Barchart Morning Call 12/6

Barchart Morning Call

BC - Thu Dec 06, 7:00AM CST

Overnight Developments

• Dec E-mini S&Ps this morning are little changed as the market awaits fiscal cliff developments and tomorrow's U.S. Nov unemployment report. European stocks are up +0.24% on support from a strong German Oct factory orders report of +3.9% m/m. The ECB today left its policy unchanged as expected. Asian stocks are mixed with Japan closing up +0.81% today but with Hong Kong closing -0.09% and China closing -0.19%. Commodity prices today are trading slightly higher by +0.11%. Jan crude oil is up +0.15%, Jan gasoline is up +0.60%, Feb gold is up +0.06%, March copper is down -0.24%, and agriculture prices are mixed. The dollar index and EUR/USD are little changed. March 10-year T-note prices are up 2.5 ticks.
• The ECB at its meeting today left its policy unchanged with its refinancing rate at 0.75%. The ECB's unchanged policy was in line with market expectations as the ECB waits to see if the Eurozone economy will start to recover now that the Eurozone debt crisis has been stabilized for the time being. Eurozone officials have stabilized the debt crisis for now with the revised Greek bailout plan and with the ECB/ESM bailout program that is available for Spain and Italy if it is needed. ECB President Draghi will hold a press conference at 8:30 AM ET and the ECB will release updated economic forecasts.
• The Bank of England today left its monetary policy unchanged with the base rate at 0.50% and its asset purchase target unchanged at 375 billion pounds. As expected, the BOE did not restart its bond purchase plan due to above-target inflation and doubts about the effectiveness of additional quantitative easing. However, the BOE left the door open to additional QE in the future if it is needed.
• The Eurozone Q3 GDP report was left unrevised at -0.1% q/q and -0.6% y/y as expected.
• The German Oct factory orders report of +3.9% m/m and -2.4% y/y was substantially stronger than market expectations of +1.0% m/m and -5.6% y/y and was a big improvement over Sep's report of -2.4% m/m and -3.9% y/y.
• The UK Oct visible trade deficit of -9.539 billion pounds was wider than market expectations of -8.650 billion pounds and Sep's revised -8.439 billion pounds, which was mildly bearish for GDP/USD.
  Market Comments
  • Dec E-mini S&Ps this morning are little changed with some support from the strong German factory orders report and yesterday's news that a group of Republicans favor a fiscal cliff compromise. The S&P 500 index on Wednesday closed slightly higher on (1) stronger-than-expected factory orders and ISM non-manufacturing reports, (2) the sharp rally in Chinese stocks on policy support measures, and (3) some optimism about the fiscal cliff as a few dozen Republicans said they would support higher tax rates. Nasdaq was dragged lower by a 6.4% sell-off in Apple on indications that Nokia is gaining ground in China. Closes: S&P 500 +0.16%, Dow Jones +0.64%, Nasdaq -1.12%. ADP reported its Nov job growth figure at +118,000, which was down from Oct's +158,000 but close to expectations of +125,000. Oct factory orders rose +0.8%, which was stronger than market expectations of unchanged. The U.S. ISM non-manufacturing index rose by +0.5 to 54.7, which was stronger than market expectations for a -0.7 point decline to 53.5. Chinese stocks rallied sharply after Chinese regulators said they will expand the ability of insurers to invest in commercial banks. In addition, top Chinese party leaders at a meeting agreed to promote urbanization and stimulate domestic demand, according to Xinhua news agency.
  • March 10-year T-notes this morning are up 2.5 ticks. March 10-year T-note prices on Wednesday closed higher on continued concerns about the fiscal cliff and shook off bearish factors that included the slightly higher close in stocks and the stronger than expected U.S. economic reports. Closes: TYH3 +7, FVH3 +2.75.
  • The dollar index this morning is slightly higher by +0.03 (+0.03%) and EUR/USD is virtually unchanged. USD/JPY is down -0.12 (-0.15%). The dollar index on Wednesday closed mildly higher on the stronger-than-expected U.S. economic data and on some short-covering after the fairly sharp 2-week sell-off. EUR/USD fell on a disappointing Spanish bond auction and on the weak Eurozone retail sales report. Closes: Dollar index +0.13 (+0.16%), EUR/USD -0.0026 (-0.20%), USD/JPY +0.57 (+0.70%).
  • Jan WTI crude oil prices this morning are up +0.13 (+0.15%). Jan gasoline is up +0.0158 (+0.60%) on some short-covering after yesterday's sharp sell-off. Jan crude oil and gasoline prices on Wednesday closed lower after the DOE report showed a very sharp 7.9 mln bbl increase in gasoline inventories that was even larger than Tuesday's API increase of +5.7 mln bbl. In addition, DOE distillate inventories rose +3.027 mln bbl vs expectations of +850,000. Crude oil inventories showed a supportive -2.357 mln bbl decline versus expectations of -500,000 bbl. The refinery utilization rate rose sharply by 2.0 points to 90.6%. Closes: CLF3 -0.62 (-0.70%), RBF3 -0.0512 (-1.90%).
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    Today's U.S. Earnings Reports Earnings reports (ranked by market cap): LULU-Lulylemon (Consensus:$0.37), HRB-H&R Block (-0.41), COO-Cooper (1.55), PANW-Palo Alto Networks (0.03), SFD-Smithfield Foods (0.43).
    Global Financial Calendar
    

    Thursday 12/6/12
    United States
    0730 ET	Nov Challenger job cuts, Oct +11.6% y/y.
    0830 ET	Weekly initial unemployment claims expected -13,000 to 380,000, previous -23,000 to 393,000. Weekly continuing claims expected -12,000 to 3.275 mln, previous -70,000 to 3.287 mln.
    0830 ET	USDA weekly Export Sales.
    0900 ET	Treasury announces details of Dec 11-13 package of 3, 10, and 30-year securities.
    1200 ET	Q3 US household wealth change, Q2 -$322 bln.
    1630 ET	Weekly money supply report and Fed balance sheet.
    Euro-Zone
    0500 ET	Revised Eurozone Q3 GDP expected unrevised at -0.1% q/q and -0.6% y/y.
    0745 ET	ECB announces interest rate decision (2-week refinancing rate expected unchanged at 0.75%).
    0830 ET	ECB President Mario Draghi speaks at monthly press conference.
    Germany
    0600 ET	German Oct factory orders expected +1.0% m/m and -5.6% y/y, Sep -3.3% m/m and -4.7% y/y.
    United Kingdom
    0430 ET	UK Oct visible trade balance expected -8.650 bln pounds, Sep -8.368 bln pounds. Oct non-EU trade balance expected -4.2 bln pounds, Sep -3.972 bln pounds. Oct total trade balance expected -3.0 bln pounds, Sep -2.699 bln pounds.
    0700 ET	BOE announces interest rate decision (base rate expected unchanged at 0.50% and no change expected in the 375 billion pound asset purchase target).

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