Barchart Morning Call
Overnight Developments
Global Financial Calendar
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- Global stocks this morning are mixed with the Euro Stoxx 50 down -0.80% and Dec S&Ps down -5.30 points. The dollar and Treasuries rallied and most stocks and commodities fell after ECB President Trichet said "the crisis has reached a systemic dimension as sovereign stress has moved from smaller economies to some of the larger countries." The markets are now awaiting a vote later today on the retooled bailout fund by Slovakia, the only Euro-Zone member that has yet to ratify the amended bailout package. The euro fell back against the dollar after Jean-Claude Juncker, head of the Euro-Zone finance ministers, said Greek bondholders may face writedowns of more than 21% envisioned in the July rescue plan and that bondholders may now need to take a write-down of more than 60% on their holdings of Greek debt. European leaders postponed a summit on the debt crisis until Sunday, Oct 23, after EU President Rompuy sought extra time to pursue a "comprehensive" package including a solution for Greece, aid for banks and a further strengthening of the rescue fund. Limiting declines in European stocks was the unexpected strength in Aug U.K. industrial production which rose +0.2% m/m, stronger than expectations of a -0.2% m/m decline.
- Asian stocks today closed mixed with Japan up +1.95%, China -0.20%, Australia +0.63%, South Korea +1.72%, India -0.13%. Most Asian stock markets rose after German and French leaders pledged to support European banks and stem the region's debt crisis. China's Shanghai Stock Index rebounded from a 1-1/4 year low led by a rally in Chinese banks stocks, after state-run Central Huijin Investment, set up to hold the government's stakes in China's biggest banks, bought shares in four of China's biggest banks. Japanese stocks received a boost when Sep Japan consumer confidence rose a more-than-expected +1.6 to 38.6, its best level in 6 months.
- December S&Ps this morning are trading down -5.30 points. The US stock market yesterday rallied sharply on reduced European sovereign debt concerns after the leaders of France and Germany pledged to deliver a plan to stem the debt crisis in 3 weeks: Dow Jones +2.97%, S&P 500 +3.41%, Nasdaq Composite +3.50%. The S&P 500 posted a 1-1/2 week high, the Dow climbed to a 2-week high and the Nasdaq rose to a 1-week high. Bullish factors included (1) a rally in bank stocks after the pledge from German Chancellor Merkel and French President Sarkozy to deliver a plan to recapitalize European banks and find a "durable" solution for Greece's debt load by the Nov 3 Group of 20 summit, (2) the larger-than-expected increase in Aug German exports, which rose for the first time in 3 months and reduces concern that the European debt crisis will push the Euro-Zone economy into recession, and (3) strength in energy and raw material producers after reduced European debt concerns and a slide in the dollar index to a 1-week low fueled a broad-based rally in most commodities.
- Bearish factors included (1) the action by HSBC to cut its year-end forecast for the S&P 500 to 1,130 from an earlier estimate of 1,430 and (2) the prediction from a Sanford C. Bernstein analyst that if a Volcker rule to prohibit fixed income trading desks from engaging in flow trading is passed, it could cut banks' and financial firms' fixed-income revenue by 25% and reduce profit margins by 18%.
- December 10-year T-notes this morning are up +25 ticks. Cash U.S. government bond trading and CME pit-trading of Treasuries was closed yesterday for Columbus Day but T-note prices on the electronic Globex exchange tumbled to a 2-week low after German and French leaders said they will draw up a plan to recapitalize banks and stop Greece's debt crisis from spreading: TYZ11 -1-9/5/32, FVZ11 -16.7, EDH12 +2.0. Bearish factors included (1) reduced safe-haven demand for Treasuries after global equity markets rallied sharply when German Chancellor Merkel and French President Sarkozy pledged to recapitalize European banks and find a "durable" solution for Greece's debt load by the Nov 3 Group of 20 summit, and (2) supply pressures ahead of $66 billion worth of T-note and T-bond Treasury auctions this week starting with Tuesday's $32 billion auction of 3-year T-notes.
- The dollar index this morning is higher with the dollar/yen -0.04 yen and the euro/dollar -0.31 cents. The dollar index yesterday slumped to a 1-week low after the euro rallied to a 1-week high against the dollar when French and German leaders pledged to deliver a plan to support banks and reiterated a commitment to keep Greece in the Euro-Zone: Dollar Index -1.173, USDJPY -0.054, EURUSD +0.02654. Bearish factors included (1) the pledge by German Chancellor Merkel and French President Sarkozy to recapitalize European banks and find a "durable" solution for Greece's debt load by the Nov 3 Group of 20 summit, (2) reduced safe-haven demand for the dollar after the stock market rallied sharply, and (3) the larger-than-expected increase in Aug German exports, which indicates economic strength in Europe and is euro supportive. Bullish factors included (1) the larger-than-expected drop in the Oct Euro-Zone Sentix investor confidence to a 2-1/4 year low, which is euro negative and (2) increased European demand for dollars after the 3-month dollar Libor rate rose for the 22nd consecutive day to a 14-month high of 0.39417%.
- Nov crude oil prices this morning are down -99 cents a barrel and Nov gasoline is -1.07 cents per gallon. Crude oil and gasoline prices yesterday rallied up to 2-week highs and settled sharply higher after Germany and France pledged to stem the European sovereign-debt crisis: CLX11 +$2.43, RBX11 +4.77. Bullish factors included (1) the slide in the dollar index to a 1-week low, which boosts investment demand in commodities, (2) the pledge by German Chancellor Merkel and French President Sarkozy to recapitalize European banks and find a "durable" solution for Greece's debt load by the Nov 3 Group of 20 summit, which reduced concern the European debt crisis will worsen and diminish energy demand, and (3) comments from Saudi Arabian Oil Minister Ali Al-Naimi who said that "there is no oversupply in the global crude oil market right now." Bearish factors included (1) data from the CFTC that showed hedge funds reduced their long crude positions in the week ended Oct 4 to a 1-1/2 month low on concern slowing economic growth will reduce fuel demand, (2) the greater-than-expected drop in the Oct Euro-Zone Sentix investor confidence to a 2-1/4 year low, which may limit economic growth and fuel demand, and (3) comments from Venezuelan Oil Minister Ramirez who said there are growing divisions within OPEC regarding oil production with some developed countries pressuring the cartel to increase output.
Global Financial Calendar
| Tuesday 10/11/11 | |
|---|---|
| United States | |
| 1000 ET | Oct IBD/TIPP economic optimism expected -0.5 to 39.4, Sep +4.1 to 39.9. |
| 1130 ET | Weekly 3-mo and 6-mo T-bill auctions. |
| 1300 ET | Treasury auctions $32 billion 3-year T-notes. |
| 1400 ET | Sep monthly budget statement expected -$64.0 billion, Aug -$134.2 billion. |
| Japan | |
| 0030 ET | Sep Japan bankruptcies, Aug -3.6% y/y. |
| 0100 ET | Sep Japan consumer confidence expected +0.2 to 35.2, Aug unchanged at 37.0. |
| 0200 ET | Sep Japan eco watchers survey current expected 46.5, Aug 47.3. Sep eco watchers survey outlook, Aug 47.1. |
| 1950 ET | Aug Japan machine orders expected +3.9% m/m and -3.6% y/y, Jul -8.2% m/m and +4.0% y/y. |
| Euro-Zone | |
| 0330 ET | ECB President Jean-Claude Trichet speaks on ESRB to the European Parliament?s economic and monetary committee. |
| United Kingdom | |
| 0430 ET | Aug U.K. DCLG house prices, Jul -1.5% y/y. |
| 0430 ET | Aug U.K. industrial production expected -0.2% m/m and -1.1% y/y, Jul -0.2% m/m and -0.7% y/y. |
| 0430 ET | Aug U.K. manufacturing production expected -0.2% m/m and +1.6% y/y, Jul +0.1% m/m and +1.9% y/y. |
| Canada | |
| 0815 ET | Sep Canada housing starts expected +189,000, Aug +184,600. |
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