Barchart Morning Call 8/27

Barchart Morning Call

BC - 1 hr 45 mins ago

Overnight Developments

• Sep E-mini S&Ps this morning are trading mildly higher by +0.25%, supported by the small +0.18% rally in European stocks and by the continued press by Chinese Premier Wen Jiabao for more growth measures. E-mini S&Ps have been able to shake off the disappointing German confidence report and the poor Chinese industrial profits report. Commodity prices this morning are trading up by an average +0.37% with Oct crude oil up +0.90%, Oct gasoline up +3.00%, Dec gold up +0.03%, Sep copper up +0.09%, and agricultural prices trading mixed. The dollar index is trading slightly lower by -0.04% and EUR/USD is up +0.10%. Sep 10-year T-notes are up +0.5 tick. The UK markets are closed today for a summer bank holiday.
• Asian stocks closed mostly lower on worries about weaker Asian economic growth and profits: Japan +0.16%, Hong Kong -0.41%, China -2.09%, Taiwan -0.12%, Australia -0.12%, Singapore -0.20%, South Korea -0.38%, India -0.59%, Turkey -0.19%.
• Apple won a $1 billion patent infringement court case against Samsung last Friday in a federal court in California. Apple is trading 2% higher in European trading and Samsung's stock is down 7.5% today. Nokia is up 11% since the U.S. may ban some Samsung handsets, thus boosting demand for competitive Nokia phones.
• Chicago Fed President Charles Evans said today at a speech in Hong Kong that the Fed should begin an open ended QE3 program and continue buying securities until unemployment steadily declines for two or three quarters. Mr. Evans said, "At the moment economic growth is not much above stall speed. Another negative shock could send the economy into recession. And if a recessionary dynamic takes hold, it would be especially difficult to regain momentum." Mr. Evans is not a voting FOMC this year, but he will be next year.
• Bundesbank President and ECB Council member Jens Weidmann in a Der Spiegel interview published over the weekend continued to voice his opposition to the ECB's bond buying plans. Mr. Weidmann said that ECB financing of budgets can "become addictive like a drug." Mr. Weidmann said that such decisions on government financing should be taken by "parliaments rather than central banks." French Finance Minister Pierre Moscovici meets today with German Finance Minister Wolfgang Schaeuble.
• Tropical Storm Isaac has passed the Florida keys and is now gathering strength in the warm waters of the Gulf of Mexico. The storm is expected to strengthen into a category 2 hurricane today or tomorrow and is expected to make landfall near Biloxi, Mississippi early Wednesday morning with winds of about 105 mph.
• Germany's August IFO business climate index fell 1.0 point to a 2-1/2 year low of 102.3 from 103.3 in July, which was the fourth consecutive monthly decline and was weaker than market expectations for a 0.6 point decline to 102.7.
• Year-to-date profits for China's industrial companies in July fell -2.7% y/y, gathering downside momentum after the -2.2% decline seen in June. July profits were down -5.4% y/y, worse than the -1.7% decline in June and -5.3% in May.
• China's Premier Wen Jiabao said that "Stabilizing economic growth is the key task for second-half economic work." Wen toured Guangdong as he sought to give a confidence boost to China's exporters.
  Market Comments
  • Sep E-mini S&Ps this morning are up 3.50 points (+0.25%) on the mildly higher +0.18% trade in the Euro Stoxx 50 and on support from Chinese Premier Wen Jiabao's push for additional growth measures. In addition, Chicago Fed President Evans in a speech today in Hong Kong called even more strongly for QE3 than he has before. Bearish factors for S&Ps this morning include the weaker-than-expected German IFO business confidence report, further opposition by Bundesbank President Weidmann to the ECB's bond buying plans, and a poor Chinese industrial profits report. The stock market on Friday rebounded from early losses and finished higher after Fed Chairman Bernanke said he saw "scope for further action," on additional Fed stimulus: S&P 500 +0.65%, Dow Jones +0.77%, Nasdaq 100 +0.58%. Stocks had opened lower after July durable goods orders ex-transportation unexpectedly fell -0.4% m/m, weaker than expectations of +0.5%, along with concern the European debt crisis will persist after unnamed ECB officials said the ECB may wait until after a Sep 12 German court ruling on the legality of Europe's permanent bailout fund before it implements a bond purchase program.
  • Sep 10-year T-notes this morning are up +0.5 tick as the market hopes for further hints from Fed Chairman Bernanke in his speech on Friday at the Fed's Jackson Hole conference. T-note prices on Friday erased early gains and closed lower after a rally in stocks reduced the safe-haven demand for Treasuries: TYU2 -3.5, FVU2 -2.0.
  • The dollar index this morning is slightly lower by -0.04 points (-0.04%) with EUR/USD up +0.0013 (+0.10%). USD/JPY is slightly higher by +0.02 points (+0.03%). The dollar index on Friday closed higher, although well off its best levels, after Fed Chairman Bernanke hinted at additional Fed stimulus: Dollar index +.234 (+0.29%), EUR/USD -0.00444 (-0.35%), USD/JPY +0.132 (+0.17%). The dollar had rallied Friday after a report said the ECB would put off its bond buying program until a German court rules on Europe's permanent bailout fund next month. However, dollar gains were limited on speculation the Fed may implement QE3 at next month's FOMC meeting.
  • Oct WTI crude oil prices this morning are up +0.87 (+0.90%) and Oct gasoline is up +0.0872 (+3.00%). Bullish factors include (1) news that Venezuela's Amuay refinery, the nation's largest, was forced to shut down after an explosion and fire on Saturday, and (2) Tropical Storm Isaac, which is now expected to take a more westerly direction than previously thought and cause even more disruption in the Gulf of Mexico. The storm has so far caused the shut-down of 24% of U.S. oil production and 8% of natural gas production in the Gulf of Mexico due to rig evacuations. Oct crude oil prices on Friday fluctuated on both sides of unchanged and finally settled lower after July durable goods orders ex-transportation unexpectedly declined and offset concern Tropical Storm Isaac may curtail oil production operations in the Gulf of Mexico: CLV2 -0.12 (-0.12%), RBU2 -0.0379 (-1.29%). Crude oil prices also gained as stock prices rose on increased speculation the Fed will provide additional stimulus to boost economic growth.
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    Today's U.S. Earnings Reports Earnings reports (ranked by market cap): TIF-Tiffany & Co. (Consensus $0.73), PVH-PVH Corp. (1.21), DCI-Donaldson (0.47), GAME-Shanda Games Ltd. (0.18), PWRD-Perfect World Co. Ltd. (0.56).
    Global Financial Calendar
    

    Monday 8/27/12
    United States
    0600 ET	Chicago Fed President Evans speaks at an MNI Seminar in Hong Kong.
    1030 ET	Dallas Fed Aug manufacturing index expected -8.0, July -13.2.
    1100 ET	USDA weekly grain export inspections.
    1130 ET	Weekly 3-mo and 6-mo T-bill auctions.
    1215 ET	Cleveland Fed President Pianalto speaks on the economic outlook and monetary policy in Newark, OH.
    1600 ET	USDA Crop Progress
    Japan
    0200 ET	Japan July machine tool orders, June -6.8% y/y.
    Germany
    0200 ET	German July import price index expected +0.9% m/m and +1.4% y/y, Jun -1.5% m/m and +1.3% y/y.
    0400 ET	German Aug IFO business climate index expected -0.6 to 1-2.7, July 103.3. Aug IFO current assessment index expected -0.8 to 110.6, July 111.6. Aug FIO expectations index expected -0.6 to 95.0, July 95.6.
    United Kingdom
    n/a	U.K. markets and government offices closed for Summer Bank Holiday.

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