Morning Call: A recovery in the yuan boosts Chinese stocks and gives U.S. and European equities a lift; Sep E-mini S&Ps up +0.31%; Aug WTI crude up +1.23% at a new 3-1/2 year high.
Barchart.com - Tue Jul 03, 6:40AM CDT
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Overnight Markets and News

Sep E-mini S&Ps (ESU18 +0.42%) this morning are up +0.31% and European stocks are up +1.24% as the Shanghai Composite recovered from a 2-1/3 year low and moved higher after the yuan strengthened versus the dollar. The yuan recovered from a 10-3/4 month low of 6.7214 per dollar on comments from PBOC Governor Yi Gang who said China will keep the currency stable at an equilibrium level and the PBOC will maintain a prudent, neutral policy stance. A +1.23% rally in Aug WTI crude oil (CLQ18 +1.15%) to a new 3-1/2 year high is also giving a boost to energy stocks. Crude oil is moving higher on concern ramped up oil production by Saudi Arabia will be insufficient to make up for disruptions to Libyan and Venezuelan oil output. Despite an increase in Saudi Arabian crude production in Jun by 330,000 bpd to 10.3 million bpd, overall OPEC Jun crude production rose only +30,000 bpd due to losses in output from other members. Asian stocks settled mixed: Japan -0.12%, Hong Kong -1.41%, China +0.41%, Taiwan -0.58%, Australia +0.52%, Singapore -0.09%, South Korea +0.14%, India +0.32%. Despite the recovery in Chinese stocks, Japan's Nikkei Stock Index fell to a 2-3/4 month low on concern a trade war between the U.S. and China will undercut global growth that will hurt Japanese exporters.

The dollar index (DXY00 -0.40%) is down -0.19%. EUR/USD (^EURUSD +0.16%) is up +0.09%. USD/JPY (^USDJPY -0.06%) is down -0.06%.

Sep 10-year T-note prices (ZNU18 -0-030) are down -3 ticks.

Eurozone May retail sales were unch m/m and up +1.4% y/y, weaker than expectations of +0.1% m/m and +1.6% y/y.

Eurozone May PPI rose +0.8% m/m, stronger than expectations of +0.5% m/m and the largest increase in 16-months.

The UK Jun Markit/CIPS construction PMI unexpectedly rose +0.6 to a 7-month high of 53.1, stronger than expectations of no change at 52.5.

U.S. Stock Preview

Key U.S. news today includes: (1) May factory orders (expected unch, Apr -0.8% and +0.4% ex transportation, and (2) Jun total vehile sales (expected 17.00 million, May 16.81 million).

Notable Russell 1000 earnings reports today include: none ($0.00).

U.S. IPO's scheduled to price today: none.

Equity conferences this week: none.

Market Comments

Sep S&P 500 E-minis (ESU18 +0.42%) are up +8.50 points (+0.31%). Monday's closes: S&P 500 +0.31%, Dow Jones +0.15%, Nasdaq 100 +0.81%. The S&P 500 on Monday shook off early losses and closed higher after the U.S. Jun ISM manufacturing index unexpectedly rose +1.5 to a 4-month high of 60.2, stronger than expectations of -0.2 to 58.5. Strength in technology stocks also lifted the overall market. Stocks had opened lower on negative carry-over from a slide in China's Shanghai Composite to a 2-1/3 year low due to heightened trade tensions ahead of this Friday when the U.S. will impose tariffs on $34 billion of Chinese imports.

Sep 10-year T-notes (ZNU18 -0-030) this morning are down -3 ticks. Monday's closes: TYU8 -3.50, FVU8 -3.50. Sep T-notes on Monday closed lower after the U.S. Jun ISM manufacturing index unexpectedly expanded to a 4-month high, which is hawkish for Fed policy. T-notes also fell back after inflation expectations increased as the 10-year T-note breakeven inflation rate rose to a 2-1/2 week high. On the positive side was the weaker than expected U.S. May construction spending, along with concern about a slowdown in the global economy, which is dovish for Fed policy, after the Eurozone Jun Markit manufacturing PMI was revised downward to a 1-1/2 year low and the China Jun manufacturing PMI fell more than expected.

The dollar index (DXY00 -0.40%) this morning is down -0.181 (-0.19%), EUR/USD (^EURUSD +0.16%) is up +0.0011 (+0.09%) and USD/JPY (^USDJPY -0.06%) is down -0.07 (-0.06%). Monday's closes: Dollar Index +0.399 (+0.42%), EUR/USD -0.0045 (-0.39%), USD/JPY +0.14 (+0.13%). The dollar index on Monday closed higher on the unexpected increase in the Jun ISM manufacturing index to a 4-month high, which is hawkish for Fed policy, and on weakness in the Chinese yuan which tumbled to a 9-month low against the dollar on trade tensions with the U.S. along with the weaker-than-expected China Jun manufacturing PMI. The dollar also found support on weakness in EUR/USD after the Eurozone Jun Markit manufacturing PMI was revised downward to a 1-1/2 year low of 54.9, which is dovish for ECB policy.

Metals this morning are higher with Aug gold (GCQ18 +0.49%) +6.2 (+0.50%), Sep silver (SIU18 +0.92%) +0.145 (+0.92%), and Sep copper (HGU18 +0.25%) +0.010 (+0.32%). Monday's closes: Aug gold -12.80 (-1.02%), Sep silver -0.363 (-2.24%), Sep copper -0.220 (-0.74%). Metals on Monday sold-off with Aug gold and Sep silver at 6-1/2 month lows and Sep copper at a 9-1/4 month low due to a stronger dollar and fund liquidation of gold as long gold positions in ETFs fell to a 3-month low as of Friday. Copper and silver prices were also under pressure on Chinese industrial metals demand concerns after the China Jun manufacturing PMI fell more than expected.

Aug WTI crude oil prices (CLQ18 +1.15%) this morning are up +91 cents (+1.23%) at a new 3-1/2 year high and Aug gasoline (RBQ18 +0.71%) is +0.0135 (+0.64%). Monday's closes: Aug crude -0.21 (-0.28%), Aug gasoline -4.64 (-2.16%). Aug crude oil and gasoline on Monday closed lower as the dollar strengthened and after Saudi Arabian Jun crude exports rose +4.5% to a 15-month high of 7.47 million bpd. Losses were limited on Libyan crude output concerns after Libya's National Oil Corp declared force majeure on the oil export terminals of Zueitina and Hariga to go along with the shutdown of its Es Sider and RasLanuf oil export terminals that will now reduce Libya's oil exports by -850,000 bpd.

Overnight U.S. Stock Movers

Albemarle (ALB -0.90%) was upgraded to 'Buy' from 'Neutral' at Goldman Sachs with a price target of $125.

Facebook (FB +1.56%) is down more than 1% in pre-market trading after the company said it's cooperating with the U.S. Securities and Exchange Commission and the FBI on their reviews of the data transfer to Cambridge Analytica.

American Airlines Group (AAL +1.05%) , United Continental (UAL +1.71%) and Delta Air Lines (DAL +0.77%) were all downgraded to 'Hold' from 'Buy' at Deutsche Bank.

Roku (ROKU +1.57%) was upgraded to 'Outperform' from 'Market Perform' at Oppenheimer with a price target of $50.

WW Grainger (GWW -0.68%) was downgraded to 'Neutral' from 'Outperform' at Baird.

Pepsico (PEP +0.61%) was downgraded to 'Hold' from 'Buy' at Deutsche Bank.

Wesco (WCC +0.79%) may move higher initially this morning after holder Blue Harbour Group LP raised its stake in the company to 7.2% from 3.2% reported on March 31.

Herman Miller (MLHR +1.62%) jumped nearly 12% in after-hours trading after it reported Q4 net sales of $618 million, stronger than consensus of $600 million, and then forecast Q1 sales of $610 million to $630 million, the midpoint above consensus of $611.5 million.

ShotSpotter (SSTI -0.53%) may move lower initially this morning after it registered to sell 2.56 million shares of the company's stock on behalf of holders after the close of trading Monday.

Acxiom (ACXM +14.22%) surged 16% in after-hours trading after it was purchased by Interpublic Group of Cos for about $2.3 billion.

Great Lakes Dredge & Dock (GLDD unch) rose almost 4% in after-hours trading after it received six dredging awards totaling $164 million.