OVERNIGHT MARKETS AND NEWS
Sep E-mini S&Ps (ESU14 -0.15%) this morning are mildly lower by -0.20% due to a -0.40% sell-off in the Euro Stoxx 50 index, a Russian rate hike and a -1.5% in the Russian Micex index, and some high profile earnings misses such as Amazon.com. Asian stocks today closed mixed: Japan +1.13%, Hong Kong +0.31%, China +1.05%, Taiwan -0.93%, Australia -0.08%, Singapore -0.11%, South Korea +0.29%, India -0.55%, Turkey -0.34%. Sep 10-year T-notes (ZNU14 -0.04%) this morning are down 1 tick. The dollar index (DXY00 +0.10%) is slightly higher by +0.08% while EUR/USD (^EURUSD) is down -0.11% and USD/JPY (^USDJPY) is up +0.06%.
Commodity prices are slightly higher by +0.06% this morning. Sep WTI crude oil (CLU14 -0.14%) is slightly lower by -0.04% but Sep gasoline (RBU14 +0.22%) is up +0.15%. Aug gold (GCQ14 +0.34%) is up +0.32%, Sep silver (SIU14 +0.37%) is up +0.47%, and Sep copper (HGU14 +0.08%) is up +0.18%. Grain, livestock, and softs prices are mixed.
Russian's central bank today unexpectedly raised its 1-week auction rate by 50 bp to 8.00% from 7.50%, the third such rate hike this year. The rate hike will cause further damage to the Russian economy, which is likely to see at least a mild recession. The Russian central bank billed the rate hike as designed to curb inflation, but it was designed as much to support the ruble and prevent a further capital outflow from Russia in response to the Ukraine and new sanctions. The Russian Micex stock index this morning is down -1.5%, erasing nearly all of the +1.8% recovery seen in the last 3 sessions. The U.S. yesterday said that Russia has been firing artillery across the border into Ukraine at Ukrainian military targets.
UK Q2 GDP rose by +0.8% q/q (+3.2% annualized), which was in line with market expectations and matched the Q1 growth rate. Q2 GDP was up +3.1% y/y. The report caused UK GDP to finally exceed the previous peak reached before the 2008 global financial crisis. GDP for all the G-7 countries has now exceeded their pre-crisis peaks except for Italy. The market consensus is that the UK economy in 2014 will grow by +3.0%, improving from +0.3% in 2012 and +1.75 in 2013 and the strongest growth rate since 2007.
Amazon is sharply lower by -10% in overnight trading after reporting a larger loss than expected.
The German Aug GfK consumer confidence index rose by +0.1 point to 9.0, which was slightly better than market expectations of unchanged at 8.9.
The German IFO business climate index fell by -1.7 points to 108.0 from 109.7 in June, which was weaker than market expectations for a -0.3 point drop to 109.4 and was the third drop in a row. The July IFO Expectations index fell by -1.4 points to 103.4, which was weaker than market expectations of -0.4 to 104.4. The report suggested that German business confidence is dropping in response to weaker German economic data and the Ukraine crisis.
Eurozone July M3 money supply rose by +1.5% y/y from +1.0% in May, which was stronger than market expectations of +1.2% y/y.
U.S. STOCK PREVIEW
Today’s June durable goods orders report is expected to show an increase of +0.5% and +0.5% ex-transportation. There are 11 of the S&P 500 companies that report earnings today with notable reports including: Moody's (consensus $1.02), Aon (1.20), AbbVie (0.76), DTE Energy (0.75). There are no equity conferences today.
Sep E-mini S&Ps this morning are mildly lower by -4.00 points (-0.20%) due to the -0.40% sell-off in the Euro Stoxx 50 index, a weak German IFO report, and a sharp sell-off in Amazon.com. The S&P 500 index on Thursday posted a new record high but then fell back to close little changed: S&P 500 +0.05%, Dow Jones -0.02%, Nasdaq -0.04%. Bullish factors included (1) strong Chinese, German, and Eurozone PMI reports, (2) ongoing optimism about Q2 earnings, and (3) the -19,000 decline in U.S. initial unemployment claims to a new 8-1/4 year low. Bearish factors included (1) the much weaker-than-expected U.S. June new home sales report and the -1.0 point decline to 56.3 in the U.S. July Markit PMI index, and (2) continued uncertainty about the extent of new sanctions against Russia.
OVERNIGHT U.S. STOCK MOVERS
Sep 10-year T-notes this morning are down 1 tick. Sep 10-year T-note futures prices on Thursday closed with fairly sharp losses on (1) the sharp drop in initial unemployment claims to an 8-1/4 year low as the improvement in the U.S. labor market may bring forward the Fed’s first rate hike, and (2) reduced safe-haven demand as global stocks remained generally strong despite the various geopolitical hot spots. Closes: TYU4 -12, FVU4 -7.75.
The dollar index this morning is slightly higher by +0.07 (+0.08%) while EUR/USD is down -0.0015 (-0.11%) and USD/JPY is up +0.06 (+0.06%). The dollar index on Wednesday closed little changed in response to mixed U.S. economic data. EUR/USD closed little changed but remained on the defensive on concern that the Ukraine-Russia crisis may yet undercut the European economy. Closes: Dollar index +0.04 (+0.05%), EUR/USD unchanged, USD/JPY +0.34 (+0.34%).
Sep WTI crude oil this morning is down -0.04 (-0.04%) and Sep gasoline is up +0.0041 (+0.15%). Aug crude and gasoline prices on Thursday closed lower: CLU4 -1.05 (-1.02%), RBU4 -0.0258 (-0.91%). Bearish factors included (1) carry-over weakness from Wed’s EIA report that showed a sharp +3.38 million rise in gasoline inventories, and (2) ongoing worries about world crude oil supplies as Libya starts to export crude oil again after a government agreement with rebels.
GLOBAL EVENT CALENDAR07/25/2014
U.S. STOCK CALENDAR07/25/2014