Barchart Morning Call 10/2

Barchart Morning Call

BC - 2 hrs 26 mins ago

Overnight Developments

• Dec E-mini S&Ps this morning are moderately higher by +0.50%, boosted by a 0.60% rally in European stocks, a 12 bp decline in Spanish bond yields, and a 25 bp rate cut in Australia. The Japanese stock market today closed slightly lower by -0.12% but most other Asian stock market closed higher. The Chinese stock market was closed again for this week's holiday. Commodity prices this morning are mildly lower by -0.11% with Nov crude oil +0.12%, Dec gold -0.11%, Dec copper +0.21%, grain prices lower, and livestock and softs prices mixed. The dollar index is slightly lower by -0.14% while EUR/USD is up +0.26%. Dec 10-year T-notes are down 2 ticks.
• The Australian central bank today cut its overnight cash-rate target by 25 bp to 3.25%, the lowest level since 2009. The market had been discounting only about a one-third chance of a rate cut today. The market is now discounting about a 60% chance of another 25 bp rate cut next month to 3.00%, which would match the 50-year low seen during the 2008/09 global financial crisis. The Australian dollar today dropped about 0.5% on the news. Australian central bank chief Glenn Stevens said that the rate cut was taken in response to weakness in the labor market, subdued inflation, and a "modest" expansion in the U.S. economy. Mr. Stevens also noted that Chinese economic growth has slowed and that key commodity prices for Australia remain significantly lower than earlier in the year. Australia's Q2 GDP growth slowed to +2.4% from +5.6% in Q1.
• Spain's 10-year bond yield fell 13 bp to 5.75% today after Reuters reported late Monday that Spain is preparing to formally ask the Eurozone for a bailout for its government finances. Reuters cited four unidentified European officials for its report. However, Prime Minister Rajoy told regional leaders at a meeting today that he will not request a bailout this weekend.
• Japan's new Economy Minister Seiji Maehara today pledged to closely watch the BOJ to ensure that it meets a 1% inflation goal.
• The Eurozone Aug PPI report of +0.9% m/m and +2.7% y/y was slightly stronger than market expectations of +0.6% m/m and +2.6% y/y and was up from July's +0.3% m/m and +1.6% y/y.
  Market Comments
  • Dec E-mini S&Ps this morning are up +7.25 points (+0.50%) on a +0.60% rally in the Euro Stoxx 50, a 12 bp drop in the Spanish 10-year bond yield, and the 25 bp rate cut by Australia's central bank. The Australian stock market today closed up +1.01%. The S&P 500 index on Monday closed mildly higher: S&P 500 +0.27%, Dow Jones +0.58%, Nasdaq 100 -0.18%. Bullish factors included the much stronger-than-expected Sep ISM manufacturing index of +1.9 points to 51.5 (versus expectations of +0.2 to 49.8) and the 1.82% rally in the Euro Stoxx 50 index on last Friday's news that the Spanish bank bailout requirements are now 59.3 billion euros, down from the previous estimate of 62 billion euros.
  • Dec 10-year T-notes this morning are down 2 ticks on reduced safe-haven demand with the rally in stocks. Dec 10-year T-note prices on Monday closed slightly higher: TYZ2 +3, FVZ2 +1. The T-note market was encouraged by Fed Chairman Bernanke's comments in which he reiterated support for the Fed's extraordinarily easy monetary policy.
  • The dollar index this morning is down -0.11 points (-0.14%) on reduced safe-haven demand while EUR/USD is up +0.0033 (+0.26%). USD/JPY is up +0.14 points (+0.18%). The dollar index on Monday closed slightly lower: Dollar index -0.11 (-0.14%), EUR/USD +0.0028 (+0.22%), USD/JPY +0.03 (+0.04%). The dollar was undercut by reduced safe-haven demand with the rally in stocks. EUR/USD received a boost from last Friday's news that the Spanish bank bailout will be 59.3 billion euros, less than the earlier estimate of 62.0 billion euros.
  • Nov WTI crude oil prices this morning are slightly higher by +0.11 points (+0.12%) on a boost from the weaker dollar and higher global stocks. However, Nov gasoline is down -0.0279 (-0.96%) on some continued technical weakness after the sharp 2-week rally. Nov crude oil prices on Monday closed mildly higher while gasoline closed unchanged: CLX2 +0.29 (+0.31%), RBV2 unch. Crude oil prices received a boost from the mildly lower dollar and the much stronger-than-expected U.S. ISM manufacturing index report of +1.9 to 51.5. Gasoline prices were unable to rally due to long liquidation pressure after the sharp 2-week rally. The market consensus for Wednesday's DOE report are for a 1.5 million barrel increase in crude oil inventories, a 375,000 barrel decline in gasoline inventories, a 450,000 barrel decline in distillate inventories, and an unchanged refinery utilization rate of 87.4%.
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    Today's U.S. Earnings Reports Earnings reports (ranked by market cap): MOS-Mosaic (Consensus:$1.16), AYI-Acuity Brands (0.93), CUB-Cubic corp (0.75%).
    Global Financial Calendar
    

    Tuesday 10/2/12
    United States
    0745 ET	ICSC (Int'l Council of Shopping Centers) weekly retailer sales.
    0855 ET	Redbook weekly retailer sales.
    0945 ET	Sep NY ISM manufacturing index, Aug 51.4.
    1130 ET	Weekly 4-week T-bill auction.
    1630 ET	API weekly U.S. oil statistics.
    1700 ET	Sep total vehicle sales expected 14.50 mln, Aug 14.46 mln. Sep domestic vehicle sales expected 11.40 mln, Aug 11.54 mln.
    United Kingdom
    0200 ET	UK Sep nationwide house prices expected unch m/m and -0.7% y/y, Aug +1.3% m/m and -0.7% y/y.
    0430 ET	UK Sep construction PMI expected 49.9, Aug 49.0.
    Euro-Zone
    0500 ET	Eurozone Aug PPI expected +0.6% m/m and +2.6% y/y, July +0.4% m/m and +1.8% y/y.
    CHI
    2100 ET	China Sep non-manufacturing PMI, Aug 56.3.

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