TradeTheNews.com Weekly
Market Update: Collapsing oil prices worry markets awaiting Black Friday sales
data
Fri, 23 Nov 2018 13:02 PM EST
Equity investors had little to be thankful for in this year’s shortened
Thanksgiving week trade. Indices moved back towards the late Oct lows on
concerns about slowing global growth, Brexit and Italian budget disagreements,
and lasting China trade worries. Investors generally responded poorly to late
Q3 earnings season reports from the retailers who largely noted growing margins
pressures heading into holiday season. US Treasury yields slipped to the lowest
levels in more than a month helped by the risk off flows. WTI crude prices
careened toward $50 a barrel as global growth concerns and worries about
oversupply weighed on oil. For the week, the S&P500 dropped 3.8%, the DJIA
lost 4.4%, and the Nasdaq sagged 4.3%.
In corporate news this week, Apple and its suppliers’ shares were weighed upon
by reports that the tech giant recently cut production orders for three new
iPhone models due to lower-than-expected demand, and a separate report
indicating Apple’s largest assembler, Foxconn, planned on nearly $3B in cost
cuts amid warnings of anemic smartphone demand. As earnings season wraps up
before the US holidays, some key retailers announced results, with Target and
TJ Maxx seeing Q3 margins under pressure. Footlocker, however, beat
expectations and raised its Q4 comps outlook, and Kohl’s saw strength in
apparel. And as Black Friday kicked off, Macy’s CEO said in an interview that
he saw a ‘really strong start to the holiday shopping season’ with the caveat
of challenges arising from exceptionally strong Q4 comps last year. Nissan
removed its long-time CEO Carlos Ghosn following his arrest on suspicion of
financial misconduct in Japan. On Friday, Rockwell Collins shares spiked nearly
10% on word that China has approved its merger deal with United Technologies,
quashing fears that the deal could get entangled in the Sino-US trade squabble.
MONDAY 11/19
7201.JP Reportedly Chairman Ghosn to be arrested in Japan for alleged financial
trading violations - Japanese press
AAPL Reportedly has recently cut production orders for 3 new iPhone models due
to lower-than-expected demand - U.S. financial press
(US) NOV NAHB HOUSING MARKET INDEX: 60 V 67E (lowest reading since Aug 2016;
biggest drop since 2014)
TUESDAY 11/20
LOW Reports Q3 $1.04 v $0.97e, Rev $17.4B v $17.3Be
BBY Reports Q3 $0.93 v $0.85e, Rev $9.59B v $9.55Be
*(US) OCT HOUSING STARTS: 1.228M V 1.225ME; BUILDING PERMITS: 1.263M V 1.260ME
(US) Atlanta Fed cuts Q4 GDP forecast to 2.5% from 2.8% prior
GPS Reports Q3 $0.69 v $0.68e, Rev $4.09B v $3.98Be
WEDNESDAY 11/21
(US) Association of American Railroads weekly rail traffic report for week
ending Nov 17th: 546.5K, +0.04% y/y
(US) Atlanta Fed maintains Q4 GDP forecast at 2.5%
(US) DOE CRUDE: +4.9M V +2ME; GASOLINE: -1.3M V -0.5ME; DISTILLATE: -0.1M V
-2.5ME
(US) OCT EXISTING HOME SALES: 5.22M V 5.20ME
(US) OCT PRELIMINARY DURABLE GOODS ORDERS: -4.4% V -2.6%E; DURABLES
EX-TRANSPORTATION: 0.1% V 0.4%E
(CN) Reportedly adviser Peter Navarro will NOT be at the upcoming Trump Xi
meeting at the G20 - China press
(EU) EU Commission opinion on 2019 draft budget plans; confirms Italy budget is
seriously noncompliance with debt reduction commitment; excessive deficit
procedure warranted
TKA.DE Reports FY18 Net €60M* v €271M y/y, adj EBIT €1.6B v €1.64Be, Rev
€42.75B v €42.3Be
FRIDAY 11/23
(US) According to Adobe Analytics, Thanksgiving online spending valued at
$2.4B, +31.8% y/y - press
(DE) GERMANY Q3 FINAL GDP Q/Q: -0.2% V -0.2%E; Y/Y: 1.1% V 1.1%E
*(FR) FRANCE NOV PRELIMINARY MANUFACTURING PMI: 50.7 V 51.2E (26th month of
expansion but lowest since Sept 2016)
*(DE) GERMANY NOV PRELIMINARY MANUFACTURING PMI: 51.6 V 52.2E (47th month of
expansion but lowest since Mar 2016)
*(EU) EURO ZONE NOV PRELIMINARY MANUFACTURING PMI: 51.5 V 52.0E (64th month of
expansion and lowest since Mar 2016)
COL China gives conditional approval for United Technologies merger deal
*(US) NOV PRELIMINARY MARKIT MANUFACTURING PMI: 55.4 V 55.7E
(SA) OPEC and Saudis are reportedly mulling quiet oil output cuts; considering
stretching 2016 output limits into 2019 - press
Saturday, November 24, 2018
Saturday, November 17, 2018
Market Weigh Signs of Slower Growth and Brexit Uncertainties
TradeTheNews.com Weekly
Market Update: Market Weigh Signs of Slower Growth and Brexit Uncertainties
Fri, 16 Nov 2018 16:25 PM EST
Headwinds persisted this week as a wide swath of headlines whipsawed the major US averages. Stocks opened the Veterans Day Monday under pressure led by the NASDAQ after a key corporate outlook downgrade weighed on Apple shares and the rest of the handset/chip space. The cautions growth narrative was subsequently echoed by other corporate forecasts by managements within that sector, as well as others, later in the week. Tuesday saw sentiment improve when White House adviser Kudlow confirmed a report that US China trade talks have resumed in earnest ahead of the upcoming G20 meeting. WTI crude futures continued fall as many pointed to global growth concerns and potential supply demand imbalances. Traders noted the exacerbated decline in crude prices came alongside as surge in natural gas prices which had many noting of a potential pairs trade gone wrong resulting in forced unwinding. For the week, the S&P lost 1.6%, the DJIA dropped 2.2%, and the Nasdaq fell 2.2%.
Slowing global growth remained an overriding factor as economic data out of Europe, particularly Germany, continued to disappoint. The signals of softening came amid arduous Brexit negotiations that saw PM May and the EU finally come to terms on a draft separation agreement. It remains anything but clear though, if the PM can cajole enough of her Conservative party members to support the deal ahead of a key European summit later this month. Separately, EU and Italian officials continued to trade barbs in the press over fiscal policy resulting in higher borrowing rates there. Fixed income risk barometers began to flash as high yield bond prices slumped, US Treasury yields fell, and the 3-month LIBOR-EURIBOR spread widened to levels not seen since 1999, before the dot com bubble. The benchmark 10-year yield closed below the 50-day moving average for the first time since Labor Day. In the latter part of the week, we heard from a cadre of Fed officials highlighted by Fed Chairman Powell and Vice Chair Clarida. Each acknowledged that the Fed must pay attention to slowing global growth signals going forward, but also indicated rates remain below ‘neutral’ and to this point nothing has altered the thinking that they need to gradually rise to that neutral level. The Greenback backed away from its strongest levels in more than a year late in the week as Treasury yields moved lower.
For the week's corporate news, on Monday, Lumentum shares fell precipitously after the company slashed its outlook, noting a large customer (presumably Apple) asked to materially reduce shipments. The news hit Apple shares along with its other suppliers, and on Tuesday, Qorvo followed suit, cutting guidance on lower recent demand for flagship smartphones. Semiconductor firms were also under pressure this week, after Nvidia cut its outlook on rising inventories and semi equipment maker Applied Materials forecast a soft Q1. KB Home added to woes in the homebuilder sector by guiding a weaker than anticipated Q4, which weighed on Home Depot and Lowes. In the retail space, Macy’s and Walmart dropped despite beating and raising earnings, and Williams Sonoma fell after reporting in line with expectations. On the M&A front, AthenaHealth confirmed a deal to be acquired by Veritas Capital for $135/share in cash, SAP announced the acquisition of Qualtrics for $8B just days ahead of its IPO, and Johnson Controls divested its power solutions business to Brookfield for $13.2B in cash and stock. Shares of Acadia Healthcare fell as much as 20% on Friday on a report that its LBO process has stalled. PG&E fell sharply this week on liability concerns relating to the disastrous 'Camp' wildfire consuming wide swaths of Northern California, but shares bounced off their lows on commentary from state regulators indicating they don't want to force the utility to go bankrupt.
SUN 11/11
XM To be acquired by SAP for $8B cash
MON 11/12
BBVA Recent strength being attributed to Mexico's govt vows no change in banking laws
LITE Cuts Q2 $1.15-1.34 v $1.67e, Rev $335-355M v $423Me (prior $1.60-1.75, Rev $405-430M), Op margin 23-25% (prior 28-30%) (update)
(US) EPA official: EPA to set new regulations to significantly cut nitrogen oxide emissions from heavy duty trucks
AAL.UK De Beers reportedly to cut low end diamond prices by as much as 10% - press
(US) Commerce Dept reportedly circulating a draft report on auto tariffs; Pres Trump to hold meeting Tues with trade advisers to discuss the report - press
(CN) On Friday (Nov 9th), US Treasury Sec Mnuchin and China Vice Premier Liu He resumed talks and spoke by phone; the conversation did not lead to any 'breakthrough' - US financial press
(CN) China Vice Premier Liu He to visit the US to pave the way for the Xi-Trump meeting; the Chinese official is expected to visit the US 'shortly' for talks - Hong Kong Press
TUES 11/13
BAYN.DE Reports Q3 Adj €2.89B v €3.88B y/y, adj EBITDA €2.20B v €2.20B y/y, Rev €9.91B v €8.03B y/y
VOD.UK Reports H1 adj EPS 3.56c v 6.32c y/y, adj EBIT €2.31B v €2.46B y/y, Rev €21.8B v €23.1B y/y
*(UK) SEPT AVERAGE WEEKLY EARNINGS 3M/Y: 3.0% V 3.0%E; WEEKLY EARNINGS (EX BONUS) 3M/Y: 3.2% V 3.1%E
*(UK) OCT JOBLESS CLAIMS CHANGE: +20.2K V +23.2K PRIOR; CLAIMANT COUNT RATE: 2.7% V 2.6% PRIOR
*(DE) GERMANY NOV ZEW CURRENT SITUATION: 58.2 V 65.0E; EXPECTATIONS SURVEY: -22.0 V -26.0E
HD Reports Q3 $2.51 v $2.27e, Rev $26.3B v $26.2Be
HD Hurricane related sales negatively impacted US comps by 80bps in Sep and 120bps in Oct - earnings call
(UK) Five pivotal senior ministers reportedly back UK Prime Min May's draft Brexit proposal - Sun's Newton Dunn
JCI Confirms to divest Power Solutions business to Brookfield Business Partners & CDPQ for $13.2B in cash and stock
(IT) Italy Govt publishes letter to the EU: Asks EU for flexibility for extraordinary events, cites spending for floods and infrastructure after Genoa; Confident to reach growth targets
(US) US planning to hold off on implementing auto tariffs for now after Trump meeting
WEDS 11/14
*(DE) GERMANY Q3 PRELIMINARY GDP Q/Q: -0.2% V -0.1%E; GDP Y/Y: 1.1% V 1.3%E (1st quarterly contraction since Q2 2014)
(EU) Euro Zone Q3 Preliminary GDP Q/Q: 0.2% v 0.2%e; Y/Y: % v 1.7%e
(DE) German Bundesbank: Real estate prices may be 15-30% overvalued, some loan collateral values may be overestimated
700.HK Reports Q2 (CNY) Net 23.3B v 18.4Be, Rev 80.6B v 80.4Be
M Reports Q3 $0.27 v $0.13e, Rev $5.40B v $5.38Be
(UK) One govt minister says two ministers, Mordaunt and McVey, will resign the cabinet - UK's Telegraph
(US) House Ways and Means Trade Subcommittee Ranking Member Pascrell (D-NJ): the new USMCA trade deal can't pass as is
(US) Association of American Railroads weekly rail traffic report for week ending Nov 14th: 547.2K, +1.4% y/y
(UK) UK PM May will not deliver statement to media on Wednesday evening - UK police minister
(UK) BBC's Kuenssberg: "Senior Tory tells me Brexiteer anger so high that seems likely there will be a call for no confidence vote tomorrow"
(UK) PM May reportedly has secured Cabinet support for Brexit deal, at least for now - UK's Telegraph
(CN) China govt reportedly has sent written response including concessions to US regarding trade reforms - press
(US) Fed Chair Powell: challenges include how much further to hike and at what pace; pretty good reason economy stays on healthy track; reiterates all meetings are live
THURS 11/15
*(ID) INDONESIA CENTRAL BANK (BI) RAISES REVERSE REPO RATE BY 25BPS TO 6.00%; NOT EXPECTED
*(PH) PHILIPPINES CENTRAL BANK (BSP) RAISES OVERNIGHT BORROWING RATE BY 25BPS TO 4.75%; AS EXPECTED
*(UK) BREXIT MIN RAAB RESIGNS; cannot support indefinite backstop arrangement
KBH Guides Q4 Housing Rev $1.31-1.34B v $1.43Be, Gross margin 18.3-18.6%, Op income margin 9.3-9.5% - annual investor presentation
*(UK) OCT RETAIL SALES (EX-AUTO/FUEL) M/M: -0.4% V +0.2%E; Y/Y: 2.7% V 3.4%E
WMT Reports Q3 $1.08 v $1.02e, Rev $124.9B v $124.8Be
*(US) NOV EMPIRE MANUFACTURING: 23.3 V 20.0E
*(US) NOV PHILADELPHIA FED BUSINESS OUTLOOK: 12.9 V 20.0E
FDA issues statement from commissioner on proposed new steps to protect youth by preventing access to flavored tobacco products and banning menthol in cigarettes
*(US) DOE CRUDE: +10.3M V +2ME; GASOLINE: -1.4M V -1.5ME; DISTILLATE: -3.6M V -2ME (biggest rise in crude since Feb 2017)
(US) Atlanta Fed cuts Q4 GDP forecast to 2.8% from 2.9% prior
(CN) US Commerce Sec Ross: still expects eventual China trade deal, but not by Jan - press
(CN) Commerce Sec Ross: US still plans China tariff boost to 25% in January - press
AMAT Reports Q4 $0.97 v $0.96e, Rev $4.01B v $4.00Be
NVDA Reports Q3 $1.84 v $1.91e, Rev $3.18B v $3.24Be; Raises Quarterly dividend 6.7% to $0.16 from $0.15 (indicated yield 0.32%)
FRI 11/16
IMB.UK Issues statement on FDA announcement: notes the menthol cigarette ban proposal would require a multi-year process
*(EU) EURO ZONE OCT FINAL CPI Y/Y: 2.2% V 2.2%E; CPI CORE Y/Y: 1.1% V 1.1%E
(US) Fed Vice Chair Clarida (moderate, voter): no clear signal to take from stock market volatility; have to pay attention to slowing global growth
*(US) OCT INDUSTRIAL PRODUCTION: 0.1% V 0.2%E; CAPACITY UTILIZATION: 78.4% V 78.2%E
(CN) US President Trump: May not have to impose additional tariffs on China; China wants to make a deal on trade, but proposal not acceptable yet (FOLLOW UP: CNBC's Javers: "White House officials tell me that the president was simply expressing optimism about ongoing negotiations with the Chinese when he said the US may not have to impose additional tariffs. I’m told we should not read into that that there is a deal imminent. All eyes still on G20.")
Fri, 16 Nov 2018 16:25 PM EST
Headwinds persisted this week as a wide swath of headlines whipsawed the major US averages. Stocks opened the Veterans Day Monday under pressure led by the NASDAQ after a key corporate outlook downgrade weighed on Apple shares and the rest of the handset/chip space. The cautions growth narrative was subsequently echoed by other corporate forecasts by managements within that sector, as well as others, later in the week. Tuesday saw sentiment improve when White House adviser Kudlow confirmed a report that US China trade talks have resumed in earnest ahead of the upcoming G20 meeting. WTI crude futures continued fall as many pointed to global growth concerns and potential supply demand imbalances. Traders noted the exacerbated decline in crude prices came alongside as surge in natural gas prices which had many noting of a potential pairs trade gone wrong resulting in forced unwinding. For the week, the S&P lost 1.6%, the DJIA dropped 2.2%, and the Nasdaq fell 2.2%.
Slowing global growth remained an overriding factor as economic data out of Europe, particularly Germany, continued to disappoint. The signals of softening came amid arduous Brexit negotiations that saw PM May and the EU finally come to terms on a draft separation agreement. It remains anything but clear though, if the PM can cajole enough of her Conservative party members to support the deal ahead of a key European summit later this month. Separately, EU and Italian officials continued to trade barbs in the press over fiscal policy resulting in higher borrowing rates there. Fixed income risk barometers began to flash as high yield bond prices slumped, US Treasury yields fell, and the 3-month LIBOR-EURIBOR spread widened to levels not seen since 1999, before the dot com bubble. The benchmark 10-year yield closed below the 50-day moving average for the first time since Labor Day. In the latter part of the week, we heard from a cadre of Fed officials highlighted by Fed Chairman Powell and Vice Chair Clarida. Each acknowledged that the Fed must pay attention to slowing global growth signals going forward, but also indicated rates remain below ‘neutral’ and to this point nothing has altered the thinking that they need to gradually rise to that neutral level. The Greenback backed away from its strongest levels in more than a year late in the week as Treasury yields moved lower.
For the week's corporate news, on Monday, Lumentum shares fell precipitously after the company slashed its outlook, noting a large customer (presumably Apple) asked to materially reduce shipments. The news hit Apple shares along with its other suppliers, and on Tuesday, Qorvo followed suit, cutting guidance on lower recent demand for flagship smartphones. Semiconductor firms were also under pressure this week, after Nvidia cut its outlook on rising inventories and semi equipment maker Applied Materials forecast a soft Q1. KB Home added to woes in the homebuilder sector by guiding a weaker than anticipated Q4, which weighed on Home Depot and Lowes. In the retail space, Macy’s and Walmart dropped despite beating and raising earnings, and Williams Sonoma fell after reporting in line with expectations. On the M&A front, AthenaHealth confirmed a deal to be acquired by Veritas Capital for $135/share in cash, SAP announced the acquisition of Qualtrics for $8B just days ahead of its IPO, and Johnson Controls divested its power solutions business to Brookfield for $13.2B in cash and stock. Shares of Acadia Healthcare fell as much as 20% on Friday on a report that its LBO process has stalled. PG&E fell sharply this week on liability concerns relating to the disastrous 'Camp' wildfire consuming wide swaths of Northern California, but shares bounced off their lows on commentary from state regulators indicating they don't want to force the utility to go bankrupt.
SUN 11/11
XM To be acquired by SAP for $8B cash
MON 11/12
BBVA Recent strength being attributed to Mexico's govt vows no change in banking laws
LITE Cuts Q2 $1.15-1.34 v $1.67e, Rev $335-355M v $423Me (prior $1.60-1.75, Rev $405-430M), Op margin 23-25% (prior 28-30%) (update)
(US) EPA official: EPA to set new regulations to significantly cut nitrogen oxide emissions from heavy duty trucks
AAL.UK De Beers reportedly to cut low end diamond prices by as much as 10% - press
(US) Commerce Dept reportedly circulating a draft report on auto tariffs; Pres Trump to hold meeting Tues with trade advisers to discuss the report - press
(CN) On Friday (Nov 9th), US Treasury Sec Mnuchin and China Vice Premier Liu He resumed talks and spoke by phone; the conversation did not lead to any 'breakthrough' - US financial press
(CN) China Vice Premier Liu He to visit the US to pave the way for the Xi-Trump meeting; the Chinese official is expected to visit the US 'shortly' for talks - Hong Kong Press
TUES 11/13
BAYN.DE Reports Q3 Adj €2.89B v €3.88B y/y, adj EBITDA €2.20B v €2.20B y/y, Rev €9.91B v €8.03B y/y
VOD.UK Reports H1 adj EPS 3.56c v 6.32c y/y, adj EBIT €2.31B v €2.46B y/y, Rev €21.8B v €23.1B y/y
*(UK) SEPT AVERAGE WEEKLY EARNINGS 3M/Y: 3.0% V 3.0%E; WEEKLY EARNINGS (EX BONUS) 3M/Y: 3.2% V 3.1%E
*(UK) OCT JOBLESS CLAIMS CHANGE: +20.2K V +23.2K PRIOR; CLAIMANT COUNT RATE: 2.7% V 2.6% PRIOR
*(DE) GERMANY NOV ZEW CURRENT SITUATION: 58.2 V 65.0E; EXPECTATIONS SURVEY: -22.0 V -26.0E
HD Reports Q3 $2.51 v $2.27e, Rev $26.3B v $26.2Be
HD Hurricane related sales negatively impacted US comps by 80bps in Sep and 120bps in Oct - earnings call
(UK) Five pivotal senior ministers reportedly back UK Prime Min May's draft Brexit proposal - Sun's Newton Dunn
JCI Confirms to divest Power Solutions business to Brookfield Business Partners & CDPQ for $13.2B in cash and stock
(IT) Italy Govt publishes letter to the EU: Asks EU for flexibility for extraordinary events, cites spending for floods and infrastructure after Genoa; Confident to reach growth targets
(US) US planning to hold off on implementing auto tariffs for now after Trump meeting
WEDS 11/14
*(DE) GERMANY Q3 PRELIMINARY GDP Q/Q: -0.2% V -0.1%E; GDP Y/Y: 1.1% V 1.3%E (1st quarterly contraction since Q2 2014)
(EU) Euro Zone Q3 Preliminary GDP Q/Q: 0.2% v 0.2%e; Y/Y: % v 1.7%e
(DE) German Bundesbank: Real estate prices may be 15-30% overvalued, some loan collateral values may be overestimated
700.HK Reports Q2 (CNY) Net 23.3B v 18.4Be, Rev 80.6B v 80.4Be
M Reports Q3 $0.27 v $0.13e, Rev $5.40B v $5.38Be
(UK) One govt minister says two ministers, Mordaunt and McVey, will resign the cabinet - UK's Telegraph
(US) House Ways and Means Trade Subcommittee Ranking Member Pascrell (D-NJ): the new USMCA trade deal can't pass as is
(US) Association of American Railroads weekly rail traffic report for week ending Nov 14th: 547.2K, +1.4% y/y
(UK) UK PM May will not deliver statement to media on Wednesday evening - UK police minister
(UK) BBC's Kuenssberg: "Senior Tory tells me Brexiteer anger so high that seems likely there will be a call for no confidence vote tomorrow"
(UK) PM May reportedly has secured Cabinet support for Brexit deal, at least for now - UK's Telegraph
(CN) China govt reportedly has sent written response including concessions to US regarding trade reforms - press
(US) Fed Chair Powell: challenges include how much further to hike and at what pace; pretty good reason economy stays on healthy track; reiterates all meetings are live
THURS 11/15
*(ID) INDONESIA CENTRAL BANK (BI) RAISES REVERSE REPO RATE BY 25BPS TO 6.00%; NOT EXPECTED
*(PH) PHILIPPINES CENTRAL BANK (BSP) RAISES OVERNIGHT BORROWING RATE BY 25BPS TO 4.75%; AS EXPECTED
*(UK) BREXIT MIN RAAB RESIGNS; cannot support indefinite backstop arrangement
KBH Guides Q4 Housing Rev $1.31-1.34B v $1.43Be, Gross margin 18.3-18.6%, Op income margin 9.3-9.5% - annual investor presentation
*(UK) OCT RETAIL SALES (EX-AUTO/FUEL) M/M: -0.4% V +0.2%E; Y/Y: 2.7% V 3.4%E
WMT Reports Q3 $1.08 v $1.02e, Rev $124.9B v $124.8Be
*(US) NOV EMPIRE MANUFACTURING: 23.3 V 20.0E
*(US) NOV PHILADELPHIA FED BUSINESS OUTLOOK: 12.9 V 20.0E
FDA issues statement from commissioner on proposed new steps to protect youth by preventing access to flavored tobacco products and banning menthol in cigarettes
*(US) DOE CRUDE: +10.3M V +2ME; GASOLINE: -1.4M V -1.5ME; DISTILLATE: -3.6M V -2ME (biggest rise in crude since Feb 2017)
(US) Atlanta Fed cuts Q4 GDP forecast to 2.8% from 2.9% prior
(CN) US Commerce Sec Ross: still expects eventual China trade deal, but not by Jan - press
(CN) Commerce Sec Ross: US still plans China tariff boost to 25% in January - press
AMAT Reports Q4 $0.97 v $0.96e, Rev $4.01B v $4.00Be
NVDA Reports Q3 $1.84 v $1.91e, Rev $3.18B v $3.24Be; Raises Quarterly dividend 6.7% to $0.16 from $0.15 (indicated yield 0.32%)
FRI 11/16
IMB.UK Issues statement on FDA announcement: notes the menthol cigarette ban proposal would require a multi-year process
*(EU) EURO ZONE OCT FINAL CPI Y/Y: 2.2% V 2.2%E; CPI CORE Y/Y: 1.1% V 1.1%E
(US) Fed Vice Chair Clarida (moderate, voter): no clear signal to take from stock market volatility; have to pay attention to slowing global growth
*(US) OCT INDUSTRIAL PRODUCTION: 0.1% V 0.2%E; CAPACITY UTILIZATION: 78.4% V 78.2%E
(CN) US President Trump: May not have to impose additional tariffs on China; China wants to make a deal on trade, but proposal not acceptable yet (FOLLOW UP: CNBC's Javers: "White House officials tell me that the president was simply expressing optimism about ongoing negotiations with the Chinese when he said the US may not have to impose additional tariffs. I’m told we should not read into that that there is a deal imminent. All eyes still on G20.")
Barrons weekend summary
Barrons weekend summary: Cautious feature on retailers amid fierce competition with Amazon; Positive select oil & gas names
Cover story: Forty years after Congress passed the Revenue Act of 1978 and created the 401(k), 55 million people have plans totaling more than $5 trillion; The 401(k) rule “has hastened or improved retirement for a large segment of the population, namely people with full-time jobs and matching benefits, but it’s far from perfect,” and needs to be available to more people.
Features: 1) Cautious on KSS, TGT, TIF, HD, WMT, BBY, TJX: Retailers have managed to counter AMZN by ramping up their e-commerce fulfillment sides, improving supply chains, and taking other offensive steps, but even with a strong holiday outlook not all will ring up gains; 2) Oil’s descent during the past six weeks has shaken traders and sown doubt among investors, and the sector’s volatility could be a red flag for the rest of the economy; 3) Positive on BP, CVX, XOM, Royal Dutch Shell, EOG, COG, EQT: Energy companies have shown financial discipline by reining in capital spending and returning more cash to shareholders, and many shares look attractive despite a recent 15% retreat in the sector; 4) Just 13% of people working in corporate America have a defined-benefit pension plan—and few people work at one company long enough to get a pension that could support them in retirement.
Tech Trader: Cracks in AAPL’s narrative began to form after its recent earnings report, with some analysts saying its reduced transparency could be a sign iPhone sales have peaked, while two key suppliers singled out Apple for a shortfall in component orders.
Trader: The U.S. and China could reach a trade deal at the G20 and the Fed could pause on rate hikes, but even those actions might not be enough to fix the market; Positive on AMGN: Biotech generates more than $10B in free cash flow annually, is a good steward of its money, and has more cash than debt on its balance sheet; Positive on THS: Shares of the private-label food maker are down on negative headlines, but its strengths are obfuscated by restructuring-related charges and one-time items as it closes facilities and streamlines production.
Interview: David Pearl, co-founder of Epoch Investments, believes that looking at growing free cash flow is the way to pick stocks, and says “We are in one of the best economic periods since World War II” (picks: MS, CVS, HXL, AAPL).
Profile: David Sand and Andy Kaufman of Community Capital Management manage the Community Reinvestment Act Qualified Investment fund, which focuses on investments that are “sustainable, responsible, and impactful.”
Follow-Up: “The SEC must take the lead in proposing—if not compelling—cooperation and new approaches to improve the accuracy and reliability of the U.S.’s outdated and expensive proxy voting system.”
European Trader: Positive on British Land, Land Securities: The U.K.-based REITs have taken a hit over Brexit turmoil, but have reached price levels that merit consideration by income-oriented investors who think a Brexit deal will be reached by March 29.
Emerging Markets: A Chinese yuan weaker than seven to the dollar has acquired symbolic significance, and if it breaches seven, it’s hard to tell where the next line will be; Beijing watchers think a currency defense might be in the offing.
Commodities: Further natural gas price hikes may follow just as winter gets under way; prices will go up and down with the weather, with upside moves greater than downside moves.
Streetwise: Economic growth tends to be higher in emerging markets, attracting bankers but putting them in place that are “less well governed, more corrupt, and increasingly polluted,” according to Renaissance Capital.
Tuesday, November 13, 2018
November-December 2018 Outlook
TradeTheNews.com November-December
2018 Outlook: The Results Are In
Tue, 13 Nov 2018 7:23 AM EST
The return of volatility has created dread in some investors and excitement in others that see opportunity in a less complacent market. The stock market had a classic October sell off, but other markets also suffered. The junk bond market had its worst month in a decade, and the 10-year Treasury yield hit a 7-year high as markets reassessed sentiment about Fed rate tightening, even at a “gradual” and predictable pace.
With the resolution of the US midterm elections, at least one of the key uncertainties of the last year is now resolved. The outcome of the election will not only change the tenor of US politics for the next two years, but it will also influence the other major outstanding geopolitical issues that play into the assessment of the balance of risks. Now risk analysis will focus squarely on Fed rate policy, the final outcome of the Brexit deal, and the nascent trade war between the world’s largest economies.
US Election ‘Blues’
In the US, the House going ‘blue’ thwarts any White House dreams of additional tax cuts, but could result in some bipartisan issues getting more attention, particularly infrastructure spending – though it remains to be seen if Trump and the Democrats can agree on the structure of any such spending legislation (highways vs. walls). A Democratic House does give Trump a foil to run against for the next two years and he will definitely use the “obstructionist Democrats” to share the blame for any policy failures, stock market weakness, or economic downturn. On the policy level, the absence of any new fiscal stimulus could give the Federal Reserve some room to slow its monetary tightening if any red flags appear in the economic data, even as it deflects criticism from President Trump about higher rates.
The next two months could see the outcome of Special Counsel Mueller’s probe, which is reportedly near completion. Mueller was in a ‘quiet period’ ahead of the election, but with the votes counted the Special Counsel may soon be ready to announce conclusions and possibly new indictments in the wide ranging investigation of Russian election interference. It will be embarrassing for Trump if more campaign advisors are caught up in the dragnet, but there is no sense of a fatal blow to his Presidency coming out of the investigation. No sooner than Mueller is done, however, House Democrats with newly regained subpoena powers could continue to harry the White House with demands for document related to his taxes and business dealings.
The probe of Russian election tampering could also be a thorn in the side of social media companies in the months ahead. If any hint of foreign influence being exerted through social platforms comes to light, firms like Facebook and Twitter will take a lot of heat, especially from President Trump seeking to assign blame for his party’s election setbacks. The social media firms have added thousands of employees to scan for misinformation campaigns, but have confirmed that they have removed only a few hundred suspect pages and users over the last few months.
Big Decisions in Europe
The same populist wave that swept Trump into power two years ago continues to roil Europe. The official Brexit, brought about by referendum, is now just months away. Meanwhile the new populist Italian government has begun to question EU authority over its budget.
The deadline for an agreement on Brexit keeps slipping but there isn’t much leeway left with the UK scheduled to leave the Union on March 29. By all accounts, most of the Brexit outline is completed but the Irish border remains the sticking point. It will all come down to whether the EU or the UK (and specifically Northern Ireland) will bend in order to save Europe from a ‘hard Brexit.’ If there is no breakthrough in the next few weeks, there won’t realistically be enough time for a new leaders’ summit or legislative debate in the parliaments of the EU27 nations. There is starting to be some speculation that the March 29 Brexit date under Article 50 could be extended but that is not likely to gain any traction with Brexiteers in the UK. Thus European markets will be on edge for the next few weeks as they contemplate the repercussions of a hard Brexit scenario, which is becoming more and more likely.
The Italian government will be watching the Brexit proceedings with special interest. Though the coalition in Rome insists that it has no desire to leave the EU or the euro, it has been pushing back hard against limits set by the European hegemony. So far Italy’s government has been adamant that it will not make any major changes to its budget plan and won’t veer from its 2.4% deficit/GDP target despite EU objections. Instead, Rome is pinning its hopes on the economic plan creating better than expected growth.
The European Commission has given Rome until mid-November (11/13) to make adjustments to its budget plan, but so far the Italians have been unyielding. If Italy’s government doesn’t pay some heed to Europe’s ‘advice’ regarding the budget and its deficit/GDP ratio should slip further, it could lead to disciplinary action in the spring of 2019 in the form an "excessive deficit procedure." That procedure could potentially culminate in sanctions that will make it even harder for Italy to spend its way out of its economic malaise.
Trade Talks or Trade War
As the dispute over international trade grows more serious, the US election result may ultimately give President Trump a stronger hand in trade talks. Though Democrats did well enough to retake the House, President Trump showed that he can still mobilize his voters, so China and Europe may not be able to simply wait him out of office. President Xi could now be more amenable to reaching an agreement with the Trump White House rather than risk a prolonged trade conflict potentially lasting six more years.
November 30 may be a binary moment as Presidents Trump and Xi meet in Buenos Aires. Arrangements appear to be on track for the two leaders to have bilateral talks on the sidelines of the G20, their first meeting since last July. If they can show some concrete progress toward resolving the impasse on trade between the world’s two largest economies it could alleviate some of the uncertainty hanging over markets. In the alternative scenario, Trump and Xi will bump heads and offer no concessions. That outcome could hasten implementation of US threats to boost existing tariffs from 10% to 25%, signaling the start of a full blown trade war.
To date, China’s biggest export has become strong rhetoric about holding its ground. The standard line from officials in Beijing has become that they do not desire a trade war, but they also don’t fear one. President Trump has also held firm and his only offer so far has been to issue additional punitive tariffs. If the G20 meeting comes and goes with no new overtures on trade issues between the two nations, it may finally shake confidence that a compromise will be found any time soon.
If the G20 is a bust, the Chinese currency could continue to fall against the greenback and test the key psychological level 7.00, which the PBoC has verbally defended in the past. The trade dispute has already weakened both the Chinese stock market and the currency, and a break of that level could stir concerns about capital flight from China. It’s also likely to earn a rebuke from the White House, which has declined to label China a currency manipulator, but knows that the weaker yuan softens the blow of tariffs because it makes exports cheaper.
Fed Steady, Inflation Steady, Oil…
The Federal Reserve has been one of the many targets of President Trump’s ire, but continues to go about its business after the election. With the US labor market at full employment and inflation stable around 2%, the Fed has achieved its mandate and logically continues to unwind extraordinary accommodation, raising rates and paring down its balance sheet holdings. Now the focus is moving to where rate tightening should stop in order to keep the economy humming without allowing it to overheat. The Fed seems to be aiming for a slightly restrictive policy as its endgame, a bit above the ‘neutral’ rate which stands somewhere around 3.00%.
The Fed made no noises about slowing rate hikes at the November meeting, giving every indication that the committee is ready to move again in December (12/18). With the rate hike locked in for next month, the statement and updated Summary of Economic Projections will be scrutinized for any signs that the Fed might blink in the face of both market and political pressure. If inflation shows no signs of percolating higher it could conceivably give the central bank an excuse to pare back tightening expectations. There is already a wing of the Fed that appears to favor stopping at ‘neutral’ to reassess the situation before tightening any further. If that strategy prevails, it means the Fed could raise in December and once more in the Spring and then declare neutral policy has been reached. If there is a “Powell put”, a level at which the Powell Fed would take action to support sagging equity market, it can be surmised that it’s at a lower level than under past Fed Chairs. Even still, the baseline case remains that that Fed will continue hikes throughout 2019 unless there are real signs downside risks are asserting themselves on the economy early next year.
A hard Brexit and unresolved trade tensions could move the needle to the downside. So too could slower economic growth in the US if the fiscal stimulus from the 2018 tax cut turns out to be just a short term ‘sugar high’ as many economists believe. There’s not much evidence yet that the corporate tax cut has changed companies’ long term behavior as the Trump administration predicted, so growth could slip back into the 2.5% range or lower next year.
The inflation outlook is another key factor in the central bank calculus, and as usual energy prices are unbalancing the scales. After demonstrating firm pricing through much of the year, crude oil prices have suffered a 20% decline from recent highs, entering a bear market amid the bout of risk-off behavior in the broader markets, shepherded along by booming US shale production and uncertainty about the OPEC+ production agreement.
An OPEC+ gathering in Abu Dhabi punted the issue, so it will come down to the semi-annual OPEC meeting (12/6) to determine if producers outside North America want to continue efforts to support prices. Even as Iranian exports dwindle under US sanctions, world oil producers will have to decide whether to keep the market in balance or to return to an every-man-for-himself production policy.
On the geopolitical end, the White House will have to contend with European governments which are contemplating a Special Purpose Vehicle to facilitate trade with Iran, circumventing some US sanctions. The SPV idea is sure to ruffle Trump’s feathers and create a negative feedback loop into efforts to resolve tariff issues between the EU and US. If world leaders don’t elect to solve these disputes diplomatically it could ratchet up tensions in the New Year.
CALENDAR OF EVENTS
NOVEMBER
6: US Midterm Election
7: China Trade Balance
8: FOMC Policy Statement; China CPI
9: US PPI
12:
13: UK CPI & PPI; German ZEW Economic Sentiment; Japan Preliminary Q3 GDP; China Industrial Production
14: UK Claimant Count & Unemployment; Euro Zone Flash Q3 GDP; US CPI
15: UK Retail Sales; US Retail Sales; Philadelphia Fed Index
16: UK Inflation Report Hearing; Euro Zone Final CPI; Preliminary University of Michigan Consumer Sentiment
19:
20: US Housing Starts & Building Permits; UK Autumn Forecast (tentative); Joint OPEC-non-OPEC Ministerial Monitoring Committee (JMMC)(tentative)
21: US Durable Goods Orders
22: ECB Minutes; THANKSGIVING HOLIDAY (US)
23: Various Euro Zone Manufacturing & Services PMIs
26: German Ifo Business Climate
27: UK Bank Stress Test Results; US Consumer Confidence
28: US Preliminary Q3 GDP (2nd reading)
29: German Preliminary CPI; US Personal Income & Spending; FOMC Minutes
30: German Retail Sales; Euro Zone Flash CPI Estimate; Chicago PMI; China Manufacturing & Non-manufacturing PMIs; G20 Leaders Summit in Buenos Aires(day 1)
DECEMBER
1: G20 Leaders Summit in Buenos Aires
3: UK Manufacturing PMI; US ISM Manufacturing PMI
4: UK Construction PMI
5: BOE Financial Stability Report; UK Services PMI; US ISM Non-Manufacturing PMI
6: Regular Semiannual OPEC Meeting in Vienna; China Trade Balance
7: US Payrolls & Unemployment
8: China CPI
10: UK Q3 GDP; UK Manufacturing Production
11: UK CPI & PPI; German ZEW Economic Sentiment; US PPI
12: UK Claimant Count & Unemployment; US CPI; China Industrial Production
13: ECB Policy Statement & Press Conference
14: US Retail Sales; Preliminary University of Michigan Consumer Sentiment
15: Japan Lower House Elections
17: NY Empire Manufacturing Index
18: German Ifo Business Climate; US Housing Starts & Building Permits
19: FOMC Policy Statement, SEP, & Press Conference; BOJ Policy Statement
20: UK Retail Sales; BOE Policy Statement; Philadelphia Fed Manufacturing Index
21: Various EU Flash Manufacturing & Services PMIs; UK Current Account; UK Final Q3 GDP; US Durable Goods Orders; US Final Q3 GDP; US Personal Income & Spending
24:
25: CHRISTMAS DAY HOLIDAY
26:
27: Chicago PMI; US Consumer Confidence
28: German CPI
31:
JANUARY
1: NEW YEARS DAY
Tue, 13 Nov 2018 7:23 AM EST
The return of volatility has created dread in some investors and excitement in others that see opportunity in a less complacent market. The stock market had a classic October sell off, but other markets also suffered. The junk bond market had its worst month in a decade, and the 10-year Treasury yield hit a 7-year high as markets reassessed sentiment about Fed rate tightening, even at a “gradual” and predictable pace.
With the resolution of the US midterm elections, at least one of the key uncertainties of the last year is now resolved. The outcome of the election will not only change the tenor of US politics for the next two years, but it will also influence the other major outstanding geopolitical issues that play into the assessment of the balance of risks. Now risk analysis will focus squarely on Fed rate policy, the final outcome of the Brexit deal, and the nascent trade war between the world’s largest economies.
US Election ‘Blues’
In the US, the House going ‘blue’ thwarts any White House dreams of additional tax cuts, but could result in some bipartisan issues getting more attention, particularly infrastructure spending – though it remains to be seen if Trump and the Democrats can agree on the structure of any such spending legislation (highways vs. walls). A Democratic House does give Trump a foil to run against for the next two years and he will definitely use the “obstructionist Democrats” to share the blame for any policy failures, stock market weakness, or economic downturn. On the policy level, the absence of any new fiscal stimulus could give the Federal Reserve some room to slow its monetary tightening if any red flags appear in the economic data, even as it deflects criticism from President Trump about higher rates.
The next two months could see the outcome of Special Counsel Mueller’s probe, which is reportedly near completion. Mueller was in a ‘quiet period’ ahead of the election, but with the votes counted the Special Counsel may soon be ready to announce conclusions and possibly new indictments in the wide ranging investigation of Russian election interference. It will be embarrassing for Trump if more campaign advisors are caught up in the dragnet, but there is no sense of a fatal blow to his Presidency coming out of the investigation. No sooner than Mueller is done, however, House Democrats with newly regained subpoena powers could continue to harry the White House with demands for document related to his taxes and business dealings.
The probe of Russian election tampering could also be a thorn in the side of social media companies in the months ahead. If any hint of foreign influence being exerted through social platforms comes to light, firms like Facebook and Twitter will take a lot of heat, especially from President Trump seeking to assign blame for his party’s election setbacks. The social media firms have added thousands of employees to scan for misinformation campaigns, but have confirmed that they have removed only a few hundred suspect pages and users over the last few months.
Big Decisions in Europe
The same populist wave that swept Trump into power two years ago continues to roil Europe. The official Brexit, brought about by referendum, is now just months away. Meanwhile the new populist Italian government has begun to question EU authority over its budget.
The deadline for an agreement on Brexit keeps slipping but there isn’t much leeway left with the UK scheduled to leave the Union on March 29. By all accounts, most of the Brexit outline is completed but the Irish border remains the sticking point. It will all come down to whether the EU or the UK (and specifically Northern Ireland) will bend in order to save Europe from a ‘hard Brexit.’ If there is no breakthrough in the next few weeks, there won’t realistically be enough time for a new leaders’ summit or legislative debate in the parliaments of the EU27 nations. There is starting to be some speculation that the March 29 Brexit date under Article 50 could be extended but that is not likely to gain any traction with Brexiteers in the UK. Thus European markets will be on edge for the next few weeks as they contemplate the repercussions of a hard Brexit scenario, which is becoming more and more likely.
The Italian government will be watching the Brexit proceedings with special interest. Though the coalition in Rome insists that it has no desire to leave the EU or the euro, it has been pushing back hard against limits set by the European hegemony. So far Italy’s government has been adamant that it will not make any major changes to its budget plan and won’t veer from its 2.4% deficit/GDP target despite EU objections. Instead, Rome is pinning its hopes on the economic plan creating better than expected growth.
The European Commission has given Rome until mid-November (11/13) to make adjustments to its budget plan, but so far the Italians have been unyielding. If Italy’s government doesn’t pay some heed to Europe’s ‘advice’ regarding the budget and its deficit/GDP ratio should slip further, it could lead to disciplinary action in the spring of 2019 in the form an "excessive deficit procedure." That procedure could potentially culminate in sanctions that will make it even harder for Italy to spend its way out of its economic malaise.
Trade Talks or Trade War
As the dispute over international trade grows more serious, the US election result may ultimately give President Trump a stronger hand in trade talks. Though Democrats did well enough to retake the House, President Trump showed that he can still mobilize his voters, so China and Europe may not be able to simply wait him out of office. President Xi could now be more amenable to reaching an agreement with the Trump White House rather than risk a prolonged trade conflict potentially lasting six more years.
November 30 may be a binary moment as Presidents Trump and Xi meet in Buenos Aires. Arrangements appear to be on track for the two leaders to have bilateral talks on the sidelines of the G20, their first meeting since last July. If they can show some concrete progress toward resolving the impasse on trade between the world’s two largest economies it could alleviate some of the uncertainty hanging over markets. In the alternative scenario, Trump and Xi will bump heads and offer no concessions. That outcome could hasten implementation of US threats to boost existing tariffs from 10% to 25%, signaling the start of a full blown trade war.
To date, China’s biggest export has become strong rhetoric about holding its ground. The standard line from officials in Beijing has become that they do not desire a trade war, but they also don’t fear one. President Trump has also held firm and his only offer so far has been to issue additional punitive tariffs. If the G20 meeting comes and goes with no new overtures on trade issues between the two nations, it may finally shake confidence that a compromise will be found any time soon.
If the G20 is a bust, the Chinese currency could continue to fall against the greenback and test the key psychological level 7.00, which the PBoC has verbally defended in the past. The trade dispute has already weakened both the Chinese stock market and the currency, and a break of that level could stir concerns about capital flight from China. It’s also likely to earn a rebuke from the White House, which has declined to label China a currency manipulator, but knows that the weaker yuan softens the blow of tariffs because it makes exports cheaper.
Fed Steady, Inflation Steady, Oil…
The Federal Reserve has been one of the many targets of President Trump’s ire, but continues to go about its business after the election. With the US labor market at full employment and inflation stable around 2%, the Fed has achieved its mandate and logically continues to unwind extraordinary accommodation, raising rates and paring down its balance sheet holdings. Now the focus is moving to where rate tightening should stop in order to keep the economy humming without allowing it to overheat. The Fed seems to be aiming for a slightly restrictive policy as its endgame, a bit above the ‘neutral’ rate which stands somewhere around 3.00%.
The Fed made no noises about slowing rate hikes at the November meeting, giving every indication that the committee is ready to move again in December (12/18). With the rate hike locked in for next month, the statement and updated Summary of Economic Projections will be scrutinized for any signs that the Fed might blink in the face of both market and political pressure. If inflation shows no signs of percolating higher it could conceivably give the central bank an excuse to pare back tightening expectations. There is already a wing of the Fed that appears to favor stopping at ‘neutral’ to reassess the situation before tightening any further. If that strategy prevails, it means the Fed could raise in December and once more in the Spring and then declare neutral policy has been reached. If there is a “Powell put”, a level at which the Powell Fed would take action to support sagging equity market, it can be surmised that it’s at a lower level than under past Fed Chairs. Even still, the baseline case remains that that Fed will continue hikes throughout 2019 unless there are real signs downside risks are asserting themselves on the economy early next year.
A hard Brexit and unresolved trade tensions could move the needle to the downside. So too could slower economic growth in the US if the fiscal stimulus from the 2018 tax cut turns out to be just a short term ‘sugar high’ as many economists believe. There’s not much evidence yet that the corporate tax cut has changed companies’ long term behavior as the Trump administration predicted, so growth could slip back into the 2.5% range or lower next year.
The inflation outlook is another key factor in the central bank calculus, and as usual energy prices are unbalancing the scales. After demonstrating firm pricing through much of the year, crude oil prices have suffered a 20% decline from recent highs, entering a bear market amid the bout of risk-off behavior in the broader markets, shepherded along by booming US shale production and uncertainty about the OPEC+ production agreement.
An OPEC+ gathering in Abu Dhabi punted the issue, so it will come down to the semi-annual OPEC meeting (12/6) to determine if producers outside North America want to continue efforts to support prices. Even as Iranian exports dwindle under US sanctions, world oil producers will have to decide whether to keep the market in balance or to return to an every-man-for-himself production policy.
On the geopolitical end, the White House will have to contend with European governments which are contemplating a Special Purpose Vehicle to facilitate trade with Iran, circumventing some US sanctions. The SPV idea is sure to ruffle Trump’s feathers and create a negative feedback loop into efforts to resolve tariff issues between the EU and US. If world leaders don’t elect to solve these disputes diplomatically it could ratchet up tensions in the New Year.
CALENDAR OF EVENTS
NOVEMBER
6: US Midterm Election
7: China Trade Balance
8: FOMC Policy Statement; China CPI
9: US PPI
12:
13: UK CPI & PPI; German ZEW Economic Sentiment; Japan Preliminary Q3 GDP; China Industrial Production
14: UK Claimant Count & Unemployment; Euro Zone Flash Q3 GDP; US CPI
15: UK Retail Sales; US Retail Sales; Philadelphia Fed Index
16: UK Inflation Report Hearing; Euro Zone Final CPI; Preliminary University of Michigan Consumer Sentiment
19:
20: US Housing Starts & Building Permits; UK Autumn Forecast (tentative); Joint OPEC-non-OPEC Ministerial Monitoring Committee (JMMC)(tentative)
21: US Durable Goods Orders
22: ECB Minutes; THANKSGIVING HOLIDAY (US)
23: Various Euro Zone Manufacturing & Services PMIs
26: German Ifo Business Climate
27: UK Bank Stress Test Results; US Consumer Confidence
28: US Preliminary Q3 GDP (2nd reading)
29: German Preliminary CPI; US Personal Income & Spending; FOMC Minutes
30: German Retail Sales; Euro Zone Flash CPI Estimate; Chicago PMI; China Manufacturing & Non-manufacturing PMIs; G20 Leaders Summit in Buenos Aires(day 1)
DECEMBER
1: G20 Leaders Summit in Buenos Aires
3: UK Manufacturing PMI; US ISM Manufacturing PMI
4: UK Construction PMI
5: BOE Financial Stability Report; UK Services PMI; US ISM Non-Manufacturing PMI
6: Regular Semiannual OPEC Meeting in Vienna; China Trade Balance
7: US Payrolls & Unemployment
8: China CPI
10: UK Q3 GDP; UK Manufacturing Production
11: UK CPI & PPI; German ZEW Economic Sentiment; US PPI
12: UK Claimant Count & Unemployment; US CPI; China Industrial Production
13: ECB Policy Statement & Press Conference
14: US Retail Sales; Preliminary University of Michigan Consumer Sentiment
15: Japan Lower House Elections
17: NY Empire Manufacturing Index
18: German Ifo Business Climate; US Housing Starts & Building Permits
19: FOMC Policy Statement, SEP, & Press Conference; BOJ Policy Statement
20: UK Retail Sales; BOE Policy Statement; Philadelphia Fed Manufacturing Index
21: Various EU Flash Manufacturing & Services PMIs; UK Current Account; UK Final Q3 GDP; US Durable Goods Orders; US Final Q3 GDP; US Personal Income & Spending
24:
25: CHRISTMAS DAY HOLIDAY
26:
27: Chicago PMI; US Consumer Confidence
28: German CPI
31:
JANUARY
1: NEW YEARS DAY
Saturday, November 10, 2018
Barrons weekend summary
Barrons weekend summary: Cover story positive on Liberty Media
Cover story: Billionaire John Malone remains the instrumental force behind 10 companies under the Liberty Media umbrella that have a combined value of $80B; Many of the stocks have lagged the market in the past year and look appealing, offering plays on a range of businesses, including cable, sports, and shopping.
Feature: 1) The recent elections “haven’t meaningfully changed the U.S. economic outlook,” but congressional results could affect U.S. trade policy while a range of state and local elections have implications for economic policy; 2) “The shake-up in the House of Representatives after Tuesday’s election could change the passive posture of the legislative branch, particularly in regards to replacing Nafta.”
Tech Trader: The growth of 5G technology and its eventually widespread use will be a major event for the communication services value chain, benefiting a range of tech and telecom companies (Positive on INTC, CSCO, KEYS, NATI, TXN, T, VZ, QCOM, COMM, ARRS).
Trader: The market may be trying to set up for a bullish reverse-head-and-shoulders pattern, but it might not—so Barron’s suggests remaining on the cautious side until the story is clearer; Positive on DLTR: The company has lost its touch during the past year, sending the shares down into the bargain bin, but they are likely to bounce back, especially if an activist investor gets involved.
Interviews: 1) Libby Cantrill, head of public policy at Pimco, says the firm is cautious about the bond markets and is positioned accordingly; 2) Ron Epstein, who covers aerospace at Merrill Lynch, sees plenty of upside for BA, LMT, and GD, and says Democratic control of the House is the best scenario for defense spending.
Profile: Ken Taubes, manger of the Pioneer Bond fund for the past 20 years, says higher interest rates have a silver lining for investors, who can be in shorter-duration, shorter interest-rate securities and collect yields without taking on too much risk.
Retirement: High home healthcare costs are hurting the U.S. population, but there is political momentum behind change, and caregiving is one of the few areas that could find bipartisan support in a divided Congress.
Follow-Up: Cautious on KR: Upside surprises generally make shares go up, but that hasn’t been true for the retailer for the past five of seven quarters, and while the outlook is bright, investors should consider taking profits.
European Trader: “There’s lots to like in Hungary, including strong capital flows, fast economic growth, low borrowing costs, and a much improved banking sector. All should help boost local stocks.”
Emerging Markets: Despite Russia’s challenging political situation with the U.S., the country’s stocks “have become an unlikely paragon for many emerging market investors based on fundamentals,” and valuations are rock-bottom.
Commodities: “Exchange-traded funds backed by gold increased their holdings by $1B in October, marking a possibly bullish shift in investor sentiment toward the precious metal.”
Streetwise: To fix healthcare, the U.S. doesn’t need to copy Europe, because the country is already doing so, albeit in overlapping, inefficient fashion—and the best way to solve the problem would through a bipartisan approach that shores up the entire system.
Congress splits, AG Sessions exits and the Fed stays on track
TradeTheNews.com Weekly
Market Update: Congress splits, AG Sessions exits and the Fed stays on track
Fri, 09 Nov 2018 16:10 PM EST
Investors entered the week largely in a holding pattern ahead of the US midterm elections and FOMC meeting. Treasury yields remained elevated as bond markets were forced to absorb another slew of bill and coupon supply and indices drifted up into Tuesday’s vote. Equity markets surged after the House went blue as widely expected, but the Republicans added seats in the Senate. Talk of a potential infrastructure deal next year and a continued deregulation push aided risk sentiment along with the notion that gridlock has been historically good for stock market returns. The prospects for another round of tax stimulus receded in most people's minds as well, which spurred a narrative that this could ultimately give the Fed latitude to back away from some of the rate hikes penciled in for 2019, if needed.
Thursday’s Fed statement saw only marginal revisions to acknowledge business spending growth decelerated from its rapid pace earlier this year. Bond yields ticked up though as most viewed the statement as solidifying expectations that the Fed will move rates in December and then again in March. Emerging markets declined after reports circulated that the incoming Mexican President would urge his Congress to go after banking industry profits when he takes power in December. Thursday also saw US Attorney General Jeff Sessions step down at the request of the President, just a day after a fiery press conference at the White House suggested Trump is unlikely to change his contentious demeanor heading into the next Congress. US stock markets rolled over on Friday as derisking hit higher beta indices like the NASDAQ and Russel 2000, in particular, while pushing Treasury yields lower. US October producer prices handily topped expectations, but inflation worries had a hard time garnering momentum in light of the continued precipitous decline in oil prices. WTI fell for the 10th straight day after officially finishing in a bear market on Thursday. Prices dipped below $60/bbl for the first time since March heading into an OPEC monitoring committee meeting this weekend. Equities rode the post-election relief rally to moderate gains on the week: the S&P500 was up 2.1%, the DJIA gained 2.8%, and the Nasdaq added 0.7%.
In corporate news this week, Disney results topped estimates on strength from its film division while weakness in ESPN abated, and the company announced its new streaming service launching in 2019 will be named Disney+. Zillow dropped 20% on business model uneasiness and a cut to its outlook. Twilio surged on a significant beat and guidance raise as the cloud communications specialist saw strong expansions in its client base and revenue stream. Yelp dropped 30% after a miss and guidance cut, pointing to a shift to non-term advertising that has left the company more sensitive to short-term operational issues. Roku also fell after earnings and on reports that Comcast intends to offer its own over-the-top box. Shares of German steel producer ThyssenKrupp dropped after it issued a profit warning attributed to new risk provisions established to address ongoing investigations by the Federal Cartel Office. On the M&A front, Thoma Bravo reportedly approached Symantec about a potential acquisition. Arris confirmed it would be acquired by CommScope for $31.75/share in an all-cash deal valued at $7.4B. And Finisar accepted a $3B cash offer from II-VI Incorporated.
MON 11/5
*(UK) OCT PMI SERVICES: 52.2 V 53.3E (27th month of expansion)
*(EU) EURO ZONE NOV SENTIX INVESTOR CONFIDENCE: 8.8 V 9.8E
7203.JP Reports H1 Net ¥1.24T v ¥1.07T y/y, Op ¥1.26T v ¥1.1T y/y; Rev ¥14.67T v ¥14.2T y/y; To buyback 42M shares (1.44% of shares) for ¥250B, Raises guidance
TUES 11/6
DPW.DE Reports Q3 Net €146M v €641M y/y, EBIT €376M v €393Me, Rev €14.8B v €14.9Be
(IT) EU's Moscovici: Next step on Italian budget depends on the Italian response - comments ahead of the ECOFIN meeting in Brussels
(IE) Northern Ireland DUP's Donaldson: Appears we are heading for a 'no-deal' Brexit
*(US) SEPT JOLTS JOB OPENINGS: 7.009M V 7.085ME
SYMC Thoma Bravo reportedly approached Symantec about potential acquisition - press
(US) US Midterm election results: Fox and NBC predict the Democrats to gain control of the House for the first time since 2010; NBC projects Republicans to retain control of the Senate
WEDS 11/7
ACA.FR Reports Q3 Net €1.1B v €1.06Be, Rev €4.80B v €4.58B y/y
Reportedly Opec+ countries to discuss Oil output cuts for 2019 - press
(EU) Planned update of Brexit for EU envoys said to be moved from Wednesday to Friday as EU awaits British decisions that are currently on the table - financial press
(US) DOE CRUDE: +5.8M V +2ME; GASOLINE: +1.9M V -1.5ME; DISTILLATE: -3.5M V -2.5ME
(US) Association of American Railroads weekly rail traffic report for week ending Nov 7th: 560K, +5.4% y/y
(US) Pres Trump: hopes to work with Democrats on drug prices and infrastructure; dealmaking may be easier with a Democratic House
*(US) JEFF SESSIONS RESIGNS AS ATTORNEY GENERAL AT THE REQUEST OF PRES TRUMP; ACTING AG WHITAKER TO TAKE OVER MUELLER INVESTIGATION - PRESS
(US) SEPT CONSUMER CREDIT: $10.9B V $15.0BE
THURS 11/8
GLE.FR Reports Q3 adj Net €1.23B v €932M y/y, Op €1.93B v €1.45B y/y, Rev €6.53B v €5.95B y/y
SIE.DE Reports Q4 Net €681M v €1.25B y/y, Industrial Business profit €2.15B v €2.14B y/y, Rev €22.6B v €22.2B y/y; to buy back up to €3B in shares by 2021
DTE.DE Reports Q3 adj Net €1.32B v €1.35Be, adj EBITDA €6.21B v €6.02Be, Rev €19.1B v €18.9Be
AZN.UK Reports Q3 Core EPS $0.71 v $0.65e, Rev $5.34B v $5.12Be
ARRS Confirms to be acquired by CommScope for $31.75/shr valued at ~$7.4B inc debt
(US) FOMC LEAVES TARGET RANGE UNCHANGED BETWEEN 2.00-2.25%; AS EXPECTED: UNEMPLOYMENT RATE HAS DECLINED, JOB GAINS HAVE BEEN STRONG ON AVERAGE
(CA) Canada govt reportedly disagrees with some US changes to USMCA trade deal text - press
DIS Reports Q4 $1.48 v $1.31e, Rev $14.31B v $13.8Be
YELP Reports Q3 $0.17 v $0.35e, Rev $241.1M v $246Me
FRI 11/9
(MX) President Elect Obrador proposes to scrap bank commissions - press
(UK) Q3 PRELIMINARY GDP Q/Q: 0.6% V 0.6%E; Y/Y: 1.5% V 1.5%E
(UK) SEPT INDUSTRIAL PRODUCTION M/M: 0.0% V -0.1%E; Y/Y: 0.0% V 0.4%E
FNSR To be acquired by II-VI Incorporated for $26.00/shr in cash and stock valued at $3.2B
VOW3.DE Reports Oct Brand Sales 516.9K -6.2% y/y
(US) OCT PPI FINAL DEMAND M/M: 0.6% V 0.2%E; Y/Y: 2.9% V 2.5%E (largest monthly rise since Sept 2012)
(EU) Eurogroup chief Centeno: Sanctions on Italy are not agenda at this time
(US) NOV PRELIMINARY UNIVERSITY OF MICHIGAN CONFIDENCE: 98.3 V 98.0E
(US) Federal prosecutors reportedly have gathered evidence that Pres Trump participated in hush money payoffs to Stormy Daniels and Karen McDougal; raise possibility that Trump violated campaign laws – WSJ
(MX) Pres-elect Lopez Obrador: will not change banking laws (reversing prior comment); doesn't intend to make change to legal framework in financial sector during first period of administration
Fri, 09 Nov 2018 16:10 PM EST
Investors entered the week largely in a holding pattern ahead of the US midterm elections and FOMC meeting. Treasury yields remained elevated as bond markets were forced to absorb another slew of bill and coupon supply and indices drifted up into Tuesday’s vote. Equity markets surged after the House went blue as widely expected, but the Republicans added seats in the Senate. Talk of a potential infrastructure deal next year and a continued deregulation push aided risk sentiment along with the notion that gridlock has been historically good for stock market returns. The prospects for another round of tax stimulus receded in most people's minds as well, which spurred a narrative that this could ultimately give the Fed latitude to back away from some of the rate hikes penciled in for 2019, if needed.
Thursday’s Fed statement saw only marginal revisions to acknowledge business spending growth decelerated from its rapid pace earlier this year. Bond yields ticked up though as most viewed the statement as solidifying expectations that the Fed will move rates in December and then again in March. Emerging markets declined after reports circulated that the incoming Mexican President would urge his Congress to go after banking industry profits when he takes power in December. Thursday also saw US Attorney General Jeff Sessions step down at the request of the President, just a day after a fiery press conference at the White House suggested Trump is unlikely to change his contentious demeanor heading into the next Congress. US stock markets rolled over on Friday as derisking hit higher beta indices like the NASDAQ and Russel 2000, in particular, while pushing Treasury yields lower. US October producer prices handily topped expectations, but inflation worries had a hard time garnering momentum in light of the continued precipitous decline in oil prices. WTI fell for the 10th straight day after officially finishing in a bear market on Thursday. Prices dipped below $60/bbl for the first time since March heading into an OPEC monitoring committee meeting this weekend. Equities rode the post-election relief rally to moderate gains on the week: the S&P500 was up 2.1%, the DJIA gained 2.8%, and the Nasdaq added 0.7%.
In corporate news this week, Disney results topped estimates on strength from its film division while weakness in ESPN abated, and the company announced its new streaming service launching in 2019 will be named Disney+. Zillow dropped 20% on business model uneasiness and a cut to its outlook. Twilio surged on a significant beat and guidance raise as the cloud communications specialist saw strong expansions in its client base and revenue stream. Yelp dropped 30% after a miss and guidance cut, pointing to a shift to non-term advertising that has left the company more sensitive to short-term operational issues. Roku also fell after earnings and on reports that Comcast intends to offer its own over-the-top box. Shares of German steel producer ThyssenKrupp dropped after it issued a profit warning attributed to new risk provisions established to address ongoing investigations by the Federal Cartel Office. On the M&A front, Thoma Bravo reportedly approached Symantec about a potential acquisition. Arris confirmed it would be acquired by CommScope for $31.75/share in an all-cash deal valued at $7.4B. And Finisar accepted a $3B cash offer from II-VI Incorporated.
MON 11/5
*(UK) OCT PMI SERVICES: 52.2 V 53.3E (27th month of expansion)
*(EU) EURO ZONE NOV SENTIX INVESTOR CONFIDENCE: 8.8 V 9.8E
7203.JP Reports H1 Net ¥1.24T v ¥1.07T y/y, Op ¥1.26T v ¥1.1T y/y; Rev ¥14.67T v ¥14.2T y/y; To buyback 42M shares (1.44% of shares) for ¥250B, Raises guidance
TUES 11/6
DPW.DE Reports Q3 Net €146M v €641M y/y, EBIT €376M v €393Me, Rev €14.8B v €14.9Be
(IT) EU's Moscovici: Next step on Italian budget depends on the Italian response - comments ahead of the ECOFIN meeting in Brussels
(IE) Northern Ireland DUP's Donaldson: Appears we are heading for a 'no-deal' Brexit
*(US) SEPT JOLTS JOB OPENINGS: 7.009M V 7.085ME
SYMC Thoma Bravo reportedly approached Symantec about potential acquisition - press
(US) US Midterm election results: Fox and NBC predict the Democrats to gain control of the House for the first time since 2010; NBC projects Republicans to retain control of the Senate
WEDS 11/7
ACA.FR Reports Q3 Net €1.1B v €1.06Be, Rev €4.80B v €4.58B y/y
Reportedly Opec+ countries to discuss Oil output cuts for 2019 - press
(EU) Planned update of Brexit for EU envoys said to be moved from Wednesday to Friday as EU awaits British decisions that are currently on the table - financial press
(US) DOE CRUDE: +5.8M V +2ME; GASOLINE: +1.9M V -1.5ME; DISTILLATE: -3.5M V -2.5ME
(US) Association of American Railroads weekly rail traffic report for week ending Nov 7th: 560K, +5.4% y/y
(US) Pres Trump: hopes to work with Democrats on drug prices and infrastructure; dealmaking may be easier with a Democratic House
*(US) JEFF SESSIONS RESIGNS AS ATTORNEY GENERAL AT THE REQUEST OF PRES TRUMP; ACTING AG WHITAKER TO TAKE OVER MUELLER INVESTIGATION - PRESS
(US) SEPT CONSUMER CREDIT: $10.9B V $15.0BE
THURS 11/8
GLE.FR Reports Q3 adj Net €1.23B v €932M y/y, Op €1.93B v €1.45B y/y, Rev €6.53B v €5.95B y/y
SIE.DE Reports Q4 Net €681M v €1.25B y/y, Industrial Business profit €2.15B v €2.14B y/y, Rev €22.6B v €22.2B y/y; to buy back up to €3B in shares by 2021
DTE.DE Reports Q3 adj Net €1.32B v €1.35Be, adj EBITDA €6.21B v €6.02Be, Rev €19.1B v €18.9Be
AZN.UK Reports Q3 Core EPS $0.71 v $0.65e, Rev $5.34B v $5.12Be
ARRS Confirms to be acquired by CommScope for $31.75/shr valued at ~$7.4B inc debt
(US) FOMC LEAVES TARGET RANGE UNCHANGED BETWEEN 2.00-2.25%; AS EXPECTED: UNEMPLOYMENT RATE HAS DECLINED, JOB GAINS HAVE BEEN STRONG ON AVERAGE
(CA) Canada govt reportedly disagrees with some US changes to USMCA trade deal text - press
DIS Reports Q4 $1.48 v $1.31e, Rev $14.31B v $13.8Be
YELP Reports Q3 $0.17 v $0.35e, Rev $241.1M v $246Me
FRI 11/9
(MX) President Elect Obrador proposes to scrap bank commissions - press
(UK) Q3 PRELIMINARY GDP Q/Q: 0.6% V 0.6%E; Y/Y: 1.5% V 1.5%E
(UK) SEPT INDUSTRIAL PRODUCTION M/M: 0.0% V -0.1%E; Y/Y: 0.0% V 0.4%E
FNSR To be acquired by II-VI Incorporated for $26.00/shr in cash and stock valued at $3.2B
VOW3.DE Reports Oct Brand Sales 516.9K -6.2% y/y
(US) OCT PPI FINAL DEMAND M/M: 0.6% V 0.2%E; Y/Y: 2.9% V 2.5%E (largest monthly rise since Sept 2012)
(EU) Eurogroup chief Centeno: Sanctions on Italy are not agenda at this time
(US) NOV PRELIMINARY UNIVERSITY OF MICHIGAN CONFIDENCE: 98.3 V 98.0E
(US) Federal prosecutors reportedly have gathered evidence that Pres Trump participated in hush money payoffs to Stormy Daniels and Karen McDougal; raise possibility that Trump violated campaign laws – WSJ
(MX) Pres-elect Lopez Obrador: will not change banking laws (reversing prior comment); doesn't intend to make change to legal framework in financial sector during first period of administration
Sunday, November 4, 2018
Spooked Markets Still Assessing Trade, Elections, and Earnings
TradeTheNews.com Weekly
Market Update: Spooked Markets Still Assessing Trade, Elections, and Earnings
Fri, 02 Nov 2018 16:11 PM EST
Investors headed towards Halloween clearly spooked by the barrage selling that took hold of equity markets in the month of October. Monday saw the Dow finally breech correction territory, briefly touching 10% off the recent highs before a late session upside reversal took hold. Buying momentum ensued into the next session and talk of a potential base resulted in a significant mid-week rebound. October turned to November riding the first multiple days rally for the S&P in more than a month. Sentiment was further aided by a Thursday phone call between President Trump and President Xi when both indicated they looked forward to meeting and G20 at the end of the month. The comments fueled some optimism and speculation about a trade deal, but were also seen with an ample amount of skepticism given the lack of progress to date and in light of next week’s mid-term elections.
A disappointing reaction to Apple’s Q3 results and outlook weighed on equity trading Friday. Rates rose and indices slipped lower after the October jobs report was particularly robust while simultaneously members of the Administration tempered expectations for the Trump-Xi meeting. Payrolls snapped back sharply from last month’s disappointment, the unemployment rate held near five-decade lows, and wage growth topped 3% on a y/y basis for the first time since 2009. Despite the whipsawing in stocks and general uneasiness in the broader markets, US Treasury yields finished at recent highs. The US 30-year yield now stands at the highest level since the fall of 2014. The Dollar index broke above 97 for the first time since 2017 as overseas economic data continued to come in short of expectations. WTI crude broke through some technical support, dropping back towards the lows of mid-June, as the US indicated it will issue eight exemptions to the Iran oil sanctions that are set to take effect on Monday. For the week, the DJIA and S&P500 each rose 2.4%, and the Nasdaq gained 2.7% for its best week since May.
In corporate news this week, GM reported an earnings beat, pointing to higher prices and demand in China, and the automaker also foresaw a strong Q4. Both Clorox and Kellogg shares slumped after their managements cited headwinds, and Kraft Heinz said its profit was squeezed by higher costs. In the first quarter under its new CEO, GE fell short on both its top and bottom line and slashed its dividend to one penny per share. Apple shares fell post earnings on conservative guidance and some cautious emerging market commentary, and the tech giant also announced it would no longer break out unit sales in its quarterly reports, to the dismay of many analysts. Facebook pushed higher on stronger than expected profit and improved monetization of its user base. On the M&A front, IBM acquired Red Hat for $190.00/share in order to expand further into the cloud and open source software space. And reports indicated some PE firms are contending to acquire the embattled pizza-maker Papa Johns.
SUN 10/28
*(BR) Brazil Presidential Candidate Bolsonaro declared winner of the election
RHT To be acquired by IBM for $190.00/shr cash for enterprise value of $34B; IBM intends to suspend its share repurchase program in 2020 and 2021
MON 10/29
HSBA.UK Reports Q3 Net $3.9B v $2.9B y/y; adj Pretax $6.19B v $5.73Be; Rev $13.8B v $13.7Be
(MX) Mexico public consultation on Mexico City Airport prefers cancellation of the $13.3B project - US financial press
(DE) German Chancellor Merkel may not run for re-election as the head of the CDU party head but wants to remain as Chancellor - financial press
3988.HK Reports Q3 (CNY) Net 44.2B v 41.8B y/y; to issue up to CNY120B of shares to boost up capital
*(US) OCT DALLAS FED MANUFACTURING ACTIVITY INDEX: 29.4 V 28.1E
(US) Atlanta Fed forecasts initial Q4 GDP growth at 2.6%
(CN) US said to implement next round of China tariffs if Trump talks with Xi fail (expected to meet at G20 on Nov 30th) - press
TUES 10/30
(FR) FRANCE Q3 ADVANCE GDP Q/Q: 0.4% V 0.5%E; Y/Y: 1.5% V 1.5%E
BP.UK Reports Q3 Adj Net $3.84B v $2.79Be, Total Rev $80.8B v $60B y/y; Raises Dividend to 10.25c/shr; Now sees BHP acquisition all funded from cash
(DE) GERMANY OCT CPI SAXONY M/M: 0.2% V 0.4% PRIOR; Y/Y: 2.5% V 2.3% PRIOR
(DE) GERMANY OCT NET UNEMPLOYMENT CHANGE: -11K V -12KE; UNEMPLOYMENT CLAIMS RATE: 5.1% V 5.1%E
(EU) EURO ZONE BUSINESS CLIMATE INDICATOR: 1.01 V 1.16E; CONSUMER CONFIDENCE: -2.7 V -2.7E
(EU) EURO ZONE Q3 ADVANCE GDP Q/Q: 0.2% V 0.4%E; Y/Y: 1.7% V 1.8%E
(IT) ITALY DEBT AGENCY (TESORO) SELLS TOTAL €4.5B VS. €3.5-4.5B INDICATED RANGE IN 5-YEAR AND 10-YEAR BTP BONDS
GE Reports Q3 $0.14 v $0.21e, Rev $29.6B v $29.9Be; Cuts dividend; To reorganize Power unit
(DE) GERMANY OCT PRELIMINARY CPI M/M: 0.2% V 0.1%E; Y/Y: 2.5% V 2.4%E
(US) Nevada reports Sept casino gaming Rev $991M, +1.3% y/y; Las Vegas strip Rev $546M, -3.7% y/y
*(US) OCT CONSUMER CONFIDENCE: 137.9 V 135.9E (18 year high)
(US) Dollar index trades above 97 for first time since June 2017
PZZA Bain and CVC reportedly among potential suitors contending to buy Papa Johns - press
FB Reports Q3 $1.76 v $1.46e, Rev $13.7B v $13.8Be
BIDU Reports Q3 $2.77 v $2.57e, Rev $4.11B v $4.12Be
(JP) BOJ LEAVES INTEREST RATE ON EXCESS RESERVES (IOER) UNCHANGED AT -0.10%; AS EXPECTED; Vote 7:2 on yield curve control (YCC) setting (Harada and Kataoka again dissent)
WEDS 10/31
SAN.FR Reports Q3 Net €2.3B v €2.2Be, Rev €9.4B v €9.3Be
AIR.FR Reports Q3 Net €957M v €307M y/y, Adj EBIT €1.6B v €1.4Be, Rev €15.5B v €12.8B y/y
(EU) EURO ZONE OCT ADVANCE CPI ESTIMATE Y/Y: 2.2% V 2.2%E; CPI CORE Y/Y: 1.1% V 1.1%E
GM Reports Q3 $1.87 v $1.26e, Rev $35.8B v $34.2Be
*(US) OCT ADP EMPLOYMENT CHANGE: +227K V +187KE
(US) Treasury to sell $37B 2-year, $27B 10-year notes and $19B 30-year bond during week of Nov 5th
(US) Conference Board Oct Total online job ads 4.48M v 4.75M m/m v 4.56M y/y; New ads 1.72M v 1.88M m/m v 1.82M y/y
(US) Fed formally proposes loosening rules for large US banks; most banks under $250B would face reduced requirements (as expected)
*(US) DOE CRUDE: +3.2M V +3ME; GASOLINE: -3.2M V -1.5ME; DISTILLATE: -4.1M V -2ME
(UK) Brexit Min Raab: Expects Brexit deal by November 21st
(US) Association of American Railroads weekly rail traffic report for week ending Oct 27th: 562.8K, +4.4% y/y
THURS 11/1
CARLB.DK Reports Q3 (DKK) Rev 17.6B v 17.1Be
MT.NL Reports Q3 Net $0.9B v $1.4Be, EBITDA $2.73B v $2.7Be, Rev $18.5B v $19.8Be; completes transaction to acquire Ilva S.p.A. and launches ArcelorMittal Italia
CSGN.CH Reports Q3 (CHF) Net 424M v 479Me, adj Pretax 856M v 862Me, Rev 4.89B v 5.05Be
RDSA.NL Reports Q3 Basic CCS EPS $0.68 v $0.70e, adj CCS Net $5.62B v $5.73Be, Rev $100.2B v $75.8B y/y; launches second buyback tranche of $2.5B
(UK) BANK OF ENGLAND BANK (BOE) QUARTERLY INFLATION REPORT (QIR)
(CZ) CZECH CENTRAL BANK (CNB) RAISES 2-WEEK REPURCHASE RATE BY 25BPS TO 1.75%; AS EXPECTED
(UK) BANK OF ENGLAND BANK (BOE) LEAVES INTEREST RATES UNCHANGED AT 0.75%; AS EXPECTED
*(US) Q3 PRELIMINARY NONFARM PRODUCTIVITY: 2.2% V 2.1%E; UNIT LABOR COSTS: 1.2% V 1.0%E
NYT Reports Q3 $0.15 v $0.12 y/y, Rev $417.3M v $385.6M y/y
(US) OCT FINAL MARKIT MANUFACTURING PMI: 55.7 V 55.8E
(CN) China Pres Xi: Pres Trump and I want to expand China-US trade cooperation; US-China economic teams should strength their contacts - Chinese press
(US) Atlanta Fed raises Q4 GDP forecast to 3.0% from 2.6% prior
PACB To be acquired by Illumina at $8/shr for ~$1.2B in all cash transaction
FRI 11/2
(CN) US President Trump has reportedly asked cabinet to draft possible China trade deal - press
CNBC: told that report President directing cabinet to draft China trade deal is not true; two sides remain far apart
*(US) OCT CHANGE IN NONFARM PAYROLLS: +250K V +200KE
(US) OCT UNEMPLOYMENT RATE: 3.7% V 3.7%E (matches lowest since 1969)
(US) OCT AVERAGE HOURLY EARNINGS M/M: 0.2% V 0.2%E; Y/Y: 3.1% V 3.1%E; AVERAGE WEEKLY HOURS: 34.5 V 34.5E
(US) New York Fed Nowcast: raises Q4 forecast to 2.6% from 2.5% prior
(EU) ECB said to be mulling a new TLTRO series in the event of a fresh economic slowdown - press
(EU) European Banking Authority: All 25 banks pass 5.5% fully loaded capital threshold in adverse scenario in EU-wide stress tests – press
(CN) White House Econ Adviser Kudlow: confirms no massive movement between US and China on trade; Have not seen any new proposals out of China; yesterday's phone call between Xi and Trump was "good" but it was "just a phone call" - CNBC interview
Fri, 02 Nov 2018 16:11 PM EST
Investors headed towards Halloween clearly spooked by the barrage selling that took hold of equity markets in the month of October. Monday saw the Dow finally breech correction territory, briefly touching 10% off the recent highs before a late session upside reversal took hold. Buying momentum ensued into the next session and talk of a potential base resulted in a significant mid-week rebound. October turned to November riding the first multiple days rally for the S&P in more than a month. Sentiment was further aided by a Thursday phone call between President Trump and President Xi when both indicated they looked forward to meeting and G20 at the end of the month. The comments fueled some optimism and speculation about a trade deal, but were also seen with an ample amount of skepticism given the lack of progress to date and in light of next week’s mid-term elections.
A disappointing reaction to Apple’s Q3 results and outlook weighed on equity trading Friday. Rates rose and indices slipped lower after the October jobs report was particularly robust while simultaneously members of the Administration tempered expectations for the Trump-Xi meeting. Payrolls snapped back sharply from last month’s disappointment, the unemployment rate held near five-decade lows, and wage growth topped 3% on a y/y basis for the first time since 2009. Despite the whipsawing in stocks and general uneasiness in the broader markets, US Treasury yields finished at recent highs. The US 30-year yield now stands at the highest level since the fall of 2014. The Dollar index broke above 97 for the first time since 2017 as overseas economic data continued to come in short of expectations. WTI crude broke through some technical support, dropping back towards the lows of mid-June, as the US indicated it will issue eight exemptions to the Iran oil sanctions that are set to take effect on Monday. For the week, the DJIA and S&P500 each rose 2.4%, and the Nasdaq gained 2.7% for its best week since May.
In corporate news this week, GM reported an earnings beat, pointing to higher prices and demand in China, and the automaker also foresaw a strong Q4. Both Clorox and Kellogg shares slumped after their managements cited headwinds, and Kraft Heinz said its profit was squeezed by higher costs. In the first quarter under its new CEO, GE fell short on both its top and bottom line and slashed its dividend to one penny per share. Apple shares fell post earnings on conservative guidance and some cautious emerging market commentary, and the tech giant also announced it would no longer break out unit sales in its quarterly reports, to the dismay of many analysts. Facebook pushed higher on stronger than expected profit and improved monetization of its user base. On the M&A front, IBM acquired Red Hat for $190.00/share in order to expand further into the cloud and open source software space. And reports indicated some PE firms are contending to acquire the embattled pizza-maker Papa Johns.
SUN 10/28
*(BR) Brazil Presidential Candidate Bolsonaro declared winner of the election
RHT To be acquired by IBM for $190.00/shr cash for enterprise value of $34B; IBM intends to suspend its share repurchase program in 2020 and 2021
MON 10/29
HSBA.UK Reports Q3 Net $3.9B v $2.9B y/y; adj Pretax $6.19B v $5.73Be; Rev $13.8B v $13.7Be
(MX) Mexico public consultation on Mexico City Airport prefers cancellation of the $13.3B project - US financial press
(DE) German Chancellor Merkel may not run for re-election as the head of the CDU party head but wants to remain as Chancellor - financial press
3988.HK Reports Q3 (CNY) Net 44.2B v 41.8B y/y; to issue up to CNY120B of shares to boost up capital
*(US) OCT DALLAS FED MANUFACTURING ACTIVITY INDEX: 29.4 V 28.1E
(US) Atlanta Fed forecasts initial Q4 GDP growth at 2.6%
(CN) US said to implement next round of China tariffs if Trump talks with Xi fail (expected to meet at G20 on Nov 30th) - press
TUES 10/30
(FR) FRANCE Q3 ADVANCE GDP Q/Q: 0.4% V 0.5%E; Y/Y: 1.5% V 1.5%E
BP.UK Reports Q3 Adj Net $3.84B v $2.79Be, Total Rev $80.8B v $60B y/y; Raises Dividend to 10.25c/shr; Now sees BHP acquisition all funded from cash
(DE) GERMANY OCT CPI SAXONY M/M: 0.2% V 0.4% PRIOR; Y/Y: 2.5% V 2.3% PRIOR
(DE) GERMANY OCT NET UNEMPLOYMENT CHANGE: -11K V -12KE; UNEMPLOYMENT CLAIMS RATE: 5.1% V 5.1%E
(EU) EURO ZONE BUSINESS CLIMATE INDICATOR: 1.01 V 1.16E; CONSUMER CONFIDENCE: -2.7 V -2.7E
(EU) EURO ZONE Q3 ADVANCE GDP Q/Q: 0.2% V 0.4%E; Y/Y: 1.7% V 1.8%E
(IT) ITALY DEBT AGENCY (TESORO) SELLS TOTAL €4.5B VS. €3.5-4.5B INDICATED RANGE IN 5-YEAR AND 10-YEAR BTP BONDS
GE Reports Q3 $0.14 v $0.21e, Rev $29.6B v $29.9Be; Cuts dividend; To reorganize Power unit
(DE) GERMANY OCT PRELIMINARY CPI M/M: 0.2% V 0.1%E; Y/Y: 2.5% V 2.4%E
(US) Nevada reports Sept casino gaming Rev $991M, +1.3% y/y; Las Vegas strip Rev $546M, -3.7% y/y
*(US) OCT CONSUMER CONFIDENCE: 137.9 V 135.9E (18 year high)
(US) Dollar index trades above 97 for first time since June 2017
PZZA Bain and CVC reportedly among potential suitors contending to buy Papa Johns - press
FB Reports Q3 $1.76 v $1.46e, Rev $13.7B v $13.8Be
BIDU Reports Q3 $2.77 v $2.57e, Rev $4.11B v $4.12Be
(JP) BOJ LEAVES INTEREST RATE ON EXCESS RESERVES (IOER) UNCHANGED AT -0.10%; AS EXPECTED; Vote 7:2 on yield curve control (YCC) setting (Harada and Kataoka again dissent)
WEDS 10/31
SAN.FR Reports Q3 Net €2.3B v €2.2Be, Rev €9.4B v €9.3Be
AIR.FR Reports Q3 Net €957M v €307M y/y, Adj EBIT €1.6B v €1.4Be, Rev €15.5B v €12.8B y/y
(EU) EURO ZONE OCT ADVANCE CPI ESTIMATE Y/Y: 2.2% V 2.2%E; CPI CORE Y/Y: 1.1% V 1.1%E
GM Reports Q3 $1.87 v $1.26e, Rev $35.8B v $34.2Be
*(US) OCT ADP EMPLOYMENT CHANGE: +227K V +187KE
(US) Treasury to sell $37B 2-year, $27B 10-year notes and $19B 30-year bond during week of Nov 5th
(US) Conference Board Oct Total online job ads 4.48M v 4.75M m/m v 4.56M y/y; New ads 1.72M v 1.88M m/m v 1.82M y/y
(US) Fed formally proposes loosening rules for large US banks; most banks under $250B would face reduced requirements (as expected)
*(US) DOE CRUDE: +3.2M V +3ME; GASOLINE: -3.2M V -1.5ME; DISTILLATE: -4.1M V -2ME
(UK) Brexit Min Raab: Expects Brexit deal by November 21st
(US) Association of American Railroads weekly rail traffic report for week ending Oct 27th: 562.8K, +4.4% y/y
THURS 11/1
CARLB.DK Reports Q3 (DKK) Rev 17.6B v 17.1Be
MT.NL Reports Q3 Net $0.9B v $1.4Be, EBITDA $2.73B v $2.7Be, Rev $18.5B v $19.8Be; completes transaction to acquire Ilva S.p.A. and launches ArcelorMittal Italia
CSGN.CH Reports Q3 (CHF) Net 424M v 479Me, adj Pretax 856M v 862Me, Rev 4.89B v 5.05Be
RDSA.NL Reports Q3 Basic CCS EPS $0.68 v $0.70e, adj CCS Net $5.62B v $5.73Be, Rev $100.2B v $75.8B y/y; launches second buyback tranche of $2.5B
(UK) BANK OF ENGLAND BANK (BOE) QUARTERLY INFLATION REPORT (QIR)
(CZ) CZECH CENTRAL BANK (CNB) RAISES 2-WEEK REPURCHASE RATE BY 25BPS TO 1.75%; AS EXPECTED
(UK) BANK OF ENGLAND BANK (BOE) LEAVES INTEREST RATES UNCHANGED AT 0.75%; AS EXPECTED
*(US) Q3 PRELIMINARY NONFARM PRODUCTIVITY: 2.2% V 2.1%E; UNIT LABOR COSTS: 1.2% V 1.0%E
NYT Reports Q3 $0.15 v $0.12 y/y, Rev $417.3M v $385.6M y/y
(US) OCT FINAL MARKIT MANUFACTURING PMI: 55.7 V 55.8E
(CN) China Pres Xi: Pres Trump and I want to expand China-US trade cooperation; US-China economic teams should strength their contacts - Chinese press
(US) Atlanta Fed raises Q4 GDP forecast to 3.0% from 2.6% prior
PACB To be acquired by Illumina at $8/shr for ~$1.2B in all cash transaction
FRI 11/2
(CN) US President Trump has reportedly asked cabinet to draft possible China trade deal - press
CNBC: told that report President directing cabinet to draft China trade deal is not true; two sides remain far apart
*(US) OCT CHANGE IN NONFARM PAYROLLS: +250K V +200KE
(US) OCT UNEMPLOYMENT RATE: 3.7% V 3.7%E (matches lowest since 1969)
(US) OCT AVERAGE HOURLY EARNINGS M/M: 0.2% V 0.2%E; Y/Y: 3.1% V 3.1%E; AVERAGE WEEKLY HOURS: 34.5 V 34.5E
(US) New York Fed Nowcast: raises Q4 forecast to 2.6% from 2.5% prior
(EU) ECB said to be mulling a new TLTRO series in the event of a fresh economic slowdown - press
(EU) European Banking Authority: All 25 banks pass 5.5% fully loaded capital threshold in adverse scenario in EU-wide stress tests – press
(CN) White House Econ Adviser Kudlow: confirms no massive movement between US and China on trade; Have not seen any new proposals out of China; yesterday's phone call between Xi and Trump was "good" but it was "just a phone call" - CNBC interview
Barrons weekend summary
Barrons weekend summary: Cover on new arms race with China that could benefit defense contractors; Positive feature on AMZN, GOOGL and MSFT; Positive feature on IR and LII
Cover story: China’s development of a new weapon called a hypersonic missile could render current defense systems obsolete, drive a new arms race, and keep money flowing for military contractors such as LMT, NOC, and RTN.
Features: 1) Positive on AMZN, GOOGL, MSFT: Top software and Internet companies could become defense-sector players because they spend vast amounts of money on research, much of which is relevant to the Department of Defense; 2) Neuroscientists and behavioral economists say erasing hard-wired biases isn’t possible; many institutional investment firms are hiring coaches to them better understand how emotions affect investing; 3) Donald Trump says that stocks will go down if Democrats are elected in the midterms, but if the market is forward-looking, why hasn’t a crash already happened?; 4) A broad selloff in the housing market has left a few stocks looking like bargains, and the HVAC sector can still deliver upside despite housing concerns; IR and LII look poised for a rally.
Tech Trader: Cautious on IBM: Company’s acquisition of RHT has been met with mixed reviews, and is “not a game changer for anybody but IBM,” which lags AMZN, MSFT, BABA, and GOOGL in the cloud; IBM is touting the deal as a path to a new “hybrid cloud,” but there’s no industry consensus about what that is.
Trader: “The fact the market sold off so abruptly on Friday is just one more reason for investors to use rallies as opportunities to sell, rather than buy”; With interest rates certain to go higher, investors need to focus on companies that won’t feel the pinch from higher borrowing costs; Positive on REZI: The HON spinoff gives investors exposure to the Internet of Things, and even if it doesn’t live up to its potential, is appears to be trading at a discount to its fundamentals.
Interview: Jim Callinan, manager of the Osterweis Emerging Opportunity fund, looks for company management teams who “stretch goals” and then deliver on them.
Profile: Adam Weigold, manager of the Eaton Vance Municipal Opportunities fund, has a team of 16 analysts who carry out deep credit analysis to find undiscovered gems; they’re currently looking for possible takeover candidates in the municipal hospital sector.
Follow-Up: GE’s move to cut its dividend is not a good sign for shareholders, and while buyback programs are easily adjusted with little fallout from investors, that’s less true with dividends.
European Trader: Positive on RIO, Glencore, Anglo American: With copper prices down, investors have an opportunity to buy shares of mining giants with generous dividends, but their long-term prospects will depend on how the global transition to electric vehicles plays out.
Emerging Markets: Mexican president-elect Andres Manuel Lopez Obrador’s decision to abandon construction of a $13B airport outside Mexico City spooked investors, who may have oversold the country based on that single policy decision.
Commodities: “The oil market has had nearly six months to assess the possible effect of U.S. sanctions on Iranian oil exports,” but the prospect of significantly tighter global supplies has resulted in lower prices.
Streetwise: The basic problem with so-called ESG investing is that there is no standard legal definition, leading various funds to approach it in their own way, and it has yet to produce demonstrable proof of its efficacy on long-term shareholder returns.
Sunday, October 28, 2018
Barrons weekend summary
Barrons weekend summary: Cover story looks at investing in China; positive features on BAC, HOME
Cover story: China is trying to eliminate its shadow banking system and move from an export-oriented economy to a consumer-oriented one, a task made more difficult amid rising U.S. interest rates and a strong dollar; policy missteps could lead to a repeat of 2015 and 2016, when China contributed to a $5T market rout; Is it time to invest more in China? Barron’s says “the answer is a resounding maybe.”
Features: 1) Third-quarter earnings for S&P 500 companies are on track to rise 22.5%, yet investors have given companies virtually no credit for outperforming Wall Street expectations; 2) Positive on BAC: Bank is a standout among its peers, with a strong earnings outlook, a leading consumer franchise, a lucrative wealth-management platform, modest international exposure, strong expense controls, and aggressive buybacks; 3) Positive on HOME: Upstart retailer with a purely bricks-and-mortar strategy could be worth a look for investors after a recent selloff, which has created an opportunity to “get in on the bottom floor of a compelling growth story”; 4) There is little sign of an economic recession on the horizon, which is good for stocks, but ongoing Fed interest-rate hikes may create uncertainty; 5) Investors could initially ignore the U.S.-China trade war because it hadn’t hit corporate profits—but that is beginning to change, and companies are spelling out tariff impacts on earnings calls.
Tech Trader: Earnings from semiconductors may hold more keys to where the market is going than earnings from tech giants like TSLA, AMZN, and GOOGL; “Veteran traders who correctly anticipated the chip weakness now see the dynamic as a red flag for the stock market and the economy.”
Trader: Despite recent market turmoil, “it may not be the end of the world—or at least not the end of the bull market”; “Whether the easing of buybacks will continue is difficult to predict, but it’s interesting that such heretofore bullish activity has slowed considerably just when the stock market has had a nasty downturn”; Positive on ST: For long-term investors, the stock’s recent slump could provide a relatively inexpensive point to buy into a business whose products will be increasingly in use.
Profile: Tyler Rosenlicht, co-manager the Cohen & Steers MLP & Energy Opportunity fund, says the industry is in the midst of a “tectonic shift” that includes a major reshaping of the North American energy infrastructure.
Interview: Howard Marks of OAK, known for his ability to look beyond daily market shifts, talks about the recent market upheaval, and says almost every boom is marked by too much optimism, not enough risk aversion, and too much money.
European Trader: Positive on BP, Royal Dutch Shell, Eni, Total: “Favorable valuations, a change in investor outlook, and a surge in oil prices could lift the stocks of major European oil producers.”
Emerging Markets: Investors are more likely to see the recent run-up in Turkish stocks as a short-term bounce rather than the dawn of a sustained rally.
Commodities: The first yearly decline in copper prices since 2015 has prompted investors to raise questions about other global markets, and many are expressing economic concerns.
Streetwise: Despite talk of lower drug prices among politicians, investors appear to be betting that a divided Congress will maintain the status quo, making some healthcare stocks worth considering.-
Market correction continues while central banks stay the course and midterm election approaches
TradeTheNews.com Weekly
Market Update: Market correction continues while central banks stay the course
and midterm election approaches
Fri, 26 Oct 2018 16:07 PM EST
Investors continued to pull money away from global stock markets this week and by Friday the S&P 500 followed the Russel 2000, Transports and the NASDAQ by officially touching correction territory. The VIX popped back above 25 and gold futures caught a bid back towards the highs of the summer after stock indices broke through Oct 11th lows bringing the April and February nadirs back into play. Markets gyrated with several dead cat bounces and volumes staying elevated, fueled by a deluge of Q3 earnings reports. Investors continued to punish corporations for missing or even merely meeting Q3 expectations, while often looking past overly robust reports and instead focusing on the headwinds building for 2019 performance. The looming midterm election lingered in back of many investors’ minds and probably curtailed their will to step in and buy the dip. Risk-off flows pressured the 10-year yield resulting in it filling the post Powell “far from neutral” gap going back to October 3rd. Crude oil prices remained heavy, hovering right around the 200-day moving average. For the week, the S&P500 lost 4%, the DJIA fell 3%, and the Nasdaq shed 3.8%.
A host of Fed speakers stuck to their rhetorical guns despite signs of softness in US housing data and corporate commentary about the macro environment that was viewed by many as substantially less rosy than current Fed projections. The ECB met and left rates and purchase targets unchanged as expected. Draghi did acknowledge recent weakness in EU data, but noted there was not enough evidence yet to adjust the ECB forecast. Italy and the EU continued to butt heads over the 2019 budget and that along with little to no progress on the Brexit front remained a major source of uncertainty for markets. Friday saw the Yuan fixing at its lowest level since 2017 despite Chinese officials coming out in force to state they would not engage in competitive devaluation. The Yuan weakness and officials’ comments came in the wake of a fresh report indicating the Trump administration has no intention of restarting trade talks until China makes concrete proposals to address forced technology transfers and other economic concerns.
In corporate news this week, industrials were weighed upon by 3M missing estimates and cutting its outlook, and by Caterpillar using a tax benefit to prop up its guidance, as well as ongoing tariff-related headwinds dampening enthusiasm for the sector. McDonald’s shares rose after it reported Q3 same-store sales topped expectations, and though the guest count dropped in the US, it grew in most top international markets. Tesla stock got a jump start after the automaker moved up its earnings report and then surprisingly turned its first quarterly profit and forecast improving production rates ahead. In a difficult stock market environment, Microsoft shares held steady after another strong earnings report highlighted by double-digit growth from many of its core offerings, such as Office, LinkedIn and its gaming unit. Amazon slid after missing top-line estimates and sandbagging Q4 guidance, while Google also fell on a slight revenue miss.
MON 10/22
941.HK Reports 9M (CNY) Net 95B v 92.1B y/y, EBITDA 214.1B v 211.3B y/y, Rev 567.7B v 569.5B y/y
BAYN.DE San Francisco judge in 'Roundup' case Ramos Bolanos ruled the $250M in punitive damages awarded by jury must be cut to match the ~$39.3M in compensatory damages - US financial press
TUES 10/23
TXN Reports Q3 $1.58 v $1.53e, Rev $4.26B v $4.30Be; Guides Q4 $1.14-1.34 (adj) v $1.38e, Rev $3.6-3.9B v $4.0Be
(US) Fed's Bostic (dove, voter): unless data surprises to the downside, Fed should maintain gradual rate increases at least a few more times; Fed still a few rate hikes away from neutral
*(US) OCT RICHMOND FED MANUFACTURING INDEX: 15 V 24E
(IT) EU Commission gives its formal response to Italy's 2019 fiscal plan: Country needs to resubmit its budget
MCD Reports Q3 $2.10 v $1.98e, Rev $5.37B v $5.25Be
(UK) EU may offer PM May a UK-wide Customs Union arrangement to break the Brexit deadlock over the Irish border but would require a separate treaty - Irish Press
CAT Reports Q3 $2.86 v $2.83e, Rev $13.5B v $13.2Be; Affirms FY18 $11.00-12.00**(now includes $0.35 tax benefit) v $11.65e
MMM Reports Q3 $2.58 v $2.70e, Rev $8.15B v $8.42Be
(UK) Reportedly the 48 Letter threshold has not been reached yet to trigger UK Conservative leadership contest - press
*(ID) INDONESIA CENTRAL BANK (BI) LEAVES 7-DAY REVERSE REPO RATE AT 5.75%; AS EXPECTED
WEDS 10/24
DBK.DE Reports Q3 Net €229M v €647M y/y, Pretax €506M v €933M y/y, Rev €6.2B v €6.3Be
HEIA.NL Reports Q3 Organic Beer volume +4.6% v +4.3%e
*(FR) FRANCE OCT BUSINESS CONFIDENCE: 104 V 106E
*(FR) FRANCE OCT PRELIMINARY MANUFACTURING PMI: 51.2 V 52.4E (25th month of expansion but lowest since Sept 2016)
*(DE) GERMANY OCT PRELIMINARY MANUFACTURING PMI: 52.3 V 53.4E (46th month of expansion and lowest since May 2015)
*(SE) SWEDEN CENTRAL BANK (RIKSBANK) LEAVES REPO RATE UNCHANGED AT -0.50%; AS EXPECTE; maintains guidance on rates
*(EU) EURO ZONE OCT PRELIMINARY MANUFACTURING PMI: 52.1 V 53.0E (63rd month of expansion)
UPS Reports Q3 $1.82 v $1.82e, Rev $17.4B v $17.4Be
BA Reports Q3 $3.58 v $3.45e, Rev $25.1B v $23.7Be; Raises FY18 EPS $14.90-15.10 v $14.58e, Rev $98-100B v $98.7Be
(US) OCT PRELIMINARY MARKIT MANUFACTURING PMI: 55.9 V 55.3E (5-month high)
(CA) BANK OF CANADA (BOC) RAISES INTEREST RATE BY 25BPS TO 1.75%; AS EXPECTED; removes gradual language
(US) SEPT NEW HOME SALES: 553K V 625KE
*(US) DOE CRUDE: +6.3M V +2.5ME; GASOLINE: -4.8M V -1.5ME; DISTILLATE: -2.3M V -1.5ME
(US) Association of American Railroads weekly rail traffic report for week ending Oct 20th: 555.1K, +0.5% y/y
*(US) FEDERAL RESERVE BEIGE BOOK: WAGE GROWTH MOSTLY CHARACTERIZED AS MODEST OR MODERATE
MSFT Reports Q1 $1.14 v $0.96e, Rev $29.1B v $27.7Be
V Reports Q4 $1.21 v $1.20e, Rev $5.40B v $5.44Be
TSLA Reports Q3 +$2.90 v -$0.53e, Rev $6.82B v $5.67Be
F Reports Q3 $0.29 v $0.29e, Rev $34.7B v $32.1Be
(CN) Bank in multiple China cities including Beijing, Guangzhou, Hangzhou, and Foshan have all cut mortgage lending rates, the first coordinated move since 2017 - Chinese press
THURS 10/25
UBSG.CH Reports Q3 (CHF) Net 1.25B v 962.3Me, Pretax 1.73B v 1.53Be, Rev 7.28B v 7.15B y/y
NOKIA.FI Reports Q3 -€0.02 v +€0.05e, adj Op €487M v €515.8Me, Rev €5.46B v €5.43Be
ABI.BE Reports Q3 $0.82 v $0.86e, Rev $13.3B v $13.7Be
066570.KR Reports Final Q3 (KRW) Net 497.1B v 377.1Be, Op Profit 748.8B v 746Be, Rev 15.4T v 15.4Te
(NO) NORWAY CENTRAL BANK (NORGES) LEAVES DEPOSIT RATES UNCHANGED AT 0.75%; AS EXPECTED
(DE) GERMANY OCT IFO BUSINESS CLIMATE: 102.8 V 103.2E; CURRENT ASSESSMENT: 105.9 V 106.0E
MRK Reports Q3 $1.19 v $1.16e, Rev $10.8B v $10.9Be; Raises Quarterly dividend 14.6% to $0.55 from $0.48 (indicated yield 3.12%); Authorizes additional $10B share repurchase
*(TR) TURKEY CENTRAL BANK (CBRT) LEAVES ONE-WEEK REPO RATE UNCHANGED AT 24.00%; AS EXPECTED
*(EU) ECB LEAVES 7-DAY MAIN REFINANCING RATE UNCHANGED AT 0.00%; AS EXPECTED; affirms policy guidance
*(US) SEPT PRELIMINARY DURABLE GOODS ORDERS: +0.8% V -1.5%E; DURABLES EX TRANSPORTATION: 0.1% V 0.4%E
(EU) ECB's Draghi: reiterates forward guidance; to have reinvestments for a prolonged period after APP ends - Prepared remarks
(EU) ECB's Draghi: General Council discussed the balance of risks; weaker momentum (not a downturn) was acknowledged - Q&A
*(US) SEPT PENDING HOME SALES M/M: 0.5% V 0.0%E; Y/Y: -3.4% V -2.6%E
(US) Fed Vice Chair Clarida: Some further rate hikes are warranted; Possible trend growth has shifted higher and structural unemployment moved lower; Signals on inflation 'Not flashing red' (first comments since joining the Fed in Sept)
(US) HHS releases International Pricing Index (IPI) drug payment model; under plan, some drugs would shift to levels closer to prices in other countries
AMZN Reports Q3 $5.75 v $3.29e, Rev $57B v $57.1Be; Guides Q4 Rev $66.5-72.5B v $73.9Be
GOOGL Reports Q3 $13.06 v $10.54e, Rev $27.1B (ex $6.6B TAC) v $27.3Be
USD/CNY *(CN) CHINA PBOC SET YUAN REFERENCE RATE: 6.9510 V 6.9409 PRIOR (first fix above 6.95 since Jan 4 2017)
FRI 10/26
BAS.DE Reports Q3 Adj Net €1.20B v €1.16Be, Adj EBIT €1.47B v €1.55Be, Rev €15.6B v €15.0Be
RBS.UK Reports Q3 Net £563M v £606M y/y, adj Op £961M v £871M y/y, Rev £3.64B v £3.3Be
*(RU) RUSSIA CENTRAL BANK (CBR) LEAVES KEY 1-WEEK AUCTION RATE UNCHANGED AT 7.50%
*(US) Q3 ADVANCE GDP ANNUALIZED Q/Q: 3.5% V 3.3%E; PERSONAL CONSUMPTION: 4.0% V 3.3%E
*(US) Q3 ADVANCE GDP PRICE INDEX: 1.7% V 2.1%E; CORE PCE Q/Q: 1.6% V 1.8%E
*(US) OCT FINAL UNIVERSITY OF MICHIGAN CONFIDENCE: 98.6 V 99.0E
(US) Authorities reportedly have arrested a man in Florida in connection to the explosive packages case - CNN
(US) New York Fed Nowcast: Raises Q3 GDP forecast to 2.2% from 2.1% prior; raises Q4 forecast to 2.5% from 2.4% prior
Fri, 26 Oct 2018 16:07 PM EST
Investors continued to pull money away from global stock markets this week and by Friday the S&P 500 followed the Russel 2000, Transports and the NASDAQ by officially touching correction territory. The VIX popped back above 25 and gold futures caught a bid back towards the highs of the summer after stock indices broke through Oct 11th lows bringing the April and February nadirs back into play. Markets gyrated with several dead cat bounces and volumes staying elevated, fueled by a deluge of Q3 earnings reports. Investors continued to punish corporations for missing or even merely meeting Q3 expectations, while often looking past overly robust reports and instead focusing on the headwinds building for 2019 performance. The looming midterm election lingered in back of many investors’ minds and probably curtailed their will to step in and buy the dip. Risk-off flows pressured the 10-year yield resulting in it filling the post Powell “far from neutral” gap going back to October 3rd. Crude oil prices remained heavy, hovering right around the 200-day moving average. For the week, the S&P500 lost 4%, the DJIA fell 3%, and the Nasdaq shed 3.8%.
A host of Fed speakers stuck to their rhetorical guns despite signs of softness in US housing data and corporate commentary about the macro environment that was viewed by many as substantially less rosy than current Fed projections. The ECB met and left rates and purchase targets unchanged as expected. Draghi did acknowledge recent weakness in EU data, but noted there was not enough evidence yet to adjust the ECB forecast. Italy and the EU continued to butt heads over the 2019 budget and that along with little to no progress on the Brexit front remained a major source of uncertainty for markets. Friday saw the Yuan fixing at its lowest level since 2017 despite Chinese officials coming out in force to state they would not engage in competitive devaluation. The Yuan weakness and officials’ comments came in the wake of a fresh report indicating the Trump administration has no intention of restarting trade talks until China makes concrete proposals to address forced technology transfers and other economic concerns.
In corporate news this week, industrials were weighed upon by 3M missing estimates and cutting its outlook, and by Caterpillar using a tax benefit to prop up its guidance, as well as ongoing tariff-related headwinds dampening enthusiasm for the sector. McDonald’s shares rose after it reported Q3 same-store sales topped expectations, and though the guest count dropped in the US, it grew in most top international markets. Tesla stock got a jump start after the automaker moved up its earnings report and then surprisingly turned its first quarterly profit and forecast improving production rates ahead. In a difficult stock market environment, Microsoft shares held steady after another strong earnings report highlighted by double-digit growth from many of its core offerings, such as Office, LinkedIn and its gaming unit. Amazon slid after missing top-line estimates and sandbagging Q4 guidance, while Google also fell on a slight revenue miss.
MON 10/22
941.HK Reports 9M (CNY) Net 95B v 92.1B y/y, EBITDA 214.1B v 211.3B y/y, Rev 567.7B v 569.5B y/y
BAYN.DE San Francisco judge in 'Roundup' case Ramos Bolanos ruled the $250M in punitive damages awarded by jury must be cut to match the ~$39.3M in compensatory damages - US financial press
TUES 10/23
TXN Reports Q3 $1.58 v $1.53e, Rev $4.26B v $4.30Be; Guides Q4 $1.14-1.34 (adj) v $1.38e, Rev $3.6-3.9B v $4.0Be
(US) Fed's Bostic (dove, voter): unless data surprises to the downside, Fed should maintain gradual rate increases at least a few more times; Fed still a few rate hikes away from neutral
*(US) OCT RICHMOND FED MANUFACTURING INDEX: 15 V 24E
(IT) EU Commission gives its formal response to Italy's 2019 fiscal plan: Country needs to resubmit its budget
MCD Reports Q3 $2.10 v $1.98e, Rev $5.37B v $5.25Be
(UK) EU may offer PM May a UK-wide Customs Union arrangement to break the Brexit deadlock over the Irish border but would require a separate treaty - Irish Press
CAT Reports Q3 $2.86 v $2.83e, Rev $13.5B v $13.2Be; Affirms FY18 $11.00-12.00**(now includes $0.35 tax benefit) v $11.65e
MMM Reports Q3 $2.58 v $2.70e, Rev $8.15B v $8.42Be
(UK) Reportedly the 48 Letter threshold has not been reached yet to trigger UK Conservative leadership contest - press
*(ID) INDONESIA CENTRAL BANK (BI) LEAVES 7-DAY REVERSE REPO RATE AT 5.75%; AS EXPECTED
WEDS 10/24
DBK.DE Reports Q3 Net €229M v €647M y/y, Pretax €506M v €933M y/y, Rev €6.2B v €6.3Be
HEIA.NL Reports Q3 Organic Beer volume +4.6% v +4.3%e
*(FR) FRANCE OCT BUSINESS CONFIDENCE: 104 V 106E
*(FR) FRANCE OCT PRELIMINARY MANUFACTURING PMI: 51.2 V 52.4E (25th month of expansion but lowest since Sept 2016)
*(DE) GERMANY OCT PRELIMINARY MANUFACTURING PMI: 52.3 V 53.4E (46th month of expansion and lowest since May 2015)
*(SE) SWEDEN CENTRAL BANK (RIKSBANK) LEAVES REPO RATE UNCHANGED AT -0.50%; AS EXPECTE; maintains guidance on rates
*(EU) EURO ZONE OCT PRELIMINARY MANUFACTURING PMI: 52.1 V 53.0E (63rd month of expansion)
UPS Reports Q3 $1.82 v $1.82e, Rev $17.4B v $17.4Be
BA Reports Q3 $3.58 v $3.45e, Rev $25.1B v $23.7Be; Raises FY18 EPS $14.90-15.10 v $14.58e, Rev $98-100B v $98.7Be
(US) OCT PRELIMINARY MARKIT MANUFACTURING PMI: 55.9 V 55.3E (5-month high)
(CA) BANK OF CANADA (BOC) RAISES INTEREST RATE BY 25BPS TO 1.75%; AS EXPECTED; removes gradual language
(US) SEPT NEW HOME SALES: 553K V 625KE
*(US) DOE CRUDE: +6.3M V +2.5ME; GASOLINE: -4.8M V -1.5ME; DISTILLATE: -2.3M V -1.5ME
(US) Association of American Railroads weekly rail traffic report for week ending Oct 20th: 555.1K, +0.5% y/y
*(US) FEDERAL RESERVE BEIGE BOOK: WAGE GROWTH MOSTLY CHARACTERIZED AS MODEST OR MODERATE
MSFT Reports Q1 $1.14 v $0.96e, Rev $29.1B v $27.7Be
V Reports Q4 $1.21 v $1.20e, Rev $5.40B v $5.44Be
TSLA Reports Q3 +$2.90 v -$0.53e, Rev $6.82B v $5.67Be
F Reports Q3 $0.29 v $0.29e, Rev $34.7B v $32.1Be
(CN) Bank in multiple China cities including Beijing, Guangzhou, Hangzhou, and Foshan have all cut mortgage lending rates, the first coordinated move since 2017 - Chinese press
THURS 10/25
UBSG.CH Reports Q3 (CHF) Net 1.25B v 962.3Me, Pretax 1.73B v 1.53Be, Rev 7.28B v 7.15B y/y
NOKIA.FI Reports Q3 -€0.02 v +€0.05e, adj Op €487M v €515.8Me, Rev €5.46B v €5.43Be
ABI.BE Reports Q3 $0.82 v $0.86e, Rev $13.3B v $13.7Be
066570.KR Reports Final Q3 (KRW) Net 497.1B v 377.1Be, Op Profit 748.8B v 746Be, Rev 15.4T v 15.4Te
(NO) NORWAY CENTRAL BANK (NORGES) LEAVES DEPOSIT RATES UNCHANGED AT 0.75%; AS EXPECTED
(DE) GERMANY OCT IFO BUSINESS CLIMATE: 102.8 V 103.2E; CURRENT ASSESSMENT: 105.9 V 106.0E
MRK Reports Q3 $1.19 v $1.16e, Rev $10.8B v $10.9Be; Raises Quarterly dividend 14.6% to $0.55 from $0.48 (indicated yield 3.12%); Authorizes additional $10B share repurchase
*(TR) TURKEY CENTRAL BANK (CBRT) LEAVES ONE-WEEK REPO RATE UNCHANGED AT 24.00%; AS EXPECTED
*(EU) ECB LEAVES 7-DAY MAIN REFINANCING RATE UNCHANGED AT 0.00%; AS EXPECTED; affirms policy guidance
*(US) SEPT PRELIMINARY DURABLE GOODS ORDERS: +0.8% V -1.5%E; DURABLES EX TRANSPORTATION: 0.1% V 0.4%E
(EU) ECB's Draghi: reiterates forward guidance; to have reinvestments for a prolonged period after APP ends - Prepared remarks
(EU) ECB's Draghi: General Council discussed the balance of risks; weaker momentum (not a downturn) was acknowledged - Q&A
*(US) SEPT PENDING HOME SALES M/M: 0.5% V 0.0%E; Y/Y: -3.4% V -2.6%E
(US) Fed Vice Chair Clarida: Some further rate hikes are warranted; Possible trend growth has shifted higher and structural unemployment moved lower; Signals on inflation 'Not flashing red' (first comments since joining the Fed in Sept)
(US) HHS releases International Pricing Index (IPI) drug payment model; under plan, some drugs would shift to levels closer to prices in other countries
AMZN Reports Q3 $5.75 v $3.29e, Rev $57B v $57.1Be; Guides Q4 Rev $66.5-72.5B v $73.9Be
GOOGL Reports Q3 $13.06 v $10.54e, Rev $27.1B (ex $6.6B TAC) v $27.3Be
USD/CNY *(CN) CHINA PBOC SET YUAN REFERENCE RATE: 6.9510 V 6.9409 PRIOR (first fix above 6.95 since Jan 4 2017)
FRI 10/26
BAS.DE Reports Q3 Adj Net €1.20B v €1.16Be, Adj EBIT €1.47B v €1.55Be, Rev €15.6B v €15.0Be
RBS.UK Reports Q3 Net £563M v £606M y/y, adj Op £961M v £871M y/y, Rev £3.64B v £3.3Be
*(RU) RUSSIA CENTRAL BANK (CBR) LEAVES KEY 1-WEEK AUCTION RATE UNCHANGED AT 7.50%
*(US) Q3 ADVANCE GDP ANNUALIZED Q/Q: 3.5% V 3.3%E; PERSONAL CONSUMPTION: 4.0% V 3.3%E
*(US) Q3 ADVANCE GDP PRICE INDEX: 1.7% V 2.1%E; CORE PCE Q/Q: 1.6% V 1.8%E
*(US) OCT FINAL UNIVERSITY OF MICHIGAN CONFIDENCE: 98.6 V 99.0E
(US) Authorities reportedly have arrested a man in Florida in connection to the explosive packages case - CNN
(US) New York Fed Nowcast: Raises Q3 GDP forecast to 2.2% from 2.1% prior; raises Q4 forecast to 2.5% from 2.4% prior
Saturday, October 20, 2018
Barrons weekend update
Barrons weekend update: cover positive on Emerging Markets; positive feature on CFG; cautious on Chinese internet names
Cover story: Emerging markets have had a bad year, but recent problems obscure their long-term attraction; 83% of the world’s population, of which half are members of the middle class, reside in them; With emerging market stocks trading at steep discounts to U.S. equities, now is the time for investors to start bargain hunting.
Features: 1) Cautious on BABA, Tencent Holdings, BIDU: Members of Barron’s Asia Roundtable discuss the Chinese Internet giants, which face problems but still offer benefits for investors; 2) Barron’s Big Money Poll found that American money managers seem confident the bull market will continue into next year, with 56% bullish on U.S. equities through next June, little changed from the spring survey’s 55%; 3) Positive on BAC, JPM, USB, WFC, JPC, FFC, PFF: Investors seeking yield should be looking at preferred stocks, where yields on many issues have risen a half-percentage point or more in the past month as investors sell off Treasuries; 4) Dallas-based Centurion American Development Group came up with an innovation in municipal finance through the sale of tax increment financing revenues, but the move has raised a number of questions; 5) Positive on CFG: The Providence, Rhode Island-based regional bank has one of the hottest lending niches in the world: It is the exclusive financing partner for iPhones bought directly from AAPL; 6) Story looks at four issues that must be addressed if the U.K. and EU are to avoid a calamity from a so-called hard Brexit: contracts, clearing houses, data, and immigration.
Tech Trader: Barron’s created a FAANG risk score card, ranking FB, AMZN, AAPL, NFLX, and GOOGL on nine issues of importance to analysts, the press, or politicians during the past year; Facebook and Alphabet have the highest scores, followed by Amazon, Apple, and Netflix.
Trader: Positive on UAA: Investors should take a look at the sports apparel company as a contrarian bet before its margins improve and Wall Street becomes confident about its turnaround plans; Positive on VTR: The real estate investment trust owns more than 1,200 properties, many of which focus on seniors, positioning it to benefit as baby boomers finally start to retire.
Interview: Former Federal Reserve chairman Alan Greenspan says the economy doesn’t look so great, and could get worse because of the ballooning deficit and the rising cost of entitlement programs.
Follow-Up: Positive on STZ: Under new chief Bill Newlands, the company will remain committed to the alcohol business, but also focus on the global cannabis market—and he sees continued growth in premium beers and alcohol-free beverages spiked with marijuana.
International Trader: It’s a good time to bet on British stocks—the “economy is strong, stocks are inexpensive relative to those in the U.S., and when the Brexit drama passes, the pound sterling should rise.”
Emerging Markets: Donald Trump is wreaking short-term havoc on China’s stock markets, though he probably won’t succeed in stemming the country’s long-term economic rise.
Commodities: With a number of recent global events clouding the outlook for gasoline prices, there’s a possibility that American consumers won’t see the usual post-summer decline in prices at the pump.
Streetwise: “The Khashoggi case is a reminder to Saudi Arabia’s business partners that they are in bed with an absolute monarchy that has a medieval view of human rights. The question now is whether these partners need to do more than just dodge the spotlight of a single conference.”
S&P Holds, Small Caps and NASDAQ Not Out of the Woods Yet as Q3 Earnings Season Kicks Off
TradeTheNews.com Weekly
Market Update: S&P Holds, Small Caps and NASDAQ Not Out of the Woods Yet as
Q3 Earnings Season Kicks Off
Fri, 19 Oct 2018 16:09 PM EST
Stock markets opened the week in a precarious state, but a big rally on Tuesday calmed concerns for some, at least temporarily. Volatility and significant price swings resumed along with relentless selling pressure in China’s stock market. US small caps and the NASDAQ continued to largely underperform deep value shares and that overall market. US Treasury yields drifted up towards the top of the recent ranges and the FOMC minutes Wednesday only confirmed the Fed remains ready to take rates even higher. Pockets of weakness popped up in a host of early key industrial Q3 earnings reports, tempering expectations despite economic reports that continued to point to a robust US economy. Tariffs, inflation, and a strong US dollar remained the underlying factors cited by most managements.
Geopolitics stayed front and center, as well, with EU member budget wrangling and intense Brexit deliberations resulting in bouts of risk aversion. Little progress was seen on Brexit and to this point a November meeting has not been secured. Italian bond yields rose after the EU essentially rejected the Italian budget proposal in its current form ahead of a final decision next week. The spread between the 10-year BTP yield and that of the German Bund reached the widest level in more than 5 years. President Trump ratcheted up immigration rhetoric heading towards November midterms and his advisors continued to talk tough on China despite reports that President Trump and Xi would meet on the sidelines of G20 next month. His administration was also forced deal with the fallout of the apparent murder of Washington Post journalist Khashoggi while in the hands of the Saudis. It remains to be seen how the foreign policy crisis will play out, but oil prices seem to be shrugging it off to this point. At one point WTI crude fell nearly 8% off the recent Oct 4th high. By Friday, options expiration led to a jump in volumes and trepidation remained high considering the recent jump in volatility and the well-chronicled history around late Oct trading. The S&P 500 cash finished the week just below the 200-day moving average for the first time in more than a year. For the week the S&P was essentially flat, the Dow gained 0.4% and the NASDAQ lost 0.6%
In corporate news this week, earnings season got rolling with reports from various large cap names. Netflix shares rose initially after announcing a jump in subscriptions but quickly gave back those gains back affirming the ominous pall that has settled over the NASDAQ/high beta complex. IBM fell on another disappointing quarterly report. Alcoa surged on an earnings blowout and boost to its buyback plan. Bank of America reported in line but shares dropped amid uncertainty over the sustainability of paying out low yields, while Schwab fell on a revenue miss and lower sequential new brokerage account numbers. Friday the Dow got a huge boost from P&G shares, surging closet to 10% after reporting impressive sales growth across nearly all its segments. On the M&A front, Carl Icahn reportedly is accumulating a significant stake in Dollar Tree, Walgreens CEO Pessina said has not ruled out deal with AmerisourceBergen, and casino magnate Tilman Fertitta reportedly approached Caesars about a potential bear hug $13/shr merger deal in cash and stock.
SUN 10/14
HRS Confirms deal with L3 Technologies in a merger of equals; Cash EPS accretive in first full year post close; $500M of annual gross pre-tax cost synergies in year 3; $300M net of savings returned to customers
MON 10/15
BAC Reports Q3 $0.66 v $0.62e, Rev $22.8B v $22.6Be
*(US) OCT EMPIRE MANUFACTURING: 21.1 V 20.0E
(US) Sept Monthly Budget Statement: $119.1B v $108Be
(SA) Saudi Government is planning to acknowledge Khashoggi died during an interrogation that went wrong, and the operation was "carried out without clearance" - CNN
TUES 10/16
*(UK) AUG AVERAGE WEEKLY EARNINGS 3M/Y: 2.7% V 2.6%E; WEEKLY EARNINGS (EX BONUS) 3M/Y: 3.1% V 2.9%E
(UK) SEPT JOBLESS CLAIMS CHANGE: +18.5K V +8.7K PRIOR; CLAIMANT COUNT RATE: 2.6% V 2.6% PRIOR
(DE) GERMANY OCT ZEW CURRENT SITUATION: 70.1 V 74.4E; EXPECTATIONS SURVEY: -24.7 V -12.0E
WMT Adjusts FY19 $4.65-4.80 v $4.80e (inc FlipKart) (prior $4.90-5.05), Op Income to increase low single digit % (ex Flipkart) - ahead of investor meeting
GS Reports Q3 $6.28 v $5.42e, Rev $8.65B v $8.37Be
(US) SEPT INDUSTRIAL PRODUCTION M/M: 0.3% V 0.2%E; CAPACITY UTILIZATION: 78.1% V 78.2%E
*(US) AUG JOLTS JOB OPENINGS: 7.136M V 6.900ME (new record)
(UK) Cabinet reportedly informed by Chief Whip that Brexit Irish backstop will not pass parliament, does not have sufficient votes - press
CSX Reports Q3 $1.05 v $0.94e, Rev $3.13B v $3.04Be
NFLX Reports Q3 $0.89 v $0.68e, Rev $4.00B v $4.01Be
IBM Reports Q3 $3.42 v $3.40e, Rev $18.8B v $19.1Be
BHP.AU Reports Q1 Waio iron ore production 69Mt v 71Mte; attributable iron ore production 61Mt v 62Mte v 64Mt y/y
WEDS 10/17
ROG.CH Reports Q3 (CHF) Rev 14.0B v 13.9Be
*(UK) SEPT CPI M/M: 0.1% V 0.3%E; Y/Y: 2.4% V 2.6%E
*(EU) EURO ZONE SEPT FINAL CPI Y/Y: 2.1% V 2.1%E; CPI CORE Y/Y: 0.9% V 0.9%E
(US) SEPT HOUSING STARTS: 1.201M V 1.21ME; BUILDING PERMITS: 1.24M V 1.28ME
*(US) DOE CRUDE: +6.5M V +1.5ME; GASOLINE: -2.0M V -0.5ME; DISTILLATE: -0.8M V -1ME
(US) Association of American Railroads weekly rail traffic report for week ending Oct 13th: 549.8K, +1.7% y/y
*(US) FOMC MINUTES FROM SEPT 26TH MEETING: GENERALLY ANTICIPATE FURTHER GRADUAL RATE INCREASES; ESTIMATES OF NEUTRAL RATE WILL BE ONLY ONE OF MANY FACTORS TO CONSIDER IN FUTURE POLICY
AA Reports Q3 $0.63 v $0.25e, Rev $3.39B v $3.36Be; Adds $200M to buyback plan (3% of market cap)
(US) Treasury Currency Report: Refrains from naming China as currency manipulator (as expected); keeps same six countries on FX watch list
*(KR) BANK OF KOREA (BOK) LEAVES 7-DAY REPO RATE UNCHANGED AT 1.50% (AS EXPECTED)
THURS 10/18
SAP.DE Reports Q3 Non-IFRS Net €973M v €1.03Be, non-IFRS Op €1.74B v €1.80Be, Rev €6.03B v €6.02Be
TSM Reports Q3 (NT$) Net 89.1B v 89.9B y/y; Op 95.2B v 98.1B y/y; Rev 260.3B v 252.1B y/y
- 2019 sales to grow on the 'high side' of 5-10% range
UNA.NL Reports Q3 Rev €12.5B v €12.5Be
*(UK) SEPT RETAIL SALES (EX AUTO) FUEL M/M: -0.8% V -0.4%E; Y/Y: 3.2% V 3.8%E
*(US) OCT PHILADELPHIA FED BUSINESS OUTLOOK: 22.2 V 20.0E
(IT) EU Commission responds to Italy draft budget plan: points to "particularly serious" non-compliance; says Italy plans "unprecedented" deviation from budget rules
CP Reports Q3 C$4.12 v C$4.12e, Rev C$1.99B v C$1.88Be
*(CL) CHILE CENTRAL BANK (BCCH) RAISES OVERNIGHT RATE TARGET BY 25BPS TO 2.75%, AS EXPECTED
(CN) China Securities Regulator (CSRC) Chief Liu: China will support non-state backed listed companies
(CN) CHINA Q3 GDP Y/Y: 6.5% V 6.6%E (slowest growth since Q1 2009)
(CN) CHINA SEPT INDUSTRIAL PRODUCTION Y/Y: 5.8% V 6.0%E (slowest growth since 2016)
FRI 10/19
(US) SEPT EXISTING HOME SALES: 5.15M V 5.29ME (lowest since Nov 2015)
Fri, 19 Oct 2018 16:09 PM EST
Stock markets opened the week in a precarious state, but a big rally on Tuesday calmed concerns for some, at least temporarily. Volatility and significant price swings resumed along with relentless selling pressure in China’s stock market. US small caps and the NASDAQ continued to largely underperform deep value shares and that overall market. US Treasury yields drifted up towards the top of the recent ranges and the FOMC minutes Wednesday only confirmed the Fed remains ready to take rates even higher. Pockets of weakness popped up in a host of early key industrial Q3 earnings reports, tempering expectations despite economic reports that continued to point to a robust US economy. Tariffs, inflation, and a strong US dollar remained the underlying factors cited by most managements.
Geopolitics stayed front and center, as well, with EU member budget wrangling and intense Brexit deliberations resulting in bouts of risk aversion. Little progress was seen on Brexit and to this point a November meeting has not been secured. Italian bond yields rose after the EU essentially rejected the Italian budget proposal in its current form ahead of a final decision next week. The spread between the 10-year BTP yield and that of the German Bund reached the widest level in more than 5 years. President Trump ratcheted up immigration rhetoric heading towards November midterms and his advisors continued to talk tough on China despite reports that President Trump and Xi would meet on the sidelines of G20 next month. His administration was also forced deal with the fallout of the apparent murder of Washington Post journalist Khashoggi while in the hands of the Saudis. It remains to be seen how the foreign policy crisis will play out, but oil prices seem to be shrugging it off to this point. At one point WTI crude fell nearly 8% off the recent Oct 4th high. By Friday, options expiration led to a jump in volumes and trepidation remained high considering the recent jump in volatility and the well-chronicled history around late Oct trading. The S&P 500 cash finished the week just below the 200-day moving average for the first time in more than a year. For the week the S&P was essentially flat, the Dow gained 0.4% and the NASDAQ lost 0.6%
In corporate news this week, earnings season got rolling with reports from various large cap names. Netflix shares rose initially after announcing a jump in subscriptions but quickly gave back those gains back affirming the ominous pall that has settled over the NASDAQ/high beta complex. IBM fell on another disappointing quarterly report. Alcoa surged on an earnings blowout and boost to its buyback plan. Bank of America reported in line but shares dropped amid uncertainty over the sustainability of paying out low yields, while Schwab fell on a revenue miss and lower sequential new brokerage account numbers. Friday the Dow got a huge boost from P&G shares, surging closet to 10% after reporting impressive sales growth across nearly all its segments. On the M&A front, Carl Icahn reportedly is accumulating a significant stake in Dollar Tree, Walgreens CEO Pessina said has not ruled out deal with AmerisourceBergen, and casino magnate Tilman Fertitta reportedly approached Caesars about a potential bear hug $13/shr merger deal in cash and stock.
SUN 10/14
HRS Confirms deal with L3 Technologies in a merger of equals; Cash EPS accretive in first full year post close; $500M of annual gross pre-tax cost synergies in year 3; $300M net of savings returned to customers
MON 10/15
BAC Reports Q3 $0.66 v $0.62e, Rev $22.8B v $22.6Be
*(US) OCT EMPIRE MANUFACTURING: 21.1 V 20.0E
(US) Sept Monthly Budget Statement: $119.1B v $108Be
(SA) Saudi Government is planning to acknowledge Khashoggi died during an interrogation that went wrong, and the operation was "carried out without clearance" - CNN
TUES 10/16
*(UK) AUG AVERAGE WEEKLY EARNINGS 3M/Y: 2.7% V 2.6%E; WEEKLY EARNINGS (EX BONUS) 3M/Y: 3.1% V 2.9%E
(UK) SEPT JOBLESS CLAIMS CHANGE: +18.5K V +8.7K PRIOR; CLAIMANT COUNT RATE: 2.6% V 2.6% PRIOR
(DE) GERMANY OCT ZEW CURRENT SITUATION: 70.1 V 74.4E; EXPECTATIONS SURVEY: -24.7 V -12.0E
WMT Adjusts FY19 $4.65-4.80 v $4.80e (inc FlipKart) (prior $4.90-5.05), Op Income to increase low single digit % (ex Flipkart) - ahead of investor meeting
GS Reports Q3 $6.28 v $5.42e, Rev $8.65B v $8.37Be
(US) SEPT INDUSTRIAL PRODUCTION M/M: 0.3% V 0.2%E; CAPACITY UTILIZATION: 78.1% V 78.2%E
*(US) AUG JOLTS JOB OPENINGS: 7.136M V 6.900ME (new record)
(UK) Cabinet reportedly informed by Chief Whip that Brexit Irish backstop will not pass parliament, does not have sufficient votes - press
CSX Reports Q3 $1.05 v $0.94e, Rev $3.13B v $3.04Be
NFLX Reports Q3 $0.89 v $0.68e, Rev $4.00B v $4.01Be
IBM Reports Q3 $3.42 v $3.40e, Rev $18.8B v $19.1Be
BHP.AU Reports Q1 Waio iron ore production 69Mt v 71Mte; attributable iron ore production 61Mt v 62Mte v 64Mt y/y
WEDS 10/17
ROG.CH Reports Q3 (CHF) Rev 14.0B v 13.9Be
*(UK) SEPT CPI M/M: 0.1% V 0.3%E; Y/Y: 2.4% V 2.6%E
*(EU) EURO ZONE SEPT FINAL CPI Y/Y: 2.1% V 2.1%E; CPI CORE Y/Y: 0.9% V 0.9%E
(US) SEPT HOUSING STARTS: 1.201M V 1.21ME; BUILDING PERMITS: 1.24M V 1.28ME
*(US) DOE CRUDE: +6.5M V +1.5ME; GASOLINE: -2.0M V -0.5ME; DISTILLATE: -0.8M V -1ME
(US) Association of American Railroads weekly rail traffic report for week ending Oct 13th: 549.8K, +1.7% y/y
*(US) FOMC MINUTES FROM SEPT 26TH MEETING: GENERALLY ANTICIPATE FURTHER GRADUAL RATE INCREASES; ESTIMATES OF NEUTRAL RATE WILL BE ONLY ONE OF MANY FACTORS TO CONSIDER IN FUTURE POLICY
AA Reports Q3 $0.63 v $0.25e, Rev $3.39B v $3.36Be; Adds $200M to buyback plan (3% of market cap)
(US) Treasury Currency Report: Refrains from naming China as currency manipulator (as expected); keeps same six countries on FX watch list
*(KR) BANK OF KOREA (BOK) LEAVES 7-DAY REPO RATE UNCHANGED AT 1.50% (AS EXPECTED)
THURS 10/18
SAP.DE Reports Q3 Non-IFRS Net €973M v €1.03Be, non-IFRS Op €1.74B v €1.80Be, Rev €6.03B v €6.02Be
TSM Reports Q3 (NT$) Net 89.1B v 89.9B y/y; Op 95.2B v 98.1B y/y; Rev 260.3B v 252.1B y/y
- 2019 sales to grow on the 'high side' of 5-10% range
UNA.NL Reports Q3 Rev €12.5B v €12.5Be
*(UK) SEPT RETAIL SALES (EX AUTO) FUEL M/M: -0.8% V -0.4%E; Y/Y: 3.2% V 3.8%E
*(US) OCT PHILADELPHIA FED BUSINESS OUTLOOK: 22.2 V 20.0E
(IT) EU Commission responds to Italy draft budget plan: points to "particularly serious" non-compliance; says Italy plans "unprecedented" deviation from budget rules
CP Reports Q3 C$4.12 v C$4.12e, Rev C$1.99B v C$1.88Be
*(CL) CHILE CENTRAL BANK (BCCH) RAISES OVERNIGHT RATE TARGET BY 25BPS TO 2.75%, AS EXPECTED
(CN) China Securities Regulator (CSRC) Chief Liu: China will support non-state backed listed companies
(CN) CHINA Q3 GDP Y/Y: 6.5% V 6.6%E (slowest growth since Q1 2009)
(CN) CHINA SEPT INDUSTRIAL PRODUCTION Y/Y: 5.8% V 6.0%E (slowest growth since 2016)
FRI 10/19
(US) SEPT EXISTING HOME SALES: 5.15M V 5.29ME (lowest since Nov 2015)
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