Markets are moving slowly ahead of the 7am ET policy announcement expected from the Bank of England’s Monetary Policy Committee. European equity markets are all painted green this morning, with the UK’s FTSE 100 trailing the pack, up just small after having been lower. In other developments, yields on British sovereign debt are grinding their way higher, and the USD/GBP relationship has worked it’s way below 1.33, but has not gone near the depths seen earlier in the week. If indeed, there were some easing of policy, it appears that shorting the Pound ahead of this announcement has become a very crowded trade. We’ve already seen the currency behave rather curiously as the week has developed, and now there is real fear that this cross could spike if there were to be disappointment in the level of the MPC’s aggression. Perhaps even if there is no disappointment.
Interesting price movements for WTI Crude overnight. Though we witnessed a surprising increase in US oil supply yesterday, the shocking drop in gasoline stocks outweighed anything else…. or was it a technical bounce once the commodity approached $39 a barrel. Regardless, WTI surged more than 3% in yesterday’s regular trading session, settling at 40.83. Then it kept going, nearly hitting 41.50 in the overnight session. Now, we see prices falling again heading into Thursday morning. Yesterday, the S&P Energy sector index gained 1.8% on the day, and the DJTA, which has been mired in a deep slump picked up 0.8% to get it’s five day performance back to less than -2%. It certainly seems that the Equity/Oil correlation that is not always there, is more there than not when Crude is cheap.
Today is the last really huge day of earnings in terms of sheer numbers of firms reporting. There are still plenty of headliners out there, namely most of the retailers, but the trader’s ability to focus on a few less items at any one time should return after today. Earnings have been slightly better than expected coming into the season. Early Q2 estimates for the S&P 500 were for an aggregate reduction of -5.3% from this time a year ago. The last updates that I’ve seen for this were under -4.0%, with revenue growth just a hair above flat. tech has been strong, and Energy has been very weak, but it will really be up to those retailers on just how the story of this quarter will ultimately be written…. and we know from our weak first look at Q2 GDP a week ago, that personal consumption expenditures were the strength of the entire report.
06:15 – Fed Speaker: Dallas Fed Pres. Robert Kaplan, who is not a voting member of the FOMC is speaking again from Beijing as he did on Tuesday. This is largely considered to be the same speech, a speech where Kaplan tried to stress patience with the next interest rate increase while not taking September off of the table.
08:30 – Initial Jobless Claims (Weekly): Expecting 265K, Last Week 266K, 4 week moving avg. 256.5k. It’s hard to believe, but if this week comes in where it’s expected, then we’ll have two consecutive weeks running above trend. The four week moving average is how economists look at this number, and traders haven’t paid much mind in this space in over a year due to it’s regularity. The range of expectations for today spans just 8k, from 262K to 270K. Markets will notice this one on the day it prints near 300K, or under 250K, and with a large portion of the labor force working less than full-time hours, this just isn’t very likely.
08:30 – Gallup Unemployment & Underemployment Rates (July): June 5.3% UnEmp, & 13.6% UnderEmp. While not apples to apples, Gallup does offer another view of the employment situation that does not always line up that perfectly with the BLS data that you see every “Jobs Friday”. The Gallup data is based upon a daily survey of 1,000 adults, so the end results are a non-seasonally adjusted, rolling 30 day average of nearly 30k interviews. Traders will not react to this survey, but I always find interesting the gap between these numbers and the ones the government dishes out. Those government numbers always seem better than these for some reason.
10:00 – Factory Orders (June): Expecting -1.8%, May -1.0% m/m. In what had on many levels been a decent June for the economy, we saw last week, that Durable Goods Orders dropped -4.0% m/m. That item, and this item intersect to some degree, so we know that we’re going to print negative today. The thought here is that this print can be partially rescued by non-durables. Due to the fact that much of this release is considered a known quantity, a market surprise would be difficult.
10:30 – Natural Gas Inventories (Weekly): Expecting 19B cf, Last Week 17B cf. We are looking for a sixteenth consecutive weekly build in this data-point today. This print will pass largely unnoticed with the exception of those directly trading the space.
Thursday’s Earnings Highlights
Before the Open: APA (-.21), BLL (1.00), BDX (2.20), CTB (1.05), DUK (1.01), K (.91), PH (1.76), TEVA (1.21), VIAB (1.03)
After the Close: ED (.69), KHC (.73), LNKD (.78), MNST (1.03), PCLN (12.66), ZG (-.04), ZNGA (.00)