Barchart's Morning Call 6/8

Barchart Morning Call

BC - 2 hrs 8 mins ago

Overnight Developments

• E-mini S&Ps this morning are down -7.75 points after Spain's credit rating was cut three steps by Fitch Ratings and after German exports declined for the first time this year. Commodity prices are weaker with crude oil down over $2 a barrel (-2.91%) and metals and agricultural prices lower. T-notes are up +22.5 ticks on a flight to safety after Spain's credit rating was cut. The dollar index is up sharply (+0.86%) as the euro tumbled (-0.82%) when German exports fell more than expected and after Spain's credit rating was cut.
• The Euro Stoxx 50 is down -0.62% after German exports fell more than forecast and Fitch Ratings cut Spain's credit Rating. The Asian stock markets today closed mostly lower on concern global central banks are not doing enough to fuel global growth after Fed Chairman Bernanke refrained from discussing any further Fed stimulus measures. Japan
• Fitch Ratings downgraded Spain's credit rating three levels to BBB, two steps off of non-investment grade, saying the cost of shoring up Spain's banks may be as much as 100 billion euros, compared with its previous estimate of 30 billion euros.
• The German Apr trade balance widened to 14.4 billion euros, more than the expected 12.3 billion euros, as Apr exports tumbled -1.7%, larger than expectations of -0.7% and Apr imports fell -4.8%, also a larger decline than expectations of -0.1%.
• European stocks and U.S. stock index futures moved up from their worst levels after an unnamed German government official said European finance ministers will hold a conference call this weekend to discuss a possible aid package for Spain.
• Germany's Bundesbank raised its 2012 German GDP forecast to +1.0% from a Dec estimate of +0.6%, citing a robust global economy, cheap financing conditions and solid domestic consumption, even as Europe's debt crisis presents an "exceptionally high" level of uncertainty. The Bundesbank also raised its 2012 German CPI estimate to 2.1% from a previous projection of 1.8%.
• The Bank of Italy reported that Italian bank purchases of the country's sovereign debt rose +1.4% to 295 billion euros in April, the most on record.
• ECB Council member Nowotny said a press conference in Vienna today that while the ECB never pre-commits on future policy actions, it "sees increased downside risks" on the economy and "may have to react." Nowotny also said that the ECB is unlikely to offer banks another longer term loan as "rate policy and liquidity must be seen in connection" with European fiscal policy measures.
  Market Comments
  • Sep E-mini S&Ps this morning are trading down -7.75 points on Spain's credit downgrade and weak German exports. The US stock market on Thursday closed mixed: S&P 500 -0.01%, Dow Jones +0.37%, Nasdaq 100 -0.43%. Stocks received an initial boost from China's surprise 25 bp interest rate cut and the successful Spanish bond auction. However, the stock market was later undercut by the 12,000 decline in initial unemployment claims and by Fed Chairman Bernanke's testimony before a Congressional panel in which he did not provide any hints of a new asset purchase program when Operation Twist expires at the end of this month. The Bank of England yesterday left its monetary policy unchanged, which was in line with market expectations.
  • Sep 10-year T-notes this morning are trading up +22.5 ticks on increased safe-haven demand as global equity markets tumble. Sep 10-year T-note prices on Thursday closed mildly higher: TYU2 +6, FVU2 +2.5. T-note prices closed higher on Thursday on the late sell-off in stocks and continued worries about the global economy. In addition, T-notes received a safe-haven boost after Fitch downgraded Spain by three notches to BBB from A, which left Spain's rating only two notches above junk.
  • The dollar index this morning is up +0.709 (+0.86%) on increasede safe-haven demand. EUR/USD is weaker by -1.03 (-0.82%), while USD/JPY is down -0.34 (-0.43%). The dollar index on Thursday closed slightly lower: Dollar Index -0.050 (-0.06%), EUR/USD -0.0021 (-0.17%), USD/JPY +0.44 (+0.55%). The Chinese rate cut was bearish for the dollar because safe-haven demand for the dollar will decline if the Chinese economy can bottom out and turn higher in the second half of the year. However, the dollar found support from the late sell-off in stocks and the Fitch credit rating downgrade for Spain.
  • July WTI crude oil prices this morning are down sharply by -$2.47 a barrel (-2.91%) and July gasoline is down -5.58 cents per gallon (-2.08%). Crude oil and gasoline prices on Thursday closed lower: CLN2 -0.86 (-1.01%), RBN2 -0.0165 (-0.61%). Crude oil prices theoretically should have received a bigger boost from the Chinese interest rate cut but instead closed lower on technical weakness, the inability of stocks to hold their gains, and ongoing concerns about global economic growth.
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    Today's U.S. Earnings Reports Earnings reports (sorted by mkt cap): PNY-Piedmont Nat Gas (consensus $0.71), THO-Thor Industries (0.79).
    Global Financial Calendar
    

    Friday 6/8/12
    0830 ET	Apr U.S. trade balance expected -$49.5 bln, Mar -$51.8 bln. Annual trade revisions.
    1000 ET	Apr wholesale inventories expected +0.5%, Mar +0.3%.
    n/a	Fed's Kocherlakota speaks on economic theory in Ann Arbor, MI.
    Japan
    0030 ET	Japan May bankruptcies, Apr -6.7% y/y.
    0100 ET	Japan May eco watchers survey, Apr current 50.9, Apr outlook 50.9.
    Germany
    0200 ET	German Apr trade balance expected 12.3 bln euros, Mar 17.4 bln euros. Apr exports expected -0.6% m/m, Mar +0.9% m/m. Apr imports, Mar +1.2% y/y. German Apr current account, Mar 19.8 bln surplus.
    0200 ET	German Q1 labor costs (sa), last +1.1% q/q and +3.3% y/y.
    United Kingdom
    0430 ET	UK May PPI input prices (sa), Apr -1.5% m/m and +1.2% y/y. May output prices (nsa) expected unchanged m/m and +3.2% y/y, Apr +0.7% m/m and +3.3% y/y. May core output prices (nsa), Apr +0.6% m/m and +2.3% y/y.
    CHI
    2130 ET	China May CPI expected +3.2% y/y, Apr +3.4% y/y. China May PPI expected -1.1% y/y, Apr -0.7% y/y.

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