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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 +0.16% and June S&Ps up +3.30 points. Treasuries are lower and commodities are higher with crude oil at a 2-1/2 year high above $108.00 a barrel. The euro fell back from a 5-month high against the dollar after European investor confidence fell more than expected from a surge in fuel costs. The Apr Euro-Zone Sentix investor confidence fell -2.9 to a 3-month low of 14.2. M&A activity is lifting European stocks as Vodafone Group Plc agreed to sell its stake in SFR to Vivendi for 7.95 billion euros ($11.3 billion) and Solvay SA agreed to buy chemical maker Rhodia SA for 3.4 billion euros ($4.8 billion). German bund prices fell for an eighth day, their longest streak of declines in almost 5 years, after Feb Euro-Zone producer prices climbed +6.6% y/y, their fastest pace in 2-1/2 years.
- The Asian stock markets today closed mostly higher with Japan up +0.11%, Hong Kong +1.46%, China and Taiwan closed for Tomb Sweeping Holiday, Australia +0.51%, Singapore +0.65%, South Korea -0.26%, India +1.45%. The plunge in the yen to a 6-month low against the dollar along with a stronger-than-expected US payrolls report on Friday lifted Asian stocks on increased optimism in the economic recovery. South Korea's won rose to a 2-1/2 year high against the dollar as increased confidence in the global economy prompts investors to increase risks as they pump money into emerging markets. In an effort to allow workers in to fix damaged pumps at its crippled Fukushima Dai-Ichi nuclear plant, Tokyo Electric Power (Tepco) said it will dump radioactive water into the sea as it runs out of space to store fluids used to cool the plant's 6 reactors. The Japanese government approved a plan by Tepco to release water with low radioactive contamination into the sea to make room for liquids with higher radiation levels.
- June S&Ps this morning are trading up +3.30 points. The US stock market last Friday settled higher after better-than-expected data on jobs growth and manufacturing boosted optimism about the economy: Dow Jones +0.46%, S&P 500 +0.50%, Nasdaq Composite +0.31%. The Dow surged to a 2-3/4 year high, the S&P 500 climbed to a 1-1/4 month high and the Nasdaq rose to a 3-week high. Bullish factors included (1) the larger-than-expected increase in Mar nonfarm payrolls (+216,000 versus expectations of +190,000), (2) the unexpected decline in the Mar unemployment rate to a 2-year low (-0.1 to 8.8% versus expectations of unchanged at 8.9%), (3) the smaller-than-expected decline in the Mar ISM manufacturing index (-0.2 to 61.2 versus expectations of -0.4 to 61.0), (4) a lack of wage pressures after the smaller-than-expected increase in Mar avg hourly earnings (unchanged m/m and +1.7% y/y versus expectations of +0.2% and +1.9% y/y), and (5) overall strength in global manufacturing, which bodes well for US exports and the sustainability of the economic expansion after China's manufacturing growth accelerated for the first time in four months in Mar, India's manufacturing expanded for a 24th straight month and Russia's factory output rose to near a 5-year high in Mar.
- Bearish factors for stocks included (1) the weaker-than-expected Feb construction spending and the downward revision to Jan (Feb -1.4% versus expectations of -0.2% and Jan revised lower to -1.8% versus the originally reported -0.7%), (2) the smaller-than-expected increase in Mar manufacturing payrolls (+17,000 versus expectations of +30,000), and (3) concern the European sovereign-debt crisis may worsen after Standard & Poor?s cut Ireland's credit rating after the cost of rescuing Irish banks rose to as much as 100 billion euros ($141.5 billion) and Fitch Ratings cut Portugal's debt ratings and kept a negative outlook on Ireland and Portugal, meaning their ratings may be cut further.
- Edwards Lifesciences (EW) jumped 6.5% in pre-market trading after Jeffries raised its recommendation on the stock to "buy" from "hold" and lifted its share-price estimate to $103 from $93.
- June 10-year T-notes this morning are trading down -2.5 ticks. T-note prices last Friday fell to a 3-week low after stronger than expected US economic data on employment and manufacturing but prices closed well off of their worst levels after dovish comments from New York Fed President Dudley: TYM11 -2, FVM11 -4.5, EDU11 +0.5. Bearish factors included (1) the larger-than-expected increase in Mar nonfarm payrolls (+216,000 versus expectations of +190,000), (2) the unexpected decline in the Mar unemployment rate to a 2-year low (-0.1 to 8.8% versus expectations of unchanged at 8.9%), (3) the smaller-than-expected decline in the Mar ISM manufacturing index (-0.2 to 61.2 versus expectations of -0.4 to 61.0), and (4) the larger-than-expected increase in the Mar ISM prices paid sub-index which expanded at its fastest pace in 2-1/2 years (+3.0 to 85.0 versus expectations of +0.9 to 82.9). Bullish factors included (1) a lack of wage pressures after the smaller-than-expected increase in Mar avg hourly earnings (unchanged m/m and +1.7% y/y versus expectations of +0.2% and +1.9% y/y), (2) the weaker-than-expected Feb construction spending and the downward revision to Jan (Feb -1.4% versus expectations of -0.2% and Jan revised lower to -1.8% versus the originally reported -0.7%), and (3) comments from New York Fed President Dudley who said the US economy's recovery is "still tenuous" and to not be "overly optimistic about the growth outlook."
- The dollar index this morning is slightly higher with the dollar/yen +0.10 yen and the euro/dollar -0.22 cents. The dollar index last Friday jumped to a 2-week high after Mar US payrolls were reported stronger than expected but then erased its gains and finished slightly lower after dovish comments from New York Fed President Dudley: Dollar Index -0.024, USDJPY +0.930, EURUSD +0.00770. Bearish factors included (1) comments from New York Fed President Dudley who said not to be "overly optimistic about the growth outlook," which signals he is not in favor of tightening Fed policy, and (2) reduced safe-haven demand for the dollar after the S&P 500 rallied to a 1-1/4 month high. Bullish factors included (1) strong US economic data on Mar manufacturing and employment which signals a faster pace of economic growth that may prompt the Fed into raising interest rates, (2) concern the European sovereign-debt crisis may worsen after Standard & Poor?s cut Ireland's credit rating after the cost of rescuing Irish banks rose to as much as 100 billion euros ($141.5 billion) and Fitch Ratings cut Portugal's debt ratings and kept a negative outlook on Ireland and Portugal, meaning their ratings may be cut further, and (3) weakness in the yen which tumbled to a 6-month low against the dollar on speculation Japan's economy will be hampered by the aftermath of its earthquake crisis.
- May crude oil prices this morning are trading up +43 cents a barrel and May gasoline is +0.86 of a cent per gallon, both at fresh 2-1/2 year highs. Crude oil and gasoline prices last Friday rallied to 2-1/2 year highs and settled higher on signs of increased global demand along with intensified fighting in Libya: CLK11 +$1.22, RBK11 +3.84. Bullish factors included (1) the increase in Mar China PMI manufacturing for the first time in 4 months, which signals increased energy demand, (2) stronger than expected US economic data on Mar payrolls and Mar ISM manufacturing, which points to economic strength that may boost fuel demand, and (3) the action by Mummar Qaddafi?s troops to repel the advances of rebel forces, which may prolong the Libyan conflict and further curtail Libyan oil production. Bearish factors include (1) weakness in European economic data after the Mar Euro-Zone PMI manufacturing index was unexpectedly revised down and Mar UK PMI manufacturing fell to a 5-month low, which indicates decreased energy consumption, and (2) comments from New York Fed President Dudley who said not to be "overly optimistic about the growth outlook."
Global Financial Calendar
| Monday 4/4/11 | |
|---|---|
| United States | |
| 0905 ET | Atlanta Fed President Dennis Lockhart speaks on the U.S. economic outlook to the International Economic Forum of the Americas? Palm Beach Strategic Forum. |
| 0930 ET | Chicago Fed President Charles Evans speaks on a panel discussion about ?The Role of Government in Financial Literacy? at the Chicago Fed?s Money Smart Week Chicago/Visa Financial Literacy and Education Summit. |
| 1100 ET | USDA weekly grain export inspections. |
| 1130 ET | Weekly 3-mo and 6-mo T-bill auctions. |
| 1515 ET | Chicago Fed President Charles Evans speaks on CNBC?s ?Closing Bell? about the economy and monetary policy. |
| 1915 ET | Fed Chairman Ben Bernanke speaks at the Atlanta Fed?s 2011 Financial Markets Conference titled ?Navigating the New Financial Landscape.? |
| United Kingdom | |
| 0430 ET | Mar UK PMI construction expected ?1.7 to 54.8, Feb +2.8 to 56.5. |
| Euro-Zone | |
| 0430 ET | Apr Euro-Zone Sentix investor confidence expected ?1.1 to 16.0, Mar +0.4 to 17.1. |
| 0500 ET | Feb Euro-Zone PPI expected +0.8% m/m and +6.7% y/y, Jan +1.5% m/m and +6.1% y/y. |
| Canada | |
| 1030 ET | Q1 Canada business outlook future sales expected +5 to 27, Q4 ?7 to 22. |
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