Barchart Morning Call
Overnight Developments
Global Financial Calendar
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- Global stocks this morning are mixed with the Euro Stoxx 50 down -0.28% and Dec S&Ps up +8.10 points. The dollar and Treasuries are weaker, while the euro and most commodities gained after the yields on Italian and Spanish government bonds fell when the ECB bought both nations? debt. Losses in bank stock led European shares lower as the cost for European banks to fund in dollars rose for a fifth day. The 3-month cross-currency basis swap, the rate banks pay to convert euro payments into dollars, increased to 130.5 bp below the euro interbank offered rate, the most expensive since Dec 2008. ECB President Draghi pushed back against calls by some European leaders for the ECB to increase its quantitative easing measures, saying the ECB will quickly lose credibility it departs from its primary role of keeping prices stable. Draghi said "We should not be waiting any longer" for European government leaders' pledges to bolster the region's rescue fund. ECB Executive Board member Gonzalez-Paramo told reporters in Madrid that it's not the ECB's role to act as a lender of last resort to governments, while fellow ECB member and Bundesbank President Weidmann said in a speech today that the ECB can't be asked to solve the sovereign debt crisis just because governments have so far failed. These comments suggest the ECB is unwilling to make large-scale bond purchases to help stem the debt crisis.
- Asian stocks today closed lower with Japan down -1.23%, China -2.09%, Australia -1.91%, South Korea -2.11%, India -0.55%. Asian stocks closed lower after rising bond yields in Spain stoked contagion concerns of the European debt crisis. Weakness in Chinese bank stocks led losses in China's Shanghai Stock Index after the China Banking Regulatory Commission said that lenders should cut "high-risk" loans to developers as it warned that some projects backed by local governments may run out of funds and loans to property developers may sour as sales slow. Japanese stocks finished in the red as exporters tumbled after the yen climbed to a 2-1/2 week high against the dollar.
- December S&Ps this morning are trading up +8.10 points. The US stock market yesterday fluctuated between gains and losses early but accelerated lower late morning and settled with moderate losses as European debt concerns offset stronger-than-expected U.S. economic data: Dow Jones -1.13%, S&P 500 -1.68%, Nasdaq Composite -1.96%. The S&P 500 fell to a 4-week low, the Dow slid to a 2-week low and the Nasdaq sank to a 1-1/4 month low. Bearish factors included (1) concern the European debt crisis will worsen after the weakest demand for a Spanish 10-year bond auction in 3 years pushed yields on Spanish government debt to euro-era highs, (2) a report from Reuters that a Euro-Zone official said there are no plans for aid to Italy from the European Financial Stability Facility, (3) the unexpected decline in the Nov Philadelphia Fed manufacturing index (-5.1 to 3.6 versus expectations of +0.3 to 9.0), and (4) weakness in technology stocks due to a slump in Applied Materials, the largest producer of chipmaking equipment, after it forecast weaker-than-estimated Q1 sales and profits.
- Bullish factors included (1) the unexpected declines in weekly initial U.S. unemployment claims to a 7-month low and in weekly continuing claims to a 3-year low (initial claims -5,000 to 388,000 versus expectations of +5,000 to 395,000 and weekly continuing claims -57,000 to 3.608 million, better than expectations of +18,000 to 3.633 million), (2) the smaller-than-expected decline in Oct housing starts (-0.3% to 628,000 versus expectations of -7.3% to 610,000), and (3) the larger-than-expected increase in Oct building permits which climbed to their best level in 19 months (+10.9% to 653,000 versus expectations of +2.4% to 603,000).
- December 10-year T-notes this morning are down -13 ticks. T-note prices yesterday rallied to a 1-week high and settled higher on increased safe-haven demand as the stock market tumbled on concern over contagion of the European debt crisis: TYZ11 +10.5, FVZ11 +4.0, EDH12 -5.5. Bullish factors included (1) increased safe-haven demand for Treasuries after the weakest demand for a Spanish 10-year bond auction in 3 years pushed yields on Spanish government debt to euro-era highs and sent European and U.S. stocks tumbling, (2) the unexpected decline in the Nov Philadelphia Fed manufacturing index (-5.1 to 3.6 versus expectations of +0.3 to 9.0), and (3) comments from New York Fed President Dudley who said the U.S. recovery is "persistently weaker than expected" and that the Fed is "not out of ammunition" and could pursue new asset buying. Bearish factors included (1) the unexpected declines in weekly initial U.S. unemployment claims to a 7-month low and in weekly continuing claims to a 3-year low (initial claims -5,000 to 388,000 versus expectations of +5,000 to 395,000 and weekly continuing claims -57,000 to 3.608 million, better than expectations of +18,000 to 3.633 million), (2) the smaller-than-expected decline in Oct housing starts (-0.3% to 628,000 versus expectations of -7.3% to 610,000), (3) the larger-than-expected increase in Oct building permits which climbed to their best level in 19 months (+10.9% to 653,000 versus expectations of +2.4% to 603,000), (4) the action by the ECB to purchase Italian government bonds, which led to a drop in Italian bond yields and reduced European debt concerns, and (5) reduced safe-haven demand for Treasuries after the report from Reuters that said ECB officials discussed lending to the IMF so that it has enough assets to sufficiently fund additional bailouts of indebted Euro-Zone countries.
- The dollar index this morning is lower with the dollar/yen -0.34 yen and the euro/dollar +1.33 cents. The dollar index yesterday climbed to a 1-1/4 month high and finished higher as the euro fell on concern the European debt crisis may worsen: Dollar Index +0.144 USDJPY +0.027, EURUSD -0.00761. Bullish factors included (1) increased safe-haven demand for dollars after weak demand at a 10-year Spanish bond auction pushed yields on Spanish government securities to euro-era record highs and sent stocks reeling, (2) the increase in dollar funding costs for European banks after the 3-month cross-currency basis swap, the rate banks pay to convert euro payments into dollars, widened to 132 bp below the euro interbank offered rate, the most expensive since Dec 2008, and (3) the unexpected drop in weekly U.S. initial unemployment claims to their lowest level in 7 months, which signals economic strength and is dollar supportive. Bearish factors included (1) reduced European debt concerns as the euro rebounded from a 1-1/4 month low after Italian government bond yields fell when the ECB purchased Italian government bonds, and (2) strength in the British pound which rebounded from a 3-week low against the dollar and settled higher after Oct U.K. retail sales unexpectedly rose.
- Dec crude oil prices this morning are up +81 cents a barrel and Dec gasoline is +2.72 cents per gallon. Crude oil and gasoline prices yesterday retreated on concern that contagion of the European sovereign-debt crisis will stymie global economic growth along with weaker-than-expected U.S. manufacturing data: CLZ11 -$3.77, RBZ11 -12.02. Bearish factors included (1) concern the European debt crisis is spreading to Spain after the yield on Spain's 10-year note rose to a euro-era record, (2) the larger-than-expected fall in U.K. consumer confidence to its lowest level since data began in 2004, which may lead to reduced consumer spending and fuel demand, and (3) the unexpected decline in the Nov Philadelphia Fed manufacturing index, which indicates reduced fuel consumption. Bullish factors included (1) the weaker dollar, which boosts investment demand for commodities, and (2) the unexpected slide in weekly initial U.S. unemployment claims to their lowest level in 7 months, which signals economic strength that is positive for energy demand.
Global Financial Calendar
| Friday 11/18/11 | |
|---|---|
| United States | |
| 0815 ET | New York Fed President William Dudley speaks on the regional and national economic outlook to the University of Albany and regional leaders. |
| 1000 ET | Oct leading indicators expected +0.6%, Sep +0.2%. |
| 1315 ET | Dallas Fed President Richard Fisher speaks to the Texas Tech Alumni Association about ?Federal Reserve Functions and the Texas Economy.? |
| 1350 ET | San Francisco Fed President John Williams speaks on ?Recovering from Crisis: The Role of Financial Markets? at the central bank of Chile?s Summit Meeting of Central Banks in Santiago, Chile. |
| Japan | |
| 0030 ET | Oct Japan nationwide department store sales, Sep -2.4% y/y. |
| Germany | |
| 0200 ET | Oct German producer prices expected +0.1% m/m and +5.3% y/y, Sep +0.3% m/m and +5.5% y/y. |
| Euro-Zone | |
| 0415 ET | ECB Council member Juan Gonzalez-Paramo speaks at an event in Madrid. |
| Canada | |
| 0700 ET | Oct Canada CPI expected +0.1% m/m and +2.8% y/y, Sep +0.2% m/m and +3.2% y/y. |
| 0700 ET | Oct Bank of Canada core CPI expected +0.1% m/m and +1.9% y/y, Sep +0.5% m/m and +2.2% y/y. |
| 0830 ET | Oct Canada leading indicators expected +0.1%, Sep -0.1%. |
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