Europe
A triple-dip recession in Italy, the Eurozone’s third largest economy and Russian troops on the Ukrainian border weighed on European stocks in early trading but some stronger corporate earnings in the US helped markets pull off their lows.
The FTSE 100 saw some widespread losses after a disappointing industrial production figures. Industrial production grew in July by 0.3%, an improvement over last month’s decline of -0.6% but below market expectations. The results go against the June PMI survey that was strong though there was some sign of weakness in July’s PMI the numbers appear to be pre-empting the surveys.
Even with hesitation over sanctions Europe including the UK appears to be starting to feel the effects of businesses shying away from trade with Russia through fear of future reprisal.
The economic numbers from Europe have been mixed at best during the second quarter but Italy officially falling back into recession and Germany posting the biggest decline in factory orders since 2011 really brought it home that Europe is not in great shape.
Europe’s unemployment levels remain stubbornly high and the insolvency ofBanco Espirito Santo (LISBON:BES) is a reminder that the banking sector is fragile.
US drugstore Walgreen (NYSE:WAG) is buying the remaining 55% of UK pharmacy Alliance Boots. It was assumed the deal was partly for tax inversion purposes much like with AbbVie-Shire but Walgreens has opted to keep its headquarters in the US.
Walgreens perhaps saw the political writing on the wall after US President Obama publicly supported a bill to retroactively punish tax-inversion deals. Walgreens could of course just change headquarters later when political winds have drifted in a different direction.
US
Market jitters and regulatory difficulties unwound two major deals yesterday but an improvement in the trade balance and strong earnings from Disney kept US stock markets hovering unchanged from the open.
The news that two proposed mega mergers between 21st Century Fox and Time Warner Cable and also Sprint and T-Mobile look no longer to be happening after offers were withdrawn was another sign of waning confidence in markets.
No longer a take-over target, Time Warner (NYSE:TWX) shares plunged on the open despite growing annual profits and beating top and bottom line estimates after its TV networks including HBO and TBS outperformed. 21st Century Fox
Groupon I(NASDAQ:GRPN) was a heavy loser on the Nasdaq despite a 23% jump in revenues. The stock dropped on the open after the company offered Q3 guidance below market expectations. The concern is that the turnaround from email blasts to an ecommerce website is taking too long and damaging the expected profit growth trajectory priced into the stock. It makes sense to diversify and Groupon as the original deal site have got first mover advantage so they have time to turn things around but the stock may suffer in the meantime.
FX
The US Dollar was mixed today.
AUD/USD got a small lift from some strength in gold, the pair is still weighing up a substantial move below 0.93
USD/CAD dipped with the Canadian economy enjoying a relatively bigger improvement in its trade balance as well as a lift in oil prices today.
The weak industrial production numbers sank GBP/USD back towards 1.68, a break there could see the currency pair back at its June lows around 1.67 which would be a 500 pip drop from recent highs near 1.72.
Commodities
Gold and silver rallied on safe-haven flows over concerns of a Russian invasion after seeing large declines in recent days.
Copper is tracking Chinese equities lower after the poor services PMI yesterday.
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