Barchart Morning Call 1/10

Barchart Morning Call

Barchart.com - 2 hrs 22 mins ago

Overnight Developments

• Global stocks this morning are higher with the Euro Stoxx 50 up +1.24% and Mar S&Ps up +11.10 points at a 5-1/4 month high. The rally in stocks has undercut the safe-haven demand for the dollar and Treasuries, while commodities gained with gold at a 2-week high. European carmakers rallied and led the broader marker higher as Bayerische Motoren Werke AG, Daimler AG and Audi AG, owned by Volkswagen, said they plan to beat auto industry growth estimates in 2012 following record sales last year. An unexpected increase in Nov French industrial production which rose +1.1% m/m and +0.9% y/y, stronger than expectations of -0.1% m/m and -0.4% y/y, also helped to lift stocks. Limiting gains in the euro was the statement by Fitch Ratings that Italy faces a "significant chance" of a downgrade as they review all of the European sovereigns and will make a decision by the end of the month. The European banking system remains under stress after the ECB reported that overnight deposits from European lenders to the ECB on Monday rose to a record 481.93 billion euros, which fuels concern of a credit crunch as banks remain wary of lending due to counter-party risk.
• Asian stocks today closed higher with Japan up +0.38%, China +3.33%, Australia +1.14%, South Korea +1.54%, India +2.22%. China's Shanghai Stock Index rallied sharply for a second day and posted a 3-week high after slowing trade data boosted speculation the government may loosen monetary policy to spur economic growth. Dec China exports rose +13.4% y/y, right on expectations but the slowest pace of growth in 10 months, while Dec China imports rose +11.8% y/y, weaker than expectations of +18.0% y/y and the weakest pace of growth in over 2 years. Other Asian stock markets also closed higher, led by gains in exporters, after Nov U.S. consumer credit had its biggest increase in a decade and boosted exporters' earnings prospects. Weakness in shipping companies limited gains in Asian stocks though, after the Baltic Dry Index, a measure of shipping costs for commodities, fell 2.9% to its lowest in 4-3/4 months.

Overnight U.S. Stock News

• March S&Ps this morning are trading up +11.10 points at a 5-1/4 month high. The US stock market yesterday fluctuated on both sides of unchanged and settled slightly higher as strength in the semiconductor sector overshadowed European recession concerns: Dow Jones +0.27%, S&P 500 +0.23%, Nasdaq Composite +0.09%. Bullish factors yesterday included (1) strength in technology stocks when chipmakers rallied after Deutsche Bank AG raised the U.S. semiconductor sector to "overweight" from "equal weight" saying weak Q4 results for chipmakers create a buying opportunity for the shares, (2) reduced concern that the European debt crisis will slow the region's economic growth after Nov German exports rose +2.5% m/m, stronger than expectations of +0.5% m/m, and (3) the stronger-than-expected Nov U.S. consumer credit which posted its biggest monthly increase in 10-years (+$20.374 billion versus expectations of +$7.000 billion), which shows consumers are positive enough about the economic outlook to take on more debt.
• Bearish factors included (1) carry-over weakness from a fall in European stocks after a meeting between German Chancellor Merkel and French President Sarkozy failed to provide any concrete plans to stem the region's debt crisis, (2) concern the European sovereign debt crisis will worsen after the Markit iTraxx SovX Western Europe Index of credit-default swaps that insure European sovereign debt rose to a record, and (3) hawkish comments from St. Louis Fed President Bullard who said the Fed probably won't begin a new round of bond purchases (QE 3) following last Friday's "encouraging" jobs report.
• Alcoa (AA) rose 2.4% in pre-market trading after the company's CEO Kleinfeld said that global aluminum demand will grow 7% this year, which when combined with Alcoa's production cuts, will lead to a global aluminum market deficit of 600,000 tons in 2012.

Today's Market Focus

• March 10-year T-notes this morning are down -7 ticks. T-note prices on Monday rallied to a 1-week high and settled higher on dovish comments from Atlanta Fed President Lockhart along with increased safe-haven demand from the European sovereign debt crisis: TYH2 +3.5, FVH2 +3.0, EDM2 +4.5. Bullish factors included (1) comments from Atlanta Fed President Lockhart who said he sees "reluctance to change" the current record accommodation by the Fed as some areas of the U.S. economy are still "challenged," and (2) increased safe-haven demand for Treasuries on concern the European sovereign debt crisis will worsen after the Markit iTraxx SovX Western Europe Index of credit-default swaps that insure European sovereign debt rose to a record. Bearish factors included (1) hawkish comments from St. Louis Fed President Bullard who said the Fed probably won't begin a new round of bond purchases (QE 3) following last Friday's "encouraging" jobs report and (2) supply pressures ahead of the Treasury's $32 billion auction of 3-year T-notes on Tuesday.
• The dollar index this morning is lower with the dollar/yen +0.01 yen and the euro/dollar +0.08 cents. The dollar index on Monday rallied up to a 1-1/4 year high but shed its gains and closed lower after stronger-than-expected Nov German exports fueled short covering in the euro: Dollar Index -0.203, USDJPY -0.122, EURUSD +0.00489. Bearish factors included (1) the rebound in the euro which recovered from a fresh 1-1/4 year low against the dollar and closed higher after Nov German exports rose more than expected and (2) short-covering in the euro after the CFTC reported that that futures traders increased their net short positions against the euro to a record 138,909 contracts in the week ended Jan 3. Bullish factors included (1) dollar supportive comments from St. Louis Fed President Bullard who said that the Fed probably won't begin a new round of bond purchases (QE 3) following last Friday's "encouraging" jobs report, (2) the bigger-than-expected decline in Nov German industrial production, which is euro negative, and (3) increased safe-haven demand for the dollar on concern the European sovereign debt crisis will worsen after the Markit iTraxx SovX Western Europe Index of credit-default swaps that insure European sovereign debt rose to a record 386 bp.
• Feb crude oil prices this morning are up +$1.39 a barrel and Feb gasoline is +2.00 cents per gallon. Crude oil prices yesterday settled mixed as a weaker dollar supported prices while European economic concerns undercut prices: CLG12 -$0.25, RBG12 +0.74. Bearish factors included (1) signs that the European economy and fuel demand may weaken after Nov German industrial production declined more than expected and (2) concern the European debt crisis may worsen and slow global growth and energy demand after the Markit iTraxx SovX Western Europe Index of credit-default swaps that insure European sovereign debt rose to a record. Bullish factors included (1) the weaker dollar, which boosts investment demand in commodities, (2) the stronger-than-expected Nov German exports, which improves confidence that the German economy and fuel demand will withstand the negative aspects of the European debt crisis, and (3) saber rattling by U.S. Joint Chiefs of Staff chairman Dempsey which heightens geopolitical risks in the Middle East when he said if Iran blocked the Strait of Hormuz the U.S. "would take action and reopen" the waterway.

Today's U.S. Earnings Reports Earnings reports (confirmed releases, sorted by mkt cap): SNX-SYNNEX (BEST earnings consensus $1.15).
Global Financial Calendar

Tuesday 1/10/12
United States
0745 ET	ICSC (Int?l Council of Shopping Centers) weekly retailer sales.
0855 ET	Redbook weekly retailer sales.
1000 ET	Jan IBD/TIPP economic optimism expected +2.2 to 45.0, Dec +2.2 to 42.8.
1000 ET	Nov wholesale inventories expected +0.5%, Oct +1.6%.
1030 ET	San Francisco Fed President John Williams speaks on the economy to the Clark County Economic Forecast Breakfast meeting in Vancouver, WA.
1110 ET	Cleveland Fed President Sandra Pianalto speaks on the labor market at an event in Wooster, Ohio.
1130 ET	Weekly 4-week and monthly 1-year T-bill auctions.
1300 ET	Treasury auctions $32 billion 3-year T-notes.
1300 ET	Kansas City Fed President Esther George speaks on the 2012 economic outlook at an event in Kansas City, MO.
France
0230 ET	Dec Bank of France business sentiment expected unchanged at 95, Nov -1 to 95.
0245 ET	Nov French industrial production expected -0.1% m/m and -0.4% y/y, Oct unchanged m/m and +1.8% y/y.
0245 ET	Nov French manufacturing production expected -0.4% m/m and -0.1% y/y, Oct unchanged m/m and +2.6% y/y.
Canada
0815 ET	Dec Canada housing starts expected +188,000, Nov +181,200.
CHI
n/a	Dec China trade balance expected +$8.80 billion, Nov +$14.53 billion. Dec exports expected +13.4% y/y, Nov +13.8% y/y. Dec imports expected +18.0% y/y, Nov +22.1% y/y.

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