After yesterday's latest drop in stocks driven by "old economy" companies such as CAT, which sent the Dow Jones back to red for the year and the S&P fractionally unchanged, today has been a glaring example of the "new" vs "old" economy contrast, with futures propped up thanks to strong tech company earnings after the close, chief among which Amazon, which gained $40 billion in after hours trading and has now surpassed Walmart as the largest US retailer. As a result Brent crude is little changed near 2-wk low after disappointing Chinese manufacturing data fueled demand concerns, adding to bearish sentiment in an oversupplied mkt. WTI up ~26c, trimming losses after yday falling to lowest since March 31 to close in bear mkt. Both Brent and WTI are set for 4th consecutive week of declines; this is the longest losing streak for Brent since Jan., for WTI since March.
A slow week devoid of virtually any macro news - last night the biggest weekly geopolitical event concluded as expected, when Greece voted to pass the bailout bill which "the government does not believe in" just so the ECB's ELA support for Greek depositors can continue - is slowly coming to a close, as is the busiest week of the second quarter earnings season which so far has been largely disappointing despite aggressive consensus estimate cuts, especially for some of the marquee names, and unlike Q1 when a quarterly drop in EPS was avoided in the last minute, this time we won't be so lucky, and the only question is on what side of -3.5% Y/Y change in EPS will the quarter end.
Just when the Chinese plunge protection team (and "arrest shortie" task force) seemed to be finally getting "malicious selling" under control, first we saw a crack yesterday when the composite broke the surge of the past three days as a result of yet another spike in margin debt funded purchases, but it was last night's reminder that "good news is bad news" that really confused the stock trading farmers and grandmas, which goalseeked Chinese economic "data" beat across the board, with Q2 GDP coming solidly above expectations at 7.0%, and retail sales and industrial production both beating, but in the process raising doubts that the PBOC will continue supporting stocks.
One day after the Greek "pre-deal" was announced and the world breathed a sigh of relief, sending US stocks soaring and Greek halted stocks, well, tumbling (via ETFs and ADRs), things are oddly quiet and in fact quite red in Europe, with futures in the US modestly lower, following both China's first red close in several days (SHCOMP -1.2%), and a Europe which is hardly looking very euphoric at this moment: it is almost as if the algos finally got to read the fine print of the Greek deal after trading all day on just the headlines.
RANsquawk Week Ahead - 13th July 2015: Greece agree preliminary deal with creditors, however there still remains hurdlesSubmitted by RANSquawk Video on 07/13/2015 09:55 -0400
China Soars Most Since 2009 After Government Threatens Short Sellers With Arrest, Global Stocks SurgeSubmitted by Tyler Durden on 07/09/2015 08:57 -0400
The Shanghai Composite Index had dropped as much as 3.8% to a 4 month low before the news that the cops were going to arrest anyone who was caught "maliciously shorting stocks", when everything suddenly took off, and the SHCOMP closed a "Dramamine required" 5.8% higher, the biggest daily increase since March 2009! Stocks around the globe followed, with US equity futures wiping out much of yesterday's losses and up 1% at last check.
Today's market battle will be between those (central banks) "hoping" that a Greek deal over the weekend is finally imminent (which on one hand looks possible after a major backpeddling by Tsipras - who may never have wanted to win the Greferendum in the first place - yesterday in Brussels and today during his speech in the Euro Parliament, but on the other will be a nearly impossible sell to Greece as any deal terms will be far harsher than the deal offered by the Troika 2 weeks ago and will have no debt reduction), and those who finally noticed that the Chinese central planners have effectively lost control.
When it comes to Greece, and Europe in general, "hope" continues to remain the driving strategy. As Bloomberg's Richard Breslow summarizes this morning, "if you were looking for a word to describe the general feeling of equity markets today, you might well pick hopeful. U.S. equity futures opened higher and have been up all day. European bourses opened cautiously higher as they await word, any word, from the European finance ministers or more importantly, Chancellor Merkel. Equity markets will continue to be very reactive to European headlines, but so far, no news has been taken as a reason for hope." Which incidentally, has been the general investment case for the past 6 years: "hope" that central banks know what they are doing.
The referendum on Sunday will likely have a significant impact on the prospects of Greece reaching a new bailout agreement and the immediate future of the governing Syriza party. Following the expiration of the second bailout and the missed IMF repayment on 30th June, Greece has had to impose capital controls while negotiations between the country and its creditors have been put on hold until after the referendum. Eurozone officials have indicated that a “No” vote would likely mean a Greek exit from the currency union although the Greek government sees the vote as only pertaining to the terms of a bailout programme.
While we showed what the all important Goldman jobs preview looks like, here is a quick snapshot of what consensus expects will be reported in 15 minutes:
- US Change in Nonfarm Payrolls (Jun) M/M Exp. 233K (Low 160K, High 290K), Prev. 280K, Apr. 221K
- US Unemployment Rate (Jun) M/M Exp. 5.4% (Low 5.3%, High 5.5%), Prev. 5.5%, Apr. 5.4%
- US Average Hourly Earnings (Jun) M/M Exp. 0.2% (Low 0.1%, High 0.3%), Prev. 0.3%, Apr. 0.1%