Home > Blog > Trader talk > Trader Talk: An analysis of the markets this morning

Good morning,

Markets are called to open flat this morning. This is what's happening today:

  • Premier Wen Jiabao said China’s economic growth hasn’t gained momentum and the government will step up policy fine-tuning. The central bank may cut interest rates by as much as one percentage point in the coming year to spur lending, the swap market signals;
  • Grains surged on concern a U.S. drought will damage crops;
  • Sales at U.S. retailers rose in June for the first time in three months, economists said before a report today;
  • Corn for December delivery climbed as much as 4% to $7.70 a bushel in Chicago, the highest for a most-active contract since Aug. 31. Soybeans for November delivery rose as much as 2.4 percent to $15.9025 a bushel, the highest price since July 2008. Corn and soybean conditions as of July 8 were the worst for that date since a drought in 1988, and areas of moderate to extreme drought have expanded to 63% of the Midwest, U.S. government data show;
  • Brent is trading at $102.57/barrel;
  • 10-year Italian debt is yielding 6.058%, 10-year Spanish debt is yielding 6.663% and 10-year Portuguese debt is yielding 10.505%;
  • Apple closed the session at $604.97, Priceline closed the session at $642.95

Friday was a good session for the markets with the S&P closing the session up 1.65%, the CAC40 up 1.46% and the DAX up 2.15%. Companies reporting better than expected results in the US fueled the rally. One of the main contributors to the rally was JP Morgan whose shares were up 6% on Friday. Investors seem more than willing to look past the bad news and focus on the positives and the future. Since they had been fearing a loss as high as $9 billion related to the soured trades, they found comfort in learning that the loss was much smaller and closer to the middle of the expected range.

Moving on to Europe, Spanish notes have delivered the world’s worst returns on securities repayable in five years or less for the past three months, jeopardizing the nation’s last line of defense against being locked out of capital markets.

With every Spanish bond maturing after 2017 yielding more than 6 percent, the nation has relied on shorter-dated sales for more than 80 percent of its borrowing since June 1, compared with 60% for Germany and 66 percent for Italy. Spain and Slovenia are the only euro nations with a two-year borrowing cost higher than their averages during the past year, according to data compiled by Bloomberg. That complicates the Spanish Treasury’s planned sale of E30b of securities by the end of the year.

Stock to watch: JP Morgan

Has the "London Whale" tempest finally been harpooned by JPMorgan Chase?

Gauging from the reaction of Wall Street investors, it sure looks that way.

Shares of the nation's biggest bank jumped nearly 6% to $36.07 Friday even though JPMorgan CEO Jamie Dimon disclosed some rather downbeat news: a loss of $4.4 billion caused by botched trades in the second quarter involving a London-based trader nicknamed the "whale" for his outsized bets. Bruno Iksil is no longer with the firm. The firm's losses now total $5.8 billiion.

Dimon created some of his own problems back in April by downplaying the severity of the trading loss, when he responded to media reports of the problems within the bank's Chief Investment Office, as a "tempest in a teapot."

Those remarks caused a crisis of confidence at the bank and its stock to lose as much as $25 billion in market value. Friday's gains came despite the bank's need to restate first-quarter losses related to the losing trades by $459 million (on top of an earlier reported loss of $800 million).

For further information on JP Morgan or other stocks and bonds we follow, contact our offices on 25688688.

Good day and happy trading!

Kristian Camenzuli