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Overnight Developments
Global Financial Calendar
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- Global stocks this morning are mostly lower with the Euro Stoxx 50 down -0.47% and Jun S&Ps up +0.10 of a point. The dollar index fell to a 2-week low and most commodities rose as the market awaits the Feb U.S. new home sales later this morning. Overall consumer sentiment is mixed as the Feb U.K. nationwide consumer confidence unexpectedly fell -3 to 44, weaker than expectations of unchanged at 47, while the Mar French business confidence rise +4 to 96, stronger than expectations of +1 to 93. St. Louis Fed President Bullard warned that the U.S. and world economies risk elevated inflation that persists for years should they mistime their exits from "ultra-easy" monetary policies. Bullard added that U.S. monetary policy may be at a "turning point" and the Fed's first interest rate increase could come as soon as late 2013, which contrasts with Fed Chairman Bernanke's view that economic slack and subdued inflation will probably warrant record low interest rates at least through late 2014.
- Asian stocks today closed mostly lower with Japan down -1.14%, China -1.19%, Australia -0.08%, South Korea -0.01%, India +0.96%. Asian stocks closed lower after a surprise drop at China's third-largest bank added to concern the global economy is slowing as manufacturing activity contracts from Europe to Asia. A stronger yen undercut Japanese exporters which led the Nikkei 225 Stock Index lower while Agricultural Bank of China slumped 3.1% and led China's Shanghai Stock Index lower after it reported Q4 net income unexpectedly fell -14% to 21.2 billion yuan ($3.4 billion), weaker than analysts' estimates for a +17% increase to 28.84 billion-yuan. Chinese property developers also closed lower after the Economic Information Daily reported that the cities of Guangzhou and Shenzhen may follow Chongqing and Shanghai in starting property tax trials.
- June S&Ps this morning are trading little changed, up +0.10 of a point. The U.S. stock market Thursday finished lower on global economic concerns after manufacturing activity contracted in China and Europe: Dow Jones -0.60%, S&P 500 -0.72%, Nasdaq Composite -0.39%. The S&P 500 and the Dow posted 1-week lows. Bearish factors Thursday included (1) concerns over global economic growth after Euro-Zone manufacturing and services contracted more than expected in March and a private report showed manufacturing activity in China may contract for a fifth month, (2) the weaker than expected Jan FHFA house price index along with the downward revision to Dec (Jan unchanged m/m versus expectations of +0.3% and Dec revised down to +0.1% from the originally reported +0.7%), and (3) doubts about the sustainability of the U.S. economic expansion after FedEx, the world?s largest cargo airline and a barometer of global economic conditions, predicted ?below-trend? growth in coming quarters.
- Bullish factors Thursday included (1) the larger-than-expected decline in weekly initial U.S. unemployment claims to their lowest level in 4 years (-5,000 to 348,000 versus expectations of -1,000 to 350,000) and (2) the greater-than-expected +0.7% increase in Feb U.S. leading indicators, better than expectations of +0.6% and the fifth straight monthly gain, which bolsters confidence in the U.S. economic outlook.
- Micron Technology (MU) slipped 3.4% in European trading after the largest U.S. maker of computer memory reported a Q2 net loss of 23 cents a share, wider than analysts' estimates of a 19 cent a share loss, as sluggish demand for personal computers dragged down chip prices.
- June 10-year T-notes this morning are up +5.5 ticks. T-note prices Thursday settled higher for a second day after U.S. home prices unexpectedly stagnated along with increased safe-haven demand for Treasuries as reports showed manufacturing activity in Europe and China contracted: TYM2 +5.5, FVM2 +9.7, EDU2 unchanged. Bullish factors included (1) the weaker than expected Jan FHFA house price index along with the downward revision to Dec (Jan unchanged m/m versus expectations of +0.3% and Dec revised down to +0.1% from the originally reported +0.7%), (2) concerns over global economic growth which undercut stock prices and boosted the safe-haven demand for Treasuries after Euro-Zone manufacturing and services contracted more than expected in March and a private report showed manufacturing activity in China may contract for a fifth month, and (3) the action by the Fed to purchase $2.008 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 down. Bearish factors Thursday included (1) the larger-than-expected decline in weekly initial U.S. unemployment claims to their lowest level in 4 years (-5,000 to 348,000 versus expectations of -1,000 to 350,000) and (2) supply pressures as the Treasury auctioned $13 billion of 10-year TIPS.
- The dollar index this morning is lower and at a 2-week low with the dollar/yen +0.15 yen and the euro/dollar +0.43 cents. The dollar index Thursday settled higher as the euro weakened on concern the European economy was slowing after data showed European manufacturing activity contracted more expected along with global growth concerns after a private report showed manufacturing activity in China may shrink for a fifth month: Dollar Index +0.079, USD/JPY -0.871, EUR/USD -0.00155. Bullish factors included (1) euro weakness after the Mar Euro-Zone PMI composite contracted more than expected, and (2) increased safe-haven demand for the dollar after the Mar HSBC flash China manufacturing PMI slipped -1.5 to 48.1, its lowest level in 4 months and an indication manufacturing activity in China may contract for a fifth month. Bearish factors included (1) strength in the yen which rallied to a 1-week high against the dollar after Fed Japan exports fell less than expected and the Feb Japan trade balance unexpected showed a +32.9 billion yen surplus, better than expectations of a -120 billion yen deficit and (2) the unexpected stagnation in the Jan FHFA house price purchase index, which indicates ongoing weakness in the U.S. housing market.
- May crude oil prices this morning are up +39 cents a barrel and May gasoline is +1.00 cent per gallon. Crude oil and gasoline prices Thursday tumbled as the dollar rallied and after manufacturing activity in Europe and China contracted, which signals that global fuel consumption may decline: CLK12 -$1.92, RBK -1.95. May crude posted to a 1-week low. Bearish factors included (1) the stronger dollar, which undercuts most commodities, (2) concern a global economic slowdown will reduce fuel demand after manufacturing activity in Europe and China contracted this month and (3) increased supplies after Libyan crude output rose 200,000 barrels to 1.125 million last month, the highest in a year and as Iraqi production increased 10,000 barrels a day to 2.76 million in Feb, the highest since 2000. Bullish factors included (1) the greater-than-expected decline in weekly initial U.S. unemployment claims to their lowest level in 4 years, which boosts confidence in the economic outlook and fuel demand and (2) the statement from the IEA that it is not planning any coordinated action among its members to release oil stockpiles and it is premature to speculate about "unconfirmed rumors" about the release of strategic reserves.
Global Financial Calendar
| Friday 3/23/12 | |
|---|---|
| United States | |
| 1000 ET | Feb new home sales expected +1.2% to 325,000, Jan -0.9% to 321,000. |
| 1345 ET | Fed Chairman Ben Bernanke delivers brief opening remarks at the Fed?s 2-day Conference on Central Banking in Washington, D.C. |
| 1430 ET | Atlanta Fed President Dennis Lockhart speaks at Georgetown University on ?Remarks on career and Federal Reserve.? |
| France | |
| 0345 ET | Revised Q4 French wages q/q, previous +0.3% q/q. |
| 0345 ET | Mar French business confidence indicator expected +1 to 93, Feb unchanged at 92. |
| Canada | |
| 0700 ET | Feb Canada CPI expected +0.5% m/m and +2.7% y/y, Jan +0.4% m/m and +2.5% y/y. |
| 0700 ET | Feb Bank of Canada core CPI expected +0.3% m/m and +2.2% y/y, Jan +0.2% and +2.1% y/y. |
| Euro-Zone | |
| 1330 ET | ECB Executive Board member Jose Manuel Gonzalez-Paramo speaks at the University of Malaga in Spain. |
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