Barchart Morning Call
Overnight Developments
Global Financial Calendar
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- Global stocks are mostly lower with the European Euro Stoxx 50 down -0.91% and Sep S&Ps down -14.60 points. The dollar and Treasuries rose and commodities weakened as European economic growth slowed more than expected in Q2 as the sovereign-debt crisis intensified. Q2 Euro-Zone GDP rose +0.2% q/q and +1.7% y/y, weaker than expectations of +0.3% q/q and +1.8% y/y, while Q2 German GDP rose +0.1% q/q and +2.7% y/y, weaker than expectations of +0.5% q/q and +3.1% y/y. The markets are awaiting the meeting today between German Chancellor Merkel and French President Sarkozy who try to come up with a lasting resolution to the European debt crisis. Jul UK CPI rose +0.1% m/m and +4.4% y/y, stronger than expectations of unchanged m/m and +4.3% y/y, which required BOE Governor King to write a letter to the Exchequer as inflation is more than 1% above the BOE's 2% target. The British pound weakened against the dollar after the letter from King to Chancellor of the Exchequer Osborne said "severe" market stress poses a risk to the U.K. economy that could push inflation too far below the 2% target.
- The Asian stock markets today closed mostly lower with Japan up +0.23%, China -0.70%, Australia -0.83%, South Korea +5.14%, India -0.65%. Asian technology stocks gained on support from M&A activity after Google agreed to buy Motorola Mobility Holdings and after Goldman Sachs said Google's purchase of Motorola Mobility may be positive for Asian Android-phone makers as it helps reduce litigation risk. Chinese bank stocks gained after the Finance Ministry said local government debts were controllable, while exporters weakened after Germany reported that economic growth was slower-than-expected in Q2. The China Securities Journal reported that the State Information Center said Q3 China GDP may slow to 9.2% y/y from 9.5% y/y in Q2 as global economic growth moderates.
- September S&Ps this morning are trading down -14,60 points. The US stock market yesterday pushed higher throughout the day on reduced European sovereign-debt concerns along with an increase in M&A activity: Dow Jones +1.90%, S&P 500 +2.18%, Nasdaq Composite +1.88%. The S&P 500, the Dow and the Nasdaq all rose to 1-week highs. 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 along with speculation that that a key summit of French and German leaders on Tuesday will lead to a more lasting solution to the European debt crisis, (2) carry-over support from a rally in Japanese stocks after a stronger-than-expected Q2 Japan GDP signaled that Japan's economy was recovering from the March earthquake, and (3) increased M&A activity after Google agreed to buy Motorola's Mobility division for $12.5 billion, Time Warner agreed to buy Insight Communications for $3 billion and Transocean offered to buy Aker Drilling for 7.9 billion kroner ($1.4 billion).
- Bearish factors included (1) the unexpected contraction in the Aug Empire manufacturing index for the third straight month (-11.5 to -7.7 versus expectations of +3.8 to 0.0) and (2) weakened foreign demand for US dollar assets after the Jun net long-term TIC flows rose by +$3.7 billion, weaker than expectations for an increase of +$30.2 billion.
- Caterpillar (CAT) fell 1.8% in European trading after Germany's economic growth almost stalled in Q2.
- Wal-Mart (WMT) rose 2.2% in pre-market trading after the world's largest retailer raised its annual earnings forecast to $4.41 to $4.51 a share from a previous estimate of $4.35 to $4.50.
- September 10-year T-notes this morning are trading up +8 ticks. T-note prices yesterday moved lower as European debt concerns eased and as strength in the equity market reduced the safe-haven demand for Treasuries: TYU11 -10, FVU11 -4.7, EDZ11 +3.0. Bearish factors included (1) reduced safe-haven demand for Treasuries from the European debt crisis after credit-default swaps to insure the government debts of European countries fell along with speculation that a key summit of French and German leaders on Tuesday will lead to a more lasting solution to the European debt crisis and (2) reduced safe-haven demand for Treasuries as the stock market rallied. Bullish factors included (1) the unexpected contraction in the Aug Empire manufacturing index for the third straight month (-11.5 to -7.7 versus expectations of +3.8 to 0.0), (2) continued strong demand for Treasuries from China, the biggest foreign holder of US debt, after China increased its holdings of Treasuries for a third month in Jun by +$5.7 billion to $1.166 trillion, and (3) comments from Atlanta Fed President Lockhart who said the fed is "not out of bullets" and could purchase more Treasuries or alter its balance sheet if the US economy were to slow further.
- The dollar index this morning is higher with the dollar/yen -0.10 yen and the euro/dollar -0.74 cents. The dollar index yesterday tumbled to a 2-week low after foreign demand for US dollar assets weakened and safe-haven demand for the dollar fell after the stock market rallied: Dollar Index -0.771, USDJPY +0.127, EURUSD +0.01975. Bearish factors included (1) weakened foreign demand for US dollar assets after the Jun net long-term TIC flows rose by +$3.7 billion, weaker than expectations of +$30.2 billion, (2) the unexpected contraction in the Aug Empire manufacturing index, which signals economic weakness that may prompt the Fed into additional stimulus measures, (3) strength in the euro which rallied to a 2-week high against the dollar on speculation that a key summit of French and German leaders on Tuesday will lead to a more lasting solution to the European debt crisis, and (4) reduced safe-haven demand for the dollar after the stock market rallied. Bullish factors included (1) the larger-than-expected purchase of European government bonds by the ECB last week in an attempt to stem the region's debt crisis when it purchased 22 billion euros of government bonds, larger than expectations of 15 billion euros, which signals increased quantitative easing by the ECB and is euro negative and (2) comments from Japanese Finance Minister Noda that weakened the yen as he raised the possibility of further Japanese currency intervention to stem the yen's gains when he said "I will continue to closely watch the markets and take bold action if it becomes necessary."
- Sep crude oil prices this morning are down -$1.23 a barrel and Sep gasoline is -2.57 cents per gallon. Sep crude oil and gasoline prices yesterday finished higher after the dollar weakened and after Japanese economic growth slowed less than expected: CLU11 +$2.50, RBU11 +5.23. Sep crude and Sep gasoline posted 1-week highs. Bullish factors included (1) the slide in the dollar index to a 2-week low, which boosts investment demand in commodities, (2) the smaller-than-expected contraction in Q2 Japan GDP, which signals stronger than expected fuel consumption, and (3) the rally in stock prices which boosts confidence in the economic outlook and energy demand. Bearish factors included (1) the unexpected contraction in the Aug Empire manufacturing index for the third straight month, which signals reduced fuel demand and (2) fund liquidation of long crude positions after the CFTC reported that large speculators cut their long positions by 11% in the week ended Aug 9 to 142,938 contracts, the fewest long positions in 8-1/2 months.
Global Financial Calendar
| Tuesday 8/16/11 | |
|---|---|
| United States | |
| 0745 ET | ICSC (Int?l Council of Shopping Centers) weekly retailer sales. |
| 0830 ET | Jul import price index expected -0.1% m/m and +13.4% y/y, Jun -0.5% m/m and +13.6% y/y. |
| 0830 ET | Jul housing starts expected -4.6% to 600,000, Jun +14.6% to 629,000. Jul building permits expected -1.9% to 605,000, Jun +1.3% to 617,000. |
| 0855 ET | Redbook weekly retailer sales. |
| 0915 ET | Jul industrial production expected +0.5%, Jun +0.2%. Jul capacity utilization expected +0.3 to 77.0%, Jun unchanged at 76.7%. |
| 1130 ET | Weekly 4-week T-bill auction. |
| Germany | |
| 0200 ET | Preliminary Q2 German GDP expected +0.5% q/q and +3.1% y/y, Q1 +1.5% q/q and +4.9% y/y |
| United Kingdom | |
| 0430 ET | Jun UK DCLG house prices, May -1.6% y/y. |
| 0430 ET | Jul UK CPI expected -0.1% m/m and +4.3% y/y, Jun -0.1% m/m and +4.2% y/y. |
| 0430 ET | Jul UK core CPI expected +3.0% y/y, Jun +2.8% y/y. |
| 0430 ET | Jul UK RPI expected -0.2% m/m and +5.0% y/y, Jun unchanged m/m and +5.0% y/y. Jul RPI ex mortgage interest payments expected +5.1% y/y, Jun +5.0% y/y. |
| Euro-Zone | |
| 0500 ET | Preliminary Q2 Euro-Zone GDP expected +0.3% q/q and +1.8% y/y, Q1 +0.8% q/q and +2.5% y/y. |
| Canada | |
| 0830 ET | Jun Canada manufacturing sales expected -0.2% m/m, May -0.8% m/m. |
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