Barchart's Morning Call 6/21

Barchart Morning Call

BC - Wed Jun 20, 7:00AM CDT

Overnight Developments

• Sep E-mini S&Ps are little changed ahead of today's FOMC meeting where the market is hoping for additional easing moves such as an extension of Operation Twist. Commodity prices are mixed with oil down -0.04%, gold down -0.70%, copper down -0.60%, and agricultural prices mixed. The dollar index is little changed. Sep 10-year T-notes are down -4.5 ticks on generally stable market conditions overnight.
• The Euro Stoxx 50 index today is down -0.10%. Asian stocks today closed mostly higher on support from Tuesday's U.S. stock market rally: Japan +1.11%, Hong Kong +0.53%, China -0.23%, Taiwan +0.85%, Australia +0.22%, Singapore +0.47%, South Korea +0.64%, India +0.22%, Turkey +1.11%.
• The Turkish stock market rallied by 1.11% today after Moody's raised its credit rating on Turkey by one notch to one step below investment grade.
• The Spanish 10-year bond yield fell by 9 bp to 6.91% and the Italian bond yield fell by 9 bp. French President Hollande said today that Eurozone leaders are exploring ways for the ESM bailout fund to buy debt from countries such as Italy that have taken fiscal consolidation measures. France's labor minister said that France is pushing a debt redemption plan for pooling European debt.
• Germany today sold 4.005 billion euros of 2-year notes at an average yield of only 0.10%.
• New Democracy leader Samaras is expected to formally announce his coalition government later today with the Pasok and Democratic Left parties as coalition members. The new government first needs to discuss the extent to which Greece can get an easing of austerity terms in the bailout agreement. The government needs to satisfy conditions for another tranche of bailout money from the Eurozone before its cash runs out in mid July.
• Procter & Gamble is down 1.6% in European trading after cutting its earnings and revenue guidance due to slowing growth in Europe and the U.S. The company cut its fiscal-Q4 organic sales growth forecast to 2-3% from 4-5%. Management cut its EPS ex-items guidance to $0.75-0.79 from $0.79-0.85, which is now less than the analyst consensus of $0.84. Procter & Gamble announced the changes in guidance at a conference in Paris. Unilever's CFO said today at the same conference that Europe is "difficult for everybody."
• Japan's May exports rose by 10% y/y, which was a strong figure that provided some encouragement about global demand. Imports rose +9.3% y/y. Japan's May trade surplus was 907.3 billion yen ($11.5 billion), which was much wider than market expectations of 544 billion yen. Japan ran a trade deficit with Europe (11.1 billion yen) for the first ever since trade data began in 1979. Japan's shipments to the EU fell -0.9%, although that was more than offset by a 38% surge in shipments to the U.S.
• Japan's parliament today passed a bill to provide $7.6 billion of sovereign insurance to tankers that carry Iranian oil. The European sanctions that begin on July 1 ban European insurance and reinsurance companies from covering tankers that carry Iranian oil, which means that 95% of tankers worldwide will lose their current insurance coverage. This requires sovereigns to step in to provide insurance to tankers carrying Iranian oil, thus providing another obstacle for Iranian oil exports starting July 1.
  Market Comments
  • Sep E-mini S&Ps this morning are trading up +0.25 points as the market awaits the outcome of today's FOMC meeting. The stock market on Tuesday closed with fairly sharp gains: S&P 500 +0.98%, Dow Jones +0.75%, Nasdaq 100 +1.09%. Bullish factors included (1) increased optimism that the FOMC at its meeting that concludes today will announce further easing measures such as an extension of Operation Twist, and (2) the sharp 21 bp drop in the Spanish 10-year bond yield to 7.00%. The stock market was able to shake off the weak May housing starts report of -4.8% versus expectations of +0.7%.
  • Sep 10-year T-notes this morning are trading -4.5 ticks on reduced safe-haven demand as global stocks are stable. Sep 10-year T-note prices on Tuesday closed mildly lower: TYU2 -8, FVU2 -2.75. T-notes closed lower on reduced safe-haven demand with the rally in the stocks and the decline in the Spanish 10-year bond yield to 7.00%.
  • The dollar index this morning is virtually unchanged while EUR/USD is up +0.0005 (+0.04%) and USD/JPY is up +0.02 (+0.03%). The forex market is treading water ahead of the outcome of today's FOMC meeting. The dollar index on Tuesday closed moderately lower: Dollar Index -0.57 (-0.69%), EUR/USD +0.0109 (+0.87%), USD/JPY -0.16 (-0.20%). The dollar index closed lower on Tuesday on increased speculation about Fed easing and the improved situation in Europe. The Spanish 10-year bond yield fell sharply by 21 bp to 7.00% and the Greek political parties are on track to announce a new coalition government on Wednesday.
  • Aug WTI crude oil prices this morning are -0.03 (-0.04%), and Aug gasoline is -0.0149 (-0.58%) as the market awaits today's DOE report and the outcome of today's FOMC meeting. Crude oil and gasoline prices on Monday closed mixed: CLQ2 +0.75 (+0.90%), RBQ2 -0.0166 (-0.64%). Oil prices were boosted by the stock market rally and by the downgrade of the Iranian nuclear talks to the "technical level." The downgrade in the talks confirmed that the talks are going basically nowhere. However, an Israel official said yesterday that there is still time for sanctions and diplomacy to work, so the market did not step up expectations for a near-term Israeli military attack on Iran.
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    Today's U.S. Earnings Reports Earnings reports (sorted by mkt cap): BBBY-Bed, Bath & Beyond (consensus $0.84), RHT-Red Hat (0.27), MU-Micron Tech (-0.20), CLC-Clarcor (0.70).
    Global Financial Calendar
    

    Wednesday 6/20/12
    United States
    0700 ET	Weekly MBA mortgage applications, last +18.0% with purchase sub-index +12.8% and refi sub-index +19.2%.
    1030 ET	DOE Weekly Petroleum Status Report.
    1230 ET	FOMC 2-day meeting concludes with policy decision announcement (federal funds rate target expected unchanged at zero to 0.25%).
    1400 ET	FOMC releases projections of economic indicators and federal funds rate.
    1415 ET	Fed Chairman Bernanke holds post-meeting press conference.
    Japan
    1950 ET	Japan May all-industry activity index expected +0.1% m/m, Apr -0.3% m/m
    0300 ET	Japan May convenience store sales, Apr +6.1% y/y.
    Germany
    0200 ET	German May producer prices expected -0.2% m/m and +2.2% y/y, Apr +0.2% m/m and +2.4% y/y.
    United Kingdom
    0430 ET	Bank of England meeting minutes.
    0430 ET	UK May unemployment claimant count rate expected 4.9%, Apr 4.9%. May claimant count change expected -4,000, Apr -13,700. UK Apr ILO unemployment rate expected 8.2%, Mar 8.2%. Apr employment change (3mo/3mo) expected +135,000, Mar +105,000.
    0430 ET	UK Apr average weekly earnings expected +0.8% 3mo y/y, Mar +6.0% 3mo y/y. Apr weekly earnings ex-bonus expected +1.8% 3mo y/y, Mar +1.6% 3mo y/y.

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