Barchart Morning Call 8/15

Barchart Morning Call

Barchart.com - Mon Aug 15, 7:00AM CDT

Overnight Developments

• Global stocks are mostly higher with the European Euro Stoxx 50 down -0.03% and Sep S&Ps up +5.30 points. The dollar and Treasuries are weaker and commodities are mixed as European debt risk declined. Stock prices were supported as credit-default swaps to insure the government debts of Euro-Zone nations declined along with cheap stock valuations as the recent slump in equity prices left stocks near their lowest level relative to earnings in more than 2 years. Increased M&A activity is also a supportive factor for equity prices after Transocean, the world's largest offshore driller, offered to buy Aker Drilling for 7.9 billion kroner ($1.4 billion). The Swiss franc fell versus the dollar for a fourth day after the SonntagsZeitung newspaper said the Swiss government and its central bank are in "intense" talks over setting a target for their currency.
• The Asian stock markets today closed higher with Japan up +1.37%, China +1.48%, Australia +2.64%, while South Korea and India were closed for holiday. Asian markets received a boost after the Japanese economy contracted less than estimated in Q2. Q2 Japan GDP contracted -0.3% q/q and -1.3% annualized, stronger than expectations of -0.6% q/q and -2.5% annualized as reconstruction work limits the slump from the March earthquake and tsunami, although the Japanese economy has now contracted for 3 consecutive quarters. China's Shanghai Stock Index increased by the most in a month as bank stocks rallied on speculation the government will introduce measures to boost economic growth after new lending declined and money supply growth slowed. In a televised interview in China, Li Daokui, one of the academic advisors to the PBOC, said China will not need to introduce another stimulus plan similar to the one in 2008 to boost its economy as the ongoing global economic turmoil will have limited impact on China.

Overnight U.S. Stock News

• September S&Ps this morning are trading up +5.30 points. The US stock market last Friday rallied for a second day as a decline in European credit-default swap prices eased concern over the European debt crisis while the largest increase in 4 months in US Jul retail sales tempered concern economic growth is slowing: Dow Jones +1.13%, S&P 500 +0.53%, Nasdaq Composite +0.61%. Bullish factors included (1) carry-over strength from a rally in European equity markets as debt concerns eased after credit default swaps to insure the government debt of Euro-Zone countries declined and (2) strength in retailers after the stronger-than-expected Jul US retail sales which posted its biggest increase in 4 months along with the upward revision to Jun (Jul +0.5% and +0.5% ex-autos versus expectations of +0.5% and +0.3% ex-autos and Jun revised up to +0.3% and +0.2% ex-autos versus the originally reported +0.1% and unchanged ex-autos).
• Bearish factors included (1) the plunge in the Aug US University of Michigan consumer confidence which tumbled to its lowest level in 31 years (-8.8 to 54.9 versus expectations of -1.2 to 62.5) and (2) comments from New York Fed President Dudley who said policy makers gave a "sober assessment" of the US economy this past week and that he cut his forecast for economic growth.
• Bank of America (BAC) rose 1.3% in pre-market trading after a Barron's article said the bank's shares may be poised to rise on growth at the bank's businesses other than its residential-mortgage division.

Today's Market Focus

• September 10-year T-notes this morning are trading down -5 ticks. T-note prices last Friday settled higher due to a plunge in the Aug US University of Michigan consumer confidence and dovish comments from New York Fed President Dudley: TYU11 +21, FVU11 +7, EDZ11 -2.5. Bullish factors included (1) the plunge in the Aug US University of Michigan consumer confidence which fell to its lowest level in 31 years (-8.8 to 54.9 versus expectations of -1.2 to 62.5) (2) comments from New York Fed President Dudley who said policy makers gave a "sober assessment" of the US economy this week and that he cut his forecast for economic growth, and (3) a post-refunding rally as dealers lifted short hedges put on over the past week for the Treasury's $72 billion Aug refunding auctions of T-notes and T-bonds. Bearish factors included (1) the stronger-than-expected Jul US retail sales which posted its biggest increase in 4 months along with the upward revision to Jun (Jul +0.5% and +0.5% ex-autos versus expectations of +0.5% and +0.3% ex-autos and Jun revised up to +0.3% and +0.2% ex-autos versus the originally reported +0.1% and unchanged ex-autos), (2) comments from Minneapolis Fed President Kocherlakota who said he sees no need for "more accommodative" policy, and (3) reduced safe-haven demand for Treasuries as the stock market rallied.
• The dollar index this morning is weaker with the dollar/yen +0.08 yen and the euro/dollar +0.45 cents. The dollar index last Friday settled little changed as stock market strength and a plunge in US consumer confidence offset stagnation in Q2 French economic growth and an unexpected decline in Jun Euro-Zone industrial production: Dollar Index -0.070, USDJPY -0.128, EURUSD +0.00061. Bearish factors included (1) reduced safe-haven demand for the dollar after the stock market rallied, and (2) the plunge in the Aug US University of Michigan consumer confidence to its lowest level in 31-years. Bullish factors included (1) the stronger-than-expected Jul US retail sales, and (2) weaker than-expected European economic data on Q2 French GDP and Jun Euro-Zone industrial production, which are euro negative.
• Sep crude oil prices this morning are down -52 cents a barrel and Sep gasoline is +0.36 of a cent per gallon. Sep crude oil and gasoline prices last Friday settled lower after a plunge in Aug US consumer confidence along with economic weakness in Europe offset strong Jul US retail sales: CLU11 -$0.34, RBU11 -0.51. Sep gasoline posted a 1-week high. Bullish factors included (1) the weaker dollar, which boosts investment demand in commodities, (2) the larger-than expected rise in Jul US retail sales which posted its biggest increase in 4-months and reduces concern that US consumer spending and fuel demand may fall, and (3) the rally in stock prices which boosts confidence in the economic outlook and energy demand. Bearish factors included (1) the plunge in the Aug US University of Michigan consumer confidence to its lowest level in 31-years, which may signal slower consumer spending and weakened fuel demand and (2) the stagnation in Q2 French GDP along with the unexpected decline in Jun Euro-Zone industrial production, which signals reduced energy demand and consumption in Europe.

Today's U.S. Earnings Reports Earnings reports (confirmed releases, sorted by mkt cap): LOW-Lowe's (BEST earnings consensus $0.66), EL-Estee Lauder (0.24), SYY-Sysco (0.57), A-Agilent Technologies (0.73), URBN-Urban Outfitters (0.32), VAL-Valspar (0.80), HTHT-China Lodging Group Ltd. (0.11), QRE-QR Energy LP (0.29).
Global Financial Calendar

Monday 8/15/11
United States
0830 ET	Aug Empire manufacturing index expected +3.8 to 0.0, Jul +4.0 to -3.8.
0900 ET	Jun net long-term TIC flows expected +$30.2 billion, May +$23.6 billion.
1000 ET	Aug NAHB housing market index expected unchanged at 15, Jul +2 to 15.
1130 ET	Weekly 3-mo and 6-mo and monthly 1-year T-bill auctions.
1325 ET	Atlanta Fed President Dennis Lockhart speaks at ?A Discussion of the U.S. Economy? before the Rotary Club of Florence, Alabama.
CHI
2200 ET	Jun China leading economic index.

Barchart.com provides Financial Quotes, Charts and Technical Analysis for Stock and Commodity Traders.