Friday, May 12, 2017

Mixed Data, Retail Woes, and Political “Fires” Leave Markets Unmoved

TradeTheNews.com Weekly Market Update: Mixed Data, Retail Woes, and Political “Fires” Leave Markets Unmoved
Fri, 12 May 2017 16:04 PM EST

The trading week opened in a relatively listless manner. Global markets appeared to have priced in the Macron victory and with much of the key April economic data and Q1 earnings season in the rear view mirror investors were forced to steer through a more than two-decade low in the VIX volatility index. The trading environment did little to mimic the raft of headlines that continued to come out of Washington DC. Markets seemed to pay little attention to the surprise announcement that President Trump fired FBI Director Comey. However, the White House’s inconsistent explanations of what led to the firing intensified press scrutiny of the event, and largely overshadowed a promising provisional trade agreement that could potentially open up Chinese markets to more US exports.

The economic data this week stuck to a now familiar pattern. US CPI and retail sales figures missed expectations while European numbers largely bested expectations and supported a third straight week of better performance by many overseas stock markets. US rates backed up for much of the week while Treasury refunding supply was met with tepid demand and various Fed officials affirmed their belief that two more rate hikes this year remained plausible. On Friday though, UST prices bounced and yields dropped along with the Dollar index following the softer than expected sales and inflation readings. Crude prices held the support levels found late last week but have had a tough time pushing away from the Nov 2016 lows despite continued reports OPEC and non-OPEC producers are moving towards an agreement to extend production cuts for at least six more months. Gold prices have held above the $1,200 mark while a surge in bitcoin to fresh all-time highs above $1,700 garnered quite a bit of attention. Reports circulated that Chinese regulators are nearing the formal publication of bitcoin regulations that could further legitimize the digital currency. For the week the S&P500 fell 0.4%, the DJIA lost 0.5%, while the Nasdaq gained 0.3%.

In corporate news this week, the woes of the retail sector remained a focus. Macy’s shares plunged to their lowest level in more than five years after reporting big misses on both the top and bottom line, as consumers continue to shift purchases to online from mall-based outlets. Nordstrom shares dropped double-digit percentages as it reported quarterly same-store sales dropped 0.8% y/y, coming in below estimates, even though it maintained its full-year outlook, noting stronger demand at its off-price Nordstrom Rack stores. Kohl’s missed on revenue but beat on profits, and saw significant improvement in traffic and sales for March and April. The Dow was weighed down on Tuesday by investor reaction to Disney earnings, as the media giant was hurt by persistent worries about its ESPN business. On the M&A front, Verizon snapped up Straight Path for $184/share in a bid to gain a key advantage in the race to deploy a 5G network. Coach agreed to acquire rival Kate Spade for $18.50/share in cash, giving the luxury fashion name ownership of an accessories manufacturer with access to a younger demographic.


SUN 5/7
(CN) CHINA APR FOREIGN RESERVES: $3.030T V $3.020TE (UPDATE); 5-month high; 3rd straight increase (first 3-month streak since mid-2014)
(HK) Macau Govt Official: Chinese UnionPay ATM cardholders will be asked to present their China ID cards and face recognition check before they can withdraw cash in Macau
(CN) CHINA APR TRADE BALANCE (CNY): 262.3B V 197.2BE ; 3-month high
(CN) CHINA APR TRADE BALANCE: $38.1B V $35.2BE

MON 5/8
(EU) EURO ZONE APR SENTIX INVESTOR CONFIDENCE: 27.4 V 25.2E (highest since July 2007)
KATE To be acquired by Coach for $18.50/shr in cash valued at $2.4B
(US) Fed Q1 senior loan officer survey: banks saw weaker commercial and industrial property loan demand in Q1
(CN) China Passenger Car Association (PCA): Jan-Apr vehicle sales 7.27M units, -1.7% y/y

TUES 5/9
(FR) BANK OF FRANCE BUSINESS SENTIMENT: 104 V 103E
VRX Reports Q1 +$1.79 (Gaap) v -$1.08 y/y, R$2.11B v $2.16Be
(US) Atlanta Fed cuts Q2 GDP to 3.6% from 4.2% on 5/4
(US) Commerce Sec Ross: haven't decided whether renegotiation on NAFTA will happen on bilateral or trilateral basis - press
DIS Reports Q2 $1.50 v $1.45e, R$13.3B v $13.5Be
- FCF $2.56B v $2.38B y/y
(US) Weekly API Oil Inventories: Crude: -5.8M v -4.2M prior; 2nd straight draw and largest draw since Jan 4th
(US) President Trump fires FBI Director Comey - financial press
WSTC To be Acquired by Certain Funds Affiliated With Apollo Global Management for $23.50/shr cash, enterprise value $5.1B (~discount of 2.5% to closing price*)
(CN) CHINA APR CPI M/M: +0.1% V -0.3% PRIOR; Y/Y: 1.2% V 1.1%E (both readings at 3-month highs)
(CN) CHINA APR PPI Y/Y: 6.4% V 6.7%E; 8th consecutive y/y increase; slowest increase in 4-months

WEDS 5/10
(FR) FRANCE MAR INDUSTRIAL PRODUCTION M/M: 2.0% V 1.0%E; Y/Y: 2.0% V 0.6%E
(US) APR IMPORT PRICE INDEX M/M: 0.5% V 0.1%E; Y/Y: 4.1% V 3.6%E
(US) Association of American Railroads weekly rail traffic report for week ending May 6th: 515.3K carloads and intermodal units, +4.6% y/y (17th straight week of gains)
BA Halts 737 MAX test flights for engine inspections after cracks found in low pressure turbine section - Aviation Week
(NZ) NEW ZEALAND CENTRAL BANK (RBNZ) LEAVES OFFICIAL CASH RATE (OCR) UNCHANGED AT 1.75%; AS EXPECTED
(CA) Moody's downgrades 6 banks in Canada by 1 notch, outlook negative

THURS 5/11
DPW.DE Reports Q1 Net €633M v €639M y/y, EBIT €885M v €918Me, Rev €14.9B v €13.9B y/y
ACA.FR Reports Q1 Net €845M v €702Me; Rev €4.70B v €3.80B y/y
DTE.DE Reports Q1 adj Net €747M v €791Me, adj EBITA €5.55B v €5.46Be, Rev €18.7B v €18.7Be
MAERSKB.DK Reports Q1 Net $253M v $199Me, EBITDA $1.71B v $1.82Be, R$8.96B v $9.14Be
(UK) MAR INDUSTRIAL PRODUCTION M/M: -0.5% V -0.4%E; Y/Y: 1.4% V 2.0%E
STRP Verizon confirms agreement to acquire for fixed price of $184.00/shr in all stock deal; to terminate agreement with AT&T
*(UK) BANK OF ENGLAND BANK (BOE) LEAVES INTEREST RATES UNCHANGED AT 0.25%; AS EXPECTED
(UK) BANK OF ENGLAND BANK (BOE) MAY MINUTES: VOTED 7-1 TO LEAVES INTEREST RATES UNCHANGED AT 0.25% (Forbes again voted for a 25bps increase)
(UK) BANK OF ENGLAND BANK (BOE) QUARTERLY INFLATION REPORT (QIR)
M Reports Q1 $0.24 v $0.35e, R$5.34B v $5.47Be
(US) APR PPI FINAL DEMAND M/M: 0.5% V 0.2%E; Y/Y: 2.5% V 2.2%E
(US) Pres Trump: I decided to fire FBI Director Comey before meeting with Attorney Gen Sessions and Dep Attorney General Rosenstein
(PE) PERU CENTRAL BANK (BRCP) CUTS REFERENCE RATE BY 25BPS TO 4.00%; NOT EXPECTED - first rate cut since Jan 2015
(CN) China Apr vehicle sales 2.1M units, -2.2% y/y v +4.0% in Mar; Biggest decline since Aug 2015 - China Association of Automobile Manufacturers
(US) US and China announce Initial Results of the 100-Day Action Plan of the US/China Comprehensive Economic Dialogue

FRIDAY 5/12
TKA.DE Reports Q2 *adj Net €64M v €108M y/y, adj EBIT €412M v €390M y/y, Rev €11.0B v €10.4Be
MT.NL Reports Q1 Net $1.00B v -$416M y/y, EBITDA $2.23B v $2.01Be, R$16.1B v $16.6Be
(DE) GERMANY Q1 PRELIMINARY GDP Q/Q: 0.6% V 0.6%E; Y/Y: 1.7% V 1.7%E; GDP NSA Y/Y: 2.9% V 2.8%E
(US) APR ADVANCE RETAIL SALES M/M: 0.4% V 0.6%E; RETAIL SALES EX AUTO M/M: 0.3% V 0.5%E
(US) APR CPI M/M: 0.2% V 0.2%E; CPI EX FOOD AND ENERGY M/M: 0.1% V 0.2%E; CPI INDEX NSA: 244.524 V 244.610E
(US) MAY PRELIMINARY UNIVERSITY OF MICHIGAN CONFIDENCE: 97.7 V 97.0E
(US) Atlanta Fed maintains Q2 GDP at 3.6%, unchanged from 5/9
(US) New York Fed Nowcast: raises Q2 GDP forecast to 1.9% from 1.8% from 5/5