Barchart Morning Call 8/28

Barchart Morning Call

BC - 1 hr 57 mins ago

Overnight Developments

• Dec E-mini S&Ps this morning are mildly lower by -0.26% on the -0.46% sell-off in European stocks, some nervousness ahead of today's release of the Spanish bank stress tests, and today's -1.3% m/m decline in Japanese industrial production. Japanese stocks closed -0.89% but other key Asian stock markets closed higher. Commodity prices are slightly higher by +0.09% this morning with Nov crude oil +0.14%, Dec gold +0.08%, Dec copper +0.29%, and agricultural prices trading mostly lower. The dollar index is slightly lower by -0.03%. Sep 10-year T-note prices are up 8 ticks.
• The Chinese stock market closed higher today by +1.84% even though there was no announcement of the market support measures that were rumored on Thursday. The Chinese markets are closed next week for a holiday. The Chinese central bank this week injected a huge 365 billion yuan ($58 billion) into the financial system to ease banks through the end-quarter statement date and next week's holiday.
• The Spanish 10-year bond yield, which fell 12 bp to 5.91% yesterday, rose back above 6.00% today as the market awaits today's results of the Spanish bank stress tests, which will provide a final bailout figure for Spanish banks. The latest estimate of 62 billion euros could be revised lower. Spain already has a line of credit for up to 100 billion to clean up its banks but the details of how the bailout will be structured are still up in the air.
• The German Aug retail sales report of +0.3% m/m and -0.8% y/y was slightly stronger than market expectations of +0.2% m/m and -0.9% y/y.
• The Eurozone Sep CPI of +2.7% y/y was up from +2.6% in Aug and was stronger than market expectations of +2.4% y/y.
• The UK Sep GfK consumer confidence index report of -28 was in line with market expectations and up by 1 point from -29 in August.
• Japan's Aug unemployment rate fell to 4.2% from 4.3% in July, which showed a slightly stronger labor market than market expectations for a report of unchanged.
• Japan's Aug national CPI of -0.4% y/y was unchanged from July and was slightly stronger than market expectations for a decline to -0.5% y/y. The Tokyo Sep CPI of -0.7% y/y was unchanged from August's -0.7% y/y and was slightly weaker than market expectations of -0.6% y/y.
• Japan's Aug retail trade report of +1.5% m/m and +1.8% y/y was much stronger than market expectations of -0.3% m/m and -0.3% y/y.
• Japan's Aug industrial production report of -1.3% m/m and -4.3% y/y was much weaker than market expectations of -0.5% m/m and -3.4% y/y.
• China's Communist Party will hold its 18th congress starting Nov 8 where Vice President Xi Jinping is expected to take over from President Hu Jintao as party general secretary and then become China's president next year. The once-a-decade leadership change is thought to be holding up Chinese stimulus measures.
  Market Comments
  • Dec E-mini S&Ps this morning are mildly lower by -3.75 points (-0.26%) due to the 0.46% sell-off in the Euro Stoxx 50 index and today's unexpected 1.3% drop in Japanese industrial production. The poor Japanese industrial production report was tied once again in part to weaker Chinese and European economic growth. The S&P 500 index on Thursday closed moderately higher: S&P 500 +0.96%, Dow Jones +0.54%, Nasdaq 100 +1.44%. Bullish factors included speculation that China will soon announce a major fiscal stimulus program, relief that Spanish Prime Minister Rajoy plans to plow ahead with his 2013 austerity budget, and the -26,000 decline in initial unemployment claims. The market shook off bearish U.S. economic data that included the downward revision in Q2 GDP to +1.3% from +1.7%, the 13.2% plunge in Aug durable goods orders (although Aug non-defense capital goods orders excluding defense rose +1.1%, which is the more specific indicator of capital spending), and the 2.6% decline in Aug pending home sales.
  • Dec 10-year T-notes this morning are up 8 ticks due to weak U.S. and European stock index markets. Dec 10-year T-note prices on Thursday closed moderately lower and fell from Wednesday's 3-week high: TYZ2 -5, FVZ2 -0.75. T-note prices were undercut by reduced safe-haven demand with the rally in global stocks and improved sentiment on Spain.
  • The dollar index this morning is slightly lower by -0.03 points (-0.03%), while EUR/USD is up +0.0009 (+0.07%) and USD/JPY is virtually unchanged. The dollar index on Thursday closed mildly lower: Dollar index -0.33 (-0.41%), EUR/USD +0.0040 (+0.31%), USD/JPY -0.14 (-0.18%). The dollar index was undercut by reduced safe-haven demand with the rally in global stocks. EUR/USD was boosted by Spanish Prime Minister Rajoy's presentation of his 2013 budget that will cut the budget deficit to the 2013 target of 4.5% of GDP from the 2012 target of 6.3% of GDP.
  • Nov WTI crude oil prices this morning are up +0.13 (+0.14%) and Nov gasoline is up +0.0214 (+0.74%). Nov crude oil and gasoline prices on Thursday closed higher: CLX2 +2.11 (+2.34%), RBV2 +0.0263 (+0.92%). Crude oil and gasoline prices rallied on (1) the weaker dollar, (2) improved economic sentiment with the global rally in stocks and the speculation about a major Chinese stimulus program, and (3) technical strength with short-covering in crude oil and a new 1-1/2 year high in gasoline prices. Gasoline prices have rallied sharply in the past week due to a particularly tight gasoline inventory situation in the Northeast where inventories have dropped to a 4-year low. That low inventory level is due to refinery closures in the U.S., Canada and the UK and a drop in U.S. gasoline imports to a 10-year low for this time of year.
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    Today's U.S. Earnings Reports Earnings reports (ranked by market cap): WAG-Walgreen (Consensus:$0.56), FINL-Finish Line (0.44), AM-American Greeting (0.14).
    Global Financial Calendar
    

    Friday 9/28/12
    United States
    0830 ET	Aug personal income expected +0.2% m/m, July +0.3% m/m. Aug personal spending expected +0.5% m/m, July +0.4% m/m.
    0830 ET	Aug PCE deflator expected +0.5% m/m and +1.5% y/y, July unchanged m/m and +1.3% y/y. Aug core PCE deflator expected +0.1% m/m and +1.6% y/y, July unchanged and +1.6% y/y.
    0830 ET	USDA Quarterly Grain Stocks report.
    0900 ET	Sep Milwaukee NAPM index, Aug 42.9.
    0945 ET	Sep Chicago Purchasing Managers index expected unch at 53.0, Aug -0.7 to 53.0.
    0955 ET	Final-Sep U.S. consumer confidence index (University of Michigan) expected -0.2 to 79.0, early-Sep +4.9 to 79.2.
    1500 ET	USDA quarterly Hog & Pigs report.
    Japan
    0000 ET	Japan Aug vehicle production, July +16.7% y/y.
    0100 ET	Japan Aug construction orders, July +8.0% y/y.
    0100 ET	Japan Aug housing starts expected -7.5% y/y at 872,000, July -9.6% y/y at 870,000.
    United Kingdom
    0430 ET	UK July index of services expected +1.5% m/m and +0.1% 3mo/3mo, June -1.7% m/m and -0.1% 3mo/3mo.
    0500 ET	Eurozone Sep CPI, Aug +2.6% y/y.
    Germany
    0200 ET	German Aug retail sales expected +0.2% m/m and -0.9% y/y, July -1.0% m/m and -1.0% y/y.
    Euro-Zone
    0500 ET	Eurozone Sep CPI expected +2.4% y/y, Aug +2.6% y/y.
    CHI
    2230 ET	China Sep HSBC manufacturing PMI, Aug 47.6.

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Barchart Morning Call 12/22

Barchart Morning Call

Thu, 22 Dec 2011 07:00:00 -0600

Overnight Developments

• Global stocks this morning are mixed with the Euro Stoxx 50 up +1.11% and Mar S&Ps up +6.50 points. The dollar index is lower which has boosted most commodities with crude oil at a 1-week high. The markets are awaiting a meeting of the European Systemic Risk Board later this morning in which ECB President Draghi and BOE Governor King are scheduled to speak. European stocks received a boost after Q3 U.K. GDP was revised up to a gain of +0.6% q/q from the previously reported +0.5% q/q. Gains in the euro were limited and the yield on 10-year Greek bonds rose +16 bp to 35.94% after it was reported that 3 people with knowledge of the matter said Greece's creditors are resisting pressure from the IMF to accept bigger losses on holdings of Greek government debt. The IMF is pushing for creditors to accept a smaller coupon in order to reduce Greece's debt-to-GDP ratio to 120% by 2020, a key element agreed to by EU leaders back in Oct.
• Asian stocks today closed mixed with Japan down -0.77%, China +0.09%, Australia -1.18%, South Korea -0.05%, India +0.82%. Most Asian stock markets weakened after European banks sought a record amount of cash from the ECB and U.S. existing home sales from last year were revised lower, which dampened the earnings outlook for Asian exporters. Japanese technology stocks weakened and led the overall market lower after a 4.5% decline in Advantest, the world's biggest maker of memory-chip testers, when JPMorgan Chase cut its ratings on the stock to "underweight" from "neutral," citing weak orders. China's Shanghai Stock Index fell to a fresh 2-1/2 year low on liquidity concerns after the 7-day repurchase rate jumped 19 bp to a 3-week high of 3.79% as speculation rises that banks will hoard cash to meet year-end capital requirements and customer withdrawals. The RBI signaled that economic growth in India, Asia's third-largest economy, may grow less than previously estimated in the year through March after RBI Governor Subbarao said the central bank will give a revised growth estimate on Jan 24 "and by all expectations that number will be lower than 7.6%," the current growth estimate.

Overnight U.S. Stock News

• March S&Ps this morning are trading up +6.50 points. The US stock market yesterday settled mixed as a rally in energy stocks led the broader market higher but technology stocks settled lower when Oracle reported weaker-than-expected earnings results: Dow Jones +0.03%, S&P 500 +0.19%, Nasdaq Composite -0.99%. Bullish factors included (1) the action by the ECB to loan European banks a record 489 billion euros in 3-year loans, which temporarily reduced European debt concerns and boosted stocks, (2) the +4.0% m/m increase in Nov U.S. existing home sales to a 10-month high of 4.42 million, stronger than expectations of +2.2% m/m, and (3) strength in energy producers after crude oil rallied sharply when the DOE reported that weekly crude inventories fell more than expected to near a 3-year low.
• Bearish factors included (1) carry-over weakness from a slide in European equities after Italian and Spanish bond yields rose and Dec Euro-Zone consumer confidence fell more than expected to a 2-1/3 year low on speculation that ECB measures to support the European banking system will be insufficient to stem the region's debt crisis, (2) a slide in technology stocks after Oracle plunged and dragged the entire sector lower when it reported weaker than expected Q2 earnings, and (3) the action by the National Association of Realtors to revise down the number of U.S. existing homes sold in 2010 by -15% to 4.19 million from the originally reported 4.91 million, which signals the U.S. housing crisis was worse than estimated.
• Tibco Software (TIBX) rose 3.4% in European trading after the company reported Q4 adjusted earnings of 42 cents a share, stronger than analysts' estimates of 35 cents.

Today's Market Focus

• March 10-year T-notes this morning are up +3.5 ticks. T-note prices yesterday fluctuated on either side of unchanged and settled lower as slack demand for the Treasuries 7-year T-note auction offset an increase in safe-haven demand after stock prices declined: TYH2 -6.5, FVH2 -4.7, EDM2 unchanged. Bearish factors included (1) the action by the ECB to loan European banks a record 489 billion euros in 3-year loans, which temporarily eased European debt concerns and reduced safe-haven demand for Treasuries, (2) the +4.0% m/m increase in Nov U.S. existing home sales to a 10-month high of 4.42 million, stronger than expectations of +2.2% m/m, (3) slack demand for the Treasury's $29 billion auction of 7-year T-notes that had a bid-to-cover ratio of 2.68, below the 12-auction average of 2.84, and (4) overall supply pressures after the Treasury auctioned $177 billion in government debt over the past 2 weeks, the most ever for that time frame. Bullish factors included (1) the action by the National Association of Realtors to revise down the number of U.S. existing homes sold in 2010 by -15% to 4.19 million from the originally reported 4.91 million, which signals the U.S. housing crisis was worse than estimated and (2) increased safe-haven demand for Treasuries as the stock market declined.
• The dollar index this morning is lower with the dollar/yen +0.03 yen and the euro/dollar +0.22 cents. The dollar index yesterday recovered from a 1-week low and settled higher on speculation that ECB measures to support European banks won't be enough to stem the region's sovereign-debt crisis: Dollar Index +0.140, USDJPY +0.168, EURUSD -0.00355. Bullish factors included (1) weakness in the euro which retreated from a 1-week high against the dollar and settled lower after European government bond yields rose and (2) increased safe-haven demand for the dollar as European and U.S. equity markets tumbled on speculation that ECB measures to support European banks won't be enough to stem the region's sovereign-debt crisis. Bearish factors for the dollar included (1) early strength in the euro after the ECB awarded 489 billion euros in 1,134 day loans, the most ever in a single operation and more than estimates of 293 billion euros to a total of 523 Euro-Zone lenders, which may help avoid a liquidity squeeze and reduce the safe-haven demand for the dollar and (2) the action by the National Association of Realtors to revise down the number of U.S. existing homes sold in 2010 by -15% to 4.19 million from the originally reported 4.91 million, which signals the U.S. housing crisis was worse than estimated.
• Feb crude oil prices this morning are up +38 cents a barrel at a 1-week high and Feb gasoline is -0.19 of a cent per gallon. Crude oil and gasoline prices yesterday rallied for a third day after weekly DOE crude supplies fell more than expected to a nearly 3-year low and total U.S. petroleum demand increased: CLG12 +$1.43, RBG12 +3.75. Bullish factors included (1) the plunge in weekly DOE crude inventories to a nearly 3-year low (-10.57 million bbl to 323.6 million bbl versus expectations of -2.12 million bbl, (2) the unexpected decline in weekly DOE gasoline supplies (-412,000 bbl versus expectations of a +1.5 million bbl build), (3) increased demand after total U.S. petroleum demand for the week ended Dec 16 rose +5% w/w to 19.3 million barrels a day, and (4) reduced European debt concerns after the ECB lent European banks a record amount for 3 years, which may help avoid a liquidity squeeze and help stem the region's debt crisis. Bearish factors included (1) a rebound in the dollar after the dollar index recovered from a 1-week low and settled higher, (2) weakness in the equity market, which curbs confidence in the economic outlook and energy demand, and (3) the greater-than-expected decline in Nov Japan exports along with the BOJ's assessment of the Japanese economy to "remain more or less flat for the time being," which signals reduced energy demand in the world's third-biggest crude oil consumer.

Today's U.S. Earnings Reports Earnings reports (confirmed releases, sorted by mkt cap): NEOG-Neogen (BEST earnings consensus $0.27), AM-American Geetings (0.81), DMND-Diamond Foods (0.72), CAMP-CalAmp (0.07), LUB-Luby's (-0.05).
Global Financial Calendar

Thursday 12/22/11
United States
0830 ET	Weekly initial unemployment claims expected +14,000 to 380,000, previous -19,000 to 366,000. Weekly continuing claims expected -3,000 to 3.600 million, previous +4,000 to 3.603 million.
0830 ET	Revised Q3 GDP, previous +2.0% annualized. Qs personal consumption, previous +2.3%. Q3 GDP price index, previous +2.5%. Q3 core PCE, previous +2.0% q/q.
0955 ET	Final Dec U.S. University of Michigan consumer confidence expected +0.3 to 68.0, previous +3.6 to 67.7.
1000 ET	Nov leading indicators expected +0.3%, Oct +0.9%.
1000 ET	Oct FHFA house price index purchase only expected +0.2% m/m, Sep +0.9% m/m.
1630 ET	Weekly money supply report and Fed balance sheet.
United Kingdom
0430 ET	Revised Q3 U.K. GDP, previous +0.5% q/q and +0.5% y/y.
0430 ET	Revised Q3 U.K. total business investment, previous -1.4% q/q and +0.3% y/y.

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