TradeTheNews.com Weekly Market Update: Markets Directionless Amid Conflicting Data and Geopolitical Maneuvers
Fri, 07 Apr 2017 16:09 PM EST
Equities remained within a fairly narrow range throughout most of the week as markets focused on events in Syria, as well as President Trump's highly anticipated meeting with China President Xi and congressional attempts to enact some part of the White House agenda. US stock markets traded mostly sideways, and for the week the DJIA was about flat, the S&P500 slipped 0.3%, and the Nasdaq fell 0.6%.
Stronger than expected ADP employment data pushed the Dow back up near 20,900 on Wednesday, but stocks to close down on the day after Speaker Ryan admitted that Republican factions were not yet “on the same page” on tax reform, and the FOMC minutes showed the Fed aiming to start shrinking its balance sheet in late 2017. The forecast for NFP had been raised to 180k after strong ADP data, so Friday's 98K top-line reading was surprising, sending 10-year notes to a low of 2.27%. That reaction was wiped out as New York Fed President Dudley reinforced the idea that the Fed may pause its rate hike schedule at the outset of the balance sheet runoff. 10-year yields rose again to close the day at 2.37% as the reflation trade remained intact.
The ECB faced continued pressure from German officials, most notably the Bundesbank. ECB President Draghi made comments dismissing the need to reduce the size of its QE program, despite many calling for it. Germany in particular is seeing rising inflation, while for other EU countries CPI remains subdued. There is likely to be more pressure as the Fed continues to hike rates. India hiked its key Reverse Repo rate this week in an attempt to defend the economy from rising inflation and maintain the spread to US dollar assets.
In corporate news, Tesla started the week off by posting Q1 deliveries above analyst estimates, which boosted investor confidence in 50K deliveries for the first half and bolstered the automaker’s effort as it starts production of the Model 3. Hospital stocks were volatile most of the week, as GOP members of Congress held meetings to potentially revive its Obamacare repeal endeavor, but the exercise was largely fruitless and the repeal bill remains in congressional purgatory as legislators start a two week recess. On the M&A front, a report indicated Staples is in early stage talks for a potential sale to private equity, in a deal that could be worth $7B. Bakery chain Panera Bread was acquired by investor JAB Holding -- owner of Krispy Kreme, Keurig, and various coffee retailers -- for $315/share in cash, in a deal valued at $7.5B. The $43B Syngenta-ChemChina merger received FTC approval, though some divestitures of US assets would be required.
SUNDAY APR 2
TSLA Reports Q1 deliveries just over 25.0K (~13.5K Model S; ~11.6K Model X), +69% y/y; Production 25.4K (deliveries and production fresh record highs)
(HK) Macau Mar Gaming Rev MOP21.23B v MOP22.99B prior; y/y: 18.1% v +11%e
MONDAY APR 3
(DE) GERMANY MAR FINAL MANUFACTURING PMI: 58.3 V 58.3E (confirms its 28th month of expansion and highest since Apr 2011)
(UK) MAR PMI MANUFACTURING: 54.2 V 55.0E (8th month of expansion)
(EU) EURO ZONE FEB UNEMPLOYMENT RATE: 9.5% V 9.5%E (lowest level since 2009)
(US) MAR ISM MANUFACTURING: 57.2 V 57.2E; PRICES PAID: 70.5 V 66.0E (prices paid highest since May 2011)
(US) Atlanta Fed raises Q1 GDP to 1.2% from 0.9% on 3/31
(ZA) S&P cuts South Africa sovereign credit rating to junk status, cuts one notch to BB+ from BBB-; outlook Negative
(US) Senate Democrats now have 41 votes against cloture, sufficient to filibuster nomination of Neil Gorsuch to the Supreme Court - press
(AU) AUSTRALIA FEB TRADE BALANCE (A$): +3.6B V +1.9BE (4TH CONSECUTIVE SURPLUS)
TUESDAY APR 4
(AU) RESERVE BANK OF AUSTRALIA (RBA) LEAVES CASH RATE TARGET UNCHANGED AT 1.50% (AS EXPECTED)
SPLS Reportedly in early stage talks with private equity over potential sale of the company; could be valued at $7B - press
(US) FEB FINAL DURABLE GOODS ORDERS: 1.8% V 1.7%E; DURABLES EX-TRANSPORTATION : 0.5% V 0.4% PRELIM
(US) Atlanta Fed maintains Q1 GDP at 1.2%, unchanged from 4/3
(US) Richmond Fed President Lacker to resign effective today over improper disclosure of confidential FOMC information, earlier than planned - press
SYT FTC approves $43B merger with ChemChina; to require divestiture of US asset as a condition for merger approval
PNRA JAB Holding reportedly in advanced talks to acquire Panera - press
WEDNESDAY APR 5
PNRA Confirms to be acquired by investor JAB for $315/shr in cash valued at $7.5B; Q1 SSS +5.3%
(PL) POLAND CENTRAL BANK (NBP) LEAVES BASE RATE UNCHANGED AT 1.50%; AS EXPECTED
(US) MAR ADP EMPLOYMENT CHANGE: +263K V +185KE
(US) MAR FINAL MARKIT SERVICES PMI: 52.8 V 53.1E (lowest since Sept)
(US) GOP leaders and conservative factions reportedly likely to take break on healthcare talks - Axios
(US) House Speaker Ryan: House, Senate and White House are not yet on the same page regarding tax reform
(US) FOMC MINUTES FROM MARCH 15 MEETING: MOST PARTICIPANTS SEE CHANGE TO BALANCE SHEET POLICY LATER THIS YEAR
(US) Association of American Railroads weekly rail traffic report for week ending April 1st: 527.7K carloads and intermodal units, +7.2% y/y (12th straight week of gains)
BBBY Reports Q4 $1.84 v $1.77e, R$3.53B v $3.50Be; Raises dividend 20% to $0.15/shr (indicated yield 1.6%)
2202.HK Reports Mar contracted sales CNY63.6B v CNY33.6B y/y
(HK) HONG KONG MAR COMPOSITE PMI: 49.9 V 49.6 PRIOR; 3rd straight contraction
(CN) CHINA MAR CAIXIN PMI SERVICES: 52.2 V 52.6 PRIOR (6-month low and 3rd straight sequential decline)
THURSDAY APR 6
(IN) INDIA CENTRAL BANK (RBI) LEAVES REPURCHASE RATE UNCHANGED AT 6.25%; AS EXPECTED; narrow rate corridor
(CZ) CZECH CENTRAL BANK (CNB) REMOVES FX FLOOR (allows the currency to float to stronger levels) - Extraordinary monetary policy meeting
(US) INITIAL JOBLESS CLAIMS: 234K V 250KE; CONTINUING CLAIMS: 2.03M V 2.03ME
(US) Senate Republicans pass "nuclear option" rule change that will allow for approval of Gorsuch Supreme Court nomination on a majority vote basis (as expected)
(CN) US Sec of State Tillerson: Has no doubt Syria is responsible for chemical attack this week; the chemical weapons attack requires a serious response
(PE) PERU CENTRAL BANK (BRCP) LEAVES REFERENCE RATE UNCHANGED AT 4.25%; AS EXPECTED
005930.KR Reports prelim Q1 Op profit KRW9.9T v KRW9.2Te, Rev KRW50T v KRW49.5Te
(SY) US LAUNCHED CRUISE MISSILES AGAINST AIRFIELD TARGETS IN SYRIA
FRIDAY APR 7
(CN) CHINA MAR FOREIGN RESERVES: $3.009T V $3.011TE (2nd straight month of increase)
(UK) FEB INDUSTRIAL PRODUCTION M/M: -0.7% V +0.2%E; Y/Y: 2.8% V 3.7%E
(GR) Eurogroup Chief Dijsselbloem: making significant progress on Greece; have an agreement on main Greek policy elements
(US) MAR UNEMPLOYMENT RATE: 4.5% V 4.7%E (lowest since April 2007)
(CA) CANADA MAR NET CHANGE IN EMPLOYMENT: +19.4K V +5.7KE; UNEMPLOYMENT RATE: 6.7% V 6.7%E
(US) MAR AVERAGE HOURLY EARNINGS M/M: 0.2% V 0.2%E; Y/Y: 2.7% V 2.7%E; AVERAGE WEEKLY HOURS: 34.3 V 34.4E
(US) MAR CHANGE IN NONFARM PAYROLLS: +98K V +180KE (lowest since May 2016)
