Barchart Morning Call
Overnight Developments
Global Financial Calendar
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- Global stocks are mostly higher with the European Euro Stoxx 50 up +0.18% and June S&Ps up +3.20 points. The dollar and Treasuries are lower and commodities rallied after Goldman Sachs said it's turning "more bullish" on raw materials. European sovereign-debt fears eased after the Greek government endorsed an asset-sale plan and 6 billion euros ($8.4 billion) of budget cuts to win extra aid. The euro rose against the dollar after the May German IFO business climate index remained unchanged at 114.2, stronger than expectations of -0.5 to 113.7. Limiting European stock gains was the larger than expected drop in May French business confidence which fell -2 to 107, greater than expectations of -1 to 109, along with the larger-than-expected decline in Mar Euro-Zone industrial new orders which fell -1.8% m/m, greater than expectations of -1.1% m/m.
- The Asian stock markets today closed mostly higher with Japan up +0.17%, Hong Kong +0.09%, China +0.11%, Taiwan +0.10%, Australia -0.31%, Singapore +0.08%, South Korea +0.22%, India +0.10%. Chinese stocks were undercut after Goldman Sachs lowered its 2011 China GDP estimate to 9.4% annualized, lower than a previous call of 10.0% annualized. Goldman also raised its forecast for Chinese inflation this year to 4.7% from 4.3%. Japanese stocks closed higher, led by gains in technology stocks, after Sony finished up 2.7% when it said it expects to turn a profit in fiscal 2011. Asian shipping companies were stronger after the Baltic Dry Index, a measure of shipping costs for commodities, rose for a third day.
- June S&Ps this morning are trading up +3.20 points. The US stock market yesterday fell to 1-month lows and closed sharply lower on concern the European debt crisis may be getting worse along with concerns of a global economic slowdown after May Euro-Zone PMI manufacturing and May Chinese manufacturing activity weakened: Dow Jones -1.05%, S&P 500 -1.19%, Nasdaq Composite -1.58%. Bearish factors for stocks included (1) carry-over weakness from a slump in European stocks on concern the European sovereign-debt crisis may be getting worse after the yields on Greek and Irish 10-year government bonds rose to records and Standard & Poor's warned it may downgrade Italy's debt, (2) global growth concerns after the May Euro-Zone manufacturing PMI fell more than expected and the May China HSBC manufacturing PMI fell to its slowest pace of expansion in 10 months, (3) the weaker-than-expected Apr Chicago Fed National Activity Index which unexpectedly fell below zero to its lowest level in 8 months (-0.77 to -0.45 versus expectations of -0.06 to 0.20), and (4) weakness in energy and raw material producers as a rally in the dollar prompted a sell-off in most commodities.
- Bullish factors included (1) a strong earnings season thus far as 72% of the 455 companies in the S&P 500 that released results since Apr 11 have beaten per-share earnings estimates, and (2) the decline in the 10-year T-note yield to a 5-1/2 month low of 3.089%.
- Freeport McMoRan (FCX) gained 1.2% in pre-market trading as the biggest publicly traded copper producer received a boost as copper prices climbed after Goldman Sachs said it's turning "more bullish" on raw materials.
- June 10-year T-notes this morning are up +0.5 of a tick. T-note prices yesterday surged to a 5-1/2 month high and closed higher on increased safe-haven demand after global stock markets plunged on concern that Europe's debt crisis was worsening: TYM11 +6, FVM11 +1.7, EDU11 -2.0. The 10-year T-note yield matched its 5-1/2 month low of 3.089%. Bullish factors included (1) increased safe-haven demand for Treasuries on concern the European sovereign-debt crisis is getting worse after the yields on Greek and Irish 10-year government bonds rose to records and Standard & Poor's warned it may downgrade Italy's debt, (2) the weaker-than-expected Apr Chicago Fed National Activity Index which unexpectedly fell below zero to its lowest level in 8 months (-0.77 to -0.45 versus expectations of -0.06 to 0.20), and (3) the Fed's action to purchase $6.9 billion of Treasuries as part of its QE2 asset=purchase program. A bearish factor is supply pressures ahead of Tuesday's $35 billion auction of 2-year T-notes.
- The dollar index this morning is weaker with the dollar/yen -0.19 yen and the euro/dollar +0.33 cents. The dollar index yesterday rallied to a 1-1/2 month high and closed higher on increased safe-haven demand due to concern Europe's sovereign-debt crisis will worsen: Dollar Index +0.721, USDJPY +0.309, EURUSD -0.01117. Bullish factors included (1) increased safe-haven demand for the dollar after the yields on Greek and Irish 10-year government bonds rose to records and Standard & Poor's warned it may downgrade Italy's debt, an indication the European debt crisis may worsen, (2) weakness in the euro which tumbled to a 2-month low against the dollar after May German manufacturing PMI fell to its lowest level in 6 months and the May Euro-Zone PMI composite fell more than expected, and (3) increased safe-haven demand for the dollar after the May China HSBC manufacturing PMI fell to its slowest pace of expansion in 10-months, a sign the global economy is slowing. Bearish factors included (1) the fall in the 10-year T-note yield to a 5-1/2 month low, which weakens the dollar's interest rate differentials, and (2) the slide in the Apr Chicago Fed National Activity Index to its lowest level in 8 months, which suggests economic weakness and is dollar negative.
- July crude oil prices this morning are trading up +$1.12 a barrel and July gasoline is +3.64 cents per gallon. Crude oil and gasoline prices yesterday closed lower due to a strong dollar along with concern that global energy demand will weaken from the European sovereign-debt crisis and a slowdown in Chinese and European manufacturing activity: CLN11 -$2.40, RBN11 -1.44. Bearish factors included (1) a rally in the dollar index to t 1-1/2 month high, which reduces investment demand in commodities, (2) the drop in the May China HSBC manufacturing PMI to its slowest level in 10 months, which indicates reduced energy consumption, (3) the larger-than-expected decline in the May Euro-Zone PMI composite, and (4) concern that the European debt crisis may worsen and slow energy demand after the yields on Greek and Irish 10-year government bonds rose to records and Standard & Poor's warned it may downgrade Italy's debt.
Global Financial Calendar
| Tuesday 5/24/11 | |
|---|---|
| United States | |
| 0200 ET | Boston Fed President Eric Rosengren speaks at a conference hosed by the Bank of Rossi in St. Petersburg, Russia on ?New Framework to Strengthen Financial Stability and Regulatory Priorities.? |
| 0745 ET | ICSC (Int?l Council of Shopping Centers) weekly retailer sales. |
| 0825 ET | Fed Governor Elizabeth Duke speaks on financial education at a conference titled ?The Future of Life-Cycle Saving and Investing? at the Boston University School of Management. |
| 0855 ET | Redbook weekly retailer sales. |
| 0950 ET | Kansas City Fed President Thomas Hoenig speaks at the Global Interdependence Center conference at Drexel University business school on ?Is Housing Ready for a Rebound?? |
| 1000 ET | Apr new home sales expected unchanged at 300,000, Mar +11.1% to 300,000. |
| 1000 ET | May Richmond Fed manufacturing index expected unchanged at 10, Apr -10 to 10. |
| 1130 ET | Weekly 4-week T-bill auction. |
| 1300 ET | Treasury auctions $35 billion 2-year T-notes. |
| 1320 ET | St. Louis Fed President James Bullard speaks to the Cape Girardeau West Rotary Club. |
| Germany | |
| 0200 ET | Revised Q1 German GDP expected no change at +1.5% q/q an d +4.9% y/y. |
| 0400 ET | May German IFO business climate expected -0.5 to 113.7, Apr -0.8 to 114.2. May IFO current assessment expected -0.3 to 120.7, Apr unchanged at 121.0. May IFO expectations expected -0.7 to 107.0, Apr -1.5 to 107.7. |
| France | |
| 0245 ET | May French business confidence indicator expected -1 to 109, Apr unchanged at 110. |
| United Kingdom | |
| 0430 ET | Apr UK public sector net borrowing expected +4.4 billion pounds, Mar +16.4 billion pounds. |
| 0600 ET | May UK CBI reported sales expected 11, Apr 21. |
| Euro-Zone | |
| 0500 ET | Mar Euro-Zone industrial new orders expected -1.1% m/m and +12.9% y/y, Feb +0.7% m/m and +21.2% y/y. |
| Japan | |
| 2330 ET | BOJ Governor Masaaki Shirakawa speaks at an economic forum in Tokyo. |
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