March-April 2018 Outlook: The Shape of Water

TradeTheNews.com March-April 2018 Outlook: The Shape of Water
Mon, 05 Mar 2018 23:21 PM EST

For two years, equity markets rose steadily, matching the longest streak ever without a correction. This extended one-way market was devoid of volatility and became very predictable. That period ended abruptly in February when global stock indices tumbled into a correction brought on by worries about higher interest rates and exacerbated by complacency (manifested in a complete malfunction in some of the financial instruments used to bet on volatility). Before last month, the markets were like a flood tide steadily inching higher and raising all boats, but now predicting the market is suddenly like describing the shape of water: amorphous and inconstant.

The prospect of a trade war has prolonged the volatility into March and may wash over market sentiment for months to come, potentially sending ripples through the delicate negotiations over NAFTA and the Brexit. Further, the threat of a wider trade war or even a shooting war with North Korea may alter the calculus of central banks as they plot their return to normalized policy. These political challenges along with concerns about rising interest rates will continue to churn markets for the foreseeable future.

Monetary Policy: “Get Out”

The Fed and other central banks have patiently waited for the moment when they could begin to get out of their extraordinarily accommodative stance and finally normalize monetary policy. After a decade of near- or sub-zero rates and an array of experimental quantitative easing measures, we are entering the era of 'quantitative tightening' (as dubbed by bond baron Jeffrey Gundlach). The Fed has started to shrink its balance sheet and has been raising rates for more than a year, while the ECB and BOE are starting to plan their own exit strategies. In the years ahead, the great unwind of government bond holdings by central banks will distort yield curves as central banks reduce their holdings of global sovereign bonds from the current 33% back toward a pre-crisis sovereign holdings that were less than half that percentage.

The Fed is leading the cycle and as its new Chairman Jay Powell takes office, he faces the task of removing accommodation in such a way as to lift inflation back to the 2% target level without extinguishing growth prospects (by raising rates too fast) or letting the economy overheat (by raising too slowly). In his first appearance before Congress, the plain speaking Fed Chair unnerved markets with his hawkish demeanor (relative to former Chair Yellen). Powell said he has no concern about the flattening yield curve and sees little chance of a recession in the next two years. Further, he stated that the data and fiscal stimulus enacted since December made him more confident that inflation is moving to target and that the Fed now must “strike a balance between avoiding an overheated economy and bringing PCE price inflation to 2 percent on a sustained basis.” The choice of the word “overheated” firmed up market expectations for three Fed rate hikes this year (as reflected in Fed funds futures), and got some market participants thinking about a four-hike year.

Better growth, higher wages, and firming oil prices could collaborate to spark faster inflation in 2018, presenting a challenge for Fed policy. GDP forecasts from the New York and Atlanta Fed Banks both see 3% or better growth in the first quarter. Average hourly earnings were better than expected in January, rising 2.9% year on year, matching the highest wage inflation since 2009. And there is growing demand for commodities: Copper and WTI crude prices have recently touched 3-year highs. Outside of exogenous events, a Fed overreaction to these improving trends could be the biggest risk to the building economic cycle. If inflation makes a sudden resurgence it could spook the Fed into raising rates faster to blunt it. Markets that have gotten so used to cheap credit could tighten up as borrowing rates hit milestones not seen in a decade.

Fed fund futures show the markets are anticipating rate hikes in March, June and then December. The persistent weakness in the greenback confirms that this rate path is baked in and at this point any monetary policy surprises will probably come from the other global central banks. For the most part, those other central banks are holding their policy steady, with only minor tweaks to lessen accommodation. The European Central Bank is debating whether it should clarify when rates will rise (likely not till 2019), the Bank of England could raise a second time in May, and the Bank of Japan remains committed to ultra-loose policy even though economic conditions have improved.

The demise of the deflationary threat to Japan has some market watchers thinking about when the Bank of Japan will start to unwind its extraordinary accommodation. A surprise cutback in Japanese government bond purchases in early January sparked some speculation that the BOJ was preparing its exit strategy. Contributing to that sense, there have also been a few BOJ policy board members questioning the necessity of the BOJ’s buying of exchange traded funds (ETFs) in the midst of a global rally in stocks. These notions were quashed in a recent speech by BOJ Governor Kuroda. Having secured a second 5-year term, Kuroda stood his ground, emphatically stating that the BOJ will continue “powerful monetary easing” to achieve its price goal. Though headline CPI hit its highest level in nearly three years at 1.4% in January, it remains well short of the target. Still Kuroda does have an eye toward the future, saying that easing will not continue once CPI reaches 2% in “stable manner,” and that normalization, once it begins, will be very gradual.

The BOE took back one 25 basis point cut last November, lifting the base rate to 0.50%. At the same meeting the BOE established that future rate hikes would be “gradual and limited,” now a familiar phrase from central banks. Then in February, after some better than expected growth data, the BOE took a more hawkish lean, hinting that more rate hikes may necessarily occur earlier and to “a greater extent” than envisioned just three months ago. That reckoning sent the pound sterling to its strongest level against the dollar since the June 2016 Brexit vote. In the days since the BOE’s February statement, the bank’s chief economist Haldane has put a finer point on the policy. Haldane noted the central bank is in “no rush” to raise rates, and that rates won't remotely go back to levels seen in the past, but any inflationary threat to the cost of living will be met with more rate hikes. With that said markets are now betting that the next 25 basis point hike will arrive in May.

In the euro zone, the ECB remains satisfied with the effects of its policy on improving growth and investment. As for normalization, the governing council is unanimous in its view of policy sequencing, saying that interest rates will not be hiked before the bond buying (QE) program is completed. The devil is always in the details as members are now debating whether to clarify the current interest rate guidance that rates will stay at current levels “well past” the end of the QE program, which would be in September at the earliest, and is likely to stretch to year end. Some board members see the “well past” language as too vague and worry that it will generate unwanted volatility. The counterargument is that setting a clearer date for rate liftoff in Europe could stifle the economic progress that’s been made, as industry and markets worry about a date certain for higher rates. Whatever the decision, the ECB has to be cautious about constructing its exit strategy because it must account for a scenario in which the Brexit is not well managed.

Brexit Talks: “Dunkirk”

It’s not certain that this is another Dunkirk moment for the UK, but many Britons already feel regrets about the referendum that began the nation’s 21st century retreat from continental Europe. Though not under direct fire from the Germans this time around, Britain looks indecisive at times and the exit talks are getting bogged down. This may have contributed to the February market correction that saw European bourses post their worst month since June 2016, when Brexit referendum shocked the world.

A Eurogroup meeting on March 12 will be a key moment for the Brexit negotiations. At this meeting the Europeans will set the guidelines for their transition-period discussions with the UK, aiming for a fully crafted withdrawal agreement by October or November. Both sides are still talking tough: the European’s chief negotiator has said that a transition is NOT a given if disagreements persist, while the UK Brexit Minister’s refrain continues to be that “no deal is better than a bad deal.” Substantial differences do remain on trade issues such as the arbitration mechanism, and the thorny Irish border issue is still not fully resolved.

Even the length of the Brexit transition period remains in dispute, and this may be the next milestone to watch for in the talks. So far, the Europeans have argued for the transition period to be as short as possible, favoring a 21 month stretch ending after 2020, which coincides with the end of a multi-year budget round, simplifying financial matters. On the other side of the table, the Britons are pushing for a more flexible Brexit implementation period of two-years or more to ensure they can make all the necessary preparations, including an overhaul of physical port infrastructure to cope with a dramatic increase in customs checks (work that has not begun yet, nearly two years after the referendum). The EU has signaled it may grant some flexibility on this issue, but that will require the UK to give some concessions such as withholding restrictions on free movement of EU citizens in the country during the transition. If dealmakers can’t forge an acceptable agreement on this timing issue, it will undoubtedly set back the even more complex trade talks that need to take place.

Trade War: “Phantom Thread”

The ‘invisible hand’ in economic theory that brings markets into equilibrium has been manipulated for the last ten years by central banks showering the global economy with massive stimulus packages. But just as that era is beginning to end, a very visible hand is tugging at a phantom thread that could unravel the entire global trade apparatus that has been painstakingly woven together over the last seven decades.

Since entering office over a year ago, President Trump has railed against “unfair” trade deals, but there was little action beyond lip service. In February, however, the Commerce Department issued its long awaited analysis on industrial metals trade, and the President pounced. Without much apparent consultation with advisors or Congressional leaders, Trump announced tariffs on steel and aluminum that were even higher than the Commerce Department’s minimum recommendations (at 25% and 10% versus the proposed 24% and 7.7%). Notably Trump chose a global tariff scheme over other proposals that would have set import quotas or used more targeted tariffs to punish problem producers. Commerce Secretary Ross defended the plan, saying the tariffs need to be global to ensure the worst offenders get squeezed and arguing the impact on consumer prices will be negligible, perhaps raisings costs by 1% on products from cans to cars.

President Trump’s decision to impose tariffs on industrial metal imports was a boon for the US steel and aluminum industry, but it has already sent a chill through in the broader markets on worries about higher basic materials costs and the threat of a trade war. The plan has been panned by many economists who equate tariffs with taxes, the WSJ described it as “folly”, and the stock market that Trump uses as his personal performance indicator dropped markedly. Shortly after President Trump cavalierly leaked his decision on tariffs, senior officials from the EU, Canada and other trading partners condemned the plan and assured there will be consequences if the US follows through. The EU indicated that it would impose duties on popular US brands such as Levi’s and Harley Davidson as well as on bourbon, a major export from Senate majority leader McConnell’s home state.

The new tariffs could be the last nail in the coffin of the North American Free Trade Agreement. The seventh round of NAFTA trade talks is underway in early March, and the negotiations remain tense amid reports the US is making onerous demands that Canada and Mexico seem unwilling to concede to. The imposition of a flat global tariff on steel and aluminum from the US’ two closest trading partners could be enough to extinguish hopes for a NAFTA renegotiation.

There may still be a glimmer of hope if the Trump administration shows some flexibility. Already industry voices ranging from Alcoa to the United Steelworkers Union are calling on the White House to exempt Canada from the new tariffs. An exemption would not be unprecedented as Canada and Mexico were spared from steel tariffs the last time the US resorted to the tactic in 2002, during the Bush administration. The auto industry is applying pressure too, worried about higher materials costs, but more importantly concerned that its longstanding and intricate cross border supply chain won’t be disrupted. Senior Republicans in Congress, including Speaker Ryan, as well as some major campaign donors are also urging the President to reverse or modify his decision.

But it may be hard to deter Trump as he pursues his vision of revitalizing the US steel industry. His initial reaction to the criticism was to tweet "trade wars are good, and easy to win." Trump may be gambling that corporations will absorb higher costs from their tax cut profits and that trading partners will fear losing access to the world’s biggest market. Unfortunately it appears other nations are ready to call his bluff, and Trump has responded to this by threatening to raise duties on automobiles shipped from Europe. A worst case scenario would be a trade war escalating to the point where the Trump administration withdraws from the WTO, an organization whose members largely comply with its rules, which are the cornerstone for most global trade agreements. Unraveling the WTO would lead to major disruptions in global trade that could set off a new recession.

Geopolitics: “Darkest Hour”

The darkest hour for the global economy and markets is not likely to come in disputes between the US and its allies, but in confrontations with enemies and rival powers. So far, President Trump has not applied that same bravado toward conventional wars as in trade wars, but he does seem bent on finding adversaries to measure himself against. Conflicts with China, North Korea, Iran and Venezuela all have the potential to disrupt orderly global markets.

So far China has taken a typically understated tone in response to the US tariff threat, responding that it may take measures to protect its own interests. The new metals tariffs won’t put a dent in the US trade deficit with China, which directly supplies less than 3% of US steel imports. Critics of the President’s plan say it should be more targeted, aimed squarely at China’s exports and its violations of intellectual property. Even though China does not want a trade war, if it finds itself singled out in this way, it is likely to retaliate. One option for China could be to slow purchases of US treasuries, which have already become less attractive assets as the face a bear market (with the 10-year yield approaching the a key 3.00% level and the 30-year testing major resistance at 3.22%). But whatever the response, it would invite further tit for tat escalations between the world’s two largest economies, an unwelcome scenario for the global outlook.

Tangling with China on trade is also counterproductive to contending with the nuclear threat from North Korea. The spectacular Winter Games in PyongChang brought with it a period of détente, as athletes and delegates from the North joined the festivities. Skeptics see the easing of tensions as the same old script from the North: conducting provocative tests of its WMD programs until sanctions are enacted, and then making conciliatory gestures in an effort to gain relief. The South Korean government is taking the lead for the moment, exploring talks with Pyongyang. But as the aura of the Olympic moment fades, chances for a political breakthrough dim along with it. Annual joint military exercises between the US and South Korea that were postponed as a good faith gesture for the Olympics will resume sometime after the Paralympic Games end on March 18. Meanwhile the Pentagon continues to refine plans for a potential military strike on the North’s weapons facilities.

The other remaining member of the once so-called “Axis of Evil,” Iran, will also be getting new attention from the White House in the months ahead. In mid-January President Trump signed another 90-day waiver on Iran sanctions, but stated that it would be the last time he will extend the waiver. To keep the US as a participant in the nuclear accord the White House is demanding that the deal be reopened to make the terms tougher and permanent with no sunset clause. Having set a countdown clock, President Trump says he will withdraw from the Iran nuclear deal immediately if he believes a revised agreement is not within reach. US officials say they are working with European partners on new provisions for the nuclear deal but there are no signs that any real progress is being made or that any allies want to revisit the nuclear agreement at this time. The Trump Administration’s end game appears to be goading the Iranians into tearing up the treaty and restarting their weapons program, giving the US an opportunity to confront Iran, but Tehran is more likely to use the US move as a talking point and perhaps as an excuse to cheat around the edges of the accord.

Venezuela may also become a political flashpoint as long-simmering tensions could come to a head around the April 22 presidential election. The political opposition has already said it will not participate in what it considers a sham election after President Maduro reorganized the government to ensure he would hold on to power. The violent protests seen last year may flair up again around the election, which could lead to disruptions in Venezuela’s two million barrels-per-day supply of oil. Recent reports citing unnamed US officials say the White House is mulling sanctions aimed at pressuring Maduro. This could involve restricting insurance on oil shipments or even a complete US embargo on Venezuelan oil – a measure that would cause at least a short term oil market shock.

President Trump also imagines enemies within US borders. His original deadline to end DACA renewals for the so-called “Dreamers” was set for March 5, but a federal court has blocked that move, ordering renewals to continue. In the meantime Congress has made no visible progress on a broader immigration deal after the President torpedoed a bipartisan effort last month. The issue continues to be entangled with government funding measures and the latest stopgap spending bill will run out on March 22. If the administration and the Democrats can’t come to terms on immigration before then, a longer government shutdown may result. Estimates are that each week of a shutdown can shave a tenth of a percent off of quarterly GDP. That would squander much of any effect from the tax cut that is so far Trump’s signature political achievement.


CALENDAR
MARCH
4: China Caixin Services PMI
5: UK Services PMI; ISM Non-Manufacturing PMI
6:
7: UK Annual Budget Release; China Trade Balance
8: ECB Policy Decision & Press Conf; BOJ Policy Decision
9: UK Manufacturing Production; US Payrolls & Unemployment

12: Eurogroup March Meeting
13: German ZEW Economic Sentiment; US CPI; China Industrial Production
14: US Retail Sales; US PPI
15: Philadelphia Fed Manufacturing Index
16: Euro Zone Final CPI; US Housing Starts & Building Permits; US Industrial Production; Preliminary Univ of Michigan Consumer Sentiment

19:
20: UK CPI & PPI
21: UK Claimant Count & Unemployment; US Existing Home Sales; FOMC Policy Statement & Press Conf
22: Euro Zone Manufacturing & Services PMIs; German Ifo Business Climate; UK Retail Sales; BOE Policy Statement
23: US Durable Goods Orders; US New Home Sales; US stopgap spending measure expires

26:
27: US Consumer Confidence
28: US Final Q4 GDP
29: German Preliminary CPI; UK Current Account; UK Final Q4 GDP; US Personal Income & Spending
30: Chicago PMI; China Manufacturing & Non-manufacturing PMIs

APRIL
1: China Caixin Manufacturing PMI
2: UK Manufacturing PMI; US ISM Manufacturing PMI
3: German Retail Sales; UK Construction PMI; China Caixin Service PMI
4: UK Services PMI; Euro Zone CPI Estimate; US ISM Non-Manufacturing PMI
5: ECB Minutes
6: US Payrolls & Unemployment

9:
10: German ZEW Economic Sentiment; US PPI; China CPI & PPI; China Trade Balance
11: UK Manufacturing Production; US CPI; FOMC Minutes
12: BOE Credit Conditions Survey; US Import Prices
13: Preliminary Univ of Michigan Consumer Sentiment

16: US Retail Sales
17: UK CPI & PPI; US Housing Starts & Building Permits; US Industrial Production; China Q1 GDP; China Industrial Production
18: UK Claimant Count & Unemployment; Euro Zone Final CPO
19: UK Retail Sales; Philadelphia Fed Manufacturing Index

22: Venezuela presidential election
23: Euro Zone Flash Manufacturing & Services PMIs; US Existing Home Sales
24: German Ifo Business Climate; US Consumer Confidence; US New Home Sales
25:
26: ECB Policy Decision & Press Conf; Durable Goods Orders; BOJ Policy Decision
27: UK Prelim Q1 GDP; US Advance Q1 GDP

30: German Retail Sales; US Personal Income & Spending; Chicago PMI; China Manufacturing & Non-Manufacturing PMIs; China Caixin Manufacturing PMI

Barrons weekend update

Barrons weekend update: positive feature on IVZ; cautious on VMW 

Cover story: “Abetted by a robust job market, low interest rates, and beneficial demographics, the nation’s housing market has been enjoying a Goldilocks sort of recovery—neither too cold nor too hot (with the exception of several coastal markets), but just about right”—and the rebound is far from over. 

Features: 1) The high end of the housing market has excess inventory, but demand for less-expensive homes remains strong, and the Southeast is likely to see some of the largest price gains; 2) Strong Q4 results from some retailers, including KSS and M, have given investors hope, but a full rebound in the sector could take a few more quarters, says Brian Tunick of RBC Capital Markets; 3) Positive on IVZ: Company could be a long-term beneficiary of the next bear market because of the firm’s “bread-and-butter” factor investing strategy, and its penchant for buying weaker players during downturns; 4) Cautious on VMW: VMware investors aren’t happy about a potential deal with DVMT, because it would link a thriving, cash-rich company with a highly leveraged one, and the move is likely to generate strong opposition from shareholders; 5) Greg Fleming of Rockefeller Capital Management turned a small family office into a modern, independent financial services company, which for the first time will offer advisory services on corporate transactions. 

Tech Trader: The big battle between the U.S. and China won’t be over tariffs, but over the future of wireless technology—more specifically, so-called 5G—with Chinese giant Huawei poised to dominate the wireless network sector. 

Trader: Brian Nick of TIAA Investments sees the S&P 500 closing the year somewhere between 2800 and 2900 as earnings continue to rise but P/E ratios fall; Cautious on LB: Company reported better-than-expected Q4 earnings, but it still faces a number of problems, including changing shopping trends, and shares could drop further; Cautious on Spotify: Aside from greater competition from AAPL’s streaming service, Spotify’s new family plan poses a risk, and growth is coming at an increased cost. 

Interview: Former FDIC chairman Sheila Bair shares her views on China’s large debt, trouble spots in the U.S. financial system and economy, and what regulators should do about bitcoin. 

Profile: Bill Costello, co-manager of the Westwood SmallCap fund, looks for growth contributors that the market has underestimated (top 10 holdings: APOG, MCS, AIN, TWNK, CPE, INN, DEA, KMPR, FIX, SSB). 

European Trader: In Italy’s elections, the worst case scenario would be an anti-euro coalition government, but the most likely one will be a traditional coalition government with a weak mandate. 

Asian Trader: Investors remain skeptical about Japan’s slow-growth economy, but 25 years after its stock market bubble burst, things are looking up for Japanese equities. 

Emerging Markets: When Kenya, which faces a host of political problems, recently issued bonds, it had seven times the demand it needed—and it’s among several exotic sovereigns finding favor in the markets. 

Commodities: Many of the key drivers that led investors to be bullish on silver last year are still in play for 2018, especially rising inflationary pressures and a weaker U.S. dollar. 

Streetwise: For investors, the possibility that Chinese president Xi Jinping will extend his reign and modernize the country is a good thing, and he appears to be steering the Chinese economy in the right direction.

Hawkish Fed Chair and Trade War Scare Overshadow Solid Earnings and Data

TradeTheNews.com Weekly Market Update: Hawkish Fed Chair and Trade War Scare Overshadow Solid Earnings and Data
Fri, 02 Mar 2018 16:04 PM EST

The week opened up with the spotlight clearly focused on Fed Chairman Powell’s first crack at testimony on Capitol Hill, but ended with markets fixated on President Trump’s trade policy. Equity markets came under pressure on Tuesday after Chairman Powell outlined his view that the economy has improved since December, increasing his confidence that inflation is moving back towards the 2% target level. A blowout February Richmond Fed reading and another extremely robust February ISM manufacturing report only bolstered that case. The US dollar firmed to better than a 1-month high though US Treasury yields never moved back to the recent highs and actually edged lower.

Indices continued to swing quite aggressively on an intraday basis and volatility picked up late in the week. President Trump’s Thursday announcement that he will introduce significant tariffs on all global imports of steel and aluminum next week set off a bout of risk off trading into Friday’s trading session. Condemnation was swift and loud from leaders around the world and many at home who feared the move could ignite a global trade war and cause the NAFTA renegotiation talks to collapse. Gold prices rose and bond yields lifted into the final bell on concerns that the trade policy will exacerbate inflation. The VIX briefly topped 25 on Friday before equity buyers stepped in through the European close. For the week the S&P dropped 2%, the DJIA lost 3%, and the Nasdaq slipped 1%.

In corporate news, this week’s Q4 earning reports were highlighted by improvement among bricks and mortar retailers. Macy’s shareholders were pleasantly surprised by an earnings beat and strong guidance including a return to same store sales growth. Electronics showroom Best Buy and denim specialist Gap also reported better than expected results for the holiday quarter. On the M&A front, Amazon expanded into another consumer sector, spending a $1B to acquire home security video company Ring.com, and putting immediate pressure on established home security names like ADT. Another household technology firm, Tivo, saw its shares rise sharply after management announced it would explore strategic alternatives.


SUNDAY 2/25
(CN) Communist Party has moved to repeal language from the constitution that says the head of state “shall serve no more than two consecutive terms”, which would allow China President Xi to stay in power indefinitely - Chinese press (as speculated)

MONDAY 2/26
SPB Spectrum Brands Holdings to combine with HRG Group in deal valued at $10B
*(US) JAN NEW HOME SALES: 593K V 647KE
(US) FEB DALLAS FED MANUFACTURING ACTIVITY: 37.2 V 30.0E
(ZA) South Africa Pres Ramaphosa: confirms naming Nhlanhla Nene as South Africa Fin Min
FIT Reports Q4 -$0.02 v -$0.00e, Rev $571M v $587Me
STAN.UK Reports FY17 adj Pretax $3.0B v $3.1Be; Op $14.3B v $13.8B y/y; Resumes dividend of $0.11

TUESDAY 2/27
BAS.DE Reports final Q4 Adj €1.29 v €1.43e, EBIT €1.86B v €1.75Be, Rev €16.1B v €16.0Be
AAPL Said to be launching primary care clinics called AC Wellness for employees this spring - CNBC
(DE) GERMANY FEB CPI SAXONY M/M: +0.4% V -0.8% PRIOR; Y/Y: 1.3% V 1.4% PRIOR
(EU) EURO ZONE FEB FINAL BUSINESS CLIMATE INDICATOR: 1.48 V 1.47E; CONSUMER CONFIDENCE (FINAL): 0.1 V 0.1E
(DE) German federal administrative court judge: German cities ordered to develop diesel ban further; refuses to overturn diesel car bans
JPM Guides FY18 core loan growth 6-7%; Medium-term pretax $44-47B, ROTCE ~17% - ahead of analyst day
M Reports Q4 $2.82 v $2.69e, Rev $8.67B v $8.71Be
(DE) GERMANY FEB CPI M/M: 0.5% V 0.5%E; Y/Y: 1.4% V 1.5%E
(US) Fed Chair Powell text of testimony released: Must strike balance to avoid overheating, lift inflation
*(US) JAN PRELIMINARY DURABLE GOODS ORDERS: -3.7% V -2.0%E; DURABLES EX TRANSPORTATION: -0.3% V +0.4%E
(US) FEB RICHMOND FED MANUFACTURING INDEX: 28 V 15E (second highest value on record)
(US) FEB CONSUMER CONFIDENCE: 130.8 V 126.5E
(US) Atlanta Fed cuts Q1 GDP estimate to 2.6% from 3.2% on 2/16
(US) Fed Chair Powell: IOER's place in long run operating framework has not been decided but it has served us well since crisis and will continue to use it - testimony to House Financial Services Committee
(US) Aluminum Association applauds Commerce Dept final ruling on aluminum foil import duties of up to 106.1% from China
AMZN To acquire home security video company Ring.com, valued at over $1B - press
TIVO Reports Q4 $0.15 v $0.39e, Rev $214.2M v $212Me; plans to explore all alternatives to maximize shareholder value

WEDS 2/28
BAYN.DE Reports Q4 Net €148M (adj) v €745Me, EBITDA adj €1.78B v €1.80Be, Rev €8.60B v €8.88Be; aims to close Monsanto transaction in Q2
(DE) GERMANY MAR GFK CONSUMER CONFIDENCE: 10.8 V 10.9E
(FR) FRANCE Q4 PRELIMINARY GDP Q/Q: 0.6% V 0.6%E; Y/Y: 2.5% V 2.4%E
(FR) FRANCE FEB PRELIMINARY CPI M/M: -0.1% V 0.3%E; Y/Y: 1.2% V 1.4%E
(DE) GERMANY FEB UNEMPLOYMENT CHANGE: -22K V -15KE; UNEMPLOYMENT CLAIMS RATE: 5.4% V 5.4%E
(DE) GERMANY SELLS €2.413B VS. €3.0B INDICATED IN 0.5% FEB 2028 BUNDS; AVG YIELD: 0.67% V 0.69%% PRIOR; BID-TO-COVER: 1.2X (technically uncovered) V 1.5X PRIOR
(EU) EU published first draft of Brexit treaty: Northern Ireland could stay within customs union; Transitions period to end on Dec 31st 2020
VRX Reports Q4 GAAP $1.45 v $0.99e, Rev $2.16B v $2.18Be
(IN) INDIA Q4 GDP Y/Y: 7.2% V 7.0%E
DKS Immediately ending sales of all assault-style rifles in its stores- NYT
(US) Q4 PRELIMINARY GDP ANNUALIZED Q/Q: 2.5% V 2.5%E; PERSONAL CONSUMPTION: 3.8% V 3.6%E
(US) Q4 PRELIMINARY GDP PRICE INDEX: 2.3% V 2.4%E; CORE PCE Q/Q: 1.9% V 1.9%E
(US) Nevada reports Jan casino gaming Rev $1.02B, -2.1% y/y; Las Vegas strip rev $554.8M, -8.9% y/y
(US) JAN PENDING HOME SALES M/M: -4.7% V +0.5%E; Y/Y: -1.7% V -1.8% PRIOR (lowest M/M in more than three years)
CA.FR Reports FY17 Adj Net €773M v €1.03B y/y, EBITDA €3.64B v €3.59Be, Gross Rev €88.2B v €85.7B y/y; Cuts dividend 34% to €0.46/shr
(US) Association of American Railroads weekly rail traffic report for week ending Feb 24th: 528.4K carloads and intermodal units, +2.8% y/y
(US) Special Counsel Mueller reportedly investigating whether Pres Trump was aware of DNC hack and whether he was involved in its release - NBC News
CRM Reports Q4 $0.35 v $0.33e, Rev $2.85B v $2.81Be

THURS 3/1
ABI.BE Reports Q4 $1.04 v $0.98e, EBITDA $6.19B v $6.03Be, Rev $14.6B v $14.5Be
(UK) FEB MANUFACTURING PMI: 55.2 V 55.0E (19th month of expansion but lowest since Jun)
BBY Reports Q4 $2.42 v $2.04e, Rev $15.4B v $14.5Be; Raises Quarterly dividend 32.4% to $0.45 from $0.34 (indicated yield 2.48%)
(BR) BRAZIL Q4 GDP Q/Q: 0.1% V 0.3%E; Y/Y: 2.1% V 2.5%E (4th straight quarter of growth)
*(US) JAN PERSONAL INCOME: 0.4% V 0.3%E; PERSONAL SPENDING: 0.2% V 0.2%E
*(US) INITIAL JOBLESS CLAIMS: 210K (lowest since 1969) V 225KE; CONTINUING CLAIMS: 1.93M V 1.92ME
KR To stop selling guns to people younger than 21 via its Fred Meyer locations (3rd major retailer to tighten policies) - press
(US) Fed Chair Powell: there's no strong evidence of a decisive move higher in wages - Senate testimony
(US) Fed's Dudley (dove, FOMC voter): trade protectionism is not the answer
(US) Atlanta Fed raises Q1 GDP estimate to 3.5% from 2.6% on 2/27
(US) Pres Trump: US will institute tariffs next week; will impose 25% tariffs on steel and 10% on aluminum imports - comments at White House
(EU) EU's Juncker: EU will "react firmly" to Trump administration tariffs; will bring forward countermeasures
GPS Reports Q4 $0.61 v $0.59e, Rev $4.78B v $4.68Be

FRI 3/2
(US) White House Economic Advisor Cohn said to be again rumored to be on the brink of leaving the White House - financial press
(US) President Trump tweets "trade wars are good, and easy to win"
(CA) CANADA DEC GDP M/M: 0.1% V 0.1%E; Y/Y: 3.3% V 3.3%E
(UK) PM May: Agreement with EU must respect referendum; listening carefully to the many voices on future - Brexit speech
EU said to target duties on up to $3.5B on imports for trade retaliation following Trump announcement on tariffs - press

Barrons weekend summary

Barrons weekend summary: cautious on advertising industry 

Cover story: Barron’s 2018 Energy Roundtable featured four experts discussing oil, natural gas, and other energy stocks, as well as MLPs,with three of the four offering picks: Helima Croft of RBC Capital Markets,Charles Robertson of Cowen (APC, NBL), John Dowd of Fidelity Select EnergyPortfolio (EOG, HAL, PXD) and Gregory Reid of Salient MLP Complex (GEL, TRGP,SHLX). 

Features: 1) In a previously unreported legal fight, TCI Fund Management andentities of TPG-Axon Management have sued private equity firm IREO, claiming ithasn’t been a proper guardian of their capital; 2) AMZN: Story says that economic experts, city planners, and laborleaders warn there may be a downside for the city in which the retailer buildsits second headquarters, partly because of the subsidies offered and housingshortages; 3) Cautious on Dentsu, IPG, OMC, PUB.FR, WPP, HAV.FR: Advertising giants are strugglingto improve their standing with investors, many of whom believe the agencies arelikely to be the next victims of Internet disruption.

Tech Trader: Positive on MSFT, INTC, NVDA, MU, GOOGL, AMZN: Microsoft is developing a practical quantum computer that could arrive in five years,affecting the chip, software, and cloud computing sectors. 

Trader: Positive on AABA: Company could get a boost Tuesday when it announces astrategic update related to its stakes in BABA and Yahoo Japan, and RobSanderson of MKM Partners expects aggressive action; Positive on TWX: Shares ofthe media giant look attractive, and its strong profit outlook could limitdownside if antitrust authorities scuttle the deal with T; Positive on Stelco Holdings:After emerging from bankruptcy in November, the Canadian steel company could beone of the more compelling plays in North American steel. 

Profile: Edward Silverstein, manager of the MacKay Shields MainStay Convertiblefund, offers investors the potential upside of owning stock with less risk byrelying on convertible securities (top 10 holdings: DISH, DHR, MCHP, WFT, BAC,LRCX, AL, NICE, PCLN, XPO); James Moriarty of Moriarty & Co. sees flat performance ahead for U.S. stocks this year, but plenty of opportunity in overseas markets. 

Follow-Up: If in its initial public offering Dropbox seeks a valuation in line with its private-market one, the number would be about nine times trailing sales; it is also likely to emphasize certain non-GAAP financials. 

European Trader: Bridgewater Associates’ move to increase its short positions inEuropean equities in recent weeks could founder—and might not be what it seems.

Asian Trader: Howard Wang of JPM Asset Management in Hong Kong says investorswill likely shift back toward growth areas like tech, healthcare, and consumerdiscretionary stocks this year ( Positive on Haier, Jiangsu Hengrui, ChinaResources Phoenix, Tonghua Dongbao Pharmaceutical). 

Emerging Markets: Investors are looking for more gains in South Africa now thatnewly elected president Cyril Ramaphosa has released a budget blueprintfocusing on restoring fiscal discipline. 

Commodities: An upcoming election in Venezuela and the possibility of U.S.sanctions could send the country’s energy sector into a tailspin. 

Streetwise: Many school pension funds own stock in gun companies, as doindexing giants Vanguard and BLK, which are “treading carefully” in the wake ofthe recent school shooting in Florida.

Markets Mixed, Treasury Yields Probe Highs, Ahead of FedTestimony Next Week

TradeTheNews.com WeeklyMarket Update: Markets Mixed, Treasury Yields Probe Highs, Ahead of FedTestimony Next Week
Fri, 23 Feb 2018 16:03 PM EST

The holiday shortened trading week was largely uneventful in terms of major market moving headlines.Investors did return to find volatility holding near the higher levels seen over the last month. Intraday swings of 100 points or more in the Dow continued, though volumes retreated back to more normal levels and indices largely moved sideways. Earnings season wound down with retailers taking center stage, and overall the positive tone from executives extended despite a few key misses. The US 10-year yield hit a 4-year high above 2.94% after the release of Wednesday’s FOMC minutes led to speculation about the tone Fed Chair Powell may take when he testifies on Capitol Hill early next week. The Greenback bounced, garnering modest momentum when stocks sold off midweek, and then ebbed when equity buyers reemerged on Friday.

In corporate news thisweek, Rite-Aid announced it would merge with Albertsons in a cash-and-stockdeal, aiming to deliver $375M in cost synergies. Qualcomm raised its offer forNXP Semiconductor to $127.50/share, which caused Broadcom to lower its Qualcommoffer to $79/share if the higher bid goes through. Blue Buffalo confirmed itwould be acquired by General Mills for $40/share in an $8B deal in whichGeneral Mills would be paying 22x EBITDA for the natural pet food company.China's Geely disclosed a 9.7% stake in Daimler worth around $9B, making Geely’sChairman Li Shufu the biggest Daimler shareholder. Walmart weighed on the Dow,falling more than 9% following a disappointing earnings report with lowered revenueguidance early in the week. For the week the DJIA gained 0.4%, the S&P500added 0.6%, and the Nasdaq rose 1.4%.


MONDAY 2/19
(EU) Spanish EconomyMinister de Guindos chosen as ECB vice president to succeed Vitor Constancio;effective in May - financial press
(HK) Macau Feb 19thGolden Week visitors from China +12.3% y/y
HSBA.UK Reports FY17 Adjpretax $20.99B v $19.3B y/y, Adj Rev $51.5B v $50.2B y/y; To issue $5.0-7.0B intier 1 capital in H1

TUESDAY 2/20
BHP.AU Reports H1 Net$2.0B v $3.2B y/y; underlying Pretax $4.05B v $3.24B y/y, Rev $21.78B v $18.8By/y
(DE) GERMAN FEB ZEWCURRENT SITUATION SURVEY: 92.3 V 93.9E; EXPECTATIONS SURVEY: 17.8 V 16.0E
HD Reports Q4 adj $1.69v $1.62e, Rev $23.9B v $23.7Be; Raises Quarterly dividend 15.7% to $1.03 from$0.89 (indicated yield 2.2%)
RAD Confirms merger withAlbertsons in cash and stock deal; To deliver $375M in cost synergies
(HK) Macau Feb 20thGolden Week visitors from China +6.5% y/y

WEDNESDAY 2/21
ORA.FR Reports FY17EBITDA €12.8B v €12.8Be, Rev €41.1B v €41.1Be
LLOY.UK Reports Q4 PBT£780M v £877Me, Underlying Profit £1.93B v £1.79B y/y, Total Income £4.63B v£4.35B y/y; announces strategic update and £1B buyback, to invest £3B instrategy
(FR) FRANCE FEB PRELIMINARYMANUFACTURING PMI: 56.1 V 58.0E (17th month of expansion)
(DE) GERMANY FEBPRELIMINARY MANUFACTURING PMI: 60.3 V 60.5E (38th month of expansion)
(EU) EURO ZONE FEBPRELIMINARY MANUFACTURING PMI: 58.5 V 59.2E (55th month of expansion)
(UK) DEC AVERAGE WEEKLYEARNINGS 3M/Y: 2.5% V 2.5%E; WEEKLY EARNINGS (EX BONUS) 3M/Y: 2.5% V 2.4%E
*(UK) JAN JOBLESS CLAIMSCHANGE: -7.2K V +6.2K PRIOR; CLAIMANT COUNT RATE: 2.3% V 2.4% PRIOR
*(UK) DEC ILOUNEMPLOYMENT RATE: 4.4% V 4.3%E
SLCA Reports Q4 $0.52 v$0.55e, Rev $360.6M v $360Me; See's February pickup in business activity
(US) President Trumpsaid to be open on raising the purchase age for some guns - financial press
(US) Association ofAmerican Railroads weekly rail traffic report for week ending Feb 17th: 540Kcarloads and intermodal units, +3.1% y/y
(CN) According to ChinaNational Tourism Administration (CNTA) Lunar New year tourism totaled CNY475B,+12.6% y/y - Xinhua

THURSDAY 2/22
DTE.DE Reports Q4 adjNet +€1.3B v -€2.1B y/y, adj EBITDA €5.0B v €5.3Be, Rev €19.2B v €19.2Be
BARC.UK Reports Q4 Net-£1.29B v +£99M y/y, adj Pretax £93M v £330M y/y, Core Net Rev £5.02B v £4.99By/y
BA.UK Reports FY17 EPS43.5p v 42.3pe, adj EBITA £2.03B v £2.0Be, Rev £19.6B v £19.5Be
*(FR) FRANCE FEBBUSINESS CONFIDENCE: 109 V 110E; MANUFACTURING CONFIDENCE: 112 V 113E
(DE) GERMAN FEB IFOBUSINESS CLIMATE: 115.4 V 117.0E; CURRENT ASSESSMENT: 126.3 V 127.0E
(UK) Q4 PRELIMINARY GDPQ/Q: 0.4% V 0.5%E; Y/Y: 1.4% V 1.5%E (slowest annual pace since 2012)
*(EU) ECB ACCOUNT OF THEMONETARY POLICY MEETING (JAN MINUTES): Broadly agree that policy stance wasappropriate; premature to alter policy mix
(JP) JAPAN JAN NATIONALCPI Y/Y: 1.4% V 1.3%E (Highest since March 2015*); CPI EX-FRESH FOOD (CORE)Y/Y: 0.9% V 0.8%E
(US) US Treasury SecMnuchin: President Trump's policies will raise wages without inflation

FRIDAY 2/23
(DE) GERMANY Q4 FINALGDP Q/Q: 0.6% V 0.6%E; Y/Y: 2.9% V 2.9%E; GDP NSA Y/Y: 2.3% V 2.3%E
RBS.UK Reports Q4 Net-£579M v -£4.44B y/y, Adj Op £512M v £1.25B y/y, Rev £3.06B v £3.22B y/y;Affirms Medium-term outlook
VOW3.DE Reports prelimFY17 net €11.4B, adj op profit €17.0B v €17.3Be, Rev €230.7B v €231Be
DAI.DE China's Geelyreportedly building nearly 10% stake in Daimler worth $9B - press
(US) Weekly Baker HughesUS Rig Count: 978 v 975 w/w (+0.3%)

Barrons weekend summary

Barrons weekend summary: cautious cover story on GE; positive feature on GOOGL, LRCX, C, CMI and REITS 

Cover story: After a series of problems, GE has been attracting attention fromvalue-oriented investors; It has strong competitive positions in some sectors,and trades for a seemingly reasonable 15 times projected 2018 earnings—but the stockisn’t a bargain and could drop another 10% or more. 

Features:1) Positive on GOOGL, LRCX, C, CMI:As the bull market draws to an end, investors should consider these fourstocks—financials will benefit from rising interest rates, industrials will geta boost from inflation, and tech still looks attractive; 2) Positive on BXP, DEI, SLG, SPG, TCO, VNQ, RQI: Fundamentals in the REIT sector aregenerally healthy, and the sector could benefit from strong economic activitythat boosts demand for apartments, office, and retail space; 3) Cautious on AMTD, SCHW, MS, MerrillLynch: Vanguard is becoming a vertically integrated business that needs nooutside distributors, raising questions about its objectivity—though the dynamicsof the industry may make neutrality impossible. 

Tech Trader: “Tech firms, long known for plowing their wealth into research anddevelopment, have increasingly become shining examples of enterprises returningmoney to shareholders”—and there’s evidence the trend is shifting investorallegiances. 

Trader: More volatility wouldn’t be a surprise, or out of the ordinary, saysInstinet’s Frank Cappelleri, and doesn’t have to be a death knell for the bullmarket; RBC Capital Markets strategist Lori Calvasina worries too manyinvestors are betting on a weak dollar, and that stock prices in sectors suchas healthcare and consumer discretionary are rising with the dollar’s value;Positive on BAC, COF, JPM: After reaching highs last summer, some financial-sectorpreferred shares are now down to levels that make them well-suited forincome-oriented investors, according to Ulland Investment. 

Interview: Jay Bowen of Atlanta-based Bowen Hanes, which oversees the TampaFire and Police Pension fund, talks about where stocks are headedpost-correction and the impending Fed overhaul (picks: ATI, ABB, IBM). 

Follow-Up: A recent boost in UA shares after strong Q4 earnings may havethwarted short sellers, but it’s hard to tell whether the revenue upside marksa real turning point for the apparel company. 

European Trader: Positive on G4S, Loomis, Prosegur Compania de Seguridad,BCO: The rush to cash during recent market turmoil may have helped createbargains in the cash-handling industry, where some companies are moving intohigh-end services. 

Asian Trader: Investors ready to look beyond big Asian tech companies may findrelative bargains at much lower entry points, including Panasonic, Line, andFanuc. 

Emerging Markets: Latin America has begun to outperform amid market turmoil,offering a heavily commodity-linked investor proposition prone to politicalupheaval and supported by free-spending consumers. 

Commodities: “After years of decline, milk prices look ready to rally—morefrigid winters, lower production in some parts of the world, and more Chinesedemand will lead to higher prices.” 

Streetwise: As sexual harassment claims continue to rattle Hollywood and otherindustries, the structures that upheld and protected serial abusers arebreaking down—making finance’s 1990s-era detente look dated.

Markets Rebound As Inflation Fears Ease

TradeTheNews.com Weekly Market Update: Markets Rebound As Inflation Fears Ease 
Fri, 16 Feb 2018 16:12 PM EST

Stock indices began the week riding the momentum of the sharp technical reversal of the S&P 200-day moving average last Friday. Stock markets gapped up on Monday and rode the winning streak to 6 sessions by week’s end. The narrative that inflation concerns and higher rates were at theroot of the extreme volatility experienced earlier this month largely dissipated. The US 10-year yield reached a fresh 4-year high midweek in the midst burgeoning US Treasury coupon sales and a string of significantly hotter than expected inflation readings, headlined by the Jan CPI data. The US Dollar stayed soft, perplexing some market watchers by not reacting to the move up in Treasury yields, but leading others to theorize it may be signaling are calibration to higher than expected future inflation levels. By Friday,Treasury yields backed off the recent highs, the dollar bounced after making fresh multiyear lows, and the VIX retreated back below 20 while stocks made back more than half of the recent losses off the top. For the week, the S&P500 and DJIA each rebounded 4.3% and the Nasdaq rose 5.3%.

In corporate news this week, US metals producers rallied on Commerce Department recommendations for actions to protect US steel and aluminum makers as part of its Section 232 probe, though no final decision has been made yet by President Trump. Investors cheered Chipotle for naming former Taco Bell CEO Brian Niccol as its new chief,noting his expertise in digital technologies, restaurant ops and branding.Cisco Systems lifted on a bottom-line beat and shareholder return plans. Fossil Group surged 90% after earnings came in higher than anticipated, with the company pointing to improved wearable sales. AmerisourceBergen shares rose on a report that Walgreens was in early stage talks to acquire the drug wholesaler.IT solutions provider CSRA also popped on news it would be acquired by General Dynamics for $40.75/share in cash.


MONDAY 2/12
HEIA.NL Reports FY17 Net(beia) €2.25B v €2.10B y/y, Op €3.76B v €3.65Be, Rev €21.9B v €20.8B y/y;Raises dividend 9.7% to €1.47/shr
CSRA To be acquired byGeneral Dynamics for $40.75/shr valued at $9.6B inc debt
ABC Walgreens said to bein early stage talks to acquire the company - US financial press

TUESDAY 2/13
*(UK) JAN CPI M/M: -0.5%V -0.6%E; Y/Y: 3.0% V 2.9%E; CPI CORE Y/Y: 2.7% V 2.6%E
CAT Reports Jan dealerstatistics: Total Machines +34% y/y
(US) Pres Trump: Willprobably not end up having a 'reciprocal tax'
BIDU Reports Q4 $2.29 v$2.05e, Rev $3.62B v $3.56Be; Submits F-1 for iQIYI Video unit IPO
CMG Names Taco Bell CEOBrian Niccol as new CEO, effective March 5th; Chairman, CEO and Founder SteveElls, will become executive chairman
FOSL Reports Q4 $0.64adj v $0.39e, Rev $921M v $890Me

WEDNESDAY 2/14
TKA.DE Reports Q1 Net€91M v -€6M y/y, adj EBIT €444M v €438Me, Rev €9.82B v €10.2Be
ACA.FR Reports Q4underlying Net €878M v €737Me, Rev €4.65B v €4.65Be
*(DE) GERMANY Q4PRELIMINARY GDP Q/Q: 0.6% V 0.6%E; Y/Y: 2.9% V 3.0%E; GDP NSA Y/Y:2.3% V 2.2%E
*(SE) SWEDEN CENTRALBANK (RIKSBANK) LEAVES REPO RATE UNCHANGED AT -0.50%; AS EXPECTED; maintainsrepo rate path outlook
(IT) ITALY Q4PRELIMINARY GDP Q/Q: 0.3% V 0.4%E; Y/Y: 1.6% V 1.7%E
(EU) EURO ZONE Q4PRELIMINARY GDP Q/Q: 0.6% V 0.6%E; Y/Y: 2.7% V 2.7%E
(US) JAN CPI M/M: 0.5% V0.3%E; CPI EX FOOD AND ENERGY M/M: 0.3% V 0.2%E; CPI INDEX NSA: 247.867 V247.551E
*(US) JAN ADVANCE RETAILSALES M/M: -0.3% V +0.2%E; RETAIL SALES EX AUTO M/M: 0.0% V 0.5%E
(US) Treasury SecMnuchin: IRS will ban hedge fund tax loophole on carried interest
(US) Association ofAmerican Railroads weekly rail traffic report for week ending Feb 10th: 519.5Kcarloads and intermodal units, +1.6% y/y
AMAT Reports Q1 $1.06 v$0.97e, Rev $4.20B v $4.10Be; Raises Quarterly dividend 100% to $0.20 from$0.10 (indicated yield 1.54%); increases share repurchase authorization by$6.0B (11% of market cap)
CSCO Reports Q2 $0.63 v$0.59e, Rev $11.9B v $11.8Be; Raises Quarterly dividend 13.8% to $0.33 from$0.29 (indicated yield 3.14%); approves $25B stock buyback increase (12% ofmarket cap)
(JP) Japan Fin Min Aso:JPY currency (Yen) strength was NOT strong enough to require intervention -parliament

THURSDAY 2/15
AIR.FR Reports FY17 Net€2.87B v €995M y/y, Adj EBIT €4.25B v €4.00Be, Rev €67.0B v €67.1Be
SU.FR Reports FY17 Net€2.15B v €2.10Be, adj EBITA €3.65B v €3.66Be; Rev €24.7B v €24.8Be
NESN.CH Reports FY17(CHF) Net 7.2B v 8.5B y/y, Op 14.7B v 13.3Be, Rev 89.8B v 90.1Be; Raisesdividend 2.2% to CHF2.35/shr
(ZA) South Africaformally declares Ramaphosa as its new President - financial press
(US) FEB EMPIREMANUFACTURING: 13.1 V 18.0E
(US) JAN FINAL PPIDEMAND M/M: 0.4% V 0.4%E; Y/Y: 2.7% V 2.4%E
(US) FEB PHILADELPHIAFED BUSINESS OUTLOOK: 25.8 V 21.6E
(US) JAN INDUSTRIALPRODUCTION M/M: -0.1% V +0.2%E; CAPACITY UTILIZATION: 77.5% V 78.0%E
(US) Treasury to sell$$28B 2-year, $35B 5-year and $29B 7-year notes
(US) DEC TOTAL NET TICFLOWS: -$119.3B V +$33.5B PRIOR; NET LONG-TERM TIC FLOWS: $27.3B V $57.5B PRIOR
PNB.IN Notifies exchangeabout fraud equal to INR113.9B; India Finance Ministry discloses probe intoformer bank officials; other Indian banks comment on exposures

FRIDAY 2/16
*(UK) JAN RETAIL SALES(EX AUTO/FUEL) M/M: 0.1% V 0.6%E; Y/Y: 1.5% V 2.4%E
DE Reports Q1 $1.31 v$1.16e, Total Net Sales and Rev $6.91B v $6.40Be
(US) JAN IMPORT PRICEINDEX M/M: 1.0% V 0.6%E; Y/Y: 3.6% V 3.0%E
*(US) JAN HOUSINGSTARTS: 1.326M V 1.234ME; BUILDING PERMITS: 1.396M V 1.300ME
(US) Atlanta Fedmaintains Q1 GDP estimate at 3.2%, unchanged from Feb 14th
GOOGL Waymo unitreportedly developing ride hailing service to directly compete with Uber;approved to operate as transportation network company in Arizona - Quartz Media
(US) Commerce Deptformerly releases steel and aluminum recommendations on official website,confirming earlier reports
(US) Weekly Baker HughesUS Rig Count: 975 v 975 w/w (unchanged w/w)

Barrons weekend summary

Barrons weekend summary: Cautious features on WFC, TWTR,SNAP 

Cover story: Since the election of Donald Trump as president, the stock market has steadily moved up, but the ride is now over; “A fast and vertiginous drop in February points to a material change in investor psychology,to cautious from enthusiastic.” 

Features (Markets in Turmoil): 1) To fully understand Monday’s market rout,investors must understand the difference between an ETN—a form of debt in whichthe underwriter must repay the note in the amount the index has returned—and anETF; Volatility exchange traded products such as XIV, SVXY, VXX, UVXY, TVIX aremeant for trading and should not be held for more than a day; 2) Positive on DHI, DAL, VZ, AEP, SBUX, AAPL,NEE: Barron’s looked for stocks that have fallen while estimates for theirearnings have risen, and the resulting seven companies are worthy ofconsideration for bargain hunters; 3) Cautiouson WFC: Bank’s shares look inexpensive relative to other large firms, butongoing regulatory challenges and the task of changing its aggressive culture could drag on the stock; 4) A recent slump in bitcoin is related less to unreliable exchanges and worries about manipulation and fraud, and more to governmen tregulation and enforcement.

Tech Trader: Cautious on TWTR, SNAP:Companies beat expectations last week, offering good news amid all the marketturmoil, but the thrill is likely to fade in coming weeks for the “priceyboutiques that aren’t growing very fast.” 

Trader: The S&P 500’s 200-day moving average may not hold again on Monday,but that doesn’t mean it’s time to call the end of the bull market justyet; Cautious on Celltrion, Samsung Biologics: Shares of Korean biotechsare way up, with sky-high multiples, but “when gravity finds them, the crashwill be epic.” 

Interview: Veteran emerging markets investor Mark Mobius, who retired at theend of January as executive chairman of the Templeton Emerging Markets Group,talks about how bitcoin could be tied to a market melt-up and the best way forinvestors to gain from emerging markets. 

European Trader: European market bulls aren’t giving up yet—Mark Haefele of UBSWealth Management says the market may have gone from being overdue for apullback to approaching overdone. 

Asian Trader: Asia still has a strong fundamental investment case, says AjayKapur of Bank of America Merrill Lynch in Hong Kong, and “nothing has reallychanged in Asia over the past few months.” 

Commodities: Natural gas demand has been up in winter amid tight U.S. supplies,which would normally lead to higher prices, but an erratic season with severallarge demand events has spurred unusual price drops. 

Streetwise: Robo advisors “got their first look at volatility” last week, withBettermment and Wealthfront going offline briefly— though it’s probably a goodthing their customers weren’t able to make rash decisions.

Weekly Market Update: Correction!

TradeTheNews.com Weekly Market Update: Correction!
Fri, 09 Feb 2018 16:10 PM EST

Investors will remember this week for a longtime as the spike in volatility that began late last week unmercifully tightened its grip on equity markets. On Tuesday, the VIX surged above 50 on wordthat several highly leveraged volatility ETFs and ETNS essentially blew up overnight. By mid-week stock indices around the globe officially moved into correction territory (-10%) despite little change to overall global economic sentiment. Bouts of intense selling remained prevalent and all eyes were on theS&P's 200-day SMA heading into Friday. US Treasury yields remained pinned at elevated levels, but buyers generally came in when equities move significantly lower. The narrative that higher interest rates were the catalyst that induced stock volatility stayed engrained in many investors’ minds. The Bank of England added to the hand-wringing by signaling the next BOE rate hike could come sooner than expected which backed up against mediocre US Treasury auctions and the wrangling over a $300B spending bill in Washington D.C. Overall though,the volatility remained mostly an equity market story. The US dollar bounced modestly but investors remained reluctant to forcefully push money into traditional safe haven assets while some cracks emerged in other risk-tethered asset classes. Commodities like copper and oil moved lower with WTI crudetrading below $60 for the first time since late December. The high yield bondETF (HYG) has made a steady move and now sits at the lowest levels since lastNovember. For the week, the DJIA and S&P each lost5.2% and the Nasdaq sank 5.1%.

Corporate news this week continued to be led byearnings reports. Big media names Disney and Fox both reported better thanexpected results despite a challenging advertising environment. Twitter andSnap shares saw big short covering rallies as both social media firms beat quarterlyestimates and renewed hopes that their user metrics can stabilize and grow. Nvidiaremained a star performer in the chip sector, crushing Q4 estimates and guidingQ1 higher. Amazon put on its disruptor hat again, announcing plans for 2-hourgrocery deliveries from its recently acquired Whole Foods unit, and reportedly preparing the launch of its own businessdelivery service "Shipping with Amazon." Wynn shares rebounded briefly after its namesake founderresigned amid sexual misconduct allegations. In M&A news, Broadcom raisedits bid for Qualcomm to $82/share, but QCOM management quickly rejected therevised offer, though reports indicate they did agree to meet with Broadcomearly next week for talks.


SUNDAY FEB 4
(UK) UK Official: PM May has ruledout staying in customs union – press

MONDAY FEB 5
*(UK) JAN SERVICES PMI: 53.0 V54.1E (18th month of expansion but lowest since Aug 2016)
*(EU) EURO ZONE FEB SENTIX INVESTORCONFIDENCE: 31.9 V 33.2E
QCOM Broadcom confirms raisingoffer to $82/shr (prior $70/shr offer was rejected); Notes ~$121B offer is bestand final
*(US) JAN ISM NON-MANUFACTURINGCOMPOSITE: 59.9 V 56.7E
(US) Fed January senior loanofficer survey: banks expect tighter commercial real estate lending and creditcard standards in 2018
*(AU) RBA LEAVES CASH RATE TARGETUNCHANGED AT 1.50%; AS EXPECTED

TUESDAY FEB 6
BP.UK Reports Q4 Adj Net (underlyingRC profit) $2.11B v $1.95Be, Total Rev $70.0B v $52.1B y/y
GM Reports Q4 $1.65 v $1.34e,Rev $37.7B v $37.1Be
*(US) DEC TRADE BALANCE: -$53.1B V-$52.1BE (widest deficit since Oct 2008)
(US) Atlanta Fed cuts Q1 GDPestimate to 4.0% from 5.4% on Feb 1st
(US) Pres Trump: if we don't getrid of immigration loopholes, 'let's have a shutdown'
DIS Reports Q1 $1.89 v $1.62e,Rev $15.4B v $15.2Be
WYNN Steve Wynn has resigned as CEOand Chairman; promotes Matt Maddox CEO and Boone Wayson Chairman; effectiveimmediately
(CN) China banks have raisedmortgage rates in several cities - Chinese press
(CN) China banks have raisedmortgage rates in several cities - Chinese press

WEDNESDAY FEB 7
CARLB.DK Reports FY17 (DKK)adj EBIT 4.93B v 4.48B y/y, Rev 61.8B v 62.3Be; Raises dividend 60% to DKK16/shr
RIO.AU Reports FY17 Net $8.76B v$4.6B y/y; EBITDA $18.6B v $5.1B y/y; Rev $41.9B v $33.8B y/y; Announces $1.0Bbuyback
*(IN) INDIA CENTRAL BANK (RBI)LEAVES REPURCHASE RATE UNCHANGED AT 6.00%; AS EXPECTED
*(DE) GERMANY SELLS €2.492B VS.€3.0B INDICATED IN 0.5% FEB 2028 BUNDS; AVG YIELD: 0.69% V 0.54% PRIOR;BID-TO-COVER: 1.5X V 1.1X PRIOR
(US) Association of AmericanRailroads weekly rail traffic report for week ending Feb 3rd: 548K carloads andintermodal units, +2.5% y/y
(US) White House aide: we have cometo agreement on 2-year budget deal (agreement includes $300B boosts to defenseand non-defense spending)
*(NZ) NEW ZEALAND CENTRAL BANK(RBNZ) LEAVES OFFICIAL CASH RATE (OCR) UNCHANGED AT 1.75%; AS EXPECTED;maintains policy path outlook
*(US) DEC CONSUMER CREDIT: $18.4B V$20.0BE
*(BR) BRAZIL CENTRAL BANK (BCB)CUTS SELIC RATE BY 25BPS TO 6.75%; AS EXPECTED (11th straight cut in thecurrent easing cycle)
TSLA Reports Q4 -$3.04 v -$3.19e,Rev $3.29B v $3.30Be
ORLY Founder to step down as CEO,to remain on Board; Greg Johnson to be named CEO, effective May 8th
*(CN) CHINA JAN TRADE BALANCE(CNY): 135.8B V 330.0BE
*(CN) CHINA JAN TRADE BALANCE(USD): $20.3B V $54.7BE

THURSDAY FEB 8
AMZN Announces 2 two-hour deliveryfrom Whole Foods Market with plans to expand across US in 2018
GLE.FR Reports Q4 adjNet €877M v €1.16By/y, Op €830M v €1.25B y/y, Rev €6.23Bv €5.86Be
TWTR Reports Q4 $0.19 v $0.14e,Rev $732M v $690Me(first quarterly profit)
*(UK) BANK OF ENGLAND (BOE)QUARTERLY INFLATION REPORT(QIR)
*(UK) BANK OF ENGLAND (BOE) LEAVESINTEREST RATES UNCHANGED AT 0.50%; AS EXPECTED
*(UK) BOE FEB MINUTES: VOTED 9-0 TOLEAVE INTEREST RATES UNCHANGED AT 0.50%; hints might need earlier rate hikes
GWR Guides initial FY18 EPS$3.70-3.90 v $3.83e; R$2.36-2.42B v $2.32Be - Investor call
NYT Reports Q4 $0.39 v $0.30e, Rev $455.3M v $439.7M y/y
NVDA Reports Q4 $1.72 v $1.16e,Rev $2.91B v $2.67Be

FRIDAY FEB 9
*(FR) FRANCE DEC INDUSTRIALPRODUCTION M/M: 0.5% V 0.1%E; Y/Y: 4.5% V 3.5%E
*(UK) DEC INDUSTRIAL PRODUCTIONM/M: -1.3% V -0.9%E; Y/Y: 0.0% V 0.3%E
(US) House approves stopgapspending bill (as expected); paves way to reopen the government (measure sentto Pres Trump)
(EU) EU chief Brexit negotiator Barnier: Have yet to be update onthe UK's future relationship plan; transparency is important in negotiations; Transition is NOT agiven if disagreements persist; substantial differences remain on terms
AMZN Reportedly preparing to launchbusiness delivery service "Shipping with Amazon" (SWA) – press
(US) Weekly Baker Hughes US Rig Count: 975 v 946 w/w (+3.1%) (most rigsadded in a week since Jan 2017); US oil rig count: 791 v 765 w/w (+3.4%)(highest oil rig count since April 2015)
S&P500 cash tests 200 day SMA at 2,538.90 (11.7% off of Jan 26 closing high)

Barrons weekend summary

Barrons weekend summary: positive features on GM, DMVT 

Cover story: Barron’s list of the 100 Most Sustainable Companies is topped by CSCO, CRM, BBY, INTU, and HPQ, based on research produced by Calvert Research and Management that rated companies on their demonstrated responsibility in five key stakeholder categories: shareholders, employees, customers, planet, and community. 

Features: 1) Positive on GM: Automaker is a “story stock,” trading on distant expectations, not current income; A number of initiatives, such as its acquisition of Cruise Automation, have helped it gain ground in the self-driving vehicle sector, and shares are moving up; 2) Harry Markowitz, Nobel Prize winner and father of modern portfolio theory, has invested all his assets in the stock market, betting that destruction from last year’s hurricanes will boost reconstruction industries; 3) Positive on DVMT: “Concerns about Michael Dell’s plans for VMW, which is controlled by his privately held Dell Technologies, have created an opportunity in shares of the Dell tracking stock for VMware.” 

Tech Trader: Investors seem unconcerned about the risks facing large-cap tech companies such as AAPL and FB, and considering their challenges—slow iPhone X sales at Apple and a drop in users at Facebook—their shares seem to have a “teflon sheen.” 

Trader: After Friday’s drop, the S&P 500 still trades at 17.7 times forward earnings, meaning a further decrease “would reset the base for equities,” according to Jason Pride of Glenmede—a healthy pullback; + DHR: Company may not be fast-growing, but it has consistency in increasing sales, cutting costs, and improving efficiency, making it a reliable pick; Some investors don’t think Berkshire Hathaway, AMZN, and JPM’s healthcare initiative will succeed, and that the market response, which punished traditional providers, was an overreaction. 

Profile: John Mowrey, co-manager of the AllianzGI NFJ Mid-Cap Value fund, seeks relative value instead of the cheapest or highest-yielding stocks (top 10 holdings: DHI, LUV, THO, SPR, EQM, VLO, DFS, NSC, MPC, CMA). 

Interview: Scott Minerd of Guggenheim Partners talks about the perils facing municipal bonds, and is bullish about international stocks and active management. 

Follow-Up: Three pundits whose predictions for the S&P 500 in 2018 were the highest and still haven’t been surpassed by the market remain upbeat despite recent rapid market gains. 

European Trader: Positive on Beazley: The Data Protection Regulation soon to take effect in the European Union should boost demand for shares of the company, which offers cyberattack insurance.

 Asian Trader: Positive on Hangzhou Hikvision Digital Technology: The world’s largest maker of surveillance cameras, which also makes software and manages back-end storage, could benefit if Donald Trump is able to build his Mexican-border wall. 

Emerging Markets: The two clear beneficiaries of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership are Vietnam and Malaysia, and the pact also marks an ambitious shift for Japan. 

Commodities: “As palladium prices soar to new records, platinum deserves to get a closer look from investors.” 

Up and Down Wall Street: With risk roaring back, “the fear is that the Fed could overdo it” on rate hikes this year, “pushing up short-term interest rates and roiling both the bond and stock markets further.” 

Streetwise: Columnist Randall Stevenson disputes TSLA’s claim that chief Elon Musk’s new 10-year compensation package aligns his interest with that of shareholders for the long term.

Rates Rise and Equities Contemplate Correction

TradeTheNews.com Weekly Market Update: Rates Rise and Equities Contemplate Correction
Fri, 02 Feb 2018 16:09 PM EST

The long overdue healthy correction may have finally begun this week as equities pulled back as aggressively as we have seen in almost two years. Many pointed to the continuing rise in interest rates while others blamed the political rumblings out of Washington, month end portfolio rebalancing, and the liquidity offered by the heart of Q4 earnings season all as factors inducing a sell off. Even as the stock market selloff accelerated on Friday, volumes were not particularly robust given the deluge of high profile earnings reports, leading some commentators to speculate that the downdraft was largely a buyers strike from overbought conditions. Nevertheless, many stock indices traded off about 4% from recent highs and the VIX popped above 17, touching levels not seen in more than a year. For the week the S&P500 dropped 3.9%, the DJIA fell 4.1%, and the Nasdaq sank 3.5%.

The Greenback probed fresh 3-year lows despite various US inflation readings that ran significantly hotter than expected. Friday’s January payrolls report saw annual wage gains reach 2.9% for the first time in 8-years. Janet Yellen's final FOMC statement signaled a March rate hike is on track and markets appear willing to debate the merits for four total hikes in 2018. Treasury yields moved up globally, highlighted by the US 10-year breaking above 2.75% and the German Bund retaking 75 bps. The dollar was unable to gain any traction until Friday's carnage in equity and cryptocurrency markets. Many noted the 3-4 rate hike Fed trajectory is all but priced in and Tuesday's quarterly refunding announcement served as a reminder the US government is set to embark on bringing more supply to a market where the Fed is going to be taking a step back.

In corporate news this week, Apple missed iPhone sales expectations but the market was assuaged by strong ASPs, indicating iPhone X sales were solid. Amazon’s quarterly earnings blew away expectations, demonstrating again that the online retailer has the market power to ratchet up its margins at will. The healthcare sector was roiled again by another Amazon disruption story, this time when the retail giant announced it would team with Berkshire and JPMorgan on an employee healthcare initiative. Metlife got slammed after disclosing it discovered a material weakness in internal control over financial reporting. PayPal shares dipped after eBay announced that it would be replacing its primary payments processing partner, though eBay users will still be able to make transactions with PayPay’s digital wallet until 2023. Dr Pepper Snapple announced it would be acquired by Keurig Green Mountain for $103.75/share via a special cash dividend, though it will retain 13% of combined company.



SUNDAY JAN 28
(US) Trump team considers nationalizing 5G network in order to counter China – Axios
MONDAY JAN 29
ABLX.BE To be acquired by Sanofi for €45 in cash for EV €3.9B
DPS To be acquired by Keurig Green Mountain for $103.75/shr via a special cash dividend, and retain 13% of combined company
LMT Reports Q4 $4.30 v $4.06e, Rev $15.1B v $14.8Be
(US) Atlanta Fed forecasts initial Q1 GDP at 4.2%
(US) Trade Rep Lighthizer: Canada has made a massive attack on US trade laws
MET Reports prelim Q4 $0.61-0.66 v $1.10e; discovered material weakness in internal control over financial reporting; to see $135-165M FY17 net income impact; to increase reserves by $525-575M; to postpone earnings

TUESDAY JAN 30
SAP.DE Reports prelim Q4 Non-IFRS Net €2.14B v €1.83B y/y, non-IFRS Op profit €2.36B v €2.39Be, Rev €6.81B v €6.84Be
(FR) FRANCE Q4 ADVANCE GDP Q/Q 0.6% V 0.6%E; Y/Y: 2.4% V 2.3%E
(JP) BOJ have taken appropriate steps in spirit of global FX code - press
(ES) SPAIN Q4 PRELIMINARY GDP Q/Q: 0.7% V 0.7%E; Y/Y: 3.1% V 3.1%E
(EU) EURO ZONE Q4 ADVANCE GDP Q/Q: 0.6% V 0.6%E; Y/Y: 2.7% V 2.7%E (fastest annual pace since 2007)
(EU) EURO ZONE JAN BUSINESS CLIMATE INDICATOR: 1.54 V 1.68E; CONSUMER CONFIDENCE (FINAL): 1.3 V 1.3E
AMZN Amazon, Berkshire Hathaway and JPMorgan Chase & Co. to partner on U.S. employee healthcare
PCAR Reports Q4 $1.67 v $1.12e, Rev $5.12B v $4.84Be
(DE) GERMANY JAN PRELIMINARY CPI M/M: -0.7% V -0.6%E; Y/Y: 1.6% V 1.7%E
(US) JAN CONSUMER CONFIDENCE: 125.4 V 123.0E

WEDNESDAY JAN 31
SIE.DE Reports Q1 Net €2.21B v €1.90Be, industrial business profit €2.21B v €2.57B y/y, Rev €19.8B v €19.9Be
MT.NL Reports Q4 $1.02 v $0.80e, EBITDA $2.14B v $2.07Be, Rev $17.7B v $18.3Be
BA Reports Q4 $4.80* v $2.91e, Rev $25.4B v $24.8Be
SAN.ES Reports Q4 Net €1.54B v €1.46Be, Rev €12.06B v €12.3B q/q
(DE) GERMANY JAN NET UNEMPLOYMENT CHANGE: -25K V -17KE; UNEMPLOYMENT CLAIMS RATE: 5.4% (record low) V 5.4%E
(US) JAN ADP EMPLOYMENT CHANGE: +234K V +185KE
(US) JAN CHICAGO PURCHASING MANAGER: 65.7 V 64.0E
(US) Conference Board Jan Total online job ads 4.90M v 4.90M m/m v 4.89M y/y; New ads 2.15M v 2.01M m/m v 2.24M y/y
(US) Association of American Railroads weekly rail traffic report for week ending Jan 27th: 543.5K carloads and intermodal units, +4% y/y
MSFT Reports Q2 $0.96 v $0.86e, Rev $28.9B v $28.4Be
PYPL EBAY: Adyen to become primary payments processing partner, replacing PayPal as primary payments processor
X Reports Q4 $0.76 v $0.68e, Rev $3.13B v $3.07Be
992.HK Reports Q3 Net loss $288.8M* v profit $98Me; Rev $12.9B v $12.5Be
(HK) Macau Jan Gaming Rev MOP26.3B, +36.4% v 27%e (largest gain since 2014)

THURSDAY FEB 1
NOKIA.FI Reports Q4 adj EPS €0.13 v €0.11e,, adj Op €1.0B v €940M y/y, Rev €6.70B v €6.44Be
ROG.CH Reports FY17 (CHF) Core EPS 15.34 v 15.53e, Core operating profit 19.0B v 19.4Be, Rev 53.3B v 53.2Be
VOD.UK Reports Q3 Rev £11.8B v £12.2B y/y, Service Organic Rev +1.1% v +1.2%e
UNA.NL Reports FY17 Core EPS €2.24 v €2.21e; Op €8.86B v €7.80B y/y, Rev €53.7B (inc spreads) v €52.7B y/y
RDSA.NL Reports Q4 adj Net $4.3B v $4.12Be, basic CCS EPS $0.52 v $0.50e, Rev $85.4B v $64.8B y/y
(UK) JAN MANUFACTURING PMI: 55.3 V 56.5E (18th month of expansion but lowest since Jun)
BX Reports Q4 adj $0.71 v $0.70e, Rev $1.88B v $1.81Be; Raises Quarterly dividend 93.2% to $0.85 from $0.44 (indicated yield 9.3%)
(CZ) CZECH CENTRAL BANK (CNB) RAISES REPURCHASE RATE BY 25BPS TO 0.75%; AS EXPECTED
UPS Reports Q4 $1.67 v $1.65e, Rev $18.8B v $18.2Be
(US) Q4 PRELIMINARY NONFARM PRODUCTIVITY: -0.1% V 0.7%E; UNIT LABOR COSTS: 2.0% V 0.9%E
(CL) CHILE CENTRAL BANK (BCCH) LEAVES OVERNIGHT RATE TARGET UNCHANGED AT 2.50%; AS EXPECTED
AMZN Reports Q4 $3.75 v $1.85e, Rev $60.5B v $60.0Be
GOOGL Reports Q4 $9.70 adj** v $10.12e, Rev $25.8B (ex $6.45B TAC) v $25.7Be; authorizes $8.6B repurchase of Class C capital stock
(JP) BOJ AGAIN CONDUCTS A FIXED-RATE JGB PURCHASE OPERATION (4th time performed): Offers to buy unlimited amount of 10-year JGBs at 0.11%

FRIDAY FEB 2
DBK.DE Reports Q4 Net -*€2.18B v -€2.24Be, Pretax -€1.34B v -€2.42B y/y, Rev €5.71B v €5.90Be
AZN.UK Reports Q4 Core EPS $1.30 v $0.84e, Rev $5.78B v $5.49Be
(US) Fed announces plan for tougher big-bank stress tests in 2018, as speculated (update)
MRK Reports Q4 $0.98 v $0.94e, Rev $10.4B v $10.4Be; To invest $12B over 5-years in US capital projects
(US) JAN CHANGE IN NONFARM PAYROLLS: +200K V +180KE
(US) Pres Trump authorizes release of memo written by Rep Nunes amid FBI objections today - press
(CA) Canada Prime Min Trudeau: Canada is willing to walk away from NAFTA

Barrons weekend update

Barrons weekend update: positive cover story on GS; cautious feature on SNA 

Cover story: Three out of four of GS’s businesses are thriving, but trading—the most important part of which is fixed income, currency, and commodities—has suffered; The bank has kept much of its FICC team intact in the belief the down cycle will turn, and Goldman is more diversified than it was before the financial crisis, making today a good time to buy shares. 

Features: 1) After a year of disappointing IPOs from firms such as SNAP and APRN, there is growing optimism now that Dropbox and Spotify are preparing to go public, and some venture capitalists believe this will be the best year for offerings since 2014; 2) Cautious on SNA: Company’s in-house financing arm has boosted sales at a fast clip, despite a decrease in the number of U.S. auto mechanics, but investors are concerned about slowing organic growth in its main tools division; 3) The U.S. economic expansion may be getting a little long in the tooth, but capital spending has picked up and shows signs of staying strong this year, a situation in the works long before the GOP tax overhaul. 

Tech Trader: Conventional wisdom says the chip sector is a good place to pick a sure thing in tech, given its importance as the backbone of the industry; But for investors who want to look beyond it, three strong picks are auto-parts supplier APTV, semiconductor maker STM, and motor manufacturer Nidec. 

Trader: Consumers are pouring money into equities, a big change from when they withdrew $9B during the last six months of the year, a situation that isn’t worrisome—at least not yet; Cautious on VRTX: Investors may be disappointed when the company reports earnings Wednesday, but it is well prepared for the months ahead, says Guggenheim analyst Tony Butler; A move by arbitrageurs long on DVMT and short on the VMW shares it tracks to unwind trades on the mistaken belief the spread was too wide has created one of the better trading opportunities of the year.

 Interview: Marvin Schwartz, head of Neuberger Berman’s Straus Group, talks about tax reform, the outlook for oil, and the elevated levels of today’s market (picks: DVN, JPM, LNC, FDX). 

Small Caps: Small company investors may want to switch their focus from the Russell 2000 to the lesser-known S&P SmallCap 600, which has consistently performed better during the past two decades. 

Follow-Up: Cautious on FSLR: Solar power will continue to get cheaper and supplant fuel-generated electricity, but investors should monitor how Trump administration tariffs disrupt the market in the short term. 

Asian Trader: Vietnam was the best-performing market in Asia last year, with traditional manufacturing, consumer, and utility stocks driving the rally, and its market continues to look strong in 2018. 

Emerging Markets: Turkey’s economic stimulus helped pull it out of a recession, “but the binge is flashing signs of an incipient hangover,” with inflation near 12% and a current account deficit near 5.5% of GDP. 

Commodities: “The outlook for lithium continues to shine, even as lithium-related stocks started off the year on a sour note”; cobalt should also benefit from its use in lithium-ion batteries. 

Streetwise: “Blockchain has taken on the same magical quality as bitcoin, with companies using it as a buzzword they know will appeal to investors—a turbocharger to turn a boring business into a rocket ship.”

FX Faux Pas at Davos Doesn’t Deter Risk-on Behavior

TradeTheNews.com Weekly Market Update: FX Faux Pas at Davos Doesn’t Deter Risk-on Behavior
Fri, 26 Jan 2018 16:03 PM EST

US indices finished out the week on yet another positive note pressing new highs. Markets barely took note of Monday’s announcement that President Trump was going to move forward and slap tariffs on Chinese solar panels and South Korean washing machines. By Friday, Trump's official Davos remarks were reserved and generally well received. The first look at Q4 GDP missed expectations, but a closer look suggested surging domestic demand was offset by a wider trade deficit and an unexpectedly sharp slowdown in inventory investment. Corporate sentiment was buoyed by the sagging Greenback and earnings season. Q4 earnings announcements added to the momentum as a host of key managements significantly raised financial projections while offering forecasts that include increased capital spending. For the week the S&P500 rose 2.2%, the DJIA added 2.1%, and the Nasdaq gained 2.3%.

Heading into Thursday’s ECB meeting the dollar stayed under pressure helped by comments from the US Treasury Secretary. Mr. Mnuchin didn’t do Mario Draghi any favors when it was reported he noted a weaker dollar was good for US trade. Despite US officials walking back the Mnuchin comments, the Greenback remained confined near the lowest levels since late 2014. Rates moved up after the ECB met and Draghi indicated the council has become increasingly confident inflation will move back to target while not changing the language around Euro volatility despite the recent surge to 1.24. US Treasury yields followed European rates higher helping the 10-year close above 2.65% for the first time since 2014. WTI crude continued to bump up against 2.5 year highs as well, coinciding with another bump up in the US rig count.

Markets digested a slew of quarterly reports this week as earnings season got into full swing. Cruise stocks rallied on a Royal Caribbean earnings beat, boosted by higher on-board spending. Netflix crossed the $100B market cap level after reporting revenue above consensus and seeing a stronger than anticipated influx of net new customers. Intel shares ripped to an 18-year high after an earnings beat and a capex boost. Airline names descended after United announced plans to match low fares and expand capacity. Celgene confirmed it would acquire Juno for $9B at $87/share in order to become a preeminent cellular immunotherapy company. Wynn Resorts fell 10% Friday after the Wall Street Journal reported dozens of allegations of sexual misconduct over decades against its namesake CEO.


SUNDAY 1/21
(DE) Germany Social Democrats (SPD, center-left) votes to support the opening of formal coalition talks with Chancellor Merkel’s conservative bloc; ends four-months of political stalemate

MONDAY 1/22
UBSG.CH Reports Q4 (CHF) Net -2.22B* v -2.15Be, adj Op 1.22B v 1.00B y/y, Rev 7.12B v 7.12Be; Plans CHF2B buyback; Creates unified Global Wealth Management division
(US) Senate Democrats reportedly ready to make deal on govt funding in exchange for DACA vote promise - Talking Points Memo
NFLX Reports Q4 $0.41 v $0.41e, Rev $3.29B v $3.28Be
President Trump approves tariff recommendations on imported large residential washing machines and imported solarcells and modules - financial press
(JP) BANK OF JAPAN (BOJ) LEAVES INTEREST RATE ON EXCESS RESERVES (IOER) UNCHANGED AT -0.10%; AS EXPECTED

TUESDAY 1/23
CA.FR Confirms 2022 Ambition: invest €2.8B in digital by 2022, cut 2,400 jobs (20% of workforce)
066570.KR Reports FY17 (KRW) Net 1.87T v 126.3B y/y, Op 2.47T v 1.34T y/y, Rev 61.4T v 55.4T y/y
(DE) GERMANY JAN ZEW CURRENT SITUATION SURVEY: 95.2 *(record high) V 89.6E; EXPECTATIONS SURVEY: 20.4 V 17.7E
(US) JAN RICHMOND FED MANUFACTURING INDEX: 14 V 19E
CRM CEO: economic freight train remains on the track; CEOs are bullish - Davos comments
TXN Reports Q4 $1.09*(ex $0.75 tax expense) v $1.09e, Rev $3.75B v $3.73Be

WEDNESDAY 1/24
NOVN.CH Reports Q4 $1.21 v $1.16e, Rev $12.9B v $12.6Be
(FR) FRANCE JAN PRELIMINARY MANUFACTURING PMI: 58.1 V 58.6E (16th month of expansion)
(DE) GERMANY JAN PRELIMINARY MANUFACTURING PMI: 61.2 V 63.0E (37th month of expansion but moves off from record highs)
(EU) EURO ZONE JAN PRELIMINARY MANUFACTURING PMI: 59.6 V 60.3E (54th month of expansion but moves off from record high)
(UK) NOV AVERAGE WEEKLY EARNINGS 3M/Y: 2.5% V 2.5%E; WEEKLY EARNINGS (EX-BONUS) 3M/Y: 2.4% V 2.3%E
(UK) DEC JOBLESS CLAIMS CHANGE: +8.6K V +12.2K PRIOR; CLAIMANT COUNT RATE: 2.4% V 2.3% PRIOR
(UK) NOV ILO UNEMPLOYMENT RATE: 4.3% V 4.3%E
GE Reports Q4 adj $0.27 v $0.28e, Rev $31.4B v $32.7Be
CAT Reports Dec dealer statistics: Total Machines +34% y/y
(US) Association of American Railroads weekly rail traffic report for week ending Jan 20th: 508.2K carloads and intermodal units, -2.9% y/y
(BR) Third judge in case against former Brazil President Lula rejects defense's arguments against Judge Moro - press
F Reports Q4 $0.39 v $0.42e, Rev $41.3B v $37.2Be
000660.KR Reports Q4 (KRW) Net 3.22T v 3.4Te, Op 4.5T v 4.3Te; Rev 9.03T v 8.9Te
(KR) SOUTH KOREA Q4 PRELIMINARY GDP Q/Q: -0.2% V +0.1%E (first contraction since 2008); Y/Y: 3.0% V 3.4%E; 2017 GDP 3.1%

THURSDAY 1/25
(MY) MALAYSIA CENTRAL BANK (BNM) RAISES OVERNIGHT POLICY RATE BY 25BPS TO 3.25%; AS EXPECTED
(DE) GERMANY FEB GFK CONSUMER CONFIDENCE: 11.0 V 10.8E (highest reading since Oct 2001)
DGE.UK Reports H1 Adj Op £2.19B v £2.1Be, Net Rev £6.53B v £6.57Be
(NO) NORWAY CENTRAL BANK (NORGES) LEAVES DEPOSIT RATES UNCHANGED AT 0.50%; AS EXPECTED
(DE) GERMANY JAN IFO BUSINESS CLIMATE: 117.6 V 117.0E (matches record high); CURRENT ASSESSMENT: 127.7 V 125.3E
CSIQ Received going private proposal; appoints special committee (no decision has been made)
CAT Reports Q4 $2.16 v $1.77e, Rev $12.9B v $11.9Be
*(EU) ECB LEAVES MAIN 7-DAY REFINANCING RATE UNCHANGED AT 0.00%; AS EXPECTED
FCX Reports Q4 $0.51 v $0.49e, Rev $5.04B v $4.81Be
(EU) ECB’s Draghi: Reiterated that Interest rates to remain at present level well past end of QE; favorable financing conditions were still needed - prepared remarks
(EU) ECB’s Draghi: ECB does not favor any country in its QE program; stock (not flows) is the only relevant metric to assess QE - Q&A
(US) DEC NEW HOME SALES: 625K V 675KE
(US) Atlanta Fed maintains Q4 GDP estimate at 3.4%, unchanged from Jan 18th
(US) President Trump: Thinks there's a good chance we'll be able to renegotiate NAFTA but we'll see what happens - CNBC interview excerpts
TSLA Employees say to expect further Model 3 delays due to inexperienced quality control operators and time-consuming manual assembly of batteries - CNBC
INTC Reports Q4 $1.08 v $0.86e, Rev $17.1B v $16.3Be; Raises FY18 capex plan materially; raises quarterly dividend by 10% to $0.30 from $0.2725 (2.65% yield)
(US) President Trump reportedly to support path to citizenship for ~1.8M DACA recipients and Dreamers in return for $25B fund for border wall and end to chain migration and visa lottery system - NBC News
VMW Dell Technologies said to examine strategic alternatives, including IPO or deal with VMWare - CNBC

FRIDAY 1/26
(UK) Q4 ADVANCE GDP Q/Q: 0.5% V 0.4%E; Y/Y: 1.5% V 1.4%E (slowest annual pace since 2012)
(US) Q4 ADVANCE GDP ANNUALIZED Q/Q: 2.6% V 3.0%E; PERSONAL CONSUMPTION: 3.8% V 3.7%
(US) Q4 ADVANCE GDP PRICE INDEX: 2.4% V 2.3%E; CORE PCE Q/Q: 1.9% V 1.9%E
(US) DEC PRELIMINARY DURABLE GOODS ORDERS: 2.9% V 0.8%E; DURABLES EX TRANSPORTATION: 0.6% V 0.6%E
WYNN Dozens of people make sexual misconduct allegations against CEO Steve Wynn - press
BBD.CA ITC rejects Boeing's injury claims in Bombardier dispute by 4-0 vote; throws out US duties on CSeries jets - press

Barrons weekend summary

Barrons weekend summary 

Cover story: The second installment of Barron’s Roundtable offers picks from panelists Henry Ellenbogen of New Horizons Fund (EFX, MTN, BFAM, SERV, SHOP, GRUB); Mario Gabelli of Gamco Investors (MSG, Liberty Braves Group, MGM, Davide Campari-Milano, ZBH, CNHI, GCP, PCAR, TXT, ENR); Jeffrey Gundlach of DoubleLine Capital (XLE, NTG, BKLN, EWZ, DXJ); Abby Joseph Cohen of GS (OXY, Samsung Electronics, ABBV, China Railway Signal & Communication, MDLZ); William Priest of Epoch Investment Partners (SBUX, OLED, AMAT, MLM, MET); Scott Black of Delphi Management (LRCX, HCLP, GTN, ARCC, HOFT); and Meryl Witmer of Eagle Capital Partners (KMX, OEC, Dart Group, Howden Joinery Group). 

Features: 1) Small caps are in a bull market, but there are more risks than many investors realize: many companies are carrying large debt loads, and shares are expensive by historical standards; 2) At CES this year, tech companies heavily pitched their IoT strategies, but “beneath the veneer of convenience, there are considerable obstacles that could sidetrack or delay tech’s utopian vision”; 3) Keith Sanders, the director of operations at a Georgia book distributor, is the winner of the 2017 Barron’s forecasting challenge, topping more than 3,000 other entrants. 

Tech Trader: Technology has a harder time than other industries putting vast amounts of cash to work, and while the tax overhaul may lead to some investment in U.S. manufacturing, tech outfits will most likely boost dividends, buybacks, and M&A. 

Trader: The wider the gap grows between the 10-year Treasury yield and the S&P 500’s dividend yield, the more enticing bonds will become for yield-seeking investors; As companies bring money back home under the new tax law, some may try to boost growth through acquisitions; Betting on BA, which is trading at 42.8% above its 200-day moving average, may seem risky, but history shows the stock can remain extended for a long time when it’s in that region. 

Profile: Mark Baribeau, co-manager of the Prudential Jennison Global Opportunities fund, seeks to build a “unique collection of business models that have a lot of firepower” (top 10 holdings: Tencent Holdings, BABA, Kering, AMZN, MELI, FB, NFLX, UNH, MA, CHTR). 

Follow-Up: Positive on WMT: The retailer’s acquisition of Jet.com and the talent infusion it brought has put the company back on entrepreneurial footing, as with its move to shutter some Sam’s Club stores and turn others into fulfillment centers for its online business. 

European Trader: Cautious on H&M: Shares of the Swedish retailer are down since mid-December, and “there is a chance that the pessimists are right, and a big rally isn’t in the cards at this point.” 

Asian Trader: Positive on AIA Group: The largest pan-Asian life insurer remains one of the most attractive insurance stocks around, partly because it’s in the middle of the world’s fastest-growing life-insurance market. 

Emerging Markets: The time may have arrived for emerging markets sectors that have lagged—such as banks, utilities, and commodities producers—to gain ground, but betting on them isn’t straightforward. 

Commodities Corner: Gold prices could hit record highs this year, driven in part by declines in the U.S. dollar and Treasury bonds, excessive optimism in the stock market, and surging inflation. 

Streetwise: Columnist Vito Racanelli critiques Larry Fink of BLK’s call for companies to make a positive contribution to society, saying such an approach isn’t a sustainable way spark social change.