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Barchart Morning Call 5/7

Barchart Morning Call

BC - 1 hr 42 mins ago

Overnight Developments

    E-mini S&Ps are down -6.75 points (-0.50%), which is better than 1% losses last night. The E-mini is lower on the European election results and continued overhang from last Friday's poor U.S. payroll report. Commodity prices are generally lower with crude oil down another 72 cents, gold down $3.5, copper down -0.3 cents, and grain prices trading lower. European stocks are trading mildly lower with the Euro Stoxx 50 down -0.03%, the German Dax down -0.66%, and the French CAC40 down -0.11%. The UK markets are closed today for a holiday. The Greek stock market today is down sharply by 7.5%. In France, Socialist party leader Francois Hollande won the presidential election over Nicolas Sarkozy, which was in line with market expectations but could nevertheless cause problems with Germany. In Germany, Chancellor Merkel's party had a poor showing in state elections in the German state of Schleswig-Holstein, which may make Ms. Merkel even less inclined to compromise on bailout terms to troubled Eurozone countries. In Greece, there was a surprise with the anti-bailout Syriza party (which means Coalition of the Radical Left) winning a projected 16% of the vote, coming in second ahead of the socialist Pasok party, which had 13%. The New Democrats won the election but received only 20% of the vote. The question is whether the New Democrats can cobble together a coalition government with Pasok and other smaller parties, thus excluding the Syriza party from the government. Syriza is not expected to be able to form a coalition government. If Syriza unexpectedly gained power with like-minded Greek coalition parties, that government would likely try to renegotiate the Greek bailout and assuming Germany refuses, could end up putting the country into full bankruptcy and possibly an exit from the Eurozone. In other European news, the May Eurozone Sentix investor confidence index fell to -24.5 from -14.7% in April, which as weaker than the market consensus of -15.3. However, German March factory orders were reported at +2.2% m/m and -1.3% y/y, which was stronger than the market consensus of +0.5% m/m and -1.5% y/y and an improvement after Feb's revised +0.6% m/m and -6.0% y/y. In the European bond markets today, the German 10-year bund yield fell 1 bp, the Greek 10-year bond yield rose by 220 bp to 22.77%, the Spanish bond yield rose 8 bp, and the Italian bond yield rose by 9 bp. Stock markets in Asia closed mostly lower in reaction to last Friday's weak U.S. payroll report: Japan -2.78%, Hong Kong -2.61%, China +0.07%, Taiwan -2.11%, Australia -2.16%, Singapore -2.19%, South Korea -1.77%, and India +0.48%. The Japanese stock market was also hurt by last Friday's strength in the yen.

Overnight U.S. Stock News

    June E-mini S&Ps this morning are down -6.75 points (-0.50%), which is an improvement from the 1% losses seen last night on the first reaction to the European election results. Today is a fairly big earnings today with reports from CTSH-Cognizant SYY-Sysco, VNO-Vornado Realty, DISH-Dish Network, WYNN-Wynn Resorts, and others. The U.S. stock market on Friday sold off fairly sharply: S&P 500 -1.61%, Dow Jones -1.27%, Nasdaq 100 -2.47%. Bearish factors included the much weaker than expected April payroll report of +115,000, which added to last Thursday's weak ISM non-manufacturing report to create worries about a softening U.S. economy. There was also nervousness last Friday ahead of Sunday's European elections.

Today's Market Focus

    June 10-year T-notes this morning are up 4 ticks this morning on fresh safe-haven demand after Sunday's European election results and on this morning's sell-off in global stocks. T-note prices on Friday closed higher: TYM2 +14.5, FVM2 +0.5. T-note prices on Friday rallied on the weak payroll report, which suggested weaker economic growth and inflation and also sparked increased safe-haven demand with the sharp sell-off in stocks. The dollar index this morning is trading is trading mildly higher by +0.18 points (+0.23%) with EUR/USD down 0.0055 (-0.42%) and USD/JPY slightly lower by -0.03 yen (-0.04%). The euro is being hurt by the European election results, which makes a return of the European debt crisis more likely. The dollar index on Friday closed mildly higher: Dollar Index +0.277, USD/JPY -0.48, EUR/USD -0.0082. The dollar index closed higher last Friday and the euro closed weaker on the weak U.S. payroll report and increased safe-haven demand. The euro was also weaker ahead of Sunday's elections in France and Greece. However, USD/JPY closed lower as the weak payroll report undercut the dollar relative to the yen. Jun crude oil prices this morning are trading lower with CLM12 down -0.72 cents (-0.73%) and RBM2 slightly lower by -0.05 cents (-0.02%). Crude oil and gasoline prices are seeing weakness from the European election results and weak global stock markets. Crude oil and gasoline prices on Friday plunged for third straight session: CLM12 -4.05, RBM2 -0.0742. June crude oil prices fell to a new 5-month low and gasoline posted a new 3-1/2 month low. Bearish factors included (1) the weak payroll report, (2) heavy technical selling with the downside breakout, and (3) continued overhang from last Wednesday's DOE report that showed a new 21-1/2 year high in crude oil prices.

Today's U.S. Earnings Reports

Earnings reports (sorted by mkt cap): CTSH-Cognizant (consensus $0.85), SYY-Sysco (0.43), VNO-Vornado Realty (0.83), DISH-Dish Network (0.70), PAA-Plains (1.51), WYNN-Wynn Resorts (1.41), TAX-Rackspace Hosting (0.17), TSN-Tyson Foods (0.39), FRI-Fed Realty Investors (0.51), HFC-Hollyfrontier (1.21), BIP-Brookfield Infrastructure (0.30), EA-Electronic Arts (0.16), TW-Towers Watson (1.35), DOS-Kosmos Energy (0.02), FTR-Frontier Communication (0.06), DNB-Dun & Bradstreet (1.32).

Global Financial Calendar

Monday, May 7
United States
1100 ET USDA weekly grain export inspections.
1130 ET Weekly 3-mo and 6-mo T-bill auctions.
1500 ET Mar consumer credit expected +$9.7 billion, Feb +$8.735 billion.
1600 ET USDA Crop Progress
1915 ET Richmond Fed President Jeffrey Lacker speaks on ?Technology, Unemployment and Workforce Development? at in event in Greensboro, NC.
0430 ET Eurozone May Sentix Investor Confidence expected -15.3, Apr -14.7.
0600 ET German March factory orders expected +0.5% m/m and -2.8% y/y, Feb +0.3% m/m and -6.1% y/y.
0700 ET German Chancellor Angela Merkel holds post-election press conference in Berlin.
United Kingdom
1901 ET UK Apr BRC Shop Price index expected +1.6% y/y, Mar +1.5% y/y.
1901 ET UK Apr Lloyds Employment Confidence, Mar -58.
1901 ET UK Apr RICS House Price Balance expected -11%, Mar -10%. provides Financial Quotes, Charts and Technical Analysis for Stock and Commodity Traders.