Morning Call For Wednesday, Dec. 26

Overnight Markets And News

Mar E-mini S&Ps (ESH19 +0.66%) this morning are up +0.62% as they recover from a 1-3/4 year nearest-futures low posted in overnight trade. U.S. stock indexes recovered from early losses and moved higher after President Trump expressed confidence in Treasury Secretary Mnuchin and in the U.S. economy. Stock indexes had initially extended Monday's sharp losses after President Trump said he had discussed firing Fed Chair Powell over the Fed's recent action to raise interest rates. President Trump attempted to calm markets concerns when he said Tuesday that the Fed is "raising interest rates too fast" but he has "confidence" the Fed will "get it pretty soon." Trading activity is muted this morning with markets closed in Europe for the extended Christmas holiday and closed in the UK for Boxing Day. The upheaval in U.S. equity markets has fueled safe-haven demand for T-notes and pushed the 10-year T-note yield down to an 8-1/2 month low of 2.718% and also boosted demand for gold as a store of wealth with Feb COMEX gold (GCG19 +0.25%) up +0.33% at a 6-month high. Asian stocks settled mixed: Japan +0.89%, China -0.26%, Taiwan -0.50%, Singapore -1.31%, South Korea -1.31%, India +0.51%. Hong Kong and Australia were closed for the Boxing Day holiday.

The dollar index (DXY00 +0.21%) is up +0.20%. EUR/USD (^EURUSD +0.28%) is down -0.11%. USD/JPY (^USDJPY-0.73%) is up +0.27%.

Mar 10-year T-note prices (ZNH19 +0-015) are up +1.5 ticks at a new contract high.

ECB Governing Council member Lane said, "the balance of risks is shifting to the downside" due to "the mixed signals about the momentum in the global business cycle and the extraordinary high levels of policy uncertainty, with businesses and households expressing concerns about the future of the global trading system and, more locally, Brexit."

U.S. Stock Preview

Key U.S. news today includes: (1) weekly MBA mortgage applications (previous -5.8% to 325.9 with purchase sub-index -6.8% to 238.6 and refi sub-index -2.3% to 832.2), (2) Oct S&P CoreLogic composite-20 home price index (expected +0.3% m/m and +4.8% y/y, Sep +0.33% m/m and +5.15% y/y), (3) Dec Richmond Fed manufacturing survey (expected +1 to 15, Nov -1 to 14), (4) Treasury auctions $18 billion of 2-year floating rate notes and $41 billion of 5-year T-notes.

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