Barchart Morning Call
Overnight Developments
Global Financial Calendar
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- Global stocks this morning are mixed with the Euro Stoxx 50 up +0.27% and Mar S&Ps down -1.90 points. European stocks rose and the cost of insuring against default on European sovereign and bank debt fell after Italy sold 4.75 billion euros of bonds, its maximum target, as borrowing costs fell. Italy sold 3-year bonds to yield 4.83%, down from 5.62% at a previous sale last month, which eases concern that it will be able to finance its debt. U.S. stock futures are lower after JPMorgan Chase reported a decline in Q4 rofits. The euro weakened against the dollar and Treasuries rose after ECB Council member Liikanen said that "there's a risk" that economic conditions in the Euro-Zone will continue to worsen. European bank stocks rallied after Handelsblatt reported the European Banking Authority will postpone the annual stress tests for banks usually published in July to allow time for the lenders to get fresh capital to fill gaps documented by the last stress test. In another positive for European banks, the 3-month cross-currency basis swap, the rate banks pay to convert interest payments into dollars, narrowed to 80 bp below the euro interbank offered rate, the lowest in 4-1/2 months.
- Asian stocks today closed mostly higher with Japan up +1.36%, China -1.68%, Australia +0.36%, South Korea +0.75%, India +0.73%. Japanese stocks closed higher, led by a rally in exporters, after lower Italian and Spanish borrowing costs signaled the worst of the European debt crisis may be past. Chinese stocks settled lower as speculation waned that the government would loosen monetary policies. Real estate developers weakened after the China Daily reported that Beijing Mayor Jinlong pledged to restrict property purchases to cool the real estate market. Data from the PBOC showed that Q4 China foreign-exchange reserves, the world's biggest, fell to $3.18 trillion on Dec 31 from $3.2 trillion on Sep 30, the first quarterly decline since the midst of the Asian financial crisis in Q2 of 1998.
- March S&Ps this morning are trading down -1.90 points. The US stock market on Thursday fluctuated between gains and losses and finally settled higher as a fall in borrowing costs at debt auctions in Europe and upbeat comments from ECB President Draghi offset disappointing data on weekly U.S. jobless claims and Dec retail sales: Dow Jones +0.17%, S&P 500 +0.23%, Nasdaq Composite +0.51%. The S&P 500 posted a 5-1/4 month high and the Nasdaq rose to a 2-month high. Bullish factors included (1) optimistic comments from ECB President Draghi who said he sees "tentative signs" the Euro-Zone economy is stabilizing, which fueled a rally in European stocks that carried over to U.S. markets and (2) strong demand for debt auctions by Spain and Italy which lowered their yields and eases concern the countries will struggle to finance their debts.
- Bearish factors yesterday included (1) the larger-than-expected increase in weekly initial U.S. unemployment claims (+24,000 to 399,000 versus expectations of +3,000 to 375,000) and (2) the weaker-than-expected Dec U.S. retail sales (+0.1% and -0.2% less autos versus expectations of +0.3% and +0.3% less autos).
- JPMorgan Chase (JPM) fell 2.3% in pre-market trading after the bank reported Q4 profit of 90 cents a share as expected, and said weak trading revenues caused net income to fall to $3.73 billion from $4.83 billion in the same period a year earlier.
- March 10-year T-notes this morning are up +8.5 ticks. T-note prices on Thursday retreated from a 3-week high and settled lower after upbeat comments from ECB President Draghi reduced the safe-haven demand for Treasuries: TYH2 -7.5, FVH2 -2.2, EDM2 +4.0. Bearish factors included (1) optimistic comments from ECB President Draghi who said he sees "tentative signs" the Euro-Zone economy is stabilizing, (2) strong demand for debt auctions by Spain and Italy which lowered their yields and reduced the safe-haven demand for Treasuries, and (3) slack demand for the Treasury's $13 billion auction of 30-year T-bonds that had a bid-to-cover ratio of 2.60, weaker than the 12-auction average of 2.68. Bullish factors included (1) the larger-than-expected increase in weekly initial U.S. unemployment claims (+24,000 to 399,000 versus expectations of +3,000 to 375,000) and (2) the weaker-than-expected Dec U.S. retail sales (+0.1% and -0.2% less autos versus expectations of +0.3% and +0.3% less autos).
- The dollar index this morning is higher with the dollar/yen -0.02 yen and the euro/dollar -0.28 cents. The dollar index on Thursday retreated and settled lower after the euro rallied when ECB President Draghi said he saw signs of stabilization in the economy and after Italy and Spain borrowing costs fell when they had successful government debt auctions: Dollar Index -0.581, USDJPY -0.095, EURUSD +0.01081. Bearish factors included (1) strong demand for debt auctions by Spain and Italy which lowered their yields and eased concern the countries will struggle to finance their debts, (2) euro positive comments from ECB President Draghi who said he sees "tentative signs" the Euro-Zone economy is stabilizing, and (3) weaker-than-expected U.S. economic data on weekly jobless claims and Dec retail sales, which is dollar negative. Bullish factors included (1) weakness in the British pound which fell to 3-month low against the dollar after Nov U.K. industrial production fell more than expected and (2) increased safe-haven demand for he dollar after the statement from the IIF that time is "running out" after talks between banks holding Greek debt and Greek officials failed to find an agreement as bondholders say the EU agreement to exchange Greek bonds for new securities with a 5% coupon would leave them with a 65% loss in the net present value of their holdings of Greek government debt, more than the 50% haircut banks had agreed upon back in Oct.
- Feb crude oil prices this morning are down -8 cents a barrel and Feb gasoline is +0.40 of a cent per gallon. Crude oil and gasoline prices Thursday moved higher as the dollar weakened, the European economic outlook improved and as a strike in Nigeria threatens to reduce global crude supplies but prices tumbled late in the session when an EU official said any EU embargo of Iranian oil will likely be delayed for 6 months: CLG12 -$1.77, RBG12 -3.20. Feb gasoline posted a 2-1/2 moth high but shed its gains and closed lower. Bearish factors included (1) the statement from an EU official that any EU embargo on imports of Iranian crude will likely be delayed for six months to allow some EU members time to find alternative supplies, (2) the larger-than-expected decline in Nov U.K. industrial production, which suggests an economic slowdown, and (3) weak U.S. economic data on Dec retail sales and the larger-than-expected increase in weekly U.S. jobless claims, which signals economic weakness that is negative for energy consumption. Bullish factors included (1) the weaker dollar, which fuels investment demand in commodities, (2) comments from ECB President Draghi who said there are signs the Euro-Zone economy is stabilizing, which would be positive for fuel demand, and (3) a strike by Nigerian oil workers over the government's refusal to reinstate fuel subsidies, which threatens to reduce Nigerian crude output.
Global Financial Calendar
| Friday 1/13/12 | |
|---|---|
| United States | |
| 0830 ET | Dec import price index expected -0.1% m/m and +8.3% y/y, Nov +0.7% m/m and +9.9% y/y. |
| 0830 ET | Nov trade balance expected -$45.0 billion, Oct -$43.5 billion. |
| 0955 ET | Preliminary Jan U.S. University of Michigan consumer confidence expected +1.6 to 71.5, Dec +5.8 to 69.9. |
| 1110 ET | Fed Governor Elizabeth Duke speaks on ?Regulation and Credit Availability? at the California Bankers Association Bank Presidents Seminar. |
| 1245 ET | Richmond Fed President Jeffrey Lacker speaks on the economic outlook to the Risk Management Association of Richmond, VA. |
| 1300 ET | Chicago Fed President Charles Evans speaks at the Indiana Bankers Association economic outlook forum. |
| 1315 ET | St. Louis Fed President James Bullard speaks on the ?U.S. Economy and Monetary Policy? at the Edward Jones Annual Meeting. |
| United Kingdom | |
| 0430 ET | Dec U.K. PPI input prices expected -0.1% m/m and +9.1% y/y, Nov +0.1% m/m and +13.4% y/y. |
| 0430 ET | Dec U.K. PPI output prices expected +0.1% m/m and +5.0% y/y, Nov +0.2% m/m and +5.4% y/y. |
| 0430 ET | Dec U.K. PPI output core prices expected unchanged m/m and +3.2% y/y, Nov unchanged m/m and +3.2% y/y. |
| Euro-Zone | |
| n/a | EU Financial-Services Commissioner Michel Barnier meets with ECB Council member and BOF President Christian Noyer in Paris. |
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