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Overnight Global News

• The European DJ Stoxx 50 this morning is trading sharply lower by -4.29% as worries increase about more credit write-downs and a likely recession in Europe. The UK banking sector is weak today with RBS down -9% and Barclays down -5%. Mining companies are lower today on weak copper (-2.67%) and industrial metal prices. BHP Billiton is down -7% and Anglo American is down -6%. Asia-Pacific stocks today closed sharply lower: Japan -6.79%, Hong Kong -5.15%, China -2.56%, Taiwan -1.62%, Australia -3.40%, Singapore -5.19%, South Korea -4.92%, and Bombay -4.81%.
• Interbank lending rates continued to fall today in a sign that the credit crisis continues to recede, although the economic fall-out is growing. The overnight dollar Libor rate fell 14 bp to 1.12%. The 3-month dollar Libor fell 29 bp to 3.54% from 3.83%. The Libor-OIS spread fell 28 bp to 250 bp and the TED spread fell 30 bp to 247 bp. The 3-month Euribor fell 3 bp to 4.93% from 4.96% on Tuesday.

Overnight U.S. Stock News

• December S&Ps this morning are trading sharply lower by -25.60 points (-2.67%) on weak overseas stocks and increased concerns about earnings. The US stock market yesterday whipsawed lower throughout the day and closed moderately lower (Dow -2.50%, S&P 500 -3.08%, Nasdaq Composite -4.14%).
• Bearish factors for stock prices yesterday included (1) weaker-than-expected earnings results from Texas Instuments which fell 06.3% to a 5-year low, Sun Microsystems which declined -17% to a 13-year low, Freeport McMoran which tumbled -11% to a 3-year low and from Western Union which slumped -18% to a 2-year low and withdrew its long-term profit targets because of uncertain global markets, (2) the prediction from Standard & Poor's that dividend payments by companies in the S&P 500 Index may fall 10% this quarter, the biggest decline in 50 years, as bank failures and slowing economic growth cut dividend payouts, (3) the prediction from Fitch Ratings that the financial crisis will cause real global credit growth, which peaked at almost 16% in 2007, to be cut over half to 7% by year-end and shrink to 5% next year as the full impact of the credit crunch takes it toll, and (4) the 6% drop in Citigroup after Goldman Sachs downgraded the bank to "sell" and said they may not report a profit until late next year as credit conditions worsen.
• Bullish factors for stock prices yesterday included (1) the action by the Fed in providing $540 billion in its new Money Market Investor Funding Facility to backstop money-market mutual funds which have been clobbered by massive redemptions and withdrawals, (2) the continued drop in interbank lending rates (the 3-month Euribor rate which fell to 4.96%, the level it was at before the banking crisis began in mid-September), and (3) the rally in regional banking stocks after they said they may join the government's $250 billion plan to recapitalize banks.
• Apple is sharply higher by +11% this morning in European trading after reporting much better than expected earnings late yesterday.
• Yahoo is up +4% in European trading this morning after the company announced a cost-cutting program involving a layoff of 10% of its staff.
• SanDisk is down -9% in European trading this morning after Sunsung Electronics canceled a $5.85 billion offer to buy SanDisk because of concern about the chip business and wider losses.
• Coventry Health Care plunged 30% in after-hours trading yesterday after reporting Q3 earnings of 58 cent a share, which was far below the analyst consensus of $1.06.
• Wachovia this morning reported a Q3 loss of $23.9 billion ($11.18 per share). The loss ex-items was $2.23 per share, which was far greater than the analyst consensus for a loss of 2 cents. Wachovia is in the process of being acquired by Wells Fargo.

Today's U.S. Market Focus

• December 10-year T-notes this morning are trading +5.5 ticks. December T-note prices yesterday added to Monday's sharp gains and closed +1-15.5/32 points at a 1-1/2 week high. Bullish factors for T-note prices yesterday included (1) expectations that the Fed will cut interest rates at next week's FOMC meeting as the US economy faces a potentially steep recession, and (2) flight-to-safety as the US equity market tumbled and as speculation arose that the Argentine government will nationalize the country's pension funds in an attempt to stave off its second default in the last 7 years. Bearish factors for T-note prices yesterday included (1) the continued decline in interbank lending rates as signs are emerging that the credit crunch may be lessening, and (2) the action by the Fed in providing up to $540 billion in a new program called the Money Market Investor Funding Facility which will backstop money-market mutual funds and attempt to relieve the pressure on the funds caused by massive redemptions.
• The dollar is mixed with the dollar sharply lower against the yen (dollar/yen -1.74 yen) but sharply higher against the euro (euro/dollar -2.12 cents). The euro plunged as market expectations increase for further ECB rate cuts. The dollar index yesterday extended Monday's gains and closed at a 19-month high. Bullish factors for the dollar yesterday included (1) the prediction from Citigroup Global Markets that the euro may slide to "at least $1.28 per dollar by year-end and maybe continue even lower in 2009" as the ECB will likely cut its benchmark rate toward 2.5% as oil prices fall and growth slows, (2) flight-to-safety into the dollar by Argentine investors on speculation that the Argentine government will seize private pension funds and use the assets to stave off a default on the government's debt, (3) the plunge in the euro to a 19-month low against the dollar after ECB Executive Board member Stark said he sees risk for one or two more "accidents" in financial markets and the IMF prediction that more European banks "may fail" as they struggle to raise capital from investors, and (4) weakness in the Canadian dollar after the Bank of Canada cut its benchmark interest rate by 25 bp to 2.25 and said "some further monetary stimulus will likely be required," implying further rate cuts.
• December crude oil prices this morning are trading -$2.60 a barrel and December gasoline is trading -6.45 cents a gallon on weak global stock markets and the poor prospects for global economic growth. December crude oil prices yesterday moved lower and closed -$2.21 a barrel and December gasoline closed -4.62 cents a gallon. Bearish factors for crude oil prices yesterday included (1) the rally in the dollar index to a 19-month high, curbing the appeal of commodities as a currency hedge, (2) the prediction from the Secretary General of OPEC that there will be a huge excess of crude oil supply at the end of the year and at the start of 2009 as global demand continues to weaken, and (3) expectations for a fourth straight weekly gain in crude oil inventories in today's DOE inventory report. On the bullish side, Iran's oil minister said that Iran favors a cut in OPEC production between 2 and 2.5 million bpd, much larger than market estimates for a 1 million bpd production cut at OPEC's emergency meeting in Vienna on Friday. Expectations for today's DOE weekly inventory report are for a +2.65 million bbl rise in crude oil inventories, a +2.7 million bbl climb in gasoline stockpiles, a +300,000 bbl rise in distillate inventories and a +1.0 point rise in the refinery capacity rate to 83.2%

Today's U.S. Earnings Reports

Earnings reports (confirmed releases for companies with market caps above $10.0 bln listed by mkt cap): T-AT&T (BEST earnings consensus $0.71 per share), PM-Philip Morris (0.89), COP-ConocoPhillips (3.19), MRK-Merck (0.79), MCD-McDonalds (0.98), AMGN-Amgen (1.08), WYE-Wyeth (0.90), BA-Boeing (1.01), KMB-Kimberly-Clark (1.01), GD-General Dynamics (1.51), AMZN-Amazon.com (0.34), WLP-Wellpoint (1.48), TRV-Travelers Companies (0.66), EMC-EMC (0.20), GENZ-Genzyme (1.00), ALL-Allstate (0.76), NOC-Northrop Grumman (1.41), ROH-Rohm & Haas (0.84), RAI-Reynolds American (1.20), APD-Air Products and Chemicals (1.26), WB-Wachovia (-0.02), NTRS-Northern Trust (1.03), BHI-Baker Hughes (1.36), NE-Noble (1.36)

Global Financial Calendar