TradeTheNews.com Weekly
Market Update: Weaker data and aggressive ECB response weighs on outlook
Fri, 08 Mar 2019 16:07 PM EST
Stock markets rolled over this week as optimism on the China trade front waned
to some degree, and worries about global growth resurfaced. Initial optimism
over a weekend report that Beijing and Washington were nearing a final trade
deal quickly melted away on concerns that the deal might not include enough
structure changes in how China conducts business, and subsequent reports that
China was getting cold feet. Risk assets in particular saw softening after the
ECB surprised markets by acting aggressively in reviving stimulus. The ECB
slashed forecasts, pushed back rate hike expectations and introduced and new
TLTRO loan program. Just a day before, the Federal Reserve’s Beige book
indicated marginal cooling in some districts. Friday saw February non-farm
payrolls come in well below expectations but the details of the report
suggested that the drop was likely due to transitory factors while affirming
that strong underlying labor market trends remain intact. Overseas economic
data remained particularly troublesome forcing investors to ponder just how
much slowing outside of the US was beginning weigh on growth expectations here.
Interest rates fell notably on both sides of the Atlantic. The German 10-year
bund yield slipped back towards 5 bps for the first time since 2016 while the
US 10-year dropped back below 2.65%. The Greenback rallied, pushing the Dollar
index back above 97 which has served as a significant resistance level. The
pound weakened as Brexit negotiations continued without real progress and PM
May reportedly rejected a new compromise proposal from the EU just days ahead
of expected votes in the UK Parliament. Oil and other commodities tied to
growth slipped late in the week as well. The S&P dipped back below its
200-day moving average for the first time in nearly a month. The DJ Transports
declined for 11 straight sessions, the longest such streak since the early
1970s. The VIX volatility index rose to levels not seen in more than a month,
briefly topping 18. For the week, the S&P and DJIA each lost 2.2%,while the
Nasdaq fell 2.5%.
Some key retailer earnings highlighted this week in corporate news. Target
shares surged after its holiday quarter beat analyst expectations on comps and
the company saw its strongest traffic growth in over a decade. Kohl’s topped
estimates on its earnings and same store sales, and also announced a new
partnership with Planet Fitness to leverage space adjacent to select Kohl's stores
for new gym locations. Kroger shares plummeted after its earnings fell short
and margins contracted amid competition from Amazon and Walmart. Shares in
Costco jumped after the wholesaler crushed earnings estimates, and the company
announced another employee pay hike, its second wage increase in a year. Biogen
bolstered its pipeline with an $800M acquisition of clinical-stage gene-therapy
company Nightstar Therapeutics for $25.50/share. Eli Lilly said it would sell a
half-price version of Humalog amid renewed scrutiny from Congress on rising
insulin costs. Shares of cloud services firm Citrix tumbled on Friday after the
revelation that it was the victim of a cyberattack, likely by an
Iranian-affiliated hacker group.
SUNDAY 3/3
(CN) China said to have offered US to lower tariffs on US farm goods, autos and
other goods; US considering removing most if not all of the sanctions imposed
against Chinese products since last year; close to a final agreement on trade -
US press
(CN) China Hainan planning to phase out petrol and diesel vehicles - press
MONDAY 3/4
*(EU) EURO ZONE MAR SENTIX INVESTOR CONFIDENCE: -2.2 V -3.1E
OPEC sources: Unlikely to make any output policy decision at its April meeting;
more likely to do so in June - press
(US) Atlanta Fed maintains Q1 GDP forecast at 0.3%, unchanged from prior
CRM Reports Q4 $0.70 v $0.56e, Rev $3.60B v $3.56Be
LLY To introduce Lower-Priced Insulin
NITE To be acquired by Biogen for $25.50/shr in ~$800M all-cash deal
*(CN) CHINA NATIONAL PEOPLE'S CONGRESS (NPC): SETS 2019 GDP TARGET AT 6.0-6.5%
v ~6.5% in 2018; CPI ~3.0% v ~3.0% in 2018 (both inline with expectations);
Fiscal policy to be proactive, monetary policy to be prudent; cuts VAT for some
sectors and top bracket
*(AU) RBA LEAVES CASH RATE TARGET UNCHANGED AT 1.50%; AS EXPECTED (27th
straight pause in the current easing cycle)
TUESDAY 3/5
(GR) Greece Debt Agency (PDMA) opens book to sell 10-year bond via syndicate;
yield guidance seen 4.125%
*(UK) FEB SERVICES PMI: 51.3 V 50.0E (31st month of expansion)
TGT Reports Q4 $1.53 v $1.53e, Rev $23.0B v $23.1Be
(UK) Govt said to be unlikely to publish no-deal tariffs before meaningful vote
- financial press
KSS Reports Q4 $2.24 v $2.17e, Rev $6.30B v $6.79Be; Raises Quarterly dividend
9.8% to $0.67 from $0.61 (indicated yield 4.03%)
*(US) FEB ISM NON-MANUFACTURING INDEX: 59.7 V 57.4E
*(US) DEC NEW HOME SALES: 621K V 600KE
GE CEO: Sees free cash flow in negative territory this year - JP Morgan conf
NIO Reports Q4 (CNY) Adj EPS -3.20 v -71.47 y/y, Rev 3.44B v n/a y/y
WEDNESDAY 3/6
THO Reports Q2 -$0.10* v +$0.88e, Rev $1.29B v $1.48Be
XOM Targets Earnings to increase $4B, Cash flow to grow >$5B from 2019 to
2020 - investor presentation
(EU) ECB reportedly to hold discussions on design of new targeted loans
(TLTRO); To cut inflation projections through 2021 - press
(US) Conference Board Experimental Help Wanted OnLine Index (HWOL) at 104.0 v
103.7 m/m
(US) Atlanta Fed raises Q1 GDP forecast to 0.5% from 0.3%
(US) Association of American Railroads weekly rail traffic report for week
ending Mar 2nd: 528.2K, -3% y/y (has fallen for 3 consecutive weeks)
(US) Kansas City Fed economist's paper: Fed is starting to consider when to
halt decline in reserves and grow the balance sheet
*(US) FEDERAL RESERVE BEIGE BOOK: ECONOMY CONTINUED TO GROW IN LATE JAN AND
FEB; WITH 10 OF 12 DISTRICTS REPORTING SLIGHT TO MODERATE PACE OF EXPANSION AND
2 SAYING GROWTH WAS FLAT
(US) Centers for Medicare & Medicaid Services seeks recommendations that
allow Americans to purchase health insurance across state lines
THURSDAY 3/7
DPW.DE Reports Q4 Net €813M v €837M y/y, EBIT €1.1B v €1.18Me, Rev €16.9B v
€16.1B y/y
*(EU) EURO ZONE Q4 FINAL GDP Q/Q: 0.2% V 0.2%E; Y/Y: 1.1% V 1.2%E
SUP Reports Q4 $0.61 v -$0.50 y/y, Rev $378.8M v $361.8M y/y
*(EU) ECB LEAVES MAIN 7-DAY REFINANCING RATE UNCHANGED AT 0.00%; AS EXPECTED;
announces new TLTRO, extends forward guidance
*(EU) ECB ANNOUNCES NEW TLTRO PROGRAM
*(US) Q4 NONFARM PRODUCTIVITY: 1.9% V 1.5%E; UNIT LABOR COSTS: 2.0% V 1.7%E
(EU) ECB’s Draghi: Took decisions to help lift inflation to target; ECB is
ready to adjust all instruments - Prepared remarks
(EU) ECB’s Draghi: New ECB measures are adding accommodation; decisions taken
following the revised Staff Projections to increase resilience of Euro Zone -
Q&A
(US) Fed Reports Q4 Financial Accounts: Household Change in Net Worth: -$3.73T
v $2.07T prior
(EU) Reportedly ECB opted for more radical easing measures today only after
growth projections showed a bigger than feared economic slowdown - press
(CN) Chinese officials reportedly becoming wary of quick trade deal; persuading
Pres Xi to attend Mar-a-Lago summit is 'no easy task' - NY Times
KR Reports Q4 $0.48 v $0.53e, Rev $28.1B v $28.0Be
(US) JAN CONSUMER CREDIT: $17.0B V $17.0BE
*(CN) CHINA FEB TRADE BALANCE (CNY): 34.5B V 250.0BE
*(CN) CHINA FEB TRADE BALANCE: $4.1B V $26.2BE (smallest trade balance since
March 2018)
FRIDAY 3/8
(US) FEB AVERAGE HOURLY EARNINGS M/M: 0.4% V 0.3%E; Y/Y: 3.4% V 3.3%E (highest
annual reading since 2009); AVERAGE WEEKLY HOURS: 34.4 V 34.5E
*(US) JAN HOUSING STARTS: 1.23M V 1.195ME; BUILDING PERMITS: 1.35M V 1.287ME
*(US) FEB CHANGE IN NONFARM PAYROLLS: +20K V +180KE
*(US) FEB UNEMPLOYMENT RATE: 3.8% V 3.9%E
(US) Atlanta Fed maintains Q1 GDP forecast at 0.5%, unchanged from prior
(UK) EU Brexit Negotiator Barnier: I briefed EU27 Ambassadors and EP today on
the ongoing talks with UK; following the EU-UK statement of 20 Feb, the EU has
proposed to the UK a legally binding interpretation of the Brexit Withdrawal
Agreement
(UK) Reportedly the EU's latest Brexit offer has been rejected by the UK -
pressCTXS Discloses investigating unauthorized access to internal
network; it appears that the hackers may have accessed and downloaded business
documents
