Barchart Morning Call
Overnight Developments
Global Financial Calendar
- Global stocks are trading lower with the European Euro Stoxx 50 index down -0.86% and March S&Ps down -7.70 points. As expected, the BOE held its benchmark interest rate at 0.50% and maintained its asset purchase plan at 200 billion pounds. The dollar rallied and most commodities fell on an increase in European sovereign debt concerns after the yields on Portuguese government bonds rose to records. The yield on the 10-year Portuguese bond climbed to 7.64%, the highest since the introduction of the euro in 1999, before the yield backed off to 7.36% when the ECB came in to purchase Portuguese debt. A nearly 8% plunge in Cisco Systems in after-hours trading is leading US stock futures lower after the company posted a gross margin that missed analysts' estimates. In Europe, Air France sank 6.8% after it reported an unexpected loss in Q3 of 46 million euros and cut its full-year forecast, while Credit Suisse fell 4.3% after saying that Q4 net income rose to 841 million francs ($873.1 million), below analysts' estimates of 928 million francs. Limiting European stock declines was the 3.9% gain in Deutsche Boerse as the company's acquisition of NYSE Euronext would create the world's biggest exchange operator with a combined host of publicly traded companies worth about $15 trillion, or 28% of global stock market value, according to Bloomberg data.
- The Asian stock markets today closed mostly lower with Japan down -0.11%, Hong Kong -1.97%, China +2.08%, Taiwan -1.89%, Australia +0.20%, Singapore -1.50%, South Korea -1.97%, India -0.74%. Comments yesterday from Fed Chairman Bernanke that US unemployment may remain high "for some time" is undercutting Asian stocks on concern that the US recovery may struggle and demand for Asian goods may wane. Dec Japan machine orders rose +1.7% m/m, their first increase in 4 months, but weaker than the +5.0% m/m expected. Losses in Japanese stocks were limited as the yen fell to a 1-1/2 week low against the dollar and lifted exporters. China's Shanghai Stock Index closed higher as investors snapped up bargains in banks and property shares that tumbled following the recent sell off sparked by China's interest rate hike.
- March S&Ps this morning are trading down -7.70 points. The US stock market yesterday settled mixed as positive earnings results offset comments from Fed Chairman Bernanke that unemployment is likely to remain elevated: Dow +0.06%, S&P 500 -0.28%, Nasdaq Composite -0.29%. The Dow posted a 2-1/2 year high and the Nasdaq rose to a 9-3/4 year high. Bearish factors included (1) comments from Fed Chairman Bernanke who said the US unemployment rate is likely to remain high "for some time," which may keep the US economy from expanding at its full potential, (2) weakness in energy and raw materials producers on concern China's demand for commodities will decline as it keeps increasing interest rates, and (3) data from the MBA that showed the average rate for a 30-year fixed mortgage rose to a 10-month high of 5.13% last week, which may further depress US housing activity and overall economic growth.
- Bullish factors for stocks included (1) comments from Treasury Secretary Geithner who said the US economic "recovery is accelerating" and that the US is growing twice as fast as Europe or Japan, (2) continued strong company earnings results with 74% of the 319 S&P 500 companies that have reported quarterly results since Jan 10 have beaten market expectations, and (3) reduced interest rate concerns after the yield on the 10-year T-note fell 12 bp from a 9-1/2 month high yield.
- Cisco Systems (CSCO) tumbled 7.9% in pre-market trading after the company forecast Q3 earnings of as little as 38 cents a share, below analysts' estimates of 40 cents.
- March 10-year T-notes this morning are trading down -1.5 ticks. T-note prices yesterday recovered from a 7-1/2 month low and closed higher after Fed Chairman Bernanke said US job growth will remain sluggish along with strong foreign demand for the Treasury's 10-year T-note auction: TYH11 +19, FVH11 +11.2, EDM11 +1.5. The 10-year T-note yield rose to a 9-1/2 month high of 3.766% but fell back and closed 12 bp lower at 3.640%. Bullish factors included (1) comments from Fed Chairman Bernanke who said US unemployment will "remain elevated for some time," which suggests the Fed will keep its quantitative easing program in place through June and may even expand it, (2) strong foreign demand for the Treasury's $24 billion 10-year T-note auction in which indirect bidders, a class of investors that includes foreign central banks, bought 71.3% of the T-notes, well ahead of the 12-auction average of 44.3% and the highest since 2003, and (3) the Fed's action to purchase $7.51 billion of Treasuries as part of its QE2 asset-purchase program. Bearish factors included (1) comments from Treasury Secretary Geithner who said the US economic "recovery is accelerating" and that the US is growing twice as fast as Europe or Japan, and (2) supply pressures ahead of the Treasury's $16 billion auction of 30-year T-bonds on Thursday.
- The dollar index this morning is higher with the dollar/yen +0.46 yen and the euro/dollar -1.08 cents. The dollar index yesterday weakened and closed lower after Fed Chairman Bernanke told the House Budget Committee that high US unemployment will persist: Dollar Index -0.358, USDJPY -0.014, EURUSD +0.01072. Bearish factors for the dollar included (1) comments from Fed Chairman Bernanke who said the US unemployment rate is likely to remain high "for some time," which is dollar bearish as it may prompt the Fed to keep its quantitative easing measures intact and possibly expand them, and (2) the increase in the 10-year German bund yield to a 1-year high of 3.315%, which benefits the euro's interest rate differentials. Bullish factors included (1) the report from Reuters that well-known monetary policy hawk Axel Weber will drop out of the race to succeed Jean-Claude Trichet as head of the ECB, which is euro negative as rate-hike expectations were reduced, and (2) comments from Treasury Secretary Geithner who said the US economic "recovery is accelerating" and that the US is growing twice as fast as Europe or Japan.
- March crude oil prices this morning are trading down -44 cents a barrel and March gasoline is -0.57 of a cent per gallon. Crude oil and gasoline prices yesterday gyrated on both sides of unchanged and settled mixed as a weaker dollar offset the rise in US gasoline supplies to a nearly 21-year high: CLH11 -0.23, RBH11 +3.18. Bullish factors included (1) the weaker dollar, which boosts investment demand for commodities, and (2) the action by pirates to hijack a US bound supertanker of Kuwaiti oil off the coast of Oman, which may increase the costs of shipping oil as insurance rates rise and shippers take longer routes to avoid pirate filled waters. Bearish factors included (1) comments from Fed Chairman Bernanke who said the US unemployment rate is likely to remain high "for some time," which may keep US economic growth and energy demand stagnant, (2) the larger-than-expected increase in US gasoline inventories (+4.66 million bbl to 240.9 million bbl, the highest since March 1990 and more than expectations of +2.7 million bbl), (3) slack gasoline demand, as measured by deliveries to wholesalers, which fell -0.3% to 8.52 million barrels a day, the lowest level in a year, and (4) the unexpected increase in distillate supplies (+288,000 bbl versus expectations of a -1.0 million bbl decline).
Global Financial Calendar
| Thursday 2/10/11 | |
|---|---|
| United States | |
| 0830 ET | Weekly initial unemployment claims expected ?5,000 to 410,000, previous ?42,000 to 415,000. Weekly continuing claims expected ?25,000 to 3.900 million, previous 84,000 to 3.925 million. |
| 1000 ET | Dec wholesale inventories expected +0.7%, Nov ?0.2%. |
| 1100 ET | Treasury announces amount of 30-year TIPS to be auctioned Feb 17 (previous $7 billion). |
| 1245 ET | Atlanta Fed President Dennis Lockhart speaks as part of an international forum at an event hosted by the Consulate General of Switzerland titled ?Balancing Act: A Dialogue on Public Debt and Fiscal Policy.? |
| 1300 ET | Treasury auctions $16 billion 30-year T-bonds. |
| 1400 ET | Jan monthly budget statement expected -$55.0 billion, Dec -$79.996 billion. |
| 1630 ET | Weekly money supply report and Fed balance sheet. |
| France | |
| 0245 ET | Dec French industrial production expected ?0.3% m/m and +5.7% y/y, Nov +2.3% m/m and +6.0% y/y. |
| 0245 ET | Dec French manufacturing production expected ?0.2% m/m and +6.0% y/y, Nov +2.2% and +5.1% y/y. |
| Euro-Zone | |
| 0400 ET | ECB publishes monthly report for Feb. |
| United Kingdom | |
| 0430 ET | Dec UK industrial production expected +0.5% m/m and +3.7% y/y, Nov +0.4% m/m and +3.3% y/y. |
| 0430 ET | Dec UK manufacturing production expected +0.4% m/m and +5.4% y/y, Nov +0.6% m/m and +5.6% y/y. |
| 0700 ET | BOE announces interest rate decision and asset purchase target (expected no change to the 0.50% benchmark rate or to the 200 billion pound asset purchase target). |
| Canada | |
| 0830 ET | Dec Canada new housing price index expected +0.2% m/m, Nov +0.3% m/m. |
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