Barchart Morning Call
Thu, 7 Jun 2012 07:00:00 -0500
Overnight Developments- E-mini S&Ps this morning are up 10.50 points (+0.80%) on the surprise Chinese rate cut and on the successful Spanish bond auction. Commodity prices are mixed with crude oil up 0.78% and agricultural prices mostly higher but with metals prices trading lower. T-notes are slightly higher by +0.5 tick. The dollar index is down -0.195 points (-0.24%).
- The Euro Stoxx 50 is up 0.93% this morning on the Chinese rate cut and on Chancellor Merkel's comments in favor of fiscal union and the successful Spanish bond auction. Asian stocks today closed mostly higher: Japan +1.24%, Hong Kong +0.85%, China -0.60%, Taiwan +0.34%, Australia +1.31%, Singapore -0.06%, South Korea +2.81%, India +1.18%, Turkey +0.93%.
- China cut its lending rate by 25 bp to 6.31% from 6.56%, in a surprise move that will be welcome around the world.
- Chancellor Merkel today said that "We need more Europe, we need not only a monetary union, but we also need a so-called fiscal union, in other words more joint budget policy. And we need most of all a political union, that means we need to gradually give competencies to Europe and give Europe control."
- The Bank of England today left its base rate at 0.50% and held its bond purchase ceiling unchanged at 325 billion pounds, which was in line with consensus market expectations.
- Spain today successfully met its target of selling 2 billion worth of bonds
at auction. The Spanish Treasury received 3.29 times as many bids as its
accepted for the 10-year bond auction that yielded 6.044%. The government sold
611 million euros worth of 10-year bonds and another 1.46 million of 2 and 4
year securities, bringing the total to 2.07 billion euros. The sale was a big
relief considering that Spain's finance minister earlier this week fretted that
the bond markets were closed to the Spanish government.
Market Comments- June E-mini S&Ps this morning are trading +10.50 (+0.80%) on the Chinese rate cut and the successful Spanish bond auction. The US stock market on Wednesday rallied sharply: S&P 500 +2.30%, Dow Jones +2.37%, Nasdaq 100 +2.36%. Bullish factors included (1) hopes that European policymakers may be in the process of putting together a bailout package for Spain, (2) ECB President Draghi's statement that the ECB is ready to act and that some ECB members favored a rate cut although the ECB left its refinancing rate unchanged at 1.00% at its meeting on Wednesday, (3) hopes that the Federal Reserve will extend its Operation Twist program at its meeting on June 19-20 given yesterday's report that Fed chairman Bernanke and Treasury Secretary Geithner are very worried about European banks, (4) the Beige Book report saying that the U.S. economy "expanded at a moderate pace" and that hiring was "steady or increased slightly," (5) short-covering after the recent sharp sell-off, and (6) some value buying with valuations at very cheap levels.
- Sep 10-year T-notes this morning are trading +0.5 tick, stabilizing after Wednesday's sharp decline. June 10-year T-note prices on Wednesday closed sharply lower: TYU2 -20.5, FVU2 -9.75. The main bearish factor was reduced safe-haven demand with the sharp rally in US and European stocks. The S&P 500 index on Wednesday closed +2.37% and the Euro Stoxx 50 closed +2.42%. The T-note market is looking ahead to today's testimony by Fed Chairman Bernanke before a Congressional panel to gauge whether the Fed will extend its Operation Twist program.
- The dollar index this morning is down -0.195 (-0.24%) on reduced safe-haven demand. EUR/USD is little changed while USD/JPY is up +0.18 (+0.23%). The dollar index on Wednesday closed with a fairly sharp loss: Dollar Index -0.504 (-0.61%), EUR/USD +0.0130 (+1.04%), USD/JPY +0.44 (+0.56%). The dollar index was undercut by reduced safe-haven demand with the sharp rally in stocks. Meanwhile, the euro was boosted by short-covering and by hopes that policy-makers are putting together a bailout package for Spain.
- July WTI crude oil prices this morning are up 0.66 (+0.78%) while gasoline is down -0.0007 (-0.03%). Crude oil and gasoline prices on Wednesday closed moderately higher: CLN2 +0.73 (+0.87%), RBN2 +0.0056 (+0.21%). The main bullish factor was the sharp rally in the stock market and the sell-off in the dollar index. However, crude oil and gasoline prices were held back by the bearish weekly DOE report. The DOE report showed that U.S. oil inventories fell slightly by 111,000 barrels, which was a smaller decline than expectations of -1 million barrels. Meanwhile, gasoline inventories rose sharply by 3.346 million (versus expectations of +1 million barrels), and distillate inventories rose by 2.253 million barrels (versus expectations of +1 million barrels). The refinery utilization rate rose sharply by 1.9 points to 91.0%, which was larger than expectations of +0.5 points and left the rate 2.9 points above the 5-year seasonal average. Refineries are now operating in high gear and that should allow oil inventories to start to consistently drop and allow product inventories to consistently rise.
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Today's U.S. Earnings Reports Earnings reports (sorted by mkt cap): LULU-Lululemon (consensus $0.30), SJM-JM Smucker (0.99), COO-Cooper (1.20).
Global Financial Calendar
Barchart.com provides Financial Quotes, Charts and Technical Analysis for Stock and Commodity Traders.Thursday 6/7/12 United States 0545 ET Fed's Rosengren speaks about global risk in Copenhagen. 0830 ET Weekly initial unemployment claims expected +3,000 to 380,000, previous +10,000 to 383,000. Weekly continuing claims expected -2,000 to 3.240 mln, previous -18,000 to 3.242 mln. 0830 ET USDA weekly exports. 1000 ET Fed Chairman Bernanke testifies to Congressional Joint Economic Committee on the U.S. economic outlook. n/a ICSC May chain store sales, Apr +0.6% y/y. 1030 ET DOE natural gas storage. 1210 ET Fed's Lockhart speaks on U.S. economy in Georgia. 1315 ET Fed's Kocherlakota speaks in Minneapolis. 1500 ET Apr consumer credit expected +$10.6 bln, Mar +$21.355 bln. 1530 ET Fed's Fisher speaks on renminbi at La Jolla, CA. 1630 ET Weekly money supply report and Fed balance sheet. n/a Treasury announces 3-year, 10-year , and 30-year auctions for June 12-14. Japan 0100 ET Japan Apr coincident index, Mar 96.7. Apr leading index, Mar 96.4. 1950 ET Japan Q1 final GDP, last +1.0% q/q and +4.1% q/q annualized. Q1 deflator -1.2% y/y. 1950 ET Japan Apr current account (sa) expected 538. bln yen, Mar 785.5 bln yen. Apr trade balance (BOP basis) expected -425 bln yen, Mar 4.2 bln yen. 1950 ET Japan May bank lending ex-trusts, Apr +0.4% y/y. May bank lending including trusts, Apr +0.3% y/y. United Kingdom 0430 ET UK May PMI services expected 52.8, Apr 53.3. 0700 ET Bank of England meeting concludes with policy announcement. Base rate expected unchanged at 0.50% and asset purchase target expected unchanged at 325 billion pounds.
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