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 +0.46% and Mar S&Ps up +3.90 points at a 6-month high. Commodities and Treasuries gained, with copper at a 4-1/4 month high, while the dollar index fell to a 1-1/2 month low on carry-over reaction to yesterday's signal from the Fed that it plans to maintain near-zero interest rates through 2014. The euro climbed to a 1-month high against the dollar on optimism Greece is making progress in talks for a debt-swap deal after the Greek newspaper Ethnos reported that private creditors will submit a new offer that Greek bonds issued as part of a debt exchange should carry a weighted-average coupon of 3.75%. Other positive factors for the euro and stocks were the unexpected +0.2 point increase in the Feb German GfK consumer confidence survey to a 10-month high of 5.9 along with the decline in Italian borrowing costs after Italy sold 4.5 billion euros of zero-coupon 2014 debt, the maximum target, at a yield of 3.783%, down from a similar-maturity auction last month of 4.853%.
- Asian stocks today closed mixed with Japan down -0.39%, China, Australia and India closed for holiday, South Korea +0.15%. Asian stocks were supported after the Fed extended its pledge to keep interest rates near record lows, which boosted exporters on optimism the Fed's actions will keep the U.S. economy expanding and strengthen exporters' earnings. Mining companies gained as gold and copper prices climbed to 1-1/2 month highs, while energy producers also rallied as crude oil climbed above $100 a barrel. Japanese stocks were undercut after Japan's Finance Ministry said the country's public debt will probably exceed a quadrillion yen for the first time next year as it projects public borrowings to rise to 1,086 trillion yen ($14 trillion) in the year ending Mar 2013, which adds pressure on the government to raise taxes to restore the nation's finances. Also limiting gains in Asian markets are growth concerns after Q4 South Korea GDP expanded +04% q/q, weaker than expectations of +0.5% q/q.
- March S&Ps this morning are trading up +3.90 points at a fresh 6-month high. The US stock market on Wednesday settled higher after the Fed said interest rates will remain at record lows until at least 2014 and after technology stocks surged when Apple reported stellar earnings: Dow Jones +0.64%, S&P 500 +0.87%, Nasdaq Composite +1.14%. The S&P 500 posted a 6-month high, the Dow posted an 8-1/2 month high and the Nasdaq posted a 10-3/4 year high. Bullish factors on Wednesday included (1) the action by the Fed to extend its pledge to hold interest rates at record lows until late 2014 from an Aug pledge to keep rates "exceptionally low" at least through 2013 as Fed Chairman Bernanke said the Fed aims to support a "stronger" recovery, (2) the unexpected increase in the Nov FHFA house price purchase only index (+1.0% m/m versus expectations of unchanged), (3) strength in technology stocks after Apple reported its quarterly profit more than doubled, and (4) a decent start to Q4 earnings season as 66% of the 112 companies in the S&P 500 that have reported earnings results since Jan 9 have beaten per-share earnings estimates.
- Bearish factors included (1) carry-over weakness from a decline in European stocks after the ECB was said to be firmly opposed to any restructuring of its Greek bond holdings, which fuels concern that Greece may yet default on its debt as a solution to its debt swap remains unresolved, (2) the weaker-than-expected Dec pending U.S. home sales (-3.5% m/m versus expectations of -1.0% m/m), and (3) the Fed's cut in its 2012 U.S. growth forecast to between 2.2% and 2.7%, down from a Nov forecast of between 2.5% and 2.9%.
- Netflix (NFLX) surged 18% in pre-market trading after the company reported late yesterday Q4 EPS of 73 cents a share, well ahead of analysts' estimates of 54 cents.
- March 10-year T-notes this morning are up +14.5 ticks. T-note prices on Wednesday settled higher after the Fed said it will keep the Fed funds rate at a record low at least until late 2014: TYH2 +21.5, FVH2 +16.0, EDM2 +.020. Bullish factors included (1) the Fed's dovish post-FOMC statement that said the Fed funds rate will stay at a record low until at least late 2014, which extends their pledge from Aug 9 that the Fed funds rate will remain "exceptionally low" at least through mid-2013, as they anticipate unemployment will remain high and inflation "subdued," (2) the weaker-than-expected Dec pending U.S. home sales (-3.5% m/m versus expectations of -1.0% m/m), and (3) strong demand for the Treasury's $35 billion auction of 5-year T-notes that had a bid-to-cover ratio of 3.17, better than the 12-auction average of 2.86 and the highest in 8 months. Bearish factors included (1) the unexpected increase in the Nov FHFA house price purchase only index (+1.0% m/m versus expectations of unchanged) and (2) supply pressures ahead of the Treasury's $29 billion auction of 7-year T-notes on Thursday.
- The dollar index this morning is weaker and at a 1-1/2 month low with the dollar/yen -0.14 yen and the euro/dollar +0.41 cents. The dollar index on Wednesday shed an early advance and slumped to a 1-monthlow and settled lower after the Fed extended its pledge to hold interest rates at record lows until late 2014: Dollar Index -0.289, USDJPY +0.107, EURUSD +0.00700. Bearish factors included (1) the Fed's post-FOMC statement that said the Fed funds rate will stay at a record low until at least late 2014, which extends their pledge from Aug 9 that the Fed funds rate will remain "exceptionally low" at least through mid-2013 and weakens the dollar's interest rate differentials, and (2) the larger-than-expected increase in the Jan German IFO business climate to a 5-month high, which is euro supportive. Bullish factors included (1) euro negative comments from 2 people familiar with the Governing Council's stance of the ECB who said that the ECB was firmly opposed to any restructuring of its Greek bond holdings and (2) weakness in the yen which fell to a 1-3/4 month low against the dollar after Dec Japan exports fell -8.0% y/y, weaker than expectations of -7.4% y/y as Japan posted an annual trade shortfall in 2011 of -2.49 trillion yen (-$32 billion), it's first annual trade deficit in 31 years.
- Mar crude oil prices this morning are up +$1.24 a barrel and Mar gasoline is +1.21 cents per gallon. Crude oil and gasoline prices on Wednesday settled higher after the dollar slumped when the Fed said its will extend its record low interest rates and on gasoline supply concerns after Hess Corp. said it will close its gasoline-making Port Reading refinery for repairs: CLH12 +$0.45, RBH12 +2.69. Mar gasoline rallied to a 3-1/4 month high. Bullish factors included (1) weakness in the dollar after the Fed said that interest rates will stay low until at least 2014, extending its earlier pledge that rates would stay low through at least 2013, (2) strength in gasoline after Hess Corp said it will close its gasoline-making Port Reading refinery in New Jersey for repairs, which will tighten gasoline supplies on the U.S. East Coast, (3) the unexpected -390,000 bbl decline in weekly DOE gasoline inventories, weaker than expectations of a +2.0 million bbl build, (4) the -2.8% w/w drop in U.S. gasoline production to 8.54 million bbl for the week ended Jan 20, the lowest gasoline output in nearly 2 years, and (5) the larger-than-expected fall in the weekly U.S. refinery utilization rate to its lowest in 8-1/2 months (-1.5 to 82.2% versus expectations of -0.6 to 83.1%), which indicates diminished output of gasoline and distillates in the weeks ahead. Bearish factors included (1) the larger-than-expected increase in weekly DOE crude supplies (+3.56 million bbl versus expectations of +1.5 million bbl) and (2) comments from a person familiar with OPEC's policy who said OPEC members would replace any loss in supply caused by the EU's ban on crude imports from Iran.
Global Financial Calendar
| Thursday 1/26/12 | |
|---|---|
| United States | |
| 0830 ET | Weekly initial unemployment claims expected +18,000 to 370,000, previous -50,000 to 352,000. Weekly continuing claims expected +68,000 to 3.500 million, previous 215,000 to 3.432 million. |
| 0830 ET | Dec durable goods orders expected +2.0% and +0.9% ex transportations, Nov +3.7% and +0.3% ex transportation. |
| 1000 ET | Dec leading indicators expected +0.7%, Nov +0.5%. |
| 1000 ET | Dec new home sales expected +1.9% to 321,000, Nov +1.6% to 315,000. |
| 1300 ET | Treasury auctions $29 billion 7-year T-notes. |
| 1630 ET | Weekly money supply report and Fed balance sheet. |
| Germany | |
| 0200 ET | Feb German GfK consumer confidence survey expected unchanged at 5.6, Jan unchanged at 5.6. |
| France | |
| 0245 ET | Jan French consumer confidence indicator expected unchanged at 80, Dec unchanged at 80. |
| United Kingdom | |
| 0600 ET | Jan U.K. CBI reported sales expected -6, Dec 9. |
| Japan | |
| 1830 ET | Jan Tokyo CPI expected -0.4% y/y, Dec -0.4% y/y. Jan Tokyo CPI ex-fresh food expected -0.3% y/y, Dec 0.3% y/y. Jan Tokyo CPI ex food & energy expected -1.0% y/y, Dec -1.1% y/y. |
| 1830 ET | Dec Japan national CPI expected -0.2% y/y, Nov -0.5% y/y. Dec national CPI ex-fresh food expected -0.1% y/y, Nov -0.2% y/y. Dec national CPI ex food & energy expected -1.1% y/y, Nov -1.1% y/y. |
| 1850 ET | Dec Japan retail trade expected +0.4% m/m and +2/0% y/y, Nov -2.0% m/m and -2.2% y/y. |
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