Stock markets around the world have been in retreat overnight, taking their lead from yesterday’s US selloff. Even Spain and Italy which had been so strong to start the year have seen some profit-taking today. US markets have been trying to stage a technical bounce today but have not been able to get very far relative to yesterday’s declines.
This action suggests that traders continue to increasingly view last Friday’s US job disappointment as a one-off distortion that likely won’t have any effect on the Fed’s tapering program. With so much of the market gains of the last year having been driven by QE liquidity, it’s only natural for markets to fall back to Earth as that dries up. After all, world indices
fell by 10-15% within three months of the completion of QE1 and QE2.
There may also be some trepidation heading into the start of earnings season. Alcoa missed last week while two big US banks beat the street marginally this morning. The big gains of recent months have raised valuations and expectations for the quarter, raising the risk of disappointment on earnings or guidance either of which could spark profit-taking.
Currency markets have been mixed this morning with USD consolidating in the middle of the pack. Gold, JPY and AUD have been giving back some of yesterday’s gains. NZD on the other hand, has rallied again after a higher than expected increase in NZ house prices increased the pressure on the RBNZ to start raising interest rates to contain the housing market CAD has started to weaken once again on speculation Canada may underperform the US this year for the first time in a while.
JPMorgan Chase adjusted EPS $1.40 beats street $1.37
Wells Fargo EPS $1.00 beats street $1.39
Significant economic announcements released yesterday afternoon and overnight include:
US retail sales 0.2% vs street 0.1% vs previous 0.7%
US retail ex auto 0.7% vs street 0.4%
Germany wholesale prices (1.8%) vs previous (2.2%)
France consumer prices 0.7% vs street 0.8%
Italy consumer prices 0.7% vs street 0.6%
UK consumer prices 2.0% vs street 2.1%
UK producer input prices (1.2%) vs street (1.5%)
UK producer output prices 1.0% as expected
UK retail prices 2.7% as expected
Eurozone industrial prodn 3.0% vs street 1.8%
NZ house prices 10.0% vs previous 9.2%
Japan trade balance (¥1,254B) vs street (¥1,236B)
Economic reports due later today include:
There are no major economic announcements due in the US or Canada later today.