TradeTheNews.com Weekly Market Update: Markets Acknowledge Embroiled Trump Administration Before Quickly Moving On
Fri, 19 May 2017 16:14 PM EST
In most cases stock indices opened the week at or near recent all-time highs. A continuing run of decelerating US economic data and the steady beat of headlines coming out of Washington DC were largely offset by a move higher in oil prices. Crude was finding support in solidifying market expectations that OPEC would extend supply cuts through next spring when they meet next week. Volatility remained remarkably low, and stocks remained bid globally, helped in part by a speech from China’s President Xi that illustrated the importance his government intends to put on finding new drivers for growth in the wake of softer April economic data.
By mid-week the tone dramatically shifted. Headwinds from Washington freshened on a report former FBI Dir Comey had drafted a memo chronicling a meeting with President Trump where he was asked to drop the investigation into former National Sec Adviser Flynn. Within 24 hours, former FBI Dir Mueller was appointed special counsel to oversee the Russia investigation, while the President repeatedly denied the reports, calling the whole thing a ‘witch hunt.’ Markets finally buckled as investors became increasingly concerned the political fallout could ultimately be fatal for the Republican’s pro-growth agenda. The flight from risk assets sent the VIX +27%, ultimately filling the gap made into the French election. Gold prices rose along with global Treasury bonds, sending yields lower. The US 10-year yield fell just short of the April low of 2.18%. The Dollar index gave back all the post-US election/Trump reflation gains.
The move into safe have assets was short lived. Equity markets rebounded Thursday in the wake of better US economic readings and technically driven momentum buying after the significant reversal. Markets largely shrugged off the latest political crisis in Brazil, which brought a spat of elevated volatility to Brazilian assets and word the Trump administration was pushing ahead with the NAFTA renegotiation. Oil prices pressed higher on speculation OPEC was contemplating a scenario of deepening supply cuts, not just extending. WTI crude finished the week above the $50 mark, while the Dollar Index closed near $97 for the first time since before the Nov election. Dollar bulls were dismayed by notably.dovish commentary from the Fed's Bullard. The US 10-year yield rebounded back towards 2.25%, but the curve remained compressed. For the week the Dow, S&P and NASDAQ nearly did a round trip, all falling ~0.5%.
As earnings news this week slowed to a trickle, a few big names reported strong results. Home Depot bucked the trend of poor retailer reports by notching a solid beat on top and bottom line, as the home improvement giant remains buoyed by a stronger housing market and a boost in big-ticket transactions. Semis were up modestly in Friday trading after Applied Materials issued strong results and guidance as its chipmaker customers ramp up to bring more advanced production equipment online. Deere rebounded by beating expectations across the board and raising its outlook, with notable strength from international farm equipment sales and home construction equipment.
SUN 5/14
(CN) CHINA APR INDUSTRIAL PRODUCTION Y/Y: 6.5% V 7.0%E; YTD Y/Y 6.7% V 6.9%E
(CN) CHINA APR RETAIL SALES Y/Y: 10.7% V 10.8%E; YTD Y/Y: 10.2% V 10.2%E
(CN) CHINA APR FIXED ASSETS EX RURAL YTD Y/Y: 8.9% V 9.1%E
(SA) Saudi Oil Min Al-Falih: Russia and Saudi Arabia in favor of extending OPEC deal for 9-months to March 2018; decision to be made May 25th - financial press
MON 5/15
(US) MAY EMPIRE MANUFACTURING: -1.0 V +7.3E
(US) MAY NAHB HOUSING MARKET INDEX: 70 V 68E (second-highest reading since financial downturn)
(US) MAR TOTAL NET TIC FLOWS: -$0.7B V $13.2B PRIOR; LONG-TERM TIC FLOWS: $59.8B V $53.1B PRIOR
27.HK CEO Lui: Encouraged by recent improvements in VIP; will need a few mouths to see if recovery is sustainable
TUES 5/16
VOD.UK Reports FY16/17 Adj EBIT €3.97B v €3.70B y/y, adj EBITDA €14.1B v €14.2B y/y, Rev €47.6B v €49.8B y/y
*(UK) APR CPI M/M: 0.5% V 0.4%E; Y/Y: 2.7% V 2.6%E; CPI CORE Y/Y: 2.4% V 2.3%E
*(EU) EURO ZONE Q1 PRELIMINARY GDP Q/Q: 0.5% V 0.5%E; Y/Y: 1.7% V 1.7%E
*(DE) GERMANY MAY ZEW CURRENT SITUATION SURVEY: 83.9 V 82.0E; EXPECTATION SURVEY: 20.6 V 22.0E
HD Reports Q1 $ 1.67 v $1.62e, R$23.9B v $23.7Be
(US) APR HOUSING STARTS: 1.17M V 1.26ME; BUILDING PERMITS: 1.23M V 1.27ME
TATA.IN Reports Q4 (INR) Group loss 7.2B v profit 9.88Be, Rev 354.6B v 316.2Be
(US) APR INDUSTRIAL PRODUCTION M/M: 1.0% V 0.4%E; CAPACITY UTILIZATION: 76.7% V 76.3%E (largest total industrial production gain since Feb 2014)
(US) Atlanta Fed raises Q2 GDP to 4.1% from 3.6% on 5/12
(US) Weekly API Oil Inventories: Crude: +0.9M v -5.8M prior; first build in 3 weeks
(US) President Trump reportedly asked former FBI Director Comey to shut down investigation into National Sec Adviser Flynn, according to memo Comey wrote following a meeting with Trump - NY Times
(US) US House Chair of Oversight Committee Chaffetz (R): Has subpoena pen ready for Comey memo, oversight committee is going to get the memo
WEDS 5/17
(HK) Macau Gaming Regulator: No plans to set up online gaming; no plan to adj gaming tax
(UK) MAR AVERAGE WEEKLY EARNINGS 3M/Y/Y: 2.4% V 2.4%E; WEEKLY EARNINGS (EX BONUS) 3M/Y/Y: 2.1% V 2.1%E
*(UK) APR JOBLESS CLAIMS CHANGE: +19.4K V +33.5K PRIOR; CLAIMANT COUNT RATE: 2.3% V 2.2% PRIOR
(UK) MAR ILO UNEMPLOYMENT RATE 3M/3M: 4.6% V 4.7%E (lowest since 1975)
700.HK Reports Q1 (CNY) Net 14.5B v 13.0Be; Rev 49.6B v 46.4Be
(EU) EURO ZONE APR CPI M/M: 0.4% V 0.4%E; Y/Y (FINAL READING): 1.9% V 1.9%E; CPI CORE Y/Y(FINAL READING): 1.2% V 1.2%E
(DE) GERMANY SELLS €812M VS. €1.0B INDICATED IN 2.5% JULY 2044 BUNDS; AVG YIELD: 1.24% V 0.87% PRIOR; BID-TO-COVER: 2.3X V 1.2X PRIOR
*(PL) POLAND CENTRAL BANK (NBP) LEAVES BASE RATE UNCHANGED AT 1.50%; AS EXPECTED
TGT Reports Q1 $1.21 v $0.89e, R$16.0B v $15.6Be
F Confirms plan to cut 10% of Salaried workforce in North America and Asia as part of cost reduction program
(IR) Trump administration confirms will renew Iran sanctions waiver, as expected, related to nuclear agreement - press
(IE) Ireland PM Kenny confirms plan to resign; effective Thursday, May 18th; successor to be appointed June 2nd - Irish press
(US) Association of American Railroads weekly rail traffic report for week ending May 13th: 527.0K carloads and intermodal units, +5.7% y/y (18th straight week of gains)
CSCO Reports Q3 $0.60 v $0.58e, R$11.9B v $11.9Be; to cut 1.1K jobs (about 1.5% of total)
(US) Justice Dept names former FBI Director Mueller as special counsel to take over Russia probe - press
*(JP) JAPAN Q1 PRELIMINARY GDP Q/Q: 0.5% V 0.5%E; ANNUALIZED GDP: 2.2% V 1.7%E; 5th consecutive quarter of growth for the first time in 11 years
(CN) China developers expect their offshore dollar bond issuance to dramatically slow in the near term in an effort for govt to cool the sector - financial press
(HK) DICJ director Martins Chan: Macau gaming licenses will be not be renewed but open for bidding again when they expire; no plans for online gaming platforms
*(AU) AUSTRALIA APR EMPLOYMENT CHANGE: +37.4K (2nd straight increase; best 2-month rise since late 2015) V +5.0KE; UNEMPLOYMENT RATE: 5.7% (3-month low) V 5.9%E
*(CN) CHINA APR PROPERTY PRICES M/M: RISE IN 58 OUT OF 70 CITIES VS 62 PRIOR; Y/Y: RISE IN 69 OUT OF 70 CITIES V 68 PRIOR
(US) Democratic strategists said to begin poll-testing public opinions of impeaching Pres Trump - US press
THURS 5/18
BRBY.UK Reports FY16 Adj Pretax £462.4M v £457.1Me, Op Profit £458.7M v £417.8M y/y, Rev £2.77B v £2.77Be
*(ID) INDONESIA CENTRAL BANK (BI) LEAVES REVERSE REPO RATE UNCHANGED AT 4.75% (as expected)
(UK) APR RETAIL SALES (EX-AUTO/FUEL) M/M: 2.0% V 1.0%E; Y/Y: 4.5% V 2.6%E
(BR) Brazil govt allies said to seek resignation of President Temer - financial press
(US) Commerce Sec Ross: Do not see any reason for policy delay; calls special investigations a sideshow - CNBC
(EU) ECB ACCOUNT OF MONETARY POLICY MEETING (APR MINUTES): Broad agreement that monetary policy stance was appropriate; risk outlook has improved
(US) MAY PHILADELPHIA FED BUSINESS OUTLOOK: 38.8 V 18.5E
(US) APR LEADING INDEX: 0.3% V 0.4%E
(MX) US Trade Rep Lighthizer: confirms began 90-day consultation period to renegotiate NAFTA
(MX) MEXICO CENTRAL BANK (BANXICO) RAISES OVERNIGHT RATE BY 25BPS TO 6.75%; NOT EXPECTED
(BR) Brazil President Temer: I have nothing to hide; I will not resign; will prove innocence before Brazil's Supreme Court - comments in Brasilia
AMAT Reports Q2 $0.79 v $0.76e, R$3.55 v $3.54Be
CRM Reports Q1 $0.28 v $0.26e, R$2.39B v $2.35Be
*(CL) CHILE CENTRAL BANK (BCCH) CUTS OVERNIGHT RATE TARGET BY 25BPS TO 2.50%; NOT EXPECTED
FRIDAY 5/19
(UK) MAY CBI INDUSTRIAL TRENDS TOTAL ORDERS: 9 V 4E
DE Reports Q2 $2.49 v $1.70e, Net Equipment Rev $7.26B* v $7.24Be
(CN) China reportedly will lift at 2-year suspension of foreign funds raising money in China to invest overseas as early as June - financial press
(US) New York Fed Nowcast: raises Q2 GDP forecast to 2.3% from 1.9% from 5/12
(US) GOP healthcare bill CBO score scheduled for release on Weds afternoon (5/24) - press
