Barchart Morning Call
Overnight Developments
Global Financial Calendar
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- Global stocks are mixed with the European Euro Stoxx 50 down -0.36% and Sep S&Ps down -4.00 points. The euro fell to a 1-week low against the dollar and Treasuries and bund prices gained due to the ongoing European sovereign-debt crisis as credit-default swaps insuring Greek government debt climbed 7 bp to a record 1,530, while Portugal's rose 3 bp to an all-time high 722. ECB Vice President Constancio said that the "burden is not on us" to solve Greece's crisis as the central bank rejects any direct participation in a second bailout for Greece with European governments continuing to squabble over how to fix the debt crisis. Weaker-than-expected factory output in France helped undercut stock prices after Apr French industrial production unexpectedly slipped -0.3% m/m, weaker than expectations of a +0.4% m/m increase. The British pound fell to a 2-week low against the dollar after Apr UK industrial production unexpectedly fell -1.7% m/m, weaker than expectations of no change and the biggest decline in 20 months. Limiting declines in European stocks was the action by the Bundesbank to raise its forecasts for German growth to 3.1% this year and 1.8% in 2012, higher than Feb estimates of 2.5% for this year and 1.5% for 2012. The Bundesbank also predicts that German inflation will average 2.5% this year before falling to 1.8% in 2012 and that the unemployment rate will continue to decline, falling to 6.5% in 2012 from 7.0% this year.
- The Asian stock markets today closed mixed with Japan up +0.50%, Hong Kong -0.84%, China +0.34%, Taiwan -1.81%, Australia +0.27%, Singapore -0.62%, South Korea -1.25%, India -0.63%. China reported a May trade surplus of $13.1 billion, smaller than expectations of $19.6 billion, as surging imports signal China's domestic demand may support global growth while also adding pressure for higher interest rates. May China exports rose +19.4% y/y, slightly weaker than expectations of +20.4%, while May China imports rose +28.4% y/y, stronger than expectations of +22.5% y/y. China's May passenger car sales fell -0.1% y/y to 1.04 million units, the first decline since Jan 2009 after Japanese automakers cut production due to supply shortages caused by Japan's Mar earthquake. South Korean stocks closed lower after the Bank of Korea raised its benchmark 7-day repurchase rate by 25 bp to 3.25%, its third increase this year, in an attempt to rein in inflation that has exceeded its target range and curb record household debt.
- September S&Ps this morning are trading down -4.00 points. The US stock market yesterday rallied after the US trade deficit unexpectedly narrowed amid record exports along with positive comments from Philadelphia Fed President Plosser: Dow Jones +0.63%, S&P 500 +0.74%, Nasdaq Composite +0.35%. The S&P 500, the Dow and the Nasdaq all fell to 2-1/2 month lows. Bullish factors for stocks included (1) the unexpected narrowing of the Apr US trade deficit to -$43.7 billion from -$46.8 billion in Mar, which indicates economic strength and is positive for Q2 GDP, (2) comments from Philadelphia Fed President Plosser who said "I expect the economy to expand at a moderate pace and for inflation to move back down from its current level as oil prices stabilize," (3) strength in energy producers after crude oil rose to a 1-week high, and (4) a rally in fertilizer producers and makers of agriculture machinery after corn prices surged to a record when the USDA cut its corn production and supply estimates.
- Bearish factors included (1) the unexpected increase in weekly US initial unemployment claims (+1,000 to 427,000 versus expectations of -3,000 to 419,000), (2) concern the European sovereign-debt crisis will worsen after credit-default swaps to insure the government debts of Greece, Portugal and Ireland all surged to records, and (3) comments from Fed Vice Chairman Yellen who said she sees no quick or easy solutions for the problems still afflicting the US housing market that will undergo a "long, drawn-out recovery."
- September 10-year T-notes this morning are up +10 ticks. T-note prices yesterday rallied early on the unexpected increase in weekly jobless claims but shed their gains and turned lower on reduced safe-haven demand after the stock market rallied: TYU11 -14.5, FVU11 -11.2, EDZ11 -1.5. The 10-year T-note yield dropped to a 6-month low of 2.92% before moving back up to 3.00%. Bearish factors included (1) reduced safe-haven demand for Treasuries after the equity market rallied, (2) the unexpected narrowing of the Apr US trade deficit to -$43.7 billion from -$46.8 billion in Mar, which indicates economic strength and is positive for Q2 GDP, and (3) the $13 billion Treasury auction of 30-year T-bonds that were sold at a yield of 4.238%, higher than expectations of 4.216% and a sign of weak demand. Bullish factors included (1) the unexpected increase in weekly US initial unemployment claims (+1,000 to 427,000 versus expectations of -3,000 to 419,000), and (2) comments from Philadelphia Fed President Plosser who said "I expect the economy to expand at a moderate pace and for inflation to move back down from its current level as oil prices stabilize."
- The dollar index this morning is higher with the dollar/yen -0.26 yen and the euro/dollar -0.48 cents. The dollar index yesterday strengthened on speculation the ECB may limit further interest rate hikes after it lowered its 2012 Euro-Zone growth estimates: Dollar Index +0.262, USDJPY +0.476, EURUSD -0.00729. Bullish factors included (1) the unexpected narrowing of the Apr US trade deficit, (2) weakness in the euro after the ECB cut its 2012 Euro-Zone GDP estimate to 0.6% to 2.8% from an earlier estimate of 0.8% to 2.8%, which bolsters speculation the ECB may limit any further interest rate hikes, and (3) concern the European sovereign-debt crisis will worsen after credit-default swaps to insure the government debts of Greece, Portugal and Ireland all surged to records. Bearish factors included (1) the unexpected increase in weekly initial US unemployment claims, which hints at economic weakness and is dollar negative, and (2) comments from ECB President Trichet that hint at an ECB interest rate hike next month when he said "strong vigilance" is warranted to contain inflation.
- July crude oil prices this morning are trading down -$1.08 a barrel and July gasoline -1.32 cents per gallon. Crude oil and gasoline prices yesterday moved higher on carry-over support from OPEC's decision to not raise crude production along with an unexpected narrowing of the Apr US trade deficit: CLN11 +$1.19, RBN11 +6.11. Jul crude and Jul gasoline posted 1-week highs. Bullish factors included (1) carry-over strength from Wednesday?s rally after OPEC failed to increase production quotas, (2) the unexpected narrowing of the Apr US trade deficit, which signals economic strength and is positive for energy demand, and (3) the rally in stocks which bolsters optimism in the economic outlook and energy demand. Bearish factors included (1) strength in the dollar, which discourages investment demand in commodities, and (2) the unexpected increase in weekly US initial unemployment claims, which indicates labor market weakness that may hold back fuel demand.
Global Financial Calendar
| Friday 6/10/11 | |
|---|---|
| United States | |
| 0830 ET | May import price index expected -0.7% m/m and +11.2% y/y, Apr +2.6% m/m and +11.1% y/y. |
| 0900 ET | New York Fed President William Dudley speaks to the Brooklyn Chamber of Commerce. |
| 1400 ET | May monthly budget statement expected -$136.0 billion, Apr -$40.488 billion. |
| Germany | |
| 0200 ET | Revised May German CPI (EU harmonized) expected no change at -0.2% m/m and +2.4% y/y. |
| 0200 ET | May German wholesale price index, Apr +0.2% m/m and +9.2% y/y. |
| France | |
| 0245 ET | Apr French industrial production expected +0.4% m/m and +3.9% y/y, Mar -0.9% m/m and +3.3% y/y. |
| 0245 ET | Apr French manufacturing production expected +0.3% m/m and +4.1% y/y, Mar -1.0% m/m and +4.6% y/y. |
| Euro-Zone | |
| 0250 ET | ECB President Jean-Claude Trichet speaks at a conference in Frankfurt. |
| United Kingdom | |
| 0430 ET | Apr UK industrial production expected unchanged m/m and +1.3% y/y, Mar +0.3% m/m and +0.7% y/y. |
| 0430 ET | Apr UK manufacturing production expected -0.1% m/m and +3.4% y/y, Mar +0.2% m/m and +2.7% y/y. |
| 0430 ET | May UK PPI input expected -1.0% m/m and +16.2% y/y, Apr +2.6% m/m and +17.6% y/y. |
| 0430 ET | May UK PPI output expected +0.3% m/m and +5.3% y/y, Apr +0.8% m/m and +5.3% y/y. |
| 0430 ET | May UK PPI output core expected +0.3% m/m and +3.4% y/y, Apr +0.6% m/m and +3.4% y/y. |
| Canada | |
| 0700 ET | May Canada net change in employment expected +25,000, Apr +58,300. May unemployment rate expected unchanged at 7.6%, Apr -0.1 to 7.6%. |
| 0830 ET | Q1 Canada labor productivity, Q4 +0.5% q/q. |
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