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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.
Overnight U.S. Stock News
- Sep S&Ps this morning are trading up +3.70 points. The US stock market yesterday moved lower after mid-morning and recovered most of its losses into the close and finished mixed (Dow Jones -0.07%, S&P 500 +0.12%, Nasdaq Composite -0.03%). Bearish factors included (1) carry-over weakness from a tumble in Asian stock markets after China’s Q2 GDP expanded less than expected (10.3% y/y versus expectations of 10.5% y/y), (2) concerns that the slowdown in US manufacturing this month may not sustain corporate profit growth after the July Empire manufacturing index fell to a 7-month low (-14.5 to 5.1) and the July Philadelphia Fed manufacturing index unexpectedly declined to its lowest level in 11 months (-2.9 to 5.1 versus expectations of +2.0 to 10.0), (3) the report from RealtyTrac that showed a record 269,962 US homes seized by banks in Q2, up +5% q/q and +38% y/y, as banks processed a backlog of US homes in foreclosure, and (4) the monthly bulletin from the ECB that predicts the global economic recovery will be dampened by fiscal consolidation and deficit cutting.
- Bullish factors included (1) the larger-than-expected decline in weekly initial unemployment claims which fell to their lowest level in 1-3/4 years (-29,000 to 429,000 versus expectations of -9,000 to 445,000), (2) slack inflation pressures after producer prices declined for the third straight month in June (June PPI -0.5% m/m and +2.8% y/y versus expectations of -0.1% m/m and +3.1% y/y), and (3) the unexpected increase in June industrial production which has now risen for 12 consecutive months (+0.1% versus expectations of a 0.1% decline).
- Google (GOOG) fell 4.7% in pre-market trading 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.
- Goldman Sachs (GS) rallied 5.9% in pre-market trading after the company agreed to pay $550 million to settle with US regulators that it misled investors in collateralized debt obligations linked to subprime mortgages.
Today’s Market Focus
- September 10-year T-notes this morning are trading down -3.5 ticks. T-note prices yesterday traded weaker into mid-morning and then moved higher the rest of the day and settled up +17.5 ticks at 122-250. The 10-year T-note yield slipped to a 1-week low of 2.96%. Bullish factors included (1) the weaker-than-expected July Empire manufacturing index which fell to its lowest level this year (-14.5 to 5.1 versus expectations of -1.6 to 18.0), (2) the weaker-than-expected Jun PPI (-0.5% m/m and +2.8% y/y versus expectations of -0.1% m/m and +3.1% y/y), (3) the unexpected decline in the July Philadelphia Fed manufacturing index which fell to its lowest level in 11 months (-2.9 to 5.1 versus expectations of +2.0 to 10.0), and (4) the prediction from Sumitomo Life Insurance that the 10-year T-note yield will fall to 2.75% by year-end as optimism that company earnings will accelerate in the US tapers off. Bearish factors included (1) the larger-than-expected decline in weekly initial unemployment claims, which fell to their lowest level in 1-3/4 years (-29,000 to 429,000 versus expectations of -9,000 to 445,000), and (2) the unexpected increase in June industrial production, which has now risen for 12 consecutive months (+0.1% versus expectations of a 0.1% decline).
- The dollar index this morning is weaker and trading at a 2-1/4 month low with the dollar/yen -0.27 yen and the euro/dollar +0.36 cents. The dollar index yesterday fell to a 2-1/4 month low and closed sharply lower. Bearish factors included (1) the rally in the euro to a 2-month high against the dollar after strong demand at Spain’s government bond sale eased concern that Euro-Zone nations won’t be able to fund their deficits, (2) the weaker-than-expected July Empire and July Philadelphia Fed manufacturing indexes, which signals a slowdown in the US economy, and (3) the prediction from Goldman Sachs that the euro will gain to $1.35 against the dollar and the yen will rally to 83 per dollar within 6 months as US economic growth slows. Bullish factors included (1) the prediction from Bank of Tokyo-Mitsubishi that the euro will be unable to rally past $1.30 per dollar as the weaker-than-expected Q2 China GDP points to a global slowdown in the second half of the year, and (2) increased safe-haven demand for the dollar after the stock market retreated.
- August crude oil prices this morning are up +12 cents and August gasoline is +0.42 of a cent. Aug crude oil prices yesterday moved lower and closed down -$0.42 per barrel. Aug gasoline closed lower by -0.58 of a cent per gallon. Bearish factors included (1) the weaker-than-expected July Empire and July Philadelphia Fed manufacturing indexes, which bolsters concern that the US economy will slow and reduce oil demand, (2) the smaller-than-expected expansion in China’s Q2 GDP, which points to a deceleration of the Chinese economy that may curb energy demand in the world’s second-largest crude oil consumer, and (3) the report from OPEC that said its compliance with self-imposed production cuts slipped to 52% in Jun from 54% in May, as relatively high crude prices enticed cartel members to cheat on their quotas and overproduce. Bullish factors included (1) the slide in the dollar index to a 2-1/4 month low, which boosts investment demand for commodities, and (2) the larger-than-expected decline in weekly initial US unemployment claims that fell to their lowest level in 1-3/4 years and may lead to an improvement in the economy and energy demand.
Today’s U.S. Earnings Reports
Earnings reports (confirmed releases, sorted by mkt cap) GE-General Electric (BEST earnings consensus $0.27), BAC-Bank of America (0.23), C-Citigroup (0.05), SCHW-Charles Scwab (0.15), COL-Rockwell Collins (0.88), MAT-Mattel (0.15), GPC-Genuine Parts (0.71), GCI-Gannett (0.54), FHN-First Horizon National (-0.09), WBS-Webster Financial (0.06), VIVO-Meridian Bioscience (0.18), KNL-Knoll (0.11).
Global Financial Calendar
| Friday, 7/16/10 | |
|---|---|
| United States | |
| 0830 ET | Jun CPI expected -0.1% m/m and +1.2% y/y, May -0.2% m/m and +2.0% y/y. Jun CPI ex food and energy expected +0.1% m/m and +0.9% y/y, May +0.1% m/m and +0.9% y/y. |
| 0900 ET | May net long-term TIC flows expected +$30.0 billion, Apr +$83.0 billion. |
| 0955 ET | Preliminary Jul U.S. University of Michigan consumer confidence expected -2.0 to 74.0, Jun +2.4 to 76.0. |
| Japan | |
| 0130 ET | Jun Japan nationwide department store sales, May -2.1% y/y. |
| Euro-Zone | |
| 0500 ET | May Euro-Zone trade balance expected -0.5 billion euros, Apr +1.8 billion euros. |
| Canada | |
| 0830 ET | Jun Canadian leading indicators expected +0.7% m/m, May +0.9% m/m. |
Morning Quote Board
| Morning Quotes (ET) | Last | Chg | %chg | Updated |
| US Stock Futures | ||||
|---|---|---|---|---|
| S&P (Globex) (U0) | 1094.10 | 3.70 | 0.34% | 07:17:03 |
| DJIA (CBOT) (U0) | 10311 | 19 | 0.18% | 07:16:50 |
| European Stocks | ||||
| Europe DJ Stoxx 50 | 2464.35 | 8.22 | 0.33% | 07:12:30 |
| London UK FTSE Index | 5267.13 | 55.84 | 1.07% | 07:12:40 |
| German Dax Index | 6198.56 | 49.20 | 0.80% | 07:12:38 |
| French CAC 40 Index | 3608.85 | 27.03 | 0.75% | 07:12:30 |
| Asian-Pacific Stocks | ||||
| Japan Nikkei Index | 9408 | -277 | -2.86% | 02:29:01 |
| Hong Kong Hang Seng | 20250 | -5 | -0.03% | 04:01:30 |
| China CSI 300 Index | 2616 | 8 | 0.29% | 03:01:32 |
| Taiwan TAIEX Index | 7665 | -40 | -0.52% | 01:46:01 |
| Australian S&P 200 | 4422.7 | -19.9 | -0.45% | 02:39:19 |
| Singapore Str. Times | 2957.72 | 14.17 | 0.48% | 05:10:01 |
| South Korea KOSPI 200 | 226.34 | -2.05 | -0.90% | 05:03:29 |
| Bombay Sensex 30 | 17956 | 46.36 | 0.26% | 06:29:58 |
| Karachi KSE-100 | 10159 | 63 | 0.63% | 07:07:25 |
| US Interest Rates | ||||
| 10yr T-notes (CBT)(U0) | 122.215 | -0.035 | -0.09% | 07:16:57 |
| Cash 10yr T-note Price | 104.095 | 0.005 | 0.01% | 07:27:31 |
| Cash 10yr T-note Yield | 2.992 | -0.002 | -0.07% | 07:27 |
| 5yr T-note (CBT)(U0) | 118.255 | -0.015 | -0.03% | 07:16:46 |
| Cash 5yr T-note Price | 100.185 | 0.005 | 0.02% | 07:26:01 |
| Cash 5yr T-note Yield | 1.752 | -0.004 | -0.20% | 07:25 |
| 30-yr T-bond (CBT)(U0) | 127.15 | -0.06 | -0.15% | 07:16:49 |
| Cash 30yr T-bond Price | 106.210 | -0.030 | -0.09% | 07:27:31 |
| Cash 30yr T-bond Yield | 3.991 | 0.005 | 0.13% | 07:27 |
| Eurodollars (CME)(U0) | 99.475 | 0.025 | 0.03% | 07:17:15 |
| Eurodollars (CME)(Z0) | 99.420 | 0.020 | 0.02% | 07:17:36 |
| Asian & European Rates | ||||
| 10-yr JGBs (TSE) (U0) | 141.66 | -0.07 | -0.05% | 02:00:00 |
| EuroyenTibor(SGX)(U0) | 99.653 | 0.002 | 0.00% | 07:07:21 |
| Bunds (Eurex) (U0) | 128.56 | -0.24 | -0.19% | 07:12:35 |
| Euribor (Eurex) (U0) | 98.96 | -0.03 | -0.03% | 06:02:33 |
| UK Gilts (Liffe) (U0) | 120.92 | 0.01 | 0.01% | 07:12:37 |
| Short Stlg (Liffe) U0) | 99.20 | -0.01 | -0.01% | 06:58:38 |
| Forex | ||||
| U.S. Dollar Index | 82.25 | -0.12 | -0.15% | 07:17:35 |
| US Dollar-Japanese Yen | 87.13 | -0.27 | -0.31% | 07:27:38 |
| EuroFX-US Dollar | 1.2987 | 0.0036 | 0.36% | 07:27:39 |
| US Dollar-Swiss Franc | 1.0435 | 0.0025 | 0.25% | 07:27:39 |
| British Pound-US$ | 1.5377 | -0.0085 | -0.85% | 07:27:39 |
| US$-Canadian Dlr | 1.0420 | 0.0037 | 0.37% | 07:27:39 |
| Yen (Globex) (U0) | 1.1485 | 0.0044 | 0.44% | 07:17:24 |
| Euro FX (Globex) (U0) | 1.2977 | 0.0082 | 0.64% | 07:17:37 |
| SwissFranc (Globex)(U0) | 0.9589 | 0 | 0.00% | 07:17:27 |
| British Pound(Glbx)(U0) | 1.5376 | -0.0033 | -0.21% | 07:17:25 |
| Canadian$ (Globex)(U0) | 0.9593 | -0.0035 | -0.36% | 07:17:37 |
| Commodities | ||||
| Gold (Comex) (Q0) | 1206.4 | -1.9 | -0.16% | 07:17:39 |
| Silver (Comex) (U0) | 18.280 | -0.082 | -0.45% | 07:17:30 |
| Copper (Comex) (U0) | 301.8 | 0.6 | 0.18% | 07:16:31 |
| Crude Oil (Nymex) (Q0) | 76.74 | 0.12 | 0.16% | 07:17:36 |
| Gasoline (Nymex) (Q0) | 206.49 | 0.42 | 0.20% | 07:07:56 |
| Heating Oil(Nymex) (Q0) | 202.37 | 0.54 | 0.27% | 07:16:34 |
| NaturalGas(Nymex)(Q0) | 4.599 | 0.013 | 0.28% | 07:17:22 |
| Corn (CBOT) (Z0) | 407.00 | 1.75 | 0.43% | 07:16:48 |
| Soybeans (CBOT) (X0) | 989.75 | 1.75 | 0.18% | 07:17:08 |
| Wheat (CBOT) (Z0) | 617.00 | -7.50 | -1.20% | 07:17:35 |
