US markets seem unimpressed by Fed report
Positive data from the Federal Reserve did little for the stock market with a drop in Dow Jones and a flat S&P; the NASDAQ did rise a little though. Stock futures are largely down this morning. There were good markers for the economy yesterday, with GDP increasing 4 per cent in Q2 and the Fed planning to keep interest rates at their historic low and the bond-buying program on target to end in the fall. Payroll data from processing firm ADP was also broadly positive. News from the food industry were less pleasing; Buffalo Wild Wings had a lower than expected forecast for the year, SodaStream’s earnings were better than forecast but still down 28 per cent and Whole Foods issued an outlook for earnings lower than forecast.
The number of US unemployment benefit claimants is released at 8.30am ET. Earnings reports before the bell come from MasterCard, Exxon Mobil and Time Warner Cable among others, while LinkedIn and GoPro are among those reporting after the close.
European shares fall as deflation concerns re-emerge
The Eurozone economy is once again at risk of deflation as new data today shows that inflation hit a 5 year low in July. Eurostat’s report shows that consumer prices rose by 0.4 per cent, the lowest rise since 2009 when the financial crisis was at its peak. The European Central Bank meets next week but is unlikely to announce any major policy changes to tackle the risk of deflation; they are expected to want to analyse the situation over a longer period.
Argentina in default but shares rise
As of midnight, Argentina is in technical default for the second time in 13 years, having failed to repay the debt to the holdout creditors. However, although the default was almost certain, investors seemed un-phased and Argentina’s share market ended Wednesday at a 20 year high. Analysts suggest this is due to domestic investors wanting to put their cash into assets due to fears of a massive devaluation of the Argentine Peso. Mark Mobius at Franklin Templeton says that for longer term investors Argentina is an opportunity. He says they will have to get their house in order as no one is going to lend them money. The value of Argentina’s government bonds are also up by almost 10 per cent. Read the full story.
Could tensions mean end to energy deals with Russia
Many of our large energy companies have huge investments in Russian oil and gas and have been generally continuing to do business as usual during the recent tensions. However, as sanctions are ramped up by the US and Europe firms are now considering how to proceed, given that the unrest could last for some time. While Russia has supplies, they lack technology and need to work with western oil companies to stay competitive but sanctions may damage that. There is a delicate play-off between a country that needs to work with the west; the west that is compelled to impose sanctions; and, in the case of the EU, a region that relies on Russian gas supplies. Read the full story.