Barchart Morning Call 9/30

Barchart Morning Call

Barchart.com - 18 mins ago

Overnight Developments

• Global stocks this morning are mostly lower with the Euro Stoxx 50 down -1.39% and Dec S&Ps down -13.10 points. The dollar and Treasuries are higher and commodities are weaker on concern the global economy is slowing. Aug German retail sales fell -2.9% m/m, larger than expectations of a -0.5% m/m decline and the biggest monthly drop in 4 years. European inflation unexpectedly accelerated after the Sep Euro-Zone CPI estimate jumped to +3.0% y/y, much higher than expectations of +2.5% y/y and the fastest pace of increase in nearly 3 years. European bank stocks led the overall market lower after UBS AG downgraded Societe Generale to "neutral" from "buy" and cut its price estimate on BNP Paribas SA to 31 euros from 36 euros. Deutsche Bank tumbled 8% after the Handelsblatt reported that the bank may cut its earnings estimates for this year, citing unidentified people close to the management board.
• Asian stocks today closed mostly lower with Japan down -0.01%, China -0.26%, Australia +0.01%, South Korea +0.02%, India -1.46%. Economic concerns undercut Asian markets after Aug Japan household spending fell -4.1% y/y, weaker than expectations of -2.8%, and Aug Japan industrial production rose +0.8% m/m and +0.6% y/y, weaker than expectations of +1.5% m/m and +1/1% y/y. Lifting Japanese stocks up off of their lows was the +1.8% y/y increase in Aug Japan vehicle production, its first gain in 11 months, while the Aug Japan jobless rate unexpectedly fell -0.4 to 4.3%, a 2-1/2 year low. New Zealand bond yields surged and its currency fell after Standard & Poor's joined Fitch ratings in cutting New Zealand's long-term local-currency rating by one level to AA+ and its foreign-currency debt to AA from AA+. Both credit assessors cited concern that government and household debt is expanding. Aug South Korea industrial production rose +4.8% y/y, weaker than expectations of +6.1% y/y, while the Sep China HSBC manufacturing PMI was 49.9, unchanged from Aug but higher than the originally reported 49.4 last week.

Overnight U.S. Stock News

• December S&Ps this morning are trading down -13.10 points. The US stock market yesterday shot higher early after stronger-than-expected U.S. economic data and after the German government approved changes to a European bailout fund along, but prices shed their gains and finished mixed as losses in technology and consumer retail stocks undercut prices: Dow Jones +1.30%, S&P 500 +0.81%, Nasdaq Composite -0.43%. Bullish factors included (1) strength in financial stocks after the German parliament approved an expansion of the EFSF, which may help contain the sovereign-debt crisis, (2) the larger-than-expected decline in weekly U.S. initial unemployment claims which fell to their lowest level in 5-1/2 months (-37,000 to 391,000 versus expectations of -3,000 to 420,000), (3) the larger-than-expected upward revision to Q2 U.S. GDP (+1.3% annualized versus expectations of +1.2% annualized as Q2 personal consumption was revised up to +0.7% from +0.4%), and (4) the better-than-expected Aug U.S. pending home sales (-1.2% m/m and +13.1% y/y versus expectations of -2.0% m/m and +6.3% y/y).
• Bearish factors included (1) comments from Fed Chairman Bernanke who said that unemployment in the U.S. is a "national crisis," (2) weakness in technology stocks after Advanced Micro Devices plunged when it reduced its forecasts for Q3 sales and profitability because of manufacturing glitches, and (3) a slump in retailers on concern about slower economic growth in China.
• Exxon-Mobil (XOM) fell 1.5% in pre-market trading as crude oil prices fell on signs a slowing global economy will diminish fuel demand.
• Bank of America (BAC) fell 1.6% and JPMorgan Chase (JPM) fell 1.5% in pre-market trading on carry-over weakness from a fall in European bank stocks.

Today's Market Focus

• December 10-year T-notes this morning are up +2.5 ticks. T-note prices yesterday were under pressure early on reduced safe-haven demand after German lawmakers approved an extension of a Euro-Zone bailout plan along with stronger-than-expected U.S. economic data, but strong demand for the Treasury's $29 billion 7-year T-note auction along with an afternoon retreat in stocks lifted T-note prices into positive territory: TYZ11 +10, FVZ11 +1.7, EDH12 -2.0. Bearish factors included (1) reduces safe-haven demand for Treasuries when German lawmakers approved an expansion of the Euro-Zone rescue fund, (2) the larger-than-expected decline in weekly U.S. initial unemployment claims which fell to their lowest level in 5-1/2 months (-37,000 to 391,000 versus expectations of -3,000 to 420,000), (3) the larger-than-expected upward revision to Q2 U.S. GDP (+1.3% annualized versus expectations of +1.2% annualized), (4) the unexpected upward revision to the Q2 core PCE deflator to its fastest pace of increase in 3-years (+2.3% y/y versus expectations of unchanged at +2.2% y/y), and (5) the better-than-expected Aug U.S. pending home sales (-1.2% m/m and +13.1% y/y versus expectations of -2.0% m/m and +6.3% y/y). Bullish factors included (1) comments from Fed Chairman Bernanke who said that unemployment in the U.S. is a "national crisis," (2) strong demand for the Treasury's $29 billion auction of 7-year T-notes that had a bid-to-cover ratio of 3.02, higher than the 12-auction average of 2.85, and (3) a slump in stock prices which boosted safe-haven demand for Treasuries.
• The dollar index this morning is higher with the dollar/yen -0.01 yen and the euro/dollar -1.02 cents. The dollar index yesterday settled little changed as the euro gained when German lawmakers approved an expansion of a bailout fund for debt-stricken Euro-Zone nations: Dollar Index +0.176, USDJPY +0.226, EURUSD +0.00541. Bearish factors included (1) reduced safe-haven demand for the dollar after the German parliament approved an expansion of the EFSF, which may help contain the sovereign-debt crisis, (2) the larger-than-expected drop in Sep German unemployment along with the unexpected fall in the German unemployment rate to 6.9%, the lowest since German reunification began two decades ago, and (3) dollar negative comments from Fed Chairman Bernanke who said that unemployment in the U.S. is a "national crisis." Bullish factors included (1) the unexpected downward revision in Sep Euro-Zone consumer confidence to a 2-year low, which is euro negative, (2) the larger-than-expected upward revision to Q2 U.S. GDP, and (3) the increase in the 3-month dollar Libor rate for the 15th consecutive day up to a 13-month high of 0.37211%, a sign of strong European demand for dollars.
• Nov crude oil prices this morning are down -40 cents a barrel and Nov gasoline is -1.04 cents per gallon. Crude oil and gasoline prices yesterday settled mixed as a stronger dollar offset a stronger than expected upward revision of Q2 U.S. GDP and reduced European debt concerns after German lawmakers approved an expanded European bailout fund: CLX11 +$0.93, RBX11 -1.67. Bullish factors included (1) the action by German lawmakers to approve an expansion of the EFSF bailout fund, which may help resolve the European debt crisis, (2) the larger-than-expected upward revision to Q2 U.S. GDP, which indicates increased fuel consumption, and (3) the plunge in weekly U.S. initial unemployment claims to a 5-1/2 month low, which signals economic improvement that may benefit fuel demand. Bearish factors included (1) the stronger dollar, which discourages investment demand in commodities, (2) the unexpected downward revision to Sep Euro-Zone consumer confidence to a 2-year low, which may curtail European consumer spending and energy demand and (3) comments from Fed Chairman Bernanke who that unemployment in the U.S. is a "national crisis," which may undercut economic growth and energy demand.

Today's U.S. Earnings Reports Earnings reports (confirmed releases, sorted by mkt cap): MSCI-MSCI Inc. (BEST earnings consensus $0.45), CRAI-CRA International (0.41).
Global Financial Calendar

Friday 9/30/11
United States
0830 ET	Aug personal spending expected +0.2%, Jul +0.8%. Aug personal income expected +0.1%, Jul +0.3%. Aug PCE deflator expected +2.9% y/y, Jul +2.8% y/y. Aug core PCE deflator expected +0.2% m/m and +1.7% y/y, Jul +0.2% m/m and +1.6% y/y.
0945 ET	Sep Chicago purchasing managers index expected -1.5 to 55.0, Aug -2.3 to 56.5.
0955 ET	Final Sep U.S. University of Michigan consumer confidence expected unchanged at 57.8, previous +2.1 to 57.8.
1100 ET	St. Louis Fed President James Bullard speaks at an event in San Diego.
Japan
0000 ET	Aug Japan vehicle production, Jul -8.9% y/y.
0100 ET	Aug Japan construction orders, Jul +5.7% y/y.
0100 ET	Aug Japan housing starts expected +4.5% y/y, Jul +21.2% y/y.
Germany
0200 ET	Aug German retail sales expected -0.5% m/m and -1.0% y/y, Jul +0.3% m/m and -1.6% y/y.
France
0245 ET	Aug French producer prices.
0245 ET	Aug French consumer spending expected +0.2% m/m and +1.3% y/y
Euro-Zone
0500 ET	Sep Euro-Zone CPI estimate expected +2.5% y/y, Aug +2.5% y/y.
0500 ET	Aug Euro-Zone unemployment rte expected unchanged at 10.0%, Jul unchanged at 10.0%.
Canada
0830 ET	Jul Canada GDP expected +0.3% m/m and +2.3% y/y, Jun +0.2% m/m and +2.0% y/y.
CHI
2100 ET	Sep China PMI manufacturing, Aug +0.2 to 50.9.

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