Barchart Morning Call 3/16

Barchart Morning Call

Barchart.com - 2 hrs 25 mins ago

Overnight Developments

• Global stocks this morning are mostly higher with the Euro Stoxx 50 up +0.40% and Jun S&Ps up +0.80 of a point. The dollar index is higher and most commodities fell ahead of this morning's U.S. economic data on consumer prices, industrial production and consumer confidence. Treasuries weakened on hawkish comments from Richmond Fed President Lacker who said "the economy is expanding at a moderate pace, and inflation is close to the committee's 2% objective, so as the expansion continues, the federal funds rate will need to rise in order to prevent the emergence of inflationary pressures." European banks reluctance to lend to each other continues to fall as the Euribor-OIS spread, the difference between the euro interbank offered rate and overnight indexed swaps, declined to 51 bp, a 7-1/2 month low. The euro was little changed against the dollar after ECB Council member Liikanen signaled that governments shouldn't expect further ECB action to fight the debt turmoil saying, "we've done a lot," citing the ECB's record low interest rates and 1 trillion euros in 3-year loans, and that "we must decide how and when we exit in a controlled and timely manner."
• Asian stocks today closed mixed with Japan up +0.06%, China +1.47%, Australia -0.04%, South Korea -0.55%, India -1.19%. Asian stocks received a boost from U.S. economic data on manufacturing and jobless claims that shows the economy is expanding, although most of the markets struggled to add on to gains as Asian stock valuations neared a 2-year high. Concern the Chinese economy was slowing gained credence after weekly Shanghai copper inventories rose 2,495 MT to 227,276 MT, the third straight week of increases to their highest level since 2003, which signals weakened demand. Gold prices fell after India, the world's biggest bullion buyer, increased the tax on gold imports for the second time this year after record purchases widened the current-account deficit.

Overnight U.S. Stock News

• June S&Ps this morning are trading up +0.80 of a point. The U.S. stock market Thursday extended this week's rally as strong U.S. economic data bolstered confidence in the outlook for improved company earnings: Dow Jones +0.44%, S&P 500 +0.60%, Nasdaq Composite +0.51%. 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 Thursday included (1) the larger-than-expected decline in weekly initial U.S. unemployment claims which matched their lowest level in 4-years (-14,000 to 351,000 versus expectations of -5,000 to 357,000), (2) the unexpected increase in the Mar Empire manufacturing index to its best level in 1-3/4 years (+0.7 to 20.2 versus expectations of -2.0 to 17.5), (3) the larger-than-expected increase in the Mar Philadelphia Fed manufacturing index which expanded at its fastest pace in 11 months (+2.3 to 12.5 versus expectations of +1.8 to 12.0), and (4) strength in raw-material producers as signs of economic strength fueled a rally in most commodities.
• Bearish factors Thursday included (1) comments from ECB Executive Board member Bini Smaghi who said Portugal may need another 100 billion euros of aid and Ireland 80 billion euros as both countries struggle to regain ?sufficient? access to bond markets and (2) concerns over contagion of the European sovereign debt crisis after Fitch Ratings lowered the outlook on Britain's sovereign debt to "negative" from "stable," indicating a "slightly greater" than 50% chance its AAA credit rating will be reduced within 2 years.

Today's Market Focus

• June 10-year T-notes this morning are down -11 ticks. T-note prices Thursday extended this week's sell-off down to a 4-1/2 month low on stronger-than-expected U.S. economic data but short-covering lifted prices off of their lows and they closed slightly higher: TYM2 +2.5, FVM2 +4.7, EDU2 +1.5. Bullish factors Thursday included (1) strong foreign demand for U.S. debt after Treasury data showed total Jan foreign holdings of Treasury securities rose +0.9% to a record $5.05 trillion, the sixth consecutive monthly increase, and (2) the Fed's purchase of $4.027 billion of Treasuries as part of its 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. Bearish factors included (1) the larger-than-expected decrease in weekly initial U.S. unemployment claims which matched their lowest level in 4-years (-14,000 to 351,000 versus expectations of -5,000 to 357,000), (2) the unexpected increase in the Mar Empire manufacturing index to its best level in 1-3/4 years (+0.7 to 20.2 versus expectations of -2.0 to 17.5), and (3) the larger-than-expected increase in the Mar Philadelphia Fed manufacturing index which expanded at its fastest pace in 11 months (+2.3 to 12.5 versus expectations of +1.8 to 12.0).
• The dollar index this morning is higher with the dollar/yen +0.15 yen and the euro/dollar -0.07 cents. Bearish factors included (1) reduced safe-haven demand for the dollar as equity markets rallied and (2) strength in the euro which rebounded from a 1-month low against the dollar and closed higher after strong demand was seen at Spanish and French auctions of government debt. Bullish factors included (1) increased foreign demand for U.S. dollar assets after the Jan net long-term TIC flows rose +$101.0 billion, more than expectations of +$38.5 billion and the biggest increase in 17 months, (2) increased safe-haven demand for the dollar after Fitch Ratings lowered the outlook on Britain's sovereign debt to "negative" from "stable," and (3) the fall in weekly U.S. jobless claims to a 4-year low and increased manufacturing activity on the U.S. East Coast, which indicates economic strength and is dollar positive.
• Apr crude oil prices this morning are up +23 cents a barrel and Apr gasoline is -0.01 of a cent per gallon. Crude oil and gasoline prices Thursday rallied early on stronger-than-expected U.S. economic data but shed those gains and turned lower on a report the U.S. and U.K will release oil from strategic reserves: CLJ12 -$0.32, RBJ -5.85. Apr crude fell to a 3-1/2 week low and Apr gasoline posted a 1-week low. Bearish factors included (1) a report from Reuters that said the U.S and U.K. had reached an agreement to release oil from strategic reserves by this summer, although the report was refuted from a White House spokesman, and (2) overall weak demand after DOE data showed U.S. gasoline demand over the 4 weeks ended Mar 9 was -7.2% below a year earlier. Bullish factors included (1) the reversal in the dollar after the dollar index fell back from a 1-3/4 month high and closed lower, which encourages investment demand in commodities, and (2) stronger-than-expected U.S. economic data which is positive for energy consumption as weekly initial unemployment claims matched a 4-year low, the Mar Empire manufacturing index unexpectedly expanded at its fastest pace in 1-3/4 years and the Mar Philadelphia Fed manufacturing index climbed to its best level in 11 months.

Today's U.S. Earnings Reports Earnings reports (confirmed releases, sorted by mkt cap): OPK-Opko Health (BEST earnings consensus -$0.02), MLHR-Herman Miller (0.36), LDK-LDK Solar Co. Ltd. (-0.61).
Global Financial Calendar

Friday 3/16/12
United States
0830 ET	Feb CPI expected +0.4% m/m and +2.9% y/y, Jan +0.2% m/m and +2.9% y/y. Feb CPI ex food & energy expected +0.2% m/m and +2.2% y/y, Jan +0.2% m/m and +2.3% y/y.
0915 ET	Feb industrial production expected +0.4%, Jan unchanged. Feb capacity utilization expected +0.3 to 78.8%, Jan -0.1 to 78.5%.
0955 ET	Preliminary Mar U.S. University of Michigan consumer confidence expected +0.7 to 76.0, Feb +0.3 to 75.3.
1500 ET	Chicago Fed President Charles Evans will speak at the International Research Forum on Monetary Policy in Frankfurt, Germany on current economic conditions or monetary policy.
Japan
0100 ET	Revised Jan Japan coincident index CI, previous 93.1. Revised Jan leading index CI, previous 94.9.
Euro-Zone
0600 ET	ECB Executive Board member Jose Manuel Gonzalez-Paramo speaks at an event in Madrid.
Canada
0830 ET