Barchart Morning Call - 11/7

Barchart Morning Call

BC - 1 hr 32 mins ago

Overnight Developments

• Dec E-mini S&Ps this morning are slightly lower by -0.04% as the markets react to last night's U.S. election returns. European stocks are up +0.38% and Asian stocks closed generally higher with Hong Kong up +0.71%, Taiwan up +0.70%, and Australia up +0.71%, although Japan closed -0.03% and China closed -0.21%. Commodity prices are slightly higher by +0.09% with Dec crude oil down -0.83%, Dec gasoline -0.90%, Dec gold up +0.55%, Dec copper virtually unchanged, and agricultural prices generally trading higher. The dollar index is slightly lower by -0.05% and EUR/USD is slightly lower by -0.09%. Dec 10-year T-notes are up 19.5 ticks.
• The election results were in line with pre-election probabilities and the status quo prevailed. President Obama won reelection, Republicans kept control of the House, and Democrats kept control of the Senate. Attention now turns to how Washington will handle the year-end fiscal cliff and the need for a debt ceiling hike by early 2013.
• The Greek parliament today will hold its first vote on approving the 13.5 billion euro austerity package that is necessary for Greece to obtain its next 31 billion euro tranche of bailout money. If the Greek parliament cannot approve the austerity package, speculation will quickly arise again about whether Greece may end up leaving the Eurozone. Greek workers today held the second day of their 2-day strike to protest austerity measures.
• The European Commission today cut its GDP forecast for the Eurozone for 2013 to +0.1% from its May forecast of +1.0%, acknowledging that the economy will show virtually no growth in 2013 after a forecasted -0.4% decline in 2012.
• The Sep Eurozone retail sales report of -0.2% m/m and -0.8% y/y was slightly weaker than market expectations of -0.2% m/m.
• The German Sep industrial production report of -1.8% m/m and -1.2% y/y was much weaker than market expectations of -0.7% m/m and +0.1% y/y.
  Market Comments
  • Dec E-mini S&Ps this morning are slightly lower by -0.50 points (-0.04%) after last night's election returns were in line with the pre-election probabilities. E-mini S&Ps are seeing some support today from the +0.38% rally in European stocks. The S&P 500 index on Tuesday closed moderately higher: S&P 500 +0.79%, Dow Jones +1.02%, Nasdaq +0.30%. Bullish factors included some relief that the election uncertainty was nearly over and the +0.73% rally in European stocks.
  • Dec 10-year T-notes this morning are up 19.5 ticks as the market calculates that the Obama reelection victory will give the FOMC more scope to continue its accommodative monetary policy, although that also boosts the long-term inflation risks. Dec 10-year T-note prices on Tuesday closed moderately lower: TYZ2 -14, FVZ2 -8.25. Bearish factors included reduced safe-haven demand with the rally in stocks and supply overhang with this week's refunding operation. The results from Tuesday's 3-year T-note auction were a bit disappointing with the bid cover ratio of 3.41 being below the 12-auction average of 3.58 and at the lowest level in 9 months. In addition, indirect (foreign) bidders bought only 25.1% of the auction, which was well below the 12-auction average of 33.9% and the lowest level since 2007.
  • The dollar index this morning is slightly lower by -0.04 (-0.05%) and EUR/USD is down lower by -0.0011 (-0.09%). USD/JPY is down -0.26 (-0.32%). The dollar index on Tuesday closed mildly lower: Dollar index -0.14 (-0.17%), EUR/USD +0.0018 (+0.14%), USD/JPY +0.06 (+0.07%). Bearish factors included (1) reduced safe-haven demand with the rally in the stocks, and (2) the odds for an Obama victory, which would mean support for the Fed's dollar-bearish QE3 program.
  • Dec WTI crude oil prices this morning are down -0.74 (-0.83%) and Dec gasoline is down -0.0242 (-0.90%) as the markets give back some of yesterday's sharp gains. Dec crude oil and gasoline prices on Tuesday closed sharply higher: CLZ2 +3.06 (+3.57%), RBZ2 +0.0787 (+3.00%). Bullish factors included general commodity strength and the continued disruptions of gasoline supplies in the northeastern U.S. The market consensus for today's DOE report is for a +1.5 million barrel rise in crude oil inventories, a -1.5 million barrel drop in gasoline inventories, a -1.25 million barrel drop in distillate inventories, and a -1.5 point drop in the refinery utilization rate to 86.2% of capacity. However, today's report for the week ended Nov 2 will see severe disruptions from Hurricane Sandy, which made landfall on October 29.
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    Today's U.S. Earnings Reports Earnings reports (ranked by market cap): QCOM-Qualcomm (Consensus:$0.82), MDLZ-Mondelez (0.36%), TWX-Time Warner (0.82), PRU-Prudential Financial (1.67), KRFT-Kraft Foods (0.67), DVN-Devon Energy (0.69), CTL-Centurylink (0.58), CBS-CBS (0.60), CTSH-Cognizant (0.92), WLP-Wellpoint (1.83), WFM-Whole Foods (0.60), M-Macy's (0.30), BDX-Becton Dickinson (1.40), CLR-Contl Res (0.87), ETE-Energy Transfer (0.40), ATVI-Activision (0.08), PRGO-Perrigo (1.24), BAP-Credicorp (2.43), CXO-Concho Resources (1.04), CNP-Centerpoint Energy (0.34), MPEL-Melco Crown (0.17).
    Global Financial Calendar
    

    Wednesday 11/7/12
    United States
    0700 ET	Weekly MBA mortgage applications, previous -4.8% with purchase sub-index +0.5% and refi sub-index -6.0%.
    1030 ET	DOE Weekly Petroleum Status Report.
    1300 ET	Treasury auctions $24 billion in 10-year T-notes.
    1500 ET	Sep consumer credit expected +$10.6 bln, Aug +$18.123 bln.
    Euro-Zone
    0500 ET	Eurozone Sep retail sales expected -0.1% m/m and -0.8% y/y, Sep +0.1% m/m and -1.3% y/y.
    Germany
    0600 ET	German Sep industrial production expected -0.6% m/m and +0.1% y/y, Aug -0.5% m/m and -1.4% y/y.
    Japan
    1850 ET	Japan Sep machine orders expected -2.1% m/m and -4.9% y/y, Aug -3.3% m/m and -6.1% y/y.
    1850 ET	Japan Sep current account expected 761 bln yen, Aug 454.7 bln yen. Sep adjusted current account expected 206 bln yen, Aug 722.3 bln yen. Sep trade balance BOP basis expected -417 bln yen, Aug -644.5 bln yen.
    1850 ET	Japan Oct bank lending ex-trusts expected +1.1% y/y, Sep +1.2% y/y.
    2100 ET	Tokyo Oct average office vacancies, Sep 8.9%.
    2330 ET	Japan Oct bankruptcies, Sep -7.0% y/y.

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