US Market Update: JPMorgan Lands the London Whale, Markets Splash Higher

***Economic Data***
- (RU) Russia Central Bank left its key rate unchanged (as expected) with the Refinancing Rate unchanged at 8.00%; Overnight Deposit Rate unchanged at 4.00% and Overnight Auction-Based Repo unchanged at 5.25%
- (IN) India Forex Reserves w/e July 6th: $287.6B v $290.0B prior
- (IC) Iceland Jun Unemployment Rate: 4.8% v 5.6% prior
- (PL) Poland Jun CPI M/M: 0.2% v 0.1%e; Y/Y: 4.3% v 4.1%e
- (PL) Poland Jun M3 Money Supply M/M: 0.1% v 0.3%e
- (PL) Poland May Current Account: -?815M v -?232Me; Trade Balance: -?933M v -?515Me; Exports: ?12.1B v ?12.1Be; Imports: ?13.0B v ?12.5Be
- (US) Jun Producer Price Index M/M: +0.1% v -0.5%e; Y/Y: +0.7% v +0.2%e
- (US) Jun PPI Ex Food & Energy M/M: +0.2% v +0.2%e; Y/Y: +2.6% v +2.6%e
- (US) July Preliminary University of Michigan Confidence: 72.0 v 73.5e

- Global equity markets have broken their week-plus losing streak following China's in-line GDP data and JPMorgan's earnings report. There were fears that China's Q2 GDP report could have been much worse than expected, although in the event it more or less met expectations (for a 13-quarter low). This morning S&P500 futures were in the green before the open and broke a six-day down streak at the open; the S&P is up 1.2% or so this morning. The euro has bounced higher with equities, with EUR/USD jumping nearly one big figure after 09:30 to trade around 1.2250.

JPMorgan's Q2 results were pretty good, although the company had a lot of questions to answer regarding the losses in its London-based CIO office, home of the so-called London Whale. JPMorgan's decent underlying performance plus Wells Fargo's firm results (profits met expectations for a 17% y/y gain) bode well for the rest of the US financial sector. In other data, the July preliminary University of Michigan confidence data was only a little bit below the consensus. Many analysts however are calling the better markets nothing but a short-covering rally, following the abysmal performance during yesterday's session, including fresh two-year lows in EUR/USD and some record lows in the benchmark 10-year UST yield.

- Shares of the largest US banks are making healthy gains this morning following the release of second-quarter results from JPMorgan and Wells Fargo. WFC is up 2% and JPM is up 4.5%. JPMorgan disclosed a raft of information this morning. First of all, the firm disclosed a lot more information relating to its CIO loss: total losses from the London Whale amount to $5.8B to date, $4.4B of which were reported in Q2. Disturbingly, JPMorgan disclosed that "certain individuals may have been seeking to avoid showing the full amount of the losses in the portfolio we are no longer confident that the trader marks reflected good faith estimates of fair value," casting more doubt on the firm and potentially opening to door to more litigation. CEO Dimon insisted that the firm would only lose another $1.6-1.7B on the bad trades. Due to these issues, JPM restated Q1 result, cutting EPS to $1.19 v $1.31 reported prior. In Q2, the firm posted net income of $4.96 billion or $1.21 a share. Note that profits were increased by $2.1B by loan loss releases, and by a further $755M or $0.12/shr by gains from the DVA adjustment.

- In other news, shares of New York & Company are up nearly 14% after stating that its Q2 results would top prior guidance, with quarterly losses much lower than a year ago. Hovnanian is up more than 9% after reaching a deal to sell a land portfolio to GSO Capital Partners and also agreed to an equity investment by the firm. Private education name Bridgeport is down more than 18% after regulators demanded a review of its accreditation of one of its main universities. Lexmark is down more than 7% after cutting guidance. The company blamed flagging demand in Europe for most of the poorer outlook.

***Looking Ahead***
- 13:20 (US) Fed's Lockhart speaks on Economy in Jackson, MS
- 15:00 (AR) Argentina Jun Consumer Price Index M/M: 0.7%e v 0.8% prior; Y/Y: 9.9%e v 9.9% prior
- 15:00 (AR) Argentina Jun Wholesale Price Index M/M: No est v 1.0% prior; Y/Y: No est v 13.0% prior
- (CO) Colombia Central Bank Monetary Policy Minutes

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Source: http://fxtraders.eu/article.php?id=22870

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