- Global stocks are weaker with the European Euro Stoxx 50 down -2.20% and Sep S&Ps down -20.30 points. The dollar and Treasuries are higher on increased safe-haven demand and the yield on the 10-year German bund tumbled to an 11-month low of 2.140% on European bank concerns. A sell-off in European bank stocks is leading the markets lower after the WSJ reported that U.S. regulators are stepping up scrutiny of local operations for Europe's largest banks on concern that the sovereign debt crisis may lead to funding problems. Bank stocks are also under pressure after comments from Lars Frisell, chief economist at Sweden's financial regulator, who said Swedish banks must do more to prepare for deterioration in Europe's debt crisis that could freeze interbank markets and cut off funding as "it won't take much for the interbank market to collapse." In an interview with the Austrian newspaper WirtschaftsBlatt, ECB Council member Nowotny said he has "Japanese fears" of the 1990's that the economy will enter a "long-term period of limited economic growth combined with low inflation." U.K. government bonds rallied and pushed the yield on the 10-year Gilt to an all-time low of 2.353% after Jul U.K. retail sales with auto fuel rose +0.2% m/m and was unchanged y/y, weaker than expectations of +0.3% m/m and +0.3% y/y.
- The Asian stock markets today closed lower with Japan down -1.25%, China -1.79%, Australia -1.22%, South Korea -2.10%, India -2.20%. Chinese stocks closed lower after brokerages cut their economic growth estimates for Chinese growth due to the effects of weaker growth in the U.S. and Europe. Deutsche Bank lowered its 2011 China GDP forecast to 8.9% from 9.1% and cut its 2012 GDP estimate to 8.3% from 8.6% and Morgan Stanley cut its 2012 China economic growth forecast to 8.7% from 9.0%. Japanese stocks fell after Jul Japan exports fell -3.3% y/y, weaker than expectations of -2.6% y/y as a stronger yen and a slow down in the global economy helped to curtail demand for Japanese exports. The yen held steady near its post WWII high after Japanese Finance Minister Noda said he's ready to take "bold" action against excessive yen moves and as a top currency official at the finance ministry met with a counterpart at the BOJ, a conference that may be aimed at showing markets that Japan's policy makers are ready to cooperate to stem gains in the yen.
- September S&Ps this morning are trading down sharply by -20.30 points. The US stock market yesterday erased an early advance and settled mixed after US Jul producer prices rose more than expected and after a plunge in Dell led a decline in technology stocks: Dow Jones +0.04%, S&P 500 +0.09%, Nasdaq Composite -0.47%. The S&P 500 and the Dow posted 1-1/2 week highs. Bearish factors included (1) carry-over weakness from a decline in European stocks on concerns the European sovereign-debt crisis may worsen after German Chancellor Merkel and French President Sarkozy rejected an expansion of the 440 billion-euro European rescue fund and rebuffed calls for joint euro borrowing, (2) continued weakness in the US housing market that may continue to be a drag on the economy after the weekly MBA mortgage purchase sub-index fell -9.1% w/w to its lowest level in 13 months, (3) the larger-than-expected gain in Jul core PPI which posted its biggest annual increase in 2 years and may keep the Fed from providing additional stimulus (+0.4% m/m and +2.5% y/y versus expectations of +0.2% m/m and +2.3% y/y), (4) comments from Dallas Fed President Fisher who said Washington's "fiscal misfeasance" restrains the U.S. economy and he also warned against the view that there is a "Bernanke put" for the stock market and that the Fed shouldn't ease monetary policy whenever there is a big drop in U.S. stock prices, and (5) weakness in technology stocks when Dell tumbled after it forecast weaker sales growth.
- Bullish factors included (1) strength in raw-material and energy producers after a fall in the dollar index to a 3-week low prompted a broad-based commodity rally and (2) comments from St. Louis Fed President Bullard who said "the most likely outcome for the U.S. economy is that it will continue to grow at a moderate pace through the second half of the year."
- JPMorgan Chase (NYSE:JPM) fell 1% in pre-market trading as it follows European bank stocks lower on concern the Euopean sovereign debt crisis may lead to funding problems.
- NetApp (NASDAQ:NTAP) slumped 14% in European trading after the company late yesterday reported Q1 earnings excluding some items of 55 cents a share, below analysts' estimates of 56 cents.
- September 10-year T-notes this morning are trading up +12 ticks on a flight-to-safety as global equity markets tumble. T-note prices yesterday traded lower early after Jul producer prices rose more than expected but they erased their losses and moved higher after the stock market relinquished an early rally: TYU11 +9, FVU11 +2.5, EDZ11 unchanged. Bullish factors included (1) an increase in the safe-haven demand for Treasuries after stocks erased an early rally and moved lower and (2) comments from Philadelphia Fed President Plosser that boosted the flight-to-safety demand for Treasuries when he said there is no "magic panacea" to cure the slowdown in the U.S. economy. Bearish factors included (1) comments from St. Louis Fed President Bullard who said that the Fed's pledge to keep interest rates near zero doesn't signal a third stimulus program, (2) the larger-than-expected increase in Jul PPI (+0.2% m/m and +7.2% y/y versus expectations of +0.1% m/m and +7.0% y/y), (3) the larger-than-expected gain in Jul core PPI which posted its biggest annual increase in 2 years (+0.4% m/m and +2.5% y/y versus expectations of +0.2% m/m and +2.3% y/y), and (4) comments from Philadelphia Fed President Plosser who said he objected to the Fed's Aug 9 post-FOMC statement that was "excessively negative" in its description of the U.S. economy and that the Fed will probably need to raise interest rates before its Aug 9 pledge to keep rates at a record low until mid-2013.
- The dollar index this morning is higher with the dollar/yen -0.01 yen and the euro/dollar -0.52 cents. The dollar index yesterday slid to a 3-week low and closed lower as commodity currencies rallied against the dollar and the British pound surged to a 3-1/4 month high against the dollar after the minutes of the BOE's Aug 4 policy meeting showed policy makers refrained from pushing for additional stimulus: Dollar Index -0.336, USDJPY -0.193, EURUSD -0.00186. Bearish factors included (1) a rally in most commodity prices, which boosted the demand for commodity currencies such as the Canadian and Australian dollar at the expense of the US dollar and (2) strength in the British pound against the dollar after the minutes of the Aug 4 BOE policy meeting showed that policy makers were not convinced that the argument for increasing the BOE's bond purchase program "was not yet strong enough." Bullish factors included (1) the larger-than-expected increase in the Jul US core PPI which rose to a 2-1/2 year high of +2.5% y/y and may keep the Fed from implementing additional stimulus measures and (2) comments from St. Louis Fed President Bullard who said that the Fed's pledge to keep interest rates near zero doesn't signal a third stimulus program.
- Sep crude oil prices this morning are down -$1.47 a barrel and Sep gasoline is -2.03 cents per gallon. Sep crude oil and gasoline prices yesterday settled higher as the dollar weakened but they retreated from their best levels after crude inventories unexpectedly rose: CLU11 +$0.93, RBU11 +1.65. Both Sep crude and Sep gasoline posted 1-1/2 week highs. Bullish factors included (1) the slide in the dollar index to a 3-week low, which boosts investment demand in commodities, and (2) the larger-than-expected decline in weekly gasoline inventories which tumbled to a 2-1/2 month low (-3.51 million bbl to 210.1 million versus expectations of -1.38 million bbl). Bearish factors included (1) the unexpected increase in weekly crude oil inventories (+4.23 million bbl versus expectations of a -250,000 bbl decline) and (2) the larger-than-expected gain in weekly distillate stockpiles which rose to a 5-month high (+2.45 million bbl to 154 million versus expectations of +550,000 bbl).
Earnings reports (confirmed releases, sorted by mkt cap): HPQ-Hewlett-Packard (BEST earnings consensus $1.09), CRM-Salesforce.com (0.29), INTU-Intuit (0.00), GPS-The Gap (0.34), SJM-JM Smucker (1.09), ROST-Ross Stores (1.27), DLTR-Dollar Tree (0.75), MRVL-Marvell Technology Group Ltd. (0.37), ADSK-Autodesk (0.41), SHLD-Sears Holdings (-0.46), NDSN-Nordson (0.89), GME-Gamestop (0.21), FL-Foot Locker (0.12), TECD-Tech Data (0.95).
Global Financial Calendar
|0830 ET||Weekly initial unemployment claims expected +5,000 to 400,000, previous -7,000 to 395,000. Weekly continuing claims expected +12,000 to 3.700 million, previous -50,000 to 3.688 million.|
|0830 ET||Jul CPI expected +0.2% m/m and +3.3% y/y, Jun -0.2% m/m and +3.6% y/y. Jul CPI ex food & energy expected +0.2% m/m and +1.7% y/y, Jun +0.3% m/m and +1.6% y/y.|
|0835 ET||New York Fed President William Dudley speak son he regional economy in Newark, NJ.|
|1000 ET||Jul leading indicators expected +0.2%, Jun +0.3%.|
|1000 ET||Aug Philadelphia Fed manufacturing index expected -1.2 to 2.0, Jul +0.9 to 3.2.|
|1000 ET||Jul existing home sales expected +2.7% to 4.90 million, Jun -0.8% to 4.77 million.|
|1100 ET||Treasury announces amounts of 2-year T-notes (previous $35 billion), 5-year T-notes (previous $35 billion) and 7-year T-notes (previous $29 billion) to be auctioned Aug 23-25.|
|1300 ET||Treasury auctions $12 billion in 5-year TIPS.|
|1630 ET||Weekly money supply report and Fed balance sheet.|
|0100 ET||Revised Jun Japan coincident index CI, previous 108.6. Revised Jun leading index CI, previous 103.2.|
|0130 ET||Jul Japan nationwide department store sales, Jun +0.3% y/y.|
|0430 ET||Jul UK retail sales ex auto fuel expected +0.4% m/m and +0.1% y/y, Jun +0.8% m/m and +0.2% y/y.|
|0430 ET||Jul UK retail sales with auto fuel expected +0.3% m/m and +0.3% y/y, Jun +0.7% m/m and +0.4% y/y.|
|0500 ET||Jun Euro-Zone construction output, May -1.1% m/m and -1.9% y/y.|
|0830 ET||Jul Canada leading indicators, Jun +0.2%.|
|0830 ET||Jun Canada wholesale sales, May +1.9% m/m.|
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