News & Views: Tuesday, August 12

By Michael Sedacca  AUG 12, 2014 9:05 AM

What you need to know for today's trading day.

 


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Ukraine Says It Is Near End of Operation to Surround Rebels (Bloomberg)

Robin Williams, Oscar-Winning Actor, Dies at 63 in Suspected Suicide (NYTimes)

Pimco Total Return cut U.S. government debt to 45 percent in July (Reuters)

Poor German data pushes euro toward 9-month lows against dollar (Reuters)

IEA Lower 2014 Oil Demand Growth Forecast on Global Economic Outlook (WSJ)

Views
Outside of the usual geopolitical evolution, the main story this morning is the extreme drop German professional investor (ZEW) feelings about the current and future economic situation (details below). It was the largest single month drop since the European debt crisis went into higher gear back in August 2011. However, if you think pragmatically about the reason behind this drop, it is quite reasonable - although the magnitude is certainly shocking. Russia is the largest trading partner for the EU, and the new sanctions - from both sides - will put a ding in that relationship that would take time to repair if it were to continue.

It's no surprise to see the German DAX as the worst performer in Europe this morning. Up to this point, it is leading US equity futures lower, so it appears at least in the morning session that this is our de facto risk gauge.

Russia is sending a humanitarian aid convoy of 280 trucks to the separatist states in eastern Ukraine, which the Ukrainian government is not letting cross the border because it says the trucks contain military equipment. The US and EU preferred for Russia to handle the mission jointly with them, but the main thing to keep in mind - in my view - is that Russia views this as more of an ethnic crisis than anything else.

When I checked the screen of active Treasuries (the current and olds) this morning, they were literally all unchanged. Trading activity overnight was also abysmally slow, as termed by David Ader of CRT Capital this morning, with the 10yr trading in a 4 tick range. Perhaps that is a good indicator of what today's trading may look like.

Overnight Data:
- German ZEW current situation (August) down to 44.3 vs 54.0 expected, prior 61.8
- German ZEW expectations down to 8.6 vs 17.0, prior 27.1
- Japan PPI YoY (July) down to 4.3% vs 4.4% exp, prior 4.6%
- Japan industrial production MoM (Jun final) down -3.4%, prior 3.3%
- India CPI YoY (July) up to 7.96% vs 7.4% exp, prior 7.31%
- India industrial production YoY (June) down to 3.4% vs 5.6% exp, prior 5.0%

US Economics (Time Zone: EST)

10:00 JOLTS Job Openings - prior 4635
2:00 Treasury Budget Statement - expected -$96B, prior $70.5B
11:00 Treasury to sell 4-week bills
11:00 Fed to purchase $950m-$1.15b bonds in 22-30 year range
1:00 Treasury selling $27b 3-year notes

Earnings

Before:
Kate Spade (KATE)
Insys Therapeutics (INSY)

After:
Fossil Group (FOSL)
Cree (CREE)

Twitter: @MichaelSedacca

No positions in stocks mentioned.

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