Barchart Morning Call
Overnight Developments
Global Financial Calendar
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- Global stocks this morning are mixed with the Euro Stoxx 50 down -0.58% and Dec S&Ps up +1.40 points. The dollar and Treasuries weakened, while most commodities gained after a Greek official told reporters that the Cabinet gave Prime Minister Papandreou unanimous backing for his referendum plans. This boosted the euro as concerns eased that there was a division between the Cabinet and the Greek government. European leaders are due to hold emergency talks with Greek Prime Minister Papandreou in Cannes, France, on the eve of the G-20 summit where French President Sarkozy will tell Papandreou that the "only way to resolve Greek debt problems" is through the deal hammered out during last week's talks. The dollar also remained weak on speculation the Fed may consider additional asset purchases when it concludes its 2-day policy meeting today. European stocks were little changed after Oct German unemployment unexpectedly rose +10,000, its first increase in over 2 years and weaker than expectations of a -10,000 decline. Also limiting stock gains was the downward revisions to the Oct Euro-Zone PMI manufacturing index to a 2-1/4 year low of 47.1 from the originally reported 47.3, while the Oct French PMI manufacturing index was revised down to 48.5 from 49.0.
- Asian stocks today closed mixed with Japan down -2.21%, China +1.66%, Australia -1.14%, South Korea -0.76%, India -0.09%. China's Shanghai Stock Index staged a late rally up to a 1-1/4 month high as banks, property developers, technology stocks and infrastructure companies rose on speculation the government may introduce measures to stimulate the economy. The Xinhua News Agency reported that unnamed people from the railway industry said the government will get more than 200 billion yuan ($31.5 billion) as financial support to ensure payment for projects. Technology stocks gained after the Shanghai Securities News reported that China will cut the business tax on software companies and will cut taxes on software products to support the development of the software industry. Japanese stocks were undercut after Sony revised its profit forecast for the year to a 90 billion yen ($1.2 billion) annual loss from an earlier projection of a 60 billion-yen profit, as a stronger yen and slack sales in the U.S. reduced profits. Sony joins Panasonic, which earlier this week forecast a full-year loss of 420 billion yen, its biggest loss in a decade as a slowdown in global sales and a record high yen reduced profits.
- December S&Ps this morning are trading up +1.40 points. The US stock market yesterday settled sharply lower for a second day on concern that Europe's bailout for Greece is in jeopardy along with signs that global economic growth may be slowing: Dow Jones -2.48%, S&P 500 -2.79%, Nasdaq Composite -2.89%. The Dow, the S&P 500 and the Nasdaq all posted 1-week lows. Bearish factors included (1) carry-over weakness from a plunge in European stocks after Greek Prime Minister Papandreou pledged to put the European rescue plan to a referendum, which risks pushing Greece into default if it is rejected by voters, (2) signs that global economic growth is slowing after the Oct China manufacturing PMI unexpectedly fell to a 2-1/2 year low and the Oct U.K. manufacturing PMI contracted at a 2-1/3 year low, and (3) the unexpected decline in the Oct ISM manufacturing index (-0.8 to 50.8 versus expectations of +0.4 to 52.0).
- Bullish factors included (1) a mid-afternoon report from Dow Jones News that quoted a Greek Socialist Party official who said that the referendum proposed by Prime Minister Papandreou is "basically dead," which lifted stocks off of their lows and (2) reduced price pressures after the Oct ISM prices paid sub-index fell more than expected to a 2-1/2 year low (-15.0 to 41.0 versus expectations of -1.0 to 55.0).
- December 10-year T-notes this morning are down -3 ticks. T-note prices yesterday rallied to a 3-1/2 week high and settled sharply higher for a second day on increased safe-haven demand as stocks tumbled over renewed concern Greece will default along with indications that global economic growth is slowing: TYZ11 +1-6/32, FVZ11 +14, EDH12 -2.5. Bullish factors included (1) increased safe-haven demand for Treasuries after European and U.S stock markets plummeted after Greek Prime Minister Papandreou's pledge to put the European rescue plan to a referendum risks pushing Greece into default if it is rejected by voters, (2) signs that global economic growth is slowing after the Oct China manufacturing PMI unexpectedly fell to a 2-1/2 year low and the Oct U.K. manufacturing PMI contracted at a 2-1/3 year low, (3) the unexpected decline in the Oct ISM manufacturing index (-0.8 to 50.8 versus expectations of +0.4 to 52.0), and (4) reduced price pressures after the Oct ISM prices paid sub-index fell more than expected to a 2-1/2 year low (-15.0 to 41.0 versus expectations of -1.0 to 55.0). A bearish factor is a possible increase in supply pressures after the SIFMA survey projected that the Treasury will sell $363.4 billion of securities in Q4, up +55% from $234.3 billion sold in Q3.
- The dollar index this morning is lower with the dollar/yen -0.33 yen and the euro/dollar +0.72 cents. The dollar index yesterday settled sharply higher for a second day as the euro tumbled on concern that Greek Prime Minister Papandreou's pledge to put the EU's latest accord to a referendum risks pushing Greece into default: Dollar Index +1.095, USDJPY +0.211, EURUSD -0.01558. The dollar index posted a 2-1/2 week high and the euro fell to a 2-1/2 week low. Bullish factors included (1) the plunge in the euro after Greek Prime Minister Papandreou pledged to put the EU's latest accord to a referendum, which risks pushing Greece into default if it is rejected by voters, (2) comments from Japanese Prime Minister Azumi who said he will "continue to intervene until I am satisfied," which weakened the yen against the dollar on concern of further Japanese intervention in the currency markets to curb the yen's strength, and (3) the slide in the British pound to a 1-week low against the dollar after the Oct U.K. manufacturing PMI contracted at its slowest pace in 2-1/3 years. Bearish factors included (1) the unexpected decline in the Oct ISM manufacturing index, which is dollar negative and (2) reduced safe-haven demand for the dollar after a late afternoon story from Dow Jones Newswires that reported a Greek Socialist Party Official said Papandreou's call for a referendum is "basically dead."
- Dec crude oil prices this morning are up +22 cents a barrel and Dec gasoline is +1.23 cents per gallon. Crude oil and gasoline prices yesterday tumbled for a second day but recovered most of their losses and settled mixed as the dollar soared, global manufacturing activity weakened and risks for a Greek default rose: CLZ11 -$1.00, RBZ11 +0.95. Dec crude slid to a 1-week low and Dec gasoline posted a 3-week low. Bearish factors included (1) the rally in the dollar to a 2-1/2 week high, which reduces investment demand for commodities, (2) concerns that global economic growth is slowing after the Oct China manufacturing PMI unexpectedly fell to a 2-1/2 year low, the Oct U.K. manufacturing PMI contracted at a 2-1/3 year low and the Oct ISM manufacturing index unexpectedly weakened, (3) renewed concern that the European debt crisis will worsen as Greek Prime Minister Papandreou's pledge to hold a referendum risks pushing Greece into default if the plan is rejected by voters, and (4) comments from Kuwait's Oil Minister that "at the moment, there is no need to cut production to control prices." Bullish factors included (1) the stronger than expected U.K. Q3 GDP, which is positive for energy consumption and (2) comments from the deputy executive director of the IEA who said ?As long as Iran holds the rotating presidency of OPEC, there will be no increases in OPEC production." Expectations for Wednesday's weekly DOE inventory report are for crude oil stockpiles to rise +1.0 million bbl, gasoline supplies to fall -800,000 bbl, distillate inventories to fall -1.75 million bbl and the refinery utilization rate to rise +0.3 to 85.1%.
Global Financial Calendar
| Wednesday 11/2/11 | |
|---|---|
| United States | |
| 0700 ET | Weekly MBA mortgage applications, previous +4.9% with purchase mortgage sub-index +6.4% and refinancing sub-index +4.4%. |
| 0730 ET | Oct Challenger job cuts, Sep +211.5% y/y. |
| 0815 ET | Oct ADP employment change expected +100,000, Sep +91,000. |
| 0900 ET | Treasury announces amounts of 3-year T-notes (previous $32 billion), 10-year T-notes (previous $21 billion) and 30-year T-bonds (previous $13 billion) to be auctioned at the Nov quarterly refunding Nov 8-10. |
| 1230 ET | FOMC announces interest rate decision (expected no change to the 0.00% to 0.25% Fed funds rate). |
| 1415 ET | Fed Chairman Ben Bernanke speaks at a press conference following the FOMC meeting. |
| 2000 ET | Dallas Fed President Richard Fisher speaks on ?Thoughts on Bastiat (With a Nod to Keynes!)? at the 2011 Bastiat-Hoiles Prize Dinner. |
| France | |
| 0450 ET | Revised Oct French PMI manufacturing expected no change at 49.0. |
| Germany | |
| 0455 ET | Revised Oct German PMI manufacturing expected no change at 48.9. |
| 0455 ET | Oct German unemployment change expected -10,000, Sep -26,000. Oct unemployment rate expected unchanged at 6.9%, Sep -0.1 to 6.9%. |
| United Kingdom | |
| 0530 ET | Oct U.K. PMI construction expected -0.1 to 50.0, Sep -2.5 to 50.1. |
| CHI | |
| 2100 ET | Oct China non-manufacturing PMI, Sep +1.7 to 59.3. |
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