Barchart Morning Call
Overnight Developments
Global Financial Calendar
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- Global stocks this morning are trading higher with the Euro Stoxx 50 up +1.83% and Sep S&Ps up +13.10 points. Treasuries, the dollar and gold are lower and most commodities are higher, while the euro rose against the dollar after Germany's top court rejected legal challenges to Germany's participation in European rescue funds. The ruling will aid German Chancellor Merkel's efforts to gain support for participation in a new round of European Financial Stability Facility programs. Also helping to lift European stocks was the surge in Jul German industrial production by +4.0% m/m and +10.1% y/y, stronger than expectations of +0.5% m/m and +6.5% y/y. Limiting gains in stocks and the euro are the ongoing European sovereign-debt concerns with the yield on the Greek 2-year note climbing to a record 53.27% along with the unexpected decline in Jul U.K. industrial production by -0.2% m/m and -0.7% y/y, weaker than expectations of +0.1% m/m and -0.5% y/y. European banks continue to hoard dollars as the 3-month dollar Libor rate increased for the 31st consecutive day to a 1-year high of 0.33683% and the dollar Libor-OIS spread, a gauge of banks' reluctance to lend, widened to a 13-month high of 25.18 bp.
- Asian stocks today closed higher with Japan up +2.01%, China +2.05%, Australia +2.65%, South Korea +4.18%, India +1.20%. The yen strengthened against the dollar after the BOJ kept the benchmark rate unchanged between 0.00% to 0.10% and left its asset-purchasing programs totaling 50 trillion yen unchanged. Chinese stocks rallied after the China Securities Journal reported that a slowing of inflation may allow the PBOC to ease monetary policy by buying bills from banks in open market operations or by cutting the required reserve ratio for banks. The Australian dollar rose along with equities after Q2 Australia GDP expanded +1.2% q/q, stronger than expectations of +1.0% q/q.
- September S&Ps this morning are trading up +13.10 points. The US stock market yesterday extended last Friday's losses on concern that global economic growth will slow further as the European debt crisis worsens, although prices did recover to settle well off of their worst levels: Dow Jones -0.90, S&P 500 -0.74%, Nasdaq Composite -0.26%. All of the indexes posted 1-week lows. Bearish factors included (1) concern that the European sovereign-debt crisis will worsen as credit default swaps to insure Greek government debt rose to records and the yield on Greece's 2-year note surged to an all-time high of 53.20% when German Chancellor Merkel told members of her CDU party that Greece will not receive aid payments due this month unless it meets conditions of the rescue, (2) weakness in energy and raw-material producers on concern a global slowdown will cut demand for commodities, (3) a sell-off in U.S. bank stocks after FBR Capital Markets said mortgage repurchase losses for U.S. banks may total $121 billion, up from a previous estimate of $54 billion to $106 billion, and (4) the action by UBS to cut its year-end forecast for the S&P 500 to 1,350 from 1,425 along with the action by HSBC to cut its 2011 global GDP forecast to 2.6% from a Jun forecast of 3.0%, saying the global recovery is now a "distant dream."
- Bullish factors included (1) the unexpected increase in the Aug ISM non-manufacturing index (+0.6 to 53.3 versus expectations of -1.7 to 51.0, (2) possible fuel for a short-covering rally as CFTC data shows that hedge funds and other large speculators as of Aug 30 held a net short position in S&P 500 futures of 107,913 contracts, the most in nearly 4 years, and (3) the decline in the 10-year T-note yield to a record low of 1.907%.
- Yahoo! (YHOO) rose 6.5% in European trading after the company fired CEO Carol Bartz and announced a strategic review to revive growth.
- December 10-year T-notes this morning are down -5.5 ticks. T-note prices yesterday rose to all-time highs on a surge in safe-haven demand due to increased European sovereign-debt concerns, but prices came off of their best levels and closed lower after the Aug ISM non-manufacturing index unexpectedly increased and helped equities up off of their lows: TYZ11 -2, FVZ11 -1, EDH12 unchanged. The 10-year T-note yield fell to a record low of 1.907%. Bullish factors included (1) carry-over safe-haven support on concern the European debt crisis may worsen as the yield on the 10-year German bund dropped to a record low of 1.824% when the yield on Greece's 2-year note surged to a record 53.20% and credit default swaps to insure Greek government debt rose to records after German Chancellor Merkel told members of her CDU party that Greece will not receive aid payments due this month unless it meets conditions of the rescue and (2) speculation that Fed Chairman Bernanke may signal at a speech this Thursday that the Fed may begin "Operation Twist" in which the Fed shed's short-term securities in its balance sheet and buys longer-dated Treasuries to keep long-term rates low. Bearish factors included (1) the unexpected increase in the Aug ISM non-manufacturing index (+0.6 to 53.3 versus expectations of -1.7 to 51.0 and (2) comments from Minneapolis Fed President Kocherlakota who said the U.S economy didn't need additional stimulus in Aug and "it is unlikely that the data in Sep will warrant adding still more accommodation."
- The dollar index this morning is lower with the dollar/yen -0.47 yen and the euro/dollar +0.53 cents. The dollar index yesterday rallied to a 1-3/4 month high on increased safe-haven demand after the euro fell to a 1-3/4 month low against the dollar on concern the European sovereign-debt crisis will worsen: Dollar Index +0.840, USDJPY +0.910, EURUSD -0.01946. Bullish factors included (1) weakness in the euro as credit default swaps to insure Greek government debt rose to a record and the yield on Greek 2-year T-notes surged to a record high of 53.20% when German Chancellor Merkel told members of her CDU party that Greece will not receive aid payments due this month unless it meets conditions of the rescue, (2) the weaker-than-expected Jul German factory orders which is euro negative, (3) the slide in the yen to a 1-week low against the dollar after Japanese Finance Minister Azumi said he will tell G-7 leaders at this Friday's meeting in France that "excessive yen rises" are bad for the global economy, which raises the risks of coordinated G-7 currency intervention to stem the yen's strength, and (4) strong dollar demand from European banks as the 3-month dollar Libor rate rose for the 30th consecutive day to a 1-year high of 0.33561% as banks continue to forego lending and park their excess reserves in dollars after the dollar Libor-OIS rate, a gauge of banks' reluctance to lend, rose to 25.26 bp, its widest in 13 months. Bearish factors included (1) the action by the SNB to impose a ceiling on the euro-franc exchange rate of 1.20 francs, which temporarily boosted the euro and (2) the decline in the 10-year T-note yield to a record low, which further undercuts the dollar's interest rate differentials.
- Oct crude oil prices this morning are up +66 cents a barrel and Oct gasoline is +0.58 of a cent per gallon. Crude oil and gasoline prices yesterday closed lower as the dollar strengthened and as concern intensified that the European debt crisis will spread and undercut the global economy and energy demand: CLV11 -$0.41, RBV11 -1.70. Oct crude slipped to a 1-week low. Bearish factors included (1) the rally in the dollar index to a 1-3/4 month high, which reduces investment demand in commodities, (2) a sell-off in most commodities on concern a worsening of the European debt crisis will slow global economic growth and demand, and (3) the weaker-than-expected Jul German factory orders, which signals a reduction in economic growth and fuel demand. A bullish factor was the unexpected increase in the Aug ISM non-manufacturing index, which indicates economic strength and is positive for fuel demand.
Global Financial Calendar
| Wednesday 9/7/11 | |
|---|---|
| United States | |
| 0700 ET | Weekly MBA mortgage applications, previous -9.6% with purchase mortgage sub-index +0.9% and refinancing sub-index -12.2%. |
| 0745 ET | ICSC (Int?l Council of Shopping Centers) weekly retailer sales. |
| 0855 ET | Redbook weekly retailer sales. |
| 1115 ET | Chicago Fed President Charles Evans speaks at the European Economics and Financial Centre: Distinguished Speakers Seminar in London. |
| 1130 ET | Weekly 4-week T-bill auction. |
| 1400 ET | Fed?s Beige Book. |
| 1600 ET | San Francisco Fed President John Williams speaks to the Seattle Rotary Club. |
| Japan | |
| 0100 ET | Jul Japan coincident index CI expected 108.8, Jun 108.8. Jul leading index CI expected 105.9, Jun 103.2. |
| 1950 ET | Jul Japan machine orders expected -4.2% m/m and +8.3% y/y, Jun +7.7% m/m and +17.9% y/y. |
| n/a | BOJ announces interest rate decision (expected no change to the 0.00% to 0.10% benchmark rate). |
| United Kingdom | |
| 0430 ET | Jul U.K. industrial production expected +0.1% m/m and -0.5% y/y, Jun unchanged m/m and -0.3% y/y. |
| 0430 ET | Jul U.K. manufacturing production expected unchanged m/m and +1.9% y/y, Jun -0.4% m/m and +2.1% y/y. |
| Germany | |
| 0600 ET | Jul German industrial production expected +0.5% m/m and +6.5% y/y, Jun -1.1% m/m and +6.7% y/y. |
| Canada | |
| 0900 ET | BOC announces interest rate decision (expected no change to the 1.00% benchmark rate). |
| 1000 ET | Aug Ivey purchasing managers index (NSA) expected +9.6 to 55.0, Jul -23.2 to 45.4. |
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