Stocks retreat on increased tensions in the Uktraine

Economic Data

- (UK) Aug CBI Industrial Reported Sales: 37 v 27e
- (IE) Ireland July Retail Sales Volume M/M: +8.2 v -2.4% prior; Y/Y: 8.6 v 5.0% prior
- (IT) Italy July Hourly Wages M/M: No est v 0.1% prior; Y/Y: No est v 1.2% prior
- (RU) Russia Gold and Forex Reserve w/e Aug 22nd: $466.1B v $468.6B prior
- (BR) Brazil Aug FGV Inflation IGPM M/M: -0.3% v -0.3%e; Y/Y: 4.9% v 4.8%e
- (DE) Germany Aug Preliminary CPI M/M: 0.0% v 0.0%e; Y/Y: 0.8% v 0.8%e
- (DE) Germany Aug Preliminary CPI Harmonized M/M: 0.0% v 0.0%e; Y/Y: 0.8% v 0.8%e
- (US) Q2 Preliminary GDP Annualized Q/Q: 4.2% v 3.9%e; Personal Consumption: 2.5% v 2.4%e
- (US) Q2 Preliminary GDP Price Index: 2.1% v 2.0%e; Core PCE Q/Q: 2.0% v 2.0%e
- (US) Initial Jobless Claims: 298K v 300Ke; Continuing Claims: 2.527M v 2.51Me
- (CA) Canada Q2 Current Account Balance: -$11.9B v -$11.5Be
- (CA) Canada Jun Average Weekly Earnings Y/Y: 3.3% v 2.6% prior
- (US) July Pending Home Sales M/M: 3.3% v 0.5%e; Y/Y: -2.7% v -3.5%e
- (US) Weekly EIA Natural Gas Inventories: +75 bcf vs. +75-79bcf expected range

- Geopolitics, the Ukraine specifically, have taken center stage once again in today's markets. Stocks traded lower in Asia and Europe which resulted in a lower US open as the latest round of escalation weighed on sentiment. Yesterday reports were surfacing that Russian troops were on the ground in parts of Southern Ukraine helping separatists. President Poroshenko confirmed as much in a press conference noting the situation on the ground had changed significantly. Talks of another round of sanctions are starting to brew as tensions are rising. US Treasury and German Bund markets are the beneficiaries again as rates move lower. The US 10-year at 2.33% is only a few basis points from fresh lows for the year and gold prices are up modestly.

- The headlines from Eastern Europe are largely overshadowing what was a solid second reading of US Q2 GDP. At 4.2% annualized it beat consensus expectations by 0.3%. In general inventories were revised down less than many analysts had expected, but other parts of the data were more positive for growth going forward. Investment spending was revised up more than expected, due in part to new Q2 data on research and development spending. Also an upward revision to business investment helped boost the Q2 growth rate of domestic demand (real final sales to domestic purchasers) from 2.8% in the advance report to 3.1%.

- The tail end of Q2 earnings season is coming to a close, and it can't be over fast enough for many of these specialty retailers. Guess, Abercrombie, Tilly's, Gordmans and Genesco gapped lower after missing expectations and lowering their outlooks. Williams-Sonoma saw some aggressive profit taking after reporting inline results but guiding next quarter below consensus.

- Momentum/speculation remains a major driver in thin late summer trade. DGLY is up another 28% after receiving a $1.1M order from Michigan State Police. Tekmira Pharma has popped for another 10% on more Ebola hand wringing and speculation it is a takeover target.

- In foreign exchange markets the Russian Ruble hit a fresh 5-month low against the Dollar on inflamed tensions. The last time it traded this low was when Russia seized Crimea. The Euro continues to trade below 1.32 as the debate on if and when the ECB will choose to move continues ahead of tomorrow's EU advanced CPI estimates.

Looking Ahead

All times listed for economic events are denominated in Eastern Standard Time (Add 4 hours for GMT equivalent)

- (DE) German Chancellor Merkel hosts Western Balkans Conference in Berlin
- (FR) Finance Ministers Sapin, Schaeuble meet for talks in Paris
- 10:30 (FI) ECB's Liikanen (Finland) gives keynote address in Austria
- 11:00 (US) Aug Kansas City Fed Manufacturing Activity: 7e v 9 prior
- 11:00 (UR) Ukraine to sell 9-Month Bills
- 11:00 (BR) Brazil to sell 2015, 2016 and 2018 Bills
- 13:00 (US) Treasury to sell $29B in 7-Year Notes
- 17:00 (KR) South Korea Sept Manufacturing Business Survey: No est v 75 prior; Non-Manufacturing Survey: No est v 66 prior
- 19:01 (UK) Aug Hometrack Housing Survey M/M: No est v 0.1% prior; Y/Y: No est v 5.8% prior