Barchart Morning Call
Overnight
Developments
- Sep E-mini S&Ps this morning are slightly higher by 2.75 points (+0.21%). European stocks are little changed. Crude oil, gold and copper are little changed and agricultural commodities are mixed. The dollar index is slightly higher by +0.08%. Sep 10-year T-notes are down 2 ticks.
- The Euro Stoxx 50 this morning is slightly lower by -0.07%. Asian stocks today closed lower on carry-over weakness from yesterday's U.S. stock market session and the 3-step downgrade for Spain by Moody's: Japan -0.22%, Hong Kong -1.15%, China -0.78%, Taiwan -0.19%, Australia -0.53%, Singapore -0.47%, South Korea +0.62%, India -1.20%, Turkey -0.09%.
- The Chinese stock market today was undercut by cuts in growth estimates. Credit Suisse cut its Chinese GDP growth estimate for 2012 to +7.7% from 8.0% and for 2013 to +7.9% from +8.2%. Deuschebank cut its 2012 GDP growth estimate to +7.9% from +8.2%.
- OPEC at its meeting today is expected to leave its production ceiling unchanged at 30 million bpd. OPEC is currently pumping 31.6 million bpd of oil, which is 1.6 million bpd above the ceiling. Saudi Arabia and its Gulf partners favor raising the target by 500,000 bpd but have run into strong resistance from Iran, Venezuela and other members of the cartel.
- Spain's 10-year yield rose to a euro-era record of 6.86% today, moving towards the 7.00% level that has prompted a bailout in other countries. Spain has a bailout coming for its banking system but hopes to continue to finance its government budget deficit in the private bond markets. If the Spanish yield continues rising, Spain will need a full sovereign bailout that will cost somewhere in the neighborhood of $300-400 billion euros. Italy's 10-year bond yield rose to 6.29% today. French President Hollande meets today in Rome with Italian President Monti.
- Italy today successfully sold its intended amount of 4.5 billion euros worth of 3-year, 7-year and 8-year bonds. However, Italy had to pay 5.3% on the 3-year bonds, up 140 bp from its 3-year sale a month ago.
- Spanish bank net borrowing from the ECB rose to 288 billion euros in May from 264 billion euros in April. That indicates that the Spanish banking system will be heavily dependent on ECB loans for a matter of years even in the wake of last Saturday's announcement of a Spanish bank bailout of up to 100 billion euros.
- German Chancellor Merkel today said that she has nothing against the ECB taking on a larger role in regulating European banks. France said yesterday that it will press the EU at the upcoming summit on June 28-29 to adopt a plan for the ECB to be in charge of bank supervision and to allow the ECB to provide money directly to troubled banks for bailout capital. France is also pushing to allow the ESM to have a banking license so that it can borrow from the ECB and leverage its capital to have a larger bailout capacity.
- Japan's final April industrial production report was revised lower to -0.2% m/m and +12.9% y/y from +0.2% m/m and +13.4% y/y. April capacity utilization fell -0.6% m/m versus the previous +1.3% m/m.
- The Eurozone May CPI report of -0.1% m/m and +2.4% y/y was close to market
expectations of -0.2% m/m and +2.4% y/y. The Eurozone May core CPI was unchanged
from the previous month at +1.6% y/y.
Market Comments- Sep E-mini S&Ps this morning are up +2.75 points (+0.21%) as the news front is relatively quiet and the market is looking ahead to today's U.S. economic reports and Sunday's Greek election. The stock market on Wednesday closed moderately lower: S&P 500 -0.70%, Dow Jones -0.62%, Nasdaq 100 -0.74%. Bearish factors centered on continued worries about Europe and the U.S. retail sales report which showed back-to-back declines of -0.2% in April/May and caused worries that the U.S. economy may be in the throes of a significant slowdown. The U.S. stock market is particularly worried ahead of Sunday's election in Greece, which could end up in a showdown between Greek politicians and Eurozone officials and a possible exit of Greece from the euro.
- Sep 10-year T-notes this morning are down 2 ticks on the relatively quiet risk front so far today. Sep 10-year T-note prices on Wednesday closed moderately higher: TYU2 +16, FVU2 +6.75. Bullish factors included the weak U.S. retail sales report and increased safe-haven demand with the weakness in stocks and the ongoing bad news in Europe that included credit rating downgrades and higher bond yields in Italy and Spain.
- The dollar index this morning is up +0.06 (+0.08%), EUR/USD is up +0.0009 (+0.07%), and USD/JPY is down -0.21 (-0.26%). The dollar index on Wednesday closed mildly lower: Dollar Index -0.272 (-0.33%), EUR/USD +0.0054 (+0.43%), USD/JPY -0.05 (-0.06%). The dollar index fell on Wednesday due to the weak U.S. retail sales report. EUR/USD saw some short-covering after the Financial Times Deutschland reported that European leaders may consider relaxing Greece's austerity program after the June 17 election. In addition, Radical Left Syriza leader Tsipras told Bloomberg he has no intention of pulling Greece out of the euro, suggesting that there may be room for a compromise even if Tsipras becomes the head of a coalition government after the election.
- July WTI crude oil prices this morning are trading slightly higher by +0.03 points and July gasoline down -0.0087 (-0.33%). The market is waiting for the outcome of today's OPEC meeting. Crude oil and gasoline prices on Wednesday closed mixed: CLN2 -0.70 (-0.84%), RBN2 +0.52 (+0.20%). Crude oil prices fell on the weak U.S. retail sales report and the smaller-than-expected -191,000 bbl decline in DOE U.S. oil inventories versus expectations of -1.5 mln bbl. Gasoline prices were supported by the -1.724 mln bbl decline in U.S. gasoline inventories vs expectations of +1.5 mln bbl. Distillate inventories fell -63,000 bbl vs expectations of +1.0 mln bbl, which was bullish for heating oil and diesel fuel. The refinery utilization rate rose by 1.0 point to the very high level of 92.0%, which means that refineries are now running flat out and that crude oil inventories should start to decline on a sustained basis and that gasoline and distillate inventories should start to increase on a sustained basis.
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Today's U.S. Earnings Reports Earnings reports (sorted by mkt cap): KR-Kroger (consensus $0.73), SFD-Smithfield Foods (0.53), PIR-Pier One Imports (0.16).
Global Financial Calendar
Barchart.com provides Financial Quotes, Charts and Technical Analysis for Stock and Commodity Traders.Thursday 6/14/12 United States 0830 ET Weekly initial unemployment claims expected -2,000 to 375,000, previous -12,000 to 377,000. Weekly continuing claims expected -24,000 to 3.269 mln, previous +34,000 to 3.293 mln. 0830 ET May CPI expected -0.2% m/m and +1.9% y/y, Apr unch m/m and +2.3% y/y. May core CPI expected +0.2% m/m and 2.2% y/y, Apr +0.2% m/m and +2.3% y/y. 0830 ET Q1 current account deficit expected -$132.0 bln, Q4 -$124.1 bln. 0830 ET USDA weekly exports. 0830 ET NOPA May oilseed report. 1030 ET DOE natural gas storage. 1300 ET Treasury sells $13 bln in 30-year T-bonds. 1500 ET Apr consumer credit, Mar +$21.355 bln. 1630 ET Weekly money supply report and Fed balance sheet. n/a Treasury announces 30-year TIPS auction for June 21, last $9 bln. n/a OPEC meets in Vienna. Japan 0030 ET Japan final-Apr industrial production expected unrevised from preliminary +0.2% m/m and +13.4% y/y. Final-Apr capacity utilization expected unrevised at +1.3% m/m. n/a BOJ begins 2-day meeting. Euro-Zone 0400 ET ECB June monthly report. 0500 ET Eurozone May CPOI expected -0.2% m/m and +2.4% y/y, Apr +0.5% m/m and +2.4% y/y. May core CPI expected +1.6% y/y, Apr +1.6% y/y. 0500 ET Eurozone Q1 labor costs expected +2.6% y/y, Q4 +2.8% y/y. Germany 0200 ET German May wholesale price index, Apr +0.5% m/m and +2.4% y/y.
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