Global investor sentiment is a little more buoyant Tuesday despite some less than stellar economic data and news, including UBS announcing it will cut 3,500 jobs.
"Key European economic data was mixed," said economists at Merrill Lynch, who said industrial surveys were better than expected and calmed the nerves of those expecting large contractions.
The euro zone's Composite Output Index, which measures activity based on manufacturing and services firm surveys, held steady from July's 22-month low of 51.1, according to Dow Jones newswires.
"Risk On...sorta,"says MNDs managing editor Adam Quinones, "stocks, oil, and the Euro are all rallying at the mercy of bonds and gold as the domestic trading session gets underway. Mortgages are however outperforming into lower dollar prices following an after-hours spike in loan supply yesterday afternoon".
The Asian session finished with shares up between 1.22% and 1.99%, and European markets are all on the rise with the FTSE 100 up 0.74% and the CAC-40 up 1.27%. The S&P 500 is ready to open 9 points higher (+1.36%) at 1,132.50 while Dow futures are 149 points higher (+1.37%) at 10,996.
"These gains sound great but I won't be getting excited about the risk trade until I see S&P futures break through 1150 resistance," Quinones added.
Light crude oil is 1.52% higher at $85.70 per barrel. Gold prices are off their recent record highs, falling 0.55% overnight to $1,881.50.
The two-year Treasury note is -1/32 at 100-10 with its yield two basis points higher at 0.22%. The benchmark 10-year note is -12/32 at 99-25 with its yield four basis points higher at 2.14%, and the 30-year yield is four basis points higher at 3.47%. The Fannie Mae 4.0 MBS coupon is -7/32 at 103-25.
Key Events Today:
10:00 - New Home Sales are anticipated to continue scraping along the bottom in July, with no reasons for optimism in the coming months. The annualized pace of sales was reported at 312k in June and 315k in May; the consensus prediction for July is 315k.
"The number of new homes for sale is now the lowest in the nearly 50 years for which the data have been collected," noted economists at Citigroup. "With demand remaining at such low levels, we expect that builders will allow inventories to fall further."
Economists at BMO note that new homes sales must contend with "a glut of existing homes for sale that is continuously fed by foreclosed properties."
"The only saving grace for the new home segment is that inventories are balanced relative to sales, so the risk of another collapse in activity and prices is lessened," they said, noting that in June, there were 6.3 months' worth of unsold new homes, versus an historic median of 6.0.
Economists at Nomura Global Economics added: "Not only did mortgage application volume remain soft in July, building permits also declined. According to the Census Bureau, only houses sold prior to being built or those that are built for sale are counted as a new home sale, so softness in building permits in July would indicate weak new home sales."
Treasury Auctions:
- 11:30 - 52-Week Bills ($25 billion)
- 11:30 - 4-Week Bills ($35 billion)
- 1:00 - 2-Year Notes ($35 billion)