Barchart Moring Call 12/28

Barchart Morning Call

BC - Fri Dec 28, 7:00AM CST

Overnight Developments

• March E-mini S&Ps are trading mildly lower ahead of Monday's fiscal cliff deadline. European stocks today are down -0.86%. Asian stocks closed higher today with Japan up +0.70%, Hong Kong up +0.21%, and China up +1.45%. Commodity prices are unchanged on average. Feb crude oil is up +0.28%, Feb gasoline is down -0.40%, Feb gold is down -0.19%, March copper is up +0.04%, and agriculture prices are trading mostly higher. The dollar index is up +0.29% on increased safe-haven demand going into Monday's fiscal cliff deadline. EUR/USD is down -0.44% and USD/JPY is down -0.03%. March 10-year T-note prices are up 1.5 ticks.
• President Obama this afternoon will meet with Congressional leaders at the White House to see if there is any way to avert going over the fiscal cliff. The House will convene on Sunday night for a session that can be used for a vote on any last minute compromise. Washington is generally pessimistic about a deal getting done before Monday night's deadline when tax rates rise and automatic spending cuts begin.
• Iran today began 6-day military exercises around the Strait of Hormuz as pre-announced earlier this week.
• Italy today successfully sold 5.9 billion euros of 5-year and 10-year bonds. The 10-year bond carried a bid cover ratio of 1.47, higher than 1.18 seen at the last 10-year auction on Nov 29.
• Japan's Nov industrial production fell -1.7% m/m and -5.8% y/y, which was weaker than market expectations of -0.5% m/m and -4.6% y/y.
• Japan's Nov jobless rate fell to 4.1% from 4.2% in October and showed a slightly stronger labor market than market expectations for an unchanged rate at 4.2%.
• Japan's Nov national CPI rose to -0.2% y/y from -0.4% y/y in October, which was in line with market expectations. The Tokyo Dec CPI fell to -0.6% y/y from -0.5% y/y in October and was in line with market expectations. Both CPI reports illustrated that Japan continues to struggle with deflation.
  Market Comments
  • March E-mini S&Ps this morning are down -4.75 (-0.34%) on fiscal cliff concerns. The S&P 500 index on Thursday slumped to a 3-week low and closed lower after U.S. Dec consumer confidence fell more than expected and as concerns increased that the U.S. economy may go over the fiscal cliff. Stock prices however, rose from their worst levels in mid-afternoon after Speaker Boehner said that the House of Representatives will reconvene this Sunday in an attempt to resolve the budget standoff. Stocks had opened higher after European stocks rallied on favorable Italian and French confidence indexes and after U.S. weekly jobless claims fell by a more than expected -12,000 to 350,000. Closes: S&P 500 -0.12%, Dow Jones -0.14%, Nasdaq -0.16%.
  • March 10-year T-notes this morning are up +1.5 ticks on fiscal cliff concerns. March 10-year T-note prices on Thursday rallied to a 2-week high and closed higher after U.S. Dec consumer confidence fell more than expected to a 4-month low and on concern the lack of a resolution to U.S. budget talks may push the economy into recession. Closes: TYH3 +13.5, FVH3 +6.5.
  • The dollar index this morning is up +0.23 points (+0.29%) on increased safe-haven demand as the market is now discounting a better than 50-50 chance of going over the fiscal cliff. EUR/USD is down -0.0058 (-0.44%) and USD/JPY is down -0.03 (-0.03%). The dollar index on Thursday shook off early losses and closed little changed as the larger-than-expected decline in U.S. Dec consumer confidence offset an increase in safe-haven demand for the dollar after stocks tumbled on U.S. fiscal cliff concerns. The yen posted a 2-year low against the dollar on expectations that newly sworn in Japanese prime minister Abe will begin his campaign against the BOJ to force it to ease further, a bearish factor for the yen. Closes: Dollar index -0.01 (unch), EUR/USD -0.0046 (-0.03%), USD/JPY +0.161 (+0.19%).
  • Feb WTI crude oil prices this morning are up +0.25 (+0.28%) and Feb gasoline is down -0.0111 (-0.40%). Feb crude oil and gasoline prices on Thursday posted 2-month highs early but then fell back and closed little changed after U.S. Dec consumer confidence fell more than expected to a 4-month low and after stock prices sank when Senate Majority leader Reid said "nothing's happening" in budget talks in Washington. Closes: CLG3 -0.11 (-0.12%), RBG3 +0.0008 (+0.03%). Bullish factors included (1) the favorable Italian and French confidence indexes, (2) the larger-than-expected drop in weekly U.S. initial unemployment claims, and (3) the increase in U.S. Nov new home sales to their best level in 2-1/2 years. The market consensus for Friday's weekly DOE report is for a 1.7 mln bbl decline in crude oil inventories, a +700,000 bbl rise in gasoline inventories, a 1 mln bbl decline in distillate inventories, and a 0.3 point drop in the refinery utilization rate to 91.2%. The DOE is releasing the report two days later in than usual due to the Christmas holiday.
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    Today's U.S. Earnings Reports Earnings reports (ranked by market cap): None.
    Global Financial Calendar
    

    Friday 12/28/12
    United States
    0830 ET	USDA weekly Export Sales.
    0945 ET	Dec Chicago purchasing managers index expected +0.6 to 51.0, Nov +0.5 to 50.4.
    1000 ET	Nov pending home sales expected +1.0% m/m and +10.5% y/y, Oct +5.2% m/m and +18.0% y/y.
    1100 ET	DOE Weekly Petroleum Status Report.
    1500 ET	USDA quarterly Hogs & Pigs report.

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