US index futures are essentially flat today with all three main contracts trading between -0.1% and +0.1%. European indices are also soft today with the Dax down 0.4% and the FTSE falling 0.2%. Italy is down 0.9% today as investors expect the departure of PM Draghi amid political turmoil.
It had been widely expected that the European Central Bank announced its first rate hike since July of 2011 today, but what surprised investors was that the ECB was more hawkish than thought and lifted up off of zero even faster than forecast (0.50% increase vs street 0.25% increase). The Euro has popped on this news, gaining 0.65% against the US Dollar on a day where the Pound and the Loonie are down 0.3% and gold is down 0.8% against the greenback. Cryptocurrencies are getting hammered today with Bitcoin falling 3.7% and Ethereum dropping 3.0% after Tesla Motors mentioned in its quarterly report that it has reduced its previous position in Bitcoin by 75%, converting it into cash.
Speaking of Europe, Russia resumed natural gas deliveries through the Nord Stream pipeline today at levels similar to the days before the recent planned maintenance shutdown. With political uncertainty easing for the time being, natural gas is down 4.25% on the news, while WTI crude oil is down 4.75% and has dropped back down toward $95.00/bbl. In metals action, copper and platinum are both down 1.4%.
Another round of US earnings have come out overnight and this morning with mixed results, perhaps seen most clearly in the numbers of headliner Tesla Motors. Tesla beat the street on EPS ($2.27 vs street $1.81), fell short on sales ($16.9B vs street $17.1B) and saw its profit margin get squeezed (27.9% vs previous 32.9%) as costs increased. Tesla is up 2.3% premarket on its news.
Airlines, on the other hand, are getting hammered in premarket action with United down 7.0% and American down 3.2%. United Airlines returned to profitability, but disappointed on earnings ($1.43 vs street $1.95) and had mixed guidance, indicating it expects demand to remain strong through the summer but also that it is struggling with higher fuel costs and cut its growth estimate amid industry capacity problems and the potential for a recession looming. On the positive side, metals giant Alcoa is up 3.8% premarket after beating expectations on earnings ($2.67 vs street $2.57) as revenue increases outpaced cost increases. Later today and tomorrow morning, focus turns to social media stocks with Snap and Twitter scheduled to report results, along with railroad Union Pacific, and credit card provider American Express.