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Overnight Developments
Global Financial Calendar
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- Global stocks are mostly higher with the European Euro Stoxx 50 index up +0.43% and June S&Ps up +6.30 points. The dollar and Treasuries are slightly weaker and commodities are mostly higher with crude oil and copper at 2-week highs. Portugal's borrowing costs rose to the highest since the euro's inception in 1999, but stocks prices are still higher on speculation the European Union will bail out indebted nations. European leaders meet in Brussels today for the start of a 2-day meeting. The extra yield investors demand to hold 10-year Portuguese bonds instead of benchmark German bunds rose 9 bp to a 4-month high of 448 bp, while the Irish-German 10-year spread widened to 609 bp, the most since at least 1991. Citing heightened financial pressure on the country's sovereign rating and "many weak banks," Moody's Investors Service cut 15 of Spain's banks by 2 levels and 5 banks by 3 or 4 levels. Moody's also cut 30 of Spain's smaller banks' senior debt and deposit ratings saying the outlook remains negative. The Mar Euro-Zone PMI composite fell -0.7 to 57.5, slightly weaker than market expectations of -0.4 to 57.8, while the unexpected increase in French business confidence is giving stock prices a lift after the Mar French business confidence indicator rose 3 points to a 3-year high of 109.
- The Asian stock markets today closed mostly higher with Japan down -0.15%, Hong Kong +0.39%, China -0.42%, Taiwan +0.37%, Australia +1.01%, Singapore +0.69%, South Korea +1.23%, India +0.79%. Engineers at Japan's damaged nuclear plant today resumed work on reconnecting power as Tokyo authorities prepared to hand out bottled water to families after determining that tap water may be unsafe for babies. The CEO of Nissan said about 40 auto-parts makers remain hampered after the Japanese earthquake and Toyota said its North American production might also be disrupted. Efforts to resume production are complicated by the need for hundreds of different components from suppliers whose plants may have been damaged or lack power, as well as disruptions of transportation infrastructure. The PBOC on its website today said that China will make more use of price tools to implement monetary policy and interest rates will be at the "core" of that strategy that moves away from the use of quantitative tools, such as banks' reserve requirement ratios and loan quotas.
- June S&Ps this morning are trading up +6.30 points. The US stock market yesterday fluctuated on either side of unchanged until early afternoon when they moved higher after a rally in commodity producers offset weakness in US new homes sales: Dow Jones +0.56%, S&P 500 +0.29%, Nasdaq Composite +0.54%. Bullish factors for stocks included (1) a rally in commodity producers after copper rose to a 2-week high and silver surged to a 31-year high, (2) gains in energy producers after crude oil rose to a 1-1/2 week high, and (3) the prediction from Wells Fargo that government data showing a record low pace in Feb new-home sales will likely be revised higher as they don't reflect market "reality."
- Bearish factors included (1) carry-over weakness from a slump in Japanese stocks after Japan's government estimated the damage from this month's earthquake and tsunami to be as much as 25 trillion yen ($309 billion), (2) concern that he European debt crisis may worsen after the yield on the 10-year Irish note exceeded 10% for the first time since the euro was introduced in 1999 and the yield on Portugal's 5-year bond rose to a record 8.14%, and (3) the unexpected decline in Feb new home sales which fell to their lowest level since records began in 1963 (-16.9% to 250,000 versus expectations of +2.1% to 290,000).
- Micron Technology (MU) climbed 3.7% in pre-market trading after the company reported fiscal Q2 sales of $2.26 billion, stronger than analysts' estimates of $2.06 billion.
- Red Hat (RHT) surged 9.6% in European trading after the company late yesterday reported fiscal Q4 earnings of 26 cents a share, beating analysts' estimates of 22 cents.
- June 10-year T-notes this morning are trading down -5.5 ticks. T-note prices yesterday traded higher until late morning when prices fell after the Fed purchased less debt than average in its asset-purchase program: TYM11 -2.5, FVM11 -0.7, EDU11 -1.0. Bearish factors included (1) the Fed's action to purchase 24.6% of the $30.766 billion of securities submitted by primary dealers for the Fed's asset-purchase program, less than the 30.8% the Fed purchased during a similar operation on Mar 14, and (2) hawkish comments from Dallas Fed President Fisher who said he sees "extraordinary speculative activity" in the US after the Fed's quantitative easing program pumped record liquidity into the economy, which signals he favors an immediate end to the Fed's QE 2 program. Bullish factors included (1) the unexpected decline in Feb new home sales which fell to their lowest level since records began in 1963 (-16.9% to 250,000 versus expectations of +2.1% to 290,000), and (2) increased safe-haven demand from the ongoing civil unrest in the Middle East along with concern the European sovereign-debt crisis will worsen after the yield on the 10-year Irish note exceeded 10% for the first time since the euro was introduced in 1999 and the yield on Portugal's 5-year bond rose to a record 8.14%.
- The dollar index this morning is weaker with the dollar/yen +0.10 yen and the euro/dollar +0.35 cents. The dollar index strengthened yesterday and closed higher on concern Europe's sovereign-debt crisis may worsen: Dollar Index +0.360, USDJPY -0.055, EURUSD -0.01096. Bullish factors included (1) weakness in the euro after EU finance minister leader Juncker said the EU won't decide to expand the European Financial Stability Facility until June, dousing expectations for a resolution to the expansion of the bailout fund as soon as this weekend's EU summit, (2) weakness in the pound after the minutes of the Mar 10 BOE monetary policy meeting showed policy makers voted 6-3 to keep interest rates on hold along with the cut in Britain's 2011 GDP estimate to 1.7% from a Nov estimate of 2.1% by England's Office for Budget Responsibility, and (3) concern the European debt crisis will worsen after the yield on the 10-year Irish note exceeded 10% for the first time since the euro was introduced in 1999 and the yield on Portugal's 5-year bond rose to a record 8.14%. Bearish factors included (1) the unexpected plunge in Feb US new home sales to a record low, which may prompt the Fed to maintain its overly easy monetary policy at the dollar's expense, and (2) hawkish comments from ECB Executive Board member Smaghi who said that interest rates in the Euro-Zone are currently lower than the inflation rate and that keeping them at that level would be "very expansionist," which suggests he favors a rate hike as soon as next month.
- May crude oil prices this morning are trading up +61 cents a barrel and May gasoline is -0.46 of a cent per gallon. Crude oil and gasoline prices yesterday rallied to 1-1/2 week highs as the US and its allies prepare to attack Libyan leader Qaddafi's ground troops and after protesters clashed with government troops in Syria: CLK11 +$0.78, RBK11 +1.50. Bullish factors included (1) concern that Libyan oil output will remain reduced after US Admiral Locklear said that more air strikes will be launched against Libya in the "coming hours and days," (2) the spread of civil unrest to Syria, which bolsters concern that civil unrest may spread to other oil-producing areas in the region and further cut global oil supplies, (3) the larger than expected decline in weekly gasoline inventories which fell to their lowest level this year (-5.32 million bbl to 219.7 million bbl versus expectations of -2.0 million bbl), and (4) increased demand after total US fuel demand for the week ending Mar 18 rose +1% to 19.3 million barrels a day. Bearish factors include (1) strength in the dollar, which reduces investment demand in commodities, (2) the larger-than expected increase in weekly crude oil inventories (+2.13 million bbl versus expectations of +1.45 million bbl), and (3) the action by Britain's OBR to cut its 2011 GDP forecast to 1.7% from a Nov estimate of 2.1%, which signals reduced energy demand and consumption.
Global Financial Calendar
| Thursday 3/24/11 | |
|---|---|
| United States | |
| 0830 ET | Weekly initial unemployment claims expected ?2,000 to 383,000, previous ?16,000 to 385,000. Weekly continuing claims expected -6,000 to 3.700 million, previous 80,000 to 3.706 million. |
| 0830 ET | Feb durable goods orders expected +1.2% and +2.0% ex transportation, Jan +3.2% and ?3.0% ex transportation. |
| 1100 ET | Treasury announces amounts of 2-year T-notes (previous $35 billion), 5-year T-notes (previous $35 billion) and 7-year T-notes (previous $29 billion) to be auctioned Mar 28-30. |
| 1300 ET | Treasury auctions $11 billion 10-year TIPS. |
| 1630 ET | Weekly money supply report and Fed balance sheet. |
| 1930 ET | Fed Governor Elizabeth Duke speaks on ?Changing Circumstances: The Impact of the Financial Crisis on Wealth? at the Virginia Association of Economists Sandridge Lecture. |
| France | |
| 0345 ET | Mar France business confidence indicator expected ?1 to 105, Feb ?2 to 106. |
| 0400 ET | Mar France PMI manufacturing expected +0.3 to 56.0, Feb +0.8 to 55.7. |
| 0400 ET | Mar France PMI services expected ?0.2 to 59.5, Feb +1.9 to 59.7. |
| 1300 ET | Feb French jobseekers, Jan ?19,300. Feb total jobseekers, Jan 2,703,200. |
| Germany | |
| 0430 ET | Mar German PMI manufacturing expected ?0.8 to 61.9, Feb +2.2 to 62.7. |
| 0430 ET | Mar German PMI services expected ?0.2 to 58.4, Feb ?1.7 to 58.6. |
| Euro-Zone | |
| 0500 ET | Mar Euro-Zone PMI composite expected ?0.4 to 57.8, Feb +1.2 to 58.2. |
| n/a | EU leaders began a 2-day summit meeting in Brussels. |
| United Kingdom | |
| 0530 ET | Feb UK retail sales ex auto fuel expected ?0.6% m/m and +2.4% y/y, Jan +1.6% m/m and +5.3% y/y. |
| 0530 ET | Feb UK retail sales with auto fuel expected ?0.6% m/m and +2.4% y/y, Jan +1.9% m/m and +5.3% y/y. |
| Japan | |
| 1930 ET | Mar Tokyo CPI expected -0.1% y/y, Feb -0.1% y/y. Mar Tokyo CPI ex-fresh food expected -0.3% y/y, Feb 0.4% y/y. Mar Tokyo CPI ex food & energy expected ?0.3% y/y, Feb ?0.3% y/y, |
| 1930 ET | Feb Japan national CPI expected unchanged y/y, Jan unchanged y/y. Feb national CPI ex-fresh food expected 0.3% y/y, Jan ?0.2% y/y. Feb national CPI ex food & energy expected ?0.6% y/y, Jan ?0.6% y/y. |
| 1950 ET | Feb Japan corporate service price index expected ?1.2% y/y, Jan ?1.1% y/y. |
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