Europe
Markets in Europe were recuperating losses from the past few sessions due to events in Ukraine and Gaza despite a disappointing result from Credit Suisse (NYSE:CS). There still remains a lot of uncertainty surrounding the MH17 crash but the feeling is starting to creep in that the repercussion on markets is not going to be too long lasting.
If it was pro-Russian separatists who shot down the plane by mistake; the assumption based on the language of western politicians is for more sanctions against Russia. The initial market reaction to the plane crash had to price in all alternatives including a terrorist attack; so there has been some relief that the likely economic implication will be nothing worse than Russian sanctions.
Shares in Credit Suisse dropped after the company reported the biggest quarterly loss since the 2008 financial crisis after paying a fine of $2.6bn to settle a US criminal investigation for help wealthy US citizens avoid taxes.
The bank is undergoing a strategic rethink, stripping out underperforming divisions with the latest being its commodities business. The bank’s idea is to refocus resources towards its traditionally strong wealth management and away from investment banking. Results this quarter put a slight spanner in the works for the restructuring in that the investment bank performed better than expected while the Wealth Management division underachieved.
One of the big concerns had been that clients would leave Credit Suisse after the US court case; as it turns out clients are more than happy to deal with an admittedly criminal bank. In fact, rather than loose assets, CS won $10bn in new money for the quarter. If the bank can keep adding clients, then long term profitability looks a lot more assured.
Shares in ARM Holdings (LONDON:ARM) jumped after the company hiked its dividend by 20%. The market reaction was particularly strong to ARM’s dividend hike because it was unexpected and because of the stock’s underperformance of late which has consistently dragged the tech sector to the bottom of the FTSE 100 since its peak in January around 1,100p.
The miners including Anglo American (LONDON:AAL) and Glencore (LONDON:GLEN)were top risers on news the former will close a number of problematic platinum mines as well as positive conference board leading indicators from China. Anglo selling off it’s mine will bring the company some much needed cash after all the strike losses and the rest of the industry can breathe a sigh of relief that the strike won’t dominate industry news.
US
Markets in the US have proven resilient so far to geopolitical setbacks including the latest from Ukraine and Gaza; investors continue to use the pullbacks as an opportunity to buy into the story of a US economic recovery.
Consumer price inflation remained unchanged at 2.1% year over year. The Fed argue the CPI remains contained but it’s not pulling back from a level which would be considered above target price growth by the Bank of England and ECB and could easily be used as justification for hike in interest rates.
McDonald's (NYSE:MCD) are showing signs of losing dominance in the fast food space; Chipotle Mexican Grill (NYSE:CMG) smashed it on both the top and bottom line, demonstrating that customers are comfortable with fast food so long as it’s of a decent standard. Organic food from Chipotle versus gone-off Chinese meat at McDonald’s stand in stark contrast
Both Coca Cola (LONDON:CCH) and Verizon Communications (LONDON:VZC) beat EPS estimates by one cent. Coke, like McDonald’s is perhaps on the wrong side of the times as soda consumption continues to decline.
On the M&A front, Time Warner (NYSE:TWX) are blocking shareholders from calling a special meeting to prevent Rupert Murdoch’s 21st Century Fox’s takeover attempt.
Johnson & Johnson (NYSE:JNJ) shares were higher after the company joined a growing number of US corporations with share buyback.
FX
The US Dollar was mostly higher today as US inflation remains at lofty levels; increasing the likelihood of a rate hike.
The Australian dollar was an outperformer after governor Stevens didn’t go too out of his way to jawbone the currency in a speech while Chinese data supported prospects for increased Australian exports.
Commodities
Gold and Silver backed off in today’s trading after benefiting from safe-haven flows. Fed Chair Janet Yellen displayed a slightly more hawkish tone at her congressional testimony last week so consumer price inflation in line with expectations actually slightly boosted the chance of a rate hike and lower gold prices.
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