Barchart Morning Call
Overnight Developments
Global Financial Calendar
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- Global stocks this morning are soaring with the Euro Stoxx 50 up +2.63% and Dec S&Ps up +25.60 points, both at 2-1/2 month highs. Treasuries tumbled and commodities gained, with copper at a 1-month high after European leaders agreed to expand a bailout fund to stem the region's debt crisis. The euro surged to a 1-1/2 month high against the dollar and the cost of credit default swaps to insure European government debt fell to a 7-week low after last-ditch talks led European leaders to expand the rescue fund's capacity to 1 trillion euros ($1.4 trillion) and for bondholders to accept 50% writedowns on their holdings of Greek debt. European leaders also struck a bank-recapitulation accord, setting a Jun 30 2012 deadline for lenders to reach core capital reserves of 9% after writing down their sovereign-debt holdings. Banks below that target would face "constraints" on paying dividends and giving out bonuses. Bank stocks surged with BNP Paribas SA, France's biggest bank, and Deutsche Bank AG, Germany's largest, up more than 14% and Greek bank stocks also rallied after Greek Prime Minister Papandreou said the government may buy shares in some Greek banks as a result of the planned writedown of the country's debt and the European accord to recapitalize lenders.
- Asian stocks today closed higher with Japan up +2.04%, China +0.22%, Australia +2.49%, South Korea +1.47%, India closed for holiday. Asian markets gained on a relief rally after European leaders took steps to stem the debt crisis. After keeping the overnight lending rate between 0.00% and 0.10% as expected, the BOJ expanded their credit and asset-purchase programs to a total of 55 trillion yen ($724 billion) from 50 trillion yen. The yen remained unfazed with the BOJ's actions and held near its record high. South Korean stocks also received a boost after Q3 South Korea GDP rose +0.7% q/q, slower than the +0.9% gain in Q2, but stronger than expectations of +0.6% q/q.
- December S&Ps this morning are trading up sharply by +25.60 points at a 2-1/2 month high. The US stock market yesterday finished higher on better-than-expected U.S. economic data and after EU leaders said they reached an agreement on plans to recapitalize banks: Dow Jones +1.39%, S&P 500 +1.05%, Nasdaq Composite +0.46%. Bullish factors included (1) the stronger-than-expected Sep durable goods orders (-0.8% and +1.7% ex transportation versus expectations of -1.0% and +0.4% ex transportation), (2) the stronger-than-expected Sep U.S. new home sales which rose to their best level in 5 months (+5.7% to 313,000 versus expectations of +1.7% to 300,000), (3) the report from Agence France-Presse that said China may be willing to help fund Europe's bailout efforts, and (4) a rally in bank stocks after EU leaders meeting in Brussels said they had reached an agreement on a plan to recapitalize the region's banks.
- Bearish factors included (1) concern that European leaders may will be unable to agree on a solution to the debt crisis after a EU official said talks with banks on bondholder losses as part of a second Greek bailout were deadlocked and that EU leaders may put off expanding the European Financial Stability Facility (EFSF) until the end of November, and (2) concern that global economic growth is slowing after Oct U.K. CBI trends total orders fell to its lowest level in a year and after incoming ECB President Draghi said he sees "significant downside risks to economic growth in the Euro-Zone as industrial output in the region expands at a "very moderate pace."
- Bank of America (BAC) and Citigroup (C) rose more than 3% in pre-market trading on carry-over support from a rally in European banks after EU leaders took steps to stem the debt crisis.
- Freeport McMoRan Copper & Gold (FCX) rose 3.6% in European trading after copper prices climbed to 1-month highs in overnight trade.
- December 10-year T-notes this morning are down -15.5 ticks as soaring global equity markets saps the safe-haven demand for Treasuries. T-note prices yesterday retreated on stronger-than-expected U.S. economic data along with reduced safe-haven demand as stocks rallied after EU leaders said they reached agreement on a plan to recapitalize the region's banks: TYZ11 -17.5, FVZ11 -9.5, EDH12 -2.0. Bearish factors included (1) the stronger-than-expected Sep durable goods orders (-0.8% and +1.7% ex transportation versus expectations of -1.0% and +0.4% ex transportation), (2) the stronger-than-expected Sep U.S. new home sales which rose to their best level in 5 months (+5.7% to 313,000 versus expectations of +1.7% to 300,000), (3) the announcement from EU leaders that they had agreed on a plan to recapitalize European banks as part of an effort to contain the sovereign debt crisis, and (4) supply pressures ahead of the Treasury's $29 billion auction of 7-year T-notes on Wed. Bullish factors included (1) increased safe-haven demand for Treasuries on concern that European leaders will be unable to agree on a solution to the debt crisis after a EU official said talks with banks on bondholder losses as part of a second Greek bailout were deadlocked, and (2) strong demand for the Treasury's auction of $35 billion in 5-year T-notes that had a bid-to-cover ratio of 2.94, stronger than the 12-auction average of 2.79.
- The dollar index this morning is weaker and at a 1-1/2 month low with the dollar/yen -0.33 yen and the euro/dollar +1.24 cents. The dollar index yesterday rebounded from a 1-1/2 month low and settled higher as the euro retreated after an EU official said EU talks with banks and on bondholders losses were deadlocked: Dollar Index +0.124, USDJPY +0.070, EURUSD -0.00012. The yen posted to a new post WWII high of 75.72 yen per dollar. Bullish factors included (1) concern that European leaders will be unable to agree on a solution to the debt crisis after a EU official said talks with banks on bondholder losses as part of a second Greek bailout were deadlocked, (2) weakness in the pound after Oct U.K. Confederation of British Industry (CBI) business optimism tumbled to a 2-1/2 year low, (3) comments from Japanese Finance Minister Azumi that increase the chance of Japanese intervention against the surging yen, when he ordered staffers "to be prepared to take action against the yen's gains," and (4) stronger-than-expected U.S. economic data on Sep durable goods orders and Sep new home sales, which suggests economic strength and is dollar supportive. Bearish factors included (1) the action by German lawmakers to approve a plan to increase the capacity of the European bailout fund, which is euro supportive and (2) weakness in the Canadian dollar against the U.S. dollar after the BOC cut its growth outlook through mid-2012, which reduces chances of the BOC raising interest rates.
- Dec crude oil prices this morning are up +$2.04 a barrel and Dec gasoline is +3.82 cents per gallon. Crude oil and gasoline prices yesterday retreated as the dollar strengthened, crude oil inventories surged and U.S. gasoline demand faltered: CLZ11 -$2.97, RBZ11 -4.94. Bearish factors included (1) the reversal in the dollar after the dollar index rebounded from a 1-1/2 month low and settled higher, which decreased investment demand in commodities, (2) the larger-than-expected rise in weekly DOE crude inventories (+4.74 million bbl versus expectations of +1.48 million bbl), (3) a slump in U.S. gasoline demand after deliveries of gasoline to wholesalers last week fell -1.1% to 8.5 million barrels a day, the lowest in 7-3/4 years, and (4) concern the European sovereign debt crisis will remain unresolved, which could slow global economic growth and energy demand after a EU official said EU talks with banks and bondholders of Greek debt were suspended over how much of a loss bondholders are willing take on their Greek debt holdings. Bullish factors included (1) the stronger-than-expected Sep U.S. durable goods orders and Sep new home sales, which indicates economic strength that it positive for energy demand and (2) the larger-than-expected decline in weekly distillate inventories which fell to their lowest level in 3-1/2 months (-4.28 million bbl to 145.5 million bbl versus expectations of -2.0 million bbl).
Global Financial Calendar
| Thursday 10/27/11 | |
|---|---|
| United States | |
| 0830 ET | Weekly initial unemployment claims expected -2,000 to 401,000, last -6,000 to 403,000. Weekly continuing claims expected -19,000 to 3.700 million, last +25,000 to 3.719 million. |
| 0830 ET | Q3 U.S. GDP expected +2.5% annualized, Q2 +1.3% annualized. Q2 personal consumption expected +1.9%, Q2 +0.7%. Q3 GDP price index expected +2.4%, Q2 +2.5%. Q3 core PCE expected +2.2%, Q2 +2.3% q/q. |
| 1000 ET | Sep pending home sales expected +0.3% m/m and +11.8% y/y, Aug -1.2% m/m and +13.1% y/y. |
| 1300 ET | Treasury auctions $29 billion in 7-year T-notes. |
| 1630 ET | Weekly money supply report and Fed balance sheet. |
| Euro-Zone | |
| 0400 ET | Sep Euro-Zone M3 money supply expected +2.6% 3-mo avg and +2.8% y/y, Aug +2.3% 3-mo avg and +2.8% y/y. |
| 0500 ET | Oct Euro-Zone economic confidence expected 93.8, Sep -3.4 to 95.0. Oct Euro-Zone industrial confidence expected -7.0, Sep -3.2 to -5.9. |
| United Kingdom | |
| 0600 ET | Oct U.K. CBI reported sales expected -16, Sep -15. |
| 1901 ET | Oct U.K. GfK consumer confidence survey expected -30, Sep +1 to -30. |
| Japan | |
| 1930 ET | Sep Japan jobless rate, Aug -0.4 to 4.3%. Sep job-to-applicant ratio expected -0.67, Aug 0.66. |
| 1930 ET | Sep Japan overall household spending expected -3.5%, Aug -4.1% y/y. |
| 1930 ET | Oct Tokyo CPI expected -0.5% y/y, Sep -0.2% y/y. Oct Tokyo CPI ex-fresh food expected -0.4% y/y, Sep -0.1% y/y. |
| 1930 ET | Sep Japan national CPI expected +0.1% y/y, Aug +0.2% y/y. Sep national CPI ex-fresh food expected +0.2% y/y, Aug +0.2% y/y. Sep national CPI ex food & energy expected -0.4% y/y, Aug -0.5% y/y. |
| 1950 ET | Sep Japan industrial production expected -2.1% m/m and -2.3% y/y, Aug +0.8% m/m and +0.4% y/y. |
| Germany | |
| n/a | Oct German CPI (EU harmonized) expected unchanged m/m and +2.8% y/y, Sep +0.2% m/m and +2.9% y/y. |
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