Barchart Morning Call
Overnight Developments
Global Financial Calendar
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- Global stocks this morning are weaker with the Euro Stoxx 50 down -0.24% at a fresh 2-1/2 year low and Dec S&Ps down -6.20 points. The euro fell on concern the European sovereign-debt crisis will widen as credit default swaps to insure the government debts of Belgium, France, Greece, Italy, Portugal and Spain all rose to records. German Chancellor Merkel tried to assuage market angst when she said she won't let Greece fall into "uncontrolled insolvency" because the risk of contagion for the other Euro-Zone countries "is very big." The euro also fell back after a second report from the Financial Times that China would provide financial support to Italy poured cold water on those expectations when the report said it was doubtful that China would buy Italian bonds. That prompted weak demand for Italy's sale of 3.9 billion euros of a new benchmark 5-year bond that had a bid-to-cover ratio of 1.28, compared with a bid-to-cover ratio of 1.93 at a similar sale in July. Weakness in European banks is leading the broader market lower amid mounting concern the sovereign-debt crisis is hurting interbank lending. BNP Paribas dropped 7.9% as France's biggest bank denied a WSJ article that said it was having problems obtaining funding in U.S. dollars. Another negative for stock prices was the +0.6% m/m and +2.4% increase in Aug French CPI, stronger than expectations of +0.3% m/m and +2.2% y/y with the +2.4% annual gain the fastest pace of increase in 2-3/4 years.
- Asian stocks today closed mixed with Japan up +0.95%, China -1.12%, Australia +0.85%, India -0.21%. Mounting concern the European debt crisis will spread and slow the global economy and demand for Asian exports is the biggest negative factor undercutting Asian stock markets. Chinese bank stocks also fell on concern the government will tighten monetary policy further after the Beijing News reported the PBOC sold additional bills to major lenders, a step to drain liquidity from the banking system.
- December S&Ps this morning are trading down -6.20 points. The US stock market yesterday traded lower for most of the day on concern the European sovereign-debt crisis will worsen and Greece may default on its debt but a Financial Times report that China may buy Italian government bonds fueled a late-day rally that left stocks higher: Dow Jones +0.63, S&P 500 +0.70%, Nasdaq Composite +1.10%. The Dow posted a 3-week low and the S&P 500 fell to a 2-week low but they both erased their losses and finished higher. Bullish factors included (1) comments from Dallas Fed President Fisher who said "inflation is not an issue presently," (2) a rally in technology stocks due to increased M&A activity after Broadcom agreed to buy NetLogic Microsystems for $3.7 billion, (3) a Financial Times report that Italy was in talks with a Chinese investment firm to buy Italian government bonds, which reduced European debt concerns and sparked a late-day short-covering rally, and (4) the decline in the 10-year T-note yield to a record low 1.876%.
- Bearish factors included (1) concern that Greece may default on its debt an economic adviser to German Chancellor Merkel said that decisions taken in July by European leaders "won't suffice" to save Greece from missing a payment on its debt, (2) concern the European debt crisis will worsen and spread throughout Europe after credit default swaps to insure the government debts of Greece, Italy, Spain and France all surged to records, (3) the action by the NABE to cut its 2011 U.S. GDP forecast to 1.7% from a May forecast of 2.8% and the cut in its 2012 U.S. GDP forecast to 2.3% from a May forecast of 3.2%, and (4) weakness in bank stocks after European bank stocks plunged when people with knowledge of the matter said Moody's Investors Service may cut the credit ratings of France's biggest banks because of their holdings of Greek debt and after Citigroup cut its Q3 profit estimates for U.S. banks.
- December 10-year T-notes this morning are down -2 ticks. T-note prices yesterday rallied to an all-time high on increased safe-haven demand due to concern Greece may default on its debt but prices erased their gains and closed lower as the equity market rebounded: TYZ11 -9.5, FVZ11 -8.7, EDH12 -1.5. The 10-year T-note yield fell to an all-time low of 1.876%. Bearish factors included (1) so-so demand for the Treasury's $32 billion auction of 4-year T-notes that had a 3.15 bid-to-cover ratio, below last month's ratio of 3.29, (2) a late-day recovery in the equity market after the Financial Times reported that Italy was in talks with a Chinese investment firm to buy Italian government bonds, which reduced European debt concerns, and (3) supply pressures ahead of the Treasury's $21 billion auction of 10-year T-notes on Tue. Bullish factors included (1) concern that Greece may default on its debt after an economic adviser to German Chancellor Merkel said that decisions taken in Jul by European leaders "won't suffice" to save Greece from missing a payment on its debt, (2) carry-over support from a drop in the 10-year German bund yield to a record low of 1.705% on concern the European debt crisis will spread throughout the Euro-Zone after credit default swaps to insure the government debts of Greece, Italy, Spain and France all surged to records, (3) comments from Dallas Fed President Fisher who said "inflation is not an issue presently," and (4) the action by the NABE to cut its 2011 U.S. GDP forecast to 1.7%, down from a May forecast of 2.8% and the cut in its 2012 U.S. GDP forecast to 2.3% from a May forecast of 3.2%.
- The dollar index this morning is slightly higher with the dollar/yen -0.23 yen and the euro/dollar -0.27 cents. The dollar index yesterday rallied up to a 6-1/2 month high on heightened European sovereign-debt concerns but fell back as the euro erased its losses after the Financial Times reported that Italy was in talks with a Chinese investment firm to buy Italian government bonds: Dollar Index +0.386, USDJPY -0.388, EURUSD +0.00230. Bullish factors included (1) a surge in safe-haven demand for the dollar as global stock markets plunged on concern the European debt crisis will worsen after credit default swaps to insure the government debts of Greece, Italy, Spain and France all surged to records, (2) the euro negative statement from the European Commission that the Euro-Zone recovery remains "fragile" and sovereign-debt levels will continue to increase through 2012 as governments struggle in the aftermath of the recession, and (3) continued strong demand from European banks for dollars as the 3-month dollar Libor rate climbed to a 1-year high of 0.34289%. Bearish factors included (1) reduced concerns that Greece will default on its sovereign debt after the Ta Nea newspaper reported that Deputy Greek Finance Minister Sachinidis said that the Greek government has the cash reserves to cover its needs for October (2) the action by the NABE to cut its 2011 and 2012 U.S. GDP forecasts, which is dollar negative, and (3) late-day short covering in the euro after the Financial Times reported that Italy was in talks with a Chinese investment firm to buy Italian government bonds.
- Oct crude oil prices this morning are up +88 cents a barrel and Oct gasoline is +1.44 cents per gallon. Crude oil and gasoline prices yesterday settled mixed as gasoline weakened to a 3-week low on concern the European credit crisis will worsen and slow the global economy and energy demand while crude gained after the dollar fell back from its best levels: CLV11 +$0.95, RBV11 -3.28. Bearish factors included (1) the rally in the dollar index to a 6-1/2 month high, which discourages investment demand in commodities, (2) the slide in global stock markets on concern the European debt crisis will worsen and reduce economic growth and fuel demand, (3) the action by OPEC to cut its global oil demand estimate for this year to 87.99 million barrels a day, down -150,000 barrels a day from a previous forecast, and (4) the action by the NABE to cut its 2011 U.S. GDP forecast to 1.7%, down from a May forecast of 2.8% and the cut in its 2012 U.S. GDP forecast to 2.3% from a May forecast of 3.2%. Bullish factors included (1) the prediction from Goldman Sachs that global oil markets will tighten up the remainder of the year and into 2012 as the market absorbs additional supplies from the release of strategic stockpiles in the U.S. and (2) the dollar index which closed little changed after it gave up most of its advance to a 6-1/2 month high.
Global Financial Calendar
| Tuesday 9/13/11 | |
|---|---|
| United States | |
| 0745 ET | ICSC (Int?l Council of Shopping Centers) weekly retailer sales. |
| 0830 ET | Aug import price index expected -0.8% m/m and +12.4% y/y, Jul +0.3% m/m and +14.0% y/y. |
| 0855 ET | Redbook weekly retailer sales. |
| 1000 ET | Sep IBD/TIPP economic optimism expected +2.2 to 38.0, Aug -5.6 to 35.8. |
| 1130 ET | Weekly 4-week T-bill auction. |
| 1300 ET | Treasury auctions $21 billion 10-year T-notes. |
| 1400 ET | Aug monthly budget statement expected -$132.0 billion, Jul -$129.376 billion. |
| France | |
| 0130 ET | Aug French CPI (EU harmonized) expected +0.3% m/m and +2.2% y/y, Jul -0.5% m/m and +2.1% y/y. |
| United Kingdom | |
| 0430 ET | Jul U.K. house prices expected -1.2% y/y, Jun -2.0% y/y. |
| 0430 ET | Aug U.K. CPI expected +0.6% m/m and +4.5% y/y, Jul unchanged m/m and +4.4% y/y. |
| 0430 ET | Aug U.K. core CPI expected +3.0% y/y, Jul +3.1% y/y. |
| 0430 ET | Aug U.K. RPI expected +0.6% m/m and +5.1% y/y, Jul -0.2% m/m and +5.0% y/y. Aug RPI ex mortgage interest payments expected +5.2% y/y, Jul +5.0% y/y. |
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