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 +1.79% and Dec S&Ps up +7.30 points. The dollar and Treasuries are weaker and Greek bond yields tumbled amid reduced safe-haven demand after German and French leaders reiterated support for the country. The yield on the 2-year Greek T-note fell to 68.46% from Wednesday's record high of 84.52% after German Chancellor Merkel and French President Sarkozy said they're "convinced" Greece will remain in the Euro-Zone. The premium European banks pay to borrow dollars for 12 months through the swaps market was little changed at 71 bp below Euribor, although not far from Monday's 2-3/4 year high of 78.8 bp. Bank stocks led the overall market higher, although UBS fell 7.7% after it said it discovered a $2 billion trading loss due to unauthorized deals by a trader in its investment-banking unit. Strength in the euro was limited after the EU cut its Euro-Zone growth forecasts for Q3 to +0.2% and its Q4 GDP estimate to +0.1%, down from an estimate in March for +0.4% expansion in both periods to reflect a worsening outlook on the sovereign-debt crisis and warned the Euro-Zone economy may come "close to standstill at year-end." EU economic and monetary affairs commissioner Rehn said in a statement, "The outlook for the European economy has deteriorated as the sovereign-debt crisis has worsened and the financial market turmoil is set to dampen the real economy." In a shot at the European governments? lack of a unified response by to the debt crisis, ECB Council member Nowotny said the ECB will have to "rethink" its bond-buying program if Euro-Zone members fail to provide an appropriate rescue program.
- Asian stocks today closed mostly higher with Japan up +1.76%, China -0.15%, Australia +1.65%, South Korea +1.62%, India +1.00%. Asian exporters received a boost after German and French leaders said they are convinced Greece will remain in the Euro-Zone, while chip-related companies also advanced after the Philadelphia Semiconductor Index rose yesterday to its highest level in 1-1/2 months.
- December S&Ps this morning are trading up +7.30 points. The US stock market yesterday moved higher on optimism that European leaders will do what is necessary to resolve the region's debt crisis: Dow Jones +1.27, S&P 500 +1.35, Nasdaq Composite +1.60%. The Nasdaq posted a 1-1/4 month high. Bullish factors included (1) carry-over support from a rally in European stocks after European Commission President Barroso said he is close to proposing options on joint Euro-Zone bond sales to resolve the crisis while Italian Prime Minister Berlusconi's government won a confidence vote on its 54 billion euro ($74 billion) austerity package, (2) reduced European sovereign-debt concerns as European government bonds rallied after a report from Caijing magazine that said China is still willing to buy bonds of nations hit by the European debt crisis and German Chancellor Merkel said she is convinced the future of Greece is inside the Euro-Zone, and (3) reduced price pressures after Aug core PPI rose less-than-expected (+0.1% m/m and +2.5% y/y versus expectations of +0.2% m/m and +2.6% y/y).
- Bearish factors included (1) the unexpected stagnation in Aug U.S. retail sales along with the downward revision to Jul (Aug unchanged and +0.1% less autos versus expectations of +0.2% and +0.2% less autos while Jul was revised down to +0.3% and +0.3% less autos from the previously reported +0.5% and +0.5% less autos), (2) the smaller-than-expected increase in Jul business inventories (+0.4% versus expectations of +0.5%), a sign that companies are bracing for a slowdown in demand, and (3) concern that interbank lending is drying up after the ECB said it will lend dollars to 2 European banks on Thursday, the first time in a month that lenders have requested dollars from the ECB.
- JPMorgan Chase (JPM) rose 0.9% and Bank of America (BAC) climbed 1.3% on carry-over strength from a rally in European bank stocks.
- December 10-year T-notes this morning are down -14.5 ticks. T-note prices yesterday gyrated on both sides of unchanged and finally settled lower as speculation European officials will take measures to contain the region's debt crisis reduced the safe-haven demand for Treasuries and offset the weaker-than-expected Aug retail sales: TYZ11 -5.5, FVZ11 -2.7, EDH12 -0.5. Bearish factors included (1) reduced safe-haven demand for Treasuries as global stock markets rallied after European Commission President Barroso said he is close to proposing options on joint Euro-Zone bond sales to resolve the crisis while Italian Prime Minister Berlusconi's government won a confidence vote on its 54 billion euro ($74 billion) austerity package, which eases European debt concerns and (2) reduced European sovereign-debt concerns after the report from Caijing magazine that said China is still willing to buy bonds of nations hit by the European debt crisis. Bullish factors included (1) the unexpected stagnation in Aug U.S. retail sales along with the downward revision to Jul (Aug unchanged and +0.1% less autos versus expectations of +0.2% and +0.2% less autos while Jul was revised down to +0.3% and +0.3% less autos from the previously reported +0.5% and +0.5% less autos), (2) the smaller-than-expected increase in Aug core PPI (+0.1% m/m and +2.5% y/y versus expectations of +0.2% m/m and +2.6% y/y, (3) renewed European sovereign-debt concerns after Austria's parliamentary finance committee didn't approve the increase of the European Financial Stability Facility with the required two-thirds majority, and (4) decent demand for the Treasury's $13 billion auction of 30-year T-bonds that had a bid-to-cover ratio of 2.85, stronger than the 12-auction average of 2.60.
- The dollar index this morning is weaker with the dollar/yen -0.02 yen and the euro/dollar +0.50 cents. The dollar index yesterday settled lower as the euro strengthened on optimism that European leaders will work to avoid a default in Greece and contain the European debt crisis: Dollar Index -0.086, USDJPY -0.313, EURUSD +0.00758. Bearish factors included (1) comments from European Commission President Barroso that boosted the euro when he said he is close to proposing options on joint Euro-Zone bond sales, which may help resolve the European debt crisis, (2) the report from Caijing magazine that said China is still willing to buy bonds of nations hit by the European debt crisis, which is euro supportive, and (3) the weaker-than-expected Aug U.S. retail sales, which signals economic weakness and is dollar negative. Bullish factors included (1) increased safe-haven demand for dollars after the ECB said it will allot $575 million in a regular 7-day liquidity-providing operation for 2 European banks at a fixed rate of 1.1%, the first time in a month that lenders have requested dollars from the ECB and a sign that European banks are having trouble borrowing dollars in the interbank market, (2) the weaker-than-expected Jul Euro-Zone industrial production, which is euro negative, and (3) increased safe-haven demand for the dollar after World Bank President Zoellick said European policy makers are not living up to their commitment to the euro as the region's debt crisis threatens to spread.
- Oct crude oil prices this morning are up +45 cents a barrel and Oct gasoline is +3.40 cents per gallon. Crude oil and gasoline prices yesterday fell back after U.S. retail sales unexpectedly stagnated and weekly DOE gasoline supplies unexpectedly increased: CLV11 -$1.30, RBV11 -1.66. Oct gasoline fell to a 3-week low. Bearish factors included (1) the weaker-than-expected Aug U.S. retail sales, which indicates slack consumer spending that may constrain economic growth and fuel demand, (2) the unexpected increase in weekly DOE gasoline supplies which posted their biggest gain in 3 months (+1.94 million bbl versus expectations of a -500,000 bbl decline), (3) the larger-than-expected increase in weekly DOE distillate inventories to their highest level since Feb (+1.71 million bbl to 158.5 million bbl versus expectations of +875,000 bbl), and (4) slack demand after U.S. fuel use fell -3.8% to 18.7 million barrels a day in the week ended Sep 9. Bullish factors included (1) the weaker dollar, which encourages investment demand in commodities, and (2) the larger-than expected decline in weekly DOE crude oil inventories which fell to a 6-month low (-6.70 million bbl to 346.4 million bbl versus expectations of -3.0 million bbl).
Global Financial Calendar
| Thursday 9/15/11 | |
|---|---|
| United States | |
| 0830 ET | Weekly initial unemployment claims expected -3,000 to 411,000, previous +2,000 to 414,000. Weekly continuing claims expected -7,000 to 3.710 million, previous -30,000 to 3.717 million. |
| 0830 ET | Aug CPI expected +0.2% m/m and +3.6% y/y, Jul +0.5% m/m and +3.6% y/y. Aug CPI ex food & energy expected +0.2% m/m and +1.9% y/y, Jul +0.2% m/m and +1.8% y/y. |
| 0830 ET | Sep Empire manufacturing index expected +3.7 to -4.0, Aug -3.9 to -7.7. |
| 0830 ET | Q2 U.S. current account balance expected -$122.6 billion, Q1 -$119.3 billion. |
| 0845 ET | Fed Chairman Ben Bernanke delivers opening remarks at the Fed Board?s systemic risk conference. |
| 0915 ET | Aug industrial production expected unchanged, Jul +0.9%. Aug capacity utilization expected unchanged at 77.5%, Jul +0.6 to 77.5%. |
| 1000 ET | Sep Philadelphia Fed manufacturing index expected +15.7 to -15.0, Aug -33.9 to -30.7. |
| 1100 ET | Treasury announces amount of 10-year TIPS to be auctioned on Sep 22 (previous $13 billion). |
| 1345 ET | Fed Governor Daniel Tarullo speaks at a Fed conference on ?Regulation of Systemic Risk? in Washington D.C. |
| 1630 ET | Weekly money supply report and Fed balance sheet. |
| Euro-Zone | |
| 0400 ET | ECB publishes monthly report for Sep. |
| 0500 ET | Aug Euro-Zone CPI expected +0.2% m/m and +2.5% y/y, Jul -0.6% m/m and +2.5% y/y. |
| 0500 ET | Aug Euro-Zone core CPI expected +1.2% y/y, Jul +1.2% y/y. |
| 0500 ET | Q2 Euro-Zone employment, Q1 +0.1% q/q and +0.1% y/y.. |
| 1230 ET | ECB Council member Juergen Stark speak a an event in Vienna. |
| 1400 ET | ECB President Jean-Claude Trichet delivers a dinner speech at the Eurofi Financial Forum in Wroclaw, Poland. |
| United Kingdom | |
| 0430 ET | Aug U.K. retail sales ex-auto fuel expected -0.2% m/m and -0.2% y/y, Jul +0.2% m/m and -0.2% y/y. |
| 0430 ET | Aug U.K. retail sales with auto fuel expected -0.3% m/m and -0.1% y/y, Jul +0.2% m/m and unchanged y/y. |
| Canada | |
| 0830 ET | Jul Canada manufacturing sales expected +1.2% m/m, Jun -1.5% m/m. |
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