Barchart Morning Call
Overnight Developments
Global Financial Calendar
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- Global stocks this morning are mostly higher with the Euro Stoxx 50 up +1.40% and Dec S&Ps up +12.90 points. The dollar and Treasuries weakened as stocks and commodities rose ahead of this morning's Nov U.S. payrolls report. The euro strengthened against the dollar and European bank stocks rallied as yields on Italian and Spanish government bonds declined, while the cost of credit default swaps to insure European government debt also fell. German Chancellor Merkel rejected the idea of joint Euro-Zone bonds or trying to make the ECB the lender of last resort, saying overcoming the region's sovereign debt crisis "will take years" as she renewed her push for European fiscal union. European finance ministers and government leaders will meet Dec 9 in Brussels as they seek a remedy to the region's debt crisis. Oct Euro-Zone PPI rose +0.1% m/m and +5.5% y/y, weaker than expectations of +0.2% m/m and +5.6% y/y.
- Asian stocks today closed mixed with Japan up +0.54%, China -1.02%, Australia +1.40%, South Korea -0.13%, India +2.20%. Japanese stocks closed higher, led by a rally in builders and construction companies, after the Japanese government said it plans a fourth extra budget of more than 2 trillion yen ($26 billion) to help shore up the economic recovery and help rebuild after the Mar earthquake. Exporters gained as the yen weakened against the dollar after Japanese Finance Minister Azumi said he will take action on speculative currency moves and after Japanese Trade and Industry Minister Edano said he doubts the strong yen reflects the country's economic fundamentals. Q3 Japan capital spending excluding software tumbled -11.0%, a larger-than-expected decline of -3.0% and the biggest drop since Q1 2010. Chinese stocks closed lower, led by a drop in energy and material producers. Also airlines stocks declined after the China Securities Journal reported that the government raised jet fuel prices by 376 yuan per ton to 7,853 yuan per ton in December.
- December S&Ps this morning are trading up +12.90 points ahead on Nov U.S. payrolls. The US stock market yesterday settled mixed as stronger-than-expected U.S. manufacturing data was offset by weakness in financial stocks: Dow Jones -0.21%, S&P 500 -0.19%, Nasdaq Composite +0.22%. The S&P 500, the Dow and the Nasdaq all posted 2-week highs. Bearish factors included (1) global growth concerns after the larger-than-expected contraction in Nov China manufacturing by the most in 2-3/4 years, (2) the unexpected increase in weekly initial U.S. unemployment claims (+6,000 to 402,000 versus expectations of -3,000 to 390,000), the warning from the United Nations that the world economy would grind to a halt should European leaders fail to contain the region's debt crisis as risks of a double-dip recession in the U.S. and Europe loom, and (4) weakness in financial stocks after the state of Massachusetts sued 5 lenders, including Bank of America and JPMorgan Chase, over foreclosure practices.
- Bullish factors included (1) reduced European debt concerns after the yields on Spanish and French bonds fell after both countries had successful government debt auctions, (2) the larger-than-expected increase in the Nov ISM manufacturing index which expanded at its fastest pace in 5 months (+1.9 to 52.7 versus expectations of +0.9 to 51.7), (3) the stronger-than-expected Oct construction spending (+0.8% versus expectations of +0.3%), and (4) comments from St. Louis Fed President Bullard who said he sees stronger growth in 2012 after better than expected economic news in the fall of this year.
- Bank of America (BAC) rose 2.2% and Citigroup (C) climbed 1.9% in pre-market trading on carry-over strength fram a rally in European bank stocks.
- March 10-year T-notes this morning are down -1.5 ticks. T-note prices yesterday settled lower as safe-haven demand from the ongoing European debt crisis offset stronger than expected U.S. manufacturing data and construction spending: TYH12 -6.5, FVH12 -3, EDM12 -0.5. Bearish factors included (1) the larger-than-expected increase in the Nov ISM manufacturing index which expanded at its fastest pace in 5 months (+1.9 to 52.7 versus expectations of +0.9 to 51.7), (2) the stronger-than-expected Oct construction spending (+0.8% versus expectations of +0.3%), and (3) comments from St. Louis Fed President Bullard who said he sees stronger growth in 2012 after better than expected economic news in the fall of this year. Bullish factors included (1) the unexpected increase in weekly initial U.S. unemployment claims (+6,000 to 402,000 versus expectations of -3,000 to 390,000), (2) the larger-than-expected contraction in Nov China manufacturing by the most in 2-3/4 years, which may lead to a slowdown in the global economy, and (3) the warning from the United Nations that the world economy would grind to a halt should European leaders fail to contain the region's debt crisis as risks of a double-dip recession in the U.S. and Europe loom.
- The dollar index this morning is slightly weaker with the dollar/yen +0.29 yen and the euro/dollar +0.28 cents. The dollar index yesterday settled slightly lower after successful government debt auctions by Spain and France lowered their bond yields and boosted the euro: Dollar Index -0.093, USDJPY +0.078, EURUSD +0.00158. Bearish factors for the dollar included, (1) the drop in the bond yields of Spain and France after Spain sold 3.75 billion euros of 5-year bonds, the maximum planned, while France sold 1.57 billion euros of 10-year bonds at an average yield of 3.18%, down from 3.22% at the last auction on Nov 3, which reduced European debt concerns and boosted the euro and (2) euro positive comments from ECB President Draghi that the ECB's program of buying government bonds "can only be limited," which reduces speculation the ECB will expand its asset-buying program. Bullish factors included (1) increased safe-haven demand for the dollar after contraction in the Nov China PMI manufacturing for the first time in 2-3/4 years bolstered concerns of a global economic slowdown and (2) the stronger-than-expected Nov ISM manufacturing and Oct construction spending, which reduces recession concerns in the U.S.
- Jan crude oil prices this morning are up +88 cents a barrel and Jan gasoline is +6.61 cents per gallon. Crude oil and gasoline prices yesterday settled lower for the first day in five after weekly U.S. jobless claims unexpectedly rose and Chinese manufacturing contracted for the first time in 2-3/4 years, signaling an economic slowdown: CLF12 -$0.16, RBF12 -0.19. Bearish factors included (1) the larger-than-expected decline in the Nov China PMI manufacturing which contracted for the first time since Feb 2009 and indicates reduced fuel demand and consumption in the world's second-largest crude consumer, (2) the unexpected increase in weekly U.S. unemployment claims, which may slow economic growth and fuel demand, and (3) data from Poten & Partners that shows Libyan crude exports may rise 22% this week to 3.3 million barrels, increasing global crude supplies. Bullish factors included (1) the weaker dollar, which encourages investment demand for commodities and (2) the stronger-than-expected Nov ISM manufacturing index which expanded at its fastest pace in 5 months and indicates strong fuel consumption.
Global Financial Calendar
| Friday 12/2/11 | |
|---|---|
| United States | |
| 0830 ET | Nov non-farm payrolls expected +125,000, Oct +80,000. Nov private payrolls (ex-government) expected +150,000, Oct +104,000. Nov unemployment rate expected unchanged at 9.0%, Oct -0.1 to 9.0%. Nov manufacturing payrolls expected +9,000, Oct +5,000. Nov avg hourly earnings all employees expected +0.2% m/m and +2.0% y/y, Oct +0.2% m/m and +1.8% y/y. Nov avg weekly hours all employees expected unchanged at 34.3, Oct unchanged at 34.3. |
| 0900 ET | Dallas Fed President Richard Fisher speaks on ?America?s Fiscal Challenges? at the Dallas/Fort Fort Worth Minority Supplier Development Council. |
| 1000 ET | Philadelphia Fed President Charles Plosser speaks at a media Q & A at the Philadelphia Fed Policy Forum on ?Budgets on the Brink: Perspectives on Debt and Monetary Policy.? |
| 1330 ET | Boston Fed President Eric Rosengren speaks on the economy to the Massachusetts Investment Conference. |
| United Kingdom | |
| 0430 ET | Nov U.K. PMI construction expected -1.9 to 52.0, Oct +3.8 to 53.9. |
| Euro-Zone | |
| 0500 ET | Oct Euro-Zone PPI expected +0.2% m/m and +5.6% y/y, Sep +0.3% m/m and +5.8% y/y. |
| 1230 ET | ECB Council member Juergen Stark speaks in New York at an event titled ?The Economic Situation and Fiscal Challenges.? |
| Canada | |
| 0700 ET | Nov Canada net change in employment expected +11,000, Oct -54,000. Nov unemployment rate expected unchanged at 7.3%, Oct +0.2 to 7.3%. |
| CHI | |
| 2000 ET | Nov China non-manufacturing PMI, Oct -1.6 to 57.7. |
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