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Overnight Developments
Global Financial Calendar
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- Global stock and commodity prices are mixed with June E-mini S&Ps down -3.50 points and the Euro Stoxx 50 down -0.33%. The dollar strengthened and most commodities fell, with May gasoline cascading to a 1-1/2 month low, on concern Spain may be the next Euro-Zone nation to need a bailout. Feb Spain non-performing loans as a proportion of total lending jumped to 8.16%, up from 7.91% in Jan and the highest level in 18 years. Data from the Bank of Spain show that Spanish banks are burdened with about 176 billion euros of "troubled" real estate assets and that 21% of the 298 billion euros of loans linked to property developers are non-performing. Despite the increase in the country's bad loans, the yield on Spain's 10-year bond fell to a 1-1/2 week low of 5.72% on optimism over tomorrows auctions of 2-year and 10-year Spanish securities. Another negative for European stocks was the drop in Feb Euro-Zone construction output for a third month after it fell -7.1% m/m and -12.9% y/y. The British pound climbed to a 2-week high against the dollar after the minutes of the Apr 4-5 BOE policy meeting showed that policy maker Posen ended his push for further stimulus. The pound also rallied after Mar U.K. jobless claims rose +3,600, less than expectations of +6,000, and after the ILO unemployment rate unexpectedly fell -0.1 to 8.3% in the quarter through Feb.
- Asian stocks today closed higher with Japan up +2.14%, China +2.28%, Australia +1.40%, South Korea +1.10%, India +0.20%. Asian stocks rose after the IMF raised its global economic forecasts and after Spain sold more bills than the maximum target. The yen slipped to a 1-week low against the dollar and boosted Japanese exporters after BOJ Deputy Governor Nishimura said that the BOJ is "committed to implementing additional easing measures, if deemed necessary." His comments bolster the view that the BOJ will expand its asset-purchase fund for the second time in 3 months at the BOJ's next policy meeting on Apr 27. China's Shanghai Stock Index climbed to a 3-1/2 week high on speculation the PBOC may cut banks' reserve requirement ratios after Mar China home prices fell in a record 37 of 70 cities tracked by the government.
- June E-mini S&Ps this morning are trading down -3.50 points on disappointing earnings results from IBM and Intel along with concerns over Spains debt. The U.S. stock market on Tuesday rallied throughout the day and settled sharply higher as European debt concerns eased after Spain raised more than its maximum target at a bill auction and after the IMF hiked its 2012 and 2013 GDP forecasts: Dow Jones +1.50%, S&P 500 +1.55%, Nasdaq Composite +1.82%. The S&P 500 posted a 1-week high and the Dow Jones climbed to a 1-1/2 week high. Additional bullish factors were carry-over strength from a rally in European equities after Apr German ZEW investor confidence unexpectedly rose to a 22-month high and after Mar U.S. building permits unexpectedly rose to their best level in 3-1/2 years (+4.5% to 747,000 versus expectations of -0.7% to 710,000). Negatives for stocks were the decline in Mar U.S. housing starts to a 5-month low (-5.8% to 654,000) and the unexpected stagnation in Mar industrial production (unchanged versus expectations of +0.3%).
- International Business Machines (IBM) slipped 1.6% in European trading after the company reported late yesterday Q1 sales of $24.7 billion, below analysts' predictions of $24.8 billion.
- Intel (INTC) fell 3% in pre-market trading after the company late yesterday predicted that gross margins, or the percentage of sales remaining after deductng costs of production, will be about 62% in Q2, below analysts' projections of 63.5%.
- June 10-year T-notes this morning are up +3 ticks. T-note prices Tuesday settled lower on reduced safe-haven demand as stocks rallied when the IMF raised its global GDP forecasts and after European debt concerns eased when Spain raised more than its maximum target at a bill auction: TYM2 -8.5, FVM2 -3.2. Other bearish factors included carry-over weakness from a slide in bund prices after the Apr German ZEW economic sentiment unexpectedly rose to a 22-month high and after St. Louis Fed President Bullard said that U.S. economic growth will quicken from a range of 2.5% to 2.7% during Q1 of 2012 to 3.0% for the entire year and that the Fed will probably need to tighten policy during the "last part of 2013." Limiting declines in T-note prices was the unexpected fall in Mar housing starts (-5.8% to 654,000 versus expectations of +1.0% to 705,000) which fell to a 5-month low.
- The dollar index this morning is higher with USD/JPY +0.54 yen and EUR/USD -0.50 cents. The dollar index Tuesday retreated and closed lower on reduced safe-haven demand after global stocks rallied sharply when the IMF hiked its global GDP forecasts along with reduced European debt concerns after Spain sold more than its maximum target of bills at auction: Dollar Index -0.079, USD/JPY +0.437, EUR/USD -0.00144. Other bearish factors for the dollar included the unexpected increase in the Apr German ZEW economic sentiment survey which rose to a 22-month high, and after weaker then expected U.S. economic data on Mar U.S. housing starts and Mar U.S. industrial production indicated uneven U.S. economic growth.
- May crude oil prices this morning are trading down -12 cents a barrel and May gasoline is -4.27 cents per gallon at a 1-1/2 month low. Crude oil prices on Tuesday settled mixed as crude gained on reduced European debt concerns after Spanish bond yields fell along with the action by the IMF to hike its global GDP forecast, but gasoline weakened on unwinding of crack spreads and the Brent-WTI spread, which prompted liquidation of long gasoline futures positions: CLM12 +1.27, RBM2 -3.30. May crude rallied up to a 2-week high. Bullish factors included an easing of European sovereign-debt concerns after Spain sold more than its maximum target of bills and after the IMF raised its global GDP outlook for 2012 and 2013. Bearish factors included liquidation of long gasoline positions as crack spreads were unwound along with the outlook for Wednesday's weekly DOE inventory report to show that U.S. crude supplies rose to a 10-month high. Expectations for the weekly DOE inventory report on Wednesday are for crude oil stockpiles to climb +1.6 million bbl, gasoline supplies to fall -1.0 million bbl, distillate inventories to remain unchanged and the refinery utilization rate to increase +0.7 to 84.5% of capacity.
Global Financial Calendar
| Wednesday 4/18/12 | |
|---|---|
| United States | |
| 0700 ET | Weekly MBA mortgage applications. |
| United Kingdom | |
| 0430 ET | Minutes of the Apr 4-5 BOE policy meeting. |
| 0430 ET | Mar U.K. jobless claims change expected +6,000, Feb +7,200. Mar claimant count rate expected 5.0%, Feb 5.0%. |
| 0430 ET | Feb U.K. avg weekly earnings expected +1.2% 3-mo/year-over-year, Jan +1.4% 3-mo/year-over-year. |
| 0430 ET | Feb U.K. ILO unemployment rate expected unchanged at 8.4%, Jan unchanged at 8.4%. |
| Euro-Zone | |
| 0500 ET | Feb Euro-Zone construction output, Jan -0.8% m/m and -1.4% y/y. |
| 0700 ET | European Commission releases a statement on growth and jobs in Greece. |
| Canada | |
| 1030 ET | BOC releases its monetary policy report. |
| Japan | |
| 1830 ET | BOJ Governor Shirakawa speaks at an event in New York. |
| 1950 ET | Mar Japan exports expected +0.2% y/y, Feb -2.7% y/y. Mar imports expected +7.0% y/y, Feb +9.2% y/y. |
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