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Barchart's Morning Call 6/25

|Includes: Apollo Education Group, Inc. (APOL), FUL

Barchart Morning Call

BC - Mon Jun 25, 7:00AM CDT

Overnight Developments

  • Sep E-mini S&Ps are down -0.72% and commodity prices are trading mostly lower due to to sharply lower European stocks and poor expectations for the Eurozone summit this Thursday and Friday. Crude oil is down -0.98%, gold is up +0.13%, copper is down -0.29%, and grains are up 2-3% on dry weather concerns. The dollar index is up +0.37% while EUR/USD is down -0.72%. T-note prices are up 11 ticks.
  • The Euro Stoxx 50 index is down sharply by -1.79% this morning with Spanish stocks down -2.43%, Italian stocks down -2.83%, and Greek stocks down -4.29%. Asian stocks today closed lower across the board: Japan -0.72%, Hong Kong -0.51%, China -2.22%, Taiwan -0.77%, Australia -0.50%, Singapore -0.45%, South Korea -1.39%, India -0.53%, Turkey -0.73%.
  • Spain's 10-year bond yield this morning is up 22 bp at 6.54% and Italy's 10-year bond yield is up 11 bp at 5.90% as market doubts grow that Eurozone officials at their summit later this week will accomplish anything more than agreeing on the 130 billion euro growth program that was approved last Friday by the leaders of Germany, France, Italy and Spain. That program is basically just a repackaging of existing EU funds and initiatives. German Chancellor Merkel in the past several days has reiterated her opposition to more aggressive action such as allowing the ESM to directly bail out banks, allowing the ESM to buy sovereign debt, or implementing joint euro bonds. There may be some room for progress, however, on banking union with European bank supervision and possibly movement towards a European-wide deposit insurance program.
  • Spain today formally requested a bank bailout but did not specify the exact amount of the request. Spain's consultants last week reported that Spain's banking system needs 52-62 billion euros. The exact amount and terms of the bailout loan will be released on July 9 when Spain and Eurozone officials announce the details of of the loan including the interest rate. Spain's Foreign Minister Jose Manuel Garcia-Margallo said the "The question of whether the money will go directly to the banks or to the state is still open." Spain is holding out hope that the loan can bypass the government somehow and be provided directly to the banks, that seems unlikely based on European bailout rules and the opposition of Germany.
  • Greek Prime Minister samaras is expected to be released from the hospital today after having eye surgery over the weekend to repair a detached retina. Mr. Samaras cannot travel this week although he can speak with people on the phone and is due to talk with President Obama later today. Mr. Samaras will miss the EU summit later this week on Thursday and Friday. Meanwhile, Finance Minister-designate Vassilis Rapanos has been the hospital since last Friday after complaining of dizziness. He collapsed before he could be sworn in as finance minister. Outgoing Finance Minister Giorgos Zanias still holds the office until the condition of Mr. Rapanos improves. Troika officials from the EU, ECB and IMF were to have met with Greek government officials today but the meeting was postponed due to illness of the prime minister the finance minister. Foreign Minister Avramopoulos and caretaker Finance Minister Zanias will go to the Eurozone summit later this week to represent Greece.
  • The Bank of International Settlements (NASDAQ:BIS) said in its annual report released yesterday that central banks are reaching the limit of their ability to boost economic growth. The BIS said, "Both conventionally and unconventionally, accommodative monetary policies are palliatives and have their limits." Market Comments
    • Sep E-mini S&Ps this morning are down 9.50 points (-0.72%) on sharply lower European stocks and pessimism about the Eurozone summit to be held later this week on Thursday and Friday. The stock market on Friday closed moderately higher: S&P 500 +0.72%, Dow Jones +0.53%, Nasdaq 100 +1.12%. The U.S. stock market on Friday saw a modest recovery rally after Thursday's sharp sell-off on the late-Thursday Moody's downgrade of 15 global banks. Moody's downgrade turned out to be no worse than the markets had expected and bank stocks on Friday rallied. Stocks continued to be undercut, however, by Thursday's spate of weak global economic news that included the June Philadelphia Fed manufacturing index (down 10.8 points to -16.6), the decline in the June manufacturing PMIs for the Eurozone to 44.8 from May's 45.1 and for Germany to 44.7 from May's 45.2, and the decline in the China HSBC flash manufacturing PMI by 0.3 points to a 1-1/2 year low of 48.1 from May's 48.4. The Chinese HSBC manufacturing PMI has been below 50 for eight straight months.
    • Sep 10-year T-notes this morning are up 11 ticks on increased safe-haven demand with the broad sell-off in global stocks today. Sep 10-year T-note prices on Friday closed mildly lower: TYU2 -11.5, FVU2 -3.5. T-note prices were undercut on Friday by the recovery rally in stocks and slighted reduced safe-haven demand as Europe's top four leaders at least agreed to a 130 billion euro growth pact.
    • The dollar index this morning is trading is up +0.31 points (+0.37%) on increased safe-haven demand. EUR/USD is down -0.72% on the sharp sell-off in European stocks and pessimism about the course of the Eurozone debt crisis with Germany's unwillingness to do more. USD/JPY is down -0.58 (-0.72%). The dollar index on Friday closed little changed: Dollar Index -0.03 (-0.04%), EUR/USD +0.0030 (+0.24%), USD/JPY +0.19 (+0.24%). The dollar index on Friday held its sharp gains seen on Thursday that occurred on increased safe-haven demand with the weak global economic data and the sharp sell-off in stocks. In addition, the dollar index continued to see support as there appears to be little chance that Germany will agree to any major provisions that could help the debt crisis.
    • Aug WTI crude oil prices this morning are down -0.78 (-0.98%) on the stronger dollar and global economic pessimism. However, Aug gasoline is up 0.0021 (+0.09%) on Tropical Storm Debby in the Gulf of Mexico which is disrupting Gulf refinery operations. Tropical Storm Debby is currently moving eastward away from oil rigs. However, 23% of oil output in the Gulf of Mexico has been shut down due to the storm, according to a statement by the U.S. Bureau of Safety and Environmental Enforcement over the weekend. Crude oil and gasoline prices on Friday closed higher: CLQ2 +1.56 (+1.99%), RBQ2 +0.0156 (+0.64%). Crude oil and gasoline prices on Friday rallied moderately on some short-covering after Thursday's sharp sell-off and on the gathering storm in the Gulf of Mexico that promised to disrupt oil rig operations. However, sentiment in the crude oil market remained bearish overall based on last week's spate of weak global economic data and last Wednesday's unexpected 2.86 mln bbl rise in U.S. crude oil inventories to a 22-year high even though the extremely high refinery utilization rate of 91.9% and should be causing a drawdown in oil inventories.
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      Earnings reports (sorted by mkt cap): APOL-Apollo (consensus $0.97), FUL-HB Fuller (0.55).

      Global Financial Calendar

      Monday 6/25/12
      United States
      0830 ET Chicago Fed national activity index expected -0.4, Apr 0.11.
      1000 ET May new home sales expected +0.9% m/m to 346,000, Apr +3.3% to 343,000.
      1030 ET June Dallas Fed manufacturing activity expected -1, May -5.1.
      1100 ET USDA weekly grain export inspections.
      1130 ET Weekly 3-mo and 6-mo T-bill auctions.
      1600 ET USDA Crop Progress
      0200 ET German July GfK consumer confidence survey expected 5.6, Jun 5.7.
      1950 ET Japan May corporate service price index expected +0.3% y/y, Apr +0.2% y/y.
      2200 ET China May leading economic index (Conference Board). provides Financial Quotes, Charts and Technical Analysis for Stock and Commodity Traders.