Barchart's Morning Call 1/31

Barchart Morning Call

BC - Thu Jan 31, 7:00AM CST

Overnight Developments

• March E-mini S&Ps this morning are trading slightly lower on continued overhang from yesterday's weak U.S. Q4 GDP report of -0.1% and a -0.86% sell-off in European stocks this morning. The German unemployment report showed a slightly stronger labor market than expected and the UK consumer confidence index improved, but German retail sales were weak and the Japan industrial production report was weaker than expected. Asian stocks closed mostly lower today. Japan closed up +0.22% but Hong Kong closed down -0.39% and China closed down -0.07%. Commodity prices are mildly lower by -0.13%. March crude oil is down -0.26%, March gasoline is down -0.12%, Feb gold is down -0.23%, March copper is up +0.05%, and agriculture prices are trading mostly lower. The dollar index is little changed while EUR/USD is down -0.10% and USD/JPY is down -0.03%. March 10-year T-note prices are up 10 ticks.
• The Japan Dec industrial production report of +2.5% m/m and -7.8% y/y was weaker than market expectations of +4.1% m/m and -5.6% y/y.
• Japan's Dec vehicle production weakened sharply to -17.2% y/y from -8.4% y/y in November. Japan's vehicle sales continue to be hurt by a partial Chinese boycott of Japanese products tied to the dispute over the islands in the East China Sea.
• The UK Jan GfK consumer confidence index improved by 3 points to -26 from -29 in December and was slightly better than market expectations for a 1 point improvement to -28.
• German Dec retail sales fell -1.7% m/m and -4.7% y/y, which was much weaker than market expectations of -0.1% m/m and -1.5% y/y.
• German Jan unemployment fell by -16,000, which showed a stronger labor market than market expectations for an +8,000 increase. Unemployment fell slightly by a revised -2,000 in December. The German Jan unemployment rate fell by -0.1 point to 6.8% from 6.9% in December.
  Market Comments
  • March E-mini S&Ps this morning are trading -1.75 points (-0.12%) as the market continues to be undercut by yesterday's weak GDP report of -0.1% and by nervousness ahead of tomorrow's Jan payroll report. The S&P 500 index on Wednesday fell back from a 5-year high and closed lower on long liquidation after U.S. Q4 GDP unexpectedly contracted -0.1% (q/q annualized), weaker than expectations of +1.1% and the slowest pace of growth since Q2 2009. Closes: S&P 500 -0.39%, Dow Jones -0.32%, Nasdaq -0.18%. Bullish factors included the +192,000 increase in the Jan ADP employment change, stronger than expectations of +165,000, along with continued strong quarterly stock earnings results as 75% of the 193 companies in the S&P 500 that reported earnings so far this season have beaten profit estimates. Further support for stocks came from the Fed's post FOMC statement in which the Fed restated its commitment to asset purchases "if the outlook for the labor market does not improve substantially."
  • March 10-year T-notes this morning are up 10 ticks as the market sees continued support from yesterday's weak U.S GDP report. March 10-year T-note prices on Wednesday closed mixed as the 10-year T-note yield climbed to a 9-month high of 2.035% on reduced safe-haven demand after the S&P 500 posted a fresh 5-year high and after the Jan ADP employment change rose by +192,000. However, prices rebounded from their worst levels after U.S. Q4 GDP unexpectedly contracted and after the Fed restated its commitment to asset purchases in its post-FOMC statement. Closes: TYH3 -1.0, FVH3 +1.25.
  • The dollar index this morning is slightly higher by +0.05 (+0.06%) while EUR/USD is down -0.0014 (-0.10%) and USD/JPY is down -0.03%. The dollar index on Wednesday slumped to a 5-week low as an unexpected contraction in U.S. Q4 GDP fueled speculation of further dollar-negative Fed stimulus, while EUR/USD surged to a 14-month high after Eurozone Jan economic confidence rose by 2.2 points to a 7-month high of 89.2. USD/JPY pushed up to a fresh 2-1/2 year high after comments from Kikuo Iwata, a potential candidate to become the next BOJ governor, who said the BOJ's best bet for achieving its inflation target is to "more than double" the assets in its current account, which suggests he favors additional quantitative easing measures by the BOJ that would be bearish for the yen. Closes: Dollar index -0.288 (-0.36%), EUR/USD +0.00754 (+0.55%), USD/JPY +0.379 (+0.41%).
  • March WTI crude oil this morning is mildly lower by -0.25 (-0.26%) and March gasoline is down -0.0036 (-0.12%). Mar crude oil and gasoline Wednesday closed higher as Mar crude posted a 4-1/4 month high and Mar gasoline climbed to a 4-month high. Bullish factors of a weak dollar and an unexpected decline in weekly DOE gasoline inventories were overshadowed by the bearish factors of an unexpected contraction in U.S Q4 GDP and a larger-than-expected build in weekly DOE crude supplies. Weekly DOE crude supplies rose +5.95 million bbl, more than double expectations for a +2.5 million bbl increase, gasoline inventories unexpectedly fell -956,000 bbl, weaker than expectations of a +1.0 million bbl build, while distillate supplies fell -2.32 million bbl, more than expectations of a -500,000 bbl draw. Closes: CLH3 +0.37 (+0.38%), RBH3 +0.0569 (+1.91%).
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    Today's U.S. Earnings ReportsEarnings reports (ranked by market cap): UPS-UPS (consensus $1.38), OXY-Occidental Petroleum (1.66), MO-Altria (0.55), MA-Mastercard (4.80), CL-Colgate-Palmolive (1.40), EPD-Enterprise (0.65), DOW-Dow Chemical (0.34), D-Dominion (0.69), VIAB-Viacom (0.90), TWC-Time Warner (1.55), TMO-Thermo Fisher (1.28), MCK-McKesson (1.63), CB-Chubb (-0.46), BX-Blackstone Group (0.47), HSY-Hersey (0.75), PCAR-Paccar (0.68), SHW-Sherwin-Williams (1.16), AET-Aetna (0.94), CAM-Cameron International (0.95), MJN-Mead Johnson (0.68), XEL-Xcel Energy (0.28), ZMH-Zimmer Holdings (1.49), IVZ-Invesco (0.47), WYNN-Wynn Resorts (1.27), CNH-CNH Global (0.70), EMN-Eastman Chemical (1.19), PFG-Principal Financial (0.74).
    Global Financial Calendar

    Thursday 1/31/13
    United States
    0730 ET	Jan Challenger job cuts, Dec -22.1% y/y.
    0830 ET	Weekly initial unemployment claims expected +20,000 to 350,000, previous -5,000 to 330,000. Weekly continuing claims expected +14,000 to 3.171 mln, previous -71,000 to 3.157 mln.
    0830 ET	Q4 employment cost index expected +0.5%, Q3 +0.4%.
    0830 ET	Dec personal spending expected +0.3%, Nov +0.4%. Dec personal income expected +0.8%, Nov +0.6%.
    0830 ET	Dec PCE deflator expected unch m/m and +1.4% y/y, Nov -0.2% m/m and +1.4% y/y. Dec core PCE deflator expected +0.1% m/m and +1.4% y/y, Nov unch m/m and +1.5% y/y.
    0830 ET	USDA weekly Export Sales.
    0900 ET	Jan Milwaukee NAPM.
    0945 ET	Jan Chicago purchasing managers index expected +0.5 to 50.5, Dec -0.2 to 50.0.
    Japan
    0000 ET	Japan Dec housing starts expected +13.5% y/y to 895,000, Nov +10.3% y/y to 907,000.
    0000 ET	Japan Dec construction orders, Nov -2.1% y/y.
    1830 ET	Japan Dec jobless rate expected 4.1%, Nov 4.1%. Dec job-to-applicant ratio expected 0.8, Nov 0.8.
    1830 ET	Japan Dec overall household spending expected -0.2% y/y, Nov +0.2% y/y.
    Germany
    0200 ET	German Dec retail sales expected -0.1% m/m and -1.5% y/y, Nov +0.9% m/m and -0.9% y/y.
    0355 ET	German Jan unemployment change expected +8,000, Dec +3,000. Jan unemployment rate expected 6.9%, Dec 6.9%.
    0800 ET	German Jan CPI expected -0.4% m/m and +2.0% y/y, Dec +0.9% m/m and +2.1% y/y. German Dec EU-harmonized CPI expected -0.5% m/m and +2.0% y/y, Nov +0.9% m/m and +2.0% y/y.
    Euro-Zone
    0500 ET	Eurozone Jan CPI, Dec +2.2% y/y.
    United Kingdom
    0200 ET	UK Jan nationwide house prices expected +0.2% m/m and -0.3% y/y, Dec -0.1% m/m and -1.0% y/y.
    CHI
    2000 ET	China Jan manufacturing PMI expected +0.4 to 51.0, Dec unch at 50.6.
    2045 ET	China HSBC Jan manufacturing PMI expected +0.5 to 52.0 from flash report of 51.5, Jan flash report +1.0 to 51.5 from Dec's 50.5.

    
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