Barchart Morning Call 7/1

Barchart Morning Call

Barchart.com - 1 hr 12 mins ago

Overnight Developments

• Global stocks are slightly higher on balance with the European Euro Stoxx 50 up 0.20% and Sep S&Ps up 0.30 points. The second Greek bailout package will total about 85 billion euros, according to an Austrian Finance Ministry official, with the IMF putting up 30% of the package and the Eurozone and private investors putting up the remaining 70%. German banks have voluntarily agreed to rollover about 2 billion euros of their current Greek holdings into a new Greek debt security. The Eurozone May unemployment rate was unchanged from April at 9.9%. Former Bundesbank President Axel Weber has been nominated to the UBS Board in 2012 as non-independent vice chairman. After a year in office, he is then expected to succeed Chairman Kaspar Villiger as Chairman in 2013. Eurozone finance ministers have canceled Sunday's meeting and will instead hold a conference call Saturday evening, according to the spokesman for Eurozone finance minister leader Jean-Claude Juncker, suggesting that approval of the next tranche of Greek aid will be perfunctory.
• The Asian stock markets today closed mostly higher: Japan +0.53%, China +0.19%, Taiwan +1.01%, Australia -0.36%, Singapore +0.60%, South Korea +1.31%, Bombay -0.44%, Karachi +0.04%. China's June manufacturing PMI fell to a 2-1/3 year low of 50.9 from 52.0 in May. The Eurozone final June manufacturing PMI was left unrevised at 52.0. Japan's tankan report indicated that Japanese companies will boost capital spending in fiscal 2011 by 4.2%, stronger than market expectations of 2.4%. However, the tankan index for large manufacturers fell to -9 in June from 6 in March as a result of the earthquake, which was weaker than the consensus of -7.

Overnight U.S. Stock News

• September S&Ps this morning are trading slightly higher by 0.30 points as the market treads water ahead of today's ISM report. The US stock market yesterday rallied for a fourth day as Greek default concerns subsided and the Jun Chicago purchasing managers index unexpectedly expanded: Dow Jones +1.25%, S&P 500 +1.01%, Nasdaq Composite +1.21%. The Dow and S&P 500 posted 1-month highs and the Nasdaq climbed to a 4-week high. Bullish factors included (1) a rally in financial companies on increased optimism that Greece will avoid a debt default after Greece's parliament approved a second bill to authorize austerity measures needed for further financial aid along with optimism that Germany's biggest banks and insurers will agree on a proposal to roll over Greek debt, (2) the unexpected increase in the Jun Chicago purchasing managers index (+4.5 to 61.1 versus expectations of -2.6 to 54.0), and (3) quarter-end window dressing by fund managers who buy winning stocks to add to their portfolios to show they have gains for the quarter.
• Bearish factors for stocks included (1) the smaller-than-expected decline in weekly US initial unemployment claims (-1,000 to 428,000 versus expectations of -9,000 to 420,000), (2) concern the European economy is slowing after the unexpected decline in May German retail sales and the third straight monthly decline in May French consumer spending, and (3) weakness in fertilizer producers after corn plunged when the USDA said US corn inventories were larger than expected.

Today's Market Focus

• September 10-year T-notes this morning are trading slightly lower by 2 ticks as bearish sentiment continues. T-note prices yesterday tumbled to a 1-month low on reduced safe-haven demand from the Greek debt crisis along with unexpected strength in the Jun Chicago purchasing managers index: TYU11 -16.5, FVU11 -9.7, EDZ11 +3.5. The 10-year T-note yield jumped to a 1-1/2 month high of 3.21%. Bearish factors included (1) reduced safe-haven demand for Treasuries from Greece's debt crisis after Greece's parliament approved a second bill to authorize austerity measures needed for further financial aid along with optimism that Germany's biggest banks and insurers will agree on a proposal to roll over Greek debt, and (2) the unexpected increase in the Jun Chicago purchasing managers index (+4.5 to 61.1 versus expectations of -2.6 to 54.0). Bullish factors included (1) the smaller-than-expected decline in weekly US initial unemployment claims (-1,000 to 428,000 versus expectations of -9,000 to 420,000), and (2) the Fed's purchase of $4.909 in Treasuries in its last installment of Treasury purchases for its QE2 asset purchase program.
• The dollar index this morning is trading slightly higher by 0.081 points with the dollar/yen up 0.20 yen and the euro/dollar down 0.05 cents. The dollar index yesterday slumped to a 2-week low as safe-haven demand was reduced on the prospects of German banks reaching a deal on Greek debt along with the rally in the stock market: Dollar Index -0.388, USDJPY -0.219, EURUSD +0.00671. Bearish factors included (1) strength in the euro which rallied to a 2-1/2 week high against the dollar on optimism that Germany's biggest banks, insurers and the government will agree on a proposal to roll over Greek debt, and (2) reduced safe-haven demand for the dollar after the S&P 500 rallied to a 1-month high. Bullish factors included (1) the unexpected decline in May German retail sales along with the larger-than-expected drop in May French consumer spending, which are both euro negative, and (2) the unexpected increase in the Jun Chicago purchasing managers index, which signals economic strength and is dollar supportive.
• Aug crude oil prices this morning are down 91 cents a barrel and Aug gasoline is down 3.21 cents per gallon on the weaker-than-expected Chinese PMI report, which raised further doubts about Chinese fuel demand. Crude oil and gasoline prices yesterday fluctuated on both sides of unchanged and pushed higher late as a weaker dollar and a stronger than expected Jun Chicago purchasing managers index offset the negative effect of an OPEC output increase in Jun: CLQ11 +$0.65, RBQ11 +3.43. Aug gasoline posted a 2-week high. Bullish factors included (1) the weaker dollar, which encourages investment demand in commodities, and (2) the unexpected increase in the Jun Chicago purchasing managers index, which signals economic strength and is positive for energy demand. Bearish factors included (1) the smaller-than-expected drop in weekly US jobless claims, which may suppress consumer confidence and spending and curtail fuel demand, and (2) the increase in OPEC?s crude output in Jun to a 32-month high of 29.105 million barrels a day as Saudi Arabia raised its output in Jun to 9.21 million barrels a day, the highest since Oct 2008.

Today's U.S. Earnings Reports Earnings reports (confirmed releases, sorted by mkt cap) MSCI-MSCI Inc. (BEST earnings consensus $0.44).
Global Financial Calendar

Friday 7/1/11
United States
0955 ET	Final Jun U.S. University of Michigan consumer confidence expected +0.2 to 72.0, previous -2.5 to 71.8.
1000 ET	May construction spending expected +0.1% m/m, Apr +0.4% m/m.
1000 ET	Jun ISM manufacturing index expected -1.7 to 51.8, May -6.9 to 53.5. Jun ISM prices paid expected -4.7 to 71.8, May -9.0 to 76.5.
1700 ET	Jun total vehicle sales expected 12.08 million, May 11.76 million. Jun domestic vehicle sales expected 9.40 million, May 9.22 million.
Japan
0100 ET	Jun Japan vehicle sales, May -38.0% y/y.
France
0350 ET	Revised Jun French PMI manufacturing expected 52.8, previous 52.5.
Germany
0355 ET	Revised Jun German PMI manufacturing expected no change at 54.9.
United Kingdom
0430 ET	Jun UK PMI manufacturing expected +0.2 to 52.3, May -2.3 to 52.1.
Euro-Zone
0500 ET	May Euro-Zone unemployment rate expected unchanged at 9.9%, Apr unchanged at 9.9%.

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