Tuesday, October 31, 2017

November-December 2017 Outlook: The Art of the Deal

November-December 2017 Outlook: The Art of the Deal
Tue, 31 Oct 2017 12:47 PM EST

For the next couple of months the macro news cycle will be focused on the progress of a number of significant political and economic deals that have been under intense negotiation. From to the tax reform bill in Washington, to the oil producers’ production accord, to the Brexit talks in Europe, key deals with global implications will see major developments in the weeks ahead. Central banks are also in the process of completing their bargain with the markets: having spared the world from a depression by implementing extreme accommodation, some monetary policy authorities have begun withdrawing stimulus now that the danger has passed.

Developments on all of these fronts will play a strong part in market movements as 2017 comes to a close. Interest rates will be gradually rising as central banks wean the markets off accommodation, while the steady rise in stocks could see a correction if the bond yield curve doesn’t steepen or if some political deals and promised fiscal measures hit roadblocks.

Win-Win-Win

Oftentimes deals with international implications can take longer than expected, and the renegotiation of NAFTA is a prime example. Early on in the Trump Administration, Commerce Secretary Ross expressed confidence that a new deal could be inked by year end. The Mexican and Canadian delegations, however, have shown they are not in a mood to be pushed around, and have since demanded that talks continue through March. Ross conceded to this but continues to threaten to drop the trilateral agreement altogether if they can’t come to terms. The latest reports indicate that White House is most keen on getting stricter rules of origin, requiring that 85% of content come from within the three NAFTA countries, perhaps including as much as a 50% US content requirement. This rule is aimed at Mexican factories in particular on concerns that they are circumventing the spirit of the agreement by bringing in excessive amounts of materials and parts from Asia to be finished in Mexico. The next few months may see reports of progress on these targets or more talk about breaking up the ‘Three Amigos’ in favor of new bilateral trade deals in North America.

The tough trade talks are already influencing other areas of policy for Canada and Mexico. Despite a solid economic rebound and some overheating in the housing sector, the Bank of Canada paused its rate tightening cycle in October after two prior hikes. This was at least in part due to uncertainties over the outcome of the NAFTA talks – the BoC doesn’t want to be caught flat footed if the trade agreement is torn up. Meanwhile the Mexican central bank has been raising rates this year to mirror Fed tightening, but has given signals it will not move higher even if the Fed hikes rates in December. The Banxico has stated that the key rate at 7.00% should adequately rein in inflation, and it is now tilted toward patiently considering when it might CUT rates. The main caveat is that the exchange rate stays relatively stable, which may not be the case if NAFTA falls apart.

Backroom Deals

Corporate expectations for deregulation and tax cuts have continued to drive the stock market higher. The failure of the Republican controlled Congress to pass healthcare reform or any other significant legislation this year has not yet discouraged market expectations of a tax overhaul being accomplished in the next few months.

In recent days, the GOP made some genuine progress by passing a budget plan under ‘reconciliation’ that should allow for the tax reform bill to escape filibuster rules and pass by a simple majority. That maneuver opens a route for the eventual bill to pass in the Senate on a partisan basis, if necessary. The House tax plan will be unveiled on November 1, with committee work on the bill to begin the following week.

GOP leaders seem hopeful that tax reform is so urgent that some Democrats will ultimately support the bill, and as things are playing out they may need those votes. If the bill comes down to a party line vote in the Senate, the GOP can only afford to have two of its members vote against the caucus, which could pose a problem as President Trump has an increasingly contentious relationship with several Republican senators who are not expected to run for reelection (Corker, Flake, McCain) and thus could vote against the tax bill if they object to the legislation or merely want to thwart Trump.

The House Republicans seem to have averted a revolt by northeast Republicans who lodged a protest vote against the budget bill because they disliked plans for removing popular state and local tax deductions in the tax reform plan. To appease these members and their constituents, House Ways and Means Chairman Brady said he would restore an itemized property tax deduction to help taxpayers with local tax burdens. This may be enough to bring wayward rank and file members back to the fold, but it illustrates how difficult it will be to find ways to offset the tax relief that is being offered (i.e. to find the so called “pay-fors”). Every current tax break has strong special interest groups defending it, and it is apparent that the Republicans have abandoned any pretense of presenting budget-neutral tax relief.

Tax reform efforts are also likely to suffer distractions from President Trump’s reflexive attacks on the investigation into Russia’s interference in US elections. Special counsel Mueller has begun serving indictments in the Russia probe, which is all but guaranteed to send the President into a new offensive on Twitter. That drama could escalate quickly if Trump decides to fire Mueller, which would cause even bigger political ripples than the termination of FBI director Comey at the outset of the Russia probe. If the President went that far it could create more conscientious objectors among the Republic moderates and reignite talk about obstruction of justice charges aimed at the White House.

By the same token, the tax reform process could be helped by President Trump’s 12 day state visit to Asia scheduled for early November. Facing off with the Chinese on trade and the North Koreans on the nuclear issue should remove the President from the day to day negotiations on the tax plan, perhaps keeping the temperature down and allowing for old fashioned horse trading and even developing some bipartisan support for the bill. House Speaker Ryan is aiming to get the tax bill through his chamber by Thanksgiving (Nov 23).

Deal or No Deal?

In Europe, negotiations over the Brexit have fallen behind schedule with less than 18 months to go. After months with very little forward momentum, UK Prime Minister May kick-started the talks with her speech in Florence, though it is still unclear if a breakthrough is coming. The Britons want to move on to discussions of new trade terms, but the EU is reluctant start that stage of talks until the matter of UK arrears is settled (the ‘divorce bill’). The latest issue to come to the fore is the length of the transition period after March of 2019. PM May is seeking a two year transition with near status quo relations while the EU want the transition period limited to 20 months because it lines up better with EU budget timelines and certain annual quotas.

The UK continues to threaten a hard Brexit with its refrain that “no deal is better than a bad deal,” and recent reports say that the EU is starting to feel the same way. Reportedly the EU has begun contingency planning for a scenario in which Brexit talks fail to reach a breakthrough at the December leadership summit (Dec 14-15), preventing them from moving on to trade talks. Meetings will continue through November including at an EU ministerial level meeting on November 20. By that time if the UK is still refusing to put up a good faith estimate on the Brexit bill, then the EU may refuse to enter phase two. Putting more pressure on the Brexit talks is the Scottish First Minister Sturgeon, who is making noises about a second independence referendum as she is determined to keep Scotland in the EU single-market and to maintain control of her country’s immigration policy.

Europe’s other burning issue of secessionist sentiment, the Catalonia crisis, will also continue to grab headlines, though the worst of it may be past. The Catalan political insurgency appears to have exhausted itself after forcing the Spanish government to invoke never-before-used constitutional measures to reassert control over the rebellious local government. Madrid has fired the Catalan government and imposed its own central administration over the region.

Separatists led by the CUP party will no doubt plan protests and renew calls for ‘mass disobedience’ in Barcelona which could result in bad optics for the central government, especially if protesters class violently with national police. But the aggressive tactics of the separatists seem to be turning sentiment against them, with one recent poll showing that the secessionist bloc would lose its majority in the Catalan parliament. That polling will be put to the test on December 21, when PM Rajoy has scheduled new local elections. If the separatists have rebuilt support by then and win a fresh majority in the Catalan government, it will create new headaches for Madrid and a further distraction for Europe.

Oddly enough, the usually contentious relations between OPEC members appear more harmonious these days than those among squabbling European nations. OPEC and non-OPEC oil producers will come together at the cartel’s semi-annual meeting on November 30 to discuss the production cutting deal that has been successfully implemented by the diverse group. Indications are that the major players are prepared to extend existing production cuts beyond the current end date. Participants have shown admirable compliance levels so far, and last May they agreed to extend the deal by nine months to March of 2018. At the November OPEC gathering, oil producers are expected to agree to another nine month extension through the end of next year. If compliance levels stay near 100%, that period of time could be enough to wipe out excess oil stocks and firm up the floor price under crude, benefitting all producers (not to mention contributing to healthier inflation levels sought by central bankers in the US and Europe).

The Central Bank Bargain

As central banks start to turn over their policy stance, some key personnel are turning over as well. Most immediately, the Fed Chair sweepstakes is expected to have a winner by early November. The shortlist has reportedly been narrowed from five candidates down to two: Fed Governor Jerome Powell and economist John Taylor. If President Trump truly wants to shake up the Fed, Mr. Taylor would be the more obvious choice, given his popularity among conservative Republicans for his rules-based monetary policy philosophy.

But the latest reports say that Trump and his advisors are leaning towards Powell, who is seen as much more of a status quo candidate. Powell is a Republican, appointed to the Fed in 2012 by President Obama as part of a deal to fill out the board of governors. He previously worked in investment banking, and he has expressed some support for easing financial regulations imposed under Dodd-Frank. On the FOMC, Powell has taken a moderate, pragmatic line, backing the consensus for gradual monetary policy normalization. A Powell Fed would likely be viewed as continuity of current policy, a stability that will be welcomed in most corners of the financial markets.

Other central banks are looking toward continuity as well. Recent reports say that the Bank of Japan Governor Kuroda will be reappointed to another 5-year term after his current term ends in April 2018. Kuroda has been instrumental in carrying out the principles of ‘Abenomics’ and now that the Prime Minister has consolidated his power in a snap election this October the BOJ governor is likely to get the nod for a second term.

It may seem a little early to think about ECB succession, but the Europeans tend to decide on top EU posts early on through consensus building and political deal making. As the ECB looks toward winding down QE it will also wind down the non-renewable term of President Draghi, whose 8-year stint ends in late 2019. All indications are that Berlin will demand its turn at the ECB helm, and Chancellor Merkel is said to gearing up to campaign for Jens Weidmann, president of the Bundesbank. The other likely candidate at this stage is Francois Villeroy de Galhau of the Bank of France. If Weidmann gets the post, his more conservative German economic philosophy will set the tone for central bank policy, which could be a good fit for the post-crisis era. He is also apt to support Merkel’s drive for “more Europe”, seeking a more rapid timetable for elevating European institutions that tie EMU nations closer together with Germany at the core.

On the monetary policy front, both the Fed and ECB have started down the path of normalization. The ECB just announced plans to cut its bond buying program in half to €30B per month starting in the New Year, while extending the earliest end date for the program to by nine months to September 2018. That change met expectations and markets took the announcement in stride.

The Fed is a little farther along, having raised rates off the zero bound already and in November beginning the roll off of assets from its $4.5 trillion balance sheet. This ‘quantitative tightening’ process was laid out in June: the Fed said it would start the reduction with a maximum of $10B of monthly redemptions ($6B of Treasuries and $4B of MBS), and ramp that up by another $10B every three months over the next year, bringing the cap to $50B per month ($30B of Treasuries and $20B of MBS). Those caps will thereafter remain in place so that holdings can “continue to decline in a gradual and predictable manner” until the balance sheet gets down to a level where the Fed deems it is “holding no more securities than necessary to implement monetary policy efficiently and effectively.” Fed leaders have made it clear they want this process to operate in the background, ideally with no impact on markets at all. For their part, the markets have appreciated the painstaking transparency provided by the Fed on this process, and so far have been unfazed, but that does not rule out the possibility of new ‘taper tantrum’ as the Fed reduces its participation in the bond market.

Stock markets that have been buoyed by low rates, strong Q3 earnings reports, and the prospect of a corporate tax cut may start to anticipate headwinds from the Fed shrinking its balance sheet and raising rates in earnest, as well as the ECB’s quantitative easing moving toward its end date. Despite the modest increase in rates implemented by the Fed over the last year, there has been some flattening in the yield curve. In mid-October the spread between 2-year and 10-year narrowed to 0.75, the lowest since before the financial crisis. That type of movement could be an early warning sign of an impending recession, though it could also just be a reaction to the Fed’s reversal of its unprecedentedly easy policy. But to ensure the next recession is pushed off as long as possible, global deal makers have to sharpen their pencils and get to work.

CALENDAR
NOVEMBER
1: FOMC policy statement; US House GOP to unveil tax reform bill
2: UK Construction PMI; BOE policy statement; China Caixin Services PMI; Pres Trump to announce Fed Chair nominee
3: UK Services PMI; US Payrolls & Unemployment; US Trade Balance; ISM Non-Manufacturing Index; US Factory Orders

6:
7: China Trade Balance
8: US JOLTS Job Openings; China CPI & PPI
9: UK Manufacturing Production
10: Preliminary University of Michigan Consumer Sentiment

13: China Industrial Production
14: UK CPI & PPI; Euro Zone Flash GDP; German ZEW Economic Sentiment; UK Autumn Forecast (tentative); US PPI; Japan Prelim Q3 GDP
15: UK Claimant Count & Unemployment; US CPI; US Retail Sales
16: UK Retail Sales; Euro Zone Final CPI; Philly Fed Manufacturing; US Industrial Production
17: ECOFIN Meetings; US Housing Starts & Building Permits

20:
21: US Existing Home Sales
22: US Durable Goods Orders; FOMC Minutes
23: Various EU Flash Manufacturing & Services PMIs; ECB Minutes; THANKSGIVING DAY (US)
24: German Ifo Business Climate

27: US New Home Sales
28: UK Bank Stress Test Results; BOE Financial Stability Reports; UK Q3 GDP (2nd estimate); US Consumer Confidence
29: US Prelim Q2 GDP; China Manufacturing & Non-Manufacturing CPI
30: OPEC semi-annual meeting in Vienna; German Retail Sales; Euro Zone Flash CPI Estimate; Chicago PMI
DECEMBER
1: UK Maufacturing; ISM Manufacturing PMI

4: UK Construction PMI; US Factory Orders; China Caixin Services PMI
5: UK Services PMI; US Trade Balance; ISM Non-Manufacturing PMI
6:
7: Japan Final Q3 GDP; China Trade Balance (tentative)
8: UK Manufacturing Production; US Payrolls & Unemployment; US JOLTS Job Openings; China CPI & PPI

11:
12: UK CPI & PPI; German ZEW Economic Sentiment; US PPI
13: UK Claimant Count & Unemployment; US CPI; FOMC Policy Statement, SEP & Press conference; China Industrial Production
14: UK Retail Sales; BOE Policy Statement; ECB Policy Statement; US Retail Sales; Japan Tankan Manufacturing & Non-manufacturing Indexes; European Council Meeting (Dec 14-15)
15: US Industrial Production; Preliminary University of Michigan Consumer Sentiment

18: Euro Zone Final CPI
19: German Ifo Business Climate; US Housing Starts & Building Permits; US Consumer Confidence
20: US Existing Home Sales; BOJ Policy Statement
21: Catalonia elections; Various EU Flash Manufacturing & Services PMIs; Philly Fed Manufacturing Index
22: UK Current Account; US Durable Goods Orders; US Personal Spending; US New Home Sales

25: CHRISTMAS DAY
26:
27:
28:
29: Chicago PMI
30: China Manufacturing & Non-manufacturing PMIs
31: China Caixin Manufacturing PMI


Saturday, October 28, 2017

Barrons weekend summary

Barrons weekend summary: positive features on EPD, TGT 
Cover story: Of the three people likely to be chosen by Donald Trump to lead the Fed—Stanford economist John Taylor, Fed governor Jerome Powell, and incumbent Janet Yellen—Powell is the most likely choice, especially given Treasury secretary Steven Mnuchin’s support for him; A Taylor Fed would likely mean a “more aggressive” normalization of policy in terms of rate increases and reducing the balance sheet. 

Features: 1) Positive on EPD: Leader among U.S. energy master limited partnerships isn’t getting the respect it deserves from the market, and shares remain attractive at a time when there is a dearth of income; 2) Positive on TGT: Chief Brian Cornell has sold assets, cut costs, and is refurbishing stores, efforts that could increase traffic and boost the share price despite growing competition from AMZN; 3) Positive on BABA, LFC: Consumer-related stocks in China stand to benefit from president Xi Jinping’s growing power and the economy’s shift from export-driven manufacturing to domestic services; 4) The S&P telecom sector, once home to 14 companies, now has only four, prompting calls for the creation of a new “communications services” category. 

Tech Trader: Strong earnings reports from AMZN, MSFT, and GOOGL are a sign tech giants continue to exploit their dominance to attract a growing amount of revenue from loyal customer bases. 

Trader: Ben Bowler of BAC/Merrill Lynch foresees two factors that might change the outlook in the U.S.: higher inflation and a new Fed chief’s outlook on the moral hazard created by central bank puts; A recent selloff in biotechs such as AMGN, BIIB, CELG, and GILD is the result of high expectations, but the companies still have room to run; Scott Davis of Melius Research is optimistic that GE chief John Flannery will be able to create value by spinning off nonessential businesses. 

Interview: Jeff Vinik, owner of the Tampa Bay Lightening hockey team and a former fund manager at Fidelity, says the market may see strong growth and low inflation for many more years. 

Follow-Up: Cautious on CVS: Company’s acquisition of AET brings some long-term benefits, but the deal requires it to trade cheap stock for more expensive stock, and some Aetna competitors that work with CVS could walk away.

 European Trader: Cautious on Shire: Irish pharmaceutical is in a slump, and though a bullish case can be made, it must take into account growing competition from Roche and generic rivals as well as limits on pricing power. 

Asian Trader: Positive on SNE: Once a rival to AAPL, the Japanese electronics giant has become a key supplier, while a turnaround and growing strength in a range of divisions are producing results. Emerging Markets: The benefits of bitcoin continue to be debated on Wall Street, but for people in countries such as Venezuela and Zimbwabwe the cryptocurrency is a lifeline. 

Commodities: “Heating-fuel supplies are tight as the weather starts to cool in the U.S., and that could lead to a spike in prices for both natural gas and heating oil, particularly if temperatures are chillier than usual.” 

Streetwise: A group of activists is asking Vanguard to no longer invest in companies that contribute to genocide or crimes against humanity, but the firm feels such an effort creates an impossible burden.

Friday, October 27, 2017

Rosy Corporate Earnings and Strong Data Keep Markets Cheerful

TradeTheNews.com Weekly Market Update: Rosy Corporate Earnings and Strong Data Keep Markets Cheerful
Fri, 27 Oct 2017 16:08 PM EST

US indices managed to end the week at fresh all-time highs once again. Early on, outstanding Q3 earnings reports by certain key Dow components propelled sentiment, and by week’s end exceptional results from several of the largest, highest profile technology companies resulted in a fresh breakout for the NASDAQ. Economic data on both sides of the Pond continued to exceed expectations keeping the accelerating global synchronized growth/reflation narrative firmly intact. European preliminary PMI figures inched up to levels not seen for years in most cases, while Friday saw the advance estimate of US Q3 GDP print above 3%, indicating the best six-month stretch of growth seen in three years. Stock volumes picked up noticeably, and several brief spikes in the volatility index were again quickly met with willing buyers driving the VIX back below 10 on Friday. For the week, the DJIA gained 0.5%, the S&P500 added 0.2%, and the Nasdaq surged 1.1%.

Several undercurrents continued to play out and affect trade away from equities and Q3 earnings season. Republicans inched closer to tax reform after the House was able to pass a budget resolution and send it over to the Senate. The news helped keep upward pressure on Treasury yields and buoyed the Dollar. Despite the stronger dollar crude futures continued to rally, with Brent crude breaking above $60/bbl for the first time since mid-2015. By midweek the US 10-year yield had tested the highest levels since March and the Dollar index reached a 3-month high. Spreads between US Treasury and Bunds widened after the ECB, as expected, extended its QE program while reducing the size of the asset purchase targets. Draghi offered little to suggest a rate hike was in the offing leading many to view the news with a dovish tint. By Friday, reports that President Trump was zeroing in on Powell for the Fed chairmanship, along with the uncertainty engendered by the Catalonian government declaring independence from Spain, helped keep a lid on interest rates though the Dollar continued to track higher.

In corporate news this week, the spotlight was on the tech sector, as Google, Intel and Microsoft shares all jumped after announcing strong earnings results. Amazon also posted a big beat, and some reports indicated the online retail behemoth was making moves to enter the wholesale pharmacy space. Twitter rose on user growth numbers and the possibility that it could turn its first-ever profit next quarter. Caterpillar and 3M shares were boosted after earnings blowouts and upbeat outlooks, highlighted by strong demand in Asia. Whirlpool was slammed as raw material cost headwinds accelerated, a trend that showed itself across a multitude of industrial earnings reports. Polaris Industries hit 52-week highs following the release of solid earnings and forecasts, which auger well for consumer discretionary spending heading into the holidays. On the M&A front, Cisco reached a deal to acquire Broadsoft at $55/shr for $1.9B aggregate price, as the networking hardware giant aims to push faster into the collaboration market. Shares of Axalta rose double digit percentages on Friday after a report that it was in early stage merger talks with Akzo Nobel to form a dominant player in the global coatings business.

SUNDAY 10/22
(CN) China End-Sept Property loans outstanding CNY31.1T – PBOC (update)
(CN) CHINA SEPT PROPERTY PRICES M/M: RISE IN 44 OUT OF 70 CITES VS 46 PRIOR; Y/Y RISE IN 67 OUT OF 70 CITIES VS 68 PRIOR

MONDAY 10/23
Foxconn reportedly will ship 25-30M iPhone X devices in Q4 (down from previous forecast of 30-35M) - Chinese press report
(UK) OCT INDUSTRIAL TRENDS TOTAL ORDERS: -2 V +9E
DEL Confirms to combine with Potlatch for EV of $4.0B in all stock deal; Agreement provides for conversion to REIT structure
(EU) EURO ZONE OCT ADVANCE CONSUMER CONFIDENCE: -1.0 V -1.1E

TUESDAY 10/24
NOVN.CH Reports Q3 $1.29 v $1.25e, Core Op $3.38B v $3.35Be, Rev $12.4B v $12.2Be
BAS.DE Reports Q3 adj EPS €1.45 v €1.30e, EBIT (adj) €1.76B v €1.75Be, Rev €15.3B v €15.1Be
(FR) FRANCE OCT BUSINESS CONFIDENCE: 109 V 109E; MANUFACTURING CONFIDENCE: 111 V 110E
(FR) FRANCE OCT PRELIMINARY MANUFACTURING PMI: 56.7 V 56.0E (13th month of expansion and highest since Apr 2011)
(DE) GERMANY OCT PRELIMINARY MANUFACTURING PMI: 60.5 V 60.0E (35th month of expansion)
(EU) EURO ZONE OCT PRELIMINARY MANUFACTURING PMI: 58.6 V 57.8E (50th month of expansion)
AAPL Reportedly will sell half planned iphone X orders (~20M units) this year due to reported issues with the face ID components - Japan press
PII Reports Q3 $1.28 v $1.22e, Rev $1.48B v $1.40Be
GM Reports Q3 $1.32 v $1.07e, Rev $33.6B v $31.6Be
CAT Reports Q3 $1.95 v $1.22e, Rev $11.4B v $10.6Be
HACK Raytheon CEO Kennedy "Equifax breach was tip of the iceberg" - CNBC interview
TXN Reports Q3 $1.26 v $1.12e, Rev $4.12B v $3.92Be

WEDS 10/25
LLOY.UK Reports Q3 PBT £1.47B v £811M y/y, Underlying profit £2.08B v £2.10Be, Total Income £4.62B v £4.28B y/y
HEIA.NL Reports Q3 Organic beer volume +2.5% v 2.8%e
(DE) GERMANY OCT IFO BUSINESS CLIMATE: 116.7 V 115.1E (record high); CURRENT ASSESSMENT: 124.8 V 123.5E V
(UK) Q3 ADVANCE GDP Q/Q: 0.4% V 0.3%E; Y/Y: 1.5% V 1.5%E
(DE) GERMANY SELLS €2.385B VS. €3.0B INDICATED IN 0.50% AUG 2027 BUNDS; AVG YIELD: 0.48% V 0.44% PRIOR; BID-TO-COVER: 1.7X V 1.6X PRIOR
V Reports Q4 $0.90 v $0.86e, Rev $4.90B v $4.62Be
FCX Reports Q3 $0.34 adj v $0.29e, Rev $4.31B v $4.08Be
(US) SEPT PRELIMINARY DURABLE GOODS ORDERS: 2.2% V 1.0%E; DURABLES EX TRANSPORTATION: 0.7% V 0.5%E
(US) SEPT NEW HOME SALES: 667K V 554KE
(US) Atlanta Fed maintains Q3 GDP at 2.7%, unchanged from 10/18
(US) Association of American Railroads weekly rail traffic report for week ending Oct 21st: 560K carloads and intermodal units, +3% y/y
Hynix Semiconductor reports Q3 (KRW) Net 3.05T v 3.0Te; Op 3.7T v 3.8Te; Rev 8.10T v 7.9Te

THURS 10/26
SAN.ES Reports Q3 Net €1.98B v €1.84Be, Rev €12.25B v €12.2B y/y
NOKIA.FI Reports Q3 adj Net €516M v €264M y/y, adj Op €668M v €540Me, Rev €5.54B v €5.64Be
ABI.BE Reports Q3 $1.31 v $1.50e, EBITDA $5.73B v $5.66Be, R$14.7B v $15.4Be
DBK.DE Reports Q3 Net €647M v €279Me, Pretax €933M v €Me, Rev €6.78B v €6.88Be
ORA.FR Reports Q3 EBITDA €3.62B v €3.55B y/y, Rev €10.3B v €10.2B y/y
SU.FR Reports Q3 Rev €5.90B v €6.0Be
BAYN.DE Reports Q3 Net €3.88B (adj) v €1.19B y/y, EBITDA adj €2.20B v €2.12Be, Rev €8.03B v €8.43Be
(DE) GERMANY NOV GFK CONSUMER CONFIDENCE: 10.7 V 10.8E
BARC.UK Reports Q3 adj net £783M v £509M y/y, adj pretax £1.11B v £837M y/y, Core Net rev £5.17B v £5.45B y/y
066570.KR Reports final Q3 (KRW) Net 336B v 315Be; Op 516B v 516.1B prelim; Rev 15.2T v 15.2T prelim
(SE) SWEDEN CENTRAL BANK (RIKSBANK) LEAVES REPO RATE UNCHANGED AT -0.50%; AS EXPECTED; maintains Repo Rate path and current QE bond buying program
2202.HK Reports Q3 (CNY) Net 3.79B v 2.91B y/y, Rev 47.3B v 42.3B y/y
TWTR Reports Q3 $0.10 v $0.06e, Rev $590M v $590Me
F Reports Q3 $0.43 v $0.33e, Rev $36.5B v $32.9Be
(EU) ECB LEAVES 7-DAY MAIN REFINANCING RATE UNCHANGED AT 0.00%; AS EXPECTED; Extends QE by 9 months until Sept by €30B/month
UPS Reports Q3 $1.45 v $1.44e, Rev $16.0B v $15.6Be
(EU) ECB AMENDS ITS BOND BUYING PROGRAM: TO BUY €30B/MONTH STARTING IN JANUARY; 9-MONTH EXTENSION TO SEPT 2018 (in-line with expectations)
(US) Yellen said to be out of contention for Fed Chair position; Taylor and Powell remain in the race - financial press
(US) Atlanta Fed cuts Q3 GDP to 2.5% from 2.7% on 10/18
AMZN Reportedly received approvals for wholesale pharmacy licenses in 12 states - local press
AMZN Reports Q3 $0.52 v $0.01e, Rev $44B v $42.2Be
MSFT Reports Q1 $0.84 v $0.72e, Rev $24.5B v $23.5Be
GOOGL Reports Q3 $9.57 v $8.43e, Rev $22.3B (ex TAC) v $21.9Be
BIDU Reports Q3 $3.89 v $2.19e, Rev $3.53B v $3.47Be

FRIDAY 10/27
UBSG.CH Reports Q3 (CHF) Net 946M v 827M y/y, Rev 7.15B v 7.03B y/y
CLN.CH Mutually agrees to end planned ~$20B all-stock merger with Huntsman
RBS.UK Reports Q3 Net £606M v -£327M y/y, adj Op £1.25B v £1.05Be, Rev £3.16B v £3.31B y/y; affirms outlook
AAPL iPhone X US ship times hit up to 2-3 weeks as order begin; iPhoneX pre-order supplies sell out, shipping estimates slip drastically - press
3328.HK Reports Q3 (CNY) Net 15.6B v 15.0B, PBT 18.6B v 18.9B y/y, NII 32.1B v 32.6B y/y
MRK Reports Q3 $1.11 v $1.03e, Rev $10.3B v $10.5Be
ICE Sells Trayport to TMX Group for £350M cash; Acquires NGX and Shorcan Energy
(US) Q3 ADVANCE GDP PRICE INDEX: 2.2% V 1.7%E; CORE PCE Q/Q: 1.3% V 1.3%E
(US) Q3 ADVANCE GDP ANNUALIZED Q/Q: 3.0% V 2.6%E; PERSONAL CONSUMPTION: 2.4% V 2.1%E
(US) OCT FINAL UNIVERSITY OF MICHIGAN CONFIDENCE: 100.7 V 100.7E
AXTA Akzo Nobel reportedly makes approach about potential merger with Axalta - press


Saturday, October 21, 2017

Barron's weekend summary

Barron's weekend summary: cover on concerns about FB, AMZN & GOOGL; positive features on COH, CZR, DWPW 
Cover story: FB, AMZN, and GOOGL are key drivers of recent stock market highs, but regulators are beginning to challenge the way they dominate their respective sectors; Beyond antitrust issues, there is concern about the huge amounts of personal data they store, and these challenges could affect their valuations. 

Features: 1) Positive on COH: Handbag maker, which is set to rebrand itself as Tapestry (TPR), is finally on the right track after years of declining sales, and shares could return 30% during the next 12 months; 2) Positive on DWDP: As chief executive Edward Breen restructures the company, the shares could post gains of as much as 15-30% over the next year, including dividends; investors should buy before it splits into three businesses; 3) Positive on CZR: The largest U.S.-focused gaming company has emerged from a difficult bankruptcy with a stronger balance sheet and less debt, and under a quality management team it appears poised for growth. 

Trader: Optimism about the market refuses to be dented, and “there’s little evidence to suggest that dips in the market shouldn’t be bought” as it continues to slowly move upward; With Japan’s economy growing more consistently than it has in a decade, the market seems poised to break out; The fact that UAL can get pounded for poor earnings while AAL and DAL drop just a little suggests the market is distinguishing between the carriers. 

Interview: Laura Geritz, manager of Rondure New World and Rondure Overseas “has a laserlike focus on stock analysis and a deep conviction that the best returns can be found overseas” (picks: WH Smith, SBUX, Create SD Holdings, Matsumotokiyoshi, Cosmos Pharmaceutical, Aselsan, Bharat Electronics). 

Profile: Stephen Liberatore, manager of TIAA-CREF Social Choice Bond, which has averaged an annual return of 3% during its five-year existence and beats 88% of all intermediate-term bond funds (top sectors: foreign government/corporate USD denominated bonds, U.S. agency & U.S. Treasury, municipal, mortgage-backed securities). 

Follow-Up: MS “hasn’t abandoned investment banking and trading even as it’s reduced its dependence on those volatile units,” and the firm has been a top player in mergers and acquisitions this year. 

European Trader: Cautious on Deutsche Lufthansa: Carrier will benefit from the collapse of Air Berlin, but the real reasons to buy are its recent five-year deal with pilots, its stellar reputation, and strong demand. 

Asian Trader: Positive on Samsung Electronics: Company has gotten past its Galaxy Note 7 problems, and shares—up 50% this year, better than AAPL—are still cheap. 

Emerging Markets: China’s onshore bond market is opening up rapidly amid Beijing’s financial reforms, and global and emerging market indexes are expanding to include Chinese bonds. 

Commodities: “Gold has outperformed mining shares so far this year, but the tide may turn in coming months if mining companies report strong results and optimism rises over the outlook for precious-metals prices.”

Friday, October 20, 2017

Markets Remain Risk-On Despite Political Uncertainties and PBoC Warning

TradeTheNews.com Weekly Market Update: Markets Remain Risk-On Despite Political Uncertainties and PBoC Warning
Fri, 20 Oct 2017 16:03 PM EST

US stocks rose for the sixth straight week despite a brief bout of risk aversion mid-week that emanated largely from overseas concerns. The political standoff in Catalonia and the PBoC Governor Zhou warning about excessive speculation were the latest additions to the wall of worry. But US economic data has stayed robust, led by manufacturing readings that have continued to surpass expectations. Employment components within the manufacturing data even showed acceleration, while continuing jobless claims made fresh four-decade lows yet again. The game of thrones for the upcoming Fed Chair vacancy appears to be drawing to a close, and reports indicated that Fed Governor Powell is now leading the pack. That news along with the Senate passage of a budget resolution lifted sentiment into Friday. The budget deal was seen as greasing the skids for an eventual tax cut package later this year or early in 2018. Rates moved up late in the week, buoyed by fiscal stimulus hopes and firming expectations for a December Fed hike. The US benchmark 10-year yield rose ~10 basis points on the week despite relative strength at the long end early on. For the week the DJIA gained 2%, the S&P500 added 0.9%, and the Nasdaq rose 0.4%.

In corporate news this week, earnings season shifted into gear, and while some big-name tech firms like IBM and PayPal posted strong results, a few big-cap CEOs had trouble explaining their quarterly reports. In United's post-earnings call, CEO Munoz admitted the airline had dug itself into a 'competitive hole', and his plea for more time to right the ship spooked investors and sent the stock plummeting. Proctor and Gamble reported in line with estimates, but its CEO said he's 'unable to discern' why US growth is lagging. GE posted a huge earnings miss, sending shares to a four-year low, as its management lowered the bar and noted the power business squeezed results. Skechers, however, surprised to the upside, beating earnings estimates handily on strong international growth, and giving the retail apparel sector a shot in the arm on Friday.

SUNDAY 10/15
(CN) CHINA SEPT NEW YUAN LOANS (CNY): 1.27T V 1.23TE
(CN) CHINA SEPT CPI M/M: 0.5% V 0.3%E; Y/Y: 1.6% V 1.6%E; PPI Y/Y: 6.9% V 6.4%E

MONDAY 10/16
IBM Announces new blockchain (technology behind bitcoin) banking solution related to clearing and settlement speeds; Invention to circumvent bank wire infrastructure
(ES) Catalan President Puigdemont response to PM Rajoy said to suspend independence mandate and seek dialogue - financial press citing letter to Rajoy
*(US) OCT EMPIRE MANUFACTURING: 30.2 V 20.5E (highest since Sept 2014)
NFLX Reports Q3 $0.29 v $0.32e, Rev $2.99B v $2.97Be
RIO.UK Reports Q3 Pilbara iron ore production 85.0Mt (100% basis), 83.2Mt y/y; shipments 85.8Mt (100% basis) v 85.2Mte v 80.9Mt y/y

TUESDAY 10/17
BN.FR Reports Q3 Rev €6.45B v €6.46Be
*(UK) SEPT CPI M/M: 0.3% V 0.3%E; Y/Y: 3.0% (highest since Apr 2012) V 3.0%E; CPI CORE Y/Y: 2.7% V 2.7%E
(EU) EURO ZONE SEPT FINAL CPI Y/Y: 1.5% V 1.5%E; CPI CORE Y/Y: 1.1% V 1.1%E
GS Reports Q3 $5.02 v $4.31e, Rev $8.33B v $7.64Be
CSX Reports Q3 $0.51 v $0.52e, Rev $2.74B v $2.78Be
(US) SEPT IMPORT PRICE INDEX M/M: 0.7% V 0.6%E; Y/Y: 2.7% V 2.6%E
(US) SEPT INDUSTRIAL PRODUCTION M/M: 0.3% V 0.3%E; CAPACITY UTILIZATION: 76.0% V 76.2%E
(US) OCT NAHB HOUSING MARKET INDEX: 68 V 64E
(US) Deputy AG Rosenstein: Justice Dept will review impact of 2016 Controlled Substances Act on DEA enforcement legislation
(US) AUG TOTAL NET TIC FLOWS: +$125B V -$7.3B PRIOR; NET LONG-TERM TIC FLOWS: $67.2B V $1.2B PRIOR
IBM Reports Q3 $3.30 v $3.28e, Rev $19.2B v $18.7Be
(HK) According to Centaline Hong Kong 2017 homes sale may reach new record of HK$186.9B - HK press
(CN) China President Xi: China will continue to grow at medium to high speed, economy shifting to period of seeking high quality - work report at 19th National Congress

WEDS 10/18
(HK) Hong Kong Govt: Property prices remain high but the pace of the rise has slowed
*(UK) AUG AVERAGE WEEKLY EARNINGS 3M/Y/Y: 2.2% V 2.1%E; WEEKLY EARNINGS EX BONUS 3M/Y: 2.1% V 2.0%E
(UK) Sept Jobless Claims Change: +1.7K v -0.2K prior; Claimant Count Rate: 2.3% 2.3% prior
*(UK) AUG ILO UNEMPLOYMENT RATE: 4.3% V 4.3%E (matches lowest reading since 1975)
*(US) SEPT HOUSING STARTS: 1.13M V 1.18ME; BUILDING PERMITS: 1.22M V 1.25ME
(US) Atlanta Fed maintains Q3 GDP at 2.7%, unchanged from 10/13
(US) Association of American Railroads weekly rail traffic report for week ending Oct 14th: 548.3K carloads and intermodal units, +3.1% y/y
CA.FR Reports Q3 Rev €21.9B v €21.84Be
AA Reports Q3 $0.72 adj v $0.77e, Rev $2.96B v $3.03Be; Tempers demand outlook

THURS 10/19
ROG.CH Reports Q3 (CHF) Rev 13.1B v 13.14Be
SAP.DE Reports Q3 Non-IFRS Net €1.21B v €1.09B y/y, non-IFRS Op profit €1.64B v €1.69Be, Rev €5.59B v €5.71Be
NESN.CH Reports Q3 (CHF) Rev 22.3B v 22.5Be
*(NZ) NEW ZEALAND LABOUR PARTY/GREEN PARTY (opposition) WINS FIRST PARTY SUPPORT TO FORM GOVT
UNA.NL Reports Q3 Rev €13.2B v €13.39Be
(ES) Spain central govt confirms to hold an emergency Cabinet meeting on Sat, Oct 21st to begin process of suspending Catalan autonomy under Article 155 (as speculated)
(UK) SEPT RETAIL SALES (EX AUTO/FUEL) M/M: -0.7% V -0.2%E; Y/Y: 1.6% V 2.2%E
*(US) OCT PHILADELPHIA FED BUSINESS OUTLOOK: 27.9 V 22.0E
(US) SEPT LEADING INDEX: -0.2% V +0.1%E
(RU) Russia Pres Putin: if the US leaves the Intermediate-Range Nuclear Forces Treaty, Russia will have immediate "symmetrical" response
SKX Reports Q3 $0.59 v $0.43e, Rev $1.10B v $1.06Be
(CL) CHILE CENTRAL BANK (BCCH) LEAVES OVERNIGHT RATE TARGET UNCHANGED AT 2.50%; AS EXPECTED

FRI 10/20
941.HK Reports 9M (CNY) Net 92.1B v 88.1B y/y, EBITDA 211.3B v 200.4B y/y, Rev 569.5B v 542.7B y/y
SLB Reports Q3 $0.42 v $0.42e, Rev $7.91B v $7.91Be
PG CFO: "unable to discern why US growth is lagging" - earnings call comments


Sunday, October 15, 2017

Barrons weekend summary

Barrons weekend summary: Positive features on GOOGL, BAC, C, JPM, MS, WFC ; Cautious on Softbank (9984.JP) 
Cover story: In the years following Black Monday on October 19, 1987, the use of algorithms to pick stocks, mitigate risk, and place trades using computer systems has grown, creating the illusion that risk can be measured and managed—but the system may be more fragile than investors expect. 

Tech Trader: Positive on GOOGL: Company is seeking to catch up to rivals AMZN and MSFT in cloud computing, and could make a large acquisition—such as WDAY or CRM—to increase its footprint in the sector. 

Trader: “Even though the large-stock indexes ended the week in positive territory, they didn’t make the big moves they have in recent weeks, as evidenced by gains of half a percentage point or less”; Many traditional dividend-paying stocks are pricey on a relative basis, says Jim Tierney of AB, who cites KO as an example; Canadian Tire chief financial officer disputes PAA Research’s view that AMZN will soon disrupt Canada’s bricks-and-mortar merchants. 

Interview: Nobel laureate Robert Shiller talks about how narratives help shape investor sentiment, and discusses the importance of the 1890s depression. 

Profile: Mark Durbiano, manager of the Federated High Yield Trust portfolio, allows up to 20% of its assets to be allotted to equities (top five equity holdings: OI, GT, BERY, NCR, GPK). 

Features: 1) In Barron’s annual Big Money Poll, top money managers remain optimistic, with 61% describing their outlook as bullish; 2) Positive on JD: Investors shopping for growth stocks in China might look beyond BABA to JD.com, the country’s No. 2 online retailer, whose shares could gain 30% or more in the next year; 3) Positive on D: With a strong power portfolio, the company hopes to increase earnings by 6-8% annually during the next few years, and raise its dividend by 10% each year. 

Echoes of ‘87: Wall Street investors Art Cashin, Abby Joseph Cohen, Marc Faber, and Peter Tuchman look back on Black Monday and the lessons they learned from the crash; Eight funds (OAKIX, BEXFX, VGTSX, JENRX, PRDGX, VIG, VBMFX, MWTRX) can help investors dial down risk; A look at market selloffs that transformed Wall Street, starting with the crash of 1929; Former Barron’s writer Alan Abelson’s column on Black Friday, first published on October 26, 1987. 

Follow-Up: Positive on BAC, C, GS, JPM, MS, WFC: Major banks, which are benefiting from higher short-term rates, modest loan-demand growth, restrained expenses, and generous capital returns look attractive for investors. 

European Trader: The British market “has too many stocks vulnerable to central bank tightening,” creating a weak spot in the market in addition to problems the Brexit process is causing.

 Asian Trader: Cautious on Softbank: While some investors think the company’s strong track record and stake in BABA make it a good opportunity, others argue its huge debt load and the capital gains taxes it would face were it to sell assets pose problems. 

Emerging Markets: International Monetary Fund data indicate that global growth is on track and many developing countries are fueling the economic expansion. 

Commodities: Prices for gold have outpaced those for silver this year, but the latter metal should emerge as the winner amid growing demand from the solar and smartphone sectors. 


Streetwise: This year has seen only eight daily moves of one percent either way in the S&P 500, so that if the market hits a bump, lower correlations should absorb some of the damage.

Friday, October 13, 2017

Earnings Season Opens, Key Central Banks Talk Normalization and the Equity Rally Rolls on

TradeTheNews.com : Earnings Season Opens, Key Central Banks Talk Normalization and the Equity Rally Rolls on
Fri, 13 Oct 2017 16:05 PM EST

The party for US stock indices extended with the Transports leading the way higher throughout much of the week. Airline stocks climbed after managements’ indicated the industry weathered the September storms better than originally thought. The September FOMC minutes along with a deluge of commentary affirmed the Fed remained firmly on a charted course towards a December rate hike, but Friday’s softer than expected CPI figures supported the notion normalization will remain agonizingly slow. Global growth shined and officials from around the globe touted the synchronized pick up, while the Chinese import figures on Friday suggested potential acceleration. President Trump followed through with another of his election pledges when he essentially began the process of withdrawing from the 2015 Iranian nuclear deal. WIT crude prices climbed more than 3% on the week finishing back above the 200-day moving average. The Greenback largely stabilized before drifting lower late in the week along with Treasury yields following the disappointing inflation readings. For the week the S&P added 0.2%, the Dow gained 0.4% and the NASDAQ rose 0.2%.

In corporate news this week, JPMorgan and Citi kicked off earnings season by reporting a top-line beat, but shares traded down as some analysts saw weakness in loan volume growth and potential warnings signs in credit card charge offs. Wells Fargo also drifted lower after posting a miss on revenue and noting higher legal costs. Micron’s announced sale of $1.2B in new shares was received positively, bringing in so many buyers that shares priced at $41 instead of $40. Honeywell announced it would spin-off its homes product portfolio and global distribution unit into two separately publicly traded companies, but will retain its aerospace unit.

SUNDAY 10/8
*(CN) CHINA SEPT CAIXIN SERVICES PMI: 50.6 V 52.7 PRIOR (21-month low)

MONDAY 10/9
*(FR) BANK OF FRANCE SEPT BUSINESS SENTIMENT: 104 V 105E
*(CN) CHINA SEPT FOREIGN RESERVES: $3.1085T v $3.100Te (8th straight increase)
*(EU) EURO ZONE OCT SENTIX INVESTOR CONFIDENCE: 29.7 V 28.5E (highest reading since 2007)
HON Reportedly readying to spin off non-core assets into two new entities - press
OPEC Sec Gen Barkindo: Sees 2017 global oil demand growth at 1.45M bpd, sees 2018 demand growth at 1.4M bpd

TUESDAY 10/10
LG Electronics reports prelim Q3 (KRW) Op 516.1B v 283.2B y/y, Rev 15.2T v 13.2T y/y
(FR) FRANCE AUG INDUSTRIAL PRODUCTION M/M: -0.3% V +0.4%E; Y/Y: 2.4% V 1.5%E
(UK) AUG INDUSTRIAL PRODUCTION M/M: 0.2% V 0.2%E; Y/Y: 1.6% V 0.9%E
(DE) German IG Metall union recommends 6.0% pay increase for metal and electrical industry
WMT Affirms FY18 $4.30-4.40 v $4.38e (prior $4.30-4.40); Launches new $20B share repurchase program (8.3% of market cap) - investor day slides
IMF UPDATES WORLD ECONOMIC OUTLOOK (WEO): Raises 2017 global growth forecast from 3.5% to 3.6%; Raises 2018 global growth forecast from 3.6% to 3.7%
(ES) Spain pro-independence Popular Unity Candidacy party (CUP) has reportedly rejected the text of Catalan President Puigdemont speech - Spanish press
(ES) Catalan President Puigdemont: asks for mandate to declare Catalonia an independent state; proposes to suspend referendum results for several weeks in order to hold talks
(MX) US reportedly to seek stricter NAFTA rules of origin requiring 85% of content to come from the three NAFTA countries - CNBC
(AU) Australia sells A$3.5B (record amount) v A$3.5B indicated in Nov 2022 bonds, bid to cover 3.68x, avg yield 2.4167%

WEDS 10/11
DAL Reports Q3 $1.57 v $1.54e, Rev $11.1B v $11.0Be
(UK) PM May: if there is no Brexit deal, we will have to make arrangements with other EU states on citizen rights - comments in Parliament
(US) Pres Trump tweets: "Fake @NBCNews made up a story that I wanted a "tenfold" increase in our U.S. nuclear arsenal. Pure fiction, made up to demean. NBC = CNN!"
(US) AUG JOLTS JOB OPENINGS: 6.082M V 6.125ME
TMUS Sprint acquisition of T-Mobile reportedly to likely meet opposition from DOJ antitrust regulators - press
*(US) FOMC MINUTES FROM SEPT 19-20 MEETING: MANY FED POLICYMAKERS FELT ANOTHER RATE INCREASE WAS LIKELY WARRANTED THIS YEAR
(US) Association of American Railroads weekly rail traffic report for week ending Oct 7th: 554.8K carloads and intermodal units, +6.3% y/y (update)
(US) US President Trump: Looking at ~10% repatriation tax rate (vs current 35% corporate tax rate)
MU Prices upsized $1.2B (prior $1.0B) offering of 29.3M shares at $41.00/shr

THURS 10/12
(EU) EU Chief Negotiator Barnier: Have NOT made great steps in negotiations but recent round was constructive- 5th round of Brexit negotiation press conference
JPM Reports Q3 $1.76 v $1.67e, Rev $26.3B (Managed Rev) v $25.7Be
GM Reportedly cutting back on production on Detroit Hamtrack assembly plant for 6 weeks due to slower demand - press
C Reports Q3 $1.42 v $1.30e, Rev $18.2B v $17.7Be
(IN) INDIA SEPT CPI Y/Y: 3.3% V 3.5%E
(US) SEPT PPI FINAL DEMAND M/M: 0.4% V 0.4%E; Y/Y: 2.6% V 2.6%E
(US) US negotiators reportedly made proposal in talks to sunset NAFTA after five years - press
Samsung Reports prelim Q3 (KRW) Op profit 14.5T* (record) v 14.3Te, Rev 62.0T v 62.0Te
(SG) SINGAPORE Q3 ADVANCE GDP Q/Q: 6.3% V 3.7%E; Y/Y: 4.6% V 3.8%E
(SG) SINGAPORE CENTRAL BANK (MAS) SEMI-ANNUAL POLICY DECISION: KEEPS ZERO APPRECIATION PATH FOR SGD CURRENCY, maintains width and center of currency band
Samsung CEO*/Co-vice Chairman Kwon Oh-hyun to step down
(US) President Trump said to plan to end subsidy payments to insurers related to sale of Obamacare insurance coverage – US press
(CN) PBOC offers CNY498B 1-year Medium-term Lending Facility (MLF) OPERATION AT 3.2% V 3.2% PRIOR
*(CN) CHINA SEPT TRADE BALANCE (CNY) 193.0B V 266.1BE
*(CN) CHINA SEPT TRADE BALANCE: $28.5B V $38.0BE

FRIDAY 10/13
BAC Reports Q3 $0.48 v $0.46e, Rev $21.9B* v $22.0Be
(US) SEPT CPI M/M: 0.5% V 0.6%E; CPI EX FOOD AND ENERGY M/M: 0.1% V 0.2%E; CPI NSA: 246.819 V 246.911E
(US) SEPT ADVANCE RETAIL SALES M/M: 1.6% V 1.7%E; RETAIL SALES EX AUTO M/M: 1.0% V 0.9%E
(US) OCT PRELIMINARY UNIVERSITY OF MICHIGAN CONFIDENCE: 101.1 V 95.0E
(US) Atlanta Fed raises Q3 GDP to 2.7% from 2.5% on 10/6
(US) Pres Trump: We cannot and will not make this Iran nuclear deal certification (as expected)
(US) Weekly Baker Hughes US Rig Count: 928 v 936 w/w (-0.9%)

Saturday, October 7, 2017

Barrons weekend summary

Barrons weekend summary: Positive features on WMT, RH, CTSH, MTCH; Cautious on CHL 
Cover story: Barron’s list of the top-performing sustainable funds, of which 37% beat the S&P 500 during the past year, is topped by CGM Focus, Vanguard Capital Opportunity, MassMutal Select Equity Opportunities, Putnam Multi-Cap Core, and Pioneer Core Equity. 

Features: 
1) Positive on WMT: The company’s acquisition of Jet.com has boosted its e-commerce efforts and brought fresh thinking and innovators such as Jet founder Marc Lore, now Wal-Mart’s e-commerce chief; 
2) Cautious on RH: The upscale furniture company’s shares are fully priced, but if it fails to keep growing amid competition from ETH, WSM’s West Elm, W, Houzz.com, and AMZN, the shares could lose a third of their value; 
3) Cautious on CHL: Chinese telecom has the industry’s best balance sheet, with $60B of net cash, but while that’s a source of strength and a draw for investors, some worry Beijing may divert the money to other state-owned enterprises; 
4) Positive on CTSH: Cognizant is increasingly moving into digital consulting and making other changes at the urging of activist investor Elliott Management; shares could rise another 15% as earnings growth reaccelerates; 
5) Positive on MTCH: Online dating company’s shares are up because of the success of a new paid feature, Tinder Gold, which has made Tinder among the highest-grossing apps in the AAPL App Store. 

Tech Trader: Positive on ATVI, EA, TTWO: Gaming companies have seen an increase in recurring spending from users, providing revenue streams for older games or new titles that don’t meet sales expectations—and the money flows straight to the bottom line. 

Trader: Wellington Shields technical analyst Frank Gretz says bull markets generally see a “blowoff” move from at least one sector before they end, and recommends watching the FANGs and financials; COST continues to face challenges in a changing retail sector, and nobody knows how its new grocery deliver services will affect in-store traffic; One of the biggest conundrums of the recovery is why wages aren’t rising faster if the U.S. economy is at full employment. 

Mutual Fund Quarterly: “More mutual funds that use social and environmental criteria are outperforming the market, and moving the style into the mainstream”; Interview with investor Jeremy Grantham, whose involvement in environmental causes is closely tied to his thinking on risk and opportunity in investing; Bond funds such as PAXHX, TSBRX, CONAX, CULAX, and GRNB may be better than stocks for investors looking to leverage ESG criteria in their portfolios; Funds that combine ESG and smart beta approaches will start to gain steam as more become available in the market; ESG funds are starting to use their size to change corporate behavior; All major fund categories except one had positive returns in the third quarter, with international stock funds outperforming U.S. counterparts; A list of the best and worst performers in the third quarter. 

Follow-Up: Positive on GM: Story says the automaker “is well-placed to make self-driving, shared, battery-powered cars of the future”; investors should hang onto shares, which have more upside and a 3.4% dividend yield. 

European Trader: Investors may want to be careful with Spanish stocks, because Catalonia—which accounts for 19% of Spain’s GDP—could succeed in its independence effort. 

Asian Trader: The Indian stock market remains one Asia’s best performers this year, but some investors think it has moved too far, too fast—though this is probably not a long-term concern. 

Emerging Market: The U.S. is in the late stages of a bull market and investors should seek out emerging market funds with handpicked stocks, says Ruchir Sharma of Morgan Stanley Investment Management. 

Commodities: For the first time in 16 years, palladium has made the biggest gains in the commodity sector, but platinum should bypass it in price by the end of the year. 

Streetwise: With the prospect of significant new federal gun legislation low, gun stocks appear to be more trading vehicles than long-term investments, and some—including RGR and AOBC—appear overpriced.

Friday, October 6, 2017

Hurricane Distorted Jobs Data Cap Turbulent Week

TradeTheNews.com Weekly Market Update: Hurricane Distorted Jobs Data Cap Turbulent Week
Fri, 06 Oct 2017 16:03 PM EST

Equity markets ran up yet again this week to fresh highs before Friday’s September employment report induced some minimal profit taking. Outside of Friday's jobs numbers the economic data remained unambiguously strong; headlined by the highest ISM non-manufacturing composite since 2005. The September jobs report did suggest wage inflation may be taking hold as unemployment rates continue to dwindle. The figures came on the heels of a plethora of Fed speak which seemed to indicate Fed officials were gaining confidence in their ability pull the trigger and raise rates in December. Rates moved up and Treasury curves steepened while the US Dollar regained some upside momentum. The Pound came under pressure as Brexit concerns, and in particular, the fate of PM May weighed on traders psyche. Spanish stocks weighed on Europe as uncertainty surrounding Catalonia resulted IBEX weakness and a modest widening of peripheral yield spreads. WTI crude futures stumbled, dipping back below $50 and under the 50-day moving average even as another tropical storm, Nate, approached the Gulf of Mexico. Copper prices broke back above the 50-day moving average to the highest levels in more than a month, helped by a dearth of headlines out of China as markets were closed for Golden Week. In Washington DC, Republicans continued to press the case for tax cuts while speculation swirled surrounding the fate of Sec of State Tillerson. Democrats called for renewed gun regulation in the wake of Las Vegas suffering the worst mass shooting in US history. The VIX drifted lower yet again nearing the 9.00 mark midweek and overall stock volumes remained notably soft. For the week the DJIA gained 1.6%, the S&P500 was up 1.2%, and the Nasdaq added 1.5%.

In corporate news this week, September auto sales topped expectations, helped by hurricane replacement purchasing and consumer demand for trucks. Tesla reported its all-time best quarter for its Models S and X deliveries, but Model 3 production numbers disappointed due to bottlenecks, though the company maintains there are no fundamental issues with the supply chain. Costco reported a Q4 beat on top and bottom line, but Wall Street was concerned about gross margins and membership numbers. Kellogg announced it would acquire the maker of RXBAR protein bars for $600M in a move to appeal to more organic-oriented consumers. Netflix raised prices on its two most popular plans in the US, changing the standard package to $10.99/mo and the premium service to $13.99/mo.

SUN 10/1
(HK) Macau Sept Gaming Rev MOP21.4B, +16.1% y/y v 14.5%e
(ES) Catalonia Referendum Update: On Sunday, police entered various polling stations to try to seize materials related to the voting; While some Catalans were blocked from voting, others were able to cast ballots – financial press
(KR) Sec State Tillerson has been encouraged to not talk with North Korea by President Trump
(CN) PBOC Q3 meeting of monetary policy committee: To cut reserve requirement ratio (RRR) for some banks that meet certain requirements for lending to small business and agricultural sector, effective in 2018 (1st cut since Feb 2016); affirms prudent and neutral monetary policy
(JP) JAPAN Q3 TANKAN LARGE MANUFACTURING INDEX: 22 V 18E (highest since Sept 2007); MANUFACTURERS OUTLOOK: 19 V 16E; ALL-INDUSTRY CAPEX: 7.7% V 8.4%E

MON 10/2
MGM Police look into reports of a shooter at Mandalay Bay; shots fired at Country Music concerts, multiple casualties - press
(EU) EURO ZONE AUG UNEMPLOYMENT RATE: 9.1%V 9.0%E
(US) SEPT ISM MANUFACTURING: 60.8 V 58.1E; PRICES PAID: 71.5 V 63E (highest headline reading since June 2004, prices highest since May 2011)
(US) Atlanta Fed raises Q3 GDP to 2.7% from 2.3% on 9/29
GOOGL Waymo division reportedly readying commercial ride-sharing service using autonomous vehicles with no safety drivers as soon as this fall - The Information
TSLA Reports Q3 deliveries 26.2K vehicles, +17.7% q/q, +4.5% y/y (all time best quarter for Model S and X deliveries); says no fundamental issues with the Model 3 production or supply chain
(AU) RESERVE BANK OF AUSTRALIA (RBA) LEAVES CASH RATE TARGET UNCHANGED AT 1.50%; AS EXPECTED (14th consecutive hold in current easing cycle)

TUES 10/3
(HK) Macau Golden Week visitors from China on Oct 2nd +8.6% y/y
*(IN) INDIA SEPT MANUFACTURING PMI: 51.2 V 51.2 PRIOR (2nd month of expansion)
LEN Reports Q3 $1.06 v $1.01e, Rev $3.26B v $3.22Be
Warren Buffett: realizing losses in some positions by holding off on stock sales in anticipation of potential tax code changes - cnbc
GM Reports Sept US vehicle sales +11.9% y/y, at 279.4K units v 268.3Ke (best Sept U.S. retail performance since 2007)
(US) House Transportation Committee Chair Shuster (R-PA): Trump may release infrastructure plan next week
(ES) Spain King Felipe VI: Spanish democracy is in a serious moment; referendum plans by Catalan leaders were illegal
(US) House GOP tax plan reportedly likely to include fourth tax bracket on high earners; not likely to exceed 39.6% - CNBC
Ford Affirms FY17 outlook; provides strategic update to investors; sees 100% of new US vehicles build with connectivity by FY19; cutting internal combustion engine capex by a third
(ES) Catalan govt President Puigdemont confirms planning to declare independence within days - press
UBER.IPO Board said to approve $1.0-1.25B investment from Softbank (implied valuation $69B) and corporate governance reforms; said to set 2019 deadline for IPO - US financial press
MYL U.S. FDA approves first generic for Copaxone 40 mg/mL 3-times-a-week; may be eligible for 180 days of generic drug exclusivity
(US) US President Trump: Puerto Rico's debt will have to be 'wiped out' - US media interview
(HK) Hong Kong Sept Home Sales (HK$) 45.3B v 56.0B y/y

WEDS 10/4
TSCO.UK Reports H1 adj PBT £504 v £352M y/y, Op £759M v £703Me, Rev (ex Fuel) £25.2B v £24.4B y/y
(UK) SEPT SERVICES PMI: 53.6 V 53.2E (14th month of expansion)
*(IN) INDIA CENTRAL BANK (RBI) LEAVES REPURCHASE RATE UNCHANGED AT 6.00%; AS EXPECTED
(PL) POLAND CENTRAL BANK (NBP) LEAVES BASE RATE UNCHANGED AT 1.50%; AS EXPECTED
(US) SEPT ADP EMPLOYMENT CHANGE: +135K V +135KE
(US) White House Budget Dir Mulvaney: Pres Trump's comments about 'wiping out' Puerto Rico debt shouldn't be taken word for word; we aren't going to bail out Puerto Rico - TV interview
(US) SEP FINAL MARKIT SERVICES PMI: 55.3 V 55.1E
(US) SEP ISM NON-MANUFACTURING COMPOSITE: 59.8 V 55.5E (highest since Aug 2005)
(US) Association of American Railroads weekly rail traffic report for week ending Sep 30th: 559.6K carloads and intermodal units, +1.9% y/y
(UK) Reportedly some UK members of parliament are prepared to call for PM May to resign; could be out of office before end of year - UK press

THURS 10/5
(CH) SWISS SEPT CPI M/M: 0.2% V 0.2%E; Y/Y: 0.7% V 0.6%E
(US) AUG TRADE BALANCE: -$42.4B V -$42.7BE
(ES) Catalan leaders reportedly are slowing push for independence due to divisions within leadership - press
(US) AUG FINAL DURABLE GOODS ORDERS: 2.0% V 1.7%E; DURABLES EX TRANSPORTATION: 0.5% V 0.2%E
(US) Senate confirms Randal Quarles for Federal Reserve Board in 65-32 vote, as expected - press
(US) Atlanta Fed raises Q3 GDP to 2.8% from 2.7% on 10/2
(US) National Rifle Association: expresses some support for additional gun regulations; gun bump stocks should be subject to regulation
(US) President Trump to announce he will decertify Iran nuclear agreement and let Congress deal with the issue; would keep door open to modifying the agreement - Wash Post
COST Reports Q4 $2.08 v $2.02e, Rev $42.3B v $41.7Be; E-commerce surging

FRI 10/6
(DE) GERMANY AUG FACTORY ORDERS M/M: 3.6% V 0.7%E; Y/Y: 7.8% V 4.7%E
(US) SEPT AVERAGE HOURLY EARNINGS M/M: 0.5% V 0.3%E; Y/Y: 2.9% V 2.5%E; AVERAGE WEEKLY HOURS: 34.4 V 34.4E
(US) SEPT CHANGE IN NONFARM PAYROLLS: -33K V +80KE (1st negative reading since Oct 2010)
(CA) CANADA SEPT NET CHANGE IN EMPLOYMENT: +10K V +12.0KE; UNEMPLOYMENT RATE: 6.2% V 6.2%E
(US) SEPT UNEMPLOYMENT RATE: 4.2% V 4.4%E (lowest since May 2001)
(NK) Russian official suggests North Korea may be preparing another long range missile test - Russian press
(US) Atlanta Fed cuts Q3 GDP to 2.5% from 2.8% on 10/5