Barchart's Morning Call 6/13

Barchart Morning Call

BC - 2 hrs 3 mins ago

Overnight Developments

• E-mini S&Ps this morning are mildly lower by -0.27% ahead of this morning's U.S. retail sales report, which is expected to show a decline of -0.1% m/m. Commodity prices are mixed this morning with crude oil -0.19%, gold -0.19%, copper +0.57%, and agricultural commodities mixed. The dollar index is -0.12% while EUR/USD is up +0.22%. Sep 10-year T-note prices are -6 ticks.
• The Euro Stoxx 50 index this morning is little changed as the market awaits Sunday's Greek election. Asian stocks today closed mostly higher: Japan +0.60%, Hong Kong +0.82%, China +1.59%, Taiwan +0.24%, Australia -0.22%, Singapore -0.36%, South Korea +0.26%, India +0.11%, Turkey +0.11%.
• Chinese stocks rallied by 1.6% today on speculation the Chinese government is planning additional stimulus measures to boost the economy. Japanese stocks received a boost today from news that Japan's April machine orders rose sharply by +5.7% m/m.
• Spanish Prime Minister Rajoy is again calling on the ECB to buy Spanish bonds under its Securities Market Program to bring down Spanish bond yields. Spanish bond yields have soared in the wake of Saturday's Spanish bank bailout because the European bailout facility is now likely to have seniority over private Spanish bond holders and because Spain is now likely to miss its budget deficit reduction targets. The ECB will not appreciate Spain's political pressure to buy bonds, although the ECB may yet step in to buy Spanish and Italian bonds if yields continue to rise and market confidence is in danger of spiraling out of control.
• Italy today was able to sell 6.5 billion euros of 1-year bills, its maximum target, at a yield of 3.972%, up from 2.34% at the previous auction on May 11. Completing the sale was a step in the right direction although Italy should not have had trouble selling short-term bills due to the relatively low risk on shorter-term securities. The tougher test will come on Thursday when the Italy is due to sell 3-year, 7-year and 8-year bonds. Germany today easily sold 4.04 billion euros of 10-year bund at an average yield of 1.52%.
• In some good news on the European debt crisis, the Italian 10-year bond yield today fell by 8 bp to 6.09% and the Spanish 10-year bond yield fell by 4 bp to 6.66%.
• Japan Apr machine orders rose +5.7% m/m and +6.6% y/y, which was stronger than market expectations of +1.6% m/m and +4.9% y/y.
• Germany's May final EU-harmonized CPI was left unrevised at -0.2% m/m and +1.9% y/y, which was in line with market expectations.
• Eurozone April industrial production fell by -0.8% m/m and -2.3% y/y, which was a smaller decline than expectations of -1.2% m/m and -2.7% y/y, but nevertheless added to the decline of -0.1% m/m seen in March.
  Market Comments
  • Sep E-mini S&Ps this morning are down -3.50 points (-0.27%) on some nervousness ahead of today's April retail sales report, which is expected to show a -0.1% m/m decline, the second consecutive weak monthly report. The US stock market on Tuesday closed with solid gains: S&P 500 +1.17%, Dow Jones +1.31%, Nasdaq 100 +1.15%. Bullish factors on Tuesday included (1) dovish comments by Chicago Fed President Evans who said he favors extending Operation Twist as well as "pretty much any accommodative policy I've heard about," (2) increased hopes for FOMC action at its meeting next Tuesday/Wednesday as an antidote to the current turmoil, and (3) the ECB's endorsement of a European Commission proposal to guarantee bank deposits. The U.S. stock market was able to shake off Fitch's warning that Spain is likely to miss its deficit reduction targets by a "significant" margin and the 19 bp rise in the Spanish 10-year bond yield to 6.68%. The Italian 10-year bond yield rose by 14 bp to 6.16%.
  • Sep 10-year T-notes this morning are down -6 ticks on generally stable global stock markets and on some supply overhang ahead of today's auction of $21 billion in 10-year T-notes. Sep 10-year T-note prices on Tuesday closed moderately lower: TYU2 -18, FVU2 -8.75. T-note prices on Tuesday fell on reduced safe-haven demand tied to the rally in stocks.
  • The dollar index this morning is down -0.101 (-0.12%) on generally stable global equity markets. EUR/USD is up +0.0028 (+0.22%) and USD/JPY is up +0.15 (+0.19%). The dollar index on Tuesday closed mildly lower: Dollar Index -0.092 (-0.11%), EUR/USD +0.0021 (+0.17%), USD/JPY +0.09 (+0.11%). The dollar index fell on Tuesday as the rally in stocks slightly reduced safe-haven demand for the dollar.
  • July WTI crude oil prices this morning are trading -0.16 (-0.19%) while July gasoline is +0.0079 (+0.30%). Crude oil saw some downward pressure from today's IEA report that global oil production in May rose by 200,000 bpd to 91.1 million bpd. The petroleum market is looking ahead to today's weekly DOE report, which is expected to show a decline in crude oil inventories and a rise in product inventories. Crude oil and gasoline prices on Tuesday closed mixed: CLN2 +0.62 (+0.75%), RBN2 -0.0064 (-0.24%). U.S. WTI crude oil prices on Tuesday closed moderately higher on some short-covering and on a little brighter economic view with the rally in the stocks and hopes that the FOMC next week will extend Operation Twist or adopt a new securities purchase program. July gasoline prices closed lower on Tuesday thanks mainly to the 86-cent sell-off in Brent crude oil on Saudi Arabia's push for a higher OPEC production target at Thursday's meeting. July Nymex gasoline prices are priced in NY Harbor and are often influenced more by European Brent crude oil than by Nymex WTI crude oil futures, which are priced in Cushing, Oklahoma.
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    Today's U.S. Earnings Reports Earnings reports (sorted by mkt cap): KFY-Korn-Ferry (consensus $0.27).
    Global Financial Calendar
    

    Wednesday 6/13/12
    United States
    0700 ET	Weekly MBA mortgage applications, previous +1.3%, purchase sub-index -1.8%, refi sub-index +2.0%.
    0830 ET	May PPI expected -0.6% m/m and +1.3% y/y, Apr -0.2% m/m and +1.9% y/y. May core PPI expected +0.2% m/m and +2.7% y/y, Apr +0.2% m/m and +2.7% y/y.
    0830 ET	May retail sales expected -0.1% m/m, Apr +0.1% m/m. May retail sales ex-autos expected unchanged m/m, Apr +0.1% m/m.
    1000 ET	Apr business inventories expected +0.3%, Mar +0.3%.
    1030 ET	DOE Weekly Petroleum Status Report.
    1300 ET	Treasury sells $21 billion in 10-year T-notes.
    Germany
    0200 ET	German final-May CPI expected unrevised from preliminary -0.2% m/m and +1.9% y/y. German final-May EU-harmonized CPI expected unrevised from -0.3% m/m and +2.1% y/y.
    Euro-Zone
    0500 ET	Eurozone Apr industrial production expected -1.2% m/m and -2.7% y/y, Mar -0.3% m/m and -2.2% y/y.

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