Barchart Morning Call
Overnight Developments
Global Financial Calendar
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- Global stocks are lower with the European Euro Stoxx 50 down -0.60% and June S&Ps down -6.00 points. The dollar index rose to a 1-1/4 month high and most commodities fell as Greece prepares to ask for an increased bailout. Greece's ASE Stock Index tumbled to a 13-year low before European leaders and the IMF meet later today in Brussels as Germany demands deeper budget cuts in exchange for granting Greece extra aid or giving it more time to pay back loans. Also clouding the bailout talks in Brussels will be the absence of IMF Director Strauss-Kahn who was arrested over the weekend in New York on sexual-assault charges. Apr Euro-Zone CPI rose an as-expected +0.6% m/m and +2.8% y/y, with the +2.8% y/y increase the biggest annual gain in 2-1/2 years. Treasuries rose after Atlanta Fed President Lockhart said it's too early to consider an exit from record stimulus until the recovery becomes "more clearly sustainable."
- The Asian stock markets today closed lower with Japan down -0.94%, Hong Kong -1.36%, China -0.88%, Taiwan -1.05%, Australia -1.30%, Singapore -0.86%, South Korea -0.85%, India -1.01%. Japanese stocks closed lower after Goldman Sachs cut Japan's equities to "underweight" due to "greater cautiousness" on US growth and domestic risks such as electricity supply and yen strength. South Korean stock prices were undercut after Goldman Sachs downgraded Korean equities to "market weight," citing slowing global growth and "persistent" local inflation, however, Goldman did keep its recommendation for Chinese and Taiwanese equities at "overweight."
- June S&Ps this morning are trading down -6.00 points. The US stock market last Friday moved lower after technology stocks retreated and bank stocks slid on concern over Europe's sovereign-debt crisis: Dow Jones -0.79%, S&P 500 -0.81%, Nasdaq Composite -1.20%. Bearish factors included (1) a sell-off in technology stocks after CA Inc., the second-largest maker of software for mainframe computers, tumbled after earnings missed estimates, (2) weakness in financial stocks on concern over the solvency of Greece and concerns that Republican efforts to change regulatory overhaul in the Dodd-Frank Act will reduce banks' earnings, and (3) concerns that Greece may need additional aid to avoid defaulting on its debt after the European Commission raised its estimate for Greece's budget deficit to 9.5% of GDP in 2011, higher than the 7.4% target adopted by the EU and the IMF in last years bailout. Bullish factors for stocks included (1) early support from a short-lived rally in European stocks after Q1 Euro-Zone GDP was stronger than expected, (2) the larger-than-expected increase in May US University of Michigan consumer confidence (+2.6 to 72.4 versus expectations of +0.2 to 70.0), and (3) the fall in the 10-year T-note yield to a 5-1/4 month low of 3.129%.
- Alcoa (AA) slipped 1.5% in European trading as metals prices tumbled on concern the European debt crisis will slow demand.
- June 10-year T-notes this morning are up +7 ticks. T-note prices last Friday moved higher on reduced inflation concerns along with increased safe-haven demand after the stock market slumped: TYM11 +10.5, FVM11 +5.7, EDU11 -1.5. The 10-yer T-note yield matched its 5-1/4 month low of 3.129%. Bullish factors included (1) reduced inflation concerns after the Apr core CPI came in at expectations (+0.2% m/m and +1.3% y/y), (2) increased safe-haven demand for Treasuries as the stock market sold off, and (3) a post refunding rally as bond dealers covered short positions put on during the Treasury's $72 billion May refunding auctions of T-notes and T-bonds. Bearish factors included (1) the larger-than-expected increase in May US University of Michigan consumer confidence (+2.6 to 72.4 versus expectations of +0.2 to 70.0), and (2) the +3.2% y/y increase in Apr CPI, stronger than expectations of +3.1% y/y and the biggest year-over-year increase in 2-1/2 years.
- The dollar index this morning is stronger and at a 1-1/4 month high with the dollar/yen +0.10 yen and the euro/dollar -0.16 cents. The dollar index last Friday recovered from early losses and surged to a 1-1/4 month high and closed higher on increased safe-haven demand for the greenback as stock prices slid: Dollar Index +0.517, USDJPY -0.160, EURUSD -0.01290. Bullish factors included (1) increased safe-haven demand for the dollar after stock prices tanked, and (2) the larger-than-expected increase in May US University of Michigan consumer confidence. Bearish factors included (1) the stronger-than-expected Q1 Euro-Zone GDP, which is euro supportive, and (2) strength in the yen after Japanese Economy and Fiscal Policy Minister Yosano said the yen's strength was the result of the dollar weakening, not the yen gaining independently, which fueled speculation that the BOJ nor the G-7 will intervene in currency markets to slow the yen's gains.
- June crude oil prices this morning are trading down -$1.69 a barrel and June gasoline is -4.39 cents per gallon. Crude oil and gasoline prices last Friday settled higher but well off of their best levels as weak equities and a stronger dollar offset strength in demand from robust Q1 European economic growth: CLM11 +$0.68, RBM11 +1.05. Bullish factors included (1) the stronger than expected Q1 Euro-Zone GDP, which is positive for energy demand and consumption, (2) the prediction from Goldman Sachs that the oil market is "structurally bullish" and prices are likely to be higher in 12 months, and (3) concern that the worst flooding of the Mississippi River in 75 years may threaten US gasoline production as refiners in the Mississippi Delta region may be forced to close. Bearish factors included (1) the rally in the dollar index to a 1-1/4 month high, which reduces investment demand in commodities, and (2) the sell-off in stock prices, which undercuts confidence in the economic outlook and energy demand.
Global Financial Calendar
| Monday 5/16/11 | |
|---|---|
| United States | |
| 0830 ET | May Empire manufacturing index expected -1.7 to 20.0, Apr +4.2 to 21.7. |
| 0900 ET | Mar net long-term TIC flows, Feb +$26.9 billion. |
| 0900 ET | Fed Chairman Ben Bernanke speaks at a conference in Georgetown University titled ?New Building Blocks for Jobs and Economic Growth; Intangible Assets as Sources of Increased Productivity and Enterprise Value.? |
| 1000 ET | May NAHB housing market index expected +1 to 17, Apr -1 to 16. |
| 1100 ET | USDA weekly grain export inspections. |
| 1130 ET | Weekly 3-mo and 6-mo T-bill auctions. |
| Japan | |
| 0100 ET | Apr Japan consumer confidence expected -1.9 to 36,7, Mar -2.6 to 38.6. |
| Euro-Zone | |
| 0500 ET | Apr Euro-Zone CPI expected +0.6% m/m and +2.8% y/y, Mar +1.4% m/m and +2.8% y/y. Apr core CPI expected +1.5% y/y, Mar +1.3% y/y. |
| 1100 ET | Euro-Zone finance ministers meet in Brussels. |
| Canada | |
| 0830 ET | Mar Canada manufacturing sales expected +1.7% m/m, Feb -1.5% m/m. |
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