Barchart Morning Call
Overnight Developments
Global Financial Calendar
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- Global stocks this morning are mixed with the Euro Stoxx 50 down -1.01% and Mar S&Ps down -5.40 points. The dollar index and Treasuries rose and commodities were mixed, although Feb gold and Mar copper both climbed to 3-1/2 week highs. The euro weakened against the dollar after Nov Spain industrial production slid -7.0% y/y, weaker than expectations of -5.4% y/y and the biggest decline in 2 years. Another negative for stocks and the euro were comments from David Riley, the head of sovereign ratings at Fitch Ratings who said the ECB should boost bond purchases to support Italy and prevent a "cataclysmic" collapse of the euro. German bunds rallied after Germany received bids on 8.97 billion euros of 5-year notes on auction today, more than double the maximum sales target of 4 billion euros. European banks continue to refrain from lending as they remain wary of counter-party risk when they parked a record 486 billion euros in overnight deposits at the ECB on Tuesday.
- Asian stocks today closed mixed with Japan up +0.30%, China -0.48%, Australia +0.85%, South Korea -0.36%, India +0.07%. Asian markets finished mostly higher as exporters advanced as optimism about the U.S. economy tempered concern the European debt crisis will worsen. Raw material producers gained as copper climbed to a 3-1/2 week high, while a rally in Indian retailers led India's stock market higher after the government removed a limit on foreign investment in single-brand store chains, which paves the way for international companies such as Starbucks and Ikea to operate in the country without a local partner. Chinese stocks closed lower, led by a fall in phone companies amid concern increased competition will hurt profits as China Telecom, the third-biggest phone carrier in China, moves closer to getting government approval to offer Apple's iPhone.
- March S&Ps this morning are trading down -5.40 points. The US stock market on Tuesday moved higher on increased economic optimism amid speculation China may loosen its monetary policy to spur growth: Dow Jones +0.56%, S&P 500 +0.89%, Nasdaq Composite +0.97%. The S&P 500 and the Dow posted 5-1/4 month highs and the Nasdaq climbed to a 2-month high. Bullish factors yesterday included (1) strength in commodity producers on speculation China will loosen its monetary policies to spur growth after Dec China exports climbed at the slowest pace in 10 months and Dec Chine imports rose at the weakest pace in over 2 years, and (2) comments from San Francisco Fed President Williams it's "vital" for the Fed to aid the U.S. economy "suffering" from high unemployment, anemic spending and a weak housing market, and that he sees a "strong" case for more Fed purchases of mortgage bonds given his expectations that inflation will fall below 1.5% this year.
- Bearish factors included (1) concern the European sovereign debt crisis may worsen after Fitch Ratings said that Italy faces a "significant chance" of a downgrade when it reviews all European sovereigns at the end of this month, (2) comments from ECB Council member Nowotny who said he sees Euro-Zone growth at zero this year with the risk of a "velvet recession" in the Euro-Zone, and (3) comments from Cleveland Fed President Pianalto who said the U.S. economic recovery is "frustratingly slow" due to "headwinds" such as "depressed" housing markets, the sovereign debt crisis in Europe and government spending cuts.
- Microsoft (MSFT) fell 1.0% in pre-market trading after the company said industrywide sales of personal computers in Q4 will probably be lower than analysts projected because supply was hurt by flooding in Thailand.
- March 10-year T-notes this morning are up +4.5 ticks. T-note prices on Tuesday fluctuated between gains and losses and settled slightly lower as a rally in stocks reduced the safe-haven demand for Treasuries and offset dovish Fed commentary and heightened European sovereign debt risks: TYH2 -4.5, FVH2 -2.0, EDM2 +0.5. Bearish factors included (1) reduced safe-haven demand for Treasuries after the S&P 500 rallied to a 5-1/4 month high and (2) supply pressures ahead of the Treasury's $21 billion auction of 10-year T-notes on Wednesday. Bullish factors included (1) comments from Cleveland Fed President Pianalto who said the U.S. economic recovery is "frustratingly slow" due to "headwinds" such as "depressed" housing markets, the sovereign debt crisis in Europe and government spending cuts, (2) comments from San Francisco Fed President Williams that it's "vital" for the Fed to aid the U.S. economy "suffering" from high unemployment, anemic spending and a weak housing market, and that he sees a "strong" case for more Fed purchases of mortgage bonds given his expectations that inflation will fall below 1.5% this year, (3) increased safe-haven demand for Treasuries on concern the European sovereign debt crisis will worsen after Fitch Ratings said that Italy faces a "significant chance" of a downgrade when it reviews all European sovereigns at the end of this month, and (4) record demand for the Treasury's $32 billion 3-year T-note auction that had a bid-to-cover ratio of 3.73, higher than the 12-auction average of 3.26 and the highest since at least 1993 when the government began releasing the data.
- The dollar index this morning is higher with the dollar/yen +0.10 yen and the euro/dollar -0.75 cents. The dollar index on Tuesday settled lower on reduced safe-haven demand as stocks rallied and after the euro gained when Nov French industrial production unexpectedly increased: Dollar Index -0.246, USDJPY +0.003, EURUSD +0.00129. Bearish factors included (1) reduced safe-haven demand for the dollar as the S&P 500 rallied to a 5-1/4 month high, (2) strength in the euro after the Dec Bank of France business sentiment and Nov French industrial production both unexpectedly increased, and (3) comments from San Francisco Fed President Williams who said it's "vital" for the Fed to support a U.S. economy hobbled by high unemployment, anemic spending and a weak housing market, which suggests he may favor additional Fed stimulus measures. Bullish factors included (1) comments from ECB Council member Nowotny who said he sees Euro-Zone growth at zero this year with the risk of a "velvet recession" in the Euro-Zone, (2) the action by the Bank of Portugal to reduce its 2012 Portuguese GDP estimate to -3.1% contraction, larger than an Oct estimate of -2.2%, which may make it harder to refinance its debt and worsen the European debt crisis, and (3) the statement from Fitch Ratings that Italy faces a "significant chance" of a downgrade when it reviews all European sovereigns at the end of this month, which undercut the euro and boosted the safe-haven demand for the dollar.
- Feb crude oil prices this morning are down -83 cents a barrel and Feb gasoline is -1.13 cents per gallon. Crude oil and gasoline prices Tuesday settled higher as a rally in global equity markets raised economic optimism along with growing concern that geopolitical tensions with Iran may lead to a disruption of global crude supplies: CLG12 +$0.93, RBG12 +1.38. Feb gasoline posted a 2-1/2 month high. Bullish factors included (1) the weaker dollar, which boosts investment demand in commodities, (2) the rally in the S&P 500 Index to a 5-1/4 month high, which boost optimism in the economic outlook and energy demand and (3) geopolitical concerns after the EU brought forward a meeting on a possible oil embargo against Iran to Jan 23 from Jan 30. Bearish factors included (1) concern that the Chinese economy is slowing after Dec China exports slowed to their least in 10 months while Dec China imports rose at the weakest pace in over 2 years, which may reduce energy demand and consumption in the world's second-largest consumer of crude oil and (2) reduced demand for heating oil due to the unseasonably warm U.S. winter this far after data from the U.S. Climate Prediction Center showed average heating days in the U.S. have failed to reach normal levels for 11 straight weeks. Expectations for the weekly inventory report from the DOE are for crude oil supplies to increase +1.0 million bbl, gasoline stockpiles to gain +2.5 million bbl, distillates to rise 2.25 million bbl and the refinery utilization rate to gain +0.5 to 85.5%.
Global Financial Calendar
| Wednesday 1/11/12 | |
|---|---|
| United States | |
| 0700 ET | Weekly MBA mortgage applications, previous -4.1% with purchase mortgage sub-index -9.6% and refinancing sub-index -2.5%. |
| 0840 ET | Chicago Fed President Charles Evans speaks to the Rotary Club of Lake Forest, Illinois. |
| 0900 ET | Atlanta Fed President Dennis Lockhart speaks on the U.S. economy at an event in Atlanta. |
| 1230 ET | Philadelphia Fed President Charles Plosser speaks on the economic outlook at an event in Rochester, NY. |
| 1300 ET | Treasury auctions $21 billion 10-year T-notes. |
| 1400 ET | Fed?s Beige Book. |
| Japan | |
| 0000 ET | Nov Japan coincident index CI expected 90.3, Oct 91.4. Nov leading index CI expected 92.9, Oct 92.0. |
| CHI | |
| 2030 ET | Dec China PPI expected +1.6% y/y, Nov +2.7% y/y. Dec CPI expected +4.0% y/y, Nov +4.2% y/y. |
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