Barchart Morning Call 6/5

Barchart Morning Call

BC - Tue Jun 05, 7:00AM CDT

Overnight Developments

• E-mini S&Ps are slightly lower this morning and commodities are mixed as the markets await today's G-7 conference call among finance ministers and central bankers. Gold is up 0.35% today, but copper is down -0.12% and crude oil is down -0.13%. Grains are higher while livestock is mixed. The dollar index is up +0.29% and EUR/USD is down -0.59%. Sep 10-year T-note prices are up 3 ticks.
• The Euro Stoxx 50 is down -0.24% today as the markets await the outcome of today's G-7 meeting and as Spain's finance minister for the first time explicitly called for European help on financing its bank bailout. Asian stocks today closed higher on a partial recovery from Monday's sharp losses: Japan +1.04%, Hong Kong +0.40%, China -0.01%, Taiwan +1.53%, Australia +1.47%, Singapore +0.50%, South Korea +1.05%, India +0.20%, Turkey +0.24%.
• The Australian central bank today cut its key interest rate by 25 bp to 3.50% in an action that the market generally expected. The action was taken partially in response to the European uncertainty and slower Chinese growth.
• The HSBC/Markit China May non-manufacturing PMI rose by 3.0 points to a 19-month high of 54.7 from 54.1 in April.
• European economic data today was generally weak. The German final-May services PMI was revised lower by 0.4 points to 51.8 from 52.2, although the Eurozone final-May services PMI was revised slightly higher by 0.2 points to 46.7 from 46.5. Eurozone April retail sales fell -1.0% m/m and -2.5% y/y, which was weaker than market expectations of -0.1% m/m and -1.1% y/y. German April factory orders fell -1.9% m/m and -3.8% y/y, which was weaker than expectations of -1.1% m/m.
• German Chancellor Merkel said last night that Germany is open to European-wide supervision for systemically-important European banks. However, German Finance Minister Schaeuble today reiterated German opposition to debt sharing as a solution, saying that the Eurozone needs "a real fiscal union" before joint debt management can be discussed.
• Spanish Finance Minister Montoro today called for European aid for its banks while saying that a full Spanish bailout was not necessary. He said Spanish banks don't need "excessive amounts" to recapitalize and the question is "where that figure comes from." He said, "That's why it's so important that European institutions help us achieve, help facilitate, that figure because we're not talking about astronomical figures." The Spanish bond yield today is up 4 bp at 6.42%. Santander Chairman Emilio Botin said yesterday that about 40 billion euros would be enough to solve Spain's banking problems, although other estimates run up to 75 billion euros.
  Market Comments
  • June E-mini S&Ps this morning are trading slightly lower by -2.00 points (-0.16%) on lower European stocks (-0.24%) and weak European economic data today, although on the positive side the Australian central bank cut its key interest rate by 25 bp. U.S. stocks on Monday closed mixed: S&P 500 +0.01%, Dow Jones -0.14%, Nasdaq 100 +0.78%. The U.S. market on Monday found support from short-covering after the recent plunge and from the +0.50% higher close in European stocks. The stock market was able to shake off the bearish news of the -0.6% decline in U.S. April factory orders and the -0.9 point drop in the China May non-manufacturing PMI index to a 14-month low of 55.2.
  • Sep 10-year T-notes this morning are up +3 ticks on the slightly lower trade in E-mini S&Ps and on some nervousness ahead of today's G-7 meeting. T-note prices on Monday closed sharply lower: TYU2 -20.5, FVU2 -9.5. T-note prices on Monday fell on long liquidation pressure sparked by the stabilization in U.S. stocks and the +0.50% rally in European stocks. The T-note market is awaiting today's G-7 conference call and Thursday's Bernanke testimony to a Congressional panel.
  • The dollar index this morning is up +0.243 this morning with EUR/USD down -0.0074 (-0.59%) on Europe's weak economic data and Spain's call for help on a bank bailout. USD/JPY is slightly lower by -0.10 yen. The dollar index on Monday fell back from last Friday's 10-month high and closed lower: Dollar Index -0.339 (-0.40%), EUR/USD +0.0065 (+0.52%), USD/JPY +0.03 (+0.04%). The dollar index on Monday fell on long liquidation pressure sparked by the recovery in U.S. stocks from the daily low and the +0.50% higher close in European stocks. USD/JPY found some support on short-covering and on the implicit threat of Japanese currency market intervention to cap the yen's strength. BOJ Governor Shirakawa on Monday said that the BOJ has been monitoring "the recent appreciation of the yen."
  • July WTI crude oil prices this morning are slightly lower by -0.11 (-0.13%) while July gasoline is down 1.02 cents (-0.38%) as the market frets about Europe. July crude oil and gasoline prices on Monday closed mildly higher: CLN2 +0.375 (+0.31%), RBN2 +0.0139 (+0.52%). Bullish factors yesterday included short-covering, the recovery in U.S. stocks from the daily lows, and expectations for the first decline in U.S. oil inventories in 11 weeks in Wednesday's DOE report. The market consensus for Wednesday's weekly DOE report is for a 1 million decline in crude oil inventories, a 1 million increase in gasoline inventories, a 1 million barrel increase in distillate inventories, and a 0.5 point increase in the refinery utilization rate to 89.6% of capacity. U.S. refineries have now ramped up operations enough after spring maintenance that they should start to work down the excessive supply of crude oil and start producing more gasoline and distillates. U.S. crude oil inventories have soared by 16.7% since the beginning of the year to a 22-year high and are currently 9.5% above the 5-year seasonal average, the highest such level since December 2010.
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    Today's U.S. Earnings Reports Earnings reports (sorted by mkt cap): ULTA-Ulta Salon (consensus $0.53), UNFI-United Natural (0.56).
    Global Financial Calendar
    

    Tuesday 6/5/12
    United States
    0700 ET	Fed's Fisher speaks in Fife, Scotland.
    0745 ET	ICSC (Int'l Council of Shopping Centers) weekly retailer sales.
    0855 ET	Redbook weekly retailer sales.
    1000 ET	May ISM non-manufacturing index expected unch at 53.5, Apr -2.5 to 53.5.
    1130 ET	Weekly 4-week T-bill auction.
    1415 ET	Fed's Bullard speaks on housing in St. Louis.
    1630 ET	API weekly U.S. oil statistics.
    1915 ET	Fed's Evans speaks to Money Marketeers in NY.
    United Kingdom
    n/a	UK holiday for Queen's Diamond Jubilee.
    Euro-Zone
    0400 ET	Eurozone May final PMI services expected unrevised at 46.5. May final PMI composite expected 45.9.
    0500 ET	Eurozone Apr retail sales expected -0.1% m/m, Mar +0.3% m/m and -0.2% y/y.
    Germany
    0355 ET	German final May PMI services expected unrevised at 52.2.
    0600 ET	German Apr factory orders expected -1.0% m/m, Mar +2.2% m/m and -1.3% y/y.

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