BC - 1 hr 57 mins ago
- 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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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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