Morning Call For Wednesday, Jan 10

OVERNIGHT MARKETS AND NEWS

Mar E-mini S&Ps (ESH18 -0.35%) this morning are down -0.40% as a surge in U.S. bond yields spurs long liquidation in stocks. The 10-year T-note yield jumped to a 9-3/4 month high of 2.59% after Chinese officials were said to recommend slowing or halting purchases of U.S. Treasuries. On the positive side is strength in energy stocks with Feb WTI crude oil (CLG18 +1.08%) up +0.94% at a new 3-year high. Crude oil is moving higher on signs of tighter supplies after the API reported late yesterday that U.S. crude inventories fell -11.2 million bbl last week. European stocks are down -0.44% as they follow U.S. equity markets lower. Asian stocks settled mixed: Japan -0.26%, Hong Kong +0.20%, China +0.23%, Taiwan -0.77%, Australia -0.64%, Singapore -0.12%, South Korea -0.80%, India -0.03%. Japanese stocks declined as exporters moved lower on reduced earnings prospects after USD/JPY tumbled -1.15% to a 1-1/4 month low. The yen surged on speculation the BOJ may be closer to ending its QE program after it cut its long-dated government bond purchases for the first time since 2016.

The dollar index (DXY00 -0.59%) is down -0.59%. EUR/USD (^EURUSD) is up +0.62%. USD/JPY (^USDJPY) is down -1.15% at a 1-1/4 month low.

Mar 10-year T-note prices (ZNH18 -0.20%) are down -10 ticks at a new contract low and the 10-year T-note yield jumped to a 9-3/4 month high of 2.59% on concern about Chinese demand for U.S. debt. T-notes declined after people familiar with the mater said officials reviewing China’s foreign-exchange holdings have recommended slowing or halting purchases of U.S. Treasuries. China is the world’s largest holder of U.S. Treasuries and holds the largest foreign-exchange reserves at $3.1 trillion.

UK Nov industrial production rose +0.4% m/m, right on expectations. Nov manufacturing production rose +0.4% m/m, stronger than expectations of +0.3% m/m.

China Dec CPI rose +1.8% y/y, weaker than expectations of +1.9% y/y. Dec PPI rose +4.9% y/y, stronger than expectations of +4.8% y/y.

U.S. STOCK PREVIEW

Key U.S. news today includes: (1) weekly MBA mortgage applications (previous +0.7% with purchase sub-index -0.1% and refi sub-index +1.4%), (2) Dec import price index (expected +0.4% m/m and +3.1% y/y, Nov +0.7% m/m and +3.1% y/y) and Dec import price index ex petroleum (expected +0.1% m/m, Nov +0.1%), (3) Chicago Fed President Charles Evans (non-voter) discusses the economic and monetary policy outlook at the Lake Forest-Lake Bluff Rotary Club, (4) Dallas Fed President Robert Kaplan (non-voter) takes part in a moderated Q&A at an event in Dallas, (5) Nov wholesale trade sales (Oct +0.7% m/m), (6) EIA weekly Petroleum Status Report, (7) Treasury auctions $20 billion 10-year T-notes.