Alcoa Opens Earnings Season

Economic Data

- (US) MBA Mortgage Applications w/e July 4th: +1.9% v -0.2% prior
- (CA) Canada Jun Housing Starts: 198.2K v 190.0Ke
- (MX) Mexico Jun CPI M/M: 0.2% v 0.2%e; Y/Y: 3.8% v 3.8%e; CPI Core M/M: 0.2% v 0.2%e
- (US) DOE Crude: -2.37M v -2Me; Gasoline: +0.58M v -0.5Me; Distillate: +0.23M v +1.5Me

- Strong earnings from Alcoa last night seem to be helping to keep US indices in the black this morning. The S&P500 is coming off its biggest two-day slump since May. As of writing, the DJIA is up 0.21%, the S&P500 is up 0.33% and the Nasdaq is up 0.49%.

- BoE Deputy Governor-designate Nemat Shafik testified before parliament this morning. She noted that the pace of the UK recovery has been striking and there may be less slack in the economy than expected. On rates, Shafik said it would be best to avoid any unwind of QE until interest rates were high enough to cut if deemed necessary. Cable has strengthened on her testimony, rising to test yesterday's highs around 1.7145 after dropping as low as 1.7095 overnight.

- Front-month WTI crude continues to trade lower, with the contract down more than a buck this morning. The weekly API petroleum inventory report saw less of a draw down than expected and inflammatory headlines out of Iraq have slowed to a trickle.

- Shares of American Airlines gained as much as 4.5% in the premarket this morning after providing an analyst update ahead of earnings season. American hiked its Q2 pre-tax margin guidance and disclosed it has sold off its remaining portfolio of fuel hedging contracts. Note that US Airways operated under the philosophy that the cost of fuel hedges was worse than the protections they might provide, and now this approach is in effect at American. Shares of Delta, Southwest and JetBlue also gained on the news.

- Shares of DRAM firm Micron are down 2% or so this morning on circulation of analyst commentary. Morgan Stanley wrote that Samsung could hike DRAM capacity by 100K units per month. Note that shares of Hynix were down 4% in Asia trading on similar concerns. Two days ago, the Korean Economic Daily reported Samsung was set to switch some idle wafer capacity at their fab 17 line in Hwaseong. JPMorgan said this move would increase global supply by 30K per month or so but was unlikely to have any impact on pricing as it would only very gradually come on line over six months.

- Last night, Walmart CEO Bill Simon appeared on CNBC and offered some uninspiring commentary on the US economy. Simon warned that hiring rebound has failed to lead to a rise in spending by Walmart's core customers. While its not getting better or worse for them, in response to difficult economy customers have adapted to new spending habits that are not supportive for retail.

Looking Ahead

- 13:00 (US) Treasury to sell $21B in 10-Year Notes Reopening
- 14:00 (US) Minutes from June 17-18 FOMC Meeting
- 14:30 (EU) ECB Chief Draghi in London
- 17:00 (KR) South Korea Jun Export Price Index M/M: No est v -1.6% prior; Y/Y: No est v -8.1% prior
- 17:00 (KR) South Korea Jun Import Price Index M/M: No est v -1.7% prior; Y/Y: No est v -6.8% prior
- 21:30 (AU) Jun Employment Change: +12.0Ke v -4.8K prior; Unemployment Rate: 5.9%e v 5.8% prior
- (CN) US-China Strategic and Economic Dialogue (through Thursday)