Markets Positioning Ahead of Wednesday's Q2 GDP Reading

Economic Data

- (IE) Ireland Jun Retail Sales Volume M/M: -1.7% v +0.4% prior; Y/Y: 4.8% v 5.5% prior
- (BR) Brazil July FGV Construction Costs M/M: % v 0.7%e
- (IL) Israel Central Bank cuts Base Rate by 25bps to 0.50%, not expected
- (US) July Preliminary Markit Services PMI: 61 v 59.8e; Composite PMI: 60.9 v 61.0 prior-
- (US) Jun Pending Home Sales M/M: -1.1% v +0.5%e; Y/Y: -4.5% v -5.2%e
- (US) July Dallas Fed Manufacturing Activity: 12.7 v 12.0e

- Participants appear to be positioning themselves conservatively ahead of the first reading of second-quarter GDP on Wednesday. Equity indices did well in Asia trading and were pretty flat in Europe ahead of the US open, but have tracked the decline in US stocks. The yield on the 10-year UST has come in and is not too far above its May low of 2.438%. As of writing, the DJIA is down 0.27%, the S&P500 is down 0.45% and the Nasdaq is down 0.53%.

- The July Markit services PMI reading showed activity in the services sector hit its highest level in 4.5 years, equal to the June reading. Much like last week's new home sales data, June pending home sales data out this morning declined more than 1%, disappointing expectations for a slight gain. The NAR warned that tight credit conditions are deterring a higher number of potential buyers.

- Shares of Cummins are getting pushed lower this morning by the negative tone in broader markets, with CMI down 3% despite a decent quarterly report. The firm grew revenue 7% y/y and earnings rose, with the latter modestly topping consensus expectations. Cummins adjusted is FY revenue guidance up slightly.

- This week is poised to be the busiest week for IPOs since August 2000, according to Dealogic. Up to 25 companies will go public this week, raising around $7 billion. One of the big highlights will be Synchrony Financial, the credit card arm of General Electric. The firm is looking to raise $3.1 billion, which would value Synchrony around $20bn.

- Today's big deals are being met by boatloads of skepticism. Online real estate site Trulia agreed to be acquired by competitor Zillow for $3.5 billion in stock, valuing it around $70.53 a share. Critics point out that in its last quarterly numers, Zillow reported a $6 million loss on $66 million in revenue, while Trulia lost $15 million on $54 million in revenue. Promised cost savings would get the combined company to about breakeven.

- Family Dollar agreed to be acquired by Dollar Tree for $74.50/share, in a total deal valued at $9.2 billion. Activist Carl Icahn has been pushing FDO to sell itself to one of the other dollar store operators, but analysts don't like the deal, noting that both firms have flagging sales, have very different business models and would yield few cost savings and the combined entity would have a very high debt load.

- US solar names are gaining on news is implementing duties on imports of solar products from China and Taiwan after determining the two countries are dumping products in the US. Duties on Chinese solar products are approximately 165%, duties on Taiwan solar products are more than 44%. US solar name JKS is up more than 4%, while Chinese name Yingli is down 3%.

Looking Ahead

- 11:00 (US) Fed to purchase $1.00-1.25N in Notes
- 11:30 (US) Treasury to sell 3-Month and 6-Month Bill
- 13:00 (US) Treasury to sell 2-Year Notes
- 16:00 (US) Crop Condition Report
- 19:30 (JP) Japan Jun Jobless Rate: 3.5%e v 3.5% prior
- 19:50 (JP) Japan Jun Retail Trade M/M: +0.8%e v 4.6% prior; Y/Y: -0.5%e v -0.4% prior