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Futures are very quiet this morning, moving up overnight slowly but steadily. Markets in the US are currently expected to open ~20 bps higher than yesterday’s close. In overnight markets, Chinese equities took a break from their explosive move with a slightly worse than flat performance among A shares; equities traded in Hong Kong moved higher once again with a 37 bps gain in the Hang Seng. India (+33 bps) and Japan (+18 bps) were both up, as was Korea where stocks piled on 1%. Most markets had a solid morning followed by modest sideways afternoon price action ahead of the large swath of US economic data today.
In Europe, a beat in Q2’s initial GDP estimate from Spain was released this morning, although the growth was modest: 1.2% YoY versus expectations for 1.1%. Spain is the best performer in Europe on the back of that move with the IBEX 35 up 51 bps as of this writing. The other Iberian nation is going the opposite direction though: Portugal is down over 1%. The only other market trading with any volatility is Norway where stocks are down 61 bps. Core markets are flat in terms of both international and national indices.
Looking ahead to the afternoon, the FOMC decision is out at 2:00 PM and we expect no significant change from prior communications: taper to continue by $10 billion to $25 billion/month, and no new language regarding rate hikes or the timeline for a hike following the removal of accommodation. While some observers are calling for dissent on the decision from hawks, we would be surprised by this outcome. Inflation has ticked up recently but the most recent CPI print was a pause from that trend, indicating that there is little need to be concerned over inflationary pressures at this point. PCE, the Fed’s preferred gauge of inflation, is trending upwards, but it is still far below target. We therefore expect a stay-the-course Fed and no significant changes in outlook for this meeting. We would also note that there is also no press conference at this meeting.
Earnings this morning have been broadly positive and relatively quiet, although Garmin (GRMN, +0.10% yesterday, +7.49% pre-market) reported a massive quarter, beating EPS estimates by over 33%, delivering large revenue growth (11.7% year-over-year) and raising full year revenue and EPS estimates.
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