Barchart Morning Call
Overnight Developments
Global Financial Calendar
- Global stocks this morning are mixed with the Euro Stoxx 50 up +2.09% and Dec S&Ps up +6.50 points. The dollar and Treasuries are weaker as stocks and commodities rose on speculation European policy makers are examining measures to shield banks from the sovereign-debt crisis. The Financial Times reported that EU Commissioner for Economic Affairs Olli Rehn said EU ministers have a "sense of urgency" and a "shared view" of the need for a "concerted, coordinated approach in Europe" and that "capital positions of European banks must be reinforced to provide additional safety margins and thus reduce uncertainty." The euro weakened against the dollar after Moody's late yesterday cut Italy's credit rating three levels to A2 from Aa2, with a negative outlook, and said other European countries rated below the top Aaa level may face downgrades. Limiting gains in European stocks was the unexpected downward revision in the Sep Euro-Zone PMI composite to a 2-year low of 49.1 from the originally reported 49.2, along with a downward revision in Q2 U.K. GDP to +0.1% q/q and +0.6% y/y from the previously reported +0.2% q/q and +0.7% y/y.
- Asian stocks today closed mostly lower with Japan down -0.86%, China closed for holiday, Australia +1.40%, South Korea -2.07%, India -0.46%. Most Asian stocks declined led by weakness in banks and exporters after Moody's cut Italy's credit rating and on concern slowing global growth may weigh on exporters' earnings. In an attempt to counter the negative aspects of the surging yen, the Japanese government provided a combined $43 billion credit line to Japan's three biggest banks to help finance domestic companies' overseas takeovers. The credit lines are part of a Japanese government program unveiled in Aug to release $100 billion of foreign-exchange reserves to banks to fund exporters and spur overseas purchases. According to Bloomberg data, Japanese companies have announced overseas takeovers totaling $56.7 billion so far this year, the highest in 3 years.
- December S&Ps this morning are trading up +8.50 points. The US stock market yesterday recovered from early losses and finished higher after Fed Chairman Bernanke said the Fed stands ready to take additional measures to boost growth along with speculation EU officials are examining how to recapitalize European banks: Dow Jones +1.44%, S&P 500 +2.25%, Nasdaq Composite +2.95%. The S&P 500 and the Dow dropped to 13-month lows, while the Nasdaq posted a 1-1/2 month low, and all of the indexes erased their losses and closed higher. Bullish factors included (1) comments from Fed Chairman Bernanke that fueled short covering in stocks when he said the Fed stands ready to take additional steps to boost the economy, (2) cheap valuations after companies in the S&P 500 started Tuesday's trade at 9.9 times 2012 forecasted earnings, the cheapest valuations since 2009, (3) reduced European debt concerns after Greek finance minister Venizelos said Greece has enough money to service all its financial obligations until mid-Nov, a month later than earlier predictions, which may buy Greece more time until European leaders can agree on a resolution to the debt crisis, and (4) late-day short covering that pushed the indexes to their highs on a Financial Times report that said EU Commissioner for economic affairs, Olin Rehn, said there is an "increasingly shared view" that the Euro-Zone needs a coordinated approach to halt the sovereign debt crisis.
- Bearish factors included (1) comments from Fed Chairman Bernanke who said that Fed officials expect a "somewhat slower pace of economic growth over coming quarters" than they did in June and that "recent indicators, including new claims for unemployment insurance and surveys of hiring plans, point to the likelihood of more sluggish job growth in the period ahead," (2) the unexpected decline in Aug factory orders (-0.2% versus expectations of unchanged), and (3) concern the European debt crisis may drag on and derail the economy after European finance ministers 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 Monday.
- Yahoo! (YHOO) rose 2.3% in pre-market trading after the WSJ reported that the company will send financial information to potential buyers in "the coming days," citing people familiar with the matter.
- December 10-year T-notes this morning are down -16.5 ticks. T-note prices yesterday fell back from a 1-week high and settled little changed on reduced safe-haven demand when comments from Fed Chairman Bernanke lifted the S&P 500 off of a 13-month low and into positive territory: TYZ11 -1, FVZ11 -3, EDH12 -4.0. Bearish factors included (1) comments from Fed Chairman Bernanke who said the Fed stands ready to take additional action to spur economic growth, which pushed stock prices higher and reduced the safe-haven demand for Treasuries and (2) reduced safe-haven demand from the European debt crisis after Greek finance minister Venizelos said Greece has enough money to service all its financial obligations until mid-Nov, a month later than earlier predictions, which may buy Greece more time until European leaders can agree on a resolution to the debt crisis. Bullish factors included (1) the unexpected decline in Aug factory orders (-0.2% versus expectations of unchanged), (2) concern the European debt crisis may drag on and derail the economy after European finance ministers 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 Monday, and (3) comments from Fed Chairman Bernanke who said that Fed officials expect a "somewhat slower pace of economic growth over coming quarters" than they did in June and that "recent indicators, including new claims for unemployment insurance and surveys of hiring plans, point to the likelihood of more sluggish job growth in the period ahead."
- The dollar index this morning is slightly weaker with the dollar/yen -0.15 yen and the euro/dollar unchanged. The dollar index yesterday posted an 8-1/2 month high early but erased most of its advance and settled little changed after Fed Chairman Bernanke signaled the Fed may take additional steps to shore up the economy: Dollar Index +0.166, USDJPY +0.189, EURUSD +0.01741. Bearish factors included (1) comments from Fed Chairman Bernanke who said the Fed stands ready to take additional steps to boost the economy, which fuels concern that further Fed measures to stimulate growth will debase the dollar, (2) reduced safe-haven demand for the dollar after the stock market recovered from sharp losses and moved higher, and (3) a rebound in the euro from an 8-1/2 month low against the dollar after Greek finance minister Venizelos said Greece has enough money to service all its financial obligations until mid-Nov, a month later than earlier predictions, which may buy Greece more time until European leaders can agree on a resolution to the debt crisis. Bullish factors included (1) euro negative comments from ECB President Trichet who said he sees "very moderate" GDP growth in the Euro-Zone in the second half of this year as growth prospects are burdened by slowing global growth rates and financial market tensions, (2) increased safe-haven demand for the dollar on concern that Europe may be heading for a liquidity crisis after the ECB reported that 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 as European bank lending remains almost non-existent, and (3) strong demand for dollars as the 3-month dollar Libor rate rose for the 18th consecutive day up to a 13-3/4 month high of 0.39094%.
- Nov crude oil prices this morning are up +$2.38 a barrel and Nov gasoline is +5.27 cents per gallon. Crude oil and gasoline prices yesterday rebounded from sharp losses after Fed Chairman Bernanke said the Fed stands ready to take additional steps to boost U.S. growth but prices fell back and closed lower on a lack of confidence in the economic outlook: CLX11 -$1.94, RBX11 -2.26. Nov crude fell to a 1-year low and Nov gasoline slipped to a 7-1/2 month low. Bearish factors included (1) the rally in the dollar index to an 8-1/2 month high, which discourages investment in commodities, (2) the slump in the S&P 500 to a 13-month low, which reduces confidence in the economic outlook and energy demand, (3) the action by Libya's National Oil company to restart Libya's Zawita refinery, the second-largest, along with the statement that it aims to raise its crude output to more than 500,000 barrels a day by the end of Oct, and (4) concern the European debt crisis will drag on and derail the economy and energy demand after European finance ministers 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 Monday. Bullish factors included (1) comments from Fed Chairman Bernanke that the Fed stands ready to take additional steps to spur growth, which is positive for energy consumption and (2) comments from Qatar's oil minister who said he is "not seeing a demand drop at the moment" for oil. Expectations for Wednesday's weekly DOE inventories are for crude oil supplies to rise +1.8 million bbl, gasoline stockpiles to increase +1.25 million bbl, distillate inventories to fall -300,000 bbl and the refinery utilization rate to drop -0.5 to 87.3%.
Global Financial Calendar
| Wednesday 10/5/11 | ||
|---|---|---|
| United States | ||
| 0700 ET | Weekly MBA mortgage applications, previous +9.3% with purchase mortgage sib-index +2.6% and refinancing sub-index +11.0%. | |
| 0730 ET | Sep Challenger job cuts, Aug +47.0%. | |
| 0815 ET | Sep ADP employment change expected +70,000, Aug +91,000. | |
| 1000 ET | Sep ISM non-manufacturing index expected -0.5 to 52.8, Aug +0.6 to 53.3. | |
| France | ||
| 0350 ET | Revised Sep French PMI services expected no change at 52.5. | |
| Germany | ||
| 0355 ET | Sep German PMI services expected no change at 50.3. | |
| Euro-Zone | ||
| 0400 ET | Sep Euro-Zone PMI composite expected no change at 49.2. | |
| 0500 ET | Aug Euro-Zone retail sales expected -0.3% m/m and -0.7% y/y, Jul +0.3% m/m and -0.2% y/y. | |
| United Kingdom | ||
| 0430 ET | Sep U.K. PMI services expected -0.6 to 50.5, Aug -4.3 to 51.1. | |
| 0430 ET | Revised Q2 U.K. GDP expected no change at +0.2% q/q and +0.7% y/y. | |
| 0430 ET | Q2
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