Barchart Morning Call 10/8

Barchart Morning Call

BC - 1 hr 27 mins ago

Overnight Developments

• Dec E-mini S&Ps are trading down -0.41% in sympathy with the -1.17% sell-off in European stocks and the lower close in Asian stocks. The Japanese stock market was closed today for a holiday. Global stocks are lower today on the World Bank's cut in its 2012 growth forecast for developing east Asia to +7.2% from +7.6% and on general concern about Europe ahead of today's Eurozone finance ministers meeting. Global stocks ignored positive news from the 2.4% rise in German exports and the 2.3 point rise in China's services PMI. The dollar index this morning is up +0.39% while EUR/USD is down -0.75%. Commodity prices are down -0.67% today on the higher dollar and lower global stocks. Nov crude oil is down -1.50%, Dec gold is down -0.54%, Dec copper is down -1.68%, and agriculture prices are trading mostly lower. Dec 10-year T-note prices are up 7.5 ticks.
• The Chinese stock market fell -0.6% today on the first day of trading after last week's Golden Week holidays. Bearish factors included continued worries about the slowing Chinese economy and the weak global economy. Chinese Q3 earnings are expected to be disappointing.
• The World Bank today said that growth in developing East Asia, which excludes Japan and India, will slide to an 11-year low of +7.2% in 2012 from +8.3% in 2011. The 2011 forecast of +7.2% is down from November's forecast of +7.6%.
• Venezuelan President Hugo Chavez won another 6-year term as he beat challenger Henrique Capriles Radonski by a margin of 54% to 45% with 90% of the vote counted. Another 6 years of Chavez means weak economic growth for Venezuela as well as continued underinvestment in the oil industry and limited oil output, which is a supportive factor for oil prices. The market is also expecting a near-term devaluation of the bolivar due to Venezuela's extremely high inflation rate of 18%.
• China's Sep HSBC services PMI on Sunday night was reported at 54.3, a 2.3 point rise from 52.0 in August.
• The German Aug trade surplus of 16.3 billion euros was down from 16.9 billion in July, but was larger than market expectations of 15.2 billion euros. In some positive news, German Aug exports rose +2.4% m/m, which was better than market expectations of -0.6% m/m and was stronger than July's revised +0.4% m/m. Aug imports rose +0.3% m/m, which was slightly stronger than market expectations of +0.2%.
• Germany's Aug industrial production report of -0.5% m/m and -1.4% y/y was slightly stronger than market expectations of -0.6% m/m and -1.6% y/y.
  Market Comments
  • Dec E-mini S&Ps this morning are down -6.00 points (-0.41%) due to today's 1.17% decline in the Euro Stoxx 50 and the lower close in Asian stocks. The S&P 500 index on Friday closed little changed: S&P 500 -0.03%, Dow Jones +0.26%, Nasdaq 100 -0.59%. The stock market rallied early on the stronger-than-expected labor market indicated by the Sep payroll report but then faded on pre-weekend long liquidation pressure and concern that QE3 may be shorter-than-expected if the U.S. labor market continues to improve. The Sep payroll report of +114,000 was very close to expectations, but Aug payrolls were revised higher by 46,000 to +142,000 from +96,000 and July payrolls were revised higher by 40,000 to +181,000 from +141,000. The Sep unemployment rate dropped sharply to 7.8% from 8.1% in August, which showed a stronger labor market than expectations for a 0.1 point rise to 8.2%. The unemployment rate dropped on a sharp 873,000 rise in employment in the household survey, which includes self-employed persons and agriculture workers.
  • Dec 10-year T-notes this morning are up 7.5 ticks on the lower trade in global stocks. Dec 10-year T-note prices on Friday closed with fairly sharp losses: TYZ2 -16, FVZ2 -6. Bearish factors included the stronger-than-expected unemployment report and concern that QE3 may be shorter than previously thought.
  • The dollar index this morning is up +0.31 points (+0.39%) on increased safe-haven demand. EUR/USD is down -0.0098 (-0.75%) on nervousness ahead of today's Eurozone finance ministers meeting and tomorrow's visit by German Chancellor Merkel to Greece, which is expected to draw large public protests. USD/JPY is down -0.60% today. The dollar index on Friday closed little changed: Dollar index -0.02 (-0.02%), EUR/USD +0.0027 (+0.21%), USD/JPY +0.19 (+0.24%). The dollar index on Friday extended Thursday's sharp sell-off and posted a new 2-month low but then recovered to close the day little changed. The dollar index received some support from the U.S. unemployment report, which was positive for the U.S. economy and the dollar's interest rate differentials. However, the dollar continues to see general weakness from QE3 and from hopes that the ECB will be able to get the European debt crisis under control with its bond-buying bailout program. However, Spain has yet to formally accept the bailout program.
  • Nov WTI crude oil prices this morning are down -1.35 (-1.50%) and Nov gasoline is down -0.0139 (-0.47%) on the higher dollar index and lower global stocks. Nov crude oil and gasoline on Friday closed mixed: CLX2 -1.83 (-2.00%), RBV2 +0.0096 (+0.33%). Crude oil prices closed lower on Friday on continued overhang from plentiful global and U.S. supplies and Saudi Arabia's recent promise to boost production through year-end if needed to push oil prices lower. However, crude oil and gasoline prices on Friday received a boost from the stronger labor market indicated by the U.S. unemployment report. Gasoline prices on Friday received a continued boost from refinery problems that have caused tight gasoline inventories in the Northeastern U.S. and particularly in California where some gasoline stations this week actually ran out of gasoline.
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    Today's U.S. Earnings Reports Earnings reports (ranked by market cap): none.
    Global Financial Calendar
    

    Monday 10/8/12
    United States
    n/a	Columbus Day holiday - federal government and banks closed. NYSE open regular hours. CME equity and commodity floor trading is open, but CME interest rate and FX floor trading is closed. Globex products are open regular hours.
    Japan
    n/a	Japan holiday.
    Germany
    0200 ET	German Aug trade balance, July 16.9 bln euros. Aug exports, July +0.4% y/y. Aug imports, July +0.7% y/y. Aug current account balance, July 12.8 bln euros.
    0600 ET	German Aug industrial production, July +1.3% m/m and -1.4% y/y.
    United Kingdom
    1901 ET	UK Sep BRC sales like-for-like, Aug -0.4% y/y.
    1901 ET	UK Sep RICS house price balance, Aug -19%.
    Euro-Zone
    0430 ET	Eurozone Sentix Oct investor confidence, Sep -23.2.
    Japan
    1950 ET	Japan Aug current account, July 625.4 bln yen. Aug current account (sa), July 335.4 bln yen. Aug trade balance (BOP basis), July -373.6 bln yen.

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