Barchart Morning Call
Overnight Developments
Global Financial Calendar
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- Global stocks this morning are sharply lower on carry-over weakness from yesterday's sharp sell-off in the US stock market when the S&P 500 fell by 4.46%. The Euro Stoxx 50 this morning is down -2.73% and Sep S&Ps are down 21.30 points (-1.86%). The stock markets today are falling on the same factors as yesterday, i.e., weakening global economic growth, the European debt crisis, and concern about the European banking system. The Euro Stoxx 600 Bank index is down 2.3% at a 2-1/2 year low but is at least showing a smaller loss than this morning's -3.07% loss in the European broad market. U.S. bank stocks are generally lower this morning in European trading with Bank of America down 3.7% and JP Morgan Chase down 1%. Citigroup yesterday cut its U.S. GDP forecasts to +1.6% from +1.7% for 2011 and to +2.1% from +2.7% for 2012. Gold rose to a record high of $1,860 per ounce as investors continue to buy the metal as a safe-haven from stocks and currencies. Asian stocks today closed sharply lower across the board: Japan -2.51%, Hong Kong -3.08%, China -0.94%, Taiwan -3.57%, Australia -3.51%, Singapore -3.23%, South Korea -6.43%, and Bombay -1.99%.
- September S&Ps this morning are trading down 21/30 points at 1122.20 as the market continues to fret about weaker economic growth, lower corporate profits, and the European debt crisis. The US stock market yesterday plunged throughout the day and finished sharply lower on growing signs the economy is slowing and on weakness in bank stocks on speculation that European banks lack sufficient capital: Dow Jones -3.68%, S&P 500 -4.46%, Nasdaq Composite -5.22%. The Nasdaq fell to a 1-week low. Bearish factors included (1) carry-over weakness from a decline in European stocks over concerns of European banks after he WSJ reported that U.S. regulators are stepping up scrutiny of local operations for Europe's largest banks on concern that the sovereign debt crisis may lead to funding problems, (2) the larger-than-expected increase in weekly initial unemployment claims (+9,000 to 408,000 versus expectations of +5,000 to 400,000), (3) the unexpected decline in Jul existing home sales which fell to their lowest level in 8 months (-3.5% to 4.67 million versus expectations of +2.7% to 4.90 million), and (4) the larger-than-expected drop in the Aug Philadelphia Fed manufacturing index which contracted at its slowest pace in 2 years (-33.9 to -30.7 versus expectations of -1.2 to 2.0).
- Bullish factors included (1) the larger-than-expected increase in Jul leading indicators (+0.5% m/m versus expectations of +0.2%), (2) comments from New York Fed President Dudley who said that growth during the second half of 2011 will be "significantly firmer" than in the first 6 months and that he sees the risk of recession as "quite low," and (3) the fall in the 10-year T-note yield to a record low of 1.973%.
- September 10-year T-notes this morning are down 1 tick, failing to rally as yet on today's 1.9% sell-off in Sep S&Ps. T-note prices yesterday rallied to all-time highs and the yield on the 10-year T-note fell below 2% for the first time as U.S. economic growth weakened along with strong safe-haven demand from a plunge in global equities and concerns over the funding of European banks: TYU11 +13.5, FVU11 +1.0, EDZ11 -4.0. The 10-year T-note yield fell to a record low of 1.973%. Bullish factors included (1) an increase in the safe-haven demand for Treasuries after stocks plunged along with concerns over European banks after the WSJ reported that U.S. regulators are stepping up scrutiny of local operations for Europe's largest banks on concern that the sovereign debt crisis may lead to funding problems, (2) the larger-than-expected increase in weekly initial unemployment claims (+9,000 to 408,000 versus expectations of +5,000 to 400,000), (3) the unexpected decline in Jul existing home sales which fell to their lowest level in 8 months (-3.5% to 4.67 million versus expectations of +2.7% to 4.90 million), and (4) the larger-than-expected drop in the Aug Philadelphia Fed manufacturing index which contracted at its slowest pace in 2 years (-33.9 to -30.7 versus expectations of -1.2 to 2.0). Bearish factors included (1) the larger-than-expected increase in Jul CPI (+0.5% m/m and +3.6% y/y versus expectations of +0.2% m/m and +3.3% y/y) and (2) the larger-than-expected increase in Jul leading indicators (+0.5% m/m versus expectations of +0.2%).
- The dollar index this morning is little changed with the dollar/yen down -0.07 yen and the euro/dollar down 0.06 cents. The dollar index yesterday moved higher on increased safe-haven demand after global stock markets plunged along with speculation European banks lack sufficient capital: Dollar Index +0.570, USDJPY -0.028, EURUSD -0.0093. Bullish factors included (1) a sell-off in global equity markets, which increased the safe-haven demand for the dollar, (2) concerns over the European banking sector which led to a flight-to-safety into the dollar after the WSJ reported that U.S. regulators are stepping up scrutiny of local operations for Europe's largest banks on concern that the sovereign debt crisis may lead to funding problems, and (3) the larger-than expected increase in Jul CPI, which may keep the Fed from providing further monetary stimulus. Bearish factors included (1) weak US economic data that is dollar negative as Jul existing home sales unexpectedly fell to an 8-month low and the Aug Philadelphia Fed index unexpectedly contracted at its slowest pace in 2-years and (2) comments from New York Fed President Dudley who said the FOMC has "plenty of ammunition left" to combat another downturn in the economy.
- Sep crude oil prices this morning are sharply lower by $2.53 (-3.07%) a barrel and Sep gasoline is down 1.69 cents (-0.61%) per gallon. The energy complex continues to move lower in sympathy with stocks and a lack of confidence in the economic outlook and fuel demand. Sep crude oil and gasoline prices yesterday tumbled as the dollar strengthened, US economic data weakened and Morgan Stanley and Deutsche Bank cut their forecasts for global economic growth: CLU11 -$5.25, RBU11 -8.71. Bearish factors included (1) dollar strength, which reduces investment demand in commodities, (2) weak US economic data after Jul existing home sales unexpectedly fell to an 8-month low, the Aug Philadelphia Fed index unexpectedly contracted at its slowest pace in 2-years and weekly initial U.S. unemployment claims rose more than expected, and (3) the action by Morgan Stanley to cut its 2011 global growth forecast to 3.9% from 4.2% and the cuts by Deutsche Bank to its 2011 and 2012 China growth forecasts. Bullish factors include (1) the larger-than-expected increase in Jun leading indicators and (2) comments from New York Fed President Dudley who said that growth during the second half of 2011 will be "significantly firmer" than in the first 6 months and that he sees the risk of recession as "quite low."
Global Financial Calendar
| Friday 8/19/11 | |
|---|---|
| United States | |
| 0830 ET | New York Fed President William Dudley speaks about regional economic conditions in Lyndhurst, NJ. |
| 1345 ET | Cleveland Fed President Sandra Pianalto speaks on ?The Evolving Financial Services Industry and the Outlook for U.S. Economic Growth? at the Community Bankers Association of Ohio Annual Convention. |
| Japan | |
| 0030 ET | Jun Japan all industry activity index expected +2.2% m/m, May +2.0% m/m. |
| Germany | |
| 0200 ET | Jul German producer prices expected +0.1% m/m and +5.3% y/y, Jun +0.1% m/m and +5.6% y/y. |
| United Kingdom | |
| 0430 ET | Jul UK public sector net borrowing expected 0.2 billion pounds, Jun 12.0 billion pounds. |
| Canada | |
| 0700 ET | Jul Canada CPI expected +0.2% m/m and +2.8% y/y, Jun -0.7% m/m and +3.1% y/y. |
| 0700 ET | Jul Bank of Canada core CPI expected +0,2% m/m and +1.6% y/y, Jun -0.6% m/m and +1.3% y/y. |
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