Barchart's Morning Call 7/11

Barchart Morning Call

BC - 20 mins ago

Overnight Developments

• Sep E-mini S&Ps are trading +0.41% on the higher trade in European stocks (+0.48%) and on Chinese Premier Wen Jiabao's statement calling for more investment. Commodity prices are higher by an average +0.60% this morning with crude oil up +1.50%, Gold down -0.09%, copper up +0.44%, and agricultural products trading higher across the board. The dollar index is down -0.33% and EUR/USD is up +0.35%. Sep 10-year T-notes are down -5 ticks.
• Asian stocks today closed mixed: Japan -0.08%, Hong Kong +0.12%, China +0.78%, Taiwan +0.09%, Australia -0.04%, Singapore +0.83%, South Korea -0.22%, India -0.73%, Turkey +0.14%. Asian stocks were supported by hopes for additional Chinese growth measures but were undercut by Tuesday's sell-off in U.S. stocks on concern about earnings.
• The European debt crisis eased a bit today with the Spanish 10-year bond yield falling by 2 bp to 6.75% and the Italian 10-year bond yield falling by 5 bp to 5.89%. Spanish Prime Minister Rajoy today announced a new austerity package of tax increases and spending cuts totaling 65 billion euros to keep the government on track with its deficit reduction program.
• Chinese Premier Wen Jiabao said today in a statement on a government website that promoting investment growth is the key to stabilizing China's economy. He said, "Growth-stabilizing policies include boosting consumption and diversifying exports, but currently, what is important is to promote a reasonable growth in investment." The market remains nervous about China's Q2 GDP report, which is scheduled to be released Thursday night and is expected to ease to +7.7% y/y from +8.1% y/y in Q1.
• Japan's June machine tool orders report fell to -15.5% y/y from -3.0% y/y in May.
• Germany's final-June CPI was left unrevised from the preliminary June report at -0.2% m/m and +1.7% y/y.
• China's June wholesale deliveries of passsenger vehicles rose +16.% y/y to 1.28 million vehicles, which was slightly stronger than market expectations of 1.27 million vehicles. June total vehicle sales rose +9.9% y/y to 1.58 million units.
  Market Comments
  • Sep E-mini S&Ps are trading +5.50 points (+0.41%) on Chinese Premier Wen Jiabao's statement about additional investment and on this morning's higher trade in European stocks (+0.48%) with the small decline in Spanish and Italian bond yields. The US stock market on Monday closed moderately lower: S&P 500 -0.81%, Dow Jones -0.65%, Nasdaq 100 -0.95%. The stock market fell mostly on worries that Q2 earnings will be disappointing due to weak global economic growth. The slide was limited by bullish factors that included a 25 bp drop in the Spanish bond yield and stronger-than-expected UK and Italian industrial production reports.
  • Sep 10-year T-notes this morning are trading -5 ticks on the higher trade in E-mini S&Ps. T-note prices on Tuesday closed slightly higher: TYU2 +2.5, FVU2 +0.75. T-note prices closed higher on the decline in U.S. stocks and on ongoing worries about global economic growth.
  • The dollar index this morning is trading -0.0279 (-0.33%) while EUR/USD is up +0.0043 (+0.35%) on the slight decline in Spanish and Italian yields and the +0.48% rally in European stocks. USD/JPY is down -0.20 (-0.25%) with the yen seeing some support from expectations that the BOJ at its 2-day meeting that began today will not further ease monetary policy. The dollar index on Tuesday closed mildly higher: Dollar index +0.235 (+0.28%), EUR/USD -0.0063 (-0.51%), USD/JPY -0.23 (-0.29%). The dollar index on Tuesday gained from technical strength with a new 1-month high and from longer-term factors such as the better performance of the U.S. economy relative to Europe. EUR/USD fell -0.51% even though the Spanish 10-year bond yield fell by 25 bp to 6.77% after Eurozone finance ministers late Monday night agreed on a Spanish bank bailout plan and said that the Spanish government will not be forced to make guarantees when the ESM bailout facility starts providing bailout capital to banks late this year or early next year. EUR/USD was undercut by the outside possibility that the German Constitutional Court could block all or part of Germany's ratification of the ESM and the fiscal pact.
  • Aug WTI crude oil prices this morning are up +$1.26 (+1.50%) on the weaker dollar, but Aug gasoline is down -0.0029 (-0.11%). The market is looking ahead to today's weekly DOE report. Crude oil and gasoline prices on Tuesday closed lower: CLQ2 -2.08 (-2.42%), RBQ2 -0.0125 (-0.45%). Bearish factors included (1) the end of the Norwegian oil workers strike due to the back-to-work order by the Norwegian government, and (2) the U.S. DOE's 4.1% cut in its 2012 average oil price forecast to $92.83 from its June forecast of $96.80 based on the weaker economic outlook. The DOE cut its 2012 global oil demand estimate to 88.64 million barrels from its 88.78 million estimate in June. The market consensus for today's weekly DOE report is for a 1.48 million barrel decline in crude oil inventories, a 500,000 barrel increase in gasoline inventories, a 625,000 barrel increase in distillate inventories, and a 0.5 point increase in the refinery utilization rate to 92.5% of capacity from 92.0% in the previous week.
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    Today's U.S. Earnings Reports Earnings reports (ranked by market cap): SCHW-Schwab (Consensus $0.18), MAR-Marriott (0.42).
    Global Financial Calendar
    

    Wednesday 7/11/12
    United States
    0700 ET	Weekly MBA mortgage applications, previous -6.7% with purchase sub-index +0.6% and refi sub-index -8.4%.
    0830 ET	May U.S. trade deficit expected -$48.5 bln, Apr -$50.1 bln.
    1000 ET	May wholesale inventories expected +0.3%, Apr +0.6%.
    1030 ET	DOE Weekly Petroleum Status Report.
    1300 ET	Treasury auctions $21 billion in 10-year T-notes.
    1400 ET	FOMC June 19-20 meeting minutes.
    1540 ET	Fed's Williams speaks in Portland, Oregon.
    Germany
    0200 ET	German final-June CPI expected unrevised from prelim -0.1% m/m and +1.7% y/y. Final-June final EU-harmonized CPI expected unrevised from prelim of -0.2% m/m and +2.0% y/y.
    Japan
    0200 ET	Japan June machine tool orders, May -3.0% y/y.
    n/a	BOJ July 11-12 policy meeting.

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