Good morning,
Looks like Western markets have survived the most recent Federal Reserve policy statement, in which, the central bank hints yet again that an interest rate rise is in the works. The tea leaf readers globally say that means a September liftoff is possible; but it could also come in December. European markets are mostly higher and the dollar is marching higher.
GDP for the second quarter grew at 2.3%. First quarter was revised to up 0.6% from a negative 0.2%. The consensus fro second quarter was: U.S. grew 2.9%, reversing the mild 0.2% contraction in the first quarter. Consumer spending rose to 2.9% from 2.1% in the first quarter. Housing expanded as well. Exports rose 5.3% vs a 7% drop in the first quarter. Also take note: The Bureau of Economic Analysis is revising its GDP estimates over the past few years and will also be producing its first blended number of GDP and GDI, which should make U.S. economic activity look more robust. Wall Street Journal (paywall) Calculated Risk
Facebook whipsawed markets with its second quarter earnings after the market close Wednesday. Initially, traders weren’t impressed with the results — 50 cents/share, besting estimates by 3 cents. Not. Good. Enough. But then sentiment changed as some considered: Wow. The social media company that wastes more of our time with cat videos has nearly one billion daily users and is a monster in mobile advertising. A 5% drop turned into a 1% rally until the CFO began talking, explaining the next few quarters wouldn’t look so rosy. Look for Facebook to open down more than 2%.
LinkedIn, Amgen, Marriott International are teeing up for second quarter results. It’s another big day for earnings. LinkedIn, the last of the three social media biggies, reports after the close. Estimize expects the company to report 35 cents/share on revenue of $762 billion. Estimize
Shanghai and Shenzhen Indices, seemingly unfloored, dropped 2.2% and 3.2%. It was another volatile day on the Mainland. Stocks initially marched hire but then got hit by a report that banks were reviewing their vulnerability to the recent market turmoil. Many have outstanding loans in a gray market to stock investors. Hong Kong’s Hang Seng Index meanwhile fared much better, ending the day down nearly 0.5%, while Japan’s Nikkei Average finished the session up over 1% on a weaker yen. Reuters
Royal Dutch Shell says profits drop 35%, plans 6,500 in layoffs, 6.9% of the workforce. The oil giant blamed lower oil prices, which averaged $53/barrel in the three months ended June 30 from $110 a year ago. The company said the layoffs are part of an effort to reduce costs by $4 billion. BBC
Deutsche Bank says it might not hit 2020 performance targets as legal costs eat into profits. In a blistering memo, the new CEO John Cryan declared “The status quo is not an option.” The bank has set aside 1.2 billion euros for fines and settlements. Second quarter pre-tax earnings fell to 1.34 billion euros from 1.36 billion a year earlier. Reuters
Baidu announces share buyback plan. To the tune of $1 billion over next 12 months, in a bid to recoup some of its Tuesday losses. Barron’s
Sony profits smash estimates. Despite losses to its smartphone and movie businesses, Japanese electronics giant Sony saw its profits triple to $664 million in the first quarter, double the $324 million analysts expected. Financial Times (paywall)
Photo: Jason McELweenie