Barchart Morning Call
Overnight Developments
Global Financial Calendar
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- Global stocks are trading mostly lower with the European Euro Stoxx 50 index down -0.73% and March S&Ps down -7.50 points, both at 3-week lows. The major bearish factor today is the continued surge in crude oil, which rallied to over $103 a barrel in overnight trade as the violent uprising in Libya intensifies. Barclays Capital estimates that about 1 million barrels of daily crude production may have been shut due to the unrest in Libya, while Societe Generale estimates that a $20 a barrel increase in oil prices may cut global GDP by 1%. An increase in safe-haven demand has pushed the yield on Treasuries and the 10-year bund down to 3-week lows, while safe-haven demand has propelled gold to a 1-1/2 month high. The euro climbed to a 3-week high against the dollar after Feb Euro-Zone economic confidence rose a larger-than-expected +1.0 to 107.8, its highest level in 3-1/2 years.
- The Asian stock markets today closed mostly lower with Japan down -1.19%, Hong Kong -1.34%, China +0.51%, Taiwan +0.15%, Australia -0.76%, Singapore -0.96%, Soth Korea -0.59%, India -3.00%. The surge in crude oil to a 2-1/3 year high amid Middle East unrest is dragging Asia-Pacific stock markets lower as well, with automakers leading declines. Mining companies also closed lower as copper slumped to a 4-week low on concern the surge in fuel prices will derail the global economic recovery and crimp copper demand. Japanese exporters retreated as the yen strengthened to a 2-1/2 week high against the dollar on increased safe-haven demand for the yen as the Middle East crisis intensifies.
- March S&Ps this morning are trading down -7.50 points as crude oil surges to a 2-1/3 year high. The US stock market yesterday erased an early rally and finished lower on concern the surge in crude oil will diminish economic growth: Dow -0.88%, S&P 500 -0.61%, Nasdaq Composite -1.21%. The Dow and S&P 500 fell to 2-week lows and the Nasdaq tumbled to a 3-week low. Bearish factors included (1) continued geo-political concerns in North Africa and the Middle East that threaten global stability and may reduce economic growth prospects, (2) a sell-off in retailers on concern that crude oil at a 2-1/3 year high will act as a tax on consumers and slow consumer spending, (3) weakness in automakers after the US Supreme Court opened the auto industry to new lawsuits over seatbelt designs, and (4) the slump in airline stocks for a second day on concern the surge in fuel prices will depress earnings.
- Bullish factors for stocks included (1) the unexpected increase in Jan US existing home sales which rose to their best level in 8 months (+2.7% to 5.36 million versus expectations of -1.5% to 5.20 million), and (2) a rally in energy producers as crude oil prices rallied sharply to a 2-1/3 year high.
- Bank of America (BAC) slipped 1.1% in European trading after investors in mortgage-backed bonds sued the bank saying Bank of America's Countrywide Financial unit breached representations and warranties about the loans, which it originated.
- March 10-year T-notes this morning are trading up +14.5 ticks on increased safe-haven demand as equity markets slide. T-note prices yesterday recovered from early weakness and climbed to a 3-week high on increased safe-haven demand but erased their gains and moved lower after there was slack demand for the Treasury's $35 billion auction of 5-year T-notes: TYH11 -9.0, FVH11 -5.7, EDM11 +0.5. Bearish factors included (1) the unexpected increase in Jan US existing home sales which rose to their best level in 8 months (+2.7% to 5.36 million versus expectations of -1.5% to 5.20 million), (2) comments from Philadelphia Fed President Plosser who said "should economic prospects continue to strengthen, I would not rule out changing the policy stance to bring QE2 to an early close," (3) weak demand for the Treasury's $35 billion auction of 5-year T-notes that had a bid-to-cover ratio of 2.69, below the 12-auction average of 2.77, and (4) supply pressures ahead of the Treasury's $29 billion auction of 7-year T-notes on Thu. Bullish factors included (1) increased safe-haven demand for Treasuries as the stock market tumbled on concern the rising instability in the Middle East that pushed crude up to a 2-1/3 year high will slow the global economy, (2) a report from the Financial Times that stated Chicago Fed President Evans said the Fed shouldn't hurry to tighten monetary policy as inflation is still low and monetary policy should remain relaxed until the risk of a "liquidity trap" diminishes, and (3) the Fed's purchase of $1.967 billion of Treasuries as part of its QE 2 asset-purchase program.
- The dollar index this morning is trading weaker and at a 3-week low with the dollar/yen -0.68 yen and the euro/dollar +0.19 cents. The dollar index yesterday slipped to a 2-1/2 week low and settled lower on speculation that the BOE and ECB will hike interest rates before the Fed: Dollar Index -0.359, USDJPY -0.261, EURUSD +0.00978. Bearish factors included (1) strength in the British pound which rose to a 2-1/2 week high against the dollar after the minutes of the Feb 10 BOE policy meeting showed BOE policy maker Dale joined fellow policy members Sentance and Weale in voting for an interest rate increase, (2) speculation that the ECB may be ready to raise interest rates after ECB President Trichet said that policy makers will make the decisions "necessary to maintain price stability," and (3) the unexpected increase in Dec Euro-Zone industrial new orders, which is euro supportive. 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, (2) the unexpected increase in the Jan existing home sales to their best level in 8 months, which is dollar supportive, and (3) comments from Philadelphia Fed President Plosser who said he "won't rule out" an early exit to the Fed's quantitative easing program if the economy strengthens.
- April crude oil prices this morning are trading up +$2.53 a barrel and April gasoline is +7.23 cents per gallon. Crude prices surged to a 2-1/3 year high of $103.41 a barrel in overnight trade on speculation the unrest in Libya has caused it to lose as much as two-thirds of its oil output. Crude oil and gasoline prices yesterday rallied sharply for a second day to 2-1/3 year highs and closed higher on a weak dollar and on concern that violent unrest in Libya may disrupt crude supplies: CLJ11 +$2.68, RBJ11 +12.13. Bullish factors included (1) concern that civil unrest in North Africa and the Middle East will spill over into major oil-producing countries in the region, (2) the report from Al Arabiya that operations at Libyan oil ports are suspended and the report from Reuters that said Libya, owner of Africa's biggest oil reserves, declared force majeure on all oil-product exports, (3) the drop in the dollar index to a 2-1/2 week low, which bolsters investment demand for commodities, and (4) the prediction from Nomura Holdings that oil prices may surge to $220 a barrel if the spread of civil unrest halts crude production in Libya and Algeria as OPEC spare capacity would be reduced to 2.1 million barrels a day. Bearish factors include (1) a report that said Saudi Arabia, the UAE, Kuwait, Angola and Nigeria would be willing to boost their oil production if buyers demand it even if no OPEC emergency meeting is held, and (2) the outlook that weekly US crude oil inventories expanded for a sixth week when the DOE reports weekly inventories on Thu (one day later due to the President's Day holiday on Mon). Expectations for the weekly DOE inventory report are for crude supplies to climb +1.13 million bbl, gasoline stockpiles to gain +850,000 bbl, distillate inventories to fall -1.35 million bbl and the refinery utilization rate to rise +0.5 to 81.7%.
Global Financial Calendar
| Thursday 2/24/11 | |
|---|---|
| United States | |
| 0830 ET | Weekly initial unemployment claims expected ?5,000 to 405,000, previous +25,000 to 410,000. Weekly continuing claims expected ?31,000 to 3.880 million, previous ?1,000 to 3.911 million. |
| 0830 ET | Jan durable goods orders expected +2.8% and +0.5% ex transportation, Dec ?2.3% and +0.8% ex transportation. |
| 0830 ET | St. Louis Fed President James Bullard speaks to the Bowling Green Area Chamber of Commerce on the ?Monetary Policy Outlook for 2011.? |
| 0945 ET | Bloomberg weekly consumer comfort index. |
| 1000 ET | Dec FHFA house price index expected ?0.1% m/m, Nov unchanged m/m. Q4 FHFA house price index expected ?0.6% q/q, Q3 1.6% q/q. |
| 1000 ET | Jan new home sales expected ?7.3% to 305,000, Dec +17.5% to 329,000. |
| 1300 ET | Treasury auctions $29 billion 7-year T-notes. |
| 1630 ET | Weekly money supply report and Fed balance sheet. |
| Germany | |
| 0200 ET | Revised Q4 German GDP, previous +0.4% q/q and +4.0% annualized. |
| France | |
| 0245 ET | Feb French consumer confidence indicator expected unchanged at 85, Jan ?1 to 85. |
| 1200 ET | Jan French jobseekers net change, Dec +27,100. Jan total jobseekers, Dec 2,725,200. |
| Euro-Zone | |
| 0500 ET | Feb Euro-Zone economic confidence expected +0.3 to 106.8, Jan ?0.1 to 106.5. |
| Japan | |
| 1830 ET | Feb Tokyo CPI expected ?0.2% y/y, Jan ?0.1% y/y. Feb Tokyo CPI ex-fresh food expected ?0.3% y/y, Jan 0.2% y/y. Feb Tokyo CPI ex food & energy expected ?0.3% y/y, Jan ?0.3% y/y. |
| 1830 ET | Jan Japan national CPI expected ?0.1% y/y, Dec unchanged y/y. Jan national CPI ex-fresh food expected ?0.3% y/y, Dec ?0.4% y/y. Jan national CPI ex food & energy expected ?0.6% y/y, Dec ?0.7% y/y. |
| United Kingdom | |
| 1901 ET | Feb UK GfK consumer confidence survey expected +2 to -27, Jan ?8 to ?29. |
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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