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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 +0.08% and March S&Ps up +5.10 points. Expanding growth in Europe is lifting stock prices and undercutting Treasuries and the dollar, with the dollar index sliding to a fresh 3-1/2 month low. The Feb Euro-Zone PMI manufacturing index was left unrevised at 59.0, a 10-1/3 year high, while Jan Euro-Zone unemployment unexpectedly fell -0.1 to 9.9%. Feb German unemployment fell three times more than expected, -52,000 to 3.07 million, the lowest since Sep 1992, while the Feb German unemployment rate slipped -0.1 to 7.3%, the lowest since Dec 1991. The euro strengthened against the dollar after the European Commission raised its 2011 Euro-Zone GDP forecast to 1.6% from a 1.5% forecast in Nov, while the recent surge in commodity prices prompted the commission to raise its 2011 inflation forecast to 2.2% from a Nov estimate of 1.8%. The British pound surged to a 13-month high against the dollar after Feb UK PMI manufacturing remained unchanged at 61.5, its best level since the survey began in 1992, which suggests the British economy has regained momentum after contracting in Q4 2010.
- The Asian stock markets today closed higher with Japan up +1.22%, Hong Kong +0.25%, China +0.47%, Taiwan +1.49%, Australia -0.11%, Singapore +1.90%, India +3.50%. Strong economic data out of the Asia-Pacific region benefited stock prices with Japan's unemployment rate in Jan holding steady at 4.9%, while the number of people in work increased by 170,000. The Feb China PMI manufacturing index fell -0.7 to 52.2, stronger than expectations of -0.8 to 52.1, and the twenty-fourth consecutive month that the level has been above 50, which signals continued expansion in Chinese manufacturing. The Feb India PMI manufacturing index rose +0.9 to 57.8, its fastest pace in 3 months, which will keep pressure on the RBI to increase interest rates for the eighth time in a year. Australia's central bank left its benchmark interest rate unchanged as expected at 4.75% and said a stronger currency and forecasted slower growth in employment will help to control inflation.
- March S&Ps this morning are trading up +5.10 points. The US stock market yesterday moved higher on speculation of increased M&A activity along with strength in US manufacturing data: Dow +0.79, S&P 500 +0.56%, Nasdaq Composite +0.04%. Bullish factors included (1) a retreat in oil prices after Saudi Arabia offered to make up for lost Libyan output, (2) the larger-than-expected increase in Jan US personal income (+1.0% versus expectations of +0.4%), (3) the unexpected increase in the Feb Chicago purchasing managers index which expanded at its best level in 22-1/2 years (+2.4 to 71.2 versus expectations of -1.3 to 67.5), (4) increased M&A activity as announced takeovers of US companies have totaled $161.9 billion so far in 2011, 66% more than the $97.4 billion through this date last year, along with speculation of further takeovers after billionaire investor Warren Buffet said his "trigger finger is itchy" for deals, (5) comments from St. Louis Fed President Bullard who said in a CNBC interview that oil prices would have to go "substantially higher" to be a concern to the US economy, and (6) comments from New York Fed President Dudley who said the "considerably brighter" economic outlook isn't yet reason for the Fed to withdraw its record monetary stimulus.
- Bearish factors for stocks included (1) concern the turmoil in the Middle East is widening after civil unrest was reported in Oman, (2) the weaker-than-expected Jan personal spending which posted its smallest gain in 7 months (+0.2% versus expectations of +0.4%), and (3) the larger-than-expected decline in Jan pending home sales (-2.8% m/m versus expectations of -2.4% m/m).
- Baker Hughes (BHI) gained 1.1% in European trading after the US permitted deep-water drilling in the Gulf of Mexico for the first time since it banned production after the Deepwater Horizon rig sank last April.
- June 10-year T-notes this morning are trading down -15 ticks. T-note prices yesterday traded in positive territory the entire day on increased safe-haven demand due to concern the unrest in the Middle East is spreading: TYM11 +3.5, FVM11 +6, EDU11 +1.0. Bullish factors included (1) concern the turmoil in the Middle East is widening after civil unrest was reported in Oman, (2) the weaker-than-expected Jan personal spending which posted its smallest gain in 7 months (+0.2% versus expectations of +0.4%), (3) the larger-than-expected decline in Jan pending home sales (-2.8% m/m versus expectations of -2.4% m/m), (4) comments from New York Fed President Dudley who said that 9% unemployment and industrial capacity that's lower than the long-term average point to "considerable" economic "slack," (5) the Fed's action to purchase $6.690 billion of Treasuries as part of its QE2 asset-purchase program, and (6) speculation that Fed Chairman Bernanke on Tuesday in his semiannual report on monetary policy to Congress will repeat his pledge to keep interest rates at record lows. Bearish factors included (1) the unexpected increase in the Feb Chicago purchasing managers index, which expanded at its best level in 22-1/2 years (+2.4 to 71.2 versus expectations of -1.3 to 67.5), and (2) reduced safe-haven demand for Treasuries as the stock market rallied.
- The dollar index this morning is trading weaker and at a fresh 3-1/2 month low with the dollar/yen +0.29 yen and the euro/dollar +0.13 cents. The dollar index yesterday slumped to a 3-1/2 month low and finished lower on speculation that Fed Chairman Bernanke on Tuesday will signal the Fed will keep interest rates at a record low: Dollar Index -0.378, USDJPY +0.117, EURUSD +0.00532. Bearish factors included (1) strength in the euro on concern that rising inflation pressures will prompt the ECB to raise interest rates after Jan French producer prices rose +5.6% y/y, the fastest pace in 2-1/3 years and Jan Euro-Zone CPI rose +2.3% y/y, its fastest pace in 2-1/4 years, and (2) speculation that Fed Chairman Bernanke on Tuesday in his semiannual report on monetary policy to Congress will signal the Fed will keep interest rates at a record low for the foreseeable future. Bullish factors included (1) the surge in the Feb Chicago purchasing managers index to its best level in 22-1/2 years, which signals strength in the economy, and increased safe-haven demand for the dollar on concern the turmoil in the Middle East is spreading after civil unrest was reported in Oman.
- April crude oil prices this morning are trading up +46 cents a barrel and April gasoline is +0.81 of a cent per gallon. Crude oil and gasoline prices yesterday fluctuated on either side of unchanged and moved lower late as a pledge by Saudi Arabia to make up for any lost Libyan crude production offset a weaker dollar: CLJ11 -$0.91, RBJ11 -1.59. Bearish factors include (1) the statement from the CEO of Saudi Arabian Oil that they are ready to compensate for any shortfall in the global oil supply from the reduction of output in Libya, (2) a report from the WSJ that oil shipments from Libya's rebel-controlled eastern territory may have resumed, and (3) the threat of long liquidation pressures after the CFTC reported that hedge funds and large speculators increased their long crude oil positions in NYMEX futures by 30% in the week ended Feb 22 to 240,572 contracts, a 4-1/2 year high. Bullish factors included (1) the slump in the dollar index to a 3-1/2 month low, which boosts investment demand for commodities, and (2) the spread of civil unrest to Oman, which produced 885,600 barrels of oil a day in Jan and raises concern that Middle Eastern oil production may be disrupted further.
Global Financial Calendar
| Tuesday 3/1/11 | |
|---|---|
| United States | |
| 0745 ET | ICSC (Int?l Council of Shopping Centers) weekly retailer sales. |
| 0855 ET | Redbook weekly retailer sales. |
| 1000 ET | Fed Chairman Ben Bernanke delivers the Fed?s semiannual report on monetary policy before the Senate Banking Committee. |
| 1000 ET | Treasury Secretary Timothy Geithner testifies on mortgages to the House Financial Services Committee. |
| 1000 ET | Jan construction spending expected ?0.4%, Dec ?2.5%. |
| 1000 ET | Feb ISM manufacturing index expected +0.2 to 61.0, Jan +2.3 to 60.8. Feb ISM prices paid expected +1.5 to 83.0, Jan +9.0 to 81.5. |
| 1130 ET | Weekly 4-week T-bill auction. |
| 1700 ET | Feb total vehicle sales expected 12.60 million, Jan 12.54 million. Feb domestic vehicle sales expected 9.62 million, Jan 9.59 million. |
| Japan | |
| 0000 ET | Feb Japan vehicle sales, Jan ?22.0% y/y. |
| United Kingdom | |
| 0200 ET | Feb UK nationwide house prices expected ?0.2% m/m and ?0.2% y/y, Jan ?0.1% m/m and ?1.1% y/y. |
| 0430 ET | Feb UK PMI manufacturing expected ?1.0 to 61.0, Jan +3.3 to 62.0. |
| 0430 ET | Jan UK net consumer credit expected +0.2 billion pounds, Dec +0.2 billion pounds. |
| 0430 ET | Jan UK mortgage approvals expected 42,900, Dec 42,600. |
| 0430 ET | Jan UK M4 money supply, Dec ?1.3% m/m and ?1.5% y/y. |
| France | |
| 0350 ET | Revised Feb French PMI manufacturing expected no change at 55.3. |
| Germany | |
| 0355 ET | Feb German unemployment change expected ?18,000, Jan ?13,000. Feb unemployment rate expected unchanged at 7.4%, Jan ?0.1 to 7.4%. |
| 0355 ET | Revised Feb German PMI manufacturing expected no change at 62.6. |
| Euro-Zone | |
| 0500 ET | Feb Euro-Zone CPI estimate expected unchanged at 2.4% y/y, Jan +0.2 to 2.4%. |
| 0500 ET | Jan Euro-Zone unemployment rate expected unchanged at 10.0%, Dec unchanged at 10.0%. |
| n/a | European Commission publishes interim economic forecasts. |
| Canada | |
| 0900 ET | BOC announces interest rate decision (expected no change to the 1.00% benchmark rate). |
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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