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Barchart Morning Call 5/10

May 10, 2012 10:53 AM ETESRX, LBTYA, CA, KSS, JWN, MSFT
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Jim Van Meerten's Blog
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Barchart Morning Call Thu, 10 May 2012 07:00:00 -0500

Overnight Developments

    E-mini S&Ps are trading slightly higher this morning by 0.75 points. The dollar index is little changed. Commodity prices are mixed this morning with crude oil down 46 cents and gold down $3.30 but with copper and grains trading higher. There was some pessimism this morning about the Chinese April trade report, which showed weaker-than-expected exports and imports. European stocks are trading moderately lower with the Euro Stoxx 50 down 0.39%. The markets are waiting for the next round of Greek talks on forming a government. The Radical Left Syriza party was unable to form a coalition yesterday. Socialist Pasok leader Venizelos later today will try to form a coalition once he is formally given the mandate by Greek president Papoulias. If Mr. Venizelos cannot form a government, then the Greek president will have one last try at brokering a coalition before calling for new elections in June. On the brighter side, the European Financial Stability Fund (EFSF) yesterday announced the release of 5.2 billion euros of bailout payments that will be sufficient to carry Greece through June, illustrating that Eurozone officials are giving Greece some time to try to work through its political troubles. French March industrial production fell -0.9% m/mm, which was weaker than the consensus of -0.6% m/m, although Feb was revised higher to +0.9% from +0.3%. Italy's March industrial production rose by +0.5% m/m, which was stronger than the consensus of -0.2% m/m and reversed part of the -0.7% m/m decline seen in Feb. The Bank of England after its 2-day meeting announced this morning that it left its base rate unchanged at 0.50%, which was in line with market expectations. The BOE also left its asset purchase target unchanged at 325 billion pounds, which meant that the BOE effectively ended its quantitative easing program for the time being. That was in line with market expectations given that UK inflation is high. Asian stock markets today closed mixed: Japan -0.39%, Hong Kong -0.51%, China -0.01%, Taiwan +0.11%, Australia +0.48%, Singapore +0.09%, South Korea -0.35%, India -0.36%. China's April trade surplus rose to $18.42 billion, which was larger than the consensus of $9.9 billion. April exports grew by +4.9% y/y, which was weaker than the market consensus of +8.5% y/y and down from +8.9% y/y in March. Import growth fell to +0.3% y/y from March's 5.3% y/y and was substantially weaker than the market consensus of +10.9% y/y. The weakness in exports indicated lackluster global demand. The weakness in imports was partially due to lower commodity prices but was also due to weak domestic demand. Japan's April eco watcher's outlook index rose to 50.9 from 49.7 in March, but the current index fell to 50.9 from 51.8 in March. The Australian dollar rallied 0.5% today after the Australian unemployment rate unexpectedly dropped to a 1-year low.

Overnight U.S. Stock News

    June E-mini S&Ps this morning are trading slightly higher by +0.75 points. The market is shaking off some bad news from Cisco and the Chinese trade report and is waiting for political developments from Greece. Cisco Systems is down 8.7% in European trading this morning after an earnings miss on the reluctance of business clients to spend money on technology upgrades. US stocks on Wednesday closed moderately lower: S&P 500 -0.67%, Dow Jones -0.75%, Nasdaq 100 -0.32%. The U.S. stock market fell once again on the Greek political uncertainty combined with the 0.5% sell-off in the Euro Stoxx 50 on Wednesday. However, the U.S. stock market was able to rebound upward when the European Financial Stability Facility confirmed that it will release 5.2 billion euros in bailout payments to Greece, ensuring that Greece has enough cash to make it through June. That indicated that Eurozone officials are giving the Greeks some time to sort out their political troubles and are not planning to immediately drop the hammer. The U.S. stock market on Wednesday was also undercut by Spanish banking troubles, which prompted an 18 bp rise in the 5-year Spanish credit default swap price (the cost of insuring against a sovereign default) to a record high of 516 bp.

Today's Market Focus

    June 10-year T-notes this morning are unchanged with few fresh developments overnight. The Treasury today concludes its $72 billion coupon package with the sale of $16 billion in 30-year T-bonds. T-note prices on Wednesday closed little changed: TYM2 -0.5, FVM2 +0.25. T-note prices on Wednesday saw continued support from Greek-related safe-haven buying, but were undercut by a lackluster 10-year T-note auction. The 10-year auction had a bid cover ratio of 2.90 that was below the 12-auction average of 3.10. Indirect bidders took 38.7% of the auction, below the 12-auction average of 43.0%. The dollar index this morning is trading slightly higher by +0.03 points with EUR/USD up $0.0015 and USD/JPY up 0.05 yen. The dollar index is in a holding pattern, awaiting Greek developments and this morning's U.S. unemployment claims and U.S. trade reports. The dollar index on Wednesday continued to rally: Dollar Index +0.315, EUR/USD -0.0076, USD/JPY -.02. The dollar index on Wednesday saw some technical buying with a new 3-week high, while EUR/USD saw selling with the new 3-1/2 month low. The dollar gained support from the ongoing Greek political drama combined with banking problems in Spain and a new record high in Spanish 5-year credit default swap prices. There was some positive European economic news with German March exports rising +0.9% m/m versus expectations for a decline of -0.5% m/m. June crude oil prices this morning are down 46 cents and gasoline is down 2.01 cents. Oil prices were undercut by last night's Chinese trade report showed that Chinese April crude oil imports dropped to a 4-month low. Crude oil and gasoline prices on Wednesday closed mixed: CLM12 -0.20, RBM2 +0.0297. Crude oil prices were hurt by technical weakness, a bearish DOE report for crude oil, and the continued Greek troubles. However, gasoline rallied on an unexpected decline in DOE gasoline inventories and a fire at Sunoco's refinery in Philadelphia. The weekly DOE report was bearish for crude oil and bullish for products. Crude oil inventories rose by 3.652 million barrels (+1.0%) to a new 21-1/2 year high of 379.516 million barrels. That is 7.2% above the 5-year seasonal average, the highest such level since last June. Meanwhile, gasoline inventories fell by 2.6 million barrels (vs expectations of +250,000 barrels) and are now 1.0% below the 5-year seasonal average, the tightest level since last May. Distillate inventories fell sharply by 3.25 million barrels (versus expectations of +750,000 barrels). Distillate inventories are now 9.8% below the 5-year seasonal average, the tightest level in 9 years.

Today's U.S. Earnings Reports

Earnings reports (sorted by mkt cap): ESRX-Express Scripts (consensus $0.77), LBTYA-Liberty Global (0.30), CA-CA Inc (0.52), KSS-Kohl's (0.61), JWN-Nordstrom (0.75), NUAN-Nuance Communications (0.40).

Global Financial Calendar

Thursday 5/10/12
United States
0830 ET Weekly initial unemployment claims expected +3,000 to 368,000, previous -27,000 to 365,000. Weekly continuing claims expected -1,000 to 3.275 million, previous -53,000 to 3.276 million.
0830 ET Mar U.S. trade deficit expected -$50.0 billion, Feb -$46.0 billion.
0830 ET Apr import price index expected -0.2% m/m and +0.8% y/y, Mar +1.3% m/m and +3.4% y/y.
0830 ET Monthly USDA crop production and WASDE reports.
0830 ET USDA weekly exports.
0930 ET Fed Chairman Ben Bernanke delivers the keynote address at the Chicago Fed’s annual conference on bank structure and competition, titled “Bank Capital: How Much is Enough?”
1030 ET DOE natural gas storage.
1100 ET Treasury announces amount of 10-year TIPS to be auctioned May 17 (previous $13 billion).
1320 ET Minneapolis Fed President Narayana Kocherlakota speaks on monetary policy in Minneapolis.
1300 ET Treasury auctions $16 billion in 30-year T-bonds.
1400 ET Apr monthly budget statement expected +$30.0 billion, Mar -$198.158 billion.
1630 ET Weekly money supply report and Fed balance sheet.
0400 ET ECB publishes May monthly report.
United Kingdom
0430 ET UK Mar industrial production expected -0.3% m/m and -2.6% y/y, Feb +0.4% m/m and -2.3% y/y. Mar manufacturing production expected +0.5% m/m and -1.3% y/y, Feb -1.0% m/m and -1.4% y/y.
0700 ET Bank of England announces monetary policy 2-day meeting outcome, no change expected in 0.50% base rate or 325 billion pound asset purchase target.
1000 ET NIESR UK Apr GDP estimate, previous +0.1%.
1902 ET UK Apr nationwide consumer confidence, Mar 53.
0030 ET Japan Apr bankruptcies, Mar -1.9%.
0100 ET Japan Apr Eco Watchers survey current index, Mar 51.8. Apr outlook index, Mar 49.7.
1950 ET Japan Apr M2 expected +2.9% y/y, Mar +3.0%. Apr M3 expected +2.5% y/y, Mar +2.6% y/y.
2130 ET China Apr CPI expected +3.4% y/y, Mar +3.6% y/y. Apr PPI expected -0.5% y/y, Mar -0.3% y/y.
n/a China Apr M0 expected +10.7% y/y, Mar +10.0% y/y. M1 expected +4.5% y/y, Mar +4.4% y/y. M2 expected +13.3% y/y, Mar +13.4%. Apr new yuan loans expected 780 billion yuan, Mar 1010 billion yuan. Release date from May 10-15.

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