Europe remains in the driver's seat; stocks churn just below recent highs

Economic Data

- (IE) Ireland July Property Prices M/M: 2.0% v 2.9% prior; Y/Y: 13.4% v 12.5% prior
- (US) MBA Mortgage Applications w/e Aug 22nd: +2.8% v +1.4% prior
- (TR) Turkey Central Bank (CBRT) left its Benchmark Repurchase Rate at 8.25% (as expected) but adjust the its rate corridor with Overnight Lending Rate cut by 75bps to 11.25%
- (BR) Brazil July PPI Manufacturing M/M: -0.3% v -0.1% prior; Y/Y: 3.5% v 5.0% prior
- (MX) Mexico July Preliminary Trade Balance: -979.9$ v -$810.0Me
- (US) DOE Crude: -2.07M v -1Me; Gasoline: -1M v -1Me; Distillate: +1.25M v -0.5Me; Utilization: 93.5% v 92.9%

- With little if any US data to sift through, investors continue to focus on geopolitical developments, plunging European bond yields and technical levels as the main drivers of trade. US indices opened flat to slightly higher but have retraced modestly from the most recent high water marks. The scuttlebutt in Europe continues to be the pressure is on Draghi to act and act decisively to fend off deflation. Despite some jawboning from the German Finance Ministry the 10-year bund yield fell to a fresh lifetime low below 0.9%. US rates followed Europe lower and the curve flattened once again. The 2-10 year spread is approaching 185 basis points, narrower by some 4+ bps on the day. The 5-year is exhibiting some relative strength ahead of this this afternoon's $35 in supply. Rates on both sides of the Atlantic did lift from the intraday lows after a report indicated ECB sources still see action as unlikely at the Sep 4th meeting.

- Gun maker Smith and Wesson came under some fire from investors following last night's Q1 earnings report. Shares slipped more than 10% after cutting FY15 guidance when the company acknowledged they were slow on the drawdown of inventory levels after the surge in customer demand seen last year. Strum Ruger opened lower in sympathy.

- Tiffany shares are shinning after Q2 results revealed they largely avoided any hangover in the Japan market due to the consumption tax increase. Quarterly results topped analyst expectations on robust margin improvement and strong Asia/US SSS, and they also raised FY15 eps targets. Express shares are surging after easily topping Q2 expectations. The apparel retailer guided higher as well which could put pressure on activist holder Sycamore Partners to come up with a firm proposal.

- The EUR/USD bounced off the recent 11-month low around 1.3150 helped by reports that the ECB had not committed to any action at next week's meeting yet. The pair initially found a base following comments attributed to the German Fin Min and saw further bids following the ECB sources story sending it back above 1.32. Cable has also attempted to retake 1.66 as some of the recent Dollar strength is unwound.

Looking Ahead

All times listed for economic events are denominated in Eastern Standard Time (Add 4 hours for GMT equivalent)

- 11:00 (US) Fed to purchase $0.95-1.15B in bonds
- 11:30 (BR) Brazil Weekly Currency Flows
- 12:00 (FR) France July Net Change in Jobseekers: +14.5Ke v +9.4K prior; Total Jobseekers: 3.413Me v 3.398M prior
- 11:30 (US) Treasury to sell $13B in 2-Year Floating Rate Notes Reopening
- 12:00 (CA) Canada to sell 3-Year Bonds
- 13:00 (US) Treasury to sell $35B in 5-Year Notes
- 13:30 (BR) Brazil July Total Federal Debt (BRL): No est v 2.202T prior
- 21:30 (CN) China July Industrial Profits Y/Y: No est v 17.9% prior