Barchart's Morning Call 3/12

Barchart Morning Call

BC - 1 hr 59 mins ago

Overnight Developments

• E-mini S&Ps this morning are up +0.44% on a +0.65% rally in European stocks and hopes for FOMC stimulative action next week after dovish comments by Chicago Fed President Evans. Commodity prices are mixed this morning with oil down -0.23%, gold down -0.26%, and copper down -0.09%, but with most agricultural prices trading higher. Sep 10-year T-note prices are down -4 ticks. The dollar index is down -0.08% while EUR/USD is up +0.23%.
• The Euro Stoxx 50 index today is up +0.65% despite a further rise in the Spanish 10-year bond yield this morning as Spain's stock market recovered by +0.68% today. Asian stocks today closed mostly lower: Japan -1.02%, Hong Kong -0.43%, China -0.71%, Taiwan -0.68%, Australia +0.23%, Singapore +0.33%, South Korea -0.75%, India +1.17%, and Turkey +0.59%.
• The Spanish 10-year bond yield today rose by 16 bp to 6.65%, which is only 5 bp below the record high of 6.70% posted last November. Fitch today said that Spain will miss its budget deficit target again this year and next year by a substantial margin due in part to the need for the Spanish government to borrow up to 100 billion euros to bail out its banking system.
• Fitch Managing Director Ed Parker said today at an event in Oslo that sovereign credit ratings for countries in the Eurozone, including those that currently have a AAA rating, risk downgrades if they cannot demonstrate an end to the Eurozone debt crisis. Meanwhile, Fitch Co-Head of Financial Institutions Ratings James Longsdon said at the same event that a Greek exit from the Eurozone would make a third LTRO from the ECB "inevitable."
• Chicago Fed President Evans reportedly said in an interview on Bloomberg TV that airs today that "I've been in favor of pretty much any accommodative policy I've heard about." He said, "extending Twist would be useful." He added, "More asset purchases would be useful. More mortgage-backed security purchases would be good."
• UK April manufacturing production fell -0.7% m/m and -0.3% y/y, which was weaker than market expectations of -0.1% m/m and +0.4% y/y. UK April industrial was unchanged and -1.0% y/y, which was close to expectations of +0.1% m/m and -1.0% y/y.
  Market Comments
  • Sep E-mini S&Ps this morning are up +5.75 points (+0.44%) on a +0.65% rally this morning in European stocks and on dovish comments by Chicago Fed President Evans, which is raising hopes for further FOMC action at next week's meeting such as extending Operation Twist. The US stock market on Monday closed with fairly sharp losses: S&P 500 -1.26%, Dow Jones -1.14%, Nasdaq 100 -1.64%. The global stock markets started out the day with a rally after Saturday's Spanish bank bailout and generally positive Chinese economic data over the weekend and on Monday. However, optimism quickly faded about the Spanish bank bailout after Spanish bond yields rose fairly sharply on concern that Spanish bond holders will have a junior claim compared with the Eurozone bailout facility. The market is also very worried about this Sunday's Greek election since the Radical Left Syriza party is expected to do well and cause continued problems with Greece keeping its bailout package and staying in the euro.
  • Sep 10-year T-notes this morning are down -4 ticks on reduced safe-haven demand with today's rally in U.S. and European stocks. Sep 10-year T-note prices on Monday closed higher: TYU2 +11.5, FVU2 +4.25. T-note prices rallied on Monday on the sharp sell-off in the U.S. stock market from its initial gains and on the knowledge that the European debt crisis is far from over despite the Spanish bank bailout.
  • The dollar index this morning is slightly lower by -0.19 points (-0.23%) on reduced safe-haven demand with the rallied in U.S. and European stocks. EUR/USD is up +0.0029 (+0.23%) and USD/JPY is up +0.10 (+0.13%). The dollar index on Monday closed little changed: Dollar Index +0.004, EUR/USD -0.0035 (-0.28%), USD/JPY -0.05 (-0.06%). The dollar index on Monday rallied back from early losses and closed the day little changed. Safe-haven demand for the dollar index returned as market optimism about the Spanish bank bailout quickly faded.
  • July WTI crude oil prices this morning are mildly lower by -0.19 (-0.23%) and July gasoline is down -0.0055 (-0.21%). The main bearish factor this morning is a report that the Gulf Cooperation Council nations (Saudi Arabia, Kuwait, UAE, Qatar) are pushing a proposal to raise OPEC's production target of 30 million bpd by 500,000 bpd at Thursday's OPEC meeting. Crude oil and gasoline prices on Monday closed sharply lower: CLN2 -2.66 (-3.16%), RBN2 -0.0537 (-2.00%). Bearish factors included (1) pessimism about Europe, (2) the fact that the U.S. yesterday granted exemptions to 7 more countries to its list of countries that can import oil from Iran without violating sanctions, and (3) expectations that OPEC on Thursday will leave its production target unchanged and not try to cut production to support oil prices.
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    Today's U.S. Earnings Reports Earnings reports (sorted by mkt cap): KORS-Michael Kors Holdings (consensus $0.16), FDS-Factset Research (1.16), CASY-Casey's General (0.67).
    Global Financial Calendar
    

    Tuesday 6/12/12
    United States
    0745 ET	ICSC (Int'l Council of Shopping Centers) weekly retailer sales.
    0830 ET	May import price index expected -1.0% m/m and -0.6% y/y, Apr -0.5% m/m and +0.5% y/y.
    0830 ET	USDA WASDE report.
    0855 ET	Redbook weekly retailer sales.
    1130 ET	Weekly 4-week T-bill auction.
    1300 ET	Treasury sells $32 bln in 3-year T-notes.
    1300 ET	World Bank releases new global economic forecasts.
    1400 ET	May Treasury budget statement expected -$110.0 bln.
    1630 ET	API weekly U.S. oil statistics.
    Japan
    1950 ET	Japan Apr machine orders expected +1.6% m/m and +4.9% y/y, Mar -2.8% m/m and -1.1% y/y.
    United Kingdom
    0430 ET	UK Apr industrial production expected +0.1% m/m and -1.0% y/y, Mar -0.3% m/m and -2.6% y/y. Apr manufacturing production expected -0.1% m/m and +0.4% y/y, Mar +0.9% m/m and -0.9% y/y.

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