Barchart Morning Call 7/30

Barchart Morning Call

BC - Mon Jul 30, 7:00AM CDT

Overnight Developments

• Sep E-mini S&Ps this morning are down by -0.24%, led by a fall in bank stocks after Deutsche Bank cut its recommendation on JPMorgan Chase to hold from buy. European stocks however, are higher with the Euro Stoxx 50 up +0.96% at a 2-3/4 month high on speculation the ECB will take action to ease Europe's debt crisis. EUR/USD is -0.42% lower and the dollar index is higher. Commodity prices are mostly higher with crude oil up +0.02% and copper down -0.02%. Agriculture prices surged with Dec corn up +2.71% at a record high and Nov soybeans up +2.58% as the drought persists in the U.S. Midwest. Sep T-notes are down -1.5 ticks.
• Asian stocks today closed mostly higher: Japan +0.80%, Hong Kong +1.61%, China -0.57%, Australia +0.85%, South Korea +0.97%, India +1.81%. China's Shanghai Stock Index fell to a 3-1/3 year low on concern China's slowing economy will crimp earnings growth.
• Spain's 10-year government bond yield fell 15 bp to a 2-week low of 6.59% and the cost of the Markit iTraxx SovX Western European Index of credit-default swaps to insure the sovereign debts of 15 European governments fell 6 bp to a 4-1/2 month low 259 on speculation the ECB will resume bond buying of European sovereign debt to contain borrowing costs. ECB President Draghi meets U.S. Treasury Secretary Geithner in Frankfurt later today as they attempt to garner the support of Bundesbank President Weidman, a critic of ECB bond purchases.
• Euro-Zone July business confidence fell to -1.27, weaker than expectations of -1.09, and July Euro-Zone economic confidence dropped to 87.9, also weaker than expectations of 88.9. Both measures of confidence fell to their lowest levels in 2-3/4 years.
• U.K. Jun M4 money supply fell -1.6% m/m and -5.2% y/y, the biggest annual decline since the BOE began money supply data in 1983.
• Japan Jun industrial production unexpectedly fell -0.1% m/m, its third consecutive monthly decline and weaker than expectations of a +1.5% m/m increase.
  Market Comments
  • Sep E-mini S&Ps this morning are down -0.24% on weak bank stocks after Deutsche Bank lowered its rating on JPMorgan Chase. The U.S. stock market on Friday closed sharply higher for the second straight session: S&P 500 +1.91%, Dow Jones +1.46%, Nasdaq 100 +2.41%. The U.S. stock market continued to rally on optimism about ECB President Draghi's push for a bond purchase program for Spain and Italy to keep their bond yields down to manageable levels. Friday's U.S. Q2 GDP report of +1.5% was line with market expectations and was strong enough to avert concerns that the U.S. economy might be headed toward recession. The U.S. stock market also continued to receive support from hopes that the FOMC at its meeting on July 31-Aug 1 might implement additional easing moves.
  • Sep 10-year T-notes this morning are down -1.5 ticks. Sep 10-year T-note prices on Friday closed sharply lower: TYU2 -29, FVU2 -12. T-note prices plunged on reduced safe-haven support as ECB President Draghi pushes for a significant bond purchase program. In addition, Friday's U.S. Q2 GDP report of +1.5% was strong enough to avert recent worries about recession and deflation and to dampen hopes for further FOMC easing moves or QE3.
  • The dollar index this morning is stronger with EUR/USD -0.42% and USD/JPY -0.29%. The dollar index on Friday closed mildly lower: Dollar index -0.099 (-0.12%), EUR/USD +0.0039 (+0.32%), USD/JPY +0.25 (+0.32%). The dollar index on Friday posted a new 1-month low and EUR/USD posted a new 1-month high. The dollar index on Friday closed lower on reduced safe-haven support from ECB President Draghi's push for a new bond purchase program and on the U.S. GDP report of +1.5% that was no worse than market expectations. The Spanish 10-year bond yield last week fell 53 bp to 6.70% while Italian bond yield fell by 21 bp to 5.94%.
  • Sep WTI crude oil prices this morning are up +2 cents a barrel (+0.02%). Sep gasoline is up +0.62 of a cent per gallon (+0.22%). Crude oil and gasoline prices on Friday closed moderately higher: CLU2 +0.74 (+0.83%), RBU2 +0.0597 (+2.18%). Crude oil rallied on Friday on hopes for improved global economic growth and improved fuel demand if Europe can contain its debt crisis. The crude oil market was also relieved by the U.S. Q2 GDP report of +1.5%.
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    Today's U.S. Earnings Reports Earnings reports (ranked by market cap): APC-Anadarko Petroleum (Consensus $0.77), SCCO-Southern Copper (0.61), BEN-Franklin Res (2.05), L-Lowes (0.76), STX-Seagate (2.43), VRTX-Vertex Pharm (0.69), FISV-Fiserv (1.26), ROP-Roper Industries (1.15), EEP-Enbridge Energy (0.30), CNA-CNA Financial (0.56), EMN-Eastman Chemical (1.30), CIT-CIT Group (-0.53), UDR-UDR Corp (-0.08), PCL-Plum Creek Timber (0.18), FLS-Flowserve (1.91), MLF-Herbalife (0.96).
    Global Financial Calendar
    

    Monday 7/30/12
    United States
    1030 ET	July Dallas Fed manufacturing activity index expected 2.0, June 5.8.
    1100 ET	USDA weekly grain export inspections.
    1130 ET	Weekly 3-mo and 6-mo T-bill auctions.
    1600 ET	USDA Crop Progress
    Japan
    0000 ET	Japan June vehicle production, May +59.5% y/y.
    1930 ET	Japan June jobless rate expected 4.4%, May 4.4%. June job-to-applicant ratio expected 0.82, May 0.81.
    1930 ET	Japan June overall household spending expected +2.9% y/y, May +4.0% y/y.
    2130 ET	Japan June labor cash earnings expected unch y/y, May -1.1% y/y.
    United Kingdom
    0430 ET	UK June net consumer credit expected +0.4 bln pounds, May +0.7 bln pounds. June net lending secured on dwellings expected +0.4 bln pounds, May +0.6 bln pounds.
    0430 ET	UK June mortgage approvals expected +48,000, May 51,100.
    0430 ET	UK June M4 money supply, May -0.1% m/m and -4.1% y/y.
    1901 ET	UK July GfK consumer confidence survey expected -29, June -29.
    Euro-Zone
    0500 ET	Eurozone July business climate indicator expected -1.09, June -0.94. Final-July Eurozone consumer confidence expected -21.6, previous -21.6. July Eurozone economic confidence expected 88.9, June 89.9. July Eurozone industrial confidence expected -14.0, June -12.7. July Eurozone services confidence expected -8.0, June -7.4.

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