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- The European stock market is trading mildly lower this morning with the DJ Stoxx 50 down -0.39%. European stocks were undercut by the report that the European Commission's Euro-Zone business and consumer confidence index was weaker than expected and fell to a 3-year low of 94.9 from 97.6 in May. European retail stocks are weak today (Stoxx 600 Retail Index -3.5%) after Carrefour, Europe's largest retailer, plunged -8.4% on its announcement that earnings growth will be little changed from the year-earlier level versus its statement just 6 weeks ago that earnings growth would exceed revenue growth. European banks are weak again today with Barclay's down -2.1% and HBOS down -3.7%. Auto and airline stocks were hurt by higher crude oil prices. Meanwhile, Asia-Pacific stocks fell sharply today, playing catch-up with yesterday's sharp sell-off in US stocks: Japan -2.01%, Hong Kong -1.84%, China -5.53%, Taiwan -3.37%, Australia -1.32%, Singapore -0.84%, South Korea -2.07% , Bombay -4.30%.
- PCE Deflator – Today’s May personal spending report is expected to be strong at +0.7%, adding to the +0.2% increase seen in April. However, the strength in personal spending is only artificial and temporary since the spending was tied to taxpayers spending their federal stimulus checks. The burst in spending is certainly not tied to any underlying consumer confidence about the economy or household finances. Meanwhile, May personal income is expected to show a +0.4% increase, adding to the +0.2% increase seen in April. On the inflation front, the May PCE deflator on a year-on-year basis is expected to be unchanged from April at +3.2%, which is far above the generally-accepted +2.0% ceiling for inflation. The May core PCE is expected be up +0.2% m/m and +2.1% y/y, which would be similar to April’s report of +0.1% m/m and +2.1% y/y. The markets would be pleased if core inflation can remain at +2.1%, which would at least suggest that there has not been additional spil lover of high energy and commodity prices into finished products. The Fed continues to talk tough on inflation, but has little room to raise interest rates due to the continued banking crisis and the weak US economy.
- US consumer confidence – Today’s final-June U.S. consumer confidence index from the University of Michigan is expected to be unchanged from the early-June report at 56.7, which would leave the index down -3.1 points from May. The early-June level of 56.7 was a 20-year low, going all the back to 1980. Earlier this week, the Conference Board’s US consumer confidence index for June fell sharply by –7.7 points to 50.4, which was a 16-1/2 year low. There is no reason to believe that US consumer confidence is ready to bottom out considering there has been no bottom as yet in housing prices or a peak for oil prices, which hit a record high of $140 yesterday. In addition, the US unemployment rate surged to a 4-year high of +5.5% in May, sparking new worries for consumers about the job market.
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Overnight U.S. Stock News
- June S&Ps this morning are trading slightly higher by +2.00 points on some short-covering after yesterday's steep decline. The US stock market yesterday sold-off sharply and closed near its low (Dow -3.03%, S&P 500 -2.94%, Nasdaq Composite -3.33%).
- Bearish factors for stock prices yesterday included (1) the sell-off in the brokerage sector after Goldman Sachs downgraded US brokerages to "neutral" from "attractive," saying the pace of deterioration in the industry "appears to be far worse" than it originally anticipated, (2) the +$5.09 spike in crude oil prices to a record high, (3) the -6.3% loss in Citigroup to its lowest price since 1998 after Goldman Sachs put the biggest US bank by assets on its "conviction sell" list, (4) the 13% tumble in Research in Motion after the company said Q2 earnings will be as low as 84 cents a share, below analysts estimates of 92 cents a share and said they face inceased competition when Apple releases a faster, cheaper iPhone model next month, and (5) the -11% fall in GM to its lowest price since 1974 after Goldman Sachs downgraded the world's largest automaker to "sell" from "neutral," saying the automaker's shares will continue to fall as the sales outlook worsens amid record f uel prices, declining consumer confidence, and tighter credit conditions.
- Bullish factors for stock prices yesterday included (1) the rally in gold producers after the price of gold surged to a 1-month high on inflation fears, (2) the +5.9% gain in Parexel International after the provider of research for drugmakers was upgraded to "buy" from "hold" by analysts at Natixis Bleichroeder, and (3) the +4.3% rise in Bed Bath & Beyond as the largest US home-furnishings retailer reported better-than-expected quarterly profit on higher sales of bedding and dishes.
- Exxon Mobil (XOM) and ConocoPhillips (COP) are both slightly higher by +0.1% this morning as crude oil posted new record highs.
- Accenture (ACN) rallied 2.2% in after-hours trading yesterday after the company announced that its fiscal Q3 earnings were up +36% and raised its full-year guidance due to new outsourcing customers.
- The Andersons (ANDE) is likely to show some strength today after the company raised its full-year EPS guidance to $4.40-4.80 from $3.65-4.00 due to improved results from its plant-nutrient unit.
- Palm Inc (PALM) is down -2.6% in European trading this morning after the company reported a Q4 loss ex-items of 22 cents a share, which was a larger loss than the market consensus of 18 cents.
- AK Steel (AKS) rallied +4.1% in after-hours trading yesterday after S&P said that the steel-maker would replace Countrywide in the S&P 500 as of the close of trading on June 30.
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Today's U.S. Market Focus
- September 10-year T-notes this morning are trading -1.5 ticks on the slightly higher trade in S&Ps. September T-notes yesterday moved higher throughout the day and closed up +28 ticks at a 2-1/2 week high. Bullish factors for T-note prices yesterday include (1) flight-to-quality as the S&P 500 tumbled to a 3-1/4 month low, (2) the exceptional $20 billion 5-year T-note auction that saw the highest demand in 8 months, (3) comments from Fed Vice Chairman Kohn that "higher headline rates of inflation have shown only a few tentative signs of embedding themselves in core inflation or in longer-term inflation expectations," and (4) the rise in weekly continuing unemployment claims to a 4-1/3 year high. Bearish factors for T-note prices yesterday include (1) the unexpected revision up in Q1 core PCE (+0.2 to +2.3% q/q), and (2) a slightly better than expected May existing home sales report (+2.0% to 4,99 mln versus expectations of +1.2% to 4.95 mln).
- The dollar is mixed this morning with the dollar/yen down -0.43 yen and the euro/dollar down -0.09 cents. The dollar index yesterday sold-off and closed at a 2-1/2 week low. Bearish factors for the dollar yesterday included (1) the rally in the yen to a 2-week high on unwinding of carry-trades due to the sharp sell-off in the stock market, (2) the rally in the pound to a 7-week high after BOE Governor King said policy makers will do what is needed to stem inflation, (3) euro strength after May German import prices rose by the biggest monthly amount (+2.4% m/m) in over 17-years, and (4) the rise in US continuing unemployment claims to a 4-1/3 year high. Bullish factors for the dollar yesterday include (1) the drop in June French consumer confidence to its lowest level since the series began in Jun 1998, and (2) the upward revision in US Q1 GDP and Q1 core PCE.
- August crude oil prices this morning are trading +$1.27 at $140.91 a barrel and August gasoline is trading +1.99 cents a gallon. August crude oil prices yesterday rallied sharply and closed up +$4.45 a barrel and August gasoline closed +6.61 cents a gallon. Aug crude posted an all-time high of $140.39 a barrel yesterday. Bullish factors for crude oil prices yesterday include (1) the comments from OPEC's President that crude oil prices may reach $170 a barrel this summer if the ECB hikes interest rates and the dollar weakens and that a disruption of Iranian crude oil production could push over $200 a barrel to possibly $400 a barrel, (2) the comment from Libya's top oil official that it may cut production in response to a US law that allows terror victims to seize assets of foreign governments as compensation, and (3) the sell-off in the dollar to a 2-1/2 week low.
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Today's U.S. Earnings Reports
Earnings reports (confirmed releases for companies with market caps above $10.0 bln listed by mkt cap): SCS-Steelcase (BEST earnings consensus $0.22 per share), KBH-KB Home (-.20)
| Friday 6/27/2008 | |
|---|---|
| United States | |
| 0830 ET | May personal spending expected +0.7%, Apr +0.2%. May personal income expected +0.4%, Apr +0.2%. May PCE deflator expected +3.2% y/y, Apr +3.2% y/y. May PCE core expected +0.2% m/m and +2.1% y/y, Apr +0.1% m/m and +2.1% y/y. |
| 1000 ET | Final Jun University of Michigan U.S. consumer confidence expected unchanged at 56.7, previous -3.1 to 56.7. |
| Japan | |
| 0000 ET | May Japan vehicle production, Apr +5.4% y/y. |
| France | |
| 0245 ET | May French producer prices expected +0.6% m/m and +5.9% y/y, Apr +0.7% m/m and +5.4% y/y. |
| 0250 ET | Final revision Q1 French GDP expected +0.6% q/q and +2.2% y/y, previous +0.4% q/q and +2.1% y/y. |
| 0400 ET | Jun French Bloomberg retail PMI expected –5.6 to 54.0, May +13.4 to 59.6. |
| Euro-Zone | |
| 0400 ET | Jun Euro-Zone Bloomberg retail PMI, May +11.3 to 53.1. |
| 0500 ET | Jun Euro-Zone business climate indicator expected –0.14 to 0.40, May –0.10 to 0.54. |
| 0500 ET | Jun Euro-Zone consumer confidence expected –1 to –16, May –3 to –15. |
| 1230 ET | ECB President Jean-Claude Trichet participates in a joint press conference in Rome for the High-Level Seminar of Central Banks in the East Asia-Pacific Region and the Euro Area organized by the Bank of Italy. |
| Germany | |
| 0400 ET | Jun German Bloomberg retail PMI, May +12.0 to 56.6. |
| n/a | Jun German CPI (EU harmonized) expected +0.3% m/m and +3.3% y/y, May +0.7% m/m and +3.1% y/y. |
| United Kingdom | |
| 0430 ET | Final revision UK Q1 GDP expected unchanged at +0.4% q/q and +2.5% y/y. |
| Canada | |
| 0830 ET | May Canadian industrial product prices expected +1.1%, Apr +1.4%. |
| 0830 ET | May raw materials price index, Apr +5.1%. |
Morning Quote Board
Morning Quotes (ET) Last Chg %chg Updated US Stock Futures S&P (Globex) (U8) 1286.40 2.00 0.16% 06:55:10 DJIA (CBOT) (U8) 11467 5 0.04% 06:55:10 European Stocks Europe DJ Stoxx 50 2877.48 -11.40 -0.39% 06:50:15 London UK FTSE Index 5536.00 17.80 0.32% 06:50:16 German Dax Index 6411.25 -48.35 -0.75% 06:50:13 French CAC 40 Index 4376.91 -49.28 -1.11% 07:05:00 Asian-Pacific Stocks Japan Nikkei Index 13544 -278 -2.01% 03:00:16 Hong Kong Hang Seng 22042 -413 -1.84% 04:10:30 China CSI 300 Index 2816 -165 -5.53% 03:00:56 Taiwan TAIEX Index 7549 -263 -3.37% 01:46:01 Australian S&P 200 5237 -70 -1.32% 02:47:04 Singapore Str. Times 2955.91 -25.04 -0.84% 05:10:07 South Korea KOSPI 200 214.59 -4.53 -2.07% 02:02:15 Bombay Sensex 30 13802 -619.6 -4.30% 06:28:13 Karachi KSE-100 12353 -99 -0.79% 03:31:00 US Interest Rates 10yr T-notes (CBT)(U8) 113.195 -0.015 -0.04% 06:55:00 Cash 10yr T-note Price 98.225 -0.005 -0.02% 07:04:30 Cash 10yr T-note Yield 4.035 0.002 0.05% 07:04 5yr T-note (CBT)(U8) 110.105 0.005 0.01% 06:55:12 Cash 5yr T-note Price 99.280 0.005 0.02% 07:00:02 Cash 5yr T-note Yield 3.402 0.017 0.51% 07:00 30-yr T-bond (CBT)(U8) 115.00 -0.01 -0.01% 06:55:10 Cash 30yr T-bond Price 96.150 0.035 0.11% 07:02:30 Cash 30yr T-bond Yield 4.594 -0.007 -0.15% 07:02 Eurodollars (CME)(U8) 96.975 -0.040 -0.04% 06:55:09 Eurodollars (CME)(Z8) 96.725 -0.050 -0.05% 06:55:09 Asian & European Rates 10-yr JGBs (TSE) (U8) 135.23 0.37 0.27% 02:00:00 EuroyenTibor(SGX)(U8) 99.130 -0.005 -0.01% 04:39:00 Bunds (Eurex) (U8) 111.16 -0.07 -0.06% 06:50:15 Euribor (Eurex) (U8) 94.96 0.01 0.01% 05:26:51 UK Gilts (Liffe) (U8) 104.88 -0.32 -0.30% 06:50:14 Short Stlg (Liffe) (U8) 93.93 -0.02 -0.02% 06:50:07 Forex US Dollar/Japanese Yen 106.39 -0.43 -0.40% 07:05:16 EuroFX / US Dollar 1.5748 -0.0009 -0.09% 07:05:16 SwissFranc/US Dollar 1.0207 -0.0031 -0.31% 07:05:14 British Pound (per USD) 1.9860 -0.0031 -0.31% 07:05:16 Canadian Dlr (perUSD) 1.0063 -0.0078 -0.78% 07:05:10 Yen (Globex) (U8) 0.9437 0.002 0.20% 06:55:16 Euro FX (Globex) (U8) 1.5682 -0.0014 -0.09% 06:55:16 SwissFranc (Globex)(U8) 0.9799 0.0017 0.17% 06:55:15 British Pound(Glbx)(U8) 1.9748 -0.0012 -0.06% 06:55:15 Canadian$ (Globex)(U8) 0.9927 0.0052 0.53% 06:55:16 Commodities Gold (Comex) (Q8) 924.2 9.1 0.99% 06:35:13 Copper (Comex) (N8) 383.0 0.0 0.00% 06:31:46 Crude Oil (Nymex) (Q8) 140.91 1.27 0.91% 06:35:09 Gasoline (Nymex) (Q8) 354.42 1.99 0.56% 06:33:43 Heating Oil(Nymex)(Q8) 395 4.05 1.04% 06:34:48 NaturalGas(Nymex)(Q8) 13.266 0.018 0.14% 06:28:56
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