The S&P500, Dow Jones Industrial Average and Nasdaq 100 all closed at new all-time highs on Thursday following better than expected earnings from some key U.S. companies and speculation around an OPEC meeting next month. The S&P500 gained +0.47% shown on the first chart below, the Dow Jones Industrial Average +0.64% and Nasdaq100 +0.42 while the U.S. dollar rallied +0.29%, shares were lifted by Macy’s Inc. (NYSE:M) which rallied as much as 17% following earnings of US$0.54 per share against estimates of US$0.48. Same-store sales only declined 2% over the quarter compared with expectations of a 4.6% decline and the company announced it will close 100 stores (14% of store bases) as it continues to face competition from online retailers.
Initial jobless claims for August 6th were in-line with forecasts of 265,000 with an actual of 266,000 while continuing claims for July 30th were slightly higher than expected, up to 2.155m vs 2.133m expected. Export prices for the month of July increased 0.2% against expectations of 0.1% while declining -3% year-on-year against a previous reading of -3.5%. Import prices also increased, up 0.1% from a month earlier with forecasts for a -0.3% decline, import prices also declined -3.7% year-on-year with a previous reading of -4.8%.
Equities have continued to be well supported by easy central bank policy, a lack of negative news flow recently and better than expected earnings in the U.S. with over 80% of companies already reported Q2 results with 78% of those beating profit projections (keeping in mind heading into earnings season there were significantly pessimistic expectations for a 5.5-6% decline in earnings).
European equities also gained on Thursday with the Euro Stoxx 600 up +0.78%, DAX up +0.86% as the EUR/USD dropped -0.38%. The FTSE100 closed +0.70% higher benefiting from a -0.44% decline in the GBP/USD.
Oil prices gained significantly overnight as Saudi Arabia’s energy minister Khalid al-Falih said both OPEC and non-opec members will discuss the oil situation and potentially take action to help rebalance the market at a September 26-28th meeting in Algeria. While this is encouraging and certainly supportive of prices in the near-term we have seen similar hopes which have fallen over previously due to the refusal of Iran to agree to an output freeze, so this could be a clear case of buy the rumour sell the fact. At the same time the International Energy Agency released a statement on Thursday that it sees no oversupply in the second half of 2016 with a healthy draw on inventories over the next few months helping to reduce a global oil glut.
Both WTI & Crude oil jumped +4.27% & +4.34% following the news shown on the second chart below, copper prices gained +0.90%, natural gas fell -0.39% and did iron ore -0.86. The stronger U.S. dollar weighed on precious metals spot gold & silver which declined -0.59% & -0.65% respectively.
Locally the S&P/ASX 200 finished -0.64% lower on Thursday but is set for a stronger open this morning with ASX SPI200 futures up 33 points in overnight trading.
Data releases:
- Chinese Industrial Production (YoY Jul), Retail Sales (YoY Jul) and Fixed Assets (YoY Jul) 12:00pm AEST
- German CPI (YoY & MoM Jul) 4:00pm AEST
- German GDP (QoQ & YoY Q2) 4:00pm AEST
- U.K. Construction Output (YoY Jun) 6:30pm AEST
- Euro-Zone GDP (YoY & QoQ Q2) 7:00pm AEST
- U.S. Advance Retail Sales (MoM Jul) 10:30pm AEST
- U.S. Business Inventories (MoM Jun) 12:00am AEST
- University of Michigan Consumer Confidence Survey (MoM Aug) 12:00am AEST
- Baker Hughes U.S. Oil Rig Count (Aug 12) 3:00am AEST
This article was written by James Woods - Global Investment Analyst, Rivkin Securities Pty Ltd. Enquiries can be made via james.woods@rivkin.com.au or by phoning +612 8302 3600.