Barchart Morning Call 7/23

Barchart Morning Call

BC - Mon Jul 23, 7:00AM CDT

Overnight Developments

• Sep E-mini S&Ps are trading sharply lower by 1.03% this morning on the 2.1% sell-off in the Euro Stoxx 50 index and on increased concern about the Eurozone debt crisis with Spanish and Italian bond yields today surging. Spanish stocks are down 3.45% this morning while Italian stocks are down 4.15%. In addition, a Chinese central bank advisor forecasted that Chinese GDP will dip further to +7.4% in Q3 and Germany's economy minister said that a Greek exit from the euro has "lost its terror." Commodity prices are sharply lower by an average 1.6% this morning on concern about weaker Chinese and European growth and on today's further rally in the dollar index. Crude oil is down 2.81%, gold is down 0.78%, copper is down 2.76%, and agricultural prices are all trading lower. The dollar index this morning is up +0.23% while EUR/USD is down -0.24%. Sep 10-year T-notes this morning are sharply higher by +13.5 ticks.
• Asian stocks today closed lower across the board: Japan -1.86%, Hong Kong -2.99%, China -1.38%, Taiwan -1.90%, Australia -1.67%, Singapore -1.10%, South Korea -1.91%, India -1.64%, Turkey -1.54%.
• The Spanish 10-year bond yield today is up sharply by 27 bp to 7.49%, adding to last week's surge of 61 bp to 7.22%. The Italian 10-year bond yield this morning is up 20 bp at 6.35% on contagion pressures from Spain. A Spanish newspaper reported today that six Spanish region/states may ask from bailout aid from the Spanish central government. Spain last week created an 18 billion euro bailout facility to help its regions. The Spanish region of Valencia officially requested bailout aid last week. Spanish and Italian banks are taking a heavy hit today with Spain's largest bank, Banco Santander, down 4.6% and Italy's UniCredit down 7.1%. The Bank of Spain today said that Spain's Q2 GDP fell -0.4% q/q for the third consecutive quarterly decline and was down -1.0% y/y.
• German Vice Chancellor and Economy Minister Philipp Roesler said on Sunday that he is "very skeptical" that the Eurozone will able to rescue Greece and that Greece's exit from the euro had "lost its terror." He said, "What's emerging is that Greece will probably not be able to fulfill its conditions. What is clear: if Greece doesn't fulfill those conditions, then there can be no more payments." Troika officials arrive in Greece on Tuesday to start examining how far Greece is behind on its adjustment plan and what needs to be done going forward.
• The Euro-zone July Consumer Confidence index fell to -20.0 from -19.8 in June.
• Chinese central bank advisor Song Guoqing said on Saturday that Chinese Q3 GDP may cool to +7.4% from +7.6% in Q2 and +8.1% in Q1, meaning that the Chinese economy has yet to bottom. He said, "The consensus is that China's economic growth rate will be close to 8% in coming months, but I personally am more pessimistic because there are problems on the export side." He added that in light of the continuing Eurozone debt crisis, "there is a risk of insufficient government measures if Chinese exports fall more sharply than expected in coming months."
• Japan's Cabinet Office in its monthly report said that "The slowdown in the global economy is becoming more widespread." Meanwhile, Japanese Finance Minister Jun Azumi reiterated today that Japanese authorities are ready to take "decisive" action to combat speculative and volatile exchange rate movements.
  Market Comments
  • Sep E-mini S&Ps this morning are trading sharply lower by 14.00 points (-1.03%) on the -2.1% sell-off in European stocks and on concern about slowing Chinese economic growth. The U.S. stock market is looking ahead to this week's peak in Q2 earnings reports. Stocks on Friday closed sharply lower: S&P 500 -1.01, Dow Jones -0.93%%, Nasdaq 100 -1.42%. Bearish factors included (1) a report that the Chinese government will keep a "firm grip" on the property market to prevent speculation from driving prices higher, and (2) a sharp rise in Spanish bond yield above 7.00% to a euro-era high of 7.23%, which increases the chances that Spain will eventually need a full bailout rather than a bailout for just its banks.
  • Sep 10-year T-notes this morning are trading sharply higher by +13.5 ticks on increased safe-haven demand tied to the sharp sell-off in global stocks and the increased concern about the European debt crisis..... Sep 10-year T-note prices Friday closed higher: TYU2 +14, FVU2 +5.5. T-note prices on Friday closed higher on increased safe-haven demand with the sharp sell-off in stocks and the increased concern about the European debt crisis.
  • The dollar index this morning is up +0.195 points (+0.23%) and EUR/USD is down -0.0029 points (-0.24%) on the surge in Spanish and Italian bond yields. USD/JPY is down -0.29 (-0.37%) at a 7-week low, although traders are nervous about possible Japanese intervention with today's comments by Japan's finance minister warning about intervention. The dollar index on Friday closed sharply higher: Dollar index +0.595 (+0.72%), EUR/USD -0.0124 (-1.01%), USD/JPY -0.10 (-0.13%). EUR/USD on Friday fell to a new 2-year low. The dollar index was boosted by increased safe-haven demand with the sell-off in stocks and the worsening European debt crisis. The Spanish 10-year bond yield on Friday soared by 26 bp to 7.23% after the Spanish government revised its 2013 GDP estimate to -0.5% from April's estimate of +0.2% and after the Spanish state of Valencia said it would be forced to request a bailout from the central government.
  • Sep WTI crude oil prices this morning are trading sharply lower by 2.58 (-2.81%) and Sep gasoline is down -0.0676 (-2.38%) on concerns about global economic growth and on this morning's higher trade in the dollar index. Crude oil and gasoline prices on Friday closed mixed: CLU2 -1.14 (-1.23%), RBU2 +0.0031 (+0.11%). Sep crude oil prices closed lower on Friday on the sell-off in stocks and the sharp rally in the dollar index. However, Sep crude oil remains near the top of its sharp 3-week rally that has been driven by (1) expectations for tightening global oil markets due to tighter sanctions on Iran, and (2) the 4-week decline in U.S. oil inventories due to the high operating rate of U.S. refineries. Oil prices received some support on Friday from an article in the Wall Street Journal citing U.S. officials as saying they believe Iran plans to start disrupting oil tanker traffic in the Persian Gulf with various types of attacks.
  • For the complete subscription version of this daily report (plus a 13-page big-picture weekly report), along with the earliest possible delivery in the morning, please visit http://www.barchart.com/register/crbfms_usmc.php
    Today's U.S. Earnings Reports Earnings reports (ranked by market cap): McDonalds (Consensus $1.38), BIDU-Baidu (1.13), VMW-Vmware (0.66), TXN-Texas Instruments (0.41), GAL-Halliburton (0.75), ETN-Eaton (1.09), CCE-Coca-Cola (0.73), CE-Celanese Corp (1.39), VNTV-Vantiv (0.28), HAS-Hasbro (0.24), FNF-Fidelity National (0.48), WCN-Waste Connection (0.36), RPM-RPM Intl (0.61), ZION-Zions Bancorp (0.35), IEX-Idex (0.71), STLD-Steel Dynamics (0.20), HXL-Hexcel (0.39), WWD-Woodward (0.45), CR-Crane (0.94).
    Global Financial Calendar
    

    Monday 7/23/12
    United States
    0830 ET	Chicago Fed June national activity index, May -0.45.
    1100 ET	USDA weekly grain export inspections.
    1130 ET	Weekly 3-mo and 6-mo T-bill auctions.
    1600 ET	USDA Crop Progress
    1900 ET	Fed's Raskin speaks in Boulder, Colorado on community banking.
    Euro-Zone
    0930 ET	ECB announces bond purchases.
    1000 ET	Jul Euro-Zone consumer confidence expected -0.2 to -20.0, Jun -19.8.
    Japan
    0100 ET	Japan June supermarket sales, May -1.7% y/y.
    n/a	Japan Cabinet Office monthly economic report.
    CHI
    2200 ET	Jun China Conference Board leading economic index.
    2230 ET	Jul China HSBC flash manufacturing PMI, Jun 48.2.

    Barchart.com provides Financial Quotes, Charts and Technical Analysis for Stock and Commodity Traders.