Barchart Morning Call
Overnight Developments
Global Financial Calendar
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- Global stocks this morning are weaker with the Euro Stoxx 50 down -2.13% and Dec S&Ps down -6.50 points. The dollar index rose to a fresh 8-1/2 month high and most commodities fell, with crude oil at a 1-3/4 month low. The head of the European finance chiefs, Jean-Claude Juncker said they may need to renegotiate the terms of Greece's bailout and adjust "technical revisions," which fueled concern bondholders may have to take bigger losses on Greek debt that they hold. The European finance ministers also pushed backed a decision on the release of Greece's next loan installment until after Oct 13, the second postponement of a vote originally slated for yesterday. Weakness in European bank stocks is leading the overall market lower after Dexia SA, Belgium's biggest bank by assets, plunged 22% after its board asked the company to solve its "structural problems," while Deutsche Bank fell nearly 7% after saying its planned operating pretax profit target of 10 billion euros form its core businesses for 2011 is no longer achievable. Mistrust among European banks is widespread and has led to limited lending between them after the ECB said banks parked 209 billion euros at the ECB on Oct 3, up from 199.6 billion euros on Sep 30 and the most in 15 months. Credit-default swaps to insure German government debt rose to a record 121.5 bp on speculation Europe's largest economy will have to foot the bill for the deepening debt crisis. The British pound fell to a 1-week low against the dollar on speculation the BOE this week may announce further stimulus measures after the Sep U.K. PMI construction index fell a more-than-expected -2.5 to a 9-month low of 50.1.
- Asian stocks today closed lower with Japan down -1.05%, China closed for holiday, Australia -0.64%, South Korea -3.68%, India -1.77%. Asian stocks sank on concern that the European debt crisis may derail global growth. The Sep South Korea HSBC purchasing managers index contracted for a second month as it fell -2.2 to 47.5, its fastest pace of contraction in 11 months. Japan's Nikkei 225 Stock Index tumbled to a 6-1/2 month low, led by declines in automakers, after Toyota said its U.S. sales fell -17% last month and Honda said its Sep U.S. auto sales declined by a more than expected -8%.
- December S&Ps this morning are trading down -6.50 points. The US stock market yesterday settled sharply lower as Greek default concerns offset an unexpected rebound in U.S. manufacturing and construction spending: Dow Jones -2.36%, S&P 500 -2.85%, Nasdaq Composite -3.29%. The S&P 500 tumbled to a 12-3/4 month low, the Dow fell to a 1-week low and the Nasdaq posted a 1-1/4 month low. Bearish factors included (1) carry-over weakness from a fall in European stocks on concern Greece may be closer to defaulting on its debt after the Greek government passed austerity measures to cut the 2012 deficit to 6.8% of GDP and missed the 6.5% goal previously set with the troika, (2) comments from Bank of France Governor Noyer who said the world is experiencing "major economic turbulence," (3) weakness in global bank stocks on concern European banks may face a liquidity crisis after the ECB reported that European banks and financial institutions parked 199.6 billion euros ($266 billion) with the ECB on Sep 30, the highest in 15 months as European banks continue to refrain from lending, (4) comments from Dallas Fed President Fisher who said he foresees less than 2% U.S. GDP growth for the rest of the year, and (5) a fall in energy and raw-material producers as dollar strength along with concerns of a global economic slowdown prompted a broad-based decline in most commodities.
- Bullish factors included (1) the +0.3 point increase in the Sep China PMI manufacturing index to a 4-month high of 51.2, which dampens concerns of a global slowdown, (2) the unexpected increase in the Sep ISM manufacturing index (+1.0 to 51.6 versus expectations of -0.2 to 50.4), and (3) the unexpected increase in Aug construction spending (+1.4% versus expectations of -0.2%).
- December 10-year T-notes this morning are up +3.5 ticks. T-note prices yesterday ratcheted higher and finished with moderate gains on increased safe-haven demand as global stock markets declined on Greek default concerns along with the Fed's action to buy long-term securities for its Operation Twist program: TYZ11 +28.5, FVZ11 +14.2, EDH12 -3.5. Bullish factors included (1) increased safe-haven demand for Treasuries as global stock markets plunged on concern Greece may default on its debt after the Greek government passed austerity measures to cut the 2012 deficit to 6.8% of GDP and missed the 6.5% goal previously set with the troika, (2) the Fed's action to purchase $2.5 billion of long-term Treasuries as part of its Operation Twist program to replace $400 billion of short-term debt in its portfolio with longer-term Treasuries, and (3) comments from Bank of France Governor Noyer who said the world is experiencing "major economic turbulence" and there's "no alternative" to U.S. Treasuries in terms of liquidity. Bearish factors included (1) the unexpected increase in the Sep ISM manufacturing index (+1.0 to 51.6 versus expectations of -0.2 to 50.4) and (2) the unexpected increase in Aug construction spending (+1.4% versus expectations of -0.2%).
- The dollar index this morning is stronger and at a fresh 8-1/2 month high with the dollar/yen +0.05 yen and the euro/dollar +0.18 cents. The dollar index yesterday jumped to an 8-1/2 month high and settled higher for the fourth consecutive session on increased safe-haven demand as global equity markets fell on the threat of a Greek default: Dollar Index +0.878, USDJPY -0.414, EURUSD -0.02100. Bullish factors included (1) increased safe-haven demand for the dollar as global equity markets fell on concern Greece may soon default on its debt after the Greek government passed 6.6 billion euros ($8.8 billion) of austerity measures to cut the 2012 deficit to 6.8% of GDP, but missed the 6.5% goal previously set with the troika, (2) increased safe-haven demand for the dollar on concerns over a liquidity crisis among European banks after the ECB said European banks and financial institutions parked 199.6 billion euros ($266 billion) with the ECB on Sep 30, the highest in 15 months as European banks refrain from lending, (3) the unexpected increases in the Sep ISM manufacturing index and in Aug U.S. construction spending, which indicates economic strength that is dollar supportive, and (4) strong demand for dollars as the 3-month dollar Libor rate rose for the 17th consecutive day up to a 13-3/4 month high of 0.37761%. Bearish factors included (1) the unexpected upward revision to the Sep French and German PMI manufacturing indexes, which is euro positive and (2) dollar negative comments from Dallas Fed President Fisher who said he foresees less than 2% U.S. GDP growth for the rest of the year.
- Nov crude oil prices this morning are down -$1.58 a barrel at a 1-3/4 month low and Nov gasoline is -1,77 cents per gallon. Crude oil and gasoline prices yesterday closed lower due to dollar strength and mounting concern that Greece will soon default on its debt: CLX11 -$1.59, RBX11 -2.71. Bearish factors included (1) the rally in the dollar index to an 8-1/2 month high, which discourages investment in commodities, (2) heightened concern that Greece will soon default on its debt which may wreak havoc on the global economy and fuel demand after the Greek government passed austerity measures to cut the 2012 deficit to 6.8% of GDP and missed the 6.5% goal previously set with the EU, IMF and ECB, and (3) weakness in global equity markets, which reduces confidence in the economic outlook and energy demand. Bullish factors included (1) the unexpected increases in the Sep ISM manufacturing index and in Aug U.S. construction spending, which indicates economic strength that is positive for fuel consumption, (2) the +0.3 point increase in the Sep China PMI manufacturing index to a 4-month high, which is positive for fuel demand, and (3) comments from the UAE's OPEC governor who said world oil consumption is stable and markets are likely to avoid "a major demand slump" even as the economy shows signs of faltering.
Global Financial Calendar
| Tuesday 10/4/11 | |
|---|---|
| United States | |
| 0745 ET | ICSC (Int?l Council of Shopping Centers) weekly retailer sales. |
| 0855 ET | Redbook weekly retailer sales. |
| 0900 ET | Fed Governor Sarah Bloom Raskin speaks on foreclosures to the Maryland Bar Association. |
| 1000 ET | Fed Chairman Ben Bernanke testifies on the economic outlook before the Joint Economic Committee of Congress. |
| 1000 ET | Aug factory orders expected unchanged, Jul +2.4%. |
| 1130 ET | Weekly 4-week T-bill auction. |
| United Kingdom | |
| 0430 ET | Sep U.K. PMI construction expected -1.0 to 51.6, Aug -0.9 to 52.6. |
| 1901 ET | Sep U.K. BRC shop price index, Aug +2.7% y/y. |
| Euro-Zone | |
| 0500 ET | Aug Euro-Zone PPI expected -0.2% m/m and +5.9% y/y, Jul +0.5% m/m and +6.1% y/y. |
| 0900 ET | ECB President Jean-Claude Trichet speaks to the European Parliament?s economic and monetary affairs committee. |
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