Barchart Morning Call
Overnight Developments
Global Financial Calendar
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- U.S. and European stocks this morning are trading higher with the Euro Stoxx 50 up 0.17% and Dec S&Ps up 6.20 points (+0.50%). The markets remain optimistic ahead of tomorrow's European summit. German parliament members today will review the two plans that are being proposed to leverage the EFSF. One plan involves partially insuring sovereign bond issuance and the other plan involves the EFSF buying sovereign debt and then selling bonds to finance those purchases. The German parliament will vote on the EFSF expansion tomorrow, the same day as the European summit, and approval is expected. Deutsche Bank today reported net income of 725 million euros, which was substantially better than the consensus of 343 million euros. BP is up more that 4% today on a better than expected earnings report. However, STMicroelectronics, Europe's largest semiconductor producer, fell 7% on weaker-than-expected sales. Forty three of the S&P 500 companies are due to release results today including UPS and Amazon.com. Texas Instruments is down 0.9% in European trading after Q3 results showed lower than expected sales.
- Asian stocks today closed mixed: Japan -0.92%, Hong Kong +1.05%, China +1.89%, Taiwan +0.28%, Australia -0.64%, Singapopre +0.33%, South Korea -0.41%, Bombay +1.86%. India's central bank today raised its repurchase rate by 25 bp to 8.50% from 8.25%, which was generally in line with market expectations. India's central bank has now raised its policy rate by a total of 375 bp since March 2010 in an effort to curb inflation pressures. Indian's wholesale inflation rate hit 9.7% in September. However, the central bank today indicated that another rate hike may not be forthcoming soon since it said that the likelihood of a rate change at its next policy review in December is "relatively low."
- December S&Ps this morning are up 6.20 points (+0.50%) on continued optimism about Wednesday's European summit cominbed with the recent better-than-expected U.S. economic data and comments by several Fed officials about the possible need for additional support measures. The US stock market on Monday extended last Friday's sharp rally: Dow Jones +0.89%, S&P 500 +1.29%, Nasdaq Composite +2.35%. Bullish factors included (1) the 1.2 point rise in China?s flash Oct purchasing managers index from HSBC/Markit to 5-month high of 51.1 from 49.9 in September, (2) the +2.4% y/y rise in Japanese Sep exports, stronger than expectations of +1% and just below August?s +2.8% y/y gain, (3) a 5% rally in Caterpillar on positive earnings news, which bode well for global demand, (4) the comment by NY Fed President William Dudley that the Fed wants to keep mortgage rates down and that QE3 is "possible," and (5) continued optimism that Europe will get a deal done to address the debt crisis.
- December 10-year T-notes this morning are trading -6 ticks on the continued decline in safe-haven demand with the rally in stocks. T-note prices on Monday closed lower: TYZ11 -10, FVZ11 -4.75, EDH12 +1.5. The main bearish factor was the continued rally in the U.S. stock market and reduced safe-haven demand tied to expectations for a European deal on the debt crisis. However, the T-note market received support from NY Fed President William Dudley's comment that the Fed wants to keep mortgage rates down and that QE3 is "possible." That was the third Fed official in as many business days mentioning further easing moves. Fed Vice Chairman Janet Yellen last Friday said that a third round of quantatitive easing might become warranted and Fed Governor Daniel Tarullo last Thursday said the Fed should consider a program of buying mortgage securities.
- The dollar index this morning is trading down -0.139 points with USDJPY +0.04 yen and EURUSD +0.20 cents. The dollar continued to be undercut by reduced safe-haven demand. The dollar index on Monday continued lower due to the continued rally in the stock market and waning safe-haven demand: Dollar Index -0.367, USDJPY 0.19, EURUSD +0.0033. USDJPY on Monday consolidated mildly above last Friday?s record low of 75.82 yen and failed to get a significant boost from implicit threats from Japanese officials about intervention. The euro continues to rally on expectations that Eurozone leaders are moving towards a deal at their summit on Wednesday that includes bank recapitalization, expansion of the EFSF fund, and a larger haircut for Greek bond holders.
- Dec crude oil prices this morning are up $2.60 but Dec gasoline is down 1.24 cents. Crude oil is higher on improved optimism about global demand while gasoline is lower on expectations for reduced seasonal demand. Crude oil and gasoline prices on Monday rallied with Dec crude oil breaking out out to a new 2-1/2 month high: CLZ11 +$3.87, RBZ11 +0.0121. Bullish factors included (1) the drawdown in inventories at Cushing, Oklahoma, the pricing hub for the WTI contract, (2) the 1.2 point rise in China?s flash Oct purchasing managers index from HSBC/Markit to 5-month high of 51.1 from 49.9 in September, which sparked expectations for increased Chinese fuel demand, (3) the rally in U.S. stocks and the improved perception of the U.S. and global economy.
Global Financial Calendar
| Tuesday 10/25/11 | |
|---|---|
| United States | |
| 0745 ET | ICSC (Int?l Council of Shopping Centers) weekly retailer sales. |
| 0855 ET | Redbook weekly retailer sales. |
| 0900 ET | Aug S&P/CaseShiller composite-20 home price index expected +0.1% m/m and -3.5% y/y, Jul +0.1% m/m and -4.1% y/y. |
| 1000 ET | Oct U.S. consumer confidence expected +0.6 to 46.0, Sep +0.2 to 45.4. |
| 1000 ET | Aug FHFA U.S. house price purchase index expected +0.2% m/m, Jul +0.8% m/m. |
| 1000 ET | Oct Richmond Fed manufacturing index expected +7 to 1, Sep +4 to -6. |
| 1130 ET | Weekly 4-week T-bill auction. |
| 1300 ET | Treasury auctions $35 billion in 2-year T-notes. |
| Germany | |
| 0200 ET | Nov German GfK consumer confidence survey expected -0.1 to 5.1, Oct unchanged at 5.2. |
| France | |
| 0245 ET | Oct French consumer confidence indicator expected -2 to 78, Sep -2 to 80. |
| Canada | |
| 0830 ET | Aug Canada retail sales expected +0.3% m/m and +0.4% ex-autos, Jul -0.6% m/m and unchanged ex-autos. |
| 0900 ET | Bank of Canada interest rate decision (policy rate expected unchanged at 1.00%). |
| Japan | |
| 1950 ET | Sep Japan corporate service price index expected -0.4% y/y, Aug -0.4% y/y. |
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