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Barchart Morning Call 5/31

|Includes: ASNA, ESL, JOSB, Joy Global Inc. (JOY), LDOS
Barchart Morning Call Thu, 31 May 2012 07:00:00 -0500

Overnight Developments

  • June E-mini S&Ps are trading mildly higher by 5.00 points (+0.38%) on today's 0.46% rally in European stocks and some short-covering after yesterday's sharp losses. Commodity prices are mixed with crude oil up +0.20%, gasoline down -0.30%, gold up +0.11%, copper down -0.03%, and agricultural commodities mixed. June 10-year T-notes are slightly lower by 1.5 ticks. The dollar index is mildly lower by -0.19% while the euro is up +0.30%.
  • Euro Stoxx 50 is up +0.46% this morning as German retail sales were stronger than expected and the German unemployment rate fell to a new two-decade low of 6.7%. Asian stocks today closed mostly lower following Wednesday's weak U.S. stock market session: Japan -1.05%, Hong Kong -0.32%, China -0.39%, Taiwan +0.55%, Australia -0.44%, Singapore -0.41%, South Korea -0.26%, India -0.57%, Turkey +0.93%.
  • Ireland's voters are going to the polls today to vote on the EU fiscal compact, which is a constitutional balanced budget requirement. Opinion polls indicate the measure should be approved by a comfortable margin. However, a surprise "no" vote would be a disaster for Ireland because it would then be unable to tap the Eurozone bailout funds again after 2013 when its current bailout package expires. The results of today's vote are not expected to be known until tomorrow.
  • Japan's April industrial production rose +0.2% m/m, which was weaker than market expectations of +0.5% m/m. However, Japan's April housing starts report of +10.3% to 896,000 units was stronger than market expectations of +3.2% to 838,000.
  • German April retail sales rose +0.6% m/m, which was stronger than market expectations of +0.2%. In addition, March retail sales were revised higher to +1.6% m/m from +0.8%.
  • The German unemployment report was mixed. The German May unemployment rate eased to a two-decade low of 6.7% versus expectations for an unchanged report of 6.8%. However, German unemployment was unchanged, which showed a less favorable labor market than expectations for a decline of -7,000.
  • Eurozone May CPI eased to +2.4% y/y from +2.6% and was weaker than expectations of +2.5%, which provided a slightly better inflation picture and may give the ECB a little more room for further monetary policy accommodation.
  • India's Q1 GDP eased to a 9-year low of +5.3% y/y, which was weaker than market expectations of +6.1% y/y and down from Q4's report of +6.1% y/y. India's economy has been slowed by weaker investment, fiscal austerity with a cut in the budget deficit to 5.1% of GDP in the current fiscal year from 5.9% last year, and the European debt crisis, which has undercut export prospects. India's central bank has limited room to cut interest rates because of the high +7.23% y/y inflation rate in April.
  • Iran tore down two buildings at its Parchin military complex near where Iran is suspected to have tested explosions on how to trigger a nuclear weapon, according to a report by the Institute for Science and International Security. Iran continues to ban IAEA inspectors from visiting the Parchin site. Market Comments
    • June E-mini S&Ps this morning are trading mildly higher by 5.00 points as the market sees a little relief rally and as European stocks are trading mildly higher. U.S. stocks on Wednesday closed sharply lower: S&P 500 -1.43%, Dow Jones -1.28%, Nasdaq 100 -0.84%. Bearish factors on Wednesday included (1) the sharp 5.8% drop in April U.S. pending home sales versus expectations of unchanged, (2) rising concern about Spain's bungling of its banking system crisis and the increasing chances that Spain will need a bailout, (3) the 2.3 point drop in the European May economic confidence index to a 2-1/2 year low of 90.6 from 92.9 in April, and (4) general concern that the wheels are coming off the Eurozone with sharp increases yesterday in Spanish and Italian bond yields.
    • June 10-year T-notes this morning are down 1.5 ticks as safe-haven buying is taking a breather with today's mildly higher trade in E-mini S&Ps. T-note prices on Wednesday closed sharply higher: TYM2 +27, FVM2 +11.25. The 10-year T-note yield on Wednesday dropped sharply to a new record low of 1.62%. U.S. T-notes, like German bunds, are seeing heavy safe-haven demand as investors dump stocks and flee to the safety of AAA (German) or AA+ (American) government securities. T-notes are also seeing strength as the recent bout of European trouble along with slower global economic growth increases the chances that the Fed in June will extend its Operation Twist program or start a new securities purchase program.
    • The dollar index this morning is down -0.16 points (-0.19%) and EUR/USD is up -0.00037 (+0.30%) on a pause in the safe-haven trade. USD/JPY is down -0.24 (-0.30%). The dollar index on Tuesday closed slightly higher after edging to a new 1-2/3 year high: Dollar Index +0.54 (+0.65%), EUR/USD -0.0136 (-1.09%), USD/JP-0.42 (-0.50%). The dollar index on Wednesday continued to rally on safe-haven demand and posted a new 1-2/3 year high. Meanwhile, EUR/USD fell sharply to a new 2-year low as investors engaged in wholesale capital flight from euro-denominated investments.
    • July WTI crude oil prices this morning are slightly higher by +0.18 (+0.20%) going into today's weekly DOE report. The market is looking for an increase in today's weekly DOE crude oil inventory figure, although the API's crude oil inventory figure yesterday fell by 350,000 barrels. July gasoline prices this morning are down -0.82 (-0.30%). July crude oil and gasoline prices on Wednesday closed sharply lower: CLN12 -2.94 (-3.24%), RBN2 -0.0596 (-2.10%). Bearish factors for crude oil included pessimism about the world economy and expectations for another increase in U.S. crude oil inventories in Thursday's weekly DOE report to a new 21-3/4 year high. Saudi Oil Minister al-Naimi is getting his wish for $100 Brent crude oil prices as July Brent crude oil yesterday fell to $103.47. July WTI crude oil on Wednesday fell to a new 7-month low while July gasoline fell to a new 5-month low.
    • For the full subscription version of this daily report (plus a 13-page big-picture weekly report), along with the earliest possible delivery in the morning, please visit <a href=" _fcksavedurl=" "> </A> Today's U.S. Earnings Reports

      Earnings reports (sorted by mkt cap): JOY-Joy Global (consensus $1.96), SAI-SAIC (0.33), ASNA-Ascena Retail (0.36), ESL-Esterline Tech (1.28), JOSB-Jos A Bank (0.79).

      Global Financial Calendar

      Thursday 5/31/12
      United States
      0730 ET May Challenger job cuts, Apr 11.2%.
      0800 ET Fed's Pianalto speaks on monetary policy in Cleveland.
      0815 ET May ADP employment expected +150,000, Apr +119,000.
      n/a May ICSC chain store sales, Apr +0.6% y/y.
      0830 ET Weekly initial unemployment claims expected unchanged at 370,000, previous -2,000 to 370,000. Weekly continuing claims expected -10,000 to 3.250 mln, previous -29,000 to 3.260 mln.
      0830 ET Q1 GDP expected revised to +1.9% from +2.2%. Q1 personal consumption unrevised at +2.9%. Q1 GDP price index expected unrevised at 1.5%. Q1 core PCE, last +2.1%.
      0830 ET USDA weekly exports.
      0945 ET May Chicago Purchasing Managers index expected +0.7 to 56.9, Apr -6.0 to 56.2.
      1000 ET May Milwaukee NAPM index expected +0.5 to 53.4, Apr 52.9.
      1030 ET DOE Weekly Petroleum Status Report (postponed one day due to Monday's holiday).
      1030 ET DOE natural gas storage.
      1630 ET Weekly money supply report and Fed balance sheet.
      0000 ET Japan Apr vehicle production, Mar +143.7% y/y.
      0100 ET Japan Apr construction orders, Mar -0.3% y/y.
      0100 ET Japan Apr housing starts expected +3.2% to 838,000, Mar +5.0% to 848,000.
      1950 ET Japan Q1 capital spending expected +1.0%, Q4 +7.6%. Q1 capital spending ex-software expected -0.1%, Q4 +4.9%.
      0200 ET German Apr retail sale expected +0.2% m/m and +0.3% y/y, Mar +1.6% m/m and +2.3% y/y.
      0355 ET German May unemployment rate expected 6.8%, Apr 6.8%. May unemployment change expected -7,000, Apr +19,000.
      0500 ET Eurozone May CPI expected +2.5% y/y, Apr +2.6% y/y.
      United Kingdom
      0200 ET UK May nationwide house prices expected +0.1% m/m and -1.1% y/y, Apr -0.2% m/m and -0.9% y/y.
      n/a Ireland holds referendum on EU fiscal pact.
      2100 ET China May manufacturing PMI expected -1.3 to 52.0, Apr 53.3.
      2230 ET China May HSBC manufacturing PMI, Apr 49.3. provides Financial Quotes, Charts and Technical Analysis for Stock and Commodity Traders.