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Barchart Morning Call --3/21

 Barchart Morning Call

Barchart.com - 19 mins ago
Overnight Developments
  • Global stocks are trading higher with the European Euro Stoxx 50 index up +1.73% and June S&Ps up +14.50 points. The dollar and Treasuries are weaker and most commodities are higher after Japanese Prime Minister Kan said progress is being made in restoring power to 2 reactors at the Fukushima Dai-Ichi power plant and as workers continue to spray water on reactor buildings, preventing fuel rods from overheating and causing further radiation leaks. Crude oil is up nearly $2 a barrel after the US, UK and France attacked military targets in Libya, effectively grounding Mummar Qaddafi's air force. Increased M&A activity is also giving a lift to equity prices after Deutsche Telekom AG jumped 14% after AT&T agreed to buy T-Mobile USA from the German phone company for about $39 billion. The acquisition is the largest in the wireless industry since 2004 and would push AT&T past Verizon Wireless to become the biggest mobile-phone company in America.
  • The Asian stock markets today closed mostly higher with Japan closed for holiday, Hong Kong +1.73%, China -0.27%, Taiwan +0.87%, Australia +0.35%, Singapore +1.63%, South Korea +0.95%, India -0.22%. Asia-Pacific stocks closed mostly higher today as Japan made progress in tackling its nuclear crisis and after Sony and Nissan Motor said they are prepared to resume production at some factories in Japan that had been halted after Japan's quake crisis forced then to shut some plants. Many Japanese businesses still face blackouts, transportation slowdowns, shortages of materials and suppliers unable to make shipments. The World Bank says "Japan's GDP growth will be negatively affected through mid-2011," but that "growth should pick up in subsequent quarters as reconstruction efforts, would could last 5 years, accelerate." The World Bank also says that despite the PBOC's actions to raise banks' reserve requirements 6 times since Nov, inflationary pressure in China is unlikely to diminish quickly as higher international commodity prices are still feeding through into the economy. The World Bank estimates Chinese CPI will average 4.7% this year compared with 3.3% in 2010.
Overnight U.S. Stock News
  • June S&Ps this morning are trading up +14.50 points. The US stock market last Friday rallied after G-7 nations agreed to help weaken the yen, which may support Japan's economy and after Libya announced a cease fire: Dow Jones +0.71%, S&P 500 +0.43%, Nasdaq Composite +0.29%. Bullish factors for stocks included (1) carry-over strength from a rally in Asian stock markets after G-7 nations agreed to coordinated intervention to weaken the yen, which may help keep Japan from falling into recession, (2) the action by Libya to announce a halt to all of its military action against rebel forces and that it will start talks with the opposition, which bolsters the chances of a resolution to the conflict, and (3) a rally in bank stocks after the Fed said 19 of the largest US banks will be able to restart dividend payments or buy back shares after "significant improvement" in their capital positions and the economy.
  • Bearish factors included (1) comments from Japanese Prime Minister Kan who said Japan's nuclear crisis remains "very grave"' as workers there attempt to restore power to the crippled Fukushima Dai-Ichi power plant's cooling systems, and (2) the action by China to raise banks reserve requirements for the third time this year by 50 bp to 20%, which may slow China's economic growth and the global economy as well.
  • AT&T (NYSE:T) rose 1.9% in European trading after it agreed to buy T-Mobile USA from Deutsche Telekom AG for about $39 billion in cash and stock to create America's largest mobile-phone company.
Today's Market Focus
  • June 10-year T-notes this morning are trading down -15.5 ticks on reduced safe-haven demand as global equity markets rally. T-note prices last Friday weakened on reduced safe-haven demand after the G-7 intervened in currency markets to stabilize the yen and after Libya said it was stopping military action against rebel forces: TYM11 -8, FVM11 -5, EDU11 +1.0. Bearish factors included (1) reduced safe-haven demand for Treasuries after G-7 nations agreed to intervene to weaken the yen, which may help keep Japan from falling into recession, and (2) a further reduction in safe-haven demand after Libya said it will halt all of its military operations against rebel forces. Bullish factors included (1) the action by the UN to approve a no-fly zone over Libya, which may lead to military action against Libyan forces and prompt safe-haven buying of Treasuries, and (2) the action by the Fed to buy $1.568 billion of Treasuries as part of its QE 2 asset-purchase program.
  • The dollar index this morning is weaker with the dollar/yen +0.68 yen and the euro/dollar -0.13 cents. The dollar index last Friday tumbled to a 4-1/2 month low and finished lower on reduced safe-haven demand for the dollar after the stock market rallied and as Libya ordered a halt to its military action against rebel forces: Dollar Index -0.238, USDJPY +1.692, EURUSD +0.01606. Bearish factors included (1) reduced safe-haven demand for the dollar after the stock market rallied, (2) reduced safe-haven demand for the dollar after Libya ordered a halt to all military operations against rebel forces, and (3) strength in the euro which climbed to a 4-1/2 month high against the dollar after ECB President Trichet said he doesn't want to change his hawkish stance on "strong vigilance" on inflation that he gave earlier this month, which fuels speculation the ECB still plans to raise interest rates next month. Bullish factors included (1) the action by the G-7 nations to announce coordinated currency intervention to weaken the yen, and (2) the plunge in Feb UK nationwide consumer confidence to its lowest level since data began in 2004, which is negative for the British pound.
  • April crude oil prices this morning are trading up $1.88 a barrel and April gasoline is +5.34 cents per gallon as allied air strikes in Libya threaten to prolong a supply outage in Africa's third biggest oil producer. Crude oil and gasoline prices last Friday fluctuated between gains and losses and settled slightly lower when Libya said it will halt all military action against rebel forces after the UN approved a no-fly zone over Libya: CLJ11 -$0.35, RBJ11 -0.12. Apr crude rose to a 1-week high but fell back and closed lower. Bearish factors include (1) the action by Libya to announce a halt to all of its military action against rebel forces and that it will start talks with the opposition, and (2) comments from the director of the Bureau of Ocean Energy Management, Regulation and Enforcement who said the Obama administration may cut the duration of US oil leases to accelerate development and production and cut the royalty rate of companies that step up crude production on federal lands, which may increase US oil supplies. Bullish factors included (1) the slump in the dollar index to a 4-1/2 month low, which boosts investment demand in commodities, (2) the action by the United Nations Security Council to approve a no-fly zone over Libya, which bolstered speculation of UN air attacks on Libyan forces, and (3) data from the API that showed US Feb fuel demand rose 4.4% y/y to 19.7 million barrels a day, the highest Feb total in 3 years.
Today's U.S. Earnings Reports

Earnings reports (confirmed releases, sorted by mkt cap) TIF-Tiffany & Co. (BEST earnings consensus $1.39), GLPW-Global Power Equipment Group (0.38), ADY-Feihe International (0.07), CXPO-Crimson Exploration (-0.04).

Global Financial Calendar

Monday 3/21/11
United States
1000 ET Feb existing home sales expected ?4.5% to 5.12 million, Jan +2.7% to 5.36 million.
1130 ET Weekly 3-mo and 6-mo T-bill auctions.
Euro-Zone
0930 ET Euro-Zone finance ministers hold special meeting in Brussels to conclude package of measures on debt crisis and economic governance.
1300 ET EU-27 finance ministers meet to discuss outlines of the post-2013 European Stability Mechanism.
Japan
n/a Japanese markets and government offices closed for Vernal Equinox Day.

 

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