|Day's range||12,172.59 - 12,296.30|
|52-week range||10,279.20 - 12,886.83|
The U.S. retail sales are much stronger than expected and point to economic stability, not interest rate cuts.
Global indices drift higher on earnings and FOMC hopes. Both earnings and FOMC hopes could suffer as the impact of trade tariffs lingers on.
While economic data out of China came in better than expected this morning, a lack of stats will leave the European majors in the hands of Oval Office Chatter.
It’s a big week ahead, with key stats, corporate earnings, and geopolitical risk to provide the majors with direction through the week.
A lack of stats leaves the markets to focus on FED Chair Powell’s testimony to Congress tomorrow and geopolitical risk, which could test the majors.
We’ve argued that the equity rally has been driven by liquidity, momentum and this concept of TINA – i.e. There Is No Alternative.
It’s a busy week ahead on the economic calendar, but it all may come down to FED Chair Powell’s testimony and updates from trade talks…
Positive news from the G20 Summit got the week off to a positive start, with a jump in nonfarm payrolls wrapping things up on Friday… There was plenty in between, however.
The U.S. non-farm payroll data blows past expectations and raises doubts about a July FOMC rate cut.
While economic data out of Germany will provide direction, it’s all about today’s U.S nonfarm payrolls. It’s make or break for the majors…
The EU surprised the market by appointing Christine Lagarde, the head of the IMF, to take the place of Mario Draghi when he retires as President of the ECB in November.
(Bloomberg) -- European equities are now up more than 16% this year with both the DAX and Euro Stoxx 50 back in bull territory. While such a broad rally should suggest optimism and increased appetite for risk, sentiment indicators signal otherwise. Cautious is needed as a number of indexes are approaching strong resistance levels.No matter how you look at it, the latest macro figures aren’t great. Geopolitical issues are here to stay and equities outflows have not reversed. Still, the market has rallied relentlessly. Whether it’s complacency or fear of missing out, traders are still buying.The Stoxx Europe 600 estimated price-to-earnings ratio has risen back to 14, near a one-year high hit in April. The re-rating was purely driven by price, as EPS estimates have been relatively stable.Barclays strategists say despite the rally, investors continue to de-risk and move into relative safe havens, like bonds and cash. They call it an “unloved” bull market. Global sentiment remains negative, whether you look at the Sentix index in Europe or the AAII Bull-Bear spread. The continuous rally in gold and the strong inflows into the metal’s exchange-traded funds is another sign of caution.The sector momentum map also hints at the careful general sentiment. Investors may buy, but they favor safer or defensive sectors. Over the past 12 weeks, food & beverages have been leading, while momentum has been strengthening fast for utilities, health care, and even telecoms. By contrast, the drive for banks, basic resources, autos, retail and oil & gas has been weakening as fast.Technically, the Stoxx Europe 600 is testing strong resistance levels. The index failed to break out from last July’s high (392.7) on several occasions in April this year. The index has also reached overbought territory.The strong correlation between asset classes (almost everything has rallied this year) and the collapse of volatility, is increasing the risk of a broad negative turnaround, according to Unigestion strategists. The asset manager says in a note this week that it continues to use derivatives for equity downside protection. The low volatility may indeed create some cheap opportunities to hedge portfolios.That said, Unigestion remains positive about risk assets, as investors’ positioning is still low, especially as it might be risky to fight the tape and the Fed, they say.Clearly, the higher the market goes without a real resolution to the China-U.S. trade conflict or an effective central bank policy easing, the greater the risk of disappointment. The market is currently pricing a 100% probability of a Fed rate cut at the next meeting on July 31. The 50bps cut probability is about 24%.In the meantime, Euro Stoxx 50 futures are trading little changed ahead of the open, while volumes might be lighter than usual as U.S. markets will be closed for Independence Day.SECTORS IN FOCUS TODAY:Watch the pound and U.K. stocks after yields on U.K. government bonds fell below the Bank of England’s policy rate, following the trend across European bonds as investors charge into the asset class seeking safety from ugly economic forecasts.Watch miners as iron ore prices slipped back a little from recent highs after a warning that the jump in the price this year has left the material disconnected from fundamentals. Watch Rio Tinto, BHP, Anglo American and Ferrexpo and watch for any impact on steelmakers like ArcelorMittal, Voestalpine and Evraz.Watch oil stocks as Brent prices edged lower after a smaller-than-expected decline in U.S. crude and gasoline inventories added bearish sentiment to a market reeling from a gloomy economic outlook. Watch oil majors like Shell, Total and BP, oil-services firms like Wood and TechnipFMC and smaller oil explorers like Tullow Oil and Lundin Petroleum.COMMENT:“Christine Lagarde’s nomination - and that of Ursula von der Leyen as Head of the Commission - means the risk of a hard Brexit has risen,” said Michael Browne, Co-manager of the Legg Mason Martin Currie European Equity Long/Short strategy. “These appointments smack of the thesis ‘the trouble with Europe is it is not integrated enough’ we should do more, and I expect the U.K. to be the first country to struggle with this, as it attempts to re-negotiate Brexit. This looks like a closing of ranks.”COMPANY NEWS AND M&A:Osram Confirms $3.8b Buyout Offer from Bain, CarlyleNorthstar Realty Europe to Be Bought by AXA For $17.03/ShareVW Management Board Completes Talks With Ford on Alliance: HBCaixabank Sells NPL Portfolio to U.S. Funds: El ConfidencialDeutsche Telekom: T-Mobile on Cusp of Justice Department Approval for SprintEDP Renovaveis Secures 20-Year Contract at Greek Energy AuctionDanske Crisis Exposes Full Extent of Damage From Negative RatesDanish Police Probe Danske Firing of Firm Hired to Examine AMLBanca Generali Is Not Up for Sale, Radiocor Says Citing SourcesWacker Neuson Holder to Offer Up to 3.77m ShrsZalando to Invest EU200 Million in Dutch Distribution Center: FDGermany’s Private, Public Sector Banks Reach Wage DealYIT to Sell Paving, Mineral Aggregates to Peab for EU280MNOTES FROM THE SELL SIDE:Nordex’s unexpectedly high 2Q order intake has led Citi to raise both its 2020 estimates and its price target for the wind-turbine maker. Broker boosts PT to EU14.60 from EU13.60 while keeping a neutral rating.RBC downgraded Lufthansa to sector perform and slashed PT by 42% to EU14.5 following strategy update and Eurowings profit warning, with enterprise value mix outlook worsening.TECHNICAL OUTLOOK for Stoxx 600 index:Resistance at 392.7 (July 2018 high); 397.9 (May 2018 high)Support at 385.7 (76.4% Fibo); 381 (50-DMA)RSI: 70.7TECHNICAL OUTLOOK for Euro Stoxx 50 index:Resistance at 3,596 (May 2018 high); 3,687 (2018 high)Support at 3,519 (76.4% Fibo); 3,411 (50-DMA)RSI: 72.7MAIN RESEARCH AND RATING CHANGES:UPGRADES:Burberry upgraded to outperform at MainFirst; PT 21.50 PoundsH&M upgraded to reduce at AlphaValueImmofinanz upgraded to buy at Baader Helvea; PT 25 EurosKloeckner upgraded to hold at Kepler Cheuvreux; PT 5 EurosDOWNGRADES:Commerzbank downgraded to neutral at JPMorgan; PT 7.50 EurosGjensidige downgraded to market perform at KBW; PT 170 KronerKeywords Studios downgraded to sell at Peel HuntLufthansa downgraded to sector perform at RBC; PT 14.50 EurosSpirax downgraded to sell at Goldman; PT 75 PoundsTomTom Cut to Hold at Kepler Cheuvreux; Price Target 10.25 EurosINITIATIONS:None reported.MARKETS:MSCI Asia Pacific down 0.3%, Nikkei 225 up 0.3%S&P 500 up 0.8%, Dow up 0.7%, Nasdaq up 0.8%Euro up 0.04% at $1.1283Dollar Index down 0.03% at 96.74Yen down 0.01% at 107.82Brent down 0.9% at $63.3/bbl, WTI down 0.9% to $56.8/bblLME 3m Copper little changed at $5919/MTGold spot down 0.2% at $1415.5/ozUS 10Yr yield little changed at 1.95%ECONOMIC DATA (All times CET):9:30am: (GE) June Markit Germany Construction PMI, prior 51.410am: (UK) June New Car Registrations YoY, prior -4.6%11am: (EC) May Retail Sales MoM, est. 0.3%, prior -0.4%11am: (EC) May Retail Sales YoY, est. 1.6%, prior 1.5%* For a daily wrap on developments in European equity capital markets, click hereTo contact the reporter on this story: Michael Msika in London at firstname.lastname@example.orgTo contact the editors responsible for this story: Blaise Robinson at email@example.com, Jon MenonFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
A quiet day ahead leaves the majors to consider Eurozone retail sales figures and geopolitical risk. Can the DAX make it 7-in-a-row?
Global equities are mixed following the new highs set by Wall Street. Lingering growth concerns and uncertainty on trade have sapped optimism and weigh on market sentiment.
Economic data out of the Eurozone and the U.S will provide direction on the day. There’s no quick fix to the U.S – China trade dispute to drive demand.
(Bloomberg) -- The restart of U.S.-China trade talks has sent Germany’s DAX back into a bull market, completely eclipsing yesterday’s poor manufacturing data. But a number of strategists question whether the revived rally will stretch beyond the short term, as economic growth stutters and the U.S. is already back on the trade war front, this time with potential tariffs on EU goods.We are entering what is traditionally the best month for the Euro Stoxx 50. The gauge has climbed 2.9% on average in July over the past decade, rising in all but two of those years. One notable difference though: June was unusually good this year, and European stocks just posted their best half-year since 1998.The export-heavy German DAX has returned to its upward trajectory, spurred by trade optimism after the G-20 summit. There is no reason to be short on the German index, says Andy Dodd, a technical analyst at Louis Capital Markets.Before the tariff truce, the change of tone from central banks had already boosted stocks. Looking at the chart below, cyclicals’ relative performance to defensives has mostly ignored plummeting bund yields, opening a significant gap. Yesterday’s jump in basic resources, technology and oil stocks, while utilities, food and telecoms shares lagged, could enhance that trend.Still, the G-20 announcements were taken with a pinch of salt by a number of strategists who only see a short-term relief rally. And then there is the latest PMIs. China’s manufacturing gauge hasn’t picked up, while Europe’s was mostly gloomy.The question remains: for how long can stocks shrug off the poor macro data? JPMorgan strategists say the activity indicators are near lows right now, and are likely to look better in the second half of the year. This, combined with easing central banks and a weaker dollar, is enough to stay bullish on equities, they say.Unsurprisingly, 75% of investors say the U.S.-China trade situation is the key driver of equity prices over the next three months, according to a Citi poll. Which means as long as the trade newsflow is on the positive side, other factors could be eclipsed.In the meantime, Euro Stoxx 50 futures are trading up 0.2% ahead of the open.SECTORS IN FOCUS TODAY:Watch Airbus and its suppliers on Tuesday after the U.S. proposed a series of further tariffs in a long-running subsidy dispute involving the plane maker and its U.S. rival Boeing. Watch engineers like Rolls-Royce Holdings, GKN-owner Melrose Industries, Safran and MTU Aero Engines; also Jenoptik and IT systems maker Sopra Steria.Watch oil stocks after crude prices pulled back from the five-week highs it hit on Monday, despite a nine-month extension to output cuts, as the fundamental drivers for higher prices clashed with weakening economic sentiment.Watch Italian banks and sectors sensitive to moves in the country’s government bonds after the government lowered its 2019 budget deficit in a bid to avoid EU sanctions for failing to rein in its debt. Watch UniCredit, Intesa Sanpaolo, Banco BPM among others.Watch Hong Kong-exposed stocks as pro-democracy protests ramped up on Monday. Watch luxury-goods merchants and Asia-exposed banks like HSBC and Standard Chartered, both of which underperformed on Monday.COMMENT:“European equity compares favourably to the Japan of today: the cash yield is c.100bp higher in Europe, the demographics are slightly less negative, and sales growth and ROE are higher,” Goldman Sachs strategists write in a note. “But Japan is restructuring and Europe’s economy remains stymied by a lack of policy flexibility.”COMPANY NEWS AND M&A:U.S. Proposes More Tariffs on EU Goods in Airbus-Boeing Spat (2)AB InBev Asia Unit Sets Terms for $9.8 Billion Hong Kong IPODeutsche Bank Discusses Lowering Its Capital Buffer (Correct)WPP Confirms Exclusive Talks With Bain for Stake in KantarTelecom Italia Set to Tap EUR 2.5B Loan for Vodafone Deal: RtrsKey Swedbank Shareholder Confident Board Can Rebuild ConfidenceCredit Suisse International Wealth CEO Exits; Wehle PromotedPublicis Says Epsilon Acquisition Positive for ShareholdersElior Completes Sale of Areas to PAI Partners for EU1.4B NetPostNL-Sandd Merger Gets No Approval From ACM: TelegraafStadler Rail Wins EU600m German Deal, Objection Period ExpiredIntelsat C-Band Plan Gets Counter Proposal From Charter, GroupsGrenke First Half Leasing New Business CM2 EU233 MlnCovivio Buys 32% Stake in Portfolio of Accor Hotels for EU176MCembra Money Bank Places 1.2m Shares at CHF94 ApieceNOTES FROM THE SELL SIDE:Auto Trader has continued to be resilient in challenging times for the car market, with innovation and new products supporting revenue growth, but the stock looks fully valued, Peel Hunt says in note as it cuts to hold from add.Intertek EPS estimates are boosted 3%-6% by Jefferies on reduced concern over trade wars and more confidence in Ebita boost driven by Alchemy, putting the broker 1% ahead of consensus for FY19 and 4% ahead in FY20. PT lift to 5,900p.TECHNICAL OUTLOOK for Stoxx 600 index:Resistance at 392.7 (July 2018 high); 397.9 (May 2018 high)Support at 381 (50-DMA); 374.5 (61.8% Fibo)RSI: 64.3TECHNICAL OUTLOOK for Euro Stoxx 50 index:Resistance at 3,514 (May high); 3,596 (May 2018 high)Support at 3,410 (50-DMA); 3,403 (61.8% Fibo)RSI: 67.2MAIN RESEARCH AND RATING CHANGES:UPGRADES:Anima upgraded to outperform at Mediobanca SpA; PT 4.50 EurosDOWNGRADES:Adidas downgraded to hold at HSBC; PT 300 EurosAuto Trader downgraded to hold at Peel HuntINITIATIONS:None reported.MARKETS:MSCI Asia Pacific up 0.9%, Nikkei 225 up 0.1%S&P 500 up 0.8%, Dow up 0.4%, Nasdaq up 1.1%Euro up 0.02% at $1.1288Dollar Index down 0.05% at 96.79Yen up 0.07% at 108.37Brent up 0.3% at $65.2/bbl, WTI up 0.1% to $59.1/bblLME 3m Copper down 0.1% at $5947/MTGold spot up 0.5% at $1391.2/ozUS 10Yr yield down 1bps at 2.02%ECONOMIC DATA (All times CET):8:45am: (FR) May Budget Balance YTD, prior -67.2b9am: (SP) June Unemployment Change, est. -90,000, prior -84,07510:30am: (UK) June Markit/CIPS UK Construction PMI, est. 49.2, prior 48.611am: (EC) May PPI MoM, est. 0.1%, prior -0.3%11am: (EC) May PPI YoY, est. 1.7%, prior 2.6%* For a daily wrap on developments in European equity capital markets, click here\--With assistance from Jan-Patrick Barnert and Namitha Jagadeesh.To contact the reporter on this story: Michael Msika in London at firstname.lastname@example.orgTo contact the editors responsible for this story: Blaise Robinson at email@example.com, Jon MenonFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
It could be a choppy day ahead as Trump shifts attention to the EU. It’s government subsidies for Airbus that may lead to a rollout of tariffs on EU Goods…
Global equities jump following the Trump/Xi meeting at the G-20 but don’t call it a deal, uncertainty remains and will drag on earnings outlook this year.