August 8, 2014
- in Uncategorized by schooloftrade
Weekly Recap: Global Chaos makes for Volatile & Profitable Markets
We had another exciting week filled with profitable trading
opportunities here at Schooloftrade.com.
opportunities here at Schooloftrade.com.
If you missed the action, here’s what
happened this week!
happened this week!
——————————————————————————–
– Geopolitical events dominated the conversation again this week, as
turmoil in Israel, Ukraine, Iraq, and West Africa provided plenty of dramatic,
market-moving headlines.
turmoil in Israel, Ukraine, Iraq, and West Africa provided plenty of dramatic,
market-moving headlines.
In the meantime, negative Italian
Q2 GDP and worrying German industrial data cast a shadow over Europe, while the
Nikkei fell 5% on the week thanks to weaker-than-expected July numbers.
Q2 GDP and worrying German industrial data cast a shadow over Europe, while the
Nikkei fell 5% on the week thanks to weaker-than-expected July numbers.
Most of the June quarter corporate
earnings reports are finished, leaving just a few retailers and some big tech
names to report next week.
earnings reports are finished, leaving just a few retailers and some big tech
names to report next week.
——————————————————————————–
At the end of a volatile week, the DJIA ended up 0.4%, the
S&P500 gained 0.3% and the Nasdaq tacked on 0.4%.
S&P500 gained 0.3% and the Nasdaq tacked on 0.4%.
——————————————————————————–
– The ECB left its policies
unchanged at the August meeting. While acknowledging ultra-low
inflation and slowing economic prospects, ECB President Draghi continued to
affirm his confidence that the ECB’s June measures would ultimately push prices
and growth higher over the medium term.
unchanged at the August meeting. While acknowledging ultra-low
inflation and slowing economic prospects, ECB President Draghi continued to
affirm his confidence that the ECB’s June measures would ultimately push prices
and growth higher over the medium term.
During the press conference,
Draghi pushed back against criticism that the ECB is not doing enough by
further detailing the TLTRO program, asserting it will disburse up to €450-850B
to the real economy.
Draghi pushed back against criticism that the ECB is not doing enough by
further detailing the TLTRO program, asserting it will disburse up to €450-850B
to the real economy.
On Ukraine, Draghi warned the
conflict had the real potential to negatively impact the Eurozone.
conflict had the real potential to negatively impact the Eurozone.
——————————————————————————–
– Italy’s economy unexpectedly
contracted in the second quarter, deepening fears that a wider
economic slowdown is under way in Europe. Italy GDP was -0.2% q/q and -0.3%
y/y, after a final Q1 GDP reading of -0.1% q/q and -0.5% y/y , marking a rare
triple dip recession.
contracted in the second quarter, deepening fears that a wider
economic slowdown is under way in Europe. Italy GDP was -0.2% q/q and -0.3%
y/y, after a final Q1 GDP reading of -0.1% q/q and -0.5% y/y , marking a rare
triple dip recession.
Germany, France and the Eurozone report initial Q2 GDP
figures next Thursday.
figures next Thursday.
There are real concerns about the
German data after Germany reported June factory orders -2.4% y/y on Wednesday
and June industrial production -0.5% on Thursday, after which the two-year bund
yield fell below zero for the first time since May 2013 and the 10-year bund
yield fell to an all-time low below 1.07%. EUR/USD hit nine-month lows below
1.3340.
German data after Germany reported June factory orders -2.4% y/y on Wednesday
and June industrial production -0.5% on Thursday, after which the two-year bund
yield fell below zero for the first time since May 2013 and the 10-year bund
yield fell to an all-time low below 1.07%. EUR/USD hit nine-month lows below
1.3340.
——————————————————————————–
– The Ebola outbreak in West Africa has become very serious this week, and the
World Health Organization has declared it a major public health risk requiring
a coordinated global response. The disease has begun to appear in Nigeria,
where the government declared a state of emergency, and there are concerns it
could spread beyond Africa.
World Health Organization has declared it a major public health risk requiring
a coordinated global response. The disease has begun to appear in Nigeria,
where the government declared a state of emergency, and there are concerns it
could spread beyond Africa.
Cases of people with Ebola-like
symptoms have been reported in the US, Europe and Saudi Arabia, but no cases
have been conclusively proved. Shares of Canadian biotech Tekmira have gained
another 40% this week after the FDA partially lifted its clinical hold on the
firm’s experimental anti-Ebola viral therapeutic. Biocryst, which is also
symptoms have been reported in the US, Europe and Saudi Arabia, but no cases
have been conclusively proved. Shares of Canadian biotech Tekmira have gained
another 40% this week after the FDA partially lifted its clinical hold on the
firm’s experimental anti-Ebola viral therapeutic. Biocryst, which is also
working on a treatment for Ebola, is up 15% on the week.
——————————————————————————–
– In the first half of the week,
there were mounting fears that Russia was moving closer to invading Ukraine
after authorities in Kiev and NATO figures said Moscow had built its forces back
up to around 20,000 troops (plus the 20,000 troops stationed in Crimea).
there were mounting fears that Russia was moving closer to invading Ukraine
after authorities in Kiev and NATO figures said Moscow had built its forces back
up to around 20,000 troops (plus the 20,000 troops stationed in Crimea).
The thought was that Moscow would
introduce troops under the guise of a “humanitarian mission” after
many armored units were seen with “peacekeeping” markings painted on
their vehicles.
introduce troops under the guise of a “humanitarian mission” after
many armored units were seen with “peacekeeping” markings painted on
their vehicles.
However on Friday there were
sudden signs of fresh de-escalation as the chairman of the Russia Security
Council said his country would like to find ways to “de-escalate the
Ukraine situation” and Moscow ended scheduled military drills and stated
that air and air defense units have been ordered back to their home bases.
sudden signs of fresh de-escalation as the chairman of the Russia Security
Council said his country would like to find ways to “de-escalate the
Ukraine situation” and Moscow ended scheduled military drills and stated
that air and air defense units have been ordered back to their home bases.
Nevertheless, the political battle
of wills continues and Russia imposed countersanctions on the West, banning a
broad range of food imports.
of wills continues and Russia imposed countersanctions on the West, banning a
broad range of food imports.
——————————————————————————–
– Within a few hours of each
other, two huge M&A deals fell apart this week, while a third was altered
to remove a tax inversion component following strong political pushback.
other, two huge M&A deals fell apart this week, while a third was altered
to remove a tax inversion component following strong political pushback.
21st Century Fox abandoned its $80
billion offer to acquire Time Warner, citing hostility to the deal at Time
Warner and reluctance to overpay.
billion offer to acquire Time Warner, citing hostility to the deal at Time
Warner and reluctance to overpay.
Sprint abandoned attempts to reach
a deal to acquire T-Mobile, costing CEO Dan Hesse his job.
a deal to acquire T-Mobile, costing CEO Dan Hesse his job.
Walgreen said it would go ahead
with buying up the rest of Alliance Boots it does not already own but abandoned
plans to move its tax address abroad.
with buying up the rest of Alliance Boots it does not already own but abandoned
plans to move its tax address abroad.
——————————————————————————–
– Media names CBS and Disney both
saw very solid quarterly reports that topped expectations. Disney reported
strong Q2 revenue growth, although the results were not quite as good as
results seen in Q1.
saw very solid quarterly reports that topped expectations. Disney reported
strong Q2 revenue growth, although the results were not quite as good as
results seen in Q1.
News Corp disclosed a mixed set of
Q4 results, missing the consensus EPS estimate for the first time four quarters
but beating on revenue. Revenue and earnings sagged on a y/y basis.
Q4 results, missing the consensus EPS estimate for the first time four quarters
but beating on revenue. Revenue and earnings sagged on a y/y basis.
——————————————————————————–
– Shares of luxury goods names
Coach and Michael Kors were closely watched after quarterly reports. Kors
widely beat top- and bottom-line expectations, saw a 24% gain in comps and
raised its FY15 outlook.
Coach and Michael Kors were closely watched after quarterly reports. Kors
widely beat top- and bottom-line expectations, saw a 24% gain in comps and
raised its FY15 outlook.
But on the conference call,
executives warned that margins would suffer going forward due to increased
markdowns and disclosed a big increase in inventories. Coach also topped
earnings and revenue expectations, with the international business strong and
Chinese comps up by double digits, even as North America comps sagged.
executives warned that margins would suffer going forward due to increased
markdowns and disclosed a big increase in inventories. Coach also topped
earnings and revenue expectations, with the international business strong and
Chinese comps up by double digits, even as North America comps sagged.
——————————————————————————–
– Solar names soared on very good
results out of solar power installer SunEdison, which reported decent profits
(beating expectations for a big loss) and revenue swelled 61% y/y. SunEdison
said it completed more projects in the quarter than it had expected, goosing
results higher.
results out of solar power installer SunEdison, which reported decent profits
(beating expectations for a big loss) and revenue swelled 61% y/y. SunEdison
said it completed more projects in the quarter than it had expected, goosing
results higher.
Earlier in the week First Solar
had widely missed expectations and saw earnings and revenue sag on a y/y basis,
although SUNE’s 15% post-earnings gain helped pull FSLR up nearly 10% on the
week.
had widely missed expectations and saw earnings and revenue sag on a y/y basis,
although SUNE’s 15% post-earnings gain helped pull FSLR up nearly 10% on the
week.
——————————————————————————–
– The Fed cleared Bank of
America’s resubmitted capital plan. Recall that back in April, the Fed directed
the company to resubmit its CCAR application after it emerged that the bank had
incorrectly reported data used in the calculation of regulatory capital ratios.
America’s resubmitted capital plan. Recall that back in April, the Fed directed
the company to resubmit its CCAR application after it emerged that the bank had
incorrectly reported data used in the calculation of regulatory capital ratios.
The Fed approval allows BoA to go
ahead with its plan to boost its dividend to $0.05 per share from $0.01 per
share.
ahead with its plan to boost its dividend to $0.05 per share from $0.01 per
share.
——————————————————————————–
– In Japan, the strengthening yen and disappointing July economic figures sent
the Nikkei225 down by nearly 5% this week.
the Nikkei225 down by nearly 5% this week.
Despite speculation of a rift in
the policy board, the BoJ’s latest statement retained its unanimous stance on
key policy settings even as the assessment of exports and industrial output
were downgraded, as both have “shown some weakness.”
the policy board, the BoJ’s latest statement retained its unanimous stance on
key policy settings even as the assessment of exports and industrial output
were downgraded, as both have “shown some weakness.”
The BoJ still cheered improvement
in employment and income situation along with some signs that consumption tax
headwinds are starting to abate. Government bond yields in Tokyo have plunged
to new lows, with the 10-year falling to a 16-month low of 0.5%.
in employment and income situation along with some signs that consumption tax
headwinds are starting to abate. Government bond yields in Tokyo have plunged
to new lows, with the 10-year falling to a 16-month low of 0.5%.
——————————————————————————–
– After two straight weeks of strong gains, the Shanghai Composite was down
0.3% this week, a modest decline against the backdrop of volatility in the
emerging markets.
0.3% this week, a modest decline against the backdrop of volatility in the
emerging markets.
A very strong set of China trade
data helped restore markets on Friday. July’s $47B surplus was the biggest on
record, and even though imports fell, a 14% rise in exports more than made up
for that decline.
data helped restore markets on Friday. July’s $47B surplus was the biggest on
record, and even though imports fell, a 14% rise in exports more than made up
for that decline.
Shipments to Europe were
particularly strong, up about 17% y/y, while exports to Japan reversed last
month’s drop with a 3% increase.
particularly strong, up about 17% y/y, while exports to Japan reversed last
month’s drop with a 3% increase.
The stream of economic data from China continues with the release of
July inflation figures late on Friday.
July inflation figures late on Friday.
