Barchart.com Morning Call for Monday, July 2, 2012
- Sep E-mini S&Ps are trading slightly higher by +2.00 points (+0.15%) on support from the 1.10% rally in European stocks and on generally stronger-than-expected global economic data overnight and over the weekend. Commodities are mixed with Aug crude oil down -1.55%, Aug gold down -0.83%, and Sep copper down -0.96%, but with agricultural prices trading higher. The dollar index is mildly higher by +0.15% and EUR/USD is down -0.33% on technical bounces after last Friday’s sharp moves. Sep 10-year T-notes are up 3 ticks.
- The Euro Stoxx 50 index this morning is up +1.10% as Spanish and Italian yields today continued to drop. Germany’s DAX is up +1.14% and the French CAC40 is up 1.20%, while Italy’s MIB is up +0.32% and Spain’s IBEX 35 is up just +0.01%. Barclays Plc is up 5.1% today after Chairman Marcus Agius resigned over the weekend to take responsibility for last week’s record 290 billion pound fine for alleged price-fixing by former Barclays traders in the Libor market. Asian stocks today closed mixed: Japan -0.04%, China +0.15%, Taiwan +0.67%, Australia +0.94%, Singapore +1.12%, South Korea -0.18%, India -0.18%, Turkey -0.34%.
- The Spain 10-year bond yield today fell by another 7 bp to 6.22%, adding to last Friday’s 61 bp plunge to 6.29. The Italian 10-year bond yield today fell by another 9 bp to 5.72%, adding to last Friday’s 38 bp drop to 5.81%.
- China’s June manufacturing index from the National Bureau of Statistics and China Federation of Logistics and Purchasing, which was released on Saturday, fell by 0.2 points to 50.2 from 50.4 in May, which was stronger than market expectations for a decline to 49.9. The June HSBC/Markit June manufacturing PMI for China on Sunday night was revised higher to 48.2 from the preliminary report of 48.1, which left it down by 0.2 points from 48.4 in May.
- Japan’s June Tankan report on Sunday night for large manufacturers was bullish with a report of -1 versus expectations of -4 and March’s report of -4. The report indicated that Japan’s large manufacturers became less pessimism due to lower commodity prices and the prospects for higher profits. The Tankan non-manufacturing index rose to 8 from 5 in Q1, which was stronger than market expectations of 7.
- UK June manufacturing PMI rose by 2.7 points to 48.6, which was stronger than market expectations of a 0.6 point increase to 46.5.
- Germany’s June final manufacturing PMI was revised higher by 0.3 points to 45.0 from the preliminary report of 44.7, which was stronger than market expectations for an unrevised report. The Eurozone June final manufacturing PMI was revised higher to 45.1 from 44.8, which was stronger than market expectations for an unrevised report.
- Eurozone May unemployment rate rose by 0.1 point to a record high 11.1% from 11.0% in April, which was in line with market expectations.
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- Sep E-mini S&Ps this morning are trading +2.00 points (+0.15%) on support from today’s +1.10% rally in European stocks and generally stronger-than-expected global economic data such as the Chinese manufacturing PMI reports, the Japanese Tankan report, and the upward revision in the German and Eurozone manufacturing PMI reports. The US stock market on Friday closed sharply higher: S&P 500 +2.49%, Dow Jones +2.20%, Nasdaq 100 +3.12%. The US stock market was very encouraged by the outcome of the 2-day EU summit at which Eurozone leaders agreed to drop the seniority of bailout facilities in sovereign debt restructurings, which will help attract bond investors back into Spanish debt and allow Spain to more easily pull of its attempt to get a 100 billion euro bailout for its banks but continue to finance its government budget deficit in the private bond markets. Eurozone officials also agreed to move towards a single European bank supervision system and then allow the ESM bailout facility to directly provide bailouts to banks, thus alleviating the current system of making the loan to the government and further impairing its credit rating. Spanish and Italian bond yields dropped sharply on Friday, indicating a substantial easing of the European debt crisis, which has recently been the main factor holding back the U.S. economy.
- Sep 10-year T-notes this morning are up 3 ticks on a technical bounce after last Friday’s plunge. Sep 10-year T-note prices on Friday fell sharply: TYU2 -17.5, FVU2 -6.75. T-note prices fell on reduced safe-haven demand with the sharp rally in the stocks and the substantial progress that Eurozone officials made towards alleviating the European debt crisis.
- The dollar index this morning is up +0.12 points (+0.15%) and EUR/USD is down -0.0042 (-0.33%) on technical bounces after last Friday’s sharp moves. USD/JPY is down -0.10 points (-0.13%). The dollar index on Friday rallied very sharply: Dollar index -1.18 (-1.43%), EUR/USD +0.0223 (+1.79%), USD/JPY +0.33 (+0.42%). The dollar index fell on reduced safe-haven demand and EUR/USD rallied sharply with the agreement of Eurozone leaders to break the death between banks and sovereign governments in Europe and to make ease the path for the bailout of the Spanish banking system.
- Aug WTI crude oil prices this morning are down -1.32 (-1.55%) and Aug gasoline is down 0.0422 (-1.60%) on some long liquidation pressure after last Friday’s sharp rallies. The strike by Norwegian oil workers entered its second week and no talks are scheduled between the unions and industry representatives. Crude oil and gasoline prices on Friday closed with an extraordinarily sharp rally: CLQ2 +7.27 (+9.36%), RBQ2 +0.1545 (+6.24%). Crude oil prices rallied on the Eurozone summit outcome and a huge bout of short-covering on hopes that improved global economic growth will revive fuel demand. Oil prices also rallied on the week-long strike by Norwegian oil workers that has cut Norwegian oil production by about 15%. In addition, the U.S. financial sanctions on overseas banks that facilitate Iranian oil transactions went into effect last Thursday and the European embargo on Iranian oil went into effect this past Sunday (July 1). Iran late last week issued another bellicose statement that it will never give up its inalienable right to uranium enrichment. The market is looking ahead to Tuesday’s meeting between the world powers and Iran about its nuclear program. That meeting was downgraded to the technical level because of the lack of any progress at the first three rounds of meetings.
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Today’s U.S. Earnings Reports
Earnings reports (sorted by mkt cap): CZZ-Cosan (consensus $0.14), AYI-Acuity Brands (0.79).
Global Financial Calendar
| Monday 7/2/12 | |
|---|---|
| United States | |
| 1000 ET | June ISM manufacturing index expected -1.5 to 52.0, May -1.3 to 53.5. May ISM prices-paid sub-index expected -1.8 to 45.7, May -13.5 to 47.5. |
| 1000 ET | May construction spending expected +0.2%, Apr +0.3% m/m. |
| 1100 ET | USDA weekly grain export inspections. |
| 1130 ET | Weekly 3-mo and 6-mo T-bill auctions. |
| 1315 ET | Fed’s Williams speaks in San Francisco. |
| 1600 ET | USDA Crop Progress. |
| Japan | |
| 0100 ET | Japan June vehicle sales, May +66.3% y/y. |
| 1950 ET | Japan June monetary base. |
| 2130 ET | Japan May labor cash earnings, Apr +0.2% y/y. |
| CHI | |
| 2100 ET | China June non-manufacturing PMI, May 55.2. |
| Germany | |
| 0355 ET | German June final manufacturing PMI expected unrevised from preliminary of 44.7. |
| Euro-Zone | |
| 0400 ET | Eurozone June final manufacturing PMI expected unrevised from preliminary 44.8. |
| 0500 ET | Eurozone May unemployment rate expected +0.1 to 11.1%, April 11.0%. |
| United Kingdom | |
| 0430 ET | UK June final manufacturing PMI expected 46.5 vs preliminary 45.9. |
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