Barchart Morning Call
Overnight Developments
Global Financial Calendar
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- Global stocks this morning are mostly higher with the Euro Stoxx 50 up +0.83% and Jun S&Ps up +2.20 points. The dollar index rose to a 1-3/4 month high, the 10-year T-note yield climbed to a 4-1/4 month high and most commodities retreated with gold falling to a 1-1/2 month low after the Fed bolstered confidence in the U.S. banking system and raised its economic assessment. Late yesterday after the markets closed, the Fed released its stress tests that said 15 of the nation's 19 largest banks could maintain adequate capital levels even in a recession. This helped lift European banking shares with Barclays Plc and Credit Suisse Group Ag up more than 3.5%. Another boost to European shares was the action by Fitch Ratings to raise Greece's credit rating 4 levels to B- from restricted default with a stable outlook on optimism that a debt swap will reduce the risk that it reneges on its debt obligations. A slight negative for stocks was the Jan Euro-Zone industrial production which rose +0.2% m/m and fell -1.2% y/y, weaker than expectations of +0.6% m/m and -0.8% y/y.
- Asian stocks today closed mostly higher with Japan up +1.53%, China -2.83%, Australia +0.93%, South Korea +1.11%, India +0.59%. Asian stocks rose after U.S. retail sales jumped and the Fed raised its economic assessment, which boosted the earnings prospects of exporters. Japan's Nikkei 225 Stock Index climbed to a 7-1/2 month high as exporters rallied when the yen tumbled to a fresh 11-month low against the dollar. China's Shanghai Stock Index bucked the trend and closed lower as property developers plunged after Chinese Premier Wen Jiabao said home prices are still too high and that loosening property controls risks "chaos in China's housing sector." The Feb India wholesale-price index climbed 6.95% y/y, its first increase in 5 months and stronger than expectations of a +6.7% y/y gain, which dampens expectations of a rate cut by the RBI at its policy meeting on Thursday.
- June S&Ps this morning are trading up +2.20 points. The U.S. stock market Tuesday moved higher right from the opening and continued higher throughout the day after German investor confidence rose more than forecast and after Feb U.S. retail sales grew at the fastest pace in 5 months: Dow Jones +1.68%, S&P 500 +1.81%, Nasdaq Composite +1.88%. The S&P 500 posted a 3-3/4 year high, the Dow rose to a 4-year high and the Nasdaq climbed to an 11-year high. Bullish factors Tuesday included (1) carry-over support from a rally in European stocks after the Mar German ZEW economic sentiment rose more than expected to a 21-month high, (2) increased optimism in the U.S. economic outlook after the larger-than-expected increase in Feb U.S. retail sales along with an upward revision to Jan (Feb +1.1% and +0.9% less autos versus expectations of +1.1% and +0.7% less autos and Jan revised up to +0.6% and +1.1% less autos from the originally reported +0.4% and +0.7% less autos), and (3) the action by the Fed to raise their assessment of the economy in its post-FOMC statement that said "labor market conditions have improved further; the unemployment rate has declined notably in recent months but remains elevated," and that "strains in global financial markets have eased, though they continue to pose significant downside risks to the economic outlook."
- Bearish factors Tuesday included (1) ongoing European sovereign-debt concerns after European Commissioner Barroso said the situation in Europe "remains fragile as we are not yet out of the crisis," and (2) insider selling of stocks after data from TrimTabs Investment Research showed U.S. companies and their executives are selling stocks at 2.2 times the pace of buying, the most in over 2 years, as about $15.3 billion of shares have been sold by companies and insiders this month compared with $7.1 billion of purchases.
- Citigroup (C) fell 2.7% in pre-market trading after it failed to meet some standards of the Fed's stress tests and said it will submit a revised capital plan to the Fed later this year.
- June 10-year T-notes this morning are down -21 ticks. T-note prices Tuesday slumped to a 1-1/2 month low and settled lower after Feb U.S. retail sales were stronger than expected along with reduced safe-haven demand for Treasuries as the stock market rallied: TYM2 -20.0, FVM2 -10.2, EDU2 -2.5. Bearish factors Tuesday included (1) the larger-than-expected increase in Feb U.S. retail sales along with an upward revision to Jan (Feb +1.1% and +0.9% less autos versus expectations of +1.1% and +0.7% less autos and Jan revised up to +0.6% and +1.1% less autos from the originally reported +0.4% and +0.7% less autos), (2) reduced safe-haven demand for Treasuries after the S&P 500 rallied up to a 3-3/4 year high, (3) the action by the Fed to raise their assessment of the economy in its post-FOMC statement that said "labor market conditions have improved further; the unemployment rate has declined notably in recent months but remains elevated," and that "strains in global financial markets have eased, though they continue to pose significant downside risks to the economic outlook," and (4) supply pressures ahead of the Treasury's $13 billion auction of 30-year T-bonds on Wednesday. Bullish factors included (1) ongoing European-sovereign debt concerns which keeps the safe-haven demand strong for Treasuries after European Commissioner Barroso said the situation in Europe "remains fragile as we are not yet out of the crisis," and (2) decent demand for the Treasury's $21 billion auction of 10-year T-notes that had a bid-to-cover ratio of 3.24, stronger than the 12-auction average of 3.12.
- The dollar index this morning is stronger and at a 1-3/4 month high with the dollar/yen +0.58 yen and the euro/dollar +0.01 cents. The dollar index Tuesday posted a 1-1/2 month high and settled higher as the yen tumbled to a 10-3/4 month low against the dollar on speculation the BOJ will expand its stimulus measures while the euro fell to a 3-week low against the dollar on speculation a rift may be developing among ECB Council members: Dollar Index +0.303, USD/JPY +0.714, EUR/USD -0.00719. Bullish factors included (1) the strong Feb U.S. retail sales which rose by the most in 5 months and reduces the chance the Fed will add to its dollar-negative stimulus measures, (2) weakness in the yen after BOJ Governor Shirakawa said the BOJ will continue with its strong easing policy, and (3) concern a rift may be building among ECB Council members after ECB Council member and Bundesbank President Weidmann sent a letter to ECB President Draghi saying the ECB is taking risks with its non-standard emergency liquidity measures. Bearish factors included (1) the larger-than-expected increase in the Mar German ZEW economic sentiment to a 21-month high, which is euro supportive and (2) reduced safe-haven demand for the dollar after the S&P 500 rose to a 3-3/4 year high.
- Apr crude oil prices this morning are down -8 cents a barrel and Apr gasoline is +0.59 of a cent per gallon. Crude oil and gasoline prices Tuesday settled higher after strength in U.S. retail sales along with a surge in German economic sentiment offset the negative aspects of a strong dollar: CLJ12 +$0.37, RBJ +3.16. Apr gasoline posted a 1-week high. Bullish factors included (1) the surge in the Mar German ZEW economic sentiment to a 21-month high, which is positive for energy demand and consumption, (2) the increase in Feb U.S. retail sales by the most in 5 months, which signals economic strength that is positive for fuel consumption, and (3) the rally in the S&P 500 to a 3-3/4 year high, which boosts confidence in the economic outlook and energy demand. Bearish factors included (1) the rally in the dollar index to a 1-1/2 month high, which discourages investment demand in commodities, (2) concern the European sovereign-debt crisis will continue after European Commissioner Barroso said the situation in Europe "remains fragile as we are not yet out of the crisis," and (3) carry-over weakness from the slide in natural gas prices to a 10-year nearest-futures low. Expectations for Wednesday's weekly inventory report from the DOE are for crude oil supplies to climb +1.75 million bbl, gasoline stockpiles to fall -1.5 million bbl, distillate inventories to decline -1.45 million bbl and the refinery utilization rate to remain unchanged at 83.9% of capacity.
Global Financial Calendar
| Wednesday 3/14/12 | |
|---|---|
| United States | |
| 0700 ET | Weekly MBA mortgage applications, previous -1.2% with purchase mortgage sub-index +2.1% and refinancing sub-index -2.0%. |
| 0830 ET | Feb import price index expected +0.6% m/m and +5.9% y/y, Jan +0.3% m/m and +7.1% y/y. |
| 0830 ET | Q4 current account balance expected -$114.80 billion, Q3 -$110.28 billion. |
| 0900 ET | Fed Chairman Ben Bernanke speaks at the Independent Community Bankers of America convention in Nashville, TN. |
| 1300 ET | Treasury auctions $13 billion 30-year T-bonds. |
| Japan | |
| 0030 ET | Revised Jan Japan industrial production, previous +2.0% m/m and -1.2% y/y. Revised Jan capacity utilization, previous +3.1% m/m. |
| 0200 ET | Revised Feb Japan machine tool orders, previous -8.6% y/y. |
| United Kingdom | |
| 0530 ET | Feb U.K. jobless claims change expected +5,000, Jan +6,900. Feb claimant count rate expected 5.0%, Jan 5.0%. |
| 0530 ET | Jan U.K. avg weekly earnings expected +1.9% 3-mo/year-over-year, Dec +2.0% 3-mo/year-over-year. |
| 0530 ET | Jan U.K. avg weekly earnings ex-bonus expected +1.9% 3-mo/year-over-year, Dec +2.0% 3-mo/year-over-year. |
| 0530 ET | Jan U.K. ILO unemployment rate expected 8.4%, Dec 8.4%. |
| Euro-Zone | |
| 0600 ET | Feb Euro-Zone CPI expected +0.5% m/m and +2.7% y/y, Jan -0.8% m/m and +2.6% y/y. Feb core CPI expected +1.6% y/y, Jan +1.5% y/y. |
| 0600 ET | Jan Euro-Zone industrial production expected +0.6% m/m and -0.8% y/y, Dec -1.2% m/m and -2.0% y/y. |
| 0800 ET | ECB Executive Board member Peter Praet speaks at the ?Collateral Solutions Conference? in Paris. |
| Canada | |
| 0830 ET | Q4 Canada capacity utilization rate expected 81.5%, Q3 81.3%. |
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