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 po ssible 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. Overnight U.S. Stock News
June S&Ps this morning are trading down -13.80 points on some give back from yesterday's sharp gains. The US stock market yesterday opened sharply higher and maintained its sharp gains the rest of the day (Dow Jones +3.90, S&P 500 +4.40%, Nasdaq Composite +4.81%). Bullish factors included (1) carry-over support from a surge in European equity markets after European leaders unveiled a $960 billion loan plan to end the region's sovereign-debt crisis and after the ECB said it will counter "severe tensions" in "certain" markets by purchasing government and private debt, (2) the action by the Fed in restarting its emergency credit-swaps program by providing as many dollars as needed to central banks in Europe, the UK and Switzerland, which should help prevent another liquidity crunch, (3) the report from the Conference Board that its April Employment Trends Index rose +0.8 to 94.7, its highest level in 16 months and another sign of strength i n the labor market, (4) a rally in homebuilders after billionaire investor John Paulson predicted a 3 to 5% gain in the US housing market in 2010 and an 8 to 12% increase in 2011, and (5) strength in raw-materials and energy producers after a plunge in the dollar prompted a rally in commodities.
Bearish factors included (1) the fall in stock prices from their highs after the euro weakened from its best levels on concern that the nearly $1 trillion aid package won't end Europe's fiscal crisis, and (2) the 11 bp surge in the yield on the 10-year T-note, which increases the cost of capital for businesses and consumers.
Alcoa (AA) slid 2.5% in European trading as metals prices declined when China reported its inflation accelerated, bank lending exceeded estimates and property prices jumped by a record, which increases pressure on the government to hike interest rates that could slow demand for commodities. Today's Market Focus
June 10-year T-notes this morning are trading up +18.5 ticks. T-note prices yesterday moved sharply lower and settled down -24 ticks at 118-300. Bearish factors included (1) the announcement by European leaders of a $960 billion loan package to end the region's sovereign-debt crisis which sent global stock markets soaring and reduced the safe-haven demand for Treasuries, (2) the prediction from Royal Bank of Scotland Group Plc that "we are in the beginning phase of a 1-2 week correction that will push the yield on the 10-year T-note up toward 3.70%," and (3) supply pressures ahead of the May quarterly refunding that starts with Tuesday's $38 billion 3-year T-note auction. Bullish factors included (1) the prediction from FTN Financial that due to the back-up in yields from the sharp rally in the equity market, that this week's $78 billion of bonds and notes in the May refunding should see strong demand, and (2) comments from Philadelphia Fed President Plo sser who said that he believes the US economic recovery will be "more of a tepid" rebound rather than V-shaped, which may signal he sees no need to raise interest rates anytime soon.
The dollar index this morning is stronger with the dollar/yen -0.92 yen and the euro/dollar -1.11 cents. The dollar index yesterday sank and closed lower. Bearish factors included (1) strength in the euro after European policy makers announced a loan plan of nearly $1 trillion to aid Euro-Zone debt-laden governments and shore up the euro, (2) reduced safe-haven demand for the dollar after the 3-month dollar Libor rate fell when the Fed announced that it would restart emergency credit-swaps by providing as many dollars as needed to central banks and private banks in Europe, the UK and Switzerland, and (3) the prediction from Goldman Sachs that the EU's loan package will halve the extra yield demanded to hold Portuguese, Spanish and Italian 2-year notes and will also send the euro toward $1.35. Bullish factors included (1) the action by the ECB to resort to a form of quantitative easing by purchasing government bonds to support the euro, which may have long-term negativ e ramifications for the euro on concern that the ECB's independence has been weakened on perceptions that the ECB bowed to political pressure from EU governments, especially after ECB President Trichet had said last week that the ECB never discussed any purchases of government debt, (2) the prediction from Bank of Tokyo Mitsubishi UFJ Ltd that the recent rally in the euro will prove temporary as the ECB's "massive policy shift" to provide European debt-laden governments with a backstop will also keep the ECB from raising interest rates in order to facilitate economic growth, and (3) the recommendation from Barclay's Capital for investors to use the strength in the euro to short the currency on the prediction it will decline to $1.20 within 3 months as its outlook "remains bleak."
June crude oil prices this morning are down -$1.26 and June gasoline is -1.34 cents. June crude oil prices yesterday moved sharply higher and closed up +$1.69 per barrel. June gasoline closed higher by +4.75 cents per gallon. Bullish factors included (1) the slide in the dollar index, (2) the action by EU leaders and the IMF to agree on an emergency lending package of about 720 billion euros to contain sovereign debt risk within the Euro-Zone, which may maintain economic growth and energy demand, (3) the prediction from Algerian Oil Minister Khelil that crude oil prices may return to $80 to $85 a barrel once the European debt crisis is resolved, and (4) China's April crude oil imports rising to a record 20.98 million tons, or 5.13 million barrels a day, which indicates strong fuel demand. Bearish factors included (1) possible long liquidation pressures in gasoline futures after the CFTC reported that large speculators increased their long positions of gasoline future s to near a record 77,662 contracts in the week ended May 4, and (2) the outlook that US weekly crude oil inventories increased for the 14th out of the last 15 weeks when the DOE reports weekly crude oil inventories on Wednesday. Expectations for Wednesday's weekly DOE inventory report are for crude oil supplies to rise +1.3 million bbl, gasoline stockpiles to gain +900,000 bbl, distillates to climb +1.0 million bbl and the refinery capacity rate to remain unchanged at 89.6%. Today's U.S. Earnings Reports
Earnings reports (confirmed releases, sorted by mkt cap) DIS-Walt Disney (BEST earnings consensus $0.46), ERTS-Electronic Arts (0.05), CTRP-Ctrip.com International Ltg (0.21), CHD-Church & Dwight (1.08), CIE-Cobalt International Energy Industries (-0.06), TWTC-TW Telecom (0.06), FOSL-Fossil (0.33), MBI-MBIA (-1.02), HMIN-Home Inns & Hotels Management (0.07), SPWRA-SunPower (0.11), WX-WuXi PharmaTech Caymnan (0.21), AONE-A123 Systems (-0.20), JASO-JA Solar Holdings (0.18), TMH-Team Health Holdings (0.29), PDM-Piedmont Office Realty Trust (0.13), SYX-Systemax (0.36).
Global Financial Calendar
| Tuesday, 5/11/10 |
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| United States |
|---|
| 0745 ET | ICSC (Int'l Council of Shopping Centers) weekly retailer sales, previous -0.4% w/w and +4.4% weekly y/y. |
| 0830 ET | Richmond Fed President Jeffrey Lacker speaks at the UNC at Greensboro's Piedmont-Triad Economic Development Summit. |
| 0855 ET | Redbook weekly retailer sales, previous -2.2% month-to-date m/m and +2.4% month-to-date y/y. |
| 1000 ET | Mar wholesale inventories expected +0.5%, Feb +0.6%. |
| 1000 ET | May IBD/TIPP economic optimism expected unchanged at 48.4, Apr +3.0 to 48.4. |
| 1130 ET | Weekly 4-week T-bill auction. |
| 1300 ET | Treasury auctions $38 billion 3-year T-notes. |
| 1315 ET | Atlanta Fed President Dennis Lockhart speaks at the Atlanta Fed's 2010 Financial Markets Conference, "Up from the Ashes: The Financial System after the Crisis." |
| 1330 ET | Philadelphia Fed President Charles Plosser speaks at the Atlanta Fed's 2010 Financial Markets Conference. |
| 1700 ET | ABC U.S. weekly consumer confidence, previous +2 to -47. |
| Germany |
|---|
| 0200 ET | Revised Apr German CPI (EU harmonized) expected no change at -0.1% m/m and +1.0% y/y. |
| 0200 ET | Apr German wholesale price index expected +0.9% m/m and +5.2% y/y, Mar +1.3% m/m and +4.3% y/y. |
| United Kingdom |
|---|
| 0430 ET | Mar UK industrial production expected +0.3% m/m and +0.6% y/y, Feb +1.0% /m and -0.1% y/y. |
| 0430 ET | Mar UK manufacturing production expected +0.4% m/m and +1.5% y/y, Feb +1.3% m/m and +1.4% y/y. |
Morning Quote Board
| Morning Quotes (ET) | Last | Chg | %chg | Updated |
| US Stock Futures |
|---|
| S&P (Globex) (M0) | 1142.80 | -13.80 | -1.19% | 07:17:14 |
| DJIA (CBOT) (M0) | 10637 | -104 | -0.97% | 07:17:11 |
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| European Stocks |
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| Europe DJ Stoxx 50 | 2445.20 | -53.20 | -2.13% | 07:12:15 |
| London UK FTSE Index | 5294.15 | -93.27 | -1.73% | 07:12:17 |
| German Dax Index | 5945.26 | -72.65 | -1.21% | 07:12:17 |
| French CAC 40 Index | 3635.65 | -84.64 | -2.28% | 07:12:15 |
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| Asian-Pacific Stocks |
|---|
| Japan Nikkei Index | 10411 | -120 | -1.14% | 02:29:01 |
| Hong Kong Hang Seng | 20147 | -280 | -1.37% | 04:01:30 |
| China CSI 300 Index | 2801 | -57 | -2.01% | 03:01:30 |
| Taiwan TAIEX Index | 7608 | -56 | -0.73% | 01:46:01 |
| Australian S&P 200 | 4548 | -51.8 | -1.13% | 02:38:34 |
| Singapore Str. Times | 2857.67 | -22.81 | -0.79% | 05:10:01 |
| South Korea KOSPI 200 | 217.63 | -1.47 | -0.67% | 05:03:28 |
| Bombay Sensex 30 | 17142 | -189.02 | -1.09% | 06:29:58 |
| Karachi KSE-100 | 10209 | -79 | -0.77% | 06:42:35 |
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| US Interest Rates |
|---|
| 10yr T-notes (CBT)(M0) | 119.165 | 0.185 | 0.49% | 07:17:12 |
| Cash 10yr T-note Price | 101.085 | 0.185 | 0.57% | 07:26:01 |
| Cash 10yr T-note Yield | 3.471 | -0.070 | -1.98% | 07:25 |
| 5yr T-note (CBT)(M0) | 116.300 | 0.110 | 0.29% | 07:17:17 |
| Cash 5yr T-note Price | 101.145 | 0.110 | 0.34% | 07:25:00 |
| Cash 5yr T-note Yield | 2.190 | -0.073 | -3.23% | 07:24 |
| 30-yr T-bond (CBT)(M0) | 121.22 | 0.27 | 0.70% | 07:17:16 |
| Cash 30yr T-bond Price | 104.265 | 1.095 | 1.25% | 07:27:00 |
| Cash 30yr T-bond Yield | 4.334 | -0.076 | -1.72% | 07:26 |
| Eurodollars (CME)(M0) | 99.440 | -0.050 | -0.05% | 07:17:17 |
| Eurodollars (CME)(U0) | 99.315 | -0.050 | -0.05% | 07:17:16 |
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| Asian & European Rates |
|---|
| 10-yr JGBs (TSE) (M0) | 139.74 | 0.08 | 0.06% | 02:00:00 |
| EuroyenTibor(SGX)(M0) | 99.620 | 0.000 | 0.00% | 07:06:36 |
| Bunds (Eurex) (M0) | 126.03 | 0.54 | 0.43% | 07:12:13 |
| Euribor (Eurex) (M0) | 99.23 | -0.02 | -0.02% | 03:16:41 |
| UK Gilts (Liffe) (M0) | 115.99 | -0.19 | -0.16% | 07:12:09 |
| Short Stlg (Liffe) (M0) | 99.14 | -0.03 | -0.03% | 07:11:41 |
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| Forex |
|---|
| U.S. Dollar Index | 84.69 | 0.53 | 0.63% | 07:17:11 |
| US Dollar-Japanese Yen | 92.38 | -0.92 | -0.99% | 07:27:18 |
| EuroFX-US Dollar | 1.2676 | -0.0111 | -1.11% | 07:27:18 |
| US Dollar-Swiss Franc | 1.1115 | 0.0016 | 0.16% | 07:27:18 |
| British Pound-US$ | 1.4733 | -0.0114 | -1.14% | 07:27:18 |
| US$-Canadian Dlr | 1.0258 | 0.0026 | 0.26% | 07:27:18 |
| Yen (Globex) (M0) | 1.0835 | 0.0097 | 0.97% | 07:17:16 |
| Euro FX (Globex) (M0) | 1.2678 | -0.0124 | -0.97% | 07:17:14 |
| SwissFranc (Globex)(M0) | 0.9004 | -0.0019 | -0.21% | 07:17:17 |
| British Pound(Glbx)(M0) | 1.4724 | -0.0153 | -1.03% | 07:17:17 |
| Canadian$ (Globex)(M0) | 0.9757 | -0.0003 | -0.03% | 07:17:16 |
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| Commodities |
|---|
| Gold (Comex) (M0) | 1218.4 | 17.6 | 1.47% | 07:17:17 |
| Silver (Comex) (N0) | 18.460 | -0.092 | -0.50% | 07:17:17 |
| Copper (Comex) (N0) | 314.1 | -8.8 | -2.71% | 07:17:16 |
| Crude Oil (Nymex) (M0) | 75.54 | -1.26 | -1.64% | 07:17:17 |
| Gasoline (Nymex) (M0) | 215.92 | -1.34 | -0.62% | 07:17:13 |
| Heating Oil(Nymex) (M0) | 210.78 | -1.24 | -0.58% | 07:17:11 |
| NaturalGas(Nymex)(M0) | 4.17 | 0 | 0.00% | 07:17:00 |
| Corn (CBOT) (N0) | 365.50 | -5.00 | -1.35% | 07:17:11 |
| Soybeans (CBOT) (N0) | 955.25 | -5.75 | -0.60% | 07:16:34 |
| Wheat (CBOT) (N0) | 490.75 | -2.00 | -0.41% | 07:16:36 |
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