Barchart Morning Call

OVERNIGHT MARKETS AND NEWS

September E-mini S&Ps (ESU14 +0.16%) this morning are up +0.03% and European stocks are up +0.04% ahead of the 2-day FOMC meeting that begins today. Stock gains were limited on concern over escalation of violence in Iraq after insurgents attacked the city of Baquba, 34 miles north of Baghdad. The AP reports that the U.S. may send a limited number of special-forces troops into Iraq that would be involved in training rather than direct combat. Another negative for European stocks was an unexpected decline in German investor confidence for a sixth month. Asian stocks closed mixed: Japan +0.29%, Hong Kong -0.42%, China -1.01%, Taiwan +0.41%, Australia -0.22%, Singapore -0.48%, South Korea +0.39%, India +1.31%. Chinese stocks closed lower after foreign direct investment in China unexpectedly fell in May by the most in 16 months. Debt concerns in China have also increased after data from Standard & Poor's showed Chinese borrowers had $14.2 trillion in debt at the end of 2013, the most of any country including the U.S. which had $13.1 trillion in company obligations. Commodity prices are mixed. July crude oil (CLN14 -0.60%) is down -0.63% on speculation that signs of violence in Iraq may not affect its oil supply. July gasoline (RBN14 -0.13%) is down -0.14%. Aug gold (GCQ14 -0.82%) is down -0.79%. July copper (HGN14 +0.18%) is up +0.38%. Agriculture and livestock prices are mixed. The dollar index (DXY00 +0.03%) is up +0.03%. EUR/USD (^EURUSD) is down -0.06%. USD/JPY (^USDJPY) is up +0.15%. Sep T-note prices (ZNU14 -0.05%) are down -0.5 of a tick.

The German Jun ZEW survey of expectations for economic growth unexpectedly fell for a sixth month as it slipped -3.3 to 29.8, weaker than expectations of +1.9 to 35.0 and the lowest in 1-1/2 years. The Jun ZEW current situation survey unexpectedly rose +5.6 to 67.7, better than expectations of unch at 62.1 and the highest in 2-3/4 years.

Eurozone Q1 labor costs rose +0.9% y/y, the smallest increase since the data series began in 2009.

China May foreign direct investment unexpectedly fell -6.7% y/y, weaker than expectations of +3.2% y/y and the largest decline in 16 months.

UK May CPI unexpectedly fell -0.1% m/m and rose +1.5% y/y, less than expectations of +0.2% m/m and +1.7% y/y with the +1.5% y/y gain the smallest annual increase in 4-1/2 years. The May core CPI rose +1.6% y/y, less than expectations of +1.7% y/y and matched the smallest annual increase in 5 years.

U.S. STOCK PREVIEW

Today's May CPI report is expected to be unchanged from April on a year-on-year basis at +2.0% y/y. Meanwhile, today's May core CPI is expected to edge higher to +1.9% y/y from +1.8% in April. Today's May housing starts report is expected to show a decline of -3.9% to 1.030 million following the +13.2% surge to 1.072 million seen in April. Meanwhile, today's May building permits report is expected to show a decline of -0.9% to 1.050 million, giving back some ground after the +5.9% rise to 1.059 million seen in April. The FOMC at its 2-day meeting that begins today is unanimously expected to taper QE3 by another $10 billion to $35 billion. There are three of the Russell 1000 companies that report earnings today: John Wiley (consensus $0.68), FactSet (1.25), and Adobe (0.30).

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