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Barchart Morning Call - 2/14

 Barchart Morning Call -

Mon Feb 14, 7:00AM CST
Overnight Developments
  • Global stocks are trading mixed with the European Euro Stoxx 50 index up +0.20% and March S&Ps down -1.40 points. The dollar index rose to a 3-week high and copper surged after China's Jan exports increased more than expected. The euro slipped to a 3-week low against the dollar ahead of a meeting of Euro-Zone finance ministers in Brussels later today. Global stocks received a boost after Egypt's ruling army council said it aims to transfer power within 6 months to a democratically elected government. Gains in European stocks were limited after Dec Euro-Zone industrial production unexpectedly declined -0.1% m/m along with a Reuters report that a rescue plan for WestLB AG, the German state-owned bank bailed out during the financial crisis, may founder. US stock prices were undercut in European trading after Wal-Mart slid 1.4% when JPMorgan Chase cut its recommendation on the stock to "neutral" from "overweight."
  • The Asian stock markets today closed higher with Japan up +1.13%, Hong Kong +1.28%, China +3.15%, Taiwan +0.88%, Australia +1.12%, Singapore +0.88%, South Korea +2.16%, India +2.67%. China's Shanghai Stock Index advanced to a 1-1/2 month high after its trade balance narrowed to +$6.5 billion, the smallest in 9 months. Jan China exports rose more than expected at +37.7% y/y and Jan imports surged +51.0% y/y, signaling strength in the Chinese economy that should benefit the global economy as well. Japan's Nikkei Stock Index soared to a 9-1/4 month high despite its economy contracting for the first time in 5 quarters. Q4 Japan GDP fell -0.3% q/q and -1.1% y/y, but the figures were stronger than the -0.5% m/m and-2.0% y/y expected as Japan's Cabinet Office said gross domestic product fell because of slowing exports and fading government stimulus programs. The Cabinet Office also said that China's $5.88 trillion GDP surpassed Japan's $5.47 trillion GDP in 2010, which pushes China ahead of Japan as the world's second-largest economy.
Overnight U.S. Stock News
  • March S&Ps this morning are trading down -1.40 points. The US stock market last Friday closed higher after Egyptian President Mubarack resigned and US consumer confidence rose: Dow +0.36%, S&P 500 +0.55%, Nasdaq Composite +0.68%. The S&P 500 and the Dow climbed to 2-1/2 year highs and the Nasdaq posted a 9-3/4 year high. Bullish factors included (1) the action by Egyptian President Mubarack to resign, which reduces concern that tensions will spread throughout the Middle East, (2) the larger-than-expected increase in the Feb US University of Michigan consumer confidence which rose to its best level in 8 months (+0.9 to 75.1 versus expectations of +0.8 to 75.0), (3) final trade data for 2010 that showed US exports rose +17% last year, their biggest gain since 1988 and US imports in 2010 climbed +20%, their biggest increase since 1984, and (4) a rally in mortgage insurers after Treasury Secretary Geithner called for limiting the role of government-backed competitors Fannie Mae and Freddie Mac in the mortgage market.
  • Bearish factors for stocks included (1) the prediction from Societe Generale that the actual US unemployment rate in Jan would be 12.8% instead of the Labor Department's reported 9.0% if Americans dropping out of the workforce were taken into account, and (2) weakness in energy producers after crude oil tumbled to a 2-1/2 month low.
  • Wal-Mart (NYSE:WMT) slipped 1.4% in European trading after JPMorgan Chase cut its recommendation on the stock to "neutral" from "overweight."
Today's Market Focus
  • March 10-year T-notes this morning are trading unchanged. T-note prices last Friday gained on Middle East uncertainty and a post-refunding rally: TYH11 +12, FVH11 +5.2, EDM11 unchanged. Bullish factors included (1) increased safe-haven demand for Treasuries as the resignation of Egyptian President Mubarack increases uncertainty on who will lead Egypt, (2) the action by the Fed to purchase $7.375 billion of Treasuries as part of its QE2 asset-purchase program, and (3) a post-refunding rally as the Treasury concluded with its Feb quarterly refunding of $72 billion of T-notes and T-bonds. Bearish factors included (1) the larger-than-expected increase in the Feb US University of Michigan consumer confidence, which rose to its best level in 8 months (+0.9 to 75.1 versus expectations of +0.8 to 75.0), and (2) reduced safe-haven demand for Treasuries after the S&P 500 posted a fresh 2-1/2 year high.
  • The dollar index this morning is trading higher and at a 3-week high with the dollar/yen -0.01 yen and the euro/dollar -1.00 cent. The dollar index last Friday rallied to a 3-week high on uncertainty in Egypt along with the increase in Feb US consumer confidence: Dollar Index +0.210, USDJPY +0.223, EURUSD -0.00540. Bullish factors for the dollar included (1) increased safe-haven demand for the dollar after Egyptian President Mubarak stepped down, which increases uncertainty on who is going to take control in Egypt, (2) weakness in the euro which fell to a 3-week low against the dollar after ECB Council Member and Bundesbank President Weber said he will step down effective Apr 30, which may reduce ECB rate-hike expectations as Weber is a staunch inflation fighter and his absence from the ECB is euro negative, (3) the jump in the Feb US University of Michigan consumer confidence to an 8-month high, which is positive for the US economy and supportive for the dollar. Bearish factors included (1) the rally in the S&P 500 Index to a 2-1/2 year high, which reduces the safe-haven demand for the dollar, and (2) hawkish comments from ECB Council member and Bank of France President Noyer who said that "we are not willing to make compromises on second-round effects" of higher inflation to feed through into higher wage demands.
  • March crude oil prices this morning are trading down 3 cents a barrel and March gasoline up +2.28 cents per gallon. Crude oil and gasoline prices last Friday settle lower due to a stronger dollar and after Egyptian President Mubarak stepped down: CLH11 -$1.15, RBH11 -0.46. Mar crude fell to a 2-1/2 month low. Bearish factors included (1) the rally in the dollar index to a 3-week high, which reduces investment demand for commodities, (2) the action by Egyptian President Mubarak to step down and hand power to the Egyptian military, which reduces concern that crude shipments from the Middle East will be disrupted, and (3) carry-over weakness from the plunge in natural gas prices to a 2-3/4 month low on speculation that demand for heating fuels will weaken after the Commodity Weather Group predicted warmer-than-normal temperatures in the eastern two-thirds of the US from Feb 16-20. Bullish factors included (1) the prediction from Deutsche Bank that China may increase its crude oil imports this year by 530,000 barrels a day or 11% to 5.4 million barrels as additional emergency storage tanks come into operation as it continues its stockpiling of commodities, and (2) the increase in Feb US University of Michigan consumer confidence to an 8-month high, which may portend to increased consumer spending and demand for fuel.
Today's U.S. Earnings Reports

Earnings reports (confirmed releases, sorted by mkt cap) A-Agilent Technologies (BEST earnings consensus $0.57), MAR-Marriott International (0.36), KKR-KKR & Co. LP (0.57), FTI-FMC Technologies (0.70), MGM-MGM Resorts International (-0.22), WLT-Walter Energy (1.96), MAS-Masco (-0.03), ACGL-Arch Capital Group Ltd. (2.36), VAL-Valspar (0.38), (0.44), MFA-MFA Financial (0.24), DBD-Diebold (0.52), CW-Curtiss-Wright (0.74), AAWW-Atlas Air Worldwide Holdings (1.33), STEC-STEC Inc. (0.33), NAT-Nordic American Tanker Shipping (-0.04).

Global Financial Calendar

Monday 2/14/11
United States
1000 ET New York Fed President William Dudley holds a briefing with bank economists on the regional economy and releases the Q4 2010 ?Quarterly Household Debt and Credit Report.?
1130 ET Weekly 3-mo and 6-mo T-bill auctions.
0500 ET Dec Euro-Zone industrial production expected unchanged m/m and +8.0% y/y, Nov +1.4% m/m and +7.9% y/y.
1100 ET Euro-Zone finance ministers meet in Brussels.
2100 ET Jan China producer prices expected +6.2% y/y, Dec +5.9% y/y.
2100 ET Jan China consumer prices expected +5.4% y/y, Dec +4.6% y/y.
2330 ET Revised Dec Japan industrial production, previous +3.1% m/m and +4.6% y/y. Revised Dec capacity utilization, previous +1.6% m/m. provides Financial Quotes, Charts and Technical Analysis for Stock and Commodity Traders.