Barchart Morning Call


September E-mini S&Ps (ESU14 -0.84%) this morning are down -0.95% at a 1-week low and European stocks are down -1.85% at a 1-1/2 month low as European sovereign debt concerns resurfaced after Portuguese bonds tumbled as concern deepened over missed debt payments by a company linked to Banco Espirito Santo, Portugal's second-largest bank. European bank stocks plunged with Banco Espirito Santo down 11% and Espirito Santo Financial Group SA, which owns 25% of the lender, down 9% before trading was halted. The company suspended trading in its stocks and bonds, saying it is "currently assessing the financial impact of its exposure" to Espirito Santo International, which has missed payments on short-term obligations. While Portugal's central bank said Banco Espirito Santo SA is protected after its parent missed debt payments, Moody's Investors Service downgraded a company in the group citing a lack of transparency and links to other companies. Another negative for stocks was the slower-than-expected increase in China Jun exports, which fueled concern that global economic momentum may be slowing. Asian stocks closed mixed: Japan -0.56%, Hong Kong +0.27%, China -0.27%, Taiwan +0.79%, Australia +0.22%, Singapore -0.18%, South Korea +0.12%, India -0.28%. Commodity prices are mixed. Aug crude oil (CLQ14 -0.42%) is down -0.53% and Aug gasoline (RBQ14 +0.06%) is down -0.09%, both at 1-month lows. Aug gold (GCQ14 +1.43%) is up +1.46% at a 3-1/2 month high as a slide in global stocks boosts the safe-haven demand for gold. Sep copper (HGU14 -0.28%) is down -0.28% at a 1-week low on Chinese demand concerns after China Jun exports rose less than expected. Agriculture and livestock prices are mixed with Aug live hog prices down -0.96% at a 2-week low on fund liquidation. The dollar index (DXY00 +0.16%) is up +0.14%. EUR/USD (^EURUSD) is down -0.18%. USD/JPY (^USDJPY) is down -0.33% at a 1-week low as the slide in stocks boosts the safe-haven demand for the yen. Sep T-note prices (ZNU14 +0.33%) are up +12 ticks at a 5-week high and the yield on the 10-year German bund dropped to a 14-month low of 1.171% on increased safe-haven demand amid signs of financial stress in Portugal.

The China Jun trade balance unexpectedly shrank to a +$31.56 billion surplus, narrower than expectations of a +$36.95 billion surplus. Jun exports rose +7.2% y/y, less than expectations of +10.4% y/y, and Jun imports climbed +5.5% y/y, less than expectations of +6.0% y/y.

St. Louis Fed President Bullard said that a rapid drop in unemployment will fuel inflation saying "I think we are going to overshoot here on inflation" as he predicts inflation of 2.4% at the end of next year, "well above" the Fed's 2% target. Bullard, who calls himself the "North Pole of inflation hawks," estimates full employment at about 6% and after U.S. Jun unemployment dropped to 6.1% he said the Fed will need to raise interest rates sooner than estimated.

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