Barrons weekend summary

Barrons weekend summary:  positive on LRCX, DBD, select energy sector names, select banks \Cover story: Mid-year picks from panelists on the Barron's 2017 Roundtable: William Priest (COHR, CYBR, DIS, JCI); Jeffrey Gundlach (PPT, EEM); Meryl Witmer (DLTR, Howden Joinery Group); Scott Black (TSEM, ICHR); Oscar Schafer (COMM, Cellnex Telecom); Abby Joseph Cohen (Schneider Electric, Clariant, Omron, ARMK); Mario Gabelli (VVV, COT, MICC, CNHI, Liberty Braves Group, RHP, MWA). 

Features: 

1) Positive on CNQ, CVX, EOG, NBL: The struggling energy sector could be near a bottom after a drop in U.S. crude-oil inventories sent prices to a new low for the year, and the stocks should see nice gains; 

2) Positive on CMA, SIVB, ZION: The three banks, which have large variable-rate commercial loan portfolios and non-interest-bearing checking accounts, should continue to benefit from short-term rate hikes; 

3) Positive on LRCX: Company is benefiting from the spread of NAND hard drives and the growth in popularity of smart devices such as refrigerators and watches; shares could gain 20% during the coming year; 

4) Positive on DBD: Though Wall Street believes online and mobile payment systems will render cash obsolete, Diebold continues to make cutting-edge ATMs and is a contrarian opportunity for investors. 

Tech Trader: Cautious on AAPL: Tech giant’s recently unveiled HomePod “shows up Apple’s shortcomings in cloud computing and the related fields of machine learning and artificial intelligence,” and isn’t likely to supplant AMZN’s Alexa or GOOGL’s Assistant. 

Trader: “If Fed chief Janet Yellen can pull off a hike and convince markets that the U.S. economy is still growing steadily, Friday’s tech wreck could be just a hiccup on the way to higher stock markets”; The tools in the activist investor playbook are getting old, with most activists simply focusing on getting companies to buy back shares and pay dividends; If KR is forced to cut guidance again, it could lead to another industry price war in which margins are sacrificed for sales growth. 

Profile: Peter Kwiatkowski of the Touchstone Flexible Income fund looks for stable income in a global portfolio with a low correlation to traditional stocks and bonds (top 10 preferred holdings: GE, RBS, LYG, Australia and New Zealand Banking Group, JPM, Societe Generale, ING, USB, VIA, Catlin Insurance). 

Follow-Up: Positive on REGN: Shares may look expensive relative to near-term earnings forecasts, but the company has more long-term potential for hits than its peers; Cautious on EXAS: Tests of the company’s colorectal cancer medication seem positive, but profits are years away and much of the optimism is already priced into the stock. 

European Trader: For investors, the outcome of the recent British elections was the worst possible, “potentially plunging the U.K. into a period of political uncertainty that could weaken the economy.” 

Asian Trader: Positive on Inventec, Primax Electronics, Sunny Optical Technology, Largan Precision: AAPL’s home-speaker device is likely to boost several companies in the Asian tech sector. 

Emerging Markets: Positive on BAP: Shares of the Peruvian bank are up, and should continue to benefit from economic growth under Peru’s market-friendly president, Pedro Pablo Kuczynski. 

Commodities: “Palladium prices surged to multiyear highs last week, but more pessimism in the auto industry and a pile-in by speculators suggest the rally is getting exhausted.” 

Streetwise: Fundstrat’s Thomas Lee sees opportunity in unloved sectors, and he likes MKTX, SCHW, WAL, TMUS, FANG, LNG.

Political Turmoil Hits FX; Big Tech Sells Off on Friday

TradeTheNews.com Weekly Market Update: Political Turmoil Hits FX; Big Tech Sells Off on Friday
Fri, 09 Jun 2017 16:12 PM EST

US stock markets digested a host of headline risk late in the week, with the Dow remaining at lofty levels while the Nasdaq sold off into Friday afternoon. Geopolitics largely ruled the roost, with terrorist attacks in London and Tehran, a Saudi rift with Qatar, former FBI Director Comey's testimony, and a surprise result in the UK election all registering on traders' radar screens. The ECB boosted its economic growth outlook for the Eurozone midweek, but kept interest rates on hold, though Mario Draghi said the ECB would continue its bond-buying program and will remain in the market for 'a long time.' The EUR/USD fell below 1.1200 on Thursday to hit its lowest point in June, and later that evening the pound weakened sharply when it became clear the UK election would result in a hung parliament. Crude was down ~3% on the week, hurt by US inventory builds, despite diplomatic turmoil between the Gulf states. Treasury yields lifted marginally and gold pared back its recent gains as safe haven assets came under pressure.Stocks were mostly higher, but large cap tech sold off on heavy volume on Friday, with profit-taking apparently triggered by a short seller note on Nvidia. The late drop in stocks lifted the VIX volatility index off of a two-decade low.For the week, the DJIA gained 0.3%, while the S&P slipped 0.3% and the Nasdaq lost 1.6%.

On the political front, Mexico came to agreement with the US government to cut its exports of refined sugar, a deal that bodes well for upcoming NAFTA renegotiation talks later in the summer. The House of Representatives passed a repeal of Dodd-Frank financial regulation on a party-line vote, though the replacement bill will likely have trouble in its current form in the Senate as it would be subject to filibuster rules. There was also some chatter this week that a GOP Obamacare replacement health care bill was making progress behind the scenes in the Senate, but no timeline was announced.

In corporate news, Macy's shares dipped on Tuesday along with other department store retailers after its CFO talked down margins at its analyst day. Nordstrom popped higher Thursday on word the Nordstrom family is considering taking the retailer private. Airlines climbed on continued softness in oil and Delta comments that it's on track to expand margins over the balance of the year. And NVIDIA led the Nasdaq lower on Friday after Citron's Andrew Left reiterated his cautious comments and said over-optimism has led people to discount the tech manufacturer's competition.


SUNDAY JUNE 4
World Bank maintains both 2017 and 2018 global GDP growth forecast; Warns on emerging market growth
*(HK) HONG KONG MAY COMPOSITE PMI: 50.5 V 51.1 PRIOR (2nd straight expansion)
(CN) CHINA MAY CAIXIN PMI SERVICES: 52.8 V 51.5 PRIOR (4 month high)

MONDAY JUNE 5
(FR) FRANCE MAY FINAL SERVICES PMI: 57.2 V 58.0E (confirms 11th month of expansion)
Evergrande reports May contracted sales CNY38.2B v CNY21.7B y/y
(US) Q1 FINAL NONFARM PRODUCTIVITY: 0.0% V -0.2%E; LABOR COST: 2.2% V 2.4%E
(US) MAY FINAL MARKIT SERVICES PMI: 53.6 V 54.0 PRELIM
(US) APR FINAL DURABLE GOODS ORDERS: -0.8% V -0.5%E; DURABLES EX TRANSPORTATION: -0.5% V -0.4% PRELIM

TUESDAY JUNE 6
(AU) RESERVE BANK OF AUSTRALIA (RBA) LEAVES CASH RATE TARGET UNCHANGED AT 1.50% (AS EXPECTED)
*(EU) EURO ZONE JUN SENTIX INVESTOR CONFIDENCE: 28.4 V 27.4E (highest reading since July 2007)
FAST Reports May Net Sales $383.5M, +14.9% y/y
August gold future approachs April high of $1300
(US) APR JOLTS JOB OPENINGS: 6.044M V 5.75ME (record high, first time above 6M)
*(US) S&P AFFIRMS UNITED STATES OF AMERICA SOVEREIGN RATING AT AA+; OUTLOOK STABLE
(AU) AUSTRALIA Q1 GDP Q/Q: 0.3% V 0.3%E; Y/Y: 1.7% V 1.6%E (ties longest expansion on record but at slowest annual pace since 2009)

WEDNESDAY JUNE 7
(IR) Shooting reported inside Iran Parliament and reports of hostages taken - Twitter sources
(UK) MAY HALIFAX HOUSE PRICE M/M: +0.4% V -0.2%E; 3M/Y: 3.3% V 3.0%E
(CH) CHINA MAY FOREIGN RESERVES: $3.054T V $3.046TE (4th straight increase and longest streak since Jun 2014)
(EU) OECD Economic Outlook; Raises 2017 Global GDP forecasts from 3.3% to 3.5% (highest since 2011)
(IN) INDIA CENTRAL BANK (RBI) LEAVES REPURCHASE RATE UNCHANGED AT 6.25%; AS EXPECTED
(IR) Iran Revolutionary Guards spokesperson: Saudi Arabia was behind terrorist attacks in Tehran today - press
(US) Association of American Railroads weekly rail traffic report for week ending June 3rd: 500.2K carloads and intermodal units, +9.8% y/y (21st straight week of gains)
(QA) Pres Trump reportedly told Qatari leaders in a phone call that he is ready to find a solution to Gulf crisis - Qatar press
(US) Senate Intel Committee posts former FBI Dir Comey's opening statement for tomorrow's Senate testimony
(US) Freedom Caucus' Meadows (R-NC): if Dems to vote for clean debt limit, let's vote now
(JP) JAPAN Q1 FINAL GDP Q/Q: 0.3% V 0.6%E; ANNUALIZED GDP: 1.0% (3-quarter low) V 2.4%E
(AU) AUSTRALIA APR TRADE BALANCE (A$): +0.56B V +2.00BE (6th consecutive surplus, smallest surplus in 6 months)
(CN) CHINA MAY TRADE BALANCE (CNY): 281.6B V 324.1BE
(CN) China Passenger Car Association (PCA): May vehicle sales 1.78M units, +1.2% y/y; YTD sales 9.05M units, -0.9% y/y
(CN) CHINA MAY TRADE BALANCE: $40.8B V $47.8BE

THURSDAY JUNE 8
(EU) EURO ZONE Q1 FINAL GDP Q/Q: 0.6% V 0.5%E; Y/Y: 1.9% V 1.7%E (highest annual pace since 2015)
(EU) ECB LEAVES MAIN 7-DAY REFINANCING RATE UNCHANGED AT 0.00%; AS EXPECTED
(EU) ECB STATEMENT AMENDS ITS FORWARD GUIDANCE: Removes "lower" on interest rate outlook
(EU) ECB's Draghi: Sees interest rates at present level well past end of QE; to preserve favorable conditions needed
UBI.IT Priced €400M rights offering share offering at 26% discount
(EU) ECB's Draghi: Council did not vote on language change; did not hear any dissent - Q&A
(EU) ECB's Draghi: Could still cut interest rates if necessary should the situation worsen - ECB press conf Q&A
(MX) MEXICO MAY CPI M/M: -0.1% V -0.1%E; Y/Y: 6.2% V 6.2%E; CORE CPI M/M: 0.3% V 0.3%E
(US) Former FBI Dir Comey: the shifting explanations of firing confused and concerned him; Trump had repeatedly said he was doing a good job - testimony to Congress
(US) Fed reports Q1 Financial Accounts: Household Change in Net Worth: $2.347T v $2.043T prior
(JP) BOJ's Kuroda: Japan is no longer experiencing deflation; long way to go until Japan price stability target is achieved - comments in UK
(US) Pres Trump's attorney: Comey hearing established that Trump was not being investigated for colluding or attempting to obstruct FBI investigation
(US) House passes Dodd-Frank financial law replacement bill - press
(UK) UK exit poll shows Prime Min May's Conservative Party set to win 314 seats; may fall short of majority and could be a hung parliament - NOP/Ipsos MORI poll
(PE) PERU CENTRAL BANK (BRCP) LEAVES REFERENCE RATE UNCHANGED AT 4.00%
(CN) CHINA MAY CPI M/M: -0.1% V 0.1% PRIOR; Y/Y: 1.5% (4-month high) V 1.5%E
(CN) CHINA MAY PPI Y/Y: 5.5% V 5.6%E; 5-month low

FRIDAY 6/9
(FR) FRANCE APR INDUSTRIAL PRODUCTION M/M: -0.5% V +0.2%E; Y/Y: 0.6% V 1.2%E
(UK) APR INDUSTRIAL PRODUCTION M/M: 0.2% V 0.7%E; Y/Y: -0.8% V -0.3%E
(UK) PM May: I will now form a government; Brexit talks to start in 10 days as expected
(CA) CANADA MAY NET CHANGE IN EMPLOYMENT: +54.5K V +15.0KE; UNEMPLOYMENT RATE: 6.6% V 6.6%E
(US) New York Fed Nowcast: raises Q2 GDP forecast to 2.3% from 2.2% on 6/2; maintains Q3 GDP forecast at 1.8%, unchanged from 6/2
NVDA Citron makes cautious comments again; sets $130 price target

Barrons weekend summary

Barrons weekend summary: positive on TWX, ACN 

Cover story: Consumers should be spending amid low unemployment and a strong stock market, but a massive credit expansion may have taken them as far as they can go; Uncertainty about tax cuts and regulatory reform also come into play in the current climate.

 Features: 

1) Starting on June 9, firms must comply with the new fiduciary rule, as well as provisions concerning conflicts of interest and impartial conduct; 

2) Positive on Atlantia, BAC, BDX, CME, JNJ, Royal Dutch Shell: These six companies could thrive in an inflationary environment because of their pricing power and/or interest-rate sensitivity; 

3) Positive on GOOGL, AAPL, AMZN, Berkshire Hathaway, MSFT: Companies top Barron’s 2017 ranking of America’s most respected companies based on a poll of money managers; JNJ, No. 1 on the list last year, fell to No. 7 this year; 

4) Positive on TWX: Media giant’s shares could return 20% this year, buoyed by the success of movies such as “Wonder Woman” and divisions such as HBO and Turner; 

5) Positive on ACN: Doubts about the technology consultant’s prospects have grown recently, but investors may be misreading the changing nature of its global opportunities. 

Tech Trader: Positive on NVDA, AMD, INTC, CEVA, CDNS: Companies stand to benefit from growing demand for artificial intelligence, though some experts say the hype about AI is overblown; It’s “a very general term for a still-evolving collection of technologies, and no one knows exactly where it’s going,” says Tiernan Ray. 

Trader: The market’s rally is quiet broad, says Doug Ramsey of Leuthold Group, despite concerns too many recent gains have come from giants such as AAPL and AMZN; There’s no doubt that economic data are worrisome, says Barron’s, “but we’d be far more concerned if economically sensitive stocks were underperforming overseas”; Positive on ESV, DO, RIG: Offshore drillers have taken a hit lately, but it’s time for investors to get back into the sector, which has probably hit bottom. 

Interview: Jason Trennert and Daniel Clifton of Strategas Research, which predicted Donald Trump’s election victory, talk about market opportunities for the second half of 2017. 

Profile: Jonas Krumplys, co-manager of the Ivy Emerging Markets Equity fund, which holds 50 to 80 stocks and averaged an annual return of 5.3% during the past three years (top five holdings: Samsung Electronics, Tencent Holdings, BABA, Sberbank of Russia, TSM). Advisor Rankings: Barron’s list of the top 100 women advisors is topped by Karen McDonald and Colleen O’Callaghan of Morgan Stanley Private Wealth Management, Kimberly Orth of Ameriprise Financial, Valerie Newell of RiverPoint Capital Management, and Stephanie Stiefel of Neuberger Berman. 

Follow-Up: Cautious on ESRX: Company’s lawsuit against Kaleo Pharma and the potential loss of a contract with ANTM continue to concern investors, keeping the share price down; Positive on GT: “The tire maker has an opportunity to transform itself into an asset-light supplier for future autonomous fleets.” 

European Trader: Positive on International Consolidated Airlines Group: British Airways is struggling to contain the fallout from a computer outage, which raised questions about its strategy, but a range of positives at the parent company make it a good time to buy shares. 

Asian Trader: Cautious on China Evergrande: A recent rally has been painful for shorts, but they could have the last laugh because of the company’s bloated balance sheet and high valuation. 

Emerging Markets: For India to continue growing, the World Bank recommends it add more regular, salaried jobs for women and provide more incentives for female entrepreneurs. 

Commodities: Natural gas faces more threats as fracking into shale and other new technologies have unleashed a record amount of gas onto the market, and a slowdown is likely to endure. 

Streetwise: “Banks may have had a mediocre trading quarter, but other trends are favorable, including widening net interest margins, loan growth, and regulatory relief.” 

Stocks Rise, Bond Yields Flatten Amid Lukewarm Data and Central Banks’ Eyeing Normalization

TradeTheNews.com Weekly Market Update: Stocks Rise, Bond Yields Flatten Amid Lukewarm Data and Central Banks’ Eyeing Normalization
Fri, 02 Jun 2017 16:12 PM EST

Global stock markets pushed out to new highs this week despite continued buying in government bond markets. By Friday the FTSE 100, DAX, S&P 500, Dow and NASDAQ Composite all reached new all-time highs. Economic figures continued to point at better relative growth outside the US, but overall solid footing for Central Banks and their policy prescriptions. The narrative that Fed would continue to raise rates like in June was unswayed while more focus was given to the upcoming ECB meeting and the cover the next round of staff projections may give to officials seeking to start reshaping expectations. By the end of the week, President Trump’s decision to pull out of the Paris climate accord, a continued retreat in crude oil prices, and a lower than forecasted May nonfarm payroll figure did little to derail global stock markets.

Recent sellers in the Greenback and buyers of US Treasuries were rewarded by the May jobs report on Friday. The Dollar Index dipped back below 97 and gold rallied 1% to a fresh one-month high. The Euro touched a fresh 7-month high, while the 10-year US Treasury yield fell to a new 2017 low below the 200-day moving average. The 2-10 spread narrowed by ~4 bps to the flattest levels since before the US election in November. The VIX finished the week back below 10. For the week, the DJIA gained 0.6%, the S&P added 0.9%, and the Nasdaq rose 1.5%.

In corporate news, financial executives tempered Q2 banking expectations at an investor conference this week. Wells Fargo CEO Sloan said Q2 loan growth has not been as robust as everyone would have hoped, while BofA’s Moynihan noted Q2 earnings would be squeezed by a 10-12% drop in trading revenues, and JPMorgan CFO Lake added she doesn’t see a reason for down trends to change in June. Shares in Lululemon surged after reporting a beat on profit and revenue, boosted by positive trends that materialized late in Q1 and are seen as continuing into Q2. On the M&A front, First Data agreed to acquire credit card payment processor CardConnect for $15/share in a $750M all-cash deal, which will add $26B worth of payments a year to First Data’s books. And media outlets indicated ConAgra had made an approach to acquire Pinnacle Foods, but CNBC’s Faber poured cold water on the report, pointing to sources that say merger talks have ended and are unlikely to be restarted.


SUNDAY 5/28
(EU) Official G7 communique from meeting May 26-27 in Taormina, Italy

MONDAY 5/29
(EU) EURO ZONE APR M3 MONEY SUPPLY Y/Y: 4.9% V 5.2%E
(JP) JAPAN APR JOBLESS RATE: 2.8% V 2.8%E (matches lowest rate since Jun 1994)

TUESDAY 5/30
(FR) FRANCE Q1 PRELIMINARY GDP Q/Q: 0.4% V 0.3%E; Y/Y: 1.0% V 0.8%E
(DE) GERMANY MAY CPI SAXONY M/M: -0.1% V -0.1% PRIOR; Y/Y: 1.6% V 2.1% PRIOR
(ES) SPAIN MAY PRELIMINARY CPI M/M: -0.1% V 0.0%E; Y/Y: 1.9% V 2.1%E
(EU) EURO ZONE MAY BUSINESS CLIMATE INDICATOR: 0.90 V 1.11E; CONSUMER CONFIDENCE (FINAL): -3.3 V -3.3E
(IT) ITALY DEBT AGENCY (TESORO) SELLS TOTAL €5.75B VS. 4.75-5.75B INDICATED RANGE IN 5-YEAR AND 10-YEAR BTP BONDS
(DE) GERMANY MAY PRELIMINARY CPI M/M: -0.2% V -0.1%E; Y/Y: 1.5% V 1.6%E
(US) APR PCE DEFLATOR M/M: 0.2% V 0.2%E; Y/Y: 1.7% V 1.7%E
(US) APR PCE CORE M/M: 0.2% V 0.1%E ; Y/Y: 1.5% V 1.5%E
(US) APR PERSONAL INCOME: 0.4% V 0.4%E ; PERSONAL SPENDING: 0.4% V 0.4%E
(US) MAY CONSUMER CONFIDENCE: 117.9 V 119.5E
(US) Atlanta Fed raises Q2 GDP to 3.8% from 3.7% on 5/26
(EU) European Commission paper proposes packaging different countries' debt into new sovereign bond-backed securities - FT
(CN) CHINA MAY MANUFACTURING PMI (GOVT OFFICIAL): 51.2 (matches 7-month low; 10th month of expansion) V 51.0E; NON-MANUFACTURING PMI: 54.5 V 54.0 PRIOR
(HK) Macau Apr Hotel Occupancy Rate: 86.1% v 82.7% prior

WEDNESDAY 5/31
(FR) FRANCE MAY PRELIMINARY CPI M/M: 0.1% V 0.1%E; Y/Y: 0.8% V 0.9%E
(DE) GERMANY MAY UNEMPLOYMENT CHANGE: -9K V -15KE; UNEMPLOYMENT RATE: 5.7% V 5.7%E
(EU) EURO ZONE MAY CPI ESTIMATE Y/Y: 1.4% V 1.5%E (2nd month remaining below ECB target); CPI CORE Y/Y: 0.9% V 1.0%E
(EU) EURO ZONE APR UNEMPLOYMENT RATE: 9.3% V 9.4%E (lowest since 2009)
JPM CFO: seeing resonably active capital markets activity in Q2 - DB conf comments
(US) May Chicago Purchasing Manager corrected to 59.4 from erroneously reported 55.2 (v 57.0e)
(US) Association of American Railroads weekly rail traffic report for week ending May 27th: 548.1K carloads and intermodal units, +6.7% y/y (20th straight week of gains)
(US) Weekly API Oil Inventories: Crude: -8.7M v -1.5M prior (biggest draw since Sept 2016)
(BR) BRAZIL CENTRAL BANK (BCB) CUTS SELIC TARGET RATE BY 100BPS TO 10.25%; AS EXPECTED
(CN) PBOC SETS YUAN MID POINT AT 6.8090 V 6.8633 PRIOR; Biggest margin of increase since Jan 6th; Strongest Yuan fix since Nov 10th
(CN) CHINA MAY CAIXIN PMI MANUFACTURING: 49.6 V 50.1E (1st contraction in 11 months)

THURSDAY 6/1
(HK) Macau May Gaming Rev MOP22.7B v MOP20.2B prior; +23.7% y/y v 16.2%e
(DE) GERMANY MAY FINAL MANUFACTURING PMI: 59.5 V 59.4E (confirms 30th month of expansion and highest since Apr 2011)
(UK) MAY MANUFACTURING PMI: 56.7 V 56.5E (10th month of expansion)
(US) MAY ADP EMPLOYMENT CHANGE: +253K V +180KE
WFC CEO: overall, credit is "very strong"; auto loan market started getting out of sorts about a year ago, was the right decision to pull back from auto market - Bernstein conf comments
GM Reports May US sales -1% y/y, to 237.3K units v 254.1Ke
(US) MAY FINAL MARKIT MANUFACTURING PMI: 52.7 V 52.5E (lowest since Sept)
(US) MAY ISM MANUFACTURING: 54.9 V 54.8E; PRICES PAID: 60.5 V 67.0E
(US) Atlanta Fed raises Q2 GDP to 4.0% from 3.8% on 5/30

FRIDAY 6/2
(US) MAY UNEMPLOYMENT RATE: 4.3% V 4.4%E (lowest since May 2001)
(US) MAY CHANGE IN NONFARM PAYROLLS: +138K V +182KE
(US) MAY AVERAGE HOURLY EARNINGS M/M: 0.2% V 0.2%E; Y/Y: 2.5% V 2.6%E; AVERAGE WEEKLY HOURS: 34.4 V 34.4E
(US) APR TRADE BALANCE: -$47.6B V -$46.1BE
EUR at 7-month highs following disappointing US payroll data; tested 1.1270 level

Risk-On Returns, Unfazed by Manchester Attack or Ho-Hum OPEC Meeting

TradeTheNews.com Weekly Market Update: Risk-On Returns, Unfazed by Manchester Attack or Ho-Hum OPEC Meeting
Fri, 26 May 2017 16:04 PM EST

Markets began the week putting last Wednesday’s brief bout of risk aversion and elevated volatility further back in the rear view mirror. Even another heinous terrorist attack in Europe did little to upset trading. US stock indices marched onward to fresh all-time highs as technical/momentum-buying emerged as seasonality and thin volumes once again played a significant role heading towards the long holiday weekend. The Dollar continued to serve as a tailwind for stocks as well. Wednesday’s FOMC minutes were seen to have a somewhat dovish tilt keeping the Dollar index from rebounding significantly from last week’s six month low. The VIX dropped back below 10 and US Treasury markets barely budged despite the new highs for equites. Oil prices moved up ahead of the OPEC meeting on Thursday, but WTI slid back below $50/bbl when ministers failed to offer up anything in the form of a surprise. The energy complex suffered with many stocks dropping to the lows of the year, but that too had little effect on overall trade or sentiment. For the week the S&P500 added 1.4%, DJIA gained 1.3%, and the Nasdaq rose 2.1%.

There were a few notable earnings reports this week. Shares of luxury goods retailer Tiffany & Co. dropped over 8% as Q1 revenues missed expectations, with management blaming continued marcoeconomic challenges, geopolitical uncertainty, and a strong USD. Video game producer Take-Two Interactive saw its share up 10% this week on the back of blow out earnings. GM took a hit after a class action lawsuit was filed accusing the automaker of employing VW-like emissions test defeat devices in some diesel trucks.On the M&A front, shares of Bunge were sharply higher on reports that Glencore had made an informal approach about a potential merger or partnership.


SUNDAY 5/21
(IR) Iran President Hassan Rouhani wins second term with 57% of the vote (update)
(CN) China regulators order new round of housing curbs in Hunan - Chinese press

MONDAY 5/22
05/22 (UK) Explosion heard near Manchester Arena, large police response seen
05/22 (CN) China Baoding city in the northern Hebei province will suspend sales of 3rd homes to local residents
*(JP) JAPAN MAY PRELIMINARY PMI MANUFACTURING: 52.0 V 52.7 PRIOR (9th consecutive expansion but at a 6-month low)
(US) President Trump's budget said to seek $3.6T in US spending cuts over 10 years; Seeks to sell half of US strategic petroleum reserve (SPR) to raise $16.5B
CLN.CH Confirms all stock merger of equals with Huntsman; Combined enterprise value of ~$20B

TUESDAY 5/23
*(DE) GERMANY Q1 FINAL GDP Q/Q: 0.6% V 0.6%E; Y/Y: % V 1.7%E; GDP NSA Y/Y: % V 2.9%E
*(FR) FRANCE MAY BUSINESS CONFIDENCE: 105 V 105E; MANUFACTURING CONFIDENCE: 109 V 108E
*(FR) FRANCE MAY PRELIMINARY MANUFACTURING PMI: 54.0 V 55.2E (8th month of expansion)
(DE) GERMANY MAY PRELIMINARY MANUFACTURING PMI: 59.4 V 58.0E (30th month of expansion and highest since Apr 2011)
(EU) EURO ZONE MAY PRELIMINARY MANUFACTURING PMI: 57.0 V 56.5E (46th straight month of growth and highest since April 2011)
(DE) GERMANY MAY IFO BUSINESS CLIMATE: 114.6 V 113.1E; CURRENT ASSESSMENT: 123.2 V 121.0E (highest level since 2011)
*(US) MAY PRELIMINARY MARKIT MANUFACTURING PMI: 52.5 V 53.0E
*(US) MAY RICHMOND FED MANUFACTURING INDEX: +1 V 15E (lowest since Sep 2016)
(US) APR NEW HOME SALES: 569K V 610KE
(US) Weekly API Oil Inventories: Crude: -1.5M v +0.9M prior
(CN) MOODY'S CUTS CHINA SOVEREIGN RATING TO A1 FROM AA3 (one notch); revises outlook from negative to stable (first Moody's cut since 1989)

WEDS 5/24
(DE) GERMANY APR JUN GFK CONSUMER CONFIDENCE: 10.4 V 10.2E (highest since 2001)
*(TH) THAILAND CENTRAL BANK (BOT) LEAVES BENCHMARK INTEREST RATE UNCHANGED AT 1.50%; AS EXPECTED
TIF Reports Q1 $0.74 v $0.70e, R$900M v $916Me
OPEC Committee statement: recommends 9 month cut extension (as expected)
(CA) BANK OF CANADA (BOC) LEAVES INTEREST RATES UNCHANGED AT 0.50%; AS EXPECTED
*(US) APR EXISTING HOME SALES: 5.57M V 5.65ME
(US) Senate Maj Leader McConnell: currently lacks votes to approve a Senate healthcare bill, but it remains a top priority - press interview
(US) FOMC MINUTES FROM MAY 3 MEETING: MOST PARTICIPANTS VIEWED MARCH SOFT INFLATION AS TRANSITORY; STAFF PRESENTED PHASED IN BALANCE SHEET RUN OFF PLAN
(US) Association of American Railroads weekly rail traffic report for week ending May 20th: 534.9K carloads and intermodal units, +5.5% y/y (19th straight week of gains) (update)
*(KR) BANK OF KOREA (BOK) LEAVES REPO RATE UNCHANGED AT 1.25%; AS EXPECTED (11th consecutive hold)

THURS 5/25
992.HK Reports Q4 Net $107M v $98Me, Op $74M v $248M y/y; R$9.6B v $9.7Be
(UK) Q1 PRELIMINARY GDP Q/Q: 0.2% V 0.3%E; Y/Y: 2.0% V 2.1%E
BBY Reports Q1 $0.60 v $0.40e, R$8.53B v $8.26Be
(ZA) SOUTH AFRICA CENTRAL BANK (SARB) LEAVES INTEREST RATES UNCHANGED 7.00%; AS EXPECTED
GM Lawsuit accuses GM of employing VW-like emissions test defeat devices in some diesel trucks - press

FRI 5/26
*(US) Q1 PRELIMINARY GDP ANNUALIZED Q/Q: 1.2% V 0.9%E; PERSONAL CONSUMPTION: 0.6% V 0.4%E
*(US) APR PRELIMINARY DURABLE GOODS ORDERS: -0.7% V -1.5%E; DURABLES EX TRANSPORTATION: -0.4% V 0.4%E
*(US) Q1 PRELIMINARY GDP PRICE INDEX: 2.2% V 2.3%E; CORE PCE Q/Q: 2.1% V 2.0%E

Barrons weekend summary

Barrons weekend summary: positive cover story on select retailers; positive on Berkshire 

Cover story: As AMZN continues to shake up the retail sector, forcing traditional players to adapt or close, “nine retail plays could thrive in a marketplace growing more competitive by the hour” (Positive on COST, WMT, LOW, BID, GGP, PRTY, BBY, HD, JWN). 

Features: 

1) The 2017 Barron’s 500, measuring operating performance based on cash flow and revenue growth, is topped by ABC, ABBV, MAR, SLF, and NVR; 

2) Positive on Berkshire Hathaway: Company’s results are driven more by wholly owned businesses such as Burlington Northern and Berkshire Energy than its big equity portfolio. 

Tech Trader: Cautious on PI, MRAM: Small chip companies offer genuine innovations and real breakthroughs that could put them at the forefront of new trends, though a bet on their stocks comes with some risk. 

Trader: Leuthold Group chief investment officer Doug Ramsey said market breadth is too strong to suggest a top, while Marketfield Asset Management isn’t letting the threat of impeachment proceedings against Donald Trump change its outlook; At the recent SALT Conference, “the one thing everyone could agree on was that the turmoil that had engulfed the president is bad for the U.S.”; At the SALT conference, many investors agreed that master limited partnerships are investable again. Profile: Sumanta Biswas and Bernard Horn, managers of the Pear Tree Polaris Foreign Value Small Cap fund, say this is an era of great opportunity for investors in foreign stocks (top 10 holdings: Dragerwerk, WorleyParsons, PrimaMeat Packers, Arcadis, Crest Nicholson Holdings, DFDS, freenet, BBA Aviation, Loomis, Taiwan Union Technology). 

Interview: Dana Telsey, chief executive of the Telsey Advisory Group, says retailers are still good investments, though the sector is going through changes in how and what people buy. 

Follow-Up: 

1) Jeremy Siegel of the Wharton School says that if Donald Trump is impeached, the Dow could rise by 1,000 points, or 5%, even before vice president Mike Pence takes the helm; 

2) Positive on FDC: Shares still trade at attractive below-market levels, and investors should hold onto them; 

3) Cautious on Badger Daylighting: A number of questions about the company’s business remain, and investors should avoid shares until they understand what’s going wrong. 

European Trader: Positive on VOD: British mobile phone operator seems to be improving its performance after struggling with competition and regulatory pressures. 

Asian Trader: “As the U.S. becomes ever more entangled in investigations of its recent presidential election mess, China is quietly easing itself to the forefront of the world stage.” 

Emerging Markets: The MSCI index will next month likely confirm that Argentina will rise from a frontier to an emerging market in 2018, attracting new funds and investors. 

Commodities: Oil prices are rising ahead of a May OPEC meeting at which the group will revisit last year’s decision to reduce production in order to boost prices. 

Streetwise: With 51% of active managers beating their benchmarks this year, up from 31% in 2016, bullish strategists are struggling to persuade investors to keep buying stocks a little longer. 

Markets Acknowledge Embroiled Trump Administration Before Quickly Moving On

TradeTheNews.com Weekly Market Update: Markets Acknowledge Embroiled Trump Administration Before Quickly Moving On
Fri, 19 May 2017 16:14 PM EST

In most cases stock indices opened the week at or near recent all-time highs. A continuing run of decelerating US economic data and the steady beat of headlines coming out of Washington DC were largely offset by a move higher in oil prices. Crude was finding support in solidifying market expectations that OPEC would extend supply cuts through next spring when they meet next week. Volatility remained remarkably low, and stocks remained bid globally, helped in part by a speech from China’s President Xi that illustrated the importance his government intends to put on finding new drivers for growth in the wake of softer April economic data.

By mid-week the tone dramatically shifted. Headwinds from Washington freshened on a report former FBI Dir Comey had drafted a memo chronicling a meeting with President Trump where he was asked to drop the investigation into former National Sec Adviser Flynn. Within 24 hours, former FBI Dir Mueller was appointed special counsel to oversee the Russia investigation, while the President repeatedly denied the reports, calling the whole thing a ‘witch hunt.’ Markets finally buckled as investors became increasingly concerned the political fallout could ultimately be fatal for the Republican’s pro-growth agenda. The flight from risk assets sent the VIX +27%, ultimately filling the gap made into the French election. Gold prices rose along with global Treasury bonds, sending yields lower. The US 10-year yield fell just short of the April low of 2.18%. The Dollar index gave back all the post-US election/Trump reflation gains.

The move into safe have assets was short lived. Equity markets rebounded Thursday in the wake of better US economic readings and technically driven momentum buying after the significant reversal. Markets largely shrugged off the latest political crisis in Brazil, which brought a spat of elevated volatility to Brazilian assets and word the Trump administration was pushing ahead with the NAFTA renegotiation. Oil prices pressed higher on speculation OPEC was contemplating a scenario of deepening supply cuts, not just extending. WTI crude finished the week above the $50 mark, while the Dollar Index closed near $97 for the first time since before the Nov election. Dollar bulls were dismayed by notably.dovish commentary from the Fed's Bullard. The US 10-year yield rebounded back towards 2.25%, but the curve remained compressed. For the week the Dow, S&P and NASDAQ nearly did a round trip, all falling ~0.5%.

As earnings news this week slowed to a trickle, a few big names reported strong results. Home Depot bucked the trend of poor retailer reports by notching a solid beat on top and bottom line, as the home improvement giant remains buoyed by a stronger housing market and a boost in big-ticket transactions. Semis were up modestly in Friday trading after Applied Materials issued strong results and guidance as its chipmaker customers ramp up to bring more advanced production equipment online. Deere rebounded by beating expectations across the board and raising its outlook, with notable strength from international farm equipment sales and home construction equipment.

SUN 5/14
(CN) CHINA APR INDUSTRIAL PRODUCTION Y/Y: 6.5% V 7.0%E; YTD Y/Y 6.7% V 6.9%E
(CN) CHINA APR RETAIL SALES Y/Y: 10.7% V 10.8%E; YTD Y/Y: 10.2% V 10.2%E
(CN) CHINA APR FIXED ASSETS EX RURAL YTD Y/Y: 8.9% V 9.1%E
(SA) Saudi Oil Min Al-Falih: Russia and Saudi Arabia in favor of extending OPEC deal for 9-months to March 2018; decision to be made May 25th - financial press

MON 5/15
(US) MAY EMPIRE MANUFACTURING: -1.0 V +7.3E
(US) MAY NAHB HOUSING MARKET INDEX: 70 V 68E (second-highest reading since financial downturn)
(US) MAR TOTAL NET TIC FLOWS: -$0.7B V $13.2B PRIOR; LONG-TERM TIC FLOWS: $59.8B V $53.1B PRIOR
27.HK CEO Lui: Encouraged by recent improvements in VIP; will need a few mouths to see if recovery is sustainable

TUES 5/16
VOD.UK Reports FY16/17 Adj EBIT €3.97B v €3.70B y/y, adj EBITDA €14.1B v €14.2B y/y, Rev €47.6B v €49.8B y/y
*(UK) APR CPI M/M: 0.5% V 0.4%E; Y/Y: 2.7% V 2.6%E; CPI CORE Y/Y: 2.4% V 2.3%E
*(EU) EURO ZONE Q1 PRELIMINARY GDP Q/Q: 0.5% V 0.5%E; Y/Y: 1.7% V 1.7%E
*(DE) GERMANY MAY ZEW CURRENT SITUATION SURVEY: 83.9 V 82.0E; EXPECTATION SURVEY: 20.6 V 22.0E
HD Reports Q1 $ 1.67 v $1.62e, R$23.9B v $23.7Be
(US) APR HOUSING STARTS: 1.17M V 1.26ME; BUILDING PERMITS: 1.23M V 1.27ME
TATA.IN Reports Q4 (INR) Group loss 7.2B v profit 9.88Be, Rev 354.6B v 316.2Be
(US) APR INDUSTRIAL PRODUCTION M/M: 1.0% V 0.4%E; CAPACITY UTILIZATION: 76.7% V 76.3%E (largest total industrial production gain since Feb 2014)
(US) Atlanta Fed raises Q2 GDP to 4.1% from 3.6% on 5/12
(US) Weekly API Oil Inventories: Crude: +0.9M v -5.8M prior; first build in 3 weeks
(US) President Trump reportedly asked former FBI Director Comey to shut down investigation into National Sec Adviser Flynn, according to memo Comey wrote following a meeting with Trump - NY Times
(US) US House Chair of Oversight Committee Chaffetz (R): Has subpoena pen ready for Comey memo, oversight committee is going to get the memo

WEDS 5/17
(HK) Macau Gaming Regulator: No plans to set up online gaming; no plan to adj gaming tax
(UK) MAR AVERAGE WEEKLY EARNINGS 3M/Y/Y: 2.4% V 2.4%E; WEEKLY EARNINGS (EX BONUS) 3M/Y/Y: 2.1% V 2.1%E
*(UK) APR JOBLESS CLAIMS CHANGE: +19.4K V +33.5K PRIOR; CLAIMANT COUNT RATE: 2.3% V 2.2% PRIOR
(UK) MAR ILO UNEMPLOYMENT RATE 3M/3M: 4.6% V 4.7%E (lowest since 1975)
700.HK Reports Q1 (CNY) Net 14.5B v 13.0Be; Rev 49.6B v 46.4Be
(EU) EURO ZONE APR CPI M/M: 0.4% V 0.4%E; Y/Y (FINAL READING): 1.9% V 1.9%E; CPI CORE Y/Y(FINAL READING): 1.2% V 1.2%E
(DE) GERMANY SELLS €812M VS. €1.0B INDICATED IN 2.5% JULY 2044 BUNDS; AVG YIELD: 1.24% V 0.87% PRIOR; BID-TO-COVER: 2.3X V 1.2X PRIOR
*(PL) POLAND CENTRAL BANK (NBP) LEAVES BASE RATE UNCHANGED AT 1.50%; AS EXPECTED
TGT Reports Q1 $1.21 v $0.89e, R$16.0B v $15.6Be
F Confirms plan to cut 10% of Salaried workforce in North America and Asia as part of cost reduction program
(IR) Trump administration confirms will renew Iran sanctions waiver, as expected, related to nuclear agreement - press
(IE) Ireland PM Kenny confirms plan to resign; effective Thursday, May 18th; successor to be appointed June 2nd - Irish press
(US) Association of American Railroads weekly rail traffic report for week ending May 13th: 527.0K carloads and intermodal units, +5.7% y/y (18th straight week of gains)
CSCO Reports Q3 $0.60 v $0.58e, R$11.9B v $11.9Be; to cut 1.1K jobs (about 1.5% of total)
(US) Justice Dept names former FBI Director Mueller as special counsel to take over Russia probe - press
*(JP) JAPAN Q1 PRELIMINARY GDP Q/Q: 0.5% V 0.5%E; ANNUALIZED GDP: 2.2% V 1.7%E; 5th consecutive quarter of growth for the first time in 11 years
(CN) China developers expect their offshore dollar bond issuance to dramatically slow in the near term in an effort for govt to cool the sector - financial press
(HK) DICJ director Martins Chan: Macau gaming licenses will be not be renewed but open for bidding again when they expire; no plans for online gaming platforms
*(AU) AUSTRALIA APR EMPLOYMENT CHANGE: +37.4K (2nd straight increase; best 2-month rise since late 2015) V +5.0KE; UNEMPLOYMENT RATE: 5.7% (3-month low) V 5.9%E
*(CN) CHINA APR PROPERTY PRICES M/M: RISE IN 58 OUT OF 70 CITIES VS 62 PRIOR; Y/Y: RISE IN 69 OUT OF 70 CITIES V 68 PRIOR
(US) Democratic strategists said to begin poll-testing public opinions of impeaching Pres Trump - US press

THURS 5/18
BRBY.UK Reports FY16 Adj Pretax £462.4M v £457.1Me, Op Profit £458.7M v £417.8M y/y, Rev £2.77B v £2.77Be
*(ID) INDONESIA CENTRAL BANK (BI) LEAVES REVERSE REPO RATE UNCHANGED AT 4.75% (as expected)
(UK) APR RETAIL SALES (EX-AUTO/FUEL) M/M: 2.0% V 1.0%E; Y/Y: 4.5% V 2.6%E
(BR) Brazil govt allies said to seek resignation of President Temer - financial press
(US) Commerce Sec Ross: Do not see any reason for policy delay; calls special investigations a sideshow - CNBC
(EU) ECB ACCOUNT OF MONETARY POLICY MEETING (APR MINUTES): Broad agreement that monetary policy stance was appropriate; risk outlook has improved
(US) MAY PHILADELPHIA FED BUSINESS OUTLOOK: 38.8 V 18.5E
(US) APR LEADING INDEX: 0.3% V 0.4%E
(MX) US Trade Rep Lighthizer: confirms began 90-day consultation period to renegotiate NAFTA
(MX) MEXICO CENTRAL BANK (BANXICO) RAISES OVERNIGHT RATE BY 25BPS TO 6.75%; NOT EXPECTED
(BR) Brazil President Temer: I have nothing to hide; I will not resign; will prove innocence before Brazil's Supreme Court - comments in Brasilia
AMAT Reports Q2 $0.79 v $0.76e, R$3.55 v $3.54Be
CRM Reports Q1 $0.28 v $0.26e, R$2.39B v $2.35Be
*(CL) CHILE CENTRAL BANK (BCCH) CUTS OVERNIGHT RATE TARGET BY 25BPS TO 2.50%; NOT EXPECTED

FRIDAY 5/19
(UK) MAY CBI INDUSTRIAL TRENDS TOTAL ORDERS: 9 V 4E
DE Reports Q2 $2.49 v $1.70e, Net Equipment Rev $7.26B* v $7.24Be
(CN) China reportedly will lift at 2-year suspension of foreign funds raising money in China to invest overseas as early as June - financial press
(US) New York Fed Nowcast: raises Q2 GDP forecast to 2.3% from 1.9% from 5/12
(US) GOP healthcare bill CBO score scheduled for release on Weds afternoon (5/24) - press

Barrons weekend summary

Barrons weekend summary: positive on ADI, AL 

Cover story: Europe has seen its share of political and banking crises, but the situation seems to be changing; "Given attractive valuations, diminished political risk, low interest rates, and a pickup in global growth, international markets, and Europe particular, could finally start to outperform." 

Features: 

1) It may be time for investors to buy emerging markets, which are trading at a hefty discount to U.S., European, and Japanese shares; China, South Korea, India, Peru, and Greece are among investors' favored destinations now; 

2) A look at the picks and pans of investors who attended the annual Sohn Investment Conference (short: CLB, SPY, FTR, U.K. government bonds; long: HHC, EEM, CTL, DHXM, ISBC, UniCredit, TSLA 2022 convertible bonds, UAL, DXC, FMC, Q); 

3) Positive on ADI: Company may lose share in iPhone screen chips, but it's flourishing in chips for autos and other sectors where it has more exposure, and shares could return 20% or more this year; 

4) Positive on AL: A long-term travel boom has helped the airplane leasing company, but despite some concerns about its debt as interest rates rise, shares are modestly priced and have 30% upside.

Tech Trader: Under chief Satya Nadella, MSFT has become a so-called cloud company, but because it combines new and old products on its income statement, cloud-related accounting becomes impenetrable. 

Trader: Some earnings reports suggest that the U.S. economy may be stronger than it looks; GS's Robert Boroujerdi is screening for stocks where estimates have moved higher but multiples haven't followed, such as CAT, STZ, CNK, and MA; Barron's suggests staying away from RH until the company can prove it has put its problems behind it and can justify its valuation. 

Interview: Columbia professor Bruce Greenwald has trained a generation of value investors, and talks to Barron's about the flaws in discounted-cash-flow valuations, globalization, and other topics. 

Profile: Nick Clay, manager of the Dreyfus Global Equity Income fund, prefers stable, cash-rich companies trading at attractive valuations (top 10 holdings: MSFT, RAI, CSCO, PG, PM, DEO, NVS, UL, CA, MRK). 

Small Caps: Positive on HMHC: Publisher had a hard year in 2016, but after cutting costs and investing in its business, a rebound appears to be under way and shares could start moving up. 

Follow-Up: Cautious on WFM: Investors who bought shares based on Barron's recommendation last year have seen upside only since Jana Partners took a stake this spring, and that won't likely create much momentum; +/- SNAP: Shares still aren't a bargain even after falling by 17% last week, while cash flow figures overstate the company's financial health by excluding hefty stock-based compensation. 

European Trader: "France's presidential election reinforced a growing belief that Europe's populist tide has been blocked, but the market's muted performance last week suggests that other issues might still be troubling investors." 

Asian Trader: Positive on JD: Chinese e-commerce major lags rival BABA, but as everyday people in China become wealthier, they're replacing a wider range of goods, and avoiding Alibaba over concern about counterfeits. 

Emerging Markets: Positive on PBR: "After a solid first-quarter profit, the Brazilian energy giant looks ready to climb by 20% or more," and will sell off assets to ease its debt burden. 

Commodities: Recent U.S. government projections about corn, which predict a decline in production this coming season, offer another reason for the grain to move higher. 

Streetwise: The increase in AAPL's market value in 2017 has surpassed the entire market cap of DIS, KO, C, two SLB's, or seven APC's.

Mixed Data, Retail Woes, and Political “Fires” Leave Markets Unmoved

TradeTheNews.com Weekly Market Update: Mixed Data, Retail Woes, and Political “Fires” Leave Markets Unmoved
Fri, 12 May 2017 16:04 PM EST

The trading week opened in a relatively listless manner. Global markets appeared to have priced in the Macron victory and with much of the key April economic data and Q1 earnings season in the rear view mirror investors were forced to steer through a more than two-decade low in the VIX volatility index. The trading environment did little to mimic the raft of headlines that continued to come out of Washington DC. Markets seemed to pay little attention to the surprise announcement that President Trump fired FBI Director Comey. However, the White House’s inconsistent explanations of what led to the firing intensified press scrutiny of the event, and largely overshadowed a promising provisional trade agreement that could potentially open up Chinese markets to more US exports.

The economic data this week stuck to a now familiar pattern. US CPI and retail sales figures missed expectations while European numbers largely bested expectations and supported a third straight week of better performance by many overseas stock markets. US rates backed up for much of the week while Treasury refunding supply was met with tepid demand and various Fed officials affirmed their belief that two more rate hikes this year remained plausible. On Friday though, UST prices bounced and yields dropped along with the Dollar index following the softer than expected sales and inflation readings. Crude prices held the support levels found late last week but have had a tough time pushing away from the Nov 2016 lows despite continued reports OPEC and non-OPEC producers are moving towards an agreement to extend production cuts for at least six more months. Gold prices have held above the $1,200 mark while a surge in bitcoin to fresh all-time highs above $1,700 garnered quite a bit of attention. Reports circulated that Chinese regulators are nearing the formal publication of bitcoin regulations that could further legitimize the digital currency. For the week the S&P500 fell 0.4%, the DJIA lost 0.5%, while the Nasdaq gained 0.3%.

In corporate news this week, the woes of the retail sector remained a focus. Macy’s shares plunged to their lowest level in more than five years after reporting big misses on both the top and bottom line, as consumers continue to shift purchases to online from mall-based outlets. Nordstrom shares dropped double-digit percentages as it reported quarterly same-store sales dropped 0.8% y/y, coming in below estimates, even though it maintained its full-year outlook, noting stronger demand at its off-price Nordstrom Rack stores. Kohl’s missed on revenue but beat on profits, and saw significant improvement in traffic and sales for March and April. The Dow was weighed down on Tuesday by investor reaction to Disney earnings, as the media giant was hurt by persistent worries about its ESPN business. On the M&A front, Verizon snapped up Straight Path for $184/share in a bid to gain a key advantage in the race to deploy a 5G network. Coach agreed to acquire rival Kate Spade for $18.50/share in cash, giving the luxury fashion name ownership of an accessories manufacturer with access to a younger demographic.


SUN 5/7
(CN) CHINA APR FOREIGN RESERVES: $3.030T V $3.020TE (UPDATE); 5-month high; 3rd straight increase (first 3-month streak since mid-2014)
(HK) Macau Govt Official: Chinese UnionPay ATM cardholders will be asked to present their China ID cards and face recognition check before they can withdraw cash in Macau
(CN) CHINA APR TRADE BALANCE (CNY): 262.3B V 197.2BE ; 3-month high
(CN) CHINA APR TRADE BALANCE: $38.1B V $35.2BE

MON 5/8
(EU) EURO ZONE APR SENTIX INVESTOR CONFIDENCE: 27.4 V 25.2E (highest since July 2007)
KATE To be acquired by Coach for $18.50/shr in cash valued at $2.4B
(US) Fed Q1 senior loan officer survey: banks saw weaker commercial and industrial property loan demand in Q1
(CN) China Passenger Car Association (PCA): Jan-Apr vehicle sales 7.27M units, -1.7% y/y

TUES 5/9
(FR) BANK OF FRANCE BUSINESS SENTIMENT: 104 V 103E
VRX Reports Q1 +$1.79 (Gaap) v -$1.08 y/y, R$2.11B v $2.16Be
(US) Atlanta Fed cuts Q2 GDP to 3.6% from 4.2% on 5/4
(US) Commerce Sec Ross: haven't decided whether renegotiation on NAFTA will happen on bilateral or trilateral basis - press
DIS Reports Q2 $1.50 v $1.45e, R$13.3B v $13.5Be
- FCF $2.56B v $2.38B y/y
(US) Weekly API Oil Inventories: Crude: -5.8M v -4.2M prior; 2nd straight draw and largest draw since Jan 4th
(US) President Trump fires FBI Director Comey - financial press
WSTC To be Acquired by Certain Funds Affiliated With Apollo Global Management for $23.50/shr cash, enterprise value $5.1B (~discount of 2.5% to closing price*)
(CN) CHINA APR CPI M/M: +0.1% V -0.3% PRIOR; Y/Y: 1.2% V 1.1%E (both readings at 3-month highs)
(CN) CHINA APR PPI Y/Y: 6.4% V 6.7%E; 8th consecutive y/y increase; slowest increase in 4-months

WEDS 5/10
(FR) FRANCE MAR INDUSTRIAL PRODUCTION M/M: 2.0% V 1.0%E; Y/Y: 2.0% V 0.6%E
(US) APR IMPORT PRICE INDEX M/M: 0.5% V 0.1%E; Y/Y: 4.1% V 3.6%E
(US) Association of American Railroads weekly rail traffic report for week ending May 6th: 515.3K carloads and intermodal units, +4.6% y/y (17th straight week of gains)
BA Halts 737 MAX test flights for engine inspections after cracks found in low pressure turbine section - Aviation Week
(NZ) NEW ZEALAND CENTRAL BANK (RBNZ) LEAVES OFFICIAL CASH RATE (OCR) UNCHANGED AT 1.75%; AS EXPECTED
(CA) Moody's downgrades 6 banks in Canada by 1 notch, outlook negative

THURS 5/11
DPW.DE Reports Q1 Net €633M v €639M y/y, EBIT €885M v €918Me, Rev €14.9B v €13.9B y/y
ACA.FR Reports Q1 Net €845M v €702Me; Rev €4.70B v €3.80B y/y
DTE.DE Reports Q1 adj Net €747M v €791Me, adj EBITA €5.55B v €5.46Be, Rev €18.7B v €18.7Be
MAERSKB.DK Reports Q1 Net $253M v $199Me, EBITDA $1.71B v $1.82Be, R$8.96B v $9.14Be
(UK) MAR INDUSTRIAL PRODUCTION M/M: -0.5% V -0.4%E; Y/Y: 1.4% V 2.0%E
STRP Verizon confirms agreement to acquire for fixed price of $184.00/shr in all stock deal; to terminate agreement with AT&T
*(UK) BANK OF ENGLAND BANK (BOE) LEAVES INTEREST RATES UNCHANGED AT 0.25%; AS EXPECTED
(UK) BANK OF ENGLAND BANK (BOE) MAY MINUTES: VOTED 7-1 TO LEAVES INTEREST RATES UNCHANGED AT 0.25% (Forbes again voted for a 25bps increase)
(UK) BANK OF ENGLAND BANK (BOE) QUARTERLY INFLATION REPORT (QIR)
M Reports Q1 $0.24 v $0.35e, R$5.34B v $5.47Be
(US) APR PPI FINAL DEMAND M/M: 0.5% V 0.2%E; Y/Y: 2.5% V 2.2%E
(US) Pres Trump: I decided to fire FBI Director Comey before meeting with Attorney Gen Sessions and Dep Attorney General Rosenstein
(PE) PERU CENTRAL BANK (BRCP) CUTS REFERENCE RATE BY 25BPS TO 4.00%; NOT EXPECTED - first rate cut since Jan 2015
(CN) China Apr vehicle sales 2.1M units, -2.2% y/y v +4.0% in Mar; Biggest decline since Aug 2015 - China Association of Automobile Manufacturers
(US) US and China announce Initial Results of the 100-Day Action Plan of the US/China Comprehensive Economic Dialogue

FRIDAY 5/12
TKA.DE Reports Q2 *adj Net €64M v €108M y/y, adj EBIT €412M v €390M y/y, Rev €11.0B v €10.4Be
MT.NL Reports Q1 Net $1.00B v -$416M y/y, EBITDA $2.23B v $2.01Be, R$16.1B v $16.6Be
(DE) GERMANY Q1 PRELIMINARY GDP Q/Q: 0.6% V 0.6%E; Y/Y: 1.7% V 1.7%E; GDP NSA Y/Y: 2.9% V 2.8%E
(US) APR ADVANCE RETAIL SALES M/M: 0.4% V 0.6%E; RETAIL SALES EX AUTO M/M: 0.3% V 0.5%E
(US) APR CPI M/M: 0.2% V 0.2%E; CPI EX FOOD AND ENERGY M/M: 0.1% V 0.2%E; CPI INDEX NSA: 244.524 V 244.610E
(US) MAY PRELIMINARY UNIVERSITY OF MICHIGAN CONFIDENCE: 97.7 V 97.0E
(US) Atlanta Fed maintains Q2 GDP at 3.6%, unchanged from 5/9
(US) New York Fed Nowcast: raises Q2 GDP forecast to 1.9% from 1.8% from 5/5

May-June 2017 Outlook: 100 Days

TradeTheNews.com May-June 2017 Outlook: 100 Days
Sat, 06 May 2017 11:13 AM EST

In the 100 days since President Trump took the oath of office, the new Administration's efforts to recode the government genome and rewrite the diplomatic playbook have kept it at the center of geopolitical focus. Allies and adversaries alike are trying to get a read on the unpredictable new President even as Trump himself is starting to realize that the American political process cannot be changed so easily.

Though three months is not a lot of time on the political scale, the President's domestic agenda has not made much progress, bogged down by infighting in the Republican Party. Yet markets remain optimistic that at the very least tax reform will materialize. Simultaneously, Trump has thrown out the established foreign policy regime as he aggressively takes on trade issues and presses for greater military spending.

Outside of Washington, impending elections in France and the UK will help shape the future of Europe, and oil producers will decide whether tepid energy prices demand an extension of their output cutting deal. Meanwhile North Korea appears to be accelerating its weapons testing programs in light of increased pressure from the US and now China. Altogether, these political affairs will dictate the narrative of the next several months and to some extent will overshadow economic issues even as central banks are taking their monetary policy out of emergency mode after handling a decade of fallout from the financial crisis.

May Days

The first hurdle for the markets on the immediate horizon is the French election. The final round vote on Sunday, May 7, has been cast as a referendum on the future of a united Europe. The expected defeat of the nationalist candidate Marine LePen, who has pledged to withdraw France from the euro, will be an important moment for European solidarity.

LePen has consistently trailed Emmanuel Macron by 20 points in second round polling. That could lead to complacency on election day - less enthusiastic Macron voters might stay at home in the belief that the election is sewn up, which could make the final result much closer. Still it would take a huge turn of events - like a major scandal for Macron or a large scale terrorist attack - to swing enough voters toward LePen to create an upset.

Since the polls remain stable with just days until the election, a LePen win would be even more shocking than the Brexit or Trump victories (which were within statistical margins of error) and would likely throw markets into chaos. But if Macron wins as expected, it may blunt the momentum of the global populist wave that produced those upsets in the UK and US. In the short term at least, it should allay fears about the EU and euro zone coming apart and discourage nationalists that hoped to gain power in other European elections coming up this year. It should be noted however, that although Macron is pro-Europe, he is also an insurgent 'change' candidate, and his election would still be a rebuke of the two traditional parties in France who were shut out of the second round vote. It also remains to be seen if Macron can live up to the name of his party, En Marche ('on the move'), or if novice politician ends up supporting the status quo.

The expected French election result will remove an immediate existential threat to the euro zone, giving the EU a stronger hand in the Brexit negotiations. But the other near-term electoral event in Europe is expected to pull in the other direction. After the government in London invoked Article 50 in late March, mainland Europe made it clear that the divorce proceedings would take several weeks to get started. That afforded UK Prime Minister May the political opportunity to affirm her mandate by calling for a snap election on June 8. With the UK opposition party in disarray, the vote is expected to give the Tory PM a bigger majority in the House of Commons, and more importantly give May the stamp of popular approval after she ascended to leadership in a closed party vote last summer. If everything goes as expected, this should give the PM more confidence of domestic support during the Brexit negotiations, showing that the UK is resolved to follow through on the separation plan.

The Brexit negotiations will get underway in earnest soon after the snap election. Officials on both sides are predicting tense talks, and major points of contention are already appearing. The EU's open bid was for up to €60 billion in exit payments by the UK to cover EU budget obligations, as well as outstanding pension liabilities and loan guarantees. This demand has since reportedly been upped to over €100 billion over 10 years. London has countered that it will not pay any exit bill without a concurrent agreement on a new trade deal with the bloc, while the EU insists that trade talks come later. In the months ahead, there are sure to be some dramatic headlines leak out of the talks as both sides send up trial balloons or issue threats.

The Next 100 Days

Tough negotiations are going to be the name of the game in Washington for the next several months as well. A number of major legislation initiatives are on the front burner, but it appears each measure will have to go through the crucible of a factional Republican House before moving on to a Senate that will have to reshape the bills to attract some Democratic support in the face of remaining filibuster rules.

In the symbolic first 100 days of the Administration, the White House hasn't managed to pass any of Trump's signature policy pledges. But there are some signs that the Administration might finally be getting its sea legs, and could actually start making some headway. After the embarrassing aborted attempt to rush through an Obamacare replacement in April, the House leadership managed to scrape together enough Republican votes to pass its stripped down healthcare bill. Ultimately this may only be a symbolic victory for the House Republicans that made repealing Obamacare their central campaign issue for the last seven years. Senate Republicans are already making noises about a complete rewrite of the House bill, which could stretch the process well into next year. Republicans may get more fodder to support their pitch for healthcare reform in the weeks ahead as insurers are required to declare by June 21 whether they will sell coverage on the Obamacare marketplaces.

The biggest achievement of the administration to date may be the $1.1 trillion omnibus spending bill that avoided a government shutdown, funding federal operations through the end of September. The deal showed that bipartisanship is not dead in D.C., even though it meant putting off some of Trump's budget demands including funding for border wall construction. The budget deal demonstrated that Republicans can attract some of the Democratic votes in the Senate they will need if they hope to pass legislation on tax reform and infrastructure spending later this year. Any spark of bipartisanship was dashed, however, when the President tweeted out a threat to shutdown the government in October after he felt Democrats crowed too loudly about the compromises they had won in the short term funding agreement.

The markets could take heart if an infrastructure spending bill gets on track. The concept of a $1 trillion infrastructure stimulus package was floated earlier this year, but since then the initiative has gotten short shrift. Businesses that depend on shipping would be happy to see a capital investment plan for improving highways and bridges, but even if Congress expedites the legislation it could suffer from a lack of "shovel ready" projects and could take years to have a real economic impact.

Even if some items on Trump's legislative agenda don't make headway, markets are still counting on tax reform later this year to keep the reflation trade alive. A brief outline of the tax plan was released late last month, envisioning a 15% corporate tax rate with government revenue losses partly offset by closing tax loopholes. Taxes for individuals would also be modestly lowered and greatly simplified. Tax reform has the potential to draw in some Democratic support if the bill is carefully crafted, but nearly every line of the complex federal tax code has its own entrenched special interest supporters, so the tax overhaul may not come easy. There is also the question of the impact on government revenues and the deficit. It appears that the Wall Street wing of the White House has scuttled the idea of a border adjustment tax (BAT), a hobbyhorse of the economic nationalists on team-Trump. This is likely to leave a big shortfall in government revenue even if the promised three-percent-plus GDP growth is achieved. That could further balloon the deficit, which will draw the ire of fiscal hawks in Congress.

It remains unclear when any of these bills will reach the President's desk. After the initial false start on healthcare, the White House has learned to be more cautious about setting dates-certain. Recently Treasury Secretary Mnuchin admitted that his original timeline for passing tax reform by the August legislative break was "highly aggressive to not realistic at this point." He now says he's hopeful about passing it this year. If the process appears to stall, markets could get nervous and extract some of the "Trump reflation trade" that has already been priced in.

Arguably the Trump administration has had a little more success on the foreign policy front. Trump has ruffled the feathers of old allies with demands for more help with paying for collective defense, successfully prodding NATO allies into reviewing their defense budgets. The White House team has also been stirring the pot on 'fair' trade issues, most notably with its NAFTA neighbors. Most of the rhetoric has been aimed at Mexico, with talk of the border taxes and building 'The Wall', but Trump lowered the boom first on Canada, imposing a 20% tariff on Canadian timer. The Commerce Department is pursuing trade investigations of the steel and aluminum markets, self-initiating the process without waiting for a US company to file a complaint.

In the geopolitical sphere, Trump's strategy of approaching China to corral North Korea seems to be bearing some fruit. The Trump administration declined to label China a currency manipulator and has dangled the promise of more generous trade terms in exchange for China's help with its neighbor. China has used its position as North Korea's largest trading partner to put economic pressure on Pyongyang, enough that the state news agency recently issued a statement warning China not to "test the limits" of North Korea's patience. Some of this diplomatic progress may be undercut, however, if the White House follows through on plans to cut funding to the State Department.

Adding to the complexity of the situation, South Korea's President Park has been ousted by a corruption scandal, leaving the country rudderless even as tensions between the two Koreas are at their worst in decades. An election on May 9 will choose a new President, and the front-runner, Moon Jae-in, the candidate from the left-leaning Democrats, has called for a renegotiation of the US deployment of THAAD missile defenses. That could disrupt efforts to apply steady pressure on the North.

6 More Months

Instability is also starting to creep back into the energy market. Four months into the six-month agreement between oil producers to reduce output, crude futures seemed to level off at around the $50/bbl level. But in recent days oil has been sinking to lows not seen since last summer, before oil producers sealed the deal on their output cutting agreement. The energy market has been hit by a relentless rise in US oil rig counts, a more stable Libya getting production back online, as well as technical factors all conspiring to take WTI crude back down to the low $40's.

If the oil market continues to deteriorate it could force a flashback to some of last year's key issues. Low energy prices hampered any progress against weak inflation for most of last year. There were also concerns about energy companies collapsing in a low price environment, and worries about the banks that hold the debt of the more speculative drilling equipment companies.

All in all, the six-month production curb agreed to by key OPEC and non-OPEC nations has been beneficial to the industry, as affirmed by energy equipment suppliers who have broadly declared a trough in deliveries of rigs and other capital equipment. But with the original agreement set to expire at the end of June, all eyes will be on the May 25 OPEC semi-annual meeting. It's at that conclave that producers will make their final decision about extending the production quotas for another six months.

There are already strong indications that the deal will be extended through the end of the year. Numerous reports have indicated that Saudi Arabia and its Gulf allies have agreed the best course of action is to keep the curbs in place, and other big producers like Iraq and Russia also seem resigned to keeping a lid on production. One report suggested that Saudi is prepared to keep the cuts in place even longer, in part to keep energy prices up until after the eagerly awaited Saudi Aramco IPO in 2018.

Oil ministers remain cagy, saying the decision will not be taken until the day of the OPEC meeting. And there is always the chance that political tensions between the Saudis and Iranians will collapse a renewal agreement.

Another wildcard is Venezuela, where anti-government unrest is growing as lower oil prices have exposed the ineffectiveness of the government. Weeks of protests have moved the unpopular President Maduro to announce the creation of a new popular assembly with the ability to rewrite the constitution, which the opposition has labeled a power grab. If the protests against Maduro grow, it could lead to disruptions in Venezuela's two million barrels-per-day supply of oil and send energy prices higher. In the months ahead, Maduro could take more drastic measures to hold onto power, or he could potentially be ousted. Both scenarios would likely crimp Venezuela oil production in the short term (ironically helping prices), but if a new leader from outside of Maduro's Socialist party should rise to power, it could lead to a more free-market policy for the country that could spur significantly more oil output.

10 Months to Go

In a much less permanent way, Janet Yellen is also on her way out. With under 10 months left on the Fed Chair's term, she has turned the FOMC toward the normalization process. Despite some tentative signs that President Trump is warming up to the Fed Chair, it's doubtful that he will reappoint Yellen to a fresh four-year term. Under the circumstances, she could have easily left the heavy lifting to her successor, but it appears that Yellen is determined to maintain the collegial spirit of the Fed and get the wind down of accommodation well underway before she leaves office.

In a sense, all of the attention that fiscal policy is getting in Washington has helped bail out the Fed - now that the Fed is not the only stimulus game in town it can finally focus on a steady unwind of accommodative monetary policy. After three rate hikes off the zero bound, including two since December, the Fed seems to finally be on track to tighten policy on a more consistent basis. The baseline expectation has been set at three hikes in 2017, with the next two earmarked for June and December. Fed officials have also left the door open to a potential fourth rate hike if the economic data dictate it.

At its early May meeting the Fed acknowledged that growth slowed in Q1, but brushed it off as "transitory", echoing the seasonality seen in the early part of the last several years. The April employment report gave credence to this case, showing a strong rebound in payrolls from the disappointing March reading, and notching a fresh decade low in unemployment. But inflation remains stubbornly weak, particularly in the wage data, and could disrupt the rate tightening schedule if inflation does not make progress toward the Fed target in the next few months.

The Fed believes it can avoid a new 'Taper Tantrum' by being transparent about its plans for the balance sheet reduction. Markets showed little reaction when the central bank announced earlier this year that it had begun deliberations on how to conduct the balance sheet run off, nor in the wake of Fed officials suggesting that the taper should probably start later this year. Market participants also seemed to approve of NY Fed President Dudley's suggestion that rate hikes could see a "little pause" when the central bank starts reducing bond holdings. Rates remain the primary tool for implementing monetary policy and the hope is that the balance sheet reduction will operate in the background, at a gradual pace.

In fact, Fed discussions around the balance sheet so far have already laid out much of what the final plan may consist of. Most Fed officials appear to agree that it is optimal to start by ending reinvestment and allowing maturing securities to roll off the books organically (rather than actively selling holdings). There is also a consensus that the balance sheet should be substantially reduced over time (in part so that the Fed will have QE as a tool for future recessions), perhaps more than halving the current $4.5 trillion balance sheet over time, though still keeping it well above the pre-crisis level.

It is likely that the Fed will continue to mull its tapering plan for at least a few more weeks, so no policy position is expected until later this year. June is a likely timeframe for an announcement on the balance sheet plan, unless the Fed wants to avoid overwhelming the markets with the expected rate hike AND simultaneous taper talk. That would set up the late July or mid-September FOMC meetings (or the intervening Jackson Hole conference) as the last chances for publicizing the balance sheet plan with enough time to let it sink in before beginning the implementation toward year end.

Oversight of the banking sector, which has been a big beneficiary of higher rates, also remains on the Fed's plate. After years of streamlining operations under a near-zero rate regime, the banks largely saw stronger than expected results in Q1. They could also benefit from getting a clean bill of health in the upcoming Comprehensive Capital Analysis and Review (CCAR). The big banks have now submitted their 2017 CCAR reports for analysis by the Fed which will reveal the results of the supervisory stress tests by June 30 (exact date TBA). In the meantime the banks will have to dodge tape bombs out of Washington, such as President Trump's recent offhand remark after a community banking event that he is "actively considering" breaking up the big banks.


CALENDAR

MAY
1: UK Manufacturing PMI; US PCE Price Index; US Personal Spending; US ISM Manufacturing; China Caixin Manufacturing PMI
2: German Unemployment; UK Construction PMI
3: UK Services PMI; Euro Zone Prelim Q1 GDP; US ISM Non-Manufacturing PMI; FOMC Policy Statement
4: US Nonfarm Productivity; US Trade Balance; US Factory Orders
5: US Payrolls & Unemployment

7: China Trade Balance; France Run-off Election
8: German Factory Orders
9: China CPI & PPI; South Korea Presidential Election
10: US JOLTS Job Openings
11: UK Manufacturing Production; BOE Policy Statement; US PPI
12: US CPI; US Retail Sales; Prelim University of Michigan Confidence

14: China Industrial Production
15: US Empire Manufacturing
16: UK CPI & PPI; Euro Zone Q1 GDP (2nd reading); German Zew Economic Sentiment; US Housing Starts & Building Permits; US Industrial Production
17: UK Claimant Count & Unemployment; Japan Prelim Q1 GDP
18: UK Retail Sales; Philadelphia Fed Manufacturing Index
19:

22:
23: Various Euro Zone Flash Manufacturing & Services PMIs; German Ifo Business Climate; UK Inflation Hearings; US New Home Sales
24: US Existing Home Sales; FOMC Minutes
25: UK Q1 GDP (2nd reading); ECB Minutes; OPEC semi-annual meeting
26: US Durable Goods Orders; US Preliminary Q1 GDP (2nd reading); G7 summit in Taormina, Sicily, Italy (ends May 27)

29: Japan Household Spending
30: US PCE Price Index; US Personal Spending; US Consumer Confidence; China Manufacturing & Non-manufacturing PMIs
31: German Retail Sales; German Unemployment; Euro Zone Flash CPI Estimate; Chicago PMI; China Caixin Manufacturing PMI
JUNE
1: UK Manufacturing PMI; US Nonfarm Productivity; US ISM Manufacturing PMI
2: UK Construction PMI; US Nonfarm Payrolls & Unemployment; US Trade Balance

5: UK Services PMI; US ISM Non-manufacturing PMI; US Factory Orders
6:
7: German Factory Orders; Japan Final Q1 GDP; China Trade Balance (tentative)
8: ECB Policy Statement; UK Snap Election; US JOLTS Job Openings; China CPI & PPI
9: UK Manufacturing Production

12: Japan Q2 Business Survey Index of Manufacturing
13: UK CPI & PPI; China Industrial Production
14: UK Claimant Count & Unemployment; US CPI; US Retail Sales; FOMC Policy Statement, Economic Projections, and Press Conference
15: UK Retail Sales; BOE Policy Statement; Philadelphia Fed Manufacturing Index; Empire State Manufacturing Index; US Industrial Production; BOJ Policy Statement
16: Euro Zone Final CPI; US Housing Starts & Building Permits; Preliminary University of Michigan Consumer Confidence

19:
20: German Zew Economic Sentiment
21: US Existing Home Sales
22: Various Euro Zone Flash Manufacturing and Services PMIs
23: US New Home Sales

26: German Ifo Business Climate; US Durable Goods Order
27: US Consumer Confidence
28: German Preliminary CPI
29: US Final Q1 GDP; Japan Household Spending; China Manufacturing & Non-manufacturing PMIs
30: German Retail Sales; German Unemployment; UK Current Account; UK Final Q1 GDP; Euro Zone Flash CPI Estimate; US Personal Spending; US Core PCE Price Index; Chicago PMI; OPEC production cut agreement expires (unless extended); Fed CCAR stress tests released by June 30