Barchart's Morning Call 6/4

Barchart Morning Call

BC - Mon Jun 04, 7:00AM CDT

Overnight Developments

• June E-mini S&Ps this morning are trading slightly higher by +1.75 points (+0.14%) on some short-covering after last Friday's sharp sell-off and on higher European stocks today. Commodity prices on average are mildly higher by +0.24% this morning with gold up 0.52%, although copper is down -0.54% and crude oil is down -1.12%. Grain prices are higher today. T-notes are down 5 ticks. The dollar index is down -0.116 points (-0.14%) with EUR/USD little changed and USD/JPY up +0.11 yen.
• The Euro Stoxx 50 this morning is up 0.77% today on a recovery from recent losses. London is closed today for a spring bank holiday and the Queen's Diamond Jubilee. Asian stocks today sold off sharply on last Friday's weak U.S. payroll report and Sunday's report of a decline in China's non-manufacturing PMI: Japan -1.71%, Hong Kong -2.01%, China -2.81%, Taiwan -2.98%, Australia -1.94%, Singapore -1.70%, South Korea -2.27%, India -0.15%, Turkey -0.25%.
• Spanish 10-year bond yields fell by 3 bp to 6.50% today after the number of people in Spain claiming unemployment benefits fell by 30,113 to 4.71 million persons. That was the second month in a row that persons claiming unemployment benefits fell following the 6,632 decline seen in April. Spanish Prime Minister Rajoy today said the EU "needs to reinforce its common institutional architecture so that investors regain confidence in the single currency. Spain will emerge from the storm through its own efforts and with the support of our European partners."
• A spokesman for Spanish Prime Minister Rajoy's office said Spain is not under pressure from its European partners to seek a bailout, denying a report that German Chancellor Merkel and French President Hollande are pressuring Spain to seek a bailout.
• The June Sentix investor confidence index fell to -28.9 from -24.5 in May, although that was a bit better than the market consensus of -30.0.
• The April Eurozone PPI eased to unchanged m/m and +2.6% y/y from +0.5% m/m and +3.5% y/y, which was weaker than market expectations of +0.2% m/m and +2.7% y/y.
• China's May non-manufacturing PMI fell by 0.8 points to a 14-month low of 55.2 from 56.1 in April, according to a report on Sunday from the Chinese National Bureau of Statistics and the China Federation of Logistics and Purchasing.
  Market Comments
  • June E-mini S&Ps this morning are trading +1.75 points on some short-covering after last Friday's sharp losses and on this morning's higher trade in European stocks. U.S. stocks on Thursday closed mildly lower: S&P 500 -2.46%, Dow Jones -2.22%, Nasdaq 100 -2.62%. The S&P 500 index last Friday fell to a new 4-1/2 month low and has now fallen by a total of 10.2% from the 4-year high posted in early April. Bearish factors on Friday included (1) the weaker than expected May payroll report of +69,000 (vs expectations of +150,000) and the 0.1 point rise in the May unemployment rate to 8.2%, (2) the larger-than-expected -1.3 point decline in the May ISM manufacturing index to 53.5 versus expectations of -1.0 to 53.8, and (3) Thursday night's weaker than expected May Chinese ISM manufacturing index of -2.9 to 50.4.
  • Sep 10-year T-notes this morning are -5 ticks on the higher trade in E-mini S&Ps and European stocks. T-note prices on Friday closed higher: TYU2 +25.5, FVU2 +6.75. The 10-year T-note yield last Friday fell to a new closing low of 1.45%. T-notes rallied further on the weak US payroll and ISM manufacturing reports and Chinese ISM manufacturing report, which all added up to an alarming synchronous decline in global economic growth. The weak economic reports, combined with the ongoing European debt crisis, increase the chances that the FOMC at its next meeting on June 19-20 will implement a new securities purchase program of some type when the current Operation Twist program expires at the end of June.
  • The dollar index this morning is mildly lower by -0.116 (-0.14%) on reduced safe-haven demand with the higher trade in E-mini S&Ps and European stocks. EUR/USD is up +0.00003 (+0.02%) and USD/JPY is up +0.11 yen (+0.14%). BOJ Governor Shirakawa today said that the BOJ has been monitoring "the recent appreciation of the yen" in a warning to the FX markets about the possibility of intervention. The dollar index on Friday posted a new 10-month high but then fell back and closed slightly lower: Dollar Index -0.07 (-0.09%), EUR/USD +0.0069 (+0.56%), USD/JPY -0.30 (-0.38%). The dollar fell on Friday as some long liquidation pressure emerged after the weak U.S. payroll report put the U.S. economy in a weaker light and increased the chances for a new Fed securities purchase program, which would be bearish for the dollar. EUR/USD posted a new 2-year low but then recovered on some short-covering to closed +0.56%. USD/JPY extended the 2-1/2 month decline and posted a new 3-1/2 month low on the weak U.S. economic reports and continued safe-haven buying in the yen. The markets this week will be watching for fresh threats from Japanese officials for intervention against the yen.
  • July WTI crude oil prices this morning are down -0.93 (-1.12%) and July gasoline is down -3.20 (-1.20%) as market concerns continue about weak global economic growth with Sunday's weak Chinese non-manufacturing PMI report of -0.9 to 55.2. July crude oil and gasoline prices on Friday closed sharply lower: CLN2 -3.30 (-3.81%), RBN2 -0.0659 (-2.42%). July crude oil has now plunged by $29 per barrel in the past 3 months to post a new 8-month low and close at $83.23, the lowest level since last October just before the economy started to regain its strength. Crude oil has plunged on the syncronized decline in economic growth in the U.S., Europe and Asian, which will substantially undercut fuel demand. In addition, Bloomberg reported on Friday that OPEC production in May rose by 0.1% m/m to a new 3-1/2 year high of 31.595 million barrels per day. Saudi production rose by 0.8% to 9.9 million bpd. Crude oil also continues to see heavy downward pressure from the 16.7% surge in U.S. oil inventories seen since the beginning of the year to a 22-year high.
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    Today's U.S. Earnings Reports Earnings reports (sorted by mkt cap): DG-Dollar General (consensus $0.60), SHFL-Shuffle Master (0.20).
    Global Financial Calendar
    

    Monday 6/4/12
    United States
    0945 ET	May NY ISM index, Apr 61.2.
    1000 ET	Apr factory orders expected +0.2% m/m, Mar -1.9% m/m.
    1100 ET	USDA weekly grain export inspections.
    1130 ET	Weekly 3-mo and 6-mo T-bill auctions.
    1600 ET	USDA Crop Progress
    United Kingdom
    n/a	UK spring bank holiday.
    Euro-Zone
    0430 ET	Eurozone June Sentix investor confidence, May -24.5.
    0500 ET	Eurozone Apr PPI expected +0.3% m/m and +2.8% y/y, Mar +0.5% m/m and +3.3% y/y.
    CHI
    2230 ET	China May HSBC services PMI, Apr 54.1.

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