Barchart Morning Call
Overnight Developments
Global Financial Calendar
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- Global stocks are mixed with the European Euro Stoxx 50 down -0.12% and June S&Ps up +2.10 points. The dollar and Treasuries are weaker, while the euro gained and gold slumped on speculation China will increase its purchases of European bonds, which eases concern that the European sovereign-debt crisis will spread. The Financial Times reported that European Financial Stability Facility (EFSF) CEO Regling said that Asian investors, including the Chinese government, may compromise a "strong proportion" of Portuguese bailout bond buyers when the EFSF sells them next month. China, the world's biggest holder of foreign-exchange reserves, bought 16% of the 4.75 billion euros ($6.7 billion) of 5-year notes sold yesterday to fund Portugal?s bailout, according to the European Commission. Another positive for European stocks was the Apr German import price index which climbed +0.3% m/m and +9.4% y/y, weaker than expectations of +0.7% m/m and +9.9% y/y.
- The Asian stock markets today closed mostly higher with Japan up +1.48%, Hong Kong +0.67%, China -0.40%, Taiwan +0.70%, Australia +!.65%, Singapore +0.16%, South Korea +2.87%, India +1.11%. China's yuan strengthened to a 17-year high today as the PBOC set the currency's reference rate at 6.4921 per dollar, the highest in 6 years. The yuan briefly touched 6.4858, the strongest level since 1993, as speculation mounts that China will tighten monetary and fiscal policies further to curb rising domestic inflation. Most Asian stocks rose, led by raw material producers, after Deutsche Bank AG upgraded basic resource companies to "overweight." South Korea's Kospi Index closed nearly 3% higher after Credit Suisse Group AG and Citigroup predicted that South Korean stocks may gain amid improved earnings and attractive valuations and recommended that investors buy the nation's equities on "dips."
- June S&Ps this morning are trading up +2.10 points. The US stock market yesterday shook off early losses and finished higher as a rally in commodity producers and financial companies reversed losses triggered by a weaker-than-expected Apr durable goods report: Dow Jones +0.31%, S&P 500 +0.32%, Nasdaq Composite +0.55%. All of the indexes fell to 1-month lows but rebounded and finished higher. Bullish factors for stocks included (1) carry-over support from a late rally in European stocks as financial stocks moved higher after Fitch Ratings said it's not planning any downgrades of German banks because of Greece's debt crisis, (2) strength in commodity and energy producers after crude oil and metals rallied, and (3) the action by the OECD to raise is 2011 US GDP estimate to 2.6% from a Nov estimate of 2.2%.
- Bearish factors included (1) carry-over weakness from a decline in Asian stock markets after Apr Japan exports slumped -12.5% y/y, the largest decline in 1-1/2 years and a sign that global economic growth may be slowing, (2) the weaker-than-expected Apr US durable goods orders which posted their biggest decline in 6 months (-3.6% and -1.5% ex transportation versus expectations of -2.5% and +0.5% ex transportation), (3) comments from Treasury Secretary Geithner who said it will take "several more years" for a recovery in the US housing market, and (4) comments from ECB Council member Draghi who said he sees "serious downside risks" to economic growth from the European debt crisis.
- NetApp (NTAP) rose 3% in pre-market trading after the company forecast Q1 adjusted earnings of 57 cents a share, higher than analysts' estimates of 50 cents.
- June 10-year T-notes this morning are down -4 ticks. T-note prices yesterday traded on both sides of unchanged throughout the day and finished slightly higher as strong demand for the Treasury's $35 billion auction of 5-year T-notes offset hawkish Fed comments: TYM11 +2, FVM11 +4, EDU11 -0.5. Bullish factors included (1) the weaker-than-expected Apr US durable goods orders which posted their biggest decline in 6 months (-3.6% and -1.5% ex transportation versus expectations of -2.5% and +0.5% ex transportation), (2) the Fed's action to purchase $4.796 billion of Treasuries as part of its QE2 asset-purchase program, (3) strong demand for the Treasury's $35 billion auction of 5-year T-notes that had a bid-to-cover ratio of 3.20, higher than the 12-auction average of 2.79, and (4) increased safe-haven demand for Treasuries after comments from ECB Council member Draghi who said he sees "serious downside risks" to economic growth from the European debt crisis. Bearish factors include (1) reduced safe-haven demand for Treasuries after the stock market shook off early losses and rallied, (2) comments from Minneapolis Fed President Kocherlakota who said that based on his predictions of core PCE inflation rising slowly this year, a "modest" rate hike of 50 bp in the Fed funds rate by the end of the year "would be desirable" and would still leave Fed policy "highly accommodative," and (3) supply pressures ahead of a $29 billion Treasury auction of 7-year T-notes on Thu.
- The dollar index this morning is lower with the dollar/yen -0.14 yen and the euro/dollar +0.76 cents. The dollar index yesterday finished slightly higher after it shook off early weakness when Apr durable goods orders fell more than expected and rallied on euro negative comments from ECB Council members Draghi and Stark: Dollar Index +0.050, USDJPY +0.011, EURUSD -0.00120. Bullish factors included (1) the bigger-than-expected decline in the Jun German GfK consumer confidence survey which fell to its lowest level in 6 months and is euro negative, (2) the action by the OECD to raise its US growth estimates for this year, (3) comments from ECB Executive Board member Stark who said Greece, Ireland and Portugal need a "drastic change" in economic policy, which boosted the safe-haven demand for the dollar on concern the European sovereign-debt crisis will linger, and (4) comments from ECB Council member Draghi who said he sees "serious downside risks" to economic growth from the European debt crisis. Bearish factors included (1) the larger-than-expected drop in Apr US durable goods orders which posted their biggest decline in 6 months and hints at economic weakness, and (2) hawkish comments from ECB Executive Board member Stark who said interest rates could go higher "if needed" because Europe's economy is growing more strongly than expected.
- July crude oil prices this morning are trading down -76 cents a barrel and July gasoline is -0.88 of a cent per gallon. Crude oil and gasoline prices yesterday finished higher after US distillate supplies fell to a 2-year low and the OECD hiked its US growth estimate for this year: CLN11 +$1.73, RBN11 +2.87. Bullish factors included (1) the unexpected decline in weekly distillate inventories which fell to a 2-year low (-2.04 million bbl to 141.1 million bbl versus expectations of a +50,000 bbl build), and (2) the action by the OECD to raise its 2011 US GDP estimate to 2.6% from a Nov estimate of 2.2%. Bearish factors included (1) the unexpected increase in weekly crude oil supplies (+616,000 bbl versus expectations of -1.7 million bbl), (2) the surge in weekly gasoline supplies by the most in 3 months (+3.79 million bbl versus expectations of +500,000 bbl), and (3) the larger-than-expected increase in the refinery utilization rate to its highest level in 4-1/2 months (+3.2 points to 86.3% versus expectations of +0.5 to 83.7%), which bodes well for further increases in fuel supplies as refiners come out of maintenance programs and boost production.
Global Financial Calendar
| Thursday 5/26/11 | |
|---|---|
| United States | |
| 0830 ET | Weekly initial unemployment claims expected -5,000 to 404,000, previous -29,000 to 409,000. Weekly continuing claims expected -11,000 to 3.700 million, previous -81,000 to 3.711 million. |
| 0830 ET | Revised Q1 U.S. GDP expected +2.2%, previous +1.8% annualized. Q1 personal consumption expected +2.8%, previous +2.7%. Q1 GDP price index, previous +1.9%. Q2 core PCE deflator, previous +1.5%. |
| 1300 ET | Treasury auctions $29 billion 7-year T-notes. |
| 1630 ET | Weekly money supply report and Fed balance sheet. |
| n/a | Group of Eight leaders begin a 2-day summit in Deauville, France. |
| Germany | |
| 0200 ET | Apr German import price index expected +0.7% m/m and +9.9% y/y, Mar +1.1% m/m and +11.3% y/y. |
| France | |
| 0245 ET | May French consumer confidence indicator expected +1 to 84, Apr unchanged at 83. |
| Euro-Zone | |
| 0900 ET | ECB Executive Board member Jose Manuel Gonzalez-Paramo speaks at an event in Barcelona. |
| United Kingdom | |
| 1901 ET | May UK GfK consumer confidence survey expected unchanged at -31, Apr -3 to -31. |
| Japan | |
| 1930 ET | May Tokyo CPI expected +0.1% y/y, Apr -0.1% y/y. May Tokyo CPI ex-fresh food expected +0.2% y/y, Apr +0.2% y/y. May Tokyo CPI ex food & energy expected +0.1% y/y, Apr unchanged y/y. |
| 1930 ET | Apr Japan national CPI expected +0.3% y/y, Mar unchanged y/y. Apr national CPI ex-fresh food expected +0.6% y/y, Mar -0.1% y/y. Apr national CPI ex food & energy expected -0.1% y/y, Mar -0.7% y/y. |
| 1950 ET | Apr Japan retail trade expected +2.6% m/m and -6.2% y/y, Mar -7.6% m/m and -8.3% y/y. |
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