Barchart Morning Call
Overnight Developments
Global Financial Calendar
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- Global stocks this morning are mostly lower with the Euro Stoxx 50 down -0.55% at a 2-1/2 month low and Jun S&Ps down -5.50 points at a 1-1/2 week low. Treasuries rose and the dollar index climbed to a 2-1/2 week high as stocks added to this week's losses on concern European authorities will struggle to keep the region's debt crisis from spreading. The euro slipped to a 2-1/2 week low against the dollar and 5-year German bund yields fell to a record low 0.719% after the yield spread between Spanish and German 10-year maturities reached 400 bp for the first time since Dec 12, while the extra yield investors demand to hold 10-year French bonds instead of benchmark German bunds widened to 126 bp, the most in 2-months. The yields on French bonds rose despite decent demand for its auction of 8.44 billion euros of debt, close to the maximum target. France sold 4.32 billion euros of 10-year debt at a yield of 2.98%, higher than a similar auction last month of 2.91%, although the bid-to-cover ratio was 2.65, higher than last month's 2.47, a sign of strong demand. Another negative for stocks and the euro was Feb German industrial production which fell -1.3% m/m and -1.0% y/y, weaker than expectations of -0.5% m/m and +0.3% y/y. As expected, the BOE held its benchmark interest rate at 0.50% and kept the asset purchase target at 325 billion pounds
- Asian stocks today closed mixed with Japan down -0.53%, China +2.36%, Australia -0.32%, South Korea +0.61%, India closed for holiday. Most Asian stock markets were under pressure on concern Europe won't be able to contain its debt crisis. Japan's Nikkei 225 Stock Index tumbled to a 4-week low after companies that do business in Europe slid while exporters as a whole weakened as the yen rose against the dollar. Japanese stocks pared a loss and closed well above their lows after a rejection of a BOJ nominee came as a victory for lawmakers pressing for more monetary easing. China's Shanghai Stock Index closed higher after the government said it will more than double the amount foreigners can invest in Chinese assets, but gains were limited as the country's big banks fell after Prime Minister Wen Jiabao pledged to break the "monopoly" enjoyed by the largest lenders who are able to make easy profits because it's hard to borrow money elsewhere. South Korea's Kospi Index finished higher after Q1 South Korea foreign direct investment rose +17% y/y, the most in 3 quarters.
- June S&Ps this morning are trading down -5.50 points. The U.S. stock market Wednesday settled sharply lower on an increase in European sovereign-debt concerns after weak demand was seen at a Spanish debt auction and after the Mar ISM non-manufacturing index fell more than expected: Dow Jones -0.95%, S&P 500 -1.02%, Nasdaq Composite -1.46%. The Dow and the Nasdaq fell to 1-week lows. Bearish factors Wednesday included (1) carry-over weakness from a fall in European stocks on concern the region's debt crisis may spread to Spain after credit-default swaps to insure its government debt jumped to a 4-month high as demand dropped at a Spanish bond auction and after Spanish Prime Minister Rajoy said Spain's situation is one of "extreme difficulty," (2) the larger-than-expected decline in the Mar ISM non-manufacturing index (-1.3 to 56.0 versus expectations of -0.5 to 56.8), and (3) weakness in energy producers after crude oil plunged to a 1-1/2 month low after weekly DOE crude supplies rose by the most since Aug 2008.
- Bullish factors Wednesday included (1) the larger-than-expected increase in the Mar ADP employment change along with the upward revision to Feb (Mar +209,000, stronger than expectations of 206,000, and Feb revised up to +230,000 from the originally reported +216,000) and (2) comments from Richmond Fed President Lacker who said "downside risks have diminished now relative to where they were 4 to 5 months ago," and the U.S. economy should expand from 2% to 3% this year.
- June 10-year T-notes this morning are up +16.5 ticks. T-note prices Wednesday rebounded from a 1-week low and settled higher early on increased safe-haven demand over concern the European debt crisis may worsen along with the weaker-than-expected Mar ISM non-manufacturing index: TYM2 +14.5, FVM2 +9.2, EDU2 -1.5. Bullish factors Wednesday included (1) increased safe-haven demand for Treasuries on concern the European debt crisis may spread to Spain after credit-default swaps to insure its government debt jumped to a 4-month high as demand dropped at a Spanish bond auction and after Spanish Prime Minister Rajoy said Spain's situation is one of "extreme difficulty," (2) the larger-than-expected decline in the Mar ISM non-manufacturing index (-1.3 to 56.0 versus expectations of -0.5 to 56.8), and (3) the action by the Fed to purchase $1.866 billion of Treasuries as part of it Operation Twist program to replace $400 billion of short-term debt in its holdings with longer maturities in an attempt to keep borrowing costs down. Bearish factors included (1) the larger-than-expected increase in the Mar ADP employment change along with the upward revision to Feb (Mar +209,000, stronger than expectations of 206,000, and Feb revised up to +230,000 from the originally reported +216,000) and (2) comments from Richmond Fed President Lacker who said U.S. economic growth will probably accelerate to about 3% next year, which will warrant an increase in interest rates.
- The dollar index this morning is stronger and at a 2-1/2 week high with the dollar/yen -0.53 yen and the euro/dollar -0.72 cents. The dollar index Wednesday rallied to a 1-1/2 week high and settled higher as the euro fell when ECB President Draghi said the economic outlook remained subject to "downside risks" and after Spanish bond yields surged on weak demand for its government debt: Dollar Index +0.295, USD/JPY -0.356, EUR/USD -0.00910. Bullish factors included (1) the fall in the euro to a 2-1/2 week low against the dollar after ECB President Draghi said the economic outlook remained subject to "downside risks as the remaining tensions in euro area sovereign debt markets are expected to dampen economic momentum," (2) increased safe-haven demand for the dollar on concern over contagion of the European debt crisis to Spain after credit-default swaps to insure its government debt jumped to a 4-month high of 457 bp after it sold 2.59 billion euros of bonds at auction, less than the maximum target of 3.5 billion euros, and after Prime Minister Rajoy said Spain's situation is one of "extreme difficulty," and (3) the weaker than expected Feb German factory orders, which is euro negative. Bearish factors included (1) the larger-than-expected decrease in the Mar ISM non-manufacturing index, which is dollar negative and (2) the unexpected upward revision to the Mar Euro-Zone PMI composite index, which is euro positive.
- May crude oil prices this morning are up +35 cents a barrel and May gasoline is -0.60 of a cent per gallon. Crude oil and gasoline prices Wednesday sold-off and settled sharply lower as the dollar rallied and after weekly DOE crude supplies surged to a 9-1/2 month high and U.S. crude output rose to a 12-year high: CLK12 -$2.54, RBK -6.18. May crude dropped to a 1-1/2 month low. Bearish factors included (1) the rally in the dollar index to a 1-1/2 week high, which reduces investment demand in commodities, (2) the much larger-than-expected increase in weekly DOE crude inventories which rose by the most since Aug 2008 to their highest level in 9-1/2 months (+9.01 million bbl to 362.4 million bbl versus expectations of +2.2 million bbl), (3) the +3.9% increase in U.S. crude production for the week ended Mar 30 to 6.049 million barrels day, the highest in 12 years, (4) the unexpected increase in weekly DOE distillate stockpiles (+19,000 bbl versus expectations of -450,000), and (5) the larger-than-expected decline in the Mar ISM non-manufacturing index, which indicates reduced fuel demand. Bullish factors included (1) the larger-than-expected increase in the Mar ADP employment change, which signals economic strength that is beneficial for fuel demand and (2) the unexpected upward revision to the Mar Euro-Zone PMI composite index, which indicates increased energy consumption.
Global Financial Calendar
| Thursday 4/5/12 | |
|---|---|
| United States | |
| 0730 ET | Mar Challenger job cuts, Feb +2.0% y/y. |
| 0830 ET | Weekly initial unemployment claims expected -4,000 to 355,000, previous -5,000 to 359,000. Weekly continuing claims expected +10,000 to 3.350 million, previous -41,000 to 3.340 million.. |
| 0910 ET | St. Louis Fed President James Bullard speaks on the U.S. economy and monetary policy at an event in St. Louis. |
| 1030 ET | Mar ICSC chain store sales, Feb +4.1% y/y. |
| 1100 ET | Treasury announces amounts of 3-year T-notes (previous $32 billion), 10-year T-notes (previous $21 billion) and 30-year T-bonds (previous $13 billion) to be auctioned Apr 10-12. |
| 1630 ET | Weekly money supply report and Fed balance sheet. |
| United Kingdom | |
| 0430 ET | Feb U.K. industrial production expected +0.4% m/m and -2.1% y/y, Jan -0.4% m/m and -3.8% y/y. |
| 0430 ET | Feb U.K. manufacturing production expected +0.1% m/m and +0.1% y/y, Jan +0.1% m/m and +0.3% y/y. |
| 0700 ET | BOE announces interest rate decision and asset purchase target (expected no change to the 0.50% benchmark rate and no change to the 325 billion asset purchase target). |
| Germany | |
| 0600 ET | Feb German industrial production expected -0.5% m/m and +0.3% y/y, Jan +1.6% m/m and +1.8% y/y. |
| Canada | |
| 0830 ET | Mar Canada net change in employment expected +10,000, Feb -2,800. Mar unemployment rate expected unchanged at 7.4%, Feb -0.2 to 7.4%. |
| 1000 ET | Mar Ivey purchasing managers index expected +0.5 to 67.0, Feb +2.4 to 66.5. |
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