Barchart Morning Call
Overnight Developments
Global Financial Calendar
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- Global stocks this morning are mixed with the Euro Stoxx 50 up +0.55% and Mar S&Ps up +1.70 points. Treasuries are lower, the dollar index climbed to a fresh 11-3/4 month high and most commodities rose on optimism that this morning's Dec U.S. payrolls report will show strength for a second month. The euro fell to a 1-1/4 year low against the dollar after BOF Governor Noyer said in an interview with Europe 1 radio that the euro remains "very strong" and a further decline would help exports. Further undercutting the euro was the -0.5 m/m drop in Dec Euro-Zone economic confidence to 93.3, right on expectations and a 2-year low. Limiting gains in stocks was the -0.8% m/m decline in Nov Euro-Zone retail sales, weaker than expectations of a -0.4% m/m fall, along with a -4.8% m/m plunge in Nov German factory orders, a larger than expected drop of -1.6% m/m and their biggest monthly fall in 2-3/4 years. The ECB continues to be the lender of last resort after Euro-Zone banks parked 455.3 billion euros with them on Thursday, the most since the euro's introduction in 1999.
- Asian stocks today closed mostly lower with Japan down -1.16%, China +0.62%, Australia -0.83%, South Kore -1.23%, India +0.07%. Japanese stocks closed lower, led by a decline in exporters, on concern the euro's weakness will continue after it fell to an 11-year low against the yen. A fall in Asian shipping companies was also a negative for stocks after the Baltic Dry Index, a measure of shipping costs for commodities, tumbled to its lowest level in 4-1/2 months. Asian technology companies declined, led by chip-related firms, after Nomura Holdings cut its growth forecast for global shipments of dynamic random access memory to 2.7% from 3.7% after prices of the chips plunged. China's Shanghai Stock Index recovered from a 2-3/4 year low and finished higher on speculation the PBOC will cut banks' reserve-requirement ratios as soon as today.
- March S&Ps this morning are trading up +1.70 points. The US stock market settled mixed on Thursday as concerns over Europe's debt crisis and the weaker-than-expected Dec ISM non-manufacturing index offset better-than-expected U.S. labor market data: Dow Jones -0.02%, S&P 500 +0.29%, Nasdaq Composite +0.81%. The Nasdaq posted a 1-1/2 month high. Bearish factors on Thursday included (1) carry-over weakness from a slide in European stocks on concern that European nations will struggle to finance their debts after France sold 10-year bonds at an average yield of 3.29%, up from 3.18% in Dec and demand weakened for the debt after the bid-to-cover ratio fell to 1.64 from 3.05 in Dec, (2) concern that Europe is falling into recession after Nov German retail sales unexpectedly fell for a second month and Oct Euro-Zone industrial new orders rose less than expected, (3) the smaller-than-expected increase in the Dec ISM non-manufacturing index (+0.6 to 52.6 versus expectations of +1.0 to 53.0), and (4) weakness in retailers after J.C. Penney and Target cut their Q4 earnings forecasts and the Dec ICSC chain stores rose less than expected (+3.5% y/y versus expectation of +4.0% y/y).
- Bullish factors included (1) the larger-than-expected increase in the Dec ADP employment change which posted its biggest increase in jobs since data began in 2001 (+325,000 versus expectations of +178,000), (2) the larger-than-expected fall in weekly U.S initial unemployment claims (-15,000 to 372,000 versus expectations of -6,000 to 375,000), and (3) a rally in bank stocks after Deutsche Bank AG saw "encouraging signs" for the industry's Q4 earnings.
- Alcoa (AA) slipped 2.8% in pre-market trading after the biggest U.S. aluminum producer said it will close 12% of its global smelting capacity after the price of aluminum plunged as global supply exceeds demand.
- March 10-year T-notes this morning are down -3.5 ticks. T-note prices on Thursday rebounded from a 1-week low on the strong Dec ADP employment change but then shed their losses and moved higher on increased safe-haven demand from the European debt crisis: TYH2 +3.5, FVH2 +1.5, EDM2 +0.5. Bullish factors included (1) increased safe-haven demand for Treasuries on concern Europe will struggle to finance its debts after France sold 10-year bonds at an average yield of 3.29%, up from 3.18% in Dec and demand weakened for the debt after the bid-to-cover ratio fell to 1.64 from 3.05 in Dec, (2) concern that Europe is falling into recession after Nov German retail sales unexpectedly fell for a second month and Oct Euro-Zone industrial new orders rose less than expected, and (3) the smaller-than-expected increase in the Dec ISM non-manufacturing index (+0.6 to 52.6 versus expectations of +1.0 to 53.0). Bearish factors included (1) the larger-than-expected increase in the Dec ADP employment change which posted its biggest increase in jobs since data began in 2001 (+325,000 versus expectations of +178,000) and (2) the larger-than-expected fall in weekly U.S initial unemployment claims (-15,000 to 372,000 versus expectations of -6,000 to 375,000).
- The dollar index this morning is little changed with the dollar/yen -0.01 yen and the euro/dollar +0.08 cents. The dollar on Thursday posted an 11-3/4 month high and settled sharply higher as data showed the U.S. labor market strengthened and concerns grew that Europe's debt crisis is worsening: Dollar Index +0.807, USDJPY +0.405, EURUSD -0.01545. Bullish factors included (1) the slump in the euro to a 1-1/4 year low against the dollar on concern Europe will struggle to finance its debts after France sold 10-year bonds at an average yield of 3.29%, up from 3.18% at a similar auction in Dec and as demand weakened for the debt after the bid-to-cover ratio fell to 1.64 from 3.05 in Dec, (2) signs the U.S. labor market strengthened after weekly initial U.S. unemployment claims fell more than expected and the Dec ADP employment change posted its biggest increase in jobs since data began in 2001, and (3) weaker than expected European economic data on Oct Euro-Zone industrial new orders and the unexpected decline in Nov German retail sales, which is euro negative. Bearish factors included (1) the smaller-than-expected increase in the Dec ISM manufacturing index and (2) the weaker than expected Dec ICSC chain store sales.
- Feb crude oil prices this morning are up +41 cents a barrel and Feb gasoline is +1.15 cents per gallon. Crude oil prices Thursday settled lower after the dollar strengthened and weekly DOE crude supplies unexpectedly increased: CLG12 -$1.41, RBG12 -4.87. Feb gasoline posted a 2-1/2 month high but erased its gains and closed lower. Bearish factors included (1) the rally in the dollar index to a 11-3/4 month high, which reduces investment demand for commodities, (2) the unexpected increase in weekly DOE crude supplies (+2.21 million bbl versus expectations of a -1.0 million bbl drawdown), (3) the larger-than-expected increase in weekly DOE gasoline inventories to their highest level in 9-1/2 months (+2.48 million bbl to 220.2 million bbl), and (4) the increase in French borrowing costs, which raises concern that Europe will struggle to contain the debt crisis. Bullish factors included (1) the improved US labor market after weekly initial unemployment claims fell more than expected and the Dec ADP employment change rose by the most since data began in 2001 and (2) heightened geopolitical concerns after British Defense Secretary Hammond said the Royal Navy may take military action against Iran if it attempts to block the Strait of Hormuz.
Global Financial Calendar
| Friday 1/6/12 | |
|---|---|
| United States | |
| 0830 ET | Dec non-farm payrolls expected +150,000, Nov +120,000. Dec private payrolls (ex-government) expected +175,000, Nov +140,000. Dec unemployment rate expected +0.1 to 8.7%, Nov -0.4 to 8.6%. Dec manufacturing payrolls expected +5,000, Nov +2,000. Dec avg hourly earnings all employees expected +0.2% m/m and +2.1% y/y, Nov -0.1% m/m and +1.8% y/y. Dec avg weekly hours all employees expected unchanged at 34.3, Nov unchanged at 34.3. |
| 0900 ET | New York Fed President William Dudley speaks at the New Jersey Bankers Association Economic Forum. |
| 1020 ET | Boston Fed President Eric Rosengren delivers a speaks on the economy at the Economic Summit and Outlook 2012 in Hartford, CT. |
| 1240 ET | Fed Governor Elizabeth Duke speaks on economic and housing market developments at the Virginia Bankers Association 2012 Financial Forecast. |
| 1300 ET | Fed Governor Sarah Raskin speaks on community banking supervision at the Maryland Bankers Association First Friday Economic Outlook Forum. |
| Euro-Zone | |
| 0500 ET | Dec Euro-Zone business climate indicator expected -0.02 to -0.46, Nov -0.25 to -0.44. |
| 0500 ET | Dec Euro-Zone economic confidence expected -0.5 to 93.2, Nov -1.1 to 93.7. |
| 0500 ET | Revised Dec Euro-Zone consumer confidence expected no change at -21.2. |
| 0500 ET | Nov Euro-Zone retail sales expected -0.4% m/m and -0.9% y/y, Oct +0.3% m/m and -0.4% y/y. |
| 0500 ET | Nov Euro-Zone unemployment rate expected unchanged at 10.3%, Oct +0.1 to 10.3%. |
| Germany | |
| 0600 ET | Nov German factory orders expected -1.6% m/m and -1.2% y/y, Oct +5.2% m/m and +5.4% y/y. |
| Canada | |
| 0700 ET | Dec Canada net change in employment expected +14,300, Nov -18,600. Dec unemployment rate expected unchanged at 7.4%, Nov +0.1 to 7.4%. |
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