Good morning! Here’s what you need to know:
Remember The Sell-Off? The global markets are extending their big comeback from their lows of the month. In Europe, Britain’s FTSE 100 is up 0.5%, France’s CAC 40 is up 0.3%, Germany’s DAX is up 0.9%, and Spain’s IBEX is up 0.4%. Asia closed higher with Japan’s Nikkei up 0.8% and Hong Kong’s Hang Seng up 0.6%. U.S. futures are pointing to another up day. Dow futures are up 31 points and S&P 500 futures are up 3 points. “The S&P 500 has recovered all of the 65 point fall from July 31 to August 7,” wrote Societe Generale’s Kit Juckes. “‘Risk’ is ‘on’ again by that measure, and if you include press reports of large fund managers buying US junk debt, or look at falling volatility, tighter spreads more generally.”
Investors Are Tired Of Worrying. That’s how stock market guru Ed Yardeni explains the series of modest market dips as opposed to big 10% corrections. “Often in the past, I’ve noted that the current bull market has been marked by a series of “endgame” corrections followed by relief rallies to new cyclical highs, and then new record highs since March 28, 2013,” he wrote. “I also noted that at the start of 2013, when the widely dreaded fiscal cliff was averted, our accounts showed symptoms of anxiety fatigue. They were tired of worrying about endgame scenarios. That might explain why there have been dips rather than corrections since early 2013.”
Good News Out Of Home Depot. The home improvement chain reported Q2 comparable store sales jumped 5.8%, which was stronger than the 4.4% growth expected. Earnings of $US1.52 per share beat expectations for $US1.44. “In the second quarter, our spring seasonal business rebounded, and we saw strong performance in the core of the store and across all of our geographies,” said CEO Frank Blake. Management’s full-year earnings outlook was also ahead of analysts’ expectations.
Good News Out Of Maersk. Danish shipping behemoth Maersk announced Q2 revenue and earnings beat expectations, driven by a 6.6% increase in volume. Management sees global container demand up 4-5% year-over-year. Shipping activity tends to be a reliable bellwether of global economic activity.
British Inflation Cools. UK consumer prices fell by 0.3%month-over-month in July, which was worse than the -0.2% expected. On a year-over-year basis, CPI climbed by just 1.6% year-over-year, missing expectations for 1.8% growth. All of this gives the Bank of England room to keep monetary policy loose for longer.
We’ll Soon Hear About U.S. Inflation. At 8:30 a.m., we’ll get the July U.S. consumer price index report. Economists estimate CPI climbed by 0.1% month-over-month or 2.0% year-over-year. Excluding food and energy, core CPI is estimated to have climbed by 0.2% or 1.9%, respectively. Here’s Morgan Stanley’s Ted Wieseman: “Lower retail gasoline prices and lower utility rates as natural gas prices extended a sharp reversal of winter elevation point to lower energy prices. Food prices were flat in June after surges averaging 0.4% from March to May, but farm prices and PPI pointed to renewed upside concentrated in meats. Core inflation, meanwhile, should continue to be boosted by a gradual acceleration in shelter costs. Taken together, rent and owners’ equivalent rent, accounting for 40% of core CPI, were at a six-year high of 2.8% year/year in June, up from 2.6% in December and 2.4% in June 2013, and a plunge in the national rental vacancy rate to a twenty- year low in Q2 points to further upside going forward. Otherwise, a decline new car prices restrained core CPI in June, but industry sources estimated lower sales incentives in July. Industry figures also pointed to more stable hotel rates after a 1.9% pullback in June reversed a 2.0% rise in May, and airlines have seen continued strength in domestic revenues.”
Aeropostale CEO Is Out. The casual apparel retailer announced that Thomas Johnson would be stepping down as CEO after three and a half years, and former CEO Julian Geiger would return. During Johnson’s tenure, the company’s stock price has fallen by around 85% and profit margins have fallen by half.
Standard Chartered Nearing Deal Over Compliance Failure. “Standard Chartered Plc is close to a deal to pay between $US200 million and $US300 million to resolve allegations by New York’s banking regulator that it failed to review high-risk transactions, two years after agreeing to reform its practices, a person familiar with the matter said on Monday,” reported Reuters’ Karen Freifeld. “The announcement of the settlement could come this week, possibly as soon as Tuesday, according to the person, who was not authorised to speak about the talks and declined to be identified.”
Sprint Cuts Prices And Doubles Data Offerings. “
Sprint Corp on Monday unveiled a new pricing plan that offers customers 20 gigabytes of data and up to 10 lines for $US100, doubling its data offerings, the latest in a string of price cuts and promotions sweeping the wireless industry,” reported Reuters’ Marina Lopes and Carey Gillam. “Sprint’s chairman, business tycoon Masayoshi Son, is betting new prices will revive a carrier hampered by an expensive network overhaul and rising competition.”
BofA’s Tom Montag Becomes Sole COO. “Bank of America Corp.’s Thomas K. Montag, the lender’s top-paid senior manager, will become sole chief operating officer as co-COO David Darnell takes a new title so he can move to Florida,” reported Bloomberg’s Hugh Son. “Darnell, 61, will be vice chairman and continue overseeing global wealth and investment management, as well as business banking, Chief Executive Officer Brian T. Moynihan wrote in a memo to employees. Montag, who has split the COO job with Darnell since 2011, will still run the investment banking and capital markets businesses.”
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