N American Morning Briefing: S&P Approaches Fresh All Time High
DOW JONES & COMPANY, INC. 6:04 AM ET 08/21/14
DJIA 16970.0 +20.0 +0.1%
S&P 500 1984.8 +1.5 +0.1%
Nasdaq 4040.5 +1.0 +0.0%
As of 0534 ET
FTSE 100 6769.8 +14.3 +0.2%
Xetra DAX 9329.9 +15.3 +0.2%
CAC40 4257.4 +16.6 +0.4%
As of 0553 ET
Nikkei 15586.2 +131.8 +0.9%
Hang Seng 24994.1 -165.7 -0.7%
Close
Snapshot:
-U.S. stock futures a touch higher; euro slightly higher; 10-year Treasury yield lower at 2.436%; oil futures lower; gold down
-Watch for: jobless claims, Philadelphia Fed, existing home sales, leading indicators and Jackson Hole symposium
Opening Call:
With stock futures pointing slightly higher, Valuetrades analyst Joao Monteiro is calling U.S. equity markets to open slightly stronger, despite weakness in Asian stocks Thursday and poor Chinese manufacturing data. He notes that investors appear "undeterred by the prospect of higher interest rates sooner than had been expected." While stocks did fall back after the minutes of the Federal Open Market Committee were published Wednesday, they quickly regained ground to close higher on the day, and the S&P now sits within reach of a fresh all time high. Without any surprising data or geopolitical shocks "it's difficult to imagine [why] we won't see this level fall in the near term." He calls the Dow to open up 31 points and the S&P up two points.
Equities:
When it opened in 1990, the McDonald's on Moscow'sPushkin Square was a symbol of thawing relations with the U.S., attracting long lines and later becoming the fast-food chain's most visited outlet world-wide.
Wall Street banks, under pressure to improve working conditions for junior employees, are raising salaries.
A host of big banks including Goldman Sachs Group Inc., J.P. Morgan Chase & Co. and Morgan Stanley have decided to lift pay or are seriously considering the move for many junior bankers. The pay increases, which are coming in the form of salaries as opposed to year-end bonuses, could hit 20% to 25% at some firms.
Forex:
In currency markets, the euro inched up against the dollar to $1.3270, having dropped below $1.33 for the fist time since September last year on Wednesday.
The relatively hawkish minutes from the Fed should help fuel further gains for the greenback, while the European Central Bank is likely to maintain ultra-loose policy for some time, according to Lutz Karpowitz, a currency strategist at Commerzbank.
"ECB President Mario Draghi will now see the euro depreciate versus the dollar sooner than he had dared to hope. What we have been waiting for months is now actually happening: the Fed and the ECB are parting ways," he said.
Elsewhere in currency markets, the Norwegian krone surged to a two-month high of 8.1563 against the euro after Norway's economy expanded faster than expected in the second quarter.
Bonds:
U.S. Treasurys edged lower as core government bond markets pulled back after the slightly hawkish tone of Wednesday's FOMC minutes. "Markets will now undoubtedly turn their attention to Fed Chair Yellen's speech at the Jackson Hole Symposium, scheduled for Friday, to get further clarity on the extent of the slack in the labour market and to see if she attempts to strike a more dovish tone," said analysts at Barclays. Ahead, initial jobless claims, Philadelphia Fed, existing home sales and leading indicators. The September Treasury contract was 3/32 lower at 125-265 and the 10s yield 2.436%.
Commodities:
Crude oil futures were lower in Europe, with October Brent crude on London's ICE Futures exchange currently trading at $101.57 a barrel, down $0.71 on the day. Prices were under pressure after a weak report on Chinese manufacturing activity dented investor sentiment and Libya resumed oil exports from its largest terminal after almost a year. "The oil market is amply supplied," said Commerzbank. "In addition, economic data from some major demand countries and/or regions also came in disappointing recently, fuelling demand concerns."
The price of gold fell further on the European spot market Thursday after minutes from the U.S. Federal Open Market Committee's latest meeting raised the prospect of a sooner-than-expected interest rate hike.
Spot gold was down 0.9% at $1,280.03 a troy ounce in morning European trading, following the release of the FOMC's minutes on Wednesday, which showed that if the committee's employment and inflation objectives are met ahead of expectations, "it might become appropriate to begin removing monetary policy accommodation sooner than currently anticipated," said James Steel, an analyst at HSBC.
Gold prices have benefited from the Fed's loose monetary policy in recent years, reflecting the metal's traditional appeal as a hedge against inflation and currency debasement.
A speech by U.S. Federal Reserve Chair Janet Yellen at the Jackson Hole central bankers' symposium Friday is likely to have little impact on gold prices, said Credit Suisse analyst, Tom Kendall.
Instead, "the markets are much more focused on what Mario Draghi is going to say there," he said.
"I don't think there's anything Yellen can say that is going to be more dovish than the market had already priced in," said Mr. Kendall. "The only thing that she can surprise on is to be less dovish, which isn't going to be bullish for gold."
=======Calendar=======
0830 CAN Jun Employment Insurance
0830 CAN Jul Production of principal
field crops
0830 US 08/16 Unemployment Claims
0830 US Weekly Exports
0945 US Bb Consumer Comfort
0945 US Aug Manufacturing PMI
1000 US Aug Philadelphia Fed Outlook
1000 US Jul Existing Home Sales
1000 US Jul Leading Indicators
1030 US 08/15 EIA Gas Storage
1630 US Money Stock Measures
1630 US Fed Discount Borrowings
1630 US Foreign Ctrl Bank Holdings
N/A US Jackson Hole symposium
======================
DJ Dominant Headlines:
Australian Bank Profits Could Be Set to Ease
India Unlikely to Allow Higher Foreign Stake in HDFC Bank
Sinopec Plans to Restructure Unit Sinopec Sales Via Stake Sales, Partnerships -- Sources
China Economy Flashes Red Again -- Heard on the Street
Coolpad Eyes Overseas Expansion, Considers Acquisitions
Top Stories Of The Day:
Euro-Zone Business Growth Slows
Business activity in the euro zone expanded sluggishly in August, held back by weakening factory output. Financial data firm Markit said its purchasing managers' index for the euro zone weakened to 52.8 from 53.8.
UK Retail Sales Weaker Than Expected
U.K. retailers sold less than expected in July, with annual growth in sales volumes slowing to the weakest rate since November last year in a sign that consumer demand softened at the start of the third quarter, official data showed.
BofA to Pay Nearly $17B in DOJ Settlement
Bank of America is said to be expected to pay nearly $17 billion to settle U.S. Department of Justice accusations it packaged shoddy mortgages into securities and sold them to investors in the run-up to the financial crisis.
Hamas Says Three Senior Military Leaders Killed
Israel killed three top commanders of Hamas' military wing in an airstrike in the southern Gaza Strip, officials from Hamas and Israel said, striking a blow at the Islamic militants' highest leadership after the collapse of a cease-fire.
Chinese Private-Investment Firm Starts Operations
China Minsheng Investment, a private capital-backed investment firm, started operations on Thursday, kicking off an ambitious plan to tap into consolidation trends in China.
Thai Junta Chief Picked to Be Prime Minister
Thailand's rubber-stamp legislature nominated army chief Gen. Prayuth Chan-ocha to become prime minister Thursday, giving him the chance to swap his military uniform for a business suit nearly three months after he seized power in a coup d'état.
Ukraine Warns About Economic Fallout As Fighting Rages
Ukraine's prime minister issued his starkest warning yet that the conflict in the country's east is causing long-term damage to its economy and hamstringing much-needed overhauls.
Write to Jonathan Robins at jonathan.robins@wsj.com
Earnings scheduled
- none
Economic indicators (all times ET)
- June job insurance claims at 8:30 a.m.
Stocks to watch
- Whitecap Resources (WCP.T) announced an asset purchase in Alberta, boosted its guidance and hiked its monthly dividend
- A unit of Brookfield Asset Management (BAM) is selling at least 40 million Western Forest (WEF.T) shares at C$2.50 each in a secondary offering
Calendar items (all times ET)
- none
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*Elizabeth Arden Resumed at Mkt Perform by Wells Fargo
*LRAD Cut to Neutral From Buy by Sidoti
*Prestige Brands Cut to Neutral From Buy by Sidoti
*Sprott Resource Started at Outperform by National Bank
*Sun Hydraulics Started at Buy by Sidoti
*Tesla Motors Started at Outperform by CLSA
*Windstream Holdings Cut to Neutral From Buy by D.A. Davidson
(END) Dow Jones Newswires
08-21-140604ET
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