Japanese and European equities came under severe pressure today. The Japanese Nikkei
(INDEXNIKKEI:NI225) failed last night at a technical level of resistance that stretches back seventeen years following a bearish key reversal in the USDJPY. Following yesterday’s sell-off, the French CAC-40
(INDEXEURO:PX1) fell 0.57% and is down 3.2% over the two days.
The preliminary estimate of third-quarter eurozone GDP showed the same rate of expansion as the last quarter. Year-over-year growth was down 0.4%, in-line with estimates, and growth rose 0.1% from the prior quarter. Industrial production showed the third straight month-over-month gain after a string of particularly disappointing data. Brazil’s stock market is one of the worst-performing across the world this year, and this kind of growth could stem the negative tide.
There was unconfirmed speculation that the Congressional budget conference had come to a preliminary agreement on a budget deal for fiscal years 2014 and 2015. The deal would remove as much as $90 billion in headwinds from the budget sequester, adding about 0.27% to real GDP next year and 0.13% in 2015, according to data compiled by Minyanville. Senate Budget Committee Chairwoman Patty Murray confirmed that talks were ongoing, but a deal had yet to be reached.
November ADP private payrolls rose 215,000, ahead of the highest economist estimate and above the 170,000 consensus estimate. Additionally, the prior month was revised up to 180,000 from 130,000. Bond yields rose as a result and US equities initially traded down. Following the strong report, a number of economists and strategists raised their estimates for Friday’s non-farm payrolls report.
New-home sales rose to the highest annual rate in 30 years in October. Sales were reported as 444,000 though many economists doubted the validity of the report due to builder comments during the month. The delayed reports for September and August’s home sales drastically missed estimates.
US equities opened down for the fourth straight day and had a very volatile session. The S&P 500
(INDEXSP:.INX) spiked to above 1,800 on the budget deal speculation, only to drop more than 1% on news that Treasury Secretary Jack Lew would update his stance on financial regulation and reform in his speech tomorrow. Buyers emerged near the end of the session to push the major indices into the positive. However, the amount of declining stocks on the NYSE outnumbered advancing stocks throughout the day.
Tomorrow's Financial Outlook
The second estimate of third-quarter US GDP will be released tomorrow morning. Because of gains in wholesale inventories, economists estimate that real GDP will be revised up to an annualized rate of 3.1% from the preliminary estimate of 2.8%. Jobless claims are forecast to rise to 322,000 from last week’s 316,000. The last piece of US economic data is October factory orders, forecast to fall 1.0% during the month.
Tomorrow the Bank of England and ECB will both issue their monthly monetary policy decisions. It is expected that the ECB will ease financial conditions through long-term loans or asset purchases, as has been hinted by a number of its officials over the past month. No change is expected from the BoE.
Notable earnings reports scheduled for tomorrow will come from Kroger
(NASDAQ:CONN), Dollar General
(NYSE:DG), Jos A Bank
(NASDAQ:JOSB), Smithfield Foods
(NYSE:SFD), Toronto-Dominion Bank
(NASDAQ:FNSR), and Ulta Salon
No positions in stocks mentioned.
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