Barchart Morning Call
Overnight Developments
Global Financial Calendar
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- Global stocks this morning are lower with the Euro Stoxx 50 down -1.84% and Dec S&Ps down -17.60 points. The dollar, Treasuries and gold are higher on strong safe-haven demand and commodities fell, with Dec copper sliding to a 9-1/2 month low as Greece's debt concerns intensify. Crude oil also weakened after OPEC Secretary-General Abdalla El-Badri said that global demand for oil is rising less than expected. Global stocks and the euro tumbled and credit default swaps to insure the government debt of European nations rose after European officials meeting for 2 days in Poland failed to offer a plan to halt the region's debt crisis. Swedish Finance Minister Borg said Greece "hasn't done enough" to meet its budget targets, while German Finance Minister Schaeuble rejected using the ECB to aid in Greece's rescue saying "We don't think that real economic and social problems can be solved by means of monetary policy." European bank stocks fell and led the broader market lower as EU and IMF officials meet today with Greek Finance Minister Venizelos to judge whether his government is eligible for its next aid payment. In its monthly report released today, the Bundesbank said it expects "robust" growth in Germany for the current quarter, but for the time thereafter, the "outlook has clouded more than previously expected amid heightened uncertainty."
- Asian stocks today closed lower with Japan closed for holiday, China down -2.00%, Australia -1.64%, South Korea -0.92%, India -1.11%. China's Shanghai Stock Index fell to a 14-month low on concern the European debt crisis will intensify and slow the European economy and curb demand for Chinese exports along with comments from Chinese Premier Wen Jiabao who said he is "concerned" about high prices and the government will take additional measures to control inflation. Chinese property developers and homebuilders slumped after Aug China new home prices rose in all 70 cities monitored by the government for the first time this year, which boosts the odds of more monetary tightening.
- December S&Ps this morning are trading sharply lower by -17.60 points as Greek debt concerns intensify. The US stock market last Friday moved higher for a third day as U.S. consumer confidence strengthened more than expected and optimism grew that European leaders will take the necessary actions to stem the European debt crisis: Dow Jones +0.66, S&P 500 +0.57, Nasdaq Composite +0.58%. The S&P 500 and the Dow posted 2-week highs and the Nasdaq rose to a 1-1/2 month high. Bullish factors included (1) the larger-than-expected increase in Sep U.S. University of Michigan consumer confidence (+2.1 to 57.8 versus expectations of +1.2 to 56.9 and (2) speculation that the actions this week by the ECB, i.e. providing European banks with dollars, shows that European leaders see the severity of the region's debt crisis and will take the actions necessary to resolve it.
- Bearish factors included (1) disappointment that European finance ministers meeting in Poland rejected offers to provide additional stimulus and decided to put off until Oct a decision on extending Greece additional rescue funds and (2) Fed data that showed Q2 U.S. household wealth fell -1% y/y to $58.5 trillion, the first decrease in a year, which may constrain consumer spending and lead to weaker economic growth.
- Citigroup (C) and Bank of America (BAC) both declined at least 2% in pre-market trading on carry-over weakness from a fall in European bank stocks.
- Alcoa (AA) slid 2.2% in European trading after the price of copper tumbled to a 9-1/2 month low in overnight trading.
- December 10-year T-notes this morning are up +16 ticks. T-note prices last Friday pushed higher on increased safe-haven demand on concern the European debt crisis may liger after European finance ministers ruled out further stimulus measures and pushed back a decision on further aid for Greece: TYZ11 +2.5, FVZ11 +2.5, EDH12 -0.5. Bullish factors included (1) increased safe-haven demand for Treasuries on concern the European sovereign-debt crisis will linger after European finance ministers meeting in Poland rejected offers to provide additional stimulus and decided to put off until Oct a decision on extending Greece additional rescue funds and (2) continued strong demand for U.S government debt from Asia after China, the biggest holder of U.S. debt, increased its Treasury holdings by $8 billion in July and Japan, the second-biggest holder, increased its U.S. debt holdings by $3.8 billion in Jul. Bearish factors included (1) the larger-than-expected increase in Sep U.S. University of Michigan consumer confidence (+2.1 to 57.8 versus expectations of +1.2 to 56.9) and (2) decreased safe-haven demand for Treasuries as equity markets rallied.
- The dollar index this morning is stronger with the dollar/yen -0.11 yen and the euro/dollar -1.32 cents. The dollar index last Friday moved higher as the euro weakened after Euro-Zone finance ministers put off until Oct a decision on whether to grant Greece additional bailout funds: Dollar Index +0.302, USDJPY +0.083, EURUSD -0.00764. Bullish factors included (1) weakness in the euro after Euro-Zone finance ministers decided to put off until Oct a decision on extending Greece additional rescue funds and (2) continued strong dollar demand from European banks after 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. Bearish factors included (1) the weaker-than-expected Jul net long-term TIC flows, which indicate reduced foreign demand for U.S. dollar assets and (2) reduced safe-haven demand for the dollar as the equity market strengthened.
- Oct crude oil prices this morning are down -77 cents a barrel and Oct gasoline is -0.81 of a cent per gallon. Crude oil and gasoline prices last Friday settled mixed as crude fell on concern a lack of a resolution to the European debt crisis will slow global growth and fuel demand while gasoline rose on speculation European gasoline exports will decline because processing rates have fallen to unprofitable levels: CLV11 -$1.44, RBV11 +0.13. Bearish factors included (1) the stronger dollar, which discourages investment demand in commodities, (2) the lack of any concrete steps by European leaders at a meeting in Poland to resolve the region's debt crisis, which may slow economic growth and fuel demand the longer the debt crisis lingers. Bullish factors included (1) strength in gasoline due to the fall in European crude processing rates to unprofitable levels, which may curb European gasoline production and limit supplies for export and (2) the larger-than-expected increase in the Sep U.S. University of Michigan consumer confidence, which may benefit economic growth and fuel demand.
Global Financial Calendar
| Monday 9/19/11 | |
|---|---|
| United States | |
| 1000 ET | Sep NAHB housing market index expected unchanged at 15, Aug unchanged at 15 |
| 1130 ET | Weekly 3-mo and 6-mo T-bill auctions. |
| Euro-Zone | |
| 0500 ET | Jul Euro-Zone construction output, Jun -1.8% m/m and -11.3% y/y. |
| Germany | |
| 0600 ET | Bundesbank publishes monthly report for Sep. |
| Japan | |
| n/a | Japanese markets closed for Respect for the Aged Day. |
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