Barchart Moring Call 1/7

Barchart Morning Call

BC - 1 hr 31 mins ago

Overnight Developments

• March E-mini S&Ps this morning are slightly lower by -0.09%. European stocks are down -0.35%. Asian stocks are mostly lower this morning with Japan down -0.83%, Hong Kong down -0.01%, and China up +0.46%. Commodity prices are up +0.23%. Feb crude oil is down -0.46%, Feb gasoline is down -0.54%, Feb gold is up +0.35%, March copper is down -0.83%, and agriculture prices are trading mostly higher. The dollar index is mildly higher by +0.14%. EUR/USD is down -0.26% with the outside chance of an ECB rate cut at this Thursday's ECB meeting. USD/JPY is down -0.31% on some long liquidation pressure after the recent sharp rally. March 10-year T-note prices are up 3.5 ticks.
• Global banks won a 4-year delay in fully implementing the international bank liquidity coverage ratio (LCR) as international bank regulators were afraid of sparking a credit crunch. The decision to relax bank liquidity rules is expected to boost bank profits over the short-term. Bank stocks are up by about 2% in European trading this morning.
• Former Prime Minister Berlusconi's People of Liberty Party and the Northern League renewed their partnership and will campaign together ahead of February's national election. Mr. Berlusconi said he may step back from being prime minister if the coalition wins enough votes, but he said he would be open to being finance minister. The markets would be pleased if Berlusconi does not serve in the cabinet in any capacity considering his alarming performance in his last go-around as prime minister when Italy was forced to install the current technocratic government of Mario Monti to address Italy's response to the European debt crisis.
• Washington this week will be preocupied with Obama cabinet appointments with President Obama reportedly set to pick former Senator Chuck Hagel as Defense Secretary. Mr. Obama will reportedly appoint his counterterrorism chief John Brennan as CIA chief. President Obama is expected to make those announcements this afternoon.
• Senate Minority Leader Mitch McConnell said on ABC's "This Week" program that further tax changes are off the table as part of debt ceiling negotiations with President Obama. He said, "The tax issue is finished, over, completed." President Obama recently said that any deal to cut spending would need to be balanced with tax reform and increased tax revenues.
• Philadelphia Fed President Charles Plosser on Saturday said that the Fed must defend its 2% inflation target, "either on the upside or the downside." However, he said that "small but steady deflation is not something that we should necessarily be terrified of."
• Fed Vice Chairman Janet Yellen said on Saturday that the Fed's communication policy is playing a "big role" in Fed policy considering that the Fed's benchmark interest rate is near zero. She also said that the Fed can raise its interest rate paid on excess reserves when it comes time to start reversing its monetary policy.
  Market Comments
  • March E-mini S&Ps this morning are down -1.25 points (-0.09%) as the market runs into some long liquidation pressure after last week's sharp rally and ahead of the debt ceiling battle. The S&P 500 index on Friday edged to a new 3-month high and closed mildly higher on the stronger-than-expected Nov-Dec payroll reports and ISM non-manufacturing index. Closes: S&P 500 +0.49%, Dow Jones +0.33%, Nasdaq -0.28%. The U.S. Dec unemployment rate of 7.8% was slightly higher than market expectations of +7.7%, and Nov was revised higher to 7.8% from 7.7%. Dec payrolls of +155,000 were slightly stronger than market expectations of +150,000, and Nov was revised higher to +161,000 from +136,000. Dec manufacturing payrolls showed an encouraging rise of +25,000. The Dec ISM non-manufacturing index rose +1.4 points to 56.1 from 54.7 in Nov, which was substantially stronger than market expectations of -0.6 to 54.1.
  • March 10-year T-notes this morning are up 3.5 ticks. March 10-year T-note prices on Friday posted a new 2-1/4 month low but then recovered to close just slightly lower. T-notes were undercut by the payroll and ISM non-manufacturing data and by Thursday's FOMC Dec 11-12 meeting minutes suggesting the FOMC will end QE3 sometime this year. Closes: TYH3 -3.5, FVH3 -1.75.
  • The dollar index this morning is up +0.11 points (+0.14%). EUR/USD is down -0.0034 (-0.26%) and USD/JPY is down -0.27 (-0.31%). The dollar index on Friday rallied to a new 1-1/2 month high and closed mildly higher on support from the U.S. payroll and ISM non-manufacturing report and on continued support from the FOMC minutes suggesting the FOMC will end QE3 this year. Closes: Dollar index +0.12 (+0.15%), EUR/USD +0.0020 (+0.15%), USD/JPY +0.91 (+1.04%).
  • Feb WTI crude oil prices this morning are down -0.43 (-0.46%) and Feb gasoline is down -0.0148 (-0.54%) on this morning's higher dollar index and on continued doubts about the global economy. Feb crude oil on Friday was supported by the 11.1 mln bbl plunge in U.S. crude oil inventories while Feb gasoline was undercut by the 2.569 mln bbl rise in gasoline inventories. Both crude oil and gasoline were undercut by continued strength in the dollar index, but were supported by the stronger-than-expected U.S. payroll report and ISM non-manufacturing index. Closes: CLG3 +0.17 (+0.18%), RBG3 -0.0334 (-1.19%).
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    Today's U.S. Earnings Reports Earnings reports (ranked by market cap): CMC-Commercial Metal (consensus $0.17).
    Global Financial Calendar
    

    Monday 1/7/13
    United States
    1100 ET	USDA weekly grain export inspections.
    Japan
    0000 ET	Japan Dec vehicle sales, Nov -3.3% y/y.
    Euro-Zone
    0430 ET	Eurozone Jan Sentix investor confidence expected -14.2, Dec -16.8.
    0500 ET	Eurozone Nov PPI expected -0.2% m/m and +2.4% y/y, Oct +0.1% m/m and +2.6% y/y.
    United Kingdom
    0300 ET	UK Dec Halifax house prices expected unch m/m and -0.6% y/y, Nov +1.0% m/m and -1.3% y/y.
    1901 ET	UK Dec BRC sale like-for-like expected +0.5% y/y, Nov +0.4% y/y.

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