Barchart Morning Call
Overnight Developments
Global Financial Calendar
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- European stocks this morning are trading higher with the Euro Stoxx 50 up 0.66% and Dec S&Ps up 5.40 points (+0.45%). The market is hopeful that European leaders will be able to produce an agreement with near-term meetings including finance ministers today and summits this coming Sunday and Wednesday. The discussions now center on merging the 440 billion euro temporary EFSF and bringing the permanent 500 billion euro facility forward to mid-2012 from 2013, creating a total of 940 billion euros worth of firepower. The European stock markets were able to shake off today's news that Germany's October Ifo business climate index fell to a 16-month low of 106.4 from 107.4 in September, which was slightly weaker than market expectations of 106.2. French Oct business confidence today fell 2 points to 97 from 99 in September, which was a bit weaker than market expectations for a 1 point drop to 98. S&P today issued a report saying that in a stressed economic scenario, France would likely receive a 1-step downgrade and that Spain, Italy, Ireland and Portugal would likely receive one or two step downgrades. Microsoft is down 0.5% this morning in European trading after reporting in-line earnings. GE this morning reported in-line earnings of 21 cents per share. Groupon filed to raise $540 million in its IPO with a pricing indication of $16-18 per share. Groupon goes on the road next week to pitch the IPO to investors. Asian stocks today closed mixed with Japan -0.04%, Hong Kong +0.24%, China -0.50%, Taiwan +0.14%, Australia -0.07%, Singapopre +0.68%, South Korea +1.89%, Bombay -0.89%.
- December S&Ps this morning are trading +5.40 (+0.45%) on the 0.66% rally in European stocks and some optimism going into Sunday's EU summmit. The US stock market yesterday settled mixed as a strong Oct Philadelphia Fed manufacturing index and reduced European debt crisis concerns offset weakness in technology stocks: Dow Jones +0.32%, S&P 500 +0.46%, Nasdaq Composite -0.21%. The Nasdaq fell to a 1-week low. Bearish factors included (1) carry-over weakness from a slide in European stocks on concern that this weekend's EU summit will fail to find a solution the region's debt crisis after German Chancellor Merkel canceled her planned speech to parliament in Berlin on Friday because of a deadlock over proposals to leverage the EFSF to give it more firepower along with a report from the Die Welt newspaper that Germany hasn't ruled out postponing the Oct 23 summit because of stalled negotiations over the EFSF, (2) concern that Greece may yet default on its sovereign debt after the troika reported that Greece's medium-term growth prospects may be lowered as additional austerity measures will likely be needed to meet its 2012-14 targets, (3) comments from St Louis Fed President Bullard who said he's hesitant to back more stimulus because CPI inflation is "making me nervous," and (4) weakness in technology stocks after Dell slumped when Western Digital, one of its suppliers, said flooding in Thailand may hamper its production for months.
- Bullish factors included (1) reduced concern that the U.S. economic recovery was faltering after the Oct Philadelphia Fed manufacturing index unexpectedly expanded and rose to its best level in 6 months (+26.2 to 8.7 versus expectations of +8.4 to -9.1), and (2) the joint statement from France and Germany that they agree on the need for an ambitious response to Europe's debt crisis and will hold a second summit next week, which eased concern that a rift between the two countries may keep the debt crisis from getting resolved.
- December 10-year T-notes this morning are down 0.5 tick as the market treads water ahead of Sunday's EU Summit. T-note prices yesterday moved lower on a strong Oct Philadelphia Fed manufacturing index and on reduced safe-haven demand after European leaders said they will hold a second summit next week to address the region's sovereign debt crisis: TYZ11 -4.5, FVZ11 -1.7, EDH12 -0.5. Bearish factors included (1) the unexpected expansion in the Oct Philadelphia Fed manufacturing index which rose to its best level in 6 months (+26.2 to 8.7 versus expectations of +8.4 to -9.1), (2) comments from St Louis Fed President Bullard who said some economic data has improved in Sep and Oct and that he's hesitant to back more stimulus because CPI inflation is "making me nervous," and (3) reduced safe-haven demand from the European debt crisis after the joint statement from France and Germany that they want Euro-Zone leaders to agree on a "comprehensive and ambitious" response to Europe's debt crisis by Oct 26 at the latest and will hold a second summit next week. Bullish factors included (1) concern that this weekend's EU summit will fail to make progress to stem the debt crisis after German Chancellor Merkel canceled her planned speech to parliament in Berlin on Friday because of a deadlock over proposals to leverage the EFSF to give it more firepower along with a report from the Die Welt newspaper that Germany hasn't ruled out postponing the Oct 23 summit because of stalled negotiations over the EFSF, and (2) concern that Greece may yet default on its sovereign debt after the troika reported that Greece's medium-term growth prospects may be lowered as additional austerity measures will likely be needed to meet its 2012-14 targets.
- The dollar index this morning is slightly higher by +0.05 points (+0.07%) with the dollar/yen down 0.04 yen and the euro/dollar down 0.14 cents. The dollar index yesterday settled lower after the euro recovered from early losses when France and Germany issued a joint statement that they want Euro-Zone leaders to agree on a "comprehensive and ambitious" response to Europe's debt crisis: Dollar Index -0.1404, USDJPY -0.015, EURUSD +0.00204. Bearish factors included (1) euro-supportive comments from European Commission President Barroso who said a "positive outcome" was possible at the Oct 23 meeting of European finance ministers in Brussels, (2) comments from EU President Rompuy who said that reports of French-German differences over leveraging the Euro-Zone's rescue fund are exaggerated, and (3) reduced safe-haven demand for the dollar after France and Germany issued a joint statement saying they want Euro-Zone leaders to agree on a "comprehensive and ambitious" response to Europe's debt crisis. Bullish factors included (1) concern that European leaders will be unable to agree on a solution to the debt crisis after the Die Welt newspaper reported that Germany hasn't ruled out postponing the Oct 23 summit because of stalled negotiations over the EFSF, (2) the statement from the troika that Greece's medium-term growth prospects may be lowered as additional austerity measures will likely be needed to meet 2012-14 targets, and (3) the unexpected expansion in the Oct Philadelphia Fed manufacturing index to its best level in 6 months, which signals economic strength and is dollar supportive.
- Dec crude oil prices this morning are up 26 cents a barrel (+0.30%) and Dec gasoline is down 1.51 cents per gallon (0.57%). Gasoline prices are seeing some weakness tied to Qaddafi's death and hopes for a faster resumption of Libyan crude oil production and put some downward pressure on Brent crude oil and by extension U.S. gasoline prices. Crude oil and gasoline prices yesterday settled mixed as dollar strength was offset by stronger-than-expected U.S. manufacturing data: CLZ11 -$0.22, RBZ11 +1.210. Dec gasoline posted a 1-week low. Bearish factors included (1) concern that EU leaders won't reach an agreement at a summit this weekend on strengthening the European bailout fund after the Die Welt newspaper reported that Germany hasn't ruled out postponing the Oct 23 summit because of stalled negotiations over the EFSF, and (2) optimism that the death and capture of Libya?s Muammar Qaddafi will lead to an end of civil unrest in Libya and speed up the restarting of Libyan crude production. Bullish factors included (1) the unexpected expansion in the Oct Philadelphia Fed manufacturing index to its best level in 6 months, which signals economic strength and greater fuel consumption and (2) the statement from Barclays Plc that the fall in U.S. crude inventories to their 5-year seasonal average for the first time in the last 15 months signals the end of the U.S crude oil inventory glut.
Global Financial Calendar
| Friday 10/21/11 | |
|---|---|
| United States | |
| 1200 ET | Former Kansas City Fed President Thomas Hoenig speaks at the Shadow Open Market Committee?s Fall Symposium. |
| 1300 ET | Minneapolis Fed President Narayana Kocherlakota speaks to the Harvard Club of Minnesota. |
| 1320 ET | Dallas Fed President Richard Fisher gives an economic update to the Friday Group in Dallas, TX. |
| 1500 ET | Fed Vice Chairman Janet Yellen speaks on ?The Outlook for the U.S. Economy and Economic Policy? at the Financial Management Association International Annual Meting in Denver, CO. |
| France | |
| 0245 ET | Oct French business confidence indicator expected -1 to 98, Sep -3 to 99. |
| Euro-Zone | |
| 0340 ET | ECB President Jean-Claude Trichet and fellow ECB Council member Juergen Stark speak at a conference in Warsaw. |
| Germany | |
| 0400 ET | Oct German IFO business climate expected -1.3 to 106.2, Sep -1.2 to 107.5. Oct IFO current assessment expected -1.5 to 116.4, Sep-0.2 to 117.9. Oct IFO expectations expected -1 to 97.0, Sep -2 to 98.0. |
| United Kingdom | |
| 0430 ET | Sep U.K. public sector net borrowing expected 11.8 billion pounds, Aug 13.2 billion pounds. |
| Canada | |
| 0700 ET | Sep Canada CPI expected +0.1% m/m and +3.0% y/y, Aug +0.3% m/m and +3.1% y/y. |
| 0700 ET | Sep Bank of Canada core CPI expected +0.2% m/m and +1.9% y/y, Aug +0.4% m/m and +1.9% y/y. |
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