Global Markets Overview – July 14, 2014
By Evan Lucas, IG Markets Strategist | July 14, 2014 9:15 AM EST
US coming off the worst week in four months
Financial stress in Europe has seen the US market log its worst week in four months.
Talk of overvaluation and multiple expansions has also helped pull stocks off the highs of two weeks ago.
The weakness is a positive in my view; the heat and indiscriminate buying of the past three months has seen markets grinding higher on the low macro issue and the rush to jump in. Now the profits logged over the past week will filter into the stocks with the earnings profile.
Q2 earnings season in the US is likely to be the next major driver of global markets, and if Alcoa is any guide, analyst expectations of double-digit growth for the quarter looks to be a near certainly. The increase in employment, confidence and housing demand over the past three months look to be coming through in the bottom-up views.
With the all the major US banks reporting this week, the market will get the best view of the 'self-sustaining' US economy that the Fed now sees.
The S&P has still not seen a 10% correction in over two years and the S&P futures hasn't seen a 5% or more pull back in 113 trading days. The trend continues to suggest a higher market despite the doom and gloom. We are due for a pull back and even a correction, but on the current charting trends a three month view is suggesting a higher move.
Ahead of the Australian Open
It's a very quiet day for macro data that will influence the region, so it is likely that most indices on this side of the world will treat water. The US and European markets were in the green on Friday, but only slightly. We will see Chinese new loans for June and it will be higher as the PBoC releases more funding, but this is a known-known and unlikely to have a huge influence.
Based on Saturday's close of the futures market I am currently calling the Australian market up by 0.45% to 5510; which is the leads seen on Friday night. Today is a major day for corporate retail Australia as the David Jones shareholder vote takes place, it looks very likely the Woolworths deal will get up and Solomon Lew is likely to receive a $17 a share price for Country Road and a tidy 5-6 cent profit per share for his 12.1% stake in David Jones. The vote happens at 10am AEST.
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