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Overnight Developments
Global Financial Calendar
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- Global stocks this morning are mostly higher with the Euro Stoxx 50 up +1.29% and Dec S&Ps up +9.10 points. The dollar and Treasuries are weaker and most commodities stronger as Greece prepares for further talks with its main creditors to avoid a default. European stocks gained after the Greek finance ministry said yesterday's talks with the IMF, the ECB and the European Union (the "Troika") about securing a sixth installment of aid were "productive," while U.S. stock futures rose ahead of the start of the Fed's 2-day FOMC meeting in which speculation increased that the Fed will provide more stimulus for the ailing economy. The euro gave up an early advance and was little changed after credit default swaps to insure Italian government debt rose to a record when Standard & Poor's cut Italy's credit rating one notch to A from A+, saying that weakening economic growth, a "fragile" government and rising borrowing costs would make it difficult to reduce Europe's second-biggest debt load. A drop in price pressures also aided European stocks after Aug German producer prices unexpectedly fell -0.3% m/m and rose +5.5% y/y, weaker than expectations of unchanged m/m and +5.8% y/y. Limiting gains in stocks however, was the -5.7 point decline in the Sep German ZEW economic sentiment to a 2-1/2 year low of -43.3. The 3-month dollar Libor rate rose for the 8th straight day to 0.35500%, the highest in 13-months
- Asian stocks today closed mixed with Japan down -1.61%, China +0.39%, Australia -1.01%, South Korea +0.94%, India +2.11%. Japanese stocks played catch-up with declines in global markets on Monday as Japan was closed for holiday. Japanese exporters fell as the yen rose to a 1-month high against the dollar and is just below its post WWII high of 75.95 yen per dollar set last month. China's Shanghai Index rebounded from a 14-month low and closed higher, led by gains in building material producers, after Premier Wen Jiabao said China will continue to promote the construction of public rental housing. Gains in most Asian markets were limited however; on concern a worsening of the European debt crisis may sour the earnings outlook for exporters, banks and commodity producers.
- December S&Ps this morning are trading up +9.10 points. The US stock market yesterday finished lower on concern the European debt crisis will worsen and Greece may default on its sovereign debt, although prices did finish off of their worst levels after Greek officials said discussions about future aid were productive: Dow Jones -0.94, S&P 500 -0.98, Nasdaq Composite -0.36%. Bearish factors included (1) carry-over weakness from a plunge in European equity markets after European finance ministers at a 2-day summit in Poland failed to offer a plan to stem the European sovereign-debt crisis, (2) concern that Greece will be denied further assistance that may prompt it to default on its debt after Swedish Finance Minister Borg said Greece "hasn't done enough" to meet its budget targets, (3) weakness in homebuilders on concern the U.S. housing slump will continue after the Sep NAHB housing market index unexpectedly fell to a 3-month low (-1 to 14 versus expectations of unchanged at 15), (4) a slump in life insurers after Wells Fargo cut its earnings estimates for the industry, citing a drop in equity prices in Q3, and (4) a sell-off in energy and raw material producers on concern a slowing global economy will dent demand for commodities.
- Bullish factors included (1) expectations the Fed will announce additional stimulus measures at its 2-day FOMC meeting this week in an attempt to spur economic growth, (2) the monthly report from the Bundesbank which stated it expects "robust" growth in Germany for the current quarter, which may aid U.S. exports and boost economic growth, and (3) late-day comments from the Greek government that a conference call between Greek Finance Minister Venizelos, high representatives of the ECB, the European Commission and the IMF were "productive and substantial."
- December 10-year T-notes this morning are down -7.5 ticks. T-note prices gapped higher yesterday and finished with solid gains as a plunge in global stock markets on fear Greece is heading for default prompted strong safe-haven demand for Treasuries : TYZ11 +31.5, FVZ11 +15.5, EDH12 +0.5. Bullish factors included (1) increased safe-haven demand for Treasuries on concern the European sovereign-debt crisis will worsen and Greece will default on its debt after European officials meeting for 2 days in Poland failed to offer a plan to halt the region's debt crisis and Swedish Finance Minister Borg said Greece "hasn't done enough" to meet its budget targets, (2) the unexpected decline in the Sep NAHB housing market index which fell to a 3-month low (-1 to 14 versus expectations of unchanged at 15), and (3) expectations that the Fed will announce at this week's FOMC meeting that it will increase its holdings of long-term Treasury securities in an attempt to keep long rates down and stimulate economic growth.
- The dollar index this morning is lower with the dollar/yen -0.02 yen and the euro/dollar +0.03 cents. The dollar index rallied yesterday on increased safe-haven demand as global equity markets and the euro tumbled when European finance ministers at a 2-day summit in Poland failed to offer a plan to stem the European sovereign-debt crisis: Dollar Index +0.603, USDJPY -0.195, EURUSD -0.01130. Bullish factors included (1) weakness in the euro on concern the European debt crisis will worsen after Swedish Finance Minister Borg at the conclusion of the 2-day summit of European finance ministers in Poland said Greece "hasn't done enough" to meet its budget targets, which may keep Greece from receiving further aid and force it into default and (2) continued strong dollar demand from European banks after the 3-month dollar Libor rate rose to 0.35250%, a 13-month high. Bearish factors included (1) the weaker-than-expected Sep NAHB housing market index, which may prompt the Fed into additional dollar negative stimulus measures to boost the economy and (2) the monthly report from the Bundesbank which stated it expects "robust" growth in Germany for the current quarter, which is euro supportive.
- Oct crude oil prices this morning are up +83 cents a barrel and Oct gasoline is +2.40 cents per gallon. Crude oil and gasoline prices yesterday weakened on concern the European debt crisis will worsen and slow the global economy and energy demand and after OPEC's secretary-general indicated global oil consumption is less than expected: CLV11 -$2.26, RBV11 -8.76. Oct crude posted a 1-1/2 week low. Bearish factors included (1) the stronger dollar, which discourages investment demand in commodities, (2) comments from OPEC Secretary-General Abdalla El-Badri who said that global demand for oil is rising less than expected, and (3) the plunge in global equity markets on concern Greece may yet default on its sovereign debt, which would roil confidence in the global economy and energy demand. Bullish factors included (1) the monthly report from the Bundesbank which stated it expects "robust" growth in Germany for the current quarter, which should boost fuel demand and (2) the U.S. Energy Department's International Energy Outlook that predicts global energy demand will increase 53% between 2008 and 2035 with China and India accounting for half of the total growth.
Global Financial Calendar
| Tuesday 9/20/11 | |
|---|---|
| United States | |
| 0745 ET | ICSC (Int?l Council of Shopping Centers) weekly retailer sales. |
| 0830 ET | Aug housing starts expected -2.3% to 590,000, Jul -1.5% to 604,000. Aug building permits expected -1.8% to 590.000, Jul -2.6% to 601,000. |
| 0855 ET | Redbook weekly retailer sales. |
| 0900 ET | FOMC begins 2-day policy meeting. |
| 1130 ET | Weekly 4-week and monthly 1-year T-bill auctions. |
| Japan | |
| 0100 ET | Revised Jul Japan coincident index CI, previous 109.0. Revised Jul leading index CI, previous 106.0. |
| 0130 ET | Aug Japan nationwide department store sales, Jul -0.1%. |
| Germany | |
| 0200 ET | Aug German producer prices expected unchanged m/m and +5.8% y/y. |
| 0500 ET | Sep German ZEW economic sentiment expected -7.4 to -45.0, Aug -22.5 to -37.6. Sep ZEW current situation expected -8.5 to 45.0, Aug -36.8 to 53.5. |
| Canada | |
| 0830 ET | Jul Canada wholesale sales expected +0.2% m/m, Jun +0.2% m/m. |
| 0830 ET | Aug Canada leading indicators expected +0.1% m/m, Jul +0.2% m/m. |
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