Breakfast Today

Surprisingly weak July NY Empire State Manufacturing Index data, coming out at 9.8, against expectations of 15.0 and compared with June at 19.8, rather set US equities on the back foot from the open yesterday. Having touched new all-time highs on Friday, both the Dow Jones and S&P-500 trod water, choosing instead not to take any significant new positions until more companies detail their quarterly earnings. The list of those expected to report this week is long, including American Express, Bank of America, Goldman Sachs, General Electric, IBM, Microsoft, UnitedHealth and Visa. What limited trading features there were on Monday, however, comprised buying of Steels, following Trump’s suggestion he will seek protectionist measures to protect domestic plays against international dumping in the US, while beaten-up consumer discretionaries and gold stocks found demand, with the latter pushing the Arca Bugs index up 1.3%, as the precious metal for August delivery climbed US$6 to US$1,233.5/oz; semiconductor and transportation shares showed weakness. Producing its results after the market close, however, tech major Netflix released pleasing subscriber growth numbers as the migration away from traditional free-to-air TV continues to gather pace, which was sufficient to push the shares up 8.5% in after-market trading. Treasuries remained almost stationary with the 10-year benchmark yield moving just 1 basis point lower to 2.309%, its fifth decline in six sessions. Asian shares, however, were broadly weaker as their session drew to a close this morning. Australian stocks were the worst hit, with the S&P/ASX 200 index down over 1% as the country’s heavily weighted banks met strong selling once again sufficient to set the sub-index back by more than 2%. The Shanghai Composite fell again following Monday's hit, while the Nikkei suffered as the Yen gained against a weaker US$ pushing the index below the 20,000 level once again. European shares remained in a relatively good mood for most of yesterday’s trading, as they tracked Friday’s positive US close and then saw mining stocks boosted by news that China’s quarterly growth had topped expectations. This was short-lived, however, first dipping on news core Eurozone consumer prices had remained unchanged for the month of June and then again in the afternoon as the release of dull US data deflated optimism. The STOXX 600 eventually closed flat on the day, with both the CAC 40 and Xetra Dax ending with fractional losses as general weakness amongst financials, industrials and consumer stocks was somewhat offset by buying of mining and telecom stocks. During this morning’s Asian session, the Euro moved above US$1.15 in Asia for the first time since May 2016, driven by expectation of a slower future pace of US rate increases while the ECB is seen preparing to reduce its monetary stimulus; its policy statement due on Thursday is seen potentially reinforcing this expectation ahead of President Mario Draghi’s speech at Jackson Hole next month. Seen only rarely these days, but London managed to outperform its continental peers on Monday having remained in positive territory for the whole day, significantly due to its heavy weighting in mining stocks which make up 88% of the index’s weighting in basic materials companies and represent 8% of the FTSE100. Elsewhere amongst smaller issues, rebounds were also seen by Carillion and Micro Focus with both appearing to have entered oversold territory. A large amount of macro data is scheduled for release from the UK today, including the highly sensitive June Retail Producer and Consumer Prices and the DCLG House Price Index, followed by a speech from the BoE Governor, Mark Carney, at 14:30hrs BST. The EU provides its July ZEW Economic Sentiment Survey, while the US offers June its Export and Import Price Indices, its weekly Redbook, NAHB Housing Market and finally its API Weekly Crude Oil Stock. UK corporates due to release earnings or trading updates include British Land (BLND.L), NCC Group (NCC.L), Alliance Pharma (APH.L), IG Group (IGG.L), Royal Mail (RMG.L), Scapa Group (SCPA.L), and BHP Billiton (BLT.L). Feeling nervous ahead of today’s release of inflation data and following a weak Asian close, London is seen opening weaker this morning, with the FTSE-100 seen down 20-25 points in early trading.