Europe
Shares in Europe meandered higher after a modest turnaround in PMIs and Spanish unemployment in a sign that ECB stimulus efforts might be starting to have an effect.
In the UK the data wasn’t too supportive with missed earnings and retail sales expectations but the FTSE 100 recovered early losses as sentiment returned particularly after a multi-year low in US jobless claims.
Germany beat on both the service and manufacturing PMI’s marking the beginning of what could be a turnaround in recent weak economic data. France saw a snapback in the services PMI to above 50 indicating expansion but saw further declines in manufacturing.
Spain’s unemployment rate dropped to 24.5% down from 26% in the first quarter. Spanish jobs are moving in the right direction but the rate of change is too slow; at this pace Spain’s economy will still be in the doldrums for the next five years.
UK retail sales missed expectations by rising by a puny 0.1% in June. Overall though, the second quarter did see positive retail sales growth which is an improvement over the contraction in the first quarter. This is supportive of the UK recovery story and the Bank of England being the first G8 central bank to raise interest rates.
The FTSE 100 hovered in the 6,800 vicinity on positive international sentiment despite the weak domestic data. The consumer staples sector fell, dragged down after poor earnings from Unilever. Kingfisher (LONDON:KGF) and Easyjet (LONDON:EZJ) earnings misses added extra weight to the index.
US
With geopolitics side-lined, stocks in the US got off to a strong start after earnings results from, in the words of Janet Yellen some of the more “stretched” sectors of the stock market including Biogen, Gilead Sciences and especially Facebook (NASDAQ:FB) all knocked the ball out of the park.
As the morning progressed the earnings picture was not quite so clear. Trip Advisor got clobbered down 10% while Caterpillar beat profit estimates but missed on revenues. Ford earnings impressed but the stock was dragged down by auto peer GM whose profits were crushed by 80% on recall losses.
US yields moved higher after unemployment claims dropped to 284k, the lowest since before the financial crisis in 2006. The claims number points to a potentially big jobs gain in the July non-farm payroll number which will add to the case for the Fed to raise rates quicker.
New homes sales tumbled to 406k in June below the 504k the month prior and the 480k estimate.
Facebook gapped to new all-time highs after beating earnings estimates on the top and bottom line afterhours. It appears any metric that gets investors concerned, Facebook then go back and put all their huge cash reserves resources into fixing it. It was first mobile ad revenue that was the problem, mobile ad growth now outstrips desktop, then user growth, then youth user growth but all metrics are growing unlike some social media peers including Twitter.
A shake up at Wal-Mart (NYSE:WMT), the company with a bigger GDP than many countries saw CEO Bill Simon step down after a number of troubled quarters.
FX
The New Zealand dollar was the big FX mover of the day seeing large losses after the Reserve Bank of New Zealand raised the official cash rate but suggested a pause in rate hikes with a “period of assessment”. The move by the RBNZ was always on the cards after the drop in the CPI recently.
The British pound fell today losing out to both the US dollar and euro as a reflection of the UK retail sales miss when compared with the PMI recovery and jobless numbers in the EZ and US respectively.
The euro was more subdued today after yesterday’s drop though the 1.35 level. If the euro can hold below 1.35 against the US dollar, it could be the calm before the storm of more declines.
Commodities
Gold and silver were substantially lower as more safe-haven flows came out of the market. Gold dropped back below 1300 the mid-level of the 1200-1400 range the precious metal has been sitting in for months.
Copper was seeing strong gains as usual taking its cues from China after the bounce back in Chinese PMI data.
Crude Oil was pulling back after yesterday’s run higher following a bigger drop than expected in US inventory data.
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