Barchart Morning Call 10/9

Barchart Morning Call

BC - Tue Oct 09, 7:00AM CDT

Overnight Developments

• Dec E-mini S&Ps are unchanged this morning, shaking off downward pressure from the IMF's global growth downgrade late Monday and expectations for large protests in Athens today to mark Ms. Merkel's visit. The Euro Stoxx 50 index this morning is mildly lower by -0.17%. China's CSI 300 index rallied by 2.21% today on some post-holiday buying. Commodity prices are up +0.36% this morning with Nov crude oil +0.39%, Dec gold -0.07%, Dec copper +0.16%, and higher agriculture prices. The dollar index is up +0.21% while EUR/USD is down -0.19%. USD/JPY is down -0.13%. Dec 10-year T-notes are down 3.5 ticks.
• Athens is braced for German Chancellor Merkel's visit today with some 7,000 officers deployed to control public protests. Troika officials are set to resume negotiations with Greek officials this week over the measures necessary for the Eurozone to release the next 31 billion euro tranche of bailout aid. Eurozone officials want Greece to commit to a list of 89 steps before next week's Oct 18-19 Eurozone leaders summit.
• The IMF late Monday cut its global growth forecast for 2012 by 0.2 points to 3.3% from July's prediction of +3.5% and for 2013 by 0.3 points to +3.6% from +3.9%. The IMF says it sees "alarmingly high" risks of a steeper slowdown with a one-in-six chance for world economic growth to slip below +2%. The IMF cut its growth for Europe to -0.4% for 2012 and +0.2% for 2013 from -0.3% and +0.7%, respectively. The IMF forecast U.S. GDP growth at +2.2% for 2012 and +2.1% for 2013. The IMF cut its forecast for China by 0.2 points to +7.8% for 2012 and +8.2% for 2013. The IMF recommended that Europe keep rates at current levels or cut further, that U.S. ensure that it does not go over the fiscal cliff, and that Japan likely needs to ease monetary policy further.
• Japan's Aug trade balance of -644.5 billion yen was slightly wider than market expectations of -626.6 billion yen and expanded from July's -373.6 billion yen. However, the adjusted current account surplus of 722.3 billion yen was wider than market expectations of 520.0 billion yen and was wider than July's 335.4 billion yen. The report was roughly neutral for the yen.
• Japan's eco watchers survey was mildly negative for the Japanese economy with the Sep current index falling by 2.34 points to 41.2 from 43.6 in Aug and with the outlook index falling by -0.1 point to 43.5 from 43.6.
• UK Aug manufacturing production fell -1.1% m/m and -1.2% y/y, which was much weaker than market expectations of -0.7% m/m and -0.7% y/y.
• The UK trade report was mildly bearish for the pound with the Aug visible trade deficit expanding to 9.844 billion pounds, which was wider than market expectations of -8.5 billion pounds and was up from July's revised -7.337 billion pounds.
  Market Comments
  • Dec E-mini S&Ps this morning are trading unchanged as the market shakes off the IMF's global growth downgrades and expected protests today in Athens. A supportive factor was today's 2.21% rally in Chinese stocks. The S&P 500 index on Monday closed mildly lower: S&P 500 -0.35%, Dow Jones -0.19%, Nasdaq 100 -0.89%. Bearish factors included (1) the 1.39% sell-off in the Euro Stoxx 50 index on increased concerns about the debt crisis with Eurozone finance ministers meeting this week and Eurozone leaders next week, (2) concern about Q3 earnings season which unofficially begins today with Alcoa's report, and (3) the World Bank's downgrade in its 2012 GDP forecast for developing East Asia (which excludes Japan and India) to an 11-year low of +7.2% from November's forecast of +7.6%.
  • Dec 10-year T-notes this morning are down 3.5 ticks on the generally stable overnight trading environment. Dec 10-year T-note prices on Monday in Globex trading closed higher on some increased safe-haven demand with the sell-off in global stocks: TYZ2 +11, FVZ2 +6.25.
  • The dollar index this morning is up +0.17 points (+0.21%) while EUR/USD is down -0.0025 (-0.19%). USD/JPY is down -0.10 points (-0.13%). The dollar index on Monday closed mildly higher: Dollar index +0.20 (+0.26%), EUR/USD -0.0077 (-0.59%), USD/JPY -0.34 (-0.43%). The dollar index on Monday rallied on (1) increased safe-haven demand with the sell-off in global stocks, and (2) weakness in EUR/USD tied to the Monday/Tuesday Eurozone finance ministers meeting and expected public protests on Tuesday in Greece to greet German Chancellor Merkel on her visit to Athens.
  • Nov WTI crude oil prices this morning are up +0.35 (+0.39%) and Nov gasoline is up +0.0298 (+1.03%) on some short-covering after yesterday's losses. Nov crude oil and gasoline on Monday closed lower: CLX2 -0.55 (-0.61%), RBV2 -0.0594 (-2.01%). Bearish factors included (1) the World Bank's downgrade of 2012 GDP growth for developing East Asia to an 11-year low of +7.2% from +7.6%, (2) long liquidation pressure in gasoline after the recent sharp gains, and (3) a sharp drop in the premium of California blend gasoline after California Governor Brown granted a waiver to California refineries to allow them to start blending winter gasoline, which is cheaper and easier to refine. The market consensus for Thursday's weekly DOE report (delayed a day due to Monday's government holiday) is for a 1.5 million barrel increase in crude oil inventories, a 500,000 barrel increase in gasoline inventories, a 500,000 barrel increase in distillate inventories, and an unchanged refinery utilization rate of 88.2% of capacity. In last week's DOE report, U.S. oil production rose 11,000 to a 15-3/4 year high of 6.52 million bpd.
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    Today's U.S. Earnings Reports Earnings reports (ranked by market cap): CVX-Chevron (Consensus:$3.06), YUM-YUM Brands (0.97), AA-Alcoa (0.0).
    Global Financial Calendar
    

    Tuesday 10/9/12
    United States
    0745 ET	ICSC (Int'l Council of Shopping Centers) weekly retailer sales.
    0855 ET	Redbook weekly retailer sales.
    1100 ET	USDA weekly grain export inspections.
    1130 ET	Weekly T-bill auctions.
    1300 ET	Treasury auction of $32 billion in 3-year T-notes.
    1600 ET	USDA Crop Progress
    1630 ET	API weekly U.S. oil statistics.
    2030 ET	Fed Vice Chair Janet Yellen in Tokyo participates in IMF panel discussion titled "Sovereign Risk, Capital Markets, and Financial Stability: The Interconnections."
    Japan
    0030 ET	Japan Sep bankruptcies, Aug -5.8% y/y.
    0100 ET	Japan Sep eco watchers current index, Aug 43.6. Sep eco watchers outlook index, Aug 43.6.
    United Kingdom
    0430 ET	UK Aug industrial production, July +2.9% m/m and -0.8% y/y. Aug manufacturing production, July +3.2% m/m and -0.5% y/y.
    United Kingdom
    0430 ET	UK Aug visible trade balance, July -7.149 bln pounds. Aug trade balance non-EU, July -2.877 bln pounds. Aug trade balance, July -1.517 bln pounds.

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