Barchart Morning Call
Overnight Developments
Global Financial Calendar
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- Global stocks this morning are trading lower with the Euro Stoxx 50 down -0.35% and Sep S&Ps down -9.50 points. The dollar is little changed and Treasuries strengthened while most commodities are lower. Global stock prices were undercut after the Washington Post reported that Fed Chairman Bernanke is unlikely to announce new stimulus plans this Friday at Jackson Hole. The yield on Greek 2-year notes climbed 216 bp to a record 41.77% on concern the second aid package to Greece won't go through if Finland sticks to its word and demands collateral for additional Greek aid, while credit default swaps to insure European bank debt reached an all-time high of 257 bp. European banks continue to hoard dollars and after the 3-month dollar Libor rate rose for the 22nd straight day to 0.31428%, a 1-year high and the dollar Libor-OIS spread, a gauge of banks' reluctance to lend, widened to 22.93 bp, also the most in a year. European stocks also weakened after the Aug German IFO business climate fell -4.2 to 108.7, greater than the expected -1.9 point decline to 111.0 and its lowest level in 14 months. Another negative factor for stocks was the unexpected -0.7% m/m decline in Jun Euro-Zone industrial new orders, weaker than expectations of a +0.4% m/m increase.
- Asian stocks today closed mostly lower with Japan down -1.07%, China -0.39%, Australia -0.14%, South Korea -1.31%, India -1.29%. Japan today unveiled a $100 billion effort to help its companies cope with a strong yen as it will release foreign-exchange reserves to the state-run Japan Bank for International Cooperation for funding to aid exporters and spur purchases overseas. The yen remained stronger against the dollar even after Moody's today cut Japan's sovereign-credit rating one step to Aa3 with a stable outlook, citing "weak" prospects for economic growth that will make it difficult to rein in the world's largest public debt. Japanese banks closed lower and led losses in stocks after Moody's also cut the credit ratings of Japanese banks by one step on concern weaker public finances will reduce the government's ability to support banks in times of crisis. China Life tumbled 12% and led Chinese stocks lower after the insurer said first-half net income dropped -28% from a year earlier as declines in the nation's stock market hurt investment returns.
- September S&Ps this morning are trading down -9.50 points. The US stock market yesterday settled sharply higher for a second day as the government's list of "problem" banks declined for the first time since 2006 along with speculation that Fed Chairman Bernanke will announce additional stimulus measures on Friday to spur the economy: Dow Jones +2.97%, S&P 500 +3.43%, Nasdaq Composite +4.29%. Bullish factors included (1) carry-over support from gains in European and Asian stocks as contraction in Chinese manufacturing eased and European manufacturing held steady in Aug, which eases concern that that global economic slowdown is deepening, (2) the Quarterly Banking Profile from the FDIC that showed its list of "problem" banks in Q2 fell by 23 to 865, the first decline since 2006, and (3) speculation that Fed Chairman Bernanke this Friday may announce additional measures to stimulate the economy.
- Bearish factors included (1) the larger-than-expected decline in Jul U.S. new home sales to their lowest level in 5 months (-0.7% to 298,000 versus expectations of -0.6% to 310,000), (2) the bigger-than-expected fall in the Aug Richmond Fed manufacturing index which contracted at its slowest pace in 2-years (-9 to -10 versus expectations of -4 to -5), (3) comments from former Fed Chairman Greenspan who said the euro is "breaking down" and is "creating very considerable difficulties" in the European banking system.
- La-Z-Boy (LZB) slumped 11% in pre-market trading after the company reported Q1 revenue of $280.1 million, weaker than analysts' estimates of $284.3 million.
- September 10-year T-notes this morning are up +1.5 ticks. T-note prices yesterday settled lower on supply pressures and as stock prices rallied sharply: TYU11 -8.5, FVU11 -1.2, EDZ11 -4.0. Bearish factors included (1) reduced safe-haven demand for Treasuries after equity markets rallied sharply and (2) supply pressures ahead of the Treasury's $35 billion auction of 5-year T-notes on Wed. Bullish factors included (1) the larger-than-expected decline in Jul U.S. new home sales to their lowest level in 5 months (-0.7% to 298,000 versus expectations of -0.6% to 310,000), (2) the bigger-than-expected fall in the Aug Richmond Fed manufacturing index which contracted at its slowest pace in 2-years (-9 to -10 versus expectations of -4 to -5), (3) increased safe-haven demand for Treasuries on concern the European debt crisis may worsen after the dollar Libor-OIS spread, a gauge of banks' reluctance to lend, widened to a 1-year high of 22.48 bp, and (4) comments from former Fed Chairman Greenspan who said the euro is "breaking down" and is "creating very considerable difficulties" in the European banking system.
- The dollar index this morning is slightly lower with the dollar/yen -0.11 yen and the euro/dollar +0.18 cents. The dollar index yesterday closed lower as stock prices rallied along with speculation that Fed Chairman Bernanke this Friday will signal additional stimulus measures to boost the economy: Dollar Index -0.180, USDJPY -0.145, EURUSD +0.00833. Bearish factors for the dollar included (1) reduced safe-haven demand for the dollar as stocks rallied sharply, (2) speculation that the Fed may boost its stimulus measures to aid the economy, which would further weaken the dollar's interest rate differentials, and (3) the stronger-than-expected Aug Euro-Zone PMI composite, which is euro supportive. Bullish factors included (1) increased safe-haven demand for the dollar following comments from former Fed Chairman Greenspan who said the euro is "breaking down" and is "creating very considerable difficulties" in the European banking system, (2) the plunge in the Aug German ZEW economic sentiment to a 2-1/2 year low, which is euro negative, and (3) strong demand for dollars by European banks as the 3-month dollar Libor rate rose for the 21st straight day to 0.31178%, a 6-1/2 month high.
- Oct crude oil prices this morning are up +1 cent a barrel and Oct gasoline is -1.60 cents per gallon. Crude oil and gasoline prices yesterday moved higher as the dollar weakened and stock prices surged along with better-than-expected manufacturing data in China and Europe: CLV11 +$1.02, RBV11 +3.43. Bullish factors included (1) a weaker dollar, which boosts investment demand in commodities, (2) a rally in stock prices, which bolsters confidence in the economic outlook and energy demand, and (3) the increase in the Aug China HSBC manufacturing PMI and the stronger-than-expected Aug Euro-Zone PMI composite, which signals economic strength that benefits fuel demand. Bearish factors included (1) forecasts for Hurricane Irene to miss the Gulf Coast area, which reduces the risk of damage to U.S. crude installations and refiners and (2) weaker-than-expected U.S. economic data on Jul new home sales which fell to a 5-momth low and the plunge in the Aug Richmond Fed manufacturing index to a 2-year low, which signals reduced energy consumption. Expectations for Wednesday's weekly DOE inventory report are for crude oil supplies to increase 1.75 million bbl, gasoline stockpiles to fall -1.0 million bbl, distillate inventories to rise 1.0 million bbl and the refinery capacity rate to remain unchanged at 89.1%.
Global Financial Calendar
| Wednesday 8/24/11 | |
|---|---|
| United States | |
| 0700 ET | Weekly MBA mortgage applications, previous +4.1% with purchase mortgage sub-index -9.1% and refinancing mortgage sub-index +8.0%. |
| 0830 ET | Jul durable goods orders expected +2.0% and -0.5% ex transportation, Jun -1.9% and +0.4% ex transportation. |
| 1000 ET | Jun FHFA house price purchase index expected +0.2% m/m, May +0.4% m/m. Q2 FHFA house price purchase index expected -0.4% q/q, Q1 -2.5% q/q. |
| 1300 ET | Treasury auctions $35 billion 5-year T-notes. |
| Germany | |
| 0400 ET | Aug German IFO business climate expected -1.9 to 111.0, Jul -1.6 to 112.9. Aug IFO current assessment expected -1.3 to 120.1, Jul -1.9 to 121.4. Aug IFO expectations expected -1.8 to 103.2, Jul -1.2 to105.0. |
| Euro-Zone | |
| 0500 ET | Jun Euro-Zone industrial new orders expected unchanged m/m, May +3.6% m/m and +15.5% y/y. |
| United Kingdom | |
| 1901 ET | Jul UK nationwide consumer confidence expected -6 to 45, Jun -4 to 51. |
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