Morning Call For Tuesday, Sept. 25

Overnight Markets And News

Dec E-mini S&Ps (ESZ18 +0.18%) this morning are up +0.26% and European stocks are up +0.33% as strength in energy stocks leads the overall market higher. Energy stocks were underpinned with Nov WTI crude oil (CLX18+0.36%) up +0.71% on positive carry-over from Monday’s rally in oil prices to a 2-1/2 month high after OPEC and non-OPEC producers stopped short of promising an increase in output after Sunday’s meeting in Algiers. The upside in stocks was contained due to an increase in interest rates rose as the 10-year German bund yield climbed to a 4-month high of 0.543% and the 10-year T-note yield rose to a 4-1/4 month high of 3.107%. Interest rates are on the rise ahead of today’s start to the 2-day FOMC meeting where the Fed is expected to increase the fed funds target range by 25 bp, along with carry-over from Monday’s hawkish comments from ECB President Draghi who said he sees a “relatively vigorous” pickup in underlying inflation. Asian stocks settled mixed: Japan +0.29%, Hong Kong and South Korea closed for holidays, China -0.58%, Taiwan +0.06%, Australia -0.02%, Singapore +0.53%, India +0.96%. Chinese stocks retreated, and the yuan fell to a 1-month low against the dollar as the trade spat with the U.S. deepened after the U.S. went ahead with its 10% tariff on $200 billion of Chinese goods on Monday, which prompted China to cancel scheduled trade talks this week with the U.S. Japanese equities moved higher, led by a rally in exporter stocks, as USD/JPY climbed to a 2-month high, which improves the earnings prospects for exporters.

The dollar index (DXY00 -0.11%) is down -0.01%. EUR/USD (^EURUSD +0.26%) is up +0.10%. USD/JPY (^USDJPY-0.01%) is up +0.08% at a fresh 2-month high on divergent central bank policies with the Fed expected to raise interest rates Wednesday while the BOJ maintains its QE program.

Dec 10-year T-note prices (ZNZ18 -0-055) are down -8.5 ticks at a 4-1/4 month nearest-futures low.

The German Aug wholesale price index rose +0.3% m/m and +3.8% y/y with the +3.8% y/y gain the largest year-on-year increase in 16 months.

Japan Aug PPI services prices rose +1.3% y/y, stronger than expectations of +1.1% y/y and the fastest pace of increase in 3-1/3 years.

U.S. Stock Preview

Key U.S. news today includes: (1) Jul FHFA house price index (expected +0.3% m/m, Jun +0.2% m/m), (2) Jul S&P CoreLogic composite-20 home price index (expected +0.1% m/m and +6.2% y/y, Jun +0.11% m/m and +6.31% y/y), (3) FOMC begins 2-day policy meeting, (4) Sep Richmond Fed manufacturing survey (expected -3 to 21, Aug +4 to 24), (5) Sep Conference Board U.S. consumer confidence (expected -1.4 to 132.0, Aug +5.5 to 133.4), (6) Treasury auctions $17 billion of 2-year floating-rate notes and $38 billion of 5-year T-notes.