Barchart Morning Call - 8/7

Barchart Morning Call

BC - Tue Aug 07, 7:00AM CDT

Overnight Developments

• Sep E-mini S&Ps this morning are trading mildly higher by +0.27% on support from the 0.78% rally in European stocks and generally stronger-than-expected earnings reports. The market is shaking off bad news that includes a poor German factory orders report, the fourth quarter of negative Italian GDP growth, and a plunge in Standard Charter on accusations by U.S. authorities of illegal Iran dealings. Spanish stocks are up 1.09% and Italian stocks are up +0.95%. Commodity prices are up by an average +0.34% with Sep crude oil up +0.23%, Dec gold up +0.09%, Sep copper up +0.97%, and agricultural commodities trading mostly higher. The dollar index is slightly lower by -0.12% while EUR/USD is up +0.12%. Sep 10-year T-notes are down -7.5 ticks.
• Asian stocks today closed mildly higher: Japan +0.88%, Hong Kong +0.37%, China +0.14%, Taiwan +0.13%, Australia +0.44%, Singapore -0.13%, South Korea +0.01%, India +1.08%, Turkey -0.67%.
• Standard Chartered Plc fell 23% in London trading after the bank is likely to face billions of dollars of costs related to U.S. authorities charging the bank with money laundering tied to its dealings with Iranian banks. The London-based bank may also lose its banking license in New York due to allegations the bank hid $250 billion in transations with Iranian banks over 7 years.
• The Swiss central bank reported today that Switzerland's foreign-currency reserves in July rose 11.3% to 406.5 billion Swiss francs ($420 billion) as the central bank sells francs and buys foreign currencies to try to enforce its Swiss franc ceiling of 1.20 Swiss francs per euro. Switzerlands foreign-currency reserves have soared by 44% since September 6 when the Swiss government announced the attempt to curb the Swiss franc's gain tied to safe-haven investment.
• German June factory orders fell -1.7% m/m and -7.8% y/y, which was weaker than market expectations of -0.8% m/m and -8.0% y/y. The report illustrated that Germany is under economic pressure as orders from the Eurozone drop due to austerity and recessions in southern Europe.
• UK June manufacturing production fell -2.9% m/m and -4.3% y/y, which was less than market expectations of -4.3% m/m and -5.7% y/y.
• Italy's Q2 GDP was reported at -0.7% q/q and -2.5% y/y, which was in line with market expectations. That was the fourth consecutive quarterly decline as the Italian recession continues.
  Market Comments
  • Sep E-mini S&Ps this morning are up +0.27% with support from the +0.78% rally in European stocks and general support from stronger-than-expected earnings reports. The stock market on Monday closed mildly higher and the S&P 500 index edged to a new 3-month high: S&P 500 +0.23%, Dow Jones +0.16%, Nasdaq 100 +0.68%. Bullish factors included German Chancellor Merkel government's approval of the ECB's bond buying plan, carry-over support from last Friday's stronger-than-expected U.S. July payroll report of +163,000, and relief that Knight Capital over the weekend received a $400 million capital injection that prevented any systemic stock market disruptions early this week when the bad trades were due to settle.
  • Sep 10-year T-notes this morning are down -7.5 ticks on reduced safe-haven demand with the rally in global stocks today. T-note prices on Monday closed mildly higher: TYU2 +6.5, FVU2 +4.75. T-note prices on Monday rallied mildly on some short-covering after last Friday's sharp sell-off on the stronger-than-expected payroll report.
  • The dollar index this morning is mildly lower by -0.10 (-0.12%) with EUR/USD up +0.12% and USD/JPY up +0.13%. The dollar index on Monday closed mildly lower: Dollar index -0.10 (-0.12%), EUR/USD +0.0014 (+0.11%), USD/JPY -0.22 (-0.28%). The dollar index closed mildly lower on Monday as safe-haven demand dissipated a bit with the capital injection for Knight Capital, with the Merkel government's approval of the ECB's bond buying plan, and with an IMF official saying that "good progress" was made in discussions over the past week with Greece. Troika officials over the weekend wrapped up their initial assessment of Greece's austerity progress and will return in September for a final assessment and negotiations over the next quarterly bailout payment.
  • Sep WTI crude oil prices this morning are mildly higher by +0.21 (+0.23%) and Sep gasoline is up +0.0159 (+0.54%). Crude oil and gasoline prices on Monday closed mixed: CLU2 +0.68 (+0.74%), RBU2 -0.0049 (-0.17%). Oil prices saw some continued support from last Friday's U.S. payroll report and from Monday's mildly lower close in the dollar index. Tropical Storm Ernesto may strengthen into a hurricane today but is moving westward towards the Yucatan Peninsula of Mexico and is not expected to move into the Gulf of Mexico to cause disruption to Gulf oil and gas production. The market consensus for Wednesday's weekly DOE report is for a 1.6 million barrel decline in crude oil inventories, and a 2 million barrel decline in gasoline inventories, and an unchanged level of distillate inventories.
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    Today's U.S. Earnings Reports Earnings reports (ranked by market cap): DIS-Walt Disney (Consensus $0.93), CVS-CVS Caremark (0.80), ESRX-Express Scripts (0.82), EMR-Emerson Electric (1.00), PCLN-Priceline (7.36), FE-FirstEnergy (0.64), PCG-PG&E Corp (0.82), MMC-Marsh & McLennan (0.58), ETE-Energy Transfer (0.46), SIRI-Siruis XM Radio (0.02), CHTR-Charter Communications (-0.21), CHD-Church & Dwight (0.55), EXPD-Expeditors (0.43), TAP-Molson Coors (1.20), NUAN-Nuance Communications (0.40), XL-XL Group (0.55), RAX-Rackspace Hosting (0.18), Transdigm (1.70), MPEL-Melco Crown (0.17), OAK-Oaktree Capital (0.61), MGM-MGM Resorts (-0.15).
    Global Financial Calendar
    

    Tuesday 8/7/12
    United States
    0745 ET	ICSC (Int'l Council of Shopping Centers) weekly retailer sales.
    0855 ET	Redbook weekly retailer sales.
    1130 ET	Weekly 4-week T-bill auction.
    1300 ET	Treasury auctions $32 billion of 3-year T-notes.
    1430 ET	Fed Chairman Bernanke speaks in Washington DC on financial education.
    1500 ET	Jun consumer credit expected +$11.0 bln, May +$17.118 bln.
    1630 ET	API weekly U.S. oil statistics.
    United Kingdom
    0430 ET	U.K. June industrial production expected -3.9% m/m and -5.4% y/y, May +1.0% m/m and -1.6% y/y.
    0430 ET	U.K. June manufacturing production expected -4.5% m/m and -5.7% y/y, May +1.2% m/m and -1/7% y/y.
    Germany
    0600 ET	German June factory orders expected -0.8% m/m and -7.0% y/y, May +0.6% m/m and -5.4% y/y.

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