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 +0.17% and Dec S&Ps down -0.70 of a point. Most commodities rallied with copper at a 2-1/2 week high after G-20 finance ministers and central bank governors concluded weekend talks in Paris endorsing parts of an emerging plan to avoid a Greek default, bolster banks and curb contagion. The Euro-Zone plan, which has yet to be made public, includes writing down Greek bonds by as much as 50%, establishing a backstop for banks, and fortifying the 440 billion-euro ($611 billion) rescue fund or EFSF. The euro retreated from a 1-month high against the dollar and stocks relinquished most of their gains after German Chancellor Merkel's chief spokesman said that European leaders won't fulfill any "dreams" of a quick end to the European debt crisis at their Oct 23 summit. Increased M&A activity is boosting U.S. equity markets as El Paso surged 37% in European trading after Kinder Morgan agreed to buy the company for $21.1 billion that would create the largest U.S. natural-gas pipeline network.
- Asian stocks today closed mostly higher with Japan up +1.50%, China +0.50%, Australia +1.66%, South Korea +1.59%, India -0.34%. Asian stock markets closed higher on optimism European leaders will find a solution to the region's debt crisis. Chinese stocks also rose on speculation that the nation's economic growth remains strong. Tomorrow's Q3 China GDP is expected up +9.3% y/y, while below the +9.5% y/y increase in Q2, will still be the ninth straight quarter of expansion above +9.0% y/y. South Korean stocks were supported after South Korean Finance Minister Jae Wan said his country's economy is performing better than expected, while gains in Japanese stocks were limited after the Japanese government downgraded its assessment of the economy for the first time since April as the surging yen and slowing global growth weighed on economic prospects. In its monthly report, Japan's Cabinet Office said "The Japanese economy is still picking up although the pace is decelerating."
- December S&Ps this morning are trading down -0.70 of a point. The US stock market last Friday moved higher on optimism G-20 leaders meeting over the weekend in France will find a resolution to the European debt crisis along with strength in U.S. retail sales: Dow Jones +1.45%, S&P 500 +1.74%, Nasdaq Composite +1.82%. The S&P 500 and the Dow rose to 1-1/2 month highs and the Nasdaq posted a 2-1/2 month high. Bullish factors included (1) optimism that a resolution to the European debt crisis may be near after G-20 and IMF officials said nations are considering increasing the IMF's lending resources to help stem the crisis and Treasury Secretary Geithner said "Europe is clearly" moving to a crisis solution, (2) signs of strength in the U.S. economy after Sep retail sales rose more than forecast and Aug was revised higher (Sep +1.1% and +0.6% less autos versus expectations of +0.7% and +0.3% less autos, while Aug retail sales were revised up to +0.3% and +0.5% less autos from the originally reported unchanged and +0.1% less autos), and (3) strength in technology stocks as Google soared after posting stellar Q3 profits and Apple gained as it began selling the new version of its iPhone.
- Bearish factors included (1) the unexpected decline in Oct U.S. University of Michigan consumer confidence (-1.9 to 57.5 versus expectations of +0.8 to 60.2), (2) the action by Standard & Poor's to cut Spain's credit rating one level to AA- with a negative outlook, and (3) weakness in bank stocks after people familiar with the discussions said European officials are considering writedowns of as much as 50% on Greek bonds.
- El Paso (EP) surged 35% in European trading after the owner of the largest network of interstate natural-gas pipeines in the U.S was purchased by Kinder Morgan for $21.1 billion.
- December 10-year T-notes this morning are up +9 ticks. T-note prices last Friday settled lower after U.S. retail sales rose more than forecast along with reduced safe-haven demand on optimism G-20 leaders meeting in France will find a resolution to the European debt crisis: TYZ11 -10, FVZ11 +0.7, EDH12 +1.5. Bearish factors included (1) the stronger-than-expected Sep U.S. retail sales along with the upward revision to Aug (Sep +1.1% and +0.6% less autos versus expectations of +0.7% and +0.3% less autos, while Aug retail sales were revised up to +0.3% and +0.5% less autos from the originally reported unchanged and +0.1% less autos), (2) the larger-than-expected increase in the Sep import price index (+0.3% m/m and +13.4% y/y versus expectations of -0.4% m/m and +12.4% y/y), and (3) reduced safe-haven demand for Treasuries after the S&P 500 rallied to a 1-1/2 month high on reduced European debt concerns when G-20 and IMF officials said nations are considering increasing the IMF's lending resources to help stem the European debt crisis. Bullish factors included (1) the unexpected decline in Oct U.S. University of Michigan consumer confidence (-1.9 to 57.5 versus expectations of +0.8 to 60.2) and (2) increased safe-haven demand for Treasuries after Standard & Poor's cut Spain's credit rating one level to AA- with a negative outlook.
- The dollar index this morning is higher as it rebounds from a 1-month low in overnight trade with the dollar/yen -0.01 yen and the euro/dollar -1.11 cents. The dollar index last Friday tumbled to a 1-month low on reduced safe-haven demand on optimism that G-20 leaders will find a resolution to the European debt crisis: Dollar Index -0.385, USDJPY +0.310, EURUSD +0.01033. Bearish factors included (1) strength in the euro which rallied to a 1-month high against the dollar after G-20 and IMF officials said nations are considering increasing the IMF's lending resources to stem the debt crisis and Treasury Secretary Geithner said "Europe is clearly" moving to a crisis solution, (2) the fall in the 1-year cross-currency basis swap rate, the rate banks pay to convert euro payments into dollars, to a 1-month low of 64 bp below the euro interbank offered rate, a sign of increased confidence in the euro, and (3) the unexpected decline in Oct U.S. University of Michigan consumer confidence, which is dollar negative. Bullish factors included (1) increased safe-haven demand for the dollar after Standard & Poor's cut Spain's credit rating one level to AA- with a negative outlook, and (2) the stronger-than-expected Sep U.S. retail sales, which signals economic strength and is dollar supportive.
- Nov crude oil prices this morning are down -13 cents a barrel and Nov gasoline is -1.98 cents per gallon. Crude oil and gasoline prices last Friday rallied on optimism the G-20 talks in Paris will lead to a solution to the European debt crisis along with stronger-than-expected U.S. retail sales: CLX11 +$2.57, RBX11 +6.72. Nov crude posted a 3-week high and Nov gasoline climbed to a 1-month high. Bullish factors included (1) the slump in the dollar index to a 1-month low, which encourages investment demand in commodities, (2) optimism that a resolution to the European debt crisis may be near after G-20 and IMF officials said the IMF may bolster its lending resources to help stem the crisis, and (3) strength in U.S retail sales, which reduces concern over a slowdown in economic growth and energy demand. Bearish factors included (1) concern the European debt crisis may widen and curb economic growth after Standard & Poor's cut Spain's credit rating and (2) the unexpected decline in the Oct U.S. University of Michigan consumer confidence, which may lead to subdued consumer spending and fuel demand.
Global Financial Calendar
| Monday 10/17/11 | |
|---|---|
| United States | |
| 0830 ET | Oct Empire manufacturing index expected +4.8 to -4.0, Sep -1.1 to -8.8. |
| 0915 ET | Sep industrial production expected +0.2%, Aug +0.2%. Sep capacity utilization expected +0.1 to 77.5%, Aug +0.1 to 77.4%. |
| 1130 ET | Weekly 3-mo and 6-mo T-bill auctions. |
| 1900 ET | Chicago Fed President Charles Evans speaks at the Michigan Council on Economic Education?s Michigan Economic Summit Dinner. |
| 1930 ET | Richmond Fed President Jeffrey Lacker speaks on the economic outlook at the Salisbury-Wicomico Economic Development Annual Meeting. |
| Japan | |
| 0030 ET | Revised Aug Japan industrial production, previous +0.8% m/m and +0.6% y/y. Revised Aug capacity utilization, previous +0.6% m/m. |
| Canada | |
| 1030 ET | Q3 Canada business outlook future sales, Q2 20.0. |
| Euro-Zone | |
| 1035 ET | ECB Council member Juergen Stark speaks before the Committee on Economic and Monetary Affairs of the European Parliament on ?Economic Governance and Crisis Management in the EU.? |
| CHI | |
| 2200 ET | Q3 China GDP expected +9.3% y/y, Q2 +9.5% y/y. |
| 2200 ET | Sep China industrial production expected +13.4% y/y, Aug +13.5% y/y. |
| 2200 ET | Sep China retail sales expected +17.0% y/y, Aug +17.0% y/y. |
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