Morning Minutes

Employment, Inflation, Earnings and Services In Focus




World markets have been mixed again overnight and into this morning. US index futures are flat to down 0.2% this morning as stocks digest yesterday’s 0.5% to 0.8% gains for major US indices. European indices are in the green today with the Dax up 0.6% and the FTSE up 0.4%, while in Asia Pacific trading the Nikkei fell 0.2% while the Hang Seng rose 0.8%. Commodities are also mixed with natural gas gaining 1.5%, but WTI crude oil losing 1.1% and copper falling 0.4%.

The most significant move overnight has been in the New Zealand Dollar which is up 0.75% against the US Dollar today after the country released quarterly employment numbers. A smaller than expected unemployment rate (4.0% vs street 4.5%), indicated a robust job market, while larger than expected growth in labor costs (0.9% over quarter vs street 0.4%), indicated increasing wage inflation. This news stoked speculation that the RBNZ may need to continue tightening monetary policy moving forward.

The New Zealand numbers and their implications could be seen as a potential preview of this week’s US and Canadian employment reports and the Fed’s annual Jackson Hole Symposium later this month. This morning, however, US ADP payrolls came in well below expectations (330K vs street 695K).  

Service PMI reports have been coming out from Europe this morning with the English Channel marking a significant divide. Continental economies came in below expectations overall, as highlighted by the overall Eurozone number (59.8 vs street 60.4), while the UK beat expectations (59.6 vs street 57.8). US Non-manufacturing PMI is due at 10:00 am EDT this morning (street 60.4). Investors may also keep an eye on the prices paid (previous 79.5) and new orders (previous 62.1) components for indications of economic momentum and inflation pressures.   

In earnings news today, General Motors disappointed on earnings ($1.97 vs street $2.23) but beat expectations on sales ($34.1B vs street $30.9B) and raised EPS guidance for this year (to $5.40-$6.40 from $4.50-$5.25). Several other companies beat expectations including Lyft (-$0.05 vs street -$0.24), Amgen ($4.38 vs street $4.09), Activision Blizard ($0.91 vs street $0.76), Kraft Heinz ($0.78 vs street $0.72), and CVS Health ($2.42 vs street $2.06). Later today, results are due from insurers Manulife Financial, Sun Life, and MetLife, plus Uber and Electronic Arts.

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Colin Cieszynski, Chief Market Strategist

Colin Cieszynski, CFA, CMT
Chief Market Strategist
+1 (647) 282-4428

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