DJIA -18.3 S&P 500 -2.7 Nasdaq +6.3%


Economic Data

- (IS) Israel Jun Foreign Currency Balance: $75.1B v $74.8B prior

- (CN) China PBoC cuts its key 1-year interest rates; The 1 year deposit rate was cut by 25bps to 3.00% while the 1-year lending Rate cut by 31bps to 6.00%

- (UK) Bank of England left Interest Rates unchanged at 0.50% and increase Asset Purchase Target by £50B to £375B (all as expected)

- (US) MBA Mortgage Applications w/e Jun 29th: -6.7% v -7.1% prior

- (BR) Brazil Jun FGV Inflation IGP-DI: 0.7% v 0.6%e

- (ZA) South Africa May Electricity Consumption Y/Y: -5.1% v -5.5% prior; Electricity Production Y/Y: -5.3% v -6.0% prior

- (US) Jun Challenger Job Cuts: 37.6K v 61.9K prior; Y/Y: -9.4% v 66.7% prior

- (EU) ECB cut the Main Refi rate by 25bps to 0.75%, as expected

- (US) Jul RBC Consumer Outlook Index: 47.0 v 46.1 prior

- (US) Jun ADP Employment Change: +176K v +100Ke

- (CL) Chile May Economic Activity Index M/M: 0.4% v 0.1%e; Y/Y: 5.3% v 4.5%e

- (US) Initial Jobless Claims: 374K v 385Ke; Continuing Claims: 3.306M v 3.300Me

- (BR) Brazil Jun Vehicle Production: 273.6K v 280.8K prior; Vehicle Sales: 353.2K v 287.5K prior

- (RU) Russia Q2 Consumer Confidence: -4 v -5 prior

- (HU) Hungary Jun YTD Budget Balance (HUF): -517.7B v -344.1B prior

- (US) Jun ISM Non-Manufacturing: 52.1 v 53.0e

- (BR) Brazil May CNI Capacity Utilization: 80.7% v 80.9%e

- This morning's central bank rate cuts and some poor US economic data are not providing market participants with much in the way of confidence. European equities slid lower following the rate cuts at the ECB and the PBoC, as well as the BoE's expanded asset purchase target. US equities sank into the red in the premarket and headed lower after 09:30ET, thanks also to the weak June ISM non-manufacturing data and a round of June same-store sales data that suggested consumers were spooked by the decaying economy. One bright spot was the US jobs data: initial jobless claims actually came in somewhat lower than expected, for the lowest reading since mid May, while the ADP report was surprisingly strong. In addition, the employment index of the ISM non-manufacturing index actually improved. The consensus view for tomorrow's June payroll report is +90K, which is not too much better than the nine-month low of +69K reported in May. WTI oil futures tick up as high as $89 ahead of the ECB decision, but quickly dropped back to the $87 handle after the disappointing outcome. Gold dipped momentarily below $1,600 before ticking higher post decision.

- The PBoC upstaged the BoE once again this morning, cutting interest rates moments before the scheduled BoE decision for the second time in a matter of weeks. It also gave banks more leeway to set lending rates in an attempt to stimulate credit creation. The BoE increased its asset purchase target by £50B to £375B, as expected, offering no surprises in its decision. The ECB trimmed borrowing costs by a quarter of a point to a new record low of 0.75% and cut the deposit rate to 0%. However, the ECB's moves were seen by markets as highly inadequate: just one month ago, Draghi himself said that cutting rates did little good because the monetary transmission mechanism was broken. Some were hoping for bolder ECB policy moves to help ease the euro zone crisis, however Draghi offered no new concessions, drawing accusations from some analysts that the positive momentum generated by the recent EU Summit was being diluted by ECB inaction. At the post-decision press conference, Draghi warned that "economic growth continues to remain weak with heightened uncertainty weighing on confidence" and again discussed the dysfunction in the policy transmission process.

- The strong same-store sales numbers seen earlier this year are only a memory now after June comps data painted a dismal picture of the US consumer. Department store names had a terrible June, with Macy's, Kohl's and Bon-Ton all lagging estimates. Discount chain Fred's reported a awful -4% comp, while Costco and Target were each a bit below par. Drug store chain Walgreen saw a steep 10% decline in comps. High-end department names Nordstroms and Saks did very well, easily topping market consensus views. Performance among apparel names was split. On the positive side, Limited Brands, TJX, Ross Stores and Zumiez all beat expectations, the former three by wide margins. On the negative side, The Gap, Buckle, Cato, Wet Seal and Stein Mart disclosed negative or flat comps, well below consensus expectations.

- In FX, dealers sold the euro hard this morning following the ECB decision. Many analysts blamed the sell-off on the absence of supportive extra ECB policy moves (no LTRO, no further peripheral bond concessions) rather than the rate cut. One analyst said that the ECB has simply added back the risk premium that the EU summit sliced off last week. EUR/USD tested below the 1.2370 level by the mid-NY morning while peripheral yields moved sharply higher. Spanish 10-year gov't yield was at 6.74% versus 6.44 % ahead of the European equity open while Italy's 10-year yield was nearing 6.00% again.


Looking Ahead

- 12:30 (EU) ECB member Weidmann

- 18:00 (FR) Friends of Syria group meets in Paris