TradeTheNews.com Weekly Market Update: Markets Stirred by Geopolitics Again, but Gravitate Back to Risk-on
Fri, 10 Feb 2017 16:02 PM EST
US stock markets had a bumpy ride this week succumbing to lingering geopolitical concerns in the first part of the week. Indices pushed away from early highs and money flowed into the arms of global bond markets. The US 10-year yield drifted back towards the early 2017 low, briefly dropping below 2.35%, while oil prices dipped and gold jumped. Polling data ahead of key European elections and more awkward rumblings from the Trump administration were ultimately pushed aside and reflation trades resurfaced. The DJIA, S&P and the NASDAQ made runs to fresh all-time highs before the week’s end and the flows into Treasuries were unwound. For the week, the DJIA gained 1%, the S&P500 added 0.8%, and the Nasdaq rose 1.2%.
Investor sentiment largely turned on another Trump tweet. At Thursday's meeting with airline executives the President teased the upcoming announcement of a “phenomenal” new tax plan in the next few weeks. Though yet again no specifics were offered, the headline gave investors the kind of fuel they were looking for to add more risk. The week finished with the state visit of Japanese PM Abe at the White House. A joint press conference failed to produce any headlines that could potentially damage the market's psyche and both leaders indicated their willingness to cooperate moving forward on security and trade.
Greek debt worries resurfaced as the IMF issued a statement saying that the EU would need to pay-in more cash to prop-up the country’s finances. The news irritated various officials in Greece and Europe, although various politicians from Germany have recently hinted it might be best for Greece to leave the EU altogether. In the UK, PM May’s government won a series of Parliamentary votes, swatting away proposed legislative amendments that would have impeded the planned invocation of Article 50 next month. The recent political upsurge of the far-right in various countries in Europe, such as Sweden, France and Holland, also adds to the pot for EU break-up risk. Spanish and Italian 10-year yields gained 9 basis points on Friday as peripheral European Government Bonds continue to take loses.
China took action in an attempt to stabilize the exchange rate and stop the continued slide of the yuan. The PBOC decided to stop reverse repo operations for four consecutive days, pushing short term money markets rates higher and making it more expensive to short sell yuan. However, the yuan reversed its bullish trend this week to close down 0.9% to the US dollar. The growing trade imbalance and potential weaker economic growth in the wake of policy tightening may have contributed to pushing the currency lower. Emerging markets, China in particular, will be watching Fed Chair Yellen's comments closely when she testifies on Capitol Hill next week. Any signal the Fed could be gearing up for a rate hike in March could unleash a significant bout of volatility into FX markets.
In corporate earnings news, GM reported better than expected results on Tuesday, but still saw some profit taking in the stock. Disney reported mixed Q1 results, as cable network revenues slipped. CEO Bob Iger confirmed press reports that he may further extend his executive tenure and promised a bright future as Disney moves more content to over the top services. Shares of Twitter collapsed after another lackluster quarter. Multiple analysts downgraded the social network after it missed revenue estimates and showed no almost growth again in monthly active users.
TM Reports 9-month Net ¥1.43T v ¥1.89T y/y, Op Profit ¥1.56T v ¥2.31T y/y, Rev ¥20.2T v ¥21.4T y/y
*(EU) EURO ZONE FEB SENTIX INVESTOR CONFIDENCE: 17.4 V 16.8E
(US) Fed Q4 senior loan officer survey: about a quarter of banks tightened credits standards for commercial real estate loans in Q4
*(NZ) NEW ZEALAND Q1 INFLATION EXPECTATION SURVEY: 2-YEAR INFLATION EXPECTATION 1.92% V 1.68% PRIOR
*(AU) RESERVE BANK OF AUSTRALIA (RBA) LEAVES CASH RATE TARGET UNCHANGED AT 1.50%; AS EXPECTED
BNP.FR Reports Q4 Net €1.44B v €1.50Be, Rev €10.7B v €10.5Be
BP.UK Reports Q4 adj Net $400M v $568Me, Underlying replacement cost profit $72M v loss $2.23B y/y, Total Rev $51.0B v $49.2B y/y
*(CN) CHINA JAN FOREIGN RESERVES: $2.998T V $3.004TE (7th consecutive decline and falls below $3T for first time since Feb 2011)
GM Reports Q4 $1.28 v $1.14e, R$43.9B v $42.2Be
(US) Atlanta Fed cuts Q1 GDP forecast to 2.7% from 3.4% on 2/1
(US) Homeland Security Sec Kelly: expects border wall with Mexico to be well underway within 2 years - comments on Capitol Hill
(US) White House Press Sec: President Trump is in favor of negotiating pharma prices
DIS Reports Q1 $1.55 v $1.48e, R$14.8B v $15.3Be
2202.HK Reports Jan contracted sales CNY48.1B v CNY23.4B m/m
CARLB.DK Reports FY16 adj EBIT DKK8.25B v DKK8.29Be, Rev DKK62.6B v DKK63.2Be RIO.AU Reports FY16 Net $4.62B v -$866M y/y; Underlying earnings $5.1B v $4.75Be; Rev $33.8B v $32.8B y/y
SAN.FR Reports Q4 Business EPS €1.25 v €1.25e, Business Op €2.12B v €2.20Be Rev €8.87B v €9.30Be
RMS.FR Reports Q4 Rev €1.5B v €1.5Be
MAERSKB.DK Reports FY16 underlying Profit $711M v $3.07B y/y, EBITDA $6.77B v $9.07B y/y, Rev $35.5B v $35.9Be;
*(TH) THAILAND CENTRAL BANK (BOT) LEAVES BENCHMARK INTEREST RATE UNCHANGED AT 1.50%; AS EXPECTED
*(IN) INDIA CENTRAL BANK (RBI) LEAVES REPURCHASE RATE UNCHANGED AT 6.25%; NOT EXPECTED (2nd straight pause)
*(PL) POLAND CENTRAL BANK (NBP) LEAVES BASE RATE UNCHANGED AT 1.50%; AS EXPECTED
HUM Reports Q4 $2.09 v $2.06e, R$12.9B v $13.5Be
(US) DOE Crude: +13.8M v +2.5Me; Gasoline: -0.9M v +1Me; Distillate: +0.03M v +0.5Me
JWN President Trump tweets: "My daughter Ivanka has been treated so unfairly by @Nordstrom. She is a great person -- always pushing me to do the right thing! Terrible!"
(US) Association of American Railroads weekly rail traffic report for week ending Feb 4th: 541.5K carloads and intermodal units, +7.3% y/y
(UK) House of Commons passes Article 50 trigger bill by 494-122 vote, as expected
(CN) China Passenger Car Association (PCA): China Jan retail auto sales 2.12M units v 2.76M m/m, -9.8% y/y
GLE.FR Reports Q4 Net €390M v €315Me, Op €1.79B v €1.70B y/y, Rev €6.13B v €5.99Be
TKA.DE Reports Q1 Net €15M v €92Me, adj EBIT €329M v €318.1Me, Rev €10.1B v €9.67Be
TWTR Reports Q4 $0.16 v $0.12e, R$717M v $738Me; MAU's ~flat q/q
*(US) INITIAL JOBLESS CLAIMS: 234K V 249KE; CONTINUING CLAIMS: 2.08M V 2.06ME (initial claims match lowest level since 1973)
(US) Pres Trump: to make a "phenomenal" tax announcement in the next 2 or 3 weeks - breakfast meeting with airline CEOs
*(CN) CHINA JAN TRADE BALANCE (USD TERMS): $51.4B (5-month high) V $48.5BE
MT.NL Reports Q4 Net +$403M v -$6.69B y/y, EBITDA $1.66B v $1.61Be, R$14.1B v $14.7Be
*(UK) DEC INDUSTRIAL PRODUCTION M/M: 1.1% V 0.2%E; Y/Y: 4.3% V 3.2%E
BHP Reportedly declaring force majeure on shipments from Escondida mine in Chile – press
*(US) JAN IMPORT PRICE INDEX M/M: 0.4% V 0.3%E; Y/Y: 3.7% V 3.4%E
*(CA) CANADA JAN NET CHANGE IN EMPLOYMENT: +48.3K V -10.0KE; UNEMPLOYMENT RATE: 6.8% V 6.9%E
(US) US Fed Gov Tarullo planning to resign on or around April 5th; Tarullo is the leading expert at the Fed on financial regulation issues; creates a 3rd open seat at the Fed