Barchart Morning Call 7/20

Barchart Morning Call

BC - Fri Jul 20, 7:00AM CDT

Overnight Developments

• Sep E-mini S&Ps are trading down by -0.40% on concern over global growth after China pledged to keep property curbs and amid concern the European debt crisis will drag on after the additional yield investors demand to hold Spanish debt instead of German debt rose to a record. The Euro Stoxx 50 is down -1.10%. Commodity prices are mostly lower with Sep crude down -1.27%, Aug gold up +0.11%, and Sep copper down -1.63%. Agricultural prices bucked the trend and moved higher on ongoing drought concerns with Nov soybeans up +1.42% and Dec corn up +0.61%. The dollar index is up +0.27% with EUR/USD down -0.33%. Sep 10-year T-notes are up +8 ticks.
• Asian stocks today closed mostly lower: Japan -1.43%, Hong Kong +0.42%, China -1.07%, Taiwan +0.23%, Australia -0.18%, South Korea -0.04%, India -0.70%.
• Chinese stocks fell after the Xinhua News Agency reported the China won't relax property control policies and will instead seek to keep a "firm grip" on the real estate market to prevent a rebound in housing prices.
• The yield spread between 10-year Spanish and German government debt widened to a record 593 bp ahead of a conference call later today between Euro-Zone finance ministers on the terms of a 100 billion-euro bailout for Spain. Spain's 10-year bond yield rose for a seventh day as the yield climbed 10 bp to 7.11%, while 5-year German bund yields tumbled to a record low 0.253%.
• June German producer prices fell -0.4% m/m and rose +1.6% y/y, weaker than expectations of -0.2% m/m and +1.8% y/y, with the +1.6% y/y increase the smallest gain in 2 years.
• June U.K. public sector net borrowing climbed 12.1 billion pounds, more than expectations of 11.2 billion pounds, while May was revised up to show a 16.1 billion pound increase from the originally reported 15.6 billion pounds.
  Market Comments
  • Sep E-mini S&Ps this morning are trading down -0.40% as Spain's 10-year bond yield climbs further above 7.00%. Stocks on Thursday closed higher: S&P 500 +0.27, Dow Jones +0.27%, Nasdaq 100 +1.14%. Stocks rallied on positive earnings reports from a range of companies including IBM (which closed +3.8% on the day) and Ebay (which closed +8.6%) and continued hopes for stimulus measure from China. The stock market shook off yesterday's weak economic data on hopes that the weak economy may eventually force the Fed into a QE3 program. Initial unemployment claims spiked higher by 33,000 to 386,000, but that was mostly due to distortions from the erratic auto plant shut-downs this year for retooling. June existing home sales fell by -5.4% to 4.37 mln units, which was much weaker than market expectations of +1.5% to 4.62 mln units. The June LEI of -0.3% m/m was weaker than market expectations of -0.1%.
  • Sep 10-year T-notes this morning are up +8 ticks on increased safe-haven demand as stocks falter. Sep 10-year T-note prices on Thursday closed lower: TYU2 -9, FVU2 -2.5. Bearish factors included reduced safe-haven demand with the rally in the stocks and some supply overhang with Thursday's sale of 10-year TIPS securities.
  • The dollar index this morning is higher by +0.27% with EUR/USD down -0.33% and USD/JPY down -0.04%. The dollar index on Thursday closed little changed: Dollar index -0.19 (-0.22%), EUR/USD -0.0003 (-0.02%), USD/JPY -0.18 (-0.23%). The dollar index traded sideways again on Thursday. Bearish factors for the dollar index included the weak U.S. economic data and reduced safe-haven demand with the rally in stocks. However, the dollar also received a boost from the temporary rise in the Spanish 10-year bond yield above 7.00%. The Spanish 10-year bond yield this week has risen sharply by 35 bp to close at 6.97% on Thursday.
  • Sep WTI crude oil prices this morning are trading down -$1.18 a barrel (-1.27%) and Sep gasoline down -2.86 cents per gallon (-1.01%). Crude oil and gasoline prices on Thursday closed sharply higher: CLU2 +2.80 (+3.11%), RBU2 +0.0659 (+2.37%). Bullish factors included (1) technical buying with the new highs, (2) expectations for tightening world oil supplies with the sanctions on Iran, (3) some concern about whether Israel will respond militarily to the terrorist attack by Iran and/or Hezbollah on Israeli tourists in Bulgaria, and (4) the 4-week decline in U.S. oil inventories.
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    Today's U.S. Earnings Reports Earnings reports (ranked by market cap): GE (Consensus $0.37), SLB-Schlumberger (1.00), AEP-Americal Electric (0.71), BHI-Baker Hughes, GR-Goodrich (1.72), STI-Suntrust Banks (0.44), IR-Ingersoll-Rand (0.91), XRX-Xerox (0.26), UAL-United Contintental (1.70), ALV-Autoliv (1.40), IDXX-Indexx Labs (0.90), NVR-NVR Inc (11.41), HCBK-Hudson City Bancorp (0.14).
    Global Financial Calendar
    

    Friday 7/20/12
    United States
    n/a	No U.S. reports.
    Japan
    0300 ET	Japan June convenience store sales, May +1.7% y/y.
    Germany
    0200 ET	German June producer prices expected -0.2% m/m and +1.8% y/y, May -0.3% m/m and +2.1% y/y.
    United Kingdom
    0430 ET	UK June public finances (PSNCR) expected 8.5 bln pounds, May -4.4 bln pounds. June PSNB ex interventions expected 13.4 bln pounds, May 17.9 bln pounds. June public sector net borrowing expected 11.2 bln pounds, May 15.6 bln pounds.

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