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Overnight Developments
Global Financial Calendar
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- Global stocks are trading higher with the European Euro Stoxx 50 index up +0.86% and March S&Ps up +9.70 points. The dollar is stronger and crude oil is slightly higher, but less of a concern after Saudi Arabia and the IEA said yesterday that they could compensate for any disruption to crude oil supplies caused by the turmoil in Libya. The British pound fell to a 1-week low against the dollar after Q4 UK GDP was revised weaker to -0.6% q/q and +1.5% annualized from the originally reported -0.5% q/q and +1.7% annualized. The euro weakened against the dollar after European retail sales failed to increase for the first time in 4 months in Feb after the Feb Euro-Zone Markit Economics gauge of retail sales fell -5.9 to 49.9. A bullish factor for European stocks was the stronger than expected Jan French consumer spending which fell -0.5% m/m, stronger than expectations for a -0.7% m/m decline. Russia's central bank unexpectedly raised its discount rate by 25 bp to 8.00% and the overnight deposit rate to 3.00% starting Feb 28 and Bank Rossii also decided to raise banks' reserve requirements starting Mar 1 in an attempt to curb inflation.
- The Asian stock markets today closed higher with Japan up +0.71%, Hong Kong +1.82%, China +0.21%, Taiwan +0.68%, Australia +0.57%, Singapore +1.75%, South Korea +0.62%, India +0.38%. Japan's deflation eased to the slowest pace in 21 months after the Jan Japan national CPI ex-fresh food slipped -0.2% y/y, stronger than expectations of a -0.3% y/y decline, as increases in global energy and food prices prompted companies to raise prices. Information-technology companies led gains in Asia-Pacific markets with Hynix Semiconductor, the world's second-largest maker of computer chips, closing up 4.1% after LIG Investment & Securities said contract prices for chips may rise in March and analysts will increase their Q1 earnings estimates for the company. Elpida Memory, the world's third-biggest maker of computer-memory chips, ended 6.4% higher after it scrapped plans to merge with Taiwanese memory makers because of opposition from the target companies. Toyota advanced 2.2% and led gains in automakers after Credit Suisse lifted its rating on the carmaker to "outperform" from "neutral."
- March S&Ps this morning are trading up +9.70 points as concerns over global crude supplies ease. The US stock market yesterday traded lower early on concern that rising energy prices will derail the global economy but erased most of its losses and settled mixed after crude oil prices erased their gains and finished lower: Dow -0.31%, S&P 500 -0.10%, Nasdaq Composite +0.55%. The S&P 500 and the Dow fell to 3-week lows. Bearish factors included (1) the surge in crude oil to a 2-1/3 year high, which may hurt global economic growth as businesses and consumers pay more for fuel costs, although crude did sell-off late in the day and settled lower, (2) continued geo-political concerns as civil unrest in North Africa and the Middle East threatens global stability and may reduce economic growth prospects, (3) the larger-than-expected decline in Jan US new home sales (-12.6% to 284,000 versus expectations of -7.3% to 305,000), and (4) the larger-than-expected decline in home prices after the Dec FHFA house price index fell -0.3% m/m, versus expectations of -0.1% m/m, and the Q4 FHFA house price index dropped -0.8% q/q, versus expectations of -0.6% q/q.
- Bullish factors for stocks included (1) the larger-than-expected decline in weekly initial unemployment claims (-22,000 to 391,000 versus expectations of -5,000 to 405,000), (2) reduced interest rate concerns after the yield on the 10-year T-note slipped to a 3-week low, and (3) the late-day sell off in crude oil after the IEA said it is ready to release emergency stockpiles if needed.
- Boeing (BA) jumped 5% in European trading after the Pentagon said late yesterday that the company beat out EADS for the $35 billion program to supply the US Air Force with 179 refueling airplanes.
- March 10-year T-notes this morning are trading down -6.5 ticks. T-note prices yesterday posted a 3-week high and remained in positive territory the entire day as escalating violence in Libya boosted safe-haven demand for Treasuries: TYH11 +7.5, FVH11 +3.7, EDM11 +1.0. Bullish factors included (1) increased safe-haven demand for Treasuries on concern the violence in Libya may spread to other oil-producing countries in the region and further boost oil prices, (2) the larger-than-expected decline in Jan US new home sales (-12.6% to 284,000 versus expectations of -7.3% to 305,000), (3) the larger-than-expected decline in home prices after the Dec FHFA house price index fell -0.3% m/m, versus expectations of -0.1% m/m, and the Q4 FHFA house price index dropped -0.8% q/q, versus expectations of a -0.6% q/q decline, and (4) the Fed's purchase of $5.008 billion of Treasuries as part of its QE 2 asset-purchase program. Bearish factors included (1) the larger-than-expected decline in weekly initial unemployment claims (-22,000 to 391,000 versus expectations of -5,000 to 405,000), and (2) comments from St. Louis Fed President Bullard who said that since November the risk of deflation has fallen and inflation expectations have increased, which may merit a reduction in the Fed's QE 2 asset-purchase program.
- The dollar index this morning is trading higher with the dollar/yen unchanged and the euro/dollar -0.13 cents. The dollar index yesterday fell to a 3-week low on concerns the surge in energy prices will slow the US economy along with hawkish comments from ECB Council member Weber: Dollar Index -0.352, USDJPY -0.620, EURUSD +0.00517. Bearish factors included (1) concern that the jump in crude prices to a 2-1/3 year high will derail the US economic recovery, and (2) strength in the euro which climbed to a 3-week high against the dollar after ECB Council member Weber said "interest rates know only one direction, and that is north," which hints the ECB may be preparing the markets for an interest rate hike. Bullish factors included (1) increased safe-haven demand for the dollar as the stock market slumped on continued unrest in North Africa and the Middle East, and (2) comments from St. Louis Fed President Bullard who said that since November the risk of deflation has fallen and inflation expectations have increased, which may merit a reduction in the Fed's QE 2 asset-purchase program.
- April crude oil prices this morning are trading up +22 cents barrel and April gasoline is +0.54 of a cent per gallon. Crude oil and gasoline prices yesterday rallied sharply for a third day to 2-1/3 year highs on a reduction in Libyan oil output but shed their gains and finished mixed after the IEA said it is ready to release emergency stockpiles if needed: CLJ11 -$0.82, RBJ11 +0.72. Bullish factors included (1) the estimation from Goldman Sachs that the civil unrest in Libya has caused it to lose 1 million bbl of its 1.6 million bbl of daily crude output, (2) concern that civil unrest in North Africa and the Middle East will spill over into major oil-producing countries in the region, (3) the fall in the dollar index to a 3-week low, which bolsters investment demand for commodities, and (4) the unexpected decline in weekly gasoline inventories which fell for the first time this year (-2.80 million bbl versus expectations of +850,000 bbl). Bearish factors include (1) the statement from the IEA that it will release its emergency stockpiles of crude into the market if needed, (2) Saudi Arabia's pledge to make up for any lost Libyan crude production if the need arises, and (3) the larger-than-expected decline in Jan US new home sales, which indicates that housing may continue to be a drag on the US economy and fuel demand.
Global Financial Calendar
| Friday 2/25/11 | |
|---|---|
| United States | |
| 0830 ET | Revised Q4 GDP expected +3.3% annualized, previous +3.2% annualized. Q4 personal consumption expected +4.2%, previous +4.4%. Q4 GDP price index, previous +0.3%. Q4 core PCE deflator, previous +0.4% q/q. |
| 0955 ET | Final Feb U.S. University of Michigan consumer confidence expected +0.3 to 75.4, previous +0.9 to 75.1. |
| 1015 ET | Richmond Fed President Jeffrey Lacker and Fed Governor nominee Peter Diamond comment on a report on bank stress tests at the University of Chicago Booth School of Business?s annual U.S. Monetary Policy Forum. |
| 1330 ET | Fed Vice Chairman Janet Yellen speaks on a panel with Deputy BOE Governor Charles Bean and Vice President of the ECB Vitor Constancio on lessons from the experience with unconventional monetary policy as part of the University of Chicago Booth School of Business?s annual U.S. Monetary Policy Forum. |
| France | |
| 0245 ET | Jan French consumer spending expected ?0.7% m/m and +2.6% y/y, Dec +0.6% m/m and +0.4% y/y. |
| Euro-Zone | |
| 0400 ET | Jan Euro-Zone M3 money supply expected +2.0% 3-mo avg and +2.1% y/y, Dec +1.6% 3-mo avg and +1.7% y/y. |
| United Kingdom | |
| 0430 ET | Revised Q4 UK GDP, previous ?0.5% q/q and +1.7% annualized. |
| 0430 ET | Preliminary Q4 UK total business investment expected -0.4% q/q and +12.6% y/y, Q3 +3.1% q/q and +8.9% y/y. |
| Germany | |
| n/a | Feb German CPI (EU harmonized) expected +0.5% m/m and +2.1% y/y, Jan ?0.5% m/m and +2.0% y/y. |
Jim Van Meerten is a portfolio advisor to Marketocracy Capital Management. He shares his knowledge and experience from over 40 years of investing in stocks, mutual funds and ETFs on Barchart.com in his daily blog -- 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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