Barchart Morning Call
Overnight Developments
Global Financial Calendar
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- Global stocks are mostly higher with the European Euro Stoxx 50 up +0.90% and June S&Ps up +5.80 points. The dollar is higher and Treasuries are weaker, while commodities are mixed. European stocks received a boost after the Greek newspaper Kathimerini reported that the IMF is arranging a package of as much as 100 billion euros ($144 billion) to replace Greece's existing bailout, while ECB Executive Board member Bini Smaghi said allowing a Euro-Zone member to default on or restructure its debt would be "wrong." The cost to insure European sovereign debt fell for the first time in 4 days, with the Markit iTraxx SovX Index of credit-default swaps on 15 European governments falling 5.5 bp to 190 bp. The euro fell against the dollar after Mar French industrial production unexpectedly declined -0.9% m/m, weaker than expectations of a +0.4% m/m increase.
- The Asian stock markets today closed mixed with Japan up +0.25%, China +0.75%, Taiwan -0.14%, Australia -0.65%, Singapore +0.62%, India -0.09%. China's Shanghai Stock Index closed higher and boosted other Asia-Pacific stock markets after Apr China exports climbed +29.9% to a record $156 billion, stronger than expectations of a +29.5% y/y increase. China's Apr trade balance rose to the highest this year as it surged to +$11.42 billion, higher than expectations of +$3.20 billion. The PBOC set the yuan's reference rate at 6.495 per dollar, a record high for the third day ahead of the final day of an annual economic meeting between US and Chinese officials in Washington. Asian stocks also received a lift from strength in commodity prices, which prompted gains in energy and raw-material producers and bolstered confidence in the global economic outlook.
- June S&Ps this morning are trading up +5.80 points. The US stock market yesterday settled modestly higher as gains in energy and raw material producers offset heightened European debt concerns after S&P cut Greece's credit rating: Dow Jones +0.36%, S&P 500 +0.45%, Nasdaq Composite +0.55%. Bullish factors for stocks included (1) strength in mining stocks and energy and raw-material producers after commodity prices rallied sharply, (2) data from the New York Fed that showed the Q1 delinquency rate on US households fell to 10.5%, down from 10.8% in Q4 and the fifth straight quarterly decline, and (3) strong company earnings results as 72% of the 421 S&P 500 companies that have reported earnings results since Apr 11 have beaten analysts' estimates.
- Bearish factors included (1) carry-over weakness from a slump in European stocks on increased sovereign-debt concerns after S&P cut Greece's credit rating 2 levels to B from BB- and said further reductions are possible, and (2) a drop in chipmakers after Wells Fargo said the inventory of semiconductor chips rose in Q1 and that memory prices continue to fall.
- Microsoft (MSFT) rose 1% in European trading after people involved with the matter said Microsoft is in talks to buy Skype Technologies Sa in a deal valued at about $8.5 billion.
- June 10-year T-notes this morning are down -6.5 ticks. T-note prices yesterday erased early losses and closed higher on increased safe-haven demand after S&P cut Greece's credit rating: TYM11 +6, FVM11 +4.7, EDU11 +1.0. Bullish factors included (1) increased safe-haven demand for Treasuries after S&P cut Greece's credit rating 2 levels to B from BB- and said further reductions are possible, (2) concern the European sovereign-debt crisis may worsen, which boosted safe-haven demand for Treasuries after credit-default swaps to insure Greek and Irish government debt rose to records, and (3) the Fed's action to purchase $7.24 billion of Treasuries as part of its QE2 asset-purchase program. Bearish factors included (1) strength in stocks which reduced the safe-haven demand for Treasuries, and (2) supply pressures ahead of the Treasury's $32 billion auction of 3-year T-notes on Tuesday.
- The dollar index this morning is stronger with the dollar/yen +0.29 yen and the euro/dollar -0.27 cents. The dollar index yesterday fell back from a 2-1/2 week high and closed lower on speculation the ECB will continue to raise interest rates despite an escalation in European sovereign-debt concerns: Dollar Index -0.104, USDJPY -0.272, EURUSD +0.00503. Bearish factors included (1) strength in Mar German exports which rose more than expected to their highest level since records began in 1950 and is euro supportive, and (2) stock market strength that sapped the safe-haven demand for the dollar. Bullish factors included (1) early weakness in the euro after S&P cut Greece's credit rating 2 levels to B from BB- and said further reductions are possible, (2) weakness in the British pound which fell to a 2-1/2 week low against the dollar after the Confederation of British Industry lowered its economic growth estimates for the UK to 1.7% annualized from a Feb forecast of 1.8% annualized, and (3) the larger-than-expected decline in the May Euro-Zone Sentix investor confidence which fell to its lowest level in 4 months and is euro negative.
- June crude oil prices this morning are trading down -75 cents a barrel and June gasoline is up +9.31 cents per gallon. Jun gasoline climbed to a 1-week high in overnight trade amid concern that flooding of the Mississippi River will disrupt fuel production and distribution. Crude oil and gasoline prices yesterday closed sharply higher on signs the global economic recovery remains intact: CLM11 +$5.37, RBM11 +18.83. Bullish factors included (1) the increase in Mar German exports to a record, which signals economic strength and is positive for energy consumption and demand, (2) the warning from Petromatrix Gmbh that US supplies of crude and petroleum products may be curtailed by record high water levels on the Mississippi river that may also force a closure of riverside refineries, (3) comments from Qatar's Oil Minister who said the world economy isn't weak enough to justify a freefall in crude prices, and (4) the action by JPMorgan Chase to raise the WTI crude oil price forecast for 2011 to $109.50 a barrel from $99 because OPEC and other producers aren't matching rising demand and consumers will take time to react to higher prices. Bearish factors included (1) the early rally in the dollar index to 2-1/2 week high, which eroded investment demand in commodities, and (2) concern the European debt crisis may worsen and start to negatively effect fuel demand after S&P cut Greece's debt rating 2 levels to B on restructuring concerns.
Global Financial Calendar
| Tuesday 5/10/11 | |
|---|---|
| United States | |
| 0745 ET | ICSC (Int?l Council of Shopping Centers) weekly retailer sales. |
| 0830 ET | Apr import price index expected +1.8% m/m and +10.4% y/y, Mar +2.7% m/m and +9.7% y/y. |
| 0855 ET | Redbook weekly retailer sales. |
| 0930 ET | Fed Governor Elizabeth Duke speaks at a conference on ?Exploring Innovation? on community development finance in St. Louis. |
| 1000 ET | May IBD/TIPP economic optimism expected +1.0 to 41.8, Apr -2.2 to 40.8. |
| 1000 ET | Mar wholesale inventories expected +1.0%, Feb +1.0%. |
| 1130 ET | Weekly 4-week T-bill auction. |
| 1245 ET | Richmond Fed President Jeffrey Lacker speaks on the economic outlook to business leaders at a luncheon in Arlington, VA. |
| 1300 ET | Treasury auctions $32 billion 3-year T-notes. |
| France | |
| 0245 ET | Mar French industrial production expected +0.4% m/m and +4.7% y/y, Feb +0.4% m/m and +5.6% y/y. |
| 0245 ET | Mar French manufacturing production expected +0.4% m/m and +5.9% y/y, Feb +0.7% m/m and +7.2% y/y. |
| Euro-Zone | |
| 0500 ET | ECB Executive Board member Lorenzo Bini Smaghi speaks at an event in Florence Italy. |
| 0930 ET | EU Economic and Monetary Affairs Commissioner Olli Rehn gives a press conference on the bailout package for Portugal. |
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