Barchart's Morning Call 6/26

Barchart Morning Call

BC - 37 mins ago

Overnight Developments

• Sep E-mini S&Ps are mildly higher by +0.29% thanks to the slightly higher +0.18% trade in European stocks. Commodity prices are mixed this morning with crude oil up +0.23%, gold down -0.23%, copper -0.14%, and agricultural prices mixed. The dollar index is down -0.13 (-0.16%) and EUR/USD is down -0.08%. Sep 10-year T-note prices are down 8.5 ticks.
• Asian stocks today closed mostly lower due to yesterday's sharp sell-off in U.S. stocks: Japan -0.81%, Hong Kong 0.45%, China -0.07%, Taiwan -0.40%, Australia -0.36%, Singapore -0.34%, South Korea -0.44%, India +0.14%, Turkey +0.50%.
• Spain today successfully sold 3.08 billion euros of bills, although the yield on the 3-month bill jumped to 2.362% from 0.846% at the previous auction. Spain's 10-year yield today rose by 7 bp to 6.67% and Italy's 10-year bond yield today is up 5 bp at 6.05%.
• Italy's cabinet may approve as soon as today a measure that would allow Italy's banks to raise capital by selling bonds to the Italian government when the banks cannot sell bonds in the capital markets. However, selling bonds to the Italian government would raise the government's cash needs and further impair Italy's credit quality.
• Germany's July GfK consumer confidence index rose by 0.1 point to 5.8 from 5.7 in June, which was better than expectations for a 0.1 point decline to 5.6.
• Turkey has stepped up its rules of engagement with Syria and now says that "any military element that approaches the Turkish border from Syria in a way that may pose a risk or danger will be viewed as a threat and treated as a military target." That action comes after Turkey concluded that the Turkish military jet that Syria shot down last Friday was over international waters when it was shot down. Turkey called for a meeting today with its NATO allies to discuss Syria's downing of its plane.
• Japanese Prime Minister Noda's bill that raises Japan's 5% sales tax to 10% by 2015 was approved today by the lower house of Parliament. The bill must still be approved by the opposition-controlled upper house of Parliament, but that appears likely due to the acceptance by the opposition parties. The bill raises the sales tax to 8% in April 2014 and to 10% in October 2015. Japan is under pressure to address its massive budget deficit which will hit 223% of GDP next year, according to the OECD.
• Japan's June small business confidence index fell by 1.0 point to 46.2 from 47.2 in May.
• HSBC today cut its 2012 growth forecast for China to +8.4% from +8.6%.
• China's commerce ministry said today that China's trade growth is improving and that China can achieve 10% growth in exports and imports if the world economy does not worsen further.
• Tropical Storm Debby is nearly stalled 85 miles west of Cedar Key, Florida and is moving at only 3 mph. The storm had halted 44% of oil production in the Gulf of Mexico and 35% of gas production, but companies on Monday started returning workers to platforms.
  Market Comments
  • Sep E-mini S&Ps this morning are up 3.75 points (+0.29%) on the mildly higher trade in European stocks by +0.18% and on some short-covering after yesterday's sharp decline. The US stock market on Monday closed sharply lower: S&P 500 -1.60%, Dow Jones -1.09%, Nasdaq 100 -2.01%. The main bearish factor was pessimism about the Eurozone summit to be held later this week on Thursday and Friday. German Chancellor Merkel has refused to accept any of the provisions that might help solve the Eurozone debt crisis such as banking union, joint euro bonds, or using the ESM to directly lend money to banks or to buy sovereign bonds. Eurozone leaders at the Thur/Fri meeting will likely only accept the 130 billion euro growth pact that the leaders from Germany, France, Italy and Spain agreed upon last Friday that mainly involves a repackaging of existing EU funds and programs. The good news on Monday was that May U.S. new home sales rose sharply by 6.7% to a new 2-year high of 369,000, which was stronger than expectations of 347,000.
  • Sep 10-year T-notes this morning are down 8.5 ticks on the higher trade in U.S. and European stock indexes this morning. Sep 10-year T-note prices on Monday closed sharply higher: TYU2 +18, FVU2 +7.75. Sep T-notes rallied mainly on increased safe-haven demand with the sharp sell-off in stocks and the likelihood that the Eurozone debt crisis will not go away anytime soon with Germany Chancellor Merkel unwilling to step up German support for a solution.
  • The dollar index this morning is trading is down -0.13 points (-0.16%) on the calm trade in U.S. and European stock indexes. EUR/USD is down -0.08% and USD/JPY is down -0.36%. The dollar index on Monday closed mildly higher: Dollar Index +0.214 (+0.26%), EUR/USD -0.0066 (-0.53%), USD/JPY -0.77 (-0.96%). The dollar index rallied on increased safe-haven support as pessimism rose for the Thursday/Friday Eurozone summit. In addition, Cyprus on Monday requested a bailout for its banking system, which was not a surprise but will further drain the Eurozone's limited bailout facilities.
  • Aug WTI crude oil prices this morning are up +0.18 (+0.23%) and Aug gasoline is up +0.0230 (+0.92%) on the lower dollar index and higher trade in stock indexes. Oil and gas companies started returning workers to platforms on Monday after Tropical Storm Debby over the weekend shifted direction and moved toward Florida. Crude oil and gasoline prices on Monday closed mixed: CLQ2 -0.55 (-0.69%), RBQ2 +0.0306 (+1.24%). Crude oil fell on economic pessimism tied to the European debt crisis, while gasoline rose on various refinery outages in the U.S. and Europe. Tropical Storm Debby succeeded in shutting down about one-quarter of the oil output in the Gulf of Mexico but the storm is now expected to hover over the northeastern part of the Gulf of Mexico and eventually make landfall in Florida, staying away from the bulk of the oil rigs in the northwestern part of the Gulf.
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    Today's U.S. Earnings Reports Earnings reports (sorted by mkt cap): HRB-H&R Block (consensus $2.07), RBN-Robbins & Myers (0.90).
    Global Financial Calendar
    

    Tuesday 6/26/12
    United States
    0745 ET	ICSC (Int'l Council of Shopping Centers) weekly retailer sales.
    0855 ET	Redbook weekly retailer sales.
    0900 ET	S&P-Case-Shiller Apr Composite-20 Home Price index expected +0.3% m/m and -2.65% y/y, Mar +0.09% m/m and -2.57% y/y.
    1000 ET	June U.S. consumer confidence (Conference Board) expected -1.5 to 63.5, May -3.8 to 64.9.
    1000 ET	June Richmond Fed manufacturing index expected +1 to 5, May -10 to 4.
    1130 ET	Weekly 4-week T-bill auction.
    1300 ET	Treasury sells $35 billion in 2-year T-notes.
    1630 ET	API weekly U.S. oil statistics.
    United Kingdom
    0430 ET	UK May public finances (PSNCR) expected 4.0 bln pounds, Apr -23.2 bln pounds. May public sector net borrowing expected 14.0 bln pounds, Apr -18.8 bln pounds.

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