Barchart Morning Call 7/26

Barchart Morning Call

BC - 21 mins ago

Overnight Developments

• Sep E-mini S&Ps are up +0.71% this morning on a 1.34% rally in European stocks after ECB President Draghi made a strong promise of support for the euro project. EUR/USD is up +0.83% this morning and the dollar index is down -0.45%. Commodity prices are mildly higher by +0.18% on average with crude oil up +0.26%, gold up +0.52%, copper up +0.73%, and with agricultural prices trading mixed. Sep 10-year T-notes are down 6.5 ticks.
• Asian stocks today closed mixed: Japan +0.92%, Hong Kong +0.08%, China -0.53%, Taiwan -0.12%, Australia +0.58%, Singapore +0.46%, South Korea +0.79%, India -1.22%, Turkey +1.02%.
• ECB President Draghi today said in a speech in London, "Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough." He added, that "To the extent that the size of these sovereign premia hamper the functioning of the monetary policy transmission channel, they come within our mandate." With that comment, Mr. Draghi was clearly saying that the ECB could reactivate its Securities Market Program at any time and start buying Spanish and Italian bonds again to bring down Spanish and Italian yields. The Spanish bond yield fell after Mr. Draghi's comments today and is currently at 7.24%, down 9 bp from Wednesday's level of 7.33%. Spanish stocks are up 1.43% this morning and Italian stocks are up 2.53%.
• Germany's Aug GfK consumer confidence index rose slightly to 5.9 from 5.8 in June and was slightly stronger than market expectations for an unchanged report of 5.8.
• The German June import price report of -1.5% m/m and +1.3% y/y was weaker than market expectations of -0.9% m/m and +1.9% y/y and was weaker than May's report of -0.7% m/m and +2.2% y/y.
• Eurozone June M3 strengthened to +3.2% y/y from a revised +3.1% in May (preliminary +2.9%) and was stronger than market expectations of +2.9% y/y.
• The IMF's senior resident official in China, Il Houng Lee, said today that China's actions have already "been adequate to ensure that the economy is bottoming out." The IMF is forecasting that Chinese GDP growth will strengthen in the second half of 2012. The IMF official said that Chinese authorities will likely maintain the "status quo" after already shifting their monetary policy to a "more neutral or accommodating one" and may forgo fiscal stimulus in this year's budget.
• China's State Council on Wednesday approved a plan to promote development in six central provinces. The plan will allow local governments to launch stimulus building projects to support local economies.
  Market Comments
  • Sep E-mini S&Ps this morning are up +0.71% as the market was encouraged by ECB President Draghi's strong statements in support of the euro project. The U.S. stock market today faces another very heavy day of earnings reports. The U.S. stock market on Wednesday closed mixed: S&P 500 -0.03%, Dow Jones +0.47%, Nasdaq 100 -0.71%. The stock market on Wednesday was undercut by the sharp sell-off in Apple on its earnings disappointment and on the sharp 8.4% drop in June new home sales. However, the stock market received support from increased hopes for central bank measures with ECB council member Nowotny promoting the idea of giving the ESM bailout facility a banking license and with the New York Times and WSJ both running stories reviewing the chances for near-term Fed easing measures.
  • Sep 10-year T-notes this morning are down 6.5 ticks on reduced safe-haven support with the rally in U.S. and European stock indexes. Sep 10-year T-note prices on Wednesday closed slightly higher: TYU2 -1, FVU2 +0.25. T-note prices were undercut by yesterday's stabilization in the stock market but were supported by hopes for QE3.
  • The dollar index this morning is down -0.373 (-0.45%) and EUR/USD is up +0.0101 (+0.83%) on ECB President Draghi's strong statement of support for the euro project and the implication that the ECB is prepared to do much more if necessary. USD/JPY is slightly higher by +0.06 (+0.08%). The dollar index on Wednesday closed lower: Dollar index -0.481 (-0.57%), EUR/USD +0.0097 (+0.80%), USD/JPY -0.02 (-0.03%). The dollar index was undercut by reduced safe-haven demand and EUR/USD was supported by ECB council member Nowotny's comment that he sees arguments in favor of giving the 500 billion euro ESM a banking license. With a banking license, the ESM bailout facility would be able to leverage its capital and substantially increase its bailout capacity to a level more commensurate with potential Eurozone bailout needs. EUR/USD also received a boost as the Spanish 10-year bond yield fell by 24 bp to 7.33%.
  • Sep WTI crude oil prices this morning are up +0.23 (+0.26%) and Sep gasoline is up +0.0092 (+0.34%) on general commodity market strength tied to higher stock markets and the lower dollar index. Crude oil and gasoline prices on Wednesday closed mixed: CLU2 +0.47 (+0.53%), RBU2 -0.0096 (-0.35%). Crude oil and gasoline prices on Wednesday were boosted by the lower dollar and hopes for new central bank measures. However, the DOE report was bearish with unexpected inventory increases in crude oil (+2.7 mln bbl), gasoline (+4.134 mln bbl), and distillates +1.71 million bbls).
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    Today's U.S. Earnings Reports Earnings reports (ranked by market cap): Exxon Mobil (Consensus $1.95), Amazon.com (0.43), Facebook (0.11), Occidental (1.60), United Technology (1.41), 3M (1.65), Amgen (1.55), Colgate-Palmolive (1.33), Gilead Sciences (0.95), Starbucks (0.45), Dow Chemical (0.64), Kimberly-Clark (1.28), Celgene (1.18), Nextera (1.16), National Oilwell Varco (1.40), Covidien (1.06), Prececision Castpt (2.36), McKesson (1.48), Ventas (0.32), Chubb (1.14), Raytheon (1.22), CME Group (0.83), Hershey (0.61), Noble Energy (0.92), Waste Management (0.52), Mead Johnson (0.77), Prologis (-0.04), International Paper (0.46), Cerner (0.55), McGraw-Hill (0.76), CA (0.61), Ensco (1.25).
    Global Financial Calendar
    

    Thursday 7/26/12
    United States
    0830 ET	Weekly initial unemployment claims expected -6,000 to 380,000, previous +34,000 to 386,000. Weekly continuing claims expected -14,000 to 3.300 mln, previous +1,000 to 3.314 mln.
    0830 ET	June durable goods orders expected +0.3%, May +1.3% m/m. June durable goods orders ex-transportation expected +0.1%, May +0.7% y/y.
    0830 ET	USDA weekly exports.
    1000 ET	June pending home sales expected +0.3% m/m and +12.1% y/y, May +5.9% m/m and +15.3% y/y.
    1030 ET	DOE natural gas storage.
    1100 ET	Kansas City Fed July manufacturing index expected +1 to 4, June 3.
    1300 ET	Treasury sells $29 bln in 7-year T-notes.
    1630 ET	Weekly money supply report and Fed balance sheet.
    Germany
    0200 ET	Aug German GfK consumer confidence survey expected unch at 5.8, Jul 5.8.
    Euro-Zone
    0400 ET	Jun Euro-Zone M3 money supply expected +2.9% y/y, May +2.9.
    Japan
    1930 ET	Jun Japan national CPI expected unch y/y, May +0.2% y/y. Jun national CPI ex-fresh food expected unch y/y, May -0.1% y/y. Jun national CPI ex food & energy expected -0.5% y/y, May -0.6% y/y.
    1930 ET	Jul Tokyo CPI expected -0.6% y/y, Jun -0.6% y/y. Jul Tokyo CPI ex-fresh food expected -0.6% y/y, Jun -0.6% y/y. Jul Tokyo CPI ex food & energy expected -1.0% y/y, Jun -1.0% y/y.
    1950 ET	Japan Jun retail trade expected +0.2% m/m and +1.1% y/y, May +0.7% m/m and +3.6% y/y. Jun large retailer sales expected -1.6% y/y, May -0.8% y/y.
    CHI
    2130 ET	China June industrial profits year-to-date, May -2.4% y/y.
    2135 ET	China July MNI business condition survey.

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