Barchart Morning Call
Overnight Developments
Global Financial Calendar
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- Global stocks this morning are slumping with the Euro Stoxx 50 down -4.14% and Dec S&Ps down -28.40 points. The dollar index soared to a 7-month high and commodities tumbled, with copper at a 1-year low and crude at a 1-month low after the Fed signaled "significant downside risks" to the economy in yesterday's post-FOMC statement. European and U.S. bond markets rallied sharply with the 10-year German bund yield posting a record low of 1.667% and the 10-year Treasury yield at an all-time low of 1.793%. The euro sank to a 7-1/4 month low against the dollar after the Sep Euro-Zone PMI composite index fell -1.5 to 49.2, weaker than expectations of -0.9 to 49.8 and its fastest pace of contraction in over 2 years. European bank stocks retreated after Standard & Poor's cut the credit ratings of Italian banks Intesa Sanpaolo and Mediobanca to A with a negative outlook and lowered the outlook for 8 other Italian banks, including Italy's biggest lender UniCredit SpA, to negative from stable. The European Union's financial-services commissioner told the Le Figaro newspaper that he can't rule out that some European banks will need state aid.
- Asian stocks today closed lower with Japan down -2.07%, China -3.08%, Australia -2.63%, South Korea -3.11%, India -4.13%. Asian exporters tumbled on concern a slowing global economy will limit demand for the region's exports. Chinese stocks fell after the Sep China HSBC flash manufacturing PMI slipped -0.4 to 49.4, its third month of contraction and a sign of a slowdown in Chinese manufacturing. Chinese property developers also sank after Credit Suisse Group AG said that the risk of default by developers is rising on possible credit tightening and weak sales, citing a Reuters report that the China Banking Regulatory Commission ordered trust companies to inform the regulator of business dealings with Greentown China Holdings Ltd., a sign that China is trying to restrict financing sources for developers. A slump in Japanese bank stocks led Japanese shares lower after BNP Paribas said Japan's banking industry is "deteriorating." BNP Paribas initiated coverage on 7 of Japan's largest banks, saying they have little chance of improving profitability.
- December S&Ps this morning are trading sharply lower by -28.40 points. The US stock market yesterday traded with modest losses after Moody's cut Bank of America's and Wells Fargo's debt ratings but then plunged into the close after the Fed cited risks to the economic outlook: Dow Jones -2.49, S&P 500 -2.94, Nasdaq Composite -2.01%. Bearish factors included (1) the warning from the European Systemic Risk Board that the risks to Europe's financial system have increased "considerably" as the sovereign debt crisis weakens economic growth and pressures banks, (2) carry-over weakness from a fall in European bank stocks after the IMF warned that the European debt crisis has generated as much as 300 billion euros ($410 billion) in credit risk for European banks, (3) a sell-off in U.S. bank stocks after Moody's Investors Service cut Bank of America's long-term senior debt rating to Baa1 from A2 and cut Wells Fargo's senior debt rating to A2 from A1, (4) a slump in coal companies and railroad stocks after Alpha Natural Resources and Walter Energy cut their earnings forecasts, which prompted a slide in railroad stocks on concern shipping demand from the coal industry will weaken, and (5) the post-FOMC statement that said "There are significant downside risks to the economic outlook, including strains in global financial markets."
- Bullish factors included (1) the larger-than-expected increase in Aug U.S. existing home sales which rose to their best level in 5 months (+7.7% to 5.03 million versus expectations of +1.7% to 4.75 million) and (2) the fall in the 10-year T-note yield to a record low 1.851%.
- Bank of America (BAC) fell 1.9% and Wells Fargo (WFC) slid 1.6% in pre-market trading on carry-over weakness from a drop in global bank stocks.
- December 10-year T-notes this morning are up +23.5 ticks as the 10-year T-note yield has fallen to a record low of 1.793% in overnight trade. T-note prices yesterday moved higher after the IMF warned of increased risks for European banks and after the Fed announced its "Operation Twist" program: TYZ11 +9, FVZ11 -5, EDH12 -4.0. The 10-year T-note yield fell to an all-time low of 1.851%. Bullish factors included (1) increased safe-haven demand for Treasuries on concerns over the global banking system after the IMF warned that the European debt crisis has generated as much as 300 billion euros ($410 billion) in credit risk for European banks and after Moody's Investors Service cut Bank of America's long-term senior debt rating to Baa1 from A2 and cut Wells Fargo's senior debt rating to A2 from A1, (2) the warning from the European Systemic Risk Board that the risks to Europe's financial system have increased "considerably" as the sovereign debt crisis weakens economic growth and pressures banks, and (3) the Fed's announcement that it will implement "Operation Twist" in which it will buy $400 billion of bonds with maturities of six to thirty years through Jun while selling an equal amount of debt maturing in 3 years or less saying the action is intended to "put downward pressure on longer-term interest rates and help make broader financial conditions more accommodative." A bearish factor was the larger-than-expected increase in Aug U.S. existing home sales which rose to their best level in 5 months (+7.7% to 5.03 million versus expectations of +1.7% to 4.75 million).
- The dollar index this morning is stronger and at a 7-month high with the dollar/yen -0.21 yen and the euro/dollar -1.29 cents. The dollar index yesterday strengthened after the IMF warned of increased risk for European banks and the Fed said it will increase its holdings of long-term Treasuries: Dollar Index +0.312, USDJPY -0.005, EURUSD -0.01285. Bullish factors included (1) increased safe-haven demand for the dollar after the IMF warned that the European debt crisis has generated as much as 300 billion euros ($410 billion) in credit risk for European banks, (2) the stronger-than-expected Aug U.S. existing home sales, (3) the slump in the British pound to an 8-1/4 month low against the dollar after the minutes of the Sep 7-8 BOE policy meeting stated that most policy makers said it was "increasingly probable that further asset purchases to loosen monetary conditions would become warranted at some point," (4) the Fed's announcement that it will implement its dollar neutral "Operation Twist" in which it will buy $400 billion of 6 to 30-year Treasuries and sell $400 billion of debt maturing in 3 years or less, and (5) continued strong demand for dollars as the 3-month dollar Libor rate rose for the 9th straight day to 0.35556%, the highest in 13-months. Bearish factors included (1) reduced safe-haven demand for the dollar on optimism Greece will be able to obtain additional aid to keep it from defaulting on its debt and (2) the rally in the yen to a 1-month high against the dollar on increased risk aversion demand on concern the global economy is slowing.
- Nov crude oil prices this morning are down -$3.80 a barrel at a 1-month low and Nov gasoline is -8.88 cents per gallon. Crude oil and gasoline prices moved higher after weekly DOE crude inventories fell to an 8-month low but they shed their gains and closed lower after the dollar rallied : CLX11 -$1.00, RBX11 -2.79. Bearish factors included (1) the stronger dollar, which discourages investment demand in commodities, (2) the larger-than-expected gain in weekly DOE gasoline inventories (+3.30 million bbl versus expectations of +1.3 million bbl), (3) the unexpected increase in the refinery utilization rate, which bodes well for increased supplies of gasoline and distillates in the weeks ahead (+1.3 to 88.3% versus expectations of -0.3 to 86.7%, and (4) data from the DOE that said U.S. oil production in the week ended Sep 16 surged 13% w/w to an 8-year high of 5.75 million barrels a day. Bullish factors included (1) the larger-than-expected fall in weekly DOE crude inventories to an 8-month low (-7.34 million bbl to 339 million bbl versus expectations of -1.2 million bbl), and (2) the unexpected decline in weekly DOE distillate supplies (-874,999 bbl versus expectations of +1.0 million bbl).
Global Financial Calendar
| Thursday 9/22/11 | |
|---|---|
| United States | |
| 0830 ET | Weekly initial unemployment claims expected -8,000 to 420,000, previous +11,000 to 428,000. Weekly continuing claims expected -4,000 to 3.722 million, previous 12,000 to 3.726 million. |
| 1000 ET | Aug leading indicators expected +0.1%, Jul +0.5%. |
| 1000 ET | Jul FHFA house price index purchase only expected +0.1% m/m, Jun +0.9% m/m. |
| 1100 ET | Treasury announces amounts of 2-year T-notes (previous $35 billion), 5-year T-notes (previous $35 billion) and 7-year T-notes (previous $29 billion) to be auctioned Sep 27-29. |
| 1300 ET | Treasury auctions $11 billion 10-year TIPS. |
| 1630 ET | Weekly money supply report and Fed balance sheet. |
| France | |
| 0300 ET | Sep French PMI manufacturing expected -0.6 to 48.5. Aug -1.4 to 49.1. |
| 0300 ET | Sep French PMI services expected -2.6 to 54.2, Aug +2.6 at 56.8. |
| Germany | |
| 0330 ET | Sep German PMI manufacturing expected -0.4 to 50.5, Aug -1.1 to 50.9. |
| 0330 ET | Sep German PMI services expected -0.6 to 50.5, Aug -1.8 to 51.1. |
| Euro-Zone | |
| 0400 ET | Sep Euro-Zone PMI composite expected -0.9 to 49.8, Aug -0.4 to 50.7. |
| 0500 ET | Jul Euro-Zone industrial new orders expected -1.2% m/m and +10.5% y/y, Jun -0.9% m/m and +11.1%. |
| 1000 ET | Sep Euro-Zone consumer confidence -1.5 to -18.0, Aug -5.3 to -16.5. |
| Canada | |
| 0830 ET | Jul Canada retail sales -0.4% m/m and +0.1% less autos, Jun +0.7% and -0.1% less autos. |
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