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Barchart Morning Call 10/17

|Includes:Abbott Laboratories (ABT), APH, AXP, BAC, BIK, BK, CHKP, DGX, DOV, EBAY, HAL, KMI, MTB, NE, NTRS, PEP, STJ, SWK, SYK, USB, XLNX

Barchart Morning Call

BC - 2 hrs 9 mins ago

Overnight Developments

  • Dec E-mini S&Ps are trading slightly higher by +0.14% as European stocks are up +0.65% on relief that Moody's late yesterday left Spain's credit rating unchanged at investment grade. Asian stocks today closed mostly higher with Japan up +1.21%, Hong Kong up +0.99%, and China up +0.11%. Commodity prices today are mildly higher by +0.22% with Nov crude oil up +0.21%, Dec gold up +0.33%, Dec copper up +0.14%, and agriculture prices mostly higher. The dollar index is down -0.46% and EUR/USD is up +0.52% on Moody's action on Spain. Dec 10-year T-note prices are down 9.5 ticks.
  • The yield on Spanish 10-year bond plunged by 26 bp to 5.55% after Moody's late yesterday left Spain's rating unchanged at the investment grade of Baa3 due to expectations that Spain would benefit from the ECB/ESM bailout program. There were some market fears that Moody's might cut Spain's credit rating to junk status and cause a wholesale dumping of Spanish bonds by investors. Italian 10-year bond yields dropped by 10 bp to 4.83%.
  • The UK employment data was a bit better than expected, which was supportive for GBP/USD. The UK Aug ILO unemployment rate (3-month average) fell by 0.2 points to 7.9% from 8.1% in July. Aug employment rose by +212,000, which was down from +236,000 but stronger than expectations of +200,000. Sep jobless claims fell by 4,000 versus expectations of unchanged. The Sep claimant count rate was unchanged from Aug at 4.8%.
  • The minutes from the Bank of England's Oct 3-4 meeting indicated that BOE monetary policy committee members are split on whether further quantitative easing is necessary. The MPC at that meeting left the base rate unchanged at 0.50% and left its bond-purchase target unchanged at 375 billion pounds. The news reduced the odds that the MPC will extend its QE program at their next meeting in November. That news was supportive for GPB/USD (up 0.38%) but bearish for Dec 10-year gilt prices (-0.70 points).
  • The Eurozone Aug construction output report of +0.7% m/m and -5.5% y/y improved from July's revised +0.1% m/m and -6.2% y/y.
  • The German government forecasted German GDP growth at +0.8% in 2012 while cutting the 2013 forecast to +1.0% from +1.6%.
  • Chinese Premier Wen Jiabao today said that China's Q3 economic situation is "relatively good." He said that China's economic growth is stabilizing. However, he also said that China should stick with its property curb policies and that the property market is still "unstable." China tonight is expected to report that Q3 GDP eased to +7.4% from +7.6% in Q2. Market Comments
    • Dec E-mini S&Ps this morning are up 2.00 points (+0.14%) on the 0.65% rally in Euro Stoxx 50 index on the lack of a Moody's downgrade of Spain's credit rating. The market also received some support from Chinese Premier Wen's comment that China's Q3 economic situation is "relatively good," which may indicate a favorable Chinese Q3 GDP report tonight . The S&P 500 index on Tuesday closed with fairly sharp gains: S&P 500 +1.03%, Dow Jones +0.95%, Nasdaq 100 +1.41%. Bullish factors included (1) various reports that Spain is getting close to requesting a precautionary line of credit from the ECB/ESM bailout program, (2) the 1 point increase in the NAHB housing market index to a new 6-1/3 year high of 41, (3) the stronger-than-expected Sep industrial production report of +0.4% (versus expectations of +0.2%), although Aug was revised lower to -1.4% from -1.2%, (4) news that Moody's will not downgrade Spain's credit rating after its review, and (5) an improvement in the German and Eurozone Zew indexes that measure investor and analyst confidence.
    • Dec 10-year T-notes this morning are . Dec 10-year T-note prices on Tuesday closed with fairly sharp losses: TYZ2 -14, FVZ2 -5. Bearish factors included the positive U.S. economic data and reduced safe-haven demand with the positive news on Spain.
    • The dollar index this morning is trading with a fairly sharp loss of -0.37 points (-0.46%) thanks to the 0.0068 point (+0.52%) rally in EUR/USD on the lack of a Moody's downgrade of Spain. USD/JPY is down -0.24 (-0.30%). The dollar index on Tuesday closed moderately lower: Dollar index -0.29 (-0.36%), EUR/USD +0.0054 (+0.41%), USD/JPY -0.03 (-0.04%). The dollar index was undercut by reduced safe-haven demand with the rally in stocks and some optimism about Spain. EUR/USD was boosted by reports that Spain is close to requesting a precautionary line of credit from the ECB/ESM bailout program and indications that German officials are coming to accept that move. EUR/USD was also boosted by a rise in the ZEW confidence indexes. The German Oct Zew economic sentiment index rose to -11.5 from -18.2 in September and was stronger than market expectations of -14.9. The Eurozone Oct Zew economic sentiment index improved to -1.4 from -3.8 in September.
    • Nov WTI crude oil prices this morning are mildly higher by +0.19 (+0.21%) and Nov gasoline is up +0.0085 (+0.30%) on this morning's weakness in the dollar index and the rally in global stocks. Nov crude oil and gasoline prices closed mixed on Tuesday: CLX2 +0.24 (+0.26%), RBX2 -0.0050 (-0.18%). Crude oil received a boost from the rally in stocks and the improved sentiment on Europe. The market consensus for today's weekly DOE report is for a 1.5 million barrel increase in crude oil inventories due to high U.S. oil production and an increase in crude oil imports, a 250,000 barrel increase in gasoline inventories, a 1.25 million barrel decline in distillate inventories, and a 0.3 point increase to 87.0% in the refinery utilization rate.
    • For the complete subscription version of this daily report (plus a 13-page big-picture weekly report), along with the earliest possible delivery in the morning, please visit Today's U.S. Earnings Reports

      Earnings reports (ranked by market cap): ABT-Abbott Labs (Consensus:$1.28), PEP-Pepsico (1.16), BAC-Bank of America (0.16), AXP-American Express (1.09), USB-US Bancorp (0.73), EBAY-Ebay (0.55), KMI-Kinder Morgan (0.28), BLK-Blackrock (3.32%), HAL-Haliburton (0.58), BK-Bank NY Mellon (0.54), SYK-Stryker (0.98), STJ-St Jude Medical (0.81), MTB-M&T Bank Corp (1.86), SWK-Stanley Black (1.45), NTRS-Northern Trust (0.74), DOV-Dover Corp (1.29), DGX-Quest Diagnostic (1.18), CHKP-Check Point Software (0.78), APH-Ampheno (0.89), NE-Noble (0.48), XLNX-Xilinx (0.41).

      Global Financial Calendar

      Wednesday 10/17/12
      United States
      0700 ET Weekly MBA mortgage applications, previous -1.2% with purchase sub-index +2.4% and refi sub-index -2.0%.
      0830 ET Sep housing starts expected +2.7% to 770,000, Aug +2.3% m/m to 750,000. Sep building permits expected +1.1% to 810,000, Aug -1.0% to 801,000.
      1030 ET DOE Weekly Petroleum Status Report.
      0200 ET Japan final-Sep machine tool orders, prelim -3.0% y/y.
      United Kingdom
      0430 ET Bank of England meeting minutes.
      0430 ET UK Sep claimant count rate expected 4.8%, Aug 4.8%. Sep jobless claims change expected unch, Aug -15,000.
      0430 ET Aug ILO unemployment rate (3mo) expected 8.1%, Aug 8.1%. Aug employment change expected +200,000, July +236,000 3mo/3mo.
      0430 ET UK Aug average weekly earnings expected +1.6% 3mo y/y, July +1.5%. Aug average weekly earnings ex-bonus expected +2.0% 3mo y/y, July +1.9%.
      0500 ET Eurozone Aug construction output, July -0.3% m/m and -4.7% y/y.
      0600 ET German government releases new macroeconomic forecasts.
      2130 ET China Sep property price.
      2200 ET China Q3 GDP expected +7.4% y/y, Q2 +7.6% y/y (+1.8% q/q).
      2200 ET China Sep industrial production expected +9.0% y/y, Aug +8.9% y/y.
      2200 ET China Sep fixed asset investment ex rural (ytd y/y) expected +20.2%, Aug +20.2%.
      2200 ET China Sep retail sales expected +13.2% y/y, Aug +13.2% y/y. provides Financial Quotes, Charts and Technical Analysis for Stock and Commodity Traders.