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Overnight Developments
Global Financial Calendar
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- Global stocks are mixed with the European Euro Stoxx 50 down -0.64% and Sep S&Ps down -4.90 points. The dollar and Treasuries gained while most commodities weakened amid speculation Greek Prime Minister Papandreou will struggle to pass additional austerity measures, even after winning a confidence vote last night. He still needs parliamentary approval next week for a 78 billion-euro ($112 billion) package of budget cuts to stave off default, while European leaders will discuss Greece's needs at a 2-day summit in Brussels starting tomorrow and Euro-Zone finance chiefs will decide on Jul 3 whether Greece has met conditions for the next aid payment. The British pound fell against the dollar after the minutes of the Jun 9 BOE policy meeting revealed some members warned the economy is weakening and further stimulus may be needed. Apr Euro-Zone industrial new orders rose +0.7% m/m and +8.6% y/y, weaker than expectations of +1.0% m/m and +14.0% y/y. Leading losses in European stocks was the 11% plunge in Royal Phillips Electronics NV after the world's biggest maker of patient-monitoring systems forecast "low single-digit" sales growth at its lighting business. Limiting losses was the unexpected increase in the Jun French business confidence indicator which rose +3 to 109, stronger than expectations of -1 to 106.
- The Asian stock markets today closed mostly higher with Japan up +1.79%, Hong Kong +0.04%, China -0.02%, Taiwan +0.27%, Australia +0.54%, Singapore -0.35%, South Korea +0.77%, India -0.06%. Japanese stocks received a boost after Greek Prime Minister Papandreou won a parliamentary confidence vote with Sony, which gets more than 20% of its sales from Europe, up 3.7%, while Toyota closed 1.1% higher after Deutsche Bank raised its estimate for Toyota's operating profit in the year ending Mar 2012 to 500 billion yen ($6.2 billion) from 461 billion yen. China's 7-day repurchase rate climbed to 8.93%, the highest since Oct 2007, and has more than doubled since Jun 14 when the PBOC raised banks' reserve requirements for a sixth time this year. The hoarding of cash by Chinese banks to meet quarter end loan-to-deposit requirements has prompted the PBOC to suspend a sale of bills tomorrow.
- September S&Ps this morning are trading down -4.90 points. The US stock market yesterday rallied as concerns eased that Greece would default on its debt: Dow Jones +0.91%, S&P 500 +1.34%, Nasdaq Composite +2.19%. The S&P 500 and the Dow posted 2-week highs. Bullish factors for stocks included (1) carry-over support from a rally in European stocks on optimism that Greek Prime Minister Papandreou's government will win a confidence vote and avoid a Greek default, (2) strength in homebuilders after the smaller-than-expected decline in May US existing home sales (-3.8% to a 6-month low of 4.81 million, less than expectations of -5.0% to 4.80 million), and (3) comments from Treasury Secretary Geithner who said he sees "a lot of progress" in bipartisan spending and debt talks to cut the deficit and raise he government's borrowing limit.
- Bearish factors included (1) the warning from the IMF that Spain's efforts to repair its economy are "incomplete" and risks are "considerable," and (2) concern that the larger-than-expected decline in the Jun German ZEW economic sentiment survey to a 29-month low may signal a lack of confidence in the Euro-Zone economy that may drag the global economic outlook lower as well.
- Adobe Systems (ADBE) fell 2.6% in European trading after the company forecast Q3 profit, before some expenses, of as little as 50 cents a share, below analysts' estimates of 54 cents.
- September 10-year T-notes this morning are unchanged. T-note prices yesterday traded weaker early on reduced safe-haven demand due to optimism that Greece's government will survive a confidence vote but prices recovered some of their losses and settled well above their worst levels after the IMF cited "considerable" risk in Spain: TYU11 -5.5, FVU11 -1.2, EDZ11 +2.5. Bearish factors included (1) reduced safe-haven demand for Treasuries on speculation that Greek Prime Minister Papandreou's government will win a confidence vote and avoid a Greek default, and (2) the smaller-than-expected decline in May US existing home sales (-3.8% to a 6-month low of 4.81 million, less than expectations of -5.0% to 4.80 million. Bullish factors included (1) increased safe-haven demand for Treasuries after the IMF said in a report that Spain's efforts to repair its economy are "incomplete" and risks are "considerable," and (2) the action by the Fed to purchase $4.909 billion of Treasuries as part of its QE2 asset-purchase program.
- The dollar index this morning is higher with the dollar/yen -0.02 yen and the euro/dollar -0.27 cents. The dollar index yesterday weakened as the euro gained on optimism that Greek Prime Minister Papandreou will survive a confidence vote along with reduced safe-haven demand for the dollar as the stock market rallied: Dollar Index -0.417, USDJPY -0.048, EURUSD +0.01077. Bearish factors included (1) strength in the euro on speculation that Greek Prime Minister Papandreou will win a confidence vote and avoid a Greek default, and (2) reduced safe-haven demand for the dollar after the S&P 500 rallied to a 2-week high. Bullish factors included (1) the larger-than-expected fall in the Jun German ZEW economic sentiment survey which fell to a 29-month low and is euro negative, and (2) comments from Treasury Secretary Geithner who said he sees "a lot of progress" in bipartisan spending and debt talks to cut the deficit and raise the government's borrowing limit.
- Aug crude oil prices this morning are trading down -67 cents a barrel and Aug gasoline is +0.28 of a cent per gallon. Crude oil and gasoline prices yesterday settled mixed as a weak dollar and speculation Greece will avoid a default supported crude while expectations for a build in weekly DOE gasoline supplies undercut gasoline: CLQ11 +$0.54, RBQ11 -2.29. Bullish factors included (1) the weaker dollar, which encourages investment demand in commodities, (2) the rally in the equity market, which boosts confidence in the economic outlook and energy demand, (3) data from China Oil, Gas and Petrochemicals that said China's May crude inventories fell -3.5% m/m, and (4) speculation that Greek Prime Minister Papandreou will win a confidence vote, which may keep Greece from defaulting on its debt and the European debt crisis from worsening. Bearish factors included (1) the outlook for a build in weekly DOE gasoline inventories when they are released on Wed, and (2) the drop in May US existing home sales to a 6-month low, which indicates continued weakness in the US housing sector that may curtail economic growth and energy demand. Expectations for Wednesday?s weekly inventory report from the DOE are for crude stockpiles to fall -1.83 million bbl, gasoline supplies to increase +1.0 million bbl, distillates to rise +525,000 bbl and the refinery capacity rate to gain +0.5 to 86.6%.
Global Financial Calendar
| Wednesday 6/22/11 | |
|---|---|
| United States | |
| 0700 ET | Weekly MBA mortgage applications, last market index +13.0% with purchase mortgage sub-index +4.5% and refinancing sun-index +16.0%. |
| 1000 ET | Apr FHFA house price index purchase only expected -0.3% m/m, Mar -0.3% m/m. |
| 1230 ET | FOMC announces interest rate decision (expected no changed to the 0.00% to 0.25% fed funds rate). |
| 1415 ET | Fed Chairman Ben Bernanke speaks at Fed press conference. |
| France | |
| 0245 ET | Jun French business confidence indicator expected -1 to 106, May -2 to 107. |
| United Kingdom | |
| 0430 ET | BOE releases minutes of the Jun 9 monetary policy meeting. |
| Euro-Zone | |
| 0500 ET | Apr Euro-Zone industrial new orders expected +1.0% m/m and +14.0% y/y, Mar -1.6% m/m and +14.3% y/y. |
| 1000 ET | Jun Euro-Zone consumer confidence expected -0.6 to -10.4, May +1.8 to -9.8. |
| 1230 ET | ECB President Jean-Claude Trichet and BOE Governor Mervyn King speak at a press conference following a meeting of the European Systemic Risk Board. |
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