Overnight Developments
- Dec E-mini S&Ps this morning are slightly higher by +0.15% as global stocks were encouraged by FT's report that Spain next week will accept the ECB/ESM bailout program. The Euro Stoxx 50 index is up +0.10%. Asian stocks today closed higher across the board with Japan +0.25%, Hong Kong +0.70%, and China +0.14%. Commodity prices are up +0.56% this morning with Nov crude oil +0.71%, Dec gold +0.33%, Dec copper +0.69%, and agricultural prices trading mostly higher. The dollar index is down -0.25% while EUR/USD is up 0.32%. Dec 10-year T-note prices are up +0.5 tick.
- India's stock market rallied 2.20% today after the government changed tax rules on overseas loans and the country's third largest political party agreed to support the government.
- EUR/USD is higher this morning on a report late yesterday by the Financial Times that Eurozone and Spanish officials are quietly negotiating a pre-packaged plan that will be released next Thursday where Spain can formally request participation in the ECB/ESM bond-buying program while knowing what additional restrictions that Eurozone officials will require.
- Greek Prime Minister Samaras travels to Rome today to meet with the leaders of Italy, Spain and Ireland. Mr. Samaras this week was again unable to get the agreement of the Democratic Left, one of his coalition partners, to the 11.5 billion euro package of budget cuts that is being required by Eurozone officials for the next tranche of aid. Another Greek coalition meeting will be held next week to try to get the package approved before the troika report is completed and given to Eurozone finance ministers for their meeting on Oct 8 to decide Greece's fate on whether it will receive its next aid package.
- The UK today reported an Aug budget deficit of -14.4 billion pounds, which was narrower than market expectations of -15.0 billion pounds but was the country's largest August budget deficit on record. The report highlighted the UK's trouble in meeting its budget deficit reduction targets while austerity measures are hurting GDP growth and tax revenues. UK Chancellor of the Exchequer George Osborne will either need to loosen his deficit reduction targets or he will have to impose new spending cuts.
- Japanese Prime Minister Noda
today won his party's leadership vote and will keep his job as Prime Minister
for the time being. Mr. Noda's party, the Democratic Party of Japan (DPJ)
controls the lower house of parliament. Mr. Noda must call an election by August
2013 but he may call an election earlier if he thinks his party can win.
Market Comments- Dec E-mini S&Ps this morning are up +0.15% on slightly higher European stocks (+0.10%) and across the board gains in Asian stocks. E-minis were supported by FT's report that Spain will accept a government bailout next week. The S&P 500 index on Thursday closed slightly lower and continued to consolidate below last Friday's 4-3/4 year high: S&P 500 -0.05%, Dow Jones +0.14%, Nasdaq 100 -0.08%. Bearish factors centered on negative economic data that included the decline of only 3,000 in U.S. initial unemployment claims to 382,000, China's flash HSBC manufacturing PMI report of 0.2 to 47.8 that remained below 50 for the 11th consecutive month, and a 5.8% y/y drop in Japanese exports overall and a 9.9% y/y plunge in Japanese exports to China.
- Dec 10-year T-notes this morning are slightly higher by +0.5 tick. Dec 10-year T-note prices on Thursday closed mildly higher: TYZ2 +3, FVZ2 +0.5. T-note prices received a boost from generally weak global economic data and the poor U.S. initial unemployment claims report. However, T-note prices were undercut by a weak 10-year TIPS auction where the bid cover ratio of 2.36 was the lowest since April 2009.
- The dollar index this morning is down -0.20 (-0.25%) and EUR/USD s up +0.0042 (+0.32%) on FT's report that Spain will accept a government bailout next week. USD/JPY is virtually unchanged. The dollar index on Thursday closed moderately higher: Dollar index +0.36 (+0.46%), EUR/USD -0.0081 (-0.62%), USD/JPY -0.14 (-0.18%). The dollar received a boost from (1) short-covering after the sharp sell-off that has been seen in the past two months, and (2) weak European, Chinese and Japanese economic data that boosted safe-haven demand for the dollar and the perception of U.S. economic growth relative to its main trading partners. An IMF official said Thursday that the IMF will cut its growth estimates for the global economy by "a few decimal points." The official said that "we expect the global economy to recover gradually over the next year." EUR/USD received some support late in the day after the Financial Times reported that Eurozone and Spanish officials are working on a prepackaged plan to be announced next Thursday that will allow Spain to formally request participation in the ECB/ESM bond-buying program.
- Nov WTI crude oil prices this morning are up +0.66 (+0.71%) and Nov gasoline is up +0.0158 (+0.57%) on some pre-weekend short-covering after this week's steep losses. Nov crude oil and gasoline prices on Thursday recovered modestly on some short-covering after the plunge seen early in the week: CLX2 -3.32 (-3.47%), RBV2 -0.0819 (-2.92%). Crude oil prices on Thursday saw a modest recovery rally, but sentiment remained generally bearish as the market continues to adjust to Saudi Arabia's willingness to boost production to push prices lower. In addition, the IEA on Thursday said that the oil market is sufficiently supplied and that additional crude is coming from Saudi Arabia and Canada. However, the IEA also made a bullish comment by suggesting that there will be no near-term release of strategic oil reserves.
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Today's U.S. Earnings Reports Earnings reports (ranked by market cap): DRI-Darden Restaurants (Consensus:$0.83), FUL-HB Fuller (0.54), KBH-KB Home (-0.15).
Global Financial Calendar
Barchart.com provides Financial Quotes, Charts and Technical Analysis for Stock and Commodity Traders.Friday 9/21/12 United States 1240 ET Atlanta Fed President Dennis Lockhart speaks on the U.S. economic outlook and monetary policy to the Atlanta Institute of Internal Auditors. 1500 ET USDA Cattle on Feed. 1500 ET USDA Cold Storage. United Kingdom 0430 ET UK Aug public finances (PSNCR), July -22.9 bln pounds. Aug PSNB ex interventions, July 0.6 bln pounds. Aug public sector net borrowing, July -1.8 bln pounds.
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