Positive economic and corporate news overnight has pulled focus away from political risks back toward growth and valuations. Flash PMI results showed that the economic advance led by the US and UK is spreading to other countries. China posted a big jump which supported additional rallies in the Hang Seng and base metal prices.
are rallying this morning on the back of generally stronger than expected flash PMI results across the Eurozone particularly on the service side. This suggests that the ECBs stimulus plans have started to have a positive impact on the economy already.
US flash PMI is due out later this morning, but on the interim there are a ton of earnings reports for traders to chew on. Last night the market responded to strong numbers out of Facebook and Gilead Sciences, although other technology names followed an emerging trend of better than expected earnings offset by weaker than expected guidance. This morning Caterpillar, Southwest and Ford have come in above expectations while other reports have been more muted.
It’s a big day for Canadian earnings too with a number of seniors reporting, particularly across resource sectors. Potash has been the star of the show so far beating the street by a wide margin for the second quarter in a row. Loblaw also came in strong even before last week’s management shakeup while other reports have been mixed.
The US Dollar has started to rally again in the last few minutes. This morning, US jobless claims fell to 284K, their lowest level in over eight years, and the first time under 300K since May. Recall that Fed Chair Yellen and other FOMC members have suggested that continued improvements in the job market could accelerate monetary policy normalization (interest rate increases and reductions to Fed balance sheet).
The main action in currency markets overnight has been in NZD which sold off dramatically following the latest RBNZ interest rate decision. Although the central bank raised interest rates by 0.25% for the fourth meeting in a row, it also indicted that it is done for now, with plans to pause for a period of assessment before changing rates again. More significantly, Governor Wheeler aggressively warned against NZD. Noting that dairy and timber prices have fallen, he called the level of the Kiwi Dollar unjustified and unsustainable and warned “there is the potential for a significant fall”.
Gold is trading lower again today, falling back under $1,300/oz in reaction to the rallying USD and a shift away from defensive havens for now. Political risks, however, could flare up again at any time as an aircraft has disappeared in Africa this morning (possibly the third major civilian aircraft incident in a week) and it’s unknown at this if flights to Israel will be allowed to resume after two days of cancellations due to rocket fire near the Tel Aviv airport.
Caterpillar $1.69 vs street $1.51, raises FY guidance to $6.20 from $6.10
Facebook $0.42 vs street $0.32, sales $2.91B vs street $2.80B, over 1.5 million active advertisers
Gilead Sciences $2.36 vs street $1.79, sales $6.5B vs street $5.8B
Qualcomm $1.44 vs street $1.21, guides next Q to $1.20-$1.35 below street $1.38
Citrix Systems $0.78 vs street $0.61, sales $778M vs street $772M, guides next Q $0.70-$0.73 vs street $0.76, guides FY to $3.20-$3.25 vs street $3.09
Ford $0.40 vs street $0.36
General Motors $0.58 in line, sales $39.6B vs street $40.5B
SouthWest Airlines $0.70 vs street $0.61
AT&T $0.62 vs street $0.63
Eli Lilly $0.68 vs street $0.66
DR Horton $0.42 vs street $0.49, raises dividend 67%
3M $1.91 in line, sales $8.13B vs street $8.07B
Potash $0.56 vs street $0.45, raises FY guidance to $1.70-$1.90 from $1.50-$1.80, above street $1.68
Loblaw $0.75 vs street $0.68
Teck Resources $0.13 vs street $0.12
Precision Drilling $0.03 vs street ($0.01), revenues $475M vs street $460M
EnCana $0.23 in line, raises FY cash flow guidance to $4.60-$4.85 from $3.90-$4.05
Husky Energy $0.63 vs street $0.70
Rogers $0.84 in line
Economic reports released overnight and this morning include:
US jobless claims 284K vs street 307K
NZ interest rate 0.25% increase to 3.50% expected
NZ trade balance $247M vs street $100M
China flash manufacturing PMI 52.0 vs street 51.0
Japan flash manufacturing PMI 50.8 vs previous 51.5
France flash manufacturing PMI 47.6 vs street 48.0
France flash service PMI 50.4 vs street 48.2
Germany flash manufacturing PMI 52.9 vs street 51.9
Germany flash service PMI 56.6 vs street 54.5
Eurozone flash manufacturing PMI 51.9 vs street 51.7
Eurozone flash service PMI 54.4 vs street 52.7
UK retail sales 3.6% vs street 3.9%
UK retail ex auto 4.0% vs street 4.6%
Sweden unemployment rate 9.2% vs street 9.0%
Sweden producer prices 2.3% vs previous 2.8%
Italy retail sales (0.5%) vs street 1.0%
Economic reports due later today include:
Visa, Starbucks and Amazon.com among others report earnings after 4:00 pm EDT.
9:45 am EDT US flash manufacturing PMI street 57.5
10:00 am EDT US new home sales street 475K
10:30 am EDT US natural gas street 96 BCF