Barchart Morning Call
Overnight Developments
Global Financial Calendar
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- Global stocks this morning are mixed with the Euro Stoxx 50 up +0.49% and Dec S&Ps up +8.50 points. Treasuries and the dollar weakened and most commodities rose, with copper at a 2-week high, after G-20 and IMF officials said nations are considering increasing the IMF's lending resources to help stem the European debt crisis. The G-20 are meeting in Paris for a 2-day meeting to discuss higher bank capital levels, increased firepower for bailouts and the IMF. U.S. stock futures also received support as Google surged 6.6% in pre-market trading when it reported Q3 revenue that beat estimates after the close of trading yesterday. The cost of insuring European sovereign debt rose after Standard & Poor's cut Spain's credit rating one level to AA- with a negative outlook, the third time in 3 years S&P has reduced Spain's credit rating. In another sign of stress on European banks, UBS AG, Lloyds Banking Group Plc, and Royal Bank of Scotland Plc had their long-term issuer default grades cut by Fitch Ratings, which put more than a dozen other lenders on watch negative as part of a global review.
- Asian stocks today closed mixed lower with Japan down -0.85%, China -0.33%, Australia -0.92%, South Korea +0.66%, India +1.18%. Chinese stocks finished lower on concern inflation pressures will prompt the government to keep tightening monetary policy. Sep China CPI climbed +6.1% y/y as expected, lower than the +6.2% y/y in Aug although well above the government's 4% target. Chinese property developers weakened after the deputy head of the Ministry of Housing and Urban-Rural Development said conditions are not yet ripe for China to relax its tightening policies on the property market and some of the measures may be maintained as home sales in the first half of the year were still "sound." After the markets closed the PBOC said the Sep China M2 money supply rose +13% y/y, the lowest pace of growth in 9-1/2 years and Sep China new loans were 470 billion yuan ($73.7 billion), weaker than expectations of 550 billion yuan and the lowest in 21 months.
- December S&Ps this morning are trading up +8.50 points. The US stock market yesterday settled mixed as concern over European banks and weakness in financial stocks offset a rally in the Nasdaq which closed higher on strength in technology stocks: Dow Jones -0.35%, S&P 500 -0.30%, Nasdaq Composite +0.60%. Bearish factors included (1) carry-over weakness from a fall in European bank stocks on heightened concern over the European banking system after the ECB said in its monthly bulletin that involvement of private-sector banks in Euro-Zone bailouts through enforced investor losses would risk financial stability and after a Credit Suisse Group AG analyst said that 66 of Europe's biggest banks would fail a revised EU stress test and would need to raise about 220 billion euros ($302.3 billion) of capital, (2) a decline in U.S. bank stocks led by losses in JPMorgan Chase after it reported a drop in profit as investment banking and trading income slumped, and (3) concern that Chinese economic growth may be slowing, which may keep overall global growth subdued after Sep China exports increased at their slowest pace in 7 months.
- Bullish factors included (1) reduced European debt concerns after Slovakia finally approved the European enhanced bailout fund, (2) the unexpected decline in weekly U.S. continuing unemployment claims to their lowest level in 5-1/2 months (-55,000 to 3.670 million versus expectations of +10,000 to 3.710 million), (3) the narrower than expected Aug U.S. trade deficit (-$45.6 billion versus expectations of -$45.8 billion), which is positive for Q3 U.S. GDP growth, and (4) strength in technology stocks as chipmakers rose led by gains in Micron and Nvidia.
- Google (GOOG) jumped 6.6% in pre-market trading after the company reported late yesterdy that Q3 sales, excluding revenue passed on to partner sites, rose to $7.51 billion, beating analysts' estimates of $7.23 billion, which sent Q3 profit soaring to $9.72 a share, also beating analysts' estimates of $8.76.
- Apple (AAPL) climbed 1.6% in pre-market trading as its new iPhone 4S becomes available today in the U.S., Australia, Canada, France, Germany, Japan and the U.K.
- December 10-year T-notes this morning are down -5 ticks. T-note prices yesterday moved higher on European bank concerns when the ECB warned that the involvement of private-sector banks in bailouts would risk financial stability and a Credit Suisse Group AG analyst said at least 66 of Europe's biggest banks would fail a revised EU stress test: TYZ11 +16.5, FVZ11 +10.5, EDH12 -2.5. Bullish factors included (1) heightened concern over the European banking system after the ECB said in its monthly bulletin that involvement of private-sector banks in Euro-Zone bailouts through enforced investor losses would risk financial stability and after a Credit Suisse Group AG analyst said that 66 of Europe's biggest banks would fail a revised EU stress test and would need to raise about 220 billion euros ($302.3 billion) of capital, (2) concern that global economic growth is slowing after Sep China exports increased at their slowest pace in 7 months, and (3) strong demand for the Treasury's $13 billion auction of 30-year T-bonds that had a bid-to-cover ratio of 2.94, stronger then the 12-auction average of 2.61. Bearish factors included (1) the unexpected decline in weekly U.S. continuing unemployment claims to their lowest level in 5-1/2 months (-55,000 to 3.670 million versus expectations of +10,000 to 3.710 million) and (2) reduced European debt concerns after Slovakia finally approved the European enhanced bailout fund.
- The dollar index this morning is little changed with the dollar/yen +0.14 yen and the euro/dollar +0.05 cents. The dollar index yesterday rallied on increased safe-haven demand after stocks fell when the ECB warned that the involvement of private-sector banks in bailouts would risk financial stability: Dollar Index +0.002, USDJPY -0.360, EURUSD -0.00147. Bullish factors included (1) increased safe-haven demand for the dollar after stocks fell when the ECB warned in its monthly bulletin that the involvement of the private sector in Euro-Zone bailouts through enforced investor losses is a risk to financial stability and would have "direct negative effects" on the banking sector and (2) the narrower than expected Aug U.S. trade deficit, which is positive for Q3 U.S. GDP growth and the dollar. Bearish factors included (1) the action by Slovakia to finally approve the European enhanced bailout fund, which is euro supportive, (2) comments from Jean-Claude Juncker, head of the Euro-Zone finance ministers, who said he's "rather optimistic" about the prospects for the Oct 23 meeting of EU leaders on the debt crisis, and (3) the unexpected upward revision to Sep German CPI to a 3-year high of +2.9% y/y, which may prompt the ECB from providing additional currency debasing stimulus measures.
- Nov crude oil prices this morning are up +$1.24 a barrel and Nov gasoline is +3.27 cents per gallon. Crude oil and gasoline prices yesterday settled mixed after a larger-than-expected increase in weekly crude inventories weakened crude prices while gasoline gained after weekly gasoline supplies fell more than expected: CLX11 -$1.34, RBX11 +0.89. Bearish factors included (1) strength in the dollar, which reduces investment demand in commodities, (2) the larger-than-expected build in weekly DOE crude oil inventories (+1.34 million bbl versus expectations of +800,000), (3) concerns of a slowdown in Chinese economic growth after Sep China exports rose by the smallest amount in 7 months and China's customs bureau warned of "severe" challenges as the global economic outlook dims, and (4) the slide in the stock market after the ECB said forcing investors to take losses in bailouts is a risk to financial stability. Bullish factors included (1) the larger-than-expected declines in weekly DOE gasoline and distillate inventories (gasoline -4.13 million bbl versus expectations of -50,000 bbl and distillates -2.93 million bbl versus expectations of -650,000 and (2) the action by Slovakia to finally approve the European enhanced bailout fund, which is seen as positive for economic growth and energy demand.
Global Financial Calendar
| Friday 10/14/11 | |
|---|---|
| United States | |
| 0830 ET | Sep import price index expected -0.4% m/m and +12.4% y/y, Aug -0.4% m/m and +13.0% y/y. |
| 0830 ET | Sep retail sales expected +0.7% and +0.3% less autos, Aug unchanged and +0.1% less autos. |
| 0955 ET | Preliminary Oct U.S. University of Michigan consumer confidence expected +0.8 to 60.2, previous +3.7 to 59.4. |
| 1000 ET | Aug business inventories expected +0.4%, Jul +0.4%. |
| Euro-Zone | |
| 0500 ET | Sep Euro-Zone CPI expected +0.8% m/m and +3.0% y/y, Aug +0.2% m/m and +2.5% y/y. Sep core CPI expected +1.5% y/y, Aug +1.2% y/y. |
| Canada | |
| 0830 ET | Aug Canada manufacturing sales expected +0.4% m/m, Jul +2.7% m/m. |
| France | |
| n/a | G-20 finance ministers and central bank chiefs meet in Paris for a 2-day summit. |
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