Stock markets across North America and Europe fell again today as traders continued to view the current round of earnings reports as a reason to head for the door.
When a rising market fails to respond to positive news, it’s often an indication of exhaustion and the potential for a reversal. Today the best US jobless claims report in nearly 42 years was pretty much ignored by both US indices
and USD. This adds more evidence to the case for the Fed to start raising interest rates later this year, and the failure of the greenback to respond to this news suggests that a September liftoff and 1-2 hikes this year has been fully factored into USD. This leaves me to wonder what it would take to drive USD further and increases the potential for a reversal.
Trading action in NZD suggests a correction may already be starting. The Kiwi Dollar soared instead of falling after the RBNZ cut interest rates yesterday indicating that the cut had already been priced in. not only does it appear that traders were covering shorts on the news, but that the central bank’s wishy washy comments on further rate cuts encouraged some traders to go bargain hunting. NZD has outperformed AUD over the last 24 hours suggesting some traders may be leaning to the RBA being the next to potentially cut rates rather than the RBNZ.
After US exchanges closed for the day, Amazon.com posted a spectacular earnings report that has sent its shares sharply higher in aftermarket trading. It remains to be seen though if enthusiasm will be contained to Amazon alone, or the tech sector, or if this can have a wider effect.
Today also brings flash PMI reports from around the world, giving traders their first look at how world economies are performing into the summer. China may attract particular attention with traders trying to figure out how the economy is holding up after the recent stock market crash. The US report may also attract interest from traders trying to figure out if the US economy is strong enough for the Fed to start raising rates or if it is weakening enough to force a delay to liftoff.
Amazon.com $0.19 yes a Q2 profit vs street ($0.15), sales $23.1B vs street $22.4B
Visa $0.74 vs street $0.58
Starbucks $0.42 vs street $0.41, same store sales 7.0% vs street 6.1%, new partnership with Pepsi for ready to drink products in Latin America,
AT&T $0.69 vs street $0.63
Celestica has agreed to sell its Toronto property (at Don Mills and Eglinton)` including its head office and manufacturing facility to a group of developers for $137 million, contingent on finding a new site for its Toronto operations and approval of the redevelopment plan within two years
Significant announcements released overnight include:
South Africa interest rate 0.25% increase to 6.00% as expected
US jobless claims 255K vs street 278K
US leading index 0.6% vs street 0.3%
US natural gas 61 BCF vs street 72 BCF
Canada retail sales 1.0% vs street 0.6%and previous (0.1%)
Canada retail ex auto 0.9% vs street 0.8%
UK retail sales 4.0% vs street 4.8%
UK retail ex auto and fuel 4.2% vs street 5.1%
Upcoming significant announcements include:
8:45 am AEST NZ trade balance street $100M
11:35 am AEST Japan flash manufacturing PMI street 50.5
11:35 am AEST China flash manufacturing PMI street 49.7
3:00 pm AEST Singapore industrial production street (0.4%)
8:00 am BST France flash manufacturing PMI street 50.8
8:00 am BST France flash service PMI street 53.8
8:00 am BST Germany flash manufacturing PMI street 51.9
8:00 am BST Germany flash service PMI street 54.0
8:00 am BST Eurozone flash manufacturing PMI street 52.5
8:00 am BST Eurozone flash service PMI street 54.2
9:45 am EDT US flash manufacturing PMI street 53.6
10:00 am EDT US new home sales street 548K
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