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Barchart Morning Call 5/9

|Includes:ATVI, BMC, Cisco Systems, Inc. (CSCO), CTL, EOG, M, MNST, MPEL, NWSA, PCLN
Barchart Morning Call Wed, 9 May 2012 07:00:00 -0500

Overnight Developments

    E-mini S&Ps are down 11.25 points (-0.83%) this morning and commodity prices are mostly lower as the markets wait to see if the anti-bailout Greek Radical Left Syriza party will be able to form a government. Gold is down $19.50 this morning, copper is down 1.07%, and crude oil is down 79 cents. Grains are lower while meats and softs are mixed. The dollar index is up 0.32% this morning and EUR/USD is down 0.24% on the Greek uncertainty. European stocks are trading lower with the Euro Stoxx 50 down 1.03%. Syriza Radical Left leader Alexis Tsipras will meet later today with other Greek party leaders in an attempt to form a government. Mr. Tsipras is scheduled to meet with Pasok leader Venizelos at 11 AT ET and New Democracy leader Samaras at Noon ET. Mr. Samaras yesterday refused to agree to Mr. Tsipras' demand that he send a letter to Eurozone officials renouncing the written promises he made earlier to uphold the terms of the bailout agreement. Mr. Samaras said he was being asked "to put my signature to the destruction of Greece," which indicates that he is not amenable to participating in a coalition government with Syriza. If a coalition government cannot be formed, then new Greek elections will have to be held in June. The Greek finance ministry has said the country may run out of cash by the end of June if a new government is not in place to meet the conditions for the next Eurozone bailout payment. The Greek situation is raising the risks for other troubled European countries. The 10-year Spanish bond yield today rose by 17 bp and the Italian yield rose by 10 bp. 5-year credit default swaps on Spanish debt rose by 8 bp to 506 bp, just below the recent record high of 510.5 bp on April 16. In some good news for Europe, Germany today reported that its March trade surplus of 17.4 billion euros was larger than expectations of 14.3 billion euros and that March exports rose +0.9% m/m, much stronger than expectations of -0.5% m/m. Asian stock markets today closed lower across the board on the European travails: Japan -1.49%, Hong Kong -0.75%, China -1.91%, Taiwan -0.93%, Australia -0.91%, Singapore -1.06%, South Korea -0.89%, India -0.40%. Japan reported its March leading index at 96.6, which was weaker than the consensus of 96.9 but was up from Feb's revised 96.0 (preliminary 96.3). The coincident index rose to 96.5 from 95.2 in Feb and was stronger than the consensus of 96.2. In some good economic news for China, April passenger-vehicle sales rose by 13% to 1.28 million units, which was stronger than the market consensus of +11.3%. An official of the China Association of Automobile Manufacturers said that the association sees "signs of recovery" after the Chinese vehicle sales in Jan-Feb had their worst 2-month start to the year since 2005. China today announced a 3.5% cut in maximum retail gasoline and diesel prices effective tomorrow. That was the first fuel price cut since last October and will be welcome by Chinese businesses and consumers.

Overnight U.S. Stock News

    June E-mini S&Ps this morning are down -11.25 points (-0.83%) on the 1.03% sell-off in European stocks. There are earnings reports today from CSCO-Cisco (consensus $0.47), NWSA-News Corp (0.31), and (3.90), among others. US stocks on Tuesday closed moderately lower: S&P 500 -0.43%, Dow Jones -0.59%, Nasdaq 100 -0.36%. The U.S. stock market fell on the Greek political uncertainty combined with the 2.06% decline seen in the Euro Stoxx 50 on Tuesday. The hard line being taken by the Greek Radical Left Syriza party in trying to forge a coalition government caused fresh market worries since the Syriza party leader is explicitly saying his government would default on Greek debt, nationalize banks, and renege on austerity and reform measures.

Today's Market Focus

    June 10-year T-notes this morning are up 5 ticks on increased safe-haven demand with the global sell-off in stocks on the Greek political uncertainty. The Treasury today continues its $72 billion coupon package with the sale of $24 billion in 10-year T-notes. T-note prices on Tuesday closed higher: TYM2 +9, FVM2 +3.5. T-note prices saw strength from continued safe-haven demand with the moderately lower close in U.S. stocks, the 2% sell-off in European stocks, and the rout in commodity prices. The dollar index this morning is trading mildly higher by 0.25 points (+0.32%) with EUR/USD down 0.31 cents (-0.24%) and USD/JPY down -0.25 yen (-0.31%). The dollar index is getting a safe-haven boost again today from the European turmoil. The dollar index on Tuesday closed mildly higher: Dollar Index +0.135, EUR/USD -0.0015, USD/JPY +0.01. The dollar index continues to see support from the political uncertainty in Europe and the threat of a downward spiral in events if hardliners gain control of the government in Greece. The euro at least received some underlying support from the report that German March industrial production rose +2.8% m/m and +1.6% y/y, which was substantially stronger than the market consensus of +0.8% m/m and -1.2% y/y. The German Economy Ministry said that Germany “industrial activity is gathering pace and the outlook has improved markedly.” June crude oil prices this morning are down -0.79 cents (-0.81%) and June gasoline is down 0.66 cents (-0.22%) on the European political uncertainty and the general sell-off in stocks and commodities. Crude oil is also lower ahead of today's weekly DOE report. Crude oil and gasoline prices on Tuesday closed mixed: CLM12 -0.93, RBM2 +0.0203. Crude oil prices were hurt by continued doubts about global growth, expectations for a new 21-1/2 year high in today's weekly DOE report, and the Saudi Oil Minister's comment that oil prices are "still a bit too high." Gasoline prices were boosted by the DOE's hike in its forecast for U.S. gasoline demand this year to 8.67 million bpd, although that would be down by 0.8% from 8.74 million bpd in 2011. The market consensus for Wednesday's weekly DOE report is that crude oil inventories will increase by another 1.9 million bbls to a new 21-1/2 year high, gasoline inventories will increase by +250,000 bbls, distillate inventories will increase by +750,00 bbls, and the refinery utilization rate will rise by 0.5 point to 86.5%. The Seaway pipeline between the key oil hub at Cushing, Oklahoma and the Gulf coast is scheduled to be reversed late next week, which should lead to a gradual drawdown in crude oil inventories at Cushing.

Today's U.S. Earnings Reports

Earnings reports (sorted by mkt cap): CSCO-Cisco (consensus $0.47), NWSA-News Corp (0.31), (3.90), EOG-EOG Resources (1.16), CTL-Centurylink (0.58), M-Macy's (0.40), ATVI-Activision (0.04), MNST-Monster Beverage (0.38), MPEL-Melco Crown (0.16), BMC-BMC Software (0.80).

Global Financial Calendar

Wednesday, May 9
United States
0700 ET Weekly MBA mortgage applications, previous +0.1%, purchase sub-index +2.9%, refinancing sub-index -0.7%.
1000 ET Mar wholesale inventories expected +0.6%, Feb +0.9%.
1000 ET Minneapolis Fed President Narayana Kocherlakota speaks to the Economic Club of Minnesota in a speech titled “Toward a More Transparent Monetary Policy.”
1030 ET DOE Weekly Petroleum Status Report.
1045 ET Cleveland Fed President Sandra Pianalto speaks on leadership in Lexington KY.
1200 ET Philadelphia Fed President Charles Plosser speaks in Philadelphia on community development.
1300 ET Treasury auctions $24 billion in 10-year T-notes.
0200 ET German Mar trade balance expected 14.3 billion euros, Feb 14.7 billion euros. Mar current account balance expected 18.0 billion euros, Feb 11.1 billion euros. Mar exports expected -0.5% m/m, Feb +1.5% m/m. Mar imports expected +1.0% m/m, Feb +3.9% m/m.
0100 ET Japan Mar leading index expected 96.9, Feb 96.3. Mar coincident index expected 96.2, Feb 95.0.
1950 ET Japan Apr bank lending including trusts, Mar +0.8% y/y (+0.9% y/y ex-trusts).
1950 ET Japan Mar adjusted current account balance expected 650 billion yen, Feb 854.1 billion yen. Mar current account balance BOP basis expected -42.8 billion yen, Feb 102.1 billion yen.
2200 ET Japan Apr Tokyo average office vacancies, Mar 9.04%.
n/a China Apr trade balance expected $9.9 billion, Mar $5.35 billion. Apr exports expected +8.5% y/y, Mar +8.9% y/y. Apr imports expected +10.9% y/y, Mar +5.3% y/y. provides Financial Quotes, Charts and Technical Analysis for Stock and Commodity Traders.