Barchart Morning Call
Overnight Developments
Global Financial Calendar
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- Global stocks this morning are mostly higher with the Euro Stoxx 50 up +1.52% and Dec S&Ps up +8.40 points. The dollar and Treasuries are weaker and commodities are mixed on speculation China may still offer support for Europe after the Caijing magazine reported that China is still willing to buy bonds of nations hit by the debt crisis, citing the vice chairman of the National Development and Reform Commission. In a sign that European banks are having trouble borrowing dollars in the interbank market, the ECB said it will allot $575 million in a regular 7-day liquidity-providing operation at a fixed rate of 1.1%, the first time in a month that lenders have requested dollars from the ECB. The cost of converting euro-based payments into dollars as measured by the 1-year cross-currency basis swap was 99.1 bp below the Euribor rate, close to widest rate in 2-3/4 years of 112.5 bp set on Monday. Gains in European stocks were limited after Jul Euro-Zone industrial production rose +1.0% m/m and +4.2% y/y, weaker than expectations of +1.5% m/m and +4.6% y/y.
- Asian stocks today closed mixed with Japan down -1.14%, China +0.47%, Australia -1.64%, South Korea -3.53%, India +1.47%. Asian stocks were undercut after Chinese Premier Wen Jiabao, speaking at the World Economic Forum in Dalian, said indebted economies must "put their own houses in order," which dampened speculation China would buy more European government debt and rescue Europe from its growing debt crisis. Japan's Nikkei 225 Stock Index fell to a 6-month low after Standard & Poor's cut Japan's GDP forecast for this year to zero from a previous estimate of 1.3%, saying the rebound from the Mar 11 earthquake is likely to be "less robust" than expected and that "the yen's sharp appreciation against major currencies also undermines Japan's recovery."
- December S&Ps this morning are trading up +8.40 points. The US stock market yesterday settled higher on reduced European debt concerns along with a rally in regional bank stocks: Dow Jones +0.40, S&P 500 +0.91, Nasdaq Composite +1.49%. Bullish factors included (1) reduced European sovereign-debt concerns after German Chancellor Merkel said she won't allow Greece to go into "uncontrolled insolvency" (2) carry-over support from a rally in French bank stocks after the CEO of Societe Generale said his bank's exposure to European sovereign debt was "manageable" and that it could do without access to U.S. money-market funds, which dispelled earlier reports that French banks were having problems obtaining funding in U.S. dollars, and (3) strength in regional U.S, bank stocks after RBC Capital Markets raised their outlook on Fifth Third Bancorp to "outperform" from "sector perform."
- Bearish factors included (1) concern the European debt crisis will worsen and spread throughout Europe after credit default swaps to insure the government debts of Belgium, France, Greece, Italy, Portugal and Spain all rose to records, (2) the survey by Manpower that shows its Q4 employment index fell to 7, the first decline in 9 quarters, from 8 in Q3, which indicates the pace of hiring in the U.S. will remain weak as employers stay guarded about the economic outlook, and (3) data from the Census Bureau that showed the proportion of people in the U.S living in poverty in 2010 rose for the third straight year to a 17-year high of 15.1% with the ranks of people in poverty in the U.S rising to 46.2 million, the most since Census Bureau data began 52 years ago.
- Dell (DELL) rose 1.8% in European trading after the company said its board approved an extra $5 billion for stock repurchases, adding to the $2.16 billion already authorized for the company's share-buyback program.
- December 10-year T-notes this morning are down -6 ticks. T-note prices yesterday weakened on reduced safe-haven demand from the European debt crisis along with supply pressures: TYZ11 -13, FVZ11 -3.7, EDH12 +0.5. Bearish factors included (1) comments from German Chancellor Merkel who said she won't allow Greece to go into "uncontrolled insolvency," which temporarily reduces European debt concerns and safe-haven demand for Treasuries, (2) the stronger-than-expected Aug import price index which fell -0.4% m/m and rose +13.0% y/y, stronger than expectations of -0.8% m/m and +12.4% y/y, and (3) supply pressures ahead of the Treasury's $13 billion auction of 30-year T-bonds on Wed. Bullish factors included (1) carry-over support from a drop in the 10-year German bund yield to a record low of 1.679% on concern the European debt crisis will spread throughout the Euro-Zone after credit default swaps to insure the government debts of Belgium, France, Greece, Italy, Portugal and Spain all rose to records, and (2) data from the Census Bureau that showed the proportion of people in the U.S living in poverty in 2010 rose for the third straight year to a 17-year high of 15.1% with the ranks of people in poverty in the U.S rising to 46.2 million, the most since Census Bureau data began 52 years ago.
- The dollar index this morning is weaker with the dollar/yen -0.15 yen and the euro/dollar +0.40 cents. The dollar index yesterday closed lower on reduced European debt risks after German Chancellor Merkel rejected any calls for a Greek bankruptcy: Dollar Index -0.659, USDJPY -0.269, EURUSD -0.00004. Bearish factors included (1) reduced safe-haven demand for the dollar after German Chancellor Merkel said she won't let Greece fall into "uncontrolled insolvency" because the risk of contagion for the other Euro-Zone countries "is very big" and (2) the rally in the stock market which also undercut the safe-haven demand for the dollar. Bullish factors included (1) concern the European debt crisis will worsen after credit default swaps to insure the government debts of Belgium, France, Greece, Italy, Portugal and Spain all rose to records, (2) weak demand for Italy's sale of 3.9 billion euros of 5-year bonds 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, and (3) continued strong demand for dollars from European banks after the 3-month dollar Libor rate rose to a 1-year high of 0.34711%.
- Oct crude oil prices this morning are down -54 cents a barrel and Oct gasoline is -0.43 of a cent per gallon. Crude oil and gasoline prices yesterday settled higher on an expected drop in weekly DOE inventories along with reduced European debt concerns: CLV11 +$2.02, RBV11 +0.42. Bullish factors included (1) the weaker dollar, which encourages investment demand in commodities, (2) the outlook for crude oil stockpiles to fall when the DOE releases its weekly inventory figures on Wed, and (3) reduced European debt concerns which fueled a stock market rally that improves confidence in the economic outlook and energy demand. Bearish factors included (1) the action by the IEA to cut its 2011 global oil demand forecast by 200,000 barrels a day and the cut in its 2012 global oil demand forecast by 400,000 barrels a day and (2) concern the ongoing European sovereign debt crisis will slow the global economy and fuel demand. Expectations for Wednesday's weekly inventory report from the DOE are for crude oil supplies to fall -3.0 million bbl, gasoline stockpiles to fall -500,000 bbl, distillate inventories to rise +875,000 bbl and the refinery capacity rate to fall -0.9 to 88.2%.
Global Financial Calendar
| Wednesday 9/14/11 | |
|---|---|
| United States | |
| 0700 ET | Weekly MBA mortgage applications, previous -4.9% with purchase mortgage sub-index +0.2% and refinancing sub-index -6.3%. |
| 0830 ET | Aug PPI expected unchanged m/m and +6.5% y/y, Jul +0.2% m/m and +7.2% y/y. Aug PPI ex food & energy expected +0.2% m/m and +2.6% y/y, Jul +0.4% m/m and +2.5% y/y. |
| 0830 ET | Aug retail sales expected +0.2% and +0.2% less autos, Jul +0.5% and +0.5% less autos. |
| 1000 ET | Jul business inventories expected +0.5%, Jun +0.3%. |
| 1300 ET | Treasury auctions $13 billion 30-year T-bonds. |
| Japan | |
| 0030 ET | Revised Jul Japan industrial production, previous +0.6% m/m and -2.8% y/y. |
| 0200 ET | Revised Aug Japan machine tool orders, previous +15.3% y/y. |
| United Kingdom | |
| 0430 ET | Aug U.K. jobless claims change expected +32,000, Jul +37,100. Aug claimant count rate expected 5.0%, Jul 4.9%. |
| 0430 ET | Jul U.K. avg weekly earnings expected +2.7% 3-mo/year-over-year, Jun +2.6% 3-mo/year-over-year. |
| 0430 ET | Jul U.K. avg weekly earnings ex-bonus expected +2.1% 3-mo/year-over-year, Jun +2.2% 3-mo/tewar-over-year. |
| 0430 ET | Jul U.K. ILO unemployment rate expected 7.9% (3-months), Jun 7.9% (3-months). |
| Euro-Zone | |
| 0500 ET | Jul Euro-Zone industrial production expected +1.5% m/m and +4.6% y/y, Jun -0.8% m/m and +2.7% y/y. |
| Canada | |
| 0830 ET | Q2 Canada capacity utilization rate, Q1 79.0%. |
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