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Barchart Moring Call - 2/18

 Barchart Morning Call

Barchart.com - 11 mins ago
Overnight Developments
  • Global stocks are trading mostly lower with the European Euro Stoxx 50 index down -0.10% and March S&Ps down -0.70 of a point. Global stock markets and commodity prices were undercut after China raised banks' reserve requirements for the second time this year and just 10 days after it raised interest rates in an attempt to cool inflation and curb property-price gains. Inflation concerns were heightened after Jan German producer prices rose a more-than-expected +1.2% m/m and +5.7% y/y, the fastest pace of increase in 2-1/4 years. The euro weakened after Feb France business confidence unexpectedly declined -2 to 106, while the British pound climbed to a 2-week high against the dollar after Jan UK retail sales rose by almost four times expectations. Jan UK retail sales with auto fuel jumped +1.9% m/m and +5.3% y/y as consumer spending rebounded after the coldest UK December in a century. The markets will be awaiting any comments to come from the Group of 20 policy makers that begin their 2-day meeting today in Paris to discuss imbalances that pose a risk to the global economy.
  • The Asian stock markets today closed mixed with Japan up +0.06%, Hong Kong +1.26%, China -1.05%, Taiwan +1.84%, Australia -0.03%, Singapore +0.13%, South Korea +1.75%, India -1.60%. In an attempt to tackle accelerating inflation and rising property bubbles, the PBOC raised banks' reserve ratios by 50 bp for the second time this year. Reserve ratios will now be 19.5% for China's biggest banks starting Feb 24. PBOC Governor Xiaochuan said in Paris after the reserve-ratio announcement that policy makers may also use means "including rates and currency" to tackle inflation. The renminbi rallied to a 17-year high ahead of the G-20 summit in Paris as China allows the yuan to move higher to placate critics of its foreign exchange policy. The yuan reached 6.5721 per dollar, the strongest level since China unified official and market exchange rates at the end of 1993. Asian stock markets received a boost after Q4 Taiwan GDP was revised higher to 6.92% y/y from a preliminary estimate of 6.48% last month.
Overnight U.S. Stock News
  • March S&Ps this morning are trading down -0.70 of a point. The US stock market yesterday rallied on strong manufacturing data and improved company earnings results: Dow +0.24%, S&P 500 +0.31%, Nasdaq Composite +0.21%. The S&P 500 and Dow posted new 2-1/2 year highs. Bullish factors included (1) the larger-than-expected increase in the Feb Philadelphia Fed manufacturing index which expanded at its fastest level in 7 years (+16.6 to 35.9 versus expectations of +1.7 to 21.0), (2) the +0.1% gain in Jan leading indicators, their seventh consecutive monthly increase and a sign the economic expansion will extend into this year, (3) continued strong earnings results with 72% of the 388 companies in the S&P 500 that have reported results since Jan 10 beating estimates, and (4) reduced interest rate concerns after the 10-year T-note yield slipped to a 2-week low.
  • Bearish factors for stocks included (1) the larger-than-expected increase in Jan core CPI (+0.2% m/m and +1.0% y/y versus expectations of +0.1% m/m and +0.9% y/y), (2) the larger-than-expected increase in weekly US initial unemployment claims (+25,000 to 410,000 versus expectations of +17,000 to 400,000), and (3) increased geo-political concerns after Iran said it is sending 2 warships through the Suez Canal, which risks an Iranian confrontation with Israel.
  • Intuit (NASDAQ:INTU) gained 2% in European trading after the company boosted its full-year profit forecast to as much as $2.48 a share from an earlier outlook of $2.43 a share at most.
Today's Market Focus
  • March 10-year T-notes this morning are trading down -3 ticks. T-note prices yesterday rallied to a 2-week high and finished higher on an escalation in Middle East tensions along with an increase in weekly jobless claims: TYH11 +13.5, FVH11 +11.7, EDM11 +2.0. Bullish factors included (1) the larger-than-expected increase in weekly US initial unemployment claims (+25,000 to 410,000 versus expectations of +17,000 to 400,000), (2) increased safe-haven demand for Treasuries after Iran said it is sending 2 warships through the Suez Canal, which risks an Iranian confrontation with Israel, (3) dovish comments from Chicago Fed President Evans who said monetary stimulus is needed to spur the "disappointing" pace of the economic recovery, and (4) the Fed's purchase of $7.24 billion of Treasuries as part of its QE2 asset-purchase program. Bearish factors included (1) the larger-than-expected increase in Jan core CPI (+0.2% m/m and +1.0% y/y versus expectations of +0.1% m/m and +0.9% y/y), (2) the larger-than-expected increase in the Feb Philadelphia Fed manufacturing index which expanded at its fastest level in 7 years (+16.6 to 35.9 versus expectations of +1.7 to 21.0), and (3) reduced safe-haven demand for Treasuries after the S&P 500 climbed to a 2-1/2 year high.
  • The dollar index this morning is trading higher with the dollar/yen +0.10 yen and the euro/dollar -0.54 cents. The dollar index yesterday closed lower for a third day as Treasury yields weakened and US jobless claims rose more than expected: Dollar Index -0.233, USDJPY -0.369, EURUSD +0.00400. Bearish factors for the dollar included (1) the drop in Treasury yields to a 2-week low, which weakens the dollar's interest rate differentials and reduces demand for dollar assets, (2) the larger-than-expected increase in weekly US jobless claims, which indicates a struggling labor market that may prompt the Fed into additional stimulus at the expense of the dollar, (3) strength in the British pound which rallied to a 2-week high against the dollar after BOE policy maker Sentance said the BOE should raise interest rates to boost the pound as a means of curbing inflation, and (4) reduced safe-haven demand for the dollar after the S&P 500 climbed to a 2-1/2 year high. Bullish factors included (1) comments from Portuguese government minister Pereira who said that delay in an "effective" European response to the "turbulence" in sovereign debt markets hurts the euro, and (2) a possible increase in the safe-haven demand for the dollar after Iran said it is sending 2 warships through the Suez Canal, which risks an Iranian confrontation with Israel.
  • March crude oil prices this morning are trading down -10 cents a barrel and March gasoline is +0.66 of a cent per gallon. Crude oil and gasoline prices yesterday fluctuated on both sides of unchanged and settle mixed as rising Middle East tensions offset a larger-than-expected increase in US jobless claims: CLH11 +$1.37, RBH11 -1.70. Mar gasoline climbed to a 2-1/3 year high but erased its gains and closed lower. Bullish factors included (1) the weaker dollar, which boosts investment demand for commodities, (2) escalating tensions in the Middle East as demonstrators clashed with police in Bahrain and Libya, the holder of Africa's largest oil reserves, and after Iran said it plans to send 2 warships through the Suez Canal, which raised concern about a possible confrontation with Israel, and (3) the increase in the Feb Philadelphia Fed manufacturing index to its best level in 7 years, which indicates strength in the economy and increased fuel consumption and demand. Bearish factors included (1) the larger-than-expected increase in weekly US jobless claims, which indicates a weak labor market that may hinder fuel demand, and (2) the forecast from the National Weather Service's Climate Prediction Center for normal temperatures for the US Northeast from Feb 22 through Mar 2, which may lead to reduced demand for heating fuels.
Today's U.S. Earnings Reports

Earnings reports (confirmed releases, sorted by mkt cap) LYB-LyondellBasell Industries NV (BEST earnings consensus $0.66), PGN-Progress Energy (0.45), CPB-Campbell Soup (0.72), UPL-Ultra Petroleum (0.54), CPN-Calpine (0.08), WIN-Windstream (0.20), BEC-Beckman Coulter (1.24), DLR-Digital Realty Trust (0.21), PNW-Pinnacle West Capital (0.01), AYE-Allegheny Energy (0.48), NVE-NV Energy (0.04), HPT-Hospitality Properties Trust (0.36), REGN-Regeneron Pharmaceuticals (-0.31), LECO-Lincoln Electric Holdings (0.82), AGP-Amerigroup (1.16), CKH-SEACOR Holdings (1.90).

Global Financial Calendar

Friday 2/18/11
United States
0800 ET Fed Chairman Ben Bernanke speaks on a panel at a Bank of France Financial Stability Review on ?Global Imbalances and Financial Stability.?
Germany
0200 ET Jan German producer prices expected +0.6% m/m and +5.1% y/y, Dec +0.7% m/m and +5.3% y/y.
France
0245 ET Feb France business confidence indicator expected +1 to 109, Jan +6 to 108.
United Kingdom
0430 ET Jan UK retail sales ex auto fuel expected +0.2% m/m and +4.3% y/y, Dec ?0.3% m/m and +1.0% y/y.
0430 ET Jan UK retail sales with auto fuel expected +0.5% m/m and +4.0% y/y, Dec ?0.8% m/m and unchanged y/y.
Canada
0700 ET Jan Canada CPI expected +0.3% m/m and +2.4% y/y, Dec unchanged m/m and +2.4% y/y.
0700 ET Jan Bank of Canada core CPI expected +0.1% m/m and +1.5% y/y, Dec ?0.3% m/m and +1.5% y/y.
Euro-Zone
n/a G-20 finance ministers begin 2-day meeting in Paris.

 

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Jim Van Meerten is a professional investor with over 40 year experience in investing in stocks, mutual funds and ETFs.  He shares his knowledge on Barchart in his daily blogs -- Barchart Portfolio Blogs.