Morning Call For Thursday, Feb. 7

OVERNIGHT MARKETS AND NEWS

Mar E-mini S&Ps (ESH18 -0.03%) this morning are down -0.28% and European stocks are down -1.38% as weakness in mining and energy stocks leads declines in the overall market. A +21,125 MT jump in LME copper inventories to a 6-3/4 month high raises copper demand concerns and sent Mar COMEX copper (HGH18 -0.36%) down -0.42% to a 1-3/4 month low. Copper prices were also weighed down on concern Chinese copper demand will dwindle with the upcoming week-long Lunar New Year holidays beginning next week. Wednesday’s EIA data that showed U.S. crude production rose to a 47-year high of 10.251 million bpd continues to weigh on oil prices with Mar WTI crude (CLH18 -0.87%) down -0.83% to a 1-month low. As expected, the BOE kept its benchmark interest rate unchanged at 0.5% and maintained its asset purchase target at 435 billion pounds following today’s monetary policy meeting but raised its UK 2018 GDP forecast to 1.8% from 1.6% and said it may need to raise interest rates earlier than expected as inflation is expected to remain above its 2% target. Asian stocks settled mostly higher: Japan +1.13%, Hong Kong +0.42%, China -1.43%, Taiwan -0.22%, Australia +0.24%, Singapore +0.95%, South Korea +0.37%, India +0.97%. Most Asian equity markets settled higher, although China’s Shanghai Composite tumbled to a 5-3/4 month low, despite stronger-than-expected Jan trade data that showed China’s trade surplus fell to an 11-month low.

The dollar index (DXY00 +0.23%) is up +0.15% at a 2-week high after Dallas Fed President Kaplan said the base case for 2018 remains for three rate hikes. EUR/USD (^EURUSD) is down -0.21%. USD/JPY (^USDJPY) is up +0.35%.

Mar 10-year T-note prices (ZNH18 -0.14%) are down -2 ticks.

Dallas Fed President Kaplan said “I expect we are going to see further tightening in an already tight labor market. I think that should create some wage pressure.” He added that “recent market correction and volatility in and of itself is not a concern” and the base case for 2018 remains for three rate hikes.

The China Jan trade balance shrank to a surplus of +$20.34 billion, narrower than expectations of +$54.65 billion and the smallest surplus in 11 months. Jan exports rose +11.1% y/y, stronger than expectations of +10.7% y/y. Jan imports jumped +36.9% y/y, stronger than expectations of +10.6% y/y and the biggest increase in 11 months.