TradeTheNews.com Weekly
Market Update: Risk assets rise on Fed’s dovish turn and as corporate guidance
not as bad as feared
Fri, 01 Feb 2019 16:06 PM EST
Markets opened the week in a bit of a holding pattern ahead of several key
catalysts. Earnings season took center stage and some key disappointments on
Monday helped push up volatility and pressure risk assets. Some reports
suggested industrial corporations have been struggling to contend with slowing
growth — particularly in China — along with rising material costs and the
strong US dollar, which kept FY19 forecasts on the conservative side and in
some cases below analysts' consensus estimates. Some of those concerns abated
after Dow component Boeing’s results soared past analyst expectations on
Tuesday. Also on Tuesday the UK Parliament voted on various non-binding Brexit
amendments which set the stage for what UK officials hope will be another round
of negotiations with EU officials in February. Crude and gasoline prices jumped
after the US announced sanctions on Venezuela and amid reports US refiners were
scrambling to find crude ahead of brutally cold weather forecast to take hold
of the middle and eastern parts of the US.
Wednesday saw the defining catalyst of the week when the FOMC tilted decidedly
further to the dovish side in its updated policy statement. Language alluding
to further rate rises was removed from the statement and Chair Powell affirmed
they were prepared to adjust balance sheet normalization in light of future
economic and financial developments. US stocks surged, ultimately pushing key
indices back towards the 100-day moving average by Friday, while the VIX
dropped precipitously. Bond markets rallied sending yields to the lowest levels
in weeks as well as pressuring global interest rates. Gold prices firmed and
the Greenback softened as many contended the ‘Powell put’ had been resurrected
and in all likelihood the Fed was done raising rates. The improving sentiment
was further aided by what appear to have been constructive high level US/China
trade talks in Washington D.C. Reports even speculated that enough progress had
been achieved to allow for the potential of another Trump/Xi summit in early
March. Friday’s economic data was the cherry on top for most bulls when stock
futures rose again following an ostensibly favorable Dec employment report
before the opening bell. Non-farm payrolls came in well above expectations,
topping 300K, while wages held steady and the labor force participation rate
unexpectedly ticked up for the second straight month. That data was followed by
a stronger than expected ISM manufacturing print, which included receding
prices paid pressure. For the week, the S&P gained 1.6%, the DJIA added
1.3%, and the Nasdaq rose 1.4%.
In corporate news this week, earnings releases continued apace. Caterpillar
opened the week with a miss on both its top and bottom line, while its outlook
fell short of expectations. Nvidia cut its guidance, blaming deteriorating
macroeconomic conditions, especially in China. Apple shares lifted despite
guiding lower than anticipated after reassuring commentary from management.
Boeing rocketed higher after a huge earnings beat, and the company forecast it
would shatter delivery records in FY19. Facebook surged on an EPS and revenue
beat, with CEO Zuckerberg noting the Instagram Stories feature now has 500M
daily active users, 25% higher than six months ago. Amazon rolled over during
its earnings conference call when the CFO said he would expect investment
spending to increase this year.
MONDAY 1/28
(US) NABE Business Conditions survey suggests $1.5T in US tax cuts had little
impact on Capex plans: 84% of respondents said they had not changed their
investment or hiring plans due to the tax package (vs. 81% in Oct survey) –
financial press
VALE5.BR Confirms to suspend dividend and bonuses for executives; to form two
independent committees
CAT Reports Q4 $2.55 v $2.98e, Rev $14.3B v $14.4Be
(US) JAN DALLAS FED MANUFACTURING ACTIVITY INDEX: +1.0 V -2.7E
(US) US govt said to be considering release of oil from US Strategic Petroleum
Reserve in order to coincide with possible sanctions imposed on Venezuela
exports - Platts
WHR Reports Q4 $4.75 v $4.30e, Rev $5.66B v $5.74Be
(CN) China NDRC: To continue improving new energy vehicle (NEV) subsidy
structure; to support consumption of green and smart home appliances
*(CN) CHINA PBOC PLANNING OFFSHORE YUAN (CNY) BILL SALE IN FEBRUARY - US PRESS
(CN) China press notes that recently National Development and Reform Commission
(NDRC) in conjunction with 10 other govt departments, announced plans to
optimize and promote steady growth private consumption
TUESDAY 1/29
SAP.DE Reports Q4 Non-IFRS EPS €1.51 v €1.55e, Non-IFRS Op €2.55B v €2.57Be,
Rev €7.43B v €7.23Be
066570.KR Reports FY (KRW) Net 1.47T v 1.87T y/y, Op 2.70T v 2.47T y/y, Rev
61.3T v 61.4T y/y
LMT Reports Q4 $4.39 v $4.39e, Rev $14.4B v $13.8Be
*(US) JAN CONSUMER CONFIDENCE: 120.2 V 124.0E (lowest since July 2017)
AAPL Reports Q1 $4.18 v $4.17e, Rev $84.3B v $84.1Be
VALE CEO: Decided to deactivate all 19 dams similar to the one that burst at
Brumadinho (upstream method); estimated impact of the production stoppage is
about 40Mt
WEDNESDAY 1/30
SIE.DE Reports Q1 Net €1.12B v €1.01Be, Industrial Business profit €2.07B v
€2.15Be, Rev €20.1B v €20.3Be
*(EU) EURO ZONE JAN BUSINESS CLIMATE INDICATOR: 0.69 V 0.77E; CONSUMER
CONFIDENCE (FINAL) : -7.9 V -7.9E
(DE) Germany Economy Ministry updates its economic forecasts
BA Reports Q4 $5.48 v $4.52e, Rev $28.3B v $26.7Be
*(DE) GERMANY JAN PRELIMINARY CPI M/M: -0.8% V -0.8%E; Y/Y: 1.4% V 1.6%E
GD Guides initial FY19 $11.60-11.70 v $12.04e, Rev $38.5B v $39.0Be, operating
margin 11.7% - earnings call
*(US) DOE CRUDE: +0.9M V +3ME; GASOLINE: -2.2M V +2.5ME; DISTILLATE: -1.1M V
-1.5ME
(US) Association of American Railroads weekly rail traffic report for week
ending Jan 19th: 543.1K, +6.9% y/y
*(US) FOMC LEAVES TARGET RANGE UNCHANGED BETWEEN 2.25-2.50%; REMOVES REFERENCE
TO GRADUAL RATE INCREASES
(MX) Mexico Pres Lopez Obrador (AMLO): would like to see bank fees adjusted to
global levels; we're not going to legislate fees banks charge
*(CL) CHILE CENTRAL BANK (BCCH) RAISES OVERNIGHT RATE TARGET BY 25BPS TO 3.00%;
AS EXPECTED
MSFT Reports Q2 $1.08 v $1.09e, Rev $32.5B v $32.5Be
FB Reports Q4 $2.38 v $2.17e, Rev $16.9B v $16.4Be
V Reports Q1 $1.30 v $1.25e, Rev $5.50B v $5.40Be; Board authorizes $8.5B in
buybacks (3% of market cap)
TSLA Reports Q4 $1.93 v $2.08e, Rev $7.23B v $7.01Be; to ramp Model 3
production to annualized 500K units by Q2 FY20
005930.KR Reports final Q4 (KRW) Net 8.3T v 10.3Te; Op 10.8T v 10.8T prelim;
Rev 59.3T v 59.0T prelim
THURSDAY 1/31
ROG.CH Reports FY18 (CHF) Core EPS 18.14 v 17.80e, Core Op 20.5B v 20.3Be, Rev
56.9B v 56.4Be
NOKIA.FI Reports Q4 €0.13 v €0.12e, Op Profit €1.12B v €1.1Be, Rev €6.87B v
€6.66Be
RDSA.NL Reports Q4 Basic CCS EPS $0.69 v $0.64e, adj CCS Net $5.81B v $4.40B
y/y, Rev $102.2B v $86.9Be
UNA.NL Reports FY18 Core EPS €2.36 v €2.24 y/y, Op €12.5B v €8.8B y/y, Rev
€51.0B v €53.7B y/y
DGE.UK Reports H1 adj Op £2.45B v £2.19B y/y, Rev £6.91B v £6.53B y/y; approves
incremental share buyback of £660M
*(DE) GERMANY JAN UNEMPLOYMENT CHANGE: -2K V -10KE; UNEMPLOYMENT CLAIMS RATE:
5.0% V 5.0%E
(EU) EURO ZONE Q4 ADVANCE GDP Q/Q: 0.2% V 0.2%E; Y/Y: 1.2% V 1.2%E
*(IT) ITALY Q4 PRELIMINARY GDP Q/Q: -0.2% V -0.1%E (technical recession); Y/Y:
0.1% V 0.3%E
*(EU) EURO ZONE DEC UNEMPLOYMENT RATE: 7.9% V 7.9%E
DWDP Guides Q1 Rev down mid-single digits %, Op EBITDA down low-teens % -
earnings slides
GE Reports Q4 $0.17 v $0.18e, Rev $33.3B v $32.2Be; Reached agrement with US
DoJ to settle FIRREA investigation
UPS Reports Q4 $1.94 v $1.91e, Rev $20.0B v $19.9Be
GE Guides FY19 industrial organic revenue to grow low to mid single digit, with
cash flow growing substantially in 2020 and 2021 - earnings call
(US) Nevada reports Dec casino gaming Rev $999.7B, +4.1% y/y; Las Vegas strip
Rev $566.2M, -0.9% y/y
*(US) NOV NEW HOME SALES: 657K V 570KE
(EU) ECB's Weidmann (Germany): process of ECB policy normalization is likely to
take several years; exit should be slow and we shouldn't lose time
unnecessarily
(US) Atlanta Fed maintains Q4 GDP forecast at 2.7%, unchanged from 1/22
(CN) President Trump: China's Xi wrote in letter that he hopes both sides will
meet each other halfway to reach early trade agreement; Xi wrote in letter that
he made arrangements on agricultural product purchases
FRIDAY 2/1
DBK.DE Reports Q4 Net -€425M v -€292Me Pretax -€319M v -€345Me, Rev €5.58B v
€5.73Be
*(UK) JAN PMI MANUFACTURING : 52.8 V 53.5E (30th month of expansion)
MRK Reports Q4 $1.04 v $1.03e, Rev $11.0B v $10.9Be
*(EU) EURO ZONE JAN ADVANCE CPI ESTIMATE Y/Y: 1.4% V 1.4%E; CPI CORE Y/Y: 1.1%
V 1.0%E
*(US) JAN AVERAGE HOURLY EARNINGS M/M: 0.1% V 0.3%E; Y/Y: 3.2% V 3.2%E; AVERAGE
WEEKLY HOURS: 34.5 V 34.5E
*(US) JAN CHANGE IN NONFARM PAYROLLS: +304K V +165KE
*(US) JAN UNEMPLOYMENT RATE: 4.0% V 3.9%E
*(US) JAN FINAL MARKIT MANUFACTURING PMI: 54.9 V 54.9E
*(US) JAN ISM MANUFACTURING: 56.6 V 54.0E ; PRICES PAID: 49.6 V 54.3E (lowest
since 2016)
