Morning Call For April 5, 2016

OVERNIGHT MARKETS AND NEWS

Jun E-mini S&Ps (ESM16 -0.66%) are down -0.78% and European stocks are down -2.15% at a 5-week low on concern that global economic growth is faltering. German Feb factory orders unexpectedly fell by the most in 6 months and IMF Managing Director Lagarde said the world economy’s outlook has dimmed. A -0.22% fall in crude oil prices to a 1-month low has also undercut energy producing stocks. The slide in stocks has boosted demand for government debt as the yield on the 10-year German bund has tumbled to an 11-1/4 month low of 0.081%. Asian stocks settled mostly lower: Japan -2.42%, Hong Kong -1.57%, China up+1.45%, Taiwan closed for holiday, Australia -1.42%, Singapore -1.21%, South Korea -1.02%, India -2.03%. The plunge in USD/JPY to a 17-month low fueled selling in Japanese exporters as Japan’s Nikkei Stock Index fell to a 1-1/2 month low. Chinese stocks bucked the trend as the Shanghai Composite rallied to a 2-1/2 month high on optimism that government efforts to spur economic growth are kicking in.

The dollar index (DXY00 +0.28%) is up +0.21%. EUR/USD (^EURUSD) is down -0.25%. USD/JPY (^USDJPY) is down -0.92% to a 17-month low.

Jun T-note prices (ZNM16 +0.31%) are up +15 ticks at a 5-week high on carryover support from a rally in German bunds to an 11-1/4 month low.

IMF Managing Director Lagarde said the world economy’s outlook has dimmed over the last 6 months, exacerbated by China’s slowdown, lower commodity prices and the risk of financial tightening in many countries. This suggests the IMF will downgrade its growth forecast when it releases its updated World Economic Outlook on Apr 12.

Chicago Fed President Evans said “I believe it will be appropriate to make two more rate hike this year and then follow a very gradual path of rate increases thereafter.” Evans projects U.S. 2016 economic growth at 2.0-2.5% and that the U.S. consumer is the “linchpin” behind the outlook.

German Feb factory orders unexpectedly fell -1.2% m/m, weaker than expectations of +0.3% m/m and the biggest decline in 6 months.