Barchart Morning Call 8/3

Barchart Morning Call

BC - 1 hr 10 mins ago

Overnight Developments

• Sep E-mini S&Ps this morning are up by +0.95% and European stocks are up with the Euro Stoxx 50 up +2.62%. EUR/USD is up +0.85% and the dollar index is down -0.72% before this morning's U.S. July nonfarm payrolls report. Italian and Spanish government bonds rebounded following Thursday's rout with the 10-year Italian yield down -22 bp to 6.068% and Spain's 10-year yield down -17 bp to 6.91% as it falls back below the critical 7.00% yield level. Commodity prices are mostly higher with crude oil up +1.31% and copper up +0.64%. Agricultural prices are mostly weaker with Dec corn down -0.60% and Nov soybeans down -0.15%. Sep T-notes are down -9.5 ticks.
• Asian stocks today closed mostly lower: Japan -1.13%, Hong Kong -0.12%, China +0.81%, Australia -1.13%, South Korea -1.25%, India -0.15%. Chinese stocks finished higher following a cut in transaction fees on share trading after the Asian markets closed yesterday.
• European and U.S. stocks gained, the EUR/USD rose and Italian and Spanish government bond yields fell after ECB Council member and Bank of Finland President Liikanen said "the euro is irreversible" and the ECB will take control and cool market turmoil once it completes details of a new bond purchasing program. He added that the size of the new program would be "adequate to reach its objective" of lowering Italian and Spanish borrowing costs.
• German final-July services PMI was unexpectedly revised up by +0.6 to 50.3 from the originally reported 49.7.
• Euro-Zone final-July composite PMI was unexpectedly revised higher by +0.1 to 46.5 from the originally reported 46.4.
• Euro-Zone June retail sales unexpectedly rose +0.1 m/m and fell -1.2% y/y, stronger than expectations of -0.1% m/m and -1.9% y/y.
• U.K. July services PMI unexpectedly fell -0.3 to 51.0, weaker than expectations of +0.3 to 51.6.
• China's July non-manufacturing PMI fell -1.1 to 55.6.
• In a quarterly report released today, the PBOC said it will keep pursuing a "prudent" monetary policy and that it will conduct "policy fine-tuning" at an appropriate time and consumer inflation may rebound after August, which suggests the PBOC may be slow to ease policy.
  Market Comments
  • Sep E-mini S&Ps this morning are up +13.00 points (+0.95%) after comments from ECB Council member Liikanen fueled a rally in EUR/USD and helped push down Spanish and Italian government bond yields. The U.S. stock market Thursday tumbled throughout the day and finished lower on concern the European debt crisis will drag on when ECB President Draghi failed to take immediate steps to alleviate the crisis: S&P 500 -0.75%, Dow Jones -0.71%, Nasdaq 100 -0.36%. Other negatives included the rise in 10-year Spanish bond yields above the critical 7.00% yield level and the unexpected decline in June U.S. factory orders.
  • Sep 10-year T-notes this morning are down -9.5 ticks on reduced safe-haven demand as equities rally. Sep 10-year T-note prices on Thursday rallied and settled higher on increased safe-haven demand after global stocks plunged when the ECB failed to take immediate action to support the economy or combat the debt crisis: TYU2 +15, FVU2 +4.7. An unexpected drop in June U.S. factory orders and a surge in Spanish and Italian government bond yields also lent support to Treasuries.
  • The dollar index this morning is weaker with EUR/USD +0.85% and USD/JPY +0.03%. The dollar index on Thursday bounced off of a 4-week low and closed higher as inaction by the ECB on the European debt crisis fueled a sell-off in global stocks and increased the safe-haven demand for the dollar: Dollar index +0.303 (+0.36%), EUR/USD -0.00456 (-0.37%), USD/JPY -0.203 (-0.26%).
  • Sep WTI crude oil prices this morning are up +$1.14 a barrel (+1.31%). Sep gasoline is down -0.0013 (-0.05%) cents per gallon . Crude oil and gasoline prices Thursday settled mixed as refinery outages across the U.S. boosted gasoline on supply concerns while crude closed lower on concern that inaction by the ECB on the European debt crisis will prolong the crisis and weaken energy demand: CLU2 -1.78 (-2.00%), RBU2 +0.0354 (+1.25%). A stronger dollar and an unexpected fall in June U.S. factory orders were additional negatives for crude prices.
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    Today's U.S. Earnings Reports Earnings reports (ranked by market cap): PG-Procter & Gamble (Consensus $0.77), VIAB-Viacom/B (1.00), ED-Consolidated Edison (0.59), NYX-NYSE Euronext (0.50), Y-Alleghany (6.83), LNT-Alliant Energy (0.47), BPL-Buckeye Partners LP (0.66), WCRX-Warner Chilcott PLC (0.80), IT-Gartner (0.41), DRC-Dresser-Rand Group (0.49), USM-US Cellular (0.72), NNN-National Retail Properties (0.25), WCG-WellCare Health Plans (1.21), MSG-Madison Square Garden (0.20), TDS-Telephone & Data Systems (0.45), SIRO-Sirona Dental Systems (0.77).
    Global Financial Calendar
    

    Friday 8/3/12
    United States
    0830 ET	July non-farm payrolls expected +100,000, June +80,000. July private payrolls expected +110,000, June +84,000. July manufacturing payrolls expected +10,000, June +11,000. July unemployment rate expected unch at 8.2%, June unch at 8.2%.
    0830 ET	July average hour earnings expected +0.2% m/m and +1.7% y/y, June +0.3% m/m and +2.0% y/y. July average weekly hours expected unchanged at 34.5 hours, June 34.5 hours.
    1000 ET	July ISM non-manufacturing index expected -0.1 to 52.0, June -1.6 to 52.1.
    Germany
    0355 ET	German final-July services PMI expected unrevised from preliminary 49.7.
    Euro-Zone
    0400 ET	Eurozone final-July services PMI expected unrevised from preliminary 47.6. Final-July composite PMI expected unrevised from preliminary 46.4.
    0500 ET	Eurozone June retail sales expected -0.1% m/m and -1.9% y/y, May +0.6% m/m and -1.7% y/y.
    United Kingdom
    0430 ET	UK July services PMI expected +0.3 to 51.6, June 51.3.

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