GDP Driven Gains Evaporate Early

Economic Data

- (PT) Portugal Jun Industrial Production M/M: -0.5 v -1.8% prior; Y/Y: -0.2% v +0.2% prior
- (PT) Portugal Jun Retail Sales M/M: -1.3% v 2.9% prior; Y/Y: 0.1% v 1.8% prior
- (IE) Ireland July Live Register Monthly Change: -3.4K v -4.4K prior; Unemployment Rate: 11.5% v 11.6% prior; Register Level: 382.8 v 386.2 prior
- (DE) Germany July CPI Baden Wuerttemberg M/M: 0.2% v 0.3% prior; Y/Y: 0.8% v 0.9% prior
- (US) MBA Mortgage Applications w/e July 25th: -2.2% v +2.4% prior
- (BR) Brazil July FGV Inflation IGPM M/M: -0.6% v -0.5%e; Y/Y: 5.3% v 5.4%e
- (DE) Germany July Preliminary CPI M/M: 0.3% v 0.2%e; Y/Y: 0.8% v 0.8%e
- (DE) Germany July Preliminary CPI Harmonized M/M: 0.3% v 0.2%e; Y/Y: 0.8% v 0.8%e
- (US) July ADP Employment Change: +218K v +230Ke
- (US) Q2 Advance GDP Annualized Q/Q: +4.0% v +3.0%e; Personal Consumption: 2.5% v 1.9%e
- (US) Q2 Advance GDP Price Index: 2.0% v 1.8%e; Core PCE Q/Q: 2.0% v 1.9%e
- (CA) Canada Jun Industrial Product Price M/M: -0.1% v +0.2%e; Raw Materials Price Index M/M: +1.1% v +0.6%e
- (BE) Belgium Q2 Preliminary GDP Q/Q: 0.1% v 0.4% prior; Y/Y: 1.0% v 1.2% prior
- (CL) Chile Jun Total Copper Production: 488.1K v 497.6K tons prior
- (US) DOE Crude: -3.7M v -2Me; Gasoline: +0.365M v +1Me; Distillate: +0.79M v +1Me

- Market participants are looking past the excellent showing in the first reading of second quarter US GDP at other problem areas this morning. The ADP jobs data was uninspiring, raising fears about Friday's July payrolls data. The GDP data depended heavily on big, unsustainable inventory builds. And rumors that the G7 would publish a statement on Russia later today are also on traders' minds. No change is expected in today's FOMC decision. As of writing, the DJIA is down 0.36%, the S&P500 is down 0.26% and the Nasdaq, propped up by Twitter, is up 0.22%.

- The two components that really juiced second quarter GDP were consumption and inventories. Consumption bounced back from a 1.2% growth rate in Q1 to a healthy 2.5% rate in Q2, concentrated in durable goods spending. Meanwhile, inventories added 1.6 points, which more than offsets the 1.16 point drawdown in inventories in Q1. The first quarter GDP data was revised to -2.1% from -2.9%.

- The July ADP report missed expectations at +218K, and Moody's analyst Mark Zandi commented that the July gain was softer than June but remains consistent with a steadily improving job market. This figure is well below June's +281K gain, which was the biggest gain in the series since November 2012. Expectations for Friday's July non-farm payrolls report are around 230K.

- Refiners Phllips 66 and Valero both missed earnings expectations in their second quarter reports. Phillips' earnings declined nearly 10% y/y thanks to a slump in refining profits, as margins fell on higher crude prices in the quarter. Valero's income grew y/y, based on higher volumes, however lower refining margins held back growth more than expected.

- Sprint managed to eke out a profit in its second quarter for the first time in many quarters, although the firm lost a total of 334K wireless customers in the quarter, 181K of which were postpaid subscribers. On the conference call, executives warned of more subscriber losses in the back half of the year as Sprint completed its network overhaul, with growth possibly resuming by the end of the year. After gaining nearly 3.5% in the premarket, shares of Sprint are down 2% presently.

- Shares of Twitter are up 20% or so as of writing, slightly off overnight highs. Numerous firms have hiked price targets and improved calls on the name this morning, citing the big gains in MAUs, advertising revenue and overall performance seen in the firm's second quarter. Skeptics note that while the adjusted EPS figure was +$0.02, on a GAAP basis the firm is still losing money.

- Netflix and AT&T reached a deal July 30 for the streaming service to connect directly to the telecom's network in a move that should reduce buffering time and improve picture quality. The companies expect the process to be complete in a matter of days. 

Looking Ahead

- 11:30 (US) Treasury to sell $15B in 2-Year Floating Rate Notes
- 13:00 (US) Treasury to sell $29B in 7-Year Notes
- 14:00 (US) FOMC Interest Rate Decision
- 14:00 (BR) Brazil May Central Govt Budget Balance (BRL): -1.0Be v -10.5B prior
- 17:00 (CO) Colombia May Trade Balance: $376.2Me v -$905.6M prior; Total Imports: $5.3Be v $5.5B prior
- 19:05 (UK) July GfK Consumer Confidence: 2e v 1 prior