Barchart's Morning Call 8/22

Barchart Morning Call

BC - 2 hrs 45 mins ago

Overnight Developments

• Sep E-mini S&Ps this morning are trading mildly lower by -0.30%, pressured by a -0.83% sell-off in European stocks and a very weak Japanese export report that indicated weak Asian economic growth. Commodity prices are down by -0.37%, with Oct crude oil down -0.44%, Dec gold down -0.07%, Sep copper down -0.45%, and agricultural prices trading mostly lower. The dollar index is slightly higher by +0.11% and EUR/USD is down -0.20%. Sep 10-year T-notes are up 6.5 ticks.
• Asian stocks today closed lower across the board: Japan -0.27%, Hong Kong -1.06%, China -0.78%, Taiwan -0.14%, Australia -0.17%, Singapore -0.53%, South Korea -0.50%, India -0.21%, Turkey -0.12%. The Chinese stock market was undercut by the weak Japanese export report and by a report in China's Legal Evening News that Hubei province is proposing property-tax rules.
• On the European debt crisis front, Luxembourg Finance Minister Jean-Claude Juncker, the head of the Eurozone group of finance ministers, visits Athens today to meet with Greek Prime Minister Samaras and hear his plea for a 2-year delay in Greece's austerity targets. Mr. Samaras said before the meeting that Greece is just asking for more time, not necessarily more bailout money. German Chancellor Merkel and French President Hollande then meet in Berlin on Thursday to discuss debt crisis measures. Greek President Samaras will then separately meet with Ms. Merkel and Mr. Hollande on Friday and Saturday.
• Japan last night reported an unadjusted July trade deficit of -517.4 billion yen (-$6.5 billion), wider than market expectations of -270 billion yen. On a seasonally adjusted basis, Japan's July trade deficit of -325.7 billion yen was narrower than market expectations of -451 billion yen. The report showed that Japan's July exports fell -8.1% y/y, which was much weaker than expectations of -2.9% y/y and weaker than June's report of -2.3% y/y. The report showed that exports to China fell -12% y/y and that exports to Europe plunged -25% y/y. The report indicating weakening overall economic growth in Japan tied to China's slower economic growth and Europe's recession.
• Chicago Fed President Evans told reporters in China today that a weakening in global trade is "awful." He said the Fed will consider whether it needs to step up monetary easing given the current circumstances on the economy and financial stability.
  Market Comments
  • Sep E-mini S&Ps this morning are down -4.25 points (-0.30%) due to the -0.83% sell-off in the Euro Stoxxx 50 index, the weak Japanese export report, and weakness in the PC sector after negative news from Dell. Dell is down 4.6% in European trading this morning after the company cut its fiscal 2013 earnings forecast due to weaker personal computer sales, saying that Q3 revenue will drop 2-5% from the previous quarter. The stock market on Tuesday closed mildly lower: S&P 500 -0.35%, Dow Jones -0.51%, Nasdaq 100 -0.44%. The S&P 500 on Tuesday posted a new 4-year high on optimism about the European debt crisis but then lost ground after a 1.4% sell-off in Apple helped to drag down the technology sector.
  • Sep 10-year T-notes this morning are up 6.5 ticks on some increased safe-haven demand with today's sell-off in global stocks and the weak Japanese exports report. T-note prices on Tuesday closed slightly higher: TYU2 +3, FVU2 +0.25. T-notes were able to close higher on reduced safe-haven demand with the lower close in the stock market.
  • The dollar index this morning is trading slightly higher by +0.09 (0.11%) and EUR/USD is down -0.0025 (-0.20%) on some increased dollar safe-haven demand with the impending European crisis meetings and the weak Japanese trade report that showed a 25% y/y plunge in Japanese exports to Europe. USD/JPY is little changed this morning. The dollar index on Tuesday closed sharply lower on a technical breakdown to a new 1-1/2 month low: Dollar index -0.55 (-0.67%), EUR/USD +0.0127 (+1.03%), USD/JPY -0.14 (-0.18%). EUR/USD rallied to a new 1-1/2 month high on increased optimism about the European debt crisis after key German lawmakers indicated there is room for some concessions for Greece in terms of a lower interest rate and a longer maturity on its bailout loans.
  • Oct WTI crude oil prices this morning are trading -0.43 (-0.44%) and Oct gasoline is down -0.0211 (-0.73%) on concern about global economic growth with the weak Japanese export report. Oct crude oil prices on Wednesday rallied to a new 3-month high and closed moderately higher: CLV2 +0.58 (+0.60%), RBU2 +0.0339 (+1.18%). Bullish factors included the sharp drop in the dollar index, improved economic sentiment with the recent rally in global stocks, and Tuesday's news of a sharp 6 million barrel drop in oil inventories in the API's weekly inventory report. The market consensus for Wednesday's weekly DOE report is now for a 250,000 barrel decline in crude oil inventories, a 1.4 million barrel drop in gasoline inventories, a 1 million barrel rise in distillate inventories, and a 0.2 point drop in the refinery utilization rate to 92.4% from 92.6% last week.
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    Today's U.S. Earnings Reports Earnings reports (ranked by market cap): HPQ-Hewlett-Packdard (Consensus $0.98), TOL-Toll Brothers (0.18), SNPS-Synopsys (0.50), AEO-American Eagle Outfitters (0.21), FMCN-Focus Media (0.59), EV-Eaton Vance (0.47), GES-Guess (0.51), CHS-Chico's Fas (0.30), HAIN-Hain Celestial (0.45).
    Global Financial Calendar
    

    Wednesday 8/22/12
    United States
    0700 ET	Weekly MBA mortgage applications, previous -4.5% with purchase sub-index -2.0% and refi sub-index -5.1%.
    1000 ET	July existing home sales expected +3.3% to 4.52 million, June -5.4% to 4.37 million.
    1030 ET	DOE Weekly Petroleum Status Report.
    1400 ET	Minutes of the July 31-Aug 1 FOMC meeting.
    2330 ET	Chicago Fed President Evans holds a press briefing at the U.S. embassy in Beijing, China.
    CHI
    2230 ET	China Aug HSBC flash manufacturing PMI, July 49.3.

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