It didn’t take long for traders to reject Friday’s relief rally as a dead cat bounce and send markets hurtling lower once again. European indices
have gone back into retreat after SAP cut earnings guidance. US indices tried to hold up but the bottom fell out from under the Dow after Big Blue announced it is selling its microelectronics division at a loss and pulled its 2015 guidance. Focus on earnings may continue through the day in the lead up to Apple’s key report after US exchanges close this afternoon.
With uncertainty hitting corporate earnings, trading may remain volatile right through earnings season. The looming end of QE3 may also continue to impact trading. This morning Dallas Fed Fisher indicated he sees no reason not to end QE3 as planned further indicating that the comments from St. Louis Fed President Bullard on delaying the end to QE3 made last week which sparked the trading rebound were likely a timely (for boosting an oversold market) but isolated voice.
Crude oil has been holding steady today, reports that Saudi Arabia and Kuwait have stopped production at one of their fields for environmental reasons (but which apparently also happens to be a lower margin operation) suggest that prices have fallen enough to bite producers and further price declines could spark more shut ins, potentially reducing supply back in line with demand.
In currencies today, gold is on fire again, taking a run at $1,250 responding to higher volatility and uncertainty in the marketplace. AUD and GBP are among the top performers while NOK and SEK are dragging behind. NZD is up a bit but remains stuck below $0.8000. The loonie has been steady despite a better than expected Canadian wholesale sales report as traders look ahead to Wednesday’s Bank of Canada meeting.
JPY is steady but the Nikkei was strong overnight after Bank of Japan Governor Kuroda indicated core inflation may remain closer to 1.25% short of its 2.0% target, while PM Abe suggested further sales tax increase could be delayed if the economy struggles. The potential for a more dovish fiscal and monetary environment to continue ignited a rally in the Nikkei to start the week.
In addition to Apple earnings, key economic reports from China including GDP, retail sales and industrial production are due this evening which could keep trading active over the next 24 hours.
IBM $3.68 vs street $4.31, saw slowdown in Sept, cut guidance FY 2014 operating EPS to (2-4%) from 2013’s $16.64 from $18.00, withdrew 2015 operating EPS guidance of $20.00, will issue new guidance in January
IBM selling microelectronics business at a loss, taking a $4.7B charge and paying Globalfoundries Inc. $1.5 billion in cash to take on the struggling business.
SAP cut its 2014 operating profit forecast to €5.6-5.8B from €6B blaming a shift among customers to cloud computing
Economic reports released overnight and this morning include:
Canada wholesale sales 0.2% vs street (0.3%)
UK Rightmove house prices 7.6% vs previous 7.9%
Germany producer prices (1.0%) as expected
Italy industrial sales (2.3%) vs previous (1.3%)
NZ service PMI 58.0 vs previous 57.9
NZ consumer confidence 123.4 vs previous 127.7
Economic reports due later today include:
After 4:00 pm EDT Apple earnings street $1.30