Barchart Morning Call
Overnight Developments
Global Financial Calendar
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- Global stocks are trading mostly higher with the European Euro Stoxx 50 index down -0.11% and June S&Ps up +9.60 points. The yen plunged and most world stock markets rose after the G-7 announced coordinated intervention in the currency markets for the first time since 2000 in order to slow yen strength that threatens to hamper Japan's recovery. G-7 finance chiefs said in a joint statement after a conference call they will "provide any needed cooperation" with Japan and "we will monitor exchange markets closely and will cooperate as appropriate." Stock gains were limited however, after China announced it would raise banks' reserve requirements for the third time this year. Crude oil prices jumped to a 1-week high after the United Nations Security Council voted to establish a no-fly zone over Libya and demanded a cease-fire with rebels. Feb UK nationwide consumer confidence plunged 10 points to 38, the lowest since records began n 2004, as Britons grew more pessimistic about the sustainability of the economic recovery and the outlook for jobs.
- The Asian stock markets today closed mostly higher with Japan up +2.72%, Hong Kong +0.07%, China +0.58%, Taiwan +1.35%, Australia +1.56%, Singapore -0.24%, South Korea +1.00%, India -1.49%. Asian stock markets climbed as concern eased about the spread of radiation from Japan's crippled power plant and after G-7 leaders said their central banks will jointly intervene in foreign-exchange markets to weaken the yen. The Sankei newspaper reported that Japan's government may sell more than 10 trillion yen ($122 billion) of reconstruction debt, all of which the BOJ may buy. The BOJ today added 4 trillion yen to the financial system, bringing its emergency fund injections this week to 38 trillion yen. After the Asian markets closed, China raised banks reserve requirements for the third time this year after inflation and industrial output exceeded forecasts in Feb. The PBOC announced a 50 bp increase in reserve ratios to 20.0% from March 25 for the nation's biggest banks and said it may impose extra requirements on individual lenders as part of efforts to rein in liquidity.
- June S&Ps this morning are trading up +9.60 points . The US stock market yesterday rallied right from the start and closed higher on strong economic data along with speculation that Japan will contain its nuclear crisis: Dow Jones +1.39%, S&P 500 +1.34%, Nasdaq Composite +0.73%. Bullish factors for stocks included (1) the larger-than-expected decline in weekly initial US unemployment claims (-16,000 to 385,000 versus expectations of -10,000 to 387,000), (2) the unexpected increase in the Mar Philadelphia Fed manufacturing index which expanded at its fastest pace in 27 years (+7.5 to 43.4 versus expectations of -5.9 to 30.0), (3) the action by Tokyo Electric Power to fix power cables on its crippled power plant to supply power to the reactor coolant system, which reduced market concerns that the Japanese nuclear crisis will worsen, and (4) the slump in the dollar that led to a broad-based rally in commodities which boosted energy and commodity producers.
- Bearish factors included (1) the larger-than-expected increase in Feb CPI (+0.5% m/m and +2.1% y/y versus expectations of +0.4% m/m and +2.0% y/y, (2) the unexpected decline in Feb industrial production (-0.1 versus expectations of +0.6%), and (3) the unexpected drop in Feb capacity utilization (-0.1 to 76.3% versus expectations of +0.4 to 76.5%).
- General Electric (GE), which has lost more than 4% since Japan's earthquake struck on Mar 11, climbed 1.4% in pre-market trading as it is in talks to sell nuclear reactors to India.
- Nike (NKE) slumped 4.8% in European trading reported Q3 profit of $1.08 a share, below analysts' estimates of $1.12 a share and the company's first miss in 19 straight quarters.
- June 10-year T-notes this morning are trading down -3.5 ticks. T-note prices yesterday ratcheted lower throughout the day and finished with moderate losses on strong economic data and reduced safe-haven demand: TYM11 -10, FVM11 -6.7, EDU11 +0.5. Bearish factors included (1) the larger-than-expected decline in weekly initial US unemployment claims (-16,000 to 385,000 versus expectations of -10,000 to 387,000), (2) the larger-than-expected increase in Feb CPI (+0.5% m/m and +2.1% y/y versus expectations of +0.4% m/m and +2.0% y/y, (3) the unexpected increase in the Mar Philadelphia Fed manufacturing index which expanded at its fastest pace in 27 years (+7.5 to 43.4 versus expectations of -5.9 to 30.0), and (4) reduced safe-haven demand for Treasuries after the stock market rallied. Bullish factors included (1) the unexpected decline in Feb industrial production (-0.1 versus expectations of +0.6%), (2) the unexpected drop in Feb capacity utilization (-0.1 to 76.3% versus expectations of +0.4 to 76.5%), and (3) the Fed's action to purchase $6.989 billion of Treasuries as part of its QE 2 asset-purchase program.
- The dollar index this morning is weaker with the dollar/yen +2.55 yen and the euro/dollar +1.09 cents. The yen plunged in overnight trade after the G-7 central agreed to sell the yen in currency markets in coordinated intervention. The dollar index yesterday sank to a 4-1/4 month low and finished lower as the yen surged on speculation there will be no currency intervention before Friday's G-7 meeting: Dollar Index -0.640, USDJPY -0.694, EURUSD +0.01223. Bearish factors included (1) strength in the yen which rallied to a new post WWII high against the dollar of 76.36 as Japan's quake crisis prompted increased safe-haven demand for yen along with speculation that insurers will repatriate dollar and euro assets back to yen to pay for earthquake damages and reconstruction, and (2) reduced safe-haven demand for the dollar as the stock market rallied. Bullish factors included (1) the action by the G-7 nations to call for an emergency meeting on Friday, which may lead to some form of coordinated intervention to curb the yen’s gains, and (2) stronger-than-expected US economic data on weekly jobless claims and the Mar Philadelphia Fed manufacturing index, which signals economic strength and is positive for the dollar.
- April crude oil prices this morning are trading up +66 cents a barrel and April gasoline is +1.98 cents per gallon. Crude oil surged over $2.00 a barrel in overnight trade on news the UN had passed a resolution for a no-fly zone over Libya, but prices fell back after China raised banks' reserve requirements. Crude oil and gasoline prices yesterday moved sharply higher on concern the civil unrest in North Africa and the Middle East will spread and reduce crude shipments from the region: CLJ11 +$3.44, RBJ11 +10.69. Bullish factors included (1) concern the escalation of violence in Bahrain will spread to Saudi Arabia, the world's biggest crude-exporting country, (2) the plunge in the dollar index to a 4-1/4 month low, which encourages investment demand in commodities, and (3) stronger-than-expected US economic data on weekly jobless claims and the Mar Philadelphia Fed manufacturing index, which signals economic strength that may support increased energy demand and consumption. Bearish factors include (1) the unexpected declines in Feb US industrial production and capacity utilization which signals reduced energy consumption, and (2) heightened concern that Japan's quake crisis may push its economy into recession which would slash global economic growth and energy demand.
Global Financial Calendar
| Friday 3/18/11 | |
|---|---|
| United States | |
| n/a | No economic reports or speaking events are scheduled. |
| Japan | |
| 0100 ET | Revised Jan Japan coincident index CI, previous 106.2. Revised leading index CI, previous 101.9. |
| Germany | |
| 0300 ET | Feb German producer prices expected +0.6% m/m and +6.4% y/y, Jan +1.2% m/m and +5.7% y/y. |
| France | |
| 0345 ET | Revised Q4 French wages, previous +0.2% q/q. |
| Euro-Zone | |
| 0600 ET | Jan Euro-Zone trade balance, Dec –0.5 billion euros. |
| Canada | |
| 0700 ET | Feb Canada CPI expected +0.4% m/m and +2.3% y/y, Jan +0.3% m/m and +2.3% y/y. |
| 0700 ET | Feb Canada CPI core expected +0.4% m/ma and +1.2% y/y, Jan unchanged m/m and +1.4% y/y. |
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