Barchart Morning Call
Overnight Developments
Global Financial Calendar
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- Global stocks this morning are mixed with the Euro Stoxx 50 up +0.10% and Dec S&Ps up +7.40 points. Treasuries fell while stocks and commodities strengthened with gold at a 1-month high, after demand for 12-month loans from the ECB weakened. European banks borrowed 56.9 billion euros in 12-month loans from the ECB, less than the 70 billion euros estimated by analysts. The markets are waiting for the results of the Euro-Zone summit later today in Brussels to see if EU leaders can resolve the region's debt crisis. European leaders are holding the 14th crisis summit in 21 months to discuss Greece's second bailout, the recapitalization of banks and the strengthening of the 440 billion-euro rescue fund. Incoming ECB President Draghi called for "immediate implementation" of the Euro-Zone rescue fund to manage the crisis. Draghi, who takes over as ECB President on Nov 1, also said that he sees "significant downside risks to economic growth in the Euro-Zone as industrial output in the region expands at a "very moderate pace."
- Asian stocks today closed mixed with Japan down -0.16%, China +1.00%, Australia +0.35%, South Korea +0.15%, India +0.28%. The yen rallied to a new post WWII high of 75.72 yen per dollar on increased safe-haven demand over concern European leaders will struggle to find a solution to the debt crisis. The yen fell back from its record high after Japanese Finance Minister Azumi said his ministry will take "decisive" measures to stem the yen's rise. The Nikkei newspaper also reported that the BOJ will discuss steps to ease the impact of the strong yen on Japan's economy at its policy meeting tomorrow. China's Shanghai Stock Index rallied to a 1-week high on speculation the government may ease monetary policy after Chinese Premier Wen Jiabao said that economic policy will be fine-tuned as needed and the industry ministry said it is studying "simulative policies" for smaller companies as a global slowdown threatens growth.
- December S&Ps this morning are trading up +7.40 points. The US stock market yesterday closed lower on weak U.S. economic data along with concern that no resolution will be found to the European debt crisis at Wednesday's summit of EU leaders in Brussels: Dow Jones +0.32%, S&P 500 -2.00%, Nasdaq Composite -2.26%. Bearish factors included (1) the larger-than-expected decline in the Aug S&P/CaseShiller composite-20 home price index (-0.1% m/m and -3.8% y/y versus expectations of +0.1% m/m and -3.5% y/y), (2) the unexpected fall in Oct U.S. consumer confidence to a 2-1/2 year low (-6.8 to 39.8 versus expectations of +0.6 to 46.0), (3) the unexpected stagnation in the Oct Richmond Fed manufacturing index (unchanged at -6 versus expectations of +7 to 1), (4) the slide in bellwether stock UPS after the world's largest package-delivery company fell when it said volume was flat in Q3 because of "the slow U.S. economy," and (5) concern that European leaders may will be unable to agree on a solution to the debt crisis after reports said that banks are pushing for only a 40% write-down of Greek debt compared to 50% to 60% mentioned by the head of the Euro-Zone finance ministers, Jean-Claude Juncker.
- Bullish factors included (1) comments from the head of the Euro-Zone finance ministers, Jean-Claude Juncker, who said he is convinced that European leaders will find a "final and even ground-breaking" solution to the debt crisis at Wednesday's EU summit in Brussels and (2) positive reported earnings results as 74% of the 144 companies in the S&P 500 since Oct 11 have beaten analysts' earnings estimates.
- December 10-year T-notes this morning are down -4.5 ticks. T-note prices yesterday recovered from a 1-week low and settled higher after U.S. home prices fell more than unexpected, U.S. consumer confidence unexpectedly fell, and strong demand was seen for the Treasury's 2-year T-note auction: TYZ11 +25, FVZ11 +13.7, EDH12 +0.5. Bullish factors included (1) the larger-than-expected decline in the Aug S&P/CaseShiller composite-20 home price index (-0.1% m/m and -3.8% y/y versus expectations of +0.1% m/m and -3.5% y/y), (2) the unexpected fall in Oct U.S. consumer confidence to a 2-1/2 year low (-6.8 to 39.8 versus expectations of +0.6 to 46.0), (3) the unexpected stagnation in the Oct Richmond Fed manufacturing index (unchanged at -6 versus expectations of +7 to 1), and (4) strong demand for the Treasury's $35 billion auction of 2-year T-notes that had a bid-to-cover ratio of 3.64, higher than the 12-auction average of 3.37. Bearish factors included (1) reduced safe-haven demand on optimism European leaders will find a resolution to the region's debt crisis after the head of the Euro-Zone finance ministers, Jean-Claude Juncker, said he is convinced that European leaders will find a "final and even ground-breaking" solution to the debt crisis at Wednesday's EU summit in Brussels and (2) supply pressures ahead of the Treasury's $35 billion auction of 5-year T-notes on Wed.
- The dollar index this morning is weaker with the dollar/yen -0.22 yen and the euro/dollar +0.26 cents. The yen rallied to a new post WWII high of 75.72 yen per dollar in overnight trade. The dollar index yesterday fell to a 1-1/2 month low as the yen rallied to an all-time high against the dollar and as the euro rose to a 1-1/2 month high against the dollar, but the dollar shed its losses and closed higher on concern EU leaders will fail to find a resolution to the debt crisis at the Euro-Zone summit on Wed: Dollar Index +0.094, USDJPY -0.004, EURUSD -0.00221. Bullish factors included (1) concern that European leaders will be unable to agree on a solution to the debt crisis with reports that banks only want a 40% write-down of Greek debt compared to 50% to 60% mentioned by the head of the Euro-Zone finance minister, Jean-Claude Juncker, and (2) a report from the Nikkei newspaper that said the BOJ will consider additional monetary easing, which knocked the yen back from an all-time high against the dollar. Bearish factors included (1) euro supportive comments from the head of the Euro-Zone finance ministers, Jean-Claude Juncker, who said he is convinced that European leaders will find a "final and even ground-breaking" solution to the debt crisis at Wednesday's EU summit in Brussels, (2) the unexpected drop in the Oct U.S. consumer confidence to a 2-1/2 year low, which is dollar negative, and (3) the rally in the yen to an all-time high of 75.74 per dollar as the slumping stock market fueled safe-haven buying of the yen.
- Dec crude oil prices this morning are up +23 cents a barrel and Dec gasoline is -1.64 cents per gallon. Crude oil and gasoline prices yesterday settled mixed as dollar strength and backwardation of crude prices boosted crude while an unexpected drop in U.S. consumer confidence undercut gasoline: CLZ11 +$1.90, RBZ11 +0.44. Dec crude posted a 2-1/2 month high. Bullish factors included (1) the slide in the dollar index to a 1-1/2 month low, which boosts investment demand in commodities and (2) a backwardation in WTI crude prices as front-month December crude settled higher than back month crude prices for the first time in 2-3/4 years, which caused massive fund short covering and may signal a decline in crude supply or an increase in demand in the near term. Bearish factors included (1) the unexpected slide in Oct U.S consumer confidence to a 2-1/2 year low, which may prompt a drop in consumer spending and fuel demand and (2) the greater-than-expected decline in home prices in the Aug S&P/CaseShiller home price index, which signals a struggling housing market that may limit economic growth and energy demand. Expectations for Wednesday's weekly DOE inventory report are for crude oil stockpiles to climb 1.48 million bbl, gasoline supplies to fall -1.75 million bbl, distillate inventories to slide -2.0 million bbl and the refinery utilization rate to remain unchanged at 83.1%.
Global Financial Calendar
| Wednesday 10/26/11 | |
|---|---|
| United States | |
| 0700 ET | Weekly MBA mortgage applications, previous -14.9% with purchase mortgage sub-index -8.8% and refinancing sub-index -16.6%. |
| 0830 ET | Sep durable goods orders expected -1.0% and +0.4% ex transportation, Aug -0.1% and -0.1% ex transportation. |
| 1000 ET | Sep new home sales expected +1.7% to 300,000, Aug -2.3% to 295,000. |
| 1300 ET | Treasury auctions $35 billion in 5-year T-notes. |
| Germany | |
| 0200 ET | German Sep import price index expected +0.6% m/m and +6.9% y/y, Aug -0.7% m/m and +6.6% y/y. |
| France | |
| 0245 ET | Oct French business survey of overall demand, Sep 16. |
| 1200 ET | Sep French jobseekers net change expected +23,500, Aug -2,000. Sep total jobseekers, Aug 2,754,500. |
| United Kingdom | |
| 0600 ET | Oct U.K. CBI trends total orders expected -7, Sep -9. |
| 0600 ET | Oct U.K. CBI business optimism, Sep -16. |
| Canada | |
| 0900 ET | Aug Canada Teranet/National Bank home price index, Jul +1.3% m/m and +5.3% y/y. |
| Euro-Zone | |
| 0730 ET | ECB Council member Vitor Constancio speaks on ?The Future of the International Monetary System? at an event organized by the Official Monetary and Financial Institutions Forum in London. |
| Japan | |
| 1950 ET | Sep Japan retail trade expected -0.5% m/m and -0.1% y/y, Aug -1.7% m/m and -2.6% y/y. |
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