Daily Agenda: Terror in France Brings Geopolitical Risk into Focus

Europe reels as Nice attack kills more than 80; China economic data stronger than anticipated; Line trade up in public debut..


Geopolitical risk again dominates investor sentiment after the terror attack on Bastille Day in Nice, when a truck on Monday night barreled down a promenade packed with holiday revelers, killing over 80. In response, French President Francois Hollande extended the state of emergency that had been in place since earlier attacks in Paris. This marks the third major terrorist attack in France since 2015 and, in the wake of similar episodes in Belgium, the U.S., Turkey, Bangladesh, Iraq and Saudi Arabia, raises the alreading looming threat of religious extremism to new heights. Political analysts note that the backlash against ethnic and religious groups associated with terrorism has fueled the populist politics that has emerged so powerfully in Europe, Britain and the U.S. in 2016. For the European Union, in particular, which faces the economic impact of the U.K.’s departure as well as rising concerns that the Italian banking system will require a bailout, the attack marks a new low. In response to the Nice attack, European equities sold off with the Stoxx 600 down by nearly 1 percent in early trading on Friday.

Chinese data beats forecasts. Figures from China’s National Bureau of Statistics issued on Friday indicated better than anticipated retail sales and industrial production for June while urban fixed investments fell short of consensus forecasts. Critically, initial second-quarter gross domestic product was slightly higher than average forecasts, at an annualized growth pace of 6.7 percent. Separately, People’s Bank of China data on new credit issued on Friday indicated nearly 1.4 trillion in new yuan-denominated debt originated in June.

Line trades up sharply in debut. Shares of Japanese mobile messaging software developer Line traded over 30 percent higher after the initial public offering today in Tokyo. The firm placed the majority of the offering in New York, raising more than $1 billion, and expanding its global presence.

Retail sales stronger than expected. Commerce Department statics released this morning indicated that US shoppers shrugged off concerns from abroad and spend an additional 0.6 percent at both the cash register and online. Separately, the labor department released consumer price inflation data with the headline index climbing by 0.2 percent for the month on rising fuel costs.

Swatch problems indicate weakness for high-end consumer discretionary sales. A sharp decline in demand for timepieces drove second quarter earnings more than 50 percent lower year-over-year for Swatch Group AG according. The Swiss watch manufacturer reported sluggish sales in Asian and European markets in a release today. Company management has rebuffed calls by investors to reduce overhead, arguing that defending the brand’s cachet is more important than reacting to current macro headwinds. Shares of the company traded lower by more than 12 percent in early trading in Zurich.

Banks continue to exceed diminished expectations. Revenues at Citigroup Inc. were better than anticipated by Wall Street analysts according to the financial filing released by the bank today. Earnings declined by 17 percent versus the second quarter in 2015, as a rebound in profits from fixed income trading helped to offset losses in lending. Meanwhile, Wells Fargo & Co. also reported for the quarter with results that were roughly in line with estimates at $1.01 per share in earnings.