Barchart Morning Call
Overnight Developments
Global Financial Calendar
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- Global stocks this morning are mixed with the Euro Stoxx 50 down -0.22% and Mar S&Ps down -0.60 of a point. The dollar and Treasuries are higher while most commodities weakened with crude oil at a 1-1/4 month low as Greece struggles to reach an agreement with bondholders on cutting its debt burden. The euro came off of its low after Chinese Premier Wen Jiabao said China is still researching the best way to participate in the European Financial Stability Facility. The euro also received a boost after France sold 7.96 billion euros of 6, 8, and 10-year debt at the top of its planned range while Spain sold 4.56 billion euros of bonds maturing between 2015-17, just above its maximum target of 4.50 billion euros. German bunds rallied after Dec Euro-Zone PPI fell -0.2% m/m, a bigger than decline than expectations of -0.1% m/m, while European stocks were undercut after Jan U.K. PMI construction fell -1.8 to 51.4, weaker than expectations of -0.7 to 52.5.
- Asian stocks today closed higher with Japan up +0.76%, China +2.36%, Australia +1.00%, South Korea +1.28%, India +0.76%. Asian stocks moved higher as manufacturing gained in the U.S. and Europe, which boosts confidence the global economy is recovering. Asian carmakers rallied after U.S. vehicle sales in Jan rose +11% y/y, while Chinese automakers were boosted after Daiwa securities predicted a "double-digit" gain this year in China's vehicle sales. Chinese stocks also received a lift after Premier Wen Jiabao said the government will support small companies with a 15 billion-yuan ($2.4 billion) fund, extend preferential tax policies for small companies until 2015 and ask banks to increase tolerance for bad loans to these businesses. The yen held near a 3-month high against the dollar despite warnings from Japanese Finance Minster Azumi who said that "speculative moves are increasing in the market and we can't overlook them," which may signal Japan is close to resuming foreign-exchange intervention to stem the yen's gains.
- March S&Ps this morning are trading little changed, down -0.60 of a point. The US stock market Wednesday rallied sharply and settled higher after strength in global manufacturing activity reduced economic growth concerns and optimism increased that Greek debt-swap talks would soon be resolved: Dow Jones +0.66%, S&P 500 +0.89%, Nasdaq Composite +1.22%. The Nasdaq posted a 10-3/4 year high. Bullish factors on Wednesday included (1) reduced economic growth concerns as global manufacturing activity expanded last month after the Jan ISM manufacturing index rose +1.0 to 54.1, its best level in 7 months, the Jan German PMI expanded at its fastest pace in 6 months (51.0), the Jan U.K. PMI rose to its best level in 9 months (+2.4 to 52.1), India's Jan manufacturing activity grew at the fastest pace in 8 months (+3.3 to 57.5) and the Jan China PMI unexpectedly expanded (+0.2 to 50.5), (2) a decline in Spanish, Italian and Portuguese government bond yields on optimism that Greek debt-swap talks would soon be resolved, and (3) strength in technology stocks as Microsoft rose 1.2% and Hewlett-Packard gained 2.8%, which boosted the Philadelphia Semiconductor Index to a 6-1/2 month high.
- Bearish factors included (1) the smaller-than-expected increase in the Jan ADP employment change along with the downward revision to Dec (Jan +170,000 versus expectations of +182,000 and Dec revised down to +292,000 from the originally reported +325,000) and (2) the larger-than-expected increase in the Jan ISM prices paid sub-index which jumped to a 4-month high (+8.0 to 55.5 versus expectations of +2.5 to 50.0).
- Qualcomm (QCOM) rose 4.8% in pre-market trading up to a 12-year high after the company raised its full-year earnings-per-share forecast to $3.36 to $3.56 from an earlier prediction of $2.80 to $3.00 a share on strength in its phone shipments to India and China.
- March 10-year T-notes this morning are up +4 ticks. T-note prices on Wednesday retreated on reduced safe-haven demand as stocks rallied after global manufacturing activity expanded and on optimism that the Greek debt-swap talks would soon be resolved: TYH2 -8.5, FVH2 -1.5, EDM2 +2.5. Bearish factors included (1) reduced safe-haven demand for Treasuries after stocks rallied sharply as strength in global manufacturing eased concern the European debt crisis will curb economic growth after the Jan ISM manufacturing index rose +1.0 to 54.1, its best level in 7 months, the Jan German PMI expanded at its fastest pace in 6 months (51.0), the Jan U.K. PMI rose to its best level in 9 months (+2.4 to 52.1), India's Jan manufacturing activity grew at the fastest pace in 8 months (+3.3 to 57.5) and the Jan China PMI unexpectedly expanded (+0.2 to 50.5), (2) the larger-than-expected increase in the Jan ISM prices paid sub-index which jumped to a 4-month high (+8.0 to 55.5 versus expectations of +2.5 to 50.0), and (3) a decline in Spanish, Italian and Portuguese government bond yields on optimism that Greek debt-swap talks would soon be resolved. Bullish factors Wednesday included (1) the smaller-than-expected increase in the Jan ADP employment change along with the downward revision to Dec (Jan +170,000 versus expectations of +182,000 and Dec revised down to +292,000 from the originally reported +325,000) and (2) the action by the Fed to purchase $1.746 billion of Treasuries as part of it 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.
- The dollar index this morning is higher with the dollar/yen -0.07 yen and the euro/dollar -0.67 cents. The dollar index on Wednesday fell to a fresh 1-1/2 month low and settled lower on reduced safe-haven demand as strength in global manufacturing activity boosted stocks along with optimism that progress was being made in Greek debt-swap talks: Dollar Index -0.366, USDJPY -0.057, EURUSD +0.00765. Bearish factors Wednesday included (1) strength in the euro after the Jan German PMI was revised up to a 6-month high of 51.0, (2) reduced safe-haven demand for the dollar as stocks rallied on economic optimism after Jan China manufacturing activity unexpectedly expanded and the Jan ISM manufacturing index expanded at its fastest pace in 7 months, (3) strength in the yen which rallied to a 3-month high against the dollar, and (4) optimism that Greek debt-swap talks would be soon resolved after people with knowledge of the debt talks said creditors negotiating with Greece may get a sweetener tied to a revival in economic growth that would ease the impact of accepting a lower interest rate on the new bonds. A bullish factor was speculation that Japan may intervene in currency markets to curb the yen's gains if it strengthens further against the dollar.
- Mar crude oil prices this morning are down -$1.00 a barrel at a 1-1/4 month low and Mar gasoline is -2.27 cents per gallon. Crude oil and gasoline prices on Wednesday traded on either side of unchanged and finally settled mixed as a weaker dollar and strong global manufacturing activity offset a larger-than-expected increase in weekly DOE supplies and a plunge in U.S. gasoline demand: CLH12 -$0.87, RBH12 +0.13. Bullish factors included (1) the slump in the dollar index to a 1-1/2 month low, which boosts investment demand in commodities, and (2) strength in global manufacturing activity which may boost worldwide energy demand after the Jam ISM manufacturing index expanded at its fastest pace in 7 months, the Jan German PMI climbed to its best level in 6 months, India's Jan manufacturing activity grew at the fastest pace in 8 months and China's PMI unexpectedly expanded last month. Bearish factors included (1) the larger-than-expected increase in weekly DOE crude supplies (+4.18 million bbl to a 3-month high of 338.9 million bbl versus expectations of +2.7 million bbl), (2) the surge in weekly DOE gasoline supplies to their highest level in 11 months (+3.02 million bbl to 230.1 million bbl versus expectations of +500,000 bbl), (3) slack demand after U.S. gasoline demand in the week ended Jan 27 fell -1.6% to 7.97 million barrels a day, the lowest in 10-1/3 years.
Global Financial Calendar
| Thursday 2/2/12 | |
|---|---|
| United States | |
| 0730 ET | Jan Challenger job cuts, Dec +30.6% y/y. |
| 0830 ET | Weekly initial unemployment claims expected -6,000 to 371,000, previous +21,000 to 377,000. Weekly continuing claims expected -19,000 to 3.535 million, previous +88,000 to 3.554 million. |
| 0830 ET | Q4 non-farm productivity expected +0.8%, Q3 +2.3%. Q4 unit labor costs expected +0.8%, Q3 -2.5%. |
| 0900 ET | Chicago Fed President Charles Evans speaks to reporters in Chicago. |
| 1000 ET | Fed Chairman Ben Bernanke testifies before the House Budget Committee on the state of the U.S. economy. |
| 1030 ET | Jan ICSC chain store sales, Dec +3.5% y/y. |
| 1630 ET | Weekly money supply report and Fed balance sheet. |
| 1915 ET | Dallas Fed President Richard Fisher speaks on the economy and Fed policy at the Headliners Club of Austin Famous Austinites Dinner. |
| United Kingdom | |
| 0430 ET | Jan U.K. PMI construction expected -0.7 to 52.5, Dec +0.9 to 53.2. |
| Euro-Zone | |
| 0500 ET | Dec Euro-Zone PPI expected -0.1% m/m and +4.3% y/y, Nov +0.2% m/m and +5.3% y/y. |
| 0600 ET | European Parliament votes on resolution on Iran?s nuclear program and votes on a Euro bond resolution. |
| CHI | |
| 2000 ET | Jan China non-manufacturing PMI, Dec +6.3 to 56.0. |
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