Barchart Morning Call 8/29

Barchart Morning Call

BC - 47 mins ago

Overnight Developments

• Sep E-mini S&Ps this morning are trading unchanged today, shaking off a 0.53% sell-off in European stocks. Commodity prices are mildly higher by +0.15% on average with Oct crude oil down -0.69%, gold down -0.26%, copper down -0.79%, but with grains and softs trading higher. Sep 10-year T-notes are down 1 tick. The dollar index is slightly higher by +0.06% while EUR/USD is down -0.08%. The markets are generally quiet, awaiting Fed Chairman Bernanke's Jackson Hole speech on Friday.
• Asian stocks today closed mostly lower: Japan +0.40%, Hong Kong -0.12%, China -1.05%, Taiwan +0.40%, Australia -0.07%, Singapore +0.05%, South Korea +0.65%, India -0.80%, Turkey +0.14%.
• Hurricane Isaac is slowly making its way onshore and is currently 60 miles south-southwest of New Orleans. The storm has maximum sustained winds of 80 mpg and is a Category 1 hurricane. The storm has caused heavy rains and an 11 foot storm surge. The storm has shut down 93% of U.S. oil production in the Gulf of Mexico and 67% of natural gas production. The storm has caused six refineries to close and three to run at reduced operation rates, idling 6.7% of U.S. refining capacity.
• Italian Prime Minister Monti meets today in Berlin with German Chancellor Merkel to discuss the European debt crisis and the plan to give Spain and Italy the option of participating in a plan where the ECB buys bonds in the secondary market and the Eurozone's bailout facilities buy bonds in the primary market. Neither Spain nor Italy has yet formally requested to participate in the program. Italy today successfully sold 9 billion euros of 6-month bills today at a yield of 1.585%, down sharply from 2.454% at the last sale in July. Italy tomorrow intends to sell up to 7.5 billion of 5 and 10-year bonds.
• ECB President Draghi wrote in a commentary carried today in the German newspaper Die Zeit that the ECB "will always act within the limits of its mandate. Yet it should be understood that fulfilling our mandate sometimes requires us to go beyond standard monetary tools." Mr. Draghi's comments provide a direct rebuttal to the recent opposition by Bundesbank President and ECB Council member Weidmann to the ECB's bond buying plan.
  Market Comments
  • Sep E-mini S&Ps this morning are trading unchanged, awaiting Fed Chairman Bernanke's speech on Friday at the Fed's Jackson Hole conference. The U.S. stock market on Tuesday closed slightly lower on balance: S&P 500 -0.08%, Dow Jones -0.17%, Nasdaq 100 +0.01%. Bearish factors included Japan's downgrade of its economy and the sharp 5.3 point drop to 60.6 in the Aug U.S. consumer confidence index from the Conference Board, which was much weaker than market expectations for a 0.1 point increase to 66.0. The 8 point rise in the Richmond Fed index was roughly in line with market expectations. The June Case-Shiller Composite-20 home price index rose +0.9%, which was stronger than market expectations of +0.5%.
  • Sep 10-year T-notes this morning are down 1 tick. Sep 10-year T-note futures prices on Tuesday closed mildly higher: TYU2 +4.5, FVU2 +1.25. T-note prices closed higher on the weak U.S. consumer confidence report, which increased the chances for QE3.
  • The dollar index this morning is slightly higher by +0.05 (+0.06%), while EUR/USD is down -0.0010 (-0.08%). USD/JPY is up +0.07 (+0.09%). EUR/USD received underlying support today from the successful Italian bill auction and ECB President Draghi's defense of the ECB's bond buying plans. The dollar index on Tuesday closed moderately lower: Dollar index -0.29 (-0.35%), EUR/USD +0.0066 (+0.53%), USD/JPY -0.23 (-0.29%). The dollar index fell on the sharp decline in the U.S. consumer confidence index, which boosted the chances for a dollar-bearish QE3 program since the U.S. economy is sure to stall unless consumer spending can recover on a sustained basis after weakness in April through June.
  • Oct WTI crude oil prices this morning are down -0.66 (-0.69%) and Oct gasoline is down -0.0375 (-1.28%) as the market drains some of the storm premium out of crude oil and gasoline prices now that the impact of Hurricane Isaac is now largely known. Oct crude oil and gasoline prices on Tuesday closed mixed: CLV2 +0.86 (+0.90%), RBU2 -0.0167 (-0.57%). The market continues to adjust to the anticipated disruptions from Hurricane Isaac, which has shut down the majority of oil and gas production in the Gulf of Mexico and has also forced the closure of some U.S. refineries. The market consensus for today's weekly DOE report are for a 2 million barrel decline in oil inventories, a 1.4 million barrel decline in gasoline inventories, a 400,000 barrel climb in distillate inventories, and a 0.3 point drop to 90.9% in the refinery utilization rate.
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    Today's U.S. Earnings Reports Earnings reports (ranked by market cap): HNZ-Heinz (Consensus $0.81), BF/B-Brown-Forman (0.63), JOY-Joy Global (1.89), TFM-Fresh Market (0.27), GEF-Greif (0.71), GCO-Genesco (0.26), P-Pandora Media (-0.03).
    Global Financial Calendar
    

    Wednesday 8/29/12
    United States
    0700 ET	Weekly MBA mortgage applications, previous -7.4 with purchase sub-index +0.9% and refi sub-index -9.2%.
    0830 ET	Revised Q2 US GDP expected +1.7% q/q annualized, preliminary +1.5%. Q2 personal consumption expected +1.6%. preliminary +1.5%. Q2 GDP price index expected unrevised from preliminary +1.6%. Q2 core PCE expected unrevised from preliminary +1.8%.
    1000 ET	July pending home sales expected +1.0% m/m and +9.9% y/y, June -1.4% m/m and +8.4% y/y.
    1030 ET	DOE Weekly Petroleum Status Report.
    1300 ET	Treasury auctions $35 billion 5-year T-notes.
    1400 ET	Fed's Beige Book report.
    Germany
    0800 ET	German Aug CPI EU-harmonized expected +0.2% m/m and +2.1% y/y, July +0.4% m/m and +1.9% y/y.
    Japan
    1950 ET	Japan July retail trade expected -0.5% m/m and -0.1% y/y, June -1.2% m/m and +0.2% y/y. Japan July large retailer sales expected -3.2% y/y, June -2.6% y/y.

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