Stock markets around the world have continued to climb overnight and into this morning. US indices futures are consolidating yesterday’s rally up 0.1% while European indices are higher with the DAX up 0.5% on its return to trading while the FTSE is up 0.7%. Crude Oil is holding steady, still attracting support following yesterday’s breakout rally as more wildfires in Canada shut in some oil sands production facilities, a setback on the road to recovery.
Traders looking for confirmation of Friday’s big US retail sales report received a big boost from Home Depot's (NYSE:HD) earnings report which beat the street on sales, earnings ($1.44 to $1.35) and the company raised its guidance for the year. This suggests that recent weak results from department stores may be contained to that sector with consumers electing to spend their money elsewhere.
Today’s trading action in the UK where the FTSE and GBP are rising appears particularly significant showing a sea change in sentiment may be underway. Back in the winter, traders had viewed news favouring Leave as negative and news favouring Remain as positive. This effect had been fading as the campaign progressed with pro-Leave news having less and less of a negative impact.
This morning, for the first time, UK markets are up on news favouring the Leave camp. A TNS poll released this morning showed Leave leading Remain 41%-38% the first time a poll from that particular agency showed Leave leading for the first time in several months. Today’s developments indicate that a big change in sentiment is underway in the UK with voters and traders viewing the Leave option as increasingly favourable. EURGBP nearing completion of a head and shoulder top also highlights this change in attitudes.
Today’s US inflation report may have a significant impact on trading. Recent FOMC comments have been indicating June remains open for a potential rate hike with retail sales favouring the hawkish camp. The US dollar index trading just below 95.00 indicates currency traders are still pricing in two rate increases this year but bond traders continue to think there may not be any. US inflation has been increasing, and some Fed members have become concerned about falling behind the curve on inflation. Higher than expected inflation could boost the hawkish case while a soft report could support the doves at the Fed.
Corporate News
Home Depot
- $1.44 vs street $1.35, sales $22.76B vs street $22.38B, same store sales 6.5% vs street 5.2%, raises full year guidance to $6.27 from $6.12-$6.18
Economic News
Significant announcements released overnight include:
UK consumer prices 0.3% vs street 0.5%
UK core CPI 1.2% vs street 1.4%
UK retail prices 1.3% vs street 1.5%
UK producer input prices (6.5%) vs street (6.7%)
UK producer output prices (0.7%) vs street (0.8%)
UK ONS house prices 9.0% vs previous 7.6%
Singapore non-oil exports (7.9%) vs street (8.4%)
Singapore electronic exports (7.4%) vs street (5.8%)
Announcements due later today include:
8:30 am EDT Canada manufacturing sales street (1.9%)
8:30 am EDT US consumer prices street 1.1%
8:30 am EDT US core CPI street 2.1%
8:30 am EDT US real average weekly earnings previous 1.1%
9:15 am EDT US industrial production street 0.3%
9:15 am EDT US manufacturing production street 0.3%
12:00 pm EDT US Williams and Lockhart speaking