Jim Van Meerten's  Instablog

Barchart Morning Call

BC - 1 hr 39 mins ago

Overnight Developments

• Global stock and commodity prices are mostly higher with June E-mini S&Ps up +5.25 points and the Euro Stoxx 50 up +0.38%. Stocks and commodities rose and Treasuries and the dollar fell as yields on Spanish and Dutch government debt declined, which temporarily reduces European sovereign-debt concerns. Sparking a gain in European stocks was the unexpected +1 point increase in Apr French consumer confidence to a 17-month high of 88, stronger than expectations of unchanged at 87. The euro erased its gains against the dollar when Spain auctioned 1.9 billion euros of 84- and 175-day bills, less than the maximum 2 billion-euro target. Stock and euro gains were also limited over political uncertainty after French Socialist presidential candidate Hollande, who leads in the polls ahead the May 6 run-off election with incumbent candidate Sarkozy, pledged to reverse French austerity measures if he's elected. Hollande has repeatedly criticized the German-advocated austerity and said that he'll send a draft proposal of the changes he would like to see to the treaty of the 25 EU leaders who signed the German-inspired treaty on Mar 2.
• Asian stocks today closed mixed with Japan down -0.78%, China -0.04%, Australia +0.18%, South Korea -0.34%, India +0.65%. Asian stocks fluctuated between gains and losses as Australian shares rallied after core consumer prices rose less than expected while political uncertainty in Europe limited gains in other Asian markets. Q1 Australia core consumer prices rose +0.3% q/q, weaker than expectations of +0.6% q/q, and its lowest rate of increase since Q3 of 1998. This sent yields on 5-year Australian bonds to a record low 3.094% and boosted the chance of an RBA interest rate cut at next week's central bank meeting. Chinese stocks finished little changed as the political uncertainty in Europe, China's biggest export market, limited gains in equities, while strength in the yen against the dollar weakened Japanese exporters and led Japanese shares lower.

Overnight U.S. Stock News

• June E-mini S&Ps this morning are trading up +5.25 points on reduced European debt concerns after Spanish and Dutch bond yields declined. The U.S. stock market on Monday followed other global bourses sharply lower on concern that economic growth was weakening after Apr manufacturing activity contracted in China and Europe, along with concern that political turmoil in France and the Netherlands would worsen the European sovereign-debt crisis: Dow Jones -0.78%, S&P 500 -0.84%, Nasdaq Composite -1.00%. The S&P fell to a 1-1/2 week low, the Dow posted a 1-week low and the Nasdaq slumped to a 1-1/2 month low. Bank stocks followed European bank shares lower after credit-default swaps to insure French government debt rose to a 3-month high when French President Sarkozy failed to win the first round of elections and after the extra yield investors demand to hold Dutch 10-year bonds over German bunds rose to a 3-year high on speculation the Netherlands will need to hold early elections after Dutch Prime Minister Rutte offered his cabinet's resignation when his party failed to reach an agreement with a coalition party over austerity measures. Raw-material and energy producers closed lower as well as commodities slumped on demand concerns after Apr Chinese manufacturing data indicates China's production may contract for a sixth and after Apr European manufacturing activity declined more than expected.
• Texas Instruments (TXN) rose 3.5% in European trading after the company said Q2 profit will be 30 cents to 38 cents a share on revenue of $3.22 billion to $3.48 billion, stronger than analysts' estimates of earnings of 32 cents a share on sales of $3.28 billion.

Today's Market Focus

• June 10-year T-notes this morning are down -7 ticks. T-note prices Monday rallied up to a 2-1/2 month high and settled higher on global growth concerns after Chinese and European manufacturing data contracted along with an increase in the safe-haven demand for Treasuries as global equity markets fell on concern the European debt crisis may worsen due to political turmoil in France and the Netherlands: TYM2 +10.0, FVM2 +4.7. Political turmoil in Europe boosted T-note prices after the Dutch government split and French President Sarkozy trailed in first round elections, while increased speculation that Fed Chairman Bernanke may hint at QE 3 following Wednesday's FOMC meeting further supported gains in Treasuries. Another positive was carry-over strength from a rally in German bunds after the 10-year bund yield fell to a euro-era low of 1.633%. Limiting gains in T-notes were supply pressures ahead of $99 billion in T-note auctions this week starting with Tuesday's $35 billion auction of 2-year T-notes.
• The dollar index this morning is lower with USD/JPY +0.03 yen and EUR/USD +0.13 cents. The dollar index on Monday strengthened and settled higher on increased safe-haven demand after global equity markets tumbled along with euro weakness amid political turmoil in Europe: Dollar Index +0.226, USD/JPY -0.334, EUR/USD -0.00661. The euro weakened on concern the European debt crisis may worsen after Dutch Prime Minister Rutte offered his cabinet's resignation after his party failed to win support for austerity measures, while credit-default swaps to insure French government debt rose to a 3-month high after French President Sarkozy failed to win the first round of elections that forces him to a run-off election May 6 with challenger Francois Hollande. Another negative for the euro was the EU data that showed the debt of the 17 Euro-Zone nations climbed to 87.2% of GDP in 2011, the highest since the euro's introduction in 1999, while an unexpected drop in the Apr Euro-Zone composite PMI to its weakest level in 5 months (-1.7 to 47.4) points to contraction in the European economy. Lifting the euro off of its low was comments from ECB Council member Nowotny who said the ECB has contributed "quite a lot" and that he sees "no point" in cutting ECB interest rates or in offering additional 3-year loans to banks.
• Jun crude oil prices this morning are trading up +4 cents a barrel and Jun gasoline is -1.88 cents per gallon. Crude oil and gasoline prices on Monday settled mixed as contraction in European and Chinese manufacturing activity In Apr indicates global economic weakness that undercut crude, while a report from the Federal Highway Administration that said U.S. miles driven in Feb was up +1.7% y/y lifted gasoline on signs of stronger fuel demand: CLM12 -0.77, RBM2 +3.76. Jun crude slipped to a 1-week low while gasoline tumbled to a 7-week low but recovered its losses and closed higher. Other bearish factors were (1) slowing crude demand in China after Mar China oil demand fell to 9.512 million barrels a day, the slowest in 5-months, (2) and (2) speculation that Sunoco was entering a joint venture with Carlyle Group in a bid to keep Sunoco's 330,000 barrel-a-day Philadelphia refinery open, which reduces gasoline supply concerns on the U.S. East Coast, and (3) a slump in global equities on concern the European debt crisis may worsen and weaken economic growth and energy demand as political uncertainty rose in Europe after Dutch Prime Minister Rutte offered to quit when he failed to reach an agreement with a coalition party over austerity measures and as French President Sarkozy failed to win the first round of elections.

Today's U.S. Earnings Reports

Earnings reports (sorted by mkt cap): AAPL-Apple (consensus $9.98), T-AT&T (0.57), UTX-United Technologies (1.19), MMM-3M Co. (1.49), AMGN-Amgen (1.46), BIDU-Baidu (0.86), ITW-Illinois Tool Works (0.95), ACE-Ace Ltd. (1.87), RAI-Reynolds American (0.65), NSC-Norfolk Southern (1.12), COH-Coach (0.75), AFL-Aflac (1.65), APD-Air Products & Chemicals (1.33).

Global Financial Calendar

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