- Global stocks this morning are sinking with the Euro Stoxx 50 down -1.74 % and Dec S&Ps down -27.10 points. Treasuries and the dollar are higher on increased safe-haven demand and commodities tumbled after credit default swaps to insure Italian government debt climbed to a record 538 bp. The euro fell to a 1-week low against the dollar after LCH Clearnet SA, Europe's largest clearing house, increased the margin level it demands to trade Italian securities. The yield on Italy's 10-year bond rose to a euro-era record of 7.43% on concern Italy will join Greece in struggling to form a new government strong enough to implement austerity measures following the resignation of Prime Minister Berlusconi. Greek Prime Minister Papandreou's talks on forming an interim government dragged into a third day as a near-agreement with the biggest opposition party stalled on EU demands for written commitments. German Chancellor Merkel's economic advisers said the debt crisis will cut GDP growth in Germany next year to 0.9% after 3.0% growth in 2011.
- Asian stocks today closed mostly higher with Japan up +1.15%, China +0.88%, Australia +1.22%, South Korea +0.37%, India -1.18%. Chinese stocks finished higher on reduced inflation fears after Oct China CPI fell as expected to +5.5% y/y from +6.1% y/y in Sep, while Oct China producer prices rose +5.0% y/y, weaker than expectations of +5.8% y/y. Oct China industrial production rose +13.2% y/y, weaker than expectations of +13.4% y/y and the smallest increase in a year, which fuels speculation the government may loosen monetary policies. Australian banks closed higher after the nation's Sep home-loan approvals rose +2.2% m/m, more than expectations of +1.5% m/m and their sixth straight monthly gain. Gains in Japanese stocks were limited as the yen rose to a 1-week high against the dollar, which crimps the earnings prospects for exporters.
- December S&Ps this morning are trading shraply lower by -24.10 points. The US stock market yesterday gyrated between gains and losses until early afternoon when they rallied into the close and settled higher after Italian Prime Minister Berlusconi agreed to step down: Dow Jones +0.84%, S&P 500 +1.17%, Nasdaq Composite +1.20%. The Dow, S&P 500 and Nasdaq all posted 1-week highs. Bullish factors included (1) carry-over support from a rally in European stocks after an unexpected +0.9% m/m increase in Sep German exports, which reduced concern the European debt crisis would cripple the European economy, (2) data from the Labor Department that showed Sep U.S. job openings rose +225,000 or +7.2% m/m to 3.35 million, a 3-year high and a sign of improvement in the U.S. labor market, and (3) the statement from Italy's president that Prime Minister Berlusconi will resign, which bolsters optimism that Italy will appoint a new leader who can resolve its debt crisis.
- Bearish factors included (1) concern the European debt crisis will worsen after the 10-year Italian bond yield rose to a euro-era high of 6.76% when Prime Minister Berlusconi failed to muster an absolute majority in a parliamentary budget vote, which fuels concern the divided Italian government will be unable to pass all of the austerity measures it needs to stem its debt crisis and (2) comments from Philadelphia Fed President Plosser who said he doesn't see further easing as "justified."
- Adobe Systems (NASDAQ:ADBE) plunged 11% in European trading after the company said fiscal Q4 net income will be 30 cents to 38 cents a share, compared with a previous forecast of 41 cents to 50 cents.
- December 10-year T-notes this morning are up +17.5 ticks. T-note prices yesterday settled lower on supply pressures from this week's Nov quarterly refunding of $72 billion of Treasury notes and bonds along with reduced safe-haven demand when stocks after Italian Prime Minister Berlusconi resigned: TYZ11 -16, FVZ11 -6.2, EDH12 -0.5. Bearish factors included (1) data from the Labor Department that showed Sep U.S. job openings rose +225,000 to 3.35 million, a 3-year high and a sign of improvement in the U.S. labor market (2) the statement from Italy's president that Prime Minister Berlusconi will resign, which bolsters optimism that Italy will appoint a new leader who can resolve its debt crisis, (3) comments from Philadelphia Fed President Plosser who said he doesn't see further easing as "justified," and (4) supply pressures ahead of the Treasury's $24 billion auction of 10-year T-notes on Wed. Bullish factors included (1) increased safe-haven demand for Treasuries on concern the European debt crisis will worsen after the 10-year Italian bond yield rose to a euro-era high of 6.76% when Prime Minister Berlusconi failed to muster an absolute majority in a parliamentary budget vote, which fueled concern the divided Italian government will be unable to pass all of the austerity measures it needs to stem its debt crisis and (2) stellar demand for the Treasury's $32 billion auction of 3-year T-notes that had a record bid-to-cover ratio of 3.41, higher than the 12-auction average of 3.19 and the highest since bid-to-cover data for 3-year T-note auctions began in 1993.
- The dollar index this morning is higher with the dollar/yen -0.09 yen and the euro/dollar -1.92 cents at a 1-week low. The dollar index yesterday closed lower as the euro strengthened after German exports unexpectedly rose in Sep and Italy's President said Prime Minister Berlusconi will resign: Dollar Index -0.376, USDJPY -0.322, EURUSD +0.00580. Bearish factors included (1) a rally in the yen to a 1-week high against the dollar, (2) the statement from Italy's president that Prime Minister Berlusconi will resign, which bolsters optimism that Italy will appoint a new leader who can resolve its debt crisis, and (3) the unexpected increase in Sep German exports for a second month, a sign of economic strength that is euro positive. Bullish factors included (1) the failure of Italian Prime Minister Berlusconi to win a parliamentary budget vote by an absolute majority, which fueled concern he will remain in power and keep the divided Italian government from passing all of the austerity measures it needs to stem its debt crisis and (2) increased safe-haven demand for the dollar on concern the European sovereign debt crisis may worsen after the yield on the Italian 10-year bond rose to a euro-era record of 6.76%.
- Dec crude oil prices this morning are down -$1.19 a barrel and Dec gasoline is -2.92 cents per gallon. Crude oil and gasoline prices yesterday settled mixed as OPEC's action to raise its global crude demand estimates along with speculation Iran's nuclear program may threaten Middle East stability boosted crude, but gasoline fell on the failure of Italian Prime Minister Berlusconi to win an absolute majority on a budget vote, which fueled concern the European debt crisis will worsen: CLZ11 +$1.28, RBZ11 -2.18. Dec crude climbed to a 3-month high and Dec gasoline rose to a 3-week high. Bullish factors included (1) the weak dollar, (2) the action by OPEC to raise its 2015 global oil demand estimate to 92.9 million barrels a day, up 1.9 million barrels from last year's estimate of 91.0 million barrels a day, (3) a report from Commerzbank AG that said concern about Iran's nuclear program and the risk of an attack on its facilities "justifies a certain risk premium" on the price of oil, and (4) comments from OPEC Secretary-General Abdalla el-Badri who said that "some OPEC member countries are reducing their production to accomodate Libya." Bearish factors included (1) the failure by Italian Prime Minister Berlusconi to win a budget vote without an absolute majority, which fuels concern that Italy may be unable to pass all the austerity measures it needs to stem its debt crisis and (2) the weaker-than-expected Nov IBD/TIPP economic optimism which signals a lack of economic confidence in the U.S. economy that may lead to reduced fuel demand. Expectations for the weekly DOE inventory report on Wednesday are for crude oil supplies to rise +500,000 bbl, gasoline stockpiles to increase +500,000 bbl, distillate inventories to fall -2.0 million bbl and the refinery utilization rate to rise +0.1 to 85.4%.
Earnings reports (confirmed releases, sorted by mkt cap): CSCO-Cisco Systems (BEST earnings consensus $0.39), GM-General Motors (0.96), RL-Ralph Lauren (2.24), M-Macy's (0.16), GGP-General Growth Properties (0.08), GMCR-Green Mountain Coffee Roasters (0.48), CSC-Computer Sciences (0.67), AAP-Advanced Auto Parts (1.18), RKT-Rock-Tenn (1.56), ASH-Ashland (0.93), CZZ-Cosan Ltd. (0.27), ATO-Atmos Energy (0.04), AH-Accretive Health (0.12), FLT-FleetCor Technologies (0.49), PSMT-Pricesmart (0.55), WEN-Wendy's (0.04).
Global Financial Calendar
|0700 ET||Weekly MBA mortgage applications, previous +0.2% with purchase mortgage sub-index +1.8% and refinancing sub-index -0.2%.|
|0930 ET||Fed Chairman Ben Bernanke delivers opening remarks at a conference in Washington D.C. titled ?Small Business and Entrepreneurship During an Economic Recovery.?|
|1000 ET||Sep wholesale inventories expected +0.5%, Aug +0.4%.|
|1215 ET||Fed Governor Daniel Tarullo speaks on ?Current Issues in Financial Regulation? at a conference in New York.|
|1300 ET||Treasury auctions $24 billion 10-year T-notes.|
|0000 ET||Oct Japan eco watchers survey current expected 46.5, Sep 45.3. Oct eco watchers survey outlook, Sep 46.4.|
|1850 ET||Sep Japan machine orders expected -7.1% m/m and +10.6% y/y, Aug +11.0% m/m and +2.1% y/y.|
|0230 ET||Oct Bank of France business sentiment expected -1 to 96, Sep unchanged at 97.|
|0830 ET||Sep Canada new housing price index expected +0.1% m/m, Aug +0.1% m/m and +2.3% y/y.|
|n/a||Oct China trade balance expected +$26.05 billion, Sep +$14.51 billion. Oct exports expected +16.2% y/y, Sep +17.1% y/y. Oct imports expected +23.0% y/y, Sep +20.9% y/y.|
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