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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 +0.80% at a 1-year high and March S&Ps up +4.10 points at a contract high. The dollar and most commodities are higher with copper posting another record high of $4.6350 a pound. Global stock markets received a boost on an easing of tensions in Egypt after Egyptian Vice President Suleiman promised, within a month; to draft a list of constitutional changes needed for free elections. European stocks were also bolstered after the Feb Euro-Zone Sentix investor confidence climbed a more-than-expected +6.1 to a 3-1/4 year high of 16.7. The euro slipped to a 2-week low against the dollar after Dec German factory orders fell a more-than-expected -3.4% m/m. The euro had gained earlier against the dollar after hawkish comments from ECB Council member Gonzalez-Paramo who said that interest rates would have to rise if inflation doesn't start to decline by the end of the year.
- The Asian stock markets today closed mostly higher with Japan up +0.46%, Hong Kong -1.49%, China and Taiwan closed for the Lunar Mew Year holiday, Australia +0.12%, Singapore -0.59%, South Korea +0.53%, India +0.16%. Japanese stocks gained as company earnings rose and the US unemployment rate unexpectedly declined, which boosts confidence in the global economy. A weaker yen lifted exporters and raw-material producers gained as copper climbed to a record, which helped push the Nikkei 225 Stock Index to a 9-month high. Australian retailers weakened after Myer Holdings Ltd., Australia's largest department store, plunged 11% when the company cut its profit forecast for 2011. Stocks in India advanced and the rupee strengthened after India's Central Statistical Organization said that India's GDP will rise +8.6% in the year ending March 31. That would be the strongest expansion in 3 years and stronger than the +8.0% expansion of the previous 12 months.
- March S&Ps this morning are trading up +4.10 points and posted a fresh contract high in overnight trade. The US stock market last Friday gyrated on both sides of unchanged until late morning when it moved higher into the close and settled with modest gains after the Jan US unemployment rate fell to a 1-3/4 year low: Dow +0.25%, S&P 500 +0.29%, Nasdaq Composite +0.56%. The S&P 500 climbed to a 2-1/3 year high and the Dow posted a 2-1/2 year high. Bullish factors included (1) the unexpected decline in the Jan US unemployment rate to a 1-3/4 year low (-0.4 to 9.0% versus expectations of +0.1 to 9.5%), (2) the larger-than-expected increase in Jan manufacturing payrolls (+49,000 versus expectations of +10,000), (3) the statement from the US Labor Department that said bad weather prevented 886,000 Americans from going to work the week of the Labor Department's Jan monthly job survey, compared with an average of 282,000 over the past 5 Januarys, which suggests that winter storms caused much of the weakness in the Jan payrolls report, and (4) the action by JPMorgan Chase to raise its 2011 S&P 500 profit forecast to $97.50 a share from $94.00, citing improved prospects for technology, energy and financial companies.
- Bearish factors for stocks included (1) the much smaller-than-expected growth in Jan nonfarm payrolls (+36,000 versus expectations of +143,000), although the US Labor Department said much of the weakness was weather related, (2) interest rate concerns after the 10-year T-note yield surged to a 9-month high of 3.659%, and (3) concern that riots in Egypt may intensify over the weekend, which prompted profit taking and long liquidation in stocks.
- InterDigital (IDCC) rose 4.2% in European trading after Barron's predicted in its "The Trader" column that the designer of mobile-phone technology may rise as much as 15% as demand increases for its network-maximizing technology and as it moves to a new business model.
- Bank of America (BAC) gained 1.9% in pre-market trading after the biggest US lender by assets said it created a unit to modify delinquent mortgages, handle foreclosures and resolve investor disputes over faulty loans originated by the company.
- March 10-year T-notes this morning are trading down -3.5 ticks. T-note prices last Friday sank to a 7-1/2 month low and closed lower after the Jan US unemployment rate unexpectedly fell to a 1-3/4 year low: TYH11 -27.5, FVH11 -17.5, EDM11 unchanged. The 10-year T-note yield climbed to a 9-month high of 3.659%. Bearish factors included (1) the unexpected decline in the Jan US unemployment rate to a 1-3/4 year low (-0.4 to 9.0% versus expectations of +0.1 to 9.5%), (2) the larger-than-expected increase in Jan manufacturing payrolls (+49,000 versus expectations of +10,000), and (3) the statement from the US Labor Department that said bad weather prevented 886,000 Americans from going to work to the week of the Labor Department's Jan monthly job survey, compared with an average of 282,000 over the past 5 Januarys, which suggests that winter storms caused much of the weakness in the Jan payrolls report. Bullish factors included (1) the early spike higher in T-note prices after Jan nonfarm payrolls were reported up only +36,000, versus expectations of +143,000, and (2) the Fed's action to purchase $7.272 billion of Treasuries as part of its QE2 asset-purchase program.
- The dollar index this morning is stronger with the dollar/yen +0.15 yen and the euro/dollar -0.33 cents. The dollar index last Friday finished higher after the US Labor Department said the weak payrolls report was due to winter storms: Dollar Index +0.227, USDJPY +0.575, EURUSD -0.00470. Bullish factors for the dollar included (1) the statement from the US Labor Department that said bad weather prevented 886,000 Americans from going work to the week of the Labor Department's Jan monthly job survey, compared with an average of 282,000 over the past 5 Januarys, which suggests that winter storms caused much of the weakness in the Jan payrolls report, and (2) euro weakness after comments from ECB Council member Nowotny who said "The ECB anticipates 1.8% inflation" next year, which suggests the ECB still expects inflation to fall back below its 2.0% limit over its policy-relevant time horizon and reduces pressure on them to increase interest rates. Bearish factors included (1) early weakness in the dollar after the weaker-than-expected Jan nonfarm payrolls, although the dollar recovered after the US Labor Department said weather caused most of the weakness, and (2) strong demand for euros as the 3-month Euribor rate climbed to a 19-month high of 1.088% as banks hoard euros on concern the ECB may withdraw its emergency cash supplies in April.
- March crude oil prices this morning are trading up +28 cents a barrel and March gasoline is +2.97 cents per gallon. Crude oil and gasoline prices last Friday spiked higher early but then sold-off and finished lower on concern the US economy is not producing enough jobs to increase energy demand: CLH11 -1.51, RBH11 -6.77. Bearish factors included (1) dollar strength, which may curtail investment demand for commodities, and (2) the weaker-than-expected Jan US payrolls report, which questions the sustainability of the US economic recovery and fuel demand. Bullish factors included (1) a temporary spike higher in gasoline prices after the US unemployment rate in Jan unexpectedly fell to a 1-3/4 year low, and (2) concerns that the civil unrest in Egypt will spill over into the major oil-producing regions of the Middle East or force the closure of the Suez Canal.
Global Financial Calendar
| Monday 2/7/11 | |
|---|---|
| United States | |
| 1130 ET | Weekly 3-mo and 6-mo T-bill auctions. |
| 1500 ET | Dec consumer credit expected +$2.000 billion, Nov +$1.346 billion. |
| Japan | |
| 0000 ET | Preliminary Dec Japan coincident index CI expected 103.1, Nov 102.4. Dec leading index CI expected 101.4, Nov 100.6. |
| 2330 ET | Jan Japan bankruptcies, Dec ?3.0% y/y |
| Euro-Zone | |
| 0430 ET | Feb Euro-Zone Sentix investor confidence expected +3.4 to 14.0, Jan +0.9 to 10.6. |
| 0900 ET | ECB Council member Axel Weber speaks on ?The Euro: Opportunities and Challenges? at an event in Tallinn. |
| 1215 ET | ECB Council member Yves Mersch speaks about lessons to be learned from the financial crisis at an event in Luxembourg. |
| Germany | |
| 0600 ET | Dec German factory orders expected ?1.5% m/m and +21.3% y/y, Nov +5.2% m/m and +20.6% y/y. |
| Canada | |
| 0830 ET | Dec Canadian building permits expected +3.5%, Nov ?11.2%. |
| United Kingdom | |
| 1901 ET | Jan UK RICS house price balance expected ?38%, Dec ?39%. |
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