Morning Minutes

European Rate Hike, Energy Selloff, Mixed Earnings Reports Move Markets




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.

Subscribe to the Morning Minutes:

Today's earnings reports and market activity, delivered right to your inbox.

Colin Cieszynski, Chief Market Strategist

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

Read More

Legal and Regulatory Disclosures

Terms and Conditions:
This information is for Investment Advisors only. The website is for informational purposes only and is not intended to provide a complete description of SIA Wealth Management’s products or services. Past performance is not indicative of future results. It should not be construed as investment advice or relied upon in making an investment decision. Products and services of SIA Wealth Management are only offered in jurisdictions where they may be lawfully offered for sale. The information contained in this Website does not constitute an offer or solicitation by anyone to buy or sell any investment fund or other product, service or information to anyone in any jurisdiction in which an offer or solicitation is not authorized or cannot be legally made or to any person to whom it is unlawful to make an offer of solicitation. All products and services are subject to the terms of each and every applicable agreement. It is important to note that not all products, services and information are available in all jurisdictions outside Canada.

SIA Wealth Management Inc. (SIAWM) specifically represents that it does not give investment advice or advocate the purchase or sale of any security or investment whatsoever. This information has been prepared without regard to any particular investor’s investment objectives, financial situation, and needs. None of the information contained in this document constitutes an offer to sell or the solicitation of an offer to buy any security or other investment or an offer to provide investment services of any kind. As such, Advisors and their clients should not act on any recommendation (express or implied) or information in this report without obtaining specific advice in relation to their accounts and should not rely on information herein as the primary basis for their investment decisions. Information contained herein is based on data obtained from recognized statistical services, issuer reports or communications, or other sources, believed to be reliable. SIA Wealth Management Inc. nor its third party content providers make any representations or warranties or take any responsibility as to the accuracy or completeness of any recommendation or information contained herein and shall not be liable for any errors, inaccuracies or delays in content, or for any actions taken in reliance thereon. Any statements nonfactual in nature constitute only current opinions, which are subject to change without notice.