Overnight Developments
- Dec E-mini S&Ps are down by -0.19% on the -0.69% decline in European stocks as bank stocks fell after EU leaders failed to discuss further aid for Spain at their 2-day EU Summit that began yesterday. Asian stocks closed mixed as Chinese shares fell -0.15% after an advisor to the PBOC said the Chinese government won't provide big economic stimulus measures and that a strong rebound in growth is unlikely. Japan's Nikkei 225 Stock Index rallied to a 3-week high and closed up +0.22% as machinery makers advanced after the Oct U.S. Philadelphia Fed manufacturing index expanded for the first time in 6 months. Commodity prices are mixed with Nov crude up +0.01 %, Dec copper down -1.30% and agriculture prices higher. The dollar index is up +0.10% and Dec T-notes are up 5.5 ticks.
- European stocks were under pressure and Spain's bond yields rose after Spanish Prime Minister Rajoy said he's "not facing pressure to seek a bailout" and he won't take any such pressure into account in any case.
- EU leaders agreed on a framework that makes the ECB the main Euro-Zone banking supervisor by Jan 1, 2013. According to EU President Herman Von Rompuy, the new supervisor can "probably be effectively operational" and allow the euro bailout fund to lend directly to banks as soon as 2013 and will phase in over the next year and could cover all 6,000 Euro-Zone banks by Jan 1, 2014.
- Italy's 10-year bond yield fell to a 7-month low of 4.70% after Italy's Treasury said it received orders for more than 18 billion euros of retail bonds it was selling to individual investors, double the two previous offers combined, which reduces funding pressures on the Italian Treasury between now and year-end.
- Moody's Investors Service said the outlook for German banks remains negative as "intense competition" and low interest rates weigh on earnings and that exposure to stressed Euro-Zone countries, plus commercial real estate and shipping, make German lenders "vulnerable to a worsening of the sovereign debt crisis in Europe."
- German Sep producer prices rose
+0.3% m/m, exactly in line with market expectations, although the +1.7% y/y
increase was larger than expectations of +1.6% y/y.
Market Comments- Dec E-mini S&Ps this morning are down -2.75 points. The S&P 500 index on Thursday closed lower: S&P 500 -0.24%, Dow Jones -0.06%, Nasdaq 100 -1.13%. The stock market received support from (1) Wednesday night's Chinese Q3 GDP report of +7.4% and the stronger than expected Chinese retail sales and industrial production reports, and (2) the stronger-than-expected U.S. Sep leading indicators report of +0.6% and Oct Philadelphia Fed manufacturing index of +7.6 to 5.7. However, stocks were undercut by the sharp increase in U.S. initial unemployment claims and a poor earnings report from Google that dragged down stocks tied to online advertising. U.S. weekly initial unemployment claims rose by 46,000 to 388,000, more than reversing by 19,000 the previous week's -27,000 slide on end-quarter seasonal adjustment problems in one state. China's Q3 GDP report of +7.4% was down from +7.6% but was in line with market expectations. China's Sep industrial production report of +9.2% y/y was up from +8.9% in August and was stronger than market expectations of +9.0%. The Sep retail sales report of +14.2% was up from +13.2% in August and was stronger than market expectations of +13.2%.
- Dec 10-year T-notes this morning are up +5.5 ticks on increased safe-haven demand as equities falter. Dec 10-year T-note prices on Thursday closed with slightly lower: TYZ2 -3, FVZ2 -1.25. T-note prices on Thursday extended the sharp Tue-Wed sell-off to a new 1-month low on continued technical weakness and concern about the recent uptick in the U.S. economic data.
- The dollar index this morning is up +0.10%. EUR/USD is down -0.20% and USD/JPY is down -0.13%. The dollar index on Thursday closed mildly higher: Dollar index +0.36 (+0.46%), EUR/USD -0.0052 (-0.40%), USD/JPY +0.35 (+0.44%). The dollar index rebounded higher on (1) some short-covering after the sharp sell-off seen on Tue-Wed, (2) weakness in U.S. stocks, and (3) nervousness ahead of the 2-day EU Summit that began on Thursday. EUR/USD was also undercut by another general strike in Greece and a protest march in Athens that turned violent.
- Nov WTI crude oil prices this morning are little changed and up +1 cent a barrel and Nov gasoline is up +2.60 cents per gallon. Nov crude oil and gasoline prices on Thursday closed lower: CLX2 -0.02 (-0.02%), RBX2 -0.0366 (-1.32%). Bearish factors included the big 46,000 jump in initial unemployment claims and some overhang from Wednesday's net bearish weekly DOE report where U.S. oil production edged to another new 17-1/2 year high. However, crude oil received a boost from the positive Chinese economic reports and the news that the Keystone pipeline (590,000 bpd) that carries oil from Canada to the hub at Cushing, Oklahoma would be closed for 3 days due to a possible technical problem.
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Today's U.S. Earnings Reports Earnings reports (ranked by market cap): GE-General Electric (Consensus:$0.36), SLB-Schlumberger (1.06), MCD-McDonalds (1.47), HON-Honeywell (1.14), BHI-Baker Hughes (0.83), APD-Air Products (1.44), IR-Ingersoll-Rand (0.98), PH-Parker Hannifin (1.72), CBE-Cooper Industries (1.13), EW-Edwards Life (0.54), KSU-Kansas City Southern (0.84), Indexx Labs (0.73), NVR-NVR Inc (9.44), SEIC-SEI Investments (0.30), VMI-Valmont (2.05), SHAW-Shaw Group (1.38).
Global Financial Calendar
Barchart.com provides Financial Quotes, Charts and Technical Analysis for Stock and Commodity Traders.Friday 10/19/12 United States 1000 ET Sep existing home sales expected -1.5% to 4.75 mln, Aug +7.8% to 4.82 mln. 1500 ET USDA Sep Cattle-on-Feed report. Japan 0030 ET Japan Aug all-industry activity index expected +0.1% m/m, July -0.6% m/m. 0100 ET Japan final-Aug coincident index, prelim 93.6. Final-Aug leading index, prelim 93.6. Germany 0200 ET German Sep producer prices expected +0.3% m/m and +1.6% y/y, Aug +0.5% m/m and +1.6% y/y. Euro-Zone 0400 ET Eurozone Aug current account (sa), July 9.7 bln euros. United Kingdom 0430 ET UK Sep public finances (PSNCR) expected 4.7 bln pounds, Aug -9.6 bln pounds. Sep PSNB ex-interventions expected 13.5 bln pounds, Aug 14.4 bln pounds. Sep public sector net borrowing expected 11.7 bln pounds, Aug 12.4 bln pounds.
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