Barchart Morning Call
Overnight Developments
Global Financial Calendar
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- Global stocks this morning are mostly higher with the Euro Stoxx 50 up +0.59% and Dec S&Ps up +15.80 points. Treasuries weakened and the dollar index fell to a 1-week low, while stocks and commodities rallied, with Nov crude and Dec copper at 1-week highs, after German Chancellor Merkel and French President Sarkozy said they will deliver a plan to recapitalize European banks and find a "durable" solution for Greece's debt load by the Nov 3 Group of 20 summit. The euro rose to a 1-week high against the dollar after German Chancellor Merkel said European leaders will do "everything necessary" to ensure that banks have enough capital. The first increase in German exports in 3 months also lifted European stocks after Aug German exports climbed +3.5% m/m, stronger than expectations of +1.1% m/m. Limiting gains in stocks however, was the -3.1 point drop in the Oct Euro-Zone Sentix investor confidence to a 2-1/4 year low of -18.5, weaker than expectations of -2.6 to -18.0.
- Asian stocks today closed mostly higher with Japan closed for holiday, China down -0.94%, Australia +0.92%, South Korea +0.24%, India +2.00%. China's Shanghai Stock Index resumed trading after a week-long holiday and fell to its lowest level in 1-1/4 years on speculation the government will maintain tighter monetary policy. The yuan appreciated to 6.3486 per dollar, the strongest level since China unified the official and market exchange rates at the end of 1993 amid speculation policy makers will tolerate gains after the U.S. said that China undervalues its currency. Other Asian stock markets advanced on optimism that European leaders will resolve the region's debt crisis and boost the earnings outlook for Asian exporters.
- December S&Ps this morning are trading up +15.80 points. The US stock market last Friday rallied up to 1-week highs after Sep U.S. non-farm payrolls rose more than expected, but shed its gains and closed lower on concern the European debt crisis will worsen after Fitch Ratings cut Italy's and Spain's government debt ratings: Dow Jones -0.18%, S&P 500 -0.82%, Nasdaq Composite -1.10%. Bearish factors included (1) concern the European sovereign-debt crisis will worsen after Fitch Ratings downgraded Italy and Spain's long-term foreign and local currency default ratings with a negative outlook, (2) the larger-than-expected drop in Sep U.S. manufacturing payrolls which posted their biggest decline in 13 months (-13,000 versus expectations of -1,000), (3) the unexpected decline in Aug U.S. consumer credit (-$9.501 billion versus expectations of +$8.000 billion), and (4) comments from former Fed Chairman Greenspan who said the fiscal situation in the U.S. is "very dangerous."
- Bullish factors included (1) the larger-than-expected increase in Sep U.S. non-farm payrolls along with the upward revision to Aug payrolls (Sep +103,000 versus expectations of +58,000 and Aug revised up to a gain of +57,000 from the original report of unchanged), (2) the unexpected increase in Sep average U.S. weekly hours, which may lead to additional hiring in the months ahead (+0.1 to 34.3 hours versus expectations of unchanged at 34.2 hours), and (3) optimism that European banks may get help from the debt crisis after the European Commission said it will make proposals in the coming days on possible coordination of bank recapitalization in the EU.
- Microchip Technology (MCHP) rose 2.3% in European trading after a weekend article in Barrons said the company's share price may climb to $40 as it continues to profit and pay dividends amid difficult economic conditions.
- General Electric (GE) gained 1.4% in European trading after it announced its first investment in Indian renewable generation after its GE Energy Financial Services unit said it will build wind farms with Greenko Group Plc for $115 million.
- December 10-year T-notes this morning are down -18.5 ticks. T-note prices last Friday closed lower for the fourth consecutive session after Sep U.S, payrolls rose more than expected, although prices recovered from their worst levels after Fitch Ratings downgraded Italy's and Spain's credit ratings: TYZ11 -20, FVZ11 -11.2, EDH12 -3.0. Bearish factors included (1) the larger-than-expected increase in Sep U.S. non-farm payrolls along with the upward revision to Aug (Sep +103,000 versus expectations of +58,000 and Aug revised up to a gain of +57,000 from the originally reported unchanged), (2) the unexpected increase in Sep average U.S. weekly hours, which may lead to additional hiring in the months ahead (+0.1 to 34.3 hours versus expectations of unchanged at 34.2 hours), and (3) reduced safe-haven demand from the European debt crisis after the European Commission said it will make proposals in the coming days on possible coordination of bank recapitalization in the EU. Bullish factors included (1) increased safe-haven demand for Treasuries after Fitch Ratings downgraded Italy and Spain's long-term foreign and local currency default ratings with a negative outlook and (2) comments from Atlanta Fed President Lockhart who said "the economy currently is weak" and that inflation will subside.
- The dollar index this morning is lower and at a 1-week low with the dollar/yen -0.01 yen and the euro/dollar +2.15 cents. The dollar index last Friday settled slightly higher as the euro fell after Fitch downgraded Italy's and Spain's debt ratings: Dollar Index +0.092, USDJPY +0.008, EURUSD -0.00614. Bullish factors included (1) the action by Fitch to downgrade Spain's long-term foreign and local currency default ratings to AA- from AA+ and to cut Italy's foreign and local currency long-term issuer default ratings to A+ from AA- with a negative outlook for both citing a vulnerability to the "Euro-Zone crisis" and (2) increased European demand for dollars after the 3-month dollar Libor rate rose for the 21st consecutive day to 0.39111%, a 13-3/4 month high, and the dollar Libor-OIS spread, a gauge of banks' reluctance to lend, expanded to 30.51 bp, the widest in 14-1/2 months. Bearish factors included (1) reduced safe-haven demand for the dollar after Sep U.S payrolls rose more than expected and eased recession fears and (2) the smaller-than-expected decline in Aug German industrial production (-1.0% m/m versus expectations of -2.0% m/m), which is euro supportive.
- Nov crude oil prices this morning are up +$1.52 a barrel and Nov gasoline is +2.88 cents per gallon. Crude oil and gasoline prices last Friday finished mixed after a larger-than-expected increase in Sep U.S. payrolls reduced recession concerns and lifted crude, but the unchanged Sep U.S. unemployment rate undercut gasoline: CLX11 +$0.39, RBX11 -3.84. Bullish factors included (1) the weaker dollar, which boosts investment demand in commodities, (2) the larger-than-expected increase in Sep U.S. payrolls, which reduced recession concerns, and (3) the smaller-than-expected decline in Aug German industrial production, which indicates stronger-than-expected fuel consumption. Bearish factors included (1) the unchanged 9.1% Sep U.S. unemployment rate, which bolsters concern that not enough jobs are being created to spur economic growth and fuel demand and (2) the slide in the equity market, which reduces confidence in the economic outlook and energy demand.
Global Financial Calendar
| Monday 10/10/11 | |
|---|---|
| United States | |
| n/a | U.S. government offices closed for Columbus Day; Equities and commodities trade regular hours. No floor trading for CME forex and interest rate products, but regular Globex hours. |
| Germany | |
| 0200 ET | Aug German trade balance expected +9.0 billion euros, Jul +10.4 billion euros. Aug exports expected +1.1% m/m, Jul -1.9% m/m. Aug imports expected +0.6%, Jul -0.5% m/m. |
| France | |
| 0230 ET | Sep Bank of France business sentiment, Aug unchanged at 98. |
| 0245 ET | Aug French industrial production expected -0.7% m/m and +2.3% y/y, Jul +1.5% m/m and +3.7% y/y. |
| 0245 ET | Aug French manufacturing production expected +0.2% m/ma and +3.7% y/y, Jul +1.4% m/m and +4.2% y/y. |
| Euro-Zone | |
| 0430 ET | Oct Euro-Zone Sentix investor confidence expected -2.6 to -18.0, Sep -1.9 to -15.4. |
| 1800 ET | ECB President Jean-Claude Trichet speaks at a hearing on ESRB in Brussels. |
| United Kingdom | |
| 1901 ET | Sep U.K. RICS house price balance expected -24%, Aug -23%. |
| Canada | |
| n/a | Canadian markets closed for Thanksgiving. |
| Japan | |
| n/a | Japanese markets closed for Health-sports Day. |
