Barchart Morning Call
Overnight Developments
Global Financial Calendar
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- Global stocks are weaker with the European Euro Stoxx 50 down -1.38% and June S&Ps down -12.20 points. The euro slumped to a 2-month low against the dollar and gold climbed to a 1-wee high on concern Europe's sovereign-debt crisis will worsen. Spain's Socialist Part suffered its worst electoral defeat in more than 30 years due to its implementation of austerity measures while Standard & Poor's late last Friday cut Italy's credit rating outlook to negative from stable. Credit-default swaps to insure Greek government debt soared 29 bp to a record 1,373, while the yield on Ireland's 10-year government bond rose to a record 10.805%. Concerns that China's economic growth is slowing also undercut stock prices after a Chinese manufacturing index fell to its lowest level in 10 months. The 10-year German bund yield slipped to a 4-1/4 month low of 3.002% on increased safe-haven demand from the European debt crisis and after manufacturing activity in the Euro-Zone slowed more than expected. The May German PMI manufacturing index fell -3.8 to 58.2, weaker than expectations of -1.0 to 61.0 and its slowest rate of expansion in 6 months, while the May Euro-Zone PMI manufacturing index declined -2.4 to 55.4, weaker than expectations of -0.5 to 57.3.
- The Asian stock markets today closed lower with Japan down -1.52%, Hong Kong -2.11%, China -3.16%, Taiwan -1.01%, Australia -1.88%, SIngapore -1.83%, South Korea -2.66%, India -1.82%. China's Shanghai Stock Index tumbled to a 3-1/4 month low and undercut other global stock markets after the May China HSBC manufacturing PMI fell -0.7 to 51.1, its slowest rate of expansion in 10 months. Japan's Nikkei 225 Stock Index closed lower, led by declines in makers of construction machinery, after Nomura Holdings cut its estimate for sales of the equipment to China by 20% in the year ending Mar 2012, saying Chinese government measures to slow the economy will likely weigh on demand in the construction industry. South Korean automakers Hyundai and Kia closed lower and dragged down South Korea's Kospi Stock Index after Hyundai said that strike action at a supplier of piston rings and cylinder liners may halt production of engines for some of its autos and Kia's auto models as well. Airline stocks weakened after Britain's weather agency warned that an ash plume from the Grimsvotn chamber, Iceland's most active volcano, could threaten trans-Atlantic air traffic as early as tonight.
- June S&Ps this morning are trading down -12.20 points on heightened European sovereign-debt concerns. The US stock market last Friday closed lower on concern the European sovereign-debt crisis will worsen and after retailers sank when GAP cut its full-year profit forecast: Dow Jones -0.74%, S&P 500 -0.77%, Nasdaq Composite -0.71%. Bearish factors for stocks included (1) carry-over weakness from a decline in European stocks on concern the European debt crisis will worsen after Fitch Ratings cut Greece's credit rating one notch to B+ from BB+ and said the country could face a further reduction in its creditworthiness, and (2) a slump in retailers after GAP cut its full-year profit forecast because of higher costs and Aeropostale forecasted weaker-than-expected Q2 profits.
- Bullish factors included (1) data from the US Labor Department that showed payrolls grew in 42 states in Apr, while the unemployment rate fell in 39 states, which signals strength in the labor market, (2) comments from Dallas Fed President Fisher who said the recovery "is gathering steam" and that "underlying fundamentals" of the US economy are better than recent data may indicate, and (3) strength in energy producers after crude oil shook off early losses and moved higher.
- United Continental (UAL) fell 3.2% in pre-market trading after Britain's weather agency warned that an ash plume from the Grimsvotn chamber, Iceland's most active volcano, could threaten trans-Atlantic air traffic with ash reaching the UK as early as tonight.
- Alcoa (AA) slipped 1% in pre-market trading as industrial metals prices fell on demand concerns after a Chinese manufacturing index fell to a 10-month low.
- June 10-year T-notes this morning are up +15 ticks on increased safe-haven demand as global equity markets slump. T-note prices last Friday moved higher on increased safe-haven demand after the stock market tumbled on concern Europe's sovereign-debt crisis is getting worse: TYM11 +6.5, FVM11 +3.7, EDU11 -0.5. Bullish factors included (1) increased safe-haven demand for Treasuries on concern the European sovereign-debt crisis is getting worse after Fitch Ratings cut Greece's credit rating one notch to B+ from BB+ and said the country could face a further reduction in its creditworthiness, (2) concerns that the global economy may begin to slow after Germany's Bundesbank said in its monthly bulletin that Germany's economy will lose momentum, and (3) comments from Chicago Fed President Evans who said that "slow progress" in the economy justifies "substantial policy accommodation." Bearish factors included (1) data from the US Labor Department that showed payrolls grew in 42 states in Apr, while the unemployment rate fell in 39, which signals strength in the labor market, and (2) comments from Dallas Fed President Fisher who said the recovery "is gathering steam" and that "underlying fundamentals" of the US economy are better than recent data may indicate.
- The dollar index this morning is higher and at a 1-1/2 month high with the dollar/yen +0.09 yen and the euro/dollar -1.41 cents at a 2-month low. The dollar index last Friday closed higher as European sovereign-debt concerns fueled an increase in the safe-haven demand for the dollar: Dollar Index +0.312, USDJPY +0.090, EURUSD -0.01512. Bullish factors included (1) increased safe-haven demand for the dollar after Fitch Ratings cut Greece's credit rating one notch to B+ from BB+ and said the country could face a further reduction in its creditworthiness, (2) comments from ECB Council member Weidmann who said the ECB may not be able to accept Greek sovereign debt as collateral if the bond maturities are extended, and (3) the Bundesbank's monthly bulletin that stated economic growth in Germany "is likely to ease somewhat in the foreseeable future." Bearish factors included (1) dollar negative comments from Chicago Fed President Evans who said that "slow progress" in the economy justifies "substantial policy accommodation," and (2) strength in the yuan after PBOC Governor Xiaochuan said that inflation remains "high" and China needs to strike a balance between economic growth and consumer prices, which fueled speculation of further tightening measures by China.
- July crude oil prices this morning are trading down -$2.40 a barrel and July gasoline is -4.29 cents per gallon. Crude oil and gasoline prices last Friday fell early on the stronger dollar but then rallied and closed higher after the API reported the US fuel consumption increased in April: CLN11 +$1.17, RBN11 +1.63. Bullish factors included (1) data from the US Labor Department that showed payrolls grew in 42 states in Apr, while the unemployment rate fell in 39, which signals broad-based strength in the labor market that may lead to increased economic strength and fuel demand, and (2) data from the API that said US fuel consumption as measured by deliveries of petroleum products, rose in Apr by +5.2% to 19.9 million barrels a day from a year earlier. Bearish factors included (1) strength in the dollar, which reduces investment demand in commodities, (2) the statement from Germany's Bundesbank that growth in Germany, Europe's largest economy will probably slow because growth in Q1 was "overstated," and (3) the slump in the equity market which reduces confidence in the economic outlook and energy demand.
Global Financial Calendar
| Monday 5/23/11 | |
|---|---|
| United States | |
| 0830 ET | Apr Chicago Fed National Activity Index expected -0.06 to 0.20, Mar +0.10 to 0.26. |
| 1130 ET | Weekly 3-mo and 6-mo T-bill auctions. |
| 2010 ET | St. Louis Fed President James Bullard speaks on the state of the U.S. economy and monetary policy in Park Hills, MO. |
| Japan | |
| 0100 ET | Revised Mar Japan coincident index CI, previous 99.5. Revised Mar leading index CI. Previous 99.5. |
| France | |
| 0300 ET | May French PMI manufacturing expected -0.5 to 57.0, Apr +2.1 to 57.5. |
| 0300 ET | May French PMI services expected -0.8 to 62.1, Apr +2.5 to 62.9. |
| Germany | |
| 0330 ET | May German PMI manufacturing expected -1.0 to 61.0, Apr +1.1 to 62.0. |
| 0330 ET | May German PMI services expected +0.2 to 57.0, Apr -3.3 to 56.8. |
| Euro-Zone | |
| 0300 ET | ECB Council member Jens Weidmann speaks at a conference in Frankfurt. |
| 0400 ET | May Euro-Zone PMI composite expected -0.5 to 57.3, Apr +0.2 to 57.8. |
| Canada | |
| n/a | Canadian markets closed for Victoria Day. |
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