Barchart Morning Call 7/19

Barchart Morning Call

BC - 1 hr 39 mins ago

Overnight Developments

• Sep E-mini S&Ps are trading mildly higher by +0.40% on positive U.S. and European earnings news and on expectations for an announcement soon on additional Chinese stimulus measures. IBM and Ebay are trading higher in European trading this morning on better-than-expected earnings reports. The Euro Stoxx 50 this morning is up 0.94%. Commodity prices are trading higher almost across the board with an average gain of +0.88%. Sep crude oil is up +1.20%, Aug gold is up +0.83%, Sep copper is up 1.02%, and agricultural prices are all trading higher expect for cattle. The dollar index is down -0.33% while EUR/USD is up +0.13%. Sep 10-year T-notes are down 6.5 ticks.
• Asian stocks today closed higher across the board: Japan +0.79%, Hong Kong +1.66%, China +0.41%, Taiwan +1.41%, Australia +2.02%, Singapore +0.39%, South Korea +1.70%, India +0.55%, Turkey +0.27%.
• Chinese stocks rallied today on a report that China's four big banks boosted new loans to 50 billion yuan in the first half of July, which is double the month-earlier period. In addition, the market is looking for new stimulus measures from the Chinese government including another cut in the bank reserve ratio and rule changes that will make it easier for insurance companies to invest in debt securities, share rights and fixed assets.
• The German parliament today is expected to approve Germany's participation in the Spanish bank bailout of up to 100 billion euros. Eurozone finance ministers meet on Friday to approve the Spanish bank bailout and to discuss the Greek situation.
• Spain's 10-year bond yield today rose by 5 bp to 7.01%, breaching the red flag level of 7.00%. Spain today was able to sell 2-year, 5-year and 7-year securities but yields were substantially higher than previous auctions and the amount of bids received was lower than previous auctions. The bid cover ratio (bids received divided by bids accepted) was only 1.9 for the 2-year security versus 4.26 in last month's auction and 2.06 for the 5-year security versus 3.44 at the June auction.
• The UK June retail sales report of +0.1% m/m and +1.6% y/y was substantially weaker than market expectations of +0.6% m/m and +2.3% y/y and was down from May's revised report of +1.5% m/m and +2.1% y/y.
• The May Eurozone current account surplus (seasonally adjusted) of 10.9 billion euros was wider than market expectations of 4.6 billion euros and up from April's 5.5 billion euros in a supportive factor for the euro.
  Market Comments
  • Sep E-mini S&Ps this morning are trading +0.40% on positive earnings reports and expectations for additional stimulus measures from China. Today is a big day for earnings reports with Microsoft and Google scheduled to report. Stocks on Wednesday closed moderately higher: S&P 500 +0.67%, Dow Jones +0.81%, Nasdaq 100 +1.32%. Bullish factors included the stronger-than-expected U.S. housing starts report of +6.9% to 760,000 units and positive earnings reports from companies such as Intel and Honeywell. The Beige Book report was in line with market expectations and said that U.S. economic growth was "modest to moderate" in June and early July. The report said, "Employment levels improved at a tepid pace."
  • Sep 10-year T-notes this morning are down -6.5 ticks with most of the world's stock markets trading higher today. Sep 10-year T-note prices on Wednesday closed mildly higher: TYU2 +6.5, FVU2 +4.5. T-note prices were boosted by Fed Chairman Bernanke's second day of generally downbeat economic commentary and Mr. Bernanke's comment that the U.S. fiscal situation is "unsustainable."
  • The dollar index this morning is mildly lower by -0.33% on reduced safe-haven demand with the rally in world stocks. EUR/USD is up +0.13% even though the Spanish 10-year bond yield today crept above 7.00%. USD/JPY is down -0.28%. The dollar index on Wednesday closed little changed: Dollar index +0.04 (+0.04%), EUR/USD -0.0010 (-0.08%), USD/JPY -0.29 (-0.37%). The dollar index on Wednesday continued to trade on a weak note as it settles back after the early-July rally. EUR/USD closed slightly lower as the Spanish 10-year bond yield rose by 15 bp to 6.92%, moving back up towards the red-flag level of 7.00%.
  • Sep WTI crude oil prices this morning are trading +1.08 (+1.20%) and Sep gasoline is up +0.0240 (+0.86%) on more positive economic sentiment with the rally in stocks and expectations for Chinese stimulus measures. Crude oil and gasoline prices on Wednesday closed higher: CLQ2 +0.65 (+0.73%), RBQ2 +0.0384 (+1.35%). Bullish factors included the positive U.S. housing starts report and the unexpected 1.815 million bbl drop in gasoline inventories versus expectations for a 1.1 million bbl increase. Crude oil inventories fell by 809,000 bbls, which was fairly close to expectations for a drop of 750,000 bbls. Distillate inventories rose by 2.619 million bbls, which was larger than expectations for a rise of 1 million bbls. The refinery operation rate fell by 0.7 points to 92.0% versus expectations for a 0.4 point rise to a new 5-year high of 93.1%.
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    Today's U.S. Earnings Reports Earnings reports (ranked by market cap): MSFT (Consensus $0.62), Google (10.12), PM-Philip Morris (1.35), VZ-Verizon (0.64), UNH-UnitedHealth (1.20), UNP-Union Pacific (1.97), DHR-Danaher (0.81), COF-Capital One (1.46), FCX-Freeport-McMoran (0.75), BAX-Baxter (1.11), MS-Morgan Stanley (0.29), TRV-Travelers (1.34), BBt-BB&T (0.70), ISRG-Intuitive Surgical (3.57), JCI-Johnson Controls (0.66), PPG-PPG Industries (2.36), VFC-VF Corp (0.94), BX-Blackstone Group (0.11), SHW-Sherwin-Williams, FITB-Fifth Third Banc (0.35), CMG-Chipotle Mexican (2.30), NUE-Nucor (0.48).
    Global Financial Calendar
    

    Thursday 7/19/12
    United States
    0830 ET	Weekly initial unemployment claims expected +15,000 to 365,000, previous -26,000 to 350,000. Weekly continuing unemployment claims expected -4,000 to 3.300 mln, previous -14,000 to 3.304 mln.
    0830 ET	USDA weekly exports.
    1000 ET	July Philadelphia Fed index expected +8.6 to -8.0, June -10.8 to -16.6.
    1000 ET	June existing home sales expected +1.5% m/m to 4.62 mln, May -1.5% m/m to 4.55 mln units.
    1000 ET	June leading indicators expected -0.1% m/m, May +0.3% m/m.
    1030 ET	DOE natural gas storage.
    1300 ET	Treasury sells $15 billion in 10-year TIPS.
    1400 ET	June U.S. budget statement.
    n/a	Treasury announces 2-year, 5-year and 7-year T-notes auctions for July 24-26.
    1630 ET	Weekly money supply report and Fed balance sheet.
    Japan
    0030 ET	Japan May all-industry activity index expected -0.3% m/m, Apr +0.1% m/m.
    0100 ET	Japan final-May leading index CI, prelim May 95.9. Final-May coincident index, prelim May 95.8.
    0130 ET	Japan June nationwide department store sales, May -1.0% y/y. June Tokyo department store sales, Apr +2.1% y/y.
    Euro-Zone
    0400 ET	Eurozone May current account (sa), April 4.6 bln euros.
    United Kingdom
    0430 ET	UK June retail sales (including fuel) expected +0.6% m/m and +2.3% y/y, May +1.4% m/m and +2.4% y/y. June retail sales ex-fuel expected +0.4% m/m and +2.6% y/y, May +0.9% m/m and +3.0% y/y.
    CHI
    2135 ET	China MNI July flash business sentiment survey.

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