TradeTheNews.com March-April 2017 Outlook: La La Land
Mon, 27 Feb 2017 11:44 AM EST
In a world where the U.K. votes itself out of Europe and where a reality TV show star is elected President of the United States it sometimes feels like we have entered La La Land. But this fanciful dream world is now reality, like it or not. The next couple of months will see the Brexit process begin and the first hundred days of the fledgling Trump administration wrap up. It remains to be seen if the populist wave that brought them to the fore will foment change in other spheres, but this atmosphere of disruption will continue to ripple across politics, trade and markets for the foreseeable future.
Arrival
The imminent IPO of Snapchat’s parent company may be a perfect metaphor on this unpredictable moment in history. Snap, which is headquartered in the real La La Land (Los Angeles) rather than Silicon Valley, is attempting to take on social media giant Facebook. The company is targeting a valuation north of $20 billion which would make it the biggest tech IPO in the US since Facebook in 2012, and thus is drawing a lot of attention from capital markets. A good reception for the IPO could lead a herd of other tech ‘unicorns’ to follow suit.
A successful IPO isn’t guaranteed, however. Snap has disclosed large financial losses and relatively modest active user numbers. In fact its user base is in the same vicinity as that of Twitter – which has floundered since its own IPO three and a half years ago – leading to some unflattering comparisons between the two. Like Twitter, Snapchat may not have the critical mass or technological innovation to generate a growing advertising revenue stream. Investors may also be leery of the share structure that gives Snap’s ordinary shareholders absolutely no say in direction of the business.
Snap is expected to arrive on the market on March 2nd. A dearth of major tech IPOs and speculation that it might be the next Facebook could be enough to send shares flying, or markets may judge it as the next Twitter and let it fizzle. The latter outcome could have a chilling effect on other ‘unicorns’ like Uber and cause investors to reconsidering plowing investments into risky unlisted tech firms.
Fences
Things are also uncertain in Washington these days, as the new Administration has striven to bend the government toward President Trump’s personal style. In his first month in office, Trump seems to be patterning his agenda on his old job as a businessman and real estate developer. He has used the highest profile office in the world to leverage his fellow CEOs to gather for powwows at the White House, and they have obliged him with upbeat sound bites and announcements on their domestic investment and hiring plans. Trump's early domestic policy forays – whether its immigration restrictions, contemplating border tariffs, or constructing a border wall – all seem to focus on building barriers. The developer-in-chief appears intent on building Fortress American in the name of national security and his 'America First' doctrine.
Trump’s deliberately unorthodox and combative style won him enough support to carry the election, but it has also caused political problems. The President’s impulsive tweets have ranged from irrelevant commentary on TV ratings for ‘The Apprentice’, to a darkly disturbing declaration that several mainstream media outlets are “the enemy of the American people.” White House spokespeople have had to walk back or massage a number of the President’s inaccurate, off-the-cuff remarks about policy. The President has also been quick to claim the surge in stocks since his election – which some market watchers have dubbed the ‘Trump Rally’ – as a sign of approval for his policies (rather than market enthusiasm over one-party control in Washington). His predecessors were much more guarded about laying claim to the animal spirits of the market, and Trump may be setting himself up for taking the blame the next time stocks enter a significant correction.
On the last day of February, the President will address a joint session of Congress to discuss his budget and policy plans. Though not technically a ‘State of the Union’ address, many market participants are looking toward this major speech as a marker for progress on the Trump agenda. If by that time the Administration has not formulated more specific plans for tax reform and the overhauls of healthcare and trade policy, markets may get nervous that Trump’s rhetoric is not translating into any legislative agenda. Reconciling greater spending on the military, border security, and infrastructure with tax cuts and debt reduction may also be difficult for those that run the numbers, raising the ire of deficit hawks.
Lion
Harkening back to the age of Europe’s royal houses battling each other, the United Kingdom is about to throw up its own barrier against the continent. The Brexit is on track to begin in March and it does not appear that Parliament will stand in the way. Over the last few weeks, UK Prime Minister May has won a series of votes in the House of Commons that swatted away attempts to add various amendments that sought to sandbag the Brexit bill. As March approaches it appears that May will have a free hand to invoke Article 50 to formally initiate the up to two-year-long Brexit process.
The latest reports from London suggest that the final Brexit bill could be cleared by the Parliament in early March, and that the PM may invoke Article 50 ahead of her self-imposed deadline at the end of the month. That could provide the opportunity for European leaders to discuss the Brexit process at an EU summit (the European Council) scheduled for March 9-10. If the remaining EU members take a hard line with Britain the erosion of economic confidence that some anticipated right after the Brexit vote last June may finally take hold as Britons contemplate potentially less favorable trade agreements and large multinationals relocating their HQs out of London. Additionally, in the face of a ‘hard Brexit’, pro-EU Scottish leaders are threatening to call a fresh referendum for independence from the United Kingdom. As the decoupling process begins EU leaders will be reminded that populist movements in their own countries can’t be ignored for fear that other countries might eventually follow Britain’s lead and unravel the entire bloc.
France’s Presidential election will be the next test of populist fervor in Europe. Playing on unease about the immigrant population and recent terrorist attacks, right-wing nationalist Marine Le Pen is the lion of the French populist movement and she is making a legitimate run at the French Presidency. After the leading conventional candidate Francois Fillon was hamstrung by a nepotism scandal, polls have been showing that Le Pen and the upstart progressive party leader Emmanuel Macron will emerge from the first round vote for a head-to-head contest. In the run-off election, the polls show that Macron should handily beat Le Pen, but given the faulty polling ahead of the Brexit and the US Presidential election, the outcome can’t be certain until all of the ballots are counted. The candidates will duke it out in a televised debate on March 20, and the first round vote will be on April 23, followed by the run-off two weeks later.
The French vote is just the first in a number of elections this year across Europe, including in Holland, Italy, and Germany. The euro-skeptics are not seen winning any of these contests but their rising popularity may beenough to rattle nerves and push the euro ever closer to dollar parity.
Manchuria by the Sea
Currency issues are also central to Sino-US relations these days, but President Trump’s approach so far has been erratic. He railed against Chinese currency manipulation during his campaign, but pulled back on the rhetoric after he was elected, even as he became the first President to try and talk down the dollar. Ahead of inauguration day, Trump ruffled China’s feathers by speaking directly with the President of Taiwan and following that up by announcing that “everything is under negotiation” including the long standing ‘One China’ policy. Then on the same day last week thatPresident Trump declared China a "grand champion" of currency manipulation, Treasury Secretary Mnuchin said he had had great discussions so far with Beijing and would reserve any judgment on China policy until the Treasury’s semi-annual currency review is released in mid-April.
Even as President Trump is trying to impose his authority over the Washington bureaucracy, his Chinese counterpart is on the brink of consolidating his power to an extent not seen in decades. On March 5, the National People's Congress (NPC) convenes its annual session, spending two weeks discussing government policy objectives. Importantly, at this year’s conclave nearly half of the seats in the 25-member Politburo will open up, including five of the seven seats on the Standing Committee, the party’s top leadership. The only two Standing Committee members who are not retiring are President Xi Jinping and his right-hand man Premier Li Keqiang.
At the communist party’s Sixth Plenum last October, Xi was designated the party’s “core” leader, elevating him to a status that was not granted to his predecessor Hu Jintao. This may signal China moving away from the consensus-style leadership of recent years, giving President Xi more control in shaping the government as he sees fit. The President may use the Politburo shake up to appoint loyalists to the standing committee, consolidating his power. If he makes such a move, it could well indicate that Xi intends to extend his rule past his scheduled retirement in 2022.
March’s NPC is also the venue for announcing China’s new economic goals for the year. Reports have circulated that top economic planners have already settled on targeting GDP growth of around 6.5% for 2017. That would be less than the expected 6.7% rate in 2016, the slowest growth in a quarter century, giving the government some leeway to continue the pursuit of economic reforms while still tracking toward long term growth goals. Officials are also said to have agreed to maintain the CPI target at 3% this year. That indicates they are not deeply concerned that a rise in commodity costs that has pushed up producer price data will translate into higher consumer prices, as weak demand persists. That should give the central bank breathing room to avoid tightening policy.
Hidden Figures
An era of profound central bank stimulus has reached the beginning of the end. The Fed and other global central banks have poured massive amounts of money into quantitative easing programs and slashed rates to near or even below zero. The numbers will never be clear on how much economic suffering this historic feat of monetary engineering may have averted, but it has definitely created lasting distortions in the global economy.
But now the global economy is regaining its footing and some of the stimulus programs have begun to pull back. The Fed has raised rates for a second time and is planning several more hikes this year. Even the ECB, which is farther from its goals than the Fed, has reduced the pace of its QE program by 25% in a nod to improving conditions.
The next move toward monetary policy normalization will be another Fed rate hike, but the timing isn’t quite certain.Despite the Fed’s SEP forecast for another 75 basis points in tightening this year and Chair Yellen warning that the all meetings remain ‘live’ for rate action, Fed funds futures predict only about a 25% chance of a rate hike in March. Most forecasters see May or June as the more likely timeframe for the first rate move of 2017. It seems unlikely that after nine years monetary policy erring on the side of caution that the Fed would take this moment to tighten faster than expected.
Some argue that the anticipation of fiscal stimulus from the Trump Administration takes pressure off the Fed which has until now been the only game in town as far as stimulus goes. But Fed officials have generally stated that they are not adjusting their forecasts to account for fiscal policy changes because it is still unclear when and how Trump’s policies will shape up.
The President also has a chance to shift the policy disposition of the Fed through his appointments. Fed governor Tarullo, the Fed’s point man on banking regulation, just announced that he will step down in April, more than four years before his term was slated to end. His resignation creates a third open seat among the seven-person Fed board of governors, providing President Trump an even greater opportunity to put his stamp on the Fed. Trump plans to fill the empty seats quickly and he is likely to choose candidates that support his plans to roll back bank supervision regulations put in place by the Dodd-Frank Act.
The other impending change at the Fed to watch for is the balance sheet policy. The headline from the minutes of the February FOMC meeting was that the committee would start evaluating the future disposition of the now $4.5 trillion in assets held by the Fed. Minneapolis Fed President Kashkari recently stated that the central bank could stop balance sheet reinvestment or start tapering in the "not too distant future," while Atlanta Fed President Lockhart postulated that the balance sheet would stay above historical norms, at a minimum of $1.5-2 trillion. By all accounts the process of balance sheet reduction will be measured and take years, but the prospect of the unwinding could trigger another ‘taper tantrum’ event from markets that have become accustomed to a decade of unprecedented stimulus.
Hell or High Water
In the bilateral “deals” environment that President Trump is trying to foster, multilateral agreements are still seeing some success. Notably the production cutting accord between OPEC and many non-OPEC nations has been a rousing success so far. In the face of collapsing oil prices, these countries that depend largely on oil revenues put aside their deep political differences and reached an accord to reduce production for the first half of 2017 in a last ditch effort to revitalize energy prices.
The participants have shown discipline, announcing cutbacks that were ahead of schedule in January. The first major report from the compliance committee in late February indicated that OPEC members were hitting 90% of cutback targets, while non-OPEC contributors were at close to 60%. That has been enough to keep WTI and Brent crude futures in the mid-$50/bbl range, a comfortable level for most OPEC producers.
Assuming this level of compliance continues, the next big decision for the signatories will be whether to extend the cutbacks for another six months when the initial agreement expires at the end of June. Oil ministers are expected to discuss this prospect at a conference in March in Houston. Russia, the largest non-OPEC contributor to the agreement, has said it will decide if it should extend its commitment by April or May. So far, indications from OPEC officials have them leaning toward no extension, with signs of demand starting to catch up to supply. Meanwhile the North American rig count has surged as independent US firms have enjoyed the higher oil prices created by their foreign competitors.
CALENDAR
FEBRUARY
28: President Trump’s address to Congress
MARCH
1: German Unemployment; UK Manufacturing PMI; US Personal Income & Spending; US ISM Manufacturing PMI
2: UK Construction PMI; Japan Household Spending; China Caixin Services PMI
3: UK Services PMI; US ISM Non-manufacturing PMI; Snap IPO (tentative)
5: China National People's Congress convenes
6: US Factory Orders
7: German Factory Orders; US Trade Balance; Japan Final Q4 GDP; China Trade Balance (tentative)
8: UK Annual Budget Release; China CPI & PPI
9: ECB Policy Statement & Press Conf; China Industrial Production; EU Summit (2 days)
10: UK Manufacturing Production; UK Goods Trade Balance; US Payrolls & Unemployment
13: US JOLTS Jobs Openings
14: German ZEW Economic Sentiment; US PPI
15: UK Claimant Count & Unemployment; US CPI; US Retail Sales; FOMC Policy Statement & Conf Call; BOJ Policy Statement & Press Conf
16: Euro Zone Final CPI; BOE Policy Statement; US Housing Starts & Building Permits; US Philly Fed Manufacturing Index
17: Industrial Production & Capacity Utilization; Prelim University of Michigan Consumer Sentiment
20: French Presidential debate
21: Euro Zone Flash Manufacturing & Services PMIs; UK CPI
22: US Existing Home Sales
23: UK Retail Sales; US New Home Sales;
24: US Durable Goods Orders
27: German Ifo Business Climate
28: US Consumer Confidence
29: German Prelim CPI
30: US Final Q4 GDP; Japan Household Spending
31: German Retail Sales; German Unemployment Change; UK Current Account
APRIL
2: Japan Tankan Manufacturing & Non-manufacturing Indices; China Caixin Manufacturing PMI
3: UK Manufacturing PMI; US ISM Manufacturing PMI
4: UK Construction PMI; US Trade Balance; US Factory Orders
5: UK Services PMI; US ISM Non-manufacturing PMI; FOMC Minutes; China Caixin Services PMI
6: German Factory Orders; ECB Minutes
7: UK Manufacturing Production; UK Goods Trade Balance; US Payrolls & Unemployment
8: China CPI & PPI
10:
11: UK CPI & PPI
12: UK Claimant Count & Unemployment; China Q1 GDP; China Industrial Production; China Trade Balance (tentative)
13: BOE Credit Conditions Survey; US PPI
14: Good Friday (US market holiday); US CPI; US Retail Sales; University of Michigan Consumer Sentiment
17:
18: German ZEW Economic Sentiment; US Housing Starts & Building Permits; US Industrial Production
19: Euro Zone Final CPI
20: Philly Fed Manufacturing Index
21: Euro Zone Flash Manufacturing & Services PMIs; UK Retail Sales; US Existing Home Sales
23: France Presidential Election (first round)
24: German Ifo Business Climate
25: US Consumer Confidence; US New Home Sales
26: BOJ Policy Statement, Outlook Report & Press Conf
27: ECB Policy Statement & Press Conf; US Durable Goods Orders; Japan Household Spending
28: German Retail Sales; UK Prelim Q1 GDP; Euro Zone Flash CPI; US Q1 Advance GDP; Chicago PMI
Late April or later: US Treasury Current Report
30: China Manufacturing & Non-manufacturing PMIs
MAY
1: UK Manufacturing PMI; US Personal Spending; US ISM Manufacturing PMI; China Caixin Manufacturing PMI
2: German Unemployment; UK Construction PMI
3: UK Services PMI; Euro Zone Flash Q1 GDP; US ISM Non-Manufacturing PMI; FOMC Policy Statement; China Caixin Services PMI
4: US Nonfarm Productivity; US Trade Balance: US Factory Orders
5: US Payrolls & Unemployment
7 May : France Run-off Election
Monday, February 27, 2017
Saturday, February 25, 2017
Barrons weekend summary
Barrons weekend summary: positive on TV, RIG, GPN ; Cautious on HOG, QCOM, INTC, SAM
Cover story (Cautious): HOG would be a key beneficiary of Donald Trump’s plan to cut taxes and promote American-made goods, but its core demographic of middle-aged white men is shrinking along with other ridership markets, and a strong dollar is crimping foreign sales; Shares should trade in the high $40s, not the high $50s.
Tech Trader: Cautious on QCOM, INTC: Both companies recently unveiled new mobile chips, but overall they will see diminishing returns; the best bet for investors interested in wireless chips may be smaller rivals SWKS and QRVO.
Trader: Most investors think the Fed will wait to raise rates, while 40% expect a March hike, down slightly from the week prior; Cautious on SAM: Craft beer seems to have hit a saturation point, and the company has been slow to embrace the “tap room” approach other breweries use to draw customers.
Interview: David Gluskin, chief economist and strategist at Gluskin Sheff & Associates, sees volatility ahead, is cautious on the Trump rally, and thinks the market will finish the year where it started.
Features:
1) Positive on TV: Shares of the Mexican television giant, which owns an appealing range of businesses, appear undervalued, having sat out the strong rally in most U.S. cable and media stocks the past year;
2) Positive on RIG: As the company puts lower revenue and losses behind it during a turnaround, shares could rise by more than 35% during the next year or two, making them a good play for patient, value-oriented investors;
3) Cressida Hogg, who oversees the Canada Pension Plan Investment Board’s $18B infrastructure portfolio, talks about Donald Trump’s infrastructure proposals and how the Brexit will affect the market;
4) Positive on GPN: Technology and services provider for small and mid-size merchants has strong international exposure, giving it an edge on U.S. rivals, and is getting into a wider range of businesses.
Small Caps: Positive AXTA: Company has a high-quality franchise with top positions in various auto-coating sectors, and its refinishing business, which accounts for 40% of revenue, should grow during the next year.
Follow-Up: Positive on Snap: As the company prepares for an initial public offering, “it seems to be overcoming qualms about profitability and slowing user growth,” and investors see strong advertising potential.
European Trader: Cautious on Nestle: Food and beverage giant has suffered a number of setbacks, but it still has good prospects in a tough market.
Asian Trader: Positive on Shenzhen Huiding Technology, Egis Technology: The Asian companies stand to benefit from the growing user of fingerprint sensors on smartphones, a trend started by AAPL.
Emerging Markets: Russian and Indonesia stand to be winners if commodity prices stabilize, driven by demand in China and the U.S.
Commodities: Platinum prices are up 11% since the start of 2017, but oversupply and weak demand could end the rally, creating an opportunity for investors to benefit from a drop.
Streetwise: “Cyclical rejuvenation hasn’t cured the structural ills of an economy hollowed out by automation and global competition, and stagnant wages for 90% of the population.”
Friday, February 24, 2017
Stocks Continued to Climb the Wall of Worry, Waiting for Trump to Deliver
TradeTheNews.com Weekly Market Update: Stocks Continued to Climb the Wall of Worry, Waiting for Trump to Deliver
Fri, 24 Feb 2017 16:07 PM EST
Early on this week, US stocks looked poised for a fifth consecutive week of record high closes. The economic data generally remained robust globally. A hotter than expected print for US CPI figures and a FOMC minutes release that pointed to a committee inclined to pull the trigger sooner rather than later kept the reflation narrative intact. President Trump continued to meet with high-profile business leaders and talk up his soon-to-be-announced tax and regulatory reforms. By Friday, the Dow was riding a 10-day winning streak.
The second half of the week though, saw the tone reach an inflection point, and investor appetite for risk began to wane. Polls out of Europe drummed up populism/nationalism concerns ahead of key elections in France and Germany later this year. President Trump doubled and tripled down on many of his most controversial campaign promises/tactics, while his Treasury Secretary laid out a timeline for growth reforms that underwhelmed. The narrative shifted its focus onto the growing number of obstacles that stand in the way of his administration and Congress reaching a deal on substantial fiscal reforms. The markets seemed to reflect this in rising bond and gold prices, while stock gains were notably more subdued. Trading may have also hit a bit of a dead spot; with earnings season nearing an end and a relatively sparse economic calendar, markets have become beholden to headlines out of Washington ahead of Trump's congressional address next week. The Dow S&P and the NASDAQ finished a fifth consecutive week at all-time highs, but the Russell 2000 lost ground. For the week the Dow rose 1%, the S&P added 0.7% and the NASDAQ eked out a gain.
Fixed income markets continued to rally and yields fell throughout the week, leading to a lot of hand-wringing over the divergence in sentiment being projected by exuberant stock and stubborn fixed income markets. Treasury yields were further pressured by a decline in German government bond rates. Political concerns and talk of an ECB-induced short squeeze sent the German 2-year yield towards -1%. The US benchmark 10-Year yield peaked for the week at 2.43% to slide lower to 2.32% today. The Feb FOMC minutes appeared to pull forward hopes for the next rate hike, but the market is not yet behind a move at the next meeting. Futures prices suggest most believe the best bet could be May or more likely June, when the Fed is currently scheduled to hold a post-meeting press conference.
As earnings season plows on, it was retailers’ turn to report this week, and the results were mixed. Nordstrom beat on top and bottom line, and investors were pleased despite its outlook coming in below street estimates. Gap reported a strong end to its year and sees next year same store sales flat to up slightly. Discount giant TJX topped analyst expectations, and its outlook also saw a slight increase in same store sales for next year. Macy’s beat street estimates on earnings, but posted its eighth quarterly same-store sales decline in a row. JCP shares slid on its results and a restructuring announcement. Walmart beat and guided initial FY18 rev above consensus, and Home Depot posted a solid end to the year. On the M&A front, Kraft Heinz slumped and Modelez rose after Unilever's offer from late last week was rescinded, and Yahoo came to an amended agreement with Verizon for a reduced asset sale price.
MONDAY, FEB 20
(UK) FEB CBI INDUSTRIAL TRENDS TOTAL ORDERS: 8 V 4E
(JP) JAPAN FEB PRELIMINARY PMI MANUFACTURING: 53.5 V 52.7 PRIOR (6th month of expansion and highest level in 35 months)
HSBC Reports FY16 Adj pretax $19.3B v $20.3Be; Adj Rev $50.2B v $51.4B y/y; Launches $1.0B share buyback program (0.6% of market cap) to be completed in H1
TUESDAY, FEB 21
BHP.AU Reports H1 Net profit $3.2B v loss $5.7B y/y, underlying Pretax $3.24B v $2.9Be, Rev $18.8B v $18.5Be
(FR) FRANCE FEB PRELIMINARY MANUFACTURING PMI: 52.3 V 53.5E (5th month of expansion)
(DE) GERMANY FEB PRELIMINARY MANUFACTURING PMI: 57.0 V 56.0E (27th month of expansion and highest since May 2011)
(EU) EURO ZONE FEB PRELIMINARY MANUFACTURING PMI: 55.5 V 55.0E (44th month of expansion and highest since Apr 2011)
HD Reports Q4 $1.44 v $1.33e, R$22.2B v $21.8Be; raises dividend 29% to $0.89/shr (implied yield 2.5%); announces new $15B share repurchase program (8.5% of market cap)
M Reports Q4 $2.02 v $1.97e, R$8.52B v $8.58Be
(US) FEB PRELIMINARY MARKIT MANUFACTURING PMI: 54.3 V 55.3E
(UK) DRAFT BREXIT BILL PASSES HOUSE OF LORDS FOLLOWING ITS 2ND READING (without a vote); Bill moves onto its next stage
(CN) CHINA JAN PROPERTY PRICES M/M: RISE IN 45 OUT OF 70 CITIES VS 46 PRIOR; Y/Y: RISE IN 66 OUT OF 70 CITIES V 65 PRIOR
WEDNESDAY, FEB 22
AIR.FR Reports FY16 Net €995M v €2.70B y/y, Adj EBIT €3.96B v €3.80Be, Rev €66.6B v €65.4Be
BAYN.DE Reports Q4 Net profit €453M (adj) v €690Me, EBITDA adj €2.18B v €2.07Be, Rev €11.8B v €11.7Be
LLOY.UK Reports Q4 PBT £973M v £1.3Be, Underlying Profit €1.79B v €1.91B y/y, Total Income £4.35B v £4.28B y/y
(DE) GERMANY FEB IFO BUSINESS CLIMATE: 111.0 V 109.6E (matches high from Feb 2014); CURRENT ASSESSMENT: 118.4 V 116.6E
(UK) Q4 PRELIMINARY GDP Q/Q: 0.7% V 0.6%E; Y/Y: 2.0% V 2.2%E (lowest annual pace since Q1 2013)
(EU) EURO ZONE JAN CPI M/M: -0.8% V -0.8%E; Y/Y (final reading): 1.8% V 1.8%E; CPI CORE Y/Y (final reading): 0.9% V 0.9%E
TJX Reports Q4 $1.03 v $1.00e, R$9.5B v $9.47Be; Raises dividend 20% to $0.3125/shr (1.64% yield); To buyback between $1.3-1.8B of stock (2.4-3.7% of market cap)
(US) JAN EXISTING HOME SALES: 5.69M V 5.55ME (highest since Feb 2007)
(US) Association of American Railroads weekly rail traffic report for week ending Feb 18th: 531.1K carloads and intermodal units, +6.8% y/y (sixth straight week of gains)
(US) FOMC MINUTES FROM FEB 1 MEETING: FOMC TO START BALANCE SHEET DEBATE AT UPCOMING MEETINGS
TSLA Reports Q4 -$0.69 v -$0.13e, R$2.28B v $2.20Be
(BR) BRAZIL CENTRAL BANK (BCB) CUTS SELIC TARGET RATE BY 75BPS TO 12.25%; AS EXPECTED
(US) Weekly API Oil Inventories: Crude: -0.9M v +9.9M prior; first draw in 5 weeks
(KR) BANK OF KOREA (BOK) LEAVES 7-DAY REPO RATE UNCHANGED AT 1.25%; AS EXPECTED
THURSDAY, FEB 23
ORA.FR Reports FY16 EBITDA €12.68B v €12.6Be, Rev €40.9B v €40.7Be; Raises dividend 8.3% to €0.65/shr
(DE) GERMANY Q4 FINAL GDP Q/Q: 0.4% V 0.4%E; Y/Y: 1.7% V 1.7%E; GDP NSA Y/Y: 1.2% V1.2%E
BA.UK Reports FY16 EPS 40.3p v 40.2p y/y, Underlying EBITA £1.91B v £1.68B y/y, Rev £19.0B v £17.9B y/y
BARC.UK Reports Q4 Net £99M v loss £2.42B y/y, adj Pretax £284M v £646Me, Core Net Rev £4.99B v £4.45B y/y; cuts FY dividend from 6.5p to 3.0p/shr; Provides update on Barclays Africa sell down & Seperation
(US) Treasury Sec Mnuchin: number one committment is to growth and passing significant tax reform - CNBC
(US) INITIAL JOBLESS CLAIMS: 244K V 240KE; CONTINUING CLAIMS: 2.06M V 2.07ME
(US) DOE CRUDE: +0.6M V +3.5ME; GASOLINE: -2.6M V -1ME; DISTILLATE: -4.9M V -0.5ME
(MX) Mexico Foreign Min Videgaray: US-Mexico relationship took steps in the right direction today
BIDU Reports Q4 $1.91 v $0.93e, R$2.62B v $2.51Be (2 est)
FRIDAY, FEB 24
BAS.DE Reports Q4 Net €689M v €688Me, EBIT (before items) €1.18B v €1.16Be, Rev €14.9B v €14.1Be
RBS.UK Reports FY16 Net loss £6.96B* v loss £1.98B y/y, adj Op profit £3.67B v £3.30Be, Rev £12.4B v £12.0Be
STAN.UK Reports FY16 Statutory Pretax profit +$409M v -$1.5B y/y, adj Pretax $1.09B v $1.42Be; Underlying Op Rev $13.8B v $13.7Be
(US) JAN NEW HOME SALES: 555K V 571KE
(US) FEB FINAL MICHIGAN CONFIDENCE: 96.3 V 96.0E
(US) White House Econ Adviser Cohn says White House doesn't support House GOP version of border adjustment tax - Axios
(US) Weekly Baker Hughes US Rig Count: 754 v 751 w/w (+0.4%) (6th straight rise)
(US) White House reportedly blocks CNN, NY Times, LA Times, Politico and BuzzFeed correspondents from White House press gaggle - Politico
Fri, 24 Feb 2017 16:07 PM EST
Early on this week, US stocks looked poised for a fifth consecutive week of record high closes. The economic data generally remained robust globally. A hotter than expected print for US CPI figures and a FOMC minutes release that pointed to a committee inclined to pull the trigger sooner rather than later kept the reflation narrative intact. President Trump continued to meet with high-profile business leaders and talk up his soon-to-be-announced tax and regulatory reforms. By Friday, the Dow was riding a 10-day winning streak.
The second half of the week though, saw the tone reach an inflection point, and investor appetite for risk began to wane. Polls out of Europe drummed up populism/nationalism concerns ahead of key elections in France and Germany later this year. President Trump doubled and tripled down on many of his most controversial campaign promises/tactics, while his Treasury Secretary laid out a timeline for growth reforms that underwhelmed. The narrative shifted its focus onto the growing number of obstacles that stand in the way of his administration and Congress reaching a deal on substantial fiscal reforms. The markets seemed to reflect this in rising bond and gold prices, while stock gains were notably more subdued. Trading may have also hit a bit of a dead spot; with earnings season nearing an end and a relatively sparse economic calendar, markets have become beholden to headlines out of Washington ahead of Trump's congressional address next week. The Dow S&P and the NASDAQ finished a fifth consecutive week at all-time highs, but the Russell 2000 lost ground. For the week the Dow rose 1%, the S&P added 0.7% and the NASDAQ eked out a gain.
Fixed income markets continued to rally and yields fell throughout the week, leading to a lot of hand-wringing over the divergence in sentiment being projected by exuberant stock and stubborn fixed income markets. Treasury yields were further pressured by a decline in German government bond rates. Political concerns and talk of an ECB-induced short squeeze sent the German 2-year yield towards -1%. The US benchmark 10-Year yield peaked for the week at 2.43% to slide lower to 2.32% today. The Feb FOMC minutes appeared to pull forward hopes for the next rate hike, but the market is not yet behind a move at the next meeting. Futures prices suggest most believe the best bet could be May or more likely June, when the Fed is currently scheduled to hold a post-meeting press conference.
As earnings season plows on, it was retailers’ turn to report this week, and the results were mixed. Nordstrom beat on top and bottom line, and investors were pleased despite its outlook coming in below street estimates. Gap reported a strong end to its year and sees next year same store sales flat to up slightly. Discount giant TJX topped analyst expectations, and its outlook also saw a slight increase in same store sales for next year. Macy’s beat street estimates on earnings, but posted its eighth quarterly same-store sales decline in a row. JCP shares slid on its results and a restructuring announcement. Walmart beat and guided initial FY18 rev above consensus, and Home Depot posted a solid end to the year. On the M&A front, Kraft Heinz slumped and Modelez rose after Unilever's offer from late last week was rescinded, and Yahoo came to an amended agreement with Verizon for a reduced asset sale price.
MONDAY, FEB 20
(UK) FEB CBI INDUSTRIAL TRENDS TOTAL ORDERS: 8 V 4E
(JP) JAPAN FEB PRELIMINARY PMI MANUFACTURING: 53.5 V 52.7 PRIOR (6th month of expansion and highest level in 35 months)
HSBC Reports FY16 Adj pretax $19.3B v $20.3Be; Adj Rev $50.2B v $51.4B y/y; Launches $1.0B share buyback program (0.6% of market cap) to be completed in H1
TUESDAY, FEB 21
BHP.AU Reports H1 Net profit $3.2B v loss $5.7B y/y, underlying Pretax $3.24B v $2.9Be, Rev $18.8B v $18.5Be
(FR) FRANCE FEB PRELIMINARY MANUFACTURING PMI: 52.3 V 53.5E (5th month of expansion)
(DE) GERMANY FEB PRELIMINARY MANUFACTURING PMI: 57.0 V 56.0E (27th month of expansion and highest since May 2011)
(EU) EURO ZONE FEB PRELIMINARY MANUFACTURING PMI: 55.5 V 55.0E (44th month of expansion and highest since Apr 2011)
HD Reports Q4 $1.44 v $1.33e, R$22.2B v $21.8Be; raises dividend 29% to $0.89/shr (implied yield 2.5%); announces new $15B share repurchase program (8.5% of market cap)
M Reports Q4 $2.02 v $1.97e, R$8.52B v $8.58Be
(US) FEB PRELIMINARY MARKIT MANUFACTURING PMI: 54.3 V 55.3E
(UK) DRAFT BREXIT BILL PASSES HOUSE OF LORDS FOLLOWING ITS 2ND READING (without a vote); Bill moves onto its next stage
(CN) CHINA JAN PROPERTY PRICES M/M: RISE IN 45 OUT OF 70 CITIES VS 46 PRIOR; Y/Y: RISE IN 66 OUT OF 70 CITIES V 65 PRIOR
WEDNESDAY, FEB 22
AIR.FR Reports FY16 Net €995M v €2.70B y/y, Adj EBIT €3.96B v €3.80Be, Rev €66.6B v €65.4Be
BAYN.DE Reports Q4 Net profit €453M (adj) v €690Me, EBITDA adj €2.18B v €2.07Be, Rev €11.8B v €11.7Be
LLOY.UK Reports Q4 PBT £973M v £1.3Be, Underlying Profit €1.79B v €1.91B y/y, Total Income £4.35B v £4.28B y/y
(DE) GERMANY FEB IFO BUSINESS CLIMATE: 111.0 V 109.6E (matches high from Feb 2014); CURRENT ASSESSMENT: 118.4 V 116.6E
(UK) Q4 PRELIMINARY GDP Q/Q: 0.7% V 0.6%E; Y/Y: 2.0% V 2.2%E (lowest annual pace since Q1 2013)
(EU) EURO ZONE JAN CPI M/M: -0.8% V -0.8%E; Y/Y (final reading): 1.8% V 1.8%E; CPI CORE Y/Y (final reading): 0.9% V 0.9%E
TJX Reports Q4 $1.03 v $1.00e, R$9.5B v $9.47Be; Raises dividend 20% to $0.3125/shr (1.64% yield); To buyback between $1.3-1.8B of stock (2.4-3.7% of market cap)
(US) JAN EXISTING HOME SALES: 5.69M V 5.55ME (highest since Feb 2007)
(US) Association of American Railroads weekly rail traffic report for week ending Feb 18th: 531.1K carloads and intermodal units, +6.8% y/y (sixth straight week of gains)
(US) FOMC MINUTES FROM FEB 1 MEETING: FOMC TO START BALANCE SHEET DEBATE AT UPCOMING MEETINGS
TSLA Reports Q4 -$0.69 v -$0.13e, R$2.28B v $2.20Be
(BR) BRAZIL CENTRAL BANK (BCB) CUTS SELIC TARGET RATE BY 75BPS TO 12.25%; AS EXPECTED
(US) Weekly API Oil Inventories: Crude: -0.9M v +9.9M prior; first draw in 5 weeks
(KR) BANK OF KOREA (BOK) LEAVES 7-DAY REPO RATE UNCHANGED AT 1.25%; AS EXPECTED
THURSDAY, FEB 23
ORA.FR Reports FY16 EBITDA €12.68B v €12.6Be, Rev €40.9B v €40.7Be; Raises dividend 8.3% to €0.65/shr
(DE) GERMANY Q4 FINAL GDP Q/Q: 0.4% V 0.4%E; Y/Y: 1.7% V 1.7%E; GDP NSA Y/Y: 1.2% V1.2%E
BA.UK Reports FY16 EPS 40.3p v 40.2p y/y, Underlying EBITA £1.91B v £1.68B y/y, Rev £19.0B v £17.9B y/y
BARC.UK Reports Q4 Net £99M v loss £2.42B y/y, adj Pretax £284M v £646Me, Core Net Rev £4.99B v £4.45B y/y; cuts FY dividend from 6.5p to 3.0p/shr; Provides update on Barclays Africa sell down & Seperation
(US) Treasury Sec Mnuchin: number one committment is to growth and passing significant tax reform - CNBC
(US) INITIAL JOBLESS CLAIMS: 244K V 240KE; CONTINUING CLAIMS: 2.06M V 2.07ME
(US) DOE CRUDE: +0.6M V +3.5ME; GASOLINE: -2.6M V -1ME; DISTILLATE: -4.9M V -0.5ME
(MX) Mexico Foreign Min Videgaray: US-Mexico relationship took steps in the right direction today
BIDU Reports Q4 $1.91 v $0.93e, R$2.62B v $2.51Be (2 est)
FRIDAY, FEB 24
BAS.DE Reports Q4 Net €689M v €688Me, EBIT (before items) €1.18B v €1.16Be, Rev €14.9B v €14.1Be
RBS.UK Reports FY16 Net loss £6.96B* v loss £1.98B y/y, adj Op profit £3.67B v £3.30Be, Rev £12.4B v £12.0Be
STAN.UK Reports FY16 Statutory Pretax profit +$409M v -$1.5B y/y, adj Pretax $1.09B v $1.42Be; Underlying Op Rev $13.8B v $13.7Be
(US) JAN NEW HOME SALES: 555K V 571KE
(US) FEB FINAL MICHIGAN CONFIDENCE: 96.3 V 96.0E
(US) White House Econ Adviser Cohn says White House doesn't support House GOP version of border adjustment tax - Axios
(US) Weekly Baker Hughes US Rig Count: 754 v 751 w/w (+0.4%) (6th straight rise)
(US) White House reportedly blocks CNN, NY Times, LA Times, Politico and BuzzFeed correspondents from White House press gaggle - Politico
Friday, February 17, 2017
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
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
Saturday, February 11, 2017
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.
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.
Friday, February 10, 2017
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
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
Saturday, February 4, 2017
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.
Friday, February 3, 2017
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
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
Sunday, January 29, 2017
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.
Friday, January 27, 2017
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
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
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