Barchart Morning Call 6/17

Morning Call

Barchart.com - 1 hr 18 mins ago

Overnight Developments

• Global stocks are mixed with the European Euro Stoxx 50 up +0.29% and Sep S&Ps up +11.10 points. The euro rallied and Treasuries fell after German Chancellor Merkel signaled she would compromise on German demands that bondholders shoulder a "substantial" share of the Greek rescue, saying she'll work with the ECB to resolve the crisis. In a meeting with French President Sarkozy, the two said the so-called Vienna initiative of 2009, which encouraged creditors to roll over expiring bonds, could be a model for helping Greece. Bank stocks rallied and led a rebound in European stocks on German Chancellor Merkel's comments. A 16% plunge in Research in Motion in pre-market trading limited gains in stocks after the maker of the Blackberry smartphone said quarterly revenue may drop for the first time in 9 years. Crude oil plunged to a 3-3/4 month low in overnight trade on demand concerns after former Fed Chairman Greenspan said that a Greek default is "almost certain" and could help drive the US into recession.
• The Asian stock markets today closed mostly lower with Japan down -0.64%, Hong Kong -1.17%, China -0.87%, Taiwan -0.21%, Australia +0.13%, Singapore -0.49%, South Korea -0.99%, India -0.64%. Asian markets were undercut on concerns the US economy is slowing after weaker-than-expected data on Jun Philadelphia Fed manufacturing along with concern that the widening of the European debt crisis may weaken the Euro-Zone economy and limit demand for Asian exports. China's Shanghai Stock Index tumbled to its lowest level in 8-1/2 months on concern the PBOC will take more steps to cool inflation. Chinese banks stocks closed lower and led declines on concern higher interest rates would curb loan growth while mining companies and raw material producers fell on speculation slowing economic growth will limit demand for metals. The PBOC increased the yield on 3-month bills for the first time in 10 weeks, to 2.9985% from 2.9168%, which according to Societe Generale SA in Hong Kong sends a strong signal for an imminent rate hike in coming days.

Overnight U.S. Stock News

• September S&Ps this morning are trading . The US stock market yesterday settled mixed as better-than-expected economic reports offset concerns over a Greek default: Dow Jones +0.54%, S&P 500 +0.18%, Nasdaq Composite -0.29%. The Nasdaq sank to a 6-1/2 month low and the S&P 500 fell to a 3-month low but recovered its losses and closed higher. Bullish factors for stocks included (1) reduced concern over Greece's debt crisis after EU Economic and Monetary Affairs Commissioner Rehn predicted an agreement this weekend between the EU and IMF that will help Greece avoid a default, (2) the larger-than-expected decline in weekly initial US unemployment claims (-16,000 to 414,000 versus expectations of -7,000 to 420,000), (3) the stronger-than-expected May housing starts (+3.5% to 560,000 versus expectations of +4.2% to 545,000), and (4) strength in homebuilders after the unexpected increase in May building permits which rose to their best level in 5 months (+8.7% to 612,000 versus expectations of -1.2% to 556,000).
• Bearish factors included (1) concern the European debt crisis will worsen after the yield on Greece's 2-year note briefly soared over 30% for the first time while the cost of insuring Greek, Irish and Portuguese debt rose to records, and (2) the unexpected contraction in the Jun Philadelphia Fed manufacturing index which fell to its lowest level in 23 months (-11.6 to -7.7 versus expectations of +3.1 to 7.0).
• Research in Motion (RIM) slipped 16% in European trading after the company forecast sales of $4.2 billion to $4.8 billion in Q2, below analysts' estimates of $5.47 billion, and cut its full-year profit forecast to $5.25 to $6 a share, down from a previous forecast of $7.50.

Today's Market Focus

• September 10-year T-notes this morning are down -15.5 ticks. T-note prices yesterday rallied to a 6-1/2 month nearest-futures high early on increased safe-haven demand from the ongoing Greek credit crisis but gave back some of their advance and closed modestly higher on speculation an agreement will be reached this weekend between the EU and IMF to stave off a Greek default: TYU11 +14.5, FVU11 +6.7, EDZ11 -3.5. The 10-year T-note yield fell to a 6-1/2 month low of 2.88%. Bullish factors included (1) a surge in safe-haven demand on concern Greece may be locked out of credit markets and forced to default on its debt when the Greek 2-year note briefly surged over 30% for the first time, (2) the unexpected contraction in the Jun Philadelphia Fed manufacturing index which fell to its lowest level in 23 months (-11.6 to -7.7 versus expectations of +3.1 to 7.0), and (3) the action by the Fed to purchase $4.9 billion of Treasuries as part of its QE2 asset-purchase program. Bearish factors included (1) comments from EU Economic and Monetary Affairs Commissioner Rehn which took Treasuries off of their best levels when he said that "close contact" with the IMF made him confident of an accord at this weekend's crisis meeting to provide Greece with aid to help it avoid default, (2) the larger-than-expected decline in weekly initial US unemployment claims (-16,000 to 414,000 versus expectations of -7,000 to 420,000), (3) the stronger-than-expected May housing starts (+3.5% to 560,000 versus expectations of +4.2% to 545,000), and (4) the unexpected increase in May building permits which rose to their best level in 5 months (+8.7% to 612,000 versus expectations of -1.2% to 556,000).
• The dollar index this morning is lower with the dollar/yen -0.34 yen and the euro/dollar +0.73 cents. The dollar index yesterday climbed to a 3-week high on increased safe-haven demand over Greek default concerns but pared its gains and closed well below its high on speculation the EU and IMF will agree on an aid package this weekend to help Greece avoid default: Dollar Index +1.269, USDJPY +0.468, EURUSD -0.02602. Bullish factors included (1) the slump in the euro to a 3-week low against the dollar on concern the European debt crisis will worsen after the yield on Greece's 2-year note briefly soared over 30% for the first time while the cost of insuring Greek, Irish and Portuguese debt rose to records, (2) the warning from ECB Council member Wellink that European leaders should be ready to double the region's bailout fund to 1.5 trillion euros if Greece winds up being ruled in default, and (3) weakness in the British pound which also fell to a 3-week low against the dollar after May UK retail sales posted their biggest decline in 16 months. Bearish factors included (1) comments from EU Economic and Monetary Affairs Commissioner Rehn which lifted the euro off of its low when he predicted an agreement this weekend between the EU and IMF that will help Greece avoid a default, and (2) the unexpected contraction in the Jun Philadelphia Fed manufacturing index, which indicates an economic slowdown that is dollar negative.
• July crude oil prices this morning are trading down -$1.03 a barrel at a fresh 3-3/4 month low and July gasoline is -1.56 cents per gallon. Crude oil and gasoline prices yesterday fluctuated between gains and losses and finished higher on a larger-than-expected decrease in weekly US jobless claims along with optimism that a resolution will be found to the Greek debt crisis: CLN11 +$0.14, RBN11 +2.59. Bullish factors included (1) the bigger-than-expected decline in weekly US initial unemployment claims, which bolsters the outlook for the US economy and energy demand, (2) comments from EU Economic and Monetary Affairs Commissioner Rehn who predicts an agreement this weekend between the EU and IMF that will help Greece avoid a default, (3) strength in gasoline after refineries on the US East Coast with total capacity of 550,000 barrels a day had unplanned shutdowns, which may limit fuel supplies, and (4) the prediction from the IEA that global oil consumption will grow 1.2 million barrels a day annually over the next 5 years which will leave a "fairly thin" cushion of global spare production capacity. Bearish factors included (1) the rally in the dollar index to a 3-week high, which reduces investment demand in commodities, (2) concern the European debt crisis will worsen and slow the global economy and fuel demand, and (3) the unexpected contraction in the Jun Philadelphia Fed manufacturing index which fell to its lowest level in 23 months and indicates weakened energy demand.

Today's U.S. Earnings Reports Earnings reports (confirmed releases, sorted by mkt cap) SMOD-SMART Modular Technologies WWH (BEST earnings consensus $0.11).
Global Financial Calendar

Friday 6/17/11
United States
0955 ET	Preliminary Jun U.S. University of Michigan consumer confidence expected -0.3 to 74.0, May +4.5 to 74.3.
1000 ET	May leading indicators expected +0.3%, Apr -0.3%.
Japan
0130 ET	May Japan nationwide department store sales, Apr -1.5% y/y.
France
0245 ET	Revised Q1 French wages, previous +1.0% q/q.
Euro-Zone
0500 ET	Apr Euro-Zone construction output, Mar -0.3% m/m and -4.9% y/y.
0700 ET	ECB Council member Lorenzo Bini Smaghi speaks on a policy panel on ?Challenges for Monetary and Fiscal Policy? at a conference in Stockholm.
1000 ET	ECB publishes its monthly report for June.
Canada
0830 ET	Apr Canada wholesale sales, Mar +0.1% m/m.

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