Barchart Morning Call
Overnight Developments
Global Financial Calendar
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- Global stocks this morning are weaker with the Euro Stoxx 50 down -1.49% and Dec S&Ps down -3.70 points. The dollar index climbed to an 8-1/4 month high and most commodities are lower, as copper fell to a 14-1/2 month low. Treasuries are higher amid safe-haven buying as equity markets decline and after Bank of France Governor Noyer, who is attending a meeting of European finance ministers, said the world is experiencing "major economic turbulence" and there's "no alternative" to U.S. Treasuries in terms of liquidity. European bank stocks tumbled with Societe Generale SA and Commerzbank AG, Germany's second-biggest lender, both down more than 4% and are leading the broader marker lower, while credit-default swaps on German government debt climbed to an all-time high of 117 bp. The Greek government passed 6.6 billion euros ($8.8 billion) of austerity measures to cut the 2012 deficit to 6.8% of GDP, missing the 6.5% goal previously set with the EU, IMF and ECB, although Greek Finance Minister Venizelos had earlier said Greece would miss the targets and the troika accepted the new budget. The euro fell to an 8-1/2 month low against the dollar after EU Economic and Monetary Affairs Commissioner Rehn said it's too early to know whether the Greek budget cuts are sufficient to secure the next aid tranche for Greece. European stock losses were limited after the French and German manufacturing PMI indexes were revised higher with the Sep French PMI manufacturing index at 48.2 versus the previously released 47.3 and the Sep German PMI manufacturing index at 50.3 from the originally reported 50.0.
- Asian stocks today closed lower with Japan down -1.78%, China and South Korea closed for holiday, Australia -2.78%, Inida -1.84%. The Q3 Japan Tankan rose to 2 from -9 in Q2, as expected although below pre-earthquake levels, which raises concern that weakening global demand will restrain the Japanese recovery. The yen fell to 2-week low against the dollar after Japanese Finance Minister Azumi said "the yen staying around the high-70s could throw cold water on the Japanese economy's recovery trend" and that he's ready to take "bold action" in markets, which signals the possibility of more intervention in the currency markets to stem the yen's strength. The Sep China PMI manufacturing index, released late last Friday after the markets were closed rose for a second month to 51.2 from 50.9 in Aug. The Chinese markets are closed this week for the country's week-long National Day holidays.
- December S&Ps this morning are trading down -3.70 points. The US stock market last Friday tumbled after economic reports from Europe and Asia heightened concern that the global economy is slowing: Dow Jones -2.16%, S&P 500 -2.50%, Nasdaq Composite -2.63%. Bearish factors included (1) carry-over weakness from a fall in European and Asian stock markets on concern the global economy may slip into recession after Aug German retail sales fell by the most in 4 years, China's HSBC Sep purchasing mangers index contracted for a third month, and Aug Japan industrial production rose less than forecast, (2) concern that U.S. consumer spending may slow after the unexpected decline in Aug U.S. personal income (-0.1% versus expectations of +0.1% and its first decline in 22 months), and (3) weakness in technology stocks after Micron Technology, the largest maker of computer-memory chips, plunged when it reported an unexpected loss on weak demand for personal computers.
- Bullish factors included (1) the unexpected increase in the final Sep U.S. University of Michigan consumer confidence (+1.6 to 59.4 versus expectations of unchanged at 57.8), (2) the unexpected increase in the Sep Chicago purchasing managers index (+4.1 to 60.4 versus expectations of -1.5 to 55.0), (3) the smaller-than-expected increase in the Aug core PCE deflator (+0.1% m/m and +1.6% y/y versus expectations of +0.2% m/m and +1.7% y/y), and (4) comments from St, Louis Fed President Bullard who said the Fed is prepared to ease policy should the U.S. economy weaken and that "the Fed has potent tools at its disposal and is not now, or ever, out of ammunition."
- December 10-year T-notes this morning are up +7.5 ticks. T-note prices last Friday traded higher for most of the session and settled slightly higher on increased safe-haven demand as equities declined and on concern the global economy is slowing: TYZ11 +3.5, FVZ11 -0.7, EDH12 -1.5. Bullish factors included (1) carry-over support from a rally in German bunds after Aug German retail sales plunged by the most in 4 years (-2.9% m/m), (2) the unexpected decline in Aug U.S. personal income (-0.1% versus expectations of +0.1% and its first decline in 22 months), (3) the smaller-than-expected increase in the Aug core PCE deflator (+0.1% m/m and +1.6% y/y versus expectations of +0.2% m/m and +1.7% y/y), (4) comments from St. Louis Fed President Bullard who said the Fed is prepared to ease policy should the U.S. economy weaken and that "the Fed has potent tools at its disposal and is not now, or ever, out of ammunition," and (5) increased safe-haven demand for Treasuries after stocks fell. Bearish factors included (1) the unexpected increase in the final Sep U.S. University of Michigan consumer confidence (+1.6 to 59.4 versus expectations of unchanged at 57.8) and (2) the unexpected increase in the Sep Chicago purchasing managers index (+4.1 to 60.4 versus expectations of -1.5 to 55.0).
- The dollar index this morning is stronger and posted an 8-1/4 month high with the dollar/yen -0.20 yen and the euro/dollar -0.24 cents. The dollar index last Friday moved higher on increased safe-haven demand as the stock market tumbled and as weak European economic data undercut the euro: Dollar Index +0.525, USDJPY +0.196, EURUSD -0.02114. Bullish factors included (1) increased safe-haven demand for the dollar as global equity markets fell on concern of a global economic slowdown, (2) the plunge in Aug German retail sales by the most in 4 years (-2.9% m/m), which is euro negative, and (3) the unexpected increase in the Sep Chicago purchasing managers index and Sep U.S. University of Michigan consumer confidence, which indicates economic strength and is dollar supportive. Bearish factors included (1) the unexpected increase in the Sep Euro-Zone CPI estimate to a 3-year high of +3.0% y/y, which may keep the ECB from cutting rates or implementing any further stimulus measures and (2) the unexpected decline in Aug U.S. personal income, which may prompt the Fed into additional dollar negative stimulus measures to spur the economy.
- Nov crude oil prices this morning are down -73 cents a barrel and Nov gasoline is +0.05 of a cent per gallon. Crude oil and gasoline prices last Friday closed lower due to dollar strength and weak global economic data: CLX11 -$2.94, RBX11 -2.05. Bearish factors included (1) the stronger dollar, which discourages investment demand in commodities, (2) the plunge in Aug German retail sales by the most in 4 years and the decline in China's Sep purchasing mangers index for a third month, which hints at global economic weakness that may reduce energy demand, and (3) the unexpected contraction in Aug U.S. personal income, which may curtail consumer spending and fuel demand. Bearish factors included (1) the unexpected increase in the Sep Chicago purchasing mangers index, which is positive for energy consumption and (2) the unexpected increase in the Sep U.S. University of Michigan consumer confidence, which may help keep consumer spending and fuel demand for falling.
Global Financial Calendar
| Monday 10/3/11 | |
|---|---|
| United States | |
| 0700 ET | Dallas Fed President Richard Fisher is interviewed by CNBC. |
| 1000 ET | Aug construction spending expected -0.2%, Jul -1.3%. |
| 1000 ET | Sep ISM manufacturing index expected -0.2 to 50.4, Aug -0.3 to 50.6. Sep ISM prices paid expected -2.0 to 53.5, Aug -3.5 to 55.5. |
| 1130 ET | Weekly 3-mo and 6-mo T-bill auctions. |
| 1700 ET | Sep total vehicle sales expected 12.50 million, Aug 12.10 million. Sep domestic vehicle sales expected 9.60 million, Aug 9.52 million. |
| 1800 ET | Richmond Fed President Jeffrey Lacker speaks on ?Economics After the Crisis? at the University of Wisconsin Madison . |
| Japan | |
| 0100 ET | Sep Japan vehicle sales, Aug -25.5% y/y. |
| 2130 ET | Aug Japan labor cash earnings, Jul -0.2% y/y. |
| France | |
| 0350 ET | Revised Sep French PMI manufacturing expected no change at 47.3 |
| Germany | |
| 0355 ET | Revised Sep German PMI manufacturing expected no change at 50.0. |
| Euro-Zone | |
| 0400 ET | ECB Council member Ewald Nowotny speaks at the OeNB conference, |
| United Kingdom | |
| 0430 ET | Sep U.K. PMI manufacturing index expected -0.5 to 48.5, Aug -0.4 to 49.0. |
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