Morning Call For January 20, 2016

OVERNIGHT MARKETS AND NEWS

March E-mini S&Ps (ESH16 -1.82%) are down -1.84% at a 4-3/4 month low and European stocks are down -3.20% at a 15-month low as a -3.06% plunge in crude oil (CLG16 -3.72%) to a fresh 12-year low drags down energy producers. Also, IBM fell 4% in pre-market trading after its 2016 profit forecast was below expectations which pulled the entire technology sector lower with Apple, Cisco and Microsoft all down more than 2% in pre-market trading. The plunge in crude oil has also weighed on commodity currencies with the Canadian dollar falling to a 12-3/4 year low against the dollar, while the Russian ruble sank to a record low of 80.463 per dollar. Asian stocks settled lower: Japan -3.71%, Hong Kong -3.82%, China -1.03%, Taiwan -1.98%, Australia -1.26%, Singapore -2.98%, South Korea -2.41%, India -1.71%. Japan’s Nikkei Stock Index sank to a 14-1/2 month low as exporters sold-off after the yen rallied to a 1-year high against the dollar and weakened the outlook for exporters’ overseas earnings.

The dollar index (DXY00 +0.12%) is up +0.04%. EUR/USD (^EURUSD) is down -0.05%. USD/JPY (^USDJPY) is down -0.86% at a 1-year low as the sell-off in global equity markets boosts the safe-haven demand for the yen.

Mar T-note prices (ZNH16 +0.34%) are up +16.5 ticks at a 3-month high as the plunge in crude oil to a 12-year low has undercut inflation expectations with the 10-year T-note breakeven inflation rate falling to a 6-1/2 year low.

German Dec PPI fell -0.5% m/m and -2.3% y/y, a faster pace of decline than expectations of -0.4% m/m and -2.2% y/y.

China Dec foreign direct investment unexpectedly fell -5.8% y/y, weaker than expectations of a +3.1% y/y increase.

U.S. STOCK PREVIEW

Key U.S. news today includes: (1) weekly MBA mortgage applications (previous +21.3% with purchase sub-index +17.8% and refi sub-index +23.8%), (2) Dec housing starts (expected +2.3% to 1.200 million, Nov +10.5% to 1.173 million), and (3) Dec CPI (expected unch m/m and +0.8% y/y, Nov unch m/m and +0.5% y/y) and Dec CPI ex food & energy (expected +0.2% m/m and +2.1% y/y, Nov +0.2% m/m and +2.0% y/y).