Barchart Morning Call
Overnight Developments
Global Financial Calendar
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- Global stocks this morning are mixed with the Euro Stoxx 50 up +0.11% and Dec S&Ps down -4.00 points. The dollar and Treasuries are little changed and commodities mixed ahead of the release of Sep U.S. non-farm payrolls. European bank stocks are leading the overall market lower with Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc both down more than 2% after Moody's Investors Service cut the senior debt and deposit ratings of 12 U.K. financial institutions. The European Commission said it will make proposals in the coming days on possible coordination of bank recapitalization in the EU, while German Chancellor Merkel and French President Sarkozy will meet Sunday in Berlin to discuss Greece's debt problems. European stock losses were limited after Aug German industrial production fell -1.0% m/m and rose +7.7% y/y, stronger than expectations of -2.0% m/m and +6.4% y/y. European demand for dollars remains strong after the 3-month dollar Libor rate rose for the 21st consecutive day to 0.39111%, a 13-3/4 month high, and the dollar Libor-OIS spread, a gauge of banks' reluctance to lend, expanded to 30.51 bp, the widest in 14-1/2 months.
- Asian stocks today closed higher with Japan up +0.98%, China closed for holiday, Australia +2.29%, South Korea +2.83%, India +2.79%. Asian stocks climbed, led by gains in banks and exporters, on an improved earnings outlook as optimism increased that European leaders will protect banks from the region's debt crisis. Following the BOJ's policy meeting where it kept the overnight lending rate between 0.00% and 0.10% and its credit and asset-purchase programs unchanged at 50 trillion yen ($652 billion), BOJ Governor Shirakawa said the strengthening yen may prompt more Japanese companies to move their production facilities abroad and risks exacting "lasting damage" to Japan's economy. India's stocks rallied as the outlook for Indian exporters improved after Citigroup raised its ratings on Indian equities to "neutral" based on a decline in global commodity prices, lower share valuations, and a short-term peak in interest rates.
- December S&Ps this morning are trading down -4.00 points ahead of the Sep payrolls report. The US stock market yesterday settled higher for a third day after Europe took steps to alleviate the region's financial crisis: Dow Jones +1.68%, S&P 500 +1.83%, Nasdaq Composite +1.88%. Bullish factors included (1) gains in financial stocks after the action by the BOE to increase its asset purchase program by 75 billion pounds and for the ECB to resume its covered-bond purchases and reintroduce 1-year loans to banks, which may help stimulate economic growth and stem the turmoil from the European debt crisis, (2) strength in bank stocks after European Commission President Barroso said the Commission is "proposing to have a coordinated action to recapitalize banks and to get rid of toxic assets they may have," (3) the smaller-than-expected increase in weekly initial U.S. unemployment claims (+6,000 to 401,000 versus expectations of +19,000 to 410,000), and (4) a rally in retailers after the ICSC reported Sep chain store sales excluding Wal-Mart rose +5.5% y/y, the most in 3 months.
- Bearish factors included (1) concern the European sovereign-debt crisis may worsen after ECB President Trichet said the Euro-Zone economy faces "intensified downside risks," (2) comments from BOE Governor King who said this could be the most serious financial crisis "ever," (3) the warning from Fitch Ratings that U.S. state revenue may fall short of forecasts in 2012, which may lead to "widespread" budget cuts, and (r) long liquidation and apprehension ahead of Friday's Sep non-farm payrolls report.
- December 10-year T-notes this morning are down -2 ticks. T-note prices yesterday fell for a third day on reduced safe-haven demand as global stocks rallied on signs European leaders are taking concrete measures to resolve the region's debt crisis: TYZ11 -19, FVZ11 -7, EDH12 +0.5. Bearish factors included (1) reduced safe-haven demand for Treasuries after global stock markets rallied when the ECB said it will resume its covered-bond purchases and reintroduce 1-year loans to banks, which may help ease the European debt crisis, (2) the smaller-than-expected increase in weekly initial unemployment claims (+6,000 to 401,000 versus expectations of +19,000 to 410,000), and (3) comments from European Commission President Barroso who said the Commission is "proposing to have a coordinated action to recapitalize banks and to get rid of toxic assets they may have," which also boosted stocks and reduced the safe-haven demand for Treasuries. Bullish factors included (1) increased safe-haven demand for Treasuries after ECB President Trichet said the Euro-Zone economy faces "intensified downside risks," and (2) comments from BOE Governor King who after raising the BOE's asset purchase target for the first time in 2 years to 275 billion pounds from 200 billion, said that this could be the most serious financial crisis "ever."
- The dollar index this morning is slightly lower with the dollar/yen -0.06 yen and the euro/dollar +0.01 cents. The dollar index yesterday erased an early rally and settled lower as stock markets rallied on speculation that additional stimulus measures enacted by the ECB will help stabilize financial markets: Dollar Index -0.285, USDJPY -0.072, EURUSD +0.00893. Bearish factors included (1) reduced safe-haven demand for the dollar after stocks rallied when the ECB said it will resume its covered-bond purchases and reintroduce 1-year loans to banks, which may help ease the European debt crisis, and (2) comments from European Commission President Barroso who said the Commission is "proposing to have a coordinated action to recapitalize banks and to get rid of toxic assets they may have," which reduces the safe-haven demand for the dollar on optimism Europe is stepping up measures to support banks. Bullish factors included (1) the unexpected decline in Aug German factory orders, which is euro negative, (2) the plunge in the British pound to a 14-1/2 month low against the dollar after the BOE unexpectedly increased its asset-purchase program to 275 billion pounds from 200 billion, and (3) euro negative comments from ECB President Trichet who said the Euro-Zone economy faces "intensified downside risks."
- Nov crude oil prices this morning are down -50 cents a barrel and Nov gasoline is -2.49 cents per gallon. Crude oil and gasoline prices yesterday settled higher after the BOE and ECB expanded stimulus measures, which may boost the economy and energy demand: CLX11 +$2.91, RBX11 +11.68. Bullish factors included (1) the weaker dollar, which boosts investment demand in commodities, (2) the action by the BOE to increase its asset purchase program by 75 billion pounds and for the ECB to resume its covered-bond purchases and reintroduce 1-year loans to banks, which may help stimulate economic growth and energy demand, and (3) a rally in global stock markets, which improves confidence in the economic outlook and energy demand. Bearish factors included (1) comments from ECB President Trichet who said the Euro-Zone economy faces "intensified downside risks," which may keep economic growth and fuel demand constrained, and (2) the statement from Iraq's Oil Ministry that Iraq's crude production rose to 2.932 million barrels a day, the highest level in 20 years.
Global Financial Calendar
| Friday 10/7/11 | |
|---|---|
| United States | |
| 0830 ET | Sep non-farm payrolls expected +58,000, Aug unchanged. Sep private payrolls (ex-government) expected +90,000, Aug +17,000. Sep unemployment rate expected unchanged at 9.1%, Aug unchanged at 9.1%. Sep manufacturing payrolls expected -1,000, Aug -3,000. Sep avg hourly earnings all employees expected +0.2% m/m and +1.9% y/y, Aug -0.1% m/m and +1.9% y/y. Sep avg weekly hours all employees expected unchanged at 34.2 hours, Aug -0.1 to 34.2 hours. |
| 0930 ET | Dallas Fed President Richard Fisher speaks on the U.S. economy to the Texas A&M Retailing Summit. |
| 1000 ET | Aug wholesale inventories expected +0.6%, Jul +0.8%. |
| 1045 ET | Atlanta Fed President Dennis Lockhart speaks on the ?U.S. economy and financial capability? at the Goizueta Business School of Emory University. |
| 1500 ET | Aug consumer credit expected +$8.000 billion, Jul +$11.965 billion. |
| Japan | |
| 0100 ET | Preliminary Aug Japan coincident index CI expected 107.4, Jul 107.1. Preliminary Aug leading index CI expected 103.5, Jul 104.6. |
| n/a | BOJ announces interest rate decision (expected no change to the 0.00% to 0.10% benchmark rate). |
| United Kingdom | |
| 0430 ET | Sep U.K. PPI input prices expected +1.3% m/m and +17.2% y/y, Aug -1.9% m/m and +16.2% y/y. |
| 0430 ET | Sep U.K. PPI output prices expected +0.1% m/m and +6.2% y/y, Aug +0.1% m/m and +6.1% y/y. |
| 0430 ET | Sep U.K. PPI output core expected +0.2% m/m and +3.7% y/y, Aug +0.2% m/m and +3.6% y/y. |
| Germany | |
| 0600 ET | Aug German industrial production expected -2.0% m/m and +6.4% y/y, Jul +4.0% m/m and +10.1% y/y. |
| Canada | |
| 0700 ET | Sep Canada net change in employment expected +19,500, Aug -5,500. Sep unemployment rate expected unchanged at 7.3%, Aug +0.1 to 7.3%. |
| CHI | |
| 2230 ET | Sep China HSBC services PMI, Aug 50.6. |
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