Echos of the Eurozone Crisis in Portugal Bank Troubles

Economic Data

- (PT) Portugal May Trade Balance: -€890M v -€627M prior
- (PT) Portugal Jun CPI M/M: +0.1% v +0.3%e; Y/Y: -0.4% v -0.2%e
- (PT) Portugal Jun CPI Harmonized M/M: 0.1% v 0.1%e; Y/Y:-0.2% v -0.3%e
- (IE) Ireland Jun CPI M/M: 0.1% v 0.1%e; Y/Y: 0.4% v 0.5%e
- (IE) Ireland Jun CPI Harmonized M/M: 0.1% v 0.1%e; Y/Y: -0.2% v -0.3%e
- (MY) Malaysia Central Bank (BNM) raised Overnight Policy Rate by 25bps to 3.25%
- (UK) Bank of England (BOE) left Interest Rates and Asset Purchase Target unchanged at 0.50% and €375B, respectively
- (ZA) South Africa May Manufacturing Production M/M: -3.3% v -0.8%e; Y/Y: -3.7% v -1.6%e
- (BR) Brazil July IGP-M Inflation 1st Preview: -0.5% v -0.2%e
- (US) Initial Jobless Claims: 304K v 315Ke; Continuing Claims: 2.584M v 2.565Me
- (CA) Canada May New Housing Price Index M/M: 0.1% v 0.2%e; Y/Y: 1.5% v 1.6% prior
- (US) May Wholesale Inventories M/M: 0.5% v 0.6%e; Wholesale Trade Sales M/M: 0.9% v 0.9%e
- (US) Weekly EIA Natural Gas Inventories: +93 bcf v +90-94 bcf expected

- Ugly events in Europe have freaked out global markets this morning, as participants collectively experience Eurozone crisis flashbacks. After bottoming out before the US cash open, European indices are ticking off their lows and US indices have also come off their worst levels. As of writing, the DJIA is down 0.54%, the S&P500 is down 0.60% and the Nasdaq is down 0.64%. The US 10-year yield dropped about five bps to trade at 2.50%, its lowest level since the beginning of June.

- Portugal's largest bank, Banco Espirito Santo, is in the crosshairs this morning. Trading in shares was suspended this morning after a wealth management affiliate delayed payments on debt and Moody's downgraded the firm. The yield on Portugal's 10-year note surged to 4%, the highest since early April, and two Spanish banks were forced to suspend bond sales, while the yields on other peripheral Eurozone sovereign bonds blew out, recalling the darkest days of the euro debt crisis.

- In addition to the events in Portugal, French manufacturing plummeted 2.3% in May, while output dropped 1.7%, far worse than expectations. Italian industrial output declined 1.2%, the largest drop since November 2012. The BoE kept interest rates at 0.5% and its asset purchase plan at 375 billion pounds, as expected. The horrible industrial production numbers and the Portugal fracas pushed EUR/USD from 1.3650 down to 1.3590.

- Share of Potbelly and Lumber Liquidators are tumbling lower this morning after the firms offered very weak second quarter guidance. Shares of PBPB are down 24% this morning, taking other fast casual names lower in turn. LL is down 23% after multiple analysts cut the firm in notes out this morning. HD and LOW had been down more than 2% in the first minutes of cash trading, but are bouncing higher as of writing.

- Family Dollar has been volatile post-earnings, with FDO down 2.5% in the first minutes of cash trading followed rapidly by a big bounce up to +2.0%. The firm's revenue performance was pretty good despite negative comps. But it was the plan to close 350-400 stores and cut prices that is driving the stock. 

Looking Ahead

- 13:15 (US) Fed's George to speak in Oklahoma
- 19:00 (PE) Peru July Interest Rate Decision, expected to leave Reference Rate unchanged at 4.00%