Friday, March 31, 2017

Brexit Begins, Washington Resets

TradeTheNews.com Weekly Market Update: Brexit Begins, Washington Resets
Fri, 31 Mar 2017 16:08 PM EST

Equities returned to their bull trend this week on positive economic data and talk of tax reform from the Trump administration. Markets shook off concerns about the Trump legislative agenda after the failed effort at healthcare reform, as the prospects of moving on to economic policy implementation starting with tax cuts re-galvanized investors' interest in stocks. For the week, the Dow gained 0.3%, the S&P added 0.8% and the Nasdaq rose 1.4%.

Talk from various Fed officials of three rate hikes for 2017 and maintaining a prudent pace kept the reflation trade muted. The economy is seen as being on track, warranting another couple of hikes this year. However, the bond market had been looking for evidence there might be a total of four. 10-Year Treasuries maintained their yield within a tight range throughout the week; most price action kept yield between a month low of 2.37% and 2.41%. WTI crude bounced from last week's low at $47, to close the week above $50 a barrel, as EIA reported an unexpected drop in supply and traders' judged OPEC cuts in a different light.

The UK Prime Minister May sent a letter to the EU council formally initiating the Brexit process by triggering Article 50 of the EU constitution. The text of the letter was conciliatory, but also advised that it was in both parties' interest to reach an agreement. It also warned that security would be undermined if a deal was not reached and called for simultaneous negotiations of Brexit terms along with a future trade deal. The EU answered that trade negotiations can only happen once Brexit terms are at a well advanced point, and EU officials reiterated calls for a £50B divorce bill. The British government has not made any official comments so far as to the size of the divorce bill request. Less than two days after invoking Article 50, the UK reported Q4 final GDP at 1.9%, its worst annual growth pace in nearly four years and potentially a bad omen as the Brexit begins.

In corporate news, with earnings season past us, hospital names led the week off buoyed by the scuttling of the Republican healthcare plan. Greenlight's Einhorn pushed GM to boost its share value by splitting common stock into two separate classes, but management rejected the plan on grounds it could harm the carmaker’s investment-grade rating. On the M&A front, the EU formally blocked Deutsche Boerse’s plan to acquire London Stock Exchange, citing competition concerns. Semiconductor company Maxlinear acquired Exar Group for $13.00/shr in cash in a $700M transaction, seeking to build scale and boost growth. Cenovus agreed to acquire ConocoPhillips' 50% interest in the FCCL Partnership for $17.7B in cash and shares, as Conoco aims to accelerate its debt reduction plan. And FMC announced it would buy parts of Dupont's Crop protection business, and Dupont would acquire FMC Health and Nutrition, as part of a strategy to win EU approval for the Dow-Dupont merger.

SUNDAY 3/26
386.HK Reports Q4 Net CNY46.4B v CNY32.3B y/y; Op CNY77.2B v CNY56.8B y/y; Rev CNY1.93T v CNY2.02T y/y
2202.HK Reports FY16 Net CNY21.0B v CNY18.1B y/y, Rev CNY228.9B v CNY184.3B y/y

MONDAY 3/27
(EU) EURO ZONE FEB M3 MONEY SUPPLY Y/Y: 4.7% V 4.9%E
(DE) GERMANY MAR IFO BUSINESS CLIMATE: 112.3 V 111.1E (highest since July 2011); CURRENT ASSESSMENT: 119.3 V 118.3E

TUESDAY 3/28
3328.HK Reports FY16 Net CNY67.2B v CNY65.4Be, NII CNY134.9B v CNY144.2B y/y
(US) MAR RICHMOND FED MANUFACTURING INDEX: 22 V 15E
- Volume of new orders 26 v 24 prior
(US) MAR CONSUMER CONFIDENCE: 125.6 V 114.0E (highest since Dec 2000)

WEDNESDAY 3/29
(FR) FRANCE MAR CONSUMER CONFIDENCE: 100 V 100E
(TH)THAILAND CENTRAL BANK (BOT) LEAVES BENCHMARK INTEREST RATE UNCHANGED AT 1.50%; AS EXPECTED
494.HK Reports FY16 Net $223M v $283.5Me, Op profit $412M v $512M y/y, Rev $16.8B v $17.6Be
(UK) UK FORMALLY BEGINS BREXIT PROCESS WITH TRANSFER OF SIGNED ARTICLE 50 LETTER TO EU'S PRESIDENT TUSK
(UK) PM May presents content of Article 50 letter: Confirm beginning of Brexit process; no turning back from this historic moment to shape the future
(EU) ECB said to be wary of making any fresh-policy shift in its communication at its April meeting - financial press
(US) Fed’s Evans (dove, voter): there has been good progress towards Fed goals; supports one or two more rate hikes this year
(US) Fed's Rosengren (moderate, non-voter): Fed should raise rates four times in 2017; raises should only be delayed if data disappoints - remarks in Boston
(US) Association of American Railroads weekly rail traffic report for week ending March 25th: 526.4K carloads and intermodal units, +12% y/y (11th straight week of gains)

THURSDAY 3/30
(DE) GERMANY MAR CPI SAXONY M/M: 0.2% V 0.5% PRIOR; Y/Y: 1.8% V 2.4% PRIOR
1398.HK Reports FY16 Net CNY278.2B v CNY275.3Be, Net interest income CNY471.8B v CNY508B y/y
(EU) EURO ZONE MAR BUSINESS CLIMATE INDICATOR: 0.82 V 0.87E; CONSUMER CONFIDENCE (FINAL): -5.0 V -5.0E
(CZ) CZECH CENTRAL BANK (CNB) LEAVES REPURCHASE RATE UNCHANGED AT 0.05%; AS EXPECTED
(DE) GERMANY MAR PRELIMINARY CPI M/M: 0.2% V 0.4%E; Y/Y: 1.6% V 1.8%E
(US) INITIAL JOBLESS CLAIMS: 258K V 247KE; CONTINUING CLAIMS: 2.05M V 2.03ME
(US) Q4 FINAL GDP PRICE INDEX: 2.1% V 2.0%E; CORE PCE Q/Q: 1.3% V 1.2%E
(US) Q4 FINAL GDP ANNUALIZED Q/Q: 2.1% V 2.0%E; PERSONAL CONSUMPTION: 3.5% V 3.0%E
(ZA) SOUTH AFRICA CENTRAL BANK (SARB) LEAVES INTEREST RATES UNCHANGED AT 7.00%; AS EXPECTED
(US) Trump administration draft letter seeks changes to NAFTA, but not scrapping deal altogether - Washington Post
(EU) ECB's Knot (Netherlands): rate hike in early 2018 is closer to my own expectations - Dutch press interview
(UK) Scotland First Min Sturgeon sends letter (section 30) to UK govt formally requesting 2nd Scottish independence referendum - financial press
(MX) MEXICO CENTRAL BANK (BANXICO) RAISES OVERNIGHT RATE BY 25BPS TO 6.50%; AS EXPECTED
(ZA) South Africa President Zuma reportedly to make major cabinet reshuffle; Fin Min Gordhan will be affected by overhaul - press
(US) Fed's Dudley (dove, FOMC voter): Rate rises are needed to keep expansion on track; economic risks may be tilting toward the upside - comments in Florida
(JP) JAPAN FEB JOBLESS RATE: 2.8% V 3.0%E; lowest since June 1994
(CN) CHINA MAR MANUFACTURING PMI (GOVT OFFICIAL): 51.8 (highest since Apr 2012) V 51.7E; NON-MANUFACTURING PMI: 55.1 (highest since May 2014) V 54.2 PRIOR

FRIDAY 3/31
(EU) EU Brexit negotiation guidelines said to ban bilateral talks between UK and EU member States - financial press
(EU) EU President Tusk formally present Brexit negotiation guidelines: Will visit London with talks with PM May ahead of the Apr 29th summit; reiterates that UK must fulfill its financial obligation to EU
(UK) Q4 FINAL GDP Q/Q: 0.7% V 0.7%E; Y/Y: 1.9% V 2.0%E (lowest annual pace since Q1 2013)
3988.HK Reports FY16 Net CNY164.6B v CNY167.1Be, Op Rev CNY485.7B v CNY473.9B y/y
(EU) EURO ZONE MAR ADVANCE CPI ESTIMATE Y/Y: 1.5% V 1.8%E; CPI CORE Y/Y: 0.7% V 0.8%E
(US) FEB PERSONAL INCOME: 0.4% V 0.4%E; PERSONAL SPENDING: 0.1% V 0.2%E
(US) FEB PCE DEFLATOR M/M: 0.1% V 0.1%E; Y/Y: 2.1% V 2.1%E
(US) FEB PCE CORE M/M: 0.2% V 0.2%E; Y/Y: 1.8% V 1.7%E
(US) MAR CHICAGO PURCHASING MANAGER: 57.7 V 56.9E
(US) MAR FINAL MICHIGAN CONFIDENCE: 96.9 V 97.6E
(US) Atlanta Fed cuts Q1 GDP to 0.9% from 1.0% on 3/24
(US) New York Fed Nowcast: cuts Q1 GDP forecast to 2.9% from 3.0% on 3/24; cuts Q2 GDP forecast to 2.6% from 2.7%