Euro-Zone GDP Fails to Grow in Second Quarter (WSJ)
Wal-Mart revenue rises but U.S. same-store sales flat (Reuters)
Death of Brazil's Presidential Candidate Resets Election (Bloomberg)
Germany May Start Reducing Bonds Outstanding as Soon as 2015 (Bloomberg)
Cisco to cut another 6,000 jobs as forecast falls flat (Reuters)
Growth in Europe was another stinker for the second quarter, prompting a momentary 10yr yield for German Bunds at sub 1% (it only traded there momentarily). Nominal GDP growth for Germany is 1.6% YoY, so a sub 1% 10yr yield is not a totally foreign concept, especially with the ECB on hold at zero for close to five years. The two major countries that were left to be reported today - Germany and France - were both below expectations (details below). Total growth for the broader eurozone was zero. The market reaction was very little in Europe, the EURUSD being the largest mover at +35pips.
However, Russian geopolitical news was enough to reverse the selloff early today. Headlines crossed that Russian President Vladimir Putin said "we'll do all we can to stop conflinct in Ukraine, Russia shouldn't isolate itself from the outside world, and the unity of Russian society should be strengthened.' Perhaps, though, the last comment means defending their brothers in east Ukraine. Also, Finnish Prime Minister Stubb said that the EU is not considering further sanctions against Russia. This caused a 6.5pt rally in S&P futures and a full 90bps reversal in the German DAX.
The Bank of Korea (BOK) cut its policy rate by 25bps to 2.25% as was expected by most economists. The government's new Finance Minister that was appointed last month has moved to make domestic fiscal policy far more expansionary - utilizing a $11bln spending plan and tax breaks - and those changes are now coupled with an interest rate cut. Even still, the USDKRW - a favored short trade that has been unwinding lately - fell.
Geopolitically speaking, the 100 odd Special Forces soldiers sent to Iraq to determine whether or not a full operation was necessary to evacuate the Yezidi villagers trapped on a mountain, said that the humanitarian situation was not as bad as expected. In Ukraine, the government will allow the Russian aid convoy to enter the eastern part of the country so long as the aid is distributed by the Red Cross.
Cisco (CSCO) out with earnings over night, not that great and they're cutting 6K jobs. However, it is being defended this morning by Piper Jaffray, Wells, and OpCo. The company is a cash machine, making $11bln in FCF per year and has an overall low cost of capital at 9% (its 10yr debt trades at 80 over). Similarly, Wal-Mart's (WMT) growth is being questioned this morning.
- France GDP QoQ (2Q prelim) flat at 0.0% vs 0.1% expected, prior 0.0%
-- YoY down to 0.1% vs 0.3% exp, prior 0.8%
- German GDP QoQ down -0.2% vs -0.1% exp, prior 0.7%
-- YoY down to 0.8% vs 1.3% exp, prior 2.5%
- Eurozone GDP QoQ flat at 0.0% vs 0.1% exp, prior 0.2%
-- YoY down to 0.7% vs 0.7% exp, prior 0.9%
- Eurozone CPI YoY (July final) unchanged at 0.4% vs 0.4% exp
- Japan machine ordres MoM (June) up 8.8% vs 15.3% exp, prior -19.5%
US Economics (Time Zone: EST)
08:30 Initial Jobless Claims, 311k, exp. 295k, prior 298k
08:30 Continuing Claims - 2544k, exp 2500K, prior 2518k
08:30 Import Price Index YoY (July) - +0.8%, expected 0.8%, prior 1.2%
11:00 Fed to purchase $1.6b-$1.9b notes in 5 to 6-year range
1:00 Treasury selling $16b 30-year bonds
Advance Auto Parts (AAP)
Applied Materials (AMAT)
Plug Power (PLUG)
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