Morning Call For May 11, 2016

OVERNIGHT MARKETS AND NEWS

Jun E-mini S&Ps (ESM16 -0.14%) are down -0.22% and European stocks are down -1.28% as a 5% sell-off in Disney in pre-market trading is dragging U.S. stocks lower. Also, Office Depot plunged 34% and Staples sank 15% in pre-market trading after a U.S. federal judge late yesterday blocked the $6.3 billion merger between the companies. Weakness in European bank stocks is pulling the overall European market lower, led by a nearly 3% decline in ABN Amro NV after it reported a -13% drop in Q1 earnings. Asian stocks settled mixed: Japan +0.08%, Hong Kong -0.93%, China +0.16%, Taiwan -0.25%, Australia +0.55%, Singapore -0.30%, South Korea -0.25%, India -0.68%. Japan’s Nikkei Stock Index rose to a 1-week high, but fell back from its best levels after USD/JPY retreated from a 1-1/2 week high.

The dollar index (DXY00 -0.26%) is down -0.26%. EUR/USD (^EURUSD) is up +0.24%. USD/JPY (^USDJPY) is down -0.46%.

Jun T-note prices (ZNM16 -0.02%) are up +0.5 of a tick ahead of today’s second leg of the Treasury’s quarterly refunding; the $23 billion 10-year T-note auction.

According to people familiar with the matter, the ECB could discuss restoring Greek banks’ access to its refinancing lines as soon as the June 2 ECB meeting. Greek government bonds could become eligible for inclusion in the ECB’s QE program following completion of a bailout review by the ECB board once a staff-level agreement between the government and auditors representing creditor institutions is reached. Greek banks have been on emergency liquidity (ELA) since Feb 2015.

U.S. STOCK PREVIEW

Key U.S. news today includes: (1) weekly MBA mortgage applications (previous -3.4% with purchase sub-index -0.1% and refi sub-index -5.5%), (2) the Treasury’s auction of $23 billion 10-year T-notes, and (3) Apr monthly budget statement (expected +$107.0 billion, Mar -$108.043 billion).

There are 8 of the Russell 1000 companies that report earnings today: Macy’s (consensus $0.36), Aramark (0.39), TopBuild (0.15), Wendy’s (0.06), CA (0.57), Middleby (0.84), Quorum Health, TerraForm Power (-0.22).