Barchart Morning Call 9/16

Barchart Morning Call

Barchart.com - 1 hr 13 mins ago

Overnight Developments

• Global stocks this morning are mixed with the Euro Stoxx 50 up +0.87% and Dec S&Ps down -3.60 points. The dollar and Treasuries are higher on increased safe-haven demand as Euro-Zone finance ministers meet in Wroclaw, Poland to discuss how to expand the Euro-Zone's bailout fund as ECB President Trichet pressed Euro-Zone governments to take decisive action to halt the debt crisis and show a "unity of purpose." The euro weakened against the dollar after Finnish Finance Minister Urpilainen said it was unlikely any agreement on collateral would be reached at the meeting. U.S. stock futures are lower after Research in Motion tumbled 19% in pre-market trading after the company posted disappointing earnings for the third consecutive quarter. Limiting gains in European stocks was the +3.6% y/y increase in Q2 Euro-Zone labor costs, the biggest increase since Q4 2008. In a sign that dollar demand remains strong in Europe, the 3-month dollar Libor rate rose to 0.35133%, a 13-month high, while the dollar Libor-OIS spread, a gauge of banks' reluctance to lend, widened to 28.33 bp, the most in 13-1/2 months.
• Asian stocks today closed higher with Japan up +2.25%, China +0.18%, Australia +1.91%, South Korea +3.90%, India +0.34%. Asian stocks received carry-over support from yesterday's gains in European and U.S. stocks after the ECB and other central banks coordinated to lend dollars to European banks, which boosted confidence that the European debt crisis may be contained. The Reserve Bank of India raised the repurchase rate to 8.25% from 8.00% today, its 12th increase since Mar 2010 in an attempt to rein in inflation which has held above 9% for the past nine months. Inflation in India rose to a 13-month high of 9.78% in Aug and is the highest among the BRICS nations.

Overnight U.S. Stock News

• December S&Ps this morning are trading down -3.60 points. The US stock market yesterday moved higher for a second day on optimism that world leaders will do what is necessary to resolve the European debt crisis after the ECB and other central banks took coordinated action to fund European banks with dollars through year-end: Dow Jones +1.66, S&P 500 +1.72, Nasdaq Composite +1.34%. The S&P 500 posted a 2-week high and the Nasdaq posted a 1-1/2 month high. Bullish factors included (1) a rally in global bank and financial stocks after the coordinated action by the ECB, the Fed and other central banks to offer three separate 3-month dollar loans to ensure European banks avoid a liquidity crisis and have enough dollars through the end of the year, (2) the unexpected increase in Aug U.S. industrial production (+0.2% versus expectations of unchanged), and (3) strength in raw material and energy producers as a weak dollar prompted a broad-based rally in most commodities.
• Bearish factors included (1) the unexpected increase in weekly initial U.S. unemployment claims which rose to their highest level in 2-1/2 months (+11,000 to 428,000 versus expectations of -3,000 to 411,000), (2) the unexpected decline in the Sep Empire manufacturing index which contracted at its slowest pace in 10 months (-1.1 to -8.8 versus expectations of +3.7 to -4.0), (3) the larger-than-expected increase in Aug CPI (+0.4% m/m and a 3-year high of +3.8% y/y versus expectations of +0.2% and +3.6% y/y), (4) the larger-than-expected contraction in the Sep Philadelphia Fed manufacturing index (+13.2 to -17.5 versus expectations of +15.7 to -15.0), and (5) the action by the EU to cut its Euro-Zone GDP forecasts for Q3 and Q4 with the warning that the Euro-Zone economy may come "close to standstill at year-end."
• Research in Motion (RIM) tumbled 19% in pre-market trading after the company reported Q2 earnings of 80 cents a share, below analysts' estimates of 88 cents and said earnings for the year, excluding some costs, would be at the low end of its previous forecast of $5.25 to $6 a share.

Today's Market Focus

• December 10-year T-notes this morning are up +1 tick. T-note prices yesterday slumped to a 2-week low on reduced safe-haven demand as global stock markets rallied smartly after the ECB said it will coordinate with the Fed and other central banks to lend dollars to European banks to avoid a liquidity crisis: TYZ11 -17, FVZ11 -6, EDH12 +7.0. Bearish factors included (1) reduced chances of a liquidity squeeze after the coordinated action by the ECB, the Fed and other central banks to offer three separate 3-month dollar loans to ensure European banks have enough dollars through the end of the year, (2) the larger-than-expected increase in Aug CPI (+0.4% m/m and a 3-year high of +3.8% y/y versus expectations of +0.2% and +3.6% y/y), and (3) the unexpected increase in Aug U.S. industrial production (+0.2% versus expectations of unchanged). Bullish factors included (1) the unexpected increase in weekly initial U.S. unemployment claims which rose to their highest level in 2-1/2 months (+11,000 to 428,000 versus expectations of -3,000 to 411,000), (2) the unexpected decline in the Sep Empire manufacturing index which contracted at its slowest pace in 10 months (-1.1 to -8.8 versus expectations of +3.7 to -4.0), and (3) the larger-than-expected contraction in the Sep Philadelphia Fed manufacturing index (+13.2 to -17.5 versus expectations of +15.7 to -15.0).
• The dollar index this morning is stronger with the dollar/yen -0.01 yen and the euro/dollar -0.66 cents. The dollar index yesterday moved lower on reduced safe-haven demand after the ECB said it will coordinate with other central banks to lend dollars to European banks: Dollar Index -0.624, USDJPY +0.068, EURUSD +0.01220. Bearish factors included (1) reduced chances of a liquidity squeeze after the coordinated action by the ECB, the Fed and other central banks to offer three separate 3-month dollar loans to ensure European banks have enough dollars through the end of the year and (2) weaker-than-expected U.S. economic data on weekly jobless claims, the Sep Empire manufacturing index and the Sep Philadelphia Fed manufacturing index, which signals economic weakness and is dollar negative. Bullish factors included (1) the action by the EU to cut its Euro-Zone GDP forecasts for Q3 and Q4 with the warning that the Euro-Zone economy may come "close to standstill at year-end," (2) the statement from EU economic and monetary affairs commissioner Rehn who said "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," and (3) the larger-than-expected increase in Aug U.S. CPI, which reduces the chances of further dollar-debasing asset purchases by the Fed.
• Oct crude oil prices this morning are down -19 cents a barrel and Oct gasoline is up +1.22 cents per gallon. Crude oil and gasoline prices yesterday moved higher as the dollar weakened, U.S. industrial production strengthened, and European debt concerns declined: CLV11 +$0.49, RBV11 +5.70. Bullish factors included (1) the weaker dollar, which encourages investment demand in commodities, (2) the unexpected +0.2% m/m increase in Aug U.S. industrial production, which is positive for fuel consumption, and (3) reduced European debt concerns after German Chancellor Merkel and French President Sarkozy said they're "convinced" Greece will remain in the Euro-Zone. Bearish factors included (1) the action by the EU to cut its Euro-Zone GDP forecasts for Q3 and Q4 with the warning that the Euro-Zone economy may come "close to standstill at year-end," (2) the unexpected increase in weekly U.S. jobless claims to their highest level in 2-1/2 months, which signals labor market weakness that may curtail fuel demand, and (3) the unexpected drop in the Sep Empire manufacturing index to its lowest level in 10-months, which signals a slowdown in manufacturing activity that is negative for energy demand.

Today's U.S. Earnings Reports Earnings reports (confirmed releases, sorted by mkt cap): MLHR-Herman Miller (BEST earnings consensus $0.33).
Global Financial Calendar

Friday 9/16/11
United States
0900 ET	Jul net long-term TIC flows expected +$22.5 billion, Jun +$3.7 billion.
0955 ET	Preliminary Sep U.S. University of Michigan consumer confidence expected +1.2 to 56.9, Aug -8.0 to 55.7.
Euro-Zone
0500 ET	Q2 Euro-Zone labor costs, Q1 +2.6% y/y.
0500 ET	Jul Euro-Zone trade balance expected +2.0 billion euros, Jun +0.9 billion euros.
0630 ET	EU finance ministers and central bankers meet in Wroclaw, Poland for a 2-day meting.

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