Barchart Morning Call 1/28

Barchart Morning Call

BC - Mon Jan 28, 7:00AM CST

Overnight Developments

• March E-mini S&Ps this morning are little changed as the market looks ahead to today's durable goods and pending home sales reports, Wednesday's FOMC meeting, and Friday's Jan payroll report (expected +160,000). The global stock markets today received some support from weekend news of a strong Chinese industrial profits report. European stocks this morning are slightly higher by +0.08%. Asian stocks today closed mixed with Japan down -0.94% but with Hong Kong up +0.39% and China up sharply by +3.12% on the industrial profits report. Commodity prices are mildly lower this morning by -0.27%. March crude oil is down -0.08%, March gasoline is down -0.51%, Feb gold is down -0.14%, March copper is down -0.21%, and agriculture prices are mixed. The dollar index is mildly higher by +0.19% while EUR/uSD is down -0.22%. USD/JPY is down -0.10%. March 10-year T-notes are up +0.5 tick after last Friday's steep decline.
• Fitch said this morning that the 4-month debt limit suspension until mid-May removes the near-term risk to America's AAA credit rating. Fitch has backed away from its previous statement that a failure to raise the debt ceiling would lead to a review of America's sovereign rating.
• China industrial profits were reported on Saturday at +5.3% y/y for the year-to-date through December, which was up from +3.0% y/y in November. The Dec figure itself rose sharply by +17.3% y/y after the +22.8% y/y in November. The report provided additional evidence of a pickup in the Chinese economy.
• Eurozone Dec M3 rose +3.3% y/y, which was less than market expectations of +3.9% and down from November's +3.8% y/y. The weak M3 report by itself is not likely to have much impact on ECB policy, which is expected to remain unchanged over at least the next few months as the ECB waits to see if the Eurozone economy can slowly emerge from recession this year as it expects.
• The Japanese government said that tax revenue in the next fiscal year that begins April 1 will total 43.1 trillion yen ($474 billion) and will exceed bond issuance of 42.85 trillion yen for the first time in four years. The government optimistically raised its GDP forecast for fiscal 2013/14 to +2.5% from its August forecast of +1.7%, which led to higher tax revenue forecasts.
• Mark Carney, who will become the head of the Bank of England in July, said over the weekend at the World Economic Forum that monetary policy in developed countries is not "maxed out" and that central bankers can be flexible in meeting inflation goals.
  Market Comments
  • March E-mini S&Ps this morning are slightly higher by +0.50 points (+0.03%) on support from expectations for a generally favorable earnings week and from the weekend news of strong Chinese industrial profits. The S&P 500 index on Friday closed moderately higher on continued favorable earnings reports and news that Eurozone banks will pay off early more of their long-term 3-year LTRO loans from the ECB than earlier thought. Closes: S&P 500 +0.54%, Dow Jones +0.51%, Nasdaq +0.48%. U.S. Dec new home sales fell -7.3% to 369,000, which was weaker than market expectations of 385,000, although Nov was revised higher by 5.6% to 398,000 from 377,000. The ECB said that Eurozone banks will pay off 137.2 billion euros of their 3-year LTRO loans next week at the first opportunity to make early repayment. That was well above the market consensus of 80 billion euros and indicated that Eurozone banks in the aggregate are in better shape than earlier thought. During the worst of the Eurozone debt crisis, the ECB provided about 1 trillion euros of 3-year loans to banks through its "Longer-Term Refinancing Operations" program.
  • March 10-year T-notes this morning are slightly higher by +0.5 tick as the market stabilizes from last Friday's plunge. March 10-year T-note prices on Friday closed sharply lower on reduced safe-haven demand on the improved health of Eurozone banks after news they will pay off more of their LTRO loans than earlier thought. Closes: TYH3 -26.5, FVH3 -14.
  • The dollar index this morning is mildly higher by +0.16 points (+0.19%). EUR/USD is down -0.0030 (-0.22%) USD/JPY is down -0.09 (-0.10%). The dollar index on Friday closed moderately lower as EUR/USD rallied fairly sharply on the news of larger-than-expected bank payoff of ECB LTRO loans. Closes: Dollar index -0.20 (-0.25%), EUR/USD +0.0087 (+0.65%), USD/JPY +0.58 (+0.64%).
  • March WTI crude oil this morning is down -0.08 (-0.08%) and March gasoline is down -0.0147 (-0.51%). Mar crude oil and gasoline Friday closed mixed with crude oil seeing some support from news that the Seaway pipeline is "running as expected," although an exact flow rate was not released. The recovery in the Seaway pipeline flow rate after recent problems should help curb oil inventories at Cushing where Nymex oil futures are priced. Crude oil and gasoline also received a boost from the improved economic prospects for Europe with the early Eurozone bank payoff of some ECB LTRO loans and with the stronger than expected German confidence report. Closes: CLH3 -0.07 (-0.07%), RBH3 +0.0131 (+0.46%).
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    Today's U.S. Earnings ReportsEarnings reports (ranked by market cap): CAT-Caterpillar (consensus $1.70), VMW-VMware (0.78), BIIB-Biogen Idec (1.46), YHOO-Yahoo (0.28), AEP-American Electric (0.46), STX-Seagate Technology (1.28), ROP-Roper Industries (1.46), PCL-Plum Creek Timber (0.29), CE-Celanese (0.63), BMC-BMC software (1.02), ILMN-Illumina (0.41), ZION-ZIONS Bancorp (4.11), NEU-Newmarket (4.11), GGG-Graco (0.60), STLD-Steel Dynamics (0.14), CR-Crane (0.96), RCII-Rent-A-Center (0.84), OLN-Olin (0.35), IRF-International Rectifier (-0.47%), ONB-Old National Bancorp (0.23).
    Global Financial Calendar

    Monday 1/28/13
    United States
    0830 ET	Dec durable goods orders expected +2.0% m/m, Nov +0.8%, Dec durable goods orders ex-transportation expected +0.8% m/m, Nov +1.6%. Dec non-defense ex-aircraft capital goods orders expected -1.0% m/m, Nov +2.7% m/m.
    1000 ET	Dec pending home sales expected +0.1% m/m and +12.5% y/y, Nov +1.7% m/m and +8.9% y/y.
    1030 ET	Jan Dallas Fed manufacturing activity expected 3, Dec 6.8.
    1100 ET	USDA weekly grain export inspections.
    1300 ET	Treasury auction of $35 billion in 2-year T-notes.
    Euro-Zone
    0400 ET	Eurozone Dec M3 expected +3.9% y/y, Nov +3.8% y/y.
    Germany
    0200 ET	German Dec import price index expected -0.1% M/M and +0.9% y/y, Nov unch m/m and +1.1% y/y.

    
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