Retailer rally, commodity crunch, USD uplift, FOMC back in focus
Focus turned back toward economic and corporate news on Tuesday with traders reacting to a number of significant developments. It appears that the correction of the last two weeks has run its course with European indices gaining for a second straight day on a stronger expectations component of the German ZEW investor survey.
US consumer price inflation came in around expectations further adding to the case for the Fed to potentially start raising interest rates next month, sparking another advance for USD. Coming out of an earnings season where many companies were complaining of the impact of an already high greenback on earnings, US stocks rose at a smaller pace than their overseas peers through the morning and then slumped back in the afternoon but managed to finish flat on the day. The cancellation of a soccer match in Germany amid reports of a potential attack didn’t help on a day when some traders were already jittery.
This afternoon saw another big merger announced with France’s Air Liquide agreeing to purchase Airgas of the US. There are two significant things to consider about this deal and the big brewery deals announced last week. On one hand, it seems that growth prospects in some industries have become so limited that many companies are finding the only growth avenue left is to gobble up their competitors. On the other hand, the fact that many of the buyers in recent mega transactions are strategic (other companies ) rather than financial (hedge funds and private equity) means that many managers are still seeing value out there.
The USD advance also helped to knock gold back down with yesterday’s rally turning out to be a dead cat bounce within a bigger downtrend. Crude oil has also been falling with traders refocusing on the glut of supply in the world market.
One brighter spot among US stocks has been the retail sector which saw Home Depot and Wal-Mart gain about 4% on better than expected earnings. There’s been a lot of concern about the prospects for the holiday selling season after Macy’s and Nordstrom missed last week and issued poor guidance with Black Friday now less than two weeks away, so today’s news provided a bit of relief for the sector. One offset through was Urban Outfitters who declined as traders tried to make sense out of the clothing retailer’s plan to get into the pizza business.
Looking ahead there’s not a huge amount of news overnight although the Australian wage report may attract attention from those trying to figure out if low commodity prices are masking rising inflation elsewhere. Tomorrow’s FOMC minutes could spark another round of Fed speculation trading as they may give traders a better indication of how close the central bank was to raising rates in October which was supposedly a live meeting.
Air Liquide agrees to purchase US competitor Airgas for $143/share or $13.4B
Citrix Systems to spin off its GoTo family of software into a separate publicly traded company
Significant announcements released overnight include:
US consumer prices 0.2% vs street 0.1%
US core CPI 1.9% as expected
US real weekly earnings 2.1% vs previous 2.2%
US industrial production (0.2%) vs street 0.1%
US NAHB housing index 62 vs street 64
UK consumer prices (0.1%) as expected
UK core CPI 1.1% vs street 1.0%
UK producer input prices (12.1%) vs street (12.0%)
UK producer output prices (1.3%) as expected
UK retail prices 0.8% vs previous 0.9%
UK house prices 6.1% vs street 5.4%
Germany ZEW current 54.4 vs street 55.0
Germany ZEW expectations 10.4 vs street 6.0
Norway GDP 1.8%/quarter vs street 0.2%
Upcoming significant economic announcements include:
(Note: 11:30 am in Sydney/Melbourne is currently 1:30 pm in Auckland, 4:30 pm in Vancouver, 7:30 pm in Toronto/Montréal, 12:30 am in London and 8:30 am in Singapore)
10:00 am AEDT Australia conf board leading index previous (0.4%)
10:30 am AEDT Australia Westpac leading index previous 0.1%
11:30 am AEDT Australia wage price index street 2.3%
TBA Singapore GDP street 1.4%
1:00 pm GMT Poland employment street 1.0%
1:00 pm GMT Poland wages street 3.6%
8:00 am EST FOMC Dudley, Lockhart and Mester speaking on panel
8:30 am EST US housing starts street 1,160K
8:30 am EST US building permits street 1,147K
10:30 am EST US DOE crude oil inventories street 2.0 mmbbls
10:30 am EST US DOE gasoline inventories street (1.5 mmbbls)
10:30 am EST US DOE implied oil demand previous 15,959 mmbbls
2:00 pm EST US FOMC minutes
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