Daily Agenda: Bank of England Releases Super Thursday Report

Bill Ackman makes a play for Oreo maker; factory orders surge in Germany; Tesla Motors cuts yearly delivery projections.

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Simon Dawson

So-called super Thursday came today in the U.K. with the release of the Bank of England’s quarterly inflation report, the notes from the latest Monetary Policy Committee meeting and the bank’s interest rate decision for the month. The bank’s central policymakers voted 8–1 to maintain the current historically low benchmark rate while cutting its near-term inflation outlook as energy costs continue to decline. The unexpectedly dovish tone drove the pound sterling lower against the euro and U.S. dollar.

Factory orders surge in Germany. June factory order data released today by Germany’s Federal Statistical Office registered stronger-than-forecast gains with the headline index rising by 2 percent from May and a full 7.2 percent year-on-year. The gains came despite a marginal contraction in domestic orders, suggesting strengthening demand in the euro zone.

Outlook dims for Tesla. Tesla Motors, manufacturer of electric cars, announced second-quarter results yesterday that beat consensus estimates, though the company cut projected total year-2015 deliveries to between 50,000 and 55,000 cars.

Pershing Square builds stake in Mondelez. Reports emerged today that New York–based activist hedge fund firm Pershing Square Capital Management, controlled by Bill Ackman, has amassed a 7.5 percent interest in suburban Chicago–headquartered food processor Mondelez International, the manufacturer of several household snack food brands such as Oreo, Triscuit and Milka. Industry analysts speculate that Ackman will seek a sale of the company through a merger with a larger rival.

Chinese stocks retreat again. Despite regulators’ efforts to restrict selling, the Shanghai Composite index declined by nearly 1 percent in trading today, keeping the index roughly 30 percent lower than its peak hit in late June. With key monthly economic data releases scheduled for next week, concerns over slowing growth are continuing to weigh on several key market sectors.

Portfolio Perspective: Ignore Macro Noise Adam Grimes, Waverly Advisors

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Equity markets appear to have weathered the most recent round of volatility with little impact to long-term trends. The message of market structure is clear. The bull market is intact and from a vantage point a few years in the future, all of 2015 will likely resolve into a long — and healthy — consolidation.

The Greek crisis is instructive from many perspectives but to our way of thinking, the most interesting lesson is a reminder to keep news and narrative in perspective. Only a few weeks ago, we were besieged by dire warnings of the impending collapse of the entire European Union and perhaps the world financial system. Today? Those concerns are easily seen for what they are: largely sound and fury, signifying nothing. Time and time again, we call our clients’ attention to the message of the market, and offer gentle reminders that so much of what we hear in the media is not actionable.

We think that the concerns and focus on Fed action and an eventual rate hike fall in the same category. Each month we have a regular flurry around the scheduled announcements and press conferences, though it’s important to remember that the impact of a hike on markets is anything but certain. If we could know the date and magnitude of a hike in advance, it would still be difficult to come up with a way to profit from that information. Perhaps the best play would be on short-term long volatility. Stocks can rise in a rising rate environment; they have in the past and will again at some point in the future.

Adam Grimes is the managing partner and CIO of Pittsford, New York-based research and asset management firm Waverly Advisors.

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