Brexit Talks Push Past Border Issue; Tech and Bitcoin Gyrations Distract Traders

TradeTheNews.com Weekly Market Update: Brexit Talks Push Past Border Issue; Tech and Bitcoin Gyrations Distract Traders
Fri, 08 Dec 2017 16:09 PM EST

US stock indices finally encountered some turbulence this week, though Monday did once again see another round of fresh highs. Rotational flows evident last week carried over early on, playing a significant role as high growth sectors, namely technology, experienced considerable relative selling. The high beta FANG names traded down 5% or more for the recent highs while the NASDAQ composite fell almost 3% from the top before buyers stepped in and shares recovered into week’s end. Some noted the parabolic rise in bitcoin, which at one point neared 19K, as potential culprit that could have been sucking oxygen away from equities. In Washington, Republicans pressed onward with efforts to reconcile the House and Senate tax bills and remain hopeful that legislation can reach the President’s desk by Christmas. Friday delivered the November employment report which offered little in way of surprises. The labor market continued to expand but the tightening slack remains slow to manifest in rising wages. Treasury yields drifted higher after the jobs report in a week that saw the benchmark spread narrow to 51 bps at one point. For the week the DJIA and S&P500 each added 0.4%, while the Nasdaq slipped 0.1%.

Back and forth surrounding the ongoing Brexit negotiations played the dominate role in FX trading this week. Disagreements surrounding the Irish border issue spurred some speculation that Prime Minister May’s eroding support could result in a leadership changed as early as next year. Those fears were temporarily allayed by a late week breakthrough in the talks that appears to have the support of factions on both sides of the border going into the EU leaders’ summit next week. The Pound stayed in a downward trend though, as focus now shifts towards what could be even tougher talks in phase two of the Brexit process.

In corporate news this week, reports indicated Disney is nearing a deal to acquire 21st Century Fox’s non-core assets, which could be accompanied by an agreement for Disney CEO Bob Iger to stay on past 2019 in order to facilitate a the integration of Fox divisions. CVS agreed on a $207/share asking price to acquire Aetna, valuing it at $77B, in a deal that would put a pharmacy, an insurer, and a PBM all under one roof. United Health's Optum unit announced it would acquire DaVita’s Medical Group division for $4.9B in cash, as DaVita pivots its focus to the kidney care sector. Lululemon shares are up 13% on the week after reporting a beat on its top and bottom line and boosting its outlook. GE announced it would cut 12K jobs from its power GE Division, mostly affecting professional and production workers based outside of the US, as the company struggles with a downturn in the gas and coal power markets. Teva is reportedly considering cutting 18% of its global workforce as it tries to pare $2B in expenses.


SUNDAY 12/3
AET Confirms to be acquired by CVS for $207/shr ($145/shr cash and 0.8378 in CVS shr) for ~$69B

MONDAY 12/4
(EU) EURO ZONE DEC SENTIX INVESTOR CONFIDENCE: 31.1 V 33.4E
(EU) Portugal Fin Min Mario Centeno wins Eurogroup chairmanship race; term starts in Jan - press
5401.JP To reduce orders accepted for steel pipes by 20-30% as production cannot keep up with the increase in demand from large-scale projects ahead of the 2020 Tokyo Olympics
*(AU) RESERVE BANK OF AUSTRALIA (RBA) LEAVES CASH RATE TARGET UNCHANGED AT 1.50%; AS EXPECTED (16th consecutive hold in the current easing cycle)
Roark Capital reportedly raising $2B to acquire additional restaurant chains - Axios

TUESDAY 12/5
(UK) NOV SERVICES PMI: 53.8 V 55.0E (16th month of expansion)
(PL) POLAND CENTRAL BANK (NBP) LEAVES BASE RATE UNCHANGED AT 1.50%; AS EXPECTED
(UK) DUP party leader Foster: Believes that DUP remains far away from a border agreement - financial press
(US) OCT TRADE BALANCE: -$48.7B V -$47.5BE
(US) Atlanta Fed cuts Q4 GDP estimate to 3.2% from 3.5% on 12/1
(CN) US Commerce Dept to collect duties up to 265.79% on China origin steel imported from Vietnam

WEDNESDAY 12/6
(IN) INDIA CENTRAL BANK (RBI) LEAVES REPURCHASE RATE UNCHANGED AT 6.00%; AS EXPECTED
FAST Reports Nov Rev $365.5M, +15.4% y/y
(US) NOV ADP EMPLOYMENT CHANGE: +190K V +190KE
(US) Q3 FINAL NONFARM PRODUCTIVITY: 3.0% V 3.3%E; UNIT LABOR COSTS: -0.2% V +0.2%E
(CA) BANK OF CANADA (BOC) LEAVES INTEREST RATES UNCHANGED AT 1.00%; AS EXPECTED
(US) Association of American Railroads weekly rail traffic report for week ending Dec 2nd: 572.8K carloads and intermodal units, +3.5% y/y
(US) Sen Franken (D-MN) said to plan announcement tomorrow following resignation calls from nearly a dozen Democratic Senate colleagues - press
(US) President Trump: recognizes Jerusalem as Israel's capital (as expected); believes it's in the best interests of the US and the pursuit of peace between Israelis and Palestinians
(BR) BRAZIL CENTRAL BANK (BCB) CUTS SELIC RATE TARGET BY 50BPS TO 7.00%; AS EXPECTED

THURSDAY 12/7
(CN) CHINA NOV FOREIGN RESERVES: $3.119T V $3.124TE (10th straight month of increases)
(EU) EURO ZONE Q3 FINAL GDP Q/Q: 0.6% V 0.6%E; Y/Y: 2.6% V 2.5%E
GE GE Power division cuts 12K jobs (18% of of Workforce)
(UK) Sticking point in Brexit talks on European Court of Justice is said to have been resolved - press
(EU) ECB's Draghi: confirms Basel III is completed; it's a great day and a major milestone
(US) Fed reports Q3 Financial Accounts: Household Change in Net Worth: $1.742T v $1.698T prior
(US) Trump admin reportedly preparing infrastructure plan announcement in Jan - press
(US) Senate passes stopgap spending measure that will keep the govt funded through Dec 22nd; vote 81 to 14
(JP) JAPAN Q3 FINAL GDP Q/Q: 0.6% V 0.4%E; ANNUALIZED SA Q/Q: 2.5% V 1.5%E; NOMINAL Q/Q: 0.8% V 0.7%E
(CN) CHINA NOV TRADE BALANCE (CNY-DENOMINATED): 263.6B V 240.8BE
(CN) CHINA NOV TRADE BALANCE: $40.2B V $35.0BE

FRIDAY 12/8
(EU) EU Commission : Reaches breakthrough in Brexit negotiations; ready for second phase of negotiations
(FR) FRANCE OCT INDUSTRIAL PRODUCTION M/M: +1.9% V -0.1%E; Y/Y: 5.5% V 2.9%E
(UK) OCT INDUSTRIAL PRODUCTION M/M: 0.0% V 0.0%E; Y/Y: 3.6% V 3.5%E
(US) NOV AVERAGE HOURLY EARNINGS M/M: 0.2% V 0.3%E; Y/Y: 2.5% V 2.7%E; AVERAGE WEEKLY HOURS: 34.5 V 34.4E
(US) NOV CHANGE IN NONFARM PAYROLLS: +228K V +195KE
(US) DEC PRELIMINARY UNIVERSITY OF MICHIGAN CONFIDENCE: 96.8 V 99.0E
WFC Pres Trump tweets: "Fines and penalties against Wells Fargo Bank for their bad acts against their customers and others will not be droppe... but will be pursued and, if anything, substantially increased. I will cut Regs but make penalties severe when caught cheating!"
(US) Atlanta Fed cuts Q4 GDP estimate to 2.9% from 3.2% on 12/5

Tax Plan Euphoria Blunted by Russia Probe Developments

TradeTheNews.com Weekly Market Update: Tax Plan Euphoria Blunted by Russia Probe Developments
Fri, 01 Dec 2017 16:13 PM EST

Stock indices moved further into uncharted territory this week on the belief tax cuts are coming from Washington DC. A mid-week rotation out of tech raised some eyebrows when high beta growth stocks fell sharply for a session. The Dow, S&P and Russell all charged ahead largely unabated, except for bouts of selling into Friday. A delayed Senate vote Thursday caused mild consternation heading into the session. Then on Friday, a report that former NSA Michael Flynn was prepared to testify against President Trump as part of plea deal caused flurry of risk off trade midway through the session. By the end of the day, markets recovered much of those losses, and for the week the DJIA gained 2.9%, the S&P500 added 1.5%, and the Nasdaq dropped 0.6%.

Oil prices drifted lower into Thursday’s OPEC meeting. As expected, Ministers and non OPEC producers ultimately agreed on a 9-month extension through 2018 and to start capping Nigeria and Libya production beginning in January. WTI crude finished the week about $1 off the recent two year highs while weekly data showed rig counts have ticked higher. Treasury markets were little changed on the week. Yields moved higher early on in the week, spurred by robust global economic data along with the belief that fiscal stimulus and forward movement in the Brexit negotiations could force Central banks to raise rates faster than the market currently anticipates. The Dollar remained on soft footing as Cable pressed out to two month highs. The Dollar index drifted back towards 93.

M&A activity dominated this week’s corporate news. Network security firm Barracuda agreed to be taken private by PE firm Thoma Bravo for $1.6 billion in cash. Publisher Time Inc reached a long-speculated deal to be acquired by Meredith Corp for $2.8B, which aims to combine the reach of its local TV business with the content available from Time’s media creators. Buffalo Wild Wings was acquired for $157/share in cash by Arby’s owner Roark Capital, which intends to make the sports bar chain a privately held unit of Arby's operated as an independent brand.


SUN 11/26
(US) According to Adobe Analytics, Black Friday and Thanksgiving online sales totaled $7.9B (record), +17.9% y/y – financial press
(US) According to ShopperTrak, shopper visits to brick-and-mortar retail stores on Thanksgiving Day and Black Friday -1.6% y/y (combined)330.HK Landlord for test store may lower rent by 30% - HK Press
TIME Meredith confirms to acquire Time for $18.50/share cash for $2.8B

MON 11/27
(US) OCT NEW HOME SALES: 685K V 625KE
CUDA Agrees to be acquired by Thoma Bravo for $27.55/sh in cash for total of $1.6B
(US) Sen Johnson (R-WI): will vote against tax bill in Budget Committee on Tues unless my issues are resolved
(US) Adobe: Confirms data shows Cyber Monday is largest online sales day in history with $6.59B in sales, +16.8% y/y as of 10:00 pm ET

TUES 11/28
*(DE) GERMANY DEC GFK CONSUMER CONFIDENCE: 10.7 V 10.7E
(US) NOV RICHMOND FED MANUFACTURING INDEX: 30 V 14E; Volume of new orders 35 v 17 prior
(US) NOV CONSUMER CONFIDENCE: 129.5 V 124.0E
(US) Senate Budget Committee advances the tax bill

WEDS 11/29
(FR) FRANCE Q3 PRELIMINARY GDP Q/Q: 0.5% V 0.5%E; Y/Y: 2.2% V 2.2%
(DE) GERMANY NOV CPI SAXONY M/M: 0.3% V 0.0% PRIOR; Y/Y: 2.0% V 1.8% PRIOR
(EU) EURO ZONE NOV BUSINESS CLIMATE INDICATOR: 1.49 V 1.51E; CONSUMER CONFIDENCE (FINAL): 0.1 V 0.1E
TIF Reports Q3 $0.80 v $0.76e, Rev $976M v $960Me
(DE) GERMANY NOV PRELIMINARY CPI M/M: 0.3% V 0.3%E; Y/Y: 1.8% V 1.7%E
(US) Q3 PRELIMINARY GDP PRICE INDEX: 2.1% V 2.2%E; CORE PCE Q/Q: 1.4% V 1.3%E
(US) Q3 PRELIMINARY GDP ANNUALIZED Q/Q: 3.3% V 3.2%E; PERSONAL CONSUMPTION: 2.3% V 2.5%E
(US) Association of American Railroads weekly rail traffic report for week ending Nov 26th: 463.6K carloads and intermodal units, +2.4% y/y
(KR) BANK OF KOREA (BOK) RAISES 7-DAY REPO RATE BY 25BPS TO 1.50%, AS EXPECTED
(CH) CHINA NOV OFFICIAL GOVT MANUFACTURING PMI: 51.8 V 51.4E, NON-MANUFACTURING PMI: 54.8 V 54.3 PRIOR

THURS 11/30
CSGN.CH Affirms FY18 targets; announces 2019-2020 objectives; aims to pay 50% of net in buybacks, dividends
(FR) FRANCE NOV PRELIMINARY CPI M/M: 0.1% V 0.1%E; Y/Y: 1.2% V 1.2%E
(DE) GERMANY NOV UNEMPLOYMENT CHANGE: -18K V -10KE; UNEMPLOYMENT RATE: 5.6% V 5.6%E
(US) OCT PCE DEFLATOR M/M: 0.1% V 0.1%E; Y/Y: 1.6% V 1.5%E
(US) OCT PCE CORE M/M: 0.2% V 0.2%E; Y/Y: 1.4% V 1.4%E
(US) OCT PERSONAL INCOME: 0.4% V 0.3%E; PERSONAL SPENDING: 0.3% V 0.3%E
(US) Nevada reports Oct casino gaming Rev $988.7M, +0.3% y/y; Las Vegas strip rev $528.7M, -6.0% y/y
(US) Atlanta Fed cuts Q4 GDP estimate to 2.7% from 3.4% on 11/22
(CN) CHINA NOV CAIXIN MANUFACTURING PMI 50.8 V 50.9E (5-month low)
(HK) Macau Nov Casino Rev MOP23.0B +22.6% y/y v +19%e


FRIDAY 12/1
(BR) BRAZIL Q3 GDP Q/Q: 0.1% V 0.3%E (3rd straight quarter of growth); Y/Y: 1.4% V 1.3%E
(DE) GERMANY NOV FINAL MANUFACTURING PMI: 62.5 V 62.5E (confirms its 36th month of expansion and highest since Feb 2011)
(CA) CANADA NOV NET CHANGE IN EMPLOYMENT: +79.5K V +10.0KE; UNEMPLOYMENT RATE: 5.9% V 6.2%E
(US) NOV ISM MANUFACTURING: 58.2 V 58.3E; PRICES PAID: 65.5 V 67.0E
(US) MICHAEL FLYNN SAID TO BE WILLING TO TESTIFY AGAINST PRESIDENT TRUMP - ABC news
(US) Senator Collins (R-ME): deal was reached to include property tax deduction amendment in tax bill
(US) Sen Corker (R-TN): there are probably enough votes to pass the Senate tax bill - press
(US) NBC sources say that Jared Kusher was the "senior transition official" that discussed Russia contacts with Flynn at Mar-a-Lago in Dec 2016

Barrons weekend summary

Barrons weekend summary: Positive features on VZ, MDLZ 

Cover story: Four emerging market stock fund managers discuss the best sectors for investors, identify risks that could be of concern, and offer stock picks: Taizo Ishida of MPACX and MEASX (BZUN, Indus Motor, Shenzhou Intl Group Holdings, China Lodging Group, PC Jeweller), Rejiv Jain of GOGPX (Sberbank of Russia, Bank Central Asia, Qualicorp, Interglobe Aviation), Howard Schwab of DREGX (Titan, Samsung Electronics, China Shenhua Energy), and Leon Eidelman of JFAMX (BABA, Kroton Educacional, Hangzhou Robam Appliances, JD). 

Feature: 1) Positive on VZ: Price wars with rivals have sent down shares, but company is on track to bring in about as much revenue this year as 2016, and could return to modest growth, making the shares a bargain; 2) Positive on VMC, FLR, MLM, ACM, JEC, GVA, EXP, USCR, CAT: Among companies that would benefit if the Trump administration manages to get a $1T infrastructure building program under way, or even a compromise measure on a smaller scale; 3) Positive on MDLZ: Investors think the packaged-food company could return to growth under new chief executive Dirk Van de Put, especially if it leverages its strength in Europe and developing economies. 

Tech Trader: AMZN, MSFT, and GOOGL dominate cloud computing, but a rapidly evolving new “serverless” technology pioneered by AMZN called Lambda requires far less work from programmers, gets dramatically better results--and could either solidify their position, or undermine it. 

Trader: Nomura Instinet analyst Joseph Mezrich says the market is expecting earnings growth of 11.7%, well above the long-term average of 7%, a sign the market is overvalued and may undergo a correction; With quantitative easing ending, borrowing costs should rise, and high stock valuations mean companies will get less bang for their buck with buybacks; A market “melt up” would cause concern because it could entail a sharp climb followed by a painful drop. 

Profile: Daniel Chace, manager of the Wasatch Micro Cap fund, picks through the less-trafficked corners of the market and focuses on about 80 potential growth companies (top 10 holdings: SGC, LGIH, HQY, IBP, V-Mart Retail, FRPT, ENSG, ENV, TREX, EXAS). 

Follow-Up: Cautious on HPE: Chief Meg Whitman has made improvements at the company, but many of the challenges it faced after she took over remain, despite her efforts to reshape the business. 

European Trader: Positive on Hapag-Lloyd: With the global container shipping industry seeing an uptick, the German company appears to be a good way for investors to play the revival. 

Asian Trader: Positive on Tencent Holdings: Chinese giant is the world’s best-performing large-cap stock this year, bypassing the FANGS, and the shares still look good as the company continues to grow. 

Commodities: “A brutal cold snap in December is likely, according to some forecasters, and it could lift winter wheat prices higher than $5 a bushel, up more than a dollar from recent prices.” 

Streetwise: Uber’s decision to delay releasing news of a data breach last years is the latest example of its history of playing by its rules—and that isn’t likely to change as long as it remains a private company.-

Investors Have Plenty to be Thankful for as Stock Markets Extend Higher

TradeTheNews.com  Weekly Market Update: Investors Have Plenty to be Thankful for as Stock Markets Extend Higher
Fri, 24 Nov 2017 13:11 PM EST

- US stock markets probed fresh all-time highs once again in a holiday shortened week. European markets shrugged off political concerns in Germany when Chancellor Merkel remained unable to force a coalition government. European economic data continued to outshine, overshadowing slogging Brexit negotiations and supporting the Euro. The Dollar remained under broad pressure, touching a 9-week low against the Euro. Treasury yield curves continued to flatten, pushing the US 2-10 year spread below 60 bps for the first time since 2007. Crude prices rose to 2-year highs heading into next week’s OPEC meeting. The Fed’s Yellen offered some slightly dovish commentary surrounding low inflation readings, setting the stage for Powell’s confirmation hearings next week. For the week the Dow and S&P gained 0.9% while the NASDAQ added another 1.6%.
- In what was a slow corporate news week, Cavium Networks confirmed an agreement to be acquired by Marvell for ~$80/shr in cash and stock in a $6B deal, as Marvell aims to expand its capacity in the networking equipment sector. Uber disclosed a cybersecurity breach that allowed hackers to access personal data from 57 million riders and drivers last year, an incident which Uber unsuccessfully tried to cover up. And Macy’s CEO said he has seen a good start to Black Friday, with traffic slightly better year-on-year so far.

11/19 SUNDAY
(CN) CHINA OCT PROPERTY PRICES M/M: RISES IN 50 OUT OF 70 CITIES V 44 PRIOR; Y/Y RISE IN 60 CITIES OUT OF 70 CITIES V 67 PRIOR (update)

11/20 MONDAY
CAVM Confirms agreement to be acquired by MRVL for ~$80/shr in cash and stock in ~$6B deal, as speculated
(DE) German President Steinmeier statement: Country faces an unprecedented situation following the failure of the coalition talks; should not return mandate to voters
(US) Janet Yellen to resign from Fed Board of Governors, effective upon the swearing in of her successor as Chair

11/21 TUESDAY
PYPL Announced move into "robo investing" with Acorns Grow Inc
(MX) Mexico business representative: NAFTA negotiators are nearing agreement on telecom, energy and e-commerce issues - press
UBER.IPO Reportedly hid a cyberattack that exposed data on 57M people, including 600K US driver's license numbers - press
(US) Fed Chair Yellen: Uncertain weak inflation is transitory; Some hint inflation expectations may be drifting down; Don't think expectations have drifted down very much - speaking in New York; We expect [inflation] to move back up over the next year or two, but I will say I'm very uncertain about this"
(CN) China Ministry of Housing and Urban-Rural Development, the Ministry of Land Resources and PBOC in a joint meeting stressed regulations to curb property sector risks must not be relaxed
(CN) China to give priority to reducing property bubble – Xinhua
(CN) China Q3 overseas real estate investments $2.5B, -51% y/y (lowest level since Q4 2013)

11/22 WEDNESDAY
(UK) Chancellor of Exchequer Hammond (Fin Min) Autumn Budget Speech
(US) OCT PRELIMINARY DURABLE GOODS ORDERS: -1.2% V +0.3%E; DURABLES EX TRANSPORTATION: 0.4% V 0.5%E
(US) Association of American Railroads weekly rail traffic report for week ending Nov 28th: 554.1K carloads and intermodal units, +1.2% y/y
(US) FOMC MINUTES FROM NOV 1 MEETING: MANY FED POLICYMAKERS SAW NEAR-TERM RATE HIKE AS WARRANTED; SOME OPPOSED NEAR-TERM HIKE DUE TO WEAK INFLATION
(HK) Macau Q3 GDP Y/Y: 6.1% v 11.5% prior
(HK) Macau Oct Tourist Arrivals y/y: 7.9% v 2.4% prior
(US) Weekly Baker Hughes US Rig Count: 923 v 915 w/w (+0.9%) (3rd weekly rise in a row)

11/23 THURSDAY
TKA.DE Reports FY17 (cont ops) adj EBIT €1.72B v €1.8Be, Net Rev €41.4B v €41.5Be
(DE) GERMANY Q3 FINAL GDP Q/Q: 0.8% V 0.8%E; Y/Y: 2.8% V 2.8%E; GDP NSA Y/Y: 2.3% V 2.3%E
(FR) FRANCE NOV BUSINESS CONFIDENCE: 111 V 109E; MANUFACTURING CONFIDENCE: 112 V 111E
(FR) FRANCE NOV PRELIMINARY MANUFACTURING PMI: 57.5 V 55.9E (14th month of expansion and highest since Apr 2011)
(DE) GERMANY NOV PRELIMINARY MANUFACTURING PMI: 62.5 V 60.4E (36th month of expansion and highest since Feb 2011)
(EU) EURO ZONE NOV PRELIMINARY MANUFACTURING PMI: 60.0 V 58.2E (52nd month of expansion and highest since Apr 2000)
(UK) Q3 PRELIMINARY GDP (2nd reading) Q/Q: 0.4% V 0.4%E; Y/Y: 1.5% V 1.5%E
(EU) ECB ACCOUNT OF THE MONETARY POLICY MEETING (NOV MINUTES): Some members were concerned that any QE end date would cause tightening
(ZA) SOUTH AFRICA CENTRAL BANK (SARB) LEAVES INTEREST RATE UNCHANGED AT 6.75%; AS EXPECTED

11/24 FRIDAY
(DE) GERMANY NOV IFO BUSINESS CLIMATE: 117.5 V 116.7E (record high); CURRENT ASSESSMENT: 124.4 V 125.0E
M CEO: Seeing a good start to Black Friday; traffic slightly better than last year - CNBC

Barrons weekend summary

Barrons weekend summary: positive features on IBM and select big box retailers 

Cover story: Initial public offerings were once a goal for so-called unicorns, companies worth more than $1B, but these startups are taking longer to go public; “The maturation of IPOs has generally been a good thing, taking the risk out of the system,” but it also reduces potential investor rewards; Leading mutual funds aren’t waiting for IPOs, and are investing in private markets. 

Features: 1) Positive on IBM: The unloved company could be the next slumbering giant to fetch a higher valuation as its large investments in analytic and cloud products increasingly win over customers; 2) Positive on M, WMT, TGT: Retailers have long taken a hit from online rivals, especially AMZN, but experts believe the shopping rush that starts on Black Friday will be the first in which their online arms begin to gain ground. 

Tech Trader: Cautious on CSCO: Tech giant’s fixation on its own balance sheet doesn’t bode well for its competitiveness in years to come, and chief Chuck Robbins has failed to articulate how the company can gain ground in the Internet of Things and the cloud. 

Trader: Higher volatility, instead of scaring investors away from the stock market, could be bringing them in, a situation that would lead to a longer bull market; GE may be giving up on BHI, but investors shouldn’t, though without GE the company “requires a different narrative”; “While the Nafta discussions aren’t due to be settled for months, they have the potential to upend sectors of the market—and make life miserable for investors.” 

Profile: Michael Grant, manager of the Calamos Phineus Long/Short fund, uses “risk regime,” or the kind of hand the market is dealing, as the starting point for investment decisions (top 10 long stocks: AAPL, GS, JPM, MS, PYPL, C, JNJ, RDN, BAC, UBS). 

Interview: Ajay Kapur, Asia-Pacific and emerging markets strategist at Bank of America Merrill Lynch, became bullish on Asia ex-Japan and emerging markets in February after being bearish for five years. ETF 

Special Report: Exchange traded fund experts David Nadig, Barry Ritholtz, Corey Hoffstein, and Ben Fulton discuss innovation in the sector and other topics. 

Follow-Up: The battle over Nelson Peltz’s bid for a PG board seat continues, and a win for the activist investor would be good for the stock. 

European Trader: Cautious on Vestas Wind Systems: The U.S. market, a key one for the company, “is at risk of turning into a turkey, depending on how Washington’s tax-reform plan plays out.” 

Asian Trader: Positive on LG Chem, Samsung SDI, Panasonic: The three companies, which make batteries for electric vehicles, trail rivals in the sector, but continue to merit investor attention. 

Emerging Markets: Venezuela may muddle through its debt crisis with help from Russian and China, so nervous bondholders aren’t likely to band together and seek accelerated bond repayments. 

Commodities: The shutdown of the world’s largest uranium mine, owned by Cameco, has rallied prices and could help revive the market. 

Streetwise: Universities pay steep fees to outside managers, but have balked at allocating money to Warren Buffett’s Berkshire Hathaway, the world’s most successful investor.

Volatility Returns Before the House Passes Tax Reform

TradeTheNews.com Weekly Market Update: Volatility Returns Before the House Passes Tax Reform
Fri, 17 Nov 2017 16:03 PM EST

US stocks rolled over early this week nudged by pressure coming from overseas. The first three sessions of the week saw futures trade lower in the premarket along with European bourses, only to see buyers step in after the opening bell in New York. An aggressive increase in corporate debt offerings may have caused some indigestion. Monday saw ~$2.5B in junk-rated bond deals brought to market compared to ~$1.5B the previous week. By Wednesday risk barometers jumped, with the VIX rising above 14 for the first time since this summer, while the high yield bond ETF (HYG) neared the March 2017 lows. The backdrop also featured a continued flatting of Treasury yield curve. Spreads between the short and long ends of the US curve continued to probe the narrowest levels since early 2007, causing further consternation for some investors. Brexit and US tax reform were most often sited along with carryover from a technical reversal in the DAX last week as contributing factors holding back sentiment and raising volatility.
Thursday saw a significant snapback in stock prices though, as the US House of Representatives finally passed a long awaited tax reform bill. The Russel 2000 led a bounce that recouped much of the first three sessions’ losses for US indices. By week’s end, equity prices were drifting lower once again despite a swath of strong retail earnings reports and management commentary that observed business activity accelerating late in the quarter and into Q4. Supply was likely a factor yet again with six US IPOs opening for trading on Friday alone, to what can be best described as a lukewarm reception by investors. The dollar remained relatively soft probing five-week lows against the Yen and gold broke out to a one-month high on Friday. US rates continued to move lower outside of the 2-year note. For the week, the DJIA lost 0.3%, the S&P500 dropped 0.1%, while the Nasdaq added 0.5%.

In corporate news this week, some large M&A deals are brewing on the horizon. Both Comcast and Verizon are said to have been in talks to acquire assets from 21st Century Fox, following reports last week that Disney also harbored interest in some part of the media giant. Toymaker Mattel is said to have turned down a takeover approach from Hasbro, but terms of the offer are still not publically known. Earnings season slowed down considerably this week, but on the retail front, apparel stores showed some signs of life. Both Gap and Ross Stores posted same store sales above analyst expectations, and sports footwear names bounced in response to better than expected earnings from Shoe Carnival and Foot Locker. On Thursday, Walmart impressed Wall Street with better than expected numbers supported by its surging ecommerce metrics, sending shares up about 10% and adding nearly $30B in market cap. GE ran in the opposite direction during its investor meeting on Monday, where CEO Flannery announced a 50% dividend cut and a restructuring plan which spooked investors, sending GE shares below the $20/share support level, in the stock’s worst day since 2009. Tesla unveiled its long-awaited electric semi truck (and threw in a Roadster announcement for good measure), despite nagging questions that remain about Model 3 production capacity.

MONDAY 11/13
*(CN) CHINA OCT NEW YUAN LOANS (CNY): 663.2B V 783BE
(IN) INDIA OCT CPI Y/Y: 3.6% V 3.4%E
(CN) CHINA OCT AGGREGATE FINANCING (CNY): 1.040T V 1.100TE
GE Guides FY18 framework adj EPS $1.00-1.07 v $1.15e, Organic Rev 0-3% y/y, FCF $6-7B - investor slides
BWLD Reportedly receives >$150/shr takeover offer from Roark Capital - press
REN Announces withdrawal of proposed offering of $550M in 2025 senior notes ;cites 'broader market conditions'
(UK) PM May has granted parliament full vote on Brexit deal - FT
(HK) According to Credit Suisse analysts Macau Nov 1-12th gaming Rev +20-22% y/y v 15%e
(CN) China Oct Home Sales Value Y/Y: -3.4% (biggest decline in approx 3-years)
(HK) Macau Gaming Regulator's Chan: To continue existing regulations on junkets, have banned over 200 people entering casino this year

TUESDAY 11/14
(DE) GERMANY Q3 PRELIMINARY GDP Q/Q: 0.8% V 0.6%E; Y/Y: 2.8% V 2.3%E; GDP NSA Y/Y: 2.3% V 2.0%E
VOD.UK Reports H1 Adj EBIT €2.46B v €2.05B y/y, adj EBITDA €7.39B v €7.09B y/y, Rev €23.1B v €24.1B y/y
(IT) ITALY Q3 PRELIMINARY GDP Q/Q: 0.5% V 0.5%E; Y/Y: 1.8% V 1.7%E
(UK) OCT CPI M/M: 0.1% V 0.2%E; Y/Y: 3.0% V 3.1 %E; CPI CORE Y/Y: 2.7% V 2.8%E
(EU) EURO ZONE Q3 PRELIMINARY GDP Q/Q: 0.6% V 0.6%E; YY: 2.5% V 2.5%E
HD Reports Q3 $1.84 v $1.81e, Rev $25B v $24.5Be
(US) OCT PPI FINAL DEMAND M/M: 0.4% V 0.1%E; Y/Y: 2.8% V 2.4%E
Noting a number of cross currents in newsflow thru the EU session to current time
(US) Fed's Bostic (non-voter, dove): Reiterates gradual Fed hikes are appropriate over next couple of years; US is nearing full employment
(CA) Canada govt files legal challenge of US softwood lumber duties under NAFTA provisions - press
(CL) CHILE CENTRAL BANK (BCCH) LEAVES OVERNIGHT RATE TARGET UNCHANGED AT 2.50%; AS EXPECTED
9064.JP Offers to increase pay for workers by 33% y/y to ¥2,000/hour in December in order to help meet rise in demand – Japanese Press

WEDNESDAY 11/15
700.HK Reports Q3 (CNY) Net 18.0B v 15.7Be, Rev 65.2B v 61Be
(UK) SEPT AVERAGE WEEKLY EARNINGS 3M/Y/Y: 2.2% V 2.1%E; WEEKLY EARNINGS EX BONUS 3M/Y: 2.2% V 2.2%E
(UK) SEPT ILO UNEMPLOYMENT RATE: 4.3% V 4.3%E (matches lowest level since 1975)
(UK) OCT JOBLESS CLAIMS CHANGE: +1.1K V +2.6K PRIOR; CLAIMANT COUNT RATE: 2.3% V 2.3% PRIOR
(DE) GERMANY SELLS €2.475B VS. €3.0B INDICATED IN 0.50%B AUG 2027 BUNDS; AVG YIELD: 0.36% V 0.48% PRIOR; BID-TO-COVER: 1.2X (technically uncovered) V 1.7X PRIOR
(US) OCT ADVANCE RETAIL SALES M/M: 0.2% V 0.0%E; RETAIL SALES EX AUTO M/M: 0.1% V 0.2%E
(US) NOV EMPIRE MANUFACTURING: 19.4 V 25.1E
(US) OCT CPI M/M: 0.1% V 0.1%E; CPI EX FOOD AND ENERGY M/M: 0.2% V 0.2%E; CPI INDEX NSA: 246.663 V 246.646E
(US) Association of American Railroads weekly rail traffic report for week ending Nov 11th: 547.5K carloads and intermodal units, +1.2% y/y
(US) Senator Ron Johnson (R-WI) says he will vote Against the Senate tax bill - press
(US) SEPT TOTAL NET TIC FLOWS:-$51.3B V $125.0B PRIOR; NET LONG-TERM TIC FLOWS: $80.9B V $67.2B PRIOR
CSCO Reports Q1 $0.61 v $0.60e, Rev $12.1B v $12.1Be
MAT Reportedly rejects latest Hasbro acquisition bid - press
(CN) China Banks are conducting stress tests related to loans to property developers - Chinese Press
(AU) AUSTRALIA OCT EMPLOYMENT CHANGE: +3.7K V +18.8KE; UNEMPLOYMENT RATE: 5.4% V 5.5%E
(US) Christie's auction sells last privately held Leonardo da Vinci painting entitled 'Salvator Mundi' sold for record $450.3M (expected $100M+)

THURSDAY 11/16
(UK) Renewed speculation that UK PM May to increase her Brexit financial settlement (divorce bill) in Dec to help kick-start trade talks - financial press
(UK) OCT RETAIL SALES (EX AUTO FUEL) M/M: 0.1% V 0.0%E; Y/Y: -0.3% V -0.4%E
BBY Reports Q3 $0.78 v $0.79e, Rev $9.32B v $9.35Be
WMT Reports Q3 $1.00 v $0.97e, Rev $123.2B v $121.1Be
APC Guides initial FY18 oil production 385-405 MBOPD (implies +14% y/y); capex $4.2-4.6B ('17 plan 4.5-4.7B)
(NO) Norway Sovereign Wealth Fund proposes to divest oil and gas stocks (valued around $35B)
(US) OCT IMPORT PRICE INDEX M/M: 0.2% V 0.4%E; Y/Y: 2.5% V 2.5%E
(US) NOV PHILADELPHIA FED BUSINESS OUTLOOK: 22.7 V 24.6E
(US) OCT INDUSTRIAL PRODUCTION M/M: 0.9% V 0.5%E; CAPACITY UTILIZATION: 77.0% V 76.3%E
(US) NOV NAHB HOUSING MARKET INDEX: 70 V 67E
(US) Judge in Sen Menendez (D-NJ) corruption trial grants mistrial - press
(US) House of Representatives passes GOP tax reform bill (as expected)
AMAT Reports Q4 $0.93 v $0.91e, Rev $3.97B v $3.93Be
GPS Reports Q3 $0.58 v $0.55e, Rev $3.84B v $3.77Be
FOXA Comcast reportedly approached Fox over possible bid; not clear if Comcast sought all of Fox or only some assets - press
FOXA Verizon reportedly also considering acquiring assets from Fox - press
TSLA Unveils prototype electric 'big rig' truck (as expected); production to begin in 2019
(IN) MOODY'S RAISES INDIA SOVEREIGN RATING TO BAA2 FROM BAA3 (1st hike in 14 years); Outlook revised to Stable from Positive

FRIDAY
(CA) CANADA OCT CPI M/M: 0.1% V 0.1%E; Y/Y: 1.4% V 1.4%E
(US) OCT HOUSING STARTS: 1.29M V 1.19ME; BUILDING PERMITS: 1.30M V 1.25ME

Barrons weekend summary

Barrons weekend summary: 

Cover story on growing competition for TSLA in EV market; positive feature on SNE; cautious on consumer staples Cover story: With electric cars increasingly likely to supplant gas-powered models, major automakers are working on new technologies and initiatives that could benefit customers and shareholders, a sign TSLA will face growing competition. 

Features: 1) Positive on SNE: Japanese electronics giant is finally thriving, with sales of camera chips for smartphones, videogame systems, and software up, while profits from its TV and music divisions are strong; 2) Cautious on PG, CL, KO, UN: Investors who could once count on consumer staples’ slow and steady earnings growth and high dividends can no longer do so as industry trends drag on stalwarts. 

Tech Trader: The success of FB “has made it easy to forget that social networking remains a challenging business model,” leaving many companies—including SNAP and TWTR—struggling to find footing. 

Trader: “There are plenty of reasons to worry the Fed will continue to raise interest rates, which would explain the 0.064-percentage-point increase in the 10-year Treasury on Friday”; The yield curve is the big issue for banks right now, but investors may be making too much of it, says Chris Verrone of Strategas Research Partners; Many of the moves in high-yield bonds last week were as much a matter of catching up to stock moves as something dire lurking under the surface, according to Evercore ISI. 

Profile: Scott Kimball of the BMO TECH Core Plus Bond fund doesn’t hitch the portfolio to sweeping macroeconomic views or use derivatives (top 10 corporates: IBM, ABT, ATVI, GS, HNZ, Coach, EBAY, BDX, Mexichem Sab). Health & Wealth Roundtable: At Barron’s fifth annual gathering, four top advisors—Kathleen Weber of Weber Russo Group, Ann Marie Etergino of RBC Wealth Management, Barbara Archer of High-Tower, and Rob Vinder of The Vinder Group—discuss how to have a healthy and stress-free retirement. 

Follow-Up: Positive on PYPL: Payments company has had a strong year, with shares up 87%, but despite the surge there’s likely more upside ahead. 

European Trader: Positive on AMS: Company’s sensor technology helps power the AAPL iPhone X’s face identification feature, and though shares have tripled this year, they still have room to rise.. 

Asian Trader: Positive on Nintendo: The company’s move to ramp up production of its Switch console and the addition of new games for its devices should help it during the holiday season, and shares could rise by 25%. 

Emerging Markets: “The dramatic arrests of prominent Saudis by their own government has unnerved some investors and raised questions about the timing and structure” of the Saudi Aramco IPO. 

Commodities: Oil prices are set to rise during the next few months, even though West Texas Intermediate crude has already reached a two-year high. 

Streetwise: Reverberations from the palace coup in Saudi Arabia are likely to be felt for a long time, complicating the difficulty investors already face trying to understand the “opaque workings” of the government.

Markets Feel Blip of Anxiety Amid Slow Progress on Policy Talks

TradeTheNews.com Weekly Market Update: Markets Feel Blip of Anxiety Amid Slow Progress on Policy Talks
Fri, 10 Nov 2017 16:08 PM EST

The week opened with stocks continuing to float up to all-time highs on low volatility, but finished on a different note. The volume of corporate announcements remained robust as the third quarter earnings season hit its peak. By midweek a slew of stock and bond offering announcements appeared to begin weighing on markets. The high-yield bond ETF broke through the 200-day moving average, and that coincided with at 15% jump in the VIX volatility index on Thursday. Global Treasury curves remained at some of its flattest levels in about decade before yields lifted on Friday. The underlying risk currents continued to be swayed by headlines from Washington and Brussels. More details started to emerge on the Republican tax plan as it worked its way through Congress. Word that a one-year delay in the implementation of the corporate rate cut to 20% was something being seriously considered seemed to cause some indigestion in US stocks — small caps, in particular. There was no breakthrough in the latest round of Brexit talks, as expected, but renewed reports that both sides continue to prepare for a ‘no deal’ scenario may have also weighed on sentiment. Crude remained one of the few bright spots as oil attracted money flows on the lead-up to the November 30th OPEC meeting and continued fallout from the Saudi crown price consolidating his power. US natural gas futures climbed another 7%, helped by forecasts for the arrival of winter temperatures across the Northeastern US. For the week the DJIA fell 0.5%, the S&P500 slipped 0.2%, and the Nasdaq lost 0.2%.

In corporate news this week, T-Mobile and Sprint formally ended long-running merger discussions, as the two companies were ultimately unable to find mutually agreeable terms. Qualcomm confirmed receipt of a $70/share merger proposal from Broadcom, but reports suggested Qualcomm is poised to reject the offer. CNBC reported that Disney recently held talks to acquire most of 21st Century Fox and later added that, while the talks have paused, the two parties have not given up on the idea of a deal. Disney earnings disappointed but shares were lifted on news that the company intends to take on Netflix with a lower-priced streaming service and that the company plans to produce a new Star Wars trilogy. Macy's reported a miss on revenues, but earnings came in stronger than anticipated on tighter inventory controls which boosted margins.

SUNDAY 11/5
S Softbank announces its intention to raise stake through open market transactions or otherwise, subject to market conditions and other factors
TMUS T-Mobile and Sprint end Merger discussions
(UK) Reportedly UK govt has signaled that it is willing to pay the €60B (£53B) Brexit divorce bill, meeting Brussels' demands - UK press
MONDAY 11/6
*(DE) GERMANY SEPT FACTORY ORDERS M/M: +1.0% V -1.1%E; Y/Y: 9.5% V 7.1%E
(CH) Swiss Oct CPI M/M: 0.1% v 0.1%e; Y/Y: 0.7% v 0.7%e
(EU) EURO ZONE NOV SENTIX INVESTOR CONFIDENCE: 34.0 V 31.0E (highest level since July 2007)
FAST Reports Oct Rev $399.7M, +19.2% y/y
FOXA CNBC's Faber: Disney recently held talks to acquire most of 21st Century Fox; price talks and deal structure can't be learned at this time
QCOM Confirms unsolicited merger proposal from Broadcom for $70/shr in cash and stock valued at $130B with our without NXP
(US) NY Fed President Dudley (FOMC voter) to retire in mid-2018 (as speculated over weekend)
CRM Forms new strategic partnership with Google
TUESDAY 11/7
(CN) CHINA OCT FOREIGN RESERVES: $3.1092T V $3.110TE (9th straight increase)
(CN) CHINA OCT TRADE BALANCE (CNY) 254.5B V 280.5BE
(CN) CHINA OCT TRADE BALANCE: $38.2B V $39.1BE
WEDNESDAY 11/8
ACA.FR Reports Q3 Net €1.07B v €1.03Be, Rev €4.58B v €4.76Be
RMS.FR Reports Q3 Rev €1.34B v €1.31Be
(PL) POLAND CENTRAL BANK (NBP) LEAVES BASE RATE UNCHANGED AT 1.50%; AS EXPECTED
AAPL Reportedly ramping up work on augmented reality headset with new chip and op system - press
(US) Association of American Railroads weekly rail traffic report for week ending Nov 4th: 538.7K carloads and intermodal units, -0.8% y/y
*(NZ) NEW ZEALAND CENTRAL BANK (RBNZ) LEAVES CASH RATE (OCR) UNCHANGED AT 1.75%; AS EXPECTED
(CN) China President Xi: Vast potential exists in China-US economic ties; China willing to significantly raise imports from the US; US/China exploring long term agreement on repatriation
THURSDAY 11/9
SIE.DE Reports Q4 Net €1.29B v €1.25Be, industrial business profit €2.20B v €2.45Be, Rev €22.3B v €24.8Be;
DTE.DE Reports Q3 adj Net €1.24B v €1.15Be, adj EBITDA €7.32B v €5.33B y/y, Rev €18.34B v €18.1B y/y
DPW.DE Reports Q3 Net €641M v €620Me, EBIT €834M v €755M y/y, Rev €14.6B v €13.9B y/y
BRBY.UK Reports H1 adj Op £185M v £163.3Me, Rev £1.26B v £1.24Be; Announces strategic update
AZN.UK Reports Q3 Core EPS $1.12 adj v $1.04e, Rev $6.23 v $6.0Be
*(PH) PHILIPPINES CENTRAL BANK (BSP) LEAVES OVERNIGHT BORROWING RATE UNCHANGED AT 3.00%, AS EXPECTED
ODP Outlines vision to become IT Service co with MRR ahead of analyst day
M Reports Q3 $0.23 v $0.19e, Rev $5.28B v $5.32Be
(US) Senate tax bill reportedly to propose delaying corporate tax cut implementation by one year to 2019 - press
HYG High yield ETF extends below 200-day moving average
*(MX) MEXICO CENTRAL BANK (BANXICO) LEAVES OVERNIGHT RATE UNCHANGED AT 7.00%; AS EXPECTED
(UK) Ireland reportedly has made new demands in Brexit talks regarding the northern border, surprising UK negotiators - UK press
DIS Reports Q4 $1.07 v $1.12e, Rev $12.8B v $13.1Be
NVDA Reports Q3 $1.33 v $0.94e, Rev $2.64B v $2.36Be; raises dividend to $0.15/shr from $0.14 (indicated yield 0.29%)
NRG Withdraws planned $870M offering of 2028 senior unsecured notes on ‘broader market conditions’; as a result to terminate cash tender for 6.625% senior notes due 2023
FRIDAY 11/10
MT.NL Reports Q3 Net $1.21B v $680M y/y, EBITDA $1.92B v $1.88Be, Rev $17.64B v $17.2Be
(FR) FRANCE SEPT INDUSTRIAL PRODUCTION M/M: 0.6% V 0.5%E; Y/Y: 3.2% V 3.1%E
*(UK) SEPT INDUSTRIAL PRODUCTION M/M: 0.7% V 0.3%E; Y/Y: 2.5% V 1.4%E
(UK) EU/UK officials Barnier and Davis hold press conference following the 6th monthly round of Brexit negotiations

Markets Remain Positive on Solid Data and Strong Earnings

TradeTheNews.com Weekly Market Update: Markets Remain Positive on Solid Data and Strong Earnings
Fri, 03 Nov 2017 16:14 PM EST

Investors had an overwhelming amount of information to digest this week, with much of it again emanating out of Washington DC. The week began with news that President Trump’s former campaign chairman, Paul Manafort, would be indicted with others as part of special counsel Mueller’s Russia probe. By Wednesday, House Republicans released the long awaited details of their tax reform proposal after a 24 hour delay, and the following day the President confirmed Jerome Powell was his choice for the next FOMC Chairman. The three DC headlines sandwiched three key central bank meetings. The US Fed and BOJ, as expected, each left rates unchanged and made minimal revisions to their policy statements. That left the Fed squarely on track for a December rate hike. The Bank of England, in a somewhat controversial yet expected decision, raised rates for the first time in a decade taking back last summer’s post-Brexit referendum cut. Nevertheless, the statement was viewed in a somewhat dovish light because it removed previous language that interest rates may need to rise more than markets expected. By Friday, all eyes were on the October jobs report that served up some surprises, but overall along with a 12-year high in the ISM services reading reinforced the notion that the US economy, helped by growth globally, may be gaining traction at higher gear than has been seen over the last decade.

Treasury prices rose, putting modest downward pressure on yields. The long end saw better buying resulting in curve flattening after the Treasury secretary indicated there was little interest in issuing ultra-long bonds at this time, and the size of the quarterly refunding issuance remained unchanged. The Dollar Index pushed back towards the recent 5-month highs helped by the robust US data and hopes for fiscal stimulus. WTI crude futures finished the week at the best levels since this spring as consensus grows that OPEC and its partners will extend their production cuts by 9-months through the end of 2018. The VIX volatility index finished the week not far from the October lows while stocks ended on a high note. For the week, the DJIA gained 0.4%, the S&P500 added 0.3%, and the Nasdaq rose 0.9%.

Earnings season pushed onward with another third of S&P500 names reporting. Once again, many highlights came from the tech space led by Apple on Thursday. Rising material costs and disruptions from the hurricanes wreaked havoc on margins and outlooks for some sectors. Management missteps continued to get punished mercilessly, particularly in retail.

In corporate news this week, Apple recorded another blowout quarter, pointing to strong iPhone 8 and iPhone X orders, as the tech giant’s market cap stretched to $900B. Facebook posted big beats on its top and bottom line, but shares fell when it forecast expenses growing 45-60% next year. Worse than expected same-store sales and a cut to long-term outlook from Starbucks sent its stock tumbling after hours Thursday, but the coffee chain rebounded on Friday as buyers queued up. Tesla was weaker on a wider-than-anticipated loss for the quarter and after the House tax plan put the federal electric vehicle tax credit on the scrap heap. In M&A news, Lennar agreed to acquire CalAtlantic Group for $51.34/share in a $9.3B transaction to create the largest homebuilder in the United States. Power producer Dynegy agreed to a $20B all-stock merger with Vistra Energy in order to address shrinking profit margins in the industry. Rockwell Automation rejected an unsolicited $215/shr bid from Emerson Electric on grounds the offer was not in shareholders’ interests. And on Friday, reports emerged that Broadcom was making a play for chip maker Qualcomm, putting QCOM’s bid for NXP Semiconductor in jeopardy.


MONDAY 10/30
7974.JP Reports H1 Net profit ¥51.5B v ¥38.3B y/y, Op profit ¥40.0B v loss ¥5.95B y/y, Rev ¥374B v ¥137B y/y; Raises FY18 outlook
386.HK Reports Q3 (CNY) Net 11.3B v 9.9B y/y, Op 20.3B v 16.9B y/y, Rev 579.1B v 484.7B y/y
(EU) EURO ZONE OCT BUSINESS CLIMATE INDICATOR: 1.44 V 1.40E ; CONSUMER CONFIDENCE (FINAL): -1.0% V -1.0E
CAA To be acquired for ~$51.34/shr by Lennar in all stock transaction valued at $9.3B inc debt; Creating largest US homebuilder
AMZN Reportedly has slashed seller fees to try to improve its grocery selection online - RECODE
(US) SEPT PCE CORE M/M: 0.1% V 0.1%E; Y/Y: 1.3% V 1.3%E
(US) SEPT PCE DEFLATOR M/M: 0.4% V 0.4%E; Y/Y: 1.6% V 1.6%
(US) SEPT PERSONAL INCOME: 0.4% V 0.4%E; PERSONAL SPENDING: 1.0% V 0.9%E
TATA.IN Reports Q2 (INR) Net 9.76B v 16.6Be, Rev 325B v 323Be
(DE) GERMANY OCT PRELIMINARY CPI M/M: 0.0% V 0.1%E; Y/Y: 1.6% V 1.7%E
(US) Atlanta Fed forecasts initial Q4 GDP at 2.9%
MDLZ Reports Q3 $0.57 v $0.54e, Rev $6.52B v $6.46Be

TUESDAY 10/31
AIR.FR Reports Q3 Net €348M v €50M y/y; Adj EBIT €697M v €632Me, Rev €14.2B v €14.0Be
(FR) FRANCE Q3 ADVANCE GDP Q/Q: 0.5% V 0.5%E; Y/Y: 2.2% V 2.1%E
BP.UK Reports Q3 Net $1.87B v $1.58Be, Underlying replacement cost profit $1.87B v $933M y/y, Total Rev $60B v $48B y/y; to commence share buyback in Q4
(FR) FRANCE OCT PRELIMINARY CPI M/M: 0.1% V 0.1%E; Y/Y: 1.1% V 1.0%E
(FR) FRANCE CONSUMER SPENDING M/M: 0.9% V 0.6%E; Y/Y: 2.8% V 1.9%E
WCG Reports Q3 $4.08 v $1.63 y/y, Rev $4.40B v $4.40Be
(EU) EURO ZONE OCT ADVANCE CPI ESTIMATE Y/Y: 1.4% V 1.5%E; CPI CORE Y/Y: 0.9% V 1.1%E
(US) Nevada reports Sept casino gaming Rev $979.9M, +3.3% y/y; Las Vegas strip rev $567.9M, +4.7% y/y
(US) OCT CONSUMER CONFIDENCE: 125.9 V 121.5E (highest since Dec 2000)
X Reports Q3 $0.92 v $0.67e, Rev $3.25B v $3.04Be

WEDNESDAY 11/1
(HK) Macau Oct Gaming Rev MOP22.6B, +22.1% y/y v 14.5%e
STAN.UK Reports Q3 adj pretax $814M v $861Me, op income $3.59B v $3.64Be
(US) OCT ADP EMPLOYMENT CHANGE: +235K V +200KE
NYT Reports Q3 $0.13 v $0.09e, Rev $385.6M v $388Me (2 est)
(US) OCT FINAL MARKIT MANUFACTURING PMI: 54.6 V 54.5E
(US) OCT ISM MANUFACTURING: 58.7 V 59.5E; PRICES PAID: 68.5 V 67.8E
(US) Atlanta Fed raises Q4 GDP to 4.5% from 2.9% on 10/30
(US) Association of American Railroads weekly rail traffic report for week ending Oct 28th: 546.6K carloads and intermodal units, +0.2% y/y (Strongest month for intermodel in history)
FB Reports Q3 $1.59 v $1.29e, Rev $10.3B v $9.88Be
TSLA Reports Q3 -$2.92 v -$2.45e, Rev $2.98B v $2.92Be
FB CFO: See FY18 total GAAP expenses +45-60%; continue to see decelerated ad revenue growth for the foreseeable future - earnings call comments
COST Reports Oct Total SSS (ex-gas) 5.6%; US SSS (ex-gas) 5.9% v 4.9%e

THURSDAY 11/2
992.HK Reports Q2 Net $139M v $157M y/y, Rev $11.76B v $11.2B y/y
CARLB.DK Reports Q3 (DKK) Rev 16.7B v 17.1Be
CSGN.CH Reports Q3 (CHF) Net 244M v 201Me, adj Pretax 620M v 237M y/y, Rev 4.97B v 4.97Be
RDSA.NL Reports Q3 adj Profit $4.09B v $3.6Be, basic CCS EPS $0.50 v $0.44e, Rev $75.8B v $61.9B y/y
(DE) GERMANY OCT UNEMPLOYMENT CHANGE: -11K V -10KE; UNEMPLOYMENT RATE: 5.6% V 5.6%E
DWDP Reports Q3 $0.55 v $0.45e, Rev $18.3B v $17.5Be; to cut workforce
(CZ) CZECH CENTRAL BANK (CNB) RAISES REPURCHASE RATE BY 25BPS TO 0.50%; AS EXPECTED
(UK) BANK OF ENGLAND (BOE) RAISES INTEREST RATES BY 25BPS TO 0.50%; AS EXPECTED
(UK) BOE NOV MINUTES: VOTED 7-2 TO RAISE INTEREST RATES BY 25BPS TO 0.50% (Ramsen and Cunliffe dissented to keep policy steady)
(US) Q3 PRELIMINARY NONFARM PRODUCTIVITY: 3.0% V 2.6%E; UNIT LABOR COSTS: 0.5% V 0.4%E
DAL Reports Oct Load factor 86.0%, +0.9ppt y/y
SYT Obtains non-exclusive IP license from Broad Institute for CRISPR-Cas9 genome-editing technology for agriculture applications
(US) PRESIDENT TRUMP NOMINATES JEROME POWELL TO FED CHAIR POSITION (AS EXPECTED)
(US) Fed Chair-designate Powell: committed to dual mandate of maximum employment and stable prices - comments in Rose Garden
SBUX Reports Q4 $0.55 v $0.55e, Rev $5.70B v $5.73Be; Raises dividend 20%; Estab $15B 3-yr buyback plan (~19% market cap)
AAPL Reports Q4 $2.07 v $1.87e, Rev $52.6B v $51.2Be
(AU) Australia Sept Retail Sales M/M: 0.0% v 0.4%e; Q3 Ex Inflation Q/Q: 0.1% v 0.0%e
(CN) PBOC CONFIRMS CNY404B MEDIUM-TERM LENDING FACILITY (MLF) OPERATION; Offers 1-year loans at 3.20% v 3.20% prior

FRIDAY 11/3
GLE.FR Reports Q3 adj Net €1.08B v €1.0Be, Gross Op €1.96B v €1.99B y/y, Adj Rev €5.96B v €6.04Be
(UK) OCT SERVICES PMI: 55.6 V 53.3E (15th month of expansion)
(US) OCT UNEMPLOYMENT RATE: 4.1% V 4.2%E (lowest level since Dec 2000)
(US) OCT AVERAGE HOURLY EARNINGS M/M: 0.0% V 0.2%E; Y/Y: 2.4% V 2.7%E; AVERAGE WEEKLY HOURS: 34.4 V 34.4E
(US) SEPT TRADE BALANCE: -$43.5B V -$43.3BE
(US) OCT CHANGE IN NONFARM PAYROLLS: +261K V +313KE
MTB Continues to expect FY17 low-single digit overall loan growth - Investor presentation
(US) OCT ISM NON-MANUFACTURING COMPOSITE: 60.1 V 58.5E (highest since Aug 2005)
QCOM Broadcom reportedly considering bid to acquire Qualcomm - press

November-December 2017 Outlook: The Art of the Deal

November-December 2017 Outlook: The Art of the Deal
Tue, 31 Oct 2017 12:47 PM EST

For the next couple of months the macro news cycle will be focused on the progress of a number of significant political and economic deals that have been under intense negotiation. From to the tax reform bill in Washington, to the oil producers’ production accord, to the Brexit talks in Europe, key deals with global implications will see major developments in the weeks ahead. Central banks are also in the process of completing their bargain with the markets: having spared the world from a depression by implementing extreme accommodation, some monetary policy authorities have begun withdrawing stimulus now that the danger has passed.

Developments on all of these fronts will play a strong part in market movements as 2017 comes to a close. Interest rates will be gradually rising as central banks wean the markets off accommodation, while the steady rise in stocks could see a correction if the bond yield curve doesn’t steepen or if some political deals and promised fiscal measures hit roadblocks.

Win-Win-Win

Oftentimes deals with international implications can take longer than expected, and the renegotiation of NAFTA is a prime example. Early on in the Trump Administration, Commerce Secretary Ross expressed confidence that a new deal could be inked by year end. The Mexican and Canadian delegations, however, have shown they are not in a mood to be pushed around, and have since demanded that talks continue through March. Ross conceded to this but continues to threaten to drop the trilateral agreement altogether if they can’t come to terms. The latest reports indicate that White House is most keen on getting stricter rules of origin, requiring that 85% of content come from within the three NAFTA countries, perhaps including as much as a 50% US content requirement. This rule is aimed at Mexican factories in particular on concerns that they are circumventing the spirit of the agreement by bringing in excessive amounts of materials and parts from Asia to be finished in Mexico. The next few months may see reports of progress on these targets or more talk about breaking up the ‘Three Amigos’ in favor of new bilateral trade deals in North America.

The tough trade talks are already influencing other areas of policy for Canada and Mexico. Despite a solid economic rebound and some overheating in the housing sector, the Bank of Canada paused its rate tightening cycle in October after two prior hikes. This was at least in part due to uncertainties over the outcome of the NAFTA talks – the BoC doesn’t want to be caught flat footed if the trade agreement is torn up. Meanwhile the Mexican central bank has been raising rates this year to mirror Fed tightening, but has given signals it will not move higher even if the Fed hikes rates in December. The Banxico has stated that the key rate at 7.00% should adequately rein in inflation, and it is now tilted toward patiently considering when it might CUT rates. The main caveat is that the exchange rate stays relatively stable, which may not be the case if NAFTA falls apart.

Backroom Deals

Corporate expectations for deregulation and tax cuts have continued to drive the stock market higher. The failure of the Republican controlled Congress to pass healthcare reform or any other significant legislation this year has not yet discouraged market expectations of a tax overhaul being accomplished in the next few months.

In recent days, the GOP made some genuine progress by passing a budget plan under ‘reconciliation’ that should allow for the tax reform bill to escape filibuster rules and pass by a simple majority. That maneuver opens a route for the eventual bill to pass in the Senate on a partisan basis, if necessary. The House tax plan will be unveiled on November 1, with committee work on the bill to begin the following week.

GOP leaders seem hopeful that tax reform is so urgent that some Democrats will ultimately support the bill, and as things are playing out they may need those votes. If the bill comes down to a party line vote in the Senate, the GOP can only afford to have two of its members vote against the caucus, which could pose a problem as President Trump has an increasingly contentious relationship with several Republican senators who are not expected to run for reelection (Corker, Flake, McCain) and thus could vote against the tax bill if they object to the legislation or merely want to thwart Trump.

The House Republicans seem to have averted a revolt by northeast Republicans who lodged a protest vote against the budget bill because they disliked plans for removing popular state and local tax deductions in the tax reform plan. To appease these members and their constituents, House Ways and Means Chairman Brady said he would restore an itemized property tax deduction to help taxpayers with local tax burdens. This may be enough to bring wayward rank and file members back to the fold, but it illustrates how difficult it will be to find ways to offset the tax relief that is being offered (i.e. to find the so called “pay-fors”). Every current tax break has strong special interest groups defending it, and it is apparent that the Republicans have abandoned any pretense of presenting budget-neutral tax relief.

Tax reform efforts are also likely to suffer distractions from President Trump’s reflexive attacks on the investigation into Russia’s interference in US elections. Special counsel Mueller has begun serving indictments in the Russia probe, which is all but guaranteed to send the President into a new offensive on Twitter. That drama could escalate quickly if Trump decides to fire Mueller, which would cause even bigger political ripples than the termination of FBI director Comey at the outset of the Russia probe. If the President went that far it could create more conscientious objectors among the Republic moderates and reignite talk about obstruction of justice charges aimed at the White House.

By the same token, the tax reform process could be helped by President Trump’s 12 day state visit to Asia scheduled for early November. Facing off with the Chinese on trade and the North Koreans on the nuclear issue should remove the President from the day to day negotiations on the tax plan, perhaps keeping the temperature down and allowing for old fashioned horse trading and even developing some bipartisan support for the bill. House Speaker Ryan is aiming to get the tax bill through his chamber by Thanksgiving (Nov 23).

Deal or No Deal?

In Europe, negotiations over the Brexit have fallen behind schedule with less than 18 months to go. After months with very little forward momentum, UK Prime Minister May kick-started the talks with her speech in Florence, though it is still unclear if a breakthrough is coming. The Britons want to move on to discussions of new trade terms, but the EU is reluctant start that stage of talks until the matter of UK arrears is settled (the ‘divorce bill’). The latest issue to come to the fore is the length of the transition period after March of 2019. PM May is seeking a two year transition with near status quo relations while the EU want the transition period limited to 20 months because it lines up better with EU budget timelines and certain annual quotas.

The UK continues to threaten a hard Brexit with its refrain that “no deal is better than a bad deal,” and recent reports say that the EU is starting to feel the same way. Reportedly the EU has begun contingency planning for a scenario in which Brexit talks fail to reach a breakthrough at the December leadership summit (Dec 14-15), preventing them from moving on to trade talks. Meetings will continue through November including at an EU ministerial level meeting on November 20. By that time if the UK is still refusing to put up a good faith estimate on the Brexit bill, then the EU may refuse to enter phase two. Putting more pressure on the Brexit talks is the Scottish First Minister Sturgeon, who is making noises about a second independence referendum as she is determined to keep Scotland in the EU single-market and to maintain control of her country’s immigration policy.

Europe’s other burning issue of secessionist sentiment, the Catalonia crisis, will also continue to grab headlines, though the worst of it may be past. The Catalan political insurgency appears to have exhausted itself after forcing the Spanish government to invoke never-before-used constitutional measures to reassert control over the rebellious local government. Madrid has fired the Catalan government and imposed its own central administration over the region.

Separatists led by the CUP party will no doubt plan protests and renew calls for ‘mass disobedience’ in Barcelona which could result in bad optics for the central government, especially if protesters class violently with national police. But the aggressive tactics of the separatists seem to be turning sentiment against them, with one recent poll showing that the secessionist bloc would lose its majority in the Catalan parliament. That polling will be put to the test on December 21, when PM Rajoy has scheduled new local elections. If the separatists have rebuilt support by then and win a fresh majority in the Catalan government, it will create new headaches for Madrid and a further distraction for Europe.

Oddly enough, the usually contentious relations between OPEC members appear more harmonious these days than those among squabbling European nations. OPEC and non-OPEC oil producers will come together at the cartel’s semi-annual meeting on November 30 to discuss the production cutting deal that has been successfully implemented by the diverse group. Indications are that the major players are prepared to extend existing production cuts beyond the current end date. Participants have shown admirable compliance levels so far, and last May they agreed to extend the deal by nine months to March of 2018. At the November OPEC gathering, oil producers are expected to agree to another nine month extension through the end of next year. If compliance levels stay near 100%, that period of time could be enough to wipe out excess oil stocks and firm up the floor price under crude, benefitting all producers (not to mention contributing to healthier inflation levels sought by central bankers in the US and Europe).

The Central Bank Bargain

As central banks start to turn over their policy stance, some key personnel are turning over as well. Most immediately, the Fed Chair sweepstakes is expected to have a winner by early November. The shortlist has reportedly been narrowed from five candidates down to two: Fed Governor Jerome Powell and economist John Taylor. If President Trump truly wants to shake up the Fed, Mr. Taylor would be the more obvious choice, given his popularity among conservative Republicans for his rules-based monetary policy philosophy.

But the latest reports say that Trump and his advisors are leaning towards Powell, who is seen as much more of a status quo candidate. Powell is a Republican, appointed to the Fed in 2012 by President Obama as part of a deal to fill out the board of governors. He previously worked in investment banking, and he has expressed some support for easing financial regulations imposed under Dodd-Frank. On the FOMC, Powell has taken a moderate, pragmatic line, backing the consensus for gradual monetary policy normalization. A Powell Fed would likely be viewed as continuity of current policy, a stability that will be welcomed in most corners of the financial markets.

Other central banks are looking toward continuity as well. Recent reports say that the Bank of Japan Governor Kuroda will be reappointed to another 5-year term after his current term ends in April 2018. Kuroda has been instrumental in carrying out the principles of ‘Abenomics’ and now that the Prime Minister has consolidated his power in a snap election this October the BOJ governor is likely to get the nod for a second term.

It may seem a little early to think about ECB succession, but the Europeans tend to decide on top EU posts early on through consensus building and political deal making. As the ECB looks toward winding down QE it will also wind down the non-renewable term of President Draghi, whose 8-year stint ends in late 2019. All indications are that Berlin will demand its turn at the ECB helm, and Chancellor Merkel is said to gearing up to campaign for Jens Weidmann, president of the Bundesbank. The other likely candidate at this stage is Francois Villeroy de Galhau of the Bank of France. If Weidmann gets the post, his more conservative German economic philosophy will set the tone for central bank policy, which could be a good fit for the post-crisis era. He is also apt to support Merkel’s drive for “more Europe”, seeking a more rapid timetable for elevating European institutions that tie EMU nations closer together with Germany at the core.

On the monetary policy front, both the Fed and ECB have started down the path of normalization. The ECB just announced plans to cut its bond buying program in half to €30B per month starting in the New Year, while extending the earliest end date for the program to by nine months to September 2018. That change met expectations and markets took the announcement in stride.

The Fed is a little farther along, having raised rates off the zero bound already and in November beginning the roll off of assets from its $4.5 trillion balance sheet. This ‘quantitative tightening’ process was laid out in June: the Fed said it would start the reduction with a maximum of $10B of monthly redemptions ($6B of Treasuries and $4B of MBS), and ramp that up by another $10B every three months over the next year, bringing the cap to $50B per month ($30B of Treasuries and $20B of MBS). Those caps will thereafter remain in place so that holdings can “continue to decline in a gradual and predictable manner” until the balance sheet gets down to a level where the Fed deems it is “holding no more securities than necessary to implement monetary policy efficiently and effectively.” Fed leaders have made it clear they want this process to operate in the background, ideally with no impact on markets at all. For their part, the markets have appreciated the painstaking transparency provided by the Fed on this process, and so far have been unfazed, but that does not rule out the possibility of new ‘taper tantrum’ as the Fed reduces its participation in the bond market.

Stock markets that have been buoyed by low rates, strong Q3 earnings reports, and the prospect of a corporate tax cut may start to anticipate headwinds from the Fed shrinking its balance sheet and raising rates in earnest, as well as the ECB’s quantitative easing moving toward its end date. Despite the modest increase in rates implemented by the Fed over the last year, there has been some flattening in the yield curve. In mid-October the spread between 2-year and 10-year narrowed to 0.75, the lowest since before the financial crisis. That type of movement could be an early warning sign of an impending recession, though it could also just be a reaction to the Fed’s reversal of its unprecedentedly easy policy. But to ensure the next recession is pushed off as long as possible, global deal makers have to sharpen their pencils and get to work.

CALENDAR
NOVEMBER
1: FOMC policy statement; US House GOP to unveil tax reform bill
2: UK Construction PMI; BOE policy statement; China Caixin Services PMI; Pres Trump to announce Fed Chair nominee
3: UK Services PMI; US Payrolls & Unemployment; US Trade Balance; ISM Non-Manufacturing Index; US Factory Orders

6:
7: China Trade Balance
8: US JOLTS Job Openings; China CPI & PPI
9: UK Manufacturing Production
10: Preliminary University of Michigan Consumer Sentiment

13: China Industrial Production
14: UK CPI & PPI; Euro Zone Flash GDP; German ZEW Economic Sentiment; UK Autumn Forecast (tentative); US PPI; Japan Prelim Q3 GDP
15: UK Claimant Count & Unemployment; US CPI; US Retail Sales
16: UK Retail Sales; Euro Zone Final CPI; Philly Fed Manufacturing; US Industrial Production
17: ECOFIN Meetings; US Housing Starts & Building Permits

20:
21: US Existing Home Sales
22: US Durable Goods Orders; FOMC Minutes
23: Various EU Flash Manufacturing & Services PMIs; ECB Minutes; THANKSGIVING DAY (US)
24: German Ifo Business Climate

27: US New Home Sales
28: UK Bank Stress Test Results; BOE Financial Stability Reports; UK Q3 GDP (2nd estimate); US Consumer Confidence
29: US Prelim Q2 GDP; China Manufacturing & Non-Manufacturing CPI
30: OPEC semi-annual meeting in Vienna; German Retail Sales; Euro Zone Flash CPI Estimate; Chicago PMI
DECEMBER
1: UK Maufacturing; ISM Manufacturing PMI

4: UK Construction PMI; US Factory Orders; China Caixin Services PMI
5: UK Services PMI; US Trade Balance; ISM Non-Manufacturing PMI
6:
7: Japan Final Q3 GDP; China Trade Balance (tentative)
8: UK Manufacturing Production; US Payrolls & Unemployment; US JOLTS Job Openings; China CPI & PPI

11:
12: UK CPI & PPI; German ZEW Economic Sentiment; US PPI
13: UK Claimant Count & Unemployment; US CPI; FOMC Policy Statement, SEP & Press conference; China Industrial Production
14: UK Retail Sales; BOE Policy Statement; ECB Policy Statement; US Retail Sales; Japan Tankan Manufacturing & Non-manufacturing Indexes; European Council Meeting (Dec 14-15)
15: US Industrial Production; Preliminary University of Michigan Consumer Sentiment

18: Euro Zone Final CPI
19: German Ifo Business Climate; US Housing Starts & Building Permits; US Consumer Confidence
20: US Existing Home Sales; BOJ Policy Statement
21: Catalonia elections; Various EU Flash Manufacturing & Services PMIs; Philly Fed Manufacturing Index
22: UK Current Account; US Durable Goods Orders; US Personal Spending; US New Home Sales

25: CHRISTMAS DAY
26:
27:
28:
29: Chicago PMI
30: China Manufacturing & Non-manufacturing PMIs
31: China Caixin Manufacturing PMI

Barrons weekend summary

Barrons weekend summary: positive features on EPD, TGT 

Cover story: Of the three people likely to be chosen by Donald Trump to lead the Fed—Stanford economist John Taylor, Fed governor Jerome Powell, and incumbent Janet Yellen—Powell is the most likely choice, especially given Treasury secretary Steven Mnuchin’s support for him; A Taylor Fed would likely mean a “more aggressive” normalization of policy in terms of rate increases and reducing the balance sheet. 

Features: 1) Positive on EPD: Leader among U.S. energy master limited partnerships isn’t getting the respect it deserves from the market, and shares remain attractive at a time when there is a dearth of income; 2) Positive on TGT: Chief Brian Cornell has sold assets, cut costs, and is refurbishing stores, efforts that could increase traffic and boost the share price despite growing competition from AMZN; 3) Positive on BABA, LFC: Consumer-related stocks in China stand to benefit from president Xi Jinping’s growing power and the economy’s shift from export-driven manufacturing to domestic services; 4) The S&P telecom sector, once home to 14 companies, now has only four, prompting calls for the creation of a new “communications services” category. 

Tech Trader: Strong earnings reports from AMZN, MSFT, and GOOGL are a sign tech giants continue to exploit their dominance to attract a growing amount of revenue from loyal customer bases. 

Trader: Ben Bowler of BAC/Merrill Lynch foresees two factors that might change the outlook in the U.S.: higher inflation and a new Fed chief’s outlook on the moral hazard created by central bank puts; A recent selloff in biotechs such as AMGN, BIIB, CELG, and GILD is the result of high expectations, but the companies still have room to run; Scott Davis of Melius Research is optimistic that GE chief John Flannery will be able to create value by spinning off nonessential businesses. 

Interview: Jeff Vinik, owner of the Tampa Bay Lightening hockey team and a former fund manager at Fidelity, says the market may see strong growth and low inflation for many more years. 

Follow-Up: Cautious on CVS: Company’s acquisition of AET brings some long-term benefits, but the deal requires it to trade cheap stock for more expensive stock, and some Aetna competitors that work with CVS could walk away.

 European Trader: Cautious on Shire: Irish pharmaceutical is in a slump, and though a bullish case can be made, it must take into account growing competition from Roche and generic rivals as well as limits on pricing power. 

Asian Trader: Positive on SNE: Once a rival to AAPL, the Japanese electronics giant has become a key supplier, while a turnaround and growing strength in a range of divisions are producing results. Emerging Markets: The benefits of bitcoin continue to be debated on Wall Street, but for people in countries such as Venezuela and Zimbwabwe the cryptocurrency is a lifeline. 

Commodities: “Heating-fuel supplies are tight as the weather starts to cool in the U.S., and that could lead to a spike in prices for both natural gas and heating oil, particularly if temperatures are chillier than usual.” 

Streetwise: A group of activists is asking Vanguard to no longer invest in companies that contribute to genocide or crimes against humanity, but the firm feels such an effort creates an impossible burden.

Rosy Corporate Earnings and Strong Data Keep Markets Cheerful

TradeTheNews.com Weekly Market Update: Rosy Corporate Earnings and Strong Data Keep Markets Cheerful
Fri, 27 Oct 2017 16:08 PM EST

US indices managed to end the week at fresh all-time highs once again. Early on, outstanding Q3 earnings reports by certain key Dow components propelled sentiment, and by week’s end exceptional results from several of the largest, highest profile technology companies resulted in a fresh breakout for the NASDAQ. Economic data on both sides of the Pond continued to exceed expectations keeping the accelerating global synchronized growth/reflation narrative firmly intact. European preliminary PMI figures inched up to levels not seen for years in most cases, while Friday saw the advance estimate of US Q3 GDP print above 3%, indicating the best six-month stretch of growth seen in three years. Stock volumes picked up noticeably, and several brief spikes in the volatility index were again quickly met with willing buyers driving the VIX back below 10 on Friday. For the week, the DJIA gained 0.5%, the S&P500 added 0.2%, and the Nasdaq surged 1.1%.

Several undercurrents continued to play out and affect trade away from equities and Q3 earnings season. Republicans inched closer to tax reform after the House was able to pass a budget resolution and send it over to the Senate. The news helped keep upward pressure on Treasury yields and buoyed the Dollar. Despite the stronger dollar crude futures continued to rally, with Brent crude breaking above $60/bbl for the first time since mid-2015. By midweek the US 10-year yield had tested the highest levels since March and the Dollar index reached a 3-month high. Spreads between US Treasury and Bunds widened after the ECB, as expected, extended its QE program while reducing the size of the asset purchase targets. Draghi offered little to suggest a rate hike was in the offing leading many to view the news with a dovish tint. By Friday, reports that President Trump was zeroing in on Powell for the Fed chairmanship, along with the uncertainty engendered by the Catalonian government declaring independence from Spain, helped keep a lid on interest rates though the Dollar continued to track higher.

In corporate news this week, the spotlight was on the tech sector, as Google, Intel and Microsoft shares all jumped after announcing strong earnings results. Amazon also posted a big beat, and some reports indicated the online retail behemoth was making moves to enter the wholesale pharmacy space. Twitter rose on user growth numbers and the possibility that it could turn its first-ever profit next quarter. Caterpillar and 3M shares were boosted after earnings blowouts and upbeat outlooks, highlighted by strong demand in Asia. Whirlpool was slammed as raw material cost headwinds accelerated, a trend that showed itself across a multitude of industrial earnings reports. Polaris Industries hit 52-week highs following the release of solid earnings and forecasts, which auger well for consumer discretionary spending heading into the holidays. On the M&A front, Cisco reached a deal to acquire Broadsoft at $55/shr for $1.9B aggregate price, as the networking hardware giant aims to push faster into the collaboration market. Shares of Axalta rose double digit percentages on Friday after a report that it was in early stage merger talks with Akzo Nobel to form a dominant player in the global coatings business.

SUNDAY 10/22
(CN) China End-Sept Property loans outstanding CNY31.1T – PBOC (update)
(CN) CHINA SEPT PROPERTY PRICES M/M: RISE IN 44 OUT OF 70 CITES VS 46 PRIOR; Y/Y RISE IN 67 OUT OF 70 CITIES VS 68 PRIOR

MONDAY 10/23
Foxconn reportedly will ship 25-30M iPhone X devices in Q4 (down from previous forecast of 30-35M) - Chinese press report
(UK) OCT INDUSTRIAL TRENDS TOTAL ORDERS: -2 V +9E
DEL Confirms to combine with Potlatch for EV of $4.0B in all stock deal; Agreement provides for conversion to REIT structure
(EU) EURO ZONE OCT ADVANCE CONSUMER CONFIDENCE: -1.0 V -1.1E

TUESDAY 10/24
NOVN.CH Reports Q3 $1.29 v $1.25e, Core Op $3.38B v $3.35Be, Rev $12.4B v $12.2Be
BAS.DE Reports Q3 adj EPS €1.45 v €1.30e, EBIT (adj) €1.76B v €1.75Be, Rev €15.3B v €15.1Be
(FR) FRANCE OCT BUSINESS CONFIDENCE: 109 V 109E; MANUFACTURING CONFIDENCE: 111 V 110E
(FR) FRANCE OCT PRELIMINARY MANUFACTURING PMI: 56.7 V 56.0E (13th month of expansion and highest since Apr 2011)
(DE) GERMANY OCT PRELIMINARY MANUFACTURING PMI: 60.5 V 60.0E (35th month of expansion)
(EU) EURO ZONE OCT PRELIMINARY MANUFACTURING PMI: 58.6 V 57.8E (50th month of expansion)
AAPL Reportedly will sell half planned iphone X orders (~20M units) this year due to reported issues with the face ID components - Japan press
PII Reports Q3 $1.28 v $1.22e, Rev $1.48B v $1.40Be
GM Reports Q3 $1.32 v $1.07e, Rev $33.6B v $31.6Be
CAT Reports Q3 $1.95 v $1.22e, Rev $11.4B v $10.6Be
HACK Raytheon CEO Kennedy "Equifax breach was tip of the iceberg" - CNBC interview
TXN Reports Q3 $1.26 v $1.12e, Rev $4.12B v $3.92Be

WEDS 10/25
LLOY.UK Reports Q3 PBT £1.47B v £811M y/y, Underlying profit £2.08B v £2.10Be, Total Income £4.62B v £4.28B y/y
HEIA.NL Reports Q3 Organic beer volume +2.5% v 2.8%e
(DE) GERMANY OCT IFO BUSINESS CLIMATE: 116.7 V 115.1E (record high); CURRENT ASSESSMENT: 124.8 V 123.5E V
(UK) Q3 ADVANCE GDP Q/Q: 0.4% V 0.3%E; Y/Y: 1.5% V 1.5%E
(DE) GERMANY SELLS €2.385B VS. €3.0B INDICATED IN 0.50% AUG 2027 BUNDS; AVG YIELD: 0.48% V 0.44% PRIOR; BID-TO-COVER: 1.7X V 1.6X PRIOR
V Reports Q4 $0.90 v $0.86e, Rev $4.90B v $4.62Be
FCX Reports Q3 $0.34 adj v $0.29e, Rev $4.31B v $4.08Be
(US) SEPT PRELIMINARY DURABLE GOODS ORDERS: 2.2% V 1.0%E; DURABLES EX TRANSPORTATION: 0.7% V 0.5%E
(US) SEPT NEW HOME SALES: 667K V 554KE
(US) Atlanta Fed maintains Q3 GDP at 2.7%, unchanged from 10/18
(US) Association of American Railroads weekly rail traffic report for week ending Oct 21st: 560K carloads and intermodal units, +3% y/y
Hynix Semiconductor reports Q3 (KRW) Net 3.05T v 3.0Te; Op 3.7T v 3.8Te; Rev 8.10T v 7.9Te

THURS 10/26
SAN.ES Reports Q3 Net €1.98B v €1.84Be, Rev €12.25B v €12.2B y/y
NOKIA.FI Reports Q3 adj Net €516M v €264M y/y, adj Op €668M v €540Me, Rev €5.54B v €5.64Be
ABI.BE Reports Q3 $1.31 v $1.50e, EBITDA $5.73B v $5.66Be, R$14.7B v $15.4Be
DBK.DE Reports Q3 Net €647M v €279Me, Pretax €933M v €Me, Rev €6.78B v €6.88Be
ORA.FR Reports Q3 EBITDA €3.62B v €3.55B y/y, Rev €10.3B v €10.2B y/y
SU.FR Reports Q3 Rev €5.90B v €6.0Be
BAYN.DE Reports Q3 Net €3.88B (adj) v €1.19B y/y, EBITDA adj €2.20B v €2.12Be, Rev €8.03B v €8.43Be
(DE) GERMANY NOV GFK CONSUMER CONFIDENCE: 10.7 V 10.8E
BARC.UK Reports Q3 adj net £783M v £509M y/y, adj pretax £1.11B v £837M y/y, Core Net rev £5.17B v £5.45B y/y
066570.KR Reports final Q3 (KRW) Net 336B v 315Be; Op 516B v 516.1B prelim; Rev 15.2T v 15.2T prelim
(SE) SWEDEN CENTRAL BANK (RIKSBANK) LEAVES REPO RATE UNCHANGED AT -0.50%; AS EXPECTED; maintains Repo Rate path and current QE bond buying program
2202.HK Reports Q3 (CNY) Net 3.79B v 2.91B y/y, Rev 47.3B v 42.3B y/y
TWTR Reports Q3 $0.10 v $0.06e, Rev $590M v $590Me
F Reports Q3 $0.43 v $0.33e, Rev $36.5B v $32.9Be
(EU) ECB LEAVES 7-DAY MAIN REFINANCING RATE UNCHANGED AT 0.00%; AS EXPECTED; Extends QE by 9 months until Sept by €30B/month
UPS Reports Q3 $1.45 v $1.44e, Rev $16.0B v $15.6Be
(EU) ECB AMENDS ITS BOND BUYING PROGRAM: TO BUY €30B/MONTH STARTING IN JANUARY; 9-MONTH EXTENSION TO SEPT 2018 (in-line with expectations)
(US) Yellen said to be out of contention for Fed Chair position; Taylor and Powell remain in the race - financial press
(US) Atlanta Fed cuts Q3 GDP to 2.5% from 2.7% on 10/18
AMZN Reportedly received approvals for wholesale pharmacy licenses in 12 states - local press
AMZN Reports Q3 $0.52 v $0.01e, Rev $44B v $42.2Be
MSFT Reports Q1 $0.84 v $0.72e, Rev $24.5B v $23.5Be
GOOGL Reports Q3 $9.57 v $8.43e, Rev $22.3B (ex TAC) v $21.9Be
BIDU Reports Q3 $3.89 v $2.19e, Rev $3.53B v $3.47Be

FRIDAY 10/27
UBSG.CH Reports Q3 (CHF) Net 946M v 827M y/y, Rev 7.15B v 7.03B y/y
CLN.CH Mutually agrees to end planned ~$20B all-stock merger with Huntsman
RBS.UK Reports Q3 Net £606M v -£327M y/y, adj Op £1.25B v £1.05Be, Rev £3.16B v £3.31B y/y; affirms outlook
AAPL iPhone X US ship times hit up to 2-3 weeks as order begin; iPhoneX pre-order supplies sell out, shipping estimates slip drastically - press
3328.HK Reports Q3 (CNY) Net 15.6B v 15.0B, PBT 18.6B v 18.9B y/y, NII 32.1B v 32.6B y/y
MRK Reports Q3 $1.11 v $1.03e, Rev $10.3B v $10.5Be
ICE Sells Trayport to TMX Group for £350M cash; Acquires NGX and Shorcan Energy
(US) Q3 ADVANCE GDP PRICE INDEX: 2.2% V 1.7%E; CORE PCE Q/Q: 1.3% V 1.3%E
(US) Q3 ADVANCE GDP ANNUALIZED Q/Q: 3.0% V 2.6%E; PERSONAL CONSUMPTION: 2.4% V 2.1%E
(US) OCT FINAL UNIVERSITY OF MICHIGAN CONFIDENCE: 100.7 V 100.7E
AXTA Akzo Nobel reportedly makes approach about potential merger with Axalta - press