Barchart Morning Call
Overnight Developments
Global Financial Calendar
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- Global stocks are mixed with the European Euro Stoxx 50 index up +0.32% and June S&Ps up +2.40 points. Stocks fluctuated on concern over what Japan's nuclear crisis will do to global economic growth. The dollar index climbed to a 1-week high and Treasury prices weakened after St. Louis Fed President Bullard said over the weekend that policy makers should review halting the $600 billion QE2 asset-purchase program before its June completion because the economy may not require that much stimulus. The euro slid to a 1-week low against the dollar after the yield on Portugal's 10-year bond rose to 7.894%, the highest since 1997 when Bloomberg began collecting the data. Also undercutting the euro was the defeat of German Chancellor Merkel's coalition in Sunday's state elections. Merkel's CDU party won 39% of the votes in Baden-Württemberg, its worst result since 1952, while its Free Democratic Party allies won only 5.2%, leaving the 2 parties short of a majority rule and marks the end of the CDU's 58-year rule in the state. The British pound tumbled to a 1-3/4 month low against the dollar after the Feb UK Lloyds business barometer, a gauge of sentiment which aims to predict economic developments in the UK four months in advance, fell -2 points to 1, its lowest level in 2 years.
- The Asian stock markets today closed mostly lower with Japan down -0.60%, Hong Kong -0.39%, China -0.12%, Taiwan -0.67%, Australia -0.19%, Singapore -0.44%, Soth Korea +0.17%, India +0.68%. Japanese stocks closed lower on concern that it may take months to end production halts and electricity shortages from the quake crisis. Tokyo Electric Power, the operator of the crippled Fukushima Dai-Ichi nuclear plant, tumbled 15% to its lowest since 1977 after radiation levels that can prove fatal were detected outside reactor buildings for the first time. Japan's chief government spokesman said a partial meltdown of fuel rods in the No. 2 reactor probably caused a jump in the radioactive readings, which further complicates efforts to contain the worst nuclear disaster since Chernobyl in 1986. Copper prices and Japanese automakers fell on concern Japanese carmakers may have to suspend production at pants in China, potentially curbing copper demand and undercutting automakers' profits. Declines in Japanese exporters were limited after the yen fell to a 1-week low against the dollar.
- June S&Ps this morning are trading up +2.40 points. The US stock market last Friday moved higher after Q4 US economic growth was revised higher and technology bellwether Oracle reported strong earning: Dow Jones +0.41%, S&P 500 +0.32%, Nasdaq Composite +0.24%. The S&P 500 and Nasdaq posted 2-week highs while the Dow climbed to a 3-week high. Bullish factors for stocks included (1) the larger-than-expected upward revision to US Q4 GDP (+3.1% annualized versus expectations of +3.0% annualized, (3) strength in technology stocks after bellwether Oracle, the world's top supplier of database software, forecast profit that beat analysts' estimates, and (3) reduced inflation concerns after the unexpected downward revision to the Q4 PCE deflator which shows the smallest increase since data began in 1959 (+0.4% q/q versus the previously reported +0.5% q/q).
- Bearish factors included (1) the recent surge in fuel prices which prompted a larger-than-expected drop in Mar U.S. University of Michigan consumer confidence to its lowest level in 16 months (-0.7 to 67.5 versus expectations of -0.2 to 68.0), (2) concern that Japan's nuclear crisis may not be contained after Japan's Nuclear and Industrial Safety Agency said one reactor core at the quake-damaged Fukushima Dai-Ichi power plant might be cracked and leaking radiation, and (3) concern that the European debt crisis may worsen after S&P downgraded Portugal's debt.
- Eastman Kodak (EK) soared 22% in pre-market trading after it won the latest round in a patent dispute against Apple and Research in Motion. Kodak's CEO said the victory may add more than $1 billion in revenue from royalty payments.
- June 10-year T-notes this morning are trading down -10 ticks. T-note prices last Friday slid to a 2-week low and closed lower after US Q4 GDP was reported stronger than expected and Fed members urged an end to monetary stimulus: TYM11 -10, FVM11 -9.7, EDU11 -2.5. Bearish factors included (1) the larger-than-expected upward revision to US Q4 GDP (+3.1% annualized versus expectations of +3.0% annualized), (2) comments from Philadelphia Fed President Plosser who said the improving economy means the Fed should set a pace for selling its mortgage and Treasury holdings in conjunction with raising interest rates, and (3) comments from Dallas Fed President Fisher who said the Fed was at risk of "doing too much" and should end its quantitative easing program. Bullish factors included (1) the unexpected downward revision to the Q4 PCE deflator which shows the smallest increase since data began in 1959 (+0.4% q/q versus the previously reported +0.5% q/q), and (2) the larger-than-expected drop in Mar U.S. University of Michigan consumer confidence to its lowest level in 16 months (-0.7 to 67.5 versus expectations of -0.2 to 68.0).
- The dollar index this morning is higher and at a 1-week high with the dollar/yen +0.34 yen and the euro/dollar -0.34 cents. The dollar index last Friday settled higher on concern about European government efforts to end the region's debt crisis: Dollar Index +0.561, USDJPY +0.362, EURUSD -0.00891. Bullish factors included (1) weakness in the euro on concern European leaders lack the resolve to quell the region's debt crisis after EU leaders caved in to German demands to cut the amount of startup capital for a program for future emergency aid, and (2) dollar supportive comments from Philadelphia Fed President Plosser who said the improving economy means the Fed should set a pace for selling its mortgage and Treasury holdings in conjunction with raising interest rates. Bearish factors included (1) the smaller-than-expected decline in Mar IFO business confidence, which is euro positive, (2) supportive interest rate differentials for the euro with the 3-month Euribor rate rising to a 1-3/4 year high of 1.203%, and (3) the plunge in Mar U.S. University of Michigan consumer confidence to a 16-month low, which is dollar negative.
- May crude oil prices this morning are trading down -58 cents a barrel and May gasoline is -1.90 cents per gallon. Crude oil and gasoline prices last Friday settled slightly lower as European debt concerns offset a stronger US economy: CLK11 -$0.20, RBK11 -0.13. May gasoline posted a 2-week high but shed its gains and closed lower. Bearish factors included (1) strength in the dollar, which discourages investment demand for commodities, (2) concern that Japan's rebuilding process may be delayed after a spokesman for Japan's Nuclear and Industrial Safety Agency said one reactor core at the quake-damaged Fukushima Dai-Ichi power plant might be cracked and leaking radiation, (3) concern that the European debt crisis will worsen and slow the economy and energy demand, and (4) the larger-than-expected drop in Mar U.S. University of Michigan consumer confidence which tumbled to a 16-month low and may lead to decreased consumer spending and fuel demand. Bullish factors include (1) the larger-than-expected upward revision to US Q4 GDP, which indicates stronger-than-expected fuel consumption, and (2) the ongoing civil unrest in North Africa and the Middle East that threatens to spread to major oil-producers in the region.
Global Financial Calendar
| Monday 3/28/11 | |
|---|---|
| United States | |
| 0830 ET | Feb personal spending expected +0.6%, Jan +0.2%. Feb personal income expected +0.4%, Jan +1.0%. Feb PCE deflator expected +1.6% y/y, Jan +1.2% y/y. Feb PCE core deflator expected +0.2% m/m and +0.9% y/y, Jan +0.1% m/m and +0.8% y/y. |
| 1000 ET | Feb pending home sales expected +0.9% m/m, Jan –2.8% m/m and –4.4% y/y. |
| 1130 ET | Weekly 3-mo and 6-mo T-bill auctions. |
| 1240 ET | Atlanta Fed President Dennis Lockhart speaks on the U.S. economic outlook to the Rotary Club of Atlanta. |
| 1300 ET | Treasury auctions $35 billion 2-year T-notes. |
| 1540 ET | Chicago Fed President Charles Evans delivers a speech titled “A Perspective on the Current Economy” at the University of South Carolina’s Darla Moore School of Business. |
| 1800 ET | Boston Fed President Eric Rosengren speaks on a panel discussion titled “Recession and Recovery: A Forum on Smart Policies for Sustainable Growth.” |
| Japan | |
| 1930 ET | Feb Japan jobless rate expected unchanged at 4.9%, Jan unchanged at 4.9%. Feb job-to-applicant ratio expected 0.62, Jan 0.61. |
| 1950 ET | Feb Japan overall household spending expected unchanged y/y, Jan –1.0% y/y. |
| 1950 ET | Feb Japan retail trade expected +0.5% m/m and –0.5% y/y, Jan +4.1% m/m and +0.1% y/y. |
| Germany | |
| n/a | Feb German retail sales (can be released any day between Mar 28-Apr 1) expected +0.3% m/m and +1.5% y/y, Jan +0.4% m/m and +2.6% y/y. |
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