Barchart Morning Call
Overnight Developments
Global Financial Calendar
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- Global stocks this morning are mixed with the Euro Stoxx 50 down -0.03% and Mar S&Ps up +0.30 of a point. Stocks and commodities gained, Treasuries weakened and the dollar index slipped to a 1-1/2 week low after German business confidence climbed more than forecast, but stocks gave up their advance and turned lower when the European Commission predicted the Euro-Zone economy will contract this year. The euro rose to a 2-1/4 month high against the dollar after the Feb German IFO business climate rose +1.3 to 109.6, greater than expectations of +0.5 to 108.8 and its best level in 7 months. The euro fell back from its best level and stocks retreated after the European Commission cut its 2012 Euro-Zone GDP forecast to contraction of -0.3% from a Nov forecast of +0.5% growth, mainly due to projected contractions of -1.3% in Italy and -1.0% in Spain with EU Economic and Monetary Commissioner Rehn saying "The euro are has entered a mild recession." The commission also raised its 2012 Euro-Zone inflation forecast to 2.1% from a Nov estimate of 1.7%, which may potentially limit the ECB's scope for further interest rate cuts. The British pound rebounded from Wednesday's 1-week low against the dollar after the Feb U.K. CBI index of total factory orders rose +13 to -3, better than expectations of +3 to -13 and its best level in 6 months.
- Asian stocks today closed mixed with Japan up +0.44%, China +0.34%, Australia -0.16%, South Korea -1.14%, India -0.37%. Japan's Nikkei 225 Stock Average climbed to a 6-1/2 month high as the yen's plunge to a 7-1/4 month low against the dollar boosted the earnings outlook for exporters. Japan's TSE Second Section Price Index, a measure of smaller companies on the Tokyo stock exchange, posted gains for the 28th consecutive day, its longest series of advances since Bloomberg data began in 1961 as Japan's $250 billion in spending to rebuild after last year's record earthquake is helping to fuel the rally in smaller stocks. China's Shanghai Stock Index posted a 2-1/2 month high as property developers and builders rallied on speculation more local governments are challenging real-estate restrictions after the National Business Daily reported that a county in Zhejiang province canceled restrictions on buying homes from this year. Falling home prices in China has fueled attempts by some of the country's smaller cities to release tightening on property policies.
- March S&Ps this morning are trading up +0.30 of a point. The US stock market Wednesday finished lower as global economic concerns along with weaker than expected Jan U.S. existing home sales undercut support for stock prices: Dow Jones -0.21%, S&P 500 -0.33%, Nasdaq Composite -0.51%. Bearish factors Wednesday included (1) global economic growth concerns after the Feb China HSBC flash manufacturing PMI showed China's manufacturing activity may have contracted for a fourth month (+0.9 to 49.7) along with the unexpected contraction in the Feb Euro-Zone PMI composite index (-0.7 to 49.7 versus expectations of +0.1 to 50.5), (2) a slump in homebuilders after the weaker than expected Jan U.S. existing home sales (+4,3% to 4.57 million versus expectations of +1.1% to 4.66 million, and (3) heightened European sovereign-debt concerns after Fitch Ratings cut Greece's credit rating 2 levels to C from CCC and said a default is "highly likely in the near term."
- Bullish factors included (1) overall improvement in the housing market despite the weaker-than-expected Jan U.S. existing home sales which climbed to 4.57 million, the most in 20 months and (2) reduced funding concerns for European banks as the 3-month cross-currency basis swap, the rate banks pay to convert euro interest payments into dollars, fell to 68 bp below the euro interbank offered rate, a 6-1/2 month low.
- Hewlett-Packard (HPQ) slipped 1.4% in European trading after the company said profit before some items in the 3 months through April will be 88 cents to 91 cents a share, below analysts' estimates of 95 cents.
- March 10-year T-notes this morning are down -4 ticks. T-note prices Wednesday settled higher on increased safe-haven demand over Greek default concerns along with decent demand for the Treasury's $35 billion 5-year T-note auction: TYH2 +13.0, FVH2 +6.2, EDM2 -0.5. Bullish factors included (1) increased safe-haven demand for Treasuries after Fitch Ratings cut Greece's credit rating 2 levels to C from CCC and said a default is "highly likely in the near term," (2) the Fed's purchase of $1.84 billion of long-term Treasuries as it replaces the short-term debt in its portfolio with longer-term Treasuries as part of its Operation Twist program to keep borrowing costs low, and (3) decent demand for the Treasury's $35 billion auction of 5-year T-notes that had a bid-to-cover ratio of 2.89, stronger than the 12-auction average of 2.87. Bearish factors Tuesday included (1) the increase in Jan existing U.S. home sales to their best level in 20-months (+4.3% to 4.57 million), and (2) supply pressures ahead of the Treasury's $29 billion auction of 7-year T-notes on Thu.
- The dollar index this morning is weaker and at a 1-1/2 week low with the dollar/yen -0.14 yen and the euro/dollar +0.43 cents. The dollar index Wednesday settled slightly higher after the Feb Euro-Zone PMI composite unexpectedly contracted along with the slump in the yen to a 7-1/4 month low against the dollar: Dollar Index +0.167, USDJPY +0.552, EURUSD +0.00151. Bullish factors included (1) the slide in the yen as the BOJ's actions to boost its asset purchases weakens the yen's interest rate differentials, (2) weakness in the British pound which fell to a 1-week low against the dollar after the minutes of the Feb 8-9 BOE policy meeting showed 2 policy makers wanted the BOE to increase its asset purchases by 75 billion pounds, more than the 50 billion pound increase supported by the other 7 policy makers, (3) the action by Fitch Ratings to cut Greece's credit rating 2 levels to C from CCC, saying a default is "highly likely in the near term," and (4) the unexpected contraction in the Feb Euro-Zone PMI composite, which is euro negative.
- Apr crude oil prices this morning are up +7 cents a barrel and Apr gasoline is +0.85 of a cent per gallon. Crude oil and gasoline prices Wednesday fluctuated on both sides of unchanged and finally finished slightly higher as geopolitical risks from Iran outweighed global energy demand concerns: CLJ12 +$0.03, RBJ +1.45. Bullish factors included (1) heightened geopolitical concerns after officials from the IAEA said they were denied access to an Iranian military base and that talks over Iran's nuclear program "couldn't find a way forward," and (2) the prediction from Goldman's head of energy research that "stronger-than-expected demand against limited inventory and scarce excess production capacity leaves the market vulnerable to price spikes in the near-to-medium term." Bearish factors included (1) strength in the dollar, (2) the unexpected contraction in the Feb Euro-Zone PMI composite index, which signals weakened fuel demand, and (3) concern over Chinese fuel demand after the Feb China HSBC flash manufacturing PMI shows China's manufacturing activity may have contracted for a fourth month. Expectations for Thursday's weekly DOE inventory report (released 1-day late due to Monday's holiday) are for crude oil supplies to increase 1.5 million bbl, gasoline stockpiles to fall -250,000 bbl, distillate inventories to decline -1.38 million bbl and the refinery utilization rate to fall -0.5 to 83.5% of capacity.
Global Financial Calendar
| Thursday 2/23/12 | |
|---|---|
| United States | |
| 0830 ET | Weekly initial unemployment claims expected +7,000 to 355,000, previous -13,000 to 348,000. Weekly continuing claims expected +34,000 to 3.460 million, previous 100,000 to 3.426 million. |
| 1000 ET | Dec FHFA house price index purchase only expected +0.1% m/m, Nov +1.0% m/m. Q4 FHFA house price index purchase only expected +0.2% q/q, Q3 +0.2% q/q. |
| 1300 ET | Treasury auctions $29 billion 7-year T-notes. |
| 1630 ET | Weekly money supply report and Fed balance sheet. |
| Germany | |
| 0400 ET | Feb German IFO business climate expected +0.5 to 108.8, Jan +1.0 to 108.3. Feb IFO current assessment expected +0.2 to 116.5, Jan 0.4 to 116.3. Feb IFO expectations expected +1.1 to 102.0, Jan +2.3 to 100.9. |
| Euro-Zone | |
| 0515 ET | European Commission issues interim economic forecasts. |
| United Kingdom | |
| 0600 ET | Feb U.K. CBI total orders expected +3 to -13, Jan +7 to -16. |
| Japan | |
| 1850 ET | Jan Japan corporate service price index expected +0.1% y/y, Dec +0.1% y/y. |
| CHI | |
| 2100 ET | Jan China Conference Board leading economic index. |
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