Barchart Morning Call
Overnight Developments
Global Financial Calendar
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- Global stocks this morning are higher with the Euro Stoxx 50 up +0.48% and Mar S&Ps up +8.40 points. Stocks and commodities rallied while the dollar and Treasuries retreated after China, which holds the world's largest currency reserves, pledged to invest in Europe's bailout funds and sustain its holdings of euro assets. PBOC Governor Zhou Xiaochuan said "China will always adhere to the principle of holding assets of EU sovereign debt" and that "we would participate in resolving the euro debt crisis." European stocks and the euro also received a boost after Q4 Euro-Zone GDP fell -0.3% q/q and rose +0.7% y/y, slightly better than expectations of -0.4% q/q. Germany's economy also was stronger than expected last quarter with Q4 German GDP -0.2% q/q and +2.0% y/y, better than expectations of -0.3% q/q and +1.8% y/y. On the negative side, Jan U.K. jobless claims rose a more than expected 6,900 to 1.6 million, the highest in 2-years, while the U.K. ILO unemployment rate remained at 8.4% in Q4, the highest in 16 years. Also, Euro-Zone finance ministers canceled a planned emergency meeting on the Greek aid package in Brussels today, citing a lack of political assurances from Greek leaders to stick to their pledges, and will instead hold a teleconference to prod Greece to do more to win support for the 130 billion euro bailout.
- Asian stocks today closed higher with Japan up +2.30%, CHina +1.09%, Australia +0.25%, South Korea +1.33%, India +1.98%. Asian stocks rallied after China pledged to help resolve Europe's debt crisis. Japanese exporters gained as the yen tumbled to a 3-1/2 month low against the dollar, which fueled a rally in the Nikkei 225 Stock Index to a 6-1/4 month high. Chipmakers outside of Japan also rallied as debt-ridden Elpida Memory sank 14% to an 8-year low after saying it sees "uncertainty" over remaining in business because it hasn't secured financing for its debt due in April. The end of Elpida, Japan's largest maker of dynamic random access memory, may mean less competition in the chip making business as it reduces the number of players and production capacity.
- March S&Ps this morning are trading up +8.40 pointa at a new contract high. The US stock market on Tuesday opened lower on increased European debt concerns after Moody's downgraded the credit ratings of 6 European nations and after Jan U.S. retail sales rose less than expected, but the indexes erased most of their losses late in the session and finished mixed after Reuters reported that Greece will commit to budget cuts: Dow Jones +0.03%, S&P 500 -0.09%, Nasdaq Composite +0.02%. The Nasdaq posted an 11-year high. Bullish factors Tuesday included (1) signs that Europe may withstand the negative effects of the region's debt crisis after the Feb German ZEW economic sentiment rose more than expected to a 10-month high and borrowing costs declined for Italy and Spain after the yield on Italy's 2-year bonds fell to 4.83%, the lowest in 11 months, and the yield on Spain's 12-month bills fell to 1.899%, the lowest in 16-months, (2) the statement from Minneapolis Fed President Kocherlakota that the U.S. economy will grow at an annual rate of between 2.5% and 3.0% in each of the next 2 years and the U.S. unemployment rate will fall to around 7.7% by the end of this year and to around 7.0% by Q4 of 2013, (3) strong Q4 U.S. earnings results as 70% of the 342 companies in the S&P 500 that have reported results since Jan 9 have beaten earnings projections, and (4) late-day short covering in stocks after Reuters reported that Greece's conservative party leader will deliver a commitment to lenders on Wed.
- Bearish factors included (1) concern the European debt crisis may worsen after Moody's Investors Service downgraded the debt ratings of 6 European nations and said it may also strip France and the U.K. of their top Aaa ratings and (2) dampened optimism about the U.S. economy after the weaker-than-expected Jan U.S. retail sales and the downward revision to Dec (Jan +0.4% and +0.7% less autos versus expectations of +0.8% and +0.5% less autos and Dec revised down to unchanged and -0.5% less autos from the originally reported +0.1% and -0.2% less autos).
- Hartford Financial Services (HIG) rose 5% in European trading after its largest shareholder, billionare hedge-fund manger John Paulson, notified regulators that he may talk with other shareholders to push for splitting up the insurance company.
- March 10-year T-notes this morning are down -6.5 ticks. T-note prices on Tuesday finished stronger after Moody's action to downgrade the debts of 6 European nations boosted the safe-haven demand for Treasuries, along with the smaller-than-expected increase in Jan U.S. retail sales: TYH2 +13, FVH2 +3.5, EDM2 -0.5. Bullish factors Monday included (1) increased safe-haven demand for Treasuries on concern the European debt crisis may worsen after Moody's Investors Service downgraded the debt ratings of 6 European nations and said it may also strip France and the U.K. of their top Aaa ratings, (2) the weaker-than-expected Jan U.S. retail sales along with the downward revision to Dec (Jan +0.4% and +0.7% less autos versus expectations of +0.8% and +0.5% less autos and Dec revised down to unchanged and -0.5% less autos from the originally reported +0.1% and -0.2% less autos), and (3) the action by the Fed to purchase $4.952 billion of Treasuries as part of its Operation Twist program to replace $400 billion of short-term debt in its portfolio with longer-term Treasuries in an effort to keep borrowing costs low. Bearish factors included (1) reduced European sovereign debt concerns after the larger-than-expected increase in the Feb German ZEW economic sentiment to a 10-month high along with a decline in Italy's and Spain's borrowing costs and (2) hawkish comments from Philadelphia Fed President Plosser who said that further easing measures would put the Fed on a "treacherous path" as "prolonged efforts to hold interest rates near zero can lead to financial market distortions and the misallocation of resources."
- The dollar index this morning is weaker with the dollar/yen +0.13 yen and the euro/dollar +0.16 cents. The dollar index on Tuesday rallied up to a 1-week high and settled higher on increased safe-haven demand after Moody's downgraded the debt ratings of 6 European nations and as the yen plummeted to a 3-1/4 month low against the dollar when the BOJ unexpectedly expanded its asset-purchase program: Dollar Index +0.634, USDJPY +0.862, EURUSD -0.00529. Bullish factors included (1) increased safe-haven demand for the dollar on concern the European debt crisis may worsen after Moody's Investors Service downgraded the debt ratings of Spain, Italy, Portugal, Slovakia, Slovenia and Malta all with negative outlooks and said it may also strip France and the U.K. of their top Aaa ratings, (2) weakness in the yen after the BOJ unexpectedly added 10 trillion yen ($128 billion) to an asset-purchase program and said it will target 1% inflation "for the time being." Bearish factors Monday included (1) the larger-than-expected increase in the Feb German ZEW survey of economic sentiment to a 10-month high, which is euro supportive and (2) the decline in borrowing costs for Italy and Spain, which is also euro positive, after the yield on Italy's 2-year bonds fell to 4.83%, the lowest in 11 months, and the yield on Spain's 12-month bills fell to 1.899%, the lowest in 16-months.
- Mar crude oil prices this morning are up +89 cents a barrel and Mar gasoline is +2.51 cents per gallon. Crude oil and gasoline prices Tuesday settled lower as a strong dollar and Moody's downgrade of 6 European nations offset an increase in German investor confidence to a 10-month high: CLH12 -$0.17, RBH -3.0. Mar crude rallied up to a 3-week high but shed its gains and closed lower. Bearish factors included (1) the rally in the dollar index to a 1-week high, which discourages investment demand in commodities, (2) the action by Moody's Investors Service to downgrade the debt ratings of 6 European countries, which signals the European debt crisis may worsen and lead to stagnant economic growth and energy demand, and (3) the outlook for weekly U.S. oil supplies to increase when the DOE releases its weekly inventory figures on Wed. Bullish factors included (1) the larger-than-expected increase in the Feb German ZEW survey of economic sentiment up to a 10-month high, which signals confidence in the European economy and energy demand and (2) the unexpected action by the BOJ to boost its bond-purchase program by 10 trillion yen ($128 billion) to 65 trillion yen, which may boost economic growth and fuel demand in Japan, the world's third-biggest crude consumer. Expectations for the weekly DOE inventories on Wednesday are for crude oil supplies to rise +1.6 million bbl, gasoline stockpiles to increase +775,000 bbl, distillate inventories to drop -1.1 million bbl and the refinery capacity rate to remain unchanged at 82.8%.
Global Financial Calendar
| Wednesday 2/15/12 | |
|---|---|
| United States | |
| 0700 ET | Weekly MBA mortgage applications, previous+7.5% with purchase mortgage sub-index +0.1% and refinancing sub-index +9.4%. |
| 0830 ET | Feb Empire manufacturing index expected +1.5 to 15.0, Jan +5.3 to 13.5. |
| 0900 ET | Dec net long-term TIC flows expected +$45.0 billion, Nov +$59.8 billion. |
| 0915 ET | Dallas Fed President Richard Fisher speaks at the Texas Manufacturers Summit 2012 in San Marcos, TX. |
| 0915 ET | Jan industrial production expected +0.7%, Dec +0.4%. Jan capacity utilization expected +0.5 to 78.6%, Dec +0.3 to 78.1%. |
| 1000 ET | Treasury Secretary Timothy Geithner testifies before the House Ways and Means Committee on the president?s budget for fiscal 2013. |
| 1000 ET | Feb NAHB housing market index expected +1 to 26, Jan +4 to 25. |
| 1400 ET | Minutes of the Jan 24-25 FOMC meeting. |
| Japan | |
| 0100 ET | Revised Jan Japan machine tool orders, previous -6.6% y/y. |
| France | |
| 0130 ET | Q4 French BDP expected -0.2% q/q and +1.1% y/y, Q3 +0.3% q/q and +1.5% y/y. |
| Germany | |
| 0200 ET | Q4 German GDP expected -0.3% q/q and +1.8% y/y, Q3 +0.5% q/q and +2.5% y/y. |
| Euro-Zone | |
| 0300 ET | EU President Herman Van Rompuy speaks at the European Parliament. |
| 0500 ET | Q4 Euro-Zone GDP expected -0.4% q/q and +0.7% y/y, Q3 +0.1% q/q and +1.3% y/y. |
| n/a | Euro-Zone finance ministers hold a conference call call instead of a planned meeting in Brussels on the Greek aid package. |
| United Kingdom | |
| 0430 ET | Jan U.K. jobless claims change expected +3,000, Dec +1,200. Jan claimant count rate expected 5.0%, Dec 5.0%. |
| 0430 ET | Dec U.K. ILO unemployment rate expected 8.4% 3-months, Nov 8.4% 3-months. |
| 0430 ET | Dec U.K. avg weekly earnings expected +1.9% 3-mo/year-over-year, Nov +1.9% 3-mo/year-over-year. |
| 0430 ET | Dec U.K. avg weekly earnings ex-bonus expected +1.9% 3-mo/year-over-year, Nov +1.9% 3-mo/year-over-year. |
| 0530 ET | BOE releases quarterly inflation report. |
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