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Barchart Morning Call

BC - Thu Oct 25, 7:00AM CDT

Overnight Developments

  • Dec E-mini S&Ps are up 0.53% with support from higher European stocks and a favorable UK Q3 GDP report of +1.0% q/q. European stocks are up 0.49% on favorable earnings results from BASF and Unilever. Asian stocks today closed mixed with Japan up +1.13%, Hong Kong up +0.21%, but China down -0.72%. Commodity prices are up +0.46% today with Dec crude oil +0.65%, Dec gold +0.81%, Dec copper -0.17%, and agriculture prices trading mildly higher across the board. The dollar index is down -0.13% and EUR/USD is up +0.18%. Dec 10-year T-note prices are down sharply by 15.5 ticks.
  • UK Q3 GDP rose +1.0% q/q (+4.0% q/q annualized), which was much better than expectations of +0.4% q/q (+1.6% annualized) and was up from -0.4% q/q (-1.6% q/q annualized) in Q2. The report indicated that the UK exited its double-dip recession. However, part of the reason for the surge in Q3 GDP was one-off effects from the summer Olympics in London.
  • Eurozone Sep M3 eased to +2.7% y/y from a revised +2.8% in Aug and was weaker than market expectations of +3.0% y/y. The report was another sign of economic weakness in the Eurozone, although it may also make the ECB a little more comfortable if it wants to cut the refinancing rate further to 0.50% from the current level of 0.75%.
  • The Nikkei newspaper reported today that the BOJ will boost its asset purchase program by 10 trillion yen ($125 billion) to 90 trillion yen at its meeting next week on October 30. The Japanese government has been pulling out all the stops in trying to pressure the BOJ into easing monetary policy further.
  • Greece will get an additional 20 billion euro loan to supplement its second bailout package, according to a report today from Handelsblatt that cited a draft copy of the new agreement between troika officials and Greece. The European markets will be pleased if troika and Eurozone leaders are able to cover the new 20 billion euro hole in Greece's finances that developed in recent months during the Greek political turmoil and lack of action.
  • China's Sep index of leading economic indicators rose +0.3% m/m to 241.2, easing from the previous month's increase of +1.7% m/m, according to the Conference Board. Market Comments
    • Dec E-mini S&Ps this morning are up 7.50 points (+0.53%). Bullish factors include the +0.49% rally in European stocks, the 1.0% q/q increase in UK GDP, the report that the BOJ will boost its asset-purchase program next week, and the report that troika officials have figured out how to cover Greece's new 20 billion euro budget hole. The S&P 500 index on Wednesday closed mildly lower: S&P 500 -0.31%, Dow Jones -0.19%, Nasdaq 100 -0.39%. Bearish factors centered on continued worries about weak global economic growth, the spate of poor Q3 earnings and revenue reports, and poor German and Eurozone PMI data and German confidence data. Supportive factors included the sharp 5.7% increase in U.S. Sep new home sales to a new 2-1/2 year high and the stronger-than-expected 1.2 point increase in the Chinese Oct manufacturing PMI index to a 3-month high of 49.1 from 47.9 in September.
    • Dec 10-year T-notes this morning are down 15.5 ticks on the rally in U.S. and European stocks indexes and supply overhang ahead of today's 7-year T-note auction. Dec 10-year T-note prices on Wednesday closed unchanged: TYZ2 unch, FVZ2 +2.25. T-notes received some underlying support from the continued weakness in global stocks, but were undercut by the stronger-than-expected U.S. new home sales report and by supply overhang from this week's $99 billion in T-note auctions.
    • The dollar index this morning is down -0.11 points (-0.13%) on reduced safe-haven demand while EUR/USD is up +0.0024 (+0.18%) on higher European stocks and the report that troika officials have a deal with Greece. USD/JPY is up +0.31 (+0.39%). The dollar index on Wednesday closed slightly lower: Dollar index -0.05 (-0.07%), EUR/USD -0.0013 (-0.10%), USD/JPY -0.04 (-0.05%). EUR/USD closed mildly lower on the poor German and Eurozone economic data. The German Oct IFO business climate index fell by 1.4 points to a 2-1/2 year low of 100.00 from 101.4 in September. Germany's Oct manufacturing PMI fell by 0.4 points to 45.7 from 46.1 in September and was weaker than market expectations for a 0.4 point increase to 46.5. The Eurozone Oct manufacturing PMI fell by 0.8 points to 45.3 from 46.1 in September and was weaker than market expectations for a 0.4 point increase to 46.5.
    • Dec WTI crude oil prices this morning are up +0.56 (+0.65%) and Dec gasoline is up +0.0229 (+0.88%) on the lower dollar index and higher global stocks. Dec crude oil on Wednesday closed sharply lower while Dec gasoline closed little changed: CLZ2 -0.94 (-1.08%), RBZ2 +0.0002 (+0.01%). Bearish factors included (1) continued worries about weak global economic growth, (2) continued hedge fund selling with weak technicals, and (3) the bearish weekly DOE report. The DOE report showed (1) a 5.9 million barrel surge in U.S. crude oil inventories versus expectations of +1.8 million barrels, (2) a 1.439 million barrel increase in inventories that was larger than expectations of +500,000 barrels, (3) a -646,000 decline in distillate inventories that was bearish relative to expectations for a 1.5 million barrel decline, (4) a 2.7% decline in gasoline demand that left the 4-week average at 3.9 points below the 5-year average, and (5) a new 17-1/2 year high in U.S. crude oil production.
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      Global Financial Calendar

      Thursday 10/25/12
      United States
      0830 ET Weekly initial unemployment claims expected -18,000 to 370,000, previous +46,000 to 388,000. Continuing claims expected +10,000 to 3.262 mln, previous -29,000 to 3.252 mln.
      0830 ET USDA weekly U.S. Export Sales.
      0830 ET Sep Chicago Fed national activity index expected -0.2, Aug -0.87.
      0830 ET Sep durable goods orders expected +7.5% m/m, Aug -13.2% m/m. Sep durable goods ex-transportation expected +0.9% m/m, Aug -1.6% m/m. Sep non-defense capital goods orders ex-air expected +0.8%, Aug +1.1% y/y.
      1000 ET Sep pending home sales expected +2.5% m/m and +17.4% y/y, Aug -2.6% m/m and +9.6% y/y.
      1100 ET Oct Kansas City Fed manufacturing activity index expected at 5, Sep 2.
      1300 ET Treasury auction of $29 billion 7-year T-notes.
      1630 ET Weekly money supply report and Fed balance sheet.
      0400 ET Eurozone Sep M3 expected +3.0% y/y, Aug +2.9% y/y.
      United Kingdom
      0430 ET UK Q3 GDP expected +0.6% q/q and -0.5% y/y, Q2 -0.4% q/q and -0.5% y/y.
      0430 ET UK Aug index of services expected +0.3% m/m and -0.3% 3mo/3mo, July +1.1% m/m and +0.1% 3mo/3mo.
      1930 ET Japan Sep CPI expected -0.4% y/y, Oct -0.4% y/y. Sep CPI ex fresh food expected -0.2% y/y, Aug -0.3% y/y. Sep CPI ex food and energy expected -0.7% y/y, Aug -0.5% y/y.
      1930 ET Tokyo Oct CPI expected -0.8% y/y, Sep -0.7% y/y. Oct CPI ex fresh food expected -0.5% y/y, Sep -0.4% y/y. Oct CPI ex food and energy expected -1.1% y/y, Sep -1.1% y/y.
      2135 ET China MNI Oct business sentiment indicator. provides Financial Quotes, Charts and Technical Analysis for Stock and Commodity Traders.