tocks in the US sold off Thursday, outpacing their European counterparts to the downside with the NASDAQ and the Russell 2000 leading the way downward. With earnings season nearing its end, traders showed no mercy for companies missing on sales results or guidance from a slate of reports dominated by small cap, momentum and media companies.
In particular, Green Mountain Coffee Roasters, makers of Keurig coffee machines were hammered for a 27% loss on soft sales while Tesla Motors took a 9% hit on soft production guidance. Media stocks, were hammered for a second straight day with Viacom diving 14% and 21st Century Fox falling 5% after both companies continued the trend of weak sales out of the sector from a combination of slowing subscriber growth and the strong USD.
There’s still a lot of potential trading action through the end of the week. first up is the Bank of Japan. While no changes to QE are expected, traders may be watching for signs of whether the number of hawkish dissenters is growing or not and if governor Kuroda continues to back away from the potential for more QE. JPY has been weakening this week as USD has gained but this could change depending on how hawkish or dovish the central bank statement is.
Tomorrow morning brings US and Canadian employment reports, which could potentially spark significant moves in both USD and CAD. Despite the lowest jobless claims in 42 years last month, ADP payrolls were soft and Challenger layoffs spiked suggesting some summer softness in the US job market. Because of this, I am thinking a below street 200K even for this month, the low end of the 200-250K sweet spot. A figure below this could be taken by traders as likely putting off interest rate liftoff and could knock USD down while supporting stocks. A number above 200K would likely be seen as keeping the Fed on track for liftoff this year and supporting the hawkish camp.
For Canada, I’m thinking we should see a reversal of last month’s full-time / part-time split with full time retrenching and part-time rebounding into the summer. The benefits of the lower loonie may also help although it’s too soon to see anything from last month’s interest rate cut. I’m looking for a 10K overall increase, slightly above the 5K street estimate. Ivey Canada PMI due later in the morning and oil price action may also influence trading in the loonie through the day.
There have been no major reports after the US close today.
Significant announcements released overnight include:
UK interest rate and QE 0.50% and £375B no change expected, 8-1 vote in interest rate with one hawkish dissenter McCafferty on inflation risk
UK Bank of England inflation report still calling for first rate hike Q2 of 2016 and one in the second half of 2016 t0 1.00% by end of 2016
2015 GDP forecast raised to 2.8% from 2.5%
2015 wage growth forecast raised to 3.0% from 2.5%
Inflation expected to reach 2.0% within two years
UK NIESR GDP estimate 0.7% unchanged
UK Halifax house prices 7.9% vs street 8.3%
UK industrial production 1.5% vs street 2.2%
UK manufacturing production 0.5% vs street 0.4%
US jobless claims 270K vs street 272K
US Challenger layoffs 105K vs previous 45K
US natural gas street 42 BCF
Germany factory orders 7.2% vs street 5.2%
Greece unemployment rate 25.0% vs street 25.5%
Upcoming significant announcements include:
9:30 am AEST Australia construction PMI previous 46.4
11:30 am AEST Australia home loans street 5.0%
4:00 pm AEST Bank of Japan decision no change to interest rates, QE or
lone hawkish dissenter expected
7:00 am BST Germany industrial production street 2.2%
7:00 am BST Germany trade balance street €21.0B
7:45 am BST France trade balance street (€3.6B)
7:45 am BST France industrial production street 1.4%
8:00 am BST Spain industrial output street 3.8%
9:00 am BST Norway industrial production previous 4.2%
9:30 am BST UK trade balance street (£1.7B)
10:00 am BST Greece consumer prices street (2.0%)
8:30 am EDT US nonfarm payrolls street 225K
8:30 am EDT US payrolls revision previous 223K
8:30 am EDT US private payrolls street 212K
8:30 am EDT US average hourly earnings street 2.3% vs previous 2.0%
8:30 am EDT US unemployment rate street 5.3%
8:30 am EDT US participation rate street 62.6%
8:30 am EDT Canada employment change street 5K
8:30 am EDT Canada full-time jobs street 64K
8:30 am EDT Canada part-time jobs street (71K)
8:30 am EDT Canada unemployment rate street 6.8%
8:30 am EDT Canada building permits street 5.0%
10:00 am EDT Canada Ivey PMI street 51.5 vs previous 55.9
1:00 pm EDT US Baker Hughes drill rig count previous 874
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