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Commentary: Stocks rebound heading into an active second half to the week
00:00, 06 November 2013
Indices in the US and Europe have been trading higher this morning as traders continue to speculate on the potential for additional monetary support from central banks. After a day of consolidation, European indices have continued to advance on speculation the ECB could cut interest rates tomorrow or at least move toward a more dovish stance after continental service PMI numbers came in mixed. There remains a big risk of reversal, however, if the ECB doesn’t deliver anything. Speculation on a December taper in the US appears to have cooled again following a number of comments from FOMC members this week that point to the central bank still looking for more data to justify cutting back QE. Stocks are on the rise again, while USD has started to retrace some of its gains. The greenback’s retreat has taken some of the pressure off of commodity and currency markets, enabling gold and oil to rebound. US markets may remain active in the run up to Friday’s big employment reports for the US and Canada. In other currency action, GBP has been the class of the field for a second straight day as the UK economy continues to improve into the fall, easing concerns that the summer improvement was weather related. Today, positive industrial production has provided a tailwind for Sterling. NZD is also outperforming on the back of a positive New Zealand employment report. While Twitter’s IPO and trading debut has attracted a lot of attention, today the focus appears to be on Tesla Motors. Shares have been under pressure overnight after the automaker’s guidance was not as strong as hoped and management indicated it is running into supply constraints for its batteries. Corporate News Twitter IPO prices tonight, trading starts tomorrow for TWTR Tesla Motors EPS ex items $0.12 vs street $0.08, sales $602 million vs street $547 million. Guided Q4 EPS similar to Q3 short of street $0.20. Q4 production of 6,000 cars essentially in line but no guidance for 2014 production. Production apparently constrained by limited supply of batteries Hasbro Restated Q3 earnings to take a $75 million charge cuts EPS by $0.50 per share to $0.96 Ralph Lauren $2.23 vs street $2.20, raised dividend by 12.5% Agrium $0.50 vs street $0.61, guidance $0.80-$1.25 vs street $1.50 Magna International $1.39 vs street $1.33 Economic News Significant economic announcements released yesterday afternoon and overnight include: Service PMI reports include: Spain 49.6 vs street 49.0 Italy 50.5 vs street 51.2 France 50.9 vs street 50.2 Germany 52.9 vs street 52.3 Eurozone 51.9 vs street 51.5 Other reports include: US Challenger layoffs 45K vs previous 40K NZ unemployment rate 6.2% as expected NZ Q3 employment change 2.4% vs street 1.6% Australia trade balance ($284M) vs street ($500M) Poland interest rate decision 2.50% no change as expected UK Halifax house prices 6.9% vs street 7.0% UK industrial production 2.2% vs street 1.8% UK manufacturing production 0.8% as expected Eurozone retail sales 0.3% vs street 0.6% Economic reports due later today include: 3:00 pm GMT UK NIESR GDP estimate previous 0.8% 10:00 am EST Canada PMI street 52.0 10:00 am EST US leading index street 0.6% 10:30 am EST US crude oil inventories street 2.1 mmbbls 10:30 am EST US gasoline inventories street (0.4 mmbbls)