TradeTheNews.com Weekly
Market Update: Fed teases rate cuts; Iran tensions mount
Fri, 19 Jul 2019 16:07 PM EST
Stock markets weakened in the middle part of the week as focus shifted from
rate cut expectations toward corporate earnings reports. Markets pulled back
further amid reports that US/China trade talks may be stalling, and as
President Trump taunted China over its slowing GDP data and suggested he could
still impose more tariffs at any moment. Trump also had some more choice words
for the Federal Reserve, continuing to pressure the Fed to cut rates as more
foreign central banks cut their own rates this week. Interestingly, the
lingering trade tensions appear to be a major motivating factor for Fed
officials who appear increasingly motivated to cut rates, to the extent that
this dovish thinking completely overshadowed the economic data, which for the
second straight week came in substantially stronger than consensus estimates.
By Thursday, futures markets were pricing in better than a 50% chance the Fed
would cut by 50 bps at the end July, but the Fed tried to walk back these more
aggressive expectations on Friday. Early in the week, the Greenback retraced
higher prodded by robust US manufacturing and retail sales figures. Gold prices
popped back to the highs of the year helped by declining interest rate
forecasts and a continued escalation of Iran tensions, while crude oil futures
tumbled more than 6% this week despite reports of Iran waylaying at least two
oil tankers in the Strait of Hormuz. For the week, the S&P lost 1.2%, the
DJIA dipped 0.6%, and the Nasdaq fell 1.2%.
In corporate news this week, as earnings season kicked off, Microsoft profits
powered higher, led by strong Azure growth again, while gross margins improved
and LinkedIn engagement continued to rise. Netflix shares tanked after
reporting a domestic subs decline q/q and a big miss on global subs estimates.
As big bank earnings rolled in, JP Morgan, Citi, and Goldman registered top and
bottom line beats, and Bank of America and Comerica cut their net interest
income outlook amid falling rates. eBay shares rallied after an earnings beat
and reports that the company was preparing to move ‘aggressively’ forward with
the sale of its StubHub division. Boeing announced it would take a nearly $5B
charge as a result of the 737 MAX groundings and said it assumed planes would
fly in Q4, giving investors some potential clarity to the extent of the damage
from the crisis.
SUNDAY 7/14
*(CN) CHINA JUN INDUSTRIAL PRODUCTION Y/Y: 6.3% V 5.2%E
*(CN) CHINA JUN RETAIL SALES Y/Y: 9.8% V 8.5%E; YTD Y/Y: 8.4% V 8.2%E
*(CN) CHINA Q2 GDP Q/Q: 1.6% V 1.5%E; Y/Y: 6.2% V 6.2%E (slowest annual growth
since 1992)
MONDAY 7/15
C Reports Q2 $1.83 adj v $1.78e, Rev $18.8B v $18.3Be
*(US) JULY EMPIRE MANUFACTURING: 4.3 V 2.0E
RIO.AU Reports Q2 Pilbara iron ore shipments 85.4Mt v 83.4Mte v 88.5Mt y/y;
Pilbara iron ore production: 79.7Mt v 81.5Mte v 85.5Mt y/y
TUESDAY 7/16
(GR) Greece Debt Agency (PDMA) opens book to sell 7-year bond via syndicate;
yield guidance seen 2.10%
*(UK) MAY AVERAGE WEEKLY EARNINGS 3M/Y: 3.4% V 3.1%E; WEEKLY EARNINGS
(EX-BONUS) 3M/Y: 3.6% V 3.5%E
*(UK) JUN JOBLESS CLAIMS CHANGE: +38.0K V +24.5K PRIOR; CLAIMANT COUNT RATE:
3.2% V 3.1% PRIOR
*(DE) GERMANY JULY ZEW S CURRENT SITUATION SURVEY: -1.1 V 5.0E; EXPECTATIONS
SURVEY: -24.5 V -22.0E
JPM Reports Q2 $2.59 adj* v $2.50e, Managed Rev $29.6B v $28.4Be
GS Reports Q2 $5.81 v $4.82e, Rev $9.46B v $8.66Be; Confirms raised Quarterly
dividend 47.1% to $1.25 from $0.85 (indicated yield 2.36%)
*(US) JUN ADVANCE RETAIL SALES M/M: 0.4% V 0.2%E; RETAIL SALES (EX-AUTO) M/M:
0.4% V 0.1%E
CP Reports Q2 C$4.30 adj v C$4.13e, Rev C$1.98B v C$1.96Be
*(US) JUN INDUSTRIAL PRODUCTION M/M: 0.0% V 0.1%E; CAPACITY UTILIZATION: 77.9%
V 78.1%E
(US) Sec of State Pompeo: Iran has said it's prepared to negotiate about its
missile program
WEDNESDAY 7/17
BAC Reports Q2 $0.74 v $0.70e, Rev $23.1B v $23.0Be
*(US) JUN HOUSING STARTS: 1.253M V 1.260ME; BUILDING PERMITS: 1.220M V 1.300ME
EBAY Reportedly moving 'aggressively' forward with potential sale of StubHub -
CNBC's Faber
(US) FEDERAL RESERVE BEIGE BOOK: ECONOMIC ACTIVITY EXPANDED AT MODEST PACE FROM
MID-MAY TO EARLY JULY
AA Reports Q2 -$0.01 v -$0.34e, Rev $2.71B v $2.79Be
IBM Reports Q2 $3.17 v $3.06e, Rev $19.2B v $19.1Be
*(KR) BANK OF KOREA (BOK) CUTS 7-DAY REPO RATE BY 25BPS TO 1.50%; NOT EXPECTED;
To maintain accommodative policy stance
(AU) AUSTRALIA JUN EMPLOYMENT CHANGE: +0.5K V +9.0KE (9th straight month of job
gorwth); UNEMPLOYMENT RATE: 5.2% V 5.2%E
THURSDAY 7/18
SAP.DE Reports Q2 Non-IFRS EPS €1.09 v €1.20e, Op €1.82B v €1.84Be, Rev €6.66B
v €6.71Be
TSM Reports Q2 (NT$) Net 66.8B v 65.9Be; Op 73.3B v 77.4Be; Rev 241.0B v 233.3B
y/y
(UK) EU Brexit negotiator Barnier: No easy solution to the Irish border issue;
ready to work on alternative arrangements
*(UK) JUN RETAIL SALES (EX-AUTO/FUEL) M/M: +0.9% V -0.2%E; Y/Y: 3.6% V 2.6%E
(EU) ECB staff said to study a revamping of inflation target; The current view
of ‘below, but close to, 2%’ definition of mandate being questioned - financial
press
(UK) UK Parliament votes 315-274 to accept Benn amendment, which seeks to
prevent suspension of Parliament and impede a 'no-deal' Brexit
MSFT Reports Q4 $1.37 v $1.21e, Rev $33.7B v $32.7Be
BA To recognize $4.9B charge ($8.74/shr) and increased costs in Q2 due to 737
MAX grounding; to result in a $5.6B reduction of revenue and pre-tax earnings
in the quarter
*(CL) CHILE CENTRAL BANK (BCCH) LEAVES OVERNIGHT RATE TARGET UNCHANGED AT
2.50%; AS EXPECTED
(JP) Japan Investors Net Buying of Foreign Bonds: ¥950.0B v ¥297.0B prior week;
Foreign Net Buying of Japan Stocks: -¥93.1B v ¥192.2B prior week
FRIDAY 7/19
STT Reports Q2 $1.42 v $1.40e, Rev $2.87B v $2.85Be
*(US) JULY PRELIMINARY UNIVERSITY OF MICHIGAN CONFIDENCE: 98.4 V 98.8E
(IR) Iran Revolutionary Guard says they have seized a UK-flagged oil tanker in
the Strait of Hormuz; stopped the tanker for failure to follow international
regulations - Iranian press
(IR) US official: A second tanker, MV Mesdar, was also seized by Iran today -
CNN (IR) Iranian
(IR) Foreign Min Zarif reportedly met Thurs with Sen Paul (R-KY) to discuss
prospects for potential Iran-US talks - Al-Monitor
