US jobless claims to come but focus on tomorrow's jobs report

Good morning,

•  Europe lower on Adidas profit warning due to Ukraine crisis;

• Argentine default weighs further on sentiment;

• Eurozone inflation falls again but ECB unlikely to react;

• US jobless claims to come but focus on tomorrow’s jobs report.

We may have seen a positive response to the Fed’s dovish statement on Wednesday evening but that boost has proven to be temporary, with a few stories this morning weighing on investor sentiment and pushing US futures lower.

The biggest of these appears to be the profit warning from Adidas, which sank almost 15% early in European trade. The company lowered its forecasts for the year quite significantly and warned about the impact of the crisis in eastern Ukraine on exports to Russia, which not only confirmed what people had already feared but highlighted the fact that the pain felt in Europe could be much larger than anticipated.

German stocks were the worst hit this morning, which is hardly surprising given the amount of trade the country conducts with Russia. When you see profit warnings like these from such a large company, it really makes you realise exactly what these countries are losing every time a fresh batch of sanctions are imposed on Russia.

With the countries in the eurozone already experiencing very low levels of growth, this is really not going to do them any favours. And as we’ve seen a lot in recent years, when one region is falling further and further behind the rest in the recovery cycle, it tends to weigh on growth everywhere.

The Argentine default isn’t helping matters this morning, although had this not come alongside the Adidas profit warning, I doubt it would have weighed too heavily on sentiment today.

One other thing potentially hitting sentiment this morning is the disappointing inflation reading for July. Up until a couple of months ago, this reading would have been met with rising expectations of monetary stimulus from the ECB but with the central bank having recently announced a large stimulus package, it’s very unlikely that we’ll see any more stimulus this year. With that in mind, further moves towards deflation in the eurozone will not be well received at the moment.

The US session is looking a little quiet today, with the only notable release being the weekly jobless claims number. This is seen rising to 301,000 following the surprise dip to 284,000 last month. I don’t expect this to have too big an impact today though, with the US jobs report and inflation data tomorrow seen as the far more important releases.

The S&P is currently seen opening 13 points lower at 1,957, the Dow 93 points lower at 16,787 and the Nasdaq 27 points lower at 3,949.