Barchart Morning Call
Overnight
Developments
- Sep E-mini S&Ps this morning are trading slightly lower by -0.19% on some concern about the Eurozone debt crisis with this week's busy news schedule and with some weaker-than-expected economic data out of China. Commodity prices are slightly higher by +0.08% on average with Oct crude oil down -0.05%, Dec gold down -0.33%, Dec copper up +1.36%, grain prices up 0.36% on average, and softs prices trading mostly lower. European stocks are down -0.31% this morning. Asian stocks today closed mixed with Japan -0.03%, Hong Kong +0.13%, and China +0.41%. Chinese stocks continued to receive a boost from last week's news of new infrastructure projects even though there was some concern about today's 2.6% drop in Chinese imports, which indicated weak domestic demand. The dollar index is slightly higher by +0.08% and EUR/USD is down -0.27%. USD/JPY is up +0.08%. Dec 10-year T-note prices are down 3 ticks.
- Italy's 10-year bond yield rose 8 bp to 5.14% this morning as concern about Greece is rising. Greek Prime Minister Samaras meets with troika officials today even though he has failed as yet to secure agreement from his coalition partners on the additional 11.5 billion euro austerity package that Eurozone officials are requiring for the next tranche of bailout aid. Greek coalition leaders agreed to meet again on the austerity package on September 12, which is just before Eurozone finance ministers plan to meet in Cyprus for a briefing on Greece. The German Federal Constitutional Court on Wednesday is expected to issue a favorable ruling to allow Germany's participation in the permanent ESM bailout facility to proceed, but there is the outside possibility that the Court could rule against the ESM, which would cause a sharp drop in the euro and European stocks.
- China's Aug CPI was reported on Saturday at +2.0% y/y, up from +1.8% in July and in line with the market consensus. Meanwhile, China's Aug PPI fell to -3.5% y/y from -2.9% y/y in July and was weaker than market expectations of -3.2%. The favorable Chinese inflation picture continues to leave room for the government to ease monetary policy and implement fiscal stimulus measures to provide support from China's slowing economy.
- China's Aug industrial production was reported on Sunday at +10.1% y/y, down slightly from July's +10.3% y/y and slightly below market expectations of +10.2% y/y. The +10.1% y/y growth rate in industrial production was the weakest since 2009. China's Aug retail sales report of +13.2% y/y was slightly above July's +13.1% y/y and was in line with market expectations. China's Aug fixed asset investment excluding rural rose +20.2% year-to-date, which was slightly below July's +20.4% and expectations of +20.4%.
- China's Aug trade surplus was reported on Sunday night at $26.66 billion, which was wider than market expectations of $19.5 billion and up from $25.15 billion in July. Aug exports rose +2.7% y/y, which was slightly weaker than market expectations of +2.9% but better than July's +1.0% y/y. The improvement in Aug exports from July at least provided some confidence that Chinese exports are not completely falling apart. However, Aug imports fell by -2.6% y/y, which was far weaker than market expectations of +3.5% y/y and July's +4.7% y/y and was an indicator of weak domestic demand.
- Japan's final Q2 GDP report of +0.2% q/q and +0.7% q/q annualized was revised lower from +0.3% q/q and +1.4% q/q annualized, which showed that the Japanese economy put in another weak quarter in Q2. On the more positive side, Japan's Aug consumer confidence index rose to 40.5 from 39.7 in July and was stronger than market expectations of 39.4.
- U.S. secretary of State Hillary Clinton said today that the U.S. is "not setting deadlines" for Iran and still considers negotiations as "by far the best approach" to prevent Iran from developing nuclear weapons. The U.S. this coming Sunday (Sep 16) will begin 11 days of military exercises in the Persian Gulf. Ms. Clinton's statement provides the petroleum markets with some confidence that a military strike on Iran is not imminent and is not likely through year-end.
- Saudi Arabian Oil Minister Ali al-Naimi said today that the current supply
and demand situation do not justify crude oil's high price at present. He said,
"The market is well balanced, forward cover remains within an acceptable range
and inventories are more than adequate."
Market Comments- Sep E-mini S&Ps this morning are mildly lower by -2.75 points (-0.19%) on the -0.31% sell-off in the Euro Stoxx 50 index this morning and some concern about China's economic data where imports fell 2.6% y/y. The S&P 500 index on Friday posted a new 4-year high and closed mildly higher: S&P 500 +0.40%, Dow Jones +0.11%, Nasdaq 100 -0.16%. Friday's Aug unemployment report was disappointing but that boosted the chances for a QE3 decision from the Fed at the Sep 12-13 FOMC meeting, thus supporting stocks. Friday's Aug payroll report of +96,000 was weaker than market expectations of +125,000 and there were downward revisions for July (to +141,000 from +163,000) and June (to +45,000 from +64,000 ). The U.S. Aug unemployment rate fell by 0.2 points to 8.1% from 8.3% in July, which was better than market expectations for a report of unchanged. The U.S. stock market on Friday also continued to receive support from the ECB's decision last Thursday to adopt its bond-buying bailout mechanism that can be utilized by Spain and Italy.
- Dec 10-year T-notes this morning are down 3 ticks on reduced safe-haven demand as global markets are generally stable this morning. Dec T-note prices on Friday closed moderately higher: TYZ2 +9, FVZ2 +6.25. T-note prices were boosted by the weaker-than-expected U.S. payroll report, which not only indicated a weak U.S. economy but also boosted the chances for QE3. A QE3 program will likely involve the purchases of both mortgage-backed securities and longer-term Treasury securities.
- The dollar index this morning is up +0.06 points (+0.08%) on a little short-covering after last Friday's sharp sell-off on increased QE3 expectations for this Thursday. EUR/USD is down -0.0034 (-0.27%) due to this week's meetings on Greece and nervousness ahead of the ruling on Wednesday by the German Federal Constitutional Court on the permanent ESM bailout facility. The dollar index on Friday fell sharply to post a new 3-1/2 month low: Dollar index -0.79 (-0.97%), EUR/USD +0.0185 (+1.46%), USD/JPY -0.62 (-0.79%). The dollar index fell sharply on the weak U.S. payroll report and the increased chances for a dollar-bearish QE3 program that would involve printing new dollars. Meanwhile, EUR/USD continued to see support from the ECB's decision last Thursday to adopt its bond-buying program to provide a financial backstop for Spain and Italy.
- Oct WTI crude oil prices this morning are slightly lower by -0.05 (-0.05%) although Oct gasoline is up +0.0128 (+0.42%). Crude oil prices were undercut this morning by Saudi Oil Minister Ali al-Naimi's attempt to jawbone oil prices lower but gasoline continues to see support from tight refinery conditions. Oct crude oil and gasoline prices on Friday closed sharply higher: CLV2 +0.89 (+0.93%), RBV2 +0.0286 (+0.96%). Crude oil and gasoline prices on Friday were lifted by the general rally in commodity prices on the sharp sell-off in the dollar index and the increased prospects for QE3. Oil and gasoline prices were also supported by continued disruptions from Hurricane Isaac, which made landfall on Aug 29. As of midday Friday, Sep 7, the U.S. BSEE reported that 36% of Gulf oil production and 19% of natural gas production was still shut down.
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Today's U.S. Earnings Reports Earnings reports (ranked by market cap): PANW-Palo Alto Network (Consensus $0.0), JW/A-John Wiley (0.73), CASY-Casey's General (0.95), TOO-Teekay Offshore (0.26), FIVE-Five Below (0.03).
Global Financial Calendar
Barchart.com provides Financial Quotes, Charts and Technical Analysis for Stock and Commodity Traders.Monday 9/10/12 United States 1100 ET USDA weekly grain export inspections. 1130 ET Weekly 3-mo and 6-mo T-bill auctions. 1500 ET July consumer credit expected +$8.8 bln, Jun +$6.459 bln. 1600 ET USDA Crop Progress. Japan 0030 ET Japan Aug bankruptcies, July -5.1% y/y. 0100 ET Japan Aug consumer confidence expected 39.4, July 39.7. 0200 ET Japan Aug eco watchers current index expected 43.4, July 44.2. Aug eco watchers outlook index expected 44.4, July 44.9. 1950 ET Japan Q3 BSI large all-industry index, Q2 -3.1. Q3 BSI large-manufacturing, Q2 -5.7. 1950 ET Japan Aug M2 money stock expected +2.3% y/y, July +2.2% y/y. Aug M3 expected +1.9% y/y, July +1.9% y/y. Euro-Zone 0430 ET Eurozone Sep Sentix investor confidence expected -30.5, Aug -30.3. United Kingdom 1901 ET UK Aug RICS house price balance expected -23%, July -24%. CHI 2010 ET China Q4 Manpower survey.
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