Barchart Morning Call
Overnight Developments
Global Financial Calendar
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- Global stocks are mixed with the European Euro Stoxx 50 up +0.15% and Sep S&Ps up +4.00 points. Commodities and Treasuries are mixed while debt insurance costs on Greek, Portuguese and Irish government debt all rose to records as Greek lawmakers begin a 3-day debate on spending cuts. The euro rebounded from a 1-week low and European stocks are higher on speculation Greek lawmakers will pass austerity measures needed to ensure the release of funds of the next phase of the country's international bailout. On Saturday, the Basel Committee on Banking Supervision said banks deemed too big to fail must hold as much as 2.5% in additional capital as part of efforts to prevent another financial crisis. According to a person familiar with the discussions, as many as 30 global lenders may face some level of surcharges. The Basel III capital rules are scheduled to be phased in from 2013 to 2019. In an annual report, the Bank for International Settlements (BIS) said banks should be pushed to meet the higher capital requirements before a series of deadlines starting in 2013, unless earlier introduction of the rules would threaten lending. The BIS also warned that global central banks need to start raising interest rates to control inflation and may have to act faster than in the past.
- The Asian stock markets today closed mostly lower with Japan down -1.04%, Hong Kong -0.59%, China +0.30%, Taiwan -0.38%, Australia =1.03%, Singapore -0.61%, South Korea -1.05% India +0.94%. Asian bank stocks weakened after regulators raised capital adequacy requirements for the world's biggest lenders. Samsung Electronics, South Korea's biggest exporter of consumer electronics, closed 2% lower after Apple sued the company charging patent infringement. Losses on Japanese stocks were limited as exporters gained when the yen declined to a 1-week low against the dollar. Chinese stocks gained after a cash shortage in China's fianancial system eased and the nation's biggest brokerages said equities are poised to rally. The euro received a boost after comments from Chinese Premier Jiabao who said China will keep investing in Europe's sovereign bond market saying "China has actually increased the purchase of government bonds of some European countries, and we haven't cut back on our euro holdings."
- September S&Ps this morning are trading up +4.00 points. The US stock market last Friday moved lower as concern about the European debt crisis intensified and technology stocks weakened: Dow Jones -0.96%, S&P 500 -1.17%, Nasdaq Composite -1.26%. Bearish factors included (1) a decline in bank stocks on concern the European debt crisis may worsen and spread throughout Europe after Moody's Investors Service said it may downgrade 13 Italian banks because they would be vulnerable to a cut in the government's credit rating, (2) weakness in technology stocks after Oracle sold-off when it reported an unexpected decline in hardware sales and Micron Technology plunged after it reported weaker-than-expected revenue and profit, and (3) comments from Dallas Fed President Fisher who said the US is in a "deep hole of unemployment" and that "it's a slow recovery and it's going to continue to be slow."
- Bullish factors for stocks included (1) the stronger-than-expected May durable goods (+1.9% versus expectations of +1.5%), and (2) the decline in long-term interest rates after the 10-year T-note yield fell to a 6-3/4 month low of 2.844%.
- Stanley Black & Decker (SWK) may move today after the company offered to buy Sweden's Niscayah AB for about 7.6 billion kroner ($1.2 billion).
- September 10-year T-notes this morning are unchnaged. T-note prices last Friday strengthened on comments from Dallas Fed President Fisher along with increased safe-haven demand after Moody's Investors Service said it may cut the ratings of Italian banks: TYU11 +12.5, FVU11 +10.2, EDZ11 -4.5. The 10-year T-note yield fell to a 6-3/4 month low of 2.844%. Bullish factors included (1) increased safe-haven demand for Treasuries after Moody's Investors Service said it may downgrade 13 Italian banks because they would be vulnerable to a cut in the government's credit rating, (2) comments from Dallas Fed President Fisher who said the US is in a "deep hole of unemployment" and that "it's a slow recovery and it's going to continue to be slow," (3) the Fed's purchase of $4.578 billion of Treasuries as part of its QE2 asset purchase program, and (4) a lack of confidence in Greece's government to pass austerity measures needed to secure a bailout. Bearish factors included (1) the stronger-than-expected May durable goods orders (+1.9% versus expectations of +1.5%), and (2) the upward revision to the Q1 GDP price index to +2.0% from +1.9%, along with the upward revision to the Q1 core PCE deflator to +1.6% q/q from +1.4% q/q.
- The dollar index this morning is weaker with the dollar/yen +0.23 yen and the euro/dollar +0.28 cents. The dollar index last Friday finished stronger on increased safe-haven demand on speculation that a Greek austerity plan and a EU pledge to stabilize the European economy won't resolve the sovereign-debt crisis: Dollar Index +0.218, USDJPY -0.043, EURUSD -0.00771. Bullish factors included (1) comments from BOE Governor King who said "the most serious and immediate risk stems from the worsening debt crisis in the Euro-Zone," (2) concern the European debt crisis might spread after Moody's Investors Service said it may downgrade 13 Italian banks because they would be vulnerable to a cut in the government's credit rating, and (3) speculation the Greek government won't be able to garner the support needed to pass the 78 billion-euro austerity package needed to receive a fifth loan payment under an existing bailout. Bearish factors included (1) the unexpected increase in the Jun German IFO business climate, which is euro supportive, and (2) euro positive comments from German Chancellor Merkel who said "we have agreed that there will be a new program for Greece."
- Aug crude oil prices this morning are trading down -51 cents a barrel and Aug gasoline is -1.69 cents per gallon. Crude oil and gasoline prices last Friday settled mixed as dollar strength and concern the European debt crisis may worsen offset speculation Saudi Arabia may curb its crude output: CLQ11 +$0.14, RBQ11 -6.05. Aug gasoline fell to a 4-month low. Bearish factors included (1) the stronger dollar, which reduces investment demand in commodities, (2) concern the European debt crisis may spread and limit economic growth after Moody's Investors Service said it may downgrade 13 Italian banks because they would be vulnerable to a cut in the government's credit rating, and (3) the slump in stock prices, which reduces confidence in the economic outlook and energy demand. Bullish factors included (1) the stronger-than-expected May US durable goods orders, which indicate economic strength that may lead to increased fuel demand, and (2) concern that Saudi Arabia may cut its crude output to limit crude oil price declines after the IEA's decision to release 60 million barrels of crude from strategic reserves on Thursday.
Global Financial Calendar
| Monday 6/27/11 | |
|---|---|
| United States | |
| 0830 ET | May personal spending expected +0.1%, Apr +0.4%. May personal income expected +0.4%, Apr +0.4%. May PCE deflator expected +2.4% y/y, Apr +2.2% y/y. May core PCE deflator expected +0.2% m/m and +1.1% y/y, Apr +0.2% m/m and +1.0% y/y. |
| 1100 ET | Minneapolis Fed President Narayana Kocherlakota speaks on ?Rethinking Leverage Subsidies? at the Tri-State Bankers Summit in Big Sky, Montana. |
| 1130 ET | Weekly 3-mo and 6-mo T-bill auctions. |
| 1300 ET | Kansas City Fed President Thomas Hoenig speaks at the Pew Charitable Trusts? Financial Reform Project in Washington. |
| 1300 ET | Treasury auctions $35 billion 2-year T-notes. |
| United Kingdom | |
| 0430 ET | Jun UK nationwide house prices expected unchanged n/n and -1.3% y/y, May +0.3% m/m and -1.2% y/y. |
| Euro-Zone | |
| 0630 ET | ECB Council member Juergen Stark speaks at a conference in Berlin. |
| Japan | |
| 1950 ET | May Japan retail trade expected +1.0% m/m and -2.2% y/y, Apr +4.1% m/m and -4.8% y/y. |
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