BC - Mon Apr 23, 7:00AM CDT
Overnight
Developments
- Global stock and commodity prices retreated with June E-mini S&Ps down
-14.25 points and the Euro Stoxx 50 down -1.77%. Weakness in global
manufacturing sent stocks and commodities lower, with gold at a 2-week low,
while the euro fell and 10-year T-note yields tumbled to a 1-3/4 month low on
political uncertainty after the Dutch government split and French President
Sarkozy lost ground in elections. Apr Chinese manufacturing activity contracted
for a sixth month according to the Apr HSBC manufacturing PMI, while the Apr
Euro-Zone PMI composite unexpectedly fell -1.7 to 47.4, weaker than expectations
of a +0.2 increase to 49.3 as it contracted by the most in 5 months. The extra
yield investors demand to hold Dutch 10-year bonds over German bunds rose to a
3-year high on speculation the Netherlands ill need to hold early elections
after Dutch Prime Minister Rutte failed to reach an agreement with a coalition
party over austerity measures. Credit-default swaps to insure French government
debt rose to a 3-month high after French President Sarkozy failed to win the
first round of elections that forces him to a run-off May 6 with challenger
Francois Hollande. The rise in popularity with the anti-euro National Front,
which came in third in elections, suggests that negative-Europe sentiment may
intensify ahead of the final round of elections next month. The euro also
weakened against the dollar after IMF Managing Director Lagarde raised only $430
billion in pledges to help safeguard the global economy at the IMF spring
meetings over the weekend, lower than her $600 billion goal as the U.S. declined
to participate and Canada proposed making it harder for Europe to tap aid.
- Asian stocks today closed lower with Japan down -0.20%, China -0.79%,
Australia -0.32%, South Korea -0.07%, India -1.60%. Asian stocks fell on weak
earnings results from companies such as South Korea's Daewoo Engineering and
Japan's Tokyo Steel Manufacturing, while a manufacturing survey pointed to a
deepening economic slowdown in China. The Apr HSBC flash manufacturing PMI rose
+0.8 to 49.1, which suggests Chinese manufacturing activity will contract for a
sixth month. Japanese power companies slumped after the Nikkei newspaper
reported that 54% of the population was critical of the government's assessment
that it was safe to restart 2 of Kansai Electric's idled nuclear reactors.
Chinese oil companies fell after China National Radio reported that the
government may cut gasoline and diesel prices next month because a slowing
economy has cut fuel demand, which would reduce refiners' earnings. Losses in
Chinese stocks were limited however; on speculation government officials will
adopt more policies to stimulate economic growth along with the prospects of
additional PBOC easing measures.
Overnight U.S. Stock News
- June E-mini S&Ps this morning are trading down -14.25 points as Chinese
and European manufacturing activity contracted along with political uncertainty
in France and the Netherlands. The U.S. stock market on Friday settled mostly
higher after an unexpected jump in German business sentiment to a 9-month high
boosted confidence in Europe's largest economy, while positive earnings results
from Microsoft, McDonalds and General Electric kept equity gains intact, but the
Nasdaq finished lower as a slump in Apple and IBM dragged down technology
stocks: Dow Jones +0.50%, S&P 500 +0.12%, Nasdaq Composite -0.24%. Another
positive for stocks was speculation that the IMF would receive additional
funding to help contain the European debt crisis when Russian Deputy Finance
Minister Storchak said that the G-20 will announce new funding for the IMF's
European reserves that will "satisfy" requests from IMF Managing Director
Lagarde. Limiting stock gains is the ongoing European debt crisis after
credit-default swaps to insure Spanish government debt climbed to a record high
503 bp and the cost of insuring Italian debt increased to 474 bp, a 3-month
high.
Today's Market
Focus
- June 10-year T-notes this morning are up +13.5 ticks on renewed safe-haven
demand as global equity markets slide. T-note prices Friday settled lower on
reduced safe-haven demand after global stocks rallied when Apr German IFO
business sentiment unexpectedly rose to a 9-month high: TYM2 -3.0, FVM2 -1.0.
Losses in Treasuries were limited however, on concern the European
sovereign-debt crisis may worsen after credit-default swaps to insure Spanish
government debt rose to an all-time high.
- The dollar index this morning is higher with USD/JPY -0.47 yen and EUR/USD
-0.46 cents. The dollar index on Friday tumbled to a 2-1/2 week low and settled
lower as an unexpected increase in Apr German IFO business climate to a 9-month
high boosted stocks and the euro and reduced the safe-haven demand for the
dollar: Dollar Index -0.367, USD/JPY -0.073, EUR/USD +0.00805. Other bearish
factors for the dollar included the fall in dollar funding costs for European
banks to an 8-1/2 month low along with expectations that the IMF will get
additional funds from member countries to help it protect the world economy
against more fiscal turmoil in Europe after IMF Managing Director Lagarde said
she expects the IMF's firepower to be "significantly" increased. Bullish factors
for the dollar were continued weakness in the yen which fell to a 1-1/2 week low
against the dollar on the prospects for additional asset-purchases by the BOJ
along with concerns the European sovereign-debt crisis may worsen after
credit-default swaps to insure Spanish government debt soared to an all-time
high.
- Jun crude oil prices this morning are trading down -85 cents a barrel and
Jun gasoline is down -1.15 cents per gallon. Crude oil and gasoline prices on
Friday settled mixed as crude closed higher after the dollar fell, German
business confidence rose to a 9-month high and as global equity markets
strengthened, but a narrowing of crack spreads fueled liquidation of long
gasoline positions and led gasoline lower: CLM12 +1.16, RBM2 -0.58. Another
positive factor for the energy markets was the report from the API that said
deliveries of gasoline, a measure of consumption, rose for a second month in Mar
as they climbed +3% y/y to 9.01 million barrels a day. A bearish factor that
limited gains in crude was the increase in credit-default swaps to insure
Spanish government debt to a record, which signals the European debt crisis may
worsen and slow economic growth and energy demand.
Today's U.S. Earnings Reports
Earnings reports (sorted by mkt cap): COP-ConocoPhillips (consensus $2.08),
TXN-Texas Instruments (0.29), ETN-Eaton (0.90), CHKP-Check Point Software
Technology (0.72), STI-SunTrust Banks (0.33), AMP-Ameriprise Financial (1.39),
XRX-Xerox (0.22), ROP-Roper Industries (1.04), NFLX-Netflix (-0.17),
ILMN-Illumina (0.32), WRB-WR Berkley (0.66), HAS-Hasbro (0.07), DHI-DR Horton
(0.04), BEAV-BE Aerospace (0.62), ZION-Zions Bancorporation (0.27).
Global Financial
Calendar
| Monday
4/23/12 |
| United
States |
| 1130 ET |
Weekly 3-mo and 6-mo T-bill
auctions. |
| Japan |
| 0100 ET |
Revised Feb Japan coincident index CI,
previous 93.7. Revised Feb leading index CI, previous 96.6. |
| 1950 ET |
Mar Japan corporate service price index
expected -0.6% y/y, Feb -0.6% y/y. |
| France |
| 0245 ET |
Apr French business confidence indicator
expected unchanged at 96, Mar +3 to 96. |
| 0300 ET |
Apr French PMI manufacturing expected
+0.7 to 47.4, Mar -3.3 to 46.7. |
| 0300 ET |
Apr French PMI services expected
unchanged at 50.1, Mar +0.1 to 50.1. |
| Germany |
| 0330 ET |
Apr German PMI manufacturing expected
+0.6 to 49.0, Mar -1.8 to 48.4. |
| 0330 ET |
Apr German PMI services expected +0.2 to
52.3, Mar -0.7 to 52.1. |
| Euro-Zone |
| 0400 ET |
Apr Euro-Zone PMI composite expected +0.2
to 49.3, Mar -0.2 to 49.1. |
| 1145 ET |
ECB Council member and Bundesbank
President Jens Weidmann speaks at the Economic Club in New
York. |
| Canada |
| 0830 ET |
Feb Canada wholesale sales expected -0.5%
m/m, Jan -1.0% m/m. |
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