Last Update: 10-Jun-10 08:46 ET
With the Stanley cup arriving in Chicago this morning for the first time since 1961, the outlook just feels brighter today. The reverie is being shared by investors as well as economic data globally continues to have a positive tone. A modest sell-off in the dollar against most major currencies is lifting U.S. equity futures this morning. The pound and the euro are both rallying, also providing a catalyst for European bourses.
Japan's economy expanded at a 5% rate for the three months ending in March and China's exports rose by 48.5% -- as leaked yesterday -- well ahead of the 32% increase forecast. The latter indicates China is weathering the crisis in Europe, but it also will spark renewed pressure from Washington for Beijing to revalue its currency.
There is a lot of news to digest this morning. The Bank of England and the ECB both left key benchmark interest rates unchanged, while Brazil's central bank raised its benchmark SELIC rate by 75 bps to 10.25%, as expected. Central banks in Asia are taking a conservative tone. Overnight, South Korea left its key rate unchanged. The Asian markets have regained some momentum as investors bet strong fiscal positions and growing domestic demand will help insulate the region from the financial and economic effects of the debt crisis in Europe.
Equities futures rallied ahead of the jobless claims and trade balance data. The data came out mixed, but continuing claims fell from 4.717 mln to 4.460 mln, the largest drop since July 2009. The figure indicates more people are being hired than fired, which is great news to say the least. Initial claims were 456,000 vs. the Briefing.com consensus estimate of 450,000.
The April trade balance came in at -$40.3 bln vs. the Briefing.com consensus estimate of -$41.3 bln. The prior figure was revised higher to -$40.0 bln.
Exporters are gaining in early trade, driven by the move in the dollar. Even BP (BP) is rebounding this morning after falling 16% yesterday to below $30 on rumors the oil spill could cause the supermajor to go bankrupt. We would argue that view is premature considering BP has the balance sheet to fund what will be a massive and costly cleanup effort. The company provided an update on the oil spill response in a 6-K filing today.
Del Monte (DLM) raised its dividend by 80% and initiated a $350 mln repurchase program. Kellogg (K) was initiated with a Buy at Cantor Fitzgerald. JP Morgan lifted oil service giant Weatherford (WFT) out of Underweight status to Neutral, while downgrading driller Ensco (ESV) to Neutral. AutoZone (AZO) was downgraded to Neutral from Outperform. Paccar (PCAR) was upped to Neutral from Sell by UBS.
On the earnings front, lululemon athletica (LULU) reported a $0.06 upside beat in earnings on a 69% y/y jump in revenues.
The oil pits have become more optimistic regarding the demand side of the equation of late as the global economy recovers.The weakness in the dollar is also contributing not only to the uplift in oil (currently $74.72 per bl) but to the entire commodity complex with the exception of gold. Bullion prices are off their highs as the risk trade comes on, currently holding at $1225 per ounce.
With the Stanley cup arriving in Chicago this morning for the first time since 1961, the outlook just feels brighter today. The reverie is being shared by investors as well as economic data globally continues to have a positive tone. A modest sell-off in the dollar against most major currencies is lifting U.S. equity futures this morning. The pound and the euro are both rallying, also providing a catalyst for European bourses.
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