Global markets are mixed this morning as investors digest another round of economic data and corporate earnings while keeping a close eye on ongoing tensions between the US and Iran. Energy prices continue to hold onto recent gains as military strikes between the two countries persist, helping to support the commodity complex.
Earnings remain front and center this week. While the major US banks continue to dominate headlines, semiconductor equipment manufacturer *ASML is providing a welcome boost to sentiment after reporting results that comfortably exceeded expectations. Its stronger outlook has helped offset concerns created by IBM’s profit warning on Tuesday, which sent that stock tumbling by 25% in a single session.
Attention now shifts to central banks. The Bank of Canada is widely expected to leave its overnight lending rate unchanged at 2.25% this morning, but investors will be paying close attention to any commentary surrounding inflation and the domestic economy. In Washington, Fed Chair Warsh resumes his testimony before Congress after reiterating yesterday that fighting inflation remains the central bank’s priority while signaling that additional Federal Reserve reforms are expected once several internal task forces complete their work.
Overnight economic releases painted a mixed picture. China’s second quarter GDP slowed more than expected, although June retail sales and industrial production both surprised to the upside, suggesting underlying activity may be proving more resilient than the headline growth figures indicate. In the United States, producer prices came in below expectations for a second consecutive month, reinforcing the view that inflation pressures continue to ease, while the Empire State Manufacturing Index pointed to stronger-than-expected activity in the manufacturing sector.
US index futures are modestly higher ahead of the opening bell, with technology shares leading the advance. Asian markets closed broadly higher overnight, led by gains in Japan and Hong Kong, while European indices are trading modestly lower this morning.
Commodity markets are relatively quiet following recent volatility. Crude oil continues to trade near US$80 per barrel as geopolitical tensions underpin prices, while Brent crude remains near US$86.50. Gold is modestly weaker but continues to hold above the US$4,000 per ounce level, and copper remains steady near US$6.35 per pound.
Bond markets are little changed this morning, with the US 10-year Treasury yield holding near 4.60% and the 30-year Treasury yield near 5.15%. Currency markets are similarly subdued, with the US Dollar largely unchanged while the Canadian Dollar edges modestly higher.
Looking ahead, investors will receive the Bank of Canada’s interest rate decision later this morning, followed by earnings from United Airlines after today’s closing bell. US retail sales, due Thursday morning, will provide another important update on the strength of consumer spending.
*ASML Holdings CDRs are held in some portfolios managed by SIA Wealth Management.