BC - 2 hrs 51 mins ago
- Sep E-mini S&Ps this morning are up +0.33% as the market looks ahead to this morning's Aug payroll report, which is expected to show a +125,000 increase. Commodity prices are little changed on average today. Oct crude oil is up +0.33%, Dec gold is down -0.49%, Dec copper is up +1.76%, and agriculture prices are mixed. The Euro Stoxx 50 is up 1.22% this morning on carry-over support from yesterday's ECB bond-buying program. Chinese stocks rallied sharply today by 4.48% due to the Chinese government's announcement of a variety of infrastructure stimulus projects. The dollar index is down -0.22% today and EUR/USD is up +0.57% as safe-haven demand fades for dollars and as EUR/USD gets a further boost from the ECB's bond-buying program. Dec 10-year T-note prices are down 14.5 ticks on reduced safe-haven demand.
- The Spanish 10-year bond yield today fell by another 29 bp to 5.71%, adding to yesterday's 39 bp plunge. Today's Spanish yield level is the lowest since early May as the market reacts positively to yesterday's ECB announcement of its bond-buying program. The Italian 10-year bond yield today fell by 14 bp to 5.11%, adding to yesterday's 25 bp decline.
- German July exports rose +0.5% m/m, which was much better than market expectations of -0.5% m/m and was an improvement from June's -1.4% m/m. The markets are watching world export levels very carefully to assess the impact of weaker growth in the Eurozone countries. Germany's trade surplus narrowed to 16.9 billion euros from a revised 18.0 billion euros in June, which was a larger surplus than market expectations of 15.3 billion euros.
- The German July industrial production report of +1.3% m/m and -1.4% y/y was substantially better than market expectations of unchanged m/m and -3.0% y/y. The German Economy Ministry said that "Manufacturing production has revived somewhat. Orders so far this year are stable, although the mood there is subdued."
- The UK July manufacturing production report of +3.2% m/m and -0.5% y/y was stronger than market expectations of +1.8% m/m and -2.4% y/y. Meanwhile, the July industrial production report of +2.9% m/m and -0.8% y/y was stronger than market expectations of +1.5% m/m and -2.7% y/y. The large increases were due to a rebound after the Queen's Jubilee holiday.
- Fitch Ratings today upgraded South Korea's credit rating, leading to a 2.9% rally in South Korean stocks.
- China's National Development and Reform Commission today approved a variety of infrastructure projects, adding to yesterday's news of the approval of a plan for subways in 18 cities. Today's plans involve 1,200 miles of roads, nine sewage-treatment plants, five port and warehouse projects, and two waterway upgrades. That news sparked a strong rally in Chinese construction stocks and helped China's CSI 300 index rally 4.48%. Market Comments
- Sep E-mini S&Ps this morning are up 4.75 points (+0.33%) on today's 1.22% rally in European stocks and on optimism about China's approval of a raft of infrastructure-related stimulus projects. The S&P 500 index on Thursday rallied sharply and posted a new 4-year high: S&P 500 +2.04%, Dow Jones +1.87%, Nasdaq 100 +2.27%. Bullish factors included the aggressive ECB bond-buying program and stronger-than-expected U.S. economic data. U.S. unemployment claims fell by -12,000 to 365,000, versus expectations for a report of 370,000. Continuing claims fell by -6,000 to 3.322 mln. Aug ADP employment rose by +201,000, which was substantially stronger than market expectations of +140,000. Aug ISM non-manufacturing index rose +1.1 to 53.7, which was stronger than market expectations for a slight 0.1 point decline to 52.5.
- Dec 10-year T-notes this morning are down 14.5 ticks as safe-haven demand continues to fade with the ECB's bond-buying program announcement yesterday and with today's continued rally in global stocks. Dec 10-year T-note prices on Thursday closed sharply lower: TYZ2 -20, FVZ2 -9.75. T-notes fell on the stronger-than-expected U.S. economic data and on reduced safe-haven demand with the ECB's bond-buying program that will help contain the Eurozone debt crisis.
- The dollar index this morning is down -0.18 points (-0.22%) as safe-haven demand continues to fade with today's sharp rally in European and Chinese stocks. EUR/USD is up +0.0072 (+0.57%) as Spanish and Italian bond yields continued to fall today as the market demonstrates confidence about the ECB's bond-buying program. USD/JPY is up +0.14 (+0.18%). The dollar index on Thursday closed mildly lower: Dollar index -0.20 (-0.24%), EUR/USD -0.0030 (+0.24%), USD/JPY +0.47 (+0.60%). The dollar fell on reduced safe-haven demand with the sharp rally in the S&P 500 to a new 4-year high and with hopes for some containment of the Eurozone debt crisis with the ECB's bond-buying program. The ECB's bond-buying program was bullish for the euro because the program does not involve printing new euros and the program should provide some support for the Eurozone economy.
- Oct WTI crude oil prices this morning are trading +0.32 (+0.33%) and Oct gasoline is up +0.0206 (+0.69%) as economic optimism improves with yesterday's ECB bond-buying program and with today's Chinese stimulus project announcements. Oct crude oil and gasoline prices on Thursday closed mixed: CLV2 -0.53 (-0.56%), RBV2 +0.0327 (+1.11%). Bullish factors yesterday centered on the rally in European and U.S. stocks and the improved prospects for the global economy with the ECB's bond-buying program. Crude oil and gasoline also saw support from the fact that 43% of oil production and 21% of natural gas production in the Gulf of Mexico is still shut down. The weekly DOE report showed a sharp 7.4 mln bbl decline in crude oil inventories, a 2.3 mln bbl decline in gasoline inventories, and a 1 mln bbl rise in distillate inventories. U.S. crude oil inventories are now only 6.0% above the 5-year seasonal average, the lowest since April.
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Global Financial Calendar
Friday 9/7/12 United States 0830 ET Aug nonfarm payrolls expected +125,000, July +163,000. Aug private payrolls expected +139,000, July +172,000. Aug manufacturing payrolls expected +10,000, July +25,000. Aug unemployment rate expected unch at 8.3%, July +0.1 to 8.3%. 0830 ET Aug avg hourly earnings all employees expected +0.2% m/m and +1.8% y/y, July +0.1% m/m and +1.7% y/y. Aug avg weekly hours expected unch at 34.5, July unch at 34.5 hours. 0830 ET USDA weekly exports. Japan 0100 ET Japan July leading index CI expected 91.6, June 93.2. July coincident index expected 93.2, June 94.1. Germany 0200 ET German Q1 and Q2 labor costs. 0200 ET German July current account expected 13.5 bln euros, June 16.5 bln euros. 0200 ET German July trade balance expected 15.3 bln euros, June 17.9 bln euros. German July exports expected -0.5% m/m, June -1.4% y/y. July imports expected -0.3% m/m, June -2.9% y/y. 0600 ET German July industrial production expected unch m/m and -3.0% y/y, June -0.9% m/m and -0.3% y/y. United Kingdom 0430 ET UK July industrial production expected +1.5% m/m and -2.8% y/y, June -2.5% m/m -4.3% y/y. July manufacturing production expected +1.7% m/m and -2.4% y/y, June -2.9% m/m and -4.3% y/y. 0430 ET UK Aug PPI input expected +1.7% m/m and +1.5% y/y, July +1.3% m/m and -2.4% y/y. Aug PPI output expected +0.2% m/m and +1.9% y/y, July unch m/m and +1.7% y/y. United Kingdom 0430 ET Aug PPI output core expected unch m/m and +1.2% y/y, July unch m/m and +1.3% y/y. 1000 ET UK Aug NIESR GDP estimate, July -0.2%.
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