Reflation Trade Ignores Trump’s Stumbles

TradeTheNews.com Weekly Market Update: Reflation Trade Ignores Trump’s Stumbles
Fri, 17 Feb 2017 16:03 PM EST

Fed Chair Yellen's remarks to Congress on Tuesday added extra fuel to the Trump and reflation trades, as the markets saw the likelihood of the next rate hike getting closer. The odds of a March rate move edged higher as she confirmed that all policy meetings are ‘live’, stating that waiting too long to raise rates may be detrimental to the economy and could cause the Fed to raise rates later at a hasty pace. A chorus of other Fed speakers largely echoed Yellen, with members agreeing that with the employment and inflation mandates nearing targets, three or so rate hikes this year would be appropriate.

Stocks rallied along with the Fed-speak: the Dow jumping 1.2% over two days, and touching a new all-time high at 20,639 before leveling off in the back half of the week. Bonds sold off, with the 10-year Treasury yield spiking above 2.51%, before bond prices rallied again and stocks sold off, as investors pondered how markets are reacting to macro factors. For the week, the DJIA gained 1.7%, the S&P500 rose 1.5%, and the Nasdaq added 1.8%.

ECB meeting minutes released this week show the central bank was unanimous in its decision to keep its stimulus at current levels. Members also noted there would be a trade-off between changes to its ‘capital key’ menu of eligible securities and bond-buying in the short part of the curve that yield less than the deposit rate. Initially, peripheral EGBs went into a rally, with 10-year BTPs losing 7bps in yield. German Bunds also recovered in price Friday as the market reassessed the extent of the trade-off between short-term bonds and capital key revisions.

In politics, Trump largely avoided making any market moving remarks this week, but he lost some key appointments. He accepted the resignation of national security adviser Mike Flynn after reports of his conversations with the Russian ambassador came to light. Labor nominee Andrew Puzder also withdrew his name from consideration after several Republican senators balked at his appointment. Trump also gave a long and rambling press conference on Thursday berating the mainstream media again for 'fake news' and unjustified criticism towards himself and administration.

Corporate news this week was dominated by major merger developments and a persistent flow of earnings releases. On the M&A front, Aetna and Humana formally ended their $37B combination attempt on Tuesday, though Aetna remains on the hook for the $1B termination fee. And after a court blocked the Cigna and Anthem combination last week, Cigna moved on Tuesday to formally end its merger agreement, seeking damages exceeding $13B; Anthem filed a temporary restraining order aiming to halt any merger termination. On Friday morning, Kraft Heinz confirmed it had made an approach for Unilever in a cash and stock deal valued at $143B, but Unilever rejected the proposal as it sees no merit for shareholders. Yahoo was said to have reached a tentative deal with Verizon for a $250-350M price reduction in the sale of its operating business after hacking reports surfaced. On the earnings side, Deere reported a beat on the top and bottom line, and surprised the street by raising its outlook on equipment sales.

SUNDAY 2/12
(JP) JAPAN PRELIMINARY Q4 GDP Q/Q: 0.2% V 0.3%E (4th straight quarterly growth); Y/Y: 1.0% V 1.1%E

MONDAY 2/13
(CN) CHINA JAN CPI M/M: 1.0% (11-month high) V 0.2% PRIOR; Y/Y: 2.5% (32-month high) V 2.4%E
(CN) CHINA JAN PPI Y/Y: 6.9% V 6.5%E; 5th straight increase and highest since Aug 2011
(US) NY Fed JAN Survey of Consumer Expectations: inflation expectations highest since summer 2015; household spending expectations lowest since Jan 2016

TUESDAY 2/14
CSGN.CH Reports Q4 Net loss CHF2.35B v loss CHF2.07Be; Pretax profit CHF692M v loss CHF2.01Be; Rev CHF5.38B v CHF5.10Be
(DE) GERMANY Q4 PRELIMINARY GDP Q/Q: 0.4% V 0.5%E; Y/Y: 1.7% V 1.8%E; GDP NSA Y/Y: 1.2% V 1.4%E
(IT) ITALY Q4 PRELIMINARY GDP Q/Q: 0.2% V 0.3%E; Y/Y: 1.1% V 1.0%E
(UK) JAN CPI M/M: -0.5% V -0.5%E; Y/Y: 1.8% V 1.9%E; CPI CORE Y/Y: 1.6% V 1.7%E (highest annual reading since Jun 2014)
(UK) JAN PPI INPUT M/M: 1.7% V 1.0%E; Y/Y: 20.5% V 18.5%E
(DE) GERMANY FEB ZEW CURRENT SITUATION SURVEY: 76.4 V 77.0E; EXPECTATIONS SURVEY: 10.4 V 15.0E
(EU) EURO ZONE Q4 PRELIMINARY GDP Q/Q: 0.4% V 0.5%E; Y/Y: 1.7% V 1.8%E
AET Aetna and Humana Mutually End Merger Agreement; Aetna to pay $1B breakup fee
(US) JAN PPI FINAL DEMAND M/M: 0.6% V 0.3%E; Y/Y: 1.6% V 1.5%E
(US) Fed Chair Yellen: waiting too long to tighten would be unwise; more policy adjustments will likely be needed if the economy remains on track - semi-annual testimony
CI Cigna terminates merger agreement with Anthem; files suit seeking damages exceeding $13B - filing
Berkshire Hathaway discloses latest quarterly holdings; adds to stakes in airline industry - 13 F-HR filing
(US) Weekly API Oil Inventories: Crude: +9.9M (4th straight build) v +14.2M prior
000725.CN Apple reportedly considering BOE Technology as its first China supplier for iPhone screens - financial press

WEDNESDAY 2/15
ACA.FR Reports Q4 Net €291M v €315Me; Rev €4.58B v €4.29Be; to reduce stake in Amundi to 70% (currently holds 74.2%)
HEIA.NL Reports FY16 Net €2.10B v €2.13Be, Op Profit €3.54B v €3.47Be, Rev €20.8B v €20.6Be
BN.FR Reports FY16 Net €1.72B v €1.79Be, Op €3.02B v €2.89B y/y, Rev €21.9B v €22.4B y/y; Announces €1B efficiency program
(SE) SWEDEN CENTRAL BANK (RIKSBANK) LEAVES REPO RATE UNCHANGED AT -0.50%; AS EXPECTED
(UK) JAN JOBLESS CLAIMS CHANGE: -42.4K V +0.5KE; CLAIMANT COUNT RATE: 2.1% V 2.3%E
(UK) DEC AVERAGE WEEKLY EARNINGS 3M/Y: 2.6% V 2.8%E; WEEKLY EARNINGS (EX BONUS) 3M/Y: 2.6% V 2.7%E
(UK) DEC ILO UNEMPLOYMENT RATE 3M/3M: 4.8% V 4.8%E
(US) JAN ADVANCE RETAIL SALES M/M: 0.4% V 0.1%E; RETAIL SALES EX AUTO M/M: 0.8% V 0.4%E
(US) FEB EMPIRE MANUFACTURING: 18.7 V 7.0E (highest since Sept 2014)
(US) JAN CPI M/M: 0.6% V 0.3%E; CPI EX FOOD AND ENERGY M/M: 0.3% V 0.2%E; CPI INDEX NSA: 242.839 V 242.479E
(US) JAN INDUSTRIAL PRODUCTION M/M: -0.3% V 0.0%E; CAPACITY UTILIZATION: 75.3% V 75.4%E
(US) FEB NAHB HOUSING MARKET INDEX: 65 V 67E
(US) DOE CRUDE: +9.5M V +3.5ME; GASOLINE: +2.8M V +0.5ME; DISTILLATE: -0.7M V -1ME
(US) Atlanta Fed cuts Q1 GDP forecast to 2.2% from 2.7% on 2/9
(US) Association of American Railroads weekly rail traffic report for week ending Feb 11th: 518K carloads and intermodal units, +2.6% y/y
(US) Top Senate Republicans reportedly urge White House to withdraw Labor Sec-designate Puzder's nomination - CNN
(US) DEC TOTAL NET TIC FLOWS: -$42.8B V +$30.2B PRIOR; NET LONG-TERM TIC FLOWS: -$12.9B (first decline in 3 months) V +$34.4B PRIOR
AMAT Reports Q1 $0.67 v $0.66e, R$3.28B v $3.29Be
CSCO Reports Q2 $0.57 v $0.56e, R$11.6B v $11.6Be; Increases dividend 11.5% to $0.29/shr (implied yield 3.5%)
(CN) China Jan Foreign Direct Investment (FDI): CNY80.1B v CNY81.4B prior, Y/Y: -9.2% (First decline in 27 months) v +1.4%e
992.HK Reports Q3 Net $98M v $146Me; R$12.2B v $11.7Be

THURSDAY 2/16
NESN.CH Reports FY16 Net CHF8.5B v CHF9.6Be, Op Profit CHF13.7B v CHF13.8Be, Rev CHF89.5B v CHF89.7Be; proposes dividend of CHF2.30/shr
SU.FR Reports FY16 Net €1.75B v €1.85Be; adj EBITA €3.48B v €3.48Be, Rev €24.7B v €24.7Be
(ID) INDONESIA CENTRAL BANK (BI) LEAVES 7-DAY REVERSE REPURCHASE RATE UNCHANGED AT 4.75%; AS EXPECTED
(US) JAN HOUSING STARTS: 1.25M V 1.23ME; BUILDING PERMITS: 1.29M V 1.23ME
(US) INITIAL JOBLESS CLAIMS: 239K V 245KE; CONTINUING CLAIMS: 2.076M V 2.05ME
(US) FEB PHILADELPHIA FED BUSINESS OUTLOOK: 43.3 V 18.0E (highest since Jan 1984)
TGH Believes used shipping container prices have bottomed - earnings slides
(US) Atlanta Fed raises Q1 GDP forecast to 2.4% from 2.2% on 2/15

FRIDAY 2/17
(UK) JAN RETAIL SALES (EX-AUTO FUEL) M/M: -0.2% V 0.7%E; Y/Y: 2.6% V 3.9%E
DE Reports Q1 $0.61 v $0.51e, R$5.63B v $4.63Be; Raises outlook
ULVR.UK Kraft Heinz confirms made approach on possible combination; Unilever declines proposal
(US) Weekly Baker Hughes US Rig Count: 751 v 741 w/w (+1.3%) (5th straight rise)
S Softbank reportedly preparing to approach Deutsche Telekom's T-Mobile US about a possible merger with Sprint - press

Barrons weekend summary

Barrons weekend summary: positive on Macy's (M), ABT, PSH.NL 
Cover story: Barron's 2016 list of the best fund families is topped by Natixis Global Asset Management, Pimco, State Street Bank & Trust, American Funds, and First Trust Advisors; Pimco is ranked No. 1 for U.S. equity and world equity, Lord Abbott is ranked No. 1 for mixed asset and taxable bond, and OppenheimerFunds is ranked No. 1 for tax-exempt bonds. 

Features: 
1) The managers of Barron's four top fund families-John Hailer of Natixis, Emmanuel Roman of Pimco, Nick Good of State Street, and Tim Armour of Capital Group-discuss the past year, and what lies ahead; 
2) Positive on M: The retail sector remains troubled, but as the retailer downsizes its physical locations and ramps up the online side, shares could rise by 20-30%, and a sale would benefit investors; 
3) Positive on ABT: Global healthcare giant faces challenges including currency headwinds and making its acquisition of St. Jude Medical boost growth, but shares are inexpensive, offering investors an opportunity; 
4) Positive on Pershing Square Holdings, Third Point Offshore Investors: Closed-end funds offer individual investors a cheap way to invest with prominent hedge fund managers Bill Ackman and Daniel Loeb.

Tech Trader: Positive on LITE: Most analysts think the company's 3-D sensing system will be the next big thing for the AAPL iPhone, though similar technology has already been used by MSFT and INTC in devices other than smartphones; Other companies working on new technology for smartphones include FNSR, IIVI, VIAV, AMS, and Infineon Technologies. 

Trader: Earnings growth in Europe could be faster than in the U.S. this year and next, says Ronan Carr of Merrill Lynch; "Much attention has been focused on the possibility of slashing the corporate tax rate, but those gains could be eroded by other Trump policies"; Cautious on ABX: A strong finish in 2016 bodes well for the company, which has slashed debt and cut costs by removing layers of management and sold unnecessary assets, though metals will continue to see volatility. Profile: Karen Bowie, manager of Nuveen Small Cap Value, seeks unsung or unnoticed companies with clear turnaround potential based on catalysts the market has missed (top 10 holdings: BANR, RNST, WBS, STL, NSR, CY, PLT, HTLF, PFBC). 

Interview: Ken Siazon of Longleaf Partners Asia Pacific fund, runs a highly concentrated portfolio with extensive research backing its holdings (picks: Global Logistics Properties, New World Development, JIN, MPEL, Melco International Development). 

Small Caps: Positive on IGT: Company's merger with Italian lottery-operator Gtech has proven successful, and more upside could lie ahead for the shares despite a recent uptick. 

Follow-Up: Cautious on TWTR: Company continues to face problems, and its best hope is probably a sale, a situation that doesn't bode well for the upcoming IPO of Snap; Positive on KEY: While investors may want to consider taking profits in big bank stocks, they should hold their KeyCorp shares, which look fairly priced relative to earnings, which could grow by double-digits.

 European Trader: Positive on Orkla: Norwegian consumer-goods company has been refocusing on higher-margin businesses, and could be a great turnaround play for investors. 

Asian Trader: "Chinese real-estate developers may be the new value performers this year, judging by the furious rally at the Hong Kong exchange last week" (Positive on China Resources Land, Longfor Properties). 

Emerging Markets: Positive on C: For investors seeking a hedge against emerging markets' volatility and some shelter from a strong dollar, the bank's shares appear to be a risk-averse way to tap into the sector's growth. 

Commodities: "Beef prices may have taken a tumble last year, but now it looks like they aren't going anywhere but sideways," an opportunity for investors who sell options at levels above and below recent prices. 

Streetwise: Letting the yuan float freely could eventually boost Chinese exports, stem capital flight, and increase inflation, says William Adams of PNC, but in the short term it could roil markets. 

Markets Stirred by Geopolitics Again, but Gravitate Back to Risk-on

TradeTheNews.com Weekly Market Update: Markets Stirred by Geopolitics Again, but Gravitate Back to Risk-on
Fri, 10 Feb 2017 16:02 PM EST

US stock markets had a bumpy ride this week succumbing to lingering geopolitical concerns in the first part of the week. Indices pushed away from early highs and money flowed into the arms of global bond markets. The US 10-year yield drifted back towards the early 2017 low, briefly dropping below 2.35%, while oil prices dipped and gold jumped. Polling data ahead of key European elections and more awkward rumblings from the Trump administration were ultimately pushed aside and reflation trades resurfaced. The DJIA, S&P and the NASDAQ made runs to fresh all-time highs before the week’s end and the flows into Treasuries were unwound. For the week, the DJIA gained 1%, the S&P500 added 0.8%, and the Nasdaq rose 1.2%.

Investor sentiment largely turned on another Trump tweet. At Thursday's meeting with airline executives the President teased the upcoming announcement of a “phenomenal” new tax plan in the next few weeks. Though yet again no specifics were offered, the headline gave investors the kind of fuel they were looking for to add more risk. The week finished with the state visit of Japanese PM Abe at the White House. A joint press conference failed to produce any headlines that could potentially damage the market's psyche and both leaders indicated their willingness to cooperate moving forward on security and trade.

Greek debt worries resurfaced as the IMF issued a statement saying that the EU would need to pay-in more cash to prop-up the country’s finances. The news irritated various officials in Greece and Europe, although various politicians from Germany have recently hinted it might be best for Greece to leave the EU altogether. In the UK, PM May’s government won a series of Parliamentary votes, swatting away proposed legislative amendments that would have impeded the planned invocation of Article 50 next month. The recent political upsurge of the far-right in various countries in Europe, such as Sweden, France and Holland, also adds to the pot for EU break-up risk. Spanish and Italian 10-year yields gained 9 basis points on Friday as peripheral European Government Bonds continue to take loses.

China took action in an attempt to stabilize the exchange rate and stop the continued slide of the yuan. The PBOC decided to stop reverse repo operations for four consecutive days, pushing short term money markets rates higher and making it more expensive to short sell yuan. However, the yuan reversed its bullish trend this week to close down 0.9% to the US dollar. The growing trade imbalance and potential weaker economic growth in the wake of policy tightening may have contributed to pushing the currency lower. Emerging markets, China in particular, will be watching Fed Chair Yellen's comments closely when she testifies on Capitol Hill next week. Any signal the Fed could be gearing up for a rate hike in March could unleash a significant bout of volatility into FX markets.

In corporate earnings news, GM reported better than expected results on Tuesday, but still saw some profit taking in the stock. Disney reported mixed Q1 results, as cable network revenues slipped. CEO Bob Iger confirmed press reports that he may further extend his executive tenure and promised a bright future as Disney moves more content to over the top services. Shares of Twitter collapsed after another lackluster quarter. Multiple analysts downgraded the social network after it missed revenue estimates and showed no almost growth again in monthly active users.

MON 2/6
TM Reports 9-month Net ¥1.43T v ¥1.89T y/y, Op Profit ¥1.56T v ¥2.31T y/y, Rev ¥20.2T v ¥21.4T y/y
*(EU) EURO ZONE FEB SENTIX INVESTOR CONFIDENCE: 17.4 V 16.8E
(US) Fed Q4 senior loan officer survey: about a quarter of banks tightened credits standards for commercial real estate loans in Q4
*(NZ) NEW ZEALAND Q1 INFLATION EXPECTATION SURVEY: 2-YEAR INFLATION EXPECTATION 1.92% V 1.68% PRIOR
*(AU) RESERVE BANK OF AUSTRALIA (RBA) LEAVES CASH RATE TARGET UNCHANGED AT 1.50%; AS EXPECTED

TUES 2/7
BNP.FR Reports Q4 Net €1.44B v €1.50Be, Rev €10.7B v €10.5Be
BP.UK Reports Q4 adj Net $400M v $568Me, Underlying replacement cost profit $72M v loss $2.23B y/y, Total Rev $51.0B v $49.2B y/y
*(CN) CHINA JAN FOREIGN RESERVES: $2.998T V $3.004TE (7th consecutive decline and falls below $3T for first time since Feb 2011)
GM Reports Q4 $1.28 v $1.14e, R$43.9B v $42.2Be
(US) Atlanta Fed cuts Q1 GDP forecast to 2.7% from 3.4% on 2/1
(US) Homeland Security Sec Kelly: expects border wall with Mexico to be well underway within 2 years - comments on Capitol Hill
(US) White House Press Sec: President Trump is in favor of negotiating pharma prices
DIS Reports Q1 $1.55 v $1.48e, R$14.8B v $15.3Be
2202.HK Reports Jan contracted sales CNY48.1B v CNY23.4B m/m

WED 2/8
CARLB.DK Reports FY16 adj EBIT DKK8.25B v DKK8.29Be, Rev DKK62.6B v DKK63.2Be RIO.AU Reports FY16 Net $4.62B v -$866M y/y; Underlying earnings $5.1B v $4.75Be; Rev $33.8B v $32.8B y/y
SAN.FR Reports Q4 Business EPS €1.25 v €1.25e, Business Op €2.12B v €2.20Be Rev €8.87B v €9.30Be
RMS.FR Reports Q4 Rev €1.5B v €1.5Be
MAERSKB.DK Reports FY16 underlying Profit $711M v $3.07B y/y, EBITDA $6.77B v $9.07B y/y, Rev $35.5B v $35.9Be;
*(TH) THAILAND CENTRAL BANK (BOT) LEAVES BENCHMARK INTEREST RATE UNCHANGED AT 1.50%; AS EXPECTED
*(IN) INDIA CENTRAL BANK (RBI) LEAVES REPURCHASE RATE UNCHANGED AT 6.25%; NOT EXPECTED (2nd straight pause)
*(PL) POLAND CENTRAL BANK (NBP) LEAVES BASE RATE UNCHANGED AT 1.50%; AS EXPECTED
HUM Reports Q4 $2.09 v $2.06e, R$12.9B v $13.5Be
(US) DOE Crude: +13.8M v +2.5Me; Gasoline: -0.9M v +1Me; Distillate: +0.03M v +0.5Me
JWN President Trump tweets: "My daughter Ivanka has been treated so unfairly by @Nordstrom. She is a great person -- always pushing me to do the right thing! Terrible!"
(US) Association of American Railroads weekly rail traffic report for week ending Feb 4th: 541.5K carloads and intermodal units, +7.3% y/y
(UK) House of Commons passes Article 50 trigger bill by 494-122 vote, as expected

THRS 2/9
(CN) China Passenger Car Association (PCA): China Jan retail auto sales 2.12M units v 2.76M m/m, -9.8% y/y
GLE.FR Reports Q4 Net €390M v €315Me, Op €1.79B v €1.70B y/y, Rev €6.13B v €5.99Be
TKA.DE Reports Q1 Net €15M v €92Me, adj EBIT €329M v €318.1Me, Rev €10.1B v €9.67Be
TWTR Reports Q4 $0.16 v $0.12e, R$717M v $738Me; MAU's ~flat q/q
*(US) INITIAL JOBLESS CLAIMS: 234K V 249KE; CONTINUING CLAIMS: 2.08M V 2.06ME (initial claims match lowest level since 1973)
(US) Pres Trump: to make a "phenomenal" tax announcement in the next 2 or 3 weeks - breakfast meeting with airline CEOs
*(CN) CHINA JAN TRADE BALANCE (USD TERMS): $51.4B (5-month high) V $48.5BE

FRI 2/10
MT.NL Reports Q4 Net +$403M v -$6.69B y/y, EBITDA $1.66B v $1.61Be, R$14.1B v $14.7Be
*(UK) DEC INDUSTRIAL PRODUCTION M/M: 1.1% V 0.2%E; Y/Y: 4.3% V 3.2%E
BHP Reportedly declaring force majeure on shipments from Escondida mine in Chile – press
*(US) JAN IMPORT PRICE INDEX M/M: 0.4% V 0.3%E; Y/Y: 3.7% V 3.4%E
*(CA) CANADA JAN NET CHANGE IN EMPLOYMENT: +48.3K V -10.0KE; UNEMPLOYMENT RATE: 6.8% V 6.9%E
(US) US Fed Gov Tarullo planning to resign on or around April 5th; Tarullo is the leading expert at the Fed on financial regulation issues; creates a 3rd open seat at the Fed

Barrons weekend update

Barrons weekend update: Positive on AMD and VSTE; cautious on CMG and Snapchat 

Cover story: Shares of CMG look cheap compared to a year ago, but investors should be cautious: boosting sales and luring back lost customers could involve greater long-term sourcing and marketing costs; A healthy return for investors would require the company to surpass past growth estimates. 

Features: 

1) Cautious on Snap: As the company prepares to go public, the risk is that it will be more like TWTR and less like FB; it is nowhere near break-even, and is likely to incur losses well into the future and face slowing growth-and investors would be wise to pass; 

2) Positive on AMD: Despite big technological strides during the past years, company has failed to gain ground on rival INTC, but that could change under new chief Lisa Su, who has streamlined the business; 

3) Positive on VSTE: Shares of Dallas-based energy company "offer an appealing play on the depressed electric-power market in Texas, and trade at a discount to rivals CPN, DYN, and NRG; 

4) Story on the healthcare challenges facing retirees says longevity is the biggest driver of total healthcare costs, meaning healthy retirees end up with higher lifetime costs; 

5) A look at what people need to know about enrolling in Medicare, a process that can be complicated and entail heavy penalties if they wait too long.

Trader: Snap's IPO should concern the film, television, and publishing industries, because it points to the growing popularity of consumption that's more about a burst of activity and quickly competing a task rather than spending the time required to read or watch a movie. 

Trader: Many investors seem to believe the next market move will be higher and that they'll see a downturn before it hits, but that may be presumptuous, says MS equity strategist Adam Parker; After outperforming the market in 2016, value stocks have stalled so far this year, but investors have good reason to be confident about a rebound; The same forces helping banks should help insurers, and many insurances stocks appear cheap compared to those of banks; "The drop in retail stocks make them a tempting buy," but investors should be careful about jumping into the sector. 

Interview: Ed Yardeni of Yardeni Research said he is giving President Trump the benefit of the doubt, and hopes the new administration will implement good policies and jettison bad ones. 

Profile: James Michal, co-manager of the Guggenheim Macro Opportunities fund; the fund has delivered 6% annual returns and can own virtually any kind of fixed income, as well as equities, currencies, and alternative investments (top five fixed-income holdings: asset-backed securities, bank loans, nonagency mortgage-backed securities, high-yield corporate bonds, commercial mortgage-backed securities). 

European Trader: "The European banking sector is no longer the investment minefield it was even six months ago, but careful stock-picking remains the order of the day" (Positive on BBVA, ING). 

Asian Trader: Asian stocks could drop 10% on the Trump administration's protectionist moves, and lesser tail winds from commodity prices; unless commodity prices rally, Asian earnings growth could fade. 

Emerging Markets: What will ultimately weigh on the dollar, and therefore emerging-market assets, will be policy, not comments from Donald Trump or other politicians. 

Commodities Corner: "OPEC's decision to dial back oil production is pushing crude prices higher and breathing new life into the U.S. oil patch," and prices could hit $55-65 this year. 

Streetwise: Donald Trump's promise to cut taxes, spend on infrastructure, and repatriate foreign cash should boost the U.S. economy, and the currency-but a stronger dollar won't help the manufacturing sector.

Markets Vacillate on Executive Orders

TradeTheNews.com Weekly Market Update: Markets Vacillate on Executive Orders 
Fri, 03 Feb 2017 16:15 PM EST

US Stock indices dipped early in the week, as the world reacted to President Trump firing out a 90-day ban on travelers from seven Muslim-majority countries in the name of security. The poorly explained order created confusion and concern in the international and business communities and sparked protests at US airports. As the furor died down, stocks finished the week on a high after a string of generally robust economic data and action from Washington aimed at reducing regulation. On Wednesday, Congress repealed regulations on the coal industry and on Friday President Trump signed an executive order designed to scale back Dodd-Frank legislation. Higher than expected GDP helped prop up the Euro against most major currencies. Stock markets returned to rally mode late in the week, reacting positively to the latest read on the US jobs market on Friday. For the week, the S&P500 rose 0.1%, the Nasdaq added 0.1%, and the DJIA lost 0.1%.

Employers added more jobs than expected in January, but wage increases were soft and the unemployment rate rose, suggesting continued labor market slack. The disappointment on wages lessens the urgency about raising rates marginally, but investors should be prepared for warnings from officials that wages are a lagging indicator. Also, the fact that the job market is strong enough to pull people into the labor force is an indication that monetary policy remains stimulative, and that the FOMC needs to remain vigilant about staying too loose for too long. Speaking after the jobs report, FOMC voter and dove Evans noted he still expects just two rate hikes this year but could be comfortable with three, and wouldn’t rule out a move in March. Fed fund futures still suggest overall market expectations are for two hikes this year, one less than the median forecast of the FOMC.

The FOMC kept rates on hold as expected after the hike in December. The policy statement gave a slightly more upbeat assessment of the economy and showed more confidence that inflation is moving toward the Fed’s 2% target. As expected, there was no change to the Fed’s reinvestment policy, though analysts may soon begin to clamor for guidance on this issue. Chair Yellen will have a chance to mold expectations further when she testifies on Capitol Hill mid-month.

The BoE also maintained rates at current levels, with a unanimous vote 9 - 0. The central bank also upgraded GDP growth forecast but at the same time gave another warning of the dangers involved in the future Brexit negotiations. The market appeared to factor in less of a chance for a near term rate hike which led to the Pound selling off 1.3% in two days.

The UK parliament ratified a 137 word bill that gives the go ahead to PM May to trigger Article 50 of the European Union constitution and start Brexit negotiations. PM May also presented a white paper with substantially the same points mentioned in her various speeches about the meaning of Brexit, two main points being reducing immigration and boosting free trade.

Iran fired a ballistic missile in apparent violation of the UN nuclear deal reached during the last administration. The White House took swift action to sanction 13 individuals and 12 companies involved in Iran’s missile program. President Trump took to twitter on multiple occasions calling out Iran leaders and warning of further action to come. WTI crude prices finished the week only modestly higher and remain pinned in the low to mid $50's.

China and Japan took monetary action in somewhat opposite directions. The PBOC partially defended a devaluing Yuan with tightening action while the BoJ emphasized it will remain stimulative. The PBOC hiked key interest rates for open market reverse repos by 10 basis points and the Lending Facility rate was increased to 3.1% from 2.75%. In Japan the central bank intervened in the market buying 10-year bonds to drive yield to its target 0%. The Yuan continued to strengthen throughout the week despite coinciding with the Chinese New Year.

On the corporate side, a slew of earnings came down the pike this week. Under Armour shares plunged after posting weak earnings, cutting its outlook, and announcing a CFO departure. Facebook earnings delivered, but shares experienced some profit-taking, as expense growth and competition led some to begin to look past its dominant business model. UPS failed to deliver as Q4 results missed targets and it provided tepid 2017 guidance. Microsoft came to market with a 7-part bond offering, and Apple joined in, launching its own nine-part $10B deal, which may have sopped up some fixed income demand. On the M&A front, Rite-Aid slumped after the offer from Walgreens Boots Alliance was revised to $6.50-7.00 from $9.00/share. Mead Johnson surged on word of a $90/share cash bid from Reckitt Benckiser. And Macy’s jumped on another report of potential takeover, this time from Canada’s Hudson’s Bay.


MONDAY JAN 30th
(EU) EURO ZONE JAN BUSINESS CLIMATE INDICATOR: 0.77 V 0.80E; CONSUMER CONFIDENCE (FINAL): -4.7 V -4.9E
(DE) GERMANY JAN PRELIMINARY CPI M/M: -0.6% V -0.5%E; Y/Y: 1.9% V 2.0%E;(highest annual level in 3 1/2 years)
(US) DEC PCE DEFLATOR M/M: 0.2% V 0.2%E; Y/Y: 1.6% V 1.7%E
(US) DEC PERSONAL INCOME: 0.3% V 0.4%E; PERSONAL SPENDING: 0.5% V 0.5%E
(US) DEC PCE CORE M/M: 0.1% V 0.1%E; Y/Y: 1.7% V 1.7%E
(US) Atlanta Fed forecasts initial Q1 GDP growth at 2.3%
(EU) Revised Euro Zone Jan Consumer Confidence at -4.9 v -4.9e (revised from earlier reported -4.7)
(JP) BOJ LEAVES INTEREST RATE ON EXCESS RESERVES (IOER) UNCHANGED AT -0.10%, AS EXPECTED; RAISES OUTLOOK FOR PRICES

TUESDAY JAN 31st
(FR) FRANCE Q4 ADVANCE GDP Q/Q: 0.4% V 0.4%E; Y/Y: 1.1% V 1.1%E
(JP) BOJ Gov Kuroda: Reiterates that economic recovery remains on a moderate trend - post rate decision press conference
(FR) FRANCE JAN PRELIMINARY CPI M/M: -0.2% V -0.5%E; Y/Y: 1.4% V 1.1%E
(DE) GERMANY JAN UNEMPLOYMENT CHANGE: -26K V -5KE; UNEMPLOYMENT RATE: 5.9% V 6.0%E;(post-reunification record low)
(EU) EURO ZONE Q4 ADVANCE GDP Q/Q: 0.5% V 0.5%E; Y/Y: 1.8% V 1.7%E
(EU) EURO ZONE DEC UNEMPLOYMENT RATE: 9.6% V 9.8%E;(lowest level since 2009)
(EU) EURO ZONE JAN CPI ESTIMATE Y/Y: 1.8% V 1.5%E (highest since Feb 2013); CPI CORE Y/Y: 0.9% V 0.9%E
UPS Reports Q4 $1.63 v $1.68e, R$16.9B v $17.0Be
(US) Q4 EMPLOYMENT COST INDEX (ECI): 0.5% V 0.6%E
(US) JAN CHICAGO PURCHASING MANAGER: 50.3 V 55.0E;(lowest since May 2016)
(US) JAN CONSUMER CONFIDENCE: 111.8 V 112.8E
SIE.DE Reports Q1 Net €2.51B v €2.1Be; Industrial Business Profit: €2.52B v €1.99B y/y, Rev €19.1B v €18.9B y/y; Raises FY17 basic EPS €7.20-7.70 (prior €6.80-7.20)
X Reports Q4 $0.27 (ex $0.88 in charges, unclear if comp) v $0.01e, R$2.65B v $2.67Be
AAPL Reports Q1 $3.36 v $3.22e, R$78.4B v $77Be
(UK) EU Brexit Negotiator Verhofstadt: What I know is the outstanding commitments now and before Britain will leave the European Union will in total be around €600B - press (update)
(CN) CHINA JAN MANUFACTURING PMI (GOVT OFFICIAL): 51.3 (6th consecutive month of expansion, 3-month low) V 51.2E; Non-manufacturing PMI: 54.6 v 54.5 prior

WEDS FEB 1st
(HK) Macau Jan Gaming Rev MOP19.3B v MOP20.3Be; y/y: +3.1% v +8.9%e
ROG.CH Reports FY16 Core EPS CHF14.53 v CHF13.49 y/y, Core operating profit CHF18.4B v CHF17.5B y/y, Rev CHF50.6B v CHF50.7Be
(UK) JAN PMI MANUFACTURING: 55.9 V 55.9E;(6th month of expansion)
(US) JAN ADP EMPLOYMENT CHANGE: +246K V +168KE
GM Reports Jan US sales -3.8% y/y, to 195.9K units v 206.1Ke
(US) JAN FINAL MARKIT MANUFACTURING PMI: 55.0 V 55.1E
(US) JAN ISM MANUFACTURING: 56.0 V 55.0E; PRICES PAID: 69.0 V 65.5E;(Manufacturing Index highest since Nov 2014, Prices Paid highest since May 2011)
(US) DOE CRUDE: +6.5M (highest since Aug) V +3ME; GASOLINE: +3.9M V +1.5ME; DISTILLATE: +1.6M V -0.5ME
(US) Atlanta Fed raises Q1 GDP forecast to 3.4% from 2.3% on 1/30
(US) Association of American Railroads weekly rail traffic report for week ending Jan 28th: 529.7K carloads and intermodal units, +3.3% y/y
(US) FOMC HOLDS TARGET RATE RANGE AT 0.50-0.75%, AS EXPECTED; REPEATS MONETARY POLICY REMAINS ACCOMMODATIVE, INFLATION WILL RISE TO 2%
(UK) UK lawmakers vote in favor of Article 50 draft law to advance legislation to next phase - press
FB Reports Q4 $1.41 (adj) v $1.34e, R$8.81B v $8.47Be
LSTR Reports Q4 $0.94 v $0.87e, R$893M v $820Me
(AU) AUSTRALIA DEC TRADE BALANCE (A$): 3.5B V +2.0BE (record surplus)

THURS FEB 2nd
NOK1V.FI Reports Q4 adj Op €940M v €766Me, Rev €6.72B v €6.79Be
DBK.DE Reports Q4 loss Net €1.89B v loss €1.32Be, Pretax loss €2.42B v loss €1.49Be, Rev €7.07B v €6.64B y/y
DAI.DE Reports Q4 EPS €2.10 v €2.16e, EBIT €3.58B v €3.74Be, Rev €41B v €40.4Be
AZN.UK Reports Q4 Core EPS $1.21 v $1.13e, Rev $5.59B v $5.61Be
VOD.UK Reports Q3 Rev £13.7B v £14.2B y/y; Service organic Rev +1.7% v +1.5%e y/y
RDSA.NL Reports Q4 Basic CCS EPS $0.22 v $0.25 y/y, CCS earnings (ex items) $1.03B v $1.84B y/y, Rev $64.8B v $58.1B y/y
MRK Reports Q4 $0.89 v $0.88e, R$10.12 v $10.2Be
(UK) BANK OF ENGLAND (BOE) LEAVES INTEREST RATES UNCHANGED AT 0.25%; AS EXPECTED
(CZ) CZECH CENTRAL BANK (CNB) LEAVES REPURCHASE RATE UNCHANGED AT 0.05%; AS EXPECTED
(UK) BOE FEB MINUTES: VOTED 9-0 (UNANIMOUS) TO LEAVE INTEREST RATES UNCHANGED AT 0.25%
(UK) BANK OF ENGLAND (BOE) QUARTERLY INFLATION REPORT;(QIR)
(UK) BOE Gov Carney: Brexit to determine UK medium term outlook - Quarterly Inflation Report Press Conference
(US) INITIAL JOBLESS CLAIMS: 246K V 250KE; CONTINUING CLAIMS: 2.06M V 2.06ME
NYT Reports Q4 $0.30 v $0.23e, R$439.7M v $437Me
(US) Q4 PRELIMINARY NONFARM PRODUCTIVITY: 1.3% V 1.0%E; LABOR COSTS: 1.7% V 1.9%E
AMZN Reports Q4 $1.54 v $1.40e, R$43.7B v $44.9Be
V Reports Q1 $0.86 GAAP v $0.78e, R$4.46B v $4.28Be
(HK) HONG KONG JAN COMPOSITE PMI: 49.9 v 50.3 PRIOR (in contraction for 22nd out of 23 months)
(CN) CHINA JAN CAIXIN MANUFACTURING PMI: 51.0 V 51.8E (7th consecutive expansion)

FRIDAY FEB 3rd
(RU) RUSSIA CENTRAL BANK (CBR) LEAVES 1-WEEK AUCTION RATE UNCHANGED AT 10.00%; AS EXPECTED
(US) JAN UNEMPLOYMENT RATE: 4.8% V 4.7%E
(US) JAN CHANGE IN NONFARM PAYROLLS: +227K V +180KE
(US) JAN AVERAGE HOURLY EARNINGS M/M: 0.1% V 0.3%E; Y/Y: 2.5% V 2.8%E; AVERAGE WEEKLY HOURS: 34.4 V 34.3E
(US) JAN FINAL MARKIT SERVICES PMI: 55.6 V 55.1 PRELIM (highest since Nov 2015)
(US) DEC FINAL DURABLE GOODS ORDERS: -0.5% V -0.4% PRELIM; DURABLES EX TRANSPORTATION: 0.5% V 0.5% PRELIM
(US) JAN FINAL ISM NON-MANUFACTURING COMPOSITE: 56.5 V 57.0E
M Reportedly Hudson's Bay makes takeover approach - press
(US) Fed's Evans (dove, voter): expects 2 rate hikes this year, could be comfortable with 3 rate hikes in 2017 - Q&A with reporters

Barrons weekend summary

Barrons weekend summary: positive on ANTM, MGA 

Cover story: "The Dow hitting 20,000 was no fluke. Today's stock prices are well supported by solid prospects for corporate earnings and economic growth"-and there's no reason the DJIA can't reach 30,000 if President Trump avoids a trade war. 

Features: 

1) Positive on ANTM: Company's No. 2 health insurer has the lowest P/E ratio among peers and the most room for improvement in profit margins and earnings, and bulls argue it could earn $20/share by 2020; 

2) Positive on MGA: Unlike rivals, company can build an entire vehicle to a company's specs, as it does for customers like Daimler, and it should be able to maintain growth and increase market share despite a few concerns.

Tech Trader: Positive on MSFT: Because of its cash horde and earnings power, shares of the tech giant now appear to be a better pick for investors than those of INTC, which may have less of an opportunity to benefit from a potential tax holiday on overseas cash. 

Trader: It's a strange time for a market rally, because so many issues have yet to be resolved, and uncertainty remains about taxes, regulations, and other issues-while volatility could still rear its head; If Donald Trump succeeds in bringing factories back to the U.S., many jobs that come with them are likely to go to robots rather than to humans; Positive on AMZN: In normal times, the retailer would have difficulty breaking into the auto parts sector, but Trump administration rules about importing and tariffs could make the task easier for it. 

Barron's Roundtable: Part three offers picks from Oscar Schafer (ABCO, AA, Liberty Global, INXN, ANIP), Brian Rogers (LM, CVS, CASY, DIS, BMY), and Abby Joseph Cohen (LLY, Olympus, BLUE, LG Chem, INTU, HMHC, Shenzhen Airport). Profile: Suzanne Hutchins, lead manager of London-based Dreyfus Global Real Return, thinks the S&P 500 could fall by 40% or more from current levels, driven by excessive valuations and rising interest rates (top holdings: Treasury bonds and notes, ES, CMS, NVS, MSFT, Wolters Kluwer). 

Small Caps: Positive on SYNT: Shares of infotech services company trade at a discount, but concerns appear to be overblown, and while there may not be any near-term catalysts for growth, the long term looks good. 

Follow-Up: Positive on CTRP: There are promising signs for the company, which is growing its overseas business by adding more hotels and focusing on China; Cautious on IR: Shares are up, and could eke out a near double-digit return over the next year, but there are better bargains, and investors should take profits; Cautious on BIP: BAM's infrastructure division will have to reveal updated valuations for properties that had different values in the past, a situation that warrants investor scrutiny.

 European Trader: Positive on Atlantia(ATL.IT): After getting past some hurdles, motorway and airport owner is looking to expand beyond Italy and restructure its business. 

Asian Trader: Investors seeking shelter amid rising rates and a stronger dollar in Asia, a trade-dependent region likely to bear the brunt of Donald Trump's protectionist policies, should look to Indonesia," which is largely insulated from turbulence in world trade. 

Emerging Markets: Indian prime minister Narendra Modi's reforms didn't produce much success last year, but India remains the fastest growing large emerging market, and could see GDP growth of 7% this year. 

Commodities: "After a big rally in 2016, palladium prices are surging again. Despite the run-up, investors say there are still plenty of reasons to buy the volatile metal." 

Streetwise: Rather than outsource its money management, Harvard University would do better to break with its endowment peers and consider greater equity indexation. 

TradeTheNews.com Weekly Market Update: Trump Era Commences with the Dow Reaching 20,000
Fri, 27 Jan 2017 16:07 PM EST

US stock markets reached new all-time highs this week when the Dow broke the psychological barrier of 20K while digesting the opening salvos of a Trump administration. Investors quickly saw he means business regarding several of his campaign promises. A flurry of executive orders began with the reopening of the Keystone and Dakota pipelines, touting it as a move to create jobs. By Friday, a formal meeting with Mexico in Washington had been cancelled after the Administration warned of a potential 20% border tax if Mexico was unwilling to renegotiate NAFTA or discuss reimbursement for the construction of a boarder wall. The Peso came under pressure yet again, and worries of a looming trade war were creeping higher. Some of that was assuaged on Friday after President Trump and Mexico President Pena Nieto spoke by phone and each called it a productive conversation. Overall, stock markets seemed to pay little attention to global trade concerns outside of the US retailing sector, which lagged notably. The volatility index meandered lower, to levels not seen since 2014 and trading volumes were muted in a sign of investor complacency despite a steady flow of geopolitical and corporate headlines. For the week the Dow rose 1.3%, the S&P added 1% and the NASDAQ finished up just under 2%.

As earnings season got rolling, tech heavyweights took center stage. While eBay, VMware and Yahoo impressed the street, Alphabet, PayPal and Juniper came up short. Among other notable names reporting this week was McDonalds, who largely surpassed expectations on strength in international markets. Brinker got hit by weak numbers from Chili's and slashed its outlook. Lockheed beat on top and bottom lines; Northrop did, as well, but guided below expectations. Homebuilders had a strong week after DR Horton beat on earnings and reported a 15% increase in orders. Overall, managements appear to have remained cautious, hopeful the new administration and Congress will push through growth-spurring policies and reforms, but unwilling to forcefully factor that into forecasts at this point.

UK's PM May presented a bill to parliament on the intention to trigger Article 50 of the EU constitution, commencing the Brexit process. The bill was read in the House of Commons on Tuesday and will be voted on next week before being passed to the upper house. May and Trump met Friday at the White House for the first official visit by a foreign leader. Despite divergence on free trade between the two, May said the US and the UK would lead the world once more, maintaining that special relationship the two countries have enjoyed for decades. Both leaders affirmed their hope for a speedy, mutually beneficial bilateral trade deal in the wake of Brexit.

Bond prices came under some pressure almost worldwide as markets continued to assess the likelihood of faster Fed tightening and effects of fiscal stimulus in the US, while in the Euro area investors begin to weigh the risks of rising inflation in Germany in particular and the effects of QE program exit by the ECB. Japanese bonds were an exception, as the Bank of Japan surprised the market by increasing its bond buying program, sending rates lower again. German 10-year Bund yields rose 6bps to 0.48%, closing Thursday at the highest level in about one year , 10-year UST rose 5bps midweek to 2.52% before receding back below 2.5% to end the week.

MONDAY 1/23
005930.KR Reports Q4 Net KRW7.09T v KRW6.5Te; Op KRW9.2T v KRW8.7Te; Rev KRW53.3T v KRW52.8Te; To buy back KRW9.3T shares (3.5% of market cap)

TUESDAY 1/24
SAP.DE Reports Q4 Non-IFRS Net €1.82B v €1.67B y/y, Op profit €2.37B v €2.37Be, Rev €6.72B v €6.68Be
(CN) China PBoC conducts total CNY245.5B Medium-term Lending Facility (MLF); raises interest rate - financial press
(FR) FRANCE JAN PRELIMINARY MANUFACTURING PMI: 53.4 V 53.4E; (4th month of expansion)
(DE) GERMANY JAN PRELIMINARY MANUFACTURING PMI: 56.5 V 55.4E; (26th month of expansion and highest since Jan 2014 )
(EU) EURO ZONE JAN PRELIMINARY MANUFACTURING PMI: 55.1 V 54.8E ( 43rd month of expansion)
(UK) SUPREME COURT UPHOLDS EARLIER RULING ON ARTICLE 50 ; Parliament must vote to trigger article 50 (rejects Govt argument)
(TR) TURKEY CENTRAL BANK (CBRT) LEAVES BENCHMARK RATE UNCHANGED AT 8.00% (not expected); widens rate corridor
LMT Reports Q4 $3.25 v $3.04e, R$13.8B v $13.1Be
(ZA) SOUTH AFRICA CENTRAL BANK (SARB) LEAVES INTEREST RATE UNCHANGED AT 7.00%;; AS EXPECTED
(US) Jan Philadelphia Fed Non-Manufacturing General Business Conditions 37.7 v 19.5 m/m
(US) JAN PRELIMINARY MARKIT MANUFACTURING PMI: 55.1 V 54.5E; (highest since March 2015)
(US) DEC EXISTING HOME SALES: 5.49M V 5.51ME
(US) JAN RICHMOND FED MANUFACTURING INDEX: 12 V 7E
AA Reports Q4 $0.14 v $0.22e, R$2.54B v $2.21Be
BHP.AU Reports Q2 iron ore production 60Mt v 57.6Mt q/q v 59Me
TXN Reports Q4 $0.88 (adj) v $0.81e, R$3.41B v $3.31Be; names Brian Crutcher COO effective immediately
(US) NORTH AMERICA DEC SEMI BOOK/BILL RATIO: 1.06 V 0.96 PRIOR; Discontinues publishing monthly report
(AU) AUSTRALIA Q4 CONSUMER PRICES (CPI) Q/Q: 0.5% V 0.7%E; Y/Y: 1.5% (1-year high) V 1.6%E; TRIMMED MEAN Q/Q: 0.4% V 0.5%E ; Y/Y: 1.6% (5-year low) V 1.6%E

WEDS 1/25
005380.KR Reports Q4 Net KRW1.0T v KRW1.4Te; Op KRW1.02T v KRW1.5Te; Rev KRW24.5T v KRW24.6Te
SAN.ES Reports Q4 Net €1.60B v €1.48Be, Rev €11.1B v €11.1B q/q
NOVN.CH Reports Q4 $1.12 v $1.03e, Core Op profit $3.01B v $3.06B y/y, R$12.3B v $12.40Be; Announces $5B sharebuyback (3% of market cap)
(DE) GERMANY JAN IFO BUSINESS CLIMATE: 109.8 V 111.3E; CURRENT ASSESSMENT: 116.9 V 117.0E
(UK) JAN CBI INDUSTRIAL TRENDS TOTAL ORDERS: 5 V 2E
FCX Reports Q4 $0.25 adj v $0.32e, R$4.38B v $4.06Be
(US) DOE CRUDE: +2.8M V +2ME; GASOLINE: +6.8M V +0.5ME; DISTILLATE: +0.1M V -1ME
(US) Association of American Railroads weekly rail traffic report for week ending Jan 21st: 530.3K carloads and intermodal units, +8.1% y/y
(MX) President Trump: Mexico wall construction will start in months; reiterates taxpayers will be reimbursed at a later date - ABC taped interview (to air tonight)
(US) White House spokesman: administration will create more detention space along US border; Trump to sign two executive orders on immigration
(NZ) NEW ZEALAND Q4 CPI Q/Q: 0.4% V 0.3%E; Y/Y: 1.3% (2-year high) V 1.2%E
000660.KR Reports Q4 Net KRW1.63T v KRW1.1Te; Op net KRW1.54T v KRW1.3Te; Rev KRW5.36T v KRW5Te

THURS 1/26
UNA.NL Reports FY16 Core EPS €1.82 v €1.72 y/y; Op €7.80B v €7.52B y/y, Rev €52.7B v €53.3B y/y
(DE) FEB GFK CONSUMER CONFIDENCE: 10.2 V 10.0E;(matches highest reading since Oct 2001)
DGE.UK Reports H1 Adj Op Profit GBP;2.07B v GBP;2.02Be, Net Rev GBP;6.42B v GBP;6.42Be
(UK) Q4 ADVANCE GDP Q/Q: 0.6% V 0.5%E; Y/Y: 2.2% V 2.1%E (matches lowest annual pace since Q1 2013)
POT Reports Q4 $0.07 v $0.09e, R$1.06B v $1.03Be
DOW Reports Q4 $0.99 v $0.88e, R$13.0B v $12.5Be
F Reports Q4 $0.30 v $0.35e, R$38.7B v $35.6Be
(UK) Brexit Min Davis submits draft Article 50 bill to Parliament to trigger Brexit (in-line with press speculation)
(US) INITIAL JOBLESS CLAIMS: 259K V 247KE; CONTINUING CLAIMS: 2.10MM V 2.04ME
(US) JAN PRELIMINARY MARKIT SERVICES PMI: 55.1 V 54.4E; (highest since Nov 2015)
(US) Atlanta Fed raises final Q4 GDP forecast to 2.9% from 2.8% on 1/19
(US) White House Press Sec: would implement 20% border tax on imports from Mexico to pay for border wall
(US) House Speaker Ryan (R-WI): Dodd-Frank law is a top GOP target; could consider action on Dodd-Frank as early as late spring - press
INTC Reports Q4 $0.79 v $0.76e, R$16.4B v $15.8Be
GOOGL Reports Q4 $9.36 v $9.63e, R$26.0B (includes $4.85B TAC) v $25.2Be
MSFT Reports Q2 $0.83 v $0.79e, R$26.1B (adj) v $25.2Be

FRI 1/27
UBSN.CH Reports Q4 Net CHF738M v CHF339Me, Adj Pretax profit CHF1.11B v CHF754M y/y, Adj Op Rev CHF6.94B v CHF6.85B y/y
BOK.UK To merge into Tesco for 205.3p/shr in cash and shares; deal valued at GBP;3.7B
(EU) EURO ZONE DEC M3 MONEY SUPPLY Y/Y: 5.0% V 4.9%E
(US) Q4 ADVANCE GDP PRICE INDEX: 2.1% V 2.1%E; CORE PCE Q/Q: 1.3% V 1.3%E
(US) Q4 ADVANCE GDP ANNUALIZED Q/Q: 1.9% V 2.2%E; PERSONAL CONSUMPTION: 2.5% V 2.5%E
(US) DEC PRELIMINARY DURABLE GOODS ORDERS: -0.4% V 2.5%E; DURABLES EX TRANSPORTATION: 0.5% V 0.5%E
(US) JAN FINAL MICHIGAN CONFIDENCE: 98.5 V 98.1E

Barrons weekend summary

Barrons weekend summary: Positive on GOOGL, GME 

Cover story: The second installment of Barron's 2017 Roundtable offer picks for the new year from Scott Black (DHI, FN, ZBH, RDS.A, FCX), Jeffrey Gundlach (PPT, BKLN, INDA, DXJ), Meryl Witmer (Dart Group, Linamar, VIRT, CPS), and Mario Gabelli (VIA.B, HRI, CNHI, FIZZ, Davide Campari-Milano, Liberty Braves Group, LYV, MWA). 

Features: 

1) Positive on GOOGL: Shares could rise 20% on two major trends this year: digital venues will draw more ad spending than TV, and mobile will make up more than half of digital spending; 

2) Brian McGill, a financial advisor from suburban Atlanta, is the winner of Barron's 2016 forecasting challenge, with the highest score in the contest's 15-year history; 

3) Positive on GME: Videogame retailer has seen sales drop, but is countering that by expanding into mobile and wireless, featuring devices from T and AAPL.

Tech Trader: For semiconductor industry investors, "this year's dilemma is one of conservatism versus radicalism"-or an industry heavyweight such as AMAT versus a specialist such as ASML. 

Trader: The market is making a big mistake if it bets on gridlock under the Trump administration, says Brian Belski of BMO Capital Markets; Cautious on DIS: The stock's strength largely stems from the company's strong movie studio, but that division may not be able to live up to future expectations, and there may be little upside; Ed Yardeni of Yardeni Research says analysts have yet to incorporate tax cuts and other pro-business actions from the new administration into their forecasts-and when they do, those should go up. 

Profile: Eric Schoenstein, co-manager of the Jensen Quality Growth fund, runs a very concentrated portfolio, evaluates the 10-year outlook of any potential investment, and holds stocks for an average of seven years (top 10 holdings: BDX, PEP, MSFT, UTX, MMM, JNJ, UNH, ECL, PX, ACN). 

Small Caps: Positive on PDCO: The drop in share price following the end of the company's 20-year exclusive distribution relationship with XRAY looks like an opportunity for investors, and the move could pave the way for growth. 

Follow-Up: Cautious on NFLX: Share price will continue to support its rich valuation as long as the company continues to beat subscriber expectations; investors may not want to buy Netflix, but they shouldn't bet against it; Cautious on CF: Now may be the time to take profits on the stock, which has seen a rebound, though the company faces a number of industry challenges, including slumping demand for fertilizer in the U.S.

European Trader: Positive on EI, LUX: Companies' merger makes strategic sense, because each is a leader in its field and there is little overlap between their products, and the execution risks of a large, international deal appear minimal. 

Asian Trader: Cautious on Bellamy's: Australian maker of organic infant formula faces a major hurdle now that China requires food makers to submit to testing and inspections before selling in the country. 

Emerging Markets: "The strength of the U.S. dollar poses a big investing risk for 2017, and is key to emerging market debt strategy. But investors can't ignore emerging market bond funds." 

Commodities: "Gold is starting to regain its luster in the new year, reversing a long string of losses following the U.S. presidential election." 

Streetwise: Cautious on GT, GM: Shares are near highs, yet remain long-term laggards, but there's evidence that such laggards should interest long-term investors. 

Trump and Brexit Remain Center Stage

TradeTheNews.com Weekly Market Update: Trump and Brexit Remain Center Stage 
Fri, 20 Jan 2017 16:24 PM EST

President Trump was sworn in today and gave a speech that promised more jobs for Americans, 4% growth, a boost to infrastructure spending, and putting 'America first' in energy and foreign policy. The stock markets received the speech cautiously, dropping modestly in the immediate aftermath of his inauguration remarks. Overall, the reflation trade stayed on track as US Treasuries sold off, although the dollar continued to lose some ground against major currencies. The 30-Year yield rose 17bps over the week to close today at 3.06%, while the dollar index was down 0.2% on the week. Over the four session period, the DJIA lost 0.3%, the S&P slipped 0.2%, and the Nasdaq fell 0.3%.

The ECB’s scheduled policy meeting on Thursday was uneventful, with nothing new coming from President Draghi's press conference. The central bank confirmed its asset buying program will be adjusted from €80 billion to €60 billion starting in April, and Draghi continued to insist this does not constitute “tapering.” He also made clear that the ECB will be watching core inflation closely, as higher energy prices are distorting long-term trends, but noted underlying inflation pressures remain “subdued.” No mention was made in the presentation as to which bonds would be cut back when the reduction in the program kicks in for April.

British PM May outlined UK intentions and desires for Brexit, mainly confirming previous statements that the UK would seek to leave the single market, take back immigration control, as well as legislative sovereignty at all levels. After a string of positive economic data, UK Retail Sales released Friday showed a much sharper slowdown than expected; m/m retail sales were down 2% compared to forecasts of -0.1%. Some analysts are saying this may be only the beginning of more severe fallout from the Brexit as the invocation of Article 50 looms in March.

On the corporate front, financial names began the holiday-shortened week hurt by lower bond yields and a disappointing investor reaction to Morgan Stanley, Comerica and Goldman earnings, despite generally solid quarters. Industrials showed some strength this week following news that CP's CEO may pursue an activist role with other railroads and after solid earnings from Union Pacific. IBM beat consensus estimates, and positive comments from analysts lifted shares into the weekend.


SUNDAY 1/15
(UK) PM May to deliver a speech on Tuesday, Jan 17th calling for 'clean and hard Brexit' - UK press
LUX.IT Said to have reached €50B merger agreement with Essilor; deal to be announced before the market opens today - FT

MONDAY 1/16
(US) IMF UPDATES ITS WORK ECONOMIC OUTLOOK (WEO): Maintains 2017 and 2018 global growth forecasts
RIO.AU Reports Q4 global iron ore production 73.6Mt v 72.7Mte; shipments 87.7Mt v 86.8Mte, +1% y/y

TUESDAY 1/17
RAI BAT to acquire remaining stake for ~$59.64/shr valued at $49.4B
(UK) DEC CPI M/M: 0.5% V 0.3%E; Y/Y: 1.6% V 1.4%E; CPI CORE Y/Y: 1.6% V 1.4%E (highest annual reading since July 2014)
(UK) DEC PPI INPUT M/M: 1.8% V 2.4%E; Y/Y: 15.8% V 15.5%E
(DE) GERMANY JAN ZEW CURRENT SITUATION SURVEY: 77.3 V 65.0E; EXPECTATIONS SURVEY: 16.6 V 18.4E
(UK) PM May: UK is leaving EU; will seek the best deal possible; not seeking partial or associate membership of EU (in-line with speculation); will be compromises in Brexit - Brexit
(SA) Saudi Min Energy Min al Falih: Oil market strength could end OPEC deal in 6 months; if OPEC does not extend cuts, that is a bullish sign for oil
(US) JAN EMPIRE MANUFACTURING: 6.5 V 8.5E
(CN) CHINA DEC PROPERTY PRICES M/M: RISE IN 46 OUT OF 70 CITIES VS 55 PRIOR; Y/Y: RISE IN 65 OUT OF 70 CITIES V 65 PRIOR

WEDNESDAY 1/18
ASML.NL Reports Q4 Net €524M v €416Me, Rev €1.91B v €1.77Be; Board to propose FY16 dividend at €1.20/shr from €1.05/shr in FY15
BRBY.UK Reports Q3 Retail rev £735M v £721Me; SSS +3% v +1.4%e
(UK) NOV AVERAGE WEEKLY EARNINGS 3M/Y: 2.8% V 2.6%E (highest since Sept 2015) ; WEEKLY EARNINGS (EX BONUS) 3M/Y: 2.7% V 2.6%E
(UK) NOV ILO UNEMPLOYMENT RATE 3M/3M: 4.8% V 4.8%E
(UK) DEC JOBLESS CLAIMS CHANGE: -10.1K V +5.0KE; CLAIMANT COUNT RATE: 2.3% V 2.3%E
(EU) EURO ZONE DEC CPI M/M: 0.5% V 0.5%E; Y/Y (FINAL): 1.1% V 1.1%E; CPI CORE Y/Y: 0.9% V 0.9%E
GS Reports Q4 $5.08 v $4.76e, R$8.17B v $7.43Be
C Reports Q4 $1.14 v $1.11e, R$17.0B v $17.0Be
(US) DEC CPI M/M: 0.3% V 0.3%E; CPI EX FOOD AND ENERGY M/M: 0.2% V 0.2%E; CPI INDEX NSA: 241.432 V 241.508E
(US) DEC INDUSTRIAL PRODUCTION M/M: 0.8% V 0.6%E; CAPACITY UTILIZATION: 75.5% V 75.4%E
(CA) BANK OF CANADA (BOC) LEFT INTEREST RATES UNCHANGED AT 0.50%; AS EXPECTED
(US) JAN NAHB HOUSING MARKET INDEX: 67 V 69E
(US) Association of American Railroads weekly rail traffic report for week ending Jan 14th: 516.2K carloads and intermodal units, +2% y/y
(US) Fed Chair Yellen: next rate hike will depend on economy over coming months
(US) NOV TOTAL NET TIC FLOWS: $23.7B V $18.8B PRIOR; NET LONG-TERM TIC FLOWS: $30.8B V $9.4B PRIOR
CP Reports Q4 C$3.04 v C$2.72 y/y, Rev C$1.64B v C$1.69B y/y; CEO Hunter Harrison to retire early to 'pursue opportunities involving other Class 1 Railroads'
(AU) AUSTRALIA DEC EMPLOYMENT CHANGE: +13.5K (3rd straight increase) V +10.0KE; UNEMPLOYMENT RATE: 5.8% (6-month high) V 5.7%E

THURSDAY 1/19
CA.FR Reports Q4 Rev €23.4B v €23.3Be
(MY) MALAYSIA CENTRAL BANK (BNM) LEAVES OVERNIGHT POLICY RATE (OPR) UNCHANGED AT 3.00%; AS EXPECTED
(EU) ECB LEAVES MAIN 7-DAY REFINANCING RATE UNCHANGED AT 0.00%; AS EXPECTED
*(US) INITIAL JOBLESS CLAIMS: 234K V 252KE; CONTINUING CLAIMS: 2.05M V 2.08ME
(US) DEC HOUSING STARTS: 1.226M V 1.188ME; BUILDING PERMITS: 1.210M V 1.225ME
(US) JAN PHILADELPHIA FED BUSINESS OUTLOOK: 23.6 V 15.3E
(EU) ECB's Draghi: Reiterates view that interest rates to stay low or lower for extended period - prepared remarks
(EU) ECB's Draghi: Have not discussed reducing stimulus at today's meeting (no tapering); inflation has to be sustained for the whole Euro Area - Q&A
(US) Atlanta Fed maintains Q4 GDP forecast at 2.8%, same as 1/13
*(US) DOE CRUDE: +2.3M V 0ME; GASOLINE: +6.0M V +1.5ME; DISTILLATE: -1.0M V 0ME
U.S. 5-YEAR TIPS BREAKEVEN RATE HITS 1.96 PCT, HIGHEST SINCE AUGUST 2014
(CL) CHILE CENTRAL BANK (BCCH) CUTS OVERNIGHT RATE TARGET BY 25BPS TO 3.25%; AS EXPECTED
IBM Reports Q4 $5.01 v $4.89e, R$21.8B v $21.6Be
(US) Fed Chair Yellen: sees inflation to rise to 2% over next couple of years; monetary policy stance remains modestly accommodative
(CN) CHINA DEC INDUSTRIAL PRODUCTION Y/Y: 6.0% (5-month low) V 6.1%E; 2016: 6.0% V 6.0%E
(CN) CHINA DEC RETAIL SALES Y/Y: 10.9% (1-year high) V 10.7%E; 2016: 10.4% V 10.4%E
(CN) CHINA DEC FIXED ASSETS EX RURAL YTD Y/Y: 8.1% (4-month low) V 8.3%E
(CN) CHINA Q4 GDP Q/Q: 1.7% V 1.7%E; Y/Y: 6.8% V 6.7%E (highest annual reading in 1-year)

FRIDAY 1/20
(UK) DEC RETAIL SALES (EX-AUTO/FUEL) M/M: -2.0% V -0.4%E; Y/Y: 4.9% V 7.5%E
(UK) DEC RETAIL SALES (INCLUDING AUTO/ FUEL) M/M: -1.9% V -0.1%E; Y/Y: 4.3% V 7.2%E
SLB Reports Q4 $0.27 v $0.27e, R$7.11B v $7.10Be
(US) President Trump administration updates WhiteHouse.gov website to highlight key issues and goals, starting with 'America First' foreign policy and energy policy

Barrons weekend update

Barrons weekend update: Part 1 of annual roundtable 

Cover story: The first 2017 Barron's Roundtable features comments from Scott Black, Jeffrey Gundlach, Oscar Schafer, Abby Joseph Cohen, William Priest, Meryl Witmer, Mario Gabelli, Brian Rogers, and Felix Zulauf; The panelists say that rising bond yields, rich valuations, and global turmoil could limit the market's gains, while the "regime change in Washington will push tax cutters and regulatory reformers back to power." 

Features: 

1) Barron's 2016 stock picks beat the market, with top pick X delivering a 120% return, and combined bullish picks returning 12.8%; 

2) Despite the growing popularity of National Front candidate Marine Le Pen, the most likely winner of France's presidential election is Francois Fillon, whose pro-business stance would benefit Renault, BNP Paribas, TOT and other French companies; 

3) Peabody Energy investors are upset because the company's bankruptcy reorganization plan would wipe out shareholders and give the company to management and hedge funds that own its debt.

Tech Trader: Earnings results may be fine for some Internet giants, but their shares aren't likely to move much this year amid cooling investor sentiment and regime change in Washington. 

Trader: The so-called Trump trade has five stages, says DB strategist Alan Ruskin, and the market has only just moved past the first one; Under the Trump administration, the key to success for pharmaceutical investors will be finding companies with more innovation and less exposure to pricing pressures; Thomas Lee of Fundstrat Global Advisors recommends oil investors take advantage of an industry rebound with RIG, ATW, RDC, DO, HP, NBR, PTEN, and UNT. 

Profile: George Cipolloni and Mark Saylor, co-managers of the Berwyn Income fund, continuously screen a wide range of assets to find price anomalies (top 10 holdings: Nintendo, TSRA, PBI, PHG, SNI, FLIR, GSK, Carlsberg, GME, GLW). Penta: Joseph Amato, chief information officer at Neuberger Berman, says the economy is still catching up to the Fed's interest rate hike, a "major shift in monetary policy that has yet to solidify." 

Small Cap: Positive on REV: Compared to rivals such as COTY, EL, and L'Oreal, Revlon shares look undervalued, and the company's recession-resistant business generates stable cash flows. 

Follow-Up: Positive on GS: Though investors may be tempted to take their profits on Goldman shares, which are up 72% since last summer, the firm stands to benefit from a rebounding economy, and the stock could get another 15% boost. 

European Trader: Positive on UL: Consumer-products major has made smart, accretive, growth-boosting acquisitions, and is making more products in countries where they are sold, reducing transportation costs. Asian Trader: For investors in Chinese stocks, tech has long been a major draw, but infrastructure spending in China is likely to boost steel and cement companies such as Baosteel and Anhui Conch Cement. 

Emerging Markets: "Mexico once advertised itself as 'The Amigo Country,' but for investors in 2017 it isn't looking like a friendly place," and the peso has yet to hit bottom. 

Commodities: For most commodity watchers, the run-up in iron ore prices was the result of China's credit-fueled steel demand and speculative activity, and they predict a drop in prices when new supply hits the market. 

Streetwise: With U.S.-China relations likely to hit a rocky patch when Donald Trump moves into the White House, a "honeymoon of sorts is developing between U.S. and Russia," says Joseph Quinlan of U.S. Trust, bringing "asymmetric risks" to U.S. companies. 

Trump Rally" Stalled…by Trump

TradeTheNews.com Weekly Market Update: "Trump Rally" Stalled…by Trump
Fri, 13 Jan 2017 16:11 PM EST

Traders took a more realistic look this week at the incoming US Administration after two months of stronger markets built on optimism about the unified Republican government. US stock markets seemed to digest the lack of further information about policy implementation at Trump's press conference on Wednesday. After hearing little in the way of details or impetus for fiscal stimulus measures, the market sold off, locking in profits and buying bonds. Trump did however, once again allude to a significant border tax which kept concerns of a looming trade war with China from abating. For the week, the DJIA lost % and the S&P edged down %, while Nasdaq rose %, marking new record highs.

The US dollar continued to retreat from its recent highs against most major currencies. Some strong GDP growth data helped currencies like the Euro and the Pound in particular. Emerging market currencies continued to feel the bite of possible trade barriers from the new Administration as the Mexican peso reached new lows against the US dollar, trading at 22.00 peso to the dollar at one point.

Gold stayed in rally mode for a third straight week as investors sought a safe haven given the sharp increase in stock prices and rise in US dollar. Over the last part of 2016 Gold lost 12.5% from July through December, making the precious metal attractive again. US bonds finished the week to the downside as stocks become more popular again and investors demanded higher yields for fixed income; the 10-Year Treasury yield rose 3bps on Friday.

Much of the corporate news this week revolved around pharma names. On Monday, Ariad Pharma was acquired by Takeda for $24/share in a ~$5.2B all-cash deal, and at the JPMorgan Health conference both Gilead and J&J management reiterated their commitment to pipeline-expanding M&A. President-elect Trump weighed in on the drug pricing debate, opining that the pharma industry is 'getting away with murder' and that it is time to change the medical bidding structure. US regulators turned their gaze towards Fiat Chrysler this week, with the EPA accusing the company of Clean Air violations over potential diesel cheating software, similar to Volkswagen's predicament; the DOJ and Congress are also reportedly considering looking into Fiat's marketing practices of diesel vehicles. And as the week came to a close, earnings season began to rear its head. Financial names Wells Fargo, JP Morgan and Bank of America announced mixed-to-OK results, as sector analysts wait to see precisely what deregulation orders will be issued by the Trump cabinet and as more interest rate hikes lay on the horizon.

SUN 1/8
(CN) CHINA DEC FOREIGN RESERVES: $3.011T V $3.052T PRIOR; (6th consecutive decline and lowest level in 6 years)
MCD: Citic confirms acquisition of controlling interest in McDonalds China assets in a deal valued at $2.1B

MONDAY 1/9
(EU) EURO ZONE JAN SENTIX INVESTOR CONFIDENCE: 18.2 V 12.8E (highest reading since Aug)
(EU) EURO ZONE NOV UNEMPLOYMENT RATE: 9.8% V 9.8%E (matches lowest level since Sept 2011)
ARIA: To be acquired by Takeda for $24/Shr in cash; valued at ~$5.2B
(US) Dec Labor Market Conditions Index Change: -0.3 v +2.1 m/m
ILMN: Says new 'NovaSeq' DNA sequencer will be able to sequence a human genome in one hour (vs current technology that takes over 24 hours) - JP Morgan conf comments
(CN) CHINA DEC CPI M/M: 0.2% V 0.1% PRIOR; Y/Y: 2.1% V 2.2%E
(CN) CHINA DEC PPI Y/Y: 5.5% V 4.6%E (4th straight positive print and highest level since Sept 2011)

TUESDAY 1/10
(CN) China Passenger Car Association (PCA): China Dec retail auto sales at 2.76M units, y/y: +17.1% v +19.8% prior; 2016 sales23.9M units, +15.9% y/y
2317.TW: Reports Dec Rev NT$449.6B, +9.8% y/y; 2016 Rev NT$4.36T, -2.8% y/y
(US) Atlanta Fed maintains Q4 GDP forecast at 2.9%, same as Jan 6th
(US) World Bank cuts 2017 and 2018 global growth forecasts; warns Trump tariff proposals could trigger protectionist retaliation - Global Economic Prospects report

WEDNESDAY 1/11
(UK) NOV INDUSTRIAL PRODUCTION M/M: 2.1% V 1.0%E; Y/Y: 2.0% V 0.7%E
(UK) NOV MANUFACTURING PRODUCTION M/M: 1.3% V 0.5%E; Y/Y: 1.2% V 0.4%E
(PL) POLAND CENTRAL BANK (NBP) LEAVES BASE RATE UNCHANGED AT 1.50%; AS EXPECTED
GBP/USD: Cable falls to lowest levels since Oct Brexit vote
(US) DOE CRUDE: +4.1M V +0.5ME; GASOLINE: +5.0M V +1.5ME; DISTILLATE: +8.4M V +0.5ME
(US) President-elect Trump: will be big news in next few weeks about other companies bringing jobs to the US - news conf in New York
IBB: Drops to session lows on Trump comments
(US) Association of American Railroads weekly rail traffic report for week ending Jan 7th: 441.4K carloads and intermodal units, -11.4% y/y
(BR) BRAZIL CENTRAL BANK (BCB) CUTS SELIC TARGET RATE BY 75BPS TO 13.00%; MORE THAN EXPECTED (Largest cut since Apr 2012)

THURSDAY 1/12
TSCO.UK: Reports Q3 UK LFL (ex-fuel, ex VAT) 1.8% v 1.7%e
DEB.UK: Reports Q1 LFL +3.5%
(DE) Germany 2016 asylum seekers 280K v 890K y/y
(CN) CHINA DEC M2 MONEY SUPPLY Y/Y: 11.3% V 11.4%E (5-month low)
Gartner Says Worldwide Semiconductor capital spending seen +2.9% in 2017
(US) Fed's Bullard (FOMC non-voter, Dovish): rates went up in response to election, but now the Trump administration will have to deliver - CNBC
(US) INITIAL JOBLESS CLAIMS: 247K V 255KE; CONTINUING CLAIMS: 2.087M V 2.09ME
(US) DEC IMPORT PRICE INDEX M/M: 0.4% V 0.7%E; Y/Y: 1.8% V 1.8%E
HES: Guides FY17 E&P capital budget $2.25B v $1.9B y/y, +18% y/y; Guides 2017 net production ex Libya 300-310K boed v 315-325K boed y/y
FCAU: EPA to charge that Fiat Chrysler used diesel emissions cheating software in 100K vehicles sold in the US since 2014 - press
(PE) PERU CENTRAL BANK (BRCP) LEAVES REFERENCE RATE UNCHANGED AT 4.25% (as expected)
APC: Announces sale of Eagleford Shale assets for $2.3B
(US) Fed Chair Yellen: Economy doing quite well; Inflation has picked up from low level, close to 2% target; Labor market generally strong and wage growth picking up
(KR) BANK OF KOREA (BOK) LEAVES 7-DAY REPO RATE UNCHANGED AT 1.25%; AS EXPECTED
(CN) CHINA DEC TRADE BALANCE (CNY-TERMS): 275B V 344.5BE (9-month low)

FRIDAY 1/13
BAC: Reports Q4 $0.40 v $0.38e, R$20.0B v $20.6Be; Increases stock buyback for H1 by $1.8B to $4.3B (total 1.9% of market cap)
JPM: Reports Q4 $1.71 (includes tax benefit) v $1.42e, R$23.4B v $23.2Be
(US) DEC ADVANCE RETAIL SALES M/M: 0.6% V 0.7%E; RETAIL SALES EX AUTO M/M: 0.2% V 0.5%E
(US) DEC PPI FINAL DEMAND M/M: 0.3% V 0.3%E; Y/Y: 1.6% V 1.6%E
(US) JAN PRELIMINARY UNIVERSITY OF MICHIGAN CONFIDENCE: 98.1 V 98.5E
(US) Atlanta Fed cuts Q4 GDP forecast to 2.8% from 2.9% on 1/10
(UK) PM May's Article 50 plans reportedly might be delayed for months due to Northern Ireland Assembly turmoil - British press
(US) Weekly Baker Hughes US Rig Count: 659 v 665 w/w (-0.9%) (first decline in 9 weeks)
DBRS DOWNGRADES ITALY SOVEREIGN RATING TO BBB (HIGH) FROM A (LOW); STABLE TREND

January-February 2017 Market Outlook: Winter is Coming

TradeTheNews.com January-February 2017 Outlook: Winter is Coming
Mon, 09 Jan 2017 20:35 PM EST

The poll-defying outcome of the US election has sent ripples across the markets for the last two months. Since November 8, the dollar index is up over five percent and bond yields have spiked, as investors sold assets to buy dollar-denominated ones, betting the new US government will enact measures that boost economic growth and inflation. This shift wiped out well over $1 trillion of value in the global bond markets, even as stock indices soared to new record highs.

In the same timeframe the other late-2016 surprise - OPEC actually agreeing to a produce cut scheme - has firmed up energy prices. That along with some long overdue signs of wage growth has given some central banks the cover they need to begin contemplating pausing or even reversing their expansive monetary stimulus programs.

For various reasons, the stock market has had three bad Januarys in a row, and January 2017 may fall prey to the same pattern. The market euphoria over a Republican sweep that helped lift the DJIA to nearly 20,000 by year end was in part due to investors waiting to sell their winners until 2017 when the presumption is that capital gains will be lower under the new Administration. That could translate into delayed portfolio rebalancing in early January, and that selling may be exacerbated by traders starting to consider potential policy missteps by the Trump Administration which don't appear to have been factored in over two months since the election. At the first sign that the Republican love fest in Washington has soured investors may turn tail and run.

Out in the Cold (War)

The reflation rally may have more legs, but it will have to climb a steeper wall of worry. Aside from potential blunders by the rookie President, a new American leader is often tested by foreign powers early in his first term. Given Trump's campaign rhetoric questioning ties with old allies including the financing structures for NATO, the early antagonist may be Russia. Early in the New Year, President Putin may want test whether his deferential treatment of Trump has bought him any latitude in exerting Russian power in Syria, the Ukraine or even the Baltic states.

North Korea is another likely trouble spot. In recent weeks, South Korean officials have indicated that they expect a new provocation from the North, possibly in the form of a new nuclear weapons test (which would be the North's 6th such test). The North itself has proclaimed that it could also test launch an ICBM at "any time." Whether its North Korea, Iran, China, or Russia that prods Trump, it may reveal how he will behave as Commander-in-Chief - either following the established doctrine of proportional response or simply going with the gut instincts that seem to dominate his decision making process.

Inauguration Day is January 20, bringing with it the first US government controlled by a single party since President Obama's first two years in office. Republicans appear to be energized by their proposed agenda and may have learned a few things from the mistakes that bogged down the Democrats in the early Obama years. But it remains to be seen if the GOP can execute its big ideas, including the repeal of Obamacare, deregulation, and major tax reform. All of these ideas appeal to the party base, but executing the legislation well will be difficult in the sausage factory that is Washington DC, and Republicans leaders may have to woo Democratic votes to navigate around Senate filibuster rules.

There is already talk that it will take years of complex negotiating to replace Obamacare, so the repeal vote that Republicans plan in the early days of the new Congress will only be symbolic. Meanwhile the public will continue to get accustomed to the benefits received under the ACA and may get upset with changes in a future Republican healthcare plan. The same may be true of tax reform and deregulation efforts - the policy wonks in Washington will hail their own efforts but the ordinary citizen might not understand the intricacies of legal changes until they see some effect on their own pocketbooks years later (or until the first scandal breaks in a 'deregulated' industry).

Any goodwill toward the Republican agenda may come down to President Trump communicating the benefits of the changes he wants. During the campaign his simplistic messaging was good enough to get voters to sweep him into office as a 'change' candidate, but when he assumes the office, the American public may demand more details about Trump's plans than just a handful of adjectives about being "great" or "the best." Trump's first full press conference since the election will be held on Jan 11 and could be an indication of whether Washington has started to moderate the President-elect or if he will continue to shoot from the hip.

In the global picture, Mr. Trump's nationalist bent, and apparent belief that geopolitics is no different from business deal making, may leave a vacuum that rival powers seek to fill. Notably, Chinese Premier Li will headline the World Economic Forum in Davos later this month. Li's appearance is symbolic of China's efforts to gain more influence in the West, while consolidating its influence in East Asian after the death of the Trans-Pacific Partnership trade deal.

The Winter of Our Discount Rate

With political change afoot and with some governments finally looking at providing new fiscal measures to help their economies, many central banks are contemplating pulling back some monetary stimulus. That trend is being led by the Fed, which raised rates for the second time in December and promises to start normalizing rates in earnest this year, forecasting rates will go up another 75 basis points in the next twelve months.

The Fed may be in a wait and see mode during the early part of 2017, watching for the new Republican controlled government to follow through on promises of an assertive fiscal policy. As it stands, a lack of 'shovel ready' projects and clashes with fiscal conservatives may ultimately whittle down Trump's infrastructure spending plans.

If, however, substantive fiscal policy does materialize, the Fed may seize the opportunity to begin normalizing monetary policy. The latest Summary of Economic Projections from the Fed's December meeting predicted three rate hikes in 2017, but the Fed may surprise markets with an even more aggressive tightening schedule if the economy continues to gain its footing and has the added stimulus of an infrastructure investment plan and tax reform out of Washington.

Much of the Fed board now sees the US at essentially full employment (though some still see a bit of slack) and their attention is shifting toward the inflation mandate. Wages rebounded strongly in the December jobs data. Should that continue in early 2017 it could mean wage inflation is finally taking hold, perhaps due in part to many US states taking it upon themselves to bump up the minimum wage. And if OPEC can keep a floor under oil prices that could remove another nettlesome drag on prices that has weighed down inflation forecasts for the last two years.

Ironically the Fed could begin tightening more eagerly even as the voting memberships rotates out 2016's three dissenting hawks in favor of a decidedly more dovish group of Fed presidents. The FOMC will still be under the guidance of Chair Yellen until early 2018, but President Trump will get his chance to influence the seven-member board which still has two vacancies. Even as he has criticized Fed policy, Trump has declared himself to be a "low rate" guy, so its not yet clear what type of Fed governors he will nominate.

The rise in interest rates since the election is likely adding to the debate at the Fed. The doves may worry that the interest rate spike could raise borrowing costs and become a drag on economic activity. The hawks will counter that the increase in yields was a natural shift in the economic outlook in light of the election outcome, which could put the Fed at risk of falling behind the curve.

Despite all the anticipation of a tighten cycle after the December move, the Fed is not likely to take any new action at its February 1 policy meeting. At most the February statement will lay the groundwork for a possible hike in March, the next meeting with a scheduled press conference.

Winter Forexland

The ECB and BOE are also showing signs that stimulus efforts may be exhausted. The BOE surprised the markets in November by moving into a neutral stance (from easing), but given the overall trend of post-Brexit UK data beating expectations, the BOE is expected to hold policy steady in early 2017. Many analysts now believe that Governor Carney's next move could be a rate hike down the road as UK inflation edges its way back towards target.

Meanwhile, the ECB decided in December to prolong QE, but at a reduced pace. President Draghi said the committee had discussed continuing at the €80 billion pace for six more months but ultimately decided to cut it to €60 billion. He said there was "very broad consensus" on the decision, indicating that the doves made some concessions to German-led faction that sees a need to start ratcheting down monetary stimulus. Draghi however refused to call this action 'tapering' (suggesting that bond purchases could easily be restored to €80 billion) and said there was no discussion of taking QE to zero. In a nod to doves, he also implied that the accommodative policy framework could continue past 2019, as he noted the 1.7% CPI forecast for 2019 is "not really close" to the 2% inflation target.

In contrast to their western counterparts, officials at the Bank of Japan are still adamantly pushing stimulus. The post-US election shift in the bond market weakened the yen and pushed the yield on 10-year Japanese government bonds above zero for the first time in a couple months. That runs counter to the goals of the BOJ, which under 'Abenomics' has strove to end over a decade of debilitating deflation by buying JGBs to keep bond yields down.

Four years into the program, the BOJ has had little success at kindling inflation, despite boosting the annual QE program to ¥80 trillion and cutting the key rate to -0.1%. BOJ governor Kuroda has blamed low oil prices and weak emerging markets, perhaps ignoring Japan's burgeoning demographic issues. His critics have formulated the uphill battle this way: "Kuroda can print money, but not people." After some speculation that the BOJ might reverse course on its aggressive easing strategy, Kuroda boldly promised in a speech last fall that he would keep the 10-year JGB yield at near zero until inflation surpasses the 2% target rate. "It is often argued that there is a limit to monetary easing but I do not share such a view," he declared. As rising Fed rates shift global conditions, Kuroda's promise will become harder to achieve, but for now it appears he is unwavering.

One central bank that may be open to additional easing is the PBoC. Though the Chinese central bank's official monetary policy stance remains at "prudent", the China Banking Regulatory Commission (CBRC) recently proposed that the Reserve Ratio Requirement (RRR) for commercial banks be cut at an "appropriate time." The last RRR cut came in October 2015, so a new cut might be timed to help boost liquidity ahead of the Spring festival Golden Week holiday that begins on Jan 29. As ever it remains difficult to tell if officials would actually implement a fresh rate cut or if this CBRC rhetoric is another ploy by the Chinese government to keep the investor class off balance as it battles capital flight.

For the time being there is not much standing in the way of the strong dollar trend, which is reflective of US monetary policy getting out of the trenches before other central banks, thanks to the relative strength of the American economy. The dollar has pushed the euro to a 14-year low below 1.04 as robust US economic data have outstripped any signs of recovery in the Euro Zone. A more concrete demonstration that corporate tax reform will become a reality in the Congress could extend the reign of King Dollar in early 2017. Many currency analysts are now eyeing EUR/USD parity, which was last tested in December 2002.

The pound sterling may also weaken further against the greenback as the starting gun for the Brexit process is set to be fired in March. After the Brexit vote squashed GBP/USD to a 30-year low, the pound is wending its way toward the 1.1950 low it hit during a still unexplained 'flash crash' in early October (still a long way from the all-time GBP/USD of 1.05 set in February 1985 at the height of the Reagan/Volcker era).

Indeed the movement in the forex market since the election has raised alarm bells at the IMF, whose chief economist Obstfeld is concerned about it sparking a crisis in emerging markets, which have much of their debt priced in dollars. Weaker domestic currencies could make those debts harder to pay. Already we have seen Mexico central bank raise rates by a surprise 50 basis points in December and then openly intervene in FX markets trying to defend the peso (without much success, as the peso swoons after each Trump tweet on a business moving from Mexico to the US).

Oil Freeze

The prospects for less easy central bank policy may depend on energy prices finally rebounding, meaning monetary officials are to some extent counting on OPEC's production scheme to pan out. OPEC confounded many predictions when it actually pulled together a deal to cut oil production by 1.2 million bpd within the cartel. The promised output cuts went into effect on the first of the year and many non-OPEC producers have agreed to follow suit with over half a million more bpd in cuts, led by Russia ramping down its production over several months. Anticipation of the initial six month agreement has already boosted oil prices back into the mid-$50's range, and if producers follow through, crude could push toward $60/barrel.

The problem is, as former Saudi Oil Minister Al-Naimi said candidly right after the deal was struck, "we tend to cheat." Historically, OPEC members have exceeded production quotas on a routine basis, and if that occurs this time it could undermine the hard-won agreement. To limit cheating, the signatories of the production deal have agreed to establish a monitoring council that will meet regularly starting in mid-January.

The fact that the Saudi's agreed to shoulder about half of the OPEC production cuts while allowing their biggest political rival, Iran, to slightly increase output seems to indicate that the Kingdom is serious about the agreement. That combined with the establishment of the monitoring committee should keep the production deal on track for its initial six month trial period. Oil analysts are generally expecting to see 75% compliance, which should be enough to prevent crude prices from suffering another collapse. If the accord is successful OPEC could extend the agreement another six months through year end. The upshot is that the declarations of the monitoring committee will be followed closely and if it uncovers unacceptable amounts of cheating, it could scuttle the chances for the output cuts to continue past mid-year.

CALENDAR

JANUARY
2: New Year's Day (observed US, UK); Euro Zone Manufacturing PMI; Japan Manufacturing PMI
3: Euro Zone Unemployment; UK Manufacturing & Construction PMIs; US ISM Manufacturing PMI
4: UK Services PMI; Euro Zone Flash CPI Estimate; US ISM Non-Manufacturing PMI; FOMC Dec Minutes
5: ECB Dec Minutes
6: German Factory Orders; German Retail Sales; US Payrolls & Unemployment; US Factory Orders

8: China CPI & PPI
9:
10: US JOLTS Job Openings
11: UK Manufacturing Production
12: US Import Prices; China Trade Balance (tentative)
13: BOE Credit Conditions Survey; US Retail Sales; US PPI; US Prelim UofM Consumer Sentiment

16: China Q4 GDP; China Industrial Production; MLK Jr. Day Holiday (US)
17: UK CPI & PPI; German ZEW Economic Sentiment; US Empire Manufacturing; Davos conference (4 days)
18: UK Unemployment & Claimant Count; US CPI; US Industrial Production & Capacity
19: ECB Policy Decision and Press Conference; US Housing Starts & Building Permits; US Philly Fed Manufacturing Index
20: UK Retail Sales; US Presidential Inauguration

23: Euro Zone Manufacturing & Services PMIs
24: US Existing Home Sales; Italian constitutional court ruling on election law
25:
26: UK Prelim Q4 GDP; US New Home Sales; Tokyo Core CPI
27: US Advance Q4 GDP; US Durable Goods Orders

29: China Spring Festival Golden Week holiday (through Feb 2)
30: US Personal Income & Spending; BOJ Policy Statement
31: German Retail Sales; German Unemployment; Euro Zone Flash CPI; Euro Zone Flash GDP; US Chicago PMI; US Consumer Confidence; China Manufacturing & Non-Manufacturing PMIs
FEBRUARY
1: UK Manufacturing PMI; US ISM Manufacturing PMI; FOMC Policy Statement (no press conf)
2: UK Construction PMI; BOE Policy Decision; BOE Inflation Report; US Non-farm Productivity
3: UK Services PMI; US Payrolls & Unemployment

6: German Factory Orders
7: US Trade Balance; US JOLTS Jobs Openings; China Trade Balance
8: China CPI & PPI
9:
10: UK Manufacturing Production; US Prelim UofM Consumer Sentiment; US Mortgage Delinquency Report (tentative)

12: Japan Preliminary Q4 GDP
13:
14: German Preliminary Q4 GDP; UK CPI & PPI; Euro Zone Q4 Flash GDP; German ZEW Economic Sentiment; US PPI
15: UK Unemployment & Claimant Count; US CPI; US Retail Sales; US Empire Manufacturing Index; US Industrial Production & Capacity Utilization
16: ECB Jan Minutes; US Housing Starts & Building Permits; US Philly Fed Manufacturing
17: UK Retail Sales

20: President's Day Holiday (US)
21: UK Inflation Report Hearings
22: Euro Zone Flash Manufacturing & Services PMIs; Euro Zone Fina CPI; US Existing Home Sales; FOMC Jan Minutes
23: UK Q4 GDP (second estimate); US Housing Starts
24: US New Home Sales

27: US Durable Goods
28: Euro Zone Flash CPI Estimate; US Prelim Q4 GDP (second estimate); US Consumer Confidence; China Manufacturing & Non-manufacturing PMIs
MARCH
1: UK Manufacturing PMI; US Personal Income & Spending; US ISM Manufacturing PMI
2: UK Construction PMI; Tokyo Core CPI
3: UK Services PMI; US ISM Non-Manufacturing PMI