Barchart Morning Call
Overnight Developments
Global Financial Calendar
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- Global stocks this morning are weaker with the Euro Stoxx 50 down -0.51% and Mar S&Ps down -4.70 points. Treasuries and the dollar rose with the dollar index at a 3-week high, while stocks and commodities declined with copper at a 3-week low as European leaders remain divided over a Greek rescue. Concern grew that Greece may miss a debt payment next month as a decision on its proposed 130 billion euro bailout was postponed until at least Feb 20. Bank stocks led losses in the equity market after Moody's Investors Service put them under review and warned that ratings for global banks may be cut as lenders worldwide face risks of rising funding costs due to the European debt crisis. Stocks were also pressured and the euro fell to a 3-week low against the dollar after the ECB said forecasters cut their growth projections for this year and next. In its monthly report that cited a quarterly survey, the ECB said forecasters lowered their 2012 Euro-Zone GDP forecast to a contraction of -0.1% from a Nov projection of +0.8% growth, while they cut their 2013 GDP forecast to 1.1% from a Nov estimate of 1.6%. On the positive side, Spain raised more money than targeted at a bond auction as it sold 4.07 billion euros of bonds, more than the maximum target of 4 billion euros, while French borrowing costs fell after France sold 2.09 billion euros of 2-year notes at an average yield of 0.89%, down from 1.05% at a similar auction last month.
- Asian stocks today closed lower with Japan down -0.24%, China -0.53%, Australia -1.68%, South Korea -1.50%, India -0.27%. Asian stocks declined as European leaders remain divided over a Greek rescue and after Moody's Investors Service said it may downgrade global banks. Losses in Japanese stocks were limited as exporters received a boost when the yen tumbled to a fresh 3-1/2 month low against the dollar. Chinese stocks fell after Jan China foreign direct investment declined -0.3% y/y, its third straight monthly drop, and after China's commerce industry said the outlook for foreign investment in China and trade this year is "grim." Australian stocks declined even after Jan Australian payrolls rose +46,000, bigger than expectations of +10,000 and the biggest gain in 14 months, while the unemployment rate fell -01 to 5.1%. The strong Aussie payroll report dampens expectations for the RBA to lower interest rates again when it meets next month.
- March S&Ps this morning are trading down -4.70 points. The US stock market on Wednesday opened higher after China said it will help participate in resolving the European debt crisis but stocks erased their advance and turned lower on concern Greece was moving toward default and after Apple shed an early advance and closed lower on a patent dispute: Dow Jones -0.76%, S&P 500 -0.54%, Nasdaq Composite -0.55%. The S&P 500 posted a 7-1/2 month high and the Nasdaq climbed to an 11-year high but they both shed their gains and closed lower. Bearish factors Wednesday included (1) a report from Reuters that cited unnamed EU sources who said an aid package for Greece was postponed until Feb 20 at the earliest and could be put off until after the Greek elections in Apr, which increases the chances of a Greek default and (2) weakness in technology stocks which were pulled lower after Apple slumped when it reportedly asked Amazon China and other websites to stop selling the iPad amid a patent dispute.
- Bullish factors included (1) reduced concern over the European sovereign-debt crisis after PBOC Governor Zhou Xiaochuan said China would help participate in resolving the crisis, (2) the stronger-than expected Feb Empire manufacturing index which expanded at its strongest pace in 20 months (+6.0 to 19.5 versus expectations of +1.5 to 15.0), and (3) strength in homebuilders after the Feb NAHB housing market index rose more-than-expected to its highest level in 4-3/4 years (+4 to 29 versus expectations of +1 to 26)
- Bank of America (BAC) fell 1.2% and Goldman Sachs (GS) dropped 1.0% in pre-market trading after Moody's Investors Service put global banks under review for a downgrade.
- March 10-year T-notes this morning are up +2.5 ticks. T-note prices on Wednesday recovered from early losses as they rallied up to a 1-week high and finished higher on speculation a Greek aid package could be delayed until after Greece's April elections: TYH2 +1.5, FVH2 +2.7, EDM2 +0.5. Bullish factors Wednesday included (1) increased safe-haven demand for Treasuries after a report from Reuters cited unnamed EU sources who said an aid package for Greece was postponed until Feb 20 at the earliest and could be put off until after the Greek elections in Apr, (2) the Jan 24-25 FOMC minutes that showed a few Fed members said economic conditions "could warrant the initiation of additional securities purchases before long," and (3) comments from Atlanta Fed President Lockhart who said slow improvement in the labor market warrants keeping the Fed funds rate near zero through 2014, even as the economy shows signs of strength. Bearish factors included (1) the stronger-than expected Feb Empire manufacturing index which expanded at its strongest pace in 20 months (+6.0 to 19.5 versus expectations of +1.5 to 15.0), (2) the larger-than-expected increase in the Feb NAHB housing market index which rose to its highest level in 4-3/4 years (+4 to 29 versus expectations of +1 to 26), (3) decreased demand for U.S. debt from China, the largest-holder of U.S. Treasuries, after the Treasury data showed China cut its Treasury holdings by -2.8% in Dec to $1.1 trillion, the lowest in 1-1/2 years, and (4) an early reduction in safe-haven demand after PBOC Governor Zhou Xiaochuan said China would help participate in resolving the European debt crisis.
- The dollar index this morning is stronger and at a 3-week high with the dollar/yen +0.35 yen and the euro/dollar -0.72 cents. The dollar index on Wednesday recovered from early weakness and settled higher on speculation a Greek aid package could be delayed until after Greece's April elections: Dollar Index +0.090, USDJPY unchanged, EURUSD -0.00677. Bullish factors included (1) increased safe-haven demand for the dollar as the euro weakened on a report from Reuters that cited unnamed EU sources who said an aid package for Greece was postponed until Feb 20 at the earliest and could be put off until after the Greek elections in Apr, and (2) signs of dollar supportive U.S. economic strength after the Feb Empire manufacturing index rose more than expected to its strongest level in 20-months and the Feb NAHB housing market index rose more than expected to its highest in 4-3/4 years. Bearish factors Wednesday included (1) early strength in the euro 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, (2) the stronger-than-expected Q4 Euro-Zone and German GDP, which is euro supportive, and (3) the smaller-than-expected increase in he Dec net long-term TIC flows, which indicates reduced foreign demand for U.S. dollar assets.
- Mar crude oil prices this morning are down -52 cents a barrel and Mar gasoline is -0.19 cents per gallon. Crude oil and gasoline prices Wednesday moved higher after weekly DOE crude supplies unexpectedly declined and after a report said that Iran had cut off oil shipments to 6 European countries: CLH12 +$1.06, RBH +2.42. Mar crude rallied up to a 1-month high and Mar gasoline climbed to a 5-1/2 month high. Bullish factors included (1) the unexpected decline in weekly DOE crude supplies (-171,000 bbl versus expectations of a +1.6 million bbl build), (2) the report from Iran's state-run Press TV that said Iran had halted oil exports to Italy, France, Spain, Greece, Portugal and the Netherlands as geopolitical tensions intensify, (3) China's pledge to help resolve the European debt crisis, which may limit a decline in European economic growth and fuel demand, and (4) concern that the global oil markets are vulnerable to a supply shock as IEA data shows crude inventories held by the 34 nations in the OECD climbed by 11.4 million bbl in Jan, less than the 5-year average increase of 43.2 million. Bearish factors included (1) the rally in the dollar index to a 3-week high, which discourages investment demand in commodities, (2) the +400,000 bbl increase in weekly DOE gasoline supplies to an 11-1/2 month high of 232.2 million bbl, and (3) weak demand after the SpendingPulse report from MasterCard showed U.S. drivers bought 8.01 million bbl of gasoline a day in the week ended Feb 10, down -3.1% w/w and the lowest level since MasterCard began collecting the data in July 2004.
Global Financial Calendar
| Thursday 2/16/12 | |
|---|---|
| United States | |
| 0830 ET | Weekly initial unemployment claims expected +7,000 to 365,000, previous-15,000 to 358,000. Weekly continuing claims expected -25,000 to 3.490 million, previous +64,000 to 3.515 million. |
| 0830 ET | Jan PPI expected +0.4% m/m and +4.1% y/y, Dec -0.1% m/m and +4.8% y/y, Jan PPI ex food & energy expected +0.2% m/m and +2.7% y/y, Dec +0.3% m/m and +3.0% y/y. |
| 0830 ET | Jan housing starts expected +2.7% to 675,000, Dec -4.1% to 657,000. Jan building permits expected +1.3% to 680,000, Dec -1.3% to 671,000. |
| 0900 ET | Fed Chairman Ben Bernanke speaks on community banking at the FDIC conference on the Future of Community Banking in Arlington, VA. |
| 1000 ET | Q4 mortgage delinquencies, Q3 +7.99%. Q4 mortgage foreclosures, Q3 +4.43%. |
| 1000 ET | Feb Philadelphia Fed manufacturing index expected +1.7 to 9.0, Jan +0.5 to 7.3. |
| 1100 ET | Treasury announces amount of 2-year T-notes (previous $35 billion), 5-year T-notes (previous $35 billion) and 7-year T-notes (previous $29 billion) to be auctioned Feb 21-23. |
| 1300 ET | Treasury auctions $9 billion 30-year TIPS. |
| 1630 ET | Weekly money supply report and Fed balance sheet. |
| Euro-Zone | |
| 0400 ET | ECB published monthly report for Feb. |
| Canada | |
| 0830 ET | Dec Canada manufacturing sales expected +0.5% m/m, Nov +2.0% m/m. |
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