Barchart Morning Call 1/12

Barchart Morning Call

Barchart.com - 54 mins ago

Overnight Developments

• Global stocks this morning are mixed with the Euro Stoxx 50 up +0.43% and Mar S&Ps up +7.10 points at a 5-1/4 month high. As expected, the BOE maintained its benchmark rate at 0.50% and held the asset purchase target at 275 billion pounds following its policy meeting. European and U.S. stocks rose, the dollar and Treasuries weakened and most commodities gained with copper at a 1-month high, after Spain sold twice the maximum target of bonds and Italy sold 12 billion euros of bills, easing concern the countries will struggle to finance their debts. Spain sold 9.98 billion euros of notes, compared with a target of 5 billion euros, while Italy sold 1-year bills at 2.735%, less than half the 5.952% that they sold at a similar auction last month. The British pound fell to a 3-month low against the dollar after Nov U.K. industrial production fell -0.7% m/m and -3.1% y/y, weaker than expectations of -0.1% m/m and -2.2% y/y, with the -3.1% y/y plunge the largest decline in nearly 2 years. On a bright note, Dec German CPI (EU harmonized) was unexpectedly revised lower to +0.7% m/m and +2.3% y/y from the originally reported +0.8% m/m and +2.4% y/y, with the +2.3% y/y increase the smallest in 9 months.
• Asian stocks today closed mostly lower with Japan down -0.74%, China -0.02%, Australia -0.16%, South Korea +1.09%, India -0.86%. Chinese stocks closed little changed after Dec China CPI fell for a fifth month to a 15-month low of +4.1% y/y, although stronger than expectations of +4.0% y/y. Japanese stocks closed lower, led by a slide in exporters, after the Nov Japan current-account surplus narrowed 86% to 138.5 billion yen ($1.8 billion), more than expectations of a 248.4 billion yen surplus and the smallest surplus in 2-3/4 years as a strong yen and slowing growth in Europe and China dampened demand for Japanese goods. Stocks in India closed lower despite Nov India industrial production rising +5.9% y/y, stronger than expectations of +2.1% y/y and a sign that consumer and business demand is withstanding the RBI's recent interest rate hikes.

Overnight U.S. Stock News

• March S&Ps this morning are trading up +7.10 points at a 5-1/4 month high. The US stock market on Wednesday settled mixed as a rally in homebuilder stocks was offset by concern that Europe's debt crisis will stifle global economic growth: Dow Jones -0.10%, S&P 500 +0.03%, Nasdaq Composite +0.31%. Bearish factors yesterday included (1) carry-over weakness from a decline in European stocks on concern the European debt crisis may worsen and curb economic growth after Nov Spain industrial production contracted by the most in 2 years (-7.0% y/y), (2) 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, and (3) comments from Richmond Fed President Lacker who said "some of the more persistent headwinds the economy is facing are more serious than we thought."
• Bullish factors included (1) a rally in homebuilding stocks after Lennar, the third-biggest U.S. homebuilder, reported a 20% y/y jump in Q4 orders, (2) comments from Chicago Fed President Evans who said signs of improvement in the economy are modest and the Fed should push forward with "substantial" easing, and (3) the upbeat Fed Beige Book that said the economy "expanded at a modest to moderate pace" across most of the U.S. from late November through the end of December.

Today's Market Focus

• March 10-year T-notes this morning are down -4.5 ticks. T-note prices on Wednesday rallied to a 3-week high and remained firm most of the day on increased safe-haven demand from the ongoing European debt crisis along with dovish comments from Chicago Fed President Evans: TYH2 +15.5, FVH2 +5.7, EDM2 +3.5. Bullish factors included (1) increased safe-haven demand for Treasuries after David Riley, the head of sovereign ratings at Fitch Ratings, said the ECB should boost bond purchases to support Italy and prevent a "cataclysmic" collapse of the euro, (2) comments from Chicago Fed President Evans who said signs of improvement in the economy are modest and the Fed should push forward with "substantial" easing, and (3) decent demand for the Treasury's $21 billion auction of 10-year T-notes that had a bid-to-cover ratio of 3.29, stronger than the 12-auction average of 3.14. Bearish factors included (1) hawkish comments from Philadelphia Fed President Plosser who said the Fed should watch the risk of accelerating mid-term inflation "very carefully" after injecting record stimulus into the economy, (2) the Fed Beige Book that said the economy "expanded at a modest to moderate pace" across most of the U.S. from late November through the end of December, and (3) supply pressures ahead of the Treasury's $13 billion auction of 30-year T-bonds on Thursday.
• The dollar index this morning is weaker with the dollar/yen unchanged and the euro/dollar +0.68 cents. The dollar index on Wednesday settled higher as the euro slumped to a 1-1/3 year low against the dollar lower on concern the European debt crisis may worsen: Dollar Index +0.546, USDJPY +0.007, EURUSD -0.00714. Bullish factors included (1) increased safe-haven demand for the dollar after 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, and (2) the larger-than-expected decline in Nov Spain industrial production which dropped by the most in 2 years (-7% y/y) and is euro negative. Bearish factors included (1) strong demand for a German auction of 5-year notes 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, (2) dollar negative comments from Chicago Fed President Evans who said signs of improvement in the economy are modest and warrant "substantial" monetary stimulus from the Fed, which suggests he favors implementation of QE3, and (3) reduced demand for dollars by European banks after the 3-month cross-currency basis swap, the rate banks pay to convert euro interest payments into dollars, shrank to 89 points below the euro interbank offered rate, the lowest in 3-3/4 months.
• Feb crude oil prices this morning are up +$1.33 a barrel and Feb gasoline is +2.39 cents per gallon. Crude oil and gasoline prices Wednesday fell back and settled lower as the dollar strengthened, weekly DOE inventories rose more than expected and fuel demand weakened: CLG12 -$1.37, RBG12 -0.95. Bearish factors included (1) the stronger dollar, which cuts investment demand in commodities, (2) the larger-than-expected increases in weekly DOE inventories after crude supplies rose +4.96 million bbl, stronger than expectations of +1.0 million bbl, while gasoline stockpiles climbed +3.61 million bbl to a 9-3/4 month high of 223.8 million bbl, and (3) slack demand after U.S. gasoline demand for the week ended Jan 6 slipped -4.4% to 8.18 million barrels per day, the lowest in nearly 9 years. Bullish factors included (1) rising tension over Iran's nuclear program after an Iranian nuclear scientist was killed in a car bomb attack and (2) comments from Chicago Fed President Evans who said the Fed should push forward with "substantial" monetary stimulus, which may boost economic growth and energy demand.

Today's U.S. Earnings Reports Earnings reports (confirmed releases, sorted by mkt cap): n/a (BEST earnings consensus $0.00).
Global Financial Calendar

Thursday 1/12/12
United States
0830 ET	Weekly initial unemployment claims expected +3,000 to 375,000, previous -15,000 to 372,000. Weekly continuing claims expected -5,000 to 3.590 million, previous -22,000 to 3.595 million.
0830 ET	Dec retail sales expected +0.3% and +0.3% less autos, Nov +0.2% and +0.2% less autos.
1000 ET	Nov business inventories expected +0.4%, Oct +0.8%.
1100 ET	Treasury announces amount of 10-year TIPS to be auctioned Jan 19.
1300 ET	Treasury auctions $13 billion 30-year T-bonds.
1400 ET	Dec monthly budget statement expected -$83.2 billion, Nov -$137.3 billion.
1630 ET	Weekly money supply report and Fed balance sheet.
Japan
0000 ET	Dec Japan eco watchers survey current, Nov 45.0. Dec eco watchers survey outlook, Nov 44.7.
0100 ET	Dec Japan machine tool orders, Nov +15.8% y/y.
2300 ET	Dec Japan bankruptcies, Nov +3.2% y/y.
France
0130 ET	Dec French CPI (EU harmonized) expected +0.3% m/m and +2.5% y/y, Nov +0.3% m/m and +2.7% y/y.
Germany
0200 ET	Revised Dec German CPI (EU harmonized) expected no change at +0.8% m/m and +2.4% y/y.
United Kingdom
0430 ET	Nov U.K. industrial production expected -0.1% m/m and -2.2% y/y, Oct -0.7% m/m and -1.7% y/y.
0430 ET	Nov U.K. manufacturing production expected -0.2% m/m and -0.5% y/y, Oct -0.7% m/m and +0.3% y/y.
0700 ET	BOE announces interest rate decision and asset purchase target (expected no change to the 0.50% benchmark rate and no change to the 275 billion pound asset purchase target).
Euro-Zone
0500 ET	Nov Euro-Zone industrial production expected -0.2% m/m and +0.3% y/y, Oct -0.1% m/m and +1.3% y/y.
0745 ET	ECB announces interest rate decision (expected no change to the 1.00% 2-week refinancing rate).
0830 ET	ECB President Mario Draghi speaks at monthly press conference.
Canada
0830 ET	Nov Canada new housing price index expected +0.2% m/m, Oct +0.2% m/m and +2.5% y/y.

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