Barchart Morning Call
Overnight Developments
Global Financial Calendar
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- Global stocks this morning are mixed with the Euro Stoxx 50 up +0.72% and Mar S&Ps up +5.50 points. The dollar is weaker, which has boosted most commodities, while the euro rose against the dollar after Spain sold more than its maximum target at a debt sale today, easing concern the region's debt crisis is worsening. Spain sold 6 billion euros of bonds due in 2016, 2020, and 2021 today, exceeding a 3.5 billion-euro target. Stocks received a boost after the Dec Euro-Zone PMI composite index unexpectedly rose +0.9 to 47.9, stronger than expectations of -0.5 to 46.5. In its monthly bulletin for Dec, the ECB said inflation pressures in the Euro-Zone should slow next year as the sovereign debt crisis dampens growth and that the global economy "may be weaker than expected." Stock gains were limited after the Dec U.K. CBI trends total orders, an index of factory orders, fell to -23, weaker than expectations of -20 and its weakest level in 14 months as the European debt crisis undermined export demand.
- Asian stocks today closed lower with Japan down -1.66%, China -2.36%, Australia 01.21%, South Korea -2.32%, India -0.28%. Asian stocks closed lower after sentiment among Japan's largest manufacturers deteriorated and after foreign investment in China declined for the first time in over 2 years. The Q4 Japan Tankan large manufacturers survey fell to -4, weaker than expectations of -2, while Nov China foreign direct investment slid -9.8% y/y to $8.76 billion, its first decline in 28 months. China's Shanghai Stock Index fell to a fresh 2-1/2 year low on signs that Chinese manufacturing in may contract for a second month after the Dec China HSBC flash manufacturing PMI rose +1.3 to 49.0 but remained below the 50.0 level of expansion and contraction.
- March S&Ps this morning are trading up +5.50 points. The US stock market yesterday slumped to 2-week lows on concern the European sovereign debt crisis may worsen: Dow Jones -1.10%, S&P 500 -1.13%, Nasdaq Composite -1.55%. Bearish factors included (1) carry-over weakness from a slide in European stocks on concern the region's debt crisis may worsen after Italian borrowing costs rose to a 14-year high and Spanish banks borrowed the most from the ECB in 14 months, (2) global economic growth concerns after the Ifo institute cut its 2011 and 2012 German GDP forecasts and China's Nov M2 money supply growth slowed to its slowest pace in 11 years, (3) weakness in energy producers after crude oil fell to a 2-1//2 week low when OPEC raised its output target for the first time in 3 years.
- Bullish factors included (1) the weaker than expected Nov import price index (+0.7% m/m and +9.9% y/y versus expectations of +1.0% m/m and +10.1% y/y), (2) a rally in financial stocks on reduced European debt concerns after the WSJ reported that Standard & Poor?s has not informed France about an imminent downgrade to the country's credit rating, and (3) the fall in the 10-year T-note yield to a 3-week low of 1.893%.
- March 10-year T-notes this morning are unchanged. T-note prices yesterday rallied to a 2-1/2 month high on increased safe-haven demand after stocks slumped on European debt concerns along with strong demand for the Treasury's $13 billion auction of 30-year T-bonds: TYH2 +10.5, FVH2 -0.5, EDM2 -5.0. Bullish factors included (1) increased safe-haven demand for Treasuries on concern the European debt crisis may worsen after Italian borrowing costs rose to a 14-year high and Spanish banks borrowed the most from the ECB in 14 months, (2) global economic growth concerns after the Ifo institute cut its 2011 and 2012 German GDP forecasts and China's Nov M2 money supply growth slowed to its slowest pace in 11 years, (3) the weaker than expected Nov import price index (+0.7% m/m and +9.9% y/y versus expectations of +1.0% m/m and +10.1% y/y),(4) strong demand for the Treasury's $13 billion auction of 30-year T-bonds that had a bid-to-cover ratio of 3.05, stronger than the 12-auction average of 2.66, and (5) increased safe-haven demand for Treasuries when the S&P 500 tumbled to a 2-week low.
- The dollar index this morning is lower with the dollar/yen -0.21 yen and the euro/dollar +0.18 cents. The dollar index yesterday rallied to an 11-month high and finished stronger on increased safe-haven demand as European debt concerns sent the euro to an 11-month low against the dollar and sent stocks tumbling: Dollar Index +0.347, USDJPY +0.082, EURUSD -0.00537. Bullish factors for the dollar included (1) the increase in Italian borrowing costs after Italy sold 3 billion euros of 5-year bonds at a 14-year high of 6.47%, (2) funding concerns for Spanish banks after Spanish lenders borrowed an average 98 billion euros from the ECB in Nov, the most in 14 months and a sign that banks are struggling to access other sources of finance, (3) the action by the Ifo institute to lower its 2011 GDP forecast for Germany to 3.0% from a previous projection of 3.3% and to slash its 2012 GDP forecast for Germany to 0.4% from 2.3%, and (4) the increase in cost for European banks to borrow in dollars to a 2-week high after the 3-month cross-currency basis swap, the rate banks pay to convert euro payments into dollars, widened to 147 bp below the euro interbank offered rate. A bearish factor was the euro positive comments from ECB Council member and Bundesbank President Weidmann who said he is "not a fan" of the ECB's bond buying program and that the idea that the ECB can solve the sovereign debt crisis by printing money must be laid to rest.
- Jan crude oil prices this morning are up +35 cents a barrel and Jan gasoline is +2.97 cents per gallon. Crude oil and gasoline prices sold-off yesterday after OPEC raised its output target, the dollar rallied, and weekly DOE gasoline supplies rose to an 8-1/2 month high: CLF12 -$5.19, RBF12 -12.12. Jan crude fell to a 2-1/2 week low and Jan gasoline posted a 2-week low. Bearish factors included (1) the rally in the dollar index to an 11-month high, which discourages investment demand in commodities and (2) the action by OPEC to raise its output target for the first time in 3 years to 30 million barrels a day from 24.845 million barrels a day to accommodate increased output from Libya and Iraq, (3) the larger-than-expected increase in weekly DOE gasoline inventories which climbed to an 8-1/2 month high (+3.82 million bbl to 218.8 million bbl versus expectations of +1.0 million bbl), and (4) European debt concerns that drove the S&P 500 down to a 2-week low, which reduces confidence in the economic outlook and energy demand.
Global Financial Calendar
| Thursday 12/15/11 | |
|---|---|
| United States | |
| 0830 ET | Weekly initial unemployment claims expected +9,000 to 390,000, previous -23,000 to 381,000. Weekly continuing claims expected +50,000 to 3.633 million, previous 174,000 to 3.583 million. |
| 0830 ET | Nov PPI expected +0.2% m/m and +5.9% y/y, Oct -0.3% m/m and +5.9% y/y. Nov PPI ex food & energy expected +0.2% m/m and +2.9% y/y, Oct unchanged m/m and +2.8% y/y. |
| 0830 ET | Nov Empire manufacturing index expected +2.4 to 3.0, Oct +9.1 to 0.6. |
| 0830 ET | Q3 current account balance expected -$108.0 billion, Q2 -$118.0 billion. |
| 0900 ET | Oct net long-term TIC flows expected +$62.5 billion, Sep +$68.6 billion. |
| 0915 ET | Nov industrial production expected +0.1%, Oct +0.7%. Nov capacity utilization expected unchanged at 77.8%, Oct +0.5 to 77.8%. |
| 1000 ET | Nov Philadelphia Fed manufacturing index expected +1.4 to 5.0, Oct -5.1 to 3.6. |
| 1100 ET | Treasury announces amounts of 2-year T-notes (previous $35 billion), 5-year T-notes (previous $35 billion) and 7-year T-notes (previous $29 billion to be auctioned Dec 19-21). |
| 1300 ET | Treasury auctions $12 billion 5-year TIPS. |
| 1630 ET | Weekly money supply report and Fed balance sheet. |
| France | |
| 0300 ET | Dec French PMI manufacturing, Nov -1.2 to 47.3. Dec PMI services, Nov +5.0 to 49.6. |
| Germany | |
| 0300 ET | German Chancellor Angela Merkel delivers s speech to the German Parliament on the accords of the Dec 9 EU summit. |
| 0330 ET | Dec German PMI manufacturing expected -0.4 to 47.5, Nov -1.2 to 47.9. |
| 0330 ET | Dec German PMI services expected -0.3 to 50.0, Nov -0.3 to 50.3. |
| Euro-Zone | |
| 0400 ET | Dec Euro-Zone PMI composite expected -0.5 to 46.5, Nov +0.5 to 47.0. |
| 0400 ET | ECB publishes monthly report for Dec. |
| 0500 ET | Nov Euro-Zone CPI expected +0.1% m/m and +3.0% y/y, Oct +0.3% m/m and +3.0% y/y. |
| 0500 ET | Nov Euro-Zone CPI core expected +1.6% y/y, Oct +1.6% y/y. |
| 0500 ET | Q3 Euro-Zone employment, Q2 +0.3% q/q and +0.4 % y/y. |
| 0625 ET | ECB President Mario Draghi speaks at INSM Foundation in Berlin on social market economy. |
| United Kingdom | |
| 0430 ET | Nov U.K. retail sales ex auto fuel expected -0.4% m/m and +0.3% y/y, Oct +0.6% m/m and +0.9% y/y. |
| 0430 ET | Nov U.K. retail sales with auto fuel expected -0.3% m/m and +0.4% y/y, Oct +0.6% m/m and +0.9% y/y. |
| 0600 ET | Dec U.K. CBI trends total orders expected -20, Nov -19. |
| Canada | |
| 0830 ET | Q3 Canada capacity utilization rate expected 79.0%, Q2 78.4%. |
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