Early Weakness Recovered Again; European Economic Data Shows Continued Growth

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European economic data continued to show improvement in this morning's releases. The eurozone and German ZEW survey of economic expectations rose sharply from the month prior, sparking solid increases in European equity indices. UK indices were modestly higher after generally in-line producer and consumer prices increase for the month of July. Asian indices also showed positive momentum following stories out of Japan that the government was debating lowering corporate tax rates alongside a planned 3% increase in the sales tax.

In the US, a story broke early in the day that activist investor Bill Ackman was resigning from the board of JC Penney ( JCP ), where his firm holds a significant stake, following the board's disapproval of his public statements regarding the search for a new CEO.

July retail sales rose by 0.2% from the prior month, slightly worse than the 0.3% estimate and down from the upwardly revised 0.6% (from 0.4%) reading in the prior month. Sales ex auto and gas rose by 0.4%, in line with expectations and up from unchanged in the prior month. Homebuilder stocks fell by 1% on the day due to the 0.4% monthly decline in building materials in the retail sales report.

US markets showed positive gains in the pre-market session, but quickly lost those gains in the opening minutes of the trading day. Following comments from Atlanta Fed President Lockhart, stating that the reasoning for tapering asset purchases in September and the coming months was becoming less clear, US equities rallied back to their pre-market levels. The tech and financial sectors led while telecom and utilities faltered. US Treasuries remained weak throughout the day due to the weakness in German bunds, which manifested in further weakness for UK gilts.

The US Airways (NYSE:LLC) / American Airlines (NYSE:AAR) merger was put into question with the filing of an antitrust suit by the US Department of Justice. The proposed merger would be disadvantageous for consumers, who would face higher fares and fewer flights between the company's bigger hubs. American Airlines was due to appear in front of a bankruptcy court in two days to present its reorganization plan.

Tomorrow's Financial Outlook

July US producer prices will be released tomorrow morning at 8:30 a.m. EDT. Economists are expecting producer prices to rise 0.3% from the prior month and 2.4% from a year ago. The prior month's rise was 0.8% and 2.5% respectively. As a whole, commodity prices rose sharply in July, but have remained relatively steady since the beginning of June.

In Europe, Germany and France will release the first estimate of 2Q GDP tomorrow. German GDP is expected to grow to an annual rate of 0.7% from -1.4% the quarter prior and French GDP is expected to slow its rate of decline to -0.1% from -0.4%. The other European data point due out is UK employment figures from July.

Earnings that are pertinent to US growth are on the calendar tomorrow. Agilent ( A ), Cisco ( CSCO ), Deere ( DE ), Dick's Sporting Goods ( DKS ), and Macy's (M) will all report.

Twitter: @Minyanville



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Stocks

Referenced Stocks: A , CSCO , DE , DKS , JCP

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