sep down -0.3 to 7.8%. Oct household employment, Sep +873,000.
    0830 ET	Oct average hourly earnings expected +0.2% m/m and +1.7% y/y, Sep +0.3% m/m and +1.8% y/y. Oct average weekly hours expected unch at 34.5 hours, Sep 34.5.
    0945 ET	Oct New York ISM index, Sep 52.9.
    1000 ET	Sep factory orders expected +4.6% m/m, Aug -5.2% m/m.
    Germany
    0455 ET	German final Oct manufacturing PMI expected no change at 45.7.
    Euro-Zone
    0500 ET	Eurozone final Oct manufacturing PMI expected no change at 45.3.
    United Kingdom
    0530 ET	UK Oct construction PMI expected -0.5 to 49.0, Sep 49.5.
    CHI
    2000 ET	China Oct non-manufacturing PMI, Sep 53.7.

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