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Overnight Developments
Global Financial Calendar
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- Global stocks are trading mixed with the European Euro Stoxx 50 index up +0.02% and March S&Ps down -0.30 of a point. The dollar index fell to a 3-1/2 month low ahead of Fed Chairman Bernanke's semiannual report to Congress tomorrow in which the Fed Chairman may signal that interest rates will remain at a record low. Treasuries and crude are higher as the violent uprising in Libya continues and civil unrest in the Middle East has spread to Oman, which produces about 800,000 barrels of oil a day. Bank stocks are limiting gains in European bourses with HSBC, Europe's biggest bank, down 4% after it reported full-year net income of $13.2 billion, below analysts' estimates of $13.72 billion. Inflation concerns are pushing up bund yields after Jan German import prices rose a more then expected +1.5% m/m and +11.8% y/y, while Jan French producer prices climbed an as-expected +5.6% y/y, their fastest pace in 2-1/3 years. Jan Euro-Zone consumer prices were slightly weaker than expected, but the +2.3% y/y advance is still the fastest annual pace of increase in 2-1/4 years.
- The Asian stock markets today closed mostly higher with Japan up +0.92%, Hong Kong +1.42%, China +1.31%, Australia -0.12%, Singapore -0.48%, South Korea -1.13%, India +0.69%. A stronger-than-expected Jan Japan retail sales report helped Japanese stocks close higher, despite Jan industrial production advancing at a slower than expected pace. Asian stocks received a boost and crude oil prices fell back from over a $2.00 a barrel increase in overnight trade after a WSJ report said oil shipments from Libya's rebel-controlled eastern territory might have resumed, even as political unrest spread to Oman. South Korean stocks finished lower as tensions rose on the Korean peninsula after North Korea threatened to take military action if the South continues to drop leaflets and other propaganda encouraging revolt. The North also threatened "all-out war" if there is an attack during annual US-South Korean military drills that began today.
- March S&Ps this morning are trading down -0.30 of a point. The US stock market last Friday rallied on strength in consumer confidence along with a stabilization in oil prices: Dow +0.51%, S&P 500 +1.06%, Nasdaq Composite +1.58%. Bullish factors included (1) reduced worries about global crude supplies after assurances from the IEA and Saudi Arabia that they would fill the void left from a drop in Libyan crude production, (2) the larger-than-expected increase in the Feb US University of Michigan consumer confidence which climbed to a 3-year high (+2.4 to 77.5 versus expectations of +0.3 to 75.4), and (3) comments from Richmond Fed President Lacker who said the recent increase in oil prices is a "manageable" risk that won't derail the economic recovery.
- Bearish factors for stocks included (1) the larger-than-expected downward revision to US Q4 GDP (+2.8% annualized versus expectations of +3.3% annualized), and (2) the action by JPMorgan Chase to cut its Q1 US GDP forecast to 3.5% from a prior estimate of 4.0% due to the recent surge in energy prices.
- Humana (HUM) may be active to the upside today after Jeffries Group upgraded the stock to "buy" from "hold" after Humana raised its 2011 anuual profit estimate to $5.95 a share to $6.15 a share from a previous estimate of as much as $5.90 a share.
- March 10-year T-notes this morning are trading up +6 ticks. T-note prices last Friday recovered from early losses and settled higher after US GDP data was revised lower and safe-haven demand from the unrest in Libya was still prevalent: TYH11 +5, FVH11 +1.7, EDM11 +1.0. Bullish factors included (1) the larger-than-expected downward revision to US Q4 GDP (+2.8% annualized versus expectations of +3.3% annualized), (2) increased safe-haven demand for Treasuries on concern the violence in Libya may turn into an all-out civil war that may lead to further instability in North Africa and the Middle East, and (3) the action by JPMorgan Chase to cut its Q1 US GDP forecast to 3.5% from a prior estimate of 4.0% due to the recent surge in energy prices. Bearish factors included (1) the larger-than-expected increase in the Feb US University of Michigan consumer confidence which climbed to a 3-year high (+2.4 to 77.5 versus expectations of +0.3 to 75.4), and (2) hawkish comments from Richmond Fed President Lacker who said "The improvement in the growth outlook has been noticeable enough to tilt the case further against QE2," which suggests he wants to end the asset-purchase program before its scheduled completion in June.
- The dollar index this morning is trading weaker and slumped to a 3-1/2 month low with the dollar/yen +0.20 yen and the euro/dollar +0.74 cents. The dollar index last Friday rebounded from a 3-week low and finished higher on hawkish comments from Richmond Fed President Lacker: Dollar Index +0.197, USDJPY -0.224, EURUSD -0.00470. Bullish factors included (1) comments from Richmond Fed President Lacker who said an early end to the Fed's QE2 asset-purchase program may be needed to limit inflation pressures, and (2) weakness in the British pound which fell to a 1-week low against the dollar after UK Q4 GDP was unexpectedly revised lower. Bearish factors included (1) the larger-than-expected downward revision to US Q4 GDP, (2) comments from French Finance Minister Lagarde who said that Spain's finances have improved and the country won't need a bailout, and (3) the action by Morgan Stanley to raise its Q1 target for the euro to $1.32 from $1.25 and to raise its year-end target for the euro against the dollar to $1.24 from $1.20, citing increased rhetoric from the ECB about the need for tighter monetary policy to combat inflation.
- April crude oil prices this morning are trading up +9 cents a barrel and April gasoline is down -0.86 of a cent per gallon. Crude oil and gasoline prices last Friday finished higher on concern that turmoil that has cut Libya's crude output may spread to other parts of the Middle East: CLJ11 +$0.60, RBJ11 +3.37. Crude oil prices in overnight trade gave up a $2.00 a barrel gain after the WSJ reported that some Libyan oil exports may bave resumed. Bullish factors included (1) concern that the unrest in Libya may blow up into a full civil war and knock out the rest of Libya's crude production, which was estimated by Goldman Sachs to be already cut to only 600,000 barrels day from its normal 1.6 million barrels a day, and (2) concern that the political unrest in Libya will spread to other oil-producing countries in the region and reduce global oil supplies further. Bearish factors include (1) the stronger dollar, which reduces investment demand for commodities, (2) the larger-than-expected downward revision to US Q4 GDP, which indicates reduced energy demand and consumption, and (3) the action by NYMEX to raise its margin requirements on crude oil futures for the first time in nearly 2 years, which may prompt speculators to reduce their crude oil positions to balance their margin accounts.
Global Financial Calendar
| Monday 2/28/11 | |
|---|---|
| United States | |
| 0830 ET | Jan personal spending expected +0.4%, Dec +0.7%. Jan personal income expected +0.4%, Dec +0.4%. Jan PCE deflator expected +1.3% y/y, Dec +1.2% y/y, Jan PCE core deflator expected +0.1% m/m and +0.8% y/y, Dec unchanged m/m and +0.7% y/y. |
| 0830 ET | New York Fed President William Dudley speaks on the U.S. economic outlook at NYU?s Stern School of Business. |
| 0845 ET | Boston Fed President Eric Rosengren speaks on a panel discussion at Boston University on ?Lessons Learned from the Global Meltdown.? |
| 0945 ET | Feb Chicago purchasing managers index expected ?1.3 to 67.5, Jan +2.0 to 68.8. |
| 1000 ET | Jan pending home sales expected ?2.4% m/m, Dec +2.0% m/m and ?3.6% y/y. |
| 1130 ET | Weekly 3-mo and 6-mo T-bill auctions. |
| Japan | |
| 0000 ET | Jan Japan construction orders, Dec +13.1% y/y. |
| 1830 ET | Jan Japan jobless rate expected unchanged at 4.9%, Dec ?0.2 to 4.9%. Jan job-to-applicant ratio expected 0.58, Dec 0.57. |
| 1830 ET | Jan Japan overall household spending expected ?1.4% y/y, Dec ?3.3% y/y. |
| 2030 ET | Jan Japan labor cash earnings expected +0.3% y/y, Dec +0.1% y/y. |
| Germany | |
| 0200 ET | Jan German import price index expected +1.1% m/m and +11.2% y/y, Dec +2.3% m/m and +12.0% y/y. |
| France | |
| 0245 ET | Jan French producer prices expected +0.9% m/m and +5.6% y/y, Dec +1.0% m/m and +5.4% y/y. |
| Euro-Zone | |
| 0500 ET | Jan Euro-Zone CPI expected ?0.6% m/m and +2.4% y/y, Dec +0.6% m/m and +2.4% y/y. |
| Canada | |
| 0830 ET | Dec Canada GDP expected +0.3% m/m, Nov +0.4% m/m and +3.0% y/y. Q4 GDP expected +3.0% annualized, Q3 +1.0% annualized. |
| CHI | |
| 2000 ET | Feb China PMI manufacturing expected ?0.8 to 52.1, Jan ?1.0 to 52.9. |
| 2130 ET | Feb China HSBC manufacturing PMI expected ?2.0 to 52.5. |
Jim Van Meerten is an analyst for 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 model portfolio.
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