Barchart Morning Call
Overnight Developments
Global Financial Calendar
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- Global stocks are lower with the European Euro Stoxx 50 down -1.83% at a 2-year low and Sep S&Ps down -3.50 points at an 8-month low. The rout in world equity and commodity markets continues as crude oil slid to an 8-1/2 month low and copper fell to a 5-week low. The euro rebounded from a 2-week low against the dollar and pushed higher as Spanish and Italian bonds rallied on speculation EU leaders may take more action to stem the European debt crisis. Bund and Treasury yields rebounded from 9-1/2 month lows ahead of this morning's US payrolls report and after the ECB bought Portuguese and Irish government bonds for the second straight day. Royal Bank of Scotland Group Plc plunged 8% and is leading European bank stocks lower after it reported a first-half net loss of 1.4 billion pounds ($2.3 billion), wider than analysts' estimates of a 571 million-pound loss. Jun German industrial production unexpectedly declined and has helped to keep stock prices under pressure as it fell -1.1% m/m, weaker than expectations of a +0.1% m/m gain, while Jun UK producer prices rose +5.9% y/y, stronger than expectations of +5.8% and the biggest annual increase in 2-1/2 years as food and clothes costs surged.
- The Asian stock markets today closed lower with Japan down -3.72%, China -2.12%, Australia -4.00%, South Korea -3.69%, India -2.19%. Asian stocks tumbled on concern the world economy is weakening and demand will dwindle for Asian exports. Sony, which earns half of its revenue in the US and Europe, closed 5% lower, Toyota Motor, the world's largest carmaker, slumped 3.2%, while BHP Billiton, the world's biggest global mining company and Australia's biggest oil producer, sank 4.8% as commodity prices plunged. Australian stocks also sank after the RBA slashed its 2011 economic growth forecast for Australia to 2.0% from its previous estimate of 3.25%.
- September S&Ps this morning are trading down -3.50 points ahead of the Jul US payrolls report. The US stock market plunged yesterday and settled sharply lower as concern over an economic slowdown intensified along with concern the European debt crisis may worsen: Dow Jones -4.31%, S&P 500 -4.78%, Nasdaq Composite -5.08%. The S&P 500 sank to an 8-month low, the Dow dropped to a 7-month low and the Nasdaq fell to a 5-week low. Bearish factors included (1) carry-over weakness from a sell-off in European stocks after the ECB extended its existing emergency liquidity measures through the end of the year, which bolstered concern that the European debt crisis may be worse than feared, (2) the action by JPMorgan Chase to cut its Q3 US GDP forecast to 1.5% from 2.5%, citing a slowdown in consumer spending, (3) weakness in energy and raw-material producers as dollar strength and demand concerns prompted a broad-based decline in most commodities, and (4) the fall in big money-center global banks such as Citigroup, JPMorgan Chase and Bank of America on concern their exposure to European debt will cut into profits as write-downs and loan losses increase.
- Bullish factors included (1) the unexpected decline in weekly initial unemployment claims which fell to a 4-month low (-1,000 to 400,000 versus expectations of +7,000 to 405,000) and (2) the fall in the 10-year T-note yield to a 9-1/2 month low of 2.439%.
- Exxon Mobile (XOM) lost 2.3% and Chevron (CVX) is down 2.6% in European trading after crude oil tumbled to an 8-1/2 month low in overnight trade.
- JPMorgan Chase (JPM) is off by 2.4% and Bank of America (BAC) dropped 3.7% in pre-market trading as US bank stocks folow their European counterparts lower.
- September 10-year T-notes this morning are trading up +3 ticks. T-note prices yesterday rallied sharply up to a 2-1/2 year nearest-futures high and settled higher for the sixth consecutive session on speculation a slow down of the US economy along with contagion of the European debt crisis will prompt the Fed to take additional steps to bolster growth: TYU11 +30.5, FVU11 +16, EDZ11 +7.5. The 10-year T-note yield dropped to a 9-1/2 month low of 2.439%. Bullish factors included (1) increased safe-haven demand for Treasuries after the S&P 500 sank to an 8-month low along with concern the European debt crisis may be worse than expected after the ECB extended its existing emergency liquidity measures through the end of the year and (2) speculation that continued economic weakness will prompt the Fed to implement additional quantitative easing or "QE 3." Bearish factors included (1) the unexpected decline in weekly initial unemployment claims which fell to a 4-month low (-1,000 to 400,000 versus expectations of +7,000 to 405,000) and (2) long liquidation pressures ahead of Friday's monthly payrolls report.
- The dollar index this morning is weaker with the dollar/yen -0.40 and the euro/dollar +0.73 cents. The dollar index yesterday rallied sharply to a 2-week high and settled higher after the ECB extended its liquidity measure through the end of the year and the BOJ intervened in the forex market to weaken the yen: Dollar Index +1.080, USDJPY +1.809, EURUSD -0.02308. Bullish factors included (1) weakness in the yen which fell to a 3-week low against the dollar after the BOJ intervened in the currency market to weaken the yen and expanded its asset-purchase fund to 15 trillion yen ($189 billion) from 10 trillion yen and expanded a credit facility by 5 trillion yen to 35 trillion yen, (2) weakness in the euro which slipped to a 2-week low against the dollar as contagion of the European sovereign-debt crisis prompted the ECB to lend European banks as much money as they need for 6 months and extended its existing emergency liquidity measures through the end of the year, and (3) the plunge in the S&P 500 to an 8-month low, which increased the safe-haven demand for the dollar. Bearish factors included (1) comments from ECB President Trichet who said the financial situation in the Euro-Zone is better than that of the US and Japan and (2) the unexpected increase in Jun German factory orders, which is euro supportive.
- Sep crude oil prices this morning are down -70 cents a barrel at an 8-1/2 month low and Sep gasoline is up +3.47 cents per gallon. Sep crude oil and gasoline prices yesterday settled lower for a fourth day after the dollar strengthened and concern intensified that the economy is slowing, which prompted a massive liquidation of most long commodity positions: CLU11 -$5.30, RBU11 -19.31. Sep crude sank to a 5-1/2 month low and Sep gasoline dropped to a 5-month low. Bearish factors included (1) the rally in the dollar index to a 2-week high, which discourages investment demand in commodities, (2) the plunge in the S&P 500 Stock Index to an 8-month low, which reduces confidence in the economic outlook and energy demand, and (3) concern that energy demand will weaken as recent data point to an economic slowdown. Bullish factors included (1) the unexpected decline in weekly US jobless claims to a 4-month low, which may boost consumer confidence as layoffs subside and lead to increased fuel demand and (2) the unexpected increase in Jun German factory orders, which suggests economic strength in Europe's largest economy that may boost energy demand.
Global Financial Calendar
| Friday 8/5/11 | |
|---|---|
| United States | |
| 0830 ET | Jul nonfarm payrolls expected +85,000, Jun +18,000. Jul private payrolls (ex-government) expected +113,000, Jun +57,000. Jul unemployment rate expected unchanged at 9.2%, Jun +0.1 to 9.2%. Jul manufacturing payrolls expected +10,000, Jun +6,000. Jul avg hourly earnings all employees expected +0.2% m/m and +1.9% y/y, Jun unchanged m/m and +1.9% y/y. Jul avg weekly hours all employees expected unchanged at 34.3 hours, Jun -0.1 to 34.3 hours. |
| 1500 ET | Jun consumer credit expected +$5.0 billion, May +$5.077 billion. |
| Japan | |
| 0100 ET | Jun Japan coincident index CI expected 108.7, May 106.3. Jun leading index CI expected 103.4, May 99.6. |
| United Kingdom | |
| 0430 ET | Jul UK PPI input prices expected +0.7% m/m and +18.7% y/y, Jun +0.4% m/m and +17.0% y/y. |
| 0430 ET | Jul UK PPI output prices expected+0.2% m/m and +5.8% y/y, Jun +0.1% m/m and +5.7% y/y. Jul PPI output core prices expected +0.2% m/m and +3.2% y/y, Jun +0.2% m/m and +3.2% y/y. |
| Germany | |
| 0600 ET | Jun German industrial production expected +0.1% m/m and +8.1% y/y, May +1.2% m/m and +7.6% y/y. |
| France | |
| 0245 ET | France Jun trade balance expected -6.5 billion euros, May -7.422 billion euros. |
| Canada | |
| 0700 ET | Jul Canada net change in employment expected +15,000, Jun +28,400. Jul unemployment rate expected unchanged at 7.4%, Jun unchanged at 7.4%. |
| 0830 ET | Jun Canada building permits expected -5.5% m/m, May +20.9% m/m. |
| 1000 ET | Jul Ivey purchasing managers index (sa) expected +2.1 to 62.0, Jun 59.9. |
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