Daily Briefing – Tuesday, February 7, 2017
In another sign of Euro imbalance, January data shows a worrying flight of capital from Spain and Italy towards Germany. There, pressure from local economists following overshot inflation targets, plus signs of an upcoming US interest rate hike may force the European Central Bank to scrub expectations of lowering interest rates in favor of reversing policy and perhaps beginning to raise them again. This morning’s data shows a severe 7.4% drop in German factory orders for January followed by a disappointing 0.1% rise in house prices in the UK. Last week BRC reported a drop in British retail sales. European stocks were up yesterday led by the FTSE’s 0.17% increase; activity was dampened by commodity and bank shares, with DeutsheBank slipped on plans for an upcoming public offering.
Major US benchmarks closed Monday in the red on the US dollar’s upswing as a March interest rate hike takes form. And the retail sector is straining under news that, following Sears and other brick & mortar establishments, JC Penny has announced the closure of 135 stores. Macy’s also intends to close 170, Footlocker 150, CVS pharmacies 70, Office Depot 200, and Ebrcrombie & Fitch 54.
Chinese and Hong Kong equities closed slightly up this morning – pressured down by a selloff in financial stocks – after Australia decided to keep interest rates unchanged. The Nikkei lost nearly 0.2%, however due to a stronger Yen. A Financial Times report from Sunday states that China’s banking system has overtaken the Eurozone’s in assets, after its GDP passed that of the EU in 2011. At 3 times annual economic output in 2016, the data could be a sign for worry, as it indicates an over-reliance on bank-finance investments and credit risk.
Oil is now trending below previous support at $53.50 after concern abides regarding Russia’s compliance with the OPEC led production freeze and China’s downward revision of growth targets. Gold began the week on an upswing thanks to global uncertainties, but renewed its downward march on pre-hike dollar strength.
Saudi Arabia has announced the listing of national oil mammoth Aramco in the 2nd half of 2018 for about 5% of the company’s value; and as the season unwinds, tomorrow brings Cocal Cola, Total and Adidas up for 2016 Q4 quarterly earnings reports.
|10 AM GMT||EU – GDP Q4 2016|
|1:55 PM GMT||US – Redbook Index|
|9:30 PM GMT||API Weekly Crude Oil Inventories|
|11:50 PM GMT||Japan – Trade Balance & GDP Q1 2017|
|2 AM GMT (+1)||China Trade Balance|