Morning Call: Reduced Italian political risks boosts stocks; Dec E-mini S&Ps up +1.13%; Euro Stoxx 50 up +1.13%; USD/JPY up +0.22% at a 1-week high.
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 ESZ18 - S&P 500 E-Mini

Overnight Markets and News

Dec E-mini S&Ps (ESZ18 +1.14%) this morning are up +1.13% and European stocks are up +1.15% as political risks in Italy subsided. The yield on Italy's 10-year government bond tumbled to a 1-3/4 month low of 3.162% after Italy's populist government said it is studying scenarios for a lower 2019 budget deficit target after talks with EU negotiators. Also, bank stocks in Greece rallied as political risks eased there after Greece's Eurobank Ergasias SA said it plans to sell about 7 billion euros ($8 billion) of bad loans and merge with real estate fund Grivalia Properties REIC. In addition, energy stocks are higher with Jan WTI crude oil (CLF19 +1.51%)up +1.19% on short covering following last week's plunge. Asian stocks settled mixed: Japan +0.76%, Hong Kong +1,73%, China -0.14%, Taiwan +1.10%, Australia -0.78%, Singapore +1.34%, South Korea +1.30%, India +1.07%. China's Shanghai Composite dropped to a 3-week low as losses in energy stocks led the overall market lower after Friday's plunge in crude prices to a 13-month low. A rally in Japanese exporters led the Nikkei Stock Index higher after USD/JPY climbed to a 1-week high, which boosts the earnings prospects of exporters with the weaker yen. USD/JPY rallied after the Japan Nov Nikkei manufacturing PMI fell to its slowest pace of growth in 2 years, which may prompt the BOJ to continue with its QE program.

The dollar index (DXY00 -0.15%) is down -0.15%. EUR/USD (^EURUSD +0.26%) recovered from a 1-week low and is up +0.26% after ECB Executive Board member Lautenschlaeger said the ECB might raise interest rates "in the summer or in the autumn" next year. USD/JPY (^USDJPY +0.26%) is up +0.22% at a 1-week high.

Dec 10-year T-note prices (ZNZ18 -0-040) are down -3.5 ticks.

The German Nov IFO business climate fell -0.9 to a 4-month low of 102.0, weaker than expectations of -0.5 to 102.3.

The ECB's Chief Economist Praet said "factors related to protectionism, financial market volatility and vulnerabilities in emerging markets are creating headwinds that are becoming increasingly noticeable."

The Japan Nov Nikkei manufacturing PMI fell -1.1 to 51.8, the slowest pace of expansion in 2 years.

U.S. Stock Preview

Key U.S. news today includes: (1) Oct Chicago Fed national activity index (expected +0.01 to 0.18, Sep -0.10 to 0.17), (2) Nov Dallas Fed manufacturing activity (expected -4.9 to 24.5, Oct +1.3 to 29.4), (3) Treasury auctions $39 billion of 2-year T-notes.

Notable Russell 1000 earnings reports today include: none.

U.S. IPO's scheduled to price today: none.

Equity conferences during the remainder of this week: Auto Mobility Show on Mon, Citi Basic Materials Conference on Tue-Wed, Credit Suisse Technology, Media & Telecom Conference on Tue-Wed, Jefferies Global Energy Conference on Tue-Wed, Evercore ISI HealthconX Conference on Tue-Wed, Piper Jaffray Health Care Conference on Tue-Thu, American Bankers Small Business Conference on Wed, Capital Research Global Mid-Cap Conference on Wed, Deutsche Bank Gaming, Lodging, Leisure & Restaurants One on One Conference on Wed, European Women in Technology Conference on Wed, Credit Suisse Industrials Conference on Wed-Thu, Deal Economy Conference on Thu, Inside FinTech with Blockchain Agenda Conference on Thu.

Market Comments

Dec S&P 500 E-minis (ESZ18 +1.14%) this morning are up +29.75 points (+1.13%). Friday's closes: S&P 500 -0.66%, Dow Jones -0.73%, Nasdaq 100 -0.73%. The S&P 500 on Friday fell to 3-1/2 week low and closed lower on the unexpected -0.3 point decline in the U.S. Nov Markit manufacturing PMI to 55.4, weaker than expectations of unchanged at 55.7. There was also a slump in energy stocks after Jan WTI crude oil plunged -7.71% to a 13-month low. Stocks received some support from optimism about a strong start for the all-important holiday shopping season after GlobaData Retail projected U.S. consumer spending on Black Friday was $59.6 billion, up +5.7% y/y and the best rate of growth since 2011.

Dec 10-year T-notes (ZNZ18 -0-040) this morning are down -3.5 ticks. Friday's closes: TYZ8 +1.50, FVZ8 +1.75. Dec 10-year T-notes on Friday rose to a 2-1/4 month high and closed higher on the slump in the S&P 500 to a 3-1/2 week low, which boosted the safe-haven demand for T-notes. T-notes also received support from reduced inflation expectations after the 10-year T-note breakeven inflation expectations tumbled to a 10-3/4 month low.

The dollar index (DXY00 -0.15%) this morning is down -0.144 (-0.15%), EUR/USD (^EURUSD +0.26%) is up +0.0030 (+0.26%), and USD/JPY (^USDJPY +0.26%) is up +0.25 (+0.22%). Friday's closes: Dollar Index +0.204 (+0.21%), EUR/USD -0.0066 (-0.58%), USD/JPY +0.01 (+0.01%). The dollar index on Friday closed higher on weakness in the currencies of crude-exporters Canada and Russia against the dollar after crude oil prices tumbled to a 13-month low. There was also weakness in EUR/USD on European economic growth concerns that are dovish for ECB policy after the Eurozone Nov Markit manufacturing PMI fell to a 2-1/2 year low and Eurozone Nov consumer confidence fell to a 1-1/2 year low.

Metals prices this morning are higher with Dec gold (GCZ18 +0.16%) +2.1 (+0.17%), Dec silver (SIZ18 +0.54%) +0.087 (+0.61%), and Dec copper (HGZ18 +0.25%) +0.002 (+0.07%). Friday's closes: Dec Comex gold (GCZ18) on Friday closed down -$4.80 an ounce (-0.39%) and Dec Comex silver (SIZ18) closed down -0.259 (-1.79%). A stronger dollar on Friday weighed on metals prices while Dec silver fell to a 1-week low on demand concerns. Eurozone Nov Markit manufacturing PMI fell -0.5 to 51.5, weaker than expectations of unchanged at 52.0 and the slowest pace of expansion in 2-1/2 years, which signals weaker demand for industrial metals. Also, U.S. Nov Markit manufacturing PMI fell -0.3 to 55.4, weaker than expectations of no change at 55.7. A bearish factor for gold is reduced inflation expectations that may curb demand for gold as an inflation hedge, after the 10-year T-note breakeven inflation expectations fell to a 10-3/4 month low Friday. Losses in precious metals prices were limited on increased safe-haven demand as the S&P 500 slumped to a 3-week low Friday. The recent stock market volatility has boosted demand for gold as a store of wealth as long gold positions in ETFs rose to a 3-1/2 month high Thursday of 2,141 MT.

Jan WTI crude oil prices (CLF19 +1.51%) this morning are up +60 cents (+1.19%) and Jan gasoline (RBF19 +1.53%) is up +1.89 (+1.37%). Friday's closes: Jan WTI crude oil (CLF19) on Friday closed down sharply by -$4.21 per barrel (-7.71%) and Jan Brent crude (CBF19) closed down -$3.80 (-6.07%). Jan RBOB gasoline (RBF19) closed down -11.83 cents a gallon (-7.92%). The energy complex sold off sharply on Friday as Jan WTI crude slumped to a 13-month low, Jan Brent crude dropped to a 1-year low, and Jan RBOB gasoline fell to a 17-month low. Global oversupply concerns roiled crude prices and fueled fund selling after Saudi Energy Minister Khalid Al-Falih said Saudi Arabia is currently producing in excess of 10.7 million bpd, which would be a new record. Crude prices were already concerned about oversupply after Wednesday's EIA crude inventories rose by +4.85 million bbl to an 11-1/2 month high, their ninth straight weekly increase. A stronger dollar this morning is also adding pressure to energy prices. Finally, the crack spread tumbled to a 9-1/4 month low Friday, which curbs the incentive for refiners to purchase crude oil to refine into gasoline.

Overnight U.S. Stock Movers

Intuit (INTU -0.68%) was upgraded to 'Outperform' from 'Sector Perform' at RBC Capital Markets with a price target of $242.

American Homes (AMH unch) was upgraded to 'Buy' from 'Neutral' at Goldman Sachs with a price target of $24.

Schlumberger (SLB -2.67%) was upgraded to 'Buy' from 'Hold' at HSBC with a price target of $64.

Nvidia (NVDA +0.20%) was rated a new 'Outperform' at Credit Suisse with a price target of $225.

Southern Copper (SCCO -10.50%) was downgraded to 'Reduce' from 'Hold' at HSBC with a price target of $32.

WildHorse Resource Department (WRD -2.88%) was downgraded to 'Market Perform' from 'Outperform' at Wells Fargo Securities with a price target of $30.

Axonics Modulation Technologies (AXNX +1.29%) was rated a new 'Buy' at SunTrust Robinson Humphrey with a price target of $20.

Scana (SCG +0.99%) was upgraded to 'Buy' from 'Neutral' at Guggenheim Securities with a price target of $49.

CytomX Therapeutics (@symbolPercentChange(CTMX ))was rated a new 'Overweight' at Piper Jaffray with a price target of $22.

Plantronics (PLT +1.58%) rose more than 3% in after-hours trading after Reuters reported that Logitech is in talks to buy Logitech.