Barchart Morning Call
Overnight Developments
Global Financial Calendar
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- Global stocks this morning are mostly higher with the Euro Stoxx 50 up +0.35% and Mar S&Ps up +1.00 point at a 5-3/4 month high. The dollar index fell to a 3-1/2 week low and most commodities rose with Feb gold at a 5-week high as European finance ministers gathered in Brussels to discuss new budget rules and a Greek debt swap. The euro rose to a 2-1/2 week high against the dollar and yields on Greek government debt fell after the FT Deutschland reported that unnamed government officials said negotiators for Greece and the IIF broadly agreed on terms of a debt swap over the weekend. Crude oil rose in overnight electronic trade after Dutch Foreign Minister Uri Rosenthal said EU foreign ministers adopted sanctions that will ban imports of crude and oil products from Iran as of Jul 1 as part of measures to ratchet up pressure on Iran's nuclear program. Limiting gains in European stocks was the statement from Germany's Bundesbank that economic growth in Germany may have come to a "standstill" in Q4 of 2011 because of the European debt crisis, while Jan French business confidence unexpectedly fell -3 points to a 23-month low of 91, weaker than expectations of a +1 point increase to 95.
- Asian stocks today closed mixed with Japan down -0.01%, China and South Korea closed for holiday, Australia -0.34%, India +0.08%. Asian exporters rallied as rising home sales in the U.S. bolstered the view the U.S. economy will continue to strengthen while falling European borrowing costs add to optimism that the region's debt crisis may be easing. Japanese internet-related companies rose after BNP Paribas said the sector may be undervalued, while Moody?s Investors Service said the action by China to slow non-bank financing growth will help it to achieve a ?soft landing? and reduce concerns about systemic risk. Limiting gains in Asian stocks were losses in companies that receive revenue from Europe as EU finance ministers continue to craft a long-term plan to tackle the region's debt crisis while Greek government negotiators continue to try to reach agreement that will lighten the country's debt burden.
- March S&Ps this morning are trading up +1.00 point. The US stock market on Friday settled mixed as strong earnings from IBM lifted the Dow to a 6-month high while weaker-than-expected U.S. existing home sales and concerns over Chinese economic growth pressured the overall market: Dow Jones +0.76%, S&P 500 +0.07%, Nasdaq Composite -0.06%. Bullish factors on Friday included (1) strength in the Dow after gains in IBM, which compromises 11% of the share-price weighting of the Dow, when the company forecast earnings will increase to at least $14.85 a share this year, better than analysts' estimates of $14.81, (2) strength in technology stocks after Microsoft gained when it said Christmas sales were strong for its video-game consoles and its Kinect sensor controllers and a rally in Intel which rose after it predicted strong Q1 revenue and said the shortage of disk drives that had slowed personal computer production may be ending and (3) optimism that European officials are moving closer to resolving the region's debt crisis after a draft of a budget treaty obtained by Bloomberg showed European governments are working toward tougher rules on budget deficits.
- Bearish factors included (1) concern over Chinese economic growth after the Jan HSBC flash China manufacturing PMI rose +0.1 to 48.4 and shows China's manufacturing activity may have contracted for a third month, (2) the smaller-than-expected increase in Dec existing home sales (+5.0% to 4.61 million versus expectations of +5.2% to 4.65 million), and (3) comments from IMF Managing Director Lagarde who said the world economy is decelerating and faces "significant and urgent challenges."
- March 10-year T-notes this morning are down -3.5 ticks. T-note prices on Friday fell to a 2-week low and settled lower on reduced safe-haven demand from the European debt crisis on signs European leaders are making progress resolving the crisis along with technical selling after the 10-year T-note yield climbed above 2.00%: TYH2 -14.0, FVH2 -5.5, EDM2 unchanged. Bearish factors included (1) reduced safe-haven demand for Treasuries on signs European officials are moving closer to resolving the region's debt crisis after a draft of a budget treaty obtained by Bloomberg showed European governments are working toward tougher rules on budget deficits as the budget treaty will require a centralized "correction mechanism" to be triggered automatically in cases of "significant" deviations from a target structural deficit of 0.5% of GDP and (2) technical selling and long liquidation of T-notes after the 10-year yield climbed above 2.00%. Bullish factors included (1) the smaller-than-expected increase in Dec existing home sales (+5.0% to 4.61 million versus expectations of +5.2% to 4.65 million) and (2) comments from IMF Managing Director Lagarde who said the world economy is decelerating and faces "significant and urgent challenges."
- The dollar index this morning is weaker and at a 2-1/2 week low with the dollar/yen -0.09 yen and the euro/dollar +0.66 cents. The dollar index on Friday rebounded from a 2-week low and settled higher as the euro weakened on disappointment that talks between Greece and its creditors dragged on for a third day without resolution: Dollar Index +0.007, USDJPY -0.080, EURUSD -0.00389. Bullish factors included (1) a drop in the euro on disappointment that a meeting between Greek officials and private creditors on a debt swap plan failed find a resolution after 3 days of meetings and (2) concern that global growth may slow further after the Jan HSBC flash China manufacturing PMI rose +0.1 to 48.4 and shows China's manufacturing activity contracted for a third month. Bearish factors included (1) reduced demand for dollars 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 and (2) strength in the British pound which rallied to a 2-week high against the dollar after Dec U.K. retail sales increased.
- Mar crude oil prices this morning are up +86 cents a barrel and Mar gasoline is +1.27 cents per gallon. Crude oil and gasoline prices Friday settled lower after a preliminary reading of Chinese manufacturing activity contracted for a third month in Jan and as Greek debt talks dragged on for a third day, which fueled concern the European debt crisis may worsen and slow European growth and fuel demand: CLH12 -$2.21, RBH12 -3.25. Bearish factors included (1) the stronger dollar, which undercuts most commodities, (2) the +0.1 increase in the Jan HSBC flash China manufacturing PMI to 48.8, which indicates Chinese manufacturing activity may contract for a third month and reduce energy demand and consumption, (3) concern the European debt crisis may not be resolved anytime soon as a meeting between Greek officials and private creditors on a debt swap plan failed to resolve their differences after a third day of meetings, and (4) comments from IMF Managing Director Lagarde who said the world economy is decelerating and faces "significant and urgent challenges." Bullish factors included (1) the increase in Dec U.S. existing home sales to an 11-month high, which signals economic strength that may lead to increased fuel demand and (2) ongoing tensions between Iran and Western nations that may lead to a disruption in Middle East oil exports after Iran's ambassador to Russia said the deployment of the U.S. Navy in the Persian Gulf is a "provocation."
Global Financial Calendar
| Monday 1/23/12 | |
|---|---|
| United States | |
| 1130 ET | Weekly 3-mo and 6-mo T-bill auctions. |
| France | |
| 0245 ET | Jan French business confidence indicator expected +1 to 95, Dec -2 to 94. |
| Canada | |
| 0830 ET | Dec Canada leading indicators, Nov +0.8%. |
| Euro-Zone | |
| 0515 ET | ECB Council members Jens Weidmann and Christian Noyer speak in Paris. |
| 1000 ET | Jan Euro-Zone consumer confidence expected -0.3 to -21.4, Dec -0.7 to -21.1. |
| 1100 ET | Euro-Zone finance ministers meet in Brussels. |
| n/a | Euro-Zone finance ministers meet to discuss how to respond to Standard & Poor?s downgrade of the European Financial Stability Facility. |
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