Barchart Morning Call
- Global stocks are lower with the European Euro Stoxx 50 down -1.13% and June S&Ps down -7.00 points. The dollar and Treasuries are stronger, with the dollar index at a 3-1/2 week high, while commodities slumped, with copper dropping to a 5-1/4 month low. Crude oil declined over -$2 a barrel after the IEA cut its 2011 global oil demand forecast by -190,000 barrels a day saying "high oil prices have finally begun to dent demand." Stock prices fell as China raised banks reserve ratio requirements again and after European factory output unexpectedly declined in March. Mar Euro-Zone industrial production fell -0.2% m/m and rose +5.3% y/y, weaker than expectations of +0.3% m/m and +6.3% y/y. The euro slipped to a 1-1/4 month low against the dollar amid speculation Greece may have to restructure its debt after ECB Executive Board member Tumpel-Gugerell said other countries will be asked to help Greece as the country will need "longer" to be able to refinance itself via the markets. The British pound fell to a 3-week low against the dollar after Mar UK industrial production increased +0.3% m/m and +0.7% y/y, weaker than expectations of +0.7% m/m and +1.1% y/y.
- The Asian stock markets today closed mostly lower with Japan down -1.50%, Hong Kong -0.94%, China -1.38%, Taiwan +0.15%, Australia -1.76%, Singapore -1.47%, South Korea -2.19%, India -1.34%. A slump in commodities fueled declines in Asia-Pacific markets led by losses in mining companies and raw material producers on concern demand for commodities will wane as global central banks tighten their monetary policies. The Australian dollar fell as markets cut back their expectations for an RBA rate hike next month after Apr Australian employment unexpectedly fell -22,100, weaker than an expected increase of +17,000 and the biggest decline in 2 years. After the Asian markets closed, the PBOC raised banks' reserve requirements by 50 bp to 21% for the biggest lenders effective May 18.
- June S&Ps this morning are trading down -7.00 points. The US stock market yesterday moved steadily lower throughout the day and finished with large losses on concern that an acceleration of global inflation will lead to higher interest rates: Dow Jones -1.02%, S&P 500 -1.11%, Nasdaq Composite -0.93%. Bearish factors for stocks included (1) global inflation concerns after Apr China consumer prices rose more than expected, Apr German CPI was unexpectedly revised up to a 2-1/2 year high and the BOE said in its quarterly inflation report that inflation remains "uncomfortably high," (2) the larger than expected Mar US trade deficit which widened by the most in 9 months and is GDP negative (-$48.2 billion versus expectations of -$47.0 billion), (3) comments from Cleveland Fed President Pianalto who said the US labor market is still a "long way" from healthy, and (4) weakness in energy and commodity producers as a stronger dollar prompted a sell-off in commodities.
- Bullish factors included (1) the action by Deutsche Bank AG to raise its 2011 profit estimates for S&P 500 companies to $99 a share, up from an earlier forecast of $96, and to hike its 2012 profit estimate to $106 a share from $102, citing Q1 profit margins and sales that have beaten estimates, and (2) comments from Atlanta Fed President Lockhart who said the economy shows signs of "improving quality" and that he expects 3%-4% GDP growth over the "next couple of years."
- Cisco Systems (CSCO) fell 3% in pre-market trading after the company forecast profit and sales that may miss analysts' estimates and after CEO Chambers abandoned a 4-year old forecast for annual sales growth of 12% to 17% as weak demand forced him to cut jobs and exit businesses.
- June 10-year T-notes this morning are up +5 ticks. T-note prices yesterday erased early losses and closed higher as the stock market plunged and after decent demand was seen at the Treasury's $24 billion auction of 10-year T-notes: TYM11 +10/5, FVM11 +7.2, EDU11 +0.5. Bullish factors included (1) increased safe-haven demand for Treasuries as the stock market plummeted, and (2) strong demand for the Treasury's $24 billion auction of 10-year T-notes that were auctioned at a yield of 3.21%, below the 3.22% the market was expecting. Bearish factors included (1) global inflation concerns after Apr China consumer prices rose more than expected, Apr German CPI was unexpectedly revised up to a 2-1/2 year high and the BOE said in its quarterly inflation report that inflation remains "uncomfortably high," and (3) supply pressures ahead of the Treasury's $16 billion auction of 30-year T-bonds on Thursday.
- The dollar index this morning is stronger and at a 3-1/2 week high with the dollar/yen -0.13 yen and the euro/dollar -0.46 cents. The dollar index yesterday climbed to a 3-week high on increased safe-haven demand as the stock market fell on concern that European leaders are balking at providing Greece with additional aid: Dollar Index +0.716, USDJPY +0.169, EURUSD -0.02176. Bullish factors included (1) weakness in the euro which fell to a 3-week low against the dollar after German Chancellor Merkel said Greece needs to stay the course on its budget-cutting program to deserve an extension of the 110 billion-euro ($158 billion) bailout granted last year, which fuels concern that European leaders are hesitating in granting Greece additional aid, which may force Greece to restructure its debt, and (2) increased safe-haven demand for the dollar as the stock market fell. Bearish factors included (1) concern that the ECB may tighten monetary policy further after Apr German consumer prices were unexpectedly revised up to a gain of +2.7% y/y, a 2-1/2 year high, and (2) the larger-than-expected Mar US trade deficit which widened to its most in 9 months (-$48.2 billion) and is dollar negative.
- June crude oil prices this morning are trading down -$2.17 a barrel and June gasoline is -4.68 cents per gallon after the IEA cut its 2011 global oil demand forecast. Crude oil and gasoline prices yesterday tumbled as the dollar strengthened and after US crude supplies rose to a 2-year high: CLM11 -$5.67, RBM11 -25.69. Bearish factors included (1) the rally in the dollar index to a 3-week high, which reduces investment demand in commodities, (2) the larger-than-expected increase in weekly DOE crude inventories to their highest level in 2 years (+3.78 million bbl to 370.3 million bbl versus expectations of +1.5 million bbl), (3) the unexpected increase in weekly gasoline supplies which rose for the first time in 12 weeks (+1.27 million bbl versus expectations of -500,000 bbl), (4) slack demand after total US fuel demand slipped -0.9% w/w to 18.2 million barrels a day, the lowest in 23 months, and (5) concern that Chinese fuel demand may slow on speculation it will further tighten monetary policy to cool price increases after Apr China consumer prices rose more than expected. Bullish factors included (1) the unexpected decrease in weekly distillate inventories (-843,000 bbl versus expectations of no change), and (2) concern that the worst flooding of the Mississippi River in 75 years might limit US gasoline supplies as it may force the closure of 11 refiners between New Orleans and Baton Rouge with a combined capacity of 2.5 million barrels a day, or 13% of US output.
Earnings reports (confirmed releases, sorted by mkt cap) PCP-Precision Castparts (BEST earnings consensus $1.91), KSS-Kohls (0.73), CA-CA Inc. (0.50), NVDA-Nvidia (0.19), JWN-Nordstrom (0.67), APO-Apollo Global Management LLC (0.80), FLT-FleetCor Technologies (0.41), TK-Teekay (-0.42), TGP-Teekay LNG Partners LP (0.45), SPWRA-SunPower (0.16), GA-Giant Interactive Group (0.14), DAR-Darling International (0.30), ENS-EnerSys (0.71), DRYS-DryShips (0.17), MIDD-Middleby (0.98).
Global Financial Calendar
|0830 ET||Weekly initial unemployment claims expected -44,000 to 430,000, previous +43,000 to 474,000. Weekly continuing claims expected -33,000 to 3.700 million, previous +74,000 to 3.733 million.|
|0830 ET||Apr PPI expected +0.6% m/m and +6.5% y/y, Mar +0.7% m/m and +5.8% y/y. Apr PPI ex food & energy expected +0.2% m/m and +2.1% y/y, Mar +0.3% m/m and +1.9% y/y.|
|0830 ET||Apr retail sales expected +0.6% and +0.6% less autos, Mar +0.4% and +0.8% less autos.|
|0830 ET||Philadelphia Fed President Charles Plosser speaks on the economic outlook at the New Jersey Bankers Association ?Opportunities in the New Decade? event in Aventura, FL.|
|1000 ET||Mar business inventories expected +0.9%, Feb +0.5%.|
|1000 ET||Fed Chairman Ben Bernanke testifies at a Senate Banking Committee hearing on ?Oversight of Dodd-Frank Implementation: Monitoring Systemic Risk and Promoting Financial Stability?|
|1100 ET||Treasury announces amount of 10-year TIPS to be auctioned May 19.|
|1300 ET||Treasury auctions $16 billion 30-year T-bonds.|
|1630 ET||Weekly money supply report and Fed balance sheet.|
|2000 ET||Fed Chairman Ben Bernanke delivers brief remarks at an award ceremony in Washington D,C, (prepared text-no Q&A).|
|0100 ET||Apr Japan Eco Watchers survey current, Mar 27.7. Apr Eco Watchers survey outlook, Mar 26.6.|
|0200 ET||Preliminary Apr Japan machine tool orders, Mar +49.6% y/y.|
|0130 ET||Apr French CPI (EU harmonized) expected +0.4% m/m and +2.3% y/y, Mar +0.9% m/m and +2.2% y/y.|
|0400 ET||ECB publishes monthly report for May.|
|0500 ET||Mar Euro-Zone industrial production expected +0.3% m/m and +6.3% y/y, Feb +0.5% m/m and +7.5% y/y.|
|0530 ET||ECB Executive Board member Jose Manuel Gonzalez-Paramo speaks at a conference on ?The European Union and Lessons from the Crisis-The Way Forward.?|
|0430 ET||Mar UK industrial production expected +0.7% m/m and +1.1% y/y, Feb -1.2% m/m and +2.4% y/y.|
|0430 ET||Mar UK manufacturing production expected +0.3% m/m and +2.8% y/y, Feb unchanged m/m and +4.9% y/y.|
|0830 ET||Mar Canada new housing price index, Feb +0.4% m/m and +2.1% y/y.|
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