What’s the Story Morning Glory?

by CC December 1, 2011 9:29 am • Commentary


Market tone: Stocks called slightly weaker on disappointing China data; euro higher against the dollar; Treasurys higher; Nymex crude up at $100.62; gold up $6 at $1,752.05.

Overnight action: Asian manufacturing weakens; UBS shuffles top management; Draghi sours European mood.

Watch for: Jobless claims and manufacturing ISM data; auto sales; retail same-store sales


At 5:45 a.m. EDT, S&P 500 futures were 0.3% lower at 1241.9. European bourses were mixed, with the FTSE 100 rising 0.4%, the DAX falling 0.5% and the CAC 40 falling 0.3%. In Asia, stocks closed sharply higher, with the Nikkei 225 up 1.9% and the Hang Seng up 5.6%.

Stocks to Watch

Finisar’s fiscal second-quarter profit fell 82% as the telecommunications equipment maker’s sales stagnated, pushing down its margins in the process. Shares fell 2.4% to $18 after hours as the second-biggest fiber-optic equipment maker behind JDS Uniphase Corp. (JDSU) also forecast a weak current-quarter adjusted profit.

Aeropostale’s fiscal third-quarter profit fell 59% as the youth-focused apparel retailer booked sharply higher input costs, though earnings topped the company’s raised forecast. Shares dropped 1.7% to $15.25 in recent after-hours trading.

Synopsys Inc.’s (SNPS) fiscal fourth-quarter profit jumped 57% as the software company projected an upbeat performance for the current quarter and agreed to acquire Magma Design, a fellow chip-design software company, for about $503 million. Shares of Synopsys rose 1.5% to $28.40 after hours. Magma was up 27% at $7.25, compared with the $7.35 per-share offer price.


SINGAPORE—Manufacturing activity in China shrank in November for the first time in nearly three years, while output elsewhere in Asia also softened, raising questions about the region’s ability to drive the global economy amid sluggish demand from the West.

The disappointing data come hot on the heels of Beijing’s decision Wednesday to cut banks’ reserve requirement ratio for the first time in nearly three years, a move analysts say could mark the beginning of a sustained monetary-easing campaign.


Spain sold 3.75 billion euros ($5.1 billion) of bonds, meeting its maximum target, and it paid the most in at least six years to borrow for five years as European efforts to stem the region’s debt crisis fall short.

Spain auctioned five-year bonds today at an average yield of 5.544 percent, compared with 4.848 percent when notes of a similar maturity were offered on Nov. 3, the Treasury said. That was the highest since at least 2005, according to data compiled by Bloomberg. It paid 5.276 percent on bonds due in 2016, and an average 5.187 percent to sell notes maturing in April 2015, compared with 3.639 percent in October.

Spanish debt gained after the sale. The yield on the 10- year benchmark bond declined to 6.045 percent as of 11:27 a.m. Madrid time, down 18 basis points from yesterday.

Demand for Spain’s five-year bonds was 2.69 times the amount sold, compared with 1.62 last month and the bid-to-cover for the April 2015 notes was 2.7 compared with 2.07 in October. France also sold 4.346 billion euros of debt today, compared with the maximum 4.5 billion euros on offer.

As the crisis that began in Greece two years ago moves to the euro-area’s core, leaders are struggling to convince investors they can ensure the euro’s survival. European Central Bank President Mario Draghi said today that the bank’s program of buying government bonds, which has included Spain since August, “can only be limited” and called on governments to “restore their credibility.”

Yields Fall

The extra yield investors demand to hold Spain’s 10-year bond over equivalent German securities fell to 376 basis points from 396 basis points yesterday. That spread reached a euro-era high of 503 basis points on Nov. 18, compared with an average of 15 basis points in the first decade of monetary union. Spain is rated AA- by Standard & Poor’s, having lost in January 2009 the AAA rating that Germany still has.

Seeking Alpha

Today’s Markets:
In Asia, Japan +1.9% to 8597. Hong Kong +5.6% to 19002. China +2.3% to 2387. India +2.2% to 16483.
In Europe, at midday, London +0.4%. Paris -0.5%. Frankfurt -0.5%.
Futures at 7:00: Dow -0.1%. S&P -0.3%. Nasdaq flat. Crude -0.3% to $100.06. Gold flat at $1749.90.

Thursday’s economic calendar:
Chain Store Sales
Auto Sales
8:30 Initial Jobless Claims
10:00 ISM Manufacturing Index
10:00 Construction Spending
10:30 EIA Natural Gas Inventory
4:30 PM Money Supply
4:30 PM Fed Balance Sheet