Stocks and commodities around the world have continued to climb overnight. US indices are trading up 0.4% this morning with a new record high for the S&P. In Europe, the Dax
is up 1.4% while the FTSE is down 0.1%. Japan's Nikkei rose 2.4% while the Hang Seng rose 1.6%.
Crude oil is also on the rebound today with Brent rising 2.4% and WTI up 2.0% with an OPEC report calling for global demand to grow by 1.2 mmbbl/d in 2017. This combined with falling non-OPEC production is expected to bring the global market back into balance next year.
Renewed enthusiasm has been kindled by expectations of a positive environment for corporate earnings just as reporting season kicks off. Signs point to a strong economy in the US, combined with increased potential for government and monetary support elsewhere. In particular Japan PM Abe's big upper house win on the weekend is expected to unleash another round of fiscal stimulus and reforms to complement the Bank of Japan's monetary efforts.
The Bank of England is widely expected to cut interest rates this week but even if it doesn't move now, it is expected to remain supportive. Governor Carney has been under fire from UK lawmakers at testimony today over his role in the Brexit referendum campaign.
Earnings season is off to a positive start with Alcoa and Daimler both beating the street and both delivering upbeat comments on their prospects. Aircraft orders continue to trickle out of the Farnborough Air Show mainly from Asia with Airbus, Boeing, Bombardier and Airbus reportedly still competing for large and small aircraft orders from India's SpiceJet.
Currency action also shows some of the recent fears of economic and financial instability from the Italian banking crisis, Brexit and other factors. Theresa May's win in the Conservative leadership contest has removed some political uncertainty igniting a rally in GBP as it crossed above $1.3000. Defensive plays like gold and JPY meanwhile continue to ease back as capital moves back out to other markets. CAD is bouncing back a bit along with crude oil as traders prepare for tomorrow's Bank of Canada decision.
Two more Fed speakers today may shed some light on what impact if any Friday’s strong nonfarm payrolls report had on FOMC thinking. St. Louis Fed President Bullard comments may be particularly significant as he swung from hawkish to ultra-dovish following the previous weaker employment report. Overnight, Cleveland Fed President Mester, speaking in Asia, maintained a neutral course emphasizing patience but also confirming that the long term track for rates remains upward.
Alcoa $0.15 vs street $0.09, expecting improved business in second half and a strong 2017
Japan producer prices (4.2%) as expected
UK same store sales (0.5%) vs previous 0.5%
Germany consumer prices 0.3% as expected
Sweden consumer prices 1.0% as expected
Upcoming significant economic announcements include:
9:15 am EDT FOMC Tarullo speaking
9:35 am EDT FOMC Bullard speaking
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