Yesterday’s positive momentum coming out of US gains that saw the Dow regain 21,000 and the NASDAQ Composite reach 6,000 propelled Asia Pacific indices higher overnight but enthusiasm has faded into the morning with European indices and US index futures trading pretty much flat.
There wasn’t much in the way of news overnight for traders to react to. Traders appear to have fully priced in the French election results and prospects for a Macron second round win. Meanwhile, the latest UK election polls show the Conservatives holding on to their huge lead with Panelbase and Ipsos Mori showing 49% for the Conservatives vs 26-27% for Labour and about 10% for the Liberal Democrats.
Crude oil held steady overnight despite surprise increases in US API inventories for crude oil of 0.8 mmbbls and gasoline of 4.5 mmbbls. Energy markets could be active around today’s DOE reports with the street expecting a 1.8 mmbbl drawdown from crude oil and a 0.2 mmbbl increase for gasoline
The Euro is giving back some of its recent gains in a normal trading correction, while the Pound is consolidating its recent smaller advance. The ECB meets tomorrow with traders expecting the central bank to hint that it could ease stimulus again sooner if the Euroskeptic Marine Le Pen is defeated in France. The Yen is holding steady ahead of tonight’s Bank of Japan meeting with no major changes expected. CAD has stabilized overnight at a lower level after a big selloff with no new threats on trade from President Trump (yet).
US indices are also holding on to their gains as corporate earnings from big industrial companies continue to come in above expectations. United Technologies and Texas Instruments beat the street by big margins, plus Chipotle appears to have finally resumed its growth momentum following a year or more of scandals and setbacks.
President Trump is expected to announce his long-awaited tax reform plan centring around an expected cut in business taxes to 15% and a reduction in personal taxes as well. The big questions for traders now is whether the reforms meet or exceed what has already been priced in to the market, and what is the timetable. The market has been expecting tax reform to be done by the end of summer, end of the year latest but we’ve already seen with repealing Obamacare that pushing through political reforms can take longer than the market would like.
There appears to be movement on other files as well with the President apparently willing to be flexible on Mexican wall funding to avoid a government shutdown this weekend, and Republicans in congress inching toward agreement on health care reform. Progress could support stocks but surprise setback could have a negative impact on trading.
Boeing $2.01 vs street $1.91, raised 2017 EPS guidance by a dime to $9.20-$9.40
United Technologies $1.48 vs street $1.39, sales $13.8B vs street $13.5B
Texas Instruments $0.91 vs street $0.83, guides next Q EPS to $0.89-$1.01 vs street $0.91
Chipotle Mexican $1.60 vs street $1.29, same store sales 17.8% above street 14.9%
Capital One $1.75 vs street $1.93
Cenovus Energy $0.39 vs street $0.41
BCE $0.87 vs street $0.84
Significant announcements released overnight include:
US API crude oil inventories 0.9 mmbbls
Australia consumer prices 2.1% vs street 2.2% vs previous 1.5%
Singapore manufacturing production 10.2% vs street 7.1%
Upcoming significant economic announcements include:
8:30 am EDT Canada retail sales street 0.0% vs previous 2.2%
8:30 am EDT Canada retail ex auto street (0.3%) vs previous 1.7%
10:30 am EDT US DOE Crude oil inventories street (1.8 mmbbls)
10:30 am EDT US DOE Gasoline inventories street 0.25 mmbbls
10:30 am EDT US DOE Distillate inventories street (1.25 mmbbls)
TBA US Aircraft Carrier Carl Vinson to arrive in waters off Korea
TBA US President Trump to unveil tax reform plans
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