Barchart Morning Call
Overnight Developments
Global Financial Calendar
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- Global stocks are weaker with the European Euro Stoxx 50 index down -0.08% and June S&Ps down -4.30 points. The dollar is stronger after Fed Chairman Bernanke said at an Atlanta Fed conference last night that inflation must be watched "extremely closely," which fueled speculation that the Fed may tighten monetary policy sooner than previously expected. Stock prices were pressured after China raised its interest rates and after Moody's Investors Service cut Portugal's long-term government bond rating to Baa1 from A3, its second downgrade in the last 3 weeks, saying another downgrade may follow and the winner of Portugal's elections in June will probably tap Europe's bailout fund with "urgency." Credit-default swaps on Portuguese government debt jumped 9 bp to a record 589 bp and the extra yield that investors demand to hold Portuguese bonds instead of benchmark German bunds rose to 531 bp, the most since Bloomberg began tabulating the data in 1997. The euro remained lower after Feb Euro-Zone retail sales unexpectedly declined -0.1% m/m as high energy costs curbed spending, while ECB Council member Bonello said that risks to the ECB's economic growth projections "are on the downside." On the positive side, the Mar Euro-Zone PMI composite index was revised up +0.1 to 57.6.
- The Asian stock markets today closed mixed with Japan down -1.06%, Hong Kong, China and Taiwan closed for holiday, Australia +0.27%, Singapore +0.20%, South Korea +0.72%, India -0.08%. China raised interest rates for the fourth time since the global financial crisis in an attempt to restrain inflation and limit the risk of asset bubbles. The PBOC hiked the 1-year lending rate by 25 bp to 6.31% from 6.06%, effective tomorrow, and boosted the 1-year deposit rate to 3.25% from 3.00%. A fall in chipmakers led technology stocks lower in Asia after the Semiconductor Industry Association said the 3-month average for global chip sales fell -1.1% m/m in Feb. Toyota closed down over 3% after it said it may temporarily shutter factories in North America as component supplies are running low after production in Japan was halted in the aftermath of the earthquake, while Sony fell 1.1% after it said it may delay the release of its new Playstation Portable game machine as the earthquake disrupted production. Tokyo Electric Power (Tepco) plunged the daily limit, or 18%, to its lowest price since the company was listed in 1951 as it continues to dump radioactive water into the ocean. Tepco has now lost 83% of its value since the Mar 11 earthquake crippled its Fukushima Dai-Ichi power plant.
- June S&Ps this morning are trading down -4.30 points. The US stock market yesterday finished mixed as increased M&A activity offset a slump in technology stocks: Dow Jones +0.19%, S&P 500 +0.03%, Nasdaq Composite -0.01%. Bullish factors included (1) strength in M&A activity that has boosted the overall equity market with total takeover deals this year as of Apr 4 at $635.2 billion, up 25% from $506.5 billion during the same period last year, and (2) strength in raw material and energy producers after silver jumped to a 31-year high and crude oil climbed to a 2-1/2 year high.
- Bearish factors for stocks included (1) weakness in technology stocks led by a slump in chipmakers after the Semiconductor Industry Association said global chip sales in Feb fell -1.1% m/m to $25.5 billion, and (2) the action by Goldman Sachs to cut its Q1 US GDP estimate to 2.5% from an earlier forecast of 3.5%, citing poor weather and higher energy costs during the quarter.
- Apple (AAPL) slid 3.1% in pre-market trading after the Nasdaq OMX said it will reduce Apple's weighting in the Nasdaq-100 Index to 12.33% from the current 20.49% to better reflect market capitalizations.
- June 10-year T-notes this morning are trading up +1.5 ticks. T-note prices yesterday erased early losses and finished higher after Atlanta Fed President Lockhart said the US economic recovery faces headwinds: TYM11 =8, FVM11 +8.5, EDU11 +4.0. Bullish factors included (1) comments from Atlanta Fed President Lockhart who said the US economic recovery faces headwinds, which reduced speculation the Fed may end its QE2 asset-purchase program before its scheduled completion in June, and (2) the action by the Fed to purchase $8.03 billion of Treasuries as part of its QE2 asset-purchase program. Bearish factors included (1) reduced safe-haven demand for Treasuries as global stock markets rallied, and (2) carry-over weakness from a decline in bund prices after Feb Euro-Zone PPI climbed to a 2-1/2 year high.
- The dollar index this morning is higher with the dollar/yen +0.29 yen and the euro/dollar -0.43 cents. The dollar index yesterday finished slightly higher as the euro retreated from a 5-month high against the dollar on weaker than expected Euro-Zone investor confidence: Dollar Index +0.079, USDJPY -0.001, EURUSD -0.00141. Bullish factors included (1) weakness in the euro which fell back from a 5-month high against the dollar on concern a likely interest-rate increase by the ECB on Thursday will hurt the economies of the most indebted nations in the Euro-Zone, which could further exacerbate the European sovereign-debt crisis, and (2) the Apr Euro-Zone Sentix investor confidence fell which fell more than expected to a 3-month low and is euro negative. Bearish factors included (1) comments from Atlanta Fed President Lockhart who said the US economic recovery faces headwinds, which bolstered speculation the Fed will keep its overly easy monetary policy in place and keep the dollar's interest rate differentials weak, and (2) the increase in the Feb Euro-Zone PPI to a 2-1/2 year high of +6.6% y/y, which boosted the euro on speculation the ECB will remain hawkish even after an expected 25 bp rate hike in the 2-week refinancing rate this Thursday.
- May crude oil prices this morning are trading down -58 cents a barrel and May gasoline is -1.59 cents per gallon. Crude oil and gasoline prices yesterday climbed to 2-1/2 year highs and settled higher on concern that global oil supplies will be hindered as the civil war in Libya is prolonged: CLK11 +$0.53, RBK11 +2.10. Bullish factors included (1) increased fighting between rebels and troops loyal to Mummar Qaddafi in Libya, which fuels speculation that a protracted conflict in Libya will curtail global oil supplies, and (2) the rally in global stock markets which bolsters confidence in the economic outlook and energy demand. Bearish factors include (1) the stronger dollar, which reduces investment demand in commodities, (2) comments from IEA Director Tanaka that the "burden" that crude at more than $100 a barrel puts on the world economy is "worrisome" and may be as bad as in 2008, and (3) the prediction from the US Climate Prediction Center for above-average temperatures for much of the US from Apr 9 to Apr 13, which could reduce demand for heating fuels.
Global Financial Calendar
| Tuesday 4/5/11 | |
|---|---|
| United States | |
| 0745 ET | ICSC (Int?l Council of Shopping Centers) weekly retailer sales. |
| 0855 ET | Redbook weekly retailer sales. |
| 1000 ET | Mar ISM non-manufacturing index expected -0.2 to 59.5, Feb +0.3 to 59.7. |
| 1000 ET | Treasury Secretary Timothy Geithner testifies to Senate Appropriations Subcommittee on the U.S. budget. |
| 1130 ET | Weekly 4-week and monthly 1-year T-bill auctions. |
| 1245 ET | Atlanta Fed President Dennis Lockhart gives welcoming remarks at the Atlanta Fed?s 2011 Financial Markets Conference. |
| 1300 ET | Philadelphia Fed President Charles Plosser moderates a panel discussion at the Atlanta Fed?s 2011 Financial Markets Conference. |
| 1400 ET | Minutes of the Mar 15 FOMC meeting. |
| France | |
| 0350 ET | Revised Mar French PMI services expected no change at 60.7. |
| Germany | |
| 0355 ET | Revised Mar German PMI services expected no change at 60.1. |
| Euro-Zone | |
| 0400 ET | Revised Mar Euro-Zone PMI composite expected no change at 57.5. |
| 0500 ET | Feb Euro-Zone retail sales expected +0.1% m/m and +0.6% y/y, Jan +0.1% m/m and +0.2% y/y. |
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