US Market Update: Dow flat S&P flat Nasdaq -8

***Economic Data***
– (SA) South Africa May Manufacturing Production M/M: 0.4% v 1.4%e; Y/Y: 0.6% v 2.4%e
– (US) Jun NFIB Small Business Optimism: 90.8 v 91.2e
– (US) ICSC/GS weekly chain store sales w/e July 9th: +0.4% w/w; +5.5% y/y
– (IC) Iceland Jun Unemployment Rate: 6.7% v 7.4% prior
– (BR) Brazil May Retail Sales M/M: 0.6% v 0.6%e; Y/Y: 6.2% v 6.3%e; Broad Retail Sales Y/Y: 12.8% v 11.8% prior
– (CA) Canada May Int’l Merchandise Trade: -C$0.8B v -C$0.8Be
– (US) May Trade Balance: -$50.2B v -$44.1Be
– (US) Redbook Retail Sales w/e July 9th: +5.4% y/y; July MTD: +0.6% v Jun
– (MX) Mexico Apr Gross Fixed Investment: 7.1%% v 7.0%e
– (MX) Mexico May Industrial Production M/M: +1.1% v -0.1% prior; Y/Y: 4.6% v 3.7%e
– (US) July IBD/TIPP Economic Optimism: 41.4 v 44.6 prior
– (US) May JOLTs Job Openings: 3.0K v 3.0K prior
– (MX) Mexico Jun Vehicle Production: 229.8K v 213.3K prior; Vehicle Domestic Sales: 68.4K v 68.6K prior; Vehicle Exports: 188.2K v 177.0K prior

– Markets on both sides of the Atlantic have been highly volatile from early morning onwards on sharpening concerns over Italy’s fiscal situation. The European debt crisis contagion fears that swept through markets late last week and through the weekend grew overnight, reflected steepening yields on peripheral debt; yields on both Spain and Italy ten-year debt had risen above +6.0% by early this morning, hitting highs last seen during the Asian financial crisis in the late 1990s. As yet unconfirmed rumors that the ECB was buying Italian government debt helped restore calm, although markets remain unsettled. Equity trading in the US session has been somewhat choppy, with some sour news in tech weighing down the Nasdaq in particular. Note that the VIX index nearly broke above the 20 just after the open. The White House and the Congressional GOP leadership are no closer to a debt ceiling deal this morning, as reports circulate that pressure from the right is building on Speaker Boehner to abandon his prior support for a grand bargain. Both WTI crude and spot gold are more or less flat on the session, trading around $95.75 and $1,552, respectively.

– Alcoa rang in the June quarter reporting season last night by meeting its Q2 profit targets and somewhat exceeding revenue estimates. Executives said that the outlook for aluminum is positive, with demand growing steadily this year, even as cost pressures continue. Tech stocks are under pressure after weak guidance from Novellus and Microchip Tech. Novelus was more or less in line with expectations in its Q2 results, however its outlook for Q3 was notably soft, with projected booking flat to down 20% y/y. Note that the company’s bookings in Q2 fell steeply both y/y and q/q. Microchip Tech offered a preliminary look at its Q1, cutting both its profit and revenue targets. MCHP’s CEO said its net sales activity in the June quarter did not progress as originally expected, due to weakness in the automotive and industrial business from Japan-related supply disruptions. MCHP and NVLS are down 8% and 13%, respectively. Semi names are broadly down on these stories, with the SMH ETF down more than 2%. Investors are rewarding troubled tech name Cisco after the company said it would lay off around 14% of its workforce.

– FX trading in the New York session saw the continued ebbing of risk aversion sentiment. Traders saw a sharp reversal of the price action after rumors circulated that the ECB was rumored to be buying Italian government debt and yields on peripheral European government made a sharp u-turn. Note that yields on both Spain and Italy ten-year debt had risen above +6.0% level and then dropped again during the US session. The overall atmosphere was further soothed by speculation that the EU leaders might hold a special summit regarding debt crisis on Friday, although latter comments from European officials threw cold water on the rumors. On the other side of the Atlantic, Treasury Secretary Geithner firmly stated that the debt ceiling would be raised and that “failure was not an option.” EUR/USD regained a foothold above 1.40 handle aided by the surge in the May US trade deficit data, with the headline figure over $50B. USD/JPY remained below the 80 handle and barely above the initial March 21st coordinated intervention level of 79.50.

***Looking Ahead***
– (PE) Peru May Trade Balance: No est v $347.7M prior
– 11:30 (US) Treasury to sell 4-Week Bills
– 13:00 (US) Treasury to sell $32B in 3-Year Notes
– 12:00 (IC) Iceland Jun International Reserves (ISK): No est v 708.6B prior
– 14:00 (US) Fed Releases Minutes from June 21-22 FOMC Meeting
– 16:30 (US) API Energy Inventories
– 22:00 (CH) China Q2 Real GDP Q/Q: No est v 2.1% prior; Y/Y: 9.3%e v 9.7% prior
– 22:00 (CH) China Jun Industrial Production Y/Y: 13.1%e v 13.3% prior; IP YTD: 13.9%e v 14.0% prior
– 22:00 (CH) China Jun YTD Fixed Assets Y/Y: 25.7%e v 25.8% prior
– 22:00 (CH) China Jun Retail Sales Y/Y: 17.0%e v 16.9% prior; ) Retail Sales YTD: 16.7%e v 16.6% prior

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July 10th, 2011 in Forex News

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