Global stocks this morning are trading higher with the Euro Stoxx 50 up +1.17% and Sep S&Ps up +9.90 points. The dollar and Treasuries are weaker and commodities are mixed with copper at a 3-week high on speculation the Fed may provide additional stimulus. Economists at JPMorgan Chase and Credit Suisse predict the Fed may decide at next month's Sep 20-21 FOMC meeting to replace short-term securities in its $1.65 trillion portfolio with longer-term bonds in an attempt to lengthen the average maturity of its Treasury holdings and keep longer-term rates low.
A decline in German unemployment for the 26th straight month helped to lift European stocks after Aug German unemployment fell -8,000 and the unemployment rate held steady at 7.0%, the lowest since records for a reunified Germany began in 1991. The upbeat jobs market in Germany helped to keep Jul German retail sales unchanged m/m, stronger than expectations for a -1.5% m/m decline. Credit default swaps to insure European government debt fell to their lowest level in 2-weeks after German Chancellor Merkel's Cabinet ratified an expansion of the European Financial Stability Facility (EFSF) to help tackle the Euro-Zone debt crisis. The German Cabinet raised Germany's share of EFSF loan guarantees to 211 billion euros ($305 billion) from 123 billion euros.
Asian stocks today closed higher with Japan up +0.01%, China +0.18%, Australia +0.64%, South Korea +1.90%, India closed for holiday. Asian exporters received a boost after the minutes of the Aug 9 FOMC meeting fueled speculation the Fed may announce additional measures to spur the economy as soon as next month. Japanese stocks shed most of their gains however, after Jul Japan industrial production rose +0.6% m/m, weaker than expectations of +1.4% m/m. Chinese stocks relinquished most of their gains also after Chinese Premier Wen Jiabao was quoted in the Qiushi magazine saying a slowdown in the economy is "reasonable" and within the government's expectations and that China's top priority is stabilizing prices, which indicates the Chinese government will continue its tightening measures to keep inflation in check.
September S&Ps this morning are trading up +9.90 points. The US stock market yesterday moved lower mid-morning after U.S. consumer confidence fell more than expected, but recovered its losses and finished slightly higher on speculation the Fed may provide additional stimulus to spur the economy: Dow Jones +0.18, S&P 500 +0.23%, Nasdaq Composite +0.55%.
The S&P 500, the Dow and the Nasdaq all posted 3-week highs. Bullish factors included (1) comments from Chicago Fed President Evans who said he would "favor more accommodation" to spur the economy, (2) the smaller-than-expected decline in the Jun S&P/CaseShiller composite-20 home price index (-4.5% y/y versus expectations of -4.6% y/y),(3) strength in mining stocks as metals prices rallied and (4) the minutes of the Aug 9 FOMC meeting which stated some Fed members favored a "more substantial" action to spur the economy and lower unemployment, which leaves the door open for additional Fed stimulus measures.
Bearish factors included (1) the larger-than-expected decline in Aug U.S. consumer confidence which tumbled to a 2-1/2 year low (-14.7 to 44.5 versus expectations of -7.5 to 52.0), (2) concerns about the European banking system after the International Accounting Standards Board said some European banks haven't sufficiently written down the value of Greek government bonds and other "distressed sovereign debt" they own, and (3) comments from Minneapolis Fed President Kocherlakota who said the unemployment outlook is "highly uncertain."
September 10-year T-notes this morning are up +3 ticks. T-note prices yesterday rallied and finished higher after U.S. consumer confidence plunged and Chicago Fed President Evans said he favors more easing of monetary policy: TYU11 +21.5, FVU11 +10, EDZ11 +1.0. Bullish factors included (1) the larger-than-expected decline in Aug U.S. consumer confidence (-14.7 to a 2-1/3 year low of 44.5 versus expectations of -7.5 to 52.0), (2) comments from Chicago Fed President Evans who said "I am somewhat nervous about the economic recovery and where we stand at this point and I would favor more accommodation," (3) increased safe-haven demand after the International Accounting Standards Board said some European banks haven't sufficiently written down the value of Greek government bonds and other "distressed sovereign debt" they own, and (4) the minutes of the Aug 9 FOMC meeting which stated some Fed members favored a "more substantial" action to spur the economy and lower unemployment, which leaves the door open for additional Fed stimulus measures. Bearish factors included (1) the smaller-than-expected decline in the Jun S&P/CaseShiller composite-20 home price index (-4.5% y/y versus expectations of -4.6% y/y) and (2) reduced safe-haven demand for Treasuries after the stock market erased early losses and finished higher.
The dollar index this morning is lower with the dollar/yen -0.16 yen and the euro/dollar unchanged. The dollar index yesterday settled higher as the euro weakened on speculation the ECB may be finished raising interest rates along with increased safe-haven demand after the International Accounting Standards Board (IASB) said some European banks haven't sufficiently written down the value of their sovereign debt: Dollar Index +0.225, USDJPY -0.099, EURUSD -0.00688.
Regards,
Commodity Tips Advisory's Team
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