Tuesday, December 11, 2012

Barchart Morning Call 12/11

Overnight Developments
  • Dec E-mini S&Ps this morning are slightly higher by +0.18% on optimism that the FOMC at its 2-day meeting that begins today will boost its QE3 program to $85 billion per month. European stocks are up +0.59% on optimism that the Greek bond buyback program may have been successfully completed today and about today's stronger-than-expected German Zew economic sentiment index. Greek stocks are up +1.89% today. Asian stocks closed mixed today with Japan down -0.09%, Hong Kong +0.21%, and China -0.55%. Commodity prices are slightly higher by +0.09% this morning with Jan crude oil +0.51%, Jan gasoline +0.64%, Feb gold -0.05%, March copper -0.18%, and agricultural prices trading mostly lower. The dollar index is mildly lower by -0.25% on today's higher trade in U.S. and European stock indexes. EUR/USD is up +0.39%. March 10-year T-note prices are down 6 ticks.
  • The markets are looking ahead to the outcome of the 2-day FOMC meeting that begins today. The market consensus is that the FOMC will announce a program of buying an outright $45 billion per month of longer-term Treasury securities to replace the expiring Operation Twist program. That expected decision would boost the Fed's QE3 program to $85 billion per month from the current $40 billion per month.
  • North Korea may be disassembling the rocket it planned to launch this week, according to the South Korean media outlet YTN. North Korea may have encountered technical difficulties with the rocket that the North Korean government now says will be launched after Dec 29.
  • Greek officials are expressing confidence that they will obtain sufficient bids for the Greek bond buyback auction to satisfy the plan to buy a nominal 30 billion euros of Greek bonds. Greek officials extended the deadline to tender the bonds until noon London time today since they were about 3 billion euros short of bond purchases as of last Friday's deadline. Eurozone finance ministers are hoping to give final approval to the revised Greek bailout at their meeting this Thursday.
  • Chinese new Nov bank lending of 522.9 billion yuan was up from 505 billion yuan in October but was a little below market expectations of 550 billion yuan.
  • China's Nov M2 growth of +13.9% y/y was a little below expectations and Oct's rate of +14.1%, which was a slightly bearish indicator for the Chinese economy.
  • The German Dec Zew economic sentiment index rose sharply to 6.9 from -15.7 in November and was much stronger than market expectations of -11.5. German investor and analyst confidence improved mainly on the progress on getting Greece stabilized into early 2013 and on expectations that the German and Eurozone economy will improve next year. The current situation index, however, only crept higher to 5.7 from 5.4 in Nov and was a little weaker than market expectations of 6.0. The Eurozone Dec Zew confidence index rose to 7.6 from -2.6 in Nov.
    Market Comments
    • Dec E-mini S&Ps this morning are trading slightly higher by +2.50 points (+0.18%) on today's 0.59% rally in European stocks and on optimism about today's stronger-than-expected German Dec Zew confidence index. The S&P 500 index closed mildly higher on Monday on the Obama-Boehner meeting on Sunday and Saturday's stronger-than-expected Chinese Nov industrial production report (+10.1% y/y) and retail sales report (+14.9% y/y), but was undercut by the sharp 29 bp increase in the Italian 10-year bond yield to 4.81% on Italian Prime Minister Monti's resignation announcement and a weaker-than-expected Chinese Nov exports report of +2.9% y/y. Closes: S&P 500 +0.48%, Dow Jones +0.11%, Nasdaq +0.27%.
    • March 10-year T-notes this morning are down -6 ticks on reduced safe-haven demand with today's higher trade in U.S. and European stock indexes. March 10-year T-note prices on Monday closed slightly higher on optimism that the FOMC at this week's meeting will announce a $45 billion per month purchase program of longer-term Treasury securities to replace its expiring Operation Twist program. Closes: TYH3 +2, FVH3 +0.75.
    • The dollar index this morning is mildly lower by -0.20 points (-0.25%) on reduced safe-haven demand with the rally in U.S. and European stock indexes. EUR/USD is up +0.0051 (+0.39%) on the improvement in the German and Eurozone Dec Zew economic sentiment indexes and on optimism that the Greek bond buyback plan will be successful. USD/JPY is up +0.10 (+0.12%). The dollar index on Monday closed slightly lower on some long liquidation pressure from last Friday's 2-week high and on weakness in EUR/USD tied to the 29 bp surge in the 10-year Italian bond yield due to Prime Minister Monti's agreement to resign once the 2013 budget law is approved. Closes: Dollar index -0.08 (-0.10%), EUR/USD +0.0014 (+0.11%), USD/JPY -0.13 (-0.16%).
    • Jan WTI crude oil prices this morning are up +0.44 (+0.51%) and Jan gasoline is up +0.0165 (+0.64%) on the lower dollar index and on the higher trade in U.S. and European stock indexes. Jan crude oil and gasoline prices on Monday settled mixed as crude oil saw continued technical weakness after last week's sell-off. The market shook off bullish news of a +0.3% increase in German exports and a 6-month high in Chinese Nov crude oil imports. Closes: CLF3 -0.37 (-0.43%), RBF3 +0.0007 (+0.03%). The market consensus for Wednesday's DOE report is for a 2.5 million barrel decline in crude oil inventories, a 2.0 million barrel increase in gasoline inventories, and a 1.5 million barrel increase in distillate inventories. U.S. refineries are running at the very high utilization rate of 90.6% as refineries try to capture high refining profit margins, accounting for the drawdown in crude oil inventories and the increase in product inventories.
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      Today's U.S. Earnings Reports Earnings reports (ranked by market cap): DG-Dollar General (Consensus:$0.60), GEOS-Geospace Tech (0.64), CNSI-Comverse (0.78%).
      Global Financial Calendar
      Tuesday 12/11/12
      United States
      0830 ET U.S. Oct trade deficit expected -$42.5 bln, Sep -$41.5 bln.
      0830 ET USDA WASDE report.
      1000 ET Oct wholesale inventories expected +0.4% m/m, Sep +1.1% m/m.
      1300 ET Treasury auction of $32 billion in 3-year T-notes.
      n/a FOMC 2-day meeting begins.
      1630 ET API weekly U.S. oil statistics.
      0200 ET German Nov wholesale price index, Oct -0.6% m/m and +4.6% y/y.
      0500 ET German Dec Zew current situation index expected 6.0, Nov 5.4. Dec Zew economic sentiment index expected at -11.5, Nov -15.7.
      0500 ET Eurozone Dec Zew economic sentiment index, Nov -2.6.
      1850 ET Japan Oct machine orders expected +3.0% m/m and -6.2% y/y, Sep -5.0% m/m and -7.8% y/y.
      1850 ET Japan Oct tertiary industry index expected -0.4% m/m, Sep +0.3% m/m.
      1850 ET Japan Nov domestic CGPI expected unch m/m and -0.9% y/y, Oct -0.3% m/m and -1.0% y/y.
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