Today, at least in the early going, the focus is on the service sector. We’ll see our numbers later this morning, but globally… the numbers are out. Generally speaking, they are not very good, but not altogether unexpected. While manufacturing data makes for better headlines, this slice of data covers about 70% of the domestic economy, and an ever-growing share globally as well. Chinese numbers missed consensus, but did manage to print in expansion, and while most of Europe either met their number or came close, it was the UK that hit the tape deeply in contraction. First month over-reaction to the Brexit shock? Probably. The start of a nasty trend? Possibly.
That brings us to the next hitter in out central banking line-up. That would be the Bank of England. The BOE’s Monetary Policy Committee actually begins their meeting today, and will release their announcement tomorrow at 7am NY time. Gov. Mark Carney already indicated last month that August would likely be the time for a policy shift, so there is clearly some expectation. To put things in perspective the BOE has left interest rates alone since 2009, and Carney’s reputation at the Bank of Canada in his prior job was that he was something of a hawk. With that in mind, the British Pound has been acting a little bit odd this week. Two days ago, we were talking about 1.31 support. Now. we’re talking about 1.335 resistance. Not exactly what you might expect from a nation’s currency if that nation’s central bank were about to ease policy. The Japanese Yen acted like this ahead of the BOJ’s massive disappointment on Friday, for your information.
When I started writing this note, European equity indices were lower across the board, but with the notable exception of the FTSE 100 (UK), they have all turned higher. Today’s leaders to the upside? The banks of course. Yesterday’s victims became today’s winners after certain Dutch and French banks reported surprise profits, and then HSBC announced a corporate repurchase program. Why not? With the ECB buying corporate debt these days, I would think that this kind of announcement will become more commonplace in Europe.
There may not be a lot of Fed speakers on the docket this week, but you know this crowd. They simply can not stay away from a microphone. Atlanta Fed Pres. Dennis Lockhart appeared in the media yesterday, and he did not rule out a rate hike at the FOMC’s next meeting in September. I wouldn’t rule it out either, it’s eight weeks away, but thanks for coming in Dennis. Today, Chicago Fed Pres. Charles Evans will speak to several news outlets. Widely considered one of the most dovish speakers at the Fed, I can hardly wait for what Evans has to say. By the way, neither one of these guys is a voting member of the FOMC this year.
08:15 – ADP Employment Report (July): Expecting 169K, June 172K. This item makes an appearance every jobs week. It makes a big splash, and then is forgotten about almost immediately as we head into the Friday NFP print. What you probably don’t know is that over the last six months, this item has averaged 183K, while the BLS’ NFP has averaged 174K. This one has been consistent while the BLS has thrown an 11K, and a 287k at you over that span of time. Now folks, this one is compiled by a business, and that one is compiled by the government. Kind of makes you wonder which one is the one that we should be focusing on. Futures markets will be impacted immediately upon thisrelease.
09:45 – Markit Services PMI (July-rev): Flashed 50.9, June 51.3. Like a warm-up act that nobody paid to see, this one will hit the tape, and then go away. Traders will wait the fifteen minutes for the ISM number. Non-event.
10:00 – ISM Non-Manufacturing Index (July): Expecting 56.2, June 56.5. June’s print in this space surprised shockingly to the upside on the strength of the Business Activity reading. In fact, that was the strongest reading on the pace of expansion for the Service Sector seen to this point in 2016. All will be watching to see if the increased growth was a fluke in June, or if this pace becomes a trend. ISM numbers are always a market event.
10:30 – Oil Inventories (Weekly): Expecting -1.6M barrels, Last week +1.7M barrels. Last week’s upside pop for US Crude supplies disrupted a streak of nine consecutive draws in the space. Those who trade oil futures are expecting to start a new streak this week. The API number came in sporting a drop in supplies of -1.3 million barrels.
Wednesday’s Earnings Highlights
Before the Open: CLX (1.28), D (.71), HUM (2.28), NBL (-.28), OXY (-.19), SMG (2.11), USAK (.19)
After the Close: ALL (.59), HLF (1.21), MET (1.35), PRU (2.50), SQ (-.03), TSLA (-.63), TSO (1.77), RIG (-.02)