Barchart Morning Call
Fri, 20 Jan 2012 07:00:00 -0600
Overnight Developments- Global stocks this morning are mixed with the Euro Stoxx 50 down -0.41% and Mar S&Ps down -1.70 points. The dollar is higher and most commodities are lower as Greek officials and private creditors meeting for a third day struggle to reach agreement on a debt swap plan. Google plunged 8.0% in pre-market trading and is another negative factor pressuring stock prices after Google's Q4 profit of $9.50 a share was well below analysts' estimates of $10.50. Limiting losses in stocks is the decline in European banks' dollar funding costs after the 3-month cross-currency basis swap, the rate banks pay to convert euro interest payments into dollars, narrowed to 76 bp below the euro interbank offered rate, the lowest in 5-1/4 months.
- Asian stocks today closed jigher with Japan up +1.47%, China +1.45%, Australia +0.59%, South Korea +2.13%, India +0.57%. A decline in European bond yields and a plunge in U.S. jobless claims to a 3-3/4 year low eased European debt crisis concerns and boosted Asian exporters, which sent Japan's Nikkei 225 Stock Index to a 2-1/2 month high and China's Shanghai Stock Index to a 5-week high. Chinese stocks were also boosted by a report from Reuters that said China's State Council is reviewing a proposal to allow local pension funds to invest 10% to 20% of their assets in stocks. Chinese markets will be closed all of next week for the Lunar New Year holiday.
- March S&Ps this morning are trading down -1.70 points. The US stock market on Thursday settled higher for a third day as European debt concerns receded and after weekly initial U.S. jobless claims plunged to a 3-3/4 year low: Dow Jones +0.36%, S&P 500 +0.49%, Nasdaq Composite +0.67%. The S&P 500 and the Dow posted 5-1/2 month highs, while the Nasdaq rallied to a 10-3/4 year high. Bullish factors included (1) carry-over support from a rally in European stocks on reduced debt concerns after French borrowing costs dropped at an auction and Spain sold more bonds than its planned target, (2) continued improvement on the U.S. labor front after weekly initial U.S. unemployment claims dropped more than expected to their lowest level in 3-3/4 years (-50,000 to 352,000 versus expectations of -15,000 to 384,000), and (3) signs that China may relax credit controls and boost lending after 2 people with knowledge of the matter said 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.
- Bearish factors on Thursday included (1) the bigger-than-expected decline in Dec housing starts (-4.1% to 657,000 versus expectations of -0.7% to 680,000), (2) the smaller-than-expected increase in the Jan Philadelphia Fed manufacturing index (+0.5 to 7.3 versus expectations of +3.5 to 10.3), and (3) the quarterly report from the European Commission that said the outlook for industry in the Euro-Zone has deteriorated.
- Google (GOOG) sank 8.0% in pre-market trading after the company reported Q4 profit of $9.50 a share, well below analysts' estimates of $10.50.
- International Business Machines (IBM) rose 2.0% in European trading after the company forecast earnings will increase to at least $14.85 a share this year, better than analysts' estimtes of $14.81.
- Microsoft (MSFT) climbed 2.1% in pre-market trading after the company reported Q2 profit of 78 cents a share, beating analysts' estimates of 77 cents.
- March 10-year T-notes this morning are down -4.5 ticks. T-note prices on Thursday dropped to a 1-week low and settled lower after weekly U.S. jobless claims plunged and on reduced safe-haven demand for Treasuries when Spain and France had successful government bond auctions and stocks rallied: TYH2 -18.0, FVH2 -6.7, EDM2 unchanged. Bearish factors included (1) the larger-than-expected fall in weekly initial U.S. unemployment claims which dropped to their lowest level in 3-3/4 years (-50,000 to 352,000 versus expectations of -15,000 to 384,000) and (2) reduced safe-haven demand for Treasuries after French borrowing costs dropped at an auction and Spain sold more bonds than its planned target, which eases concern that European nations will struggle to finance their debts. Bullish factors included (1) the bigger-than-expected decline in Dec housing starts (-4.1% to 657,000 versus expectations of -0.7% to 680,000) and (2) the smaller-than-expected increase in the Jan Philadelphia Fed manufacturing index (+0.5 to 7.3 versus expectations of +3.5 to 10.3).
- The dollar index this morning is higher with the dollar/yen +0.02 yen and the euro/dollar -0.53 cents. The dollar index on Thursday tumbled to a 2-week low and finished lower on reduced safe-haven demand after French borrowing costs dropped at an auction and Spain sold more bonds than its planned target and as the S&P 500 rallied to a 5-1/2 month high: Dollar Index -0.393, USDJPY +0.280, EURUSD +0.01050. Bearish factors included (1) strong demand for bond auctions of Spanish and French government debt, which boosts optimism the European sovereign debt crisis is being contained and reduces the safe-haven demand for the dollar and (2) ECB data that showed investors boosted holdings of euro assets by +2.4 billion euros in Nov, which indicates the European debt crisis has yet to cause widespread liquidation of euro assets. Bullish factors included (1) the plunge in weekly U.S. jobless claims to their lowest level in 3-3/4 years, which may boost economic growth and is dollar positive and (2) the quarterly report from the European Commission that said the outlook for industry in the Euro-Zone has deteriorated, which is euro negative.
- Feb crude oil prices this morning are down -62 cents a barrel and Feb gasoline is -0.30 of a cent per gallon. Crude oil and gasoline prices Thursday settled lower on weak gasoline demand and after weekly DOE gasoline supplies rose more than expected to a 10-month high: CLG12 -$0.20, RBG12 -0.96. Bearish factors included (1) the larger-than-expected increase in weekly DOE gasoline supplies to their highest level in 10 months (+3.72 million bbl to 227.5 million bbl versus expectations of +2.35 million bbl), (2) slack demand after the DOE said U.S gasoline demand for the week ended Jan 13 fell -2.2% to 8 million barrels a day, the weakest in over 10 years, and (3) the weaker than expected Dec U.S. housing starts and Jan Philadelphia Fed manufacturing activity, which indicates reduced energy demand. Bullish factors included (1) the slide in the dollar index to a 2-week low, (2) the unexpected decline in weekly DOE crude supplies (-3.44 million bbl versus expectations of a +3.0 million bbl build), and (3) signs of strength in the labor market that may boost economic confidence and fuel demand after weekly initial U.S. unemployment claims fell to a 3-3/4 year low.
Global Financial Calendar
| Friday 1/20/12 | |
|---|---|
| United States | |
| 1000 ET | Dec existing home sales expected +5.2% to 4.65 million, Nov +4.0% to 4.42 million. |
| Japan | |
| 0000 ET | Revised Nov Japan coincident index CI, previous 90.3. Revised Nov leading index CI, previous 92.9. |
| Germany | |
| 0200 ET | Dec German producer prices expected +0.1% m/m and +4.6% y/y, Nov +0.1% m/m and +5.2% y/y. |
| United Kingdom | |
| 0430 ET | Dec U.K. retail sales ex-auto fuel expected +0.7% m/m and +1.7% y/y, Nov -0.7% m/m and +0.5% y/y. |
| 0430 ET | Dec U.K. retail sales with auto fuel expected +0.6% m/m and +2.4% y/y, Nov -0.4% m/m and +0.7% y/y. |
| Canada | |
| 0700 ET | Dec Canada CPI expected -0.1% m/m and +2.8% y/y, Nov +0.1% m/m and +2.9% y/y. |
| 0700 ET | Dec Bank of Canada core CPI expected -0.3% m/m and +2.2% y/y, Nov +0.1% m/m and +2.1% y/y. |
| 0830 ET | Nov Canada wholesale sales, Oct +0.9% m/m. |
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