Barchart Morning Call
Overnight Developments
- Global stocks are trading mostly higher with the European Euro Stoxx 50 index up +1.01%, and March S&Ps up +12.50 points. Crude oil is weaker and the euro is slightly bid ahead of the conclusion of the ECB's monetary policy meeting and comments from ECB President Trichet later this morning. Stronger consumer spending in Europe helped to lift European stock prices as both Jan German retail sales and Jan Euro-Zone retail sales were better than expected. Stellar company earnings results are also a positive for stocks with AB InBev up 3.1% after the brewer reported Q4 earnings of $3.9 billion, higher than analysts' estimates of $3.4 billion, while Adecco, the world's largest supplier of temporary workers, rose 5.8% after reporting Q4 net income of 141 million euros ($196 million), stronger than estimates of 115 million euros. A slight negative for stock prices was the unexpected downward revision to the Feb Euro-Zone PMI composite index by -0.2 to 58.2.
- The Asian stock markets today closed mostly higher with Japan up +0.89%, Hong Kong +0.32%, China -0.67%, Taiwan +1.37%, Australia +0.07%, Singapore +0.33%, South Korea +2.17%, India +0.23%. Most Asia-Pacific stock markets received a boost after the Fed's Beige Book yesterday said the US labor market improved, which benefits the sustainability of the economic recovery. India's services industry grew at its fastest pace n 7 months after the Feb India services PMI rose +2.1 to 60.2, adding pressure to the RBI to raise interest rates. South Korea's Kospi Index closed higher after Jan Korea industrial production jumped +13.7% y/y, higher than estimates of +12.4% y/y. China's Shanghai Stock Index closed lower after China's services industries contracted in Feb for the first time in a year. The Feb China non-manufacturing PMI tumbled -1.3 to 44.1, its lowest level in 2 years.
Overnight U.S. Stock News
- March S&Ps this morning are trading up +12.50 points. The US stock market closed higher on an upbeat Fed Beige Book and a larger-than-expected increase in private employment: Dow +0.07, S&P 500 +0.16%, Nasdaq Composite +0.39%. Bullish factors included (1) the larger-than-expected increase in employment growth in the Feb ADP employment change (+217,000 versus expectations of +175,000), (2) strength in technology stocks after JPMorgan Chase raised its rating on the semiconductor industry to "constructive" from "cautious," citing a change in its belief that an economic downturn was imminent, (3) comments from Fed Chairman Bernanke who said he wouldn't rule out further Fed purchases of Treasuries if the economy stalls, and (4) the Fed's Beige Book that stated the labor market improved throughout the country early this year, driven by increasing retail sales and "solid growth" in manufacturing.
- Bearish factors for stocks included (1) the rally in crude oil to near a 2-1/2 year high, which threatens to slow consumer and business spending, and (2) hawkish comments from Kansas City Fed President Hoenig who said the Fed should lift the Fed funds rate to 1.00% from near zero rather than ease during the current economic recovery.
- Alcoa (AA) climbed 1.7% in pre-market trading after the prices of copper, lead, nickel and zinc all rose in overnight trade.
Today's Market Focus
- June 10-year T-notes this morning are trading down -7 ticks. T-note prices yesterday fluctuated on either side of unchanged and retreated into the close as an upbeat Beige Book offset a sharp rally in oil prices: TYM11 -13, FVM11 -6.2, EDU11 -2.5. Bearish factors included (1) the larger-than-expected increase in employment growth in the Feb ADP employment change (+217,000 versus expectations of +175,000), (2) hawkish comments from Kansas City Fed President Hoenig who said the Fed should lift the Fed funds rate to 1.00% from near zero rather than ease during the current economic recovery, (3) reduced safe-haven demand for Treasuries after the stock market rallied, and (4) the Fed's Beige Book that stated the labor market improved throughout the country early this year, driven by increasing retail sales and "solid growth" in manufacturing. Bullish factors included (1) the rally in crude oil amid the turmoil in the Middle East, which threatens to choke off global economic growth, (2) comments from Fed Chairman Bernanke who said he wouldn't rule out further Fed purchases of Treasuries if the economy stalls, and (3) the Fed's action to purchase $6.7 billion of Treasuries as part of its QE2 asset-purchase program.
- The dollar index this morning is trading little changed with the dollar/yen -0.03 yen and the euro/dollar -0.09 cents. The dollar index yesterday sank to a 3-3/4 month low and closed lower as a surge in oil prices threatens economic growth: Dollar Index -0.378, USDJPY +0.010, EURUSD +0.00878. Bearish factors included (1) a rally in crude oil to near a 2-1/2 year high, which threatens to derail economic growth, (2) comments from Fed Chairman Bernanke who said a "sustained period of strong job creation" is needed to ensure a solid recovery and that interest rates will stay low for an "extended period," which signal's the Fed will not raise interest rates anytime soon and that spurred inflation concerns and weakens the dollar's interest rate differentials, and (3) strength in the euro which climbed to a 3-3/4 month high against the dollar after the Jan Euro-Zone PPI accelerated to its fastest pace of increase in 2-1/3 years. Bullish factors included (1) renewed European sovereign-debt concerns that are bearish for the euro after Standard & Poor's kept ratings on Greece's and Portugal's debt credit watch negative, saying both countries debt ratings remain at risk of being cut on concern about how a European Union rescue fund may affect holders of the two nations' sovereign bonds, and (2) the prediction from Axa Investment Managers that Portugal will accept a financial bailout "within the next few weeks" as the cost of issuing debt becomes unsustainable.
- April crude oil prices this morning are trading down -56 cents a barrel and April gasoline -2.77 cents per gallon. Crude oil and gasoline prices yesterday rallied sharply for a second day on concern the civil unrest in Libya will spread to other oil producing countries in the region: CLJ11 +$2.60, RBJ11 +4.20. April gasoline rose to a contract high and nearest-futures Mar gasoline soared to a 2-1/2 year high. Bullish factors included (1) the decline in the dollar index to a 3-3/4 month low, which boosts investment demand for commodities, (2) concern that the civil unrest that is curbing oil exports from Libya will spread to other oil-producing countries in the region, and (3) the unexpected declines in weekly DOE inventories of crude oil and gasoline (crude -364,000 bbl versus expectations of +875,000 bbl and gasoline -3.59 million bbl versus expectations of no change). Bearish factors include (1) the +1.13 million bbl increase in crude oil inventories at Cushing, Oklahoma, the delivery point for NYMEX WTI crude contracts, to 38.6 million barrels, the highest level since at least 2004 when the DOE began tracking stockpiles at the hub, and (2) the prediction from Petomatrix GmbH that oil markets are showing signs of "demand destruction" as high prices erode consumption.
Today's U.S. Earnings Reports Earnings reports (confirmed releases, sorted by mkt cap) HNZ-HJ Heinz (BEST earnings consensus $0.82), KR-Kroger (0.44), MRVL-Marvell Technology Group Ltd. (0.42), DLM-Del Monte Foods (0.40), BIG-Big Lots (1.38), COO-Cooper (0.68), NOVL-Novell (0.07), UNFI-United Natural Foods (0.39), WNR-Western Refining (0.06), HUGH-Hughes Communications (0.56), GEL-Genesis Energy LP (0.31), SEM-Select Medical Holdings (0.14), IRWD-Ironwood Pharmaceuticals (-0.17), NNI-Nelnet (1.52), DIN-DineEquity (0.61).
Global Financial Calendar
| Thursday 3/3/11 |
| United States |
| 0830 ET | Weekly initial unemployment claims expected +4,000 to 395,000, previous ?22,000 to 391,000. Weekly continuing claims expected +25,000 to 3.815 million, previous 145,000 to 3.790 million. |
| 0830 ET | Revised Q4 nonfarm productivity expected +2.3%, previous +2.6%. Revised Q4 unit labor costs expected 0.5%, previous ?0.6%. |
| 0945 ET | Bloomberg weekly consumer comfort index. |
| 1000 ET | Feb ISM non-manufacturing index expected ?0.1 to 59.3, Jan +2.3 to 59.4. |
| 1030 ET | Feb ICSC chain store sales, Jan +4.8% y/y. |
| 1100 ET | Minneapolis Fed President Narayana Kocherlakota speaks at St. Cloud State University Winter Institute. |
| 1100 ET | Treasury announces amounts of 1-year T-bills (previous $22 billion), 3-year T-notes (previous $32 billion), 10-year T-notes (previous $24 billion) and 30-year T-bonds (previous $16 billion) to be auctioned Mar 8-10. |
| 1215 ET | Atlanta Fed President Dennis Lockhart speaks to eh Economic Club of Florida on the economy and labor. |
| 1630 ET | Weekly money supply report and Fed balance sheet. |
| France |
| 0130 ET | Q4 French mainland unemployment rate, Q3 unchanged at 9.3%. Q4 ILO unemployment rate expected unchanged at 9.7%, Q3 unchanged at 9.7%. |
| 0350 ET | Revised Feb French PMI services expected no change at 60.8. |
| Germany |
| 0200 ET | Jan German retail sales expected +0.5% m/m and +1.7% y/y, Dec ?0.3% m/m and ?1.3% y/y. |
| 0355 ET | Revised Feb German PMI services expected no change at 59.5. |
| Euro-Zone |
| 0400 ET | Revised Feb Euro-Zone PMI composite expected no change at 58.4. |
| 0500 ET | Revised Q4 Euro-Zone GDP expected no change at +0.3% q/q and +2.0% y/y. |
| 0500 ET | Jan Euro-Zone retail sales expected +0.3% m/m and unchanged y/y, Dec ?0.6% m/m and ?0.8% y/y. |
| 0745 ET | ECB announces interest rate decision (expected no change to the 1.00% 2-week refinancing rate). |
| 0830 ET | ECB President Jean-Claude Trichet speaks at monthly press conference. |
| United Kingdom |
| 0430 ET | Feb UK PMI services expected ?0.7 to 53.8, Jan +4.8 to 54.5. |
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