Barchart Morning Call
Overnight Developments
Global Financial Calendar
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- Global stocks this morning are higher with the Euro Stoxx 50 up +0.17% and Mar S&Ps up +1.50 points at a 5-1/2 month high. The dollar index fell to a 2-week low and most commodities rose with gold at a 1-month high and copper at a 3-3/4 month high after French borrowing costs dropped at an auction and Spain sold more bonds than its planned target. Spain sold 6.61 billion euros of bonds, compared with a maximum target for the sale of 4.5 billion euros, while French 2-year note yields fell to 1.05% from 1.58% at a similar auction on Oct, which boosts optimism the European sovereign debt crisis is being contained. Another positive for stocks is the report from people with knowledge of the matter that China is letting its larger banks boost lending and is weighing a plan to relax capital requirements.
- Asian stocks today closed mostly higher with Japan up +1.04%, China +1.91%, Australia -0.07%, South Korea +1.39%, India +1.17%. Asian stocks rose amid signs China will relax credit controls and boost lending. According to 2 people at state banks who have knowledge of the matter, the PBOC will let China's largest banks increase new loans by a maximum of 5% from a year earlier, while the banking regulator will delay implementing the most stringent capital adequacy ratios and may lower risk weightings for loans to small businessmen and companies. Technology stocks in Asia rose after ASML Holding NV, Europe's biggest semiconductor-equipment maker, forecast higher Q1 orders, and after sales at U.S. chipmaker Linear Technology beat analysts' projections.
- March S&Ps this morning are trading up +1.50 points at a fresh 5-1/2 month high. The US stock market on Wednesday moved higher throughout the day and settled near its high after the IMF's proposal to increase its lending capacity by $500 billion reduced European debt concerns while homebuilders surged after the Jan NAHB housing index climbed to a 4-1/2 year high: Dow Jones +0.78%, S&P 500 +1.11%, Nasdaq Composite +1.53%. The S&P 500, the Dow and the Nasdaq all posted 5-1/2 month highs. Bullish factors included (1) reduced European debt concerns after the IMF proposed a $500 billion expansion of its lending resources to insulate the global economy against any worsening of Europe's debt crisis and after a Greek finance official said his government could forge an agreement on a voluntary debt swap with creditors by the end of this week, (2) a rally in homebuilders after the Jan HAHB housing market index rose more than expected to its best level in 4-1/2 years (+4 to 25 versus expectations of +1 to 22), and (3) strength in technology stocks after semiconductor companies advanced when Linear Technology and Taiwan Semiconductor reported better-than-expected sales forecasts.
- Bearish factors on Wednesday included (1) concerns over a global economic slowdown after the World Bank cut its 2012 global growth forecast to +2.5% from a June estimate of +3.6% and Germany's Economy Ministry cut its 2012 German GDP forecast to +0.7% from an Oct forecast of +1.0% and (2) Dec U.S. industrial production which rose +0.4%, weaker than expectations of +0.5%, while Nov industrial production was revised lower to -0.3% from the originally reported -0.2%.
- Ebay (EBAY) climbed 3.4% in European trading after the company reported Q4 revenue rose 35% to $3.38 billion, better than analysts' estimates of $3.32 billion.
- March 10-year T-notes this morning are up +1.5 ticks. T-note prices on Wednesday moved lower after Dec core producer prices unexpectedly increased and after safe-haven demand for Treasuries fell as the stock market rallied: TYH2 -10.5, FVH2 -3.7, EDM2 -2.5. Bearish factors included (1) the larger-than-expected increase in Dec core PPI prices (+0.3% m/m and a 2-1/2 year high of +3.0% y/y versus expectations of +0.1% m/m and +2.8% y/y), (2) the larger-than-expected increase in the Jan NAHB housing market index which climbed to its best level in 4-1/2 years (+4 to 25 versus expectations of +1 to 22), and (3) reduced safe-haven demand for Treasuries after the IMF's proposal to boost its lending capacity by $500 billion reduced European debt concerns and lifted stocks. Bullish factors included (1) concern over a global economic slowdown after the World Bank cut its 2012 global growth forecast to +2.5% from a June estimate of +3.6% and Germany's Economy Ministry cut its 2012 German GDP forecast to +0.7% from an Oct forecast of +1.0%, (2) solid foreign demand for U.S. government debt after the Nov long-term TIC flows showed foreign holdings of Treasuries rose +1.7% to a record $4.75 trillion, and (3) Dec U.S. industrial production which rose +0.4%, weaker than expectations of +0.5%, while Nov was revised lower to -0.3% from the originally reported -0.2%.
- The dollar index this morning is lower and trading at a 2-week low with the dollar/yen +0.03 yen and the euro/dollar +0.30 cents. The dollar index on Wednesday fell to a 1-1/2 week low and finished lower on reduced safe-haven demand after the IMF proposed boosting its lending capacity by $500 billion: Dollar Index -0.573, USDJPY -0.005, EURUSD +0.01281. Bearish factors included (1) the proposal by the IMF to expand its lending resources by $500 billion to insulate the global economy against any worsening of Europe's debt crisis, which is euro supportive, (2) reduced demand for dollars after the 3-month cross-currency basis swap, the rate banks pay to convert euro interest payments into dollars, fell to 78 bp below the euro interbank offered rate, a 5-1/4 month low, and (3) fuel for short-covering in the euro after data from the CFTC showed that traders had increased their short euro positions to a record 155,195 contracts in the week ended Jan 10. Bullish factors included (1) increased safe-haven demand on global economic concerns after the World Bank cut its 2012 global growth forecast to +2.5% from a June estimate of +3.6% and Germany's Economy Ministry cut its 2012 German GDP forecast to +0.7% from an Oct forecast of +1.0%, (2) the Nov long-term TIC flows which increased by +$59.8 billion, bigger than expectations of +$40.0 billion and a sign of strong foreign demand for dollar assets, and (3) signs of stronger U.S. economic confidence after the Jan NAHB housing market index rose more than expected to its highest in 4-1/2 years.
- Feb crude oil prices this morning are up +$1.13 a barrel and Feb gasoline is -0.37 of a cent per gallon. Crude oil and gasoline prices Wednesday settled mixed as crude oil fell after the Obama administration said it will reject the Keystone XL pipeline and gasoline surged to a 3-month high after Hovensa LLC said it will close a refinery in the Virgin Islands that supplies gasoline to the U.S. East Coast: CLG12 -$0.12, RBG12 +5.41. Bullish factors included (1) the weaker dollar, and (2) strength in gasoline on concern gasoline supplies to the U.S. East Coast may be reduced after Hovensa LLC said it will shut its 350,000 barrel-a-day St. Croix refinery in the U.S. Virgin Islands because of mounting losses and weak demand. Bearish factors included (1) the action by the Obama administration to reject the implementation of TransCanada's Keystone XL pipeline from Canada to the U.S Gulf coast, which may increase crude inventories in Cushing, OK, the hub for WTI supplies and delivery point for NYMEX futures contracts, (2) the action by the IEA to cut its 2012 global crude oil demand forecast to an increase of 1.1 million barrels a day, -200,000 bbl less than a previous estimate saying "the risks are to the downside for the global economy and oil demand growth," and (3) the outlook for weekly DOE crude inventories to climb for a fourth week when the DOE reports its weekly inventory data on Thursday. Expectations for Thursday's weekly DOE inventories (delayed 1 day due to the Dr. Martin Luther King Jr. holiday) are for crude supplies to grow by +3.0 million bbl, gasoline stockpiles to climb by +2.35 million bbl, distillate inventories to rise +1.38 million bbl and the refinery utilization rate to drop -0.5 to 85.1%.
Global Financial Calendar
| Thursday 1/19/12 | |
|---|---|
| United States | |
| 0830 ET | Weekly initial unemployment claims expected -15,000 to 384,000, previous +24,000 to 399,000. Weekly continuing claims expected -38,000 to 3.590 million, previous +19,000 to 3.628 million. |
| 0830 ET | Dec CPI expected +0.1% m/m and +3.0% y/y, Nov unchanged m/m and +3.4% y/y. Dec CPI ex food & energy expected +0.1% m/m and +2.2% y/y, Nov +0.2% m/m and +2.2% y/y. |
| 0830 ET | Dec housing starts expected -0.7% to 680,000, Nov +9.3% to 685,000. Dec building permits expected no change at 680,000, Nov +5.6% at 680,000. |
| 1000 ET | Jan Philadelphia Fed manufacturing index expected +3.5 to 10.3, Dec +3.7 to 6.8. |
| 1100 ET | Treasury announces amounts of 2-year T-notes (previous $35 billion), 5-year T-notes (previous $35 billion) and 7-year T-notes (previous $29 billion) to be auctioned Jan 24-26. |
| 1300 ET | Treasury auctions $15 billion 10-year TIPS. |
| 1630 ET | Weekly money supply report and Fed balance sheet. |
| Japan | |
| 0030 ET | Dec Japan nationwide department store sales, Nov -1.9% y/y. |
| 2330 ET | Nov Japan all industry activity index expected -0.9% m/m, Oct +0.8% m/m. |
| Euro-Zone | |
| 0400 ET | ECB publishes its monthly report for Jan. |
| 0700 ET | ECB President Mario Draghi speaks at a press conference in Abu Dhabi. |
| 1200 ET | ECB Council member and Bundesbank President Jens Weidmann speaks at an event in Berlin. |
| Canada | |
| 0830 ET | Nov Canada manufacturing sales expected +0.8% m/m, Oct -0.8% m/m. |
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