Jim Van Meerten's  Instablog

Barchart Morning Call

BC - Wed Sep 26, 7:00AM CDT

Overnight Developments

• Dec E-mini S&Ps this morning are slightly lower by -0.75 points on a sharp 1.95% sell-off in European stocks and lower Asian stocks. European stocks are sharply lower as the crisis temperature rises on Spain's debt problems. Commodity prices are down -0.32% this morning with Nov crude oil down -0.84%, Dec gold down -0.03%, Dec copper down -1.02%, and agricultural prices mixed. The dollar index is up +0.39% and EUR/USD is down -0.28%. Dec 10-year T-notes are up 4.5 ticks.
• The Spanish 10-year bond yield today is up sharply by 26 bp at 6.01% after Catalan's president yesterday called for new national Spanish elections to address greater autonomy for Spain's regions. In addition, Germany, the Netherlands, and Finland said in a letter that the Eurozone's ESM bailout facility should assume only a limited burden in bank recapitalizations. Spanish Prime Minister Rajoy has been dragging its feet on formally requesting a bailout for government finances because he has been hoping he can limp by with recent drop in bond yields and avoid the stigma of a Eurozone bailout. However, bond yields are now moving sharply higher and are forcing his hand on formally requesting aid. Italy's 10-year bond yield today rose by 8 bp to 5.18%.
• Greek public and many private workers held a general strike today to protest austerity measures. Greek Prime Minister Samaras is trying to get a new 11.5 billion euro austerity package approved by his coalition members in order to qualify for the next tranche of 31 billion euros of bailout aid. There was also a non-violent protest today of about 25,000 people on the central square of Athens. Greece and Eurozone officials next week will have a showdown on whether Greece qualifies for the next tranche of aid and whether Greece needs a new shot of aid to plug what appears to be a 20 billion euro gap.
• Germany today received bids for only 3.95 billion euros for its sale of 10-year bonds, which was less than the targeted amount of 5 billion euros. The auction produced an average yield of 1.52%. Demand for Germany's bonds has been lackluster due to low yields and general concerns about Germany's liabilities with the Eurozone debt crisis. However, Italy today was able to sell 9 billion euros of 6-month bills at 1.503%, down from 1.585% at the last 6-month auction on Aug 29.
• The Chinese-Japanese territorial spat over disputed islands in the East China Sea flared up again today as the foreign ministers of China and Japan held "severe" talks yesterday in New York on the sidelines of the UN's General Assembly. Neither side showed any sign of compromise on their claim to the islands. The spat has already resulted in the temporary shut-downs of some Japanese factories and retail shops in China due to public protests and the spat is hurting trade between the two nations. Market Comments
  • Dec E-mini S&Ps this morning are down -0.75 points (-0.05%) mainly due to negative events in Europe. The Euro Stoxx 50 index is sharply lower by 1.95% this morning. Asian stocks today also fell sharply across the board due to Tuesday's sell-off in U.S. stocks on Plosser's doubts about QE3. The S&P 500 index on Tuesday closed with fairly sharp losses: S&P 500 -1.05%, Dow Jones -0.75%, Nasdaq 100 -1.39%. Bearish factors included Caterpillar's outlook for "anemic" global growth through 2015, negative comments by Philadelphia Fed President Plosser on QE3, social unrest in Spain that is making hitting deficit targets more difficult, weaker than expected U.S. home price reports (Case-Shiller +0.4%, FHFA +0.2%), and technical selling as the S&P 500 falls from the recent 4-3/4 year high. Philadelphia Fed President Charles Plosser said that QE3 probably will not boost economic growth and may hurt the Fed's credibility. On the brighter side, the U.S. Sep consumer confidence index soared by 9.0 points to 70.3 from a revised 61.3 in Aug and was much stronger than market expectations of 63.1.
  • Dec 10-year T-notes this morning are up +4.5 ticks due to lower global stocks. Dec 10-year T-note prices on Tuesday closed mildly higher: TYZ2 +8, FVZ2 +1.75. T-notes received a boost from increased safe-haven demand tied to the sharp sell-off in stocks. The Treasury today sells $35 billion in 5-year T-notes.
  • The dollar index this morning is up +0.31 points (+0.39%) on increased safe-haven demand with the sell-off in global stocks and the renewed concerns about Europe. EUR/USD is down -0.0036 points (-0.28%) and USD/JPY is down -0.11 (-0.14%). The dollar index on Tuesday closed higher: Dollar index +0.03 (+0.04%), EUR/USD -0.0032 (-0.25%), USD/JPY -0.05 (-0.06%). The dollar closed slightly higher on (1) increased safe-haven demand tied to the sell-off in stocks, and (2) the positive U.S. consumer confidence index. EUR/USD closed moderately lower due to street protests in Spain and continued uncertainty about whether Spain will sign up for the ECB/ESM bailout program.
  • Nov WTI crude oil prices this morning are down -0.77 (-0.84%) and Nov gasoline is up +0.0047 (0.17%). Crude oil is seeing downward pressure from the rally in the dollar index and on lower global stocks. Nov crude oil and gasoline prices on Monday closed mixed: CLX2 -0.56 (-0.61%), RBV2 +0.0347 (+1.24%). Crude oil showed weakness again on technical selling with the new 1-1/2 month low, expectations for a 2.0 million barrel increase in crude oil inventories in today's DOE report, and Saudi Arabia's stated intention last week to raise production through year-end as needed to push oil prices lower. The main bullish factor on Tuesday was some geopolitical tension as Iran fired four missiles into the Persian Gulf as part of a military exercise, increasing tensions with the U.S. and its allies which are still conducting their mine-sweeping exercises in the Persian Gulf. The market consensus for today's DOE report is for a 2.0 million barrel increase in crude oil inventories, a 500,000 barrel increase in gasoline inventories, a 900,000 barrel increase in distillates, and a 0.3 point increase in the refinery utilization rate to 89.2% of capacity. Tuesday's API report showed a +335,000 barrel increase in crude oil inventories, a 112,000 barrel increase in gasoline inventories, and a 438,000 barrel decline in distillate inventories.
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    Earnings reports (ranked by market cap): FUL-HB Fuller (Consensus:$0.53), Worthington Industries (0.47), PRGS-Progress Sofware.

    Global Financial Calendar

    Wednesday 9/26/12
    United States
    0700 ET	Weekly MBA mortgage applications, previous -0.2%, purchase sub-index -3.8%, refi sub-index +0.8%.
    1030 ET	DOE Weekly Petroleum Status Report.
    1000 ET	Aug new home sales expected +2.2% to 380,000, July +3.6% to 372,000.
    1300 ET	Treasury auction of $35 billion in 5-year T-notes.
    1315 ET	Chicago Fed President Charles Evans speaks in Hammond, Indiana at Lake Shore Chamber of Commmerce.
    Germany
    0300 ET	German states report Sep CPIs.
    0800 ET	German Sep CPI expected unch m/m and +2.0% y/y, Aug +0.4% m/m and +2.1% y/y. German Sep EU-harmonized CPI expected unch m/m and +2.1% y/y, Aug +0.4% m/m and +2.2% y/y.
    CHI
    2130 ET	China Aug industrial profits, July -2.7% y/y.

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