Barchart.com - Tue Jan 03, 7:00AM CST
Overnight Developments - Global stocks this morning are trading higher with the Euro Stoxx 50 up 0.75% and Mar S&Ps up 22.40 points (+1.8%). The main bullish factors are positive manufacturing data from China and India over the holiday weekend and today's news that Germany's Dec unemployment fell by 22,000 to 2.89 million, which was larger than the expected decline of 10,000. China reported on Sunday that its Dec manufacturing purchasing managers index rose by 1.3 points to 50.3 from 49.0 in November, returning to expansion territory above 50.0. The UK PMI manufacturing index was reported today at +1.9 to 49.6, stronger than expectations for a 0.4 point drop to 47.3. The race is close for today's Republican caucus election in Iowa. Oil prices are up 2.7% this morning as Iran continues its belligerence and said that any U.S. effort to harm its interests will be met with "reciprocal measures." Iran also warned the U.S. not to send its aircraft carrier back into the Persian Gulf. Asian stocks today closed higher with Hong Kong +2.40, Taiwan +1.46, Australia +1.10%, Singapore +1.59%, South Korea +2.98%, and Bombay +2.72%. The Japanese and Chinese stock markets were closed for holidays today.
Overnight U.S. Stock News - March S&Ps this morning are trading sharply higher by 22.40 points (+1.8%) on positive global economic data and general optimism coming into the New Year with plenty of cash on the sidelines. The US stock market last Friday settled lower in listless year-end trade as European debt concerns overshadowed the generally upbeat U.S. economic picture: Dow Jones -0.57%, S&P 500 -0.43%, Nasdaq Composite -0.33%. Bearish factors included (1) concern about the European sovereign-debt crisis after Spain revised its 2011 budget deficit to 8% of GDP from a previous estimate of 6% of GDP, which may further hamper efforts to fund its debt, and (2) comments from Jean-Claude Juncker, head of the Euro-Zone finance ministers, who said economic growth in the Euro-Zone "isn't good" and that the economic situation in 2012 may become more "foggy." Bullish factors included (1) carry-over strength from a rally in European stocks after German Finance Minister Schaeuble ruled out a Euro-Zone breakup and said the region is doing everything to maintain confidence in the euro and (2) optimism the U.S. economy can weather the European debt crisis as recent economic data have bolstered U.S. economic prospects into 2012.
Today's Market Focus - March 10-year T-notes this morning are down 15.5 ticks on the rally in stocks and reduced safe-haven demand. T-note prices last Friday rallied to a 1-1/2 week high and settled higher on European debt concerns: TYH2 +9.0, FVH2 +5.5, EDM2 +3.5. Bullish factors included (1) increased safe-haven demand for Treasuries after Jean-Claude Juncker, head of the Euro-Zone finance ministers, said economic growth in the Euro-Zone "isn't good" and that the economic situation in 2012 may become more "foggy," and (2) the action by Spain to revise its 2011 budget deficit to 8% of GDP from a previous estimate of 6% of GDP, which may further hamper efforts to fund its debt. Bearish factors include (1) comments from German Finance Minister Schaeuble which dampened safe-haven demand for Treasuries when he ruled out a Euro-Zone breakup and said the region is doing everything to maintain confidence in the euro and (2) the statement from Japan's Ministry of Finance that it refrained from selling yen in the foreign-exchange market in the month through Dec 28, which may slow Japan's purchases of US Treasuries as its dollar holdings from selling yen in he forex market are reduced.
- The dollar index this morning is down 0.57 points with the dollar/yen down 0.18 yen and the euro/dollar up 1.00 cents. The dollar is lower today on reduced safe-haven demand with the euro seeing some short-covering on the global rally in stocks. The dollar index last Friday settled lower as dollar funding costs for European banks fell and as the yen rose to a 5-week high against the dollar after Japan's Ministry of Finance said it refrained from selling yen in the foreign-exchange market during the past month: Dollar Index -0.281, USDJPY -0.745, EURUSD -0.00017. Bearish factors included (1) the fall in the 3-month cross-currency basis swap to -114 bp below the euro interbank offered rate, its lowest level in 3 weeks and a sign of reduced dollar demand by European banks, (2) the statement by Japan's Ministry of Finance that said Japan refrained from selling yen in the foreign-exchange market in the month through Dec 28, which boosted the yen to a 5-week high against the dollar, and (3) strength in the Chinese yuan which climbed to 6.2940 per dollar, a 17-year high on signs the PBOC favors appreciation to prevent capital outflows. Bullish factors included (1) the action by Spain to revise its 2011 budget deficit to 8% of GDP from a previous estimate of 6% of GDP, which is euro negative and (2) euro negative-comments from Jean-Claude Juncker, head of the Euro-Zone finance ministers, who said economic growth in the Euro-Zone "isn't good" and that the economic situation in 2012 may become more "foggy."
- Feb crude oil prices this morning are up $2.66 a barrel and Feb gasoline is up 4.56 cents per gallon on the continued belligerence from Iran. Crude oil and gasoline prices last Friday settled lower after Chinese manufacturing contracted in Dec for a second month along with concern the ongoing European debt crisis will slow economic growth: CLG12 -$0.82, RBG12 -1.20. Bearish factors included comments from Jean-Claude Juncker, head of the Euro-Zone finance ministers, who said economic growth in the Euro-Zone "isn't good" and that the economic situation in 2012 may become more "foggy," which may also curtail fuel demand. Bullish factors included (1) the weaker dollar, which boosts investment demand for commodities, and (2) geopolitical concerns as Iran is still holding military maneuvers in the Strait of Hormuz, where 17 million barrels of oil flow through each day according to the DOE.
Today's U.S. Earnings Reports Earnings reports (confirmed releases, sorted by mkt cap): PRGS-Progress Software (BEST earnings consensus $0.33), TISI-Team Inc. (0.49), CVGW-Calavo Growers (0.23), LNDC-Landec (0.11).
Global Financial Calendar
| Tuesday 1/3/12 |
| United States |
| 1000 ET | Nov construction spending expected +0.5% m/m, Oct +0.8% m/m. |
| 1000 ET | Dec ISM manufacturing index expected +0.5 to 53.2, Nov +1.9 to 52.7. Dec ISM prices paid sub-index expected +2.9 to 47.9, Nov +4.0 to 45.0. |
| 1130 ET | Weekly 3-mo and 6-mo T-bill auctions. |
| 1400 ET | Minutes of the Dec 13 FOMC meeting. |
| Germany |
| 0355 ET | Dec German unemployment change expected -10,000, Nov -20,000. Dec unemployment rate expected unchanged at 6.9%, Nov-0.1 to 6.9%. |
| United Kingdom |
| 0430 ET | Dec U.K. PMI manufacturing expected -0.3 to 47.3, Nov -0.2 to 47.6. |
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