Forex Go!

***Economic Data***
– (TU) Turkey Central Bank leaves Benchmark Repo Rate unchanged at 6.25%; As expected
– (US) Initial Jobless Claims: 418K v 410Ke; Continuing Claims: 3.698M v 3.705Me
– (SA) South Africa Central Bank (SARB) leaves Interest Rates unchanged at 5.50%; As expected
– (MX) Mexico Jun Unemployment Rate: 5.4% v 5.1%e
– (US) May House Price Index M/M: 0.4% v 0.1%e
– (US) Jun Leading Indicators: 0.3% v 0.2%e
– (US) July Philadelphia Fed: 3.2 v 2.0e
– (US) Weekly EIA Natural Gas Inventories: +60 BCF v +60 BCF to +65 BCF expected range

– Events are conspiring to drive a big rally in global markets this morning. There are a couple of real positives in play: key US earnings reports have been strong, US economic data is looking less bad and Europe is close to rolling out a final solution to the Greek problem. In earnings, Morgan Stanley is rallying the financial stocks higher on excellent results. The July Philly Fed report jumped to a positive 3.2 reading from June’s terrible -7.7 number. In Europe, leaders are meeting to agree to a second Greece bailout package and initial leaked documents indicate that the nation will roll over debt into 30-year maturities, the EFSF will backstop the banks and everybody will just swallow a selective default. In the background, Congress and President Obama are still fiddling while Washington burns. Gold is back above $1,600 in the session, whereas WTI crude is pennies short of $100. Money is coming out of Treasury markets in this latest risk on rally. The 10-year yield has backed up towards 3%.

– Morgan Stanley impressed markets with the highest revenue in four years, and analysts have fallen over themselves to point out that the firm’s top line was notably higher than revenue from Goldman Sachs in the quarter. The quarterly loss was nearly half the expected amount, stemming from the conversion of Mitsubishi UFJ’s preferred stock to common shares. “Morgan Stanley is the new Goldman Sachs,” declared Dick Bove. American Express is also in focus, after the firm’s profits beat expectations handily on a big 18% y/y gain in cardmember spending. AmEx’s CEO said that spending was at an all-time high on broad-based strength across sectors. Money manager Blackrock pulled of an impressive quarter, beating both top- and bottom-line expectations by wide margins. Regional banks BB&T and Fifth Third had solid quarters, characterized by lower loss provisions.

– Intel’s results were a bit stronger than expected, although profit margins have declined somewhat from year-ago levels. The firm said demand for high-end products from the corporate world remains healthy, even as consumer demand is still pretty weak. Intel reduced its industry forecast for 2011 PC shipments to +8-10% v +11% prior. Nokia managed to calm investors after Apple’s stunning quarter, beating expectations and saying that its cellphone business would remain profitable in the third quarter. Mobile phone chip maker Qualcomm was right in line with expectations, but investors are nervous about comments from executives that the firm’s customers are reducing inventories slightly. AT&T’s net wireless adds were half the level seen last quarter and fell on a y/y basis, even as the firm’s postpaid business perked up nicely.

– Like Coca Cola earlier in the week, Pepsi broadly met targets in its Q2 report on broad strength in all global markets. However the company appeared to back off its prior forecast for FY11 earnings, warning that updated guidance reflects higher uncertainty regarding macroeconomic and consumer trends for the year. Pepsi’s CEO stated that the modest pickup in US consumer spending seen earlier in the year has reversed in the past several months. Profits at United Continental and US Airways were disappointing, as high fuel costs and sluggish consumer spending weighed on both firms. Note that United is still facing costs from its merger with Continental.

– The healthcare sector saw quarterly reports from Eli Lilly, Baxter, Express Scripts and Medco. Lilly tweaked its outlook slightly higher, but otherwise results from the companies broadly met expectations. The big news was that Express Scripts has struck a deal to buy Medco for $71.36 in cash and stock, a 27.9% premium to yesterday’s close, in a total deal worth $29B. This marks the biggest consolidation in the pharmacy benefits sector since back in 2007, when CVS bought Caremark. Recall that back in May, Medco lost a major federal contract to rival CVS Caremark.

– The greenback has zigzagged through the US morning session, strengthening briefly before markets decided that the headlines coming out of the EU Summit looked like the event could be a positive for the euro. Draft summit plans suggested that an extension of EFSF loans from 7.5-years to at least 15 years was in the works, coupled with a lending rate for Greece lowered to 3.5% and an expansion of the EFSF’s role to include precautionary lines of credit for banks. In a relief rally EUR/USD surged almost 200 pips to test above 1.4330. Around the same time S&P reiterated its dim view on US and warned that the debt limit issue could still affect global economy even with a deal in Congress.

***Looking Ahead***
– (AR) Argentina July Consumer Confidence: No est v 55.7 prior
– 13:00 (US) Treasury to sell $13.0B in 10-Year TIPS

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