Barchart Morning Call
Overnight Developments
Global Financial Calendar
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- Global stocks this morning are higher with the Euro Stoxx 50 up +0.10% and Mar S&Ps up +4.50 points. The euro strengthened against the dollar, stocks rose and commodities were mixed as the markets expect a further boost from liquidity injections from the ECB. Market expectations are for European banks to tap the ECB for 470 billion euros in 3-year funds as the central bank provides a second round of unlimited funds tomorrow to support banks. ECB Council member Nowotny said the ECB's second 3-year loan to be allotted tomorrow "will have an even more direct effect for the real economy" as the first one "was really for banks to get their house in order." The euro and stocks also reacted positively after Italy sold 3.75 billion euros of 10-year bonds, its maximum target, at a yield of 5.5%, down from 6.08% at a similar auction last month and the lowest yield in 5-months. Economic confidence in the Euro-Zone improved more than forecast after the Feb Euro-Zone economic confidence rose +1.0 to 94.4, stronger than expectations of +0.6 to 94.0. The market basically ignored the action late yesterday by Standard & Poor's to cut Greece's credit ratings to "selective default" after Greece negotiated the biggest sovereign-debt restructuring in history.
- Asian stocks today closed mostly higher with Japan up +0.92%, China +0.22%, Australia -0.11%, South Korea +0.82%, India +1.64%. Jan Japan retail sales jumped +4.1% m/m and +1.9% y/y, stronger than expectations of +1.0% m/m and -0.1% y/y, as car sales surged +24%, the most in 22 years, after the Japanese government re-introduced a subsidy for buyers of energy-efficient cars. Elsewhere in Asia, South Korea posted a -$772.2 million current account deficit in Jan, its first shortfall nearly 2 years as exports declined due to Europe's debt crisis and the Lunar New Year holiday. Chinese stocks shook off early losses and closed higher after the China Securities Journal reported that China has relaxed lending curbs on local government financing vehicles to help prevent default risks as the peak period for loan repayments approaches. The report said banks can continue providing credit to such companies to complete projects already started, buy land reserves and build roads, which may help local government financing vehicles cope with a liquidity crunch as they spend money building infrastructure projects that won't generate income immediately to cover repayments.
- March S&Ps this morning are trading up +4.50 points. The U.S. stock market Monday opened lower after G-20 nations rebuffed calls from Euro-Zone nations for more bailout funding but then shed their losses and settled mostly higher after U.S. pending home sales rose more than expected: Dow Jones -0.01%, S&P 500 +0.14%, Nasdaq Composite +0.08%. The S&P 500 posted a 9-3/4 month high and the Nasdaq posted an 11-year high. Bullish factors Monday included (1) the larger-than-expected increase in Jan U.S. pending home sales along with an upward revision to Dec (Jan +2.0% m/m versus expectations of +1.0% and Dec revised up to a -1.9% m/m decline from the originally reported -3.5% m/m decline), (2) the action by the lower house of the German parliament to vote for approval of Germany's participation in the Greek bailout, and (3) reduced liquidity concerns for European banks after the Euribor-OIS spread, a measure of European banks' reluctance to lend to one another, narrowed to a 5-3/4 month low.
- Bearish factors included (1) carry-over weakness from a slide in European stocks after G-20 nations that met over the weekend in Mexico City refused to increase their financial support to help resolve the European debt crisis, (2) the warning from IMF Managing Director Lagarde said the world economy is "not out of the danger zone" amid fragile financial systems, high public and private debt and rising oil prices, and (3) the statement from Moody's Investors Service that Greek default risk "remains high."
- Newmont Mining (NEM) rose 1% in European trading as the prices of gold and copper advanced in overnight trade.
- March 10-year T-notes this morning are up +1.5 ticks. T-note prices Monday climbed to a 1-week high and settled higher on increased safe-haven demand after the IMF warned on the global economy and G-20 nations refused to increase financial support for debt-stricken Euro-Zone nations: TYH2 +14.0, FVH2 +8.2, EDM2 +2.5. Bullish factors Monday included (1) the warning from IMF Managing Director Lagarde who said the world economy is "not out of the danger zone" amid fragile financial systems, high public and private debt and rising oil prices, (2) the refusal from G-20 nations that met over the weekend in Mexico City to increase their financial support to help resolve the European debt crisis, (3) the statement from Moody's Investors Service that Greek default risk "remains high," and (4) the Fed's purchase of $4.959 billion of long-term Treasuries as part of its Operation Twist program to replace $400 billion of shorter-maturity Treasuries in its holdings with longer-term debt to cap borrowing costs. Bearish factors included (1) the larger-than-expected increase in Jan U.S. pending home sales along with an upward revision to Dec (Jan +2.0% m/m versus expectations of +1.0% and Dec revised up to a -1.9% m/m decline from the originally reported -3.5% m/m decline), and (2) reduced liquidity concerns in Europe after the Euribor-OIS spread, a measure of European banks' reluctance to lend to one another, fell to a 5-3/4 month low.
- The dollar index this morning is weaker with the dollar/yen -0.13 yen and the euro/dollar +0.50 cents. The dollar index Monday settled higher on increased safe-haven demand after G-20 nations rebuffed Euro-Zone countries call for increased aid along with indications the U.S. economy was improving after Jan pending home sales rose more than expected: Dollar Index +0.216, USDJPY -0.584, EURUSD -0.00485. Bullish factors included (1) weakness in the euro after Moody's Investors Service said Greek default risk "remains high" along with the actions of the G-20 nations meeting in Mexico City over the weekend who refused to increase funds to Euro-Zone nations that are still trying to resolve the region's debt crisis, (2) the larger-than-expected increase in Jan U.S. pending home sales along with an upward revision to Dec pending home sales, which signals economic strength and is dollar supportive, and (3) the warning from IMF Managing Director Lagarde who said the world economy is "not out of the danger zone." Bearish factors included (1) reduced funding concerns for European banks that is euro bullish after the Euribor-OIS spread, a measure of European banks' reluctance to lend to one another, fell to 64.7 bp between the euro interbank offered rate and overnight indexed swaps, a 5-3/4 month low, and (2) the stronger than expected Jan Euro-Zone M3 money supply, which is euro supportive.
- Apr crude oil prices this morning are down -47 cents a barrel and Apr gasoline is -3.80 cents per gallon. Crude oil and gasoline prices Monday fell back and settled lower after the G-20 refuted calls from Euro-Zone countries for increased aid to help them with their debt crisis along with the IMF's warning on the global economy: CLJ12 -$1.21, RBJ -2.20. Bearish factors included (1) strength in the dollar, which is negative for most commodities, (2) the G-20's refusal to increase aid to the IMF to help contain the European debt crisis, which adds to concern the crisis will slow the economy and fuel demand, (3) the warning from IMF Managing Director Lagarde who said the world economy is "not out of the danger zone," which signals energy demand may remain constrained, and (4) the statement from the NOC of Libya that Libyan crude output is at 1.4 million barrels a day now and will increase to 1.5 million by April and up to 1.7 million barrels a day by the end of this year, which indicates an increase in global crude supplies. Bullish factors included (1) heightened geopolitical tensions over Iran after Russian Prime Minister Putin warned that a strike against Iran from any Western nation would be "truly catastrophic," and (2) the reversal in stocks which shook off early losses and moved higher, which bolsters expectations for a strong economy and energy demand.
Global Financial Calendar
| Tuesday 2/28/12 | |
|---|---|
| United States | |
| 0745 ET | ICSC (Int?l Council of Shopping Centers) weekly retailer sales. |
| 0830 ET | Jan Durable goods orders expected -1.0% and unchanged ex transportation, Dec +3.0% and +2.2% ex transportation. |
| 0855 ET | Redbook weekly retailer sales. |
| 0900 ET | Dec S&P/CaseShiller compostite-20 home price index expected -0.4% m/m and -3.6% y/y, Nov -0.7% m/m and -3.7% y/y. Q4 S&P/CaseShiller hole price index expected -4.3% q/q, Q3 -3.9% y/y. |
| 1000 ET | Feb U.S. consumer confidence (Conference Board) expected +1.9 to 63.0, Jan -3.7 to 61.1 |
| 1000 ET | Fed Governor Elizabeth Duke testifies to Senate Banking Committee on ?State of the Housing Market: Removing Barriers to Economic Recovery.? |
| 1000 ET | Feb Richmond Fed manufacturing index expected +1 to 13, Jan +9 to 12. |
| 1130 ET | Weekly 4-week T-bill auction. |
| 1915 ET | Cleveland Fed President Sandra Pianalto speaks on ?Prospects for the Nation and the Region? at the Medina County Economic Development Corporation Annual Meeting. |
| Germany | |
| 0200 ET | Mar German GfK consumer confidence survey expected +0.1 to 6.0, Feb +0.2 to 5.9. |
| 0400 ET | Germany?s Constitutional Court rules on parliament?s participation in decisions on European financial bailouts. |
| 0800 ET | Feb German CPI (EU harmonized) expected +0.% m/m and +2.2% y/y, Jan -0.5% m/m and +2.3% y/y. |
| Euro-Zone | |
| 0500 ET | Feb Euro-Zone business climate indicator expected +0.06 to -0.15, Jan +0.11 to -0.21. |
| 0500 ET | Revised Feb Euro-Zone consumer confidence, previous -20.2. |
| 0500 ET | Feb Euro-Zone economic confidence expected +0.6 to 94.0, Jan +0.6 to 93.4. |
| Japan | |
| 1815 ET | Feb Japan Markit/JMMA manufacturing PMI, Jan +0.5 to 50.7. |
| 1850 ET | Jan Japan industrial production expected +1.5% m/m and -1.6% y/y, Dec +3.8% m/m and -4.3% y/y. |
| 2300 ET | Jan Japan vehicle production, Dec +13.4% y/y. |
| United Kingdom | |
| 1901 ET | Feb U.K. GfK consumer confidence survey expected +2 to -27, Jan +4 to -29. |
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