Barchart Morning Call
Overnight Developments
Global Financial Calendar
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- Global stocks this morning are trading mixed with the Euro Stoxx 50 down -1.13% and Sep S&Ps down -0.20 of a point. Treasuries and the dollar are weaker and commodity prices are mixed ahead of Fed Chairman Bernanke's speech later today in Jackson Hole, Wyoming, and any indications about future Fed policy intentions. Gasoline prices retreated after Hurricane Irene was downgraded to a Category 2 as it moves north along the U.S. East Coast. According to the Energy Department, the U.S. East Coast has 10 operating oil refineries with a capacity of 1.21 million barrels a day, or about 7.1% of total U.S. operating capacity. Demand for dollars by European banks remains strong after the 3-month dollar Libor rate rose for the 24th consecutive day to 0.32278%, a 1-year high, while the dollar Libor-OIS spread, a gauge of banks' reluctance to lend, widened to 23.88 bp, also a 1-year high. The euro rose against the dollar after the Financial Times reported that Euro-Zone officials will discuss a new version of Finland's collateral agreement with Greece. A larger-than-expected increase in German import prices is helping to subdue stock prices after the Jul German import price index rose +0.8% m/m and +7.5% y/y, stronger than expectations of +0.3% m/m and +7.0% y/y.
- Asian stocks today closed mixed with Japan up +0.29%, China -0.09%, Australia -0.30%, South Korea +0.87%, India -1.84%. Speculation that the yen will weaken if Fed Chairman Bernanke avoids signaling any new stimulus measures boosted Japanese stocks today along with the resignation of Japanese Prime Minister Kan, whose popularity had plunged below 20%. Asian semiconductor chip makers rallied after the spot price of some dynamic-random-access-memory (DRAM) chips rose 3.2% yesterday, the first gain in almost 5 months, according to the Taiwan-based Dramexchange.
- September S&Ps this morning are trading little changed ahead of Fed Chairman Bernanke's speech, down -0.20 of a point. The US stock market yesterday settled lower on carry-over weakness from a fall in European bourses along with an unexpected increase in weekly initial unemployment claims: Dow Jones -1.51%, S&P 500 -1.56%, Nasdaq Composite -1.95%. Bearish factors included (1) carry-over weakness from a slide in European stocks after French, Italian and Spanish regulators extended a ban on short selling along with speculation that Germany may impose a short-selling ban on stocks, (2) concern that Greece may default on its debt as Finland's demand for collateral on loans to Greece jeopardizes a second bailout package and sent Greek government debt yields to record highs, and (3) the unexpected increase in weekly initial U.S. unemployment claims to their highest level in 5 weeks (+5,000 to 417,000 versus expectations of -3,000 to 405,000).
- Bullish factors included (1) early strength in financial stocks after the action by Warren Buffet's Berkshire Hathaway to invest $5 billion in Bank of America, (2) comments from Kansas City Fed President Hoenig who said he "doesn't see a double-dip recession" and that the U.S. economy will continue to grow at a modest pace as consumers and businesses pare back excessive amounts of debt, and (3) speculation that Fed Chairman may allude to additional Fed stimulus to bolster the economy when he speaks at a Fed conference on Friday.
- Bank of Amreica (BAC) was 1.9% higher in European trading as it extended yesterday's gains made after Warren Buffet's Bershire Hathaway agreed to invest $5 billion in the bank.
- September 10-year T-notes this morning are up +2.5 ticks. T-note prices yesterday moved higher after weekly U.S. jobless claims unexpectedly rose and after a slide in stock prices prompted an increase in safe-haven demand for Treasuries: TYU11 +13, FVU11 +8.5, EDZ11 unchanged. Bullish factors included (1) the unexpected increase in weekly initial U.S. unemployment claims to their highest level in 5 weeks (+5,000 to 417,000 versus expectations of -3,000 to 405,000) and (2) increased safe-haven demand for Treasuries after stocks declined and on concern Greece may default on its debt as Finland's demand for collateral on loans to Greece jeopardizes a second bailout package. Bearish factors included (1) weakened demand for the Treasury's $29 billion auction of 7-year T-notes that had a bid-to-cover ratio of 2.76, below the 12-auction average of 2.85, and (2) speculation that Fed Chairman Bernanke may not offer additional stimulus measures when he speaks at Jackson Hole, Wyoming on Friday.
- The dollar index this morning is weaker with the dollar/yen -0.50 yen and the euro/dollar +0.43 cents. The dollar index yesterday settled higher as the euro weakened after yields on Greek government debt rose to record highs on concern Greece may default on its debt: Dollar Index +0.267, USDJPY +0.488, EURUSD -0.00355. Bullish factors for the dollar included (1) increased safe-haven demand for the dollar after yields on Greek government debt rose to record highs on concern that Finland's demand for collateral on loans to Greece jeopardizes a second bailout package and may trigger a Greek default, (2) continued strong demand for dollars by European banks after the 3-month dollar Libor rate rose for the 23rd straight day to a 1-year high of 0.319%, and (3) weakness in the British pound which fell to a 1-1/2 week low against the dollar after an Aug UK retail sales index fell to its lowest level in 15 months. Bearish factors included (1) uncertainty over Fed Chairman Bernanke's speech on Friday and whether he will allude to additional stimulus measures to bolster the economy, which would undercut the dollar and (2) the unexpected increase in weekly initial U.S. unemployment claims to a 5-week high, which indicates labor market weakness and is dollar negative.
- Oct crude oil prices this morning are down -46 cents a barrel and Oct gasoline is -0.46 of a cent per gallon. Crude oil and gasoline prices yesterday finished higher as concern that Hurricane Irene may disrupt East Coast refinery production offset an increase in weekly U.S. jobless claims and equity market weakness: CLV11 +$0.14, RBV11 +4.59. Oct gasoline rose to a 3-week high. Bullish factors included (1) strength in gasoline on concern Hurricane Irene may move up the East Coast and damage and disrupt refinery production and fuel distribution and (2) speculation that Fed Chairman Bernanke on Friday may announce new measures to stimulate the economy and energy demand. Bearish factors included (1) a stronger dollar, which reduces investment demand in commodities, (2) the unexpected increase in weekly U.S. initial unemployment claims to their highest level in 5 weeks, which hints at labor market weakness that may dent fuel demand, and (3) a slide in stock prices which undercuts confidence in the economic outlook and energy demand.
Global Financial Calendar
| Friday 8/26/11 | |
|---|---|
| United States | |
| 0830 ET | Revised Q2 U.S. GDP expected +1.1% q/q annualized, previous +1.3% q/q annualized. Revised Q2 personal consumption expected +0.2%, previous +0.1%. Q2 GDP price index expected unrevised from +2.3%. Q2 core PCE deflator expected unrevised from +2.1% q/q. |
| 0955 ET | Final Aug U.S. University of Michigan consumer confidence expected +0.9 to 55.8, previous -8.8 to 54.9. |
| 1000 ET | Fed Chairman Ben Bernanke delivers a speech at the Kansas City Fed’s annual economic conference in Jackson Hole, Wyoming. |
| Germany | |
| 0200 ET | Jul German import prices index expected +0.3% m/m and +7.0% y/y, Jun -0.6% m/m and +6.5% y/y. |
| Euro-Zone | |
| 0400 ET | Jul Euro-Zone M3 money supply expected +2.3% 3-mo avg and +2.2% y/y, Jun +2.2% 3-mo avg and +2.1% y/y. |
| United Kingdom | |
| 0430 ET | Q2 U.K. GDP expected +0.2% q/q and +0.7% y/y, Q1 +0.2% q/q and +0.7% y/y. |
| 0430 ET | Q2 U.K. total business investment, Q1 -3.2% q/q and +2.7% y/y. |
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