Barchart Morning Call

Overnight Developments

  • Sep E-mini S&Ps are down -0.47% on today's -0.97% sell-off in European stocks, Germany's mildly disappointing unemployment report, and nervousness ahead of the 2-day EU summit that begins today. Commodity prices are mixed this morning with crude oil down -0.31%, gold down -0.65%, copper down -0.57%, and agricultural prices mixed. The dollar index is up +0.15% while EUR/USD is down -0.31%. Sep 10-year T-note prices are up 7.5 ticks.
  • Asian stocks closed mixed today as a better-than-expected Japan retail sales report was offset by nervousness ahead of the EU summit: Japan +1.65%, Hong Kong -0.79%, China -0.88%, Taiwan -0.19%, Australia +0.04%, Singapore +0.18%, South Korea +0.05%, India +0.14%, Turkey -0.52%.
  • JP Morgan is down almost 5% in European trading this morning after the New York Times reported that the bank's loss from its credit derivatives trade may be as much as $9 billion, more than four times higher than the bank's initial announcement of a $2 billion loss. The report said JP Morgan has closed out about half the trade so far.
  • Peripheral European bond yields this morning are higher on the poor German unemployment report and on trepidation ahead of the 2-day EU summit that begins today. The Spanish 10-year bond yield today briefly breached the 7.0% mark and hit an intraday high of 7.013% but has since fallen back to 6.985%, which is up 6 bp from Wednesday's close. The Italian 10-year yield is up 2.5 bp at 6.20%. Italy today sold 5.42 billion euros of 5 and 10 year bonds, which was close to its target of 5.5 billion euros.
  • The 2-day EU summit begins today with low expectations since Ms. Merkel in recent days has reiterated her strong opposition to measures such as joint euro bonds, using the ESM to buy sovereign bonds, allowing the ESM to provide bailout funds directly to banks, or joint liability on a pan-European deposit insurance scheme. Ms. Merkel Friday night needs to return quickly to Berlin for a vote in the Bundestag to approve the ESM and the fiscal pact. One question that is still open is whether the bailout loan to Spain's banks will have a senior claim compared with private bond holders of Spain's debt. The markets will be pleased if the bailout fund does not have a senior claim.
  • Germany's June unemployment rate of 6.8% was higher than market expectations of 6.7% and was unchanged from May's revised 6.8% (preliminary was 6.7%). The unemployment change was +7,000, slightly worse than expectations of +3,000.
  • Europe's confidence indicators this morning were slightly worse than expected on balance. The June business climate indicator fell to -0.94 from a revised -0.79 in May and was weaker than market expectations of -0.87. June Eurozone consumer confidence fell to -19.8 from -19.6 in May and was weaker than market expectations of unchanged. June Eurozone confidence fell to 89.9 from May's revised 90.5 and was slightly better than expectations of 89.6.
  • UK June nationwide house prices fell -0.6% m/m and -1.5% y/y, which was worse than market expectations of +0.1% m/m and -0.6% y/y.
  • Japan's May retail trade report of +0.7% m/m and +3.6% y/y was stronger than market expectations of +0.2% m/m and +2.9% y/y. May large retailer sales fell -0.9%, which was slightly better than market expectations for a drop of -1.0%. Market Comments
    • Sep E-mini S&Ps this morning are trading down -6.25 points (-0.47%) on today's disappointing German unemployment and Eurozone confidence reports and on nervousness ahead of the 2-day EU Summit that begins today. The US stock market on Wednesday closed solidly higher: S&P 500 +0.90%, Dow Jones +0.74%, Nasdaq 100 +0.62%. Stocks rose on Wednesday on improved sentiment about the U.S. economy after May pending home sales rose sharply by 5.9% and May durable goods showed an increase of +1.1% that was stronger than market expectations of +0.5%. The market was also boosted by two Chinese newspaper reports that speculated that further growth measures will be forthcoming from the Chinese government.
    • Sep 10-year T-notes this morning are up 7.5 ticks ahead of the EU Summit. The T-note market is looking ahead to today's sale of $29 billion in 7-year T-notes to wrap up this week's $99 billion T-note package. Sep 10-year T-note prices on Wednesday closed slightly higher: TYU2 +3.5, FVU2 +1.5. T-note prices closed higher on some last-minute safe-haven demand ahead of the 2-day EU summit that begins today and shook-off the bearish factors of strong U.S. economic data and supply overhang with this week's $99 billion T-note package.
    • The dollar index this morning is up +0.12 points (+0.15%) ahead of today's EU Summit. EUR/USD is down -0.00039 (-0.31%) on the disappointing German unemployment and Eurozone confidence reports and on low expectations for the 2-day EU Summit that begins today. USD/JPY is down -0.32 (-0.40%) this morning with the yen seeing some strength due to the stronger-than-expected Japanese retail sales report. The dollar index on Wednesday closed mildly higher: Dollar Index +0.25 (+0.30%), EUR/USD -0.0023 (-0.18%), USD/JPY +0.20 (+0.25%). The dollar index moved mildly higher on Wednesday on the stronger than expected U.S. economic data and on some safe-haven demand ahead of the 2-day EU summit that begins today. Market expectations are very low for the summit, although Eurozone leaders may at least try to salvage the meeting by announcing some longer-term plan to move toward fiscal and banking union.
    • Aug WTI crude oil prices this morning are down -0.25 (-0.31%) and Aug gasoline is down -0.0109 (-0.44%) due to lower U.S. and European stocks and nervousness about the EU Summit. Crude oil and gasoline prices on Wednesday closed higher: CLQ2 +0.85 (+1.07%), RBQ2 -0.0240 (-0.95%). Bullish factors on Wednesday included (1) the stronger-than-expected U.S. pending home sales report and durable goods report, and (2) the fourth day of an oil worker strike on Norwegian oil platforms in the North Sea that has cut production by about 240,000 barrels per day. The market was able to shake off bearish factors including (1) the quick ramp-up in Gulf of Mexico production back to near-normal levels after Tropical Storm Debby earlier reduced about one-quarter of Gulf production, and (2) the weekly DOE report that was bearish for crude oil and gasoline. The weekly DOE report showed that crude oil inventories fell -133,000 bbl (vs expectations of -1.0 mln), gasoline inventories rose +2.078 mln bbls (versus expectations of +1.0 mln), and distillate inventories fell -2.279 mln bbls (vs expectations of +1.25 mln. The refinery utilization rate soared to a new 5-year high of 92.6%.
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      Global Financial Calendar

      Thursday 6/28/12
      United States
      0830 ET Weekly initial unemployment claims expected -2,000 to 385,000, previous -2,000 to 387,000. Weekly continuing claims expected -21,000 to 3.278 mln, previous unchanged at 3.299 mln.
      0830 ET Q1 GDP expected unrevised at +1.9%. Q1 personal consumption expected unrevised at +2.7%. Q1 GDP price index expected unrevised at +1.7%. Q1 core PCE expected unrevised at +2.1%.
      0830 ET USDA weekly exports.
      1030 ET DOE natural gas storage.
      1100 ET June Kansas City Fed manufacturing index expected 4, May 9.
      1130 ET Fed's Pianalto speaks in Cleveland.
      1300 ET Treasury sells $29 billion in 7-year T-notes.
      1630 ET Weekly money supply report and Fed balance sheet.
      n/a 2-day EU Summit begins to discuss further integration measures.
      0500 ET June Eurozone June business climate indicator expected -0.87, May -0.77. June Eurozone economic confidence expected 89.6, May 90.6. June Eurozone industrial confidence expected -12, May -11.3. June Eurozone services confidence expected -6, May -4.9.
      0355 ET German Jun unemployment rate expected unchanged at 6.7%, May 6.7%. June unemployment change expected +3,000, May unchanged.
      United Kingdom
      0200 ET UK Jun nationwide house prices expected +0.1% m/m and -0.6% y/y, May +0.3% m/m and -0.7% y/y.
      0430 ET UK final Q1 GDP expected unrevised from -0.3% q/q and -0.1% y/y.
      0430 ET UK current account balance expected -9.0 bln pounds, previous -8.5 bln pounds.
      0430 ET UK final Q1 total business investment expected +3.6% q/q and +14.2% y/y, previous +10.8% q/q and +22.2% y/y.
      1901 ET UK June GfK consumer confidence survey, May -29.
      1930 ET Japan May jobless rate expected 4.5%, Apr 4.6%. May job-to-applicant ratio expected 0.80, Apr 0.79.
      1930 ET Japan May overall household spending expected +2.5% y/y, Apr +2.6% y/y.
      1930 ET Japan May national CPI expected +0.2% y/y, Apr +0.4% y/y. May national CPI ex-fresh food expected unchanged y/y, Apr +0.2% y/y. May national CPI ex food and energy expected -0.6% y/y, Apr -0.3% y/y.
      1930 ET June Tokyo CPI expected -0.5% y/y, May -0.5% y/y. June Tokyo CPI ex-fresh food expected -0.7% y/y, May -0.8% y/y. June Tokyo ex-food and energy expected -1.2% y/y, May -1.3% y/y.
      1950 ET Japan May industrial production expected -2.8% m/m and +6.6% y/y, Apr -0.2% m/m and +12.9% y/y.
      2130 ET China May industrial profits, Apr -1.6% y/y.
      2135 ET China MNI June business condition survey. provides Financial Quotes, Charts and Technical Analysis for Stock and Commodity Traders.


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