Barchart Morning Call
Overnight Developments
Global Financial Calendar
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- Global stocks this morning are mixed with the Euro Stoxx 50 up +0.14% and Mar S&Ps down -3.00 points. The euro rose and lifted European stocks as Greek Finance Minister Venizelos meets with Euro-Zone finance ministers today in Brussels who will decide if Greece has done enough to receive a bailout package needed to stave off default. Greek Prime Minister Papademos said the leaders of the three parties supporting his government "agreed on all the points of the program with the exception of one which requires further elaboration and discussion" with the lenders. Talks between Greece's political leaders stumbled over pensions and officials from the EU and the IMF gave Greece 15 more days to identify measures totaling 300 million euros. A rally in European carmakers boosted the overall stock market with Daimler AG up 3.7% after it reported Q4 earnings before interest and taxes of 2.18 billion euros, beating analysts' estimates of 2.17 billion euros. Another positive for equities was the +0.5% m/m increase in Dec U.K. industrial production, stronger than expectations of +0.2% m/m. Limiting gains in stocks is weakness in banking shares with Credit Suisse down 3.3% after it reported an unexpected Q4 loss of 637 million francs ($698 million), much weaker than analysts' estimates of a 446 million-franc profit and its first quarterly loss since 2008. As expected, the BOE kept the benchmark interest rate unchanged at 0.50% and raised the asset purchase target by 50 billion pounds to 325 billion pounds and said it expects a "significant" shortfall in the U.K. economy to persist.
- Asian stocks today closed mixed with Japan down -0.15%, China +0.04%, Australia -0.18%, South Korea +0.59%, India +0.70%. Japanese stocks closed lower after Dec Japan machine orders fell -7.1% m/m, weaker than expectations of -5.0% m/m and the biggest decline in 3 months as a faltering global economy and a strong yen dimmed the earnings outlook for exporters. Losses in Japanese stocks were limited however, as the yen tumbled to a 1-1/2 week low against the dollar. Chinese stocks finished higher, despite Jan China CPI rising a more than-expected +4.5% y/y, when the National Development and Reform Commission said China's rate of inflation will "steadily decline" as the effects of the New Year holiday and other "temporary factors" fade. Jan China PPI rose an as-expected +0.7% y/y, its smallest increase in over 2 years.
- March S&Ps this morning are trading down -3.00 points. The US stock market on Wednesday was whipsawed by Greek debt news headlines and finally closed higher: Dow Jones +0.04%, S&P 500 +0.22%, Nasdaq Composite +0.41%. The S&P 500 climbed to a 7-month high and the Nasdaq posted a 10-3/4 year high. Bullish factors included (1) the possibility of QE3 from the Fed after San Francisco Fed President Williams said the Fed may have to buy additional mortgage bonds if the economic expansion falters or inflation slows too much and (2) decent Q4 earnings results thus far as 68% of the 304 companies in the S&P 500 that have reported quarterly results since Jan 9 have beaten earnings projections.
- Bearish factors Wednesday included (1) carry-over weakness from a late sell-off in European stocks which gave up early gains and closed lower on concern Greek debt-swap negotiations will fail after Reuters reported that 2 unidentified ECB sources said the ECB is still divided on what contribution to make as part of a Greek debt restructuring and (2) concern that growth in Germany, Europe's biggest economy, may be slowing after Dec German exports fell -4.3% m/m, the biggest monthly decline in nearly 3 years.
- March 10-year T-notes this morning are down -1 tick. T-note prices on Wednesday closed lower on supply concerns although they settled well above their worst levels on increased safe-haven demand on concern Greek debt-swap talks will fail: TYH2 -2.0, FVH2 -1.2, EDM2 +1.5. Bearish factors Wednesday included (1) slack demand for the Treasury's $24 billion auction of 10-year T-notes that had a bid-to-cover ratio of 3.05, below the 12-auction average of 3.14, and indirect bidders, a proxy for foreign buying, took only 38.9% of the T-notes, below the 12-auction average of 47.3% and (2) supply pressures ahead of the Treasury's $16 billion 30-year T-bond auction on Thursday. Bullish factors included (1) comments from San Francisco Fed President Williams who said "we may still need to provide more policy accommodation if the economy loses momentum of inflation remains well below 2%," which keeps the door open for the Fed to implement QE3, and (2) increased safe-haven demand for Treasuries on concern Greek debt-swap negotiations will fail after Reuters reported that 2 unidentified ECB sources said the ECB is still divided on what contribution to make as part of a Greek debt restructuring.
- The dollar index this morning is weaker and at a 2-month low with the dollar/yen +0.12 yen and the euro/dollar -0.13 cents. The dollar index on Wednesday recovered from a 1-3/4 month low and settled higher after optimism over a resolution to the Greek debt-swap talks faded: Dollar Index +0.065, USDJPY +0.272, EURUSD +0.00003. The euro climbed to a 1-3/4 month high but shed its gains and closed little changed. Bullish factors included (1) increased safe-haven demand for the dollar after the euro relinquished early gains on speculation Greek debt-swap negotiations will fail after Reuters reported that 2 unidentified ECB sources said the ECB is still divided on what contribution to make as part of a Greek debt restructuring, (2) the slide in the yen to a 1-1/2 week low against the dollar after Japan's 2011 current-account surplus shrank -44% from 2010 to 9.63 trillion yen ($125 billion), the lowest in 15 years, and (3) the larger-than-expected -4.3% m/m decline in Dec German exports, the biggest monthly drop in nearly 3 years, which may lead to slower economic growth and is euro negative. Bearish factors Wednesday included (1) the -2 bp decline in the Markit iTraxx SovX Western Index of credit-default swaps to a 3-1/4 month low of 316 bp, which reduces European default concerns and is euro supportive and (2) dollar negative comments from San Francisco Fed President Williams who said the Fed may have to buy additional mortgage bonds if the economic expansion falters or inflation shows too much.
- Mar crude oil prices this morning are up +64 cents a barrel and Mar gasoline is +0.97 cents per gallon at a 5-1/4 month high. Crude oil and gasoline prices on Wednesday settled higher but well off of their best levels as a rebound in the dollar and a jump in weekly DOE gasoline inventories erased most of a morning rally: CLH12 +$0.30, RBH12 +4.77. Mar crude posted a 1-week high and Mar gasoline soared to a 5-1/2 month high. Bullish factors included (1) the smaller-than-expected increase in weekly DOE crude inventories (+304,000 bbl versus expectations of +2.5 million bbl), and (2) strength in gasoline on speculation that refinery shutdowns in the U.S. and Europe will trigger a supply crunch during the upcoming spring and summer driving season. Bearish factors included (1) the larger-than-expected increase in weekly DOE gasoline supplies to their highest level in 11 months (+1.63 million bbl to 231.8 million bbl versus expectations of +625,000 bbl), (2) the unexpected increase in weekly DOE distillate supplies (+1.17 million bbl versus expectations of -875,000 bbl), and (3) the rebound in the dollar which bounced back from a 1-3/4 month low to close higher, which reduces investment demand in commodities.
Global Financial Calendar
| Thursday 2/9/12 | |
|---|---|
| United States | |
| 0830 ET | Weekly initial unemployment claims expected +3,000 to 370,000, previous -12,000 to 367,000. Weekly continuing claims expected +63,000 to 3.500 million, previous 130,000 to 3.437 million. |
| 1000 ET | Dec wholesale inventories expected +0.4%, Nov +0.1%. |
| 1100 ET | Treasury announces amount of 30-year TIPS to be auctioned on Feb 16 (previous $7 billion). |
| 1300 ET | Treasury auctions $16 billion 30-year T-bonds. |
| 1630 ET | Weekly money supply report and Fed balance sheet. |
| Japan | |
| 0000 ET | Jan Japan consumer confidence expected -0.4 to 38.5, Dec +0.8 to 38.9. |
| 1850 ET | Jan Japan domestic CGPI expected +0.1% m/m and +0.8% y/y, Dec +0.1% m/m and +1.3% y/y. |
| United Kingdom | |
| 0430 ET | Dec U.K. industrial production expected +0.2% m/m and -3.1% y/y, Nov -0.7% m/m and -3.1% y/y. |
| 0430 ET | Dec U.K. manufacturing production expected +0.2% m/m and +0.3% y/y, Nov -0.2% m/m and -0.6% y/y. |
| 0700 ET | BOE announces interest rate decision and asset purchase target (expected no change to the 0.50% benchmark rate but asset purchase target increased 50 billion pounds to 325 billion pounds). |
| Euro-Zone | |
| 0745 ET | ECB announces interest rate decision (expected no change to the 1.00% 2-week refinancing rate). |
| 0830 ET | ECB President Mario Draghi speaks at monthly press conference. |
| Canada | |
| 0830 ET | Dec Canada new housing price index, Nov +0.3% m/m and +2.5% y/y. |
| CHI | |
| n/a | Jan China trade balance expected +$10.70 billion, Dec +$16.52 billion. Jan exports expected -1.5% y/y, Dec +13.4% y/y. Jan imports expected -5.0% y/y, Dec +11.8% y/y. |
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