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Daily Markets Update, 25 July


  • European Shares Gain on German Business Optimism
  • European bank stocks follow bond yields higher
  • Dollar steady as Fed meeting begins
  • The euro climbing on


Global stocks climbed Tuesday  rebounding after three days of declines as rising bond yields spurred banks, German business sentiment touched a record high.  U.S. stock futures climbed on strong corporate earnings, and gold headed for the first drop in four days.

The Stoxx Europe 600 was up 0.7% midday, with banks, insurance companies and miners leading much of the advance.

Monday’s Key Earnings

Anadarko Petroleum (NYSE:APC-4% AH after missing expectations, capex cut.
Celanese (NYSE:CE+0.5% on earnings beat.
Core Laboratories (NYSE:CLB-6.1% AH on disappointing Q3 outlook.
CryoLife (NYSE:CRY-4.6% AH on Q3 outlook.
Alphabet (NASDAQ:GOOG-2.6% AH on EU fine impact.

Today’s Markets 

In Asia, Japan -0.10%. Hong Kong +0.02%. China -0.21%. India -0.05%.
In Europe, at midday, London +0.92%. Paris +0.86%. Frankfurt +0.87%.
Futures at 6:20, Dow +0.15%. S&P +0.15%. Nasdaq +0.05%. Crude +1.3% to $46.96. Gold -0.20% to $1,251.80.
Ten-year Treasury Yield +2 bps to 2.27%


Germany Ifo Business Climate Index

In true terms, German economic activity, while still quite robust, has come off the highs.

”A strong economy is causing a strong euro,” said to The WSJ Peter Elston, chief investment officer at Seneca Investment Managers. While it won’t help exporters, many European companies are likely to benefit from falling unemployment and stronger growth in the region, he added.


The EUR/USD 3-month risk reversals hit a multi-year high as traders turn increasingly bullish on the euro.


German 2s10s curve steepens and ahead of bank earnings later this week, helping the DAX regain some of the recently lost ground, although as the chart above shows it has a way to go before catching up with the MSCI World Stocks index which remains just shy of all time highs.

European shares have given up most of the recent outperformance as the euro strengthens.

Markets this week are moving to the ebbs and flows of company- and industry-specific forces as investors brace for the Fed decision, when the central bank will weigh robust global growth against feeble inflation and mixed U.S. economic data. Expectations are for policy makers to keep rates on hold; clues to the fate of its balance sheet will be key.

Greece returned to the bond market for the first time since 2014. The sub-investment grade rated country is seeking to sell five-year debt yielding about 4.75 percent, according to a person familiar with the transaction.

Greek bond yields are drifting lower as the nation prepares to issue debt in the markets for the first time in three years.


Main market moves from Bloomberg: 


  • The euro rose 0.3 percent to $1.1672 as of 8:01 a.m. in New York
  • The Bloomberg Dollar Spot Index dropped less than 0.1 percent.
  • The British pound rose 0.3 percent to $1.3071, the strongest in more than a week.
  • The Japanese yen fell 0.3 percent to 111.48 per dollar, the first retreat in more than a week.


  • The Stoxx Europe 600 Index gained 0.8 percent, the biggest rise in almost two weeks.
  • The MSCI All-Country World Index rose 0.2 percent.
  • Germany’s DAX Index gained 0.7 percent, the biggest rise in almost two weeks.
  • The MSCI Emerging Market Index fell 0.3 percent, the largest dip in more than two weeks.
  • Futures on the S&P 500 Index added 0.2 percent after the underlying gauge slipped 0.1 percent on Monday.


  • Gold fell 0.4 percent to $1,250.23 an ounce, the largest dip in more than two weeks.
  • West Texas Intermediate crude surged 1.7 percent to $47.13 a barrel, the biggest climb in more than three weeks.
  • Iron ore rose 2.2 percent to 521 yuan per metric ton.
  • Copper surged 2.6 percent to $2.81 a pound.


  • The yield on 10-year Treasuries rose two basis points to 2.28 percent, the highest in more than a week.
  • Germany’s 10-year yield also added two basis points to 0.53 percent.
  • Britain’s 10-year yield rose two basis points to 1.204 percent.
  • France’s 10-year yield increased three basis points to 0.78 percent, the first advance in more than a week.


  • The Australian dollar rose 0.3 percent after erasing an earlier decline. Attention turns to two key events on Wednesday: June quarterly inflation data and a speech on the labor market and monetary policy from Reserve Bank of Australia Governor Philip Lowe.
  • Japan’s Topix index lost 0.3 percent. Australia’s S&P/ASX 200 Index added 0.7 percent. South Korea’s Kospi index retreated 0.5 percent.
  • The Hang Seng Index was little changed while the Shanghai Composite Index slipped 0.2 percent.


Stocks News

Michael Kors agrees to acquire Jimmy Choo (OTCPK:JYMHF) for $1.2B. The company expects to grow Jimmy Choo sales to $1B a year and create long-term operational synergies with the MK business. The deal follows a move earlier this year by luxury rival Coach (NYSE:COH) to snap up Kate Spade. Shares of Michael Kors (NYSE:KORS) are down 19% YTD.

Reports out of Japan indicate that Toyota (NYSE:TM) is working on an electric car with improved driving range and a fast-charging battery. The Japanese automaker is expected to build the new EV on a new platform and use solid-state batteries that can be recharged in minutes. The new model could arrive as early as 2022.

Facing a low-margin business of scraping for pennies while dealing with big-bank capital requirements, Goldman Sachs (NYSE:GS) is reportedly backing out of a role as a top lead market maker for exchange-traded funds. That likely clears the way for market-share taking by smaller, electronic-focused firms that may find the ETF effort more worthwhile.

For the first time since 2008 and the global financial crisis that brought it three government bailouts, Citigroup (NYSE:C) is holding an investor day, and a select audience of analysts and stakeholders will look to CEO Mike Corbat and his update of a promise that profits would reach 10% of tangible common equity by 2019. The bank has $1.82T in assets, down from $2.2T at its last investor day.

Sandell Asset Management is buying up a stake in Barnes & Noble (NYSE:BKS) in an activist push to persuade the bookseller to sell itself again. Like many retailers, B&N has struggled in competition against, but Sandell believes its prominence in national retail is an asset, and that it could draw $12/share, vs. current pricing of $7.10.

With solid advertising growth leading the way, Alphabet (GOOGGOOGL) topped estimates with its Q2 earnings, but it was dinged by a $2.7B antitrust fine from Europe and lower cost-per-click as the mix shifted toward mobile and YouTube links that earn less than traditional desktop search. Paid clicks were up 52% Y/Y (and 12% sequentially), but cost per click fell 23% Y/Y.

Model 3 watching: Shares of Tesla (NASDAQ:TSLA) finished up 4.30% as investors show confidence in front of the first batch of deliveries to Model 3 customers scheduled for this Friday. Amid the intense focus on Tesla’s pace of production, the company aims to ramp up without sacrificing quality or safety. Musk and gang have pointed to the simpler platform of the Model 3 in comparison to the Model X. By next week, there should be more insight into the features, road performance, Autopilot capabilities and charging costs of the Model 3.





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