Jim Van Meerten's  Instablog

Barchart Morning Call

BC - Wed Dec 12, 7:00AM CST

Overnight Developments

• Dec E-mini S&Ps this morning are slightly higher by +0.10% as the market awaits the outcome of today's FOMC meeting. The Euro Stoxx 50 index is unchanged. Asian stocks today closed higher due to yesterday's rally in U.S. stocks with Japan up +0.59%, Hong Kong up +0.80%, and China up +0.41%. Commodity prices are mildly higher by +0.17% with Jan crude oil +0.61%, Jan gasoline +0.86%, Feb gold +0.30%, March copper +0.53%, grain prices down by -0.4% on average, livestock prices little changed, and softs mostly lower. The dollar index is slightly lower by -0.11% on the stable stock environment this morning. EUR/USD is up +0.25% on optimism about the official confirmation of the successful Greek bond buyback program. March 10-year T-note prices are down 4.5 ticks.
• Greek officials today confirmed that the bond buyback program was a success. Greece will be able to retire government bonds with a face value of 31.9 billion euros, thus bringing its debt load down far enough to meet the terms of the Eurozone and the IMF for the release of its bailout aid. Greece paid an average of 33.8% of the face value of the bonds. Eurozone finance ministers have some minor issues to resolve but apparently plan at their meeting on Thursday to provide final approval of the revised Greek bailout plan and the release of Greece's bailout aid.
• North Korea last night launched a rocket that successfully placed a satellite into orbit around the earth. The rocket's first stage fell into the Yellow Sea and the second stage fell into the Philippine Sea. Most major nations including China criticize North Korea's rocket launch. South Korea's defense minister said that there are indications that North Korea may conduct a nuclear test "within a short period of time."
• U.K. Oct unemployment rose by +40,000 3mo/3mo, which was mildly better than market expectations of +45,000 and down from +100,000 in September. The UK Oct (3mo) ILO unemployment rate of 7.8% was unchanged from Sep and was in line with market expectations. Meanwhile, U.S. Nov jobless claims fell by -3,000 to 1.58 million, which showed a better labor market than market expectations for an increase of +7,000.
• The Eurozone Oct industrial production report of -1.4% m/m and -3.6% y/y was significantly weaker than market expectations of unchanged m/m and -2.4% y/y.
• OPEC at its quarterly meeting today will keep its production target unchanged at 30 million bpd, according to the market consensus.
• Japan Oct machine orders rose +2.6% m/m and +1.2% y/y, which was a bit weaker than market expectations of +3.0% m/m but still much better than the Sep report of -4.3% m/m.
  Market Comments
  • Dec E-mini S&Ps this morning are slightly higher by +1.50 points (+0.10%). The market is waiting for the outcome of today's FOMC meeting and any developments on the fiscal cliff. The S&P 500 index staged a solid rally on Tuesday on (1) the impressive gains in the German and Eurozone Zew investor confidence indexes that reflected an improvement in the European debt crisis, (2) optimism that the pieces seem to be coming together for a fiscal cliff deal, and (3) technical buying as the S&P 500 nearly posted a new 2-month high. Closes: S&P 500 +0.65%, Dow Jones +0.60%, Nasdaq +1.30%.
  • March 10-year T-notes this morning are down 4.5 ticks due to supply overhang from this week's $66 billion coupon auction and reduced safe-haven demand with this morning's stability in stocks. The Treasury today will sell $21 billion in reopened 10-year T-notes. March 10-year T-note prices on Tuesday closed moderately lower on (1) reduced safe-haven demand with the rally in stocks, and (2) supply overhang with this week's $66 billion coupon package. On the bullish side, the market is expecting the FOMC today to announce an outright purchase program of $45 billion per month in longer-term Treasury securities to replace the expiring Operation Twist program. Closes: TYH3 -7, FVH3 -2.25.
  • The dollar index this morning is slightly lower by -0.09 points (-0.11%). EUR/USD is up +0.0032 (+0.25%) on confirmation of the successful Greek bond buyback. USD/JPY is mildly higher by +0.29 yen (+0.35%). The dollar index on Tuesday closed moderately lower on reduced safe-haven demand and on a rally in EUR/USD on the successful conclusion of the Greek bond buyback program and the strong German and Eurozone Zew indexes. Closes: Dollar index -0.27 (-0.33%), EUR/USD +0.0064 (+0.49%), USD/JPY +0.16 (+0.19%).
  • Jan WTI crude oil prices this morning are up +0.52 (+0.61%) and Jan gasoline is up +0.0225 (+0.86%). OPEC at its meeting today is expected to leave its production target unchanged at 30 million bpd. Jan crude oil and gasoline prices on Tuesday closed mildly higher on weakness in the dollar index and the positive European Zew indexes. API crude oil inventories soared by a bearish 4.27 mln bbl versus expectations of -2.5 mln for today's DOE report. The API report showed bearish, larger-than-expected increases in both gasoline inventories (+2.76 mln bbl) and distillate inventories (+2.24 mln bbl) relative to expectations for today's DOE report of +2 mln and 1.1 mln bbl, respectively. Closes: CLF3 +0.23 (+0.27%), RBF3 +0.0124 (+0.48%). U.S. refineries are running at the very high utilization rate of 90.6% as refineries try to capture high refining profit margins, accounting for the drawdown in crude oil inventories and the increase in product inventories.
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    Today's U.S. Earnings Reports Earnings reports (ranked by market cap): COST-Costco Wholesale (Consensus:$0.93), JOY-Joy Global (1.91), RH-Restoration Hardware (0.03).
    Global Financial Calendar
    

    Wednesday 12/12/12
    United States
    0700 ET	Weekly MBA mortgage applications, previous +4.5% with purchase sub-index +0.1% and refi sub-index +6.1%.
    0830 ET	Nov import price index expected -0.5% m/m and -1.0% y/y, Oct +0.5% m/m and +0.4% y/y.
    1030 ET	DOE Weekly Petroleum Status Report.
    1230 ET	FOMC 2-day meeting concludes with policy announcement.
    1300 ET	Treasury auction of $21 billion in 10-year T-notes.
    1400 ET	Nov U.S. monthly budget statement expected -$150 bln, previous -$137.3 bln.
    1400 ET	FOMC releases projections of economy and federal funds rate.
    1415 ET	Fed Chairman Bernanke holds press conference.
    Germany
    0200 ET	German Nov final CPI expected unrevised at -0.1% m/m and +1.9% y/y. Nov final EU-harmonized CPI expected unrevised at -0.1% m/m and +2.0% y/y.
    United Kingdom
    0430 ET	UK Nov claimant count rate expected 4.8%, Oct 4.8%. UK Nov jobless claims expected +7,000, Oct +10,100. UK Oct ILO unemployment rate expected 7.8%, Sep 7.8%. Oct employment change expected +45,000, Sep +100,000 3mo/3mo.
    0430 ET	UK Oct average weekly earnings, Sep +1.8% 3mo y/y. Oct average weekly earnings ex-bonus, Sep +1.9% 3mo y/y.
    Euro-Zone
    0500 ET	Eurozone Oct industrial production expected unch m/m and -2.4% y/y, Sep -2.5% m/m and -2.3% y/y.

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