Barchart Morning Call
Overnight Developments
Global Financial Calendar
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- Global stocks are mixed with the European Euro Stoxx 50 up +0.14% and June S&Ps up +4.40 points. The euro rose to a 16-1/4 month high against the dollar after ECB President Trichet said the ECB must continue "solidly anchoring" inflation expectations, which bolstered speculation of further ECB rate hikes. Crude oil weakened after the CEO of Saudi Arabia's state oil company, Saudi Arabian Oil Co., said it is "not comfortable" with the current price of oil and is concerned about its effect of global economic growth. UBS AG surged nearly 6% and is leading European stocks higher after Switzerland's biggest lender reported Q1 net income of 1.81 billion francs, beating analysts' estimates of 1.69 billion francs, as the bank attracted the most new money from wealthy customers since the end of 2007. Credit-default swaps to insure Greek government debt jumped 13 bp to a record 1,345 bp after Europe's statistics agency reported Greece's 2010 budget gap was 10.5% of GDP, more than the 9.4% the Greek government reported back in Feb. A member of German Chancellor Merkel's council of economic advisers said Greece will have to restructure its debt and should avoid waiting too long to do it, while ECB Council member and ECB Chief Economist Stark said a debt restructuring by a euro country risks triggering a banking crisis that in a "worst case" could exceed the effects of the failure of Lehman Brothers Holdings.
- The Asian stock markets today closed lower with Japan down -1.17%, Hong Kong -0.54%, China -0.57%, Taiwan -0.03%, Australia closed for holiday, Singapore -0.50%, South Korea -0.45%, India -0.20%. Chinese bank stocks weakened and led the Shanghai Stock Index lower after 3 people with knowledge of the matter said China's banking regulator set capital targets for the nation's 5 biggest lenders above the minimum 11.5% ratio last month amid concern that credit risks may rise. A report in the Economic Information Daily by a member of China's State Council Development Research Center said the PBOC may raise interest rates and bank reserve requirement ratios in Q2 to control liquidity. Japanese stocks closed lower after the yen rallied to a 4-week high against the dollar, which may hurt exporters' earnings as they repatriate overseas profits back into yen, while Nintendo fell 1.6% after it said sales and profits this year may grow less than analysts' estimates.
- June S&Ps this morning are trading up +4.40 points. The US stock market yesterday settled mixed as a drop in consumer-staples companies offset stronger-than-expected Mar new home sales: Dow Jones -0.21%, S&P 500 -0.16%, Nasdaq Composite +0.20%. The Dow climbed to a 2-3/4 year high, the Nasdaq posted a 2-1/4 month high and the S&P 500 posted a 1-1/2 week high. Bullish factors included (1) the stronger than expected Mar US new home sales along with the upward revision to Feb (Mar +11.1% to 300,000 versus expectations of +12.0% to 280,000 and Feb revised up to a -13.5% drop to 270,000 from the originally reported -16.9% decline to 250,000), and (2) continued earnings optimism as corporate earnings results so far this earnings season have exceeded projections by 9.6%.
- Bearish factors for stocks included (1) weakness in consumer-staples companies after Kimberly-Clark cut its profit forecast due to an increase in material costs, which raises concern that the bottom line of other companies may be hurt be rising commodity prices, (2) the slide in energy producers after crude oil fell back from a 2-1/2 year high, and (3) the action by Morgan Stanley to cut its estimate for US home price declines to down -39% from their 2006 peak from an earlier estimate of down -35%.
- June 10-year T-notes this morning are up +1 tick. T-note prices yesterday finished higher after the stock market erased an early rally and as the Fed bought Treasuries as part of its QE2 asset-purchase program: TYM11 +11, FVM11 +8.2, EDU11 -0.5. Bullish factors included (1) increased safe-haven demand for Treasuries after the stock market declined, and (2) the Fed's action to purchase $7.24 billion of Treasuries as part of its QE 2 asset-purchase program. Bearish factors included (1) the stronger than expected Mar US new home sales along with the upward revision to Feb (Mar +11.1% to 300,000 versus expectations of +12.0% to 280,000 and Feb revised up to a -13.5% drop to 270,000 from the originally reported -16.9% decline to 250,000), and (2) supply pressures ahead of the Treasury's $35 billion 2-year T-note auction on Tuesday.
- The dollar index this morning is weaker with the dollar/yen -0.17 yen and the euro/dollar +0.25 cents. The dollar index yesterday weakened on speculation that the FOMC this week will keep interest rates at a record low, which will keep the dollar's interest rate differentials weak: Dollar Index -0.122, USDJPY -0.017, EURUSD +0.00288. Bearish factors included (1) an early rally in commodity currencies against the dollar after crude oil rose to a 2-1/2 year high, and (2) speculation that the FOMC this week will keep interest rates at a record low, which may prompt inventors to shy away from dollar assets in favor of higher yielding ones. Bullish factors included (1) increased safe-haven demand for the dollar as the stock market declined, and (2) weakness in the yen against the dollar on speculation the BOJ this week will signal an increase in stimulus to help Japan's economy recover from its earthquake crisis.
- June crude oil prices this morning are trading down -41 cents a barrel and June gasoline is +0.28 of a cent per gallon. Crude oil and gasoline prices yesterday retreated after an early rally faded and prices finished mixed on profit taking: CLM11 -$0.01, RBM11 +0.62. June crude rallied to a 2-1/2 year high but closed lower and Jun gasoline posted a contract high and nearest-futures May gasoline climbed to a 2-3/4 year high. Bearish factors included (1) the decline in the equity market which erodes optimism in the economic outlook and energy demand, and (2) technical selling after the energy markets failed to hold its gains to 2+ year highs. Bullish factors included (1) the weak dollar which encourages investment demand in commodities, and (2) comments from a Saudi Arabian oil official who said his country's oil output will stay at 12.5 million barrels a day, squashing rumors that the country was considering hiking output to 15 million barrels a day.
Global Financial Calendar
| Tuesday 4/26/11 | |
|---|---|
| United States | |
| 0745 ET | ICSC (Int?l Council of Shopping Centers) weekly retailer sales. |
| 0855 ET | Redbook weekly retailer sales. |
| 0900 ET | Feb S&P/CaseShiller composite-20 home price index expected -0.4% m/m and -3.3% y/y, Jan ?0.2% m/m and 3.1% y/y. |
| 0900 ET | FOMC begins 2-day policy meeting. |
| 1000 ET | Apr U.S. consumer confidence expected +1.4 to 64.8, Mar ?8.6 to 63.4. |
| 1000 ET | Apr Richmond Fed manufacturing index expected unchanged at 20, Mar ?5 to 20. |
| 1130 ET | Weekly 4-week T-bill auction. |
| 1300 ET | Treasury auctions $35 billion 2-year T-notes. |
| Japan | |
| 1950 ET | Mar Japan retail trade expected -6.0% m/m and -6.2% y/y, Feb +0.8% m/m and +0.1% y/y. |
| United Kingdom | |
| n/a | Apr UK nationwide house prices, Mar +0.5% m/m and +0.1% y/y. |
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