Barchart Morning Call
Overnight Developments
Global Financial Calendar
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- Global stocks are Lower with the European Euro Stoxx 50 down -0.58% and Sep S&Ps down -0.30 of a point. The euro slid to a 3-week low against the dollar and the 10-year bund yield fell to a 5-month low on safe-haven buying on concern the Greek debt crisis is deteriorating. Greek Prime Minister Papandreou will reshuffle his cabinet and seek to win a confidence vote today after attempts to garner opposition support for an austerity plan failed. European finance ministers will meet on Jun 19 in another attempt to find a solution to Greece's debt crisis that threatens to spiral out of control with the yield on Greek 2-year notes surging past 30% for the first time. Credit-default swaps to insure against default on Greek, Irish and Portuguese government debt surged to records and the Euro Stoxx 50 Stock Index tumbled to a 6-1/2 month low. The British pound fell to a 3-week low against the dollar after May UK retail sales with auto fuel fell -1.4% m/m, weaker than expectations of -0.6% m/m and the biggest decline in 16 months. On the positive side, May Euro-Zone core CPI rose +1.5% y/y, weaker than expectations of a +1.6% y/y increase.
- The Asian stock markets today closed lower with Japan down -1.70%, Hong Kong -1.75%, China -1.54%, Taiwan -2.00%, Australia -1.92%, Singapore -1.14%, South Korea -2.06%, India -0.81%. Most Asian stocks were undercut as the Greek debt crisis worsened and after reports showed the US economy is cooling, which may curb demand for Asian exports. China's Shanghai Stock Index tumbled to a 4-1/2 month low as bank stocks fell on concern the PBOC will tighten monetary policy further after the Economic Information Daily reported that an interest-rate increase isn't "far away." India stepped up its fight against inflation after the RBI increased the repurchase rate 25 bp to 7.50%, the 10th time they increased rates since the start of 2010. India's Sensitive Stock Index closed lower after the RBI interest rate hike and the central bank's post-meeting statement that "domestic inflation risks remain high and some short-run deceleration in growth may be unavoidable in bringing inflation under control."
- September S&Ps this morning are trading down -0.30 of a point. The US stock market yesterday tumbled on concern Greece will default on its debt and on signs the US economy is slowing: Dow Jones -1.48%, S&P 500 -1.74%, Nasdaq Composite -1.76%. The S&P 500 and the Nasdaq slumped to 3-month low and the Dow fell to a 2-3/4 month low. Bearish factors for stocks included (1) concern that the European sovereign-debt crisis will worsen after the yield on the 10-year Greek bond soared to a record high of 17.79% and credit-default swaps to insure the debts of Greece, Ireland and Portugal debt rose to records after European officials in an emergency meeting failed to agree on a second bailout for Greece, (2) a plunge in bank stocks after comments from ECB Vice President Constancio who said "Greece could have a contagion effect" with the threat of the Greek debt crisis spilling over into the banking sector, (3) from the unexpected decline in the Jun Empire manufacturing index which contracted at its slowest level in 7 months (-19.7 to -7,8 versus expectations of +0.1 to 12.0), (4) the smaller-than-expected increase in May industrial production (+0.1% versus expectations of +0.2%), and (5) the unexpected decline in the Jun NAHB housing market index which fell to a 9-month low (-3 to 13 versus expectations of unchanged at 16).
- Bullish factors included (1) cheap valuations with the S&P 500 trading at 12.7 times forecasted 2011 earnings, the lowest multiple in 9 months, and (2) the 12 bp plunge in the 10-year T-note yield to 2.97%.
- September 10-year T-notes this morning are up +9.5 ticks. T-note prices yesterday rallied sharply after mid-morning and maintained their gains on weaker-than-expected US economic data and on increased safe-haven demand on concern the European debt crisis will worsen and threaten stability in the global banking system: TYU11 +1-5/32, FVU11 +21.5, EDZ11 -4.5. Bullish factors included (1) a surge in safe-haven demand as global stock markets plunged on concern Greece may be locked out of credit markets and default on its debt when the Greek 10-year bond yield soared to a record high of 17.79% after European officials in an emergency meeting failed to agree on a second bailout for Greece, (2) the unexpected decline in the Jun Empire manufacturing index which contracted at its slowest level in 7 months (-19.7 to -7.8 versus expectations of +0.1 to 12.0), (3) the smaller-than-expected increase in May industrial production (+0.1% versus expectations of +0.2%), (4) the unexpected decline in the Jun NAHB housing market index which fell to a 9-month low (-3 to 13 versus expectations of unchanged at 16), and (5) increased demand for Treasuries in China, the largest foreign holder of US government debt, after it increased its Treasury holdings in April by +0.7% to $1.15 trillion. A bearish factor was the larger-than-expected increase in May CPI (+0.4% m/m and +3.6% y/y, the biggest year-over-year increase in 2-1/2 years, versus expectations of +0.1% m/m and +3.4% y/y).
- The dollar index this morning is higher and at a 3-week high with the dollar/yen -0.22 yen and the euro/dollar -0.77 cents. The dollar index yesterday rallied sharply to a 2-1/2 week high on increased safe-haven demand on concern the European debt crisis will worsen: Dollar Index +1.269, USDJPY +0.468, EURUSD -0.02602. Bullish factors included (1) the slump in the euro to a 2-1/2 week low against the dollar on concern the European debt crisis will deepen after the yield on Greece's 10-year bond jumped to a record high of 17.79% and the cost of insuring Greek, Irish and Portuguese debt rose to records when European officials in an emergency meeting failed to agree on a second bailout for Greece, and (2) comments from ECB Vice President Constancio who said "Greece could have a contagion effect" with the threat of the Greek debt crisis spilling over into the banking sector the biggest risk to Euro-Zone financial stability. Bearish factors included (1) the smaller-than-expected increase in Apr net long-term TIC flows, which indicates reduced foreign demand for US dollar assets, and (2) the weaker-than-expected US economic data on Jun Empire manufacturing, May industrial production and the Jun NAHB housing market index, which is dollar negative as it may prompt the Fed into maintaining its overly easy monetary policy.
- July crude oil prices this morning are trading up +41 cents a barrel and July gasoline is +3.95 cents per gallon. Crude oil and gasoline prices yesterday plunged on concern Europe's debt crisis will deepen and on signals the US economy is slowing: CLN11 -$4.56, RBN11 -14.11. Jul crude slumped to a 3-3/4 month low and Jul gasoline fell a 4-week low. Bearish factors included (1) the rally in the dollar index to a 2-1/2 week high, which reduces investment demand in commodities, (2) concern the European debt crisis will worsen after the yield on Greece's 10-year bond soared to a record when European officials at an emergency meeting failed to agree on a rescue plan for Greece, (3) weaker-than-expected US economic data on Jun Empire manufacturing and May industrial production, which indicates an economic slowdown that is negative for energy demand, and (4) slack demand for distillate products after US distillate demand in the week ended Jun 10 fell -5.2% w/w to 3.6 million barrels a day, a 5-month low. Bullish factors included (1) the larger-than-expected decline in weekly DOE crude inventories (-3.41 million bbl versus expectations of -1/9 million bbl, (2) the smaller-than-expected increase in weekly gasoline inventories (+573,000 bbl versus expectations of +1.05 million bbl, and (3) increased fuel demand after US gasoline demand in the week ended Jun 10 rose +2.3% w/w to 9.37 million barrels a day.
Global Financial Calendar
| Thursday 6/16/11 | |
|---|---|
| United States | |
| 0830 ET | Weekly initial unemployment claims expected -7,000 to 420,000, previous +1,000 to 427,000. Weekly continuing claims expected +4,000 to 3.680 million, previous -71,000 to 3.676 million. |
| 0830 ET | May housing starts expected +4.2% to 545,000, Apr -10.6% to 523,000. May building permits expected -1.2% to 556,000, Apr -1.9% to 563,000. |
| 0830 ET | Q1 U.S. current account balance expected -$130.0 billion, Q4 -$113.35 billion. |
| 1000 ET | Fed Governor Daniel Tarullo testifies at a hearing titled ?Financial Regulatory Reform: The International Context.? |
| 1000 ET | Jun Philadelphia Fed manufacturing index expected +3.1 to 7.0, May -14.6 to 3.9. |
| 1100 ET | Treasury announces amount of 30-year TIPS (previous $9 billion) to be auctioned on Jun 23. |
| 1630 ET | Weekly money supply report and Fed balance sheet. |
| United Kingdom | |
| 0430 ET | May UK retail sales ex-auto fuel expected -0.6% m/m and +1.7% y/y, Apr +1.2% m/m and +2.7% y/y. |
| 0430 ET | May UK retail sales with auto fuel expected -0.6% m/m and +1.5% y/y, Apr +1.1% m/m and +2.8% y/y. |
| Euro-Zone | |
| 0500 ET | May Euro-Zone CPI expected unchanged m/m and +2.7% y/y, Apr +0.6% m/m and +2.8% y/y. |
| 0500 ET | May Euro-Zone core CPI expected +1.6% y/y, Apr +1.6% y/y. |
| 0500 ET | Q1 Euro-Zone employment, Q4 +0.2% q/q and +0.2% y/y. |
| 2000 ET | ECB President Jean-Claude Trichet speaks at a benefit in New York. |
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