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Barchart Morning Call 3/22

 Barchart Morning Call

Barchart.com - 2 hrs 22 mins ago
Overnight Developments
  • Global stocks are mostly higher with the European Euro Stoxx 50 index up +0.22% and June S&Ps down -0.10 of a point. The dollar and Treasuries retreated, with the dollar index falling to a 1-1/4 year low, as Japan makes progress in averting a nuclear meltdown. In Libya, allied forces are expanding their air strikes to thwart Muammar Qaddafi's fighters, while unrest in Yemen escalated as thousands of people protested on the street against President Ali Abdullah Saleh, who is also facing an internal revolt from army leaders, ministers and diplomats. The British pound surged to a 14-month high against the dollar after Feb UK CPI rose a more-than-expected +4.4% y/y, its fastest pace of increase in 2-1/4 years. The euro climbed to a 4-1/2 month high against the dollar after European officials announced a permanent rescue fund to lend 500 billion euros ($710 billion) from 2013. The 3-month Euribor rate, the rate at which Euro-Zone banks borrow between each other, rose 6 bp to a 1.185%, its highest level in 1-3/4 years as speculation builds about an ECB interest rate hike next month.
  • The Asian stock markets today closed higher with Japan up +4.36%, Hong Kong +0.76%, China +0.49%, Taiwan +0.48%, Australia +0.01%, Singapore +0.64%, South Korea +0.44%, India +0.84%. Asia-Pacific stocks received a boost after Japan made progress in stabilizing reactors at its crippled power plant and as Japanese Prime minister Kan said there was "light at the end of the tunnel" for the country's nuclear crisis. The BOJ pumped an additional 2 trillion yen into the financial system today, bringing its total amount of emergency liquidity pumped into money markets at 40 trillion yen. The Chinese yuan today rose to 6.5552 against the dollar, its highest level since China unified official and market exchange rates in 1993, as speculation mounts that the PBOC will raise interest rates again.
Overnight U.S. Stock News
  • June S&Ps this morning are trading down -0.10 of a point. The US stock market yesterday opened sharply higher and maintained most of its gains as Japan's nuclear crisis eased along with an increase in M&A activity: Dow Jones +1.50%, S&P 500 +1.50%, Nasdaq Composite +1.83%. The Dow posted a 1-week high. Bullish factors for stocks included (1) reduced concern over Japan's nuclear crisis after the US Nuclear Regulatory Commission said the situation at Japan's Fukushima Dai-Ichi plant "is on the verge of stabilizing," (2) increased M&A activity after AT&T agreed to buy T-Mobile USA from Deutsche Telekom AG for about $39 billion to create America's largest mobile-phone company and Charles Schwab agreed to buy OptionsXpress Holdings for $1 billion, and (3) strength in energy producers as allied air strikes in Libya boosted crude oil prices and threatens to prolong a supply outage in Africa's third biggest oil producer.
  • Bearish factors included (1) the weaker-than-expected Feb existing home sales (-9.6% to 4.88 million versus expectations of -4.5% to 5.12 million, (2) the estimate from the nonpartisan CBO that said President Obama's budget would produce $2.3 trillion more in deficits over the next decade than the administration projects, and (3) the prediction from market researcher IHS iSuppli that production halts at Shin-Etsu Chemical and MEMC Electronic Materials because of Japan's earthquake have idled 25% of the global production of silicon wafers used to make microchips, which may cut production and profits for many technology companies that use chips in their products.
  • Chipmakers may move to the upside today after Citigroup said the semiconductor industry will probably avoid the worst supply constraints and recommended that investors should buy chip stocks after their recent declines.
Today's Market Focus
  • June 10-year T-notes this morning are trading down -7.5 ticks. T-note prices yesterday traded weaker the entire day on reduced safe-haven demand as the stock market rallied and after the Treasury announced it will liquidate its MBS holdings: TYM11 -15.5, FVM11 -12.7, EDU11 -1.5. Bearish factors included (1) reduced safe-haven demand for Treasuries after the stock market rallied sharply and as Japan's nuclear crisis eased, (2) the announcement by the Treasury that it will wind down its $142 billion portfolio of MBS securities by $10 billion a month starting this month, which indicates a reduction in the Treasury's emergency liquidity measures, and (3) the estimate from the nonpartisan CBO that said President Obama's budget would produce $2.3 trillion more in deficits over the next decade than the administration currently projects, which may lead to increased issuance of government debt by the Treasury. Bullish factors included (1) the weaker-than-expected Feb existing home sales (-9.6% to 4.88 million versus expectations of -4.5% to 5.12 million, and (2) increased safe-haven demand for Treasuries on concern the civil unrest in North Africa and he Middle east is spreading after Yemen declared a state of emergency.
  • The dollar index this morning is weaker and trading at a fresh 1-1/4 year low with the dollar/yen -0.10 yen and the euro/dollar +0.15 cents. The dollar index yesterday slumped to a 1-1/4 year low and finished weaker on reduced safe-haven demand for the dollar after the stock market rallied along with hawkish rhetoric from the ECB: Dollar Index -0.317, USDJPY +0.440, EURUSD +0.04400. Bearish factors included (1) reduced safe-haven demand for the dollar after the stock market rallied, (2) hawkish comments from ECB Executive Board member Tumpel-Gugerell that lifted the euro to a 4-1/2 month high against the dollar after she reiterated ECB President Trichet's mantra that "strong vigilance" is necessary to keep a lid on inflation, which shows a consensus building among ECB policy makers for an interest rate hike as soon as next month's policy meeting, and (3) the weaker-than-expected Feb US existing home sales, which may prompt the Fed into keeping its overly easy monetary policy in place for the foreseeable future and further weaken the dollar's interest rate differentials. Bullish factors included (1) weakness in the yen on fears of further G-7 currency intervention, and (2) the announcement by the Treasury that it will wind down its $142 billion portfolio of MBS securities by $10 billion a month starting this month, which is dollar positive as it shows the Treasury reducing the size of its balance sheet.
  • April crude oil prices this morning are trading down -34 cents a barrel and April gasoline is -1.37 cents per gallon. Crude oil and gasoline prices yesterday climbed after allied forces launched air attacks on Libya along with continued weakness in the dollar: CLJ11 +$1.26, RBJ11 +4.80. Apr gasoline posted a 1-week high. Bullish factors included (1) allied air strikes in Libya that threaten to prolong a supply outage in Africa's third biggest oil producer, (2) the slump in the dollar index to a 1-1/4 year low, which boosts investment demand in commodities, and (3) concern the civil unrest in North Africa and the Middle East is worsening and may spread to other oil producing countries in he region after Yemen declared a state of emergency. Bearish factors include (1) estimates from JPMorgan Chase that about half of Japan's refineries remain shut due to its quake crisis, which indicates reduced crude demand, and (2) the weaker-than-expected Feb US existing home sales, which signals the weak housing market may keep pressure on the economy and energy demand.
Today's U.S. Earnings Reports

Earnings reports (confirmed releases, sorted by mkt cap) WAG-Walgreen (BEST earnings consensus $0.79), CCL-Carnival (0.19), ADBE-Adobe Systems (0.57), DFS-Discover Financial Services (0.57), DG-Dollar General (0.59), JEF-Jeffries Group (0.37), JBL-Jabil Circuit (0.51), CTAS-Cintas (0.36), IOC-InterOil (-0.13), CMC-Commercial Metals (-0.07), EXPR-Express (0.48), NEOG-Neogen (0.21), EXAM-ExamWorks Group (-0.01).

Global Financial Calendar

Tuesday 3/22/11
United States
0745 ET ICSC (Int?l Council of Shopping Centers) weekly retailer sales.
0800 ET Cleveland Fed President Sandra Pianalto speaks at the University of Akron Economic Summit on: ?The Economy; 2011 and Beyond.?
0830 ET Treasury Secretary Geithner addresses a small business investment conference in Washington D.C.
0855 ET Redbook weekly retailer sales.
1000 ET Jan FHFA U.S. house price purchase index expected ?0.2% m/m, Dec ?0.3% m/m.
1000 ET Mar Richmond Fed manufacturing index expected ?1 to 24, Feb +7 to 25.
1130 ET Weekly 4-week T-bill auction.
Japan
0030 ET Jan Japan all industry activity index expected +2.8% m/m, Dec ?0.2% m/m.
United Kingdom
0530 ET Feb UK CPI expected +0.6% m/m and +4.2% y/y, Jan +0.1% m/m and +4.0% y/y.
0530 ET Feb UK core CPI expected +3.1% y/y, Jan +3.0% y/y.
0530 ET Feb UK RPI expected +0.7% m/m and +5.2% y/y, Jan +0.3% m/m and +5.1% y/y.
0530 ET Feb UK RPI ex mortgage interest payments expected +5.2% y/y, Jan +5.1% y/y.
0530 ET Feb UK public sector net borrowing expected +7.9 billion pounds, Jan ?5.3 billion pounds.
0700 ET Mar UK CBI trends total orders survey expected +2 to ?6, Feb +8 to ?8.
Canada
0830 ET Feb Canada leading indicators expected +0.7% m/m, Jan +0.3% m/m.
0830 ET Jan Canadian retail sales expected +1.0% and +0.7% les autos, Dec ?0.2% and +0.6% less autos.

 

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