Barchart Morning Call
Overnight Developments
- Global stocks are trading mixed with the European Euro Stoxx 50 index down -0.30% and March S&Ps off by -1.40 points. The dollar index weakened to its lowest level in 1-3/4 months, which has given most commodities a lift. The British pound strengthened against eh dollar after Dec UK jobless claims unexpectedly fell -4,100 to their lowest level in 21 months, while Nov Spain home sales fell -6.2% y/y, their third month of declines. Greek 10-year government bonds fell, which widened the yield spread with German bunds by 24 bp to 856 bp, after Die Zeit newspaper reported that the German government is considering a plan that would help Greece "restructure" its debt. ECB officials are toning down their threat to raise interest rates, saying financial markets have over-reacted to their change in tone on inflation when ECB Council member Nowotny said that ECB President Trichet's CPI statements were interpreted in a "one-sided-way" and that he "sees present rates adequate" for the "foreseeable future."
- The Asian stock markets today closed mostly higher with Japan up +0.36%, Hong Kong +1.10%, China +2.26%, Taiwan +1.09%, Australia +0.68%, Singapore -0.23%, South Korea +0.96%, India -0.60%. Asian technology stocks rose after US bellwethers Apple and IBM reported earnings that exceeded analyst expectations. Phoenix Television reported that an unidentified official with the PBOC said economic figures due tomorrow were leaked and will show Dec China CPI rising +4.6% y/y, right on market expectations, and that China's economy grew 10.3% last year, which would exceed market expectations of 10.2% y/y. Jan Australia consumer confidence plunged -6.4 to 104.6, its lowest level in 7 months on concern that flood damage in Queensland state will weaken the country's economy. The worst floods in 50 years in Australia may cost as much as A$20 billion ($19.9 billion), or about 1.5% of GDP, according to the Australia & New Zealand Banking Group Ltd., and prompt the RBA from raising interest rates in the foreseeable future.
- March S&Ps this morning are trading down -1.40 points. The US stock market yesterday gyrated on both sides of unchanged into early afternoon when it rallied into the close as weakness in the technology sector was offset by strength in European markets on optimism that EU leaders will increase efforts to stem the debt crisis: Dow +0.43%, S&P 500 +0.14%, Nasdaq Composite +0.38%. The Dow and S&P 500 both posted 2-1/3 year highs and the Nasdaq posted a 9-3/4 year high. Bullish factors for stocks included (1) carry-over support from a rally in European stocks on speculation EU leaders will increase efforts to stem the sovereign-debt crisis, (2) strength in energy and raw-material producers after a slide in the dollar index to a 1-3/4 month low prompted a broad-based rally in commodities, and (3) strong foreign demand for US dollar assets after the Nov long-term TIC flows increased by $85.1 billion, much larger than expectations of $40.0 billion.
- Bearish factors included (1) the slide in homebuilders on concern the housing crisis may linger after the unexpected stagnation in the Jan NAHB housing market index (unchanged at 16 versus expectations of +1 to 17), (2) weakness in technology stocks after Apple fell on leadership concerns when the company reported that CEO Steve Jobs will take a leave of absence to focus on his health, and (3) the warning from the IEA that the current price of oil is "alarming" and may endanger the recovery in the global economy.
- Apple (AAPL) rose 1.9% in pre-market trading after it reported late yesterday Q1 profit of $6.43 a share, easily surpassing analysts' estimates of $5.41 a share.
- International Business Machines (IBM) rose 2.4% in pre-market trading after it reported Q4 profit of $4.18 a share, topping analysts' estimates of $4.08 a share.
- March 10-year T-notes this morning are down -2 ticks. T-note prices yesterday erased an early rally and sold-off on an increase in inflation concerns: TYH11 -8.5, FVH11 -2.2, EDM11 +1.0. Bearish factors included (1) as increase in inflation concerns as the yield curve steepened to an all-time high after the yield spread between 2-year T-notes and 30-year T-bonds widened to a record 409 bp, the steepest since data began in 1977, (2) comments from Philadelphia Fed President Plosser who said he won't rule out raising interest rates despite unemployment remaining too high for the foreseeable future, and (3) reduced safe-haven demand for Treasuries after the S&P 500 climbed to a 2-1/3 year high. Bullish factors included (1) strong foreign demand for US Treasuries after the Nov long-term TIC data showed total foreign purchases of US Treasury notes and bonds were $61.7 billion in Nov, up from $24.7 billion in Oct, the prediction from the CIBC that the Fed will be on hold until 2013 as the US housing and labor markets struggle to recover, and (3) the unexpected stagnation in the Jan NAHB housing market index (unchanged at 16 versus expectations of +1 to 17).
- The dollar index this morning is weaker and at a 1-3/4 month low with the dollar/yen -0.32 yen and the euro/dollar +0.91 cents. The dollar index yesterday slid to a 1-3/4 month low and finished weaker on speculation Euro-Zone finance ministers will increase efforts to prevent the sovereign-debt crisis from deepening: Dollar Index -0.375, USDJPY -0.442, EURUSD +0.00142. Bearish factors included (1) a rally in the euro to a 1-month high against the dollar on speculation that European leaders will increase their efforts to stem the debt crisis after European Union Economic and Monetary Affairs Commissioner Rehn said, "We shall improve our current existing financial backstops so that the so-called market forces cannot have even the slightest doubt about our capacity to act even in the most stresses scenarios," (2) the larger-than-expected increase in the Jan German ZEW economic sentiment survey to a 6-month high, which is euro supportive, (3) strength in the British pound which climbed to a 1-3/4 month high against the dollar after Dec UK CPI matched its highest level in 2 years and fuels speculation the BOE may need to raise interest rates, and (4) the prediction from the Canadian Imperial Bank of Commerce that the Fed will be on hold until 2013 as the US housing and labor markets struggle to recover. Bullish factors included (1) comments from Philadelphia Fed President Plosser who said he won't rule out raising interest rates despite unemployment remaining too high for the foreseeable future, and (2) the larger-than-expected increase in the Nov long-tern TIC flows, which signals strong foreign demand for US dollar assets.
- February crude oil prices this morning are trading up +58 cents a barrel and February gasoline is +1.75 cents per gallon. Crude oil and gasoline prices yesterday fluctuated on either side of unchanged and finally settled lower after the IEA said that global crude supplies are ample: CLG11 -0.16, RBG11 -1.54. Feb gasoline climbed to a 2-1/3 nearest-futures high but erased its gains and finished lower. Bearish factors included (1) comments from the IEA that global oil supplies in the most developed economies still "looks relatively comfortable," with North American inventories "well above" the 5-year average, (2) IEA data that shows OPEC compliance with its late 2008 crude oil production cuts fell to 45% in Dec from 51% in Nov as the recent rise in prices encouraged OPEC members to cheat and overproduce from their quotas. Bullish factors included (1) the slide in the dollar index to a 1-3/4 month low, which boosts investment demand for commodities, and (2) the action by the IEA to raise their 2011 global oil demand forecast for a fourth month after they hiked their global oil consumption estimate for 2011 to 89.1 million barrels a day, up 360,000 barrels a day from last month's forecast.
Jim Van Meerten is a professional investor with over 40 year experience in investing in stocks, mutual funds and ETFs. He shares his knowledge on Barchart in his daily blogs -- Barchart Portfolio Blogs.
Through Marketocracy Capital Management you can have a Separately Managed Account that mirrors his Barchart Van Meerten New High portfolio.
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