Barchart Morning Call
Thu, 22 Dec 2011 07:00:00 -0600
Overnight Developments- Global stocks this morning are mixed with the Euro Stoxx 50 up +1.11% and Mar S&Ps up +6.50 points. The dollar index is lower which has boosted most commodities with crude oil at a 1-week high. The markets are awaiting a meeting of the European Systemic Risk Board later this morning in which ECB President Draghi and BOE Governor King are scheduled to speak. European stocks received a boost after Q3 U.K. GDP was revised up to a gain of +0.6% q/q from the previously reported +0.5% q/q. Gains in the euro were limited and the yield on 10-year Greek bonds rose +16 bp to 35.94% after it was reported that 3 people with knowledge of the matter said Greece's creditors are resisting pressure from the IMF to accept bigger losses on holdings of Greek government debt. The IMF is pushing for creditors to accept a smaller coupon in order to reduce Greece's debt-to-GDP ratio to 120% by 2020, a key element agreed to by EU leaders back in Oct.
- Asian stocks today closed mixed with Japan down -0.77%, China +0.09%, Australia -1.18%, South Korea -0.05%, India +0.82%. Most Asian stock markets weakened after European banks sought a record amount of cash from the ECB and U.S. existing home sales from last year were revised lower, which dampened the earnings outlook for Asian exporters. Japanese technology stocks weakened and led the overall market lower after a 4.5% decline in Advantest, the world's biggest maker of memory-chip testers, when JPMorgan Chase cut its ratings on the stock to "underweight" from "neutral," citing weak orders. China's Shanghai Stock Index fell to a fresh 2-1/2 year low on liquidity concerns after the 7-day repurchase rate jumped 19 bp to a 3-week high of 3.79% as speculation rises that banks will hoard cash to meet year-end capital requirements and customer withdrawals. The RBI signaled that economic growth in India, Asia's third-largest economy, may grow less than previously estimated in the year through March after RBI Governor Subbarao said the central bank will give a revised growth estimate on Jan 24 "and by all expectations that number will be lower than 7.6%," the current growth estimate.
- March S&Ps this morning are trading up +6.50 points. The US stock market yesterday settled mixed as a rally in energy stocks led the broader market higher but technology stocks settled lower when Oracle reported weaker-than-expected earnings results: Dow Jones +0.03%, S&P 500 +0.19%, Nasdaq Composite -0.99%. Bullish factors included (1) the action by the ECB to loan European banks a record 489 billion euros in 3-year loans, which temporarily reduced European debt concerns and boosted stocks, (2) the +4.0% m/m increase in Nov U.S. existing home sales to a 10-month high of 4.42 million, stronger than expectations of +2.2% m/m, and (3) strength in energy producers after crude oil rallied sharply when the DOE reported that weekly crude inventories fell more than expected to near a 3-year low.
- Bearish factors included (1) carry-over weakness from a slide in European equities after Italian and Spanish bond yields rose and Dec Euro-Zone consumer confidence fell more than expected to a 2-1/3 year low on speculation that ECB measures to support the European banking system will be insufficient to stem the region's debt crisis, (2) a slide in technology stocks after Oracle plunged and dragged the entire sector lower when it reported weaker than expected Q2 earnings, and (3) the action by the National Association of Realtors to revise down the number of U.S. existing homes sold in 2010 by -15% to 4.19 million from the originally reported 4.91 million, which signals the U.S. housing crisis was worse than estimated.
- Tibco Software (TIBX) rose 3.4% in European trading after the company reported Q4 adjusted earnings of 42 cents a share, stronger than analysts' estimates of 35 cents.
- March 10-year T-notes this morning are up +3.5 ticks. T-note prices yesterday fluctuated on either side of unchanged and settled lower as slack demand for the Treasuries 7-year T-note auction offset an increase in safe-haven demand after stock prices declined: TYH2 -6.5, FVH2 -4.7, EDM2 unchanged. Bearish factors included (1) the action by the ECB to loan European banks a record 489 billion euros in 3-year loans, which temporarily eased European debt concerns and reduced safe-haven demand for Treasuries, (2) the +4.0% m/m increase in Nov U.S. existing home sales to a 10-month high of 4.42 million, stronger than expectations of +2.2% m/m, (3) slack demand for the Treasury's $29 billion auction of 7-year T-notes that had a bid-to-cover ratio of 2.68, below the 12-auction average of 2.84, and (4) overall supply pressures after the Treasury auctioned $177 billion in government debt over the past 2 weeks, the most ever for that time frame. Bullish factors included (1) the action by the National Association of Realtors to revise down the number of U.S. existing homes sold in 2010 by -15% to 4.19 million from the originally reported 4.91 million, which signals the U.S. housing crisis was worse than estimated and (2) increased safe-haven demand for Treasuries as the stock market declined.
- The dollar index this morning is lower with the dollar/yen +0.03 yen and the euro/dollar +0.22 cents. The dollar index yesterday recovered from a 1-week low and settled higher on speculation that ECB measures to support European banks won't be enough to stem the region's sovereign-debt crisis: Dollar Index +0.140, USDJPY +0.168, EURUSD -0.00355. Bullish factors included (1) weakness in the euro which retreated from a 1-week high against the dollar and settled lower after European government bond yields rose and (2) increased safe-haven demand for the dollar as European and U.S. equity markets tumbled on speculation that ECB measures to support European banks won't be enough to stem the region's sovereign-debt crisis. Bearish factors for the dollar included (1) early strength in the euro after 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, which may help avoid a liquidity squeeze and reduce the safe-haven demand for the dollar and (2) the action by the National Association of Realtors to revise down the number of U.S. existing homes sold in 2010 by -15% to 4.19 million from the originally reported 4.91 million, which signals the U.S. housing crisis was worse than estimated.
- Feb crude oil prices this morning are up +38 cents a barrel at a 1-week high and Feb gasoline is -0.19 of a cent per gallon. Crude oil and gasoline prices yesterday rallied for a third day after weekly DOE crude supplies fell more than expected to a nearly 3-year low and total U.S. petroleum demand increased: CLG12 +$1.43, RBG12 +3.75. Bullish factors included (1) the plunge in weekly DOE crude inventories to a nearly 3-year low (-10.57 million bbl to 323.6 million bbl versus expectations of -2.12 million bbl, (2) the unexpected decline in weekly DOE gasoline supplies (-412,000 bbl versus expectations of a +1.5 million bbl build), (3) increased demand after total U.S. petroleum demand for the week ended Dec 16 rose +5% w/w to 19.3 million barrels a day, and (4) reduced European debt concerns after the ECB lent European banks a record amount for 3 years, which may help avoid a liquidity squeeze and help stem the region's debt crisis. Bearish factors included (1) a rebound in the dollar after the dollar index recovered from a 1-week low and settled higher, (2) weakness in the equity market, which curbs confidence in the economic outlook and energy demand, and (3) the greater-than-expected decline in Nov Japan exports along with the BOJ's assessment of the Japanese economy to "remain more or less flat for the time being," which signals reduced energy demand in the world's third-biggest crude oil consumer.
Global Financial Calendar
| Thursday 12/22/11 | |
|---|---|
| United States | |
| 0830 ET | Weekly initial unemployment claims expected +14,000 to 380,000, previous -19,000 to 366,000. Weekly continuing claims expected -3,000 to 3.600 million, previous +4,000 to 3.603 million. |
| 0830 ET | Revised Q3 GDP, previous +2.0% annualized. Qs personal consumption, previous +2.3%. Q3 GDP price index, previous +2.5%. Q3 core PCE, previous +2.0% q/q. |
| 0955 ET | Final Dec U.S. University of Michigan consumer confidence expected +0.3 to 68.0, previous +3.6 to 67.7. |
| 1000 ET | Nov leading indicators expected +0.3%, Oct +0.9%. |
| 1000 ET | Oct FHFA house price index purchase only expected +0.2% m/m, Sep +0.9% m/m. |
| 1630 ET | Weekly money supply report and Fed balance sheet. |
| United Kingdom | |
| 0430 ET | Revised Q3 U.K. GDP, previous +0.5% q/q and +0.5% y/y. |
| 0430 ET | Revised Q3 U.K. total business investment, previous -1.4% q/q and +0.3% y/y. |
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