Barchart U.S. Morning Call
Tuesday, October 06, 2009
by Barchart Research Team of Barchart.com
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Overnight Global News
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 LLC 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.
Today's Market Focus
December 10-year T-notes this morning are trading down -1.5 ticks. Dec T-note prices yesterday rallied early and then gave up their gains during the remainder of the day and closed up +1 tick. Bullish factors for T-note prices yesterday included (1) strength in the long-end (i.e., 10-year and 30-year) of the Treasury market as investors increase the duration of their Treasury holdings on speculation that the Fed will be on hold for the foreseeable future, (2) the prediction from Deutsche Bank AG that Treasury yields will continue to see "downward pressure" from currency intervention and increased foreign central bank participation in Treasury auctions, and (3) strong demand for the Treasury's $7 billion 10-year TIPS auction that saw a bid-to-cover ratio of 3.12, higher than the 2.51 bid-to-cover seen at July's TIPS auction and better than the 2.12 average seen at the past 10 TIPS auctions. Bearish factors included (1) the stronger-than-expected Sep ISM non-manufacturing index which strengthened at its fastest pace in 16 months (+2.5 to 50.9 versus expectations of +1.6 to 50.0), (2) the prediction from Calyon that US government bonds may decline as the Fed winds down its $300 billion quantitative easing program that has only has $17 billion left to be purchased for completion, (3) reduced safe-haven demand for Treasuries as the equity market rallied, and (4) the prediction from DBS Group Holdings that the US yield curve is likely to steepen rather than flatten with 10-year T-note yields rising to 4% as the Fed moves toward boosting interest rates.
The dollar index this morning is weaker and at a 1-1/2 week low with the dollar/yen -0.45 yen and the euro/dollar +0.75 cents. The dollar was undercut today by the surprise hike in interest rates by Australia's central bank. The dollar index yesterday closed lower. Bearish factors for the dollar yesterday included (1) a lack of a strong response from the Group of Seven finance ministers and central banks against recent dollar weakness at their weekend meeting in Istanbul, (2) the prediction from Goldman Sachs that the global economic backdrop remains "quite friendly" for higher-risk assets, which may reduce safe-haven demand for dollars, and (3) euro strength after the Sep Euro-Zone PMI composite index was revised upward to a 16-month high. Bullish factors included (1) weakness in the yen after Japanese Finance Minister Fujji warned "if currencies show some excessive moves in a biased direction, we will take action," hinting at BOJ intervention in the currency market if the yen continues to strengthen, (2) comments from French Finance Minister Lagarge that the recent recovery in the European economy "doesn't justify" a stronger euro, and (3) a possible increase in the safe-haven demand for dollars after JPMorgan Chase predicted that European banks will need to raise $78 billion in additional capital, $38 billion to buy back stakes owned by the government and an additional $40 billion to meet stricter capital requirements.
November crude oil prices this morning are up +77 cents a barrel and Nov gasoline is trading +1.26 cents a gallon. Nov crude oil prices yesterday shook off early losses and rallied after late morning and closed up +$0.46 a barrel. November gasoline closed up +1.30 cents a gallon. Bullish factors included (1) the strength in the equity market which fuels specualtion that energy demand will improve as the economy recovers, (2) the weaker dollar, which benefits most commodities priced in dollars, (3) the stronger-than-expected Sep ISM non-manufacturing index which signals stronger US energy consumption, and (4) the prediction from Merrill Lynch that oil prices may jump to over $100 a barrel next year as emerging market demand rises and "loose" monetary policy weakens the dollar. Bearish factors included (1) reduced concerns about global supply disruptions after Nigerian militants accepted an amnesty agreement, signaling reduced tensions in Nigeria, and Iran's acceptance of UN nuclear inspectors to its country on Oct 25, which lessens geopolitical tensions in the Middle East, and (2) the weak Aug Euro-Zone retail sales report, which points to slack energy demand in Europe.
Today's U.S. Earnings Reports:
Earnings reports (confirmed releases, sorted by mkt cap) YUM-YUM! Brands (BEST earnings consensus $0.58), PBG-Pepsi Bottling Group (1.07), CHTT-Chattem (1.21), ANGO-AngioDynamics (0.08), TESO-Tesco (-0.08).
Global Financial Calendar
| Tuesday 10/6/2009 |
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| United States |
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| 0745 ET | ICSC (Int'l Council of Shopping Centers) weekly retailer sales, previous +0.1% w/w and +0.9% weekly y/y. |
| 0855 ET | Redbook weekly retailer sales, previous +0.4% month-to-date m/m and -2.3% month-to-date y/y. |
| 1130 ET | Weekly 4-week T-bill auction. |
| 1300 ET | Treasury auctions $39 billion 3-year T-notes. |
| 1700 ET | ABC U.S. weekly consumer confidence, previous unchanged at -46. |
| 2145 ET | Kansas City Fed President Thomas Hoenig speaks at an economic forum in Denver. |
| United Kingdom |
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| 0430 ET | Aug UK industrial production expected +0.2% m/m and -8.7% y/y, Jul +0.5% m/m and -9.3% y/y. |
| 0430 ET | Aug UK manufacturing production expected +0.3% m/m and -9.3% y/y, Jul +0.9% m/m and -10.1% y/y. |
| 1901 ET | Sep UK nationwide consumer confidence expected +5 to 68, Aug +2 to 63. |
| Canada |
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| 0830 ET | Aug Canadian building permits, Jul -11.4% m/m. |
| 1000 ET | Sep Ivey purchasing managers index expected +0.9 to 56.6, Aug +3.9 to 55.7. |
Morning Quote Board
| Morning Quotes (ET) | Last | Chg | %chg | Updated |
| US Stock Futures |
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| S&P (Globex) (Z9) | 1045.80 | 9.40 | 0.91% | 07:12:42 |
| DJIA (CBOT) (Z9) | 9612 | 66 | 0.69% | 07:13:03 |
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| European Stocks |
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| Europe DJ Stoxx 50 | 2421.19 | 32.83 | 1.37% | 07:08:00 |
| London UK FTSE Index | 5106.70 | 82.37 | 1.64% | 07:08:00 |
| German Dax Index | 5602.65 | 93.80 | 1.70% | 07:08:11 |
| French CAC 40 Index | 3727.89 | 52.88 | 1.44% | 07:08:00 |
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| Asian-Pacific Stocks |
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| Japan Nikkei Index | 9692 | 17 | 0.18% | 03:00:16 |
| Hong Kong Hang Seng | 20812 | 382 | 1.87% | 04:01:30 |
| China CSI 300 Index | 3005 | 0 | 0.00% | 9/30/2009 |
| Taiwan TAIEX Index | 7536 | 98 | 1.32% | 01:46:00 |
| Australian S&P 200 | 4591.6 | 18.3 | 0.40% | 01:47:03 |
| Singapore Str. Times | 2611.89 | 28.16 | 1.09% | 05:10:01 |
| South Korea KOSPI 200 | 209.25 | -1.13 | -0.54% | 05:03:25 |
| Bombay Sensex 30 | 16959 | 92.13 | 0.55% | 06:29:57 |
| Karachi KSE-100 | 9643 | 155 | 1.64% | 05:47:05 |
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| US Interest Rates |
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| 10yr T-notes (CBT)(Z9) | #VALUE! | -0.015 | -0.04% | 07:13:07 |
| Cash 10yr T-note Price | 103.100 | -0.025 | -0.08% | 07:20:00 |
| Cash 10yr T-note Yield | 3.230 | 0.009 | 0.28% | 07:19 |
| 5yr T-note (CBT)(Z9) | 116.175 | 37.490 | -0.05% | 07:12:55 |
| Cash 5yr T-note Price | 100.220 | -0.030 | -0.09% | 07:21:01 |
| Cash 5yr T-note Yield | 2.228 | 0.020 | 0.90% | 07:20 |
| 30-yr T-bond (CBT)(Z9) | 121.67 | 0.03 | 0.08% | 07:12:45 |
| Cash 30yr T-bond Price | 108.130 | 0.010 | 0.03% | 07:21:01 |
| Cash 30yr T-bond Yield | 4.014 | -0.002 | -0.04% | 07:20 |
| Eurodollars (CME)(Z9) | 99.635 | -0.005 | -0.01% | 07:12:53 |
| Eurodollars (CME)(H0) | 99.410 | -0.005 | -0.01% | 07:11:08 |
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| Asian & European Rates |
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| 10-yr JGBs (TSE) (Z9) | 139.59 | 0.09 | 0.06% | 02:00:00 |
| EuroyenTibor(SGX)(Z9) | 99.520 | 0.005 | 0.01% | 02:37:38 |
| Bunds (Eurex) (Z9) | 122.44 | -0.26 | -0.21% | 07:07:59 |
| Euribor (Eurex) (Z9) | 99.26 | 0.00 | -0.01% | 03:31:52 |
| UK Gilts (Liffe) (Z9) | 120.38 | 0.02 | 0.02% | 07:08:11 |
| Short Stlg (Liffe) (Z9) | 99.41 | -0.01 | -0.01% | 07:06:21 |
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| Forex |
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| U.S. Dollar Index | 76.38 | -0.32 | -0.41% | 07:13:10 |
| US Dollar-Japanese Yen | 89.09 | -0.45 | -0.50% | 07:23:12 |
| EuroFX-US Dollar | 1.4722 | 0.0075 | 0.75% | 07:23:12 |
| US Dollar-Swiss Franc | 1.0262 | -0.0061 | -0.61% | 07:23:12 |
| British Pound-US$ | 1.5892 | -0.0043 | -0.43% | 07:23:12 |
| US$-Canadian Dlr | 1.0639 | -0.0058 | -0.58% | 07:23:12 |
| Yen (Globex) (Z9) | 1.1232 | 0.0055 | 0.55% | 07:13:04 |
| Euro FX (Globex) (Z9) | 1.4721 | 0.0061 | 0.42% | 07:13:08 |
| SwissFranc (Globex)(Z9) | 0.9751 | 0.005 | 0.52% | 07:13:05 |
| British Pound(Glbx)(Z9) | 1.5884 | -0.0053 | -0.33% | 07:13:07 |
| Canadian$ (Globex)(Z9) | 0.9395 | 0.0045 | 0.48% | 07:13:07 |
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| Commodities |
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| Gold (Comex) (Z9) | 1025.9 | 8.1 | 0.80% | 07:13:11 |
| Silver (Comex) (Z9) | 16.985 | 0.450 | 2.72% | 07:13:10 |
| Copper (Comex) (Z9) | 275.6 | 2.9 | 1.05% | 07:13:08 |
| Crude Oil (Nymex) (X9) | 71.18 | 0.77 | 1.09% | 07:13:11 |
| Gasoline (Nymex) (X9) | 176.65 | 1.26 | 0.72% | 06:57:10 |
| Heating Oil(Nymex) (X9) | 181.15 | 1.99 | 1.11% | 07:12:27 |
| NaturalGas(Nymex)(X9) | 5.045 | 0.058 | 1.16% | 07:13:09 |
| Corn (CBOT) (Z9) | 348.00 | 6.50 | 1.90% | 07:13:02 |
| Soybeans (CBOT) (X9) | 893.25 | 8.25 | 0.93% | 07:12:07 |
| Wheat (CBOT) (Z9) | 449.75 | 7.00 | 1.58% | 07:05:25 |
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About the author
Get Barchart U.S. Morning Call delivered to your email inbox! Sign up for free here. Barchart U.S. Morning Call is written by the experienced members of the Commodity Research Bureau and the Barchart Research Team. Commodity Research Bureau (CRB) has been providing research to the financial and commodity community since 1934. If you have any questions for our analysts, please contact us at support@crbtrader.com. Sent every morning, "Morning Call" summarizes overnight global market news, along with a U.S. market forecast for the day ahead. It Includes upcoming earnings reports, a global financial calendar, and quote board overview of where the markets are standing.
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