Barchart Morning Call
Overnight Developments
Global Financial Calendar
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- Global stocks this morning are mostly higher with the Euro Stoxx 50 up +0.71% and Dec S&Ps up +11.90 points. Treasuries are weaker and the dollar index slumped to a 3-week low, which has boosted commodities with Dec gold and Dec silver at 2-week highs after European Economic and Monetary Affairs Commissioner Rehn said the Euro-Zone is moving toward a consensus on resolving the "calamity" of the sovereign debt crisis. The euro rose to a 3-week high against the dollar after European Commission President Barroso said he will present the "roadmap for stability" to the European Parliament later today that will outline a "comprehensive" set of proposals to deal with the debt crisis. The rally in stocks and the euro was tempered as political turmoil in Slovakia delayed the nation's approval of Europe's enhanced bailout fund. European stocks also received a lift after an unexpected increase in Aug Euro-Zone industrial production which rose +1.2% m/m and +5.3% y/y, stronger than expectations of -0.8% m/m and +2.1% y/y. A negative factor for European stocks was the larger-than-expected increase in the U.K. unemployment rate which rose +0.2 to 8.1% in the three months through July, bigger than expectations of +0.1 to 8.0% and the highest in 15 years. Sep U.K. jobless claims rose +17,500, the seventh consecutive monthly increase, as the number of unemployed climbed to 2.57 million, the most since 1994. The 3-month dollar Libor rate increased for the 24th consecutive day to 0.40083%, the highest in 14 months, while the dollar Libor-OIS spread, a gauge of banks' reluctance to lend, widened to 31.68 bp, the most in 14-1/2 months.
- Asian stocks today closed mostly higher with Japan down -0.40%, China +3.64%, Australia -0.55%, South Korea +0.79%, India +2.55%. Asian stocks were mostly higher amid speculation China will increase support for the equity market after valuations dropped to record-low levels. Chinese bank stocks rallied for a second day after Central Huijin Investment Ltd., a state-run investment arm, began buying shares of the top four financial institutions. Aug Japan machine orders surged +11.0% m/m, stronger than expectations of +3.9% and the biggest increase n a year, which signals companies are willing to invest even as global economic growth slows and the yen stays near a record high. Japanese stocks finished slightly lower though, led by declines in Honda Motor and Nikon, which were among several Japanese companies to suspend production in Thailand because of floods.
- December S&Ps this morning are trading up +11.90 points. The US stock market yesterday opened lower after ECB President Trichet warned that the debt crisis threatens the Euro-Zone's financial system, but stocks erased those losses and finished mixed after the troika indicated Greece will receive its next installment of financial aid: Dow Jones -0.15%, S&P 500 +0.05%, Nasdaq Composite +0.66%. All of the indexes posted 2-1/2 week highs. Bullish factors included (1) reduced European debt concerns after the troika indicated that Greece will get the next 8-billion euro loan installment next month when they said Greece has made "important progress" in fiscal consolidation, (2) the action by the FDIC to reduce its cost estimate to cover U.S. bank failures through 2015 to $19 billion, down from last year's estimate of $23 billion as the rate of bank shutdowns slows and the impact of assessment increases imposed by the FDIC bolsters the Deposit Insurance Fund, and (3) Q3 earnings optimism as the market expects earnings per share for the S&P 500, excluding financial companies, to rise +14% y/y in Q3.
- Bearish factors included (1) carry-over weakness from a decline in European stocks on the threat of contagion from the European debt crisis 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," (2) concern that banks holding Greek debt may take bigger-than-expected losses after Jean-Claude Juncker, head of the Euro-Zone finance ministers, said Greek bondholders may face writedowns of more than 60% on their holdings of Greek debt, well more than a July estimate of 21%.
- TE Connectivity (TEL) jumped 5.9% in European trading after S&P announced that the company will replace Cephalon in the S&P 500 after the close of trading on Oct 14.
- December 10-year T-notes this morning are down -12 ticks. T-note prices yesterday finished higher on increased safe-haven demand after ECB President Trichet said the debt crisis threatens the Euro-Zone's financial system: TYZ11 +20.5, FVZ11 +7.2, EDH12 +1.5. Bullish factors included (1) comments from ECB President Trichet who said the debt crisis in Europe has reached a "systemic dimension" that threatens the Euro-Zone's financial system and (2) decent demand for the Treasury's $32 billion auction of 3-year T-notes that had a bid-to-cover ratio of 3.30, higher than the 12-auction average of 3.16. Bearish factors included (1) reduced safe-haven demand for Treasuries after stocks reversed early losses after the troika indicated that Greece will get the next 8-billion euro loan installment next month, and (2) supply pressures ahead of Wednesday's $21 billion auction of 10-year T-notes.
- The dollar index this morning is weaker and at a 3-week low with the dollar/yen +0.04 yen and the euro/dollar +1.32 cents. The dollar index yesterday settled higher on increased safe-haven demand after ECB President Trichet said the debt crisis threatens the Euro-Zone's financial system: Dollar Index +0.091, USDJPY -0.029, EURUSD -0.00020. Bullish factors included (1) the warning from ECB President Trichet that "the crisis has reached a systemic dimension as sovereign stress has moved from smaller economies to some of the larger countries," which boosted the safe-haven demand for the dollar, (2) euro negative comments from Jean-Claude Juncker, head of the Euro-Zone finance ministers, who said Greek bondholders may face writedowns of more than 60% on their holdings of Greek debt, well more than a July estimate of 21%. Bearish factors included (1) reduced safe-haven demand for the dollar when equities erased early losses and moved higher and (2) euro supportive comments from ECB President Trichet who said fears that ECB government bond purchases may create price pressures are "totally unfounded" as the ECB is "rigorously withdrawing all the liquidity which is provided."
- Nov crude oil prices this morning are up +51 cents a barrel and Nov gasoline is +1.57 cents per gallon. Crude oil and gasoline prices yesterday settled higher after equities erased early losses and moved higher along with strength from gasoline on speculation seasonal maintenance to refineries may limit gasoline production: CLX11 +$0.40, RBX11 +5.23. Nov gasoline posted a 3-week high. Bearish factors included (1) the stronger dollar, which discourages investment demand in commodities, (2) the warning from ECB President Trichet that the European debt crisis threatens the financial system, which undercuts confidence in the economic outlook and energy demand, and (3) the action by OPEC to cut its global crude demand estimate for this year for a third month, predicting 2011 oil demand will grow +880,000 barrels a day, down from 1.06 million barrels a day forecasted last month as threats to the world economy grow. Bullish factors included (1) strength in gasoline on speculation seasonal refinery maintenance could limit supplies of gasoline as refiners gear up for increased heating oil production, (2) the unexpected increase in Sep U.K. industrial production, which is positive for fuel consumption, and (3) the rebound in stock prices which shook off early losses and traded mixed. Expectations for Thursday's weekly inventory report from the DOE (pushed back a day due to Monday's Columbus Day holiday) are for crude supplies to rise +850,000 bbl, gasoline stockpiles to fall -50,000 bbl, distillate inventories to drop -650,000 bbl and the refinery utilization rate to fall -0.8 to 86.9%.
Global Financial Calendar
| Wednesday 10/12/11 | |
|---|---|
| United States | |
| 0700 ET | Weekly MBA mortgage applications, previous -4.3% with purchase mortgage sub-index -0.8% and refinancing sub-index -5.2%. |
| 0745 ET | ICSC (Int?l Council of Shopping Centers) weekly retailer sales. |
| 0855 ET | Redbook weekly retailer sales. |
| 1130 ET | Weekly 4-week T-bill auction. |
| 1300 ET | Treasury auctions $21 billion 10-year T-notes. |
| 1315 ET | Cleveland Fed President Sandra Pianalto speaks on ?Leadership in Challenging Times? at the University of Akron?s College of Business Administration. |
| 1320 ET | Dallas Fed President Richard Fisher speaks on Fed operations and U.S. economic conditions at a community forum in Abilene, TX. |
| 1330 ET | Philadelphia Fed President Charles Plosser speaks on the economic outlook to senior executives from the real estate industry at the University of Pennsylvania. |
| 1400 ET | Minutes of the Sep 20-21 FOMC meeting. |
| France | |
| 0130 ET | Sep French CPI (EU harmonized) expected +0.1% m/m and +2.6% y/y, Aug +0.6% m/m and +2.4% y/y. |
| Germany | |
| 0200 ET | Sep German wholesale price index, Aug +0.1% m/m and +6.5% y/y. |
| United Kingdom | |
| 0430 ET | Sep U.K. jobless claims change expected +24,500, Aug +20,300. Sep claimant count rate expected 5.0%, Aug 4.9%. |
| 0430 ET | Aug U.K. avg weekly earnings expected +2.8% 3-mo/year-over-year, Jul +2.8%. Aug avg weekly earnings ex-bonus expected +1.9% 3-mo/year-over-year, Jul +2.1%. |
| Euro-Zone | |
| 0500 ET | Aug Euro-Zone industrial production expected -0.8% m/m and +2.1% y/y, Jul +0.9% m/m and +4.2% y/y. |
| 1430 ET | ECB President Jean-Claude Trichet speaks at the annual dinner of he Association for Financial Markets in Europe in London. |
| Canada | |
| 0830 ET | Aug Canada new housing price index expected +0.1% m/m and +2.3% y/y, Jul +0.1% m/m and +2.3% y/y. |
| Japan | |
| 1950 ET | Aug Japan tertiary index expected -0.3% m/m, Jul -0.1% m/m. |
| CHI | |
| 2200 ET | Sep China trade balance expected +$16.90 billion, Aug +$17.76 billion. Sep exports expected +20.8% y/y, Aug +24.5% y/y. Sep imports expected +24.6% y/y, Aug +30.2% y/y. |
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