Barchart Morning Call
Wed, 21 Dec 2011 07:00:00 -0600
Overnight Developments- Global stocks this morning are mostly higher with the Euro Stoxx 50 up +0.22% and Mar S&Ps up +2.80 points. Treasuries and the dollar fell on reduced safe-haven demand after stocks and commodities rallied when the ECB lent Euro-Zone banks a record amount for 3 years in an effort to avert a liquidity squeeze during the ongoing debt crisis. The ECB awarded 489 billion euros in 1,134 day loans, the most ever in a single operation and more than estimates of 293 billion euros to a total of 523 Euro-Zone lenders. That helped push the cost of credit default swaps to insure European government debt down 6 bp to a 2-week low of 355.5 bp. Limiting gains in stocks is weakness in technology shares led by a 7.5% drop in Oracle when it reported late yesterday that its fiscal Q2 profit than ended Nov 30 was 54 cents a share on revenue excluding certain items of $8.81 billion, weaker than analysts' estimates of profit of 57 cents a share on sales of $9.23 billion. The British pound rallied to a 3-week high against the dollar after the Nov U.K. budget deficit narrowed more than expected as net borrowing excluding support for banks was 18.1 billion pounds, smaller than expectations of 19.1 billion pounds.
- Asian stocks today closed mostly higher with Japan up +1.48%, China -1.60%, Australia +2.13%, South Korea +3.28%, India +3.36%. Asian stocks finished mostly higher as better-than-expected U.S. data on housing starts and the unexpected increase in German business optimism reduces the chances of the global economy falling into recession and boosts the earnings prospects of Asian exporters. Gains in Japanese stocks were limited after Nov Japan exports fell -4.5% y/y, weaker than expectations of -4.3% y/y and after the BOJ downgraded its assessment of the economy following its policy meeting when it said the Japanese economy will "remain more or less flat for the time being." Chinese stocks closed lower as a cash crunch weighed on equities after the 7-day repurchase rate, a gauge of funding available in the financial system, rose 36 bp to a 2-1/2 week high of 3.60% as banks hoard cash to meet year-end reserve-ratio requirements.
- March S&Ps this morning are trading up +2.80 points. The US stock market yesterday rallied right from the opening and settled sharply higher as European debt concerns eased and recession fears abated after strong Nov U.S. housing starts bolstered speculation the U.S. economy may weather the European debt crisis: Dow Jones +2.87%, S&P 500 +2.98%, Nasdaq Composite +3.19%. Bullish factors included (1) carry-over strength from a rally in European equity markets as the region's debt concerns eased after strong demand was seen at an auction of Spanish government debt and after Dec German Ifo business sentiment unexpectedly improved, (2) a rally in homebuilders after Nov U.S. housing starts rose to a 19-month high (+9.3% to 685,000) and Nov U.S. building permits unexpected surged to a 20-month high (+5.7% to 681,000 versus expectations of -1.4% to 635,000), (3) data from the U.S. Labor Department that showed payrolls increased in 29 states in Nov and the jobless rate declined in 43 states, a sign the labor market is recovering across much of the U.S., and (4) comments from Minneapolis Fed President Kocherlakota who said recent government data have made him "more upbeat" on the outlook for the U.S. economy.
- Bearish factors included (1) comments from European Commission President Barroso who said the sovereign-debt crisis is "worsening" conditions in the European labor market and (2) concern the European debt crisis may worsen after Fitch Ratings said the risk of downgrading the EFSF bail-out fund had increased and that the fund's AAA rating depends on France remaining AAA.
- Research in Motion (RIMM) surged 13% in pre-market trrading after the WSJ reported that Microsaft and Nokia Oyj have "flirted" with the idea of making a joint bid for the company.
- Oracle (ORCL) fell 7.5% in pre-market trading after the company reported late yesterday that its fiscal Q2 profit than ended Nov 30 was 54 cents a share on revenue excluding certain items of $8.81 billion, weaker than analysts' estimates of profit of 57 cents a share on sales of $9.23 billion.
- March 10-year T-notes this morning are up +1 tick. T-note prices yesterday retreated on reduced safe-haven demand as equity markets rallied sharply after German business confidence unexpectedly improved and as Nov U.S. housing starts surged to a 19-month high: TYH2 -22.5, FVH2 -8.0, EDM2 +0.5. Bearish factors included (1) carry-over weakness from a slide in German bund prices after European debt concerns eased when the Dec German Ifo business climate unexpectedly improved and after strong demand was seen at a Spanish auction of government debt, (2) the larger-than-expected increase in Nov U.S. housing starts which rose to a 19-month high (+9.3% to 685,000 versus expectations of +1.1% to 635,000), (3) the unexpected surge in Nov U.S. building permits to their best level in 20 months (+5.7% to 681,000 versus expectations of -1.4% to 635,000), (4) comments from Minneapolis Fed President Kocherlakota who said recent government data have made him "more upbeat" on the outlook for the U.S. economy, and (5) supply pressures ahead of the Treasury's $29 billion auction of 7-year T-notes on Wed. Bullish factors included (1) strong demand for the Treasury's $35 billion auction of 5-year T-notes that had a bid-to-cover ratio of 2.86, slightly above the 12-auction average of 2.84 and strong foreign demand after indirect bidders took 50.6% of the auction, above the 12-auction average of 41.8%, and (2) the statement from Fitch Ratings that said the risk of downgrading the EFSF bail-out fund had increased and that the fund's AAA rating depends on France remaining AAA.
- The dollar index this morning is lower with the dollar/yen -0.07 yen and the euro/dollar +0.05 cents. The dollar index yesterday settled lower as the euro rallied when German business sentiment unexpectedly improved and strong demand was seen at a sale of Spanish government debt: Dollar Index -0.405, USDJPY -0.156, EURUSD +0.00835. Bearish factors included (1) the unexpected increase in the Dec German Ifo business climate, which is euro supportive, (2) the action by Spain to sell 5.64 billion euros of 3-month and 6-month Treasury bills, more than the maximum target of 4.5 billion euros and a sign of strong demand, and (3) strength in the British pound which rose to a 1-week high against the dollar after Nov U.K. nationwide consumer confidence unexpectedly rose and Dec U.K. CBI reported that sales unexpectedly surged to a 7-month high. Bullish factors for the dollar included (1) ongoing European debt crisis concerns which boosts the safe-haven demand for the dollar after European Commission President Barroso said the sovereign-debt crisis is "worsening" conditions in the European labor market and (2) dollar supportive comments from Minneapolis Fed President Kocherlakota who said recent government data have made him "more upbeat" on the outlook for the U.S. economy.
- Feb crude oil prices this morning are up +34 cents a barrel and Feb gasoline is +0.01 of a cent per gallon. Crude oil and gasoline prices yesterday closed higher for a second day as the dollar weakened, European debt concerns eased and after Nov U.S. housing starts surged: CLG12 +$3.19, RBG12 +8.68. Bullish factors included (1) the weaker dollar, which encourages investment demand in commodities, (2) the surge in Nov U.S. housing starts to their best level in 19 months, which lifts confidence in the economy and energy demand, and (3) reduced European debt concerns after the Dec German Ifo business climate unexpectedly gained. Bearish factors included (1) comments from European Commission President Barroso who said the sovereign-debt crisis is "worsening" conditions in the European labor market, which may slow economic growth and fuel demand and (2) concern that U.S. legislators will fail to extend the expiring U.S. payroll tax cut, which may reduce economic growth and fuel demand. Expectations for Wednesday's weekly inventory report from the DOE are for crude oil stockpiles to fall -2.12 million bbl, gasoline supplies to increase +1.5 million bbl, distillate inventories to fall -750,000 bbl and the refinery capacity rate to rise +0.4 to 85.5%.
Global Financial Calendar
| Wednesday 12/21/11 | |
|---|---|
| United States | |
| 0700 ET | Weekly MBA mortgage applications, previous +4.1% with purchase mortgage sub-index -8.2% and refinancing sub-index +9.3%. |
| 1000 ET | Nov existing home sales expected +2.0% to 5.07 million. |
| 1300 ET | Treasury auctions $29 billion 7-year T-notes. |
| Germany | |
| 0200 ET | Nov German import price index expected +5.3% y/y, Oct -0.3% m/m and +6.8% y/y. |
| United Kingdom | |
| 0430 ET | Minutes of the Dec 8 BOE policy meeting. |
| 0430 ET | Nov U.K. public sector net borrowing expected +16.6 billion pounds, Oct +3.4 billion pounds. |
| Canada | |
| 0830 ET | Oct Canada retail sales expected +0.4% and +0.2% less autos, Sep +1.0% m/m and +0.5% less autos. |
| Euro-Zone | |
| 1000 ET | Dec Euro-Zone consumer confidence expected -0.6 to -21.0, Nov -0.5 to -20.4. |
| 1800 ET | European Systemic Risk Board (ESRB) meets in Frankfurt. |
| Japan | |
| n/a | BOJ announces interest rate decision (expected no change to the 0.00% to 0.10% benchmark rate). |
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