Barchart Morning Call
Overnight Developments
Global Financial Calendar
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- Global stocks are mixed with the European Euro Stoxx 50 up +0.01% and June S&Ps down -0.90 of a point. Weakness in the dollar accelerated after the FOMC pledged yesterday to keep record stimulus measures in place as the dollar index plunged overnight to a 2-3/4 year low. Gold soared to a record high and Treasuries are higher on expectations that this morning's US Q1 GDP report will show the economy slowed. US stocks were boosted on increased M&A activity after Exelon agreed to buy Constellation Energy for $7.9 billion, or about $28.59 a share. European stocks received a boost after Apr German unemployment fell -37,000, as expected, to 2.97 million, the lowest level of unemployment in 19 years. Interest rate differentials are supporting the euro, which climbed to a 16-1/2 month high against the dollar as the 3-month Euribor rate rose to 1.375%, the highest level in 2 years. Limiting gains in European stocks was the unexpected decline in Mar French consumer spending, which fell -0.7% m/m, weaker than expectations of a +0.2% increase, as soaring fuel prices eroded income.
- The Asian stock markets today closed mixed with Japan up +1.63%, Hong Kong -0.37%, China -1.49%, Taiwan -0.09%, Australia unchanged, Singapore +0.07%, South Korea +0.02% and India -0.81%. Japan's economy took a bigger hit than expected from last month's earthquake crisis as Mar Japan industrial production plunged -15.3% m/m, the biggest drop since data began in 1953. The BOJ also cut its growth estimate for the year ending Mar 2012 to 0.6% from a Jan prediction of 1.6%. Deputy Governor Nishimura's proposal to expand the BOJ's asset-purchase fund was rejected by the policy board, which boosted the yen against the dollar. China's Shanghai Stock Index slipped to a 1-month low and closed lower on fears the PBOC may raise interest rates again as soon as next week. Credit Suisse Group AG predicts that China may raise interest rates as early as a public holiday on May 2 to counter rising price pressures. Since Jan 2010, 11 of the 13 PBOC decisions to either raise interest rates or boost banks' reserve requirements came on weekends or public holidays.
- June S&Ps this morning are trading down -0.90 of a point. The US stock market yesterday settled higher on strong company earnings results along with comments from Fed Chairman Bernanke that the Fed will maintain record stimulus: Dow Jones +0.76%, S&P 500 +0.62%, Nasdaq Composite +0.78%. The Dow and S&P 500 climbed to 2-3/4 year highs and the Nasdaq posted a 10-year high. Bullish factors included (1) the Mar durable goods orders which rose for the third straight month after Feb durable goods orders were unexpectedly revised up to show an increase (Mar +2.5% m/m versus expectations of +2.3% m/m and Feb revised up to a +0.7% increase from the originally reported decline of -0.6% m/m), (2) the post FOMC statement that said "the economic recovery is proceeding at a moderate pace and overall conditions in the labor market are improving gradually," (3) comments from Fed Chairman Bernanke who said the Fed will maintain record stimulus measures until job growth accelerates and the recovery is robust enough to withstand tighter credit, (4) strong company earnings results as 77% of the 197 companies in the S&P 500 that reported earnings results since Apr 11 have beaten analysts' estimates, and (5) a friendlier environment for stocks as Renaissance Capital LLC reported that at least 31 US companies have announced plans for IPO's this month, the most since Aug 2007.
- Bearish factors for stocks included (1) comments from Fed Chairman Bernanke that he expects a "relatively weak" Q1, (2) the action by the Fed to cut its growth forecast for the US economy this year to 3.1% to 3.3% from a Jan forecast of 3.4% to 3.9% and to raise its core inflation estimate for this year to 1.3% to 1.6%, higher than a Jan estimate of 1.0% to 1.3%, and (2) concern the European sovereign-debt crisis may worsen after credit-default swaps to insure the government debts of Greece, Portugal and Ireland all rose to records.
- Constellation Energy Group (CEG) jumped 7.9% in European trading after Exelon agreed to buy the company for $7.9 billion, or $38.59 a share.
- June 10-year T-notes this morning are up +8 ticks. T-note prices yesterday closed lower on supply pressures and after the Fed raised its inflation estimates for this year: TYM11 -8, FVM11 -1, EDU11 unchanged. Bearish factors included (1) reduced safe-haven demand for Treasuries after the S&P 500 rose to a 2-3/4 year high, (2) the Fed's action to raise its core inflation estimate for this year to 1.3% to 1.6%, higher than a Jan estimate of 1.0% to 1.3%, and (3) supply pressures ahead of the Treasury's $29 billion 7-year T-note auction on Thursday. Bullish factors included (1) the action by the Fed to cut its growth forecast for the US economy this year to 3.1% to 3.3% from a Jan forecast of 3.4% to 3.9%, (2) increased safe-haven demand for Treasuries on concern the European debt crisis may worsen after credit-default swaps to insure the government debts of Greece, Portugal and Ireland all rose to records, and (3) the post-FOMC statement that said the economy is recovering at a "moderate pace" and a pickup in inflation is likely to be temporary.
- The dollar index this morning is weaker and fell to a fresh 2-3/4 year low in overnight trade with the dollar/yen -0.41 yen and the euro/dollar +0.18 cents. The dollar index yesterday fell to a 2-2/3 year low and closed lower after the Fed lowered its growth forecast for this year and said it will finish its QE2 bond purchase program: Dollar Index -0.318, USDJPY +0.598, EURUSD +0.01437. Bearish factors included (1) the action by the Fed to cut its growth forecast for the economy this year to 3.1% to 3.3% from a Jan forecast of 3.4% to 3.9% and to raise its core inflation estimate for this year to 1.3% to 1.6%, higher than a Jan estimate of 1.0% to 1.3%, (2) the action by the Fed to maintain its QE2 asset-purchase program, which further weakens the dollar's interest rate differentials, and (3) reduced safe-haven demand for the dollar after the S&P 500 climbed to a 2-3/4 year high. Bullish factors included (1) a possible increase in the safe-haven demand for the dollar after credit-default swaps to insure the government debts of Greece, Portugal and Ireland all rose to records, which raises concern the European sovereign-debt crisis will worsen, and (2) weakness in the yen after Standard & Poor's cut Japan's sovereign-rating outlook to "negative" from "stable," citing the costs for rebuilding after lest month's earthquake.
- June crude oil prices this morning are trading down -16 cents a barrel and June gasoline is +0.35 of a cent per gallon. Crude oil and gasoline prices yesterday fluctuated after the release of the DOE weekly inventories but finished higher as gasoline supplies plunged to a 1-2/3 year low: CLM11 +$0.55, RBM11 +5.10. Jun gasoline posted a contract high and nearest-futures May gasoline climbed to a 2-3/4 year high. Bullish factors included (1) the fall in the dollar index to a 2-2/3 year low, which boosts investment demand in commodities, (2) strength in gasoline prices after weekly DOE gasoline supplies fell more than expected (-2.51 million bbl to a 1-2/3 year low of 205.6 million bbl versus expectations of a -1.0 million bbl decline), (3) the unexpected decline in weekly distillate inventories (-1.80 million bbl versus expectations of a +500,000 bbl increase), (4) the smaller-than-expected increase in the refinery utilization rate, which signals reduced output of gasoline and distillate products in the weeks ahead (+0.2 to 82.7% versus expectations of +0.9 to 83.4%), and (5) the rally in the S&P 500 to a 2-3/4 year high, which bolsters confidence in the economic outlook and energy demand. Bearish factors included (1) the larger-than-expected increase in weekly crude oil supplies (+6.16 million bbl versus expectations of +1.7 million bbl), and (2) the action by the Fed to cut its growth forecast for the US economy this year, which signals reduced energy demand and consumption.
Global Financial Calendar
| Thursday 4/28/11 | |
|---|---|
| United States | |
| 0830 ET | Weekly initial unemployment claims expected -8,000 to 395,000, previous -13,000 to 403,000. Weekly continuing claims expected -15,000 to 3.680 million, previous -7,000 to 3.695 million. |
| 0830 ET | Q1 U.S. GDP expected +2.0% annualized, Q4 +3.1% annualized, Q1 personal consumption expected +2.0%, Q4 +4.0%. Q1 GDP price index expected +2.3%, Q4 +0.4%. Q1 core PCE deflator expected +1.4% q/q, Q4 +0.4% q/q. |
| 0830 ET | San Francisco Fed President John Williams gives welcoming remarks and Fed Governor Elizabeth Duke delivers opening remarks at a community affairs conference in Washington D.C. |
| 1000 ET | Mar pending home sales expected +1.5% m/m, Feb +2.1% m/m and –9.3% y/y. |
| 1300 ET | Treasury auctions $29 billion 7-year T-notes. |
| 1630 ET | Weekly money supply report and Fed balance sheet. |
| Japan | |
| 0000 ET | Mar Japan vehicle production, Feb -5.5% y/y. |
| 0100 ET | Mar Japan housing starts expected +0.4% y/y, Feb +10.1% y/y. |
| 0100 ET | Mar Japan construction orders, Feb +19.5% y/y. |
| n/a | BOJ announces interest rate decision (expected no change to the 0.00% to 0.10% benchmark rate). |
| France | |
| 0245 ET | Mar French consumer spending expected +0.2% m/m and +11.3% y/y, Feb +0.9% m/m and +5.5% y/y. |
| Germany | |
| 0200 ET | Mar German import price index expected +1.0% m/m and +11.2% y/y, Feb +1.1% m/m and +11.9% y/y. |
| 0355 ET | Apr German unemployment change expected -37,000, Mar -55,000. Apr unemployment rate expected -0.1 to 7.0%, Mar -0.2 to 7.1% |
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