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After Early European Weakness, Stocks Close Flat


Today's financial recap and tomorrow's financial outlook.

European equities were lower this morning after the Bank of England announced in its quarterly inflation report that it was downgrading its economic and inflation outlook due to external weakness. The central bank only sees inflation around 1% during 2015, which would imply a lower rate path than it has discussed in the past. The Italian FTSEMIB fell by 2.87% and was the worst performing global equity index. UK Gilts also rallied, supporting US Treasuries.

US equities opened lower in sympathy to the weakness in European stocks. The selloff was led by utilities, a defensive sector that has led over the past few weeks. The S&P 500 (SPX) sector was down 2% versus a near unchanged finish for the broader index. The news that Russian combat troops had entered eastern Ukraine spooked stocks, but that did not persist for the remainder of the session.

Crude oil continued to suffer today and the price of Brent fell below $80 per barrel for the first time since September 2010. The US dollar was higher due to the weakness in the British Pound, which fell 0.83% as the new economic outlook pushed the first rate hike by the Bank of England out even further into 2015, and possibly even 2016. The weekly government supplies report was delayed from its usual time today, to tomorrow.

US, UK, and Swiss regulators announced that they have ordered five major banks to pay fines totaling $3.3 billion for illegal rigging of FX. These fines have been long expected and the group of banks had collectively set aside $5.3 billion for the probe. Of the five banks that were named, JPMorgan (JPM), Citigroup (C), and Royal Bank of Scotland (RBS) underperformed the market in today's session.

Tomorrow's Financial Outlook

The major economic report scheduled for tomorrow is the weekly jobless claims. Over the past four weeks, claims have averaged 280K, which is the lowest in decades. Also scheduled to be released is the monthly Treasury budget statement and JOLTS job openings from September. Janet Yellen is scheduled to give the welcoming remarks from a prepared text at an ECB/Fed conference at 11:45am ET. She will not take questions.

Overnight is a pair of significant economic reports from China. October retail sales, fixed asset investment, and industrial production will be released. Growth is expected to remain the same as the prior month. Separately, the final reading of German October inflation and the ECB's monthly financing report will be reported.

Earnings reports from major companies are due out from Kohl's (KSS), Wal-Mart (WMT), Nordstrom (JWN), Applied Materials (AMAT), Viacom (VIA).

Twitter: @Minyanville

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No positions in stocks mentioned.

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