Positive momentum continued through Asia Pacific trading overnight but has stalled in European and North American trading this morning. The S&P/ASX continued to drive higher, while the Dax
has levelled off to consolidate its recent breakout. Other European and US indices are trading moderately lower.
Similarly, crude oil has settled back after four days of screaming gains to confirm that it has moved into a $44.00 to $55.00 or $60.00 trading range and that recent trading has been more of a bear market rally than the start of a new recovery trend. Some capital has also started to go back into defensive plays with gold and USD bouncing back this morning.
GBP is climbing today and is among the stronger performers as UK completed a hat trick this morning with manufacturing, construction and service PMI all increasing over month and coming in above expectations, indicating that the UK economy has gotten off to a good start in 2015. Even if the Bank of England doesn’t raise rates this year, this data indicates it’s unlikely to lower them either. We may hear more around tomorrow’s central bank meeting.
Today, the People’s Bank of China joined the parade of easing moves out of central banks, cutting bank reserve requirements, a tool it has used more frequently over the last several years to affect its economy over than interest rates. The prospect for monetary stimulus in China has boosted the hang Seng, S&P/ASX, NZD and AUD but not copper so far.
US ADP payrolls were pretty much a non-event this time around as the 10K shortfall relative to street expectations can be mostly explained by an 8K upward revision to the previous month. With payrolls still in the 200-250K sweet spot (economy strong but not so strong to pressure the Fed to raise rates sooner) markets were basically unaffected. US focus now pretty much turns back to earnings for a couple of days until Friday’s nonfarm payrolls. US service PMI and crude oil inventories may have some impact later this morning.
Staples agrees to buy Office Depot for $11.00 per share or $6.3B through a combination of cash and stock, a 44% premium to Monday’s close
Chipotle Mexican Grill $3.84 vs street $3.79, sales $1.07B below street $1.08B, same store sales up 16.1%
General Motors $1.19 vs street $0.83
Merck $0.87 vs street $0.86
Whirlpool $3.52 vs street $3.19
Macy’s to buy luxury retailer Bluemercury for $210M, Q4 same store sales 2.5% vs guidance 2.5-3.0%, above street 2.3%. raised Jan 2015 yar guidance to $4.35-$4.37 from $4.25-$4.35
Walt Disney $1.27 vs street $1.07
Gilead Sciences $2.43 vs street $2.23, launches quarterly dividend of $0.43 per share
Economic reports released overnight and this morning include:
China PBOC cuts reserve requirement ratio for banks by 0.50% to 19.50%, also cuts agricultural bank requirement by an additional 4.00%
US ADP payrolls 213K vs street 220K, previous revised up to 253K from 241K
Eurozone retail sales 2.8% vs street 2.0%
Service/Non-manufacturing PMI reports:
Australia 49.9 vs previous 47.5
Japan 51.3 vs previous 51.7
China HSBC 51.8 vs previous 53.4
India 52.4 vs previous 51.1
Sweden 57.9 vs street 56.0
Spain 56.7 vs street 54.4
Italy 51.2 vs street 50.0
France 49.4 vs street 49.5
Germany 54.0 vs street 52.7
Eurozone 52.7 vs street 52.3
UK 57.2 vs street 56.3
Brazil 48.4 vs previous 49.1
Economic reports due later today include:
9:45 am EDT US Markit Service PMI street 54.1
10:00 am EDT US ISM non-manufacturing PMI street 56.4
10:00 am EDT Canada Ivey PMI street 53.4
10:30 am EDT US crude oil inventories street 3.0 mmbbls