Weekly Market Update: Markets Eye End of European QE and Start of Corporate Earning, Ignoring Fresh White House Turmoil
US equities tested all-time highs yet again this week, with the Nasdaq notching a 10-session winning streak, its longest since Feb 2015. Policy comments from ECB President Draghi and subsequent reports of an ECB tapering decision coming in October sent European bourses lower on the week for the first time since June, while the euro strengthened to its best levels since 2015. Draghi noted that ahead of decisions on QE in the autumn, underlying inflation remains subdued, and this was confirmed by tepid June CPI data. The Trump administration's effort on healthcare went on life support, as his own party's senators balked at GOP repeal plans, while Special Counsel Mueller's Russia investigation widened to Trump's finances and inner circle. The week ended with a shakeup in the White House communications team ahead of the Senate Intelligence Committee hearing testimony next week from key advisors and Donald Trump Jr. The dollar index hit more than a 1-year low, and crude weakened ahead of an OPEC/non-OPEC compliance meeting on Monday. The Shanghai Composite Index finished with a weekly gain of 0.5% as China Q2 GDP growth topped forecasts on strong investment. The S&P500 gained 0.5% and the Nasdaq was up 1.2%, while the DJIA fell 0.3%, weighed on by weak earnings reports from GE and IBM.
In other corporate news this week, earnings season ramped up with notably strong guidance and streaming metrics from Netflix. Morgan Stanley outperformed rival Goldman Sachs in Q2, and Bank of America reported it benefited less from low interest rates than analysts had expected. The Amazon effect hit on two fronts: a Sears plan to sell Kenmore appliances on the site roiled competitors and retailers, and an announcement that Amazon would enter the meal kit market whacked Blue Apron to new lows. Chipotle also sagged on word of another restaurant closure due to reports of customers falling ill, which the company attributed to norovirus.
SUNDAY 7/16
(CN) CHINA JUN RETAIL SALES Y/Y: 11.0% V 10.6%E; YTD Y/Y: 10.4% V 10.3%E
(CN) CHINA Q2 GDP Q/Q: 1.7% V 1.7%E; Y/Y: 6.9% V 6.8%E; YTD Y/Y: 6.9% V 6.8%E
(CN) CHINA JUN INDUSTRIAL PRODUCTION Y/Y: 7.6% V 6.5%E; YTD Y/Y: 6.9% V 6.7%E
MONDAY 7/17
(EU) EURO ZONE JUN CPI M/M: 0.0% V 0.0%E; CPI Y/Y (FINAL): 1.3% V 1.3%E; CPI CORE (FINAL) Y/Y: 1.1% V 1.1%E
3699.HK Reportedly China have ordered Chinese banks to block lending to Dalian Wanda in order to stop completion of overseas deals - press (update)
(US) JULY EMPIRE MANUFACTURING 9.8 V 15.0E
NFLX Reports Q2 $0.15 v $0.16e, Rev $2.78B v $2.76Be; Guides Q3 $0.32 v $0.22e, total Rev $3.0B v $2.88B
RIO.AU Reports Q2 global iron ore production 79.8Mt v 85.30Mt y/y; Shipments 77.7Mt v 81.8Mte
*(CN) CHINA JUN PROPERTY PRICES M/M: RISE IN 60 OUT OF 70 CITIES VS 56 PRIOR; Y/Y: RISE IN 70 OUT OF 70 CITIES V 69 PRIOR
(US) Sen Maj Leader McConnell: Senate to vote on house passed bill to only Repeal Obamacare with 2-year delay to provide a stable transition to a new healthcare program
TUESDAY 7/18
NOVN.CH Reports Q2 $1.22 v $1.16e, Core Op $3.24B v $3.16Be, R$12.2B v $12.1Be
*(UK) JUN CPI M/M: 0.0% V 0.2%E; Y/Y: 2.6% V 2.9%E; CPI CORE Y/Y: 2.4% V 2.6%E
(DE) GERMANY JULY ZEW CURRENT SITUATION SURVEY: 86.4 V 88.0E; EXPECTATION SURVEY: 17.5 V 18.0E
BAC Reports Q2 $0.46 v $0.43e, R$22.8B v $21.9Be
LMT Reports Q2 $3.23 v $3.09e, R$12.7B v $12.5Be
GS Reports Q2 $3.95 v $3.51e, R$7.89B v $7.6Be
(SA) Saudi Arabia said to be considering further 1M bpd export cut to offset the rise in Libyan and Nigerian production - consultant Petroleum Policy
(US) JUN IMPORT PRICE INDEX M/M: -0.2% V -0.2%E; Y/Y: 1.5% V 1.3.%E
(US) JULY NAHB HOUSING MARKET INDEX: 64 V 67E (lowest in 8 months)
(US) Republican Senator Murkowski (R-AK) says she cannot vote to proceed on a repeal of Obamacare without a replacement; third GOP senator to indicate a vote against straight repeal, enough to block the effort on repeal
(US) MAY TOTAL NET TIC FLOWS: $57.3B V $65.8B PRIOR; LONG-TERM TIC FLOWS: $91.9B V $1.8B PRIOR
CSX Reports Q2 $0.64 v $0.59e, Rev $2.93B v $2.85Be; Boosts share repurchase program by $500M to $1.5B (3% of market cap)
IBM Reports Q2 $2.97 v $2.73e, Rev $19.3B v $19.5Be
UAL Reports Q2 $2.75 v $2.65e, Rev $10.0B v $9.96Be
BHP.AU Reports Q4 iron ore production 60.0Mt v 61.5Mte v 54.0Mt q/q
WEDNESDAY 7/19
(US) JUN HOUSING STARTS: 1.22M V 1.16ME; BUILDING PERMITS: 1.25M V 1.20ME
(US) Atlanta Fed raises Q2 GDP to 2.5% from 2.4% on 7/14
(US) Association of American Railroads weekly rail traffic report for week ending July 15th: 540K carloads and intermodal units, +3.8% y/y (27th straight week of gains)
CP Reports Q2 C$2.77 v C$2.05e, Rev C$1.64B v C$1.24Be
AA Reports Q2 $0.62 v $0.60e, Rev $2.86B v $2.89Be
(US) US Senator McCain (R) diagnosed with brain cancer - McCain's Office
(AU) AUSTRALIA JUN EMPLOYMENT CHANGE: +14.0K V +15.0KE (4th consecutive increase); UNEMPLOYMENT RATE: 5.6% V 5.6%E
(CN) China expected to increasing monitoring cash flows in Macau - SCMP
(JP) BANK OF JAPAN (BOJ) LEAVES INTEREST RATE ON EXCESS RESERVES (IOER) UNCHANGED AT -0.10%; AS EXPECTED; Again delays reaching 2% inflation target to ~FY19 from ~FY18
THURSDAY 7/20
SAP.DE Reports Q2 Non-IFRS Net €1.12B v €979M y/y, non-IFRS Op profit €1.57B v €1.58Be, Rev €5.78B v €5.67Be; launches €500M buyback
UNA.NL Reports H1 Net €3.3B, +22.4% y/yy, Rev €27.7B v €27.8Be
(JP) BOJ Gov Kuroda: Reiterates that virtuous economic cycle is working; risks to prices and economy are tilted to the downside; will continue with powerful easing- post rate decision press conference
(UK) JUN RETAIL SALES (EX AUTO FUEL) M/M: 0.9% V 0.5%E; Y/Y: 3.0% V 2.5%E
*(EU) ECB LEAVES MAIN REFINANCING RATE UNCHANGED AT 0.00%; AS EXPECTED
(EU) ECB Statement: Reiterates QE can be increased in size, duration if outlook worsens
SHLD Launches sales of Kenmore products on Amazon.com
(US) JULY PHILADELPHIA FED BUSINESS OUTLOOK: 19.5 V 23.0E (lowest since Nov)
(EU) ECB chief Draghi: Reiterates that rate at stay at current level well past QE; Bond buying to stay at €60B until end of 2017- Prepared remarks
(EU) ECB chief Draghi: To take discussion on guidance during the autumn; Council was unanimous in not wanting to set a precise date for when changes to QE should be discussed - Q&A
(ZA) SOUTH AFRICA CENTRAL BANK (SARB) CUTS INTEREST RATE BY 25BPS TO 6.75%; NOT EXPECTED
(US) JUN LEADING INDEX: 0.6% V 0.4%E
(US) Special counsel Mueller reportedly expanding Russia probe into Trump business transactions, as well as financial dealings of Trump associates - press
(ID) INDONESIA CENTRAL BANK (BI) LEAVES REVERSE REPO RATE UNCHANGED AT 4.75%; AS EXPECTED
V Reports Q3 $0.86 v $0.80e, Rev $4.57B v $4.36Be
MSFT Reports Q4 $0.98 v $0.71e, Rev $24.7B v $24.2Be
FRIDAY 7/21
RMS.FR Reports Q2 Rev €1.36B v €1.36Be
VOD.UK Reports Q1 group Rev €11.5B v €11.9B y/y
GE Reports Q2 $0.28 v $0.25e, Rev $29.6B v $29.1Be
SLB Reports Q2 $0.35 v $0.30e, Rev $7.5B v $7.26Be
(US) New York Fed Nowcast: raises Q2 GDP forecast to 2.0% from 1.9% on 7/14; raises Q3 GDP forecast to 2.0% from 1.8% on 7/14
(US) Press Sec Spicer resigns; reportedly objected to appointment of Anthony Scaramucci as WH Communications Director - press