Microsoft to Lay Off Nearly 20% of Workforce, Global Tensions Test Confidence

Economic Data

- (IL) Israel July CPI Forecast: No est v 1.4% prior
- (IL) Israel July Jun M1 Money Supply Y/Y: No est v 19.7% prior
- (PT) Portugal Jun PPI M/M: 0.0% v 0.0% prior; Y/Y: -0.4 v -0.6% prior
- (RU) Russia Gold and Forex Reserve w/e Jul 11th: $476.7B v $474.3b prior
- (TR) Turkey Central Bank (CBRT) cut its Benchmark Repurchase by 50bps to 8.25% (as expected)
- (BR) Brazil May Economic Activity M/M: -0.2% v -0.4%e; Y/Y: -0.2% v -0.3%e
- (PL) Poland Jun Sold Industrial Output M/M: -0.1% v +2.0%e; Y/Y: 1.7% v 3.7%e
- (PL) Poland Jun PPI M/M: 0.0% v -0.1%e; Y/Y: -1.7% v -1.8%e
- (RU) Russia Jun Unemployment Rate: 4.9% v 5.0%e
- (RU) Russia Jun Real Retail Sales M/M: 0.4% v 1.4%e; Y/Y: 0.7% v 1.8%e
- (US) Jun Housing Starts: 893K v 1.020Me; Building Permits: 963K v 1.035Me
- (US) Initial Jobless Claims: 302K v 310Ke; Continuing Claims: 2.507M v 2.580Me
- (CA) Canada May Int'l Securities Transactions: C$21.4B v C$5.0Be
- (ZA) South Africa Central Bank (SARB) raises Interest Rate by 25 bps to 5.75%
- (US) July Philadelphia Fed Business Outlook: 23.9 v 16.0e
- (US) Weekly EIA Natural Gas Inventories: +107 bcf v +97-101 bcf expected range

- The new Russia sanctions, jitters about the Chinese economy and the weak housing data undercut futures in the premarket, sending the S&P500 sharply lower, exacerbated by losses in European trading. US indices returned to positive territory mid morning. As of writing, the DJIA is down 0.14%, the S&P500 is down 0.10% and the Nasdaq is down 0.40%.

- This morning's June housing starts and building permits numbers were not confidence-inspiring. The June figure missed expectations by 100K and the reading was at its lowest level since September 2013. Meanwhile the May starts figure was revised lower. June single-family starts fell to 575K, their lowest level since November 2012. Major US homebuilders are down 1.5-2.0% a piece on the news.

- The reversal in crude continues. The front-month WTI contract traded as high as $103 earlier this morning before dropping right back to the lower end of the $102 handle. Meanwhile the larger-than-expected build seen in EIA weekly inventory data sent front-month natural gas below $4.00 for the first time in seven months.

- Microsoft said it would lay off up to 18,000 workers over the next year, and take a pretax charge of $1.1-1.6 billion to pay for the cuts. Two thirds of these cuts come in Microsoft's ill-fated hardware division, representing about half of the total employees that the Nokia deal brought into the company in April. Shares of MSFT gained 2% yesterday on early reports of the cuts, and another 3% before the bell today on confirmation. Currently MSFT is up 2.2% on the day.

- Morgan Stanley reported strong results for its second quarter. Profits were up nearly 50% y/y, driven by strong performance in the wealth management, investment banking and equity sales units. Shares of MS were up 2.0% at one point this morning but are well off their highs.

- There is a steady drip of takeover chatter going around this morning. On the Time Warner front, a NYT report suggested that the company doesn't have a broadcast network, making CBS a nice possible fit for a defensive acquisition. There was a German press report that Volkswagen was mulling a bid for Fiat, although both firms denied the report. Dresser-Rand is up 13.4% after reports that Siemens was considering takeover after losing out on Alstom.

- Yesterday's post-market earnings losers are sinking further this morning. Sandisk's headline numbers were ok but guidance was weak, driving shares down 12% this morning in cash trading. YUM! Brands is at its lows, down 4%, after executives on this morning's conference call were unable to say anything to inspire confidence, claiming they still were counting on a "bounce back in China" but warned China comps would be weaker in the second half.

- The totals from the Farnborough Airshow are in and Airbus has clearly beat rival Boeing in the aircraft order stakes. Airbus took twice as many orders and commitments: 496 aircraft valued at $75 billion. Demand for its A320 neo was particularly strong. Boeing won $40.2 billion in orders for 201 airplanes. 

Looking Ahead

- 11:15 (BR) Brazil to sell 2015, 2016 and 2018 Bills
- 11:15 (BR) Brazil to sell Floating-rate 2020 Notes
- 13:30 (BR) Brazil Jun Total Formal Job Creation: +53.5Ke v +58.8K prior
- 13:35 (US) Fed's Bullard speaks on Monetary Policy in Owensboro, Kentucky
- 15:00 (US) API Monthly Statistical Report