Morning Call: A rally in auto stocks leads U.S. and European markets higher on signs of compromise in trade talks; Sep E-mini S&Ps up +0.60%; EUR/USD up +0.35% at a 1-week high. - Thu Jul 05, 6:44AM CDT
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 ESU18 - S&P 500 E-Mini

Overnight Markets and News

Sep E-mini S&Ps (ESU18 +0.65%) this morning are up +0.60% and European stocks are up +1.23% at a 2-week high. A rally in European automakers is leading the overall market higher after Handelsblatt reported the U.S. Ambassador to Germany told German automakers he was asked by Washington to reach a solution between Berlin and the European Unions on car tariffs. European stocks also rallied, and EUR/USD (^EURUSD +0.41%) climbed to a 1-week high after German May factory orders posted their biggest increase in 5-months. Asian stocks settled mostly lower: Japan -0.78%, Hong Kong -0.21%, China -0.91%, Taiwan -1.03%, Australia +0.52%, Singapore +0.36%, South Korea -0.22%, India -0.20%. Asian equity markets moved lower as Japan's Nikkei Stock Index fell to a 3-month low on trade concerns as the U.S. is set to impose $34 billion of tariffs on Chinese goods tomorrow which may escalate trade tensions that slows global economic growth. China's General Administration of Customs said China's proposed additional tariffs on some U.S. goods will become effective "immediately" after the U.S. imposes its new tariffs on Chinese products.

The dollar index (DXY00 -0.37%) is down -0.16% at a 1-week low. EUR/USD (^EURUSD +0.41%) is up +0.35% at a 1-week high as the stronger-than-expected German May factory orders bolsters the outlook for tighter ECB policy. USD/JPY (^USDJPY +0.17%) is up +0.14%.

Sep 10-year T-note prices (ZNU18 -0-050) are down -5 ticks as the rally in equities saps the safe-haven demand for T-notes.

UK Jun new car registrations fell -3.5% y/y to 234,945 and year-to-date are down -6.3% at 1.313,994.

German May factory orders rose +2.6% m/m stronger than expectations of +1.1% m/m and the biggest increase in 5 months.

U.S. Stock Preview

Key U.S. news today includes: (1) Jun Challenger job cuts (May -4.8% y/y), (2) Jun ADP employment change (expected +190,000, May +178,000), (3) weekly initial unemployment claims (expected -2,000 to 225,000, previous +9,000 to 2227,000), (4) weekly continuing claims (expected +13,000 to 1.718 million, previous -21,000 to 1.705 million), (5) Jun ISM non-manufacturing PMI (expected -0.3 to 58.3, previous +1.8 to 58.60), (6) EIA weekly petrloleum status report, (7) Treasury announces amount of 3-year T-notes (previous $32 billion), 10-year T-notes (previous $22 billion) and 30-year T-bonds (previous $14 billion) to be auctioned Jul 10-12, and (8) minutes of the Jun 12-13 FOMC meeting.

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 +0.65%) are up +16.25 points (+0.60%). Tuesday's closes: S&P 500 -0.49%, Dow Jones -0.54%, Nasdaq 100 -1.17%. The S&P 500 on Tuesday closed lower on weakness in technology stocks after China banned Micron Technology from selling its computer chips in China due to a patent dispute with United Microelectronics. Also weighing on stock prices is concern that trade tensions will intensify between China and the U.S. on Friday when the U.S. goes ahead with $34 billion of tariffs on Chinese goods. A bullish factor was the U.S. May factory orders that rose +0.4%, stronger than expectations of no change.

Sep 10-year T-notes (ZNU18 -0-050) this morning are down -5 ticks. Tuesday's closes: TYU8 +7.50, FVU8 +3.50. Sep 10-year T-notes on Tuesday closed higher on carry-over support from rally in German bunds and on weakness in stocks, which boosted the safe-haven demand for T-notes.

The dollar index (DXY00 -0.37%) this morning is down -0.154 (-0.16%) at a 1-week low, EUR/USD (^EURUSD +0.41%) is up +0.0041 (+0.35%) at a 1-week high and USD/JPY (^USDJPY +0.17%) is up +0.15 (+0.14%). Tuesday's closes: Dollar Index -0.364 (-0.38%), EUR/USD +0.0020 (+0.17%), USD/JPY -0.31 (-0.28%). The dollar index on Tuesday closed lower due to a recovery in the yuan after it rebounded from a 10-3/4 month low against the dollar and moved higher. Also, strength in EUR/USD was negative for the dollar after Eurozone May PPI rose +0.8% m/m, stronger than expectations of +0.5% m/m and the largest increase in 16-months, which is hawkish for ECB policy.

Metals this morning are weaker with Aug gold (GCQ18 +0.06%) -0.2 (-0.02%), Sep silver (SIU18 -0.21%) -0.033 (-0.21%), and Sep copper (HGU18 -1.80%) -0.054 (-1.83%) at an 11-1/2 month low. Tuesday's closes: Aug gold +11.80 (+0.95%), Sep silver +0.208 (+1.31%), Sep copper -0.270 (-0.92%). Metals on Tuesday settled mixed as they found support on a weaker dollar, and signs of tighter copper supplies after LME copper inventories fell -3,350 MT to a 5-week low of 286,525 MT. Sep copper fell to a 9-1/4 month low on concern that the implementation of U.S. tariffs Friday on $34 billion of Chinese goods will lead to a trade war that decimates global demand for industrial metals.

Aug WTI crude oil prices (CLQ18 +0.47%) this morning are up +41 cents (+0.55%) and Aug gasoline (@symbolPercentChangeRBQ18)) is +0.0144 (+0.68%). Tuesday's closes: Aug crude +0.20 (+0.27%), Aug gasoline +1.28 (+0.61%). Aug crude oil and gasoline on Tuesday closed higher with Aug crude at a new 3-1/2 year nearest-futures high due to a weaker dollar and expectations for Thursday's weekly EIA crude inventories to fall -5.0 million bbl. Crude prices fell back from their best levels on signs that Saudi Arabia may further boost its crude production after the Saudi Press Agency reported the Saudi Arabian Cabinet "affirmed the Kingdom's readiness to utilize its spare production capacity to deal with changes in the levels of supply and demand."

Overnight U.S. Stock Movers

Diamondback Energy (FANG +0.58%) was rated a new 'Buy' at TD Securities with a price target of $165.

Noble Energy (NBL +2.03%) was rated a new 'Buy' at TD Securities with a price target of $45.

Qorvo (QRVO -3.32%) was upgraded to 'Overweight' from 'Sector Weight' at KeyBanc Capital Markets with a price target of $95.

Fiat Chrysler (FCAU -1.00%) was upgraded to 'Buy' from 'Hold' at Jeffries.

DMC Global (BOOM +0.22%) was rated anew 'Buy' at Chardan with a price target of $59.

Veoneer (VNE +3.63%) was rated a new 'Overweight' at Barclays with a price target of $55.

Clean Energy Fuels (CLNE +1.64%) was downgraded to 'Underperform' from 'Market Perform' at Raymond James.

Advanced Energy Industries (AEIS -2.18%) was upgraded to 'Outperform' from 'Market Perform' at Raymond James with a price target of $72.

Hexcel (HXL +0.21%) was upgraded to 'Buy' from 'Hold' at Canaccord Genuity with a price target of $80.

Deciphera Pharmaceuticals (DCPH +5.97%) was rated a new 'Buy' at SunTrust Robinson Humphrey with a price target of $60.

API reported Tuesday after the markets closed that U.S. crude stockpiles fell -5.51 million bbl last week.