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Barchart Morning Call 12/23

Barchart Morning Call Fri, 23 Dec 2011 07:00:00 -0600Overnight Developments
  • Global stocks this morning are mostly higher with the Euro Stoxx 50 up +1.00% and Mar S&Ps up +6.60 points at a 2-week high. The dollar and Treasuries are lower on reduced safe-haven demand and commodities gained with crude oil and copper at 1-week highs. U.S. stocks received a boost after House Speaker Boehner said Republicans agreed to a 2-month extension of the U.S. payroll-tax cut. The euro rose against the dollar after the Markit iTraxx SovX Western Index of credit-default swaps to insure European government debt fell -7 bp to 351, a 2-week low. European stock gains were limited after Q3 French GDP was revised down to +0.3% q/q and +1.5% y/y from the originally reported +0.4% q/q and +1.6% y/y and after the dollar Libor-OIS spread, a gauge of banks' reluctance to lend, widened to 48.62 bp, the most in 2-1/2 years. The yield on the 10-yer U.K. gilt fell to a record low 1.996% after the Oct U.K. index of services fell -0.7% m/m, more than expectations of -0.1% m/m and its biggest decline in 6 months. ECB Executive Board member Bini Smaghi said ECB policy makers shouldn't shirk from using quantitative easing if deflation becomes a danger to the Euro-Zone saying "It is appropriate if economic conditions justify it, in particular in countries facing a liquidity trap that may lead to deflation."
  • Asian stocks today closed mostly higher with Japan closed for holiday, China up +0.76%, Australia +1.21%, South Korea +1.17%, India -0.47%. Asian stocks rose as exporters rallied after U.S. unemployment claims fell to a 3-1/2 year low and consumer confidence rose to a 6-month high, which bolsters exporters' earnings prospects. Chinese stocks closed higher for the first time in a week on speculation the government will ease monetary policy and relax property curbs to prevent the economic slowdown from widening. Property developers rose after the Beijing Municipal Commission of Housing and Urban-Rural Development said the government is studying policies to help return property prices to a reasonable level while the Xinkuai newspaper reported that a city in Guangdong province may allow home price restrictions to expire. A weakened outlook for Asian economies prompted Fitch Ratings to cut its 2012 China GDP forecast to 8.2% from a previous estimate of 8.5% and to cut its GDP estimate for India for the year ending March 2013 to 7.5% from an earlier estimate of 8.2%.
Overnight U.S. Stock News
  • March S&Ps this morning are trading up +6.60 points at a 2-week high. The US stock market yesterday settled higher as an unexpected drop in weekly jobless claims and improved consumer confidence bolstered optimism in the U.S. economy: Dow Jones +0.51%, S&P 500 +0.83%, Nasdaq Composite +0.83%. The S&P 500 posted a 1-1/2 week high and the Dow rose to a 1-week high. Bullish factors included (1) the unexpected decline in weekly initial U.S. unemployment claims to their lowest level in 3-1/2 years (-4,000 to 364,000 versus expectations of +14,000 to 380,000), (2) the larger-than-expected increase in Dec U.S. University of Michigan consumer confidence to its best level in 6 months (+2.2 to 69.9 versus expectations of +0.3 to 68.0), (3) the bigger-than-expected increase in Nov leading indicators (+0.5% versus expectations of +0.3%), and (4) reduced European debt concerns after Italy's Senate approved Prime Minister Monti's 30 billion-euro emergency budget plan.
  • Bearish factors included (1) the unexpected downward revision to Q3 U.S. GDP (+1.8% annualized versus expectations of no change at 2.0% as Q3 personal consumption was revised downward to +1.7% from the originally reported +2.3%), (2) the unexpected drop in the Oct FHFA house price purchase only index (-0.2% m/m versus expectations of a +0.2% m/m increase), and (3) comments from BOE Governor and ESRB vice chairman King who said the Euro-Zone debt crisis is starting to affect the real economy as growth prospects "have deteriorated."
Today's Market Focus
  • March 10-year T-notes this morning are down -3 ticks. T-note prices yesterday settled higher after Q3 U.S. GDP was unexpectedly revised lower along with dealer short covering after the Treasury sold $177 billion of government debt over the past 2 weeks: TYH2 +1.0, FVH2 -0.7, EDM2 -1.0. Bullish factors included (1) the unexpected downward revision to Q3 U.S. GDP (+1.8% annualized versus expectations of no change at 2.0% as Q3 personal consumption was revised downward to +1.7% from the originally reported +2.3%), (2) the unexpected drop in the Oct FHFA house price purchase only index (-0.2% m/m versus expectations of a +0.2% m/m increase), (3) comments from BOE Governor and ESRB vice chairman King who said the Euro-Zone debt crisis is starting to affect the real economy as growth prospects "have deteriorated," and (4) dealer short covering after the Treasury auctioned $177 billion in government debt over the past 2 weeks, the most ever for that time frame. Bearish factors included (1) the unexpected decline in weekly initial U.S. unemployment claims to their lowest level in 3-1/2 years (-4,000 to 364,000 versus expectations of +14,000 to 380,000), (2) the larger-than-expected increase in Dec U.S. University of Michigan consumer confidence to its best level in 6 months (+2.2 to 69.9 versus expectations of +0.3 to 68.0), (3) the unexpected upward revision to the Q3 GDP price index to its highest level in 3 years (+2.7% versus expectations of +2.5%), and (4) the bigger-than-expected increase in Nov leading indicators (+0.5% versus expectations of +0.3%).
  • The dollar index this morning is weaker with the dollar/yen -0.15 yen and the euro/dollar +0.25 cents. The dollar index yesterday settled slightly lower after an unexpected downward revision to Q3 U.S. GDP and reduced European debt concerns pressured the dollar: Dollar Index -0.058, USDJPY +0.112, EURUSD +0.00034. Bearish factors included (1) the unexpected downward revision to Q3 U.S. GDP to 1.8% annualized form 2.0% annualized, and (2) reduced European debt concerns after Italy's Senate approved Prime Minister Monti's 30 billion-euro emergency budget plan. Bullish factors for the dollar included (1) the unexpected decline in weekly U.S. jobless claims to their lowest level in 3-1/2 years, which is dollar supportive and (2) increased safe-haven demand for the dollar after BOE Governor and ESRB vice chairman King said the Euro-Zone debt crisis is starting to affect the real economy as growth prospects "have deteriorated."
  • Feb crude oil prices this morning are up +33 cents a barrel at a 1-week high and Feb gasoline is -0.88 of a cent per gallon. Crude oil and gasoline prices yesterday settled higher for a fourth day after weekly U.S jobless claims fell to a 3-1/2 year low and Dec U.S. University of Michigan consumer confidence rose to a 6-month high: CLG12 +$0.86, RBG12 +1.53. Bullish factors included (1) the unexpected decline in weekly initial U.S. unemployment claims to their lowest level in 3-1/2 years, which shows improvement in the labor market that may boost economic growth and energy demand, (2) the larger than expected increase in the Dec U.S. University of Michigan consumer confidence to a 6-month high, which may lead to an increase in consumer spending and energy demand, and (3) the larger than expected increase in Nov leading indicators, which boosts confidence in the economic outlook and energy demand. Bearish factors included (1) the unexpected downward revision to Q3 U.S> GDP, which indicates reduced energy demand and (2) comments from BOE Governor and ESRB vice chairman King who said the Euro-Zone debt crisis is starting to affect the real economy as growth prospects "have deteriorated."
Today's U.S. Earnings Reports

Earnings reports (confirmed releases, sorted by mkt cap): n/a (BEST earnings consensus $0.00).

Global Financial Calendar

Friday 12/23/11
United States
0830 ET Nov durable goods orders expected +2.2% and +0.4% ex transportation, Oct -0.5% and +1.1% ex transportation.
0830 ET Nov personal spending expected +0.3%, Oct +0.1%. Nov personal income expected +0.2%, Oct +0.4%. Nov PCE deflator expected +2.7% y/y, Oct +2.7% y/y. Nov PCE core expected +0.1% m/m and +1.7% y/y, Oct +0.1% m/m and +1.7% y/y.
1000 ET Nov new home sales expected +2.6% to 315,000, Oct +1.3% to 307,000.
France
0130 ET Revised Q3 French GDP, previous +0.4% q/q and +1.6% y/y.
0245 ET Nov French producer prices expected unchanged m/m and +5.2% y/y, Oct +0.5% m/m and +5.8% y/y.
United Kingdom
0430 ET Oct U.K. index of services expected -0.1% m/m and +0.3% 3-mo/3-mo, Sep +0.1% m/m and +0.6% 3-mo/3-mo.
Canada
0830 ET Oct Canada GDP expected unchanged m/m, Sep +0.2% m/m and +3.0% y/y.
Japan
n/a Japanese markets closed for the Emperor’s Birthday.

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