Barron's weekend summary: Cover positive on CBS and speculates about it buying VIAB; positive on COF, SAVE
Cover story: Amid ongoing turmoil at VIA, simple management changes, such as the departure of interim chief executive Tom Dooley, won't be enough to fix the problems; The company should consider a sale, with CBS the most natural buyer-though the network's investors will likely prosper with or without such a deal. With or without a Viacom deal, CBS shares might double in the next 4 years.
Features:
1) Positive on COF: Firm's skillful loan underwriting and its growing commitment to credit cards that offer rewards have put it in a strong competitive position relative to other issuers and regional banks;
2) Positive on SAVE: Though rivals have adapted some of the discount carrier's business strategies, both the fares it charges and the share price should rise soon, giving earnings a boost.
Technology Trader: Positive on DLPH, MAG: Automotive parts makers play a key role in the development of new cars, so their shares-which have reasonable valuations-are a good way for investors to gain exposure to the growing autonomous vehicle sector.
Trader: The Fed's lower rate expectations have longer-term implications for defensive stock sectors such as utilities, telecoms, and staples, according to Michael Yoshikami of Destination Wealth Management; Positive on WFM: Concerns about growing competition, slowing sales growth, and the need to lower prices have been discounted into the grocer's share price, and a little good news could send it higher; Spending on healthcare is denting consumer finances, despite a healthy jobs and housing market, low gas prices, and rising wages.
Interview: Jamie Cook, an analyst at CSFB, talks about what companies will benefit if the next president ramps up infrastructure spending (Positive on CMI, DE, CAT, PH, ACM).
Alternative Investments: Richard Merage runs MIG Capital with a long/short strategy that focuses on the consumer and invests with a longer time line than most peers (top 10 holdings: S, RCL, AAPL, Liberty Global, CCOI, CPRT, CCI, VSAT, DSW, CMG).
Small Caps: Positive on KLXI: "Distributor of aerospace parts is poised to benefit from a new aircraft-maintenance cycle, which could help lift the stock price more than 30%."
Follow-Up: Positive on SRPT: Following the recent FDA approval of Sarepta's Duchenne muscular dystrophy drug, Exondys 51, shares could see more upside, and the company could become a lucrative biotech play in the coming years.
International Trader: Positive on Dufry: Operator of duty-fee and retail stores at airports, seaports, and railway stations has 24% market share in airport travel retail and should continue to provide investor gains.
Asian Trader: Even if the Bank of Japan succeeds in boosting long-term bond yields, earnings at Japanese banks will hardly improve, says BNP Paribas analyst Toyoki Sameshima; Unlike in Europe, negative interest rates don't work in Japan.
Emerging Markets: It's not yet clear whether infrastructure spending can contribute to Brazil's economic growth, though that question shouldn't dampen investor enthusiasm for the country.
Commodities: Demand for lead in China has slowed, and supplies of the metal are ample, but that won't necessarily halt recent price gains.
Streetwise: The Fed should take its time raising rates, says columnist Ben Levisohn, who adds that "Economic growth is still sluggish, and inflation is low, leaving no real reason for an increase except a desire to get one done."
Friday, September 23, 2016
Markets Clear Hurdles of Central Bank Policy Risk
TradeTheNews.com Weekly
Market Update: Markets Clear Hurdles of Central Bank Policy Risk
Fri, 23 Sep 2016 16:03 PM EST
Coming into the week, focus was squarely on two key Central Bank meetings. Equities drifted higher and global bond prices stabilized leading into the BOJ and FOMC announcements on Wednesday. The Bank of Japan surprised many observers when it formally changed course introducing yield curve control and inflation overshooting policies. Investors' increased willingness to add risk was evident globally and was only intensified by the US Federal Reserve announcement a few hours later. The FOMC left rates unchanged exasperating some who felt the window was there for the Fed to take the next step in the slow process of normalizing rates. Despite three hawkish dissenters in the decision, markets took solace from the updated forecast that plotted rates staying lower for even longer than they had previously thought.
With the risk of central bank induced turmoil behind it, the market settled back in to risk on mode for the balance of the week. By Thursday, the NASDAQ was touching fresh all-time highs, and for the week, the S&P500 gained 1.2%, the DJIA added 0.8%, and the Nasdaq was 1.2% higher. Treasury markets rallied in tandem while curves flattened as investors moved back into the long end. The benchmark US 10-year yield fell towards 1.6% after entering the weak at 1.7%.
Crude prices stabilized early in the week helped by a deluge of press reports surrounding producers. OPEC members met in Vienna ahead of next week's Algiers meeting and there was no shortage of jawboning by officials. Momentum appears to be building for some kind of agreement on a production freeze, but Iran and Saudi Arabia remain at odds on what yardstick will be used in determining high water output marks. On Friday, the price of WTI slipped back below $45 after the Saudis said they do not to expect any formal decision from Algiers next week.
In corporate news there was intrigue around Apple's plans for the auto market again, with a report that it could consider buying supercar maker McLaren. Later in the week Apple shares were dragged lower on more concerns about interest waning in the iPhone 7. Shares of Twitter jumped 20% on Friday after a report that the social media firm was stepping up efforts to sell itself and had attracted some early interest from Google and Salesforce.com. The IPO market was seeing a renaissance with several notable deals pricing favorably and posting big first day gains including Apptio Inc. and Elf Cosmetics.
SUNDAY 9/18
(EU) Italy PM Renzi: Germany, France, and Spain are not following EU rules on trade and deficit control - Italian press
MONDAY 9/19
*(US) SEPT NAHB HOUSING MARKET INDEX: 65 V 60E
HNI: Cuts Q3 $0.74-0.79 v $0.95e (prior $0.90-0.95), cuts FY16 $2.50-2.70 v $2.87e (prior $2.80-2.95)
TUESDAY 9/20
*(HU) HUNGARY CENTRAL BANK (NBH) LEAVES BASE RATE UNCHANGED AT 0.90%; AS EXPECTED
(US) AUG HOUSING STARTS: 1.14M V 1.19ME; BUILDING PERMITS: 1.14M V 1.17ME
(HU) Hungary Central Bank Gov Matolcsy: to limit size of 3-mo deposits at HUF900B at Oct - Post Rate Decision Statement
FDX: Reports Q1 $2.90 v $2.79e, R$14.7B v $14.4Be
WEDNESDAY 9/21
(JP) BANK OF JAPAN (BOJ) LEAVES INTEREST RATE ON EXCESS RESERVES (IOER) UNCHANGED AT -0.10% (AS EXPECTED); CHANGES POLICY FRAMEWORK TO "QQE WITH YIELD CONTROL"
DGE.UK: Issues trading update: FY17 has started well
(JP) BOJ Gov Kuroda: Easing made Japan no longer in deflationary state - post rate decision press conference
(UK) AUG PUBLIC FINANCES (PSNCR): +£0.7B V -£2.1B PRIOR; PUBLIC SECTOR NET BORROWING: £10.1B V £10.3BE
AAPL: Reportedly in talks with sports car maker McLaren over potential acquisition - FT
(US) FOMC HOLDS TARGET RATE RANGE AT 0.25-0.50%: AS EXPECTED; NEAR-TERM RISKS APPEAR ROUGHLY BALANCED; STRONGER CASE FOR HIKE BUT WAITING FOR MORE EVIDENCE
(US) FOMC UPDATED ECONOMIC FORECAST FOR SEPT MEETING; lowers 2016 GDP forecast; lowers 2016 PCE inflation forecast; raises 2016 unemployment forecast
(US) Fed Chair Yellen: seeing solid increases in household income and consumer sentiment - FOMC press conf
(US) Fed Chair Yellen: seeing definite evidence economy is expanding more strongly after weak H1; unemployment rate is close to equilibrium - FOMC press conf Q&A
(NZ) NEW ZEALAND CENTRAL BANK (RBNZ) LEAVES OFFICIAL CASH RATE UNCHANGED AT 2.00%; AS EXPECTED
(AU) RBA Gov Lowe: Flexible medium term inflation target remains the right monetary policy; inflation to remain low for some time
THURSDAY 9/22
MAERSKB.DK: To separate into 2 division; Announces progress update on strategic review and change of management
(NO) NORWAY CENTRAL BANK (NORGES) LEAVES DEPOSIT RATES UNCHANGED AT 0.50%; AS EXPECTED
(PH) PHILIPPINES CENTRAL BANK (BSP) LEAVES OVERNIGHT BORROWING RATE UNCHANGED AT 3.00%, AS EXPECTED
(ID) INDONESIA CENTRAL BANK (BI) CUTS 7- DAY REVERSE RATE (NEW BENCHMARK RATE) BY 25BPS TO 5.00%; AS EXPECTED (5TH CUT IN 2016)
(UK) SEPT CBI TRENDS TOTAL ORDERS: -5 V -5E
(TR) TURKEY CENTRAL BANK (CBRT) LEAVES BENCHMARK REPURCHASE RATE UNCHANGED AT 7.50%; AS EXPECTED; again narrows rate corridor (as expected)
(ZA) SOUTH AFRICA CENTRAL BANK (SARB) LEAVES INTEREST RATE UNCHANGED AT 7.00%; AS EXPECTED
(US) AUG EXISTING HOME SALES: 5.33M V 5.45ME
ELF: IPO opens for trade at $24.00
YHOO: Confirms certain data from over 500M user accounts stolen, believed to be by a state-sponsored actor; stolen data includes hashed passwords, names and email addresses
BATS: CBOE reportedly in discussions to acquire BATS Global - press
FRIDAY 9/23
(FR) FRANCE SEPT PRELIMINARY MANUFACTURING PMI: 49.5 V 48.5E (highest reading in 6 months and 7th straight contraction)
(KR) South Korea Fin Min Yoo: Says 90% of Hanjin ships to offload by end of October - statement
(DE) GERMANY SEPT PRELIMINARY MANUFACTURING PMI: 54.3 (22nd month of expansion) V 53.1E
(EU) EURO ZONE SEPT PRELIMINARY MANUFACTURING PMI: 52.6 (39th month of expansion) V 51.5E
AAPL: iPhone 7 chip orders said to have likely fell in Q1 - press
(SA) Saudi Arabia ready to reduce output if Iran agrees to freeze production at current levels of 3.6M bpd - financial press
(US) Fed's Rosengren (moderate, FOMC voter): not doing modest, gradual tightening now will put recovery's duration and sustainability at greater risk - statement on FOMC dissent (was 1 of 3 dissenters)
TWTR: CNBC's Faber: Twitter reportedly moving closer to a sale; suitors include Google and Salesforce
(US) SEPT PRELIMINARY MARKIT MANUFACTURING PMI: 51.4 V 52.0E
VVV: IPO opens for trade at $24.10
APTI: IPO opens for trade at $23.40
(US) Weekly Baker Hughes US Rig Count: 511 v 506 w/w (+0.9%)
Fri, 23 Sep 2016 16:03 PM EST
Coming into the week, focus was squarely on two key Central Bank meetings. Equities drifted higher and global bond prices stabilized leading into the BOJ and FOMC announcements on Wednesday. The Bank of Japan surprised many observers when it formally changed course introducing yield curve control and inflation overshooting policies. Investors' increased willingness to add risk was evident globally and was only intensified by the US Federal Reserve announcement a few hours later. The FOMC left rates unchanged exasperating some who felt the window was there for the Fed to take the next step in the slow process of normalizing rates. Despite three hawkish dissenters in the decision, markets took solace from the updated forecast that plotted rates staying lower for even longer than they had previously thought.
With the risk of central bank induced turmoil behind it, the market settled back in to risk on mode for the balance of the week. By Thursday, the NASDAQ was touching fresh all-time highs, and for the week, the S&P500 gained 1.2%, the DJIA added 0.8%, and the Nasdaq was 1.2% higher. Treasury markets rallied in tandem while curves flattened as investors moved back into the long end. The benchmark US 10-year yield fell towards 1.6% after entering the weak at 1.7%.
Crude prices stabilized early in the week helped by a deluge of press reports surrounding producers. OPEC members met in Vienna ahead of next week's Algiers meeting and there was no shortage of jawboning by officials. Momentum appears to be building for some kind of agreement on a production freeze, but Iran and Saudi Arabia remain at odds on what yardstick will be used in determining high water output marks. On Friday, the price of WTI slipped back below $45 after the Saudis said they do not to expect any formal decision from Algiers next week.
In corporate news there was intrigue around Apple's plans for the auto market again, with a report that it could consider buying supercar maker McLaren. Later in the week Apple shares were dragged lower on more concerns about interest waning in the iPhone 7. Shares of Twitter jumped 20% on Friday after a report that the social media firm was stepping up efforts to sell itself and had attracted some early interest from Google and Salesforce.com. The IPO market was seeing a renaissance with several notable deals pricing favorably and posting big first day gains including Apptio Inc. and Elf Cosmetics.
SUNDAY 9/18
(EU) Italy PM Renzi: Germany, France, and Spain are not following EU rules on trade and deficit control - Italian press
MONDAY 9/19
*(US) SEPT NAHB HOUSING MARKET INDEX: 65 V 60E
HNI: Cuts Q3 $0.74-0.79 v $0.95e (prior $0.90-0.95), cuts FY16 $2.50-2.70 v $2.87e (prior $2.80-2.95)
TUESDAY 9/20
*(HU) HUNGARY CENTRAL BANK (NBH) LEAVES BASE RATE UNCHANGED AT 0.90%; AS EXPECTED
(US) AUG HOUSING STARTS: 1.14M V 1.19ME; BUILDING PERMITS: 1.14M V 1.17ME
(HU) Hungary Central Bank Gov Matolcsy: to limit size of 3-mo deposits at HUF900B at Oct - Post Rate Decision Statement
FDX: Reports Q1 $2.90 v $2.79e, R$14.7B v $14.4Be
WEDNESDAY 9/21
(JP) BANK OF JAPAN (BOJ) LEAVES INTEREST RATE ON EXCESS RESERVES (IOER) UNCHANGED AT -0.10% (AS EXPECTED); CHANGES POLICY FRAMEWORK TO "QQE WITH YIELD CONTROL"
DGE.UK: Issues trading update: FY17 has started well
(JP) BOJ Gov Kuroda: Easing made Japan no longer in deflationary state - post rate decision press conference
(UK) AUG PUBLIC FINANCES (PSNCR): +£0.7B V -£2.1B PRIOR; PUBLIC SECTOR NET BORROWING: £10.1B V £10.3BE
AAPL: Reportedly in talks with sports car maker McLaren over potential acquisition - FT
(US) FOMC HOLDS TARGET RATE RANGE AT 0.25-0.50%: AS EXPECTED; NEAR-TERM RISKS APPEAR ROUGHLY BALANCED; STRONGER CASE FOR HIKE BUT WAITING FOR MORE EVIDENCE
(US) FOMC UPDATED ECONOMIC FORECAST FOR SEPT MEETING; lowers 2016 GDP forecast; lowers 2016 PCE inflation forecast; raises 2016 unemployment forecast
(US) Fed Chair Yellen: seeing solid increases in household income and consumer sentiment - FOMC press conf
(US) Fed Chair Yellen: seeing definite evidence economy is expanding more strongly after weak H1; unemployment rate is close to equilibrium - FOMC press conf Q&A
(NZ) NEW ZEALAND CENTRAL BANK (RBNZ) LEAVES OFFICIAL CASH RATE UNCHANGED AT 2.00%; AS EXPECTED
(AU) RBA Gov Lowe: Flexible medium term inflation target remains the right monetary policy; inflation to remain low for some time
THURSDAY 9/22
MAERSKB.DK: To separate into 2 division; Announces progress update on strategic review and change of management
(NO) NORWAY CENTRAL BANK (NORGES) LEAVES DEPOSIT RATES UNCHANGED AT 0.50%; AS EXPECTED
(PH) PHILIPPINES CENTRAL BANK (BSP) LEAVES OVERNIGHT BORROWING RATE UNCHANGED AT 3.00%, AS EXPECTED
(ID) INDONESIA CENTRAL BANK (BI) CUTS 7- DAY REVERSE RATE (NEW BENCHMARK RATE) BY 25BPS TO 5.00%; AS EXPECTED (5TH CUT IN 2016)
(UK) SEPT CBI TRENDS TOTAL ORDERS: -5 V -5E
(TR) TURKEY CENTRAL BANK (CBRT) LEAVES BENCHMARK REPURCHASE RATE UNCHANGED AT 7.50%; AS EXPECTED; again narrows rate corridor (as expected)
(ZA) SOUTH AFRICA CENTRAL BANK (SARB) LEAVES INTEREST RATE UNCHANGED AT 7.00%; AS EXPECTED
(US) AUG EXISTING HOME SALES: 5.33M V 5.45ME
ELF: IPO opens for trade at $24.00
YHOO: Confirms certain data from over 500M user accounts stolen, believed to be by a state-sponsored actor; stolen data includes hashed passwords, names and email addresses
BATS: CBOE reportedly in discussions to acquire BATS Global - press
FRIDAY 9/23
(FR) FRANCE SEPT PRELIMINARY MANUFACTURING PMI: 49.5 V 48.5E (highest reading in 6 months and 7th straight contraction)
(KR) South Korea Fin Min Yoo: Says 90% of Hanjin ships to offload by end of October - statement
(DE) GERMANY SEPT PRELIMINARY MANUFACTURING PMI: 54.3 (22nd month of expansion) V 53.1E
(EU) EURO ZONE SEPT PRELIMINARY MANUFACTURING PMI: 52.6 (39th month of expansion) V 51.5E
AAPL: iPhone 7 chip orders said to have likely fell in Q1 - press
(SA) Saudi Arabia ready to reduce output if Iran agrees to freeze production at current levels of 3.6M bpd - financial press
(US) Fed's Rosengren (moderate, FOMC voter): not doing modest, gradual tightening now will put recovery's duration and sustainability at greater risk - statement on FOMC dissent (was 1 of 3 dissenters)
TWTR: CNBC's Faber: Twitter reportedly moving closer to a sale; suitors include Google and Salesforce
(US) SEPT PRELIMINARY MARKIT MANUFACTURING PMI: 51.4 V 52.0E
VVV: IPO opens for trade at $24.10
APTI: IPO opens for trade at $23.40
(US) Weekly Baker Hughes US Rig Count: 511 v 506 w/w (+0.9%)
Saturday, September 17, 2016
Barron's Weekend summary
Barron's Weekend summary: positive on CAA, HPE, LH
Cover story: For the first time, the number of families with more than $5M in assets has surpassed one million, part of a trend in which every level of the wealth pyramid is expanding; Last year, there were 492 billionaires in the U.S., one hundred of which were created in the past five years alone.
Feature:
1) Positive on HPE: With chief Meg Whitman focusing on computer-infrastructure products such as servers for corporate clients, company should see increased cash flow, much of which will go to investors;
2) Positive on LH: Company, whose tests are generally cheaper than those performed at hospitals, should benefit from a growing senior population and broader health insurance coverage through the ACA;
3) Positive on CAA: Homebuilder is expanding in some of the country's fastest-growing regions, and shares, which have a lower P/E ratio than peers, could have 25% upside.
Tech Trader: The camera on AAPL's new iPhone 7 model is said to be able to match or beat professional gear costing thousands of dollars, but that's just one element in the rapidly changing photography sector; Investors can play the trend with CEVA and Foveon, a subsidiary of Japanese lens and camera maker Sigma.
Trader: "A Fed hike Wednesday could be followed by a knee-jerk selloff below 2100 on the S&P 500," says Peter Kenny of Kenny & Co., but a relief rally is likely if there's no hike; Positive on CTSH: Company is a leading global player in infotech, consulting, and outsourcing, and with a potential 15% gain in shares as companies spend on digital infrastructure, investors should take a look; Positive on PII: Company continues to face issues, including recalls, but is installing the infrastructure to improve and monitor its products, and the stock could be a long-term winner.
Profile: John Loffredo and Robert DiMella, co-managers, MainStay High Yield Municipal Bond fund, don't use leverage and take a cautious approach to non-rated securities (sector weightings: education, health, transportation, general obligation, industrial, tobacco, cash equivalents and other, water & sewer, advance refunded, housing, utilities, miscellaneous revenue).
Interview: Jeff Rottinghaus, manager, T. Rowe Price U.S. Large-Cap Core fund, says he does a deep dive into companies he owns-and those he avoids-and thinks the market is fairly valued to overvalued.
Barron's Penta: Barron's annual list of the top 40 wealth management firms is topped by Bank of America Global Wealth & Investment Management, Morgan Stanley Wealth Management, and J.P. Morgan Private Bank; Other Penta stories report on Biedermeier furniture, Cap Ferrat, suitmaker Hickey Freeman, in-demand aircraft, the new Maserati off-road vehicle, watchmaker Laurent Ferrier, undervalued housing markets, UBS head of U.S. wealth management Tom Narati, trends in philanthropy, how to cut accounting fees, how to build an education trust, trends in wine, and the boom in homemade brewing.
Small Caps: Positive on PICO: Shares of the company, which holds a sizable amount of water rights in Nevada and Arizona, look deeply undervalued, and the company could be a takeover target. Follow-Up: Positive on NWL: Shares are up 35% to about $50 since Barron's recommended them in January, and they could rise to $60 as the company seeks fresh savings and pares its holdings; Cautious on MFIN: Company has cut dividends among ongoing trouble in the taxi industry, but at this point investors should hold on to shares, because yellow cabs are a long way from disappearing.
European Trader: Positive on Total: Shares of French integrated energy company, which is keenly focused on profitability, could gain 20% in the next 12 months.
Asian Trader: Positive on HSBC, China Construction Bank, Axis Bank: Three Asian-listed banks offer strong yields, growth prospects, or both, and despite a recent stock surge, they may have more room to grow.
Emerging Markets: Positive on Cielo, Sberbank: James Donald, who runs Lazard's Emerging Markets Equity Portfolio, likes the Brazilian credit-card processor and Russia's largest bank.
Commodities: Despite an active hurricane season in Florida, frozen concentrated orange juice futures are up and aren't likely to drop for some time.
Streetwise: Though investors are calling on GILD to make a major deal, management has chosen to focus on smaller acquisitions, which is exactly what it should be doing, according to Hilarey Bhatt of Bhatt Innovation Capital.
Cover story: For the first time, the number of families with more than $5M in assets has surpassed one million, part of a trend in which every level of the wealth pyramid is expanding; Last year, there were 492 billionaires in the U.S., one hundred of which were created in the past five years alone.
Feature:
1) Positive on HPE: With chief Meg Whitman focusing on computer-infrastructure products such as servers for corporate clients, company should see increased cash flow, much of which will go to investors;
2) Positive on LH: Company, whose tests are generally cheaper than those performed at hospitals, should benefit from a growing senior population and broader health insurance coverage through the ACA;
3) Positive on CAA: Homebuilder is expanding in some of the country's fastest-growing regions, and shares, which have a lower P/E ratio than peers, could have 25% upside.
Tech Trader: The camera on AAPL's new iPhone 7 model is said to be able to match or beat professional gear costing thousands of dollars, but that's just one element in the rapidly changing photography sector; Investors can play the trend with CEVA and Foveon, a subsidiary of Japanese lens and camera maker Sigma.
Trader: "A Fed hike Wednesday could be followed by a knee-jerk selloff below 2100 on the S&P 500," says Peter Kenny of Kenny & Co., but a relief rally is likely if there's no hike; Positive on CTSH: Company is a leading global player in infotech, consulting, and outsourcing, and with a potential 15% gain in shares as companies spend on digital infrastructure, investors should take a look; Positive on PII: Company continues to face issues, including recalls, but is installing the infrastructure to improve and monitor its products, and the stock could be a long-term winner.
Profile: John Loffredo and Robert DiMella, co-managers, MainStay High Yield Municipal Bond fund, don't use leverage and take a cautious approach to non-rated securities (sector weightings: education, health, transportation, general obligation, industrial, tobacco, cash equivalents and other, water & sewer, advance refunded, housing, utilities, miscellaneous revenue).
Interview: Jeff Rottinghaus, manager, T. Rowe Price U.S. Large-Cap Core fund, says he does a deep dive into companies he owns-and those he avoids-and thinks the market is fairly valued to overvalued.
Barron's Penta: Barron's annual list of the top 40 wealth management firms is topped by Bank of America Global Wealth & Investment Management, Morgan Stanley Wealth Management, and J.P. Morgan Private Bank; Other Penta stories report on Biedermeier furniture, Cap Ferrat, suitmaker Hickey Freeman, in-demand aircraft, the new Maserati off-road vehicle, watchmaker Laurent Ferrier, undervalued housing markets, UBS head of U.S. wealth management Tom Narati, trends in philanthropy, how to cut accounting fees, how to build an education trust, trends in wine, and the boom in homemade brewing.
Small Caps: Positive on PICO: Shares of the company, which holds a sizable amount of water rights in Nevada and Arizona, look deeply undervalued, and the company could be a takeover target. Follow-Up: Positive on NWL: Shares are up 35% to about $50 since Barron's recommended them in January, and they could rise to $60 as the company seeks fresh savings and pares its holdings; Cautious on MFIN: Company has cut dividends among ongoing trouble in the taxi industry, but at this point investors should hold on to shares, because yellow cabs are a long way from disappearing.
European Trader: Positive on Total: Shares of French integrated energy company, which is keenly focused on profitability, could gain 20% in the next 12 months.
Asian Trader: Positive on HSBC, China Construction Bank, Axis Bank: Three Asian-listed banks offer strong yields, growth prospects, or both, and despite a recent stock surge, they may have more room to grow.
Emerging Markets: Positive on Cielo, Sberbank: James Donald, who runs Lazard's Emerging Markets Equity Portfolio, likes the Brazilian credit-card processor and Russia's largest bank.
Commodities: Despite an active hurricane season in Florida, frozen concentrated orange juice futures are up and aren't likely to drop for some time.
Streetwise: Though investors are calling on GILD to make a major deal, management has chosen to focus on smaller acquisitions, which is exactly what it should be doing, according to Hilarey Bhatt of Bhatt Innovation Capital.
Friday, September 16, 2016
Markets Choppy Ahead of FOMC Next Wednesday
TradeTheNews.com Weekly
Market Update: Markets Choppy Ahead of FOMC Next Wednesday
Fri, 16 Sep 2016 16:05 PM EST
Volatility continued this week as the markets pondered the timing of the next Fed rate hike. The week started off with Fed Governor Brainard making the dovish case for Fed policy, which helped reverse the risk off sentiment that built up last week amid a barrage of hawkish commentary from Brainard's colleagues. A big miss on US Advanced Retail Sales data on Thursday lent support to the dovish view that the Fed will be on hold next week. But a hotter than expected US CPI reading on Friday caused markets to once again reassess expectations for Fed policy as progress toward the inflation target could bring the next hike sooner. Meanwhile, the BOE kept its policy unchanged this week, as expected, but said it could cut rates again if the baseline forecast set in August is realized. The renewed contrast between US policy tightening and European easing led to the dollar strengthening substantially on Friday, particularly against the pound sterling. WTI crude futures slid throughout the week, dropping three bucks to around $43/bbl. Two major M&A deals in the agriculture sector, an earnings miss by Oracle and increased guidance from Intel provided the buzz in the corporate sector. The tech sector was also bolstered by a surge in Apple shares driven by strong pre-orders for iPhone 7 at Sprint and T-Mobile. Equities were volatile but ended little changed: for the week the DJIA gained 0.2%, the S&P500 added 0.5%, and the Nasdaq was jumped 2.3%.
Agrium and Potash began a week replete with large-scale M&A activity by announcing a $26B merger of equals on Monday morning. The all-stock combination would partner Potash's crop nutrient production capacity with the farm retail network of Agrium to form an integrated crop inputs platform. In another agricultural mega-merger announcement, Germany's Bayer agreed to acquire Monsanto with an improved $128/share cash offer after months of back-and-forth. With a total value of $66B, the deal would be the largest all-cash deal on record, a fact which has not gone unnoticed by regulators; Iowa Republican Senator Grassley has already noted a Bayer-Monsanto merger would likely cause concerns for US farmers. In another sign of a rebound in oil sector M&A, Anadarko announced the acquisition of Freeport McMoran's deepwater Gulf of Mexico assets for $2B, adding approximately 80K net BOE per day to Anadarko's production, who aims to use the added revenue from the offshore wells to accelerate its onshore development plans. And late in the week, Gilead registered a $5B notes offering, leading investors to believe some future acquisition plans could soon be set into motion.
In the only major corporate earnings release this week, Oracle reported a miss on both profit and revenue in Q1, noting continued growth in its burgeoning cloud business but a slowdown in traditional new software licenses. The tech giant raised its SaaS/PaaS FY revenue growth outlook, but guided its overall revenue below street consensus, sending shares lower. Intel, on the other hand, raised its Q3 revenue guidance Friday, citing replenished PC supply chain inventory and some signs of improving PC demand. Off-road vehicle manufacturer Polaris cut its FY profit guidance on effects from the RZR Turbo product recall that have become more expensive than previously anticipated.
MON 9/12
AGU.CA: To combine in merger of equals with Potash; To form new parent company in all-stock deal with EV of $36B
(US) Fed Gov Brainard (FOMC voter, dove): urges continued prudence in removing accommodation; more concerned about undershooting inflation
TUES 9/13
(DE) GERMANY AUG FINAL CPI M/M: 0.0% V 0.0%E; Y/Y: 0.4% V 0.4%E
IEA Monthly Report: Cuts 2016 global oil demand forecast by 100K bpd and by 200K in 2017
(UK) AUG CPI M/M: 0.3% V 0.4%E; Y/Y: 0.6% V 0.7%E; CPI CORE Y/Y: 1.3% V 1.4%E (annual pace matches 21-month high)
(UK) AUG PPI INPUT M/M: 0.2% V 0.6%E; Y/Y: 7.6% V 8.1%E
(DE) GERMANY SEPT ZEW CURRENT SITUATION SURVEY: 55.1 V 56.0E; EXPECTATIONS SURVEY: 0.5 V 2.5E
AAPL: T-Mobile says iPhone 7 and iPhone 7 Plus sales in pre orders were up 4x compared to the next most popular iPhone
(JP) BOJ to consider moving deeper into negative rates; may drop timing on reaching 2% inflation target - Nikkei
WED 9/14
RMS.FR: Reports H1 Net €545M v €546Me, Op €827M v €818.5Me, Rev €2.44B v €2.44B prelim
(UK) JULY AVERAGE WEEKLY EARNINGS 3M/Y: 2.3% V 2.1%E; WEEKLY EARNINGS 3M/Y (EX BONUS): 2.1% V 2.2%E
(UK) AUG JOBLESS CLAIMS CHANGE: +2.4K V +1.8KE; CLAIMANT COUNT RATE: 2.2% V 2.2%E
(UK) JULY ILO UNEMPLOYMENT RATE 3M/3M: 4.9% V 4.9%E
(US) AUG IMPORT PRICE INDEX M/M: -0.2% V -0.1%E; Y/Y: -2.2% V -2.2%E
(AU) AUSTRALIA AUG EMPLOYMENT CHANGE: -3.9K (first decline in 6 months) V +15.0KE; UNEMPLOYMENT RATE: 5.6% (3-year low) V 5.7%E
THURS 9/15
(CH) SNB LEAVES SIGHT DEPOSIT INTEREST RATE UNCHANGED AT -0.75%; AS EXPECTED
(UK) AUG RETAIL SALES (EX-AUTO FUEL) M/M: -0.3% V-0.7%E; Y/Y: 5.9% V 4.8%E
(UK) AUG RETAIL SALES (INCLUDING AUTO FUEL) M/M: -0.2%V -0.4%E; Y/Y: 6.2%V 5.4%E
(EU) EURO ZONE AUG CPI M/M: 0.1% V 0.1%E; Y/Y: 0.2% V 0.2%E; CPI CORE Y/Y: 0.8% V 0.8%E
(UK) BANK OF ENGLAND (BOE) LEAVES INTEREST RATES UNCHANGED AT 0.25%; AS EXPECTED
(UK) BOE SEPT MINUTES: VOTED 9-0 TO LEAVE INTEREST RATES UNCHANGED AT 0.25%
(US) AUG ADVANCE RETAIL SALES M/M: -0.3% V -0.1%E; RETAIL SALES EX AUTO M/M: -0.1% V +0.2%E
(US) AUG PPI FINAL DEMAND M/M: 0.0% V +0.1%E; Y/Y: 0.0% V +0.1%E
(US) SEPT PHILADELPHIA FED BUSINESS OUTLOOK: 12.8 V 1.0E (Highest since Feb 2015)
ORCL: Reports Q1 $0.55 v $0.58e, R$8.60B v $8.72Be
(US) NORTH AMERICA AUG SEMI BOOK/BILL RATIO: 1.03 V 1.05 prior
FRI 9/16
(RU) RUSSIA CENTRAL BANK (CBR) CUTS 1-WEEK AUCTION RATE BY 50BPS TO 10.00%; AS EXPECTED
(US) AUG CPI M/M: 0.2% V 0.1%E; CPI EX FOOD AND ENERGY M/M: 0.3% V 0.2%E
INTC: Raises Q3 R$15.3-15.9B v $14.8Be (prior R$14.4-15.4B); cites replenished PC supply chain inventory and improving PC demand
(US) SEPT PRELIMINARY UNIVERSITY OF MICHIGAN CONFIDENCE: 89.8 V 90.6E
(US) Fed reports Q2 Financial Accounts: Household Change in Net Worth: $1.075T v $0.837T prior; Total household net worth: $89.1T v $88.1T q/q
Fri, 16 Sep 2016 16:05 PM EST
Volatility continued this week as the markets pondered the timing of the next Fed rate hike. The week started off with Fed Governor Brainard making the dovish case for Fed policy, which helped reverse the risk off sentiment that built up last week amid a barrage of hawkish commentary from Brainard's colleagues. A big miss on US Advanced Retail Sales data on Thursday lent support to the dovish view that the Fed will be on hold next week. But a hotter than expected US CPI reading on Friday caused markets to once again reassess expectations for Fed policy as progress toward the inflation target could bring the next hike sooner. Meanwhile, the BOE kept its policy unchanged this week, as expected, but said it could cut rates again if the baseline forecast set in August is realized. The renewed contrast between US policy tightening and European easing led to the dollar strengthening substantially on Friday, particularly against the pound sterling. WTI crude futures slid throughout the week, dropping three bucks to around $43/bbl. Two major M&A deals in the agriculture sector, an earnings miss by Oracle and increased guidance from Intel provided the buzz in the corporate sector. The tech sector was also bolstered by a surge in Apple shares driven by strong pre-orders for iPhone 7 at Sprint and T-Mobile. Equities were volatile but ended little changed: for the week the DJIA gained 0.2%, the S&P500 added 0.5%, and the Nasdaq was jumped 2.3%.
Agrium and Potash began a week replete with large-scale M&A activity by announcing a $26B merger of equals on Monday morning. The all-stock combination would partner Potash's crop nutrient production capacity with the farm retail network of Agrium to form an integrated crop inputs platform. In another agricultural mega-merger announcement, Germany's Bayer agreed to acquire Monsanto with an improved $128/share cash offer after months of back-and-forth. With a total value of $66B, the deal would be the largest all-cash deal on record, a fact which has not gone unnoticed by regulators; Iowa Republican Senator Grassley has already noted a Bayer-Monsanto merger would likely cause concerns for US farmers. In another sign of a rebound in oil sector M&A, Anadarko announced the acquisition of Freeport McMoran's deepwater Gulf of Mexico assets for $2B, adding approximately 80K net BOE per day to Anadarko's production, who aims to use the added revenue from the offshore wells to accelerate its onshore development plans. And late in the week, Gilead registered a $5B notes offering, leading investors to believe some future acquisition plans could soon be set into motion.
In the only major corporate earnings release this week, Oracle reported a miss on both profit and revenue in Q1, noting continued growth in its burgeoning cloud business but a slowdown in traditional new software licenses. The tech giant raised its SaaS/PaaS FY revenue growth outlook, but guided its overall revenue below street consensus, sending shares lower. Intel, on the other hand, raised its Q3 revenue guidance Friday, citing replenished PC supply chain inventory and some signs of improving PC demand. Off-road vehicle manufacturer Polaris cut its FY profit guidance on effects from the RZR Turbo product recall that have become more expensive than previously anticipated.
MON 9/12
AGU.CA: To combine in merger of equals with Potash; To form new parent company in all-stock deal with EV of $36B
(US) Fed Gov Brainard (FOMC voter, dove): urges continued prudence in removing accommodation; more concerned about undershooting inflation
TUES 9/13
(DE) GERMANY AUG FINAL CPI M/M: 0.0% V 0.0%E; Y/Y: 0.4% V 0.4%E
IEA Monthly Report: Cuts 2016 global oil demand forecast by 100K bpd and by 200K in 2017
(UK) AUG CPI M/M: 0.3% V 0.4%E; Y/Y: 0.6% V 0.7%E; CPI CORE Y/Y: 1.3% V 1.4%E (annual pace matches 21-month high)
(UK) AUG PPI INPUT M/M: 0.2% V 0.6%E; Y/Y: 7.6% V 8.1%E
(DE) GERMANY SEPT ZEW CURRENT SITUATION SURVEY: 55.1 V 56.0E; EXPECTATIONS SURVEY: 0.5 V 2.5E
AAPL: T-Mobile says iPhone 7 and iPhone 7 Plus sales in pre orders were up 4x compared to the next most popular iPhone
(JP) BOJ to consider moving deeper into negative rates; may drop timing on reaching 2% inflation target - Nikkei
WED 9/14
RMS.FR: Reports H1 Net €545M v €546Me, Op €827M v €818.5Me, Rev €2.44B v €2.44B prelim
(UK) JULY AVERAGE WEEKLY EARNINGS 3M/Y: 2.3% V 2.1%E; WEEKLY EARNINGS 3M/Y (EX BONUS): 2.1% V 2.2%E
(UK) AUG JOBLESS CLAIMS CHANGE: +2.4K V +1.8KE; CLAIMANT COUNT RATE: 2.2% V 2.2%E
(UK) JULY ILO UNEMPLOYMENT RATE 3M/3M: 4.9% V 4.9%E
(US) AUG IMPORT PRICE INDEX M/M: -0.2% V -0.1%E; Y/Y: -2.2% V -2.2%E
(AU) AUSTRALIA AUG EMPLOYMENT CHANGE: -3.9K (first decline in 6 months) V +15.0KE; UNEMPLOYMENT RATE: 5.6% (3-year low) V 5.7%E
THURS 9/15
(CH) SNB LEAVES SIGHT DEPOSIT INTEREST RATE UNCHANGED AT -0.75%; AS EXPECTED
(UK) AUG RETAIL SALES (EX-AUTO FUEL) M/M: -0.3% V-0.7%E; Y/Y: 5.9% V 4.8%E
(UK) AUG RETAIL SALES (INCLUDING AUTO FUEL) M/M: -0.2%V -0.4%E; Y/Y: 6.2%V 5.4%E
(EU) EURO ZONE AUG CPI M/M: 0.1% V 0.1%E; Y/Y: 0.2% V 0.2%E; CPI CORE Y/Y: 0.8% V 0.8%E
(UK) BANK OF ENGLAND (BOE) LEAVES INTEREST RATES UNCHANGED AT 0.25%; AS EXPECTED
(UK) BOE SEPT MINUTES: VOTED 9-0 TO LEAVE INTEREST RATES UNCHANGED AT 0.25%
(US) AUG ADVANCE RETAIL SALES M/M: -0.3% V -0.1%E; RETAIL SALES EX AUTO M/M: -0.1% V +0.2%E
(US) AUG PPI FINAL DEMAND M/M: 0.0% V +0.1%E; Y/Y: 0.0% V +0.1%E
(US) SEPT PHILADELPHIA FED BUSINESS OUTLOOK: 12.8 V 1.0E (Highest since Feb 2015)
ORCL: Reports Q1 $0.55 v $0.58e, R$8.60B v $8.72Be
(US) NORTH AMERICA AUG SEMI BOOK/BILL RATIO: 1.03 V 1.05 prior
FRI 9/16
(RU) RUSSIA CENTRAL BANK (CBR) CUTS 1-WEEK AUCTION RATE BY 50BPS TO 10.00%; AS EXPECTED
(US) AUG CPI M/M: 0.2% V 0.1%E; CPI EX FOOD AND ENERGY M/M: 0.3% V 0.2%E
INTC: Raises Q3 R$15.3-15.9B v $14.8Be (prior R$14.4-15.4B); cites replenished PC supply chain inventory and improving PC demand
(US) SEPT PRELIMINARY UNIVERSITY OF MICHIGAN CONFIDENCE: 89.8 V 90.6E
(US) Fed reports Q2 Financial Accounts: Household Change in Net Worth: $1.075T v $0.837T prior; Total household net worth: $89.1T v $88.1T q/q
Friday, September 9, 2016
Passive ECB and Hawkish Fed Finally Jar Markets
TradeTheNews.com Weekly
Market Update: Passive ECB and Hawkish Fed Finally Jar Markets
Fri, 09 Sep 2016 16:05 PM EST
September trade finally ushered in some volatility after the long slog higher for much of the summer. Early on in the week volumes remained light and movement remained minimal coming on the heels of a disappointing August employment report last Friday. An uptick in M&A announcements after the Labor Day holiday did little to juice equity markets. Corporate debt offerings surged as company's looked to roll over financing costs ahead of a potential Fed rate hike. US data continued to come in soft, highlighted by the August ISM Services reading that touched its lowest level since 2010. The weaker readings helped push Treasury markets higher, keeping a lid on yields through midweek.
By Wednesday traders focus turned decidedly towards Europe. With August (post-Brexit) economic readings holding up generally better than some officials admittedly had forecasted, expectations that much would come of Thursdays ECB meeting were diminished. Nevertheless, markets responded when the ECB held pat on rates and stimulus measures and Draghi was decidedly more hawkish than many had expected in his commentary. Notably Draghi said the ECB did not discuss extending its QE timeframe, even as the nominal end date is looming in March. The reverberations were felt most potently in the rates complex. Sovereign bonds sold off globally pushing benchmark rates in Europe and the US up to levels not seen since the Brexit vote. The pressure was amplified by a more hawkish tone from a slate of Fed speakers that spooked markets about the possibility the Fed could actually make its next rate move this month. Boston Fed President Rosengren said there is a reasonable case for gradual tightening, and even the usually cautious dove Governor Tarullo said he would not rule out a rate hike this year. Stock markets came under pressure and the selling accelerated into week's end. The S&P, Dow and Nasdaq Composite each fell below their 50-day moving averages on Friday for the first time since the post Brexit swoon, and the S&P500 saws its first daily move of greater than 1% for the first time in over 40 sessions. For the week, the DJIA lost 2.2%, the S&P500 dropped 2.4%, and the Nasdaq fell 2.4%.
Energy futures pushed higher for most of the week after Russia and Saudi Arabia agreed to form a working group on oil price stability and other oil producers including Iran made constructive comments about a potential oil production freeze agreement. Weekly energy inventory data also provided a boost for crude futures as the 12% of US Gulf of Mexico oil production that was shut in by tropical storm Hermine resulted in the largest weekly draw in crude since 1999.
In the realm of corporate news, the most anticipated event this week was Apple's product unveiling. CEO Cook divulged the new 'water-resistant' iPhone 7 model, which features larger hard drives, an upgraded camera, and a somewhat controversial removal of the headphone jack, but the announcement revealed few features that surprised any tech-watchers. The consumer electronics giant also introduced the Apple Watch 2, with built-in GPS, and Airpod wireless earphones. While the event disappointed some, Apple's week was considerably better than competitor Samsung's; the Korean electronics maker announced a global recall of its Galaxy Note 7 phones on reports of battery fires. M&A began to pick up from the relatively quiet pre-Labor Day holiday period. Hewlett Packard Enterprise announced it would spin off and sell its non-core software assets to Micro Focus in a deal valued at $8.8B, creating one of the world's largest pure-play enterprise software companies. Reports indicated Monsanto is could announce a deal to be acquired by Bayer next week at price a little below $130/share. And Liberty Media Corp agreed to acquire motorsports league Formula One for an equity value of $4.4B.
Sun 9/4
(CN) CHINA AUG CAIXIN PMI SERVICES: 52.1 V 51.7 PRIOR
Mon 9/5
(EU) EURO ZONE SEPT SENTIX INVESTOR CONFIDENCE: 5.6 V 5.0E
(RU) SAUDI ARABIA AND RUSSIA SIGN AGREEMENT ON OIL MARKET; discussed cooperation on oil and gas to avoid catastrophe and achieve stability; could include possible production freeze (as speculated)
Tues 9/6
(AU) RESERVE BANK OF AUSTRALIA (RBA) LEAVES CASH RATE TARGET AT 1.50%; AS EXPECTED
(EU) EURO ZONE Q2 FINAL GDP Q/Q: 0.3% V 0.3%E; Y/Y: 1.6% V 1.6%E
CPHD: To be acquired by Danaher for $53/shr valued at $4B
SE: To combine companies with Enbridge in an all stock for stock merger, EV at C$165B; values Spectra common stock at ~C$37B
NAV: Confirms wide-ranging strategic alliance with Volkswagen Truck & Bus; VW to invest at $15.76/shr for 19.9% stake
(US) AUG ISM NON-MANUFACTURING COMPOSITE: 51.4 V 55.0E (lowest since Feb 2010)
(US) Aug Labor Market Conditions Index Change: -0.7 v +1.0 prior
FDML: Enters into definitive merger agreement with Icahn Enterprises L.P. at $9.25/shr in all-cash offer
CMG: Pershing Square discloses new 9.9% stake; intends to engage in discussions with management - 13D filing
(AU) AUSTRALIA Q2 GDP Q/Q: 0.5% V 0.6%E (1-year low); Y/Y: 3.3% V 3.3%E (annual pace hits a 2-year high)
Wed 9/7
(SE) SWEDEN CENTRAL BANK (RIKSBANK) LEAVES REPO RATE UNCHANGED AT -0.50%; AS EXPECTED
(CN) CHINA AUG FOREIGN RESERVES: $3.185T V $3.190TE (lowest level since Dec 2011)
(UK) JULY INDUSTRIAL PRODUCTION M/M: +0.1% V -0.2%E; Y/Y: 2.1% V 1.9%E
(UK) JULY MANUFACTURING PRODUCTION M/M: -0.9% V -0.3%E; Y/Y: 0.8% V 1.7%E
(CA) BANK OF CANADA (BOC) LEAVES INTEREST RATES UNCHANGED AT 0.50%; AS EXPECTED
AAPL: Introduces iPhone 7 and Apple Watch 2 - product event
(US) FEDERAL RESERVE RELEASES BEIGE BOOK: ECONOMY CONTINUED TO EXPAND AT MODEST PACE THROUGH LATE AUGUST; UPWARD WAGE PRESSURES INCREASED FURTHER
(JP) JAPAN Q2 FINAL GDP Q/Q: 0.2% V 0.0%E; ANNUALIZED GDP: 0.7% V 0.2%E (2nd straight expansion both quarterly and annualized)
(CN) CHINA AUG TRADE BALANCE: $52.1B V $58.4BE
Thrs 9/8
(CN) China Passenger Car Association (PCA): China July vehicle sales 1.8M units, +24.5% y/y; YTD 14.2M units, +12.7% y/y
(EU) ECB LEAVES MAIN 7-DAY REFINANCING RATE UNCHANGED AT 0.00%; AS EXPECTED
(EU) ECB Statement: Reiterates to continue €80B/month asset purchases program until Mar 2017 or beyond if necessary (no change in current timeline)
(US) INITIAL JOBLESS CLAIMS: 259K V 265KE; CONTINUING CLAIMS: 2.14M V 2.15ME
(EU) ECB chief Draghi: Sees rates at present or lower level for extended period; to preserve very substantial amount of support - prepared remarks
(EU) ECB chief Draghi: Did not discuss extension of QE; working on smooth implementation of policies, changes are needed - Q&A
(EU) ECB chief Draghi: Have not discussed helicopter money or equity buying
(US) DOE CRUDE: -14.5M V +0.5ME; GASOLINE: -4.2M V -0.5ME; DISTILLATE: +3.4M V +1ME (largest crude draw since 1999)
(PE) PERU CENTRAL BANK (BCRP) LEAVES REFERENCE RATE UNCHANGED AT 4.25%; AS EXPECTED
(KR) BANK OF KOREA (BOK) LEAVES 7-DAY REPO RATE UNCHANGED AT 1.25%; AS EXPECTED (3rd straight puase in current easing cycle)
(CN) CHINA AUG CPI Y/Y: 1.3% V 1.7%E; 10-month low
(CN) CHINA AUG PPI Y/Y: -0.8% V -0.9%E; 54th consecutive month of decline; smallest decline since Apr 2012
Fri 9/9
(FR) FRANCE JULY INDUSTRIAL PRODUCTION M/M: -0.6% V +0.3%E; Y/Y: -0.1% V +1.0%E
(FR) FRANCE JULY MANUFACTURING PRODUCTION M/M: -0.3% V +0.7%E; Y/Y: 0.4% V 1.8%E
GILTS: (UK) 10-year Gilt yield approaching 0.81%; highest since BOE announced new QE measures back on Aug 2nd - dealers
(US) Fed's Rosengren (moderate, FOMC voter): Sees reasonable case for gradual tightening
(CA) CANADA AUG NET CHANGE IN EMPLOYMENT: +26.2K V +14.0KE; UNEMPLOYMENT RATE: 7.0% V 7.0%E
(US) Weekly Baker Hughes US Rig Count: 508 v 497 w/w (+2%)
Fri, 09 Sep 2016 16:05 PM EST
September trade finally ushered in some volatility after the long slog higher for much of the summer. Early on in the week volumes remained light and movement remained minimal coming on the heels of a disappointing August employment report last Friday. An uptick in M&A announcements after the Labor Day holiday did little to juice equity markets. Corporate debt offerings surged as company's looked to roll over financing costs ahead of a potential Fed rate hike. US data continued to come in soft, highlighted by the August ISM Services reading that touched its lowest level since 2010. The weaker readings helped push Treasury markets higher, keeping a lid on yields through midweek.
By Wednesday traders focus turned decidedly towards Europe. With August (post-Brexit) economic readings holding up generally better than some officials admittedly had forecasted, expectations that much would come of Thursdays ECB meeting were diminished. Nevertheless, markets responded when the ECB held pat on rates and stimulus measures and Draghi was decidedly more hawkish than many had expected in his commentary. Notably Draghi said the ECB did not discuss extending its QE timeframe, even as the nominal end date is looming in March. The reverberations were felt most potently in the rates complex. Sovereign bonds sold off globally pushing benchmark rates in Europe and the US up to levels not seen since the Brexit vote. The pressure was amplified by a more hawkish tone from a slate of Fed speakers that spooked markets about the possibility the Fed could actually make its next rate move this month. Boston Fed President Rosengren said there is a reasonable case for gradual tightening, and even the usually cautious dove Governor Tarullo said he would not rule out a rate hike this year. Stock markets came under pressure and the selling accelerated into week's end. The S&P, Dow and Nasdaq Composite each fell below their 50-day moving averages on Friday for the first time since the post Brexit swoon, and the S&P500 saws its first daily move of greater than 1% for the first time in over 40 sessions. For the week, the DJIA lost 2.2%, the S&P500 dropped 2.4%, and the Nasdaq fell 2.4%.
Energy futures pushed higher for most of the week after Russia and Saudi Arabia agreed to form a working group on oil price stability and other oil producers including Iran made constructive comments about a potential oil production freeze agreement. Weekly energy inventory data also provided a boost for crude futures as the 12% of US Gulf of Mexico oil production that was shut in by tropical storm Hermine resulted in the largest weekly draw in crude since 1999.
In the realm of corporate news, the most anticipated event this week was Apple's product unveiling. CEO Cook divulged the new 'water-resistant' iPhone 7 model, which features larger hard drives, an upgraded camera, and a somewhat controversial removal of the headphone jack, but the announcement revealed few features that surprised any tech-watchers. The consumer electronics giant also introduced the Apple Watch 2, with built-in GPS, and Airpod wireless earphones. While the event disappointed some, Apple's week was considerably better than competitor Samsung's; the Korean electronics maker announced a global recall of its Galaxy Note 7 phones on reports of battery fires. M&A began to pick up from the relatively quiet pre-Labor Day holiday period. Hewlett Packard Enterprise announced it would spin off and sell its non-core software assets to Micro Focus in a deal valued at $8.8B, creating one of the world's largest pure-play enterprise software companies. Reports indicated Monsanto is could announce a deal to be acquired by Bayer next week at price a little below $130/share. And Liberty Media Corp agreed to acquire motorsports league Formula One for an equity value of $4.4B.
Sun 9/4
(CN) CHINA AUG CAIXIN PMI SERVICES: 52.1 V 51.7 PRIOR
Mon 9/5
(EU) EURO ZONE SEPT SENTIX INVESTOR CONFIDENCE: 5.6 V 5.0E
(RU) SAUDI ARABIA AND RUSSIA SIGN AGREEMENT ON OIL MARKET; discussed cooperation on oil and gas to avoid catastrophe and achieve stability; could include possible production freeze (as speculated)
Tues 9/6
(AU) RESERVE BANK OF AUSTRALIA (RBA) LEAVES CASH RATE TARGET AT 1.50%; AS EXPECTED
(EU) EURO ZONE Q2 FINAL GDP Q/Q: 0.3% V 0.3%E; Y/Y: 1.6% V 1.6%E
CPHD: To be acquired by Danaher for $53/shr valued at $4B
SE: To combine companies with Enbridge in an all stock for stock merger, EV at C$165B; values Spectra common stock at ~C$37B
NAV: Confirms wide-ranging strategic alliance with Volkswagen Truck & Bus; VW to invest at $15.76/shr for 19.9% stake
(US) AUG ISM NON-MANUFACTURING COMPOSITE: 51.4 V 55.0E (lowest since Feb 2010)
(US) Aug Labor Market Conditions Index Change: -0.7 v +1.0 prior
FDML: Enters into definitive merger agreement with Icahn Enterprises L.P. at $9.25/shr in all-cash offer
CMG: Pershing Square discloses new 9.9% stake; intends to engage in discussions with management - 13D filing
(AU) AUSTRALIA Q2 GDP Q/Q: 0.5% V 0.6%E (1-year low); Y/Y: 3.3% V 3.3%E (annual pace hits a 2-year high)
Wed 9/7
(SE) SWEDEN CENTRAL BANK (RIKSBANK) LEAVES REPO RATE UNCHANGED AT -0.50%; AS EXPECTED
(CN) CHINA AUG FOREIGN RESERVES: $3.185T V $3.190TE (lowest level since Dec 2011)
(UK) JULY INDUSTRIAL PRODUCTION M/M: +0.1% V -0.2%E; Y/Y: 2.1% V 1.9%E
(UK) JULY MANUFACTURING PRODUCTION M/M: -0.9% V -0.3%E; Y/Y: 0.8% V 1.7%E
(CA) BANK OF CANADA (BOC) LEAVES INTEREST RATES UNCHANGED AT 0.50%; AS EXPECTED
AAPL: Introduces iPhone 7 and Apple Watch 2 - product event
(US) FEDERAL RESERVE RELEASES BEIGE BOOK: ECONOMY CONTINUED TO EXPAND AT MODEST PACE THROUGH LATE AUGUST; UPWARD WAGE PRESSURES INCREASED FURTHER
(JP) JAPAN Q2 FINAL GDP Q/Q: 0.2% V 0.0%E; ANNUALIZED GDP: 0.7% V 0.2%E (2nd straight expansion both quarterly and annualized)
(CN) CHINA AUG TRADE BALANCE: $52.1B V $58.4BE
Thrs 9/8
(CN) China Passenger Car Association (PCA): China July vehicle sales 1.8M units, +24.5% y/y; YTD 14.2M units, +12.7% y/y
(EU) ECB LEAVES MAIN 7-DAY REFINANCING RATE UNCHANGED AT 0.00%; AS EXPECTED
(EU) ECB Statement: Reiterates to continue €80B/month asset purchases program until Mar 2017 or beyond if necessary (no change in current timeline)
(US) INITIAL JOBLESS CLAIMS: 259K V 265KE; CONTINUING CLAIMS: 2.14M V 2.15ME
(EU) ECB chief Draghi: Sees rates at present or lower level for extended period; to preserve very substantial amount of support - prepared remarks
(EU) ECB chief Draghi: Did not discuss extension of QE; working on smooth implementation of policies, changes are needed - Q&A
(EU) ECB chief Draghi: Have not discussed helicopter money or equity buying
(US) DOE CRUDE: -14.5M V +0.5ME; GASOLINE: -4.2M V -0.5ME; DISTILLATE: +3.4M V +1ME (largest crude draw since 1999)
(PE) PERU CENTRAL BANK (BCRP) LEAVES REFERENCE RATE UNCHANGED AT 4.25%; AS EXPECTED
(KR) BANK OF KOREA (BOK) LEAVES 7-DAY REPO RATE UNCHANGED AT 1.25%; AS EXPECTED (3rd straight puase in current easing cycle)
(CN) CHINA AUG CPI Y/Y: 1.3% V 1.7%E; 10-month low
(CN) CHINA AUG PPI Y/Y: -0.8% V -0.9%E; 54th consecutive month of decline; smallest decline since Apr 2012
Fri 9/9
(FR) FRANCE JULY INDUSTRIAL PRODUCTION M/M: -0.6% V +0.3%E; Y/Y: -0.1% V +1.0%E
(FR) FRANCE JULY MANUFACTURING PRODUCTION M/M: -0.3% V +0.7%E; Y/Y: 0.4% V 1.8%E
GILTS: (UK) 10-year Gilt yield approaching 0.81%; highest since BOE announced new QE measures back on Aug 2nd - dealers
(US) Fed's Rosengren (moderate, FOMC voter): Sees reasonable case for gradual tightening
(CA) CANADA AUG NET CHANGE IN EMPLOYMENT: +26.2K V +14.0KE; UNEMPLOYMENT RATE: 7.0% V 7.0%E
(US) Weekly Baker Hughes US Rig Count: 508 v 497 w/w (+2%)
Wednesday, September 7, 2016
September-October 2016 Market Outlook: A Disaster in the Making
TradeTheNews.com September-October
2016 Outlook: A Disaster in the Making
Tue, 06 Sep 2016 23:22 PM EST
With US Presidential candidate Donald Trump labeling the economy a "disaster" and his billionaire advisor Carl Icahn calling for a "day of reckoning" for the stock market, we look ahead to the potential upsets and near misses that might occur in the next couple of months. Stocks continue to climb the wall of worry, pushing aside every adversity from the Brexit to anemic global growth. Government paper remains a crowded trade even as central banks keeping adding to their hoards, with the key 10-year US Treasury yield still compressed near 1.50% and the German and Japanese equivalents at negative yields. WTI crude futures have seen some stabilization in the $40's as OPEC edges toward a possible agreement on an oil freeze.
Brexit related worries have subsided for the time being, but may emerge again early next year when the UK invokes article 50 to start the succession process. The BOE and other central banks are poised to expand or extend their stimulus programs in the months ahead, notwithstanding the Fed looking to take rates in the other direction. Markets will probably be able to absorb a "one and done" rate hike from the Fed in September, or more likely December. Not incidentally, between now and then the US will elect a new President and OPEC may well retake some control of the oil market.
Fed Seas Rising
With global jitters in check, the Fed has resumed making noises about a rate hike this year, perhaps within the month. The one thing all Fed members can agree on is that monetary policy remains data dependent. Unfortunately, the latest data was inconclusive. The August Nonfarm Payrolls came in below expectations, and just weak enough to lower market expectations for a September rate hike. After the jobs report was released Fed Fund futures indicated the probability of a September raise dropped from 25% to less than 20%.
Some market luminaries, including Goldman's chief economist Jan Hatzius and Janus' Bill Gross believe that the pace of job gains was still strong enough to green-light a Fed hike this month. If they are right, then the Fed will have to do significant jawboning in the next few days to prepare the markets for a policy move. In the absence of strong verbal guidance from the Fed in the next week or so, it should be inferred that the FOMC will hold its fire until December.
A more hawkish Fed could prompt renewed volatility if economic conditions start to deteriorate again. On the other hand, if conditions continue to improve, the markets might finally admit that "good news is good news" and accept that another 25 basis point Fed rate hike is a show of confidence in the economy and not an act of sabotage.
And there are indeed some signs of rebounding economic health. The Job Openings and Labor Turnover Survey (JOLTS), one of Janet Yellen's favorite employment indicators, has reached record levels in recent months. New home sales and building permits continue to rise steadily, and auto sales remain strong. Another less prominent but still interesting signal of an improving economy was the recent industry-wide hike in containerboard prices. All signs of growth and inflation at work.
The Fed appears ready to execute its second rate hike of the cycle, though Fed officials are downplaying talk about the timing and stressing that "gradual" tightening is the key takeaway. Officials concur that every meeting is "live" and that overseas developments have been a big reason why the Fed has held off on more tightening this year.
Landslide
September and October are seasonally bad months for the stock market, and there is election risk this year with two unpopular candidates. Clinton remains the odds on favorite and if she pulls out the victory it will probably be a negative for biotechs, against whom the Democratic nominee has been railing over hefty drug price increases. If Trump gets a late surge in the polls it is likely to elevate volatility on concerns about his protectionist rhetoric. Mr. Trump's political inexperience and over the top personality has led to a series of gaffs that have him down in the polls, and the Presidential debates (Sept 26, Oct 9, Oct 19) may be his last chance pull even. If Trump can score a knockout blow against Clinton during the debates - unlikely but not impossible - markets will have to recalibrate for a potential Trump Presidency. Alternatively, if Trump completely implodes, then Democrats will be salivating over the possibility that they might win enough down-ticket contests to retake the Senate and the House. Democrats would need to win at least four seats in the Senate to retake control of that body, but would need a daunting thirty seat net gain in the House to flip it back to Democratic control.
Despite assurances from Fed leaders that they will not let the Presidential race impact their monetary policy decisions, the political environment is forever intertwined with market calculus. Stock market analysts note that of the past 22 presidential elections, the direction of the S&P500 index has correctly predicted the outcome of 19 elections. That is to say, a run higher in stocks preceding the election portends a victory by the incumbent party, while a negative return usually leads to the other party taking control of the White House. Notably, the S&P500 fell about 10% in the months after the first rate hike last December, so a Fed rate hike in September could conceivably influence the election outcome, even if the Fed says its policy is divorced from politics.
The next earnings season in October will be presaged by a busy conference calendar in September. Given the mediocre quality of the just completed Q2 earning season and guidance, the bar is not set very high for Q3. That could give at least some individual companies the chance to shine in their Q3 releases, which could in turn add to the case that business and consumers are improving headed into the key holiday quarter.
Oil Spill
The energy market continues to hold out hope that OPEC will manage to agree to a production level freeze as soon as this month. Oil producers will meet at the International Energy Forum in Algeria on September 26, and could forge an agreement for a new production cap, as first proposed about a year ago. Efforts to reach a freeze deal earlier this year fell apart as Iran refused to participate before it had returned to full production and Saudi Arabia continued to vie with rivals for market share with no concern for pricing.
This time around Iran is approaching pre-sanction production levels of 4M bpd, and Saudi Arabia is pumping oil at record levels (10.48M bpd in July). Heading into the Algeria meeting, Saudi Arabia and Russia agreed to form a working group to cooperation on stabilizing the oil market, which might include a production freeze. The Russians and Saudis will meet in Moscow in October. Iranian President Rouhani also signaled he would support measures that would foster a recovery in oil prices, so the pieces could be in place for a deal. If no accord emerges from the September meeting, focus will turn to the November 30 semi-annual OPEC gathering in Vienna.
Helicopter Rescue
Outside of the US, it has been noted that global central-bank rate cuts haven't effectively weakened surging currencies despite the fact loosening monetary policy generally lowers a currency's value. Even with this frustrating dynamic in play, the ECB, BOJ and other central banks appear poised to consider ever more accommodation.
At the ECB, rates are already negative and the central bank is vacuuming up €80 billion per month in bonds for its QE program. Mr. Draghi's team has kept all options on the table including cutting rates further, or expanding the QE buying program even though it appears to already seems to be struggling to find enough worthy paper to purchase. The simplest path for the ECB appears to be the option of extending the QE program past the current tentative end date of March 2017. With the New Year coming up fast it would be prudent for the ECB to announce an extension sometime in the next few months, so that markets don't start to contemplate the QE program suddenly ending in March.
The Bank of England took measured steps to address the surprise Brexit vote. At its August meeting, the BOE followed through on an expected 25 basis point rate cut to 0.25%, and also threw in a £60 billion boost to the asset purchase facility (APF) for good measure. In the wake of the move, BOE chief economist Haldane warned that the central bank is not under any illusions that it can fully insulate against the long term effects of the Brexit vote, which will represents a structural shift in the UK economic and trading regime. Likewise, the new PM May has stated that the UK may face difficult times ahead, though she remains optimistic about the longer term.
Brexit related turmoil has calmed for the moment, so the BOE has the leeway to keep policy on hold in September. However, expectations are that the BOE is not done providing new stimulus, and that could come in November in the form of a 15 basis point cut in the bank rate, which would take it down to 0.10%.
Though Japanese officials have ruled out using "helicopter money" as stimulus, many market analysts still believe they will ultimate resort to this tactic. They point to the cozy relationship between the government and the BOJ, working closely together to beat deflation under the framework of 'Abenomics.' Even with this level of cooperation, Koichi Hamada, a key economic advisor to PM Abe has been verbally flogging officials to do more. Hamada recently asserted that the Ministry of Finance has lost credibility when it comes to intervention threats and that the MOF should "courageously" intervene in FX markets to stem the yen currency appreciation. It remains to be seen of the MOF will acquiesce, especially given that the USD/JPY has managed to hold above 100.
China remains under continued scrutiny after currency tinkering contributed to a market meltdown last August and again in January. Another shoe could drop at any time in China, but things have been quiet since the spring. Some industrial and growth data has been less than satisfactory, including a 7-year low in the Q2 GDP reading (at 6.7%, though that was one-tenth better than expected).
Earlier this year, there were concerns that China could execute another large devaluation, but speculation about such a move has died down. Instead the Chinese currency has devalued slowly to the tune of 2.5% year to date, obviating the need for another sudden one-off adjustment. But that still leaves concerns about poorly regulated and opaque investments could suddenly implode and threaten the financial system and jolt the economy.
SEPTEMBER
1: UK Manufacturing PMI; US ISM Manufacturing PMI
2: UK Construction PMI; US Payrolls & Unemployment; US Trade Balance; US Factory Orders
4: China Caixin Services PMI
5: UK Services PMI; US ISM Non- Manufacturing PMI; US LABOR DAY HOLIDAY
6:
7: UK Manufacturing Production; US Jolts Jobs Openings; Japan Final Q2 GDP; China Trade Balance (tentative)
8: ECB Policy Statement & Press Confernce; China CPI & PPI
9: UK Goods Trade Balance
12: China Industrial Production; Japan BSI Manufacturing Index
13: UK CPI & PPI; German Zew Economic Sentiment
14: UK Claimant Count & Unemployment
15: UK Retail Sales; Euro Zone Final CPI; BOE Policy Statement; US PPI; US Retail Sales; Philadelphia Fed Manufacturing; US Industrial Production & Capacity Utilization
16: US CPI; Preliminary University of Michigan Consumer Sentiment
19: BOJ Policy Statement
20: Various Euro Zone PMI readings; US Housing Starts & Building Permits
21: FOMC Policy Statement, Economic Projections & Press Conference
22: US Existing Home Sales
23:
26: German Ifo Business Climate; US Durable Goods Orders; US New Home Sales; International Energy Forum in Algeria; 1st US Presidential Debate
27: UK Current Account; UK Final Q2 GDP; US Consumer Confidence
28: German Unemployment
29: US Final Q2 GDP; Japan Household Spending; Tokyo Core CPI; China Caixin Services PMI
30: German Retail Sales; Euro Zone Flash CPI; Chicago PMI; China Manufacturing & Non-Manufacturing PMIs
OCTOBER
2: Japan Tankan Manufacturing & Non-Manufacturing Indices
3: UK Manufacturing PMI; US ISM Manufacturing PMI
4: UK Construction PMI; US Vice Presidential Debate
5: UK Manufacturing Production; UK Services PMI; US Trade Balance; US ISM Non-Manufacturing PMI; US Factory Orders
6: German Factory Orders; ECB Minutes
7: UK Goods Trade Balance; US Payrolls & Unemployment
9: 2nd US Presidential Debate
10: Japan Current Account
11: UK CPI & PPI; German Zew Economic Sentiment
12: JOLTS Job Openings; FOMC Minutes; China Trade Balance (tentative)
13: UK Retail Sales; BOE Policy Statement; China CPI & PPI
14: US Retail Sales; US PPI; Preliminary University of Michigan Consumer Sentiment
17: Euro Zone Final CPI; US Industrial Production & Capacity Utilization
18: US CPI; China Q3 GDP; China Industrial Production
19: UK Claimant Count & Unemployment; US Housing Starts & Building Permits; 3rd US Presidential Debate
20: ECB Policy Statement & Press Conference; Philadelphia Fed Manufacturing; US Existing Home Sales
21: Various Euro Zone PMIs
24:
25: German Ifo Business Climate; UK Preliminary Q3 GDP; US Consumer Confidence
26: US Durable Goods Orders; US New Home Sales
27: German Unemployment; Japan Household Spending; Tokyo Core CPI
28: US Q3 Advance GDP
31: BOJ Policy Statement (tentative)
NOVEMBER
1: UK Manufacturing PMI; US ISM Manufacturing PMI; China Caixin Manufacturing PMI
2: UK Construction PMI; Euro Zone Economic Forecasts; FOMC Policy Statement
3: UK Services PMI; BOE Policy Statement; US ISM Non-Manufacturing PMI; US Factory Orders; China Caixin Services PMI
4: US Payrolls & Unemployment; US Trade Balance
7: German Factory Orders; China Trade Balance (tentative)
8: US ELECTION DAY; China CPI & PPI
Tue, 06 Sep 2016 23:22 PM EST
With US Presidential candidate Donald Trump labeling the economy a "disaster" and his billionaire advisor Carl Icahn calling for a "day of reckoning" for the stock market, we look ahead to the potential upsets and near misses that might occur in the next couple of months. Stocks continue to climb the wall of worry, pushing aside every adversity from the Brexit to anemic global growth. Government paper remains a crowded trade even as central banks keeping adding to their hoards, with the key 10-year US Treasury yield still compressed near 1.50% and the German and Japanese equivalents at negative yields. WTI crude futures have seen some stabilization in the $40's as OPEC edges toward a possible agreement on an oil freeze.
Brexit related worries have subsided for the time being, but may emerge again early next year when the UK invokes article 50 to start the succession process. The BOE and other central banks are poised to expand or extend their stimulus programs in the months ahead, notwithstanding the Fed looking to take rates in the other direction. Markets will probably be able to absorb a "one and done" rate hike from the Fed in September, or more likely December. Not incidentally, between now and then the US will elect a new President and OPEC may well retake some control of the oil market.
Fed Seas Rising
With global jitters in check, the Fed has resumed making noises about a rate hike this year, perhaps within the month. The one thing all Fed members can agree on is that monetary policy remains data dependent. Unfortunately, the latest data was inconclusive. The August Nonfarm Payrolls came in below expectations, and just weak enough to lower market expectations for a September rate hike. After the jobs report was released Fed Fund futures indicated the probability of a September raise dropped from 25% to less than 20%.
Some market luminaries, including Goldman's chief economist Jan Hatzius and Janus' Bill Gross believe that the pace of job gains was still strong enough to green-light a Fed hike this month. If they are right, then the Fed will have to do significant jawboning in the next few days to prepare the markets for a policy move. In the absence of strong verbal guidance from the Fed in the next week or so, it should be inferred that the FOMC will hold its fire until December.
A more hawkish Fed could prompt renewed volatility if economic conditions start to deteriorate again. On the other hand, if conditions continue to improve, the markets might finally admit that "good news is good news" and accept that another 25 basis point Fed rate hike is a show of confidence in the economy and not an act of sabotage.
And there are indeed some signs of rebounding economic health. The Job Openings and Labor Turnover Survey (JOLTS), one of Janet Yellen's favorite employment indicators, has reached record levels in recent months. New home sales and building permits continue to rise steadily, and auto sales remain strong. Another less prominent but still interesting signal of an improving economy was the recent industry-wide hike in containerboard prices. All signs of growth and inflation at work.
The Fed appears ready to execute its second rate hike of the cycle, though Fed officials are downplaying talk about the timing and stressing that "gradual" tightening is the key takeaway. Officials concur that every meeting is "live" and that overseas developments have been a big reason why the Fed has held off on more tightening this year.
Landslide
September and October are seasonally bad months for the stock market, and there is election risk this year with two unpopular candidates. Clinton remains the odds on favorite and if she pulls out the victory it will probably be a negative for biotechs, against whom the Democratic nominee has been railing over hefty drug price increases. If Trump gets a late surge in the polls it is likely to elevate volatility on concerns about his protectionist rhetoric. Mr. Trump's political inexperience and over the top personality has led to a series of gaffs that have him down in the polls, and the Presidential debates (Sept 26, Oct 9, Oct 19) may be his last chance pull even. If Trump can score a knockout blow against Clinton during the debates - unlikely but not impossible - markets will have to recalibrate for a potential Trump Presidency. Alternatively, if Trump completely implodes, then Democrats will be salivating over the possibility that they might win enough down-ticket contests to retake the Senate and the House. Democrats would need to win at least four seats in the Senate to retake control of that body, but would need a daunting thirty seat net gain in the House to flip it back to Democratic control.
Despite assurances from Fed leaders that they will not let the Presidential race impact their monetary policy decisions, the political environment is forever intertwined with market calculus. Stock market analysts note that of the past 22 presidential elections, the direction of the S&P500 index has correctly predicted the outcome of 19 elections. That is to say, a run higher in stocks preceding the election portends a victory by the incumbent party, while a negative return usually leads to the other party taking control of the White House. Notably, the S&P500 fell about 10% in the months after the first rate hike last December, so a Fed rate hike in September could conceivably influence the election outcome, even if the Fed says its policy is divorced from politics.
The next earnings season in October will be presaged by a busy conference calendar in September. Given the mediocre quality of the just completed Q2 earning season and guidance, the bar is not set very high for Q3. That could give at least some individual companies the chance to shine in their Q3 releases, which could in turn add to the case that business and consumers are improving headed into the key holiday quarter.
Oil Spill
The energy market continues to hold out hope that OPEC will manage to agree to a production level freeze as soon as this month. Oil producers will meet at the International Energy Forum in Algeria on September 26, and could forge an agreement for a new production cap, as first proposed about a year ago. Efforts to reach a freeze deal earlier this year fell apart as Iran refused to participate before it had returned to full production and Saudi Arabia continued to vie with rivals for market share with no concern for pricing.
This time around Iran is approaching pre-sanction production levels of 4M bpd, and Saudi Arabia is pumping oil at record levels (10.48M bpd in July). Heading into the Algeria meeting, Saudi Arabia and Russia agreed to form a working group to cooperation on stabilizing the oil market, which might include a production freeze. The Russians and Saudis will meet in Moscow in October. Iranian President Rouhani also signaled he would support measures that would foster a recovery in oil prices, so the pieces could be in place for a deal. If no accord emerges from the September meeting, focus will turn to the November 30 semi-annual OPEC gathering in Vienna.
Helicopter Rescue
Outside of the US, it has been noted that global central-bank rate cuts haven't effectively weakened surging currencies despite the fact loosening monetary policy generally lowers a currency's value. Even with this frustrating dynamic in play, the ECB, BOJ and other central banks appear poised to consider ever more accommodation.
At the ECB, rates are already negative and the central bank is vacuuming up €80 billion per month in bonds for its QE program. Mr. Draghi's team has kept all options on the table including cutting rates further, or expanding the QE buying program even though it appears to already seems to be struggling to find enough worthy paper to purchase. The simplest path for the ECB appears to be the option of extending the QE program past the current tentative end date of March 2017. With the New Year coming up fast it would be prudent for the ECB to announce an extension sometime in the next few months, so that markets don't start to contemplate the QE program suddenly ending in March.
The Bank of England took measured steps to address the surprise Brexit vote. At its August meeting, the BOE followed through on an expected 25 basis point rate cut to 0.25%, and also threw in a £60 billion boost to the asset purchase facility (APF) for good measure. In the wake of the move, BOE chief economist Haldane warned that the central bank is not under any illusions that it can fully insulate against the long term effects of the Brexit vote, which will represents a structural shift in the UK economic and trading regime. Likewise, the new PM May has stated that the UK may face difficult times ahead, though she remains optimistic about the longer term.
Brexit related turmoil has calmed for the moment, so the BOE has the leeway to keep policy on hold in September. However, expectations are that the BOE is not done providing new stimulus, and that could come in November in the form of a 15 basis point cut in the bank rate, which would take it down to 0.10%.
Though Japanese officials have ruled out using "helicopter money" as stimulus, many market analysts still believe they will ultimate resort to this tactic. They point to the cozy relationship between the government and the BOJ, working closely together to beat deflation under the framework of 'Abenomics.' Even with this level of cooperation, Koichi Hamada, a key economic advisor to PM Abe has been verbally flogging officials to do more. Hamada recently asserted that the Ministry of Finance has lost credibility when it comes to intervention threats and that the MOF should "courageously" intervene in FX markets to stem the yen currency appreciation. It remains to be seen of the MOF will acquiesce, especially given that the USD/JPY has managed to hold above 100.
China remains under continued scrutiny after currency tinkering contributed to a market meltdown last August and again in January. Another shoe could drop at any time in China, but things have been quiet since the spring. Some industrial and growth data has been less than satisfactory, including a 7-year low in the Q2 GDP reading (at 6.7%, though that was one-tenth better than expected).
Earlier this year, there were concerns that China could execute another large devaluation, but speculation about such a move has died down. Instead the Chinese currency has devalued slowly to the tune of 2.5% year to date, obviating the need for another sudden one-off adjustment. But that still leaves concerns about poorly regulated and opaque investments could suddenly implode and threaten the financial system and jolt the economy.
SEPTEMBER
1: UK Manufacturing PMI; US ISM Manufacturing PMI
2: UK Construction PMI; US Payrolls & Unemployment; US Trade Balance; US Factory Orders
4: China Caixin Services PMI
5: UK Services PMI; US ISM Non- Manufacturing PMI; US LABOR DAY HOLIDAY
6:
7: UK Manufacturing Production; US Jolts Jobs Openings; Japan Final Q2 GDP; China Trade Balance (tentative)
8: ECB Policy Statement & Press Confernce; China CPI & PPI
9: UK Goods Trade Balance
12: China Industrial Production; Japan BSI Manufacturing Index
13: UK CPI & PPI; German Zew Economic Sentiment
14: UK Claimant Count & Unemployment
15: UK Retail Sales; Euro Zone Final CPI; BOE Policy Statement; US PPI; US Retail Sales; Philadelphia Fed Manufacturing; US Industrial Production & Capacity Utilization
16: US CPI; Preliminary University of Michigan Consumer Sentiment
19: BOJ Policy Statement
20: Various Euro Zone PMI readings; US Housing Starts & Building Permits
21: FOMC Policy Statement, Economic Projections & Press Conference
22: US Existing Home Sales
23:
26: German Ifo Business Climate; US Durable Goods Orders; US New Home Sales; International Energy Forum in Algeria; 1st US Presidential Debate
27: UK Current Account; UK Final Q2 GDP; US Consumer Confidence
28: German Unemployment
29: US Final Q2 GDP; Japan Household Spending; Tokyo Core CPI; China Caixin Services PMI
30: German Retail Sales; Euro Zone Flash CPI; Chicago PMI; China Manufacturing & Non-Manufacturing PMIs
OCTOBER
2: Japan Tankan Manufacturing & Non-Manufacturing Indices
3: UK Manufacturing PMI; US ISM Manufacturing PMI
4: UK Construction PMI; US Vice Presidential Debate
5: UK Manufacturing Production; UK Services PMI; US Trade Balance; US ISM Non-Manufacturing PMI; US Factory Orders
6: German Factory Orders; ECB Minutes
7: UK Goods Trade Balance; US Payrolls & Unemployment
9: 2nd US Presidential Debate
10: Japan Current Account
11: UK CPI & PPI; German Zew Economic Sentiment
12: JOLTS Job Openings; FOMC Minutes; China Trade Balance (tentative)
13: UK Retail Sales; BOE Policy Statement; China CPI & PPI
14: US Retail Sales; US PPI; Preliminary University of Michigan Consumer Sentiment
17: Euro Zone Final CPI; US Industrial Production & Capacity Utilization
18: US CPI; China Q3 GDP; China Industrial Production
19: UK Claimant Count & Unemployment; US Housing Starts & Building Permits; 3rd US Presidential Debate
20: ECB Policy Statement & Press Conference; Philadelphia Fed Manufacturing; US Existing Home Sales
21: Various Euro Zone PMIs
24:
25: German Ifo Business Climate; UK Preliminary Q3 GDP; US Consumer Confidence
26: US Durable Goods Orders; US New Home Sales
27: German Unemployment; Japan Household Spending; Tokyo Core CPI
28: US Q3 Advance GDP
31: BOJ Policy Statement (tentative)
NOVEMBER
1: UK Manufacturing PMI; US ISM Manufacturing PMI; China Caixin Manufacturing PMI
2: UK Construction PMI; Euro Zone Economic Forecasts; FOMC Policy Statement
3: UK Services PMI; BOE Policy Statement; US ISM Non-Manufacturing PMI; US Factory Orders; China Caixin Services PMI
4: US Payrolls & Unemployment; US Trade Balance
7: German Factory Orders; China Trade Balance (tentative)
8: US ELECTION DAY; China CPI & PPI
Saturday, September 3, 2016
Barrons weekend summary
Barrons weekend summary: positive on BKS, ZTS, AMG
Cover story: According to Barron's strategists, the "consensus outlook for U.S. stocks in the remainder of 2016 is mixed and even tinged with a bearish hue," a downgrade from optimism at the beginning of the year-though pundits are more upbeat on 2017.
Features:
1) Positive on BKS: "Despite the widespread perception that Barnes & Noble is getting destroyed by AMZN, the country's largest bricks-and-mortar bookseller remains solidly profitable and projects significant earnings increases in coming years";
2) Positive on ZTS: Maker of animal medications is benefiting from greater consumer spending on pets and growing demand for livestock products, and shares could rise 15%;
3) Positive on AMG: Shares of the holding company have taken a hit, but the selling appears overdone, and they have the potential for 35% upside.
Tech Trader: Positive on AVGO: Broadcom's chips are powering the growth of servers that companies such as AMZN, MSFT, and GOOGL are building at a rapid pace in multiple cities, while chipmakers such as SWKS and QRVO are tied to AAPL and other players in the slowing smartphone sector; Other players in the sector, including XLNX, CAVM, and MRVL, could be takeover targets.
Trader: Weakness in manufacturing sometimes heralds a recession, but Michael Shaoul of Marketfield Asset Management says manufacturing is stagnating because the economy is shifting toward service jobs; UAL's reputation for late flights and lousy service is hurting its standing with corporate clients and has likely contributed to weaker performance; Positive on USG, BLDR: Building-products stocks are benefiting from the boom in single-family home construction.
Profile: Bob Mitchell and Joe Monahan of Conestoga Small Cap Investors look for growth stocks with insider ownership and high returns on equity (top 10 holdings: OMCL, SPSC, BLKB, NEOG, LGND, MLAB, VASC, CNM, TYL, SSD).
Interview: Morris Mark of Mark Asset Management says the firm's funds are a vehicle for capital appreciation, and thinks AMZN could be worth up to $1,200 a share (picks: ATVI, AMZN, SCHW, TOL).
Small Caps: Positive on DSW: Disappointing second-quarter earnings and a bleak sales outlook for the second half have hurt the stock, but the company's longer-term prospects are better than many investors realize.
Follow-Up: Positive on ARMK: Shares are still attractive at 10.6 times enterprise value to earnings before interest, taxes, depreciation, and amortization, and they could push past $42 during the next 12 months.
European Trader: Positive on Valeo: French automotive supplier could grow faster than expected and see rising profits because of strength in reducing carbon emissions and intuitive driving, two hot auto segments.
Asian Trader: Cautious on CNOOC, PetroChina, Sinopec: Rather than look to OPEC to gauge the direction of oil prices, investors would do well to keep an eye on China's Big Three energy companies.
Emerging Markets: Inflows in emerging markets are up, but numbers from the private-equity sector hint that something may be wrong with the picture.
Commodities: The surge in agricultural products to feed a growing global population, along with advancing urbanization, are pressuring the world's water supply, of which only 2.5% is fresh.
Streetwise: Technology may be improving lives in many ways, but it's also a force of deflation, because tech companies require far fewer workers than traditional ones, creating a radical shift in the labor market.
Cover story: According to Barron's strategists, the "consensus outlook for U.S. stocks in the remainder of 2016 is mixed and even tinged with a bearish hue," a downgrade from optimism at the beginning of the year-though pundits are more upbeat on 2017.
Features:
1) Positive on BKS: "Despite the widespread perception that Barnes & Noble is getting destroyed by AMZN, the country's largest bricks-and-mortar bookseller remains solidly profitable and projects significant earnings increases in coming years";
2) Positive on ZTS: Maker of animal medications is benefiting from greater consumer spending on pets and growing demand for livestock products, and shares could rise 15%;
3) Positive on AMG: Shares of the holding company have taken a hit, but the selling appears overdone, and they have the potential for 35% upside.
Tech Trader: Positive on AVGO: Broadcom's chips are powering the growth of servers that companies such as AMZN, MSFT, and GOOGL are building at a rapid pace in multiple cities, while chipmakers such as SWKS and QRVO are tied to AAPL and other players in the slowing smartphone sector; Other players in the sector, including XLNX, CAVM, and MRVL, could be takeover targets.
Trader: Weakness in manufacturing sometimes heralds a recession, but Michael Shaoul of Marketfield Asset Management says manufacturing is stagnating because the economy is shifting toward service jobs; UAL's reputation for late flights and lousy service is hurting its standing with corporate clients and has likely contributed to weaker performance; Positive on USG, BLDR: Building-products stocks are benefiting from the boom in single-family home construction.
Profile: Bob Mitchell and Joe Monahan of Conestoga Small Cap Investors look for growth stocks with insider ownership and high returns on equity (top 10 holdings: OMCL, SPSC, BLKB, NEOG, LGND, MLAB, VASC, CNM, TYL, SSD).
Interview: Morris Mark of Mark Asset Management says the firm's funds are a vehicle for capital appreciation, and thinks AMZN could be worth up to $1,200 a share (picks: ATVI, AMZN, SCHW, TOL).
Small Caps: Positive on DSW: Disappointing second-quarter earnings and a bleak sales outlook for the second half have hurt the stock, but the company's longer-term prospects are better than many investors realize.
Follow-Up: Positive on ARMK: Shares are still attractive at 10.6 times enterprise value to earnings before interest, taxes, depreciation, and amortization, and they could push past $42 during the next 12 months.
European Trader: Positive on Valeo: French automotive supplier could grow faster than expected and see rising profits because of strength in reducing carbon emissions and intuitive driving, two hot auto segments.
Asian Trader: Cautious on CNOOC, PetroChina, Sinopec: Rather than look to OPEC to gauge the direction of oil prices, investors would do well to keep an eye on China's Big Three energy companies.
Emerging Markets: Inflows in emerging markets are up, but numbers from the private-equity sector hint that something may be wrong with the picture.
Commodities: The surge in agricultural products to feed a growing global population, along with advancing urbanization, are pressuring the world's water supply, of which only 2.5% is fresh.
Streetwise: Technology may be improving lives in many ways, but it's also a force of deflation, because tech companies require far fewer workers than traditional ones, creating a radical shift in the labor market.
Friday, September 2, 2016
Inconclusive Jobs Report Leaves Fed Up in the Air
TradeTheNews.com Weekly
Market Update: Inconclusive Jobs Report Leaves Fed Up in the Air
Fri, 02 Sep 2016 16:03 PM EST
Another week of summer trading was punctuated by a few key data points and corporate developments. Positive data included the US August Consumer Confidence reading hitting an 11 month high, while China August Manufacturing PMI registered its first expansionary reading in 3 months and hit a 22 month high. Then on Friday, the US nonfarm payroll data missed expectations and showed some deterioration in hourly earnings and weekly hours. This led to Fed Fund futures indicating a lesser chance of a September rate hike, shifting concerns about tighter US rates to December. However, some experts including Goldman's chief economist Jan Hatzius, cautioned that the payroll gain at 151K was good enough for the Fed to greenlight a September rate hike. Hours after the data, Fed hawk Lacker tried to start that sentiment shift by stating that Fed funds rate should be considerably higher than it is now.
In corporate news, Mylan attempted to stem the tide of bad news flow by launching a generic version of its own EpiPen, but that did not deter a rare bi-partisan group of Congressmen from demanding the company appear to provide for testimony. A lackluster quarterly earnings report from Salesforce.com may be an indication that the breakneck pace of growth in the cloud sector may be starting to slow. Canadian fertilizer producers Potash Corp and Agrium confirmed they are in preliminary merger discussions, though press reports said a deal could be announced as soon as next week. Meanwhile, Mondelez dropped its pursuit of Hersey. Wynn and Las Vegas Sands saw good gains on Thursday as monthly Macau casino revenue rose for the first time in 27 months.
WTI crude futures slipped about 7% on the week as OPEC notched another record high month of production and traders remained skeptical that the cartel can reach a deal on a production freeze. Most currency pairs remained in tight ranges, with the EUR/USD holding below the 1.12 level most of the week. The yen was a notable exception, rising from 102 to 104 over the course of the week, despite the yield on the bellwether 10-year Japanese government bond moving higher towards zero percent (but remaining in negative territory), reaching a 5-month highs. Policy divergence between the BOJ and the Fed contributed to the yen's underperformance. Equity indices traded sideways and for the week the DJIA rose 0.5%, the S&P500 gained 0.5%, the Nasdaq edged up 0.6%.
Mon 8/29
MYL: To launch first generic to EpiPen Auto-Injector at a list price of $300/ two-pack carton
(US) JULY PERSONAL INCOME: 0.4% V 0.4%E; PERSONAL SPENDING: 0.3% V 0.3%E
(US) JULY PCE CORE M/M: 0.1% V 0.1%E; Y/Y: 1.6% V 1.5%E
(US) JULY PCE DEFLATOR M/M: 0.0% V 0.0%E; Y/Y: 0.8% V 0.8%E
HSY: Mondelez International no longer pursuing combination with Hershey
(JP) JAPAN JULY JOBLESS RATE: 3.0% V 3.1%E; Lowest since 1995
Tues 8/30
Industrial and Commercial Bank of China Ltd (ICBC):Reports H1 Net CNY150.2B v CNY149.9Be; Op Income CNY329.0B v CNY336.7B y/y, Net Interest Income CNY234.3B v CNY252.1B y/y
Bank of China Ltd: Reports H1 Net CNY93B v CNY91.7Be, Net Interest Income CNY154.9B v CNY163.4B y/y
(EU) EURO ZONE AUG BUSINESS CLIMATE INDICATOR: 0.02 V 0.36E; CONSUMER CONFIDENCE (FINAL):-8.5 V -8.5E
(DE) GERMANY AUG PRELIMINARY CPI M/M: 0.0% V 0.1%E; Y/Y: 0.4% V 0.5%E
(US) AUG CONSUMER CONFIDENCE: 101.1 V 97.0E (highest since Sep 2015)
AGU: Agrium and PotashCorp confirm preliminary discussion regarding potential merger of equals
Weds 8/31
(EU) EURO ZONE JULY UNEMPLOYMENT RATE: 10.1% V 10.0%E
(EU) EURO ZONE AUG ADVANCE CPI ESTIMATE Y/Y: 0.2% V 0.3%E; CPI CORE Y/Y: 0.8% V 0.9%E
(US) AUG ADP EMPLOYMENT CHANGE: +177K V +175KE
(US) AUG CHICAGO PURCHASING MANAGER: 51.5 V 54.0E
(US) JULY PENDING HOME SALES M/M: 1.3% V 0.7%E; Y/Y: -2.2% V +2.2%E
(BR) Brazil Senate formally votes 61-20 to impeach President Rousseff for breaking budget laws, as expected
CRM: Reports Q2 $0.24 v $0.22e, R$2.04B v $2.02Be
(BR) BRAZIL CENTRAL BANK (BCB) LEAVES SELIC RATE UNCHANGED AT 14.25%; AS EXPECTED
(CN) CHINA AUG MANUFACTURING PMI (GOVT OFFICIAL): 50.4 V 49.8E (1st expansion in 3 months and a 22-month high)
(AU) AUSTRALIA Q2 PRIVATE CAPITAL EXPENDITURE (CAPEX) Q/Q: -5.4% V -4.0%E
(CN) CHINA AUG CAIXIN PMI MANUFACTURING: 50.0 V 50.1E
Thurs 9/1
(HK) Macau Aug casino revenue 18.8B patacas v 17.8B prior, y/y: +1.1% (first rise in 27 months) v -4.5% prior
(UK) UK AUG PMI MANUFACTURING: 53.3 V 49.0E (moves back into expansion and highest since Oct 2015)
(US) Q2 FINAL NONFARM PRODUCTIVITY: -0.6% V -0.6%E; UNIT LABOR COSTS: 4.3% V 2.1%E
(US) INITIAL JOBLESS CLAIMS: 263K V 265KE; CONTINUING CLAIMS: 2.16M V 2.15ME
(US) AUG FINAL MARKIT MANUFACTURING PMI: 52.0 V 52.1E (lowest reading since June 2016)
(US) AUG FINAL MARKIT MANUFACTURING PMI: 52.0 V 52.1E (lowest reading since June 2016)
Friday 9/2
(US) AUG UNEMPLOYMENT RATE: 4.9% V 4.8%E
(US) AUG AVERAGE HOURLY EARNINGS M/M: 0.1% V 0.2%E; Y/Y: 2.4% V 2.5%E; AVERAGE WEEKLY HOURS: 34.3 V 34.5E
(US) AUG CHANGE IN NONFARM PAYROLLS: +151K V +180KE
DAL: Reports Aug load factor 84.4% v 87.3% y/y; PRASM -9.5% y/y; Aug outage had $100M negative revenue impact
(US) Weekly Baker Hughes US Rig Count: 497 v 489 w/w (+2%)
(US) Fed's Lacker (hawk, non-voter): Fed funds rate should be considerably higher than it is now
(ES) PM Rajoy fails 2nd confidence vote in Spain legislature, as expected (vote 170 to 180)
Fri, 02 Sep 2016 16:03 PM EST
Another week of summer trading was punctuated by a few key data points and corporate developments. Positive data included the US August Consumer Confidence reading hitting an 11 month high, while China August Manufacturing PMI registered its first expansionary reading in 3 months and hit a 22 month high. Then on Friday, the US nonfarm payroll data missed expectations and showed some deterioration in hourly earnings and weekly hours. This led to Fed Fund futures indicating a lesser chance of a September rate hike, shifting concerns about tighter US rates to December. However, some experts including Goldman's chief economist Jan Hatzius, cautioned that the payroll gain at 151K was good enough for the Fed to greenlight a September rate hike. Hours after the data, Fed hawk Lacker tried to start that sentiment shift by stating that Fed funds rate should be considerably higher than it is now.
In corporate news, Mylan attempted to stem the tide of bad news flow by launching a generic version of its own EpiPen, but that did not deter a rare bi-partisan group of Congressmen from demanding the company appear to provide for testimony. A lackluster quarterly earnings report from Salesforce.com may be an indication that the breakneck pace of growth in the cloud sector may be starting to slow. Canadian fertilizer producers Potash Corp and Agrium confirmed they are in preliminary merger discussions, though press reports said a deal could be announced as soon as next week. Meanwhile, Mondelez dropped its pursuit of Hersey. Wynn and Las Vegas Sands saw good gains on Thursday as monthly Macau casino revenue rose for the first time in 27 months.
WTI crude futures slipped about 7% on the week as OPEC notched another record high month of production and traders remained skeptical that the cartel can reach a deal on a production freeze. Most currency pairs remained in tight ranges, with the EUR/USD holding below the 1.12 level most of the week. The yen was a notable exception, rising from 102 to 104 over the course of the week, despite the yield on the bellwether 10-year Japanese government bond moving higher towards zero percent (but remaining in negative territory), reaching a 5-month highs. Policy divergence between the BOJ and the Fed contributed to the yen's underperformance. Equity indices traded sideways and for the week the DJIA rose 0.5%, the S&P500 gained 0.5%, the Nasdaq edged up 0.6%.
Mon 8/29
MYL: To launch first generic to EpiPen Auto-Injector at a list price of $300/ two-pack carton
(US) JULY PERSONAL INCOME: 0.4% V 0.4%E; PERSONAL SPENDING: 0.3% V 0.3%E
(US) JULY PCE CORE M/M: 0.1% V 0.1%E; Y/Y: 1.6% V 1.5%E
(US) JULY PCE DEFLATOR M/M: 0.0% V 0.0%E; Y/Y: 0.8% V 0.8%E
HSY: Mondelez International no longer pursuing combination with Hershey
(JP) JAPAN JULY JOBLESS RATE: 3.0% V 3.1%E; Lowest since 1995
Tues 8/30
Industrial and Commercial Bank of China Ltd (ICBC):Reports H1 Net CNY150.2B v CNY149.9Be; Op Income CNY329.0B v CNY336.7B y/y, Net Interest Income CNY234.3B v CNY252.1B y/y
Bank of China Ltd: Reports H1 Net CNY93B v CNY91.7Be, Net Interest Income CNY154.9B v CNY163.4B y/y
(EU) EURO ZONE AUG BUSINESS CLIMATE INDICATOR: 0.02 V 0.36E; CONSUMER CONFIDENCE (FINAL):-8.5 V -8.5E
(DE) GERMANY AUG PRELIMINARY CPI M/M: 0.0% V 0.1%E; Y/Y: 0.4% V 0.5%E
(US) AUG CONSUMER CONFIDENCE: 101.1 V 97.0E (highest since Sep 2015)
AGU: Agrium and PotashCorp confirm preliminary discussion regarding potential merger of equals
Weds 8/31
(EU) EURO ZONE JULY UNEMPLOYMENT RATE: 10.1% V 10.0%E
(EU) EURO ZONE AUG ADVANCE CPI ESTIMATE Y/Y: 0.2% V 0.3%E; CPI CORE Y/Y: 0.8% V 0.9%E
(US) AUG ADP EMPLOYMENT CHANGE: +177K V +175KE
(US) AUG CHICAGO PURCHASING MANAGER: 51.5 V 54.0E
(US) JULY PENDING HOME SALES M/M: 1.3% V 0.7%E; Y/Y: -2.2% V +2.2%E
(BR) Brazil Senate formally votes 61-20 to impeach President Rousseff for breaking budget laws, as expected
CRM: Reports Q2 $0.24 v $0.22e, R$2.04B v $2.02Be
(BR) BRAZIL CENTRAL BANK (BCB) LEAVES SELIC RATE UNCHANGED AT 14.25%; AS EXPECTED
(CN) CHINA AUG MANUFACTURING PMI (GOVT OFFICIAL): 50.4 V 49.8E (1st expansion in 3 months and a 22-month high)
(AU) AUSTRALIA Q2 PRIVATE CAPITAL EXPENDITURE (CAPEX) Q/Q: -5.4% V -4.0%E
(CN) CHINA AUG CAIXIN PMI MANUFACTURING: 50.0 V 50.1E
Thurs 9/1
(HK) Macau Aug casino revenue 18.8B patacas v 17.8B prior, y/y: +1.1% (first rise in 27 months) v -4.5% prior
(UK) UK AUG PMI MANUFACTURING: 53.3 V 49.0E (moves back into expansion and highest since Oct 2015)
(US) Q2 FINAL NONFARM PRODUCTIVITY: -0.6% V -0.6%E; UNIT LABOR COSTS: 4.3% V 2.1%E
(US) INITIAL JOBLESS CLAIMS: 263K V 265KE; CONTINUING CLAIMS: 2.16M V 2.15ME
(US) AUG FINAL MARKIT MANUFACTURING PMI: 52.0 V 52.1E (lowest reading since June 2016)
(US) AUG FINAL MARKIT MANUFACTURING PMI: 52.0 V 52.1E (lowest reading since June 2016)
Friday 9/2
(US) AUG UNEMPLOYMENT RATE: 4.9% V 4.8%E
(US) AUG AVERAGE HOURLY EARNINGS M/M: 0.1% V 0.2%E; Y/Y: 2.4% V 2.5%E; AVERAGE WEEKLY HOURS: 34.3 V 34.5E
(US) AUG CHANGE IN NONFARM PAYROLLS: +151K V +180KE
DAL: Reports Aug load factor 84.4% v 87.3% y/y; PRASM -9.5% y/y; Aug outage had $100M negative revenue impact
(US) Weekly Baker Hughes US Rig Count: 497 v 489 w/w (+2%)
(US) Fed's Lacker (hawk, non-voter): Fed funds rate should be considerably higher than it is now
(ES) PM Rajoy fails 2nd confidence vote in Spain legislature, as expected (vote 170 to 180)
Friday, August 26, 2016
Sideways Markets Slip on Friday After Hawkish Fed
TradeTheNews.com Weekly
Market Update: Sideways Markets Slip on Friday After Hawkish Fed
Fri, 26 Aug 2016 16:04 PM EST
Markets drifted sideways most of the week as they anticipated a key policy speech from Fed Chair Yellen at Jackson Hole on Friday. Volumes were light and ranges remained narrow despite relatively heavy news flow including economic data releases and late season earnings reports. Healthcare stocks were in crosshairs for much of the week as several headlines affected trading. Pfizer's acquisition of Medivation pushed up oncology stocks early, but renewed drug price gouging concerns from Washington D.C. weighed on a swath of names competing within the US pharmacy market. After ending last week near $50/bbl, oil prices backed off early in the week exaggerated by a roll in the front month futures contract. Press reports continued to focus on the September meeting of energy producers in Algeria and the potential for coordinated action, but the likelihood of a meaningful agreement still seems low.
Friday's Jackson Hole meeting did induce some broader market volatility, but the trading flows only picked up after Fed Vice Chair Fischer came on TV to offer his explanation of what Chair Yellen attempted to lay out in her speech earlier. The US Dollar firmed and interest rates backed up while stocks came under modest pressure after the two highest ranking Fed officials illustrated their view that the economy continues to improve at a pace that has strengthened the case for at least one rate hike this year. The US benchmark 10-year yield has broken out to a three month high to close above 1.60%. In the wake of the Jackson Hole comments, the Dow swung more than 230 points, its biggest one-day move since late June. For the week, the DJIA lost 0.9%, the Nasdaq fell 0.4%, and the S&P500 dropped 0.7%.
Monday
- (UK) UK govt said to be readying multi-billion-pound post-Brexit housing stimulus - press
- MDVN: To be acquired by Pfizer for $81.50/shr in cash, valued at ~$14B
Tuesday
*(FR) FRANCE AUG PRELIMINARY MANUFACTURING PMI: 48.5 V 48.8E (6th straight contraction)
*(DE) GERMANY AUG PRELIMINARY MANUFACTURING PMI: 53.6 V 53.6E (21st month of expansion)
*(EU) EURO ZONE AUG PRELIMINARY MANUFACTURING PMI: 51.8 V 52.0E (38th month of expansion)
*(UK) AUG CBI INDUSTRIAL TRENDS TOTAL ORDERS: -5 V -10E
- BBY: Reports Q2 $0.57 v $0.42e, R$8.53B v $8.40Be; Raises FY17 guidance
*(TR) TURKEY CENTRAL BANK (CBRT) LEAVES BENCHMARK REPURCHASE RATE UNCHANGED AT 7.50%; AS EXPECTED; again narrows rate corridor
*(HU) HUNGARY CENTRAL BANK (NBH) LEAVES BASE RATE UNCHANGED AT 0.90%; AS EXPECTED
*(US) AUG PRELIMINARY MARKIT MANUFACTURING PMI: 52.1 V 52.6E
*(US) AUG RICHMOND FED MANUFACTURING INDEX: -11 V +6E
*(US) JULY NEW HOME SALES: 654K V 580KE (highest since Oct 2007)
- (IR) OPEC sources see positive signals from Iran on support for joint action to boost oil prices - press
* (US) NORTH AMERICA JULY SEMI BOOK/BILL RATIO: 1.05 V 1.00 prior
Wednesday
*(DE) GERMANY Q2 FINAL GDP Q/Q: 0.4% V 0.4%E; Y/Y: 1.8% V 1.8%E; GDP NSA Y/Y: 3.1% V 3.1%E
- GLEN.UK: Reports H1 Adj Net $300M v $254Me, Adj EBITDA $4.02B v $3.87Be, R$69.4B v $74.8Be
*(UK) JULY BBA LOANS FOR HOUSE PURCHASE: 37.7K V 38.0KE (lowest since Jan 2015)
*(US) JULY EXISTING HOME SALES: 5.39M V 5.51ME
- MYL: US Democratic Presidential candidate Hillary Clinton calls Epipen price hike 'outrageous', calls for Mylan to immediately cut price - press
Thursday
*(DE) GERMANY AUG IFO BUSINESS CLIMATE: 106.2 V 108.5E; CURRENT ASSESSMENT: 112.8 V 114.9E
- 494.HK: Reports H1 Net $72M v $149M y/y, Op $156M v $182M y/y, Rev $8.07B v $8.63B y/y
- 3328.HK: Reports H1 Net CNY37.6B v CNY37.3B y/y, NII CNY68.1B v CNY71.1B y/y
- MYL: Plans to cut patient Epipen cost through use of savings card; Reducing patient cost by 50% off Mylan list price
- 939.HK: Reports H1 Net CNY133.4B v CNY132.5Be
- (IR) Iran Oil Min Zanganeh plans to attend the OPEC meeting in Algeria on Sept 26th
*(US) INITIAL JOBLESS CLAIMS: 261K V 265KE; CONTINUING CLAIMS: 2.15M V 2.16ME
*(US) JULY PRELIMINARY DURABLE GOODS ORDERS: 4.4% V 3.4%E; DURABLES EX TRANSPORTATION: 1.5% V 0.4%E
- (US) Atlanta Fed GDPNow: lowers Q3 GDP forecast to 3.4% from 3.6% on Aug 16th
- (SA) Saudi Energy Minister: Have not discussed specific action regarding a production freeze; Has been no discussions of substance on OPEC production levels - press interview
*(JP) JAPAN JULY NATIONAL CPI Y/Y: -0.4% V -0.4%E; CPI EX FRESH FOOD (CORE) Y/Y: -0.5% V -0.4%E
Friday
*(DE) GERMANY SEPT GFK CONSUMER CONFIDENCE: 10.2 V 10.0E (matches highest level since Oct 2001)
*(EU) EURO ZONE JULY M3 MONEY SUPPLY Y/Y: 4.8% V 5.0%E
*(UK) Q2 PRELIMINARY GDP Q/Q: 0.6% V 0.6%E; Y/Y: 2.2% V 2.2%E
*(US) Q2 PRELIMINARY GDP ANNUALIZED Q/Q: 1.1% V 1.1%E; PERSONAL CONSUMPTION: 4.4% V 4.2%E
- RAX: Agrees to be taken private by Apollo Global at $32.00/shr all cash in $4.3B deal
*(US) AUGUST FINAL UNIVERSITY OF MICHIGAN CONFIDENCE: 89.8 V 90.4 PRELIM
- (US) Fed Chair Yellen: case for rate hike has strengthened in recent months - Jackson Hole speech
- (US) Weekly Baker Hughes Rig Count: 489 v 491 w/w (-0.4%) (breaks streak of 8 weeks of increases)
* (US) Fed Vice Chair Fischer: notes strong job reports recently and seeing more evidence the economy has strengthened; emphasizes Fed remains data dependent and thus a rate hike or hikes is possible this year
Fri, 26 Aug 2016 16:04 PM EST
Markets drifted sideways most of the week as they anticipated a key policy speech from Fed Chair Yellen at Jackson Hole on Friday. Volumes were light and ranges remained narrow despite relatively heavy news flow including economic data releases and late season earnings reports. Healthcare stocks were in crosshairs for much of the week as several headlines affected trading. Pfizer's acquisition of Medivation pushed up oncology stocks early, but renewed drug price gouging concerns from Washington D.C. weighed on a swath of names competing within the US pharmacy market. After ending last week near $50/bbl, oil prices backed off early in the week exaggerated by a roll in the front month futures contract. Press reports continued to focus on the September meeting of energy producers in Algeria and the potential for coordinated action, but the likelihood of a meaningful agreement still seems low.
Friday's Jackson Hole meeting did induce some broader market volatility, but the trading flows only picked up after Fed Vice Chair Fischer came on TV to offer his explanation of what Chair Yellen attempted to lay out in her speech earlier. The US Dollar firmed and interest rates backed up while stocks came under modest pressure after the two highest ranking Fed officials illustrated their view that the economy continues to improve at a pace that has strengthened the case for at least one rate hike this year. The US benchmark 10-year yield has broken out to a three month high to close above 1.60%. In the wake of the Jackson Hole comments, the Dow swung more than 230 points, its biggest one-day move since late June. For the week, the DJIA lost 0.9%, the Nasdaq fell 0.4%, and the S&P500 dropped 0.7%.
Monday
- (UK) UK govt said to be readying multi-billion-pound post-Brexit housing stimulus - press
- MDVN: To be acquired by Pfizer for $81.50/shr in cash, valued at ~$14B
Tuesday
*(FR) FRANCE AUG PRELIMINARY MANUFACTURING PMI: 48.5 V 48.8E (6th straight contraction)
*(DE) GERMANY AUG PRELIMINARY MANUFACTURING PMI: 53.6 V 53.6E (21st month of expansion)
*(EU) EURO ZONE AUG PRELIMINARY MANUFACTURING PMI: 51.8 V 52.0E (38th month of expansion)
*(UK) AUG CBI INDUSTRIAL TRENDS TOTAL ORDERS: -5 V -10E
- BBY: Reports Q2 $0.57 v $0.42e, R$8.53B v $8.40Be; Raises FY17 guidance
*(TR) TURKEY CENTRAL BANK (CBRT) LEAVES BENCHMARK REPURCHASE RATE UNCHANGED AT 7.50%; AS EXPECTED; again narrows rate corridor
*(HU) HUNGARY CENTRAL BANK (NBH) LEAVES BASE RATE UNCHANGED AT 0.90%; AS EXPECTED
*(US) AUG PRELIMINARY MARKIT MANUFACTURING PMI: 52.1 V 52.6E
*(US) AUG RICHMOND FED MANUFACTURING INDEX: -11 V +6E
*(US) JULY NEW HOME SALES: 654K V 580KE (highest since Oct 2007)
- (IR) OPEC sources see positive signals from Iran on support for joint action to boost oil prices - press
* (US) NORTH AMERICA JULY SEMI BOOK/BILL RATIO: 1.05 V 1.00 prior
Wednesday
*(DE) GERMANY Q2 FINAL GDP Q/Q: 0.4% V 0.4%E; Y/Y: 1.8% V 1.8%E; GDP NSA Y/Y: 3.1% V 3.1%E
- GLEN.UK: Reports H1 Adj Net $300M v $254Me, Adj EBITDA $4.02B v $3.87Be, R$69.4B v $74.8Be
*(UK) JULY BBA LOANS FOR HOUSE PURCHASE: 37.7K V 38.0KE (lowest since Jan 2015)
*(US) JULY EXISTING HOME SALES: 5.39M V 5.51ME
- MYL: US Democratic Presidential candidate Hillary Clinton calls Epipen price hike 'outrageous', calls for Mylan to immediately cut price - press
Thursday
*(DE) GERMANY AUG IFO BUSINESS CLIMATE: 106.2 V 108.5E; CURRENT ASSESSMENT: 112.8 V 114.9E
- 494.HK: Reports H1 Net $72M v $149M y/y, Op $156M v $182M y/y, Rev $8.07B v $8.63B y/y
- 3328.HK: Reports H1 Net CNY37.6B v CNY37.3B y/y, NII CNY68.1B v CNY71.1B y/y
- MYL: Plans to cut patient Epipen cost through use of savings card; Reducing patient cost by 50% off Mylan list price
- 939.HK: Reports H1 Net CNY133.4B v CNY132.5Be
- (IR) Iran Oil Min Zanganeh plans to attend the OPEC meeting in Algeria on Sept 26th
*(US) INITIAL JOBLESS CLAIMS: 261K V 265KE; CONTINUING CLAIMS: 2.15M V 2.16ME
*(US) JULY PRELIMINARY DURABLE GOODS ORDERS: 4.4% V 3.4%E; DURABLES EX TRANSPORTATION: 1.5% V 0.4%E
- (US) Atlanta Fed GDPNow: lowers Q3 GDP forecast to 3.4% from 3.6% on Aug 16th
- (SA) Saudi Energy Minister: Have not discussed specific action regarding a production freeze; Has been no discussions of substance on OPEC production levels - press interview
*(JP) JAPAN JULY NATIONAL CPI Y/Y: -0.4% V -0.4%E; CPI EX FRESH FOOD (CORE) Y/Y: -0.5% V -0.4%E
Friday
*(DE) GERMANY SEPT GFK CONSUMER CONFIDENCE: 10.2 V 10.0E (matches highest level since Oct 2001)
*(EU) EURO ZONE JULY M3 MONEY SUPPLY Y/Y: 4.8% V 5.0%E
*(UK) Q2 PRELIMINARY GDP Q/Q: 0.6% V 0.6%E; Y/Y: 2.2% V 2.2%E
*(US) Q2 PRELIMINARY GDP ANNUALIZED Q/Q: 1.1% V 1.1%E; PERSONAL CONSUMPTION: 4.4% V 4.2%E
- RAX: Agrees to be taken private by Apollo Global at $32.00/shr all cash in $4.3B deal
*(US) AUGUST FINAL UNIVERSITY OF MICHIGAN CONFIDENCE: 89.8 V 90.4 PRELIM
- (US) Fed Chair Yellen: case for rate hike has strengthened in recent months - Jackson Hole speech
- (US) Weekly Baker Hughes Rig Count: 489 v 491 w/w (-0.4%) (breaks streak of 8 weeks of increases)
* (US) Fed Vice Chair Fischer: notes strong job reports recently and seeing more evidence the economy has strengthened; emphasizes Fed remains data dependent and thus a rate hike or hikes is possible this year
Saturday, August 20, 2016
Barron's weekend
Barron's weekend: positive on FB
Cover story: Donald Trump and Hillary Clinton's views on free trade are wrong, since they don't take into account the benefits cheap imports bring, including jobs that more costly imports can destroy; nor do they see that a widening trade deficit correlates with prosperity while a shrinking one is tied to slumps and recessions.
Features:
1) Profile of Paul Britton, founder of the Capstone Volatility Master fund, uses an unusual alternative strategy that seeks to profit from volatility spikes and which involves owning only a few underlying securities;
2) Positive on FB: Wall Street analysts predict the social site's shares could hit $153 in a year, for a further gain of 20%, with profits growing steadily and stronger advertising sales;
3) Positive on Liberty Braves Group: Shares of the stock that tracks the Atlanta Braves could benefit from increased ticket sales and concessions when the team moves into a new stadium, and deliver 20% returns;
4) A look at what top investors, including George Soros, Warren Buffett, David Einhorn, Jeffrey Ubben, and Carl Icahn, are betting on, with AIG, C, GS and MS being favorites and all but Buffett dumping AAPL;
5) Review of a new book, "Winning at Active Management," explains why it's hard for investors to beat the index, and how they can go about doing so.
Tech Trader: Cautious on CSCO: Recently announced layoffs at the networking major are sign that its market opportunity is being eroded by the shift of computing activity to cloud services run by AMZN, MSFT, and others.
Trader: In the markets, "plenty of cash remains on the sidelines, but a 2% to 3% pullback could draw in folks who have been either short or have missed this latest rally over the past six weeks," says Andrew Ahrens of Ahrens Investment; Positive on C: Shares of bank look cheap for investors with long-term horizons, and they could provide a double-digit percentage annual return during the next two years; The rising popularity of various derivatives, such as options, among others, has stolen volume from equities.
Interview: Stephanie Pomboy, founder of MacroMavens, continue to like government bonds because economic growth won't be a catalyst to push rates higher, and she says investors should look for a repricing of credit risk.
Follow-Up: Positive on MAT: Barron's foresees a strong holiday season for the toymaker, and a further 20% return during the next year, including dividends; Cautious on HAIN: Company "may eventually find an acquirer, but until the cloud dispels from its books, the stock is going nowhere"; + LafargeHolcim: Cement giant has delivered synergies following the merger of Lafarge and Holcim last year and has cut staff and trimmed fat, all of which should help the shares rise.
European Trader: Positive on SpareBank 1 SR Bank and SpareBank 1 SMN: Norwegian regional savings banks are among the firms doing well in the troubled European banking sector, partly because Norway's economy, though tied to oil, is thriving.
Asian Trader: China may not be as scary as some investors have made it out to be, but its stocks can't have a reasonable rally less bank shares participate.
Emerging Markets: The MSCI Emerging Markets index is up about 35% from its January low and should continue to rally, according to Calamos Investments.
Commodities: Gold has made an impressive comeback, and investors hope the rally will continue as many of the factors that have driven it remain in force.
Streetwise: Positive on CRL, APC, WLL: Guggenheim's Subash Chandra says these energy companies may be on the verge of seeing gains because of higher production targets.
Cover story: Donald Trump and Hillary Clinton's views on free trade are wrong, since they don't take into account the benefits cheap imports bring, including jobs that more costly imports can destroy; nor do they see that a widening trade deficit correlates with prosperity while a shrinking one is tied to slumps and recessions.
Features:
1) Profile of Paul Britton, founder of the Capstone Volatility Master fund, uses an unusual alternative strategy that seeks to profit from volatility spikes and which involves owning only a few underlying securities;
2) Positive on FB: Wall Street analysts predict the social site's shares could hit $153 in a year, for a further gain of 20%, with profits growing steadily and stronger advertising sales;
3) Positive on Liberty Braves Group: Shares of the stock that tracks the Atlanta Braves could benefit from increased ticket sales and concessions when the team moves into a new stadium, and deliver 20% returns;
4) A look at what top investors, including George Soros, Warren Buffett, David Einhorn, Jeffrey Ubben, and Carl Icahn, are betting on, with AIG, C, GS and MS being favorites and all but Buffett dumping AAPL;
5) Review of a new book, "Winning at Active Management," explains why it's hard for investors to beat the index, and how they can go about doing so.
Tech Trader: Cautious on CSCO: Recently announced layoffs at the networking major are sign that its market opportunity is being eroded by the shift of computing activity to cloud services run by AMZN, MSFT, and others.
Trader: In the markets, "plenty of cash remains on the sidelines, but a 2% to 3% pullback could draw in folks who have been either short or have missed this latest rally over the past six weeks," says Andrew Ahrens of Ahrens Investment; Positive on C: Shares of bank look cheap for investors with long-term horizons, and they could provide a double-digit percentage annual return during the next two years; The rising popularity of various derivatives, such as options, among others, has stolen volume from equities.
Interview: Stephanie Pomboy, founder of MacroMavens, continue to like government bonds because economic growth won't be a catalyst to push rates higher, and she says investors should look for a repricing of credit risk.
Follow-Up: Positive on MAT: Barron's foresees a strong holiday season for the toymaker, and a further 20% return during the next year, including dividends; Cautious on HAIN: Company "may eventually find an acquirer, but until the cloud dispels from its books, the stock is going nowhere"; + LafargeHolcim: Cement giant has delivered synergies following the merger of Lafarge and Holcim last year and has cut staff and trimmed fat, all of which should help the shares rise.
European Trader: Positive on SpareBank 1 SR Bank and SpareBank 1 SMN: Norwegian regional savings banks are among the firms doing well in the troubled European banking sector, partly because Norway's economy, though tied to oil, is thriving.
Asian Trader: China may not be as scary as some investors have made it out to be, but its stocks can't have a reasonable rally less bank shares participate.
Emerging Markets: The MSCI Emerging Markets index is up about 35% from its January low and should continue to rally, according to Calamos Investments.
Commodities: Gold has made an impressive comeback, and investors hope the rally will continue as many of the factors that have driven it remain in force.
Streetwise: Positive on CRL, APC, WLL: Guggenheim's Subash Chandra says these energy companies may be on the verge of seeing gains because of higher production targets.
Friday, August 19, 2016
Markets Drift Sideways, Looking Ahead to Jackson Hole
TradeTheNews.com Weekly
Market Update: Markets Drift Sideways, Looking Ahead to Jackson Hole
Fri, 19 Aug 2016 16:07 PM EST
Major equity indices retreated slightly from record highs in light summer trading, while the 10-year Treasury yield crept up toward 1.6% this week. Crude futures continued to march higher with Brent breaking above $50/bbl for the first time since early July and WTI topping $48/bbl, even as the Baker Hughes rig count rose for the eighth straight week. The greenback hit seven-week lows against the Yen and Euro before mounting a small recovery on Friday. For the week, the DJIA lost 0.1%, the S&P500 slipped less than 0.1%, and the Nasdaq edge up 0.1%.
The economic data this week was mostly unremarkable, though US July core CPI came in one-tenth weaker than expected. Meanwhile UK inflation data saw some fallout from the Brexit vote and post-referendum sterling fall: July CPI hit a 20-month high at 0.6% y/y and manufacturers saw the biggest jump in PPI in 3 years. On Friday, a report said that Prime Minister May would invoke EU Article 50 and start the 2-year Brexit process by next April.
In corporate news, Cisco beat earnings expectations but was weighed on by a 7% workforce reduction announcement. Private prison operators Corrections Corp and Geo Group were subject to hard time this week after the DOJ said it would phase out their contracts, hitting their shares by as much as 50% on Thursday.
A raft of Fed speakers set a somewhat more hawkish tone as markets look ahead for signals about rate tightening at the Jackson Hole symposium next week. Most notably, the normally dovish NY Fed President Dudley said the time for a rate hike is getting closer and would not rule out a September move. The minutes of the July FOMC meeting released this week indicated that Fed members are still divided on the future course of action and wanted more data before making a decision.
Monday
(US) AUG EMPIRE MANUFACTURING: -4.2 V +2.0E
(US) AUG NAHB HOUSING MARKET INDEX: 60 V 60E
(US) JUNE TOTAL NET TIC FLOWS: -$202.8B V -$11.0B PRIOR; NET LONG-TERM TIC FLOWS: -$3.6B V +$42BE
Tuesday
BLT.UK: Reports FY16 Net loss $6.39B v profit $1.91B y/y, Underlying profit $1.22B v $1.04Be; Rev $30.9B v $52.3B y/y
(UK) JULY CPI M/M: -0.1% V -0.1%E; Y/Y: 0.6% (20-month high) V 0.5%E; CPI CORE Y/Y: 1.3% V 1.4%E
(UK) JULY RPI M/M: +0.1% V -0.1%E; Y/Y: 1.9% V 1.7%E
(UK) JULY PPI INPUT M/M: 3.3% V 1.0%E; Y/Y: 4.3% V 2.0%E (largest annual rise since July 2013)
(DE) GERMANY AUG ZEW CURRENT SITUATION SURVEY: 57.6 V 50.2E; EXPECTATIONS SURVEY: 0.5 V 2.0E
HD: Reports Q2 $1.97 v $1.96e, R$26.5B v $26.4Be
(US) JULY CPI M/M: 0.0% V 0.0%E; CPI EX FOOD AND ENERGY M/M: 0.1% V 0.2%E; CPI NSA: 240.647 V 240.805E
(US) JULY HOUSING STARTS: 1.211M V 1.180ME; BUILDING PERMITS: 1.152M V 1.160ME
TJX: Reports Q2 $0.84 v $0.80e, R$7.88B v $7.87Be
(US) JULY INDUSTRIAL PRODUCTION M/M: 0.7% V 0.3%E; CAPACITY UTILIZATION: 75.9% V 75.6%E
(US) Fed's Dudley (dove, FOMC voter): Getting closer to the time for a rate hike, Sept rate hike is possible; Bond market is looking a bit stretched, 10-year yield is looking a bit low, given the circumstances - TV interview
(US) Fed's Lockhart (moderate, non-voter): would not rule out at least one rate hike this year; not committed to any particular timing on rate hike
(US) Atlanta Fed GDPnow: raises Q3 GDP forecast to 3.6% from 3.5% on Aug 12th
(US) EPA finalizes greenhouse gas requirements for medium and heavy duty trucks; 2027 model year trucks to be 25% more efficient
F: Targets fully autonomous vehicle for ride sharing in 2021
Wednesday
CARLB.DK: Reports H1 adj Net DKK1.41B v DKK1.80B, EBIT DKK3.45B v DKK3.54Be, Rev DKK31.2B v DKK31.5Be
(UK) JULY JOBLESS CLAIMS CHANGE: -8.6K V +9.0KE; CLAIMANT COUNT RATE: 2.2% V 2.2%E
(UK) JUN ILO UNEMPLOYMENT RATE 3M/3M: 4.9% V 4.9%E
(UK) JUN AVERAGE WEEKLY EARNINGS 3M/Y/Y: 2.4% V 2.4%E; WEEKLY EARNINGS (EX BONUS) 3M/Y/Y: 2.3% V 2.3%E
700.HK: Reports Q2 Net CNY10.7B v CNY9.52Be, Rev CNY35.7B v CNY23.4B y/y
MON: Reportedly allows Bayer limited access to confidential company information; Bayer has not yet signed confidentiality agreement with Monsanto and ongoing talks described as "difficult" - press
(PT) Canadian ratings agency DBRS analyst: agency is 'comfortable' with current Portugal BBB rating - press
(US) FOMC MINUTES FROM JULY 26-27TH MEETING: FED OFFICIALS SPLIT, WANT MORE DATA BEFORE DECISION ON RATE HIKE
CSCO: Reports Q4 $0.63 v $0.60e, R$12.6B v $12.5Be; to eliminate up to 5.5K positions (7% of global workforce)
992.HK: Reports Q1 $0.02 v $0.01e; Net $173M v $111Me, Rev $10.1B v $9.9Be
(CN) CHINA JULY PROPERTY PRICES M/M: FALL IN 16 OUT OF 70 CITIES VS FALL IN 10 PRIOR; Y/Y: FALL IN 11 OUT OF 70 CITIES V FALL IN 12 PRIOR
(AU) AUSTRALIA JULY EMPLOYMENT CHANGE: +26.2K V +10.0KE; UNEMPLOYMENT RATE: 5.7% V 5.8%E
Thursday
(UK) JULY RETAIL SALES (EX AUTO FUEL) M/M: 1.5% V 0.3%E; Y/Y: 5.4% V 3.9%E
(UK) JULY RETAIL SALES (INCLUDING AUTO FUEL) M/M: 1.4% V 0.1%E; Y/Y: 5.9% V 4.2%E
(EU) EURO ZONE JULY CPI M/M: -0.6% V -0.5%E; Y/Y: 0.2% V 0.2%E V 0.2% ADVANCE; CPI CORE: 0.9% V 0.9%E
(US) INITIAL JOBLESS CLAIMS: 262K V 265KE; CONTINUING CLAIMS: 2.175M V 2.14ME
(US) AUG PHILADELPHIA FED BUSINESS OUTLOOK: 2.0 V 2.0E
HOG: US regulators file suit over emission control defeat devices, claims Harley Davidson violated Clean Air Act - press
(US) Dept of Justice to end its use of private prisons due to safety and security issues - Washington Post
(US) Fed's Williams (moderate, non-voter): calls for rate hike sooner rather than later; raising interest rates makes sense
AMAT: Reports Q3 $0.50 v $0.47e, R$2.82B v $2.83Be
GPS: Reports Q2 $0.60 v $0.58e, R$3.85B v $3.81Be
Friday
(UK) JULY PUBLIC FINANCES (PSNCR): -£2.1B V +£13.5B PRIOR; PUBLIC SECTOR NET BORROWING: -£1.5B V -£2.2BE
(ID) INDONESIA CENTRAL BANK (BI) LEAVES 7-DAY REVERSE REPO RATE (new benchmark rate) UNCHANGED AT 5.25% (not expected)
(UK) UK govt reportedly likely to trigger Brexit by April 2017 - press
(US) Weekly Baker Hughes Rig Count: 491 v 481 w/w (+2%) (8th straight week of increase)
Fri, 19 Aug 2016 16:07 PM EST
Major equity indices retreated slightly from record highs in light summer trading, while the 10-year Treasury yield crept up toward 1.6% this week. Crude futures continued to march higher with Brent breaking above $50/bbl for the first time since early July and WTI topping $48/bbl, even as the Baker Hughes rig count rose for the eighth straight week. The greenback hit seven-week lows against the Yen and Euro before mounting a small recovery on Friday. For the week, the DJIA lost 0.1%, the S&P500 slipped less than 0.1%, and the Nasdaq edge up 0.1%.
The economic data this week was mostly unremarkable, though US July core CPI came in one-tenth weaker than expected. Meanwhile UK inflation data saw some fallout from the Brexit vote and post-referendum sterling fall: July CPI hit a 20-month high at 0.6% y/y and manufacturers saw the biggest jump in PPI in 3 years. On Friday, a report said that Prime Minister May would invoke EU Article 50 and start the 2-year Brexit process by next April.
In corporate news, Cisco beat earnings expectations but was weighed on by a 7% workforce reduction announcement. Private prison operators Corrections Corp and Geo Group were subject to hard time this week after the DOJ said it would phase out their contracts, hitting their shares by as much as 50% on Thursday.
A raft of Fed speakers set a somewhat more hawkish tone as markets look ahead for signals about rate tightening at the Jackson Hole symposium next week. Most notably, the normally dovish NY Fed President Dudley said the time for a rate hike is getting closer and would not rule out a September move. The minutes of the July FOMC meeting released this week indicated that Fed members are still divided on the future course of action and wanted more data before making a decision.
Monday
(US) AUG EMPIRE MANUFACTURING: -4.2 V +2.0E
(US) AUG NAHB HOUSING MARKET INDEX: 60 V 60E
(US) JUNE TOTAL NET TIC FLOWS: -$202.8B V -$11.0B PRIOR; NET LONG-TERM TIC FLOWS: -$3.6B V +$42BE
Tuesday
BLT.UK: Reports FY16 Net loss $6.39B v profit $1.91B y/y, Underlying profit $1.22B v $1.04Be; Rev $30.9B v $52.3B y/y
(UK) JULY CPI M/M: -0.1% V -0.1%E; Y/Y: 0.6% (20-month high) V 0.5%E; CPI CORE Y/Y: 1.3% V 1.4%E
(UK) JULY RPI M/M: +0.1% V -0.1%E; Y/Y: 1.9% V 1.7%E
(UK) JULY PPI INPUT M/M: 3.3% V 1.0%E; Y/Y: 4.3% V 2.0%E (largest annual rise since July 2013)
(DE) GERMANY AUG ZEW CURRENT SITUATION SURVEY: 57.6 V 50.2E; EXPECTATIONS SURVEY: 0.5 V 2.0E
HD: Reports Q2 $1.97 v $1.96e, R$26.5B v $26.4Be
(US) JULY CPI M/M: 0.0% V 0.0%E; CPI EX FOOD AND ENERGY M/M: 0.1% V 0.2%E; CPI NSA: 240.647 V 240.805E
(US) JULY HOUSING STARTS: 1.211M V 1.180ME; BUILDING PERMITS: 1.152M V 1.160ME
TJX: Reports Q2 $0.84 v $0.80e, R$7.88B v $7.87Be
(US) JULY INDUSTRIAL PRODUCTION M/M: 0.7% V 0.3%E; CAPACITY UTILIZATION: 75.9% V 75.6%E
(US) Fed's Dudley (dove, FOMC voter): Getting closer to the time for a rate hike, Sept rate hike is possible; Bond market is looking a bit stretched, 10-year yield is looking a bit low, given the circumstances - TV interview
(US) Fed's Lockhart (moderate, non-voter): would not rule out at least one rate hike this year; not committed to any particular timing on rate hike
(US) Atlanta Fed GDPnow: raises Q3 GDP forecast to 3.6% from 3.5% on Aug 12th
(US) EPA finalizes greenhouse gas requirements for medium and heavy duty trucks; 2027 model year trucks to be 25% more efficient
F: Targets fully autonomous vehicle for ride sharing in 2021
Wednesday
CARLB.DK: Reports H1 adj Net DKK1.41B v DKK1.80B, EBIT DKK3.45B v DKK3.54Be, Rev DKK31.2B v DKK31.5Be
(UK) JULY JOBLESS CLAIMS CHANGE: -8.6K V +9.0KE; CLAIMANT COUNT RATE: 2.2% V 2.2%E
(UK) JUN ILO UNEMPLOYMENT RATE 3M/3M: 4.9% V 4.9%E
(UK) JUN AVERAGE WEEKLY EARNINGS 3M/Y/Y: 2.4% V 2.4%E; WEEKLY EARNINGS (EX BONUS) 3M/Y/Y: 2.3% V 2.3%E
700.HK: Reports Q2 Net CNY10.7B v CNY9.52Be, Rev CNY35.7B v CNY23.4B y/y
MON: Reportedly allows Bayer limited access to confidential company information; Bayer has not yet signed confidentiality agreement with Monsanto and ongoing talks described as "difficult" - press
(PT) Canadian ratings agency DBRS analyst: agency is 'comfortable' with current Portugal BBB rating - press
(US) FOMC MINUTES FROM JULY 26-27TH MEETING: FED OFFICIALS SPLIT, WANT MORE DATA BEFORE DECISION ON RATE HIKE
CSCO: Reports Q4 $0.63 v $0.60e, R$12.6B v $12.5Be; to eliminate up to 5.5K positions (7% of global workforce)
992.HK: Reports Q1 $0.02 v $0.01e; Net $173M v $111Me, Rev $10.1B v $9.9Be
(CN) CHINA JULY PROPERTY PRICES M/M: FALL IN 16 OUT OF 70 CITIES VS FALL IN 10 PRIOR; Y/Y: FALL IN 11 OUT OF 70 CITIES V FALL IN 12 PRIOR
(AU) AUSTRALIA JULY EMPLOYMENT CHANGE: +26.2K V +10.0KE; UNEMPLOYMENT RATE: 5.7% V 5.8%E
Thursday
(UK) JULY RETAIL SALES (EX AUTO FUEL) M/M: 1.5% V 0.3%E; Y/Y: 5.4% V 3.9%E
(UK) JULY RETAIL SALES (INCLUDING AUTO FUEL) M/M: 1.4% V 0.1%E; Y/Y: 5.9% V 4.2%E
(EU) EURO ZONE JULY CPI M/M: -0.6% V -0.5%E; Y/Y: 0.2% V 0.2%E V 0.2% ADVANCE; CPI CORE: 0.9% V 0.9%E
(US) INITIAL JOBLESS CLAIMS: 262K V 265KE; CONTINUING CLAIMS: 2.175M V 2.14ME
(US) AUG PHILADELPHIA FED BUSINESS OUTLOOK: 2.0 V 2.0E
HOG: US regulators file suit over emission control defeat devices, claims Harley Davidson violated Clean Air Act - press
(US) Dept of Justice to end its use of private prisons due to safety and security issues - Washington Post
(US) Fed's Williams (moderate, non-voter): calls for rate hike sooner rather than later; raising interest rates makes sense
AMAT: Reports Q3 $0.50 v $0.47e, R$2.82B v $2.83Be
GPS: Reports Q2 $0.60 v $0.58e, R$3.85B v $3.81Be
Friday
(UK) JULY PUBLIC FINANCES (PSNCR): -£2.1B V +£13.5B PRIOR; PUBLIC SECTOR NET BORROWING: -£1.5B V -£2.2BE
(ID) INDONESIA CENTRAL BANK (BI) LEAVES 7-DAY REVERSE REPO RATE (new benchmark rate) UNCHANGED AT 5.25% (not expected)
(UK) UK govt reportedly likely to trigger Brexit by April 2017 - press
(US) Weekly Baker Hughes Rig Count: 491 v 481 w/w (+2%) (8th straight week of increase)
Saturday, August 13, 2016
Barron's weekend update
Barron's weekend update: positive on BKD
Cover story: A Hillary Clinton win in the presidential race "would be easily digested by markets because of her mostly moderate instincts and predictable policy prescriptions"; U.S. multinationals such as GE, MON, and DE would likely benefit because Clinton has shown no signs of being a protectionist.
Features:
1) Sectors including biotech, energy, and even defense stocks could benefit from a Donald Trump presidency, because he is calling for less regulation on a variety of industries;
2) Positive on VOD, Deutsche Telekom, NVS, Nestle, NGG: Five European stocks have yields ranging from 2-5%, and could get a boost as European investors seek alternatives to ultralow, or negative, government bond yields;
3) Positive on BKD: Company faces a number of issues, including a slowdown in new construction in senior housing, but shares already appear to reflect these concerns, and they could rise 30% or more.
Tech Trader: Cautious on IBM: Tech company has contributed to the impression that it's failing in the cloud sector because it doesn't indicate what cloud revenue is new business; A lack of information from players such as MSFT and GOOGL about their cloud businesses has forced analysts to compile their own estimates.
Trader: "The more stocks go up, the more those sitting on the sidelines will be forced to capitulate and join in," says Douglas Cote of Voya Investment Management; A rise in three names-MMM, IBM, and UNH-accounted for almost 50% of the Dow's 7% gain as of Thursday; Cautious on PAY: Company's valuation is near an all-time low, with the stock trading at big discounts to its own history, rivals, and the market; Positive on AMZN: Retailer is likely to benefit from back-to-school shopping-22% of respondents to a Civic Science poll say they'll do a quarter or more of their shopping online.
Small Cap: Positive on SSP: Broadcaster faces slower-than-expected political spending this year, but a recent selloff looks like an opportunity, and long-term prospects are good.
Follow-Up: Positive on CAT: An earnings recovery could take two more years to begin, but when it happens it should be strong, and patient investors should stick with the shares; Positive on BDX: Shares of medical-equipment maker could rise by 10% during the next 12 months following a string of strong revenue and earnings gains; Cautious on ECL: Shares are up 48% during the past three years, but with sluggish growth and some industry headwinds, it could be time for investors to take their profits.
European Trader: Positive on FirstGroup: Shares of transport group have rebounded following a drop in the wake of the Brexit vote, and its profit picture shows signs of brightening.
Asian Trader: Cautious on Idea Cellular: Indian consumers have embraced smartphones, but they shy away from high-priced data plans, a problem for the country's No. 3 carrier.
Emerging Markets: With state-run deficits amounting to 10% of GDP for three years straight and failures by the central bank to prop up its currency, Egypt badly needs a bailout from the IMF.
Commodities: Easing concerns about the global economy this year have halted the long slide in copper prices-though the support isn't likely to last.
Streetwise: Profits in technology and healthcare continue to grow at double-digit rates, and it wouldn't take much outperformance for them to attract momentum investors, which would give them a boost.
Cover story: A Hillary Clinton win in the presidential race "would be easily digested by markets because of her mostly moderate instincts and predictable policy prescriptions"; U.S. multinationals such as GE, MON, and DE would likely benefit because Clinton has shown no signs of being a protectionist.
Features:
1) Sectors including biotech, energy, and even defense stocks could benefit from a Donald Trump presidency, because he is calling for less regulation on a variety of industries;
2) Positive on VOD, Deutsche Telekom, NVS, Nestle, NGG: Five European stocks have yields ranging from 2-5%, and could get a boost as European investors seek alternatives to ultralow, or negative, government bond yields;
3) Positive on BKD: Company faces a number of issues, including a slowdown in new construction in senior housing, but shares already appear to reflect these concerns, and they could rise 30% or more.
Tech Trader: Cautious on IBM: Tech company has contributed to the impression that it's failing in the cloud sector because it doesn't indicate what cloud revenue is new business; A lack of information from players such as MSFT and GOOGL about their cloud businesses has forced analysts to compile their own estimates.
Trader: "The more stocks go up, the more those sitting on the sidelines will be forced to capitulate and join in," says Douglas Cote of Voya Investment Management; A rise in three names-MMM, IBM, and UNH-accounted for almost 50% of the Dow's 7% gain as of Thursday; Cautious on PAY: Company's valuation is near an all-time low, with the stock trading at big discounts to its own history, rivals, and the market; Positive on AMZN: Retailer is likely to benefit from back-to-school shopping-22% of respondents to a Civic Science poll say they'll do a quarter or more of their shopping online.
Small Cap: Positive on SSP: Broadcaster faces slower-than-expected political spending this year, but a recent selloff looks like an opportunity, and long-term prospects are good.
Follow-Up: Positive on CAT: An earnings recovery could take two more years to begin, but when it happens it should be strong, and patient investors should stick with the shares; Positive on BDX: Shares of medical-equipment maker could rise by 10% during the next 12 months following a string of strong revenue and earnings gains; Cautious on ECL: Shares are up 48% during the past three years, but with sluggish growth and some industry headwinds, it could be time for investors to take their profits.
European Trader: Positive on FirstGroup: Shares of transport group have rebounded following a drop in the wake of the Brexit vote, and its profit picture shows signs of brightening.
Asian Trader: Cautious on Idea Cellular: Indian consumers have embraced smartphones, but they shy away from high-priced data plans, a problem for the country's No. 3 carrier.
Emerging Markets: With state-run deficits amounting to 10% of GDP for three years straight and failures by the central bank to prop up its currency, Egypt badly needs a bailout from the IMF.
Commodities: Easing concerns about the global economy this year have halted the long slide in copper prices-though the support isn't likely to last.
Streetwise: Profits in technology and healthcare continue to grow at double-digit rates, and it wouldn't take much outperformance for them to attract momentum investors, which would give them a boost.
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