Morning Call: Ramped up Italian political risks weigh on stocks and the euro; Dec E-mini S&Ps down -0.20%; EUR/USD down -0.45% to a 1-month low. - Tue Oct 02, 6:38AM CDT
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 ESZ18 - S&P 500 E-Mini

Overnight Markets and News

Dec E-mini S&Ps (ESZ18 -0.26%) this morning are down -0.20% and European stocks are down -0.93% at a 1-week low on ramped-up Italian political concerns. EUR/USD (^EURUSD -0.42%) slumped to a 1-month low and the yield on Italy's 10-year government bond surged to a 4-1/2 year high of 3.4% after Claudio Borghi, head of the budget committee in Italy's lower house, said Italy would have solved its fiscal problems if it had its own currency. European Commission President Juncker responded by saying "recent announcements by the Italian government have raised concerns about its budgetary course" as he warned of a Greek-style crisis in Italy. Stock prices recovered from their worst levels after Italian Deputy Prime Minister Di Maio said the Italian government is not willing to exit the euro or the EU. The political turmoil in Italy prompted a rush to safety to German bunds as the 10-year bund yield fell to a 2-week low of 0.408%. Asian stocks settled mostly lower: Japan +0.10%, Hong Kong -2.36%, China and India closed for holidays, Taiwan -1.20%, Australia -0.75%, Singapore -0.39%, South Korea -1.21%. Japan's Nikkei Stock Index posted a fresh 26-3/4 year high after Japan Sep consumer confidence unexpectedly rose and after USD/JPY soared to a 10-3/4 month high Monday, which fueled a rally in Japanese exporter stocks.

The dollar index (DXY00 +0.34%) is up +0.37% at a 4-week high. EUR/USD (^EURUSD -0.42%) is down -0.45% at a 1-month low on Italian political risks. USD/JPY (^USDJPY -0.10%) is down -0.11%.

Dec 10-year T-note prices (ZNZ18 +0-035) are up +4 ticks.

The UK Sep Markit/CIPS construction PMI unexpectedly fell -0.8 to a 6-month low of 52.1, weaker than expectations of no change at 52.9.

Eurozone Aug PPI of +0.3% m/m and +4.2% y/y was stronger than expectations of +0.2% m/m and +3.8% y/y.

Japan Sep consumer confidence unexpectedly rose +0.1 to 43.4, stronger than expectations of -0.2 to 43.1.

U.S. Stock Preview

Key U.S. news today includes: (1) Fed Vice Chair for Supervision Randal Quarles testifies to the Senate Banking Committee about the implementation of the Economic Growth, Regulatory Relief, and Consumer Protection Act, (2) Fed Chair Jerome Powell speaks at a NABE meeting in Boston.

Notable Russell 2000 earnings reports today include: PepsiCo (consensus $1.57), Paychex (0.66), Lamb Weston Holdings (0.68).

U.S. IPO's scheduled to price today: Upwork (UPWK), Edtechx Holdings Acquisition Corp ((EDTXU).

Equity conferences during the remainder of this week: Cantor Global Health Care Conference on Mon-Tue, Deutsche Bank Leveraged Financial Conference on Tue, InsureTech Connect 2018 on Tue, In-Memory Computing Summit on Tue, Wolfe Research Utilities & Energy Conference on Tue-Thu, European Association for the Study of Diabetes Meeting on Thu.

Market Comments

Dec S&P 500 E-minis (ESZ18 -0.26%) this morning are down -6.00 points (-0.20%). Monday's closes: S&P 500 +0.36%, Dow Jones +0.73%, Nasdaq 100 +0.23%. The S&P 500 on Monday rallied to a 1-week high and closed higher on reduced global trade concerns after U.S. and Canadian negotiators agreed to a new trade agreement known as the U.S.-Mexico-Canada Agreement. There was also strength in energy stocks after crude oil prices rose +2.80% to a 3-3/4 year high. Stocks were undercut by the -1.5 point decline in the U.S. Sep ISM manufacturing index to 59.8, weaker than expectations of -1.3 to 60.0.

Dec 10-year T-notes (ZNZ18 +0-035) this morning are up +4 ticks. Monday's closes: TYZ8 -3.50, FVZ8 -1.00. Dec 10-year T-notes on Monday closed lower on the new U.S.-Mexico-Canada trade deal, which reduces trade concerns and was hawkish for Fed policy. T-notes were also undercut by reduced safe-haven demand with the rally in stocks. T-notes found support on news that the U.S. Sep ISM manufacturing index fell more than expected.

The dollar index (DXY00 +0.34%) this morning is up +0.357 (+0.37%) at a 4-week high, EUR/USD (^EURUSD -0.42%) is down -0.0052 (-0.45%) at a 1-month low, and USD/JPY (^USDJPY -0.10%) is down -0.13 (-0.11%). Monday's closes: Dollar Index +0.166 (+1.17%), EUR/USD -0.0026 (-0.22%), USD/JPY +0.23 (+0.20%). The dollar index on Monday closed higher on strength in USD/JPY which climbed to a 10-3/4 month high as a rally in stocks reduced safe-haven demand for the yen. There was also weakness in EUR/USD which fell to a 3-week low after the Eurozone Sep Markit manufacturing PMI was revised downward to a 2-year low of 53.2, which was dovish for ECB policy.

Metals prices this morning are mixed with Dec gold (GCZ18 +0.29%) +2.7 (+0.23%), Dec silver (SIZ18 +0.40%) +0.028 (+0.19%) and Dec copper (HGZ18 +0.57%) -0.001 (-0.04%). Monday's closes: Dec gold -4.5 (-0.38%), Dec silver -0.205 (-1.39%), Dec copper -1.75 (-0.62%). Metals on Monday closed lower with Dec copper at a 1-week low. Metals prices were undercut by a stronger dollar and by concern about Chinese industrial metals demand after the China Sep manufacturing PMI fell -0.5 to a 7-month low of 50.8. Gold prices were undercut by continued fund liquidation as long gold positions in ETFs fell to a 1-year low Friday.

Nov WTI crude oil prices (CLX18 +0.21%) this morning are down -1 cent (-0.01%) and Nov gasoline (RBX18 -0.02%) is -0.39 (-0.18%). Monday's closes: Nov crude oil +2.05 (+2.80%), Nov gasoline +4.18 (+2.00%). Nov crude oil and gasoline on Monday moved higher with Nov crude at a 3-3/4 year high. Crude oil prices were boosted by global supply fears with the collapse of Venezuela's oil industry and concern about the extent to which Iranian crude exports will fall due to U.S. sanctions in November. Crude oil prices were also boosted by the new U.S.-Mexico-Canada trade deal, which may lead to stronger economic growth and energy demand. Crude oil prices were undercut by the the +30,000 bpd increase OPEC Sep crude production to 32.83 million bpd, a 14-month high.

Overnight U.S. Stock Movers

Whirlpool (WHR -0.13%) was rated a new 'Sell' at Goldman Sachs with a price target of $107

Veoneer (VNE +0.84%) was downgraded to 'Sell' from 'Neutral' at UBS with a price target of $44.

General Electric (GE +7.09%) was upgraded to 'Outperform' from 'Sector Perform' at RBC Capital Markets with a price target of $15.

Ultimate Software Group (ULTI -0.46%) was rated a new 'Buy' at Jeffries with a price target of $370.

Knight-Swift Transportation Holdings (KNX +1.19%) was rated a new 'Buy' at Loop Capital Markets with a price target of $45.

Zendesk (ZEN -2.54%) climbed nearly 3% in after-hours trading after it was rated a new 'Buy' at Jeffries with a price target of $82.

Papa John's International (PZZA -3.92%) rose 2% in after-hours trading after Legion Partners reported a 5.46% stake in the company.

Werner Enterprises (WERN +1.02%) was rated a new 'Buy' at Loop Capital Markets with a price target of $42.

Stitch Fix (SFIX +1.96%) tumbled 15% in after-hours trading after it forecast Q1 revenue of $354 million to 260 million, the midpoint below consensus of $358 million.

Wabash National (WNC -1.87%) was rated a new 'Buy' at Loop Capital Markets with a price target of $27.

GW Pharmaceuticals (GWPH -3.17%) lost more than 1% in after-hours trading after it said it will offer $300 million in American Depositary Shares (ADRs).

Radiant Logistics (RLGT -0.17%) was rated a new 'Buy' at Loop Capital Markets with a price target of $9.