Markets Bounce Higher, Ukraine Situation Dominates Attention

Economic Data

- (EU) ECB: 16 banks to repay total €21.5B in 3-Year LTRO Funds vs. €3.5Be
- (BR) Brazil July IGP-M Inflation (2nd Preview): -0.5% v -0.5%e
- (IN) India Forex Reserves w/e July 4th: $317.0B v $316.4B prior
- (CA) Canada Jun CPI M/M: 0.1% v 0.0%e; Y/Y: 2.4% v 2.3%e; Consumer Price Index: 125.9 v 125.8 prior
- (CA) Canada Jun CPI Core M/M: -0.1% v -0.2%e; Y/Y: 1.8% v 1.7%e
- (CA) Canada Jun CPI (Seasonally Adj) M/M: 0.3% v 0.3%e; CPI Core (Seasonally Adj) M/M: 0.2% v 0.2% prior
- (CA) Canada May Wholesale Trade Sales M/M: 0.6%e
- (BR) Brazil July CNI Industrial Confidence: 46.4 v 47.5 prior
- (BE) Belgium July Consumer Confidence Index: -10 v -7 prior
- (MX) Mexico Jun Unemployment Rate NSA (unadj): 4.8% v 4.9%e; Unemployment Rate (Seasonally Adj): 4.8% v 5.0%e
- (US) July Preliminary University of Michigan Confidence: 81.3 v 83.0e
- (US) Jun Leading Index: 0.3% v 0.5%e

- US equities are bouncing higher this morning after yesterday's geopolitical-induced slide lower. The situation in Ukraine following the downing of Malaysia Airlines MH17 remains very tense, with Russia and the western powers now trading barbs. As of writing, the DJIA is up 0.37%, the S&P500 is up 0.44% and the Nasdaq is up 0.89%.

- Cable took a nose dive this morning after 08:00ET as chatter made the rounds that an interview would be published over the weekend in which BoE Governor Carney made dovish comments. GBP/USD dropped from 1.7095 to 1.7040, prompting a denial from the BoE. EUR/USD saw a slightly delayed reaction from the pound, dropping below 1.3500 for the first time since February after 09:00ET. Note that key support for the pair is the 2014 low of 1.3477.

- Brazil stocks are seeing good gains in trading this morning after organizations released the first post-World Cup election polls for the upcoming presidential elections. Brazil President Rousseff's support declined to 36% from 38%, while challenger Senator Aecio Neves's support rose to 20%. Neves is seen as much more pro-business than Rousseff. ADRs of Petrobras rose 5.5% in US trading while ETF EWZ gained 3.2% this morning.

- In Ukraine, there have been calls for a ceasefire to facilitate an international investigation of the MH17 Air Malaysia disaster. Both the OSCE and US intelligence are fingering the pro-Russia Ukraine rebels for shooting down the airliner, while Putin and the rebels are loudly declaring their innocence. Germany Chancellor Merkel warned that if it is found that a missile attack brought down the plane, it would constitute a grave escalation of the crisis.

- Industrials General Electric, Honeywell and Johnson Controls reported solid, in-line earnings this morning. Both GE and HON met expectations on good earnings and revenue growth, with FY14 guidance reaffirmed. With divestiture and restructuring costs, JCI's earnings were down sharply, but ex costs the firm did well. GE remains in the red, while HON is off its best levels. JCI is down 2.5%.

- AMD is not recovering a bit this morning after yesterday's terrible earnings performance. The firm met low expectations, but the numbers were not pretty: the net loss of $36 million was better than a year ago, but revenue in its computing solutions chip unit was down 20% y/y. Shares of AMD are down more than 20% this morning.

- AbbVie has reached a deal worth roughly $55 billion to combine with Shire. The two sides agreed to the prior terms: £24.44 cash and 0.8960 New AbbVie Shares, for a total value of £52.48/shr. In this morning's conference call, AbbVie CEO asserted that tax benefits of the acquisition are clearly an advantage but are not the central rationale behind the deal. Note that senators from both parties have promised hearing soon on how Congress can plug the tax inversion loophole. 

Looking Ahead

- (CY) Cyprus Sovereign Debt Rating might be published by Moody's
- (DE) Germany Sovereign Debt Rating published by Fitch
- (LX) Luxembourg Sovereign Debt Rating pPublished by Fitch