Fed promises easing, Trump and Xi confirm G20 sit down, Iran tensions rise

TradeTheNews.com Weekly Market Update: Fed promises easing, Trump and Xi confirm G20 sit down, Iran tensions rise
Fri, 21 Jun 2019 16:04 PM EST

Coming into the week expectations were already riding exceedingly high heading into the FOMC meeting. Rates remained under pressure and US stock markets were within a few percent of all-time highs. US manufacturing data was soft suggesting deceleration and an environment conducive to a rate cut. Those expectations were only further strengthened by the ECB’s Draghi who said that if the outlook does not improve then additional stimulus will be needed in the Euro Zone. Draghi’s comments prompted President Trump to complain that Fed policy isn’t providing the US with a “level playing field”, keeping the pressure on Chainman Powell ahead of the rate decision. Global stocks and bonds continued to rally and the move was turbocharged by news President Trump and Chinese President Xi had spoken by phone confirming both sides were preparing to meet at the G20 meeting next week.

Wednesday’s FOMC statement appeared to satisfy the markets, setting the table for a rate cut in July. After dropping the word “patient” from the monetary policy statement Chairman Powell acknowledged that many committee members, perhaps even himself, saw a stronger case for stimulus amid the risks presented by trade disputes, weak global growth and stubbornly low inflation. On Thursday, stock indices opened at all-time highs despite a 5% pop in WTI crude after Iran tensions were ratcheted significantly by the downing of a US surveillance drone near the Straight of Hormuz. Rates trended lower, pressuring the US 10-year back below 2% for the first time since before the 2016 election. Gold prices broke above the $1,400 mark for the first time since 2013 and the Greenback rolled over. Friday saw equities consolidate at or just below record highs on very robust volumes due to options expiration. Bond yields lifted helped by marginal improvement on some key European manufacturing PMI readings. Also, trade sentiment was further buoyed by a report VP Pence would be postponing a key China policy address indefinitely amid "positive signs" of progress ahead of Trump/Xi meeting. For the week, the S&P hit new highs up 2.2%, the DJIA gained 2.4%, and the Nasdaq added 3%.

In corporate news this week, Pfizer announced it would acquire Array BioPharma for $48/share in a cash deal valued at $11.4B as part of an effort to expand its colorectal cancer drug portfolio. Auction house Sotheby’s sold itself to collector and Altice founder Patrick Drahi for $57/share in cash. American steel makers described an industry slowdown: Steel Dynamics said it saw lower Q2 earnings due to weaker prices; Nucor tempered its Q2 expectations citing decreasing performance in its steel mill business; and US Steel said it would idle some capacity to better align global production. After a slow start at the Paris Air Show, Boeing announced its first order from the event on Tuesday, as IAG signed a letter of intent for 200 Boeing 737 MAX aircraft to join its fleet. Oracle posted an earnings beat for Q4 and said it expected a strong Q1. Carnival Corp cut its FY outlook, noting US-Cuba policy changes and other global headwinds.

MONDAY 6/17
ARRY To be acquried by Pfizer for $48/shr in cash valued at $11.4B
*(US) JUN EMPIRE MANUFACTURING: -8.6 V +11.0E (lowest since 2016)
BID To be acquired by Patrick Drahi (BidFair USA) for $57.00/shr in cash valued at $3.7B
STLD Guides Q2 $0.86-0.90 v $0.98e, primarily related to lower profitability from long product steel operations

TUESDAY 6/18
*(DE) GERMANY JUN ZEW CURRENT SITUATION: 7.8 V 6.1E; EXPECTATIONS SURVEY: -21.1 V -5.8E
*(US) MAY HOUSING STARTS: 1.27M V 1.239ME; BUILDING PERMITS: 1.29M V 1.29ME
(CN) China state media confirms Pres Xi held call with Pres Trump; confirms Pres Xi plan to talk with Trump during G20 meeting - press
(US) Atlanta Fed cuts Q2 GDP forecast to 2.0% from 2.1% prior
BA IAG signs letter of intent with for 200 Boeing 737 MAX aircraft to join its fleet
(US) Reportedly White House looked into legality of demoting Fed Chairman Powell - press
(EU) ECB POLICYMAKERS SAID TO BE DIVIDED ON NEXT STEP; RATE CUT, GUIDANCE CHANGE AND FURTHER QE ALL POSSIBILITIES - PRESS
X (US Steel) Guides Q2 $0.40 v $0.48e; idling two blast furnaces in the US and one blast furnace in Europe to better align global production with order book

WEDNESDAY 6/19
(US) Association of American Railroads weekly rail traffic report for week ending June 15th: 528K, -5.4% y/y (has fallen for 18 consecutive weeks)
(US) FOMC LEAVES TARGET RANGE UNCHANGED BETWEEN 2.25-2.50%; AS EXPECTED; DROPS 'PATIENT' LANGUAGE ON FUTURE POLICY ADJUSTMENTS, SAYS 'WILL ACT AS APPROPRIATE' TO SUSTAIN EXPANSION
(US) Fed Chair Powell: Many FOMC participants see stronger case for rate cuts; changes made to today's statement were "significant" - post rate decision press conference
ORCL Reports Q4 $1.16 v $1.07e, Rev $11.1B v $11.0Be
*(JP) BOJ LEAVES INTEREST RATE ON EXCESS RESERVES (IOER) UNCHANGED AT -0.10%; AS EXPECTED

THURSDAY 6/20
(UK) MAY RETAIL SALES (EX-AUTO/FUEL) M/M: -0.3% V -0.4%E; Y/Y: 2.2% V 2.5%E
*(UK) BOE JUN MINUTES: VOTED 9-0 TO LEAVE INTEREST RATES UNCHANGED
KR Reports Q1 $0.72 v $0.72e, Rev $37.3B v $36.8Be
WORK *OPENS FOR TRADE ON NYSE $38.50

FRIDAY 6/21
*(DE) GERMANY JUN PRELIMINARY PMI MANUFACTURING: 45.4 V 44.6E ( 6th straight contraction)
(FR) FRANCE JUN PRELIMINARY PMI MANUFACTURING: 52.0 V 50.8E (3rd straight expansion and highest since Sept)
(EU) EURO ZONE JUN PRELIMINARY PMI MANUFACTURING: 47.8 V 48.0E (5th straight contraction)
*(US) JUN MARKIT PRELIMINARY PMI MANUFACTURING: 50.1 V 50.5E (lowest reading since Sep 2009)
(US) VP Pence said to postpone China policy address indefinitely amid "positive signs" of progress ahead of Trump/Xi meeting - press

Barron’s weekend summary

Barron’s weekend summary: positive feature on drug distributors (MCK CAH ABC) and on upcoming IPO Slack 

Cover story: Barron’s list of the World’s Best CEOs contains 30 names selected after screening the S&P 500 index and a roster of large non-U.S. companies for standout results in recent years on growth in revenue, earnings, and shareholder returns; the names are not ranked, but separated into three groups: visionary founders, growth leaders, and change agents; New to the list this year are Mary Dillon of ULTA, Steve Easterbrook of MCD, Henry Fernandez of MSCI, Marilyn Hewson of LMT, Craig Jelinek of COST, David Lewis of Tesco, Brian Moynihan of BAC, Francois-Henri Pinault of Kering, James Robo of NEE, Stephen Schwartzman of BX, and Lisa Su of AMD. 

Features: 1) Positive on MCK, CAH, ABC: Shares of drug distributors have taken a hit amid declining prices for generic drugs, lawsuits accusing the companies of liability in the opioid crisis, and regulatory proposals that could upset their business models, but for long-term investors who can stomach risk, the shares present an opportunity; 2) Positive on WORK: There are ample reasons to be bullish about the long-term opportunity for Slack and the performance of its stock, and whether to buy or sell will come down to its valuation on day one of its direct listing, which doesn’t come with any capital raise. 

Best CEO profiles: 1) Change agent Lisa Su joined AMD in 2014 and quickly refocused it on its core high-performance computing business, establishing an ironclad policy of meeting commitments to customers, and made bold bets on chip-manufacturing technologies; 2) Growth leader Brian Moynihan of BAC follows a mantra of responsible growth, which means treating customers and borrowers fairly, controlling risk, acting to limit global warming, and creating a strong corporate culture; 3) Visionary founder Stephen Schwarzman of BX leads a firm that puts money to work for investors willing to lock up cash for years in investments that may be more attractive than stocks and bonds, such as private equity, real estate, credit strategies, and hedge funds, and alternatives. 

Tech Trader: Over the past few days, there has been an out-of-left-field revival for the IPO market following the poor performance of UBER and LYFT; The market “went gaga” for CHWY, CRWD, FVRR, likely because of “megacap fatigue” with AMZN, AAPL, FB, and GOOGL, which face intense government scrutiny. 

Trader: The small-cap Russell 2000 index has dropped 7.2% during the past 12 months, even as the S&P 500 has gained 6.2%, just the fifth time in the past 20 years that small has underperformed large by 10 percentage points or more based on monthly prices; Since the start of June, the materials sector has trounced the rest of the market, rising more than 10% in the past two weeks, but “two weeks does not a trend reversal make”; Positive on GRUB: Company stands to benefit from AMZN’s decision to shutter Amazon Restaurants and exit the meal-delivery sector to focus on groceries. 

Interview: Louis-Vincent Gave of GaveKal Research says that by weaponizing the dollar, the Trump administration has opened the door to a reversal in the global power structure that will create a new world order in which China comes out on top. 

Profile: Elisa Mazen, co-manager of the ClearBridge International Growth fund, scrutinizes whether a company can keep growing for years, and just how large that growth can be, which sometimes means taking a more conservative approach than peers (top 10 holdings: Nestle, Shiseido, SAP, DEO, London Stock Exchange Group, Rentokil Initial, LVMH Moet Hennessy, NVS, CP, ICLR). 

European Trader: Cautious on Renault: Some investors wonder if the French government can hurt the automaker’s shareholders more than it already has following a series of blunders that led FCAU to end talks for a “merger of equals.” 

Emerging Markets: Vietnam is an ascendant nation—economic growth is 6% to 7% annually, powered by a strong export sector, but making money on Vietnamese stocks isn’t so simple, and the country has yet to be recognized as an official emerging market by MSCI. 

Commodities: “U.S. farmers are millions of acres behind their usual pace of corn planting this spring because of flooding, which may lead to a supply shortage that lifts prices by year end to their highest in five years.”

Streetwise: “Autonomous driving will eventually solve for the least-scalable part of food delivery—people,” says columnist Jack Hough. “Costs will plunge. Companies that survive the thin-margin years between now and then could enjoy powerful network effects, and rich profits.”

Gulf and trade tensions overshadow bustling M&A and IPO activity

TradeTheNews.com Weekly Market Update: Gulf and trade tensions overshadow bustling M&A and IPO activity
Fri, 14 Jun 2019 16:05 PM EST

Global stocks opened the week on a positive note after President Trump refrained from slapping tariffs on Mexico, for now, but continued to espouse the utility of using tariffs as a blunt tool to address what he sees as unbalanced trade around the world. Monday also saw significant deals in the tech, defense and energy sectors revive animal spirits, pushing the S&P back within 2% of its all-time high. There was little new to report on the US/China trade spat and it remains unclear whether Presidents Xi and Trump will meet and the G20 later this month. Trump did indicate he had no deadline for additional China tariffs at this time, but only after saying early in the week that if Pres Xi doesn't come to the G20, he would put the next $300B of tariffs into effect immediately. Wednesday’s weaker than expected US CPI figures resulted in continued buying across most of the Treasury curve. Ahead of next week’s FOMC meeting, short rates fell faster, indicating renewed bets for rate cuts later this year.

After WTI prices dropped following mid-week inventory readings that showed crude stockpiles continued to climb, on Thursday investors woke to find oil prices bouncing following an attack on two tankers sailing from Saudi Arabia near the Strait of Hormuz. US and UK officials were quick to point the finger squarely at Iran. By Friday, US indices opened lower and gold prices rose to a new high for the year. Chinese industrial production data disappointed investors while geopolitical concerns continued to rise after the U.S. released a video it said proved Iran was involved in the attacks on the oil tankers. Treasury yields plumbed to new lows before a stronger than expected May retail sales report when factoring in revisions. The yield curve flattened following the data release as short rates moved up faster, while crude traded only marginally higher. For the week, the S&P gained 0.5%, the DJIA added 0.4%, and the Nasdaq rose 0.7%.

Merger announcements took top billing in corporate news this week. United Technologies announced a plan to combine its aerospace business with Raytheon in an all-stock merger that would create a new manufacturing behemoth, though President Trump noted he was ‘a little concerned’ about the deal’s effects on competition in the defense sector. Salesforce revealed its plans to acquire Tableau Software for $15.7B in an all-stock deal in order to diversify further into analytics. Ten state attorneys general, led by New York AG James, filed a lawsuit to block the Sprint/T-Mobile merger, though the two companies vowed to fight the states’ efforts if they do receive approval from the DOJ. Broadcom’s earnings report blunted a rebound in the chip sector as management confirmed that the US/China trade dispute and the ban on Huawei are hurting business to the tune of a $2B cut in FY guidance. The IPO market continued to be red hot, with the launches of CrowdStrike, Fiverr, and Chewy all drawing strong interest from investors.


SUNDAY 6/9
RTN Raytheon and United Technologies Aerospace Businesses to Combine in Merger of Equals in all stock deal; both companies affirm FY19 guidance

MONDAY 6/10
DATA To be acquired by Salesforce in all stock transaction valued at $15.7B; Adjusts FY20 outlook
(US) Pres Trump: If China Pres Xi doesn't come to the G20, we would put the next $300B of tariffs into effect immediately - CNBC interview
*(US) APR JOLTS JOB OPENINGS: 7.449M V 7.496ME
SFLY Agrees to be acquired by certain funds managed by affiliates of Apollo Global Management in an all-cash $51/shr transaction with an enterprise value of $2.7B
(CN) China issued notice related to local government special bonds issuance and project financing; to encourage financial firms and individuals to invest in local gov't bonds - Xinhua

TUESDAY 6/11
*(UK) APR AVERAGE WEEKLY EARNINGS 3M/Y: 3.1% V 3.0%E; WEEKLY EARNINGS (EX BONUS) 3M/Y: 3.4% V 3.2%E
*(UK) MAY JOBLESS CLAIMS CHANGE: +23.2K V +19.1K PRIOR; CLAIMANT COUNT RATE: 3.1% V 3.0% PRIOR
*(US) MAY PPI FINAL DEMAND M/M: 0.1% V 0.1%E; Y/Y: 1.8% V 2.0%E

WEDNESDAY 6/12
(IT) EU's Moscovici: We need to see a credible fiscal path for 2019 and 2020 for Italy
(US) May CPI M/M: 0.1% v 0.1%e; CPI (ex-food/energy) M/M: 0.1% v 0.2%e; CPI NSA: 256.092 v 256.179e
(US) Business Roundtable survey shows US CEOs' confidence hits lowest since Q4 2016
CRWD IPO opens for trade at $63.50
(UK) Parliament rejects Labour-backed bid to block no-deal Brexit in 309-298 vote
(US) Association of American Railroads weekly rail traffic report for week ending June 8th: 513.1K, -8.5% y/y (has fallen for 17 consecutive weeks)
Algeria reportedly raises idea of OPEC+ supply cut of 1.8M bpd in H2'19 (up from 1.2M now) - press
*(US) MAY MONTHLY BUDGET STATEMENT: -$207.8B V -$202.5BE
*(AU) AUSTRALIA MAY EMPLOYMENT CHANGE: +42.3K V +16.0KE; UNEMPLOYMENT RATE: 5.2% V 5.1%E

THURSDAY 6/13
(AE) UAE Port Officials report oil tanker is on fire in Gulf of Oman; explosions reported
*(CH) SNB LEAVES SIGHT DEPOSIT RATE UNCHANGED AT -0.75%; AS EXPECTED; Introduces a policy rate
TSN Unveils alternative protein products and new Raised & Rooted brand; Company uniquely positioned; offers plant-based and blended protein products
06/13 AVGO Reports Q2 $5.21 v $5.17e, Rev $5.52B v $5.66Be; Cuts FY guidance

FRIDAY 6/14
(CN) CHINA MAY INDUSTRIAL PRODUCTION Y/Y: 5.0% V 5.4%E (weakest reading since 2002)
(CN) CHINA MAY RETAIL SALES Y/Y: 8.6% V 8.1%E
(IN) India reportedly seeks to impose higher tariffs on U.S. goods next week - press
(US) MAY ADVANCE RETAIL SALES M/M: 0.5% V 0.6%E; RETAIL SALES (EX-AUTO) M/M: 0.5% V 0.4%E
(US) MAY INDUSTRIAL PRODUCTION M/M: 0.4% V 0.2%E; CAPACITY UTILIZATION: 78.1% V 78.0%E
(US) Atlanta Fed raises Q2 GDP forecast to 2.1% from 1.4% prior
CHWY IPO opens for trade at $36.00

Barrons weekend summary

Barrons weekend summary: Positive cover story on JPM; cautious feature on Apple, Amazon, Facebook & Alphabet 

Cover story: Positive on JPM: Under chief Jamie Dimon, the bank “has become the world’s top bank, with the industry’s deepest management talent and highest returns,” and its strengths are underappreciated, especially in consumer banking and wealth management, two resilient areas; The bank is expected to boost its quarterly payout to about 90 cents, after the Federal Reserve releases the results of its annual stress tests for major banks later this month.

Tech Trader: Cautious on AAPL, AMZN, FB, GOOGL: Reports that the Department of Justice and the Federal Trade Commission have divvied up the tech giants for investigations has sparked concern because it’s unclear what “bad deeds” will be investigated, or whether existing antitrust law can address them. 

Trader: The Fed’s move toward easier monetary policy could give stocks a boost, but such shifts take about six months to work through the system, so we won’t know for sure until Q3 earnings season—and there could be more frightening moments between now and then; Cautious on UBER: Though the stock has rallied after what looked like a disastrous IPO, investors “should think twice before hitching a ride on Uber’s volatile stock”; Cautious on JCP: A new management team has been trying to carry out a turnaround, but it isn’t happening quickly—Penney’s bond spreads are notably wide, even for a junk-rated company, and the stock isn’t doing well either.Interview: Owen Bennett, who covers tobacco and cannabis stocks at Jefferies Financial Group, likes APHA and Green Organic Dutchman, but is cautious on CRON. 

Profile: David Green, manager of Hotchkis & Wiley Value Opportunities fund, invests in stocks of any size, bonds of any credit quality, preferred stock, and merger arbitrage, yet is also concentrated, with 40 to 75 securities (top 10 holdings: GE, MSFT, WFC, General Electric 5% Perpetual Bond, AIG, SRG, UHAL, GS, MS, BAC).

Features: 1) Modern monetary theory has heavily influenced the Green New Deal and other recent Democratic proposals that have drawn criticism from Republicans, but the theory “is actually grounded in old and uncontroversial economic ideas, and its appeal is neither ideological nor partisan”; 2) Cautious on AAPL, AMZN, FB, GOOGL: News of government regulation shouldn’t cause investors to be impetuous—stock price volatility is a chance to step back and analyze each company on its own merits and determine whether regulatory action would materially affect the companies’ economic business models; 3) If the markets are right, interest rates could fall by three-quarters of a point over the next year, which would have wide-ranging consequences for stocks, bonds, and savings vehicles like money-market funds.

Advisor Guide: 1) Stephanie Stiefel of Neuberger Berman, who oversees $2.59B as managing director and head of client development for the Strauss Group within the firm’s private wealth management division, talks about how she helps clients build and protect wealth in uncertain times; 2) Kimberlee Orth, founder of Orth Financial Group, says taking the time to deeply understand a client’s needs, motivations, goals, and fears sets the best advisors apart from the rest, especially in the age of the robo advisor and low-cost fintech services; 3) Valerie Houts, a managing director at Merrill Lynch’s Venture Services Group, talks about the scope of her business and how she oversees one of the largest advisory practices focused on venture-capital and private-equity investors. 

European Trader: Positive on British Land: The company and its peer, Land Securities, have been overexposed to struggling retail sites and hurt by Brexit uncertainty, but an upcoming planning decision in London could transform British Land and send shares back up. 

Emerging Markets: Positive on BABA, Tencent: Donald Trump’s trade war with China sent shares of the tech giants down, spelling a buying opportunity for investors—both companies have strong bull cases, and derive nearly all their income domestically, with Chinese economic growth a macro driver. 

Commodities: “Gold has moved higher for the year, after stalling just below the $1,300-an-ounce mark for weeks. All the factors for the metal to rally to record levels might finally be falling into place.”

Streetwise: Back at the end of 2006, the Fed had room for five percentage points of cuts during the dire recession that followed, says columnist Jack Hough, who adds that while there’s no reason to expect the next downturn to be as severe as the last one, it could be a stubborn one if the Fed lacks the firepower to fight it.

Fed hints of rate cuts soothe concerns over widening trade war, weaker data, and probes of tech giants

TradeTheNews.com Weekly Market Update: Fed hints of rate cuts soothe concerns over widening trade war, weaker data, and probes of tech giants
Fri, 07 Jun 2019 16:06 PM EST

Trade and politics remained the overriding constraint to risk appetite heading into the week, but big tech regulation concerns resurfaced this week, adding to the ‘wall of worry.’ Reports emerged that the US regulators were considering a fresh look at antitrust issues at Google and Facebook, sending the Nasdaq spiraling lower on Monday. On top of that global economic data continued to disappoint amid lingering trade tensions, forcing interest rates lower while pulling forward Fed rate cut expectations. Talks between the US and Mexico were reportedly constructive, and President Trump said he sees a good chance of making a deal, but maintained the threat of imposing a 5% tariff on cross-border trade starting Monday, despite resistance from the Chamber of Commerce and many Republicans in Congress.

The US/China trade spat persisted, though there were some murmurings of early preparations for Trump/Xi talks at the G20 and perhaps again later this summer. Those reports, along with Chairman Powell and other Fed officials hinting that they stand ready to “act as appropriate to sustain the expansion” amid growing uncertainty surrounding trade and global growth, helped stock markets rebound sharply mid-week. A chorus of dovish Fed speak was accompanied by India and Australia rate cuts and Thursday’s ECB announcement which again lowered growth and inflation forecasts while pushing back expectations for the next ECB rate hike by another seven months. A big miss on US nonfarm payrolls in Friday’s employment report added to speculation that the Fed will ride to the rescue with up to three rate cuts later this year, and stocks closed out the week on a high note, with the S&P gaining 4.4%, the DJIA up 4.7%, and the Nasdaq adding 3.9%.

In corporate news this week, Fiat withdrew its offer to merge with Renault, citing resistance from French government regulators. The FTC and DOJ reportedly are divvying up scrutiny of large tech firms, with the FTC taking the regulatory lead looking into Facebook and Amazon, while the Justice Department will focus on Apple and Google. The House Judiciary Committee is also opening its own probe of practices at the large tech firms. Salesforce beat consensus and raised its EPS outlook, noting increased momentum for its MuleSoft platform. Stitch Fix shares jumped after strong active client numbers boosted quarterly revenue growth. Tiffany’s comparable store sales and margins disappointed, and the jewelry retailer adjusted its outlook lower. Skyworks cut its Q3 outlook, citing the impact of Commerce Department actions against Huawei. Barnes and Noble agreed to be taken private by Elliott Advisors for $6.50/share in a deal valued at $683M after months of speculation about the struggling bookstore’s future. Google bought big data analytics platform Looker for $2.6B in cash in a move to compete in the business intelligence software space.


MONDAY 6/3
*(ES) SPAIN MAY MANUFACTURING PMI: 50.1 V 51.3E
*(UK) MAY PMI MANUFACTURING: 49.4 V 52.2E (1st contraction in 34 months)
AMD and Samsung announce strategic partnership in ultra low power, high performance graphics technologies
*(US) MAY ISM MANUFACTURING: 52.1 V 53.0E; PRICES PAID: 53.2 V 51.0E
*(US) APR CONSTRUCTION SPENDING M/M: 0.0% V 0.4%E
FB Reportedly FTC to take regulatory lead on review Facebook competition practices, as US regulators divvy up scrutiny of large tech firms - press
FB FTC reportedly has opened an antitrust review of Facebook practices - press
*(US) FED'S BULLARD (DOVE, VOTER): INTEREST RATE CUT MAY BE WARRANTED SOON ON TRADE AND INFLATION RISKS
AAPL Justice Dept said to have been given jurisdiction for potential investigation of Apple as part of broad study of tech companies by antitrust regulators - press
(US) SEMI: Q1 Worldwide Semiconductor Manufacturing Equipment Billings: $13.8B v $17.0B y/y; -8% y/y; -19% q/q

TUESDAY 6/4
*(AU) RESERVE BANK OF AUSTRALIA (RBA) CUTS CASH RATE TARGET BY 25BPS TO 1.25%; AS EXPECTED (1st rate move since Aug 2016, resuming the easing cycle, record low rate)
TIF Reports Q1 $1.03 v $1.01e, Rev $1.00B v $1.02Be; Raises Quarterly dividend 5.5% to $0.58 from $0.55 (indicated yield 2.57%)
(CN) China Ministry of Commerce (MOFCOM): Reiterates stance that US-China trade dispute should be solved via dialogue and based upon mutual trust - press
(IT) Italy Dep PM Di Maio: confirms he and Dep PM Salvini have spoken and reached agreement to work together
(US) VP Pence schedules speech on US-China relations for June 24th, just days before potential Trump-Xi meeting - CNBC
(US) World Bank cuts 2019 global growth forecast from 2.9% to 2.6% on trade concerns
CRM Reports Q1 $0.93 v $0.61e, Rev $3.74B v $3.68Be
SWKS Cuts Q3 $1.34 v $1.50e, Rev $755-775M v $825Me (prior $1.50, Rev $815-835M), reflects impact of Commerce Dept actions against Huawei

WEDNESDAY 6/5
EU Commission: Confirms preparation of disciplinary process against Italy over public debt (as widely speculated)
*(UK) MAY SERVICES PMI: 51.0 V 50.5E (2nd straight expansion)
(DE) GERMANY MAY FINAL SERVICES PMI: 55.4 V 55.0E (confirms 71st month of expansion)
*(US) MAY ISM NON-MANUFACTURING INDEX: 56.9 V 55.4E
*(US) MAY ADP EMPLOYMENT CHANGE: +27K V +185KE (lowest since Mar 2010)
*(US) FEDERAL RESERVE BEIGE BOOK: ECONOMIC ACTIVITY GREW AT MODEST PACE FROM APRIL THROUGH MID-MAY; NOTES 'SLIGHT IMPROVEMENT' IN GROWTH FROM PREVIOUS PERIOD
(US) Association of American Railroads weekly rail traffic report for week ending June 1st: 478.7K, -6.1% y/y (has fallen for 16 consecutive weeks)

THURSDAY 6/6
(CN) China Commerce Ministry (MOFCOM) report: US benefits a lot from bilateral trade and should create conditions for more balanced trade - CCTV
*(IN) INDIA CENTRAL BANK (RBI) CUTS REPURCHASE RATE BY 25BPS TO 5.75%; AS EXPECTED
(US) US Pres Trump: Reiterates Mexico has made progress in tariffs talks but needs to do more; talks are also ongoing with China
*(EU) EURO ZONE Q1 FINAL GDP Q/Q: 0.4% V 0.4%E; Y/Y: 1.2% V 1.2%E
*(EU) ECB LEAVES 7-DAY MAIN REFINANCING RATE UNCHANGED AT 0.00%; AS EXPECTED; pushes back forward guidance by another 6 months; provides TLTRO-3 details
*(US) Q1 FINAL NONFARM PRODUCTIVITY: 3.4% V 3.5%E; UNIT LABOR COSTS: -1.6% V -0.9%E
(US) Fed Reports Q1 Financial Accounts: Household Change in Net Worth: $4.691T v -$3.73T prior
(MX) US said to be considering delaying Mexico tariffs as implementation date approaches; Mexican officials seek more time for talks - press

FRIDAY 6/7
*(US) MAY CHANGE IN NONFARM PAYROLLS: +75K V +175KE
*(US) MAY UNEMPLOYMENT RATE: 3.6% V 3.6%E (matches lowest level since 1969)
(US) Atlanta Fed cuts Q2 GDP forecast to 1.4% from 1.5% prior
(US) APR CONSUMER CREDIT: $17.5B V $13.0BE

Barrons weekend summary

Barrons weekend summary: positive features on AVGO, CODI, OXY; cautious on BYND; cautious on cannabis names 

Cover story: When it comes to retirement, baby boomers and the younger part of the “silent generation” don’t want to be isolated—they want communities where they can pursue passions rather than retire in the traditional sense; “As a result, developers are brainstorming in preparation for the nearly 2.5 million seniors expected to move out of their homes each year starting in 2035. Already, developers are coming out with new takes on senior living.”

Features: 1) Cautious on CGC, TLRY, ACB: California-based Grupo Flor’s plan to move cannabis production to lower-cost Colombia could pose a threat to North American rivals that have invested hundreds of millions of dollars to build climate-controlled operations for growing weed up north; 2 Positive on AVGO: Semiconductor demand is soft, the company faces an antitrust probe, and the Trump administration’s Huawei ban will hit Broadcom’s bottom line—but its valuation was low even before the slump, and investors should still buy shares, which are cheaper than the S&P 500 index, relative to estimated earnings; 3) Cautious on BYND: Strong growth numbers have boosted the stock, but forecasts, and much more, are already reflected in the share price—and even if the alternative meat space explodes, it’s not clear the company can maintain the growth required to justify its current valuation; 4) Positive on CODI: Small caps are still vulnerable to economic distress and interest rate swings, so the best way to invest in them is through an experience operator such as Compass Diversified Holdings, which manages eight businesses in niche industrial and consumer markets; 5) Positive on OXY: Activist investor Carl Icahn’s pressure on the company could be bullish for its depressed stock, though there is little he can do to stop what he sees as an overpriced acquisition of APC; 6) Positive on CTRE, HCP, SBRA, SNH, VTR, WELL: Senior housing represents an enormous business opportunity and perhaps the largest growth opportunity in real estate; these seven stocks aren’t pure plays on senior housing, but own a mix of properties, and are less vulnerable to the U.S.-China trade war than most stocks. 

Tech Trader: Dismal commentary from companies and an escalating trade war have undermined the magical recovery narrative in the chip sector, and many companies may have been too optimistic with their guidance at the beginning of the year; “Almost every important end market, including cloud computing, enterprises, and China, offered disappointing commentary during the latest round of earnings. And the sector has pulled back on its second-half confidence.” 

Trader: “Now trade fears are mingling with fears that the Fed won’t lower interest rates, and the market is waiting to see if its message gets heard again—expect stocks to remain in purgatory until it does”; Cautious on KHC: The shares are 70% below their high of $97 in 2017, a huge decline for a major player in the usually stable food industry, but they could be near a bottom after the latest plunge, while the dividend—one of the highest in the sector—appears safe; Cautious on GM, F, DLPH: Auto sector shares dropped after Donald Trump’s announced of tariffs on Mexico over migration, but despite reports forecasting doom for the sector, the stock declines appear to be an overreaction. 

Interview: Carol Levenson, co-founder of Gimme Credit, has spent more than two decades covering individual companies’ credit; she talks to Barron’s about the bond-bubble debate, shareholder activism, and what investors should demand from company executives.

Profile: Gauta Khanna, lead manager of the $606M BNY Mellon Insight Core Plus bond fund, credits a rigorous investment process for the fund’s consistent returns—its institutional shares have returned an average of 3.2% a year during the past five years, better than 92% of intermediate-term bonds. 

European Trader: Cautious on Marks & Spencer: Retailer’s turnaround efforts have been largely unsuccessful, and it continues to grapple with a legacy of outdated systems, tired stores, and a hierarchical culture—but a deal with online grocer Ocado Group could transform the business. 

Emerging Markets: The policies of Donald Trump and Mexican president Andres Obrador pose problems for Mexico, but there’s still good news, including inflation that has plunged by three percentage points during the past 18 months and a hawkish central bank that has keep interest rates high. 

Commodities: This year’s hurricane season, which has seen an early start, may rattle traders’ nerves—major storms and hurricanes in the Atlantic have prompted big price moves for commodities, including oil, natural gas, gasoline, grains, cotton, oranges, and even lumber. 

Streetwise: The pet sector is thriving, says columnist Jack Hough, though the investment opportunities in pet tech—including Actijoy, which tracks pet activity, and Wagz, which makes smart collars—are mostly confined to venture capitalists for now.

Trade war opens on new front

TradeTheNews.com Weekly Market Update: Trade war opens on new front
Fri, 31 May 2019 16:13 PM EST

The holiday shortened week opened amid light volumes and continued hand ringing by investors. The US/China trade war showed no signs of letting up with rhetoric on each side only amplifying a growing narrative that not much should be expected if and when Trump and Xi meet at the G20 in late June. Economic data continued to decelerate, particularly outside of the US. Chinese PMI data deteriorated for the first time in 3-months and German CPI figures weakened. A raft of US retail earnings were nothing to cheer about either, raising doubts about the health of what to this point has been a resilient US consumer. By Wednesday investors were fleeing risk assets like stocks and commodities resulting in continued flows into the relative safety of government bonds and gold. Major US indices dipped back below their 200-day moving averages and interest rates retreated further. WTI crude futures dropped below $55 for the first time since February.

Those investors who pared back on risk assets were rewarded on Friday when the Trump administration announced a surprise move to slap tariffs on Mexico. The White House emphasized the move was intended to prod the Mexican government to help fight an illegal immigration, but the President himself said he also aspired to see more jobs and business move back to the US. The Mexican peso dropped 3% on the news while stocks with perceived Mexico exposure like autos got drubbed. A number of prominent Republican politicians and business trade groups came out in opposition to the tariffs as the wrong policy for the task.

Interest rates continued to plumb lower this week. The US 10-year Treasury yield slid to a 2-year low below 2.15% and the German Bund to a new record negative rate below -0.20%. Copper and oil fell while Gold prices rose sharply after the Mexico tariff announcement. Wall Street forecasters began incorporating multiple Fed rate cuts into their models for later this year which mirrored movements seen across futures markets. The Nasdaq dropped 2.4%,the DJIA fell 3%, and the S&P lost 2.6%, its biggest weekly drop since December.

In corporate news this week, Global Payments and Total System Services confirmed they would combine in a $21B all-stock merger of equals, notching yet another deal within the busy fintech space. Cypress Semi shares rose on a report that the company is working with advisers to explore strategic options, including a sale, though the company had no comment. Beyond Meat shares extended their meteoric rise on reports that KFC has held meetings with plant-based meat producers over the launch of a potential vegan version of fried chicken. Friday saw press reports speculate that both Amazon and cable companies could have interest in wireless spectrum and or assets that are likely to become available from required divestitures needed to get regulatory approval of the Sprint/T-mobile deal.


SUNDAY 5/26
(CN) China releases plan to increase number of hydrogen filling stations in Yangtze River Delta region from 6 to 500 by 2030 - Chinese Press

TUESDAY 5/28
NIO Reports Q1 (CNY) Net -2.42 v -3.20 y/y, Rev 1.63B v 1.54Be
*(EU) EURO ZONE MAY BUSINESS CLIMATE INDICATOR: 0.30 V 0.40E
TSS Confirms To be acquired by Global Payments for ~$119.86/shr in all share transaction valued at ~$21.5B
(IT) EU's Moscovici: Going to exchange views with Italy, not favoring sanctions for the country
(DE) German Chancellor Merkel said to believe that her chosen successor (CDU party leader Kramp-Karrenbauer) is not up to the job; vows to stay in position until 2021
*(US) MAY CONSUMER CONFIDENCE: 134.1 V 130.0E (highest since Nov)
(US) May Dallas Fed Manufacturing Activity: -5.3 v 6.2e
WDAY Reports Q1 $0.43 v $0.41e, Rev $825.1M v $814Me
(CN) China National Development and Reform Commission (NDRC) Spokesperson: China will give priority to domestic needs for rare earth, not ruling out using rare earths in trade dispute with US - SCMP

WEDNESDAY 5/29
*(DE) GERMANY MAY UNEMPLOYMENT CHANGE: +60K V -8KE (1st rise in 2 year); UNEMPLOYMENT CLAIMS RATE: 5.0% V 4.9%E
(US) Nevada reports April casino gaming Rev $936.5B, -1.8% y/y; Las Vegas strip Rev $481.9M, -3.5% y/y
*(US) MAY RICHMOND FED MANUFACTURING INDEX: 5 V 7E
*(CA) BANK OF CANADA (BOC) LEAVES INTEREST RATES UNCHANGED AT 1.75%; AS EXPECTED
(US) Association of American Railroads weekly rail traffic report for week ending May 25th: 528.0K, -6.7% y/y (has fallen for 15 consecutive weeks)
(IR) Iran supreme leader Khamenei: repeats we will not negotiate with US, especially regarding Iran's military capabilities
(IL) Israel to hold new elections on Sept 17th after Netanyahu fails to form coalition govt

THURSDAY 5/30
(IT) ITALY DEBT AGENCY (TESORO) SELLS TOTAL €5.25B VS. €4.25-5.25B INDICATED RANGE IN 5-YEAR, 7-YEAR AND 10-YEAR BTP BONDS
*(US) Q1 PRELIMINARY GDP ANNUALIZED Q/Q: 3.1% V 3.0%E; PERSONAL CONSUMPTION: 1.3% V 1.2%E
(IT) Italy Dep PM Salvini (League): Ready to end Italy coalition government unless Five-Star Party supports my tax plan
GPS Reports Q1 $0.24 v $0.31e, Rev $3.70B v $3.76Be
COST Reports Q3 $2.05 v $1.83e, Rev $34.7B v $34.9Be
(US) Pres Trump said to be preparing to threaten Mexico with new tariffs as part of effort to force country to crack down on Central American migrants - Wash Post
(US) US President Trump: US to impose 5% tariff on all goods from Mexico. Tariffs will gradually increase to 25% "until illegal immigration problem is remedied"

FRIDAY 5/31
(DE) GERMANY MAY CPI SAXONY M/M: 0.3% V 0.9% PRIOR; Y/Y: 1.4% V 1.9% PRIOR
BUNDS Safe haven flows has German 10-year yield testing record lows of -0.20%
(DE) GERMANY MAY PRELIMINARY CPI M/M: 0.2% V 0.3%E; Y/Y: 1.4% V 1.6%E
(US) APR PERSONAL INCOME: 0.5% V 0.3%E; PERSONAL SPENDING: 0.3% V 0.2%E
(US) Atlanta Fed cuts Q2 GDP forecast to 1.2% from 1.3% prior

Barrons weekend summary

Barrons weekend summary: cover story positive on legacy credit card companies (V, MA, AXP); positive feature on MGM; cautious on CTVA 

Cover story: Positive on MA, V, AXP: Far from being disrupted by digital payment startups, legacy card companies are the bedrock upon which services such as AAPL’s Apple Pay operate; Despite countless efforts from tech companies, just one payment startup—PYPL—has managed to achieve significant scale, and it succeeded by focusing on the periphery of Visa and Mastercard’s world; Together, the three companies look virtually unassailable, and the so-called MVP—part tech and part finance—has crushed the FAANGs in terms of stock performance. 

Features: 1) Positive on MGM: Shares have been hit by a slowdown in Las Vegas, concerns about the economy and China, and doubts about management, but investors are overlooking positives, such as valuation based on free cash flow and EBITDA; 2) Positive on The Texas Permanent School Fund: The 165-year-old agency is one of the jewels of the $3.9T municipal bond market, backing $79.1B of debt from more than 800 school districts statewide—offering the ultimate in safety for bond investors; 3) Cautious on CTVA: Crop-protection and seeds and traits business set to be spun off from DWDP will be the largest stand-alone company selling crop inputs to farmers in 140 countries, but smaller rival FMC looks like the better bet now, as it is less exposed to the U.S. market; 4) Profile of Tony and Dina Isola, who manage 403(b) plans at Ritholtz Asset Management, and who say many teachers are woefully misguided when it comes planning for retirement, often buying into high-cost annuities and/or tax-deferred products that don’t offer growth; 5) Asset managers are addressing the issue of financial illiteracy with a broad range of initiatives, from Prudential’s practical advice to Fidelity’s efforts to rear a financially savvy generation, but the concern remains that consumers’ lack of financial knowledge is a “slow-burning national emergency.” 

Tech Trader: Mayfield Fund’s Navin Chaddha contends we’re seeing the emergence of new trillion-dollar industries in food, fuels, materials, diagnostics, therapeutics, computers, and more; he also says the renaissance of silicon will create industry giants, and that with the end of Moore’s Law, “new semiconductors are required for a cloud-native, data-dominated, AI-powered, IoT world.” 

Trader: The S&P 500’s four percent drop in May doesn’t seem all that steep, says Andrew Slimmon of Morgan Stanley Investment Management, who expects the index to drop to 2750 or so—down nearly seven percent from its all-time high; Cautious on KSS, DDS, JCP, JWN, M, HD: Department stores and other retailers face problems that nicer weather isn’t going to fix—shoppers are shifting their purchases online, competition is ramping up, and inventory is sitting dormant on shelves across the country. 

Interview: Glen Kacher and Jay Kahn of Light Street Capital “have identified and invested in some of the biggest changes in the tech world, from the launch of cloud computing to the growth of ride-sharing” (picks: UBER, Slack Technologies, Just Eat, FTCH). 

Profile: Tom Mandel, manager of the $2B Semper MBS Total Return fund, has followed mortgage-backed securities for most of his 35-year investment career—the small size and complexity of the market translates to higher yields (top holdings: ARSI/ARGENT, Invitation Homes, STACR, L STARZ, Green Point, Long Beach, CAS). 

European Trader: Positive on Renault: Shares of the French auto maker fell after then-chief executive Carlos Ghosn was arrested in Japan for misusing funds, but investors can safely look beyond that incident, and a fresh line of vehicles should put the company on the road to growth. 

Emerging Markets: Fundamental reforms enacted during Indian prime minister Narendra Modi’s first term should bear fruit in his second, including a national goods and services tax, a bankruptcy law to attack India’s legion of zombie companies, and a national ID card that enables direct payments into bank accounts.

Commodities: “Gasoline prices have eased at the pump after experiencing their biggest seasonal spike in eight years. But demand for the fuel is headed toward a record this summer, and prices might rebound, hitting a new peak for the year.”

Streetwise: Cautious on TSLA: For the electric-car maker, “any loss of confidence over future resale values could add to its present sales challenges,” says columnist Jack Hough, and while delivery has long been a concern, some investors are starting to worry about demand.

Trade war tensions continue to stoke uncertainty

TradeTheNews.com Weekly Market Update: Trade war tensions continue to stoke uncertainty
Fri, 24 May 2019 16:04 PM EST

Equity trade remained extremely sloppy this week as the growing tension between the US and China hung over markets. Huawei remained ground zero for the trade war as rhetoric around the controversial Chinese telecom name mushroomed. The White House was said to be considering an expanded black list of Chinese companies while reports circulated that China could retaliate against US tech companies or use its rare earth monopoly as an asymmetrical pressure tactic. By the week’s end, some analysts saw the seeds of a new Cold War splitting the world between two economic and technological blocs.

Brexit uncertainly also continued to drag on sentiment as PM May made one final gambit to gain support for her withdrawal bill. By Friday, the broad-based rejection of her new Brexit offer to Parliament forced her to step aside and begin the process for finding a new Conservative leader. Following the news officials in Europe and potential PM candidates in London agreed that the UK would still be leaving EU by the end of October, but chances of a ‘no deal’ Brexit rose at least modestly. That, along with more weak manufacturing and business confidence data reignited uneasiness about the potential for recession across Europe. Any hopes for firmer inflation were dampened by a technical sell off in oil, as crude prices slid below the 200-day moving average to near two-month lows. Persistent growth and trade worries kept pressure on US and European bond yields, with some hitting their lowest levels since 2017. For the week, the S&P lost 1.2%, the DJIA dropped 0.7%, and the Nasdaq gave up 2.3%.

In corporate news this week, Sprint and T-Mobile reached a deal with the FCC for merger approval, but hurdles still remain from potential antitrust action at the Justice Department or from state attorneys general. A federal judge ruled against Qualcomm, finding the company’s patent licensing practices violated antitrust law, sending shares down almost 15% on the week. Home Depot slipped after announcing that weak lumber prices and bad weather weighed on its Q1 results. Kohl’s missed expectations on earnings and its outlook, while JC Penney’s same store sales fell 5.5%, well below consensus. Lowe’s shares plummeted after it reported an EPS miss amid gross margin contraction, while Target jumped after seeing strong SSS and traffic in Q1.

SUNDAY 5/19
05/19 *(JP) JAPAN Q1 PRELIMINARY GDP Q/Q: +0.5% V -0.1%E ANNUALIZED GDP Q/Q: +2.1% V -0.2%E

MONDAY 5/20
LITE Cuts Q4 $0.65-0.77 v $0.91e (prior $0.85-1.00), Rev $375-390M v $416Me (prior $405-425M); Provides update on U.S. Department of Commerce entity list designation of Huawei; Discontinues all shipments to company

TUESDAY 5/21
HD Reports Q1 $2.27 v $2.17e, Rev $26.4B v $26.3Be
KSS Reports Q1 $0.61 v $0.67e, Rev $4.09B v $4.21Be
*(US) APR EXISTING HOME SALES: 5.19M V 5.35ME
(UK) PM May: I will offer vote to all on 2nd referendum assuming a Brexit deal has been agreed to first (conditional on bill passing first stage)
(SY) State Dept spokesperson: seeing signs that Syria could be renewing its use of chemical weapons; If Syrian govt uses chemical weapons, US and allies 'will respond quickly and appropriately'

WEDNESDAY 5/22
(CN) US said to now consider blacklisting up to 5 surveillance companies in China (follows report of possible blacklisting of Hikvision) - US financial press
QCOM US Federal Judge Lucy Koh rules against Qualcomm in Federal Antitrust Case, ordered to renegotiate licensing agreements - press
LOW Reports Q1 $1.22 v $1.33e, Rev $17.7B v $17.6Be
(US) Fed's Bullard (Dove, voter): would not rule out rate cut later this year - speaks in Hong Kong on US Economic Outlook
(US) Pres Trump: I told Democrats I wanted to do infrastructure but can't do it under these circumstances; there will be no infrastructure deal amid ongoing 'phony investigations'
*(US) FOMC MINUTES FROM MAY 1 MEETING: OFFICIALS SAW PATIENT APPROACH APPROPRIATE FOR 'SOME TIME'; MANY POLICYMAKERS SAID RECENT DIP IN PCE INFLATION LIKELY TO BE TRANSITORY
(US) Association of American Railroads weekly rail traffic report for week ending May 18th: 536.4K, -1.8% y/y (has fallen for 14 consecutive weeks)

THURSDAY 5/23
992.HK Reports Q4 Net $118M v $33M y/y, Rev $11.7B v $10.6B y/y
*(DE) GERMANY Q1 FINAL GDP Q/Q: 0.4% V 0.4%E; Y/Y: 0.7% V 0.7%E
(CN) China Commerce Ministry (MOFCOM) spokesperson Gao: US wrong practices escalated trade tensions with China; If US wants to keep talks, they should show sincerity
*(FR) FRANCE MAY PRELIMINARY PMI MANUFACTURING: 50.6 V 50.0E (3 month high)
(DE) GERMANY MAY PRELIMINARY PMI MANUFACTURING: 44.3 V 44.8E
*(EU) EURO ZONE MAY PRELIMINARY PMI MANUFACTURING: 47.7 V 48.1E
*(DE) GERMANY MAY IFO BUSINESS CLIMATE SURVEY: 97.9 V 99.1E; CURRENT ASSESSMENT SURVEY: 100.6 V 103.5E
BBY Reports Q1 $1.02 v $0.88e, Rev $9.14B v $9.14Be
(ZA) SOUTH AFRICA CENTRAL BANK (SARB) LEAVES INTEREST RATE UNCHANGED AT 6.75%; AS EXPECTED
*(US) MAY PRELIMINARY MARKIT MANUFACTURING PMI: 50.6 V 52.7E (lowest since Sept 2009)
*(US) APR NEW HOME SALES: 673K V 675KE
(CN) Pres Trump: there's a good possibility of a China trade deal; Huawei could be included in a China trade deal
(US) US Commerce Dept: Proposing rule to impose countervailing duties on countries that undervalue their currency relative to the US dollar

FRIDAY 5/24
(KR) North Korea said to take actions against U.S. distrust, hostility - Korean press
*(UK) APR RETAIL SALES (EX-AUTO /FUEL) M/M: -0.2% V -0.5%E; YOY: 4.9% V 4.2%E
(UK) PM May: I have strived to honor results of EU referendum; has done her best to deliver Brexit
*(UK) PM MAY ANNOUNCES TO STEP DOWN ON JUN 7TH
(CN) Premier Li Keqiang: China will expand tax cuts to stimulate economy; China has space to use policy tools for macro adjustments
(US) Atlanta Fed raises Q2 GDP forecast to 1.3% from 1.2% prior

Barrons weekend summary

Barrons weekend summary: positive feature on CERN 

Cover story: Despite the fact Donald Trump has escalated the trade war with China—though both countries will be able to withstand tariffs—the market is likely to prove resilient, and investors should “put aside the playbook for a trade war and global recession for now, but be prepared for uncertainty and bouts of stock market volatility for months to come.” 

Features: 1) Positive on AMAT, BWA, SCHW, REGN, TPR: Five stocks are cheap, with decent long-term growth prospects, and aren’t likely to face volatility because of the U.S.-China trade war; 2) Positive on BID, Christies, Phillips: Despite trade-war worries and stock market volatility, recent auctions in New York show a healthy luxury market, full of super-rich buyers as competitive as ever over precious works; 3) Positive on JWN: The Seattle-based retailer remains the best-positioned in the tough department-store sector, with a mix of full-price and discount stores, a pioneering online presence, and a reputation for superior service and affluent customers; 4) Positive on CERN: Shares have been “dead money” after an boom in 2015, because most doctors’ offices have embraced electronic health records, but they have become a hot investment again as big tech gets involved, and Cerner and other big players could be in a position to profit; 5) While industrial metals like copper have sold off since the U.S.-China trade dispute re-escalated in early May, the long-term consequences won’t be severe, barring a global recession—but soybeans are another story, and the farm belt will take a hit. 

Tech Trader: Positive on TTWO: While gaming giants EA and ATVI deal with disappointing releases, questionable pipelines, and declining enthusiasm for their non-sports franchises, Take-Two’s core game properties have proven to be stronger than ever—the company is in some ways the DIS of the videogame sector. 

Trader: Investors have become accustomed to central banks stepping in to bail out the markets, and there’s no reason to expect that to change—monetary policy could soon be joined by government spending of epic proportions to keep the economic cycle going; Cautious on KSHB: Even the cannabis industry will be hit by the U.S.-China trade war—the fast-growing company that supplies cannabis producers with packaging, chemicals, and vaping hardware war imports most of its goods from China; Cautious on PINS: Company “violated a cardinal rule of earnings conference-call management” by giving weak guidance: if a company can’t impress Wall Street out of the gate, investors will assume something ominous is brewing.

Interview: Nancy Lazar, chief executive of Cornerstone Macro says escalating tensions with China will trim U.S. growth, and may damage business confidence, but that the U.S. has underlying strength that will persist even though the expansion is “long in the tooth.” 

Profile: Masakazu Takeda, manager of the Hennessy Japan fund, takes a long-term, value-oriented philosophy with the $645M fund that has just 25 holdings—and isn’t a pure play on Japan (top 10 holdings: Softbank Group, Shimano, Nidec, Daikin Industries, Keyence, Recruit Holdings, Fast Retailing, Kao, Kubota, Unicharm). 

European Investor: As European Union voters head to the polls later this month to elect a new parliament, “the political fragmentation of Europe suggests that their decisions could contribute to a near-paralysis of EU institutions.”

Emerging Markets: China dominates emerging markets, accounting for one-third of global indexes, but the other two-thirds includes countries such as India that are relatively insulated from Beijing’s escalating trade conflict with Washington—and home to some exciting growth companies.

Commodities: Oil trading has been particularly volatile lately, as concerns mount about threats to both global supplies and demand—“The geopolitical risk environment is dangerously close to the levels we haven’t seen since the early stages of Operation Iraqi Freedom” says Robbie Fraser of Schneider Electric.

Streetwise: Real progress is being made in the fake meat industry, and companies such as BYND and Impossible Foods are growing, but big players such as TSN may get into the game, and investors may want to hold off on the shares for now.

Trade war escalates; UK Brexit talks remain at impasse

TradeTheNews.com Weekly Market Update: Trade war escalates; UK Brexit talks remain at impasse
Fri, 17 May 2019 16:13 PM EST

Stocks opened the week in freefall as risk appetite dried up, spurred by the US and China continuing to exchange barbs over trade. Also lurking large in the background were various press reports surrounding Iran suggesting there was growing concern for a potential US military confrontation in the Middle East. The S&P managed to hold the 2800 mark on Monday and stock investors became more comfortable with the escalating trade tensions as the week progressed. The President did delay a potential decision on auto import tariffs which helped US indices rebound sharply from Monday’s low. By Friday, reports that the Chinese were exasperated and ready to call off talks with the Trump administration all together were somewhat overshadowed by news the US, Mexico and Canada had reached a deal to end steel and aluminum tariffs, likely paving the way for USMCA ratification in Congress. The Chinese Yuan remained under significant pressure as data points coming from the region remained disappointing and reports continued to suggest trade talks were at a standstill. It resulted in Chinese press recycling reports that the PBOC would defend the 7 Yuan to the dollar level if the weakness accelerates. Friday also saw UK Brexit talks between PM May’s Conservative Party and the opposition Labour Party break down, leaving another round of indicative votes as the most likely course of action. For the week, the Dow lost 0.7%, NASDAQ declined 1.3% and the S&P dropped 0.8%. The Dow saw its first 4-week losing streak in three years.

On the corporate front this week, Disney reached a deal with Comcast to assume full operational control of the Hulu streaming service, effective immediately, with Comcast agreeing to sell its Hulu stake to Disney for $5.8B. Macy's announced an earnings beat and reaffirmed its outlook on strong online sales, as SSS held in positive territory. Walmart topped EPS estimates and also noted strong growth in e-commerce sales. Nvidia beat on the top and bottom line and guided in line with consensus, though the CFO on their conference call noted the Q2 outlook is somewhat lower than their expectation earlier in the quarter. Baidu shares took a dive after reporting its first earnings loss since 2005 and guiding Q2 below consensus. Boeing announced it has completed development of an updated software fix for the 737 MAX and said it would now work with the FAA to schedule certification test flights and submit final certification documents.

MONDAY 5/13
(US) Pres Trump tweets: Their is no reason for the U.S. Consumer to pay the Tariffs, which take effect on China today. This has been proven recently when only 4 points were paid by the U.S., 21 points by China because China subsidizes product to such a large degree.
(CN) Global Times Editor-in-chief Hu Xijin: China may stop purchasing US agricultural products and energy, reduce Boeing orders and restrict US service trade with China. Many Chinese scholars are discussing the possibility of dumping US Treasuries and how to do it specifically
(US) Pres Trump: will meet with China Pres Xi at G20 (June 28-29), believes US-China meeting at G20 could be fruitful

TUESDAY 5/14
*(CN) CHINA APR RETAIL SALES Y/Y: 7.2% V 8.6%E (lowest level since May 2003); RETAIL SALES YTD Y/Y: 8.0% V 8.4%E
*(CN) CHINA APR INDUSTRIAL PRODUCTION Y/Y: 5.4% V 6.5%E; YTD Y/Y: 6.2% V 6.5%E
DIS Disney and Comcast agree on Hulu’s future governance and ownership; Disney to assume full operational control of Hulu, effective immediately; extends NBCUniversal content agreement for 3 years
(US) Senior Trump administration officials reportedly suggested trade deal with China is NOT close and the U.S. could be in for a long trade war - Axios
*(DE) GERMANY MAY ZEW CURRENT SITUATION SURVEY: 8.2 V 6.3E; EXPECTATIONS SURVEY: -2.1 V +5.0E
*(UK) APR JOBLESS CLAIMS CHANGE: 24.7K V +22.6K PRIOR; CLAIMANT COUNT RATE: 3.0% V 3.0% PRIOR
*(UK) MAR AVERAGE WEEKLY EARNINGS 3M/Y: 3.2% V 3.4%E; WEEKLY EARNINGS (EX-BONUS): 3M/Y: 3.3% V 3.3%E
VOD.UK Reports FY18/19 Net -€8.02B v €2.44B y/y,adj EBITDA €14.1B v €14.2Be, Rev €43.7B v €45.2Be; Announces progressive dividend policy; 5G goes live on Jul 3, 2019
TKA.DE Reports Q2 full group** Net -€99M v +€240M y/y, Adj EBIT €353M v €495M y/y, Rev €10.64B v €10.44B y/y

WEDNESDAY 5/15
ACA.FR Reports Q1 Net €763M v € 856M y/y, Rev €4.86B v €4.9Be
*(DE) GERMANY Q1 PRELIMINARY GDP Q/Q: 0.4% V 0.4%E; Y/Y: 0.7% V 0.7%E
(CN) China Foreign Ministry spokesperson Geng Shuang: Reiterates it is the U.S. that is defining trade dispute as trade war; China is only taking actions in self-defense
*(EU) EURO ZONE Q1 PRELIMINARY GDP: 0.4% V 0.4%E; Y/Y: 1.2% V 1.2%E
700.HK Reports Q1 (CNY) Net 27.2B v 19.4Be, Op 36.7B v 30.7B y/y, Rev 85.5B v 88.7Be
M Reports Q1 $0.44 v $0.33e, Rev $5.50B v $5.53Be; 2019 strategic initiatives on track to deliver Rev growth
*(US) MAY EMPIRE MANUFACTURING: 17.8 V 8.0E (highest since Nov 2018)
*(US) APR ADVANCE RETAIL SALES M/M: -0.2% V 0.2%E; RETAIL SALES (EX-AUTO) M/M: 0.1% V 0.7%E
*(US) APR INDUSTRIAL PRODUCTION M/M: -0.5% V 0.0%E; CAPACITY UTILIZATION: 77.9% V 78.7%E
*(US) PRES TRUMP REPORTEDLY PLANS TO DELAY AUTO IMPORTS TARIFFS UP TO 6 MONTHS (in line with speculation from May 8th)
(IR) Iran Revolutionary Guards Corps commander: we're on the cusp of a full-scale confrontation with the enemy
*(AU) AUSTRALIA APR EMPLOYMENT CHANGE +28.4K V +15.0KE; UNEMPLOYMENT RATE: 5.2% V 5.0%E (8 month high for unemployment rate)

THURSDAY 5/16
(CN) China Commerce Ministry (MOFCOM) spokesperson Gao: Reiterates China strongly opposes U.S. bullying; no information on any plans for U.S. trade delegation to visit China at present
WMT Reports Q1 $1.13 v $1.02e, Rev $123.9B v $125.2Be
*(US) APR HOUSING STARTS 1.235M V 1.21ME; BUILDING PERMITS: 1.296M V 1.29ME
(US) Association of American Railroads weekly rail traffic report for week ending May 11th: 529K, -3.7% y/y (has fallen for 13 consecutive weeks)
(US) Atlanta Fed raises Q2 GDP forecast to 1.2% from 1.1% prior
(US) Treasury to sell $11B 10-year (r) TIPS; $26B 52-week bills
BA Announces completed development of updated software for 737 MAX - press
AMAT Reports Q2 $0.70 v $0.66e, Rev $3.54B v $3.48Be
NVDA Reports Q1 $0.88 v $0.82e, Rev $2.22B v $2.25Be
BIDU Reports Q1 $0.41 v $0.41e, Rev $3.59B v $3.59Be; announces $1B share buyback; Senior VP for search business resigns
(CN) China State Media Commentary: China may have no interest in continuing trade talks with the US for now; sees little "sincerity" in Pres Trump's approach

FRIDAY 5/17
(CN) China Central Bank (PBOC) said to not let CNY weaken past 7.00 per dollar - press (in line with prior reports)
(DE) German Business Association DIHK estimates that further U.S. tariffs of 25% on cars, car parts would cost German economy €6B per year
(US) Trump Administration releases proclamation on EU, Japan auto tariffs delay for at least 180 days (as expected); orders negotiations
*(US) MAY PRELIMINARY UNIVERSITY OF MICHIGAN CONFIDENCE: 102.4 V 97.2E (15-year high)

Barrons weekend summary

Barrons weekend summary: Cover story on selection dividend stocks; Positive features on JBHT and UPS; cautious on UBER 

Cover story: The case for dividend stocks has rarely been stronger. Lower interest rates—especially with the Federal Reserve signaling that it will not raise rates this year—provide support by making bonds less of a threat to dividend stocks; Barron’s found seven that investors should consider—they all possess good prospects for growing payouts, thanks to strong free-cash flows and sound capital-allocation priorities by their management (Positive on SRE, JPM, NEE, APD, HON, MKC, MSFT). 

Features: 1) Cautious on UBER: Ride-hailing company’s first day of trading after its initial public offering was the worst first-day performance for a giant U.S. IPO by a wide margin, a sign investors are hesitant to buy into what Uber called its “massive” global market opportunity; 2) Positive on UPS: Wall Street isn’t entirely enthusiastic about the delivery giant, but at $100, its shares look appealing after changing very little during the past five years, and bulls like the company’s conservative balance sheet and high credit ratings; 3) Positive on JBHT: Company known as the “king” of intermodal shipping—transporting goods on containers via low-cost rail, then switching to higher-cost, shorter-distance trucks—faces negative trends in the railway and e-commerce sectors, but the decline in share price is an overreaction, and the stock now looks cheap; 4) Cautious on Brown-Forman, MCPI: Sales of Kentucky bourbon and Tennessee whiskey have elbowed aside beer to become a favorite of millennials worldwide—revenues doubled for American whiskey suppliers in the past 10 years, but the trend, while it may not have peaked, will eventually slow down, and investors “should eye the exits.” 

Tech Trader: Positive on MTCH: The diminishing threat from FB’s plan to enter the online dating space has provided a tailwind for Match, which “has achieved a rare feat in the world of social-networking: persuading people to actually pay for the service,” many of whom may be wary of privacy issues at Facebook. 

Trader: The U.S. economy could get hit by a slowdown in demand due to the Federal Reserve’s previous interest-rate hikes and higher prices triggered by tariffs, says Michael Darda of MKM Partners—to prevent the worst-case scenario, the Fed might have to lower interest rates; Companies continue to spend large amounts of money on buybacks, but investors shouldn’t overlook spending on research and development—and how much they stand to gain by favoring the most innovative companies; Positive on GM: The latest round of investment in the automaker’s Cruise division, amounting to $1.15B, barely budged the stock, but investors should be more excited—autonomous driving is a major trend with the potential to remake the car business. 

Interview: James Anderson, head of Scottish investment firm Baillie Gifford’s global equities business, believes that a group of founder-led companies “of the utmost ambition” has the potential “for greatness at an extreme scale” (select holdings: AMZN, TSLA, BABA, Tencent).

Profile: Winslow Capital chief executive and chief investment officer Justin Kelly doesn’t hire anybody without an implied agreement they will spend their entire career at the firm, based on the belief turnover can damage the portfolio (MainStay Large Cap Growth Fund top 10 equity holdings: MSFT, AMZN, GOOG, B, UNH, CRM, FB, MA, PYPL, NKE). 

European Trader: Replacing Mario Draghi as president of the European Central Bank may well be the most important task for Europe’s leaders this year—but that doesn’t mean the most qualified candidate will get the job, which requires somebody with a serious résumé, political acumen, a vision of the ECB’s future, firm views on monetary policy, and a deep understanding of financial markets.

Emerging Markets: Investors are unsure about how to react to South Africa’s general election—pundits assumed the African National Congress would win re-election, but president Cyril Ramaphosa may not have a large enough margin of victory to neutralize rivals loyal to his predecessor, Jacob Zuma. 

Commodities: “Copper’s recent decline looks to be a temporary setback, as the industrial metal readies for a potentially significant supply shortage in the coming years.”

Streetwise: Investors should nonetheless consider putting some money in RSP or the smaller RVRS—doing so can produce handsome returns while providing a hedge after a long S&P 500 run that is “looking equal parts wonderful and weird,” says columnist Jack Hough.

US-China Trade Differences Resurface

TradeTheNews.com Weekly Market Update: US-China Trade Differences Resurface
Fri, 10 May 2019 16:05 PM EST

Global markets were waylaid this week by resurgent worries surrounding trade which coincided with renewed missile tests from North Korea. Both the S&P and NASDAQ tested below their 50-day moving averages for the first time since January, and the Russell 2000 briefly moved back into correction territory. Before Monday’s opening bell, President Trump had already announced tariffs would be raised to 25% by the end of the week while threatening to go even further. Repeatedly the President openly displayed his displeasure by confirming his belief China had backtracked on legal issues related to an already agreed-upon text of a proposed U.S. trade agreement, affecting nearly every chapter. Risk-off flows picked up in intensity as the week wore on. Treasury yields fell on both sides of the Atlantic. US CPI figures seemed to offer little to change the Fed’s narrative around inflation, as well. Wednesday’s 10-year Treasury auction saw some of the weakest demand in years, prompting speculation China may have backed away to send a signal to Washington.

Friday’s trade saw a significant reversal from the week’s lows after US and Chinese officials concluded two days of discussions in Washington. Despite the implementation of intensified US tariffs and the looming threat of even more down the pike, along with an open threat of retaliation by the Chinese, both sides agreed talks had remained constructive and would push forward in the future. The VIX popped to the highs of the year midweek, but moderated as markets seemed to become accustomed to the salvos of trade barbs. Emerging market currencies suffered and the Dollar gained significant ground against the Yuan. Dr. Copper retraced to the lowest level since January, and WTI crude got within a few pennies of $60 per barrel before rebounding after weekly crude stockpiles shrank. For the week, the S&P fell 2.2%, the Dow lost 2.2% and the NASDAQ shed 3%.

In corporate news this week, earnings season began to wind down, and Fox topped estimates in its first quarterly report as a standalone company, bolstered by strong growth in cable news revenue. Yelp shares slipped due to worries about its growth with new customers, despite reporting in-line with consensus. Marriott fell after posting a miss on top-line estimates and guiding Q2 profits below consensus. Intel moved lower after warning in an investor presentation that its move to a more competitive chip space could affect profit margins and medium-term revenues going forward. Communications infrastructure firm Zayo Group agreed to go private for $35/shr after months of reports of a potential takeover. Chevron announced it would not raise its offer for Anadarko and accepted the $1B breakup fee after Occidental finalized its $38B competing bid to acquire the hydrocarbon E&P giant. Uber opened for trading below its IPO price of $45 as investor appetite wobbled after a long journey going public.


SUNDAY 5/5
(CN) President Trump tweet indicates that tariffs on some China goods will go from 10% to 25% starting Friday and some goods currently not taxed will be taxed at 25%
BA Reportedly did not tell anyone about issue with cockpit safety alert in 737 Max for a year - US Press

MONDAY 5/6
(CN) China Vice Premier Liu He likely to delay trip to US by 3 days and shorten trip to only 1 day for trade talks this week (in response to Trump's tweets on raising tariffs) - SCMP
*(DE) GERMANY APR FINAL SERVICES PMI: 55.7 V 55.6E (confirms 70th month of expansion)
KHC Discloses reached a determination to restate the Company’s consolidated financial statements - filing
(TR) Turkey Election Board reportedly has nullified the mayoral vote in Istanbul; AKP party rep says election will be re-run on June 23 - Turkish press
(US) Trade Rep Lighthizer: confirms US will raise China tariffs effective 12:01ET on Friday if no deal; confirms China was reneging on commitments - comments to reporters

TUESDAY 5/7
*(AU) RESERVE BANK OF AUSTRALIA (RBA) LEAVES CASH RATE TARGET UNCHANGED AT 1.50%; NOT EXPECTED
ABI.BE Reports Q1 $0.79 v $0.90e, adj EBITDA $4.99B v $5.10Be, Rev $12.6B v $12.8Be; confirms mulling sale Asia Pacific unit in Hong Kong IPO
*(US) MAR JOLTS JOB OPENINGS: 7.488M V 7.350ME
*(US) MAR CONSUMER CREDIT: $10.3B V $16BE
*(NZ) NEW ZEALAND CENTRAL BANK (RBNZ) CUTS OFFICIAL CASH RATE (OCR) BY 25BPS TO 1.50% (record low); AS EXPECTED (resumes its easing with its 1st since Nov 2016), adjusts rate path for another cut
*(CN) CHINA APR TRADE BALANCE (CNY): 93.6B V 216.8BE

WEDNESDAY 5/8
7203.JP Reports FY18/19 Net ¥1.88T v ¥2.49T y/y; Op ¥2.47T v ¥2.40T y/y; Rev ¥30.2T v ¥29.4T y/y; to buyback ¥300B in shares (1.73% of shares outstanding)
SIE.DE Reports Q2 Net €1.92B v €1.20Be, Industrial Business Profit €2.41B v €2.20Be, Rev €20.9B v €21.0Be
(CN) China said to have backtracked on legal issues through text of proposed U.S. trade agreement, affecting nearly every chapter - press
(CN) US govt issues formal notice that 25% tariffs on $200B worth of Chinese goods will take effect Friday
(US) Association of American Railroads weekly rail traffic report for week ending May 4th: 535K, -2% y/y (has fallen for 12 consecutive weeks)
INTC Guides 3-yr Rev growth in low-single digits to ~$76-78B - investor day

THURSDAY 5/9
DTE.DE Reports Q1 adj Net €1.18B v €1.30Be, adj EBITDA (adj for leases) €5.94B v €6.0Be, Rev €19.5B v €19.3Be
MT.NL Reports Q1 Net $414M v $1.19B y/y, EBITDA $1.65B v $1.7Be, Rev $19.2B v $18.4Be
(KR) North Korea said to fire an unidentified projectile - press
*(US) APR PPI FINAL DEMAND M/M: 0.2% V 0.3%E; Y/Y: 2.2% V 2.3%E
(US) Atlanta Fed cuts Q2 GDP forecast to 1.6% from 1.7% prior
*(CL) CHILE CENTRAL BANK (BCCH) LEAVES OVERNIGHT RATE TARGET UNCHANGED AT 3.0%; AS EXPECTED
APC Agrees To Be Acquired By Occidental; implied value of the cash and stock offer is ~$75.53/share (based on Occidental's closing price); Chevron to receive the $1.0B breakup fee

FRI 5/10
*(CN) TRUMP IMPLEMENTATION OF TARIFFS ON $200B IN CHINA GOODS FROM 10% TO 25% TAKES EFFECT
*(CN) CHINA ANNOUNCES TO RETALIATE TO US TARIFF INCREASE (awaiting specifics)
*(US) APR CPI M/M: 0.3% V 0.4%E; CPI EX-FOOD/ENERGY M/M: 0.1% V 0.2%E; CPI NSA: 255.548 V 255.800E
UBER IPO opens for trade at $42.00
(CN) China trade negotiator Liu: Trade talks with the US went fairly well
(US) President Trump tweet: "Over the course of the past two days, the United States and China have held candid and constructive conversations on the status of the trade relationship between both countries. The relationship between President Xi and myself remains a very strong one, and conversations into the future will continue. In the meantime, the United States has imposed Tariffs on China, which may or may not be removed depending on what happens with respect to future negotiations!"