ECB Extends QE and Reflation Rally Continues

TradeTheNews.com Weekly Market Update: ECB Extends QE and Reflation Rally Continues
Fri, 09 Dec 2016 16:02 PM EST

Stocks had a positive week in the US and globally, with many hitting new all-time highs and the S&P 500 posting consecutive record levels over the past three sessions. On the week, the S&P and DJIA each gained 3.1%, while the Nasdaq surged 3.6%. After the historic OPEC agreement and talks with non-OPEC producers this weekend expected to be fruitful, cuts set by the oil cartel last week seem to be real. And with a Fed rate decision also on the horizon, the markets have heavily discounted a likely hike in December. In the past, the dark shadow of higher rates pushed stock prices down, whereas now expected corporate tax cuts and deregulation have more than offset the higher cost of money.

The market rally was also given extra fuel by the hoped-for extension of the ECB asset buying program. The market reacted positively after Thursday's meeting, which saw the ECB extend purchases, but at a reduced amount. ECB President Draghi said purchases will continue through Dec 2017, an extension of 9 months, while the size of purchases will be reduced to $60B from $80B as of April 2017. Under the current macro narrative, bonds are the target, with the inevitability of higher interest rates and a larger federal budget pushing prices lower. Over the week, 10-year Treasuries gained 7bps in yield going from 2.39% to 2.46%, while 30-year bonds were hit harder, gaining 9bps, from 3.06% to 3.15%.

In corporate news, President-elect Trump gained some market attention by targeting both the pharmaceutical industry and Boeing in some pointed comments. On Tuesday, Trump told Boeing through Twitter that the price of its next delivery for Air Force One was too high and would have to be renegotiated, and on Wednesday, the president-elect stated in an interview that drug prices would have to come down, which sent pharmaceutical sector plunging and the NASDAQ Biotechnology Index down 3% on the day. The financial sector was one of the big gainers this week, rising 4.4%, helped by interest rate normalization and a high probability of easier capital requirements. The Italian financial sector was an exception, with banks selling off after Italian voters said "no" to constitutional reforms that would have smoothed capital raising by Monte Paschi and other banks. Energy deals were busy this week: Glencore is said to be in the final stage of a deal to buy 19.5% of Russian Rosneft at €10.2B, while a Macquarie-led consortium plans to buy a 61% stake in the UK National Gas grid for $7B, with the Qatari Government involved in both deals. Also Sky disclosed it received a takeover approach from 21st Century Fox, which already hold a 39% stake.


SUNDAY 12/4
(CN) CHINA OCT CAIXIN CHINA SERVICES PMI: 53.1 V 52.4 PRIOR (16-month high)
*(HK) HONG KONG NOV COMPOSITE PMI: 49.5 V 48.2 PRIOR; highest since Mar 2015; 21st consecutive month of contraction
(IT) Italy PM Renzi: My govt ends here (resigns as promised); Turnout was higher than anyone expected; Italian people have spoke
(IT) Italy referendum early exit polls shows "no" vote ahead on PM Renzi's proposed Constitutional reforms
(AT) Austria Presidential election: Center-left candidate Alexander Van der Bellen defeats far-right Norbert Hofer by 53.3% to 46.7% margin

MONDAY 12/5
*(EU) EURO ZONE DEC SENTIX INVESTOR CONFIDENCE: 10.0 V 14.3E
*(US) NOV FINAL MARKIT SERVICES PMI: 54.6 V 54.9E (lowest since Sep 2016)
*(US) NOV ISM NON-MANUFACTURING COMPOSITE: 57.2 V 55.5E
(US) Nov Labor Market Conditions Index Change: 1.5 v 0.2e
*(AU) RESERVE BANK OF AUSTRALIA (RBA) LEAVES CASH RATE TARGET (OCR) UNCHANGED AT 1.50%; AS EXPECTED

TUESDAY 12/6
*(DE) GERMANY OCT FACTORY ORDERS M/M: 4.9% V 0.6%E; Y/Y: 6.3% V 1.6%E
*(EU) EURO ZONE Q3 FINAL GDP Q/Q: 0.3% V 0.3%E; Y/Y: 1.7% V 1.6%E
*(US) Q3 FINAL NONFARM PRODUCTIVITY: 3.1% V 3.3%E; LABOR COSTS: 0.7% V 0.3%E
(US) OCT FINAL DURABLE GOODS ORDERS: 4.6% V 3.4%E; DURABLES EX TRANSPORTATION: 0.8% V 0.5%E
LNKD: EU approves Microsoft-LinkedIn merger with conditions, as expected - press
(US) Atlanta Fed GDPNow: cuts Q4 GDP forecast to 2.6% from 2.9% on Dec 1st
VA: Justice Department approves Virgin-Alaska merger, as expected
9984.JP: President-elect Trump tweets: "Masa (SoftBank) of Japan has agreed to invest $50 billion in the U.S. toward businesses and 50,000 new jobs"
*(AU) AUSTRALIA Q3 GDP Q/Q: -0.5% (first contraction in 5 years) V -0.1%E; Y/Y: 1.8% V 2.2%E (lowest annual pace since 2008)

WEDNESDAY 12/7
*(CN) CHINA NOV FOREIGN RESERVES: $3.052T V $3.061TE (5th straight month of decline and largest monthly amount since January; Lowest level since Mar 2011)
*(IN) INDIA CENTRAL BANK (RBI) LEAVES REPURCHASE RATE UNCHANGED AT 6.25%; NOT EXPECTED
*(UK) OCT INDUSTRIAL PRODUCTION M/M: -1.3% V 0.2%E; Y/Y: -1.1% V 0.5%E (largest decline since 2012)
*(UK) OCT MANUFACTURING PRODUCTION M/M: -0.9% V +0.2%E; Y/Y: -0.4% V +0.7%E
*(PL) POLAND CENTRAL BANK (NBP) LEAVES BASE RATE UNCHANGED AT 1.50%; AS EXPECTED
(US) President-elect Trump: will bring down drug prices - Time Magazine
*(CA) BANK OF CANADA (BOC) LEAVES INTEREST RATES UNCHANGED AT 0.50%; AS EXPECTED
ALR: Abbott seeks to terminate $56/shr cash Alere acquisition; files complaint seeking termination in the Delaware Court of Chancery
(US) Association of American Railroads weekly rail traffic report for week ending Dec 3rd: 553.1K carloads and intermodal units, +2% y/y (third straight week of gains)
COST: Reports Q1 $1.17 (ex $0.07 benefit from legal settlement) v $1.19e, R$28.1B (including member fees) v $28.4Be
*(JP) JAPAN Q3 FINAL GDP Q/Q: 0.3% V 0.5%E; ANNUALIZED GDP: 1.3% V 2.3%E (3rd straight expansion both quarterly and annualized)
*(CN) CHINA NOV TRADE BALANCE $44.6B V $46.9BE

THURSDAY 12/8
(CN) China Passenger Car Association (PCA): China Nov retail auto sales at 2.42M, +19.8% y/y
*(EU) ECB LEAVES MAIN 7-DAY REFINANCING RATE SEEN UNCHANGED AT 0.00%, AS EXPECTED
*(EU) ECB POLICY STATEMENT: EXTENDS ASSET PURCHASE TARGET UNTIL DEC 2017 (9-month extension); SCALES BACK PURCHASES TO €60B AFTER APRIL
*(US) INITIAL JOBLESS CLAIMS: 258K V 257KE; CONTINUING CLAIMS: 2.01M V 2.05ME
(EU) ECB chief Draghi: To buy €60B in QE from Apr until Dec; reiterates that program can be amended if needed - prepared remarks
*(EU) ECB chief Draghi: discussed option of continuing QE at full €80B for 6 months, decided instead to reduce QE to €60B in April - Q&A
(US) Fed reports Q3 Financial Accounts: Household Change in Net Worth: $1.59T v $0.84T prior
*(CN) CHINA NOV CPI M/M: 0.1% V 0.7% PRIOR; Y/Y: 2.3% (7-month high) V 2.2%E
*(CN) CHINA NOV PPI Y/Y: 3.3% V 2.3%E (3rd straight y/y positive print; 5-year high)

FRIDAY 12/9
*(FR) FRANCE OCT INDUSTRIAL PRODUCTION M/M: -0.2% V +0.6%E; Y/Y: -1.8% V -0.6%E
*(FR) FRANCE OCT MANUFACTURING PRODUCTION M/M: -0.6% V +0.7%E; Y/Y: -1.5% V +0.1%E
LLY: Provides detailed study from failed Alzheimer's drug Solanezumab trial
*(US) DEC PRELIMINARY MICHIGAN CONFIDENCE: 98.0 V 94.5E
SKY.UK: Discloses possible offer for Sky plc by 21st Century Fox at £10.75/shr in cash; forms independent committee to consider proposal terms
(US) Atlanta Fed maintains Q4 GDP forecast at 2.6%, no change from Dec 6th
(US) Weekly Baker Hughes US Rig Count: 624 v 597 w/w (+4.5%) (4th straight weekly increase)

Barrons weekend update

Barrons weekend update: positive on ARCH 

Cover story: A federal debt that's nearly $19T leaves less flexibility for the U.S. to fund infrastructure projects, but that doesn't mean they shouldn't be undertaken-failing to do so would be more expensive in the long run because of the affect crumbling infrastructure has on productivity; Historically low rates and the possibility of 100-year bonds should provide incentives for the government to act. 

Features: 

1) Barron's list of the top 10 stock picks for 2017 includes GOOGL, AAPL, C, DAL, Deutsche Telekom, MRK, NVS, TOL, UL, DIS; 

2) The lower corporate tax rates the Trump administration plans to impose will help retailers such as TJX and FL more than struggling ones such as GME, AEO, JCP; 

3) Positive on ARCH: Coal company emerged from bankruptcy having made significant changes, and should benefit from the shifts in supply and demand as it picks up orders for thermal and metallurgical coal.

Tech Trader: T's DirectTV NOW "looks to be a great product, but selling 60 channels of live video at close to, or below, cost seems unwise; Less media regulation under the Trump administration could make vertical integration for media companies such as VZ, DIS, VIA, FOXA, DISH an imperative. 

Trader: Investors are no longer buying stocks whole hog, but are rotating their money from one part of the market to another, keeping a lid on the S&P for now, says Michael Shaoul of Marketfield Asset Management; The recent OPEC deal is a game changer, creating the possibility the oil glut will fade as early as the first quarter of 2017, says MS analyst Evan Calio; The market has accepted that tax cuts are a given under Donald Trump, but Wall Street is trying to figure out how much companies will gain from lower tax rates. 

Interview: John Levin and Jack Murphy of Levin Capital looks for value-priced stocks with potential catalysts, and they see plenty of opportunities in the market (picks: DOW, DD, Nestle, NOK; pan: XOM). 

Profile: Jenny Jones, portfolio manager of Hartford Schroders U.S. Small/Mid Cap Opportunities fund, looks for mispriced companies and companies that grow earnings consistently (top 10 holdings: ARMK, PVH, VWR, VNTV, KAR, SPB, ROL, GHC, XRAY, CPHD). 

Small Caps: Positive on EVC: Broadcaster stands to benefit from a growing Hispanic market in the U.S., and its valuable spectrum holdings could help send shares higher. Follow-Up: "If the past is prologue, the Trump Treasury could go ahead with 50- or 100-year bond sales without further market disruption"; "Double-digit prices for crude oil are here to stay. But $100 crude is likely gone for good, as is OPEC's dominance of the market." 

European Trader: When it meets on December 8 amid a backdrop of downside risks to economic growth from political uncertainty, the European Central Bank's governing council could signal more quantitative easing. 

Asian Trader: China Unicom will invite BIDU, BABA, and Tencent to become shareholders, but investors should be cautious about rushing after the threesome into the stock because of Beijing's uncertain role. 

Emerging Markets: Many emerging markets face a bumpy ride ahead following the presidential election, but countries such as Brazil, India, and Poland have corporate-earnings strength. 

Commodities: Arabica futures prices fell in November as new data pointed to higher-than-expected supply in the current season, which could weigh on prices through next year. 

Streetwise: The Trump administration isn't looking like the anti-establishment outfit the president-elect's working-class voters might have expected, but that doesn't matter to investors-especially those holding financial services stocks.

OPEC Cuts; Fed on Track to Hike

TradeTheNews.com Weekly Market Update: OPEC Cuts; Fed on Track to Hike
Fri, 02 Dec 2016 16:11 PM EST

Markets entered the week focused on Vienna, and growing doubts about whether OPEC and in turn non-OPEC producers could come to an accord. Ultimately the Saudis appeared to blink and an agreement was reached that would cut production by 1.2M bpd to 32.5M bpd as laid out in September's tentative framework in Algiers. Crude prices moved up into the closed door meeting on Wednesday and ended the week up 10% from the lows. The US oil patch saw a dramatic rally with some shale names jumping more than 20%. The 6-month production cut that goes into effect with the New Year is seen as a potential boon for well capitalized US producers who will not be participating in any quotas.

Global economic data continued to paint a solid picture heading into the final month of the year, particularly here in the US. November manufacturing readings largely topped estimates while new orders saw growth. Friday's Labor Department report saw several surprises in the details but the bottom line did not differ greatly from expectations. Job growth was steady, labor market slack continues to diminish, and the case for a December rate hike remains intact.

US Treasury yields hit fresh highs mid-week propelled by a continuation of the post-election reflation trade and the surge in oil prices. After making a run at 2.5% in the benchmark 10-year yield, Treasury prices were firming into the jobs numbers on Friday. Yields moved down despite the lowest print in the unemployment rate since 2007. The Dollar index drifted back below 101, but as with most asset classes, price action remains well within recent ranges and suggests post-election trends remain entrenched. Overall, stocks trended lower for the first time since the US election, and for the week the S&P500 dropped 1.1% and the Nasdaq fell 2.7%, while the DJIA eked out a 0.1% gain.

In corporate news, Caterpillar threw some dirt on the rotation into the infrastructure play, cautioning that FY17 analyst earnings consensus is overly optimistic given the expected headwinds. Starbucks shares took a hit after CEO Howard Schultz said he would cede the CEO role to his lieutenant Kevin Johnson in April. Luxury retailer Tiffany Co. blew out expectations for Q3, but merely affirmed FY16 guidance in part due to the drag on sales at its New York flagship store caused by security cordon around the adjacent Trump Tower.

MONDAY 11/28
STAN.UK: Reportedly set to unveil wider global job cuts as early as this week - financial press
*(EU) EURO ZONE OCT M3 MONEY SUPPLY Y/Y: 4.4% V 5.0%E

TUESDAY 11/29
*(EU) EURO ZONE NOV BUSINESS CLIMATE INDICATOR: 0.42 V 0.60E; CONSUMER CONFIDENCE (FINAL): -6.1 V -6.1E
(IT) ECB ready to temporarily step up purchases of Italian government bonds if Dec 4th Referendum drives up borrowing costs- financial press
*(DE) GERMANY NOV PRELIMINARY CPI M/M: 0.1% V 0.1%E; Y/Y: 0.8% V 0.8%E
*(US) Q3 PRELIMINARY GDP PRICE INDEX: 1.4% V 1.5%E; CORE PCE Q/Q: 1.7% V 1.7%E
TIF: Reports Q3 $0.76 v $0.67e, R$949M v $923Me
*(US) Q3 PRELIMINARY GDP ANNUALIZED Q/Q: 3.2% V 3.0%E; PERSONAL CONSUMPTION: 2.8% V 2.3%E
(IR) Iran Oil Min Zanganeh: Iran will NOT cut oil production
*(US) NOV CONSUMER CONFIDENCE: 107.1 V 101.5E (highest since July 2007)

WEDNESDAY 11/30
*(EU) EURO ZONE NOV ADVANCE CPI ESTIMATE Y/Y: 0.6% V 0.6%E (Highest level since Apr 2014); CPI CORE Y/Y: 0.8% V 0.8%E
*(IN) INDIA Q3 GDP Y/Y: 7.3% V 7.5%E
*(US) NOV ADP EMPLOYMENT CHANGE: +216K V +170KE
*(US) OCT PCE CORE M/M: 0.1% V 0.1%E; Y/Y: 1.7% V 1.7%E
*(US) OCT PCE DEFLATOR M/M: 0.2% V 0.3%E; Y/Y: 1.4% V 1.5%E
*(US) OCT PERSONAL INCOME: 0.6% V 0.4%E; PERSONAL SPENDING: 0.3% V 0.5%E
*(US) NOV CHICAGO PURCHASING MANAGER: 57.6 V 52.5E (highest since Jan 2015)
(US) Atlanta Fed GDPNow: cuts Q4 GDP forecast to 2.4% from 3.6% on Nov 23rd
*OPEC Ministers comment after meeting concludes: confirms cutting output to 32.5M bpd, 6 month agreement starts in Jan and could extend it another 6 months at May meeting; seeks 600K bpd in cuts from non-OPEC producers
*(BR) BRAZIL CENTRAL BANK (BCB) CUTS SELIC TARGET RATE BY 25BPS TO 13.75%; AS EXPECTED
*(AU) AUSTRALIA Q3 PRIVATE CAPITAL EXPENDITURE (CAPEX) Q/Q: -4.0% V -3.0%E
*(CN) CHINA NOV MANUFACTURING PMI (Gov't official): 51.7 V 51.0E (4th consecutive expansion and highest since July 2014)
*(CN) CHINA NOV CAIXIN PMI MANUFACTURING: 50.9 V 51.0E; 5th consecutive expansion
(HK) Macau Nov Casino Rev 18.8B Patacas v 18.4B m/m, +14.4% y/y (4th consecutive increase, largest gain since Feb 2014) v 8.8% prior

THURSDAY 12/1
GLEN.UK: Trading update: Raises FY16 Marketing EBIT at upper end of $2.5-2.7B; Guides initial FY17 illustrative cash flow $6.5B, EBITDA $14.0B; Cuts Long-term EBIT $2.2-3.2B (prior $2.7-3.7B)
*(UK) NOV PMI MANUFACTURING: 53.4 V 54.4E (4th month of expansion)
*(EU) EURO ZONE OCT UNEMPLOYMENT RATE: 9.8% V 10.0%E (lowest since Sept 2011)
*(US) INITIAL JOBLESS CLAIMS: 268K V 253KE; CONTINUING CLAIMS: 2.08M V 2.03ME
*(US) NOV FINAL MARKIT MANUFACTURING PMI: 54.1 V 53.9E (highest since Oct 2015)
*(US) NOV ISM MANUFACTURING: 53.2 V 52.5E; PRICES PAID: 54.5 V 54.5E
CAT: Guides FY17 R$38B v $38.1Be, sees FY17 EPS $3.25 consensus ex restructuring as too optimistic considering expected headwinds (Zack's FY17 consensus estimates is $3.36e) - investor presentation
(US) Atlanta Fed GDPNow: raises Q4 GDP forecast to 2.9% from 2.4% on Nov 30th
SBUX: *CEO Howard Schultz to step down, to become exec Chairman; COO Kevin Johnson to take over as CEO; effective April 3, 2017

FRIDAY 12/2
*(US) NOV UNEMPLOYMENT RATE: 4.6% V 4.9%E (lowest since 2007)
*(US) NOV CHANGE IN NONFARM PAYROLLS: +178K V +180KE
*(US) NOV AVERAGE HOURLY EARNINGS M/M: -0.1% V +0.2%E; Y/Y: 2.5% V 2.8%E; AVERAGE WEEKLY HOURS: 34.4 V 34.4E
*(CA) CANADA NOV NET CHANGE IN EMPLOYMENT: +10.7K V -15.0KE; UNEMPLOYMENT RATE: 6.8% V 7.0%E
DAL: Reports Nov Load factor 85% v 84.1% y/y; Affirms Q4 metrics guidance
(US) CMS report: 2015 US health care spending +5.8% y/y to $3.2T

Barrons weekend summary

Barrons weekend summary: positive on BHI, MGM 
Cover story: Donald Trump's proposal to slash the corporate tax rate form 35% to 15% might be too much, since it could significantly reduce the government's tax haul and add to the country's large debt burden, but a cut to 22% would be revenue-neutral, allowing businesses to produce just enough additional taxable income to offset the effect of the lower rate. 

Features: 
1) Profile of Michael Petry, chief portfolio manager for Danske Invest Hedge Fixed Income Strategies, believes global bond investors will have to navigate markets in which more interest-rate hikes will follow the one likely to occur in December; 
2) Positive on BHI: The logic behind Baker Hughes' planned merger with GE's oil-and-gas unit makes sense, and could set up the new company-which would be less tied to oil-price cycles-to profit as energy prices rise; 
3) Under a Trump administration, more merger deals are likely to succeed, and M&A arbitrate could remain a profitable investment strategy, yielding annualized double-digit percentage returns; 
4) Positive on MGM: Company stands to benefit from Las Vegas' move to diversify beyond gambling into areas such as entertainment and professional sports, and it should continue to see strong earnings and cash flow. 

Tech Trader: Positive on PSTG, NMBL, NTNX: Promising flash-based data-storage-equipment vendors could be takeover targets for larger tech companies that are falling behind in innovation, such as HPE and CSCO; VEEV, TEAM, and NOW could also be of interest to bigger rivals. 

Trader: A cut of six to seven percentage points in corporate tax rates should result in a 10% increase in earnings-per-share for small caps, says Jason Pride of Glenmede; Short-sellers have been taken by surprise by the post-election rally, and don't seem as if they're going to fight the new upward trend for now; Cautious on AXP: Card company has lagged in boosting its rewards program and could be squeezed by a trend in which consumers are paying off their balances each month. 

Interview: Larry Jeddeloh, founder of TIS Group and publisher of the firm's Institutional Strategist newsletter, likes pipelines, defense stocks, and the dollar, and is betting against 10-year Treasuries (picks: UUP, ENB, ETP, ITA, GD, TBF). 

Small Caps: Positive on TRCO: Chicago-based broadcaster took a hit because of a drop in political advertising during the presidential election, but the company is asset-rich, the market doesn't appear to appreciate the value of its properties-and its asset value could be twice its current share price. 

Follow-Up: 
1) Cautious on PG: Company has narrowed its focus with the sale of many of its brands, but the shares, which are up since last November, could stall if these efforts don't prove sufficient, and investors may want to take profits; 
2) Puerto Rico's new governor, Ricardo Rossello, is viewed on Wall Street as a serious leader who wants to put the island on stronger financial footing, and his efforts to restructure its debt could benefit municipal bond holders. 

European Trader: Italy's December 4 constitutional referendum-which seeks to strip the upper house of much of its power-could fail, leading to the fall of prime minister Matteo Renzi's government, which would endanger banks and put more pressure on the plummeting euro. 

Asian Trader: The execution of the Indian government's unprecedented decision to take 500- and 1,000-rupee notes out of circulation was badly flawed, a situation that could derail the country's growth next year. 

Emerging Markets: A stronger dollar resulting from the election of Donald Trump means emerging market currencies are likely to weaken, traders will flee risky assets, and emerging-market stocks and bonds should get cheaper. 

Commodities: The cotton market has been heating up as winter "sweater season" approaches, but prices are likely to drop amid a global oversupply that hasn't been dented by shortfalls in India and bad weather in China. 

Streetwise: Sentiment is crucial to the way the market operates; the fact that it matters can be seen in a recent CivicScience consumer survey, which found that American voters changed their holiday-gift plans after the election.

Barron's weekend update

Barron's weekend update: positive on KMX 
Cover story: To help support his administration's ambitious spending and tax-cut plans at a time when the nation faces massive debt, Donald Trump may want to consider issuing Treasury bonds for the longest possible term, perhaps 100 years, as some other countries have done. 

Features: 
1) In the wake of Donald Trump's victory, bonds have sold off sharply, making prices more attractive for a variety of municipal-bond close- and open-end funds, taxable closed-ends, and preferred stocks; 
2) Positive on KMX: Country's largest used-car seller is likely to benefit from dropping prices for used cars and a flood of off-lease vehicles about to hit the market; shares could see 20% upside; 
3) Cautious on YERR: Company has secured $1B in financing from U.S. conglomerate Amanda Enterprises, but investors should be wary of the suspect track record of its CEO, George Wight.

Tech Trader: Positive on Tectonic Audio Labs: Washington-based startup has developed a technology for small speakers that can produce brilliantly clear sound, which could help the streaming-music sector. 

Trader: The combination of better jobless claims and retail sales numbers with Donald Trump's stimulus plan could drive economic growth up by 3% or more in Q4; Small-cap stocks may slow down a bit after a recent rally, but they could outperform large-caps in the next year; Positive on UAL: Shares of the airline look to be the strongest in its sector based on fundamentals, and operating profit margins should continue to rise because of reduced costs and better hub management. 

Profile: Danton Goei, manager of the Davis Globalfund, is concentrated, with 54 holdings versus more than 2,000 for its benchmark (top 10 holdings: AMZN, GOOGL, Encana, APA, Berkshire Hathaway, WFC, Naspers, Did Chuxing Series A, JPM, JD). Barron's Roundtable: Four top investors-Phil Blancato of Ladenburg Thalmann Asset Management, Bill Roach of Globalt Investments, Keith Goddard of Capital Advisors, and Ben Johnson of Morningstar - say investors will continue to face the same big issues even under a Trump administration. 

Small Caps: Positive on ATRO: Shares of aerospace-parts maker are down because of problems at an ancillary unit, giving investors a chance to take advantage of the weakness. 

Follow-Up: Positive on NVDA, AMD: Shares of chip makers are benefiting from the companies' growing strength in the cloud market and have more upside, while earlier optimism about MU has yet to pan out; Positive on HAR: Samsung's acquisition of the dashboard electronics company implies a 5% annualized return for Harman investors who hold on to their shares; Positive on SAVE: Shares still have 20% upside as new chief executive Robert Fornaro continues to make changes. 

European Trader: "Technology stocks have fallen out of favor in Europe in recent weeks, but the sector still offers value for long-term investors," and shares such as Temenos, SAP, and Legrand are good long-term plays. 

Asian Trader: CS global chief investment officer Michael Strobaek says Australian shares are reasonably priced, and that it isn't fair to call China a currency manipulator. 

Emerging Markets: In the long term, Turkey can expand its export base, and the weak Turkish lira only helps on that score. 

Commodities: The prolonged bear market in corn could soon end, because supply may be reaching a peak while demand is still growing. 

Streetwise: Donald Trump's election notwithstanding, "the dynamics that keep Treasury yields low haven't gone away. Inflation can't be willed into existence."

Post-Election Reflation Trade Continues

TradeTheNews.com Weekly Market Update: Post-Election Reflation Trade Continues
Fri, 18 Nov 2016 16:04 PM EST

The post US election money flows largely extended into a second week, but moderation was seen across various sectors and asset classes. The Trump reflation trade continued to push interest rates higher and was aided by economic data and Federal Reserve commentary that essentially clinched a rate hike is coming at next month's monetary policy meeting. Outside of the chatter surrounding the President-elect's rumored cabinet picks, the question markets shifted most of their focus onto was just how many more hikes could follow in 2017. Against that backdrop the US benchmark 10-year yield rose above 2.3% for the first time since ealry 2015. The spread over the comparable German 10-year yield widened to levels not seen since the late 1980's. The US Dollar continued to surge, particularly against emerging market currencies, including another 1% move against the Chinese Yuan this week. Currency traders prepared for seasonal FX liquidity to ebb which could allow for further aggressive moves. The Euro is within striking distance of the post financial crisis low of 1.0460 and after that potentially parity. Japan's Nikkei touched a fresh 10-month high powered by the USD/JPY which rose to a level not seen since June. WTI crude futures bounced 6% off a Monday low to surpass $46 as producers met in Doha on Friday and by most accounts remained adamant an output deal will be reached by the November 30th meeting.

The Dow Jones Industrial average largely traded sideways, consolidating the outsized move into banks and financials since the election. Transports have traded up 15 of the last 18 sessions, emboldening bullishness by Dow theorists. The rotation into small caps continued, exhibited by the Russell 2000 which bumped up against lifetime highs at 1313. The NASDAQ saw money slosh back to many of the large cap tech names that so severely underperformed in the wake of the Trump victory and thus the overall index played a bit of catch up. The S&P encountered some resistance just below new all-time highs as traders try to handicap just how much and how fast Trump's pro-growth agenda can be enacted. Corporate bond issuance picked up to the most active levels in a couple weeks spurred by the move up in rates along with the calendar. For the week, the DJIA gained 0.1%, the S&P500 rose 0.8%, and the Nasdaq added 1.6%.

The last of the major quarterly earnings reports continued to paint a mixed picture. Cisco Systems reported solid results but shares dropped 5% after guiding next quarter down on lower spending by service provider customers. Shares of Home Depot and Lowe's fell after their earnings reports and Lowe's cuts its guidance for the year. Discount retailer TJX beat expectations and raised guidance, sending shares to their best level in two months. On the M&A front, Samsung jumped into the automotive technology segment with the $8 billion acquisition of Harman International.

SUNDAY 11/13
(JP) JAPAN Q3 PRELIMINARY GDP Q/Q: 0.5% (matches 6-quarter high) V 0.2%E; ANNUALIZED GDP Q/Q: 2.2% (6-quarter high) V 0.8%E

MONDAY 11/14
HAR: To be acquired by Samsung Electronics for $112/shr cash; deal valued at $8.0B
(RU) Kremlin spokesperson: Russia President Putin and President-elect Trump agree on phone call that Russia-US relations are unsatisfactory, aim to normalize relationship - Russia press

TUESDAY 11/15
(UK) Govt said to have no common Brexit strategy due to divisions within Cabinet - financial press (DE) GERMANY Q3 PRELIMINARY GDP Q/Q: 0.2% V 0.3%E; Y/Y: 1.7% V 1.8%E; GDP NSA Y/Y: 1.5% V 1.6%E
VOD.UK: Reports H1 EBITDA €7.91B v €8.04B y/y, Rev €27.1B v €28.2B y/y, Organic Service Revenue Growth: +2.4% y/y
(UK) OCT PPI INPUT M/M: 4.6% V 2.0%E; Y/Y: 12.2% V 9.3%E
(EU) EURO ZONE Q3 PRELIMINARY GDP Q/Q: 0.3% V 0.3%E; Y/Y: 1.6% V 1.6%E (2nd reading of data)
(DE) GERMANY NOV ZEW CURRENT SITUATION SURVEY: 58.8 V 61.6E; EXPECTATIONS SURVEY: 13.8 V 8.1E
HD: Reports Q3 $1.60 v $1.58e, R$23.2B v $23.0Be
(US) OCT IMPORT PRICE INDEX M/M: 0.5% V 0.4%E; Y/Y: -0.2% V -0.3%E
(US) OCT ADVANCE RETAIL SALES M/M: 0.8% V 0.6%E ; RETAIL SALES EX AUTO M/M: 0.8% V 0.5%E
TJX: Reports Q3 $0.91 v $0.87e, R$8.29B v $8.27Be
(US) Atlanta Fed GDPNow: raises Q4 GDP forecast to 3.3% from 3.1% on Nov 9th

WEDNESDAY 11/16
700.HK: Reports Q3 Net CNY10.6B v CNY10.7Be, Rev CNY40.4B v CNY26.6B y/y
(UK) SEPT ILO UNEMPLOYMENT RATE 3M/3M: 4.8% V 4.9%E
(UK) OCT JOBLESS CLAIMS CHANGE: 9.8K V +2.0KE; CLAIMANT COUNT RATE: 2.3% V 2.3%E
(US) OCT PPI FINAL DEMAND M/M: 0.0% V 0.3%E; Y/Y: 0.8% V 1.2%E
(US) OCT INDUSTRIAL PRODUCTION M/M: 0.0% V 0.2%E; CAPACITY UTILIZATION: 75.3% V 75.5%E
(US) NOV NAHB HOUSING MARKET INDEX: 63 V 63E
(US) Association of American Railroads weekly rail traffic report for week ending Nov 12th: 541.1K carloads and intermodal units, -0.5% y/y
CSCO: Reports Q1 $0.61 v $0.59e, R$12.4B v $12.3Be
(JP) BOJ CONDUCTS FIXED-RATE JGB PURCHASE OPERATION (1st time under new policy framework) FOR JGBs WITH 1-5 YEAR MATURITIES

THURSDAY 11/17
(ID) INDONESIA CENTRAL BANK (BI) LEAVES 7-DAY REVERSE REPO UNCHANGED AT 4.75%, AS EXPECTED
(UK) OCT RETAIL SALES EX AUTO FUEL M/M: 2.0% V 0.4%E; Y/Y: 7.6% V 5.4%E
(UK) OCT RETAIL SALES INC AUTO FUEL M/M: 1.9% V 0.5%E; Y/Y: 7.4% V 5.3%E (highest annual pace since 2002)
(EU) EURO ZONE OCT CPI M/M: 0.2% V 0.3%E; Y/Y (FINAL): 0.5% V 0.5%E; CPI CORE Y/Y (FINAL): 0.8% V 0.8%E
BBY: Reports Q3 $0.62 v $0.47e, R$8.95B v $8.84Be
(US) OCT CPI M/M: 0.4% V 0.4%E; CPI EX FOOD AND ENERGY M/M: 0.1% V 0.2%E; CPI NSA INDEX: 241.729 V 241.785E
(US) INITIAL JOBLESS CLAIMS: 235K (lowest since 1973) V 257KE; CONTINUING CLAIMS: 1.98M V 2.03ME (lowest since 2000)
(US) OCT HOUSING STARTS: 1.323M V 1.156ME; BUILDING PERMITS: 1.229M V 1.193ME
(US) NOV PHILADELPHIA FED BUSINESS OUTLOOK: 7.6 V 7.8E
(US) Atlanta Fed GDPNow: raises Q4 GDP forecast to 3.6% from 3.3% on Nov 15th
(MX) MEXICO CENTRAL BANK (BANXICO) RAISES OVERNIGHT RATE BY 50BPS TO 5.25%; AS EXPECTED
(CL) CHILE CENTRAL BANK (BCCH) LEAVES OVERNIGHT RATE TARGET UNCHANGED AT 3.50%; AS EXPECTED
AMAT: Reports Q4 $0.66 v $0.66e, R$3.30B v $3.31Be
CRM: Reports Q3 $0.24 v $0.21e, R$2.14B v $2.12Be
GPS: Reports Q3 $0.60 v $0.59e, R$3.80B v $3.77Be
(CN) CHINA OCT PROPERTY PRICES M/M: RISE IN 62 OUT OF 70 CITIES VS 63 PRIOR; Y/Y: RISE IN 65 OUT OF 70 CITIES V 64 PRIOR

FRIDAY 11/18
(IR) Iran OPEC Gov Kazempour: Remains optimistic for an OPEC deal after talks with Russia
(IQ) Iraq Oil Min Luaibi: optimistic OPEC will clinch output deal; differences are narrowing over OPEC output data - press
(US) New York Fed Nowcast: raises Q4 GDP forecast to 2.4% from 1.6% on 11/4

November-December 2016 Outlook: Trumping All Expectations

November-December 2016 Outlook: Trumping All Expectations
Mon, 14 Nov 2016 13:22 PM EST

After the shocking Brexit vote result this summer markets were a little better hedged for the surprise Trump victory, but it was still astonishing to see the pollsters get it so wrong again. Instead of four more years of the same government gridlock in Washington, the prospect of a united US government initially raised hopes that a pro-business agenda could emerge. For the time being, markets have ignored the "temperament" issue and the question of whether a President Trump will remain a maverick or go along with the Republican Congress that shunned him during the entire campaign.

In the immediate aftermath of the surprise Trump victory, interest rates rose and stocks moved back toward record highs on optimism that the US will have functional government that that President Trump will keep an an even keel. In the days since the election, Mr. Trump has been more subdued than he was on the campaign trail and has so far kept his famous outbursts in check. Between now and his inauguration in January, every move he makes will be closely scrutinized, and other major world events will have to be viewed through a prism of how the new Administration might react to it. Uncertainty will persist for months to come until the Trump White House starts to fall into a clear pattern. Until then it won't be clear as to whether Trump will flout the Washington establishment (after all, Trump's mandate was to dismantle the old order in Washington and he ran against the establishment of BOTH parties) or if he will quickly fall in line with Republican orthodoxy in order to get a pro-growth, anti-regulation agenda passed quickly.

Early indications will come from Trump's choices to fill top posts. The first big tell may be the selection for Chief of Staff which is coming down to Republican National Committee Chairman Reince Priebus or Steve Bannon, the Trump campaign CEO and executive chairman of the "alt-right" Breitbart News. Choosing Priebus to be his closest White House advisor would give Republicans some assurance that the new President wants to work with them, while naming Bannon to the position would be another shot across the bow of the establishment [Update: press reports now say Priebus will be chief of staff, but Bannon will be kept on call as "chief strategist"] . Another question is whether Trump will push his own legislative agenda or if he will allow Congress to set the tone. If Trump is content with just being a figurehead for the "Make American Great Again" movement, the Congress may run roughshod over the White House.

Trump has stated his early focus will be on three top priorities: health care, border control, and jobs. Congress seems likely to support a long-overdue spending on infrastructure and jobs growth, and Republicans will help pass legislation on immigration, healthcare, and tax reform, including a tax holiday for repatriation of corporate earnings from overseas. Republicans will also welcome the Trump Administration rolling back numerous executive orders that President Obama used to implement environmental regulations and other policies that could not be squeezed through the obstructionist Congress.

Trump may come into conflict with the GOP establishment when it comes to trade policy, where the Administration has a lot of authority that is independent of Congress. His election mandate was largely built on vague promises to renegotiate trade deals including NAFTA which could put the new Administration in direct conflict with a Republican Party establishment that overwhelmingly supports free trade. The President-elect's pledge to name China a currency manipulator "on day one" could also draw focus away from the domestic agenda. In response to the Trump victory, China's vice finance minister Shi calculating stated that it remains to be seen if Trump will implement his campaign rhetoric and that the president-elect should be aware of the benefits of economic cooperation with China. If Trump delivers on his protectionist rhetoric, markets could shudder at the prospect of a trade war damaging the global economy. He could also make waves for individual companies that move production jobs overseas by imposing tariffs on goods that they produce outside of the US. Fiscal conservatives may also cringe at efforts by the Trump Administration to finance big spending projects.

Populism Trumps Polls

The early days of the Trump Administration will coincide with the next phase of the UK's Brexit drama. The Bank of England has just diminished uncertainty about its policy future, but that was offset by new uncertainties about the Brexit process. Shortly before the November policy meeting, BOE Governor Carney turned aside speculation that he might resign early and instead announced that he would stay on through 2019 to guide the central bank through the entire Brexit process. Then at the meeting, the policy committee essentially stated that it had taken the prospect of another rate hike off the table.

The same day, the mechanics of the Brexit were thrown into question as a UK court ruled that the Parliament should have a say in the government's plans for disentangling itself from the EU, raising the prospects for a "soft Brexit" which would retain certain agreements with the EU including adherence to free movement of people rules. Specifically the court said the government must get Parliamentary approval to invoke Article 50 which triggers the two-year process of leaving the EU.

Members of the May government have increasingly hinted that they'll push for a "hard Brexit" that would allow the UK to control immigration from the European Union, even if that means giving up membership of the European common market. The government is in the process of appealing ruling on Parliamentary oversight to the nation's highest judicial body and a decision is anticipated before the year end. If that timeframe stays true, the government has said it will remain on track to invoke Article 50 by the end of March.

Some political observers are concerned that starting the Brexit process in March will play into the hands of populists across Europe, whose fortunes appear to be on the rise after the votes on Brexit and the US Presidency. France and Germany will hold national elections in 2017 - France in the spring and Germany probably in late September. In France, Marine Le Pen and her National Front (FN) are running competitively with the candidates of the two traditional leading parties, positioning the anti-immigrant populist to be one of the two choices in the run- off election for President in May. Meanwhile in Germany, the right wing populist and euroskeptic Alternative for Germany (AfD) is poised to gain seats in Bundestag for the first time after running strong in several state elections this year.

OPEC Self-Interest Trumps Cooperation

Outside of rise of populist politics, probably the biggest uncertainty in the weeks ahead is the fate of the "oil freeze" deal that was tentatively agreed upon in Algiers a month ago. That preliminary agreement helped oil prices get back above $50/bbl for a time, but the price has eroded again as OPEC members continue to bicker over who should participate in a freeze or cut, and as non-OPEC producers have also wavered. With just a few weeks to go before the November 30th semi-annual OPEC meeting that was to usher in the finalized production deal, market watchers are starting to lay odds against a final accord being enacted.

As the case has been since the oil freeze idea was conceived, the main tension has been between Saudi Arabia's block of Gulf producers and Iran, which wants to recoup all of the market share it lost due to anti-nuclear sanctions. Technical level meetings over the last few weeks have not achieved a breakthrough, though more meetings are scheduled. It's clear the frustration level is high, exemplified by a press leak that suggested the Gulf nations threatened to INCREASE production if Iran didn't get on board with plan (that threat was later walked back to a suggestion that the Gulf producers would shift capacity to "meet market demand"). For its part, Iran's oil minister just recently commented that it does not see November 30th as a hard deadline for reaching an accord, calling into doubt whether producers can come to an agreement at all this year.

Given these circumstances, there is a good chance the freeze deal will not come to pass, or at least get delayed. In that case WTI crude could easily sink back to the low $30s, dragging down the energy sector with it and taking some more air out of equities. It could also give headaches to central banks that had been elated to see the downward inflation pressure exerted by low oil prices finally abating over the spring and summer.

Fed Tightening Finally Trumps Accommodation

The US Fed is hoping that inflation will continue to rise enough to justify another rate hike. The December 14 FOMC meeting will be a crucial moment for Fed credibility. When the Fed raised rates last December the dot plot projections suggested there could be FOUR rate hikes during the course of 2016. Since then, the Fed has found excuses to keep rates on hold, ranging from stagnant growth in Q1, to the Brexit uncertainty over the summer. By intimating for the last year that the next rate hike is coming soon, the Fed has lost a lot of the benefits of keeping rate policy unchanged for the last 10 months, and it would be a major blow to the Fed's reputation if it holds off on a rate hike yet again in December.

Additionally, the voting membership will change after the December meeting - in 2017 all three of the recent hawkish dissenters will rotate out and will be replaced by a decidedly more moderate group of Fed presidents. Chair Yellen has already indicated a willingness to let the economy "run hot," so as long as there is no sign of runaway inflation, the Fed may be even more reluctant to raise rates next year.

The November statement edged the Fed closer to a December rate hike, announcing that the case for a hike "continued" to strengthen. But until the FOMC actually pulls the trigger on another 25 basis point move, markets are right to be skeptical of hawkish signals. Though some Fed watchers may be worried that the 'era of cheap money' is over, the promise of a "gradual pace" of rate hikes may well mean that the market opinion starts coalescing around the one-and-done rate hike view of St Louis Fed President Bullard. So far, markets have been unperturbed by the prospect of a December rate hike, and may even take it as positive development if the Fed framed the hike as a vote of confidence in the economy.

The Trump Administration will also exert some influence on the Fed. Trump has been broadly critical of the Fed and said earlier this year that he wants to replace Chair Yellen because she is political and "not a Republican," though he also declared that both she and he are "low rates" people. Unless the Chair chooses to tender her resignation and triggers an earlier succession, the new President will have the option to name a replacement at the end of Yellen's term in early 2018. In the meantime, two vacancies on the seven-member board of governors will allow Trump to put his imprint on the Fed immediately.

The Republican controlled Congress may also try to persuade Trump to support legislation to reform the central bank. Last year the House passed a bill that would require the Fed to set a policy rule, and the 2016 GOP party platform called for an annual audit of interest rate decisions. The central bank has argued that the 'audit the Fed' legislation would put undue political pressure on monetary policy decisions, but that may just be the new reality in the era of America's first modern populist president.


CALENDAR
NOVEBMER
1: UK Manufacturing PMI; US ISM Manufacturing PMI
2: UK Construction PMI; FOMC policy statement; China Caixin Services PMI
3: UK Services PMI; BOE policy statement; US ISM Manufacturing; US Factory Orders
4: US Payrolls & Unemployment

7: German Factory Orders; China Trade Balance (tentative)
8: Japan Current Account; China CPI & PPI; US ELECTION DAY
9: UK Manufacturing Production; US JOLTS Jobs Openings
10:
11: US Prelim University of Michigan Sentiment

13: China Industrial Production; Japan Prelim Q3 GDP
14:
15: UK CPI & PPI; Euro Zone Prelim Q3 GDP; German ZEW Economic Sentiment; US Retail Sales
16: UK Claimant Count & Unemployment; US PPI; US Industrial Production & Capacity Utilization
17: UK Retail Sales; Euro Zone Final CPI; ECB Minutes; US Housing Starts & Building Permits; US CPI; Philadelphia Fed Manufacturing Index
18:

21: Various Euro Zone Manufacturing & Services PMIs
22: US Existing Home Sales
23: US Durable Goods Orders; US New Home Sales; FOMC Minutes
24: German Ifo Business Climate; Tokyo Core CPI; US THANKSGIVING HOLIDAY
25: UK Q3 GDP Second Estimate

28: Japan Household Spending
29: German Unemployment; BOE Financial Stability Report; US Prelim Q3 GDP; US Consumer Confidence
30: OPEC Semi-Annual Meeting; German Retail Sales; Euro Zone Prelim CPI Estimate; US Personal Income & Spending; Chicago PMI; China Manufacturing & Non-Manufacturing PMIs; China Caixin Manufacturing PMI
DECEMBER
1: UK Bank Stress Test Results; UK Manufacturing PMI; US ISM Manufacturing PMI
2: UK Construction PMI; US Payrolls & Unemployment

4: Italy Referendum on Constitutional Reform; China Caixin Services PMI
5: UK Services PMI; US ISM Non-Manufacturing
6: German Factory Orders; US Trade Balance; US Factory Orders
7: UK Manufacturing Production; Japan Final Q3 GDP; China Trade Balance (tentative)
8: ECB Policy Statement & Press Conf; US JOLT Job Openings; China CPI & PPI
9: Prelim University of Michigan Sentiment

12: China Industrial Production
13: UK CPI & PPI; German ZEW Economic Sentiment; Japan Tankan Manufacturing & Non-Manufacturing Indices
14: UK Claimant Count & Unemployment; US Retail Sales; US PPI; US Industrial Production & Capacity Utilization; FOMC Policy Statement & Updated Economic Projections; FOMC press conference
15: UK Retail Sales; BOE Policy Statement; US CPI; Philadelphia Fed Manufacturing Index
16: Euro Zone Final CPI; US Housing Starts & Building Permits

18: BOJ Policy Statement (tentative)
19: German Ifo Business Climate
20:
21: Various Euro Zone Prelim Manufacturing & Services PMIs; US Existing Home Sales
22: US Final Q3 GDP; US Personal Spending
23: US Durable Goods Orders; US New Home Sales

26: Japan Household Spending; Tokyo Core CPI
27: UK Current Account; UK Final Q3 GDP; US Consumer Confidence
28:
29:
30: Chicago PMI
31: China Manufacturing & Non-Manufacturing PMIs

Barrons weekend update

Barrons weekend update: Positive on certain steel, financials, and pharma names following election of Trump 
Cover story: Donald Trumps agenda as president could promote economic growth, but the big question for investors is whether his pro-growth, tax-reform, and fiscal-stimulus policies will outweigh his protectionist views; On trade, he may end up speaking loudly but carrying a small stick. 

Tech Trader: Nobody in the tech sector knows what to expect from a Trump presidency because he has issued conflicting statements on topics such as the H-1B visa program; The biggest payoff for tech giants could be a repatriation of their enormous cash piles stashed overseas. 

Trader: Market gains after Donald Trumps election victor werent spread evenly across sectors, and the biggest surprise was that basic price trends remained unchanged for some parts of the stock market; Infrastructure stocks are up on the prospects of more action in that sector under the Trump administration (Positive on VMC, MLM, URI); Large pharmaceutical companies could benefit from Donald Trumps proposals to let companies bring home money trapped overseas. 

Profile: Vince Montemaggiore, manager of the Fidelity Overseas fund, retooled the fund from its lower-quality cyclical bent to one focused on high-quality companies with high returns on capital (top 10 holdings: SAP, TOT, BUD, SNY, Nordea Bank, AIA Group, Henkel, Fresenius, Novo Nordisk). 

Interview: Howard Penney, managing director at independent research firm Hedgeye Risk Management, talks about what restaurant stocks might benefit under a Trump administration (picks: PNRA, WFM; pans: CMG, PLAY, KR). 

Features: 
1) Jeffrey Gundlach of DoubleLine Capital, who predicted a Trump victory in January, predicts a rise in bond yields that could lift the yield on the 10-year Treasury note to 6% in the next four or five years; 
2) A look at companies likely to be winners and losers under a Trump administration (Positive on X, NUE, MLM, VMC, JPM, BEN, PFE, BMY, CVI, VLO; Mixed on HCA, THC, DUK, VZ); 
3) Positive on LOPE, DV, CPLA: Among for-profit colleges that could profit with Donald Trump in the White House, based on hopes federal oversight will ease; 
4) Positive on TMO: Shares of the top seller of laboratory gear could benefit from a smoother budget process under a unified government and consolidation in the industry; shares could see 30% upside; 
5) Positive on DFS: Even amid growth in subprime lending, the company has shown discipline, and if it can grow its loan book faster, shares could offer a 12% return during the next 12 months. 

Small Caps: Positive on AVD: Shares are down in a slow agricultural sector, but the company is launching new products and stands to benefit from acquisitions, which should translate into higher earnings. 

Follow-Up: Negative on CVS: Company lacks the tax-dodging opportunities of multinationals, and the growth that originally attracted investors to shares is no longer steadymaking it time to sell; Positive on LVLT, CTL: The companies merger is good for investors, because it should give Level 3 shares 25% upside, while Century has a 9.1% yield. 

European Trader: With Donald Trumps presidential victory, the outlook for Europes banks has improved, because he isnt expected to be tough on regulationthough many of his ideas make investors uneasy. 

Asian Trader: Asian markets have been unexpectedly tolerant of Donald Trump, and his win probably will extend the value-oriented theme that has prevailed since Brexit. 

Emerging Markets: The reordering of markets is happening, absent clarity from Donald Trump on his cabinet, strategy, and foreign policy. But the strengthening dollar is already a sign of tough times ahead for foreign currencies. 

Commodities: The price of nickel hit a peak for the year last week, and could rise further on expectations of stronger demand from China and the U.S.

Streetwise: A shift in investor focus from assets that benefit from globalization to those boosted by domestic consumption could portend a Main Street recovery under a Trump administration.

TradeTheNews.com Weekly Market Update: The Trump Bump
Fri, 11 Nov 2016 16:06 PM EST

Global markets opened the week trading in what best could be described as a cautiously optimistic state. The run up in the VIX last week suggested to many that investors had already aggressively put on protection heading into Tuesday's election, and the modest rebound in stocks on Monday and Tuesday had most attributing the stabilization in risk sentiment to the polls that still predicted a Hillary Clinton Administration/Washington gridlock outcome. By late Tuesday evening stock futures were plummeting as it became clear that all the polls were wrong and Donald Trump would be the next President of the United States. Dow futures dropped 800 points, the Mexican Peso and Asian stock markets cratered, and the Yen surged along with gold into early Wednesday morning on a wave of uncertainty.

As European markets opened on early Wednesday Trump offered up a victory speech that struck and generally healing and inclusive tone and stressed the importance his administration would place of fiscal stimulus in the form of infrastructure spending out of the gate. The markets took note and, along with the Republican sweep in both Houses of Congress, sentiment turned in a fashion almost as stunning as the election outcome itself. Equity futures turned up and Treasury prices plunged as a barrage of reflation trades took hold. By Wednesday's NYSE opening bell equity futures had recouped most of the overnight losses and the Dow futures finished the session up nearly 1000 points from the lows.

The narrative quickly snowballed; lower taxes, aggressive fiscal stimulus and a much friendlier regulatory environment will goose growth and along with it inflation. Rates continued to back up aggressively and the yield curve steepened to levels not seen in almost a year. Banks and financials surged along with all deep cyclical groups leveraged to infrastructure outlays. Pharmaceutical and biotech names jumped in classic relief rally. Hospitals sank on prospect of repealed and replaced Obamacare. Dividend focused bond proxy groups lagged as rates moved up. Large cap technology also notably underperformed, mainly on concerns around immigration and trade, and the notion that the aforementioned out-of-favor sectors are better places to invest following the change in leadership. By Thursday, the DJIA closed at a new record high above 18,873, and for the week the DJIA gained 5.4%, the S&P500 rose 3.8%, and the Nasdaq jumped 3.8%. Energy futures did not participate in the risk-on surge -- crude futures slid as Iran's oil minister showed no urgency for reaching a production accord, saying the November 30th OPEC meeting is not a deadline for any deal.

Earnings seasons wound down with a few more notable names reporting. Retailers Macy's and Nordstrom announced solid quarterly results and selectively raised guidance. Hertz shares collapsed after a disastrous earnings report, but paired losses sharply as Carl Icahn announced he had doubled his stake in the car rental firm.

SUN 11/6
(US) FBI Director Comey: Review of Hillary Clinton's emails has NOT changed the original conclusion that she should not face criminal charges - press
HSBA.UK: Reports Q3 Adj pretax $5.59B v $5.29Be; Rev $9.5B v $15.1B y/y; Adj Rev $12.8B v $12.5B y/y

MON 11/7
(CN) CHINA OCT FOREIGN RESERVES: $3.121T V $3.133TE (lowest level since Dec 2011, 4th straight decline, and largest decline since Jan)
(EU) EURO ZONE NOV SENTIX INVESTOR CONFIDENCE: 13.1 V 8.6E
(US) Oct Labor Market Conditions Index Change: +0.7 v -2.2 prior
HTZ: Reports Q3 $1.58 v $2.81e, R$2.54B v $2.57Be
(CN) CHINA OCT TRADE BALANCE (USD): $49.1B V $52.3BE

TUES 11/8
ACA.FR: Reports Q3 Net €1.86B v €1.81Be; Rev €3.74B v €3.95Be
DPW.DE: Reports Q3 Net €618M v €49M y/y, EBIT €755M v €746Me, Rev €13.9B v €14.0Be
TM: Reports H1 Net ¥946B v ¥1.26T y/y, Op Profit ¥1.12T v ¥1.58T y/y, Rev ¥13.1T v ¥14.1T y/y; to buy back 1.3% shares for ¥200B
MT.NL: Reports Q3 Net profit $680M v loss $711M y/y, EBITDA $1.90B v $1.95Be, Rev $14.5B v $15.0Be
(IR) Iran Oil Min Zanganeh: Not pessimistic about the OPEC deal; Nov 30th is not a deadline for a deal
(UK) SEPT MANUFACTURING PRODUCTION M/M: 0.6% V 0.4%E; Y/Y: +0.2% V -0.1%E
(UK) SEPT INDUSTRIAL PRODUCTION M/M: -0.4% V 0.0%E; Y/Y: 0.3% V 0.8%E
VRX: Reports Q3 $1.55 v $1.78e, R$2.48B v $2.49Be
CVS: Reports Q3 $1.64 v $1.57e, R$44.6B v $45.3Be
(CN) CHINA OCT CPI M/M: 0.7% V 0.7% PRIOR; Y/Y: 2.1% V 2.1%E
(CN) CHINA OCT PPI Y/Y: 1.2% V 1.0%E; 2nd straight increase; highest since Dec 2011

WEDS 11/9
CARLB.DK: Reports Q3 Rev DKK17.5B v DKK18.0Be
BRBY.UK: Reports H1 Adj pretax £146M v £145Me, Pretax £102M v £155M y/y, Rev £1.16B v £1.18B prelim
(US) DONALD TRUMP PROJECTED TO BE THE WINNER OF US PRESIDENTIAL RACE; serve as the 45th President
Risk aversion off its worst level as President-elect Trump take a conciliatory tone in victory speech
(US) Atlanta Fed GDPNow: maintains Q4 GDP forecast at 3.1%, unchanged from Nov 4th
(NZ) NEW ZEALAND CENTRAL BANK (RBNZ) CUTS OFFICIAL CASH RATE BY 25BPS TO 1.75% (record low)); AS EXPECTED

THURS 11/10
SIE.DE: Reports Q4 Net profit €1.18B v €1.00B y/y, Industrial Business profit €2.45B v €2.41Be, Rev €22.0B v €22.4Be; Plans public listing of Health care business;
DTE.DE: Reports Q3 Adj Net €1.04B v €1.11Be; Adj EBITDA €5.54B v €5.56Be, Rev €18.1B v €18.1Be
AZN.UK: Reports Q3 Core EPS $1.32 v $0.98e, Rev $5.70B v $5.95Be; Affirms FY16
(FR) FRANCE SEPT INDUSTRIAL PRODUCTION M/M: -1.1% V -0.3%E; Y/Y: -1.1% V +0.4%E
(FR) FRANCE SEPT MANUFACTURING PRODUCTION M/M: -1.1% V -0.1%E; Y/Y: -0.9% V +0.4%E
(PH) PHILIPPINES CENTRAL BANK (BSP) LEAVES OVERNIGHT BORROWING RATE UNCHANGED AT 3.00%, AS EXPECTED
M: Reports Q3 $0.17 v $0.40e, R$5.63B v $5.63Be
(US) INITIAL JOBLESS CLAIMS: 254K V 260KE; CONTINUING CLAIMS: 2.04M V 2.03ME
JWN: Reports Q3 $0.84 adj v $0.52e, R$3.54B v $3.49Be
DIS: Reports Q4 $1.10 v $1.15e, R$13.1B v $13.5Be
(PE) PERU CENTRAL BANK (BCRP) LEAVES REFERENCE RATE UNCHANGED AT 4.25%; AS EXPECTED
(KR) BANK OF KOREA (BOK) LEAVES INTEREST RATE UNCHANGED AT 1.25%; AS EXPECTED

FRI 11/11
(US) NOV PRELIMINARY MICHIGAN CONFIDENCE: 91.6 V 87.9E (highest since June)

Barrons weekend update

Barrons weekend update: Positive on MJN, Cautious on NKE, NFLX 
Cover story: Though passive investing has grown in popularity and delivered strong returns, active management is back, and a rise in interest rates should begin to lift the smaller companies that stock pickers prefer, while increased volatility will give these investors more opportunities. 

Tech Trader: Cautious on Comcast, NFLX: Despite being at odds on a number of issues, companies are launching a joint beta test that allows Netflix to flow into Comcast cable boxes, a move meant to counter the growing strength of AMZN, Hulu, TWX, and other content providers. 

Trader: The market wants a Clinton win in the presidential race with Republicans holding onto Congress to rein in spending, but a problem will arise if the race is extremely close and sentiment is unanimous that the market will be in trouble if Trump wins; Cautious on NKE: Growing short interest is a sign some investors think things may get worse before they get better, and the company needs a game-changing product to return to form; Positive on MJN: The stocks low valuation seems to discount most of the headwinds its faces, and shares could see a 25% total return over the next two to three years.

Profile: Scott St. John and Michael Reckmeyer, co-managers of the Hartford Balanced Income fund, hold 46% of assets in stocks, 50% in bonds, and the rest in cashand only stray from the strategy if the markets hit extremes (top 10 equity holdings: MSFT, JPM, WFC, JNJ, CSCO, PFE, MRK, PM, GE, VZ). 

Features: 
1) Picks from the four panelists at Barrons Emerging Market Roundtable, including Michael Kass of Baron Emerging Markets (Haitong Securities, Bid Corp., Amara Raja Batteries, Zee Entertainment Enterprises, Mr Price Group, PVR, Bank Mandiri, Bank Negara Indonesia; Andrew Foster of Seafarer Overseas Growth & Income (Sanlam, INFY); Arjun Divecha of GMO Emerging Markets (CX, Yes Bank, Sberbank of Russia); and Matthew Benkendorf of Virtus Emerging Markets Opportunities (ABEV, FMX HDB, BABA, Tencent Holdings, Matahara Department Store); 
2) Positive on EQR, MAC, SPG, PSA: Shares of these notable REITs are at or near 52-week lows, part of an overall pullback in the sector thats created an attractive opportunity for investors; 
3) China has relied on mindless monetary stimulus since 2008 to muscle its way to continued output growth, leading debt levels to surge and creating a borrowing spree that could have global repercussions. 

Small Caps: Positive on ALSN: Worlds largest maker of fully automatic transmissions for medium and heavy commercial trucks and defensive vehicles has dedicated customers, few competitors, and pricing power. 

Follow-Up: If Donald Trump wins the election, investors expect a swift selloff in stocks, though sectors such as energy and steel could be winners based on Trumps campaign proposals. 

European Trader: The reaction in the U.K. to a high court ruling that Parliament must approve a move to start the Brexit is indicative of what would happen if Britain doesnt leave the EU: sterling could retrace its losses, and the U.K. stock market could fall. 

Asian Trader: Cautious on Samsung Biologic: Biopharmaceutical arm of SamsungGroup raised $2B in an IPO last week, but though it has an interesting strategy, the stocks pricing is too aggressive. 

Emerging Markets: The Russian ruble is stronger by 13% this year against the dollar, reflecting the central banks market-friendly policies, while the economy is stronger and shares are up 24% this year (Positive on Magnit, Yandex, VanEck Vectors Russia). 

Commodities: As zinc mines close, supply has fallen, pushing prices up, but the rally will likely run out of steam before long. 

Streetwise: Should the proposed BATS-RAI deal go through, its likely MO and PM would recombine to create a global tobacco giant with more stable cash flows and would make it easier to launch the IQOS smokeless cigarette.

Election Jitters Overshadow More Confident Fed

TradeTheNews.com Weekly Market Update: Election Jitters Overshadow More Confident Fed
Fri, 04 Nov 2016 16:07 PM EST

Global equity markets entered into some rough waters this week as anxiety over next week's US Presidential election ramped up. Polls narrowed considerably in the wake of the FBI reopening the investigation surrounding Hillary Clintons' email scandal. The VIX shot back above 20 to trade at levels not seen since the June Brexit vote and gold found buyers. The S&P dipped back below 2100 and got within a point its 200-day moving average for the first time since July. Investors appeared to look for protection in the event a Trump surprise victory or a severely hampered Clinton Administration. Declining oil prices may have also weighed on investor sentiment when prices fell back towards the September lows. US crude inventories continued to swell and OPEC has yet to reach agreement on member output levels with less than a month until the November meeting. Sovereign bond yields drifted lower, but remained within recently elevated levels. Generally solid economic data points complimented rate announcements from the US Fed and BOE that suggested officials are becoming more confident in their ability to move toward slowly withdrawing stimulus. The S&P extended its longest losing streak since 1980 with its ninth consecutive decline on Friday. For the week the S&P500 lost 1.9%, the DJIA gave up 1.5%, and the Nasdaq fell 2.8%.

Earnings season reached its crescendo with a majority of the S&P 500's components reporting by week's end. Healthcare stocks remained under substantial pressure, in large part due to political concerns, including the report this week of a DOJ probe of price fixing in the generics market, that were seen factoring into some managements' outlooks. Facebook shares slumped on Thursday after its CFO warned the street to take down ad growth projections and prepare for increased capital spend next year. Deals continued to get consummated but not quite at the same degree. Brocade confirmed a $5.9B deal to be bought by Broadcom. Lattice Semi and Metaldyne Performance each found suitors willing to pay more than $1B while there was a slew of smaller transactions, many of which were in the US oil patch.


SUNDAY 10/30
OPEC talks in Vienna yielded NO DEAL to limit oil output; Iraq and Iran remain in dispute about production cuts, not ready to freeze output - press

MONDAY 10/31
(EU) EURO ZONE OCT ADVANCE CPI ESTIMATE Y/Y: 0.5% V 0.5%E; CPI CORE Y/Y: 0.8% V 0.8%E
(EU) EURO ZONE Q3 ADVANCE GDP Q/Q: 0.3% V 0.3%E; Y/Y: 1.6% V 1.6%E
LVLT: To be acquired by Centurylink for $66.50/shr in cash and stock deal valued at $34B
(US) SEPT PERSONAL INCOME: 0.3% V 0.4%E; PERSONAL SPENDING: 0.5% V 0.4%E
(US) SEPT PCE CORE M/M: 0.1% V 0.1%E; Y/Y: 1.7% V 1.7%E
(US) SEPT PCE DEFLATOR M/M: 0.2% V 0.2%E; Y/Y: 1.4% V 1.2%E
(US) OCT CHICAGO PURCHASING MANAGER: 50.6 V 54.0E (lowest since May)
(CN) CHINA OCT MANUFACTURING PMI (GOVT OFFICIAL): 51.2 V 50.3E; 3rd straight expansion; 2-year high
(CN) CHINA OCT CAIXIN PMI MANUFACTURING: 51.2 V 50.1E; 4th consecutive expansion; highest since July 2014
(JP) BANK OF JAPAN (BOJ) LEAVES INTEREST RATE ON EXCESS RESERVES (IOER) UNCHANGED AT -0.10% (as expected); AGAIN PUSHES BACK TIME FRAME TO ACHIEVE 2% INFLATION TARGET BY ONE YEAR UNTIL IN/AFTER FY18/19
(AU) RESERVE BANK OF AUSTRALIA (RBA) LEAVES CASH RATE TARGET AT 1.50%; AS EXPECTED

TUESDAY 11/1
(HK) Macau Oct casino revenue 21.8B Patacas v 18.4B m/m, y/y: +8.8% (3rd straight increase after 26 months of decline) v 7.4% prior
RDSA.NL: Reports Q3 Basic CCS EPS $0.70 v $0.54e, CCS earnings (ex items) $2.79B v $1.79Be, Rev $61.9B v $68.0Be
BP.UK: Reports Q3 Net $933M v $719Me, Underlying replacement cost profit $1.66B v $1.35Be, Total Rev $48.0B v $46.0Be
STAN.UK: Reports Q3 Pre tax profit $458M v $520Me, Op Income $3.47B v $3.68B y/y
(UK) OCT PMI MANUFACTURING: 54.3 V 54.5E (3rd month of expansion)
EMR: Reports Q4 $0.96 v $0.89e, R$5.50B v $5.51Be
(US) OCT FINAL MARKIT MANUFACTURING PMI: 53.4 V 53.2E (highest reading since Oct 2015)
(US) OCT ISM MANUFACTURING: 51.9 V 51.7E; PRICES PAID: 54.5 V 54.3E
X: Reports Q3 $0.40 v $0.88e, R$2.69B v $2.84Be
(NZ) NEW ZEALAND Q3 UNEMPLOYMENT RATE: 4.9% (8-year low) V 5.1%E; EMPLOYMENT CHANGE Q/Q: 1.4% V 0.5%E; Y/Y: 6.1% V 5.4%E

WEDNESDAY 11/2
LHA.DE: Reports 9-month Net €1.85B v €1.75B y/y, adj EBIT €1.68B v €1.69B y/y, Rev €23.9B v €24.3B y/y
MAERSKB.DK: Reports Q3 adj Net $426M v $490Me, EBIT $805M v $870Me, Rev $9.18B v $9.38Be
(US) OCT ADP EMPLOYMENT CHANGE: +147K V +165KE; Discloses revisions to model to better predict NFP
NYT: Reports Q3 $0.06 v $0.05e, R$363.5M v $365Me
DAL: Reports Oct Load factor 85.1%, -1.8% y/y
(US) DOE CRUDE: +14.4M V +1ME; GASOLINE: -2.2M V -1ME; DISTILLATE: -1.8M V -1.5ME (largest crude build on record)
(US) Association of American Railroads weekly rail traffic report for week ending Oct 29th: 545K carloads and intermodal units, -0.8% y/y
(US) FOMC HOLDS TARGET RATE RANGE AT 0.25-0.50%: CASE FOR RATE HIKE HAS CONTINUED TO STRENGTHEN
FB: Reports Q3 $1.09 (adj) v $0.98e, R$7.01B v $6.92Be
FB: CFO: expect to see ad revenue growth rates come down meaningfully - earnings call comments
2202.HK: Reports Oct contracted sales CNY49.0B v CNY25.4B m/m
(CN) CHINA OCT CAIXIN CHINA SERVICES PMI: 52.4 V 52.0 PRIOR; 4-month high

THURSDAY 11/3
GLE.FR: Reports Q3 Net €1.1B v €790Me, Op €1.58B v €1.82B y/y, Rev €6.01B v €5.9Be
CSGN.CH: Reports Q3 Net profit CHF41M v loss CHF150Me; Pretax profit CHF222M, +12% y/y; Rev CHF5.40B v CHF5.1Be
RMS.FR: Reports Q3 Rev €1.26B v €1.23Be
GLEN.UK: Reports Q3 own-sourced copper production 1.06Mt v kte
992.HK: Reports Q2 Net $157M v $87.6Me, Rev $11.2B v $12.2B y/y
(EU) EURO ZONE SEPT UNEMPLOYMENT RATE: 10.0% V 10.0%E (matches lowest level since Sept 2011)
(UK) BANK OF ENGLAND (BOE) LEAVES INTEREST RATES UNCHANGED AT 0.25%; AS EXPECTED
(UK) BANK OF ENGLAND (BOE) NOV MINUTES: VOTED UNANIMOUS (9-0) TO LEAVE INTEREST RATES UNCHANGED
(UK) BANK OF ENGLAND (BOE) QUARTERLY INFLATION REPORT (QIR)
(US) INITIAL JOBLESS CLAIMS: 265K V 256KE; CONTINUING CLAIMS: 2.03M V 2.04ME
(US) Q3 PRELIMINARY NONFARM PRODUCTIVITY: 3.1% V 2.1%E; UNIT LABOR COSTS: 0.3% V 1.2%E
(UK) BOE Gov Carney: There are limits to tolerance for CPI overshoot; BOE monitoring inflation expectations - post rate decision press conference
(US) OCT FINAL MARKIT SERVICES PMI: 54.8 V 54.8E
(US) OCT ISM NON-MANUFACTURING COMPOSITE: 54.8 V 56.0E
(US) SEPT FINAL DURABLE GOODS ORDERS: -0.3% V -0.1%E; DURABLES EX TRANSPORTATION: 0.1% V 0.1%E

FRIDAY 11/4
BMW.DE: Reports Q3 Net €1.82B v €1.58B y/y, EBIT €2.38B v €2.37Be, Rev €23.4B v €23.2Be
HUM: Reports Q3 $3.18 v $2.99e, R$13.7B v $13.4Be
(CA) CANADA OCT NET CHANGE IN EMPLOYMENT: 43.9K V -15.0KE; UNEMPLOYMENT RATE: 7.0% V 7.0%E
(US) OCT UNEMPLOYMENT RATE: 4.9% V 4.9%E
(US) OCT AVERAGE HOURLY EARNINGS M/M: 0.4% V 0.3%E; Y/Y: 2.8% V 2.6%E; AVERAGE WEEKLY HOURS: 34.4 V 34.4E
(US) OCT CHANGE IN NONFARM PAYROLLS: +161K V +173KE
(US) Atlanta Fed GDPNow: raises Q4 GDP forecast to 3.1% from 2.3% Nov 1st

Barrons weekend summary

Barrons weekend summary: positive on HLT, ITT; cautious on BAD.CA 
Cover story: Many investors say T's bid for TWX is an admission that its lucrative wireless phone business is under pressure from TMUS and its acquisition of DirecTV hasn't yielded the expected benefits; Tie-ups between DIS/NFLX and Comcast/TMUS are possible, but unlikely anytime soon; The media deal most likely to succeed in the current landscape would be a CBS/VIAB merger. 

Features: 
1) Positive on HLT: In contrast to other hotel chains, Hilton's cheap shares look like an opportunity, since the company is opening hotels in profitable overseas markets and plans to split into three operations; 
2) Positive on ITT: Conglomerate sells more pumps and valves to chemical and industrial companies than rival FLS, giving it lower exposure to the oil-and-gas industry, and its brake pad business is strong; 
3) Hillary Clinton is widely expected to win the White House, but even if Democrats take the Senate, Republicans will control the House-a divided government scenario that should benefit investors; 
4) Cautious on Badger Daylighting: Canadian company's revenue and truck fleet have grown during the past 15 years, but the oil slowdown, growing competition, and concerns about accounting practices should give investors pause.

Tech Trader: While AAPL still dominates the smartphone market, some investors wonder whether its dominance in the tech sector is eroding, while rivals such as AMZN and GOOGL expand into areas such as cars and artificial-intelligence devices. 

Trader: Edward Crotty of Davidson Investment Advisors says sector rotation induced by higher rates should to continue as investors move into financials and some cyclical stocks; Positive on LAZ: The small investment bank's "top-tier brand allows it to punch above its weight class"; it faces little risk from proprietary trading while getting about half its profits from asset management; David Trainer of New Constructs says companies with a lot of money overseas, construction firms and their suppliers, and transportation outfits should benefit if Hillary Clinton becomes president. 

Interview: Jon Pollock of Elliott Management talks about the firm's activist investing strategies, which have targeted a range of underperforming companies (picks: DVMT, CTXS, ECA, HES, AGN, Samsung Electronics; pans: Long-term bonds in the U.S., Japan, and Europe). 

Small Caps: Positive on KRNY: Bank's shares have gained 40% since its so-called thrift conversion, and could rise over the next two years as it expands its commercial operations in real estate and business lending. 

Follow-Up: Positive on KEY: The firm's credit quality has improved and it's making progress cutting $400M in yearly costs from the merger with Niagara Financial Group; shares are likely to see more gains. 

European Trader: Positive on Compagnie Financiere Richemont: Luxury conglomerate should soon recover from problems including sluggish demand in Asia, volatile currencies, and weakening tourism in Europe-and shares are likely to rise. 

Asian Trader: Positive on Great Wall Motor: Investors who have piled into Geely Automobile Holdings should reverse the trade, since Great Wall shares have more room to rise amid strong demand and sales in China. 

Emerging Markets: A Donald Trump defeat in the presidential race is probably already priced into Mexican assets, which have gyrated inversely to his perceived election prospects. 

Commodities: Supply-side reforms in China may have led to an excessive cut in coal production there, setting off an unexpected rally this year, but prices are unlikely sustain gains. 

Streetwise: MS strategist Adam Parker screened for stocks that rank in the top half of the market in terms of quality metrics, trade below 15 times 12-month earnings forecasts, and should see positive growth next year; the list includes JPM, UTX, ETN, CSCO, HON, and JCI.