Yesterday's post-FOMC equity slide reverberated through global markets. The Shanghai Composite lost 3.4%, the Hang Seng entered a bear market, and the CAC and DAX are both about to close right at their lows, down 2% a piece. The S&P500 has gone negative on the year as decliners led gainers nearly 10 to one. The 10-year yield contracted four bps to 2.085% at its best level and other major sovereign yields came in even more. Gold has seen a +2% gain, while WTI crude is poised to break below $40. As of writing, the DJIA is down 1.22%, the S&P500 is off 1.0% and the Nasdaq is down 1.6%.
The emerging consensus on the Fed minutes is that they have somewhat confused market participants and revealed no clear sign in favor of a September rate hike. Those seeking a dovish tilt pointed toward one passage stating "some participants expressed the view that the incoming information had not yet provided grounds for reasonable confidence that inflation would move back to 2% over the medium term and that the inflation outlook thus might not soon meet one of the conditions established by the Committee for initiating a firming of policy." A hawkish signal could equally well be divined from a passage stating "Many participants indicated that their outlook for sustained economic growth and further improvement in labor markets was key in supporting their expectation that inflation would move up to the Committee's 2 percent objective"
Like the July housing starts data out on Tuesday, July's annualized rate of existing home sales marked an eight-year high and the prior month's estimate was revised slightly higher. Median existing home prices were up 5.6% y/y in the month, leading the NAR to warn declining affordability could begin to slowly dampen demand, despite the strong growth in sales since this spring. The homebuilder stocks are falling in line with broader market declines, however volatile shares of Hovnanian are down 4% this morning. The Philly Fed outlook was stronger than expected, although both the new orders and prices paid components were lower on a sequential basis.
Shares of Disney and Time Warner have fallen off a cliff today thanks to a very bearish research note out of Bernstein. The firm agreed with a market that is now valuing ad-supported TV as structurally impaired assets and warned that TV advertising is undeniably in secular decline, with affiliate fees at increased risk. According to Bernstein, US TV businesses are now heading towards valuations more resembling things like satellite TV, publishing and AOL. Shares of DIS and TWX bottomed out down 4.5% a piece, although TWX has bounced a bit higher.
On Tuesday, the FDA approved Sprout Pharmaceutical's Addyi, the first treatment for female hypoactive sexual desire disorder, and today Valeant announced a deal to acquire Sprout for $1.0B in cash. There are real concerns about the drug, which was rejected twice by the FDA over concerns about its effectiveness and side-effects. Valeant said it would pay $500 million upfront and make another installment next year for privately owned Sprout. Shares of Palatin Technologies have soared on the deal. Its main drug candidate Bremelanotide, a peptide melanocortin receptor agonist, has completed Phase 2B clinical trial for the treatment of female sexual dysfunction (FSD). VRX is down 4% on the deal and PTN was up as much as 16% in the early going, but has come well off its highs.
***Looking Ahead***
- 13:00 (US) Treasury to sell 5-Year TIPS
- 15:00 (MX) Mexico Banamex Survey of Economists
- 21:35 (JP) Japan Aug Preliminary Manufacturing PMI: No est v 51.2 prior
- 21:45 (CN) China Aug Preliminary Caixin Manufacturing PMI: 48.5e v 47.8 prior
***Economic Data***
- ((PT) Portugal Jun Current Account: +€0.2 v -€4.5B prior
- (UK) Aug CBI Industrial Trends Total Orders: 10e v -10 prior; Selling Prices: No est v +1 prior
- (BR) Brazil July Unemployment Rate: 7.5% v 7.0%e
- (US) Initial Jobless Claims: 277K v 271Ke; Continuing Claims: 2.254M v 2.27Me
- (CA) Canada Jun Wholesale Trade Sales M/M: 1.2% v 1.0%e
- (BE) Belgium Aug Consumer Confidence Index: -6 v -6 prior
- (MX) Mexico Jun Economic Activity Index (Monthly GDP) Y/Y: 3.1% v 2.6%e
- (MX) Mexico Q2 GDP Q/Q: 0.5% v 0.4%e; Y/Y: 2.2% v 2.1%e; GDP Nominal Y/Y: % v 5.2%e
- (US) July Existing Home Sales: 5.59M v 5.43Me
- (US) Aug Philadelphia Fed Business Outlook: 8.3 v 6.5e
- (US) July Leading Index: -0.2% v 0.2%e
- (US) Weekly EIA Natural Gas Inventories: +53 bcf vs. +59 to +61 bcf expected
[I]Contributed by Trade The News[/I]
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