Barchart Morning Call
Overnight Developments
Global Financial Calendar
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- Global stocks are mostly lower with the European Euro Stoxx 50 down -0.93% and Sep S&Ps down -6.70 points. The dollar and Treasuries are stronger and most commodities weakened after ECB President Trichet warned that risk signals for financial stability in the Euro-Zone are flashing "red" as the debt crisis threatens to infect banks. Greek bond yields rose and credit-default swaps to insure Greek government debt climbed after the Financial Times reported that the opposition leader in the Greek parliament said his party will vote against the government's new austerity measures. Also helping to depress stock and commodity prices is the weaker than expected European PMI manufacturing indexes. The Jun German manufacturing PMI slumped -2.8 to a 17-month low of 54.9, the Jun French manufacturing PMI slid -2.4 to a 22-month low of 52.5, while the Jun Euro-Zone PMI composite fell -2.2 to 53.6, weaker than expectations of -0.6 to 55.2, and its lowest level of expansion in 20 months. The British pound tumbled to a 2-1/2 month low against the dollar after the Jun UK CBI retail-sales index sank -20 to -2, weaker than expectations of -5 to 13 and its lowest level in a year.
- The Asian stock markets today closed mostly lower with Japan down -0.34%, Hong Kong -0.46%, China +1.69%, Taiwan -0.62%, Australia -0.71%, Singapore +0.06%, South Korea -0.51%, India +1.01%. Most Asian stock markets were undercut after the Fed lowered its US growth forecasts along with concern that China will further tighten its monetary policies. The Jun China HSBC PMI manufacturing index, a precursor to the official China PMI manufacturing index to be released Jun 30, fell -1.5 in Jun to 50.1, which is an 11-month low and shows Chinese manufacturing activity barely above the 50.0 level that signals growth. China's Shanghai Stock Index closed higher despite the weak manufacturing data, as construction companies and cement producers rallied after the China Business News reported the government may release a 5-year development plan for the construction machinery industry and said the nation will invest 400 billion yuan ($62 billion) for building 4 hydroelectric dams on a tributary of the Yangtze River.
- September S&Ps this morning are trading down -6.70 points. The US stock market yesterday traded with modest gains until early afternoon when it tumbled into the close when the Fed cut its US growth forecasts and Fed Chairman Bernanke gave no indication of any additional stimulus measures: Dow Jones -0.66%, S&P 500 -0.65%, Nasdaq Composite -0.56%. The S&P 500 posted a 2-week high but shed its gains and finished on its low. Bearish factors included (1) concern the European debt crisis may worsen after comments from ECB President Trichet who said the biggest risk to the European banking system emanates from sovereign debt, along with comments from the leader of the Euro-zone finance ministers, Jean-Claude Juncker, who said the Greek crisis has "radically intensified" and risks turning "the entire Euro-Zone on its head," (2) the action by the Fed to lower its US growth and employment forecasts as they cut their growth projection for 2011 for the second time this year to 2.7% to 2.9%, down from an Apr forecast of 3.1% to 3.3%, and raised their Q4 US unemployment forecast for this year to 8.6% to 8.9%, higher than an Apr estimate of 8.4% to 8.7%, and (3) market disappointment that Fed Chairman Bernanke did not indicate any additional stimulus measures, even after he acknowledged the economy had softened.
- Bullish factors for stocks included (1) the unexpected increase in the Apr FHFA house price index which posted its largest monthly increase in 5-1/2 years (+0.8% versus expectations of -0.3%), (2) the post-FOMC statement in which the Fed said that the slower pace of recovery is "likely to be temporary" with the recovery "to pick up over coming quarters," and (3) comments from Fed Chairman Bernanke who said the Fed can take additional action if the conditions warrant.
- September 10-year T-notes this morning are up +12 ticks. T-note prices yesterday traded in positive territory most of the day on increased safe-haven demand from the Greek debt crisis along with the Fed's action to cut its US growth and employment forecasts: TYU11 +0.5, FVU11 +1.2, EDZ11 +0.5. Bullish factors included (1) increased safe-haven demand for Treasuries on speculation that despite the vote of confidence for Greek Prime Minister Papandreou, the Greek government will be unable to pass budget cuts to secure loan payments from the EU and IMF, (2) comments from ECB President Trichet who said he sees a stability threat from banks' sovereign-debt links, and (3) the action by the Fed to lower its US growth and employment forecasts as they cut their growth projection for 2011 for the second time this year to 2.7% to 2.9%, down from an Apr forecast of 3.1% to 3.3%, and raised their Q4 US unemployment forecast for this year to 8.6% to 8.9%, higher than an Apr estimate of 8.4% to 8.7%. Bearish factors included (1) the unexpected increase in the Apr FHFA house price index which posted its largest monthly increase in 5-1/2 years (+0.8% versus expectations of -0.3%) and (2) the post-FOMC statement in which the Fed said it will end the $600 billion QE2 asset-purchase program at the end of Jun as scheduled and that the slower pace of recovery is "likely to be temporary" with the recovery "to pick up over coming quarters."
- The dollar index this morning is higher with the dollar/yen +0.31 yen and the euro/dollar -1.31 cents. The dollar index yesterday rallied after Fed Chairman Bernanke indicated no further stimulus measures and the FOMC said the slower pace of recovery is likely to be temporary: Dollar Index +0.242, USDJPY +0.086, EURUSD -0.00558. Bullish factors included (1) euro negative comments from ECB President Trichet who said the biggest risk to the European banking system emanates from sovereign debt, along with comments from the leader of the Euro-zone finance ministers, Jean-Claude Juncker, who said the Greek crisis has "radically intensified" and risks turning "the entire Euro-Zone on its head," (2) the unexpected increase in the Apr FHFA house price index, which posted its biggest increase in 5-1/2 years and is dollar supportive, and (3) the post-FOMC statement in which the Fed said it will end the $600 billion QE2 asset-purchase program at the end of Jun as scheduled and that the slower pace of recovery is "likely to be temporary" with the recovery "to pick up over coming quarters."Bearish factors included (1) the post-FOMC statement from the Fed that it will keep interest rates low for an "extended period," along with its action to cut its 2011 US growth and employment forecasts, and (2) the unexpected increase in the Jun French business confidence indicator, which is euro supportive.
- Aug crude oil prices this morning are trading down sharply by -$2.41 a barrel and Aug gasoline is -7.32 cents per gallon. Crude oil and gasoline prices yesterday moved higher after Greek Prime Minister Papandreou won a vote of confidence, which reduced concern that Greece's debt crisis would worsen and after weekly gasoline supplies unexpectedly declined: CLQ11 +$1.24, RBQ11 +9.91. Bullish factors included (1) reduced concern that the European debt crisis will worsen and threaten economic growth after Greek Prime Minister Papandreou won a vote of confidence, and (2) the unexpected fall in weekly DOE gasoline inventories (-464,000 bbl versus expectations of a +1.0 million bbl build). Bearish factors included (1) weakened fuel demand after US gasoline demand in the week ended Jun 17 fell -0.5% to 9.319 million barrels a day, and (2) the larger-than-expected increase in the refinery capacity rate to its highest level in 10 months, which bodes well for future increases in gasoline and distillate products (+3.1 to 89.2% versus expectations of +0.5 to 86.6%).
Global Financial Calendar
| Thursday 6/23/11 | |
|---|---|
| United States | |
| 0830 ET | Weekly initial unemployment claims expected +1,000 to 415,000, previous -16,000 to 414,000. Weekly continuing claims expected -5,000 to 3.670 million, previous -21,000 to 3.675 million. |
| 1000 ET | May new home sales expected -4.0% to 310,000, Apr +7.3% to 323,000. |
| 1100 ET | Treasury announces amounts of 1-year T-bills (previous $24 billion), 2-year T-notes (previous $35 billion), 5-year T-notes (previous $35 billion) and 7-year T-notes (previous $29 billion) to be auctioned Jun 27-29. |
| 1300 ET | Treasury auctions $7 billion 30-year TIPS. |
| 1630 ET | Weekly money supply report and Fed balance sheet. |
| 1900 ET | Chicago Fed President Charles Evans gives welcoming remarks at the ?State Budgets Under Stress: Paths to Sustainability? conference at the Chicago Fed. |
| France | |
| 0300 ET | Jun French PMI manufacturing expected -0.9 to 54.0, May -2.6 to 54.9. |
| Germany | |
| 0330 ET | Jun German PMI manufacturing expected -0.7 to 57.0, May -4.3 to 57.7. |
| Euro-Zone | |
| 0400 ET | Jun Euro-Zone PMI composite expected -0.6 to 55.2, May -2.0 to 55.8. |
| 1200 ET | ECB President Jean-Claude Trichet speaks as an event in Jerusalem. |
| United Kingdom | |
| 0600 ET | Jun UK CBI reported sales expected 13, May 18. |
| Japan | |
| 1950 ET | May Japan corporate service price index expected -0.8% y/y, Apr -0.8% y/y. |
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