Yesterday’s downward US stock momentum carried though overnight sessions in Asia Pacific and European markets and has come back around again with US stocks looking set to fall for a second straight day.
Traders responded negatively to reports out of both Apple and Microsoft overnight, even though headline earnings from both companies beat the street. This indicates that following the big moves up of recent days, long-side traders appear to be more interested in finding reasons to head for the door than in taking on new positions. With Boeing cutting guidance this morning and companies like Chipotle and Yahoo missing outright, US stocks may remain under pressure today.
Today’s currency trading finds USD on the rebound from yesterday’s correction but the most interesting action has been in GBP with Sterling rallying following today’s Bank of England minutes. Although the MPC voted unanimously to maintain interest rates yet again, this was mainly attributed wanting to be cautious as the Greece crisis swirled. Excluding Greece, it appears MPC members are getting concerned about the potential for rising inflation. The street has taken this to suggest that later in the year, calls for higher rates could grow, potentially pushing up the timetable for UK rate liftoff from the current expectation of mid-2016.
On the other hand, resource currencies in general fell back with gold and crude oil prices tumbling again. Of the group, NZD has been the worst performer with downward pressure increasing again ahead of today’s RBNZ meeting where another interest rate cut is widely expected.
Crude oil fell overnight after a surprisingly larger increase in API US inventories and could be active again later this morning on the US DOE inventory report. The perfect storm for gold continues to intensify with the metal price falling back under $1,100 on a combination of factors including capital flowing out of defensive havens, low inflation risk with commodity prices falling and speculation that the US and UK could start raising interest rates in coming months suggesting that outside of commodity countries, the pendulum may be starting to swing
away from monetary stimulus.
Apple $1.85 vs street $1.81, sales $49.6B vs street $49.2B, iphone shipments 47.5M below street 48.8M, next Q revenue guidance $49-51B below street $51.1B
Microsoft $0.62 vs street $0.56, $7.5B writedown on Nokia acquisition
Yahoo! $0.16 vs street $0.18, guides next Q ex TAC revenues to $1.00-$1.04B below street $1.07B
Coca-Cola $0.63 vs street $0.60
Boeing $1.62 vs street $1.37, cuts full year guidance to $7.70-$7.90 from $8.20-$8.40, took a $0.77 charge on KC-346 tanker writedown
Chipotle Mexican Grill $4.45 vs street $4.43, same store sales 4.3% below street 5.7%
Significant announcements released overnight include:
S&P upgraded Greece to CCC+ from CCC- citing the risk of a Eurozone exit by 2018 falling to below 50%
API crude oil inventories 2.3 mmbbls vs street 1.1 mmbbls
UK Bank of England minutes 9-0 in favour of maintaining current interest rate and QE targets
Australia leading index 0.0% vs previous (0.1%)
Australia Q2 consumer prices 1.5% vs street 1.7% vs previous 1.3%
Italy industrial orders (0.5%) vs street 5.5%
Italy retail sales 0.3% vs street 0.2%
Upcoming significant announcements include:
9:00 am EDT US FHFA house prices street 0.4%
10:00 am EDT US existing home sales street 5.40M
10:30 am EDT US DOE crude oil inventories street (2.0 mmbbls)
5:00 pm EDT Wed
9:00 am NZST Thu NZ RBNZ interest rate 0.25% cut to 3.00% widely expected
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