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Overnight Developments
Global Financial Calendar
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- Global stocks are mixed with the European Euro Stoxx 50 up +0.44% and Sep S&Ps are up +3.80 points. The dollar and Treasuries are little changed and most commodities are lower with copper at a 2-week low. European sovereign-debt concerns continue to pressure markets as the price of credit-default swaps to insure the government debts of Greece, Ireland and Portugal all climbed to record highs. ECB President Trichet and German Finance Minister Schaeuble are at odds over whether Greek bondholders should be compelled to incur losses in the nation's second rescue plan in the last 14 months with Schaeuble calling for an extension of Greek debt by 7 years and Trichet saying any forced losses on creditors would be akin to default. The IMF has threatened to withhold its share of what remains of Greece's original 110 billion-euro ($159 billion) bailout unless a deal can be struck to guarantee Greece's financing needs for the next 12 months. European finance ministers have called for a special meeting tomorrow to avoid what European Economic and Monetary Affairs Commissioner Rehn called a "Lehman Brother catastrophe on European soil." European stocks received a lift on the prospects for increaed M&A activity in the mining sector as ENRC rose nearly 6% on speculation that Glencor may bid for the company.
- The Asian stock markets today closed mostly lower with Japan down -0.70%, Hong Kong +0.39%, China -0.39%, Taiwan -1.41%, Australia closed for holiday, Singapore -0.63%, South Korea +0.28%, India -0.01%. The Japanese yen slipped to a 1-week low against the dollar and Japanese stocks finished lower after Apr Japan machine orders unexpectedly fell -3.3% m/m and -0.2% y/y, weaker than expectations of +1.7% m/m and +4.9% y/y. This has bearish implications for the Japanese economy as it indicates capital spending in 3 to 6 months may be constrained as companies remain reluctant to spend after the March earthquake and tsunami. China's Shanghai Stock Index fell to a 4-1/2 month low after new lending fell in May and China's money supply grew at the slowest pace since 2008, further signs that the Chinese economy is cooling. May China new loans totaled 551.6 billion yuan ($85 billion), less than expectations of 650 billion yuan, while May China M2, the broadest measure of money supply, rose 15.1% y/y, weaker than expectations of 15.5% y/y and the slowest pace of growth in 2-1/2 years. A report in the China Securities Journal predicts that Jun China inflation may exceed 6% due to rapid investment growth and excessive lending.
- September S&Ps this morning are trading up +3.80 points. The US stock market last Friday tumbled as industrial stocks fell on concern the economy is slowing and bank stocks weakened on the Fed's plan to expand a capital-planning program to the 35 largest US banks: Dow Jones -1.42%, S&P 500 -1.40%, Nasdaq Composite -1.53%. The S&P 500, the Dow and the Nasdaq all fell to 2-3/4 month lows. Bearish factors for stocks included (1) inflation concerns after the unexpected increase in May import prices (+0.2% m/m and +12.5% y/y, the biggest annual gain in 2-1/2 years, and stronger than expectations of -0.7% m/m and +1.2% y/y), (2) weakness in industrial and consumer stocks on concern the economy is slowing, (3) a slump in bank stocks on concern that over-regulation may hurt bank profits after the Fed said it will expand a capital-planning program to the 35 largest US banks, and (4) comments from New York Fed President Dudley who said "the recent disappointing data suggest that downside risks to the outlook" have increased.
- Bullish factors included (1) the larger than expected increase in May China imports (+28.4% y/y versus expectations of +22.5% y/y), which bolsters optimism that Chinese demand may support global growth, and (2) the action by the Bundesbank to raise its forecasts for German growth for this year and next, which signals strength in the German economy that may help sustain the global economic recovery.
- Transatlantic Holdings (TRH) surged 10% in European trading after agreeing to merge with Allied World Assurance in a deal worth $3.2 billion.
- September 10-year T-notes this morning are down -1.5 ticks. T-note prices last Friday closed higher on dovish comments from New York Fed President Dudley along with increased safe-haven demand as the stock market declined: TYU11 +8, FVU11 +4, EDZ11 +0.5. Bullish factors included (1) comments from New York Fed President Dudley who said "the recent disappointing data suggest that downside risks to the outlook" have increased, and (2) increased safe-haven demand for Treasuries after the S&P 500 fell to a 2-3/4 month low. A bearish factor was the unexpected increase in May import prices (+0.2% m/m and +12.5% y/y, the biggest annual gain in 2-1/2 years, and stronger than expectations of -0.7% m/m and +1.2% y/y).
- The dollar index this morning is weaker with the dollar/yen +0.03 yen and the euro/dollar +0.42 cents. The dollar index last Friday rallied to a 1-week high on increased safe-haven demand for the greenback as the stock market tumbled along with weakness in the euro on rising European debt concerns: Dollar Index +0.603, USDJPY -0.046, EURUSD -0.01634. Bullish factors included (1) the slide in the euro to a 1-week low against the dollar on concern the European sovereign-debt crisis will worsen after credit-default swaps to insure Greek and Portuguese government debt climbed to records, and (2) increased safe-haven demand for the dollar after the S&P 500 fell to a 2-3/4 month low. Bearish factors included (1) the action by the Bundesbank to raise its growth estimates for Germany this year and next, which is euro supportive, and (2) weakened dollar interest rate differentials as the 3-month dollar Libor rate fell to a record low of 0.24850%.
- July crude oil prices this morning are trading down -$1.23 a barrel and July gasoline -0.77 of a cent per gallon. Crude oil and gasoline prices last Friday tumbled as the dollar strengthened along with a report that Saudi Arabia will raise oil production: CLN11 -$2.64, RBN11 -2.21. Bearish factors included (1) the rally in the dollar index to a 1-week high, which discourages investment demand in commodities, (2) the report from the el-Hayat newspaper that Saudi Arabia will raise oil production to 10 million barrels a day next month, and (3) the sell-off in the stock market, which decreases confidence in the economic outlook and energy demand. Bullish factors included (1) the action by the Bundesbank to raise its growth estimates for Germany this year and next, which signals greater fuel consumption, and (2) the widening of the spread between Brent crude and WTI to a record $18.88 a barrel, which may boost gasoline and distillate products that are vulnerable to changes in Brent because refineries on the US East Coast process oil grades that are sold relative to the European benchmark.
Global Financial Calendar
| Monday 6/13/11 | |
|---|---|
| United States | |
| 0930 ET | Richmond Fed President Jeffrey Lacker speaks on ?Manufacturing in the New Southern Economy? at the Southern Growth Conference in Roanoke, VA. |
| 1130 ET | Weekly 3-mo and 6-mo T-bill auctions. |
| 1900 ET | Dallas Fed President Richard Fisher speaks to the Certified Financial Analysts Society of Dallas on Federal Reserve functions and an economic update. |
| Euro-Zone | |
| 0900 ET | ECB President Jean-Claude Trichet speaks at the London School of Economics on ?The euro, its central bank and economic governance.? |
| United Kingdom | |
| 1901 ET | May UK RICS house price balance expected -20%, Apr -21%. |
| Japan | |
| 1950 ET | Q2 Japan BSI large all industry conditions, Q1 -1.1. Q2 BSI large manufacturing conditions, Q1 -3.2. |
| CHI | |
| 2200 ET | May China producer price index expected +6.5% y/y, Apr +6.8% y/y. |
| 2200 ET | May China consumer price index expected +5.5% y/y, Apr +5.3% y/y. |
| 2200 ET | May China retail sales expected +17.0% y/y, Apr +17.1% y/y. |
| 2200 ET | May China industrial production expected +14.0% y/y, Apr +14.2% y/y. |
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