Barchart Morning Call 8/8

Barchart Morning Call

BC - 2 hrs 46 mins ago

Overnight Developments

• Sep E-mini S&Ps this morning are trading mildly lower by -0.27% due to the -0.63% sell-off in European stocks and weaker-than-expected German industrial production and export reports. Commodity prices are trading -0.28% on average with Sep crude oil down -0.65%, Dec gold -0.18%, Sep copper -0.71%, and agricultural prices mixed. The dollar index is up +0.22% and EUR/USD is down -0.27% on the return of some safe-haven demand. Sep 10-year T-note prices are up 2.5 ticks.
• The German June trade balance of 17.9 billion euros was wider than market expectations of 14.6 billion euros, but exports fell by -1.5%, which was a larger drop than market expectations of -1.3%.
• The German June industrial production report of -0.9% m/m was slightly weaker than market expectations of -0.8% m/m and was substantially weaker than the May report of +1.7% m/m.
• The British pound strengthened today after Bank of England Governor Mervyn King said that policymakers discussed a rate cut but "we concluded for the time being, that it would be more counterproductive than beneficial."
• Standard & Poors yesterday cut the outlook to negative on Greece's CCC rating, which is eight notches below investment grade, citing the possibility that Greece might not qualify for its next bailout disbursement from the Eurozone and IMF.
• Japan's June adjusted current account balance report of 773.6 billion yen was wider than market expectations of 714.7 billion yen and was supportive for the yen.
• Japan's July Eco Watchers outlook index of 44.9 was stronger than expectations of 44.0 but was down by 0.6 points from 45.7 in June.
  Market Comments
  • Sep E-mini S&Ps this morning are down -3.75 (-0.27%) this morning on long liquidation pressure and on this morning's 0.63% sell-off in the Euro Stoxx 50 index on the weaker-than-expected German industrial production and export reports. The stock market on Tuesday closed moderately higher and the S&P 500 index edged to a new 3-month high: S&P 500 +0.51%, Dow Jones +0.39%, Nasdaq 100 +0.86%. The stock market saw continued support from the stronger-than-expected Q2 earnings season and hopes for ECB and Fed action in September. Boston Fed President Eric Rosengren on Tuesday said the Fed should pursue an "open-ended" quantitative easing program of "substantial magnitude" to boost economic growth and employment.
  • Sep 10-year T-notes this morning are up 2.5 ticks on the lower trade in E-mini S&Ps and on some short-covering after Tuesday's sharp 17 tick sell-off. T-note prices on Tuesday closed sharply lower: TYU2 -17, FVU2 -8.25. Bearish factors include reduced safe-haven demand with the 3-month high in the S&P 500, improved sentiment on the U.S. economy after last Friday's payroll report of +163,000, and the sharp 20 bp increase in 10-year inflation expectations seen in the past two weeks driven by last week's FOMC meeting where the Fed essentially promised QE3 if the economy continues to show weakness.
  • The dollar index this morning is up +0.18 (+0.22%) on the return of some safe-haven demand with the sell-off in stocks. EUR/USD is down -0.0034 (-0.27%) and USD/JPY is down -0.29 (-0.37%). The dollar index on Tuesday edged to a new 1-month low and closed slightly lower: Dollar index -0.07 (-0.09%), EUR/USD -0.0002 (-0.02%), USD/JPY +0.36 (+0.46%). The dollar continued to lose ground on reduced safe-haven demand as the S&P 500 index hit a new 3-month high and as economic sentiment improved. The Spanish 10-year bond yield on Tuesday rose by 12 bp to 6.82% while the Italian 10-year bond yield fell by 3 bp to 5.95%.
  • Sep WTI crude oil prices this morning are down -0.61 (-0.65%) and Sep gasoline is down -0.0160 (-0.53%). Bearish factors this morning include the higher dollar index, lower stocks, and some long liquidation pressure after Tuesday's sharp rally. Crude oil and gasoline prices on Tuesday rallied sharply: CLU2 +1.47 (+1.59%), RBU2 +0.0691 (+2.36%). Sep crude oil posted a new 2-1/2 month high and Sep gasoline posted a new 3-month high. Crude oil saw strength on technical buying, the slightly lower dollar index, expectations for a 1.6 million barrel decline in oil inventories Wednesday's weekly DOE report, and improved economic sentiment with the rally in stocks and last Friday's stronger-than-expected payroll report of +163,000. Gasoline is also seeing strength from refinery outages and strength in Brent crude oil prices. The market consensus for Wednesday's weekly DOE report is for a 1.6 million barrel decline in crude oil inventories, 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): NWSA-News Corp (Consensus $0.32), CTL-Centurylink (0.62), PPL-PPL Corp (0.41), M-Macy's (0.64), RL-Ralph Lauren (1.78), DISH-Dish Network (0.66), CLR-Contl Res (0.74), MNST-Monster Beverage (0.61), LMCA-Liberty Media (0.73), HFC-Hollyfrontier (2.24), CG-Carlyle Group (-0.04), BIP-Brookfield Infrastructure (0.34), TEG-Integrys Energy (0.41).
    Global Financial Calendar
    

    Wednesday 8/8/12
    United States
    0700 ET	Weekly MBA mortgage applications, previous +0.2% with purchase sub-index -2.3% and refi sub-index +0.8%.
    0830 ET	Q2 non-farm productivity expected +1.4%, Q1 -0.9%. Q2 unit labor costs expected +0.5%, Q1+1.3%.
    1030 ET	DOE Weekly Petroleum Status Report.
    1300 ET	Treasury auctions $24 billion 10-year T-notes.
    Japan
    0030 ET	Japan July bankruptcies, June-16.3% y/y.
    0100 ET	Japan July eco watchers survey current, June 43.8. July eco watchers survey outlook, June 45.7.
    1950 ET	Japan June machine orders expected +11.0% m/m and -5.3% y/y, May -14.8% m/m and +1.0% y/y.
    n/a	BOJ begins 2-day policy meeting (expected no change to the 0.00% to 0.10% benchmark target rate).
    Germany
    0200 ET	German June trade balance expected +14.6 billion euros, May +15.3 billion euros. June exports, May +4.2%. June imports, May +6.2%.
    0600 ET	German June industrial production expected -0.8% m/m and +0.3% y/y, May +1.6% m/m and unchanged y/y.
    United Kingdom
    0530 ET	BOE releases quarterly inflation report.
    CHI
    2130 ET	China July CPI expected +1.7% y/y, June +2.2% y/y.
    2130 ET	China July PPI expected -2.5% y/y, June -2.1% y/y.

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