Poland’s Prime Minister increased its rhetoric on Russia’s continued buildup of military forces on the Ukraine border. He suggested that Russia is planning to invade under the guise of a peacekeeping mission to prevent further humanitarian violations, or at least pressure Ukraine’s government into ceasing its offensive in the eastern part of the country. This kept European equities weak overnight and by extension, the US.
Also early this morning, Italy’s preliminary report of second quarter GDP showed a second quarter of recession. Growth fell 0.2% in the quarter after dropping 0.1% in the previous period. Italy’s FTSEMIB was the second worst performing index in Europe today, behind Portugal. Additionally, German factory orders fell the most in two and a half years in June, declining 3.2%.
Two major M&A deals were withdrawn last night, which caused a significant amount of negative movement in their respective stocks. Sprint (S) withdrew its intent to buy T-Mobile (TMUS) due to regulatory reasons. 21st Century Fox (FOX) withdrew its bid for Time Warner (TWX) because its board was not responsive to any deal. In both cases, the stocks in question were down significantly, erasing the substantial gains from when the bids were originally announced.
A sizable trade in the foreign exchange shook equity markets in the afternoon. The USD plummeted by more than 20bps (a substantial move, intraday) on volume in Yen futures that was more than a full day’s average trading. Amongst other things, a fat finger error trade was cited as the catalyst behind this trade. Only major currencies such as the euro, pound, yen, and aussie were affected. Emerging market currency pairs were unmoved during the trade. Following the trade and subsequent currency movements, US equity indices began to roll over and finished the day back near flat.
By the end of the day, the S&P 500 (SPX) finished exactly unchanged after a volatile session in both directions. Utilities stocks continued to struggle for the seventh straight day and are now down 3% for the week. Consumer staples, a defensive sector, was the top performer today.
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In the US, weekly jobless claims will be reported tomorrow morning. Economists are expecting claims to trend back up to 305K after the past two weeks likely included temporary distortions from auto manufacturing shutdowns. The other economic report scheduled for tomorrow is June consumer credit, expected to expand at an annualized rate of $18.25 billion.
The main focus for overnight risk markets and much of tomorrow’s trading will be the ECB rate decision, scheduled for 7:45 a.m. ET tomorrow morning. It is unlikely, given media reports, that the ECB is ready to take any further substantial action, but it is likely that it continues to keep a dovish tone. President Draghi will hold his usual press conference at 8:30 a.m. where market participants will be able to glean the most information. The other event of note is the Bank of England’s rate decision, which for the first time may include a dissent on keeping rates unchanged at 0.5%, as two Monetary Policy Committee members have become much more vocally hawkish. This change may not be revealed until the minutes are released in two weeks. More than 40 major US companies are scheduled to report earnings tomorrow. Notable reports include Cooper Tire (CTB), Wendy’s (WEN), Duke Energy (DUKW), Goodrich Petroleum (GDP), Nvidia (NVDA), CBS (CBS), Lions Gate (LGF), Monster Beverages (MNST), Medivation (MDVN), and Zynga (ZNGA). |
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