- Global stocks this morning are weaker with the Euro Stoxx 50 down -0.64% and Jun S&Ps down -12.60 points. The dollar index climbed to a 1-week high and most commodities fell, with Jun gold falling to a 1-1/2 week low, as stocks fell around the world after the Fed signaled it may refrain from additional stimulus to boost the economy. The euro fell to a 1-1/2 week low against the dollar and credit-default swaps to insure the government debt of Spain jumped 18 bp to a 4-month high of 457 bp after it sold fewer securities than targeted. Spanish 5-year yields climbed 27 bp to a 3-3/4 month high of 4.53% after Spain sold 2.50 billion euros of bonds at auction, less than the maximum target of 3.5 billion euros. European automakers slid after Mar U.S. total vehicle sales came in at 14.32 million units, weaker than estimates of 14.60 million. Another negative for stocks was the Feb German factory orders that rose +0.3% m/m and fell -6.1% y/y, weaker than expectations of +1.5% m/m and -5.5% y/y, with the -6.1% y/y decline the biggest in 28-months. On the positive side, the Mar Euro-Zone PMI composite contracted less than expected after it was revised up to 49.1 from the previously reported 48.7.
- Asian stocks today closed lower with Japan down -2.29%, China closed for holiday, Australia -0.07%, South Korea -1.52%, India -0.63%. Asian stocks closed lower after the Fed dampened expectations of more monetary stimulus. Japan's Nikkei 225 Stock Index fell below 10,000 and tumbled to a 3-1/2 week low as exporters and commodity producers declined. The Australian dollar sank to an 11-week low against the U.S. dollar after Australia posted an unexpected trade deficit in Feb for a second month, its first back-to-back deficits in 2-years. Feb Australian exports fell to A$24.4 billion, the lowest level in a year, which boosts expectations of an interest rate cut by the RBA next month. China accelerated the opening of its capital markets by more than doubling the amount foreigners can invest in stocks, bonds and bank deposits after the China Securities Regulatory Commission increased the quotas for foreign institutional investors to $80 billion from $30 billion.
- June S&Ps this morning are trading down -12.60 points as global stocks fall after the Fed signaled no additional stimulus. The U.S. stock market Tuesday settled lower on an increase in European sovereign-debt concerns and after the Mar 13 FOMC meeting minute?s dampened speculation the Fed would increase monetary accommodation: Dow Jones -0.49%, S&P 500 -0.40%, Nasdaq Composite -0.20%. The Nasdaq posted an 11-year high but erased its advance and closed lower. Bearish factors Tuesday included (1) carry-over weakness from a slide in European stocks on concern the region's debt crisis may spread after bond yields on Italian, Spanish and Portuguese government debt all rose, (2) the smaller-than-expected increase in Feb U.S. factory orders along with the downward revision to Jan (Feb +1.3% versus expectations of +1.5%, while Jan was revised down to -1.1%, weaker than the originally reported -1.0%), (3) the warning from IMF Managing Director Lagarde who said "if the European economy falters, the American recovery and American jobs would be in jeopardy," and (4) the minutes of the Mar 13 FOMC meeting that showed the Fed is holding off on additional stimulus measures unless the U.S. economic expansion falters or prices rise less than the Fed's 2% target.
- Bullish factors Tuesday included (1) stronger-than-expected global economic data that bolsters confidence in the economic outlook after the Mar U.K. PMI construction unexpectedly expanded at its fastest pace in 21 months (+2.4 to 56.7) and after the Mar China non-manufacturing PMI rose to its best level in 10 months (+0.7 to 58.0) and (2) early strength in technology stocks as Apple climbed to an all-time high after Piper Jaffrey said Apple's stock price could climb to $1,000 a share by 2014.
- SanDisk (SNDK) fell 7.6% in European trading after the company lowered its revenue estimate for the quarter that ended Apr 1 to $1.2 billion, below an earlier forecast of $1.3 billion to $1.35 billion.
- June 10-year T-notes this morning are up +15 ticks as weak global stocks fuel safe-haven demand for Treasuries. T-note prices Tuesday traded higher early on increased safe-haven demand from the European debt crisis along with a smaller-than-expected increase in Feb U.S. factory orders but prices tumbled into the close and settled lower after the Mar 13 FOMC meeting minutes said that Fed members saw no need of new easing unless growth slips: TYM2 -25.0, FVM2 -14.0, EDU2 -2.5. Bearish factors Tuesday included (1) reduced safe-haven demand for Treasuries after Volker Kauder, a parliamentary leader of Chancellor Merkel's Christian Democratic Party said "There is no necessity at the moment for there to be any talk of Spain having to apply for aid from a rescue fund," (2) stronger-than-expected global economic data that bolsters confidence in the economic outlook and may reduce the safe-haven demand of Treasuries after the Mar U.K. PMI construction unexpectedly expanded at its fastest in 21 months (+2.4 to 56.7) and after the Mar China non-manufacturing PMI rose at its best pace in 10 months (+0.7 to 58.0), and (3) the Mar 13 FOMC meeting minutes that dashed hopes of QE3 after policy members stated they will hold off on increasing monetary stimulus unless U.S. economic growth falters or prices rise at a rate slower than its 2% target. Bullish factors included (1) the smaller-than-expected increase in Feb U.S. factory orders along with the downward revision to Jan (Feb +1.3% versus expectations of +1.5%, while Jan was revised down to -1.1%, weaker than the originally reported -1.0%), (2) increased safe-haven demand for Treasuries on concern the European debt crisis may worsen after Portuguese and Spanish bond yields rose, and (3) the action by the Fed to purchase $1.347 billion of long-term TIPS as part of it Operation Twist program to replace $400 billion of short-term debt in its holdings with longer maturities in an attempt to keep borrowing costs down.
- The dollar index this morning is higher and at a 1-week high with the dollar/yen -0.54 yen and the euro/dollar -0.78 cents. The dollar index Tuesday fluctuated on both sides of unchanged but recovered from a 1-month low and settled higher after the Fed dampened speculation it will increase its monetary accommodation : Dollar Index +0.663, USD/JPY +0.736, EUR/USD -0.00872. Bullish factors included (1) increased safe-haven demand for the dollar after IMF Managing Director Lagarde warned that "if the European economy falters, the American recovery and American jobs would be in jeopardy," (2) concern over contagion of the European sovereign-debt crisis to Spain after Spanish bond yields rose when Spain's Labor Ministry said the number of Spanish people registering for jobless benefits rose +38,769 to 4.75 million, the eighth consecutive monthly increase, and after the Spanish government said its debt will climb to 79.8% of GDP this year, up from 68.5% of GDP last year, and (3) the Mar 13 FOMC meeting minutes that showed the Fed is holding off on additional stimulus measures unless the U.S. economic expansion falters or prices rise less than the Fed's 2% target. Bearish factors included (1) euro supportive comments from Volker Kauder, a parliamentary leader of Chancellor Merkel's Christian Democratic Party who said "There is no necessity at the moment for there to be any talk of Spain having to apply for aid from a rescue fund," and (2) the smaller-than-expected increase in Feb U.S. factory orders, which indicates slowing momentum in the U.S. economy and is dollar negative.
- May crude oil prices this morning are down -88 cents a barrel and May gasoline is +0.66 cents per gallon. Crude oil and gasoline prices Tuesday settled mixed as crude fell after the dollar rebounded from a 1-month low and Feb U.S. factory orders rose less than expected, while gasoline gained on support from a rally in Eurobob prices to a record: CLK12 -$1.22, RBK +1.32. May gasoline posted a contract high. Bullish factors included (1) the increase in the Mar China non-manufacturing index to a 10-month high, which is positive for fuel consumption in the world's second-largest crude oil consumer, and (2) carry-over support from a rally in European gasoline or the Eurobob blend of gasoline to a record as inventories in ARA, the trading hub for Northwest Europe, are 25% below last year's levels. Bearish factors included (1) the rebound in the dollar after the dollar index recovered from a 1-month low and closed higher, which reduces investment demand for commodities, (2) the smaller-than-expected increase in Feb U.S. factory orders, which suggests economic weakness that is negative for fuel demand, and (3) the outlook for U.S. crude supplies to increase to a 7-month high when the weekly DOE inventory report is released on Wed. Expectations for the weekly DOE inventory report are for crude stockpiles to increase +2.2 million bbl, gasoline supplies to fall -1.2 million bbl, distillate inventories to decline -450,000 bbl and the refinery utilization rate to climb +0.4 to 84.9% of capacity.
Global Financial Calendar
| Wednesday 4/4/12 | |
|---|---|
| United States | |
| 0700 ET | Weekly MBA mortgage applications, previous -2.7% with purchase mortgage sub-index +3.3% and refinancing sub-index -4.6%. |
| 0815 ET | Mar ADP employment change expected +206,000, Feb +216,000. |
| 1000 ET | Mar ISM non-manufacturing index expected -0.5 to 56.8, Feb +0.5 to 57.3. |
| 1100 ET | San Francisco President John Williams speaks to the San Francisco Planning & Urban Research. |
| France | |
| 0350 ET | Revised Mar French PMI services expected no change at 50.0. |
| Germany | |
| 0355 ET | Revised Mar German PMI services expected no change at 51.8. |
| 0600 ET | Feb German factory orders expected +1.5% m/m and -5.5% y/y, Jan -2.7% m/m and 4.9% y/y. |
| Euro-Zone | |
| 0400 ET | Revised Mar Euro-Zone PMI composite expected no change at 48.7. |
| 0500 ET | Feb Euro-Zone retail sales expected -0.1% m/m and -1.1% y/y, Jan +0.3% m/m and unchanged y/y. |
| 0745 ET | ECB announces interest rate decision (expected no change to the 1.00% 2-week refinancing rate). |
| 0830 ET | ECB President Mario Draghi speaks at monthly press conference. |
| United Kingdom | |
| 0430 ET | Mar U.K. PMI services expected -0.4 to 53.4, Feb -2.2 to 53.8. |
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