Good morning! Here’s what you need to know:
Russia Passes The Blame. “Without doubt the government of the territory on which it happened bears responsibility for this frightening tragedy,” said Russian President Vladimir Putin.
Investors Sell Russia. Russia’s MICEX stock index is down 1.5%. The rationale is that harsher sanctions would come down should Russia be tied directly to the tragedy. Today’s trading activity follows Thursday’s sharp sell-off, which came after the U.S. announced harsh sanctions against Russian energy and financial firms.
Wall Street Is Split. Some experts believe this too shall pass. “Over time MH17 will be seen as a human tragedy with regional implications more than a geo-political crisis and next week should see the focus return to yield-hunting,” said Societe Generale’s Kit Juckes.
But This Time Could Be Different. “If there’s something that could take this dangerous Cold War-era standoff to a whole new level, this is it,” said Nicholas Spiro of Spiro Sovereign Strategy. “[I]t’s possible that markets, which continue to brush off all sorts of country-specific and geo-political risk events after brief periods of nervousness, will perceive the MH17 crash as a development which forces Russia to change course and disassociate itself from the separatist insurgents in eastern Ukraine. This looks like wishful thinking for the time being.”
Markets Are Mixed. In western Europe, Britain’s FTSE 100 is down by 0.4%, France’s CAC 40 is down 0.1%, Germany’s DAX is down 0.6%. In Asia, Japan’s Nikkei closed down 1.0% and Hong Kong’s Hang Seng fell 0.3%.
Google Whiffs. Search giant Google reported Q2 earnings of $US6.08 per share, missing expectations for $US6.25. However, revenue excluding traffic acquisition costs was strong at $US12.67 billion versus $US12.32 billion expected. The stock is up by around 1% in pre-market trading.
IBM Beats. IBM Q2 earnings came in at $US4.29 per share, beating expectations for $US4.32 by a hair. “We performed well in our strategic imperatives around cloud, big data and analytics, security and mobile,” said CEO Ginni Rometty. “We will continue to extend and leverage our unique strengths to address the emerging trends in enterprise IT and transform our business, positioning ourselves for growth over the long term.” The stock is down by 1.6% in pre-market trading.
Sentiment Update. At 9:55 a.m. ET, we’ll get the University of Michigan’s preliminary read on consumer sentiment in July. Economists estimate the headline index climbed to 83.0 from 82.5 in June. “Rising equity markets, combined with moderately lower retail gasoline prices and financial market volatility, suggest that consumer sentiment should remain on a broadly upward trend,” said Barclays economists. “A rise to 83.0 in July would put the six-month moving average at 82.2, up from 81.9 in June, and be consistent with the recent uptick in consumer spending following only modest growth in the first quarter.”
CBS-CNN? “We’ve always talked about doing things with CNN,” said CBS CEO Les Moonves. “We’ll see. It’s something I’m sure we will look at if that becomes available.” Earlier this week, Morgan Stanley’s Benjamin Swinburne estimated CNN’s value at ~$10 billion.