Barchart Morning Call
Overnight Developments
Global Financial Calendar
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- Global stocks are mixed with the European Euro Stoxx 50 down -0.64% and June S&Ps are up +6.20 points. The dollar and Treasuries are lower and commodities are higher with crude oil up over +$3.00 a barrel. Weakness in banks is leading European stocks lower on increased European sovereign-debt concerns with credit-default swaps insuring Greek government debt for 5 years climbing 19 bp to a record 1,360 bp. In an unannounced meeting on May 6, the European Union agreed to review the terms of the 110 billion-euro ($158 billion) bailout plan that Greece received last year with Jean-Claude Juncker, head of the European finance ministers, saying Greece "does need a further adjustment program." Also undercutting stock prices was the decline in the May Euro-Zone Sentix investor confidence which fell -3.3 to 10.9, its lowest level in 4 months and greater-than-expectation of a -0.4 decline to 13.8. The euro strengthened against the dollar after Mar German exports surged +7.3% m/m to 98.3 billion euros ($141.4 billion), stronger than expectations of +1.1% m/m and the most since records began in 1950.
- The Asian stock markets today closed mixed with Japan down -0.66%, Hong Kong +0.76%, China +0.27%, Taiwan +0.65%, Australia +0.29%, Singapore +1.21%, South Korea -0.38%, India +0.05%. Asian energy-related and raw-material producing stocks closed higher after US jobs growth bolstered confidence in the economic outlook and halted a rout in commodity prices. Japanese stocks finished lower, led by declines among power companies, after Japanese Prime Minister Kan asked Chubu Electric Power to shut its Hamaoka nuclear plant because it was located close to an earthquake fault-line. Prime Minister Kan cited a government study that shows an 87% likelihood of a magnitude-8 quake striking the area within 30 years.
- June S&Ps this morning are trading up +6.20 points. The US stock market last Friday rallied sharply on the stronger-than-expected Apr nonfarm payrolls but then gave up most of their gains on speculation that Greece may leave the European Union: Dow Jones +0.43%, S&P 500 +0.38%, Nasdaq Composite +0.46%. Bullish factors for stocks included (1) the stronger-than-expected Apr nonfarm payrolls (+244,000 versus expectations of +185,000), (2) the larger-than-expected increase in Apr manufacturing payrolls (+29,000 versus expectations of +20,000), (3) the -1.1% decline in Q1 US bankruptcy filings, the third straight quarterly decline, and (4) reduced interest rate concerns after the 10-year T-note yield fell to a 5-month low of 3.129%.
- Bearish factors included (1) the unexpected increase in the Apr unemployment rate (+0.2 to 9.0% versus expectations of unchanged at 8.8%), (2) renewed European sovereign-debt concerns after Der Spiegel magazine reported that Greece is considering reintroducing its own currency and may leave the European monetary union, and (3) weakness in energy and raw material producers after dollar strength fueled further declines in commodities as copper plunged to a 5-1/4 month low and crude oil fell to a 2-1/4 month low.
- US Steel (X) rose 1.4% in European trading after Barron's reported the steelmaker may rise as much as 65% over the next year if the company posts higher earnings and limits any decline in prices.
- June 10-year T-notes this morning are down -3.5 ticks. T-note prices last Friday shook off early weakness from the strong Apr nonfarm payrolls report and moved higher on increased safe-haven demand due to speculation that Greece may leave the European Union: TYM11 +7, FVM11 +5.2, EDU11 -1.0. The 10-year T-note yield fell to a 5-month low of 3.129%. Bullish factors included (1) the unexpected increase in the Apr unemployment rate (+0.2 to 9.0% versus expectations of unchanged at 8.8%), (2) increased safe-haven demand for Treasuries after Der Spiegel magazine reported that Greece is considering reintroducing its own currency and may leave the European monetary union, and (3) comments from New York Fed President Dudley who said the US recovery is still a "considerable way" from the Fed's goals, which suggest he favors keeping the Fed's overly easy monetary policy in place. Bearish factors included (1) the stronger-than-expected Apr nonfarm payrolls (+244,000 versus expectations of +185,000), (2) the larger-than-expected increase in Apr manufacturing payrolls (+29,000 versus expectations of +20,000), and (3) early strength in stocks which sapped the safe-haven demand for Treasuries.
- The dollar index this morning is weaker with the dollar/yen +0.12 yen and the euro/dollar +0.86 cents. The dollar index last Friday rallied to a 2-1/2 week high on strong Apr US nonfarm payrolls and on a report that Greece was considering leaving the Euro-Zone: Dollar Index +0.647, USDJPY +0.559, EURUSD -0.02249. Bullish factors included (1) the stronger-than-expected Apr US nonfarm payrolls which signals economic strength and is dollar supportive, and (2) weakness in the euro which fell to 2-week low against the dollar after Der Spiegel magazine reported that Greece is considering reintroducing its own currency and may stop using the euro. Bearish factors included (1) comments from New York Fed President Dudley who said the US recovery is still a "considerable way" from the Fed's goals, which suggest he favors keeping the Fed's overly easy monetary policy in place, and (2) the stronger-than-expected Mar German industrial production, which is euro supportive.
- June crude oil prices this morning are trading up $3.12 a barrel and June gasoline is +9.66 cents per gallon. Crude oil and gasoline prices last Friday fluctuated on both sides of unchanged and finally settled lower as a rally in the dollar offset the strong Apr nonfarm payrolls report: CLM11 -$2.62, RBM11 -0.53. Jun crude fell to a 2-1/4 month low and Jun gasoline dropped to a 1-1/4 month low. Bearish factors included (1) the rally in the dollar index to 2-1/2 week high, which erodes investment demand in commodities, (2) technical selling with the drop in prices to a 2-1/4 month low, and (3) comments from Qatari Oil Minister Saleh Al who said crude supplies are "very healthy." Bullish factors included (1) the stronger-than-expected Apr US nonfarm payrolls and Mar German industrial production, which is positive for energy consumption and demand, and (2) the rally in the stock market which bolsters the outlook on the economy and fuel demand.
Global Financial Calendar
| Monday 5/9/11 | |
|---|---|
| United States | |
| 1100 ET | USDA weekly grain export inspections. |
| 1130 ET | Weekly 3-mo and 6-mo T-bill auctions. |
| Germany | |
| 0200 ET | Mar German trade balance expected +12.0 billion euros, Feb +12.1 billion euros. Mar exports expected +0.9%, Feb +2.8%. Mar imports expected +0.9%, Feb +4.0%. |
| France | |
| 0230 ET | Apr Bank of France business sentiment expected unchanged at 110, Mar unchanged at 110. |
| Euro-Zone | |
| 0430 ET | May Euro-Zone Sentix investor confidence expected -0.4 to 13.8, Apr -2.9 to 14.2. |
| Canada | |
| 0815 ET | Apr Canada housing starts expected +183,000, Mar +185,100. |
| United Kingdom | |
| 1901 ET | Apr UK RICS house price balance expected -23%, Mar -23%. |
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