- Global stocks this morning are weaker with the Euro Stoxx 50 down -0.82% and Mar S&Ps down -9.00 points. The dollar and Treasuries rose while commodities generally moved lower as European debt concerns intensified. The euro sank to a fresh 1-1/4 year low against the dollar on concern Europe will struggle to finance its debts after France sold 10-year bonds at an average yield of 3.29%, up from 3.18% in Dec as the bid-to-cover ratio fell to 1.64 from 3.05, while Hungary sold 1-year bills at an average yield of 9.96%, up from a similar sale last month at 7.91% and the highest since 2009. Bank stocks are leading the overall market lower on capital concerns with UniCredit, Italy's biggest bank, down nearly 9% to its lowest level since 1992 after losing 15% yesterday when it announced a rights offer at a 43% discount. Stocks and the euro were also under pressure after Nov German retail sales unexpectedly fell for a second month when it dropped -0.9% m/m, weaker than expectations of a +0.2% m/m increase, while Oct Euro-Zone industrial new orders rose +1.8% m/m and +1.6% y/y, weaker than expectations of +2.5% m/m and +3.3% y/y.
- Asian stocks today closed lower with Japan down -0.83%, China -0.97%, Australia -1.08%, South Korea -0.28%, India -0.16%. Asian stocks declined as concern over European debt resurfaced. Japanese exporters tumbled when the euro sank to an 11-year low against the yen, which hurts their earnings prospects. The PBOC refrained from selling 3-month bills for a second week, which helped slow increases in money-market rates as banks hoard cash in the run-up to the Chinese New Year holiday. Chinese bank stocks gained on speculation the PBOC will cut lenders' reserve requirements again before the start of the New Year holiday on Jan 23.
- March S&Ps this morning are trading down -9.00 points. The US stock market on Wednesday settled mixed as lower-than-forecast factory orders and European debt concerns offset strength in automakers and retailers: Dow Jones +0.17%, S&P 500 +0.02%, Nasdaq Composite -0.01%. Bearish factors on Wednesday included (1) carry-over weakness from a slide in European stocks on concern the European debt crisis may worsen after Jean-Claude Juncker, head of the Euro-Zone finance ministers, said "Europe is facing a recession of unknown scope" and Greek Prime Minister Papademos said Greece may face a default by March if it couldn't secure agreement with the Troika on a new economic plan, (2) the weaker-than-expected Nov factory orders (+1.8% versus expectations of +2.0%), and (3) growth concerns in China after Chinese Premier Wen Jiabao said business conditions may be "relatively difficult" this quarter as inflation stays "elevated" and overseas demand weakens.
- Bullish factors included (1) strength in retailers after ICSC raised its Dec estimate for same-store sales to +4.0% from a previous estimate of +3.8%, (2) a rally in U.S. automakers after the stronger-than-expected Dec sales reports from Ford, GM and Chrysler, and (3) the report from Comscore that US online holiday spending this year was up +15% y/y to $37.2 billion, which reduces recession fears and increases confidence in the U.S. economic outlook.
- Citigroup (NYSE:C) fell 1.5% and Bank of America (NYSE:BAC) slipped 1.2% in pre-market trading on carry-over weakness from a fall in European bank stocks.
- March 10-year T-notes this morning are up +9 ticks. T-note prices on Wednesday settled lower after the ICSC raised its retail sales estimates for Dec and Dec U.S. auto sales were stronger than expected: TYH2 -5, FVH2 +0.2, EDM2 +1.5. Bearish factors included (1) increased confidence in the U.S. economic outlook after the ICSC raised its Dec estimate for same-store sales to +4.0% from a previous estimate of +3.8%, which reduced the safe-haven demand for Treasuries and (2) the stronger-than-expected Dec sales reports from U.S. automakers Ford, GM and Chrysler, which boosted stocks and undercut Treasuries. Bullish factors included (1) increased safe-haven demand for Treasuries after Greek Prime Minister Papademos said Greece may face a default by March if it couldn't secure agreement with the Troika on a new economic plan and (2) concern the European sovereign debt crisis may worsen after Jean-Claude Juncker, head of the Euro-Zone finance ministers, said "Europe is facing a recession of unknown scope."
- The dollar index this morning is higher with the dollar/yen +0.13 yen and the euro/dollar -1.12 cents at a fresh 1-1/4 year low. The dollar on Wednesday finished higher after Italy's biggest bank said it needs to raise more capital and European banks parked a record amount of euros with the ECB on Tuesday, signs the European sovereign debt crisis may worsen: Dollar Index +0.518, USDJPY -0.025, EURUSD -0.01069. Bullish factors included (1) the action by UniCredit, Italy's biggest bank, to sell new shares in a 7.5 billion euro offer, which fueled concern other banks will need to raise more capital, (2) the action by European banks to park a record 453.2 billion euros with the ECB on Tuesday, the most since the euro's introduction in 1999 as banks rather park their excess cash with the ECB at the overnight rate of 0.25% and incur a loss rather than lend it for more elsewhere, (3) concerns that Spain may need financial help after the Spanish newspaper Expansion reported that Spain's government may apply for loans from the EU's rescue fund and from the IMF, and (4) comments from Jean-Claude Juncker, head of the Euro-Zone finance ministers, who said "Europe is facing a recession of unknown scope." A bearish factor was the unexpected upward revision to the Dec Euro-Zone PMI composite index, which is euro supportive.
- Feb crude oil prices this morning are down -66 cents a barrel and Feb gasoline is -1.92 cents per gallon. Crude oil prices settled higher after the EU said it may sanction Iranian oil exports, although a stronger dollar limited gains: CLG12 +$0.26, RBG12 +3.66. Feb crude posted a 6-3/4 month high and Feb gasoline climbed to a 2-1/4 month high. Bullish factors included (1) the statement from an EU spokesman that said the EU is working to sanction Iran's oil exports and banks, which increases geopolitical tensions and may prompt Iran to close the Strait of Hormuz, where one-sixth of the world's crude flows through daily and (2) the outlook for weekly DOE crude inventories to decline when they are reported Thursday. Bearish factors included (1) strength in the dollar, which reduces investment demand for commodities, (2) Bloomberg data that shows Dec OPEC crude output rose to 30.667 million barrels a day, a 3-year high, and (3) concern the European debt crisis will worsen and slow economic growth after the ECB reported overnight deposits from European financial institutions rose to an all-time high. Expectations for Thursday's weekly inventory report from the DOE (released 1-day later due to the New Year's Holiday) are for crude supplies to fall -1.0 million bbl, gasoline stockpiles to increase +1.0 million bbl, distillate inventories to rise +1.0 million bbl and the refinery utilization rate to increase +0.5 to 84.7%.
Earnings reports (confirmed releases, sorted by mkt cap): MON-Monsanto (BEST earnings consensus $0.18), APOL-Apollo Group (1.18), FDO-Family Dollar Stores (0.68), MSM-MSC Industrial Direct (0.93), STZ-Constellation Brands (0.52), GPN-Global Payments (0.80), RPM-RPM International (0.39), WOR-Worthington Industries (0.32), HELE-Helen of Troy Ltd. (1.03), TXI-Texas Industries (-0.61), SHLM-A Schulman (0.42).
Global Financial Calendar
|0730 ET||Dec Challenger job cuts, Nov -12.8% y/y.|
|0815 ET||Dec ADP employment change expected +178,000, Nov +206,000.|
|0830 ET||Weekly initial unemployment claims expected -6,000 to 375,000, previous +15,000 to 381,000. Weekly continuing claims expected -31,000 to 3.570 million, previous +34,000 to 3.601 million.|
|1000 ET||Dec ISM non-manufacturing index expected +1.0 to 53.0, Nov -0.9 to 52.0.|
|1030 ET||Dec ICSC chain store sales expected +3.8%, Nov +3.2% y/y.|
|1100 ET||Treasury announces amount of 1-year T-bills (previous $25 billion), 3-year T-notes (previous $32 billion), 10-year T-notes (previous $21 billion) and 30-year T-bonds (previous $13 billion) to be auctioned Jan 10-12.|
|1630 ET||Weekly money supply report and Fed balance sheet.|
|0000 ET||Dec Japan vehicle sales, Nov +24.1% y/y.|
|0200 ET||Nov German retail sales expected +0.2% m/m and +0.7% y/y, Oct -0.2% m/m and -0.4% y/y.|
|0245 ET||Dec French consumer confidence indicator expected +1 to 80, Nov -3 to 79.|
|0430 ET||Dec U.K. PMI services expected -0.6 to 51.5, Nov +0.8 to 52.1.|
|0500 ET||Oct Euro-Zone industrial new orders expected +2.5% m/m and +3.3% y/y, Sep -6.2% m/m and +1.6% y/y.|
|0500 ET||Nov Euro-Zone PPI expected +0.1% m/m and +5.2% y/y, Oct +0.1% m/m and +5.5% y/y.|
|0830 ET||Nov Canada industrial product prices expected -0.3% m/m, Oct -0.1% m/m.|
|0830 ET||Nov Canada raw materials price index expected +1.0% m/m, Oct -1.2% m/m.|
|1000 ET||Dec Ivey purchasing mangers index (seasonally adjusted) expected -0.8 to 59.1, Nov +5.5 to 59.9.|
Barchart.com provides Financial Quotes, Charts and Technical Analysis for Stock and Commodity Traders.