Barchart Morning Call
Overnight Developments
Global Financial Calendar
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- Global stocks this morning are mixed with the Euro Stoxx 50 down -0.28% and Mar S&Ps down -0.10 of a point. Stocks and commodities are mixed while Treasuries are weaker as German Chancellor Merkel and French President Sarkozy meet in Berlin to discuss measures to rescue the euro over the next 3 months. Treasuries weakened after St. Louis Fed President Bullard said late Saturday that the Fed probably won't begin a new round of bond purchases (QE 3) following last Friday's "encouraging" jobs report. Nov German exports rose +2.5% m/m, stronger than expectations of +0.5%, which lifted the euro off of a 1-1/4 year low against the dollar. The euro may succumb to additional bouts of short covering after the CFTC late last Friday reported that futures traders increased their net short positions against the euro to a record 138,909 contracts in the week ended Jan 3. Gains in the euro may be limited however, after the Markit iTraxx SovX Western Europe Index of credit-default swaps that insure European sovereign debt rose to a record 386 bp. Stock gains may also be limited after Nov German industrial production fell -0.6% m/m and rose +3.6% y/y, weaker than expectations of -0.5% m/m and +3.9% y/y.
- Asian stocks today closed mostly lower with Japan closed for holiday, China up +3.40%, Australia -0.08%, South Korea -1.06%, India -0.22%. China's Shanghai Stock Index posted a 2-week high and closed higher on speculation the government is relaxing monetary policies to bolster economic growth. Dec China new loans increased by 640.5 billion yuan, the highest amount in 8 months and stronger than expectations of 575 billion yuan, while Dec China M2 money supply growth expanded at a +13.6% y/y pace, the fastest pace since July and stronger than expectations of +12.9% y/y. Comments from Chinese Premier Wen Jiabao also boosted stocks when the Shanghai Securities News reported that he called for measures to boost confidence in the stock market including reforming initial public offerings and improving companies' dividend payouts.
- March S&Ps this morning are trading little changed, up +0.10 of a point. The US stock market last Friday settled mixed as European recession concerns overshadowed stronger-than-expected U.S. employment data and calls by Fed members for additional easing: Dow Jones -0.45%, S&P 500 -0.25%, Nasdaq Composite +0.16%. The Nasdaq posted a 1-3/4 month high. Bearish factors included (1) carry-over weakness from a fall in European stocks on concern Europe may be headed for recession after Dec Euro-Zone economic confidence fell to a 2-year low (-0.5 to 93.3), Nov Euro-Zone retail sales weakened more than expected (-0.8% m/m), and Nov German factory orders plunged -4.8% m/m, the most in 2-3/4 years, and (2) weakness in bank stocks after Sanford C. Bernstein and Ticonderoga Securities LLC cut their Q4 bank earnings estimates and said a weak Q4 dimmed prospects for a capital-markets rebound in the first half of this year.
- Bullish factors last Friday included (1) the larger-than-expected increase in Dec non-farm payrolls (+200,000 versus expectations of +150,000), (2) the unexpected decline in the Dec unemployment rate which fell to its lowest level in 2-3/4 years (-0.2 to 8.5% versus expectations of +0.1 to 8.7%), (3) the larger-than-expected increase in Dec manufacturing payrolls (+23,000 versus expectations of +5,000), (4) the unexpected increase in Dec average weekly hours (+0.1 to 34.4 versus expectations of unchanged at 34.3), which may prompt employers to boost hiring as current employees work more hours, and (5) comments from New York Fed President Dudley who said the Fed may consider further monetary easing to improve the economic outlook.
- March 10-year T-notes this morning are down -2 ticks. T-note prices last Friday fell to a 1-week low after the stronger-than-expected Dec U.S. non-farm payrolls report but then erased their losses and settled higher on dovish Fed comments along with concern Europe may be headed for recession: TYH2 +8, FVH2 +3.2, EDM2 +5.5. Bullish factors included (1) comments from New York Fed President Dudley that suggests he favors additional Fed easing when he said "because the outlook for unemployment is unacceptably high relative to our dual mandate and the outlook for inflation is moderate, I believe it is appropriate to continue to evaluate whether we could provide additional accommodation in a manner that produces more benefits than costs," (2) comments from Boston Fed President Rosengren who said "he expects that inflation is likely to be below 2.0% not only in 2012 but also over the next several years" and that the Fed should "further purchases of mortgage-backed securities to help provide a more rapid recovery in housing," and (3) recession concerns in Europe after Dec Euro-Zone economic confidence fell to a 2-year low and Nov Euro-Zone retail sales and Nov German factory orders both weakened more than expected. Bearish factors included (1) the larger-than-expected increase in Dec non-farm payrolls (+200,000 versus expectations of +150,000), (2) the unexpected decline in the Dec unemployment rate which fell to its lowest level in 2-3/4 years (-0.2 to 8.5% versus expectations of +0.1 to 8.7%), and (3) a pickup in inflation expectations after the spread between 2-year T-notes and TIPS, or breakeven rate, widened to 1.682 percentage points, a 5-month high.
- The dollar index this morning is lower with the dollar/yen -0.13 yen and the euro/dollar +0.40 cents. The dollar index last Friday soared to a 13-month high and finished higher as U.S. economic data points to strength in the U.S. economy while Europe may be headed for recession: Dollar Index +0.318, USDJPY -0.148, EURUSD -0.00726. Bullish factors included (1) the slump in the euro to a 1-1/4 year low against the dollar on recession concerns after Dec Euro-Zone economic confidence fell to a 2-year low and Nov Euro-Zone retail sales and Nov German factory orders both weakened more than expected, and (2) the stronger-than-expected Dec U.S. non-farm payrolls and the unexpected decline in the Dec U.S. unemployment rate to a 2-3/4 year low, which signals economic strength that is dollar supportive. Bearish factors included (1) comments from New York Fed President Dudley who said the Fed may consider further monetary easing to improve the economic outlook and (2) dollar negative comments from Boston Fed President Rosengren who said the Fed should "further purchases of mortgage-backed securities to help provide a more rapid recovery in housing."
- Feb crude oil prices this morning are down -36 cents a barrel and Feb gasoline is -0.19 of a cent per gallon. Crude oil prices last Friday settled mixed as a stronger dollar and European recession concerns offset strong U.S. payrolls and Iran concerns: CLG12 -$0.25, RBG12 +1.51. Bearish factors included (1) the rally in the dollar index to a 13-month high, which reduces investment demand for commodities, and (2) signs that the European economy may be headed for recession after the Dec Euro-Zone economic confidence fell to a 2-year low and Nov Euro-Zone retail sales and Nov German factory orders both weakened more than expected. Bullish factors included (1) the larger-than-expected increase in Dec U.S. non-farm payrolls and the unexpected decline in the Dec U.S. unemployment rate to a 2-3/4 year low, which is positive for economic growth and energy demand and (2) heightened geopolitical concerns after an EU official said European foreign ministers are likely to agree to block Iranian oil imports at a meeting on Jan 30, which may prompt Iran to try to close the Strait of Hormuz where one-sixth of the world's crude supplies flow through each day.
Global Financial Calendar
| Monday 1/9/12 | |
|---|---|
| United States | |
| 1130 ET | Weekly 3-mo and 6-mo T-bill auctions. |
| 1240 ET | Atlanta Fed President Dennis Lockhart will speak about the U.S. economy to the Rotary Club of Atlanta. |
| 1500 ET | Nov consumer credit expected +$7.000 billion, Oct $7.646 billion. |
| Germany | |
| 0200 ET | Nov German trade balance expected +12.0 billion euros, Oct +11.6 billion euros. Nov exports expected +0.5% m/m, Oct -3.5% m/m. Nov imports expected +0.5% m/m, Oct -0.7% m/m. |
| 0600 ET | Nov German industrial production expected -0.5% m/m and +4.1% y/y, Oct +0.8% m/m and +4.1% y/y. |
| Euro-Zone | |
| 0430 ET | Jan Euro-Zone Sentix investor confidence, Dec -2.8 to -24.0. |
| 0730 ET | German Chancellor Angela Merkel and French President Nicolas Sarkozy meet in Berlin; joint press conference to follow. |
| Canada | |
| 0830 ET | Nov Canada building permits expected -3.0% m/m, Oct +11.9% m/m. |
| 1030 ET | Q4 Canada business outlook of future sales expected 8.0, Q3 6.0. |
| United Kingdom | |
| 1901 ET | Dec U.K. RICS house price balance expected -19%, Nov -17%. |
| Japan | |
| n/a | Japanese markets closed for Coming-of-Age Day. |
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