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ECB Preview

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What’s in Today’s Report:

  • ECB Preview
  • Have Treasury Yields Bottomed?

Stock futures are flat while most international markets rallied overnight thanks to incremental progress on trade amid a continuation of the recent rotation into cyclicals.

There were no notable economic reports overnight.

China announced tariff exemptions for multiple U.S. imports o/n which is an incremental positive as both sides have made modest concessions in recent weeks.

The rotation from momentum to cyclicals is continuing overseas, a theme that will remain in focus today. Remember that because of the heavy weighting of big tech stocks in the major indexes, this rotation could remain a headwind on the broader stock market in the near term.

Today, there is one economic report to watch: PPI (E: 0.1%) and no Fed officials are scheduled to speak.

There is a 10-Yr Treasury Note Auction at 1:00 p.m. ET and depending on the reaction from the bond market, there could be an impact on stocks however investor focus has largely shifted forward to the ECB tomorrow which will likely keep stocks largely paralyzed for the next 24 hours.

ECB Preview (The Most Important Catalyst of the Week)

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What’s in Today’s Report:

  • ECB Preview
  • The Threat to Oil Prices and the Potential Effect on Bonds

S&P futures are down 10 points this morning after the U.S. DOJ announced an antitrust probe into big tech firms late yesterday while EU economic data badly missed estimates.

The EU PMI Composite Flash for July was 51.5 vs. (E) 52.1 but the German Manufacturing component was especially weak at 43.1 vs. (E) 45.2 rekindling fears of a further, and potentially accelerating, slowdown in the global economy.

In today’s U.S. session, there are two economic reports to watch: The PMI Composite Flash (E: 51.2) and New Home Sales (E: 655K) while no Fed officials are scheduled to speak ahead of next week’s FOMC Meeting.

There is a 5-Yr Note Auction by the Treasury at 1:00 p.m. ET today and the results could have an impact on the yield curve which could ultimately move stocks (like we saw with yesterday’s 2-Yr Auction).

Earnings season is continuing to pick up and today will be a very busy day of releases with BA (-$0.56), T ($0.89), CAT ($3.12), UPS ($1.93), NOC ($4.64), GD ($2.68), FCX (-$0.05), and NSC ($2.77) due to report before the open, and FB ($1.90), TSLA (-$0.52), PYPL ($0.73), and F ($0.30) will hit after the bell.

ECB Preview (Why It’s Important For U.S. Stocks)

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What’s in Today’s Report:

  • ECB Preview (This is more important to U.S. stocks than it seems)
  • Jobs Report Preview

Futures are drifting slightly lower following a quiet night as markets await the ECB decision later this morning.

Economic data generally met expectations overnight as Euro Zone Q4 GDP was 1.1% vs. (E) 1.2% while Chinese FX reserves were in line at $3.09T.

Today the key event will be the ECB Decision at 7:45 a.m. ET and then the ECB Press Conference at 8:30 a.m. ET.  For this to meet dovish expectations (and not be a disappointment for stocks) we’ll need to see 1) An extension of the promise not to raise rates until 2020 and 2) A strong hint more TLTROs are coming.  This decision will have direct impacts on Treasuries and stocks (more inside the report).

Away from the ECB we also get Jobless Claims (E: 223K) and Q4 Productivity and Costs (E: 1.6%, 1.8%) plus there’s one Fed speaker:  Brainard (12:15 p.m. ET).