TradeTheNews.com Weekly Market Update: Brexit Begins, Washington Resets
Fri, 31 Mar 2017 16:08 PM EST
Equities returned to their bull trend this week on positive economic data and talk of tax reform from the Trump administration. Markets shook off concerns about the Trump legislative agenda after the failed effort at healthcare reform, as the prospects of moving on to economic policy implementation starting with tax cuts re-galvanized investors' interest in stocks. For the week, the Dow gained 0.3%, the S&P added 0.8% and the Nasdaq rose 1.4%.
Talk from various Fed officials of three rate hikes for 2017 and maintaining a prudent pace kept the reflation trade muted. The economy is seen as being on track, warranting another couple of hikes this year. However, the bond market had been looking for evidence there might be a total of four. 10-Year Treasuries maintained their yield within a tight range throughout the week; most price action kept yield between a month low of 2.37% and 2.41%. WTI crude bounced from last week's low at $47, to close the week above $50 a barrel, as EIA reported an unexpected drop in supply and traders' judged OPEC cuts in a different light.
The UK Prime Minister May sent a letter to the EU council formally initiating the Brexit process by triggering Article 50 of the EU constitution. The text of the letter was conciliatory, but also advised that it was in both parties' interest to reach an agreement. It also warned that security would be undermined if a deal was not reached and called for simultaneous negotiations of Brexit terms along with a future trade deal. The EU answered that trade negotiations can only happen once Brexit terms are at a well advanced point, and EU officials reiterated calls for a £50B divorce bill. The British government has not made any official comments so far as to the size of the divorce bill request. Less than two days after invoking Article 50, the UK reported Q4 final GDP at 1.9%, its worst annual growth pace in nearly four years and potentially a bad omen as the Brexit begins.
In corporate news, with earnings season past us, hospital names led the week off buoyed by the scuttling of the Republican healthcare plan. Greenlight's Einhorn pushed GM to boost its share value by splitting common stock into two separate classes, but management rejected the plan on grounds it could harm the carmaker’s investment-grade rating. On the M&A front, the EU formally blocked Deutsche Boerse’s plan to acquire London Stock Exchange, citing competition concerns. Semiconductor company Maxlinear acquired Exar Group for $13.00/shr in cash in a $700M transaction, seeking to build scale and boost growth. Cenovus agreed to acquire ConocoPhillips' 50% interest in the FCCL Partnership for $17.7B in cash and shares, as Conoco aims to accelerate its debt reduction plan. And FMC announced it would buy parts of Dupont's Crop protection business, and Dupont would acquire FMC Health and Nutrition, as part of a strategy to win EU approval for the Dow-Dupont merger.
SUNDAY 3/26
386.HK Reports Q4 Net CNY46.4B v CNY32.3B y/y; Op CNY77.2B v CNY56.8B y/y; Rev CNY1.93T v CNY2.02T y/y
2202.HK Reports FY16 Net CNY21.0B v CNY18.1B y/y, Rev CNY228.9B v CNY184.3B y/y
MONDAY 3/27
(EU) EURO ZONE FEB M3 MONEY SUPPLY Y/Y: 4.7% V 4.9%E
(DE) GERMANY MAR IFO BUSINESS CLIMATE: 112.3 V 111.1E (highest since July 2011); CURRENT ASSESSMENT: 119.3 V 118.3E
TUESDAY 3/28
3328.HK Reports FY16 Net CNY67.2B v CNY65.4Be, NII CNY134.9B v CNY144.2B y/y
(US) MAR RICHMOND FED MANUFACTURING INDEX: 22 V 15E
- Volume of new orders 26 v 24 prior
(US) MAR CONSUMER CONFIDENCE: 125.6 V 114.0E (highest since Dec 2000)
WEDNESDAY 3/29
(FR) FRANCE MAR CONSUMER CONFIDENCE: 100 V 100E
(TH)THAILAND CENTRAL BANK (BOT) LEAVES BENCHMARK INTEREST RATE UNCHANGED AT 1.50%; AS EXPECTED
494.HK Reports FY16 Net $223M v $283.5Me, Op profit $412M v $512M y/y, Rev $16.8B v $17.6Be
(UK) UK FORMALLY BEGINS BREXIT PROCESS WITH TRANSFER OF SIGNED ARTICLE 50 LETTER TO EU'S PRESIDENT TUSK
(UK) PM May presents content of Article 50 letter: Confirm beginning of Brexit process; no turning back from this historic moment to shape the future
(EU) ECB said to be wary of making any fresh-policy shift in its communication at its April meeting - financial press
(US) Fed’s Evans (dove, voter): there has been good progress towards Fed goals; supports one or two more rate hikes this year
(US) Fed's Rosengren (moderate, non-voter): Fed should raise rates four times in 2017; raises should only be delayed if data disappoints - remarks in Boston
(US) Association of American Railroads weekly rail traffic report for week ending March 25th: 526.4K carloads and intermodal units, +12% y/y (11th straight week of gains)
THURSDAY 3/30
(DE) GERMANY MAR CPI SAXONY M/M: 0.2% V 0.5% PRIOR; Y/Y: 1.8% V 2.4% PRIOR
1398.HK Reports FY16 Net CNY278.2B v CNY275.3Be, Net interest income CNY471.8B v CNY508B y/y
(EU) EURO ZONE MAR BUSINESS CLIMATE INDICATOR: 0.82 V 0.87E; CONSUMER CONFIDENCE (FINAL): -5.0 V -5.0E
(CZ) CZECH CENTRAL BANK (CNB) LEAVES REPURCHASE RATE UNCHANGED AT 0.05%; AS EXPECTED
(DE) GERMANY MAR PRELIMINARY CPI M/M: 0.2% V 0.4%E; Y/Y: 1.6% V 1.8%E
(US) INITIAL JOBLESS CLAIMS: 258K V 247KE; CONTINUING CLAIMS: 2.05M V 2.03ME
(US) Q4 FINAL GDP PRICE INDEX: 2.1% V 2.0%E; CORE PCE Q/Q: 1.3% V 1.2%E
(US) Q4 FINAL GDP ANNUALIZED Q/Q: 2.1% V 2.0%E; PERSONAL CONSUMPTION: 3.5% V 3.0%E
(ZA) SOUTH AFRICA CENTRAL BANK (SARB) LEAVES INTEREST RATES UNCHANGED AT 7.00%; AS EXPECTED
(US) Trump administration draft letter seeks changes to NAFTA, but not scrapping deal altogether - Washington Post
(EU) ECB's Knot (Netherlands): rate hike in early 2018 is closer to my own expectations - Dutch press interview
(UK) Scotland First Min Sturgeon sends letter (section 30) to UK govt formally requesting 2nd Scottish independence referendum - financial press
(MX) MEXICO CENTRAL BANK (BANXICO) RAISES OVERNIGHT RATE BY 25BPS TO 6.50%; AS EXPECTED
(ZA) South Africa President Zuma reportedly to make major cabinet reshuffle; Fin Min Gordhan will be affected by overhaul - press
(US) Fed's Dudley (dove, FOMC voter): Rate rises are needed to keep expansion on track; economic risks may be tilting toward the upside - comments in Florida
(JP) JAPAN FEB JOBLESS RATE: 2.8% V 3.0%E; lowest since June 1994
(CN) CHINA MAR MANUFACTURING PMI (GOVT OFFICIAL): 51.8 (highest since Apr 2012) V 51.7E; NON-MANUFACTURING PMI: 55.1 (highest since May 2014) V 54.2 PRIOR
FRIDAY 3/31
(EU) EU Brexit negotiation guidelines said to ban bilateral talks between UK and EU member States - financial press
(EU) EU President Tusk formally present Brexit negotiation guidelines: Will visit London with talks with PM May ahead of the Apr 29th summit; reiterates that UK must fulfill its financial obligation to EU
(UK) Q4 FINAL GDP Q/Q: 0.7% V 0.7%E; Y/Y: 1.9% V 2.0%E (lowest annual pace since Q1 2013)
3988.HK Reports FY16 Net CNY164.6B v CNY167.1Be, Op Rev CNY485.7B v CNY473.9B y/y
(EU) EURO ZONE MAR ADVANCE CPI ESTIMATE Y/Y: 1.5% V 1.8%E; CPI CORE Y/Y: 0.7% V 0.8%E
(US) FEB PERSONAL INCOME: 0.4% V 0.4%E; PERSONAL SPENDING: 0.1% V 0.2%E
(US) FEB PCE DEFLATOR M/M: 0.1% V 0.1%E; Y/Y: 2.1% V 2.1%E
(US) FEB PCE CORE M/M: 0.2% V 0.2%E; Y/Y: 1.8% V 1.7%E
(US) MAR CHICAGO PURCHASING MANAGER: 57.7 V 56.9E
(US) MAR FINAL MICHIGAN CONFIDENCE: 96.9 V 97.6E
(US) Atlanta Fed cuts Q1 GDP to 0.9% from 1.0% on 3/24
(US) New York Fed Nowcast: cuts Q1 GDP forecast to 2.9% from 3.0% on 3/24; cuts Q2 GDP forecast to 2.6% from 2.7%
Friday, March 31, 2017
Saturday, March 25, 2017
Barrons weekend update
Barrons weekend update: Positive on VIA, SIVB; cautious on SEDG
Cover story: Barron's list of the World's Best CEOs includes newcomers Mary Barra of GM, Satya Nadella of MSFT, and Stephen Hensley of UNH.
Features:
1) Positive on VIA: The media company's shares are up since Bob Bakish became CEO, and his plan to reorganize programming, revive reality TV, and create more content for MTV could give shares a 40% upside;
2) Cautious on SEDG: Shares of company that makes residential and commercial solar-power systems have taken a hit along with those of other firms in the sector, but shares are underpriced and could rally if sales targets are hit this year;
3) Positive on SIVB: Lender to venture capitalists and start-up founders expects strong earnings growth in the years ahead, and shares could move 25% or more higher.
Tech Trader: Tiernan Ray says the good times for MU aren't likely to last, since DRAM and flash memory chips "haven't become any less of a commodity since the stock bottomed out roughly a year ago."
Trader: Jason Trennert of Strategas Research Partners says that of nine factors that precede a market top, only one-slowing upward earnings revisions-is of concern; Robert Sluymer of Fundstrat Global Advisors says the number of energy stocks making new relative lows is no longer growing; Mall REITs have historically outperformed other real estate investments when rates are rising, a trend that should continue this year.
Interview: Mariko Gordon of small-cap specialist Daruma Capital looks for a positive rate of change in a company's fundamentals and for risks and rewards that aren't reflected in the valuation (picks: ABM, FCB, OMCL, NPO).
Profile: Jim Dondero of Highland Capital Management makes bets on alternative investments by focusing strongly on debt deals, turnarounds, and trends (top holdings: VSTE, CLO, TWTR, TRGP, LRN, PAGP, EPD, TerreStar, Argentina sovereign debt).
Follow-Up: Positive on YHOO: Company's shares trade at a discount to its likely asset value; assuming no change in its BABA stake, investors could realize a 20% return during the next year; Cautious on GME: Shares could rally if the company gains time for its transition to selling a wider range of merchandise, and strong sales on new products from Nintendo and MSFT.
European Trader: Positive on TOT: French oil major "could again find favor with investors after emerging from the recent oil-price collapse in better shape than many rivals."
Asian Trader: Positive on BABA, Tencent: With fintech set to be a major trend in China, tech giants have the potential to generate an estimated $65B in sales by 2020 from the technology, and add 60% to their current valuations.
Emerging Markets: Poland, Korea, and Mexico are the best-performing emerging-market countries so far this year, while Greece, Russia, and Qatar/UAE have performed the worst.
Commodities: Lumber prices are set to rise because of a small trade war under way between the U.S. and Canada related to the price Canadian foresters charge to cut down a tree.
Streetwise: "With the dollar's rise stalling and Americans balking at potential border adjustments that make imports pricier, investors looking to walk back their Trump trades could find NKE an increasingly comfortable fit."
Friday, March 24, 2017
‘Trump Bump’ Wobbles as Healthcare Bill Dies
TradeTheNews.com Weekly Market Update: ‘Trump Bump’ Wobbles as Healthcare Bill Dies
Fri, 24 Mar 2017 16:09 PM EST
The week saw a reversal in sentiment as investors grew concerned about the ability of the White House to push through the healthcare reform bill in the House and began to sell risk. Tuesday, the Dow lost more than 1%, its biggest one-day loss since last September. Stocks sold off on Friday morning as it appeared the Republicans didn’t have the votes to pass the bill, raising concerns about the Trump administration’s effectiveness in moving forward on the rest of its legislative agenda, including tax reform and infrastructure spending plans. Just before the close on Friday, the GOP pulled the healthcare bill, and stocks saw a relief rally led by the hospitals and healthcare sector. For the week, the S&P500 lost 1.4%, the DJIA dropped 1.5%, and the Nasdaq slipped 1.2%.
China's central bank intervened in the open market to add liquidity, as various financial institutions failed to meet payments. The Bank also tightened rules on borrowing and using corporate bonds as collateral, requiring a AAA rating on bonds as of April 7th. China may be starting to see the effects of financial stress typically associated with extremely high levels of credit-to-GDP ratios. However, the Shanghai Composite closed up on the week by 0.9%, bucking the global trend.
UK PM May set March 29th as the date to trigger the start of the Brexit negotiation process. Article 50 of the EU Treaty states that a member wishing to leave has two years from the date it officially triggers the process. Fears of a ‘hard Brexit’ have driven the Pound to recent lows, while the FTSE has reached new all-time highs. With the Brexit looming, however, the FTSE lost 1.2% over the week in sympathy with the US stock market, joining the sell-off of global stock indices as the Trump trade faded.
In corporate news, Nike shares fell following a mixed quarterly report and disappointing Q3 worldwide futures orders guidance. The sports retailer’s revenues disappointed the Street, despite a beat on earnings, which analysts mostly attributed to tighter expense management and shortening the production process length, amid increasing competition domestically from Under Armour and Adidas. Ford stock also slumped after guiding Q1 earnings below consensus, noting higher costs and unfavorable exchange rates, amid increasing sector worry about fast-falling used car prices. Micron closed out the week on a positive note, posting a big beat on earnings, as well as guiding much higher revenue and profit next quarter, citing strong demand and limited industry supply combined with a successful cost reduction plan.
SUNDAY 3/19
(CN) CHINA FEB PROPERTY PRICES M/M: RISE IN 56 OUT OF 70 CITIES VS 45 PRIOR; Y/Y: RISE IN 67 OUT OF 70 CITIES V 66 PRIOR
(CN) China property sector said to be more sensitive to rising interest rates - Chinese press
MONDAY 3/20
DBK.DE Guides FY17 Income to remain 'in comparison' y/y, Rev 'broadly flat' y/y; Plans to reorganise business into three divisions; Plans to recommend at least the minimum dividend - annual report
(US) FBI Director Comey: confirms that FBI is investigating Russian govt efforts to interfere in election, including potential links between Trump campaign and Russia - testimony to House Intel Committee
(UK) Report by PA Consulting Group found that a hard Brexit could increase the cost of making a car in the UK by £2,400
TUESDAY 3/21
BMW.DE Guides FY17 EBIT, Rev and Sales volume to see 'slight rise' y/y
*(UK) FEB CPI M/M: 0.7% V 0.5%E; Y/Y: 2.3% V 2.1%E; CPI CORE Y/Y: 2.0% V 1.7%E; inflation above BOE target for 1st time since Dec 2013
(UK) MAR CBI INDUSTRIAL TRENDS TOTAL ORDERS: 8 V 5E
(US) Mar Philadelphia Fed Non-Manufacturing General Business Conditions: 35.4 v 29.3 prior
NKE Reports Q3 $0.68 v $0.52e, R$8.43B v $8.45Be
- Gross margin 44.5% v 45.9% y/y
FDX Reports Q3 $2.35 v $2.63e, R$15.0B v $15.0Be
WEDNESDAY 3/22
RMS.FR Reports FY16 Net €1.1B v €1.1Be, Op profit €1.70B v €827M y/y; confirms mid-term Rev targets
700.HK Reports Q4 Net CNY10.5B v CNY11.0Be, Op CNY13.9B v CNY10.9B y/y; Rev CNY43.9B v CNY44.2Be
(US) FEB EXISTING HOME SALES: 5.48M V 5.55ME
(UK) Shots reportedly fired outside of UK Parliament building - press
(US) Association of American Railroads weekly rail traffic report for week ending March 18th: 495.3K carloads and intermodal units, +2.4% y/y (10th straight week of gains)
(NZ) NEW ZEALAND CENTRAL BANK (RBNZ) LEAVES OFFICIAL CASH RATE (OCR) UNCHANGED AT 1.75%; AS EXPECTED
THURSDAY 3/23
(DE) GERMANY APR GFK CONSUMER CONFIDENCE: 9.8 V 10.0E
(PH) PHILIPPINES CENTRAL BANK (BSP) LEAVES OVERNIGHT BORROWING RATE UNCHANGED AT 3.00%; AS EXPECTED
(GR) ECB raises emergency liquidity assistance (ELA) cap for Greece banks from €46.2B to €46.6B (1st hike since Jun 2015)
(EU) ECB PUBLISHES ECONOMIC BULLETIN: Reiterates March monetary policy stance
(TW) TAIWAN CENTRAL BANK (CBC) LEAVES BENCHMARK INTEREST RATE UNCHANGED AT 1.375%; AS EXPECTED
(UK) FEB RETAIL SALES (EX-AUTO FUEL) M/M: 1.3% V 0.3%E; Y/Y: 4.1% V 3.2%E V
(EU) ECB ALLOTS €233.5B IN FINAL TLTRO-2 OPERATION VS. €110BE (last auction of an unconventional tool)
*(US) INITIAL JOBLESS CLAIMS: 258K V 240KE; CONTINUING CLAIMS: 2.00M V 2.04ME
F Guides Q1 $0.30-0.35 v $0.45e - filing ahead of analyst event
(US) FEB NEW HOME SALES: 592K V 564KE
MU Reports Q2 $0.90 v $0.81e, R$4.65B v $4.65Be - filing
(JP) JAPAN MAR PRELIMINARY PMI MANUFACTURING: 52.6 V 53.3 PRIOR (7th month of expansion)
FRIDAY 3/24
CSGN.CH Revises Q4 Net loss CHF2.62B* v CHF2.35B prior reported following CHF272M charge after NCUA settlement on toxic mortgage securities - annual report
(FR) FRANCE MAR PRELIMINARY MANUFACTURING PMI: 53.4 V 52.4E (6th month of expansion)
(DE) GERMANY MAR PRELIMINARY MANUFACTURING PMI: 58.3 V 56.5E (28th month of expansion and highest since Apr 2011)
(EU) EURO ZONE MAR PRELIMINARY MANUFACTURING PMI: 56.2 V 55.3E (45th month of expansion and highest since Apr 2011)
(RU) RUSSIA CENTRAL BANK (CBR) CUTS 7-DAY AUCTION RATE BY 25BPS TO 9.75%; NOT EXPECTED
(US) FEB PRELIMINARY DURABLE GOODS ORDERS: 1.7% V 1.3%E; DURABLES EX-TRANSPORTATION: 0.4% V 0.6%E
(US) MAR PRELIMINARY MARKIT MANUFACTURING PMI: 53.4 V 54.8E (lowest since Oct)
(US) Atlanta Fed raises Q1 GDP to 1.0% from 0.9% on 3/16
(US) Labor Dept corrects jobless claims for March 18th week to 261K from 258K prior release
(US) New York Fed Nowcast: raises Q1 GDP forecast to 3.0% from 2.8% on 3/17; raises Q2 GDP forecast to 2.7% from 2.5%
(US) GOP congressional aide: GOP leaders are not confident they have votes to pass AHCA bill; now planning what to do next if healthcare bill fails - press
(US) US President Trump says the GOP has just pulled the healthcare bill - press
Fri, 24 Mar 2017 16:09 PM EST
The week saw a reversal in sentiment as investors grew concerned about the ability of the White House to push through the healthcare reform bill in the House and began to sell risk. Tuesday, the Dow lost more than 1%, its biggest one-day loss since last September. Stocks sold off on Friday morning as it appeared the Republicans didn’t have the votes to pass the bill, raising concerns about the Trump administration’s effectiveness in moving forward on the rest of its legislative agenda, including tax reform and infrastructure spending plans. Just before the close on Friday, the GOP pulled the healthcare bill, and stocks saw a relief rally led by the hospitals and healthcare sector. For the week, the S&P500 lost 1.4%, the DJIA dropped 1.5%, and the Nasdaq slipped 1.2%.
China's central bank intervened in the open market to add liquidity, as various financial institutions failed to meet payments. The Bank also tightened rules on borrowing and using corporate bonds as collateral, requiring a AAA rating on bonds as of April 7th. China may be starting to see the effects of financial stress typically associated with extremely high levels of credit-to-GDP ratios. However, the Shanghai Composite closed up on the week by 0.9%, bucking the global trend.
UK PM May set March 29th as the date to trigger the start of the Brexit negotiation process. Article 50 of the EU Treaty states that a member wishing to leave has two years from the date it officially triggers the process. Fears of a ‘hard Brexit’ have driven the Pound to recent lows, while the FTSE has reached new all-time highs. With the Brexit looming, however, the FTSE lost 1.2% over the week in sympathy with the US stock market, joining the sell-off of global stock indices as the Trump trade faded.
In corporate news, Nike shares fell following a mixed quarterly report and disappointing Q3 worldwide futures orders guidance. The sports retailer’s revenues disappointed the Street, despite a beat on earnings, which analysts mostly attributed to tighter expense management and shortening the production process length, amid increasing competition domestically from Under Armour and Adidas. Ford stock also slumped after guiding Q1 earnings below consensus, noting higher costs and unfavorable exchange rates, amid increasing sector worry about fast-falling used car prices. Micron closed out the week on a positive note, posting a big beat on earnings, as well as guiding much higher revenue and profit next quarter, citing strong demand and limited industry supply combined with a successful cost reduction plan.
SUNDAY 3/19
(CN) CHINA FEB PROPERTY PRICES M/M: RISE IN 56 OUT OF 70 CITIES VS 45 PRIOR; Y/Y: RISE IN 67 OUT OF 70 CITIES V 66 PRIOR
(CN) China property sector said to be more sensitive to rising interest rates - Chinese press
MONDAY 3/20
DBK.DE Guides FY17 Income to remain 'in comparison' y/y, Rev 'broadly flat' y/y; Plans to reorganise business into three divisions; Plans to recommend at least the minimum dividend - annual report
(US) FBI Director Comey: confirms that FBI is investigating Russian govt efforts to interfere in election, including potential links between Trump campaign and Russia - testimony to House Intel Committee
(UK) Report by PA Consulting Group found that a hard Brexit could increase the cost of making a car in the UK by £2,400
TUESDAY 3/21
BMW.DE Guides FY17 EBIT, Rev and Sales volume to see 'slight rise' y/y
*(UK) FEB CPI M/M: 0.7% V 0.5%E; Y/Y: 2.3% V 2.1%E; CPI CORE Y/Y: 2.0% V 1.7%E; inflation above BOE target for 1st time since Dec 2013
(UK) MAR CBI INDUSTRIAL TRENDS TOTAL ORDERS: 8 V 5E
(US) Mar Philadelphia Fed Non-Manufacturing General Business Conditions: 35.4 v 29.3 prior
NKE Reports Q3 $0.68 v $0.52e, R$8.43B v $8.45Be
- Gross margin 44.5% v 45.9% y/y
FDX Reports Q3 $2.35 v $2.63e, R$15.0B v $15.0Be
WEDNESDAY 3/22
RMS.FR Reports FY16 Net €1.1B v €1.1Be, Op profit €1.70B v €827M y/y; confirms mid-term Rev targets
700.HK Reports Q4 Net CNY10.5B v CNY11.0Be, Op CNY13.9B v CNY10.9B y/y; Rev CNY43.9B v CNY44.2Be
(US) FEB EXISTING HOME SALES: 5.48M V 5.55ME
(UK) Shots reportedly fired outside of UK Parliament building - press
(US) Association of American Railroads weekly rail traffic report for week ending March 18th: 495.3K carloads and intermodal units, +2.4% y/y (10th straight week of gains)
(NZ) NEW ZEALAND CENTRAL BANK (RBNZ) LEAVES OFFICIAL CASH RATE (OCR) UNCHANGED AT 1.75%; AS EXPECTED
THURSDAY 3/23
(DE) GERMANY APR GFK CONSUMER CONFIDENCE: 9.8 V 10.0E
(PH) PHILIPPINES CENTRAL BANK (BSP) LEAVES OVERNIGHT BORROWING RATE UNCHANGED AT 3.00%; AS EXPECTED
(GR) ECB raises emergency liquidity assistance (ELA) cap for Greece banks from €46.2B to €46.6B (1st hike since Jun 2015)
(EU) ECB PUBLISHES ECONOMIC BULLETIN: Reiterates March monetary policy stance
(TW) TAIWAN CENTRAL BANK (CBC) LEAVES BENCHMARK INTEREST RATE UNCHANGED AT 1.375%; AS EXPECTED
(UK) FEB RETAIL SALES (EX-AUTO FUEL) M/M: 1.3% V 0.3%E; Y/Y: 4.1% V 3.2%E V
(EU) ECB ALLOTS €233.5B IN FINAL TLTRO-2 OPERATION VS. €110BE (last auction of an unconventional tool)
*(US) INITIAL JOBLESS CLAIMS: 258K V 240KE; CONTINUING CLAIMS: 2.00M V 2.04ME
F Guides Q1 $0.30-0.35 v $0.45e - filing ahead of analyst event
(US) FEB NEW HOME SALES: 592K V 564KE
MU Reports Q2 $0.90 v $0.81e, R$4.65B v $4.65Be - filing
(JP) JAPAN MAR PRELIMINARY PMI MANUFACTURING: 52.6 V 53.3 PRIOR (7th month of expansion)
FRIDAY 3/24
CSGN.CH Revises Q4 Net loss CHF2.62B* v CHF2.35B prior reported following CHF272M charge after NCUA settlement on toxic mortgage securities - annual report
(FR) FRANCE MAR PRELIMINARY MANUFACTURING PMI: 53.4 V 52.4E (6th month of expansion)
(DE) GERMANY MAR PRELIMINARY MANUFACTURING PMI: 58.3 V 56.5E (28th month of expansion and highest since Apr 2011)
(EU) EURO ZONE MAR PRELIMINARY MANUFACTURING PMI: 56.2 V 55.3E (45th month of expansion and highest since Apr 2011)
(RU) RUSSIA CENTRAL BANK (CBR) CUTS 7-DAY AUCTION RATE BY 25BPS TO 9.75%; NOT EXPECTED
(US) FEB PRELIMINARY DURABLE GOODS ORDERS: 1.7% V 1.3%E; DURABLES EX-TRANSPORTATION: 0.4% V 0.6%E
(US) MAR PRELIMINARY MARKIT MANUFACTURING PMI: 53.4 V 54.8E (lowest since Oct)
(US) Atlanta Fed raises Q1 GDP to 1.0% from 0.9% on 3/16
(US) Labor Dept corrects jobless claims for March 18th week to 261K from 258K prior release
(US) New York Fed Nowcast: raises Q1 GDP forecast to 3.0% from 2.8% on 3/17; raises Q2 GDP forecast to 2.7% from 2.5%
(US) GOP congressional aide: GOP leaders are not confident they have votes to pass AHCA bill; now planning what to do next if healthcare bill fails - press
(US) US President Trump says the GOP has just pulled the healthcare bill - press
Saturday, March 18, 2017
Barron's weekend summary
Barron's weekend summary: Positive on DIS and water sector; cautious on GRUB
Cover story: Donald Trump's border adjustment tax is a bad idea, and is "so complicated that even its advocates can't agree on how its disruptive effects on the U.S. economy will play out"; Barron's says there are better ways to boost the economy.
Features:
1) Cautious on GRUB: Online food-ordering service has seen strong revenue and profit growth since 2013, but new rivals with deeper pocks could grab market share and dent earnings;
2) Positive on PHO, CGW, TTEK, XYL: There isn't a single dominant company to bet on in the
3) Positive on DIS: Company's film and parks divisions are doing well, and an upcoming ESPN service viewers will be able to access outside of cable packages should boost earnings growth next year.
Tech Trader: Positive on INTC, ORCL, IBM: Companies may be doing better than many investors expected, but little has changed in their strategy and operations, and they don't truly grasp the leaps technology is making.
Trader: The fact that tech stocks such as FB and PCLN are back in fashion is a sign investors have begun to doubt the economic growth spurt expected under the Trump administration; Cautious on FDX, NSC: Transportation companies are lagging, but investors have no reason to worry yet, says Doug Ramsey of Leuthold Group; Cautious on GOOS: Shares of trendy clothing company seem richly priced, and while it may have a strong year, its stock discounts many years of success, but not much risk.
Interview: Ellen Stanek, chief investment officer of Baird Advisors, "focuses on adding basis points of yield and return through old-fashioned credit analysis."
Profile: David Marcus, manager of the Evermore Global Value fund, focuses primarily on Europe and looks for value and change (top 10 holdings: Scorpio Bulkers, ENZ, Ainmt, Ambac Financial Group, Codere, Aurelius Equity Opportunities, NN Group, Bollore, Hapag-Lloyd, Telecom Italia).
Small Caps: Positive on WBT: Shares have gained 40% since Wellbilt was spun off from MTW, and could see more gains when investors better understand its business.
Best Online Brokers: Barron's list of the best online brokers for 2017 is topped by Fidelity, IBKR, AMTD, OptionsHouse, and SCHW.
Follow-Up : Positive on AAPL: Investors should hold shares until at least the end of summer, when buzz for the tenth anniversary iPhone will heat up and shares could see a 10% boost.
European Trader: The results of the recent Dutch elections have eased fears of a European Union breakup, but uncertainty about rising populism and upcoming elections in France and Germany could affect market s .
Asian Trader: The surprise majority win of Indian prime minister Narendra Modi's Bharatiya Janata party in Uttar Pradesh should send the country's stocks higher.
Emerging Markets: "Emerging-market skeptics may need to rethink their positions. While higher U.S. rates historically have been bad for emerging markets, this rate cycle looks different."
Commodities: A closer look at the natural-gas market indicates it may not be in as much trouble as it appears to be; investors should look past winter and prepare to make a summer play.
Streetwise: Investors have a number of issues to worry about, including the potential for a slower-than-expected economic recovery, an economic slowdown in China, and a Fed move to raise rates faster than the market anticipates.
Friday, March 17, 2017
Global Central Banks Mull Tighter Policy as Fed Hikes Again
TradeTheNews.com Weekly Market Update: Global Central Banks Mull Tighter Policy as Fed Hikes Again
Fri, 17 Mar 2017 16:17 PM EST
While German Chancellor Merkel and President Trump met at the White House to discuss their differences, the stock market continued to post gains on Friday, and closed up on the week. Major indices had faltered when the week began, as investors keep looking for promised fiscal policy implementation to buy at higher prices. While most economic data this week was strong and better than expected, that alone was not enough to send equities to new highs. For the week the DJIA gained 0.1%, the S&P rose 0.2%, and the Nasdaq added 0.7%.
Wednesday's FOMC meeting statement sent stock markets rallying again as the Fed framed a 25 basis point hike as a vote of confidence in the economy and reiterated it would raise rates gradually. The committee noted inflation is near the 2% target, but that it may also be willing to let inflation exceed that level for a while. Signals from Chair Yellen that interest rate normalization wouldn't happen faster than the economy could handle reassured buyers, as the market took on more risk, sending all major indices higher for the day. Those perceived reassurances on the speed of hikes didn't help bond prices, however, as fixed-income products sold off after the statement, reversing their rise from the beginning of the week.
Various central banks held monetary policy meetings on Thursday, and all three banks kept rates on hold. Japan, Switzerland and the UK kept their monetary policy unchanged, with no surprises from the first two central banks. Analysts, however, debated how long major developed economies such as Switzerland, Japan or the EU could keep current accommodating rates. ECB official Nowotny said that monetary policy in the EU is not like the US and that interest rates could rise before the end of the QE program (though no decision on this policy has been made yet). The BOE policy meeting kept the Asset Purchase Target in place with a unanimous vote, but on the question of rates Forbes dissented in favor of a rate hike. With the Brexit about to be triggered, higher rates for the UK are still seen as on hold, but that may change soon if economic data stays strong.
In corporate news this week, Intel announced it would acquire Mobileye for $15.3B in cash, as the chipmaker makes a move into the computer vision and machine learning space for autonomous vehicles, a sector it sees as a $70B market opportunity by 2030. Valeant shares were hit Monday on news Bill Ackman’s Pershing Square was liquidating its stake, with Ackman noting that he didn't realize how bad the Valeant situation was until he joined the board. Airline names ended the week slightly lower after some soft Q1 commentary from Southwest and a snowstorm which ravaged the Northeast led to over 1,500 flight cancellations. Amgen dragged down the biotech sector on Friday when study results showed its Repatha cholesterol treatment reduced heart attack risk, but perhaps not by enough to justify the price tag of the drug.
MONDAY 3/13
(UK) Scottish First Min Sturgeon (SNP): Confirms will seek authority for another independence referendum between autumn 2018 and spring 2019 period to give Scotland the opportunity to follow the UK out of the EU - speech from Edinburgh
(US) CBO scores American Health Care Act (AHCA): 14M more people would be uninsured in 2018 and 24M more by 2026
(CN) CHINA JAN-FEB FIXED ASSETS EX RURAL YTD Y/Y: 8.9% V 8.3%E (8-month high)
(CN) CHINA JAN-FEB INDUSTRIAL PRODUCTION Y/Y: 6.3% V 6.2%E (6-month high)
(CN) CHINA JAN-FEB RETAIL SALES Y/Y: 9.5% V 10.6%E (multi-year low)
MBLY Confirms to be acquired by Intel for $63.54/shr in cash valued at $15.3B; To be accretive to Intel EPS immediately
03/13 VRX Pershing Square sold its entire 27.2M share stake at $11.00/shr and Ackman to leave the board - CNBC
TUESDAY 3/14
(DE) GERMANY MAR ZEW CURRENT SITUATION SURVEY: 77.3 V 78.0E; EXPECTATIONS SURVEY: 12.8 V 13.0E
OPEC Monthly Report: raises 2017 global oil demand growth from 1.19M bpd to 1.26M bpd; boosts non OPEC supply growth forecast
(US) FEB PPI FINAL DEMAND M/M: 0.3% V 0.1%E; Y/Y: 2.2% V 1.9%E
WEDNESDAY 4/15
BAS.DE Raises prices globally for antioxidants & light stabilizers by 10% (majority of products); effective today
(CN) China Feb YTD Fiscal Balance at CNY660B (surplus)
(UK) JAN ILO UNEMPLOYMENT RATE 3M/3M: 4.7% V 4.8%E
(UK) FEB JOBLESS CLAIMS CHANGE: -11.3K V -41.2K PRIOR; CLAIMANT COUNT RATE: 2.1% V 2.2% PRIOR
(UK) JAN AVERAGE WEEKLY EARNINGS 3M/Y: 2.2% V 2.4%E; WEEKLY EARNINGS (EX BONUS) 3M/Y: 2.3% V 2.5%E
(US) FEB ADVANCE RETAIL SALES M/M: 0.1% V 0.1%E; RETAIL SALES EX AUTO M/M: 0.2% V 0.1%E
(US) MAR EMPIRE MANUFACTURING: 16.4 V 15.0E
(US) FEB CPI M/M: 0.1% V 0.0%E; CPI EX FOOD AND ENERGY M/M: 0.2% V 0.2%E; CPI INDEX NSA: 243.603 V 243.416E
(US) MAR NAHB HOUSING MARKET INDEX: 71 V 65E (highest since June 2005)
(US) Atlanta Fed cuts Q1 GDP forecast to 0.9% from 1.2% on 3/8
(US) Association of American Railroads weekly rail traffic report for week ending March 11th: 510.6K carloads and intermodal units, +4.4% y/y (ninth straight week of gains)
(US) FOMC RAISES FED FUNDS TARGET RANGE 25BPS TO 0.75-1.00% (AS EXPECTED); EXPECTS ECONOMIC CONDITIONS WILL EVOLVE IN WAY THAT WARRANTS GRADUAL INCREASES
(US) FOMC UPDATED ECONOMIC FORECAST FOR MARCH MEETING (DEC)
(US) Fed Chair Yellen: rate decision was based on economy's continued progress toward reaching our two mandates - post rate decision conf
(US) President Trump: will do something about rising CAFE standards for autos; US auto industry has been hurt, but won't be hurting for long - press
(US) Fed Chair Yellen: Fed wants confidence in economy before starting to shrink balance sheet; the term "well under way" is more qualitative than quantitative - Q&A
(US) JAN TOTAL NET TIC FLOWS: +$110.4B V -$42.8B PRIOR; NET LONG-TERM TIC FLOWS: +$6.3B V -$12.9B PRIOR
ORCL Reports Q3 $0.69 v $0.62e, R$9.21B v $9.24Be; Raises dividend 27% to $0.19/shr (implied yield 1.8%)
(NL) Netherlands election results (1st exit poll): PM Rutte's VVD party wins the most seats with 31 out of 150 in the lower house; Wilders' PVV wins 19 seats - Ipsos
(AU) AUSTRALIA FEB EMPLOYMENT CHANGE: -6.4K (first decline in 5 months) V +16.0KE; UNEMPLOYMENT RATE: 5.9% (13-month high) V 5.7%E
(CN) PBOC to inject combined CNY80B v CNY60B prior in 7-day,14-day, and 28-day reverse repos; raises all offer yields by 10bps
(CN) PBoC conducts total of CNY303B in 6-month and 1-yr Medium-term Lending Facility (MLF) operations; again raises rates by another 10bps
(JP) BOJ LEAVES INTEREST RATE ON EXCESS RESERVES (IOER) UNCHANGED AT -0.10%; AS EXPECTED; Maintains 10-yr JGB yield target around 0%; Cuts assessment of Housing sector
THURSDAY 3/16
(CH) SWISS NATIONAL BANK (SNB) LEAVES SIGHT DEPOSIT INTEREST RATE UNCHANGED AT -0.75%; AS EXPECTED
(NO) NORWAY CENTRAL BANK (NORGES) LEAVES DEPOSIT RATES UNCHANGED AT 0.50%; AS EXPECTED
(EU) EURO ZONE FEB CPI M/M: 0.4% V 0.4%E; Y/Y (FINAL READING): 2.0% V 2.0%E; CPI CORE Y/Y (FINAL READING): 0.9% V 0.9%E
(ID) INDONESIA CENTRAL BANK (BI) LEAVES 7-DAY REVERSE REPURCHASE RATE UNCHANGED AT 4.75%; AS EXPECTED
(TR) TURKEY CENTRAL BANK (CBRT) LEAVES BENCHMARK REPURCHASE RATE UNCHANGED AT 8.00%; AS EXPECTED
(UK) BANK OF ENGLAND (BOE) LEAVES INTEREST RATES UNCHANGED AT 0.25%; AS EXPECTED
(UK) BOE MAR MINUTES: VOTED 8-1 TO LEAVES INTEREST RATES UNCHANGED AT 0.50% (Forbes dissented, called for 25bps hike)
(US) FEB HOUSING STARTS: 1.29M V 1.26ME; BUILDING PERMITS: 1.21M V 1.27ME
(US) INITIAL JOBLESS CLAIMS: 241K V 240KE; CONTINUING CLAIMS: 2.03M V 2.05ME
(US) MAR PHILADELPHIA FED BUSINESS OUTLOOK: 32.8 V 30.0E
(EU) ECB's Nowotny (Austria): ECB strategy for tightening policy will be different from the US Fed; ECB could raise rates before QE ends - Handelsblatt interview
(CL) CHILE CENTRAL BANK (BCCH) CUTS OVERNIGHT RATE TARGET BY 25BPS TO 3.00%; AS EXPECTED
FRIDAY
TIF Reports Q4 $1.45 (adj) v $1.37e, R$1.23B v $1.22Be
(US) FEB INDUSTRIAL PRODUCTION M/M: 0.0% V 0.2%E; CAPACITY UTILIZATION: 75.4% V 75.5%E
(US) Fed's Kashkari (dove, dissenting voter): Fed should only resume rate hikes after it publishes a plan to reduce balance sheet and sees the market reaction to it
(US) FEB LEADING INDEX: 0.6% V 0.5%E (highest level in over a decade)
(US) MAR PRELIMINARY UNIVERSITY OF MICHIGAN CONFIDENCE: 97.6 V 97.0E
(US) New York Fed Nowcast: cuts Q1 GDP forecast to 2.8% from 3.2% on 3/10; cuts Q2 GDP forecast to 2.5% from 3.0%
(US) Weekly Baker Hughes US Rig Count: 789 v 768 w/w (+2.7%) (9th straight weekly rise)
Fri, 17 Mar 2017 16:17 PM EST
While German Chancellor Merkel and President Trump met at the White House to discuss their differences, the stock market continued to post gains on Friday, and closed up on the week. Major indices had faltered when the week began, as investors keep looking for promised fiscal policy implementation to buy at higher prices. While most economic data this week was strong and better than expected, that alone was not enough to send equities to new highs. For the week the DJIA gained 0.1%, the S&P rose 0.2%, and the Nasdaq added 0.7%.
Wednesday's FOMC meeting statement sent stock markets rallying again as the Fed framed a 25 basis point hike as a vote of confidence in the economy and reiterated it would raise rates gradually. The committee noted inflation is near the 2% target, but that it may also be willing to let inflation exceed that level for a while. Signals from Chair Yellen that interest rate normalization wouldn't happen faster than the economy could handle reassured buyers, as the market took on more risk, sending all major indices higher for the day. Those perceived reassurances on the speed of hikes didn't help bond prices, however, as fixed-income products sold off after the statement, reversing their rise from the beginning of the week.
Various central banks held monetary policy meetings on Thursday, and all three banks kept rates on hold. Japan, Switzerland and the UK kept their monetary policy unchanged, with no surprises from the first two central banks. Analysts, however, debated how long major developed economies such as Switzerland, Japan or the EU could keep current accommodating rates. ECB official Nowotny said that monetary policy in the EU is not like the US and that interest rates could rise before the end of the QE program (though no decision on this policy has been made yet). The BOE policy meeting kept the Asset Purchase Target in place with a unanimous vote, but on the question of rates Forbes dissented in favor of a rate hike. With the Brexit about to be triggered, higher rates for the UK are still seen as on hold, but that may change soon if economic data stays strong.
In corporate news this week, Intel announced it would acquire Mobileye for $15.3B in cash, as the chipmaker makes a move into the computer vision and machine learning space for autonomous vehicles, a sector it sees as a $70B market opportunity by 2030. Valeant shares were hit Monday on news Bill Ackman’s Pershing Square was liquidating its stake, with Ackman noting that he didn't realize how bad the Valeant situation was until he joined the board. Airline names ended the week slightly lower after some soft Q1 commentary from Southwest and a snowstorm which ravaged the Northeast led to over 1,500 flight cancellations. Amgen dragged down the biotech sector on Friday when study results showed its Repatha cholesterol treatment reduced heart attack risk, but perhaps not by enough to justify the price tag of the drug.
MONDAY 3/13
(UK) Scottish First Min Sturgeon (SNP): Confirms will seek authority for another independence referendum between autumn 2018 and spring 2019 period to give Scotland the opportunity to follow the UK out of the EU - speech from Edinburgh
(US) CBO scores American Health Care Act (AHCA): 14M more people would be uninsured in 2018 and 24M more by 2026
(CN) CHINA JAN-FEB FIXED ASSETS EX RURAL YTD Y/Y: 8.9% V 8.3%E (8-month high)
(CN) CHINA JAN-FEB INDUSTRIAL PRODUCTION Y/Y: 6.3% V 6.2%E (6-month high)
(CN) CHINA JAN-FEB RETAIL SALES Y/Y: 9.5% V 10.6%E (multi-year low)
MBLY Confirms to be acquired by Intel for $63.54/shr in cash valued at $15.3B; To be accretive to Intel EPS immediately
03/13 VRX Pershing Square sold its entire 27.2M share stake at $11.00/shr and Ackman to leave the board - CNBC
TUESDAY 3/14
(DE) GERMANY MAR ZEW CURRENT SITUATION SURVEY: 77.3 V 78.0E; EXPECTATIONS SURVEY: 12.8 V 13.0E
OPEC Monthly Report: raises 2017 global oil demand growth from 1.19M bpd to 1.26M bpd; boosts non OPEC supply growth forecast
(US) FEB PPI FINAL DEMAND M/M: 0.3% V 0.1%E; Y/Y: 2.2% V 1.9%E
WEDNESDAY 4/15
BAS.DE Raises prices globally for antioxidants & light stabilizers by 10% (majority of products); effective today
(CN) China Feb YTD Fiscal Balance at CNY660B (surplus)
(UK) JAN ILO UNEMPLOYMENT RATE 3M/3M: 4.7% V 4.8%E
(UK) FEB JOBLESS CLAIMS CHANGE: -11.3K V -41.2K PRIOR; CLAIMANT COUNT RATE: 2.1% V 2.2% PRIOR
(UK) JAN AVERAGE WEEKLY EARNINGS 3M/Y: 2.2% V 2.4%E; WEEKLY EARNINGS (EX BONUS) 3M/Y: 2.3% V 2.5%E
(US) FEB ADVANCE RETAIL SALES M/M: 0.1% V 0.1%E; RETAIL SALES EX AUTO M/M: 0.2% V 0.1%E
(US) MAR EMPIRE MANUFACTURING: 16.4 V 15.0E
(US) FEB CPI M/M: 0.1% V 0.0%E; CPI EX FOOD AND ENERGY M/M: 0.2% V 0.2%E; CPI INDEX NSA: 243.603 V 243.416E
(US) MAR NAHB HOUSING MARKET INDEX: 71 V 65E (highest since June 2005)
(US) Atlanta Fed cuts Q1 GDP forecast to 0.9% from 1.2% on 3/8
(US) Association of American Railroads weekly rail traffic report for week ending March 11th: 510.6K carloads and intermodal units, +4.4% y/y (ninth straight week of gains)
(US) FOMC RAISES FED FUNDS TARGET RANGE 25BPS TO 0.75-1.00% (AS EXPECTED); EXPECTS ECONOMIC CONDITIONS WILL EVOLVE IN WAY THAT WARRANTS GRADUAL INCREASES
(US) FOMC UPDATED ECONOMIC FORECAST FOR MARCH MEETING (DEC)
(US) Fed Chair Yellen: rate decision was based on economy's continued progress toward reaching our two mandates - post rate decision conf
(US) President Trump: will do something about rising CAFE standards for autos; US auto industry has been hurt, but won't be hurting for long - press
(US) Fed Chair Yellen: Fed wants confidence in economy before starting to shrink balance sheet; the term "well under way" is more qualitative than quantitative - Q&A
(US) JAN TOTAL NET TIC FLOWS: +$110.4B V -$42.8B PRIOR; NET LONG-TERM TIC FLOWS: +$6.3B V -$12.9B PRIOR
ORCL Reports Q3 $0.69 v $0.62e, R$9.21B v $9.24Be; Raises dividend 27% to $0.19/shr (implied yield 1.8%)
(NL) Netherlands election results (1st exit poll): PM Rutte's VVD party wins the most seats with 31 out of 150 in the lower house; Wilders' PVV wins 19 seats - Ipsos
(AU) AUSTRALIA FEB EMPLOYMENT CHANGE: -6.4K (first decline in 5 months) V +16.0KE; UNEMPLOYMENT RATE: 5.9% (13-month high) V 5.7%E
(CN) PBOC to inject combined CNY80B v CNY60B prior in 7-day,14-day, and 28-day reverse repos; raises all offer yields by 10bps
(CN) PBoC conducts total of CNY303B in 6-month and 1-yr Medium-term Lending Facility (MLF) operations; again raises rates by another 10bps
(JP) BOJ LEAVES INTEREST RATE ON EXCESS RESERVES (IOER) UNCHANGED AT -0.10%; AS EXPECTED; Maintains 10-yr JGB yield target around 0%; Cuts assessment of Housing sector
THURSDAY 3/16
(CH) SWISS NATIONAL BANK (SNB) LEAVES SIGHT DEPOSIT INTEREST RATE UNCHANGED AT -0.75%; AS EXPECTED
(NO) NORWAY CENTRAL BANK (NORGES) LEAVES DEPOSIT RATES UNCHANGED AT 0.50%; AS EXPECTED
(EU) EURO ZONE FEB CPI M/M: 0.4% V 0.4%E; Y/Y (FINAL READING): 2.0% V 2.0%E; CPI CORE Y/Y (FINAL READING): 0.9% V 0.9%E
(ID) INDONESIA CENTRAL BANK (BI) LEAVES 7-DAY REVERSE REPURCHASE RATE UNCHANGED AT 4.75%; AS EXPECTED
(TR) TURKEY CENTRAL BANK (CBRT) LEAVES BENCHMARK REPURCHASE RATE UNCHANGED AT 8.00%; AS EXPECTED
(UK) BANK OF ENGLAND (BOE) LEAVES INTEREST RATES UNCHANGED AT 0.25%; AS EXPECTED
(UK) BOE MAR MINUTES: VOTED 8-1 TO LEAVES INTEREST RATES UNCHANGED AT 0.50% (Forbes dissented, called for 25bps hike)
(US) FEB HOUSING STARTS: 1.29M V 1.26ME; BUILDING PERMITS: 1.21M V 1.27ME
(US) INITIAL JOBLESS CLAIMS: 241K V 240KE; CONTINUING CLAIMS: 2.03M V 2.05ME
(US) MAR PHILADELPHIA FED BUSINESS OUTLOOK: 32.8 V 30.0E
(EU) ECB's Nowotny (Austria): ECB strategy for tightening policy will be different from the US Fed; ECB could raise rates before QE ends - Handelsblatt interview
(CL) CHILE CENTRAL BANK (BCCH) CUTS OVERNIGHT RATE TARGET BY 25BPS TO 3.00%; AS EXPECTED
FRIDAY
TIF Reports Q4 $1.45 (adj) v $1.37e, R$1.23B v $1.22Be
(US) FEB INDUSTRIAL PRODUCTION M/M: 0.0% V 0.2%E; CAPACITY UTILIZATION: 75.4% V 75.5%E
(US) Fed's Kashkari (dove, dissenting voter): Fed should only resume rate hikes after it publishes a plan to reduce balance sheet and sees the market reaction to it
(US) FEB LEADING INDEX: 0.6% V 0.5%E (highest level in over a decade)
(US) MAR PRELIMINARY UNIVERSITY OF MICHIGAN CONFIDENCE: 97.6 V 97.0E
(US) New York Fed Nowcast: cuts Q1 GDP forecast to 2.8% from 3.2% on 3/10; cuts Q2 GDP forecast to 2.5% from 3.0%
(US) Weekly Baker Hughes US Rig Count: 789 v 768 w/w (+2.7%) (9th straight weekly rise)
Saturday, March 11, 2017
Barron's weekend summary
Barron's weekend summary: positive on BX, NCLH, BLL
Cover story: Four exchange traded fund experts-Joel Dickson of Vanguard Group, Mark Wiedman of BLK, Jim Ross of STT and Tony Rochte of Fidelity-discuss the ETF industry and topics such as the active-versus-passive debate.
Features:
1) Positive on BX: The alternative-asset manager has been making far more money than rivals, and its shares could see a 40% rise based on more fund raising and an increase in distributable earnings;
2) Positive on NCLH: Shares may have trailed those of other cruise line companies during the past year, but stronger booking trends and higher-paying passengers could send them up by 20%;
3) Positive on BLL: Shares of the world's largest beverage-can maker have dropped amid concerns about its Rexam acquisition, presenting an opportunity for investors to buy in on the cheap;
Tech Trader: Asking whether SNAP is more like FB or TWTR is the wrong question-the recently listed company's identity crisis is more reminiscent of onetime highflyer GPRO, a camera company that sought to be a media company, much like Snap wants to be.
Trader: "A sense of unease hangs over the market, especially after the price of oil fell 9.1% last week, sinking to its lowest level since November. And the market is certainly overdue for a selloff"; "Right now, confidence is surging in the market, but it has yet to translate into tangible gains"; Cautious on GILD: Biotech stocks are on the rise again, but investors are bypassing Gilead because it has yet to produce a blockbuster follow-up for its hepatitis-C treatments.
Profile: Arvind Navaratnam of the Fidelity Event Driven Opportunities fund looks for corporate actions that will help him identify mispriced stocks (top 10 holdings: EXTN, MSG, FOX, BCO, ECPG, ADS, DEPO, TIME, FMCC, FNMA).
Profile: Arvind Navaratnam of the Fidelity Event Driven Opportunities fund looks for corporate actions that will help him identify mispriced stocks (top 10 holdings: EXTN, MSG, FOX, BCO, ECPG, ADS, DEPO, TIME, FMCC, FNMA).
Small Caps: Positive on MPW: Shares of the REIT have taken a hit over concerns about operational and liquidity problems at ADPT, but the selloff appears overdone, and shares are now cheap.
Follow-Up: ANET is among smaller firms gaining ground on CSCO, and with a higher share price and greater operating momentum, investors should stick with it; Positive on VC: Shares could add another 20% as revenue and profits rise, and the company could be an acquisition target.
European Trader: Positive on Peugeot: French automaker's acquisition of Opel and Vauxhall from GM "is a relatively small deal financially, but strategically smart," as it will make Peugeot Europe's second-biggest car maker.
Asian Trader: "To sustain its gains, Hong Kong will need more capital flows from the mainland, because foreigners have not bought into China's recovery story yet. Actively managed funds are still selling."
Emerging Markets: Positive on Fomento Economico Mexicano: Mexican conglomerate has seen a rally recently, but shares still look undervalued given the diversity of the company's revenue streams.
Commodities: Analysts say sugar prices are likely to remain volatile in the months ahead, as uncertainties over weather conditions and production spark volatility.
CEO Spotlight: Profile of Airbus chief executive Thomas Enders, who wants to build on the company's presence in the Asia-Pacific region, North America, and Europe.
Streetwise: As the bull market enters its ninth year, investors should keep an eye on crude-and other commodity prices and be prepared for potential surprises.
Friday, March 10, 2017
Markets Absorb Strong NFP Report and Calmer ECB
TradeTheNews.com Weekly Market Update: Markets Absorb Strong NFP Report and Calmer ECB
Fri, 10 Mar 2017 16:13 PM EST
The stock market advance saw a respite this week as legislators in Washington began what is going to be the arduous process of passing healthcare reform. Rising bond yields caught investors' attention testing some key levels. The February jobs data remained robust, surpassing expectations on the payrolls, while suggesting the tightening labor market is starting to translate into upward pressure on wages. The ECB signaled that it is no longer worried about deflation and raised both its inflation and GDP forecasts for this year and next. A growing number of market participants were emboldened in their calls that central banks are falling behind the curve on removing accommodation. By Friday, futures markets were pricing in at least three hikes from the Fed this year, and some analyst were pulling forward their timetable for beginning to shrink the Fed's balance sheet. WTI crude prices careened back through the $50 mark after US crude stockpiles showed another outsized jump. Many pointed to technical/seasonal selling pressures, but nonetheless a 9% weekly decline weighed on stock sentiment. Gold prices fell back below the 200-day moving average to test $1200. For the week, the DJIA fell 0.5%, the S&P500 dropped 0.4%, and the Nasdaq lost 0.2%.
Bonds continued to decline throughout the week, potentially hurt by a deluge of corporate issuance accompanying rising rate expectations. The 10-year Treasury note yield went from 2.49% on Monday to reach a week-high 2.61%. Bonds rallied slightly after NFP data as the market had been hoping for even stronger numbers in the wake of the blowout ADP jobs data on Wednesday. Bund prices sold off late in the week following slightly more constructive commentary from Draghi and a source report noting some ECB officials had requested a discussion on whether rates can rise before QE ends. The German 10-year yield rose 7bps, reaching 0.495%, before prices recovered some ground on Friday.
Investors looking for economic policy implementation had little reward as the White House started the messy process of engaging with Congress to repeal and replace Obamacare. The bill has been passed by two committees in Congress, but faces opposition from conservative groups, heathcare providers, the AARP, and Democrats. Trump also continued to work on deregulation of the financial sector, meeting with small banks and their associations. The administration is looking at ways to ease the burden on community banks and reinstate an updated Glass-Steagall Act.
In corporate news this week, airline names weakened after some carriers lowered guidance. Delta cut its op margin and passenger unit revenue outlook on Monday, noting higher costs. Southwest revised its RASM guidance lower, citing unexpected softness in close-in demand in the back half of February. Caterpillar came under pressure after the US government made accusations of tax and accounting fraud following a raid on its offices last week. On Friday, the company confirmed that the IRS is challenging its 2007-2012 taxes, but that Caterpillar stands by its financial reporting.
SUNDAY 3/5
(CN) CHINA NATIONAL PEOPLE'S CONGRESS (NPC) SETS 2017 GDP TARGET of "around 6.5% or higher if possible" vs 6.5-7.0% in 2016
MONDAY 3/6
DAL Adjusts Q1 PRASM flat to 1% (prior flat to +2% y/y) ; Affirms capacity flat to down 1%; Narrows CASM +5.5-6.5% y/y (prior 5-7%) ; Trims Op margin 10-11%(prior 11-13%)
(US) JAN FINAL DURABLE GOODS ORDERS: 2.0% V 1.0%E; DURABLES EX-TRANSPORTATION : 0.0% V +0.1%E
CRM IBM and Salesforce announce global strategic partnership centered on artificial intelligence
(AU) RESERVE BANK OF AUSTRALIA (RBA) LEAVES CASH RATE TARGET UNCHANGED AT 1.50% (AS EXPECTED)
TUESDAY 3/7
(CN) CHINA FEB FOREIGN RESERVES: $3.005T V $2.965TE (1st monthly rise since June)
*(EU) EURO ZONE Q4 FINAL GDP Q/Q: 0.4% V 0.4%E; Y/Y: 1.7% V 1.7%E
(UK) HOUSE OF LORDS VOTES ON BREXIT BILL: PM MAY GOVT WINS VOTE; reject amendment to Brexit bill (votes down calls for second referendum)
(US) Atlanta Fed cuts Q1 GDP forecast to 1.3% from 1.8% on 3/1
(UK) HOUSE OF LORDS VOTES IN FAVOR OF ADDING EXTRA CONDITIONS TO BREXIT BILL (loss for PM May govt); calls for a binding vote on the final Brexit agreement with Europe
(JP) JAPAN Q4 FINAL GDP Q/Q: 0.3% V 0.4%E; ANNUALIZED GDP: 1.2% V 1.5%E
(CN) CHINA FEB TRADE BALANCE (CNY-TERMS): -60.4B V +172.5BE; First deficit since Feb 2014
WEDNESDAY 3/8
DPW.DE Reports Q4 Net €841M v €670M y/y, EBIT €1.11B v €1.13Be, Rev €15.4B v €15.4B y/y
(CN) CHINA FEB TRADE BALANCE (USD TERMS): -$9.2B V +$27.0BE (1st deficit since Feb 2014)
CAT: US government makes accusation of tax, accounting fraud
(PL) POLAND CENTRAL BANK (NBP) LEAVES BASE RATE UNCHANGED AT 1.50%; AS EXPECTED
(US) FEB ADP EMPLOYMENT CHANGE: +298K V +187KE
(US) Q4 FINAL NONFARM PRODUCTIVITY: 1.3% V 1.5%E; LABOR COSTS: 1.7% V 1.6%E
(US) Atlanta Fed cuts Q1 GDP forecast to 1.2% from 1.3% on 3/7
NVDA NVIDIA and Microsoft boost AI cloud computing with launch of industry-standard Hyperscale GPU accelerator
THURSDAY 3/9
(US) Association of American Railroads weekly rail traffic report for week ending March 4th: 521.6K carloads and intermodal units, +1.8% y/y (eighth straight week of gains)
(CN) CHINA FEB CPI M/M: -0.2% (first decline in 4 months, biggest decline in 9 months) V +1.0% PRIOR; Y/Y: 0.8% (2-year low) V 1.7%E
(CN) CHINA FEB PPI Y/Y: 7.8% V 7.7%E; 6th consecutive and biggest increase since Sept 2008
FRIDAY 3/10
(UK) JAN INDUSTRIAL PRODUCTION M/M: -0.4% V -0.5%E; Y/Y: 3.2% V 3.2%E
(US) FEB UNEMPLOYMENT RATE: 4.7% V 4.7%E
(US) FEB AVERAGE HOURLY EARNINGS M/M: 0.2% V 0.3%E; Y/Y: 2.8% V 2.8%E; AVERAGE WEEKLY HOURS: 34.4 V 34.4E
(US) FEB CHANGE IN NONFARM PAYROLLS: +235K V +200KE
(CA) CANADA FEB NET CHANGE IN EMPLOYMENT: +15.3K V -5.0KE; UNEMPLOYMENT RATE: 6.6% V 6.8%E
(EU) ECB reportedly has discussed whether rates can rise before QE ends - press
(US) New York Fed Nowcast: raises Q1 GDP forecast to 3.2% from 3.1% on 3/3; raises Q2 GDP forecast to 3.0% from 2.9%
Fri, 10 Mar 2017 16:13 PM EST
The stock market advance saw a respite this week as legislators in Washington began what is going to be the arduous process of passing healthcare reform. Rising bond yields caught investors' attention testing some key levels. The February jobs data remained robust, surpassing expectations on the payrolls, while suggesting the tightening labor market is starting to translate into upward pressure on wages. The ECB signaled that it is no longer worried about deflation and raised both its inflation and GDP forecasts for this year and next. A growing number of market participants were emboldened in their calls that central banks are falling behind the curve on removing accommodation. By Friday, futures markets were pricing in at least three hikes from the Fed this year, and some analyst were pulling forward their timetable for beginning to shrink the Fed's balance sheet. WTI crude prices careened back through the $50 mark after US crude stockpiles showed another outsized jump. Many pointed to technical/seasonal selling pressures, but nonetheless a 9% weekly decline weighed on stock sentiment. Gold prices fell back below the 200-day moving average to test $1200. For the week, the DJIA fell 0.5%, the S&P500 dropped 0.4%, and the Nasdaq lost 0.2%.
Bonds continued to decline throughout the week, potentially hurt by a deluge of corporate issuance accompanying rising rate expectations. The 10-year Treasury note yield went from 2.49% on Monday to reach a week-high 2.61%. Bonds rallied slightly after NFP data as the market had been hoping for even stronger numbers in the wake of the blowout ADP jobs data on Wednesday. Bund prices sold off late in the week following slightly more constructive commentary from Draghi and a source report noting some ECB officials had requested a discussion on whether rates can rise before QE ends. The German 10-year yield rose 7bps, reaching 0.495%, before prices recovered some ground on Friday.
Investors looking for economic policy implementation had little reward as the White House started the messy process of engaging with Congress to repeal and replace Obamacare. The bill has been passed by two committees in Congress, but faces opposition from conservative groups, heathcare providers, the AARP, and Democrats. Trump also continued to work on deregulation of the financial sector, meeting with small banks and their associations. The administration is looking at ways to ease the burden on community banks and reinstate an updated Glass-Steagall Act.
In corporate news this week, airline names weakened after some carriers lowered guidance. Delta cut its op margin and passenger unit revenue outlook on Monday, noting higher costs. Southwest revised its RASM guidance lower, citing unexpected softness in close-in demand in the back half of February. Caterpillar came under pressure after the US government made accusations of tax and accounting fraud following a raid on its offices last week. On Friday, the company confirmed that the IRS is challenging its 2007-2012 taxes, but that Caterpillar stands by its financial reporting.
SUNDAY 3/5
(CN) CHINA NATIONAL PEOPLE'S CONGRESS (NPC) SETS 2017 GDP TARGET of "around 6.5% or higher if possible" vs 6.5-7.0% in 2016
MONDAY 3/6
DAL Adjusts Q1 PRASM flat to 1% (prior flat to +2% y/y) ; Affirms capacity flat to down 1%; Narrows CASM +5.5-6.5% y/y (prior 5-7%) ; Trims Op margin 10-11%(prior 11-13%)
(US) JAN FINAL DURABLE GOODS ORDERS: 2.0% V 1.0%E; DURABLES EX-TRANSPORTATION : 0.0% V +0.1%E
CRM IBM and Salesforce announce global strategic partnership centered on artificial intelligence
(AU) RESERVE BANK OF AUSTRALIA (RBA) LEAVES CASH RATE TARGET UNCHANGED AT 1.50% (AS EXPECTED)
TUESDAY 3/7
(CN) CHINA FEB FOREIGN RESERVES: $3.005T V $2.965TE (1st monthly rise since June)
*(EU) EURO ZONE Q4 FINAL GDP Q/Q: 0.4% V 0.4%E; Y/Y: 1.7% V 1.7%E
(UK) HOUSE OF LORDS VOTES ON BREXIT BILL: PM MAY GOVT WINS VOTE; reject amendment to Brexit bill (votes down calls for second referendum)
(US) Atlanta Fed cuts Q1 GDP forecast to 1.3% from 1.8% on 3/1
(UK) HOUSE OF LORDS VOTES IN FAVOR OF ADDING EXTRA CONDITIONS TO BREXIT BILL (loss for PM May govt); calls for a binding vote on the final Brexit agreement with Europe
(JP) JAPAN Q4 FINAL GDP Q/Q: 0.3% V 0.4%E; ANNUALIZED GDP: 1.2% V 1.5%E
(CN) CHINA FEB TRADE BALANCE (CNY-TERMS): -60.4B V +172.5BE; First deficit since Feb 2014
WEDNESDAY 3/8
DPW.DE Reports Q4 Net €841M v €670M y/y, EBIT €1.11B v €1.13Be, Rev €15.4B v €15.4B y/y
(CN) CHINA FEB TRADE BALANCE (USD TERMS): -$9.2B V +$27.0BE (1st deficit since Feb 2014)
CAT: US government makes accusation of tax, accounting fraud
(PL) POLAND CENTRAL BANK (NBP) LEAVES BASE RATE UNCHANGED AT 1.50%; AS EXPECTED
(US) FEB ADP EMPLOYMENT CHANGE: +298K V +187KE
(US) Q4 FINAL NONFARM PRODUCTIVITY: 1.3% V 1.5%E; LABOR COSTS: 1.7% V 1.6%E
(US) Atlanta Fed cuts Q1 GDP forecast to 1.2% from 1.3% on 3/7
NVDA NVIDIA and Microsoft boost AI cloud computing with launch of industry-standard Hyperscale GPU accelerator
THURSDAY 3/9
(US) Association of American Railroads weekly rail traffic report for week ending March 4th: 521.6K carloads and intermodal units, +1.8% y/y (eighth straight week of gains)
(CN) CHINA FEB CPI M/M: -0.2% (first decline in 4 months, biggest decline in 9 months) V +1.0% PRIOR; Y/Y: 0.8% (2-year low) V 1.7%E
(CN) CHINA FEB PPI Y/Y: 7.8% V 7.7%E; 6th consecutive and biggest increase since Sept 2008
FRIDAY 3/10
(UK) JAN INDUSTRIAL PRODUCTION M/M: -0.4% V -0.5%E; Y/Y: 3.2% V 3.2%E
(US) FEB UNEMPLOYMENT RATE: 4.7% V 4.7%E
(US) FEB AVERAGE HOURLY EARNINGS M/M: 0.2% V 0.3%E; Y/Y: 2.8% V 2.8%E; AVERAGE WEEKLY HOURS: 34.4 V 34.4E
(US) FEB CHANGE IN NONFARM PAYROLLS: +235K V +200KE
(CA) CANADA FEB NET CHANGE IN EMPLOYMENT: +15.3K V -5.0KE; UNEMPLOYMENT RATE: 6.6% V 6.8%E
(EU) ECB reportedly has discussed whether rates can rise before QE ends - press
(US) New York Fed Nowcast: raises Q1 GDP forecast to 3.2% from 3.1% on 3/3; raises Q2 GDP forecast to 3.0% from 2.9%
Saturday, March 4, 2017
Barrons weekend summary
Barrons weekend summary: positive on RRC, XRX; cautious on SNAP
Cover story: As Donald Trump tries to keep manufacturing jobs in the U.S., many companies that remain will use robots in an effort to lower labor costs; "For long-term investors, robots could be one key to securing healthy corporate profit growth, and stock returns, even as wages rise"; Investors should look at Fanuc, ROK, ABB, Yaskawa Electric, and ROBO.
Features:
1) Positive on RRC: Leading U.S. gas producer appears undervalued, and its ability to drill profitable wells, even at current prices, gives it staying power and makes it an "option" on higher gas prices;
2) Cautious on SNAP: Even assuming the startup sees strong growth, it's hard to justify more than half the current stock price, and the company is more likely to resemble TWTR than FB;
3) Positive on XRX: Now that it has spun off business-processing units such as CNDT, Xerox and its investors have the opportunity to realize substantial long-term gains under new chief executive Jeff Jacobson.
Tech Trader: At the Mobile World Congress the key topic was the advent of 5G technology, which is less about making phones faster than about connecting a wide range of devices to the Web; NOK, ERIC, CIEN, and JNPR stand to benefit from the trend.
Trader: "Merrill Lynch's Sell Side Indicator, a measure of Wall Street's bullishness, still sits in neutral territory despite hitting its highest level in 16 months"; Positive on PHM: Shares have lagged the market for the past four years and are nearing the top of their long-term range, but expectations of stronger growth and margins could carry them further; Cautious on SIG: Jeweler's valuation may be the one good thing it has going for it as it faces several challenges, including allegations it underpaid female workers.
Profile: Brian Kessens, manager of the Tortoise MLP & Pipeline fund, is upbeat about the prospects for pipelines, storage facilities, and other midstream energy outfits (top 10 holdings: KMI, WMB, TRP, LNG, SE, ENG, OKE, PAGP, TRGP, Inter Pipeline).
Interview: Mark Boyar, founder of Boyar Asset Management, is an "eclectic value investor" who looks for strong businesses that aren't in favor (picks: MSG, MSGN, QVCA, TRCO).
Advisor Rankings: Barron's list of the top 1,200 financial advisors by state looks at assets under management, revenue produced for their firms, regulatory record, quality of practice, and philanthropic efforts.
Follow-Up: Cautious on MLM: The miner's prospects remain strong, but the excitement is already priced into the shares, and investors may want to take profits; Cautious on AFSI: Questions Barron's raised earlier about the company's accounting and reserve levels remain, and there could be more bad news when it files its 10-K report for 2016.
European Trader: Positive on AZN: This could be the year the company starts to deliver on a promise made in 2014 that it would fare better alone than by accepting PFE's takeover bid.
Asian Trader: The Indian economy grew by 7% in the December quarter despite the government's ban of the use of large rupee bills, but Capital Economics doesn't see India's economy surpassing China's.
Emerging Markets: In a recent report, Jim Barrineau of Schroders Investment Management claimed EMB and PCY haven't properly tracked their benchmark indexes and aren't proxies for the diversity of developing market debt.
Commodities: Aluminum prices are up this year on expected boosts in China's smelting industry, but without more evidence that production is decreasing, investors may find prices falling.
Streetwise: Reducing the U.S. corporate tax rate, which Donald Trump is unlikely to do if he wants to increase infrastructure spending, would hurt some companies, particularly those with high interest rates.
Cover story: As Donald Trump tries to keep manufacturing jobs in the U.S., many companies that remain will use robots in an effort to lower labor costs; "For long-term investors, robots could be one key to securing healthy corporate profit growth, and stock returns, even as wages rise"; Investors should look at Fanuc, ROK, ABB, Yaskawa Electric, and ROBO.
Features:
1) Positive on RRC: Leading U.S. gas producer appears undervalued, and its ability to drill profitable wells, even at current prices, gives it staying power and makes it an "option" on higher gas prices;
2) Cautious on SNAP: Even assuming the startup sees strong growth, it's hard to justify more than half the current stock price, and the company is more likely to resemble TWTR than FB;
3) Positive on XRX: Now that it has spun off business-processing units such as CNDT, Xerox and its investors have the opportunity to realize substantial long-term gains under new chief executive Jeff Jacobson.
Tech Trader: At the Mobile World Congress the key topic was the advent of 5G technology, which is less about making phones faster than about connecting a wide range of devices to the Web; NOK, ERIC, CIEN, and JNPR stand to benefit from the trend.
Trader: "Merrill Lynch's Sell Side Indicator, a measure of Wall Street's bullishness, still sits in neutral territory despite hitting its highest level in 16 months"; Positive on PHM: Shares have lagged the market for the past four years and are nearing the top of their long-term range, but expectations of stronger growth and margins could carry them further; Cautious on SIG: Jeweler's valuation may be the one good thing it has going for it as it faces several challenges, including allegations it underpaid female workers.
Profile: Brian Kessens, manager of the Tortoise MLP & Pipeline fund, is upbeat about the prospects for pipelines, storage facilities, and other midstream energy outfits (top 10 holdings: KMI, WMB, TRP, LNG, SE, ENG, OKE, PAGP, TRGP, Inter Pipeline).
Interview: Mark Boyar, founder of Boyar Asset Management, is an "eclectic value investor" who looks for strong businesses that aren't in favor (picks: MSG, MSGN, QVCA, TRCO).
Advisor Rankings: Barron's list of the top 1,200 financial advisors by state looks at assets under management, revenue produced for their firms, regulatory record, quality of practice, and philanthropic efforts.
Follow-Up: Cautious on MLM: The miner's prospects remain strong, but the excitement is already priced into the shares, and investors may want to take profits; Cautious on AFSI: Questions Barron's raised earlier about the company's accounting and reserve levels remain, and there could be more bad news when it files its 10-K report for 2016.
European Trader: Positive on AZN: This could be the year the company starts to deliver on a promise made in 2014 that it would fare better alone than by accepting PFE's takeover bid.
Asian Trader: The Indian economy grew by 7% in the December quarter despite the government's ban of the use of large rupee bills, but Capital Economics doesn't see India's economy surpassing China's.
Emerging Markets: In a recent report, Jim Barrineau of Schroders Investment Management claimed EMB and PCY haven't properly tracked their benchmark indexes and aren't proxies for the diversity of developing market debt.
Commodities: Aluminum prices are up this year on expected boosts in China's smelting industry, but without more evidence that production is decreasing, investors may find prices falling.
Streetwise: Reducing the U.S. corporate tax rate, which Donald Trump is unlikely to do if he wants to increase infrastructure spending, would hurt some companies, particularly those with high interest rates.
Friday, March 3, 2017
Fed Speak Moves Hike Expectations to March; Dow Tips 21,000
TradeTheNews.com Weekly Market Update: Fed Speak Moves Hike Expectations to March; Dow Tips 21,000
Fri, 03 Mar 2017 16:16 PM EST
The stock markets started the week on hold as investors slowed down the pace and strength of the recent bull run. Markets were muted at the beginning of the week, awaiting President Trump's speech to Congress on Tuesday evening. Investors were looking for some concrete details on economic policy including tax reform, which the speech failed to deliver. Trump did, however, strike what many considered a much more presidential tone while promising a $1 trillion infrastructure spending spree. Global stock markets received the comments extremely well sending the Dow up above the 21,000 mark for the first time. For the week, the DJIA gained 0.9%, the S&P500 rose 0.7%, and the Nasdaq added 0.4%.
Reflation trade flows picked up again helped by NY Fed president Dudley's comments on Tuesday clearly hinting at a likely rate at the March FOMC meeting. That foreshadowed what would be the narrative by a chorus of fed speakers through the week’s end, culminating Friday with Chair Yellen . The probability of a rate hike, determined by Fed Fund futures prices, jumped Monday from 35% to 50%, on the back of continued strong economic data. By Wednesday that probability had jumped to above 80% after a spate of hawkish commentary from Fed officials supporting the notion of a ‘live’ FOMC meeting on March 14-15.
The 10-Year Treasury Yield started the week at 2.35% and continued to rise, closing Friday at 2.51%. A stronger sell off in the shorter end of the curve caused the yield curve to flatten with the 10-year/30-year spread decreasing from 62bps to 59bps, and the 5-year/30-year curve decreasing 6bps to 106bps. The US dollar continued to rally as a March rate hike was priced in with the British Pound losing 1% over the week, the dollar index up 1.1%. By Friday gold prices dropped back towards the 90 day moving average for the first time in nearly a month.
The UK Brexit bill experienced a minor setback this week as the upper house endorsed an amendment to safeguard the rights of EU citizens in the country. PM May has stated her invocation of Article 50 remains on track for this month and she has asked the House of Commons to throw out the amendment when they debate the bill again March 13 and 14. In France the far-right anti EU candidate, Marine Le Pen, has begun to fall behind in the polls to the independent candidate Macron, who enjoys a more than 20 point lead in polling for the May run-off election. However, EGBs were subdued and core bonds continued to fall in price as inflation data for Germany was higher than expected.
As earnings season winds down, some key retailers reported this week and continued to paint a worrying picture for the sector. Best Buy’s Q4 earnings came in above estimates, but revenue lagged, driven by weakness in gaming, tablets, wearables and phone sales. Target shares plunged after missing profit estimates amid unexpected softness in stores, and the retailer guided a decline in SSS for next year, warning its investment into lower gross margins may present headwinds to short-term performance. Costco underperformed on the top and bottom line, and announced it would increase membership fees for the first time in six years. On the positive side, Lowe's shares surged on continued strong results and outlook. Snap Inc’s long-awaited Wall Street IPO finally debuted, and despite cautious comments from analysts, shares of the social media/tech firm were up 61% by the end of the week.
SUN 2/26
GSK.UK Has conducted the world's first drug trial under "real world" conditions, as the company looks to to prove the value of its medicines in a cost conscious health system - FT
MON 2/27
*(EU) EURO ZONE JAN M3 MONEY SUPPLY Y/Y: 4.9% V 4.8%E
*(EU) EURO ZONE FEB BUSINESS CLIMATE INDICATOR: 0.82 V 0.79E; CONSUMER CONFIDENCE (FINAL): -6.2 V -6.2E
*(US) JAN PRELIMINARY DURABLE GOODS ORDERS: 1.8% V 1.7%E; DURABLES EX-TRANSPORTATION: -0.2% V +0.5%E
TUE 2/28
(FR) FRANCE FEB PRELIMINARY CPI M/M: 0.1% V 0.4%E; Y/Y: 1.2% V 1.5%E
(FR) FRANCE Q4 PRELIMINARY GDP Q/Q: 0.4% V 0.4%E; Y/Y: 1.2% V 1.1%E
TGT Reports Q4 $1.45 v $1.50e, R$20.7B v $20.7Be; Will invest in lower gross margins
JPM Guides FY17 core loan growth +10% y/y - ahead of analyst day
- Guides Q1 trading rev up modestly y/y; Q1 invest banking largely flat q/q; FY17 NII $11B v $10B y/y
VRX Reports Q4 $1.26 v $1.24e, R$2.40B v $2.35Be
(IN) India Q4 GDP Y/Y: 7.0% v 6.1%e; GVA Y/Y: 6.6% v 6.0%e
*(US) Q4 PRELIMINARY GDP ANNUALIZED Q/Q: 1.9% V 2.1%E; PERSONAL CONSUMPTION: 3.0% V 2.6%E
(US) Q4 PRELIMINARY GDP PRICE INDEX: 2.0% V 2.1%E; CORE PCE Q/Q: 1.2% V 1.3%E
(US) Feb Chicago Purchasing Manager: 57.4 v 53.5e (highest since Dec 2014)
(US) FEB RICHMOND FED MANUFACTURING INDEX: 17 V 10E
(US) FEB CONSUMER CONFIDENCE: 114.8 V 111.0E (highest since 2001)
(US) Fed's Williams (moderate, non-voter): sees March hike getting serious consideration - comments in Santa Cruz
CRM Reports Q4 $0.28 v $0.25e, R$2.29B v $2.27Be
(AU) AUSTRALIA Q4 GDP Q/Q: 1.1% V 0.8%E; Y/Y: 2.4% V 2.0%E
(CN) CHINA FEB MANUFACTURING PMI (govt official): 51.6 V 51.2E
(CN) CHINA FEB CAIXIN MANUFACTURING PMI: 51.7 V 50.8E (8th consecutive expansion)
(HK) Macau Feb Gaming Rev MOP22.99B v MOP21.5Be; y/y: 17.8% v +10%e
WEDS 3/1
(DE) GERMANY FEB FINAL MANUFACTURING PMI: 56.8 V 57.0E
*(UK) FEB MANUFACTURING PMI: 54.6 V 55.8E (7th month of expansion)
BBY Reports Q4 $1.95 v $1.66e, R$13.5B v $13.6Be; raises dividend 21% to $0.34 from $0.28 (indicated yield 3.22%)
(DE) GERMANY FEB PRELIMINARY CPI M/M: 0.6% V 0.6%E; Y/Y: 2.2% V 2.1%E
(US) JAN PCE CORE M/M: 0.3% V 0.3%E; Y/Y: 1.7% V 1.7%E
(US) JAN PERSONAL INCOME: 0.4% V 0.3%E; PERSONAL SPENDING: 0.2% V 0.3%E
(US) JAN PCE DEFLATOR M/M: 0.4% V 0.5%E; Y/Y: 1.9% V 2.0%E
*(US) FEB ISM MANUFACTURING: 57.7 V 56.2E; PRICES PAID: 68.0 V 68.0E (Manufacturing Activity highest since Aug 2014)
(CA) BANK OF CANADA (BOC) LEAVES INTEREST RATES UNCHANGED AT 0.50%; AS EXPECTED
(US) Atlanta Fed cuts Q1 GDP forecast to 1.8% from 2.5% on 2/27
AVGO Reports Q1 $3.63 v $3.48e, R$4.14B v $4.06Be
(KR) White House reportedly considering options against North Korea, including possible use of force, as part of strategy review - press
(AU) AUSTRALIA JAN TRADE BALANCE (A$): +1.3B V +3.8BE; 3rd straight surplus
THURS 3/2
DTE.DE Reports Q4 adj Net €973M v €959M y/y, adj EBITA €5.3B v €5.1B y/y, Rev €19.5B v €19.0Be; Takes €2.2B writedown ; proposes 9% dividend increase to €0.60/shr
ABI.BE Reports Q4 $0.43 v $0.98e, EBITDA $5.25B v $5.64Be, Rev $14.2B v $13.8Be
*(EU) EURO ZONE FEB ADVANCE CPI ESTIMATE Y/Y: 2.0% V 2.0%E (highest level since Feb 2013); CPI CORE Y/Y: 0.9% V 0.9%E
*(EU) EURO ZONE JAN UNEMPLOYMENT RATE: 9.6% V 9.6%E (matches its lowest level since May 2009)
(US) INITIAL JOBLESS CLAIMS: 223K V 245KE (lowest since Mar 1973); CONTINUING CLAIMS: 2.07M V 2.06ME
(US) Fed's Powell (moderate, voter): Rate hike in March is on table for discussion; we're certainly getting very close to 2% inflation goal - CNBC interview
SNAP IPO opens for trade at $24.00
(US) Attorney General Sessions: To recuse himself from any investigations related to the Trump campaign
COST Reports Q2 $1.17 v $1.35e, R$29.1B v $30.0Be; To increase membership fees by $5-10/year (+8.3-9.1%)
(HK) HONG KONG FEB COMPOSITE PMI:49.6 V 49.9 PRIOR; 2nd month of contraction
FRI 3/3
(US) FEB FINAL MARKIT SERVICES PMI: 53.8 V 54.0E
GM Peugeot board reportedly met today and approved Opel acquisition; to announce the deal on Monday – press
(US) Fed Chair Yellen: Raising interest rates at March meeting would probably be appropriate if economy evolves as expected - comments in Chicago
DBK.DE Confirms undertaking preparatory work for a potential €8B capital increase and further strategic measures including reintegration of Postbank
(US) US Trump administration to announce it will reopen 2022-2025 vehicle emissions standards for review next week - press
Fri, 03 Mar 2017 16:16 PM EST
The stock markets started the week on hold as investors slowed down the pace and strength of the recent bull run. Markets were muted at the beginning of the week, awaiting President Trump's speech to Congress on Tuesday evening. Investors were looking for some concrete details on economic policy including tax reform, which the speech failed to deliver. Trump did, however, strike what many considered a much more presidential tone while promising a $1 trillion infrastructure spending spree. Global stock markets received the comments extremely well sending the Dow up above the 21,000 mark for the first time. For the week, the DJIA gained 0.9%, the S&P500 rose 0.7%, and the Nasdaq added 0.4%.
Reflation trade flows picked up again helped by NY Fed president Dudley's comments on Tuesday clearly hinting at a likely rate at the March FOMC meeting. That foreshadowed what would be the narrative by a chorus of fed speakers through the week’s end, culminating Friday with Chair Yellen . The probability of a rate hike, determined by Fed Fund futures prices, jumped Monday from 35% to 50%, on the back of continued strong economic data. By Wednesday that probability had jumped to above 80% after a spate of hawkish commentary from Fed officials supporting the notion of a ‘live’ FOMC meeting on March 14-15.
The 10-Year Treasury Yield started the week at 2.35% and continued to rise, closing Friday at 2.51%. A stronger sell off in the shorter end of the curve caused the yield curve to flatten with the 10-year/30-year spread decreasing from 62bps to 59bps, and the 5-year/30-year curve decreasing 6bps to 106bps. The US dollar continued to rally as a March rate hike was priced in with the British Pound losing 1% over the week, the dollar index up 1.1%. By Friday gold prices dropped back towards the 90 day moving average for the first time in nearly a month.
The UK Brexit bill experienced a minor setback this week as the upper house endorsed an amendment to safeguard the rights of EU citizens in the country. PM May has stated her invocation of Article 50 remains on track for this month and she has asked the House of Commons to throw out the amendment when they debate the bill again March 13 and 14. In France the far-right anti EU candidate, Marine Le Pen, has begun to fall behind in the polls to the independent candidate Macron, who enjoys a more than 20 point lead in polling for the May run-off election. However, EGBs were subdued and core bonds continued to fall in price as inflation data for Germany was higher than expected.
As earnings season winds down, some key retailers reported this week and continued to paint a worrying picture for the sector. Best Buy’s Q4 earnings came in above estimates, but revenue lagged, driven by weakness in gaming, tablets, wearables and phone sales. Target shares plunged after missing profit estimates amid unexpected softness in stores, and the retailer guided a decline in SSS for next year, warning its investment into lower gross margins may present headwinds to short-term performance. Costco underperformed on the top and bottom line, and announced it would increase membership fees for the first time in six years. On the positive side, Lowe's shares surged on continued strong results and outlook. Snap Inc’s long-awaited Wall Street IPO finally debuted, and despite cautious comments from analysts, shares of the social media/tech firm were up 61% by the end of the week.
SUN 2/26
GSK.UK Has conducted the world's first drug trial under "real world" conditions, as the company looks to to prove the value of its medicines in a cost conscious health system - FT
MON 2/27
*(EU) EURO ZONE JAN M3 MONEY SUPPLY Y/Y: 4.9% V 4.8%E
*(EU) EURO ZONE FEB BUSINESS CLIMATE INDICATOR: 0.82 V 0.79E; CONSUMER CONFIDENCE (FINAL): -6.2 V -6.2E
*(US) JAN PRELIMINARY DURABLE GOODS ORDERS: 1.8% V 1.7%E; DURABLES EX-TRANSPORTATION: -0.2% V +0.5%E
TUE 2/28
(FR) FRANCE FEB PRELIMINARY CPI M/M: 0.1% V 0.4%E; Y/Y: 1.2% V 1.5%E
(FR) FRANCE Q4 PRELIMINARY GDP Q/Q: 0.4% V 0.4%E; Y/Y: 1.2% V 1.1%E
TGT Reports Q4 $1.45 v $1.50e, R$20.7B v $20.7Be; Will invest in lower gross margins
JPM Guides FY17 core loan growth +10% y/y - ahead of analyst day
- Guides Q1 trading rev up modestly y/y; Q1 invest banking largely flat q/q; FY17 NII $11B v $10B y/y
VRX Reports Q4 $1.26 v $1.24e, R$2.40B v $2.35Be
(IN) India Q4 GDP Y/Y: 7.0% v 6.1%e; GVA Y/Y: 6.6% v 6.0%e
*(US) Q4 PRELIMINARY GDP ANNUALIZED Q/Q: 1.9% V 2.1%E; PERSONAL CONSUMPTION: 3.0% V 2.6%E
(US) Q4 PRELIMINARY GDP PRICE INDEX: 2.0% V 2.1%E; CORE PCE Q/Q: 1.2% V 1.3%E
(US) Feb Chicago Purchasing Manager: 57.4 v 53.5e (highest since Dec 2014)
(US) FEB RICHMOND FED MANUFACTURING INDEX: 17 V 10E
(US) FEB CONSUMER CONFIDENCE: 114.8 V 111.0E (highest since 2001)
(US) Fed's Williams (moderate, non-voter): sees March hike getting serious consideration - comments in Santa Cruz
CRM Reports Q4 $0.28 v $0.25e, R$2.29B v $2.27Be
(AU) AUSTRALIA Q4 GDP Q/Q: 1.1% V 0.8%E; Y/Y: 2.4% V 2.0%E
(CN) CHINA FEB MANUFACTURING PMI (govt official): 51.6 V 51.2E
(CN) CHINA FEB CAIXIN MANUFACTURING PMI: 51.7 V 50.8E (8th consecutive expansion)
(HK) Macau Feb Gaming Rev MOP22.99B v MOP21.5Be; y/y: 17.8% v +10%e
WEDS 3/1
(DE) GERMANY FEB FINAL MANUFACTURING PMI: 56.8 V 57.0E
*(UK) FEB MANUFACTURING PMI: 54.6 V 55.8E (7th month of expansion)
BBY Reports Q4 $1.95 v $1.66e, R$13.5B v $13.6Be; raises dividend 21% to $0.34 from $0.28 (indicated yield 3.22%)
(DE) GERMANY FEB PRELIMINARY CPI M/M: 0.6% V 0.6%E; Y/Y: 2.2% V 2.1%E
(US) JAN PCE CORE M/M: 0.3% V 0.3%E; Y/Y: 1.7% V 1.7%E
(US) JAN PERSONAL INCOME: 0.4% V 0.3%E; PERSONAL SPENDING: 0.2% V 0.3%E
(US) JAN PCE DEFLATOR M/M: 0.4% V 0.5%E; Y/Y: 1.9% V 2.0%E
*(US) FEB ISM MANUFACTURING: 57.7 V 56.2E; PRICES PAID: 68.0 V 68.0E (Manufacturing Activity highest since Aug 2014)
(CA) BANK OF CANADA (BOC) LEAVES INTEREST RATES UNCHANGED AT 0.50%; AS EXPECTED
(US) Atlanta Fed cuts Q1 GDP forecast to 1.8% from 2.5% on 2/27
AVGO Reports Q1 $3.63 v $3.48e, R$4.14B v $4.06Be
(KR) White House reportedly considering options against North Korea, including possible use of force, as part of strategy review - press
(AU) AUSTRALIA JAN TRADE BALANCE (A$): +1.3B V +3.8BE; 3rd straight surplus
THURS 3/2
DTE.DE Reports Q4 adj Net €973M v €959M y/y, adj EBITA €5.3B v €5.1B y/y, Rev €19.5B v €19.0Be; Takes €2.2B writedown ; proposes 9% dividend increase to €0.60/shr
ABI.BE Reports Q4 $0.43 v $0.98e, EBITDA $5.25B v $5.64Be, Rev $14.2B v $13.8Be
*(EU) EURO ZONE FEB ADVANCE CPI ESTIMATE Y/Y: 2.0% V 2.0%E (highest level since Feb 2013); CPI CORE Y/Y: 0.9% V 0.9%E
*(EU) EURO ZONE JAN UNEMPLOYMENT RATE: 9.6% V 9.6%E (matches its lowest level since May 2009)
(US) INITIAL JOBLESS CLAIMS: 223K V 245KE (lowest since Mar 1973); CONTINUING CLAIMS: 2.07M V 2.06ME
(US) Fed's Powell (moderate, voter): Rate hike in March is on table for discussion; we're certainly getting very close to 2% inflation goal - CNBC interview
SNAP IPO opens for trade at $24.00
(US) Attorney General Sessions: To recuse himself from any investigations related to the Trump campaign
COST Reports Q2 $1.17 v $1.35e, R$29.1B v $30.0Be; To increase membership fees by $5-10/year (+8.3-9.1%)
(HK) HONG KONG FEB COMPOSITE PMI:49.6 V 49.9 PRIOR; 2nd month of contraction
FRI 3/3
(US) FEB FINAL MARKIT SERVICES PMI: 53.8 V 54.0E
GM Peugeot board reportedly met today and approved Opel acquisition; to announce the deal on Monday – press
(US) Fed Chair Yellen: Raising interest rates at March meeting would probably be appropriate if economy evolves as expected - comments in Chicago
DBK.DE Confirms undertaking preparatory work for a potential €8B capital increase and further strategic measures including reintegration of Postbank
(US) US Trump administration to announce it will reopen 2022-2025 vehicle emissions standards for review next week - press
Monday, February 27, 2017
March-April 2017 Market Outlook: La La Land
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
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
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