Barchart Morning Call
Overnight Developments
Global Financial Calendar
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- Global stocks this morning are mixed with the Euro Stoxx 50 up +0.41% and Dec S&Ps down -1.40 points. The dollar and Treasuries are little changed as the market awaits an expected 25 bp interest rate cut by the ECB and the possibility the central bank loosens collateral criteria and offers longer-term loans to give banks greater access to cheap cash. EU leaders will meet for a dinner tonight in Brussels for talks on a "comprehensive" solution to the region's debt crisis that will continue tomorrow. The euro is slightly weaker against the dollar on concern Euro-Zone nations may have their credit ratings downgraded if European leaders fail to agree on a plan to curb the debt crisis. Gains in European stocks were limited after the Nov Bank of France business sentiment fell for an eighth month as it dropped -1 to a 2-year low of 95. The BOE as expected maintained its benchmark interest rate at 0.50% and kept its asset purchase target at 275 billion pounds.
- Asian stocks today closed lower with Japan down -0.66%, China -0.13%, Australia -0.27%, South Korea -0.50^, India -2.30%. China's Shanghai Stock Index posted a 2-1/2 year low and closed lower ahead of economic data later today that may show a decline in Chinese industrial production and retail sales. A rally in the yen to a 1-week high against the dollar undercut Japanese exporters, while an unexpected decline in Japanese machinery orders for a second month signals that a slowing global economy is prompting companies to postpone investment. Oct Japan machine orders, an indicator of capital spending, fell -6.9% m/m and rose +1.5% y/y, much weaker than expectations of +0.5% m/m and +9.4% y/y. Moody's Investors Service said Japan may face "long-term key challenges" to its credit rating because of a swelling debt load. The Australian dollar fell against most currencies after Nov Australian payrolls unexpectedly fell -6,300, weaker than expectations for a +10,000 gain, while the unemployment rate rose +0.1 to 5.3%.
- December S&Ps this morning are trading down -1.40 points. The US stock market yesterday gyrated between gains and losses and finally settled mixed as gains in financial companies offset European sovereign debt concerns: Dow Jones +0.38%, S&P 500 +0.20%, Nasdaq Composite -0.01%. The S&P 500 posted a 4-week high and the Dow climbed to a 5-week high. Bullish factors included (1) a rally in financial stocks, led by an increase in JPMorgan Chase, after CEO Dimon said the bank may buy back some of its shares, (2) signs that the global economy continues to grow after Q3 Australia GDP expanded more than expected and Oct German industrial production rose more than expected, and (3) expectations for a 25 bp interest rate cut by the ECB on Thursday along with speculation the ECB may take additional measures to stimulate bank lending.
- Bearish factors included (1) carry-over weakness from a slide in European stocks on skepticism European leaders will be able to resolve the region's debt crisis after an official from German Chancellor Merkel's government said it was more pessimistic over the outcome of this week's summit, (2) concerns over the global banking system after the Libor OIS spread, which increases as banks become less willing to lend, widened to a 2-1/2 year high of 44 bp, and (3) weakness in energy producers after oil prices fell on an unexpected build in weekly crude supplies and as coal producers slumped when Goldman Sachs cut its view on the coal industry to "neutral" from "attractive."
- American Axle & Manufacturing Holdings (AXL) climbed 2.8% in European trading after the company was raised to "buy" from "hold" at Deutsche Bank AG.
- March 10-year T-notes this morning are down -5.5 ticks. T-note prices yesterday settled higher on increased safe-haven demand over skepticism European leaders will be able to resolve the region's debt crisis at this week's summit: TYH2 +20.5, FVH2 +10.5, EDM2 +1.5. Bullish factors included (1) increased safe-haven demand for Treasuries on concern the European debt crisis may not get resolved anytime soon after an official from German Chancellor Merkel's government said it was more pessimistic over the outcome of this week's summit, (2) concerns over the global banking system that boosted the safe-haven demand for Treasuries after the Libor OIS spread, which increases as banks become less willing to lend, widened to a 2-1/2 year high of 44 bp, and (3) carry-over support from a slide in the 10-year German bund yield to a 2-week low on expectations for a 25 bp interest rate cut by the ECB on Thursday. Bearish factors included (1) reduced safe-haven demand as stocks rallied and (2) the larger-than-expected increase in Oct U.S. consumer credit (+$7.645 billion versus expectations of +$7.000 billion)
- The dollar index this morning is higher with the dollar/yen -0.32 yen and the euro/dollar -0.29 cents. The dollar index yesterday settled little changed as headlines out of Europe whipsawed prices on both sides of unchanged throughout the day: Dollar Index -0.014, USDJPY -0.055, EURUSD +0.00104. Bullish factors for the dollar included (1) increased safe-haven demand for the dollar on concern the European debt crisis may not get resolved anytime soon after an official from German Chancellor Merkel's government said it was more pessimistic over the outcome of the 2-day summit that starts Thu, and (2) euro negative comments from 3 Euro-Zone officials who said that the ECB on Thursday may take additional measures to stimulate bank lending. Bearish factors included (1) a drop in European government bond yields after Germany got bids for 8.67 billion euros at an auction of 5-year notes, more than the maximum sales target of 5 billion euros, which is a sign of strong demand and euro supportive, (2) stronger-than-expected Oct German industrial production, which is euro positive, and (3) reduced dollar demand from European banks after the 3-month cross-currency basis swap, the rate banks pay to convert euro payments into dollars, fell to a 3-week low of -114 bp below the euro interbank offered rate.
- Jan crude oil prices this morning are up +41 cents a barrel and Jan gasoline is +1.12 cents per gallon. Crude oil and gasoline prices yesterday fell back after weekly DOE crude inventories unexpectedly increased and as optimism waned that a resolution to the European debt crisis would be found: CLF12 -$0.79, RBF12 -5.85. Bearish factors included (1) the unexpected increase in weekly DOE crude inventories (+1.34 million bbl versus expectations of -1.25 million bbl), (2) the larger-than-expected surge in weekly DOE gasoline supplies to their highest in 4 months (+5.15 million bbl to 215.0 million bbl versus expectations of +875,000 bbl), (3) waning optimism for a near-term resolution to the European debt crisis after German Chancellor Merkel's government said it was more pessimistic over the outcome of the 2-day summit that starts Thu, and (4) increased Saudi Arabian crude output after Saudi oil minister Ali al-Naimi said Saudi Arabian oil production rose to a 31-year high of 10 million barrels a day in Nov and may also increase to that amount again in Dec. Bullish factors included (1) comments from 3 Euro-Zone officials who said that the ECB on Thursday may take additional measures to stimulate bank lending, which may lift economic growth and energy demand and (2) the stronger-than-expected Q3 Australian GDP, which indicates strength in the global economy that is positive for energy consumption.
Global Financial Calendar
| Thursday 12/8/11 | |
|---|---|
| United States | |
| 0830 ET | Weekly initial unemployment claims expected -7,000 to 395,000, previous +6,000 to 402,000. Weekly continuing claims expected -40,000 to 3.700 million, previous +35,000 to 3.740 million. |
| 1000 ET | Oct wholesale inventories expected +0.3%, Sep -0.1%. |
| 1100 ET | Treasury announces amounts of 1-year T-bills (previous $25 billion), 3-year T-notes (previous $32 billion), 10-year T-notes (previous $24 billion), 30-year T-bonds (previous $16 billion) and 5-year TIPS (previous $12 billion) to be auctioned Dec 13-15. |
| 1630 ET | Weekly money supply report and Fed balance sheet. |
| France | |
| 0130 ET | Revised Q3 French non-farm payrolls, expected unchanged at 0.0% q/q. |
| 0230 ET | Nov Bank of France business sentiment, Oct -1 to 96. |
| United Kingdom | |
| 0700 ET | BOE announces interest rate decision and asset purchase target (expected no change to the 0.50% benchmark rate or to the 275 billion pound asset purchase target). |
| Euro-Zone | |
| 0745 ET | ECB announces interest rate decision (expected -25 bp cut to the 2-week refinancing rate to 1.00%). |
| 0830 ET | ECB President Mario Draghi speaks at monthly press conference. |
| 1030 ET | ECB Vice Chairman Vitor Constancio speaks at a conference in Frankfurt titled ?Challenges to the European Macroeconomic Policy in 2012.? |
| 1330 ET | European Union starts summit meeting in Brussels with dinner session for all 27 leaders. |
| Canada | |
| 0815 ET | Nov Canada housing starts expected +202,500, Oct +207,600. |
| 0830 ET | Oct Canada new housing price index expected +0.2% m/m, Sep +0.2% m/m and +2.3% y/y. |
| 1030 ET | |
| Japan | |
| 1850 ET | Q4 Japan BSI business condition all industry, Q3 6.6 q/q. Q4 BSI large manufacturing, Q3 10.3 q/q. |
| 1850 ET | Revised Q3 Japan GDP expected +1.3% q/q and +5.1% annualized, previous +1.5% q/q and +6.0% annualized. Revised Q3 deflator expected no change at -1.9% y/y. |
| CHI | |
| 2100 ET | Nov China CPI expected +4.5% y/y, Oct +5.5% y/y. |
| 2100 ET | Nov China PPI expected +3.3% y/y, Oct +5.0% y/y. |
| 2100 ET | Nov China industrial production expected +12.6% y/y, Oct +13.2% y/y. |
| 2100 ET | Nov China retail sales expected +16.8% y/y, Oct +17.2% y/y. |
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