MARKET NEWS

Barchart.com U.S. Morning Call for Wednesday, September 8, 2010

Overnight Developments

European stocks are higher with the European DJ Stoxx 50 up +0.56% and Sep S&Ps are up +3.90 points. European bank stocks are weaker for a second day on concern the sovereign-debt crisis may force them to raise more capital. The yen climbed to a 15-year high against the dollar as investors flock into the Asian currency to avoid risk and gold rallied to a 2-1/4 month high on increased safe-haven demand. Well-known bank analyst Meredith Whitney added further pressure to bank stocks when she predicted that securities firms around the world will cut as many as 80,000 jobs in the next 18 months as revenue growth begins to slow. Jul German industrial production rose a less-than-expected +0.1% m/m and Jul German exports unexpectedly declined -1.5% m/m, their first drop in 3 months, which suggests the recovery is beginning to lose momentum. Helping to push stock prices into positive territory is the 2.1% jump in Ericsson AB after Credit Suisse predicted the world's largest maker of wireless phone networks should "enjoy a robust" second half in 2010, along with the 2.2% increase in Sanofi-Aventis SA after Citigroup raised its price estimate for the drugmaker by 15% to 70 euros, saying the next 12 months could be a "turning point" for the company.

The Asian markets today closed mostly lower with Japan down -2.18%, Hong Kong -1.46%, China -0.07%, Taiwan -0.42%, Australia -0.79%, Singapore -0.81%, South Korea -0.65%, India +0.12%. Asian stocks fell for a second day, led by Japanese equities, as the yen's advance to a 15-year high against the dollar threatens the earnings of its exporters. Nomura Holdings cut sales and profit forecasts for Japanese companies this year because of the stronger yen, predicting year-on-year sales growth of 353 companies excluding financials in the Nomura 400 stock index of 4.0%, down from its Jun estimate of 4.4%. China's Shanghai Stock Index closed lower, led by declines in property stocks, on concern the Chinese government may put further restrictions on the housing market after the 21st Century Business Herald cited an unidentified person close to the Ministry of Housing and Urban-Rural Development as saying new curbs may include ending loans to real estate developers, a compulsory lowering of home prices, and a ban on third-home purchases.

Overnight U.S. Stock News

Sep S&Ps this morning are up +3.90 points. The stock market yesterday traded in negative territory the entire day and closed just above its low (Dow -1.03%, S&P 500 -1.15%, Nasdaq Composite -1.11%). Bearish factors included (1) carry-over weakness from a fall in European equity markets on concern the European debt crisis may worsen after the WSJ reported that European stress tests published in July may have understated some financial institutions' sovereign debt holdings of potentially risky government debt, along with a separate report from the Association of German banks that Germany's top lenders might need about 105 billion euros ($135 billion) in fresh capital, (2) concern that the recovery in Europe's largest economy may be losing momentum after Jul German factory orders unexpectedly posted their biggest monthly decline in 17 months (-2.2% m/m versus expectations of +0.6% m/m), (3) the prediction from Bank of America Merrill Lynch that the jobless rate in the US is likely to approach 10% in coming months as the economy fails to grow quickly enough to employ people rejoining the labor force, (4) the action by Oppenheimer to cut its year-end forecast for the S&P 500 Index to 1,225 from an earlier forecast of 1,300, saying "the deceleration of important economic indicators recently cannot be ignored," and (5) losses in raw materials and energy producers as demand concerns and a surge in the dollar prompted a sell off in the prices of most commodities.
Bullish factors included (1) the report from Bank of America that said more US stocks are paying dividends that exceed bond yields by the most in 15 years as profits rise at the fastest pace in two decades, which may lead to increased demand for US stocks that pay high dividends, and (2) the prediction from Goldman Sachs that the world economy won't slip back into recession as it benefits from growth in emerging economies in Asia.
Hewlett-Packard (HPQ) fell 1.4% in pre-market trading after UBS downgraded the world's largest maker of personal computers and printers to "neutral" from "buy."
Staples (SPLS) rose 1.7% in pre-market trading after Goldman Sachs lifted its recommendation on the world's largest office-supply retailer to "buy" from "neutral" and added the stock to its "conviction buy" list.

Today's Market Focus

December 10-year T-notes this morning are trading down -1.5 ticks. Dec 10-year T-note prices yesterday strengthened the entire session and closed up +26.5 ticks at 124-270. Bullish factors included (1) strong safe-haven demand for Treasuries after European and US stock markets declined on renewed concerns that Europe's sovereign-debt crisis will undermine the global economic recovery, (2) comments from former Fed Governor Kohn who said the Fed should take further steps to support the economy such as buying government bonds if the recovery continues to slow, (3) overall strong demand for the Treasury's $33 billion 3-year T-note auction which had a bid-to-cover ratio of 3.21, compared with an average of 3.14 for the previous 10 sales, and (4) the prediction from Bank of America Merrill Lynch that the jobless rate in the US is likely to approach 10% in coming months as the economy fails to grow quickly enough to employ people rejoining the labor force. Bearish factors included (1) concern that President Obama's proposed $50 billion program to update US infrastructure will lead to increased Treasury issuance to pay for the program, and (2) supply pressures ahead of the Treasury's $21 billion auction of 10-year T-notes on Wed.
The dollar index this morning is weaker with the dollar/yen -0.06 yen and the euro/dollar +0.35 cents. The dollar index yesterday rallied throughout the day and closed moderately higher. Bullish factors included (1) weakness in the euro on renewed European sovereign-debt concerns after the WSJ reported that European stress tests published in July may have understated some financial institutions' sovereign debt holdings of potentially risky government debt, (2) the report from the Association of German banks that said Germany's top 10 lenders might need about 105 billion euros ($135 billion) in fresh capital, (3) increased safe-haven demand for the dollar after European and US equity markets tumbled, and (4) the prediction from PIMCO that Greece still faces a "substantial" default risk as insolvency prevents them from repaying their debt when its bailout program expires in 3 years. Bearish factors included (1) the surge in the yen to a 15-year high against the dollar as the fall in global stock markets boosted demand for the yen on risk aversion and after the BOJ refrained from expanding its quantitative easing program following the conclusion of its monetary policy meeting, (2) the action by Morgan Stanley to cut its year-end forecast for the euro against the dollar to $1.36 from a previous forecast of $1.16, citing the increasing likelihood of the Fed further easing monetary policy, and (3) comments from former Fed Governor Kohn who said the Fed should take further steps to support the economy such as buying government bonds if the recovery continues to slow, which would undercut the dollar.
October crude oil prices this morning are trading down -20 cents a barrel and October gasoline is -1.30 cents per gallon. Oct crude oil prices yesterday retreated for a second session as they closed down -$0.51 a barrel. Oct gasoline closed higher by +1.34 cents per gallon. Bearish factors included (1) the stronger dollar, (2) the unexpected decline In Jul German factory orders, which signals weak fuel consumption in Europe's largest economy, (3) weakness in gasoline on the prospects for weaker demand going forward as the US Labor Day Holiday marks the end of the summer driving season and US gasoline supplies are already 14% above their 5-year average for the period, and (4) the slide in European and US equity markets, which dampens confidence in the economic outlook and energy demand. Bullish factors included (1) strength in gasoline prices after an explosion at Mexico's Cadereyta refinery, which produces 235,000 bpd of gasoline, may lead to increased Mexican demand for US gasoline supplies, and (2) the outlook for US crude supplies to fall in Thursday's weekly DOE inventory report (delayed one day because of the Labor Day holiday).

Barchart.com U.S. Morning Call for Tuesday, September 7, 2010

Overnight Developments

European stocks are lower with the European DJ Stoxx 50 down -0.62% and Sep S&Ps down -6.10 points. The dollar and Treasuries rallied while the euro and most commodities weakened on concern Europe's debt crisis may worsen. Banks led stocks lower on concern they might require more capital after Germany's banking association said yesterday that its lenders need to raise $135 billion and Pacific Management Co. said Greece still faces "substantial" default risk. Greek bonds plunged and pushed the yield on 10-year Greek bonds up 28 bp relative to 10-year German bunds to 941 bp, the most since the European Union and the IMF crafted a bailout package in May. Also undercutting European stocks was the unexpected -2.2% m/m decline in July German factory orders, their biggest monthly decrease in 17 months and a sign that momentum in Europe's largest economy is losing momentum. Irish banks also fell with Allied Irish Bank Plc and Bank of Ireland Plc down over 2% after they had their ratings cut to "neutral" from "outperform" at Davy, which cited concerns over whether the Irish government bank guarantee will be extended. On the positive side, Nokia rallied 3.5% after the largest maker of mobile phones was raised to "overweight" from "underweight" at Morgan Stanley.

The Asian markets today closed mixed with Japan down -0.81%, Hong Kong +0.22%, China +0.27%, Taiwan -0.08%, Australia -0.05%, Singapore +0.05%, South Korea -0.14%, India +0.46%. A decline in Japanese automakers led the Nikkei 225 Stock Index lower as the yen strengthened to near a 15-year high against the dollar. Asian steel companies rallied which helped China's Shanghai Index close slightly higher after US President Obama proposed a $50 billion spending plan on infrastructure to fix US roads, railways and runways. Japan's and Australia's central banks signaled that the outlook for US growth is deteriorating and making it harder for them to set monetary policy. The RBA extended a pause in raising interest rates "for the time being" even after the nation's GDP rose the most since 2007, while the BOJ said it's prepared to add more monetary stimulus. Both central banks singled out the US, with the RBA saying growth there looked "weaker" in the second half, and the BOJ citing "uncertainty about the future, especially for the US."

Barchart.com U.S. Morning Call for Friday, September 3, 2010

Overnight Developments

European stocks are higher with the European DJ Stoxx 50 up +0.59% and Sep S&Ps up +0.10 of a point, both at 2-week highs. The dollar is weaker while Treasuries and most commodities are little changed as the markets anxiously await the monthly US payrolls report. Speaking to reporters in Seoul today, ECB Council member Draghi said that while the economic recovery remains "fragile," it is becoming more broad-based. Draghi, who is also the governor of Italy's central bank, said the ECB's monetary stance would remain "accommodative." The euro strengthened after ECB Council member Wellink told Market News International that the yen's appreciation against the euro is helping some Euro-Zone exporters. Yell Group Plc rose 6.2% as the publisher of the UK's yellow pages directories rallied for a third straight day on takeover speculation, while Theolia SA plunged 9.4% after the French wind-power company reported a first-half net loss of 24.2 million euros, larger than the 14.1 million-euro loss a year earlier.

The Asian markets today closed mostly higher with Japan up +0.57%, Hong Kong +0.49%, China -0.04%, Taiwan +1.42%, Australia +0.19%, Singapore +0.53%, South Korea +0.16%, India -0.09%. Asian stocks rose after US reports showed an unexpected increase in pending home sales and improved retail sales that eased concerns of an economic slowdown. Sony, the electronics maker that gets 22% of sales from the US, rose 2.4% and James Hardie Industries SE, the biggest seller of home siding in the US, climbed 2.1%. Technology stocks also advanced with Wintek Corp., a component maker for Apple's iPads, surging 7% after saying its Aug revenue rose 17% m/m, while Chimei Innolux, Taiwan's largest maker of liquid-crystal displays, closed 6.9% higher amid speculation that Q4 demand for consumer electronics will improves from the previous 3 months. Japan's economy probably grew more than three times the government's initial estimate of +0.4% annualized in Q2 after a Finance Ministry report today showed Japan Q2 capital investment excluding software fell -1.5% y/y, its smallest decrease since 2007 as a result of strong overseas demand. Japan will release its revised Q2 GDP growth estimate on Sep 10.

Barchart.com U.S. Morning Call for Thursday, September 2, 2010

Overnight Developments

European stocks are slightly weaker with the European DJ Stoxx 50 down -0.36% and Sep S&Ps down -1.20 points. The dollar and Treasuries are little changed while copper rose to a 4-month high after the IMF raise its economic forecast for South Korea, the world's fourth largest copper consumer. European and US stock prices are fluctuating on either side of unchanged ahead of the conclusion of today's ECB's monetary policy meeting in which policy makers are likely to extend emergency lending measures to banks into 2011. The French Q2 jobless rate unexpectedly slipped -0.2 to 9.7%, its first decline in 2 years as companies began hiring again. DSG International Plc rose 1.2% after the UK's largest consumer-electronics retailer reported an increase in Q1 sales, boosted by the World Cup soccer tournament and the introduction of Apple's iPad. On the negative side, Pernod Ricard SA slid 2.2% after it reported first-half profit of 951 million euros ($1.2 billion), below analysts' estimates of 987 million-euros, while Yara International ASA, the largest publicly traded maker of nitrogen fertilizer, dropped 3.2% after Morgan Stanley downgraded the shares to "equal weight" from "overweight."

The Asian markets today closed higher with Japan up +1.52%, Hong Kong +1.19%, China +1.30%, Taiwan +0.69%, Australia +0.82%, singapore +0.13%, South Korea +0.54%, India +0.18%. Asian stocks rose after faster-than-estimated growth in US Aug manufacturing supported confidence in global economic growth. Japanese exporters rose as the yen weakened with Honda Motor up 1.9%, Nissan Motor up 3% and Sony up 2.2%. Chinese automakers advanced after China's passenger-car sales grew 59% y/y in Aug, more than 3 times July's pace, while Ping An Insurance, China's second-largest insurer, gained 2.7% on plans to merge its bank unit with Shenzhen Development Bank after it said it will pay 29.1 billion yuan ($4.3 billion) for a stake that will give it control of Shenzhen. South Korean stocks rallied after the IMF raised its economic growth forecast for the country to 6.1% this year from 5.75% previously, and said the country still has room to raise its benchmark interest rate to a more neutral 4.0% from 2.25% currently. The Bank of Korea raised its benchmark rate 25 bp to 2.25% on July 9 as it joined Asian counterparts including India and Malaysia in removing monetary stimulus.

Barchart.com U.S. Morning Call for Wednesday, September 1, 2010

Overnight Developments

European stocks are higher with the European DJ Stoxx 50 up +1.03% and Sep S&Ps up +12.10 points. The dollar and Treasuries are weaker, with the dollar index sliding to a 1-1/2 week low, and most commodities are higher with gold climbing to a 2-month high and copper racing to a 4-month high. Acceleration in Chinese manufacturing in Aug is helping to allay concerns of a slowing recovery and is the major bullish factor for global stock prices today. European media companies are stronger with a 4.7% surge in Vivendi leading gains after it reported first-half profit of 1.53 billion euros ($1.94 billion), beating analysts' estimates of 1.49 billion euros, and it raised its full-year earnings estimates. Vinci SA rise 3.2% and led building stocks higher after the world's biggest builder reported first-half profit of 703 million euros, higher than analysts' estimates of 681 million-euros. On the negative side, Jul German retail sales unexpectedly declined for a second month as they fell -0.3% m/m, while manufacturing in Britain slumped after the Aug UK PMI manufacturing index slipped a more-than-expected -2.6 to 54.3, its weakest level in 9 months.

The Asian markets today closed mostly higher with Japan up +1.17%, Hong Kong +0.43%, China -0.66%, Taiwan +0.68%, Australia +2.08%, Singapore +1.10%, South Korea +1.15%, India +1.31%. Manufacturing in China strengthened in Aug, indicating that China's moderation in growth isn't deepening. The Aug China purchasing managers' index rose a more than expected +0.5 to 51.7, while a separate PMI released by HSBC Holdings Plc and Markit Economics gained to 51.9 from 49.4. Domestic demand could help to support production and boost the Chinese economy after the China Automotive Technology & Research Center reported Aug China passenger-car sales surged +59% y/y, more than 3 times July's pace. Raw materials producers and mining companies rallied on speculation of stronger demand for commodities after Australia reported its Q2 GDP expanded +1.2% q/q, more than the +0.9% q/q expected and its fastest pace of growth in 3 years. Australian exports surged 5.6% in Q2 as strong Chinese demand for coal and iron ore spurred exports which added 1.1 percentage points to Australia's GDP.

Barchart.com U.S. Morning Call for Tuesday, August 31, 2010

Overnight Developments

European stocks are weaker with the European DJ Stoxx 50 down -1.01% and Sep S&Ps down -4.20 points. The dollar and most commodities are lower while Treasuries and bunds are higher. European bank stocks are leading share prices lower with Raiffeisen International Bank Holding AG down 1.8% after the Austrian bank that operates in 17 former communist countries in eastern Europe reported Q2 net income of 71 million euros ($89.75 million), below analysts' estimates of 99 million-euros. Eurobank Ergasias SA fell 3.1% as Greece's second-largest lender said first-half profit fell after loan losses and taxes increased. Aug Euro-Zone inflation slowed to 1.6% y/y from 1.7% y/y in July, while the Aug Euro-Zone unemployment rate held at 10.0% for a fifth month, the highest in 12 years. In Germany, the number of people out of work declined -17,000 in Aug, its 14th consecutive month of declines, as the unemployment rate held steady at 7.6%. The German economy is leading Europe's recovery as exports and investment surge, and may limit any slowdown in the Euro-Zone.

The Asian markets today closed lower with Japan down -3.55%, Hong Kong -0.97%, China -0.41%, Taiwan -1.61%, Singapore -0.23%, South Korea -1.23%, India -0.34%. Asian stocks fell after slower-than-estimated growth in US personal income increased concern the economic recovery may falter. Japanese stocks tumbled despite an unexpected +0.3% m/m increase in Jul Japan industrial production and the larger-than-expected +0.7% m/m increase in Jul Japan retail sales. Stock prices in Japan remain under pressure on concern that the steps taken Monday by the BOJ and the government to halt the yen's gain and boost economic growth will be insufficient. Q2 GDP in India expanded 8.8% annualized, its fastest pace in 2-1/2 years, which increases pressure on the Reserve Bank of India (RBI) to extend its recent string of interest rate hikes. The markets now expect another 25 bp rate hike by the RBI at its next meeting Sep 16 to cool inflation as India's wholesale-price inflation has remained stubbornly around 10% since Jan.

Barchart.com U.S. Morning Call for Monday, August 30, 2010

Overnight Developments

European stocks are slightly higher with the European DJ Stoxx 50 up +0.09% and Sep S&Ps down -0.80 of a point. The dollar index is weaker and copper jumped to a 4-month high on speculation that central banks won't allow the global economy to slide back into recession after the Bank of Japan (BOJ) expanded a bank-loan program and Fed Chairman Bernanke pledged last Friday to "do all that it can" to ensure a continuation of the economic recovery. European stocks also received a boost after Aug Euro-Zone economic confidence rose a more-than-expected +0.7 to 101.8, its highest level in 2-1/2 years, as a surge in exports help the Euro-Zone economy in Q2 to expand at its fastest pace in 4 years. An increase in M&A activity is another positive factor for stock prices today after Zodiac Aerospace jumped 13% after La Tribune reported that Safran SA is preparing another bid for Europe's biggest maker of airplane seats, while Genzyme climbed 3.4% after Sanofi-Aventis SA offered to buy the world's largest maker of medicines for genetic diseases for about $18.5 billion. On the negative side of M&A activity, Infineon Technologies AG, Europe's second-largest semiconductor maker, slid 1.9% after Intel agreed to buy its wireless unit for about $1.4 billion, below the $1.9 billion Infineon was seeking.

The Asian markets today closed higher with Japan up +1.76%, Hong Kong +0.68%, China +1.97%, Taiwan +0.24%, Australia +1.89%, Singapore +0.62%, South Korea +1.82%. India +0.19%. Japanese stocks rallied when the BOJ, at the conclusion of its emergency meeting in Tokyo, boosted its bank-loan program by 10 trillion yen ($118 billion) to 30 trillion yen as the yen's surge to a 15-year high against the dollar threatens economic growth. The yen knee-jerked lower after the BOJ's action, but soon strengthened on speculation the steps taken by the BOJ are insufficient to stem its strength. Even Prime Minister Kan's announcement that the government will spend 920 billion yen ($10.8 billion) on economic stimulus and compile an extra budget if needed failed to stem the yen's gains. Deutsche Bank AG recommends that investors sell Asian stocks before slowing earnings growth and a weakening global economy lead to further stock losses.

Barchart.com U.S. Morning Call for Friday, August 27, 2010

Overnight Developments

European stocks are little changed with the European DJ Stoxx 50 up +0.03% and Sep S&Ps are up +3.50 points. The market's attention is focused on speeches later today from Fed Chairman Bernanke and ECB President Trichet from the Fed's annual symposium at Jackson Hole, Wyoming. Losses in European banks are undercutting European stock prices today with Banca Papolare di Milano down 5% after the Italian bank reported Q2 net income of 20.1 million euros, lower than analysts' estimates of 41.6 million-euros, and Credit Suisse Group AG predicted that earnings estimates for 2010-12 will likely be revised down by 10 to 15% following the bank's "very weak set of results." Commerzbank AG slumped 2.6% after Handelsbatt said the bank plans to sell new shares as early as next month to pave the way for an exit by the German government. Limiting losses in European markets was the upward revision to Q2 UK GDP figures to +1.2% q/q and +1.7% y/y, higher than the initial estimate of +1.1% q/q and +1.6% y/y, and shows the British economy expanding by its biggest amount since 2001.

The Asian markets today closed mostly higher with Japan up +0.95%, Hong Kong -0.07%, China +0.30%, Taiwan +0.43%, Australia +0.32%, Singapore +0.44%, South Korea +0.06%, India -1.25%. Japanese stocks closed higher and the yen weakened against the dollar after Japanese Prime Minister Kan said the government is ready to take "bold" action in the currency market to stem the yen's advance. Kan said he expects the BOJ to implement monetary policy "swiftly," and that he plans on meeting with BOJ governor Shirakawa soon after he returns from the US. July Japan consumer prices excluding fresh food fell -1.1% y/y, their 17th consecutive monthly decline, while July Japan overall household spending rose +1.1% y/y, lower than expectations for a +1.5% y/y increase, and signals that Japan's economic recovery may be faltering. On the bright side, Japan added 210,000 jobs in July from a month earlier, the most since Jan, while the unemployment dropped -0.1 to 5.2%, its first decline in 6 months as the job-to-applicant ratio rose to 0.53, meaning there are 53 job openings for every 100 job candidates, the most since March 2009.

Barchart.com U.S. Morning Call for Thursday, August 26, 2010

Overnight Developments

European stocks are higher with the European DJ Stoxx 50 up +0.45% and Sep S&Ps up +1.00 point. Better-than-expected earnings results are leading European stocks higher as Credit Agricole, France's largest bank by branches, jumped 3.8% after it reported Q2 net income of 279 million euros, beating analysts' estimates of 318 million euros, while L'Oreal, the world's biggest cosmetics maker, surged 6.6% after it reported first-half net income increased 21% from last year to 1.32 billion euros. Also boosting European stocks was the +0.1 point increase in the Sep German GfK consumer confidence survey to an 11-month high of 4.1 as stronger economic growth and declining unemployment in Germany boosted income expectations. Loan growth grew in Europe in July as the economic recovery gathered steam after the ECB reported a +0.9% y/y increase in loans to Euro-Zone households and companies in July, the fastest pace in 13 months, which suggests the economy may not lose as much momentum as some economists forecast.

The Asian markets today closed mixed with Japan up +0.69%, Hong Kong -0.11%, China +0.25%, Taiwan -0.61%, Australia +0.83%, Singapore -0.02%, South Korea -0.27%, India +0.26%. Japanese exporters rallied and led Japanese stocks higher as the yen weakened against the dollar. The Asahi newspaper reported today that the Japanese government may ask the BOJ to ease monetary policy further as part of an economic stimulus package, while the Nikkei English news reported that Japanese Prime Minister Kan told business leaders he is in contact with the Finance Ministry and the central bank on the possibility of currency intervention. The yen has risen 15% this year and Suzuki Motor Corp. Chairman Suzuki said the strengthening currency poses an "extremely grave" situation and will have a "very big impact" on profit.

Barchart.com U.S. Morning Call for Wednesday, August 25, 2010

Overnight Developments

European stocks are lower with the European DJ Stoxx 50 down -0.33% and Sep S&Ps down -1.00 point. European stocks weakened after S&P cut Ireland's long-term sovereign credit rating one step to AA-, its lowest since 1995, on concern the rising cost of supporting the country's struggling banks will swell the budget deficit. S&P hiked its estimate for recapitalizing the banking system to as much as 50 billion euros ($63 billion) from a previous estimate of 35 billion euros. The yield on Irish 10-year bonds surged to a record 332 bp more than German bunds, while credit-default swaps protecting Irish debt climbed 6.5 bp to 316.5, the highest since Mar 2009 and implying a 23.6% probability of default within 5 years. Irish banks moved lower after the news with Allied Irish Banks Plc down 1.8% and Bank of Ireland down 2.3%. The euro gained and stock losses were limited after the Aug German IFO business climate unexpectedly increased for the fourth straight month as it rose +0.5 to a 3-year high of 106.7.

The Asian markets today closed mostly lower with Japan down -1.66%, Hong Kong -0.11%, China -2.36%, Taiwan -2.56%, Australia -1.40%, Singapore +0.13%, South Korea -1.50%, India -0.72%. The yen backed off from a 15-year high against the dollar after Japanese Finance Minister Noda pledged to take "appropriate action" to arrest the yen's rally and after the Nikkei newspaper reported that the BOJ is considering further monetary easing. Japan hasn't intervened in currency markets since March 2004 when the yen was at 109 per dollar. Deflation risks continue to rise in Japan after the July Japan corporate service price index fell a more than expected -1.2% y/y, its 22nd consecutive monthly decline. In its annual report for the year ended Jun 30, the Reserve Bank of India (RBI) said, "Inflation has emerged as a major concern." The RBI has raised interest rates the most this year among Asian central banks as India's wholesale-price inflation rate hovered around 10%. The RBI last boosted its reverse repurchase rate by 50 bp to 4.5% and the repurchase rate by 25 bp to 5.75% on Jul 27, and today's hawkish comments suggest the RBI may hike rates again when it meets next on Sep 16.

Barchart.com U.S. Morning Call for Tuesday, August 24, 2010

Overnight Developments

European stocks are weaker with the European DJ Stoxx 50 down -1.27% and Sep S&Ps down -7.40 points, both at their lowest levels in a month. This prompted a flight-to-safety into German bunds and Treasuries with the yield on the 10-year bund falling to a record low 2.232%. Risk aversion also prompted a surge in the yen to a 15-year high against the dollar, while most commodities slumped with crude oil at a 1-1/2 month low. European stocks retreated, led by weakness in construction and basic-resource companies, on concern that economic growth is slowing. CRH Plc, the world's second-largest maker and distributor of building materials, tumbled 14% after the company forecast that earnings will fall 10% this year due to a slowdown in the US. HeidelbergCement AG, the world's largest maker of aggregates used to produce concrete and asphalt, dropped 4.8% and Wolseley Plc, the world's largest supplier of heating and plumbing products, tumbled 5.2%. EU Commissioner for economic and monetary affairs, Olli Rehn, said that a slowdown in the US recovery and turmoil in the sovereign debt markets could cause concern in Europe, where growth is likely to decelerate in he second half. On the bright side, Jun Euro-Zone industrial new orders climbed a larger-than-expected +2.5% m/m as stronger global growth helped fuel Q2 Euro-Zone GDP to its fastest rate expansion in 4 years.

The Asian markets today closed mostly lower with Japan down -1.33%, Hong Kong -1.10%, China +0.54%, Taiwan -0.44%, Australia -1.08%, Singapore -0.11%, South Korea -0.34%, India -0.53%. Japan's Nikkei 224 Stock Index plunged to a 15-month low on concern the global recovery is faltering. The yen rose to an 8-year high against the euro and a 15-year high against the dollar, which undercut exporters as the strengthening yen threatens to erode Japan's export earnings. Japan's Prime Minister Naoto Kan tried to slow the yen's advance when he said "steep currency moves are undesirable" as Japanese policymakers and government leaders are under pressure to protect Japan's fragile economic recovery as the yen's surge threatens to undermine export earnings and deepen deflation. According to the Sankei newspaper, Prime Minister Kan will meet today with business leaders to discuss the yen's strength and its impact on the economy. Asian mining-companies and raw materials and energy producers closed lower on demand concerns as commodity prices declined, while Foster's Group Ltd., Australia's biggest beer and wine maker, slumped 4.3% after posting a second-half loss.

Barchart.com U.S. Morning Call for Monday, August 23, 2010

Overnight Developments

European stocks are higher with the European DJ Stoxx 50 up +0.90% and Sep S&Ps up +5.50 points. An increase in M&A activity is boosting European and US stocks today with Old Mutual Plc up over 4% after it said it might sell 70% of its Nedbank Group Ltd. banking unit to HSBC Holdings. Metals producers are higher as well with gains of 2% for Rio Tinto Group and BHP Billiton Ltd. amid speculation that a proposed mining tax in Australia might be scrapped or diluted after Australia's general election failed to deliver a majority government for the first time in 70 years. A negative factor for European stock prices is the larger-than-expected -0.6 point decline in the Aug Euro-Zone PMI composite to 56.1, which signals the pace of the recovery might have peaked.

The Asian markets today closed mostly lower with Japan down -0.68%, Hong Kong -0.44%, China -0.07%, Taiwan +0.61%, Australia -0.04%, Singapore -0.36%, South Korea -0.42%, India +0.04%. The yen climbed to near a 1-3/4 month high against the euro and pressured Japanese stocks along with last Friday's comments from ECB Council member Weber who said that the ECB should continue with its emergency funding measures until at least year-end, which fueled speculation about the sustainability of Europe's economic recovery and its demand for Asian exports. Japanese Prime Minister Kan and BOJ Governor Shirakawa spoke today about the economy and the strength of the yen and the yen rallied after Chief Cabinet Secretary Dengoku said that there was "absolutely no" discussion of intervention in the currency markets to slow the yen's rise against the dollar. On the positive side, Japan's 3 major shipping companies closed higher after the Nikkei English news reported that the companies are considering increasing their earnings outlook for 2010 as they were able to increase shipping rates on some routes.

Barchart.com U.S. Morning Call for Friday, August 20, 2010

Overnight Developments

European stocks are lower with the European DJ Stoxx 50 down -0.70 % at a 4-week low and Sep S&Ps down -4.90 points. The euro sank to a 5-week low and the yield on the 10-year German bund declined to a record low after dovish comments from ECB Council member Weber who said the ECB should keep its emergency funding measures in place through year-end before determining in Q1 of next year when to withdraw the emergency lending measures. European stocks were undercut when France's Les Echos newspaper reported that the French government might cut its 2.5% forecast for growth in 2011 after President Sarkozy meets with his finance and economic ministers. Cie de Saint-Gobain SA, Europe's biggest supplier of building materials, fell 2.9% and led declines in companies sensitive to economic growth, while Holcim, which plunged over 6% yesterday when it said weak European growth threatens its outlook, lost another 2.6% today after Credit Suisse Group Ag and Deutsche Bank AG cut their price estimates on the world's second-biggest cement maker.

The Asian markets today closed lower with Japan down -1.96%, Hong Kong -0.43%, China -1.93%, Taiwan -0.02%, Australia -1.07%, Singapore -0.35%, South Korea -0.31%, India -0.29%. Asian stocks closed lower on concern that international demand for its exports may wane. Sharp fell 2.7% and led declines in electronics makers, after the Nikkei English News said the company will cut its liquid-crystal-display panel output. Japanese exporters also fell as the yen rose to a 7-week high against the euro, which threatens to hurt the value of sales denominated in euros when repatriated. The yen backed off earlier highs and was near unchanged after Japanese Finance Minister Noda said he's watching currency markets "with great interest," which indicates the Japanese government may be near to some kind of action to weaken the yen if it strengthens much more. Chinese banks fell after the Securities Times reported they might need to take a 600 billion yuan provision on bad local government loans. The report cited calculations by the Securities Times based on figures announced by the government.

Barchart.com U.S. Morning Call for Thursday, August 19, 2010

Overnight Developments

European stocks are higher with the European DJ Stoxx 50 up +0.60% and Sep S&Ps up +5.20 points after Germany's central bank raised its economic growth forecast and UK retail sales rose. Stocks received a boost after the Bundesbank hiked its GDP forecast for Germany this year to +3.0% from a June forecast of +1.9% as the economy expanded in Q2 at the fastest pace since records for a reunified Germany began in 1991. July UK retail sales including fuel rose at a larger-than-expected pace of +1.1% m/m, its biggest increase in 5 months, while the EU said that Greece meets the conditions to receive the second part of an emergency loan from the Euro-Zone member states. Technology stocks were stronger after Applied Materials forecast Q4 profit that beat analyst estimates on orders from memory-chip makers. ARM, the UK designer of semiconductors used in Apple's iPhone, climbed 3.6% and ASML, Europe's biggest maker of semiconductor equipment, advanced 2.3%. On the negative side, July German producer prices rose a more-than-expected +3.7% y/y, their biggest increase in 19 months, and Holcim fell 4.4% after the world's second-biggest cement maker reported Q2 income of 399 million francs ($384 million), lower than analysts' profit estimates of 561 million francs.

The Asian markets today closed higher with Japan up +1.32%, Hong Kong +0.24%, China +0.61%, Taiwan +0.06%, Australia +0.09%, Singapore +0.94%, South Korea +1.30%, India +1.08%. Strength in technology stocks lifted Asian share prices today after Applied Materials, the world's largest producer of chipmaking equipment, reported "strong" orders and forecast higher-than-estimated Q4 profit, a sign that demand is recovering for Asia's chipmakers. Tokyo Electron, the second-biggest maker of chip making machinery, closed up 4.7% and Hynix Semiconductor, the world's second-biggest maker of computer-memory chips, increased 3.7%. The yen weakened and boosted Japanese exporters after the Sankei newspaper reported that the BOJ might increase the amount of a corporate loan program to 30 trillion yen ($351 billion) from 20 trillion yen, with the duration of the loans doubling to 6 months. Q2 GDP in Taiwan rose a more than expected +12.5% annualized, which bolsters the case for further interest rate increases after the island's exports weathered global risks. Exports to China, which together with Hong Kong absorbs more than 40% of Taiwan's exports, rose +38.8% in July y/y.

Barchart.com U.S. Morning Call for Wednesday, August 18, 2010

Overnight Developments

European stocks are weaker with the European DJ Stoxx 50 down -0.41% and Sep S&Ps are down -1.00 point. The dollar is lower and bond markets across the globe are stronger on speculation that global economic growth is too anemic to fuel inflation. The yield on the German 30-year bond fell to a record low of 2.978% and Japanese 10-year yields slid to a 7-year low of 0.916%. The yield on the US 10-year T-note declined to near a 17-month low after St. Louis Fed President Bullard said in a WSJ editorial today that the Fed might need to buy more Treasuries if inflation continues to slow. European stocks were led lower by renewable energy stocks after Vestas, the world's biggest wind-turbine maker, plunged 21% when it cut its annual sales forecast to 6 billion euros ($5.5 billion) from 7 billion euros and reported its second straight quarterly loss as a lack of financing caused customers to delay or cancel renewable energy projects. Limiting stock losses in Europe were the +2.7% m/m increase in Jun Euro-Zone construction output, its biggest gain in 3 months, and the 6% jump in Swiss Life after Switzerland's biggest life insurer reported first-half net income of 268 million francs ($257 million), higher than analysts' estimates of 219 million francs.

The Asian markets today closed mixed with Japan up +0.86%, Hong Kong -0.54%, China -0.17%, Taiwan -0.09%, Australia -0.05%, Singapore -0.14%, South Korea +0.41%, India +1.15%. Asian stocks received a boost after US industrial production rose more than forecast, easing concern that US demand will slow for Asian goods. Honda Motor and Nintendo, which both get more than 40% of their revenue from North America, closed over 3% higher. Woodside Petroleum, Australia's second-biggest oil and gas producer, closed 1.1% higher after it reported that its first-half net income rose to $901 million, stronger than analysts' estimates of $775 million. Data from the South Korean Financial Supervisory Service showed that China purchased 3.99 trillion won ($3.4 billion) of Korean Treasury bonds in the first half of this year, up +11% from a year earlier, as China continues to diversify part of its world's largest foreign-exchange reserves out of dollars.

Barchart.com U.S. Morning Call for Tuesday, August 17, 2010

Overnight Developments

European stocks are stronger with the European DJ Stoxx 50 up +0.37% and Sep S&Ps are up +7.00 points. The dollar index and Treasuries are weaker while most commodities are higher, even after German investor confidence dropped to a 16-month low. The Aug German ZEW economic sentiment survey fell a more-than-expected -7.2 to 14.0, its fourth straight decline and its lowest level in 16 months, which suggests a weaker growth outlook going forward. In the UK, July consumer prices rose +3.1% y/y, which is above the government's 3.0% limit and forced BOE Governor King to write his third public letter this year to explain how he will bring prices under control. European stocks received a boost after Carlsberg, the biggest brewer in Russia, climbed 2.1% after it reported Q2 profit of 2.63 billion kroner, beating analysts' estimates of 2.05 billion-kroner and after the company raised its full-year profit forecast due to the effect of a stronger ruble and an improvement in the Russian market. Weinerberger surged 7.2% after the world's largest brickmaker reported Q2 net income of 20.6 million euros ($26 million), compared with a 151.5 million euro loss the year before after the company cut costs and the building material market began to recover.

The Asian markets today closed mixed with Japan down -0.38%, Hong Kong +0.12%, China +0.69%, Taiwan -0.13%, Australia +0.87%, Singapore -0.35%, South Korea +0.64%, India -0.01%. Japanese bank stocks fell and helped to lead the overall market lower after Deutsche Bank downgraded the industry to "marketweight" from "overweight," citing "a lack of confidence that the strong Q1 performance will continue in subsequent quarters." A report from the Nikkei newspaper said that the Japanese government might extend the eco-point incentive program for purchases of energy-saving devices in an attempt to extend the economic recovery after Monday's release of Japan Q2 GDP data showed the Japanese economy barely grew last quarter. The central banks of Australia and South Korea said the world economic outlook has become clouded, which may slow their pace of future interest rate increases. The minutes of the Aug 3 RBA policy meeting released today said there is "more uncertainty over the global outlook than there had been earlier in the year," while BOK Governor Kim Choong Soo said in a speech today that markets "may prove turbulent in the future."

Barchart.com U.S. Morning Call for Monday, August 16, 2010

Overnight Developments

European stocks are lower with the European DJ Stoxx 50 down -0.46 % at a 3-week low and Sep S&Ps down -2.10 points. 10-year US Treasury yields dipped to a 17-month low and German 10-year bund yields fell to a record low, while gold prices jumped to a 1-1/2 month high on increased demand for the metal as a store of value on signs the global economy is faltering after Q2 Japan GDP came in weaker-than-expected. Losses in Irish banks led financial shares lower with Bank of Ireland down 5.3% and Allied Irish down 2.2% after ECB Council member and Irish Central Bank Governor Honohan said Ireland's 20 billion to 25 billion euro bailout of Anglo Irish Bank Corp. is a "shock to the system." The dollar weakened after the 3-month dollar Libor rate declined for the 24th consecutive day to a 3-1/4 month low of 0.362%.

The Asian markets today closed mixed with Japan down -0.61%, Hong Kong +0.19%, China +2.33%, Taiwan +0.63%, Australia -0.47%, Singapore -0.22%, South Korea -0.22%, India -0.64%. Japanese stocks fell and undercut other global equity markets on concern the global economic recovery may be in jeopardy after Q2 Japan GDP came in weaker-than-expected at +0.1% q/q and +0.4% annualized, well below market expectations of +0.6% q/q and +2.3% annualized. The slower than expected Q2 Japan GDP pushed the Japanese economy into third place behind the US and China and reinforces the IMF's prediction that China will be the world's second-biggest economy by the end of 2010. Chinese stocks closed higher as higher commodity-freight rates boosted shipping companies and rising power demand drove energy producers higher. Copper and crude oil prices rose after Goldman Sachs predicted that increased demand from China might keep commodity prices firm into the end of the year.

Barchart.com U.S. Morning Call for Thursday, August 12, 2010

Overnight Developments

European stocks are slightly higher with the European Stoxx up +0.45% although Sep S&Ps are down -1.30 points after sliding to a 3-week low in overnight electronic trade when Cisco Systems, the largest maker of networking equipment, forecast sales that missed analysts' estimates. The dollar index strengthened to a 2-1/2 week high, while Treasuries and most commodities weakened with copper falling to a 2-week low and crude oil sinking to a 1-1/2 week low. European stocks fluctuated between slight losses and gains as equities try to regain their footing following Wednesday's deep slide. AB InBev gained 3.7% after the world's largest brewer reported Q2 net income rose to $1.15 billion, beating analysts' estimates of $1.08 billion, and Vestas Wind Systems A/S, the world's largest maker of wind turbines, rose 3.8% after winning an order for turbines in what will be Australia's biggest wind-energy project. Undercutting European stock prices was the unexpected -0.1% m/m drop in Jun Euro-Zone industrial production, which was dragged lower by a decline in durable consumer goods such as furniture and home appliances. In its monthly bulletin for Aug released today, the ECB said that Q3 growth in the Euro-Zone is likely "better than expected," echoing ECB President Trichet's comments last week, while the central bank cut its forecast for 2011 GDP growth in the Euro-Zone to 1.4% versus a previous projection of 1.5%.

The Asian markets today closed mostly lower with Japan down -0.86%, Hong Lomg -0.89%, China -1.19%, Taiwan -0.83%, Australia -1.23%, Singapore -0.75%, South Korea -2.19%, India +0.02%. The yen fell back slightly from a 15-year high against the dollar after Japanese Vice Finance Minister Tamaki met with BOJ members to discuss the financial markets. Nintendo and Sony, which get more than 70% of their sales abroad, slumped at least 3% on concern the yen's appreciation will hurt the value of Japanese exports, while concerns that the global economic recovery is unraveling sent Japan's Nikkei 225 Stock Index tumbling to a 13-month low. Australian stocks closed lower after the country's jobless rate in July rose to 5.3% from 5.1% in June. India's industrial production rose 7.1% y/y in June, the slowest pace in 13 months, which adds to evidence that Asian economies are weakening.

Barchart.com U.S. Morning Call for Wednesday, August 11, 2010

Overnight Developments

European stocks are weaker with the European Stoxx down -1.15% and Sep S&Ps down -15.10 points. The drop in US stocks that began after the FOMC meeting yesterday afternoon accelerated in overnight trade with Sep S&Ps falling to a 1-week low as the Fed signaled the recovery is decelerating. Treasuries around the globe gained, with the US 2-year T-note yield dropping to a record low of 0.4892%, while the yield on the 10-year German bund slipped to a record low of 2.458%. The dollar index rose to a 1-1/2 week high and commodities slumped with copper declining to a 1-week low. Adding to pressure on European stocks was the Bank of England's quarterly inflation report in which the BOE cut its economic growth estimate for England to a 3.0% annual pace instead of the 3.6% rate forecast in May and said that inflation will be at about 1.5% in 2012, lower than its 2.0% goal, which signals the economy may need more emergency stimulus. July UK nationwide consumer confidence tumbled a more-than-expected 7 points to a 15-month low of 56, which aided a drop in the British pound to a 1-1/2 week low against the dollar.

The Asian markets today closed mostly lower with Japan down -2.70%, Hong Kong -0.83%, China +0.62%, Taiwan -1.02%, Australia -1.88%, Singapore -1.17%, South Korea -1.32%, India -0.82%. Japan's Nikkei 225 Stock Index fell to a 2-1/2 week low on economic growth concerns after Jun Japan machine orders, an indicator of business investment in 3 to 6 months, rose +1.6% m/m, far less than the expected +5.4% m/m increase. Japan's exporters also closed lower after the yen surged to a 15-year high against the dollar as a stronger yen reduces the value of overseas income at Japanese companies when converted into their home currency. Chinese bank stocks weakened after China's banking regulator ordered banks to transfer off-balance-sheet loans onto their books and make provisions for those that may default. Adding to evidence that China's economy is cooling, China's July industrial output rose +13.4% y/y, the least in 11 months, while new loans in July were 532.8 billion yuan, below expectations of 600 billion yuan. China's July inflation quickened to 3.3% y/y, the fastest pace in 21 months, boosted by a low year-earlier base for comparison and rising food costs.

Barchart.com U.S. Morning Call for Tuesday, August 10, 2010

Overnight Developments

European stocks are lower with the European Stoxx down -0.39% and Sep S&Ps down -5.80 points. Stock prices fell as reports added to evidence that Chinese economic growth is slowing and as the markets await the Fed's latest policy statement later today. Treasuries and the dollar are higher, with the dollar index climbing to a 1-week high, while most commodities are lower with copper and silver sliding to 1-week lows. InterContinental Hotels Group Plc, owner of the Holiday Inn brand, sank 4.6% after saying the "economic environment does remain uncertain," while TUI Travel, Europe's biggest tour operator, slumped 8.5% after it said it expects its full-year result to be at the lower end of forecasts after posting a loss for the first nine months of the year of 409 million pounds ($646 million). Also undercutting European stocks was the larger-than expected -1.7% m/m drop in Jun French industrial production and the unexpected -1.3% m/m fall in Jun French manufacturing production, their biggest declines in 15 months.

The Asian markets today closed lower with Japan down -0.22%. Hong Kong -1.50%, China -2.83%, Taiwan -0.72%, Australia -1.18%, Singapore -0.36%, South Korea -0.47%, India -0.37%. China's Shanghai Stock Index closed sharply lower today on evidence that Chinese economic growth is slowing after July China imports rose 22.7% y/y, below market expectations of a 30.0% gain and the slowest pace of import growth in 9 months, while July property prices in 70 major Chinese cities climbed +10.3% y/y, the slowest pace of gains in 6 months. The BOJ left its benchmark interest rate at 0.10%, as expected, following its policy meeting today and kept their assessment of the economy unchanged. While the BOJ also maintained its view of Japan's economy, it cut its evaluation of China's outlook for the first time in 18 months, citing cooling demand.

Barchart.com U.S. Morning Call for Monday, August 9, 2010

Overnight Developments

European stocks are higher with the European Stoxx up +1.53% and Sep S&Ps are higher by +4.30 points. Basic-resource producers and energy companies are leading a rally in European bourses as copper and crude oil prices strengthened. Rio Tinto, the world's third-largest mining company, gained 2.2%, and BHP Billliton, the biggest mining company, rose 2.0%, while Total SA, Europe's third-biggest oil company, increased 2.1% and Repsol YPF SA, Spain's largest oil company, advanced 2.0%. Also boosting European stocks was the larger-than-expected increase in Jun German exports, (+3.8% m/m versus expectations of +1.5% m/m), as the global recovery helped bolster the expansion in Europe's largest economy. European investor confidence climbed to its best level in 2-1/2 years after the Aug Euro-Zone Sentix investor confidence rose a more-than-expected 9.8 to 8.5 as demand from emerging economies brightened the outlook. The euro weakened slightly against the dollar after ECB Council member Orphanides told Reuters in an interview published today that there's no "urgency" for the ECB to start raising borrowing costs to fight inflation risks.

The Asian markets today closed mostly higher with Japan down -0.72%, Hong Kong +0.57%, China +0.71%, Taiwan +0.89%, Australia +0.63%, South Korea +0.34%, India +0.79%. Japanese stocks were undercut after Goldman Sachs cut its 2011 growth forecast for Japan to 1.4% from an earlier prediction of 1.7%. Goldman last week had already lowered its projection for 2011 US growth to 1.9% from 2.5% on signs that boosts to the economy from government stimulus will wane. The chief strategist at Resona Bank predicts that Japan's Nikkei 225 Stock Average may fall 6.7% by Nov, driven down by a stronger yen and concern about the strength of global economic growth. In China, the AlphaShares Chinese Volatility Index, a gauge of investor fear of Chinese stocks, fell to 20.17, its lowest level since Dec of 2006, which signals investors "comfort" with the outlook for slowing economic growth. July Chinese trade data, due tomorrow, may show July Chinese exports rose +35% y/y, down from 43.9% in June while import growth may have slowed for a fourth month to +30.0% y/y, leaving a trade surplus of $19.6 billion.

Barchart.com U.S. Morning Call for Friday, August 6, 2010

Overnight Developments

European stocks are slightly higher with the European Stoxx up +0.59% and Sep S&Ps up +1.90 points. The dollar and Treasuries are a little stronger as the markets await the US employment report for July later this morning. The euro weakened after June German industrial production unexpectedly declined -0.6% m/m versus expectations for a +0.5% m/m gain. A 1.8% increase in Royal Bank of Scotland (RBS) led gains in European bank stocks after RBS said its first-half net income unexpectedly increased to 9 million pounds ($14 million), higher than analysts' estimates for a -47 million pound loss and its first profit since 2007. Unicore SA climbed 3.2% after the world's largest precious-metals recycler raised its full-year profit forecast to a range of 315 million euros ($415 million) to 335 million euros, up from a previous forecast of 260 million euros to 290 million euros. Declines in brewing companies limited gains in European stocks after Anheuser-Busch InBev, the world's largest brewer, fell 3.9%, and Heinekin NV dropped 3.5% on concern that wheat prices may continue to climb as other nations follow Russia's wheat export ban.

The Asian markets today closed mixed with Japan down -0.12%, Hong Kong +0.59%, China +1.64%, Taiwan +0.33%, Australia -0.01%, Singapore -0.39%, South Korea -0.02%, India -0.16%. Most Asian exporters lost ground on concern that the unexpected increase in US initial unemployment claims to a 3-1/2 month high signals a slowdown in the US economy. Korea's Hyundai Motor, which counts North America as its biggest overseas market, closed down 2.4% and Fanuc Ltd, the Japanese industrial robot maker that gets 18% of its sales from North America, lost 1.2%. The Reserve Bank of Australia (RBA) said today that Australia's economic expansion is unlikely to stoke inflation pressures for the next 2 years as weaker household and government spending offset the stimulatory boost from the nation's mining boom. The RBA forecasts that Australia's core inflation will average 2.75% until the end of next year before accelerating to the top of the central bank's 2.0% to 3.0% target range by mid-2012. The RBA also reiterated its prediction from 3 months ago that annual economic growth will quicken to 3.75% late this year to 4.0% at he end of 2012.

Barchart.com U.S. Morning Call for Thursday, August 5, 2010

Overnight Developments

European stocks are higher with the European Stoxx up +0.41% and Sep S&Ps up +1.60 points. The BOE as expected left its benchmark interest rate unchanged at 0.5% and kept its asset purchase plan unchanged at 200 billion pounds. The markets will now await the outcome of the ECB's policy meeting later this morning and comments from ECB President Trichet. The euro is stronger and near a 3-month high after comments from the IMF that Greece has shown "great progress" in implementing austerity measures and should qualify for the next installment of emergency loans in a 110 billion-euro rescue package. European stocks also received a boost after June German factory orders climbed a more-than-expected +3.2% m/m as the global recovery strengthened and spurred demand for German goods. Aviva Plc soared 6.7% and led insurance companies higher after the UK's second-biggest insurer reported first-half profit of 1.27 billion pounds ($2 billion), beating analysts' estimate of 1.17 billion pounds. Aviva also increased its dividend as it raised its half-year payout to 9.5 pence a share from 9 pence a year earlier. Undercutting European stock gains was the 3.6% drop in Unilever after the world's second-largest maker of consumer goods said Q2 sales rose 3.6% from a year earlier, below analysts' estimates of 4.0%.

The Asian markets today closed mixed with Japan up +1.73%, Hong Kong +0.01%, China -0.89%, Taiwan -0.45%, Australia +0.54%, Singapore +0.16%, South Korea -0.32%, India -0.24%. Toyota closed nearly 2% higher and led a rally in Japanese automakers after it raised its full-year profit forecast to 340 billion yen ($3.94 billion) for the year ending in March, compared with an earlier estimate of 310 billion yen, as sales in Asia grow and demand in the US recovers following Toyota's recall of 8 million vehicles. Japanese exporters also gained after the yen weakened against the dollar, which boosts the value of repatriated overseas revenue. Property stocks and bank shares led declines in Chinese stocks today on concern that China's proposed new stress tests of its banks signals the government may be growing more concerned about the health of the real estate market.

Barchart.com U.S. Morning Call for Wednesday, August 4, 2010

Overnight Developments

European stocks are weaker with the European Stoxx down -0.81% and Sep S&Ps down -2.90 points. The dollar and Treasuries are higher on increased safe-haven demand as stocks falter. European bank stocks are leading financial shares lower after Allied Irish Banks Plc, Ireland's second-biggest bank, dropped 8.2% after its first-half loss widened as bad debts rose. Standard Chartered Plc fell 6.3% after Royal Bank of Scotland Group Plc cut its recommendation on the bank to "hold" from "buy," citing weakness in capital-market related sales and pre-impairment profit that missed forecasts. Next Plc slid 7.4% and led retailers lower after Britain's second-largest clothing retailer said consumer spending will be "more restrained" in the second half. Limiting losses in European stocks was the 4.0% jump in Electricite de France SA after the French government said that electricity prices would rise 3.4% starting Aug 15. Demand for dollars continues to weaken after the 3-month dollar Libor rate fell for the 16th consecutive session to a 2-3/4 month low of 0.424%.

The Asian markets today closed mixed with Japan down -2.11%, Hong Kong +0.43%, China +0.37%, Taiwan +0.19%, Australia -0.65%, Singapore -0.43%, South Korea -0.10%, India +0.57%. Asian stocks were undercut after weaker-than-expected US economic data on home sales and factory orders renewed concerns about the strength of the global economy. Japanese exporters were pressured as the yen rose to an 8-month high against the dollar, which threatens to hurt the value of overseas sales when converted to the local currency. Canon, the world's biggest maker of digital cameras, fell 4.3%, and Sony, which gets 22% of its sales from the US, slipped 3%. Toyota Motor dropped 1.6% and Honda Motor fell 2.2% after the companies posted declines in US auto sales last month of 3.2% and 2.0% respectively. The yield on Japanese 10-year government bonds fell below 1.00% for the first time in 7 years on speculation the strengthening yen will increase deflationary pressures.

Barchart.com U.S. Morning Call for Tuesday, August 3, 2010

Overnight Developments

European stocks are weaker with the European Stoxx down -0.35% and Sep S&Ps down -2.40 points. Treasuries are stronger while the dollar index slipped to a 3-1/2 month low, which help push crude oil up to a 3-month high. US stocks slid as earnings results from Procter & Gamble and Dow Chemical missed analysts' estimates, while European stocks fluctuated between slight gains and losses as declines in media companies offset better-than-expected results at Bayerische Motoren Werke AG. ITV Plc fell 2.2% after the UK's biggest commercial broadcaster said the outlook for advertising in Q4 and into 2011 is "uncertain," while BMW jumped 4.3% and led automakers higher after it reported Q2 net income of 831 million euros, beating analysts' estimates of 546 million euros and posting its biggest quarterly profit in 2-1/2 years. The euro rose to a 3-month high against the dollar after the 3-month dollar Libor rate fell to a 2-1/2 month low of 0.435% along with speculation that the Fed may resume its quantitative easing program of buying bonds. Citigroup Private Banking cut its rating on US stocks to "underweight" from "neutral" and raised its rating on European stocks to "overweight" from "neutral," citing attractive valuations in Europe.

The Asian markets today closed mixed with Japan up +1.29%, Hong Kong +0.21%, China -1.76%, Taiwan +0.58%, Australia +0.66%, Singapore -0.34%, South Korea +0.50%, India +0.19%. Better-than-expected July manufacturing data out of the US and the Euro-Zone helped to boost Asian stock prices, while comments from Fed Chairman Bernanke that rising US wages would spur consumer spending helped ease concern that the US economy would slump. Asian technology stocks gained after the Semiconductor Industry Association said global sales in the first half of this year were "exceptionally robust" and rose more than 50% from a year earlier to $144.6 billion, driven by "strong demand" from end-markets, while some Japanese exporters weakened after the yen rose to an 8-month high against the dollar. Undercutting Asian stock prices was the downgrade made by Citigroup Private Bank on Asian stocks to "underweight" from "neutral" on concern the global economy will falter. Australian stocks rose after the RBA kept its overnight cash rate target at 4.5% for a third month as expected as RBA Governor Stevens said that "with growth likely close to trend, inflation close to target and the global outlook remaining somewhat uncertain, the board judged this setting of monetary policy to be appropriate."

Barchart.com U.S. Morning Call for Monday, August 2, 2010

Overnight Developments

European stocks are trading higher with the European Stoxx up +2.13% and Sep S&Ps are up +13.20 points. The dollar index weakened to a 3-month low while commodities gained with copper at a 2-3/4 month high and crude oil at a 1-month high. Manufacturing activity in Europe was stronger-than-expected in July after the July Euro-Zone PMI manufacturing index was unexpectedly revised up +0.2 to 56.7. European bank stocks are leading financial shares higher with BNP Paribas up 4.6% after it reported Q2 earnings of 2.11 billion euros ($2.76 billion), higher than analysts' estimates of 1.61 billion euros, and said bad-loan provisions fell to their lowest level since before Lehman Brothers Holdings 2008 bankruptcy, while HSBC is up 5.6% after Europe's biggest bank reported first-half pretax profit of $11.1 billion, higher than analysts' estimates of $8.8 billion, as its bad-debt provisions dropped by 46%.

The Asian markets today closed higher with Japan up +0.35%, Hong Kong +1.82%, China +1.69%, Taiwan +1.95%, Australia +1.07%, Singapore +1.25%, South Korea +!.30%, India +1.19%. China's Shanghai Stock Index rose to a 2-month high on speculation that the PBOC may delay raising interest rates and the government may do more to aid growth by year-end after China's July manufacturing data fell to its weakest level in more than a year. The July HSBC China manufacturing PMI declined -1.0 to 49.4 while a separate, government-backed July manufacturing PMI fell -0.9 to 51.2 as the government clamped down on property speculation. Australian stocks closed higher after the July Australia manufacturing PMI rose 1.5 to 54.4, its seventh consecutive month of expansion, and Japanese stocks finished stronger after Honda Motor rallied 4% when it raised its full-year profit forecast by 34% as global vehicle demand strengthened.

Barchart.com U.S. Morning Call for Friday, July 30, 2010

Overnight Developments

European stocks are trading mildly lower with the European Stoxx 50 down -0.28%. Sep S&Ps are down 4.80 points (-0.44%). S&Ps are on edge ahead of this morning's Q2 GDP report (expected +2.6%). There is also some caution ahead of Sunday's expected release of China's purchasing managers index due to talk of a sharply weaker figure. The market consensus is for a moderate 0.7 point decline to 51.4 from 52.1 in June. The Eurozone July CPI rose to a 20-month high of +1.7% y/y from +1.4% y/y in June, which was in line with market expectations. However, the core CPI rose to only +0.9% y/y from +0.8% y/y in June. Meanwhile, the Eurozone June unmeployment rate remained at 10%, the highest level in almost 12 years. The IMF said today that US banks may need as much as $76 billion more in capital. A senior executive from Moody's said that Spain, already on review for a possible downgrade, will probably lose its Aaa rating. Spain has already lost its triple-A rating from S&P and Fitch. The Moody's executive also said that the U.S. needs a "clear plan" for tackling its deficit.

The Asian markets today closed lower across the board: Japan -1.64%, Hong Kong -0.30%, China -0.32%, Taiwan -0.49%, Australia -0.68%, Singapore -0.33%, South Korea -0.83%, Bombay -0.69%. Asian markets were undercut by the report that Japan's June unemployment rate rose to a 7-month high of 5.3%, which was higher than the consensus of 5.2%. In addition, Japan's factory output fell 1.5% m/m versus the consensus for a +0.2% rise.

Barchart.com U.S. Morning Call for Thursday, July 29, 2010

Overnight Developments

European stocks are higher with the European Stoxx 50 up 0.55% after hitting a 3-month high. Sep S&Ps are up 5.70 points (+0.52%). European stocks received support from positive earnings reports from AstraZeneca and Volkswagen and from positive confidence and employment reports. The European Commission's business and consumer confidence index rose to a 2-1/3 year high of 101.3 from 99 in June. Meanwhile, Germany unemployment fell by 20,000 to 3.21 million, which was the lowest level in 1-1/2 years and was the 13th consecutive monthly decline. The Germany unemployment rate fell to 7.6% from 7.7%. French Finance Minister Christine Lagarde today said she expects a "serious pickup" in global growth in 2011, "if only because global trade has significantly improved." UBS upgraded European stocks to "neutral" from "underweight," cut U.S. stocks to "neutral," and cut Japanese stocks to "underweight."

The Asian markets today closed mixed: Japan -0.59%, Hong Kong +0.01%, China +0.50%, Taiwan +0.18%, Australia -0.13%, Singapore +0.41%, South Korea -0.17%, Bombay +0.19%. Asian stocks were undercut by Wednesday's U.S. Beige Book report, which suggested lackluster U.S. demand for Asian exports. Panasonic fell 7.7% today after news that the company would offer stock to help it purchase full control of its Sanyo Electric and Panasonic Electric Works units.

Barchart.com U.S. Morning Call for Wednesday, July 28, 2010

Overnight Developments

European stocks are little changed this morning with the European Stocks 50 up 0.12%. Sep S&Ps are slightly lower by 0.80 points. Some long liquidation pressures have emerged after the week-long rally. In addition, the market remains concerned about weak economic growth. An oil tanker owned by Mitsui O.S.K Lines Ltd suffered an explosion that "may have been caused by an external attack" near the Straights of Hormuz, a key area through which 40% of all the world's transported oil passes. The focus was on a possible pirate attack although pirates have not attacked in that area before. There was no indication that Iran may have been involved, although Iran is being closely watched as UN members progressively implement the new round of sanctions.

The Asian markets today closed higher nearly across the board: Japan +2.70%, Hong Kong +0.56%, China +2.43%, Taiwan +0.47%, Australia +0.72%, Singapore +0.20%, South Korea +0.19%, Bombay -0.67%. Canon rallied 5.7% after a better-than-expected earnings report and an upgrade to "overweight" from JPMorgan Chase. Chinese industrial companies were boosted today by the report from China's statistics bureau of a 72% surge in first-half earnings for Chinese industrial companies.

Barchart.com U.S. Morning Call for Tuesday, July 27, 2010

Overnight Developments

European stocks this morning are trading with solid gains with the European Stoxx 50 up 1.04%. Sep S&Ps are up 6.20 points (+0.56%). European stocks have been boosted by the continued decline in bank risk and a sharp 9% rally in UBS due to a favorable earnings report. The Markit iTraxx Financial Index of credit default swaps for 25 banks and insurers fell for the 6th day by 6.5 bp to hit a 3-month low of 111 bp. Deutsche Bank rallied by 3.5% after also reporting stronger than expected earnings today. The European stock markets were also encouraged by the fact that Hungary was able to sell $228 million in 3-month T-bills despite the recent financial turmoil in Hungary and the forint rallied by 0.8%. In another favorable US earnings report, Du Pont reported Q2 EPS of $1.17 that was well above the analyst consensus of 94 cents and raised its full-year 2010 EPS guidance to $2.90-$3.05 from $2.50-$2.70.

The Asian markets today closed mixed: Japan -0.07%, Hong Kong +0.64%, China -0.55%, Taiwan -0.51%, Australia +0.25%, Singapore +0.42%, South Korea +0.03%, Bombay +0.32%. India's central bank today raised its reverse repo rate by 50 bp to 4.50% and its repo rate by 25 bp to 5.75% in order to address inflation concerns. The central bank raised its India GDP forecast to 8.5% from 8.0% and its wholesale price inflation forecast to 6.0% from 5.5% for the year through March.

Barchart.com U.S. Morning Call for Monday, July 26, 2010

Overnight Developments

Global stocks are mixed with Asian stocks today closing mildly higher but with European and US stocks slightly lower. The European DJ Stoxx 50 this morning is down -0.21% and Sep S&Ps are down 2.00 points. European stocks received underlying support today from the report early last Friday afternoon that that only 7 of 91 European banks failed the stress tests. The Markit iTraxx Financial Index of credit default swaps on 25 European banks and insurers today fell 3.25 bp to a 2-1/2 month low 129.25 bp, the fifth consecutive daily decline, indicating that the European debt crisis continues to ebb. However, the theme of slower global growth was highlight today after Stephen Roach, non-executive chairman of Morgan Stanley Asia, forecast growth economic growth in the next 3-5 years at 3.25-3.50%, well below the 4.7% average in the 5 years before the 2008 recession. Morgan Stanley said slower growth will be caused by consumer retrenchent and weaker bank lending and employment in the US and Europe, and by ebbing Chinese growth as Chinese reorients its economy away from manufacturing and exports.

The Asian markets today closed mostly higher: Japan +0.77%, Hong Kong +0.12%, China +0.64%, Taiwan +0.34%, Australia +0.62%, Singapore -0.22%, South Korea +0.60%, Bombay -0.61%. Japanese June exports rose by +27.7% y/y, which was stronger than the market consensus of +23.5% y/y. Japanese exports have grown for 7 consecutive months, but the June rise was the weakest this year, indicating that export demand may be waning. Moody's today raised India's local currency credit rating by one notch to Ba1, the highest non-investment rating. Moody's left unchanged India's Baa3 foreign currency rating. Moody's said the upgrade was tied to an improved Indian government fiscal and debt position after the government raised fuel prices and the government took in $14.5 billion from the sale of high-speed wireless permits. South Korea's Q2 GDP report grew sharply by +1.5% q/q (+6% annualized), which was stronger than the market consensus of +2.3% q/q.

Barchart.com U.S. Morning Call for Friday, July 23, 2010

Overnight Developments

Global stocks are higher with the European Euro Stoxx 50 Index up +0.30% and Sep S&Ps up +6.00 points. The dollar and Treasuries are weaker and commodities strengthened, with copper at a 2-1/4 month high and crude oil at a 3-1/2 week high. The euro rose against the dollar after German business confidence unexpectedly surged in July as exports climbed and economic growth accelerated. The Jul German IFO business climate index surged +4.4 points to a 3-year high of 106.2. Further boosting European stocks was the larger-than-expected expansion of the UK economy in the second quarter as Q2 UK GDP grew +1.1% q/q, nearly twice more than expected and the fastest rate of expansion in 4 years, with a rebound in services, manufacturing and construction igniting the recovery. On the negative side, Jun French consumer spending unexpectedly declined -1.4% m/m and -1.9% y/y and Moody's Investors Service said it would review Hungary's debt rating for possible downgrade. Ericsson AB, the world's largest maker of wireless phone networks, slumped over 4% after it reported Q2 net income of 1.88 billion kroner ($260 million), well below analysts' estimates of 3.12 billion kroner as phone companies spent less on telecommunications infrastructure. The markets will be eagerly awaiting the results from the European Union's stress tests on banks that will be released later today. According to a document from the Committee of European Banking Supervisors, regulators are scrutinizing banks to assess if they have enough capital, defined as a Tier 1 ratio of at least 6%, to withstand a recession and sovereign-debt crisis.

The Asian markets today closed higher with Japan up +2.28%, Hong Kong +1.10%, China +0.42%, Taiwan +1.24%, Ausrtalia +1.91%, Singapore +0.60%, South Korea +1.45%, India +0.10%. Asian technology stocks gained after Microsoft reported its biggest sales gain in 2-1/2 years, while mining companies and raw material producers closed higher after copper rallied to a 2-1/4 month high. The yen weakened against the dollar, which boosted most Japanese exporters, after policy makers signaled for the third straight day that a stronger yen poses a danger to growth. Cabinet Office official Tsumura said the yen, which had risen 9% since May, has been "a bit too high," while Macquarie Research said Japanese authorities are "close" to intervening in the currency market, and that the BOJ may pump additional funds into the financial system.

Barchart.com U.S. Morning Call for Thursday, July 22, 2010

Overnight Developments

Global stocks are mostly higher with the European Euro Stoxx 50 Index up +1.55% and Sep S&Ps up +12.80 points. The dollar and Treasuries are weaker and copper rose to a 1-3/4 month high as growth unexpectedly accelerated in the European manufacturing and service industries in July. The July Euro-Zone PMI composite rose +0.7 to 56.7 when the market was expecting a decline to 55.5. Also boosting European stocks was the stronger than expected UK retail sales for Jun, the unexpected increase in the July French business indicator which rose +2 points to a 2-year high of 98 and the unexpected increase in May Euro-Zone industrial new orders that climbed +3.8% m/m. Limiting gains in European stocks was the 2.7% drop in Credit Suisse AG after Switzerland's second-largest bank reported a drop in profit at its investment banking unit in Q2 as trading revenue slumped amid Europe's sovereign debt crisis, while SSAB Svenskt Staal AB, the largest supplier of high-tensile steel, slid 6.9% after it reported Q2 income of 369 million kroner ($49.9 million), below analysts' estimates of 482 million kroner.

The Asian markets today closed mixed with Japan down -0.62%, Hong Kong +0.50%, China +1.24%, Taiwan -0.45%, Australia -0.86%, Singapore +1.01%, South Korea -0.72%, India +0.76%. Japanese stocks closed lower for the fifth straight day as the Nikkei 225 Stock Index fell to a 2-week low after Fed Chairman Bernanke said the US economic outlook remains "unusually uncertain." Most Japanese exporters declined as the yen approached a 7-month high against the dollar, while Nintendo, the world's biggest portable video-game maker that gets 80% of its revenue overseas, slipped 1.3% after Citigroup cut its rating on the stock to "hold" from "buy." Citigroup also cut its outlook for China's 2010 economic expansion to 9.5% from 10.5% after China's economy showed signs of slowing at the end of Q2. Citigroup also cut its 2011 growth estimate for China to 8.8%, lower than last month's forecast of 9.3%.

Barchart.com U.S. Morning Call for Wednesday, July 21, 2010

Overnight Developments

Global stocks are mixed with the European Euro Stoxx 50 Index up +1.49% and Sep S&Ps up +3.20 points. Better-than-expected earnings results from several companies have pushed stock prices higher. Apple is up 3.5% after it forecast Q4 sales that topped analysts' estimates and reported Q3 revenue and profit that also exceeded expectations, while ARM Holdings Plc, the UK designer of semiconductors used in Apple products, gained 2.7%. Fiat surged 6.6% after Italy's biggest automaker returned to profit in Q2 on higher sales of trucks and agricultural machines and said it may raise its forecast later this year. Accor rallied 5.1% after Europe's largest hotel company reported Q2 revenue of 1.72 billion euros, beating analysts' estimates of 1.64 billion euros. Limiting gains in US and European stocks is the 5.6% drop in Yahoo! which reported Q2 sales that missed analysts' estimates and the 4.1% decline in Roche Holding AG after scientific advisers to the FDA voted 12 to 1 to rescind Roche's drug Avastin's clearance in treatments of breast cancer.

The Asian markets today closed mixed with Japan down -0.23%, Hong Kong +1.10%, China +0.21%, Taiwan -0.14%, Australia +0.21%, Singapore -0.76%, South Korea +0.90%, India +0.55%. Asian technology stocks rose, boosted by Apple's better-than-estimated earnings, while Japanese exporters weakened due to a stronger yen. Japanese stocks also weakened after the BOJ's quarterly loan-demand index slid to -17 in July, matching its lowest level since July 2004 and its fifth consecutive decline. According to an article in the Japanese newspaper Asahi, China's central bank adviser Zhou Qiren said that China will let the yuan weaken if exports fall sharply and that the fixed exchange rate should have ended earlier because central bank sales of yuan to maintain it resulted in an excessive amount of money entering China's financial system, fueling an overheating of the economy. Yuan forwards fell today to their weakest level this month on concern a slowing economy and an uncertain outlook for exports will prompt the PBOC to limit the yuan's strength.

Barchart.com U.S. Morning Call for Tuesday, July 20, 2010

Overnight Developments

Global stocks are mixed with the European Euro Stoxx 50 Index down -0.45% and Sep S&Ps down -7.30 points. US Stock futures retreated and led European shares lower after IBM and Texas Instruments reported revenue that missed analysts' estimates. Treasuries and the dollar are higher as the drop in stocks prompts an increase in safe-haven demand. Spain sold 6 billion euros ($7.8 billion) of Treasury bills, the maximum target for the auction, which pushed down the borrowing costs due to the increase in demand. Spain, which has to repay 24.7 billion euros of debt this month, has the third-largest deficit in the Euro-Zone and many of its banks are dependent on the ECB for funds. Greece sold 1.95 billion euros ($2.53 billion) of 13-week Treasury bills with a bid-to-cover ratio of 3.85, higher than last week's 3.64, which shows strong demand and indicates an increase in investor confidence towards Greek government debt. Hungary, however, raised less than planned in a debt sale for a fourth time since June, which sent its borrowing costs soaring to a 19-week high and reignited concern about the ability to tame its budget deficit as the economy slows.

The Asian markets today closed mixed with Japan down -1.15%, Hong Kong +0.86%, China +2.20%, Taiwan +0.81%, Australia +1.04%, Singapore +0.11%, South Korea +0.23%, India -0.28%. China's Shanghai Stock Index closed higher after the International Strategy & Investment Group said China would relax polices that were aimed at curbing its housing industry as the economy faces a bigger risk from a slowdown than inflation. At a briefing in Beijing, China's Commerce Ministry said that China's domestic consumption will become the most important element of the nation's economic growth in the future and that domestic consumption in the second half of this year will continue to grow at a relatively fast pace. Japanese stocks fell, led by declines in semiconductor-related stocks, after Texas Instruments reported disappointing profit and sales, while automakers and electronics companies also closed lower fell on concern demand from the US may falter after US home-builder confidence sank to a 16-month low.

Barchart.com U.S. Morning Call for Monday, July 19, 2010

Overnight Developments

Global stocks are mixed with the European Euro Stoxx 50 Index up +0.45% and Sep S&Ps up +5.70 points. The euro and Treasuries are little changed despite the action by Moody's Investors Service to downgrade Ireland's credit rating one notch to Aa2 from Aa1, citing the government's "gradual but significant loss of financial strength." European stocks and the euro also saw little reaction after the cost to insure debt payments from Hungary surged and the forint tumbled 2.6% against the euro when deficit-reduction talks with the IMF broke down. Credit-default swaps on Hungarian government debt jumped 45.5 bp to a 5-week high of 362 bp after the IMF and European Union declined to endorse Prime Minister Orban's plans to control the budget deficit as part of a 20 billion-euro ($25.8 billion) emergency bailout because "a range of issues remain open." The EU said that Hungary's government must make "tough decisions, notably on spending," to comply with deficit requirements. M&A activity boosted European stock prices after International power and GDF Suez climbed after GDF Suez, operator of Europe's largest natural-gas network, said it's in preliminary talks to combine some of its assets with International Power, creating an enlarged company majority-owned by GDF. Tomkins rallied 34% after Onex Corp., Canada's biggest publicly traded buyout firm, and the Canada Pension Plan Investment Board signaled they might bid 2.9 billion pounds ($4.4 billion) for Tomkins.

The Asian markets today closed mostly lower with Japan closed for holiday, Hong Kong down -0.79%, China +2.54%, Taiwan -0.19%, Australia -1.46%, Singapore -0.42%, South Korea -0.45%, India -0.15%. Asian stocks were undercut as concern deepened that the global economic recovery is faltering which may hurt exports and curb demand for Asian goods after US July University of Michigan consumer confidence tumbled to an 11-month low. The China Securities Journal said a report from the State Information Center said that China's export growth might slow over the rest of the year to less than half the pace of the first six months. The report states that China's exports between July-through-December may rise only +16.3% from a year earlier, slowing from the +35% y/y increase in the first half as the removal of tax rebates, weaker demand because of Europe's debt crisis, and comparisons with higher base levels leads to smaller increases. Still, the report predicts that China's exports for the full year of 2010 will climb 24.5% compared with a -16% decline in 2009.

Barchart.com U.S. Morning Call for Friday, July 16, 2010

Overnight Developments

Global stocks are mixed with the European Euro Stoxx 50 Index up +0.33 % and Sep S&Ps up +3.70 points. US and European shares are fluctuating between small gains and losses as disappointing earnings from Google offset gains in BP Plc and Goldman Sachs. BP is 4% higher after the company said late yesterday that oil has stopped flowing into the Gulf of Mexico from its damaged Macando well and Goldman Sachs is 5% higher in European trading after the firm agreed to pay $550 million to settle with US regulators that it misled investors in collateralized debt obligations linked to subprime mortgages. Google is trading down 3.7% after it reported Q2 profit of $6.45 a share, weaker than analysts' estimates of $6.52 as expenses surged 22% to $4.46 billion during the quarter, higher than an 18% increase in Q1. Weakness in German utility companies is also undercutting European share prices after the Handelsblatt newspaper reported that Germany's planned tax on utilities that run nuclear power plants would levy a tax of 220 euros ($284) per gram of plutonium or uranium when a reactor is refueled. The euro rallied to a 2-month high against the dollar after May Euro-Zone exports rose 1.6% from April, indicating a revival in global demand will help boost Q2 Euro-Zone growth and that the weaker euro is helping export competitiveness.

The Asian markets today closed mixed with Japan down -2.86%, Hong Kong -0.03%, China +0.29%, Taiwan -0.52%, Australia -0.45%, Singapore +0.48%, South Korea -0.90%, India +0.26%. Japanese stocks weakened after the May Japan tertiary index, which shows demand for services and captures 63% of the economy, fell -0.9% from April and adds to signs that Japan's economy has started to cool as the effects of government incentives for cars and home appliances fades. Asian technology stocks fell after Google missed earnings estimates and Japanese exporters and automakers closed lower after the yen rallied to a 2-week high against the dollar. Asian material and energy stocks also declined as signs of a slowing economy dimmed the outlook for global commodity prices.

Barchart.com U.S. Morning Call for Thursday, July 15, 2010

Overnight Developments

Global stocks are mixed with the European Euro Stoxx 50 Index up +0.35% and Sep S&Ps up +4.20 points. European stocks gyrated on either side of unchanged with the Fed's assessment that the economic outlook has "softened" offset by a Spanish bond sale that drew increased demand and stellar earnings from JPMorgan Chase. The euro rallied to a 2-month high against the dollar after Spain sold 3 billion euros ($3.8 billion) of 15-year bonds with a bid-to-cover ratio of 2.57, higher than the 1.79 bid-to-cover ratio at a bond sale in April, which eases concern that Spain will struggle to cover debt payments. Weaker than expected Q2 GDP growth in China led European mining companies and raw material producers lower on concern that demand from China will weaken. Helping to keep stocks in positive territory was a rally in Greek bank stocks when Piraeus Bank, Greece's fourth-largest lender, offered to buy government stakes in 2 banks after Finance Minister Papaconstantinou urged the country's lenders to merge. Piraeus Bank offered to purchase 77% of Agricultural Bank of Greece SA and 33% of Hellenic Postbank SA, making the combined bank Greece's biggest.

The Asian markets today closed lower with Japan down -1.12%, Hong Kong -1.48%, China -1.70%, Taiwan -0.13%, Australia -0.44%, Singapore -0.31%, South Korea -0.38%, India -0.16%. Asian stocks weakened after China's Q2 GDP eased more-than-expected to 10.3% from 11.9% growth in Q1, and Jun China industrial production also slowed more than expected, up +13.7% y/y from a +16.5% y/y increase in May, which decreases the risk of economic overheating and signals a deeper second-half slowdown. After the reports, JPMorgan Chase cut its full-year growth estimate for China to 10.0% from a prior estimate of 10.8%. On the positive side, China's June CPI slipped to 2.9% y/y from a 3.1% y/y increase in May, which was the fastest pace of inflation in 19 months. Following the conclusion of its 2-day meeting today the BOJ kept interest rates unchanged as expected and predicted growth will slow next year as fiscal stimulus evaporates worldwide and overseas demand weakens. The BOJ raised its growth estimate for the year ending Mar 2011 to 2.6% from 1.8% estimated in April, while cutting next year's growth estimate to 1.9% from 2.0%.

Barchart.com U.S. Morning Call for Wednesday, July 14, 2010

Overnight Developments

Global stocks are mixed with the European Euro Stoxx 50 Index down -0.48% and Sep S&Ps up +1.80 points. US stock futures rose to a 2-week high after Intel, the world's biggest chipmaker, reported better-than-expected earnings late yesterday and boosted its profit forecast for the year to a record. Intel's rally led a surge in global technology stocks with STMicroelectronics NV and Infineon Technologies AG, Europe's biggest chipmakers, climbing more than 2% and ASML Holding NV, Europe's largest manufacturer of chip technology, advancing 5.6%. European stocks failed to hold their gains however after ICAP, the biggest broker of transactions between banks, dropped 5.3% after saying, "volumes slowed significantly in June as our customers' and end investors' risk appetites reduced." Also undercutting European stocks and the euro was the smaller than expected +0.9% m/m increase in May Euro-Zone industrial production which was forecast to increase +1.2% m/m along with a report from the Bank of Spain that showed Spanish lenders borrowed a record 126.3 billion euros ($161 billion) from the ECB in June as investors shunned the nation's banks.

The Asian markets today closed mostly higher with Japan up +2.71%, Hong Kong +0.64%, China +0.72%, Taiwan +1.54%, Australia +1.87%, Singapore +0.82%, South Korea +1.38%, India -0.27%. Intel's earnings report boosted Asian technology stocks with Samsung Electronics, Asia's biggest semiconductor maker, advancing 2.6% and Advantest, the world's largest maker of chip-testing equipment, gaining 5.9%. Japanese stocks also received a boost after Komatsu Ltd., the world's second-largest maker of construction equipment, gained 5.5% after raising its first-half net income forecast by 41% to 52 billion yen on rising demand from Asia and Latin America. Singapore raised its 2010 economic growth forecast saying its economy will grow between 13% and 15% this year after it reported that growth in the first half of this year accelerated to a record 18.1% pace as casinos spurred tourism. Fitch Ratings claims that Chinese bank lending in the first half was 28% higher than official numbers suggest as more loans were repackaged into investment products, "distorting" credit data. Fitch said after adjusting for "informal securitization," new loans stood at about 5.9 trillion yuan ($871 billion) in the first six months, more than the PBOC's data that show new loans of 4.6 trillion yuan.

Barchart.com U.S. Morning Call for Tuesday, July 13, 2010

Overnight Developments

Global stocks are mixed with the European Euro Stoxx 50 Index up +1.47% and Sep S&Ps up +5.80 points. Better than expected earnings from Alcoa boosted US and European stocks to 2-week highs despite weakness in the euro after the action by Moody's Investors Service to cut Portugal's credit rating two notches to A1 because of a growing debt burden and "weak" economic growth prospects. The euro remained under pressure after the July German ZEW economic sentiment fell a more than expected -7.5 to a 15-month low of 21.2 as Europe's debt crisis threatens to cripple economic growth and banks undergo stress tests to prove their durability. Helping to keep European stocks in positive territory was the action by Greece to sell 1.625 billion euros ($2.1 billion) of 26-week T-bills at 4.65%, below the 5.00% rate charged by the European Union for its bailout package, easing concern about its budget deficit and reviving confidence in the Greek government's austerity measures. BMW jumped 6.6% and led automakers higher after it forecast 2010 sales volume will rise by about 10% to more than 1,4 million units, with a full-year profit margin of more than 5% expected for the automobilies segment.

The Asian markets today closed mostly lower with Japan down -0.11%, Hong Kong -0.18%, China -1.56%, Taiwan -0.55%, Australia -0.67%, Singapore +0.12%, South Korea +0.12%, India +0.27%. Chinese stocks fell and led other Asian stock markets lower after the government quashed speculation that it will ease real estate curbs that drove property prices lower for the first time in 16 months. Chinese banks and property developers led declines after the government said it will "strictly" enforce housing policies to prevent speculative real estate investment. Also pressuring Asian stocks was the 3.6% fall in Infosys after India's second-largest software services provider reported Q2 net income of 14.9 billion rupees ($318.5 million), below analysts' estimates of 15.6 billion rupees.

Barchart.com U.S. Morning Call for Monday, July 12, 2010

Overnight Developments

Global stocks are mixed with the European Euro Stoxx 50 Index down -0.04% and Sep S&Ps down -3.50 points. The dollar and Treasuries are stronger and most commodities are weaker. European stocks fluctuated between slight gains and losses ahead of Q2 earnings season, which officially begins when Alcoa reports its earnings results after the close of today's trading. European bank stocks are weak, led by a 3.2% decline in Allied Irish Banks Plc, as European finance ministers meeting in Brussels today are under pressure to disclose more about the stress tests being conducted on banks to see whether they could withstand losses if the region's debt crisis worsens. Limiting losses is the 6.7% jump in BP Plc after the Sunday Times reported that Exxon Mobile may bid for the company along with reports that BP is selling assets in Alaska, while Volkswagen AG climbed 1.9% after the biggest foreign carmaker in China boosted sales +46% y/y in the first half of this year in the world's largest vehicle market after introducing new models to attract customers.

The Asian markets today closed mixed with Japan down -0.37%, Hong Kong +0.44%, China +1.10%, Taiwan -0.10%, Australia +0.31%, Singapore +0.28%, South Korea +0.63%, India +0.58%. Japanese banks closed lower and led losses in stock prices after the Democratic Part of Japan won only 44 seats in the upper house, 12 short of majority, making it unlikely Prime Minister Kan will be able to reduce the world's largest public debt. The yen weakened to a 2-week low against the dollar after Standard & Poor's said Kan's defeat is "potentially negative" for Japan's debt rating because of legislative gridlock. The yen's weakness provided a boost to Japan's exporters, helping to limit declines. China's Shanghai Stock Index closed higher, led by gains in property developers, on speculation the government will relax curbs on mortgage lending amid a slowdown in property prices. China's June property prices declined -0.1% m/m, snapping 15 straight months of increases, while Chinese new lending in June was 603 billion yuan ($89 billion), the least in 3 months. Morgan Stanley predicts that the Chinese government may loosen this year's 7.5 trillion yuan new-lending quota for banks in Q4, when a slowdown in inflation will be "well established." Rounding out the bullish factors for Chinese stocks was the more-than-forecast 44% y/y increase in June China exports to $137 billion, which signals that global demand has withstood Europe's sovereign-debt crisis so far.

Barchart.com U.S. Morning Call for Friday, July 9, 2010

Overnight Developments

Global stocks are mostly higher with the European Euro Stoxx 50 Index up +0.45% and Sep S&Ps up +1.20 points. The dollar index is little changed, Treasuries are weaker and most commodities are higher. Rio Tinto rose 3.5% and led mining companies higher as copper rallied after LME copper inventories declined to a 7-1/4 month low. Antofagasta gained 3.4% after Citigroup raised its recommendation for the copper producer to "buy" from "hold." Also helping European stocks was the larger-than-expected +1.7% m/m increase in May French industrial production which was boosted by improving global trade and a pickup in output at car plants, while ECB President Trichet said that while the fiscal crisis isn't over, the economic signs are "encouraging."

The Asian markets today closed higher with Japan up +0.52%, Hong Kong +1.64%, China +2.76%, Taiwan +0.50%, Australia +0.91%, Singapore +0.69%, South Korea +1.66%, India +1.03%. Asian stocks were helped higher by Citigroup's prediction that emerging-market stocks will rally as much as 25% by the end of the year as the global economy avoids a "double dip" recession and attractive valuations lure investors. The South Korean won strengthened over 1% against the dollar after the Bank of Korea unexpectedly raised its 7-day repurchase rate to 2.25% from a record low 2.00%, citing a pre-emptive strike against inflation. South Korea joins India, Malaysia and Taiwan in lifting interest rates in recent weeks, signaling that Asia's expansion will remain resilient to Europe's debt crisis.

Barchart.com U.S. Morning Call for Thursday, July 8, 2010

Overnight Developments

Global stocks are mixed with the European Euro Stoxx 50 Index up +0.92% and Sep S&Ps down -1.30 points. European stocks gained and the euro strengthened to a 1-3/4 month high on speculation stress tests on European banks will show narrower losses than estimated. European bank stocks led financial shares higher after Credit Suisse Group AG raised their recommendation for lenders to "benchmark," saying European sovereign-debt risk is overstated, the financial industry is undervalued and the European Union stress tests "may be a positive catalyst." Stocks and most commodities also received a boost after the IMF raised its estimate for global economic growth. The IMF now estimates the world economy will expand 4.6% this year; the biggest increase since 2007, from an April forecast of 4.2% after a stronger-than-expected first half. The IMF warned however, "recent turbulence in financial markets, reflecting a drop in confidence about fiscal sustainability, policy responses, and future growth prospects, has cast a cloud over the outlook." As expected, the BOE kept its benchmark interest rate unchanged at 0.50% and kept its asset purchase target unchanged at 200 billion pounds.

The Asian markets today closed mostly higher with Japan up +2.76%, Hong Kong +0.97%, China -0.18%, Taiwan +0.99%, Australia +2.40%, Singapore +1.26%, South Korea +1.53%, India +1.03%. Japanese exporters rallied as the yen fell against the dollar and after the ICSC said that US retail sales in June grew at the fastest pace in 4 years, easing concern that growth in the world's biggest economy is faltering. NEC Corp., Japan's largest personal computer maker, led gains in Asian technology stocks after it jumped 2.6% when it said it aims to double its share of the world's supercomputer market in the next 4 years. Australian job growth in Jun rose a more-than-expected 45,900, boosting stocks and the Australian dollar, and heightening odds that the RBA will have to resume raising interest rates. Australia's jobless rate held steady in June at 5.1%, marking the first time it's below Japan's jobless rate since at least 1978. China's Shanghai Stock Index closed lower, led by industrial companies and energy producers, as concern the government will step up tightening measures overshadowed rising earnings. Energy producers were undercut after the government said it would extend a resource tax to the entire nation, while industrial companies weakened after UBS AG said that China will "intensify" enforcement on land policies.

Barchart.com U.S. Morning Call for Wednesday, July 7, 2010

Overnight Developments

Global stocks are mostly lower with the European Euro Stoxx 50 Index down -0.70% and Sep S&Ps down -2.80 points. The dollar and Treasuries are stronger and most commodities are weaker as stocks give back some of Tuesday's gains. The 10-year Spanish bond yield rose 6 bp after the Bank of Spain said the cost of recapitalizing and reorganizing savings banks would represent 1.5% of the economy. The yield premium investors demand to hold Spanish 10-year bonds instead of benchmark German debt widened 8 bp to 216 bp. Also adding to downside pressure in European stocks was the unexpected -0.5% m/m decline in May German factory orders, their first drop in the last 5 months, as demand for German goods weakened. CRH sank 10% and led construction and building companies lower after the world's second-largest maker and distributor of building materials said first-half earnings before interest, taxes, depreciation and amortization probably fell about 20%, with sales sliding 10%. Marks & Spencer slipped 3.8% even after the UK's largest clothing retailer reported Q1 sales growth of 3.6%, beating analysts' estimates, after it said a proposed increase in the UK value-added tax and other measures to curb the country's deficit are likely to dampen consumer confidence.

The Asian markets today closed mostly lower with Japan down -0.63%, Hong Kong -1.13%, China +0.69%, Taiwan -0.19%, Australia -0.50%, Singapore -0.24%, South Korea -0.76%, India -0.81%. Most Asian stocks retreated after yesterday's weaker-than-expected Jun ISM non-manufacturing index increased concern that the global recovery will weaken. Japan's Nikkei 225 Stock Index declined, led by losses in Honda Motor and Sony, while Hong Kong's Hang Seng Index retreated after the head of the National Bureau of Statistics said in the bureau's newspaper today that China's economy faces increasing uncertainties and the economic situation is becoming more complex. The manager of China's foreign exchange reserves said the US bond market is important and changes in holdings of Treausuries "shouldn't be politicized." The State Administration of Foreign Exchange (SAFE) also said on its website that concern China might consider using the "nuclear" option of dumping its Treasury holdings is "completely unnecessary." Australia's Jun building industry index fell -6.8 points to 46.4, its first contraction in 10 months, and a sign that interest rate increases by the RBA are eroding demand for new dwellings.

Barchart.com U.S. Morning Call for Tuesday, July 6, 2010

Overnight Developments

Global stocks are higher with the European Euro Stoxx 50 Index up +2.34% and Sep S&Ps up +11.00 points. Speculation that stock valuations have become attractive is boosting global stocks today after the recent decline in equity prices may have overrun the outlook for company earnings. Analysts are projecting profit for S&P 500 companies will climb 34% in 2010 compared with a 27% projected gain on March 29. The revision, the most during any quarter in at least 6 years, comes as stocks posted their biggest losses in 16 months. Basis resource stocks are leading the rally today in European stocks as rising commodities boosts share prices. BHP Billiton, the world's biggest mining company, gained 4% and Rio Tinto rose 4.8%. BP rallied 3.7% after RBS upgraded the company to "buy" from "hold," saying the "pessimistic view on the probable costs of Macondo oil spill is currently discounted" in the share price.

The Asian markets today closed higher with Japan up +0.77%, Hong Kong +1.22%, China +2.00%, Taiwan +!.46%, Australia +1.28%, Singapore +0.84%, South Korea +0.76%, India +0.99%. The Australian dollar and financial stocks rallied today after Australia's central bank paused in raising borrowing costs for a second month. RBA Governor Stevens kept the overnight cash rate at 4.5% and said "caution in financial markets has been evident in the past couple of months, driven principally by concerns about European sovereigns and banks but also by some uncertainty about the pace of future global growth." China's Shanghai Stock Index rallied off of a 15-month low to close higher and provided support for gains in other Asian stock markets. Technology shares gained after Taiwan Semiconductor Manufacturing, the world's largest contract manufacturer of chips, increased 2.6% after JPMorgan Chase maintained its "overweight" rating on the company, while Elpida Memory advanced 4.5% after the world's third-biggest maker of computer-memory chips said it plans to cut debt and "seek opportunities including acquisitions" as a recovery in computer sales boosts profits.

Barchart.com U.S. Morning Call for Friday, July 2, 2010

Overnight Developments

Global stocks are mostly higher with the European Euro Stoxx 50 Index up +0.17% and Sep S&Ps up +0.60 of a point. The dollar and Treasuries are weaker and most commodities are higher as the markets square positions ahead of this morning's Jun US payrolls report. The European Union's statistics office today said that the May Euro-Zone unemployment rate remained at 10.0%, its highest level in nearly 12 years, after the April figure was revised down from a previously reported 10.1%. European automakers led stocks higher as Daimler AG rose 1.7% after it reported a 25% jump y/y in June US car sales and BMW gained 1.1% after it reported a 12% increase in June US car sales. Deutsche Boerse AG, the operator of the Frankfurt stock exchange, climbed 3% after Morgan Stanley upgraded the stock to "overweight" from "equal weight," saying that exchanges are "starting to look more attractive given lower balance sheet risks compared with banks and strong, volatility-driven volumes." Steel makers also advanced led by a 2.3% jump in ThyssenKrupp AG after Goldman Sachs Group upgraded Germany's largest steelmaker to "buy" from "neutral," saying "recent volatility in the equity markets has driven steel valuations to low levels."

The Asian markets today closed mostly higher with Japan up +0.13%, Hong Kong -1.11%, China +0.32%, Taiwan +1.06%, Australia +0.03%, Singapore +0.85%, South Korea -0.75%, India -0.28%. Currencies of commodity-producing countries strengthened and mining stocks rallied after Australia reached a compromise on a new resource tax. Australian Prime Minister Gillard agreed to exempt most commodities from the tax, cut the planned tax on mining profits to 30% from 40% on coal and iron ore earnings and to raise the levy's trigger level. Japanese exporters closed slightly higher after the yen fell back from a 7-month high against the dollar, although most shipping companies weakened after the Baltic Dry Index of shipping costs for commodities fell for a 25th consecutive session, its longest losing streak since Aug 2005. Goldman Sachs Group cut its growth forecast for China for this year to 10.1% from 11.4%, saying that government restrictions on lending and real estate will slow expansion in the world's fastest-growing major economy.

Barchart.com U.S. Morning Call for Thursday, July 1, 2010

Overnight Developments

Global stocks are lower with the European Euro Stoxx 50 Index down -1.04% and Sep S&Ps down -1.00 point. A bigger than expected slowdown in Chinese manufacturing along with Spain's deteriorating creditworthiness fanned concern that the global economic recovery is faltering and kept stock prices on the defensive. Weaker-than-expected demand at a Spanish auction of 3.5 billion euros ($4.3 billion) of 5-year notes heightened sovereign-debt worries, with credit-default swaps tied to Spain's debt climbing 10 bp to 273.6. Spanish bank stocks sold-off and led European bank stocks lower and mining stocks tumbled as well after metal prices slumped. The euro gained as the ECB said it will lend 111.2 billion euros ($136.5 billion) to banks in 6-day loans to help them cope with the expiry of its 12-month loans in which banks needed to repay 442 billion euros worth of debt by today.

The Asian markets today closed lower with Japan down -2.04%, Homg Kong closed for holiday, China -1.44%, Taiwan -1.03%, Australia -1.49%, Singapore -0.53%, South Korea -1.00%, India -1.08%. China's Shanghai Stock Index tumbled to a 14-1/2 month low after China's manufacturing expanded at a slower pace for a second month in June, adding to signs that its economy is moderating. The Jun China purchasing mangers' index fell -1.8 to 52.1, a bigger drop than the -0.7 drop the market was expecting. Japan's Nikkei 225 Stock Index fell to a 7-month low despite the Q2 Japan Tankan large manufacturers index climbing to a 2-year high. Most Asian exporters closed lower on concern European demand for their goods may wane after Moody's Investors Service warned that it may cut Spain's top credit rating, while concerns that a global economic slowdown is deepening sent shipping companies lower after the Baltic Dry Index, which measures the cost of transporting commodities, sank 1.7% and extended its 24-day slump to a whopping 43%.

Barchart.com U.S. Morning Call for Wednesday, June 30, 2010

Overnight Developments

Global stocks are mixed with the European Euro Stoxx 50 Index up +0.64% and Sep S&Ps up +7.40 points. The dollar and Treasuries are weaker and most commodities are higher as the euro strengthened after ECB figures suggested reduced funding pressure for European banks. The ECB said it would lend banks 131.9 billion euros ($161.5 billion) for 3 months, less than some market estimates of 250 to 300 billion euros. Banks on July 1 need to repay 442 billion euros in 12-month funds, the biggest amount ever awarded by the ECB, and a main cog in its extraordinary liquidity measures designed to fight the financial crisis last year. The weaker-than-expected demand suggests that funding pressures for European banks aren't as bad as originally feared and helped push the euro higher and send European bank stocks soaring. AstraZeneca Plc, the UK's second-biggest drug maker, climbed 9.7% after winning a US court ruling that will help prevent the sale of generic copies of its cholesterol medicine Crestor until 2016, while Portugal Telecom SGPS SA jumped 5.8% after Telefonica SA increased its offer for the Portuguese company's stake in Brazil's largest mobile-phone operator.

The Asian markets today closed mostly lower with Japan down -1.96%, Hong Kong -0.59%, China -1.12%, Taiwan -1.27%, Australia -1.02%, Singapore +0.18%, South Korea -0.76%, India +0.95%. Most Asian stock markets declined, with Chinese stocks falling to a 14-month low, as Asian markets play catch up to yesterday's global equity market rout that was extended by weaker-than-expected US Jun consumer confidence that's spurring concern about a slowdown in US economic growth. Most Asian exporters closed lower on concerns demand will weaken for their goods if the US economy slows and Japan's Nikkei 225 Stock Index tumbled to a 7-month low after Japan's wages unexpectedly declined in May. May Japan labor cash earnings dropped -0.2% y/y when the market was expecting a +0.8% y/y increase, eroding prospects for acceleration in domestic demand and deepening concern that the global economic recovery will slow.

Overnight U.S. Stock News

Sep S&Ps this morning are trading up +7.40 points. The US stock market yesterday opened lower and continued lower throughout the day and finished with sharp losses (Dow Jones -2.65%, S&P 500 -3.10%, Nasdaq Composite -3.85%). The S&P 500 plunged to a 7-3/4 month low, the Dow Jones fell to 3-week lows while the Nasdaq slid to a 1-3/4 month low. Bearish factors included (1) carry-over weakness from a plunge in Asian and European stock markets as industrial and commodity stocks declined on concern that China's economy is weakening after the Conference Board revised down its April gauge for the outlook of China's economy to indicate slower growth, (2) the larger-than-expected decline in Jun US consumer confidence (-9.8 to 52.9 versus expectations of -0.8 to 62.5), (3) weakness in bank stocks led by a plunge in JPMorgan Chase after Moody's Investors Service said JPMorgan Chase, Bank of America and Wells Fargo may lose $1.38 billion in annual revenue from the proposed cap on credit-card swipe fees being considered by Congress, and (4) concerns over the health of European banks after the 3-month Euribor rate rose to an 8-month high of 0.688%, signaling a lack of trust between lenders, along with concerns that European banks must refinance $540 billion in 1-year ECB loans into 3-month loans by July 1.
Bullish factors included (1) the larger-than-expected increase in the Apr S&P/CaseShiller composite-20 home price index which had its biggest year-over-year gain in 3-1/2 years (+0.4% m/m and +3.8% y/y versus expectations of -0.15% m/m and +3.4% y/y), (2) comments from President Obama who said after meeting with Fed Chairman Bernanke that he and the Fed Chairman both agree that the US economy is strengthening "into recovery," and (3) the plunge in the 10-year T-note yield to a 14-month low of 2.95%.
Citigroup (C) rose 2.1% and Bank of America (BAC) climbed 1.5% in pre-market trading on carry-over support from a rally in European bank stocks on weaker-than-expected demand for ECB funds.
Peabody Energy (BTU) increased 1.3% in pre-market trading after Deutsche Bank AG raised its recommendation on the stock to "buy" from "hold."

Barchart.com U.S. Morning Call for Tuesday, June 29, 2010

Overnight Developments

Global stocks are weaker with the European Euro Stoxx 50 Index down -1.87% and Sep S&Ps down -12.40 points. Commodities sank and the dollar and Treasuries gained on concern that growth in China, the main engine of the world's economic recovery, is slowing. The Conference Board's Apr leading economic index for China was revised down to show a 0.3% gain, far less than the 1.7% increase reported Jun 15. Mining companies took a hit on demand concerns with Rio Tinto down 4.7% and BHP Billiton losing 3.1%. A 2% drop in Vodaphone added to the negative price action in European stocks after Credit Suisse cut its recommendation on the world's largest mobile-phone company to "neutral" from "outperform." On the positive side, the Jun Euro-Zone economic confidence unexpectedly rose +0.3 to 98.7 as the drop in the euro bolstered the prospects for exports and optimism in Europe's recovery. Three people familiar with the results said that Deutsche Bank AG, Commerzbank AG and Bayerische Landesbank passed a stress test that evaluated how about 25 European lenders would handle an economic downturn. The results are based on data from April that were passed on to the Committee of European Banking Supervisors. The European Union pledged on Jun 17 to disclose the results of the tests by the end of July.

The Asian markets today closed lower with Japan down -1.27%, Hong Kong -2.31%, China -4.59%, Taiwan -1.03%, Australia -0.88%, Singapore -1.38%, South Korea -1.33%, India -1.35%. China's Shanghai Stock Index plunged to a 14-month low after the Conference Board revised down its April gauge for China's economic outlook to its smallest gain in 5 months, signaling a weaker expansion. Citigroup said in a report that China's exports face "strong headwinds" in the second half of the year from policy tightening measures and the European debt crisis, reducing prospects of a rebound in the stock market. Concerns over the prospect for growth sent commodities tumbling which undercut most Asian commodity producers, while Chinese banks fell after Moody's Investors Service said that China's banks will face a rise in bad loans caused by the real estate industry and local-government financing vehicles. Stocks in Japan also closed lower on concern that its economic recovery is stalling. The May Japan jobless rate unexpectedly rose +0.1 to 5.2% for its third straight monthly increase while the job-to-applicant ratio for May rose to 0.50, its highest level in more than a year, meaning there are 50 positions for every 100 candidates. May Japan household spending unexpectedly declined -0.7% y/y and May Japan industrial production also unexpectedly fell -0.1% m/m for its first decline since Feb. Japanese exporters were also undercut after the yen climbed to a 1-1/2 month high against the dollar.

Overnight U.S. Stock News

Sep S&Ps this morning are trading down -12.40 points. The US stock market yesterday lacked direction the entire day and finished a volatile session slightly lower (Dow Jones -0.05%, S&P 500 -0.20%, Nasdaq Composite -0.13%). Bearish factors included (1) weakness in energy producers after crude oil tumbled, (2) the warning from the Bank for International Settlements (BIS) that European banks may struggle to refinance their debt if investor sentiment remains negative, which could start another banking crisis, and (3) the prediction from Columbia University finance professor Calomiris that the recently passed US financial services overhaul legislation will result in a "hidden tax" to consumers as banks levy an estimated $19 billion in additional fees to pay for the cost of the overhaul.
Bullish factors included (1) comments from G-20 leaders after this past weekend's summit in Toronto that they will focus on spurring economic growth and reducing deficits, (2) optimism that the US recovery is strengthening after the slightly larger-than-expected increase in May personal spending (+0.2% versus expectations of +0.1%), (3) the rally in phone service and wireless infrastructure companies after President Obama proposed doubling the airwaves available for smartphones, laptop connections to the Internet and new wireless devices, (4) the recommendation by Nomura Securities to buy stocks because equities "will be supported by valuations, monetary policy and earnings upgrades," and (5) the drop in the yield on the 10-year T-note to a 14-month low of 3.03%.
Alcoa (AA) fell 1.7% in European trading on concern that metals demand from China may weaken.

Barchart.com U.S. Morning Call for Monday, June 28, 2010

Overnight Developments

Global stocks are mixed with the European Euro Stoxx 50 Index up +0.73% and Sep S&Ps up +2.90 points. The dollar is little changed and Treasuries and stock indexes are higher after the Group of 20 leaders meeting over the weekend in Toronto said they would focus on nurturing economic growth and cutting deficits. Group leaders also agreed to pursue higher capital requirements for banks once their economic recoveries gain momentum. The G-20 leaders endorsed targets to cut their deficits at least by half by 2013 and stabilize their debt-to-output ratios by 2016. Stock gains in Europe were led higher by strength in automakers when PSA Peugeot Citroen climbed 2.7% after La Lettre de L'Expansion reported that France's biggest carmaker lifted its sales target for the DS3 model to 70,000 from 45,000 and Porsche SE rose 2.3% after Bankhaus Metzler upgraded the carmaker to "buy" from "sell."

The Asian markets today closed mixed with Japan down -0.45%, Hong Kong +0.17%, China -0.71%, Taiwan +0.35%, Australia -0.65%, Singapore +0.64%, South Korea -0.04%, India +1.14%. Asian stocks were undercut after the weekend meeting of Group of 20 leaders failed to reassure investors about the strength of the global economic recovery. Speaking at the G-20 Summit in Toronto, a Chinese Ministry of Commerce director general said that his country's pledge for a more flexible yuan will slow its exports this year and add to difficulties that include the European debt crisis and rising costs. China, the world's largest exporter, is aiming to raise domestic consumption and reduce its reliance on exports for economic growth. Chinese coal companies closed lower after China's National Development and Reform Commission ordered China's coal companies to keep prices agreed to in annual supply contracts stable as the government seeks ways to manage inflation. Japanese stocks closed lower after Japan's May retail sales climbed a slower-than-expected 2.8% y/y, the slowest pace since Jan, and a sign that government incentives to purchase cars and household appliances are fading. Japan's May retail sales slumped a seasonally adjusted -2.0% m/m, the biggest drop in 5 years as automobile sales in May fell -5.9% m/m and household machinery, which includes appliances such as flat-screen TVs, tumbled -7.9% m/m in May.

Barchart.com U.S. Morning Call for Friday, June 25, 2010

Overnight Developments

Global stocks are mostly lower with the European Euro Stoxx 50 Index down -0.41% although Sep S&Ps are slightly higher by +0.50 points. The markets are worried that the weekend G20 meeting in Toronto will expose the rift on austerity versus stimulus that currently exists within the G20 and that G20 leaders will be unable to project a unified message. European stocks are being hurt by the fact that Greek 5-year credit default swap prices today reached a new record high of 1115 bp as the market increasingly worries about a possible Greek debt default. European officials today in Brussels are discussing the details of exactly when to disclose the results of the stress tests on 25 top cross-border European banks and on whether to go further and conduct stress tests on domestic national banks to determine the exact state of the European banking system. The EU last week said it would disclose the results of the stress tests some time in July. US Congressional negotiators working through the night approved a compromise on US financial regulation, one provision of which will require US banks to move their swaps trading desks into subsidiaries. Both the House and Senate now need to approve the deal, which they propose to have on President Obama's desk for signature by July 4.

A storm is gathering in the Caribbean that could turn into a tropical storm or even a hurricane by the end of this weekend or by early next week and that has a chance of moving northward towards oil rigs in the Gulf of Mexico. BP's stock is down 7% this morning on the possibility the storm will disrupt the effort to halt and clean up the BP oil spill.

The Asian markets today closed mostly lower on concerns about stronger Asian currencies and higher interest rates following this week's surprise Taiwan rate hike: Japan -.92%, Hong Kong -0.21%, China -0.77%, Taiwan -1.52%, Australia -1.49%, Singapore +0.14%, South Korea -0.80%, and Bombay -0.88%.

Barchart.com U.S. Morning Call for Thursday, June 24, 2010

Overnight Developments

Global stocks are lower with the European Euro Stoxx 50 Index down -0.67% and Sep S&Ps down 6.60 points (-0.61%). The markets remain concerned about the European economy with Greek credit default swaps today rising 27 bp to a record high of 959 bp, indicating that the markets are increasingly concerned about a Greek debt default. Meanwhile, the Greek 10-year bond spread against Germany rose by 10 bp to a 1-1/2 month high of 782 bp. Global stocks are also lower on yesterday's news that US May new home sales plunged by 33%. On the brighter side, April Eurozone industrial orders today rose by +0.9% m/m, adding to March's +5.1% surge and marking the third consecutive monthly increase. The report boosted hopes for a continuance in the surge in European exports tied to the recent depreciation of the euro.

The Asian markets today closed mostly lower: Japan +0.05%, Hong Kong -0.59%, China -0.04%, Taiwan +0.10%, Australia -0.14%, Singapore -0.82%, South Korea +0.82%, and Bombay -0.14%. Taiwan's central bank today unexpectedly raised its key policy rate to 1.375% from 1.25%, as opposed to the unanimous market consensus that the bank would leave rates unchanged. Taiwan's Q1 GDP soared by 13.3% and the government last month hiked its 2010 GDP forecast to +6.14% from +4.72% and its 2010 inflation forecast to +1.4% from +1.27%. Adding to the news of tighter policy in Asia, South Korea's Finance Ministry today said that South Korea will "normalize" its accommodative policies and take pre-emptive action against inflation due to stronger-than-expected economic growth. The Finance Ministry raised its forecast for South Korean 2010 GDP to +5.8% from +5.0%.

Barchart.com U.S. Morning Call for Wednesday, June 23, 2010

Overnight Developments

Global stocks are mixed with the European Euro Stoxx 50 Index down -0.31% and Sep S&Ps up +5.50 points. Signs that that the economic recovery may falter are undercutting European stock prices on concern that slower growth will hurt the outlook for earnings. The Jun Euro-Zone PMI composite, a gauge of growth in European manufacturing and service industries, fell to 56.0 from 56.4 in May, close to market expectations. The spread between the yield on Greek government bonds over comparable German bunds widened to 751 bp, a 1-1/2 month high, while a draft document from the European Commission proposes that European governments will consider imposing a charge on bond sales by countries that violate debt rules. Basic resource and mining companies fell on demand concerns with BHP Billiton down 1.4%, Rio Tinto falling 1.5% and Xstrata Plc retreating 1.8%. Holcim dropped 1.3% after Morgan Stanley downgraded the second-largest cement maker to "underweight" from "equal weight." According to the chief investment officer at Citigroup's Private Bank, global equities are set to fall as the withdrawal of stimulus measures around the world causes a slowdown in earnings growth, while UBS AG and Goldman Sachs Group strategists predict the euro's 14% slide against the dollar will boost earnings at European companies at least 25% this year and they recommend buying European stocks because the global economic rebound will overcome concerns that governments will default in Europe.

The Asian markets today closed mostly lower with Japan down -1.87%, Hong Kong +0.18%, China -0.91%, Taiwan -0.40%, Australia -1.58%, Singapore -0.04%, South Korea -0.38%, India +0.04%. Asian stocks declined after the unexpected drop in May US existing home sales raised concern about the sustainability of the US economic recovery and demand for Asian goods. Asian commodity producers and exporters closed lower while Chinese property developers slumped after Shanghai housing sales in the first 5 months of this year fell -32.5% y/y, which indicates government measures to cool the real estate market are working. Toyota fell 1.7% and Honda lost 1.5% after both companies halted production at factories in southern China after two suppliers' plants were closed by strikes, extending disputes to at least eight in the past month. Strikes have spread since Honda agreed last month to raise wages at a parts supplier by 24% to end a work stoppage as unrest at foreign-owned factories in China reflects a shrinking supply of low-cost labor in the nation.

Barchart.com U.S. Morning Call for Tuesday, June 22, 2010

Overnight Developments

Global stocks are mostly lower with the European Euro Stoxx 50 Index down -1.14% and Sep S&Ps down -4.50 points. The dollar and Treasuries are stronger while most commodities are weaker. European stocks declined on valuation concerns as investors fear that stock prices have outpaced the prospects for company earnings and economic growth. BNP Paribas fell 3.4% and led bank stocks lower after Fitch Ratings cut the long term credit rating of France's largest bank one step to AA-, the fourth-highest investment grade, from AA citing a "deterioration" of the company's asset quality. Bank stocks were also pressured after comments from ECB Council member Noyer who said "some banks have started facing increasing funding problems and that the situation reflects a general state of uncertainty which, left unchecked, could have significant consequences on financial stability and the real economy, as was the case during the last part of 2008." European debt concerns also undercut stock prices after Standard & Poor's lowered its economic growth forecast for Spain to an average of 0.7% a year through 2016 from 1.0%, saying Spanish banks face mounting credit losses and "substantial strain" on revenue generation. Limiting losses in European stocks was the unexpected increase in German business confidence after the Jun German IFO business climate rose +0.3 to a 2-year high of 101.8 as the euro's depreciation and a global economic recovery brightened the outlook for exports.

The Asian markets today closed mostly lower with Japan down -1.22%, Hong Kong -0.45%, China +0.11%, Taiwan -0.30%, Australia -1.18%, Singapore -0.46%, South Korea -0.54%, India -0.71%. Asian shipping companies closed lower after freight rates slumped for a 17th consecutive day and basic resource companies fell as most commodity prices declined. Japan's fiscal strategy released today has yet to impress upon the ratings' agencies the ability of Japan's government to cut the country's massive debt. Under the plan, Prime Minister Kan's administration pledged to balance its books in 10 years, restrict bond sales and overhaul the tax system. Annual spending will be capped at 71 trillion yen ($781 billion) over the next 3 years, and the government will decide changes to the tax regime "soon." The director of sovereign ratings at Standard & Poor's in Singapore said that while the strategy is "better than nothing," the country's credit quality is "still eroding slowly," while the director of Fitch Ratings' Asia-Pacific sovereign group said the plan "does not have enough details for us to reach a firm conclusion or for us to say that we have confidence that Japan has a detailed fiscal consolidation plan."

Barchart.com U.S. Morning Call for Monday, June 21, 2010

Overnight Developments

Global stocks are sharply higher with the European Euro Stoxx 50 Index up +1.34% at a 1-1/4 month high and Sep S&Ps up +17.10 points at a 1-month high. The dollar index plunged to a 1-1/4 month low, Treasuries sank and commodities surged with gold jumping to an all-time high after China signaled it will relax the yuan's fixed rate to the dollar, a sign that the global economy may strengthen. European mining stocks and basic resource producers rallied on speculation a stronger yuan will boost Chinese demand for metals and other commodities. European carmakers all gained with Daimler AG and Bayerische Motoren Werke AG both up over 3%, while Porsche SE advanced 4.1% after Commerzbank raised its recommendation on the carmaker to "hold" from "reduce." Banco Santander SA climbed nearly 2% after the Times reported that Spain's largest bank is considering selling parts of its UK operations that may be worth as much as 25 billion pounds. BP Plc limited gains in European stocks after it slid nearly 5% after the Sunday Times reported that the company is seeking to raise $50 billion to cover the cost of the oil spill in the Gulf of Mexico. BP may raise the first $10 billion from a bond sale this week, acquire a $20 billion loan and get the remaining $20 billion from asset sales over the next 2 years, the newspaper reported, and that BP wants to move quickly to raise cash because of concern its ratings may be downgraded, which would boost its borrowing costs.

The Asian markets today closed higher with Japan up +2.43%, Hong Kong +3.08%, China +3.13%, Taiwan +1.90%, Australia +1.33%, Singapore +1.84%, South Korea +1.75%, India +1.74%. Asian stock markets rallied sharply on speculation that China's relaxing of its currency peg to the dollar will bolster global economic growth. China's currency posted its biggest gain in 20 months as the yuan surged to 6.798 per dollar after being held at about 6.83 to the dollar since mid-2008. In a statement on its website, the PBOC said the decision to increase "exchange-rate flexibility" was made after the economy improved, but did not indicate a timeframe for the change. The PBOC said it would maintain the yuan's 0.5% daily trading band and said greater yuan flexibility would help cut the trade surplus and reduce reliance on exports as a driver of growth. In a tactical move ahead of this weekend's Jun 26-27 G-20 summit in Toronto, China is trying to shift the focus of the G-20 meeting away from the value of its currency to items on its own agenda. Vice Foreign Minister Tiankai said that China wanted to discuss new quotas for the IMF that would boost the power of developing countries, promote the overhaul of global financial regulations, speak out against trade protectionism and pay more attention to economic development in poorer countries.

Barchart.com U.S. Morning Call for Friday, June 18, 2010

Overnight Developments

Global stocks are mixed with the European Euro Stoxx 50 Index down -0.06% and Sep S&Ps down -0.70 of a point. The European Union yesterday said it would publish the results of stress tests on the region's banks after Spain became the first European government to pledge to release results on individual banks. The EU decision comes more than a year after the US released the results of stress tests it carried out on 19 financial institutions. Banco Santander SA climbed 2.6% after Spain's El Economista reported that it scored the highest rating in the stress tests, and Banco Bilbao Vizcaya Argentaria rose 4.2% after Spain's second-biggest bank scored the second-highest rating among Europe's largest banks in stress tests carried out by the Committee of European Banking Supervisors. BP Plc, which has lost 43% of its value since its drilling rig exploded in the Gulf of Mexico, rose nearly 4% after Societe Generale raised its recommendation on the company to "buy" from "hold," citing improved visibility following BP's meeting with the US government. Drug makers led stocks lower in Europe with Roche Holding AG sliding 2,6% after patients showed hypersensitivity to an experimental diabetes treatment and Sanofi-Aventis SA plunged 5% on renewed concern that one of its drugs may be linked to increased cancer risks.

The Asian markets today closed mixed with Japan down -0.04%, Hong Kong +0.74%, China -1.70%, Taiwan -0.30%, Australia +0.54%, Singapore -0.37%, South Korea +0.14%, India -0.26%. BOJ Governor Shirakawa told policy makers today that China's strengthening recovery is raising concern that its economy is in a bubble. The PBOC has refrained from raising interest rates this year, instead trying to slow lending by increasing banks' reserve requirements on 3 occasions. According to minutes of the BOJ's May 20-21 board meeting released today, some members said financial conditions may "tighten" if "European financial markets became more unstable and this resulted in an appreciation of the yen and weaker stock prices." Asian automakers led stock prices lower on demand concerns after weaker-than-expected economic data from the US yesterday. Toyota fell 2.3%, Nissan slid 2.6%, Honda lost 1.5% and Hyundai closed down 1%. Consumer lenders weakened in Japan after Nomura Holdings predicted that Japan's top consumer-finance providers will face losses of 503 billion yen ($5.5 billion) over the next 2 years as a law that takes effect today caps interest rates at 20% and prohibits lending to borrowers with consumer debt equal to a third or more of their annual income.

Barchart.com U.S. Morning Call for Thursday, June 17, 2010

Overnight Developments

Global stocks are mixed with the European Euro Stoxx 50 Index up +0.76% at a 1-month high and Sep S&Ps up +4.70 points at a 4-week high. European and US stocks rallied while the dollar index slipped to a 3-week low after a successful Spanish bond sale eased concern that Spain's government will struggle to finance its widening deficit. Spain sold 3.5 billion euros ($4.3 billion) of 10-year and 30-year bonds at yields lower than the prevailing market rates with a strong bid-to-cover ratio of 2.45, assuaging concern that it would face difficulty meeting bond repayments. The yield premium demanded by investors to hold Spanish debt rather than equivalent German bunds narrowed to 209.5 bp after the sale, as it retreated from a record wide 221 bp yesterday, the highest since the introduction of the euro. Limiting stock gains was the 1% drop in Nokia Oyj, extending yesterday's 9% sell off, after Goldman Sachs slashed their share price estimates and profit forecasts for the world's largest maker of mobile phones which started the slide yesterday after it lowered its revenue and margin forecasts.

The Asian markets today closed mixed with Japan down -0.67%, Hong Kong +0.38%, China -0.58%, Taiwan +0.83%, Australia -0.70%, Singapore -0.11%, South Korea +0.05%, India +0.88%. James Hardie Industries SE, the biggest seller of home siding in the US, lost 3.8% in Sydney after US building permits unexpectedly fell to a 1-year low and most Japanese exporters closed lower as the yen gained against the dollar, which threatens to cut the value of overseas income when repatriated. On the positive side, Nintendo, the world's number one maker of portable video-game players, rose 5.2%, adding on to yesterday's 5.2% gain, after UBS boosted its rating on the stock to "buy" from "neutral" as the company introduced a new handheld video-game player this week.

Overnight U.S. Stock News

Sep S&Ps this morning are trading up +4.70 points. The US stock market yesterday erased a late morning rally and finished the day mixed (Dow Jones +0.05%, S&P 500 -0.06%, Nasdaq Composite +0.00%). The S&P 500 Index, the Dow Jones and the Nasdaq all rallied up to 4-week highs. Bullish factors included (1) strength in energy producers after crude oil climbed to a 1-month high and after reports that BP agreed to set up a $20 billion fund to pay damages from the Gulf oil spill, which lifted BP off of its low to close higher as it puts a hard number on the amount of possible claims against BP, (2) the stronger-than-expected May US industrial production (+1.2% versus expectations of +0.9%), (3) the surge in the May US capacity utilization rate which rose to its best level in 19 months (+1.0 to 74.7% versus expectations of +0.8 to 74.5%), and (4) increased optimism in US company profits as the average 2010 earnings growth forecasts for the S&P 500 have been revised up to about +32% from up +26% at the end of March.
Bearish factors included (1) concerns that the European debt crisis may be worsening after the Spanish newspaper El Economista reported that the IMF, the EU and the US Treasury are putting together a credit line of as much as 250 billion euros ($307 billion) for Spain, (2) the weaker-than-expected May US housing starts which fell to its lowest level in 5 months (-10.0% to 593,000 versus expectations of -3.6% to 648,000), (3) the unexpected drop in May US building permits which sank to their lowest level in a year and points to weakness in home building in the months ahead (-5.9% to 574,000 versus expectations of +2.5% to 625,000), and (4) the prediction from former Fed Governor Gramley that the Fed may reduce its 2010 economic growth estimates by "several tenths" of a percentage point and as much as 0.75% when it meets next week as Europe's debt crisis saps demand for American goods and roils financial markets.
First Solar (FSLR) rose 1% in pre-market trading after Credit Suisse raised its recommendation on the world's biggest maker of thin-film solar power modules to "outperform" from "neutral."

Barchart.com U.S. Morning Call for Wednesday, June 16, 2010

Overnight Developments

Global stocks are mixed with the European Euro Stoxx 50 Index up +0.14% and Sep S&Ps down -4.70 points. The euro weakened and the yield premium that investors demand to hold Spanish 10-year government bonds over German bunds widened to a record 219 bp, the most since the euro's debut in 1999, after the Spanish newspaper El Economista reported that the IMF, the EU and the US Treasury are putting together a credit line of as much as 250 billion euros ($307 billion) for Spain. The EU and the Spanish government denied the report. European stocks shrugged off the Spanish report and rallied with Celesio jumping 6.1% as Europe's largest publicly traded drug wholesaler said it's forming a joint venture with Phoenix Group in the Netherlands to distribute pharmaceuticals. Irish Life surged 9.5% after Deutsche Bank initiated coverage of the bank with a "buy" recommendation, while automobile stocks fell and limited gains in the overall market with Daimler AG falling 2.4% and Michelin & Cie. dropping 1.4%.

The Asian markets today closed higher with Japan up +1.81%, Hong Kong, China and Taiwan all closed for holiday, Australia +1.20%, Singapore +1.02%, South Korea +0.90%, India +0.29%. Asian stock markets closed higher, led by gains in technology shares, after Taiwan Semiconductor Manufacturing Co.'s projection for global demand boosted US chip sales. Raw materials and commodity producers also gained on speculation for increased demand and after the price of copper climbed to a 1-1/2 week high. Japan's Nintendo closed 4.7% higher after the company introduced its 3DS handheld device that displays games in 3 dimensions without requiring glasses at the annual E3 game conference in Los Angeles. Nomura Holdings predicts that the "bubble" in China's property market is going to burst very quickly, with prices set to fall as much as 20% in the next 12 to 18 months. China's real-estate prices jumped 12.4% across 70 cities in May, adding to the 12.8% surge in April that was the most since the data series began in 2005. In its annual report released on its website yesterday, the China Banking Regulatory Commission warned of growing credit risks in the country's real-estate industry and that the risks associated with home mortgages are growing and a "chain effect" may reappear in real-estate development loans.

Overnight U.S. Stock News

Sep S&Ps this morning are trading down -4.70 points. The US stock market yesterday trended higher the entire day and finished sharply higher (Dow Jones +2.10%, S&P 500 +2.35%, Nasdaq Composite +2.76%). The S&P 500 Index and the Dow Jones rallied to 3-week highs and the Nasdaq rose to a 1-1/2 week high. Bullish factors included (1) carry-over support from a rally in European stock markets after the euro rallied to a 2-week high on optimism that the European sovereign-debt crisis is nearing containment, (2) the expansion of manufacturing in the New York region for an 11th straight month after the June Empire manufacturing index increased +0.5 to 19.6, (3) strength in semiconductor and technology stocks after Taiwan Semiconductor, the world's largest maker of chips, boosted this year's forecast for global sales to +30% from an April forecast of +22% and International Data Corp. reiterated its projection for 20% growth in global PC shipments in 2010 and said desktop computer sales are recovering, (4) gains in energy producers after crude oil rallied to a 1-month high, and (5) comments from St. Louis Fed President Bullard who said the European dent crisis won't stop the global economic recovery and may be helping to push US interest rates lower.
Bearish factors included (1) concerns that the European debt crisis may slow the European and global economies after the June German ZEW economic sentiment survey plunged to its lowest level in 14 months, and (2) weakness in homebuilders on concern that the US housing market may take another downturn after the larger-than-expected decline in the June NAHB housing market index (-5 to 17 versus expectations of -1 to 21).
International Game Technology (IGT) slipped 1.9% in European trading after the maker of computerized casino gaming systems was downgraded by Goldman Sachs to "sell" from "neutral."

Today's Market Focus

September 10-year T-notes this morning are trading up +5.5 ticks. T-note prices yesterday traded mixed into late morning when they drifted lower into the close and settled down -9.5 ticks at 119-285. Bearish factors included (1) reduced safe-haven demand for Treasuries after global equity markets rallied on increased optimism that the European sovereign-debt crisis is nearing containment, and (2) the action by the Fed to sell $1.15 billion in term deposits in an auction of what is its first test of a credit-tightening tool it may use in the future to drain cash from the banking system. Bullish factors included (1) strong foreign demand for Treasuries after the April net long-term TIC flows showed that China, Japan and the UK all increased their US Treasury holdings in April, (2) a research paper released by the San Francisco Fed that said high unemployment and low inflation will likely keep the Fed from raising interest rates until 2012, (3) the larger-than-expected decline in the June NAHB housing market index (-5 to 17 versus expectations of -1 to 21), and (4) comments from St. Louis Fed President Bullard who said that the European debt crisis may be helping to push US interest rates lower "than otherwise would be the case."
The dollar index this morning is stronger the dollar/yen +0.06 yen and the euro/dollar -0.48 cents. The dollar index yesterday dropped to a 2-week low and finished sharply lower. Bearish factors included (1) reduced safe-haven demand for the dollar after global stock markets rallied, and (2) strength in the euro which rallied to a 2-week high against the dollar on optimism that the European sovereign-debt crisis is nearing containment. Bullish factors included (1) strong foreign demand for dollar assets after the April net long-term TIC flows rose more than expected, (2) continued strong safe-haven demand for dollars by European banks on concern that some Euro-Zone financial companies may hold too many securities from Europe's most indebted countries after the 3-month dollar Libor rate climbed to an 11-month high of 0.539%, (3) the prediction from UBS AG that the euro will fall to $1.15 within 3 months as the Euro-Zone debt crisis is unlikely to be resolved anytime soon, (4) the larger-than-expected decline in the June German ZEW economic sentiment which plunged to a 14-month low, and (5) the prediction from KLS Diversified Asset Management that the euro may fall to $1.10 by Sep and drop to $1.00 within 18 months to 2 years as concern about government debt and slowing growth in Europe undermines confidence in the euro.
July crude oil prices this morning are down -36 cents and July gasoline is -1.75 cents. July crude oil prices yesterday moved higher the entire day and closed up +$1.82 per barrel. July gasoline closed higher by +4.51 cents per gallon. Both July crude and July gasoline posted 1-month highs. Bullish factors included (1) the fall in the dollar index to a 2-week low, which increases investment demand for commodities, (2) the rally in global stock markets, which bolsters optimism in the economic outlook and energy demand, and (3) the forecast that US crude oil stockpiles will decline for a third straight week when the DOE releases its weekly inventory report on Wednesday. Bearish factors included (1) the larger-than-expected decline in the June German ZEW economic sentiment which plunged to a 14-month low, and (2) concerns that the lingering European debt crisis will curtail fuel demand. Expectations for Wednesday's weekly DOE inventory report are for crude oil supplies to fall -1.00 million bbl, gasoline stockpiles to gain +500,000 bbl, distillate inventories to climb +1.0 million bbl and the refinery capacity rate to remain unchanged at 89.1%.

Barchart.com U.S. Morning Call for Tuesday, June 15, 2010

Overnight Developments

Global stocks are mostly higher with the European Euro Stoxx 50 Index up +0.35% and Sep S&Ps up +7.30 points. Treasuries are weaker, the dollar is little changed and commodities are mixed. A rally in media stocks is boosting European equities, led by a 20% surge in BSkyB, the UK's biggest pay-TV provider, after News Corp. raised its bid for the shares of the company that it doesn't already own. European stocks are higher and the euro is little changed despite the plunge in German investor confidence in June. The June German ZEW economic sentiment dropped a larger-than-expected -17.1 to a 14-month low of 28.7 as concerns mount that the European sovereign debt crisis will undermine exports and crimp growth in Germany, Europe's largest economy. Greek bond yields surged 82 bp today to 8.89% after Moody's Investors Service yesterday cut the country's government bond rating 4 levels to junk. The downgrade prompted Citigroup to remove Greek government debt from its World Government Bond Index.

The Asian markets today closed mostly higher with Japan up +0.08%, Hong Kong +0.05%, China closed for holiday, Taiwan +0.90%, Australia -0.01%, Singapore unchanged, South Korea -0.04%, India +0.43%. The yen was little changed after the BOJ kept its benchmark interest rate at 0.10% as expected following the conclusion of its 2-day policy meeting. The BOJ did say however, that it would offer as much as 3 trillion yen ($33 billion) for a new program aimed at expanding credit available to companies. Financial stocks prompted a mild rally in Japanese equities led by a 2.8% rise in Nomura, a 4.1% gain in Mizuho Securities and a 2.8% gain in Daiwa after Credit Suisse boosted its ratings on the stocks to "outperform" from "neutral," saying their valuations have fallen to "attractive" levels. The Australian dollar weakened after the release of the Reserve Bank of Australia's (RBA) minutes of its Jun 1 meeting. The minutes said "the situation in Europe had deteriorated significantly over the previous month" and that previous rate increases had given them "flexibility," fueling speculation that it will keep interest rates unchanged until at least Q4.

Overnight U.S. Stock News

Sep S&Ps this morning are trading up +7.30 points. The US stock market opened higher yesterday and traded in positive territory into early afternoon when they fell into the close and finished mixed (Dow Jones -0.20%, S&P 500 -0.18%, Nasdaq Composite +0.02%). The S&P 500 Index and the Dow Jones rallied to 3-week highs but shed their gains and closed lower and the Nasdaq rose to a 1-week high. Bullish factors included (1) carry-over support from a rally in European equity markets after April Euro-Zone industrial production rose for the 11th consecutive month (+0.8% m/m and +9.5% y/y) with the +9.5% y/y increase the biggest year-over-year gain since the data series began in 1991 which bolsters optimism that the global economic rebound is strengthening, (2) the prediction from the head of equity strategy at Bank of America-Merrill Lynch that the S&P 500 will rally to 1,300 by year-end as corporate profits continue to grow in a "very low-inflation, low-interest-rate environment," and (3) the prediction from Nomura Holdings that "fundamentals remain supportive for equities" and that "the coming earnings announcement season should provide the catalyst for equities to recover."
Bearish factors included (1) the action by Moody's Investors Service to downgrade Greece's government bond ratings by four levels to junk status, from A3 to Ba1, citing the country's economic "risks," (2) hawkish comments from St. Louis Fed President Bullard who said that Europe's sovereign-debt crisis shouldn't postpone the Fed from raising interest rates, and (3) the 5 bp jump in the yield on the 10-year T-note to a 1-week high of 3.32% which increases the cost of capital for consumers and businesses.
News Corp. (NWSA) may be active today after the company's 7.8 billion pound ($11.5 billion) offer to buy British Sky Broadcasting Plc was rejected by the UK's biggest pay-TV provider.

Today's Market Focus

September 10-year T-notes this morning are trading down -4 ticks. T-note prices yesterday fell to a 1-week low and traded heavy throughout the day, finally settling down -15 ticks at 120-210. Bearish factors included (1) reduced safe-haven demand for Treasuries after global equity markets rallied and after Greek Finance Minister Papaconstantinou told the Real News that the receipt of 110 billion euros ($134 billion) in emergency loans is enough to cover most of Greece's borrowing needs in the coming years and that his nation isn't considering restructuring its debt, and (2) hawkish comments from St. Louis Fed President Bullard who said that Europe's sovereign-debt crisis shouldn't delay the Fed from raising interest rates. Bullish factors included (1) increased safe-haven demand for Treasuries after Moody's Investors Service downgraded Greece's government bond ratings by four levels to junk status, (2) the prediction from Royal Bank of Canada that "many international investors will continue to reallocate out of euro-denominated assets in favor of Treasuries," as Europe's sovereign-debt crisis continues, and (3) the action by UBS AG to push back its forecast for Fed tightening until Jan 2011 from an earlier prediction for Fed interest rate hikes to start in Sep 2010, because of the European debt crisis.
The dollar index this morning is little changed with the dollar/yen -0.22 yen and the euro/dollar +0.37 cents. The dollar index yesterday slipped to a 1-1/2 week low and finished sharply lower. Bearish factors included (1) the jump in the euro to a 1-week high against the dollar after April Euro-Zone industrial production rose more-than-expected and had its biggest year-over-year gain (+9.5% y/y) since the data series began in 1991, (2) comments from Spain's Finance Minister who said his government is not seeking any kind of financial support from Europe and doesn't expect to in the future, (3) the prediction from the BIS that the euro's recent slide to a 4-year low against the dollar may fuel a resumption of economic growth in Europe later this year, and (4) reduced safe-haven demand for the dollar after the stock market rallied. Bullish factors included (1) the prediction from Standard Bank Plc that the euro will fall to parity ($1.00) with the dollar by year-end as the Euro-Zone economy faces a "dramatic fiscal squeeze" due to austerity measures taken to cut widening budget deficits, and (2) increased chances of a liquidity squeeze that may boost the safe-haven appeal of the dollar after deposits by European banks with the ECB rose to a record 384.3 billion euros ($472 billion) on Jun 11 as banks continue to shy away from lending.
July crude oil prices this morning are up +78 cents and July gasoline +1.14 cents. July crude oil prices yesterday moved higher and closed up +$1.34 per barrel. July gasoline rallied up to a 4-week high and closed higher by +2.67 cents per gallon. Bullish factors included (1) the drop in the dollar index to a 1-1/2 week low, which increases investment demand for commodities, (2) the larger-than-expected increase in April Euro-Zone industrial production, which signals increased energy demand, and (3) the rally in global equity markets, which bolsters optimism in the economic outlook and energy demand. A bearish factor was the CFTC report that net-long positions in NYMEX crude oil futures declined 30% to 17,457 contracts in the week ended Jun 8, the lowest level in 10 months. Expectations for Wednesday's weekly DOE inventory report are for crude oil supplies to fall -1.75 million bbl, gasoline stockpiles to gain +625,000 bbl, distillate inventories to climb +1.0 million bbl and the refinery capacity rate to rise +0.2 to 89.3%.

Barchart.com U.S. Morning Call for Monday, June 14, 2010

Overnight Developments

Global stocks are higher with the European Euro Stoxx 50 Index up +0.60% at a 3-week high and Sep S&Ps up +8.30 points at a 1-week high. Treasuries are weaker and the dollar index fell to a 1-week low, while commodities are stronger with copper at a 1-week high. European stocks rallied after April Euro-Zone industrial production rose a more-than-expected +0.8% m/m and its +9.5% y/y increase is the biggest year-over-year gain since the data series began in 1991. Mining companies gained after copper rose to a 1-week high and Salzgitter AG, Germany's second-biggest steelmaker, advanced 3.2% after UBS AG raised its recommendation on the stock to "neutral" from "sell." The euro jumped to a 1-week high against the dollar after Greek Finance Minister Papaconstantinou told the Real News that the receipt of 110 billion euros ($134 billion) in emergency loans is enough to cover most of Greece's borrowing needs in the coming years and that his nation isn't considering restructuring its debt. Treasuries were pressured after equities rallied and after St. Louis Fed President Bullard, who was speaking at a press briefing in Tokyo, said that Europe's sovereign-debt crisis shouldn't postpone the Fed from raising interest rates.

The Asian markets today closed higher with Japan up +1.80%, Hong Kong +0.90%, China closed for holiday, Taiwan +1.20%, Australia closed for holiday, Singapore +0.78%, South Korea +1.01%, India +1.60%. Japan's large manufacturers said business conditions improved in Q2 from Q1 as the Q2 BSI large manufacturing rose to 10 from 4.3 in Q1, signaling that Japan's export-led recovery is gaining traction. Japanese companies said they plan to increase spending on plants and equipment by 9.7% this fiscal year, compared with the -5.5% in cutbacks projected 3 months ago. The Q2 BSI data suggests that the Q2 Japan Tankan survey, due to be released July 1, may also be on the strong side. Japanese exporters gained as the yen slumped to a 1-week low against the dollar, easing concern that a stronger currency will erode exporters' earnings. May India wholesale prices accelerated 10.16% y/y, more than market expectations of a 9.6% y/y gain, and increases pressure on India's central bank to raise interest rates. The RBI has raised the benchmark reverse repurchase rate by 25 bp twice since Mar to the current 3.75% level and the central bank said it will tighten monetary policy at a "moderate" pace given the risks to economic expansion from Europe's debt crisis. India and China, Asia's fastest-growing major economies, are battling to contain inflation as the region shows little signs of being affected by Europe's debt woes.

Overnight U.S. Stock News

Sep S&Ps this morning are trading up +8.30 points. The US stock market opened lower last Friday but recovered its losses and zigzagged higher into the close to finish with modest gains (Dow Jones +0.38%, S&P 500 +0.44%, Nasdaq Composite +1.12%). Bullish factors included (1) the larger-than-expected increase in the Jun US University of Michigan consumer confidence which jumped to a 2-1/3 year high (+1.9 to 75.5 versus expectations of +0.9 to 74.5), (2) comments from Philadelphia Fed President Plosser who said that he doesn't expect a "big impact from Europe's fiscal crisis on the US economy," and (3) the report from the Fed that said net worth for US households and non-profit groups rose by $1.6 trillion in Q1, the fourth consecutive quarterly increase, to $54.6 trillion, which may keep consumer attitudes positive about the economy.
Bearish factors included (1) weakness in consumer companies after the unexpected decline in May US retail sales which had its biggest decline in 8 months (-1.2% and -1.1% less autos versus expectations of +0.2% and +0.1% less autos), (2) the warning from billionaire investor George Soros who said the fiscal crisis that prompted European governments to curb their budget deficits may push the global economy back into recession, and (3) comments from Minneapolis Fed President Kocherlakota who said that he's concerned about "weakness in the labor market."
Alcoa (AA) rose 2% and Freeport-McMoRan Copper & Gold (FCX) gained 1.6% in premarket trading after copper prices climbed to a 1-week high.
SanDisk (SNDK) advanced 1.6% in European trading after an article in Barron's said the memory chip supplier may rise as much as 17% as flash memory sales for Apple's iPad and other mobile devices expand.

Today's Market Focus

September 10-year T-notes this morning are trading down -16 ticks on stronger global equities and on hawkish comments from St. Louis Fed President Bullard. T-note prices last Friday moved higher and remained well supported throughout the day as they settled up +26 ticks at 120-210. Bullish factors included (1) the unexpected decline in May US retail sales which had its biggest decline in 8 months (-1.2% and -1.1% less autos versus expectations of +0.2% and +0.1% less autos), (2) increased safe-haven demand for Treasuries after billionaire investor George Soros said the fiscal crisis that prompted European governments to curb their budget deficits may push the global economy back into recession, and (3) the prediction from Goldman Sachs that the US economy is poised to slow in the second half of 2010, keeping inflation "extremely low." Bearish factors included (1) the larger-than-expected increase in the June US University of Michigan consumer confidence which jumped to a 2-1/3 year high (+1.9 to 75.5 versus expectations of +0.9 to 74.5), and (2) comments from Philadelphia Fed President Plosser who said the US economic recovery is broadening and that the Fed could begin to sell assets from its balance sheet "sooner rather than later."
The dollar index this morning is lower and at a 1-week low with the dollar/yen +0.15 yen and the euro/dollar +1.16 cents. The dollar index last Friday moved higher and finished with moderate gains. Bullish factors included (1) increased safe-haven demand for the dollar after May US retail sales unexpectedly declined, which questions the sustainability of the global economic recovery, and (2) concerns that China may take additional steps to slow its economy, which may also lead to slower global economic growth, after May China consumer prices accelerated by +3.1% y/y to its highest level in 19 months. Bearish factors included (1) the prediction from HSBC Holdings that the euro's decline may slow as investors turn their attention away from Europe's debt crisis to the possibility of the global economic recovery stalling, and (2) jaw-boning from ECB Executive Board member Stark who said that markets are "exaggerating" the fiscal problems of Euro-Zone countries.
July crude oil prices this morning are up +$1.27 and July gasoline +2.63 cents. July crude oil prices last Friday sold-off and closed down -$1.70 per barrel. July gasoline closed lower by -2.08 cents per gallon. Bearish factors included (1) the rally in the dollar index, and (2) the unexpected drop in May US retail sales, which spurred concern that economic growth in the world's biggest energy-consuming country will slow. Bullish factors included (1) strong energy demand in China, the world's second-largest energy user, after it refined a record 35.8 million metric tons, or 8.5 million barrels a day of crude in May, up +15% y/y, and (2) the larger-than-expected increase in the Jun US University of Michigan consumer confidence which jumped to a 2-1/3 year high.

Barchart.com U.S. Morning Call for Friday, June 11, 2010

Overnight Developments

Global stocks are higher with the European Euro Stoxx 50 Index up +1.01% and Sep S&Ps up +1.30 points. The dollar is little changed, Treasuries are stronger and commodities are mixed. European bank stocks gained, led by a 8% surge in Banco Santander SA, after Spain's biggest lender said its outlook is "brilliant" and that is can benefit from rivals' "weakness" in mature markets. Novartis gained 3.4% after winning a US regulatory advisory panel's backing to introduce the first pill to treat multiple sclerosis with its drug Gilenia. Continental AG rose 3.8% after Europe's second-biggest tire maker was raised to "buy" from "hold" at Deutsche Bank AG, while BP gained 8.7% as it snapped 4 days of declines that saw its stock tumble to a 13 year low, after the WSJ reported the company is considering cutting or deferring its Q2 dividend payment. Also boosting European stocks today was the action by the Bundesbank to raise its growth forecasts for Germany, as it now predicts GDP growth of 1.9% this year and 1.4% in 2011, higher than a Dec prediction of 1.6% growth in 2010 and 1.2% for 2011 as the economy profits from a pick-up in global demand.

The Asian markets today closed higher with Japan up +1.70%, Hong Kong +1.22%, China +0.32%, Taiwan +1.64%, Australia +1.58%, Singapore +0.60%, South Korea +1.62%, India +0.84%. Asian stock markets rallied after several economic reports from China showed its economy continues to strengthen. May China retail sales surged +18.7% y/y and May industrial production climbed 16.5% y/y as the Chinese economy proves resilient so far to the European debt crisis. Computer-related companies closed higher after Acer, the world's largest vendor of laptop computers, rallied over 3% higher when it reported a 45% jump in May sales and Taiwan Semiconductor Manufacturing, the biggest maker of custom chips, said that it's optimistic about the chip industry and the global economy for the second half of 2010. This adds to bullishness in the technology sector after the Semiconductor Industry Association said that global sales of microchips will rise 28% to $290.5 billion this year, boosted by demand in China and India, compared with a Nov forecast of 10% growth.

Barchart.com U.S. Morning Call for Thursday, June 10, 2010

Overnight Developments

Global stocks are mostly higher with the European Euro Stoxx 50 Index up +0.57% and June S&Ps up +12.20 points. The dollar and Treasuries are weaker and commodity prices rose after economic reports from Asia show accelerating growth. China's exports in May jumped by the most in 6 years, while Q1 Japan GDP was unexpectedly revised higher. Daimler AG climbed 4% after forecasting Mercedes-Benz sales will advance at twice the rate of the overall market on demand from China, while Lafarge SA, the world's biggest cement maker, gained 4.3% after Citigroup recommended buying the shares. Overnight deposits at the ECB rose to a record 369 billion euros ($444 billion) today, the most since the start of the euro currency in 1999, as an increase in counterparty risks prompts European banks to deposit their excess funds with the ECB's overnight deposit facility rather than lend. As expected, the Bank of England maintained its benchmark interest rate at 0.50% and held its asset purchase target at 200 billion pounds.

The Asian markets today closed mostly higher with Japan up +1.10%, Hong Kong +0.06%, China -1.15%, Taiwan +1.56%, Australia +1.14%, Singapore +1.23%, South Korea +0.22%, India +1.59%. Japanese stocks closed higher after Japan's Q1 GDP was unexpectedly revised up to a 5.0% annualized rate from 4.9%, driven by exports and an upward revision to consumer spending (+0.4% q/q from the previously reported +0.3% q/q). In a separate report, May Japan CGPI rose +0.4% y/y, the first increase in producer prices in 17 months, which may ease deflation concerns as an increase in raw-material costs fueled price gains. Aussie stocks closed higher after Australia's jobless rate declined -0.2 to a 16-month low of 5.2% in May when employers added 26,900 to payrolls, more than market expectations of 20,000. China's May exports rose +48.5% y/y, the biggest gain in more than six years, which indicates the European debt crisis has yet to slow the world's fastest-growing major economy. Despite the strong export figure, China's Shanghai Stock Index closed lower after China's property prices jumped +12.4% y/y in May, the second-fastest pace on record, which raises concern the government will step up tightening measures to cool the property market.

Barchart.com U.S. Morning Call for Wednesday, June 9, 2010

Overnight Developments

Global stocks are mixed with the European Euro Stoxx 50 Index up +0.56% and June S&Ps up +3.20 points. The dollar and Treasuries are weaker after comments last night from Kansas City Fed President Hoenig who said that the US economy is in a sustained recovery, and he repeated his call to raise the Fed funds rate to 1.00% by the end of Sep. Hoenig warned that "monetary policy can cause asset-price bubbles and that we need to take out the excess stimulus." He also said that the US has a "very serious fiscal situation" and that "we need to pass a law that is very firm that says you cannot spend more unless you cut something else." European technology stocks are leading a slight rally in equities today led by a 2.3% gain in STMicroelectronics which rallied after it was rated a "buy" in new coverage at Jeffries Group. IMF Deputy Managing Director Shinohara said most advanced economies are experiencing a "subdued" recovery and risks to the global economic outlook have "risen significantly" and policy makers have limited room to provide support to growth. European banks still remain wary of counterparty risk as they refuse to lend and rather deposit their excess funds with the ECB. Banks lodged 364.6 billion euros ($436 billion) in the ECB's overnight deposit facility yesterday, the most since the euro's inception in 1999, with deposits close to or above 300 billion euros for the past 9 sessions.

The Asian markets today closed mixed with Japan down -1.04%, Hong Kong +0.69%, China +3.07%, Taiwan -1.12%, Australia +0.09%, Singapore -0.03%, South Korea -0.38%, India +0.25%. China's Shanghai Stock Index closed higher after Reuters reported a surge in the nation's exports and higher-than-expected new loans in May, signaling Europe's debt crisis hasn't derailed the economy. Chinese banks and property developers gained as new loans in May totaled 630 billion yuan ($92.3 billion), exceeding market expectations by 5%, while exporters rallied after May China exports surged +50% y/y. Tempering the rally in Chinese stocks was the +3.1% y/y increase in May consumer prices, which is above the PBOC's targeted full-year ceiling of 3.0%, and adds to risks of overheating the economy. Japanese stocks closed lower led by losses in exporters, as the yen neared an 8-year high against the euro, raising concern a stronger yen will hurt the value of repatriated overseas earnings.

Barchart.com U.S. Morning Call for Monday, June 7, 2010

Overnight Developments

Global stocks are mixed with the European Euro Stoxx 50 Index up +0.02% and June S&Ps up +2.20 points. The dollar index rallied to a 14-3/4 month high and copper slid to an 8-month low after the weekend meeting of the Group of 20 finance chiefs failed to agree on steps to ensure the economic recovery will strengthen. The G-20 post meeting statement said the global economic rebound faces "significant challenges," while US Treasury Secretary Geithner warned that the world cannot count on the US consumer to drive growth and urged other nations to stimulate their own demand. The euro fell to a fresh 4-year low against the dollar but erased its losses after German factory orders unexpectedly gained for a second month on April as the weaker euro boosted export demand and companies increased investment. April German factory orders rose +2.8% m/m, when the market was expecting a -0.4% m/m decline, and gained +29.6% y/y, the biggest year-over-year increase since data began in 1992. Greece's benchmark stock index, the ASE index, tumbled to a 12-year low, and was led lower by weakness in bank stocks, while European telecommunication stocks fell after Hellenic Telecommunications Organization SA plunged 6.6% when it announced that it will pay a lower dividend than planned. Also giving European stocks a lift was the unexpected increase in the June Euro-Zone Sentix investor confidence, which climbed +2.3 points to -4.1 when the market was expecting a -0.6 point decline to -7.0.

The Asian markets today closed lower with Japan down -3.84%, Hong Kong -2.03%, China -1.77%, Taiwan -2.54%, Australia -2.78%, Singapore -1.95%, South Korea -1.67%, India -1.97%. Asian stock markets closed lower as they played catch up with last Friday's losses in European and US markets. Asian mining companies and raw materials producers weakened on concerns a slowing global economy may undercut demand for commodities, while Japanese exporters slid after the yen strengthened. KB Financial Group fell 5.3% and led Asian financial companies lower on concern the European sovereign debt crisis is spreading, while China's Hon Hai Precision Industry, the world's largest contract electronics manufacturer, declined 5.6% after the company announced the base wage for workers at a China factory will double following recent employee suicides at its plant.

Overnight U.S. Stock News

June S&Ps this morning are trading up +2.20 points. The US stock market last Friday traded lower the entire day and finished with sharp losses (Dow Jones -3.15%, S&P 500 -3.44%, Nasdaq Composite -3.64%). The Dow Jones, S&P 500 and the Nasdaq all dropped to 1-week lows. Bearish factors included (1) carry-over weakness from a slump in European equity markets on concern that the European sovereign debt crisis is spreading after Hungarian Prime Minster Orban said Hungary's economy is in a "very grave situation" because the previous government manipulated figures and lied about the state of the economy and that talk of a default is "not an exaggeration," (2) concerns that the US economic recovery may not be robust after the weaker-than-expected May nonfarm payrolls (+431,000 versus expectations of +520,000) with private payrolls up +41,000 (versus expectations of +178,000), (3) weakness in energy and raw material producers after the dollar surged to a 14-3/4 month high and prompted a sell off in most commodities, and (4) comments from Atlanta Fed President Lockhart who said that falling commercial property prices pose a growing challenge to the banks in the Southeastern US where more failures are likely to occur.
Bullish factors included (1) the larger-than-expected drop in the May US unemployment rate (-0.2 to 9.7% versus expectations of -0.1 to 9.8%), (2) the +31,000 increase in temporary workers in May, the eighth straight monthly increase, which may be a harbinger of future payroll gains as employment at temporary-help agencies often picks up before companies take on permanent staff, and (3) the drop in the yield on the 10-year T-note to a 1-week low of 3.20% which cuts the cost of capital for consumers and businesses.
Talecris Biotherapeutics (TLCR) soared 38% in pre-market trading after Grifols, Europe's largest maker of blood-plasma products, agreed to buy Talecris for about $3.4 billion in cash and stock.

Barchart.com U.S. Morning Call for Friday, June 4, 2010

Overnight Developments

Global stocks are mostly lower with the European Euro Stoxx 50 Index down -0.55% and June S&Ps down -7.40 points. The euro sank to a 4-year low and is undercutting European stock prices after Hungarian Prime Minster Orban said Hungary's economy is in a "very grave situation" because the previous government manipulated figures and lied about the state of the economy and that talk of a default is "not an exaggeration." The dollar and Treasuries rallied on the Hungary news, which undercut commodity prices. Limiting losses in stocks today is speculation that the US payrolls report, released later this morning, will show a fifth month of gains and add to evidence that the economy is gaining momentum. Q1 Euro-Zone GDP was revised up to +0.6% y/y from +0.5% y/y, the first annual gain since Q3 of 2008, led by a +6.0% y/y jump in exports and a +2.0% y/y increase in government spending. European technology stocks rallied, led by a 2.9% advance in STMicroelectronics; after UBS raised its recommendation on Europe's largest chipmaker to "neutral" from "sell," saying the chipmaker was a "strong beneficiary" from recent currency moves. Infineon Technologies AG gained 2.7% and ASML Holding NV rose 3.1% after the Dramexchange Index, which tracks prices of the most widely used computer memory chips, rose 1.2% and indicates an increase in demand.

The Asian markets today closed mostly lower with Japan down -0.13%, Hong Kong -0.03%, China +0.30%, Taiwan -0.21%, Australia -0.82%, Singapore +0.47%, South Korea +0.21%, India +0.56%. South Korean stocks closed higher after the country's Q1 GDP was revised up to a gain of +2.1% q/q from April's initial estimate of +1.8% q/q, as exports surged and domestic demand strengthened. The South Korean Finance Ministry said in its monthly economic report today that the government will keep its expansionary economic-policy stance "for the time being" to support the recovery, citing risks from Europe and North Korea tensions. Japanese stocks were little changed as the Democratic Party of Japan is scheduled to vote on a new prime minister today to replace Yukio Hatoyama who resigned earlier this week. Asian mining companies closed lower and limited gains in other sectors after the CEO of Freeport-McMoRan said that China is a "risk to the world's market place in the near term" as it takes measures to cool its economy.

Overnight U.S. Stock News

June S&Ps this morning are trading down -7.40 points on concern that Hungary may default on its sovereign debt. The US stock market yesterday finished with modest gains (Dow Jones +0.06%, S&P 500 +0.41%, Nasdaq Composite +0.96%). All of the stock indexes climbed to 2-week highs. Bullish factors included (1) optimism the economy is strengthening after Apr factory orders gained for the eighth consecutive month (+1.2% m/m) and the May ISM non-manufacturing index expanded for the fifth straight month (unchanged at 55.4), (2) strength in retailers after May ICSC chain store sales rose +2.6% y/y, their sixth straight monthly increase, and (3) Goldman Sachs' hike in its May US payroll forecast to increase +600,000 from +500,000.
Bearish factors included (1) concerns that the European debt crisis will worsen after the euro weakened on liquidity concerns as overnight deposits with the ECB rose to a record 320.4 billion euros ($394 billion), the fifth consecutive day deposits with the ECB have exceeded 300 billion euros as the sovereign debt crisis makes banks wary of lending to each other, (2) the weaker-than-expected May ADP employment change (+55,000 versus expectations of +70,000), and (3) weakness in mining companies and raw material producers after the CEO's of Codelco and Freeport-McMoRan, the two largest copper producers, said that China's plans to slow its economy threatens to reduce demand for metals and other commodities.
Comtech (CMTL) gained 5.5% in pre-market trading after the provider of mobile-data communications equipment reported Q3 revenue of $216.3 million, well ahead of analysts' estimates of $190.3 million.

Barchart.com U.S. Morning Call for Thursday, June 3, 2010

Overnight Developments

Global stocks are mostly higher with the European Euro Stoxx 50 Index up +1.78% and June S&Ps up +3.80 points. The dollar is little changed, Treasuries are weaker and most commodities are higher on increased economic optimism. European stocks received a boost after the May Euro-Zone PMI composite was unexpectedly revised up to 56.4 from the originally reported 56.2. Automakers gained, led by a 5.5% jump in Peugeot, after Deutsche Bank AG raised its recommendation on Europe's second-largest carmaker to "buy" from "hold," and Daimler AG rose 2.5% after its Mercedes Benz division reported a 23% gain in US sales in May. Air France-KLM Group jumped 4.8% after Europe's biggest airline said passenger traffic rose 4.3% in May. Limiting stock gains was the unexpected decline in Apr Euro-Zone retail sales which fell -1.2% m/m, the biggest drop in 1-1/2 years and weaker than market expectations for a +0.1% m/m increase. European banks are parking cash with the ECB amid concern that a 750 billion-euro European rescue package may not be enough to stop the crisis from spreading and spilling into the banking industry. Overnight deposits with the ECB rose to a record 320.4 billion euros ($394 billion) and deposits have exceeded 300 billion euros for the past five days as the sovereign debt crisis makes banks wary of lending to each other.

The Asian markets today closed mostly higher with Japan up +3.24%, Hong Kong +1.62%, China -0.78%, Taiwan +2.29%, Australia +2.40%, Singapore +2.42%, South Korea +2.14%,India +1.68%. Japanese businesses cut spending for the 12th consecutive quarter after Q1 capital spending excluding software fell -12.9% y/y. The much larger than expected decrease in capital spending will lead the government to downgrade Japan's Q1 GDP figures later this month. Japanese exporters closed higher as the yen slumped to a 2-week low against the dollar and Asian carmakers gained on increased US sales. Nissan Motor closed 4.8% higher after reporting a +24% y/y increase in US car sales in May, Toyota rose 3.6% after posting a 5.7% sales gain and Kia Motors advanced 3.2% after its US sales rose 21% last month. The South Korean won rose sharply after JPMorgan Chase raised the nation's equities to "overweight" and said the won is one of the "most undervalued" emerging-market currencies.

Overnight U.S. Stock News

June S&Ps this morning are trading up +3.80 points. The US stock market yesterday opened higher and maintained a positive tone throughout the day as it trended higher into the close and finished on its high (Dow Jones +2.25%, S&P 500 +2.58%, Nasdaq Composite +2.64%). Bullish factors included (1) a rally in homebuilders after the stronger-than-expected Apr US pending home sales (+6.0% m/m and +24,6% y/y versus expectations of +5.0% m/m and +21.0% y/y), (2) a rally in energy producers and oil service providers after crude oil rose, (3) strength in airline stocks after Continental airlines beat monthly estimates for monthly unit revenue, which signals a stronger return of business travelers who pay higher fares, and (4) the prediction from MFS Investment Management that "the US is in the middle of a V-shaped economic recovery and that the European bank crisis does not have the scale and scope of Lehman and AIG and it doesn't have the ingredients to bring down the banking system."
Bearish factors included (1) the slump in the MBA's home purchase index to its lowest level since Apr 1997, which indicates future US housing sales may be weak as the expiration of government tax incentives to purchase homes by the end of April has led to a reduction in home sales since then, and (2) carry-over weakness from a slump in European stocks on concern the region's sovereign debt contagion is spreading after the yield premium between Spanish 10-year government bonds and 10-year German bunds widened to a 13-year high of 177 bp.
Alcoa (AA) rose 1.6% in European trading after the company was upgraded to "outperform" from "neutral" at Macquarie Group Ltd.
Las Vegas Sands (LVS) climbed 2.6% in pre-market trading after Morgan Stanley raised its recommendation on the casino company to "overweight" from equal weight."

Barchart.com U.S. Morning Call for Wednesday, June 2, 2010

Overnight Developments

Global stocks are mixed with the European Euro Stoxx 50 Index down -0.89% and June S&Ps up +6.40 points. European stocks retreated and were led lower by losses in energy producers and oil service companies as the US opens up criminal and civil investigations into BP Plc's Gulf of Mexico oil spill. Prudential Plc, the UK's biggest insurer, fell nearly 3% after its $35.5 billion takeover attempt of American International Group's Asian unit collapsed, while Aegis Group Plc slipped 3.1% after the world's largest independent buyer of advertising space was downgraded to "sell" from "hold" at Deutsche Bank AG. Also undercutting European stock prices was the larger-than-expected +0.9% m/m increase in April Euro-Zone PPI, the biggest monthly gain in 1-3/4 years, as a weaker euro made imports more expensive and energy costs rose.

The Asian markets today closed mostly lower with Japan down -1.12%, Hong Kong -0.13%, China +0.49%, Taiwan -1.28%, Australia -0.73%, Singapore +0.45%, India +1.02%. Most Asian stock markets fell and the yen droppped to a 2-week low against the dollar after Japanese Prime Minister Hatoyama said he will resign, less than 2 months before elections, which raises uncertainty after the future direction of the Japanese economy. The next prime minister will inherit an economy that's dependent on exports and remains within the throes of deflation that the BOJ has failed to stop. With consumer spending slowing in Q1, the reliance on trade leaves Japan vulnerable to any slump in overseas demand stemming from Europe's debt crisis. Australia's Q1 GDP rose +0.5% q/q, its fifth straight quarterly increase, as government stimulus spending helped counter consumer demand that weakened. Policy makers expect Australia's economic growth to almost double in he next 2 years, as China's demand for resources spurs a mining investment boom.

Overnight U.S. Stock News

June S&Ps this morning are trading up +6.40 points. The US stock market yesterday shook off early weakness and rallied into early afternoon, but then plummeted into the close and finished on its low (Dow Jones -1.11%, S&P 500 -1.72%, Nasdaq Composite -1.54%). Bearish factors included (1) concerns that the global economy may begin to slow after China's May purchasing managers index slowed more than forecast (-1.8 to 53.9 versus expectations of -1.2 to 54.5) (2) weakness in bank stocks after the ECB said in its bi-annual Financial Stability Report that Euro-Zone banks may see another 90 billion euros in net writedowns this year on loans and securities and will need to make provisions for losses of about 105 billion euros next year, (3) the plunge in the euro to a 4-year low against the dollar after the April Euro-Zone unemployment rate unexpectedly rose +0.1 to a 12-year high of 10.1%, and (4) geopolitical concerns after AFP reported that Lebanon fired on Israeli warplanes that were flying over its airspace.
Bullish factors included (1) optimism the US economy may be able to overcome the negative effects of the European debt crisis after the May ISM manufacturing index fell less than expected (-0.7 to 59.7 versus expectations of -1.0 to 59.4), (2) the unexpected increase in April construction spending which had its largest monthly increase since June 1998 (+2.7% m/m versus expectations of unchanged), and (3) the prediction from the chief equity strategist at JPMorgan Chase who said that the 5-week decline in the S&P 500 Stock Index is consistent with a temporary pullback within a bull market.
JPMorgan Chase (JPM) climbed 1.6% in pre-market trading after UBS upgraded the stock to "buy" from "neutral."
Joy Global (JOYG) rose 2.7% in pre-market trading after Goldman Sachs raised its recommendation on the stock to "buy" from "neutral."

Barchart.com U.S. Morning Call for Tuesday, June 1, 2010

Overnight Developments

Global stocks are weaker with the European Euro Stoxx 50 Index down -1.99% and June S&Ps down -14.50 points. The dollar index rose to a 14-month high and most commodities sank on concern that global economic growth is starting to slow. The euro sank to a 4-year low and bank stocks tumbled after the ECB said in its bi-annual Financial Stability Report yesterday that Euro-Zone banks may see another 90 billion euros in net writedowns this year on loans and securities and will need to make provisions for losses of about 105 billion euros next year, which may be even bigger amid "heightened sovereign risks and possible second-round effects of the fiscal consolidation." European stocks weakened further after the April Euro-Zone unemployment rate unexpectedly rose +0.1 to a 12-year high of 10.1% as the region's sovereign debt crisis undermined the outlook for the economy. ECB Vice President Papademos, speaking on the final day of his term as Vice President, said that Europe's economy may struggle to gather strength after contagion from Greece's fiscal crisis eroded confidence in consumers and companies last month and forced governments to deepen spending cuts to reduce budget deficits and that "the consolidation measures can be expected to have some short-term negative impact on growth and employment."

The Asian markets today closed lower with Japan down -0.58%, Hong Kong -1.36%, China -1.05%, Taiwan -1.15%, Australia -0.37%, Singapore -1.35%, South Korea -0.62%, India -2.20%. Chinese stocks declined and helped to send global stock markets lower after manufacturing in China slowed more than expected. China's Federation of Logistics and Purchasing reported that the April China Purchasing Managers' Index fell -1.8 to 53.9, lower than estimates for a decline to 54.5, which raises concern that China's economy, the engine of global growth, is slowing. China's real estate market may also be weakening after the Shanghai Securities reported that real estate closings in Beijing, Shanghai and Shenzhen in May plunged as contract numbers dropped by as much as -70% m/m from April. Japanese stocks closed lower on concern the nation's political instability may slow the economic recovery after Prime Minister Hatoyama said he will consider his political future and do "what's best for the people of Japan" after polls showed 80% of Japanese voters want him to step down 6 weeks before mid-term elections.

Overnight U.S. Stock News

June S&Ps this morning are trading down -14.50 points on global economic growth concerns. The US stock market weakened last Friday and finished with moderate losses (Dow Jones -1.19%, S&P 500 -1.24%, Nasdaq Composite -0.91%). Bearish factors included (1) the action by Fitch Ratings to cut Spain's credit rating to AA+ from AAA, spurring concern the European debt crisis will worsen, (2) concerns that the US economic recovery will slow after April personal spending unexpected failed to increase for the first time in the last 7 months (unchanged versus expectations of +0.3%), (3) the weaker-than-expected May Chicago purchasing managers index (-4.1 to 59.7 versus expectations of -2.8 to 61.0), (4) an escalation of tensions in Korea after a North Korean general warned of "all out war" if any accidental clashes with South Korea break out, and (5) weakness in oil-services companies and energy producers after President Obama extended a moratorium on deep-water offshore drilling permits, suspended exploration in two areas off of Alaska, cancelled pending lease sales in the Gulf of Mexico and proposed sales off Virginia's coast, and suspended operations at 33 deep-water wells being drilled in the Gulf of Mexico.
Bullish factors included (1) an easing of liquidity concerns after the 3-month dollar Libor rate fell for the first time in the last 14 sessions, (2) the unexpected increase in the May US University of Michigan consumer confidence (+0.3 to 73.6 versus expectations of unchanged at 73.3), and (3) the action by Goldman Sachs to raise their operating earnings per share estimates for S&P 500 companies to $78 for 2010 and $93 for 2011, up from $76 and $90 respectively, citing stellar Q1 results and better net margins than they had expected.
British Petroleum Plc (BP) plunged nearly 17% in European trading after it abandoned an attempt to plug the leaking well in he Gulf of Mexico.
Alcoa (AA) fell nearly 2% and Freeport-McMoRan (FCX) dropped 2.4% in pre-market trading after industrial metals prices slumped.

Barchart.com U.S. Morning Call for Friday, May 28, 2010

Overnight Developments

Global stocks are mostly higher with the European Euro Stoxx 50 Index up +0.26% and June S&Ps up +0.30 of a point. The euro strengthened for a second day and most commodities rallied, as crude oil and copper climbed to 1-1/2 week highs. Daimler AG rose 2% and is leading automakers higher after the world's second-largest luxury carmaker raised its profit forecast for its Mercedes-Benz division for the second time in 6 weeks as the global recovery spurs demand. Daimler now expects full-year earnings for its Mercedes-Benz unit to be at the "upper end" of the carmaker's target of 2.5 billion euros ($3.1 billion) to 3 billion euro range, and its Q2 Ebit will exceed the Q1 total of 806 million euros. Daimler's CEO said deliveries of Mercedes-Benz vehicles to China more than doubled in Q1 and China has now become Mercedes-Benz cars' third-largest sales market. Travis Perkins jumped 8.1% after it made a 553 million-pound ($806 million) takeover offer for BSS Group in an attempt to create the UK's largest plumbing and heating materials chain, and Opap SA rose 3.7% after Europe's largest publicly traded gambling company reported Q1 net income of 192.2 million euros, beating analysts' estimates of 182 million euros. Liquidity concerns eased slightly after the 3-month dollar Libor rate dropped to 0.536% from 0.538% and the dollar Libor-OIS spread, a gauge of banks' reluctance to lend, narrowed to 30.4 bp from 30.8 bp.

The Asian markets today closed mostly higher with Japan up +1.28%, Hong Kong +1.73%, China -0.34%, Taiwan +0.72%, Australia +1.79%, South Korea +1.08%, India +1.18%. Asian stocks received a boost after St. Louis Fed President Bullard said the debt crisis is likely to be contained in Europe as US and Asian growth protects them from contagion. Japanese exports gained as the yen weakened to a 1-week low against the dollar with Nintendo ending 2.8% higher and Sony closing with a 1.8% gain. The April Japan jobless rate unexpectedly rose +0.1 to 5.1%, April Japan overall household spending unexpectedly fell -0.7% y/y, and deflation deepened with the April Japan national CPI ex fresh food falling a more than expected -1.5% y/y, signaling domestic demand is restraining the nation's recovery. In another sign of economic uncertainty, the April Japan job-to-applicant ratio unexpectedly fell -0.01 to 0.48, meaning there are 48 jobs for every 100 candidates, its first deterioration in 8 months.

Overnight U.S. Stock News

June S&Ps this morning are trading little changed, up +0.30 of a point. The US stock market yesterday trended higher the entire session and finished sharply higher (Dow Jones +2.85%, S&P 500 +3.29%, Nasdaq Composite +3.73%). Bullish factors included (1) carry-over support from a sharp rally in European bourses after China affirmed its commitment to investing in Europe, which was a boost of confidence for the euro, (2) comments from St. Louis Fed President Bullard who said that Europe's sovereign debt crisis is likely to be contained within the Euro-Zone as the recovery trajectory in the US and Asia protects them from contagion, (3) strength in energy and raw-materials producers after the weaker dollar prompted a rally in most commodities, and (4) a rally in technology stocks led by gains in Microsoft after the company was upgraded to "outperform" from "market perform" at FBR Capital Markets.
Bearish factors included (1) the unexpected downward revision to US Q1 GDP to 3.0% from 3.2% (versus expectations of an increase to 3.4%), and (2) the slightly smaller-than-expected drop in weekly initial unemployment claims (-14,000 to 460,000 versus expectations of -16,000 to 455,000).
Apple (AAPL) climbed 1.5% in European trading as its iPad tablet computer went on sale outside of the US.

Barchart.com U.S. Morning Call for Thursday, May 27, 2010

Overnight Developments

Global stocks are sharply higher with the European Euro Stoxx 50 Index up +2.04% and June S&Ps up +25.50 points. The euro and most commodities strengthened, while Treasuries weakened after China's foreign exchange regulator said reports that it was reviewing its euro holdings are "groundless." This boosted global stocks and the euro as concerns eased from a report late yesterday that China might be looking to sell its euro assets. Mining companies rose as metals prices climbed and insurance companies rallied, led by a 9.5% gain in Ageas, after the insurer sold 4.8 billion euros ($5.9 billion) of southern European government bonds, reducing the concentration of the region in its investment holdings. Commerzbank AG predicts that German bund yields are likely to stay near record lows as Euro-Zone fiscal consolidation weighs on growth. Commerzbank says with "this strong dis-inflationary outlook, together with the renewed woes in the banking system, ECB rate hike expectations have been pushed deep into 2012 and should limit the setback potential for bunds and other core country paper across the curve."

The Asian markets today closed higher with Japan up +1.23%, Hong Kong +1.22%, China +1.64%, Taiwan +1.06%, Australia +1.67%, Singapore +1.62%, South Korea +1.55%, India +1.70%. Asian stocks were boosted after New Zealand and South Korea posted current-account surpluses and Japan reported a fifth monthly gain in exports. Shipping companies rallied after the Baltic Dry Index, a measure of shipping costs for commodities, advanced for the fourth consecutive day. Japan's April exports climbed +40.4% y/y, their fifth straight monthly increase, which adds to signs that Asia-Pacific economies are strengthening. A surge in exports drove most of Japan's 4.9% annualized GDP gain in Q1, with much of that demand from developing markets in Asia. Japan's April exports to China, Japan's biggest market, were up +41.4% y/y to 1.15 trillion yen, a record for the month of April.

Overnight U.S. Stock News

June S&Ps this morning are trading sharply high by +25.50 points. The US stock market yesterday traded in positive territory into early afternoon and then plunged into the close and finished on its low (Dow Jones -0.69%, S&P 500 -0.57%, Nasdaq Composite -0.68%). Bearish factors included (1) a late-day slide in the euro, which helped to drag stocks lower, after a FT report that said China is reviewing its holdings of European government bonds, which may exacerbate the crisis and weaken the euro if China lightens up on its euro assets, (2) concerns that the European liquidity crunch is worsening after it was reported that Banco Bilbao Vizcaya Argentaria SA, Spain's second-largest bank by capitalization, has been unable to renew about $1 billion of short-term funding, along with the increase in the 3-month dollar Libor rate for the 12th consecutive day to a 10-1/2 month high of 0.538%, (3) the -3.3% decrease in the MBA's mortgage purchase index to its lowest level since 1997, which signals the housing market may weaken further as government programs used to prop up sales expired last month, and (4) the prediction from Goldman Sachs that a stronger dollar along with the potential for slower demand from Europe may reduce US economic growth by 0.1% to 0.3%.
Bullish factors included (1) the action by the OECD to revise up its growth forecasts for the global economy to expand 4.6% this year and 4.5% in 2011, compared with an average of 3.7% during the decade through 2006, along with its hike in its US growth estimate for this year to 3.2% instead of a Nov prediction of 2.5%, (2) the stronger-than-expected April US durable goods orders (+2.9% versus expectations of +1.4%), (3) strength in homebuilders after April US new home sales climbed to its best level in nearly 2 years (+14.8% to 504,000 versus expectations of +3.4% t0 425,000), and (4) gains in regional bank stocks after Morgan Keegan & Co. recommended investors should "buy the dip" after a recent pullback of the industry's shares.
Citigroup (C) rallied 4.2% in pre-market trading after hedge-fund operator Bill Ackerman said he purchased 150 million shares of the bank recently.
Microsoft (MSFT) climed 2.8% in pre-market trading after FBR Capital Markets raised its recommendation on the company to "outperform" from "market perform," citing demand from corporations and a slump that erased 14% of the stock's price since May 17.

Barchart.com U.S. Morning Call for Wednesday, May 26, 2010

Overnight Developments

Global stocks are higher with the European Euro Stoxx 50 Index up +2.00% and June S&Ps up +8.20 points. Treasuries are weaker and most commodities rallied as stocks rebounded from recent losses on speculation the global economy is improving. The Organization for Economic Cooperation and Development (OECD) raised its growth forecasts for this year and next. The OECD now predicts the economy of its 30 members will grow 2.7% this year, higher than its 1.9% estimate in Nov, and including China, the global economy will expand 4.6% this year and 4.5% in 2011, compared with an average of 3.7% during the decade through 2006. The Euro-Zone will expand 1.2% this year, compared with a Nov forecast of 0.9%, and the OECD estimates the US economy will grow 3.2% in 2010 instead of the 2.5% predicted in Nov. Mining companies rallied as metals prices gained along with the recommendation from ING Groep NV that there "is excellent value in the mining industry." BHP Billiton rose 3.8%, while Xstrata and Rio Tinto climbed over 5%. Bank stocks also rebounded today led by a 4.9% increase in Royal Bank of Scotland and a 5.2% gain in Lloyds Banking Group Plc after Credit Suisse upgraded both British banks to "outperform" from "neutral," citing the stocks' plunge in the past month. The 3-month dollar Libor rate rose for the 12th consecutive day to 0.538%, a 10-1/2 month high, although the dollar Libor-OIS spread, a gauge of banks' reluctance to lend, narrowed to 30.7 from 31.2 bp.

The Asian markets today closed higher with Japan up +0.66%, Hong Kong +1.11%, China unchanged, Taiwan +1.14%, Australia +0.98%, Singapore +1.71%, South Korea +0.87%, India +2.28%. Asian stocks rallied, led by gains in commodity producers, as speculation of rising demand in China outweighed European debt concerns and rising tensions in Korea. Investor sentiment improved when copper prices rallied after Rio Tinto Group, the world's third-biggest mining company, said it expects commodity demand in China to increase in the next 15 years. Shipping stocks rallied after the Baltic Dry Index, a measure of shipping costs for commodities, jumped 6.2%, its biggest increase since March. Minutes of the Apr 30 BOJ meeting said the central bank should avoid getting too involved in the allocation of capital in its latest effort to spur lending and economic growth, while in a speech today BOJ Governor Shirakawa said measures that border on fiscal policy can "undermine credibility for central banks." Shirakawa also warned against becoming too fixated on prices when setting policy as board members forecast consumer prices will resume rising next year. The BOJ projects that consumer prices excluding fresh food in Japan will climb +0.1% in the year ending March 2012 after falling -0.5% in the current period.

Overnight U.S. Stock News

June S&Ps this morning are trading up +8.20 points. The US stock market yesterday opened sharply lower and recovered nearly all of its losses to finally settle mixed (Dow Jones -0.23%, S&P 500 +0.04%, Nasdaq Composite -0.12%). The S&P 500 and the Dow Jones plunged to 6-1/2 month lows and the Nasdaq slipped to a 3-week low. Bearish factors included (1) carry-over weakness from a plunge in global stock markets after tensions escalated in Korea when North Korea's leader told the military to be combat ready, (2) concerns that Europe's debt-crisis is widening after regulators pushed for the merger of 4 weak Spanish banks and the IMF warned that Spain's banking industry "remains under pressure" as consolidation has been "too slow," (3) the study by Independent Credit View that global banks may have a capital deficit of more than $1.5 trillion by the end of next year and some lenders may require government support, (4) the tumble in energy and raw-material producers after commodities plunged on demand concerns, and (5) liquidity concerns in Europe after the 3-month dollar Libor rate climbed to a 10-1/2 month high of 0.536% and the dollar Libor-OIS spread, a gauge of banks' reluctance to lend, widened to a 10-month high of 31 bp, as banks continue to refrain from lending due to counterparty risk.
Bullish factors included (1) the stronger-than-expected May US consumer confidence which jumped to a 2-year high (+5.6 to 63.3 versus expectations of +0.6 to 58.5), (2) the prediction from World Trade Organization Director Lamy that Europe's debt crisis won't hurt world trade this year and that he expects a "big pickup" in global commerce, (3) comments from St. Louis Fed President Bullard who said Europe's debt crisis probably won't derail the US or global economic recovery and may actually benefit the US because the flight-to-safety effect has pushed bond yields lower," and (4) the plunge in the yield on the 10-year T-note to a nearly 13-month low of 3.06%.
Vertex Pharmaceuticals (VRTX) surged 12% in European trading after a clinical trial showed its experimental hepatitus C drug made treatment more effective when added to standard therapy.

Today's Market Focus

June 10-year T-notes this morning are trading down -18.5 ticks. T-note prices yesterday rallied to a contract high early but drifted lower the rest of the day to finally settle up +16 ticks at 121-215. The 10-year T-note yield tumbled to a 13-month low of 3.06%. Bullish factors included (1) strong safe-haven demand for Treasuries after global stock markets plunged as tensions escalated in Korea when North Korea's leader told the military to be combat ready, (2) concerns that the European debt-crisis is widening after regulators pushed for the merger of 4 weak Spanish banks and the IMF warned that Spain's banking industry "remains under pressure" as consolidation has been "too slow," (3) carry-over support from the plunge in German 10-year bund yields to a record low of 2.56%, and (4) comments from St. Louis Fed President Bullard who said US monetary policy depends on how the economic recovery evolves into next year, which signals he favors no interest rates hikes this year. Bearish factors included (1) the stronger-than-expected May US consumer confidence which jumped to a 2-year high (+5.6 to 63.3 versus expectations of +0.6 to 58.5), (2) overall weak demand for the Treasury's $42 billion 2-year T-note auction that had a 2.93 bid-to-cover ratio, below the 3.08 average for the last 10 sales, (3) and (3) supply pressures ahead of the Treasury's $40 billion 5-year T-note auction on Wednesday.
The dollar index this morning is stronger with the dollar/yen +0.07 yen and the euro/dollar -0.21 cents. The dollar index yesterday closed higher but well off of its best levels. Bullish factors included (1) the plunge in the euro on concern that weakness in Spain's banks signals the European sovereign debt crisis is spreading which may hinder the global economic recovery, along with the warning from the IMF that Spain's banking industry "remains under pressure" as consolidation has been "too slow," (2) a surge in the safe-haven demand for the dollar on geopolitical concerns as tensions on the Korean peninsula intensified, (3) the prediction from Helaba Landesbank Hessen-Thueringen that the euro may fall to $1.15 in the coming quarters as interest rate differentials turn negative for the euro, and (4) increased liquidity concerns in Europe after the 3-month dollar Libor rate climbed to a 10-1/2 month high of 0.536% and the dollar Libor-OIS spread widened to a 10-month high of 31 bp. Bearish factors included the jump in May US consumer confidence to a 2-year high, which signals that the US economy may be strong enough to withstand the European debt crisis, and (2) the larger-than-expected increase in March Euro-Zone industrial new orders which expanded at their best level in 2-3/4 years.
July crude oil prices this morning are up +$1.99 and July gasoline is +4.73 cents. July crude oil prices yesterday closed lower although well off of their worst levels when they settled down -$1.46 per barrel. July gasoline sank to a 3-1/2 month nearest-futures low and closed lower by -3.78 cents per gallon. Bearish factors included (1) the rally in the dollar index which undercuts investment demand for commodities, (2) concerns that Europe's debt crisis is spreading which may crimp economic growth and slash energy demand, (3) geopolitical concerns which caused an overall liquidation of commodities and other risky assets as investors flocked into cash and Treasuries after North Korea's leader told the military to be combat ready as tensions on the Korean peninsula intensified, (4) comments from Kuwait's oil minister who said that OPEC ministers are "not yet" concerned that oil costs less than $70 a barrel and there is no need to hold an emergency meeting, and (5) the outlook for US weekly crude oil inventories to increase for the 16th time in the last 17 weeks when the DOE reports weekly inventories on Wednesday. Bullish factors included (1) the larger-than-expected increase in May US consumer confidence which climbed to a 2-year high, and (2) the larger-than-expected increase in March Euro-Zone industrial new orders which expanded at their strongest pace in 2-3/4 years and signaled increased fuel demand and consumption. Expectations for Wednesday's weekly DOE inventory report are for crude oil supplies to increase +125,000 bbl, gasoline stockpiles to rise +300,000 bbl, distillate inventories to climb +500,000 bbl and the refinery capacity rate to remain unchanged at 87.9%.

Barchart.com U.S. Morning Call for Tuesday, May 25, 2010

Overnight Developments

Global stocks are sharply lower with the European Euro Stoxx 50 Index down -2.32% at a 10-month low and June S&Ps down -28.10 points at a 3-1/2 month low. The dollar index jumped to just under last week's 14-month high and Treasuries and bunds are surging on increased flight-to-safety demand due to mounting tension in the Korean peninsula and on concern Spain's troubled banks signal a widening European debt crisis. Four Spanish banks said they will combine to form Spain's fifth-largest financial group with more than 135 billion euros ($166 billion) in assets, as regulators push lenders to merge with stronger partners after the IMF warned yesterday that Spain's banking industry "remains under pressure" as consolidation has been "too slow." Banco Santander is down nearly 5% and Bank of Ireland plunged 11% as bank stocks lead the decline in European shares. Technology stocks in Europe also weakened after Royal Bank of Scotland Group Plc maintained a "cautious" view on Europe's semiconductor industry, citing a "potential slowdown in end demand, particularly in China." The North Korea Intellectuals Solidarity Group said on its website that the country's military was put on alert, and the US announced plans to conduct anti-submarine exercises with South Korea as tensions escalate on the Korean peninsula. Liquidity concerns continue to increase in Europe after the 3-month dollar Libor rate climbed to 0.536%, a 10-1/2 month high, and the dollar Libor-OIS spread, a gauge of banks' reluctance to lend, widened to a 10-month high of 31 bp.

The Asian markets today closed lower with Japan down -3.06%, Hong Kong -3.47%, China -2.07%, Taiwan -3.23%, Australia -2.96%, Singapore -2.69%, South Korea -2.59%, India -2.71%. Asian stocks slumped with Japan's Nikkei 225 Stock Index falling to a 5-1/2 month low after North Korean leader Kim Jong Il told the country's military to be combat-ready as geopolitical tensions rise. Asian mining companies and energy producers sank as commodities plummeted on demand concerns, while the South Korean won dropped to a 10-month low. Most exporters weakened on concern the European debt crisis will widen and dampen demand for Asian exports. On the positive side, Henderson Global Investors recommends long positions in Chinese equities saying Europe's debt crisis may prompt China's government to delay further measures to slow the economy, making Chinese stocks attractive.

Overnight U.S. Stock News

June S&Ps this morning are trading down sharply by -28.10 points. The US stock market yesterday recovered from early losses and rallied into late morning but reversed its gains and sold off into the close and finished on its low (Dow Jones -1.24%, S&P 500 -1.29%, Nasdaq Composite -0.69%). Bearish factors included (1) carry-over weakness from a slump in European bourses on concern that some financial institutions are facing stress after the Bank of Spain took over CajaSur, a savings bank that was crippled by property loan defaults, (2) the prediction from the president of the Hussman Strategic Total Return Fund that last week's decline in the S&P 500 signals "sharply negative market implications" that could send the S&P 500 down to 1,000 by mid-August after the reversal in the ratio of stocks making 52-week lows versus those making 52-week highs, (3) the action by UBS to cut its 2010 S&P 500 EPS estimate to $87 from $90 and to cut its 2011 S&P 500 EPS estimate to $97 from $100, citing the euro's slump against the dollar and lower commodity prices, and (4) fears of a liquidity crunch after the 3-month dollar Libor rate climbed to 0.51% the highest level in 10-1/4 months, while the dollar Libor-OIS spread, a gauge of banks' reluctance to lend, widened to a 9-1/2 month high of 28.5 bps.
Bullish factors included (1) carry-over support from a rally in Chinese stocks on speculation that China may delay measures to slow its economy, which would benefit the global economy as well, after an official at China's National Development and Reform Commission warned that China should be cautious in introducing new tightening measures to slow its economy because the global economic environment is complex, (2) signs of an improving US housing market after April US existing home sales rose to their best level in 5 months (+7.6% to 5.77 million versus expectations of +4/7% to 5.60 million), and (3) strength in technology stocks after Apple surged when Morgan Stanley raised its share-price estimate on the company and added the stock to its list of "best ideas."
Morgan Stanley (MS) dropped 3.8% in European trading on carry-over weakness from a drop in European banking shares on concern that Europe's debt crisis is widening.
Microsoft (MSFT) fell 2.2% in pre-market trading after its CEO said the company is less optimistic about China as a market than India or Indonesia because of China's lack of progress in stamping out software piracy.

Today's Market Focus

June 10-year T-notes this morning are trading up +1-0.5/32 points at a contract high on strong safe-haven demand as tensions in Korea rise and on concerns Europe's debt crisis is widening. T-note prices yesterday gyrated on either side of unchanged throughout the day and finally settled down -4.5 ticks at 121-055. Bearish factors included (1) the stronger-than-expected April US existing home sales which rose to their best level in 5 months (+7.6% to 5.77 million versus expectations of +4/7% to 5.60 million), and (2) supply pressures ahead of the Treasury's $42 billion 2-year T-note auction on Tuesday. Bullish factors included (1) increased safe-haven demand for Treasuries on speculation that Europe's debt crisis was spreading after the Bank of Spain took over a failed lender, (2) the prediction from Capital Economics that US M3 money supply has shrunk -5.4% in the past year, which indicates the economy may face deflationary pressure as fewer dollars chase the same amount of goods, and (3) the Fed's annual report to Congress which stated that the Fed doesn't intend to sell any of its assets, including more than $1.1 trillion in mortgage-backed securities, until after it begins raising interest rates.
The dollar index this morning is stronger with the dollar/yen -0.93 yen and the euro/dollar -1.73 cents. The dollar index yesterday moved higher and finished with moderate gains. Bullish factors included (1) weakness in the euro on speculation that European institutions still face the prospect of losses from Greek debt holdings after the Bank of Spain seized a lender that was decimated by property-loan defaults, (2) the prediction from Tokai Tokyo Securities that the euro may extend its recent decline down to $1.17 as speculation mounts that the European debt crisis will push the Euro-Zone into recession, (3) increased safe-haven demand for dollars on geopolitical concerns after South Korea said it will halt trade with North Korea and seek United Nations Security Council action over the sinking of one of its warships in March that killed 46 sailors, and (4) strong demand for dollars after the 3-month dollar Libor rate rose for the tenth straight day to 0.510%, its highest level in 10-1/4 months, while the dollar Libor-OIS spread, a gauge of banks' reluctance to lend, widened to 28.5 bp, the most in 9-1/2 months. A bearish factor was the comment from World Bank President Zoellick that the European Union's debt crisis might slow the US economic recovery even as the region's rescue package "bought time."
July crude oil prices this morning are down -$2.62 and July gasoline is down -5.71 cents. July crude oil prices yesterday fluctuated on both sides of unchanged and finally settled up +$0.17 per barrel. July gasoline closed higher by +0.43 of a cent per gallon. Bullish factors included (1) signs that the US economy continues to expand which is positive for energy consumption and demand after Apr US existing home sales increased more than expected, and (2) speculation that China may delay measures to slow its economy which would keep its energy demand strong after an official of China's National Development and Reform Commission warned that China should be cautious in introducing new tightening measures to slow its economy because the global economic environment is complex. Bearish factors included (1) the stronger dollar which dampens investment demand for commodities, (2) concern that the European sovereign-debt crisis is spreading after the Bank of Spain took over a failed savings bank that was crippled by property loan defaults, and (3) fund liquidation of crude oil contracts after the CFTC's Commitment of Traders Report showed large speculators liquidated their long positions by -32% to 89,335 in the week ended May 18, the biggest weekly decline in 8 months.

Barchart.com U.S. Morning Call for Monday, May 24, 2010

Overnight Developments

Global stocks are mixed with the European Euro Stoxx 50 Index down -0.50% and June S&Ps down -11.30 points. The euro weakened and helped push European and US stocks lower on concern Europe's fiscal crisis may spread after the Bank of Spain over the weekend took over CajaSur, a savings bank crippled by property loan defaults, while commodities rallied on speculation China will delay efforts to cool economic growth. European automakers declined amid speculation that government efforts to reduce their budget deficits may curb economic growth, while energy producers weakened as crude oil declined. US stocks also weakened after UBS cut its 2010 S&P 500 EPS estimate to $87 from $90 and also lowered its 2011 EPS estimate to $97 from $100. Fears of a liquidity squeeze continue to mount after the 3-month dollar Libor rate climbed to 0.51% the highest level in 10-1/4 months, while the dollar Libor-OIS spread, a gauge of banks' reluctance to lend, widened to a 9-1/2 month high of 28.5 bps.

The Asian markets today closed mostly higher with Japan down -0.27%, Hong Kong +0.62%, China +3.78%, Taiwan +1.17%, Australia +2.09%, Singapore +0.84%, South Korea +0.71%, India +0.15%. China's Shanghai Stock Index closed with solid gains and led most Asian markets higher after an official with the National Development and Reform Commission's price monitoring center wrote an article in the China Securities Journal saying China should be cautious in introducing new tightening measures because the global economic environment is complex. Chinese property developers rallied on optimism the government will delay further tightening measures, while Asian automakers strengthened after the Shanghai Securities News reported the government will extend subsidies for trade-in vehicles to the end of this year. The South Korean won sank to an 8-month low against the dollar after the government said it will halt trade with North Korea and seek United Nations Security Council action over the sinking of one of its warships in March that killed 46 sailors. US President Obama offered "unequivocal" support for South Korea's defense after evidence showed a North Korean submarine sank the ship, which raises the geopolitical risk on the Korean peninsula.

Overnight U.S. Stock News

June S&Ps this morning are trading down -11.30 points. The US stock market last Friday opened on its low and rallied throughout the day and finished just under its high (Dow Jones +1.25%, S&P 500 +1.50%, Nasdaq Composite +1.14%). The S&P 500 sank to a 3-1/2 month low but shed its losses and closed higher, while the Dow Jones and Nasdaq slipped to 2-week lows but recovered their losses and settled higher. Bullish factors included (1) carry-over support from a rebound in European stock markets after German lawmakers approved their country's share of the $1 trillion Euro-Zone bailout, which temporarily allays concern that the Euro-Zone is divided on resolving its debt crisis, (2) the US Labor Department's report saying that payrolls increased in 38 states in April, which suggests that the US labor market is strengthening, and (3) the fall in the 10-year T-note yield to a 7-1/2 month low of 3.11%, which is beneficial for consumers and businesses.
Bearish factors included (1) concerns that the European economy is weakening after the unexpected fall in the May German IFO business climate index along with the larger-than-expected decline in the May Euro-zone PMI composite index, which may lead to slower European imports of US goods and slow the US economy as well, (2) data from EPFR Global that showed investors withdrew $12 billion from US and European equity funds in the week to May 19, the most in almost 2 years, and (3) concerns that a liquidity crunch may be forthcoming after the 3-month dollar Libor rate rose for the ninth straight day to a 10-month high of 0.497% and the dollar Libor-OIS spread, a gauge of banks' reluctance to lend, widened to a 9-1/2 month high of 27 bp.
Wells Fargo (WFC) dropped 2% in pre-market trading after Goldman Sachs downgraded the lender to "neutral" from "buy," saying there is "more relative value" in its peers.

Today's Market Focus

June 10-year T-notes this morning are trading up +5 ticks. T-note prices last Friday rallied to a contract high early in the day but then drifted lower to finally settle up +11.5 ticks at 121-100. The yield on the 10-year T-note yield plunged to a 7-1/2 month low of 3.11%. Bullish factors included (1) continued safe-haven demand for Treasuries after global stock markets sank early in the day on concern about the European sovereign-debt crisis and the rise in the Libor-OIS spread to a 9-1/2 month high of 27 bp, (2) carry-over support from the drop in German 10-year bund yields to 2.618%, the lowest yield since records for a reunified Germany began in 1990, and (3) the prediction from Societe Generale that the US and the Euro-Zone "now stand on the edge of a deflationary precipice," that will cause the yield on the 10-year T-note to drop below 2.00%. Bearish factors included (1) reduced safe-haven buying of Treasuries after the S&P 500 rebounded from a 3-1/2 month low and closed higher, along with the rally in the euro after German lawmakers approved their country's share of the $1 trillion Euro-Zone bailout, and (2) the +$14.8 billion (+0.6%) increase in the Fed's assets to a record $2.35 billion for the week ended May 19, which increases the prospects of future inflationary pressures.
The dollar index this morning is higher with the dollar/yen +0.09 yen and the euro/dollar -1.79 cents. The dollar index last Friday fell to a 1-week low and closed lower for the third straight day. Bearish factors included (1) a rally in the euro to a 1-week high after German lawmakers approved their country's share of the $1 trillion Euro-Zone bailout, which at least temporarily allayed market concern that the Euro-Zone is divided on resolving its debt crisis, (2) jawboning from ECB Executive Board member Stark who said the euro's purchasing power "is and remains secure," and (3) the prediction from Morgan Stanley that there is an "elevated threat" that the central banks of Europe, the US and Japan will intervene in currency markets if the euro continues to slide. Bullish factors included (1) the unexpected decline in the May German IFO business climate, which was euro-negative, (2) the action by Nomura Securities to cut its forecast for the euro to $1.15 by year-end from a previous call for $1.30, citing the debt crisis, and (3) continued strong demand for dollars after the 3-month dollar Libor rate rose for the ninth straight day to 0.497%, its highest level in 10 months, while the dollar Libor-OIS spread, a gauge of banks' reluctance to lend, widened to 27 bp, the most in 9-1/2 months.
July crude oil prices this morning are down -16 cents and July gasoline is -0.05 of a cent. July crude oil prices last Friday couldn't hold an early rally and settled lower for the ninth consecutive session by -$0.76 per barrel. July gasoline closed lower by -0.63 of a cent per gallon. Bearish factors included (1) concern that the European sovereign-debt crisis will drag the global economy into another recession, which would decimate energy demand, and (2) the report from the API that April US gasoline production rose +3% y/y to 9.1 million bpd, its second highest monthly total on record. Bullish factors included (1) the weaker dollar, which increases investment demand for commodities, and (2) the recovery in the equity market, which shook off early losses and closed higher, which increases optimism in the economic recovery and fuel demand.

Barchart.com U.S. Morning Call for Friday, May 21, 2010

Overnight Developments

Global stocks are mostly lower with the European Euro Stoxx 50 Index down -2.51% and June S&Ps down -6.10 points. The euro strengthened and lifted European and US stock prices up from their lows after Germany's lower house of parliament approved the country's share of the $1 trillion Euro-Zone bailout package. The bill still needs to be approved by the upper house of parliament, or Bundesrat, later today before the German president can sign it into law. European stocks moved lower after German business confidence unexpectedly declined in May after Europe's debt crisis rattled financial markets and fueled concerns about the future of the euro. The May German IFO business climate eased -0.1 to 101.5, versus expectations of a +0.3 point gain to 101.9. Also undercutting European stock prices was the larger-than-expected drop in the May Euro-Zone PMI composite which fell -1.1 to 56.2, versus expectations of a -0.1 drop to 57.2, which suggests that the Euro-Zone economy may struggle to gather strength as the debt crisis hurts confidence. According to EPFR Global, investors withdrew $12 billion from US and European equity funds in the week to May 19, the most in almost 2 years; on concern Europe's sovereign-debt crisis will slow global growth

The Asian markets today closed mostly lower with Japan down -2.45%, China +1.57%, Taiwan -2.51%, Australia -0.26%, Singapore -1.90%, India -0.45%. Japan's Nikkei 225 Stock Index plunged to a 5-1/2 month low after disappointing US economic reports on jobless claims and leading economic indicators point to a slowing of the US economy, which may weaken demand for Japanese exports. Japanese exporters closed lower and led stock declines, while Asian raw materials and energy producers also fell as commodities declined. The yen fell back against the dollar after BOJ Governor Shirakawa warned of the impact of "excessive" yen gains. Shirakawa also told reporters following the central bank's policy meeting in which they left the benchmark interest rate unchanged at 0.1% that while the European debt crisis has had a "limited" effect on Japan's recovery so far, any escalation would become a "downside factor."

Overnight U.S. Stock News

June S&Ps this morning are trading down -6.10 points. The US stock market yesterday sold-off sharply and finished just above their lows (Dow Jones -3.60%, S&P 500 -3.90%, Nasdaq Composite -3.11%). The Dow Jones, S&P 500 and the Nasdaq all dropped to 2-week lows. Bearish factors included (1) carry-over weakness from a plunge in European stock markets on concern that Europe's sovereign-debt crisis is getting worse and that European leaders remain divided on how to resolve the region's sovereign-debt crisis, (2) concerns that the US labor market is faltering after the unexpected increase in weekly initial unemployment claims which climbed to a 5-week high (+25,000 to 471,000 versus expectations of a -4,000 drop to 440,000), (3) the unexpected decline in April leading indicators which fell for the first time in a year and may signal the US recovery will slow in the second half of the year (-0.1% versus expectations of +0.2%), (4) the decline in energy producers after crude oil plunged to a 7-1/2 month low, and (5) comments from Fed Governor Tarullo who warned that Europe's debt crisis poses a threat to the US and world economies as trade shrinks and banks incur losses on their European investments.
Bullish factors included (1) the slightly stronger-than-expected May Philadelphia Fed manufacturing index (+1.2 to 21.4 versus expectations of +1.1 to 21.3), and (2) the plunge in the yield on the 10-year T-note to a 5-1/2 month low of 3.20%, which reduces the cost of capital for consumers and businesses.
Dell (DELL) fell 2.5% in pre-market trading after it reported that its Q1 gross margin excluding some items were 17.6%, below the 17.9% expected by analysts, as rising component costs eroded the benefit of a rebound in corporate demand.
Salesforce.com (CRM) slumped 6.8% in European trading after the company forecast Q2 profit of 26 cents to 27 cents a share, below the 30 cent estimate expected by analysts.

Today's Market Focus

June 10-year T-notes this morning are trading up +12 ticks. T-note prices yesterday opened higher and remained well bid throughout the day and closed up +22.5 ticks at 120-305. June T-notes rallied to a contract high and the yield on the 10-year T-note yield dropped to a 5-1/2 month low of 3.20%. Bullish factors included (1) a surge in the safe-haven demand for Treasuries after global stock markets plummeted on concern that Europe's sovereign-debt crisis is getting worse, (2) the unexpected increase in weekly initial unemployment claims which climbed to a 5-week high (+25,000 to 471,000 versus expectations of a -4,000 drop to 440,000), (3) the unexpected decline in April leading indicators which fell for the first time in a year and signaled the US recovery may slow in the second half of the year (-0.1% versus expectations of +0.2%), (4) carry-over support from the plunge in German 10-year bund yields to 2.658%, the lowest yield since records for a reunified Germany began in 1990, (5) the prediction from Royal Bank of Scotland Group Plc that the yield on the 10-year T-note may drop to 2.50% as investors lose confidence in some European nation's ability to repay their debts, and (6) comments from Fed Governor Tarullo who warned that Europe's debt crisis poses a threat to the US and world economies as trade shrinks and banks incur losses on their European investments. A bearish factor was the slightly stronger-than-expected May Philadelphia Fed manufacturing index (+1.2 to 21.4 versus expectations of +1.1 to 21.3).
The dollar index this morning is weaker with the dollar/yen -0.06 yen and the euro/dollar +0.18 cents. The dollar index yesterday weakened and closed lower for a second day. Bearish factors included (1) short-covering in the euro which erased early losses and closed higher on speculation the ECB may intervene in the forex markets to support the euro, (2) the action by Nomura Holdings to push back its forecast for Fed tightening to June 2011 from March 2011, and (3) comments from Fed Governor Tarullo who said that Europe's debt crisis may stall the recovery of the entire global economy, which may keep the dollar's interest rate differentials weak as the Fed refrains from raising interest rates. Bullish factors included (1) concern that European leaders remain divided on how to resolve the region's sovereign-debt crisis after ECB Council member Jose Manuel Gonzalez-Paramo said Germany didn't tell the ECB before its surprise ban on naked short selling in government bonds along with comments from French Finance Minister Lagarde who said Euro-Zone nations need greater coordination, (2) the prediction from Westpac Banking that the euro will decline to $1.20 within a month, (3) comments from the leader of Euro-Zone finance ministers, Jean-Claude Juncker, who said he sees no "immediate" intervention to halt the euro's slide, and (4) continued strong demand for dollars as banks remain reluctant to lend due to counterparty risk as the 3-month dollar Libor rate rose to 0.484%, its highest in 9-1/2 months, while the dollar Libor-OIS spread, a gauge of banks' reluctance to lend, widened to 25.4 bp, the most in 9 months.
July crude oil prices this morning are down -88 cents and July gasoline is -1.06 cents. July crude oil prices yesterday sank to a 7-1/2 month low and closed down -$1.68 per barrel. July gasoline dropped to a 3-month low and closed lower by -5.03 cents per gallon. Bearish factors included (1) the sell-off in global equity markets on concern the European sovereign-debt crisis is getting worse, which erodes confidence in the economic recovery and energy demand, (2) weaker-than-expected US economic data that showed weekly initial unemployment claims rising to a 5-week high and Apr leading indicators unexpectedly declining for the first time in a year, which may lead to reduced fuel demand as the economy slows, and (3) the weaker than expected Q1 Japan GDP, which indicates weaker than expected energy consumption in the world's second-largest economy. A bullish factor was the reversal in the dollar which erased an early rally and closed lower.

Barchart.com U.S. Morning Call for Thursday, May 20, 2010

Overnight Developments

Global stocks are lower with the European Euro Stoxx 50 Index down -0.27% and June S&Ps down -7.60 points. A weaker euro is undercutting European stocks on concern European governments are divided on how to contain financial turmoil in the wake of the sovereign-debt crisis. Italy's Il Sole 24 Ore newspaper cited comments from ECB Council member Jose Manuel Gonzalez-Paramo who said Germany didn't tell the ECB before its surprise ban on naked short selling in government bonds. Demand for dollars remains strong as banks remain reluctant to lend due to counterparty risk as the 3-month dollar Libor rate rose to 0.484% today, its highest in 9-1/2 months, while the dollar Libor-OIS spread, a gauge of banks' reluctance to lend, widened to 25.4 bp, the most in 9 months. Limiting losses in European stocks is a 2.7% gain in Vienna Insurance Group after Austria's largest insurer reported better-than-expected Q1 profits and strength in automakers led by a 2.3% increase in Fiat SpA after Royal Bank of Scotland raised its recommendation on Italy's largest automaker to "buy" from "hold."

The Asian markets today closed lower with Japan down -1.54%, Hong Kong -0.17%,China -1.31%, Taiwan -1.78%, Australia -1.61%, Singapore -0.76%, South Korea -1.72%, India +0.68%. Japan's economy grew less than expected in Q1 as an export-led recovery failed to fuel consumer spending. Q1 Japan GDP rose an annualized 4.9%, less than the 5.5% expected. The GDP report showed more than half of the growth came from trade as consumer spending rose +0.3% q/q, slowing from a +0.7% q/q increase in Q4. Price declines in Japan did moderate last quarter, with the domestic demand deflator falling -1.9%, the smallest drop in a year. Japan's Finance Minister Kan said he expects the BOJ to support the economy with "flexible and appropriate" policy and that officials must be "cautious" about calling the recovery self-sustaining. Other economies in Asia were much stronger than Japan's with Singapore's Q1 GDP expanding at an annual 38.6% pace, while in Taiwan, its Q1 GDP expanded 13.27% from a year earlier, the fastest pace in 32 years.

Overnight U.S. Stock News

June S&Ps this morning are trading down -7.60 points. The US stock market yesterday rallied early but moved lower mid-morning and remained in negative territory the rest of the day and finished with moderate losses (Dow Jones -0.63%, S&P 500 -0.51%, Nasdaq Composite -0.82%). The Dow Jones, S&P 500 and the Nasdaq all fell to 1-1/2 week lows. Bearish factors included (1) carry-over weakness from a drop in European stock markets on concern that Germany's newly implemented ban on naked short-selling will lead to further regulation of financial markets that may reduce economic growth, (2) concern that the slumping US housing market has yet to bottom after the inventory of US homes in foreclosure in Q1 rose to 4.63%, the highest level since records began in 1979, (3) the fall in raw materials and energy producers as most commodities slumped on demand concerns along with the plunge in crude oil to a 7-1/2 month low, and (4) comments from ECB Council member and Bundesbank President Weber who said he's concerned of "dramatic" developments in financial markets on May 24 unless German lawmakers agree on May 21 to support an aid package to support the euro.
Bullish factors included (1) a rebound in the euro which recovered from a 4-year low and closed higher after comments from IMF First Deputy Director Lipsky who said that the euro's current level is close to an "equilibrium" value and that its fall to a 4-year low against the dollar may actually benefit Euro-Zone exports and strengthen the European economy, (2) a continued lack of inflation after the unexpected decline in April consumer prices (-0.1% m/m and +2.2% y/y versus expectations of +0.1% m/m and +2.4% y/y), (3) the smaller-than-expected rise in April core CPI which had its smallest y/y increase in 44 years (unchanged m/m and +0.9% y/y versus expectations of +0.1% m/m and +1.0% y/y), and (4) the minutes of the Fed's Apr 27-28 FOMC meeting in which Fed officials revised up their growth estimates for US 2010 GDP to 3.2% to 3.7%, up from a Jan forecast of 2.8% to 3.5%.

Today's Market Focus

June 10-year T-notes this morning are trading up +5.5 ticks. T-note prices yesterday traded mixed early and then climbed to a 1-1/2 week high when they erased most of their gains into the close and settled up +1.5 ticks at 120-080. The 10-year T-note yield dropped to a 1-1/2 week low of 3.31%. Bullish factors included (1) a lack of inflation after the unexpected decline in April consumer prices (-0.1% m/m and +2.2% y/y versus expectations of +0.1% m/m and +2.4% y/y), (2) the smaller-than-expected rise in April core CPI which had its smallest y/y increase in 44 years (unchanged m/m and +0.9% y/y versus expectations of +0.1% m/m and +1.0% y/y), (3) increased demand for the safe-haven of Treasuries after the stock market plunged on concern that Europe will further regulate financial markets and slow economic growth, (4) the increase in the inventory of US homes in foreclosure in Q1 to 4.63%, the highest level since records began in 1979, and (5) the minutes of the Fed's Apr 27-28 FOMC meeting in which Fed officials lowered their outlook for inflation as they cut their estimates for the 2010 core PCE deflator to a range of 0.9% to 1.2%, down from a Jan projection of 1.1% to 1.7%, and also cut their estimates for 2011 core inflation to 1.0% to 1.5%, below a Jan forecast of 1.0% to 1.9%. Bearish factors included (1) the rebound in the euro which recovered from a 4-year low and closed higher, eroding some safe-haven demand for Treasuries, and (2) the minutes of the Fed's Apr 27-28 FOMC meeting in which Fed officials raised their growth estimates for US 2010 GDP to 3.2% to 3.7%, up from a Jan forecast of 2.8% to 3.5%.
The dollar index this morning is higher with the dollar/yen -0.69 yen and the euro/dollar -0.71 cents. The dollar index yesterday rallied to a 14-month high early in the session but erased its gains and closed sharply lower. Bearish factors included (1) a reversal in the euro which strengthened and closed higher after falling to a 4-year low, (2) comments from ECB Council member Weber who said the Euro-Zone must "urgently" tighten its fiscal rules, and (3) comments from IMF First Deputy Director Lipsky who said that the euro's current level is close to an "equilibrium" value and that its fall to a 4-year low against the dollar may actually benefit Euro-Zone exports and strengthen the European economy. Bullish factors included (1) the prediction from Commerzbank that the euro may extend losses as investors bet Germany's ban on naked short-selling is an "act of desperation" and a sign that policy makers expect the European debt crisis to worsen, (2) the action by Credit Suisse Group AG to cut its 3-month euro forecast to $1.16 from a previous forecast of $1.29 as the sovereign-debt crisis forces the ECB to keep interest rates at record lows, and (3) strong demand for dollars after the 3-month Libor rate rose to a 9-1/2 month high of 0.477% and the Libor-OIS spread, a gauge of banks' reluctance to lend, rose to a 9-month high of 25 bp.
June crude oil prices this morning are down -77 cents and June gasoline is down -2.12 cents. June crude oil prices yesterday slumped to a 7-1/2 month low but shed their losses into the close and settled up +$0.46 per barrel. June gasoline sank to a 3-month low and closed lower by -2.79 cents per gallon. Bearish factors included (1) the plunge in global equity markets after Germany's ban on naked short-selling sparked concern that regulation of financial markets will increase, which threatens to reduce economic growth and energy demand, (2) the early rally in the dollar index to a 14-month high, and (3) the smaller-than-expected decline in weekly gasoline inventories (-294,000 bbl versus expectations of a -1.0 million draw). Bullish factors included (1) the rebound in the euro which recovered from a 4-year low and closed higher, (2) the smaller-than-expected increase in weekly crude oil inventories (+162,000 bbl versus expectations for +500,000 bbl), and (3) the unexpected decline in the weekly refinery capacity rate (-0.5 to 87.9% versus expectations of a +0.2 increase to 88.6%).

Barchart.com U.S. Morning Call for Wednesday, May 19, 2010

Overnight Developments

Global stocks are lower with the European Euro Stoxx 50 Index down -2.21% and June S&Ps down -7.10 points. The euro sank to a fresh 4-year low and undercut commodity prices with a slide in crude oil to a 7-1/2 month low. European stocks are weaker on concern regulation will increase after Germany banned naked short selling against government bonds and financial institutions. Bank stocks are leading the way lower with Santander, Spain's biggest lender, down 4%, BNP Paribas SA, France's biggest, down 3.2%, and Deutsche Bank, Germany's biggest bank, down 2.5%. ICAP Plc slid 3.5% after the world's largest broker of transactions between banks said full-year pretax profit fell 5% as markets stabilized and volatility declined, while BMW slumped 4.4% after Bank of America Merrill Lynch cut its recommendation on the carmaker to "underperform" from "neutral," citing concerns demand may be hurt by government austerity measures. On the positive side, March Euro-Zone construction output surged +7.6% m/m, the first increase in a year and the biggest gain in 14 years, led by a +27% m/m increase in German construction, the biggest gain among the 27 EU countries.

The Asian markets today closed lower with Japan down -0.54%, Hong Kong -1.83%, China -0.33%, Taiwan -0.34%, Australia -1.87%, Singapore -2.45%, South Korea -0.93%, India -2.77%. Asian stocks weakened on concern Europe's debt crisis will worsen and threaten the region's export-laden economies. Chinese freight and shipping lines fell after an article in the Shanghai Securities News said China's export growth to Europe might slow by up to 7% because of the debt crisis. Europe is China's biggest export destination, making up 20% of its total overseas sales. Chinese property stocks and real-estate developers also closed lower after Goldman Sachs and Credit Suisse Group cur their profit estimates and share-price forecasts for Chinese property developers, citing the impact of government curbs on transaction volumes. Japanese exporters fell after the yen rose to a 1-1/2 week high against the dollar, while raw-material producers declined on concern the European debt crisis will worsen and crimp demand for commodities.

Overnight U.S. Stock News

June S&Ps this morning are trading down -7.10 points. The US stock market yesterday opened higher but shed its gains into early afternoon and collapsed into the close where it finished just above its low (Dow Jones -1.08%, S&P 500 -1.42%, Nasdaq Composite -1.57%). Bearish factors included (1) the plunge in the euro which erased an early rally and fell to a 4-year low on concern that European austerity measures will diminish growth prospects for their respective economies and in turn weaken the global economy, (2) the weaker-than-expected April US building permits which fell to a 6-month low and may signal a renewed housing slump (-11.5% to 606,000 versus expectations of -0.4% to 677,000), (3) the drop in credit card issuers after Democratic Senator Whitehouse from Rhode Island said he plans to introduce legislation to cap interest rates on credit cards, and (4) the action by German lawmakers to ban "naked short-selling" on some assets starting Wednesday along with the Bank of Italy's decision to allow lenders to exclude losses on government bonds, which fueled speculation that European finances are worse than anticipated.
Bullish factors included (1) carry-over strength from an early rally in European equity markets after EU Economic and Monetary Affairs Commissioner Rehn said Greece's debt crisis won't unleash a continent-wide austerity drive with the potential to tip the Euro-Zone economy back into recession, (2) a rally in homebuilders after the stronger-than-expected April US housing starts report, which rose to its best level in 1-1/2 years (+5.8% to 672,000 versus expectations of +3.8% to 650,000), (3) slack inflation pressures after the unexpected decline in April producer prices (-0.1% m/m and +5.5% y/y versus expectations of +0.1% m/m and +5.6% y/y), and (4) comments from Cleveland Fed President Pianalto who said that the US economy is recovering only gradually from recession which will require the Fed to keep interest rates "exceptionally low" for an "extended period."
Alcoa (AA) and Freeport-McMoRan Copper & Gold (FCX) declined more than 1.5% in European trading as metal prices fell.
Citigroup (C) and Wells Fargo (WFC) dropped over 2% in pre-market trading as they slide in sympathy with a drop in European bank stocks.

Today's Market Focus

June 10-year T-notes this morning are trading up +6 ticks. T-note prices yesterday strengthened after mid-morning and rallied into the close where they settled up +20 ticks at 120-065. The 10-year T-note yield dropped to a 1-week low of 3.365%. Bullish factors included (1) slack inflation pressures after the unexpected decline in April producer prices (-0.1% m/m and +5.5% y/y versus expectations of +0.1% m/m and +5.6% y/y), (2) increased demand for the safe-haven of Treasuries after the euro erased an early rally and plunged to a 4-year low, (3) the weaker-than-expected April US building permits report, which fell to a 6-month low and may signal a renewed housing slump (-11.5% to 606,000 versus expectations of -0.4% to 677,000), (4) the prediction from Guggenheim Partners LLC that the Greek bond and European contagion environment will have the Fed on hold for quite some time and that there is real fear of a deflationary environment going forward, and (5) comments from Cleveland Fed President Pianalto who said that the US economy is recovering gradually from recession which will require the Fed to keep interest rates "exceptionally low" for an "extended period." Bearish factors included (1) the stronger-than-expected April PPI ex food and energy (+0.2% m/m and +1.0% y/y versus expectations of +0.1% m/m and +0.9% y/y), and (2) the stronger-than-expected April US housing starts, which rose to its best level in 1-1/2 years (+5.8% to 672,000 versus expectations of +3.8% to 650,000).
The dollar index this morning is slightly lower with the dollar/yen -1.00 yen and the euro/dollar -0.09 cents. The dollar fell back from a 14-month high posted in overnight trade and the euro slipped to a fresh 4-year low overnight. The dollar index yesterday overcame early weakness and surged to a 14-month high and closed higher for the sixth straight session. Bullish factors included (1) a reversal in the euro which plunged to a fresh 4-year low after the action by German lawmakers to ban "naked short-selling" on some assets starting Wednesday along with the Bank of Italy's decision to allow lenders to exclude losses on government bonds, which fueled speculation that European finances are worse than anticipated, (2) the prediction from former BOE official Blanchflower that another Euro-Zone financial rescue package may be "inevitable" and the euro's "unstoppable" fall could send it to parity with the US dollar, (3) the weaker-than-expected May German ZEW economic sentiment survey, which was euro-negative, (4) the prediction from Resona Bank that the ECB may tolerate further euro weakness as a way to counter deflation, and (5) strong demand for dollars after the 3-month Libor rate rose to a 9-1/4 month high of 0.465% and the Libor-OIS spread, a gauge of banks' reluctance to lend, remained unchanged at a 9-month high of 24 bp. Bearish factors included (1) comments from EU Economic and Monetary Affairs Commissioner Rehn who said Greece's debt crisis won't unleash a continent-wide austerity drive with the potential to tip the Euro-Zone economy back into recession, and (2) the weaker-than-expected April US building permits which fell to a 6-month low and may signal a renewed housing slump.
June crude oil prices this morning are down -$1.03 at a 7-1/2 month low and June gasoline is -2.05 cents. June crude oil prices yesterday erased an early rally and sold-off into the close and settled down -$0.67 per barrel. June gasoline closed unchanged. June crude oil plunged to 5-month low and closed lower for the sixth consecutive sesion, while Jun gasoline slid to a 3-month low. Bearish factors included (1) the stronger dollar, (2) the reversal in the equity market which erased an early rally and closed lower which dampened confidence in the economic outlook and energy demand, and (3) the outlook for US weekly crude inventories to increase for the 15th time in the last 16 weeks when the DOE releases its weekly inventory report on Wednesday. Bullish factors included (1) an easing of European sovereign-debt concerns after EU Economic and Monetary Affairs Commissioner Rehn said Greece's debt crisis won't unleash a continent-wide austerity drive with the potential to tip the Euro-Zone economy back into recession, (2) the stronger-than-expected April US housing starts which climbed to their highest level in 1-1/2 years and boosts optimism in the US economy and energy demand, and (3) comments from Algerian Oil Minister de Vasconcelos who said OPEC is "tense" about the recent decline in oil prices and may call an extraordinary meeting if the price drop continues. Expectations for Wednesday's DOE inventory report are for crude oil stockpiles to climb +500,000 bbl, gasoline supplies to drop -1.0 million bbl, distillate inventories to increase +1.0 million bbl and the refinery capacity rate to inch up +0.2 to 88.6%.

Barchart.com U.S. Morning Call for Tuesday, May 18, 2010

Overnight Developments

Global stocks are higher with the European Euro Stoxx 50 Index up +0.92% and June S&Ps up +6.10 points. The dollar is weaker which has boosted most commodities. The euro and stocks are stronger despite the May German ZEW economic sentiment survey falling more than expected. The May German ZEW slumped -7.2 to 45.8 as Europe's sovereign debt crisis weakened the euro and crimped investor sentiment. The markets will be keenly focused on any developments that come out of Brussels where Euro-Zone finance ministers are currently meeting. April UK consumer prices rose a more-than-expected +3.7% y/y; the highest in 17 months, although BOE Governor King said the surge is "temporary" and masks the slack in the British economy. The Asian markets today closed mostly higher with Japan up +0.07%, Hong Kong +1.17%, China +2.09%, Taiwan -0.18%, Australia +0.08%, Singapore +0.38%, Siuth Korea -0.44%, India +0.24%. A boost in consumer confidence boosted Japanese stocks after Japan's April consumer confidence households rose +1.1 to 42.0, its highest level since Oct 2007, as the benefits of an export-fueled recovery continue to spread to Japanese households.

Overnight U.S. Stock News

June S&Ps this morning are trading up +6.10 points. The US stock market yesterday overcame early losses and finished slightly higher (Dow Jones +0.05, S&P 500 +0.11%, Nasdaq Composite +0.31%). The S&P 500, the Dow and the Nasdaq all slid to 1-week lows but erased their losses and closed higher. Bullish factors included (1) optimism that the US housing market may be improving after the larger-than-expected increase in the May NAHB housing market index which rose to a 2-3/4 year high (+3 to 22 versus expectations of +1 to 20), (2) increased M&A activity which led to a rally in packaging product makers after Apollo Global Management LLC said it was in talks to acquire the maker of Hefty trash bags, (3) strong global demand for long-term US financial assets after the March TIC long-term flows rose by $140.5 billion, the largest increase since data began in 1977, as signs of a sustained US economic recovery along with concerns about growth prospects in Europe prompts foreigners to increase their purchases of US assets, including stocks, and (4) the late-session rally in the euro which closed higher after it rebounded from a 4-year low, which bolstered optimisim that the currency will endure Europe's debt crisis.
Bearish factors included (1) carry-over weakness from a fall in European equity markets on concern the austerity measures to cut deficits within the Euro-Zone will curb economic growth prospects and derail the global economic recovery, (2) the weaker-than-expected May Empire manufacturing index (-12.8 to 19.1 versus expectations of -1.9 to 30.0), which shows a slowdown in manufacturing in the northeastern US, (3) the drop in energy producers after crude oil prices plunged to a 3-1/2 month low, and (4) continued concerns of an impending credit crunch as banks continue to hoard dollars and remain averse to lending after the 3-month Libor rate rose to a 9-1/4 month high of 0.460% and the Libor-OIS spread, a gauge of banks' reluctance to lend, widened to a 9-month high of 24 bp.
Home Depot (HD) rose 1% in pre-market trading after it reported Q1 earnings of 45 cents a share, beating analysts' estimates of 40 cents, and after it raised its full-year profit forecast to $1.88 a share, ahead of analysts' estimates of $1.87.

Today's Market Focus

June 10-year T-notes this morning are trading down -2 ticks. T-note prices yesterday rallied to a 1-week high early in the session but shed their gains in the afternoon and continued lower into the close and settled down -6 ticks at 119-185. Bearish factors included (1) data that showed the Fed's balance sheet increased by $10 billion in the week ended May 12 to a near-record $2.34 trillion as seven firms took advantage of the swap lines to arrange dollar loans through the ECB, (2) the larger-than-expected increase in the May NAHB housing market index which rose to a 2-3/4 year high (+3 to 22 versus expectations of +1 to 20), and (3) the late-sessionn recovery in the euro which closed higher after rebounding from a 4-year low, which curtailed some-safe-haven demand for Treasuries. Bullish factors included (1) strong safe-haven demand for Treasuries after global stock markets fell on concern that European austerity measures will derail the economic recovery, (2) the weaker-than-expected May Empire manufacturing index (-12.8 to 19.1 versus expectations of -1.9 to 30.0), (3) increased foreign purchases of Treasuries in March (+$108.5 billion versus +$48.1 billion in Feb) as China, the biggest holder of US debt, increased its Treasury holdings for the first time since Sep, (4) the action by Wrightson ICAP to push back its forecast for Fed rate hikes to the first half of 2011 from Nov 2010 due to the European debt crisis, and (5) increased concerns of a credit crunch as banks continue to hoard dollars and remain averse to lending after the 3-month Libor rate rose to a 9-1/4 month high of 0.460% and the Libor-OIS spread, a gauge of banks' reluctance to lend, widened to a 9-month high of 24 bp.
The dollar index this morning is lower with the dollar/yen +0.19 yen and the euro/dollar +0.36 cents. The dollar index yesterday rallied to a 14-month high and closed higher for the fifth straight day. Bullish factors included (1) the ever-sinking euro which tumbled to a 4-year low against the dollar on concern austerity measures to cut deficits within the Euro-Zone will curb its economic growth prospects, (2) the March long-term TIC flows which rose by the most since records began in 1977 (+$140.5 billion) and showed strong foreign demand for dollar assets, (3) JPMorgan Chase's cut in its year-end euro forecast to $1.20 from $1.35, citing ECB policy to buy bonds and offer unlimited loans to banks, (4) the prediction from Commerzbank AG that the euro may continue to weaken as investors abandon the currency on concern measures to reduce government budget deficits will trigger a recession, (5) the plunge in the British pound to a 13-month low against the dollar after UK Prime Minister Cameron said the government discovered "very bad" spending decisions made by the previous administration, and (6) strong demand for dollars after the 3-month Libor rate rose to a 9-1/4 month high of 0.460% and the Libor-OIS spread, a gauge of banks' reluctance to lend, widened to a 9-month high of 24 bp. Bearish factors included (1) the statement from the European Commission that the weaker euro "is helpful" for European exports, (2) the prediction from Standard Bank Plc that the euro will recover to end the year at $1.25 as the ECB keeps inflation low, and (3) the prediction from Goldman Sachs that "excessive pessimism" against the euro "guarantees the euro will not fall much further" and that its "ridiculous" to suggest the Euro-Zone will break up within the next year.
June crude oil prices this morning are up +$2.06 and June gasoline is +4.19 cents. June crude oil prices yesterday slumped to a 3-1/2 month low and closed lower for the fifth straight day, finally closing down -$1.55 per barrel. June gasoline slid to a 2-3/4 month low and closed lower by -8.75 cents per gallon. Bearish factors included (1) continued dollar strength after the dollar index climbed to a 14-month high, which curtails investment demand for commodities, (2) concern that Europe's sovereign-debt crisis may derail the global economic recovery and reduce fuel consumption and demand, and (3) the larger-than-expected decline in the May Empire manufacturing index which indicates weakened energy consumption. Bullish factors included (1) comments from Qatari's Energy Minister who said that oil below $70 a barrel "does not give them an incentive to invest" in increased oil production, and (2) comments from the Kuwaiti Oil Minister who said that oil prices below $65 a barrel would "ring a bell" for OPEC to hold a meeting before its next scheduled meeting on Oct 14.

Barchart.com U.S. Morning Call for Monday, May 17, 2010

Overnight Developments

Global stocks are mixed with the European Euro Stoxx 50 Index up +1.11% and June S&Ps up +1.70 points. European and US stocks recovered from sharp overnight losses despite the plunge in the euro to a 4-year low, after the European Commission said the weaker euro "is helpful" for European exports. European finance ministers, who are meeting in Brussels today, are under pressure to show that they can reduce deficits fast enough to satisfy investors. The German news weekly Der Spiegel reported that ECB President Trichet called for a "quantum leap" in how Euro-Zone member states' budgets are controlled. European bank shares are leading a rebound in stock prices, led by a 7.4% surge in Banco Poplare after the lender was raised to "outperform" from "underperform" at Credit Suisse AG when the Italian based bank reported Q1 net income of 77.1 million euros, beating analysts' estimates of 45.8 million euros. Telecommunication shares also gained after Vodafone rose 2.2% when Vodacom Group Ltd, the largest provider of mobile-phone services to South Africans of which 65% of the company is owned by Vodaphone, said it plans to raise its dividend payout by 50% in 2011, citing its "strong" financial position and cash flow. Finally, European stocks were boosted after Credit Suisse Group AG and Morgan Stanley both recommended that clients add to European stock holdings after the recent sell-off reduced market valuations and made stocks more attractive.

The Asian markets today lower with Japan down -2.17%, Hong Kong -2.14%, China -5.35%, Taiwan -2.23%, Australia -3.12%, Singapore -0.75%, South Korea -2.59%, India -0.94%. Asian stocks closed lower on concern measures to reduce fiscal deficits in Europe will hurt economic growth. Japanese exporters slumped on concern the weaker euro will reduce income for exporters when European revenue is converted back into yen and stock prices were pressured further after Morgan Stanley reduced its rating on Japanese stocks to "underweight" given the yen's strength against the euro. China's Shanghai Stock index closed sharply lower and tumbled to an 11-1/2 month low after the Xinhua News Agency reported that Premier Wen Jiabao warned the government would "decisively" contain gains in home prices and the Ministry of Commerce said the euro's decline is pressuring exporters. Asian raw materials companies and energy producers weakened after copper slid to a 1-week low and crude oil tumbled to a 3-1/2 month low on concern the European sovereign-debt crisis will slow the global economy and crimp demand for commodities.

Overnight U.S. Stock News

June S&Ps this morning are trading up +1.70 points. The US stock market last Friday slumped the entire day and finished sharply lower (Dow Jones -1.51, S&P 500 -1.88%, Nasdaq Composite -1.98%). Bearish factors included (1) carry-over weakness from a drop in European equity markets on concern the European sovereign-debt crisis is destabilizing the euro, which plunged to a 1-1/2 year low last Friday, and that austerity measures implemented by European nations will limit global economic growth, (2) the statement from Moody's Investors Service that there's a "greater than 80% chance" that it will cut its ratings on Greece's debt further within the next 3 months, along with comments from Deutsche Bank AG CEO Ackermann who said Greece may not be able to repay its debt in full, (3) the weaker-than-expected May University of Michigan consumer confidence (+1.1 to 73.3 versus expectations of +1.3 to 73.5), (4) weakness in bank stocks after Credit Suisse Group AG forecast new banking regulations may cost the industry $306 billion in lost earnings and increased capital requirements, (5) the fall in debit-card issuers after the Senate approved an amendment that would empower the Fed to impose limits on debit-card fees collected by banks as part of the financial overhaul bill, and (6) the drop in basic resource and energy producers after the surge in the dollar to a 12-1/2 month high prompted a sell-off in most commodities with crude oil sliding to a 3-1/4 month low.
Bullish factors included (1) the stronger-than-expected April retail sales along with the upward revisions to March (April +0.4% and +0.4% less autos versus expectations of +0.2% and +0.4% less autos and March revised up to +2.1% and +1.2% less autos from +1.6% and +0.6% less autos, (2) the +0.4% increase in March business inventories as sales climbed +2.3% m/m, the biggest increase since Nov, which pushed the inventory-to-sales ratio down to 1.24 months, which matched the Jan 2006 level as the lowest since data began in 1992 and indicates that factories need to keep increasing production to keep up with demand, and (3) the larger-than-expected increase in April industrial production (+0.8% versus expectations of +0.7%), along with the +0.6 gain in April capacity utilization to a 17-month high of 73.7%.
Psychiatric Solutions (PSYS) rallied 2,7% in pre-market trading after Universal Health Services agreed to buy the company for about $2 billion.

Today's Market Focus

June 10-year T-notes this morning are trading down -2 ticks. T-note prices last Friday were well supported the entire day as they moved higher and closed up +29 ticks at 119-245. Bullish factors included (1) strong safe-haven demand for Treasuries after global stock markets plunged on speculation Europe's sovereign-debt crisis will limit economic growth and lead to a breakup of the euro, (2) the weaker-than-expected May University of Michigan consumer confidence (+1.1 to 73.3 versus expectations of +1.3 to 73.5), (3) the prediction from Standard Chartered Plc that policy makers in debt-laden economies including US, Japan and Europe are likely to delay raising interest rates to offset a tightening in fiscal spending, and (4) increased concerns of a credit crunch as banks continue to hoard dollars and remain averse to lending after the 3-month Libor rate rose to a 9-month high of 0.445% and the Libor-OIS spread, a gauge of banks' reluctance to lend, widened to an 8-3/4 month high of 22.5 bp. A bearish factor last Friday was the stronger-than-expected April retail sales along with the upward revisions to March (April +0.4% and +0.4% less autos versus expectations of +0.2% and +0.4% less autos and March revised up to +2.1% and +1.2% less autos from +1.6% and +0.6% less autos.
The dollar index this morning is higher and at a 14-month high with the dollar/yen -0.02 yen and the euro/dollar -0.19 cents. The euro plunged to a 4-year low against the dollar overnight on concern austerity measures to cut deficits within the Euro-Zone will curb economic growth prospects. The dollar index last Friday surged to a 12-1/2 month high and settled higher for the fourth straight day. Bullish factors included (1) the collapse of the euro to a 1-1/2 year low against the dollar on concern the euro currency may be headed for disintegration, (2) the report from the Spanish newspaper El Pais that French President Sarkozy threatened to pull out of the euro unless Germany agreed to back last week's EU bailout plan, which shows increased tensions among Euro-Zone members over how to solve the region's sovereign-debt crisis and is bearish for the euro, (3) the statement from Moody's Investors Service that there's a "greater than 80% chance" that it will cut its ratings on Greece's debt further within the next 3 months, (4) the action by UBS to raise its downside forecast for the euro to fall to $1.15 by Dec and $1.10 by the end of 2011 from an earlier estimate of $1.30 and $1.25, and (5) strong demand for dollars after the 3-month Libor rate rose to a 9-month high of 0.445% and the Libor-OIS spread, a gauge of banks' reluctance to lend, widened to an 8-3/4 month high of 22.5 bp.
June crude oil prices this morning are up +14 cents and June gasoline is -0.22 of a cent. June crude oil prices last Friday sank to a 3-1/4 month low as they closed lower for the fourth straight day when they settled down -$2.79 per barrel. June gasoline closed lower by -6.43 cents per gallon. Bearish factors included (1) the surge in the dollar index to a 12-1/2 month high, which curtails investment demand for commodities, and (2) concern that Europe's sovereign-debt crisis will reduce global economic growth and fuel consumption. Bullish factors included (1) the stronger-than-expected April US retail sales which signals an improving economy that may lead to increased fuel demand, and (2) the prediction from billionaire Mukesh Ambani, who runs the world's largest refining complex, that the petroleum industry must be ready for oil prices to rebound to $100 a barrel or more on growing consumption in Asia.

Barchart.com U.S. Morning Call for Friday, May 14, 2010

Overnight Developments

Global stocks are lower with the European Euro Stoxx 50 Index down -2.00% and June S&Ps down -6.90 points. The euro plummeted to a 17-3/4 month low, which has dragged most commodities lower with crude oil sliding to a 3-month low. Concern that the European sovereign debt crisis will limit economic growth prospects along with a total lack of confidence in the euro is driving global stock prices lower. The price of gold surged to a record high $1,249.70 an ounce as investors flock into the yellow metal as a safe-haven amid turmoil in European debt markets. Bank stocks are leading the decline in equities with Banco Santander SA, Spain's biggest lender, down 5.1% and Barclays Plc slumping 3.1% after Credit Suisse AG forecast that new banking regulations may cost the industry 244 billion euros ($306 billion) in lost earnings and increased capital requirements. Greek bonds declined after comments from Deutsche Bank AG CEO Ackermann who said Greece may not be able to repay its debt in full, saying it would require "incredible efforts." Spain's April core consumer prices fell -0.1% y/y, its first annual decline since data began in 1986. Having the third-largest budget gap in the Euro-Zone, Spain faces deflationary pressures as it implements budget cuts that could undermine any growth prospects as its economy struggles with unemployment above 20%.

The Asian markets today closed mostly lower with Japan down -1.49%, Hong Kong -1.36%, China -0.65%, Taiwan +0.02%, Australia -0.90%, Singapore -0.44%, South Korea +0.13%, India -1.57%. A 6.8% plunge in Sony undercut Japanese stock prices after the world's second-largest maker of consumer electronics said it may suffer a "significant impact" if the European sovereign-debt crisis spreads. Barclays Capital, Goldman Sachs and Nomura Holdings all cut their share-price estimates on Sony after the company forecast net income this fiscal year will total 50 billion yen ($540 million), less than half of analysts' estimates. Asian raw materials and metals producers closed lower as industrial metals declined on concern Europe's debt-cutting measures will crimp demand and hurt economic growth. Chinese Premier Wen Jiabao said the foundations for a worldwide recovery aren't "solid" and the sovereign-debt crisis is "deepening."

Overnight U.S. Stock News

June S&Ps this morning are trading down -6.90 points. The US stock market yesterday fluctuated on both sides of unchanged until early afternoon when it trended lower into the close and finished just above its low (Dow Jones -1.05, S&P 500 -1.21%, Nasdaq Composite -1.26%). All of the indexes rallied to 1-week highs early in the session but erased their gains and closed lower. Bearish factors included (1) weakness in bank stocks after the WSJ reported that the SEC is widening its investigation of US banks' mortgage-bond deals and New York prosecutors are probing eight firms over whether they misled ratings companies about mortgage-backed securities, (2) the slump in energy producers after crude oil plunged to a 3-month low, (3) comments from former Fed Chairman Volcker who said that "there is not much growth in the US apart from manufacturing," and (4) the warning from Fed Chairman Bernanke who said that the proposal in the Senate's financial-overhaul bill to separate commercial banks from their swaps trading desks "would weaken both financial stability and strong prudential regulation of derivative activities."
Bullish factors included (1) the fourth straight weekly decline in weekly initial unemployment claims (-4,000 to 444,000), (2) increased M&A activity which sparked gains in technology stocks after SAP AG, the world's biggest maker of business-management software, agreed to buy Sybase for $5.8 billion, and (3) a rally in aluminum producers after China discontinued energy subsidies to domestic producers of aluminum.
Nordstrom (JWN) fell 3.4% in pre-market trading after the company reported Q1 net income of 52 cents a share, below analyss' estimates of 55 cents.
Nvidia (NVDA) dropped 3.1% in pre-market trading after the company forecast revenue for the current quarter will drop to as low as $950 million, weaker than analysts' estimates of $991 million.

Today's Market Focus

June 10-year T-notes this morning are trading up +17 ticks. T-note prices yesterday traded higher early and then dropped down to the day's low in the early afternoon, finally pushing higher into the close to settle up +2 ticks at 118-275. Bullish factors included (1) comments from former Fed Chairman Volcker who said that "there is not much growth in the US apart from manufacturing," (2) continued safe-haven buying of Treasuries after the euro fell to a new 14 month low on concern that the European sovereign-debt crisis will persist, (3) concerns of a liquidity crunch after the 3-month Libor rate rose to an 8-1/2 month high of 0.436% and the Libor-OIS spread, a gauge of banks' reluctance to lend, widened to an 8-1/2 month high of 21.5 bp, and (4) dovish comments from Dallas Fed President Fisher who said "there's very little price pressure" except from Chinese imports and that there's "a little bit of tail risk for deflation." Bearish factors yesterday included (1) the lower-than-forecast demand for the Treasury's $16 billion 30-year T-bond auction that drew a yield of 4.49%, higher than the 4.47% expected by primary bond dealers just ahead of the auction, along with weak foreign participation after indirect bidders, an investor class that includes foreign central banks, purchased only 32.5% of the bonds, compared with an average of 39.3% for the past 10 sales, and (2) comments from Minneapolis Fed President Kocherlakota who said the economic recovery is "well under way" and that the economy will grow at about a 3% annual pace this quarter and around a 3.5% annual rate over the next two years.
The dollar index this morning is higher and posted a fresh 1-year high with the dollar/yen -0.23 yen and the euro/dollar -0.60 cents at a 17-3/4 month low. The dollar index yesterday rallied to a fresh 1-year high and closed higher for a third day. Bullish factors included (1) weakness in the euro which slumped to a new 14-month low on concern deficit-reduction measures taken by Euro-Zone countries will limit their economic growth prospects, (2) the prediction from Sumitomo Mitsui Banking Corp that the euro may tumble back toward its 1999 starting level of $1.18 by year-end due to widening deficits in the European Union, (3) the action by Unicredit to revise its call for ECB rate hikes to begin in Q4 of 2011 instead of its earlier estimate for interest rate hikes to start in Q1 2011, and (4) strong demand for dollars after the 3-month Libor rate rose to an 8-1/2 month high of 0.436% and the Libor-OIS spread, a gauge of banks' reluctance to lend, widened to an 8-1/2 month high of 21.5 bp. Bearish factors included (1) euro positive comments from ECB Governing Council member Kranjec who said the ECB's bond purchases will "be sterilized at the same time" and will not fan inflation, and (2) comments from former Fed Chairman Volcker who said that "there is not much growth in the US apart from manufacturing."
June crude oil prices this morning are down -$1.27 and June gasoline is -2.01 cents. June crude oil prices yesterday dropped to a 3-month low as they moved lower for the third straight day and closed down -$1.25 per barrel. June gasoline closed lower by -1.53 cents per gallon. Bearish factors included (1) the rally in the dollar index to a 1-year high, which reduces investment demand in commodities, and (2) the action by Portugal to lower its budget-deficit goal for 2011 to 4.6% from 7.3% in 2010 which stokes concern that the fiscal austerity measures being implemented by Euro-Zone countries to decrease their deficits will slow their economies and cut fuel demand. Bullish factors included (1) carry-over support from the rally in natural gas to a 2-month high after weekly natural gas inventories rose less than expected, and (2) the prediction from the tanker-tracker Oil Movements that OPEC will ship 23.29 million barrels a day in the month to May 29, down -0.5% from 23.4 million in the month to May 1.

Barchart.com U.S. Morning Call for Thursday, May 13, 2010

Overnight Developments

Global stocks are mixed with the European Euro Stoxx 50 Index up +0.24% and June S&Ps down -0.30 of a point. The euro weakened for a third day against the dollar on concern governments may not cut budget deficits fast enough as euro sentiment overall remains extremely negative. Gold, crude and most other commodities weakened, while stocks are gyrating on either side of unchanged in listless trade. SAP AG, the world's biggest maker of business-management software, fell 2.3% after it agreed to buy Sybase for $5.8 billion, while J Sainsbury Plc rallied 2.7% after it reported an 18% rise in Q1 profits. In its monthly bulletin released today, the ECB said interest rates are "appropriate" and inflation is expected to remain "moderate," which signals the central bank has no intentions of raising interest rates anytime soon.

The Asian markets today closed mostly higher with Japan up +2.18%, Hong Kong +1.04%, China +2.44%, Taiwan +2.21%, Australia +1.75%, Singapore -0.43%, South Korea +1.85%, India +0.41%. Asian technology stocks gained after IBM projected higher profit and revenue and Cisco System's earnings exceeded estimates, which indicates companies are spending more as the global economy recovers. Japanese stocks received a boost after Tokyo Electron, the world's second-largest maker of semiconductor equipment, jumped 7% after it forecast a return to profit, while Elpida, the world's third-biggest maker of memory chips, closed 2.5% higher after it reported its first profit since 2007. South Korean stocks closed higher led by a 5.6% jump in Hyundai Motor after Goldman Sachs raised its rating on the stock along with a 2% gain in Samsung Electronics, Asia's biggest chipmaker. Job growth in Australia accelerated for a second month in April after employment rolls rose a more-than-expected 33,700 and the unemployment rate remained unchanged at 5.4%. Assistant RBA Governor Lowe said demand is pushing against the economy's capacity, which may signal further interest rate hikes ahead from the RBA.

Barchart.com U.S. Morning Call for Wednesday, May 12, 2010

Overnight Developments

Global stocks are mostly higher with the European Euro Stoxx 50 Index up +0.41% and June S&Ps up +3.50 points. Greek bonds rallied for a third day, the euro is little changed, and gold rallied to a record high as concern lingers that Europe's most indebted countries will struggle to reduce their deficits. Helping to lift stock prices in Europe was the larger-than-expected increase in Q1 Euro-Zone GDP, which expanded +0.2% q/q (versus expectations of +0.1% q/q) as the global recovery boosted exports. March Euro-Zone industrial production was also stronger-than-expected as it gained +1.3% m/m and increased for the 10th consecutive month. Better-than-expected earnings results are also helping to boost stocks with Maersk, owner of the world's largest container-shipping line, up over 7% after it reported Q1 income of 3.44 billion kroner ($584 million) compared with a 2.13 billion-krone loss a year earlier. ING rose over 5% after it reported Q1 profit of 1.33 billion euros, beating analysts' estimates of 981 million euros as writedowns narrowed, bad loans fell and it booked a gain on the sale of Asian and Swiss private-banking businesses.

The Asian markets today closed mixed with Japan down -0.16%, Hong Kong +0.33%, China +0.62%, Taiwan -0.08%, Australia +0.55%, Singapore +0.79%, South Korea -0.39%, India +0.32%. Weakness in financials led Japanese stocks lower after Mitsubishi UFJ, Japan's largest bank by market value that also owns about 20% of Morgan Stanley, closed down 2.4% after the WSJ said US prosecutors were investigating Morgan Stanley over allegations that it misled investors about mortgage derivatives. Most Asian gold producers gained after gold rallied to a record high and the 2.7% jump in Toyota limited the downside for Japanese stocks after the carmaker said annual profit will increase by almost half on recovering US revenue. India's March industrial production rose 13.5% y/y, the sixth straight month that industrial production has gained more than 10%, which will add to inflation pressures that may prompt further interest rate hikes from India's central bank.

Barchart.com U.S. Morning Call for Tuesday, May 11, 2010

Overnight Developments

Global stocks are lower with the European Euro Stoxx 50 Index down -2.13% and June S&Ps down -13.80 points. The euro and most commodities weakened on concern the nearly $1 trillion lending package for the Euro-Zone's most-indebted nations won't solve the region's debt crisis. The director of the IMF's European department said he doesn't consider the latest European rescue package a "long-term solution," while ECB Council member Weber said the ECB's purchase of government bond poses "significant" risks. Moody's Investors Service said Greece might have its credit rating lowered to junk within the next month, citing the country's "dismal" economic prospects, while EU Economic and Monetary Affairs Commissioner Rehn told the French newspaper Les Echos that Spain and Portugal must take immediate steps to improve their public finances. European banks led the slide in stocks with Banco Santander SA, Spain's biggest lender, down 4.4%, and Barclays Plc down 3.8%. Banks within the Euro-Zone borrowed the most in 2 months from the ECB yesterday, indicating the near-$1 trillion lending package to shore up debt markets didn't spur lending between banks. Banks borrowed 3.83 billion euros ($4.9 billion) from the ECB's marginal loan facility, the most since March 10, while the amount of overnight deposits held at the central bank increased to 314.8 billion euros yesterday, the most in 10 months.

The Asian markets today closed lower with Japan down -1.14%, Hong Kong -1.37%, China -2.01%, Taiwan -0.73%, Australia -1.13%, Singapore -0.79%, South Korea -0.67%, India -1.09%. China's Shanghai Composite Index slid to an 11-1/2 month low on concern the government will need to hike interest rates to combat inflation and unveil even more measures to curb soaring house prices. China's April consumer prices rose +2.8% y/y, the fastest pace in 18 months, while April China producer prices rose +6.8% y/y, and their fastest gain in 18 months as well. April China property prices jumped a record 12.8%, the biggest increase since data began in 2005, while April China new lending rose a more-than-expected 774 billion yuan ($113 billion), which may keep the pressure on the government to curtail further bank lending increases. In Japan, Mizuho Financial Group, the Asian bank with the biggest losses from the financial crisis, fell 2.9% and led bank stocks lower on speculation a possible sale of 1 trillion yen ($11 billion) in stock will dilute shareholders. The yen strengthened and prompted losses in Japanese exporters as optimism faded that the neat $1 trillion lending package for the Euro-Zone's most-indebted members will solve the region's fiscal woes.

Barchart.com U.S. Morning Call for Monday, May 10, 2010

Overnight Developments

Global stocks are higher with the European Euro Stoxx 50 Index up sharply by +6.35% and June S&Ps surging +52.00 points. The euro rallied sharply, which lent support to most commodities after European leaders unveiled a $960 billion loan plan to end the region's sovereign-debt crisis. The governments of the 16 Euro-Zone nations agreed to lend as much as 750 billion euros ($962 billion) to countries in the region after Euro-Zone governments pledged 440 billion euros in loans or guarantees, with 60 billion euros more in loans from the EU's budget and as much as 250 billion euros from the IMF. The ECB said it will counter "severe tensions" in "certain" markets by purchasing government and private debt as it will "act in coordination" with the central banks of the Euro-Zone to purchase government bonds. The ECB also reactivated unlimited fixed-rate offerings of 3-month loans, a key tool in the ECB's efforts to fight the credit crisis after the collapse of Lehman Brothers. The Fed announced that it would restart emergency credit-swaps by providing as many dollars as needed to central banks in Europe, the UK and Switzerland. The premium between the yield on Greek bonds over German bunds tumbled more than 600 bp while the yield on the German bund surged 20 bp on a decrease in safe-haven demand. Also adding to the market's bullish fervor was the +10.7% jump in March German exports, the biggest gain in 18 years as the global economic recovery prompts German companies to step up output to meet rising export orders, along with the action by Morgan Stanley to upgrade European equities to "overweight" from "underweight," citing "recent policy initiatives." As expected today, the BOE left its benchmark interest rate unchanged at 0.50% and left its asset purchase program unchanged at 200 billion pounds.

The Asian markets today closed higher with Japan up +1.60%, Hong Kong +2.54%, China +0.76%, Taiwan +1.29%, Australia +2.66%, Singapore +2.10%, Soth Korea +1.86%, India +3.35%. The yen weakened on a drop in safe-haven demand after global equity markets rallied, while Asian mining companies gained after the fall in the dollar prompted a rally in industrial metals. China's April trade surplus was $1.68 billion compared with a deficit in March of -$7.24 billion, as imports grew faster than exports because of stimulus-driven demand. A 79% decline in China's trade surplus in the first four months of this year from a year earlier may ease pressure on the government for gains in the yuan and support Premier Wen Jiabao's argument that the currency isn't overvalued. According to a report from China International Capital Corp., the PBOC may delay allowing the yuan to strengthen against the dollar and refrain from increasing interest rates because of rising risks of an economic slowdown due to the sovereign-debt crisis in Europe. The PBOC said today on their website that Europe's debt crisis could spread globally if some developed nations can't cut their expenditures and raise income.

Barchart.com U.S. Morning Call for Friday, May 7, 2010

Overnight Developments

Global stocks are mostly lower with the European Euro Stoxx 50 Index down -0.76% at a 9-1/2 month low and June S&Ps up +9.50 points. The euro strengthened against most currencies after Japanese Finance Minister Kan said the Group of Seven nations will hold a conference call to discuss the Greece debt crisis. Banking shares led European stocks lower as Credit Agricole fell 4.5% after France's biggest bank by branches said its corporate and investment bank has 2.4 billion euros at risk in Greek assets, while RBS, Britain's biggest government-owned bank, tumbled 5.7% after it reported a Q1 loss of 248 million pounds ($363 million). The yield on Greece's 10-year note climbed 110 bp to 12.76% and drove the yield premium to German debt to a record 966 bp. Overnight deposits at the ECB rose to a 10-month high as the sovereign debt crisis made commercial banks reluctant to lend to each other. European banks on Thursday put 290 billion euros in the ECB's overnight facility, up from 288 billion on Wednesday and deposits with the ECB from European banks have exceeded 200 billion euros for the past 10 days. According to EPFR Global, investors cut their holdings of European equity funds by more than $2 billion in the week to May 5, the biggest outflow in almost a year, as concern rose that Greece's debt crisis would spread.

The Asian markets today closed lower with Japan down -3.10%, Hong Kong -1.06%, China -2.07%, Taiwan -0.16%, Australia -2.02%, Singapore -0.65%, South Korea -2.33%, India -1.29%. Asian shares tumbled with China's Shanghai Composite Stock Index falling to an 8-month low and Japan's Nikkei 225 Stock Index sliding to a 2-month low on concern the European debt crisis will spread and hurt the global recovery. Financial companies led the declines in Asian markets as Mitsubishi UFJ Financial Group, Japan's biggest bank by market value, finished 2.5% lower and Commonwealth Bank of Australia, the country's biggest lender by market capitalization, ended the day down 3.9%. Companies that get a lion's share of their profits from Europe fell also as Nintendo, which gets 34% of its revenue in Europe, plunged 4.4% and Canon, the Japanese camera maker that counts Europe as its largest market, closed down 3.9%. Other Japanese exporters also sank after the yen rallied to an 8-month high yesterday, which reduces the value of overseas sales at Japanese companies when converted into their home currency. Raw-materials and energy producers also tumbled after the Reserve Bank of Australia said the fiscal problems in Europe could intensify and prompt a retreat from risk-taking by investors and a sharp slowing in the world economy, which if it were to occur abruptly, "could prompt another period of global economic weakness and a fall in commodity prices."

Barchart.com U.S. Morning Call for Thursday, May 6, 2010

Overnight U.S. Stock News

June S&Ps this morning are trading up 4.10 points on the upward rebound in European stocks and the fact that Spain was able to sell 5-year bonds. The US stock market yesterday finished lower, although well above its worst levels of the day (Dow Jones -0.54%, S&P 500 -0.66%, Nasdaq Composite -0.91%). The S&P 500 and the Nasdaq both dropped to 1-1/2 month lows and the Dow fell to a 1-1/4 month low. Bearish factors included (1) carry-over weakness from a fall in European stocks on concern that the Euro-Zone sovereign-debt crisis is spreading beyond Greece after Moody's Investors Service warned that Portugal's credit rating may be reduced, (2) comments from ECB Council member and Bundesbank President Axel Weber who warned that there is a threat of "grave contagion effects" from the Greek fiscal crisis, (3) a drop in energy producers after crude oil fell to a 2-month low, (4) the prediction from well-known bank analyst Meredith Whitney that US lenders face "tough" comparisons when they report Q2 results and higher dividends aren't likely because of increasing capital requirements for banks, and (5) comments from Boston Fed President Rosengren who warned that a weak housing market "still poses a risk" to the US economy.
Bullish factors included (1) the stronger-than-expected April ADP employment change and the upward revision to March (April +32,000 versus expectations of +28,000 and March revised to up +19,000 from -23,000), (2) the +13% increase in the weekly MBA mortgage purchase sub-index which rose to a 7-month high and indicates an improvement in the US housing market, and (3) the tumble in the 10-year T-note yield to a 4-1/2 month low of 3.49%, which cut the cost of capital for businesses and consumers.

Barchart.com U.S. Morning Call for Wednesday, May 5, 2010

Overnight Developments

Global stocks are weaker with the European Euro Stoxx 50 Index down -0.22% and June S&Ps down -3.30 points. The euro slipped to a fresh 1-year low, which undercut commodities with copper sliding to a 2-1/2 month low. The euro's slump to a fresh 1-year low came after comments from ECB Council member and Bundesbank President Axel Weber who warned that there is a threat of "grave contagion effects" from the Greek fiscal crisis, while former BOE policy maker Washwani said the Euro-Zone faces the danger of further debt crises because of its delay in bailing out Greece and the failure to prepare a system to rescue other nations. The threat of Greece's fiscal crisis extending to Spain and Portugal shows in the yield premium investors demand to hold the countries' debt. The yield spread for holding Spanish 10-year bonds instead of German bunds widened to 122 bp, up 6 bp from yesterday, while the difference for holding Portuguese bonds jumped to 273 bp from 252 bp. Helping to limit losses in European stock prices was the release of the European Commission's semi-annual forecast in which the commission forecasts GDP growth in the Euro-Zone this year of 0.9%, higher than an earlier estimate of 0.7%, as a global recovery lifts exports.

The Asian markets today closed mostly lower with Japan closed for holiday, Hong Kong down -2.10%, China +0.56%, Taiwan -2.95%, Australia -1.33%, Singapore -1.41%, India -0.29%. India's service industries April HSBC and Markit Economics' purchasing managers index rose +4.0 to 62.1, a 21-month high and its 12th straight increase, which will add to pressure on India's central bank to keep raising interest rates. Reserve Bank of India Governor Subbarao last raised rates by 25 bp on April 20 for the second time in less than a month to control inflation that is running at a 17-month high. Asian mining stocks closed higher, led by a 2.3% rise in BHP Billiton and a 3% gain in Rio Tinto Group, after Fitch Ratings said a proposed Australian 40% "super tax" on resource stock profits won't affect their credit ratings.

Barchart.com U.S. Morning Call for Tuesday, May 4, 2010

Overnight Developments

Global stocks are lower with the European Euro Stoxx 50 Index down -1.34% and June S&Ps down -6.80 points. Concerns that the Greek debt crisis will spread throughout the Euro-Zone has boosted the dollar index to an 11-1/2 month high and has sent commodities tumbling, with copper falling to a 2-1/4 month low. European bank stocks fell and helped send Spanish stocks to a 9-month low with Spain's Banco Santander declining 3.8%, while stocks in Greece also fell led by a 6.8% drop in National Bank of Greece. STMicroelectronics declined 3.7% after Europe's largest chipmaker was cut to "underperform" from "selected list" at Cheuvreux, which said, "The semiconductor industry is getting ahead of market fundamentals and ahead of underlying end-demand." European mining stocks fell when metals prices dropped after the dollar rallied and after an index of Chinese manufacturing fell to a 6-month low, while an unexpected -2.4% m/m decline in Mar German retail sales, their biggest monthly fall in 2-years, also helped to fuel downside momentum in stock prices.

The Asian markets today closed lower with Japan closed for holiday, Hong Kong -0.23%, China -1.56%, Taiwan -0.27%, Australia -1.01%, Singapore -1.46%, South Korea -0.15%, India -1.43%. Asian stocks fell after the April HSBC China purchasing managers index slipped -2.6 points to a 6-month low of 55.4, which indicates that government efforts to prevent overheating in the economy may be starting to bite. Australia's central bank hiked the benchmark interest rate for the sixth time since Oct, boosting the overnight cash rate target by 25 bp to 4.50% from 4.25%. RBA Governor Stevens said inflation may not slow as much as earlier forecast and "now appears likely to be in the upper half" of the central bank's target range of 2% to 3% over the coming year. The RBA is concerned that price pressures are increasing especially after the Apr Australian manufacturing index surged +9.3 points to 59.8, its highest level since May 2002.

Barchart.com U.S. Morning Call for Monday, May 3, 2010

Overnight Developments

Global stocks are mixed with the European Euro Stoxx 50 Index down -0.35% and June S&Ps up +5.60 points. The euro weakened and European stocks fell on concern that a proposed 110 billion ($146 billion) rescue package for Greece will fail to contain the region's debt crisis. EU leaders are scheduled to meet on May 7 to discuss the timeline of parliamentary approval for loans to Greece. After Greece's rescue package was announced by the EU and the IMF yesterday, the ECB said it will accept all Greek government debt as collateral when lending to banks, indefinitely suspending its minimum credit-rating thresholds on collateral in order to support the bailout. Under the plan backed by the ECB, Greece pledged another 30 billion euros in budget cuts to bring a deficit of 13.6% of GDP back within the EU limit of 3% in 2014. Limiting losses in European stocks was the unexpected upward revision to the Apr Euro-Zone PMI manufacturing index which rose to 57.6 from a previously reported 57.5, the highest since Jun 2006 as companies increased production to meet export orders.

The Asian markets today closed lower with Japan closed for holiday, Hong Kong -1.41%, China closed for holiday, Taiwan -0.65%, Australia -0.46%, Singapore -1.02%, South Korea -1.25%, India -0.98%. Asian stocks closed lower, led by mining companies, and copper declined after China ordered banks to set aside more funds as reserves and Australia boosted taxes on commodity producers. China raised bank reserve ratios for the third time this year to cool speculative real estate purchases after the PBOC hiked the reserve requirement for the nation's biggest banks by 50 bp to 17% effective May 10. The Australian government imposed a 40% tax on resource companies' profits, which will start in 2012 and raise an estimated $11.1 billion for the Australian government in its first 2 years. BHP Billiton, with 51% of its assets in Australia, closed 3% lower after it estimated the tax rate on its Australian earnings will increase to 57% in 2013 from 43% now. Citigroup said that Australia, the world's biggest iron ore and coal exporter, is now the most highly taxed mining nation, which may reduce its competitiveness.

Barchart.com U.S. Morning Call for Friday, April 30, 2010

Overnight Developments

Global stocks are mixed with the European Euro Stoxx 50 Index down -0.43% and June S&Ps up +0.70. The dollar is weaker which has pushed commodities higher with crude oil at a 2-week high. Greek stocks rallied and the yields on Greek government bonds fell after European Commission President Barroso said that the EU, IMF and the ECB were making "rapid progress" on a rescue package for Greece and that debt restructuring was not a part of the package. The Apr Euro-Zone CPI estimate remained unchanged at a 16-month high of +1.5% y/y and the Mar Euro-Zone unemployment rate also remained unchanged at 10.0%, an 11-year high. Undercutting European stocks was the 4.4% drop in Barclays after the UK's third-biggest bank by assets reported Q1 revenue at its Barclays Capital unit slipped to 3.8 billion pounds ($5.8 billion), missing analysts' estimates of 4.9 billion pounds, while Petroleum Geo-Services ASA fell 5.3% after the world's third-biggest surveyor of oil and natural gas fields reported Q1 net income of $16.2 million, well below analysts' estimates of $31 million. Michelin climbed 2.5% after the world's second-biggest tire maker said Q1 revenue rose 12% and it forecast a 10% full-year volume gain as developed economies join the recovery. Man SE rose 2.2% after Nomura Holdings and Deutsche Bank AG raised their recommendations on the stock to a "buy."

The Asian markets today closed mostly higher with Japan up +1.21%, Hong Kong +1.59%, China +0.24%, Taiwan -0.62%. Australia +0.46%, Singapore +0.53%, South Korea +0.81%, India +0.32%. Following its monetary policy meeting in which it left its benchmark rate unchanged at 0.10%, the BOJ upgraded its forecast for the current year's economic growth. The BOJ now expects the Japanese economy to expand 1.8% in the year ending next Mar, faster than the 1.3% estimated in Jan, while bumping up its consumer price forecast to a gain of +0.1% for the year ending Mar 2012, higher than Jan's projection for a -0.2% decline. Mar Japan consumer prices excluding fresh food, the central bank's key gauge, were reported today at a -1.2% y/y decline, their 13th straight monthly decline which shows deflationary pressures still exist. BOJ Governor Shirakawa also said the central bank will explore steps similar to those taken in 1998-1999, when it increased credit to lenders to funnel cash to companies amid a credit squeeze. The announcement signals policy makers may not be convinced improvements in domestic demand are strong enough to spark inflation and spur long-term growth. Japanese exporters rallied after the yen slipped to a 3-1/2 week low against the dollar, while South Korea's Samsung Electronics, Asia's biggest chipmaker, closed 2.9% higher after it reported profit surged as rebounding demand for personal computers drove up prices for semiconductors.

Barchart.com U.S. Morning Call for Thursday, April 29, 2010

Overnight Developments

Global stocks are mixed with the European Euro Stoxx 50 Index up +0.73% and June S&Ps up +6.10 points. European stocks rebounded from recent losses as better-than-estimated earnings reports offset concern that Greece's credit crisis will spread through the Euro-Zone. The euro gained after the yield spread between Greek 10-year bonds and the equivalent 10-year German bunds narrowed to 676 bp from more than 800 bp on Wednesday. Banco Santander gained 4.4% after Spain's biggest bank reported Q1 profit of 2.22 billion euros, higher than analysts' estimates of 2.11 billion euros and Pernod Ricard jumped 4.3% after the liquor maker raised its forecast for full-year earnings to about 3% this year, more than a previous forecast of 1% to 3% after demand for premium cognac in China helped the distiller beat sales estimates. Also helping stock prices was the larger-than-expected increase in the Apr Euro-Zone economic confidence which rose +2.7 to a 2-year high of 100.6 as accelerating global economic growth is boosting sales at European companies. Apr German unemployment fell a more-than expected -68,000, the biggest drop in 2 years, which lowered the Apr German unemployment rate -0.2 to 7.8%, as the German recovery gathered steam and strengthened the economy.

The Asian markets today closed mostly lower with Japan closed for Showa Day, Hong Kong down -0.81%, China -1.20%, Taiwan -0.34%, Australia -0.77%, Singapore +0.92%, South Korea -0.38%, India +0.71%%. The Fed's post FOMC statement yesterday that "the labor market is beginning to improve" limited losses in Asian markets today on speculation the improved labor picture in the US will lead to increased exports for Asian economies. The IMF said in a report today that Asia's economy will expand 7.1% this year and next on demand for manufactured goods and commodities and that brighter economic growth prospects and widening interest rate differentials with advanced economies "are likely to attract more capital" to Asia. These increased capital inflows may cause the region to overheat and lead to the formation of asset bubbles, according to the IMF.

Barchart.com U.S. Morning Call for Wednesday, April 28, 2010

Overnight Developments

Global stocks are mostly lower with the European Euro Stoxx 50 Index down -0.82% at a 1-3/4 month low and June S&Ps up +2.40 points. Concerns that the European sovereign-debt crisis is spreading has undercut global stocks and sent commodities tumbling with copper at a 1-month low and crude oil at a 3-1/2 week low. The euro has rebounded slightly from an 11-3/4 month low on speculation that the IMF will provide more aid for Greece. The yield on the Greek 2-year note jumped to a record 25% while the extra yield investors demand to hold Greek 10-year bonds instead of German bunds surpassed 800 bp for the first time. European bank stocks are leading financial shares lower after Standard & Poor's downgrade yesterday of Portugal's and Greece's credit ratings sparked concern that the Greek debt crisis will spread to other countries, and as credit-default swaps on Greece, Portugal and Spain advanced to records. In Greece, the Hellenic Capital Market Commission banned short selling of stocks on the Athens stock exchange effective today through June 28, citing "the extraordinary conditions prevailing on the Greek market." ECB President Trichet and IMF Director Strauss-Kahn will meet German politicians in Berlin today to promote a financial rescue plan.

The Asian markets today closed lower with Japan down -2.57%, Hong Kong -1.47%, China -0.36%, Taiwan -0.80%, Australia -1.17%, Singapore -1.99%, South Korea -1.00%, India -1.76%. Japanese stocks closed lower after financial companies slid on sovereign debt concerns and exporters declined when the yen strengthened, which stoked concern the stronger yen will threaten overseas income. The fall in metals prices undercut Asian commodity producers and mining companies as BHP Billiton lost 2.2% and Rio Tinto Group declined 2.7%. The PBOC in its annual report on financial markets pledged to keep its policies flexible to respond to "new conditions" and highlighted risks to the global recovery. UniCredit SpA and Societe Generale SA both predict that China may delay scrapping the yuan's peg to the dollar after debt-rating downgrades of Greece and Portugal, while Bank of America-Merrill Lynch predicts the central bank is "less and less likely" to raise interest rates this quarter. In other comments, the PBOC said that banks should replenish capital to strengthen financial buffers and that China needs to speed the opening of its financial markets due to an increase in offshore yuan business.

Barchart.com U.S. Morning Call for Tuesday, April 27, 2010

Overnight Developments

Global stocks are mostly lower with the European Euro Stoxx 50 Index down -1.62% and June S&Ps down -4.40 points. The euro is weaker and Treasuries are higher on increased safe-haven demand due to European debt-contagion concerns. Speculation that the proposed 45 billion-euro ($60 billion) aid package to Greece will get delayed is causing investors to dump the bonds of countries with rising deficits after German Chancellor Merkel said yesterday she won't release funds for Greece until the nation has a "sustainable" plan to reduce its shortfall. Portugal's 2-year notes fell for the 11th consecutive session and yields on Spain's benchmark debt rose. Greek banks tumbled with losses of 3.4% for National Bank of Greece, 3.7% for EFG Eurobank Ergasias and a 3.3% drop in Alpha Bank SA after Moody's Investors Service placed the mortgage covered bonds on Greece's 3 biggest lenders on negative review. Portuguese lender Banco Comercial Portugues SA declined 2.9% after spreads on Portuguese debt, or the extra yield that investors demand to hold its debt rather than German equivalents, jumped to 227 bp, the most since at least 1997.

The Asian markets today closed mixed with Japan up +0.42%, Hong Kong -1.51%, China -2.00%, Taiwan -0.14%, Australia -0.03%, Singapore -0.36%, South Korea -0.16%, India -0.31%. China's Shanghai Composite Stock Index tumbled to a 6-1/2 month low on concern government measures to cool the property market will dampen consumer spending and slow the economy. Most raw material and commodity producers weakened as commodities declined on concern demand will fall as China's economy slows. Asian technology stocks also fell led by a 2.4% drop in Japan's Elpida Memory, as memory-chip prices slumped to a 5-week low. Indian stocks declined after Reserve Bank of India (RBI) Governor Subbarao said faster inflation is a "big worry" for the economy and said the central bank plans to remove monetary stimulus in a gradual manner to ensure sustained growth. The RBI is preparing the markets for further interest rate hikes after India's wholesale-price inflation quickened to a 17-month high of 9.9% y/y in March and consumer prices accelerated in Feb to 14.9% y/y.

Barchart.com U.S. Morning Call for Monday, April 26, 2010

Overnight Developments

Global stocks are mixed with the European Euro Stoxx 50 Index up +1.10%% and June S&Ps up +2.60 points. Upbeat earnings reports and higher commodity prices are boosting European stocks prices today, despite the plunge in Greece's ASE Stock Index to a 1-year low as the premium that investors demand to hold Greek 10-year notes rather than German bunds widened to a record 600 bp. Air Liquide SA increased 1.4% after the world's biggest producer of industrial gases reported Q1 sales of 3.15 billion euros, beating analysts' estimates of sales of 3.08 billion euros, while Julius Baer Group rose 3.3% after the Swiss bank was upgraded by Deutsche Bank to "buy" from "hold." European stocks also received a boost on the prediction from JPMorgan Chase that "the recovery will prove sustainable," along with its recommendation of an "overweight" stance on European stocks relative to US equities. The euro declined for the seventh time in the last eight sessions on concern that the European Union-led Greek bailout plan still faces hurdles along with the prediction from Evolution Securities that Greece's request for a $60 million bailout doesn't reduce the risk of default next year and a debt restructuring will be a "necessity" without even more aid.

The Asian markets today closed mostly higher with Japan up +2.30%, Hong Kong +1.61%, China -0.56%, Taiwan +1.91%, Australia closed for holiday, Singapore +0.47%, South Korea +1.00%, India +0.29%. Japanese stocks finished higher, led by a 3.4% gain in Toyota, after the Nikkei English News reported that the world's largest carmaker probably had an operating profit of as much as 50 billion yen ($531 million) for the year ended Mar 31, much better than a Toyota forecast on Feb 4 for an operating loss of 20 billion yen. Japanese exporters also closed higher after the yen weakened. Chinese officials over the weekend pledged to extend their "proactive" fiscal measures and maintain a "relatively easy" monetary policy, saying the global economic recovery remains tentative. Chinese stocks closed lower, led by declines in real estate stocks and property developers, after the government announced additional measures to slow property speculation and prevent a bubble. China further tightened real-estate financing measures with the announcement that real estate developers are now required to submit fund-raising plans for review. This latest move adds to curbs on loans for third-home purchases, increased down-payment requirements and higher mortgage rates announced this month.

Barchart.com U.S. Morning Call for Friday, April 23, 2010

Overnight Developments

Global stocks are mixed with the European Euro Stoxx 50 Index up +0.49% and June S&Ps up +3.50 points. The euro recovered off of an 11-3/4 month low and is trading slightly higher after Greece said it needs to accept emergency funding to help pay its debts. Greek 10-year bonds surged, sending the yield down 80 bp to 8.17%, the first decline in yield in the last nine sessions. Greek Prime Minister Papandreou said today he has given the Greek Finance Ministry a mandate to ask the EU to release an aid package designed to help the government stave off a default. Credit-default swaps on Greek government bonds fell 54 bp to 591 today, after rising to a record 650 bp yesterday. Also boosting European stocks is the rise in German business confidence after the Apr German IFO business climate index increased a larger-than-expected +2.4 to 101.6, its highest level in nearly 2 years as the global economic recovery boosted export demand and warmer weather allowed workers back onto construction sites. Limiting gains in European stocks was the +0.2% q/q gain in Q1 UK GDP, half as much as economists forecast, which underscores the fragility of the economic recovery.

The Asian markets today closed mostly lower with Japan down -0.32%, Hong Kong -0.98%, China -0.36%, Taiwan +0.33%, Australia -0.53%, Singapore +0.26%, South Korea -0.18%, India +0.68%. Chinese stocks closed lower, led by weakness in banks and property developers, after the State Council told banks to stop loans for third-home purchases in cities with excessive property price gains. Yuan forwards rose to a 3-month high on speculation that the Group of 20 finance chiefs meeting this weekend in Washington will press China for a revaluation of its currency. The Australian dollar weakened after RBA Governor Stevens said interest rates are "close to average," which dampened speculation the RBA will continue to raise interest rates. Financial companies led Japanese stocks lower on sovereign debt concerns following comments from Fitch Ratings yesterday that Japan's rising debt may hurt its creditworthiness and derail its recovery.

Barchart.com U.S. Morning Call for Thursday, April 22, 2010

Overnight Developments

Global stocks are lower with the European Euro Stoxx 50 Index down -1.15% at a 3-week low and June S&Ps down -6.70 points. The euro slumped to a 2-week low against the dollar and Greek bonds plunged, increasing the premium investors demand to hold them instead of German bunds to 550 bp. The EU's statistics office, Eurostat, said the total budget shortfall for the 16-nation Euro-Zone widened to 6.3% of GDP last year, the biggest since the introduction of the euro in 1999 and more than double the EU's 3% limit, from 2% in 2008. At 14.3% of GDP, Ireland had the biggest shortfall, while Greece came in second with a 13.6% deficit, bigger than the Greek governmemnt's Apr 7 forecast of 12.9%. The IMF, which yesterday raised its forecast for global growth in 2010, warned that a failure to contain public debt might have "severe" consequences for the world economy. Banking stocks led the decline in European shares with Piraeus Bank SA sliding 4.9% and Allied Irish Banks tumbling 3.2%. Credit Suisse Group fell 3.7% after it said debt-trading revenue in Q1 was 2.66 billion francs ($2.5 billion), lower than analysts' estimates for 2.8 billion francs. On the positive side, the Apr Euro-Zone PMI composite index unexpectedly rose +1.4 to 57.3, its highest level in 2-1/2 years, and a sign that the economic recovery in Europe is strengthening.

The Asian markets today closed mostly lower with Japan down -1.27%, Hong Kong -0.26%, China -1.09%, Taiwan -0.15%, Australia -0.95%, Singapore +0.44%, South Korea -0.58%, India +0.58%. Japanese stocks closed lower after Fitch Ratings said Japan's swelling debt burden may put pressure on its sovereign AA-rating, increasing the pressure for Japan to rein in its debt, the world's biggest. Japanese Prime Minister Hatoyama will unveil a fiscal plan in June to cut a debt burden that Fitch estimates is at 201% of GDP. Asian stocks fell on concern US plans to increase oversight of financial companies and force separation of derivatives trading from other businesses may crimp earnings. US President Obama will say today that new financial-industry regulations are needed to protect the US economy from "risky decisions" on Wall Street. The speech comes after a Senate panel approved draft legislation yesterday that would force banks to separate swaps trading from commercial bank operations. Toyota closed 1.4% lower after Moody's Investors Service cut its credit rating to Aa2, the third-highest grade, from Aa1, and Fitch Ratings said is may also downgrade the world's biggest carmaker as recalls of more than 8 million vehicles ravage profit. China's Shanghai Composite Index closed lower, led by declines in banks and property developers; on concern government measures to curb property loans will dampen earnings growth.

Barchart.com U.S. Morning Call for Wednesday, April 21, 2010

Overnight Developments

Global stocks are mixed with the European Euro Stoxx 50 Index down -0.52% and June S&Ps down -2.40 point. The euro slipped to a 1-week low and credit-default swaps tied to Greek bonds rose 13 bp to a record 477 bp, which has undercut European share prices. The yield premium investors demand to hold Greek 10-year bonds instead of benchmark German bunds climbed 23 bp to 501 bp, its widest since the introduction of the euro in 1999. Greek government officials began as much as 3 weeks of talks with Euro-Zone officials, the IMF and the ECB over the details of a potential aid package. Portuguese government bonds fell for a fourth day, pushing the yield spread to German bunds to near a record and, on concerns Portugal may be the next Euro-Zone nation with sovereign debt risks. Limiting losses is strength in technology stocks led by gains in Infineon Technologies and STMicroelectronics NV after Apple late yesterday said its earnings almost doubled. Also boosting technology stocks was the action by Goldman Sachs analysts to lift their earnings forecasts for European technology-hardware stocks. Airlines are also stronger as European airports resumed flights after 6 days of closure from the Icelandic volcanic ash cloud.

The Asian markets today closed mostly higher with Japan up +1.74%, Hong Kong -0.52%, China +1.99%, Taiwan +1.14%, Australia +0.58%, Singapore -0.46%, South Korea +1.76%, India +0.07%. Technology stocks in Asia climbed after Apple reported robust earnings and after Elpida Memory, Japan's biggest maker of computer memory, closed 4% higher after it unexpectedly reported full-year net income of 2 billion yen ($21.4 million) when market expectations were for a 5.68 billion-yen loss. Japanese chip stocks also gained after Citigroup raised its rating on the industrial electronics and semiconductors sector to "moderately bullish" from "neutral." Stocks climbed in South Korea, the biggest maker of memory chips used in computers and mobile phones, led by a 5.7% jump in Hynix Semiconductor, a 3.4% advance in LG Display and a 2.8% gain in Samsung Electronics. Chinese stocks also gained, led by gains in raw-materials producers, on speculation of increased demand for commodities.

Barchart.com U.S. Morning Call for Tuesday, April 20, 2010

Overnight Developments

Global stocks are mixed with the European Euro Stoxx 50 Index up +1.09% and June S&Ps up +4.30 points. Stellar Q1 earnings from Goldman Sachs ($5.59 a share versus expectatins of $4.14) is boosting US stocks and European stocks are rallying on the report that German investor confidence rose for the first time in 7 months. The Apr ZEW German economic sentiment climbed a more than expected +8.5 to 53.0, its highest level in 6 months, as falling unemployment and a weaker euro improved the economic outlook. European automakers strengthened after Daimler AG rose 6.7% when it raised its profit forecast for its car division before interest and tax of between 2.5 billion euros and 3 billion euros from ongoing business this year, stronger than a previous forecast of 1.5 billion euros. Most European airline stocks gained as European airspace that had been closed by the volcanic eruption in Iceland started to reopen. European stocks pared their gains after the UK Financial Services Authority said it decided to start a formal enforcement investigation into Goldman Sachs in relation to recent SEC allegations. Greek bonds declined and widened the yield spread between Greek bonds and German bunds to a record 471 bp, on increased concern Greece will have to tap a EU-brokered bailout package to avoid a default. UK gilts fell after Mar UK consumer prices rose 3.4% y/y, above market expectations of a 3.1% y/y increase and above the Bank of England's 3.0% limit.

The Asian markets today closed mixed with Japan down -0.07%, Hong Kong +1.02%, China -0.10%, Taiwan +0.59%, Australia +0.22%, Singapore +0.69%, South Korea +0.66%, India +0.34%. India's central bank raised interest rates for the second time in a month and raised banks' cash reserve ratio in an attempt to slow the fastest inflation among the Group of 20 nations. The Reserve Bank of India (RBI) increased its reverse repurchase rate to 3.75% from 3.50%, the repurchase rate to 5.25% from 5.00% and hiked the cash reserve ratio to 6.00% from 5.75%. Most Japanese banks closed higher after Citigroup reported Q1 profit that beat estimates along with Morgan Stanley's upgrade of Japan's banking industry to "attractive" from "in-line," citing the outlook for lower credit costs as the economy recovers. Japanese exporters gained as the yen weakened against the dollar as a weaker yen boosts companies' revenue from overseas sales when converted into the local currency. Chinese property developers weakened after China ordered property developers not to take deposits for sales of uncompleted apartments without proper approval and barred them from charging "abnormally high" prices, as the government steps up efforts to prevent a property bubble.

Barchart.com U.S. Morning Call for Monday, April 19, 2010

Overnight Developments

Global stocks are lower with the European Euro Stoxx 50 Index down -1.00% and June S&Ps down -7.00 points. Global stocks extended last Friday's weakness after calls for regulatory probes on Goldman Sachs widened to Europe. The yen and Treasuries rallied to 3-1/2 week highs on increased safe-haven demand, while commodities slumped with crude oil and copper dropping to 3-week lows. European banks fell on the news that Goldman Sachs committed fraud in its mortgage securities business, while airline stocks tumbled as volcanic ash from an Iceland volcano halted most European flights for a fifth day. Greek stocks sank and credit-default swaps on Greece's government bonds rose 17 bp to a record 455 after talks on the country's debt crisis involving the ECB, the European Commission and the IMF were delayed after airspace across most of northern Europe remained closed. On the bright side, Royal Philips Electronics NV climbed 2.1% after the world's biggest lighting company posted Q1 net income of 200 million euros ($270 million), beating analysts' estimates of 102.4 million euros.

The Asian markets today closed lower with Japan down -1.74%, Hong Kong -2.10%, China -5.36%, Taiwan -3.17%, Australia -1.40%, Singapore -1.54%, South Korea -1.77%, India -1.08%. China's Shanghai Composite stock index slumped to a 1-month low after the government told banks to stop loans for third-home purchases, which undercut property developers and homebuilders. Deutsche Bank AG said the latest move is the "most draconian measures on the property market in history," and also prompted Goldman Sachs to say China's real estate stocks now face "high policy risk." China's latest move to cool its property market comes after prices gained a record 11.7% in March. Japanese banks fell on the news of the alleged fraud committed by Goldman Sachs while most Asian raw-materials producers weakened as commodity markets slumped and most Japanese exporters closed lower after the yen strengthened to a 3-1/2 week high against the dollar. On the positive side, Japan's March consumer confidence household sentiment climbed 1.1 points to 40.9, its highest level in more than 2 years, as consumers grew more confident for the third straight month that export growth is driving improvements in production and wages.

Barchart.com U.S. Morning Call for Friday, April 16, 2010

Overnight Developments

Global stocks are lower with the European Euro Stoxx 50 Index down -0.06% and June S&Ps down -1.60 points. Treasuries are higher after comments made late yesterday from San Francisco Fed President Yellen who said "the economy is operating well below its potential, inflation is subdued, and such conditions are likely to continue for a while," reinforcing speculation that the Fed will keep interest rates at a record low through year-end. The euro is weaker despite comments from EU finance ministers meeting in Madrid for a 2-day meeting that Greece doesn't have an immediate plan to tap its just approved $61 billion rescue package. European airline stocks are lower after the Centre for Asia Pacific Aviation predicted that airlines might lose $1 billion in revenue because a cloud of volcanic ash threatens to keep dozens of airports in the UK and northern Europe shut for three more days. Car part makers are stronger on the back of a 2.6% jump in Continental AG, its sixth consecutive gain, after Europe's second-largest auto-parts maker was rated "buy" in new coverage at UBS which said "the recovery in automobile production combined with good exposure to attractive segments could lead to 10% growth in automotive this year." European bank stocks strengthened after Royal Bank of Scotland Group Plc rose 6.8% after BofA Merrill Lynch Global Research said the biggest UK government-owned bank may be profitable this year and retailers gained after a 2.5% increase in Carrefour SA, Europe's biggest retailer, reported a 5.5% increase in Q1 sales and said it plans to buy back about 1.6 billion euros ($2.2 billion) in shares, its first stock repurchase since 2007.

The Asian markets today closed lower with Japan down -1.52%, Hong Kong -1.32%, China -1.13%, Taiwan -0.74%, Australia -0.34%, Singapore -0.32%, South Korea -0.54%, India -0.27%. Japanese stocks closed lower led by declnes in exporters after the yen rose to a 2-1/2 week high against the dollar and China's stocks closed lower after the Chinese cabinet said "more forceful" steps are needed to cool real estate speculation, raising concern that economic growth will be hurt given the property market's contribution to the economy. China's State Council said down payments for second homes must be at least 50%, up from 40%, and interest rates can't be lower than 110% of benchmark rates. Makers of construction equipment in Asia fell along with homebuilders and other real-estate companies on the harshest measures targeting the property market made to date by he Chinese government.

Barchart.com U.S. Morning Call for Thursday, April 15, 2010

Overnight Developments

Global stocks are mixed with the European Euro Stoxx 50 Index up +0.21% and June S&Ps down -2.50 points. The euro and commodities weakened as doubts persist about the success of the EU bailout plan for Greece. The yield on Greek 2-year notes jumped 27 bp to 7.26% and Greek stocks fell which undercut other European bourses while the surge in Q1 China GDP to a 3-year high of 11.9% y/y boosted stocks. ECB Council member Bonello said today that the Euro-Zone's economic recovery will be slower than in other areas of he world saying "economic activity is expected to remain sluggish and GDP growth is expected to be less than 1%." Germany's leading economic institutes today hiked their 2010 GDP forecast for Germany to 1.5% from an October estimate of 1.2% and predict that the ECB will keep its main refinancing rate unchanged at 1.0% through 2011 as inflation risks remain under control. The ECB in its monthly bulletin today said "current rates remain appropriate" and that the economy is recovering only slowly from recession and inflation is expected to remain "subdued" over the medium term. The ECB also reiterated in its monthly report that it will maintain looser collateral rules "beyond the end of 2010," which ensures that Greek government bonds will remain eligible in its refinancing operations.

The Asian markets today closed mixed with Japan up +0.61%, Hong Kong +0.16%, China -0.27%, Taiwan +0.92%, Australia +0.14%, Singapore -0.09%, South Korea +0.48%, India -1.03%. Q1 China GDP accelerated by a greater-than-expected +11.9% y/y, the fastest pace in almost 3 years, which highlights the overheating risks to the economy that may lead to interest rate hikes by the PBOC or a scrap of the yuan's peg to the dollar. China Mar consumer prices rose a less-than-expected 2.4% y/y, despite Mar China industrial production gaining 18.1% y/y and China Mar retail sales surging 18.0% y/y. The last time China's growth accelerated to more than 11%, in Q1 of 2006, the PBOC raised interest rates within a month. China's cabinet yesterday signaled caution in ending crisis policies, saying Q1 economic growth was largely driven by stimulus policies and a comparison with low levels from 2009. Instead of raising rates, the PBOC may again increase reserve requirements for lenders, something it has done twice already this year. After today's data, Citigroup raised its 2010 growth forecast for China to 10.5% from an earlier prediction of 9.8%, JPMorgan Chase increased to 10.8% from 10% and RBS hiked its growth estimate to 11% from 10%.

Barchart.com U.S. Morning Call for Wednesday, April 14, 2010

Overnight Developments

Global stocks are mostly higher with the European Euro Stoxx 50 Index up +0.69% and June S&Ps up +3.40 points. Technology companies in Europe and Asia are pacing a rally today after Intel late yesterday forecast sales that topped estimates, spurring optimism in the economic recovery. Intel is up nearly 5% in European trading, which boosted Infineon Technologies, Europe's second-largest chipmaker, by 2.6% and prompted a 3.4% increase in STMicroelectronics. Ericsson AB rose nearly 4% after Credit Suisse upgraded the stock to "outperform" from "neutral," saying the outlook for sales is improving. Allied Irish Banks gained nearly 6% after Goldman Sachs raised its recommendation on the stock to "buy" from "neutral" and Deutsche Postbank AG climbed 5.5% after the Handelsblatt reported that Deutsche Bank AG's preparations for the integration of Deutsche Postbank are more advanced than expected. Rounding out the bullish factors was the Feb Euro-Zone industrial production, which rose a more than expected +0.9% m/m and climbed +4.1% y/y, its biggest year-over-year gain in 1-3/4 years.

The Asian markets today closed higher with Japan up +0.39%, Hong Kong +0.08%, China +0.35%, Taiwan +0.84%, Australia +0.87%, Singapore +1.62%, South Korea +1.51%. Asian technology stocks were boosted by the release of Intel's upbeat earnings with Samsung Electronics closing 2.1% higher and Tokyo Electron advancing 3.6%. South Korean stocks gained, led by financial companies, after Moody's Investors Service raised the nation's credit ratings to A1 from A2, citing accelerating economic growth and a "relatively small" deficit. Singapore unexpectedly revalued its currency after the government raised its forecasts for economic growth and inflation. The Monetary Authority of Singapore hiked its growth estimate for this year to 9.0% from a previous outlook of 6.5% and said it will seek a "modest and gradual appreciation" in the local dollar and shift to a stronger range for currency fluctuations, the first such move in its 39-year history. The decision by Singapore adds to signs that China is preparing to end the yuan's 21-month-old peg to the dollar.

Barchart.com U.S. Morning Call for Tuesday, April 13, 2010

Overnight Developments

Global stocks are mostly weaker with the European Euro Stoxx 50 Index down -0.17% and June S&Ps down -3.30 points. The dollar is higher and most commodities are lower after Alcoa, the largest US aluminum maker, slumped 2.4% in European trading as it kicked off earnings season by reporting disappointing Q1 sales. The euro is little changed after a Greek auction of Treasury bills drew stronger demand than at a previous sale, which signals renewed investor appetite for Greek debt at the government's first offering of debt since winning an aid package from the European Union. Lower metals prices undercut basic-resource producers with Xstrata down 2.4% and Rio Tinto down 1.5%. Voestalpine sank over 5% after UniCredit SpA, which said, "The industry has to compensate at least 10% of the raw material price increases," downgraded Austria's largest steelmaker to "sell" from "hold" Sandvik dropped over 3% after the world's largest maker of metal-cutting tools was downgraded to "underperform" from "neutral" at Credit Suisse and cut to "equal weight" from "overweight" at Morgan Stanley. A rally in retail stocks limited losses in European stocks as LVMH Moet Hennessy Louis Vuitton SA advanced 2% after it reported that its Q1 sales rose 11%.

The Asian markets today closed mostly lower with Japan down -0.81%, Hong Kong -0.16%, China +1.20%, Taiwan -1.08%, Australia -0.66%, Singapore -0.19%, South Korea +0.04%, India -0.17%. China dampened speculation of an imminent revaluation of the yuan after Chinese leader Hu Jintao met with President Obama and rebuffed calls to strengthen the yuan. Yuan forwards fell after the Xinhua News Agency reported that Jintao told Obama that China won't yield to outside pressure on the exchange rate and any changes will be "based on its own economic and social-development needs." Chinese stocks closed higher after the National Business Daily reported that He Keng, deputy director of the finance and economic affairs committee of the National People's Congress, said that interest rates won't be raised anytime soon because of uncertainties in China's growth outlook, while the Xinhua News Agency reported that Xu Lianzhong, an official at the National Development and Reform Commission's price monitor center, said consumer price gains may slow in April and in coming months, which reduces the need for a rate increase. BOJ Governor Shirakawa said, "We're starting to see more positive signs than negative signs in consumer prices," indication policy makers may raise their inflation forecasts this month. Shirakawa said the BOJ is seeing "slight" improvements in wages and that commodity prices have risen amid the global economic recovery. The BOJ will update their forecasts for prices and GDP in their semi-annual outlook report on April 30.

Barchart.com U.S. Morning Call for Monday, April 12, 2010

Overnight Developments

Global stocks are mostly higher this morning with the European Euro Stoxx 50 Index down -0.02% and June S&Ps up +0.20 of a point. The main bullish factor today is the action by Euro-Zone finance ministers to offer Greece a rescue package worth as much as 45 billion euros ($61 billion) at below-market interest rates to stem its fiscal crisis and restore confidence in the euro. The finance ministers said they would offer as much as 30 billion euros in 3-year loans in 2010 at around 5% and another 15 billion euros would come from the IMF. The dollar and Treasuries fell on the news while commodities gained with copper at a 20-month high. Greek bonds surged as the yield on the benchmark 2-year note tumbled 124 bp to 5.92%, the biggest decline since the euro was introduced in 1999. Also boosting European stocks is the 3.7% gain in UBS which said its Q1 pretax profit was at least 2.5 billion francs ($2.4 billion), the highest pretax result since Q2 of 2007 as a rebound at the investment bank's debt trading unit spurred profits. European stocks relinquished their gains and turned lower on concern that the aid package for Greece will do little to shrink the levels of sovereign debt across the region along with the warning from Unicredit AG's chief strategist that the outlook for European stocks will "slowly but steadily" worsen. Undercutting European technology stocks is the 2% drop in Infineon AG after Merrill Lynch downgraded Europe's second-biggest maker of semiconductors to "underperform" from "neutral."

The Asian markets today closed mixed with Japan up +0.42%, Hong Kong -0.32%, China -0.82%, Taiwan +0.32%, Australia +0.73%, Singapore +0.17%, South Korea -0.98%, India -0.45%. China's customs bureau reported that the country's imports in March surged +66% y/y while its exports rose 24% y/y, leaving a $7.2 billion trade deficit, its first since 2004. Chinese Commerce Minister Chen Deming told the media that a deficit would be a blip and a return to a surplus is likely this month after seasonal labor shortages hurt exporters. Chinese banks in March extended a less-than-estimated 510.7 billion yuan ($74.8 billion) of new loans after the PBOC told lenders to set aside bigger reserves. Chinese banking regulator Liu Mingkang said that banks must report on their risk exposures by the end of June to help prevent a stimulus-linked credit boom from causing bad loans. The Bank of Korea today raised its 2010 GDP forecast to 5.2% from a December forecast of 4.6% and cut its forecast for core inflation for 2010 to 1.8% from a 2.5% estimate in December. The central bank said that South Korea's economy will expand this year at the fastest pace since 2006, and probably grew 1.6% in Q1 as the global economy increases demand for the nation's products.

Barchart.com U.S. Morning Call for Friday, April 9, 2010

Overnight Developments

Global stocks are higher this morning with the European Euro Stoxx 50 Index up 1.18% and June S&Ps up 2.80 points. The main bullish factor is indications that the EU may be getting closer to a serious bailout package for Greece. European Commission spokesman Amelia Torres said today that EU officials are "ready to act" on a financial assistance package for Greece. The Greek stock market today rebounded upward earlier, but is currently down -0.7%, adding to the sharp 3-day sell-off totaling 8.1%. The euro is higher today on the possibility of a break-through on the Greek debt situation, and the dollar index is down -0.19 points. The weaker dollar is providing a boost to commodity prices, which are higher today nearly across the board, led by nickel (+1.4%), natural gas (+1.3%), and silver +1.25%). European stock markets were also helped by the report that February German exports rose by 5.1% m/m, which was larger than the consensus forecast for a 4% gain. Fed Chairman Ben Bernanke in a speech last night said that "policy makers much respond forcefully, creatively, and decisively to severe financial crises," although his comments were general in nature and did not have implications for the Fed's immediate policy direction. The Asian markets today closed higher almost across the board: Japan +0.32%, Hong Kong +1.56%, China +0.97%, Taiwan +0.43%, Australia +0.21%, Singapore +0.30%, South Korea -0.64%, Bombay +1.23%.

Barchart.com U.S. Morning Call for Thursday, April 8, 2010

Overnight Developments

Global stocks are mostly lower with the European DJ Stoxx 50 Index down -0.91% and June S&Ps down -3.60 points. The dollar is stronger and most commodities are lower. Greek debt concerns continue to undercut European stocks as Greek bonds plummeted, sending the yield premium over German bunds to 440 bp, the widest since the inception of the euro in 1999. There is increased uncertainty about Greece's ability to raise funds without tapping the European Union's emergency lending facility and the IMF. Greek bank stocks sank with National Bank of Greece falling 7.6% and Alpha Bank sliding 7.4% after Natixis Securities downgraded Greece's biggest banks to "reduce" from "buy." Also hurting European stocks was the unexpected -0.6% m/m decline in Feb Euro-Zone retail sales, the biggest drop in 9 months. Mining stocks fell, led by losses of 2% in BHP Billiton and Rio Tinto Group, after metals prices slumped and Porsche SE slid 3% after analysts at Sanford C. Bernstein said tax and legal issues might threaten the planned merger between Porsche and Volkswagen AG. As expected, the BOE held its benchmark interest rate at 0.5% and its asset purchase plan at 200 billion pounds following the conclusion of its monetary policy meeting.

The Asian markets today closed lower with Japan down -1.10%, Hong Kong -0.28%, China -1.19%, Taiwan -0.79%, Australia -0.46%, Singapore -0.83%, South Korea +0.42%, India -1.42%. Feb Japan machinery orders unexpectedly fell -5.4% m/m, a sign that the resurgence in overseas demand isn't enough to prompt Japanese companies to spend on new plants or equipment. Asian exporters fell after the larger-than-expected decline in Feb US consumer credit raised concern about the sustainability of US consumer spending. Speculation is mounting that China may soon allow some sort of yuan appreciation as US Treasury Secretary Geithner is in Beijing today on a previously unscheduled trip to China to meet with Chinese Vice Premier Qishan. His trip comes four days after he postponed an Apr 15 deadline for a semiannual review of the currency policies of major US trading partners. Yuan forwards rose the most in 6 weeks after the New York Times reported today that China may announce a revision of its currency policy within days with a small, one-time jump in the yuan, which would then be allowed to trade in a greater range against the dollar. According to the US Commerce Department, China is the second-largest trading partner with the US after Canada, and that the 2009 US trade deficit with China was $226.8 billion, down 15% from a year earlier.

Barchart.com U.S. Morning Call for Wednesday, April 7, 2010

Overnight Developments

Global stocks are mixed with the European DJ Stoxx 50 Index down -0.22% and June S&Ps down -3.30 points. European stocks were undercut today after Q4 Euro-Zone GDP was unexpectedly revised down to 0.0% q/q versus the previously reported gain of +0.1% q/q, which shows the European economy stagnated in Q4. Corporate investment in Q4 was revised down to -1.3% q/q from the previously reported -0.8% q/q, and shows companies cut spending more than previously estimated. Tempering losses in European stocks was the unexpected upward revision to the Mar Euro-Zone PMI composite index to a 2-1/2 year high of 55.9 from the previously reported 55.5, which shows the recovery gained momentum. The British Chamber of Commerce said today that the Bank of England will keep the benchmark interest rate at a record low of 0.5% until at least November because the economic recovery remains "vulnerable." Finally, price pressures at the wholesale level in Europe remain muted after the Feb Euro-Zone PPI was reported at a weaker-than-expected +0.1% m/m and -0.5% y/y, the 14th consecutive month of year-over-year falling prices.

The Asian markets today closed mixed with Japan up +0.09%, Hong Kong +1.82%, China -0.53%, Taiwan +0.40%, Australia +0.15%, Singapore +0.42%, South Korea -0.09%, India +0.16%. After the BOJ left its benchmark interest rate unchanged as expected at 0.1%, BOJ Governor Shirakawa said a return to recession is unlikely as the recovery begins to sustain itself. The BOJ in its post-meeting comment said business sentiment "has been improving" and "the deterioration of employment is clearly stopping." Asian stocks also received support from the minutes of the Mar 16 FOMC meeting in which Fed members indicated interest rates in the US will stay near record lows. Chinese stocks closed lower, led by a decline in property developers, after the PBOC said it plans to sell 3-year bills tomorrow for the first time since 2008 to drain cash from the economy. The sale may be a precursor to an interest rate increase and a major proportion of China's economy is supported by investment that needs loans for sustained growth and the growth rate may fall if financing costs rise.

Barchart.com U.S. Morning Call for Tuesday, April 6, 2010

Overnight Developments

Global stocks are mixed with the European DJ Stoxx 50 Index up +0.29% at a 2-1/2 month high and June S&Ps down -2.30 points. The dollar and Treasuries are higher and most commodities are weaker. European markets are higher after being closed since last Thursday as they play catch up to the rally in US markets yesterday. The Apr Euro-Zone Sentix investor confidence rose a more-than-expected +7.0 to a 1-3/4 year high of 2.5. Basic resource companies rallied after yesterday's rise in crude oil to a 1-3/4 year high and the surge in copper to a 20-month high. Renault SA gained nearly 3% after people with direct knowledge of secret talks said that Renault, Nissan Motor and Daimler AG expect to save "billions of euros" by sharing development costs as part of an equity-swap alliance. Ryanair climbed 1.5% after Deutsche Bank upgraded the stock to "buy" from "hold" and Lafarge SA, the world's biggest cement maker, rose 2.7% after the Sawiris family purchased 6 million options in Lafarge which if exercised, would lead to an increase of 2.1% from the current Sawiris holding of 13.9% in Lafarge. The euro weakened after Market News cited unidentified officials as saying Greece might seek a rescue package that doesn't involve the IMF. Greece has been receiving information from the IMF about the conditions it would impose in return for aid and government officials found them to be "tough," and are concerned that they could result in civil unrest.

The Asian markets today closed mixed with Japan down -0.50%, China -0.06%, Taiwan +0.79%, Australia +0.94%, Singapore +0.24%, South Korea +0.01%, India +0.03%. The Feb Japan leading coincident index, a composite of 11 indicators including factory production and retail sales, climbed to 100.7 from 100.3 in Jan. The 11th consecutive monthly increase in the coincident index extends its longest winning streak since 1997 and adds to signs that the world's second-largest economy is picking up. Australia's S&P 200 Stock Index closed higher despite the RBA raising its benchmark interest rate to 4.25% from 4.00%, the fifth increase in borrowing costs in the last six policy meetings. RBA Governor Stevens dismissed warnings that higher borrowing costs are already eroding consumer spending saying today's move was a "further step" in returning interest rates to average levels and that growth in Asia is "quite strong." Asian commodity producers closed higher on speculation of increased demand for raw materials as the global economy strengthens and Asian chipmakers gained after the Economic Daily News reported that chip companies may raise salaries by as much as 3% as their business outlook improved.

Overnight U.S. Stock News

June S&Ps this morning are trading down -2.30 points. The US stock market yesterday rallied the entire day and finished near the high with solid gains (Dow Jones +0.43%, S&P 500 +0.79%, Nasdaq Composite +1.12%). The S&P 500 and the Dow Jones rose to 1-1/2 year highs and the Nasdaq climbed to a 1-3/4 year high. Bullish factors for stocks included (1) carry-over support from last Friday's report on Mar US payrolls that showed nonfarm payrolls increased by the most in 3 years and increases confidence in the US economic outlook, (2) the larger-than-expected increase in the Mar ISM non-manufacturing index which expanded by its fastest pace in 3-3/4 years (+2.4 to 55.4 versus expectations of +1.0 to 54.0), (3) a rally in homebuilders after the unexpected increase in Feb US pending home sales which had their biggest monthly increase in 8 years (+8.2% m/m versus expectations of -1.0% m/m), (4) the +0.7 point increase in the Mar Conference Board Employment Trends Index to 94.4, its seventh consecutive monthly gain, which signals that the US labor market is likely to add more workers, and (5) the prediction from Mizuho Financial Group that US companies are sitting on a record pile of cash after spending the lowest proportion of their profits in 2009 on stock buybacks since 2003 and that they will double their spending on stock repurchases to $235 billion in 2010 as earnings surge.
Bearish factors for stocks included (1) the prediction from Credit Suisse that commercial property loans of under $10 million account for $167.8 billion of the $651 billion commercial mortgage-backed securities market and that problems on these small loans are likely to increase and may not be getting adequate attention as loan servicers focus on and devote resources to rising defaults on high-profile properties, and (2) the surge in the 10-year T-note yield to a 17-1/2 month high of 4.01%, which increases the cost of capital for businesses and consumers.
Brigham Exploration (BEXP) fell 3.2% in European trading after saying it plans to issue 13 million shares of stock in a public offering and use the proceeds to fund work on its Williston Basin project.

Today's Market Focus

June 10-year T-notes this morning are trading up +9 ticks. T-note prices yesterday extended their 3-session slump down to a 7-3/4 month nearest-futures low and settled down -11 ticks at 115-000. The 10-year T-note yield climbed to a 17-1/2 month high of 4.01%. Bearish factors included (1) the larger-than-expected increase in the Mar ISM non-manufacturing index which expanded by its fastest pace in 3-3/4 years (+2.4 to 55.4 versus expectations of +1.0 to 54.0), (2) the unexpected increase in Feb US pending home sales which had their biggest monthly increase in 8 years (+8.2% m/m versus expectations of -1.0% m/m), (3) weakened safe-haven demand for Treasuries after the S&P 500 Index rose to a 1-1/2 year high, (4) the prediction from Morgan Stanley that the yield on the 10-year T-note will rise to 5.50% by year-end due to massive increases in Treasury borrowing, and (5) supply pressures ahead of the Treasury's $40 billion auction of 3-year T-notes on Tuesday.
The dollar index this morning is higher with the dollar/yen -0.36 yen and the euro/dollar -0.70 cents. The dollar index yesterday settled slightly lower. Bearish factors yesterday included (1) a rally in the commodity currencies of the world including the Canadian dollar and Australian dollar after crude oil rose to a 1-1/2 year high and copper surged to a 20-month high on speculation that an improving global economy will lead to increased demand for raw-materials, and (2) the prediction from Wells Fargo that a lack of follow-through on strong US economic data shows that "we've reached a case of near-term fatigue in terms of the dollar rally." Bullish factors included (1) the unexpected increase in Feb US pending home sales along with the expansion of the Mar ISM non-manufacturing index by its fastest pace in 3-3/4 years, which may lead to sooner-than-expected Fed rate hikes that would boost the dollar's interest rate differentials, and (2) the action by Barclays Capital to hike its forecasts for the dollar against the yen to 96 yen in 3 months and to 98 yen in 6 months, from a previous estimate of 93 and 96 yen, respectively, citing higher US yields and fading concern that Japanese investors and companies will be bringing money home from abroad.
May crude oil prices this morning are up +5 cents and May gasoline is -0.33 of a cent. May crude oil prices yesterday rallied throughout the day and closed up +$1.75 per barrel. May gasoline settled up +2.65 cents per gallon. Both May crude oil and May gasoline posted 1-1/2 year highs. Bullish factors included (1) the weaker dollar, (2) carry-over support from last Friday's Mar US payrolls that showed nonfarm payrolls increased by the most in 3 years along with yesterday's larger-than-expected increase in the Mar ISM non-manufacturing index, which bolsters optimism that fuel demand will increase as the economy strengthens, and (3) comments from Venezuelan Oil Minister Ramirez who said that oil prices have established a floor of $75 a barrel and should trade between $80 and $100 a barrel and that there's no need for OPEC to increase production.

Barchart.com U.S. Morning Call for Monday, April 5, 2010

Overnight Developments

June S&Ps are up +4.20 points this morning while Japan's Nikkei 225 Stock Index closed at a 1-1/2 year high on carry-over strength from last Friday's US Mar payrolls report that increases optimism the US economy is strengthening. The European DJ Stoxx 50 Index is closed along with the rest of Europe for Easter Monday. The dollar and commodities are stronger, with crude oil climbing to a 17-3/4 month high and copper rising to a 20-month high. Asian stock markets that were open closed higher with Japan up +0.47%, Singapore +0.86%, South Korea +0.35%, India +1.37%. The Japanese yen slipped to a 7-1/4 month low against the dollar and boosted Japanese exporters on optimism the weaker yen will boost the value of overseas sales. Canon, which gets 28% of its revenue in the Americas, closed 2.5% higher and Toyota Motor, which derives 31% of its revenue in North America, ended 1.1% higher. Asian chipmakers also strengthened led by a 3.4% gain in Hynix Semiconductor and a 1.5% increase in Samsung Electronics on signs of increased demand after the Maeli Business Newspaper reported that Samsung will add a new semiconductor chip line. Former Fed Chairman Greenspan said Sunday on ABC's "This Week" news program that the chances the economy will retrench after recovering from the recession "have fallen very significantly in the last two months" and White House economic adviser Summers was also optimistic about jobs and the economy when he added "now that the process of job creation has started, we expect it will accelerate." The Italian news agency Ansa reported that the IMF raised its forecast for global growth this year to 4.1% from a Jan prediction of 3.9% with IMF managing director Strauss-Kahn warning that world policy makers risk "shooting their own feet" if they withdraw emergency economic measures too quickly as most of the economic growth is related to public support rather than private demand.

Overnight U.S. Stock News

June S&Ps this morning are trading up +4.20 points. The US stock index futures last Friday were open until 0915 ET on the electronic Globex session and the the Jun S&Ps rallied to a 1-1/2 year high. The cash stock indices were closed last Friday for Good Friday. Bullish factors for stock futures last Friday included (1) the Mar US nonfarm payrolls report of +162,000, which was smaller than the consensus of +182,000 but was still the biggest monthly increase in 3 years, (2) the larger-than-expected +17,000 increase in Mar manufacturing payrolls and the upward revision in Feb manufacturing payrolls to +6,000 from +1,000, (3) the +40,000 increase in temporary US workers in Mar, which is a positive sign as payrolls at temporary-help agencies often turn up before total employment does, and (4) the report from the research firm IBIS World that US consumer spending this Easter will increase +1.8% y/y to $14 billion, the first increase in Easter spending in the last 3 years.
Bearish factors for stock futures included (1) the 0.1 point increase in the so-called underemployment rate (which includes part-time workers who would prefer a full-time job and people who want work but have given up looking) to 16.9%, (2) the increase in the percentage of people unemployed for 27 weeks or more to a record 44.1%, indicating worsening long-term unemployment, and (3) the surge in the yield on the 10-year T-note to a 9-3/4 month high of 3.95%, which increases the cost of capital to consumers and businesses.
Apple (AAPL) may be active today after Piper Jaffray estimated that Apple sold more than 700,000 of its newly released iPAds in its debut weekend, more than a previous estimate for sales of 200,000 to 300,000.

Today's Market Focus

June 10-year T-notes this morning are trading down -2.5 ticks. T-note prices during last Friday's abbreviated session fell to a 1-week low and settled down -22 ticks at 115-110. The 10-year T-note yield climbed to a 9-3/4 month high of 3.95%. Bearish factors included (1) the March unemployment report, which was generally interpreted as bullish for the economy, and (2) supply pressures ahead of the Treasury's $8 billion auction of 10-year TIPS on Monday. Bullish factors included (1) slack wage pressures with the unexpected decline in Mar avg hourly earnings (-0.1% m/m and +1.8% y/y versus expectations of +0.2% m/m and +1.9% y/y), and (2) comments from New York Fed President Dudley who said that the US economic recovery may be "quite muted" and job growth too slow, which justifies low borrowing costs for a long period.
The dollar index this morning is slightly higher with the dollar/yen -0.18 yen and the euro/dollar -0.25 cents. The dollar index last Friday closed higher in abbreviated trade. Bullish factors yesterday included (1) the slump in the yen to a 7-month low against the dollar after March US nonfarm payrolls increased by the most in 3 years and added to signs that the economy is improving, and (2) the prediction from Credit Agricole that the dollar will continue to strengthen as expectations for a Fed rate increase rise as the US economic outlook picks up. Bearish factors included (1) dollar-negative comments from New York Fed President Dudley who said that a US economic recovery that is "quite muted," and (2) comments from the Chinese central bank that the dollar will have only a limited rebound in 2010 because of the high fiscal deficit in the US along with low interest rates.
May crude oil prices this morning are up +50 cents and May gasoline is +1.68 cents. May crude oil climbed to a 17-3/4 month high of $85.89 a barrel in overnight electronic trade on increased optimism that fuel demand will climb. May crude oil prices last Thursday rallied to a 17-3/4 month nearest-futures high and settled up +$1.11 per barrel. May gasoline rallied to a 1-1/2 year high and closed up +1.65 cents per gallon. Bullish factors included (1) the slide in the dollar index to a 1-week low, which benefits the prices of most commodities priced in dollars, and (2) signs that the global economy is strengthening after the US Mar ISM manufacturing index expanded at its fastest pace in 5-1/2 years, China's Mar manufacturing sector expanded for the 13th straight month, and Mar Euro-Zone manufacturing expanded at its fastest pace in 3-1/2 years, which bolsters optimism that fuel demand will increase this year. Bearish factors included (1) the larger-than-expected decrease in Feb construction spending which fell for the fourth straight month and may hinder the economic recovery and slow fuel demand in the US, and (2) the unexpected decline in Feb German retail sales, which signals an uneven recovery in Europe that may limit energy demand.

Barchart.com U.S. Morning Call for Friday, April 2, 2010

Overnight Developments

June S&Ps are down -1.30 points ahead of this morning's US Mar payrolls report. The US stock futures trading on the electronic Globex will remain open today until 0915 ET while the cash market will remain closed. The European DJ Stoxx 50 Index is closed along with the rest of Europe for Good Friday. The Asian markets today closed higher with Japan up +0.37%, China +0.45%, Taiwan +0.16%, South Korea +0.54%. Markets in Australia, Hong Kong, New Zealand, Singapore, India, the Philippines and Indonesia were closed for Good Friday. Japan's Nikkei 225 Stock Average climbed to a 1-1/2 year high as a drop in the yen to a 7-month low against the dollar prompted a rally in exporters. Toshiba, Japan's biggest memory-chip maker closed 3.5% higher, while Toyota ended 1.5% higher and led gains in automakers after reporting a 41% increase in US sales for March. According to Autodata Corp., Japanese and South Korean automakers boosted combined US sales by 29% to 522,775 and their market share rose to 49% from 47.1% a year earlier. Hyundai climbed 5.8% to a record and led South Korean stocks higher after the country's largest automaker posted record sales in the US and China. Energy producers gained on yesterday's surge in crude oil to nearly a 1-1/2 year high with JX Holdings, the Japanese energy company created by the merger of Nippon Oil and Nippon Mining, jumping 10% and received an added boost when it was upgraded to "buy" at Nomura Holdings. China's Shanghai Stock Index rallied to a 2-1/4 month high and was led by gains in raw-material producers after copper soared to a 20-month high yesterday.

Overnight U.S. Stock News

June S&Ps this morning are trading down -1.30 points. The US stock market yesterday closed higher but well off its best levels (Dow Jones +0.65%, S&P 500 +0.74%, Nasdaq Composite +0.19%). The Nasdaq surged to a 1-3/4 year high while the S&P 500 and Dow Jones climbed to 1-1/2 year highs. Bullish factors for stocks included (1) carry-over support from a rally in European and Asian equity markets after the Euro-Zone manufacturing sector in March expanded by its fastest pace in 3-1/2 years and China's manufacturing sector in Mar expanded for the 13th consecutive month, which bolsters optimism that the global economy is strengthening, (2) the larger-than-expected decline in weekly initial unemployment claims which matched the Feb 5th 19-month low (-6,000 to 439,000 versus expectations of -2,000 to 440,000), (3) the larger-than-expected increase in the Mar ISM manufacturing index which expanded at its fastest pace in 5-1/2 years (+3.1 to 59.6 versus expectations of +0.5 to 57.0), and (4) strength in raw material and energy producers after copper prices surged to a 20-month high and crude oil climbed to a 17-3/4 month high on optimism that the strengthening economy will lead to increased demand for commodities.
Bearish factors for stocks included (1) the weaker-than expected Feb construction spending which fell for the fourth consecutive month (-1.3% versus expectations of -1.0% with Jan revised down to -1.4% from -0.6%) to its lowest level since 2002 and a fresh sign that the troubled real-estate market remains a soft spot for the economic recovery, (2) a possible sign that inflation may begin to creep higher after the Mar ISM prices paid sub-index rose more-than-expected to a 19-month high (+8.0 to 75.0 versus expectations of unchanged at 67.0), and (3) weakness in technology companies on concern that Apple's new iPad will hurt sales of laptops and reduce demand for computers running Microsoft software.

Today's Market Focus

June 10-year T-notes this morning are trading down -2.5 ticks ahead of this morning's Mar US payrolls report. T-note prices yesterday weakened and closed down -7 ticks at 116-010. Bearish factors included (1) the larger-than-expected decline in weekly initial unemployment claims which matched the Feb 5th 19-month low (-6,000 to 439,000 versus expectations of -2,000 to 440,000), (2) the larger-than-expected increase in the Mar ISM manufacturing index which expanded at its fastest pace in 5-1/2 years (+3.1 to 59.6 versus expectations of +0.5 to 57.0), (3) the larger-than-expected increase in the Mar ISM prices paid sub-index which rose to a 19-month high (+8.0 to 75.0 versus expectations of unchanged at 67.0), and (4) the rally in the S&P 500 to a 1-1/2 year high, which lessens the safe-haven demand for Treasuries. A bullish factor yesterday was the larger-than-expected decline in Feb construction spending which fell for the fourth straight month (-1.3% versus expectations of -1.0% with Jan revised down to -1.4% from -0.6%).
The dollar index this morning is stronger with the dollar/yen +0.14 yen at a fresh 7-month high and the euro/dollar -0.41 cents. The dollar index yesterday slid to a 1-week low and closed lower for a second day. Bearish factors yesterday included (1) a decrease in the safe-haven demand for the dollar after the S&P 500 rallied to a 1-1/2 year high, and (2) strength in commodity currencies, including the Canadian dollar, after crude oil rose a 17-3/4 month high and copper surged to a 20-month high on evidence that the global economy is expanding, which may lead to increased global demand for commodities. Bullish factors included (1) the slump in the yen to a 7-month low against the dollar on optimism that Friday's US payrolls report will show growth in the labor market which may move up expectations for Fed rate hikes, and (2) euro negative comments from ECB Council member Kranjec who said that the European Union and the ECB won't "do much more" to help Greece overcome its fiscal difficulties.
The energy markets are closed today for Good Friday. May crude oil prices yesterday rallied to a 17-3/4 month nearest-futures high and settled up +$1.11 per barrel. May gasoline rallied to a 1-1/2 year high and closed up +1.65 cents per gallon. Bullish factors included (1) the slide in the dollar index to a 1-week low, which benefits the prices of most commodities priced in dollars, and (2) signs that the global economy is strengthening after the US Mar ISM manufacturing index expanded at its fastest pace in 5-1/2 years, China's Mar manufacturing sector expanded for the 13th straight month, and Mar Euro-Zone manufacturing expanded at its fastest pace in 3-1/2 years, which bolsters optimism that fuel demand will increase this year. Bearish factors included (1) the larger-than-expected decrease in Feb construction spending which fell for the fourth straight month and may hinder the economic recovery and slow fuel demand in the US, and (2) the unexpected decline in Feb German retail sales, which signals an uneven recovery in Europe that may limit energy demand.

Barchart.com U.S. Morning Call for Thursday, April 1, 2010

Overnight Developments

Global stocks are higher with the European DJ Stoxx 50 Index up +0.93% and June S&Ps up +4.80 points. Signs of accelerating economic growth are boosting stocks and commodities today. The dollar index slipped to a 1-week low while crude oil surged to a 17-1/2 month high and copper prices climbed to a 20-month high. The Mar Euro-Zone manufacturing PMI index was unexpectedly revised up +0.3 to 56.6, to nearly a 3-1/2 year high. In a separate report, the Mar UK manufacturing PMI increased a more- than-expected +0.7 to 57.2, its highest level since 1994 and a sign that reviving global demand is prompting companies to step up output. Mining companies gained due to surging metals prices with BHP Billiton up 2.1% and Rio Tinto Group up 2.8%. BMW rallied 2.9% after the world's biggest maker of luxury cars was raised to "outperform" from "underperform" at Credit Suisse, which cited a "positive" pricing strategy. On the bearish side, Michelin & Cie, dropped 1.8% after the world's second-biggest tire maker was downgraded to "hold" from "buy" at Deutsch Bank AG, and Feb German retail sales unexpectedly fell -0.4% m/m as bad weather and job concerns kept consumers at home.

The Asian markets today closed higher with Japan up +1.39%, Hong Kong +1.40%, China +1.38%, Taiwan +1.17%, Australia +0.66%, Singapore +1.92%, South Korea +1.76%, India +0.94%. China's Shanghai Composite Stock Index climbed to a 2-month high after the Mar China Purchasing Managers' Index rose +3.2 to 55.1, the 13th straight month of expansion. Surging growth in China is pulling the global economy out of recession and leading to a pickup in exports and global trade. Japan's Nikkei Stock Index rose to a 17-3/4 month high after the BOJ reported that the nation's large manufacturers became the least pessimistic since 2008 in March. The Q1 Tankan index rose to -14 from -24 in Q4, the fourth straight quarter of improvement, as increased Asian demand is spurring earnings for Japanese exporters. In other signs of strength in Asia, India's March factory output grew for the 12th consecutive month and Australian imports of machinery and industrial equipment soared 23% to a 10-month high, while South Korean exports in March jumped 35.1%. JPMorgan Chase predicts that contract iron ore prices may increase 65% this year amid stronger-than-expected demand from Chinese steel mills.

Overnight U.S. Stock News

June S&Ps this morning are trading up +4.80 points. The US stock market yesterday swung between gains and losses into early afternoon when it declined and finished lower (Dow Jones -0.47%, S&P 500 -0.33%, Nasdaq Composite -0.53%). Bearish factors for stocks included (1) the unexpected loss of jobs in the Mar ADP employment change (-23,000 versus expectations of +40,000), which increases skepticism over this Friday's expected +180,000 increase in Mar nonfarm payrolls, (2) the larger-than-expected decline in the Mar Chicago purchasing managers index (-3.8 to 58.8 versus expectations of -1.6 to 61.0), and (3) comments from Fed Governor Duke who said that US banks remain weakened and their failure to boost lending is a "great concern."
Bullish factors for stocks included (1) the Feb factory orders report, which rose for the 10th time in the last 11 months (Feb +0.6% versus expectations of +0.5% with Jan revised up to +2.5% from a previously reported +1.7%), (2) the +0.5% increase in Feb factory inventories, the biggest gain since Aug 2008, which will also boost growth in Q1 GDP, (3) strength in energy producers after crude oil surged to a 2-1/2 month high, and (4) a rally in mortgage insurers after the Mortgage Insurance Companies of America said borrowers who caught up on their overdue mortgages outnumbered people who became newly delinquent on insured home loans for the first time in almost 4 years.
Alcoa (AA) rose 1.1% and Freeport McMoRan (FCX) gained 1% in European trading after metals prices surged with copper climbing to a 20-month high.
Research in Motion (RIM) sank 6.3% in pre-market trading after the maker of the BlackBerry reported Q4 revenue and shipments that fell short of estimates and said its profit margins will shrink in the quarter ending in May. Goldman Sachs then downgraded the stock to "sell" from "neutral" saying RIM's products will lag behind the iPhone and Android.

Today's Market Focus

June 10-year T-notes this morning are trading down -1 tick. T-note prices yesterday moved higher and closed up +10 ticks at 116-080. Bullish factors included (1) the unexpected loss of jobs in the Mar ADP employment change (-23,000 versus expectations of +40,000), (2) the larger-than-expected decline in the Mar Chicago purchasing managers index (-3.8 to 58.8 versus expectations of -1.6 to 61.0), (3) comments from Fed Governor Duke who said that US banks remain weakened and their failure to boost lending is a "great concern," and (4) comments from Dallas Fed President Fisher who said that raising US interest rates from near zero is not on the "front burner" because the economy is operating with a large amount of slack. Bearish factors yesterday included (1) the prediction from Societe Generale SA that China may curb purchases of Treasuries this year as its first trade deficit in 17 years leaves it with fewer dollars to invest, which may push 10-year T-note yields up to between 4.75% and 6.00%, and (2) the larger than expected increase in Feb factory orders and the upward revision to Jan (Feb +0.6% versus expectations of +0.5% and Jan revised up to +2.5% from the earlier reported +1.7%).
The dollar index this morning is lower and at a 1-week low with the dollar/yen +0.05 yen and the euro/dollar -0.09 cents. The dollar index yesterday fell to a 1-week low and closed lower. Bearish factors yesterday included (1) comments from Dallas Fed President Fisher who said that raising US interest rates from near zero is not on the "front burner" because the economy is operating with a large amount of slack, which may keep the dollar's interest rate differentials weak as the Fed refrains from tightening, (2) strength in the euro after Mar German unemployment unexpectedly dropped, (3) the unexpected loss of jobs in the Mar ADP employment change, and (4) comments from Atlanta Fed President Lockhart who said the Fed's "highly accommodative" stance on interest rates is "appropriate at present." Bullish factors included (1) the IMF report that showed the US dollar's share of global currency reserves rose to 62.1% in Q4 of 2009 and the euro's share dropped to 27.4%, and (2) the prediction from Morgan Stanley that the dollar is losing its carry-trade "allure" as rising Treasury yields and speculation the Fed will hike interest rates sooner rather than later makes the dollar "unattractive to short" as a funding currency.
May crude oil prices this morning are up +65 cents and posted a 17-1/2 month high of $84.62 in overnight trade and May gasoline is up +1.38 cents. May crude oil prices yesterday rallied to a 2-1/2 month high and settled up +$1.39 per barrel. May gasoline rallied to a 1-1/2 week high and closed up +3.51 cents per gallon. Bullish factors included (1) the slump in the dollar index to a 1-week low, which benefits the prices of most commodities priced in dollars, and (2) OPEC's cut in production by -30,000 bpd in March to 19.205 million bpd. Bearish factors included (1) the larger-than-expected increase in weekly crude oil inventories which increased for the ninth consecutive week to a 9-1/2 month high (+2.93 million bbl to 354.2 million bbl versus expectations of +2.5 million bbl), (2) the unexpected increase in weekly gasoline supplies (+313,000 bbl versus expectations of a -2.0 million bbl drawdown), and (3) the larger-than-expected climb in the weekly refinery capacity rate which jumped to a 5-3/4 month high and bodes well for further increases in gasoline and distillates in the weeks ahead (+1.5 to 82.6% versus expectations of +0.2 to 81.3%).

Barchart.com U.S. Morning Call for Wednesday, March 31, 2010

Overnight Developments

Global stocks are weaker with the European DJ Stoxx 50 Index down -0.02% and June S&Ps down -1.20 points. Sending European stocks lower was the larger-than-expected increase in the Mar Euro-Zone CPI estimate, which climbed +1.5% y/y, its largest gain in 15 months, while the Feb Euro-Zone unemployment rate rose +0.1 to 10.0%, the highest rate since Aug 1998. Gains in Ireland's banks are limiting losses in European markets with Bank of Ireland surging 25% and Allied Irish Banks up nearly 7% after the National Asset Management Agency announced bank fund-raising requirements. According to the NAMA, the Irish lenders must have an 8% core Tier 1 capital ratio and a 7% equity core Tier 1 capital ratio by the end of the year. At the end of 2009, Allied Irish Bank's equity core tier 1 ratio stood at 5% and Bank of Ireland's 5.3%, excluding a government investment of 3.5 billion euros in each bank made at the start of 2009. European stocks were also boosted after Mar German unemployment unexpectedly dropped -31,000 (versus expectations of a +7,000 increase), and the Mar German unemployment rate unexpectedly dipped -0.1 to 8.0%, a 1-year low.

The Asian markets today closed lower with Japan down -0.06%, Hong Kong -0.63%, China -0.63%, Taiwan -0.53%, Australia -0.84%, Singapore -1.57%, South Korea -0.40%, India -0.35%. Feb Japan labor cash earnings fell -0.6% y/y, their 21st consecutive monthly decline and the longest slide in 7 years, which adds to signs that Japanese workers have yet to reap the benefits of the economic recovery. Finance companies led Japanese stocks lower after Prime Minister Hatoyama said the government will double the cap on deposits at the nation's postal bank, despite arguments from the National Strategy Minister that raising the cap will cause deposits to flow out of commercial banks. Valuation concerns also undercut Japanese stocks after the average price of stocks in the Nikkei 225 climbed yesterday to 39 times estimated profit, the highest level among the world's biggest stock markets. China's Shanghai Composite Index closed lower and finished Q1 down -5.1% q/q, as investors fret over the increase in inflation, asset bubbles and the PBOC's attempts to curb bank lending.

Barchart.com U.S. Morning Call for Tuesday, March 30, 2010

Overnight Developments

Global stocks are mostly higher with the European DJ Stoxx 50 Index up +0.52% at a 2-month high and June S&Ps up +2.00 points. UBS surged nearly 4% and led financial stocks higher after Switzerland's biggest bank by assets was said to have generated about $2.3 billion of revenue at its fixed-income division in Q1 after it rebuilt the unit following record losses. BHP Billiton Ltd. rose 1.2% and led mining companies higher after it announced plans to start selling iron ore to Asian steel mills on short-term contracts, helping producers benefit from surging spot prices, as the world's largest mining company ends a 40-year system of setting annual prices. Vinci SA gained 1.5% after the world's biggest builder won a 7.2 billion-euro ($9.7 billion) contract to build, operate and maintain a high-speed rail line between the French cities of Tours and Bordeaux. On the bearish side, Greek stocks and bonds fell after the country's newly auctioned 7-year notes fell on the first day of trading on concern the nation will continue to struggle to fund itself at a price it can afford. Allied Irish Banks Plc tumbled 17%, extending yesterday's 20% plunge, as Ireland prepares to announce details of banks' capital requirements. The Irish Times reported that Allied Irish might need as much as 7 billion euros in new capital.

The Asian markets today closed mostly higher with Japan up +1.01%, Hong Kong +0.65%, China +0.24%, Taiwan +0.19%, Australia +0.40%, Singapore +0.15%, South Korea +0.40%, India -0.68%. Japan's Nikkei Stock Index rose to its highest level in nearly 1-1/2 years after the Feb Japan jobless rate held steady at 4.9%, its lowest level in nearly a year, and the Feb job-to-applicant ratio increased +0.01 to 0.47. The increase in Feb US consumer spending for the fifth consecutive month supported a rally in Asian exporters, while South Korean stocks and the won were boosted after the Bank of Korea said its index of manufacturers' expectations climbed to 105 in March, the highest level since Q4 of 2002. Morgan Stanley analysts predict that China's stocks may "break out" in the second half of this year as the yuan strengthens and slowing inflation eases concerns about monetary tightening. Chinese Commerce Minister Chen Deming said increasing the value of the yuan wouldn't overcome the lopsided trade with the US, saying, "It has been proved in theory and practice that the appreciation of a nation's currency provides little help for improving balance of payments." Chen cited Japan and Germany as examples of nations that are still running surpluses with the US after being pushed to revalue their currencies.

Barchart.com U.S. Morning Call for Monday, March 29, 2010

Overnight Developments

Global stocks are mostly higher with the European DJ Stoxx 50 Index up +0.28% at a 2-month high and June S&Ps up +6.20 points. The dollar and Treasuries are weaker, while commodities are higher with copper trading at a 4-week high. March Euro-Zone economic confidence surged a more-than-expected +1.8 points to a 1-3/4 year high of 97.7, a sign that the recovery is gathering strength as a weaker euro helps exporters. Also boosting European stocks was the larger-than-expected increase in the March Euro-Zone business climate indicator, which gained +0.33 to a 19-month high of -0.32. Standard & Poor's Ratings Services today affirmed the UK's AAA long-term and A-1+ short-term sovereign credit ratings but said the UK's ratings outlook remains negative. Also limiting equity market gains was the plunge in Irish bank stocks, with Bank of Ireland Plc down over 9% and Allied Irish Banks Plc down more than 19% on concern the government will have to increase its stakes in the lenders as Ireland's so-called bad bank begins taking over toxic loans. The Irish Times reported today that the state might end up with a 70% stake in Allied Irish and a 40% stake in Bank of Ireland.

The Asian markets today closed mostly higher with Japan down -0.09%, Hong Kong +0.88%, China +2.55%, Taiwan +0.90%, Australia +0.01%, Singapore +0.79%, South Korea -0.29%, India +0.38%. China's Shanghai Composite Index rallied to a 2-month high after China Resources Land Ltd. and China Construction Bank Corp. both reported higher-than-expected profits. Japan's Feb retail sales unexpectedly rose +0.9% m/m for its second straight monthly increase and surged +4.2% y/y, its biggest year-over-year gain since 1997, which signals that the drop in the unemployment rate is feeding through to higher household spending. Seven & I, Japan's largest retailer, closed 3.6% higher after Morgan Stanley upgraded the stock to "overweight." Reserve Bank of Australia Governor Stevens said today that house prices in Australia are "getting quite high," which signals the RBA may further increase interest rates to contain inflation. The RBA already increased borrowing costs this month for the fourth time in the last five policy meetings and may raise the overnight cash rate target from its current 4.0% level at its next policy meeting on Apr 6.

Barchart.com U.S. Morning Call for Friday, March 26, 2010

Overnight Developments

Global stocks are mixed with the European DJ Stoxx 50 Index down -0.54% and June S&Ps up +3.00 points. The euro, commodities and Greek stocks gained after ECB President Trichet endorsed the European leader's aid plan for Greece saying he was "extraordinarily happy that the governments of the Euro-Zone found out a workable solution." Trichet had earlier said an IMF role in the funding of a rescue framework for Greece would be "very, very bad," but EU President Rompuy said that the "lion's share" of funding for Greece would come from the EU, with the rest from the IMF. A 5.3% loss in Unipol Gruppo Finanziario SpA is leading European financial stocks lower after Italy's third-largest insurer announced it plans to raise 500 million euros ($667 million) selling stock and warrants to existing investors after it posted a full-year loss for 2009. On the positive side, Parmalat SpA gained 3.1% after Italy's largest dairy food company was upgraded by Morgan Stanley to "overweight" from "equal weight" and Volkswagen AG's preferred stock climbed 2.5% after it set the price of a sale of preferred shares to help finance the takeover of Porsche SE at 65 euros, the upper end of a previously announced range.

The Asian markets today closed higher with Japan up +1.55%, Hong Kong +1.32%, China +1.42%, Taiwan +0.49%, Australia +0.24%, Singapore +0.62%, South Korea +0.53%, India +0.49%. Japan's Nikkei Stock Index rose to a 17-3/4 month high as recent weakness in the yen aided export stocks while technology stocks gained on signs of increased demand. Semiconductors and chipmakers gained after Qualcomm, the world's biggest maker of mobile-phone chips, boosted its Q2 profit and sales forecasts. Chip stocks also found support after the Dramexchange Index, which tracks prices of the most widely used computer-memory chips, rose 0.3% to its highest level in over 3 years. According to Fan Gang, an adviser to the PBOC, China may allow the yuan to trade more freely against the dollar, while avoiding an abrupt revaluation that would wreck its exports. Fan's comments echoed earlier remarks this month from PBOC Governor Xiaochuan who said that "sooner or later" China would exit its anti-crisis policies, which included pegging the yuan to the dollar since July 2008. The US Treasury Department will decide next month whether to label China as manipulating its currency, a designation not invoked since 1994, as Chinese Premier Wen Jiabao said that the yuan was not undervalued and policy makers aim to keep the currency "basically stable."

Barchart.com U.S. Morning Call for Thursday, March 25, 2010

Overnight Developments

Global stocks are mixed with the European DJ Stoxx 50 Index up +0.66% and June S&Ps up +4.20 points. The euro rallied off of a 10-1/2 month low and Greek bonds climbed after ECB President Trichet said his bank will leave emergency collateral rules in place into 2011, a reversal of his stance in Jan when he said the ECB wouldn't change its collateral policy "for the sake of any particular country." Had the ECB reverted to its pre-crisis rules, a downgrade of two notches by Moody's, which has as A2 rating on Greece, would have meant banks couldn't use Greek government bonds when borrowing from the central bank. The euro and European stocks also found support after German Chancellor Merkel said she would recommend a combination of IMF help and bilateral EU aid to Greece as a last resort if default looms. Dubai said it will support Dubai World's debt restructuring with $9.5 billion as the state-owned holding company asks creditors to wait up to 8 years to get all of their money back. The additional funds double to $20 billion the amount the government paid to the emirate's holding company, which eases concern of default as Dubai World seeks to renegotiate $23.5 billion in debt. Limiting gains in European stocks was the unexpected decline in Feb French consumer spending which fell -1.2% m/m as unfavorable labor-market conditions keep consumption restrained.

The Asian markets today closed mixed with Japan up +0.13%, Hong Kong -1.10%, China -1.45%, Taiwan +0.20%, Australia -0.12%, Singapore +0.07%, South Korea +0.45%, India +0.62%. BOJ board member Kamezaki said today that the central bank is prepared to consider further monetary easing after last week's expansion of a lending program for banks. Kamezaki said the BOJ's efforts to combat deflation have pushed down interest rates on various securities such as government bonds and corporate debt, and while further declines in borrowing costs may help spur growth, those alone "may not necessarily be enough." Japanese exporters gained after the yen fell to a 2 month low against the dollar despite the 10% plunge in Li & Fung, the biggest supplier to companies including Wal-Mart. Li & Fung reported net income last year of HK$3.37 billion ($434 million), missing analysts' estimates of HK$3.75 billion as it said the recovery in global consumer demand is "anemic" and retailers are keeping inventories low.

Barchart.com U.S. Morning Call for Wednesday, March 24, 2010

Overnight Developments

Global stocks are mixed with the European DJ Stoxx 50 Index down -0.39% and June S&Ps down -4.60 points. European stocks fell after Fitch Ratings downgraded Portugal's credit rating to AA- from AA, citing its deteriorating public finances. Fitch also kept the outlook on Portugal's debt rating "negative," meaning it's more likely to cut the grade further than raise it or keep it unchanged. The euro slumped to a 10-1/2 month low against the dollar and confidence in the currency was further undercut after French and German leaders said any aid package for Greece would need help from the IMF. Limiting losses in European stocks was the larger-than-expected increase in the Mar German IFO business climate, which jumped +2.9 to a 1-3/4 year high of 98.1. Also supporting confidence in the European economy was the unexpected increase in the Mar Euro-Zone PMI composite index, which rose +1.8 to 55.5, its fastest pace of growth in 2-1/2 years.

The Asian markets today closed mostly higher with Japan up +0.38%, Hong Kong +0.10%, China +0.03%, Taiwan +0.14%, Australia +0.34%, Singapore -0.66%, South Korea unchanged. China's central bank Governor Zhou Xiaochuan said his government needs evidence of a "very certain" recovery before it can roll back stimulus measures adopted during the crisis. Zhou said China would coordinate with other countries, especially the Group of 20 nations, on a stimulus exit, saying that G-20 leaders will assess the status of the economic recovery at a summit in Canada in June. Feb Japan exports surged 45.3% y/y, the fastest pace in 30 years, which increases the prospects for a sustained economic rebound. Feb Japan imports climbed 29.5% y/y, the fastest pace in 3 years, which shows Japan's domestic economy continues to improve as well.

Barchart.com U.S. Morning Call for Tuesday, March 23, 2010

Overnight Developments

Global stocks are mixed with the European DJ Stoxx 50 Index up +0.41% and June S&Ps up +0.90 points. The euro weakened against the dollar on concern European Union leaders will fail to agree on an aid package for Greece at a summit this week after ECB President Trichet spoke out against offering the low-interest loans for which the Greek government has demanded. Treasuries are higher after Chicago Fed President Evans told reporters at a press briefing in Shanghai that the Fed is likely to maintain an "accommodative" interest rate stance for at least six months to support the momentum of economic growth. Underpinning stock gains in Europe was the larger-than-expected increase in the Mar French business confidence indicator, which rose +3 to a 20-month high of 94. Legal & General Group Plc led financial stocks higher after the UK's fourth-biggest insurer climbed 4.6% when it reported 2009 net income of 863 million pounds ($1.3 billion), nearly double analysts' estimates of 461 million pounds, and the insurer also increased its dividend by 33% to 2.73 pence per share. Oil-services companies were also stronger after Saipen SpA, Europe's largest oil-services provider, gained 3.4% and Technip SA, the second-biggest, climbed 4.1% after Morgan Stanley upgraded both companies to "overweight" from "equal weight."

The Asian markets today closed mixed with Japan down -0.47%, Hong Kong +0.26%, China -0.82%, Taiwan -0.31%, Australia +0.92%, Singapore +0.57%, South Korea +0.72%, India +0.23%. The just released minutes of the BOJ Feb 17-18 policy meeting showed that board members were divided on their views of the economy, reflecting signs of a sustained recovery at the same time as declines in consumer prices were deepening. According to the minutes, members agreed in Feb that the economy continued to "pick up" and would gain momentum from the middle of the fiscal year starting in April, while a few members said record declines in consumer prices excluding food and energy showed deflation may be "becoming widespread." Real-estate companies in China slumped after the Oriental Morning Post reported that Shanghai may require faster payments from developers for land purchases, while Japanese real-estate stocks fell after Mizuho Asset Management said "there are a lack of growth prospects" in Japanese real estate companies. Limiting losses in Asian stocks were gains in bank stocks after Fukuoka Financial Group gained 2.2% when it was raised to "buy" from "neutral" at Nomura Holdings, and Bank of China gained nearly 2% after it reported 2009 net income of 81.1 billion yuan, beating analysts' estimates of 78.7 billion yuan. Also boosting stocks was the 5.1% jump in China Telecom after the country's biggest fixed-line carrier was upgraded to "neutral" from "underweight" at HSBC.

Barchart.com U.S. Morning Call for Monday, March 22, 2010

Overnight Developments

Global stocks are mostly lower with the European DJ Stoxx 50 Index down -1.02 % and June S&Ps down -7.80 points. Concerns that sovereign-debt burdens will hinder the global economic recovery weighed on European and US stocks. The dollar index jumped to a 2-1/2 week high and most commodities are lower after German Chancellor Merkel said investors shouldn't expect this week's European Union summit to agree on a package to help Greece tackle its deficit, saying EU leaders must not create "illusions" for markets by building expectations for Greek aid. Also undercutting stock prices were comments from IMF first deputy managing director Lipsky who said at a forum in Beijing yesterday that advanced economies face "acute" challenges in tackling high public debt and that unwinding existing stimulus measures won't come close to bringing deficits back to prudent levels. He added that maintaining government debt at post-crisis levels might reduce growth in advanced economies by as much as half a percentage point a year from the pace before the global recession began. The British pound slipped to a 1-1/2 week low against the dollar and British bank stocks were dragged lower after the Confederation of British Industry said the UK's economic recovery will be "slow and sluggish" this year, along with an article in the Times newspaper that said Dubai World will ask for 8 more years to repay its creditors. Dubai World is restructuring $22 billion of debt and delayed repayments would be negative for risk sentiment and for UK banks that have loan exposure to the company.

The Asian markets today closed mostly lower with Japan closed for holiday, Hong Kong -2.05%, China +0.27%, Taiwan -0.78%, Australia -0.86%, Singapore -0.91%, South Korea -0.89%, India -0.95%. Fears that the start of interest-rate normalization will lead to slower growth dragged Asian stocks lower after the Reserve Bank of India's surprise rate hike last Friday. Resource companies and raw materials producers closed lower on concern that demand will contract as economic stimulus programs are wound back. Tensions over China's currency are mounting as China's Commerce Minister Chen Deming said that sanctions against China that amounted to protectionism would hinder growth and raise the risk of a "double dip recession." Five US senators last week introduced legislation to make it easier for the US to declare currency misalignments and take corrective action and the Treasury Department is to decide next month whether to label China as a currency manipulator. China has accumulated a record $2.4 trilliion of currency reserves, and $889 billion of US government debt, partly a consequence of its exchange-rate policy.

Barchart.com U.S. Morning Call for Friday, March 19, 2010

Overnight Developments

Global stocks are higher with the European DJ Stoxx 50 Index up +0.43% and June S&Ps up +0.30 of a point. The euro slipped to a 1-week low against the dollar after Dutch Finance Minister Jan Kees de Jager said that the IMF "will probably do part" of Greece's financing needs. Banking stocks are leading European stocks higher after Lloyds surged 8.9% when it said trading has been "strong" in the first 10 weeks of 2010 and that it may be profitable this year while impairments will be better than previously forecast. European oil service stocks gained after Barclays Capital upgraded the sector to "positive" from "neutral," saying "we believe investors in the sector still face the threat of a market pull-back in the near term, but it is clear to us that the industrial situation for oil services is beginning to improve." Limiting gains for stocks were comments from EU Economic and Monetary Commissioner Rehn who said "the worst is over, the economic recovery is now in progress, but it is still not self-sustaining and employment has not yet turned for the better." Also undercutting stock prices is the report from EPFR Global that said European equity funds posted net outflows of $1.06 billion in the week ended Mar 17, the biggest withdrawals since May 2009, amid concerns about Greece's debt burden.

The Asian markets today closed higher with Japan up +0.75%, Hong Kong +0.19%, China +0.81%, Taiwan +0.15%, Australia +0.19%, Singapore +0.06%, South Korea +0.67%, India +0.34%. Asian stock markets closed higher as an improving outlook for the global economy lifted expectations for corporate earnings. Japan's biggest exporters closed higher on increased confidence that the global recovery will continue after the US Mar Philadelphia Fed manufacturing index and the Feb CPI reports were better than expected. South Korean stocks were boosted after Kia Motors, the country's second-biggest automaker, closed 4.2% higher after it said it would add a 100 million-euro ($136 million) engine unit to its factory in Slovakia. Stocks in China gained led by a rally in raw-material producers after copper prices rose and after Aluminum Corp. of China agreed to buy a stake in an African iron ore mine.

Barchart.com U.S. Morning Call for Thursday, March 18, 2010

Overnight Developments

Global stocks are lower with the European DJ Stoxx 50 Index down -0.04% and June S&Ps down -1.20 points. The euro weakened and Greek stocks and bonds fell on concern a bailout plan for Greece is unraveling. Michael Meister, the chief finance spokesman for German Chancellor Merkel's party, said Greece should turn to the IMF if it needs aid, contradicting statements from leaders including ECB President Trichet, who said the Euro-Zone should solve its own financial problems. It appears the rift between Greece and Germany is much deeper than assumed after an unnamed senior Greek government official said Greek Prime Minister Papandreou gave European leaders until next week to spell out what financial aid they are prepared to give him or Greece may seek aid from the IMF over the April 2 to April 4 Easter weekend. European energy producers fell as crude oil declined and after Total SA dropped 1.1% when Goldman Sachs added the third-largest European oil company to its "conviction sell" list. Declines in European stocks were limited as health-care companies rallied after GlaxoSmithKline Plc, Britain's biggest drug maker, jumped 2.5% after Novartis AG abandoned the US rights to an asthma drug that would rival Glaxo's Advair.

The Asian markets today closed mostly lower with Japan down -0.95%, Hong Kong -0.25%, China -0.19%, Taiwan +0.49%, Australia +0.20%, Singapore -0.18%, South Korea -0.57%, India +0.17%. Sentiment among Japan's large manufacturers with more than 1 billion yen ($11 million) in capital was 4.3 in Q1, the third consecutive quarter manufacturers were optimistic and a sign that Japan's export-led recovery is gaining momentum. A number greater than zero means optimists outnumber pessimists. The Q1 BSI sentiment report indicates that the BOJ's April 1 Tankan survey will improve this quarter. Japanese commercial land prices plunged -6.1% y/y in 2009 to their lowest level in at least 36 years as developers faced tighter credit markets and the recession discouraged buyers. Zhang Wei, China's vice chairman of the China Council for the Promotion of International Trade, said the government is conducting yuan stress tests for 12 industries to test the ability of companies to withstand a stronger currency. Zhang Wei said China should delay the appreciation of the yuan to give exporters more time as the electronics and machinery industries would post losses if the yuan appreciated because they have signed contracts to supply products in advance.

Barchart.com U.S. Morning Call for Wednesday, March 17, 2010

Overnight Developments

Global stocks are higher with the European DJ Stoxx 50 Index up +1.00% at a 1-3/4 month high and June S&Ps up +3.80 points at a 17-1/2 month high. Commodity prices soared with gold rallying to a 1-week high as the dollar index tumbled to a 1-1/4 month low. Feb UK jobless claims unexpectedly fell -32,300, the biggest decline since 1997, and a sign that the economic recovery is strengthening. UniCredit SpA jumped 4.7% after Italy's biggest bank reported Q4 net income of 371 million euros ($511 million), beating analysts' estimates of a 26 million-euro loss. Inditex SA gained 3.4% after the world's largest clothing retailer reported Q4 net income of 483 million euros, well ahead of analysts' estimates of 429.9 million euros. Limiting gains in European stocks was the drop in Jan Euro-Zone construction output by -2.2% m/m, the biggest decline in over a year, while Q4 Euro-Zone labor costs rose +2.2% y/y, the smallest increase in 4 years, which suggests that European consumer spending may slow as wage growth weakens.

The Asian markets today closed higher with Japan up +1.17%, Hong Kong +1.72%, China +2.18%, Taiwan +1.98%, Australia +1.17%, Singapore +0.79%, outh Korea +2.34%, India +0.61%. Japan's Nikkei stock index climbed to a 1-3/4 month high after the BOJ doubled its lending program by increasing the three-month loan facility lending program to 20 trillion yen ($222 billion) from 10 trillion yen in an effort to combat deflation that's hindering the economic recovery. Asian technology stocks closed higher after Intel's release of a new product stoked optimism demand for chips are improving. In a quarterly report released today in Beijing, the World Bank warned that China's "massive monetary stimulus" risks triggering large asset-price increases, a housing bubble, and bad debts from the financing of local-government projects. The World Bank raised its economic forecast for Chinese growth this year to 9.5% from a 9.0% estimate in Jan and said that the country should raise interest rates to help contain the risk of a property bubble and allow a stronger yuan to help dampen inflation expectations.

Barchart.com U.S. Morning Call for Tuesday, March 16, 2010

Overnight Developments

Global stocks are mostly higher with the European DJ Stoxx 50 Index up +0.77% and June S&Ps up +2.30 points. Concerns over Greece's sovereign debt eased after European finance ministers worked out a strategy for emergency loans in case its plan for 4.8 billion ($6.6 billion) in tax increases and wage cuts fails to stave off financial disaster. European banks are higher after Morgan Stanley raised its share-price estimates for Barclays, BNP Paribas, Deutsche Bank AG, UBS AG and Credit Suisse Group AG, saying "capital providers are likely to take a greater share of industry profits." Also boosting European stocks was the smaller-than-expected -0.6 point decline in the Mar German ZEW economic sentiment which fell for a sixth month to 44.5 as the coldest winter in 14 years along with concerns over Greece's debt undermined investor confidence. The ZEW's gauge of current economic conditions however, rose to -51.9, its tenth straight monthly improvement, and its highest level in 16 months. The euro and commodities also strengthened after UAE Central Bank Governor Sultan bin Nasser al-Suwaidi said that Dubai isn't likely to need more central bank aid and that a Dubai World restructuring plan will be discussed "very soon."

The Asian markets today closed mostly higher with Japan down -0.28%, Hong Kong -0.27%, China +0.65%, Taiwan +0.80%, Australia +0.27%, Singapore +0.77%, South Korea -0.11%, India +1.27%. Asian shipping companies gained after the Baltic Dry Index, a measure of shipping costs for commodities, rose for the fourth straight day. Memory-chip makers rose in Taiwan after prices of the benchmark dynamic random access memory, or DRAM, chip rose to its highest level in 2 months. Also supporting gains in Asian share prices is the expectation that the BOJ will take additional easing measures when it ends its 2-day meeting tomorrow. According to Li & Fung Ltd, the world's biggest outsourcer for retailers, China's growth momentum has peaked as orders and production are expanding at a slower pace. Li & Fung said that the moderation could "ease the pressure for further government tightening" as the Chinese economy slows.

Barchart.com U.S. Morning Call for Monday, March 15, 2010

Overnight Developments

Global stocks are mostly lower with the European DJ Stoxx 50 Index down -0.46% and June S&Ps down -4.30 points. The dollar and Treasuries are higher and most commodities are lower, with copper falling to a 1-1/2 week low. The euro fell against the dollar after the German and French finance ministers damped speculation over the weekend that there will be a decision on aid for Greece at a 2-day meeting of European finance ministers that starts today. Q4 Euro-Zone employment fell -0.2% q/q and -2.0% y/y manufacturers and builders continued to cut jobs, helping to send European employment lower for the sixth consecutive quarter. Also undercutting European stock prices is the 1.0% fall in Deutsche Telekom after Europe's biggest phone company was downgraded to "underperform" from "neutral" at Bank of America-Merrill Lynch Global Research which said "challenging times" lie ahead for the company's T-Mobile USA unit and its German fixed-line business. European solar stocks rallied after Deutsche Presse-Agentur reported that Germany would postpone cuts in solar-power subsidies for ground-based systems by three months to Oct 1.

The Asian markets today closed mostly lower with Japan up +0.01%, Hong Kong -0.62%, China -1.54%, Taiwan -1.46%, Australia -0.71%, Singapore -0.24%, South Korea -0.86%, India -0.01%. Japanese stocks rose to a 1-3/4 month high after the government raised its assessment of the economy for the first time in eight months, saying the recovery is beginning to spur profits, home building and consumer spending. Chinese stocks slipped to a 2-week low after Premier Wen Jiabao said that ballooning sovereign debt and high unemployment worldwide could send the global economy into a "double dip" slump. The Chinese Premier also risks worsening trade relations with other countries after he rebuffed calls for the yuan to appreciate saying, "I don't think the renminbi is undervalued." Chinese stocks were also undercut after Morgan Stanley predicted "multiple" increases in China's bank-reserve ratio requirements with the next one "imminent." Morgan Stanley also predicts the PBOC may begin raising interest rates as soon as next month.

Barchart.com U.S. Morning Call for Friday, March 12, 2010

Overnight Developments

Global stocks are mostly higher with the European DJ Stoxx 50 Index up +0.37% at a 1-1/2 month high and June S&Ps up +2.60 points at a 17-1/4 month high. The dollar slumped to a 3-week low which has boosted most commodities, while the euro jumped to a 3-week high against the dollar after the Kurier newspaper reported that the European Union will offer Greece a 55 billion-euro ($75 billion) bailout. The Vienna-based newpaper said Germany will contribute as much as 20 billion euros and France may provide 10 billion euros. Also boosting European stocks is the larger-than-expected increase in Jan Euro-Zone industrial production, which rose +1.7% m/m, its biggest gain in more than two decades, which signals the recovery may be strengthening. European financial stocks and commodity producers are leading today's rally with gains in homebuilders also adding strength after UK home prices increased at the fastest pace in more than 7 years. Slightly denting the bullish euphoria is the 2.3% slump in Carrefour SA after Europe's biggest retailer was cut to "underperform" from "neutral" at Credit Suisse Group AG.

The Asian markets today closed mixed with Japan up +0.81%, Hong Kong -0.09%, China -1.33%, Taiwan -0.02%, Australia +0.08%, Singapore +0.26%, South Korea +0.27%, India -0.01%. Japanese stocks closed at a 1-1/2 month high after two BOJ officials, speaking on condition of anonymity, said the BOJ at its policy meeting next week may seek to expand a 10 trillion yen ($110 billion) fund that provides loans to banks. The yen weakened, which boosted Japanese exporters, after Japanese Prime Minister Hatoyama said the government must take "firm measures" to keep the rising yen from hurting the economy. Asian health-care companies surged on speculation that proposed changes to the US health system will be harder to pass, while Singapore stocks gained after Indonesia's sovereign debt rating was raised by Standard & Poor's to BB from BB-, its highest level in 12 years, after the central bank increased the country's economic growth forecasts this week. Feb India industrial production rose +16.7% y/y on the heels of December's +17.6% y/y record gain, further diminishing spare capacity that may contribute to inflationary pressures and prompt India's central bank to raise interest rates. India's government bond yields jumped to a 17-month high after central bank Deputy Governor Gokarn said India's inflation rate could surge to "double digits."

Barchart.com U.S. Morning Call for Thursday, March 11, 2010

Overnight Developments

Global stocks are mixed with the European DJ Stoxx 50 Index down -0.32% and March S&Ps down -3.20 points. European stocks are gyrating between slight gains and losses on speculation China will slow its expansion to control inflation after Feb China consumer prices rose to a 16-month high. The dollar and Treasuries are weaker while lower commodity prices have undercut basic-resource producers with BHP Billiton down 1.4%. Also hurting European stocks is the 6.9% drop in Lagardere SCA after France's biggest publisher said full-year adjusted net income fell to 324 million euros ($442.5 million), below analysts' estimates of 374 million euros. A rally in automakers limited declines in stocks after Volkswagen gained 3.7% after it said 2-month sales across its nine brands surged 27%, while Bayerische Motoren Werke AG (BMW) rose 2.6% after it reported full-year net income of 210 million euros, higher than analysts' estimates of 167 million euros.

The Asian markets today closed mixed with Japan up +0.96%, Hong Kong +0.09%, China -0.09%, Taiwan -0.38%, Australia -0.12%, Singapore +0.41%, South Korea -0.49%, India +0.41%. Feb China consumer prices rose +2.7% y/y and Feb China producer prices climbed +5.4% y/y, both at 16-month highs, which adds to the case for the government to pare back stimulus measures. China's banks extended 700 billion yuan ($103 billion) of new loans in Feb, while M2 money supply climbed 25.5% y/y, well above the government's target of 17% M2 growth for this year, which adds to pressure on the PBOC to tighten lending and curb asset bubbles. Japan's Q4 GDP was revised down to 0.9% q/q and 3.8% y/y from the previously reported 1.1% q/q and 4.6% y/y as companies pared spending. Japan's Nikkei stock index rallied to a 1-1/2 month high after the Nikkei newspaper reported that the Japanese government will probably upgrade its overall assessment of the economy to a "steady recovery," its first upgrade since July, as rising exports to China continue to drive growth and production.

Barchart.com U.S. Morning Call for Wednesday, March 10, 2010

Overnight Developments

Global stocks are mixed with the European DJ Stoxx 50 Index down -0.19% and March S&Ps up +1.00 point. European stocks are fluctuating on either side of unchanged in uninspired trade. Jan German exports unexpectedly declined -6.3% m/m, the biggest drop in a year, which ends a 4-month streak of gains as demand for German goods slumped. Jan UK industrial production unexpectedly fell -0.9% m/m and UK Prime Minister Brown said his country's economic recovery is still "fragile" and in its early stages. Former European Commissioner Prodi said the worst of Greece's financial crisis is over and other European nations won't follow in its path. Prodi said intervention by European nations to date "was enough" and countries such as Spain and Portugal have "plenty of time" to get their finances in order. Fortis rose over 2% after the owner of Belgium's biggest life insurer reported full-year net income of 1.19 billion euros ($1.6 billion), which beat analysts' estimates of 1.12 billion-euros and said it will resume dividend payouts. ICAP Plc jumped nearly 5% after the world's largest broker of transactions between banks said rival Tullet Prebon Plc announced it was in takeover talks.

The Asian markets today closed mixed with Japan down -0.04%, Hong Kong unchanged, China -0.79%, Taiwan +0.11%, Australia unchanged, Singapore +0.80%, South Korea unchanged, India +0.27%. Asian stocks received a boost after Feb China exports surged 45.7% m/m, more than the 38.3% m/m expected, and the biggest increase in 3 years. Feb China property prices climbed a larger-than-expected +10.7% y/y, the biggest increase in nearly 2 years, which will put pressure on the Chinese government to reduce property speculation and the risk of asset bubbles. Metals prices rose on he improved economic outlook for China, which boosted Asian mining companies and raw-material producers. Despite the upbeat economic data, Chinese stocks closed lower on concern the PBOC may raise interest rates to cool the economy. Deflation risks still remain in Japan after the Feb Japan domestic corporate goods price index fell -1.5% y/y, its 14th consecutive year-over-year decline, which weakened the yen along with comments from BOJ board member Suda who said that upside and downside risks for the economy are now balanced and that the BOJ will maintain its extremely accommodative monetary policy.

Barchart.com U.S. Morning Call for Tuesday, March 9, 2010

Overnight Developments

Global stocks are mixed with the European DJ Stoxx 50 Index down -0.59% and March S&Ps down -4.70 points. The dollar and Treasuries are higher, while most commodities are lower. Valuation concerns and some poor earnings results have knocked stock prices lower. European Aeronautic, Defense & Space Co. (EADS) sank 5.2% after it reported its fourth annual loss since it was created in 2000 and as it scrapped its dividend. EADS reported a full-year loss of 763 million euros ($1.04 billion), wider than analysts' estimates for a 375 million-euro loss because of cost overruns on its two largest Airbus plane projects. Greek bank stocks took a hit after Deutsche Bank cut National Bank of Greece SA, the biggest lender, and Alpha Bank SA to "hold" from "buy," citing concern that Greece's economy will worsen. Antofagasta Plc slid 1.6% and led mining companies lower as copper prices fell and after it reported its full-year profit plunged 61% because of lower prices and output. Limiting losses in European stocks was comments from Bundesbank President and ECB Governing Council member Weber who said Germany's economic recovery is "essentially intact" and will benefit from stronger demand in countries outside the euro region.

The Asian markets today closed mixed with Japan down -0.17%, Honk Kong +0.05%, China +0.60%, Taiwan +0.11%, Ausralia +0.25%, Singapore +0.18%, South Korea +0.04%, India -0.29%. The yen strengthened and undercut Japanese exporters on speculation exporters are taking advantage of a tax break enacted last year on repatriated overseas earnings before the fiscal year ends at the end of this month. Asian commodity producers fell on concern China's metals demand may stagnate as government attempts to curb lending slow the economy, although China's Shanghai Composite Index closed slightly higher after PBOC deputy governor Su Ning said there's no need for new measures to cool the property market and after China Life Insurance boosted its profit forecast. Australian stocks gained after jobs advertised in newspapers and on the Internet climbed 19.1% in Feb from Jan, the biggest jump in more than a decade, and as the Feb National Australia Bank business confidence index rose +4 to 19 and matched November's 7-year high. These reports underscore RBA Governor Stevens' view that Australian economic growth is at or close to "trend," and increases pressure on the RBA to continue raising interest rates.

Barchart.com U.S. Morning Call for Monday, March 8, 2010

Overnight Developments

Global stocks are higher with the European DJ Stoxx 50 Index up +0.01% and March S&Ps up +0.90 points. The dollar and Treasuries are weaker and commodities are higher as yields on Greek government bonds fell after French President Sarkozy said the Euro-Zone is ready to rescue Greece should it need help in funding its deficit. The euro also strengthened after former Fed Chairman Volcker said European officials are lucky that the Euro-Zone's first major crisis was sparked by one of its smaller members and that he's "still a believer in the euro." European stocks fluctuated between small gains and losses as a rally in retailers offset a decline among health-care companies. Metro AG, Germany's biggest retailer, rose 1.6% after Morgan Stanley upgraded the stock to "equal weight" from "underweight," while Petreofac gained 3.9% after it reported net income last quarter of $353.6 million, beating analysts' estimates of $331 million. AstraZeneca Plc slid 1.5% after its experimental Recentin medicine failed to equal Roche's Avastin for use as a first-line treatment against colon cancer.

The Asian markets today closed higher with Japan up +2.09%, Hong Kong +1.97%, China +0.81%, Taiwan +1.25%, Australia +0.85%, Singapore +1.59%, South Korea +1.72%, India +0.64%. Asian stocks rose on carry-over strength from last Friday's gains in US markets following the better-than-expected Feb US jobs report and as concerns eased over Greece's debt crisis. Japanese exporters closed higher, led by a 4.7% jump in Nissan and a 1.6% increase in Sony, after the yen weakened to a 1-1/2 week low against the dollar. Chinese stocks rallied after PBOC Governor Xiaochuan said "we must be very cautious about the timing of normalizing policies," which suggests the Chinese government might delay withdrawing stimulus to support the economy.

Barchart.com U.S. Morning Call for Friday, March 5, 2010

Overnight Developments

Global stocks are stronger with the European DJ Stoxx 50 Index up +0.58% at a 1-month high and March S&Ps up +4.60 points at a 1-1/4 month high. Global stocks gained ahead of the Feb US payrolls report that will provide clues about the strength of the recovery. The dollar and Treasuries are little changed and most commodities are higher. Greece successfully raised 5 billion euros ($6.8 billion) in a sale of 10-year bonds and Jean-Claude Juncker, who heads the group of Euro-Zone finance ministers, said Greece "won't be left alone" as it tries to tame a record budget deficit. European stocks also received a boost after Jan German factory orders rose a more-than-expected +4.3% m/m and +19.6% y/y. The +4.3% m/m increase is the biggest monthly gain in 2-1/2 years as a revival in global demand shows the recovery strengthening. Basic-resource producers rallied as commodity prices rose and Volkswagen AG, Europe's largest automaker, climbed 2.3% after Citigroup upgraded the stock to "buy" from "hold." Limiting gains in European stocks was the 1.1% drop in Salzgitter AG after Germany's second-largest steelmaker posted a full-year net loss of 386.9 million euros, wider than analysts' estimates of a 239 million-euro loss.

The Asian markets today closed higher with Japan up +2.20%, Hong Kong +1.03%, China +0.28%, Taiwan +1.27%, Australia +0.35%, Singapore +0.78%, South Korea +1.01%, India +0.13%. The yen weakened and Japanese stocks gained after the Nikkei newspaper reported that the BOJ would discuss ways to lower short-term rates at its 2-day policy meeting starting March 16. Japanese exporters were boosted after the yen dropped and Asian shipping companies gained after the Baltic Dry Index, a gauge of shipping rates, soared 7.2%, its biggest increase since July. Chinese stocks came off of their best levels after Premier Wen Jiabao warned of "latent risk" in China's banks and pledged to crack down on property speculation as the government struggles to avert building asset bubbles. Wen also said the government will promote the yuan's usage abroad and aims to manage inflation expectations.

Barchart.com U.S. Morning Call for Thursday, March 4, 2010

Overnight Developments

Global stocks are mostly lower with the European DJ Stoxx 50 Index down -0.04% and March S&Ps down -0.20 points. The dollar is stronger and most commodities are weaker, while Treasuries are little changed. As expected the BOE held its benchmark interest rate at 0.50% and kept its asset purchase plan at 200 billion pounds. The markets now await the ECB's interest rate decision later this morning and whether the central bank will decide to pare back any of its stimulus measures pt in place to help revive growth. Maersk, the owner of the world's largest container shipping line, fell over 4% after it reported a full-year net loss for 2009 of 7.04 billion kroner ($1.29 billion), larger than analysts' estimates for a 5.5 billion kroner loss and its first full-year loss since WWII. Amec Plc slumped 6.6% after the UK engineering company said the business environment "remains challenging" and Anheuser-Busch InBev NV dropped 3.3% after the world's largest brewer reported weaker-than-expected profit and said earnings growth will slow. On the positive side, Ahold climbed 4.1% after raising its dividend by 28% and saying it plans to buy back 500 million euros in stock and Vinci rose 2.8% after the world's biggest builder reported 2009 profit that beat analysts' estimates and said sales may rise this year, helped by acquisitions.

The Asian markets today closed mostly lower with Japan down -1.05%, Hong Kong -1.44%, China -2.53%, Taiwam -0.78%, Australia +0.31%, Singapore -0.51%, South Korea -0.21%, India -0.17%. Japan's stocks closed lower after it was reported that Japanese businesses cut Q4 capital spending excluding software -18.5% y/y, the 11th consecutive quarterly decline, and signals that even a pick-up in exports remains insufficient to prompt investment that would spur the recovery. The data also suggest that Q4 Japan GDP may be revised lower and that a stronger yen is forcing exporters to invest overseas rather than at home, while deflation is discouraging spending by domestic service companies. Mitsubishi Motors slumped 11% after the carmaker and PSA Peugeot Citroen said they wouldn't form an alliance. Chinese stocks fell on concern China the PBOC will soon raise borrowing costs and curb lending to cool the economy after comments from Premier Wen Jiabao who said that China's growth path is "unbalanced, uncoordinated, and unsustainable." China's Industrial Bank closed down 2.4% and led bank stocks lower after it said that new loan growth will be cut in half this year as the government orders lenders to curb borrowing.

Barchart.com U.S. Morning Call for Wednesday, March 3, 2010

Overnight Developments

Global stocks are mixed with the European DJ Stoxx 50 Index down -0.16% and March S&Ps down -0.60 points. The dollar and Treasuries are weaker after Greek bonds rallied for a fourth day when Greek Prime Minister Papandreou announced an additional 4.8 billion euros ($6.6 billion) of deficit cuts, including higher taxes and reduced salaries for civil servants, after European leaders called for greater austerity measures before considering aid. Jan Euro-Zone retail sales came in near expectations at -0.3% m/m and -1.3% y/y, although the 20th consecutive year-over-year decline shows that European consumer spending has yet to pick up to pre-financial crisis levels. Adidas slumped nearly 6% after the world's second-largest sporting-goods maker reported Q4 profit of 19 million euros, weaker than analysts' estimates of 27.6 million euros. Irish Life climbed 3% after the county's biggest life insurance company said its full-year loss narrowed to 279 million euros from 433 million euros last year and its CEO said he expects to see a "significant improvement in the life businesses' profitability" in 2010.

The Asian markets today closed mostly higher with Japan up +0.31%, Hong Kong -0.14%, China +0.72%, Taiwan +0.42%, Australia +0.72%, Singapore +0.38%, South Korea +0.44%, India +1.36%. Japan's Jan labor cash earnings unexpectedly rose +0.1% y/y, the first increase in the last 20 months, and a sign the economic recovery is strengthening as employers add working hours. Japanese manufacturers boosted workers' overtime hours by 6.5% in Jan from Dec with overtime hours across industries rising for the first time in the last 18 months. Australia's Q4 GDP expanded 0.9% q/q, the strongest pace in almost two years, which underscores the RBA's decision yesterday to raise interest rates for the fourth time in the last five monetary policy meetings. PBOC deputy governor Su Ning said today that "China's economy will perform better than last year" and that GDP growth this year will top last year's 8.7% pace. Standard & Poor's warns, however, that Asian policy makers risk creating asset bubbles and fueling inflation by keeping interest rates "too low for too long" in their attempt to boost domestic demand. According to a report from S&P, it said it expects monetary tightening this year in South Korea, Hong Kong and Singapore, where asset-price volatility is a concern. It added that India and China would also further tighten policy while in Japan, where the recovery is lagging behind the rest of the region; further policy support will be needed to mitigate recessionary conditions.

Barchart.com U.S. Morning Call for Tuesday, March 2, 2010

Overnight Developments

Global stocks are mostly higher with the European DJ Stoxx 50 Index up +0.43% and March S&Ps up +6.10 points. The euro slipped to a 9-1/4 month low against the dollar after EU Monetary Affairs Commissioner Rehn said that Greece must reveal new measures "in the coming days" to allay officials' concerns that the current austerity plan falls short. A slight rally in European stocks was led by a 2% gain in PSA Peugeot Citroen after the CEO of Europe's second-biggest carmaker said the year started "better than expectations." Allied Irish Banks Plc, Ireland's second-biggest lender by market value, rose 4% after it reported a full-year loss for 2009 of 2.41 billion euros, below the 2.5 billion-euro estimate by analysts, while Keene & Nagel International AG, the world's largest sea-freight forwarder, jumped 5.2% after the company was upgraded to "buy" from "hold" at Deutsche Bank AG. Limiting gains in European stocks was a move lower in pharmaceutical companies led by a 7.5% drop in Intercell after the Austrian vaccine maker reported Q4 profit of 7.5 million euros ($10 million), below analysts' estimates of profit of 9.45 million euros.

The Asian markets today closed mostly higher with Japan up +0.49%, Hong Kong -0.72%, China -0.40%, Taiwan +0.26%, Australia +0.33%, Singapore -0.07%, South Korea +1.48%, India +2.09%. Japanese stocks were boosted after Japan's Jan unemployment rate unexpectedly dropped -0.3 from Dec to a 10-month low of 4.9% as the Japanese economy added 540,000 jobs in Jan, the most since Oct 1973. A separate report showed that Jan Japan overall household spending rose +1.7% y/y, the sixth consecutive monthly gain, and a sign that a rebound in exports is aiding in the recovery of the world's second-largest economy. India's stock market gained after the government reported that Jan India exports rose 11.5% along with a 12% surge in Tata Motors, which reported a 58% jump in Feb car sales. Li & Fung Ltd., the biggest supplier for retailers including Wal-Mart Stores, gained 3% on optimism for rising consumer spending in the US, its largest market, after Jan US personal spending increased more than expected. On the bearish side, Australia's central bank resumed raising interest rates after the RBA increased the benchmark overnight cash rate target to 4.00% from 3.75%, with RBA Governor Stevens saying that interest rates should now be closer to "average," which he signaled last week may be 75 bp higher than today's new level.

Barchart.com U.S. Morning Call for Monday, March 1, 2010

Overnight Developments

Global stocks are mostly higher with the European DJ Stoxx 50 Index down -0.06% and March S&Ps up +2.40 points. Treasuries are weaker and global stocks rallied on speculation Greece may receive help to finance its debt. Greek stocks rose to a 1-month high after German lawmakers said Euro-Zone officials will unveil a plan to grant Greece about 25 billion euros ($34 billion) in aid should it need help financing its debt, possibly by using Germany's state-owned lender KfW Group to buy its bonds. Despite the plan to aid Greece, the euro is weaker as the market wants to see more concrete details of the plan. Mining companies surged with BHP Billiton, the world's biggest, up 2.1% and Rio Tinto, the third-biggest up 2.5%, after an 8.8-magnitude earthquake in Chile, the world's biggest copper producer, forced closure to nearly all of its mining operations and raised concerns about possible supply disruptions. Also boosting European stocks was the unexpected upward revision to the Feb Euro-Zone PMI manufacturing index, which was revised up +0.1 to 54.2, a 2-1/2 year high and the fifth consecutive month of expansion as reviving global demand boosted orders. Undercutting European stock prices is the 13% plunge in Prudential Plc after the UK's biggest insurer agreed to purchase AIG's Asian life operations for $35.5 billion in cash and stock, with Prudential saying it plans to raise $20 billion in a rights offering and will sell about $5 billion of bonds to finance the cash part of its offer. Also limiting stock gains is the nearly 5% fall in HSBC after Europe's biggest bank reported 2009 full-year net income of $5.83 billion, well below analysts' expectations of $7.76 billion.

The Asian markets today closed higher with Japan up +0.45%, Hong Kong +2.17%, China +1.30%, Taiwan +1.90%, Australia +1.05%, Singapore +0.84%. Japanese bank stocks gained after JPMorgan Chase upgraded its ratings on Japan's three biggest banks to "overweight" from "neutral." Australian stocks were boosted after the Feb Australia manufacturing index rose +2.8 to 53.8, its fastest pace of expansion in 2 years. Chinese copper producers surged on concern that the earthquake in Chile may disrupt global supplies, while Chinese life insurers gained after Goldman Sachs recommended the industry. Besides insurers, Goldman Sachs recommended China's automobile, health-care, personal computer and Internet stocks, predicting gains from domestic consumption growth. Chinese stocks gained despite the China Feb purchasing managers index falling -3.8 to 52.0, a 1-year low.

Barchart.com U.S. Morning Call for Friday, February 26, 2010

Overnight Developments

Global stocks are higher with the European DJ Stoxx 50 Index up +0.60% and March S&Ps up +1.60 points. The dollar is weaker and commodities are higher on evidence of sustained global economic expansion. Q4 UK GDP was revised up to 0.3% q/q from the previously reported 0.1% q/q as services growth was revised to 0.5%, the biggest gain since Q1 2008, from a previous estimate of 0.1%. Mining companies rallied in Europe as metals prices climbed with Rio Tinto up 1.9% and BHP up 1.3%. Bekaert jumped over 8% after the world's biggest maker of steel cord used in tires reported profit last year of 151.8 million euros, beating analysts' estimates of 124.7 million euros. Holding back further gains in European stocks is the 2.8% drop in Bayer AG after the drug maker missed a goal to limit the decline in underlying earnings to 5% for the year, while Lloyds Banking Group Plc, Britain's biggest mortgage lender, dropped 2.4% after it reported a bigger-than-expected full-year loss for last year due to an increase in loan impairments.

The Asian markets today closed mostly higher with Japan up +0.24%, Hong Kong +1.03%, China -0.32%, Taiwan +0.12%, Australia +0.95%, Singapore +0.06%, South Korea +0.39%, India +1.08%. Japanese stocks rallied after Jan Japan industrial production rose a larger-than-expected +2.5% m/m, its 11th straight monthly increase and the longest stretch of gains in 12 years. Also helping to boost stocks was the unexpected +2.6% y/y jump in Jan Japan retail sales, which snapped a 16-month slump and signals the economic recovery is strengthening. Deflation concerns in Japan continue though, after Jan Japan CPI ex food and energy slid 1.2% y/y, the 11th consecutive year-over-year decline, and matching the previous month's drop as the sharpest since records began in 1971. Indian stocks rallied after Indian Finance Minister Mukherjee predicted that the economy may grow at a 10% pace in the "not-too-distant future," while South Korean stocks gained after an index of South Korean manufacturing confidence surged to its highest level in more than 7 years.

Barchart.com U.S. Morning Call for Thursday, February 25, 2010

Overnight Developments

Global stocks are mostly lower with the European DJ Stoxx 50 Index down -0.23% and March S&Ps down -5.00 points. The dollar strengthened and Treasuries rose as Greek stocks and bonds tumbled after Moody's Investors Service and Standard & Poor's said they may cut Greece's debt rating. Greece has to repay more than 20 billion euros ($27 billion) of maturing bonds and bills by the end of May and a downgrade of its debt may make it harder for the country to borrow by making Greek government debt ineligible as collateral for ECB loans. According to its just released semi-annual economic forecast, the European Commission said Europe's economic recovery may fail to gather strength for most of2010 as governments phase out stimulus measures and domestic demand remains "subdued." The commission sees the Euro-Zone economy expanding 0.7% this year after a -4.0% contraction in 2009, unchanged from its previous forecast in Nov. Losses in European stocks were limited after BASF SE, the world's largest chemical company, rallied 4.7% after cutting its dividend to 1.70 euros a share from 1.95, less than analysts' estimates of a cut to 1.55 euros. Royal Bank of Scotland, Britain's largest government controlled lender, surged 7.6% after the bank reported a narrower-than-expected full-year net loss and said impairments for bad loans are likely to have peaked.

The Asian markets today closed mostly lower with Japan down -0.95%, Hong Kong -0.33%, China +1.47%, Taiwan -1.36%, Australia -1.17%, Singapore -0.47%, South Korea -1.59%, India -0.01%. China's Shanghai Composite Index rallied to nearly a 1-month high after the government said it will extend support for the country's industries amid weak global demand. According to a statement released after a meeting chaired by Premier Wen Jiabao, the government will continue to expand domestic demand, consolidate the recovery in key industries and encourage companies to find new export markets, while subsidies to boost consumption will be increased and support will be given to boost sales of "new energy" vehicles. Most Asian stocks fell, led by finance and technology companies, amid speculation Greece's credit rating will be downgraded, which will put the global economic recovery at risk, and Japanese export companies fell after the yen rallied to a 2-week high against the dollar.

Barchart.com U.S. Morning Call for Wednesday, February 24, 2010

Overnight Developments

Global stocks are mixed with the European DJ Stoxx 50 Index up +0.17% and March S&Ps up +0.20 of a point. Geo-political tensions in Greece and Turkey rattled markets ahead of Fed Chairman Bernanke's congressional testimony later this morning. Greece's unions are striking for a second day to protest the government's fiscal austerity measures, while the Turkish army, which has ousted four governments since 1960, called the arrest of retired officers over an alleged coup plot a "serious situation." Bilfinger Berger lost 8.6% and led European construction stocks lower after Equinet cut its share-price forecast 16% on the stock, while CSM NV lost 7.1% after the world's largest supplier of bakery ingredients reported full-year net income of 86.8 million euros, lower than analysts' estimates of 95.4 million euros. Limiting losses in European stocks was the unexpected +0.8% m/m gain in Dec Euro-Zone industrial orders which were led higher by a surge in demand for capital goods such as machinery and equipment. From the year-earlier month, industrial orders rose +9.5% y/y, the first annual gain since July 2008.

The Asian markets today closed mostly lower with Japan down -1.48%, Hong Kong -0.75%, China +1.43%, Taiwan -0.89%, Australia -1.48%, Singapore -0.73%, South Kprea -1.19%, India -0.19%. Asian stock markets weakened after reports showed confidence fell in the US and Germany, which may dampen the outlook for Asian exporters. Asian mining companies fell on speculation that a slowdown in growth will dent demand for metals and Japanese exporters slid as the yen strengthened. South Korean stocks closed lower after a Bank of Korea report showed consumer sentiment in Feb fell for the first time in four months along with the 2.6% drop in Hyundai Motors after Autoweek magazine said the company halted US sales of some cars due to door-lock problems. A bright spot for Japanese stocks was the 40.9% y/y surge in Jan Japan exports, the biggest increase since Feb 1980, as a global rebound in demand spurred gains. Japanese exports to China surged 79.9% y/y in Jan, the biggest advance since 1985, while shipments to the US increased for the first time in more than 2 years.

Barchart.com U.S. Morning Call for Tuesday, February 23, 2010

Overnight Developments

Global stocks are mostly lower with the European DJ Stoxx 50 Index down -0.65% and March S&Ps down -2.90 points. The dollar and Treasuries are stronger and nearly all commodities are weaker. European stocks fell after German business confidence unexpectedly declined. The Feb IFO German business climate fell -0.6 to 95.2 as the coldest European winter in 14 years curbed retail sales and construction. Also undercutting European stocks was the larger-than-expected -2.7% m/m decline in Jan French consumer spending, the sharpest monthly drop in 2 years. Commerzbank AG slumped 6.8% after Germany's second-biggest bank reported a Q4 loss of 1.86 billion euros ($2.5 billion), wider than analysts' estimates of a 1.26 billion-euro loss. Limiting losses in European equity markets was the 12% surge in Wolseley Plc after the world's largest supplier of heating and plumbing products forecast profit will exceed analysts' forecasts along with the 2.6% jump in Heineken NV after the brewer said 2009 net income before amortization and one-time charges increased to 1.06 billion euros, beating analysts' estimates of 1.02 billion euros.

The Asian markets today closed mixed with Japan down -0.47%, Hong Kong +1.21, China -1.07%, Taiwan +0.49%, Australia +0.02%, Singapore +0.91%, South Korea +0.08%, India +0.30%. Asian stocks received a boost after the Al-Ittihad newspaper reported that Dubai's government had allocated 18.3 billion dirhams ($5 billion) to Dubai World, which eased concerns over sovereign debt issues. Minutes of the Jan 25-26 BOJ policy meeting showed that policy makers agreed to maintain "extremely low" interest rates and to maintain its bond purchasing program at 1.8 trillion yen ($20 billion) a month. The minutes also showed some BOJ members had expressed concern that Japan's fiscal condition was "serious" and that the government should do more to reign in deficits in order to maintain market confidence in both fiscal policy and monetary policy. Chinese stocks were led lower by a slump in insurers after Ping An Insurance Group tumbled nearly 9% when it announced that 859.8 million of its shares will become tradable March 1 when a lockup period ends.

Barchart.com U.S. Morning Call for Monday, February 22, 2010

Overnight Developments

Global stocks are mixed with the European DJ Stoxx 50 Index down -0.23% and March S&Ps up +3.30 points. The dollar and Treasuries are little changed while crude oil climbed to a 1-1/4 month high. European stocks were led lower by a 6.4% drop in Bank of Ireland and a 4% slide in Allied Irish Banks after Bank of Ireland said it will give the Irish government a stake of almost 16% in the bank instead of a dividend. Inditex SA, the world's largest clothing retailer, slid 2.3% after it was downgraded to "neutral" from "outperform" at Exane, which said analyst earnings estimates "look too optimistic." Carefour, Europe's largest retailer fell 2.1% after it was also downgraded to "neutral" from "outperform" at Exane, while Hennes & Mauritz lost 1.8% after Europe's second-biggest clothing retailer was cut to "underperform" from "neutral." GlaxoSmithKline Plc fell 2.2% after US senators released a report showing that safety reviewers had urged the FDA to take the drugmaker's Avandia diabetes treatment off the market because it caused an increased risk of heart attacks. Supporting European stocks was a rally in Greek stocks and bonds after Greek central bank governor Provopoulos said he's confident Greece's government will meet its "very ambitious" deficit-reduction goals.

The Asian markets today closed mostly higher with Japan up +2.74%, Hong Kong +2.43%, China -0.55%, Taiwan +1.59%, Australia +1.78%, Singapore +0.01%, South Korea +2.19%, India +0.28%. Asian energy producers advanced after crude oil jumped to a 1-1/4 month high, while shipping companies gained following a rally in the Baltic Dry Index, which measures the cost of shipping commodities, for a fourth day. Japanese stocks were also boosted by the 3.7% jump in Nikon after Credit Suisse raised its recommendation on the stock to "neutral" from "underperform," and after Suruga Bank surged 8.2% after the Japanese bank was upgraded to "buy" from "neutral" at Nomura Securities following Suruga's action to increase its stock buyback program. South Korean stocks were boosted after sales at the country's largest department stores rose in Jan for the 11th consecutive month. Chinese real-estate stocks declined following action by Goldman Sachs to cut the share-price estimates of Chinese property developers by as much as 32%, citing increased uncertainty from government tightening measures.

Barchart.com U.S. Morning Call for Friday, February 19, 2010

Overnight Developments

Global stocks are lower with the European DJ Stoxx 50 Index down -0.38% and March S&Ps down -7.70 points. Stock markets around the world took a hit following the Fed's unexpected move late yesterday to hike the discount rate by 25 bp to 0.75%. Treasuries and commodities tumbled while the dollar index soared to an 8-month high. The Fed's surprise move yesterday after the markets closed is the latest signal that it is prepared to reverse emergency stimulus measures, and suggests an accelerated time frame on interest rate hikes. Mining companies and raw materials and energy producers in Europe all fell as commodities slumped, while Thales SA, Europe's biggest military electronics maker, plunged 11% after it cut its dividend for the first time in a decade after it reported a 2009 loss of 128 million euros ($173 million). Jan German producer prices rose more than expected by +0.8% m/m, the biggest monthly increase in 1-1/2 years, although the -3.4% y/y decline was the eleventh straight year-over-year decline in German producer prices, limiting its impact. Supporting European stocks was the larger than expected increases in the Feb German and Feb Euro-Zone PMI manufacturing indexes, which both expanded at their fastest paces in 2-1/2 years, and indicate that the European economic recovery is strengthening

The Asian markets today closed lower with Japan down -2.05%, Hong Kong -2.59%, Australia -0.42%, Singapore -0.44%, South Korea -1.81%, India -0.83%. Dollar-denominated commodities fell as the greenback strengthened, which pressured commodities and raw-materials producers, while Li & Fung Ltd., the biggest supplier of clothes and toys to Wal-Mart and Target stores, slumped 3.6% on fears the economic recovery will slow as the Fed removes its stimulus measures. The yen fell to a 5-week low against the dollar, although the dollar's gains were tempered after Atlanta Fed President Lockhart said the Fed's decision to raise the discount rate doesn't signal a tightening of policy and St. Louis Fed President Bullard said that financial markets' view that borrowing costs will increase later this year are "overblown." Singapore's trade ministry revised up its growth forecasts for Singapore's GDP this year to 4.5% to 6.5% from a previous prediction of growth of 3% to 5%, and lowered its inflation forecast for this year to between 2% and 3% from an earlier forecast of between 2.5% and 3.5%.

Overnight U.S. Stock News

March S&Ps this morning are trading down -7.70 points on carry-over weakness from the Fed's 25 bp hike in the discount rate late yesterday. The US stock market yesterday gyrated on both sides of unchanged into early afternoon when it pushed higher into the close and settled on its high (Dow Jones +0.81, S&P 500 +0.66%, Nasdaq Composite +0.69%). The S&P 500 Index, the Dow Jones and the Nasdaq Composite all rallied to 3-week highs. After the close of trading, however, all of the indexes tumbled when the Fed unexpectedly hiked the discount rate 25 bp to 0.75%. Bullish factors for stocks included (1) the stronger-than-expected Feb Philadelphia Fed manufacturing index (+2.4 to 17.6 versus expectations of +1.8 to 17.0), which included an increase in the Philadelphia Fed's employment sub-index to a 2-year high and a surge in its new orders sub-index to a 5-1/2 year high, (2) the Jan leading indicators report, which came in slightly weaker-than-expected at +0.3% (versus expectations of +0.5%), but did increase for the tenth straight month and signaled the economy will keep expanding through the first half of this year, and (3) continued strong company earnings as 76% of the more than 350 companies in the S&P 500 that have reported Q4 earnings since Jan 11 have beaten analyst estimates.
Bearish factors for stocks included (1) labor market weakness after the unexpected increase in weekly initial unemployment claims (+31,000 to 473,000 versus expectations of -2,000 to 438,000), (2) inflation fears as the yield curve between 2-year and 10-year T-notes steepened to a record 294 bp (data since 1977), along with a 15-month high in the Jan PPI of +4.6% y/y (versus expectations of +4.4% y/y), and (3) weakness in consumer companies triggered by a slide in Wal-Mart after the world's biggest retailer reported that price cuts triggered a bigger-than-expected drop in comparable-store sales.
Dell (DELL) slid 6.2% in European trading after the company late yesterday reported a 4.8% decline in Q4 net income as holiday sales of low-priced PCs and higher component costs pushed profit margins below analysts' estimates.
First Solar (FSLR) tumbled 7.9% in European trading after the world's largest maker of solar power modules reiterated its prior 2010 sales and profit forecasts, disappointing investors who had expected an increase.

Today's Market Focus

March 10-year T-notes this morning are down -1.5 ticks. T-note prices yesterday pushed up to the day's high early but then sold-off steadily the remainder of the day and settled down -15 ticks at 117-065. Mar T-notes fell to a 1-month low and the 10-year T-note yield climbed to a 5-week high of 3.82%. Bearish factors yesterday included (1) the larger-than-expected increase in Jan PPI with the 5-year high of +4.6% y/y, (2) inflation fears as the yield curve between 2-year and 10-year T-notes steepened to a record 294 bp (data since 1977), (3) the stronger-than-expected Feb Philadelphia Fed manufacturing index (+2.4 to 17.6 versus expectations of +1.8 to 17.0), which included an increase in the Philadelphia Fed's employment sub-index to a 2-year high and a surge in the new orders sub-index to a 5-1/2 year high, and (4) the Fed's surprise 25 bp hike in the discount rate to 0.75%, which shows the Fed is starting its exit strategy. Bullish factors included (1) the unexpected increase in weekly initial unemployment claims (+31,000 to 473,000 versus expectations of -2,000 to 438,000), and (2) the weaker-than-expected Jan leading indicators report (+0.3% versus expectations of +0.5%).
The dollar index this morning is atronger and posted an 8-month high with the dollar/yen +0.01 yen and the euro/dollar -0.15 cents. The dollar surged late yesterday and continues to hold those gains following the Fed's hike in the discount rate. The dollar index traded with moderate gains until late in the day when it shot to an 8-month high and closed sharply higher. Bullish factors included (1) the Fed's surprise 25 bp hike in the discount rate to 0.75%, which improves the dollar's interest rate differentials and raises speculation the Fed will begin to remove excess reserves and further unwind its emergency stimulus measures, (2) President Obama's executive order to create an 18-member bipartisan panel to recommend steps to reduce record debt and deficits, which could prove bullish for the dollar if the commission can come up with any remedies that Congress would accept, and (3) the larger-than-expected increases in the Jan PPI and the Feb Philadelphia manufacturing index, which may boost the dollar's interest rate differentials as the Fed is prompted to end its emergency stimulus measures sooner-than-expected. Bearish factors yesterday included (1) early strength in the euro on rumors that the Bank of Switzerland intervened in the currency market and sold the Swiss franc and bought the euro to weaken the franc, and (2) the Bundesbank's monthly bulletin which was euro-positive after it stated that the German economy remains on a recovery path even as "negative influences" such as the harsh winter temporarily dampen economic activity.
March crude oil prices this morning are trading down -93 cents and Mar gasoline is -2.12 cents. Mar crude oil yesterday erased early losses when it rallied after mid-morning and finished the day up +$0.32 per barrel. Mar gasoline closed up +1.89 cents per gallon. Mar crude climbed to a 4-week high and Mar gasoline rose to a 2-week high. Bullish factors included (1) the larger-than-expected decline in distillate inventories (-2.94 million bbl versus expectations of -1.5 million bbl), and (2) the larger-than-expected increase in the Feb Philadelphia Fed manufacturing index along with the increase in Jan US leading indicators for the tenth consecutive month, which bolsters expectations that the improving economy will lead in increased energy demand. Bearish factors for crude prices yesterday included (1) the surge in the dollar index to an 8-month high, (2) the larger-than-expected increase in weekly crude oil inventories (+3.08 million bbl versus expectations of +1.73 million bbl), and (3) slack fuel usage after US gasoline demand for the week ending Feb 12 slipped -2.8% from the previous week to a 6-year low of 8.52 million barrels a day.

Barchart.com U.S. Morning Call for Thursday, February 18, 2010

Overnight Developments

Global stocks are mixed with the European DJ Stoxx 50 Index up +0.36% and March S&Ps down -2.30 points. The dollar is stronger, Treasuries are little changed and commodities are mostly weaker. ABB rose 4.8% and is leading gains in European stocks after the biggest builder of power grids reported Q4 net income more than doubled to $540 million, topping analysts' estimates of $534 million, after the company expanded its cost savings program by 50%. The British pound and gilts tumbled after Britain unexpectedly posted its first budget deficit for Jan since records began in 1993. Government spending exceeded revenue by 4.3 billion pounds ($6.7 billion) last month, when expectations were for a 2.6 billion-pound surplus. Societe Generale SA, France's second-biggest bank by market value, sank 5.4% after writedowns tied to risky assets weighed on Q4 profit and the company cut its dividend. Daimler AG slid 7.8% after the world's second-biggest maker of luxury vehicles posted a full-year loss of 2.64 billion euros, wider than analysts' estimates of a 1.86 billion-euro loss, and the company said it plans to pay no annual dividend for the first time since 2000.

The Asian markets today closed mostly lower with Japan up +0.28%, Hong Kong -0.54%, Australia -0.28%, Singapore -0.89%, South Korea -0.42%, India -0.62%. Asian energy and raw materials producers closed lower after a stronger dollar prompted a slide in commodity prices. Newcrest Mining, Australia's largest gold producer slid 2.6%, while Sims Metal Management, the world's No 1 recycler of scrap metal, plunged 7.6% after it reported a decline in first-half sales. Qantas Airways, Australia's biggest airline, sank 8.1% after it said it will scrap first-class cabins on most routes after a slump in demand for the most expensive seats led to a 72% drop in first-half profit. The yen rose for the first time in five days against the dollar after the BOJ refrained from expanding lending and asset-purchase programs. The BOJ kept its benchmark rate at 0.1% following the conclusion of its monthly policy meeting and maintained its monthly debt repurchase level, resisting government pressure to take further action to counter deflation.

Overnight U.S. Stock News

March S&Ps this morning are trading down -2.30 points. The US stock market yesterday traded slightly higher into early afternoon, creeping higher into the close to finish on its high (Dow Jones +0.39, S&P 500 +0.42%, Nasdaq Composite +0.55%). The S&P 500 Index rose to a 2-week high, while the Dow Jones and the Nasdaq Composite rallied to 3-week highs. Bullish factors for stocks included (1) strength in homebuilders after Jan US housing starts rose more than expected to their highest level in last 6 months (+2.8% to 591,000 versus expectations of 580,000), (2) the stronger-than-expected Jan industrial production report of +0.9% (versus expectations of +0.8%), (3) a rally in health-care companies after Gilead Sciences surged after studies on its 4 in 1 combination pill for AIDS showed fewer side effects and may be more effective than its three-drug treatment Atripla, the world's best-selling HIV therapy, (4) updated US growth forecasts from the Fed in their Jan 26-27 FOMC meeting minutes in which they said US GDP will expand by a range of 2.8% to 3.5% this year, revised up from their Nov forecast of 2.5% to 3.5%, and (5) the prediction from Goldman Sachs strategist Abby Cohen for the S&P 500 Index to rally 19% from current values to between 1,250 and 1,300, saying "the market overall is likely undervalued."
Bearish factors for stocks included (1) the minutes of the Jan 26-27 FOMC meeting in which policy makers agreed to shrink assets "substantially over time," with some policy makers pushing to start selling assets in the "near future," which indicates that the Fed is prepared to remove its stimulus measures sooner than expected, (2) a sign of price pressures after the 15-year high of +11.5% y/y in Jan import prices, and (3) the prediction from Standard & Poor's Financial Services that increased foreclosures will cause US home prices to fall this year as the overhang of homes heading toward liquidation suggests more delinquencies and lower home prices to come.
Hewlett-Packard (HPQ) rose 1% in pre-market trading after it reported Q1 profit of $1.10 a share, beating analysts' estimates of $1.06, and it raised its annual profit forecast to $4.37 to $4.44 a sahre, up from its previous forecast of as much as $4.35.

Today's Market Focus

March 10-year T-notes this morning are unchanged. T-note prices yesterday traded weaker throughout the day and finally settled down -20.5 ticks at 117-215. The 10-year T-note yield matched last Thursday's 1-month high of 3.754%. Bearish factors yesterday included (1) the larger-than-expected increase in Jan US housing starts which rose to their highest level in 6 months (+2.8% to 591,000 versus expectations of 580,000), (2) the larger-than-expected gain in Jan import prices with the year-over-year increase of +11.5% being the largest in 15 months, (3) the stronger-than-expected Jan industrial production report of +0.9% (versus expectations of +0.8%), (4) hawkish comments from Philadelphia Fed President Plosser who said the Fed should shrink its balance sheet and sell its assets "sooner rather than later" and that current US fiscal policy is "unsustainable" and may eventually lead to higher interest rates, and (5) the minutes of the Jan 26-27 FOMC meeting in which policy makers agreed to shrink assets "substantially over time," with some policy makers pushing to start selling assets in the "near future," which indicates that the Fed is prepared to remove its stimulus measures sooner than expected.
The dollar index this morning is stronger with the dollar/yen -0.46 yen and the euro/dollar -0.41 cents. The dollar index yesterday recovered from a 1-1/2 week low and finished the day moderately higher. Bullish factors included (1) signs that the US economic recovery is strengthening after Jan US housing starts and Jan industrial production both increased by more than expected, (2) the prediction from Credit Suisse Group Ag that President Obama's proposal to rein in proprietary trading by banks may boost the dollar by spurring repatriation from emerging-market securities and commodity markets, and (3) the prediction from Citigroup that the euro may soon resume its slide after EU finance ministers failed to agree on concrete measures to help Greece plug its budget deficit. Bearish factors yesterday included (1) early strength in the euro after Greece announced a budget that surpassed expectations, which was a positive sign that the Greek government may be able to pull off its fiscal austerity measures, and (2) strength in the equity market which sapped the safe-haven demand for the dollar.
March crude oil prices this morning are trading down -70 cents and Mar gasoline is -1.40 cents. Mar crude oil yesterday fluctuated on either side of unchanged and finally settled up +$0.32 per barrel. Mar gasoline closed up +1.89 cents per gallon. Mar crude rose to a 2-week high. Bullish factors included (1) better-than-expected US economic data on Jan industrial production and Jan US housing starts, which signals an improving economy that may lead to increased fuel demand, and (2) the prediction from Bank of America Merrill Lynch that crude oil prices may trade between $65 and $105 a barrel next year as emerging market demand eats into spare production capacity. Bearish factors for crude prices yesterday included (1) the rebound in the dollar index which closed higher on the day after recovering from a 1-1/2 week low, which pressured most commodity prices, and (2) speculation that weekly US crude oil and gasoline stockpiles increased in Thursday's weekly inventory report. Expectations for Thursday's DOE inventory report are for crude oil supplies to climb +1.73 million bbl, gasoline stockpiles to rise +1.5 million bbl, distillate inventories to drop -1.5 million bbl and the refinery capacity rate to increase +0.2 to 79.3%.

Barchart.com U.S. Morning Call for Wednesday, February 17, 2010

Overnight Developments

Global stocks are higher with the European DJ Stoxx 50 Index up +1.05% and March S&Ps up +3.60 points. Sovereign debt concerns eased after Greek Finance Minister Papaconstantinou said there's no need for a European Union bailout of Greece. Bank stocks are leading gains in Europe after BNP Paribas rose 2.9% when France's largest bank reported Q4 net income of 1.37 billion euros ($1.89 billion), higher than analysts' estimates of 1.06 billion euros and its fourth straight quarterly profit. Deutsche Boerse AG, Europe's largest exchange by market value, climbed 2.8% after it reported a Q4 loss of 33 million euros, smaller than analysts' estimates for a loss of 66.3 million euros. Also helping to boost European stocks is the 4.6% gain in European Aeronautic Defense and Space Co. after CA Cheuvreux added the maker of Airbus jets to its "selected list" of preferred stocks on optimism the company is close to an accord with governments on financing the A400M military transporter. Limiting gains in European stocks was the unexpected jump in Jan UK unemployment claims by 23,500 from Dec to 1.64 million, the highest since Apr 1997. In minutes of its Feb 4 monetary policy meeting, BOE policy makers voted unanimously to keep its asset-purchase program unchanged at 200 billion pounds, but added that employment is at risk of falling "significantly further" if the economy's recovery falters.

The Asian markets today closed higher with Japan up +2.72%, Hong Kong +1.31%, Australia +2.19%, Singapore +1.27%, South Korea +1.77%, India +1.25%. Raw materials and energy producers rallied in Asia after the price of copper rose to a 3-week high and crude oil climbed to a 2-week high. Gains in commodities boosted shipping rates, which helped Mitsui O.S.K., which operates the world's largest merchant-shipping fleet, to a 5% gain. CSL Ltd., the only influenza-vaccine maker in the Southern Hemisphere, jumped 5.1% after it posted a bigger-than-expected 23% gain in first-half profit on sales of its swine flu shot, while Toshiba Corp. rallied 5.4% after the US government said it has conditionally committed $8.33 billion to Southern Co. and its partners to build a power plant using Toshiba's reactors.

Overnight U.S. Stock News

March S&Ps this morning are trading up +3.60 points. The US stock market yesterday traded in positive territory the entire day and finished sharply higher (Dow Jones +1.68%, S&P 500 +1.80%, Nasdaq Composite +1.40%). The S&P 500 Index and the Dow Jones climbed to 1-1/2 week highs and the Nasdaq Composite rose to a 2-week high. Bullish factors for stocks included (1) the larger-than-expected increase in the Feb Empire manufacturing index which expanded at its fastest pace in 4 months (+9.0 to 24.9 versus expectations of +1.8 to 17.7), (2) strength in homebuilders after the unexpected increase in the Feb NAHB housing market index of +2 to 17 (versus expectations of unchanged at 15), (3) a rally in bank stocks on carry-over support from gains in European bank stocks after Barclays reported stellar earnings and Deutsche Bank was upgraded by Credit Suisse Group AG to "outperform" from "neutral," (4) a rally in technology stocks led by gains in Seagate Technology and Western Digital, the biggest makers of hard-disk drives, after Caris & Co. cited "strong momentum in the PC market," and (5) gains in raw-materials and energy producers after the dollar fell and commodities rallied along with projections by Ernst & Young LLP that the value of mining mergers and acquisitions may more than double this year and snap a 2-year decline as China and India seek to secure supplies of raw materials.
Bearish factors for stocks included (1) a slump in health insurers after Wellpoint, the biggest US health insurer by enrollment, canceled a Feb 23 meeting with investors because the company is preparing Congressional testimony over proposed premium increases in California, (2) the report from Bank of America Merrill Lynch Global Research that showed investors have become the most pessimistic on stocks in five months on fears that global economic growth will slow due to concerns on European sovereign debt and measures by China to curb bank lending, and (3) comments from Minneapolis Fed President Kocherlakota who said that a "slow" US recovery will be hindered by the threat of further declines in bank lending and uncertainty created by congressional proposals to overhaul health care and financial regulation.
Whole Foods Markets (WFMI) rallied 7.6% in European trading after the company forecast full-year earnings of $1.20 to $1.25 a share, up from a previous forecast of $1.05 to $1.10. Seperately, JPMorgan Chase raised its recommendation on Whole Foods to "overweight' from "neutral."
Home Depot (HD) gained 1.2% in pre-market trading after Oppenheimer upgraded the stock to "outperform" from "market perform," with a price estimate of $37 a share.

Today's Market Focus

March 10-year T-notes this morning are trading down -6.5 ticks. T-note prices yesterday traded in negative territory into late morning when they pushed higher late morning, rallied the rest of the day, and settled up +7.5 ticks at 118-100. Bullish factors yesterday included (1) comments from Minneapolis Fed President Kocherlakota who said that a "slow" US recovery will be hindered by the threat of further declines in bank lending and uncertainty created by Congressional proposals to overhaul health care and financial regulation, and (2) a possible increase in the safe-haven demand for Treasuries after Fitch Ratings said European leveraged buyouts face a wave of defaults by 2013 as borrowers "are unlikely to generate sufficient free cash flow to repay debt when maturities come due." Bearish factors for T-note prices yesterday included (1) the larger-than-expected increase in the Feb Empire manufacturing index which expanded at its fastest pace in 4 months (+9.0 to 24.9 versus expectations of +1.8 to 17.7), (2) China's action to become a net seller of US Treasuries in Dec for a second straight month (-$34.2 billion), which dropped China below Japan as the world's largest holder of US debt, (3) the unexpected increase in the Feb NAHB housing market index (+2 to 17 versus expectations of unchanged at 15), (4) the warning from Kansas City Fed President Hoenig that the "unsustainable" federal debt threatens the Fed's goal of price stability, and (5) reduced safe-haven demand for Treasuries after the stock market rallied.
The dollar index this morning is stronger with the dollar/yen +0.58 yen and the euro/dollar -0.34 cents. The dollar index yesterday retreated the entire session and finished with moderate losses. Bearish factors included (1) short-covering in the euro on speculation that its month-long plunge against the dollar because of Greece's deficit problems were too sharp and too fast, along with the smaller-than-expected decline in the Feb German ZEW economic sentiment survey which was euro-positive, (2) the warning from Kansas City Fed President Hoenig that the US must take "difficult" steps to reduce spending and increase revenue so that the Fed isn't pressured to fund the "unsustainable" federal debt or the US risks "its own next crisis," and (3) reduced safe-haven demand for the dollar after the stock market rallied. Bullish factors yesterday included (1) the larger-than-expected Dec net long-term TIC flows which indicates strong foreign demand for US assets, and (2) the prediction from Westpac Banking that the yen will reverse this year's gains against the dollar and weaken to 100 yen per dollar by year-end as a recovery in Japanese domestic hiring encourages investors to buy higher-yielding Australian and New Zealand assets.
March crude oil prices this morning are trading up +53 cents at a 2-week high and Mar gasoline is +1.49 cents. Mar crude oil yesterday traded sharply higher throughout the day and closed up +$2.88 per barrel. Mar gasoline closed up +5.87 cents per gallon. Both Mar crude and Mar gasoline rose to 1-1/2 week highs. Bullish factors included (1) the weaker dollar which boosts investment demand in commodities, (2) the stronger-than-expected Feb Empire manufacturing index that expanded at its fastest pace in 4 months and suggested stronger fuel consumption in the New York manufacturing area, and (3) the stronger-than-expected Q4 Japan GDP, which signals strong energy demand in the world's third-biggest crude oil consumer. Bearish factors for crude prices yesterday included (1) the prediction from BP Plc that OPEC's compliance with its production cuts will continue to weaken as crude oil prices recover, and (2) expectations for builds in weekly US crude oil and gasoline stockpiles when the DOE's weekly inventory report in released on Thursday (1 day later than usual due to Monday's holiday). Expectations for Thursday's DOE inventory report are for crude oil supplies to climb +1.75 million bbl, gasoline stockpiles to rise +1.4 million bbl, distillate inventories to drop -1.5 million bbl and the refinery capacity rate to increase +0.1 to 79.2%.

Barchart.com U.S. Morning Call for Tuesday, February 16, 2010

Overnight Developments

Global stocks are mostly higher with the European DJ Stoxx 50 Index up +0.64% and March S&Ps up +3.20 points and trading at a 1-1/2 week high. The dollar and Treasuries are weaker and most commodities are higher with gold at a 1-1/2 week high and copper at a 2-week high. Barclays surged 6.4% and is leading European financial stocks higher after it reported net income for the six months to Dec 31 rose to 7.5 billion pounds ($11.8 billion), beating analysts' estimates of 6.72 billion pounds. Deutsche Bank jumped 2.8% after Germany's biggest bank was upgraded by Credit Suisse Group AG to "outperform" from "neutral," while BHP Billiton climbed 1.6% after ING Groep NV raised their recommendation on the world's largest mining company to "buy" from "hold." European stocks extended their gains after the Feb German ZEW economic sentiment survey fell less than expected at -2.1 to 45.1. Limiting advances in European stocks is the 5.4% fall in L'Oreal after the world's biggest cosmetics maker reported an 8% drop in full-year profit to 1.79 billion euros, missing analysts' estimates of 1.89 billion euros, while Greek bonds and stocks soured on speculation that European finance ministers meeting today in Brussels may force the country to find more ways to pare its budget deficit.

The Asian markets today that were still open due to the Lunar New Year Holiday closed higher with Japan up +0.21%, Australia +0.49%, South Korea +0.47%, India +1.17%. Australian financial companies lead a rally in Asian stocks as earnings reports boosted confidence that economic conditions are improving. WestPac Banking Corp. advanced 5.7% after Australia's second-biggest lender reported unaudited cash earnings in the three months ended Dec 31 rose to A$1.6 billion ($1.42 billion) from A$1.2 billion a year earlier, as the bank sold more loans and fewer customers defaulted. OneSteel jumped 5.9% after Australia's second-biggest steelmaker forecast second-half earnings in line with the first, with its CEO saying that there is a "slow, steady" improvement in demand. Stocks in Japan were boosted from carry-over strength after Monday's GDP report that showed Q4 Japan GDP rose 4.6% annualized, higher than estimates for a 3.5% annualized gain, which reduces the risk of the Japanese economy falling back into a recession even as deflation intensifies.

Overnight U.S. Stock News

March S&Ps this morning are trading up +3.20 points. The US stock market last Friday recovered from early losses and finished the day mixed (Dow Jones -0.44%, S&P 500 -0.27%, Nasdaq Composite +0.28%). Bearish factors for stocks included (1) the action by China to increase its reserve requirements for its banks for the second time in a month, which fueled concern that China's attempt to slow its economy may threaten the global recovery, (2) concerns about overall global economic growth after Q1 Euro-Zone GDP grew less-than-expected (+0.1% q/q versus expectations of +0.3% q/q), (3) the unexpected decline in the Feb US University of Michigan consumer confidence (-0.7 to 73.7 versus expectations of +0.6 to 75.0), and (4) weakness in metals and energy producers after the dollar's surge to a 7-month high prompted a sell-off in most commodities.
Bullish factors for stocks included (1) a pickup in consumer spending after Jan US retail sales rose more than expected (+0.5% and +0.6% less autos versus expectations of +0.3% and +0.5% less autos), (2) the unexpected decline in Dec US business inventories (-0.2% versus expectations of +0.2%), which indicates companies couldn't keep up with increased demand and that may lead to an expansion of economic growth as factories ramp up production to rebuild depleted stockpiles, and (3) strength in technology shares after JDS Uniphase rose 6.6% after it was upgraded to "outperform" from "market perform" at Morgan Keegan and as Motorola surged 7.5% when it said it will split into two companies next year, combining the mobile-phone and set-top box divisions into one publicly traded company and the enterprise mobility and network units into a second business.
Oracle (ORCL) rose 2% in European trading after an article in Barron's said the stock may rise to $32 during the next 12 months as the purchase of Sun Microsystems boosts its revenue and earnings.
Alcoa (AA) gained 1.2% and Newmont Mining (NEW) climbed 2% in European trading as copper prices jumped to a 2-week high and gold prices advanced to a 1-1/2 week high.

Today's Market Focus

March 10-year T-notes this morning are trading down -4 ticks. T-note prices last Friday were well supported throughout the day and they closed higher by +10 ticks at 118-025. Bullish factors for T-note prices last Friday included (1) an increase in safe-haven demand for Treasuries when China increased its reserve requirements for its banks for the second time in a month, which fueled concern that China's economy will slow and possibly threaten the global recovery, (2) concerns about overall global economic growth after Q1 Euro-Zone GDP grew less-than-expected (+0.1% q/q versus expectations of +0.3% q/q), and (3) the unexpected decline in the Feb US University of Michigan consumer confidence (-0.7 to 73.7 versus expectations of +0.6 to 75.0). Bearish factors last Friday included (1) the stronger-than-expected Jan US retail sales (+0.5% and +0.6% less autos versus expectations of +0.3% and +0.5% less autos), and (2) the unexpected decline in Dec US business inventories (-0.2% versus expectations of +0.2%), which indicated companies couldn't keep up with increased demand.
The dollar index this morning is weaker with the dollar/yen -0.14 yen and the euro/dollar +0.58 cents. The dollar index last Friday surged to a 7-month high and closed higher. Bullish factors included (1) the slump in the euro to an 8-1/2 month low against the dollar after Q1 Euro-Zone GDP grew less than expected along with some disappointment with the vague support for Greece voiced by the EU, (2) the stronger-than-expected US Jan retail sales report, which may boost the dollar's interest rate differentials if the Fed is prompted into ending stimulus measures and raising interest rates sooner than expected, (3) China's action to raise its reserve requirements for its banks for the second time in a month, which boosted the safe-haven demand for the dollar when equity markets tumbled on fears of a slowdown in global economic growth, and (4) the prediction from Societe Generale SA that southern European countries are trapped in an overvalued currency and suffocated by low competitiveness, which will lead to a breakup of the Euro-Zone. A bearish factor last Friday was the unexpected decline in Feb US University of Michigan consumer confidence.
March crude oil prices this morning are trading up +$1.25 and Mar gasoline is +2.62 cents. Mar crude oil last Friday moved lower throughout the day and closed down -$1.15 per barrel. Mar gasoline closed down -0.62 of a cent per gallon. Bearish factors included (1) the rally in the dollar index to a 7-month high, (2) China's hike in its reserve requirements for its banks for the second time in a month, which may cool its economy and lead to reduced energy demand, (3) the weaker-than-expected Q1 Euro-Zone GDP, which signals a decrease in energy demand, and (4) the larger-than-expected increases in weekly crude oil and gasoline inventories (crude +2.42 million bbl versus expectations of +1.6 million bbl and gasoline +2.32 million bbl versus expectations of +600,000 bbl). Bullish factors for crude prices last Friday included (1) an increase in gasoline demand after the DOE said US gasoline demand was 8.77 million bbl a day the past week, up +1.9% from the previous week, and (2) the stronger than expected US Jan retail sales, which indicates a firming economy that may lead to stronger fuel demand.

Barchart.com U.S. Morning Call for Friday, February 12, 2010

Overnight Developments

Global stocks are mixed with the European DJ Stoxx 50 Index up +0.21% and March S&Ps down -6.90 points. European and US stocks were dragged lower after the euro slumped to an 8-1/2 month low against the dollar on concern European Union efforts to avoid a default by Greece will undermine the currency. Further undercutting stock prices was the slower than expected growth in Q1 Euro-Zone GDP which rose only +0.1% q/q, weaker than market expectations for a +0.3% q/q increase, and an indication of a sluggish economic recovery. US and European stocks were pressured further after China's policy makers unexpectedly raised banks' reserve requirements for a second time in a month. Limiting losses in European bourses were stronger-than-expected earnings when ThyssenKrupp, Germany's largest steelmaker, gaimed 2.9% after it reported Q1 adjusted earnings before tax of 237 million euros ($323 million), well ahead of analysts' estimates of 111.6 million euros, while Eni, Italy's biggest oil company, gained 2.1% after it reported Q4 adjusted net income of 1.39 billion euros, which beat analysts' estimates of 1.22 billion euros.

The Asian markets today closed mostly higher with Japan up +1.29%, Hong Kong -0.11%, China +0.96%, Australia +0.17%, Singapore +0.19%, South Korea -0.47%. China ordered banks to set aside more deposits as reserves for the second time in a month in an attempt to cool its economy after loan growth and property prices accelerated last month. The PBOC said effective Feb 25 the reserve requirement for banks will increase 50 bp to 16.50% for big banks and 14.50% for smaller ones. The PBOC announced the increase after Asian markets were closed and ahead of the weeklong Lunar New Year holiday that begins next week. In its quarterly economic outlook released today, the PBOC said we will "gradually guide monetary conditions back to normal from the counter-crisis mode." Japanese stocks rallied, led by gains in commodity producers and exporters, after US jobless claims were fewer-than-estimated and commodity prices rallied. India's Dec industrial production surged +16.8% y/y, the fastest pace since 1994, which will put pressure on the Indian government to roll back its economic stimulus measures.

Overnight U.S. Stock News

March S&Ps this morning are trading down -6.90 points. The US stock market yesterday dipped lower early but then rallied steadily the rest of the day and finished just below its high (Dow Jones +1.05%, S&P 500 +0.97%, Nasdaq Composite +1.38%). Bullish factors for stocks included (1) carry-over strength from a rally in European stocks after European leaders said they were prepared to take "determined" action to aid Greece in its battle to weather its debt crisis, (2) improvement in the labor market after weekly initial unemployment claims fell more than expected (-43,000 to 440,000 versus expectations of -15,000 to 465,000), and continuing weekly unemployment claims fell to their lowest level in 13 months (-79,000 to 4.538 million versus expectations of -7,000 to 4.595 million), (3) strength in raw-material and energy producers after crude oil and metals prices rallied, and (4) the increase in the Business Council's quarterly confidence survey to 64.7 in Feb, a 4 year high and up from Oct's 63.2, which shows CEO's in the US more confident of the economic recovery taking hold.
Bearish factors for stocks included (1) initial disappointment after European leaders didn't give specifics on how they will solve Greece's debt crisis, (2) early weakness in real-estate companies after RealtyTrac reported that Jan US foreclosure filings rose +15% y/y and exceeded 300,000 for the 11th consecutive month, which indicates continued stress in the housing market, (3) the prediction from Zillow.com that a "double dip" in US home prices is possible after the Fed's purchases of mortgage bonds ends in March and the government's tax credit for home buyers expires at the end of April.
Alcoa (AA) slid 1.1% and Barrick Gold (ABX) fell 1.8% in pre-market trading after metals prices tumbled when China raised banks' reserve requirements.
3M Co. (MMM) declined 1.8% in pre-market tradng after Bank of America Merrill Lynch cut its recommendation on the stock to "underperform" from "neutral."

Today's Market Focus

March 10-year T-notes this morning are trading up +6 ticks. T-note prices yesterday closed lower for the fourth straight day when they settled down -4.5 ticks at 117-245. Bearish factors for T-note prices yesterday included (1) the larger-than-expected decline in weekly initial unemployment claims (-43,000 to 440,000 versus expectations of -15,000 to 465,000), (2) the larger-than-expected decrease in weekly continuing unemployment claims which fell to their lowest level in 13 months (-79,000 to 4.538 million versus expectations of -7,000 to 4.595 million), (3) reduced safe-haven demand for Treasuries after the stock market rallied when an agreement brokered by the European Union to help Greece weather its debt crisis was announced, and (4) mediocre demand for the Treasury's $16 billion 30-year T-bond auction that had a bid-to-cover ratio of 2.36 versus an average of 2.48 at the past 10 auctions, while foreign participation was weak as indirect bidders purchased only 28.5% of the bonds, which was well below the 43.2% average of the past 10 sales. Bullish factors yesterday included (1) an article from the Telegraph newspaper that said China ordered managers of its currency reserves to withdraw risky dollar assets in favor of debt guaranteed by the US government, which may increase the demand for Treasuries, and (2) a possible increase in the safe-haven demand for Treasuries after the report from Societe General SA that said the "enormous" exposure to the debt of the PIGS countries (Portugal, Ireland Greece and Spain) by European banks puts them at risk and puts the finances of the stronger European countries in jeopardy.
The dollar index this morning is stronger and trading at a 7-month high with the dollar/yen +0.27 and the euro/dollar -1.25 cents. Concerns over Greece's deficit and weaker-than-expected Q1 Euro-Zone GDP has prompted a sell-off in the euro to an 8-1/2 month low against the dollar. The dollar index yesterday gave up an early rally and then fluctuated on either side of unchanged into the close and finally settled slightly lower. Bearish factors included (1) an early rally in the euro when news first broke that the EU had reached an agreement on the Greek budget crisis, and (2) reduced safe-haven demand for the dollar when the stock market rallied. Bullish factors included (1) euro weakness on disappointment that the agreement brokered by the European Union to help Greece weather its debt crisis lacked any concrete details, (2) the prediction from Bank of Tokyo-Mitsubishi that Greece's budget woes and the European Union's efforts to shore up Greece's finances will only serve to undermine the euro, (3) a Reuters report that ECB Council member and Bundesbank President Weber said that he can't rule out that the German economy will contract in Q1, and (4) Goldman Sach's cut in its 3-month target for the euro to $1.45 from $1.55, saying Greece's budget woes are sapping confidence in the Euro-Zone and "permanently" increasing the risk of holding the euro.
March crude oil prices this morning are trading down -$1.25 and Mar gasoline is -2.22 cents. Mar crude oil yesterday settled higher for the fourth consecutive session when it closed up +$0.76 per barrel. Mar gasoline closed up +0.67 cents per gallon. Bullish factors included (1) the weaker dollar, (2) the IEA's hike in its 2010 global oil demand forecast by +170,000 barrels a day to 86.5 million barrels a day, and (3) the rally in the stock market after European leaders pledged to aid Greece, which eased concern that Greece's budget problems will spread and slow the global economic recovery and oil demand. Bearish factors for crude prices yesterday included (1) the IEA report that said OPEC's compliance with its 2008 crude production cuts slipped to 58% in Jan from 61% in Dec, which shows cartel members sill overproducing from their quotas, and (2) expectations for a build in crude oil and gasoline supplies when the DOE releases its weekly inventory report on Friday. Expectations for the weekly DOE inventory report are for crude oil supplies to rise +1.6 million bbl, gasoline inventories to climb +600,000 bbl, distillate stockpiles to drop -1.55 million bbl and the refinery capacity rate to rise +0.2 to 77.9%.

Barchart.com U.S. Morning Call for Thursday, February 11, 2010

Overnight Developments

Global stocks are higher with the European DJ Stoxx 50 Index up +0.77% and March S&Ps up +1.90 points. European and US stocks rallied after news that the EU has reached an agreement on the Greek budget crisis, but the markets are anxiously awaiting details of the just announced accord. Greece's stock and bond markets rallied on the news, while the euro was little changed. European Commission President Barroso said the European Union has reached an accord to deal with Greece's debt crisis, although the Handelsblatt newspaper reported that the ECB has voiced concerns about the Greek government's plan to cut spending and reduce the budget deficit, saying the Greek government's assumptions regarding the country's economic growth are too optimistic and planned spending cuts lack detail. Raw material and energy producers rallied as commodities climbed on relief that an agreement on Greece's budget deficit may help keep the global economic recovery from slowing. In its monthly bulletin for Feb, the ECB expects the Euro-Zone to grow at a moderate pace in 2010, but it revised up its growth estimate for this year to 1.2% from a previous forecast of 1.0%.

The Asian markets today closed mostly higher with Japan closed for holiday, Hong Kong +1.85%, China +0.20%, Australia +0.91%, Singapore +0.70%, South Korea +1.84%, India +1.45%. Chinese stocks received a boost after Jan China consumer prices rose 1.5% y/y, lower than market expectations for a 2.1% y/y increase, and a sign that inflation in China is still contained. Australian stocks rallied after its statistics bureau said Australian employers added 52,700 workers in Jan, the most in three years and the fifth straight monthly gain, which helped push the jobless rate down to 5.3% from 5.5% in Dec. The Australian dollar surged after the report as it increases speculation that the RBA will resume its interest-rate hiking campaign.

Overnight U.S. Stock News

March S&Ps this morning are trading up +1.90 points. The US stock market yesterday opened mixed and moved higher late morning but shed its gains and turned lower into the close to finish the day slightly lower (Dow Jones -0.20%, S&P 500 -0.22%, Nasdaq Composite -0.14%). Bearish factors for stocks included (1) the unexpected widening of the Dec US trade balance to -$40.2 billion versus an expected -$35.5 billion, which may lead to a downward revision of Q4 US GDP, (2) the statement from Fed Chairman Bernanke that the Fed may raise the discount rate "before long" as part of the "normalization" of Fed lending, which signals the Fed is nearing an end to its emergency stimulus measures, (3) the report from Zillow.com that 21.4% of US homeowners in Q4 were underwater, or owed more on their home than they were worth, which is negative for the housing market and consumer spending, and (4) comments from Dallas Fed President Fisher who said that the latest Jan payrolls report shows the labor market is in "slow repair" and that it will take a "long time" for unemployment to fall.
Bullish factors for stocks included (1) carry-over strength from a rally in European stocks on optimism that the European Union at its meeting on Thursday will find a way to bail out Greece and ease concern that deteriorating government finances may derail the global economic recovery, (2) the 3.3% increase in Dec US exports to their highest level since Oct 2008, which signals a pickup in global economic growth and bodes well for further increases in US manufacturing to rebuild depleted inventories, and (3) positive Q4 earnings results as 76% of the 327 S&P 500 companies that have reported earnings since Jan 11 have beaten analysts' estimates.
Activision Blizzard (ATVI) jumped 5% in pre-market trading after the world's largest video-game maker posted better-than-expected Q4 earnings, announced a $1 billion stock buyback and will pay out its first dividend.

Today's Market Focus

March 10-year T-notes this morning are trading up +2 ticks. T-note prices yesterday traded higher into early afternoon and then sank into the close and settled down -10.5 ticks at 117-290. Bearish factors for T-note prices yesterday included (1) weak foreign demand for the Treasury's $25 billion 10-year T-note auction in which indirect bidders, a class of investors that includes foreign central banks, purchased only 33.2% of the notes, below the 39.3% average of the past 10 auctions, (2) the statement from Fed Chairman Bernanke that the Fed may raise the discount rate "before long" as part of the "normalization" of Fed lending, and (3) supply pressures ahead of the Treasury's $16 billion 30-year T-bond auction on Thursday. Bullish factors yesterday included (1) some safe-haven buying of Treasuries ahead of Thursday's EU meeting in Brussels and the uncertainty about the prospects for a bailout of Greece, and (2) the prediction from Goldman Sachs that US consumer spending will decelerate this year and that "growth will slow materially during the first half of 2010."
The dollar index this morning is a tad weaker with the dollar/yen -0.30 and the euro/dollar -0.19 cents. The dollar index yesterday erased early losses and closed higher. Bullish factors included (1) euro weakness after a German official said the European Union will probably stop short of announcing an aid package for Greece when it meets on Thursday, (2) the statement from Fed Chairman Bernanke that the Fed may raise the discount rate "before long" as part of the "normalization" of Fed lending, which boosted the dollar on improved dollar interest rate differentials, (3) weakness in the pound after the BOE cut its economic growth forecast and after BOE Governor King said the BOE may extend its bond-purchase program, and (4) the prediction from BlueGold Capital management that the euro is in a "lose-lose" deal from any Greek bailout as any plan to give financial aid to Greece will open the way to help for other member states. Bearish factors included (1) the wider than expected US trade deficit for Dec, and (2) early reports that Germany would come to the aid of Greece after German Finance Minister Schaeuble said aid to Greece might extend beyond guaranteeing loans.
March crude oil prices this morning are trading up +62 cents and Mar gasoline is +1.09 cents. Mar crude oil gyrated on either side of unchanged before it moved higher late in the session and closed up +$0.77 per barrel. Mar gasoline closed down -3.40 cents per gallon. Bullish factors included (1) the US Energy Department's hike in its global oil consumption forecast for this year to 85.3 million bpd from last month's estimate of 85.18 million bpd, (2) strong Chinese crude demand after China's Jan crude imports rose to 17.1 million metric tons, or about 4 million barrels a day, a record for any January and up +33% y/y, (3) the prediction from China National Petroleum that China may import a record amount of crude oil this year as a resurgent economy spurs fuel demand growth, and (4) the action by the US Treasury Department to freeze the assets of four companies with links to Iran's Islamic Revolutionary Guard, which increases tensions with Iran, OPEC's second-largest crude producer. Bearish factors for crude prices yesterday included (1) the stronger dollar, (2) the report from OPEC that its members compliance with record supply cuts agreed to in 2008 slipped to 53% in Jan from 56% in Dec, a sign that cartel members continue to overproduce from their quotas, and (3) weakness in gasoline on the fact that blizzards and snowstorms in the central and eastern US will temporarily depress gasoline demand as drivers stay off the roads. Expectations for the weekly DOE inventory report are for crude oil supplies to rise +1.6 million bbl, gasoline inventories to climb +600,000 bbl, distillate stockpiles to drop -1.55 million bbl and the refinery capacity rate to rise +0,2 to 77.9%.

Barchart.com U.S. Morning Call for Wednesday, February 10, 2010

Overnight Developments

Global stocks are higher with the European DJ Stoxx 50 Index up +1.32% and March S&Ps up +2.20 points. Stock markets rallied worldwide on the prospect of German aid for Greece. German Finance Minister Schaeuble said aid to Greece might extend beyond guaranteeing loans, which sent the Greek stock market surging and the yield on the Greek 10-year note tumbling as much as 55 bp. The euro is little changed as an aid package for Greece may fuel speculation the strongest members of the Euro-Zone are being shackled by the deficit troubles of the weakest members. In its quarterly report released today, the BOE cut its forecast for economic growth to 3.2% by Q2 of 2011, down from a previous estimate of 4.0%. The BOE also said inflation will peak at about 3.3% before slowing to as low as 0.9% and will stay below the goal of 2.0%. BOE Governor King said it's "far too soon" to say whether the BOE may need to halt their 200 billion-pound ($314 billion) bond-purchase program, which sent Gilt yields tumbling. Limiting gains in European stocks was the unexpected declines in Dec French industrial production, which fell -0.1% m/m and Dec French manufacturing production, which fell -0.8% m/m.

The Asian markets today closed mostly higher with Japan up +0.31%, Hong Kong +0.67%, China +1.42%, Taiwan +1.10%, Australia _0.18%, Singapore -0.39%, South Korea -0.03%, India -0.75%. Improved economic data from Japan and China, along with the prospects of aid to Greece, boosted Asian stock markets today. Dec Japan machinery orders, a sign of business investment in 3 to 6 months, surged 20.1% m/m, the biggest increase in nine years, and a sign that the worst of Japan's corporate investment slump may be over. Japanese machinery and industrial stocks rallied after the report that shows's strong Asian demand is prompting Japanese exporters to increase production. Jan China imports surged a record 85.5% y/y, their third straight monthly increase, and a sign that strength in Chinese domestic demand may aid the global economic rebound. The surge in imports however, was influenced by a shift in the lunar new year holiday to Feb this year from Jan last year. Jan China exports rose 21% y/y, its second monthly increase after 13 consecutive declines, which shows that global demand for Chinese goods is picking up and may also reinforce calls for China to allow a stronger yuan. According to an analyst at Bank of America- Merrill Lynch, Chinese policy makers will be very cautious in interpreting the Jan data, which is highly distorted by the Chinese lunar new year holiday, and may prompt them to wait a few more months before making major policy moves."

Overnight U.S. Stock News

March S&Ps this morning are trading up +2.20 points. The US stock market yesterday rallied to its high by late morning but then fell back into the close to finish moderately higher (Dow Jones +1.52%, S&P 500 +1.30%, Nasdaq Composite +1.17%). Bullish factors for stocks included (1) improved prospects for a European Union bailout of Greece, which eases concerns that a deterioration of government finances will derail the global economic recovery, (2) the unexpected decline in Dec wholesale US inventories of -0.8% versus expectations of +0.5%, which signaled an improved inventory overhang problem, (3) the report from the US Labor Department that showed job openings in the US rose in December to 2.5 million from 2.43 million in November, the first increase in 3 months and a sign of stronger labor demand, (4) strength in airline stocks after the six biggest US airline carriers posted their first collective increase in monthly air traffic since May 2008, a sign that travel demand is starting to grow, and (5) dovish comments from St. Louis Fed President Bullard who said market forecasts that the Fed will start to raise interest rates in November are overblown, which suggests the Fed is no where near tightening monetary policy.
Bearish factors for stocks included (1) comments from Fitch Ratings that the UK needs to pledge further measures to rein in its budget deficit and that the medium-term outlook for Greece is "cloudy," which keeps anxiety high that growing deficits and sovereign debt of some European countries may yet still slow the global economic recovery, (2) the warning from the Bank for International Settlements that capital requirements on banks aren't sufficient to ensure financial stability and that the capacity and incentives to take risks have "clearly overwhelmed" any improvements in risk management, and (3) the prediction from Barclays Capital that investors in US financial, energy and raw-material companies can no longer count on an economic "recovery trade" to send their shares higher as demand for the so-called cyclical stocks is due for a slump.
Dell (DELL) rose 2.7% in pre-market trading aftr Merrill Lynch raised its recommemdation on the stock to "buy" from "neutral," citing the stock's underperformance relative to the market since Nov.
Baidu (BIDU) surged 8.8% in European trading after the operator of China's biggest Internet search engine forecast Q1 sales that beat analysts' estimates after rival Google said it may exit the country.

Today's Market Focus

March 10-year T-notes this morning are trading up +1 tick. T-note prices yesterday firmed into mid-morning but then retreated into the close to settle down -8 ticks at 118-075. Bearish factors for T-note prices yesterday included (1) reduced safe-haven demand for Treasuries after the stock market rallied on the prospects that the European Union will aid Greece as long as it makes progress in reducing its budget deficit, and (2) supply pressures ahead of the Treasury's $25 billion 10-year T-note auction on Wednesday. Bullish factors yesterday included (1) decent foreign demand for the Treasury's $40 billion 3-year T-note auction as indirect bidders, an investor class that includes foreign central banks, purchased 51.2% of the 3-year T-notes, higher than the 50.7% average of the past 10 auctions, and (2) dovish comments from St. Louis Fed President Bullard who said market forecasts that the Fed will start to raise interest rates in November are overblown and that the Fed should start a gradual process of selling its holdings of mortgage securities before short-term rates are increased.
The dollar index this morning is little changed with the dollar/yen unchanged and the euro/dollar -0.16 cents. The dollar index yesterday finished lower for a second day. Bearish factors included (1) strength in the euro after ECB President Trichet decided to leave a meeting of policy makers in Sydney one day early to attend a meeting with EU leaders on Feb 11 to discuss Greece's plans to reduce its budget deficit, which fueled speculation that EU officials will agree on an aid package for Greece, and (2) the report from Reuters that said Euro-Zone governments have decided "in principle" to help Greece tackle its fiscal crisis with the most likely possibility some form of "bilateral help." Bullish factors included (1) the prediction from Royal Bank of Scotland that the euro still looks like the "sickest dog in the litter" and may weaken further and not find support until $1.30, and (2) euro-negative comments from Standard & Poor's that said it doesn't expect to raise the credit ratings of Euro-Zone countries this year as "the risks to the ratings will likely remain firmly on the downside during 2010."
March crude oil prices this morning are trading up +10 cents and Mar gasoline is +0.40 of a cent. Mar crude oil moved higher for a second day and closed up +$1.86 per barrel. Mar gasoline closed up +3.50 cents per gallon. Bullish factors included (1) dollar weakness, (2) a rally in the stock market which boosts confidence in the economic outlook and energy demand, and (3) carry-over support from a rally in heating oil after the National Weather Service forecasted below-normal temperatures for the central and eastern US from Feb 14 to Feb 22, which may boost demand for heating fuels. Bearish factors for crude prices yesterday included (1) speculation that the blizzard conditions encroaching the central and eastern US will dampen gasoline demand due to fewer vehicles on the roads, and (2) expectations for a build in crude oil and gasoline stockpiles when the DOE releases its weekly inventory report on Friday (delayed from Wednesday due to inclement weather). Expectations for the weekly DOE inventory report are for crude oil supplies to rise +1.5 million bbl, gasoline inventories to climb +150,000 bbl, distillate stockpiles to drop -1.55 million bbl and the refinery capacity rate to remain unchanged at 77.7%.

Barchart.com U.S. Morning Call for Tuesday, February 9, 2010

Overnight Developments

Global stocks are mixed with the European DJ Stoxx 50 Index down -0.16% and March S&Ps up +8.40 points. The euro strengthened on speculation that Greece will get European help to tackle its budget deficit while most commodities are higher. European Union leaders will meet on Feb 11 to discuss Greece's plans to reduce its budget deficit and ECB President Trichet's decision to leave a meeting of policy makers in Sydney one day early to attend the meeting fanned speculation that officials will agree on aid. Greek bonds and stocks rallied on the news with the yield on the Greek 10-year government bond falling 10 bp to 6.66%, while Greek banks rallied smartly with National Bank of Greece SA up 6.3% and Alpha Bank AE up 7.1%. Gains in European stocks were limited as Unibail-Rodamco SE, Europe's largest shopping-center owner, dropped nearly 5% after saying the recession curbed growth in rental income, while SAS AB plunged 21% after the owner of the Nordic region's largest airline reported a loss and announced a share sale. Ubisoft Entertainment SA, Europe's largest video-game maker, fell 3.5% after US rival Electronic Arts forecast full-year earnings that trailed analysts' forecasts.

The Asian markets today closed mixed with Japan down -0.19%, Hong Kong up +1.22%, China +0.58%, Taiwan +2.01%, Australia -0.36%, Singapore +1.91%, South Korea +1.30%, India +0.67%. The China Association of Automobile Manufacturers reported that total China Jan vehicle sales, which include buses and trucks, more than doubled to a record 1.66 million units after the government extended economic stimulus measures. Asian technology stocks rose as the prospect of a rescue for Greece eased concern that exports will decline. Taiwan Semiconductor Manufacturing, which accounts on Europe for about 12% of sales, rose 2.1% and Murata Manufacturing, a Japanese maker of precision electronics that relies on Europe for 14% of revenue, climbed 2.3%. After the close of trading, Nissan Motor predicted a return to profit this year, citing government incentives that boosted demand for the company's vehicles in China and Japan. Nissan expects net income of 35 billion yen ($391 million) in the year ending Mar 31, compared with an earlier forecast of a 40 billion yen loss. Nissan closed 2.4% higher before the announcement, and Renault SA, which owns 44% of Nissan, climbed more than 3% in European trading.

Overnight U.S. Stock News

March S&Ps this morning are trading up +8.40 points. The US stock market yesterday traded higher through late morning and then turned lower and traded lower into the close to finish with moderate losses (Dow Jones -1.04%, S&P 500 -0.89%, Nasdaq Composite -0.70%). Bearish factors for stocks included (1) continued concern that deteriorating European government finances will derail the global economic recovery, (2) comments from former Fed Chairman Greenspan who said that the US economic recovery is "going to be a slow trudging thing" and that unemployment will likely stay between 9% to 10% for most of the year and that "it's very difficult to make the case that unemployment is coming down any time soon," (3) the recommendation by UBS AG for investors to reduce their stock holdings for the second time in as many weeks, as they cut their equity allocation to "neutral" from "a small overweight," saying "resolution of the challenges facing Greece, Portugal and Spain is likely to take time and as a result risk premiums will remain elevated," (4) a sell-off in solar stocks after Deutsche Bank AG said the average selling price for solar panels may fall more than 20% this year because of a glut, and (5) the report from Fitch Ratings that showed US jumbo mortgage "serious delinquencies" rose to 9.6% in Jan from 9.2% in Dec, their 32nd straight increase, illustrating the ongoing difficulties in the US housing market.
Bullish factors for stocks included (1) early carry-over support from gains in European stock markets after concerns eased slightly over Greece's debt crisis when French Finance Minister Lagarde said at the G-7 meeting in Canada that Greece's budget deficit will be "managed," (2) comments from Treasury Secretary Geithner in an ABC News interview that the US will "never" lose its Aaa debt rating despite mounting deficits because the world still turns to dollar assets in times of global instability, (3) the rise in the Conference Board's Employment Trends Index which gained in Jan for the fifth straight month to its highest level in a year (+1.0 to 93.2%) and signaled the labor market may be poised to add workers in the coming months, (4) a rally in homebuilders after a WSJ article said the housing industry is looking "a lot less bad," citing fewer write-downs and new-home order cancellations and improved order rates, and (5) strength in raw-material and energy producers after a weaker dollar prompted a rally in most commodities.
Electronic Arts (ERTS) plunged 7% in European trading after the company forecast fiscal 2011 profit, excluding some items, will be 50 cents to 70 cents a share, below analysts' estimates of $1.00 a share.
Monsanto (MON) gained 2.5% in pre-market trading after Bank of America Merrill Lynch raised their recommendation on the stock to "buy" from "neutral," citing "attractive" prospects in the corn-seed business and an improved outllok for the Roundup weed-killer.

Today's Market Focus

March 10-year T-notes this morning are trading unchanged. T-note prices yesterday opened weaker and traded in negative territory the entire day, finally settling down -12 ticks at 118-155. Bearish factors for T-note prices yesterday included (1) comments from St. Louis Fed President Bullard that the Fed could begin selling assets to shrink its balance sheet in the second half of this year, and (2) supply pressures ahead of the Treasury's $40 billion 3-year T-note auction on Tuesday. Bullish factors yesterday included (1) comments from Treasury Secretary Geithner who said that the US is in no danger of losing its Aaa debt rating, (2) the report from Fitch Ratings that showed US jumbo mortgage "serious delinquencies" rose to 9.6% in Jan from 9.2% in Dec, their 32nd straight increase, which may increase demand for Treasuries as the report shows continued crisis in the US housing market, and (3) comments from former Fed Chairman Greenspan who said on NBC's "Meet the Press" program that it's "very difficult" to see US unemployment falling anytime soon.
The dollar index this morning is weaker with the dollar/yen +0.40 yen and the euro/dollar +0.82 cents. The dollar index yesterday traded slightly weaker the entire day and finished with modest losses. Bearish factors included (1) strength in the euro after French Finance Minister Lagarde said at the G-7 meeting in Canada that Greece's budget deficit will be "managed," (2) a rally in the commodity currencies of Canada and Norway as most commodity prices strengthened, and (3) the prediction from Commerzbank that the euro is posed to rally on "extreme positioning" as futures traders now hold record short positions in the euro which may lead to a huge short-covering rally. Bullish factors included (1) Deutsche Bank's action to cut its forecast for ECB interest rate hikes to 50 bp to 1.5% by year-end from an earlier estimate of a 100 bp of rate hikes to 2.0% by year-end, saying "sovereign stress, liquidity exit and weak money growth" all point to smaller-than-expected ECB rate hikes, and (2) comments from Treasury Secretary Geithner in an ABC News interview when he said the US will "never" lose its Aaa debt rating despite mounting deficits.
March crude oil prices this morning are trading up +50 cents and Mar gasoline is +1.20 cents. Mar crude oil yesterday traded in positive territory most of the day and closed up +$0.70 per barrel. Mar gasoline closed up +0.76 of a cent per gallon. Bullish factors included (1) the weaker dollar, (2) forecasts from the National Weather Service for below-normal temperatures in the eastern US which could raise demand for heating fuels, (3) attacks by militants on oil infrastructures in Nigeria that "disabled" a trunk oil pipeline operated by Royal Dutch Shell Plc, which may lead to a decrease in Nigerian oil exports, and (4) comments from Iran's OPEC governor who said that world oil supplies are sufficient to meet demand during the first half of this year, which signals OPEC may not raise its production quotas when it meets next in March. Bearish factors for crude prices yesterday included (1) speculation that the global economic recovery is not progressing fast enough to absorb excess oil stockpiles, and (2) expectations for a build in crude oil and gasoline stockpiles when the DOE releases its weekly inventory report on Wednesday. Expectations for the weekly DOE inventory report are for crude oil supplies to rise +1.5 million bbl, gasoline inventories to climb +500,000 bbl, distillate stockpiles to drop -1.5 million bbl and the refinery capacity rate to remain unchanged at 77.7%.

Barchart.com U.S. Morning Call for Monday, February 8, 2010

Overnight Developments

Global stocks are mostly lower with the European DJ Stoxx 50 Index down -0.09% and March S&Ps down -1.60 points. The dollar and Treasuries are weaker and commodities are stronger. European stocks and the euro are trying to recover from last week's rout after European finance ministers expressed confidence in Greece's plans to cut its deficit. French Finance Minister Lagarde told reporters following Saturday's G-7 meeting in Canada that "the European members of the G-7 will make sure it is managed" as she tries to bolster international confidence in Greece's ability to cut its deficit with promises to ensure that the government delivers on it. G-7 finance ministers also pledged to continue with economic stimulus measures even as markets intensify their focus on mounting budget deficits. Despite the show of support for Greece, Greek bank stocks fell with National Bank of Greece SA and EFG Eurobank Ergasia SA, the country's biggest banks, both down over 3%. Also undercutting European stocks was the decline in European investor confidence for the first time in seven months in February when the Feb Euro-Zone Sentix investor confidence unexpectedly fell -4.5 to -8.2, a four month low.

The Asian markets today closed mixed with Japan down -1.05%, Hong Kong -0.58%, China -0.07%, Taiwan +0.04%, Australia +0.16%, Singapore +0.37%, South Korea -0.82%, India +0.13%. Japan's Nikkei stock index fell to a 1-3/4 month low and was led lower by a 5.3% drop in Panasonic, the world's largest maker of plasma televisions, when it reported a net loss for the nine months ended Dec 31 and by the 4.5% decline in Yamaha after the motorcycle maker widened its 2009 loss forecast. Also hurting Japanese stocks was the -1.7% y/y fall in Jan Japan bank lending, the largest decline since Sep 2005, as some companies deferred capital investments and others turned to bond markets to raise funds. Taiwan stocks were boosted after the government there reported that Jan Taiwan exports surged +75.8% y/y, their biggest jump in more than 30 years, as holiday spending in China before the Lunar New Year fueled demand for its computers and mobile phones.

Overnight U.S. Stock News

March S&Ps this morning are trading down -1.60 points. The US stock market last Friday traded in negative territory most of the day but then rallied sharply late in the day to finish with modest gains (Dow Jones +0.10%, S&P 500 +0.29%, Nasdaq Composite +0.74%). The S&P 500 Index, Dow Jones and Nasdaq Composite all slid to 3-month lows before recovering. Bullish factors for stocks included (1) massive short-covering in the final hour of trade on speculation that the EU may come up with a solution over the weekend for the budget deficits of Greece and Spain, (2) the unexpected decline in the Jan US unemployment rate to a 5-month low (-0.3 to 9.7% versus expectations of unchanged at 10.0%), (3) the unexpected increase in Jan US manufacturing payrolls which posted their first increase in 3 years (+11,000 versus expectations of -20,000), (4) the prediction from Goldman Sachs that stock markets will recover from the recent correction because of improving economic indicators and company earnings, and (5) the smaller-than-expected decline in Dec consumer credit (-$1.7 billion versus expectations of -$10.0 billion).
Bearish factors for stocks included (1) carry-over weakness from the continued slide in European stocks on concern that the budget deficits of Greece and other European countries will slow their economies and drag down the global economy as well, (2) the unexpected loss of jobs in the Jan US nonfarm payroll report along with the downward revision to Dec payrolls (Jan payrolls -20,000 versus expectations of +15,000 and Dec payrolls revised down to -150,000 from -85,000), and (3) weakness in energy producers after crude oil slumped to a 1-3/4 month low.
Home Depot (HD) rose 1.4% in pre-market trading after Morgan Stanley raised its recommnedation on the stock to "overweight" from "equal-weight."
Motorola (MOT) climbed 2.8% in pre-market trading after a Barron'a article said the mobile-phone maker may rise as much as 40% during the next year if it spins off its mobile-pnone unit and revenue from its radio and data-communications equipment division increases.

Today's Market Focus

March 10-year T-notes this morning are trading down -7.5 ticks. T-note prices last Friday dropped down to the session low following the release of the Jan payroll report and then crept higher the remainder of the day to finally settle up +19.5 ticks at a 2-month high of 118-275. The 10-year T-note yield fell to a 1-1/2 month low of 3.54%. Bullish factors for T-note prices last Friday included (1) the unexpected loss of jobs in the Jan US nonfarm payrolls along with the downward revision to Dec payrolls, and (2) continued strong safe-haven demand for Treasuries after US stocks followed European bourses lower on concern that the budget deficits of Greece and other European countries will damage the European and global economies. Bearish factors last Friday included (1) the unexpected decline in the Jan US unemployment rate (-0.3 to 9.7% versus expectations of unchanged at 10.0%), (2) the unexpected increase in Jan US manufacturing payrolls, which posted their first increase in 3 years (+11,000 versus expectations of -20,000), and (3) the smaller-than-expected decline in Dec US consumer credit (-$1.7 billion versus expectations of -$10.0 billion).
The dollar index this morning is slightly weaker with the dollar/yen unchanged and the euro/dollar -0.20 cents. The dollar index last Friday rallied to a 6-3/4 month high and settled sharply higher for a second session. Bullish factors included (1) the plunge in the euro to an 8-1/2 month low against the dollar on concern that widening budget deficits in Greece and other European countries will drag down the European economy, (2) Morgan Stanley's cut in its year-end euro forecast to $1.24 from an earlier forecast of $1.32, saying "internal strains in the Euro-Zone have increased the downside risks" for the currency, and (3) comments from ECB Council member Nowotny who said that the current euro-dollar exchange rate in not a cause of concern, which signals the ECB may welcome further weakness in the euro to aid European exporters. Bearish factors included (1) the unexpected loss of jobs in the Jan US payrolls, which may prompt the Fed to keep US interest rates at record lows longer-than-expected, and (2) position-squaring ahead of the start of the 2-day G-7 meeting of finance ministers and central bankers in Canada on Feb 5-6.
March crude oil prices this morning are trading up +16 cents and Mar gasoline is +0.36 of a cent. Mar crude oil last Friday sold off sharply for the second straight session and closed down -$1.95 per barrel. Mar gasoline closed down -6.44 cents per gallon. Mar crude and Mar gasoline both fell to 1-3/4 month nearest-futures lows. Bearish factors included (1) continued strength in the dollar after the dollar index rose to a 6-3/4 month high, (2) the unexpected loss of jobs in the Jan US nonfarm payrolls, which indicates continued weakness in the labor market that could derail the economy and energy demand, (3) the slump in global equity markets on concerns that the budget deficit problems of Greece are spreading to other European nations as well, which may slow the global economy and energy demand, and (4) the unexpected decrease in Dec German industrial production, which signals reduced energy consumption in Europe's largest economy. Bullish factors for crude prices last Friday included (1) the recommendation by Goldman Sachs to buy Dec 2010 crude oil contracts on anticipation that "the supply/demand balance will continue to tighten in 2010 as the global economic recovery continues to strengthen demand, draw down inventories and draw OPEC spare capacity back into the market," and (2) comments from OPEC President Pinto who said oil prices will remain between about $70 and $80 a barrel this year amid a slight increase in global consumption.

Barchart.com U.S. Morning Call for Friday, February 5, 2010

Overnight Developments

Global stocks are lower with the European DJ Stoxx 50 Index down -1.73% at a 5-1/2 month low and March S&Ps down -4.20 points at a 3-month low. The cost of credit-default swap insurance against a default by Greece, Portugal and Spain surged to a record which sent the euro tumbling to an 8-1/2 month low against the dollar as investors remain concerned that the indebted Euro-Zone members threaten the stability of the euro. Financial companies in Europe are leading stock prices lower, led by an 18% plunge in ICAP, after the world's largest broker of transactions between banks lowered its outlook for full-year profit, saying some of its newer businesses are taking longer than anticipated to become profitable. Mining companies and raw-material producers fell after the dollar index surged to a 6-1/2 month high, which sank most commodities, as gold dropped to a 3-month low and copper tumbled to a 3-1/2 month low. Renault SA, France's second biggest carmaker, retreated nearly 4% after Royal Bank of Scotland Group Plc downgraded the company to "hold" from "buy." Rounding out the negative factors for stock prices in Europe is the unexpected decline in Dec German industrial production which fell -2.6% m/m and -7.1% y/y, its biggest monthly fall in 8 months and the 16th straight year-over-year decline, which suggests the recovery in Europe's largest economy has slowed.

The Asian markets today closed sharply lower with Japan down -2.89%, Hong Kong -3.33%, China -2.04%, Taiwan -5.40%, Australia -2.33%, Singapore -2.24%, South Korea -3.15%, India -2.68%. Asian stocks dropped in sympathy with declines in European and US markets on concerns over the sustainability of the global economic recovery. Japanese exporters fell with Nissan Motor down 3.9%, Honda Motor down 3.7% and Canon down 3.5% as a stronger yen threatens to crimp their earnings. Toyota Motor Company's corporate credit rating was placed on credit watch with negative implications at Standard & Poor's Ratings Services today, which cited concerns about quality issues. In South Korea, Samsung fell 3.4% after the world's largest maker of computer-memory chips was being investigated by the US International Trade Commission on complaints from Sharp that allege Samsung infringed on Sharp's LCD patent. EPFR Global reported that investors removed almost $1 billion from global emerging market stock funds in the week ended Feb 3, the most in more than a year, and withdrew $516 million from Asian equities outside of Japan, as earnings and Greek debt woes raised concerns that the global recovery may be faltering.

Overnight U.S. Stock News

March S&Ps this morning are trading down -4.20 points and at a 3-month low. The US stock market yesterday opened sharply lower and sold-off steadily throughout the day and finished with large losses (Dow Jones -2.61%, S&P 500 -3.11%, Nasdaq Composite -2.00%). The S&P 500 Index and the Dow Jones both fell to 2-3/4 month lows. Bearish factors for stocks included (1) carry-over weakness from a plunge in European stocks on concerns about sovereign default risk in Europe when Spain's and Portugal's bonds plunged on fears that they will be unable to finance their growing budget deficits, (2) the unexpected increase in weekly initial US unemployment claims which rose to their highest level in the last 7 weeks and raised concern that the improvement in the job market is stalling (+8,000 to 480,000 versus expectations of -15,000 to 455,000), and (3) the plunge in energy and raw-material producers after the surge in the dollar index to a 6-1/2 month high aided the fall in metals and crude oil with copper slumping to a 3-1/2 month low.
Bullish factors for stocks included (1) the surge in US Q4 nonfarm productivity by +6.2% q/q and by +2.9% for all of 2009, its biggest increase in 6 years as companies squeezed more out of workers to boost earnings, (2) continued slack wage inflation after the larger-than-expected decrease in Q4 unit labor costs (-4.4% q/q versus expectations of -3.4% q/q) with total unit labor costs for 2009 falling -0.9%, the biggest yearly decline in 7 years, and (3) the larger-than-expected increase in Dec US factory orders (+1.0% versus expectations of +0.5%).
Alcoa (AA) slipped 1.9% and Newmont Mining (NEM) fell 1.8% in pre-market trading as the overnight surge in the dollar index to a 6-1/2 month high sent metals prices tumbling, with gold falling to a 3-month low and copper down to a 3-1/2 month low.

Today's Market Focus

March 10-year T-notes this morning are trading up +6.5 ticks as the fall in global equities increases the saf-haven demand for Treasuries. T-note prices yesterday opened higher and rallied steadily the entire day and settled up +21.5 ticks at 118-080. Bullish factors for T-note prices yesterday included (1) strong safe-haven buying of Treasuries after global stock markets tumbled on concerns of sovereign default risk in Europe when Spain's and Portugal's bonds plunged on fears that they will be unable to finance their growing budget deficits, (2) the unexpected increase in weekly initial US unemployment claims which rose to their highest level in the last 7 weeks (+8,000 to 480,000 versus expectations of -15,000 to 455,000), and (3) the larger-than-expected decrease in Q4 unit labor costs (-4.4% q/q versus expectations of -3.4% q/q) with total unit labor costs for 2009 falling -0.9%, the biggest yearly decline in 7 years. Bearish factors yesterday included (1) the larger-than-expected increase in Dec US factory orders (+1.0% versus expectations of +0.5%), and (2) hawkish comments from Kansas City Fed President Hoenig who said growth in the US will "slowly reduce" the unemployment rate and that interest rates "can't stay at zero forever."
The dollar index this morning is higher and posted a new 6-1/2 month high with the dollar/yen +0.39 yen and the euro/dollar -0.30 cents. The dollar yesterday surged to a 6-1/2 month high and closed sharply higher. Bullish factors included (1) the plunge in the euro to a 7-1/2 month low against the dollar on a "crisis of confidence" in Europe after Spain's and Portugal's bonds plunged on fears that they will be unable to finance their growing budget deficits, (2) comments from ECB President Trichet who said that the economic outlook is subject to "uncertainty," which signals the ECB has no immediate plans to tighten monetary policy, (3) increased safe-haven demand for the dollar as global equity markets slumped, and (4) the recommendation from PIMCO for investors to avoid the euro because the region's finances hinder its ability to adjust to changes in the global economy. A bearish factor was the unexpected increase in weekly initial US unemployment claims which rose to their highest level in 7 weeks and raised concern that the improvement in the job market is stalling, which would prompt the Fed to keep interest rates at a record low and weaken the dollar's interest rate differentials.
March crude oil prices this morning are trading up +22 cents and Mar gasoline is -0.34 of a cent. Mar crude oil yesterday sold-off sharply throughout the day and closed down -$3.84 per barrel. Mar gasoline closed down -8.54 cents per gallon. Bearish factors included (1) the surge in the dollar index to a 6-1/2 month high, (2) the unexpected increase in weekly initial US unemployment claims which rose to their highest level in 7 weeks, which had negative implications for the economy and energy demand, (3) the prediction from Fitch Ratings Ltd. that OPEC has enough spare capacity to meet demand growth from emerging countries and there's no significant upward pressure on prices, and (4) the worldwide slump in equity prices, which fuels skepticism that the economic recovery and energy demand will be sustained. Bullish factors for crude prices yesterday included (1) the larger-than-expected gain in Dec US factory orders, which indicates increased energy consumption, and (2) the prediction from CNPC Research Institute of Economics & Technology that China's crude oil imports may rise to a record 212 million metric tons this year, 4% above a record 203.8 million tons in 2009.

Barchart.com U.S. Morning Call for Thursday, February 4, 2010

Overnight Developments

Global stocks are lower with the European DJ Stoxx 50 Index down -0.82% and March S&Ps down -7.10 points. Treasuries and the dollar are higher with the dollar index climbing to a 6-1/2 month high, while most commodities are lower. As expected, the BOE kept its benchmark interest rate unchanged at 0.50%, but paused its 200 billion pound asset purchase plan and said it will make further purchases should the economic outlook warrant it. After the European Union yesterday pledged to back Greece's plan to cut its deficit, investors are fleeing the debt of other countries such as Spain, Portugal and Hungary, where their deficit-reduction plans have been far less ambitious. This has led to a plunge in the euro to a 7-1/2 month low against the dollar and a surge in the cost of insuring against losses on sovereign debt to a record as concern grows that nations will struggle to cut budget deficits deepens a "crisis of confidence" in Europe. Also adding pressure to European stocks was the unexpected drop in Dec German factory orders, which fell -2.3% m/m when expectations were for a +0.2% m/m gain.

The Asian markets today closed lower with Japan down -0.46%, Hong Kong -1.84%, China -0.37%, Taiwan -0.08%, Australia -0.57%, Singapore -0.72%, South Korea -0.07%, India -1.64%. Asian stocks fell on concern the region's economic recovery may be derailed after New Zealand's jobless rate rose to 7.3% in Q4, its highest level in more than 10 years, and Australia's Dec retail sales unexpectedly fell -0.7% m/m, its first decrease in five months. In Japan, Toyota fell 3.5% on concern that its Prius hybrid may be recalled after the government ordered an investigation of brake problems, although Honda Motor rose 2.6% after it increased its full-year profit forecast by 71% because of a weaker yen. BOJ board member Nakamura said today that Japan's government must heed the warning on soaring debt loads stemming from the turmoil of Greece's credit-rating downgrade. Nakamura said debt needs to be contained before bond yields surge and overwhelm the government with higher borrowing costs and that relying on fiscal stimulus to spur an expansion without having a strategy to cut public debt will only exacerbate the government's fiscal situation.

Overnight U.S. Stock News

March S&Ps this morning are trading down -7.10 points. The US stock market yesterday gyrated on both sides of unchanged throughout the session and finished the day mixed (Dow Jones -0.26%, S&P 500 -0.55%, Nasdaq Composite +0.04%). Bullish factors for stocks included (1) a possible stabilization in the US job market after the Jan ADP employment change posted its smallest loss of jobs in 2 years along with an upward revision to its December's job losses (Jan -22,000 versus expectations of -30,000 and Dec revised up to -61,000 from -84,000), (2) the +10% increase in the weekly MBA mortgage applications purchase sub-index, which signals an improvement in the US housing market, and (3) the prediction from Bank of Montreal that the S&P 500 Index and Canada's S&P/TSX Composite Index are likely to increase at least 8.6% from current levels to the end of the year as both the US and Canadian economies are strong enough that equities will withstand the withdrawal of some government stimulus measures.
Bearish factors for stocks included (1) the smaller-than-expected increase in the Jan ISM non-manufacturing index (+0.7 to 50.5 versus expectations of +0.9 to 51.0), which fuels concern that the rate of expansion in the US service sector (which makes up almost 90% of the economy) is significantly slower than in the manufacturing sector, (2) the warning from Moody's Investors Service that the US government's Aaa bond rating will come under pressure unless measures are taken to reduce budget deficits for the next decade, and (3) the prediction from PIMCO that investors have wrongly priced in an "orderly" withdrawal of stimulus measures, a rebound in bank lending and coordinated government policy to restore growth, which means Wall Street projections for gains in 2010 may prove incorrect and stock prices will slump.
Cisco Systems (CSCO) gained 3.3% in European trading after the world's biggest maker of networking equipment reported Q2 earnings, excluding costs such as stock-based compensation, of 40 cents a share, beating analysts' estmate of 35 cents, and the company also forecast Q3 sales of at least $10 billion, topping analysts' estimates of $9.49 billion.
Visa (V) rose 2.7% in European trading after it reported Q1 profit excluding some items of $1.02 a share, beating analysts' estimates of 92 cents.

Today's Market Focus

March 10-year T-notes this morning are trading up +4 ticks. T-note prices yesterday traded in negative territory the entire day and they settled down -14 ticks at 117-185. Bearish factors for T-note prices yesterday included (1) the smaller-than-expected job losses in the Jan ADP employment change which showed the least amount of jobs lost in 2 years in Jan along with an upward revision to Dec job losses (Jan -22,000 versus expectations of -30,000 and Dec revised up to -61,000 from -84,000), (2) reduced safe-haven demand for Treasuries when Greek bonds rallied after European Commission President Barroso said his commission endorses the nation's deficit-reduction program, and (3) the warning from Moody's Investors Service that the US government's Aaa bond rating will come under pressure unless measures are taken to reduce budget deficits for the next decade. Bullish factors included (1) the prediction from Totan Research that the Fed will keep interest rates on hold until at least the Nov mid-term US elections because the steps involved in raising interest rates take at least a half of year to be implemented, (2) the smaller-than-expected increase in the Jan ISM non-manufacturing index (+0.7 to 50.5 versus expectations of +0.9 to 51.0), and (3) the statement from the Treasury in its quarterly refunding announcement that there is no need to increase current Treasury auction sizes to finance the country's budget deficit.
The dollar index this morning is stronger and trading at a 6-1/2 month high with the dollar/yen -0.21 yen and the euro/dollar -0.50 cents. The dollar yesterday shook off early weakness as it rallied after mid-morning and closed higher. Bullish factors included (1) strong US economic data that shows improved economic conditions after the Jan ADP employment change showed the fewest amount of jobs lost in 2 years and the Jan ISM non-manufacturing index expanded at its fastest pace in 1-1/2 years, which boosted the dollar on speculation that the the dollar's interest rate differentials may strengthen if the Fed hikes interest rates sooner-than-expected, and (2) the prediction by Nomura Holdings that the euro will weaken to $1.36 by the end of March on speculation that some EU member states will have problems financing their debt. Bearish factors included (1) the warning from Moody's Investors Service that the US government's Aaa bond rating will come under pressure unless measures are taken to reduce budget deficits for the next decade, and (2) the prediction from Totan Research that the Fed will keep interest rates on hold until at least the Nov mid-term US elections because the steps involved in raising interest rates take at least a half of year to be implemented.
March crude oil prices this morning are trading down -75 cents and Mar gasoline is -1.34 cents. Mar crude oil yesterday erased an early rally and moved lower after mid-morning and closed down -$0.25 per barrel. Mar gasoline closed up +1.83 cents per gallon. Both Mar crude and Mar gasoline posted 1-1/2 week highs. Bearish factors included (1) the rally in the dollar index, (2) the larger-than-expected increase in weekly crude oil inventories (+2.32 million bbl versus expectations of +400,000 bbl), (3) the -0.5% drop in US gasoline demand over the past four weeks to 8.64 million barrels a day, the lowest level since 2004, and (4) the unexpected decline in the refinery capacity rate (-0.7 to a 1-year low of 77.7% versus expectations of unchanged at 78.4%) as refiners cut operations due to slack demand. Bullish factors for crude prices yesterday included (1) the unexpected fall in weekly gasoline inventories (-1.31 million bbl versus expectations of a +1.4 million bbl build), and (2) the smallest loss of jobs in the Jan ADP employment change in 2 years, which signals the job market may be stabilizing and demand for fuel may improve.

Barchart.com U.S. Morning Call for Wednesday, February 3, 2010

Overnight Developments

Global stocks are higher with the European DJ Stoxx 50 Index up +0.05% and March S&Ps up +1.70 points. The dollar and Treasuries are weaker and commodities are stronger, with crude oil climbing to a 1-1/2 week high. European stocks received a boost as concerns over Greece's budget deficit eased when Greek stocks and bonds rallied after European Commission President Barroso said his commission endorses the nation's deficit-reduction program. European automakers posted gains led by a 2.7% jump in Volkswagen who said sales at its US division jumped 41% last month, while Daimler AG added 2.3% after its Mercedes-Benz unit said US sales surged 45% in Jan. European bank stocks were also generally positive after UBS AG climbed 3.6% after JPMorgan Chase upgraded the biggest Swiss bank by assets to "overweight" from "neutral," saying capital concerns in the European banking industry are "overdone" and investment-banking stocks are "cheap." Undercutting European stocks is the 13% slump in Electrolux AB after the appliance maker said Q4 net income rose to 644 million kroner ($92 million), shy of analysts' estimates for 671 million kroner.

The Asian markets today closed higher with Japan up +0.32%, Hong Kong +2.22%, China +2.69%, Taiwan +1.59%, Australia +0.93%, Singapore +1.62%, South Korea +1.24%, India +2.06%. Chinese stocks were supported by a report from China International Capital Corp. that predicts China's imports may have jumped in Jan by the most since at least 1991 and that Jan exports may have climbed +30% y/y. The CICC estimates that rising commodity prices and strong demand helped to drive the increase and the fact that China's trade numbers are subject to distortions in the first two months of each year because of the Lunar New Year holiday and will benefit in 2010 from comparisons with low levels in 2009. China's stocks also received a boost after the Shanghai Securities News reported that National Bureau of Statistics Chief Economist Yao Jinyuan said China's economic growth wouldn't fall below 8% this year. Japan's automakers led gains in Japanese stocks after Nissan Motor rose 1.2% after it said its Jan US vehicle sales rose 16%, while Honda Motor closed 2.3% higher before the automaker raised its full-year profit forecast as it cut spending on research and the yen strengthened less against the dollar than the company predicted.

Overnight U.S. Stock News

March S&Ps this morning are trading up +1.70 points. The US stock market yesterday finished higher for a second day (Dow Jones +1.09%, S&P 500 +1.30%, Nasdaq Composite +0.87%). Bullish factors for stocks included (1) a rally in homebuilders after Dec US pending home sales rose +1.0% m/m along with the 11% surge in D.R. Horton after the second-biggest US homebuilder by revenue reported its first quarterly profit since 2007, signaling possible stabilization in the housing market, (2) strength in metals producers after the weaker dollar and Citigroup's forecast for higher base metal prices fueled a gain in metals along with Citigroup's upgrade of Freeport McMoRan and Alcoa to "buy" from "hold," (3) gains in energy producers after crude oil prices rose to a 1-week high along with Bank of America's upgrade of Exxon Mobil to "buy" from "neutral," and (4) the move higher in credit card companies after Bank of America upgraded the group to "buy" from "neutral," saying earnings momentum will accelerate in 2010.
Bearish factors for stocks included (1) comments from Treasury Secretary Geithner who said that small US banks "remain under enormous pressure" along with his warning that mounting budget deficits "pose a corrosive threat to our economic future," and (2) the report from the US Census Bureau that said the Q4 US homeowner vacancy rate rose to 2.7% from 2.6% in Q3 with a total of 18.9 million vacant homes including foreclosures, residences for sale and vacation homes for sale at the end of Q4, which may lengthen the housing crisis as the high inventory of unsold homes keeps housing prices at depressed levels.
News Corp. (NWS) gained 5.5% in pre-market trading after the media company that owns Twentieth Century Fox film studio and the WSJ reported profit that excludes items such as a legal settlement rose to 25 cents a share in the quarter ended Dec 31, beating analysts' estimates of 20 cents, and it raised its dividend for the first time since 2005.
Verisign (VRSN) tumbled 4.6% after it reported Q4 adjusted EPS of 31 cents, below analysts' estimates of 35 cents, and was cut to "hold" from "buy" at Deutsche Bank.

Today's Market Focus

March 10-year T-notes this morning are trading down -6.5 ticks ahead of this morning's Feb refunding announcement. T-note prices yesterday traded sideways with small gains most of the day and finally settled up +5 ticks at 118-005. Bullish factors for T-note prices yesterday included (1) a Financial Times report saying that Japan Financial Services Minister Kamei is urging Japan Post Bank Co., the world's largest holder of deposits, to diversify its investments into US Treasuries and corporate bonds, which would increase demand for Treasuries, and (2) the prediction from Moody's Investors Service that junk-rated companies face "huge uncertainties" as they try to refinance more than $800 billion of debt that comes due within the next 5 years, which may boost the safe-haven appeal of Treasuries. Bearish factors included (1) reduced safe-haven demand for Treasuries after the stock market rallied for a second day, and (2) the prediction from Allianz SE that Treasury yields are poised to rise as any slowdown of the US economy will be met with increased government spending which will boost Treasury yields as inflation expectations climb.
The dollar index this morning is lower with the dollar/yen +0.25 yen and the euro/dollar +0.31 cents. The dollar yesterday fell for a second day and closed moderately lower. Bearish factors included (1) the prediction by JPMorgan Chase that the yen will strengthen to 85 per dollar by March 31 due to low prospects of currency-market intervention by Japan, and (2) reduced safe-haven demand for the dollar after the equity market rallied for a second day. Bullish factors included (1) the report from the European Commission that said the economic slump's "full social consequences have yet to materialize across the EU," and that unemployment in the Euro-Zone "is likely to rise further, and (2) euro-negative comments from ECB Council member Constancio who said that European economic growth will be "weak" over the next few years.
March crude oil prices this morning are trading up +38 cents and Mar gasoline is +2.12 cents. Mar crude oil yesterday rallied for a second day and closed sharply higher by +$2.80 per barrel. Mar gasoline closed up +8.58 cents per gallon. Both Mar crude and Mar gasoline posted 1-week highs. Bullish factors included (1) the weaker dollar, (2) the rally in the stock market which signals the economy is on the rebound, which may lead to increased energy demand, (3) comments from OPEC Secretary General Abdalla el-Badri who said OPEC is unlikely to change oil-production quotas when it meets next month and that crude prices at $70 to $90 a barrel are "acceptable," and (4) the action by JPMorgan Chase to raise its US distillate consumption forecast by 75,000 bpd to 3.8 million barrels a day due to a return of colder temperatures in the US Northeast. Bearish factors for crude prices yesterday included (1) the rise in Russian January crude oil production by +2.8% y/y to 10.04 million barrels a day, and (2) expected gains in US crude and gasoline supplies in Wednesday's weekly inventory report. Expectations for Wednesday's weekly DOE inventory report are for crude oil stockpiles to rise +400,000 bbl, gasoline supplies to increase +1.4 million bbl, distillate inventories to fall -1.0 million bbl and the refinery capacity rate to be unchanged at 78.4%.

Barchart.com U.S. Morning Call for Tuesday, February 2, 2010

Overnight Developments

Global stocks are mostly higher with the European DJ Stoxx 50 Index up +0.46% and March S&Ps up +2.90 points. The dollar and Treasuries are little changed, while most commodities are higher. Mining companies are leading European stocks higher, led by a 4.1% rise in Rio Tinto, after Citigroup raised its recommendation on the stock to "buy" from "hold," citing upgrades to iron ore prices. ARM Holdings Plc rose over 4% after the UK chip designer whose products are used in Apple's iPhone reported Q4 revenue that beat analysts' estimates, while Telecom Italia SpA jumped 3.9% after the la Repubblica newspaper reported that Italy's government would support a merger of the company with Europe's second-largest phone company, Telefonica SA. Producer price pressures in Europe continue to be negligible after the Dec Euro-Zone PPI rose +0.1% m/m and fell -2.9% y/y, its 12th consecutive annual decrease, and the longest stretch of year-over-year declines since 1998-99. Limiting gains in European stocks is the 4.4% fall in BP after Europe's largest oil company reported Q4 earnings of $4.38 billion, below analyst estimates of $4.7 billion, while BP's CEO said he expects the recovery from last year's recession to be "slow and gradual," and that refining margins will "remain depressed" for the time being.

The Asian markets today closed mixed with Japan up +1.63%, Hong Kong +0.14%, China -0.21%, Taiwan -1.26%, Australia +1.79%, Singapore -0.56%, South Korea -0.71%, India -1.18%. Asian markets garnered support from the unexpected jump in the US manufacturing sector after the Jan ISM manufacturing index expanded at its fastest pace in over 5 years. Toyota Motor climbed 4.5% after it said it would resume some production operations that were halted following an accelerator problem in 2.3 million vehicles. Japan's Dec labor cash earnings fell -6.1% y/y, the 19th consecutive monthly decline and the longest losing streak since 2003. Japan's average monthly wages for all of 2009 slid -3.9%, the lowest level since government records began in 1990, and an indication that consumer spending is unlikely to support the economic recovery. Australia's central bank unexpectedly paused in its rate-hiking cycle after the RBA kept its overnight cash rate target unchanged at 3.75% after three increases. The markets had been expecting a 25 bp hike, and the unexpected pause pummeled the Australian dollar to a 6-week low and sparked concern at the economy's ability to withstand higher borrowing costs.

Overnight U.S. Stock News

March S&Ps this morning are trading up +2.90 points. The US stock market yesterday moved higher throughout the day and finished on its high with solid gains (Dow Jones +1.17%, S&P 500 +1.43%, Nasdaq Composite +1.11%). Bullish factors for stocks included (1) strength in metals, coal and energy producers on optimism that the global economic recovery is accelerating after the Jan Euro-Zone PMI manufacturing index was unexpectedly revised up to a 2-year high (+0.4 to 52.4) and the Jan ISM manufacturing index unexpectedly expanded at its fastest pace in 5-1/3 years (+3.5 to 58.4 versus expectations of -0.3 to 55.6), (2) the increase in the employment sub-index of the Jan ISM manufacturing report which rose to a 3-1/2 year high (+3.1 to 53.3) and signaled a stronger labor market, (3) the prediction from Barclay's Capital that the US unemployment rate may fall to 9.0% this year as a rise in capital spending leads to an increase in hiring, (4) comments from St. Louis Fed President Bullard who said that the risk of deflation has passed and that the US economic recovery is "on track," and (5) the prediction from JPMorgan Asset Management for "a further leg up in equity prices that will be driven by positive economic and earnings news."
Bearish factors for stocks included (1) concerns that the Chinese central bank will take further steps to slow China's economy, which may lead to an overall slowdown in the global economy, after PBOC Deputy Governor Zhu Min said the Chinese government is planning on reining in overcapacity in the industrial sector, (2) the larger-than-expected decline in Dec US construction spending along with the downward revision to Nov US construction spending (Dec -1.2% m/m versus expectations of -0.4% m/m and Nov revised down to -1.2% m/m from an earlier reported -0.6% m/m), and (3) some inflation news after the prices-paid sub-index of the Jan ISM manufacturing index rose more than expected to its highest level in 1-1/2 years (+8.5 to 70.0 versus expectations of +1.5 to 63.0).
Barnes & Noble (BKS) surged 16% in European trading after Ron Burkle, its largest shareholder, asked the book seller to waive a provision preventing unwanted takeovers and allow him to acquire as much as 37% of the company's shares.

Today's Market Focus

March 10-year T-notes this morning are trading down -0.5 of a tick. T-note prices yesterday traded in negative territory the entire day and settled down -9.5 ticks at 117-275. Bearish factors for T-note prices yesterday included (1) concerns that Treasury issuance may increase after President Obama's budget proposal projected a record $1.6 trillion budget deficit for this year, (2) a decline in safe-haven demand for Treasuries after the stock market rallied sharply and after comments from St. Louis Fed President Bullard who said that the risk of deflation has passed and that the US economic recovery is "on track," (3) the unexpected increase in the Jan ISM manufacturing index to a 5-1/3 year high (+3.5 to 58.4 versus expectations of -0.3 to 55.6), and (4) the larger-than-expected increase in the prices paid sub-index of the Jan ISM report which rose to its highest level in 1-1/2 years and warns of a possible building of price pressures (+8.5 to 70.0 versus expectations of +1.5 to 63.0). Bullish factors included (1) the larger-than-expected decrease in Dec US construction spending along with the downward revision to Nov US construction spending (Dec -1.2% m/m versus expectations of -0.4% m/m and Nov revised down to a decrease of -1.2% m/m from an earlier reported -0.6% m/m), and (2) the smaller-than-expected increase in the Dec PCE deflator that indicates limited price pressures (+2.1% y/y versus expectations of +2.2% y/y).
The dollar index this morning is slightly weaker with the dollar/yen +0.02 yen and the euro/dollar +0.17 cents. The dollar yesterday erased an early rally to a new 6-month high and closed lower on the day. Bearish factors included (1) reduced safe-haven demand for the dollar after the equity market rallied sharply, and (2) strength in the euro after the Jan Euro-Zone PMI manufacturing index was unexpectedly revised up to a 2-year high. Bullish factors included (1) comments from St. Louis Fed President Bullard who said that the risk of deflation has passed and that the US economic recovery is "on track," and (2) the larger-than-expected increase in the Jan ISM manufacturing index to a 5-1/3 year high, which may prompt the Fed to tighten monetary policy sooner than expected, thus boosting the dollar's interest rate differentials.
March crude oil prices this morning are trading up +82 cents and Mar gasoline is +1.51 cents. Mar crude oil yesterday pushed higher throughout the day and closed up +$1.54 per barrel. Mar gasoline closed up +2.53 cents per gallon. Bullish factors included (1) the weaker dollar, (2) the larger-than-expected increase in the Jan ISM manufacturing index to a 5-1/3 year high, which suggested stronger fuel consumption, (3) the unexpected upward revision to the Jan Euro-Zone PMI manufacturing index to a 2-year high, which suggested stronger energy consumption in Europe, (4) the prediction from the US Climate Prediction Center for a colder-than-normal February for the central and eastern US, which may lead to increased demand for heating fuels, and (5) the sharp rally in the US equity market which signals increased confidence in the economy that may lead to improved energy demand. A bearish factor for crude prices yesterday was the comment by PBOC Deputy Governor Zhu Min that the Chinese government is ready to take steps to curb overcapacity in the industrial sector, which may cut energy demand in China, the world's second-largest energy consumer.

Barchart.com U.S. Morning Call for Monday, February 1, 2010

Overnight Developments

Global stocks are mixed with the European DJ Stoxx 50 Index down -0.63% and March S&Ps up +4.30 points. Concern that China will take further measures to prevent its economy from overheating is weighing on global equity markets after comments from PBOC Deputy Governor Zhu Min in Davos, Switzerland yesterday. The dollar fell back from a 6-month high and copper fell to a 2-1/2 month low, while Treasuries are little changed. US stock index futures are higher on speculation that today's Jan ISM manufacturing index will show expansion in the US manufacturing sector for a sixth month. Vivendi SA slumped over 3% and led media stocks lower in Europe after a US jury ruled that the world's largest music company misled investors who may be able to recover up to $9.3 billion in damages. Drug makers are also lower after ARD television reported that Germany's health minister said he would review pricing practices in the country's pharmaceuticals industry to lower health-care expenses. Limiting losses in European bourses was the unexpected upward revision to European manufacturing indexes after the Jan Euro-Zone PMI manufacturing index was revised up +0.4 to a 2-year high of 52.4 and Germany's Jan PMI manufacturing index was revised up +0.3 to a 22-month high of 53.7.

The Asian markets today closed mostly lower with Japan up +0.07%, Hong Kong +0.61%, China -1.61%, Taiwan -1.52%, Australia -1.00%, Singapore -0.33%, South Korea +0.20%, India -0.01%. China's Shanghai Composite Stock Index tumbled to a 3-1/2 month low after PBOC Deputy Governor Zhu Min said yesterday in an interview in Davos, Switzerland that the government is planning new measures to rein in overcapacity in steel, cement and other industries. Most Asian raw-material, steel, and energy producers closed lower after the comments, while, two manufacturing surveys in China also increased speculation that Chinese policy makers may tighten monetary policy as inflation pressures rose. The Jan China HSBC Holdings purchasing managers index rose to a record 57.4 and the survey showed the biggest gains in prices since July 2008, while a similar index from the Federation of Logistics and Purchasing rose to 55.8 in Jan, the second fastest pace since 2008. In Japan, Toshiba Corp., Japan's biggest memory-chip maker, closed 6% lower after it cut its annual sales forecast by 5.9%, citing the global recession, while Honda Motor dropped 2.5% after it said it is recalling 646,000 Fit, Jazz and City cars because of faulty power windows that may lead to fires.

Overnight U.S. Stock News

March S&Ps this morning are trading up +4.30 points. The US stock market last Friday rallied early but then gave up its gains and sold-off into the close to finish moderately lower (Dow Jones -0.52%, S&P 500 -0.98%, Nasdaq Composite -1.45%). The S&P 500 Index and the Nasdaq dropped to 2-3/4 month lows and the Dow Jones fell to a 2-1/2 month low. Bearish factors for stocks included (1) the drop in technology shares which dragged the overall stock market lower after Microsoft's CFO said his company has yet to see a recovery in spending on enterprise software and after SanDisk plunged over 10% after the world's biggest maker of flash-memory cards forecasted lower-than-expected Q1 sales, (2) the prediction from RealtyTrac that home foreclosures in the US this year may reach 3 million, surpassing last year's record of 2.82 million as unemployment and repossessions increase, (3) the action by the Reserve Bank of India to increase the reserve ratio for its banks to 5.75% from 5.00%, which adds to the recent action from the Chinese central bank to limit lending by Chinese banks and may slow the global economic recovery, and (4) the overall -2.4% decline in 2009 GDP, the worst single year performance since 1946.
Bullish factors for stocks included (1) the larger-than-expected expansion of Q4 US GDP which rose at its fastest pace in 6 years (+5.7% annualized versus expectations of +4.6% annualized), (2) limited wage inflation after the Q4 employment index rose +0.5% q/q and for all of 2009 US labor costs rose +1.5%, the smallest annual gain since records began in 1982, which is positive for earnings, (3) the unexpected increase in the Jan Chicago purchasing managers index to a 4-year high (+2.8 to 61.5 versus expectations of -1.5 to 57.2), and (4) the larger-than-expected rise in the Jan US consumer confidence to a 2-year high (+1.6 to 74.4 versus expectations of +0.2 to 73.0).
CME Group (CME) fell 2.6% in European trading after the company said it is in talks to buy the News Corp. stock-index business that owns the Dow Jones Industrial Average for up to $700 million.

Today's Market Focus

March 10-year T-notes this morning are trading down -5.5 ticks. T-note prices last Friday shook off early weakness and moved higher the rest of the day to finally settle up +14.5 ticks at a 1-1/2 month high of 118-050. Bullish factors for T-note prices last Friday included (1) slack price pressures after the smaller-than-expected increase in the Q4 GDP price index of +0.6% versus expectations of +1.3%, (2) limited wage inflation after the Q4 employment index rose +0.5% q/q and +1.5% for all of 2009, the smallest annual gain since records began in 1982, and (3) continued safe-haven demand for Treasuries on concerns that Greece's burgeoning budget deficit may force it to default on its debt along with the the sell-off in the equity market. Bearish factors included (1) the larger-than-expected expansion of Q4 US GDP which rose at its fastest pace in 6 years (+5.7% annualized versus expectations of +4.6% annualized), (2) the unexpected increase in the Jan Chicago purchasing managers index tp a 4-year high (+2.8 to 61.5 versus expectations of -1.5 to 57.2), and (3) the larger-than-expected rise in the Jan US University of Michigan consumer confidence which rose to a 2-year high (+1.6 to 74.4 versus expectations of +0.2 to 73.0).
The dollar index this morning is slightly weaker after earlier posting a fresh 6-month high with the dollar/yen +0.02 yen and the euro/dollar +0.36 cents. Bullish factors included (1) the drop in the yen to a 1-week low against the dollar after BOJ Governor Shirakawa said that Japanese policy makers are "prepared to act swiftly and decisively should concerns that financial market stability might be hampered re-emerge," which signals the Japanese may intervene in the currency markets should the yen strengthen further, (2) the slump in the euro to a 6-1/2 month low against the dollar on concern Greece's budget problems will spread throughout Europe, (3) the strong Q4 US GDP report of +5.7% which may prompt the Fed to tighten monetary policy sooner-than-expected and boost the dollar's interest rate differentials, and (4) the prediction from United-ICAP that the dollar will benefit as a potential "financial stone age" for Greece and other nations threatens to break up the euro.
March crude oil prices this morning are trading up +29 cents and Mar gasoline is -0.01 of a cent. Mar crude oil last Friday erased an early rally and moved lower the rest of the day to finally close down -$0.75 per barrel. Mar gasoline closed down -1.40 cents per gallon. Both Mar crude and Mar gasoline posted new 5-week lows. Bearish factors included (1) continued strength in the dollar as the dollar index rose to a 5-1/2 month high and prompted a liquidation of most commodities, (2) the increase in the Dec Euro-Zone unemployment rate to an 11-year high of 10.0%, which may keep fuel demand constrained in Europe, (3) the slump in the stock market which raised questions about the sustainability of the economic recovery and energy demand, and (4) the Reserve Bank of India's action to raise its reserve requirement for its banks to 5.75% from 5.0% as India joins China in attempting to slow bank lending, which may reduce global energy demand. Bullish factors for crude prices last Friday included (1) the larger-than-expected expansion of Q4 US GDP which rose at its fastest pace in 6 years and suggested stronger energy consumption, (2) the unexpected increase in the Jan Chicago purchasing managers index which expanded at its best level in 4 years and signaled an improved economy that may lead to increased energy demand, and (3) the statement from E.A. Gibson Shipbrokers that the number of oil tankers storing crude oil cargoes at sea fell 16% in January.

Barchart.com U.S. Morning Call for Friday, January 29, 2010

Overnight Developments

Global stocks are mixed with the European DJ Stoxx 50 Index up +0.77% and March S&Ps up +2.50 points. Stocks fluctuated in Europe after the euro slumped to a 6-1/2 month low against the dollar on concern that Greece's fiscal struggles will spread, while BMW boosted the market after the world's largest carmaker said its earnings will rise this year. US stock futures gained after Fed Chairman Bernanke won Senate approval for a second term and ahead of this mornings expected release of a robust US Q4 GDP. Bayerische Motoren Werke AG (BMW), climbed 2.5% in Europe after it raised its sales forecast and said it's "confident" that it will post a pretax profit for 2009 on increased sales in China, Europe and the US. The Dec Euro-Zone CPI estimate climbed +1.0% y/y, and although it rose less than expected, was still at an 11-month high, while Dec Euro-Zone unemployment rose +0.1 to 10.0%, an 11-year high.

The Asian markets today closed mostly lower with Japan down -2.08%, Hong Kong -1.15%, China -0.08%, Taiwan -0.70%, Australia -2.22%, Singapore -0.45%, South Korea -2.47%, India +0.31%. Asian stocks were undercut today on concern about Greece's swelling deficit and by tightening measures by central banks in the US, China and India. The Reserve Bank of India today increased the proportion of deposits lenders must set aside as reserves to 5.75% from 5.00%. Japan's Nikkei 225 Stock Index fell to a 1-1/4 month low and was led lower by a slump in technology stocks after Elpida Memory, Japan's biggest computer-memory maker, sank 9% after it reported lower-than-expected profit, while Advantest Corp. plunged 10.2% after the world's biggest maker of memory-chip testers forecasted a wider full-year loss than expected. The yen declined against the dollar after BOJ Governor Shirakawa said that Japanese policy makers are "prepared to act swiftly and decisively should concerns that financial market stability might be hampered re-emerge."

Barchart.com U.S. Morning Call for Thursday, January 28, 2010

Overnight Developments

Global stocks are higher with the European DJ Stoxx 50 Index up +1.02% and March S&Ps up +6.60 points. Financial stocks are leading the way higher after President Obama said in his first State of the Union address last night that he's not "punishing" financial companies. President Obama also called for an extension of tax incentives worth $38 billion over this year and next to spur job growth. The dollar index climbed to a 5-1/4 month high, while Treasuries and commodities are lower. Also boosting European share prices was the 10% surge in Nokia after it reported Q4 net incime of 948 million euros ($1.33 billion), handily beating analyst estimates of 572 million euros. The Asian markets today closed higher with Japan up +1.58%, Hong Kong +1.61%, China +0.25%, Taiwan +1,78%, Australia +0.62%, Singapore +1.90%, South Korea +1.24%, India +0.10%. Asian stocks received a boost after Zhu Mon, a deputy governor of the PBOC, said China will maintain a "relatively accomodating" fiscal and monetary policy this year to sustain growth of 8% to 9%.

Barchart.com U.S. Morning Call for Wednesday, January 27, 2010

Overnight Developments

Global stocks are mixed with the European DJ Stoxx 50 Index down -0.46% and March S&Ps up +2.20 points. The markets remain concerned that economic growth may falter as the Fed and ECB curb stimulus measures while other central banks such as Australia and China push up lending costs. The markets await the post FOMC announcement later this afternoon. European bonds fell after ECB Council member Weber said that policy makers may take further steps in the first half of this year to withdraw liquidity from the banking system. Banco Bulbao Vizcaya Argentaria SA, Spain's second-biggest lender, fell over 5% after it reported a 94% slump in Q4 net income to 31 million euros ($44 million), well below analysts' estimates of 1.05 billion euros in income as the bank wrote down goodwill on its US business and set aside more reserves for bad loans. Man Group fell nearly 5% as it has now declined for nine straight sessions, the longest losing streak in almost five years, while SAP AG< the world's biggest maker of business-management software, slid nearly 2% after it reported Q4 net income of 727 million euros ($1.02 billion), below analysts' estimates of earnings of 736 million euros. Limiting losses in European markets was the unexpected +1 point increase in the Jan French consumer confidence indicator to -29, its highest level in more than 2 years.

The Asian markets today closed lower with Japan down -0.71%, Hong Kong -0.38%, China -1.36%, Taiwan -0.51%, Australia -1.55%, Singapore -1.24%, South Korea -0.87%, India -2.92%. Chinese bank stocks closed lower and helped the Shanghai Stock Index slump to a 2-3/4 month low after the Securities Times reported that some Chinese banks were ordered to recall excess loans advanced this month in order to meet regulatory requirements. Mining companies declined as metals prices fell while Toyota Motor closed 4.3% lower in Japan after it announced plans to halt the sales of eight of its models involved in a recall. On the bright side, Dec Japan exports jumped +12.1% y/y, their first increase in 15 months as strong demand from China, Japan's biggest export market, is helping the country recover from recession. For all of 2009, Japan's exports fell 33%, the biggest drop since comparable figures were made available in 1979, while China surpassed the US as Japan's largest export market for the first time on an annual basis.

Barchart.com U.S. Morning Call for Monday, January 25, 2010

Overnight Developments

Global stocks are mixed with the European DJ Stoxx 50 Index down -0.27% and March S&Ps up +8.20 points. US stock futures are sharply higher on speculation that recent losses were overdone and on optimism that Fed Chairman Bernanke will be reappointed to a second term. Senate Republican leader Mitch McConnell said on NBC's "Meet the Press" that Bernanke will have "bipartisan support in the Senate" even as a number of his party are opposed. The dollar and Treasuries are weaker and commodity prices are stronger. Credit Suisse Group AG analysts predict that "recent market weakness is a buying opportunity" and that "both earnings revisions and economic surprises remain positive." Royal Philips Electronics NV gained 5.5% after the world's biggest maker of light bulbs reported Q4 net income of 251 million euros ($355 million), which beat analysts estimate of 249 million euros, as the company posted its third straight quarterly profit. Societe Generale rose 2.4% after France's second-biggest bank by market value was upgraded by Deutsche Bank AG to "buy" from "hold." Limiting gains in European stocks is the 2.4% drop in Ericsson AB after the world's biggest maker of wireless networks reported Q4 net income of 314 million kroner ($43 million), well below analysts' estimates of profit of 2.5 billion kroner, as phone companies reduced spending on networks.

The Asian markets today closed lower with Japan down -0.74%, Hong Kong -0.62%, China -1.13%, Taiwan -0.69%, Australia -0.69%, Singapore -0.28%, South Korea -0.61%, India -0.47%. Asian markets continue to correct lower on concern Chinese banks need more capital and that profit growth won't be enough to justify current valuations. Bank of China lost 2.1% after it unveiled plans to raise $5.86 billion from selling convertible bonds. Toyota Motor fell 2.1% after the company reported that its global sales in 2009 fell 13% to 7.81 million units, while other exporters declined with Honda down 1.7% and India's number two software exporter Infosys Technologies sliding 1.3% on concerns about the health of the global economy should President Obama's plan to overhaul banking regulations be approved.

Barchart.com U.S. Morning Call for Friday, January 22, 2010

Overnight Developments

Global stocks are mostly lower with the European DJ Stoxx 50 Index down -1.48% and March S&Ps down -3.20 points. Financial stocks fell worldwide after President Obama yesterday called for limiting the size and trading activities of financial institutions as a way to reduce risk-taking and prevent another financial crisis. The markets are concerned that profitability of financial companies will be constrained with stricter regulations. ICAP, the world's largest broker of trades between banks, slumped 6.6%, LSE, Europe's oldest independent bourse, fell over 4%, and Deutsche Boerse, which runs the Frankfurt exchange, slid 3.7% on concern President Obama's proposals will reduce trading volumes. European banks also took a beating with Deutsche Bank down nearly 5%, UBS down over 4% and Barclay's Plc losing nearly 6%. Limiting losses in European markets was the larger-than-expected +1.6% m/m increase in Nov Euro-Zone industrial new orders and the +4 point increase in the Jan French business confidence indicator which rose to a 17-month high of 92.

The Asian markets today closed lower with Japan down -2.56%, Hong Kong -0.65%, China -1.24%, Taiwan -2.47%, Australia -1.59%, Singapore -1.10%, South Korea -2.42%, India -1.12%. Concerns continue to rise over the extent of possible monetary tightening in China to ease asset bubbles and to slow its economy from overheating. Stocks in South Korea and Taiwan, which both count China as their number one export market, both closed down over 2%, while Samsung Electronics, which relies on China for more than 20% of its sales, slid nearly 3%. According to EPFR Global, investors pulled $348 million from China equity funds in the week ended Jan 20, the biggest decline in four months, on concern China's moves to cool its economy will slow growth. Most Japanese exporters closed lower after the yen rose to a 1-month high against the dollar and mining companies fell in Australia with BHP Billiton down nearly 3% and Rio Tinto Group down nearly 4% after the Sydney Morning Herald newspaper reported that an Australian tax review recommends replacing royalty charges on mining projects with a national resource tax.

Barchart.com U.S. Morning Call for Thursday, January 21, 2010

Overnight Developments

Global stocks are mixed with the European DJ Stoxx 50 Index up +0.31 and March S&Ps up +1.30 points. The dollar index strengthened to a 4-1/2 month high, which pressured commodity prices with gold posting a 2-week low. The euro plunged to a 5-1/2 month low against the dollar after the EuropeanVoice newspaper reported that the European Union is looking into a possible "heavily conditioned" loan for Greece to ease its financial crisis and stop the country from seeking aid from the IMF. Expansion in Europe's service and manufacturing industries unexpectedly slowed in January when the Jan Euro-Zone PMI composite fell -0.6 to 53.6, adding to signs that the Euro-Zone economy may lose momentum as the effect of government stimulus measures taper off and rising unemployment undercuts consumer spending. In its monthly bulletin released today, the ECB signaled it intends to keep interest rates at a record low for some time as the economy recovers gradually and inflation pressures remain subdued when it said "the current rates remain appropriate" as "inflation is expected to remain moderate over the policy-relevant horizon." The World Bank raised its global growth forecast for 2010 to 2.7% compared with a 2.0% estimate in June, but warned that the recovery may lose momentum in the second half of he year as government stimulus programs wind down and "high" unemployment persists. The World Bank raised its US growth forecast for 2010 to 2.5%, up from June's estimate of 1.8%, and raised its growth forecast for the Euro-Zone to 1.0%, up from a June estimate of 0.5%.

The Asian markets today closed mixed with Japan up +1.22%, Hong Kong -1.99%, China +0.42%, Taiwan -1.13%, Australia -0.84%, Singapore -1.46%, South Korea +0.59%, India -2.42%. The Asian markets received a boost when China reported its Q4 GDP rose to 10.7% y/y, higher than an expected 10.5% y/y, and the fastest pace of growth since Q4 2007. For the full year, China's 2009 GDP gained 8.7%, beating the government's 8.0% target, but also raises speculation that the PBOC may start raising interest rates and tighten lending restrictions to rein in credit growth. Property developers with projects in China declined on concern lending restrictions will curb real-estate demand while Japanese exporters closed higher after a weaker yen boosted the outlook for export earnings. Japanese demand for bank loans dropped to a 5-year low as companies cut spending. The BOJ's quarterly survey of loan officers showed that the index of demand for loans to businesses plunged to -17 in Jan from Oct, the lowest demand for loans since July 2004.

Barchart.com U.S. Morning Call for Wednesday, January 20, 2010

Overnight Developments

Global stocks are mostly weaker with the European DJ Stoxx 50 Index down -0.42% and March S&Ps down -6.70 points. The dollar index rose to a 3-week high which pushed commodity prices lower, while the euro tumbled to a 5-month low against the dollar after IMF Managing Director Dominique Strauss-Kahn said that Greece's budget woes are "a serious problem." China's chief banking regulator said some of his country's banks were asked to reduce lending, which raises concern that the Chinese government's actions to slow down its economy may lead to a significant correction in equity markets. Also hurting US and European markets was the bigger-than-expected Q4 loss reported by Bank of America. Limiting losses in European markets is the rally in health-care shares and drug makers on speculation US President Obama's plan to overhaul the health-care system will be derailed after Democrats lost a key Senate seat, while technology companies firmed after ASML Holding NV, Europe's largest maker of semiconductor equipment, jumped over 5% after it reported a Q4 profit that beat analyst estimates as chipmakers resumed buying its machines after an industry-wide slump.

The Asian markets today closed mostly lower with Japan down -0.25%, Hong Kong -1.81%, China -3.22%, Taiwan -0.34%, Australia +0.14%, Singapore -0.68%, South Korea +0.31%, India -0.07%. Liu Mingkang, chairman of the China Banking Regulatory Commission, said today that some banks were asked to rein in lending because they failed to meet regulatory requirements. According to the China Securities Journal, major Chinese commercial banks received verbal orders from authorities to halt new lending for the remainder of Jan after credit was reported to have already exceeded 1 trillion yuan. Chinese banks were eager to issue new loans and speed up loan extensions to start the year with the knowledge that the government will tighten credit in 2010. Most Chinese bank and financial stocks closed lower while financial stocks also fell in Japan after Credit Suisse Group AG cut its investment rating on the Japanese securities industry to "market weight" from "overweight." Hong Kong's Hang Seng stock index declined after Shanghai's government said a Caijing magazine report that the city may allow individuals to invest abroad is "pure fabrication."

Barchart.com U.S. Morning Call for Tuesday, January 19, 2010

Overnight Developments

Global stocks are mostly lower with the European DJ Stoxx 50 Index down -0.66% and March S&Ps down -2.00 points. The dollar index climbed to a 1-week high and pushed most commodity prices higher, except for crude oil which slipped to a 3-week low on demand concerns. The biggest drag on European stocks is the larger-than-expected decline in the Jan German ZEW economic sentiment survey, which fell for the fourth straight month, -3.2 to 47.2, amid signs the economic recovery is slowing. Bank stocks are leading the way lower today with HSBC, Europe's largest bank, sliding 2.2% after Exane downgraded the bank to "underperform" from "neutral," while Barclays PLC dropped 2.2% after Credit Suisse AG cut its price estimate on Barclays by 13% saying its forecasts imply a "sizable capital deficit." Alstom SA, the world's second-largest train maker, fell 3.8% after it reported Q3 fiscal sales of 4.69 billion euros ($6.75 billion), well below analysts' estimates of 4.81 billion euros. Limiting losses in European stocks was the 3.7% jump in shares of Cadbury Plc after its board agreed on a revised 11.9 billion-pound ($19.7 billion) takeover offer from Kraft Foods.

The Asian markets today closed mixed with Japan down -0.83%, Hong Kong +1.02%, China +0.19%, Taiwan -1.07%, Australia -1.02%, Singapore +0.03%, South Korea -0.11%, India -0.88%. Asian technology companies fell after a benchmark gauge of prices for dynamic-random-access memory chips fell 1.7%, the sixth straight day of declines, according to Dramexchange Technology. Japanese bank stocks closed lower after Barclays Capital said that Japanese banks' income from lending may slump, while Japanese car and electronic makers fell after the yen rallied to a 4-week high against the dollar and threatened the value of export earnings. Japan Airlines filed for bankruptcy under a 900 billion yen ($10 billion) turnaround plan after four government bailouts failed to revive the carrier. Asia's largest airline will shed staff, cut unprofitable routes and retire older planes as it restructures following a 131 billion first-half loss. Hong Kong stocks jumped after the head of Shanghai's financial services office said that Shanghai is considering allowing individuals to invest in Hong Kong and "other overseas areas." Allowing Chinese individuals to invest overseas may help counter the flows that have helped boost China's foreign-exchange reserves to a record and spurred concern about asset bubbles.

Barchart.com U.S. Morning Call for Friday, January 15, 2010

Overnight Developments

Global stocks are mixed with Asia closing higher but with the European DJ Stoxx 50 Index down -0.24% and March S&Ps down -5.40 points. Weaker-than-expected Q4 revenue reported by JPMorgan Chase this morning is dragging US and European stocks lower. Concern that mounting budget deficits in Greece will weaken confidence in the euro bolstered the dollar, which sent the prices of most commodities lower. The 5.3% drop in Man Group Plc, the world's largest publicly traded hedge-fund firm, is undercutting European stocks after it posted a bigger-than-expected decline in assets in Q4 and as its main fund posted its first annual loss. Dec Euro-Zone CPI rose an as expected +0.3% m/m and +0.9% y/y, the biggest year-over-year increase in 10-months, while the Dec core CPI rose +1.1% y/y, slightly more than market expectations of +1.0%. Limiting losses in European stocks is the +3.2% gain in Carrefour SA after Europe's largest retailer reported full-year operating profit of 2.78 billion euros ($4 billion), higher than the 2.6 billion euro estimate of analysts. Irish banks also rallied with Allied Irish Bank Plc gaining 4.1% after Morgan Stanley rated the shares "overweight" in new coverage, while Bank of Ireland Plc climbed 4.7% after Morgan Stanley upgraded the lender to "equal weight."

The Asian markets today closed mostly higher with Japan up +0.68%, Hong Kong -0.29%, China +0.39%, Taiwan +0.81%, Australia +0.03%, Singapore -0.04%, South Korea +0.91%, India -0.17%. China's Dec foreign-exchange reserves surged +23% y/y to a record $2.399 trillion while bank lending in China increased more than expected after Dec China new loans grew by 379.8 billion yuan ($55.6 billion), which brought total Chinese new lending for 2009 to a record 9.59 trillion yuan. This will increase pressure on the Chinese government to keep surging lending growth and the influx of speculative capital from abroad from destabilizing the economy with asset bubbles from property to stock markets. Better-than-expected earnings from Intel lifted Asian technology stocks and helped boost Japan's Nikkei 225 Stock Index to a 15-1/4 month high. Hynix Semiconductor closed 2.6% higher and Elpida Memory, Japan's biggest maker of computer-memory chips, closed 1.5% higher.

Barchart.com U.S. Morning Call for Thursday, January 14, 2010

Overnight Developments

Global stocks are higher with the European DJ Stoxx 50 Index up +0.55% and March S&Ps up +0.30 of a point. Speculation that global central banks will keep their interest rates near record lows is boosting confidence in the economic recovery after New York Fed President Dudley said late yesterday that US interest rates may remain "low" for at least six months and possibly two years. The markets are also expecting the ECB to leave its main interest rate at a record low of 1.00% at the conclusion of its policy meeting later today. Mining companies rose, led by a 2.3% gain from Rio Tinto, after it said its Q4 iron ore output surged 49% to 47.2 million metric tons because of demand from China. Also boosting European share prices is the +1.0% m/m increase in Nov Euro-Zone industrial production, double the +0.5% m/m pace the market was expecting, as companies ramped up production to meet reviving global demand.

The Asian markets today closed higher with Japan up +1.61%, Hong Kong -0.15%, China +1.40%, Taiwan +1.14%, Australia +0.61%, Simgapore +0.73%, South Korea +0.92%, India +0.43%. Asian stocks received a boost after Australia reported that the number of people employed in December rose +32,500 m/m, the fourth straight monthly increase and more than three times what was expected. The yen weakened after the report which boosted Japanese exporters and help push the Nikkei 225 Stock Index up to a 15-1/4 month high. Dec China property prices climbed +7.8% y/y, the fastest pace in 18 months, and highlight the government's struggle to rein in speculation while maintaining economic growth. As if on cue, the World Economic Forum (WEF) warned today that China's economy is overheating as asset bubbles and inflation pressures build and it poses a "major risk" to global growth. The WEF also warned "a hard landing in China is a major risk" and that a drop in momentum in the Chinese economy "could adversely affect global capital and commodity markets." The WEF will hold its annual meeting Jan 27-31 in Davos, Switzerland.

Barchart.com U.S. Morning Call for Wednesday, January 13, 2010

Overnight Developments

Global stocks are mixed with the European DJ Stoxx 50 Index down -0.08% and March S&Ps up +1.10 points. The dollar is weaker and crude oil slid to a 1-week low, while Treasuries fell after comments late yesterday from Philadelphia Fed President Plosser who said that policy makers must begin to raise interest rates "well before" unemployment falls to an acceptable level to keep inflation in check. Technology stocks are higher in Europe led by a 4% gain in Infineon Technologies and a 2% gain in ASML Holding NV, after Goldman Sachs added Infineon to its "conviction buy" list and upgraded ASML Holding to "buy" from "neutral," saying they expect a "robust" Q4 earnings season for semiconductors and technology hardware companies. Steelmakers also gained in Europe after analysts at Bank of America Merrill Lynch named ThyssenKrupp, Germany's largest steelmaker, and ArcelorMittal, the world's largest, as their "top picks" in a report today. Undercutting European stocks is weakness in financials and bank stocks led by a 3.8% drop in Societe Generale after France's second-biggest bank said it had 1.4 billion euros ($2.03 billion) of writedowns and provisions on risky assets, while the Dec French CPI gained more than expected at +0.3% m/m and +1.0% y/y, the biggest year-over-year increase in 10 months.

The Asian markets today closed mostly lower with Japan down -1.32%, Hong Kong -2.59%, China -3.22%, Taiwan -1.36%, Australia -0.64%, Singapore -0.95%, South Korea -1.74%, India +0.50%. Asian markets tumbled and are still feeling the negative effects of China's decision yesterday to raise its bank reserve ratio in an attempt to slow its economic growth and stem inflation. The PBOC's unexpected move to restrain lending has spurred concern that higher interest rates will follow. ABN Amro Bank NV said the Shanghai Composite Stock Index "looks expensive" and that China's stocks will underperform their regional rivals and recommended that investors underweight Chinese stocks on the prospect of higher interest rates. Shares of Asian commodity producers declined on concern demand in China will decline and export-related companies also fell on concern a slowdown in Chinese demand may hurt sales. Baidu Inc., operator of China's most popular online search engine, rallied over 8% after Google said it may close its offices in China after it discovered a "highly sophisticated" attack last month aimed at gaining access to e-mail accounts of human-rights activists.

Barchart.com U.S. Morning Call for Tuesday, January 12, 2010

Overnight Developments

Global stocks are mixed with the European DJ Stoxx 50 Index down -0.79% and March S&Ps down -7.60 points. Weaker-than-expected earnings from Alcoa along with the action by China to raise its reserve requirements for its lenders are helping to lead US and European share prices lower today. Treasuries and the dollar are higher on safe-haven buying and most commodities are lower. European airline stocks are lower in sympathy with the 45% plunge in Japan Airlines to a record low on speculation JAL may not get bailed out by the government this time and be forced to file bankruptcy. Limiting losses in European bourses was the larger-than-expected increase in the Dec Bank of France business sentiment, which rose +2 to a 1-3/4 year high of 101. Also boosting stocks was the action by Bank of America Merrill Lynch Global Research to increase its allocation of equities to 65% of total assets from 60% and reduce its bond allocation to 30% from 35%.

The Asian markets today closed mixed with Japan up +0.75%, Hong Kong -0.38%, China +1.52%, Taiwan -0.17%, Australia -1.03%, Singapore -0.59%, South Korea +0.36%, India -0.59%. China raised the proportion of deposits that banks must set aside for reserves by 50 bp to 16% for big banks and 14% for smaller ones effective Jan 18. The increase in reserve requirements is the first since Jun 2008 and the PBOC also sold bills at a higher yield for the second time in a week, fueling speculation that policy makers will raise the benchmark interest rate in the first half of this year. The PBOC said last week it is aiming for "moderate" credit growth in 2010 after a record 9.21 trillion yuan of loans in the first 11 months of 2009. In another sign that the global recovery is accelerating, India's Nov industrial production surged a larger-than-expected 11.7% y/y, its fastest pace in over 2 years, and strengthens the case for its central bank to raise interest rates some time in the first half of this year.

Barchart.com U.S. Morning Call for Monday, January 11, 2010

Overnight Developments

Global stocks are higher with the European DJ Stoxx 50 Index up +0.42% at a 15-month high and March S&Ps up +3.50 points at a 15-1/4 month high. The dollar slumped to a 3-week low, Treasuries weakened and commodity prices rose, as crude oil posted a 14-3/4 month high and gold climbed to a 1-month high. The main bullish factor for global stocks was the Dec China trade figures that added to signs the global economic recovery is accelerating. European energy producers and basic-resources stocks advanced and BP Plc gained 2.4% after Citigroup upgraded Europe's second-largest oil company to "buy" from "hold." Another bullish factor for European stock prices was the stronger-than-expected increases in Nov French industrial production and manufacturing production. Swiss Life surged 9.1% after Wansquare cited unidentified Swiss bankers who said that Allianz SE is preparing a takeover bid for Switzerland's biggest life insurer. Heineken NV climbed 6.2% after the brewer agreed to buy the beer division of Fomento Economico Mexicano SAB, Mexico's second-largest beer maker, in an all-share transaction valued at 5.3 billion euros ($7.7 billion). The markets will be looking ahead to earnings from Alcoa later today, the official start of Q4 earnings season, as analysts predict that S&P 500 companies will snap nine straight quarters of declining profits.

The Asian markets today closed mostly higher with Japan closed for holiday, Hong Kong up +0.51%, China +0.06%, Taiwan +0.52%, Australia +0.79%, Singapore +0.37%, South Korea -0.19%, India -0.08%. China's Shanghai Composite index closed higher after the government reported that Dec China exports climbed +17.7% y/y, the first increase in 14 months, and that Dec China imports surged +55.9% to a record. According to data from the China Association of Automobile Manufacturers, China supplanted the US as the world's biggest auto market after its 2009 vehicle sales jumped 46% to 13.6 million, the fastest pace in at least 10 years. Chinese brokerages and banks also rallied after the government approved the use of stock index futures, which stoked speculation that the use of derivatives will boost trading. Pacific Investment Management Co. (PIMCO), which runs the world's biggest bond fund, said the BOJ may need to sell yen of buy long-term government bonds in "unlimited amounts" to combat deflation. According to PIMCO, an "all-in" reflationary policy is needed, as "Japan's problem is deflation, not inflation as far as an eye can see."

Barchart.com U.S. Morning Call for Friday, January 8, 2010

Overnight Developments

Global stocks are higher with the European DJ Stoxx 50 Index up +0.60% and March S&Ps up +0.50 of a point on speculation that US job losses may have stopped with the release later today of the Dec US nonfarm payrolls. The dollar is higher and commodities are lower for a second day on concern Chinese plans to slow lending will curb demand for raw materials. Financial stocks are higher in Europe after UBS AG raised its recommendation on European investment banks to "overweight," while Nov German exports rose +1.6% m/m, double the +0.8% m/m increase the market was expecting, as Europe's largest economy benefited from the recovery in global trade. Limiting gains in European bourses was the +0.1 increase in the Nov Euro-Zone unemployment rate to 10.0%, its highest level in more than 11 years, while Nov German industrial production came in weaker-than-expected at +0.7% m/m and -8.0% y/y, its fifteenth straight year-over-year decline.

The Asian markets today closed mostly higher with Japan up +1.09%, Hong Kong +0.12%, China +0.25%, Taiwan +0.53%, Australia +0.26%, Singapore +0.33%, South Korea +0.61%, India -0.43%. Japan's Nikkei stock index closed at a 15-month high as exporters rallied sharply after the yen fell to a 4-1/4 month low against the dollar when Japanese Prime Minister Hatoyama said rapid moves in the currency market were "not good." Stock prices in South Korea were boosted after its central bank kept interest rates at a record low, while China's Shanghai stock index eked out a slight gain after earlier falling to a 1-1/2 week low on concern the Chinese government will tighten monetary policy. Stock prices in Taiwan gained after Dec Taiwan exports surged +46.9% y/y, the fastest pace in nearly 15 years, as the global recovery fueled demand for its computers, mobile phones and television screens.

Barchart.com U.S. Morning Call for Thursday, January 7, 2010

Overnight Developments

Global stocks are weaker with the European DJ Stoxx 50 Index down -0.48% and March S&Ps down -3.80 points. The dollar strengthened and Treasury and commodity prices moved lower after China moved to curb lending. The PBOC sold 3-month bills at a higher interest rate for the first time in 19 weeks in a signal that it is tightening liquidity. Global stock markets fell on concern that growth will slow in China, the engine of the global economic recovery. European mining companies moved lower on weaker metals prices and retailers fell after Nov Euro-Zone retail sales unexpectedly declined. Nov Euro-Zone retail sales fell -1.2% m/m, the biggest monthly decline in over a year, and also dropped -4.0% y/y, the 18th straight year-over year decline. Helping to limit losses in European markets was the larger-than-expected increase in Dec Euro-Zone economic confidence which increased for the ninth straight month. The Dec Euro-Zone economic confidence rose +2.5 to a 1-1/2 year high of 91.3 and adds to signs that the European economy may gather pace this year.

The Asian markets today closed lower with Japan down -0.46%, Hong Kong -0.66%, China -1.98%, Taiwan -1.08%, Australia -0.45%, Singapore -0.59%, South Korea -1.50%, India -0.48%. Stock prices fell around the world after China's central bank offered 60 billion yuan ($8.8 billion) of bills at a yield of 1.3684%, 4 bp higher than at last week's sale after saying earlier this week that its focus in 2010 is controlling the record expansion in lending and curbing price increases. Chinese bank stocks slid following the bill auction results and SAIC Motor, China's biggest carmaker, plunged 4.4% on prospects that higher interest rates will slow auto sales this year. The yen weakened after Japan's newly appointed Finance Minister Naoto Kan said he would like the currency to weaken "a bit more," and he pledged to monitor its level.

Barchart.com U.S. Morning Call for Wednesday, January 6, 2010

Overnight Developments

Global stocks are mixed with the European DJ Stoxx 50 Index down -0.04% and March S&Ps down -3.60 points. The dollar is firmer while Treasuries are weaker and copper rose to a 16-month high on speculation that demand for industrial metals will improve as the global economy strengthens. Oct Euro-Zone industrial new orders declined more than expected at -2.2% m/m and -14.5% y/y, which suggests the Euro-Zone economy may struggle to gather steam, while producer prices continue to remain contained after the Nov Euro-Zone PPI rose +0.1% m/m and fell -4.4% y/y, its eleventh straight year-over-year decline. Greek Finance Minister Papaconstantinou said today there are "absolutely" no discussions under way with other European governments about crafting a rescue package for Greece as European Union officials fly in from Brussels to scrutinize the country's tax and spending plans. Comments from ECB Executive Board member Juergen Stark weakened the euro and raised concerns about Greece's vulnerability to default when Italy's Il Sole newspaper quoted him as saying the rest of the EU won't rescue the country if its fiscal position worsens.

The Asian markets today closed mixed with Japan up +0.46%, Hong Kong +0.62%, China -0.63%, Taiwan +1.42%, Australia -0.06%, Singapore +0.35%, South Korea +0.82%, India +0.08%. Japanese stocks gained after Toyota, which gets 32% of its sales from North America, rose 2.5% after the company's US sales surged +32% in Dec from a year earlier, while Nintendo jumped 7.3% after the company said US consumers probably bought more than 3 million Wii game consoles last month. Japanese markets had little reaction to the resignation of Hirohisa Fujii as Finance Minister who stepped down because of health concerns and was replaced by Naoto Kan, the deputy premier. The PBOC said on its Web site today that it will curb volatility in lending, manage inflation expectations and monitor the property market on 2010 as a credit boom poses risks to the Chinese economy and it will also "stabilize the stock market's operations." The PBOC didn't state a target for growth in M2, the broadest measure of money supply, after it missed its 17% target last year. The actual rate was more than 25% for most of 2009, with a record 29.7% gain in Nov alone.

Barchart.com U.S. Morning Call for Tuesday, January 5, 2010

Overnight Developments

Global stocks are mixed this morning with the European DJ Stoxx 50 Index down -0.12% and March S&Ps up +0.20 of a point. European stock prices are holding near a 15-month high with gains in financial stocks offset by losses among health-care companies. Allied Irish Banks Plc surged 11% and Bank of Ireland Plc jumped nearly 7% after Irish Finance Minister Lenihan said the capitalization of his country's banking system would be resolved by the end of Q1. Sanofi-Aventis SA and GlaxoSmithKline Plc slid nearly 2% after France cut back orders for swine flu vaccine. German unemployment unexpectedly fell in Dec as the number of people out of work fell -3,000 to 3.42 million, its sixth straight monthly drop, as market expectations had been for an increase of +5,000. IMF Deputy Managing Director Lipsky said that his agency would boost its forecast for global growth this month partly because state efforts to prevent a wider financial crisis were successful. The Dec Euro-Zone CPI estimate rose +0.9% y/y, its biggest increase in 10 months, as energy costs spiked higher, while the Dec French consumer confidence indicator unexpectedly fell -1 to -31, its first decrease in four months.

The Asian markets today closed mostly higher with Japan up +0.25%, Hong Kong +2.09%, China +0.81%, Taiwan +0.04%, Australia +0.98%, Singapore +0.89%, South Korea -0.29%, India +0.73%. China's deputy head of the National Development and Reform Commission said that China may report 8.5% GDP growth for 2009, beating the government's 8% target when the government releases Q4 growth figures later this month, while Chinese central bank Governor Xiaochuan reiterated government warnings that investment in industries with excess capacity and in redundant infrastructure projects could threaten banks' loan quality. Japanese Prime Minister Hatoyama said no decision has been made on whether finance chief Fujii will remain after he was admitted to the hospital for high blood pressure and exhaustion on Dec 28. The loss of Fujii as finance minister would complicate government spending plans to battle deflation and efforts to curb the recent strength in the yen. Sony Vice Chairman Chubachi said today that Japan might face a second economic contraction as falling prices squeeze earnings at the nation's manufacturers and that exporters should also see earnings eroded by a stronger yen.

Barchart.com U.S. Morning Call for Monday, January 4, 2010

Overnight Developments

Global stocks are generally higher this morning with the European DJ Stoxx 50 index up 1.09% and March S&Ps up +7.00 points (+0.63%). Japan's Nikkei index today closed +1.03% while the rest of the Asian stock markets were narrowly mixed: Hong Kong -0.23%, Taiwan +0.24%, Australia +0.12%, Singapore -0.11%, South Korea +0.73%, and Bombay +0.54%. The main bullish factor this morning is the news that China's December manufacturing purchasing managers index rose to 56.1, the highest level in 5 years. U.S. and global bond prices are seeing some weakness today on the rally in stocks and on the comment by Pacific Investment Management (Pimco) investment management committee member Paul McCulley that Pimco is paring its holding's of US and UK government debt due to high debt issuance and is "more cautious" on corporate debt. Fed Chairman Ben Bernanke, in comments Sunday, said that low Fed interest rates did not cause the housing bubble and that the best response to the ho using bubble would have been better regulatory efforts. He said that monetary policy after the 2001 recession "appears to have been reasonably appropriate, at least in relation to" the Taylor Rule. Mr. Bernanke's comments could be taken to suggest that he is not overly worried that today's low interest rates may be inappropriate and may create another bubble. Fed Vice Chairman Donald Kohn said on Sunday that "Lingering credit constraints are a key reason why I expect the strengthening in economic activity to be gradual and the drop in unemployment to be slow." Mr. Kohn also said the Fed has "no shortage of tools for firming the stance of policy, and we will be able to unwind out actions when and as appropriate."

Barchart.com U.S. Morning Call for Thursday, December 31, 2009

Overnight Developments

The UK FTSE is up +0.15% this morning and the French CAC40 is up +0.24%. Mar S&Ps are up +2.50 points. The German stock market was closed today along with most of the Asian stock markets for the New Year's holiday. The main supportive factor for global stocks this morning is the comment by China's central bank governor Zhou Ziaochuan that he will maintain a "moderately loose" monetary policy because 2010 will be "a crucial year in strengthening the stabilization and recovery of the economy and defeating the international financial crisis." Mining companies are being supported today by higher copper and gold prices. Ford Motor is up 3% in European trading this morning on indications that US auto sales improved in December.

Overnight U.S. Stock News

March S&Ps this morning are trading . The US stock market yesterday erased an early sell-off and finished on their highs with slight gains (Dow Jones +0.03%, S&P 500 +0.02%, Nasdaq Composite +0.13%). Bullish factors included (1) the unexpected increase in the Dec Chicago purchasing managers index which rose to its best level in nearly 4 years (+3.9 to 60.0 versus expectations of -1.0 to 55.1), (2) gains in energy producers after crude oil prices surged to a 1-month high, and (3) strength in the makers of security devices and biometric technologies after the Netherlands said it will start using full-body scanners for all US-bound flights following the Detroit-bound bombing attempt last week.
Bearish factors included (1) speculation that the recent strong economic data will prompt the Fed to reduce its stimulus measures which may curtail economic growth, (2) overall year-end profit-taking in stocks after they rallied smartly for the last nine months and stretched stock valuations to almost 25 times companies reported earnings, the most expensive level since 2002, and (3) the fall in stock market pessimism among newsletter writers to a 22-1/2 year low which is often seen as a contrarian indicator for the future direction of stock prices.

Today's U.S. Market Focus

March 10-year T-notes this morning are trading -8.5 points on higher global stocks this morning. Mar T-note prices yesterday closed an uneventful session higher by +6 ticks. Bullish factors included (1) the early sell-off in the equity market which increased the safe-haven demand for Treasuries, and (2) decent overall demand for the Treasury's $32 billion 7-year T-note auction that had a bid-to-cover ratio of 2.72, higher than the 2.56 average of the last 10 auctions. Bearish factors included (1) the unexpected increase in the Dec Chicago purchasing managers index which rose to its best level in nearly 4 years (+3.9 to 60.0 versus expectations of -1.0 to 55.1), and (2) the prediction from Pacific Investment Management that investment grade corporate bonds will outperform Treasuries next year as most companies managed their cash needs well during the recession which signals "less need for corporate issuance" in 2010 while "$1.4 trillion in long-dated Treasuries will b e hitting the market next year."
The dollar index this morning is down -0.38 points with the dollar/yen down -0.07 yen and the euro/dollar up +0.74 cents. The dollar index yesterday erased nearly all of an early rally and settled just slightly higher. Bearish factors yesterday included (1) strength in the British pound which rallied to a 1-week high and recovered from an 11-week low on speculation that it is undervalued, and (2) reduced safe-haven demand for dollars after the stock market rebounded from sharp losses to settle slightly higher. Bullish factors for the dollar included (1) the slump in the yen to a 3-1/2 month low against the dollar after Standard & Poor’s warned that Japan’s AA credit rating could be threatened if policies fail to stabilize and gradually reduce its huge debt burden, and (2) the unexpected increase in the Dec Chicago purchasing mangers index to its highest level in nearly 4 years which boosts speculation that the Fed will withdraw its stimulus measures as the economy re covers and push long-term Treasury yields higher which will benefit the dollar's interest rate differentials.
February crude oil prices this morning are trading +6 cents a barrel but Feb gasoline is down -0.25 cents a gallon. Crude oil is seeing support from this morning's lower dollar and from forecasts for colder weather over the next two weeks. Feb crude oil yesterday shook off early weakness and rallied the remainder of the day to close up +$0.41 a barrel. Feb gasoline prices closed +2.76 cents. Feb crude and Feb gasoline rose to 1-month nearest-futures highs. Bullish factors yesterday included (1) the unexpected decline in weekly gasoline inventories (-366,000 bbl versus the expectations for a +1.0 million bbl climb), (2) the unexpected increase in the Dec Chicago purchasing managers index which rose to its highest level in nearly 4 years and points to an increase in fuel consumption, and (3) the prediction from EarthSat Energy Weather for a "predominantly cold" outlook for the South and East US for the next two weeks which may boost demand for heating fuels. Bearis h factors yesterday included (1) the stronger dollar, and (2) the prediction from the chief energy economist at Deutsche Bank AG that he sees a possible "low oil demand" economic recovery and expects little gain in oil and gasoline prices next year.

Barchart.com U.S. Morning Call for Wednesday, December 30, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is down -0.90% and Mar S&Ps are down -6.20 points. Year-end profit-taking in US and European equity markets is the main bearish factor today as stock valuations become stretched from a 9-1/2 month long rally and as most of Europe will be closed tomorrow for the New Year holiday. Basis-resource companies are leading European stocks lower despite the rise in copper prices to a 15-3/4 month high due to labor unrest in Chile. Also undercutting European stock prices was the weaker-than-expected Nov Euro-Zone M3 money supply, which gained +0.6% on a 3-month average but declined -0.2% y/y, the first annual decline since records began in Jan 1981. Loans to households and businesses in Europe posted their third straight decline in Nov as the economic slump curbed credit demand and banks continue to be reluctant to lend.

The Asian markets today closed mixed with Japan down -0.86%, Hong Kong -0.01%, China +1.66%, Taiwan +0.73%, Australia -0.24%, Singapore +0.35%, South Korea +0.69%, India -0.33%. The -24% plunge in Japan Airlines to a record low on speculation that the carrier will file for bankruptcy helped Japanese stocks close lower today. Japanese Transport Minister Maehara said members of Japan's Cabinet would meet today to discuss the airline's future. Japan's government has pledged to keep Japan Air operating as it bails out the carrier for the fourth time since 2001. Japan Air owed its biggest lenders at least 529 billion yen ($5.8 billion) as of July. Chinese stocks closed at a 2-week high, led by gains in big-cap stocks such as banks and energy producers, on speculation that they will benefit the most from the country's economic growth next year. UBS AG predicts that emerging-market companies are the best stock investments for next year because earnings growth may exceed the expansion in developed nations by 10%.

Overnight U.S. Stock News

March S&Ps this morning are trading down -6.20 points as year-end profit taking sets in. The US stock market yesterday closed slightly lower, breaking the string of six consecutive higher closes in the S&P 500 index (Dow Jones -0.02%, S&P 500 -0.14%, Nasdaq Composite -0.12%). The S&P 500 Index index yesterday matched Monday's 14-3/4 month high. Bearish factors included (1) some long liquidation pressure after the 6-session rally, (2) underlying concern about the recent rise in the 10-year T-note yield to a 4-1/2 month high of 3.85%, (3) some long liquidation pressure in oil stocks after a slightly stronger dollar caused the oil rally to stall, and (4) weakness in some financial stocks such as Bank of America (-1.1%) and American Express (-0.4%) after Moody's said November credit card charge-offs rose about one-half percentage point to 10.56%.
Bullish factors included (1) Tuesday's 2.3 point increase in the US consumer confidence index to a 3-month high of 52.9 from the revised level of 50.6 in November, (2) hopes that institutional and individual investors that are on the sidelines with large amounts of cash will be buyers when the new year begins, (3) general optimism about consumer spending after the stronger-than-expected holiday shopping season, and (4) the report that the S&P/Case-Shiller 20-city home-price index rose +0.4% m/m, which kept the US housing sector is a more positive light.
Broadcom (BRCM) fell 1.5% in pre-market trading after the maker of chips for wireless headsets and television set-top boxes agreed to pay $160.5 million in cash to settle shareholder lawsuits over its stock-option accounting practices.
Barrick Gold (ABX) slipped 1.4% in European trading as a stronger dollar weighed on gold prices

Today's U.S. Market Focus

March 10-year T-notes this morning are trading up +1.5 ticks. Mar T-note prices yesterday edged to a new 4-month low but then recovered modestly to close 4.5 ticks higher. Bullish factors included (1) the slightly lower close in the US stock market, and (2) the improved results for Tuesday's 5-year auction compared with Monday's 2-year auction as indirect bidder demand improved to 44.0% for the 5-year auction versus 34.8% for the 2-year auction. Bearish factors included (1) the rise in consumer confidence and US home prices, which added to the recent spate of strong economic data, and (2) supply overhang ahead of Wednesday's sale of $32 billion in 7-year T-notes.
The dollar index this morning is stronger with the dollar/yen +0.25 yen and the euro/dollar -0.15 cents. The dollar index yesterday closed mildy higher by +0.198 at 77.831. Bullish factors included (1) the increases in US consumer confidence and home prices, which added to the recent firmer US economic data, and (2) underlying support from the recent sharp increase in longer-term US interest rates, which bodes well for US interest rate differentials. Bearish factors for the dollar centered on the euro-positive news that the German December CPI (EU harmonized) rose by +0.9% m/m and +0.7% y/y, which was stronger than the consensus of +0.7% m/m and +0.7% y/y.
February crude oil prices this morning are trading down -24 cents a barrel and Feb gasoline is up +0.60 cent a gallon. Feb crude oil yesterday edged to a new 3-week high but settled back and closed just 10 cents higher. Feb gasoline prices closed -0.81 cents. The main bearish factor yesterday was the slightly stronger dollar, which sparked some long liquidation pressure in the crude oil market. Bullish factors yesterday included (1) the firm US economic data seen in the US consumer confidence and home price reports, and (2) the forecast from AccuWeather that a "major Artic wave" heading for the US will keep the US cold through January and boost heating oil demand. Expectations for Wednesday's weekly DOE inventory report are for crude oil stockpiles to fall -2.2 million bbl, gasoline inventories to rise +1.0 million bbl, distillate supplies to fall -2.25 million bbl, and the refinery capacity rate to rise +0.2 to 80.2%.

Barchart.com U.S. Morning Call for Tuesday, December 29, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +0.28% and Mar S&Ps are up +4.20 points, both rising to 14-3/4 month highs. Most global stock markets are higher today and are being led by gains in basic-resource companies and energy producers. Treasuries are weaker ahead of today's $42 billion 5-year T-note auction and the dollar index slid to a 1-week low, although profit-taking in most commodities from their recent rallies has them trading lower today. ECB Council member Marko Kranjec said in an interview on TV Slovenija that "the year 2010 will be a difficult year, though the economy will be growing."

The Asian markets today closed mostly higher with Japan up +0.04%, Hong Kong +0.09%, China +0.64%, Taiwan -0.05%, Australia +1.13%, Singapore +0.49%, South Korea -0.76%, India +0.24%. Asian mining companies led a rally today on speculation of increased metals demand from China and on labor strife in Chile's copper industry. Limiting gains in the Asian markets was weakness in Japanese bank stocks that closed lower on concerns they may have to raise more capital after Sumitomo Mitsui Financial Group fell 2.8% when it said it was considering a stock sale to raise more funds.

Overnight U.S. Stock News

March S&Ps this morning are trading up +4.20 points and posted a fresh 14-3/4 month high. The US stock market yesterday rallied early but shed most of its gains and closed the day slightly higher (Dow Jones +0.26%, S&P 500 +0.12%, Nasdaq Composite +0.24%). The S&P 500 Index posted a 14-3/4 month high, the Dow Jones posted a 15-month high, and the Nasdaq Composite posted a 15-3/4 month high. Bullish factors included (1) carry-over support from a rally in European and Asian stock markets after China on Dec 25 raised its 2008 GDP estimate to 9.6% from 9.0% and said this year's quarterly figures will improve, while Japan's Cabinet Office said its economy will expand for the first time in three years in the fiscal year starting April, (2) strength in retailers after the report from MasterCard Advisors' SpendingPulse said US retail sales rose an estimated +3.6% this holiday season from last year due to stability in consumer spending and as retailers held less inventory whi ch led to fewer unexpected markdowns, (3) a rally in energy producers after crude oil climbed to a 5-week high, and (4) the prediction from the chief economist at Barclays Capital that the US economy will expand by 3.5% in 2010 and turn in its best performance since 2004 as consumer spending picks up and companies increase investment.
Bearish factors included (1) interest rate concerns which weakened banking and financial stocks after the yield on the 10-year T-note rose to a 4-1/2 month high of 3.85% and fueled speculation that higher borrowing costs will stifle the economic recovery, (2) weakness in airline stocks after President Obama asked the Homeland Security Department to review airport screening capabilities, which may lead to changes in procedures that increase security costs for the airlines, and (3) a pessimistic business forecast from Burlington Northern Santa Fe, which according to Barron's, may mean US industrial activity will be less robust in 2010 than many on Wall Street anticipate.

Today's U.S. Market Focus

March 10-year T-notes this morning are trading down -5 ticks ahead of today's $42 billion 5-year T-note auction. Mar T-note prices yesterday slumped for the sixth consecutive session and settled down 6.5 ticks at 115-165. TYH posted a 4-1/2 month nearest-futures low and the 10-year T-note yield rose to a 4-1/2 month high of 3.85%. Bearish factors yesterday included (1) reduced safe-haven demand for Treasuries after the S&P 500 Index climbed to a 14-3/4 month high, (2) the prediction from Morgan Stanley that the yield on the 10-year T-note will rise to 5.5% next year as the US faces increased competition from other debt issuers which will spur investors to demand higher yields as the Fed ends its $1.6 trillion asset-purchase program, (3) weak demand for the Treasury's $44 billion 2-year auction, which had a bid-to-cover ratio of 2.91 compared with the 2.96 average at the last 10 auctions and weak foreign demand after indirect bidders purchased only 34.8% of the auctio n compared with the 45% average of the last 10 auctions, and (4) supply pressures ahead of Tuesday's $42 billion 5-year T-note auction. A bullish factor yesterday was the prediction from Goldman Sachs that the yield on the 10-year T-note will drop to 3.25% next year as unemployment in the US averages 10.3% and hinders the economic recovery.
The dollar index this morning is weaker and trading at a 1-week low with the dollar/yen +0.06 yen and the euro/dollar +0.68 cents. The dollar index yesterday ended a lackluster session by closing -0.101 points at 77.633. Bearish factors yesterday included (1) the larger-than-expected increase in Nov Japan industrial production, which was positive for the yen, and (2) the prediction from Brown Brothers Harriman & Co. that the recent strength in the dollar is a "head fake" and is due to short-covering and is not the start of a bullish trend. Bullish factors included (1) a possible increase in demand for US assets after the chief economist at Barclays Capital predicted that the US economy will expand by 3.5% in 2010 and turn in its best performance since 2004, and (2) an improvement in the dollar's interest rate differentials after the yield on the 10-year T-note rose to a 4-1/2 month high of 3.85%.
February crude oil prices this morning are trading down -39 cents a barrel and Feb gasoline is -0.37 cent a gallon. Feb crude oil yesterday rallied and closed 72 cents higher. Feb gasoline closed up 0.21 cents a gallon. Feb crude posted a 5-week nearest-futures high and Feb gasoline posted a 3-week high. Bullish factors included (1) the weaker dollar, (2) the prediction from Shanghai Securities that China's 2010 energy demand may rise by 3.6% y/y, (3) the jump in the S&P 500 Index to a 14-3/4 month high which signals increased confidence in the US economy that may lead to an improvement in energy demand, and (4) the prediction from Weather Derivatives that the current cold weather will raise US consumption of heating fuels by 6.7% in the next seven days. A bearish factor was the -4.5% y/y drop in Nov Japan crude oil imports, which signals weakened energy demand in the world's second-largest economy. Expectations for Wednesday's weekly DOE inventory report are for crude oil stockpiles to fall -2.2 million bbl, gasoline inventories to rise +1.0 million bbl, distillate supplies to fall -2.25 million bbl, and the refinery capacity rate to rise +0.2 to 80.2%.

Barchart.com U.S. Morning Call for Monday, December 28, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +0.55% and Mar S&Ps are up +1.40 points, both at 14-3/4 month highs. Global stock markets received a boost when China on Dec 25 raised its 2008 GDP estimate to 9.6% from 9% and said this year's quarterly figures will increase, while Japan's Cabinet Office said the economy will expand for the first time in three years and that industrial production gained for a ninth month in Nov. Treasuries and the dollar are weaker while most commodities are higher, with copper surging to a 15-month high and crude climbing to a 3-week high, which has prompted a rally in European basic-resource companies and energy producers. The chief economist at Barclays Capital predicts that the US economy will expand by 3.5% in 2010 and turn in its best performance since 2004 as consumer spending picks up and companies increase investment.

The Asian markets today closed mostly higher with Japan up +1.33%, Hong Kong -0.17%, China +1.57%, Taiwan +1.06%, Singapore +0.63%, South Korea +0.16%. Japan's Nov industrial production rose a larger-than-expected +2.6% m/m for its biggest gain in six months and helped Japanese stocks to gain on signs that Japan's exporters are coping with the impact of a stronger yen. Japan's Cabinet Office on Dec 25 predicted that the Japanese economy "will probably recover gradually" next year with a 1.4% expansion in the year starting in April. Consumer spending in Japan may be limited after Nov Japan monthly wages fell -2.8% y/y, their biggest decrease in the last four months and the 18th consecutive monthly year-over-year decline. Chinese stocks closed higher after Chinese Premier Wen Jiabao said the government will cool property prices, resist pressure for the yuan to appreciate and keep inflation at "reasonable" levels.

Overnight U.S. Stock News

March S&Ps this morning are trading up +1.40 points and posted a fresh 14-3/4 month high. The US stock market last Thursday settled with moderate gains and closed higher for the fifth consecutive session (Dow Jones +0.51%, S&P 500 +0.53%, Nasdaq Composite +0.71%). The S&P 500 Index and the Dow Jones posted 14-3/4 month highs while the Nasdaq Composite climbed to a 15-1/2 month high. Bullish factors included (1) an improvement in the labor market after weekly initial unemployment claims fell to their lowest level in 15 months (-28,000 to 452,000 versus expectations of -10,000 to 470,000), (2) an increase in economic optimism after the less volatile ex-transportation component of the Nov durable goods orders rose more than expected (+2.0% ex-transportation versus market expectations of +1.0%), (3) Morgan Stanley's hike in its US Q4 GDP estimate to a 5.1% annual rate from an earlier prediction of a 4.1% annual rate, and (4) the prediction from Fortis Global Markets that "growth in Q4 of this year and Q1 of 2010 will be particularly strong because inventories will correct to the upside," and government stimulus measures will still support the economy in that period.
Bearish factors included (1) weakness in health-care stocks after the US Senate approved legislation that would make the broadest changes to the US health-care system in decades, and (2) a continued rise in interest rates that may dampen consumer and business spending after the 10-year T-note yield climbed to a 4-1/2 month high of 3.80% and has now risen sharply by 34 bp in the past week.
Exxon-Mobile (XOM) rose 1% in pre-market trading after crude oil prices jumped to a 3-week high

Today's U.S. Market Focus

March 10-year T-notes this morning are trading down -9.5 ticks. Mar T-note prices last Thursday closed lower for the fifth consecutive session and settled down -13 ticks at 115-230. TYH posted a 4-1/2 month nearest-futures low and the 10-year T-note yield rose to a 4-1/2 month high of 3.80%. Bearish factors included (1) the larger-than-expected decline in weekly initial unemployment claims which fell to their lowest level in 15 months (-28,000 to 452,000 versus expectations of -10,000 to 470,000), (2) the larger-than-expected increase in the less volatile ex-transportation component of the Nov durable goods orders report (+2.0% ex transportation versus market expectations of +1.0%), (3) reduced safe-haven demand for Treasuries after the S&P 500 Index rose to a 14-3/4 month high, (4) supply pressures ahead of this week's $118 billion in Treasury auctions that begin with Monday's $44 billion 2-year T-note auction, and (5) the prediction from Barclays Plc that the 10-year T-note yield will climb to 4.50% in 2010 as a strengthening economy prompts the Fed to unwind programs put in place to revive growth. A bullish factor last Thursday was the prediction from RBS that 10-year T-notes will see an influx of demand from mutual funds, pension finds and individuals when the yield on the 10-year T-note nears 3.90%.
The dollar index this morning is weaker with the dollar/yen +0.23 yen and the euro/dollar -0.08 cents. The dollar index last Thursday finished slightly lower. Bearish factors included (1) the report from Barclays that said global central banks in Q3 cut their purchases of dollars to a record low of less than 30% of new foreign-exchange reserves, and (2) reduced safe-haven demand for the dollar after the S&P 500 Index rose to a 14-3/4 month high. Bullish factors for the dollar last Thursday included (1) better-than-expected US economic data that may prompt the Fed to increase interest rates sooner-than-expected after US weekly initial unemployment claims fell to a 15-month low and Nov durable goods orders ex-transportation rose more than expected, and (2) the prediction from the Diawa Institute of Research that the yen may fall to 100 yen per dollar by Q3 of next year as deflation keeps the BOJ from following interest rate increases by the Fed.
February crude oil prices this morning are trading up +68 cents a barrel and Feb gasoline is +2.21 cents a gallon. Feb crude oil last Thursday rallied for a third day and closed up +$1.38 a barrel. Feb gasoline closed up +2.38 cents a gallon. Both Feb crude and Feb gasoline posted 2-week highs. Bullish factors included (1) dollar weakness, (2) better-than-expected US economic data that may portend an increase in fuel demand after US weekly initial unemployment claims fell to a 15-month low and Nov durable goods orders ex-transportation rose more than expected, and (3) carry-over strength from a rally in gasoline after a refinery fire in Texas City, Texas closed a Valero Energy refinery with a capacity of 230,000 bbl a day. A bearish factor was the resumption of crude exports through Iraq's 450,000 bbl a day oil export pipeline to Turkey after an explosion had forced its closure on Dec 20.

Barchart.com U.S. Morning Call for Wednesday, December 23, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +0.76% and Mar S&Ps are up +3.80 points, both at 14-1/2 month highs. Global stock markets are all higher on the last full day of trading in Europe and the US before the Christmas holiday. The dollar and Treasuries are little changed ahead of the Treasury's announcement later today on the size of next week's auctions of 2-year, 5-year and 7-year T-notes. Technology stocks in Europe are higher led by a 1.7% jump in Infineon Technologies after UniCredit Markets & Investment Banking reiterated its "buy" recommendation on Europe's second-largest chipmaker after Infineon raised its sales forecast yesterday. Mining stocks were higher as the price of copper climbed and Maurel & Prom jumped 4.2% after the French company whose units explore for oil and operate cable-laying ships said its exploration well in Gabon was successful. Undercutting the bullish euphoria was the unexpected decline in Nov French consumer spending (-0.1% m/m and +3.2% y/y), as consumers still remain hesitant to spend due to fears of rising unemployment.

The Asian markets today closed higher with Hong Kong up +1.12%, China +0.94%, Taiwan +0.58%, Australia +0.75%, Singapore +0.63%, South Korea +0.50%, India +3.23%. Japanese markets were closed for the Emperor's Birthday. India's exporters surged and led India's stock market to a 3% gain after India's Finance Minister said the economy may accelerate at a faster pacec. China's Shanghai Composite Index closed higher and rebounded from yesterday's 1-3/4 month low after the PBOC reaffirmed plans to keep a "moderately loose" stance for 2010 and to restrict credit for industries with excess capacity, as it released its final policy statement for the year. Citic Securities, China's biggest listed brokerage, predicts that that China's growth may surge to as much as 12% next year led by a rebound in exports and domestic spending.

Overnight U.S. Stock News

March S&Ps this morning are trading up +3.80 points and posted a new 14-1/2 month high. The US stock market yesterday rose for a third day as it finished moderately higher (Dow Jones +0.49%, S&P 500 +0.36%, Nasdaq Composite +0.67%). The S&P 500 Index posted a 14-1/2 month high while the Nasdaq Composite climbed to a 15-1/2 month high. Bullish factors included (1) carry-over strength from a rally in European stocks after Moody's Investors Service cut Greece's credit rating one level to A2 from A1, which eased concerns that a steeper downgrade was looming that would have made Greek debt ineligible as collateral at the ECB, (2) a rally in homebuilders after Nov existing home sales rose by 7.4% to their highest level in 2-3/4 years of 6.54 million units (versus expectations of +2.5% to 6.25 million), (3) indications that the health of the US economy is improving after the cost to protect US corporate bonds from default fell to its lowest level in almost 2 years, and (4) strength in technology stocks after Jabil Circuit surged 14% when it raised its profit projections.
Bearish factors included (1) the unexpected downward revision to Q3 US GDP to 2.2% from +2.8%, (2) the unexpected 5 point decline in the Dec Richmond Fed manufacturing index to an 8-month low of -4, (3) a drop in insurance stocks after a report from Verisk Analytics said that US property and casualty insurance sales fell -5% y/y in Q3, the tenth consecutive quarter of year-over-year declines, as the recession weakened demand for home and auto insurance, and (4) the jump in the 10-year T-note yield to a 4-1/4 month high of 3.760% as increased evidence the economy is improving indicates that the Fed may be closer to ending its extraordinarily accommodative policy stance.
Schlumberger (SLB) gained 1.3% in pre-market trading after the world's largest oilfied-services provider was upgraded to "overweight" from "equal weight" at Barclays, which cited the company's "financial strength, deep management and a product line that benefits more than most from increased exploration activity."
Red Hat (RHT) jumped 5.7% in European trading after the company reported Q3 adjusted EPS of 17 cents a share, beating analysts' estimates of 16 cents, and its CEO said demand for its products is reviving, especially in North America

Today's U.S. Market Focus

March 10-year T-notes this morning are trading down -2 ticks . Mar T-note prices yesterday moved lower for the third straight session as they closed down -13 ticks at a 1-3/4 month low of 116-075. The 10-year T-note yield rose to a 4-1/4 month high of 3.760%. Bearish factors yesterday included (1) reduced safe-haven demand for Treasuries after the S&P 500 Index surged to a 14-1/2 month high, (2) a continued steepening of the yield curve after the difference between the yield on the 2-year and 10-year Treasury notes widened to a record 286 bp as investors seek a higher yield on longer-term Treasuries on speculation an accelerating economic recovery will fuel inflation and dampen demand for huge Treasury issuance, and (3) the larger-than-expected increase in Nov existing home sales which rose to their highest level in 2-3/4 years (+7.4% to 6.54 million versus expectations of +2.5% to 6.25 million). Bullish factors yesterday included (1) the unexpected downward revision in US Q3 GDP to 2.2% q/q annualized from 2.8%, and (2) the unexpected 5-point decline in the Dec Richmond Fed manufacturing index to an 8-month low of -4 (versus expectations of +3 to 4).
The dollar index this morning is slightly weaker with the dollar/yen -0.04 yen and the euro/dollar +0.10 cents. The dollar index yesterday surged to a 3-1/2 month high and closed higher for the sixth consecutive session. Bullish factors included (1) the fall in the euro to a 3-1/2 month low against the dollar on concerns that the euro's stability could be jeopardized if budget concerns that decimated Greek bonds spread to larger European economies such as Spain, (2) the drop in the yen to a 1-3/4 month low against the dollar on speculation that the BOJ will increase its quantitative easing efforts in order to combat deflation, which would weaken the yen, and (3) the prediction from Nordea Markets that the dollar may gain as much as 6% to 1.35 per euro "over the next few weeks" as signs the US economy is recovering prompts investors to "unwind" short positions in the dollar. Bearish factors for the dollar yesterday included (1) the unexpected downward revision to US Q3 GDP, and (2) the rally in the S&P 500 Index to a 14-1/2 month high, which reduces the safe-haven demand for the dollar.
February crude oil prices this morning are trading up +26 cents a barrel and Feb gasoline is +0.85 cent a gallon. Feb crude oil yesterday traded weaker into late morning when it reversed direction and rallied into the close to settle up +$0.68 a barrel. Feb gasoline closed up +1.90 cents a gallon. Bullish factors included (1) the rally in the S&P 500 Index to a 14-1/2 month high, which indicates economic optimism that may lead to an increase in energy demand, (2) the forecast by WSI for colder-than-average weather in northwest Europe in the three months through March, which may lead to increased demand for heating fuels in Europe, and (3) the statement from China's commerce ministry that China should increase imports and reserves of strategic resources in 2010, which may signal stronger Chinese demand for crude oil in the coming year. Bearish factors included (1) the surge in the dollar index to a 3-1/2 month high, (2) the unexpected sharp downward revision in Q3 US GDP, which raises concern about the health of the economy and energy demand, and (3) comments from OPEC Secretary General Abdalla el-Badri that oil projects that were delayed by last year's price slump are coming back "one by one," which may lead to an increase in global crude production. Expectations for Wednesday's weekly DOE inventory report are for crude oil supplies to fall -1.7 million bbl, gasoline inventories to climb +1.0 million bbl, distillate supplies to fall -2.0 million bbl and the refinery capacity rate to rise +0.4 to 80.3%.

Barchart.com U.S. Morning Call for Tuesday, December 22, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +0.83% and Mar S&Ps are higher by +5.10 points. Greek bank stocks are leading a rally among European financial shares today after Moody's Investors Service cut Greece's credit rating one level to A2 from A1, sparking a rally in Greek stocks and bonds as concern eased that a steeper downgrade would make its debt ineligible as collateral at the ECB. The Jan German GfK consumer confidence survey fell for the third straight month, -0.3 to 3.6, as German consumers remain concerned over rising job losses and energy costs. Producer prices in France continue to be tame after Nov French producer prices rose +0.2% m/m and fell -4.5% y/y, the twelfth consecutive month that French producer prices have fallen on a year-over-year basis. US 10-year Treasury yields climbed to a 4-month high of 3.73% overnight on prospects for a sustained US economic recovery and on a decrease in the safe-haven appeal for Treasuries as global stock markets rallied.

The Asian markets today closed mostly higher with Japan up +1.91%, Hong Kong +0.69%, China -2.68%, Taiwan +0.88%, Australia +1.49%, Singapore +!.33%, South Korea +0.77%, India +0.55%. Japanese exporters rallied and closed higher after BOJ Governor Shirakawa said the BOJ will "persistently" keep interest rates close to zero to fight deflation, which weakened the yen to a 1-1/2 month low against the dollar. China's Shanghai Index slumped to a 1-1/2 month low and was led lower by bank stocks after PBOC Governor Xiaochuan said reserve requirements for lenders remain an important policy tool, fueling speculation that requirements may be increased for Chinese lenders to limit the risk of asset bubbles. Currently, the reserve requirement is 15.5% for big banks and the PBOC has left it unchanged since 2008 to counter the effects of the financial crisis. China’s commerce ministry said today that China should increase imports and reserves of strategic resources in 2010, which may fuel a further rally in commodity prices, after Chinese buying of raw materials for stockpiling in the first half of this year doubled the prices of copper and zinc with imports of soybeans and iron ore climbing to records.

Barchart.com U.S. Morning Call for Monday, December 21, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +0.72% and Mar S&Ps are up +5.10 points. The dollar is little changed and Treasuries are lower, while most commodity prices are higher. The European Commission predicts the Euro-Zone economy may expand +0.7% next year and 1.5% in 2011 after global governments provided "massive economic support," according to the commission's quarterly report released today. Safran SA rose nearly 4% after it said it won a $5 billion contract to supply engines for China's first narrow-body aircraft. Safran's CEO said the deal may be worth three times that amount over 30 years including maintenance contracts. Energy producers are higher after crude oil gained to over $73 a barrel while Natixis SA rose nearly 3% after France's second-largest bank by branches said that it would be profitable in Q4. On the bearish side, Nokia Oyj slid 2% after the world's largest mobile-phone maker's long-term default rating and senior unsecured rating was cut to A- from A at Fitch Ratings, which cited increased competition in the smart-phones market, the industry's fastest growing segment.

The Asian markets today closed mixed with Japan up +0.41%, Hong Kong -1.08%, China +0.14%, Taiwan +0.43%, Australia -0.33%, Singapore -0.56%, South Korea -0.22%, India -0.71%. Property developers in China and Hong Kong slid on concerns the Chinese government will do more to curb real-estate speculation. Li Yizhong, China's minister of information and technology, said the government is targeting 8% growth in 2010 amid a "fragile" global recovery and is aiming for 11% growth in industrial output. China has officially aimed for 8% growth in GDP every year since 2005 and has always met its target. Japan's Nov exports slid -6.2% y/y, the slowest pace of decline in 14 months, and a sign that strengthening global demand for Japanese goods is supporting an economic rebound in Japan. Japanese exports are improving even as the strengthening yen erodes the value of profits companies can earn abroad and makes their products less competitive. Exports to China, Japan's biggest customer, climbed +7.8% y/y and exports to Asia rose +4.7% in Nov y/y, their first increases in 14 months, and may offset the negative impact of the stronger yen.

Barchart.com U.S. Morning Call for Friday, December 18, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +0.48% and Mar S&Ps are up +3.50 points. The main bullish factor for European stocks today is the larger-than-expected +0.8 increase in Dec German IFO business sentiment to a 17-month high of 94.7. The current conditions and expectations gauges also increased and the IFO said the outlook for exports improved. Technology shares in Europe advanced as Oracle, the world's second-largest software maker, beat profit estimates and Research in Motion forecast sales and earnings that beat analysts' projections. Infineon Technologies gained nearly 4% after Europe's second-largest maker of semiconductors was raised to "add" from "hold" at Commerzbank, which cited "a better-than-expected development in automotive end-market demand." Gains were limited after the Dec French business confidence indicator unexpectedly declined -1 to 89, its first decline in the last nine months, on concern that fading government stimulus measures may slow the economic recovery. Also undercutting prices was Credit Agricole Sa, France's largest bank by branches, which sank over 5% after Bank of America Merrill Lynch Global Research cut its recommendation on the stock to "neutral."

The Asian markets today closed mostly lower with Japan down -0.21%, Hong Kong -0.80%, China -2.54%, Taiwan +0.15%, Australia -0.42%, Singapore -0.38%, South Korea -0.10%, India -1.03%. The BOJ held interest rates at 0.10% as expected following the policy meeting but said they are intolerant of price declines amid signs deflation might undermine the economic recovery. In its post meeting statement, the BOJ said the policy board "does not tolerate a year-over-year rate of change in the CPI equal to or below 0%." This signals the BOJ may implement further quantitative easing measures to combat any deflationary pressures and are unlikely to raise interest rates until inflation returns to the economy. Chinese bank stocks closed lower after Fitch Ratings said Chinese banks' capital strength is likely to be more "strained" than it appears as lenders increasingly use off-balance sheet transactions to free up room for further loan growth. Property stocks in China tumbled after the Ministry of Finance set the down payment requirement for land purchases to at least 50% of the total price, as the government steps up measures to curb property speculation. Former Morgan Stanley chief Asian economist Andy Xie warned that "China's asset markets are a ponzi scheme" and that "property is heading for one huge bust that will take a year and a half to unfold."

Barchart.com U.S. Morning Call for Thursday, December 17, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is down -0.65% and Mar S&Ps are down -6.10 points. The dollar index surged to a 3-1/4 month high and Treasuries gained while global stocks and commodities fell after Standard & Poor's reduced Greece's credit rating for the second time this year. European banks are leading stock markets lower after Standard & Poor's cut Greece's credit rating by one level to BBB+ from A- and threatened to take further action unless the Greek government tackles the European Union's largest budget deficit. Greek Prime Minister Papandreou vowed "radical" measures this week to fix Greece's finances, and Finance Minister Papaconstantinou increased the 2010 deficit-reduction target to 4% from 3.6%. That would lower the deficit to 8.7% of GDP, still almost three times above the EU limit of 3% of GDP. Nov UK retail sales unexpectedly fell -0.3% m/m, which added to the negative tone of the market, as a weak job market prompts British consumers to limit their spending.

The Asian markets today closed mostly lower with Japan down -0.13%, Hong Kong -1.22%, China -2.26%, Taiwan -0.12%, Australia +0.18%, Singapore -0.02%, South Korea -1.10%, India -0.11%. Hong Kong's central bank warned today of a "sharp correction" in asset prices should fund flows reverse, adding to concerns voiced by Japan, China and South Korea on the dangers of speculative capital. Housing prices in Hong Kong have gained for 10 months while the Hang Seng Stock Index has surged 48% this year. Nomura Holdings warns in its 2010 Global Economic Outlook today that Asia is under threat of asset bubbles next year as China's rebounding economy and low US interest rates drive a "tsunami" of capital into the region. Asia has attracted $241 billion in the six months to Sep of 2009, reversing outflows of $262 billion in the period from Jul 2008 to Mar 2009. Nomura downgraded Asia's developed stock markets outside of Japan to "neutral" from "overweight," saying that the gains this year have boosted valuations.

Barchart.com U.S. Morning Call for Wednesday, December 16, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +0.83% and Mar S&Ps are up +5.30 points. European stocks gained as better-than-expected economic data continues to point to a strengthening economy. Dec Euro-Zone PMI composite rose a more than expected +0.5 to a 2-year high of 54.2, while the Dec German PMI manufacturing index rose a more-than-expected +0.7 to a 19-month high of 53.1. European bank stocks rallied after Reuters reported that global regulators will give banks an unspecified grace period to adopt new capital rules, which eases worries that they would have to raise money hurriedly through share sales. The new rules are being drawn up by the Basel Committee on Banking Supervision, a group of central bankers and regulators from 30 countries, who will implement the new regulations starting 2012. Deutsche Bank AG rose nearly 5% when CA Cheuvreux upgraded Germany's biggest lender to "selected list" from "outperform," while BNP Paribas SA gained 2.4% after WestLB raised its recommendation on France's largest bank to "buy" from "add. Rounding out the bullish factors for today's gains was the smaller-than-expected increase in Nov Euro-Zone CPI which rose +0.1% m/m and +0.5% y/y with the +1.0% y/y gain in the Nov core CPI the smallest increase in nine years. Undercutting some of the bullish enthusiasm was the 4.8% drop in Bank of Ireland Plc after Irish central bank Governor Honohan said it's "quite possible" the government may end up with 50% of one or both of the country's biggest banks and that the lenders may need significant new capital after the country's so-called bad bank buys loans from them at a discount.

The Asian markets today closed mostly lower with Japan up +0.93%, Hong Kong -0.93%, China -0.63%, Taiwan -0.72%, Australia -0.25%, Singapore +0.54%, South Korea -0.13%, India +0.21%. Japanese banks surged and led Japan's stock market higher after the Nikkei newspaper said lenders would be given at least 10 years to comply with stricter international capital rules being drawn up by the Basel Committee on Banking Supervision. Chinese stocks closed lower after a commissioner from the China Banking Regulatory Commission said at a forum in Beijing that China's banks will face risks from bad loans and lending concentration to certain industries and big customers for a "long period of time." Foreign investors continue to pour money into China after Nov foreign direct investment in China surged +32% y/y to $7.02 billion, the fastest pace of growth in 16 months, although total investment through the first 11 months of the year is still down 9.9%. China's Q4 GDP is estimated to grow 10.5% q/q and China's Ministry of Commerce predicts that foreign direct investment will grow steadily in the next few months and may stay within the $7 billion to $8 billion monthly range attracted since Aug.

Barchart.com U.S. Morning Call for Tuesday, December 15, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is down -0.39% and Mar S&Ps are down -3.30 points. A rally in the dollar index to a 2-1/4 month high today has prompted a decline in most commodity prices, while Treasuries are slightly lower. German investor confidence fell for a third month in December after the Dec German ZEW economic sentiment survey dipped -0.7 to 50.4, although the market had been expecting a bigger -1.1 point decline to 50.0. Bank stocks are leading declines in European markets today as Allied Irish Banks Plc, Ireland’s second-biggest lender, fell -5.1% for its eighth consecutive decline, after Moody's Investors Service said the credit outlook for the Irish banking system remains negative. Greek bank stocks also fell after Citigroup cut its share-price estimates for the country's four biggest banks. Airline companies are also being hit today after the International Air Transport Association said airline losses in 2010 will total $5.6 billion, 47% more than earlier forecast, as oil prices rise while carriers compete for passengers with lower fares.

The Asian markets today closed mostly lower with Japan down -0.22%, Hong Kong -1.23%, China -0.81%, Taiwan -0.15%, Australia +0.42%, Singapore -0.03%, South Korea +0.04%, India -1.29%. Chinese property and real-estate companies led losses in China's Shanghai Stock Index on concerns the government will take more steps to curb property speculation along with a warning from Haitong Securities that "government policy is a big risk to property stocks." The Asian Development Bank (ADP) said today the Asia should keep interest rates low even as some emerging economies in the region may grow at their fastest pace in three years in 2010 as inflation is still low and export demand for Asian goods may falter as government stimulus measures fade. The ADP predicts that developing Asia, which includes economies such as India and Pakistan and excludes Japan, will probably expand 6.6% in 2010 after growing 4.5% in 2009. Limiting losses in Asian markets were gains in raw-material producers after JPMorgan Chase upgraded BHP Billiton to "neutral" from "underweight" and raised Rio Tinto Group, to "overweight" from "neutral." JPMorgan also predicted that the global recovery, growing profits and low interest rates will help extend the bull markets for Asia stocks outside of Japan.

Barchart.com U.S. Morning Call for Monday, December 14, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +0.71% and Mar S&Ps are up +5.60 points. Global stock markets received a boost today following news that Abu Dhabi will provide $10 billion to Dubai's Nakheel PJSC in order to avoid a default. Abu Dhabi's pledge reassured investors who had worried about a possible worldwide contagion from Dubai World's threat of defaulting on its debt as it will allow Dubai World's Nakheel real-estate subsidiary to make $4.1 billion of payments on bonds that mature today. European bank stocks that had exposure to the U.A.E. rallied with HSBC up 2.2% and Standard Chartered gaining 3.4%. Banks pared some gains after Citigroup said it reached an agreement with the US government and its regulators to repay the $20 billion that the government holds in its Troubled Asset Relief Program (TARP) trust preferred securities and to terminate the loss-sharing agreement with the government. Daimler AG rose 1.8% after saying it expects growth and sales to continue to rise in China and said it will triple production capacity at a Beijing venture for a new Mercedez-Benz E-Class sedan. Nomura Holdings predicts the Euro Stoxx 50 Stock Index will rise to 3,200 by the end of 2010, as the rally in 2009 was a "macro trade" while gains in 2010 will have a different complexion, as "the emphasis will switch to the micro, with themes within the market becoming more important."

The Asian markets today closed mixed with Japan down -0.02%, Hong Kong +0.84%, China +1.06%, Taiwan +0.31%, Australia +0.41%, Singapore -0.04%, South Korea +0.34%, India -0.13%. Japan's Q3 Tankan large manufacturers sentiment survey rose +9 to -24 and showed that large companies planned deeper spending cuts to protect earnings that are under threat from a rising yen that surged to a 14-year high against the dollar last month. The Xinhua news agency reported the China's government will target "excessive" growth in property prices in some cities as it plans to "speed the construction of low-cost housing" and strengthen supervision of the real-state market. Norman Chan, the head of Hong Kong's de facto central bank warned that Asia's experience in the past 20 years shows the biggest threat to financial stability in Asia "is from asset bubbles, rather than inflation." Korea's Samsung C&T, builder of the world's tallest tower in Dubai, closed 3.3% higher after Abu Dhabi agreed to provide the money for Dubai's financial support fund.

Barchart.com U.S. Morning Call for Friday, December 11, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +0.52% and Mar S&Ps are up +4.80 points. The dollar and Treasuries are lower while commodities and global stock markets rallied after China's industrial production grew more than forecast. Nov China industrial production rose +19.2% y/y, more than market expectations of 18.2%, as exports fell the least in 13 months and imports surged, boosting confidence in the worldwide recovery. European mining stocks gained, led by a 2% jump in BHP Billiton, as metals prices rose, and ING Groep NV surged 5.4% after the bank said it will repay 5.6 billion euros ($8.3 billion) in government aid. European leaders say government measures to stimulate the economy should stay in place until the "recovery is fully secured," according to a draft released at the conclusion of a summit in Brussels that ends today. According to the draft, "forecasts suggest a weak recovery in 2010, followed by a return to stronger growth in 2011" and once the recovery is in place, governments should rein in their budget deficits by 2011 "at the latest" as long as forecasts by the European Commission "continue to indicate that the recovery is strengthening and becoming self-sustaining."

The Asian markets today closed mostly higher with Japan up +2.48%, Hong Kong +0.93%, China -0.06%, Taiwan +1.53%, Australia +0.62%, Singapore +0.68%, South Korea +0.02%, India -0.41%. Asian stocks soared after China reported better-than-expected industrial production figures. Asian markets also received a boost after the PBOC said Nov new local-currency loans totaled 294.8 billion yuan ($43.2 billion), more than the 253 billion yuan of new loans in Oct, while China's M2 money supply rose a record +29.74% in Nov y/y. China's banking regulator plans to slow new lending to between 7 trillion yuan and 8 trillion yuan to ensure that there is enough credit to support an economic recovery without increased risks of bad loans and asset bubbles. Despite all of the encouraging economic news, China's Shanghai Composite Stock Index closed -0.06% lower on concern that the government will need to raise interest rates early next year to prevent overheating and to avert asset bubbles.

Barchart.com U.S. Morning Call for Thursday, December 10, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +0.92% and Dec S&Ps are up +4.40 points. European stocks advanced after three days of declines, as retailers gained after Inditex SA, the world's biggest clothing retailer, rose 2.3% after it reported net income in the nine months through Oct of 831 million euros ($1.2 billion), more than the 807 million euros expected by analysts. ING Groep NV climbed 4.2% after the Netherlands' biggest financial-services company was added to Bank of America Merrill Lynch's "Europe 1" list. Limiting gains in European stocks were the unexpected declines in Oct French industrial production and Oct manufacturing production that reflects the fragility of the recovery. As expected, the BOE left interest rates at a record low 0.5% and kept its asset-purchase program unchanged at 200 billion pounds ($326 billion) following the conclusion of today's policy meeting.

The Asian markets today closed mostly lower with Japan down -1.42%, Hong Kong -0.19%, China +0.64%, Taiwan -1.53%, Australia -0.67%, Singapore -0.55%, South Korea +1.38%, India +0.37%. Japanese automakers closed lower after the yen strengthened to a 1-week high against the dollar while Chinese property developers weakened after the State Council said it will re-impose a sales tax on homes sold within five years after cutting the period to two years in Jan. The Chinese government will scale back some tax breaks for car buyers, while continuing to fund vehicle and appliance purchases in rural areas as it seeks to cool speculation while sustaining a recovery. China's property prices rose 5.7% y/y in Nov, the fastest pace in 16 months, and reinforced concern that record lending and a $586 billion stimulus package may lead to asset bubbles.

Barchart.com U.S. Morning Call for Wednesday, December 9, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +0.21% and Dec S&Ps are up +5.90 points. The dollar and Treasuries are weaker and most commodities are higher. European stocks are gyrating on either side of unchanged as a rally in travel companies offsets pressure from financial companies. Fitch Ratings followed its downgrade of Greece's sovereign debt rating yesterday by downgrading five Greek banks today. Greek banks are lower with the National Bank of Greece, the nation's biggest bank, down 4.7% and EFG Eurobank Ergasias SA, the second-largest, down 5.8%. A former BOE official, Willem Buiter, said Greece may be the first nation in the European Union to default on its debt since WWII, although Greek Finance Minister Papaconstantinou said there is "absolutely" no chance of a default as Greek banks are "fundamentally sound" and Greece will not seek an EU aid package. US stocks are higher after Treasury Secretary Geithner said he plans to tell Congress that the Obama administration will extend the $700 billion Troubled Asset Relief Program (TARP) until next October. Also benefiting European stocks was the unexpected downward revision to Nov German CPI which was revised down to -0.2% m/m and +0.3% y/y from the previously reported -0.1% m/m and +0.3% y/y.

The Asian markets today closed mostly weaker with Japan down -1.34%, Hong Kong -1.44%, China -1/92%, Taiwan +0.37%, Australia -0.70%, Singapore -0.30%, South Korea +0.39%, India -0.59%. Japan's economy expanded less than forecast in the third quarter after Q3 Japan GDP was revised down to +0.3% q/q and +1.3% annualized from the previously reported +0.7% q/q and +2.8% annualized as companies slashed spending. Q3 Japan capital spending was revised down to a -2.8% decline from a previously reported +1.6% increase. Deflation concerns continue to mount after the Q3 GDP deflator was revised to a -0.5% y/y decrease from the earlier reported +0.2% y/y increase. Japan's GDP deflator has only risen twice in the past decade and underscores concern about an economic recovery that is under assault from deflation and a rising yen. Japanese exporters declined as the yen strengthened with Nissan Motor closing down 3.5% and Honda Motor closing down 2.1%. The China Banking Regulatory Commission plans to slow new lending next year to between 7 trillion yuan ($1 trillion) and 8 trillion yuan compared with the 8.9 trillion yuan of new local-currency loans in the first 10 months of this year. China's banking regulator plans to put a cap on yuan loans for 2010 to ensure credit flow is enough to support an economic recovery while limiting the risk that this year's lending boom will lead to bad loans and asset bubbles.

Barchart.com U.S. Morning Call for Tuesday, December 8, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is down -1.38% and Dec S&Ps are down -6.30 points. Treasuries and the dollar are higher while commodity prices are mostly lower. Fed Chairman Bernanke's comments yesterday after European markets closed that "formidable headwinds" for the US economy are likely to produce a "moderate" pace of expansion are weighing on European stock prices today. Also, renewed concern that credit losses from Dubai may hamper the global econoic recovery is dragging stocks lower after Nakheel PJSC, the Dubai World-owned property devleoper seeking to renegotiate debt, reported a first-half loss of 13.4 billion dirhams ($3.65 billion) as revenue fell and it wrote down the value of land and property. Another bearish factor for European stocks is the unexpected decline in German industrial output after Oct German industrial production fell -1.8% m/m and -12.4% y/y, the fourteenth consecutive year-over-year decline. Moody's Investors Service said today that its top debt ratings on the US and the UK may "test the Aaa boundaries" because their public finances are worsening in the wake of the global financial crisis. Limiting losses was the prediction from Bank of America Merrill Lynch that European stocks may climb as much as +27% by the end of next year as corporate earnings improve and valuations are "attractive" and "credit markets remain supportive."

The Asian markets today closed mostly lower with Japan down -0.27%, Hong Kong -1.18%, China -1.22%, Taiwan -0.09%, Australia -0.13%, Singapore +0.30%, South Korea -0.30%, India +1.44%. The Japanese government unveiled a 7.2 trillion yen ($81 billion) economic stimulus package that had been delayed because of haggling with the coalition government. Japan has complied four stimulus plans since Sep 2008 totaling more than 29 trillion yen ($326 billion) compared with the US's $787 billion and China's $586 billion plans. Japan has the world's largest public debt and the government said it wants to avoid selling new bonds "as much as possible." Finance Minister Fujii said bond sales for the current fiscal year will exceed tax revenue for the first time in 63 years with bond issuance totaling 54.5 trillion yen and tax revenue totaling 36.9 trillion yen. China's Nov passenger-car sales surged +98% to 1.04 million, the most in five years, while total vehicle sales, which include trucks and buses, rose 96% to 1.34 million. China's passenger car sales have jumped more than 50% for five straight months, as China's automobile demand remains a bright spot for global automakers.

Barchart.com U.S. Morning Call for Monday, December 7, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is down -0.81% and Dec S&Ps are down -4.30 points. The dollar extended last Friday's gains to a 1-month high, while commodity prices retreated with gold posting a 1-week low. Leading the way lower is weakness in mining companies and basic-resource stocks as metals prices declined. Oct German factory orders unexpectedly fell -2.1% m/m, their first decline in the last eight months, and a sign that Germany's recovery may slow as the impact of government stimulus measures fade and the impact of the stronger euro erodes export revenues. Limiting declines in European markets was the +1.5 point increase in the Dec Euro-Zone Sentix investor confidence to a 1-1/2 year high of -5.5 along with the recommendation from JPMorgan Chase that European stocks may rally 17% by the end of 2010 amid earnings growth and an improvement in economic leading indicators. Possibly benefiting US stock prices is the prediction from Bank of America Merrill Lynch that US stocks may gain a further 15% from current levels by the end of next year with the S&P 500 Index climbing to 1,275, saying "in an environment of healthy global growth led by emerging economies and a slow but steady US recovery, we think S&P 500 companies will deliver strong EPS growth from today's depressed levels."

The Asian markets today closed mixed with Japan up +1.45%, Hong Kong -0.77%, China +0.70%, Taiwan +1.63%, Australia -0.55%, Singapore +0.21%, South Korea +0.49%, India -0.69%. The Xinhua news agency reported that China’s top leaders at a weekend economic work conference in Beijing pledged to maintain a "moderately" loose monetary policy stance and "proactive" fiscal policies next year to bolster growth and ensure a continuation of the economic recovery. In its economic outlook published today, the Chinese Academy of Social Sciences predicts China's economic growth will accelerate to 9.1% in 2010 from 8.3% this year. The Bank for International Settlements (BIS) warned that China's lending boom may erode the quality of bank balance sheets as a jump in lending was "unavoidably" linked to an easing in credit standards which "raised concerns about excessively loose credit conditions." The warning underscores a need for higher loss provisions at the nation's lenders that China's financial regulator has already identified.

Barchart.com U.S. Morning Call for Friday, December 4, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is down -0.30% and Dec S&Ps are up +1.90 points. The dollar is a little stronger and most commodity prices are weaker as investors book profits before the release of the US Nov nonfarm payrolls report later today. Bank stocks are leading European stocks lower with Royal Bank of Scotland down 2.6% and Lloyds Banking Group down 3.9% after the National Audit Office said the two banks are failing to meet lending targets. Bank of America is down nearly 1% after it raised $19.3 billion by selling 1.286 billion shares at $15 a piece in the biggest sale of stock or preferred shares by a US public company since at least 2000. Heineken NV, the world's third-largest brewer, rose 1.5% after Petercam raised its recommendation on the tock to "add" from "hold," saying the stock looks "cheap" and that "brewing stocks are cash-flow machines even in a downturn." The Bundesbank in its bi-annual economic outlook today raised its 2010 GDP forecast for Germany to 1.6% from no growth forecast in June, and for German GDP to gain 1.2% in 2011, saying the outlook for the next two years has "brightened perceptibly." The Bundesbank predicts German inflation will remain benign, averaging 0.9% in 2010 and 1.0% in 2011 after rising just 0.3% this year, and predicts that unemployment will rise to 10.1% in 2011 from 8.1% today. ECB Council member Erkki Liikanen said today that the economic recovery will follow "a rocky road," and that "when stimulus ends and companies start to reduce stock levels again, there will probably be a little dip."

The Asian markets today closed mixed with Japan +0.45%, Hong Kong -0.25%, China +1.47%, Taiwan -0.44%, Australia -1.52%, Singapore -0.61%, South Korea +0.56%, India -0.49%. Li & Fung Ltd., the biggest supplier of clothes and toys to WalMart Stores, closed 4.3% lower after the unexpected contraction in the Nov US ISM non-manufacturing index raised concerns that economic growth may slow and the recovery may be uneven. Sony closed 1.2% higher following a 6% gain yesterday after Chairman Howard Stringer said he saw "very positive signs" for sales of TVs, personal computers, PlayStation 3 game consoles and Blu-ray discs during the US Thanksgiving week. Most Asian mining companies closed lower following the slide in metals prices, while South Korean stocks gained after Q3 GDP in South Korea was revised up to 3.2% from a 2.9% initial estimate reported in October.

Barchart.com U.S. Morning Call for Thursday, December 3, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +0.24% and Dec S&Ps are up +3.30 points. Plans by Bank of America to repay $45 billion to the Troubled Asset Relief Program (TARP) along with plans by PSA Peugeot Citroen and Mitsubishi Motors to form a "strategic partnership" has boosted US and European stocks this morning. The dollar and Treasuries are lower while gold rose to yet another all-time high. Bank of America is trading 5% higher in Europe this morning after it said it would repay $45 billion it received in TARP funds using $26.2 billion of "excess liquidity" and $18.8 billion from the sale of securities. Peugeot, Europe's second-biggest carmaker, rose 2.5% as discussions between it and Mitsubishi Motors are intended to extend an alliance that involves developing four-wheel-drive vehicles, electric cars and a joint venture in Russia. Goldman Sachs predicts that the Stoxx 600 Index may advance 22% by the end of next year amid "above trend" growth in the global economy as a low-interest rate environment supports stock markets with corporate earnings growing 38% excluding some items next year and 28% in 2011. Limiting gains in European stocks was the weaker-than-expected Oct Euro-Zone retail sales (unchanged m/m versus expectations of +0.2% m/m) along with expectations that the ECB may announce plans to scale back some of its emergency liquidity measures following its policy meeting later today.

The Asian markets today closed mostly higher with Japan +3.84%, Hong Kong +1.19%, China -0.18%, Taiwan +0.09%, Australia +0.26%, Singapore +0.42%, South Korea +1.46%, India +0.09%. Japanese exporters soared following the decline in the yen against the dollar for a third day along with support from the Fed's Beige Book that said consumer spending lifted regional economies in the US. Mitsubishi Motors surged 13% after announcing it will form a "strategic partnership" with Peugeot Citroen. Q3 Japan capital spending excluding software fell -25.7% y/y, the tenth straight quarterly decline and the largest drop since the government began the survey in 1955, which indicates businesses aren't yet confident that the recovery will be sustained. Japan's Cabinet Office will use today's report to revise Q3 GDP figures on Dec 9 and estimates are for Q3 Japan GDP to be revised down to 2.5% annualized growth from the initial figure of 4.8%. A deputy governor at the PBOC said the price of gold is very high and that the central bank will be wary of investments in "bubble" assets, which dampened speculation that China may buy the 190 tons remaining form the 403.3 tons the IMF said it would divest to shore up its finances. Goldman Sachs predicts that corporate profit growth in China will be between 20% and 30% next year and fuel an equity market rally as it recommends buying shares in China's auto and healthcare industries, and companies with large land reserves in Shanghai ahead of next year's World Expo.

Barchart.com U.S. Morning Call for Wednesday, December 2, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is down -0.11% and Dec S&Ps are down -1.50 points. European and US stocks have been fluctuating on either side of unchanged while a slightly weaker dollar boosted gold to yet another record high. European banks are mostly lower led by declines in Royal Bank of Scotland Plc and Barclays Plc which fell more than 2% after Credit Suisse Group AG said UK banks are "still not attractive" as "capital pressure" is not necessarily over and refinancing wholesale financing will be "costly." Drug makers strengthened after UBS raised European pharmaceutical stocks to "overweight" from "neutral" on the prospect of a recovery next year after investors sold the companies because of concern that health-policy changes in the US might curb drug sales. UBS also predicted that the S&P 500 Index might rise to 1,250 by the end of next year as earnings continue to beat forecasts saying, "large-cap, dividend paying, globally oriented stocks offer good risk/reward." European producer prices continue to be benign after the Oct Euro-Zone PPI rose +0.2% m/m but fell -6.7% y/y, its tenth consecutive year-over-year decline.

The Asian markets today closed higher with Japan up +0.38%, Hong Kong +0.80%, China +1.02%, Taiwan +0.37%, Australia +0.92%, Singapore +0.92%, South Korea +1.54%, India -0.16%. Asian mining companies and raw-material producers finished mostly higher after gold climbed to a record high and on anticipation that commodity prices will continue to gain from increased demand for hedging against inflation and on speculation that the global economic recovery will continue. Japanese exporters strengthened when the yen weakened following comments from Financial Services Minister Kamei who called for "international coordinated intervention" to weaken the yen. Japan hasn't intervened in the currency markets since Mar 2004 when the yen was around 109 per dollar when the BOJ sold 14.8 trillion yen in the first three months of 2004.

Barchart.com U.S. Morning Call for Tuesday, December 1, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +2.18% and Dec S&Ps are up +9.60 points. Global stocks rallied today as Dubai said half of its debts are "stable" and that it’s in "constructive" talks with banks to restructure about $26 billion in debt. Chinese manufacturing grew at the fastest pace in five years and the dollar and Treasuries fell which prompted a rally in commodities with gold climbing to another record high. European stocks received a further boost after all of the respective Nov PMI manufacturing indexes for France, Germany and the Euro-Zone were revised upward with the Nov Euro-Zone PMI manufacturing index revised +0.2 to 51.2, a 20-month high. German unemployment unexpectedly fell -7,000 in Nov as government measures discouraged firings, which kept Germany's unemployment rate steady at 8.1%, while Oct German retail sales rose a more-than-expected +0.5% m/m. The markets were kept sober from the Oct Euro-Zone unemployment rate which remained unchanged at a 11-year high of 9.8% which shows despite the recovery in Europe's economy, companies are still cutting jobs and new jobs remain scarce.

The Asian markets today closed higher with Japan +2.43%, Hong Kong +1.34%, China +1.40%, Taiwan +0.88%, Australia +0.38%, Singapore +1.42%, South Korea +1.13%, India +1.61%. Asian markets soared after the Nov China purchasing managers' index rose +0.3 to 55.7, the highest level since the HSBC PMI was introduced in Apr 2004 and adds to evidence that China is powering a global recovery. Japanese stocks surged after the BOJ announced, following an emergency board meeting, that it will offer three-month loans at 0.1% to commercial banks and unveiled a 10 trillion yen ($115 billion) program to help the economy battle falling prices and the yen's surge to a 14-year high. The BOJ also maintained its monthly purchases of Japanese bonds at 1.8 trillion yen, with Societe Generale now predicting that the BOJ will expand its quantitative easing policy to 2.2 to 2.5 trillion yen in asset purchases in the coming months. Japan’s central bank is expanding credit just when others in the Asia-Pacific region are looking to tighten. The Reserve Bank of Australia (RBA) raised interest rates for the third straight month, +25 bp to 3.75% on mounting evidence that the Australian economy is strengthening, although RBA Governor Stevens hinted at a pause in the rate-hiking regime when he said the bank's "material adjustments" to borrowing costs are enough to keep inflation within his 2% to 3% target range.

Barchart.com U.S. Morning Call for Monday, November 30, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is down -1.09% and Dec S&Ps are down -1.30 points. The dollar is weaker and commodity prices and emerging markets are higher after the United Arab Emirates' central bank said it "stands behind" the country's local and foreign banks as they face the prospect of rising losses from Dubai World's possible default. The Abu Dhabi-based Central Bank of the U.A.E. also ensured that local markets are operational and will have access to ample liquidity when it announced that banks will be able to borrow money from the regulator for 0.50% above the three-month local benchmark interest rate, which currently stands at 1.941%. European stocks are lower today over banking loss concerns as Bank of Ireland Plc slid over 5% when it said it may take a loss of 3.4 billion euros ($5.1 billion) on loans it sells to Ireland's so-called bad bank. Other bank stocks fell as well with RBS down nearly 5% and Lloyds Banking Group Plc off by 6.5%. UBS AG cut its allocation for financial shares to "neutral" from "overweight," citing the "strong performance of the sector," and that "several challenges lie ahead for the sector including regulatory reform, loan growth, margins, and still-elevated loan loss provisioning." Also helping to keep European stocks in negative territory was the larger-than-expected increase in the Nov Euro-Zone CPI estimate which rose +0.6% y/y, its first increase in the last seven months.

The Asian markets today closed mostly higher with Japan up +2.91%, Hong Kong +3.25%, China +3.82%, Taiwan +1.22%, Australia +2.83%, Singapore -1.09%, South Korea +2.00%, India +1.77%. Asian stocks rose after the U.A.E. pledged support for its banks, easing concerns that losses from Dubai World will spread. Also helping to boost Asian stocks were comments from the Chinese government that it will maintain stimulus policies next year. Goldman Sachs, Citigroup and BNP Paribas all forecast further gains for Asian-Pacific equities next year with Goldman predicting returns of 36% in dollar terms next year. BNP Paribas predicts Asian stocks ex Japan will rise 20% in the next 12 months and Citigroup predicts gains as much as 14%. BOJ Governor Shirakawa said today that he agrees with the government that Japan is in deflation and pledged to take action if needed to ensure economic stability. Shirakawa also said the government will decide whether it is necessary to intervene in the currency market after the yen surged to a 14-year high against the dollar last week.

Barchart.com U.S. Morning Call for Friday, November 27, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is down -0.25% and Dec S&Ps are down -29.50 points as US markets reopen from the Thanksgiving Holiday and catch up with sharp losses in global stock markets after Dubai's attempt to delay debt repayments unnerved world stock markets. The dollar and Treasuries rallied sharply on heavy flight-to-safety demand while commodity prices plunged. Dubai World, the government investment company burdened by $59 billion of liabilities, sought this week to delay repayment on much of its debt and sparked speculation that if Dubai has to default, that could start a wave of defaults in other areas and this scenario could revive the whole financial crisis. European bank stocks, which took the brunt of much of the selling yesterday when the Dubai news first broke, have recovered some of their sharp losses. Royal Bank of Scotland Group Plc, which was Dubai World's biggest loan arranger since Jan 2007 according to JPMorgan Chase, gained 4.1% today after having plunged 10% earlier on top of yesterday's 7.8% loss and HSBC Holdings Plc fell only 0.6% after sliding as much as 4.2% earlier. According to Deutsche Bank AG, Dubai, which borrowed $80 billion in a four-year construction boom, suffered the world's steepest property slump during the recession with home prices plunging 50% from their 2008 peak. Moody's Investors Service and Standard & Poor's cut their ratings on Dubai state companies this week, saying they may consider Dubai World's plan to delay debt payments a default.

The Asian markets today closed lower with Japan -3.22%, Hong Kong -4.84%, China -2.96%, Taiwan -3.21%, Australia -2.90%, South Korea -4.76%, India -1.32%. Asian stocks slumped, along with other global equity markets, on concern over losses stemming from Dubai's attempt to reschedule its debt. Obayashi Corp. tumbled 8.7% and Kajima Corp., Japan's biggest listed construction company, plunged 14% after Daiwa Securities Group said Japanese builders in Dubai may lose "tens of billions of yen" should they fail to receive revenue from their projects, while Japanese exporters fell after the dollar fell to a 14-year low against the yen. The yen fell back from its 14-year high however, after Japanese Finance Minister Fujii said he might contact US and European authorities about currencies if necessary. Asian finance companies also closed sharply lower led by a 8.6% loss in Standard Chartered, which makes most of its profits in emerging markets, after CLSA downgraded the bank to "underperform" from "buy," saying "capital raising cannot be ruled out by any bank due to the Dubai situation, but especially Standard Chartered." Asian markets are worried over the contagion effect from Dubai with companies ranging from banks to builders having large exposure to Dubai's debt.

Barchart.com U.S. Morning Call for Wednesday, November 25, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +0.65% and Dec S&Ps are up +4.90 points. The dollar index has fallen to a 15-1/2 month low, which has propelled gold to yet another record high, while stock markets around the world are stronger on the prospects for an extended global economic recovery. Exane BNP Paribas predicted today "a double-dip recession looks unlikely in 2010 as fiscal stimulus and restocking have yet to have their full impact on GDP growth." BNP predicts that European stocks may yield a total return of 12% to 14% next year, as valuations are attractive when adjusted for interest rates, while sales growth will boost earnings. Limiting gains in European stocks was the unexpected drop in the Dec German GfK consumer confidence survey, which fell -0.3 to 3.7 when the market was expecting the survey to be unchanged at 4.0.

The Asian markets today closed higher with Japan up +0.43%, Hong Kong +0.84%, China +2.30%, Taiwan +0.54%, Australia +0.79%, Singapore +0.46%, South Korea +0.33%, India +0.40%. Japanese stocks closed higher today after Japan's Finance Ministry reported today that Oct Japan exports fell -23.2% y/y, smaller than an expected -26.8% y/y decline and the smallest drop in a year as global demand picked up for Japanese goods. Australian stocks gained after the Deputy Governor of the RBA, Ric Battellino, said that Australia's economy has entered a "new upswing" that will last for several years and help the nation's households fund mortgage costs. Weakness in Chinese bank stocks limited gains in Asian bourses on concerns that they may need to raise more capital and Goldman Sachs said, "although capital raising may not be imminent and will likely be a managed process, we believe this could be a sector overhang."

Barchart.com U.S. Morning Call for Tuesday, November 24, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is down -0.08% and Dec S&Ps are up +2.70 points. Weaker Asian markets are weighing on European stock prices on concerns that banks may need additional capital. The dollar and Treasuries are stronger and commodity prices are mixed. Standard & Poor's said yesterday it expects banks to "continue strengthening capital ratios" as regulators demand higher standards. UBS dropped nearly 2% after BofA Merrill Lynch placed the bank on its "least preferred" list and an S&P study yesterday placed UBS on a list of 45 global banks with the weakest capital. French business confidence was unexpectedly unchanged in Nov at 89 as manufacturers grew more concerned that strength in the euro will hurt exports and the end of stimulus measures will slow gains in consumer spending, although Oct French consumer spending was up a larger-than-expected +1.1% m/m and +3.5% y/y. Limiting declines in European stocks is the larger-than-expected increase in German business confidence. The Nov German IFO business climate rose +1.9 to 93.9, a 15-month high and suggests the economic recovery will continue into next year. Russia's central bank, Bank Rossii, cut its key interest rates to a record low in its ninth cut since April in an attempt to revive bank lending and to stem speculative capital inflows and avoid currency volatility. Bank Rossii cut the refinancing rate to 9% from 9.5% and reduced the repurchase rate charged on central bank loans to 8% from 8.5%.

The Asian markets today closed mostly lower with Japan down -1.01%, Hong Kong -1.53%, China -3.20%, Taiwan +0.36%, Australia -0.68%, Singapore -0.64%, South Korea -0.84%, India -0.29%. Asian bank stocks tumbled and led equity markets lower on concerns that more banks will sell shares to replenish capital. Bank of China said it's studying "various options" to replenish capital and China's five largest banks submitted plans to regulators for raising money after record lending eroded their capital and the China Banking Regulatory Commission (CBRC) evaluated their finances last week. The banks were told to estimate potential deficits in 2010 based on their own loan forecasts and capital ratio targets. The CBRC said that lenders must formulate long-term fundraising plans and those with "relatively low" capital adequacy ratios and without a "practical" plan will face restrictions on their operations, including limits on market entry, outbound investment, new branches and "business expansion." According to BNP Paribas, Chinese lenders would need as much as a combined 368 billion yuan to keep their capital adequacy ratios at 12%. The CBRC last year raised the minimum required capital adequacy ratio for publicly traded banks to 10% from 8%.

Barchart.com U.S. Morning Call for Monday, November 23, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +1.73% and Dec S&Ps are up +11.70 points. Stock prices rose around the world as the dollar fell and commodities gained, with gold climbing to a record high and copper climbing to a 14-month high. The dollar fell after comments from Chicago Fed President Evans who told the Financial Times that US interest rates may stay near zero until "late 2010, perhaps later in terms of 2011." The dollar also fell after St. Louis Fed President Bullard said he thinks the Fed should retain the flexibility to respond to any weakening of the economy by extending its asset-purchase program beyond its earlier imposed March deadline. Boosting European stocks was the larger-than-expected +0.7 point increase in the Nov Euro-Zone PMI composite index to 53.7, its highest level in 2-years and a sign that the economic recovery is expanding. Also, benefiting stock prices was the 4.3% gain in Renault SA after Credit Suisse raised its recommendation on Europe's second-biggest automaker, which owns 44% of Nissan Motor, to "outperform" from "underperform," citing "exposure to fast improving cash flows" at Nissan. Limiting gains in stocks was the warning from IMF director Strauss-Kahn who said that banking systems "remain undercapitalized" in many advanced economies with "far from normal" financial conditions and that about half of bank losses from the global financial crisis have yet to be revealed.

The Asian markets today closed mostly higher with Hong Kong +1.41%, Chona +0.95%, Taiwan +0.05%, Australia +0.67%, Singapore +1.32%, South Kprea -0.02%, India +0.93%. Japan was closed for a holiday. Asian stocks closed higher after a government economist predicted that the Chinese economy may grow more than 10% in Q4. Oct Taiwan export orders climbed +4.4% y/y, their first increase in 13 months as stronger demand for electronic goods helped the recovery and the government predicted that export orders are likely to turn positive in the fourth quarter as well. Also aiding Asian stock prices was the gain in mining and energy companies as commodities rallied and the 6.4% surge in Australia's James Hardie Industries NV, the top seller of home siding in the US, after it forecast full-year earnings at the top of analysts' estimates.

Barchart.com U.S. Morning Call for Friday, November 20, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is down -1.12% and Dec S&Ps are down -9.20 points. Treasuries and the dollar are higher, while most commodity prices weakened. Global stock markets are mostly lower after Dell reported a 54% drop in Q3 profit and after ECB President Trichet signaled his bank is ready to end some of the extraordinary stimulus measures put in place during the financial crisis. At a conference in Frankfurt today, President Trichet said "any non-standard measure whose continuation would pose a threat to the achievement of price stability must be undone promptly and unequivocally." Trichet has already hinted the ECB is unlikely to renew its offer of 12-month loans to banks after December and has stated that the exit from emergency lending measures doesn't necessarily mean they will raise interest rates anytime soon. European stocks had gained earlier as steelmakers rallied after Goldman Sachs said the outlook for steelmakers is improving. Also boosting stocks was the Oct German producer prices that came in weaker-than-expected at unchanged m/m and -7.6% y/y, the eighth consecutive month of year-over-year declines.

The Asian markets today closed mostly lower with Japan down -0.54%, Hong Kong -0.83%, China -0.31%, Taiwan -0.99%, Australia -1.33%, Singapore +0.10%, South Korea -0.06%, India +1.41%. Asian shares weakened when Sony fell 2.4% after it said it will take longer to reach its profitability target. Sony said it's aiming for a 10% return on equity by March 2013, later than its previous target of March 2011. The BOJ kept interest rates unchanged at 0.1% and said "Japan's economy is picking up mainly due to various policy measures taken at home and abroad, although the momentum of a self-sustaining recovery in domestic private demand remains weak." Earlier, Deputy Prime Minister Kan said the economy "is in a mild deflationary phase," referring to declining prices in its evaluation for the first time since Jun 2006. By highlighting deflation, the Japanese government is putting pressure on the BOJ to increase its accommodative measures such as increasing its purchases of government bonds to fight deflation. BOJ Governor Shirakawa said inflationary expectations are stable and the financial system is solid, signaling he sees little risk price declines will snowball into a deflationary spiral.

Barchart.com U.S. Morning Call for Thursday, November 19, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is down -0.76% and Dec S&Ps are down -9.00 points. The dollar and Treasuries are higher, while commodities are weaker. Mining companies and raw-material producers are all moving to the downside today while ASML, Europe's largest maker of semiconductor equipment, and ARM, whose products are used in Apple's iPhone, both lost at least 3% after Bank of America Merrill Lynch downgraded ASML to "neutral" from "buy" and lowered its recommendation on ARM to "underperform" from "neutral." Swatch Group AG, the world's biggest watchmaker, fell 2.7% after Oct Swiss watch exports fell -23% y/y, their 12th consecutive monthly decline. Limiting losses in European and US stocks was comments from Philadelphia Fed President Plosser who said in Singapore today that the US economy is "on the mend" and may strengthen in coming quarters, leaving policy makers to "struggle and debate" on the right time to raise interest rates. Plosser said he is "less fearful" than he was three months ago of another recession, although growth isn't "as strong as we would like it to be." The OECD revised up its growth forecasts for the combined economies of its 30-member countries to 1.9% next year, up from a Jun forecast of 0.7%. The OECD said growth in the US will be 2.5% in 2010 instead of the 0.9% predicted in Jun and the Euro-Zone will advance 0.9% next year instead of its previous estimate of no growth.

The Asian markets today closed mixed with Japan down -1.32%, Hong Kong -0.86%, China +0.34%, Taiwan -0.09%, Australia +0.22%, Singapore +0.50%, South Korea +1.10%, India -1.25%. Japanese stocks fell as more companies are tapping the equity market to raise capital with Mitsubishi UFJ Financial Group falling 4.1% after filing with regulators its plan to raise as much as 1 trillion yen ($11.2 billion) in its second share sale since Jan to bolster its capital while Nomura Real Estate sank 8.8% after it said it plans to raise as much as 11.5 billion yen from a share sale. The OECD raised its growth forecasts for Japan next year to 1.8% from a Jun forecast of 0.7% and raised China's growth estimate to 10.2% and predicted a further acceleration in 2011 as China and other emerging countries power a global recovery. Hong Kong's Monetary Authority Chief Executive Norman Chan warned that policy makers exiting economic stimulus plans "too late" may increase the risk of asset bubbles for Asian economies. His view is part of a growing concern that the seeds of the next financial crisis may be being laid in Asia in the wake huge stimulus programs and liquidity injections by the world's central banks.

Barchart.com U.S. Morning Call for Wednesday, November 18, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +0.38% and Dec S&Ps are up +1.90 points. European and US stocks are higher while Treasuries are lower and the weaker dollar is supporting a broad-based commodity rally with gold surging to a record high and copper climbing to a 13-3/4 month high. Mining companies and basic-resource stocks are stronger with Xstrata Plc, the world's fourth-largest copper supplier, up over 4% and Fresnillo Plc, the world's biggest primary silver producer gaining 5.2%. Limiting stock gains was the action by Allied Irish Banks Plc, Ireland's second-largest lender, to raise its 2009 bad-debt forecast to 5.3 billion euros ($7.9 billion) from a previously estimated 4.3 billion euros, citing increases on losses on property loans. Allied Irish received a 3.5 billion-euro injection from the government this year to shore up capital against loan losses and is still forecasting an operating profit for this year of 2 billion euros.

The Asian markets today closed mixed with Japan down -0.55%, Hong Kong -0.32%, China +0.05%, Taiwan +0.43%, Australia +0.20%, Singapore -0.72%, South Korea +1.22%, India -0.30%. Financial shares were a drag on Asian stocks today after HSBC Chairman Stephen Green warned of the "unintended effects" from new rules to increase banks' capital saying the raising of capital ratios at the wrong stage of the economic cycle could withdraw credit from the economy and cause a new credit crunch. PBOC advisor Fan Gang warned today that China is among the emerging markets facing risks of property and commodity market bubbles saying a "Chinese asset bubble would be something very dangerous that would cause overheating elsewhere as well." Fang joins BOJ Governor Shirakawa and China's top banking regulator Liu Mingkang, in recent warnings about the risks of asset bubbles to the global economy.

Barchart.com U.S. Morning Call for Tuesday, November 17, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is down -0.20% and Dec S&Ps are down -1.80 points. The dollar is stronger after comments from ECB President Trichet, which has weakened commodity prices, while Treasuries and stocks are lower. Ireland's biggest mortgage lender, Irish Life, sank 12% after it increased its provisions for loan losses for the three years to 2011 to 800 million euros ($1.12 billion) to 900 million euros, higher than previously estimated provisions of 700 million euros. Limiting losses in European stocks was the rise in the Sep Euro-Zone trade balance to 6.8 billion euros ($10.2 billion), the largest gap in more than five years as Euro-Zone exports in Sep rose a seasonally adjusted 5.5% from Aug, the biggest monthly increase since Jan 2008 as global demand strengthened and helped revive export growth. The dollar strengthened this morning after France's Le Monde newspaper reported that ECB President Trichet said "the euro wasn't created to compete with the dollar or to be a substitute to the dollar as a reserve currency" and that "the ECB isn't campaigning for the international use of the euro." The euro has recently been consolidating on either side of $1.50, just below last month's 15-month high of $1.5063.

The Asian markets today closed mostly lower with Japan down -0.63%, Hon Kong -0.13%, China +0.07%, Taiwan -0.76%, Australia -0.54%, Singapore -0.68%, South Korea -0.43%, India +0.11%. Asian markets today weakened after Fed Chairman Bernanke yesterday said that "significant" challenges remain to revive the US economy. President Obama, in a joint appearance in Beijing today with his Chinese counterpart Hu Jintao, called on the Chinese government to make good on a commitment to allow the yuan to appreciate to help prevent trade imbalances that exacerbated the global economic crisis. The US trade deficit with China widened to a 10-month high in Sep and raises concerns that the combination of a recovering US economy and a fixed yuan exchange rate will worsen global imbalances. China's dollar purchases to prevent yuan appreciation swelled its foreign-exchange reserves to $2.3 trillion in Q3, more than twice as much as any other country.

Barchart.com U.S. Morning Call for Monday, November 16, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up 0.82% and Dec S&Ps are up 7.90 points or 0.72%. The main bullish factor this morning is the pledge on Sunday from the 21 Asia-Pacific leaders attending the Asia Pacific Economic Cooperation (APEC) conference in Singapore to maintain measures to stimulate economic growth. President Obama attended the conference in Singapore and then arrived in China on Sunday night to meet with Chinese leaders on Monday. In addition, Japan today reported that its Q3 GDP grew by an annualized +4.5%, the fastest pace in more than 2 years and the second consecutive quarterly gain after the Q2 increase of +2.7%. The Japanese GDP report was accidently disclosed an hour before its scheduled release time by Japanese Trade Minister Masayuki Naoshima, who was speaking with oil industry executives and said that he was not aware of when the data was supposed to be officially released. Japan's Q3 exports rose by +6.4% q/q, which was a positive sign of a pickup in global growth in general. Chinese stocks were boosted today after a Chinese Ministry of Commerce official said his agency expects consumer spending to become a "important engine" for Chinese economic growth. The Asian markets today closed higher across the board: Japan +0.21%, Hong Kong +1.73%, China +3.04%, Taiwan +1.66%, Australia +1.04%, Singapore +2.08%, South Korea +1.48%, Bombay +1.09%.

Overnight U.S. Stock News

December S&Ps this morning are trading 7.90 points higher on carry-over support from the rally in global stocks. Cisco Systems today raised its bid for Tandberg ASA to 19 billion kroner ($3.4 billion) after its earlier bid succeeded in buying just 9.4% of Tandberg's shares. GM, which is currently 61% owned by the US government, reported a loss of $1.15 billion in Q3 but said that it will start repaying government loans in Q4, ahead of schedule. The US stock market last Friday slumped to its low early in the day but then reversed course and traded with moderate gains into the close (Dow Jones +0.72%, S&P 500 +0.57%, Nasdaq Composite +0.88%). Bullish factors included (1) carry-over support from a rally in European bourses after the Euro-Zone economy expanded +0.4% in Q3, the first increase in the last five quarters and a sign that the global recovery is gaining momentum, (2) strong Q3 earnings results as 80% of the S&P 500 companies that have released earnings so far have exceeded expectations, the highest proportion since at least 1993, (3) strength in raw materials and commodity producers as a weak dollar spurred gains in most metals and commodities, and (4) increased M&A activity as $123 billion of acquisition deals have been announced so far this month, compared with $67 billion for the whole of Nov 2008.
Bearish factors included (1) the wider-than-expected Sep trade deficit of -$36.5 billion versus expectations of -$31.8 billion, which has negative GDP implications and may prompt US Q3 GDP to be revised lower, (2) the unexpected decline in the Nov US University of Michigan consumer confidence of -4.6 to 66.0 versus expectations of +0.4 to 71.0, and (3) comments from Alan Krueger, the assistant Treasury Secretary for economic policy, that the economy is "very fragile" and the labor market remains a "very serious challenge" and faces "substantial headwinds."

Today's U.S. Market Focus

December 10-year T-notes this morning are trading +7 ticks. Dec T-note prices last Friday gyrated on either side of unchanged and finally closed up +1 tick at 118-305. Bullish factors last Friday included (1) the wider-than-expected Sep trade deficit report (-$36.5 billion versus expectations of -$31.8 billion), which is a drag on growth and has negative GDP implications, (2) the unexpected decline in the Nov US University of Michigan consumer confidence of -4.6 to 66.0 (versus expectations of +0.4 to 71.0), (3) comments from Chicago Fed President Evans who said a recovery from recession is likely to be "modest" which will require "highly accommodative monetary policy for an indefinite period," and (4) a post-refunding rally as bond dealers covered short positions put on ahead of this past week's Treasury auctions. Bearish factors for T-note prices last Friday included (1) limited safe-haven demand for Treasuries as the stock market rallied, and (2) comments from President Obama who said that he will consider additional measures to spur job creation, which fuels concern that any new programs or spending initiatives the President proposes will be funded by an increase in Treasury debt issuance.
The dollar index this morning is trading down -0.33 points with the dollar/yen down 0.12 yen and the euro/dollar up 0.7 cents. The dollar was undercut today by the rally in global stocks, which has reduced the safe-haven demand for the dollar. The dollar index last Friday traded lower the entire day and closed with a moderate loss. Bearish factors included (1) reduced safe-haven demand for dollars on optimism that the global economic recovery is gathering momentum after Q3 Euro-Zone GDP expanded for the first time in the last five quarters (+0.4% q/q), (2) the prediction from Royal Bank of Scotland Group Plc that the US economic recovery is still not strong enough to provide a regular boost to the dollar, (3) the wider-than-expected Sep US trade balance, and (4) euro-supportive comments from ECB Executive Board member Jose Manuel Gonzalez-Paramo who said that he can't rule out that the ECB may raise interest rates even while some European economies are still contracting. Bullish factors included (1) comments from French Finance Minister Lagarde who said that her government favors a "strong" US dollar as an appreciating euro threatens to hurt European exports, and (2) euro-negative comments from ECB Council member Axel Weber who predicted that economic growth in the Euro-Zone going forward will be weaker than before the financial crisis, which may prompt the ECB to leave interest rates at a record low for an extended period.
December crude oil prices this morning are trading +85 cents a barrel and Dec gasoline is trading 1.48 cents a gallon. Bullish factors include the weaker dollar and the improved global demand outlook with APEC leaders promising continued simulus measures and with the strong Japanese Q3 GDP report. Dec crude last Friday fell to a 1-month low before recovering some of its losses into the close to finally settle down -$0.59 a barrel. Dec gasoline last Friday closed down -2.43 cents a gallon. Bearish factors last Friday included (1) carry-over weakness from Thursday's weekly DOE inventory figures that show continued slack US fuel demand with US gasoline stockpiles 4.8% above the 5-year average and distillate supplies 29% above the 5-year average, (2) the unexpected decline in the Nov US University of Michigan consumer confidence which raises questions about the sustainability of an economic recovery and energy demand, and (3) the observation from the CEO of Exxon Mobil that a "disconnection" exists between demand for crude oil and its current price. Bullish factors last Friday included (1) the weaker dollar, and (2) the rally in the equity market which increases optimism that fuel demand will improve as the economy recovers.

Barchart.com U.S. Morning Call for Friday, November 13, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +0.31% and Dec S&Ps are up +3.20 points. The dollar fell and commodities rose as Europe's economic growth accelerated, a sign that the global recovery is gaining momentum. Q3 Euro-Zone GDP expanded +0.4% q/q, slightly below market expectations for a +0.5% q/q increase. An jump in M&A activity is also helping to boost stock prices with British Airways, Europe's third-biggest carrier, up 2.9% and Iberia up 1.9% after the two airlines agreed to a $7 billion merger that will have British Airways investors owning 55% of the business. The merger won't be completed until late 2010 and can be called off by Iberia if British Airways fails to resolve pension-deficit issues. Limiting stock gains is the 5.4% drop in Natixis after the investment-banking unit of France's second-largest lender by branches reported Q3 net income of 268 million euros ($398 million), which missed analysts' estimates of 396 million euros.

The Asian markets today closed mixed with Japan down -0.35%, Hong Kong +0.70%, China +0.54%, Taiwan -0.07%, Australia -0.87%, Singapore +0.04%, South Korea +0.08%, India +0.92%. Chinese export stocks were boosted on speculation corporate earnings in yuan will be boosted by a stronger currency after twelve-month non-deliverable forwards for the yuan rose to a 15-month high of 6.5895 per dollar on speculation China will shift its currency peg of about 6,83 per dollar that has been in place since July 2008. Japanese stocks fell despite the unexpected increase in Oct Japan consumer confidence which rose +0.1 to a 2-year high of 40.8 as government stimulus programs are helping to ensure a recovery. Uncertainty about the economy's longer-term prospects continues to weigh on Japanese share prices even as companies report profits nearly double those of the previous quarter.

Overnight U.S. Stock News

December S&Ps this morning are trading up +3.20 points. The US stock market yesterday opened lower and rallied early, but then moved lower the rest of the day and finished with moderate losses (Dow Jones -0.91%, S&P 500 -1.03%, Nasdaq Composite -0.83%). Bearish factors included (1) carry-over weakness from a drop in European and Asian stocks after comments from Chinese Premier Wen Jiabao that the world faces a "gradual and uneven recovery," (2) weakness in energy producers after crude oil prices tumbled on a bigger-than-expected increase in crude inventories, (3) the plunge in the weekly MBA mortgage purchase index to its lowest level in nearly nine years, a sign that house buying is drying up, (4) the report from RealtyTrac that US foreclosure filings surpassed 300,000 for the eighth straight month in October, which may exacerbate the housing crisis as continued bank sales of foreclosed properties will keep pressure on home prices, and (5) valuation concerns as the 8-month rally pushed the S&P 500 to about 22 times trailing earnings, the highest in seven years.
Bullish factors included (1) the larger-than-expected -12,000 decline in weekly initial US unemployment claims to a 10-month low of 502,000 (versus expectations of -2,000 to 510,000), (2) JPMorgan Chase's contention that jobless claims at around 500,000 are consistent with stable payrolls and that "the economy is approaching the point at which employment stabilizes and then begins to grow," (3) an increase in M&A activity after Hewlett-Packard's offer for 3Com of $2.7 billion, (4) comments from Treasury Secretary Geithner that there are "early signs" that the world is addressing imbalances in spending and savings that contributed to the global crisis, and (5) the prediction from Bank Sarasin & Co. that "if the next 6 months of the reaction to this turbulent crisis continue to follow the book of history, which is more likely than not, then that will suggest that equities globally still have another 20% to 30% upside from here onwards."
Walt Disney (DIS) gained 1.1% in European trading after reporting Q4 EPS of 46 cents, beating analysts' estimates of 41 cents as sales rose 4.5% to $9.87 billion in the period ended Oct 3, topping analysts' estimates for sales of $9.3 billion

Today's U.S. Market Focus

December 10-year T-notes this morning are trading up +2 ticks. Dec T-note prices yesterday traded sideways in negative territory the entire day and settled down -3.5 ticks at 118-295. Bearish factors for T-note prices yesterday included (1) the larger-than-expected decline in weekly initial US unemployment claims which fell to a 10-month low (-12,000 to 502,000 versus expectations of -2,000 to 510,000), and (2) mediocre demand for the Treasury's record $16 billion 30-year T-bond auction that had a bid-to-cover ratio of 2.26, the weakest in 6 months and below the average of 2.39 seen at the last 10 auctions. Bullish factors yesterday included (1) the plunge in the weekly MBA mortgage purchase index to its lowest level in nearly nine years, a sign of weaker housing demand, (2) comments from Japanese Parliamentary Secretary of Finance Furumoto that Japan supports a strong dollar and doesn't intend to reduce its holdings of US Treasuries or buy more gold, which eases concerns that foreign demand for Treasuries may dwindle, (3) the report from RealtyTrac that showed US foreclosure filings surpassed 300,000 for the eighth straight month in October, which may exacerbate the housing crisis as continued bank sales of foreclosed properties will keep housing prices at depressed levels.
The dollar index this morning is lower with the dollar/yen -0.62 yen and the euro/dollar +0.31 cents. The dollar index rallied smartly yesterday and finished with sizable gains. Bullish factors included (1) dollar supportive comments from Japanese Parliamentary Secretary of Finance Furumoto who said that Japan supports a strong dollar and doesn't intend to reduce its holdings of US Treasuries or buy more gold, and (2) an increase in the safe-haven demand for the dollar after global stock prices fell when Chinese Premier Wen Jiabao said the world economy faces a "gradual and uneven recovery." Bearish factors included (1) the report from the Financial Times that said IMF economists said world demand for dollar reserves should be reduced and alternative reserve assets should be explored, and (2) the prediction from Mitsubishi UFJ Trust & Banking that the yen will strengthen to a 14-year high of 85 yen per dollar by the end of March as the global economy heads for a "second bottom."
December crude oil prices this morning are trading up +24 cents a barrel and Dec gasoline is trading +0.60 cent a gallon. Dec crude yesterday moved sharply lower throughout the day and closed down -$2.34 a barrel at a 1-week low. Dec gasoline yesterday closed down -5.22 cents a gallon. Bearish factors yesterday included (1) the rally in the dollar index, (2) the larger-than-expected increase in weekly crude oil inventories (+1.76 million bbl versus expectations of +1.0 million bbl), (3) the unexpected increase in weekly gasoline inventories (+2.56 million bbl versus expectations of -350,000 bbl), (4) the unexpected decline in the refinery capacity rate to a 14-month low (-0.7 to 79.9% versus expectations of +0.1 to 80.7%), which is extremely bearish in that even as refiners reigned in capacity, inventories still rose, a sign of weak demand, and (5) the prediction from Deutsche Bank AG that crude oil may fall to $60 a barrel next year as wealthy countries maintain near-record levels of crude and fuel inventories. Bullish factors yesterday included (1) the IEA's hike in its 2008 global oil demand estimate to 84.9 million bpd, up +220,000 bbl from last month's estimate and its hike in its 2010 global oil demand forecast to 86.2 million bpd, up +140,000 bbl from October's estimate, and (2) the ECB's monthly bulletin for Nov in which ECB forecasters now expect economic growth in the Euro-Zone to expand 1.0% in 2010, up from 0.3% predicted three months ago, and now forecast the economy will contract 3.9% this year, less than the 4.5% contraction forecast in Aug, which signals increased energy consumption.

Barchart.com U.S. Morning Call for Thursday, November 12, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is down -0.06% and Dec S&Ps are down -4.00 points. The dollar is stronger and Treasuries and most commodities are lower, although gold still managed to post another all-time high of $1,123.40 an ounce. Positive developments for European stocks are the +0.3% m/m increase in Sep Euro-Zone industrial production, its fifth consecutive monthly increase, along with the ECB's monthly bulletin for Nov that revised up their growth outlooks. ECB forecasters now expect economic growth in the Euro-Zone to expand 1.0% in 2010, up from 0.3% predicted three months ago, and now forecast the economy will contract 3.9% this year, less than the 4.5% contraction forecast in Aug. The ECB said price pressures will stay "subdued" as they forecast inflation to average +0.3% in 2009 and +1.2% in 2010, little changed from their Aug predictions, but their long-term inflation expectations eased to +1.92% from +1.98%. Undercutting stock prices is the 4.5% decline in Maersk after the owner of the world's largest container shipper reported a net 3.86 billion kroner ($778 million) loss in the first nine months of the year, wider than analysts' estimates of a 3.62 billion-krone loss as freight carrying prices and volumes fell.

The Asian markets today closed mostly lower with Japan down -0.68%, Hong Kong -1.01%, China +0.12%, Taiwan +0.04%, Australia -0.19%, Singapore -0.52%, South Korea -1.62%, India -0.91%. Speaking at a press briefing with counterparts from the Asia-Pacific Economic Cooperation (APEC) group, Treasury Secretary Geithner said there are "early signs" of a global economic rebalancing and that Asia is "leading the world" back to recovery. In a joint statement APEC finance ministers reiterated a pledge to maintain stimulus effects "until a durable recovery in private demand is secured." Also speaking at the APEC summit was Japanese Parliamentary Secretary of Finance Furumoto who said that Japan supports a strong dollar and doesn't intend to reduce its holdings of US Treasuries or buy more gold. In a speech in Beijing today, Chinese Premier Wen Jiabao said the world faces a gradual and uneven recovery and that "the worst is over." He added that China will "continue opening up, cooperating and shouldering its responsibilities" to help restore stable global growth.

Overnight U.S. Stock News

December S&Ps this morning are trading down -4.00 points. The US stock market yesterday had a see-saw day and closed moderately higher (Dow Jones +0.43%, S&P 500 +0.50%, Nasdaq Composite +0.74%). The Dow Jones Industrials and the S&P 500 Index rose to 13-month highs and the Nasdaq Composite climbed to a 14-month high. Bullish factors included (1) carry-over support from a rally in Asian and European equity markets after China's Oct industrial production expanded by the most in 1-1/2 years and Japan's Oct machinery orders gained more than twice the amount expected, which fueled global growth optimism, (2) a rally in homebuilders after Toll Brothers was upgraded by Wells Fargo to "outperform" from "market perform" when the largest luxury US homebuilder said orders surged 42% in fiscal Q4 and cancellations slowed, and (3) comments from Dallas Fed President Fisher who said that US economic growth and inflation may persist below ideal levels into 2011, which he said makes the Fed's current interest-rate stance "appropriate."
Bearish factors included (1) the prediction from Zisler Capital Partners that "a crisis of unprecedented proportions is approaching" in the US commercial real-estate market as building owners may default on $500 billion to $750 billion of mortgage debt, or 54% of the $1.4 trillion in loans that will come due in 4 years, which will cause many regional and community banks to end up insolvent as they reduce the value of their debt holdings, (2) weakness in commodity and energy producers after the dollar rebounded from a 15-month low and caused commodity prices to fall, and (3) comments from ECB Council member Wellink who said that the world economy is "fragile" and the financial and real economy have a long way to go before they fully recover.
Green Mountain Coffee Roasters (GMCR) fell nearly 9% in European trading after saying it probably will earn 15 cents a share at most in Q1, less than analysts' estimates of 23 cents.
Wal-Mart (WMT) fell 1% in pre-market trading despite reporting Q3 profit od 84 cents a share, better than analysts' estimates for 81 cents and raising its full-year profit forecast to $3.57 to $3.61 a share, up from a previous forecast of $3.50 to $3.60 a share. Wal-Mart however, did drop its Q4 profit estimate to $1.08 to $1.12 a share, lower than analysts' estimates for profit of $1.12

Today's U.S. Market Focus

December 10-year T-notes this morning are trading down -4 ticks. Dec T-note prices yesterday rallied to a 1-month high and closed up +14.5 ticks at 119-010. Trading in cash Treasuries was closed yesterday for the Veterans Day Holiday. Bullish factors for T-note prices yesterday included (1) dovish comments from Dallas Fed President Fisher who said "looking into 2010 and perhaps to 2011, the most likely outcome is for growth to be suboptimal, unemployment to remain a vexing problem and inflation to be subdued," which indicates that Fisher, a notable Fed hawk, may support keeping Fed policy extremely accommodative for an extended period, and (2) comments from ECB Council member Wellink who said that the world economy is "fragile" and the financial and real economy have a long way to go before they full recover. Bearish factors yesterday included (1) the rally in the S&P 500 Index to a 13-month high which diminishes the safe-haven allure of Treasuries, and (2) supply concerns with Thursday's $16 billion 30-year T-bond auction, the final leg of the Treasury's record $81 billion Nov quarterly refunding operation.
The dollar index this morning is higher with the dollar/yen -0.06 yen and the euro/dollar -0.62 cents. The dollar yesterday rebounded from an early slump to a 15-month low and closed higher on the day. Bullish factors included (1) comments from Treasury Secretary Geithner who said that a strong dollar is "very important" to US economic health, (2) weakness in the British pound after BOE Governor King said a weaker pound should help the U.K. economy, and (3) a possible increase in the safe-haven demand for the dollar after comments from ECB Council member Wellink who said that the world economy is "fragile" and the financial and real economy have a long way to go before they fully recover. Bearish factors included (1) the prediction from BNP Paribas SA that the dollar may extend declines as recent Fed speak is "dovish" and shows that policy makers are concerned that unemployment will continue rising, and (2) comments from Dallas Fed President Fisher who said that US economic growth and inflation may persist below ideal levels into 2011, which makes the Fed's current interest-rate stance "appropriate."
December crude oil prices this morning are trading down -69 cents a barrel and Dec gasoline is trading -1.25 cents a gallon. Dec crude yesterday traded higher through mid-morning when it shed most of its gains as the dollar strengthened and finally closed up +$0.23 a barrel. Dec gasoline yesterday closed up +1.53 cents a gallon. Bullish factors yesterday included (1) OPEC's hike in its 2010 global oil demand forecast for a third month to 85.07 million bpd, +40,000 bpd more than its October estimate, (2) the +19% m/m increase in Oct China crude oil imports to 19.34 million tons, its second-highest total ever as Oct China industrial production soared +16.1% y/y, the largest increase in 1-1/2 years and an indication of strong energy demand, and (3) comments from Qatar's energy minister who said that that the crude oil market is "very comfortable" and OPEC is unlikely to increase production quotas when it meets next month. Bearish factors yesterday included (1) the rebound in the dollar index which closed higher after falling to a 15-month low, (2) the drop in OPEC's compliance with its output cuts to 60% in Oct, down 62% in Sep as crude prices near a 1-year high encouraged cartel members to cheat and increase production above their quotas, and (3) expectations that weekly crude supplies rose when the DOE releases its weekly inventory report Thursday. Expectations for Thursday's weekly DOE inventory report (released a day later due to Veterans Day) are for crude oil stockpiles to rise +1.0 million bbl, gasoline inventories to fall -400,000 bbl, distillate supplies to drop -800,000 bbl, and the refinery capacity rate to rise +0.1 to 80.7%.

Barchart.com U.S. Morning Call for Tuesday, November 10, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is unchanged and Dec S&Ps are down -2.90 points. Treasuries are higher while the dollar and commodity prices are little changed. European stocks are gyrating on either side of unchanged after Credit Suisse upgraded European stocks and Nov German economic sentiment fell more-than-expected. Credit Suisse recommended investors increase their holdings in mainland European stocks, after they upgraded the region to "overweight" from "underweight," saying "Europe tends to outperform when interest rate expectations start to rise." Also benefiting European stock prices was comments from ECB Council member Yves Mersch who said "it would not be surprising" if the bank raises its economic growth forecasts next month along with a 3.9% gain in HSBC Holdings Plc after the lender sid Q3 profit was "significantly" higher than a year ago on lower loan loss provisions. Undercutting stock gains was the larger-than-expected decline in the Nov German ZEW economic sentiment survey which fell -4.9 to 51.1, more than market expectations for a -1.0 drop to 55.0 as the prospect of expiring government stimulus programs and rising unemployment crimped expectations for economic growth.

The Asian markets today closed mostly higher with Japan up +0.63%, Hong Kong +0.27%, China +0.23%, Taiwan +0.75%, Australia +1.26%, Singapore +0,53%, South Korea +0.45%, India -0.35%. Fitch Ratings today predicted that Japan is unlikely to experience a "rapid economic recovery" as a stronger yen, falling prices and unemployment weigh on growth. Fitch added that "the recovery process for Japan in 2010 is expected to be modest and fragile, since domestic economic conditions point towards a possibly extended period of deflation." Fitch Ratings currently has as AA rating and a stable outllook on Japan's long-term, foreign-currency borrowings, the third-highest grade. Japanese banks closed higher after Japanese Financial Services Minister Kamei said domestic banks won't be punished if their Tier 1 capital ratios fall briefly below 4%. China's Oct house prices jumped +3.9% y/y, the biggest gain in 14 months, adding to concern that record lending may create asset bubbles in China's economy.

Barchart.com U.S. Morning Call for Monday, November 9, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +1.54% and Dec S&Ps are up +9.90 points. Global stock markets are up sharply after the Group of 20 finance ministers and central bankers agreed to maintain stimulus measures to boost economic growth. Treasuries and the dollar are weaker, with the dollar index falling to a 2-week low, while commodities are higher, with gold surging to yet another record high. The G-20 said at the conclusion of their meeting on Nov 7 that while economic and financial conditions have improved, "the recovery is uneven and remains dependent on policy support, and high unemployment is a major concern." Also aiding gains in European stocks was the larger-than-expected increase in Sep German exports which rose +3.8% m/m versus expectations of +2.5% m/m, as a global recovery stoked demand for German goods. To meet that ramped up demand for exports, Sep German industrial production increased a greater-than-expected +2.7% m/m, as growth in Europe's largest economy gathers pace. Sentiment among European consumers and businesses continues to improve after the Oct Bank of France business sentiment rose a more than expected +2 to 95, while the Nov Euro-Zone Sentix investor confidence increased a larger-than-expected +7 to -7.0, both gaining to their highest levels in 1-1/2 years.

The Asian markets today closed higher with Japan up +0.20%, Hong Kong +1.73%, China +0.37%, Taiwan +0.99%, Australia +1.76%, Singapore +1.32%, South Korea +0.37%, India +2.11%. Moody's Investors Service raised China's ratings outlook to "positive" from "stable," citing the government's success in steering the nation through the global crisis. The change affects China's A1 foreign and local currency bond ratings, while Moody's also lifted Hong Kong's outlook to positive from stable. The China Association of Automobile Manufacturers said today that Oct China car sales jumped +76% m/m to 946,400 units, with sales in the first 10 months of this year up +45.2% from a year earlier to 8.19 million as governemnt stimulus measures spurred demand. The director-general of Shanghai's financial services office said today in Beijing that China's central bank and banking regulator may "soon" reduce "leverage ratios" to limit the use of debt in real-estate purchases after asset prices climbed. Excessive borrowing by some Chinese developers threatens to cause an increase in delinquent debts should prices collapse.

Barchart.com U.S. Morning Call for Friday, November 6, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +0.10% and Dec S&Ps are up +1.30 points. Treasuries and commodities are higher and the dollar weaker on speculation this morning's US employment report will add to evidence the labor-market slump is bottoming. Continued better-than-expected earnings results has helped European stocks to firm today after Hannover Re rose 3.7% after Germany's second-biggest reinsurer posted Q3 net income of 159.4 million euros ($237 million), beating analysts' estimates of 148 million euros, and they also raised their full-year profit target. British Airways climbed 6.3% even after reporting a first-half net loss of 217 million pounds ($360 million), as they said premium air traffic slipped 1.4% last month versus a 7.9% decline in Sep and that volume and yields, a measure of revenue per passenger, are now stable. Also benefiting Eurpean stock prices was the +0.9% increase in Sep German factory orders, the seventh consecutive monthly gain, as a 3.7% increase in export orders helped the recovery in Europe's largest economy to gather pace. Keeping gains in check was the 3.8% tumble in Lafarge after the world's biggest cement maker reported that Q3 net income fell to 404 million euros from 637 million euros a year earlier and it predicted a 6% to 8% drop in cement sales this year versus a July estimate of a 4% to 8% sales decline.

The Asian markets today closed higher with Japan up +0.74%, Hong Kong +1.63%, China +0.54%, Taiwan +0.61%, Australia +1.91%, Singapore +1.10%, South Korea +1.48%, India +0.59%. Asian stock markets were boosted today after Australia's central bank, the RBA, predicted that the Australian economy will expand at more than three times the pace forecast in Aug, and signaled "a further gradual lessening of monetary stimulus is likely required over time." The RBA now forecasts GDP will rise 1.75% this year and 3.25% in 2010, higher than its Aug estimates of 0.5% and 2.25%. Australian bank stocks rallied, led by Macquarie Group, Australia's largest investment bank, and Westpac Banking, the country's second-largest bank, both closing more than 2.5% higher, while DBS Group Holdings, Southeast Asia's biggest lender, closed 2.9% higher after it reported better-than-expected Q3 net income.

Barchart.com U.S. Morning Call for Thursday, November 5, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is down -0.57% although Dec S&Ps are up +0.70 of a point. The Bank of England raised its bond purchase plan by a less than expected 25 billion pounds ($41 billion), the third increase since Mar, bringing the total amount of bond pruchases to 200 billion pounds as policy makers try to assure a recovery through quantitative easing, The BOE also kept its key benchmark rate at a record low of 0.5%, as expected. The unexpected decline in Sep Euro-Zone retail sales is undercutting European stock prices with sales dropping -0.7% m/m and -3.6% y/y, the 16th consecutive month of year-over-year declines. Consumer spending in Europe continues to be held back amid concerns of rising unemployment, with the Euro-Zone unemployment rate rising to 9.7% in Sep, the highest in a decade. The European Commission forecast two days ago that the jobless rate will reach 10.9% in 2011, which would be the most since at least 1995.

The Asian markets today closed mostly lower except for China which closed up +0.30% and at a 2-month high. Japan closed down -1.29%, Hong Kong -0.63%, Taiwan -0.66%, Australia -0.71%, Singapore -0.73%, Soth Korea -1.77%, India +0.95%. China's stocks bucked the trend of lower Asian stock markets as they rallied for a fifth day. Transportation stocks led the rally today as railroad companies surged after China's deputy director of the State Council's Development Research Center said exports may return to growth at the end of this year and may grow by 8% to 10% in 2010. China's exports had plunged as the financial crisis slowed global trade with China's Sep exports falling -15.2% y/y. Leading the way lower in the rest of the Asian markets was the 2.9% drop in Samsung Electronics as Asia's biggest maker of chips and mobile phones fell after South Korea's finance minister said its "unclear" whether the economic rebound will be sustained and that South Korea remains "too dependent" on external demand.

Barchart.com U.S. Morning Call for Wednesday, November 4, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +0.87% and Dec S&Ps are up +6.10 points. European and US stocks are higher on speculation that the Fed at the conclusion of today's FOMC meeting will repeat its stance that interest rates will stay on hold for an "extended period." The dollar and Treasuries are weaker, while commodity prices are higher with gold surging to yet another record high. Supporting a rally in European stocks is the 3.2% gain in Societe Generale, France's second-biggest bank by market value, after it reported Q3 net income of 426 million euros ($627 million), above analysts' estimates of 300 million euros, after its investment-banking unit returned to profit. European producer prices continue to be well contained after the Sep Euro-Zone PPI fell an as expected -0.4% m/m and -7.7% y/y, the ninth consecutibe monthly decline in prices on an annual basis.

The Asian markets today closed higher with Japan up +0.42%, Hong Kong +1.76%, China +0.54%, Taiwan +1.97%, Australia +0.19%, Singapore +1.03%, South Korea +1.99%, India +3.29%. Asian stocks closed higher today on profit optimism and prospects for increased earnings. Korea Exchange Bank jumped 7.8% after saying Q3 profit almost tripled and Japan Steel Works surged 10% after it lifted its net income target by 6.4% for the year to Mar 2010, citing cost cuts. Asian gold producrs and mining stocks also closed higher after gold prices climbed to an all-time high. The World Bank said in its semi-annual report today that developing East Asia, which excludes Japan, Hong Kong, Taiwan, South Korea, Singapore and the Indian subcontinent, will expand 6.7% this year, more than an Apr estimate of 5.3%. The World Bank also raised its estimate for China's growth this year to 8.4% from 7.2% and urged China's policymakers to avoid stock and property-market bubbles after lending in China swelled to a record $1.27 trillion this year.

Barchart.com U.S. Morning Call for Monday, November 2, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +0.18% and Dec S&Ps are up +6.60 points. The main bullish factor for global stock prices today is the expansion in Chinese manufacturing data for Oct to its fastest pace in 18 months, stoking optimism that growth in China will help ensure a global recovery. The dollar and Treausuries are weaker and commodity prices are higher. European and US stocks are higher despite the bankruptcy filing by CIT yesterday, which received $2.33 billion in government funds and is the largest firm to go bankrupt after getting a federal bailout. Limiting gains in European stocks is weakness in bank stocks, led by the 7% drop in RBS, after Britains's biggest government-controlled bank said it may be forced by the European Union to sell more assets than planned. The EU is forcing banks that took state money to sell assets and branches to ensure they don't have an unfair advantage. Lloyds Banking Group, which is 43% owned by the British government, fell 3.2% after Chancellor of the Exchequer Darling, who said in an interview yesterday that breaking up RBS, Lloyds and Northern Rock will help create three new banks by 2013 and boost competition.

The Asian markets today closed mostly lower with Japan down -2.31%, Hong Kong -0.61%, China +3.43%, Taiwan -0.07%, Australia -2.21%, Singapore -0.22%, South Korea -1.24%. Chinese stock prices closed higher today after the Oct China HSBC purchasing managers index rose +0.4 to 55.4, its fastest rate of growth in 18 months. An index of export orders in the HSBC report jumped to its highest level since Jun 2007 and job creation was the strongest since the HSBC survey began in Apr 2004. Japanese stocks closed lower despite the +12.5% y/y gain in Oct Japan vehicle sales, its third straight monthly increase and its biggest year-over-year increase in 12-1/2 years. Japan's domestic vehicle sales this fiscal year may still be the worst in three decades due to Japan's recession. The yen rallied to a 2-week high against the dollar today which undercut Japanese exporters on concern the sronger yen will reduce income when overseas revenue is converted into yen, while Sep Japan labor cash earnings fell -1.6% y/y, their sixteenth consecutive decline, which adds to concerns that consumer spending may be too weak to support a recovery as wages continue to fall.

Barchart.com U.S. Morning Call for Friday, October 30, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is down -0.14% and Dec S&Ps are down -3.30 points. An unexpected decline in Sep German retail sales for a second month is dragging European stocks lower today along with the expected +0.1 rise in the Sep Euro-Zone unemployment rate to 9.7%, a 10-3/4 year high. Sep German retail sales fell -0.5% m/m and -3.9% y/y when market expectations were for a +1.0% m/m gain. Average Q2 wages in Germany fell -1.2% y/y after companies reduced working hours to cut costs during the economic slump. With employers cutting back on hours instead of firing employees, workers have less income for spending. European Union leaders say it's too early to withdraw emergency stimulus measures put in place to counter the recession, according to a draft statement from the conclusion of today's 27-nation summit in Brussels. The European Union leaders backed away from imposing a target date for exiting from stimulus programs "until the recovery is fully secured," according to the statement. Inflation in the Euro-Zone continues to be muted after the Oct Euro-Zone CPI estimate fell an as expected -0.1% y/y, its fifth consecutive monthly decline,

The Asian markets today closed mostly higher with Japan +1.45%, Hong Kong +2.29%, China +1.03%, Taiwan -0.21%, Australia +1.50%, Singapore +0.71%, South Korea -0.42%, India -0.97%. The Peoples Bank of China said on its web site today that China will sustain its economic rebound this quarter and growth is likely to top the government's 8% target for 2009. Today's comments contrast with the PBOC's July report, which described China's economy as being in a "critical" phase and facing many uncertainties. Chinese stocks also received a boost after Bank of China, the country's third-largest lender, rose 5.8% when it reported Q3 profit of 21.1 billion yuan ($3.09 billion), beating analysts' estimates of 20.52 billion yuan. The Bank of Japan said today it will stop buying corporate debt at the end of the year, as global central banks begin to phase out emergency measures taken at the height of the financial crisis. BOJ Governor Shirakawa also said they will only extend a program providing unlimited collateral-backed loans to banks one last time through Mar of 2010. Japanese stocks received a boost today after the Sep Japan jobless rate unexpectedly declined -0.2 to 5.3%. The market had been expecting a +0.1 increase to 5.6%.

Barchart.com U.S. Morning Call for Thursday, October 29, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +0.10% and Dec S&Ps are up +5.10 points. The dollar and Treasuries are weaker, which has pushed metals and crude oil higher. The markets are looking ahead to this morning's US Q3 GDP which is expected to show the US economy expanding for the first time in more than a year. Pushing European stock prices higher today is the larger-than-expected increase in the Oct Euro-Zone economic confidence which rose +3.4 to 86.2, its highest level in 13 months. Also benefiting stocks was the unexpected decline in Oct German unemployment which fell -26,000 to 3.43 million with the jobless rate unexpectedly slipping -0.1 to 8.1%, and adds to signs that the German economy may help lead the Euro-Zone out of recession. In an attempt to boost lending, Russia's central bank, Bank Rossii, lowered the refinancing rate to 9.5% from 10% and cut the repurchase rate charged on central bank loans also by 50 bp to 8.5%, both to record lows. Bank Rossii has cut rates eight times since Apr 24 to help stimulate lending after Russia's economy shrank a record -10.9% in Q2 and contracted a further -9.4% in Q3. Limiting gains in European share prices were weaker than expected earnings from BASF SE, after the world's biggest chemical company fell 2% after it reported Q3 net income of 237 million euros, well below analysts' estimates of 413 million euros, and Royal Dutch Shell Plc, Europe's largest oil conpany, dropped 3.6% after it reported a 62% plunge in Q3 earnings and said a "quick recovery" in energy demand and prices is unlikely.

The Asian markets today closed lower with Japan down -1.83%, Hong Kong -2.28%, China -2.47%, Taiwan -2.37%, Australia -2.36%, Singapore -0.63%, South Korea -1.59%, India -1.42%. Disappointing earnings results helped lead Asian share prices lower today after PetroChina, the nations's biggest oil producer, slumped 4% after it reported Q3 profit fell -24% to 30.8 billion yuan ($4.5 billion), when the market was expecting profit of 35 billion yuan. Advantest Corp., the world's number-one maker of memory-chip testers, closed 6.6% lower after posting a wider Q3 loss on slumping orders, while NEC Electronics tumbled 8.3% after widening its full-year loss forecast. ANZ bank, Australia's second-biggest provider of business loans, slipped 2.1% after its CEO said the RBA should have waited longer before raising borrowing costs because the economy is "still fragile," while most raw-material and energy producers declined after the rising US dollar yesterday caused commodity prices to plummet. On the positive side, Japan's industrial production increased a larger-than-expected +1.4% m/m in Sep, its seventh consecutive month of gains, as stimulus spending by governments helped to revive trade.

Barchart.com U.S. Morning Call for Wednesday, October 28, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is down -1.18% and Dec S&Ps are down -5.60 points. The dollar and Treasury prices are stronger, while most commodity prices are lower. Weaker-than-expected earnings are leading global share prices lower today after SAP, the world's biggest maker of business-managment software, slid 7% when it reported Q3 profit of 435 million euros ($645 million) on sales of 2.51 billion euros. Analysts' had been expecting net income of 454 million euros and sales of 2.63 billion euros. ArcelorMittal fell over 2% and led European steelmakers lower after the world's largest steelamker reported Q3 operating income plus depreciation and other expenses of $1.59 billion, which missed analysts' estimates of $1.78 billion. Irish Banks were taken down on concern the European Union may demand changes in return for government aid. Bank of Ireland Plc sank 15% and Allied Irish Banks Plc dropped 13%. European banks have been undercut this week after ING Groep NV agreed to EU demands that it sell its insurance units to secure approval for its bailout, which has negatively impacted sentiment toward other European banks. On the positive side, price pressures continue to be non-existent after Sep German import prices fell more-than-expected and posted their eleventh consecutive month of year-over-year declines.

The Asian markets today closed mostly lower with Japan down -1.35%, Hong Kong -1.84%, China +0.44%, Taiwan -1.61%, Australia -1.44%, Singapore -1.69%, South Korea -2.51%, India -0.43%. Asian stocks fell on concern about the strength of the global economic recovery. Canon lost 3.4% after the world's largest camera maker reported its seventh-straight drop in quarterly profit, while Toshiba fell 4.6% after saying the outlook for the global economy in the second half of its fiscal year "remains highly opaque." Asian steelmakers slumped after China's Ministry of Industry and Information Technology said steel inventories held by large Chinese companies jumped 10% in the first nine months of this year, adding to evidence of slack demand and oversupply. China's Banking Regulatory Commission said today it plans to tighten rules on personal loans to prevent them from being used for speculation. The tightening reflects concern that funds are being diverted to stocks and property, raising the risk of asset bubbles and bad loans. On the positive side, Honda Motor climbed 3.3% after Japan's second-largest carmaker raised its full-year earnings estimates as it now predicts net income of 155 billion yen in the year ending Mar, compared with an earlier target of 55 billion yen.

Barchart.com U.S. Morning Call for Tuesday, October 27, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +1.04% and Dec S&Ps are up +2.30 points. European and US stock proces are gyrating on either side of unchanged with a weaker dollar and mixed commodity prices offering little support. Boosting European share prices though was the better-than-expected Q3 earnings from BP Plc, Europe's second-largest oil company. BP reported Q3 earnings, excluding one-time items and inventory changes, of $4.67 billion from a year earlier, which beat analysts' estimates of $3.25 billion. BP also raised its cost-cutting target for 2009 to $4 billion from a previous target of $3 billion which helped send its share price 4.8% higher to a 16-month high. Also supporting European share prices was the unexpected improvement in the Oct French consumer confidence indicator which rose +1 to a 1-3/4 year high of -35. Limiting gains in European stocks are weaker financial shares with ING down 5.8%, extending yesterday's 18% plunge, and Lloyds Banking Group Plc down 4.6%, adding to yesterday's 7.2% fall, on speculation the European Union may compel banks to repay aid.

The Asian markets today closed lower with Japan down -1.45%, Hong Kong -1.86%, China -2.91%, Taiwan -0.14%, Australia -1.59%, Singapore -0.81%, South Korea -0.45%, India -2.31%. India's stocks tumbled after its central bank increased its inflation forecast and ordered lenders to keep more cash in government bonds, fueling speculation it may raise interest rates by year-end. Japanese shipping lines weakened after Kawasaki Kisen more than doubled its net-loss forecast for the year to Mar 2010, Nippon Yusen widened its full-year loss forecast by more than fivefold and Mitsui O.S.K cut its annual earnings target by 93%. Japanese consumer lenders also fell after the Japan Financial Services Association said that half of he companies' borrowers may be rejected for additional loans as regulations providing a limit on lending are implemented. China's Ministry of Commerce said investment by Chinese firms abroad rose to $20.5 billion in Q3, almost triple a year earlier, and predicts that industrial production may rise 16% in Q4, compared with a 13.9% pace of gains in Sep. China's policy makers may be encouraging Chinese companies to invest abroad to help counter pressure for the yuan to appreciate. China's central bank Deputy Governor Yi Gang said inflation in China isn't a big risk in the foreseeable future and that the government will keep the yuan exchange rate stable.

Barchart.com U.S. Morning Call for Monday, October 26, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +0.15% and Dec S&Ps are up +1.50 points. The dollar, crude oil and Treasuries are weaker, while copper has pushed up to a 13-month high. Helping to propel European stocks higher is the 8.4% surge in Electrolux AB after the world's second-biggest appliance maker reported Q3 net income of 1.63 billion kroner, beating analysts' estimates of 829 million kroner. Limiting stock gains in Europe was the 9.7% tumble in ING Groep NV after the company proposed plans to riase 7.5 billion euros ($11.3 billion) in a stock sale that may dilute the value of current shares as it starts to repay a 10 billion-euro government loan sooner than originally planned. Also undercutting European share prices was the unexpected drop in the Nov German GfK consumer sentiment index which fell -0.2 to 4.0, its first decline in in 14 months, as concerns over rising energy prices and higher unemployment dampen the optimisim of an economic recovery.

The Asian markets today closed mostly higher with Japan +0.77%, China +0.03%, Taiwan +0.25%, Australia -0.60%, Singapore +0.05%, South Korea +1.27%, India -0.42%. Automakers led a rally in Asian stocks after Toyota Industries, a parts manufacturer controlled by Toyota Motor, jumped 7.4%, while Toyota Motor, the world's biggest automaker rose 1.7%. Kia Motors, South Korea's second-biggest automaker, gained 1.9% after Credit Suisse Group AG upgraded the company to "neutral" from "underperform." The upgrade also helped to boost Hyundai Motor, South Korea's largest carmaker, by 4.1%. South Korea's Q3 GDP rose 2.9% q/q, a larger-than-expected increase and the fastest pace of growth since Q1 of 2002, which is fueling speculation that South Korea may join Australia in raising interest rates when the Bank of Korea next meets on Nov 12 to review borrowing costs.

Overnight U.S. Stock News

December S&Ps this morning are trading up +1.50 points. The US stock market last Friday faded from the recent 1-year high and closed moderately lower (Dow Jones -1.08%, S&P 500 -1.22%, Nasdaq Composite -0.50%). Bearish factors included (1) a 13% plunge in Boston Scientific, which dragged health care stocks lower, (2) an 8.4% drop in Burlington Northern on weaker-than-expected Q4 guidance, which hurt transportation stocks, (3) a sharp 6.2% sell-off in Dow-component Boeing after reporting a bigger-than-expected loss and reducing its 2009 earnings guidance, and (4) continued concern about valuation levels with the S&P 500 trading at forward earnings of 17.6, well above the 5-year average of 15.3, (5) the breadth of last week's weakness with 9 of the 10 S&P 500 industries closing lower, led by the raw-materials, health care, and industrials companies.
Bullish factors included (1) an extraordinary 24% rally in Amazon on a stronger-than-expected earnings report, (2) an 8.5% surge in Apple on strong iPhone and Mac sales and hopes for new product announcements, (3) favorable earnings from New York Times, PNC Financial Services, and Capital One, (4) last Friday's stronger-than-expected Sep existing home sales report of +9.4% to 5.57 million units (versus expectations of +4.9% to 5.35 million), and (5) generally favorable Q3 earnings as 80% of companies have so far beat expectations versus the typical figure of 61%.
Verizon Communications (VZ) rallied 2.4% on speculation that its Q3 earnings results scheduled to be released later this morning will beat market expectations.
Corning (GLW) rose 1.6% in European trading after the company reported Q3 profit of 42 cents a share, better than analysts' estimates of 39 cents

Today's U.S. Market Focus

December 10-year T-notes this morning are trading down -7 ticks. Dec T-note prices last Friday posted a new 1-month low and closed down 12 ticks. Bearish factors for T-note prices last Friday included (1) last Friday's stronger-than-expected Sep existing home sales report of +9.4% to 5.57 million units (versus expectations of +4.9% to 5.35 million), (2) supply overhang ahead of this week's heavy auction schedule, (3) some concern that the FOMC at its meeting next week may discuss a medium-term plan for removing liquidity and raising interest rates, (4) the scheduled completion this Thursday of the Fed's $300 billion Treasury purchase program, which will remove a big buyer from the Treasury market, and (5) techical weakness with a new 1-month low. The main bullish factor was the sell-off in the stock market, which boosted safe-haven demand for Treasury securities.
The dollar index this morning is weaker with the dollar/yen -0.25 yen and the euro/dollar +0.27 cents. The dollar index last Friday closed mildly higher by 0.374 points, recovering a bit from last Wednesday's 14-month low. Bullish factors included (1) last Friday's stronger-than-expected US existing home sales report, (2) last Friday's sell-off in US stocks, which sparked some safe-haven demand for the dollar, (3) some carry-over support from last Thursday's news that Bank of Canada Governor Mark Carney said that intervention to weaken the Canadian dollar "is always an option," which kept alive worries of intervention in support of the dollar from major G-7 central banks, and (4) some pre-weekend short-covering.
December crude oil prices this morning are trading down -26 cents and Dec gasoline is trading +1.79 cents. Dec crude oil prices last Friday closed down -69 cents, moving lower from last Wednesday's 1-year high of $82.00. Dec gasoline last Friday closed slightly lower by 0.04 cent, just below last Wednesday's 2-month high of 207.51 cents/gallon. Bearish factors last Friday included (1) carry-over weakness from OPEC Secretary-General El-Badri's comment last Thursday that OPEC may decide to increase production at its meeting in December depending on prices and the elimination of floating crude storage, (2) last Friday's mild rally in the dollar, (3) the reduced chances for a disruption of Nigerian oil production after the main Nigerian rebel group agreed to a renewed cease fire and peace talks, (4) the sell-off in the stock market, which depressed hopes about the economy and fuel demand, and (5) the weaker-than-expected UK Q3 GDP report of -0.4% q/q, which suggested an ongoing recession in the UK and continued weak fuel demand.

Barchart.com U.S. Morning Call for Friday, October 23, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +0.44% and Dec S&Ps are up 0.80 points (+0.07%). The main bullish factor overnight was the report from Amazon.com of stronger-than-expected earnings, which caused the stock to soar 14% in European trading. In addition, the German IFO October business climate index rose +0.6 to a new 1-year high of 91.9, indicating that German business confidence continues to steadily improve. Mining stocks such as BHP Billiton and Rio Tinto Group are higher as copper climbed by 1.2% to a new 1-year high and as other industrial metals prices are higher. The main bearish factor overnight was the UK Q3 GDP report of -0.4% q/q, which was substantially weaker than market expectations for an increase of +0.2%. The market had been expected the UK to climb out of recession in Q3, but UK GDP has now declined for 6 consecutive quarters. Meanwhile, the Asian stock markets today closed higher: Japan +0.15%, Hong Kong +1.71%, China +1.97%, Taiwan +0.54%, Australia +0.97%, Singapore +1.24%, South Korea +0.69%, Bombay +0.13%. South Korea-based Kia Motors rallied 6% after reporting stronger-than-expected earnings.

Overnight U.S. Stock News

December S&Ps this morning are trading slightly higher by +0.80 points on the positive Amazon earnings news. The US stock market yesterday recovered from early weakness and finished the day near its high (Dow +1.33%, S&P 500 +1.06%, Nasdaq Composite +0.68%). Bullish factors included (1) continued better-than-expected earnings reports, this time from AT&T, PNC, New York Times and McDonald's, (2) strength in insurance companies after Travelers jumped 7.7% when it boosted its quarterly dividend by 10% and said it may increase share buybacks as it benefited from fewer hurricanes and other catastrophes over the past year, (3) the larger-than-expected +1.0% increase in the Sep leading indicators which have now risen for six consecutive months, their longest stretch of gains in the last 26 years, and (4) the prediction from the Leuthold Core Investment Fund that US stocks are setting up for a year-end rally as stock prices will benefit going forward from "capitulation on the part of people who have been cautious."
Bearish factors included (1) the larger-than-expected increase in weekly US initial unemployment claims, (2) the unexpected decline in home prices in the Aug FHFA house price index, (3) comments from Boston Fed President Rosengren who said that the US economy is "at risk" of relapsing into recession next year after expanding the second half of this year, and (4) the prediction from Moody's Investors Service that rising delinquencies and an "expectation" of higher unemployment suggest credit-card write-offs will rise in coming months after credit-card loans at least 30 days delinquent, a signal of future losses, rose to 5.97% in Sep from 5.8% in Aug.

Today's U.S. Market Focus

December 10-year T-notes this morning are trading -8.5 ticks on the higher trade in global stocks and on supply overhang ahead of next week's T-note auctions. Dec T-note prices yesterday chopped on either side of unchanged throughout the day before finally closing down -1.5 ticks. Bearish factors for T-note prices yesterday included (1) the larger-than-expected increase in the Sep leading indicators which have now risen for six consecutive months (+1.0% versus expectations of +0.8%), and (2) supply pressures after the Treasury announced that it plans to sell a record $123 billion of notes and TIPS next week. Bullish factors included (1) the larger-than-expected increase in weekly US initial unemployment claims (+11,000 to 531,000 versus expectations of +1,000 to 515,000), (2) the unexpected decline in the Aug FHFA house price index (-0.3% m/m versus expectations of +0.3% m/m), and (3) comments from Boston Fed President Rosengren who said that the US economy is "at risk" of relapsing into recession next year after expanding the second half of this year.
The dollar index this morning is traidng slightly higher by +0.16 points with the dollar/yen up +0.38 yen and the euro/dollar up +0.08 cents. The dollar index yesterday traded higher throughout the day and finished with modest gains. Bullish factors for the dollar yesterday included (1) the 8.9% y/y growth in Q3 China GDP, the fastest pace in a year which fuels speculation that China will end fiscal and monetary stimulus as economic growth accelerates, which may reduce demand for higher-yielding assets, and (2) the prediction from UBS AG that central banks may act to weaken the euro if its gains persist ahead of next month's Group of 20 meeting. Bearish factors included (1) comments from Pacific Investment Management that a "disorderly decline" of the dollar, which would lead to the end of its reserve-currency status, cannot be ruled out, and (2) the prediction from Scotia Capital that the euro may reach $1.60 in three to six months as weakness in the dollar persists amid selling by central banks and as the worldwide economic recovery gathers momentum.
December crude oil prices this morning are trading +6 cents a barrel and Dec gasoline is trading -0.25 cents a gallon. Dec crude oil prices yesterday moved lower and closed down -$0.18 a barrel. December gasoline closed down -0.99 cent a gallon. Bearish factors included (1) the stronger dollar, (2) the larger-than-expected increase in weekly initial US unemployment claims, which signals a weak labor market that may keep fuel demand constrained, (3) comments from OPEC Secretary-General El-Badri that OPEC may decide to increase production at its meeting in Dec depending on prices and the elimination of floating crude storage, and (4) the -13% y/y drop in Japan crude oil imports from Apr-Sep, the biggest decline for the same period in the last 10 years, because of lower energy demand from factories after exports of Japanese manufactured goods slumped. Bullish factors included (1) the 8.9% y/y growth in Q3 China GDP, the fastest growth in over a year and a sign of increased energy consumption, and (2) the prediction from DekaBank that oil is "too cheap" and should rise to $88 a barrel in coming months as the euro strengthened to above $1.50.

Barchart.com U.S. Morning Call for Thursday, October 22, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is down -1.24% and Dec S&Ps are down -1.30 points. The dollar and Treauries are higher, while metals and crude oil are lower. Global stocks were pressured after China's GDP expanded at its fastest pace in more than a year, which fueled speculation that government stimulus measures will be removed, while some European company earnings disappointed. Ericsson AB, the world's biggest maker of mobile-phone networks, slumped 8% after it reported Q3 net income of 810 million kroner ($118 million), below market expectations of 1.97 billion kroner, while Credit Suisse AG, Switzerland's biggest bank by market value, fell 2.5% even after it reported Q3 net income of 2.35 billion Swiss francs ($2.33 billion), well ahead of analysts' estimates of 1.74 billion francs, as Citigroup said private banking results were mixed with "strong" new money inflows offset by narrowing margins. Limiting losses in European stocks was the larger-than-expected increase in the Oct French business confidence indicator which rose +3 to a 13-month high of 89, buoyed by demand from outside Europe and government support for the auto industry.

The Asian markets today closed lower with Japan -0.64%, Hong Kong -0.48%, China -0.65%, Taiwan -1.21%, Australia -0.53%, Singapore -0.39%, South Korea -1.56%, India -1.29%. China's Q3 GDP rose 8.9% y/y, near market expectations for a 9.0% increase and at its strongest pace in a year, while Sep China industrial production rose +13.9% y/y, also the fastest pace in more than a year, which puts pressure on Chinese policy makers to end their stimulus measures and raise interest rates or risk accelerating inflation. China's statistics bureau spokesman Li Xiaochao said that inflationary expectations are increasing in China as prices rise month-on-month, while former Morgan Stanley economist Xie warned that China is risking property-market "bubbles" to encourage growth. Finance companies in Japan tumbled on loan-loss concerns as Mitsubishi UFJ Financial Group, Japan's biggest publicly traded bank, dropped 3.1%, and Sumitomo Mitsui, Japan's second-largest bank by market value, fell 2.7%. Japan's Sep exports fell -30.7% y/y which while a smaller decline than the Aug drop of -36.0% y/y, is still the twelfth consecutive month of declining exports as demand for Japanese goods remains constricted as global economies emerge from recession.

Barchart.com U.S. Morning Call for Wednesday, October 21, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is down -0.76% and Dec S&Ps are down -6.30 points. Automakers are leading a decline in European stocks after PSA Peugeot Citroen tumbled 5.7% after Europe's second-biggest carmaker reported that Q3 revenue slid -7.7%. Deutsche Bank AG fell 4% even after Germany's biggest bank said Q3 profit more than tripled to 1.4 billion euros ($2.1 billion) as net income was boosted by tax credits and the resolution of tax audits related to prior years. Energy and raw-material producers weakened as crude oil prices fell and metals slumped, while the dollar weakened after Bank of England Governor King was quoted in a Scottish newspaper saying "it would be wise to take account" of the prospect of rising interest rates, signaling the BOE may begin to hike rates sooner than the market had expected.

The Asian markets today closed lower with Japan down -0.03%, Hong Kong -0.30%, China -0.25%, Taiwan -0.67%, Australia -0.16%, Singapore -0.68%, South Korea -0.41%, India -1.24%. China Mobile fell 1.3% after the world's biggest phone carrier by market value disappointed the market when it reported Q3 net income rose to 28.6 billion yuan ($4.2 billion), lower than market expectations of 29 billion yuan. BHP Billiton lost 1% as metals prices fell and Samsung, the world's biggest maker of liquid-crystal displays, dropped 2% after AT&T filed a complaint in federal court stating that Samsung and others were among those that "formed an international cartel illegally to restrict competition" in the LCD market in the US. On the positive side, Toshiba rose 3.6% after CLSA upgraded the stock to "buy" from "underperform," citing rebounding demand for flash memory and Japan Airlines jumped 5.9% after the Nikkei newspaper reported that a government panel recommended the airline receive 300 billion yen ($3.3 billion) in private and public funds, more than an earlier proposal for 150 billion yen.

Barchart.com U.S. Morning Call for Tuesday, October 20, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +0.18% and Dec S&Ps are up +5.50 points, both at 1-year highs. Better-than-expected earnings results from Apple and Caterpillar are boosting stock prices this morning. The dollar has sunk to a fresh 14-month low which has boosted gold prices, while crude oil fell back from a 1-year high of over $80 a barrel. European stocks were undercut after Barclays fell nearly 5% after Qatar Holding LLC said it would sell more than 379 million shares in the UK's second biggest bank. The Asian markets today closed mostly higher with Japan +0.98%, Hong Kong +0.83%, China +1.45%, Taiwan +0.03%, Australia +1.11%, Singapore -0.02%, South Korea +0.62%, India -0.59%.

Overnight U.S. Stock News

December S&Ps this morning are trading up +5.50 points at a new 1-year high. The US stock market yesterday extended its 7-month rally and finished higher (Dow +0.96%, S&P 500 +0.94%, Nasdaq Composite +0.91%). The S&P 500 Index climbed to a 1-year high. Bullish factors included (1) optimisim that Q3 company earnings results will be better-than-expected, (2) the prediction from Nomura Holdings that earnings at US companies will probably exceed analysts' Q3 expectations and support further gains in equities through the end of the year, and (3) the statement from the New York Fed that it has been working with market participants on the operational aspects of reverse repurchase agreements, which is bullish as it suggests the economy has improved enough for the Fed to prepare to remove some of the excessive liquidity it had provided to the markets during the financial crisis.
Bearish factors included (1) the unexpected decline in the Oct NAHB housing market index, indicating that the US housing market continues to struggle, (2) the prediction from Bank of America that "seasonal weakness" that often occurs in Sep and Oct will occur this year instead in Nov, Dec and Jan, and (3) comments from Greenlight Capital that JPMorgan Chase, Bank of America, Wells Fargo and Citigroup should all be broken up because the US government would be forced to bail them out if they were in danger of collapse due to their continued systemic importance.
Apple (AAPL) surged over 6% in after-hours trading after it reported Q4 EPS of $1.82, ahead of analysts' extimates of $1.43, due to strong back-to-school demand for iPhones, iPods and Macintosh computers.
Caterpillar (CAT) is 3.7% higher in pre-market trading after it reported Q3 profit of 64 cents a share, well ahead of analysts estimates of 5 cents. Caterpillar also raised its full-year guidance as it now forecasts 2009 profit of $1.85 to $2.05 a share compared to the previous range of $1.15 to $2.25 per share

Barchart.com U.S. Morning Call for Monday, October 19, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +1.31% and Dec S&Ps are up +6.80 points. European and US stock prices are higher on speculation for continued better-than-expected Q3 earnings results. The dollar and Treausuries are weaker, while metals prices are stronger. Nomura Holdings predicts that earnings at US companies will probably exceed analysts' Q3 expectations and support further gains in equities through the end of the year, while JPMorgan Chase upgraded Russian stocks and emerging-market energy companies to "overweight," saying valuations are "attractive" after crude oil rose above $78 a barrel. The British pound is weaker today afer the Sunday Times reported that Bank of England policy maker Posen said he may support an extension of the BOE's current 175 billion pound ($286 billion) asset-purchase program to help stimulate the economy.

The Asian markets today closed mostly higher with Japan down -0.21%, Hong Kong +1.23%, China +2.70%, Taiwan +0.47%, Australia -0.90%, Singapore +0.13%, South Korea +0.60%, India closed for holiday. The Bank of Japan said in its quarterly regional report today that "signs of picking up had appeared throughout the economy, although regional differences remained." BOJ Governor Shirakawa added that while the economy has started to "pick up," domestic demand remains weak and the policy board is concerned about risks to growth and prices, suggesting the BOJ may proceed slowly in removing stimulus measures and emergency liquidity programs. Japan's demand for services rose for the third straight month in Aug after the Aug tertiary index, which captures 63% of the economy, advanced 0.3 to 97.1, the highest level since Jan and signals Japan's recovery may be gaining strength. Chinese stocks strengthened on speculation that data released later this week will show China's Q3 GDP expanded at a 9% pace, its strongest level of growth since Q3 of last year.

Barchart.com U.S. Morning Call for Friday, October 16, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is down -0.12% and Dec S&Ps are down -3.10 points. European and US stocks retreated from 1-year highs after Bank of America reported a $1 billion Q3 loss. The dollar strengthened which has weakened commodity prices, while Treasury prices are little changed. Upbeat earnings from Google late yesterday propped up stock prices earlier as Google's CEO predicted that the worst of the recession has passed and the company has "the confidence to be optimistic." European energy producers are stronger after crude oil surged to a 1-year high yesterday, while Swiss Life climbed 5.5% after Citigroup upgraded Switzerland's biggest life insurer to "buy" from "hold." Undercutting European stock prices was the fall in Aug Euro-Zone exports by a seasonally adjusted -5.8% from July, the biggest decline since Jan, as the euro's appreciation threatens to undermine Europe's economic recovery. The euro has gained 15% against the dollar in the last seven months, eroding export returns for European companies, just as the region is beginning to recover from the gloabal economic slump.

The Asian markets today closed mixed with Japan +0.18%, Hong Kong -0.31%, China +0.06%, Taiwan +0.06%, Australia -0.48%, Singapore -0.15%, South Korea -1.18%, India +0.74%. Asian airline stocks weakened after the Interantional Air Transport Association said in a statement yesterday that a recovery in premium air travel slowed in Aug and may have reversed last month as demand for business flights remains fragile. Japanese export companies closed higher as the yen weakened to a 3-week low against the dollar while the US Treasury Department criticized China for the "lack of flexibility" of the yuan. In a semiannual report to Congress, the Treasury Department said the rigidity of China's currency and an acceleration in the nation's buildup of foreign-exchange reserves should be "corrected" to help ensure a stronger, more balanced global economy. China's Commerce Ministry said yesterday that the nation would stick to a "gradual" approach on currency reform, moving at its own pace, while the Asian Development bank cautioned that China would risk instability by letting the yuan appreciate excessively.

Barchart.com U.S. Morning Call for Thursday, October 15, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +0.77% and Dec S&Ps are down -0.30 points. European and US shares are little changed ahead of more Q3 company earnings, while Asian stocks ended higher. The dollar fell to a new 14-month low and crude oil rallied to nearly a 1-year high. Inflation pressures in Europe continue to be muted after the Sep Euro-Zone CPI was unchanged m/m and fell -0.3% y/y, the fourth consecutive year-over-year decline. European stocks lost ground after Nokia Oyj, the world's biggest maker of mobile phones, dropped 7% after it reported an unexpected Q3 loss as demand slid. Nokia reported a loss of -559 million euros (-$833.9 million) when analysts were expecting a profit of 367 million euros. In its monthly bulletin released today, the ECB reiterated recent comments from ECB President Trichet that interest rates remain "appropriate," and that the Euro-Zone economy is stabilizing and is expected to recover at a gradual pace.

The Asian markets today closed mostly higher with Japan +1.77%, Hong Kong +0.51%, China +0.38%, Taiwan +0.19%, Australia +0.60%, Singapore +0.14%, South Korea +0.73%, India -0.21%. Chinese stocks were bolstered after the Ministry of Commerce reported that foreign direct investment jumped +18.9% m/m in Sep to $7.9 billion while Sep China home prices climbed +2.8% y/y. Home sales in China surged +73.4% in the first nine months of 2009 from a year earlier to 2.75 trillion yuan, with investment in property development accelerating +17.7%, which may prompt the PBOC to tighten credit in order to avoid creating an asset bubble in the property market. The Australian dollar rose to a 14-month high against the dollar today after RBA governor Stevens said that his central bank can't be "too timid" in raising interest rates now that the threat of an economic crisis has passed, signaling the RBA soon plans to add to last week's 25 bp rate hike to its overnight cash rate target, possibly as soon as next month.

Barchart.com U.S. Morning Call for Wednesday, October 14, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +2.38% and Dec S&Ps are up +14.90 points, both at 1-year highs. Global stocks are soaring after Intel late yesterday reported better-than-expected Q3 earnings and forecast Q4 sales that surpassed projections by as much as $1 billion. Intel's better-than-expected numbers show one of the first major companies to report a more sustainable recovery instead of heavily cutting costs. The dollar sank to a fresh 14-month low which has boosted commodity prices as crude oil climbed above $75 a barrel and gold reached another record high. The smallest decrease this year in Chinese exports is also supporting a global stock rally today on speculation that growth is returning to global economies. European technology companies and raw material producers are leading the rally today while Credit Agricole SA, France's largest bank by branches, gained over 3% after saying it will reimburse 3 billion euros it borrowed from the government last year to help sustain lending and bolster capital.

The Asian markets today closed mostly higher with Japan down -0.16%, Hong Kong +1.95%, China +0.90%, Taiwan +1.31%, Australia +0.95%, Singapore +1.50%, South Korea +1.31%, India +1.20%. Chinese stocks were bolstered today after Sep China exports fell -15.2% y/y, the smallest drop in nine months, fueling optimism that the global economy is strengthening. New lending in China climbed to 516.7 billion yuan ($75.7 billion) in Sep, higher than expected and more than the 410.4 billion yuan of new lending in Aug. China's foreign-exchange reserves climbed to a record $2.273 trillion at the end of Sep, with China's M2 money supply jumping a record +29.3% in Sep from a year earlier, which may fuel speculation of a tightening of China's monetary policy as soon as Q1 of next year. Japanese stocks were undercut as exporters fell after the yen strengthened when Reuters reported that Japanese Vice Minister Naoki Minezaki said that dollar weakness is likely to continue and Japan shouldn't intervene in markets to halt gains in its currency.

Barchart.com U.S. Morning Call for Tuesday, October 13, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is down -0.11%, although Dec S&Ps are up +1.90 points. An unexpected decline in German investor confidence is dragging European stocks lower today on concern a recovery in Europe's largest economy may not be robust. The Oct German ZEW economic sentiment survey unexpectedly fell -1.7 to 56.0, its first decline in three months, while the market was expecting a +1.1 increase in the survey to 58.8. A weaker dollar today has propelled gold prices to another record high and crude oil to a 6-week high. Bank stocks are leading the fall in European stocks today with Lloyds Banking Group Plc down nearly 4% and Goldman Sachs down 2.1% after analyst Meredith Whitney downgraded Goldman, her only previous buy recommendation, to "neutral." The British pound fell to 6-month low against the euro after the British Chamber of Commerce recommended that England expand its asset-purchase program by 25 billion pounds ($39 billion) to revive the economy. An unexpected drop in the French consumer prices is limiting losses today as the Sep French CPI fell -0.2% m/m and -0.4% y/y, its fifth consecutive annual decline.

The Asian markets today closed mostly higher with Japan +0.60%, Hong Kong +0.79%, China +1.49%, Taiwan -0.04%, Australia +0.97%, Singapore -0.45%, South Korea -0.53%, India closed for holiday. Sep China car sales rose +84% y/y to 1.015 million units, the first time China'a monthly auto sales have exceeded 1 million, which may prompt the government to halt tax cuts and subsidies to prevent overcapacity. For the first nine months of this year, China's passenger-vehicle sales have risen 42% to 7.2 million units, with industrywide vehicle sales soaring 34% to 9.7 million. Raw material and energy producers led a rally in Asian stock markets as gold surged to a record and crude oil climbed to a 6-week high. Steel producers also moved higher after Goldman Sachs upgraded the sector and said "we are turning maximum bullish on Asian steel and on Japan in particular," adding "we expect Asian steel demand to surprise on the upside ion 2010, mainly due to rising steel intensity of Asian economies."

Barchart.com U.S. Morning Call for Monday, October 12, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +1.26% and Dec S&Ps are up +7.70 points, both at 1-year highs. The dollar is weaker which has boosted commodity price, with silver surging to a 14-1/2 month high and crude oil climbing to a 3-week high. Sep German wholesale prices unexpectedly fell -0.2% m/m while the larger-than-expected -8.1% y/y drop marked the eleventh consecutive month of year-over-year price declines. Leading European share prices higher today is the 6.5% jump in Royal Philips Electronics NV, Europe's biggest consumer-electronics maker, after it reported an unexpected Q3 profit of 174 million euros ($256 million), when analysts had been expecting a 44.7 million euro loss. Fiat SpA, Italy's largest automaker, gained 6.1 after Morgan Stanley said in a report that investors may not have fully accounted for synergy potential with Chrysler Group LLC. Steelmakers in Europe strengthened after the World Steel Association predicted that the global steel market has bottomed and will grow by 9.2% next year as demand rebounds in the US, Europe and Japan.

The Asian markets today closed mixed with Japan closed for holiday, Hong Kong -0.93%, China -0.38%, Taiwan +0.37%, Australia -0.28%, Singapore +1.05%, South Korea -0.62%, India +2.31%. South Korean oil refiners lost ground after Woori cut its profit estimates for the companies and said refiners may report "earnings shock" in Q3 after margins for premium products narrowed and the won strengthened. Steelmakers in China fell after the Xinhua News Agency said Baoshan Iron & Steel, China's largest steelmaker, will cut November prices on hot-rolled and cold-rolled steel products by 400 yuan a metric ton, which may prompt other Chinese steelmakers to do the same which may cut into their future earnings. Limiting losses in Asian-Pacific markets was the strength in semiconductor and computer-memory chip makers after Deutsche Bank AG predicted that Q3 earnings for the companies will beat analysts' estimates.

Barchart.com U.S. Morning Call for Friday, October 9, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is down -0.15% and Dec S&Ps are down -0.60 points. The dollar is stronger while Treasuries and commodity prices are weaker after Fed Chairman Bernanke said late yesterady at a Board of Governors Conference in Washington that the Fed will be prepared to tighten monetary policy when the outlook for the economy "has improved sufficiently." European stocks weakened when Aug German exports unexpectedly fell -1.8% m/m when the market was looking for a +1.9% m/m increase, a sign that the recovery of Europe's largest economy remains fragile. Also undercutting stocks was comments from ECB President Trichet who said that while the Euro-Zone economy "is showing signs of stabilization" it will recover "very gradually," a sign that the ECB does not plan anytime soon in removing its emergency stimulus measures. Limiting losses in European stocks were the stronger-than-expected increases in Aug French industrial and manufacturing production, adding to signs that stimulus spending is helping the Euro-Zone emerge from recession. Also supporting European stock prices was the unexpected downward revision to the Sep German CPI (EU harmonised) which fell both -0.5% m/m and -0.5% y/y, a bigger decline than the initial estimate of -0.4% m/m and -0.4% y/y, indicating price pressures remain subdued.

The Asian markets today closed mostly higher with Japan +1.87%, Hong Kong +0.03%, China +5.29%, Taiwan +0.91%, Australia -0.33%, Singapore +0.06%, South Korea +2.16%, India -1.19%. China's banking regulator said it's too soon for the government to start winding down stimulus efforts because the economy "may face a bumpy road ahead." According to the World Bank, government spending on building projects has driven more than 80% of China's expansion this year, as private sector spending has yet to recover. Asian technology stocks were boosted today after the price of the benchmark dynamic random access memory chip gained 2.4% yesterday to the highest since Jun 2008, according to Dramexchange Technology, operator of Asia's biggest spot market for semiconductors. Japanese exporters also gained after the yen weakened when Aug Japan machine orders rose a smaller-than-expected +0.5% m/m.

Barchart.com U.S. Morning Call for Thursday, October 8, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +0.74% and Dec S&Ps are up +9.50 points. Global stock prices are pumped up from better-than-expected earnings from Alcoa, while the drop in the dollar index to a 2-week low has boosted most commodity prices with gold climbing to its third consecutive record high. Raw-material producers are leading a rally in European shares after the CEO of Alcoa said "we do see growth, substantial growth I might add, in China, and a stabilization in North America." Alcoa soared over 7% in European trading, while Xstrata Plc, the world's fourth-biggest copper producer, advanced 3.4% as copper prices shot up to a 2-week high. Also helping to boost European shares was the larger-than-expected increase in the Sep Bank of France business sentiment which rose +3 to a 15-month high of 92 as government stimulus spending fosters economic growth. Undercutting stock prices is the 3% decline in Lloyds Banking Group Plc after the FT reported that the UK's biggest mortgage lender is preparing to raise 15 billion pounds ($24 billion) in a share sale and leave the government's asset insurance program. Banks in Ireland are also slumping with Allied Irish Banks Plc down 7% and Bank of Ireland Plc losing nearly 5% after Irish Finance Minister Lenihan said the country's biggest banks may need further money from the state even after selling real-estate loans to the government.

The Asian markets today closed mostly higher with Japan up +0.34%, Hong Kong +1.18%, China closed for holiday, Taiwan -1.38%, Australia +1.55%, Singapore +0.62%, South Korea +0.99%, India +0.22%. Sep Japanese corporate bankruptcies fell -18% y/y, their fastest pace of decline in over four years, as an easing in the credit crunch is enabling firms to stay in business. Shipping companies in Japan gained after Bank of America Merrill Lynch upgraded the sector to "neutral" from "underperform," while Australia's S&P/ASX 200 Stock Index climbed to a 1-year high after the country's jobless rate fell to 5.7%, its first decline in five months, and the statistics bureau reported that the number of people employed in Sep unexpectedly rose 40,600 from Aug. The Australian dollar surged to a 14-month high on the news as market expectations increased for another rate hike by the RBA as soon as next month.

Barchart.com U.S. Morning Call for Wednesday, October 7, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is down -0.39%, although Dec S&Ps are up +2.00 points. The weaker dollar is helping to boost commodity prices, with gold climbing to yet another record high, and Treasuries are little changed despite comments made late yesterday by Kansas City Fed President Hoenig who said that the US economic rebound should support higher interest rates "sooner rather than later." Undercutting European stock prices today was the unexpected downward revision to Q2 Euro-Zone GDP after European consumer spending, investment and exports were all weaker than earlier reported. Q2 Euro-Zone GDP fell -0.2% q/q and -4.8% y/y, a sharper decline than the Sep 2 estimate of a -0.1% q/q and -4.7% y/y contraction. Helping to lift European equity prices today was the larger-than-expected +1.4% m/m increase in Aug German factory orders, which were helped by an increase in foreign demand after foreign orders rose +4.6% m/m. German factory orders have now increased for the sixth straight month, an indication that Germany's economic growth continues to accelerate.

The Asian markets today closed mostly higher with Japan up +1.11%, Hong Kong +2.07%, China closed for holiday, Taiwan +0.96%, Australia +2.27%, Singapore +0.87%, South Korea -0.15%, India -0.90%. The Japanese yen rallied to an 8-1/4 month high against the dollar today after Japanese Finance Minister Fujii was quoted in an interview with the WSJ that the strength of the yen is "acceptable." Asian commodity and energy producers led the rally in stocks today after metals prices climbed and crude oil rose. Signs of global economic growth helped to lift Asian shipping companies on expectations of increased exports, while the Baltic Dry Index, a measure of shipping costs for commodities, rose 3.3% yesterday, its steepest climb since July.

Overnight U.S. Stock News

December S&Ps this morning are trading up +2.00 points. The US stock market yesterday closed with sharp gains for the second straight session (Dow +1.37%, S&P 500 +1.37%, Nasdaq Composite +1.71%). Bullish factors included (1) carry-over strength from overseas stock markets which rallied after the Reserve Bank of Australia unexpectedly raised interest rates, signaling strength and confidence in the global economy by the Australian central bank, (2) a rally in commodity and energy producers after oil rose to 2-week high and the price of gold surged to a record high, (3) the prediction from Fidelity International that sustainable economic growth and low interest rates worldwide will spur a "multi-year" bull market in equities, led by developing nations, (4) the gain in newspaper publishers after Rupert Murdoch, the CEO of News Corp., said print and television advertising markets are picking up, and (5) the prediction from Dallas Fed President Fisher that the US is likely to undergo "a very slow process" of recovery and probably won't endure a double-dip recession.
Bearish factors included (1) the prediction from JPMorgan Chase that the "disappointing" Sep employment figures indicate that it will take the US four years to recover all the jobs lost during the recession, and (2) the report from Reis Inc. that US apartment vacancies rose to 7.8% in Q3, the highest since 1986, as job losses and falling wages are shrinking the pool of potential tenants.
Freeport-McMoRan (FCX) climbed 1.2% in European trading as the company with the world's biggest gold mine rose after gold prices jumped to a record high for a second day.
Walt Disney (DIS) advanced 2.1% in pre-market trading after the world's biggest theme-park operator was upgraded to "neutral" at Bank of America Merrill Lynch.
Coca-Cola (KO) increased 1.6% in European trading after the world's largest soft-drink maker was raised to "buy" at Deutsche Bank, which cited a "better currency and commodity outlook, stable volumes and improved domestic bottler relations.

Barchart.com U.S. Morning Call for Tuesday, October 6, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +1.37% and Dec S&Ps are up +9.40 points. Global stocks rose and the dollar fell after the Reserve Bank of Australia (RBA) unexpectedly raised its overnight cash rate target by 25 bp from a 49-year low of 3.00% to 3.25%. Australia is the first Group of 20 nation to raise interest rates since the recession began, amid evidence the global recovery is gathering momentum. Treasuries are higher after New York Fed President Dudley late yesterday expressed concern that the risk of slowing inflation is "problematic" for the economy and that interest rates should stay low for a while to ensure a "robust recovery." Raw-material producers and mining companies rallied after metals prices surged and gold prices climbed to a 1-1/2 year high. European banks are higher after Bank of America Merrill Lynch upgraded the industry to "overweight," saying "with further EPS upgades ahead reasonable valuations offer the potential for re-rating." Limiting gains in European stocks was the unexpected slump in Sep UK manufacturing production which fell -1.9% m/m, while the index of manufacturing fell to 87.8, the lowest in 17 years.

The Asian markets today closed mostly higher with Japan up +0.18%, Hong Kong +1.87%, China closed for holiday, Taiwan +1.32%, Australia +0.40%, Singapore +1.09%, South Korea -0.54%, India +0.55%. Asian exporters moved higher following the larger-than-expected increase in the Sep ISM non-manufacturing index, which showed a return of growth in the US service sector following 11 months of contraction and is stoking optimism that growth will pick up. Japanese financial stocks gained after Japanese Financial Services Minister Kamei said lenders won't have to boost provisions for bad loans should borrowers delay repayments. Following the surprise 25 bp rate hike in its benchmark lending rate to 3.25%, RBA Govermor Stevens said the Australian economy is likely to expand "close to trend over the year ahead," and that "the risk of serious economic contraction" has passed, signaling the RBA may have more interest rate hikes to come in the months ahead.

Overnight U.S. Stock News

December S&Ps this morning are trading higher by +9.40 points. The US stock market yesterday rallied throughout the day and finished just below its high (Dow +1.18%, S&P 500 +1.49%, Nasdaq Composite +0.98%). Bullish factors included (1) the larger-than-expected increase in the Sep ISM non-manufacturing index which showed the US service sector expanding at its strongest pace in the last 16 months, (2) a rally in large US bank stocks after Goldman Sachs raised its ratings on US large banks to "attractive," citing the outlook for earnings, (3) the prediction from MFC Global Investment Management that "Q3 earnings season is going to be pretty strong" and that earnings estimates will have to move higher as actual earnings come in better than expected because "analysts are way too conservative coming out of recessions," (4) the prediction from Credit Suisse Group that the S&P 500 Index will be at 1,100 by year-end, and (5) the prediction from Greenwood Capital Assiciates LL C that "growth is going to surprise people on the upside in the near-to-intermediate term" as Q4 last year was so bad from an economic and earnings perspective that "simply lagging that is going to be a fairly positive event."
Bearish factors included (1) the prediction from billionare investor George Soros that the US economic recovery will be sluggish as "basically bankrupt" financial companies and indebted consumers impede economic growth, and (2) the prediction from Bank of America that the S&P 500 Index may extend its correction from last month's 1-year high to 20% before rallying to finish the year.
Mosaic (MOS) climbed 1.1% in European trading after the fertilizer maker said it expects potash demand to return to "normal" by the second half of 2010.
Alcoa (AA) jumped 2.6% in pre-market trading as metal prices surged following the drop in the dollar after the RBA unexpectedly increased interest rates.

Barchart.com U.S. Morning Call for Monday, October 5, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +0.23% and Dec S&Ps are up +6.10 points. The dollar is weaker this morning after the Group of Seven finance ministers omitted any mention of the dollar's weakness in their final communique. European stocks received a boost after the Sep Euro-Zone PMI composite index was revised up +0.3 to a 16-month high of 51.1, adding to signs that the European economy continues to recover from recession. Also supporting a gain in European stock prices was the +2.0 point increase in the Oct Euro-Zone Sentix investor confidence to a 15-month high of -12.6 and a smaller-than-expected -0.2% m/m decrease in Aug Euro-Zone retail sales, although on a year-over-year basis Euro-Zone retail sales declined -2.6% y/y, the 15th consecutive monthly decline. Limiting stock gains was comments from the CEO of HSBC Holdings Plc who said that there may be a second global economic slump and that he wasn't convinced the worst was over and that the "reality is that profits will be quite reduced."

The Asian markets today closed mostly lower with Japan down -0.59% at a 2-1/4 month low, Hong Kong +0.26%, China closed for holiday, Taiwan +0.35%, Australia -0.62%, Singapore -0.80%, Soth Korea -2.57%, India -1.56%. Asian markets closed mostly lower on catch-up from last Friday's drop in US and European share prices after US Sep payrolls declined more than forecast and US Aug factory orders unexpectedly declined. The yen is weaker today after Japanese Finance Minister Fujii warned "if currencies show some excessive moves in a biased direction, we will take action," hinting at BOJ intervention in the currency markets if the yen continues to srengthen. The yen's appreciation threatens to undermine Japan's export-driven economic recovery which is already feeling the effects of near-record high unemployment and deflationary price declines.

Barchart.com U.S. Morning Call for Friday, October 2, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is down -1.10% and Dec S&Ps are down -2.30 points, both at 3-week lows. Global stocks are lower today on a continuation of yesterday's meltdown on fears that rising unemployment will derail the global economic recovery. The US unemployment rate may climb to a 26-1/2 year high of 9.8% when the US Sep payrolls figures are released this morning. The markets are expecting a -175,000 monthly loss of jobs, but late yesterday Goldman Sachs predicted that US job losses in Sep will widen to -250,000, citing "disappointing" data. The dollar is higher, which has dragged commodity prices lower, while 10-year Treasuries climbed to a 5-month high on increased safe-haven demand. US bank stocks may be under pressure today following an FDIC report that showed the number of US banks that can't collect on at least 20% of thier loans climbed to an 18-year high, signaling that more bank failures and losses could slow an economic recovery. Also un dercutting stocks is an article in the WSJ today in which bank analyst Meredith Whitney says the US economic recovery will falter as banks continue to curb lending to small companies. Whitney said small company's "access to credit is being denied at an accelerating pace" and that while large companies have no problem obtaining loans, small businesses "have never had a harder time." The Aug Euro-Zone PPI fell -7.5% y/y, the eighth straight monthly year-over-year decline, showing that price pressures at the wholesale level still remain non-existent. Stress tests on the European Union's biggest banks showed they could withstand an even deeper recession and that under current EU economic forecasts for 2009 and 2010, the largest banks in the region would maintain an average Tier 1 capital ratio "well above" 9%. European financial institutions have posted $498 billion in losses since the start of the credit crunch in mid-2007, less than half the $1.08 trillion in losses report ed in the US.

The Asian markets today closed mostly lower with Japan -2.47%, Hong Kong -2.77%, China, South Korea and India closed for holiday, Taiwan -1.77%, Australia -2.11%, Singapore -1.99%. Japanese automakers sank as Toyota closed down 3.7% and Honda Motor fell 3.4%, after US auto sales slumped following the end of the "cash for clunkers" rebate program. Japanese exporters also fell amid concerns a stronger yen will reduce the value of repatriated overseas sales. The yen moved higher today following the global stock market slide, which boosted demand for the currency as a refuge. Japan's jobless rate unexpectedly dropped to 5.5% in Aug from 5.7% in July as the number of employed rose by 290,000, the first increase since Jan, while the job-to-applicant ratio, a leading indicator of employmemt trends, was unchanged at 0.42, the first time the indicator has stopped falling since Jan 2008. Another positive for the Japanese economy was the unexpected increase in Japan's Aug ho usehold spending which climbed +2.6% y/y, the biggest jump in 19 months.

Barchart.com U.S. Morning Call for Thursday, October 1, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is down -0.41% and Dec S&Ps are down -5.60 points. The dollar is stronger today after European Union Monetary Affairs Commissioner Joaquin Almunia said EU officials will discuss the recent strength in the euro in preparation for the Group of Seven meetings in Istanbul this weekend, fueling speculation that G-7 officials will signal that further dollar weakness is unwelcome. Aug German retail sales unexpectedly declined -1.5% m/m, the biggest monthly fall in 17 months, as concerns about rising unemployment kept a lid on consumer spending. Those fears of increasing unemployment came to fruition after the Aug Euro-Zone unemploymnet rate rose to a 10-1/2 year high of 9.6%, while the IMF today predicted that the unemployment rate in the Euro-Zone will rise to 11.7% next year, higher than in the US or the UK. Limiting losses in global stocks was the IMF's upward revision for global economic growth next year to rise 3.1%, up from a Ju ly forecast of 2.5%, and its revision for global economic growth to contract -1.1% this year, less than the -1.4% projected in July. The IMF said that more than $2 trillion in stimulus packages and demand from Asia are pulling the global economy out of recession, although the rebound will be "sluggish, credit constained and, for quite some time, jobless." European stocks were also supported after the Sep Euro-Zone PMI manufacturing index was unexpectedly revised up +0.3 to a 16-month high of 49.3.

The Asian markets today closed mostly lower with Japan -1.53%, Hong Kong and China closed for holidays, Taiwan +0.48%, Australia -0.90%, Singapore -0.57%, South Korea -1.73%, India +0.05%. Japan's Q3 Tankan large manufacturers business conditions survey improved to -33 as expected from -48 in Q2, although large businesses plan to cut spending -10.8% this year, more than the -9.4% plannned three months ago. The capital spending plans are the worst for a September survey in at least 26 years as Japanese companies continue to worry whether overseas demand will reliably recover. The Sep China Purchasing Managers' Index rose +0.3 to 54.3, the fastest pace of growth in 17 months on stimulus spending and this year's record growth in new loans. The Chinese markets were closed today and will be closed for the next week for holidays.

Barchart.com U.S. Morning Call for Wednesday, September 30, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +0.01% and Dec S&Ps are up +4.10 points. The dollar fell and commodity prices rose as global stocks gained afer the IMF cut its prediction for worldwide bank writedowns by -15% to $3.4 trillion, citing improving credit markets and economic growth. European consumer prices fell more than forecast in September after the Sep Euro-Zone CPI estimate declined -0.3% y/y, its fourth straight decrease and exceeded the -0.2% y/y fall the market was expecting. UK consumer confidence jumped in Sep by the most since 1995 after the Sep UK GfK consumer confidence gained +9 to -16, the highest level since Jan 2008. In a sign that the liquidity crisis is easing, European banks bid for 75.2 billion euros ($110 billion) at the ECB's second 12-month auction of unlimited funds, less than the forecasted 137.5 billion euros and far below the 442 billion euros at the first auction in Jun, indicating banks' need for cash has dwindled. The ECB, w hich will offer banks 12-month loans for a third time on Dec 15, is flooding the system with money in an attempt to stimulate lending.

The Asian markets today closed mostly higher with Japan +0.33%, Hong Kong -0.28%, China +1.09%, Taiwan +1.07%, Australia -0.20%, Singapore +0.35%, South Korea -0.83%, India +1.63%. Asian markets received a boost today after Chinese manufacturing expanded for the sixth consecutive month in September. The China Sep PMI manufacturing index slipped -0.1 to 55.0 as government stimulus measures continue to boost the economy. The Chinese market was also supported by stock buying ahead of the week-long holiday that begins tomorrow. Aug Australian retail sales rose +0.9%, the first gain in three months, while technology stocks rose throughout the Asia-Pacific region after Micron Technology reported a narrower loss, boosting optimism a glut in the memory-chip industry is easing. Japanese manufacturers increased production for a sixth consecutive month in Aug, the longest stretch of gains in 12 years, after Japan Aug industrial production rose +1.8% m/m as stimulus spending by governments worldwide rekindled global trade.

Barchart.com U.S. Morning Call for Tuesday, September 29, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is down -0.16% and Dec S&Ps are down -1.70 points. European and US stocks are gyrating on either side of unchanged in uninspired trade. The Sep Euro-Zone economic confidence rose +2.0 to 82.8, its sixth consecutive monthly increase and a 1-year high, as the European economy continues to rebound from recession. The Aug German import price index decreased from a year earlier for the tenth consecutive month as inflation pressures continue to be scant. Russia's central bank, Bank Rossii, cut its refinancing rate effective tomorrow by 50 bp to 10% and lowered the repurchase rate on bank loans to 9% from 9.5% in an attempt to stimulate lending. Bank Rossii has slashed rates seven times since Apr 24, including a 25 bp cut just two weeks ago, as Russia recovers from its biggest economic contraction on record. French bank stocks rose led by a 2.5% gain in BNP Paribas SA, France's largest bank, after saying it will seek 4.3 billion euro s ($6.3 billion) in a rights offer to help repay government funds. Undercutting European stock prices was the 2.6% fall in Siemens after its CEO said fiscal 2009 was a "tough" year and that order bookings in the year that ends this month will fall.

The Asian markets today closed mostly higher with Japan up +0.91%, Hong Kong +2.06%, China -0.01%, Taiwan +2.00%, Australia +1.62%, Singapore +1.30%, South Korea +0.88%, India +0.96%. The yen retreated from yesterday's 8-month high against the dollar after Japanese Finance Minister Fujii said today his government may act to stabilize the foreign-exchange market and denied that he supported a stronger yen, reversing earlier rhetoric when Fujii said the idea of a weaker yen helping the nation's exports is "absurd." The yen has gained about 16% in the past year, threatening Japan's export-driven economy by making Japanese products more expensive and eroding the value of overseas profits. Japan's Aug national CPI ex-fresh food slid -2.4% y/y, the sharpest drop since the data began in 1971 and heightens the risk that prolonged deflation may hamper Japan's recovery. In its quarterly monetary policy meeting today, the People's Bank of China (PBOC) said it will stick to a "moderately loose" monetary policy and guide loan growth to further cement its economic recovery. The PBOC did not signal any policy change and said China's economic rebound isn't solid and that the country still faces weak external demand.

Barchart.com U.S. Morning Call for Monday, September 28, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +0.02% and Dec S&Ps are up +2.90 points. The dollar is higher despite the surge in the Japanese yen to an 8-month high, which has undercut commodity prices with copper falling to an 1-1/4 month low. The Group of 20 meeting ended over the weekend with leaders saying they would "avoid any premature withdrawl of stimulus," and acknowledged that the global recovery remains dependent on emergency government money. This has undercut global stock prices on the premise that the current recovery in world equity markets may stall once government stimulus packages are removed. Raw-materials and energy producers are weaker today as stocks grasp for direction ahead of Q3 earnings season which begins next week. German utilities rallied after Chancellor Merkel won re-election on speculation that her coalition will scrap a law that required Germany's 17 nuclear plants to close by 2021. Increased M&A activity is also helping to lift Euro pean and US stocks today after Abbott Laboratories agreed to purchase Solvay SA's pharmaceutical unit for about 4.8 billion euros ($7.1 billion) and Johnson & Johnson agreed to purchase an 18% stake in Crucell NV for 301.8 million euros.

The Asian markets today all closed lower with Japan down -2.50%, Hong Kong -2.07%, China -2.81%, Taiwan -0.83%, Australia -0.76%, Singapore -1.26%, South Korea -0.97%. Japanese exporters closed lower after the yen surged to an 8-month high against the dollar on concerns the value of overseas sales will be reduced when converted into yen, although the yen shed nearly all of its gains after Japanese Finance Minister Fujii said he was misinterpreted as supporting a stronger yen. The Finance Minister was also reported by the Sankei newspaper as saying "the days of high growth driven by exports and big companies are over and we want to focus on policies that will foster spending by consumers and domestic demand." Japanese brokers and consumer finance companies also slumped after Merrill Lynch downgraded the sectors to "underweight" from "neutral," citing a weakening stock market and tighter regulations.

Barchart.com U.S. Morning Call for Friday, September 25, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +0.20% and Dec S&Ps are up +2.50 points. The dollar is weaker and commodity prices are stronger as the markets await the conclusion of the two-day G-20 meeting in Pittsburgh today. According to US officials, world leaders are uniting behind a plan to force banks to tie compensation more closely to risk and tighten capital requirements, while Treasury Secretary Geithner said there's a "strong consensus" to tackle global imbalances. World leaders may announce today that the Group of 20 nations is replacing the G-8 as the main forum for global economic coordination, reflecting a shift in power from rich countries to emerging markets. German consumer confidence rose to a 16-month high, signaling the economic recovery in Europe's largest economy may strengthen, after the Oct German GfK sentiment index increased +0.5 to 4.3. European banks continue to be reluctant to lend and demand for credit remains sparse after loans to hou seholds and companies in Europe rose +0.1% y/y in Aug, the slowest pace of loan growth since records began in 1991. The Aug Euro-Zone M3 money supply growth, used by the ECB as a gauge of future inflation, slowed to 2.5% y/y, the slowest pace of money supply growth in 14 years.

The Asian markets today closed mostly lower with Japan -2.64%, Hong Kong -0.13%, China -0.73%, Taiwan +0.29%, Australia +0.26%, Singapore -0.17%, South Korea -0.24%, India -0.53%. Worries that the G-20 may impose stricter financial market regulations are causing risk aversion and boosting the yen. The Japanese yen strengthened to a 7-1/2 month high against the dollar today on risk aversion and on speculation that Japanese exporters repatriated profits back home before the fiscal first half ends this month as they take advantage of the Apr 1 rule change that waives taxes on repatriated profits. Toyota, which gets 31% of its sales from North America, fell 2.6% on the stronger yen and the Executive Vice President of the automaker said today that "the yen should be a little weaker" and that the current level of 90 yen per dollar is "painful." Toyota, the world's largest automaker, forecasts a 450 billion-yen ($5 billion) net loss for the year ending Mar 2010. Japanese brokerages were weaker today led by the 16% plunge in Nomura after Japan's largest brokerage said it will sell a record 511.3 billion yen ($5.6 billion) of stock to fund expansion in the US, equivalent to almost 30% of the stock outstanding. Nikko Citigroup downgraded Nomura to "sell" from "hold" following the stock sale announcement. Japan Airlines fell 7.6% and plunged for a second day on concerns it will be broken up or forced to sell new shares under government plans after the Japanese government said the carrier will be reorganized under a government plan designed to avert bankruptcy.

Barchart.com U.S. Morning Call for Thursday, September 24, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is down -0.82% and Dec S&Ps are down -1.20 points. European markets are lower on carry-over weakness from yesterday's fall in US markets after the Fed signaled the US economy isn't growing enough for stimulus measures to end. The dollar is slightly higher while copper prices dropped to a 3-week low and crude oil fell to a 2-1/2 week low. German business confidence rose to a 1-year high in Sep, indicating Europe's largest economy will continue to strengthen. The Sep German IFO business climate rose +0.8 to a 1-year high of 91.3, although below expectations for a +1.5 increase to 92.0. Retail stocks are weaker in Europe after Hennes & Mauritz AG, Europe's second-largest clothing retailer, reported Q3 net income of 3.46 billion kroner ($504 million), lower than analysts' estimates of 3.5 billion kroner after revenue at stores open at least a year fell 11% last month, the fourth consecutive monthly decline and worse than July's 3% decrease. Airline stocks are also weaker in Europe today after Air France fell 2.8% when UBS gave Europe's largest airline a "sell" recommendation in new coverage while British Airways Plc dropped 3.7% after Europe's third-largest carrier was downgraded to "hold" from "buy" at Citigroup. which said mid-cycle share-price valuations were reached "far earlier than expected."

The Asian markets today closed mixed with Japan up +1.67%, Hong Kong -2.52%, China +0.68%, Taiwan -0.71%, Australia -0.69%, Singapore -0.69%, South Korea -1.04%, India +0.37%. Japanese stocks closed higher after a three-day holiday despite Japanese exports falling for the 11th consecutive month in Aug. Japan's Aug exports tumbled -36% y/y as the economic recovery struggled to gain traction. From a month earlier, exports fell 0.7%, the second straight decrease which suggests the boost in overseas demand that helped the Japanese economy to expand in Q2 may be moderating as governments exhaust stimulus spending. Mining companies were weaker and China's Jiangxi Copper fell 3.6% after copper prices fell to a 3-week low. Japan Air, which is under government supervision following state bailouts, tumbled 16% after Asia's most indebted carrier asked the government for a fourth bailout since 2001 and raises speculation that the carrier's lenders may ask the government to sp lit the company up.

Barchart.com U.S. Morning Call for Wednesday, September 23, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +0.65% and Dec S&Ps are up +1.80 points. The dollar is little changed after extending its current downtrend to a new 1-year low and commodity prices are mixed. Europe's manufacturing and service industries expanded for a second month in Sep and suggest that the Euro-Zone economy is gathering strength. The Sep Euro-Zone PMI composite rose +0.4 to a 16-month high of 50.8, although lower than an expected increase of +0.9 to 51.3. Also helping to boost European share prices today was the larger-than-expected increase in the Sep French business confidence indicator which jumped +6 to an 11-month high of 85, its fifth consecutive month of improvement. Limiting stock gains in Europe was the unexpected decline in Aug French consumer spending which fell -1.0% m/m and -1.3% y/y as mounting job losses deterred consumers from spending. French Finance Minister Christine Lagarde said yesterday that her government will maintain its emergency measures to bolster the economy until joblessness begins to recede. IMF Managing Director Dominique Strauss-Kahn in an interview before the G-20 summit begins in Pittsburgh tomorrow warned that "it's too early to say the crisis is behind us," as he urged leaders from the G-20 nations to maintain their efforts to pull the world economy out of recession.

The Asian markets today closed mostly lower with Hong Kong -0.49%, China -2.27%, Taiwan -1.24%, Australia +1.51%, Singapore +0.01%, South Korea -0.26%, India -0.99%. Chinese central bank governor Zhou Xiaochuan said in an interview that currency stability was the most important goal of monetary policy, heeding calls from Chinese exporters to delay appreciation of the yuan. Zhou said China must stick to a moderately loose monetary stance, use policy tools flexibly and control inflation to keep the yuan stable. China has stalled the yuan's appreciation against the dollar since July of last year and exporters at a trade show in Shanghai today urged the government to continue to delay gains in the currency after Chinese exports dropped -23.4% in Aug y/y. The China News Service reported today that President Hu Jintao, speaking with US President Obama at a meeting yesterday, said the yuan's stability has been China's contribution to regional and global development during the financial crisis.

Barchart.com U.S. Morning Call for Tuesday, September 22, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +1.20% and Dec S&Ps are higher by +6.90 points. Faster economic growth forecasts from the Asian Development Bank (ADB) is providing further evidence that the global economic recovery is accelerating and is helping to boost stock prices today. Treasuries and the dollar have weakened, with the euro currency climbing to an 11-3/4 month high, which has boosted most commodity prices. Market News International reported that ECB Council member Axel Weber said the recent strengthening of the euro is consistent with economic developments in the Euro-Zone, which has helped the euro to sustain its gains. Energy producers and mining companies are higher, while STMicroelectronics NV, Europe's largest semiconductor maker, jumped 3% after Dramexchange Technology reported that the price of benchmark computer-memory chips rose 1.1% to a 13-month high. Russia's Micex stock index rallied sharply today after Goldman Sachs recommended investors should increase holdings of Russian stocks because "cheap" valuations will help spur a rally of 25%.

The Asian markets today closed mixed with Hong Kong +1.06%, China -2.42%, Taiwan -0.45%, Australia -0.29%, Singapore +1.42%, South Korea +1.54%, India +0.87%. Helping spur a rally in most Asian markets today was the upwardly revised economic growth predictions from the ADB who forecast that Asia, excluding Japan, will grow 3.9% this year, better than its Mar estimate of 3.4%, and that growth may accelerate to 6.4% in 2010 as the economies of China, India and Indonesia expand. The ADB revised its 2009 growth estimates for China to 8.2% from a Mar forecast of 7% and said India will grow 6% this year, up from a Mar forecast of 5%. The ADB said that withdrawing stimulus measures too soon may derail the "fragile" economic recovery.

Barchart.com U.S. Morning Call for Monday, September 21, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is down -0.85 % and Dec S&Ps are down -5.80 points. Concerns that stock valuations remain stretched from the 6-month rally are weighing down global equity markets today, while a stronger dollar has sent crude oil and metals prices tumbling with copper sliding to a 2-1/2 week low. US President Obama said in an interview yesterday that "the jobs picture is not going to improve considerably, and it could even get a little bit worse, over the next couple of months." ECB Executive Board member Gertrude Tumpel-Gugerell said in a speech in Milan today that banks are the key to ending the financial crisis and that "the worst financial storm since the 1930s is only gradually calming down," while fellow ECB Council member and Bundesbank President Axel Weber said in an interview that he expects German unemployment to increase further from the 4.3 million forecast for 2010 and that "in such an enviroment the risk is small that we'll see an inflationary push in the near future." The Asian markets that were open today closed mostly lower with Hong Kong -0.70%, China +0.28%, Taiwan -0.32%, Australia -0.34%, South Korea -0.22%. Markets in Japan, Singapore and India were all closed today for holiday.

Overnight U.S. Stock News

December S&Ps this morning are trading down by -5.80 points. The US stock market last Friday fluctuated on both sides of unchanged throughout the day and closed slightly higher (Dow +0.37%, S&P 500 +0.26%, Nasdaq Composite +0.29%). Bullish factors included (1) the action by Barclays Capital to boost its Q1 2010 US GDP forecast to 5% from an earlier forecast of 3%, saying inventories are being cut at a faster pace than expected, "suggesting more of a production rebound over the next few quarters," (2) the prediction from Wells Capital Management that the economy is improving more rapidly than people think and that should be reflected in better-than-expected corporate earnings and in investors' confidence as the momentum in the stock market is "very strong," and (3) the action by the Treasury to end its Temporary Guarantee Program for Money Market Funds insurance program for money-market mutual funds with Treasury Secretary Geithner saying "the need for some of the emergency programs put in place during the most acute phase of the financial crisis has receded."
Bearish factors included (1) valuation concerns after the recent rally pushed valuations on S&P 500 stocks to almost 20 times the reported earnings from continuing operations of its companies, the highest level since 2004, (2) the US Labor Department's report that showed unemployment rose in 27 US states in August, with California and Nevada reaching record levels of joblessness, and (3) weakness in commodity producers and mining companies as the dollar rallied for the first day in four and copper prices tumbled on demand concerns after Shanghai copper inventories surged to a 5-1/2 year high.
Potash Corp. of Saskatchewan (POT) sank over 4% in European trading after the company said profit this year will be $3.25 to $3.75 a share instead of a previous forecast of $4 to $5.
Lennar (LEN) slid 1.5% in pre-market trading after the third-biggest US homebuilder by revenue reported a Q3 net loss of 97 cents a share, worse than analysts' estimates of a 51 cent loss.

Barchart.com U.S. Morning Call for Friday, September 18, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is flat and Dec S&Ps are up +1.00 point. The dollar is higher and metals prices are mostly lower, especially copper, after Shanghai copper stockpiles expanded to a 5-year high and LME copper inventories rose for the 16th consecutive day, signaling adequate supply and weak demand. As a result, mining companies and raw-material producers are weaker. German producer prices rose for the first time in 11 months in Aug as energy costs increased. Despite rising +0.5% m/m, Aug German producer prices fell -6.9% y/y, the fifth straight month of year-over-year declines, indicating inflation pressures are virtually non-existent. The UK posted a -16.1 billion-pound ($26.3 billion) deficit in Aug, its biggest deficit for any Aug since records began in 1993 as the recession decimated tax revenue and welfare costs soared. The IMF expects Britain's deficit to exceed 13% of GDP next year, the most in the Group of 20 nations.

The Asian markets today closed mostly lower with Japan down -0.70%, Hong Kong -0.67%, China -3.63%, Taiwan +0.66%, Australia -0.56%, Singapore -0.92%, South Korea +0.01%, India +0.18%. Aiful Corp., Japan's third-largest consumer lender by revenue, plunged 27% and led Japanese consumer lenders lower after it said it will try to reschedule debt payments after being shut out of credit markets. Japan's consumer finance companies are grappling with falling revenue after the government capped interest rates they can charge and forced repayments to customers for overcharged interest. Japan's Financial Services Minister said he'll determine if Aiful's funding woes are specific to the company, or are an industry-wide issue, as consumer lenders brace for tougher regulations that will take effect in Jun. BOJ Deputy Governor Yamaguchi warned against the BOJ keeping its emergency credit programs for "a long time" because they might hamper a recovery in the financial industry, signaling the BOJ is warning markets that it is inclined to unwind the emergency measures sooner rather than later.

Barchart.com U.S. Morning Call for Thursday, September 17, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +0.49% and Dec S&Ps are up +1.00 point, both at 11-1/4 month highs. The dollar's slump continues as the dollar index tumbled to a 11-3/4 month low which boosted gold to a fresh 1-1/2 year high. Banks in Ireland rallied sharply after the Irish government detailed plans to purge banks of toxic assets. Bank of Ireland Plc rose 15% and Allied Irish Banks surged 25% after Ireland's National Asset Management Agency announced a proposal to spend 54 billion euros ($80 billion) buying real-estate loans in which the agency proposes to pay a 30% discount on the 77 billion-euro book value of the loans. Europe's trade surplus increased for a fourth straight month in July as exports rose +4.1% m/m, adding to signs the Euro-Zone is starting to emerge from recession. The Jul Euro-Zone trade surplus rose ro 6.8 billion euros ($10 billion), the largest since 2004, from a 2.3 billion euro surplus in Jun. The euro currency rallied to an 11-1/2 month high after the data was released.

The Asian markets today closed mostly higer with Japan +1.69%, Hong Kong +1.71%, China +1.90%, Taiwan +0.50%, Australia +1.39%, Singapore -0.07%, South Korea +0.81%, India +0.20%. China's Shanghai Composite Index jumped to a 1-month high, led by gains in commodity producers, while Japanese stocks rose after a survey showed Japan's manufacturers turned optimistic for the first time in almost two years. The Q3 Japan BSI large manufacturing business condition jumped to 15.5 from a Q2 level of -13.2. The 15.5 reading in Q3 is the highest since the survey began in 2004, with a reading above zero signaling optimists outnumber pessimists. The Bank of Japan as expected kept its benchmark overnight lending rate unchanged at 0.1% and maintained their emergency lending programs to banks and companies. While describing the economy as "showing signs of recovery," an upgrade from the "stopped worsening" assessment made last month, the BOJ said that it still sess "downside" risks to growth.

Barchart.com U.S. Morning Call for Wednesday, September 16, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +1.20% and Dec S&Ps are up +5.90 points, both at 11-month highs. The dollar index fell to a 11-3/4 month low which has lifted gold to a 1-1/2 year high and silver to a 13-1/4 month high. Fed Chairman Bernanke's comments yesterday that the recession is "very likely" over along with comments from billionare investor Buffet that the economy is responding to government stimulus measures and that his company is "buying equities as we speak" is helping to lift European share prices. European consumer prices remained tame in Aug, rising +0.3% m/m and falling -0.2% y/y, the third consecutive monthly drop on an annual basis. European Union Economic and Monetary Affairs Commissioner Joaquin Almunia warned about "risks of regression" in the Euro-Zone's recovery from recession saying "we are not yet in a situation where we can say economic activity can maintain itself." The EU Commissioner was speaking before the 27-nation EU Parliament today, warning about removing government economic-stimulus measures too soon.

The Asian markets today closed mostly higher with Japan up +0.52%, Hong Kong +2.57%, China -1.34%, Taiwan +1.28%, Australia +2.42%, Singapore +1.37%, South Korea +2.03%, India +1.35%. Comments from Japan's incoming finance chief, Hirohisa Fujii, who said that he doesn't support a "weak yen," helped propel the yen to a 7-month high against the dollar today. The yen's rally took some of the luster off the gains in Japanese exporters which had rallied nicely following the biggest surge in US retail sales in 3-1/2 years yesterday. Concerns that incoming Primie Minister Hatoyama's policies will delay Japan's economic recovery also limited stock gains. Most Asian mining companies and metal producers rose as gold climbed to a 1-1/2 year high and comments from former Fed Chairman Greenspan, who spoke to Tokyo clients of Deutsche Bank today and said "the next six months seem reasonably easy to anticipate: no inflation, good economic growth," kept stock prices in the black.

Barchart.com U.S. Morning Call for Tuesday, September 15, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is down -0.22% and Dec S&Ps are down -1.80 points. European stocks were undercut today after German investor confidence rose less than forecast. Although still rising +1.6 points to a 3-1/2 year high of 57.7, the Sep German ZEW economic sentiment survey had been expected to rise to 60.0. The Sep French CPI climbed +0.6% m/m and fell -0.2% y/y as rising energy costs added to the monthly increase although from a year ago prices declined for the fourth straight month, indicating scant price pressures. European wage growth accelerated +4.0% y/y in Q2 compared with a +3.6% y/y increase in Q1 as the Euro-Zone economy edged closer to recovery, while European car sales rose for the third straight month in Aug as vehicle-scrapping incentives boosted sales in Germany, France the U.K and Italy.

The Asian markets today closed mostly higher with Japan up +0.15%, Hong Kong -0.31%, China +0.28%, Tauwan +1.23%, Australia +0.20%, Singapore -0.05%, South Korea +1.27%, India +1.48%. The Chinese stock market received a boost today after the Ministry of Finance reported that Aug foreign direct investment in China climbed +7% y/y, the first increase in 11 months. That follows a -35.7% y/y plunge in July and a total -17.5% y/y decline in the first eight months of this year. China's rebound from the slowest growth in almost a decade may attract more money from abroad, helping to fuel its economic recovery. Tire companies in China rallied today after most said the US imposition of tariffs on imported tires won't affect their second-half sales while Chinese airlines stocks gained after the Civil Aviation Administration of China said air passenger numbers rose +42% y/y in Aug while cargo volumes rose 18% y/y. US President Obama downplayed the possibility that the imposition of tariffs on imported tires from China would spark a cycle of retaliation saying "we're not going to see a trade war."

Overnight U.S. Stock News

December S&Ps this morning are trading down -1.80 points. The US stock market yesterday recovered from early losses and closed modestly higher (Dow +0.22%, S&P 500 +0.63%, Nasdaq Composite +0.52%). The S&P 500 Index rallied to an 11-1/4 month high. Bullish factors included (1) a rally in defensive stocks and consumer staple companies that do not sell a lot of goods to China on fears a trade war with China will hurt those companies that rely on increased sales to China for their earnings, and (2) comments from San Francisco Fed President Yellen who said that prospects for a "tepid" recovery require policy makers boost employment and that "a wide array of data" supports the view that the recesion has ended and the economy will expand in the second half as growth comes from a "diminished pace of inventory liquidation by manufacturers, wholesalers and retailers."
Bearish factors included (1) comments from Nobel Prize-winning economist Joseph Stiglitz that the US has failed to fix the underlying problems of its banking system and that "the problems are worse than they were in 2007 before the crisis," and (2) concerns that a trade war with China will derail the global economic recovery.
Citigroup (C) fell 2.2% in pre-market trading after people familiar with the matter said the Treasury Department has been discussing how to sell the 34% stake that the government acquired in the rescue of the bank.
Ebay (EBAY) climbed 2% in pre-maket trading after UBS upgraded the stock to "buy" from "neutral," saying the comapny's marketplaces business is "turning a corner" and it raised its stock price estimate on Ebay to $28 from $24.

Barchart.com U.S. Morning Call for Monday, September 14, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is down 1.18% and Dec S&Ps are 8.60 points (-0.83%). Bearish factors include talk of overvaluation in global stock markets and China's threat of trade retaliation on US exports of chickens and auto products after President Obama slapped tariffs on US tire imports from China. The US over the weekend announced tariffs on $1.8 billion of tires from China in response to complaints by US unions about low prices on Chinese tires. Mining stocks such as BHP Billiton (-3.2%) are trading lower on today's sell-off in industrial metals prices. Societe Generale is down 3.4% this morning and Deutsche Bank is down 2.6% after Nomura cut its recommendations on the two stocks. Also, Moody's said today that UK banks are likely to suffer additional losses of at least 130 billion pounds, adding to the 110 billion pounds of losses seen already since the credit crisis began in 2007. The Russian central bank today cut its refinancing rate by 25 bp to 10.5% from 10.75% and cut the repurchase rate on central bank loans by 25 bp to 9.50% from 9.75% in an attempt to stimuluate the economy. The Russian central bank has been limited in its ability to cut interest rates by an inflation rate near 10% and by the threat of weakness in the ruble, which fell 35% in the second half of 2008. The Asian markets today closed lower nearly across the board: Japan -2.32%, Hong Kong -1.08%, China +1.71%, Taiwan -1.09%, Australia -1.41%, Singapore -1.54%, South Korea -1.11%, Bombay -0.31%. Japanese exporter stocks such as Sony, Honda and Toyota fell today on the appreciation in the yen during the Asian session, which makes Japanese exports more expensive.

Overnight U.S. Stock News

December S&Ps this morning are trading -8.60 points on valuation concerns and weak Asian and European stocks. The US stock market last Friday gave up an early rally and closed slightly lower (Dow -0.23%, S&P 500 -0.14%, Nasdaq Composite -0.15%). The S&P 500 Index posted an 11-month high before closing lower. Bearish factors included (1) valuation concerns after the 6-month rally pushed the valuation of the S&P 500 Index to nearly 19 times reported earnings, a 5-year high, and raised concerns that the recent rally has outpaced the prospects for future earnings, (2) weakness in energy producers after crude oil prices slumped, and (3) the warning from Morgan Stanley that the odds of a US-led "relapse" into global recession may be as high as one-in-three if any shock to the US economy adds to already-depressed consumer demand.
Bullish factors last Friday included (1) the larger-than-expected increase in the Sep US University of Michigan consumer confidence index, (2) carry-over strength from a rally in the Chinese stock market which was supported by larger-than-expectd increases in Aug China new-lending and industrial production, which may support a resumption of growth in the global economy, and (3) the fall in the 10-year T-note yield to a 2-month low, which may bolster the housing market.

Barchart.com U.S. Morning Call for Thursday, September 10, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is down -0.41% and Sep S&Ps are down -1.20 points. Stock prices are fluctuating on either side og unchanged while a stronger dollar has led to declines in metals prices. Crude oil prices climbed ahead of this morning's weekly DOE inventories report and after the IEA raised its global oil demand estimate for next year for a second consecutive month, citing growth in Chinese consumption and stronger demand in the US. The IEA now estimates world oil consumption is likely to average 85.7 million bpd next year, +450,000 bpd more than last month's estimate. Technology stocks firmed afer Texas Instruments late yesterday reported stronger-than-expected Q3 profit and said demand is beginning to recover for analog chips; semiconductors used in devices such as electronic utility meters, computer disk drives and consumer electronics. In its monthly bulletin released today, the ECB said that the Euro-Zone's recovery from recession will be patchy and inflation will remain "subdued," nearly the same message ECB President Jean-Claude Trichet made after last Thursday's ECB policy meeting, suggesting ECB policy makers are in no rush to withdraw policy stimulus.

The Asian markets today closed mostly higher with Japan up +1.95%, Hong Kong +1.05%, China -1.00%, Taiwan +1.12%, Australia +1.07%, Singapore +1.19%, South Korea +2.30%, India +0.21%. China's Premier Wen Jiabao said today that his nation "cannot and will not" pull back from policies designed to revive the economy as "China's economic rebound is unstable, unbalanced and not yet solid." He cautioned that some stimulus measures will "fade" and others will take time to become effective. In an interview in the Dalian today, Zhu Min, the Vice President of the Bank of China said that ample liquidity has caused "bubbles" in stocks, commodities and real estate, raising concerns that bank loans are fueling unsustainable gains in equity and property markets. July Japan machine orders, an indicator of capital spending in the next three to six months, plunged -9.3% m/m to 665 billion yen ($7.2 billion), the lowest level since the data series began in 1987, and a sign that consumer demand at home and abroad has yet to recover sufficiently to spur investment by Japanese businesses.

Overnight U.S. Stock News

September S&Ps this morning are trading down -1.20 points. The US stock market yesterday moved higher into early afternoon and then shed of its some gains into the close and finished modestly higher (Dow +0.53%, S&P 500 +0.78%, Nasdaq Composite +1.11%). Bullish factors included (1) strength in industrial companies after Goldman Sachs upgraded multi-industry companies to "attractive" from "neutral," saying the stocks tend to outperform the S&P 500 when the ISM manufacturing index climbs "sustainably above 50." (2) the rally in credit-card companies after Citigroup predicted "the credit cycle has begun to recover for US credit cards," (3) the prediction from former Fed Chairman Greenspan that the US economy will start to pull out of a recession by year end, helped by "remarkable growth" in productivity and a depletion of inventories, (4) the +9.5% gain in weekly mortgage purchase applications to the highest level since Jan, which indicates strength in the housing market, and (5) the Fed's Beige Book in which most Fed districts "mentioned signs of improvement" in the economy.
Bearish factors yesterday included (1) comments from Chicago Fed President Evans that the US jobless rate will continue to rise, peaking at a "little over 10%," and stay "high for an uncomfortable period of time," (2) the prediction from Bank of America that the US stock rally is "maturing" and the risk of a 20% correction in the S&P 500 Index has increased, and (3) the prediction from Blackrock that investors should be prepared for some "near-term corrective action as stocks are no longer as cheap as they were several months ago and there is still a great deal of uncertainty over the economic outlook."
Yahoo! (YHOO) climbed over 3% in pre-market trading after Bank of America upgraded the company to "buy" from "neutral" saying the owner of the second-most popular US Internet search engine is a growth company that's "trading like a long-term secular decliner."
Monsanto (MON) is 3% lower in pre-market trading after the world's biggest seed maker said its 2009 earnings would come in at the low end of its projected 2009 EPS range of $4.40 to $4.50, below analysts' estimaes of $4.52, and that fiscal year 2010 EPS would be $3.10 to $3.30, well below analysts' estimates of $4.12.

Barchart.com U.S. Morning Call for Wednesday, September 9, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +0.13% and Sep S&Ps are down -0.30 points. The dollar is little changed and metals and crude oil prices are lower. OPEC's production-monitoring committee recommended that the cartel keep its production target unchanged at 24.845 million bpd and improve compliance of quotas as it meets in Vienna. ECB Council member Erkki Liikanen said at a speech in Helsinki that "the free fall is over" and "the bottom has been found in the world economy" and ECB President Jean-Claude Trichet said at a speech in Brussels that "it's not time yet to say that the crisis is over," though policy makers should be ready to respond to faster growth by curbing stimulus measures. Automakers in Europe are stronger today after BMW jumped 6% when Morgan Stanley upgraded the world's biggest maker of luxury cars to "overweight" from "underweight" and Renault SA rallied over 5% after its CEO said that worst of the financial crisis is over. The Aug German CPI was unexpectedly revised lower to +0.3% m/m and -0.1% y/y from an earlier reported +0.4% m/m and unchanged y/y. German consumer prices have now declined from a year earlier for a second month in Aug, indicating inflation presures remained subdued.

The Asian markets today closed mixed with Japan down -0.78%, Hong Kong -1.04%, China +0.76%, Taiwan -0.87%, Australia -0.04%, Singapore -0.39%, South Korea -0.62%, India +0.37%. Japan's broadest indicator of economic health, the coincident index which is a composite of 11 indicators including factory production and retail sales, rose for a fourth month in Jul to 89.6, the highest since Dec and adds to signs that Japan is climbing out of recession. Deutsche Bank AG economists predict that inflation in China may accelerate to 4% by the middle of next year and prompt the PBOC to raise interest rates. Deutsche Bank predicts the PBOC may start raising rates as soon as March as economic growth accelerates to an annual rate of at least 11% in Q1 of 2010. China, the world's largest steelmaker, increased steel output in Aug by 2% to a record 51.7 million metric tons, according to data from the China Iron & Steel Association, as government stimulus spending has spurred building and manufacturing demand.

Overnight U.S. Stock News

September S&Ps this morning are trading down -0.30 points. The US stock market yesterday moved sharply higher and finished just below its high (Dow +0.59%, S&P 500 +0.88%, Nasdaq Composite +0.94%). Bullish factors included (1) carry-over strength from global equity markets, which rallied on speculation the worldwide recession has abated, (2) strength in raw material companies and energy producers after crude oil rallied sharply to a 1-week high and gold prices surged to a 1-1/2 year high, (3) comments from former Fed Chairman Greenspan that countries are moving out of the financial crisis "fairly quickly" along with comments from IMF Director Strauss-Kahn that the financial crisis is "almost certainly behind us," (4) data from Eurekahedge Pte, that hedge funds in August attracted $4.5 billion of fresh capital and posted a sixth straight month of positive returns, and (5) the prediction from Credit Suisse that the S&P 500 Index will rise 13% to 1,150 by mid-2010 and their recommendation that investors favor stocks over bonds and cash as the global economy recovers.
Bearish factors yesterday included (1) concerns over the health of the US banking system after 5 more US banks were taken over by the FDIC over the past weekend, bringing this year's total of US bank failures to 89, (2) the prediction from Hussman Econometrics that US companies are still reducing the ranks of temporary workers which shows that any rebound in overall employment won't happen soon (the number of temporary US workers dropped by 65,000 in Aug to 1.74 million and has fallen every month since Jan 2008), (3) the -$21.6 billion plunge in US Jul consumer credit, the biggest decline since the data series began in 1943, which suggests slow consumer spending, and (4) data from Manpower that showed its Q4 Net Employment Outlook fell -3%, a record low for the third straight quarter and the weakest since Manpower's data series began in 1962, which signals that the US labor market continues to stagnate.
Ebay (EBAY) is trading 1% higher in pre-market trading after Sanford C. Bernstein raised its recommendation on the company to "outperform" from "market perform" and lifted its share-price estimate by 17% to $28 a share.

Barchart.com U.S. Morning Call for Tuesday, September 8, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +0.29% and Sep S&Ps are up +11.00 points. Commodity producers are leading European and US stocks higher as gold prices surge to a 1-1/2 year high and drag other raw-material and commodity prices higher, due to the slump in the dollar index to a 11-1/4 month low. Increased M&A speculation is also supporting European share prices as Cadbury Plc rose 2% on speculation it may attract competing offers after rejecting Kraft Foods bid while Deutsche Telekom AG and France Telecom SA are 2% higher after agreeing to merge their UK mobile-phone units. Continuing the bullish enthusiasm was the recommendation by Credit Suisse AG strategists to favor stocks over bonds and cash as they forecast gains in equity indexes worldwide ranging from 12% in Europe to 23% for Japan through 2010 as the global economy recovers. German exports in July rose +2.3%, their third monthly increase as global trade picked up and may help lead Europe's largest economy out of recession while the Aug Bank of France business sentiment rose +2 to a 1-year high of 89. European stocks pared their gains after July German industrial production unexpectedly declined -0.9% m/m after economists had predicted a +1.6% m/m increase.

The Asian markets today closed higher with Japan +0.70%, Hong Kong +2.14%, China +2.15%, Taiwan +1.24%, Australia +1.56%, Singapore +0.64%, South Korea +0.80%, India +0.67%. Strength in technology stocks led a rally in Asia-Pacific bourses after prices of the benchmark 1-gigabit computer-memory chip climbed to a 1-year high of $1.71, an indication of increased demand, according to Dramexchange Technology, operator of Asia's biggest spot market for the chips. Aug China passenger-car sales surged a record 90% y/y to 858,300 as tax cuts and government subsidies spurred demand and brought China closer to overtaking the US as the world's largest auto market. Weakness in Japanese banks limited gains in Japanese stocks after lending growth in Japan slowed for the eighth-straight month in Aug while G-20 finance ministers said over the weekend that banks need to increase the amount and quality of so-called core capital. The Nikkei newspaper reported that Japanese banks may be disadvantaged if preferred shares are not allowed to be counted toward capital.

Barchart.com U.S. Morning Call for Friday, September 4, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +1.02% and Sep S&Ps are up +4.60 points. Global stock markets are mostly higher as they look ahead to this morning's US jobs report for clues about the pace of recovery in the US economy and also eye the G-20 meeting of finance ministers and central bankers set to covene later today in London for clues as to when economic stimulus measures may be lifted. Dallas Fed President Fisher while speaking at UC Santa Barbara late yesterday said the US economy will probably undergo an extended period of slow growth while facing "financial headwinds" that will take years to wane. ECB President Trichet while speaking at an event in Frankfurt today said the ECB won't necessarily raise interest rates when the time comes for it to start withdrawing other emergency measures, suggesting the ECB is prepared to leave its benchmark rate at a record low 1.00% for an extended period to ensure an economic recovery in the Euro-Zone. European carmakers strengthened today after UBS upgraded Peugot, Europe's second-biggest carmaker, to "neutral" from "sell" after Peugot signed an agreement with Mitsubishi Motors to develop a vehicle based on Mitsubishi's i-MiEV electric car while Bild Zeitung reported that Daimler AG does not plan to cut jobs at the moment and will trim costs by more than 4 billion euros ($5.7 billion) this year.

The Asian markets today closed mostly higher with Japan down -0.27%, Hong Kong +2.82%, China +0.82%, Taiwan +0.68%, Australia +0.13%, Singapore +0.94%, South Korea -0.38%, India +1.89%. China's State Adminisration of Foreign Exchange announced just after the Asian markets closed that China will raise the amount foreign funds can invest in stocks by 25% to $1 billion and that the lockup period for some investors will be cut to three months from one year. This action should encourage foreign inflows into the Chinese stock market and may boost the Shanghai Index when it reopens Monday. In another course of action that should benefit Chinese stocks, the China Banking Regulatory Commission, seeking to assuage fears that stricter capital requirements for banks will spur a plunge in new lending and the stock markets, said today that measures to force banks to deduct holdings of other lenders' subordinated debt from their capital would be taken "over the course of years." Japanese businesses cut spending for a ninth straight quarter after Japan Q2 capital spending excluding software fell -22.2% y/y, after dropping a record -25.4% in Q1. Q2 profits plunged -53% and sales fell -17%, the second-biggest drop on record, indicating global demand hasn't recovered enough to encourage companies to expand or buy more equipment.

Overnight U.S. Stock News

September S&Ps this morning are trading up +4.60 points. The US stock market yesterday finished with moderate gains (Dow +0.69%, S&P 500 +0.85%, Nasdaq Composite +0.82%). Bullish factors included (1) carry-over strength from the rally in China's Shanghai Index which had its biggest one-day gain in 6 months, (2) the OECD's prediction of a "modest" recovery for the world's leading industrialized nations after it revised its G7 GDP forecast for this year higher to a contraction of -3.7% from its -4.1% forecast in June, (3) the larger-than-expected increase in the Aug ISM non-manufacturing index which rose to an 11-month high, and (4) strength in retailers after the Aug ICSC chain store sales fell -2.0% y/y, the smallest year-over-year decline in the last 11 months.
Bearish factors yesterday included (1) the smaller-than-expected decline in weekly initial unemployment claims and the unexpected jump in weekly continuing unemployment claims, heightening anxiety ahead of Friday's Aug nonfarm payrolls report, (2) comments from Treasury Secretary Geithner who said its "too early" to remove policies aimed at boosting economic growth and that "we've got a long way to go still," fueling concern that the US economy is too weak to grow without government stimulus programs, and (3) the prediction from BNP Paribas that the US unemployment rate will not peak until Q2 of 2010 and climb to almost 11%.
Novellus Systems (NVLS) rallied 7.4% in pre-market trading after the maker of equipment that helps turn silicon wafers into computer chips forecast Q3 orders may rise as much as 55% as chip demand recovers. The prediction, used by investors as an indicator of future sales, is higher than a July forecast the company gave for a gain in sales of as much as 50%.

Barchart.com U.S. Morning Call for Wednesday, September 2, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is down -0.18% although Sep S&Ps are unchanged. Insurance companies are leading the European stock market decline today led by Prudential Plc, the UK's biggest insurer by market value, which slid 2.8% after the Financial Times reported that the UK life insurance industry may need to raise as much as 70 billion pounds ($113 billion) of fresh capital to meet new European Union regulations, citing a letter from the Association of British Insurers. Mining companies are lower after copper prices fell to a 1-1/2 week low and European automakers are weaker after reporting lackluster US auto sales for the month of Aug. Bp Plc rallied over 3% after Europe's second-largest oil company said it has made a "giant" oil discovery at its Tiber prospect in the Gulf of Mexico with resources of more than 3 billion barrels. July European producer prices fell more than expected and at a record pace with the -8.5% y/y drop the biggest annual decline since records first began in 1981.

The Asian markets today closed mostly lower with Japan down -2.37%, Hong Kong -1.76%, China +1.66%, Taiwan +0.29%, Australia -1.69%, Singapore -1.02%, South Korea -0.65%, India -0.54%. Japanese retailers led Japan's Nikkei Index lower today after by Seven & I, the world's largest convenience store owner, fell 2.7% after cutting its full-year net income target by 11% and saying "consumer sentiment remains weak." Chinese airline stocks closed lower after China's National Development and Reform Commission reported the government will raise fuel prices by 300 yuan ($44) a ton to reflect gains in crude oil and offset higher raw material costs, although China's Shanghai Composite Index closed higher by +1.7%, led by a rally in financial shares, after the Xinhua news agency reported Premier Wen Jiabao said the country's economy is at a "critical phase" of its recovery and the government will stick to its pro-active fiscal policy. Stocks in Australia closed lower despite the country's Q2 GDP growing a larger-than-expected +0.6% q/q. Australia's central bank, the RBA, scrapped its forecast last month for the economy to contract this year and instead predicted Australia's GDP will expand +0.5% this year.

Overnight U.S. Stock News

September S&Ps this morning are trading unchanged. The US stock market yesterday gave up early gains and moved sharply lower the rest of the day to close lower for the third straight session (Dow -1.96%, S&P 500 -2.21%, Nasdaq Composite -2.00%). The S&P 500 Index slipped to a 1-1/2 week low. Bearish factors included (1) growing concerns that stock prices are overbought and have run ahead of the prospects for an economic recovery with valuations for stocks in the S&P 500 at 5-year highs, (2) the sell-off in bank stocks on concerns that US banks may post further losses after RBC Capital Markets predicted that US banks on the West Coast still face credit deterioration and higher loan losses and that "many banks may still not have enough capital and reserves" to cushion against writedowns from worsening real estate markets, (3) the action by Credit Suisse Group AG to cut its recommended allocation of US stocks to 5% "underweight" from "benchmark," along with their prediction that valuations for US stocks look "marginally stretched" and that American equities will underperform even when the ISM manufacturing index is above 50 and rising, and (4) the prediction from Goldman Sachs' chief investment strategist that S&P 500 companies will slash their capital spending by 22% this year and 15% next year, which would be the sharpest cuts in 25 years.
Bullish factors yesterday included (1) the larger-than-expected increase in the Aug ISM manufacturing index which grew for the first time in 19 months and matched a 3-year high, (2) the greater-than-expected jump in July US pending home sales, which have risen for six consecutive months to post a 4-1/2 year high and signal a possible bottom in the US housing crisis, and (3) the larger-than-expected increase in Aug US total vehicle sales which rose at a 15-month high seasonally adjusted annual sales rate as the government's "cash for clunkers" rebates lured shoppers to showrooms.
Wells Fargo (WFC) rose 0.6% in pre-market trading after the bank said it plans to repay the US bank bailout program "shortly" without raising equity, a tactic that would protect current shareholders.
Hologic (HOLX) gained 1.7% in pre-market trading after the US Food and Drug Administration approved the company's radiation therapy system for the treatment of early stage breast cancer.

Barchart.com U.S. Morning Call for Monday, August 24, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +0.30% and Sep S&Ps are trading up +2.30 points, both at 10-1/4 month highs. Global stock markets rallied after comments from Fed Chairman Ben Bernanke and ECB President Jean-Claude Trichet, who said while speaking at the annual central banker's symposium in Jackson Hole, Wyoming, that the world economy is pulling out of recession. Also boosting European stock prices was the larger-than-expected increase in Jun Euro-Zone industrial new orders which rose +3.1% m/m, the biggest monthly increase in 1-1/2 years, and yet another sign that the worst of the recession is receding.

The Asian markets today closed higher with Japan +3.35%, Hong Kong +1.67%, China +0.81%, Taiwan +2.76%, Australia +3.16%, Singapore +2.65%, South Korea +2.10%, India +2.55%. Asian markets were supported by dovish comments from Chinese Premier Wen Jiabao who soothed market fears that the Chinese government may tighten its fiscal policy and slow bank lending after saying the government will maintain its fiscal and monetary policies as the economic recovery isn't stable yet and faces many "uncertainties." Jiabao added that authorities can't be "blindly" optimistic as a "decline in external demand may continue for a longer time" and excess production capacity may restrain industrial growth. Jiabao's comments suggest that the Chinese government has not decided on a timetable to implement an exit strategy from its unprecedented stimulus measures.

Overnight U.S. Stock News

September S&Ps this morning are trading up +2.30 points at a fresh 10-1/4 month high. The US stock market last Friday extended the sharp 3-session rally with the S&P 500 index posting a new 10-month high (Dow +1.67%, S&P 500 +1.86%, Nasdaq Composite +1.59%). Bullish factors last Friday included (1) the 7.2% jump in July new home sales to a 2-year high, which sparked a sharp 6.5% rally in the S&P 500 Home Builder sub-index, (2) Fed Chairman Bernanke's comment that "Economic activity appears to be leveing out, both the United States and abroad, and the prospects for a return to growth in the near term appear good," (3) strength in oil companies with the rally in oil prices to a new 2-month high, (4) carry-over strength from the rally in European stocks on the stronger-than-expected European purchasing managers reports, and (5) rallies in Salesforce.com, Gap and Smuckers on better-than-expected earnings.
Bearish factors included (1) Friday's sharp sell-off in T-note prices, (2) bank-analyst Meredith Whitney's forecast that 300 banks will fail, that investors are overestimating bank earnings, and that she does not expect consumer spending to "come back anytime soon," and (3) ongoing concern about valuations with the S&P index hitting a 10-month high and with the forward P/E posting a 4-1/2 year high of 17.19.
Freeport-McMoRan Copper & Gold (FCX) climbed 1.8% in European trading as the world's largest publicly traded copper producer advanced after copper prices rose to a 1-week high.
American Express (AXP) is 2.8% higher in European trading after the largest credit-card company by purchases was upgraded to "overweight" at Barclays Capital, which said a peak in charge-offs is near and the company will benefit from declining credit costs.

Barchart.com U.S. Morning Call for Friday, August 21, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +1.30% and Sep S&Ps are up +6.70 points (+0.67%). The main bullish factor is this morning's stronger-than-expected German and French purchasing managers indexes, which added to the recent news that Germany and French Q2 GDP rose +0.3% and suggested that the recession is over in those countries. The German services purchasing managers index (PMI) rose sharply to 54.1 in August from 48.1 in July, indicating that the German services sector is now expanding. The French manufacturing PMI rose to 50.2 in August from 48.1 in July. Moreover, the Euro-Zone Aug composite PMI rose to 50.0 from 47.0 in July. The Asian markets today closed mixed: Japan -1.40%, Hong Kong -0.64%, China +1.88%, Taiwan -1.16%, Australia -1.99%, Singapore -0.57%, South Korea +0.51%, Bombay +1.52%.

Overnight U.S. Stock News

September S&Ps this morning are trading +6.70 points (+0.67%) with help from the European PMI indexes and indications that recession is over in Germany and France. The US stock market yesterday finished with moderate gains (S&P 500 +0.76%, Dow +1.09%, Nasdaq Composite +1.01%). Bullish factors for stocks yesterday included (1) carry-over strengh from the +4.5% surge in China's Shanghai Composite Index on speculation that its recent slump was overdone given the outlook for earnings and economic growth, (2) the rise in Jul US leading indicators for a fourth consecutive month, (3) the larger-than-expected increase in the Aug Philadelphia Fed manufacturing index to its highest level in 1-3/4 years, adding to evidence that the recession may be ending, (4) comments from Treasury Secretary Geithner that the US economic recovery is still in its early stages, propelled by an improving job market and a housing industry that is beginning to stabilize, (5) the prediction from Goldman Sachs that the recession may have ended in June, citing the gain in July US industrial production along with the likelihood that output will continue to grow becasue of depleted inventories, and (6) the 21% surge in AIG after its CEO said it expects to repay the government and hopes to be able to "do something for our shareholders."
Bearish factors included (1) the unexpected increase in weekly initial US unemployment claims, spurring concern higher unemployment will delay an economic recovery, and (2) the surge to 9.2% in Q2 US mortgage delinquencies, the highest ever for the data series that began in 1979, raising concern that the US housing crisis has yet to bottom.

Barchart.com U.S. Morning Call for Thursday, August 20, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +1.22% and Sep S&Ps are up +2.50 points. European and US stocks are higher this morning, taking their cue from a rally in China's Shanghai Composite Index which surged 4.5% on speculation that its recent slump was overdone given the outlook for earnings and economic growth. Treasuries fell and the dollar and metals prices climbed, while crude oil was little changed. UBS AG rose over 4% after the Swiss government agreed to settle a US tax-evasion lawsuit and arranged to sell its 6 billion-franc stake in the bank, while Holcim climbed over 7% after the world's second-biggest cement maker reported Q2 profit of 453 million francs, better than analysts' estimates of 436 million francs. The Organiztion for Economic Cooperation and Development (OECD) said late yesterday that the economies of its 30 members collectively stopped shrinking in Q2 as France, Germany and Japan exited recession.

The Asian markets today closed higher with Japan +1.76%, Hong Kong +1.88%, China +4.51%, Taiwan -0.82%, Australia +0.08%, Singapore +1.46%, South Korea +2.06%, India +1.37%. China's Shanghai Composite Stock Index posted its biggest one-day gain since March and led other major global bourses higher after better-than-expected estimated earnings revived confidence that the economy is recovering. Bank of Communications, China's fourth-largest lender, rose over 4% after it said Q2 net income was 7.62 billion yuan ($1.1 billion), better than analysts' estimates of 7.24 billion yuan. PetroChina, the nation's biggest oil company, gained nearly 7% and China Shenhua Energy and China Coal Energy, the top two coal producers, climbed more than 7%. Bank of America Merrill Lynch predicts that equities in China will climb as earnings exceed estimates and policy makers maintain their "loose monetary policy." The 21st Century Business Herald reported that China may audit the destination of bank loans next month, citing unidentified commercial bank officials, and that several Chinese banks have already begun compiling materials for the audit.

Barchart.com U.S. Morning Call for Tuesday, August 18, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +1.01% and Sep S&Ps are up +5.30 points. Global stocks are on the mend today after Monday's precipitous decline with the larger than expected increase in German investor confidence supporting a rebound in stock prices today. The Aug ZEW German economic sentiment survey surged a larger-than-expected 16.6 to 56.1, its highest level in 3-1/3 years. The dollar declined while metals and crude oil rebounded from Monday's losses. HSBC Holdings Plc rose 2.4% after Europe's biggest bank was raised to "buy" from "neutral" at Goldman Sachs, which said provisions and losses at HSBC may decline, while Poland's WIG20 benchmark stock index gained after Morgan Stanley raised its recommendation on the country's equities to "overweight" from "equal weight."

The Asian markets today closed mostly higher with Japan +0.16%, Hong Kong +0.84%, China +1.01%, Taiwan -2.05%, Australia -0.15%, Singapore +0.85%, South Korea +0.40%, India +1.69%. Japan's Casio Computer rallied 7.1% after Credit Suisse upgraded the company to "outperform" from "underperform" amid optimism the company will restore profits while Everbright Securities, the first Chinese brokerage to make an initial public offering in almost seven years, soared 30%. Other Chinese brokerages did not fare as well with Citic Securities falling 4.1% and Haitong Securities slumping 3.9% on concerns a falling stock market will hurt their equity investments. Former Morgan Stanley chief Asian economist Andy Xie who correctly predicted in Apr 2007 that China's equities would tumble now says China's Shanghai Composite Index may fall by another 10% as "the current correction is reflecting the tightening in lending." Japan's department store sales fell for the 17th straight month after the July Japan nationwide department store sales tumbled -11.7% y/y, as a worsening job market and falling wages helped to depress consumer spending.

Overnight U.S. Stock News

September S&Ps this morning are trading up +5.30 points. The US stock market yesterday finished sharply lower (S&P 500 -2.00%, Dow -2.43%, Nasdaq Composite -2.75%). The S&P 500 Index fell to a 2-week low. Bearish factors for stocks yesterday included (1) carry-over weakness from Asia-Pacific markets which plunged after Japan's Q2 GDP grew less-than-expected, raising concerns about the strength of the global economic recovery, (2) weakness in bank stocks on concern about the health of the US banking industry after US regulators late last Friday closed Colonial BancGroup, the biggest bank failure since Washington Mutual collapsed last year, which pushed the total of failed banks in the US this year to 77, (3) the fall in energy producers after crude oil prices tumbled to a 2-week low on demand concerns, (4) the Fed's latest survey of loan officers which said most banks expect lending to remain tight through the second half of next year, and (5) the prediction from Bank of America analysts that the fall in China's Shanghai Stock Index to a 1-3/4 month low signals further losses ahead for the S&P 500 Index "since China was leadership during both the bear market decline and the recovery" along with concerns that investors have become "too bullish" on the equity market.
Bullish factors included (1) the larger-than-expected increase in the US Aug Empire manufacturing index to a 1-1/2 year high, (2) the gain in the US Aug NAHB housing market index to a 1-year high, stoking optimism the US housing market may have found a bottom, and (3) the prediction from Goldman Sachs analyst Cohen that the recession is ending "right now" and that there will be no "double-dip" recession.
Agilent Technologies (A) rose nearly 3% in after-hours trading after the biggest maker of scientific-testing equipment reported Q3 fiscal profit of 15 cents a share, better than analysts' estimates of 11 cents.
Home Depot (HD) climbed 3.6% in pre-market trading after the world's largest home-improvement chain reported Q2 earnings of 67 cents a share, well ahead of analysts' estimates of 59 cents.

Barchart.com U.S. Morning Call for Monday, August 17, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is down -2.27% at a 2-week low and Sep S&Ps are down -22.00 points also at a 2-week low. Global stock markets fell on concerns that current valuations may be stretched and that the 5-month rally has outpaced the prospects for economic growth. The dollar and Treasuries rallied on increased safe-haven demand and commodity prices fell with crude oil and gold tumbling to 2-week lows. Mining companies BHP Billiton, the world's largest, lost over 4% and Rio Tinto Group, the third-largest, dropped over 5%. Swedbank, the largest lender in the Baltics, fell nearly 5% after it said it will raise 15 billion kroner ($2.1 billion), while the closure by US regulators late last Friday of Colonial BancGroup, the biggest bank failure since Washington Mutual collapsed last year, pushed the total of failed banks in the US this year to 77 and increased concerns about the health of the US banking industry.

The Asian markets today closed sharply lower with Japan -3.10%, Hong Kong -3.62%, China -6.11%, Taiwan -1.95%, Australia -1.63%, Singapore -3.25%, South Korea -2.88%, India -4.07%. Japanese markets led the fall in global equity markets after Q2 Japan GDP was reported at +0.9% q/q nad +3.7% y/y, weaker than the expected +1.0% q/q and +3.9% y/y, stoking concern that economic growth will falter once governments worldwide complete $2 trillion in stimulus spending. China's Shanghai Composite Index tumbled 6.1% to a 1-3/4 month low after foreign direct investment in China fell -35.7% in July, the 10th straight monthly decline, as companies stalled expansion plans amid the global financial crisis. Also undercutting Chinese stocks was the 3.9% drop in Ping An, China's second-biggest insurance company, after it reported first-half net income plunged 45%, along the 10% loss in Yunnan Copper after China's third-biggest copper producer posted a first-half loss of 126.3 million yuan ($18 million) and said it sees "no clear signs" of a recovery.

Overnight U.S. Stock News

September S&Ps this morning are trading sharply lower by -22.00 points after Japan's economy grew less than expected. The US stock market last Friday closed lower, although off of the worst levels of the session (S&P 500 -0.82%, Dow -0.85%, Nasdaq Composite -1.19%). Bearish factors for stocks last Friday included (1) the unexpected decline in the Aug US University of Michigan consumer confidence which fell for the second straight month to a 5-month low, (2) the prediction from Federated Investors that US stocks are "dramatically overpriced" because fallout from the financial crisis will continue to hurt consumer spending, and (3) data from the FDIC showing that about 2.6% of the $7.74 trillion in bank loans outstanding in the US at the end of Q1 were nonaccruing, the highest in 17 years, which may increase bank writedowns and limit their earnings in the months ahead.
Bullish factors included (1) the lack of inflation pressures in the US economy after the July CPI posted its largest annual decline since Jan 1950 along with the July core CPI posting its smallest annual increase in 5-1/2 years, (2) the larger-than-expected increase in Jul US industrial production, which rose for the first time in the last nine months, and (3) the continued thaw in interbank lending markets after the 3-month dollar Libor rate fell to a record low of 0.43% and the Libor-OIS spread fell to 24 bp, its lowest since Jan 2008.
International Business Machines (IBM) slipped 1.6% in pre-market trading and Intel (INTC) slid 2.1% in European trading after Japan's Q2 GDP was reported weaker than expected. Intel gets about 60% of its annual sales in the Asia-Pacific region and IBM gets about 10% of its annual sales from Japan.
Lowe's (LOW) tumbled over 7% in pre-market trading after it reported Q2 profit of 51 cents a share, below analysts' estimates of 54 cents.

Barchart.com U.S. Morning Call for Friday, August 14, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +0.24% and Sep S&Ps are down slightly by -0.20 points. Speculation that earnings growh will accelerate as the global economy recovers from recession continues to buoy stock prices. Swatch Group, the world's largest watchmaker, jumped 11% after it reported first-half profit of 299 million francs ($279 million) which beat analysts' estimates of 259 million francs and said sales and operating profit in May and June improved from the first four months of the year and the "very positive trend" continued in July. Rio Tinto Group rose nearly 2% after the world's third-biggest mining company rallied after copper prices climbed to a 10-1/2 month high and Porsche SE soared 12% after Volkswagen AG said it will pay 3.3 billion euros for a 42% stake in Porsche's automotive unit. Inflation pressures in Europe continue to be limited after the Jul Euro-Zone CPI fell more-than-expected, -0.7% m/m and -0.7% y/y, with the -0.7% y/y drop the largest annual decline since records began in 1991. European telecommunication stocks were undercut when Bank of America cut its recommendation on Europan phone stocks to "neutral" from "overweight," saying they favor industries more likely to benefit from the economic recovery.

The Asian markets today closed mixed with Japan up +0.76%, Hong Kong +0.15%, China -2.80%, Taiwan +0.49%, Australia +0.57%, Singapore +0.66%, South Korea +1.98%, India -0.69%. China's Shanghai Composite Index tumbled to a 1-month low on concerns its 67% rally this year has caused stock prices to be over-extended. Japan's Jun tertiary index unexpectedly rose +0.1% m/m as government stimulus measures spurred consumer spending while minutes of the Bank of Japan's Jul 14-15 policy meeting showed policy makers were cautious about the economic outlook and said emergency credit programs may need to be extended into 2010. Hong Kong's GDP rose a larger-than-expected 3.3% in Q2, adding to signs that the global economy is recovering. The Australian dollar and bond yields jumped as speculation rose that the Reserve Bank of Australia will hike interest rates by year-end after RBA Governor Stevens said the RBA will have to raise the benchmark interst rate from its "emergency" level at some stage as the economy rebounds from the global recession. Governor Stevens added that a more normal level for the overnight cash rate target is "a good deal north" of the current 49-year low of 3%.

Overnight U.S. Stock News

September S&Ps this morning are trading little changed, down -0.20 points. The US stock market yesterday finished the session moderately higher (S&P 500 +0.39%, Dow +0.69%, Nasdaq Composite +0.53%). Bullish factors for stocks yesterday included (1) strength in retailers after Wal-Mart, the world's largest retailer, gained 2.7% on its report of a Q2 profit of 88 cents a share, better than analysts' estmates of 86 cents, (2) a rally in financial companies on optimism that the freeze in credit markets is nearly over after the Libor-OIS spread, a gauge of bank reluctance to lend, narrowed to 25 bp for the first time since Jan 2008, a level that former Fed Chairman Greenspan said more than a year ago he considered "normal," (3) carry-over strength from European stock markets that rallied when the French and German economies unexpectedly expanded in Q2, signaling a possible end to the recession, and (4) a rally in bank stocks after billionare John Paulson's hedge fund said it bought shares of Bank of America, Regions Financial and Goldman Sachs.
Bearish factors included (1) the unexpected decline in US Jul retail sales, raising concerns about the sustainability of an economic recovery as consumers, whose spending contributes to 2/3 of GDP, are still cautious due to rising job losses,(2)the unexpected increase in US weekly initial unemployment claims, (3) Morgan Stanley's cut in its Q3 US GDP forecast to 3.7% from an earlier forecast of 4.2%, and (4) the +6.7% m/m and +32% y/y surge in July US foreclosure filings to a record 360,149, as falling home prices and the recession keep the US housing market from bottoming.
King Pharmaceutical (KG) rallied nearly 5% in pre-market trading after the drugmaker won US approval to sell the first pain pill that users can't easily manipulate to get high.
Abercrombie & Fitch (ANF) fell 1.4% in pre-market trading after the teen-clothing retailer reported a Q2 net loss of -30 cents per share, compared with profit of 87 cents a share in the year-earlier period.

Barchart.com U.S. Morning Call for Wednesday, August 12, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +0.22% and Sep S&Ps are up +0.70 points. European and US stocks are gyrating on either side of unchanged amid mixed company earnings. E.ON advanced 4.3% after Germany's biggest utility posted larger-than-expected first-half profit and said 2009 earnings may drop less than anticipated after increasing power generation by 20% through expansion in Italy, France and Spain. Nestle dropped over 3% after the world's biggest food company said first-half income declined 2.8% and said it was unsure if its forecasts for 2009 sales growth would reach its long-range target of 5% to 6%. ING Groep NV slid over 4% after the largest Dutch financial-services company reported Q2 profit of 71 million euros ($100 million), below analysts' estimates for profit of 362 million euros. June Euro-Zone industrial production unexpectedly fell -0.6% m/m, and has now fallen in 9 of the last 10 months, signaling a slow recovery from recession. Inflation pressures in Europe continue to be scant after July French consumer prices fell -0.8% y/y, their third straight decline and the biggest annual drop since the data series began in 1996. Bank of England Governor Mervyn King said its "more likely than not" that inflation will slow below 1% this year and stay below the BOE's main 2% target until at least the end of 2012. Governor King added that while recent economic data was "encouraging," banks are still restricting access to credit and that the UK will find itself "in a difficult position" for "some years." BOE policy makers decided to expand its asset purchase program last week by 50 billion pounds ($82 billion) to 175 billion pounds because "there were real downside risks to inflation."

The Asian markets today closed mostly lower with Japan -1.42%, Hong Kong -3.03%, China -4.47%, Taiwan -0.15%, Australia +0.26%, Singapore -1.00%, South Korea -1.12%, India -0.36%. Most Asian stock markets were undercut by valuation concerns after the five-month rally has made some stocks expensive relative to earnings. China'a Shanghai Composite Index tumbled 4.4% to a 3-1/2 week low after the Chinese commerce industry said efforts to boost domestic demand can't completely offset an export slump. A stronger yen led to losses in Japanese exporters as the stronger currency threatens to reduce the value of dollar-denominated sales. Honda Motor, which generates 45% of its sales in North America, dropped 2.6%, and Toyota Motor fell 2.4%, while Mitsubishi Corp., a trading company that gets more than a third of its sales from commodites, lost 2.6% on lower oil and metals prices.

Overnight U.S. Stock News

September S&Ps this morning are trading +0.70 points. The S&P 500 Index yesterday fell for a second day and finished with moderate losses (S&P 500 -1.03%, Dow -1.27%, Nasdaq Composite -1.13%). Bearish factors for stocks yesterday included (1) the plunge in bank stocks after a Rochdale Securities analyst predicted that bank stocks have been rallying recently on "fumes," not fundamentals, and that bank earnings will not improve in the third and fourth quarters of this year, (2) weakness in energy producers after crude oil fell to a 1-week low when the US Energy Departmant cut its 2009 global demand and price forecasts, (3) the report from Zillow.com that 23% of US mortgage holders owed more than their homes were worth at the end of Q2 and Zillow.com's prediction that US mortgages that are underwater may rise to as much as 30% by mid-2010 as job losses and foreclosures climb, and (4) continued weakness in the global economy after July China exports plunged -23% m/m and Russia'a Q2 GDP contracted a record -10.9% q/q, indicating weakened growth prospects for the world economy.
Bullish factors included (1) the largest jump in Q2 US nonfarm productivity in 5-3/4 years, as employers squeezed more out of remaining staff to bolster profits, (2) slack labor costs after Q2 US unit labor costs tumbled by the most in nine years, and (3) the larger-than-expected fall in Jun US wholesale inventories which have now fallen for ten straight months, which is an encouraging sign for a pickup in production in the second-half of the year as most company inventories are nearly depleted and in need of replenishment.
Applied Materials (AMAT) jumped 3.3% in after-hours trading after the largest maker of semiconductor-production machinery reported a Q3 loss of 4 cents a share, better than a 9 cent loss predicted by analysts. In addition, AMAT predicted Q4 profit will be as much as 4 cents a share, beating analysts' estimates of a loss of 5 cents, signaling that the chip market may have bottomed out.
VeriSign (VRSN) gained nearly 2% in European trading after Credit Suisse raised its recommendation on the biggest operator of computers that direct Internet traffic to "outperform" from "neutral.

Barchart.com U.S. Morning Call for Tuesday, August 11, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is down -0.19% and Sep S&Ps are down -1.30 points. European and US stocks were fluctuating on both sides of unchanged before being dragged lower by bank stocks. Lloyds Banking Group Plc plummeted 9.4% after the FT reported that the UK bank may face government resistance to its plans to raise 15 billion pounds ($25 billion) in a rights offer. Danske Bank fell over 2% after Denmark's largest lender said it expects impairment charges to remain high this year after a surge in loan losses at home and in Ireland resulted in a Q2 loss. Nattixix SA plunged 15% after the WSJ said there are no plans to de-list any of the lender's securities from the market. Russia's GDP contracted a more-than-expected -10.9% in Q2, the most on record and follows a -9.8% contraction in Q1, as rising unemployment crimped consumer demand and the government failed to approve a stimulus package until just two months ago. Russia's economic crisis deepened as the global recession sapped demand for Russia's oil, natural gas and metals while the country's industrial production plunged as companies struggled to raise funds during the credit crunch. On the brighter side, consumer prices in Germany were unexpectedly revised lower with the -0.7% y/y fall in July German CPI the largest annual decline since records for a reunified Germany began, while the -10.6% y/y plunge in July German wholesale prices is the the biggest decline since the data were first compiled in 1968, exacerbating downward pressure on inflation.

The Asian markets today all closed higher with Japan +0.58%, Hong Kong +0.69%, China +0.33%, Taiwan +0.38%, Australia +0.65%, Singapore +1.88%, South Korea +0.09%, India +0.43%. China's July exports tumbled -23% y/y, thier ninth consecutive monthly decline, and new loans in July plunged to 355.9 billion yuan ($52 billion), less than a quarter of June's level, underscoring government concern that the world's third-biggest economy is yet to establish a solid recovery. China's statistics bureau also reported that July China industrial production rose a less-than-expected 10.8% and July consumer prices fell -1.8% y/y, the biggest decline since 1999, and may delay any speculation of a tightening of Chinese monetary policy. The BOJ as expected left its benchmark interest rate unchanged today at 0.10%, citing "downside risks to economic activity" while South Korea's central bank held its benchmark interest rate at a record low with Governor Tae saying a recovery faces "some uncertainties."

Barchart.com U.S. Morning Call for Monday, August 10, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is down -0.87% and Sep S&Ps are down -4.20 points. European and US stocks are lower this morning on speculation that a 5-month rally has stretched valuations and outpaced the prospects for corporate profits. Automotive companies led European stocks lower as Daimler AG fell nearly 4% after Morgan Stanley downgraded the world's largest luxury automaker to "underweight" from "overweight," citing "risks" to 2010 estimates for growth and a "stretched valuation," while Volkswagen sank over 5% after Europe's largest carmaker was cut to "underweight" from "neutral" at HSBC Holdings Plc, which said "selling pressure could arise." Lloyds fell over 3% after the London-based Times reported the bank's new chairman said he is seeking to raise 10 billion pounds to 15 billion pounds in a share sale as part of a plan to reduce the bank's exposure to the UK's asset protection plan. Laura Tyson, an adviser to President Obama, said at a conference in Kuala Lumpur, that the US needs to change its growth strategy and focus on investment and exports as it faces a slow recovery from the global recession. She added that the Obama administration's current stimulus package "is supposed to get considerably stronger in the second half of this year," and that its too soon to tell if a second stimulus package will be needed. Limiting losses in European markets was the larger-than-expected increase in the Aug Sentix investor confidence to a 1-year high along with the greater-than-expected increase in the July Bank of France business sentiment to an 11-month high, adding to signs that the negative effects from the global recession are abating.

The Asian markets today closed mixed with Japan up +1.08%, Hong Kong +2.72%, China -0.30%, Taiwan +0.21%, Australia +0.11%, South Korea -0.09%, India -0.99%. Japanese stocks strengthened after Japan's Cabinet Office reported that Jun Japanese machinery orders climbed +9.7% m/m, the first increase in four months. Goldman Sachs today raised their forecast for China's economic growth this year to 9.4% from a previous estimate of 8.3%, citing "strong momentum" and the likelihood that the goverment will delay tightening policy. China's property sales surged +60% by value in the first seven months of this year, adding to concern that record lending will create a real-estate bubble. Chinese Premier Wen Jiabao reiterated yesterday that monetary and fiscal policy will remain unchanged because of problems including falling export demand and industrial overcapacity as the government tries to walk a tightrope and avert bubbles in stocks and property without choking off the recovery.

Overnight U.S. Stock News

September S&Ps this morning are trading down -4.20 points on valuation concerns. The S&P 500 index last Friday surged to a 9-3/4 month high and finished sharply higher (S&P 500 +1.23%, Dow +1.34%, Nasdaq Composite +1.37%). Bullish factors last Friday included (1) the Jul US nonfarm payrolls which showed job losses shrank at the smallest amount in 11 months along with the unexpected drop in the unemployment rate for the first time since April 2008, bolstering speculation that the economy is improving and justifying the recent 5-month rally in stock prices, (2) the 69% jump in US corporate bonds sales to $23.3 billion this past week from $13.8 billion the previous week, as a strengthening economy has buoyed demand for US corporate debt and borrowing costs have fallen to levels seen before the credit crisis began in 2007 which should benefit US companies trying to raise capital, and (3) the prediction from New Amsterdam Partners that economic news is getting less grim and earnings estimates are being ratcheted up with earnings estimates for companies in the S&P 500 next year now "north of $70" per share.
Bearish factors included (1) the report from Comstock Partners that the US is headed for a "deleveraging period" in which the amount of consumer borrowing collapses as government borrowing explodes with the US savings rate rising to about 10% by 2018 which may curtail growth in US consumer spending by 0.75% annually on average during the next 9 years, (2) comments from White House press secretary Gibbs who said that the Obama administration still expects the US unemployment rate to surpass 10% before a recovery takes hold, and (3) the warning from the National Association of Home Builders that legislation approved by the House and being considered in the Senate requiring new US homes to be more energy-efficient threatens to smother a rebound in the housing market as the extra costs to new homes associated with the legislation will price more than 1 million people out of the market.
Freddie Mac (FRE) surged over 80% in pre-market trading after the mortgage finance company reported Q2 net income of $768 million, its first profit in two years and said it did not request more aid from the Treasury.
Eli Lilly (LLY) dropped 2.4% in European trading after Goldman Sachs downgraded the company to "sell" from "neutral" and added the drugmaker to its "conviction sell" list, saying its "patent cliff" is the largest in the industry.
Best Buy (BBY) is 1.1% lower in pre-market trading after Goldamn Sachs cut its recommendation on the world's largest electronics retailer to "neutral" from "buy."

Barchart.com U.S. Morning Call for Friday, August 7, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is down -0.77% and Sep S&Ps are down -2.60 points. Investors are anxiously awaiting this morning's July US employment report that is expected to show US employers slashed 328,000 jobs and the unemployment rate roseg to a 26-year high of 9.6%. RBS is leading European financial stocks lower after it plunged 15% when the UK's biggest government owned bank posted a first-half loss of 1.04 billion pounds ($1.7 billion) as it set aside 7.5 billion pounds ($12.6 billion) to cover bad loans. Peugeot Citroen is down nearly 7% after Europe's second-largest carmaker had its debt rating cut to junk by Standard & Poor's who also affixed Peugeot with a "negative" outlook, saying the automaker's finances would "deteriorate significantly" as a European auto-market recovery will fail to take place in 2010. Jun German industrial production unexpectedly fell -0.1%, giving back some of May's record +4.3% surge. Russia's Micex Index fell 2% despite the Russian central bank cutting its benchmark refinancing rate for the fifth time since Apr 24, -25 bp to 10.75%, in an attempt to spur lending. Limiting losses in Europe was the larger-than-expected +7.0% surge in Jun German exports, the biggest increase in 2-3/4 years, which will help lift Europe's largest economy out of recession.

The Asian markets today closed mixed with Japan up +0.23%, Hong Kong -2.51%, China -2.95%, Australia -0.62%, Singapore -2.00%, South Korea +0.59%, India -2.28%. China's Shanghai Composite Index closed -2.9% lower after China Construction Bank, China's second-largest bank, said it will reduce new loans by about 70% in the second-half of the year to avert a surge in bad debt. Also, Chinese Vice Finance Minister Ding Xuedong at a press briefing in Beijing said officials will scrutinize gains in stock prices and create an "internal mechanism" to stabilize the stock market, fueling concern that loans meant for infrastructure projects are being used for speculation in equity markets.

Overnight U.S. Stock News

September S&Ps this morning are trading down -2.60 points. The S&P 500 index yesterday rose to a 9-1/2 month high early before shedding its gains and trading lower the rest of the day and finishing with modest losses (S&P 500 -0.27%, Dow -0.56%, Nasdaq Composite -1.00%). Bearish factors yesterday included (1) weakness in health-care companies after JPMorgan Chase cut its recommendation on health stocks to "underweight" from "neutral," saying the group has less "upside potential to earnings" than other industries, (2) the prediction from Deutsche Bank that the percentage of US properties "underwater" is forecast to rise to 48%, or 25 million homes, as property prices continue to drop through Q1 of 2011, and (3) the statement from the chairman of the President's Council of Economic Advisers, that the US unemployment rate is likely to rise even as the $787 billion stimulus plan provides more support in the short term.
Bullish factors included (1) the larger-than-expected decrease in weekly US initial unemployment claims, (2) the action by the BOE to unexpectedly increase its quantitative easing program by 50 billion pounds ($84 billion), and (3) the drop in the cost of protecting US corporate bonds from default after contracts on the Markit CDX Noth America Investment-Grade Index fell to 109 bp, the lowest in 13 months and a sign of improved perceptions of credit quality.
Alcoa (AA) is 1.6% lower in pre-market trading after prices of copper, nickel, tin and zinc all fell after China Construction Bank said it will curtail new lending by 70%, spurring concern this may hamper growth.
Nvidia (NVDA) soared 7.5% in after-hours trading after it forecast Q3 sales of as much as $830.9 million, well ahead of analysts' estimates of $757 million.

Barchart.com U.S. Morning Call for Thursday, August 6, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +0.66% and Sep S&Ps are up +0.70 points. European and US stocks are higher, led by financial companies after KBC Group NV, the Belgian bank that received 7 billion euros ($10.1 billion) in rescue funds, surged 17% after it reported an unexpected profit as the value of its collateralized debt obligations increased. Aviva Plc, the UK's second-biggest insurer by market value, jumped 5.6% after it reported a first-half profit as margins on sales of life-insurance policies increased. The Royal Institution of Chartered Surveyors (RICS) said UK house prices will increase this year, reversing an earlier prediction for a drop of as much as 15%. The Bank of England as expected kept its benchmark interest rate unchanged at 0.5%, but did increase its bond purchase program by 50 billion pounds to 175 billion pounds. In another sign that the European recession is abating, Jun German factory orders surged +4.5% m/m, larger-than-expected and the biggest monthly increase in 2 years.

The Asian markets today closed mixed with Japan up +1.32%, Hong Kong +1.97%, China -2.08%, Taiwan +0.30%, Australia +1.45%, Singapore -0.20%, South Korea +0.27%, India -2.45%. Leading technology stocks higher in Japan was the 7.2% gain in Elpida, Japan's largest maker of computer-memory chips, after JPMorgan Chase upgraded the stock to "overweight" from "neutral" on signs that earnings will "beak even" in the December quarter. Australia's S&P/ASK 200 Index gained after the government reported that the number of Australians employed rose +32,200 in Jun, better than the expected decline of -18,000. China's Shanghai Composite Index posted its first back-to-back drop in three weeks as investors are spooked by the "fine-tune" langauage in the PBOC's quarterly monetary report, stoking concern the central bank will follow up with tightening measures, such as hiking the reserve ratio.

Overnight U.S. Stock News

September S&Ps this morning are trading up +0.70 points. The S&P 500 index yesterday traded weaker most of the day and finished with mild losses (S&P 500 -0.42%, Dow -0.29%, Nasdaq Composite -0.91%). Bearish factors yesterday included (1) the larger-than-expected loss of jobs in the Jul ADP employment change, (2) the unexpected decrease in the Jul ISM non-manufacturing index, and (3) the prediction from Barclays Capital that the US economy will probably experience "at least one more decent growth scare" this year that may send stocks down 10%.
Bullish factors included (1) the unexpected increase in Jun US factory orders, (2) the prediction from Haverford Trust that the equity market will "continue to surprise investors" and that stock prices will have more upside to reflect what will be "continued improving economic fundamentals," and (3) despite falling profits, companies earnings results have beaten projections by 9.5% in the current earnings season and per-share earnings have beaten estimates at 75% of the 411 companies in the S&P 500 that released Q2 results since Jun 17.
Allstate (ALL) slipped 2.6% in after-hours trading after the largest publicly traded US home and auto insurer reported Q2 adjusted EPS of 55 cents, well below analysts' estimates of $1.11 a share.
Cisco Systems (CSCO) fell over 3% in European trading after the largest maker of networking equipment said Q1 sales will fall 15% to 17% from a year earlier.
General Cable (BGC) sank nearly 10% in after-hours trading after the biggest US maker of cable for energy and communications companies forecast profit of 55 cents a share at most in the third quarter, below analysts estimates of 73 cents a share.
Staples (SPLS) is 1.6% higher in European trading after the world's largest retailer of office supplies was added to the "conviction buy" list at Goldman Sachs, which previously had a "neutral" recommendation on the stock.

Barchart.com U.S. Morning Call for Wednesday, August 5, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +0.41% and Sep S&Ps are little changed, down -0.70. Financial stocks are leading the European market higher after Societe Generale, France's second-biggest bank, rose 5.8% after it reported Q2 profit of 309 million euros ($445 million), exceeding analysts' estimates of 68 million euros. Lloyds Banking Group Plc shot higher by 14% after the British lender said provisions for bad loans will decline "significantly" after it reported a first-half loss of 3.1 billion pounds ($5.2 billion). The July Euro-Zone composite purchasing managers index was unexpectedly revised higher to 47.0, an 11-month high and another sign that the recession has bottomed out. Undercutting stock gains was the unexpected drop in June Euro-Zone retail sales which fell -0.2% m/m and -2.4% y/y as the weak job market prompts consumers to hold back on spending. Also limiting gains was the 6.3% fall in Deutsche Boerse AG after Europe's largest exchange by market value said Q2 profit dropped as revenue from stock and derivative trading declined.

The Asian markets today closed lower with Japan -1.18%, Hong Kong -1.45%, China -1.21%, Taiwan -1.55%, Australia -1.04%, Singapore -1.58%, South Korea -0.45%, India +0.46%. Leading the Japanese market lower was the 4.7% loss in Isuzu after Japan's largest maker of light-duty trucks reported a net loss of 16.6 billion yen ($170 million) in the quarter ended Jun 30. Weakness in technology stocks was led by the 5.1% slump in Elpida after Japan's biggest computer-memory chipmaker reported a 44.5 billion yen loss due to lower semiconductor prices. China's Shanghai Composite Index ended lower for the first time in the last five days on valuation concerns as the Index has climbed +88% so far this year. China's central bank reaffirmed its pledge to maintain its "moderately loose" monetary policy and will fine-tune the approach as needed, the PBOC said in a quarterly monetary-policy report on its Web site. With new lending in China tripling to more than $1 trillion in the first half of 2009 from a year earlier, concerns are rising that Chinese banks are taking on too much risk and bubbles are inflating stock and property prices.

Overnight U.S. Stock News

September S&Ps this morning are trading slightly lower by -0.70. The S&P 500 index yesterday overcame early weakness to post a new 9-month high and close higher (S&P 500 +0.36%, Dow +0.30%, Nasdaq Composite +0.13%). Bullish factors yesterday included (1) the slightly stronger-than-expected increase in Jun US personal spending, (2) a rally in homebuilders and real estate companies after Jun US pending home sales rose more than expected and increased for the fifth straight month, (3) a lack of inflation after the Jun core PCE deflator, the Fed's preferred guage of inflation, rose at its smallest pace (+1.5% y/y) in 5-1/2 years, and (4) the prediction from Schaeffer's Investment Research that a further rise above 1,000 in the S&P 500 Index will spur additional gains as it attracts mutual funds and larger investors who remained skeptical of the five-month rally.
Bearish factors included (1) the larger-than-expected decrease in US Jun personal income which had its biggest drop (-1.3% m/m) in 3-3/4 years, (2) the report from the American Bankruptcy Institute that US consumer bankruptcy filings are at their highest volume since Oct 2005, (3) the prediction from Euro Pacific Capital that the Fed will have to raise interest rates before the end of this year to stem inflation as the dollar weakens and commodity prices soar, and (4) data from the US Commerce Department that showed US wages and salaries fell -4.7% in the 12 months through Jun, the biggest drop since records began in 1960, and an indication that any recovery in spending may be limited as consumers continue to pay down debt and save amid mounting joblessness.
Whole Foods Markets (WFMI) surged over 12% in European trading after the largest natural-goods grocer in the US reported Q3 profit of 25 cents a share, beating analysts estimates of 20 cents, and the company raised its full-year profit forecast after reducing expenses and using coupons to lure customers.

Barchart.com U.S. Morning Call for Tuesday, August 4, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is down -0.79% and Sep S&Ps are down -7.50 points (-0.75%) after the recent rally stretched stock valuations. UBS AG is down over 2% and leading financial stocks lower, after reporting its third consecutive quarterly loss, while BMW fell 4.4% after the world's largest maker of luxury cars reported that its second quarter profit declined 76% from last year. Standard Chartered Plc is nearly 4% lower after the British lender announced a plan to raise $1.7 billion in a share sale and Legal & General Group Plc, the second biggest UK insurer by assets, slid over 8% after reporting its operating profit fell 92% to 31 million pounds in the six months to Jun 30, below analysts' estimates of 248 million pounds. Limiting lossses in Europe was the -6.6% y/y decline in June European producer prices, the biggest annual decline since the data series began in Jan 1981.

The Asian markets today closed mixed with Japan +0.22%, Hong Kong -0.05%, China -0.01%, Taiwan -1.43%, Australia +1.08%, Singapore -1.23%, South Korea +0.14%, India -0.59%. Yamaha Motor, the world's second-largest maker of motor bikes, slumped 9.9% after forecasting a fiscal first-half net loss that's four times wider than its previous projection and Suzuki Motor sank 5% after Japan's second-largest maker of minicars, reported its Q1 net income fell 92%. Chip stocks advanced in Asia after the Semiconducor Industry Association said semiconductor sales rose 17% worldwide in the second quarter. After the close of Asian trading, Toyota Motor, the world's largest automaker, narrowed its full-year net loss forecast to 450 billion yen ($4.7 billion) in the year ending March, from an earlier forecast of a 550 billion yen loss, as government stimulus measures worldwide boosted demand for its autos.

Overnight U.S. Stock News

September S&Ps this morning are trading down -7.50 points as the market retreats following the recent rally. The S&P 500 index yesterday extended its 4-1/2 month rally to a 9-month high and finished stronger (S&P 500 +1.25%, Dow +1.53%, Nasdaq Composite +1.52%). Bullish factors yesterday included (1) the larger-than-expected increase in the Jul ISM manufacturing index to an 11-month high, fueling speculation that the recession is ending, (2) the unexpected increase in Jul US construction spending, (3) the 4.1% jump in Ford Motor after the US government's incentive program "cash-for-clunckers" helped Ford achieve its first monthly sales increase last month for the first time since 2007, and (4) overnight comments from former Fed Chairman Greenspan that led to a rally in European and Asian equity markets when he said that US economic growth may resume at a rate faster than most economists forecast.
Bearish factors included (1) the statement from Treasury Secretary Geithner that the US unemployment rate may not peak until the second half of 2010, even as the broader economy shows signs of improvement, and (2) the warning from the chief economist of the IEA that the global economic recovery could be threatened by an energy crunch as a rapid increase in demand for oil together with a stagnation or fall in supply drives up crude prices.

Barchart.com U.S. Morning Call for Monday, August 3, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +1.94% at a 8-3/4 month high and Sep S&Ps are up +9.80 points at a 9-month high. European and US stocks are surging today after former Fed Chairman Alan Greenspan said that US economic growth may resume at a rate faster than most economists forecast. Xstrata Plc and Rio Tinto Group advanced more than 4% as copper rallied to a 10-month high and bank stocks gained after HSBC, Europe's biggest lender, posted an unexpected profit and after Barclays Plc said first-half net income rose 10%. European stocks were also boosted after ING raised their recommendation on European financial-services, basic resources, chemical and industrial stocks to "overweight." The European manufacturing sector contracted less-than-estimated after the July Euro-Zone PMI manufacturing index was revised up to 46.3, an 11-month high, adding to indications the recession may have bottomed. Limiting gains in European stocks was the unexpected drop in June German retail sales which fell for a second month as rising unemployment prompted consumers to cut spending.

The Asian markets today closed mostly higher with Japan -0.04%, Hong Kong +1.14%, China +1.40%, Taiwan -0.30%, Australia +0.46%, Singapore +0.84%, South Korea +0.42%, India +1.62%. Sparking a rally in Asian stocks was the jump in China's July CLSA purchasing managers' Index to 52.8, a 1-year high, as record lending and a 4 trillion yuan ($585 billion) stimulus package stoked economic growth and helped propel China's Shanghai Composite Index to a 14-month high. Helping Japan's Nikkei Index to a 9-3/4 month high today was the 6% gain in Mitsubishi UFJ after Japan's biggest bank by market value reported its first profit in nine months along with the 6% rally in Mizuho Financial, Japan's third-largest bank by market value, after Morgan Stanley increased its investment rating in the lender to "overweight" from "underweight." South Korea's Kospi Index climbed to its highest level in almost a year after Goldman Sachs raised South Korea's stocks to "market weight" from "underweight," saying earnings appear more "resilient" than expected.

Overnight U.S. Stock News

September S&Ps this morning are trading up +9.80 points after posting a fresh 9-month high. The S&P 500 index last Friday consolidated below the previous session's 9-month high and the stock market closed narrowly mixed (S&P 500 +0.07%, Dow +0.19%, Nasdaq Composite -0.29%). Bullish factors last Friday included (1) the smaller-than-expected -1.0% decline in US Q2 GDP, (2) better-than-expected Q2 earnings reports as about three-quarters of companies reporting last week reported earnings that were above the analyst consensus, (3) last Friday's rally in T-note prices on some post-auction relief, (4) a 4.6% rally in MasterCard, which reported stronger than expected earnings of $2.68 per share due to cost-cutting, fee-raising, and higher transaction processing volume, (5) a 2.3% rally in Amgen after the company reported stronger-than-expected Q2 earnings and raised its 2009 earnings guidance, (6) a 4.9% rally in cyclical-stock Dow Chemical, which reported better than expected earnings as sales stabilized, and (7) a 4.4% rally in the S&P financial sector sub-index.
Bearish factors included (1) some pre-weekend long liquidation pressure after the recent sharp rally, (2) an 18% sell-off in Yahoo after its tie-up with Microsoft did not include the expected up-front payment from Microsoft of as much as $3 billion, and (3) weakness in energy companies after Exxon Mobil fell 2.6% on its report of its lowest profit in more than 5 years.

Barchart.com U.S. Morning Call for Thursday, July 30, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +1.39% and Sep S&Ps are up +7.90 points. Bullish factors this morning include (1) positive earnings news from a variety of companies including BT Group, Honda and Alcatel-Lucent, (2) the 2.8 point rise in the European Commission's July executive and consumer sentiment index to an 8-month high of 76.0, which was stronger than market expectations for a rise to 75.0, (3) the fourth straight rise in Japanese factory output (+2.4% m/m), and (4) a 2.14% recovery in the Chinese stock market today after China's central bank said that it would maintain a "moderately loose monetary policy." The Asian markets closed mostly higher: Japan +0.51%, Hong Kong +0.49%, China +2.14%, Taiwan -0.80%, Australia +1.15%, Singapore +1.23%, South Korea +0.83%, Bombay +1.41%.

Overnight U.S. Stock News

September S&Ps this morning are trading +7.90 points on higher stocks overseas and general opimtism about earnings. Today is a big earnings day with more than 50 of the S&P 500 companies due to report earnings. The US stock market on Wednesday closed slightly lower with the S&P 500 consolidating mildly below Monday's 8-1/2 month high (Dow -0.29%, S&P 500 -0.46%, Nasdaq Composite -0.39%). Bearish factors for stock prices on Wednesday included (1) Wednesday's sharp 5.25% decline in the Chinese stock market, which took commodity and energy prices lower and raised some doubts about China's ability to pull the world out of recession, (2) weakness in global energy and mining companies, (3) a 12% decline in Yahoo! after news that Microsoft would not be paying Yahoo! an upfront payment for Yahoo! to begin using Microsoft's search technology, (4) a rise in Treasury yields after a poor 5-year T-note auction, (5) a 0.8% decline in Morgan Stanley after Goldman Sachs cut its rating on Morgan Stanley to "neutral" from "buy" due to expectations for lower investment banking revenue, and (6) a 12% decline in Sprint Nextel due to a larger than expected loss on the failure to win market share away from AT&T/iPhone. Bullish factors included (1) news from the Fed's Beige Book report that the pace of the economic decline slowed in June and July, which was in line Fed Chairman Bernanke's testimony last week that the contraction "appears to have slowed significantly" with demand and production showing "tentative signs of stabilization," and (2) positive earnings news from Coca-Cola.
GE is up 3.4% this morning in European trading after Goldman Sachs raised its recommendation on the stock to "buy" from "neutral."
Visa is up +0.7% this morning after reporting higher than expected earnings of 67 cents were share, which was 2 cents better than the analyst consensus of 65 cents.

Barchart.com U.S. Morning Call for Wednesday, July 29, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +0.95% but Sep S&Ps are down -0.34%. Japan closed up +0.26% but other Asian markets closed lower: Hong Kong -2.37%, China -5.25%, Taiwan -0.83%, Australia -0.64%, Singapore -0.76%, South Korea -0.14%, India -1.03%. European stocks this morning were boosted by better-than-expected earnings from paint-and-coating-supplier Akzo Nobel and Bayer AG, which both rallied more than 5%. The European auto industry received a boost as Peugeot and Daimler rallied more than 5% after reporting smaller-than-expected losses. On the bearish side, European stocks were undercut by lower commodity prices and a larger-than-expected loss from steelmaker ArcelorMittal, which fell 3.6%. Asian stocks today were hurt by valuations concerns, lower commodity prices, and some earnings disappointments. Today's 5.25% sell-off in the Chinese stock market was the largest decline in 8 months. Jiangxi Copper fell 9% in Chinese trading due to lower copper prices today and reduced earnings guidance, helping to undercut the Chinese stock market as a whole. Rio Tinto, the world's third largest mining company, fell 2.4% in Australia today. China Petroleum fell 5% today after China cut prices on gasoline and diesel by 3.3%, thus undercutting margins for Asia's largest oil refiner.

Barchart.com U.S. Morning Call for Tuesday, July 28, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is down -0.04% and Sep S&Ps are down -4.20 points (-0.43) as the market sees a little long liquidation pressure after recent gains and frets the global recession may drag on. Deutsche Bank fell 5% in European trading this morning after it was forced to set aside 1 billion euros for loan losses, which was more than the analyst consensus of 630 million euros, although the bank still produced a Q2 profit of 1.09 billion euros, higher than the analyst consensus of 945 millon euros. BP is down 1.5% this morning after CEO Tony Hayward said that there is "little evidence of any growth in demand" for fuel and that he expects "the recovery to be long and drawn out." However, BP reported Q2 ex-items earnings of $2.94 billion, slightly higher than the analyst consensus of $2.82 billion. Sanofi-Aventis is up 2.4% this morning in European trading after Morgan Stanley lifted its rating on France's largest pharmaceutical company to "overweight" from "equal weight" due to its opinion that lost sales from the diabetes drug Lantus will be less than expected. Asia-Pacific markets today closed mostly higher: Japan -0.01%, Hong Kong +1.84%, China +0.33%, Taiwan +1.62%, Australia +0.72%, Singapore +1.84%, South Korea +0.23%, India -0.28%.

Overnight U.S. Stock News

September S&Ps this morning are trading -4.20 points as the market sees some long liquidation pressure following the recent rally. The US stock market on Monday closed mildly higher with the S&P 500 edging to a new 8-1/2 month high (Dow +0.17%, S&P 500 +0.30%, Nasdaq Composite +0.20%). The S&P 500 Index edged to a new 8-1/2 month high.
Bullish factors included (1) yesterday&s much stronger-than-expected June new home sales report of +11.0% (versus expectations of +3.0%), (2) a rally in homebuilders sparked by the strong new home sales report with Centex closing up +9%, Lennar closing up +6.8%, and Pulte Homes closing up +8.6%, (3) technical support with the new 8-1/2 month high in the S&P 500 index, (4) strength in oil and mining companies based on stronger oil and metals prices, and (5) a 4.6% rally in Bank of America after Morgan Stanley said that Bank of America is its "top pick" among US banks because of improved capital levels and an attractive valuation. Bearish factors for stock prices included (1) a disappointing earning report from RadioShack which fell 6.6%, and (2) a 2.7% sell-off in Aetna after the insurer missed Q2 earnings estimates and reduced its earnings guidance.
Amgen (AMGN) rallied 3.4% in after-hours trading yesterday after boosting its 2009 earnings guidance.

Barchart.com U.S. Morning Call for Monday, July 27, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +0.85% and Sep S&Ps are up 2.20 points (+0.22%). Global stocks are being boosted by an improved view of global earnings. European stocks were helped by today's news that the GfK German August confidence index rose 3.5 points to 14-month high. Mining companies are generally higher this morning on higher metals prices with BHP Billiton up 1.5% and Alcoa up 1.5%. Petroleum companies are trading higher this morning due to higher oil prices with Chevron up +0.7% in European trading and ConocoPhillips up 1%. Pearson rallied 9% this morning after the media and education company expanded its global education business and reported better-than-expected earnings. Citigroup is up 1.5% at $2.76 this morning in European trading after Barron's carried an article citing a Sanford C. Bernstein analyst as citing a $4 target for 2010 for the stock based on an economic revival and stronger global business. Wal-Mart is down -0.8% this morning after a report that the company plans to sell 100 billion yen ($1.05 billion) of yen-denominated bonds on July 29. Asia-Pacific markets closed higher almost across the board: Japan +1.45%, Hong Kong +1.35%, China +2.07%, Taiwan +0.79%, Australia +1.22%, Singapore +1.71%, South Korea +1.51%, India -0.03%. Japanese brokerage firms Nomura (+3%), Daiwa Securities (+4.5%) and Nikko Cordial are trading higher this morning after the Nikkei newspaper on Sunday forecasted positive earnings news.

Overnight U.S. Stock News

September S&Ps this morning are up 2.20 points (+0.22%) and expectations for an increase in new home sales this morning and on improved sentiment on the economy and earnings. The US stock market last Friday traded mixed into the afternoon and then pushed higher into the close and finished mixed (Dow +0.26%, S&P 500 +0.30%, Nasdaq Composite -0.39%). The S&P 500 Index posted an 8-1/2 month high.
Bullish factors included (1) comments from Fed Chairman Bernanke who said the Fed is "winding down" emergency measures established to end the financial crisis, which signals a possible improvement in financial conditions, (2) strength in energy producers after crude oil rallied to a 3-week high, and (3) the hike by HSBC in its year-end forecast for the S&P 500 Index to 1,020 from an earlier forecast of 900 based on expectations the global economy will keep improving.
Bearish factors for stock prices included (1) the 8.3% plunge in Microsoft after the world&s biggest software maker reported a 29% drop in fiscal Q4 profit and lower-than-expected revenue, a sign that cuts in expenses were not enough to make up for declining software sales, (2) the warning from Fitch Ratings that US municipal credit rating downgrades may increase in the second half of this year as the economic slump reduces the ability of public borrowers to repay debt, and (3) the report from research firm Bespoke Investment Group LLC that showed 84% as many shares of US stocks traded daily on the NYSE between May 1 and Jul 20, compared with the average from Jan 1 to Apr 30, the steepest slowdown since 1989 which fuels concern that the weak trading volumes may cause the current stock market rally to fizzle.

Barchart.com U.S. Morning Call for Thursday, July 23, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +0.13% and Sep S&Ps are up +2.10 points (+0.22%). Asia-Pacific markets closed mostly higher with Japan (+0.72%), Hong Kong (+2.96%), China (+1.25%), Taiwan (-0.06%), Australia (-0.11%), Singapore (+1.39%), South Korea (+0.06%) India (+2.61%).

Better-than-expected earnings are supporting gains in US and European stock prices today. Credit Suisse Group AG, is up over 4% after the bank reported Q2 profit rose 29% as revenue from trading stocks and bonds doubled. Roche advanced 2.6% after raising its full-year profit forecst because of increased savings from the acquisition of Genetech and it also forecast that its EPS will probably rise by double-digits in local currencies this year and next, with sales set to ourperform the industry&s. The July French business confidence indicator rose a more-than-expected +2 to 78, an 8-month high as it gained for the fourth straight month, adding to signs the worst of the recession is over. Speaking late yesterday at an event in the US, Bank of France Governor and ECB Council member Christian Noyer said the Euro-Zone economy is showing signs of recovery and credit markets in Europe are strengthening. Limiting gains in European stocks was the 7.4% drop in Compass Group Plc which led travel and leisure companies lower after the world&s largest catering company said it expects full-year organic revenue growth to be "broadly flat."

Japan&s Jun exports fell -35.7% y/y, the slowest pace of contraction this year as the global economy improves and worldwide demand recovers. Japan&s trade surplus in Jun widened to 508 billion yen ($5.4 billion), rising for the first time in 20 months as shipments gained +1.1% m/m due to China&s 4 trillion yuan ($586 billion) stimulus package which is feeding demand for Japan&s heavy equipment, autos and materials. Trade with China this year has surpassed the US as Japan&s biggest. Elsewhere in Asia, Singapore&s exports dropped the least in nine months in Jun, South Korea&s shipments fell at the slowest pace in eight months, while Taiwan&s export orders declined the least in eight months in Jun. The Asian Development Bank said today that the region&s economy will probably expand faster than the 3% estimated in March, before growth accelerates to 6% in 2010.

Overnight U.S. Stock News

September S&Ps this morning are up +2.10 points. The US stock market yesterday erased early losses and rallied into mid-day, but then faded into the close to finish mixed (Dow -0.39%, S&P 500 -0.05%, Nasdaq Composite +0.53%). The S&P 500 Index posted an 8-1/2 month high.
Bullish factors included (1) a rally in homebuilders after the unexpected increase in the US May FHFA house price index, (2) the prediction from Legg Mason that "the worst has passed" for the US stock market and that financial and technology companies will probably lead gains, and (3) continued better-than-expected corporate earnings with Apple climbing 3.5% after reporting Q3 profit of $1.35 a share, higher than market expectations of $1.17, and Pfizer, the world&s biggest drugmaker, gaining 1.1% after reporting Q2 profit excluding certain items of 48 cents a share, a penney better than analyst estimates and boosting its 2009 guidance for adjusted diluted EPS to a range of $1.90 to $2.00 from $1.85 to $1.95.
Bearish factors for stock prices yesterday included (1) weakness in energy producers as crude oil prices fell, (2) the recomendation from Morgan Stanley that investors "sell into" the global rally in equities because "cyclical growth risks" haven&t disappeared, (3) the drop in bank stocks led by a 3.6% fall in Wells Fargo after it said bad loans increased in Q2 and assets no longer collecting interest climbed 45% to $18.3 billion as of Jun 30 from the first quarter and by a 6.2% drop in Bank of New York Mellon which said investment losses rose 68% to $256 million from $152 million a year earlier, (4) the warning from Fed Chairman Bernanke that a potential wave of defaults in the US commercial real estate market may present a "difficult" challenge for the economy, and (5) the statement from Axiom Capital Management that the quality of the Q2 bank earnings is quite low as there is no long-term organic growth, only revenue being driven by goverment programs that will not last.
Qualcomm (QCOM) fell over 4% in after-hours trading on Wednesday after the world&s biggest maker of mobile-phone chips forecast Q3 revenue between $2.55 billion and $2.75 billion, the midpoint of that range being $2.65 billion, below the $2.71 billion predicted by analysts.
EBay (EBAY) jumped over 5% in after-hours trading Wednesday after it reported Q2 earnings of 37 cents a share, beating analysts& estimates by a penney, and it forecasted revenue for the next three months will be $2.05 billion to $2.15 billion, higher than analysts& estimates of $2 billion.
Ford (F) is up nearly 3% in pre-market trading after reporting a Q2 loss of -21 cents a share, better than the -50 cents loss estimated by analysts.

Barchart.com U.S. Morning Call for Wednesday, July 22, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is down -0.12% and Sep S&Ps are down -4.50 points (-0.47%). Asia-Pacific markets closed mixed with Japan up (+0.74%), Hong Kong (-1.30%), China (+1.90%), Taiwan (+0.46%), Australia (+0.44%), Singapore (-0.14%), South Korea (+0.35%), India (-1.46%).

European and US stocks are lower today, as they pull back from multi-month highs on concerns stock valuations may have become stretched. Morgan Stanley recommends that investors "sell into" the global rally in equities because "cyclical growth risks" haven&t disappeared. Bank of England Deputy Governor said in an interview in the Western Mail that British Q2 domestic product may show a contraction. May Euro-Zone industrial new orders unexpectedly declined -0.2% m/m, and have now fallen or remain unchanged for 10 straight months. Limiting losses in European stocks was the larger-than-expected increase in Jun French consumer spending which rose +1.4% m/m, the biggest increase since Jan, while the +1.2% y/y increase was the largest annual gain in 16 months, signaling a possible end to the recession. French Finance Minister Lagarde said that Europe&s third-largest economy was at a "turning point" as improving industrial production and consumption point to a way out of the slump, although the job market "will continue to deteriorate for several quarters."

Most Asian-Pacific stock markets rose today on speculation earnings will continue to surprise to the upside. Shin-Etsu Chemical, the world&s largest maker of silicon wafers, climbed 4.9% in Tokyo after saying it will start talks with chipmakers to boost prices for silicon wafers. Toshiba Corp., Japan&s biggest chipmaker, jumped 5% after Apple reported better-than-expected earnings and said it paid $500 million to Toshiba for flash memory chips. China Petroleum & Chemical surged 10% and helped lead China&s Shanghai Composite Index to a 13-month high after Nomura Holdings said the company&s first-half net income may more than triple. The BOJ said in its quarterly survey of loan officers that demand for loans by businesses declined to -14 in July from 13 in Apr and that household&s desire to borrow also dropped to -14, the lowest since the BOJ began the report in Apr 2000, as companies and households remain reluctant to take on debt until there are more signs of a sustainable economic recovery.

Overnight U.S. Stock News

September S&Ps this morning are down -4.50 points. The US stock market yesterday overcame early weakness and finished on its high (Dow +0.77%, S&P 500 +0.36%, Nasdaq Composite +0.36%). The S&P 500 Index posted an 8-1/2 month high.
Bullish factors included (1) comments from Fed Chairman Bernanke that the economy is showing "tentative signs of stabilization," and that the Fed intends to maintain a "highly accomodative" monetary policy for "an extended period," (2) the recommendation by Credit Suisse Group AG for investors to increase holdings of global equities to "overweight," based on improving economic indicators and earnings and the firm&s hike in its year-end forecast for the S&P 500 Index to 1,050 from an earlier prediction of 920, (3) continued positive Q2 earnings surprises as earnings season is off to an encouraging start with Caterpillar jumping 7.7% when it reported Q2 earnings of 72 cents a share, far ahead of analyst estimates of 22 cents, and with Merk climbing 6.1% after reporting Q2 earnings of 83 cents a share, above market estimates of 77 cents, and (4) the sharp 11 bp drop in the yield on the 10-year T-note.
Bearish factors for stock prices yesterday included (1) renewed concerns of a CIT Group bankruptcy after the lender plunged 22% on its statement that it may need to file for bankruptcy if it can&t repurchase maturing debt next month, (2) the prediction from the former head of the National Bureau of Economic Research and Reagan administration advisor Martin Feldstein, that the US recession may not be near its end and that there is a risk the economy may experience a "double-dip" contraction as growth may decelerate after the federal stimulus program is finished, and (3) the warning from Fed Chairman Bernanke who said financial markets remain "stressed," and that household spending is an "important" risk to the economic outlook because of continued job losses and declines in home values.
Apple (AAPL) jumped 4.4% in after-hours trading yesterday and is up 3.6% in European trading after reporting Q3 profit of $1.35 a share, higher than market expectations of $1.17. Demand exceeded expectations for its new iPhone and less-expensive Macintosh notebook computers.
Starbucks (SBUX) rallied 10% in after-hours trading after it reported Q3 profit of 24 cents a share, higher than analysts& estimates of 19 cents. Starbucks also forecast fiscal 2009 earnings of at least 74 cents a share, topping analysts& estimates of 71 cents.
Yahoo! (YHOO) is 3.8% lower in European trading after it forecast revenue in the current quarter of between $1.45 billion to $1.55 billion, below market estimates of $1.56 billion, as the slump in online advertising continues.

Barchart.com U.S. Morning Call for Tuesday, July 21, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +0.41% and Sep S&Ps are up +1.30 points (+0.14%). Asia-Pacific markets closed mostly mixed with Japan (+2.73%), Hong Kong (unchanged), China (-1.43%), Taiwan (+0.21%), Australia (+0.01%), Singapore (-0.07%), South Korea (+0.71%), India (-0.85%).

US and European stocks are higher with European bourses rising for the seventh straight day, the longest stretch of gains since credit markets froze in Aug 2007, as companies raise their profit forecasts. WM Morrison Supermarkets Plc jumped 9% and led a rally in retailers after saying its full-year results will be ahead of its earlier expectations and Actelion Ltd. rose 4.5% after Switzerland&s biggest biotechnology company raised its sales and profit forecasts for this year and reported higher-than-expected Q2 earnings. Credit Suisse AG raised its year-end target for the S&P 500 Index to 1,050 from 920, citing improved economic indicators and earnings, and advised investors to increase their holdings of global equities to "overweight" and reduce their government bond holdings to "benchmark." White House National Economic Council Director and former Treasury Secretary Lawrence Summers said in an interview published today that the US economy is "no longer in freefall," while Fed Chairman Bernanke wrote in a WSJ article that policy makers are "confident" they can stem inflation once the economy rebounds. Limiting gains in European stocks was the 2% drop in Volvo AB after the second-largest truckmaker in the world said it foresees a "difficult" third quarter after it reported a Q2 loss of 5.57 billion kroner ($725 million), larger than analysts& estimates of a 3.9 billion kroner loss while Nokia, the biggest mobile-phone maker in the world, dropped over 3% after it was downgraded to "underweight" from "overweight" at Morgan Stanley, which cited rising competition.

Bank of Japan policy members said in the minutes from their Jun 15-16 policy meeting that they are likely to consider when to end its three unprecedented credit programs seperately and said that when to end the programs depends on the state of financial markets and corporate borrowing, and that keeping policies for too long could cause "swings in economic activity and prices." Some members said accomodative polices worldwide may have fueled recent gains in commodity prices and that the cost increases may hurt the economy by worsening Japan&s terms of trade. Since lowering its overnight lending rate to 0.1% in Dec, the BOJ has been buying commercial paper and corporate bonds from banks, as well as providing them with unlimited credit in exchange for approved collateral. The BOJ last week extended the length of the lending programs to the end of the year from a Sep 30 expiry, citing "severe" borrowing conditions.

Overnight U.S. Stock News

September S&Ps this morning are up +1.30 points. The US stock market yesterday traded higher throughout the day and closed on its high (Dow +1.19%, S&P 500 +1.14%, Nasdaq Composite +1.20%). The S&P 500 Index closed at its highest level in 8-1/2 months.
Bullish factors for stock prices yesterday included (1) the larger-than-expected rise in US Jun leading indicators, which rose for the third consecutive month for the first time since 2004 and signaled a possible end to the recession, (2) the rally in European and Asian stock markets sparked by speculation that CIT Group will receive a $3 billion bailout from its bondholders and avoid bankruptcy, and (3) the hike by Goldman Sachs in its 2009 year-end forecast for the S&P 500 Index by 13% to 1060 from an earlier year-end forecast of 940, saying improving corporate earnings will spur the largest second-half rally since 1982.
Bearish factors included (1) the prediction from the Treasury&s chief economist that the US labor market faces further deterioration as companies postpone hiring new workers, (2) comments from Atlanta Fed President Lockhart that although the US economy appears to be leveling off after a "severe" recession, growth will likely be "weak" as consumers continue to boost savings, and (3) the prediction from the Treasury&s special inspector general for the Troubled Asset Relief Program (TARP) that US taxpayers may be liable for as much as $23.7 trillion in bailout obligations.
Texas Instruments (TXN) slid 1.1% in pre-market trading after the second-largest US semiconductor maker reported a 56% drop in Q2 profit to $260 million and forecast sales in the current quarter will be $2.5 billion to $2.8 billion with analysts expecting sales of $2.53 billion.
Dupont (DD) rose over 1% in pre-market trading after reporting Q2 profit of 61 cents a share, well ahead of analysts& estimates of 53 cents, and it maintained its guidance for its 2009 full-year forecast.

Barchart.com U.S. Morning Call for Friday, July 17, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +0.59% and Sep S&Ps are down -2.50 points (-0.27%). Asia-Pacific markets closed higher with Japan (+0.55%), Hong Kong (+2.42%), China (+0.53%), Taiwan (+1.04%), Australia (+0.13%), Singapore (+1.25%), South Korea (+0.50%), India (+3.47%).

European stocks are higher on better-than-expected company earnings while US stocks declined after Google reported slowing sales growth in Q2 which offset strong earnings estimates at IBM. Sandvik AB, the largest maker of metal-cutting tools in the world, jumped over 4% after it reported a Q2 operating loss of 2 billion kroner ($260 million), less than their Jun estimate of 2.2 billion kroner to 2.5 billion kroner. Novartis AG, the second-largest drugmaker in Europe, rose 1.5% after JPMorgan Chase upgraded the compamy to "overweight" from "neutral" and IBM helped lift US and European equity markets after posting better-than-expected Q2 earnings and raising its full-year profit forecast. In another positive economic development for Europe, the May Euro-Zone trade surplus rose for a second straight month, rising to 800 million euros ($1.1 billion) from a revised 700-million euro surplus in Apr, adding to evidence that a pick up in global trade may help lead Europe out of the recession. Gains in equity markets were limited after explosions tore through two hotels in Jakarta, killing eight people and injuring 42 others, in the first terrorist attacks in Indonesia since 2005.

Most Asia-Pacific stock markets were higher as sentiment improves following positive economic and earnings news. Mitsubishi Estate, Japan&s biggest property developer, rose 4.4% after Barclays Plc gave the company its top "overweight" rating while Macquarie Countrywide surged 19% after the Australian company agreed to sell its 75% interest in a US portfolio of 86 properties for $1.3 billion. The yen rallied today on a flight-to-safety after the bombings in Jakarta along with comments from Japan&s new top currency official, vice finance minister for international affairs Rintaro Tamaki, that the Japanese government would consider stepping into the foreign-exchange market if abrupt yen moves hurt the economy.

Overnight U.S. Stock News

September S&Ps this morning are down -2.50 points. The US stock market yesterday gyrated between small gains and losses into mid-afternoon when it rallied the rest of the day and finished higher (Dow +1.11%, S&P 500 +0.86%, Nasdaq Composite +1.19%).
Bullish factors for stock prices yesterday included (1) the larger-than-expected decline in weekly US initial unemployment claims, which fell to a 6-month low, (2) strength in homebuilders after the US July NAHB housing market index rose more-than-expected to a 10-month high, (3) the larger-than-expected gain in Q2 China GDP which may help other world economies recover from the global economic slump as Chinese consumers lead a rebound in demand, and (4) comments from US Treasury Secretary Geithner that there are grounds for "cautious optimism" about the prospects for global growth and that "we&re seeing durable signs of greater confidence" in markets.
Bearish factors included (1) the larger-than-expected drop in the July Philadelphia Fed manufacturing index, (2) the report from RealtyTrac that Q2 US foreclosure filings jumped +11% from Q1 and now total a record 1.5 million in the first half of this year, a sign that job losses and falling home prices deepened the housing slump, and (3) the negative economic ramifications of CIT Group possibly declaring bankruptcy after the the US government refused to bail out the commercial lender.
International Business Machines (IBM) rose 1.6% in after-hours trading after the biggest computer-services provider in the world reported Q2 net income of $2.32 a share, topping analysts& estimates of $2.02 and boosted its full-year earnings forecast to at least $9.70 a share, up from a previous forecast of at least $9.20 and above analysts& estimates of $9.12.
Google (GOOG) fell over 3% in after-hours trading after the world&s most popular search engine reported Q2 profit of $5.36 a share, which beat analysts& estimate of $5.08. However, the company said the recession crimped the price of its online ads which fell -13% from a year ago and clicks on its ads declined -2% from the first quarter.

Barchart.com U.S. Morning Call for Monday, July 13, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is down -0.07% and Sep S&Ps are down -2.00 points (-0.23%). Asia-Pacific markets closed lower today with Japan (-2.55%), Hong Kong (-2.56%), China (-1.10%), Taiwan (-3.53%), Australia (-1.49%), Singapore (-1.79%), South Korea (-3.47%), India (-0.77%).

Global stock markets are lower today on concerns a global economic recovery will be delayed. Atlanta Fed President Dennis Lockhart said in a commentary in the Atlanta Journal-Constitution that a economic revival may be "subdued for some time," while ECB President Jean-Claude Trichet said at the Ifo seminar in Munich today that he expects Euro-Zone economic activity "to keep dropping at a slower pace" and that the economy should start growing again by mid-2010. CIT Group, which said late Sunday it was in talks with regulators about ways to improve its short-term liquidity, is down 3.3% in European trading after the lender said its demise would put 760 manufacturing clients at risk of failure and "precipitate a crisis" for as many as 300,000 retailers. Losses were limited in Europe and the US after Goldman Sachs rose +0.9% after being upgraded to "buy" at Meredith Whitney Advisory Group ahead of its reported earnings tomorrow.

The assistant governor of the PBOC, Li Dongrong, said the central bank will "strengthen monetary and credit management" as an expansion in credit adds to risks of asset bubbles and bad debt. He said complications and "new challenges" for PBOC policy makers include the difficulty of boosting domestic demand and the "gloomy" state of global demand. Markets in China and Taiwan were disappointed after the chairwoman of the Mainland Affairs Council said negotiations for an economic cooperation agreement between Taiwan and China should begin this year with the signing of a deal next year. The markets had been anticipating a deal between the two countries would be signed this year. Japanese stocks were dragged lower after Prime Minister Aso called for national elections on Aug 30, with polls indicating his ruling Liberal Democratic Party may lose power for only the second time since 1955.

Barchart.com U.S. Morning Call for Thursday, July 9, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +1.06% and Sep S&Ps are higher by +6.00 points (+0.69%). Asia-Pacific markets closed mixed with Japan (-1.38%), Hong Kong (+0.39%), China (+1.31%), Taiwan (+1.20%), Australia (-0.12%), Singapore (+2.12%), South Korea (-0.01%), India (-0.08%).

European and US stock markets are higher after Alcoa kicked off the Q2 earnings season with better-than-expected results. The dollar and Treasuries are weaker and metal and oil prices are higher. Speaking at the Group of Eight summit in L&Aquila, Italy, Angel Gurria, secretary general of the OECD said the economic recovery is still too fragile for governments to consider exiting spending plans designed to bolster growth and to "stimulate now, consolidate later." The Bank of England maintained its benchmark lending rate at 0.50% as expected and continued with its 125 billion pound ($202 billion) asset purchase program until next month when it will review the scale of the program. European automakers are higher led by Daimler AG up 3.6% and Renault SA up 2.4% after Bank of America raised its rating on European automakers to "overweight" from "neutral" on optimism the economy will recover this year. SAP AG is up 3.7% after Bank of America upgraded the world&s largest maker of business-management software to "buy" from "neutral," saying the company "still has further earnings upside from cost savings," while Electrolux AB is higher by 3% after the world&s second-largest appliance maker was upgraded to "buy" from "sell" at UBS AG, which said "pricing will hold up in coming quarters."

Jun car sales in China surged +48%, the biggest monthly increase since Feb 2006, as government stimulus spending spurred demand in the world&s third-largest economy. The China Association of Automobile Manufacturers said overall auto sales in Jun, including buses and trucks, rose +36% y/y to 1.14 million and they raised their full-year vehicle forecast to more than 11 million from 10.2 million previously. Sales through the first-half of this year jumped +18% after the government cut some retail taxes and handed out vehicle subsidies in rural areas to spur demand. The Bank of Korea kept its benchmark lending rate unchanged at 2.00% and said it will keep an accomodative policy as the economy recovers from the global recession. The yen pulled back from a 4-month high against the dollar after a report from Reuters that Japanese Chief Cabinet Secretary Kawamura said excessive currency movements are undesirable, fueling speculation the BOJ may intervene in foreign-exchange markets.

Overnight U.S. Stock News

September S&Ps this morning are up +6.00 points as Alcoa leads off Q2 earnings season with better-than-expected results. The US stock market yesterday finished mixed, although the S&P 500 Index slumped to a 2-1/4 month low (Dow +0.18%, S&P 500 -0.17%, Nasdaq Composite +0.06%).
Bearish factors for stock prices yesterday included (1) increased speculation that second-quarter US corporate earnings will disappoint as "earnings anxiety" grips the market with the start of Q2 earnings season this week, (2) the report from Reis Inc. that US office vacancies increased to 15.9% in Q2, a 4-year high, as demand for offices slid for the sixth consecutive quarter as job losses mounted and demand for space declined, and (3) the plunge in Intercontinental Exchange and CME Group for a second day after the futures exchanges were pummeled after the Commodity Futures Trading Commission said it will hold hearings to explore the need for government-imposed restrictions on spec trading in energy markets, which may limit trading on the exchanges and decrease revenue.
Bullish factors included (1) the late recovery in US stocks after the Treasury released details on its plan to remove as much as $40 billion in toxic assets from financial institutions, (2) the IMF&s hike in it global growth estimate for next year to +2.5% from an Apr projection of +1.9% growth, and (3) the drop in the 10-year T-note yield to a 1-1/2 month low of 3.28% after demand for the Treasury&s $19 billion 10-year T-note auction exceeded expectations.
Alcoa (AA) rose 6% in after-hours trading yesterday and is up 5% in European trading after the largest US aluminum producer reported a Q2 loss of -26 cents a share, better than the -38 cent loss expected by analysts, after production cuts and workfore reductions helped the company save money.
Goldman Sachs (GS) is up 2.9% in pre-market trading after Bank of America upgraded the company to "buy" from "neutral," saying the bank is likely to beat Q2 earnings estimates. Analysts at Bank of America-Merrill Lynch also raised their 2009 and 2010 profit forecasts for Goldman and boosted its share-price estimate to $175 from $144.

Barchart.com U.S. Morning Call for Wednesday, July 8, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is down -0.13% and Sep S&Ps are trading up +1.20 points (+0.14%). European stocks are lower today on concern that second-quarter earnings season, which begins this week, will show that the global recession is far from over. Holcim Ltd, slipped 3.4% after the world&s second-biggest cement maker said it expects a "difficult" 2009 as the economy shows no signs of reversal. Energy producers are lower as crude oil fell to a 1-1/2 month low and commodity producers and mining companies are weaker also after silver plunged to a 2-month low and copper slipped to a 2-week low. Limiting losses in European stocks was the jump in the June Bank of France business sentiment to a 9-month high (+3 to 84) along with the larger-than-expected increase in May German industrial production, which had its biggest monthly increase in 15-3/4 years (+3.7% m/m versus expectations of +0.5% m/m).

Asia-Pacific markets closed mostly lower with Japan (-2.35%), Hong Kong (-0.79%), China (+0.35%), Taiwan (-0.70%), Australia (+0.03%), Singapore (-0.55%), South Korea (-0.21%), India (-2.83%). Japan&s May machine orders unexpectedly declined for the 8th time in the last 9 months (-3.0% m/m versus expectations of +2.0% m/m), fueling concern that the Japanese economy will struggle to emerge from recession. Financial stocks in Japan dropped after Japanese bank lending in June rose +2.5% y/y, the slowest pace in 8 months, as tight borrowing conditions in Japan may also inhibit an economic recovery. The jump in the yen to a 1-1/2 month high against the dollar sent Honda Motor, which gets 45% of its sales in North America, down 5.5% and Toyota Motor Corp., Japan&s largest automaker, slumped 3.3% after it said it will slash spending 36% this year as it forecasts a second year of losses. Tokyo Electron Ltd., the world&s second largest maker of semiconductor equipment, sank 5.2% after Credit Suisse Group AG cut its outlook on Japan&s semiconductor production equipment industry to "market weight" from "overweight," citing a weaker outlook for capital spending.

Overnight U.S. Stock News

September S&Ps this morning are trading up +1.20 points. The US stock market yesterday extended the 3-session sell-off and closed sharply lower, with the S&P 500 posting a new 1-1/2 month low (Dow -1.94%, S&P 500 -1.97%, Nasdaq Composite -2.31%).
Bearish factors for stock prices yesterday included (1) worries about tech spending (Microsoft and Goggle each fell about 3%) after Gartner Inc forecast a 6% drop in spending on IT this year, worse than its prediction in March for a decline of 3.8%, (2) worries about earnings season which officially begins today with an expected 38-cent loss from Alcoa, (3) a sharp decline in Discover Financial by 11% on its plan to sell $500 million in new equity, which had some carry-over negative impact on the financial sector, (4) weakness in gasoline refiners such as Valero (-4.7%) with gasoline hitting a 7-week low, and (5) technical selling with the new 1-1/2 month low. The main bullish factor yesterday was the continued decline in interest rates with the 10-year yield edging to a 1-1/2 month low of 3.44%, down 56% from the peak near 4% posted in mid-June.

Barchart.com U.S. Morning Call for Tuesday, July 7, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +0.71% and Sep S&Ps are trading +1.20 points (+0.13%). Bullish factors in European trading include a sharp +4.4% m/m jump in German manufacturing orders (far above the market consensus of +0.5%) and a rise in the UK June nationwide consumer confidence index to 55 from 53 in May. Persimmon, the largest UK home builder, is up 4.7% this morning after the company said that home prices are stabilizing in some regions and that it would take another "substantial" negative event such as a bank failure to force fresh land writedowns. On the negative side in the UK, May UK manufacturing production fell -0.5% m/m and -12.7%, which was weaker than market expectations for a report of +0.2% m/m and -11.8% y/y. EU Finance Ministers today said that it is too soon to think about exit strategies from the monetary stimulus programs. Obama economic advisor Laura Tyson, who is a member of Obama's Economic Recovery Advisory Board, said in a speech today in Singapore that Congress should consider another stimulus package since February's $787 billion package was "a bit too small," although she said she was speaking for herself and not the administration. This morning's higher trade in metals prices has boosted BHP Billiton and Rio Tinto Group by more than 3%. The Asia-Pacific stock markets today closed mixed. The following Asian markets closed lower: Japan -0.34%, Hong Kong -0.65%, China -1.02%, Australia -0.44%. The follower Asian markets closed higher: Taiwan +0.98%, Singapore +0.27%, South Korea +0.33%, Bombay +0.90%.

Overnight U.S. Stock News

September S&Ps this morning are trading slightly higher by 1.20 points (+0.13%). Bullish factors this morning include higher European stocks and Bank of America's improved view of the semiconductor industry. The US stock market yesterday rebounded from sharp losses and finished the day mixed (Dow +0.53%, S&P 500 +0.26%, Nasdaq Composite -0.51%).
Bearish factors for stock prices yesterday included (1) carry-over weakness from the tumble in European and Asian equity markets on concerns that a global economic recovery may stall, (2) the drop in energy producers after crude oil prices fell to a 1-1/4 month low, (3) the prediction from the chief economist at MFR that the US recession will probably last until "the middle of next year at the earliest," with economic growth averaging around zero during 2010, and (4) the report from the Economic Policy Institute that said for the first time since the 1930s, the US economy has lost more jobs in a recession than it created in the preceding expansion.
Bullish factors for stock prices yesterday included (1) the larger-than-expected increase in the US Jun non-manufacturing index which rose to a 9-month high, indicating continued improvement in the service sector of the US economy, (2) the statement from Moody's Investors Service that Brazil's credit ratings may be boosted to investment grade because the country has "demonstrated resilience to shocks" in the global economy, which would be a positive for US banks that have exposure to Brazil's debt, (3) the report from Wells Capital Management that showed that "buy" recommendations in June by US stock analysts increased and that "hold" recommendations fell for the first time since Aug 2007, a sign of improved market optimism, and (4) Bank of America-Merrill Lynch's hike in its 2010 global growth forecast to +3.7% from a previous estimate of +3.2%.
Discover Financial Services (DFS) tumbled 7.6% in after-hours trading yesterday after the credit-card company that received $1.2 billion in government bailout money said it plans to sell $500 million in common stock to raise funds for its bank or to buy back some of the government's stake.
Exxon is up +0.3% this morning on higher oil prices.
Intel is up +0.8% this morning after Bank of America upgraded Intel on its boost in its chip industry growth estimate for 2010 to 21% from 14%.

Barchart.com U.S. Morning Call for Monday, July 6, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is down -1.77% and Sep S&Ps are down -9.40 points (-1.05%). The Asia-Pacific stock markets today closed mostly lower with Japan (-1.38%), Hong Kong (-1.23%), China (+1.43%), Taiwan (-0.23%), Australia (-1.16%), Singapore (-1.46%), South Korea (+0.86%), India (-5.83%).

Global stock markets are lower today on concern the global economic recovery is faltering. Energy producers and mining companies slumped after crude oil fell to a 5-week low and metal prices retreated. The dollar rallied on a flight-to-safety as stocks fell despite Russia and India saying the world economy is too reliant on the dollar and they called for changes in how the $6.5 trillion in global currency reserves are managed, ahead of the Group of Eight meeting in Italy this week. European investor confidence unexpectedly turned lower after the July Euro-Zone Sentix investor confidence fell -4.3 to -31.3 when the market was expecting a +2.0 improvement to -25.0. Porsche SE fell 2.8% after UBS AG downgraded the company to "sell" from "neutral," citing the carmaker's growing debt and a liklihood that the company will sell its Volkswagen stake. Limiting losses in stocks was Bank of America-Merrill Lynch's upward revision to its 2010 global growth forecast to +3.7% from a previous estimate of +3.2%. The revision focused on an improved outlook for China next year as China's 2010 growth estimate was raised to +9.6%, up from an earlier forecast of 8.3%.

The Bank of Japan (BOJ) became more optimistic about its country's economic prospects for the first time since Jan 2006 after its quarterly report released today stated "the pace of economic deterioration was slower in all regions." BOJ Governor Shirakawa said exports and industrial production are recovering although "high downside risks" to the economy remain and that some companies are still struggling to borrow funds, which hints that the BOJ may extend its emergency credit programs beyond September. India's Sensitive Stock Index tumbled 5.8% after its finance minister said the country's fiscal deficit may grow to its widest level since 1994, fueling concern that more government borrowing will drive up interest rates for companies and consumers.

Overnight U.S. Stock News

September S&Ps this morning are down -9.40 points. The US stock market last Thursday tumbled throughout the day and finished with sharp losses (Dow -2.63%, S&P 500 -2.91%, Nasdaq Composite -2.67%).
Bearish factors for stock prices last Thursday included (1) concerns about a prolonged recession after the larger-than-projected decline in jobs in the Jun US nonfarm payrolls report along with the rise in the US unemployment rate to a 26-year high of 9.5%, (2) worries that weak labor earnings will erode the consumer spending essential to an economic recovery after US earnings per hour climbed at a +0.7% annual pace over the last three months, the smallest gain since records began in 1964, (3) the fall in the US average work week in Jun to 33.0 hours, the lowest level since records began in 1964 and a sign that companies are far from ready to hire new workers, and (4) weakness in energy producers after crude oil fell to a 1-week low.
Bullish factors for stock prices last Thursday included (1) the larger-than-expected increase in May US factory orders which rose for the third time in the last four months and may indicate that the economy is beginning to stabilize, and (2) the 5 bp drop in the 10-year T-note yield to a 1-month low.

Barchart.com U.S. Morning Call for Thursday, July 2, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is down -1.00% and Sep S&Ps are down -6.10 points (-0.66%). The Asia-Pacific stock markets today closed mixed with Japan (-0.64%), Hong Kong (-1.09%), China (+1.35%), Taiwan (+1.35%), Australia (+0.09%), Singapore (-1.35%), South Korea (-0.05%), India (+0.09%).

Global stock markets are mostly lower ahead of the all-important Jun US nonfarm payrolls report. Energy producers are lower after crude oil slipped to a 1-week low while automakers are weaker after European carmakers were downgraded to "market weight" from "overweight" by Credit Suisse Group AG which sees "increasing risk to first half of 2010 estimated cash flows as retail volume and price support from scrappage schemes fade." Europe's unemployment rate in May rose a more-than-expected +0.2 to 9.5%, a 10-year high, and increases the odds that the ECB may have to expand its use of unconventional tools to battle the recession. Although the ECB is expected to leave its benchmark 2-week refinancing rate unchanged at a record low 1.00% at the conclusion of today's monetary policy meeting, President Jean-Calude Trichet will unveil further details of the bank's plan to buy 60 billion euros of covered bonds. Producer prices in Europe unexpectedly declined for a 10th straight month after May Euro-Zone PPI fell -0.2% m/m, while the -5.8% y/y drop is the largest annual decline in European producer prices since data began in 1981.

Asia-Pacific auto-makers slumped after US auto sales in Jun failed to climb above a 10 million annualized rate. Honda Motor, Japan's number 2 automaker, fell 2.3% after reporting a -30% y/y slide in US auto sales for Jun and Mazda Motor fell 2.4%. Maruti Suzuki Ltd., maker of half of India's cars, dropped 2% after the government said it will increase fuel prices to narrow revenue losses at state-run refiners. The Chinese stock market was a bright spot today after power companies led the Shanghai Composite Index to a 1-year high after the state-run Xinhua News Agency said power demand in China's manufacturing hub of Guangdong rose in June. The dollar rallied today after China's Vice Foreign Minister told reporters in Beijing that he's "not aware' of China pushing to put the subject of an international currency on the agenda for next week's Group of Eight meeting, easing concern that China plans to diversify its $1.95 trillion of currency reserves.

Overnight U.S. Stock News

September S&Ps this morning are down -6.10 points ahead of the release of the Jun US nonfarm payrolls. The US stock market yesterday closed higher but below the best levels of the day (Dow +0.68%, S&P 500 +0.44%, Nasdaq Composite +0.58%).
Bullish factors for stock prices yesterday included (1) the unexpected rise in May US pending home sales which have now risen for four straight months and may indicate an improvement in the slumping US housing market, (2) the larger-than-expected increase in the Jun ISM manufacturing index to a 10-month high, adding to evidence to suggest that the worst of the recession is over, (3) the report from Morningstar that US stock mutual funds rose an average +19% in Q2, the biggest quarterly gain in almost a decade, and (4) comments from San Francisco Fed President Yellen that the prospect that policy makers will leave the benchmark US interest rate near zero for the next several years is "not outside the realm of possibility."
Bearish factors for stock prices yesterday included (1) the larger-than-expected job losses in the Jun ADP employment change, (2) the statement from the president of Legg Mason Global Asset Allocation LLC that he's "unconvinced" by the stock market's rally since March as US unemployment continues to rise and industrial production continues to slow, and (3) weakness in hotel stocks after Barclays Capital downgraded the sector to "underweight," saying the hotel outlook is "extremely bearish" with more deterioration to come as the recession causes companies and business travelers to spend less on travel and perks.

Barchart.com U.S. Morning Call for Tuesday, June 30, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is unchanged and Sep S&Ps are up +3.00 points (+0.33%). The Asia-Pacific stock markets today closed mixed with Japan (+1.79%), Hong Kong (-0.81%), China (-0.42%), Taiwan (+0.64%), Australia (+1.75%), Singapore (+0.69%), South Korea (+0.10%), India (-1.97%).

European and US stocks are flat to slightly higher today led by gains in energy and commodity producers after crude oil climbed to an 8-month high and copper prices rose to a 2-week high. Deutsche Bank AG raised its forecast for global growth next year to +2.5%, up from a Mar forecast of +2.0%, citing an improved outlook for investment and exports. European consumer prices fell -0.1% y/y in Jun, their first annual decline since compilation of data began in 1996, while loans to households and companies in Europe rose by +1.8% y/y in May, the slowest annual growth since records began in 1991 as the worst recession since WWII is prompting companies to cut prices and banks to tighten credit standards. The economy in the UK shrank more than previously estimated in the first quarter after Q1 GDP in the UK contracted by -2.4% q/q and -4.9% y/y, larger than the expected -2.1% q/q and -4.3% y/y, and the biggest contraction since 1958.

Japan's unemployment rate rose +0.2 to a five-year high of 5.2% in May, while the May job-to-applicant ratio, the ratio of positions available to each applicant, dropped to 0.44, the lowest since the survey began in 1963. May Japan household spending unexpectedly rose by +0.3% y/y after the government distributed cash to help lift the economy out of recession, while May Japan labor cash earnings tumbled -2.9% y/y, extending the longest losing streak in five years. Comments from the President of NEC Electronics helped to lift the Nikkei 225 Stock Index today after he said the "worst is over" in regards to the recession and that semiconductor orders for next quarter will jump "several percent" thanks to increased demand.

Overnight U.S. Stock News

September S&Ps this morning are up +3.00 points. The US stock market yesterday closed with moderate gains (Dow +1.08%, S&P 500 +0.91%, Nasdaq Composite +0.32%).
Bullish factors for stock prices yesterday included (1) strength in energy producers after crude oil climbed to a 1-week high, (2) comments from Boston Fed President Rosengren that US gross domestic product "is expected to start being positive in the second half of this year," (3) a rally in technology shares led by Microsoft which rose 2.2% when Deutsche Bank raised its share-price forecast for the world's largest software maker to $30 from $22, saying Microsoft's Windows 7 operating system is "poised for rapid adoption," and (4) the prediction from Barclays Capital that industrial production and corporate profits are likely to accelerate in the next few months as the global economy emerges from recession.
Bearish factors for stock prices yesterday included (1) weakness in health-care companies as uncertainties regarding legislative proposals for the health-care industry continue to weigh on share prices, and (2) the prediction from Gluskin Sheff & Associates that the US savings rate may climb to 10% to 15% in a decade, causing deflation and holding down consumer spending that could derail an economic recovery.
H&R Block (HRB) jumped over 5% in after-hours trading yesterday after the biggest US tax preparer reported Q4 fiscal profit of $2.09 a share, higher than analysts' estimates of $2.05, citing higher fees for consumer financial services.

Barchart.com U.S. Morning Call for Thursday, June 25, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is down -1.68%% and Sep S&Ps are up +0.60 point (+0.07%). The Asia-Pacific stock markets today closed mostly higher with Japan (+2.15%), Hong Kong (+2.14%), China (-0.09%), Taiwan (+1.22%), Australia (+1.29%), Singapore (+1.03%), South Korea (+2.16%), India (-0.53%).

European stock prices were undercut today after the International Monetary Fund (IMF) said Irish banks face as much as 35 billion euros ($49 billion) of losses through 2010 in an "unprecedented" economic slump. European banks are leading the way lower with Bank of Ireland and Allied Irish Banks Plc both down more than 2.7% and Credit Agricole SA down nearly 5% after Cheuvreux and Kepler Capital Markets cut their profit estimates for France's second-biggest bank and downgraded it to "hold" from "buy." Swiss Life Holding AG slid more than 4% after Bank of America cut its recommendation on Switzerland's largest life insurer to "underperform" from "neutral." Also adding pressure to European stocks today was the unexpected decline in Apr Euro-Zone industrial new orders which fell for the ninth consecutive month -1.0% m/m, and tumbled -35.5% y/y, the largest annual decline since the data series began in 1995.

The People's Bank of China (PBOC) pledged today to keep pumping money into the financial system to support a recovery saying the economy is in a "critical" stage and the central bank will maintain a "moderately loose" monetary policy. Speculation that the PBOC would lower banks' reserve requirements were dealt a blow when the Shanghai Securities News said policy makers are unlikely to make reductions in the "near term" as liquidity between lenders remains ample, citing unidentified "authorities." Japanese stocks were boosted today when Mitsubishi Electric surged 7.7% after the Nikkei newspaper reported the company is planning to set up solar power manufacturing facilities in the US and Europe abd Kubota Corp. and Iseki & Co. climbed more than 5% each after the Nikkei newspaper said the makers of farm equipment are seeking a greater presence in China. South Korea's Kospi Index rose 2.1% after the government revised up its growth forecast for this year to a contraction of -1.5%, from an earlier forecast for a -2.0% contraction, while Australia's S&P/ASX 200 Index climbed 1.3% after the IMF raised their 2009 and 2010 growth forecasts for the Australian economy.

Overnight U.S. Stock News

September S&Ps this morning are up +0.60 points. The US stock market yesterday closed mixed (Dow -0.28%, S&P 500 +0.65%, Nasdaq Composite +1.55%).
Bullish factors for stock prices yesterday included (1) signs that the economy may be recovering from recession after May US durable goods orders unexpectedly rose with ex-transportation durable goods orders posting their first back-to-back increase in more than a year, (2) the OECD's hike in its forecast for the economies of its 30 member nations for the first time in two years as it revised its growth forecast for this year to a contraction of 4.1%, up from a March forecast of a 4.3% contraction, and upgraded its growth forecast for 2010 to an expansion of 0.7%, up from a March prediction of 0.1%, (3) a rally in technology stocks after the 7% surge in Oracle on Q4 profit of 46 cents a share, higher than analysts' estimates of 44 cents, and on Oracle President Safra Catz's comment that customers are showing a renewed interest in buying software, a sign they expect the recession to ease, and (4) the post-FOMC meeting statement which said the funds rate will stay at "exceptionally low levels" for an "extended period."
Bearish factors for stock prices yesterday included (1) weakness in homebuilders after May US new home sales unexpectedly declined, (2) the prediction from billionare investor Warren Buffet that the US may need a second stimulus package as unemployment is poised to continue climbing, and (3) disappointment that the Fed didn't mention an increase its bond purchase program (i.e. quantitative easing) in its post FOMC-meeting statement.
Bed Bath & Beyond (BBBY) jumped 5.4% in European trading after the company reported Q1 profit of 34 cents a share, higher than analysts' estimates of 25 cents, saying they have cut costs by 2.4% from a year ago.
Nike (NKE) slumped 3.3% in European trading after the world's largest athletic-shoe maker said excluding the effect of currency exchange rates, worldwide orders for delivery from June through November fell -5% from a year earlier, more than the -2% decline analysts' were expecting.

Barchart.com U.S. Morning Call for Tuesday, June 16, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +0.57% and September S&Ps are up +2.80 points (+0.30%). The Asia-Pacific stock markets today closed mostly lower with Japan (-2.86%), Hong Kong (-1.80%), China (-0.17%), Taiwan (-0.08%), Australia (-1.72%), Singapore (-1.23%), South Korea (-0.99%), India (+0.55%).

German investor confidence rose more than expected to a 3-year high in June, boosting stocks and pressuring the dollar, which is supporting a gain in commodity prices. The Jun German ZEW economic sentiment survey surged +13.7 to a 3-year high of 44.8, adding to evidence that the recession in Europe's largest economy may be ending. ECB Council member Ewald Nowotny, who also heads Austria's central bank, said at a conference in Vienna that "we are still in a crisis and I would warn against a premature exit strategy as the primary goal should be to restore economic growth as fast as possible." Inflation in the Euro-Zone fell to zero in May as the global economic slump forced companies to lower prices. The May Euro-Zone CPI was 0.0% y/y, the lowest since the data series was first compiled in 1996. Limiting gains in European stocks is weakness in the banking sector with UBS AG down 2.4% after Moody's put Switzerland's largest bank by assets long-term debt and deposit ratings on review for downgrade because of potential losses at its investment bank and client defections at its wealth management unit. National Bank of Greece plunged 10% after announcing plans for a 1.25 billion euro ($1.7 billion) rights offer and Nordea Bank AG slumped 2% as the Nordic region's largest bank by market value was downgraded to "sell" from "neutral" at Goldman Sachs, which cited "the worsening outlook in the Nordic and Baltic region."

After the Bank of Japan (BOJ) left its benchmark interest rate unchanged at 0.10%, BOJ Governor Shirakawa said the BOJ "remains cautious" and that there's no guarantee the economy's revival will be sustained, signaling Japan's central bank has yet to decide when to stop buying corporate debt and providing lenders with unlimited credit. In its post meeting statement, the BOJ said "Japan's economic conditions, after deteriorating significantly, have begun to stop worsening," and Governor Shirakawa said the BOJ will judge how to end the asset purchase program "by the end of September in a predictable manner to market participants" based on an assessment of the economy, financial markets and funding conditions for businesses. Japanese exporters declined after the weak Jun US Empire manufacturing report dampened optimism that economic activity is recovering in their biggest market and the yen rallied to a 1-1/2 week high, cutting the value of sales from abroad.

Overnight U.S. Stock News

September S&Ps this morning are up +2.80 points. The US stock market yesterday sold off during the entire day and finished sharply lower (Dow -2.13%, S&P 500 -2.38%, Nasdaq Composite -2.28%). The S&P 500 Index slumped to a 2-week low.
Bearish factors for stock prices yesterday included (1) carry-over weakness from European and Asian stock markets that were weighed down by the slide in commodity producers, which fell after the dollar rallied sharply, (2) the weaker-than-expected Jun Empire manufacturing index, (3) the smaller-than-expected increase in Apr US long-term TIC flows, signaling reduced foreign demand for US assets, (4) a decline in US homebuilders after the Jun NAHB unexpectedly declined, (5) weakness in retailers after Wal-Mart slumped -2.8% after Goldman Sachs cut the world's largest retailer to "neutral" from "buy," saying it sees little near-term positive catalysts to drive shares higher," and (6) the prediction from Susquehanna International Group that the upside for US retailers may be limited because consumers still face "headwinds" that may curb spending.
Bullish factors for stock prices yesterday included (1) the IMF's upward revision to its 2009 US GDP forecast to a contraction of -2.5%, up from an April forecast of -2.8%, and its upward revision to its 2010 US GDP forecast to growth of +0.75% from an April forecast of zero growth, (2) comments from Treasury Secretary Geithner that risks of a deeper global recession have "dramatically diminished and that has helped to provide some stability in economic activity," and (3) the prediction from Dallas Fed President Fisher that he doesn't see the Fed increasing interest rates in the "immediate future."
Amgen (AMGN) is up 1.3% in pre-market trading after the world's largest biotechnology company was upgraded to "outperform" from "market perform" by Sanford C. Bernstein, which said the stock "should benefit from a significant re-acceleration in revenue and earnings growth" over the next year.

Barchart.com U.S. Morning Call for Monday, June 15, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is down -1.49% and September S&Ps are down -10.70 points (-1.14%). The Asia-Pacific stock markets today closed mostly lower with Japan (-0.95%), Hong Kong (-2.07%), China (+2.06%), Taiwan (-3.45%), Australia (-0.75%), Singapore (-2.55%), South Korea (-1.11%), India (-2.38%).

Commodity prices fell and are leading a retreat in global energy and mining stocks after the dollar rallied. The dollar rose after Russian Finance Minister Kudrin, speaking after the Group of Eight meeting in Italy, that "it's too early to speak of an alternative" to the dollar as the world's reserve currency. Gold and silver slumped to 3-week lows and US Treasury yields fell as equity markets worldwide dropped on speculation prices have outstripped the prospects for earnings with valuations on most global bourses at 4-year highs. Payrolls in Europe contracted by the most on record after Q1 Euro-Zone employment tumbled -0.8% q/q, the most since data began in 1995, as European companies shed -1.22 million jobs in Q1. Limiting declines in European stocks was the strength in oil-service companies after Goldman Sachs boosted its recommendation of the sector to "attractive" from "neutral," saying the industry has "underperformed integrated oils" and the exploration and production sector since mid-2007.

The Group of Eight finance ministers began drawing up plans to roll back budget deficits and bank bailouts as the global economy shows signs of recovery and investors start to worry about inflation. In a statement followin the G-8 meeting in Italy, the Group of Eight finance ministers said there are "signs of stablization," though "the situation remains uncertain" as rising unemployment and volatile commodity prices present obstacles. German Finance Minister Steinbrueck sought a "credible exit srategy" to avoid inflation while US Treasury Secretary Geithner said "growth should remain the principle focus of policy" and that "it is too early to shift toward policy restraint." Policy makers wordwide are walking a fine line in the knowledge that withdrawing stimulus measures too soon could choke the recovery before it starts, and allowing them to last too long might lead to a rise in inflation and inflation expectations which could push up interest rates.

Foreign direct investment in China fell for the eighth consecutive month from a year earlier as companies worlwide cut spending to weather the global recession. May foreign direct investment in China dropped -17.8% to $6.38 billion, and is down a combined -20.4% for the first five months of this year, according to the Chinese commerce ministry. Foreign-invested businesses account for 30% of China's industrial output, 55% of trade and 11% of urban jobs, and a commerce industry spokesman said China will further relax and streamline procedures for investment from abroad.

Overnight U.S. Stock News

September S&Ps this morning are down -10.70 points. The US stock market last Friday gyrated on both sides of unchanged and finished mixed (Dow +0.32%, S&P 500 +0.14%, Nasdaq Composite -0.19%).
Bearish factors for stock prices last Friday included (1) weakness in technology stocks after the CEO of National Semiconductor said the computer-chip market shows no signs of rebounding, (2) the weaker-than-expected Jun University of Michigan US consumer confidence report, (3) the -53% plunge in US corporate bond sales this week from the previous week as the recent jump in the 10-year T-note yield to a 7-3/4 month high makes it more expensive for companies' to raise money through corporate bond issuance, and (4) the prediction from RBC Capital Markets that the US economy's growth rate will be "near zero" for an extended period of time as any recovery will wind up being slow and jagged.
Bullish factors for stock prices last Friday included (1) slack price pressures in the US economy after the May US import price index tumbled -17.6% y/y, the largest annual decline since the data series began in 1983, (2) comments from the director of the White House National Economic Council, Lawrence Summers, that the Obama administration's economic plam is showing early signs of success and that the government intends to intervene in markets only temporarily, (3) the action by the IMF to raise its global growth forecast for next year to 2.4% from an earlier forecast of 1.9%, and (4) the 7 bp drop in the 10-year T-note yield which fell after Japan's Finance Minister said his country's confidence in US debt is "unshakable."

Barchart.com U.S. Morning Call for Friday, June 12, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is down -0.01% and September S&Ps are down -1.70 points (-0.18%). The Asia-Pacific stock markets today closed mixed with Japan (+1.55%), Hong Kong (+0.52%), China (-1.87%), Taiwan (-1.81%), Australia (+0.37%), Singapore (-0.20%), South Korea (+0.69%), India (-1.13%).

The US dollar is higher ahead of this weekend's Group of Eight meeting in Italy after the Wall Street Journal reported the Fed will resist pressure to expand its quantitative easing program. European stocks are gyrating on either side of unchanged as valuation concerns offset a rally in telecommunication and health-care stocks. Apr Euro-Zone industrial production dropped a greater-than-expected -21.6% y/y, the most since records began in 1986, indicating the recession may have further to run in Europe. French Finance Minister Christine Lagarde said she wants to see more evidence of recovery before declaring an end to the recession saying "it's not time to exit yet" governments' rescue strategies. French consumer prices declined for the first time in at least 13 years as the worldwide recession helped to keep a lid on prices. The May French consumer price index fell a larger-than-expected -0.3% y/y, the first annual decline since the data series began in 1996.

China's new lending nearly doubled in May as new loans surged to 664.5 billion yuan ($97 billion) from 318.5 billion yuan a year earlier. China's statistics bureau reported that May industrial production increased +8.9% y/y and May China retail sales surged +15.2% y/y, both more than expected, signaling the government's stimulus plan is helping to offset a slump in exports. US Treasuries and the dollar received a boost today after Japanese Finance Minister Kaoru Yosano said his nation's confidence in US debt was "unshakable" and that the dollar's global status as a reserve currency is safe. A jump in Japan's consumer confidence helped send the Nikkei 225 Index to an 8-month high today after Japan's May household consumer confidence rose more-than-expected to a 14-month high of 35.7, as it has improved every month since tumbling to a record low of 26.2 in December and adds to signs that the recession may be easing.

Overnight U.S. Stock News

September S&Ps this morning are down -1.70 points. The US stock market yesterday rallied to a 7-month high and closed moderately higher (Dow +0.37%, S&P 500 +0.61%, Nasdaq Composite +0.50%).
Bullish factors for stock prices yesterday included (1) the larger-than-expected increase in May US retail sales, which rose for the first time in three months and bolstered confidence that the economy is recovering, (2) the larger-than-expected fall in weekly US initial unemployment claims to a 4-1/2 month low, signaling the pace of layoffs is slowing, (3) the rally in energy producers after crude oil jumped to a 7-1/2 month high, and (4) the 8 bp drop in the 10-year T-note yield after the Treasury's $11 biliion 30-year T-bond auction met with strong foreign demand, temporarily assuaging fears that rising interest rates may crimp an economic recovery.
Bearish factors for stock prices yesterday included (1) the report from RealtyTrac that US foreclosure filings jumped +18% y/y in May along with RealtyTrac's prediction that US foreclosure filings may hit a record 1.8 million by the end of June, (2) weakness in companies that depend on discretionary spending after gasoline prices surged to an 8-month high, (3) comments from former Fed Chairman Volcker that the financial system, "even if out of the emergency room, remains in intensive care," as "large loan losses still need to be fully recognized," and (4) the report from the Fed that US household wealth fell -$1.3 trillion in Q1 to $50.4 trillion, the lowest since 2004, which may lead consumers to continue to scale back spending and increase savings and in the process slow an economic recovery.
National Semiconductor Corp. (NSM) is down nearly 3% in European trading after the company's CEO said the chip market shows no signs of rebounding yet.
Blackrock (BLK) is higher by 1.5% in European trading after agreeing to buy Barclays Plc's investment unit for $13.5 billion and become the world's largest money manger that oversees $2.7 trillion in assets, more than the Federal Reserve.

Barchart.com U.S. Morning Call for Tuesday, June 9, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +0.28% and June S&Ps are down -0.50 points (-0.05%). The Asia-Pacific stock markets today closed mixed with Japan (-0.80%), Hong Kong (-1.07%), China (+0.41%), Taiwan (-3.22%), Australia (-0.91%), Singapore (+0.69%), South Korea (-1.55%), India (+3.14%).

Technology stocks are higher in Europe after Texas Instruments forecast higher than expected second quarter earnings on improved demand and energy producers rose after crude oil prices rallied. The May Bank of France business sentiment rose more than expected to an 8-month high, although Apr German industrial production unexpectedly fell, suggesting Germany's economy may be slow to recover from recession. Also, the -21.6% y/y decline in Apr German industrial production is the largest annual drop since records for a reunified Germany began. German exports fell more than expected in Apr and ECB Council member Erkki Liikanen said today that "no quick recovery is in sight for the world economy."

Asian stocks were undercut on continued North Korea tensions after South Korea doubled the number of naval ships deployed around its maritime border with North Korea and the Associated Press reported that North Korea said it would carry out a "merciless offensive" with nuclear weapons if provoked. Limiting losses in Japan was a report showing the Japanese recession may be easing. The Apr Japan coincident index, the government's broadest measure of economic health, rose +1.0 to 85.8, its first increase in the last 11 months. The US dollar received a boost today after China'a Vice Foreign Minister He Yafei said that the world should discuss ideas to reform the global monetary system, though any talk of dumping the dollar is "unrealistic."

Overnight U.S. Stock News

June S&Ps this morning are down -0.50 points. The US stock market yesterday overcame sharp losses and finished the day mixed (Dow +0.02%, S&P 500 -0.10%, Nasdaq Composite -0.38%).
Bearish factors for stock prices yesterday included (1) weakness in commodity producers and raw material companies after the dollar index rallied to a 2-week high, (2) the prediction from State Street Corp. that US companies will struggle to raise money next year as a surge in government borrowing pushes bond yields to "extreme" levels and limits demand for corporate debt, and (3) the prediction from Lyxor Asset Management that the combination of companies' diluting corporate profits by selling a record amount of stock along with the cut in companies' dividends by the most since 1938 will reduce annual equity returns as much as 4.1% and may be a warning that returns may not be high enough to justify buying stocks, (4) the drop in health-care stocks after Goldman Sachs predicted government reform is likely to hurt profitability in the health-care industry, and (5) the prediction from Robert Shiller, a finance professor at Yale University who helped create a home-price index that bears his name (the S&P CaseShiller home price index), that US housing prices are in the midst of a decline that may last for years and that "prices may continue to fall, or stagnate, in 2010 and 2011."
Bullish factors for stock prices yesterday included (1) a late-day rally spurred by economist Paul Krugman's prediction that the recession will end by September, (2) the prediction from the Bank for International Settlements (BIS) that the global recession may be past its worst point after central bank and government policies helped to shore up investor sentiment, and (3) the prediction from Goldman Sachs tha the Fed is "not anywhere near" raising interest rates and that rates will stay "extraordinarily low" for the foreseeable future.
Texas Instruments (TXN) is nearly 8% higher in European trading after the second-largest US chipmaker raised its Q2 profit forecast to 14 cents to 22 cents a share on sales of $2.3 billion to $2.5 billion due to improved demand for wireless semiconductors. Analysts had expected profit of 10 cents a share on sales of $2.21 billion.

Barchart.com U.S. Morning Call for Monday, June 8, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is down -1.19% and June S&Ps are down -9.60 points (-1.02%). The Asia-Pacific stock markets today closed mixed with Japan (+1.00%), Hong Kong (-2.28%), China (+0.31%), Taiwan (-3.34%), Australia closed for holiday, Singapore (-2.61%), South Korea (-0.06%), India (-2.90%).

European and US stocks are lower today amid speculation that share prices have outpaced the prospects for earnings growth after the sharp 3-month rally. Raw-material and mining companies are weaker today on lower industrial metals prices and a drop in crude oil prices has undercut global energy producers. Ireland's credit rating was downgraded by Standard & Poor's to AA from AA+ with a "negative" outlook, the second time in three months the country's credit rating was cut. S&P said it is more likely to lower Ireland's classification again than raise it or leave it unchanged as the cost of bailing out the country's banking industry will be "significantly higher" than what they expected when they first lowered its rating in March. Limiting European stock declines was the improvement in European investor confidence for a third month. The Jun Euro-Zone Sentix investor confidence rose a more-than-expected +7.3 to a 9-month high of -27.0 on expectations for a global economic recovery.

Most Asian stock markets closed lower today on valuation concerns although Japan's Nikkei 225 Stock Index closed at an 8-month high after Japan's corporate bankruptcies dropped for the first time in the last year and sentiment among Japan's merchants climbed to a 1-year high. May Japan bankruptcies fell -6.7% y/y in May and the May Japan Economy Watchers Index rose to 36.7 from 34.2 in April. The slump in the yen to a near 1-month low against the dollar boosted the earnings outlooks for Japan's exporters and helped support a rally in the Nikkei 225, which has now surged +40% since it slumped to a 26-year low in March.

Overnight U.S. Stock News

June S&Ps this morning are down -9.60 points. The US stock market last Friday opened higher but then shed its gains and closed the day little changed (Dow +0.15%, S&P 500 -0.25%, Nasdaq Composite -0.03%). The S&P 500 Index rallied to a 6-3/4 month high before closing lower.
Bearish factors for stock prices last Friday included (1) the larger-than-expected increase in the May US unemployment rate to a 25-3/4 year high of 9.4%, (2) concerns that even though the size of US job losses is shrinking, new hiring is still virtually non-existent as the average weekly hours in the May US payrolls report unexpectedly dropped to its lowest level since data began in 1964, signaling that company work-time continues to fall, (3) the larger than expected decline in US Apr consumer credit which fell by the second-largest amount on record, and (4) the surge in the 10-year T-note yield to a 7-month high of 3.897%, increasing concerns that the Fed may hike interest rates this year which may choke off an economic recovery as mortgage rates rise and business capital becomes more expensive.
Bullish factors for stock prices last Friday included (1) the stronger-than-expected May US nonfarm payroll report that showed the fewest amount of US jobs lost in the last eight months, which boosted optimism that the recession is getting closer to the end, (2) the denial by US Labor Secretary Solis of a rumor that the Bureau of Labor Statistics had underestimated the drop in payrolls last month, which had briefly sent stock prices lower but then rebounded on her denial of the rumor, and (3) the statement from MasterCard that while consumer spending is still dropping, the "freefall" in US consumer spending has abated.

Barchart.com U.S. Morning Call for Friday, May 29, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +1.50% and June S&Ps are up +7.60 points (+0.84%). The Asia-Pacific stock markets today closed higher with Japan (+0.75%), Hong Kong (+1.60%), Australia (+1.66%), Singapore (+1.57%), South Korea (+0.29%), India (+2.30%).

Global stock markets are higher today on speculation that the worst of the world recession has passed. Global bond yields are lower and the dollar index slumped to a 5-month low which boosted gold to a 3-month high and crude oil to a 6-1/2 month high. Apr German retail sales rose +0.5% m/m, the first gain in four months, while the May Euro-Zone CPI estimate unexpectedly dropped to 0.0% y/y, the lowest annual rate of inflation since Euro-Zone data was first compiled in 1996. Commodity producers and mining companies are all moving higher from the weaker dollar and higher metal prices, and the surge in crude oil is supporting energy producers.

In Asia, Apr Japan industrial production surged a larger-than-expected +5.2% m/m, the biggest jump in 56 years. Still industrial output is running at two-thirds last year's levels, with the Apr Japan jobless rate rising to a 5-1/2 year high of 5.0%. Japanese job seekers found it harder to find work as the Apr job-to-applicant ratio slid to 0.46, matching a record low from Jun 1999, while Apr Japan household spending slumped -1.3%, its fourteenth consecutive monthly decline and a record losing streak. India's economy, Asia's third largest, grew a larger-than-expected +5.8% in Q1, adding to evidence that the global recession is easing.

Overnight U.S. Stock News

June S&Ps this morning are up +7.60 points. The US stock market yesterday zigzagged higher throughout the day and finished with solid gains (Dow +1.25%, S&P 500 +1.54%, Nasdaq Composite +1.20%).
Bullish factors for stock prices yesterday included (1) strength in banking stocks as 10-year T-note prices rebounded from earlier losses when strong foreign demand was seen for the Treasury's $26 billion 7-year T-note auction, temporarily easing concerns that record government debt sales will lead to higher borrowing costs, (2) a rally in energy producers after crude oil prices surged to a 6-1/2 month high, (3) the statement from Fitch Ratings that it is "premature" to question the US government's triple-A rating and "they are triple-A for a reason," and (4) the stronger-than-expected US April durable goods orders, which added to evidence that the recession is easing.
Bearish factors for stock prices yesterday included (1) the jump in weekly US continuing unemployment claims to a record high for the seventeenth consecutive week, indicating a lack of hiring within the US labor market, (2) the weaker-than-expected April US new home sales report, as the US housing market continues to struggle, and (3) a slump in homebuilders after Q1 US mortgage delinquencies and foreclosures surged to their highest levels since records began in 1972.

Barchart.com U.S. Morning Call for Thursday, May 28, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is down -1.07% and June S&Ps are up +3.20 points (+0.36%). The Asia-Pacific stock markets today closed mixed with Japan (+0.13%), Australia (-1.19%), Singapore (-0.57%), South Korea (+2.56%), India (+1.32%).

European bank stocks were undercut today on the jump in European bond yields to a 6-month high after the yield on the US 10-year T-note soared to a 6-month high yesterday on concerns record US debt sales will offset the Fed's attempts to lower interest rates by buying assets. Deutsche Bank AG, Germany's biggest bank, fell over 3%, and Barclays Plc, the UK's third-biggest lender, slipped 2.3%. May Euro-Zone economic confidence rose +2.1 to 69.3, more than expected and a 6-month high, on signs the worst of the financial crisis may be over. The May Euro-Zone Bloomberg retail PMI index fell -1.3 to 47.1, as rising unemployment prompted consumers to hold back spending. The index has held below the 50.0 level, which signals contraction, for the past twelve months.

OPEC decided to keep its production quotas unchanged at today's meeting in Vienna, hoping for a recovery in global oil demand the second half of this year. OPEC's choice not to cut may have been influenced by its failure to complete previous reductions in output it agreed to at last December's meeting. According to OPEC's latest monthly report, the cartel pumped 25.81 million bpd in April, an increase of +225,000 bpd from March and its first increase in nine months, which means OPEC completed only 77% ot its cuts, down from 82% in March.

The Japanese yen dropped to a 2-week low against the dollar today after Japan's Ministry of Finance said that Japanese investors bought 641.1 billion yen ($6.61 billion) more overseas bonds and notes than they sold in the week ended May 23. The weaker yen boosted Toyota Motor and other companies that rely on overseas sales. Apr Japan retail sales rose +0.6% m/m, the first month over month increase in the last eight months, as the government began distributing 12,000 yen ($125) to each resident as part of its effort to revive the world's second-largest economy, although retail sales fell -2.9% y/y, its eighth consecutive year over year decline. Markets in China, Hong Kong and Taiwan were closed for holidays today.

Overnight U.S. Stock News

June S&Ps this morning are up +3.20 points. The US stock market yesterday fluctuated on either side of unchanged into early afternoon but then retreated to close lower (Dow -2.05%, S&P 500 -1.90%, Nasdaq Composite -1.11%).
Bearish factors for stock prices yesterday included (1) the jump in the 10-year T-note yield to a 6-1/4 month high of 3.738%, possibly undercutting an economic recovery, (2) weakness in bank stocks after the FDIC's report that US "problem" banks surged 21% in Q1 to their highest level since 1994, (3) the prediction from Encima Global that the US unemployment rate will probably exceed 10% in part because banks continue to refrain from lending to small businesses, and (4) fears that the US housing slump has not bottomed after the unexpected decline in the US March FHFA house price index.
Bullish factors for stock prices yesterday included (1) the statement from Moody's Investors Service that the US government's Aaa credit rating is stable "even with a significant deterioration" in the country's debt load, (2) the stronger-than-expected US Apr existing home sales report, (3) the prediction from the National Association for Business Economists that the US recession will probably end in Q3, and (4) comments from Treasury Secretary Geithner that the US economy is stabilizing and is at the "beginning" of recovery.

Barchart.com U.S. Morning Call for Wednesday, May 27, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +0.33% and June S&Ps are up +1.80 pointa (+0.20%). The Asia-Pacific stock markets today closed mostly higher with Japan (+1.37%), Hong Kong (+5.26%), China (+1.47%), Taiwan (+3.10%), Australia (+0.34%), Singapore (+3.01%), South Korea (-0.58%), India (+3.83%).

Global stock markets received a boost from the better-than expected May US consumer confidence which sent US stocks soaring and increased speculation that the worst of the global recession is over. Energy producers are higher today as crude oil rallied to a 6-1/2 month high on increased prospects of an improvment in energy demand. May French consumer confidence rose an as expected +1 to -40 which is a 13-month high and ECB Council members Lorenzo Bini Smaghi and Erkki Liikanen both said they agreed with ECB President Jean-Claude Trichet that the 1.00% level on the bank's 2-week refinancing rate is not the floor for interest rates, stoking optimisim of further ECB rate cuts.

North Korea upped its sabre rattling after saying it will no longer abide by the 1953 armistice that ended the Korean War. North Korea threatened a military response to South Korean participation in a US-led program to seize weapons of mass destruction and said any attempt to inspect North Korean vessels will be countered with "prompt and strong military strikes." The increased tensions sent the South Korean Kospi stock index down for a fifth day, its longest losing streak since Feb. Li & Fung Ltd., the biggest supplier of clothes and toys to Wal-Mart stores, surged 11% and Toyota Motor, which gets 31% of its revenue in North America, rose 2.8% after US consumer confidence jumped the most in six years. Japan's Apr exports fell -39.1% y/y, improving from a -45.5% y/y fall in Mar and a record -49.4% drop in Feb, easing recession concerns as China's $586 billion stimulus plan is spurring demand for Japanese machinery.

Overnight U.S. Stock News

June S&Ps this morning are up +1.80 points. The US stock market yesterday shrugged off early losses and rallied to close with sharp gains (Dow +2.37%, S&P 500 +2.63%, Nasdaq Composite +3.45%).
Bullish factors for stock prices yesterday included (1) a rally in retailers and consumer discretionary stocks after May US consumer confidence jumped the most in 6 years to an 8-month high, (2) strength in technology companies after Apple rose 6.8% when Morgan Stanley raised the company to "overweight" saying the iPhone will cause Apple's profits to beat estimates for the next two years, (3) stronger-than-expected manufacturing activity in the Richmond area after the May Richmond Fed manufacturing index rose more than expected and showed its first month of growth in the last 13 months, and (4) diminished fears that foreign investors will shy away from US assets after the Treasury's $40 billion 2-year T-note auction drew the most demand from indirect bidders (a class of bidders that includes foreign central banks) since Nov 2006.
Bearish factors for stock prices yesterday included (1) concerns that the US housing market has yet to bottom after the Q1 S&P/CaseShiller home price index fell at a record pace of -19.1% y/y, (2) weakness in life and health insurance companies after A.M. Best predicted that life and health insurance companies will become impaired at a faster rate this year and next as the industry absorbs "unprecedented losses," and (3) geo-political concerns after foreign equity markets were undecut when North Korea fired two short-range missles off of its eastern coast a day after its nuclear test provoked international condemnation.

Barchart.com U.S. Morning Call for Tuesday, May 26, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is down -1.10% and June S&Ps are down -5.60 points (-0.63%). The Asia-Pacific stock markets today closed mostly lower with Japan (-0.39%), Hong Kong (-0.76%), China (-1.20%), Taiwan (-0.76%), Australia (+1.35%), Singapore (-1.26%), South Korea (-2.13%), India (-2.33%).

Global stocks are mostly lower and the dollar shot higher following reports that North Korea fired two short-range missles off its eastern coast, a day after the rogue nation reportedly conducted a nuclear test that provoked international condemnation. Crude oil prices are sharply lower today following comments from Algerian Energy Minister Khelil at the conclusion of the G8 conference in Rome that OPEC production will likely be "untouched" so the cartel can avoid dampening an economic recovery and Saudi Arabian Oil Minister Ali al-Naimi added that he expects OPEC "to stay the course" when it meets this Thursday in Vienna. In Europe, Mar Euro-Zone industrial new orders unexpectedly declined -0.8% m/m, the eighth straight monthly decline while German banking stocks are under pressure after the Telegraph newspaper reported that Germany's financial regulator said debts of the country's banks will blow up "like a grenade" unless the lenders participate in the government's plan to help them prepare for the credit crunch's next stage.

Asian stocks were undercut today on concerns North Korea may step up military exercises and increase political instability in the region. Limiting losses in the region was the action by Japan's Cabinet Office in its monthly report to say that the pace of Japan's economic deterioration has "become moderate," its first upgrade of economic conditions since Feb 2006. Also helping stock prices was the 3.1% gain in Nippon Telegraph & Telephone, Japan's largest fixed-line telephone operator, after agreeing to buy Pacific Crossing, owner and operator of a trans-Pacific undersea cable system linking the US and Asia, for an undisclosed amount.

Overnight U.S. Stock News

June S&Ps this morning are down -5.60 points. The US stock market last Friday zigzagged between losses and gains but then faded late and closed with small losses (Dow -0.18%, S&P 500 -0.15%, Nasdaq Composite -0.19%).
Bearish factors for stock prices last Friday included (1) concerns that the massive budget deficits that the US government is amassing to bail out the financial industry may lead to a credit rating downgrade which would raise borrowing costs for the government, stoke inflation and make it harder to curtail the banking crisis, (2) the prediction from Boston Fed President Rosengren that the US economy will probably be "slow" to recover as banks tighten lending and consumers boost savings, (3) the prediction from R.K. Hammer Investment Bankers that the recent credit-card legislation passed by Congress may prompt banks to slash available credit by as much as $90 billion to avoid risk, which may choke off any consumer-led recovery and hurt retailers, and (4) the jump in the 10-year T-note yield to a 6-month high of 3.45%.
Bullish factors for stock prices last Friday included (1) comments from Treasury Secretary Geithner that the Obama adminstration is committed to cutting the budget deficit and that the recent rise in Treasury yields is due to prospects for an economic recovery, (2) the prediction from JPMorgan Chase that its "very unlikely" that the US will lose its AAA credit rating as "the Fed will not start financing debt in an unregulated fashion," and (3) strength in raw materials and commodity producing companies as dollar weakness prompted investors to purchase the stocks as an inflation hedge.

Barchart.com U.S. Morning Call for Friday, May 22, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +0.31% and June S&Ps are up +5.80 points (+0.65%). The Asia-Pacific stock markets today closed mixed with Japan (-0.41%), Hong Kong (-0.80%), China (-0.34%), Taiwan (+0.28%), Australia (-1.37%), Singapore (+1.55%), South Korea (-1.55%), India (+1.10%).

Mining companies advanced in Europe as copper prices rose and after Goldman Sachs said the companies remain "attractive." Mobile-phone companies are weaker after Nokia Oyj, the world's biggest mobile-phone maker, fell 4.5% after research firm Gartner said Nokia's market share fell to 36.2% in Q1 from 39.1% a year earlier, and overall worldwide mobile-phone sales fell -8.6%, the industry's first y/y contraction. British Airways Plc is down over 2% after Europe's third-largest carrier reported a full-year loss of 375 million pounds ($595 million), its first full-year loss since 2002, and wider than analysts' estimates of a 312 million pound loss.

The dollar index tumbled to a fresh 4-1/2 month low today after comments late yesterday from Boston Fed President Rosengren who said that "a rather slow recovery is likely" in the US this year. Also speaking late yesterday, Philadelphia Fed President Plosser said the US may grow below potential "for some time" as unemploymnet rises and the shock to financial markets persists. Plosser also cautioned against complacency on inflation, saying prices may rise 2.5% in 2011, which is higher than official Fed forecasts of a 1.7% to 2.0% rise in inflation for 2011.

The Bank of Japan raised its outlook on the economy for the first time in almost three years saying at the conclusion of its policy meeting today that "economic conditions have been deteriorating, but exports and production are beginning to level out." Previously it had said the world's second-largest economy had "deteriorated significantly." The BOJ kept its overnight lending rate unchanged at 0.10%, but did decide to accept foreign currency denominated sovereign bonds as collateral to make it easier for lenders to get capital. Japanese export companies were undercut today after the yen rose to a 2-month high against the dollar and Lenovo, China's biggest maker of personal computers, tumbled 6.4% after reporting a fiscal Q4 loss of $264 million, higher than analysts' estimates of a $211 million loss, and the company said it faces a "very challenging" market.

Overnight U.S. Stock News

June S&Ps this morning are up +5.80 points. The US stock market yesterday traded in negative territory the entire day and finished with moderate losses (Dow -1.54%, S&P 500 -1.68%, Nasdaq Composite -1.89%).
Bearish factors for stock prices yesterday included (1) weakness in bank stocks after former Fed Chairman Greenspan warned that the financial crisis has yet to end and said the commercial banking system in the US "still has a very large unfunded capital requirement," (2) the rise in weekly US continuing unemployment claims to a record high for the sixteenth straight week, indicating an economic recovery may be slow to take hold as companies are still not hiring, (3) the statement from the Congressional Budget Office Director to the House Budget Committee that the US economic recovery his agency expects to begin later this year will be "more tepid" than previously predicted, and (4) comments from PIMCO that current weakness in US stocks, bonds and the dollar may be the result of concerns from foreign investors that the US is at risk of losing its AAA credit rating.
Bullish factors for stock prices yesterday included (1) the first increase in US leading indicators in the last ten months and the largest increase in 3-1/2 years, boosting optimism that the US economy may be recovering, (2) the slowest rate of contraction in the May US Philadelphia Fed manufacturing index in the last 8 months, and (3) the 32% surge in General Motors after the United Auto Workers Union said it reached a tentative agreement with GM and the US Treasury to modify the automaker's 2007 labor contract and a health-care trust for union retirees.
Sears Holdings (SHLD) jumped 18% in European trading after unexpectedly reporting a Q1 profit, excluding dome items, of 38 cents a share due to cuts to advertising and payroll expenses. Analysts' were expecting a loss of -87 cents a share.

Barchart.com U.S. Morning Call for Thursday, May 21, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is down -1.54%% and June S&Ps are lower by -6.20 points (-0.69%). The Asia-Pacific stock markets today closed mostly lower with Japan (-0.86%), Hong Kong (-1.58%), China (-2.23%), Taiwan (+0.23%), Australia (-0.28%), Singapore (-2.57%), South Korea (-1.08%), India (-2.31%).

Fears that England may lose its AAA credit rating sent British stocks and bonds lower today and undercut the pound. Standard & Poor's lowered its outlook on Britain's AAA credit rating to "negative" from "stable" because of the country's increasing debt burden. The UK plans to sell a record 220 billion pounds ($343 billion) of bonds in the fiscal year through Mar 2010 and may join Ireland, Greece, Portugal and Spain in becoming the fifth western EU nation to lose its top-level credit rating. Britain's Chancellor of the Exchequer predicts that the country's budget deficit this year will reach 175 billion pounds, or 12.4% of GDP, although Standard & Poor's estimates the net general government debt burden could approach 100% of GDP. In a sign that global stimulus packages and interest-rate cuts are starting to prop up demand, Europe's manufacturing and service industries improved to their best levels in eight months after the May Euro-Zone PMI composite rose a larger-than-expected +2.8 to an 8-month high of 43.9.

Former Fed Chairman Greenspan sounded a warning that the financial crisis has yet to end, saying that the commercial banking system in the US "still has a very large unfunded capital requirement," and that the US housing slump may persist "until the price of homes flattens out we still have a very serious mortgage crisis."

Japanese stocks retreated today as the rally in the yen to a 2-month high against the dollar hurt Japanese exporter earnings prospects while Chinese stocks were undercut after Credit Suisse Group AG predicted that an economic rebound in China won't be as "strong as many recently have hoped." Taiwan's economy shrank a record -10.2% y/y in Q1 and follows the -8.6% y/y contraction in Q4, making this the biggest slump in Taiwan since records began in 1952. Taiwan's central bank has cut interest rates to a record low 1.25% in Feb and the government has implemented $25 billion of stimulus spending to counter the recession.

Overnight U.S. Stock News

June S&Ps this morning are down -6.20 points after former Fed Chairman Greenspan warns the financial crisis is not over. The US stock market yesterday rallied sharply into mid-morning when it ratcheted lower the remainder of the day and finished on its low (Dow -0.62%, S&P 500 -0.51%, Nasdaq Composite -0.39%).

Bearish factors for stock prices yesterday included (1) the minutes from the April 28-29 FOMC meeting in which Fed members predicted a deeper recession this year and a slower recovery in 2010, (2) a reversal in financial stocks which gave up early gains after the CEO of American Express said US legislation to curb credit-card fees may reduce lending to "consumers who need it," (3) the prediction from Strategic Economic Decisions that an "economic and social collapse" is a risk for the US unless the government limits borrowing and promotes faster growth, and (4) weakness in life insurance companies after the prediction from Standard & Poor's that US life insurers face "pain" on more than $300 billion invested in mortgages tied to commercial property and mutifamily homes as borrowers default or let loans go into foreclosure.

Bullish factors for stock prices yesterday included (1) strength in energy producers and big name oil companies after crude oil prices advanced to a 6-1/4 month high, (2) the rally in raw-materials producers as the drop in the dollar index to a 4-1/2 month low spurred demand for metals and other commodities, (3) comments from Treasury Secretary Geithner that "there are important indications that our financial system is starting to heal," and (4) speculation that confidence in the lending markets is gaining traction after the 3-month dollar Libor rate fell for the 36th consecutive day to an all-time low of 0.72%, the TED spread narrowed to 54 bp, the lowest since Aug 2007, and the Libor-OIS spread fell to a 15-month low of 52 bp.

Barchart.com U.S. Morning Call for Wednesday, May 20, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is down -0.41% and June S&Ps are up +2.50 points (+0.28%). The Asia-Pacific stock markets today closed mixed with Japan (+0.59%), Hong Kong (-0.39%), China (-0.96%), Taiwan (+0.72%), Australia (+0.19%), Singapore (+0.39%), South Korea (+0.57%), India (-1.69%).

European car makers received a boost today after Goldman Sachs reiterated its "attractive" rating on them and affirmed its "conviction buy" on both Daimler AG abd Bayerische Motoren Werke AG. Air France surged 10% after reporting a net loss for the year through March 31 of 814 million euros ($1.11 billion), below analysts' estimates of 902 million euros. Apr German producer prices tumbled more than expected with the -2.7% y/y plunge the biggest annual decline in nearly 22 years as energy costs fell and demand weakened.

Japan's economy shrank by a record last quarter as exports collapsed and consumers and businesses cut spending. Q1 Japan GDP fell -4.0% q/q and -15.2% annualized, while the economy contracted -3.5% in the year ended March 31, the most since records began in 1955. Net exports, the difference between exports and imports, cut -1.4 percentage points off of GDP, while domestic demand, the biggest contributor to weak growth, shaved -2.6 percentage points off of GDP. Japanese exports plunged -26% last quarter, while Q1 business investment plunged 10.4%, both records. In a warning over economic growth in China, the World Bank today said enthusiasm about an economic recovery in China may be "premature" as private investment lags behind government spending. The World Bank warned that while stimulus spending has "stabilized" the Chinese economy, manufacturers have excess capacity and "a lot of the real-estate sector is over-built."

Barchart.com U.S. Morning Call for Tuesday, May 19, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +1.26% and June S&Ps are up +5.70 points (+0.63%). The Asia-Pacific stock markets today closed higher with Japan (+2.78%), Hong Kong (+3.06%), China (+1.05%), Taiwan (+1.18%), Australia (+2.19%), Singapore (+3.83%), South Korea (+3.10%), India (+0.12%).

Deutsche Bank, Germany's largest bank, is higher by 5.6% as global banks rally on carryover support from speculation that Goldman Sachs, JPMorgan Chase and Morgan Stanley will repay a combined $45 billion of government funds from the Troubled Asset Relief Program (TARP). The three banks first need approval from their primary supervisor, the Federal Reserve, before returning the money. Lloyds Banking Group Plc and Royal Bank of Scotland Group Plc are both nearly 5% higher after the UK government began talks with sovereign wealth funds and other investors about selling stakes in the part-nationalized British banks, according to the FT. Also underpinning European stock prices today is the larger-than-expected jump in German investor confidence, signaling the worst of the recession may have passed. The May German ZEW economic sentiment survey surged +18.1 to a nearly 3-year high of 31.1.

In Asia, PetroChina, the nation's biggest oil producer, climbed 6% after Goldman Sachs upgraded the energy producer to "neutral" from "sell" along with crude oil prices rising to a 6-month high. Toyota Motor, which gets a third of its sales in North America, rallied 3.4% after the yen weakened for a second day, while Mitsubishi UFJ, Japan's biggest publicly traded bank, rose 4.2%, on the heels of the rally in global bank stocks. ICICI Bank Ltd., India's second-largest lender, surged 11% after Morgan Stanley upgraded its ratings on India's financial companies to "inline" from "cautious.

Overnight U.S. Stock News

June S&Ps this morning are up +5.70 points. The US stock market yesterday rallied sharply and finished on its high (Dow +2.85%, S&P 500 +3.04%, Nasdaq Composite +3.11%).
Bullish factors for stock prices yesterday included (1) the rally in Indian ADR stocks on speculation that the victory by Prime Minister Singh's Congress Party in nationwide elections over the weekend will speed up economic reforms and lure global investment into India, (2) strength in financial stocks after the 3-month dollar Libor rate fell to a record low of 0.79% and the Libor-OIS spread dropped to a 1-year low of 60 bp, a sign that interbank credit markets are thawing, (3) a gain in homebuilders after the US May NAHB housing market index rose to an 8-month high, (4) comments from Treasury Secretary Geithner that the economy has "clearly stabilized," (5) the rally in technology stocks after Barclays Plc predicted that technology spending in 2009 should be "less bad" than expected, along with the upgrade of US semiconductor makers by Morgan Stanley to "attractive," saying "the fundamentals of the group are bottoming." and (6) the prediction from Rochdale Securities that banks may have "explosive earnings growth" if the economy recovers and that bank stock prices could triple over the next five years as they now have excessive capital, excessive liquidity and excessive reserves.
Bearish factors for stock prices yesterday included (1) the prediction from economists at the San Francisco Fed that debt reduction by US consumers will lead to either higher bank losses if debt is reduced by default or "a substantial" slowdown in consumer spending if deleveraging is accomplished through increased savings, and (2) the prediction from Goldman Sachs that a US economic recovery will stall out in 2010 as a huge overhang of unoccupied homes will prevent a cyclical recovery in homebuilding, that efforts to boost savings will stunt consumer spending, and that companies will be slow to rehire workers, as they were in the last two "jobless" recoveries.
MGM Mirage (MGM) is 6.6% higher in European trading after the largest operator of casinos on the Las Vegas Strip amended its loan agreement with lenders to waive covenant defaults and allow it to pay down debt.
General Electric (GE) is up by 2.1% in European trading after Fidelity Investments, the largest mutual-fund company, bought 90.3 million GE shares in Q1, more than doubling its stake in the company.
Home Depot (HD) climbed 2.6% higher in pre-market trading after it reported Q1 EPS of 30 cents, or 35 cents on an adjusted basis, both above analysts' estimates of 29 cents, as the company shed workers and froze executive pay.

Barchart.com U.S. Morning Call for Monday, May 18, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +0.49% and June S&Ps are up +4.50 points (+0.51%). The Asia-Pacific stock markets today finished mixed with Japan (-2.44%), Hong Kong (+1.38%), China (+0.52%), Taiwan (+1.37%), Australia (-1.00%), Singapore (+1.74%), South Korea (-0.30%), India (+17.34%). In another sign that the worst of the European recession has passed, Mar Euro-Zone exports rose +1.6% m/m, their second straight monthly advance, as the Mar Euro-Zone trade deficit narrowed ro 2.1 billion euros ($2.8 billion) from 2.9 billion euros in Feb. Lloyds jumped 5.8% after the UK's biggest mortgage provider said it will redeem 4 billion pounds ($6.1 billion) of preference shares held by the British government and Porsche SE fell 3.6% after Volkswagen AG called off merger talks between the two companies less than two weeks after the companies' controlling families agreed to pursue a merger. US technology stocks may receive a boost today after Morgan Stanley upgraded its outlook on US semiconductor makers to "attractive," saying the fundamentals of the group are bottoming." India's benchmark stock index, the Sensex, surged by a record 17% today after Prime Minister Singh's Congress Party won nationwide elections. Stock trading was halted in India for the first time on the historic advance as market optimism surges that barriers to foreign investment in India may now be reduced after the ruling Congress party won the most seats since 1991. Singh's ruling Congress party will be able to form a government without needing the support of communist lawmakers who frustrated plans to entice foreign investment into India during his first five-year term.

Overnight U.S. Stock News

June S&Ps this morning are up +4.50 points. The US stock market last Friday finished with moderate losses (Dow -0.75%, S&P 500 -1.14%, Nasdaq Composite -0.54%).
Bearish factors for stock prices last Friday included (1) weakness in bank stocks after FDIC Chairman Bair said some bank CEOs will be replaced in the next few months, (2) the recommendation by UBS AG to cut its global equity allocation to "neutral" from "overweight," saying hopes of a recovery in the global economy are "likely to fade," (3) a drop in energy producers and big-name oil companies after crude oil fell on demand worries, and (4) the prediction from Dallas Fed President Fisher that Americans should brace themselves for a slow recovery back to health after the recession ends, with unemployment likely to hit the double-digits.
Bullish factors for stock prices last Friday included (1) a rally in insurance companies after the Treasury approved access to capital from its Troubled Asset Relief Program (TARP) for Hartford Financial, Prudential Financial, Allstate, Principal Financial Group, Lincoln National and Ameriprise Finanacial, (2) the larger than expected increase in the May Empire manufacturing index along with the smaller-than-expected decline in US Apr industrial production, signaling the possibility that the contraction in the US manufacturing sector is abating, (3) the larger-than-expected increase in the May University of Michigan US consumer confidence to a 14-month high, and (4) comments from Fed Chairman Bernanke that "early indications" show that investor demand for the Fed's Term Asset-Backed Securities Loan Facility (TALF) loans will increase next month from May's total, signaling a greater chance of success for the Fed's program to restart the securitization markets.
Broadcom (BRCM) is 2% higher in European trading after Morgan Stanley upgraded the stock to "overweight" from "equal weight" and boosted its stance on US semiconductor makers to "attractive," saying "the fundamentaals of the group are bottoming."
General Motors (GM) is down 2,4% in pre-market trading after the automaker failed to reach a deal with Canadian labor unions as it battles to cut costs to avoid bankruptcy.
Bank of America (BAC) climbed 4% in pre-market trading after Goldman Sachs added the bank to its "conviction buy" list, citing the bank's progress in raising capital and another "solid" quarter for he mortgage and capital markets businesses.
Lowe's (LOW) surged nearly 10% in pre-market trading after reporting Q1 profit of 32 cents a share, beating analyst's estimates of 26 cents, and forecasting Q2 EPS of 51 cents to 55 cents a share, also above analysts' estimates of 50 cents

Barchart.com U.S. Morning Call for Friday, May 15, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is dowm -0.32% and June S&Ps are down -5.70 points (-0.64%). The Asia-Pacific stock markets today all closed higher with Japan (+1.88%), Hong Kong (+1.51%), China (+0.13%), Taiwan (+1.96%), Australia (+1.34%), Singapore (+0.83%), South Korea (+0.86%), India (+2.53%). Q1 Euro-Zone GDP shrank -2.5% q/q, more than expected and the biggest quarterly contraction since Euro-Zone GDP data were first compiled in 1995. Q1 German GDP also contracted more than expected at -3.8% q/q, the largest quarterly decline since German GDP data were first compiled in 1970. While policy makers have expressed optimism that the global economy may be easing, recent reports indicate any recovery is likely to be tepid. Also undercutting stock prices today is the recommendation from UBS AG to cut their holdings of stocks, saying hopes of a recovery in the global economy are "likely to fade." UBS cut its global equities allocation to "neutral" from "overweight," reduced its ratings on real estate investment trusts and precious metals, and increased its recommendation on government bonds and soft commodities and retained its "overweight" rating on corporate debt. Barclays Plc is up 9% and leading a rally in financial shares on reports that the UK's third-biggest bank is in talks to sell its Barclays Global Investors management unit. US insurance stocks should receive a boost today after the Treasury approved access to capital from its Troubled Asset Relief Program (TARP) to Hartford Financial, Prudential Financial, Allstate, Principal Financial Group, Lincoln National and Ameriprise Finanacial. Asian stocks were bolstered today after Mar Japan machinery orders fell a less-than-expected -1.3% y/y, and bookings from abroad jumped 46.4%, the biggest monthly gain on record. Limiting gains in Japanese stocks are signs that deflation may be returning to the world's second-largest economy after Apr Japan wholesale prices unexpectedly declined -0.4% m/m, the eighth consecutive monthly fall, with the -3.8% y/y plunge the biggest annual decline in 22 years.

Overnight U.S. Stock News

June S&Ps this morning are down -5.70 points amid speculation the recent rally has outpaced the prospects for earnings and economic growth. The US stock market yesterday overcame early weakness and moved higher after mid-morning and closed up on the day (Dow +0.56%, S&P 500 +1.04%, Nasdaq Composite +1.50%).
Bullish factors for stock prices yesterday included (1) a continued thaw in interbank lending markets after the 3-month dollar Libor rate fell 3 bp to a record low of 0.85% and the Libor-OIS spread, a guage of banks' willingness to lend, narrowed 3 bp to an 11-month low of 65 bp, (2) the 4% gain in Ford Motor after its CEO said the automaker will survive a 15% global drop in auto sales this year by cutting costs and making cars that are more fuel-efficient, and (3) the prediction from UBS AG that US corporate earnings are approaching a low point relative to sales after falling for the past three years, which may limit the downside risk to companies' profit margins.
Bearish factors for stock prices yesterday included (1) the larger-than-expected jump in US weekly unemployment claims with continuing claims surging to a record high (data since 1967) for the fifteenth consecutive week, signaling companies are still not hiring, (2) the 1.9% drop in Wal-Mart after it reported Q1 profit in line with expectations but gave future guidance for Q2 profit of 83 cents a share, below analysts' estimates of 85 cents, and (3) the 5% decline in General Motors after its CEO said a bankruptcy is now "probable" as the biggest US automaker struggles to beat a Jun 1 government deadline to cut costs and debt.
Hartford Financial Services Group (HIG) is 10% higher in European trading after the US Treasury granted Hartford and five other insurers access to capital from the Treasury's Troubled Asset Relief Program (TARP).

Barchart.com U.S. Morning Call for Thursday, May 14, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is down -0.74% and June S&Ps are down -3.10 points (-0.35%). The Asia-Pacific stock markets today all closed lower with Japan (-2.64%), Hong Kong (-3.04%), China (-0.76%), Taiwan (-1.87%), Australia (-3.44%), Singapore (-2.89%), South Korea (-2.68%), India (-1.22%). Global mining companies and oil producers are leading markets lower today after copper prices slumped to a 2-week low and crude oil fell for a second day after the IEA said global oil demand will drop the most since 1981. European bank stocks were boosted after Barclays Plc rallied over 6% when Morgan Stanley upgraded Briain's third-biggest lender to "overweight" from "equal weight," saying investment banks may post better-than-expected earnings in the second quarter. UCB SA surged 18% after the Belgian drugmaker won US approval to sell its Cimzia medicine for rheumatoid arthritis while BASF SE, the world's largest chemical maker, sank 2.4% after Germany's VCI industry group forecasted that sales in Germany's chemical industry will fall twice as much as previously forecast this year as the worldwide recession saps demand for consumer and industrial goods. European car sales dropped -12% in April, the twelfth consecutive monthly decline, and for the first four months of this year are down -16%. In Asia. Panasonic Corp., the world's biggest consumer electronics maker, fell 4.4% after the Yomiuri newspaper reported the company may forecast a net loss, while the Hong Kong Exchanges & Clearing Ltd., operator of Asia's third-biggest stock market, slumped over 7% after its chairman said it was "difficult to say" if profit had hit bottom. Sony Corp., the world's number-two maker of consumer electronics, sank nearly 7% and after the close of trading said it expects to lose 120 billion yen ($1.26 billion) this year, while Canon, which gets a third of its sales from the Americas, declined 4.8% as the yen strengthened to a 1-1/2 month high against the dollar and US Apr retail sales were weaker than expected.

Overnight U.S. Stock News

June S&Ps this morning are down -3.10 points, following global stock markets lower. The US stock market yesterday moved lower the entire day and finished with sharp losses (Dow -2.18%, S&P 500 -2.69%, Nasdaq Composite -3.01%).
Bearish factors for stock prices yesterday included (1) weakness in retailers and consumer stocks after the unexpected decline in Apr US retail sales, (2) carryover negative sentiment from European stock markets which fell after the Bank of England said the UK economy faces a "slow" recovery along with the steepest annual drop in Mar European industrial production since data began in 1986, (3) the slump in real estate companies and homebuilders after RealtyTrac reported that US foreclosure filings in April surged to a record, (4) the prediction from Telsey Advisory Group that US consumer spending will be restrained by "economic headwinds" until next year as consumers, facing instability in the labor market, "want to save instead of spend," and (5) comments from former US Comptroller General Walker that the AAA debt rating of the US may be cut beacuse the government can't control spending.
Bullish factors for stock prices yesterday included (1) comments from Treasury Secretary Geithner that "the financial system is starting to heal" and "concern about systemic risk has diminished," (2) the continued improvement in interbank lending rates after the 3-month dollar Libor rate fell 2 bp to an all-time low of 0.88% and the Libor-OIS spread, a barometer of banks' willingness to lend, fell 2 bp to an 11-month low of 68 bp, and (3) the drop on the yield of the 10-year T-note to a 2-week low.
Coca-Cola Enterprises (CCE) may receive a boost today after Goldman Sach's added the world's largest soft-drink bottler to its "conviction buy list" on expectations growing demand for soda and falling commodity prices will bolster earnings.
MBIA (MBI) slumped 4.4% in after-hours trading after the biggest bond insurer was sued by Bank of America, JPMorgan Chase and 16 more of the world's largest financial companies, saying MBIA's split of its guarantee business illegally cut their chances of getting paid on policies.
Whole Foods Markets (WFMI) rose 5% in European trading after the largest natural-goods grocer in the US reported adjusted Q2 profit of 25 cents a share, beating analysts' estimates of 19 cents.

Barchart.com U.S. Morning Call for Wednesday, May 13, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is down -0.56% and June S&Ps are down -5.20 points (-0.57%). The Asia-Pacific stock markets today closed mixed with Japan (+0.45%), Hong Kong (-0.55%), China (+0.91%), Taiwan (+0.82%), Australia (-0.54%), Singapore (+0.33%), South Korea (+0.78%), India (-1.14%). European and US stocks are lower after the Bank of England said the UK economy faces a "slow" recovery and Credit Suisse recommended investors reduce holdings of automakers, technology companies and steelmakers, saying valuations of cyclical stocks "looks very stretched." European industrial production in March fell for the seventh consecutive month and by the largest amount on record, signaling first quarter growth in the Euro-Zone may have contracted more than expected. Mar Euro-Zone industrial production fell -2.0% m/m and -20.2% y/y, the biggest annual decline since the data series began in 1986. OPEC cut its 2009 global oil demand forecast by 150,000 bpd to 84.03 million bpd, its ninth straight monthly reduction, saying demand will contract by 1.57 million bpd, or -1.8% this year. OPEC will meet in Vienna on May 28 to review its production quotas. In Asia, Toyota fell over 2% after the world's biggest automaker said it plans to cut global vehicle production by 28% this year due to falling demand while Nissan, Japan's third-largest automaker, rallied over 6% after projecting a net loss for fiscal 2009 that was almost half the amount analysts had expected.

Overnight U.S. Stock News

June S&Ps this morning are down -5.20 points ahead of Apr US retail sales. The US stock market yesterday traded on both sides of unchanged and finished mixed (Dow +0.60%, S&P 500 -0.10%, Nasdaq Composite -0.88%).

Bearish factors for stock prices yesterday included (1) the widening of the US Mar trade deficit, indicating a possible downward revision to US Q1 GDP, (2) the Apr US budget deficit of -$20.9 billion, the first budget deficit for an April in 26 years, as the typical surge in April tax receipts failed to compensate for the loss of government revenue from the recession, (3) the report from the US Labor Department that job openings in the US fell to 2.0% of total employment in Mar from 2.2% in Feb, the lowest level of jobs available since records began more than eight years ago and signaling the jobless rate is likely to keep rising even as job losses abate, (4) the report from the National Association of Realtors that the median US home price fell a record -14% in Q1 from a year earlier as banks sold repossessed homes which typically sold for 20% less than other homes on the market, and (5) the prediction from Nobel Prize-winning economist Paul Krugman, that the two-month rally in global equity markets has been based on expectations of a rapid economic recovery that is "extremely unlikely" to materialize.

Bullish factors for stock prices yesterday included (1) the prediction from Bank of America that the current rally in US stocks may continue as money managers are still holding a near record $2.51 trillion in money-market funds as of Apr 27 and may shift their assets from cash into equities, (2) the continued improvement in the interbank lending markets as the 3-month dollar Libor rate fell for the 30th straight day to an all-time low of 0.91%, and the Libor-OIS spread, a gauge of banks' reluctance to lend, fell to a 10-3/4 month low of 71 bp, and (3) comments from former Fed Chairman Greenspan that its "very easy to see" continued financial market improvement as the US is seeing a "very significant rise in the availability of money" and that the US is finally "seeing seeds" of a bottoming in the housing market.

Intel (INTC) is 2.6% higher in European trading after the CEO of the world's biggest chipmaker said the second quarter is shaping up "a little better than expected."

Cliffs Natural Resouces (CLF) sank over 7% in pre-market trading after North America's largest iron-ore producer said it is slashing its dividend, cutting salaries and selling common stock to raise cash in case metals demand worsens.

Barchart.com U.S. Morning Call for Tuesday, May 12, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is down -0.01% and June S&Ps are up +0.40 points (+0.04%). The Asia-Pacific stock markets today closed mixed with Japan (-1.62%), Hong Kong (+0.38%), China (+2.32%), Taiwan (-3.23%), Australia (-1.24%), Singapore (+0.56%), South Korea (-0.89%), India (+4.07%). Speaking last night at a Fed conference in Jekyll Island, Georgia, Fed Chairman Bernanke said efforts by US banks to raise capital are "encouraging" and that banks are "well ahead" in finding ways to increase capital and several have already announced plans to raise equity or issue long-term debt not guaranteed by the Federal Deposit Incurance Corp. (FDIC). Retailers in Europe are higher after Tesco Plc, Britain's biggest retailer, and Next Plc, the UK's second-largest clothing retailer, were upgraded with "buy" recommendations at ICAP Plc. Renault SA, which owns 44% of Nissan Motor, jumped over 6% after Nissan forecast an annual loss of 170 billion yen ($1.7 billion), smaller than analysts' estimates of a 310 billion yen loss. Royal Bank of Scotland, the biggest bank owned by the British government, fell 3.5% after Credit Suisse cut its recommendation on the bank to "underperform." European and US energy producers are higher today after crude oil prices rose to a 6-month high, while copper and aluminum prices strengthened after April China copper imports jumped to a record along with Chinese investment in factories and property rising more than expected in response to the government's 4 trillion yuan ($586 billion) stimulus package. Urban fixed-asset investment in China rose +30.5% in the four months to the end of April from a year earlier, from +28.6% in the first three months, although China's exports slid -22.6% in April from a year earlier, highlighting China's dependence on government-led spending to revive its economy as the recession crimps global trade.

Overnight U.S. Stock News

June S&Ps this morning are up +0.40 points. The US stock market yesterday traded lower the entire day and finished with moderate losses (Dow -1.82%, S&P 500 -2.15%, Nasdaq Composite -0.45%).

Bearish factors for stock prices yesterday included (1) valuation concerns after the S&P 500 Index ended last week trading at 15.1 times companies' reported earnings, its most expensive level in seven months, (2) a slump in insurance companies after Prudential Financial tumbled 12% as the second-largest US life insurer said unrealized losses on corporate debt issued by financial firms widened by $1.58 billion in Q1, (3) the 11% plunge in General Motors after the biggest US automaker said bankruptcy is more probable than previously thought, and (4) the sell-off in the banks that plan to repay government bailout money by selling shares, which would dilute the value of existing stock as more shares are issued.

Bullish factors for stock prices yesterday included (1) the prediction from Barclays Capital that the longest recession since the Great Depression may have ended last month, (2) a continued improvement in interbank lending rates after the 3-month dollar Libor rate fell to an all-time low of 0.92% and the Libor-OIS spread declined to a 10-month low of 72 bp, (3) strength in technology stocks after Citigroup upgraded software makers and service providers to "overweight" from "market weight," and (4) comments from ECB President Trichet, who after meeting with other central bankers at a BIS conference in Switzerland, said global central bankers see the first signs of an economic recovery as the global economy is near a turning point.

Andarko Petroleum (APC) fell 4.5% in after-hours trading as the second-largest US oil producer said it has plans to sell 30 million shares of stock in a public offering.

Ford Motor (F) is trading nearly 6% lower in European trading after the second-largest US automaker said it will issue 300 million shares of common stock which will be an 11% increase in total shares outstanding, possibly diluting the value of existing shares.

Bank of America (BAC) is 2.4% higher in pre-market trading after the bank sold a 5.8% stake in China Construction Bank for about $7.3 billion, bringing Bank of America closer to the $33.9 billion regulators say it needs to raise following stress tests.

Barchart.com U.S. Morning Call for Monday, May 11, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is down -0.83% and June S&Ps are lower by -10.80 points (-1.17%). The Asia-Pacific stock markets today closed mixed with Japan (+0.20%), Hong Kong (-1.74%), China (-2.29%), Taiwan (+0.97%), Australia (-0.40%), Singapore (-3.22%), South Korea (+0.17%), India (-1.63%). Lower metal and energy prices today are undercutting raw-material and energy producers, while valuation concerns send financial stocks lower. HSBC Holdings Plc, Europe's biggest bank, fell nearly 4% after its CEO said 2009 will be a "tough" year as bad loans increase, while Asia remains "resilient." STMicroelectronics NV dropped 3.7% after Europe's largest chipmaker was cut to "sell" from "neutral" at UBS AG, which reduced its recommendation on the industry to "neutral." French industrial and manufacturing production in March dropped more-than-expected, falling for the eighth consecutive month and raising concerns that Q1 GDP figures to be released at the end of the week will show lower-than-consensus growth. In fact, UniCredit MIB revised their growth estimates lower after the French data, predicting Euro-Zone Q1 GDP to contract -2.3% from an earlier estimate of -2.1%, and for Q1 French GDP to contract -1.4% from a previous estimate of -1.3%. Consumer prices in China dropped for a third straight month, falling -1.5% in April, while producer prices in China tumbled -6.6%, their biggest decline since data began in 1999, making it easier for the People's Bank of China (PBOC) to maintain its "moderately loose" monetary policy. New loans in China were at 591.8 billion yuan ($86.7 billion) in April, slowing appreciably from the record 1.89 trillion yuan in March, easing concerns that Chinese banks are taking on too much risk and that credit growth will lead to asset bubbles and bad debts.

Overnight U.S. Stock News

June S&Ps this morning are down -10.80 points as the market retreats from its recent sharp rally. The US stock market last Friday moved higher throughout the day and finished with decent gains (Dow +1.96%, S&P 500 +2.41%, Nasdaq Composite +1.33%).
Bullish factors for stock prices last Friday included (1) a sharp rally in bank stocks worldwide after comments from Fed Chairman Bernanke that a review of US banks' health "should provide considerable comfort," along with an added boost to US bank stocks after UBS AG raised their recommendation of US commercial bank stocks to "overweight" from "underweight," (2) the US Apr nonfarm payrolls that showed fewer job losses than expected, (3) strength in energy producers after crude oil prices gained on expectations the improving economy will boost fuel demand, (4) a continued thaw in the interbank lending markets after the 3-month dollar Libor rate dropped to an all-time low of 0.94% and the Libor-OIS spread dropped to a 9-month low, and (5) the prediction from Richmond Fed President Lacker that the worst of the US recession is abating and that growth may resume by year end.
Bearish factors for stock prices last Friday included (1) the jump in the Apr US unemployment rate to a 25-1/2 year high of 8.9%, (2) the greater-than-expected decline in Mar US wholesale inventories which have now fallen for seven straight months with wholesale sales plunging to their lowest level since 2005, and (3) the downgrade of semiconductor and retailer stocks by Citigroup, citing valuation.
Intel (INTC) is down 1.2% in European trading after the world's largest chipmaker is accused by the European Union of giving computer sellers rebates not to buy a rival's chips, and may be ordered to stop the practice and pay a possible antitrust fine of 1 billion-euros ($1.36 billion).
Bank of America (BAC) is down 4.7%, JPMorgan Chase (JPM) is 4% lower and Wells Fargo (WFC) declined over 3% in European trading as most US bank stocks retreated from their recent rallies following the government's bank stress tests.
AstraZeneca Plc (AZN) is 6.8% higher in pre-market trading after the company's experimental blood thinner Brilinta prevented heart attacks, strokes and death from cardiovascular disease better than Bristol-Meyers Squibb and Sanifi-Aventis SA's Plavix drug in a head-to-head study.

Barchart.com U.S. Morning Call for Thursday, May 7, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +1.72% at a 3-3/4 month high and June S&Ps are up +4.40 points (+0.48%) at a 4-month high. The Asia-Pacific stock markets today all closed higher with Japan (+4.55%), Hong Kong (+2.28%), China (+0.08%), Taiwan (+0.09%), Australia (+1.85%), Singapore (+2.87%), South Korea (+0.51%), India (+1.37%). Global stocks are receiving a boost today after US Treasury Secretary Geithner said late yesterday in an interview on a PBS program that the results of the government's stress tests on the nation's 19 biggest banks will be "reassuring" and that "none of those 19 banks are at risk for insolvency." March German factory orders unexpectedly rose +3.3% m/m, the first gain in the last seven months, and a sign that the worst of the global recession may be over. Swiss Re. the world's second-largest reinsurer, surged 19% after reporting Q1 net income of 150 million francs ($132 million), beating the 44 million-franc estimate by analysts, while AB InBev gained 7% after the world's biggest brewer posted a Q1 profit of $716 million as sales increased and costs declined, easily beating analysts' estimates of $484 million. Lloyds Banking Group Plc sank over 8% after the UK's biggest mortgage provider said corporate bad loans are rising "significantly" and forecast a 50% increase in bad loans this year as the economy deteriorates. The Bank of England kept its main benchmark rate at 0.50% as expected but said it will boost the size of its asset purchase program by an additional 50 billion pounds, raising the total assets purchased to 125 billion pounds as part of its quantitative easing. The ECB as expected lowered its 2-week refinancing rate -25 bp to an all-time low of 1.00%.

Overnight U.S. Stock News

June S&Ps this morning are up +4.40 points at a 4-month high after Treasury Secretary Geithner said bank stress-test results will be "reassuring." The US stock market yesterday shook off early losses and finished higher (Dow +1.21%, S&P 500 +1.74%, Nasdaq Composite +0.28%). The S&P 500 Index posted a 4-month high.
Bullish factors for stock prices yesterday included (1) a rally in bank stocks after results of the government's stress tests were leaked throughout the day and investors found that banks don't need as much capital as had been feared, (2) strength in financial stocks on speculation that the economy is improving after the Apr ADP employment change showed the fewest number of job losses since October, (3) the rally in energy producers and big name oil companies after crude oil prices rose to a 5-1/4 month high, and (4) the prediction from San Francisco Fed President Yellen that the US economy may be approaching "an inflection point," with reasons for optimism seen in rising consumer spending and falling business inventories.
Bearish factors for stock prices yesterday included (1) early weakness in bank stocks after it was reported that the government's stress tests will show Bank of America needs $34 billion in new capital and Wells Fargo requires $15 billion, although those were not new capital needs and could be met by converting preferred equity, (2) the prediction from Rochdale Securities that forcing banks to boost capital in the midst of a recession will cripple lending and may delay a recovery, and (3) comments from Nout Wellink, ECB Council member and chairman of the Basel Committee on Banking Supervision, that banks worldwide may be asked to raise minimum capital reserves by several percentage points to help them weather the next financial crisis.
Cisco Systems (CSCO) rallied 3% in after-hours trading after reporting Q3 profit of 30 cents a share, higher than analysts' estimates of 25 cents, as the world's largest maker of networking equipment said it was making progress on a plan to cut $1 billion in costs by July.
Bank of America (BAC) is up nearly 7% in pre-market trading after Morgan Stanley upgraded the biggest US bank by assets to "overweught" from "underweight," saying "with capital now largely known, we view BAC as a higher-quality bank that is trading cheaply despite reduced downside risk.

Barchart.com U.S. Morning Call for Wednesday, May 6, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +0.33% and June S&Ps are down -7.60 points (-0.84%). The Asia-Pacific stock markets today closed mixed with Hong Kong (+2.46%), China (+1.39%), Taiwan (+2.93%), Australia (-0.60%), Singapore (+5.05%), South Korea (-0.48%), India (-1.47%). Japanese markets were closed for the Golden Week Holiday. US bank stocks are under pressure today on speculation that its biggest lenders will need deeper reserves after it was reported that Bank of America requires about $34 billion in new capital. European stocks gained after BNP Paribas SA, France's biggest bank, rallied over 6% after reporting Q1 earnings of 1.56 billion euros ($2.08 billion), beating analysts' estimates of 784 million euros as profits from its investment banking division cushioned a surge in loan losses and its CEO said the bank's capital level is "perfectly adequate." Also aiding European stock gains was the unexpected upward revisions to all if the April European PMI service indexes to 6-month highs and the 6% jump in Bayerische Motoren Werke AG (BMW) after the world's biggest luxury car maker posted a Q1 net loss of 152 million euros ($202 million), narrower than analysts' estimates of a 268 million euro loss. Limiting stock gains in Europe was the unexpected decline in March Euro-Zone retail sales with the -4.2% y/y decline the tenth consecutive monthly annual decline and the biggest annual drop since the data series began in 1996. In its quarterly monetary policy report, the People's Bank of China (PBOC) said the Chinese economy performed "better than expected" in the first quarter and pledged an "ample" supply of money for the financial system to sustain growth. The PBOC also warned that global central banks risk inflation, currency devaluation and a "big consolidation" in bond markets by adopting unconventional monetary policies, such as quantitative easing, to revive their economies.

Overnight U.S. Stock News

June S&Ps this morning are down -7.60 points on concern more of the nation's biggest banks may need to raise additional capital. The US stock market yesterday retreated after Monday's sharp rally and closed slightly lower (Dow -0.19%, S&P 500 -0.38%, Nasdaq Composite -0.54%). The S&P 500 Index continued its recent rally to a 4-month high but then closed lower.
Bearish factors for stock prices yesterday included (1) weakness in bank stocks on concern that the government's stress tests to be released Thursday will show some banks need more capital, (2) the sell-off in energy producers after crude oil prices fell back from a 5-1/4 month high, and (3) the warning from Fed Chairman Bernanke that another shock to the financial system would undercut the Fed's forecast that the US recession will give way to a slow recovery this year.
Bullish factors for stock prices yesterday included (1) the larger-than-expected increase in the Apr ISM non-manufacturing index, which rose to a 6-month high, (2) comments from Fed Chairman Bernanke that the economic contraction may be slowing and that the housing market has "shown some signs of bottoming," and (3) a continued thaw in interbank lending markets after the 3-month dollar Libor rate fell 2 bp to 0.99%, an all-time low and the first time the rate has been below 1.00%.
Bank of America (BAC) slumped over 9% in European trading on a report leaked from the government's stress tests that the bank requires $34 billion in new capital, the largest need among the 19 biggest US banks subjected to stress tests.
Walt Disney (DIS) is up nearly 5% in after-hours trading after the world's biggest media company reported Q2 profit excluding items was 43 cents a share, beating analysts' estimates of 40 cents after cutting jobs at its parks and TV division. Barclays Plc then raised its recommendation on Disney to "overweight," saying the company is "best-positioned for media's digital revolution.

Barchart.com U.S. Morning Call for Tuesday, May 5, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +1.32% and June S&Ps are down -0.60 points (-0.07%). The Asia-Pacific stock markets today closed higher with Hong Kong (+0.30%), China (+0.47%), Taiwan (+0.78%), Australia (+0.19%), Singapore (+2.25%), India (-0.03%). Japanese markets were closed for Children's Day as part of the Golden Week Holiday. UBS AG, Switzerland's largest bank by assets, is up 5% after reporting a Q1 net loss of 1.98 billion frnacs ($1.75 billion), narrower than the 2 billion franc loss the bank estimated last month and Standard Chartered PLC surged 13% after the UK bank said it had a "strong start" to the year with record Q1 earnings and revenue. Mar Euro-Zone producer prices fell -0.7% m/m, their eighth consecutive monthly decline, and tumbled -3.1% y/y, their biggest annual decline in 22 years, raising deflation concerns and adding to the case for more action by the ECB to revive economic growth. Interbank lending rates show that the credit crunch continues to abate after the 3-month dollar Libor rate fell 2 bp today to 0.99%, the first time the rate has fallen below 1.00%, while the Libor-OIS spread, a gauge of banks' reluctance to lend, narrowed to 78 basis points, the lowest since Sep 1. Real estate and construction companies in Taiwan received a boost after the Economic Daily Times reported that Taiwan may allow investors from mainland China to buy real estate on the island. Australia'a central bank kept its overnight cash rate target unchanged at 3.00% as expected with central bank Governor Stevens saying policy makers will "monitor how economic and financial conditions unfold, and how they impinge on prospects for a substantial recovery in economic activity." China Galaxy Securities, the nation's largest brokerage, warned that China is at risk of a stock market "bubble" after the Shanghai Composite INdex surged 50% since last year's low in Nov amid signs the government's stimulus mesures are reviving the world's third-largest economy. The gains have driven valuations on the index to 27.2 earnings, the highest in a year, and according to Galaxy, risk that the stock market "bubble" may burst as investor confidence weakens and bank lending slows.

Barchart.com U.S. Morning Call for Monday, May 4, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +0.45% and June S&Ps are up +3.50 points (+0.40%). The Asia-Pacific stock markets today closed higher with Hong Kong (+5.54%), China (+3.48%), Taiwan (+5.64%), Australia (+3.01%), Singapore (+5.65%), South Korea (+2.10%), India (+6.41%). Japanese markets were closed for Greenery Day and British markets were closed for May Day. Mining and metal companies are higher today after copper prices rose to a 2-week high and BASF SE, the world's largest chemical maker, jumped over 5% after being upgraded by Bank of America and Exane BNP Paribas to "neutral" from "underperform" after BASF posted Q1 profit that beat analysts' estimates. The European Union (EU) downgraded its economic growth forecast for the Euro-Zone this year saying growth will now contract 4% in 2009, twice as deep as a Jan projection of a 1.9% contraction. The EU sees the Euro-Zone unemployment rate increasing to 9.9% this year and 11.5% in 2010 with inflation slowing to +0.4% this year before accelerating to +1.2% in 2010. Stocks in Asia received a boost from the jump in the Apr China CLSA purchasing managers' Index to 50.1 from 44.8 in Mar, the first time the index has broken the 50.0 contraction/expansion threshold in nine months, as the decline in export orders moderated and the government's stimulus package begins to stimulate growth. Taiwan stocks also climbed on an upgrade from Goldman Sachs, which said the island may reap benefits from improving ties with China.

Overnight U.S. Stock News

June S&Ps this morning are up +3.50 points. The US stock market last Friday moved lower into mid-morning but then rallied into the afternoon and held most of the gains into the close to finish higher (Dow +0.54%, S&P 500 +0.54%, Nasdaq Composite +0.11%).
Bullish factors for stock prices last Friday included (1) the unexpected jump in the US Apr University of Michigan consumer confidence to a 7-month high, (2) speculation that the worst of the recession may be over after the Apr ISM manufacturing index rose to a 7-month high, (3) the rally in big-name oil companies after crude oil rallied to a 2-1/2 week high, (4) the prediction from JPMorgan Chase that gains in US consumer confidence and better credit conditions will lead to a pickup in spending in Q2, (5) the prediction from Abby Cohen, senior investment strategist at Goldman Sachs, that the S&P 500 may jump 20% to 1,050 over the next six to twelve months as investors buy stocks at low valuations, and (6) the prediction from Barclays that the stabilization in consumer spending, the Obama administration's $787 billion stimulus, the Fed's efforts to unfreeze credit, and a drawdown of inventories, are all factors pointing to a return of growth in the economy.
Bearish factors for stock prices last Friday included (1) the prediction from Credit Suisse that the economy will rebound this quarter but then contract again in Q3 when rising unemployment and lower incomes cause consumers to retrench, (2) the 7.7% plunge in MetLife, which led insurance companies lower, after the insurer reported a Q1 profit ex-items of 20 cents a share (well below analysts' estimates of 33 cents) but reported a bottom-line GAAP loss, its first quarterly loss since 2001 on writedowns and lower returns from investments, and (3) weakness in financials after JPMorgan Chase cut its full-year earnings estimate for most US banks, citing higher credit costs, lower fees and falling net interest income.
General Motors (GM) is 5% higher in European trading on reports that Fiat SpA may seek to buy the automaker's operations in Latin America, China and Russia.
Intel (INTC) is 2.3% higher in pre-market trading after the world's biggest chipmaker was upgraded to "overweight" from "equal weight" at Morgan Stanley, which said orders are set to grow and analysts' earnings estimates are too low.

Barchart.com U.S. Morning Call for Friday, May 1, 2009

Overnight Developments

June S&Ps are up +3.90 points (+0.45%) while the UK FTSE Index is down (-0.06%). The European and most Asian markets were closed for the Labour Day Hoiiday. Japan closed (+1.69%) and Australia (-0.29%). The Fed is postponing the release of stress tests on the biggest US banks until the end of next week, instead of their originally scheduled release May 4, as bank executives debate preliminary findings with examiners. At least six of the 19 largest US banks require additional capital, according to preliminary results of the tests. UK manufacturing contracted at the slowest pace in eight months after the Apr UK PMI manufacturing index rose a larger-than-expected +3.4 to 42.9, showing the British economy is pulling out of its downward spiral that saw its Q1 GDP contract by the most since 1979. The Japanese yen fell to a 2-week low against the dollar after Japan's unemployment rate in Mar jumped +0.4 to 4.8%, a four-year high and the biggest one-month increase since 1967. Japan's job prospects are also getting worse as the job-to-applicant ratio in Mar plunged to 0.52 from 0.59, the lowest in seven years. Mar Japan household spendng fell -0.4% m/m, a record thirteenth consecutive monthly decline, while wages plunged -3.7% y/y, the fastest drop in more than six years, indicating any recovery in the world's second-largest economy is likely to be weak. The Apr China purchasing manager's index climbed +1.1 to 53.5, the second straight month that China's manufacturing has expanded, as government stimulus spending fuels a recovery in the world's third-biggest economy. India's exports plunged a record 33% in Mar y/y, the largest monthly decline since data began in 1995, and the sixth consecutive monthly drop as the global recession hurts demand for India's products.

Overnight U.S. Stock News

June S&Ps this morning are up +3.90 points. The US stock market yesterday rallied sharply early but failed to maintain its gains and finished mixed (Dow -0.22%, S&P 500 -0.10%, Nasdaq Composite +0.31%). The S&P 500 Index posted a 3-1/2 month high before closing lower.
Bearish factors for stock prices yesterday included (1) the bankruptcy filing by Chrysler after the third-biggest US automaker failed to restructure debts will all of its creditors, (2) the weaker-than-expected US Mar personal income and spending reports, (3) the rise in US weekly continuing unemployment claims to a record high for the thirteenth consecutive week, (4) weakness in energy producers which were dragged lower as Exxon fell -2.6% after posting its biggest profit drop since 2002, and (5) the jump in the 10-year T-note yield to a 5-month high of 3.16%.
Bullish factors for stock prices yesterday included (1) the larger-than-expected rise in the Apr Chicago purchasing managers' index to a 7-month high, (2) speculation that the FDIC may offer investors financing to buy distressed US bank assets without requiring them to share an equity stake with the Treasury, (3) the prediction from Fidelity International that low valuations indicate stock advances that began in March are the start of a bull market and that financial shares are poised to drive recent gains higher, and (4) a rally in solar stocks led by First Solar which surged 23% after reporting its Q1 profit more than tripled as production costs fell and utilities increased demand for renewable energy.

Barchart.com U.S. Morning Call for Thursday, April 30, 2009

Overnight Developments

Global stocks are all rallying today on growing speculation the worst of the worldwide recession is over. The European DJ Stoxx 50 this morning is up +2.29% and June S&Ps are up +13.80 points (+1.59%), both at 3-1/2 month highs. The Asia-Pacific stock markets today closed higher with Japan (+3.94%), Hong Kong (+3.77%), China (+0.67%), Taiwan (+6.74%), Australia (+2.31%), Singapore (+3.82%), South Korea (+2.28%). More than half of 129 companies in the Stoxx 600 that reported earnings since Apr 7 have beaten expectations, compared with 43% in the previous quarter. BASF, the world's biggest chemical company, is trading 8% higher after reporting Q1 net income of 375 million euros ($501 million), handily beating the 124 million-euro estimate, while MAN AG, Europe's third-largest truckmaker, is up almost 6% after it reported Q1 net income of 179 million euros ($239 million), easily beating analysts' estimates of 47.5 million euros. The ECB will be under increased pressure for further action to revive Europe's economy after the Mar Euro-Zone unemployment rate rose to a 3-1/2 year high of 8.9% while the Mar Euro-Zone CPI estimate held at +0.6% y/y, the lowest since data were first compiled in 1996. In Asia, Japan's Mar industrial production rose +1.6% m/m, twice the pace predicted and the first increase in the last six months, indicating the economy may resume expanding as soon as this quarter. In its semiannual outlook released today, the Bank of Japan (BOJ) revised lower its prediction for the Japanese economy saying it will contract -3.1% this year, steeper than the -2.0% estimate it made in Jan and that the economy will expand +1.2% in the year starting Apr 2010, compared with its Jan estimate of a +1.5% gain. The BOJ stated the global economy is showing a "leveling out" and Japan will "recover at a moderate pace" from the latter half of this fiscal year. Honda, Japan's second-largest automaker, rallied over 9% after saying it expects an operaing profit of 10 billion yen ($103 million) this fiscal year on optimism the US car market may recover. Taiwan's Taiex Index surged +6.7%, the biggest gain since Aug 1991, after the country allowed Chinese investments for the first time since a civil war ended six decades ago. Far EasTone Telecommunictions, Taiwan's third-biggest phone company, surged by the 7% daily limit after China Mobile agreed to buy a 12% stake in the company while Taiwan Semiconductor Manufacturing and Cathay Financial Holding also advanced the maximum limit on speculation more Chinese companies will invest in Taiwan businesses.

Overnight U.S. Stock News

June S&Ps this morning are up +13.80 points on speculation the worst of the global recession is over. The US stock market yesterday rallied up to its high after the post-FOMC meeting statement and then shed some gains into the close and finished higher (Dow +2.11%, S&P 500 +2.16%, Nasdaq Composite +2.28%). The S&P 500 INdex posted a 3-1/2 month high.
Bullish factors for stock prices yesterday included (1) a rally in bank stocks after after Fox-Pitt Cochran Caronia Waller raised their recommendation on bank stocks for the first time since 2004 to "marketweight" from "underweight," saying non-performing assets will peak at the end of this year, (2) the big $103.7 billion drop in US inventories in Q1, the largest drop since records began in 1947, which means that smaller stockpiles could set the stage for a recovery earlier than previously thought, (3) the Fed's post-FOMC policy statement that the "economic outlook has improved modestly" since March, (4) better-than-expected Q1 earnings as 68% of the S&P 500 companies that released first-quarter results have beaten estimates, the most since September, and (5) comments from Paul Volcker, one of President Obama's top economic advisors and former Fed Chairman, that the US economy is "leveling off at a low level" and doesn't need a second fiscal stimulus package.
Bearish factors for stock prices yesterday included (1) the sharper-than-expected contraction in US Q1 GDP (-6.1% versus expectations of -4.7%) and when taken with the Q4 contraction of -6.3% is the weakest six month stretch in the US economy since 1957-58, and (2) speculation that President Obama will announce plans to put Chrysler LLC into bankruptcy as soon as today.
Dow Chemical (DOW) is trading 6.4% higher in pre-market trading after the largest US chemical maker reported a Q1 EPS gain of 12 cents a share, well above amalysts' estimates of a loss of 19 cents.
First Solar (FSLR) jumped 13% in pre-market trading after the world's largest manufacturer of thin-film solar power modules reported Q1 net income of $1.99 a share, beating analysts' estimates of $1.50 a share, as production costs fell and utilities increased demand for renewable energy.

Barchart.com U.S. Morning Call for Wednesday, April 29, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +0.68% and June S&Ps are up +7.00 points (+0.82%). The Asia-Pacific stock markets today closed mostly higher with Hong Kong (+2.76%), China (+3.45%), Taiwan (+0.31%), Australia (-0.35%), Singapore (+2.28%), South Korea (+2.89%), India (+3.65%). Japanese markets were closed today for the Showa Day Holiday. Global stock prices are rebounding from losses posted the first two days of this week from concerns over the swine flu outbreak. US bank stocks received a boost today after Fox-Pitt Cochran Caronia Waller raised their recommendation on bank stocks to "marketweight" from "underweight," saying non-performing assets will peak at the end of this year. Siemens AG, Europe's largest engineering company is up over 5% after reporting Q1 profit of 1.84 billion euros ($2.42 billion), well ahead of analysts' estimates of 1.65 billion euros, while Sanofi-Aventis SA, France's biggest drugmaker, rose nearly 3% after reporting Q1 adjusted net income of 2.18 billion euros, higher than the 1.98 billion-euro median estimate. Consumer and business confidence in the Euro-Zone rose for the first time in the last 11 months in Apr and all of the European Apr Bloomberg retail PMI indexes improved to their best levels since last May as government stimulus packages and central bank rate cuts begin to take hold. In Asia, China Petroleum & Chemical, Asia's biggest refiner, gained nearly 4% after saying first-half profit may climb more than 50% and South Korea's Samsung SDI, the world's second-biggest plasma-display maker, surged over 8% after Hana Daetoo Securities raised its recommendation to "buy" saying the company's profits will improve "rapidly" starting in the second quarter. Li & Fung Ltd., the biggest supplier of toys and clothes to Wal-Mart Stores jumped over 7% after US consumer confidence in Apr gained more-than-expected.

Overnight U.S. Stock News

June S&Ps this morning are up +7.00 points as bank stocks rally after being upgraded by Fox-Pitt Kelton Cochran Caronia Waller. The US stock market yesterday recovered early losses and pushed into positive territory in the early afternoon, but then faded into the close to settle mildly lower (Dow -0.10%, S&P 500 -0.27%, Nasdaq Composite -0.33%).
Bearish factors for stock prices yesterday included (1) weakness in bank stocks after the WSJ reported that the early results of the government's stress tests show that some banks may need additional capital, (2) carryover weakness from overseas equity markets that fell on concerns the swine flu outbreak will hinder a recovery from the global recession, and (3) the tumble in energy and raw-material producers as crude oil and industrial metal prices fell on concerns demand for commodities will remain weak.
Bullish factors for stock prices yesterday included (1) a rally in retailers and consumer discretionary stocks after US Apr consumer confidence had its biggest monthly increase since 2005 as it jumped to a 5-month high, (2) a sign that the drop in US home prices may be stabilizing after the Feb S&P/CaseShiller home price index fell less-than-expected, (3) the stronger-than-expected Apr Richmond Fed manufacturing index which climbed to an 11-month high, and (4) speculation that Chrysler may stave off bankruptcy after the automaker reportedly reached a deal with creditors in a deal brokered by the Treasury Department that has bond holder representatives agreeing to forego $6.9 billion in debt in return for $2 billion in cash.
Dreamworks Animation (DWA) surged 14% in European trading after reporting Q1 profit of 68 cents a share, beating analysts' estimaes of 43 cents after home-video sales of its "Madagascar: Escape 2 Africa" surged. Goldman Sachs then raised Dreamworks to "buy" from "neutral," saying "the bulk of estimate cuts and negative catalysts are now behind us."
Citigroup (c) is up nearly 7% and Bank of America (BAC) is trading nearly 4% higher after Fox-Pitt Cochran Caronia Waller upgraded the banking industry to "marketweight" from "underweight," saying non-performing assets will peak at the end of this year.

Barchart.com U.S. Morning Call for Tuesday, April 28, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is down -1.60% and June S&Ps are down -14.80 points (-1.73%). The Asia-Pacific stock markets today closed mostly lower with Japan (-2.67%), Hong Kong (-1.92%), China (+0.21%), Taiwan (-1.90%), Australia (-0.62%), Singapore (-0.56%), South Korea (-2.84%), India (-3.25%). Stock markets around the world are undercut for a second day on fears the swine flu outbreak will dampen the global economic recovery. The World Health Organization raised its global pandemic alert to 4 from 3, the highest since the system was adopted in 2005, and closer to the stage 6 pandemic level, stating the swine flu was no longer containable. Also adding pressure to the equity markets is the weakness in global bank stocks after the report from the WSJ that the US government's examination of lenders shows Bank of America, Citigroup, Wells Fargo, Fifth Third Bancorp and Regions Financial may all need more capital. Mining companies and steel makers are weaker today as copper prices plunged to a 3-week low and as US Steel reported a wider-than-expected Q1 loss. Daimler AG, the world's second-biggest luxury car maker, is trading down 5.4% after reporting a Q1 loss of 1.3 billion euros ($1.7 billion), wider than an expected 790 million euro loss, and its first back-to-back quarterly losses in at least 10 years as the recession decimated sales of Mercedes-Benz cars and trucks. Japanese exporters were weaker today after the yen rose to a 5-week high against the dollar, while Chugai Pharmaceutical gained almost 2% on speculation the swine flu outbreak will boost sales of its Tamiflu antiviral drug. Japan's Trade Ministry cut its assessment of retail sales, saying for the first time that they are "decreasing" compared with "on a decreasing trend" a month earlier after Mar Japan retail sales tumbled -3.9% y/y, the seventh consecutive monthly y/y decline.

Overnight U.S. Stock News

June S&Ps this morning are down -14.80 points as the WSJ reports early results of the government's stress tests show that some banks may need additional capital. The US stock market yesterday recovered from early sharp losses to close just modestly lower (Dow -0.64%, S&P 500 -1.01%, Nasdaq Composite -0.88%).
Bearish factors for stock prices yesterday included (1) the slump in airlines, hotel and travel companies on concern the swine flu outbreak will hurt travel, (2) comments from the director of the White House National Economic Council that the US economy will keep contracting "for some time," (3) weakness in meat producers and pork processors on speculation that meat demand will shrink with the global spread of swine flu in humans, (4) concerns that the World Health Organization may raise its pandemic alert to an unprecedented level due to the swine flu outbreak which may constrict global trade and further hinder world economies that are already struggling to recover from recession, and (5) the downgrade of US stocks by Credit Suisse to "benchmark" from "overweight," saying "the relative performance of the US deteriorates as lead indicators turn up."
Bullish factors for stock prices yesterday included (1) a rally in biotechnology companies that make flu vaccines, (2) the prediction from JPMorgan Chase that stocks that get battered from the swine flu outbreak may represent bargains for long-term investors and that the S&P 500 Index will climb to 1,100 by year-end, (3) the 21% surge in General Motors after the automaker attempting to stave off bankrutcy stepped up dealer shutdowns and job cuts and offered equity to bondholders under a plan to reduce liabilities by $44 billion, and (4) the prediction from Bank of America that US stocks may have entered a sustained rally where pullbacks are likely to be limited as an improvement in market internals indicate a broadening out of the current rally.
US Steel (X) fell 6.5% in after-hours trading yesterday and is down 11% in European trading after reporting a Q1 loss of -$3.84 a share versus analysts' estmates of -$1.67 a share, its first quarterly loss in five years as demand and prices plunged. US Steel also reduced its quarterly dividend to 5 cents a share from 30 cents and Moody's INvestors Service downgraded about $1.6 billion of US Steel's debt to junk status.
Bank of America (BAC) and Citicroup (C) both dropped over 8% while Wells Fargo (WFC) and Fifth Third Bancorp (FITB) retreated over 3% in pre-market trading after the WSJ reported that the US government's stress tests on the nation's 19 largest lenders will show that banks may need more capital.

Barchart.com U.S. Morning Call for Monday, April 27, 2009

Overnight Developments

Global stock markets are lower today as the swine flu outbreak spreads, raising concern the outbreak will curb efforts to revive the global economy. The European DJ Stoxx 50 this morning is down -1.04% and June S&Ps are down -16.70 points (-1.93%). The Asia-Pacific stock markets today closed mostly lower with Japan (+0.21%), Hong Kong (-2.74%), China (-2.32%), Taiwan (-2.99%), Australia (+0.52%), Singapore (-1.85%), South Korea (-1.15%), India (+0.38%). Global airline stocks are sharply lower today on concern the swine flu outbreak will reduce travel. The World Health Organization declared a state of emergency after the flu outbreak spread from Mexico to as far away as New Zealand with UBS AG downgrading Mexican stocks to "underweight" from "top pick," saying economic growth in Mexico will worsen as the government tries to stop the spread of the lethal swine flu virus which will affect its trade and tourism industries. Roche Holding AG, the maker of the Tamiflu treatment that can reduce swine flu symptoms, jumped nearly 4% in European trading on expectations of a surge in sales in its medicine. Further undercutting US stock prices today were comments Sunday from Lawrence Summers, director of the White House Economic Council, that the US economy will experience "sharp declines in employment for quite some time this year" and the downgrade of US stocks by Credit Suisse AG to "benchmark" from "overweight," saying "the relative performance of the US deteriorates as lead indicators turn up." Inflation pressures in Europe continue to be scant after Mar German import prices fell a larger-than-expected -0.4% m/m, their eighth straight monthly decline, while the -7.1% y/y fall in import prices is the biggest annual decline in 22 years. After last Friday's meeting in Washington D.C., G-7 officials said they expected a "weak" economic recovery in coming months and warned that the world economy could still take another turn for the worse, depending on their abilities to clean up banks' toxic assets.

Overnight U.S. Stock News

June S&Ps this morning are down sharply by -16.70 points as the swine flu outbreak threatens growth in the global economy. The US stock market last Friday traded in positive territory the entire day and closed just under its high (Dow +1.50%, S&P 500 +1.68%, Nasdaq Composite +2.55%).
Bullish factors for stock prices last Friday included (1) strength in energy and raw-materials producers as crude oil rallied for the fourth straight day while gold and silver jumped to 3-week highs, (2) a rally in homebuilders after US March new home sales were stronger-than-expected, (3) a continued thaw in interbank lending markets after the 3-month dollar Libor rate tumbled to a 5-3/4 year low of 1.07%, (4) gains in technology stocks that were led by Microsoft which climbed 11% after the world's biggest software maker reported Q3 profit in line with analysts' expectations and was upgraded by Morgan Stanley to "overweight" from "equal weight," citing an "accelerating growth story," and (5) the prediction from Brown Brothers Harriman that US Q1 GDP will be stronger-than expected, with a contraction of -2.0% compared with market expectations of -5.0%, citing a narrowing US trade deficit and the end of a "freefall" in business sales.
Bearish factors for stock prices last Friday included (1) concerns that banks may continue to post more credit losses, (2) the jump in 10 year T-note yields to a 5-week high, and (3) trepidation ahead of the release of the results of the government's "stress tests" on the nation's biggest banks, which may show that some banks need to raise additional capital, especially after after the Fed stated Friday that capital at some major banks is "substantially reduced" due to market turbulence and the recession.

Barchart.com U.S. Morning Call for Friday, April 24, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is up +1.26% and June S&Ps are up +6.40 points (+0.75%). The Asia-Pacific stock markets today closed mixed with Japan down (-1.57%), Hong Kong (+0.29%), China (-0.80%), Taiwan (+0.09%), Australia (-0.82%), Singapore (-0.38%), South Korea (-1.14%), India (+1.74%). European stocks received a boost today from the Apr German IFO business climate index which rose a more-than-expected +1.6 to 83.7, rebounding from a 26-year low in Mar. Also supporting stock gains in Europe was the rebound in Mar French consumer spending which climbed at a +1.1% m/m pace, higher than the +0.2% m/m gain expected. Limiting gains in stocks today was the plunge in Britain's Q1 GDP which fell -1.9% q/q, the biggest quarterly contraction since Q3 1979, and the first time GDP has shrank by more than 1.0% in consecutive quarters (Q4 -1.6% q/q) since modern records began after WWII. The pound tumbled after the report along with concern the UK will lose its AAA credit rating after Moody's Investors Service said the UK government is "taking risks" with public finances as Britain's balance sheet is "deteriorating rapidly" due to a combination of weakening revenues and bank bailouts. Asian stocks were undercut today by the 5.2% drop in KDDI Corp., Japan's second-biggest mobile-phone operator, after it forecast its slowest profit growth in four years along with the 5.6% fall in Samsung Electronics, the world's largest maker of memory chips, after the company said its too soon to predict a rebound in consumer demand.

Overnight U.S. Stock News

June S&Ps this morning are up +6.40 points on better-than-expected earnings from American Express and Ford. The US stock market yesterday gyrated on both sides of unchanged into late morning before rallying into the close and finishing on its high (Dow +0.89%, S&P 500 +0.99%, Nasdaq Composite +0.37%).
Bullish factors for stock prices yesterday included (1) strength in hotel-related stocks after Marriott International surged 12% as the biggest US hotel chain posted a Q1 profit of 24 cents a share, better than the 13 cents expected by analysts, (2) the 4.5% rally in the S&P 500 Financials Index as the market awaits any additional information on the "stress tests" given to the nations 19 biggest banks, (3) the 3.2% gain in Apple after it reported Q2 profit of $1.33 a share, well ahead of analysts' estimates of $1.08 a share, saying strong sales of the iPhone and new versions of the iPod helped the company overcome a slump in consumer spending, and (4) the 12% rise in EBay after the most-visited US e-commerce site reported Q1 earnings of 39 cents a share, better than the 34 cents expected by analysts.
Bearish factors for stock prices yesterday included (1) the jump in weekly US continuing unemployment claims to a record high for the twelfth consecutive week, indicating a continued deterioration of the US labor market, (2) weakness in homebuilders after US Mar existing home sales fell more-than-expected, (3) The prediction from Deutsche Bank AG that the market for existing homes in the US will take longer to rebound than the one for new homes becasue "shadow inventory," or homes headed for foreclosure, is increasing and hurting prices, (4) the sell-off in drug stocks after IMS Health predicted drugmakers will bring in $70 billion less this year than last year and that prescription drug sales in the US will decline as much as 2%, or $6 billion, the first drop in the 47 years IMS has been keeping records, and (5) the prediction from KBW that US banks may need another $1 trillion to cushion loan losses as unemployment rises and borrowers fall behind on payments.
American Express (AXP) jumped over 8% in after-hours trading late yesterday after the biggest US credit-card company by purchases reported Q1 profit of 32 cents a share, well ahead of analysts' estimates of 13 cents.
Microsoft (MSFT) rallied neary 4% in after-hours trading late yesterday after the world's biggest software maker reported Q3 profit of 39 cents a share, matching analysts' expectations, and saying it plans to eliminate 5,000 jobs by the middle of 2010 with the goal of saving $1.5 billion annually in operating expenses. Early today Morgan Stanley raised their recommendation on Microsoft to "overweight" from "equal weight," citing an "accelerating growth story."
Ford Motor (F) jumped 15% in pre-market trading after reporting a Q1 loss of 75 cents a share, much less than the $1.24 loss expected by analysts.

Barchart.com U.S. Morning Call for Thursday, April 23, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is down (-0.01%) and June S&Ps are up +8.50 points (+1.02%). The Asia-Pacific stock markets today closed mostly higher with Japan (+1.37%), Hong Kong (+2.26%), China (+0.67%), Taiwan (-0.18%), Australia (+2.04%), Singapore (+0.90%), South Korea (+1.00%), India (+2.93%). Europe's manufacturing and service industries contracted at the slowest pace in six months in Apr, suggesting the worst of the recession may be over after the Apr Euro-Zone PMI composite rose a greater-than-expected +2.2 to 40.5. French manufacturers' confidence rose for the first time in 13 months in Apr as the Apr French business confidence indicator climbed +3 to 71, recovering from the Mar reading of 68, which was the lowest level since the index began in 1962. Feb Euro-Zone industrial new orders fell -0.6% m/m, their seventh straight monthly decline, while the -34.5% y/y decline in Feb industrial orders is the largest annual decline since records began in Dec 1994. Credit Suisse rallied over 7% after the biggest Swiss bank by market value reported Q1 profit of 2 billion francs ($1.7 billion), nearly twice the 1 billion-franc estmate expected by analysts. Japanese automakers received a boost today after Goldman Sachs upgraded Toyota and Honda to "buy" from "neutral," saying the automakers and Nissan will likely boost their US market share by 7% through 2010. After the close of Asian trading, Mizuho Financial Group, Japan's third-biggest bank by market value, said it will revise its earnings estimate for the year just ended after reporting a 529.5 billion yen ($5,4 billion) loss for the quarter ending Mar 31, wider than the expected 350.5 billion yen shortfall as bad-loan costs surged almost seven times to 560 billion yen for the year ended Mar 31.

Overnight U.S. Stock News

June S&Ps this morning are up +8.50 points on stronger-than-expected earnings from Apple. The US stock market yesterday rallied mid-morning but shed its gains late in the day and finished mixed (Dow -1.04%, S&P 500 -0.77%, Nasdaq Composite +0.14%).
Bearish factors for stock prices yesterday included (1) a late-day plunge in financials after the CEO of Wells Fargo said "credit may not have turned yet," along with the prediction from Friedman Billings Ramsey that should the US unemployment rate rise to 12% from its current 8.5%, then most banks will need to raise more capital, (2) the sell-off in the S&P 500 Real Estate Index after RealFacts reported that apartment rents and occupancy rates dropped for the third straight quarter in the US West and South as the recession forced some renters to combine households, and (3) the IMF's cut in its 2009 world growth estimate to a contraction of -1.3% compared with their Jan estimate of +0.5% growth and the cut in its world growth forecast for next year to an expansion of +1.9% instead of a previous prediction of 3% growth, saying the global recessiom will be deeper and the recovery slower than previously thought.
Bullish factors for stock prices yesterday included (1) the unexpected rise in the US Feb Federal Housing Finance Agency house price index which has now risen in back-to-back months for the first time in nearly 2 years, suggesting a e bottom in US home prices could be getting closer, (2) the 12% surge in shares of Ford Motor after Goldman Sachs added the company to its "conviction buy" list, saying the automaker doesn't need government assistance and will benefit from likely bankruptcy filings at General Motors and Chrysler, and (3) the 2% gain in AT&T after the biggest US phone company reported Q1 EPS of 53 cents, higher than analysts' estimates of 48 cents.
Apple (AAPL) rallied 3.5% in after-hours trading yesterday after reporting Q2 profit of $1.33 a share, well ahead of analysts' estimates of $1.08 a share. Apple said strong sales of the iPhone and new versions of the iPod helped the company overcome a slump in consumer spending.

Barchart.com U.S. Morning Call for Wednesday, April 22, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is down -0.19% and June S&Ps are down -7.10 points (-0.84%). The Asia-Pacific stock markets today closed mixed with Japan (+0.18%), Hong Kong (-2.67%), China (-3.71%), Taiwan (+0.08%), Australia (-0.25%), Singapore (-2.32%), South Korea (+1.42%), India (-0.74%). Electrolux AB, the world's second-biggest appliance maker, jumped 16% after reporting a Q1 loss of 346 million kronor ($40.5 million), less than a 423 million-kroner loss analysts' were expecting, with the company saying there are "early signs" the market slump is leveling off. Commerzbank AG rallied 7.5% and led European bank stocks higher after the Financial Times Deutschland reported that the bank will have to split off commercial-property lender Eurohypo to get the European Commission's approval for a government bailout. Axel Weber, ECB Council member and President of Germany's Bundesbank, said the Euro-Zone economy shows few signs of emerging from its recession. Weber said while the ECB has "marginal room for maneuver" on its benchmark rate, he sees 1.00% as a "reasonable lower bound." He added that buying government bonds to help revive the Euro-Zone economy is not a "desirable option," stating the ECB should combine longer-term loans with a "clear signal" that rates will stay where they are "for some time." Japan's export slump slowed in March, ending a 4-month steak of record drops and hinting that the recession may have started to ease. Mar Japan exports fell -45.6% from a year earlier, compared with Feb's record -49.4% y/y plunge. Today's report showed that collapsing exports resulted in Japan running a 725 billion yen trade deficit in the year ended Mar 31, the first deficit in 28 years. Goldman Sachs today revised their growth forecast upward for China this year to 8.3% from an earlier estimate of 6.0%, and next year's growth forecast to 10.9% from a previous prediction for a 9% expansion, saying the government's 4 trillion yuan ($586 billion) stimulus package will spur domestic demand and boost investment. China's central bank deputy governor Yi Gang said today that China's economy will continue to recover this quarter and growth will reach the government's 8% target in 2009.

Overnight U.S. Stock News

June S&Ps this morning are down -7.10 points as Capital One and Advanced Micro Devices posted first-quarter losses. The US stock market yesterday overcame early weakness and closed higher (Dow +1.63%, S&P 500 +2.13%, Nasdaq Composite +2.22%).
Bullish factors for stock prices yesterday included (1) a recovery in stock prices from early losses as most bank stocks rallied on Treasury Secretary Geithner's statement that the "vast majority" of US banks have more capital than needed, (2) the prediction from Fed Vice Chairman Kohn that the US economy may stabilize in the second half of this year and begin a slow rebound after a strengthening of "fragile" financial markets, and (3) a rally in technology stocks after Texas Instruments reported better-than-expected Q1 earnings along with reports that Microsoft and Yahoo! may form an advertising partnership.
Bearish factors for stock prices yesterday included (1) comments from Kansas City Fed President Hoenig that injecting more capital into troubled financial companies may prolong the credit crisis, (2) the prediction from the IMF that worldwide losses tied to bad loans and securitized assets may climb to $4.1 trillion by the end of 2010, and (3) the prediction from Standard & Poor's that dividends for S&P 500 companies will probably plunge 22.6% this year, the steepest annual decline since 1938.
Capital One Financial (COF) plunged over 7% in after-hours trading after the credit-card company reported a Q1 loss of $111.9 million and added $124.1 million to reserves for bad loans. The company also said its previous estimate of $8.6 billion in unpaid 2009 loans was too low.
Advanced Micro Devices (AMD) dropped over 6% in after-hours trading after reporting a Q1 loss of -$414 million or 66 cents a share as sales plunged 21% after customers cut orders amid falling PC demand. AMD projected sales will continue to drop this quarter and cited "limited visibility.

Barchart.com U.S. Morning Call for Tuesday, April 21, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is down -0.80% and June S&Ps are down -5.50 points (-0.66%). The Asia-Pacific stock markets today closed mostly lower with Japan (-2.39%), Hong Kong (-2.95%), China (-1.19%), Taiwan (+1.73%), Australia (-2.43%), Singapore (+0.66%), South Korea (-0.20%), India (-0.74%). Tesco Plc, Europe's second-biggest retailer, is up 4.6% after reporting Q1 sales ex-gasoline up 3.4%, more than the 2.7% rise in Q4 sales. The Apr German ZEW economic sentiment survey rose a greater-than-expected +16.5 to 13.0, a 1-3/4 year high and the first positive reading for German investor confidence since July 2007. Mar German producer prices fell a greater-than-expected -0.7% m/m, their sixth straight monthly decline, and fell -0.5% y/y for their steepest y/y drop in 6-1/2 years, indicating deflation risks are increasing in Europe's largest economy. The Reserve Bank of India cut the reverse repurchase rate to a record low 3.25% from 3.50% and forecast that economic growth in Asia's third-largest economy will ease to 6% in the year started Apr 1 from 7.1% the previous year, the slowest rate of growth since 2003.

Overnight U.S. Stock News

June S&Ps this morning are down -5.50 points after Bank of New York Mellon said Q1 earnings dropped a greater-than-expected 51%. The US stock market yesterday sold-off sharply and closed near its low (Dow -3.56%, S&P 500 -4.28%, Nasdaq Composite -3.88%).
Bearish factors for stock prices yesterday included (1) weakness in bank stocks after JPMorgan Chase predicted global banks are likely to realize about $400 billion more in losses on bad assets, requiring further injections of government capital, (2) the sell-off in energy and raw-material producers after crude oil plunged to a 1-month low and copper prices tumbled, (3) the prediction from Standard & Poor's that companies in the S&P 500 Index may need to divert cash from operations or sell assets this year to meet underfunded retirement expenses, and (4) the prediction from Goldman Sachs that state and local finances will constrain the US economic recovery as government officials are forced to cut spending and raise taxes to meet balanced budget requirements.
Bullish factors for stock prices yesterday included (1) the prediction from Obama administration officials that there may be no need to request more financial-rescue funds from Congress as several banks plan to return taxpayer money and others are pushed to tap private markets first, and (2) the 37% surge in Sun Microsystems after Oracle agreed to buy Sun for about $7.4 billion in cash.
Texas Instruments (TXN) is trading 2.3% higher in pre-market trading after late yesterday reporting Q1 net income of $17 million, or 1 cent a share, better than analysts' estimates of a 4 cents a share loss. The company also said earnings this quarter will be as much as 15 cents a share, greater than the 1 cent a share forecast by analysts.
Bank of New York Mellon (BK) tumbled over 9% in pre-market trading after the world's biggest custody bank reported Q1 earnings of 53 cents a share, well below analysts' estimates of 63 cents, and it slashed its dividend to 9 cents a share from 24 cents so it could build capital and repay TARP funds it received from the government.

Barchart.com U.S. Morning Call for Monday, April 20, 2009

Overnight Developments

The European DJ Stoxx 50 this morning is down -1.25% and June S&Ps are down -10.40 points (-1.20%). The Asia-Pacific stock markets today closed mostly higher with Japan (+0.19%), Hong Kong (+0.96%), China (+2.15%), Taiwan (+0.46%), Australia (-0.20%), Singapore (-1.14%), South Korea (+0.57%), India (-0.40%). European and US stock prices are lower today on concern that earnings reports this week will show that the global recession hasn't eased. Germany's central bank, the Bundesbank, said the recession in Europe's largest economy deepened in the first quarter saying "the sharp contraction continued in the manufacturing sector" as the "steep slump" in orders, which begn in Sep, "didn't slow down yet and the recessive underlying trend in the German economy deepened after gross donestic product fell by 2.1%" in the previous quarter. GlaxoSmithKline Plc agreed to buy Stiefel Laboratories for $2.9 billion in cash and may pay another $300 million, depending on Steifel's performance, and will assume $400 million in debt. China's Shanghai Composite Index rose to an 8-month high today and boosted other Asian stock markets after Chinese Premier Wen Jiabao said a stimulus plan has shown "better-than-expected" results.

Overnight U.S. Stock News

June S&Ps this morning are trading down -10.40 points. The US stock market last Friday closed higher with the S&P 500 posting a new 3-month high (Dow +0.07%, S&P 500 +0.50%, Nasdaq Composite +0.16%).
Bullish factors for stock prices last Friday included (1) the stronger-than-expected US consumer confidence report (+4.6 to 61.9 versus expectations of +1.2 to 58.5), (2) continued strength in banking stocks with Wells Fargo, Bank of America and Morgan Stanley all showing gains of more than 4%, (3) a 14% rally in BB&T, which reported much stronger than expected Q1 EPS ex-items of 52 cents, and (4) a 2.8% rally in Procter & Gamble, which raised its dividend last week.
Bearish factors for stock prices last Friday included (1) a 2.2% decline in Intel and a 3% decline in Microsoft after orders for semiconductor equipment plunged by 76% in March, indicating soft IT demand, and (2) the sharp 30-tick sell-off in T-note prices.
Citigroup (C) is trading 3% lower in European trading after Goldman Sachs stated that Citigroup's credit losses are growing at a "rapid rate," and repeated their "sell" rating on the stock.
Bank of America (BAC) fell 7% in pre-market trading despite reporting Q1 earnings of 44 cents a share, much better than the 4 cents expected by analysts. However, Bank of America said their Q1 unrealized losses on mortgage-backed securities widened to $10.9 billion from $9.3 billion in Q4 and they also recorded a $13.4 billion loan-loss provision.

Barchart.com U.S. Morning Call for Wednesday, April 15, 2009

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The European DJ Stoxx 50 this morning is up +0.09% and June S&Ps are up +1.90 points (+0.23%). The Asia-Pacific stock markets today closed mixed with Japan (-1.13%), Hong Kong (+0.57%), China (+0.38%), Taiwan (-0.30%), Australia (-0.14%), Singapore (+0.47%), South Korea (-0.48%), India (+2.90%). HSBC Holdings Plc cut their recommendation on US equities to "underweight" saying "the non-US markets may do better if risk appetite revives." European stocks and emerging markets stocks were raised to "overweight" at HSBC and Japan and other Asian markets were raised to "neutral" from "underweight." UBS is trading down -3.5% after Switzerland's biggest bank reported a loss of almost 2 billion francs ($1.75 billion) for Q1 and its CEO said it will cut an additional 7,500 jobs as markets remain "extremely unstable." German wholesale prices in Mar declined for the eighth straight month with the -8.0% y/y drop the biggest annual decline in 22 years. In a sign that there may be a growing rift within the European Central Bank, ECB Council member Weber said today that cutting the bank's main benchmark rate below 1.00% risks bringing the money market to a standstill. His comments contrast with recent comments from fellow ECB Council members Nowotny and Orphanides who both have indicated support for further ECB rate reductions. In Asia, Li & Fung Ltd., the biggest supplier of toys and clothing to Wal-Mart Stores, tumbled 10% after US retail sales unexpectedly fell last month. Komatsu Ltd., the world's second-biggest maker of earthmoving equipment, fell 5.6% after saying it will close two plants amid declining demand and most Japanese exporters weakened today after the yen jumped to a 2-week high against the dollar

Barchart.com U.S. Morning Call for Tuesday, April 14, 2009

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The European DJ Stoxx 50 this morning is up +1.30% at a 2-month high and June S&Ps are down -2.40 points (-0.28%). The Asia-Pacific stock markets today closed mostly higher with Japan (-0.92%), Hong Kong (+4.55%), China (+0.77%), Taiwan (+0.60%), Australia (+2.212%), Singapore (+1.08%), South Korea (+0.20%). Global mining stocks and commodity producers are higher today after copper prices moved up to a 5-3/4 month high. The euro weakened and European bond prices rallied after comments from ECB Council member Orphanides, who also heads the Central Bank of Cyprus, said that the ECB may have to continue easing monetary policy beyond next month's May 7 meeting to quell deflation risks in the Euro-Zone. Dallas Fed President Fisher, speaking in Hong Kong today, said that "the economic data in the US is quite grim, and I expect a contraction at a very dazzling rate in the first quarter." He also reiterated his prediction that US unemployment may exceed 10% this year. After Singapore's exports tumbled -17% in Mar from a year earlier, its eleventh straight monthly decline, its trade ministry reduced its growth forecast for the third time since Jan and predicted that Singapore's economy may contract as much as 9% this year, the most since its independence in 1965, as the global recession drives down exports and manufacturing. Taiwan's long-term credit rating outlook was cut to negative from stable by Standard & Poor's Ratings Services, citing concern about the government's debt burden and banking system. China's Shanghai Composite Index rallied to an 8-month high today, with Chinese automakers leading the rally, on speculation the government will enact a second round of stimulus measures to increase domestic growth.

Barchart.com U.S. Morning Call for Monday, April 13, 2009

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The European markets are closed today for the Easter Holiday. June S&Ps are down -5.50 points (-0.65%). The Asia-Pacific stock markets today closed mixed with Japan (-0.44%), China (+2.35%), Taiwan (+1.31%), Singapore (+2.64%), South Korea (-0.19%), India (+1.51%). China's industrial production in March climbed +8.3% y/y and Premier Wen Jiabao said Chinese consumer demand grew "relatively rapidly" in the first quarter, a sign that the government's 4 trillion yuan stimulus plan is taking effect. the People's Bank of China (PBOC) said it will provide "ample liquidity" to "ensure money supply and loan growth to meet economic development needs." Concerns are building that the PBOC's easy monetary policy will lead to bad debts and asset bubbles after China's new lending and money supply surged to records in March. Chinese bank loans in March jumped more than sixfold from a year earlier to 1.89 trillion yuan ($277 billion) and M2, the broadest measure of money supply, surged 25.5% as China's banks have already met the bulk of the government's target of at least 5 trillion yuan ($732 billion) in new lending this year. The Oriental Morning Post is reporting that China's State Council will meet on Apr 15 to discuss a new stimulus package that will be focused more on social welfare spending and on boosting consumer consumption. Deflation concerns are rising in Japan after March Japanese producer prices fell a greater-than-expected -2.2% y/y, the fastest pace of decline since 2002, as the economic slump weakened demand and pressured prices.

Barchart.com U.S. Morning Call for Thursday, April 9, 2009

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The European DJ Stoxx 50 this morning is up +0.23% and June S&Ps are up +5.80 points (+0.71%). The Asia-Pacific stock markets today closed higher with Japan (+3.74%), Hong Kong (+2.95%), China (+1.55%), Taiwan (+4.12%), Australia (+1.44%), Singapore (+2.50%), South Korea (+4.18%), India (+0.57%). Global stocks are receiving a boost today from a NY Times report that all 19 US banks subjected to the government's stress tests to determine their viability if the recession deepens will pass the review. The report stated some lenders may still need additional capital infusions, but overall fuels speculation that banks' financial health may be better than anticipated. The Bank of England kept its benchmark lending rate unchanged at 0,50% as expected and said it will continue its three-month program to purchase 75 billion pounds ($110 billion) of government bonds in an attempt to ease credit markets and bolster the economy. Industrial production in Germany, Europe's largest economy, fell for the sixth straight month in Feb with the -20.6% y/y decline the largest since data for a reunified Germany began in 1991. Supporting a rally in Asian stock markets today was the unexpected rise in Japanese machinery orders, which rose +1.4% in Feb m/m, the first increase in the last five months and a sign that the recession may be easing. Japanese Prime Minister Aso is also set to unveil a 15.4 trillion yen ($154 billion) stimulus package to counter an unprecedented collapse in exports.

Unemployment claims – Today’s weekly initial unemployment claims report is expected to show a decline of –9,000 to 660,000, reversing half of last week’s rise of +12,000 to 669,000. Meanwhile, weekly continuing claims are expected to show a further increase of +72,000 to 5.800 million, adding to last week’s surge of +161,000 to 5.728 million. Initial claims last week were at a 26-year high and continuing claims were at a record high (the series has history back to 1967). Layoffs continue at a strong pace as businesses shed employees to cut costs and production during the recession. Meanwhile, the number of people receiving unemployment benefits continues to surge, pushing up the unemployment rate. The unemployment rate in March rose sharply by another 0.4 points to a 25-year high of 8.5%. The post-war record high for the unemployment rate is 10.8% posted in 1982. The FOMC expects the unemployment rate to keep rising into 2010, meaning the post-war record high for the US unemployment rate of 10.8% may be challenged in this recession cycle.

US trade deficit – Today’s February US trade deficit is expected at -$36.0 billion, unchanged from January’s figure of -$36.0 billion. The US trade deficit has improved sharply in the past 6 months, mainly because of the plunge in oil prices, which reduces the dollar value of imported petroleum. However, the US trade deficit has actually seen downward pressure over the past 2 years from the sharp improvement in demand for US exports, which was driven by (1) the weak dollar and low US export prices, and (2) strong overseas economic growth. In fact, the US trade deficit excluding petroleum is currently near its smallest level of the past 8 years. Looking ahead, the US trade deficit is likely to be choppy as exports and imports fluctuate sharply in respond to the global recession and as the recent rise in oil prices puts some upward pressure on the US trade deficit.

Chain store sales – Today’s March ICSC chain store sales report is expected to show a decline of –0.8% y/y, weakening from the February decline of –0.1% y/y. US retail sales took a heavy hit in the fourth-quarter of 2008 with retail sales falling –3.4% in October, -2.4% in November, and –3.1% in December. However, retail sales so far in 2009 have rebounded a bit from the dismal level seen in December, with retail sales in January rising +1.8% and then showing only a small decline of –0.1% in February. It is encouraging that retail sales stopped falling, but it is premature to expect any sustained improvement in retail sales given that home prices are still falling and the unemployment rate is still rising.

Import prices – Today’s March import price index is expected to show an increase of +0.9% m/m following February’s decline of –0.2% due to the recent rise in oil prices. However, import prices on a year-on-year basis are expected to worsen to –14.7% y/y from the record decline of –12.8% y/y in February. Import prices excluding petroleum have also turned lower in response to the recession with a decline of –1.9% y/y in February, the weakest figure in 6-1/2 years. The decline in import prices gives the Fed some cover for its extraordinarily accommodative monetary policy.

10-year T-note auction – The Treasury today will sell $18 billion in 10-year T-notes, unchanged from the March auction size. Today’s 10-year issue was trading at 2.86% in when-issued trading late yesterday afternoon. Today’s 10-year is a reopening of the 2-3/4% T-note of February 2019. The 12-auction averages for the 10-year auction are as follows: 2.30 bid cover, $66 million in non-competitive bids, 5.63 bp tail to the median yield, 21.68 bp tail to the low yield, and 40% taken at the high yield. The 10-year is only mildly popular among foreign central banks. Indirect bidders, a category mainly composed of foreign central banks, have taken an average of 23.5% of the last twelve 10-year T-note auctions, which is well below the average of 33.5% across all recent Treasury coupon auctions

Barchart.com U.S. Morning Call for Wednesday, April 8, 2009

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The European DJ Stoxx 50 this morning is down -0.55% and June S&Ps are down -3.80 points (-0.47%). The Asia-Pacific stock markets today closed mostly lower with Japan (-2.69%), Hong Kong (-3.04%), China (-3.79%), Taiwan (-2.39%), Australia (-2.34%), Singapore (-1.02%), South Korea (-3.36%), India (+1.97%). Global stock markets are lower today after Alcoa, the largest US aluminum producer, posted its second straight quarterly loss and spurred concern the global economy is still deteriorating. German factory orders fell a larger-than-expected -3.5% m/m in Feb, the sixth straight monthly decline, and fell -38.2% y/y, the largest y/y decline on record (data back to Jan 1992). The CEO of OAO Sberbank, Russia's biggest bank, said delinquent loans in Russia are rising by 20% a month and now represent 3.7% of all Russian bank loans. The Nikkei newspaper reported today that Japan's government may now spend about 15 trillion yen ($150 billion), or 3% of total Japanese GDP, in its next economic stimulus package. The Japanese economic picture continues to deteriorate with Japan's exports plunging a record -50.4% in Feb y/y while Japan's bankruptcies in Mar surged +14.1% y/y to a six-year high.

Mortgage apps – The latest weekly MBA mortgage applications rose +4.7% to a three-month high, with the purchase sub-index rising +11% and the refinancing sub-index climbing +3.2%. The 30-year mortgage rate in the week ended April 2 fell by 7 bp to a new record low of 4.85%. The 30-year mortgage rate has fallen by about one-quarter point so far in reaction to the FOMC’s announcement on March 18 that it was substantially expanding its mortgage security purchase program (see below). The refinancing index rose to a three-month high of 6,813.5 indicating a very active refinancing market. Meanwhile, the purchase sub-index rose to 297.7, although a 2-1/2 month high, is just mildly above the 8-year low of 235.9 posted in the first week of February, indicating continued weak home buying activity. The high level of refinancing activity, however, is very positive for the economy since lower mortgage payments mean at least some US consumers have more cash in their pockets each month.

FOMC minutes – The minutes will be released today from the March 17-18 FOMC meeting. The FOMC at that meeting announced that it would expand its purchase program for mortgage securities to $1.25 trillion from $500 billion and double its purchase program of Fannie/Freddie/Ginnie debt to $200 billion from $100 billion. The FOMC also announced its quantitative easing program of buying $300 billion of T-notes and bonds over the next 6 months. The FOMC at that meeting left its funds rate target unchanged at the range of zero to 0.25%. The markets will assess the minutes to see whether there was any opposition to those moves by a minority of members and whether the FOMC seems inclined to expand the quantitative easing program beyond 6 months.

3-year T-note auction – The Treasury today will sell $35 billion in 3-year T-notes. The size of today’s 3-year is up $1 billion from the $34 billion auction in March and is up sharply from the $14 billion auction seen about a year ago in May 2007. Today’s 3-year issue was trading at 1.36% in when-issued trading late yesterday afternoon. The 12-auction averages for the 3-year are as follows: 2.41 bid cover, $222 million in non-competitive bids, 4.0 bp tail to the median yield, 11.3 bp tail to the low yield, and 43% taken at the high yield. The 3-year is a little below-average on the popularity scale with foreign central banks. Indirect bidders, a category that is mainly composed of foreign central banks, have taken an average of 30.1% of the last twelve 3-year auctions, which is mildly below the average of 33.6% across all recent Treasury coupon auctions. However, indirect bidders have been very active at the last two 3-year auctions, taking 40.3% of the March auction and 44.8% of the February auction.

Barchart.com U.S. Morning Call for Tuesday, April 7, 2009

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The European DJ Stoxx 50 this morning is down -1.20% and June S&Ps are down -13.10 points (-1.58%). The Asia-Pacific stock markets today closed mixed with Japan (-0.28%), Hong Kong (-0.46%), China (+0.25%), Taiwan (+0.37%), Australia (-1.34%), Singapore (-2.47%), South Korea (-0.17%). Undercutting US equity prices today is Citigroup's just released quarterly report in which they cut US equities to "underweight" from "neutral," saying the recent rally is likely to end and that other markets are cheaper. Citigroup raised Japanese stocks to "neutral" from "underweight," saying the weakening yen and a forthcoming stimulus package that may total 10 trillion yen ($99 billion) should aid market performance. Europe's recession deepened more than estimated in Q4 as companies slashed production and consumers scaled back spending. Q4 Euro-Zone GDP was revised down to -1.6% q/q from -1.5% q/q, the biggest quarterly drop in at least 13 years and contracted -1.5% y/y from a Mar estimate of -1.3% y/y, the only yearly decline on record (data back to Q4 1995). Australia's central bank cut its overnight cash rate an as-expected 25 bp to a 49-year low of 3.00% with RBA Governor Stevens saying demand for labor is "weakening" and that there was scope for a further modest adjustment to the cash rate. After the RBA unexpectedly kept rates unchanged at their March meeting, reports have shown the Australian economy unexpectedly contracted -0.5% in Q4 and Feb retail sales slumped -2.0% m/m, the biggest drop in almost nine years. In an effort to ease the credit crunch in Japan, BOJ Governor Shirakawa announced today that his bank will widen the range of collateral it accepts for loans by now accepting municipal and central government bonds that are sold directly to investors in an attempt to stimulate lending. Shirakawa also said the Japanese economy has worsened since the BOJ released its most recent growth forecasts in Jan, suggesting a downgrade of economic conditions is likely when the bank releases new predictions at the end of the month.

Consumer credit – Today’s Feb consumer credit report is expected to show a decline of -$3.0 billion, more than reversing January’s small rise of +$1.8 billion. On a year-on-year basis, US consumer credit in January eased to a 16-year low of +1.1%. The record low for the year-on-year change in consumer credit is –1.9%, posted in 1991. The year-on-year growth in US consumer credit has only turned negative three times in post-war history, i.e., in 1958, 1975, and 1991. However, overall US household debt, which includes mortgage debt, already turned negative at –2.0% y/y in Q1-2009. The –2.0% y/y decline in US household debt is a record low for the series, which has history back to 1952. US consumer debt will likely continue to fall. US consumers have never been in as much debt as a percentage of disposable income as they have been in this business cycle. US consumers are cutting their credit needs by reducing spending and by paying down credit card debt and auto loans. In addition, credit card companies are raising interest rates and cutting credit lines, thus encouraging consumers to cut their revolving debt. Also contributing to a decline in debt is the high level of defaults since the debt ceases to exist when a debtor discharges the debt in bankruptcy or when the bank of finance company writes off the debt as an uncollectible charge-off. Lower debt will lead to a healthier US consumer over the long-run, but in the short-run it means a sharp slowdown in consumer spending.

10-year TIPS auction – The Treasury today will auction $6 billion in 10-year TIPS inflation-protected T-notes. Today’s issue was trading at 2.03% in when-issued trading late yesterday afternoon. The 12-auction averages for the 10-year TIPS are as follows: 1.99 bid cover, $81 million in non-competitive bids, 5.91 bp tail to the median yield, 26.69 bp tail to the low yield, and 54% taken at the high yield. The 10-year TIPS security is very popular among foreign central banks. Indirect bidders, a category mainly composed of foreign central banks, have taken an average of 39.5% of the last twelve 10-year TIPS auctions, which is well above the average of 33.5% across all recent Treasury coupon auctions

Barchart.com U.S. Morning Call for Monday, April 6, 2009

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The European DJ Stoxx 50 this morning is up +0.63% and June S&Ps are up +2.50 points (+0.30%). The Asia-Pacific stock markets today closed higher with Japan (+1.24%), Hong Kong (+3.11%), Taiwan (+0.48%), Australia (+0.56%), Singapore (+1.49%), South Korea (+0.90%), India (+1.80%). China's stock market was closed today for a holiday. Global stock markets are higher today on increased optimism that government bailouts will revive economic growth. Feb Euro-Zone producer prices fell -1.8% y/y, the biggest decline since Apr 1999, as the global economic slump reduces inflation pressures in Europe, while Feb retail sales in the Euro-Zone fell -4.0% y/y, the ninth consecutive month of y/y declines and the biggest y/y decline since data began in Jan 1996. Japanese Prime Minister Aso said he wants his new economic stimulus package to exceed 2% of Japan's GDP, or 10 trillion yen ($100 billion), in what would be the largest stimulus package since Aso took office in Sep.

Market focus - The markets this week will focus on (1) this week’s relatively light economic calendar (Feb consumer credit on Tuesday, FOMC minutes on Wednesday, and the trade deficit and import prices on Thursday), (2) further assessment of the US economy in the wake of last Friday’s dismal, but expected, March unemployment report (payrolls –663,000, unemployment rate +0.4 points to a new 25-year high of 8.5%) (3) this week’s heavy Treasury supply schedule with 10-year TIPS on Tuesday, 3-year T-notes on Wednesday, and 10-year T-notes on Thursday, (4) the US stock market, which extended the month-long rally last week after the successful G20 meeting and FASB’s decision to ease mark-to-market rules for banks, (5) T-note prices which moved lower last week on the weight of new Treasury supply, (6) the dollar index, which fell last week as the euro saw strength on the ECB’s smaller-than-expected 25 bp rate cut to 1.25%, and (7) crude oil prices which closed mildly higher last week despite continued dismal economic news. The VIX index, which measures expected stock market volatility, fell below 40% for the first time last week since January, suggesting that the stock market is becoming less concerned about a new meltdown in stock prices.

Q1 Earnings – The Q1 earnings season officially kicks off this week with Alcoa reporting on Tuesday (EPS expected –57 cents). The market consensus is that S&P 500 earnings will fall –36.6% in Q1, which is much worse than expectations on January 1 at the beginning of the quarter for a decline of –12.5%, according to Thomson Reuters. Looking ahead, the market consensus is for S&P 500 earnings to fall by –31.8% in Q2 and by -17.3% in Q3, and then show a big increase of 170% in Q4 due to the extremely poor Q4-2008 year-earlier base. Earnings in Q4-2008 plunged by -67%. In Q1-2009, most of the sub-sectors are expected to show double-digit earnings declines: Consumer discretionary –107%, Materials –81%, Energy –57, Financials –40%, Industrials –40%, Technology –31%, Telecom –15%. The best three performing sectors are expected to be Consumer Staples –7%, Utilities –7%, Health Care –3%.

Fed policy – There was little change last week in expectations for Fed policy. The market is expecting the funds rate to remain below 0.25% until July 2009. The market is then expecting a slow rise in the funds rate to 0.50% by January 2010 and to 1.00% by July 2010. The Fed is carrying-out its quantitative easing program by buying T-notes. However, T-note prices moved lower last week in any case as the economic data was no worse than expected and as the market prepared for this week’s round of new Treasury auctions.

Barchart.com U.S. Morning Call for Friday, April 3, 2009

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The European DJ Stoxx 50 this morning is down -0.40% and June S&Ps are down -0.10 point (-0.01%). The Asia-Pacific stock markets today closed mostly higher with Japan (+0.34%), Hong Kong (+0.16%), China (-0.23%), Taiwan (+1.02%), Australia (+1.51%), Singapore (+0.97%), South Korea (+0.56%). All of the European Mar PMI service indexes were revised higher in a sign the global economy may be slowly improving. European auto and auto-part makers rallied today after Credit Suisse upgraded European automakers to "overweight," saying "we believe investors are in danger of becoming too pessimistic about car sales." Import prices in Germany fell for the eighth consecutive month after sliding -0.1% m/m in Feb. The drop in the yen to a 5-month low against the dollar today gave some Japanese companies a boost as Toyota, who gets 37% of its sales in North America, rallied over 7%, and Panasonic, the world's biggest consumer-electronics maker, jumped over 6%. JPMorgan Chase analysts said that China, the world's third-biggest economy, "bottomed" in Q4 and its stock market will keep rising as government spending strengthens the economy, while analysts at Credit Suisse predicted that a recovery in China's economic growth is a "high certainty" as state-funded infrastructure investment "spills over to the housing and consumption sectors."

US unemployment – Today’s March unemployment report is expected to show a continued free-fall in the US labor market. March payrolls are expected to show another sharp decline of –660,000, adding to February’s decline of –651,000. Payrolls have now shown an overall loss of 3.3 million since September 2008 when the global financial crisis began with the Lehman bankruptcy. Since the US recession officially began in December 2007, payrolls have fallen for 14 consecutive months by a total of 4.4 million. Payrolls have shown extraordinary declines near –600,000 for last the four months (Nov –597,000, Dec –681,000, Jan –655,000, Feb –651,000). Manufacturing payrolls are also in a free-fall and are expected to fall another –160,000 in March, adding to the –168,000 decline in February. Manufacturing payrolls have plunged by a total of -910,000 since the financial crisis began in September. Meanwhile, the March unemployment rate is expected to rise sharply by +0.4 points to a new 25-year high of 8.5%. Since the US recession began in December 2007, the US unemployment rate has risen by 3.2 percentage points from 4.9% to the 25-year high of 8.1% seen in February. The US unemployment rate will certainly climb into the 9% area and may even breach the 10% level. The post-war record high for the US unemployment rate is 10.8% posted in November 1982. The labor market provides lagging data for the business cycle. Nevertheless, the labor market data is very important in providing insight to consumer confidence and spending. As long as the US unemployment rate is rising and layoffs are continuing in large numbers, US consumers are not going to have any fundamental confidence about an economy recovery. At some point, however, businesses will have laid off as many employees as they think are necessary to survive the recession. At that point, US consumers may start to breathe a little easier and may start spending money a little more freely. However, there appears to be little chance at present that the US labor market will show any signs of positive job growth until early 2010.

ISM non-manufacturing index – Today’s March ISM non-manufacturing index is expected to show a small +0.4 point increase to 42.0, reversing part of the –1.3 point decline to 41.6 seen in February. The ISM non-manufacturing index hit a record low of 37.4 in November 2008. The index has since shown a mild upward rebound but is still well below the boom-bust level of 50, confirming other economic data indicating that the US service sector is in a serious recession. The ISM manufacturing index, released earlier this week, showed a +0.5 point increase to 36.3, which was a bit stronger than expected and indicated that manufacturing executives in March were a little less pessimistic than they were in the previous three months

Barchart.com U.S. Morning Call for Thursday, April 2, 2009

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Global stocks and commodity prices are sharply higher this morning as G-20 members convening in London are optimistic that the worst of the global recession may be over. The European DJ Stoxx 50 this morning is up +3.67% and June S&Ps are up +15.20 points (+1.88%). The Asia-Pacific stock markets today closed sharply higher with Japan (+4.40%), Hong Kong (+7.41%), Chona (+1.11%), Taiwan (+3.00%), Australia (+2.81%), Singapore (+5.94%), South Korea (+3.56%), India (+4.51%). Leaders of the Group of 20 nations signaled they will endorse more cash for the IMF, seek to revive trade finance and put forth initiatives to rein in toxic assets, hedge funds, derivatives trading and excessive risk-taking by financial firms. Also boosting global financial stocks today is the action by the US Financial Accounting Standards Board to hold a final vote today on an overhaul of accounting rules that may increase profits at banks by more than 20%. The proposed changes to mark-to-market accounting, would allow companies to use "significant judgement" in valuing assets and reduce the amount of writedowns they must take on impaired investments, including mortgage-backed securities.

Unemployment claims – Today’s weekly initial unemployment claims report is expected to show a small decline of -2,000 to 650,000 following last week’s increase of +8,000 to 652,000. Meanwhile, weekly continuing claims are expected to rise another +20,000 to 5.580 million, adding to last week’s surge of +122,000 to 5.560 million. Initial unemployment claims last week were just slightly below the 26-year high of 657,000 posted in the week ended March 6. However, initial claims have been moving basically sideways in the past several weeks, leading to some hope that the high rate of layoffs will not get much worse. At some point, businesses will have laid off as many employees as they believe are necessary to survive the recession and the level of layoffs will start to decline. The number of people receiving unemployment benefits, however, continues to soar. Last week’s level was a record high for the series, which has a long history back to 1967. Regarding the labor market, traders are looking ahead to Friday’s March unemployment report. March payrolls are expected to show another sharp decline of –658,000, adding to February’s decline of –651,000. The March unemployment rate is expected to rise sharply by +0.4 points to a new 25-year high of 8.5%.

Factory orders – Today’s Feb factory orders report is expected to show an increase of +1.4%, reversing part of January’s decline of –1.9%. On a year-on-year basis, factory orders in January plunged by –19.2%, which was just above December’s record low of –19.5% (the history of the factory orders series goes back to 1956). Expectations for an increase in Feb factory orders are based on the recently-released Feb durable goods orders report of +3.4% overall and +3.9% ex-transportation, which was much stronger than the market consensus at the time for a decline of –2.5% overall and –2.0% ex-transportation. The US manufacturing sector is in dire need of new orders to prevent even more layoffs and plant shutdowns. Wednesday’s March ISM manufacturing index showed a stronger-than-expected increase of +0.5 points to 36.3, pushing the index farther above the 28-year low of 32.9 posted in December. The ISM index suggested that manufacturing executives are a little less pessimistic than they were in the past several months, although the very low index of 36.3 still indicates that US manufacturing sector is in a deep contraction.

Overnight U.S. Stock News

June S&Ps this morning are up +15.20 points as optimism rises that the worst of the global recession may be over. The US stock market yesterday overcame early weakness and moved higher after mid-morning to finish the day with decent gains (Dow +2.01%, S&P 500 +1.66%, Nasdaq Composite +1.51%).
Bullish factors for stock prices yesterday included (1) a rally in homebuilders after the unexpected rise in US Feb pending home sales, (2) strength in industrial companies after the Mar ISM manufacturing index came in higher than expected, (3) a rally in bank stocks after comments from Treasury Secretary Geithner that there are "encouraging signs" that financial markets are recovering, and (4) a continued improvement in interbank lending rates after the 3-month dollar Libor rate fell to a 2-month low and the TED spread narrowed to a 1-month low.
Bearish factors for stock prices yesterday included (1) the largest monthly loss of jobs in the Mar ADP employment change since data began in 2001, which may signal a weaker-than-expected Mar nonfarm payrolls report on Friday, (2) an increased likelihood that General Motors and Chrysler will fall into bankruptcy on reports that President Obama believes a quick, negotiated bankruptcy is the most likely way for GM to restructure and become viable again, and (3) comments from Dallas Fed President Fisher that the economy's performance will probably gradually begin "getting less worse as we go through the year," and that positive growth won't happen until 2010.
Dow Chemical (DOW) is up 7% in European trading after the biggest US chemicals maker agreed to sell its Morton Salt unit to K+S AG, Europe's largest salt maker, for $1.68 billion in cash to help finance its acquisition of Rohm & Haas

Today's U.S. Market Focus

June 10-year T-notes this morning are down -17.5 ticks as the sharp rally in global stock markets reduces demand for the safety of Treasuries. June T-note prices yesterday moved higher for the third straight day and closed up +6.5 ticks at a 1-week high. Bullish factors for T-note prices yesterday included (1) the largest monthly loss of jobs in the Mar ADP employment change since the data series began in 2001 (-742,000 versus expectations of -663,000), (2) a benign US inflation outlook after the prices paid sub-index of the Mar ISM manufacturing index rose half as much as expected (+2.0 to 31.0 versus expectations of +4.0 to 33.0), and (3) the Fed's purchase of $6 billion in Treasuries as part of its ongoing quantitative easing campaign. Bearish factors for T-note prices yesterday included (1) the unexpected rise in US Feb pending home sales (+2.1% versus expectations of no change), (2) reduced safe-haven demand for Treasuries as the stock market rallied, (3) the continued thaw in interbank lending rates as the 3-month dollar Libor rate fell to a 2-month low of 1.18% and the Ted spread, the gap between what banks and the Treasury pay to borrow money for 3-months, narrowed to a 1-month low of 97 basis points, and (4) comments from Treasury Secretary Geithner that there are "encouraging signs" that financial markets are recovering.
The dollar index is weaker this morning with the dollar/yen +0.98 yen and the euro/dollar +1.00 cent. The dollar index yesterday finished with slight gains. Bullish factors for the dollar yesterday included (1) the drop in the yen to a 3-1/2 week low against the dollar after Japan's Q1 Tankan large manufacturers' sentiment survey tumbled to the lowest level since the survey began in 1974, (2) the jump in the Feb Euro-Zone unemployment rate to a near 3-year high, and (3) comments from ECB Council member Kranjec that he doesn't see any signs of an imminent economic recovery in the Euro-Zone. Bearish factors for the dollar yesterday included (1) the biggest monthly loss of jobs in the Mar ADP employment change (-742,000) since the data series began in 2001, and (2) the prediction from Daiwa Institute of Research that the euro will strengthen against the dollar to $1.45 by year-end as the ECB is unlikely to match the Fed's aggressiveness in printing money.
May crude oil prices this morning are up +$2.84 a barrel and May gasoline is +5.03 cents a gallon. Crude oil along with other commodities are receiving a boost today on signs the world economy is stabilizing which would increase overall demand. May crude oil prices yesterday moved lower and closed down -$1.27 a barrel and May gasoline closed -4.96 cents a gallon. May crude oil and May gasoline both posted 2-week lows yesterday. Bearish factors for crude oil prices yesterday included (1) the stronger dollar, (2) the +2.84 million bbl climb in the weekly DOE crude oil inventories to a 15-1/2 year high of 359.4 million bbl, (3) the unexpected rise in weekly DOE gasoline and distillate inventories (gasoline +2.23 million bbl versus expectations of a -1.5 million bbl drawdown and distillates +221,000 bbl versus expectations of a -1.5 million bbl drop), and (4) the declinei of US average fuel demand over the past four weeks of 18.9 million bpd of -4.4% y/y, the lowest consumption level for a four-week period since October. Bullish factors for crude oil prices yesterday included (1) the rally in the stock market, stoking optimism that an improving economy will boost energy demand, and (2) PetroLogistics's cut in its OPEC-11 Mar crude oil supply estimate to 25.5 million bpd from 25.9 million bpd.

Barchart.com U.S. Morning Call for Wednesday, April 1, 2009

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The European DJ Stoxx 50 this morning is down -0.64% and June S&Ps are down -6.90 points (-0.87%). The Asia-Pacific stock markets today closed mostly higher with Japan (+2.99%), Hong Kong (-0.42%), China (+1.61%), Taiwan (+1.99%), Australia (-0.07%), Singapore (+0.13%), South Korea (+2.20%), India (+1.99%). An increased liklihood that General Motors and Chrysler will fall into bankruptcy is pressuring stock markets today. People familiar with the situation said that President Obama believes a quick, negotiated bankruptcy is the most likely way for GM to restructure and become viable and that if Chrysler can't form an alliance with Fiat SpA, it should also be allowed to go bankrupt. European unemployment in Feb jumped to a 3-year high of 8.5% as companies throughout Europe continue to shed workers. Retail sales in Germany, Europe's largest economy, unexpectedly fell -0.2% m/m in Feb and has now fallen in five of the last six months. Economic data out of Asia is weak as well with China's Mar CLSA Purchasing Managers' Index falling -0.3 to 44.8, the eighth straight month the index has been below the growth/contraction level of 50. In Japan, the Bank of Japan's Tankan index of sentiment among large manufacturers for Q1 fell more than expected to -58, the lowest level since the survey began in 1974. South Korean exports in Mar fell -21.2% from a year earlier, the fifth consecutive month that exports have declined as the global recession decimates the export-dependent economies of Asia.

ISM manufacturing index – Today’s March ISM manufacturing index is expected to show a small +0.2 point increase to 36.0, matching the +0.2 point increase to 35.8 seen in February. The ISM manufacturing index during the global financial crisis late last year plunged from 49.3 in August 2008 to a 28-year low of 32.9 in December 2008. The index then rebounded mildly higher by 2.7 points to 35.6 in January and by 0.2 points to 35.8 in February. Despite the small recovery, the ISM index is still far below the boom-bust level of 50, indicating a deep recession in the US manufacturing sector.

Vehicle sales – Today’s March total vehicle sales report is expected to rise slightly to 9.2 million units from 9.1 million units in February. The stabilization in vehicle sales above February’s 27-year low of 9.1 million would be a welcome relief. However, the devastatingly weak sales level of 9.1 million units in February was 33.6% below the 13.7 million level seen in August 2008 (just before the global financial crisis emerged) and 43% below the 2007 average of 16.2 million. Weak auto sales are decimating the entire vehicle value chain, from auto parts suppliers, to auto manufacturers, to auto dealers. The markets will quickly jump on any unexpected pickup in auto sales as a sign that the freeze in consumer spending may be thawing a bit.

ADP employment change – Today’s March ADP employment change is expected to show another massive loss of –663,000, adding to February’s decline of –697,000. The ADP employment change is loosely correlated with the US Bureau of Labor Statistics’ payroll report. Friday’s March unemployment report is expected to show a –658,000 decline in payrolls (following February’s –651,000) and a +0.4 point increase in the unemployment rate to a new 25-year high of 8.5%.

Pending home sales – Today’s Feb pending home sales report is expected to be unchanged on a month-on-month basis following January’s sharp decline of –7.7% m/m. On a year-on-year basis, Jan pending home sales were down –6.6%. The pending home sales series does not look particularly bad on a year-on-year basis only because the year-earlier base is so low and is relatively easy to beat. The pending home sales report measures the change in home sales contracts and generally leads to existing home sales within one to two months, thus providing some leading information on the existing home sales series. US existing home sales in February showed an unexpected rise of +5.1% to 4.72 million units, although up to 40% of recent home sales have been at distressed prices due to a foreclosure or short sale. Still, any hint of an increase in home sales would be a welcome relief to the US housing market, which still has a huge overhang of homes on the market for sale.

Mortgage apps – The markets will be watching to see if mortgage applications continue to rise with the recent drop in mortgage rates. Last week, the weekly MBA mortgage applications index rose +32.2%, with the purchase sub-index up +4.2% and the refinancing sub-index up +41.5%. In the week ended March 26, the 30-year fixed mortgage rate fell another 13 bp to a new record low of 4.85%. Mortgage rates are falling in response to the FOMC’s announcement after its March meeting that it was boosting the size of its mortgage security purchase program to $1.25 trillion from $500 billion and the size of its purchase program of Fannie/Freddie/Ginnie debt to $200 billion from $100 billion. Lower mortgage rates boost the US economy through making home purchases more affordable and by allowing homeowners to refinance existing mortgages, thus putting more cash in their pockets each month

Barchart.com U.S. Morning Call for Tuesday, March 31, 2009

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The European DJ Stoxx 50 this morning is up +2.18% and June S&Ps are up +8.10 points (+1.03%). The Asia-Pacific stock markets today closed mostly higher with Japan (-1.54%), Hong Kong (+0.89%), China (+0.94%), Taiwan (+0.09%), Australia (-0.62%), Singapore (+1.60%), South Korea (+0.50%), India (+1.47%). The World Bank and the Organization for Economic Cooperation and Development (OECD) cut their economic outlooks for 2009. The OECD said the economy of its 30 members will contract -4.3% this year, -4.00 points below its previous prediction and the most in more than 50 years, while the World Bank lowered its growth forecast for developing countries this year by more than half to 2.1%. German unemployment in Mar rose a more-than-expected +69,000 to 3.4 million and the unemployment rate rose to a 15-month high of 8.1%. Europe's inflation rate dropped more than expected in Mar as the Mar Euro-Zone CPI rose +0.6% y/y, the lowest since the data series first began in 1996, and raises concerns that deflationary pressures are emerging. In Asia, Japan's jobless rate rose in Feb to a 3-year high of 4.4% and the ratio of jobs available to each applicant tumbled to 0.59 from 0.67, the biggest drop since 1974. The Asian Development Bank said in a report today that economies in Asia excluding Japan will grow 3.4% this year, less than the 5.8% it estimated in Dec and the lowest rate of growth since 1998. Australia's central bank Deputy Governor Battellino said his nation's economy will probably contract this year for the first time since 1991, reversing a Jan prediction that the Aussie economy would expand +0.5% this year, as slumping demand for exports forces the central bank to slash its growth estimates.

Home prices – Today’s Jan S&P/Case-Shiller composite-20 home price index on a year-on-year basis is expected to unchanged from December’s decline of –18.6% y/y. However, the absolute level of the index is expected to fall to 147.08 from 150.66 in December, thus leading to a 2.4% decline on a month-on-month basis. The December level of 150.66 was down by an overall 27.0% from the record high of 206.52 posted in July 2006. US house prices are likely to continue to fall as homeowners who are trying to sell a home are forced to further reduce asking prices to get a home sold with the huge inventory of homes on the market and with heavy price competition from foreclosures and short sales. The supply of existing homes on the market was at 9.1 months in February, down from the 23-year high of 11.0 posted in June 2008 but still far above the average of about 4.5 months seen in 1999-2004. US home prices could continue to fall until that inventory is worked down to more normal levels.

Chicago Purchasing Managers index – Today’s March Chicago purchasing managers index is expected to show a small +0.2 point increase to 34.4, adding to the +0.9 point increase to 34.2 seen in February. The Chicago index hit a 27-year low of 33.3 in January and then rebounded mildly higher to 34.2 in February. The Chicago index fell below the boom-bust level of 50 in October to the deeply negative range of 33-35, indicating severe recessionary conditions in the Chicago-area manufacturing area. Regarding the manufacturing sector, the market is looking ahead to Wednesday’s March ISM manufacturing index, which is expected to show a small +0.2 point increase to 36.0, rebounding a bit further from the 28-year low of 32.9 posted in December 2008.

US consumer confidence – Today’s March US consumer confidence index from the Conference Board is expected to show a +3.0 point upward rebound to 28.0. The Conference Board’s US consumer confidence index in February fell sharply by 12.4 points to 25.0, which was by far a record low for the series that has a long history back to 1967. The Conference Board’s consumer confidence index could rebound higher by 20 points and still be below the worst levels seen in other post-war recession, attesting to the dismal state of US consumer attitudes. US consumer confidence may start to stabilize given the sharp rally seen in the stock market and the slew of government stimulus programs. However, US consumer confidence is not likely to see a sustained and fundamental improvement until the US labor market and home prices stop falling

Barchart.com U.S. Morning Call for Monday, March 30, 2009

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Global stock markets are down sharply today after US Treasury Secretary Geithner warned some financial institutions will need substantial government aid. The European DJ Stoxx 50 this morning is down -2.35% and June S&Ps are down -18.00 points (-2.21%). The Asia-Pacific stock markets today closed lower with Japan (-4.53%), Hong Kong (-4.70%), China (-0.58%), Taiwan (-3.43%), Australia (-1.85%), Singapore (-4.15%), South Korea (-3.36%), India (-4.78%). Concerns deepened that the global financial crisis may not be nearing an end after Treasury Secretary Geithner said on the ABC News program "This Week" that some banks are going to need "large amounts of assistance." European bank stocks were also pressured today as UBS AG, Switzerland's largest bank, fell 7% after the Sonntag newspaper reported the bank may cut 8,000 jobs and "write down billions," while Barclay's dropped over 8% after Societe Generale downgraded the UK's third-biggest bank to "sell" from "hold," saying the bank still needs 15 billion pounds ($21 billion) to 20 billion pounds of tangible common equity to adequately address "its excess leverage." European economic confidence tumbled to a record low in Mar as consumers and businesses remain pessimistic over the prospects for the economy. The Mar Euro-Zone economic confidence unexpectedly fell -0.9 to 64.6, the lowest ever for the index since it was first published in 1985. In Asia, Japan's vehicle production tumbled -56.2% y/y, the biggest drop since 1967, on slumping demand from the US and Europe as Japan's domestic auto production has posted record drops every month since Nov, while Japan's industrial production fell -9.4% m/m in Feb, its fifth consecutive monthly decline and the longest streak of declines since 2001.

Market factors – The market this week will focus on (1) Thursday’s G-20 meeting in London and how well leaders paper over differences on fiscal stimulus, financial regulatory policy, and various protectionist measures, (2) this week’s key US economic reports, which include Tuesday’s US consumer confidence index (expected +2.0 to 27.0), Wednesday’s March ISM manufacturing index (expected +0.2 to 36.0), and Friday’s March unemployment report (payrolls expected –656,000 and unemployment rate expected +0.4 to a new 25- year high of 8.5%), (3) the US stock market as the S&P 500 index has now recovered by 24.9% from its early-March 12-year low on optimism that the US government now has sufficient stimulus programs in place to get the economy in a recovery mode by year-end, (4) the T-note market which is focused on the stock market recovery, the huge Treasury auction supply, and the Treasury’s $300 billion T-note purchase program, (5) the dollar which showed a recovery rally last Friday to a 2-week high, thus reducing concern that the Treasury’s monetary stimulus will sap confidence in the dollar’s long-term value, and (6) crude oil prices which fell back last Friday but posted a 4-month high last Thursday, bringing the 1-1/2 month rally to about $20 per barrel.

Fed policy – There was little change last week in expectations for Fed policy. The FOMC is currently targeting the federal funds rate in the range of zero to 0.25%. The market expects the funds rate to remain below 0.25% through June 2009. The market is then expecting a slow rise in the average funds rate to 0.50% by February 2010, to 0.75% by May 2010, and to 1.00% by August 2010.

Dallas Fed manufacturing index – Today’s March Dallas Fed manufacturing activity index is expected to rebound upward by +12.3 points to –45.0%, more than recovering the –6.8 point decline to –57.3% seen in February. The Dallas Fed index posted a record low of –61.0 in November and has since rebounded mildly higher. However, the index has been in negative territory for the past 20 months and was deeply negative at –57.3 in February, illustrating the severe recession currently being seen in the Dallas Fed’s manufacturing district. Regarding the manufacturing sector, the market is looking ahead to this Wednesday’s March ISM manufacturing index, which is expected to show a small +0.2 point increase to 36.0, rebounding a bit further from the 28-year low of 32.9 posted in December 2008.

Barchart.com U.S. Morning Call for Friday, March 27, 2009

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The European DJ Stoxx 50 this morning is down -0.75% and June S&Ps are down -6.50 points (-0.79%). The Asia-Pacific stock markets today closed mixed with Japan (-0.11%), Hong Kong (+0.07%), China (+0.77%), Taiwan (+0.08%), Australia (+0.70%), Singapore (-0.75%), South Korea (-0.35%), India (+0.45%). European industrial orders plunged -34% y/y in Jan, the biggest drop since the data series began in 1996, as the global recession forces companies to cut production. Germany's Heidelberger Druckmaschinen AG, the world's largest maker of printing presses, said it plans to fire 5,000 workers, about a quarter of its workforce, after the company's orders in Q4 2008 tumbled -42%. Bayerische Motoren Werke AG (BMW) gained over 5% after the world's biggsest maker of luxury cars was raised to "buy" from "hold" at Societe Generale SA, which said "fundamentals remain very solid despite a very tough enviroment." Air France slid 5.5% after saying it will suffer an operating loss of about 200 million euros ($271 million) this fiscal year ending Mar 31 and that its unlikely to report a profit in the following 12 months. In Asia, Japanese realty trusts soared after the Nikkei newspaper reported that Japan's ruling coalition is studying the creation of a 1 trillion yen ($10 billion) fund to buy property from REITS. Japan's Feb retail sales fell -5.8% y/y, the biggest decline in 7 years, as falling exports force companies to fire workers and cut wages, weakening consumer spending and pushing the Japanese economy deeper into recession.

Personal income/consumption and deflator – Today’s Feb personal income report is expected to show a small decline of –0.1% following the +0.4% increase seen in January. Feb personal spending is expected to rise +0.2%, adding to January’s increase of +0.6%. The expected reports would fall on the side of data suggesting that the economic situation may not be as dire as the markets had earlier thought. Meanwhile, on the inflation front, the Feb PCE deflator is expected to rise slightly to +0.8% y/y from +0.7% y/y in January. The Feb core PCE deflator, which is the Fed’s preferred inflation measure, is expected to be up +0.2% m/m and +1.6% y/y, little changed from January’s report of +0.1% m/m and +1.6% y/y. The Feb core PCE deflator of +1.6% was a 5-year low and was down sharply from the 14-year high of +2.5% posted in 2006. Still, the core PCE deflator of +1.6% is roughly in line with the Fed’s inflation target area of mildly below 2%, which means that there are still no serious worries about core deflation at present. In fact, the core PCE deflator in its 48-year history has never been negative and the record low was +0.9% in 1961. That illustrates that it is very difficult for core (ex-food and energy) deflation to emerge in an economy as large and diversified as the United States.

US consumer confidence – Today’s final-March U.S. consumer confidence index from the University of Michigan is expected to show a small increase +0.2 points to 56.8 from the early-March level of 56.6. The early-March level of 56.6 was up +0.3 points from the February level of 56.3. The US consumer confidence index hit a 28-year low of 55.3 in November 2008, which was only 3.6 points above the record low of 51.7 posted in 1980. The consumer confidence index in December through March are been bouncing up and down just above November’s 28-year low. The recent rally in the US stock market and the plethora of government stimulus programs may lead to some improvement in US consumer confidence. However, as long as the unemployment rate is rising and housing prices are falling, US consumer confidence is not likely to show any sustained advance

Barchart.com U.S. Morning Call for Thursday, March 26, 2009

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The European DJ Stoxx 50 this morning is down -0.16% and June S&Ps are up +9.10 points (+1.13%). The Asia-Pacific stock markets today closed higher with Japan (+1.84%), Hong Kong (+3.57%), China (+3.27%), Taiwan (+0.75%), Australia (+1.03%), Singapore (+3.97%), South Korea (+1.21%), India (+3.47%). Retail sales in the UK tumbled -1.9% m/m in Feb and rose a paltry +0.4% y/y, the smallest annual increase since Sep 1995, as rising unemployment and the deepening recession deterred British shoppers. European loan growth grew at the slowest pace in 14 years in Feb as the recession prompted banks to tighten credit standards and the desire for new debt waned. The ECB reported loans to the private sector rose +4.2% y/y in Feb from a year earlier, the lowest rate of growth since Jan 1995, while M3 money-supply growth eased to 5.9% y/y in Feb, the lowest rate in more than four years, which should appease the inflation hawks on the ECB. People's Bank of China Governor Xiaochuan said today that China's "rapid economic slide" has been "basically" brought under control through a combination of government spending and stimulus packages. China is spending 4 trillion yuan ($585 billion) on a stimulus package, has cut interest rates five times since Sep and has offered incentives for exporters in an attempt to achieve an economic growth target this year of 8%. The State Council announced yesterday that China will make more cuts to export taxes on textiles, garments, steel, non-ferrous metals, petrochemicals and electronics from Apr 1 to help revive key industries.

Unemployment claims – Today’s weekly initial unemployment claims report is expected to show a small increase of +4,000 to 650,000, reversing part of last week’s decline of –12,000 to 646,000. Weekly continuing claims are expected to show a small increase of +2,000 to 5.475 million, adding to last week’s surge of +185,000 to 5.473 million. Initial claims last week were just mildly below the 26-year high of 670,000 posted in the week ended Feb 20. Continuing claims last week were at a new record high, illustrating the huge buildup of people on the unemployment rolls. The unemployment rate in February soared by 0.5 points to a 25-year high of 8.1% and appears headed toward 9% and possibly even 10%. The post-war record high for the unemployment rate is 10.8%, posted in November 1982.

Q4 GDP – Today’s Q4 GDP report is expected to be revised lower to –6.6% from the last estimate of –6.2%. Q4 personal consumption is expected to be revised lower to –4.4% from –4.3%. No revision is expected for the Q4 GDP price index of +0.5%. The Q4 GDP report of –6.2% was the weakest quarterly GDP report since 1982. The US economy has now shown two consecutive quarters of negative growth, i.e., -0.5% in Q3-2008 and –6.2% in Q4-2008. Looking ahead, the market consensus is that US GDP will fall –5.2% in Q1 and by –2.0% in Q2, and then turn positive to +0.5% in Q3 and +2.0% in Q4. Expectations for positive GDP growth in the second half appear overly optimistic at this point.

7-year T-note auction – The Treasury today will sell $24 billion in 7-year T-notes, up $2 billion from the 7-year T-note auction in January. The Treasury in January just started selling 7-year T-notes again in order to spread the huge amount of its borrowing requirement across a wider range of maturities. Today’s 7-year T-note issue was trading at 2.40% in when-issued trading late yesterday afternoon. The January 7-year auction produced the following results: 2.11 bid cover, 7.80 bp tail to the median yield, 24.8 bp tail to the low yield, 67% taken at the high yield, and 38.7% taken by indirect bidders (higher than the 33.5% average across all recent Treasury coupon auctions)

Barchart.com U.S. Morning Call for Tuesday, March 24, 2009

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The European DJ Stoxx 50 this morning is up +0.14% and June S&Ps are down -5.80 points (-0.71%). The Asia-Pacific stock markets today closed higher with Japan (+3.32%), Hong Kong (+3.44%), China (+0.51%), Taiwan (+2.30%), Australia (+0.84%), Singapore (+2.54%), South Korea (+2.01%), India (+0.50%). French manufacturers' confidence remained unchanged in Mar at 68, matching the Feb reading which was the lowest since the data began in 1962. All of the Euro-Zone PMI manufacturing and service indexes improved slightly in Mar from their record low levels in Feb, although they all point to further contraction in the European economy. Mining companies and raw-material producers are lower in Europe today with Rio Tinto, the world's third-largest mining company, down 5.8% and BHP Billiton, the largest, down 4.5% as copper prices back away from 4-1/2 month highs. Swiss Life Holding AG is up over 3% after Germany's Talanx AG agreed to buy as much as 9.9% of Switzerland's biggest life insurer. South Korea's government proposed a stimulus package today that will spend a record 17.7 trillion won ($13 billion) on cash handouts, cheap loans, infrastructure and job training. KB Financial, which controls South Korea's largest bank, jumped 4.6% while Hyundai Engineering rose 7.1% and GS Engineering & Construction, South Korea's third-biggest builder, gained 5.3%.

US house price index – Today’s January house price index from OFHEO is expected to show a decline of –0.8% m/m, more than reversing the small +0.1% m/m increase seen in December. On a year-on-year basis, the Jan house price index improved a bit to –8.7% y/y from –9.1% y/y in November. November’s report of –9.1% y/y was the lowest level for the series, which has history back to 1992. The OFHEO house price index has fallen by an overall 10.9% from the record high for the index seen in April 2007. The OFHEO house price index has shown a milder decline than most other US home price indexes. The Case-Shiller index, for example, has fallen by a much larger 27.0% from the record high posted in July 2006.

Richmond Fed index – Today’s March Richmond Fed manufacturing index is expected to be unchanged at –51. The Richmond Fed index hit a record low of –55.0 in December, rebounded higher to –49 in January, and then fell back by 2 points to –51 in February. The index has been in negative territory since May 2008. The deeply negative figure of –51.0 seen in February illustrates the extent of the severe manufacturing recession currently being seen in the Richmond area. Regarding the US manufacturing sector, the market is looking ahead to next Wednesday’s national March ISM manufacturing index, which is expected to fall by –0.3 points to –35.5. The national ISM index hit a low of 32.9 in December but then rebounded mildly higher to 35.6 in January and 35.8 in February.

2-year T-note auction – The Treasury today kicks off this week’s auctions with the sale of $40 billion in 2-year T-notes. The Treasury will then sell $24 billion in 5-year T-notes on Wednesday and $24 billion in 7-year T-notes on Thursday. The size of today’s $40 billion 2-year T-note auction is unchanged from the last two 2-year auctions in January and February. The 12-auction averages for the 2-year are as follows: 2.37 bid cover, $577 million in non-competitive bids, 5.06 bp tail to the median yield, 12.82 bp tail to the low yield, and 47% taken at the high yield. Indirect bidders, a category mainly composed of foreign central banks, have taken an average of 31.3% of the last twelve 2-year auctions, which is just mildly below the average of 33.5% across all recent Treasury coupon auctions

Barchart.com U.S. Morning Call for Friday, March 20, 2009

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The European DJ Stoxx 50 this morning is down -0.45% and June S&Ps are down -1.90 points (-0.24%). The Asia-Pacific stock markets today closed mostly lower with Hong Kong (-2.26%), China (-0.11%), Taiwan (-1.48%), Australia (-0.41%), Singapore (+0.76%), South Korea (+0.71%), India (-0..39%). Japanese markets were closed today for Vernal Equinox Day. Global mobile phone companies were lower today after Ericsson, the world's largest maker of wireless phone networks, tumbled over 8% after reporting its mobile-phone venture with Sony Ericsson will report a Q1 loss of as much as 390 million euros ($534 million) as handset sales decline. Nokia, the world's biggest mobile-phone maker, lost 5.6% and China Mobile Ltd., the largest cell-phone operator by users, dropped 4.1% after Bank of America predicted the company will post declines in annual profit from this year to 2011 as phone users hold back spending amid the weak economy. Rounding out losses in the telecommunications sector is the 2.2% slide in Deutsche Telekom AG after Europe's biggest phone company was cut to "underperform" from "neutral" by Credit Suisse Group AG, citing "a more cautious view" on the company's US operations. Barclays dropped over 5% and is leading a slump in bank stocks today after the Guardian newspaper reported the UK bank is alleged to have made about 1 billion pounds ($1.5 billion) a year in profit through tax avoidance. European industrial production in Jan fell by -17.3% y/y, the biggest decline since the data series began in 1986, as the global recession forces companies to cut output and curb investments. The statistics institute Insee predicts the French economy may shrink -1.5% this quarter, which would be the largest contraction in French growth since Q1 1975. Insee also estimates that French GDP will probably shrink -0.6% in Q2, cutting its Dec prediction that growth would shrink -0.4% and -0.1% for the first two quarters, respectively. Inflation continues to be tame in Europe after Germany reported Its Feb producer prices fell-0.5% m/m, the fifth consecutive month of price declines. The Secretary-General for the Organization for Economic Cooperation and Development (OECD) said it may cut its forecast for China's economic growth this year to as little as 6% because of the deepening global slump. In Nov, the OECD estimated Chinese growth this year of 8% and it joins the World Bank this week in lowering its growth estimates for the world's third-biggest economy. China's growth has slowed from 13% in 2007 to 6.8% in Q4 of last year and the OECD predicts growth in China and India this year won't be enough to offset contractions in the other members of the OECD that will have "very negative growth."

Overnight U.S. Stock News

June S&Ps this morning are down -1.90 points. The US stock market yesterday rallied early before shedding its gains and closing lower on the day (Dow -1.15%, S&P 500 -1.30%, Nasdaq Composite -0.52%).
Bearish factors for stock prices yesterday included (1) the surge in US weekly continuing unemployment claims to their highest level since records began in 1967 (+185,000 to 5.473 million), (2) the prediction from Federated Investors that global investors will shun US assets because the Fed is playing a "shell game" by issuing debt with one hand and with the other hand repurchasing it using money it just printed, (3) weakness in airline stocks after the International Air Transport Association said losses in the industry this year may exceed the $2.5 billion it projected in Dec as the global recession saps demand, (4) the tumble in life insurance companies when Prudential Financial plunged 25% after its senior debt rating was downgraded by Moody's Investors Service because of investment losses, and (5) the slide in drug companies after IMS Health reported that retail sales of prescription medications rose at the slowest pace in 47 years as consumers favored cheaper gernerics.
Bullish factors for stock prices yesterday included (1) the rally in US automakers and auto suppliers after the US government announced that auto suppliers will get $5 billion in government aid to avoid bankruptcy, (2) the stronger-than-expected Mar Philadelphia Fed manufacturing index, (3) the 9.7% surge in Oracle after the world's second-largest software maker reported Q3 earnings of 35 cents a share, easily beating analysts' estimates of 32 cents, along with declaring its first ever dividend of 5 cents a share, and (4) the rally in energy companies and commodity producers after crude oil prices rose to a 2-1/4 month high and copper prices shot up to a 4-1/4 month high.
Intel (INTC) may be active today after Goldman Sachs late yesterday boosted the 2009 profit estimate on the world's largest chipmaker to 30 cents a share from 20 cents, citing "an uptick in shipments and lower underutilization charges." Goldman kept Intel's rating at "neutral," saying the stock's valuation looks "full.

Barchart.com U.S. Morning Call for Thursday, March 19, 2009

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The European DJ Stoxx 50 this morning is up +1.01% and June S&Ps are down -2.30 points (-0.29%). The Asia-Pacific stock markets today closed mostly higher with Japan (-0.33%), Hong Kong (+0.10%), China (+2.14%), Taiwan (-0.23%), Australia (+0.98%), Singapore (+0.57%), South Korea (-0.90%), India (+0.28%). Global stock markets are mostly higher today on optimism that the Fed's quantitative easing will help the global economy recover from its worst recession since WWII. Commodity producers and mining companies are higher today as the slumping dollar boosts commodity prices. The Bank of Japan in its monthly report today said "Japan's economic conditions have deteriorated significantly" and are likely to keep worsening. The BOJ kept its dire evaluation of the economy for a second straight month, keeping its most pessimistic language of economic conditions since the Asian crisis of 1998. Having cut its benchmark rate to 0.10% in Dec, the BOJ is trying to ease funding for businesses by buying corporate debt and other securities from banks.

Unemployment claims – Today’s weekly initial unemployment claims report is expected to show a small gain of +1,000 at 655,000, adding to last week’s gain of +9,000 to 654,000. Today’s weekly continuing claims report is expected to rise +6,000 to 5.323 million, adding to last week’s surge of +193,000 to 5.317 million. The initial claims series is currently at 654,000, which is just below the 26-year high of 670,000 posted in the week ended Feb 20 and the record high of 695,000 posted in 1982. The continuing claims series last week hit a record high of 5.317 million persons, which was a post-war record and was higher than the peaks seen in previous serious recessions such as 1974-75 and the 1981-82. The continued high level of initial claims indicates that businesses are still busy laying off workers even though we are now six months into the global financial crisis, which started in earnest in September 2008. Meanwhile, the number of people that are on the unemployment rolls is currently at a record high, illustrating the cumulative effect of the widespread layoffs. The US unemployment rate in February rose sharply by 0.5 points to a 16-1/2 year high of 8.1% and is destined to move even higher over at least the next several months.

Leading indicators – Today’s Feb leading indicators report is expected to show a decline of –0.6%, more than reversing the +0.4% upward rebound seen in January. On a year-on-year basis, the LEI in January improved to –1.9% from the recent 18-year low of –4.1% y/y posted in November 2008. Some market participants are grasping for any data that might suggest that the US economy is bottoming out and the recent improvement in the LEI on a year-on-year basis could be such an indication.

Philadelphia Fed index – Today’s March Philadelphia Fed manufacturing index is expected to show an upward rebound of +2.3 points to –39.0 following the plunge of –17.0 points to –41.3 seen in February. The February level of –41.3 was a new 18-1/2 year low. The Philadelphia Fed index has been in negative territory in 14 of the last 15 months and was in deeply negative territory of –41.3 in Feb, illustrating the deep recession in the Philadelphia-area manufacturing sector

Barchart.com U.S. Morning Call for Wednesday, March 18, 2009

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The European DJ Stoxx 50 this morning is up +0.08% and June S&Ps are down -4.10 points (-0.53%). The Asia-Pacific stock markets today closed mostly higher with Japan (+0.29%), Hong Kong (+1.86%), China (+0.44%), Taiwan (+0.12%), Australia (-0.16%), Singapore (+1.08%), South Korea (+0.47%), India (+1.27%). Bank stocks are higher in Europe on speculation the Fed will consider increasing the pace and size of its $600 billion program to purchase mortgage securities and other assets when they conclude their 2-day FOMC meeting today. Stock gains were limited after the Feb UK jobless figure rose a more than expected +138,400 to 1.39 million, the fastest pace of job losses since at least 1971 as the recession in England deepens. The minutes from the Mar 5 Bank of England policy meeting showed policy makers voted unanimously to start printing as much as 75 billion pounds ($105 billion) over three months in its first vote on so-called quantitative easing. Financial stocks in Asia received a boost today after the Bank of Japan said it will increase its purchases of government bonds each month to 1.8 trillion yen ($18.3 billion), up from 1.4 trillion yen, in addition to extending subordinated loans to lenders as it widens efforts to combat the recession. The BOJ has been buying government bonds since 1989 and increased the purchases in Dec to 1.4 trillion yen a month from 1.2 trillion yen with BOJ Governor Shirakawa saying today the central bank has "very limited room" to expand them further.

Mortgage apps – The latest weekly MBA mortgage applications rose +21.2% to a 2-month high, with the purchase sub-index up +1.5% and the refi sub-index surging +29.6% to a 2-month high as lower borrowing costs led to a jump in refinancing. The refinancing index is still well above the levels seen during most of 2008 as US homeowners continue to try to refinance to take advantage of low mortgage rates. The purchase mortgage sub-index, on the other hand, remains near recent lows due to the continued dearth of home sales. The 30-year mortgage rate in the latest week (the week ended March 12) fell sharply by 12 bp to 5.03%, which was just 7 bp above the record low of 4.96% posted in mid-February. Yesterday’s Feb housing starts report of +22% was much stronger than expected. However, the report was led by the 82% surge in multi-family starts (apartments and townhouses). In fact, single-family home starts were up only 1.1%, indicating the continued weakness in the single-family home sector.

FOMC meeting – The 2-day FOMC meeting concludes today. The market consensus is that there is no chance that the FOMC today will change its current target for the federal funds rate of zero to 0.25%. The market currently expects the average funds rate to remain below 0.25% through May 2009. The market is then expecting a slow rise in the average funds rate to 0.50% by January 2010 and to 1.00% by July 2010. The market today will mainly be watching for any announcements on expanded liquidity programs. The Term Asset-Backed Securities Loan Facility (TALF) is getting off to a very slow start but has the potential for being one of the best ways to funnel capital to consumers, businesses and the mortgage market since it focuses on restarting the securitization markets and bypassing the hamstrung capital bases of U.S. banks. The FOMC today could announce an official expansion of the TALF program. The Fed today could also announce the faster purchase of mortgage securities under its $600 billion mortgage program, which the Fed has not yet come close to fulfilling. The main area of interest is whether the FOMC today might announce a decision to go ahead with purchasing longer-term T-notes in a so-called “quantitative” easing move. The Bank of England is so far the only major central bank during this crisis to announce a bond purchase program, and the program has so far been successful in bringing down UK gilt yields. In fact, 10-year UK gilt yields last week fell below German 10-year bund yields for the first time in 7 years.

CPI – Today’s Feb CPI report is expected to be up +0.3% m/m, matching January’s report of +0.3% m/m. The Feb core CPI is expected to show a small increase of +0.1% m/m following January’s report of +0.2% m/m. On a year-on-year basis, the Feb CPI is expected to match January’s report of unchanged y/y. The CPI has plunged from the 18-year high of +5.6% seen in July 2008. The Fed core CPI is expected to be unchanged from January’s 5-year low of +1.7%, which was a 5-year low but was still 0..6 points above the 43-year low of +1.1% posted in 2003. The record low for the core CPI is +0.7% posted in 1961. The core CPI has never been negative in the 50-year history of the CPI series, which illustrates that it is very difficult to produce core deflation in the US economy. So far, the core CPI has not fallen much in response to the global crisis, which started back in September 2008

Barchart.com U.S. Morning Call for Tuesday, March 10, 2009

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The European DJ Stoxx 50 this morning is up +1.59% and March S&Ps are up +14.20 points (+2.10%). The Asia-Pacific stock markets today closed mpstly higher with Japan (-0.44%), Hong Kong (+3.08%), China (+1.74%), Taiwan (+0.92%), Australia (+0.95%), Singapore (+1.98%), South Korea (+1.95%). Citigroup is leading global bank stocks higher today after its CEO said the bank had its best start to a quarter in more than a year. Citigroup is 22% higher today, Deutsche Bank AG, Germany's largest bank, is nearly 6% higher and UniCredit SpA, Italy's biggest bank, is up over 4%. E.ON AG slid nearly 8% today after Germany's biggest utility said it expects 2009 profit before writedowns on assets and hedging derivatives will fall 10%. German exports fell a larger-than-expected -4.4% m/m in Jan, the fourth straight monthly decline, and pushed Europe's largest economy deeper into recession. French industrial production declined for the fifth straight month in Jan with the -13.8% y/y drop the largest since records began in 1990. In Asia, oil producers are higher after crude oil prices rose to a 5-week high yesterday while Mitsubishi UFJ Financial Group, Japan's biggest bank, rallied 3.7% and snapped a three-day 11% decline. China vehicle sales surged 25% in Feb, the first gain in four months, after the government cut taxes on some models to revive demand and GM, the biggest overseas automaker in China, raised its foreacst for growth this year in China to a range of 5% to 10% from an earlier prediction of less than 3%. Consumer prices in China dropped -1.6% y/y in Feb, the first decline since 2002, while producer prices in Feb fell -4.5% y/y, the most in a decade, and raises the odds of further interest rate cuts by China's central bank.

US banking system - Fed Chairman Ben Bernanke today is scheduled to speak on the topic of reforming the US bank regulatory system. The US financial system remains on life support as the Fed is forced to provide essentially unlimited amounts to liquidity to troubled banks and financial institutions and also to inject cash directly into funding channels by purchasing commercial paper, mortgage securities, consumer loans, and small business loans. The market remains concerned about the extent to which the US government will end up owning major percentages of key US banks, thus effectively wiping out common shareholders.

The S&P 500 Diversified Financials Index has plunged by 84.7% from the record high of 820.85 posted in June 2007 to last Friday’s 23-1/2 year low of 125.35. That sell-off is even larger than the bursting of the tech bubble when the Nasdaq 100 fell by 83.5% in 2000-02. European bank stocks have shown a similar sell-off to US bank stocks. The Dow Jones STOXX 600 Banks index on Monday posted a new 16-1/2 year low and has plunged by 83.9% from the record high posted in May 2007.

3-year T-note auction – The Treasury’s coupon auctions kick off today with the sale of $34 billion 3-year T-notes. The Treasury will sell $10 billion in reopened 10-year T-notes on Wednesday and $11 billion in reopened 30-year bonds on Thursday. Today’s 3-year t-note issue was trading at 1.40% in when-issued trading late yesterday afternoon. The $34 billion size of today’s 3-year T-note auction is up by $2 billion from February’s $32 billion and is more than double the $14 billion size seen as recently as May 2007. The 12-auction averages for the 3-year are as follows: 2.41 bid cover, $227 million in non-competitive bids, 3.6 bp tail to the auction yield, 10.5 bp tail to the low yield, and 46% taken at the high yield. Indirect bidders, a category mainly composed of foreign central banks, have taken an average of 29.0% of the 3-year in the past twelve auctions, which is mildly below the average of 33.5% across all recent Treasury coupon auctions. However, indirect bidders came out in force for the last 3-year auction in February and took 44.8% of that auction

Barchart.com U.S. Morning Call for Monday, March 9, 2009

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The European DJ Stoxx 50 this morning is down -2.51% at a 12-year low and March S&Ps are down -11.40 points (-1.66%). The Asia-Pacific stock markets today closed mostly lower with Japan (-1.21%), Hong Kong (-4.84%), China (-3.68%), Taiwan (-0.55%), Australia (+0.29%), Singapore (-3.71%), South Korea (+1.57%), India (-1.99%). European bank stocks are lower today with HSBC Holdings falling over 9% on concern that bad loans at its US unit will curb profits while Lloyds Banking Group Plc sank over 6% after Britain's biggest mortgage lender will give the government a 75% stake in the bank from 43% in exchange for tapping a guarantee program backing 260 billion pounds of assets. Helping to limit stock market losses today is the 21% surge in Schering-Plough after Merck agreed to buy the drugmaker for $41 billion is stock and cash. The World Bank said the global economy is likely to shrink for the first time since WWII with world growth 5% below its potential as developing nations face a shortfall of between $270 billion and $700 billion to pay for imports and service debts. The World Bank also said a surge of debt issuance by rich nations risks "crowding out many developing country borrowers, both private and public" and that maturing debt is another major risk for emerging nations, estimating more than $1 trillion of corporate debt and as much as $3 trillion on government debt will come due this year. In Asia, Foxconn International Holdings, the world's biggest contract maker of mobile phones, tumbled 15% after it reported a second-half loss while Sunco Corp., the world's second-biggest maker of silicon wafers, slid 12% after forecasting a first-half loss on falling demand. Japan posted a current-account deficit of 172.8 billion yen ($1.76 billion) in Jan, its first deficit in 13 years, as exports tumbled 46.3% in Jan from a year earlier.

Market focus – The markets this week will focus on (1) the state of the US economy after last Friday’s Feb unemployment report illustrated continued all-out panic among businesses in shedding employees, (2) the financial crisis as the market assesses the Obama administration’s attempts to deal with the housing crisis and as the market looks ahead to the startup of the $1 trillion TALF program with the initial disbursement on March 25 (spreads on bonds back by auto loans fell by 75 bp to 200 bp last week ahead of the program’s startup, illustrating the program is helping already), (3) T-note prices which rallied late last week on the poor Feb unemployment report but saw overhead pressure ahead of this week’s sale of $63 billion in Treasury notes and bonds, (4) the US stock market which was pressured last week by the lack of further Chinese fiscal stimulus, ongoing US banking problems, and the alarming global economic data, (5) the dollar which fell back last Friday on the weak Feb unemployment report but generally continues to see strength on demand for emergency dollar liquidity, and (6) crude oil prices which are pushing at the top of the 3-month trading range on a nascent increase in US fuel demand and the effect of OPEC’s 16% production cut to a 6-year low from last July’s record high.

US economy - The markets took last Friday’s Feb unemployment report in stride if only because the news wasn’t much worse than expected. February payrolls plunged by another 615,000 persons and the unemployment rate rose +0.5 points to a 25-year high of 8.1%. Payrolls have plunged by 4.384 million jobs since the recession officially began in December 2007, with 2.6 million of those job losses happening in just the last four months (Nov-Feb). Since the banking crisis flared to global proportions in September 2008, businesses have been laying off workers at a record pace in order to try to reduce their losses and stay in business. The job losses in turn have caused panic among US consumers, who have responded by sharply cutting their spending, thus leading to even weaker economic growth and more job losses. Governments around the world have responded with aggressive monetary and fiscal stimulus measures, which have helped to some degree in softening the blow. However, the US economy cannot stabilize until the banking system is put on firm ground, housing prices stop falling (thus stabilizing mortgage security prices and slowing bank losses), and some measure of confidence returns among consumers and businesses. The recent market consensus was that the US economy would bottom in the second quarter, but it now appears that the US will be lucky if the economy can bottom by the end of the year.

Fed policy – There was no change last week in expectations for Fed policy through the end of 2009. However there was a small 5 bp rise in expectations for the average funds rate in 2010 and 2011. The Fed is currently targeting the funds rate in the range of zero to 0.25%. The market is expecting the funds rate to remain below 0.25% through April. The market is then expecting a slow rise in the funds rate to 0.50% by January 2010, to 1.00% by June 2010, and to 1.50% by November 2010. Expectations for a sub-par funds rate through the end of 2010 indicate that the interest rate markets at present see little chance of a “normal” economy until at least 2011

Overnight U.S. Stock News

March S&Ps this morning are down -11.40 points as the World Bank forecasts a global economic contraction. The US stock market last Friday recovered almost all of its losses late and ended the day mixed (Dow +0.49%, S&P 500 +0.12%, Nasdaq Composite -0.44%). The S&P 500 Index fell to a 12-1/3 year low and the Dow Jones Industrials fell to a 11-3/4 year low.
Bullish factors for stock prices last Friday included (1) relief that although US Feb payrolls tumbled -651,000, they still improved from January's drop of -655,000 and December's plunge of -681,000, sparking optimism that US unemployment may be starting to plateau, (2) comments from New York Fed President Dudley that the US government will supply as much capital as needed to ensure the viability of major banks and that the Fed will do "whatever it takes" within its legal authority to revive credit and keep financial markets working, (3) the rally in energy producers after crude oil prices moved higher on the weaker dollar, and (4) the late 6% rally in General Electric after analysts as Sanford C. Bernstein and Merrill Lynch said GE's finance unit has adequate funding.
Bearish factors for stock prices last Friday included (1) the US Feb payrolls report that showed the US economy losing over 600,000 jobs for the third consecutive month along with the unemployment rate soaring to a 25-year high of 8.1%, (2) the slump in technology stocks after JPMorgan Chase cut its earnings estimates for Apple this year and next year, citing the "deepening global downturn," (3) weakness in the financial sector as the S&P 500 Financials Index fell to its lowest level since April 1992 after Standard & Poor's said it may cut credit ratings on nine real-estate investment trusts, and (4) the report from the Organization for Economic Cooperation and Development (OECD) that its leading indicator for the world economy fell to a new low and that all of the major economies are in a "strong slowdown," with "little clear indication of stabilizing soon."
Schering-Plough (SGP) surged 21% higher in European trading today after Merck agreed to buy the drugmaker for $41 billion in stock and cash

Barchart.com U.S. Morning Call for Friday, March 6, 2009

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The European DJ Stoxx 50 this morning is down -0.28% and trading at a 12-year low and March S&Ps are down -1.90 points (-0.28%). The Asia-Pacific stock markets today closed mostly lower with Japan (-3.50%), Hong Kong (-2.37%), China (-0.80%), Taiwan (+0.35%), Australia (-1.35%), Singapore (-0.36%), South Korea (-0.30%), India (+1.56%). Global markets are awaiting an expected grim US Feb payrolls report today (see below) that may show the US losing the most jobs since 1949 and the unemployment rate surging to a 25-year high. Wolseley Plc sank 11% today after the world's biggest distributor of heating and plumbing supplies said it plans to raise 1.05 billion pounds ($1.49 billion) in a stock sale and exit its US-based Stock Building Supply unit. Gold producers and mining companies are higher in European trading today on the surge in metals prices. Alcoa, the biggest US aluminum producer, is up over 4% and BHP Billiton Ltd., the world's biggest mining company was nearly 3% higher. Asian stocks closed lower today on renewed concern losses at financial institutions will mount as the global recession worsens. Mitsubishi UFJ Financial Group, Japan's biggest bank, sank 4.8% and Mizuho Financial Group, Japan's second-biggest bank, slid 4.9%. Bank of Japan Deputy Governor Yamaguchi said the BOJ may need to expand its purchases of corporate debt to prevent a credit shortage as the recession deepens.

Unemployment report – Today’s Feb nonfarm payrolls report is expected to plunge by –650,000, adding to the –598,000 drop seen in January. During 2008, payroll losses averaged around 150,000 from February through August, accelerated to losses averaging near 350,000 in September-October, and then showed losses of more than 500,000 in November (-597,000), December (-577,000), and January 2009 (-598,000). February is expected to be the fourth consecutive month with job losses of more than 500,000 persons. Today’s Feb unemployment rate is expected to rise +0.3 points to 7.9%, adding to January’s +0.4 point rise to a 16-year high of 7..6%. Today’s expected increase in the unemployment rate to 7.9% would push the unemployment rate to a new 25-year high, thus exceeding the current 25-year high posted in 1992. Most commentators are calling for the US unemployment rate to peak in the 9% area. However, if the US economy does not hit bottom soon, there is an outside chance that the unemployment rate during this cycle could take a run at the record high of 10.8% posted in 1982. The US unemployment series has a long history going back to 1948, which means it covers all the post-war recessions including the worst post-war US recession in 1973-75. Businesses are clearly panicking and are laying off people at an extremely fast rate in order to cut costs and try to survive during a recession of unknown depth and duration. There has been no letup in the bad news to convince business managers to slow their layoffs. Economic growth is tanking worldwide, the US banking system has yet to be stabilized, the US housing market has yet to hit bottom, and the US stock market has hit new lows for the cycle. The labor markets lag the business cycle, but the US economy will not be able to stabilize until the massive hemorrhaging of jobs slows. The massive job losses are causing a great deal of fear among US consumers and an unwillingness to spend money, thus leading to a downward spiral with larger business service/production cutbacks and more job losses.

Consumer credit – Today’s Jan US consumer credit report is expected to fall by $5.0 billion, adding to the $6.6 billion decline seen in December. US consumer credit has taken a nosedive as consumers shun credit cards and auto loans and hunker down in their spending for a recession that could last at least through the end of the year. On a year-on-year basis, consumer credit rose by only +1.5% in December, which was a 16-year low for the series. Over the next few months, US consumer credit is likely to fall further, thus taking out the 64-year low of –1.9% y/y posted in 1991. The current collapse in consumer spending and credit is due in large part to consumer deleveraging after years of gorging on mortgage, installment and revolving credit. This is a healthy development over the long-run, but over the short-run it means pain for the economy as businesses adjust to sharply lower levels of consumer spending

Overnight U.S. Stock News

March S&Ps this morning are down -1.90 points. The US stock market yesterday erased all of Tuesday's rally as it traded in negative territory the entire day and finished with sharp losses (Dow -4.09%, S&P 500 -4.25%, Nasdaq Composite -4.00%). The S&P 500 Index fell to a 12-1/3 year low.
Bearish factors for stock prices yesterday included (1) the action by Chinese Premier Wen Jiabao to squash any speculation that China will add to its stimulus plans, (2) the drop in US Jan factory orders for the sixth consecutive month, stoking concerns the US recession is deepening, (3) the jump in US Q4 mortgage delinquencies to their highest level since records began in 1972, (4) the prediction from Goldman Sachs that the global recession is worsening after it cut its 2009 world growth estimate to a -0.6% contraction from a previous estimate of -0.2%, (5) the plunge in bank stocks led by JPMorgan which plunged 14% after Moody's cut its ratings outlook to negative from stable and said it will review the long-term debt ratings of Wells Fargo and Bank of America on concern higher credit costs may damage capital ratios, (6) the 15% plunge in General Motors after the largest US automaker said its auditors made a "going concern" ruling, meaning they are unsure the company will remain in business, and (7) comments from Atlanta Fed Preident Lockhart that the US economic contraction appears to be worsening, with credit markets continuing to be pressured.
Bullish factors for stock prices yesterday included (1) the larger-than-expected decline in US weekly unemployment claims, (2) the better-than-expected Feb ICSC chain store sales, (3) the 2.6% rally in Wal-Mart after the world's largest retailer boosted its annual dividend by 16% to $1..09 a share, and (4) comments from Treasury Secretary Geithner that the Obama administration will act to make sure the nation's largest financial companies can get government help if needed to avoid collapse.
General Motors (GM) is 5.4% lower in European trading today after saying it may lose more than $1 billion separating from Sweden's Saab Automobile unit, which filed for bankruptcy protection last month

Barchart.com U.S. Morning Call for Thursday, March 5, 2009

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The European DJ Stoxx 50 this morning is down -1.93% and March S&Ps are down -11.40 points (-1.61%). The Asia-Pacific stock markets today closed mixed with Japan (+1.95%), Hong Kong (-0.97%), China (+0.87%), Taiwan (+2.11%), Australia (+0.70%), Singapore (-1.66%), South Koera (+0.03%), India (-2.94%) . European and US stock markets were disappointed today after Chinese Premier Wen Jiabao said his country's targeted 8% GDP growth rate is within reach this year, indicating he doesn't see the need for additional stimulus. Goldman Sachs said the global recession is worsening as it downgraded its world growth estimate for this year predicting the world economy will shrink -0.6% after a previously estimate of a -0.2% contraction. France's unemployment rate rose a more than expected +0.6 in Q4 to 8.2%, the highest since Q3 of 2007 amid a deepening economic slump.. The markets today are expecting the Bank of England to cut its benchmark rate -50 bp to 0.50% and the European Central Bank to slash its benchmark rate -50 bp to 1.50%. In Asia, the fall in the yen to a 4-month low against the dollar aided Japanese automakers with Mazda up 11%, Honda up 2.5% and Nissan up over 6%. Despite Chinese Premier Wen Jiabao not indicating any additional stimulus, he affirmed China's growth target may be reached this year. This aided Komatsu Ltd., the world's second-largest maker of earthmoving equipment to a nearly 4% gain and Hitachi Construction and Machinery, the world's largest maker of giant excavators, to a nearly 3% rise.

Unemployment claims – Today’s weekly initial unemployment claims report is expected to fall –17,000 to 650,000, reversing about one-half of last week’s rise of +36,000 to 667,000. Initial claims last week rose to a new 28-year high and are now only 28,000 below the record high of 695,000 posted in 1982 (the series has history back to 1967). Weekly continuing claims are expected to rise +43,000 to 5.155 million, adding to last week’s increase of +114,000 to a record high of 5.112 million. The high level of both initial and continuing unemployment claims shows that layoffs are continuing at an extremely fast pace and that the number of people on the unemployment rolls is rising sharply as well.

Regarding the labor market, the market is mainly focused on tomorrow’s Feb unemployment report, which is expected to show a further sharp deterioration in the US labor market. Feb payrolls are expected to fall –650,00, which would be an even larger decline than the –598,000 decline seen in January. The Feb unemployment rate is expected to rise +0.3 points to 7.9%, adding to the +0.4 point rise to 7.8% seen in January.

Productivity – Today’s Q4 nonfarm productivity report is expected to be revised lower to +1.1% from the preliminary report of +3.2%. The downward revision would be due to the recent downward revision in Q4 GDP to –6.2% from –3.8%, which reduced the output numerator in the productivity ratio (output per hour worked). Productivity is likely to fall sharply during the recession as output falls and businesses lag behind on cutting employees to match production levels.

Factory orders – Today’s Jan factory orders report is expected to fall –3.5%, adding to December’s decline of –3.9%. Expectations for a decline in today’s factory orders report are based on the recently-released Jan durable goods orders report of –5.2% (-2.5% ex-transportation). Durable goods orders account for more than half of the factory orders series. US factory orders in December plunged by a record –18.7% y/y as businesses try to reduce inventories to match the sharp drop-off in demand. The US manufacturing sector is in dire need of new orders to at least stop the panic among business management that is leading to massive job layoffs.

Mortgage delinquencies – Today’s Q4 mortgage delinquencies report is likely to show an increase from the Q3 level of +6.99%. The fourth quarter was the first full month of the banking crisis. It will take time for mortgage delinquencies to evolve as homeowners draw down savings but finally quit paying their mortgages. Mortgage delinquencies are likely to rise in Q4 and then even further in Q1 and possibly Q2. It remains unclear whether the Obama administration’s foreclosure prevention program will put more than a dent in the rising foreclosure rate.

Barchart.com U.S. Morning Call for Wednesday, March 4, 2009

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Global stock markets are higher today on speculation that China may announce new stimulus measures to revive economic growth. The European DJ Stoxx 50 this morning is up +1.95% and March S&Ps are up +12.90 points (+1.87%). The Asia-Pacific stock markets today closed mostly higher with Japan (+0.85%), Hong Kong (+2.47%), China (+6.68%), Taiwan (+2.39%), Australia (-1.64%), Singapore (+1.04%), South Korea (+3.31%), India (+0.23%). Former Chinese statistics bureau chief Li Deshui told reporters in Beijing today that Chinese Premier Wen Jiabo will announce "a new stimulus package" in his annual address to the nation's legislature tomorrow, adding to an already approved 4 trillion yuan ($585 billion) spending plan to boost growth in the world's third-largest economy. Mining companies surged on the news with BHP Billiton, the world's largest mining company, up 6% abd Rio Tinto, the third-biggest, up over 7% as copper prices rallied to a 3-week high on optimism metals consumption in China may pick up. Metro AG, Germany's largest retailer, was up nearly 3% today after Bank of America upgraded it to a "buy," saying concern over its operations in eastern Europe is "overdone." Credit Agricole SA, France's second-largest bank, is trading over 2% lower today after reporting a Q4 loss of 309 million euros ($386 million), larger than analysts' estimates of a 19 million euro loss and Standard Chartered Plc, the UK's second-largest bank by market value, gained over 8% after UBS AG upgraded the company to "buy" following "robust" earnings reported yesterday. In Asia, the Feb China purchasing managers index rose +3.7 t0 49.0, the third straight monthly increase and China's central bank Vice Governor Su Ning said a recovery in the first half is "very likely." Bank of Japan board member Miyako Suda said today the BOJ should signal it's prepared to take "bold" measures to counter the recession and Japan's lower house of parliament approved a bill that will free up about 5 trillion yen ($50 billion) for economic stimulus. Australia's economy unexpectedly contracted for the first time in eight years after it reported its Q4 GDP -0.5% q/q, well below market expectations for a +0.2 q/q gain.

Mortgage applications – Today's weekly MBA mortgage applications fell -12.6%, adding to the prior week's -15.1% slide. The purchase sub-index fell -5.6% and the refinancing sub-index tumbled -15.3%. The refinancing index soared to a 5-1/2 year high starting in late November when mortgage rates dropped sharply. Refinancing activity has since fallen back from the peak levels but is still well above the levels seen before the banking crisis emerged last September as homeowners continue to try to refinance their mortgages to obtain lower payments. Meanwhile, the purchases sub-index is just slightly above the 8-year low posted in the week ended February 6, illustrating the dismal level of home sales. The 30-year mortgage rate in the week ended February 27 rose 7 bp to 5.14%, but is still only 18 bp above the record low of 4.96% posted in the week ended January 15.

ADP employment change – Today’s Feb ADP employment change is expected to show a sharp decline of –630,000 persons, adding to January’s decline of –522,000. The ADP employment series has a rough correlation with this Friday’s payroll report and is therefore carefully watched by the markets. Friday’s Feb payroll report is expected to show a decline of –650,000 persons, adding to January’s decline of –598,000. Payroll losses averaged around 150,000 during 2008 from February through August, accelerated to losses averaging near 350,000 in September-October, and then showed losses of more than 500,000 in November (-597,000), December (-577,000), and January (-598,000). While the labor markets lag the business cycle, the US economy will not be able to stabilize until the massive hemorrhaging of jobs slows. The massive job losses are causing a great deal of fear among US consumers and an unwillingness to spend money, thus leading to a downward spiral with more job losses.

ISM non-manufacturing index – Today’s Feb ISM non-manufacturing index is expected to show a –1.9 point decline to 41.0. The ISM non-manufacturing index posted a record low of 37.4 in November and then rebounded higher by +2.7 points to 40.1 in December and by +2.8 points to 42.9 in January. The ISM non-manufacturing index was below the boom-bust level of 50 in October 2008 through January 2009 and its weak level of 42.9 in January provided further confirmation of recessionary economic conditions in the US. The February ISM manufacturing index, released earlier this week, showed a small +0.2 point increase to 35.8, rebounding higher from the 28-1/2 year low of 32.9 posted in December

Barchart.com U.S. Morning Call for Tuesday, March 3, 2009

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The European DJ Stoxx 50 this morning is down -0.20% at a 5-3/4 year low and March S&Ps are up +2.10 points (+0.30%). The Asia-Pacific stock markets today closed mostly lower with Japan (-0.69%), Hong Kong (-2.30%), China (-1.04%), Taiwan (+0.21%), Australia (-0.95%), Singapore (-0.32%), South Korea (+0.99%), India (-2.09%). Bayer AG, Germany's biggest drugmaker, is down over 3% today and trading lower for the ninth consecutive session after reporting Q4 net income of 106 million euros ($134 nillion), missing analysts' estimates of 190 million euros. Barclays Plc is leading European financial shares lower today and is down over 9%, extending its three-day slump to 29%. In Asia, there are growing expectations that the Japanese government will take measures to bolster its stock market after Finance Minister Yosano said the government can't ignore "excessive declines" in the nation's stock market. Sony, the world's second-largest consumer-electronics maker, rebounded from a 3.4% loss and climbed 4.5% higher after the comments. Yahoo Japan slumped 9% after Morgan Stanley downgraded the company to "underweight" from "equalweight," citing a possible decline in Internet advertising. Australia's central bank unexpectedly left its benchmark interest rate unchanged for the first time in the last seven months, saying the already 40-year low in rates along with increased government spending are supporting the economy.

Pending home sales – Today’s Jan pending home sales report is expected to show a –3.5% m/m decline, reversing about one-half of December’s rise of +6.3% m/m. On a year-on-year basis, December pending home sales were up +6.0% y/y, reversing direction from November’s decline of –9.5% y/y. The year-on-year figures for the series are starting to benefit from the fact that pending home sales were down sharply a year ago, meaning it is not difficult for the year-on-year figures to show gains. The pending home sales report measures the change in home sales contracts and generally leads to existing home sales within one to two months, thus providing some leading information on the existing home sales series. The current US existing home sales market remains dismal. US existing home sales in January fell 5.3% to 4.49 million homes, which was a new record low for the series (although the series only has history back to 1999). The decline in existing home sales to a new record low in January was disappointing after an upward rebound in December. The reality is that 40-45% of homes are presently being sold only at fire sale prices involving either a foreclosure or a short sale. While mortgage rates are low, mortgages are difficult to obtain and most potential homebuyers would rather wait until the economy bottoms out and until they are sure that home prices have stopped dropping.

Vehicle sales – Today’s Feb total vehicle sales report is expected to show a decline to 9.4 million units from January’s 26-1/2 year low of 9.6 million. The record low for the series, which has history back to 1976, is 8.8 million units posted in December 1981 during the 1980-82 double-dip recession period. US vehicle sales averaged near 17 million units during 2000-2005, but then started tailing off in 2006-07 to an average 16 million units. US vehicle sales then fell off a cliff starting when the US recession officially began in December 2007. Vehicle sales accelerated lower after the banking crisis began in earnest in September 2008 as consumers sharply curbed spending on all discretionary items in an effort to preserve what was left of their household income and wealth. The US vehicle sales data is currently more important than usual because it provides a window to consumers’ current willingness to spend and also indicates whether things will get even worse for the US auto sector, which has a key multiplier effect in the US manufacturing sector and economy

February 26, 2009

Home Sales at Slowest Pace in More Than a Decade

By JACK HEALY

Sales of previously owned homes fell 5.3 percent in January after an unexpected rise in December, an industry group reported Wednesday, as worries about job losses and the economy kept potential buyers out of the market.

The National Association of Realtors reported that existing-home sales, which make up most of the market, fell to an annual rate of 4.49 million in January, the slowest pace in more than a decade. Sales were down 8.6 percent from January 2008.

“Given so much stimulus package discussion in January, some would-be buyers simply sat out for clarity and certainty on the nature of housing stimulus,” Lawrence Yun, chief economist for the National Association of Realtors, said in a statement.

The nationwide median home price fell to $170,300, its lowest point since March 2003. The median price in January was down some 26 percent from its peak of $230,100 in July 2006.

On Tuesday, a closely watched gauge of housing prices in the United States reported that single-family home prices had fallen 18.5 percent in December from a year earlier, the fastest pace on record, and economists said that housing would probably continue to sink as buyers wait on the sidelines for the economy to improve and prices to halt a two-year-long decline.

The Obama administration has laid out a $275 billion plan to help as many as nine million families refinance their mortgages or avoid foreclosure using a variety of incentives and government subsidies to reduce interest rates and principal amounts. President Obama pointed to the plan in his address to Congress on Tuesday night, and said that Americans could save $2,000 a year by refinancing their mortgages.

In January, home sales were best in the West, where they were flat. They dropped 5.7 percent in the Midwest and the South, but fell 14.7 percent across the Northeast.

The inventory of unsold homes fell to 3.6 million nationwide from a glut of more than 4.5 million last summer as some buyers took advantage of lower prices, lower mortgage rates and a surplus of distressed properties and foreclosure sales. At the current rate of sales, it would take 9.6 months to burn through the excess supply of homes.

Barchart.com U.S. Morning Call for Thursday, February 12, 2009

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Stock markets worldwide are under pressure today on concerns that government stimulus plans may fail to revive the global economy. The European DJ Stoxx 50 this morning is down -1.27% and March S&Ps are down -7.70 points (-0.93%). The Asia-Pacific stock markets today closed mostly lower with Japan (-3.03%), Hong Kong (-2.30%), China (-0.55%), Taiwan (-2.39%), Australia (+1.15%), Singapore (-2.15%), South Korea (-1.03%), India (-1.59%). December industrial production in the Euro-Zone fell by the largest amount since the data series began in 1986. Dec Euro-Zone industrial production tumbled -2.6% m/m and -12.0% y/y and hints at a dramatic contraction in growth when Q4 Euro-Zone GDP data is released tomorrow. EDF, the biggest operator of nuclear reactors, dropped over 9% today after saying 2008 net income fell to 3.4 billion euros ($4.39 billion) because of costs associated with regulated power rates and lower industrial demand amid the economic slowdown. Commerzbank AG slid over 5% after being downgraded by Morgan Stanley to "underweight" from "equal weight" because of "a lack of visibility on financials, including Dresdner and the operating enviroment." In Asia, Mitsubishi UFJ Financial Group Ltd., Japan's biggest lender, slumped 3.5% as a lack of details in the US bank-rescue plan continues to pressure bank stocks globally while Guangzhou Shipyard International and China State Shipbuilding both surged 10% after the Chinese government banned construction of new shipyards for three years and said it will urge banks to boost trade financing. South Korea's central bank cut its seven-day repurchase rate today by 50 bp to a record low 2.00% and said "the possibility of a further interest rate cut is still open" after South Korea's economy shrank by the most in 10 years last quarter.

Unemployment claims – Today’s weekly initial unemployment claims report is expected to show a decline of –16,000 to 610,000, reversing about one-half of last week’s surge of +35,000 to 626,000. Meanwhile, weekly continuing claims are expected to rise +12,000 to 4.800 million, adding to last week’s rise of +20,000 to 4.788 million. Initial claims last week rose to a 26-year high and continuing claims rose to a record high. The rise in initial claims illustrates the heavy layoffs that have been seen since in the past several months, particularly since the beginning of January. The rise in continuing unemployment claims illustrates the accumulation of people that are on the unemployment rolls. The unemployment rate in January rose by 0.4 points to a 16-year high of 7.6% and appears destined to easily exceed the 25-year high of 7.8% posted in 1992. The US unemployment during this recession cycle will hopefully remain below the record high of 10.8% posted in 1982.

Retail sales – Today’s Jan retail sales report is expected to show another hefty decline of –0.8% and –0.4% ex-autos, adding to the plunge seen in December of –2.7% and –3.1% ex-autos. Total vehicle sales in December were already reported at a 26-year low of 9.6 million units, down 30% from 13.7 million units in August 2008 before the credit crisis emerged in September 2008. US retail sales fell every month on a month-on-month basis in the last six months of 2008 and plunged by –9.8% on a year-on-year basis in December. US consumers have been shell-shocked by the meltdown in the US financial markets, economy, and labor market, causing them to halt much of their discretionary spending and prepare for a long and severe recession. The US economy cannot start to recover until US consumer confidence stabilizes and US consumers feel more comfortable about spending money.

Business inventories – Today’s Dec business inventories report is expected to show a decline of –0.9%, adding to November’s decline of –0.7%. However, the level of inventories in the US economy compared to sales soared in Q4-2008, creating an inventory overhang that now needs to be worked off before businesses will start ordering more goods. The business-to-inventories ratio rose very sharply from the record low of 1.27 months in August to a 7-year high of 1.41 months in November. The banking crisis that emerged in mid-September and the subsequent melt-down in consumer spending happened so quickly that businesses did not have a chance to draw down their inventories to match lower demand. Now those inventories are acting like a wet blanket thrown on the economy to add to the other problems including the housing and credit crisis.

30-year T-bond auction – This week’s $67 billion refunding operation concludes today with the sale of $14 billion in 30-year T-bonds. The $14 billion size of today’s auction is up by $4 billion from the last two 30-year T-bond auctions in August and November 2008. Today’s 30-year T-bond issue was trading at 3.44% in when-issued trading late yesterday afternoon. The 6-auction averages for the 30-year are as follows: 2.26 bid cover, $18 million in non-competitive bids (by individual investors), 4.97 bp tail to the median yield, 12.28 bp tail to the low yield, and 53% taken at the high yield. The 30-year is not particularly popular among foreign central banks. Indirect bidders, a category that is mainly composed of foreign central banks, have taken an average of 21.4% of the last six 30-year auctions, which is well below the average of 32.1% across all recent Treasury coupon auctions

Barchart.com U.S. Morning Call for Thursday, February 12, 2009

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Barchart.com U.S. Morning Call for Wednesday, February 11, 2009

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The European DJ Stoxx 50 this morning is down -0.91% and March S&Ps are down -0.80 points (-0.10% ). The Asia-Pacific stock markets today closed mixed with Hong Kong (-2.46%), China (+0.19%), Taiwan (+1.10%), Australia (-0.41%), Singapore (+1.10%), South Korea (-1.01%), India (-0.30%). Japanese markets were closed today for National Foundation Day. Global bank stocks are mostly lower today after being disappointed with a lack of clarity in the US bank-rescue plan after Treasury Secretary Geithner stated he's still "exploring a range of different structures" to bail out banks. Credit Suisse, Switzerland's second-largest bank, is down nearly 2% today after reporting a higher-than-expected 6.02 billion Swiss-franc ($5.2 billion) Q4 loss on trading losses and cost cutting measures. Peugeot, France's largest carmaker, is down over 3% today after reporting a full-year net loss of 343 million euros ($443 million) for 2008 and is forecasting another loss for 2009 as car markets "collapse." Sweden's Riksbank today cut its seven-day repo rate a more-than-expected full percentage point to 1.00%, the lowest since the Riksbank introduced the key rate in 1994, as the central bank warns the downturn in the economy looks worse than it did in December. In Asia, Chinese exports in Jan declined -17.5% from a year earlier for their biggest decline in 13 years while imports plunged 43.1%, signaling a deepening slump in the world's third-biggest economy. China's $39.1 billion trade surplus in Jan was just below the Nov record of $40.09 billion and may be a topic of concern at this weekend's G-7 meeting in Rome.

Mortgage apps – The latest weekly MBA mortgage application index fell -24.5% as the refinancing sub-index plunged -30.3% to a 2-1/2 month low and the purchase sub-index dropped -9.8% to an 8-year low. While refinancing is being hurt by the recent rise in mortgage rates, stricter credit availability and surging job losses are crimping demand for actual home purchases. The 30-year mortgage rate in the past several weeks has risen by 29 bp to 5.25% from the record low of 4.96% posted in the week ended January 15. Despite that rise, the 30-year mortgage rate of 5-1/4% is still at the lowest levels in recent US history, providing some psychological support for the mortgage market and providing lower mortgage payments for homeowners who refinance their mortgages.

US trade deficit – Today’s US Dec trade deficit report is expected to narrow to -$35.5 billion from -$40.4 billion in November. The US trade deficit in November narrowed sharply too -$40.4 billion from the recent average of -$60 billion mainly because of the sharp drop in oil prices, which reduces the value of US oil imports. Today’s expected report of -$35.5 billion would be a new 6-year low for the US trade deficit. The US trade deficit, excluding petroleum, has sharply improved in the past two years due to strong demand for US exports. However, the overall US trade deficit figure moved sideways because of the offsetting factor of the sharp increase in oil prices and the value of oil imports. Now that oil prices have dropped sharply, the overall US trade deficit figure has dropped sharply as well. The sharp decline in the US trade deficit is another bullish factor for the dollar, adding to the bullish factors of continued emergency demand for dollar liquidity and US investor repatriation of investments from overseas.

10-year T-note auction – The Treasury today will sell a record $21 billion in 10-year T-notes, which is up $1 billion from the last 10-year refunding issue sold in November. After the November 10-year, the Treasury sold $16 billion in reopened 10-year T-notes in December and January. Today’s 10-year T-note issue was trading at 2.86% in when-issued trading late yesterday afternoon. The 12-auction averages for the 10-year are as follows: 2.38 bid cover, $72 million in non-competitive bids, 4.61 bp tail to the median yield, 17.55 bp tail to the low yield, and 41% taken at the high yield. Indirect bidders, a category mainly composed of foreign central banks, have taken an average of 32.9% of the last six 10-year refunding issues, which is just above the average of 32.1% across all recent Treasury coupon auctions

Barchart.com U.S. Morning Call for Tuesday, February 10, 2009

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The European DJ Stoxx 50 this morning is down -0.55% and March S&Ps are down -6.80 points (-0.79%). The Asia-Pacific stock markets today closed mixed with Japan (-0.29%), Hong Kong (+0.61%), China (+1.31%), Taiwan (+0.70%), Australia (-0.57%), Singapore (-0.55%), India (+0.66%). Global stock markets are mostly lower today on concern that US plans to increase spending and shore up banks wil be ineffective in reviving growth. US President Obama said in a press conference last night that the US faces a "full-blown crisis" and signaled he would be open to seeking additional funds should the remaining $350 billion from the Troubled Asset Relief Program (TARP) be insufficient in reviving credit markets. French industrial production declined for a fifth straight month in December and may signal a deeper contraction in the French economy when Q4 French GDP is released Friday. Commodity producers and mining companies are lower in Europe and Asia as gold and copper prices tumbled yesterday. Chinese stocks rallied today as inflation climbed at its slowest pace since 2006, boosting speculation China's central bank may cut interest rates.

Geithner & Bernanke speak – The markets today will get a double dose of information about progress on the government’s bailout plans. Fed Chairman Ben Bernanke testifies today before the House Financial Services Committee on the Fed’s lending programs. More importantly, Treasury Secretary Timothy Geithner will outline the Obama administration’s financial rescue plan, which includes how to rescue the US banking system from its current zombie state and a program (mainly for political cover) involving mortgage foreclosure relief.

A “new and improved” bank rescue program is critical for rehabilitating the nation’s banks and getting them back into the business of lending. The US banking system at present is still on very shaky ground because US home prices continue to decline, US consumers are defaulting on mortgages and consumer debt in rising numbers, and the true value of bank assets remains unknown (and falling). The US government needs to take dramatic action in order to get the US financial system functioning again and funnel credit to worthy borrowers who can help get the US economy back on its feet.

The S&P 500 Diversified Financials index posted a 13-year low in mid-January and has so far shown only a mild and indecisive recovery. The markets remain worried that the US government will still end up being forced to nationalize a large number of US banks, effectively wiping out common shareholders and driving the stock prices effectively to zero. The European Dow Jones 600 is in similar shape near a 14-year low.

3-year T-note auction – The Treasury today will sell a record $32 billion in 3-year T-notes, up $2 billion from the $30 billion auction in January. This week’s refunding operation continues with Wednesday’s sale of $21 billion in 10-year T-notes and concludes with the sale of $14 billion in 30-year T-bonds on Thursday. The 12-auction averages for the 3-year are as follows: 2.39 bid cover, $260 million in non-competitive bids, 3.3 bp tail to the median yield, 10.9 bp tail to the low yield, and 48% taken at the high yield. The 3-year T-note isn’t overly popular with foreign central banks. Indirect bidders, a category mainly composed of foreign central banks, have taken an average of 28.7% of the last twelve 3-year T-note auctions, which is mildly below the average of 32.1% across all recent Treasury coupon auctions.

Barchart.com U.S. Morning Call for Monday, February 9, 2009

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Global stocks today are dragged down on news that the Obama administration is delaying by one day the announcement of its financial-recovery plan to allow the administration time to focus on getting Senate approval of President Obama's stimulus package. The European DJ Stoxx 50 this morning is down -0.36%% and March S&Ps are down -7.00 points (-0.81%). The Asia-Pacific stock markets today closed mixed with Japan (-1.33%), Hong Kong (+0.84%), China (+2.65%), Taiwan (+0.52%), Australia (+1.12%), Singapore (-1.92%), South Korea (-0.76%), India (+3.04%). Limiting losses in Europe today is the 8.2% rally in Barclays as the third-biggest UK bank by assets said full-year net income for 2008 was 2.66 billion pounds, more than analysts estimates of only 2.05 billion pounds, and that writedowns for 2009 will be less than the 8.1 billion pounds of writedwons for last year. In Asia, Nomura Holdings, Japan's largest securities firm, fell 14% after saying it may sell as much as 300 billion yen ($3.3 billion) in stock to replenish capital after posting a record loss of 343 billion yen in the three months ended Dec 31, while Nissan Motor Co., Japan's third-largest automaker, slumped 6% before reporting a 265 billion yen ($2.91 billion) loss for the year ending March 31 compared with an October prediction of a 160 billion yen profit. Nisssan also scrapped its dividend for the second-half of the year and said it will slash 20,000 jobs as it posts its first annual loss in nine years. Also negatively affecting Asian share prices today were comments from the Bank of Japan's chief economist, Kazuo Momma, who said that Japan's economy is deteriorating at a pace unseen in the past half century as it contracted at an "unimaginable" speed last quarter and is likely to slump at a similar rate or worse in the three months ending March.

Weekly Focus - Market attention this week will focus on (1) Treasury Secretary Geithner’s speech tomorrow in which he is scheduled to unveil the Obama administration’s plan for using the remaining $350 million of TARP money and providing support for the banking sector going forward, (2) progress by Congress in ironing out the $800 billion stimulus bill that is acceptable to both chambers and to the Obama administration, (3) the US stock market which rallied late last week on increased hopes that the fiscal stimulus plan and the financial rescue plan may together help stop the hemorrhaging in the US economy, (4) the T-note market which is braced for this week’s record-sized $67 billion refunding operation, (5) the dollar which consolidated last week and which needs to remain strong for the Treasury to be able to fund its huge financing needs, and (6) crude oil prices which traded sideways on a depressed note last week due to continued weak demand and rising excess inventories.

Q4 Earnings – Q4 earnings season is winding down with 60 of the S&P 500 companies due to report this week. Of the 500 companies in the S&P 500 index, 309 have reported so far. The blended Q4 earnings growth rate for the S&P 500 companies, combining companies that have already reported and estimates for those that have yet to report, is expected at –40.6%, according to the survey of analysts conducted by Thomson Reuters. S&P 500 earnings have now shown negative growth for six consecutive quarters. The weakest sector is of course Financials with a -705% plunge in earnings. However, the S&P 500 companies excluding Financials are still expected to show poor earnings growth of –19.1% in Q4. Of the ten sectors, seven showed a decline in Q4 and only three showed an increase. The sections showing a slight increase were Health Care, Consumer Staples, and Utilities. The weakest sectors aside from Financials were Materials (-80%) and Consumer Discretionary (-77%), according to Thomson Reuters.

Fed policy – There was little change last week in market expectations for Fed policy in coming months. With the funds rate target currently at zero to 0.25%, the market expects the funds rate to remain below 0.25% through the next FOMC meeting on March 17. The market is then expecting a slow rise in the funds rate to 0.50% by November 2009, to 1.00% by May 2010, and to 1.50% by September 2010.

Barchart.com U.S. Morning Call for Thursday, February 5, 2009

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The European DJ Stoxx 50 this morning is down -1.20% and March S&Ps are down -2.60 points (-0.31%). The Asia-Pacific stock markets today closed mostly lower with Japan (-1.11%), Hong Kong (+0.88%), China (-0.71%), Taiwan (-0.61%), Australia (-0.27%), Singapore (-0.16%), South Korea (-1.28%), India (-1.21%). Manufacturing orders in Germany, Europe's largest economy, declined for the fourth straight month in Dec, dropping -6.9% m/m and extending their worst decline since data for a reunified Germany was first compiled in 1991. Swiss Re, the world's second largest reinsurer, plunged 14% after it said it plans to cut its dividend and raise 3 billion francs ($2.6 billion) from Warren Buffett's Berkshire Hathaway to shore up capital. Unilever fell over 3% after the world's second-largest consumer products maker's CEO scrapped future guidance on the company saying profitability forecasts are "inappropriate" amid declining economic growth and volatile commodity prices. European stocks pared some of their losses after the CEO of Deutsche Bank AG, Germany's largest bank, said revenue in Jan rose "significantly" from the previous year, giving him "confidence" for 2009. The Bank of England as expected cut their main benchmark rate 50 bp to 1.00%, the lowest since the bank was founded in 1694, saying the rate was cut on a "substantial risk" that CPI will undershoot its 2% target. In Asia, Quantas Airways Ltd., Australia's largest carrier, tumbled 18% after selling A$500 million ($321 million) in stock at a 19% discount to bolster its balance sheet while Takeda Pharmaceutical, Asia's largest medicine producer, fell over 3% after CLSA Ltd. cut its share price target by 14%. BHP Billiton Ltd., which gets about 20% of its revenue in China, rose over 6% and Kawasaki Kisen Kaisha, Japan's third-biggest shipping line, rose almost 8% after China's State Council said components and raw materials that "really need to be imported" for major construction projects will be exempted from import duties and value-added taxes.

Claims – Today’s weekly initial unemployment claims report is expected to show a decline of -8,000 to 580,000, more than reversing last week’s small increase of +3,000 to 588,000. Weekly continuing claims are expected to rise +19,000 to 4.795 million, adding to last week’s surge of +159,000 to 4.776 million. Last week’s level of initial unemployment claims of 588,000 is just 1,000 below the 26-year high of 599,000 posted in the week ended December 19, illustrating that layoffs are running at near-record levels. Meanwhile, the continuing claims series is already at a record high, even exceeding the previous peaks seen in 1975 and 1982. That indicates the big accumulation of people that are on the unemployment rolls. Regarding the labor market, the market is mainly focused on Friday’s Jan payroll report, which is expected to show a –535,000 decline, similar to the –524,000 decline seen in December. That would also be close to the –522,000 decline seen in Wednesday’s ADP employment change report. Friday’s Jan unemployment rate is expected to rise +0.3 points to 7.5%, which would be a new 16-year high and only 0.3 points below the 25-year high of 7.8% posted in 1992. The sharp rise in unemployment is causing even more consumer angst and an even sharper drop-off in consumer spending.

Productivity – Today’s Q4 nonfarm productivity report is expected to improve slightly to +1.5% from +1.3% in Q3, but remain relatively weak at a level below the 8-quarter average of +2.3%. US productivity is likely to drop in coming quarters due to the weak economy and the fact that most businesses will probably lag behind in cutting employees to match lower sales volumes. Q4 GDP fell –3.8%, adding to the –0.5% decline seen in Q3. The decline in productivity is a negative development since strong productivity is necessary to produce higher real wages and corporate earnings and to provide a bulwark against inflation.

Factory orders – Today’s Dec factory orders report is expected to show a decline of –3.1%, adding to the sharp decline of –4.6% seen in November. Expectations for a decline in factory orders are based on the recently-released Dec durable goods orders report of –2.6% and –3.6% ex-transportation, since durable goods orders account for more than half of the factory orders series. Factory orders on a year-on-year basis in November were down –12.2% y/y, the weakest report since the –13.8% y/y report seen in June 2001. Factory orders have plunged as businesses cut back on ordering new equipment and inventory to brace for the steep recession. The decline in orders will quickly translate into lower actual industrial production figures in coming months. Until new orders stabilize and start to rise, the US manufacturing sector will be in for continued tough times

Barchart.com U.S. Morning Call for Wednesday, February 4, 2009

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The European DJ Stoxx 50 this morning is up +0.37% and March S&Ps are up +1.40 points (+0.17%). The Asia-Pacific stock markets today closed mostly higher with Japan (+2.73%), Hong Kong (+2.25%), China (+2.73%), Taiwan (+0.39%), Australia (-2.02%), Singapore (-0.26%), South Korea (+3.02%), India (+0.57%). December retail sales in the Euro-Zone fell -1.6% y/y, larger than the -1.4% y/y expected, and the seventh straight y/y decline, as the current recession slows European consumer spending. In Asia, Indonesia cut its key benchmark rate for a third month to 8.25% form 8.75% and said it has "room" to reduce rates further. Chinese stocks received a boost after the Xinhua News Agency said the Chinese government is releasing more stimulus funds. South Korea's Samsung, the world's largest computer-memory maker, gained 5.7% and led technology shares higher in Asia after memory-chip prices jumped to a 3-1/2 month high. Hyundai Motor rose 8% and Kia Motors gained 12% as the South Korean automakers defied lower auto demand and said their US sales increased in Jan. Panasonic Corp., the world's largest consumer-electronics maker, forecast its largest loss in nearly seven years beacause of falling sales of flat-screen televisions and a stronger yen and said it will cut about 15,000 jobs and slash its dividend a third.

Mortgage apps – The latest weekly MBA mortgage applications rose +8.6% as the refinancing sub-index rose +15.8% but the purchase sub-index fell -11.2%. Refinancing remains strong although home buying continues to slow due to the fact that mortgage rates appear to have hit bottom along with a lack of credit and mounting job losses deterring home buyers. The 30-year mortgage rate in the past two weeks has moved mildly higher by 14 bp to 5.10% from the record low of 4.96% posted in the week ended January 15. Last week, the overall MBA mortgage applications index plunged -38.8%, with purchases sub-index down -2.9% and refi sub-index down -48%. The purchases sub-index has recently rebounded mildly higher from its recent 8-year low, which tracks with the home sales data indicating a pickup in existing home sales tied to foreclosures and short sales. Even after last week’s sharp decline, the refinancing sub-index is still substantially above the average seen over the past several years, indicating that homeowners are still rushing to get refinanced with mortgages near 5%.

ADP employment change – Today’s Jan ADP employment change is expected to show a sharp decline of –535,000, adding to December’s plunge of –693,000. The markets will be closely watching today’s ADP report for hints about Friday’s Jan payroll report. Friday’s Jan payroll report is expected to show a –535,000 decline, similar to the –524,000 decline seen in December. Friday’s Jan unemployment rate is expected to rise +0.3 points to 7.5%, which would be a new 16-year high and only 0.3 points below the 25-year high of 7.8% posted in 1992. There were a stream of layoff announcements in January in conjunction with the release of quarterly earnings, and those layoffs are likely to continue in coming months as businesses brace for the worst that the economy may throw at them.

ISM non-manufacturing index – Today’s Jan ISM non-manufacturing index is expected to show a –1.1 point decline to 39.0, giving back some of December’s small upward rebound of +2.8 points to a revised 40.1. The index in December rebounded upward from the record low of 37.4 seen in November (history back to 1997). The plunge in the non-manufacturing index to the mid-30 indicates the extreme pessimism about the economy currently being expressed by executives in the general economy. However, a small recovery in the index from those extremely low levels would not be surprising considering that there have been no new disasters lately and the Fed and the Treasury appear to have a handle on the worst of the crisis, at least for the time being

Barchart.com U.S. Morning Call for Tuesday, February 3, 2009

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The European DJ Stoxx 50 this morning is up +0.07% and March S&Ps are down -1.90 points (-0.23%). The Asia-Pacific stock markets today closed mixed with Japan (-0.62%), Hong Kong (-0.66%), China (+2.52%), Taiwan (+2.65%), Australia (+0.32%), Singapore (+0.39%), South Korea (+1.62%), India (+0.91%). Vodafone Group Plc is up over +6% and leading other European phone companies higher today after reporting Q4 sales of 10.47 billion pounds ($14.9 billion), higher than analysts' estimates of 10.29 billion pounds. BP Plc is down nearly 4% today after Europe's second-biggest oil company posted a -$3.3 billion Q4 loss, its first quarterly loss in seven years, and is leading other European energy producers lower. European producer-price inflation slowed to the lowest level in 16 months in December with Dec Euro-Zone producer prices up +1.8% y/y, which gives the ECB more scope to continue cutting interest rates. In Asia, the Bank of Japan (BOJ) today said will buy 1 trillion yen ($11.1 billion) of stock from financial companies with a credit rating of BBB- and higher in an attempt to shore up their capital, The BOJ said it will purchase stocks until April 2010, resuming a program it ended more than four years ago. BOJ Governor Shirakawa said his bank will hold the shares until at least March 2012 and is an attempt to improve banks' balance sheets and make it easier for them to lend. In Australia, Aussie central bank Governor Stevens cut its overnight cash rate target by 1.00 full point to a 45 year low of 3.25% and the government said it will spend A$42 billion ($27 billion) in a stimulus measure for households and on the country's infrastructure.

Pending home sales – Today’s Dec pending home sales report is expected to be unchanged m/m following November’s decline of –4.0% m/m. The pending home sales report measures the change in home sales contracts and generally leads to existing home sales within one to two months, thus providing some leading information on the existing home sales series. The pending home sales series on a year-on-year basis was down –3.9% in October and –9.6% in November and after brief rise into positive territory of +7.9% in September and +5.1% in August 2008. US existing home sales rose +6.5% to 4.74 million in December from the record low of 4.45 million units seen in November. However, about 45% of those home sales involved sales at distressed prices from foreclosures and short sales. The good news is that some homes are getting sold, but the bad news is that steep price declines are necessary to get those deals done. Home prices will likely have to go substantially lower before the huge unsold inventory of homes on the market can be cleared. There were 8.7 months worth of existing homes on the market as of December, which was a 1-1/2 year low and was down from the peak of 11.0 months seen in June 2008. However, the supply of homes on the market is still nearly double the average of about 4.5 months seen in 2002-05 prior to the emergence of the housing crisis.

Vehicle sales – Today’s Jan total US vehicle sales report is expected to edge lower to 10.2 million units from 10.3 million units in December. US vehicle sales fell off a cliff to the 26-year low of 10.2 million units in November from the average of about 16 million units seen in 2007. There is little prospect for any major improvement in US vehicle sales as long as layoff announcements continue and the US economy remains mired in a serious recession. The plunge in vehicle sales is having substantial negative spillover effects into the US manufacturing sector and the US economy at large.

Barchart.com U.S. Morning Call for Monday, February 2, 2009

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The European DJ Stoxx 50 this morning is down -2.54% and March S&Ps are down -10.30 points (-1.25%). The Asia-Pacific stock markets today closed mostly lower with Japan -1.50%, Hong Kong -3.14%, China +1.20%, Taiwan +0.28%, Australia -1.22%, Singapore -2.36%, South Korea -1.54%, India -3.79%. Barclays Plc plunged 11% after having its long-term debt rating downgraded to Aa3 from Aa1 by Moody's Investors Service, citing "potentially significant further losses" from credit asset writedowns. Also helping send European stocks lower today is the 12% drop in BNP Paribas SA, France's biggest bank, after it said the revised purchase of Fortis units won't increase its capital ratio as previously announced. In Asia, Hitachi, the world's third-largest maker of hard-disk drives, plummeted 17% after forecasting a record loss, while Mizuho, Japan's second-largest listed bank, fell 6.6% after posting its second quarterly loss in a row and Sharp Corp., Japan's largest maker of liquid-crystal-display televisions, slumped nearly 5% after the Asahi newspaper reported the company may post its first net loss since the stock first traded in 1956. The Russian ruble fell to its lowest level since 1998 and has now dropped 35% against the dollar since August as investors have withdrawn over $290 billion from the country and the Russian central bank has devalued the ruble 20 times since mid-November. Russia has reduced its foreign currency reserves, the world's third largest, by more than a third to $386.5 billion as it bought rubles to defend its currency.

Market attention this week will focus on (1) this week’s busy economic schedule as the market looks for additional weak economic data after last Friday’s Q4 GDP report of –3.8% was actually a decline of –5.1% excluding inventories, leading to expectations for a GDP drop of about 5% in the current quarter, (2) the $800+ billion stimulus package which is wending its way through Congress and any news on the Obama administration’s new financial system bailout plan that is under development, (3) the US stock market which continues to move generally sideways in a trading range, (4) the T-note market which has moved lower in the past several weeks on the weight of huge Treasury security issuance (the Treasury this Wednesday will announce next week’s expected $69 billion refunding operation), (5) the dollar which remains generally strong due to continued emergency dollar liquidity demand and repatriation of assets by US investors, and (6) crude oil prices which continue to trade on the defensive due to weak global economic growth and weak fuel demand.

Q4 earnings – This will be another busy earnings week with 102 of the S&P 500 companies due to report Q4 earnings. The Q4 earnings estimate for the S&P 500 companies fell further to –35.2% y/y from –28.1% the previous week due to some weaker-than-expected earnings reports last week in the financial sector (e.g., Fifth Third and Capital One), according to Reuters Thomson. The Financials sector is showing disastrous earnings growth of –549% in Q4. But even excluding Financials, the consensus for the remainder of the S&P 500 is for negative earnings growth of –18.2% in Q4, attesting to the difficult earnings situation across virtually all industries. The earnings situation is expected to remain extremely negative all year with the analyst consensus for –24.7% earnings growth in Q1, -22.0% in Q2, -7.9% in Q3, and –12.5% in Q4, according to Thomson Reuters’ analyst survey.

Fed policy – The FOMC at its meeting last week left its funds rate target unchanged at zero to 0.25%, which was fully in line with market expectations. The main news in the post-meeting statement was that the FOMC said it continues to consider buying longer-dated Treasury securities as a quantitative easing move. However, the FOMC gave no timetable or indication of whether it will actually implement the program. Instead, the FOMC seemed to be offering the program as a contingency plan if things take a turn for the worse. The FOMC, by mentioning the possible quantitative easing and by saying that rates will remain low for an extended period of time, is trying to counteract the view of some that the Fed has no weapons left to fight the liquidity war since interest rates are already essentially at zero. In fact, the Fed is still directly battling the crisis with liquidity injections into the commercial paper and mortgage markets, sidestepping hamstrung banks that are likely to just sit on excess reserves rather than boost lending. The market is expecting the funds rate to remain below 0.25% through the next FOMC meeting on March 17. The market is then looking for a slow rise in the funds rate to 0.50% by November 2009, to 1.00% by May 2010, and to 1.50% by August 2010, according to the federal funds futures market.

Personal income-consumption and deflator – Today’s Dec personal income report is expected to show a decline of –0.3%, adding to the –0.2% decline seen in November. Dec personal spending is expected to show a sharp decline of –0.9%, adding to November’s decline of –0.6%. On the inflation front, today’s Dec PCE deflator is expected to ease to +1.1% y/y from +1.4% y/y in November. The Dec PCE core deflator is expected to be unchanged m/m and +1.7% y/y following November’s report of unchanged m/m and +1.9% y/y.

The expected decline in the core PCE deflator, which is the Fed’s preferred inflation measure, to +1.7% in December from +1.9% in November would illustrate the disinflation trend that is being caused by the sharp decline in input costs and demand. The core deflator in coming months is likely to challenge the 47-year low of +1.0% posted in 1998 and the record low of +0.9% seen in 1961. Based on the history of the series, it appears unlikely that the core deflator will actually turn negative and indicate deflation. However, the bottom of the current crisis has not necessarily been seen and thus it is too early to predict whether deflation will emerge.

ISM manufacturing index – Today’s Jan ISM manufacturing index is expected to show a small increase of +0.1 to 33.0, stabilizing after the –3.3 point decline to 32.9 seen in December. The ISM manufacturing index has plunged since September to post a 28-year low of 32.9 in December and has now been below the boom-bust level of 50 since February 2008. The record low for the series, which has history all the way back to 1948, is 29.4 posted in May 1980. The ISM index in January was therefore only 3.5 points above that record low, attesting to the extreme pessimism among manufacturing executives. Meanwhile, the ISM’s prices-paid index is expected to show a slight 1.0 point recovery to 19.0 in January from the 60-year low of 18.0 posted in December. The prices-paid index has seen a dramatic reversal in the past six months, plunging to 18.0 from the 28-year high of 91.5 seen as recently as June 2008.

U.S. Morning Call for Thursday, January 29, 2009

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The European DJ Stoxx 50 this morning is down -1.11% and March S&Ps are down -7.20 points (-0.83%). The Asia-Pacific stock markets today closed mostly higher with Japan +1.79%, Hong Kong +4.58%, Australia +0.88%, Singapore +0.04%, South Korea +0.83%, India -0.23%. Stock markets in China and Taiwan remain closed for the Lunar New Year Holiday. Economic confidence in the Euro-Zone declined in Jan by -1.5 to 68.9, the lowest level since the index was created in 1985, and adding to arguments for further ECB interest rate cuts. German unemployment rose almost twice as much as forecast in Jan (+56,000 versus expectations of +30,000) and the unemployment rate climbed to 7.8%, +0.1 higher than the 7.7% expected. Xstrata sank over 8% after the mining company said it plans to raise 4.1 billion pounds ($5.8 billion) in a two-for-one rights offer to pay down debt and buy Columbian coal assets from Glencore International AG, its largest shareholder. Falling metal prices aided the slide in other mining companies today with BHP, the world's largest mining company, down nearly 4%, and Rio Tinto Group, the third-largest, down over 7%. London Stock Exchange dropped over 6% after Citigroup downgraded it to "sell" from "hold," citing a weak trading volume outlook while Deutsche Boerse AG fell 4% after having its share-price estimate cut 37% to 54 euros. Supporting Asian bank stock prices today was the action by the Reserve Bank of New Zealand in cutting its benchmark rate a larger-than-expected 1.5 points to 3.5% and saying there's room for further rate reductions. Asian exporters rallied on optimism that US government measures to revive the economy will shore up consumer demand. Yue Yuen Industrial, who supplies shoes to Nike and Adidas, climbed over 3%, Sony rallied 4% and Canon, the world's largest camera maker, rose nearly 2%.

Unemployment claims – Today’s weekly initial unemployment claims report is expected to show a decline of –14,000 to 575,000, reversing part of last week’s surge of +62,000 to 589,000. Meanwhile, weekly continuing claims are expected to rise +13,000 to 4.620 million, adding to last week’s rise of +97,000 to 4.607 million. The initial claims series is just slightly below the mid-December 26-year high of 589,000, indicating that layoffs continue at a very strong pace. The continuing claims series is just below the late-December 26-year high of 4.612 million, indicating that the number of people on the unemployment rolls is at the highest level in 26 years, attesting to the very tough employment situation.

Durable goods orders – Today’s Dec durable good orders report is expected to show a decline of –2.0% overall and a –2.7% decline excluding transportation. That would follow November’s mixed report of –1.5% overall and +0.6% ex-transportation. The durable goods series in November fell sharply by –18.3% on a year-on-year basis, which is the largest drop since 2001. Orders have plunged as businesses panic in the current environment and pull back on ordering new goods in order to cut inventory. The sharp drop in orders will translate into lower shipments and economic growth within the next several months.

New home sales – Today’s Dec new home sales report is expected to show a decline of –2.5% to 397,000, adding to November’s decline of –2.9% to 407,000. November’s new home sales level of 407,000 was an 18-year low. This past Monday’s Dec existing home sales report showed a surprise increase of +6.5% to 4.74 million units, which was much better than market expectations for a decline of –2.0%. However, that increase was sparked largely by distress sale prices since 45% of the sales were of homes that were being sold in foreclosure or as a short sale. US homebuilders may take a cue from conditions in the existing home sales market and start to cut prices more sharply on their unsold inventories of new homes. The supply of new homes on the market is currently extremely high at 11.5 months, which is just slightly below the record high of 11.8 months posted in October (history for the series goes back to 1963).

5-year T-note auction – The Treasury today will sell $30 billion in 5-year T-notes. The $30 billion size of today’s auction is up from $28 billion in December and is more than double the $13 billion level seen in late 2007. The 12-auction averages for the 5-year are as follows: 2.14 bid cover, $85 million in non-competitive bids, 5.49 bp tail to the median yield, 14.58 bp tail to the low yield, 59% taken at the high yield. Indirect bidders, a category mainly composed of foreign central banks, have taken an average of 26.9% of the last twelve 5-year auctions, which is mildly below the average of 32.1% across all recent Treasury coupon auctions

Barchart.com U.S. Morning Call for Wednesday, January 28, 2009

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Global stock markets are trading at 1-week highs this morning as details emerge about an Obama administration plan to absorb toxic bank assets. The European DJ Stoxx 50 this morning is up +1.79% and March S&Ps are up +19.20 points (+2.29%). The Asia-Pacific stock markets closed higher with Japan +0.56%, Australia +1.50%, Singapore +4.80%, South Korea +6.55%, India +2.81%. China, Hong Kong and Taiwan remain closed for the Lunar New Year Holidays. Bank stocks worldwide are sharply higher on speculation the US government will set up a so-called bad bank in an attempt to spur lending by absorbing toxic assets. The bad-bank plan may allow the government to rewrite some of the mortgages that underpin banks' toxic debt with the Federal Deposit Insurance Corporation (FDIC) running the operation. The FDIC would manage and sell the bad assets and could help finance the effort by issuing bonds guaranteed by the FDIC. An Obama administration official said outlines of its financial-rescue plan may be announced as early as next week. Deutsche Bank AG, Barclays Plc, Bank of America and Citigroup all surged at least 11% on the news. Also helping European share prices today is the 5.5% rise in Germany's SAP as the world's largest maker of business management software reported Q4 net income of 850 million euros, topping analysts' estimates of 746.5 million euros and the company said it will slash 3,000 jobs and freeze salaries to cut costs. In Asia, the world's largest makers of computer memory chips, Samsung and Hynix Semiconductor, rallied 11% and 15% respectively on analyst expectations that an industry wide glut of memory chips will ease after rival Qimonda AG filed for bankruptcy.

MBA mortgage apps – The weekly MBA mortgage applications index plunged -38.8% as the recent climb in mortgage rates deterred any new refinancings or home puchases. The refinancing sub-index plummeted –48% and the purchase sub-index fell -2.9%. The -38.8% fall in the mortgage applications index along with the -48% plunge in the refinance sub-index were the biggest weekly declines in 16 years. The refinancing index fell further from its recent 5-1/2 year high as homeowners may be holding off on trying to refinance until new government initiatives to lower borrowing costs prove more successful. That refinancing activity is good for the economy since it is providing consumers will lower mortgage payments and cash-out equity in some cases. By contrast, the MBA purchases sub-index is only moderately above the recent 8-year low, indicating that few applications are being filed for mortgages for home purchases. The 30-year mortgage rate in the latest week (Jan 22) rose by 16 bp to 5.12% from the previous week’s record low of 4.96%. The latest mortgage rate of 5.12% is still sharply below the mid-6% area seen just several months ago, but the rise in the latest week suggests that mortgage rates may have bottomed out. The Fed was able to spark the 150 bp plunge in the 30-year mortgage rate seen from November through January through its $600 billion program of purchasing mortgage securities and buying the debt of Fannie Mae and Freddie Mac, thus reducing their financing costs.

FOMC meeting – The FOMC at its 2-day meeting that concludes today is expected to leave its funds rate target unchanged from its current range of zero to 0.25%. The FOMC at its last meeting in December surprised the market by cutting the funds rate straight to the zero to 0.25% range from the previous target of 1.00%. The Fed’s move provided additional confidence that the Fed recognizes the seriousness of the situation and the need to move quickly and forcefully to provide liquidity to the banking system and financial markets. The market expects the average funds rate to remain below 0.25% through March 2009. The market is then looking for the funds rate to rise slowly to 0.50% by November 2008, to 1.00% by May 2010, and to 1.50% by October 2010. Now that the funds rate is near zero, the Fed’s only recourse on the funds rate is to promise that it will remain at an extremely low level for an extended period of time. The FOMC is likely to repeat that promise in today’s post-meeting statement. The Fed may also again refer to its willingness to expand current direct-liquidity programs such as buying commercial paper, mortgages, and securitized consumer and small-business loans. By buying those securities, the Fed is providing liquidity directly into borrowing channels, bypassing the nations’ large banks, which are hamstrung by losses and weak capital bases. The markets will be listening carefully to see if the Fed is any closer to a quantitative easing involving the direct purchase of longer-term Treasury bonds. That would push long-term Treasury yields lower and help private long-term rates to fall as well, thus providing further benefits to corporate and mortgage borrowers.

Barchart.com U.S. Morning Call for Tuesday, January 27, 2009

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The European DJ Stoxx 50 this morning is down -1.18%, although March S&Ps are up +4.50 points (+0.54%). The Asia-Pacific stock markets that were open (many closed for holiday) closed sharply higher today with Japan +4.93%, Australia +3.03%, India +3.80%. German business confidence unexpectedly rose for the first time in eight months as the Jan IFO business climate index rose +0.3 to 83.0 after the ECB continued its rate cutting cycle and the German government doubled the amount put aside for a stimulus package. Undercutting European share prices today are the over 3% drops in BHP Billiton and Rio Tinto Group as lower copper prices today weigh on the earnings outlook for the mining companies. Siemens, Europe's biggest engineering company, is trading 3.2% higher today after reporting Q4 sector profit up 20% to 2 billion euros ($2.6 billion), higher than analysts' estimates of 1.83 billion euros. Asian stock markets were boosted today after reports from Japan's Trade Ministry that the Japanese government may let a state-owned bank purchase stock in companies struggling to raise capital and the government will guarantee the investments should the companies go bankrupt. Mitsubishi UFJ, Japan's biggest bank, soared 8.5% while Mizuho Financial Group, Japan's second-largest bank, surged 12%. Commonwealth Bank, Australia's biggest mortgage lender, rose nearly 3% today after the Aussie government pledged $2.7 billion in lending for commercial property companies in case foreign banks don't renew business loans.

US home prices – Today’s Nov S&P/CaseShiller composite-20 home price index is expected to fall to a new record low of –18.4% y/y from –18.0% y/y in October. The Case-Shiller index has fallen by a total of -23.4% from the index peak seen in July 2006. US home prices are likely to continue to fall in coming months due to the huge supply of homes that are on the market and due to the reluctance of anyone to buy a home except at a bargain price. Yesterday’s Dec existing home sales report showed an unexpected increase of +6.5% (versus expectations for a –2.0% decline). However, 45% of those sales were at distressed prices involving a foreclosure or short sale. The good news from yesterday’s existing home sales report is that there do appear to be some buyers for homes, but the bad news is that those buyers are only willing to buy at distressed prices that involve little risk on the buyer’s part that the home price could fall even farther.

US consumer confidence – Today’s Jan US consumer confidence index is expected to show a small +1.0 point increase to 39.0, recovering some of the –6.7 point drop to 38.0 seen in December. The December level of 38.0 was a record low for the series, which has history back to 1967. US consumer confidence remains at rock bottom with the ongoing drumbeat of bad news including the banking crisis, falling home prices, and the raft of layoff announcements. The only good news at present is that the stock market has been relatively stable recently and that gasoline prices and mortgage rates are low. However, those positive factors provide little encouragement to anyone who has already lost his/her job or who is afraid of being laid off soon.

Richmond Fed index – Today’s Jan Richmond Fed manufacturing index is expected to rebound higher by +5 points to -50, recovering part of the sharp –17 point decline to –55 seen in December. The Richmond Fed index is at a record low and has been in negative territory since May 2008. The Richmond-area manufacturing sector is clearly in a deep recession, along with the rest of the US manufacturing sector.

2-year T-note auction – The Treasury today will sell $40 billion in 2-year T-notes. The size of today’s auction is up from $38 billion in December and is more than double the $18 billion size seen in the first half of 2007. The Treasury continues to steadily boost the size of its auctions to finance the various Fed/Treasury bailout programs and the increased government costs tied to the recession. Today’s 2-year issue was trading at 0.90% in when-issued trading late yesterday afternoon. The 12-auction averages for the 2-year are as follows: 2.30 bid cover, $603 million in non-competitive bids, 4.62 bp tail to the auction yield, 11.56 bp tail to the low yield, and 44% taken at the high yield. The 2-year is not overly popular among foreign central banks. Indirect bidders, a category that mainly includes foreign central banks, have taken an average of 29.3% of the last twelve 2-year T-note auctions, which is mildly below the average of 32.1% across all recent Treasury coupon auctions

Barchart.com U.S. Morning Call for Friday, January 23, 2009

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Global stock markets are sharply lower today with the European DJ Stoxx 50 this morning down -1.48% at a 5-3/4 year low and March S&Ps are down -16.10 points (-1.95%). Asia-Pacific stocks closed lower with Japan -3.81%, Hong Kong -0.63%, China -0.58%, Austalia -4.13%, Singapore -1.38%, South Korea -2.32%, India -1.58%. Disappointing company earnings along with concern that banks may need to raise more capital is sending equities lower today. South Korea's Samsung lost over 4% after reporting a Q4 loss of 22.2 billion won ($16 million), more than double what analysts' had expected while Japan's Sony, the world's second-biggest consumer electronics maker, plunged 7% after forecasting its first annual loss in 14 years. Infineon Technologies, Europe's second-biggest semiconductor maker, slumped over 6% as its Qimonda unit filed for insolvency after failing to secure adequate financing following a drop in memory-chip prices. Westpac Banking, Australia's largest bank by market value, sank nearly 6% after Bernie Fraser, a former Aussie central bank governor, predicted a "longer" recession for the country than the last recession in 1991 and Australia's BHP Billiton Ltd., the world's biggest mining company, lost almost 6% as well after Nomura Holdings cut its recommendation on the company to "neutral" from "buy," citing slowing demand for industrial metals.

The UK economy contracted in Q4 2008 more than estimated as the financial crisis drives England deeper into recession. Q4 GDP in the UK contracted -1.5% q/q, more than the -1.2% q/q estimated, and the biggest contraction in UK growth since Q2 of 1980. Along with the drop in UK growth in Q3 of -0.6% q/q, the UK economy officially meets the conventional definition of a recession with back-to-back contractions in economic growth. The European Commission forecasts the UK economy will contract -2.8% this year, the most since 1946 whem Britain was in the grip of mass demobilization after WWII. The British pound has been decimated this week after the UK government's plan for a second bank bailout in three months raised concern the nation's budget deficit will keep widening. The pound this week fell to an all-time low against the yen, a 23-year low against the dollar and a 7-year low against the euro

Barchart.com U.S. Morning Call for Thursday, January 22, 2009

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The European DJ Stoxx 50 this morning is up +0.51%, although March S&Ps are down -4.30 points (-0.51%). Asia-Pacific stocks closed higher today with Japan +1.90%, Hong Kong +0.59%, China +1.13%, Australia +1.28%, Singapore +0.25%, South Korea +1.27%, India +0.39%. Global equity markets today are finding support on speculation that government measures will help revive the global economy. HSBC, Europe's largest bank, and Societe Generale, France's third-largest lender, are both up over 5% while Deutsche Bank, Germany's biggest bank by assets, is higher by over 6%. Bank stocks are receiving a boost today from comments made by President Obama's nominee Treasury Secretary, Timothy Geithner, that his office will have an expanded role in stabilizing banks on a "very dramatic scale." Also supporting bank stocks today is the report from the German newspaper Handelsblatt, that the German government is working on a new rescue plan for its country's lenders. European stock gains were limited after Nokia Oyi, the world's largest mobile phone maker, reported weaker-than-expected Q4 earnings and said industry sales will fall 10% in 2009 while Fiat, Italy's biggest carmaker, slumped 13% after it cut its earnings forecst for this year and said it won't pay a dividend to common shareholders. Asian stocks received a boost today after the Bank of Japan said it may purchase corporate bonds to prevent a credit shortage as the BOJ joins the Fed and the BOE in implementing additional measures to assist credit-starved banks and companies. In additional signs that the global economic slowdown is deepening however, China reported its Q4 GDP at 6.8%, the slowest pace of growth in seven years, while South Korean Q4 GDP contracted -5.6%, a larger-than-expected decline and the biggest contraction in South Korean growth since the Asian financial crisis a decade ago.

Mortgage apps – The MBA report was postponed until today due to Monday’s U.S. holiday. Today's weekly MBA mortgage applications fell -9.8% with the purchase sub-index rising +2.5% and the refinancing sub-index declining -12.4%, falling back from the previous week's 5-1/2 year high. That 5-1/2 year high in the refinancing sub-index illustrated the fact that refinancing activity is very high, thus benefiting the economy through cutting consumers’ mortgage payments and allowing some homeowners to withdraw equity to boost spending or pay down debt. By contrast, the purchases sub-index is only modestly above the recent 8-year low, illustrating the ongoing slump in home-buying activity. The 30-year mortgage rate in the week ended January fell by another 5 bp to a new record low of 4.96%. The low mortgage rate is encouraging refinancing activity, but is also making homes more affordable to buy as well, thus providing some stimulus to the housing market.

Claims – Today’s weekly initial unemployment claims report is expected to show an increase of +16,000 to 540,000, adding to last week’s increase of +54,000 to 524,000. Meanwhile, weekly continuing claims are expected to rise by +30,000 to 4.527 million, reversing part of last week’s decline of –115,000 to 4.497 million. Both the initial and continuing unemployment claims series are only moderately below their recent 26-year highs. That indicates that a huge number of people are being laid off from their jobs and that the cumulative number of people on unemployment is extremely high. The US unemployment rate in December rose to a 16-year high of 7.2% and appears headed to easily exceed the 1992 peak of 7.8%, though hopefully stop short of the record high of 10.8% posted in 1982.

Housing starts – Today’s Dec housing starts report is expected to show a decline of –3.2% to 605,000, adding to the –18.9% plunge to 625,000 seen in November. Dec building permits are expected to fall –2.4% to 600,000, adding to the –13.1% decline to 615,000 seen in November. US housing starts plunged in late 2008 as builders reacted to the credit crisis and the severe economic conditions. There is a huge supply of new homes already on the market and builders are therefore cutting back their building plans even further. US housing starts are already at the lowest level since the history of the series began in 1959 and there is little reason to expect any rebound in housing any time in at least the first half of 2009.

US house prices – Today’s Nov house price index from OFHEO (Office of Federal Housing Enterprise Oversight) is expected to show a decline of –1.2% m/m, adding to the –1.1% m/m decline seen in October. On a year-on-year basis, the series hit a record low of –7.5% y/y in October, although the history for the series only goes back to 1992. US home prices are likely to continue to fall in at least the first half of 2009 due to the huge supply of homes that are on the market and the increased number of foreclosures, which is causing banks to dump houses onto the market at fire sale prices

Barchart.com U.S. Morning Call for Wednesday, January 21, 2009

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The European DJ Stoxx 50 this morning is down -1.48% at a 2-month low while March S&PS ae up +5.50 points (+0.68%). Asia-Pacific stocks closed mostly lower with Japan -2.04%, Hong Kong -2.90%, China -0.17%, Taiwan +0.13%, Australia -0.97%, Singapore -1.09%, South Korea -2.22%, India -3.53%. Fears that the global recession is deepening is eroding European and Asian stock prices today. ThyssenKrupp AG, Germany's largest steelmaker, is down nearly 3% after Morgan Stanley downgraded the company to "underweight" from "equalweight" saying 2009 may be the worst year for the steel industry on record. Angang Steel, China's second-biggest steelmaker, plunged 13% after saying earnings last year were half of the previous year. Global bank stocks continued lower today on fears that they will need to raise more capital. Barclays Plc is trading down 24% today for its seventh straight daily loss on speculation it may be forced to take more writedowns and be nationalized, while BNP Paribas, France's largest bank, is down over 5%. French President Sarkozy late yesterday agreed to provide a further 10.5 billion euros ($13.5 billion) in aid for France's biggest banks in exchange for their top executives giving up bonuses. HSBC Holdings Plc, which owns two banks in Hong Kong, fell over 4% on capital concerns while Mitsubishi UFJ Financial, Japan's largest listed bank, lost 3.8% and National Australia Bank Ltd, Australia's biggest bank by assets, dropped over 4%. On the positive side, European technology stocks were led higher by a 14% gain in Ericsson AB after the world's largest maker of wireless networks said Q4 net income was higher than expected and it said it plans to deepen cost reductions and eliminate about 5,000 more jobs. IBM is trading 3.3% higher in Europe this morning after saying its 2009 net income will climb to $9.20 a share, higher than analysts' estimates of $8.75.

NAHB housing market index – Today’s Jan NAHB housing market index is expected to be unchanged at 9. The NAHB index in December was unchanged from November’s level of 9, which was a record low for the series that has history back to 1985. The National Association of Home Builders index measures the general state of the single-family home market, with 50 being the demarcation between a “good” versus “poor” outlook for the single-family home marketplace. The index has been below the boom-bust level of 50 since May 2006. The NAHB index continues to bump along at its record low since there is basically no reason for optimism among homebuilders. The decline in mortgage rates is a positive factor, but there is still a huge supply of homes that are already on the market to chew through before homebuilders can even think about coming up with new building plans. With the US economy in a deep recession, there is little reason to think that potential homebuyers will go out and buy a new home unless the price is slashed to fire-sale level.

Barchart.com U.S. Morning Call for Tuesday, January 20, 2009

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The European DJ Stoxx 50 this morning is down -0.34% and March S&Ps are down -5.00 points (-0.59 %). Asia-Pacific stocks closed mostly lower today with Japan -2.31%, Hong Kong -2.85%, China +0.63%, Taiwan -2.84%, Australia -3.14%, Singapore -1.35%, South Korea -2.31%, India -2.45%. The US stock market is playing catch up today from Monday's losses in the European markets after Royal Bank of Scotland (RBS) said it expects to post a 28 billion pound ($41 billion) loss for 2008, the biggest loss ever for a UK company, with the stock plunging -67% after the announcement. UK Prime Minister Brown today said the British government will spend an extra 100 billion pounds ($142 billion) to support its banks and it will increase its stake in RBS as the government takes another step towards nationalizing RBS and taking full control of the bank. Also hurting European stocks Monday were the updated economic forecasts from the European Commission who cut their growth estimate for this year for the Euro-Zone to a contraction of -1.9%, much lower than a November estimate of +0.1%, with comments from EU Monetary Affairs Commissioner Alumunia theat "the overall outlook is grim" and from ECB President Trichet that economic prospects are "substantially" worse than the ECB predicted last month. A bright spot today for the European markets today was the larger-than-expected rise in the Jan German ZEW economic sentiment to a 14-month high as German investor confidence increased for the third straight month. In more signs that the global economic slowdown is deepening, Japan's consumer confidence in December tumbled to its lowest level since records began in 2004 and Japan's Cabinet Office today said the economy is "worsening rapidly," as it lowered its economic assessment for a fourth straight month, while in China the Chinese government warned that the official Chinese urban unemployment may climb to 4.6% this year, the highest since 1980.

The markets this week will focus on (1) Senate confirmation hearings for Timothy Geithner as Treasury Secretary and whether Mr. Geithner throws any light on the Obama administration’s plan for a further bail-out the U.S. banking system and how the new $350 billion in TARP money will be used, (2) President-elect Obama’s inauguration on Tuesday and how quickly he can push through his $850 billion stimulus plan, (3) this week’s heavy schedule of Q4 earnings reports, (4) bank stocks after last week’s sharp sell-off on concerns about more losses for major US banks, (5) the US stock market which sold off last week on banking concerns and a spate of new layoff announcements by major US corporation, (6) T-note prices which were supported last week by the new turmoil for the US banking system, although T-note prices fell Friday after Bank of America received new aid from the U.S. government, and (5) the dollar which posted a new 1-month high last Thursday on continued demand for dollars for emergency liquidity and from US investors who are still repatriating investments from overseas.

This week’s US economic calendar is light. Wednesday’s Jan NAHB housing market index is expected to be unchanged at a record low of 9. Thursday’s unemployment claims report is expected to show increases for both initial and continuing claims. Thursday’s Dec housing starts report is expected to show a –2.4% to a new record low. Thursday’s Nov US house price index report is expected to fall by another 1.2%.

Fed policy – The market last week reduced expectations for the average funds rate in the latter half of 2009 by about 7 bp due to renewed concern about US bank losses. The market is currently expecting the funds rate to remain below 0.25% through June 2009 and below 0.50% through November 2009. The market is then expecting a slow rise in the funds rate to 1.00% by June 2010.

Barchart.com U.S. Morning Call for Friday, January 16, 2009

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Stock markets are higher around the world today after the US Treasury, Federal Reserve and Federal Deposit Insurance Corp. announced it will invest $20 billion in Bank of America and guarantee $118 billion of assets to help the bank absorb its takeover of Merrill Lynch. Bank of America is trading 12% higher in European trading today. The European DJ Stoxx 50 this morning is up +3.21% and March S&Ps are up +15.80 points (+1.88%). Asia-Pacific stocks closed higher with Japan +2.58%, Hong Kong +0.09%, China +1.81%, Taiwan +0.76%, Australia +0.61%, Singapore +1.55%, South Korea +2.05%, India +3.06%. Citigroup is up 12% in European trading after announcing it will split itself into two businesses. Intel is trading 4% higher in European trading and boosting European chipmakers after saying late yesterday that profit margins may bottom out in the current quarter and rebound thereafter as orders pick up from customers running low on inventories. European exports dropped by -4,7% in Nov, the biggest monthly decline in 8-1/2 years, as the global economic slowdown crimped demand for the region's goods which helped to widen the Euro-Zone trade deficit for the first time in four months to -4.9 billion euros. HSBC Holdings Plc, Europe's biggest bank, is down 2.7%, bringing this week's loss to 14%, after Goldman Sachs downgraded the bank to a "conviction sell," citing effects from the worsening US economy and falling property prices. Asian stocks received a boost today after Shanghai Securities News reported that China said it's enacting stimulus plans for nine industries including steelmakers, carmakers, and shipbuilders.

CPI – Today’s Dec CPI report is expected to show a sharp decline of –0.9% m/m, adding to the –1.7% m/m decline seen in November. The core CPI (ex-food and energy) is expected to show a small increase of +0.1% m/m following November’s report of unchanged m/m. On a year-on-year basis, the Dec CPI is expected to fall to –0.2% y/y from +1.1% y/y in November. The Dec core CPI is expected to ease to +1.8% y/y from +2.0% y/y, thus falling below the unofficial 2.0% ceiling for inflation. The CPI figures are dropping sharply due to the plunge in energy and commodity prices and the overall weak demand for goods and services. The CPI posted an 18-year high of +5.6% as recently as July 2008, and is now expected to turn negative in today’s report for December. The CPI in this cycle is not likely to fall as much as the –10.7% y/y trough seen during the Depression, but the 50-year low of –2.9% posted in 1949 is in sight. Yet, the Fed is more concerned about the core CPI since the overall CPI figure is distorted by the extreme volatility of oil prices. The core CPI on a year-on-year basis has never turned negative since its history began in 1958. Yet there is likely to be a challenge in this cycle of the 43-year low of +1.1% posted in 2004. With the US economy possibly in the worst shape since the Great Depression, the Fed continues to pull out all the stops to halt deflationary trends and try to keep the US economy afloat. The core CPI will be one measure of whether the Fed is winning the battle against deflation.

Industrial production –Today’s Dec industrial production report is expected to show a sharp decline of –1.0%, adding to the –0.6% decline seen in November. On a year-on-year basis, the Dec industrial production report of –5.5% was just above the 26-year low of –6.3% posted in September. The US manufacturing sector is in a severe recession at present and there is little suggest that the US manufacturing sector will see a recovery any time in at least the first half of 2009. The US manufacturing sector is being hurt by weak domestic demand, the melt-down in the US auto sector, and weak overseas demand for US manufactured products.

US consumer confidence – Today’s preliminary-Jan US consumer confidence index from the University of Michigan is expected to show a –1.1 point decline to 59.0, reversing part of December’s recovery of +4.8 points to 60.1. The US consumer confidence index hit a 28-1/2 year low of 55.3 in November and then bounced higher in December. The record low for the University of Michigan’s US consumer confidence series, which has history back to 1978, is 51.7 in 1980. US consumer confidence in this cycle may have already fallen about as much as it can get in the wake of the banking crisis, the stock market melt-down, and the recessionary conditions in the US economy and labor market. The only positive items at present are low gasoline prices and mortgage rates, although those are little comfort to the growing number of people who are already on the unemployment rolls or who that fear losing their jobs in coming months

Overnight U.S. Stock News

March S&Ps this morning are sharply higher by ++15.80 points after Bank of America receives a $138 billion government lifeline. The US stock market yesterday moved lower into late morning and then staged a modest rally the rest of the session and managed to eke out a small gain for the day (Dow +0.15%, S&P 500 +0.13%, Nasdaq Composite +1.49%).
Bearish factors for stock prices yesterday included (1) the 18% plunge in Bank of America, the biggest US bank by assets, to an 18-year low and the 15% sell-off in Citigroup on concern both banks will need more government aid, (2) a larger-than-expected jump in US weekly unemployment claims, (3) the +41% jump in US foreclosure filings in Dec with total US foreclosure filings for 2008 surging +81% to 2,3 million homes, which may prolong the housing slump as lenders put thousands of bank-owned properties on the market, further pressuring home prices, (4) the 2.3% fall in shares of Apple after CEO Steve Jobs said he will take a medical leave of absence until June, and (5) the drop in energy producers as crude oil prices fell for the 7th time in the last eight sessions after OPEC said demand for its crude in 2009 will decline -4.2%.
Bullish factors for stock prices yesterday included (1) the bigger-than-expected rise in the Jan Empire manufacturing index, (2) the unexpected rise in the Jan Philadelphia Fed manufacturing index, and (3) the action by the Fed in buying $23.4 billion of Fannie Mae, Freddie Mac and Ginnie Mae mortgage bonds as part of the Fed's plan to lower mortgage costs and support the slumping housing sector

Barchart.com U.S. Morning Call for Thursday, January 15, 2009

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Global stock markets are trading at 5-week lows with The European DJ Stoxx 50 this morning down -0.23% and March S&Ps down -3.00 points (-0.36%). Asia-Pacific stocks closed sharply lower today with Japan -4.92%, Hong Kong -3.37%, China -0.02%, Taiwan -4.44%, Australia -4.27%, Singapore -3.44%, South Korea -6.12%, India -3.45%. Nov Japanese machine orders, an indicator for capital spending in the next 3 to 6 months, tumbled by a record -16.2% m/m, the biggest decline since the survey began in 1987. Japan's Advantest Corp., the world's number-one maker of memory-chip testing equipment, fell 9.8% while South Korea's Samsung Electronics, the world's largest television maker, lost 6.1%. Asian banking shares declined as well with Woori Financial, operator of South Korea's second-largest bank, plunging 11%, Mizuho Financial Group, Japan's third-largest bank, dropping 5.5% and Fubon Financial Holding, Taiwan's second-largest listed financial services company, losing 6.9%. Slumping metals prices and surging metal inventories are taking their toll on global mining companies with BHP, the world's largest mining company, losing 6.6%, Rio Tinto Group, the third-largest, plunging 8.2% and Australia's Alumina falling 8.5%. Japanese aluminum stockpiles climbed 17% in Dec to a 3-year high while LME copper inventories have risen 14% this year to a nearly 5-year high. South Korea's largest automaker Hyundai Motor slid 10% and its affiliate Kia Motors slumped 11% after Fitch Ratings today cut both companies debt to junk levels on waning global auto sales. In Europe today, ASML, Europe's largest maker of semiconductor equipment, fell over 4% and dragged other European tech companies lower after saying revenue this quarter will be between 180 and 200 million euros this quarter, lower than the company's Dec forecast of 250 million euros. European inflation dropped to a 2-year low of +1.6% y/y in Dec, giving the ECB enough cover to cut interest rates as the market expects a 50 bp cut today at the conclusion of their policy meeting.

Unemployment claims – Today’s weekly initial unemployment claims report is expected to show an increase of +38,000 to 505,000, more than reversing last week’s decline of –24,000 to 467,000. Meanwhile, weekly continuing claims are expected to rise +9,000 to 4.620 million, adding to last week’s surge of +101,000 to 4.611 million. Initial unemployment claims have fallen sharply from the recent 26-year high of 589,000, but remain in high territory that indicates that layoffs are still running at a high level. Continuing claims last week hit a new 26-year high and are now just mildly below the record high for the series of 4.713 million posted in 1982. That indicates how quickly the ranks of the unemployed are adding up, thus causing general despair and a sharp cutback in spending.

PPI – Today’s Dec PPI report is expected to decline by –2.0% m/m, adding to the sharp decline of –2.2% m/m seen in November. The Dec core PPI (ex-food and energy) is expected to show a small increase of +0.1% m/m, matching November’s increase of +0.1% m/m. On a year-on-year basis, the PPI plunged from the 17-1/2 year high of +9.9% in July 2008 to the +0.4% level seen in November. The record low for the PPI is –2.9% posted in 2002. Today’s Dec core PPI report is expected to ease to +4.1% y/y from the 19-1/2 year high of +4.2% y/y in November. The PPI figures will continue dropping sharply in coming months, illustrating that the Fed at present is mainly facing a threat from deflation.

NY and Philadelphia Fed manufacturing index – Today’s manufacturing indexes from NY and Philadelphia are expected to show little change and remain in deeply-negative territory, illustrating the recessionary conditions in the NY and Philadelphia manufacturing areas. Today’s Jan Empire manufacturing index is expected to show a small increase of +0.8 to -25.0, more than reversing December’s small decline of–0.4 to –25.8. Today’s Jan Philadelphia Fed manufacturing index is expected to fall –2.1 points to –35.0, reversing part of December’s modest upward rebound of +6.4 points to –32.9. The US manufacturing sector as a whole is clearly in recession and is suffering not only from weak domestic demand but also from a drop-off in overseas demand for US manufactured exports

Overnight U.S. Stock News

March S&Ps this morning are down -3.00 points as shares of Apple and Bank of America tumble. The US stock market yesterday moved lower throughout the day and closed sharply lower (Dow -2.94%, S&P 500 -3.35%, Nasdaq Composite -3.67%).
Bearish factors for stock prices yesterday included (1) the weaker-than-expected US Dec retail sales as US retail sales have now fallen for six straight months, the longest stretch of declines since data began in 1992, (2) the rise in the business inventory-to-sales ratio to a 7-year high of +1.41 months, a sign that businesses can't shed inventories fast enough as sales tumble, (3) the Fed's Beige Book, which showed the US economy weakened further in the past month across almost all regions as a lack of credit and declines in retail sales reduced business activity, (4) the 6% fall in the KBW Bank Index to a 13-year low as all 24 banks and financial companies in the index closed lower, and (5) the prediction from Minneapolis Fed President Stern that the first stage of a US economic recovery will probably be "subdued" with "healthy" growth returning sometime next year.
Bullish factors for stock prices yesterday included (1) waning inflation with the -9.3% y/y decline in the US import price index for Dec, the biggest y/y drop since the data series began in 1983, and (2) remarks from incoming Chief of Staff Emanuel that President-elect Obama's stimulus package will be $850 billion and include about $300 billion in tax cuts, larger than earlier reports of a $775 billion stimulus package.
Apple (AAPL) fell 7.7% in after-hours trading yesterday after CEO Steve Jobs said he will take a medical leave of absence until June.
Coventry Health Care (CVH) tumbled 9.6% in after-hours trading yesterday after the provider of US Medicare health plans said it expects to earn as much as $1.90 a share this year, well below analysts' estimates of $2.49.
Bank of America (BOA) fell nearly 4% in after-hours trading as the biggest US bank by assets may require aid from the government to help absorb losses tied to its acquisition of Merrill Lynch.
JPMorgan Chase (JPM) may be active today after earlier today reporting Q4 net income of 7 cents a share, higher than analysts' estimates of 1 cent

Barchart.com U.S. Morning Call for Wednesday, January 14, 2009

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The European DJ Stoxx 50 this morning is down -1.94% at a 1-month low and March S&Ps are down -7.60 points (-0.87%). Asia-Pacific stocks closed mostly higher today with Japan +0.29%, Hong Kong +0.27%, China +4.21%, Taiwan -0.24%, Australia +0.89%, Singapore +0.16%, South Korea +1.34%, India +3.30%. European stocks are lower for the sixth consecutive day as the banking sector drags down the market with Deutsche Bank, Germany's biggest bank, trading down 7% after reporting a Q4 loss of 4.8 billion euros ($6.3 billion) and HSBC Holdings Plc, Europe's largest bank by market value, tumbling 8.3% after Morgan Stanley predicted it will have to raise as much as $30 billion and cut its dividend in half and that the bank's profit is likely to fall "sharply" this year and won't recover until 2011 at the earliest. Rounding out the negative banking sector news, Exane downgraded UniCredit (down 3.5%), Italy's largest bank by assets, and smaller rival Banco Poplare (down 3.8%) to "underperform" from "neutral." Mining companies are lower today as well with Citigroup downgrading Anglo American (down 2.4%) and Xstrata Plc (down 4.1%) to "hold" from "buy," as well as several other smaller mining firms. Siemens AG is down by over 6% today after Merrill Lynch downgraded Europe's largest engineering company to "neutral" from "buy" after saying Q1 orders dropped "significantly." The Russian ruble fell to a nearly 6-year low against the dollar today as Russia's central bank devalued the ruble for the third time in four days and as the government's dispute with Ukraine over gas shipments remains unresolved. On the positive side, Toshiba and Fujitsu, Japan's second largest personal computer maker, gained more than 5% each as the companies neared an agreement to combine their hard-disk drive businesses and the UK government said today it will guarantee 21.3 billion pounds ($31 billion) of bank loans to small and medium-sized companies in order to keep credit flowing during the recession.

Mortgage apps – The latest overall weekly MBA mortgage applications index rose +15.8% to a 5-1/2 year high with the purchase sub-index down -14.1% and refinancing sub-index surging +25.6% to a 5-1/2 year high as homeowners continue to cash in on the recent plunge in mortgage rates. The purchases sub-index, however, is just above the recent 8-year low and remains at a depressed level that indicates lackluster home buying activity. The 30-year mortgage rate in the week ended January 1 fell by another 4 bp to a new record low of 5.10%. The 30-year mortgage rate has plunged by 136 bp since mid-October mainly because of the Fed’s recent program of buying mortgage securities and the debt of Fannie/Freddie.

Import prices – Today’s Dec import price index is expected to fall sharply by –5.3% m/m and –9.7% y/y, adding to the plunge seen in November of –6.7% m/m and –4.4% y/y. Import prices were up +21.4% y/y as recently as July 2008, and have now completely reversed course to show a –4.4% y/y decline in November. Import prices are dropping sharply mainly due to lower crude oil prices. However, import prices excluding petroleum are also dropping sharply, providing some good inflation news for the Fed and the markets. Import prices ex-petroleum were up only +2.4% y/y in November, which was sharply below the 20-year high of +7.8% seen in July 2008. Import prices are dropping due to the sharp drop in commodity prices and finished goods priced due to weak demand.

Retail sales – Today’s Dec retail sales report is expected to show a decline of –1.2% overall and –1.4% excluding autos. That would add to the sharp decline seen in November of –1.8% overall and –1.6% ex-autos. On a year-on-year basis, US retail sales in November fell by –7.4% y/y, which was a record low in the history of the series which goes back to 1993. Excluding auto sales, US retail sales were down by –2.9% in November. US consumer spending has plunged in the wake of the banking crisis that began in mid-September and the subsequent melt-down in the stock market. US consumers have sharply cut back on spending to prepare for what is likely to be a long and severe recession with sharply higher levels of unemployment.

Business inventories – Today’s Nov business inventories report is expected to show a decline of –0.5%, adding to the –0.6% decline seen in October. Businesses are trying to cut inventories to stay ahead of the sharp drop in demand, thus preventing their inventories from building up too much. The business inventory-to-sales ratio in the past several months has soared to a 5-1/2 year high of 1.34 months from the record low of 1.23 months seen in June 2008. The sharp rise in inventories puts pressure on businesses to sharply cut back on new orders and to slash prices on existing inventory to try to bring their inventory levels back down to more manageable levels

Overnight U.S. Stock News

March S&Ps this morning are down -7.60 points ahead of an expected weak US retail sales report for December. The US stock market yesterday gyrated between gains and losses throughout the day and finally closed mixed (Dow -0.30%, S&P 500 +0.18%, Nasdaq Composite +0.50%).
Bearish factors for stock prices yesterday included (1) comments from Fed Chairman Bernanke that "Fiscal actions are unlikely to promote a lasting recovery unless they are accompanied by strong measures to further stabilize and strengthen the financial system," (2) continued pessimism over US company earnings after Alcoa, the largest US aluminum producer, slumped -5.1% after reporting its first quarterly net loss in 6 years on reduced demand for aluminum and warning that the recession could weaken demand further this year, (3) the widening of the US budget deficit to a record -$485.2 billion for the first quarter of the 2009 fiscal year as the government used taxpayer money to shore up the financial system by purchasing stakes in banks, and (4) the prediction from TrimTabs Investment Research that US companies may make more stock available for trading this year after 5 years of declines which may hurt stock prices as stock float will be "flat to higher" this year after declining by $500 million in Q4 2008.
Bullish factors for stock prices yesterday included (1) a continuing thaw in interbank lending markets as the 3-month dollar Libor rate declined 7 bp to a 5-1/2 year low of 1.09%, (2) a rally in energy producers as crude oil prices rose for the first time in the last six sessions, (3) the 1.8% gain in the KBW Bank Index as it climbed for its first time in five days as JPMorgan Chase rallied 5.8% after saying it was moving its earnings announcement to Jan 15 from Jan 21, and (4) the decline in the S&P 500's valuation to less than 15.5 times reported earnings, the cheapest level since 1991.

Barchart.com U.S. Morning Call for Tuesday, January 13, 2009

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The European DJ Stoxx 50 this morning is down -2.20% and March S&Ps are down -5.50 points (-0.63%), both at 2-week lows. Asia-Pacific stocks closed mostly lower as well today with Japan -4.79%, Hong Kong -2.17%, China -2.32%, Taiwan +1.76%, Australia -0.78%, Singapore -0.81%, South Korea +0.95%, India -0.42%. Japan's Sony Corp. lost 8.9% after the Nikkei newspaper said the company will record an annual operating loss this year of 100 billion yen ($1.12 billion), for its first loss in 14 years, due to the stronger yen and weak demand for its electronics. Energy and metal producers fell globally as declining commodity prices dragged down metal and oil. BHP, the world's biggest mining company is trading down 4% while Rio Tinto Group is off by 7.2%. Alcoa, the largest US aluminum producer, is trading 1.2% lower in European trading this morning after late yesterday reporting a Q4 net loss of -$1.19 billion, its first quarterly net loss in six years, and warned that demand for aluminum may continue to weaken this year. Supporting European stocks today was the action by the German government in agreeing to spend an extra 50 billion euros ($66 billion) this year and next in its second stimulus package and set up a fund to backstop loans to German companies. The package approved late yesterday in Berlin, along with November's stimulus package, brings the total German stimulus to 82 billion euros ($108) billion as Germany grapples with a deepening economic slump.

US trade balance – Today’s Nov US trade deficit report is expected to narrow sharply to -$51.0 billion from -$57.2 billion in October. Today’s expected drop in the US trade deficit to -$51 billion would take the deficit to the lowest level in 4 years. The US trade deficit is currently falling due to the sharp drop in oil prices, which is reducing the dollar value of US oil imports. The US trade deficit is also seeing downward pressure from a decline in demand for imports in the US due to the recessionary economy and the lack of domestic demand. On the opposite side of the coin, the US trade deficit is still seeing upward pressure from slow economic growth overseas, which is reducing demand for US exports. The US trade deficit data in any case is likely to be volatile in coming months due to the large shifts being caused by oil prices and import/export demand. Now that oil prices have dropped sharply, the US trade deficit as a whole can start to catch up with the improvement in the trade deficit ex-petroleum seen in the past two years. The US trade deficit ex-petroleum has improved sharply from the -$40 billion level seen as recent as early 2007 to the most recent level of -$24.5 billion. That improvement has been driven mainly by a strong increase demand for US exports in the past several years, driven by the weak dollar and strong overseas growth. Demand for US exports will slow somewhat in coming months due to slow economic growth overseas and the sharp rally in the dollar seen in the latter half of 2008. However, once the current economic crisis passes, the dollar may show renewed weakness and US exports could then see a resurgence on renewed global demand and a cheap dollar.

Bernanke – Fed Chairman Bernanke today is scheduled to speak at the London School of Economics. Mr. Bernanke’s comments will be his first since the FOMC at the Dec 15-16 meeting cut its funds rate target to the range of zero to 0.25%. The market is looking for Mr. Bernanke to try to provide a coherent definition of the Fed’s current policy stance, which involves providing virtually free reserves to the banking system in unlimited quantity and also injecting liquidity directly into the financial markets (circumventing banks) by buying commercial paper, mortgage securities, and securitized consumer and small-business loans. The FOMC in its minutes mentioned that it is still studying whether to buy longer-dated Treasury securities in large quantities, which is a the classic definition of “quantitative easing.” T-note prices have recently received an extra boost from the possibility that the Fed may start buying notes and bonds. The T-note market will therefore be listening to Mr. Bernanke’s comments very carefully to assess whether the Fed will soon start a T-note buying program to add to its other programs

Barchart.com U.S. Morning Call for Monday, January 12, 2009

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The European DJ Stoxx 50 this morning is down -0.82%% and March S&Ps are down -0.30 points (-0.03%) as global equity markets brace for the start of an expected lackluster earnings season. Asia-Pacific stocks closed mostly lower today with Hong Kong -2,83%, China +0.12%, Taiwan -0.31%, Australia -1.40%, Singapore -1.65%, South Korea -2.05%, India -3.15%. Japanese markets were closed today for Coming-of Age Day Holiday. UBS AG is trading nearly 6% lower this morning after the newspaper SonntagsZeitung reported the bank may post an 8 billion-franc ($7.2 billion) loss for thr fourth quarter. STMicroelectronics, Europe's largest computer-chip maker, is down 3.6% this morning after being downgraded to "sell" from neutral" by UBS, citing a risk of revenue coming in lower than revised guidance. The Russian ruble fell to a 5-3/4 year low against the dollar today after Russia's central bank devalued the ruble for the 14th time in the last 2 months and as slumping oil prices threaten to deepen Russia's financial crisis. Russia is experiencing its worst economic crisis since defaulting on $40 billion of debt in 1998 with the current dispute between Russia and Ukraine over natural gas further deterring investors. The International Monetry Fund (IMF) may need another $150 billion to counter mounting losses from the global financial crisis and will make a "significant" increase in its $1.4 trillion projection for global financial losses and writedowns, said IMF Managing Director Dominique Strauss-Kahn. The IMF also noted that the governments in Western Europe are "behind the curve" in implementing stimulus packages and are "underestimating" the effects of the crisis as the full impact of the crisis has yet to hit the region. On the brighter side, Nomura Holdings predicts global stocks will gain 25% this year as government measures revive the economy and investors move from cash into equities and reports that Citigroup may earn as much as $10 billion by selling control of its brokerage to Morgan Stnaley, helping it to replenish depleted capital.

Market focus - Market attention this week with focus on (1) Wednesday’s Dec retail sales report (expected –1.2%) and the extent to which it confirms the plunge in consumer spending, (2) the Dec PPI and CPI reports on Thursday and Friday which are likely to show a sharp decline and indicate that the Fed’s problem at present is deflation rather than inflation, (3) the S&P 500 index which faded late last week on weak economic data and is now focused on the start of Q4 earnings season, (4) T-note prices which rallied later last week with help from last Friday’s alarming 524,000 decline in Dec payrolls and the +0.4 point rise in the Dec unemployment rate to a 16-year high of 7.2%, (5) the dollar which remains near the top of the 3-week recovery rally but remains vulnerable if the credit crisis continues to recede, and (6) crude oil prices which fell back last week after big rises in the DOE’s weekly inventory report.

Earnings season – The Q4 earnings season officially kicks off today with Alcoa reporting its Q4 earnings. Of the S&P 500 companies, eight report Q4 earnings this week, 52 next week (the week beginning Jan 20), and 99 in the following week (the week beginning Jan 26). The market consensus is that Q4-2008 earnings will fall by –15.1% y/y, which is much more pessimistic than expectations as of Jan 1 for a decline of –1.2% and on Oct 1 for an increase of 47%, according to Thomson Reuters. The market consensus is that S&P 500 earnings will fall by –13.3% in Q1-2009, by –12.5% in Q2-2009, and then stabilize to +1.8% in Q3-2009.

Fed policy – The market last week reduced expectations by about 10 bp for the funds rate target in the latter half of 2009 and 2010. The market is still expecting the Fed to maintain its current funds rate target of zero to 0.25% through May 2009. The market is then expecting a slow rise in the funds rate target to 0.50% by October 2009, 0.75% by Feb 2010, and 1.00% by May 2010. The FOMC in the minutes from the Dec 15-16 FOMC meeting, which were released last week, detailed the dismal state of the US economy and effectively promised to maintain extremely low interest rates for an extended period of time. The FOMC also said it is considering expanding its current liquidity programs and is considering explicit quantitative easing through the purchase of large quantities of longer-term Treasury securities.

Barchart.com U.S. Morning Call for Friday, January 9, 2009

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The European DJ Stoxx 50 this morning is down -0.26% and March S&Ps are down -2.60 points (-0.29%) as the markets brace for today's US December employment report which is expected to show the American economy lost jobs for the 12th straight month. Asia Pacific stocks closed mostly lower today with Japan -0.45%, Hong Kong -0.27%, China +1.61%, Taiwan -0.73%, Australia +1.12%, Singapore -1.18%, South Korea -2.26%, India -1.88%. South Korea's central bank today cut its benchmark seven-day repurchase rate 50 bp to a record low 2.50%, citing the "rapidly" deteriorating economy." Nissan Motor Company, Japan's third-biggest automaker, fell 5% after saying it will eliminate 1,200 workers at a UK factory, citing the "extremely challenging" car market. In Europe, Commerzbank, Germany's second-largest bank, fell 6.5% after tumbling 14% yesterday saying the German government will take a state in the bank as part of a new state bailout, prompting Societe Generale to downgrade Commerzbank to a "sell" from "hold" on concern repaying funds from the state will burden earnings amid a tough economic climate in Germany. Deutsche Postbank AG, Germany's biggest consumer bank by clients, slid 4.4% after saying its 2008 earnings will be "clearly negative" and Natixis SA, the worst performing French banking stock last year, sank 9.3% after the French newspaper Les Echos reported the bank may report as much as 1 billion ($1.37 billion) of losses last quarter. Bundesbank President and ECB Council member Axel Weber hinted at a speech in Cologne late yesterday that he may favor additional ECB rate cuts after saying Germany's economy may contract by more than expected this year as the recession deepens.

US unemployment report – Today’s Dec nonfarm payroll report is expected to plunge by -515,000, adding to the -533,000 decline seen in November. The expected combined drop of 1.048 million in November and December would be the largest 2-month drop in US payrolls in post-war history, eclipsing the 2-month job losses seen in all of the post-war recessions. The plunge in payrolls illustrates the shock that the US economy is seeing in the wake of the credit crisis that started in earnest in September with the bankruptcy of Lehman Brothers. The record single-month decline seen in the history of the payroll series, which goes back to 1939, is the plunge of 1.966 million jobs seen in September 1945. US payrolls for all of 2008 (through November) plunged by a total of 1.911 million jobs, illustrating the dismal condition of the US labor market. The labor market typically lags the business cycle, which means US businesses may continue to reduce their employee counts all through 2009, even if the economy bottoms out as most economists hope by mid-2009.

Today’s Dec unemployment rate is expected to rise +0.3 points to 7.0%, adding to the +0.2 point climb to the 15-year high of 6.7% seen in November. The November unemployment rate of 6.7% was only 1.1 points below the 25-year high of 7.8% posted in 1992. The post-war record high for the US unemployment rate is 10.8% posted in 1982.

The labor situation in the US manufacturing sector will certainly continue to deteriorate in December. The market consensus is that Dec manufacturing payrolls will decline by another -100,000, adding to the -85,000 decline seen in November. US manufacturing payrolls have fallen every month since June 2006. US manufacturing payrolls in 2008 (through November) plunged by a total of 604,000, due both to the weak US economy and to the multi-year trend of manufacturing jobs moving outside of the US to lower-cost labor countries.

Barchart.com U.S. Morning Call for Thursday, January 8, 2009

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The European DJ Stoxx 50 this morning is down -0.72% and March S&Ps are down -0.50 points (-0.06%) as the Bank of England's rate cut lifts stock prices off of their lows. Asia-Pacific stocks ended lower with Japan -3.93%, Hong Kong -3.81%, China -2.24%, Taiwan -5,30%, Australia -2.26%, Singapore -2.82%, South Korea -2.23%. The Bank of England today cut its benchmark interest rate by 50 bp to 1.5%, the lowest since the BOE was founded in 1694, as its policy makers try to prevent the credit squeeze from deepening Britain's recession. Negative economic news continues to flow out of Europe with December Euro-Zone economic confidence tumbling -7.8 to 67.1, its lowest level since the index began in 1985, while unemployment in the Euro-Zone rose to a 2-year high of 7.8% in November. Undercutting the equity markets and also adding pressure on the ECB for more interest rate cuts was the -6.0% m/m decline in November German factory orders which have now declined in 11 of the past 12 months along with -10.6% drop in German exports in Nov, the largest monthly decline since records for a reunified Germany began in 1990. Economic conditions out of Asia are not much better as Lenovo Group, China's biggest personal-computer maker, plunged 26% today after forecasting its first loss in 11 quarters and saying it will cut 11% of its workforce and Macquarie Group Ltd., Australia's biggest securities firm, losing 3.7% today after saying "exeptionally challenging" conditions will erode earnings. Exports out of Taiwan plummeted by a record -41.9% in December on weaker US and Chinese demand for its laptops, mobile phones and computer chips. Confidence in Indian stocks may be hard to find after India's Sensex index tumbled 7.3% yesterday led by the 78% plunge in Satyam after Satyam's Chairman said the company's profits had been inflated for years. India's stock markets are closed today for a public holiday.

Unemployment Claims – Today’s weekly initial unemployment claims report is expected to show a large increase of +53,000 to 545,000, reversing nearly one-half of last week’s plunge of –94,000 to 492,000. Meanwhile, weekly continuing claims are expected to fall –23,000 to 4.483 million, reversing a small part of last week’s surge of +140,000 to 4.506 million. The unemployment claims series are being distorted to some extent by the holiday season. However, the initial claims series is only moderately below its recent 26-year high and the continuing claims series hit a 26-year high in the latest report, indicating a sharp deterioration in the US labor market. Regarding the labor market, attention is focused on tomorrow’s Dec unemployment report. Tomorrow’s Dec payroll report is expected to show a big decline of –500,000, adding to the –533,000 decline seen in November. The market may be braced for an even weaker payroll report given yesterday’s news that ADP payrolls fell by –693,000, which was larger than the expected decline of –495,000. Tomorrow’s Dec unemployment rate is expected to rise +0.3% points to new 15-year high.

10-year T-note auction – The Treasury today will sell $16 billion in reopened 10-year T-notes. The size of today’s auction is unchanged from the $16 billion auction in December. The 12-auction averages for the 10-year are as follows: 2.35 bid cover, $89 million in non-competitive bids, 4.24 bp tail to the median yield, 14.93 bp tail to the low yield, and 39% taken at the high yield. Indirect bidders, a category comprised mainly by foreign central banks, have taken an average of 23.8% of the last twelve 10-year T-note auctions, which is well below the average of 32.6% across all recent Treasury coupon auctions.

Consumer credit – Today’s Nov consumer credit report is expected to show a small increase of +$0.5 billion following the -$3.5 billion decline seen in October. Consumer credit is falling as consumers stop spending and try to conserve cash and even save some money. US consumer credit growth on a year-on-year basis eased to +2.9% in October, which was a 15-1/2 year low. The record post-war low for the consumer credit series was –1.9% y/y in November 1991. However, the series during World War II hit a low of –17.9% y/y in January 1944

Barchart.com U.S. Morning Call for Wednesday, January 7, 2009

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The European DJ Stoxx 50 this morning is down -0.57% and March S&Ps are down -6.60 points (-0,71%). Asia-Pacific stocks closed mixed today with Japan +1.74%, Hong Kong -3.37%, China -0.60%, Taiwan +1.32%, Australia +0.99%, Singapore -1.73%, South Korea +2.91%. European stock prices were hurt today as E.ON AG, Germany's biggest utility, fell 3.1% after Russian natural-gas exports through Ukraine were halted for the first time in 3 years. OAO Gazprom cut off all gas supplies to Europe today as the pricing dispute with the Ukraine enters a seventh day and threatens to create natural gas shortages in Europe just as freezing weather is increasing demand. Commerzbank is down 3.5% after JPMorgan Chase downgraded the bank to a "sell" saying Commerzbank's acquisition of Dresdner Bank may hurt its earnings and the bank may face further "capital erosion" until 2011. Also hurting European stock prices this morning is the 3.7% drop in Alcoa after the world's largest aluminum maker announced its third production cut in as many months, dragging down mining companies Rio Tinto (-4.1%) and BHP Billiton (-3.6%). On the positive side today, European inflation at the producer level had its biggest monthly decline since data began in 1981 as the Nov Euro-Zone PPI declined -1.9% m/m. Supporting Asia-Pacific stocks today is the yen holding near a 1-month low against the dollar, along with speculation that President-elect Obama's stimulus plan will restore US economic growth, sending Japan's Nikkei 225 higher for the seventh straight session to a 2-month high.

Mortgage apps – The latest weekly MBA mortggage applications fell -8.2% with the purchase index increasing +7.3% while the refinancing index declined -12,3%. The refinancing index is now moderately below the recent 5-1/2 year high, illustrating that refinancing activity is still very active. The refinancing activity is good for the US economy since low mortgage rates are allowing homeowners to reduce their mortgage payments, thus putting more cash straight into their pockets. The purchases index is moderately above the recent 7-year low but is still at a weak level that indicates dismal home buying activity. The 30-year fixed mortgage rate in the latest week (the week ended Dec 25) fell another 5 bp to a new record low of 5.14%. That is down by 132 bp from the 4-month high of 6.46% posted as recently as the end of October. US mortgage rates have fallen sharply in the past two months following the Fed’s announcement of a $600 billion program to buy mortgage securities to help grease the pipeline of mortgage funding and also to buy the debt of Fannie Mae and Freddie Mac to reduce their financing costs.

ADP employment change – Today’s Dec ADP employment change is expected to show a huge decline of –493,000, falling by even more than the –472,000 decline seen in November. The ADP employment figure has plunged by a total of 1.282 million in just the past four months (Aug-Nov), illustrating the alarming deterioration in the US labor market. That deterioration is likely to continue in early 2009 as businesses continue to lay off employees in order to defend against the sharp drop-off in US economic activity. The ADP and non-farm payroll reports have only a minor correlation, but today’s report will nevertheless be taken as a hint of what is to come in Friday’s December unemployment report. The market consensus is that Friday’s Dec nonfarm payrolls report will show a plunge of -500,000, adding to the –533,000 decline seen in November. The market expects the Dec unemployment rate to rise by +0.3 points to 7.0%, posting a new 15-1/2 year high.

3-year T-note auction – The Treasury today will sell $30 billion 3-year T-notes. The $30 billion size of today’s 3-year T-note auction is up from the $28 billion size at the last auction in December. Today’s 3-year T-note issue was trading at 1.14% in when-issued trading late yesterday afternoon. The 12-auction averages for the 3-year are as follows: 2.37 bid cover, $271 million in non-competitive bids, 3.1 bp tail to the median yield, 13.1 bp tail to the low yield, and 46% taken at the high yield. Indirect bidders, a category mainly comprised by foreign central banks, have taken an average of 30.0% of the last twelve 3-year auctions, which is mildly below the average of 32.6% across all recent Treasury coupon auctions

Barchart.com U.S. Morning Call for Tuesday, January 6, 2009

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The European DJ Stoxx 50 this morning is up +2.06% and March S&Ps are up +6.40 points (+0.69%), both at 1-3/4 month highs. Asia-Pacific stocks closed mostly higher today with Japan +0.42%, Hong Kong -0.35%, China +3.18%, Taiwan +0.62%, Australia +1.51%, Singapore -0.58%, South Korea +1.92%, India +0.59%. Leading European stocks higher today is the drop in inflation with the Euro-Zone CPI estimate for Dec falling to a more than two-year low of +1.6% y/y, the first time inflation has moved below the ECB's 2% ceiling since Aug 2007 and providing the central bank enough cover to continue cutting rates at next week's policy meeting. A rally in copper prices up to a 1-month high today is supporting mining companies Rio Tinto (+5.9%) and Xstrata (+8.3%). Royal Bank of Scotland Group Plc (RBS) fell 1.9% after Britain's financial regulator lifted the short-selling ban on RBS and 33 other British financial companies that was in place since Sep 18. Supporting Asian stocks today is a rebound in chip prices, spurring optimism that Asian electronics makers will withstand the global recession. South Korean based Samsung rallied 4.6% today after benchmark chip prices soared to a 6-week high and Japan's Nippon Electric Glass, the world's third-biggest supplier of glass for liquid-crystal displays, soared 16% after Macquarie Securities forecast a rebound in monitor panel prices. Also supporting Asian stock prices today is the drop in the yen to a 1-month low against the dollar, aiding most Asian export based companies. Alternative energy-related companies gained on speculation government spending in the sector by the South Korean and Japanese governments will boost sales. South Korea's "Green Deal" will produce 956,000 new jobs over the next four years, South Korea's Ministry of Startegy and Finance said today, while Japan aims to create over 2 million jobs in enviromental technologies by 2015, according to the Nikkei newspaper. NGL Insulators Ltd., the world's only producer of sodium-sulfur batteries used to store power generated by wind turbines and solar panels, jumped nearly 9% after a 10 billion yen sale of the batteries to the UAE. Russia's OAO Gazprom said they have cut natural gas shipments to Europe through Ukraine to 74 million cubic meters, compared with 300 million normally and deliveries to the Balkans were halted at the Romanian border as a pricing dispute enters its sixth day and continues European supply disruptions.

Pending home sales – Today’s Nov pending home sales report is expected to show a decline of –1.0% m/m, adding to the decline of –0.7% seen in October. On a year-on-year basis, October pending home sales were down only –0.6% y/y, not because of any significant improvement in pending home sales, but only because the year-earlier base was so low. The pending home sales report measures the change in home sales contracts and generally leads to existing home sales within one to two months, thus providing some leading information on the existing home sales series. US existing home sales are in dismal shape, falling to a new record low of 4.49 million units in November. Up to 45% of the recent home sales that have occurred involve fire sales of either foreclosures or short sales.

ISM non-manufacturing index – Today’s Dec ISM non-manufacturing index is expected to fall another –0.3 points to 37.0, adding to the sharp decline of –7.1 points to 37.3 seen in November. The November level of 37.3 was a record low for the series, which has history back to 1997. The ISM non-manufacturing index was above the boom-bust level of 50 as recently as September at 52.1, but the index then plunged to 44.2 in October and 33.0 in November, clearly indicating a recession in the US economy outside the manufacturing sector. The market consensus is that US GDP will fall –4.4% in Q4, -2.4% in Q1, and -0.5% in Q2, and then turn positive in the second half of 2009 to GDP growth above 1%.

Factory orders – Today’s Nov factory orders report is expected to show a decline of –2.2%, adding to the sharp decline of –5.1% seen in October. Expectations for a decline in today’s factory orders report are based on the recently-reported Nov durable goods orders report of –1.0% m/m (following –8.4% in Oct) and +1.2% ex-transportation (following Oct’s –6.8%). Durable goods account for more than one-half of the factory orders series. The US manufacturing sector is in dire need of new orders to prevent even more panic and layoffs in the manufacturing sector.

10-year TIPS auction – The Treasury today will sell $8 billion 10-year inflation-protected TIPS T-notes. The size of today’s auction is unchanged from the July 2008 auction when the Treasury also sold $8 billion in 10-year TIPS and then followed that up with a $6 billion reopening the following quarter in October 2008. The 12-auction averages are as follows: 1.94 bid cover, $66 million in non-competitive bids, 5.73 bp tail to the median yield, 29.02 bp tail to the low yield, and 55% taken at the high yield. Indirect bidders, a category mainly comprised by foreign central banks, have taken an average of 40.6% of the last twelve 10-year TIPS auctions. That average of 40.6% is well above the average of 32.6% across all recent Treasury coupon auctions and illustrates the popularity of the 10-year TIPS issue among foreign central banks.

FOMC minutes – The markets will be dissecting the minutes from the Dec 15-16 FOMC meeting, which was the meeting at which the Fed cut its funds rate target from 1.00% to the range of zero to 0.25%. The FOMC also promised to keep the funds rate at a very low level for an extended period of time. The markets will be looking for any indication that the Fed is about to embark on an explicit quantitative easing program by buying Treasury securities in the open market, which would not only represent a new front in the Fed’s aggressive liquidity measures, but would also help boost Treasury security prices and reduce yields

Barchart.com U.S. Morning Call for Tuesday, December 30, 2008

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The European DJ Stoxx 50 this morning is trading +1.07% and March S&Ps are trading higher by +3.80 points (+0.44%). Bullish factors this morning for European stocks include carry over support from the rally in US automakers after the US Treasury committed $6 billion to support GMAC, the financing arm of GM, in an attempt to revive auto lending and keep GM out of bankruptcy. Also supporting European stocks this morning were the gains in the European retail PMI indexes for December and the drop in the Euro-Zone M3 money supply for November to a 2-3/4 year low of +7.8% y/y. Asia-Pacific stocks today closed mixed: Japan +1.28%, Hong Kong -0.65%, China -1.15%, Taiwan +3.91%, Australia +0.91%, Singapore -0.56%, South Korea +0.43%, India +1.92%. Bullish factors for Asian stocks today included (1) the plans by Taiwan's government to spend $6.1 billion to help key industries through the global financial crisis, (2) the 1.5% rally in South Korea's Hyundai Heavy as the world's biggest shipbuilder said sales in November rose 44% to 2.11 trillion won ($1.6 billion) as it built more ships at higher prices, and (3) the 1.2% gain in Sony as the world's second largest consumer electronics maker said it cut the cost of making the PlayStation3 by 35%. Undercutting Asian stock prices today was South Korea's industrial output plunging by 14.1% in November y/y, the biggest drop on record and a sign that South Korea's economy will join Japan, Europe and US in recession, and the prediction from Barclays that Japan's economy this quarter will contract by 12%, the most in 34 years and almost three times more than the -4.1% q/q decline previously predicted.

US home prices – Today’s Oct S&P/Case-Shiller composite-20 home price index is expected to deteriorate further to a new record low of –17.9% y/y from –17.4% y/y in September. The S&P/Case-Shiller index has been weaker than the OFHEO home price indexes, but appears to be more in line with reality on the ground. There is little sign that the US housing market is about to hit bottom anytime soon with the continued huge overhang of homes on the market and the dismal state of the economy and labor market. The only bright spot is low mortgage rates, which combined with a continued decline in home prices, will eventually draw in buyers looking for bargains once it appears that the US economy has stabilized.

Chicago purchasing managers index – Today’s Dec Chicago purchasing managers index is expected to show a decline of –0.8 points to 33.0, adding to the –4.0 point decline to the 26-2/3 year low of 33.8 seen in November. The November Chicago purchasing managers index of 33.8 was far below the boom-bust level of 50 and clearly signaled that the Chicago-area manufacturing sector is in a recession. The national Dec ISM manufacturing index, which will be released this Friday, is expected to show a –0.7 point decline to 35.5, adding to the –2.7 point decline to 36.2 posted in November. The national ISM index has been at or below 50 through virtually all of 2008 and the latest reading of 36.2 clearly illustrates that the US manufacturing sector as a whole is in a recession. The US manufacturing sector is not only suffering from weak domestic demand, but has also taken hits from the US auto sector and from the recessions in Europe and Japan, which have undercut demand for US manufacturing exports.

US consumer confidence – Today’s Dec consumer confidence index from the Conference Board is expected to show a small increase of +0.8 points to 45.7, adding to the +6.1 point upward rebound to 44.9 seen in November. The US consumer confidence index hit a low of 38.8 in October, which was a record low for the series, which has a relatively long history back to 1967. US consumer confidence in November rebounded higher due to low gasoline prices, the calmer banking crisis situation, and the stabilization in the stock market. However, US consumer confidence is likely to remain near depressed levels in coming months as the US labor market worsens and more people become worried about their jobs

Barchart.com U.S. Morning Call for Monday, December 29, 2008

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The Euro Stoxx 50 this morning is trading +0.66% and March S&Ps are trading slightly higher by +1.60 points (+0.18%). Asia-Pacific stocks today closed mixed: Japan +0.09%, Hong Kong +1.02%, China -0.39%, Taiwan -0.20%, Australia +1.09%, Singapore +3.18%, South Korea -0.06%, India +2.19%. Commodity producer stocks are higher in Europe this morning due to this morning's rally in oil and precious metals prices. BP is up 4% this morning and Exxon Mobil is up 2%. Rio Tinto is up 6% this morning. Japanese stocks were boosted by news of merger talks in the insurance industry between Aioi Insurance and Nissay Dow General Insurance, the combination of which would create Japan's largest non-life insurer.

Focus factors - Market attention this week will focus on (1) whether after-Christmas shopping is as bad as the holiday shopping season itself (MasterCard estimated holiday sales through December 24 at down 2% to 4%, (2) geopolitical concerns with Israel launching air strikes on Hamas targets in Gaza and with India moving troops to the Pakistan border to pressure Pakistan into clamping down on internal terrorist groups, (3) the incoming economic data and the implications for the depth and duration of the U.S., European and Japanese recessions, (4) the U.S. stock market which moved mildly lower last week on increased concerns about the global economy and corporate earnings, (5) T-note prices which consolidated below the recent contract high last week as the market waits to see if any catalysts emerge to move T-note prices higher or whether T-note prices simply move lower on long liquidation pressure, (6) the dollar which has rebounded higher in the past 1-1/2 weeks but continues to pose a threat to foreign investment in U.S. stocks and bonds if the dollar should start a new leg down, and (7) crude oil prices which fell another 11% last week on market perceptions that the drop in global fuel demand is outpacing OPEC’s ability to cut production.

US economic calendar - This week’s main U.S. economic news includes Tuesday’s Dec consumer confidence index (expected +0.6 to 45.5), Wednesday’s initial unemployment claims report (expected –11,000 to 575,000), and Friday’s Dec ISM manufacturing index (expected –0.8 to 35.4). The markets are closed on Thursday for New Years and the interest rate futures markets close early on Wednesday.

Fed policy - There was little change last week in market expectations for Fed policy through 2009, although the market slightly boosted expectations for Fed tightening in 2010. The market is currently expecting the Fed to maintain its current target range of zero to 0.25% through April 2009. The market is then expecting the funds rate to slowly rise to 0.75% by the end of 2009 and to 1.62% by the end of 2010. With the funds rate currently near zero, the market is watching the Fed for the extent to which it directly injects liquidity into the financial system through purchases of securities backed by mortgages, consumer and small-business loans, and corporate commercial paper. The market is waiting to see if the Fed will eventually decide to directly buy Treasury securities in an explicit quantitative easing.

Barchart.com U.S. Morning Call for Friday, December 19, 2008

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The European DJ Stoxx 50 this morning is trading -1.54% and S&Ps are trading -8.10 points (-0.91%). The banking sector is trading lower in Europe after S&P cut the ratings for 12 US and European banks. American banks included Bank of America, Citibank, Goldman Sachs, JPMorgan, and Wells Fargo. European banks included Barclays, Credit Suisse, Deutsche Bank, HSBC, RBS, and UBS. Oil and mining companies are trading lower on this morning's drop in oil and gold prices. BP and Total are each down at least 3%. BHP Billiton and Rio Tinto are each down about 4%. The mining sector was also hurt by a downgrade by UBS for Anglo American, Antofagasta, and Xstrata to "neutral" from "buy." The Bush administration today may announce a rescue loan through March for GM and Chrysler, according to newswire reports.

Barchart.com U.S. Morning Call for Wednesday, December 17, 2008

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The European DJ Stoxx 50 this morning is down -0.83% and S&Ps are trading -13.20 points (-1.45%) as the markets see some long liquidation pressure after yesterday's sharp rally. Asia-Pacific stocks today closed mostly higher: Japan +0.52%, Hong Kong +2.18%, China +0.35%, Taiwan +0.67%, Australia +0.40%, Singapore -0.16%, South Korea +0.84%, India -2.62%. The markets are waiting for Morgan Stanley's earnings report today (consensus -50 cents per share). BNP Paribas fell 15% today after announcing that its securities unit had a loss of 710 million euros through November. Deutsche Bank is down 6% after the bank chose to delay refinancing of 1 billion euros of bonds. Citigroup is down 3%. The Russian central bank today allowed the ruble to drop 1.2%, which was the largest decline in three months and brought the overall decline to 15% since August. The ruble has been under pressure due to low oil prices and capital flight and the Russian central bank is under pressure to allow the ruble to depreciation to preserve reserves. Oil prices are up $1.30 as the markets wait for the outcome of today's OPEC meeting.

Mortgage applications – This morning's MBA mortgage applications index rose +2.9%, with a -4.5% decline in the purchases sub-index offset by a +6.5% increase in the refinancing sub-index. The indexes remain at relatively high levels after the surge seen in the week ended November 28. In that week, the MBA mortgage applications index rose +112%, the purchases sub-index rose +38%, and the refinancing sub-index rose +203%. The 30-year fixed mortgage rate fell another 6 bp to 5.47% in the week ended December 11, bringing the overall decline to 99 bp in the past 6 weeks from the 4-month high of 6.46% posted in the last week of October. That decline in mortgage rates was sparked in large part by the Fed’s $600 billion program to buy mortgage securities and the debt of Fannie Mae and Freddie Mac, which reduced Fannie/Freddie financing costs. The big boost in refinancing activity is a direct benefit to the economy through lower monthly mortgage payments, which boosts consumer-spending power. However, the real question going forward is the extent to which lower mortgage rates can translate into home buying via reduced mortgage costs and improved home affordability.

US current account – Today’s Q3 current account deficit is expected to narrow mildly to -$179.5 billion from -$183.1 billion in Q2. The US current account deficit in the past two years has improved mildly from the recent high of -$210.91 billion posted in Q3-2006. As a percent of GDP, the US current account deficit has improved to the current level of 5.08% from the record high of 6.56% posted in Q4-2005. The US current account has improved mainly due to the surge in US exports in the pasts several years tied to strong economic growth in Europe and Asia. The US current account deficit could continue to narrow over the next several quarters due to lower oil prices (i.e., which reduces the import value of oil) and reduced imports due to weak US economic activity. However, the offsetting factor will be a decline in US exports due to weaker economic growth overseas

Barchart.com U.S. Morning Call for Tuesday, December 16, 2008

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The European DJ Stoxx 50 this morning is trading +0.32% higher and S&Ps are up +2.60 points (+0.30%) on optimism that the FOMC today will cut its funds rate target by at least 50 bp to 0.50% and may signal an expansion of methods to boost liquidity in the banking system. Cyclical stocks saw a boost today with engineering-giant Seimens up 2.6% and chemical-maker BASF up +3%. On the negative side, ECB President Trichet today said he feels there is a limit to how far the ECB can cut rates, suggesting that the ECB may stop cutting rates after a rate cut in January. Oil company stocks are generally higher this morning with this morning's 46-cent rally in oil prices. Goldman Sachs reports earnings today (consensus is for $3.73 per share) and Morgan Stanley reports tomorrow (consensus is for a loss of 26 cents a share). Asia-Pacific stocks today closed mixed: Japan -1.12%, Hong Kong +0.55%, China +0.98%, Taiwan +0.07%, Australia -0.98%, Singapore +0.41%, South Korea -0.05%, India +1.47%.

Fed policy – The market is fully discounting a 50 bp rate cut to 0.50% at the 2-day FOMC meeting that ends today and is discounting about a two-thirds chance of a 75 bp rate cut to 0.25%. The market will also be waiting to hear if the Fed makes any reference to “quantitative easing,” meaning measures to force cash into the financial system through buying bonds for example. The Fed is already directly injecting cash into the credit markets outside the banking system through its purchase commercial paper and securities backed by mortgages, student loans, credit card receivables, and small business loans. The market is expecting the average monthly funds rate to bottom out at 0.33% in January 2009, according to the federal funds rate futures markets. The market is then expecting a slow climb in the funds rate to 0.80% by December 2009 and to 1.45% by December 2010. That indicates the market at present is expecting an extremely slow and painful recovery with the funds rate only rising as high as 1.45% in two years time.

CPI – Today’s Nov CPI is expected to show a decline of –1.3% m/m, adding to the –1.0% m/m decline seen in October. The Nov core CPI is expected to show a small increase of +0.1% m/m, reversing the –0.1% m/m decline seen in October. On a year-on-year basis, the Nov CPI is expected to plunge to +1.5% y/y from +3.7% y/y in October and the 18-year high of +5.6% posted in July 2008. The Nov core CPI is expected to ease slightly to +2.1% from +2.2% in October. Today’s expected core CPI report of +2.1% y/y would match the current 3-year low posted mostly recently in August-September 2007. The sharp decline in the inflation statistics will give the Fed more latitude to maintain its extraordinarily easy monetary policy, although in reality the Fed and the markets at present are much more worried about deflation than inflation.

Housing starts – Today’s Nov housing starts report is expected to show a sharp decline of –7.0% to 736,000, adding to the –4.5% decline to 791,000 seen in October. Nov building permits are expected to fall –4.1% to 700,000, adding to the –7.1% decline to 730,000 seen in October. October’s housing starts level of 791,000 was a record low for the series, which has a long history all the way back to 1959. The US housing market continues to suffer mightily from the effects of the huge overhang of unsold homes, the difficulty of obtaining mortgages, falling home prices, and recessionary economic conditions. There is little to suggest that any bottom in the housing market will occur anytime over at least the next two or three quarters

Barchart.com U.S. Morning Call for Monday, December 15, 2008

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The European DJ Stoxx 50 this morning is trading +0.16% higher while S&Ps are slightly lower by -0.17%. Global stocks are receiving a boost today after the Bush administration said a rescue plan for US automakers "won't be a long process." Dailer is up 2.9% this morning and Toyota is up more than 9%. Hopes for bailout package supported industrial metals prices, thus boosting large mining companies (Rio Tinto for example is up 3% this morning). BNP Paribas is down -8% after news that a Belgian court temporarily halted its plan to buy Fortis. Oil companies are trading higher today on the rally in oil prices. The ruble fell another 1.3% today to a 4-year low against the euro as the Russian central bank was forced to widen its target band for the ruble for the second time in a week to avoid spending such a large quantity of reserves to defend the currency, which was been plunging on weak crude oil prices and capital flight. Russia still has a substantial $437 billion in reserves. Today's Tankan survey from the Bank of Japan showed that confidence among larger manufacturers fell by the most in 34 years, with the tankan index falling to -24 from -3 last quarter. The large non-manufacturers index fell to -9 from +1, falling into negative territory for the first time in five years. Asia-Pacific stocks were nevertheless able to close higher today on optimism about a US automaker bailout: Japan +5.21%, Hong Kong +1.96%, China +0.75%, Taiwan +2.96%, Australia +2.31%, Singapore +1.98%, South Korea +4.88%, Bombay +1.47%.

Focus factors - Market attention this week will focus on (1) the 2-day FOMC meeting to be held Monday and Tuesday, which is expected to produce a rate cut of at least 50 bp to 0.50%, (2) this week’s key economic reports, which include today’s Nov industrial production report (expected –0.9%), tomorrow’s Nov CPI (expected –1.2% m/m), tomorrow’s Nov housing starts report (expected –7.7%), and Thursday’s unemployment claims report (initial claims expected –20,000), (3) whether a bailout package still arrives for US automakers from the US Treasury or whether GM and Chrysler edge closer to bankruptcy as suppliers demand up-front payment and cause cash to evaporate, (4) the US stock market which closed mildly higher last week despite the rejection in the Senate of a US automaker bailout package, (4) the T-note market which closed near the recent record high on the grim prospects for the US economy, which will be even worse if GM, Chrysler and some of its suppliers declare bankruptcy and start throwing even more people out of work, (5) the dollar which broke down to a 1-1/2 month low late last week as the overhang of dollar liquidity in the global financial system is starting to take its toll, and (6) crude oil prices which rallied moderately late last week as Saudi Arabia disclosed it cut production in November by more than the market thought and as the market looks ahead to a likely OPEC production cut announcement at this Wednesday’s OPEC meeting in Cairo.

Fed policy – The market last week boosted expectations for Fed easing by about 10 bp for 2009 due to the US automaker troubles and general concern about the imploding US economic data. The market fully expects the FOMC tomorrow after its 2-day meeting to announce a 50 bp rate cut to 0.50% and is discounting about a two-thirds chance of a 75 bp rate cut to 0.25%. The market is discounting a minimum average monthly funds rate of 0.32% in January and February and is then discounting a slow rise in the funds rate to 0.83% by the end of 2009 and 1.50% by the end of 2010. Based on fed funds rate futures prices, the market currently expects the crisis situation to bottom out in January and February and then improve at a snail’s pace over the next two years.

US manufacturing data – Today’s Nov industrial production report is expected to show a sharp decline of –0.9%, reversing the bulk of the +1.3% increase seen in October. US industrial production on a year-on-year basis plunged to –4.1% y/y in October from the +2.0% y/y level seen earlier this year, clearly placing the US manufacturing sector in recessionary territory. The record low for the US industrial production series, which has data back to 1945, was –33.7% y/y in 1946. The record low for post-war history is –12.4% y/y in 1975. Looking ahead to the December manufacturing data, today’s Dec Empire manufacturing index is expected to fall –2.1 points to –27.5, adding to the –0.8 point decline to the record low of –25.4 seen in November (data history to July 2001).

NAHB index – Today’s Dec NAHB housing market index is expected to be unchanged at 9, stabilizing after the –5 point decline in November to a record low of 9 (history back to 1985). The National Association of Home Builders index measures the general state of the single-family home market, with 50 being the demarcation between a “good” versus “poor” outlook for the single-family home marketplace. The US homebuilder situation went from bad to worse when the credit crisis began in earnest in mid-September and sent the US economy off a cliff. US homebuilders could hardly be more bearish at this point with the huge supply of new homes on the market, the tight mortgage conditions, and the lack of buyers given unemployment fears.

Barchart.com U.S. Morning Call for Thursday, December 11, 2008

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The European DJ Stoxx 50 this morning is trading -0.73% but Dec S&Ps are up +2.10 points (+0.23%). The main bearish factor this morning is that Goldman Sachs cut its its Chinese 2009 GDP forecast by 1.5 percentage points to 6%. Goldman said, "In China, the slowdown will be greater than during the Asia financial crisis or the 2001 dot-com bust. The near-term growth outlook in China is particularly weak." On the bullish side, the U.S. House last night approved an auto bailout, though the prospects are less clear in the Senate (see below). The Swiss National Bank today cut its target rate by another 50 bp to 0.50%, which was in line with market expectations and left the Swiss rate 200 bp below the ECB's 2.50% target. Russia today allowed its currency to depreciate another notch, widening the target band for the ruble for the fifth time in a month. The ruble fell 0.7% today against its basket and is now down by 16% since August as a result of the plunge in oil prices, the Russian banking crisis, and capital flight. The ECB in its monthly bulletin published today said that global economic weakness and "very sluggish" European domestic demand "are seen as persisting in the next few quarters" but that a "subsequent recovery should then gradually take place, suppported by the fall in commodity prices and assuming that the external environment improves and financial tensions weaken." Asia-Pacific stocks today closed mixed: Japan +0.70%, Hong Kong +0.23%, China -2.39%, Taiwan -0.07%, Australia -1.17%, Singapore -1.51%, South Korea +0.80%, Bombay -0.10%.

Auto bailout - The House last night approved a $14 billion loan package to US automakers by a comfortable margin of 237-170. However, the prospects are less clear in the Senate where some Republicans may try to delay or kill the legislation with a filibuster. House Speaker Nancy Pelosi said she would not bring the House back to vote again if the Senate approves a different version of the bill. GM is up 4% in European trading this morning and Ford is up 1%.

Unemployment claims – Today’s weekly initial unemployment claims report is expected to rise +16,000 to 525,000, reversing most of the previous week’s decline of –21,000 to 509,000 from the 16-year high of 543,00 posted in the week ended Nov 14. Today’s weekly continuing claims report is expected to show a +13,000 increase to 4.100 million, adding to last week’s rise of +89,000 to 4.087 million. Last week’s level was a 26-year high. The unemployment claims data indicates a truly dismal US labor market situation with more layoff announcements each day and a huge pile-up of people that are already on the unemployment rolls.

Trade balance – Today’s Oct trade deficit report is expected to narrow to -$53.5 billion from -$56.5 billion in September. The US trade balance has been moving sideways in the range of about $55 billion to $62 billion for the past two years, with an increase in imports tied to high oil prices roughly offset by a sharp increase in demand for US exports. The US trade deficit could become much more volatile with the recent economic crisis. US imports and exports are both likely to fall sharply due to reduced demand in the US and overseas. In addition, the value of imports will drop sharply due to the plunge in oil prices. If the drop in imports has the dominant impact, then the trade deficit will decline, though not for fundamentally healthy reasons. The bottom line for the dollar at present is not the trade deficit but rather the huge demand for the safety of dollar-denominated assets and the huge repatriation of overseas assets by US investors trying to preserve what little capital they have left.

Import prices – Today’s Nov import price index is expected to show a sharp decline of –4.9% m/m, adding to the –4.7% decline seen in October. On a year-on-year basis, Nov import prices are expected to fall sharply to –2.0% y/y from +6.7% y/y in October and the record high of +21.4% posted in July 2008 (records back to 1985). Import prices are of course falling sharply due to petroleum prices. Bu t import prices excluding petroleum are also dropping sharply due to lower commodity input prices and due to weak demand for imports in the first place.

Barchart.com U.S. Morning Call for Tuesday, December 9, 2008

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The European DJ Stoxx 50 this morning is up +0.88% and Dec S&Ps are up +5.70 points (+0.63%) as bullish sentiment continues. The Nov ZEW German investor confidence index today unexpectedly rose to -45.2 from -53.5, which was better than the market consensus for a drop to -57. Reasons for an improvement in German investor confidence despite recessionary economic conditions include an improving credit crisis situation, the ECB's overall 175 bp rate cut, lower fuel prices, the weaker euro, and low stock market valuations. The solar sector was hurt today by Q-Cells' reduction in its 2008 net income guidance to 185 million euros from 215 million euros and in its 2008 revenue to 1.225 billion euros from 1.35 billion euros, due to weakening demand and postponed orders. Chip stocks were hurt as Texas Instruments fell 5% on a reduction of Q4 earnings guidance to 10 cents from 30 cents and in Q4 sales guidance to $2.3-2.5 billion $3.07 billion. National Semiconductor fell 4% after the compamy said revenue in the current quarter would drop 30% from the quarter ending Nov 23. Asian shipping stocks saw some strength after bulk-shipping rates rose for the first time in 3 weeks. Sony announced plans to cut 16,000 jobs as part of a cost-cutting move.

US pending home sales – Today’s Oct pending home sales report is expected to show a decline of –3.0% m/m, adding to the –4.6% m/m decline seen in September. While US home sales remain depressed, the pending home series has been improving on a year-on-year basis in recent months, in large part because of the extremely weak year-earlier base and also because of active foreclosure sales. In October, pending home sales on a year-on-year basis improved to +7.7% y/y from +5.1% y/y in August and the trough of –23.9% seen in December 2007. Home sales could receive a continued boost over the next several months, despite the horrendous economic news, due to the sharp drop in mortgage rates and continued bargains on foreclosure sales. The pending home sales report measures the change in home sales contracts and generally leads to existing home sales within one to two months, thus providing some leading information on the existing home sales series. The US existing home sales series continues to bump along just mildly above the trough of 4.85 million units posted in June 2008.

50 bp Canadian rate cut expected – The Bank of Canada today after its policy meeting is expected to announce a 50 bp rate cut to 1.75%. The Bank of Canada since the worse of the credit crisis began in September 2008 has cut its lending rate target by only 75 bp to 2.25%. A 50 bp rate cut today to 1.75% would leave Canada’s target rate below Europe and the UK but still above the US and Japan. The current G7 target rates are as follows: European Central Bank 2.50%, Bank of Canada 2.25%, Bank of England 2.0%, U.S. Federal Reserve 1.00%, and Japan 0.30%.

Overnight U.S. Stock News

December S&Ps this morning are trading +5.70 points on higher European stocks and follow-through buying from the last two sessions. The US stock market yesterday opened higher and held most of its gains throughout the day and finished at a 3-week high (Dow +3.46%, S&P 500 +3.84%, Nasdaq Composite +4.14%).
Bullish factors for stock prices yesterday included (1) the announcement by President-elect Obama that he will push for the biggest US public-works spending package in 50 years in an attempt to jumpstart the economy, which boosted overseas stock markets as well as US commodity stocks and construction and engineering firms, (2) the prediction from Morgan Stanley that the S&P 500 Index will rally 11% from last Friday's close to 975 by the end of next year as "it does not appear to us that equity markets will fall substantially from here" with growth expectations having been dramatically lowered and continued excessive pessimism regarding the ability of policymakers to salvage the financial system, (3) the rally in the US automakers with General Motors up +21% and Ford up +24% after the White house agreed in principle to provide funds to shore up the car industry, and (4) the rally in steel makers after Goldman Sachs predicted steel prices are on the verge of rebounding as supply cuts have outpaced the global collapse in demand.
Bearish factors for stock prices yesterday included (1) the prediction from Barclays Capital that M&A deals, which are already down 36% so far this year, will decline 30% next year with only forced sales demanded by creditors and government-brokered transactions the only likely acquisition business for banks, (2) the prediction from Merrill Lynch that credit-card companies are likely to fall next year as the issuers increasingly bear the burden of "credit stress" among US consumers as the unwinding of consmuer leverage "is just beginning," and (3) the prediction from Herrmann Forecasting LLC that unemployment in the US will probably peak at 9% and that the US needs a $2.5 trillion fiscal stimulus

Barchart.com U.S. Morning Call for Wednesday, December 3, 2008

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The European DJ Stoxx 50 this morning is trading -1.31% and Dec S&P's are trading -12.90 points (-1.52%). Bearish factors include the unexpected downward revisions in all of the European PMI service indexes which now show them contracting at a record pace, the weaker-than-expected Euro-Zone retail sales for Oct with the -0.8% m/m drop the biggest monthly decline in 22 months and the UK PMI service index falling to its lowest level since the index was created in 1996. On the brighter side, UBS predicts that global stocks will withstand a "full-blown" recession and surge in 2009 as cheap valuations and efforts by governments to restore confidence in the financial system lure investors back into stocks. UBS predicts the S&P 500 Index may rally to 1,300 (+53%) by the end of next year and the FTSE 100 Index may surge to 5,800 (+41%) by the end of 2009. Undercutting Asia-Pacific markets today were Australia reporting that its Q3 GDP came in weaker-than-expected at +0.1% q/q, the weakest in 8 years, and Honda Motor, Japan's second-largest automaker, falling to a 7-year low in Tokyo after reporting the weakest US car sales since 1981. Overall, Asia-Pacific stocks today closed mixed: Japan +1.79%, Hong Kong +1.36%, China +4.50%, Taiwan -1.14%, Australia +0.16%, Singapore +0.08%, South Korea -0.06%, Bombay +0.09%.

Mortgage apps – The markets are looking for a big increase in refinancing activity in the next several weeks. The real question, however, is whether the drop in mortgage rates will spark any significant boost in home buying activity. Mortgage rates fell sharply last week after the Treasury and Fed announced an $800 billion program to support the mortgage market with the purchase of $600 billion in mortgage securities and $200 billion worth of Freddie/Fannie debt. The 30-year mortgage rate in the week ended November 27 fell to 5.97%, according to Freddie Mac data, which is one-half percentage point lower than the previous month. More recent data indicates that the 30-year fixed mortgage rate is currently at 5.76%, down another 21 bp from last Thursday’s Freddie Mac figure.

Productivity – Today’s Q3 nonfarm productivity is expected to be revised lower to +0.9% from the last report of +1.1%. US productivity is likely to drop sharply over the next several quarters as GDP output falls. US businesses have been cutting workforces, but the decline in hours worked is likely to lag sales, thus pushing productivity lower.

ISM non-manufacturing index – Today’s Nov ISM non-manufacturing index is expected to fall –2.4 points to 42.0, adding to the –5.8 point decline to 44.4 seen in October. The October level of 44.4 was the lowest since the 7-year low of 41.9 was posted in Jan 2008. The record low for the series, which has history back to 1997, is 40.5 posted in Oct 2001. The current market consensus is for a –2.1% decline in Q4-2008 GDP, followed by an improvement to –0.9% in Q1 and +0.5% in Q2

Barchart.com U.S. Morning Call for Tuesday, December 2, 2008

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The European DJ Stoxx 50 this morning is trading +1.23% reversing an earlier decline. Bullish factors include better-than-expected Euro-Zone producer prices for October which helped drive the 10-year German bund yield down to a 3-year low. Also aiding stock prices in Europe today was the +6.7% jump in Tesco Plc as the largest UK supermarket company reported better-than-expected sales and on expectations for interest rate cuts from the BOE and ECB this Thursday. Asian markets tumbled today despite the unexpected 100 bp rate cut by the Bank of Australia. Most Asia-Pacific stock markets ended sharply lower: Japan -6.35%, Hong-Kong -4.98%, China +0.24%, Taiwan -3.57%, Australia -4.16%, Singapore -3.02%, South Korea -3.35%, Bombay -1.14%.

US auto sales – Today’s Nov US total vehicle sales report is expected to fall to 10.4 million units from 10.6 million units in October. Nov domestic vehicle sales are expected to fall to 7.8 million units from 7.9 million units in October. The expected decline in total vehicle sales to 10.4 million units in November would match the current 25-year low posted in April 1991. US vehicle sales have fallen off a cliff this year to the 10.6 million level in October from the 16.0 million average seen last year and the average of about 17.0 million seen in 2000-05. US consumers are panicked with the credit crisis and the plunge in the stock market and are postponing a decision on buying a new vehicle. The plunge in US vehicle sales has created a crisis for US automakers, which are suffering from both high costs and plunging demand for their vehicles. US automakers this week are presenting a business plan to Congress to try to justify why they should receive a taxpayer-funding bridge loan to get them to the next stage of trying to fundamentally rationalize their business models. The US auto industry has large implications for the US economy since millions of jobs depend on the sector. The US economy could survive the bankruptcy of one automaker during normal economic times. However, with the US economy currently headed into its worst recession in decades, the US economy clearly has no resilience to absorb the melt-down of the entire US auto sector. Therefore, Congress and the incoming Obama administration are likely to provide funding to keep the industry alive for the time being until it can be determined whether there is any way for the US auto industry to restructure into a period of long-term competitiveness and profitability.

European producer prices slowed more-than-expected in October as crude oil prices tumbled. Euro-Zone PPI fell -0.8% m/m in October, the biggest monthly decline in 22 years, and prices rose +6.3% y/y, a 6-month low. The diminishing inflation outlook gives the ECB ample room to lower rates further as the market fully expects a 50 bp rate cut at Thursday's policy meeting.

The Bank of Australia unexpectedly cut its benchmark rate 100 bp to a 6-year low of 4.25% today as the market had been expecting a 75 bp rate cut. BOA Governor Glenn Stevens said monetary policy is now "expansionary" as the Aussie central bank has now lowered rates by a whopping 300 bp since September to ease the sting of the global financial crisis.

The Bank of Japan will start accepting BBB or higher-rated corporate debt as of Dec 9 and the bank will start a new lending facility in January as Japanese businesses struggle to obtain funds. BOJ Governor Masaaki Shirakawa said after an emergency board meeting in Tokyo today that Japanese companies' access to funding is deteriorating "at an accelerating pace." Lending between Japanese banks has tightened even further despite the BOJ lowering its benchmark rate to 0.3% from 0.5% October 31. The 3-month Tokyo interbank lending rate, or Tibor, soared to a 10-year high of 0.893% today as banks hoard cash and remain wary of lending

Barchart.com U.S. Morning Call for Friday, November 21, 2008

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The European DJ Stoxx 50 this morning is trading mildly higher by +0.36% on better-than-expected earnings from Dell, improved sentiment about Citigroup, and some short-covering in banks and mining companies. Banks are trading higher today with UBS and Deutsche Bank up more than 5%. BHP Billiton, the world's largest mining company, is up 10%, and Rio Tinto is up 8%. Asia-Pacific stocks today kicked off the improved sentiment by rallying even in the face of yesterday's sharp US stock market sell-off: Japan +2.70%, Hong Kong +2.93%, China -0.61%, Taiwan +1.98%, Australia +1.90%, Singapore +2.98%, South Korea +5.84%, Bombay +5.49%.

The Bank of Japan at its policy meeting early today decided to leave its key overnight call loan rate unchanged at 0.3%. The BOJ said it would expand liquidity measures by expanding the type of collateral it will take to loan money to banks and that it will be more flexible in its purchase of commercial paper to jump-start the commercial paper market.

Citigroup's board will reportedly meet today to consider the firm's options after Citigroup stock yesterday fell to a 15 year low. Citigroup may seek to sell the entire company or sell off some of its assets to raise cash, according to the Wall Street Journal. Citigroup's stock is up 18% in European trading this morning, reversing part of yesterday's loss of 26%. Investors are concerned about the quality of Citigroup's balance sheet even though Citigroup earlier this week said it has "a very strong capital and liquidity position.

Barchart.com U.S. Morning Call for Thursday, November 20, 2008

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The European DJ Stoxx 50 this morning is trading -3.00% as gloom continues over the economic and earnings outlook. USB is down 9% this morning and ING is down 7%. Oil companies are lower this morning on the $1.42 sell-off in oil prices with Royal Dutch Shell down 2.6%, Total down 3%, Chevron down 1%, and Schlumberger down 2.5%. Mining companies are lower on weak metals prices with Rio Tinto down 6%, BHP Billiton down 5%, and Schlumberger down 2.5%. Air France is down 6% this morning after the airline reported that fiscal Q2 earnings fell 49% but said that it will produce positive operating income for the full fiscal year. Iceland received a $4.6 billion bailout loan from the IMF and four Nordic companies, which will help the country get back on its feet after its banking industry and currency collapsed. The Swiss central bank this morning unexpectedly cut its benchmark rate by 100 bp. Asia-Pacific stocks today plunged on the back of yesterday's sharp US stock market sell-off: Japan -6.89%, Hong Kong -4.04%, China -1.06%, Taiwai -4.53%, Australia -4.19%, Singapore -3.10%, South Korea -6.64%, Bombay -3.68%.

Claims – Today’s weekly initial unemployment claims report is expected to show a decline of –11,000 to 505,000, adding to last week’s decline of -32,000 to 516,000. Weekly continuing claims are expected to show a small increase of +3,000 to 3.900 million, adding to last week’s surge of +65,000 to 3.897 million. Initial claims are currently near a 7-year high and continuing claims are at a 25-year high. Unemployment claims are likely to keep rising in the wake of the series of recent layoff announcements by large companies and layoffs by smaller companies that don’t make announcements on the newswires. The labor data is likely to get much worse over the next few months as businesses shed employees to prepare for a potentially long and steep recession.

Philadelphia Fed index – Today’s Nov Philadelphia Fed manufacturing index is expected to show a small upward rebound of +2.5 points to –35.0. However, that would only be a small upward correction after the index plunged by –41.3 points to –37.5 in October. Manufacturing executives in the Philadelphia area, like the rest of the country, were shocked by the credit crisis that emerged in September and October and Philadelphia Fed’s manufacturing index in October plunged to an 18-year low. The US manufacturing sector is hurting, not only from the credit crisis and the US recession, but also from weaker overseas export demand and from the possibility that the US auto industry may implode within the next several months if there is no bailout from Washington.

LEI – Today’s Oct leading indicators report is expected to show a decline of –0.6%, more than reversing the +0.3% increase seen in September. On a year-on –year basis, the LEI in September fell to a 7-1/2 year low of –3.0% y/y. The LEI is likely to fall further in coming months to challenge the most recent troughs of –3.6% in 2001 and –3.7% seen in 1991. The largest year-on-year decline in the LEI occurred in 1974 with a decline of –14.7% y/y.

Barchart.com U.S. Morning Call for Wednesday, November 19, 2008

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The European DJ Stoxx 50 this morning is trading -1.66% lower on continued concerns about global economic growth and earnings. UBS is down -4.1% this morning after Morgan Stanley cut its 2009 earnings estimates for UBS to 1.41 francs per share from 1.83 francs due to the possibility of more writedowns. Mining stocks are generally lower today with lower metals prices. Rio Tinto is down -3.1% and BHP Billiton is down 2.6%. European automakers are trading lower today on concern about consumer demand with BMW down 6% and Peugeot Citroen down 4.7%. Exxon is down -1.2% and ConocoPhillips is down -0.9% on lower oil prices. Asia-Pacific stocks generally closed lower today: Japan -0.66%, Hong Kong -0.77%, China +6.16%, -0.49%, Australia -0.67%, Singapore -1.59%, South Korea -1.89%, Bombay -1.83%.

CPI – Today’s Oct CPI report is expected to show a sharp decline of –0.8% m/m following the report of unchanged in September. The Oct core CPI is expected to show a small increase of +0.1% m/m, matching the +0.1% m/m increase seen in September. On a year-on-year basis, the Oct CPI is expected to drop to +4.0% from +4.9% in September and fall further from the 17-1/2 year high of +5.6% posted in July. The Oct core CPI is expected to decline slightly to +2.4% from +2.5% in September. The headline inflation statistics remain high at present, but will be dropping sharply in coming months as the effects feed through from the plunge in oil and commodity prices and from the recessionary economic conditions. Falling inflation will make it easier for the Fed to maintain an extremely easy monetary policy as it attempts to reboot the US economy.

Housing starts – Today’s Oct housing starts report is expected to show a decline of –4.5% to 780,000, adding to the decline of –6.3% to 817,000 seen in September. Meanwhile, Oct building permits are expected to drop -3.7% to 775,000, adding to the decline of –6.1% to 805,000 seen in September. US housing starts hit a 17-year year low of 817,000 in September. The expected report today of 780,000 would push the series to a new record low, falling below the current record low of 798,000 posted in January 1991. The US credit crisis reached full stride in October and homebuilders were undoubtedly forced to slash their building plans even further to account for canceled contracts and the likelihood of a recession lasting well into 2009.

Mortgage apps – Mortgage applications were mixed today with the market index falling -6.2%, the purchases sub-index falling -12.6%, and the refinancing sub-index rising +2.6%. Today's decline in the purchases index pushed that index to a new 8-year low, indicating the lack of demand for home purchases. The 30-year mortgage rate has at least fallen in the last two weeks to 6.14% from the recent 3-month high of 6.46%.

FOMC minutes – The FOMC today will release the minutes of its meeting on Oct 28-29. The FOMC at that meeting cut its funds rate target by 50 bp to 1.00%, which was fully in line with market expectations, adding to the inter-meeting 50 bp rate cut to 1.50% made on October 8. The FOMC in its post-meeting statement said that, “The pace of economic activity appears to have slowed markedly.” The FOMC also said that it expects “inflation to moderate in coming quarters to levels consistent with price stability.” The statement indicated that the FOMC stood ready to implement further easing measures as necessary by saying, “The Committee will monitor economic and financial developments carefully and will act as needed to promote sustainable economic growth and price stability.”

Barchart.com U.S. Morning Call for Monday, November 17, 2008

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The European DJ Stoxx 50 this morning is trading -1.77% as the markets worry about weak global economic growth. Japan's Q3 GDP was reported today at -0.4% (qtr/qtr annualized), pushing Japan into the technical definition of a recession of at least two consecutive quarters of negative GDP growth (Japan's Q2 GDP was down a revised -3.7%). The Confederation of British Industry today forecasted that the UK economy in 2009 will fall -1.7%. European banks are generally trading lower today with Santander SA, Spain's largest bank, and BNP Paribas down more than 6%. Tesco, the largest UK retailer, fell 4% today after JPMorgan cut its rating to "underweight" from "neutral." Asian-Pacific stocks closed mixed today: Japan +0.71%, Hong Kong -0.10%, China +2.24%, Taiwan -0.29%, Australia -2.54%, South Korea -1.19%, Bombay -1.01%.

Market focus - The markets this week will focus on (1) the outcome of the 2-day G20 summit held over the weekend and whether there are any concrete benefits for the markets such as another set of coordinated rate cuts or stimulus plans, (2) Tuesday’s appearance by Bernake/Paulson/Bair before the House Financial Services Committee as they seek to defend and explain the direction of the Treasury’s $700 billion rescue plan and what they plan to do to help the auto industry and homeowners facing foreclosure, (3) the extent of economic weakness indicated by this week’s heavy slate of US economic reports, (4) the US stock market which traded in a volatile range last week with little fundamental confidence due to the likelihood of continued sharp downward revisions in earnings estimates for Q4 and 2009, (5) the US credit market where the yield curve remains steep as the Fed keeps short-term rates low but as long-term yields remain elevated by comparison due to supply concerns, (6) the dollar which is consolidating near the top of its 4-month rally as demand for dollars remains strong and as European GDP data last week indicated that Europe was already in a recession in Q2 and Q3, and (6) crude oil prices which extended the 4-month plunge as fuel demand evaporates and as OPEC lags on cutting production.

Fed policy – The market last week boosted expectations for Fed easing as the stock market remained weak and as October US retail sales plunged –2.8% overall and –2.2% ex-autos (adding to the Sep decline of –1.3% overall and –0.5% ex-autos). In addition, Fed Chairman Bernanke last Friday said that global “policy makers will remain in close contact, monitor developments closely and stand ready to take additional steps should conditions warrant.” Mr. Bernanke was clearly leaving the door open for more Fed rate cuts and possibly another round of coordinated central bank rate cuts if the situation should suddenly deteriorate. The market is fully expecting the Fed to cut the funds rate target by another 50 bp to 0.50% at its next FOMC meeting on Dec 16. The market is expecting the ECB to cut its 2-week refinancing rate by at least 50 bp to 2.75% at its upcoming policy meeting on December 10.

NY Empire manufacturing index and US industrial production – Today’s Nov Empire manufacturing index is expected to show a decline of 1.5 points to –26.1, adding to the plunge of 17.2 points to –24.6 seen in October. The October level of –24.6 was a record low for the series, although the history for the series only goes back to July 2001. On the nationwide front, today’s Oct industrial production report is expected to show a small increase of +0.2% m/m, recovering a bit after the plunge of -2.8% m/m seen in September. On a year-on-year basis, industrial production in September hit a 6-3/4 year low of –4.5% y/y and appears headed for a challenge of the 26-year low of –5.7% y/y posted in November 2001 and possibly the 33-year low of –7.0% y/y posted in 1982. The record low for the industrial production series is –12.4% y/y posted in 1975.

Manufacturing executives can only be in shock given the credit crisis and the fact that consumer spending hit a wall in September and October, which will lead to sharp cutbacks in orders in the manufacturing sector. In addition, the global nature of the crisis means that the US manufacturing sector can no longer rely on orders from overseas to keep the US manufacturing sector afloat. The US manufacturing sector is also hemorrhaging from the US auto industry, which by most accounts is near bankruptcy.

Barchart.com U.S. Morning Call for Thursday, November 13, 2008

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The European DJ Stoxx 50 this morning is trading -0.79%. German Q3 GDP was reported at -0.5% q/q, adding to the revised -0.4% q/q decline in Q2 to meet the definition of a recession of at least two consecutive quarters of negative growth. Intel and Wal-Mart reduced their earnings guidance. The OECD reduced its global economic forecast and cut its forecast for Euro-Zone 2009 GDP growth to -0.5% and for US 2009 GDP growth to -0.9%. Russia's Micex Index was down -17% on its low today but then recovered to a -7.5% loss after a 30-minute trading halt. UK banks are weak today with Barclays down -5.5% and the Royal Bank of Scotland down -6%. Asia-Pacific stocks today generally closed sharply lower on the back of yesterday's sharp US loss: Japan -5.25%, Hong Kong -5.15%, China +4.01%, Taiwan -3.85%, Australia -5.86%, Singapore -1.60%, South Korea -3.10%.

Unemployment claims – Today’s weekly initial unemployment claims report is expected to show a small decline of –1,000 to 480,000, adding to last week’s decline of –4,000 to 481,000. Weekly continuing claims are expected to fall –18,000 to 3.825 million, reversing only a small part of last week’s +122,000 surge to 3.843 million. The unemployment claims situation is grim and illustrates the deteriorating US labor market. Initial claims are just mildly below the recent 7-year high and continuing claims are at a 25-year high. The 25-year high in continuing claims illustrates the cumulative effect of people being laid off from their jobs and not being able to find a new job. The labor situation will almost certainly get worse over the next several months as businesses retrench and prepare for a steep recession.

US trade deficit – Today’s Sep US trade deficit is expected to narrow mildly to -$57.0 billion from -$59.1 billion in August. The US trade deficit in the past 2 years has basically moved sideways in the range of about $55 billion to $62 billion, with the ex-petroleum trade deficit generally improving due to strong export demand. More recently, there is downward pressure on the US trade deficit from the falling value of US oil imports and from falling imports due to weak US import demand. However, there is upward pressure on the US trade deficit from the decline in demand for US exports. The US trade deficit data could therefore be more volatile than usual over at least the next several months.

30-year T-bonds – The Treasury today will auction $10 billion 30-year T-bonds. Today’s 30-year issue was trading at 4.18% in when-issued trading late yesterday afternoon. The Treasury’s pattern has been to sell an original 30-year T-bond issue in February and August and then reopen those issues in the following quarter in May and November. Today’s 30-year T-bond issue will be a reopening of the 4.50% 30-year T-bond of 5/15/2038 originally sold on August 7, 2008. The 6-auction averages for the 30-year are as follows: 2.24 bid cover ratio, $15 million in non-competitive bids, 3.60 bp tail to the median yield, 9.83 bp tail to the low yield, and 43% taken at the high yield. The 30-year T-bond is not particularly popular among foreign central banks. Indirect bidders, a category mainly comprised by foreign central banks, have taken an average of 20.1% of the last six 30-year T-bond auctions, which is well below the average of 32.4% across all recent Treasury coupon auctions

Barchart.com U.S. Morning Call for Tuesday, November 11, 2008

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Global stocks are trading lower across the board today as the markets continue to fret about declining economic growth and earnings. The European DJ Stoxx 50 this morning is trading -2.81% and Dec S&Ps are down -16.00 points. Asia-Pacific stocks today closed lower across the board: Japan -3.00%, Hong Kong -4.77%, China -1.13%, Taiwan -2.15%, Australia -3.58%, Singapore -4.14%, South Korea -2.10%, Bombay -6.61%. Today is a partial holiday in the US with the equity markets open as usual but with the interest rate and currency futures pits closed.

US life insurance stocks today are trading lower this morning on Goldman Sachs' downgrade of the sector on concern about credit rating declines and the possible need for more capital. European insurance companies also fell with Allianz down 6.5% and Swiss Life down 8%. Financial stocks were also hurt by a 6% decline in Julius Baer, which said its assets under management fell. Commodity producer stocks were hurt today by lower metals and energy prices and concern about demand. BHP Billiton is down 5%, Rio Tino is down 4%, Total is down 3%, and Shell is down 2%. UK homebuilder Taylor Wimpey Plc said orders for UK homes have fallen by 40% due to the credit crisis.

On the more positive side today, ZEW's November German consumer confidence index today unexpectedly improved to -53.5 from -63.0 in October and from September's record low of -63.9. German confidence improved on the German government's bank bailout program and its 50 billion euro stimulus package.

Overnight U.S. Stock News

December S&Ps this morning are trading -16.00 points on weak overseas stocks and continued worries about earnings and economic growth. The US stock market yesterday could not hold the early rally on the Chinese stimulus package and closed lower (Dow -0.82%, S&P 500 -1.27%, Nasdaq Composite -1.86%).
Bearish factors for stock prices yesterday included (1) the sell-off in financial stocks after Goldman Sachs' stock fell -8.4% on Barclays' view that Goldman Sachs may post a Q4 loss of $2.50 a share, (2) the 3.7% drop in Google to a 3-year low after Barclays cut Google's Q4 revenue estimates saying the search-engine business has deteriorated, (3) the 23% plunge in General Motors to its lowest level in 50 years after Deutsche Bank downgraded the automaker to "sell" saying the shares may be worthless in a year, and (4) the filing for bankruptcy by Circuit Ciity Stores, the biggest retail casualty of the credit crisis thus far.
Bullish factors for stock prices yesterday included (1) China's announcement of a $586 billion economic stimulus plan which may help spur global growth, (2) the statement out of the Group of 20 nations meeting in Brazil that the G-20 is prepared to act "urgently" to bolster growth, raising speculation of more coordinated central bank interest rate cuts, and (3) the 8% rally in AIG after the US government almost doubled the size of its bailout of the insurer to $150 billion.
Starbucks is down 3.5% in European trading this morning after reducing its 2009 earnings guidance to the range of 71-90 cents per share from its previous guidance of 90 cents to $1.00. The latest analyst consensus was 87 cents.
American Express is up +1.2% after receiving approval to become a bank, thus gaining access to funding from the Federal Reserve.

Today's U.S. Market Focus

December 10-year T-notes this morning are trading +8.5 ticks on global stock market weakness. December T-note prices yesterday overcame early weakness and closed +15 ticks. Bullish factors for T-note prices yesterday included (1) flight-to-safety after the stock market sold off sharply from early gains, (2) stronger-than-expected demand for yesterday's $25 billion 3-year T-note auction, (3) dovish comments from ECB President Trichet that receding inflation may allow central banks to further reduce interest rates, and (4) Fitch Ratings' cut in its debt rating for four Eastern European emerging market countries and its downgrade of the credit outlook for Russia, South Korea and Mexico on concern the global financial crisis is making it more difficult for emerging economies to attract foreign capital. Bearish factors for T-note prices yesterday included (1) China's $586 billion economic stimulus plan, potentially helping the global economy and decreasing demand for the safety of Treasuries, and (2) supply pressures with the ongoing quarterly refunding as the Treasury auctions $20 billion in 10-year T-notes on Wednesday and $10 billion in 30-year T-bonds on Thursday.
The dollar this morning is narrowly mixed with the dollar/yen down -0.14 yen and the euro/dollar down -0.26 cents. The dollar index yesterday closed little changed. Bullish factors for the dollar yesterday included (1) the larger-than-expected decline in the Dec Euro-Zone Sentix investor confidence to its lowest level (-8.6 to -36.4) since the data series began in July 2002, (2) comments from ECB Coucil member Mersch that all available forecasts indicate the impact of the credit crunch may lead to a recession in the Euro-Zone, and (3) comments from ECB President Trichet that receding inflation may allow central banks to further reduce interest rates, raising speculation about additional ECB rate cuts. Bearish factors for the dollar yesterday included (1) strength in the yen as the US stock market crumbled from an early rally, discouraging the yen carry trade, and (2) speculation that the proposed $586 billion Chinese stimulus package may boost global growth less expected becasue the Chinese government is investing in infrastructure instead of increasing consumer spending.
December crude oil prices this morning are trading -$2.66 a barrel and December gasoline is trading -6.17 cents a gallon on continued concern about global economic growth and demand. December crude oil prices yesterday opened the day sharply higher, sold off to a 19-month low and then recovered to close the day +$1.37 a barrel. December gasoline yesterday closed +1.84 cents a gallon. Bullish factors for crude oil prices yesterday included (1) China's $586 billion economic stimulus package, which could increase energy demand down the road, (2) the weaker dollar, and (3) comments from Iran's oil minister that OPEC may meet before its scheduled Dec 17 meeting if crude oil prices keep falling. Bearish factors for crude oil prices yesterday included (1) speculation that a Chinese stimulus package won't be felt until well into next year at the earliest, keeping global economic growth weak in the near-term, (2) yesterday's US stock market decline, and (3) the prediction from Merrill Lynch that demand for distillate fuels and refined petroleum products will weaken further in 2009 as economic growth slows and consumers continue to cut spending.

Barchart.com U.S. Morning Call for Thursday, November 6, 2008

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The European DJ Stoxx 50 this morning is trading sharply lower by -3.95%. The markets are waiting for news later this morning on the outcome of today's ECB policy meeting as the market consensus is for a 50 bp rate cut to 3.25%. The Bank of England later this morning is expected to announce a 50 bp rate cut to 4.00%. Bearish factors this morning include earnings disappointments from Toyota, Cisco Systems, News Corp, and Adidas. Toyota fell sharply by 8% today after cutting its fiscal 2008-09 (ending March 31) net income guidance to 550 billion yen ($5.6 billion) from its May guidance of 1.25 trillion yen due to high fuel prices and the credit crisis. Cisco is down 5% on guidance for a revenue decline for the first time in 5 years. News Corp fell 11% after saying that ad sales are declining at its Fox stations and newspapers. Adidas is down 7% after reporting an earnings miss. Ambac Financial is down 14% in European trading this morning after Moody's cut its bond insurance rating by four levels. Wells Fargo is down 3.6% this morning after saying it will raise $10 billion through a stock offering to fund its purchase of Wachovia. Asia-Pacific stocks today closed sharply lower following yesterday's losses in the US stock market: Japan -6.53%, Hong Kong -7.08%, China -2.46%, Taiwan -5.71%, Australia -4.31%, Singapore -2.66%, South Korea -7.46%, Bombay -3.81%.

Unemployment claims – Today’s weekly initial unemployment claims report is expected to show a small decline of –2,000 to 477,000 following last week’s report of unchanged at 479,000. Weekly continuing claims are expected to rise +25,000 to 3.740 million, more than reversing last week’s –12,000 rise to 3.715 million. Initial claims are just below the late-September 7-year high of 499,000 and continuing claims are just below the recent 5-year high of 3.727 million. The unemployment claims data is likely to get worse in coming weeks as more companies announce layoffs to prepare for a potentially steep recession. On the labor front, the market is expecting tomorrow’s Oct payroll report to show a decline of –200,000, which would be the tenth consecutive monthly decline and would bring the overall payroll loss in the past ten months to -860,000. Tomorrow’s Oct unemployment rate is expected to rise +0.2 points to 6.3%, which would match the 14-1/2 year high of 6.3% posted in June 2003 during the last economic bust. The US unemployment rate is likely to continue to rise in coming months and may challenge the previous cyclical high of 7.8% posted in June 2002, which was the highest US unemployment rate in 24 years. The highest US unemployment rate in post-war history was 10.8% posted in November 1982.

Productivity – Today’s Q3 nonfarm productivity is expected to ease to +0.7% from the strong rate of +4.3% seen in Q2. The lower productivity figure will be due to the poor US GDP output of –0.3% seen in Q3 versus the respectable GDP rate of +2.8% seen in Q2. US productivity is likely to be weak in coming quarters as GDP declines and businesses struggle to cut employment levels to match sales. Meanwhile, Q3 unit labor costs are expected to be high at +3.0% after the –0.5% decline seen in Q2.

Chain store sales – Today’s Oct ICSC chain store sales report is expected to ease to +0.7% y/y from +1.0% y/y in September. US retail sales received a shock in September and October as the simmering mortgage and banking problems seen in the past year reached the status of a full-blown crisis with the bankruptcy of Lehman Brothers and the plunge in the US stock market. US consumers are currently in the process of trimming their spending due to the poor employment outlook, the difficulty of obtaining credit, and the sharp drop in household wealth due to the housing and stock market sell-offs.

Overnight U.S. Stock News

December S&Ps this morning are trading -18.00 points on earnings disappointments by a variety of global companies and concern about further earnings downgrades. The US stock market yesterday opened lower and sold-off sharply throughout the day and closed on its low (Dow -5.05%, S&P 500 -5.27, Nasdaq Composite -5.53%).
Bearish factors for stock prices yesterday included (1) the larger-than-expected loss of jobs in Oct ADP employment change, (2) the larger-than-expected decline in the Oct ISM non-manufacturing index to a record low for the index that was created in July 1997, (3) concern that the US economy will worsen even as President-elect Obama takes steps to stimulate growth, (4) the 08.8% plunge in the S&P 500 Financials Index after Oppenheimer analyst Whitney predicted the mortgage market will contract and more than $2 trillion in available credit-card lines will be pulled from the system, and (5) the sell-off in high-end retailers after the prediction from the ICSC that luxury retailers in the US may see holiday sales decline 3% this year after advancing 5% last year and that this will be the first year since 2002 that luxury retailers sales won't outpace low-priced retailers.
Bullish factors for stock prices yesterday included (1) speculation that President-elect Obama favors a second stimulus plan to help the ailing US economy, (2) the prediction from UBS AG that natural gas and infrastructure companies may benefit when President-elect Obama takes office as Obama is "a friend of natural gas" and may help push through laws that would tax carbon emissions, hurting coal-fired electricity, and Obama's pledge to spend on roads and bridges will help infrastructure companies such as Flour and Caterpillar, and (3) the 18th consecutive decline in the 3-month dollar Libor rate which dropped 20 bp to a 3-3/4 year low of 2.51%, signaling a continued easing in interbank lending rates.
Cisco Systems (CSCO) tumbled 6.4% in after-hours trading yesterday as the world's largest maker of networking equipment said Q1 sales rose at the slowest pace in 3 years and that Q2 revenue will decrease as much as 10% as the slumping economy crimps sales.

Today's U.S. Market Focus

December 10-year T-notes this morning are trading +6 ticks on weak global stocks. December T-note prices rallied every day this week and closed yesterday up +10.5 ticks at a 1-1/2 week high. Bullish factors for T-note prices yesterday included (1) the larger-than-expected loss of jobs in the Oct ADM employment change (-157,000 versus expectations of -100,000), (2) the larger-than-expected decline in the Oct ISM non-manufacturing index which fell to a record low for the index that was created in July 1997 (-5.8 to 44.4 versus expectations of -3.2 to 47.0), and (3) flight-to-safety as the equity market plummeted. Bearish factors for T-note prices yesterday included (1) the continued decline in interbank lending rates with the 3-month dollar Libor rate falling 20 bp to 2.51%, a 3-3/4 year low, and (2) supply pressures with the Treasury's hike in the size of the November quarterly refunding to its largest amount in 4 years ($55 billion) and the Treasury's increase in the frequency of longer-term 10-year and 30-year debt auctions.
The dollar/yen this morning is down -0.23 yen. The euro/dollar is down -0.77 cents as the market awaits today's expected ECB rate cut announcement. The dollar index yesterday closed lower for the second straight day. Bearish factors for the dollar yesterday included (1) fears of a weaker-than-expected unemployment report tomorrow after the Oct ADP employment change came in much weaker than anticipated, (2) strength in the yen as the plunging equity market caused investors to abandon their yen carry trades, and (3) the larger-than-expected fall in the Oct ISM non-manufacturing index. Bullish factors for the dollar yesterday included (1) expectations that both the BOE and ECB will cut their benchmark interest rates by 50 bp when they meet today, and (2) President-elect Obama's support for a second fiscal stimulus package to help boost the US economy.
December crude oil prices this morning are trading -94 cents a barrel and December gasoline is trading -0.89 cents a gallon on a mildly higher dollar versus the euro and on weak global stocks. December crude oil prices yesterday tumbled and closed -$5.23 a barrel and December gasoline closed -10.83 cents a gallon. Bearish factors for crude oil prices yesterday included (1) the unexpected rise in gasoline inventories in yesterday's DOE inventory report (gasoline +1.12 million bbl versus expectations of a -650.000 bbl decline), and (2) continued weak fuel demand as US fuel demand during the past four weeks averaged 19.1 million bpd, down 6.7% from a year ago. Bullish factors for crude oil prices yesterday included (1) weakness in the dollar, and (2) negative refining margins as the crack spread has been negative for the last two weeks, prompting refiners to cut back on processing of crude into gasoline and distillate products which will limit supplies going forward.

Barchart.com U.S. Morning Call for Wednesday, November 5, 2008

U.S. Preview

The European DJ Stoxx 50 this morning is down -1.91% on earnings disappointments and bank stock weakness. ArcelorMittal today plunged 15% as the world's largest steel maker said it would cut production due to lower prices and demand for steel. BNP Paribas is down 3% after reporting that Q3 earnings fell 56% to 901 million euros, which was below the consensus of 1.38 billion euros. Ireland's second largest bank, Allied Irish Banks, fell 8% after the bank said 2008 earnings will fall 72% on rising bad debt charges and costs tied to the government bailout. Q-Cells fell 12% after Deutsche Bank cut its rating on the German solar-panel manufacturer to "sell" from "buy" due to slower growth. On the plus side, the 3-month dollar Libor rate today fell to 2.71%. Asia-Pacific stocks today closed mostly higher on support from yesterday's strong US stock market rally: Japan +4.46%, Hong Kong +3.17%, China +3.91%, Taiwan -0.29%, Australia +2.88%, Singapore +2.14%, South Korea +2.18%, Bombay -4.81%.

Mortgage apps – Today's MBA mortgage applications report showed a -20% drop in the mortgage index, a -14% in the purchase sub-index, and a -28% decline in the refinancing index. The declines came as the 30-year mortgage rate in the latest week rose sharply by 42 bp to 6.46%, matching the 2-month high seen in mid-October.

ADP employment change – Today’s Oct ADP employment change is expected to show a decline of –100,000, adding to the –8,000 decline seen in September. Over the past five years, the ADP employment change has virtually no correlation (0.04) with the payroll report from the Bureau of Labor Statistics. The payroll report has shown significantly more weakness than the ADP report, having falling every month this year and having shown a net –760,000 decline this year. The market is expecting Friday’s Oct payroll report to show a decline of –200,000, which would be the largest loss of jobs yet this year. The unemployment situation is likely to get much worse over the next several months as businesses lay off employees and prepare for recession.

ISM non-manufacturing index – Today’s Oct ISM non-manufacturing index is expected to show a –3.2 point decline to 47.0, adding to the –0.4 point decline to 50.2 seen in September. The ISM non-manufacturing index has dipped below the boom-bust level of 50 on three different occasions this year, but in each case bounced back above 50 the following month. However, this time the ISM non-manufacturing index is likely to remain below 50 for an extended period of time as the US economy enters a potentially long and steep recession. For its part, the ISM manufacturing index in Sep-Oct plunged by a combined 11.0 points to post a 26-year low of 38.9, indicating that executives in the manufacturing sector are expecting a sharp contraction. Executives in the service sector are likely to be similarly pessimistic, though probably not as pessimistic as the US manufacturing sector, which is dealing with a auto sector collapse and weaker overseas demand for US manufactured exports.

Barchart.com U.S. Morning Call for Tuesday, November 4, 2008

U.S. Preview

The European DJ Stoxx 50 this morning is trading +1.80% higher on the continued decline in interbank lending rates and some better-than-expected earnings results. Chemical-maker Clariant rallied 12% and UK-retailer Marks & Spencers rallied 7% after reporting better-than-expected earnings. Bank stocks are generally higher this morning with the decline in interbank lending rates. Barclays is up 3%, Societe Generale is up 6.5%, Mizuho is up +7%, Mitsubishi is up +5%, and Citigroup is up 2%. Australia today cut its benchmark rate by 75 bp to 5.25%, adding to the 100 bp rate cut seen in October. Asia-Pacific stocks today closed mixed: Japan +6.27%, Hong Kong +0.28%, China -1.56%, Taiwan -0.05%, Australia -0.15%, Singapore -2.87%, South Korea +1.90%, Bombay +2.84%.

Interbank lending rates continued lower today. The 3-month Euribor fell 3 bp to a 7-month low of 4.70%. Japan's 3-month Libor rate fell 10 bp to 0.79%. The 3-month dollar Libor rate fell 15 bp to a 5-month low of 2.71%, finally dropping below the 2.82% level that prevailed before the banking crisis began in mid-September.

Factory orders – Today’s Sep factory orders report is expected to show a decline of –0.8%, adding to the sharp –4.4% decline seen in August. Manufacturing orders are likely to fall off a cliff in October as businesses freeze any expansion or inventory building plans in light of the credit crisis. The ISM manufacturing index yesterday fell sharply to a 26-year low, indicating the depth of pessimism in the manufacturing sector.

Overnight U.S. Stock News

December S&Ps this morning are trading +18.10 on the continued decline in interbank lending rates. The US stock market yesterday traded on either side of unchanged the entire day and finished mixed (Dow -0.06%, S&P 500 -0.25%, Nasdaq Composite +0.31%).
Bearish factors for stock prices yesterday included (1) the larger-than-expected drop in the Oct ISM manufacturing index to a 26-year low, (2) the Fed's quarterly loan survey which said large businesses faced the tightest lending standards on record over the past three months as the risks of a deeper slowdown increased in the wake of the financial turmoil in Sep and Oct, (3) comments from Richmond Fed President Lacker that falling US economic growth and rising unemployment may further erode banks' willingness to lend to consumers and businesses, (4) comments from Dallas Fed President Fisher that he sees no US economic growth through 2009 and that we're "not out of the woods yet" even as interbank lending rates fall, and (5) the surge in US bankruptcies in Oct which topped 100,000 for the first time since bankruptcy laws were tightened three years ago.
Bullish factors for stock prices yesterday included (1) the predicton by Citigroup that Intel and other semiconductor makers may return 43% over the next year and outperform the overall stock market in the next 12 months, (2) the continued decline in interbank lending rates with the 3-month dollar Libor rate falling to its lowest level since Lehman Brothers collapsed on Sep 15, and (3) speculation that the stock market may rally if Senator Obama is elected President as the Dow since 1900 rose by an average 9.8% in the 12 months after the Democratic Party captured the White House with only two exceptions (in 1912 for President Wilson and in 1976 for President Carter).
MasterCard is trading sharply higher by 9% in European trading this morning after reporting stronger-than-expected Q3 EPS ex-items of $2.47 per share, which was substantially better than the market consensus of $2.22 per share.

Today's U.S. Market Focus

December 10-year T-notes this morning are trading -7 ticks due to higher S&Ps and European stocks. December T-note prices yesterday closed +23 ticks. Bullish factors for T-note prices yesterday included (1) the weaker-than-expected Oct ISM manufacturing index that fell to a 26-year low (-4.6 to 38.9 versus expectations of -2.5 to 41.0), (2) the weaker-than expected new orders sub-index of the Oct ISM manufacturing index which dropped to a 28-year low of 32.2, (3) reduced inflation concerns as the ISM prices-paid sub-index plunged to a 6-3/4 year low (-13.5 to 37.0 versus expectations of -4.5 to 49.0), (4) comments from Dallas Fed President Fisher that he sees no US economic growth through 2009 and that it is clear that in September price pressures "screeched to a halt," and (5) comments from Richmond Fed President Lacker that "the deterioration of economic conditions is playing a more prominent role in the tightening of credit terms right now than the direct effects of financial-market turbulence." Bearish factors ror T-note prices yesterday included (1) the US Treasury's statement that it will need to borrow $550 billion in the three months to Dec 31 compared with the $142 billion it predicted in July as weaker economic growth and the costs of a bank rescue package swell the budget deficit, (2) the prediction by Goldman Sachs that the next US president may find foreign investors unable to absorb a growing supply of Treasury bonds as the financial crisis prompts nations to invest in their own banks and currencies, pushing bond yields higher, and (3) the prediction by Morgan Stanley that the US yield curve may steepen substantially and grow to 3.00 points by the end of Q1 2009 as shorter-term securities "will continued to be anchored by monetary poicy and the long end will sell off on increased supply."
The dollar/yen this morning is up +0.38 yen. The euro/dollar is up +1.21 cents as the dollar suffers from reduced safe-haven buying. The dollar index yesterday ended the day higher. Bullish factors for the dollar yesterday included (1) the European Commission's forecast that the Euro-Zone economy has entered a recession this year and will stagnate into 2009, increasing the chances of continued easier ECB monetary policy, and (2) speculation that both the BOE and the ECB will cut their target lending rates by 50 bp at their policy meetings this Thursday. Bearish factors for the dollar yesterday included (1) the weaker-than-expected US Oct ISM manufacturing index which tumbled to a 26-year low, and (2) the continued decline in interbank lending rates as the 3-month dollar Libor rate fell to its lowest level since the failure of Lehman Brothers on Sep 15, reducing the demand for dollars.
December crude oil prices this morning are trading +31 cents a barrel and December gasoline is trading +0.76 cents a gallon. The main bullish factor this morning is the weaker dollar versus the euro. December crude oil prices yesterday closed -$3.90 a barrel and December gasoline closed -13.34 cents a gallon. Bearish factors for crude oil prices yesterday included (1) the contraction in the US manufacturing sector to its lowest level in 26 years in October, signaling weakening energy demand, (2) the prediction by the European Commssion that the Euro-Zone economy probably entered a recession this year and will stagnate in 2009, (3) the rally in the dollar, (4) Societe Generale's cut in its 2009 crude oil forecast for the second time in a month, reducing its price target by 36% to $72.50 a barrel, and (5) Goldman Sachs' comment that "downside risks" to its year-end crude oil price forecast of $70 a barrel have increased amid signs of slowing emerging-market demand and the fact that OPEC is unlikely to fulfill all of its announced production cuts within the next couple of months

Today's U.S. Earnings Reports

Earnings reports (confirmed releases for companies with market caps above $10.0 bln listed by mkt cap): EMR-Emerson Electric (BEST earnings consensus $0.86 per share), FE-FirstEnergy (1.45), ADM-Archer-DAniels Midland (0.69), PPL-PPL Corp. (0.61), VNO-Vornado Realty Trust (0.41), HCP-HCP (0.21), UPL-Ultra Petroleum (0.71), EXPD-Expeditors International (0.37), AEE-Ameren (1.28), VTR-Ventas (0.31), JEC-Jacobs Engineering Group (0.92), CHD-Church & Dwight (0.69), NI-Nisource (0.04), MKL-Markel (0.36), XEC-Cimarex Energy (2.28), DF-Dean Foods (0.31), PXD-Pioneer Natural Resources (1.22), PNW-Pinnacle West (1.55), DNR-Denbury Resources (0.52), PSD-Puget Energy (0.12), NHP-Nationwide Health Properties (0.27), MYGN-Myriad Genetics (0.14), JOE-St. Joe (-0.03)

Global Financial Calendar

Tuesday 11/4/2008

United States
0745 ET	ICSC (Int’l Council of Shopping Centers) weekly retailer sales, previous +0.5% w/w and +1.3% weekly y/y.
0855 ET	Redbook weekly retailer sales, previous –1.1% month-to-date m/m and +0.7% month-to-date y/y.
1000 ET	Sep factory orders expected –0.8%, Aug –4.4%.
1045 ET	Dallas Fed President Richard Fisher speaks on US economic challenges at the Texas Cattle Feeders Association Annual Convention.
1300 ET	Weekly 4-week T-Bill auction.
1700 ET	ABC U.S. weekly consumer confidence, previous +1 to -49.
Japan
0000 ET	Oct Japan vehicle sales, Sep –5.3% y/y.
United Kingdom
0430 ET	Oct U.K. PMI construction expected –1.0 to 37.8, Sep –1.7 to 38.8.
1901 ET	Oct U.K. nationwide consumer confidence expected –3 to 47, Sep –2 to 50.
Euro-Zone
0500 ET	Sep Euro-Zone producer price index (PPI) expected –0.1% m/m and +8.0% y/y, Aug –0.5% m/m and +8.5% y/y.

Morning Quote Board

US Stock Futures
Morning Quotes (ET)	Last	Chg	%chg	Updated
S&P (Globex) (Z8)	987.60	18.10	1.87%	06:58:37
DJIA (CBOT) (Z8)	9500	168	1.80%	06:56:52

European Stocks
Europe DJ Stoxx 50	2382.03	42.14	1.80%	06:53:30
London UK FTSE Index	4522.23	78.95	1.78%	06:53:31
German Dax Index	5118.95	92.11	1.83%	06:53:37
French CAC 40 Index	3605.27	77.30	2.19%	06:53:30

Asian-Pacific Stocks
Japan Nikkei Index	9115	538	6.27%	02:00:13
Hong Kong Hang Seng	14384	40	0.28%	03:10:45
China CSI 300 Index	1628	-26	-1.56%	02:01:05
Taiwan TAIEX Index	4993	-2	-0.05%	00:46:01
Australian S&P 200	4215.1	-6.4	-0.15%	00:47:03
Singapore Str. Times	1829.69	-54.06	-2.87%	04:10:07
South Korea KOSPI 200	151.63	2.82	1.90%	01:01:16
Bombay Sensex 30	10631	293.44	2.84%	07:06:48
Karachi KSE-100	9183	0	0.00%	00:40:13

US Interest Rates
10yr T-notes (CBT)(Z8)	113.185	-0.070	-0.19%	06:58:00
Cash 10yr T-note Price	100.200	-0.020	-0.06%	07:07:01
Cash 10yr T-note Yield	3.922	0.008	0.20%	07:06
5yr T-note (CBT)(Z8)	114.050	-0.005	-0.01%	06:57:46
Cash 5yr T-note Price	100.055	-0.020	-0.06%	07:08:00
Cash 5yr T-note Yield	2.713	0.013	0.50%	07:07
30-yr T-bond (CBT)(Z8)	113.04	-0.14	-0.37%	06:58:02
Cash 30yr T-bond Price	102.205	-0.100	-0.30%	07:08:31
Cash 30yr T-bond Yield	4.340	0.018	0.43%	07:08
Eurodollars (CME)(Z8)	97.885	0.055	0.06%	06:58:33
Eurodollars (CME)(H9)	97.885	0.030	0.03%	06:58:33

Asian & European Rates
10-yr JGBs (TSE) (Z8)	137.83	-0.15	-0.11%	01:00:00
EuroyenTibor(SGX)(Z8)	99.295	0.000	0.00%	11/4/2008
Bunds (Eurex) (Z8)	116.59	0.02	0.02%	06:53:36
Euribor (Eurex) (Z8)	96.31	0.03	0.03%	03:21:15
UK Gilts (Liffe) (Z8)	111.47	-0.07	-0.06%	06:53:28
Short Stlg (Liffe) (Z8)	95.85	0.03	0.03%	06:53:29

Forex
US Dollar-Japanese Yen	99.50	0.38	0.38%	07:08:38
EuroFX-US Dollar	1.2764	0.0121	1.21%	07:08:39
US Dollar-Swiss Franc	1.1687	-0.0062	-0.62%	07:08:36
British Pound-US$	1.5847	0.0028	0.28%	07:08:38
US$-Canadian Dlr	1.1758	-0.0057	-0.57%	07:08:36
Yen (Globex) (Z8)	1.0049	-0.0063	-0.63%	06:58:27
Euro FX (Globex) (Z8)	1.2765	0.0156	1.24%	06:58:39
SwissFranc (Globex)(Z8)	0.8568	0.0042	0.49%	06:58:36
British Pound(Glbx)(Z8)	1.5828	0.004	0.25%	06:58:39
Canadian$ (Globex)(Z8)	0.8503	0.0068	0.81%	06:58:33

Commodities
Gold (Comex) (Z8)	732.6	5.8	0.80%	06:38:35
Copper (Comex) (Z8)	189.3	5.3	2.88%	06:38:35
Crude Oil (Nymex) (Z8)	64.22	0.31	0.49%	06:38:37
Gasoline (Nymex) (Z8)	137.01	0.76	0.56%	06:38:38
Heating Oil(Nymex)(Z8)	199.99	1.71	0.86%	06:37:42
NaturalGas(Nymex)(Z8)	6.867	0.029	0.42%	06:38:31

Copyright © 2008, All rights reserved. The information contained herein is derived from public sources believed to be reliable but is not guaranteed as to its accuracy or completeness. No responsibility is assumed for the use of this material and no express or implied warranties nor guarantees are made. Nothing contained herein should be construed as an offer to buy or sell, or as a solicitation to buy or sell, any securities or derivative instruments.

Barchart.com U.S. Morning Call for Monday, October 27, 2008

U.S. Preview

World equity markets continue under pressure today on concern government efforts to stabilize financial markets will be unable to avert a global recession. The European DJ Stoxx 50 this morning is trading -4.78%. Bearish factors include the Oct German IFO business climate falling to a 5-1/3 year low and the IMF agreeing to lend Ukraine $16.5 billion. Asia-Pacific stocks today closed sharply lower with Japan -6.36% at a 26-year low, Hong Kong -12.70%, China -7,12%, Taiwan -4.65%, Australia -1.56%, South Korea +2.16% as the Bank of Korea cut its benchmark rate 75 bp to 4.25% today at an emergency meeting, Bombay -2.20%. The ECB today gave Denmark access to 12 billion euros ($15 billion) as it steps up efforts to help neighboring European countries deal with global financial crisis.

Interbank lending rates were slightly weaker today with the 3-month dollar Libor rate falling by 1 bp to 3.51% and the overnight dollar Libor rate also declining slightly by 1 bp to 1.27%. The Libor-OIS spread widened by 3 bp to 264 and the 3-month Euribor fell 1 bp to a 4-1/2 month low of 4.90%.

The Group of Seven (G-7) industrialized nations failed to halt the dollar index's surge to a 2-1/2 year high today after issuing an unscheduled statement expressing concern about "excessive volatility" in the currency market at the request of Japan's Finance Minister Shoichi Nakagawa. The G-7 statement fell short of pledging concerted action to halt the yen's advance to near a 13-year high against the dollar with Japan indicating it may take action to halt the yen's advance after Vice Finance Monister Kazuyuki Sugimoto said his government was prepared to act "quickly" in the currency market. Japan hasn't intervened in the currency market since March 2004 but may be preparing to do so as the rising yen is threatening its export based economy. Japan's Nikkei 225 Stock Average sold-off today to a 26-year low on concern exporter profits are eroding due to the rising yen. In another sign of excessive currency volatility, there was a bank run today on Gulf Bank KSC, Kuwait's second-biggest bank, after clients defaulted on currency derivative contracts and Kuwait's central bank was forced to guarantee deposits.

The markets this week will continue to focus on fall-out from the credit crisis. The US and European governments appear to have contained the banking crisis by providing massive amounts of liquidity to financial institutions, guaranteeing bank debt, and injecting capital into banks. Interbank lending rates have progressively fallen over the past two weeks, indicating that interbank lending is starting to resume. The 3-month dollar Libor rate has fallen sharply by 130 bp to 3.52% from the peak of 4.82% posted on Oct 10, but is still 70 bp above the 2.82% level that prevailed before the banking crisis began in mid-September. The 3-month Libor rate should actually be 50 bp lower than pre-crisis levels (i.e., near 2.32%) considering that the Fed on Oct 8 cut the funds rate by 50 bp to 1.50%, which would normally have pushed interbank lending rates lower by 50 bp as well. Thus the current 3-month dollar Libor rate of 3.52% is about 120 bp higher that its ideal level. While the banking crunch is slowly receding, the pain is now trickling down to the corporate world, Main Street, and entire countries. Foreclosures are mounting on Main Street and market concerns are growing about corporate debt defaults. As for entire countries, Iceland was an early victim of the crisis, but there is now a growing list of countries lining up at the IMF for relief packages. The list of countries that are running into trouble includes Argentina, Pakistan, Hungary, Ukraine, and Belarus. The credit default swap rate on 14 emerging market governments rose sharply late last week by 3 percentage points to the 10% area as the markets raised the risk assessment of debt defaults by emerging market countries. The troubles in emerging market countries are being compounded by a sharp drop in their currencies, which reduces the purchasing power of companies and citizens in those countries and raises their external debt financing costs. The troubles among emerging market countries and global corporations threatens to extend the rough sledding for the global stock markets in coming days and weeks.

Fed policy – The market is fully discounting a 50 bp rate cut to 1.00% at this week’s 2-day FOMC meeting on Tuesday and Wednesday, and is discounting a small 26% chance for a 75 bp rate cut to 0.75% at that meeting. The 1.00% funds rate level has some psychological benefit in this environment since it was the 1.00% funds rate seen during 2003-04 that set the stage for the recovery in the US economy as an antidote to the technology bust and 9/11. However, the depth of the US and global financial problems this time around has prompted some talk that the Fed may need to cut the funds rate target to between zero and 50 bp. The Bank of Japan has held its benchmark overnight rate between zero and 50 bp for the past 13 years as it battled deflation and weak economic growth.

New home sales – Today’s US Sep new home sales report is expected to show a decline of –1.3% to 454,000, adding to the –11.5% decline to the 17-1/2 year low of 460,000 seen in August. Last Friday’s Sep existing home sales report was stronger than expected at +5.5%, but 35-40% of those home sales were of foreclosed properties at fire-sale prices. New home sales in any case likely to remain under pressure due to the credit crisis, the difficulty of obtaining mortgages, falling home prices, and worries about a steep recession. The supply of new homes on the market remains extremely high at 10.9 months, which is just slightly below the 27-year high of 11.2 months posted in March 2008. The market desperately needs buyers to emerge and work down the excess inventory of new homes before housing prices can stabilize and builders can even think about new building plans.

5-year TIPS – The Treasury today will sell $6 billion in 5-year inflation-protected TIPS T-notes. Today’s 5-year TIPS issue was quoted at 0.92% in when-issued trading late last Friday. The 6-auction averages for the 5-year TIPS auctions are as follows: 2.18 bid cover ratio, $79 million in non-competitive bids, 3.77 bp tail to the median yield, 13.9 bp tail to the low yield, and 90% taken at the high yield. The 5-year TIPS is relatively popular with foreign central banks as seen by the fact that indirect bidders have taken 34.2% of the last six 5-year TIPS auctions, which is higher than the average of 32.4% across all recent Treasury coupon auctions

Overnight U.S. Stock News

December S&Ps this morning are trading sharply lower by -21.00 points on continued global recession fears The US stock market last Friday sold-off sharply although ended the day off of its worst levels (Dow -3.59%, S&P 500 -3.45%, Nasdaq Composite -3.23%).
Bearish factors for stock prices last Friday included (1) the sell-off in Asian and European stock markets on concern the financial crisis is plunging the world's economy into a recession, (2) speculation that last Friday's losses were exacerbated by forced selling from hedge funds facing margin calls and or redemptions, and (3) the surge in the VIX volatility index to a record high as fear and panic have gripped the equity markets aided by unprecedented levels of uncertainty over what will happen next.
Bullish factors for stock prices last Friday included (1) a rally in insurance companies on speculation that the US Treasury is considering taking stakes in insurers to help shore up the financial system, (2) the larger-than-expected rise in US existing home sales for Sep, (3) and market expectations of a possible 50 bp rate cut in the Fed funds rate at the conclusion of Wednesday's FOMC meeting

Today's U.S. Market Focus

December 10-year T-notes this morning are trading +14.5 ticks on a flight-to-safety due to the slumping global equity markets. December T-note prices opened higher last Friday but sold-off throughout the day and closed -23 ticks. Bearish factors for T-note prices last Friday included (1) profit-taking after the 4+ point rally this week after equity markets came back from their worst levels of the day, and (2) the larger-than-expected rise in US existing home sales for Sep (+5.5% to a 1-year high of 5.18 million units versus expectations of +0.8% to 4.95 million). Bullish factors for T-note prices last Friday included (1) a flight-to-quality as a global equity market sell-off along with investors fleeing emerging-market assets prompted strong demand for US Treasuries, and (2) the comment from Chinese economic adviser Li Yang that his country is following the right strategy in buying US Treasuries with their dollar reserves as US Treasuries are "safer" than other debt products, signaling the Chinese government has no plans to liquidate their US Treasury holdings.
The dollar index surged to a 2-1/2 year high today with the greater-than-expected fall in the Oct German IFO business climate to a 5-1/3 year low helping send the euro down to a 2-1/2 year low against the dollar. The dollar/yen is down -1.00 yen and the euro/dollar is down -1.89 cents. The dollar index rallied every day last week and closed last Friday at a 2-year high. Bullish factors for the dollar last Friday included (1) safe-haven demand as global equity markets tumbled on fears of a global recession and as investors flee emerging-market currencies after Iceland, Hungary, Ukraine, Pakistan and Belarus all requested at least $20 billion of emergency loans from the IMF, (2) the plunge in the pound to a 6-year low against the dollar as the UK economy contracted for the first time since 1992, (3) the sell-off in the euro to a 2-year low against the dollar after the Oct Euro-Zone PMI composite came in at its weakest level since the data series began in 1998, and (4) the larger-than-expected rise in US existing home sales for Sep. A bearish factor for the dollar last Friday was the surge in the yen to a 13-year high against the dollar as the global equity market meltdown forced investors to unwind their yen carry trades.
December crude oil prices this morning are trading a -$1.76 barrel at a 17-month low and December gasoline is trading -3.47 cents a gallon at a 1-3/4 year low. The major bearish factor for crude oil prices today is the plunging global equity markets that are heightening concerns that a global recession will cut energy demand. December crude oil prices last Friday sold-off and closed -$3.09 a barrel at a 16-1/2 month low and December gasoline closed -2.60 cents a gallon at a 20-1/2 month low. Bearish factors for crude oil prices last Friday included (1) the surge in the dollar index to a 2-year high, undercutting the demand for crude oil as an inflation hedge, (2) the meltdown in global equity markets onfears of a worldwide recession which would crimp demand for crude, and (3) the 10th consecutive month of declining miles traveled by US motorists as the Federal Highway Administration said vehicle-miles traveled fell 5.6% from a year earlier. The main bullish factor for crude oil prices last Friday was the action by OPEC to agree to cut crude oil production by 1.5 million bpd starting in November

Today's U.S. Earnings Reports

Earnings reports (confirmed releases for companies with market caps above $10.0 bln listed by mkt cap): VZ-Verizon Communications (BEST earnings consensus $0.66 per share), FPL-FPL Group (1.35), LO-Lorillard (1.36), HUM-Humana (1.47), PCL-Plum Creek Timber (0.40), CNA-CNA Financial (0.82), RCL-Royal Caribbean Cruises (1.67), BWP-Boardwalk Pipeline Partners (0.28), VRTX-Vertex Pharmaceuticals (-0.91), ACI-Arch Coal (0.63), FIS-Fidelity National Information Services (0.40), CF-CF Industries Holdings (3.62), AFG-American Financial Group (0.95), BOH-Bank of Hawaii (0.99), ACV-Alberto-Culver (0.31), UHS-Universal Health Services (0.78), TDW-Tidewater (1.84), SLG-SL Green Realty (0.41)

Global Financial Calendar

Monday 10/27/2008

United States
1000 ET	Sep new home sales expected –1.3% to 454,000, Aug –11.5% to 460,000.
1130 ET	Weekly 3-mo and 6-mo T-Bill auctions.
1300 ET	Treasury auctions $6 billion 5-year TIPS.
Euro-Zone
0500 ET	Sep Euro-Zone M3 money supply expected +8.8% 3-month avg and +8.5% y/y, Aug +8.8% 3-month avg and +8.8% y/y.
0955 ET	ECB President Jean-Claude Trichet speaks at an event in Madrid.
Germany
0500 ET	Oct German IFO business climate expected –1.9 to 91.0, Sep –1.9 to 92.9. Oct IFO current assessment expected –2.8 to 97.0, Sep –3.4 to 99.8. Oct IFO expectations expected –1.5 to 85,0, Sep –0.5 to 86.5.
Japan
1950 ET	Sep Japan retail trade expected –0.2% m/m and unchanged y/y, Aug +0.7% m/m and +0.7% y/y.
1950 ET	Sep Japan large retailers’ sales expected –2.7%, Aug –2.2%

Morning Quote Board

US Stock Futures
Morning Quotes (ET)	Last	Chg	%chg	Updated
S&P (Globex) (Z8)	845.00	-21.00	-2.42%	07:33:51
DJIA (CBOT) (Z8)	8097	-164	-1.99%	07:34:11

European Stocks
Europe DJ Stoxx 50	2017.08	-101.25	-4.78%	07:29:00
London UK FTSE Index	3733.89	-149.47	-3.85%	07:29:01
German Dax Index	4159.95	-135.72	-3.16%	07:29:12
French CAC 40 Index	3026.36	-167.43	-5.24%	07:29:00

Asian-Pacific Stocks
Japan Nikkei Index	7163	-486	-6.36%	03:00:16
Hong Kong Hang Seng	11016	-1603	-12.70%	04:10:30
China CSI 300 Index	1655	-127	-7.12%	03:01:05
Taiwan TAIEX Index	4367	-213	-4.65%	01:46:01
Australian S&P 200	3809.2	-60.2	-1.56%	01:47:03
Singapore Str. Times	1600.28	0	0.00%	10/24/2008
South Korea KOSPI 200	125.93	2.66	2.16%	02:02:20
Bombay Sensex 30	8510	-191.51	-2.20%	07:43:21
Karachi KSE-100	9183	0	0.00%	02:10:08

US Interest Rates
10yr T-notes (CBT)(Z8)	115.185	0.145	0.39%	07:34:14
Cash 10yr T-note Price	102.290	0.110	0.34%	07:43:31
Cash 10yr T-note Yield	3.644	-0.041	-1.13%	07:43
5yr T-note (CBT)(Z8)	114.045	0.100	0.27%	07:33:59
Cash 5yr T-note Price	102.200	0.040	0.12%	07:44:01
Cash 5yr T-note Yield	2.554	-0.027	-1.05%	07:43
30-yr T-bond (CBT)(Z8)	117.20	0.22	0.57%	07:34:14
Cash 30yr T-bond Price	108.080	0.280	0.81%	07:44:01
Cash 30yr T-bond Yield	4.020	-0.048	-1.19%	07:43
Eurodollars (CME)(Z8)	97.400	-0.005	-0.01%	07:34:08
Eurodollars (CME)(H9)	97.595	0.065	0.07%	07:33:48

Asian & European Rates
10-yr JGBs (TSE) (Z8)	138.15	0.45	0.33%	02:00:00
EuroyenTibor(SGX)(Z8)	99.260	0.025	0.03%	07:05:00
Bunds (Eurex) (Z8)	117.08	0.00	0.00%	07:29:11
Euribor (Eurex) (Z8)	96.18	0.08	0.08%	04:33:54
UK Gilts (Liffe) (Z8)	112.65	-0.12	-0.11%	07:29:09
Short Stlg (Liffe) (Z8)	95.37	0.01	0.01%	07:29:04

Forex
US Dollar-Japanese Yen	93.32	-1.00	-1.06%	07:44:14
EuroFX-US Dollar	1.2434	-0.0189	-1.89%	07:44:14
US Dollar-Swiss Franc	1.1587	-0.0087	-0.87%	07:44:12
British Pound-US$	1.5385	-0.0512	-5.12%	07:44:14
US$-Canadian Dlr	1.2878	0.0102	1.02%	07:44:10
Yen (Globex) (Z8)	1.0736	0.0112	1.12%	07:34:09
Euro FX (Globex) (Z8)	1.2463	-0.0141	-1.12%	07:34:09
SwissFranc (Globex)(Z8)	0.8663	0.0075	0.87%	07:34:14
British Pound(Glbx)(Z8)	1.5419	-0.0425	-2.68%	07:34:13
Canadian$ (Globex)(Z8)	0.7795	-0.0063	-0.80%	07:34:00

Commodities
Gold (Comex) (Z8)	726.0	-4.3	-0.59%	07:14:14
Copper (Comex) (Z8)	163.9	-4.8	-2.82%	07:14:10
Crude Oil (Nymex) (Z8)	62.39	-1.76	-2.74%	07:14:08
Gasoline (Nymex) (Z8)	141.5	-3.47	-2.39%	07:05:34
Heating Oil(Nymex)(Z8)	194.1	-2.91	-1.48%	07:12:45
NaturalGas(Nymex)(Z8)	6.261	-0.201	-3.11%	07:09:52

Barchart.com U.S. Morning Call for Friday, October 24, 2008

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Stock markets around the world today are crumbling on deepening concern that the global economic slump is intensifying and will further hurt company earnings. Bearish factors include the bigger-than-expected contraction in third quarter GDP for the UK (-0.5% q/q and +0.3% y/y versus expectations for -0.2% q/q and +0.5% y/y) which sent the British pound tumbling to a 6-year low against the dollar and the contraction in the European manufacturing and service sectors with the Oct Euro-Zone PMI composite falling to its lowest level (-2.3 to 44.6) since the survey began in 1998. The European DJ Stoxx 50 this morning is trading -8.05%. Asia-Pacific stocks today closed sharply weaker on bearish factors including South Korea's economy growing at its slowest pace in four years, Sony slashing its earnings forecast for the year through March 31 and the yen surging to a 13-year high against the dollar. Japan's Nikkei fell -9.6%, Hong Kong -8.3%, China -2.9%, Taiwan -3.19%, Australia -2.64%, Singapore -8.33%, South Korea -10.2%, Bombay -11.0%.

US Treasury Secretary Paulson is preparing to buy stakes in a number of regional US banks in another attempt in trying to unfreeze the interbank lending markets. In a plan that may be announced as early as today, Secretary Paulson is being forced by rapidly deteriorating global financial markets to act agressively and buying stakes in banks is the fastest way of injecting capital into them.

Interbank lending rates were mixed today. The 3-month dollar Libor rate dropped 2 bp to 3.52% but the overnight dollar Libor rate climbed 7 bp to 1.28% and has risen 16 bp in the last two days. The Libor-OIS spead widened 8 bp to 262 and the 3-month Euribor today fell 1 bp to a 4-1/2 month low of 4.91%.

US existing home sales – Today’s Sep existing home sales report is expected to rise +0.8% to 4.95 million, reversing part of the –2.2% decline to 4.91 million seen in August. US existing home sales so far this year have been moving sideways near the recent multi-decade low. However, the credit crisis that began in September and extended into October is likely to push home sales down another notch. US citizens were more worried about moving their savings and retirement accounts to safer locations in September and October than they were about going out to look for a new home. The widespread talk in the popular media about a steep recession, or even a depression, can only further discourage anyone thinking about doing some bottom fishing in the housing market. Still, there was some news earlier this week that steep discounts on foreclosed property sparked some active home buying in parts of California. That raised some hopes that buyers will in fact emerge when prices are low enough. The housing market cannot start to recover until some of the heavy supply inventory of unsold homes is worked down. That heavy supply overhang is placing continued downward pressure on home prices, creating a negative spiral in which potential homebuyers are reluctant to buy a home for fear its price will continue to fall and put them underwater on their mortgage. The level of existing homes for sale is currently at 10.0 months, down from the 23-year high of 11.0 months posted in June, but more than twice as high as the average of 4.7 months seen during 1999-2004. Meanwhile, mortgage rates are not cooperating with the need to bring buyers into the housing market. The 30-year fixed mortgage rate in the latest week fell to 6.04% from the previous week’s 2-month high of 6.46%. However, the 30-year fixed mortgage rate is still at a relatively high premium of about 200 bp above the 30-year T-bond yield. The 30-year mortgage rate remains high relative to Treasury yields due to (1) the sharply reduced number of players in the mortgage lending business, (2) much higher mortgage default risks, and (3) the continued shut-down in the mortgage securitization funding chain.

Barchart.com U.S. Morning Call for Thursday, October 23, 2008

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The European DJ Stoxx 50 this morning is trading -2.50%. Bearish factors include weaker-than-expected orders from ABB (the world's largest power grid builder) and a guidance cut by Daimler. Asia-Pacific stocks today generally closed sharply lower: Japan -2.46%, Hong Kong +3.55%, China +0.08%, Taiwan -2.72%, Australia -4.37%, Singapore -4.14%, South Korea -7.20%, Bombay -3.92%. The gloom continued in overseas trading today after RealtyTrac reported that Q3 US foreclosure filings rose +71% y/y. In addition, Amazon.com is sharply lower by 13% today in European trading after reducing its Q4 guidance late yesterday. On the brighter side, Sweden's central bank today cut its key repo rate by 50 bp to 3.75%, the second cut in two weeks. New Zealand's central bank today cut its key rate by 100 bp to 6.5%.

Interbank lending rates were mixed today, halting the sharp daily declines that have been seen for the past two weeks. The 3-month dollar Libor rate was unchanged at 3.54% today. The 3-month dollar Libor rate has fallen sharply from the peak of 4.82% posted on Oct 10, but is still well above the 2.82% level that prevailed before the banking crisis began in mid-September. The 3-month Libor rate should actually be 50 bp lower than pre-crisis levels (i.e., near 4.32% considering that the Fed on Oct 8 cut the funds rate by 50 bp to 1.50%). The overnight dollar Libor rate today rose +9 bp to 1.21%, but remains below the 1.50% funds rate target. The Libor-OIS spread fell 2 bp to 251 bp. The 3-month Euribor today fell 1 bp to 4.92% from 4.93% on Wednesday.

The latest dominos to run into trouble in the global credit crisis are entire countries. Iceland was an early victim of the crisis, but there is now a growing list of countries lining up at the IMF seeking relief packages. The list of countries that are running into trouble include Argentina, Pakistan, Hungary, Ukraine, and Belarus. The credit default swap rate on 14 emerging market governments rose sharply today by 320 bp to 9.9% as the markets raised the risk assessment of defaults by emerging market countries.

Claims – Today’s weekly initial unemployment claims report is expected to show a small increase of +6,000 to 467,000, reversing part of last week’s –16,000 decline to 461,000. Last week’s decline brought the series down from its 7-year high, but initial claims are still in the upper reaches of the peaks seen during recessions in the past two decades. Meanwhile, weekly continuing claims are expected to fall –11,000 to 3.700 million, reversing part of last week’s +40,000 surge to 3.711 million. Last week’s level of continuing claims was a 5-year high and was only mildly below the 25-year high seen during the 2000-03 recessionary period. The US labor market is likely headed for a sharp drop-off as businesses panic from the credit crunch and start to scale back on production and employee head counts to brace for a potentially steep recession. Payrolls have fallen every month this year and are likely to continue to drop into at least early 2009. Payrolls in September fell by –159,000, the largest monthly decline since 2003, and an even steeper decline is likely for October when the credit crisis peaked. The US unemployment rate is currently at a 5-year high of 6.1% and appears likely to easily rise above the peak of 6.4% seen during the 2000-03 recessionary period and perhaps even challenge the previous peak of 7.8% posted in connection with the 1990-91 recession. The post-war record high for the US unemployment rate is 10.8% posted in 1982.

US house prices – Today’s Aug OFHEO US house price index is expected to fall –0.5% m/m, adding to July’s decline of –0.6% m/m. The index has now fallen by a total of 5.8% from the record high of 225.1 posted in April 2007. OFHEO’s house price index is far out of sync with other home price indicators and anecdotal data, which indicates that US home prices have fallen by some 20% from the peak thus far. Most observers are calling for a further decline of at least 5 or 10%, considering the latest shock from the credit crisis, a potentially steep recession, and the rising tide of foreclosures

Overnight U.S. Stock News

December S&Ps this morning are trading sharply lower by -25.60 points (-2.67%) on weak overseas stocks and increased concerns about earnings. The US stock market yesterday whipsawed lower throughout the day and closed moderately lower (Dow -2.50%, S&P 500 -3.08%, Nasdaq Composite -4.14%).
Bearish factors for stock prices yesterday included (1) weaker-than-expected earnings results from Texas Instuments which fell 06.3% to a 5-year low, Sun Microsystems which declined -17% to a 13-year low, Freeport McMoran which tumbled -11% to a 3-year low and from Western Union which slumped -18% to a 2-year low and withdrew its long-term profit targets because of uncertain global markets, (2) the prediction from Standard & Poor's that dividend payments by companies in the S&P 500 Index may fall 10% this quarter, the biggest decline in 50 years, as bank failures and slowing economic growth cut dividend payouts, (3) the prediction from Fitch Ratings that the financial crisis will cause real global credit growth, which peaked at almost 16% in 2007, to be cut over half to 7% by year-end and shrink to 5% next year as the full impact of the credit crunch takes it toll, and (4) the 6% drop in Citigroup after Goldman Sachs downgraded the bank to "sell" and said they may not report a profit until late next year as credit conditions worsen.
Bullish factors for stock prices yesterday included (1) the action by the Fed in providing $540 billion in its new Money Market Investor Funding Facility to backstop money-market mutual funds which have been clobbered by massive redemptions and withdrawals, (2) the continued drop in interbank lending rates (the 3-month Euribor rate which fell to 4.96%, the level it was at before the banking crisis began in mid-September), and (3) the rally in regional banking stocks after they said they may join the government's $250 billion plan to recapitalize banks.

Barchart.com U.S. Morning Call for Wednesday, October 22, 2008

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The European DJ Stoxx 50 this morning is trading sharply lower by -4.29% as worries increase about more credit write-downs and a likely recession in Europe. The UK banking sector is weak today with RBS down -9% and Barclays down -5%. Mining companies are lower today on weak copper (-2.67%) and industrial metal prices. BHP Billiton is down -7% and Anglo American is down -6%. Asia-Pacific stocks today closed sharply lower: Japan -6.79%, Hong Kong -5.15%, China -2.56%, Taiwan -1.62%, Australia -3.40%, Singapore -5.19%, South Korea -4.92%, and Bombay -4.81%.

Interbank lending rates continued to fall today in a sign that the credit crisis continues to recede, although the economic fall-out is growing. The overnight dollar Libor rate fell 14 bp to 1.12%. The 3-month dollar Libor fell 29 bp to 3.54% from 3.83%. The Libor-OIS spread fell 28 bp to 250 bp and the TED spread fell 30 bp to 247 bp. The 3-month Euribor fell 3 bp to 4.93% from 4.96% on Tuesday.

Apple is sharply higher by +11% this morning in European trading after reporting much better than expected earnings late yesterday.

Yahoo is up +4% in European trading this morning after the company announced a cost-cutting program involving a layoff of 10% of its staff.
SanDisk is down -9% in European trading this morning after Sunsung Electronics canceled a $5.85 billion offer to buy SanDisk because of concern about the chip business and wider losses.
Coventry Health Care plunged 30% in after-hours trading yesterday after reporting Q3 earnings of 58 cent a share, which was far below the analyst consensus of $1.06.
Wachovia this morning reported a Q3 loss of $23.9 billion ($11.18 per share). The loss ex-items was $2.23 per share, which was far greater than the analyst consensus for a loss of 2 cents. Wachovia is in the process of being acquired by Wells Fargo.

Barchart.com U.S. Morning Call for Tuesday, October 21, 2008

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The European DJ Stoxx 50 this morning is up +0.84% on the French government's plan for injecting capital into French banks. Asia-Pacific stocks today closed mixed: Japan +3.34%, Hong Kong -1.84%, China -0.81%, Taiwan +0.22%, Australia +3.87%, Singapore -0.95%, South Korea -1.09%, Bombay +4.50%.

French bank stocks rallied today after the French government announced a 10.5 billion euro capital injection. BNP Paribas is up 5.6%, Societe Generale is up 9.5%, and Credit Agricole is up 10%.

Citic Pacific plunged 55% today after the unit of China's largest state-owned investment company announced a $2 billion loss from unauthorized trading. The trade apparently involved being long the Australian dollar. Citic Pacific is seeking a $1.5 billion loan from its parent company.

Interbank lending rates continued to decline today. The overnight dollar Libor rate fell to 1.28% from 1.52% on Monday. The 3-month dollar Libor rate fell to 3.83% from 4.06% on Monday, which it is down 99 bp from the peak of 4.82% posted on Oct 10 but still 101 bp above the 2.82% level seen before the credit crisis emerged in mid-September. The Libor-OIS spread fell 20 bp to 270 bp. The 3-month Euribor rate fell to 4.96% from 4.99% on Monday, where it is now back to where it was before the banking crisis began in mid-September, although the overnight rate should theoretically fall by another 50 bp from the current level since the ECB on Oct 9 cut its 2-week refinancing rate by 50 bp to 3.75%

Barchart.com U.S. Morning Call for Monday, October 20, 2008

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The European DJ Stoxx 50 this morning is trading +2.94% on lower interbank rates and general optimism that the credit crisis is receding. ING Group NV is up 24% today after it received a 10 billion euro support package from the government of the Netherlands. Citigroup is up 3% and Morgan Stanley is up 2%. Ericsson AB, the largest wireless phone network producer, is sharply higher by 22% today after reporting better-than-expected earnings (2.8 billion Swedish kroner or $380 million versus expectations of 2.34 billion kroner). Oil companies are higher on today's $2.15 per barrel rally in oil prices. Shell is up 6% and Total is up 7%. Veolia Environnement SA is down 22% today after saying its water and waste management businesses have slowed and that it will cut new investment by 34% this year. Asia-Pacific stocks today closed mostly with sharp gains: Japan +3.59%, Hong Kong +5.28%, China +3.46%, Taiwan -0.58%, Australia +4.32%, Singapore +3.23%, South Korea +2.91%, Bombay +2.48%. India's stock market was supported by news that India's central bank today unexpectedly cut its overnight lending rate by 100 bp to 8.00%.

Falling interbank lending rates provide some encouragement - The markets this week will continue to focus mainly on the credit crisis and whether the situation continues to improve with the myriad of rescue programs now in place in the US and overseas. Interbank lending finally started to get going again last week with a decline in interbank lending rates. The 3-month dollar Libor rate fell by 40 bp to 4.42% last Friday from the peak of 4.82% seen the previous Friday (October 10), although last Friday’s 3-month dollar Libor rate of 4.42% was still 160 bp above the 2.82% level that prevailed before the credit crisis started in mid-September. That illustrated that there is still a long way to go before some semblance of normality returns. The 3-month Euribor last week did much better, falling sharply to 5.02% from the peak of 5.39% and returning to a level that is only 7 bp above the 4.95% level that prevailed before the credit crisis. Still, the 3-month dollar Libor and Euribor rates should be 50 bp below the levels seen in mid-September simply because of the 50 bp rate cuts implemented by the Fed and the ECB on Oct 9.

Interbank lending rates today in London continued last week's decline. The 3-month dollar Libor rate fell sharply by 36 bp to 4.06%. The overall dollar Libor rate fell by 16 bp to 1.51%. The Libor-OIS spread this morning dropped by 38 bp to 292 bp. The 3-month Euribor rate today fell by 3 bp to 4.99%.

Economic calendar - Now that the worst of the credit crisis seems to be contained, the market is turning its attention mainly to the economic data to assess the fall-out for the real economy. The economic data seen so far for September has been dismal and the data for October will be much worse since the crisis hit its peak in the first half of October. This week’s US economic calendar is very light. Today brings Sep leading indicators (expected –0.2%). Thursday brings weekly initial unemployment claims (expected +4,000), and Aug house prices (expected –0.4%). Friday brings Sep existing home sales (expected +1.4%).

Bernanke - Fed Chairman Ben Bernanke is scheduled to testify today on the economic outlook and financial markets. The markets will be listening carefully to see if Mr. Bernanke believes that the US and European governments finally have the credit crisis under control. The markets will be hoping for some assessment from Mr. Bernanke about the extent of damage on the real economy. The markets will also be listening for hints as to whether the Fed will ease at its meeting next week.

FOMC policy – The market last week boosted expectations by about 12 bp for Fed easing in the latter half of 2009. The market is fully discounting a 25 bp rate cut to 1.25% at the FOMC meeting next Tuesday/Wednesday and a 38% chance of a 50 bp rate cut to 1.00% at that meeting. The market is discounting a maximum 46% chance of an overall 50 bp rate cut by December. The market is then expecting the funds rate to remain at or below 1.25% through April 2009. The market then expects the funds rate to rise to 1.50% by July 2009 and to 2.00% by December 2009. That indicates that the current market consensus is that the current economic crisis will bottom out in December/January and then slowly improve through 2009.

Barchart.com U.S. Morning Call for Friday, October 17, 2008

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The European DJ Stoxx 50 this morning is trading +3.20% on carry-over support from yesterday's US stock market rally and falling interbank lending rates. The market is also being supported by some positive earnings news with sharp rallies in Ericsson (+6.5%) and Google (+10%) on stronger-than-expected earnings. However, stock market participants are worried about abnormally high price volatility today since today is a big option expiration day. Asia-Pacific stocks today closed mixed: Japan +2.78%, Hong Kong -4.44%, China +0.68%, Taiwan -2.28%, Australia -1.06%, Singapore -3.73%, South Korea -2.90%, Bombay -5.73%.

Interbank lending rates continued to decline today for the fifth consecutive day, suggesting that the US and European bank rescue plans are working and banks are starting to lend to each other again. The overnight dollar Libor rate today fell 27 bp to 1.67%, which is only 15 bp above the 1.50% federal funds target rate. The 3-month dollar Libor rate fell by 8 bp to 4.42%, which is down 40 bp from last Monday's peak of 4.82% but still far above the 2.82% area that prevailed before the credit crisis emerged in mid-September.

US housing starts – Today’s Sep housing starts report is expected to show a decline of –2.6% to 872,000, adding to the –6.2% decline to 895,000 seen in August. The housing starts series hit a 17-year low in August and a decline today would produce a new 17-year low. The record low for the series (which dates back to 1959) is 798,000, which was posted in 1991. There is a possibility of challenging that record low within the next several months, which would require only another –10.8% decline from the August level. US housing starts appear destined to fall further in the current environment where home buying activity is dismal and the credit crisis has now assured a significant recession though at least part of 2009. US homebuilders have no choice but to cut back further on home building to slash the huge overhang of unsold new homes that are on the market.

US consumer confidence – Today’s early-Oct US consumer confidence index from the University of Michigan is expected to show a –5.3 point decline to 65.0, reversing part of the +7.3 point upward rebound to 70.3 seen in September. The US consumer confidence index hit a 28-year low of 56.4 in June but then rebounded higher through the summer due to the decline in oil prices. However, US consumer confidence is now likely to plunge to new lows due to the worst financial crisis since the Great Depression. Many US consumers will now be worried about their jobs, which is the biggest single factor that causes a drop in confidence. On the brighter side, oil and gasoline prices are at least dropping sharply, which is freeing up some income for consumers to spend on staples and to pay down debt

Barchart.com U.S. Morning Call for Thursday, October 16, 2008

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The European DJ Stoxx 50 this morning is trading -2.83% as the European markets catch up with the sharp loss in US stocks seen yesterday. Asia-Pacific stocks today closed sharply lower on yesterday's US stock market loses: Japan -11.41%, Hong Kong -4.80%, China -4.88%, Taiwan -3.25%, Australia -6.67%, Singapore -5.25%, South Korea -9.55%, Bombay -2.11%.

UBS today received a $59 billion support package from the Swiss government and credit-default swaps on UBS fell by 26 bp to 124 bp. As part of the deal, UBS is spinning off its toxic US mortgage securities into a separate, government-supported fund, which will leave UBS with no exposure to US mortgage securities going forward. UBS's stock price is up 2% today. Switzerland's other major bank, Credit Suisse, did a private capital raise today that substantially improved its capital ratios. Credit Suisse is up 7% today. Merrill Lynch today reported a loss of $5.58 per share ($5.15 billion), which was larger than market expectations for a loss of $5.18. Merrill Lynch is in the process of being acquired by Bank of America in a stock swap deal. Citigroup this morning reported a Q3 loss of 60 per share ($2.8 billion), which was smaller than the analyst consensus for a loss of $3.8 billion.

Interbank Libor rates continued lower today, as they have each day this week, after central banks injected $254 billion in funding today. The overnight dollar Libor rate fell by 20 bp to 1.94% and the 3-month dollar Libor rate fell by 5 bp to 4.50%. The 3-month Euribor rate fell 8 bp to 5.09%.

Unemployment claims – Today’s weekly initial unemployment claims report is expected to fall –8,000 to 470,000, adding to last week’s decline of –20,000 to 478,000. Last week’s decline was tied to the reversal of hurricane effects from Ike and Gustav. Initial claims are only mildly below the 7-year high of 498,000 posted in the last week of September, indicating that the rate of layoffs is currently as high as the peaks seen in the past several recessions. Meanwhile, weekly continuing claims are expected to rise +11,000 to 3.670 million, adding to last week’s +56,000 increase to 3.659 million. Continuing unemployment claims (3.659 million) are currently at a 5-year high and within the next month or two are likely to exceed the last cyclical peak of 3.790 million posted in November 2001. Hopefully, the number of people on unemployment during this cycle will not exceed the record high of 4.689 million posted in October 1982. In any case, the US labor market is destined to get much worse over the next few months as businesses lay off employees to prepare for a deep and possibly long recession.

CPI – Today’s Sep CPI report is expected to show small increases of +0.1% m/m overall and +0.2% m/m on a core basis. That would follow the August report of –0.1% m/m overall and +0.2% m/m core. On a year-on-year basis, the Sep CPI is expected to ease to +5.0% from +5.4% in August and from the 7-1/2 year high of +5.6% posted in July. The Sep core CPI is expected to be unchanged from August at +2.5% y/y. The core CPI of +2.5% is currently in the middle of the 2-year range of +2.1% to +2.9%. The core CPI has been at or above the generally-accepted +2.0% ceiling for inflation since late 2004. However, the Fed will soon be turning its attention more to the possibility of deflation than inflation. There is a danger that the Fed has already fallen into the liquidity trap in which the Fed is just “pushing on the string” and its monetary policy has no impact on stimulating the economy since consumers and businesses do not want to spend or borrow money. The Bank of Japan was in a liquidity trap during Japan’s lost decade in the 1990s when the BOJ’s super-easy monetary policy had no effect on stimulating the economy or counteracting deflationary pressures. Japan only recovered after cleaning up its banking problems, boosting exports, and maintaining a super-easy monetary policy that still exists to this day (and can be blamed in part for stimulating global asset prices through the yen carry trade).

Industrial production – Today’s Sep industrial production report is expected to show a sharp decline of -0.8%, adding to the -1.1% decline seen in August. The US manufacturing sector most likely has a long way to go before bottoming out. Industrial production in August fell by –1.5% y/y, which is substantially better than the trough of –5.7% y/y posted in Nov 2001 during the last recession. The largest year-on-year decline in industrial production in post-war history was –12.4% posted in May 1975. Philadelphia Fed – Today’s Oct Philadelphia Fed manufacturing index is expected to fall –13.8 points to –10.0, reversing most of September’s +16.5 point climb to 3.8. A weaker-than-expected report today would not be surprising given that yesterday’s Oct NY Empire manufacturing index plunged to –24.6 from –7.4 in September, which was much weaker than market expectations for a small decline to –10.0. All the economic sentiment survey data for October is likely to demonstrate the panic that struck the country as the US experienced the worst financial crisis since the Great Depression. The only hope at this point is that the facts of the ground do not turn out to be as bad as October sentiment surveys will likely suggest.

NAHB housing index – Today’s Oct NAHB housing market index is expected to fall –1 point to 17, reversing half of the small +2 point upward rebound to 18 seen in September. The index posted a record low of 16 in July and August and then recovered by 2 points in September. The index is now likely to fall to new record lows given the credit crisis that arose in full force in October. Sentiment among US homebuilders has been falling to new record lows during most of this year, and can only get worse now that the credit crisis has eliminated any hope of a bottoming out for the US housing market for at least several more quarters.

Barchart.com U.S. Morning Call for Wednesday, October 15, 2008

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The European DJ Stoxx 50 this morning is trading -2.22% and Dec S&Ps are trading -7.90 points (-0.79%). The relief rally has worn off and market participants now appear to be hunkering down to better assess the damage from the credit crisis. On the brighter side, JPMorgan Chase this morning reported Q3 earnings of 11 cents a share (vs 97 cents a year earlier), which was much better than the analyst consensus for an 18-cent loss. Asia-Pacific stocks today closed mostly lower: Japan +1.06%, Hong Kong -4.96%, China -1.05%, Taiwan -0.86%, Australia -0.81%, Singapore -3.24%, South Korea -2.17%, Bombay -5.87%.

Libor rates contined to ease today for the third consecutive session, indicating that banks are starting to lend to each other again and that the massive liquidity injections by the Fed and the world's central banks are finally gaining some traction. The ECB, Bank of England, and Swiss National Bank, in conjunction with unlimited swap lines from the Fed, loaned their banks a combined $254 billion of dollar liquidity. The 3-month dollar Libor rate eased by 9 bp to 4.55%, the overnight dollar Libor rate fell 4 bp to 2.14%, and the 3-month Euribor rate fell by 5 bp to 5.175%. The Libor-OIS spread narrowed by 6 bp to 333 bp. In Asia, the Bank of Japan today said it will also offer unlimited dollar funds and Hong Kong agreed to guarantee all bank deposits.

PPI – Today’s Sep PPI report is expected at –0.4% m/m overall and +0.2% core, following Aug’s report of –0.9% m/m overall and +0.1% m/m core. On a year-on-year basis, the overall Sep PPI is expected to ease to +8.7% y/y from +9.6% y/y in August and the 27-year high of +9.8% seen in July. The Sep core PPI is expected to edge higher to +3.8% y/y from the 17-year high of +3.6% seen in August. The inflation figures will be falling sharply in coming months due to the recent plunge in oil and commodity prices. The Fed at this point is not focused on the inflation outlook as it pursues the more important task of saving the global financial system.

Retail sales – The markets will start watching the retail sales figures very carefully for an indication of the extent to which consumers have stopped spending during the credit crisis and how long and deep a recession might be. Today’s Sep retail sales is expected to show a decline of –0.7% and –0.2% less autos, adding to the decline seen in August of –0.3% and –0.7% less autos. The credit crisis only came to the public’s attention in about mid-September and reached its peak in early October when the stock market plunged, which means consumer spending in October will be much worse than in September.

Empire manufacturing index – Today’s Oct Empire manufacturing index is expected to show a –2.6 point decline to –10.0, adding to the sharp decline seen in September of –10.2 points to –7.4. The Empire index has been below zero for most of this year, suggesting that the NY-area manufacturing sector is contracting. The US manufacturing sector is sure to take an even bigger hit now that the credit crisis has reduced financing for the manufacturing sector and that businesses are likely to cut back on orders due to expectations for a potentially deep recession.

Business inventories – Today’s Aug business inventories report is expected to show an increase of +0.5%, adding to the increase of +1.1% seen in July. However, the business inventories-to-sales ratio in July was a 1.24 months, which was only 0.1 month above the record low of 1.23 months seen in June. The fact that inventories are tight means that a recession will be less severe than would be the case if inventories were bloated.

Barchart.com U.S. Morning Call for Tuesday, October 14, 2008

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The European DJ Stoxx 50 this morning is up +5.88% and S&Ps are up another 2.86% (+29.10 points) as the market likes the emerging details of the US Treasury's $250 billion plan to inject capital into US banks and guarantee bank debt for 3 years. Bank stocks are sharply higher in Europe today. Citigroup is up 7%, Deutsche Bank is up 12%, Barclays is up 11%, and Goldman Sachs is up 5.5%. Asia-Pacific stocks today closed mostly higher to add to Monday's sharp gains: Japan +14.15%, Hong Kong +3.19%, China -2.56%, Taiwan +5.40%, Australia +3.70%, Singapore +2.50%, South Korea +6.10%, Bombay +1.54%. Japan's Nikkei index rallied +14.15% today since it was playing catch-up to sharp global stock market gains on Monday when the Japanese stock market was closed for a public holiday.

The US government will reportedly inject $250 billion in capital into US financial institutions in a non-voluntary plan that will boost their Tier 1 capital and reduce their leverage to more comfortable levels. The US government will receive preferred shares in a deal that is similar to Warren Buffett's investment in Goldman Sachs several weeks ago, although it is not clear at this point whether the Treasury will receive warrants. Treasury Secretary Paulson is scheduled to discuss the plan at a press conference at 8:30 AM this morning, which will also be attended by Fed Chairman Bernanke and FDIC Chairman Sheila Bair. The Treasury will reportedly inject $125 billion in the largest US banks as follows: $25 billion to Citigroup, JPMorgan and Bank of America/Merrill, $20 billion to Wells Fargo, $10 billion to Goldman Sachs and Morgan Stanley, and $3 billion to State Street and Bank of New York. The remaining $125 billion will go to smaller US banks. The US government will also guarantee banks' newly issued unsecured senior debt for 3 years, thus ensuring that banks will be able to roll-over their funding for at least the next 3 years.

Libor rates fell again today for the second day in a row in a sign that interbank lending may be starting to flow again. The overnight dollar Libor rate fell to 2.18% from 2.47%. The 3-month dollar Libor rate fell by 12 bp to 4.64%. The TED spread today fell 12 bp to 445 bp and the Libor-OIS spread fell by 15 bp to 339 bp

Barchart.com U.S. Morning Call for Monday, October 13, 2008

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The European DJ Stoxx 50 this morning is sharply higher by +5.51%. Asia-Pacific stocks today closed mostly with sharp gains: Hong Kong +10.24%, China +4.12%, Taiwan -2.15%, Australia +5.55%, Singapore +6.57%, South Korea +3.62%, and Bombay +7.42%. Japan's stock market was closed today for a public holiday.

European bank stocks are sharply higher this morning with UBS up 15%, Deutsche Bank up +12%, and ING up +17%. In the UK, bank stock are mixed with Barclays up 8% but Lloyds down -5.7%. RBS is down -6% and HBOS is down -21% after news that the UK will take controlling stakes in the two banks after making large capital injections to ensure their ongoing viability. Morgan Stanley is up 24% today. There are reports that Morgan Stanley and Mitsubishi UFJ are renegotiating the $9 billion capital injection but that the transaction will still proceed. Morgan Stanley said last week that they planned to have that deal closed by Tuesday, but a hitch now is to obtain an agreement from the US Treasury not to wipe out Mitsubishi's equity stake if the Treasury ends up injecting capital into Morgan Stanley. Banco Santander, Spain's largest bank, is up 7% this morning. Banco Santander is reportedly in talks to buy Sovereign Bancorp, the largest US savings and loan bank.

There have been a substantial number of weekend events that have boosted confidence that US and European governments may finally be getting the upper hand in containing the credit crisis. This morning, the Fed, in conjunction with the ECB, Bank of England and Swiss central bank, offered unlimited dollar funds to UK and European banks with maturities of 1-week, 1-month and 3-months. This liquidity move backstopped Sunday's European summit agreement for a coordinated European plan to address the credit crisis, which includes direct capital injections into banks, government guarantees for bank debt, and a rollback in mark-to-market accounting. There are reports today that Germany, formerly the laggard in joining the rescue party, will now offer bank loan guarantees totaling 400 billion euros and will provide up to 100 billion euros of capital to banks.

As for the US, the Treasury today will provide more details on its $700 billion TARP program to buy bad mortgage securities from banks. The market is also waiting for the Treasury's plan to buy preferred stock in US banks, thus boosting banks' Tier 1 capital.

In a positive sign that the massive central bank liquidity and government guarantees are starting to gain traction, the 3-month dollar Libor rate today fell by 7 bp to 4.75% from 4.82% last Friday. The 3-month Euribor rate fell 6 bp to 5.32% from 5.38% last Friday. The 1-week Euribor rate fell sharply by 26 bp to 4.37%

Barchart.com U.S. Morning Call for Friday, October 10, 2008

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The European DJ Stoxx 50 this morning is sharply lower by -7.89%. The sharp sell-off in US stocks seen late yesterday sparked heavy selling overseas today. Asia-Pacific stocks today closed sharply lower across the board: Japan -9.62%, Hong Kong -7.19%, China -4.43%, Australia -8.34%, Singapore -7.34%, Bombay -7.07%. Trading was disrupted in several countries today due to selling pressure. Russian exchanges delayed the opening today, Iceland's stock trading remains closed until Monday, Austria had a temporary circuit-breaker trading halt today, and Thailand had a 30-minute circuit-breaker trading halt after a 10% decline.

GE reported favorable earnings news this morning as its Q3 EPS report was in line with the consensus and the company said it was on track to meet its most recent full-year guidance. Morgan Stanley is down 4% today after Moody's said it may cut Morgan Stanley's credit rating.

The inter-bank lending market remains frozen with the 3-month dollar Libor rate rising 7 bp to 4.82%, although the overnight dollar Libor rate fell sharply by 262 bp to 2.47%. The TED spread today fell 1 bp to 422 bp. The Libor-OIS spread rose 11 bp to 365 bp.

US trade balance – Today’s Aug US trade deficit is expected to narrow moderately to -$59.0 billion from the 1-1/2 year high of -$62.2 billion in July. The US trade deficit has generally been moving sideways for the past two years due to the fact that the two major factors affecting the deficit have mostly offset each other, i.e., the high value of US oil imports versus strong demand for US exports. However, those pressures have shifted in the past several months, with the value of imports now falling due to lower oil prices and weaker demand for imports from US consumers. At the same time, US exports are also starting to drop due to slower overseas growth. The bottom line is that those shifting forces will cause the trade figures to be volatile and difficult to predict over the near-term. The big impact of strong export demand can be seen in the US trade deficit ex-petroleum, which has narrowed by more than $20 billion in the past 2 years to the current level of -$18.8 billion. That is the narrowest ex-petroleum deficit in at least the last 8 years since the data series began. If it were not for the huge American appetite for foreign oil, the US trade deficit problem would be on its way towards being solved. However, there is no prospect on the horizon for the US to cut its oil imports, aside from a recession-related drop in demand. Oil prices are falling, which is also a step towards cutting the dollar-value of US oil imports. Still, oil prices remain very high from an historical perspective near $86. Therefore, the US appetite for foreign oil will continue to cause a big US trade deficit, which in turns undercuts the dollar on a long-term basis.

US import prices – Today’s Sep import price index is expected to fall sharply by –2.8% m/m, adding to the –3.7% m/m decline seen in August. On a year-on-year basis, Sep import prices are expected to ease to +12.2% y/y from +16.0% y/y in August and the record high of +21.3% seen in June. Import prices are of course falling due to the crude oil prices, which have plunged by about $60 in the past four months. Nevertheless, import prices, excluding petroleum, are also likely to decline sharply in coming months as raw materials prices fall and as importers are forced to cut prices to support demand. In fact, US import prices ex-petroleum in August eased slightly to +7.5% from the 20-year high of +7.8% posted in June 2008. While inflation used to be one of the Fed’s major concerns, the inflation outlook has now been thrown out the window as a monetary policy criterion since a serious recession likely looms and since the Fed and the Treasury are preoccupied with saving the global financial system

Barchart.com U.S. Morning Call for Thursday, October 9, 2008

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The European DJ Stoxx 50 this morning is trading mildly higher by +0.39% on the global rate cuts yesterday and today and on some bottom-fishing by investors attracted by extremely low valuations. European banks today are sharply higher on short-covering and optimism about yesterday's 50 bp rate cut to 3.75% by the ECB. In addition, ECB President Trichet said yesterday that he can't rule out more rate cuts. The ECB today also provided unlimited loans to banks at a rate no higher than 3.75%. UBS is up +7% today and Deutschebank is up +8%. Royal Bank of Scotland is up +18% this morning on a Citibank upgrade on the UK bank sector to "neutral" from "underweight," although RBS remains down 43% on the week. Russian stocks are up +17% today, more than reversing yesterday's 14% decline and leading to some hopes of a recovery in emerging market stocks.

There were rate cuts today in South Korea, Taiwan and Hong Kong today, which followed yesterday's US-European rate cuts and the rate cut by China. Asia-Pacific stocks today closed mixed: Japan -0.50%, Hong Kong +3.31%, China -1.36%, Taiwan -1.45%, Australia -1.53%, Singapore +3.40%, South Korea +1.02%.

Claims – Today’s weekly unemployment claims report is expected to show a decline of –22,000 to 475,000 following last week’s small increase of +1,000 to a 7-year high of 497,000. Meanwhile, weekly continuing claims are expected to climb +17,000 to 3.608 million, adding to last week’s +48,000 increase to a 5-year high of 3.591 million. The unemployment claims figures have been pushed higher in the past few weeks by Hurricanes Gustav and Ike. However, there is significant upward pressure on unemployment claims from the credit crisis, which is causing businesses to lay off workers in response to the drop-off already seen in economic activity and to prepare for a tough road ahead. The recent September unemployment report was weak with a –159,000 decline in payrolls, which brought the total 9-month string of payroll declines to a total of –760,000. The unemployment rate in September was unchanged at 6.1%, but will certainly be headed higher in the next few months to likely exceed the peak from the last recession of 6.3% but hopefully stop well shy of the peak of 7.8% seen after the 1990-91 recession.

Chain store sales – Today’s Sep ICSC chain store sales report is expected to fall to +1.4% y/y from the August level of Aug +1.7% y/y. Today’s report will provide some early indications of how consumers reacted to the credit crisis, although the crisis did not really hit the public’s attention until the middle September when Treasury Secretary Paulson went to Congress to ask for the $700 million rescue package. The markets will therefore be much more worried about October retail sales, which are likely to fall off a cliff as the situation blew up into a full-fledged banking and stock market crisis

Barchart.com U.S. Morning Call for Wednesday, October 8, 2008

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Global central banks at about 7 AM ET this morning announced a coordinated 50 bp rate cut. The Fed, ECB, Bank of England, Bank of Canada and Swiss and Swedish central banks all cut their benchmark rates by 50 bp. The central banks released a joint statement in which they said that "The recent intensification of the financial crisis has augmented the downside risks to growth and thus has diminised further the upside risks to price stability." The statement added that "Some easing of global monetary conditions is therefore warranted." It was particularly encouraging that even the ECB went along with a 50 bp rate cut. China joined the action by cutting its benchmark lending rate by 27 bp.

In other positive news today, the UK government today implemented a 50 billion pound ($87 billion) bank rescue package that involves an offer to inject capital into RBS, Barclays and at least six other UK banks and about 250 billion pounds of loan guarantees to refinance debt. In addition, the Bank of England is making up to 200 billion pounds of liquidity available. UK bank stocks initially dropped sharply on the news since there was no announcement on which banks would take capital and the level of dilution was thus unknown. HSBC, however, said it has no plans to use the government's rescue program.

European stock markets recovered somewhat from steep early losses on the coordinated rate cut. As of about 7:15 PM ET, the European DJ Stoxx 50 was down -2.48%, the FTSE 100 was down -0.20%, and the DAX was down -1.95%. The situation was ugly in the Asian stock markets today prior to the rate cut news: Japan -9.38%, Hong Kong -8.17%, China -3.78%, Taiwan -5.76%, Australia -4.99%, Singapore -6.61%, South Korea -5.27%, Bombay -3.14%. Russia and Indonesia closed their stock markets earlier today after the indexes fell more than 10%.

Pending home sales – Today’s Aug pending home sales report is expected to show a decline of –1.3%, adding to the decline of –3.2% m/m seen in July. On a year-on-year basis, pending home prices fell -6.5% in July, which was a substantial improvement from the record low of -23.9% seen in December 2007. The pending home sales report measures the change in home sales contracts and generally leads to existing home sales within one to two months, thus providing some leading information on the existing home sales series. However, today’s report for August will have little economic significance given that the market is mainly worried about how far home sales fell in September once the credit crisis began. Ford’s CEO said that auto sales plunged in September as if there had been a natural disaster, which means that the same thing almost certainly happened to home sales as well.

Barchart.com U.S. Morning Call for Tuesday, October 7, 2008

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The European DJ Stoxx 50 this morning is trading +0.58% and Dec S&Ps are trading +11.90 points (+1.13%) as the markets hope for a coordinated rate cut by the Fed, ECB and other central banks.. Asia-Pacific stocks today closed mixed: Japan -3.03%, China -1.23%, Taiwan +0.34%, Australia +1.72%, Singapore +0.43%, South Korea +0.82%, Bombay -0.90%. The Australian stock market was bolstered by today's 1.00 percentage point rate cut by Australia's central bank, which was twice the expected 50 bp rate cut.

UK bank stocks are in bad shape today with Royal Bank of Scotland down about 30%, Lloyds down 9%, and Barclays down 8%. There are reports that the UK government may directly inject up to $79 billion of capital into UK banks, which could dilute current shareholders. In addition, S&P cut RBS's credit rating. However, Barclays recovered somewhat after the bank denied that it requested an investment from the UK government. In an effort to stabilize its banking system and economy, Iceland today announced that it is in talks for a 4 billion euro loan from Russia, nationalized its second largest bank, granted a 500 million euro loan to its largest bank, and pegged the krona to a trade-weighted index. S&P downgraded Iceland's credit ratings last night.

Bank of America is down 9% in European trading this morning after the bank yesterday pre-announced that earnings dropped to 15 cents per share, which was well below the analyst consensus of 61 cents and down from 82 cents a year earlier, although the bank was still able to produce $1.18 billion in profits in this atmosphere. Bank of America cut its dividend in half to 32 cents and announced a stock sale of at least $10 billion to build cash and capital.

Fed policy – The market yesterday substantially boosted expectations for Fed easing versus last Friday due to yesterday’s stock market plunge and the spread of the credit crunch overseas. The market yesterday pushed the fed funds futures yield strip curve down by 10 bp from November through February, and by as much as 29 bp for December 2009. That indicated that the market now believes there will be even more damage from the credit crunch and that the US economy will not bottom out until early-2009. The fed funds strip curve on a yield basis is at its lowest point in Feb 2009 with a yield of 1.285%. That represents an 86% chance of an overall 75 bp rate cut by then.

The market is now fully discounting an emergency 50 bp Fed rate cut even before the Fed’s next meeting on October 28-29. That is seen by the fact that the October federal funds futures implied yield yesterday closed at 1.38%, which is 62 bp below the current fed funds target rate of 2.00%. There is widespread speculation that the Fed may be trying to talk other central banks into a coordinated rate cut, which would go a lot further toward calming investor nerves around the globe if the world’s central banks are seen acting together. The European markets are already discounting a 25 bp rate cut by the ECB by early November and an overall 50 bp rate cut by early December. The Bank of England could probably easily be talking into cooperating with a rate cut, along with the Bank of Canada. Some Asian central banks might go along since their credit markets are starting to lock up as well.

Aside from interest rate cuts, the Fed is still busy expanding its facilities to directly pump liquidity into the banking system. The Fed yesterday doubled its Term Auction Facility (TAF) auctions to $900 billion. In addition, Fed officials are reportedly talking to market participants about possibility of buying commercial paper, or taking commercial paper as collateral for loans. This would provide a much-needed vote of confidence for the commercial paper market, which is drying up due to investor fears. US corporations rely on the commercial paper market to fund their day-to-day operations, meaning further damage to the commercial paper market would have a direct negative effect on corporate liquidity and corporate economic activity.

Barchart.com U.S. Morning Call for Monday, October 6, 2008

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The European DJ Stoxx 50 this morning is trading -5.23% on increased concern about the credit crisis in Europea. Asia-Pacific stocks today closed sharply lower: Japan -4.25%, Hong Kong -4.97%, China -5.12%, Taiwan -4.12%, Australia -3.30%, Singapore -5.61%, South Korea -4.20%, Bombay -5.78%. The credit credit expanded globally over the weekend as European leaders ruled out any pan-European action and as investors and savers try to flee to less-risky investments. On the brighter side, the 3-month Libor rate today fell 4 bp to 4.29% from Friday's peak of 4.33% and the 3-month Euribor rate rose only 1 bp to a new record of 5.34%. Russian stocks fell 15% today and the Russian stock markets halted trading again. Bank of America, Merrill Lynch and Goldman Sachs are all down more than 3% this morning in European trading.

In weekend European bank rescue news, both Fortis and Hypo Real Estate Holding AG both required revamped rescue plans after the initial plans from a week earlier didn't work. The Belgium and Netherlands governments over the weekend implemented a deal where BNP Paribas, France's largest bank, will take control of most of Fortis. Germany, Sweden, Austria and Denmark all took action today or over the weekend to extend bank deposit guarantees and try to prevent depositor runs on banks. In the UK, the Royal Bank of Scotland is down 11% and Barclay's is down 8% after newspaper reports that the UK government may make capital injections into UK banks, which would protect the banks but could dilute current shareholders.

Market focus – The markets this week will focus on (1) whether the Fed and the Treasury can halt the panic in the banking system now that the $700 billion rescue bill has passed and the end-quarter statement date has passed, (2) the banking situation in Europe which remains tense as European leaders over the weekend pledged to rescue their own nations’ banks as necessary but were unable to agree on any pan-European rescue plan, (3) the US stock market which is now worried about the state of the US economy and earnings and failed to rally on the Houser passage last Friday of the rescue package, (4) the T-note market where the market is assessing the state of safe-haven demand for Treasury securities and the likelihood of near-term Fed easing, (5) talk about the possibility of a coordinated central bank easing if the banking situation continues to deteriorate this week, (6) the dollar which has rallied sharply in the past two weeks due to dollar hoarding during the crisis and the weakening economic situation in Europe, and (7) oil prices which have fallen fairly sharply in the past two weeks due to the banking crisis and fears about the possibility of a global recession.

US Calendar – On this week’s US economic calendar, Tuesday brings comments by Fed Chairman Bernanke, the minutes of the Sep 16 FOMC meeting, and Aug consumer credit (expected +$5.8 billion). Wednesday brings Aug pending home sales (expected –1.1%), and the Treasury’s auction of 10-year inflation-protected T-notes. Thursday brings weekly initial unemployment claims (expected –22,000), Aug whole inventories (expected +0.4%), and Sep ICSC chain store sales. Friday brings the Aug US trade deficit (expected narrower at -$59.0 billion vs -$62.2 billion in July), and Sep import prices (expected –2.5%). The interest rate and currency futures markets will close early this Friday ahead of next Monday’s Columbus Day holiday.

Banking crisis – The overnight dollar Libor rate late last week eased to pre-crisis after Tuesday’s end-quarter statement date, which was an encouraging sign that inter-bank lending was starting to ease up. However, banks are still basically refusing to lend to each other for any significant length of time as seen by last Friday’s continued rise in the 3-month dollar Libor rate to an 8-month high of 4.34%, up 154 bp from the 2.80% area that prevailed before the string of banking crises began about 3 weeks ago. The 3-month dollar Libor rate is now 366 bp above the federal funds target rate, which is by far the tightest situation since the mortgage and banking crisis originally began in July 2007. The markets will continue to closely watch inter-banking lending rates as a proxy for when banks start to become more confident and start lending to each other again, as opposed to the current situation where banks are relying on the Fed for much of their short-term funding needs.

Fed policy – The market last week boosted the odds for Fed easing by about another 25 bp as the banking system continued to freeze up and talk grew about the possibility of an emergency Fed rate cut or even a coordinated rate cut between the Fed, ECB, Bank of England, and other major central banks. The market is now fully discounting a 50 bp Fed rate cut to 1.50% either before or at the next FOMC meeting on Oct 28-29. The market is discounting a maximum 40% chance of an overall 75 bp rate cut to 1.25% by January 2009. The market then expects the Fed to starting raising the funds rate target back to 2.00% by October 2009.

UPDATE 1-Banks show strong demand in dollar tenders

Wed Sep 10, 2008 10:56am EDT

FRANKFURT, Sept 10 (Reuters) - European banks showed strong demand for U.S. dollar funds on Wednesday, bidding for more than four times the funds on offer at central bank auctions.

The European Central Bank received bids for $43.34 billion versus the maximum $10 billion on offer in the 28-day operation, while the Swiss National Bank got bids worth $6.673 billion for the $2 billion it had available.

In cooperation with the U.S. Federal Reserve, the ECB and SNB have provided local banks with U.S. dollars since last December to relieve money market tensions.

European banks showed similar strong demand for 84-day dollar funds at auctions on Tuesday, even though the rates at the central bank auctions are not universally lower than market interest rates as they were last month.

The one-month LIBOR dollar rate fixed at 2.48688 percent on Wednesday. The average rate at the SNB auction was lower at 2.36 percent, while the ECB funds went for a fixed rate of 2.53 percent, the same as the lowest successful bid at a parallel Fed auction.

The Fed received bids for $46.237 billion and lent banks $25 billion. The awarded loans will settle on Sept. 11 and mature on Oct. 9. (Reporting by Krista Hughes; editing by David Stamp)

DIARY-Federal Reserve Events

Wed Sep 10, 2008 9:28am EDT

Thursday, September 18

 PHILADELPHIA - Federal Reserve Bank of Philadelphia
releases its monthly business outlook survey, 1000 EDT/1400
GMT.

 Monday, September 22

 CHICAGO - Federal Reserve Bank of Chicago issues monthly
Chicago Fed National Activity Index on current state of U.S.
economic activity and inflationary pressures, 0730 CDT/0830
EDT/1230 GMT

 Tuesday, September 23

 RICHMOND, Va. - Federal Reserve Bank of Richmond releases
monthly manufacturing and services indices, 1000 EDT/1400 GMT.

 Thursday, September 25

 KANSAS CITY, Mo. - Federal Reserve Bank of Kansas City
releases its manufacturing index for the tenth Fed district for
September, 1000 CDT/1100 EDT/1500 GMT.

 Monday, September 29

 DALLAS - Federal Reserve Bank of Dallas issues Texas
Manufacturing Outlook Survey for September, 0930 CDT/1030
EDT/1430 GMT.

 DALLAS - Federal Reserve Bank of Dallas releases
trimmed-mean PCE inflation rate, no set time

 CHICAGO - Federal Reserve Bank of Chicago releases the
Midwest Manufacturing Index, 1100 CDT/1200 EDT/1600 GMT
----------------------------------------------------------

 FOMC MINUTES FROM MEETINGS

 2008 dates:

 Released 1400 EDT/1800 GMT:

 Tuesday, October 7 (for September 16 meeting)

 Released 1400 EST/1900 GMT:

 Wednesday, November 19 (for October 28-29 meeting)
---------------------------------------------------------

 FED WEEKLY DATA

 Every Monday (except federal holidays)

 WASHINGTON - Federal Reserve releases weekly selected
interest rates, no set time.

 Every Thursday (except federal holidays)

 NEW YORK - Federal Reserve releases weekly money supply and
other weekly Fed banking statistics, 1630 EDT/2030 GMT

 Every Friday (except federal holidays)

 WASHINGTON - Federal Reserve releases weekly assets and
liabilities of commercial banks figures, 1615 EDT/2015 GMT.
-------------------------------------------------------------

 NOTES:

 Eastern Daylight Time through November 1, 2008 (four-hour
time difference EDT/GMT)

 Eastern Standard Time resumes November 2, 2008 (five-hour
time difference EST/GMT)
---------------------------------------------------------

 VOTING MEMBERS:

 Federal Reserve Bank of New York President Timothy
Geithner

 Federal Reserve Bank of Cleveland President Sandra
Pianalto

 Federal Reserve Bank of Philadelphia President Charles
Plosser

 Federal Reserve Bank of Dallas President Richard Fisher

 Federal Reserve Bank of Minneapolis President Gary Stern

 Federal Reserve Bank of New York President Timothy
Geithner

 Federal Reserve Bank of Chicago President Charles Evans

 Federal Reserve Bank of Richmond President Jeffrey Lacker

 Federal Reserve Bank of Atlanta President Dennis Lockhart

 Federal Reserve Bank of San Francisco President Janet
Yellen

 Federal Reserve Bank of New York President Timothy
Geithner

 Federal Reserve Bank of Cleveland President Sandra
Pianalto

 Federal Reserve Bank of Boston President Eric Rosengren

 Federal Reserve Bank of St. Louis President James Bullard

 Federal Reserve Bank of Kansas City President Thomas
Hoenig

Dollar brushes aside Lehman loss, up versus yen

Wed Sep 10, 2008 10:00am EDT

By Lucia Mutikani

NEW YORK (Reuters) - The U.S. dollar rose in choppy trade on Wednesday, shrugging off uncertainty over investment bank Lehman Brothers on the view that problems in the U.S. financial sector would also hurt the global economy.

The dollar briefly fell against the yen on news that Lehman, the fourth-largest U.S. investment bank, recorded a third-quarter loss and did not announce firm deals to raise desperately needed capital.

Lehman (LEH.N: Quote, Profile, Research, Stock Buzz), whose share price plunged 45 percent on Tuesday on growing concerns about its capital situation, reported a loss of $5.92 per share, slashed dividends and said it is actively in talks to sell assets.

"The yen's reaction was very telling: we had initial risk aversion favoring yen trade, but the strong dollar theme continues to dominate," said Matthew Strauss, a senior currency strategist at RBC Capital Markets in Toronto.

"Problems in the U.S. are not going to be confined to the U.S. and if the financial situation worsens, it will spill over to the rest of the world. Negative news from the U.S. does not necessarily translate into U.S. dollar selling."

In New York morning trade, the dollar was up 0.6 percent at 107.44 yen, after dropping to session lows around 106.61 yen. The euro rose 0.3 percent to 151.70 yen, pushing away from a 13-month low around 150.15 yen.

The euro trended lower versus the dollar in a volatile session, with analysts attributing the bid to safe-haven flows. The euro zone single currency, which touched an intraday low of $1.4074, was last down 0.1 percent at $1.4121.

"We saw a safe-haven bid. As risk gets unwound money simply runs into the dollar, which is why it is getting support right now," said Boris Schlossberg, director of FX research at GFT Forex in New York.

"But we think euro/dollar is very close to forming some near-term bottom."

The ICE Futures U.S. dollar index, which measures the dollar's value against a basket of six currencies, was last up 0.1 percent at 79.480.

Traders showed limited reaction to European Central Bank President Jean-Claude Trichet, who on Wednesday told the European Parliament it would be naive to think markets will return to their pre-turbulence state.

(Editing by James Dalgleish)

Oil rises after surprise OPEC output cut

Wed Sep 10, 2008 8:46am EDT

LONDON (Reuters) - Oil rose on Wednesday in response to a surprise decision by OPEC to cut production by about half a million barrels a day.

The Organization of the Petroleum Exporting Countries had been expected to keep existing output allocations but some members had voiced concern about a growing surplus of oil on the market as high prices have impacted demand.

U.S. crude was up 9 cents at $103.35 a barrel by 8:36 a.m. EDT. On Tuesday, it fell to a five-month low of $101.74.

London Brent crude was up 28 cents at $100.62, after a fall below $100 on Tuesday for the first time since April.

"We think this is a serious deal for a real cut...In this market, direction matters and this is a turn," UBS economist Jan Stuart said in a report.

OPEC lowered its output targets to 28.8 million barrels per day (bpd), a move the group's president said would reduce output by 520,000 bpd.

"Since the market is over-supplied, the conference agreed to abide by September 2007 production allocations (adjusted to include new members Angola and Ecuador and excluding Indonesia and Iraq), totaling 28.8 million bpd," it said in a communique.

The market drew additional support from reports of an earthquake that struck southern Iran near Bandar Abbas, site of a major Iranian oil refinery.

Oil has fallen about 30 percent from a peak of $147.27 a barrel on July 11, partly due to a fall in demand, a stronger U.S. dollar and shifts in investment flows.

"There were enough surprises in Vienna to give some support to the bullish camp, the question now is whether there is still enough financial interest to play the game," said Olivier Jakob, of energy analysts Petromatrix.

IEA

Price gains were limited as the International Energy Agency lowered its 2008 world oil demand growth forecast by 100,000 bpd due to the impact of weaker economic conditions and high prices.

The IEA, adviser to 27 industrialized countries on energy policy, also trimmed its forecast for 2009 global demand growth by 40,000 bpd to 890,000 bpd.

The market is now likely to turn its focus to U.S. weekly oil statistics due out later on Wednesday. <EIA/S>

Analysts in a Reuters poll expect U.S. government oil inventory data to show a sharp fall in crude oil and refined product stocks due to production and import disruptions caused by Hurricane Gustav.

Crude oil stocks in the United States were seen falling 4.4 million barrels in the week to September 5. Gasoline stocks were seen down by 4.2 million barrels and distillates by 2.7 million barrels.

Hurricane Ike's progress toward the U.S. Gulf of Mexico has kept most oil and natural gas production shut in for a second week. Its path has recently shifted south and west of the biggest concentration of production platforms, aiming instead at the Texas coast.

(Reporting by Ikuko Kao, Matthew Robinson, Jane Merriman in London and Angela Moon in Seoul and Jonathan Leff in Singapore; Editing by Anthony Barker)

EU sees lower euro zone 2008 growth, higher inflation

Wed Sep 10, 2008 6:55am EDT

By Jan Strupczewski

BRUSSELS (Reuters) - Euro zone economic growth will halve in 2008 from 2007 and inflation will be much higher because of financial turmoil, soaring commodity prices and housing market shocks, the European Commission said on Wednesday.

Updating its economic forecasts, the European Union executive slashed its prediction for gross domestic product growth for the 15 nations using the euro to 1.3 percent from the 1.7 percent predicted in April, as the OECD did on September 2.

In 2007, euro zone gross domestic product (GDP) grew 2.6 percent.

The Commission cautioned that its new forecast for the euro zone could still prove too strong, and its figures showed the bloc's biggest economy, Germany, in recession, with GDP shrinking 0.2 percent in the July-September period after contracting 0.5 percent in the previous three months.

Spain, whose housing bubble has burst, will also go into recession in the second half of the year, as will Britain, the Commission forecast.

Both France and Italy, whose economies shrank 0.3 percent in the second quarter, would only stagnate in the third.

"The main downside risks identified in the spring forecast have materialized, with the financial turmoil deepening, commodity prices soaring and the shocks to several housing markets spreading more widely," the Commission said.

The Commission raised its inflation estimate for this year to 3.6 percent from 3.1 percent previously. That is almost twice the European Central Bank's target of keeping inflation below, but close to, 2 percent.

"This represents an upward revision, although inflation could be at a turning point as the impact of past increases in energy and food prices gradually fades in the coming months," the Commission said.

It said risks to the growth outlook remained more on the downside, and if they materialized, growth could be 1.1 percent this year rather than 1.3 percent.

"Risks to the inflation outlook (remain) more on the upside as the euro area might witness some second-round effects on inflation in the rest of the year, although there is no evidence of any widespread effects so far," the Commission said, referring to the risk of a wage-price spiral.

The Commission forecasts on growth for 2008 are in the lower end of the ECB's forecast range while on inflation they are in the upper end of the ECB projection range.

RISKS TO INFLATION

The Commission said there had so far been only limited evidence of high oil and food prices driving up wage demands and prices in other sectors.

"However, the risk of such effects cannot be excluded, especially if (low) inflationary expectations were to become less well anchored," the Commission said.

"Moreover, the oil market remains tight, despite the current easing of prices, and any renewed oil price hikes will worsen the inflation prospects in the EU," it said.

Secondary inflation is what the ECB is keen to prevent and the bank raised interest rates in July by 25 basis points to 4.25 percent despite signs of slowing growth to drive home its point.

The Commission does not see the euro zone economy falling into a technical recession, defined as two consecutive quarters of negative growth, as it forecast stagnation rather than contraction of quarterly growth in the third quarter after a 0.2 percent contraction in the second.

However, the International Monetary Fund also believes a recession is possible in Germany this year and has revised down its 2009 growth forecast to less than 1 percent from 1 percent, German newspaper Die Zeit said in its online edition.

Poland, the biggest of the 10 economies that joined the EU in 2004, would grow more slowly in the last two quarters of 2008, but its overall performance would be better than previously expected at 5.4 percent, rather than 5.3 percent, the Commission forecast.

It said despite the easing of the nominal and effective exchange rates of the euro, the common currency would remain a drag on exports because trade reacted to exchange rate adjustments with a time-lag.

The Commission said the U.S. government's rescue package for mortgage market-makers Fannie Mae and Freddie Mac was a clear warning that financial market turmoil was far from over, and that public finances in the EU would suffer more than previously expected from the economic slowdown.

"We must speed up the implementation of the road map to help restore confidence in the financial markets, and preserve the improvements in public finances so as not to increase the burden for future generations, which will already face the challenge of an ageing population," said Joaquin Almunia, Economic and Monetary Affairs Commissioner.

(Reporting by Jan Strupczewski; Editing by Ruth Pitchford)

Top 10 beachside cities

16:47 ET, Jul 2008

TORONTO (Reuters Life!) - The idea of going surfing or for a dip in the ocean before work is a dream for many people, but for others it's part of daily life in a beach city.

Men's portal AskMen.com has come up with a list of the top 10 beachside cities where the sand and the surf are an integral part of the place. Reuters has not endorsed this list:

1. Miami, USA

Miami is where the world's jet-set come to top up their tans and dance until the early hours. Aside from being a tourism hub for its beaches, Miami is one of the country's busiest ports.

Best beach: Just 90 miles across the Atlantic Ocean from Cuba, South Beach is Miami's most iconic stretch of sand, and is bordered by Ocean Drive's restaurants, bars and hotels.

2. Dubai, UAE

Built from the ground up in the desert to be one of the world's busiest beachside cities, Dubai is known for its daring architecture, gaudy style and sweltering heat.

Best beach: Dubai relies heavily on its beautiful beaches, such as Jumeirah Beach, for tourism.

3. Barcelona, Spain

A heady mix of architecture, shopping and nightlife, Barcelona sits on the edge of the Mediterranean and boasts over 2.5 miles of stunning white-sand beaches.

Best beach: The city's signature strip of sand has to be Barceloneta Beach that attracts up to 7 million people a year.

4. Rio de Janeiro, Brazil

Cities don't come more beach-orientated than Rio de Janeiro. Home of the world-famous Carnival, the laid-back citizens of Rio love nothing more than donning their flip-flops for the beach.

Best beach: Stretching 2.5 miles from Princesa Isabel Avenue to Posto Seis, the iconic Copacabana Beach oozes an atmosphere of casual-beach chic.

5. Cape Town, South Africa

A city where sickening wealth rubs its Prada-clad shoulders with heartbreaking poverty, Cape Town has risen up the tourism ranks in the past decade to become a go-to place for expatriate residents looking for a better life in the sun.

Best beach: Clifton Beach is one of Cape Town's most glamorous waterfronts while Big Bay and Little Bay are best for water sports such as windsurfing.

6. Los Angeles, USA

The world's capital for popular culture and entertainment, L.A. is also recognized for its stunning array of beaches, thanks in large part to their many appearances on TV and in movies. Best beach: Though technically part of Los Angeles county, Santa Monica is by far the most renowned beach in the L.A. area, with TV show Baywatch filmed here during its run.

7. Brighton, UK

In the south of England, Brighton is steeped in history and was where the mods and rockers of the 1960s used to come. Unfortunately, the pier burned down years ago but a new one was built, complete with fairground rides, stalls and arcades.

Best beach: Aside from the hundreds of pubs and clubs, the beach is Brighton's biggest draw, with red-and-white striped deck chairs dotting its stony shorefront.

8. Sydney, Australia

With show-stopping architecture, such as the Sydney Opera House and the Sydney Harbor Bridge, a vibrant nightlife scene, and an abundance of natural beauty, there's a lot to do in Sydney but one of the biggest draws is undoubtedly the beaches.

Best beach: Bondi Beach is the most photographed stretch of sand in Australia and is famed for its excellent surfing.

9. Mumbai, India

Mumbai is the financial, commercial, industrial, and celluloid capital of India, but another one of Mumbai's points of interest is, of course, the beach. Juhu Beach, which sits just outside the city center, is lined with Mumbai's best hotels.

Best beach: Fringed by Marina Drive on the western side of the city, Chowpatty Beach is Mumbai's most charismatic.

10. Venice, Italy

Venice's beaches are often overlooked given its meandering canals, gondola rides and stunning architecture. But the romantic Italian city is actually home to some of the most hush-hush beaches in Europe, where nature and history collide.

Best beach: Venice Lido is only 10 minutes away from the throngs of tourists that congregate around St. Mark's Square, an 11-mile island that stretches between the open sea and a lagoon.

Bush signs housing rescue plan into law

Wed Jul 30, 2008 7:58am EDT

By Jeremy Pelofsky

WASHINGTON (Reuters) - As home foreclosures rise and property values slump, U.S. President George W. Bush on Wednesday signed into law a rescue package that includes emergency backstops for mortgage financing companies Fannie Mae and Freddie Mac.

Despite opposition to a provision that offers $4 billion in grants to states to buy and repair foreclosed homes, Bush reversed his opposition to the overall legislation because it included numerous other key housing reforms.

The new law boosts oversight of Fannie Mae and Freddie Mac, which own or guarantee almost half the country's $12 trillion in home mortgage debt. It also expands a temporary line of U.S. Treasury credit and gives the government the option to buy shares in them if they ran into trouble.

"We look forward to put in place new authorities to improve confidence and stability in markets, and to provide better oversight for Fannie Mae and Freddie Mac," said White House spokesman Tony Fratto.

Bush signed the measure in the Oval Office shortly after 7 a.m. EDT with his economic team on hand, including Treasury Secretary Henry Paulson who helped negotiate the package with the Democratic-controlled Congress.

The new measures come as prices of U.S. single-family homes plunged at a record pace in May from a year earlier. The closely-watched Standard & Poor's/Case Shiller composite index of 20 metropolitan areas fell 0.9 percent in May from April, bringing the measure down 15.8 percent from May 2007.

The new law also sets up a $300-billion fund under the Federal Housing Administration to help distressed homeowners get more affordable, government-backed mortgages and get out from under exotic mortgages they cannot afford.

"The Federal Housing Administration will begin to implement new policies intended to keep more deserving American families in their homes," Fratto said.

Fannie Mae portfolio rose at fastest rate since '03

Wed Jul 30, 2008 11:18am EDT

NEW YORK (Reuters) - Fannie Mae, the largest provider of funding for U.S. residential mortgages, on Wednesday said it grew its investment portfolio in June at the fastest annualized rate in nearly five years.

Fannie Mae's (FNM.N: Quote, Profile, Research, Stock Buzz) mortgage portfolio increased at a 22.8 percent annualized rate to $749.6 billion in June, from $736.9 billion in May, the Washington-based company said in a statement.

The government-sponsored enterprise (GSE) has been boosting growth in its investments since its regulator earlier this year began easing requirements on capital it must hold against the assets. Lawmakers consider such purchases by Fannie Mae and rival Freddie Mac (FRE.N: Quote, Profile, Research, Stock Buzz) as playing a key role in supporting the U.S. housing market that is going through a wrenching downturn.

U.S. President George W. Bush signed into law on Wednesday a housing bill that includes measures to ensure funding for the two companies, which have sustained billions of dollars in losses from rising loan defaults. For details, see: ID:nN30428711.

Serious delinquencies on loans guaranteed by Fannie Mae jumped to 1.3 percent in May from 1.22 percent in April.

Fannie Mae last registered a faster annual rate of portfolio growth in September 2003 as falling interest rates sparked a record boom in refinancing.

Commitments by Fannie Mae to purchase mortgages in future months declined to $38.3 billion in June -- the third-highest rate this year -- from nearly $43 billion in May.

(Reporting by Al Yoon; Editing by Tom Hals)

Wall St gains as Fed, SEC act to stabilize market

Wed Jul 30, 2008 10:56am EDT

By Walter Brandimarte

NEW YORK (Reuters) - Stocks rose on Wednesday as U.S. officials acted to provide liquidity and stabilize turbulent financial markets, while a report showed private employers unexpectedly added jobs in July, easing concerns about labor market weakness.

Bank shares rallied, with Citigroup (C.N: Quote, Profile, Research, Stock Buzz) and Bank of America (BAC.N: Quote, Profile, Research, Stock Buzz) up more than 3 percent after the Federal Reserve and other central banks extended liquidity offerings to stressed banks and securities firms to ease credit strains.

In addition, U.S. securities regulators extended through August 12 an emergency rule aimed at curbing abusive short selling in the stocks of Fannie Mae (FNM.N: Quote, Profile, Research, Stock Buzz) and Freddie Mac (FRE.N: Quote, Profile, Research, Stock Buzz), as well as 17 other major financial firms.

The combination of both measures "shows that the Fed and the SEC are really coming in trying to defend the stock market, and financials in particular, and doing their best to calm individual investors fears that are out there still," said Ryan Detrick, technical analyst at Schaeffer's Investment Research in Cincinnati.

The Dow Jones industrial average .DJI gained 155.60 points, or 1.37 percent, to 11,553.16, while the Standard & Poor's 500 Index .SPX rose 16.13 points, or 1.28 percent, to 1,279.33. The Nasdaq Composite Index .IXIC was up 20.85 points, or 0.90 percent, at 2,340.47.

Shares of Fannie and Freddie rose more than 7 percent on the SEC emergency rule extension as well as on news President George W. Bush had signed into law a housing rescue plan passed by Congress, which includes a government lifeline to the two housing finance companies.

Oil fell for most of the morning, helping stocks by reducing fears about inflation and the impact of high energy prices on consumer spending. But U.S. crude futures reversed direction after data showing U.S. inventories of crude and gasoline fell. Oil was up about 20 cents to $122.20 a barrel.

Adding to the positive mood, ADP Employer Services said U.S. private employers added 9,000 jobs in July, surprising analysts who expected a decline in new jobs.

The report encouraged investors to bet the government's more comprehensive labor market report due on Friday will bring a stronger figure than a 75,000 jobs decline currently expected by economists.

Although stocks welcomed the ADP news, Peter Boockvar, equity strategist with Miller Tabak & Co in New York, said, "the ADP number has shown no correlation to the government data which we will get on Friday."

"So I don't think people should extrapolate too much from what they saw today," he warned.

Shares of Elan Corp (ELN.I: Quote, Profile, Research, Stock Buzz)(ELN.N: Quote, Profile, Research, Stock Buzz) plunged about 34 percent to $22.30 while Wyeth (WYE.N: Quote, Profile, Research, Stock Buzz) declined more than 11 percent to $40.11 after a drug trial showed the risk of a potentially serious side effect in a new Alzheimer's drug jointly developed by the companies. Wyeth was the biggest drag on the S&P 500.

(Additional reporting by Kristina Cooke and Ellis Mnyandu; Editing by Kenneth Barry)

Stocks Drop Sharply; Banks Lead Decline

By MICHAEL M. GRYNBAUM

Published: July 25, 2008

Widespread fear about the financial sector brought a dramatic end to the recent stock rally, as investors scrambled to take profits from bank shares and sent the Dow Jones industrials down more than 280 points, its worst loss in a month.

Financial shares, coming off a six-session winning streak, plunged after the regional bank National City and Washington Mutual, the nation’s biggest savings and loan, were besieged by gloomy analyst reports.

WaMu was forced to take the unusual step of issuing a public statement about its financial strength, for the second time in a week.

Investors are worried that the worst of the tight credit market still lies ahead. The nation’s banks have struggled to escape the cascading effects of paralysis in the debt markets and the decline in home values. Sales of previously owned homes declined in June at nearly double the rate that economists had expected, according to a report on Thursday.

The sell-off in financial shares brought down the broader market, with the Standard & Poor’s 500-stock index finishing down 2.3 percent. The Nasdaq composite index slipped 2 percent. All the major indexes headed downward at the opening bell and never recovered.

“We’ve had such a strong run especially in the financials,” Ryan Larson, a trader at Voyageur Asset Management, said. “A lot of people are taking money off the table.”

Big bank stocks like Citigroup and Lehman Brothers, which had seen record gains in the last week, plunged again. As a group, shares of financial firms listed in the S.&P. 500 lost 6.3 percent on Thursday alone.

National City shares lost 2.1 percent after the holding company reported a $1.8 billion loss for the second quarter. Washington Mutual was off 13.3 percent after losing more than 20 percent on Wednesday.

Oil prices also moved higher. Crude oil futures rose $1.05, to $125.49 a barrel in New York trading.

The painful home sales report, released before the markets opened, started the day off on a sour note. Sales of previously owned homes, which make up most of the housing market, tumbled 2.6 percent in June after a 2 percent increase in May, according to a private trade group.

The report from the National Association of Realtors reinforced fears that the weak job market and scarcity of credit are discouraging Americans from buying homes. Those who may be in the market for a house may find it harder to take out a mortgage.

Housing-related stocks were among the day’s worst performers. Shares of Fannie Mae, which had recovered in recent days, dipped 20 percent. Its sister company, Freddie Mac, was off 18 percent.

The declines came a day after the House passed legislation aimed at shoring up the beleaguered mortgage buyers. The bill will potentially help hundreds of thousands of Americans avoid foreclosure with an infusion of government-backed loans and state financing. The Senate is expected to take up the bill this week and President Bush has said he will reluctantly sign it.

But the Realtors’ report suggested that the woes in the housing market would not end soon. June sales slowed to an annual rate of 4.86 million, adjusted for seasonal variables, after a 2 percent increase in May. Total sales were 15.5 percent below their level in June 2007.

Western states reported higher sales, with a 1 percent increase. But every other region saw declines, with sales falling 6.6 percent in the Northeast, 3.4 percent in the Midwest and 3.1 percent in the South.

Across the country, the decline came from a 3.2 percent drop in sales of single-family homes; apartment and condominium sales increased 1.7 percent for the month.

The report was “a little bit of a catalyst” for the stock market, said Richard Sparks, an analyst at Schaeffer’s Investment Research. But he said the declines in the Dow were more likely attributable to profit-taking after the market’s recent gains. “No one in a general sense was really expecting anything great out of those numbers anyway,” he said, referring to the home sales report.

At the current sales rate, it would take more than 11 months to sell off the current inventory of unsold homes, and some economists thought that estimate may be understated.

“Inventories are very high relative to sales rates, and would probably be even more so if all those wishing to sell their home actually had the house on the market instead of pulling it off in the face of weak demand and eroding prices,” wrote Joshua Shapiro, chief domestic economist at the research firm MFR.

Home prices have risen modestly for the last four months, but they remain 6.1 percent below their level from a year ago. The median price of a previously owned home in June was $215,100.

Many Americans expect home prices to fall further in the next year, the Realtors group said, which means many would-be buyers are holding out.

Weak job prospects are also having a dampening effect. In a separate report on Thursday, the Labor Department said that new unemployment claims rose 34,000 last week to 406,000, the highest level since the month after Hurricane Katrina.

New Regulator in Rescue Plan Spurs Debate

By STEPHEN LABATON

Published: July 21, 2008

WASHINGTON — When the Treasury secretary, Henry M. Paulson Jr., orchestrated a rescue effort for the nation’s two largest mortgage finance companies last week, most of the attention was focused on the infusion of cash and credit that the government would provide. But his plan also relies on the creation of a new regulatory agency to control the companies more tightly over the long term and to limit the risk they pose to the country’s financial system. Under the measure, Congress would lose some of its authority to oversee the companies, Fannie Mae and Freddie Mac, including the right to determine how much capital they must keep as a cushion against losses. That role would shift to the new regulator, which would be called the Federal Housing Finance Agency; the director of the agency would be appointed by the president and confirmed by the Senate.

While experts on the companies agree that the proposed regulator would be stronger than the existing one, housed in the Department of Housing and Urban Development, some contend that the legislation does not go far enough.

These critics say that the measure tilts in favor of the companies, even as it tries to strike a balance between promoting affordable housing — a primary mission of the government-sponsored mortgage giants — and setting limits on them to diminish the risks they pose to the world financial system. A new regulator, they say, would have significant new powers, but still less than bank regulators now have.

As a result, the companies, which have a reputation for retaining some of the most influential lobbyists in Washington, could continue to exploit those weaknesses to their advantage, these people say, potentially encouraging them to take on more risks that could ultimately require a taxpayer bailout.

“The new law will not give the regulator either the mandate or the capacity of a bank regulator,” said Thomas H. Stanton, an authority on the companies who has written several books on them. “The new law creates a cumbersome regulatory process to implement many parts of the bill,” he said, adding, “I’m afraid we will need to revisit the issue of the proper regulatory framework for the companies.”

Even Mr. Paulson, in a television interview on Sunday, conceded that tougher regulation was secondary to reassuring the financial markets of the fiscal health of Fannie and Freddie, which provide financing for roughly 80 percent of all new home loans in the country.

“You know, the second part of this is having a strong regulator with real teeth, with real responsibilities and powers,” Mr. Paulson said on “Face the Nation” on CBS. “And this is going to be key to putting us in a position where we can address the risks that they pose and that have been focused on. But our first priority today is the stability of the capital markets.”

There have been previous efforts to tighten regulations and establish more independent oversight of Fannie Mae and Freddie Mac, including a 1992 law that established the current regulatory framework for the companies. Congress and the White House have tussled for decades over which branch of government should control the companies. Now the Bush administration is urging lawmakers to act swiftly to calm jittery markets.

The legislation, which Congress is expected to approve as early as this week, would make it more difficult for the companies to intimidate or weaken the regulator by attacking its budget in Congress. Instead, they would be assessed fees directly by the regulator, just as commercial and investment banks are by their regulators.

Lawmakers were negotiating through the end of last week over differences between the House and Senate versions of the legislation. One detail still on the table is whether the measure would become effective immediately, as the Senate bill provides, or in six months under a new president, as the House bill stipulates.

As a practical matter, though, Bush administration officials acknowledge it will take many months to set up a new regulatory office and begin to consider new rules, forestalling any immediate effort to rein in the companies well into 2009.

Moreover, the administration has little incentive to curb Fannie and Freddie because it is relying on them more than ever to pull the ailing housing market out of its slump by buying most of the mortgages that banks are issuing.

House and Senate lawmakers also were considering whether to add last-minute provisions that would give the new regulator the authority to cut the dividends issued by the companies or reduce the millions of dollars in compensation provided annually to top executives.

As the only big players in the so-called secondary market for home loans, Fannie and Freddie buy billions of dollars in mortgages from lenders. They hold some of those mortgages in their own portfolios as investments; those portfolios now hold about $700 billion in mortgages apiece.

Other mortages are used as collateral for securities that are guaranteed by Fannie and Freddie and sold to investors. Money from those sales is then plowed back to the lenders to finance new mortgages.

The legislation would set up protracted procedures that critics say would enable Fannie and Freddie to continue to use their enormous political clout with Congress to beat back proposals that their executives view as onerous. For instance, it would require the new regulator to go through a lengthy process to raise the companies’ capital standards — the amount of money that the companies need as a buffer against losses.

Capital standards are the lever a regulator uses to control the overall size of a financial institution. Higher rates leave a company with less money to lend. In setting new rules, the regulator would have to focus in particular on the health of the companies and on their mission of helping to finance housing, rather than on the overall risks the companies pose to the financial system.

In recent days, the administration has proposed that the new regulator consult with the Federal Reserve, which looks at larger systemic risks. Congressional aides were discussing late last week whether the legislation should include that provision, which, in any event, does not give the Fed significant authority to alter new regulations.

The Bush administration has long sought to regulate Fannie Mae and Freddie Mac more closely, and the plan was revised a week ago to give the administration authority to inject billions of dollars in loans and investments in the two companies to answer concerns about whether they were short on capital.

As the housing market has steadily declined, reducing the value of the $5 trillion in mortgages the two companies own or guarantee and the $1.5 trillion in debt outstanding, they have struggled to shore up confidence in their stock and debt.

Critics say that by relying too heavily on the two companies to pull the country out of its housing slump, the administration postponed longer-term problems.

“Hank Paulson is running the Treasury the way he ran Goldman,” said L. William Seidman, the top regulator during the bailout of the savings and loan industry in the 1980s and early 1990s. “He’s doing everything he can to meet next quarter’s numbers. I might do the same thing in his position. But it postpones a lot of bigger problems to the future, when he will be gone.”

Administration officials said that Mr. Paulson had been seeking an overhaul of the companies for more than a year, and that it was not the administration’s fault that Congress had moved so slowly. They also said that the legislation was the product of the typical compromises that accompanied the writing of any law.

“We think that this will put us in a substantially stronger position than the current regulatory scheme,” said Michele Davis, a Treasury Department spokeswoman.

As they grow larger, the companies pose bigger risks to the financial system, particularly as they continue to suffer losses that erode their capital cushion. That cushion is significantly smaller than that required of banks.

With the crucial questions about the companies most likely falling to the next president, senior aides to the presidential campaigns of Senators John McCain and Barack Obama said they wanted legislation that would ultimately give the new regulator broad authority to control the companies.

Douglas Holtz-Eakin, Mr. McCain’s chief domestic policy adviser, said he hoped the legislation would give the regulator the authority to force the companies to reduce their large portfolios. Mr. Holtz-Eakin, echoing others’ concerns, including those of the former Federal Reserve chairman, Alan Greenspan, has said those portfolios pose the most significant risk to taxpayers.

“They were quite rapidly grown in the 1990s and they provide a return to private shareholders, but it is not something from which taxpayers benefit,” Mr. Holtz-Eakin said.

Jason Furman, Mr. Obama’s economic policy director, said Mr. Obama supported taking steps to ensure that management did not benefit at the expense of taxpayers, for example, by giving the government the authority to curtail executive compensation under certain circumstances.

“These companies play a very vital role,” Mr. Furman said, “but they also have a set of incentives that heads, their investors win, and tails, the taxpayers lose.”

Trouble at Fannie Mae and Freddie Mac Stirs Concern Abroad

By HEATHER TIMMONS

Published: July 21, 2008

For more than a decade, Fannie Mae and Freddie Mac, the housing giants that make the American mortgage market run, have attracted overseas investors with a simple pitch: the securities they issue are just as good as the United States government’s, and they usually pay better. The marketing plan worked. About one-fifth of securities issued by Fannie, Freddie and a handful of much smaller quasi-governmental agencies, some $1.5 trillion worth, were held by foreign investors at the end of March. One out of 10 American mortgages is, in effect, in the hands of institutions and governments outside the United States.

Now that the two companies are at risk, how their rescue is handled will ultimately test the world’s faith in American markets. It could also influence the level of interest rates and weigh on the strength of the dollar for years to come, analysts say.

“No less than the international perception of the credit quality of the U.S. government is at stake,” said Richard Hofmann, an analyst with CreditSights, an independent research house with offices in London and New York.

Also at stake is Americans’ future ability to gain access to credit. If foreign companies and governments abandon United States investments, home, auto and credit card loans will be much more difficult to come by.

That helps explain why Treasury Secretary Henry M. Paulson Jr. is pressing American lawmakers for the authority to inject unspecified billions in cash into either company or both. The “blank check” nature of his request has raised concerns on Capitol Hill, but Mr. Paulson is betting that Congress is even more fearful of the consequences of doing nothing to rescue Fannie and Freddie.

On Sunday, in an appearance on the television program “Face the Nation,” Mr. Paulson said he was “very optimistic that we’re going to get what we need from Congress.”

“Congress understands how important these institutions are,” Mr. Paulson said.

Asian institutions and investors hold some $800 billion in securities issued by Fannie and Freddie, the bulk of that in China and Japan. China held $376 billion and Japan $228 billion as of June 2007, the most recent country-specific Treasury figures.

In Europe, roughly $39 billion in Fannie and Freddie debt is held in Luxembourg and $33 billion more in Belgium, countries that are home to large investment management firms. Investors in Britain hold $28 billion, and Russian buyers hold $75 billion. Sovereign wealth funds in the Middle East are also believed to be big investors in Fannie and Freddie debt.

The trillions in securities issued by Fannie and Freddie and backed by American mortgages were never explicitly guaranteed by the United States government, but foreign and domestic investors alike have always believed, because of the companies’ integral role in the housing market and their marketing pitch, that the guarantee would be backed up if it were tested.

As the United States government’s debt, and the corresponding amount of Treasury securities, shrank in the late 1990s, foreign investors with currency reserves needed a safe alternative to park their cash. Fannie and Freddie stepped up their overseas marketing efforts and, with the help of Wall Street banks, sold billions of dollars in securities overseas.

Asian banks and insurers bought Fannie’s and Freddie’s paper because it gave a little more yield than a straight Treasury note — “the same risk at a better price,” said Deborah Schuler, an analyst with Moody’s Investors Service in Singapore.

Investment managers at Asian banks and central governments are “very comfortable with the idea of implied government support” because it is so prevalent in Asia, Ms. Schuler said.

Still, this week’s Congressional debate on the issue “is going to worry people,” Ms. Schuler said, though she, like most analysts, is confident that Washington will deliver, just as it has in past financial crises like the savings and loan industry bailout of the late 1980s and early 1990s.

Because America’s relations with a host of countries are intricately tied to Fannie and Freddie, the only realistic option open to lawmakers may be to hand the Treasury Department that blank check, analysts say.

The two housing agencies have always been fierce competitors, and they made no exception in their expansion into international markets. Top executives wooed governments, banks and insurance companies in Asia and Europe, and lent executives to help foreign governments, including Russia and Hong Kong, set up their own American-style mortgage markets.

Both companies often compared their product to United States Treasuries when they talked to international investors, and adjusted the way that bonds matured and were priced so they looked and acted more like Treasury bonds.

In an interview with a London financial trade paper in 1999, Jerome T. Lienhard, Freddie Mac’s senior vice president of investment funding, said, “Investors that make the transition from U.S. Treasuries to our securities will be pleased with the performance.” Freddie Mac’s program is “designed to mirror that already used by the United States government,” he said.

The Treasury will not comment on Fannie and Freddie’s international marketing pitches, but in the past it has tried to rein in the two institutions.

In March 2000, Gary Gensler, then Treasury under secretary, proposed more oversight of Fannie and Freddie, testifying to Congress that the two agencies “receive no funds from the federal government, and the government does not guarantee their securities.”

The companies “have been promoting their debt securities as an alternative market benchmark” to Treasuries, he noted, particularly as the amount of Treasuries issued by the government shrank with the deficit. Mr. Gensler’s comments roiled mortgage markets, sending prices down sharply on traded Fannie- and Freddie-backed securities and on both companies’ stock. Ultimately, the controls he proposed were softened.

The bulk of investments related to Fannie and Freddie are in the form of mortgage-backed securities, often called agency securities or agency paper. This agency paper is considered of much higher quality than securities backed by subprime loans because Fannie and Freddie generally lend to borrowers with good credit histories and require higher down payments.

Prices on senior Fannie and Freddie securities, the highest quality, have not changed significantly since the end of last year, even as the two companies’ stock prices have plummeted, Moody’s noted. As of June 30, 2008, prices on a typical Fannie or Freddie security maturing in 10 years were off only about 2 percent from December 2007.

Questions about Fannie and Freddie have prompted individual institutions and governments in Asia and Europe to specify their exposure in recent days, but so far international concern has been limited. Ingo Buse, a spokesman for Zurich Financial Services, Switzerland’s largest insurer, said it held $8.3 billion in mortgage securities backed by Freddie Mac or Fannie Mae, and felt “comfortable with our position and asset allocation.”

Swiss Reinsurance, Switzerland’s largest reinsurer, said on Wednesday that it held $9.6 billion of corporate debt from Freddie Mac and Fannie Mae and $12 billion in mortgage securities backed by the two companies. Swiss Re’s holding of Freddie Mac and Fannie Mae shares is minimal, it said.

Hannover Re, Germany’s second-largest reinsurer after Munich Re, said it held 125 million euros, or $199 million, in securities issued by Freddie Mac and Fannie Mae. “We are not worried about the exposure,” said Stefan Schulz, a spokesman for the company, “because we expect the U.S. government to step in if there is any problem.”

Julia Werdigier contributed reporting.

Leading Indicators Fell 0.1% in June

By REUTERS

Published: July 22, 2008

WASHINGTON (Reuters) — The index of leading economic indicators slipped 0.1 percent in June as expected, showing that the limping economy is still far from being on the mend, the Conference Board reported Monday.

It “wouldn’t take much to push the economy so that it’s even weaker in the second half of 2008,” said Ken Goldstein, labor economist at the private research group, in a statement.

Mr. Goldstein attributed the drop to a “deep financial crisis, a prolonged, intense slump in housing, high gasoline and food prices, weak consumer confidence and a weak dollar.”

The index’s reading for May was revised to show a 0.2 percent drop, initially reported as a 0.1 percent rise.

Economists polled by Reuters ahead of the report had anticipated that June’s index would fall 0.1 percent.

During the first six months of the year, the leading index fell 0.9 percent, the Conference Board said.

The coincident index, a measure of current conditions, rose 0.1 percent in June, following a 0.1 percent decline in May, and the lagging index dropped 0.3 percent in June, after falling 0.2 percent in May.

The index’s strength rested on increases in industrial production, personal income, and manufacturing and trade sales, according to the board.

Only one component of the seven that make up the lagging index — changes in consumer prices for services — was positive in June. Outstanding commercial and industrial loans were the largest drag on that index.

Treasury prices rise modestly ahead of Fed meeting

By MADLEN READ AP Business Writer

Article Launched: 06/23/2008 11:16:15 AM EDT

NEW YORK—Treasury prices rose moderately Monday as investors positioned themselves ahead of the Federal Reserve's interest rate decision.

The Fed is scheduled to meet Tuesday and Wednesday, and then Wednesday afternoon release its rate decision. Most market participants do not expect policy makers to alter interest rates this week, but many believe the Fed could start raising rates as soon as September, as several central bank officials have recently focused their comments on the growing threat of inflation.

"There's some difference of opinion about whether they'll be more emphatic on inflation, or take some of that tough rhetoric back," said John Spinello, bond strategist at Jefferies & Co.

As the stock market wavered in late-morning trading, the benchmark 10-year note rose 10/32 to 97 30/32, and its yield fell to 4.13 percent from 4.17 percent late Friday, according to BGCantor Market Data. Yields move in the opposite direction from prices.

The 2-year note rose 1/32 to 99 16/32 and yielded 2.88 percent, down from 2.89 percent.

The 30-year long bond rose 26/32 to 95 7/32. Its yield fell to 4.67 percent from 4.73 percent.

On Friday, Treasury prices jumped as investors fled the stock market and sought safer investments on rising concerns about high oil prices and the ailing financial and automotive sectors.

Oil prices have been creating a conundrum for bond investors, both raising the risk of inflation and dampening the economy. Inflation devalues government bonds over time, but government bonds are a popular investment during times of economic weakness.

So far, soaring commodities prices have not trickled down significantly to consumer-level prices outside of food and energy, but they could if companies reach the point where they cannot swallow the rising costs. Meanwhile, Americans have been paring back their discretionary spending to make room in their budgets for gasoline and groceries.

By late afternoon trading, crude futures were up $1.32 to $132.68 a barrel on the New York Mercantile Exchange.

Oil retreats, Saudi pledge fails to reassure market

Mon Jun 23, 2008 9:20am EDT

LONDON (Reuters) - Oil pulled back from session highs on Monday, pressured by gains in the U.S. dollar.

Earlier oil had advanced more than $2 a barrel as Saudi Arabia's promise to pump more oil if needed failed to win over a skeptical market.

A ceasefire by rebels halting attacks on facilities in the Niger delta barely tempered the rise after two new attacks over the past week knocked out another tranche of Nigerian output.

U.S. light crude for August delivery was down $1.20 at $134.16 a barrel by 1310 GMT. The market had initially fallen more than $1 and then rallied more than $2.

London Brent crude was down 91 cents at $133.95.

"The market took the opportunity to take profits earlier on Saudi Arabia's promise... but realistically that alone is not enough to calm the market," said Mark Pervan, senior commodities analyst at Australia and New Zealand (ANZ) Bank in Melbourne.

Oil prices hit a record near $140 a barrel last week and have doubled from a year ago, stoking inflation and triggering protests worldwide. A meeting of top energy policy makers in Jeddah at the weekend offered little hope for a quick fix.

Top exporter Saudi Arabia confirmed it will lift production for a second time to 9.7 million barrels per day (bpd) in July, its highest in more than 30 years, and pledged on Sunday to pump even more if the market demanded it.

It detailed plans to boost capacity to 15 million bpd when future demand warrants the investment, in a bid to soothe growing fears that the world is running out of oil, but those measures failed to allay fears in an anxious market.

"With the immediate benefit of higher Saudi production seemingly already lost, and with limited visibility on capacity expansion plans, there seems to be little here to cool prices," Citi analysts said in a note.

Analysts said the short-term supply situation was still very tight, putting tensions between Iran and Israel back in focus.

Iran said it would give a "devastating" response to any attack on the country, the latest in an ongoing war of words centered on Tehran's nuclear program.

The New York Times quoted U.S. officials last week as saying Israel had carried out a large military exercise, in an apparent rehearsal for a potential bombing of Iran's nuclear facilities.

Energy experts are concerned any conflict in Iran could lead to a shutdown of the Strait of Hormuz, a narrow waterway separating Iran from the Arabian Peninsula through which roughly 40 percent of the world's traded oil is shipped.

JEDDAH OVERSHADOWED

Sunday's emergency meeting in Jeddah infused new urgency to the ongoing dialogue of major producers and consumers, participants said, but acknowledged a lack of hard measures for taming oil's rally could leave the market underwhelmed.

"The meeting was a bit disappointing," said a European diplomat. "The only producer that came up with any concrete proposals was Saudi Arabia -- all the other producers just made bland statements about future capacity plans."

OPEC President Chakib Khelil said on Monday oil producers could not pump more without demand for extra supply, and at the moment that demand did not exist.

In the end, Jeddah was overshadowed by news from Nigeria, where militants in the southern Niger Delta announced a unilateral ceasefire on Sunday, the end of a week that saw two new attacks knock an additional 340,000 bpd offline.

(Additional reporting by Fayen Wong in Perth; editing by James Jukwey)

Gold tumbles 2.7 pct as dollar firms vs euro

Mon Jun 23, 2008 9:25am EDT

LONDON (Reuters) - Spot gold slipped almost 3 percent on Monday, dragging silver in its wake, as the firmer dollar and softer oil prices sparked a sell-off.

Gold slipped below $900 an ounce and stops were triggered, traders said, taking the precious metal down 2.7 percent to a session low of $877.00.

Spot gold was trading at $878.70/379.70 an ounce at 1315 GMT, against $901.35/902.75 in late New York trade on Friday.

Silver fell 4.6 percent to a low of $16.56, later pulling back to trade at $16.64/16.69 against $17.36/17.43.

"We had a good close on gold on Friday and all the news seemed basically supportive for oil and gold prices," said Dresdner Kleinwort's director of precious metals sales David Holmes.

"The market was ready for some good U.S. buying at the open, but that didn't materialize."

He said the scale of gold's fall suggested a bout of long liquidation in the market. Renewed strength in the dollar is likely to be denting the precious metals' appeal as an alternative investment.

The euro slid sharply against the dollar earlier on Monday after the euro zone's manufacturing and service sectors contracted.

Meanwhile the dollar is taking support from expectations the U.S. Federal Reserve will deliver a hawkish message after its rate-setting meeting this week.

(Reporting by Jan Harvey: Editing by Pratima Desai)

US STOCKS-Financial shares erase Wall St gains

Mon Jun 23, 2008 10:06am EDT

(Updates with indexes turning little changed)

NEW YORK, June 23 (Reuters) - U.S. stocks were little changed after opening up on Monday as concerns about the outlook for financial services companies punctured a recovery after Friday's market sell-off.

Rising oil prices were another headwind for the market.

The Dow Jones industrial average .DJI rose 4.39 points, or 0.04 percent, to 11,847.08. The Standard & Poor's 500 Index .SPX inched up 1.70 points, or 0.13 percent, to 1,319.63. The Nasdaq Composite Index slipped 1.78 points, or 0.07 percent, to 2,404.31. (Reporting by Ellis Mnyandu; Editing by Kenneth Barry)

Fed Seen Holding Rates Steady, Eyeing Prices

By REUTERS

Published: June 22, 2008

WASHINGTON (Reuters) - The U.S.Federal Reserve is expected to hold interest rates steady at a meeting this week and suggest it is in no rush to raise them, even as it acknowledges some troubling signs on the inflation front.

Surging oil prices and lingering financial-sector weakness are clouding some hopeful signs that the U.S. economy has weathered the worst of a credit crisis and is poised to work its way through a period of sluggishness with the help of low interest rates and the government's fiscal stimulus handouts.

While record-high oil and gasoline costs risk upsetting the Fed's forecast for slowing inflation, officials also remain concerned that the economy has yet to find solid footing.

When they announce their rate decision at the end of a two-day meeting on Wednesday, Fed policy-makers are expected to voice discomfort on the inflation front, but stop short of signaling a near-term rate increase was imminent.

"While downside risks to growth undoubtedly remain, upside risks to inflation have intensified," Global Insight economists Brian Bethune and Nigel Gault wrote in a note to clients.

TOUGHER TONE ON INFLATION

After its last meeting April 29-30, the U.S. central bank said the combined 3.25 percentage points in rate cuts put in place since mid-September, in conjunction with extraordinary measures to provide emergency liquidity to struggling financial markets, should steer the economy back to steady growth.

Top Fed officials speaking in recent weeks have portrayed an economy that looked to have skirted a deep recession even though the unemployment rate spiked to 5.5 percent in May, the highest in more than 3-1/2 years.

At the same time, the Fed's top two policy-makers, nodding to oil prices that climbed to a record above $139 a barrel in early June, took a decidedly tougher tone on inflation risks.

Higher raw materials costs have so far not pushed up the prices of other goods or wages, Fed Chairman Ben Bernanke said on June 9, but he warned that could change.

Bernanke further promised to "strongly resist" any trend of public expectations of higher inflation, while Fed Vice Chairman Donald Kohn cautioned that any rise in longer-term inflation expectations would have "troublesome" implications.

The Fed believes "core" prices that strip out volatile energy and food costs are the best measure of inflation trends, and those costs were relatively tame in May. But the central bank places great emphasis on making sure expectations of future inflation do not rise in a way that could trigger a self-perpetuating upward spiral of wages and prices.

MARKET OVERREACTION

Even so, the Fed let it be known that market assumptions that those remarks presaged a series a rate rises before year-end were premature and that at least some policy-makers continued to harbor serious worries about risks to growth.

Markets scaled back expectations of higher rates and chances that the first increase in borrowing costs could come in August, which had been priced in as a near certainty, slipped to as low as 43 percent as implied by short-term interest rate futures.

Some Fed officials, such as Dallas Federal Reserve Bank President Richard Fisher and Philadelphia Fed chief Charles Plosser, have for months expressed concern that the Fed's sharp lowering of rates risked igniting inflation.

The Fed's statement this week, and whether there are any dissents against holding rates steady in preference of raising them, will provide a clue as to how much pressure is building within the central bank to begin raising rates.

"The Fed would like to arrest the tilt higher in inflation expectations, and officials probably will continue to emphasize their commitment to price stability," Citigroup economist Lewis Alexander wrote in a note to clients.

"On balance, the timetable for tightening likely has moved forward, perhaps to the beginning of 2009, although an initial step later this autumn cannot be ruled out," he said.

(Editing by Maureen Bavdek)

Mortgage applications rise in latest week: MBA

Wed Jun 11, 2008 7:06am EDT

NEW YORK (Reuters) - Mortgage applications rose after falling for three straight weeks, bouncing back from the lowest level in more than six years and overcoming a rise in home loan rates, an industry trade group said on Wednesday.

The Mortgage Bankers Association said its seasonally adjusted mortgage application index, boosted by increased demand for both purchase and refinance loans, rose 10.9 percent to 557.1 in the June 6 week.

Thirty-year fixed home loan rates rose 0.07 percentage point to 6.24 percent, the highest since early March. A year ago the rate stood closer to 6.60 percent.

In the worst U.S. housing market since the Great Depression, some signs are emerging that deep discounts are starting to entice buyers.

Pending sales of existing homes rose in April to the highest level in six months as bargain hunters were drawn in by double-digit price drops in some regions.

Record home foreclosures are dumping additional supply to already burdensome backlogs of unsold houses, increasing choices and depressing prices for buyers that are able to get mortgages from restrictive lenders.

However, the excess of homes and prospects for mounting foreclosures impede chances of a meaningful housing recovery this year, most analysts agree.

Henry Kaufman, president of financial consulting firm Henry Kaufman & Company Inc. said U.S. home prices have slumped 12 to 17 percent from their peak in the summer of 2006 "and it wouldn't surprise me to see a further decline, to 25 percent nationally in housing prices."

"There is still significant housing inventory that has to be worked through," he said at the Reuters Investment Outlook Summit in New York on Tuesday. "This will take us into next year."

The MBA's seasonally adjusted purchase index rose 12.8 percent to 376.2, and its refinancing gauge climbed 8.4 percent to 1,622.1 in the latest week.

Taken on a four-week moving average, which smoothes out volatility, the overall applications index is down 2.8 percent, the purchase index is up 1.7 percent and the refinancing measure is down 8 percent.

A year ago, however, the purchase index stood at about 465, almost 24 percent higher than its current level.

(Reporting by Lynn Adler, editing by Walker Simon)

May retail sales rise on gasoline: SpendingPulse

Wed Jun 11, 2008 4:13am EDT

NEW YORK (Reuters) - Retail sales excluding cars improved in May, as consumers shelled out more money for gasoline at the expense of other purchases, according to a private report released on Wednesday.

Consumer spending outside of cars and gasoline fell for a second straight month in May, according to SpendingPulse, the retail data service of MasterCard Advisors, an arm of MasterCard Worldwide (MA.N:).

Retail sales less autos rose 0.6 percent last month on a seasonally adjusted basis, compared with a 0.1 percent uptick in April.

"Gasoline continued to bolster retail sales growth ... but it's taking away spending on other discretionary items," said Kamalesh Rao, director of economic research at MasterCard Advisors.

U.S. retail gasoline prices topped $4 a gallon on average for the first time last week, up from $3.67 a month ago and $3.10 a year ago, according to the American Automobile Association.

Retail sales excluding cars and gasoline fell 0.5 percent in May, following a 0.7 percent drop in April.

Moreover, "core" consumer spending -- which excludes autos, gasoline and building materials -- posted its biggest drop since February, SpendingPulse said. Core sales tend to be less volatile on a monthly basis, more indicative of overall spending trends.

Core consumer spending fell for a fourth straight month, despite expectations of a flurry of purchases from government tax rebate checks.

SpendingPulse's seasonally adjusted core retail gauge was down 0.5 percent in May, steeper than the 0.2 percent decline in April. It was down 1.0 percent in February.

Meanwhile, the U.S. government will release its own retail sales survey at 8:30 a.m. EDT on Thursday.

Economists forecast the government's overall May retail figure would show a 0.5 percent rise, rebounding from a 0.2 percent fall in April. They predicted its ex-auto reading would show a 0.7 percent increase compared with a 0.5 percent rise in April.

The SpendingPulse data are derived from the aggregate sales in the MasterCard U.S. payment network, coupled with estimates on all other payment methods including cash and check.

Oil above $133, awaits U.S. inventory data

Wed Jun 11, 2008 8:25am EDT

LONDON (Reuters) - Oil jumped more than $3 to top $133 a barrel on Wednesday after oil major BP (BP.L:) said the world's proven oil reserves were mostly unchanged last year, a further indication of tightening global oil supplies.

Prices also rose ahead of U.S. weekly oil data, which is forecast to show a drop in crude inventories later in the day.

U.S. crude leapt $3.29 to $134.60 a barrel and was trading at $133.35 by 1130 GMT. In the past two days, it had fallen by more than $7.

London Brent crude was trading $1.73 higher at

$132.75.

The world's proven oil reserves were essentially flat in 2007 while production fell by 0.2 percent, the first decline since 2002, BP reported on Wednesday, when it launched its 2008 Statistical Review of World Energy.

On Tuesday, the International Energy Agency, the energy adviser for the world's industrialized countries, sharply lowered its projection for supply outside the Organization of the Petroleum Exporting Countries.

Concern over long-term oil supplies has driven the recent spike in oil prices and prompted Wall Street banks to raise their price forecast to about $150 and $200.

"For sure, banks tend to focus on supply. It is easy for them to make assumptions of $200," Olivier Jakob with Petromatrix said. "On the other side, we have to look at price impact on demand. That's why the market is so volatile."

Oil's six-year rally has accelerated this year, with around a 40 percent increase in prices since the start of 2008. It hit a record high of nearly $140 a barrel last Friday.

The U.S. Energy Information Administration (EIA) will release weekly oil stocks data at 1435 GMT on Wednesday.

Analysts polled by Reuters forecast a 1.1 million barrel drop in crude inventories, the fourth straight week of draws.

Gasoline stocks are forecast to rise 1.2 million barrels, the second straight weekly increase, because production rose and with demand has been hurt by high pump prices.

OPEC's Secretary General Abdullah al-Badri appealed on Tuesday that the market should calm down and the group's biggest producer Saudi Arabia said it would host a meeting of oil producers and consumers on June 22 to discuss the high prices.

However, the market was skeptical that the messages from OPEC could tame prices. "There seems to be a feeling that a meeting in Saudi and even an increase in production would not halt price rise in oil," one oil broker said.

Stocks mostly fall as oil, Bernanke fuels concerns

By Nick Godt , MarketWatch

Last Update: 11:34 AM ET Jun 10, 2008

NEW YORK (MarketWatch) -- U.S. stocks were lower Tuesday, as renewed gains in crude oil prices fueled fears about the economy, and Federal Reserve Chairman Ben Bernanke revived expectations of a possible interest-rate hike to contain inflation.

"Bernanke's inflation fighting, hawkish comments are weighing," said Marc Pado, market strategist at Cantor Fitzgerald.

The Dow Jones Industrial Average ($INDU) was up 5 points, or 0.04%, at 12,285, as 12 of its 30 components rose. The Dow's financial components - AIG (AIG), Citigroup (C), and JP Morgan Chase (JPM) all advanced, providing support for the Dow.

With concerns about the credit crisis still casting doubts about financial stocks, the sector received a lift from regional bank National City (NCC) saying it reached a deal with regulators and that its required capital levels remained strong.

The S&P 500 index ($SPX) lost 4 points, or 0.3%, to 1,357, while the Nasdaq Composite (COMP) lost 17 points, or 0.7%, to 2,443.

The energy sector lost the most on the S&P, with refiners and other purchasers of crude as a raw material taking a hit from the latest oil surge. Consumer-related stocks, including technology were also under pressure.

Tech-bellwether Texas Instruments (TXN) raised the midpoint of its earnings forecast but failed to convince the market about the outlook for the chip-making industry. See full story.

Bernanke fuels rate hike fears

"The Federal Open Market Committee will strongly resist an erosion of longer-term inflation expectations, as an unanchoring of those expectations would be destabilizing from growth as well as inflation," Bernanke said in a speech Monday night. See full story.

The market has been plagued by concerns that surging oil prices will further dampen consumption, especially after a surge in the jobless rate in May rekindled concerns about the ailing U.S. economy.

After dropping sharply on Monday, crude oil futures for July delivery were recently up $2.25, or 1.7%, at $136.60 a barrel. Even "$135 crude isn't good enough," Pado said. "Under $130 might help."

At the same time, should commodities price inflation start seeping into core prices, the market fears the Fed will eventually hike interest rates.

Data points

In economic news, the U.S. trade deficit widened to $60.9 billion in April on higher prices for crude oil and other commodities, the Commerce Department reported.

Imports rose 4.5% to $216.4 billion, while exports increased 3.3% to $155.5 billion. Excluding the impact of inflation, the trade deficit slipped by 0.1% to the lowest level in nearly five years.

In the markets Monday, the Dow industrials had ended with a gain of 70 points at 12,280 -- a small rebound in the wake of Friday's nearly 400-point slide.

The dollar was higher against major global currencies as Bernanke's remarks stoked ideas that a rate hike could be in store sooner rather than later. The greenback was also lifted late Monday by comments from U.S. Treasury Secretary Henry Paulson, who said he wouldn't take the option of foreign-exchange intervention off the table. See full story.

European markets were also lower Tuesday. See Europe Markets.

Nick Godt is a MarketWatch reporter based in New York.

Inflation Worries Unsettle Global Markets

By MATTHEW SALTMARSH and KEITH BRADSHER

Published: June 11, 2008

PARIS — Fears of rising interest rates in Europe and the United States and their effect on already faltering consumption dragged stock markets lower on Wall Street on Tuesday after a sharp sell-off in Asia.

The Dow Jones industrials dropped 35 points before recovering somewhat. The broad Standard & Poor’s 500-stock index fell half a percentage point, a day after Ben S. Bernanke, the chairman of the Federal Reserve, implied that rates may move higher this year to combat a tide of rising prices.

The modest morning losses followed a similar day in the main European indexes, which remained lower Tuesday afternoon after paring earlier losses of over 1 percent.

Inflation was the word on investors’ minds this week after the price of crude oil shot. Oil was up nearly $2 a barrel on Tuesday before falling back slightly, and a series of speeches from central bankers suggested that worldwide inflation had worsened.

Adding to the anxiety was a report that expensive oil pushed American imports to a record high in April. Americans bought more fuel, and at a more expensive rate, than ever before, the Commerce Department said, widening the trade deficit and sending a signal that consumption could stumble in coming months.

The jitters reached a head overnight in the Chinese markets, which fell 8.1 percent, the biggest single-day drop in nearly 16 months.

The plunge in the Shanghai and Shenzhen markets followed an increase in Chinese bank reserve requirements, heightened worries about food and oil prices, and fears about exports to the United States.

“The mood has changed quite dramatically in the last two or three weeks,” said Roger Cursley, equity strategist at Investec, a banking group in London. “Central banks are focusing on inflation, and seemingly they have put worries about the effects of the credit crisis behind them.”

One positive development from the inflation talk was an uptick in the value of the dollar, which gained against the yen and the euro.

Mr. Bernanke said late Monday that threats to the American economy had diminished and that the central bank would “strongly resist” inflation pressure, added to the sense in the market that rates in the United States have hit a low point in this cycle.

The remarks, coupled with a signal last week from the president of the Europe Central Bank, Jean-Claude Trichet, that borrowing costs in the euro zone could rise as soon as next month, have led to fears that consumer activity will weaken further.

The expectation of higher rates, just as consumers struggle to adapt to higher oil and food prices, has led to a raft of downward revisions to growth estimates in the West from institutions like the Organization for Economic Cooperation and Development. The OECD said last week that growth among its members would slow to 1.8 percent this year and 1.7 percent next year, compared with its previous forecast of 2.3 percent in 2008 and 2.4 percent in 2009.

That in turn is lowering the expectation among analysts for earnings growth, particularly among banks, retailers, homebuilders and leisure stocks. Those stocks with more exposure to emerging markets, particularly food and tobacco stocks, and those that benefit from rising prices, like utilities, appear less vulnerable to the downturn.

In London, the FTSE 100 was down 0.99 percent to 3,576.11 points in early afternoon trading. The CAC-40 was down 0.88 percent in Paris and the broader Stoxx 600 also shed 0.6 percent, to 306.99. In Frankurt, the DAX was off 1.1 percent to 6,760,29.

Among individual stocks, ABB, the world’s largest builder of power networks, lost 2.3 percent, to 31.56 Swiss francs. Tesco, the giant British retailer, dropped 3.2 percent to 389.1 pence after higher food and energy prices curbed its revenue.

Among American stocks traded in Europe, Bank of America sank 24 cents, to $29.37 in Germany. Texas Instruments fell 57 cents, to $30.76 in Germany after predicting second-quarter sales that met analysts’ forecasts.

In Asia, Industrial and Commercial Bank, the largest Chinese lender, slumped 8.4 percent, to 5.38 yuan. Shanghai Pudong Development Bank dropped 10 percent, to 25.75 yuan.

Elsewhere in the region, the Hong Kong stock market fell 4.1 percent; the Nikkei stock market index in Tokyo dipped 1.1 percent; the South Korean market declined 2.1 percent; the Taiwanese market was down 2.5 percent and the Australian stock market fell 2.8 percent.

Stock markets in mainland China and Hong Kong had been closed on Monday as a continuation of the Dragon Boat Festival on Sunday.

Economists attributed the steepness of the Chinese market’s plunge to broader worries among investors about how far the Chinese government will go to slow the economy to prevent food and oil prices from triggering a broader rise in inflation.

Chinese markets have lost 45 percent of their value since setting a record in October during a period of feverish speculation when many small investors began buying stocks for the first time.

The People’s Bank of China, the country’s central bank, announced on Saturday that it would raise the proportion of assets that banks must hold as reserves by a full percentage point, in two equal steps on June 15 and June 25. The increase — the fifth this year — tightens monetary policy by leaving banks with less money to lend.

“People can’t see the end of inflation,” said Stephen Green, the head of China research in the Shanghai office of Standard Chartered. “People are worried about the government having to continue to tighten.”

China is scheduled to announce on Thursday its statistics for consumer price inflation in May. During trading hours on Tuesday, news wire services cited unidentified Chinese officials as saying that the inflation rate was 7.7 percent; that would represent a decline from 8.5 percent in April, but would still be well above the rate of 5 percent that Chinese officials have described as the maximum they can tolerate.

Officials at the National Bureau of Statistics in Beijing could not be reached on Tuesday evening for comment.

China depends fairly heavily on exports, which have already slowed along with growth in the American economy.

Weaker growth in the United States could further reduce demand for the Chinese electronics, clothing and other products that already crowd the shelves of American stores.

China’s current account — the broadest measure of trade in goods and services as well as remittances and overseas investment returns — reached 11.3 percent of its entire economic output last year. Together with massive currency market intervention to slow the rise of the Chinese currency against the dollar, the current account surplus was a central reason why Chinese foreign exchange reserves grew by a record $462 billion last year.

Keith Bradsher reported from Hong Kong and Matthew Saltmarsh from Paris. Michael M. Grynbaum contributed reporting from New York.

Pending Home Sales Higher in April

By THE ASSOCIATED PRESS

Published: June 9, 2008

Filed at 10:38 a.m. ET

NEW YORK (AP) -- Pending home sales unexpectedly increased in April to the highest reading since October, an industry group said Monday, but they remain more than 13 percent below a year ago.

The National Association of Realtors' seasonally adjusted index of pending sales for existing homes rose to 88.2 from a March reading of 83.0, the lowest since the index was started in 2001. The index stood at 101.5 in April 2007.

Wall Street economists polled by Thomson/IFR had predicted the index would remain steady at 83.

A reading of 100 is equal to the average level of sales activity in 2001.

The April index in the West climbed 8.3 percent from March and is 4 percent higher than a year ago. In the Midwest, the index jumped 13 percent, but is still lower than in 2007. The South posted a 4.6 percent gain, while the Northeast index declined 1.9 percent.

NAR Chief Economist Lawrence Yun noted that pending sales contracts have ticked up in areas with the largest price declines such as Detroit and Las Vegas.

''Bargain hunters have entered the market en masse,'' he said. ''Sharp price reductions are leading to a quicker discovery of price equilibrium points.''

Yun forecasts that the median price of an existing home will drop 8.4 percent in the first half of the year before stabilizing. In 2009, prices will rise 4.4 percent to $213,900, he predicts.

Existing home sales this year are expected to total 5.40 million and then increase to 5.74 million next year, Yun said.

Dollar reverses overnight losses; market eyes rates

By William L. Watts & Laura Mandaro , MarketWatch

Last Update: 11:03 AM ET Jun 9, 2008

SAN FRANCISCO (MarketWatch) -- The U.S. dollar rebounded against the euro and other currencies in North American trading Monday as traders eyed the chance of an increase in U.S. interest rates and some rosier housing market news.

The euro reversed gains in London trading and was recently buying $1.5691, down from $1.5789 in London trading and $1.5781 in late U.S. action Friday.

The dollar index, which tracks the greenback against a basket of six major currencies, rose to 72.75 compared with 72.39 Friday, strengthening further after the National Realtors Association released its April pending home sales index.

The group's index of sales contracts on previously owned U.S. homes, considered a leading indicator of existing sales, rose 6.3% in April from the prior month, the trade group reported Monday. The index tumbled 13.1% from the same month last year, however.

On the back of a run in oil prices to more than $139 a barrel on Friday, investors are particularly keyed to inflation data and the chance the Federal Reserve will raise rates to offset accelerating commodities prices - particularly if the U.S. economy manages to avoid a recession.

Futures traders are now pricing in an 88% chance the Federal Reserve will increase its federal funds target rate at a late October meeting, up from a 48% chance late Friday.

Fed chairman Ben Bernanke will speak at a conference about inflation after the market closes.

The dollar also strengthened against the Japanese yen, buying 105.99 yen, up from105.80 in overnight trading and 104.87 in late action Friday.

ECB expectations

Overnight, Europe's single currency had gained on anticipation the European Central Bank will increase its key lending rate by 75 basis points, or three-quarters of a percentage point, to 4.75% by the end of the year.

ECB President Jean-Claude Trichet last Thursday shocked financial markets by warning that the central bank could move in July to raise rates by a "small" amount in an effort to tamp down surging inflation pressures. See related story.

While Trichet said the ECB wasn't pre-committed to a move, markets brought forward expectations for a rate hike and now see potential for the ECB's key lending rate to rise by 75 basis points, or three-quarters of a percentage point, to 4.75% by the end of the year, strategists noted.

The British pound extended overnight gains against the U.S. dollar, boosted after the U.K. Office for National Statistics reported an 8.9% annual rise in output prices, the largest since current records began in 1986.

Sterling recently bought $1.974 , up from $1.9730 in London trading and $1.9701 late Friday.

The dollar gained ground at the start of last week after Federal Reserve Chairman Ben Bernanke said the Fed was concerned about the weakness of the dollar, saying its fall was contributing to inflation pressures in the United States.

But the euro recovered against the greenback on the Trichet comments and extended its move to the upside on Friday after the May U.S. employment report showed an unexpected jump in the unemployment rate to 5.5%, compared to expectations for a reading of 5.1%. See full story.

"The extremely weak reading of the U.S. household employment survey has put the [U.S. dollar] under pressure, working against the Fed's renewed enthusiasm for a stable, or even a stronger dollar," said strategists at BNP Paribas.

Renewed weakness by the dollar, meanwhile, could contribute to further rises in oil and commodity prices higher, further stoking inflation worries, the BNP Paribas strategists said.

Strategists at Commerzbank said there is a "reasonable chance" ECB officials may now seek to calm rate-hike expectations given Trichet's emphasis on prospects for a "small" rise in rates. Also, Bernanke is likely to again underline Fed worries about inflation in a speech scheduled for Tuesday, they said.

William L. Watts is a reporter for MarketWatch in London.
Laura Mandaro is a reporter for MarketWatch in San Francisco.

Dow Rebounds as Oil Prices Decline

By ABHA BHATTARAI

Published: June , 2008

Oil prices retreated in volatile trading on Monday morning, helping the Dow Jones industrial average bounce back from its big losses on Friday. But a larger-than-expected loss from Lehman Brothers added to continued concerns about credit markets.

The Dow Jones industrial average, which took its biggest hit in 15 months on Friday, was up 109.34, or 0.9 percent to 12,319.15, shortly after 11:30 a.m.

The Standard & Poor’s 500-stock index gained 0.6 percent, while the Nasdaq composite index, which opened slightly higher, was down 0.4 percent.

A record one-day surge in the price of oil on Friday, to more than $138 a barrel, helped send markets into a tailspin, with Wall Street suffering its worst losses in more than two months. The three main indexes were down 3 percent or more, with the Dow dropping almost 400 points.

Investors were keeping an eye on oil prices, which pulled back on Monday. West Texas intermediate crude for July delivery was down $3 shortly after 10 a.m., then recovered most of those losses before heading down again. At 11 a.m., it was at $136.80, down $1.74.

Traders were also watching Lehman Brothers, which announced an unexpected $2.8 billion loss and said it planned to raise $6 billion in capital. Its shares were down more than 7 percent, to $29.81, at loss of $2.48, at 11:20 a.m. They are down more than 50 percent this year.