have been stronger overnight in what appears to be a combination of a trading bounce for Europe and North America from recent weakness and positive momentum from Asia Pacific indices. China continued to power ahead overnight with the Hang Seng and China A indices climbing again as sentiment toward the country continues to improve. Meanwhile, soft employment and retail sales out of Japan indicated no pressure on the Bank of Japan to slow its QE program boosting the Nikkei and undercutting JPY.
In other currency action, USD has been outperforming other majors indicating that traders are expecting positive employment, GDP and PMI reports from the US this week which could then put pressure on the Fed to raise rates sooner than currently expected.
GBP, meanwhile, continues to drift lower with efforts to talk Sterling down increasing. Bank of England Deputy Governor Broadbent suggested the currency is modestly overvalued while the IMF was more aggressive suggesting GBP appears to be 5-10% overvalued in their estimation that that this seems to be preventing the UK economy from rebalancing. The previous recent subject of central bank warnings on valuation, NZD, meanwhile is underperforming its group and continues to fall in the wake of last week’s RBNZ comments.
The reaction to overnight political developments which include talk of more sanctions against Russia and Israel ramping up its military campaign in Gaza has been mixed. Stocks appear to be ignoring it completely, but gold and silver are climbing as some capital appears to be seeking out havens.
Commodity markets are mixed today. In base metals, aluminium and zinc are climbing while copper and nickel are lower as China’s resurgence continues to impact metal trading. Crude oil and natural gas are holding steady. Grains are lower in reaction to last night’s crop report which shows corn and other crops doing a lot better than last year.
Today the two day FOMC starts with the announcement due tomorrow afternoon. Another $10B taper is widely expected along with dovish talk on interest rates. Tomorrow morning we will get US Q2 GDP and ADP payrolls. If these come in strong it will be interesting to see if we get any hawkish dissenters among FOMC members. Later today, earnings from Twitter are due which could spark some activity in the social media sector.
Merck $0.85 vs street $0.81
Pfizer $0.58 vs street $0.57
Herbalife $1.55 vs street $1.57, cut sales growth forecast to 8.5-10.5% from 10-12%
UPS $1.21 vs street $1.25
WestJet $0.40 vs street $0.28, revenues $930M vs street $913M
Talisman Energy ($0.01) vs street $0.03, ($0.24) including a $171 million trading loss
Economic reports released overnight and this morning include:
Japan unemployment rate 3.7% vs street 3.5%
Japan retail sales (0.6%) vs street (0.5%)
Australia new home sales 1.2% vs previous (4.3%)
Spain retail sales 0.0% vs previous 0.8%
UK mortgage approvals 67K vs street 63K
Economic reports due later today include:
9:00 am EDT FOMC two day meeting starts
9:00 am EDT US S&P/CaseSchiller house prices street 9.0% vs previous 10.8%
10:00 am EDT US consumer confidence street 85.5
Twitter, American Express, Newmont Mining and many others report earnings after US exchanges close today.