Daily Briefing – Monday, July 31, 2017
Over the weekend, the EU took legal actions against Poland in light of the government’s decision to go ahead with judiciary reform. Meanwhile, indexes last week ended down as UBS and Paribas reported poor earnings. French inflation remained steady for July, while the business climate for the EU fell from 1.16 in June to 1.05 in July. In the UK, the FTSE fell on tobacco shares alongside a swing in Barclays to a Q2 loss of $1.83bn. German inflation and GDP for Q2 on Friday beat expectations, as did retail sales on a monthly scale – doubling May’s 0.5% to 1.1%. Lloyds this morning published a survey suggesting that British business confidence is at a 6-month low despite moderate growth in the past month. Meanwhile, Le Monde has published an interview with UK Finance Minister Philip Hammond saying that the UK would refrain from offering lower-than-EU taxes to remain competitive post-Brexit. In January, Hammond suggested the opposite to the German Welt am Sonntag, which was seen as a veiled threat.
US markets staggered on Friday after Amazon missed quarterly expectations, pulling down shares by 3%. The S&P closed down 0.13% and the Nasdaq -0.12%. Nevertheless, online retail continues to hurt bricks-&-mortar, according to Fitch, which reports bankruptcies surging 110% since the beginning of the year. Also on Friday, the US’s GDP index for the 2nd Quarter was down by a half from Q1 to 1%. Increased spending is coming from utilities, health care, recreation and cars. Finally, the USD is being impacted downwards by the slowest wage growth in 2 years.
Tech threats from the US also sent indexes down in Asia, where even this morning the Nikkei closed down 0.12%. Chinese benchmarks have recovered, though, the Shenzhen up 0.69% and the Hang Seng 0.92%. In China overnight, the manufacturing PMI for July fell slightly to 51.4 from 51.7 in June, while the non-manufacturing PMI also lost half a point, coming in at 54.5 in July. Analysts believe that signs of a slowing may be the result of the government’s attempt to curb property markets and company debts. Japanese industrial production rose 1.6% MoM in June, missing estimates by a tenth but still better than April’s 3.6% decline. This morning housing starts soared to 1.7% in June from a 0.3% decline the month before.
In spite of so-far relatively good reports, Thursday’s Amazon earnings missed on EPS, spooking futures and hitting indexes around the world. Earnings season continues this week, with Sony and Apple tomorrow, and Tesla on Wednesday – among others.
Oil continues to ignite the imagination, WTI topping $50 after news that the US may sanction Venezuela on its poor elections performance, limiting the country’s oil exports to the US. Futures are up 0.41% after the Baker Hughes report Friday announced a 2-rig uptick.
|8:30 AM GMT||UK: Consumer Credit & Mortgage Approvals, followed at 10 by inflation report hearings|
|9 AM GMT||EU: Unemployment & CPIs|
|2 PM GMT||US: Pending home sales, Chicago PMI & Dallas Manufacturing Business Index.|