After a beating Thursday, stocks should move lower again Friday, given weak U.S. durable goods data. Europe got some relief from a push forward statement from Angel Merkel, though the stocks were still in the red at the hour of publishing here. There will be no major announcement today from Merkel after her meeting with the Greek Prime Minister. The weight on European shares is due to the purchasing managers data reported Thursday, which showed economic contraction across the region, including in Germany. The realization that the global community is feeling the effects of Europe should also weigh against the broader indices Friday. The SPDR S&P 500 (SPY), SPDR Dow Jones Industrial Average (DIA) and the PowerShares QQQ (QQQ) were all lower Thursday and are hard to look at this morning.
EURO STOXX 50: -0.5%
S&P/ASX 200: -0.8%
FTSE 100: -0.4%
Nikkei 225: -1.2%
German DAX: -0.5%
Hang Sang: -1.25%
CAC 40: -0.5%
Shanghai Shenzhen CSI 300: -1.15%
Greece's ASE: +1.3%
India's Sensex 30: -0.4%
Angela Merkel basically passed the buck forward this morning, telling the press and Antonis Samaras, the Greek PM, that she and France's Hollande had determined to wait for a report from the troika before making a determination on Greece. She said that the two cornerstones of the EU had agreed on the importance of Greece remaining in the euro-zone. However, they also maintain that Greece must show adequate progress in the required budget goals to receive new funding. That funding, however, will simply be used to repay loans coming due from the same parties, though Samaras may ask for more. Therefore, I assume it will be reissued. Greek stocks are up on the news in Athens, and the Global X FTSE Greece 20 ETF (GREK) is likely to gain as well today. The rest of Europe is lower, as it continues to suffer from the PMI data reported yesterday showing an 8th straight month of contraction.
Shares in Asia are running on a lag, after rising yesterday while the rest of the markets declined. Today, they felt the effects of the European data, Japanese export softness and also China PMI data, which each indicated the effects of Europe are contaminating Asian economies as well. The iShares FTSE China 25 Index (FXI) and the iShares MSCI Japan Index (EWJ) were each burdened yesterday in New York and are going to have a hard time of it again Friday in my view.
U.S. Economic Drivers
Durable Goods Orders were reported this morning for the month of July. While the news was strong on the top line, with new orders rising three consecutive months and 4.2% in July, it wasn't good for stocks today. The top line increase matched against expectations for a lesser 1.9% increase, based on Bloomberg's survey of economists. However, when excluding transportation, new orders actually declined by 0.4%, which matched poorly against the expectation for a 0.4% increase. Most importantly, new orders for capital goods excluding defense and transportation declined 3.4% this month, after dropping 2.7% last month. It means businesses are not spending, and that reflects poorly for the economy on the whole. While Boeing (BA) might benefit from this report, the data is likely to weigh on other industrials and the Industrials Select Sector SPDR (XLI) today.