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OVERNIGHT MARKETS AND NEWS
Sep E-mini S&Ps (ESU16-0.61%) are down -0.67% and European stocks are down sharply by -2.09% on concern the fallout from Brexit will slow global economic growth. Late Tuesday, New York Fed President Dudley warned that the risks from Brexit could escalate if it triggers turmoil beyond the UK. A decline in European bank stocks is leading the overall market lower after BlackRock downgraded European stocks to underweight, with a negative view on the Eurozone banking sector due to fallout from Brexit. European stocks were also undercut after German May factory orders came in weaker than expected. On the positive side, mining stocks and gold producers are higher as the price of gold (GCQ16 +1.22%) rose to a 2-1/3 year high. GBP/USD is down -0.27% to a fresh 31-year low, while global government bond yields fell further into uncharted territory. The German 10-year bund yield slid to a record low of -0.205%, the UK 10-year gilt yield fell to a record low 0.729% and the U.S. 10-year T-note yield dropped to a record low 1.318%. Asian stocks settled mostly lower: Japan -1.85%, Hong Kong -1.23%, China +0.36%, Taiwan -1.61%, Australia -0.58%, South Korea -2.05%, Singapore and India closed for holiday. China's Shanghai Composite rallied to a 2-1/2 month high on speculation the government will boost measures to spur economic growth in the wake of the fallout from Brexit. Japan's Nikkei Stock Index fell to a 1-week low as exporter stocks declined after USD/JPY slid to a 1-week low, which reduces the earnings prospects of exporters.
The dollar index (DXY00 +0.04%) is down -0.05%. EUR/USD (^EURUSD) is down -0.05%. USD/JPY (^USDJPY) is down -1.39% at a 1-week low.
Sep T-note prices (ZNU16 +0.18%) are up +7.5 ticks at a 3-1/2 year nearest-futures high.
BOE Governor Carney warned that the risks from Brexit have started to crystalize and "there is the prospect of a material slowing of the economy and that the number of vulnerable households could increase due to a tougher economic outlook."
German May factory orders were unch m/m and -0.2% y/y, weaker than expectations of +1.0% m/m and +0.9% y/y.
U.S. STOCK PREVIEW
Key U.S. news today includes: (1) weekly MBA mortgage applications (previous -2.6% with purchase sub-index -3.0% and refi sub-index -2.4%), (2) May trade balance (expected -$40.0 billion, Apr -$37.4 billion), (3) Fed Governor Daniel Tarullo speaks at an event in Washington D.C. on financial regulation and monetary policy, (4) revised Jun Markit U.S. services PMI (expected unchanged at 51.3, prelim-Jun unch at 51.3), (5) Jun ISM non-manufacturing PMI (expected +0.4 to 53.3, May -2.8 to 52.9), and (6) minutes of the June 14-15 FOMC meeting.
Russell 1000 companies reporting earnings today: Walgreens Boots Alliance (consensus $1.14), MSC Industrial Direct (1.00).
U.S. IPO's scheduled to price today: none.
Equity conferences this week include: none.
OVERNIGHT U.S. STOCK MOVERS
Netflix (NFLX +1.28%) fell over 2% in pre-market trading after it was downgraded to 'Underperform' from 'Hold' at Jeffries on subscriber growth concerns,
Royal Gold (RGLD +0.44%) was upgraded to 'Buy' from 'Neutral' at Dundee with a 12-month price target of $85.
Teledyne Technologies (TDY-1.64%) was downgraded to 'Neutral' from 'Buy' at CL King with a 12-month target price of $107.
Dow Chemical (DOW-1.57%) was downgraded to 'Underperform' from 'Outperform' at CLSA.
U.S. Steel (X-3.45%) was upgraded to 'Hold' from 'Sell' at Deutsche Bank.
Harley Davidson (HOG-10.84%) was downgraded to 'Neutral' from 'Buy' at UBS.
Newmont Mining (NEM +0.10%) and Coeur Mining (CDE +1.24%) both are up over 2% in pre-market trading as the price of gold climbed to a 2-1/3 year high.
Biogen (BIIB-1.24%) rose over 1% in after-hours trading on positive carryover from Tuesday's decision by the European Commission to approve Biogen and Abbvie's Zinbryta for treating relapsing forms of multiple sclerosis.
Ventas (VTR +0.83%) said it will acquire a group of medical and life-science properties from Blackstone Group LP for $1.5 billion.
Comcast (CMCSA-0.41%) dropped over 1% in after-hours trading on negative carryover from Tuesday's session when the company said it will incorporate Netflix's web-streaming services from Comcast cable boxes.
Tesla (TSLA-1.16%) slid over 1% in after-hours trading after the Detroit Free Press reported a Tesla Model X was in Autopilot mode when it crashed and rolled over on the Pennsylvania Turnpike on July 1.
Medivation (MDVN +2.73%) gained over 1% in after-hours trading after Reuters reported that it is in talks with Sanofi and other companies after it recently rejected a raised bid from Sanofi.
September E-mini S&Ps (ESU16-0.61%) this morning are down -14.00 points (-0.67%). Tuesday's closes: S&P 500 -0.68%, Dow Jones -0.61%, Nasdaq -0.60%. The S&P 500 on Tuesday closed lower on concern about Brexit fallout after Standard Life Investments suspended trading in its 2.9 billion pound ($3.9 billion) fund after seeing a surge in redemption requests. Stocks were also undercut by weakness in energy producers after crude oil prices plunged -4.9%.
Sep 10-year T-note prices (ZNU16 +0.18%) this morning are up +7.5 ticks at a 3-1/2 year nearest-futures high. Tuesday's closes: TYU6 +26.00. FVU6 +11.00. Sep T-notes on Tuesday rose to a 1-week high and closed higher, while the 10-year T-note yield fell to an all-time low of 1.354%. T-note prices were boosted by increased safe-haven demand with the sell-off in stocks and by carryover support from a rally in UK gilts and German bunds to all-time highs. T-note also received a boost from the slightly weaker-than-expected U.S. May factory orders of -1.0% (versus expectations of -0.9%).
The dollar index (DXY00 +0.04%) this morning is down -0.052 (-0.05%). EUR/USD (^EURUSD) is down -0.0006 (-0.05%). USD/JPY (^USDJPY) is down -1.41 (-1.39%) at a 1-week low. Tuesday's closes: Dollar Index +0.517 (+0.54%), EUR/USD -0.0078 (-0.70%), USD/JPY -0.82 (-0.80%). The dollar index on Tuesday recovered from a 1-week low and closed higher on the decline in GBP/USD to a 31-year low and on weakness in EUR/USD on concern over contagion of the Brexit crisis to the rest of Europe. The dollar was undercut by safe-haven demand for the yen as USD/JPY fell to a 1-week low.
Aug WTI crude oil (CLQ16-1.33%) this morning is down -59 cents (-1.27%) at a 1-week low. Aug gasoline (RBQ16-3.12%) is down -0.0360 (-2.52%) at a 2-3/4 month low. Tuesday's closes: CLQ6 -2.39 (-4.88%), RBQ6 -0.0848 (-5.60%). Aug crude and gasoline on Tuesday closed sharply lower with Aug gasoline at a 2-1/2 month low. Crude oil prices were undercut by the stronger dollar and by news that OPEC June oil production rose +240,000 bpd to a 5-month high of 32.88 million bpd.
GLOBAL EVENT CALENDAR07/06/2016
Wednesday, July 6, 2016
Weekly MBA mortgage applications, previous -2.6% with purchase sub-index -3.0% and refi sub-index -2.4%.
May trade balance expected -$40.0 billion, Apr -$37.4 billion.
Fed Governor Daniel Tarullo speaks at an event in Washington D.C. on financial regulation and monetary policy.
Revised Jun Markit U.S. services PMI expected unchanged at 51.3, prelim-Jun unch at 51.3. Revised Jun Markit composite PMI, prelim-June +0.3 to 51.2.
Jun ISM non-manufacturing PMI expected +0.4 to 53.3, May -2.8 to 52.9.
Minutes of the Jun 14-15 FOMC meeting.
Thursday, July 7, 2016
Jun Challenger job cuts, May -26.5% y/y.
Jun ADP employment change expected +160,000, May +173,000.
Weekly initial unemployment claims expected unch at 268,000, previous +10,000 to 268,000. Weekly continuing claims expected-10,000 to 2.110 million, previous 20,000 to 2.120 million.
EIA Weekly Petroleum Status Report.
Treasury announces amount of 3-year T-notes (previous $24 billion), 10-year T-notes (previous $20 billion), and 30-year T-bonds (previous $12 billion) to be auctioned Jul 11-13.
Japan May leading index CI expected unch at 100.00. May coincident index expected -1.7 to 110.3, Apr 112.0.
Japan May labor cash earnings expected +0.5% y/y, Apr unch y/y. May real cash earnings, Apr +0.4% y/y.
German May industrial production expected +0.1% m/m and +1.5% y/y, Apr +0.8% m/m and +1.2% y/y.
UK Jun Halifax house prices expected +0.3% m/m and +7.8% 3-mo/y/y, May +0.6% m/m and +9.2% 3-mo/y/y.
UK May industrial production expected -1.0% m/m and +0.5% y/y, Apr +2.0% m/m and +1.6% y/y.
UK May manufacturing production expected -1.2% m/m and +0.4% y/y, Apr +2.3% m/m and +0.8% y/y.