TradeTheNews.com Weekly
Market Update: Brexit Anxiety Rises; Markets Calibrate to Slower Growth
Expectations
Fri, 29 Mar 2019 16:10 PM EST
Stocks managed to look past a host of worries this week and move higher. The
Brexit saga rolled on, with the UK Parliament unable to coalesce around any
particular way forward setting up another round of indicative votes early next
week. The risk of the UK crashing out of the EU has not been taken off the
table, despite MPs' insistence it will not happen. Global inflation readings
continued to miss central bank targets allowing growth jitters to persist,
particularly in Europe. Treasury yields slipped to fresh lows mid-week with
markets continuing to fixate on inversions along the US curve and the
burgeoning amount of global sovereign debt carrying negative interest rates
once again. Emerging market currencies saw renewed pressures highlighted by a
spike in Turkish swap rates rekindling concerns about potential contagion.
Ultimately the investor anxiety, mainly emanating from Europe, was more than
offset by optimism on the US China trade front. On Friday, the US Treasury Sec
Mnuchin wrapped up a week of negotiations in Beijing by emphasizing discussions
remained constructive and will continue in DC next week. WTI crude finished the
week above $60, holding at roughly 5-month highs. The Greenback lifted and the
Euro slumped. The DJ Transports had a particularly strong showing,
outperforming the broader indexes in 3 of the 5 trading sessions to a 3.5%
rally. For the week, the S&P rose 1.2%, the Dow added 1.7% and NASDAQ
gained 1.1%.
In corporate news, Apple held a press event to announce its entrance into the
video streaming market with its upcoming Apple TV+ product, as well as
introducing an Apple Card digital credit card service and magazine subscription
app Apple News+. Samsung weighed upon semi names after warning its Q1 will be
lower than market expectations, noting a decline in memory chip and display
prices that were larger than expected. Boeing shares lifted after it announced
three software changes for its beleaguered 737 MAX aircraft, and the company
said that the software upgrade could be installed within days following its
approval from regulators. Wells Fargo CEO Tim Sloan announced he would retire,
effective June 30th, while the Board pledged to find an outsider to replace
him. Lyft’s long-awaited IPO opened for trade, quickly drifting below its opening
price but finishing well above its $72/shr pricing.
SUNDAY 3/24
*(US) US Attorney General Barr releases special counsel Mueller report
findings: Finds no collusion with Russia on 2016 Presidential elections but
falls short of calling him innocent; identifies two Russian influences
386.HK Reports FY18 (CNY) 61.6B v 51.2B y/y; Op 82.3B v 71.5B y/y; Rev 2.89T v
2.36T y/y (update)
AVYA Evaluating offer from private equity that could value the company at over
$20.00/shr, or over $5B - US press
MONDAY 3/25
ADM Extreme weather to affect Q1 NA operations by neg $50-60M in pretax
operating profits
*(US) MAR DALLAS FED MANUFACTURING ACTIVITY INDEX: 8.3 V 8.0E
AAPL Introduces 'Apple Card', digital credit card services as part of Apple Pay
product - Apple product event
005930.KR Guides Q1 to be lower than market expectations; decline in memory
chip and display prices larger than expected
TUESDAY 3/26
*(DE) GERMANY APR GFK CONSUMER CONFIDENCE 10.4 V 10.8E
*(US) FEB HOUSING STARTS 1.162M V 1.210ME; BUILDING PERMITS: 1.296M V 1.305ME
*(US) MAR RICHMOND FED MANUFACTURING INDEX 10 V 10E
*(US) MAR CONSUMER CONFIDENCE INDEX 124.1 V 132.5E
BA Southwest Boeing 737 Max reportedly makes emergency landing at Orlando
airport on its way to be grounded - local press
(NZ) NEW ZEALAND CENTRAL BANK (RBNZ) LEAVES OFFICIAL CASH RATE (OCR) UNCHANGED
AT 1.75%; AS EXPECTED; revises forward guidance to dovish from neutral
WEDNESDAY 3/27
(US) Fed's Kaplan (dove, non-voter): Too soon for Fed to consider lowering
rates - press interview
LEN Reports Q1 $0.74 v $0.75e, Rev $3.87B v $4.08Be
(EU) ECB said to be working on models for tiered Deposit Rate - press
(US) Association of American Railroads weekly rail traffic report for week
ending Mar 23rd: 503K, -4.5% y/y (has fallen for 6 consecutive weeks)
*(UK) PM May told Tory MPs in her Statement to 1922 Tory party committee that
she'll hand over leadership once Brexit is delivered; does not offer a specific
timetable for stepping down - press
BA Exec: Announces three software changes for 737 MAX; sees 737 MAX upgrade
installed within days of software approval; working with regulators on a 737
MAX patch and training
(US) Pres Trump asks agencies to end conservatorship of Fannie and Freddie;
will sign Trump reform memo
*(UK) UK Parliament indicative votes: no majority reached on any indicative
votes (as expected); MP Letwin proposes parliament should vote again on Monday
to reconsider these matters
(CN) Trump Administration Official: China tariffs will be key sticking point and
will be resolved as part of the deal; no specific time frame set for trade
deal, talks could conclude anytime from April to June
THURSDAY 3/28
(DE) GERMANY MAR CPI SAXONY M/M: 0.5% V 0.3% PRIOR; Y/Y: 1.4% V 1.4% PRIOR
(EU) EURO ZONE MAR BUSINESS CLIMATE INDICATOR: 0.53 V 0.68E
*(US) Q4 FINAL GDP PRICE INDEX: 1.7% V 1.8%E; CORE PCE Q/Q: 1.8% V 1.7%E
*(US) Q4 FINAL GDP ANNUALIZED Q/Q: 2.2% V 2.3%E; PERSONAL CONSUMPTION: 2.5% V
2.6%E
(RU) Russia and OPEC might agree to three-month extension of oil supply
reductions at June meeting; Energy Min Novak said to tell Saudis he can't
promise extension until end of 2019 - press
(US) Nevada reports Feb casino gaming Rev $1.01B, -0.6% y/y; Las Vegas strip
Rev $591.7M, -2.0% y/y
(BR) Brazil Econ Min Guedes: pension reform will pass; has full support of
Lower House President Maia
(UK) Northern Ireland's DUP party confirms they will vote against withdrawal
agreement approval motion just announced - Sky News
WFC CEO and President Tim Sloan to retire, effective June 30th; Board of
Directors elects General Counsel Allen Parker as interim CEO and President
FRIDAY 3/29
*(DE) GERMANY MAR UNEMPLOYMENT CHANGE: -7K V -10KE; UNEMPLOYMENT CLAIMS RATE:
4.9% V 4.9%E
(US) Treasury Sec Mnuchin: have concluded constructive talks in Beijing;
looking forward to continuing the negotiations in Washington DC next week
*(US) FEB PERSONAL INCOME 0.2% V 0.3%E
*(US) FEB NEW HOME SALES 667K V 620KE
(US) Fed's Kaplan (dove, non-voter): yield curve is indicative of skepticism on
growth; did not pencil in a rate increase for 2019
*(UK) UK PARLIAMENT VOTES 286-344 AGAINST WITHDRAWAL AGREEMENT
(US) Atlanta Fed raises Q1 GDP forecast to 1.7% v 1.5% prior
(US) New York Fed Nowcast: maintains Q1 forecast at 1.3%; cuts Q2 forecast to
1.6% from 1.7%
LYFT IPO opens for trade at $87.24
Sunday, March 31, 2019
Saturday, March 23, 2019
Barrons weekend summary
Barrons weekend summary Cover story: Nearly 80% of parents give some financial support to their adult children, costing about $500B a year, twice what parents put into retirement accounts according to surveys—and almost three-quarters of respondents acknowledged putting their children’s interests ahead of their own retirement needs; Ten years of a bull market and a growing comfort with debt have made this largesse easier to rationalize, but incurring additional costs just before or just into retirement can be problematic.
Features: 1) Cautious on LYFT: The ride-hailing startup’s upcoming initial public offering is likely to be a hit, and with a float of just 12% of the shares outstanding and high revenue growth, the stock could pop on its debut—but investors should take a pass until the company proves it has a path to profitability; 2) Activist investors have generally become accepted by the investing community, but there is evidence their strategies don’t work as well as one might think: Activist hedge funds trailed the market by about five percentage points a year since the end of the financial crisis, and trailed the broader hedge fund industry by about five percentage points a year since the end of 2016; 3) Nearly 19 million Americans suffer from substance-use disorder, and overdoses are the leading cause of accidental death—yet affluence not only offers no protection, it can make matters worse as people with money spend vast sums in a largely unregulated treatment industry; 4) Even small investors can think like activists by looking at stock in terms of acquisition potential and studying cash conversion—the time it takes for a product sale to turn into cash—and asset turnover, the amount of sales generated by an asset; 5) Story looks at how parents can put their adult children on better financial footing without creating an air of entitlement or damaging their own financial situations.
Tech Trader: Positive on GOOGL: Google's rollout of Stadia, which enables gamers to play streamed games on their computers, televisions, and smartphones without the need for a separate console, is the latest example of the tech battle moving to the cloud, which offers quicker scalability, cost efficiencies, and a closer connection to the customer.
Trader: The yield-curve inversion might not be signaling a recession yet, but there are other reasons to worry, says Richard Farr of Merion Capital Group, who says earnings season, which gets under way in April, is a primary concern; Positive on IIPR: As the only U.S.-listed REIT serving the cash hungry cannabis industry, IIP has turned its cost-of-capital advantage into steady growth and a generously-valued stock; Positive on CAT: Changes the company made to its manufacturing system are improving operating margins and preparing the company for the next downturn, but investors so far don’t seem impressed—shares are trading at a 35% discount to the broader market.
Interview: Rod Lache and Don Galves of Wolfe Research say the automotive landscape will change dramatically during the next five to 10 years, creating opportunities and disruption (picks: APTV, BWA, GM, LEA, TSLA).
Profile: Samantha Lu, co-manager of the AB Small Cap Growth Portfolio and co-chief investment officer of small and SMID growth strategies at AllianceBernstein looks for small companies that can grow faster than the market expects, and seeks to minimize the opportunity cost of owning stocks that stumble (top 10 holdings: ETSY, IWO, FIVE, PLNT, TTD, IRTC, OLLI, NGVT, NEWR, LHCG).
European Trader: Positive on RELX: Low-profile giant formerly known as Reed Elsevier—which owns properties as diverse as The Lancet and Comic Con—is transforming itself from a tired media stock into a high-margin tech player leveraging technologies such as artificial intelligence, sending the share price up.
Emerging Markets: Emerging market currencies look undervalued, says Rob Neithart of Capital Group, while inflation is dropping in many places, positioning central banks to cut rates, after having hiked them to defend their currencies.
Commodities: With a more than 30% jump in prices so far this year, rhodium—which is corrosion resistant, is used in catalytic converters and as an electrical contact material—now costs more than twice what gold or palladium do, but hasn’t attracted much attention from investors.
Streetwise: As Americans increasingly turn to streaming, they are paying more for it than cable or satellite—and “If there’s a safe bet in media right now, it’s that the market can’t stay this fragmented, because streaming fatigue isn’t much more appealing than bundle burnout.”
Friday, March 22, 2019
Investor worries grow after Fed doubles down and data disappoints
TradeTheNews.com Weekly
Market Update: Investor worries grow after Fed doubles down and data
disappoints
Fri, 22 Mar 2019 16:20 PM EST
US stock markets managed to scale the proverbial wall of worry for much of this week, helped by another prod from the US Federal Reserve. CPI figures continued to miss expectations here in the US and elsewhere, while global economic data both here and abroad suggested deceleration. Brexit worries were dragged out as PM May went to Brussels and appears to have at least secured a short-term extension to this month’s deadline, but a resolution remains up in the air and it is contingent on yet another round of vital votes in Parliament next week. Friday saw key European manufacturing figures move further into contractionary territory, suggesting Brexit and trade uncertainty has further pressured economic growth there. Risk appetite dried up as investors looked to unload assets while buying up government bonds in the final session of the week. Stocks gave back all the post-FOMC meeting gains. Volatility picked up notably after the yield on the US 3-month T-bill inverted by going above that of the US 10-year yield for the first time since 2007.
The Fed came out Wednesday with what was essentially a dovish double-down to the pivot announced earlier this year. The FOMC dot plot went from a median of two expected rate hikes this year to zero, while also announcing quantitative tightening of the balance sheet would likely come to an end by September at a size of ~$3.5T. In his press conference, Chairman Powell emphasized that risk factors to growth, namely overseas, as well as inflation readings persistently backing off from the Fed's 2% target make it the right time to be patient. He further opined that patience means there is no need to rush to judgment, and it may be some time before the outlook calls for a policy change. Rates fell globally and the US Treasury yield curve flattened in the wake of the news. The short end of the US curve further inverted and by Friday the German 10-year bund yield dipped into negative territory for the first time since 2016. The Greenback initially saw selling pressure in the wake of the Fed, but buyers returned quickly, particularly against the Euro and emerging markets, most notably Turkey. Crude briefly topped $60 helped by drawdowns in US stockpiles before backing away from those 4-month highs on growth concerns. Gold moved to a fresh 1-month high helped by the Fed, and the VIX shot up almost 20% on Friday. For the week, the S&P dropped 0.8%, the Dow shed 1.3%, and the Nasdaq lost 0.6%.
In corporate news this week, Boeing slipped further as questions about its MAX 737 aircraft mounted, as did scrutiny from regulators and Congress. FedEx pressured the transports sector after releasing disappointing results and an outlook that raised global growth concerns. Nike released underwhelming results and noted it saw FX headwinds weighing on their growth in the near term. The biotech space took a hit after Biogen and Eisai announced they were discontinuing Phase 3 ENGAGE and EMERGE Trials of aducanumab in Alzheimer’s Disease. Banks and financials fell sharply after a more dovish than anticipated Fed announcement and as the spread between the 3-month Treasury bill yield and the 10-year note yield dropped to the narrowest level seen since 2007.
MONDAY 3/18
LYFT Files to sell 30.7M IPO shares between $62.00 and $68.00 on NASDAQ - filing
(UK) Northern Ireland's DUP party spokesperson: DUP leader Foster has no current plans to travel to London; Deputy Leader Dodds continues to lead talks with govt
(UK) Parliament Speaker Bercow: PM May must change Brexit deal to hold third 'meaningful vote'; May CANNOT put the same Brexit deal to a third vote
(UK) EU to formally agree on Brexit delay this week potentially until July 1st - Guardian
TUESDAY 3/19
*(UK) FEB JOBLESS CLAIMS CHANGE: +27.0K V +15.7K PRIOR CLAIMANT COUNT RATE: 2.9% V 2.8% PRIOR
(UK) JAN AVERAGE WEEKLY EARNINGS 3M/Y: 3.4% V 3.2%E; WEEKLY EARNINGS (EX-BONUS) 3M/Y: 3.4% V 3.4%E
*(DE) GERMANY MAR ZEW CURRENT SITUATION: 11.1 V 13.0E; EXPECTATIONS SURVEY: -3.6 V -11.0E
(CN) China said to be considering excluding 737 Max aircraft from US trade deal - press
*(US) JAN FINAL DURABLE GOODS ORDERS: 0.3% V 0.4%E; DURABLES (EX-TRANSPORTATION): -0.2% V -0.1% PRELIM
(CN) Some US officials reportedly see China walking back trade offers; some officials said to see China moves as normal part of the process - press
FDX Reports Q3 $3.03 v $3.10e, Rev $17.0B v $17.6Be
WEDNESDAY 3/20
WP Becomes first card acquirer to enable Amazon Pay
(US) Association of American Railroads weekly rail traffic report for week ending Mar 16th: 501K, -6.8% y/y (has fallen for 5 consecutive weeks)
(US) Pres Trump: We are talking about leaving tariffs on China for a long period of time to ensure China complies with the trade deal
*(US) FOMC LEAVES TARGET RANGE UNCHANGED BETWEEN 2.25-2.50%; SIGNALS NO HIKES THIS YEAR AND ONE RATE HIKE IN 2020
*(US) FED: Balance Sheet Normalization Plans: to slow reduction of holdings starting in May and conclude run off in Sept
(UK) PM May: UK will not leave EU on time on March 20th as previously expected; not ready to delay Brexit any further than June 30th
MU Reports Q2 $1.71 v $1.73e, Rev $5.84B v $5.92Be
THURSDAY 3/21
941.HK Reports FY18 (CNY) Net 117.8B v 114.3B y/y, EBITDA 275.5B v 270.4B y/y; Rev 736.8B v 741B y/y
*(CH) SNB LEAVES SIGHT DEPOSIT RATE UNCHANGED AT -0.75%; AS EXPECTED
700.HK Reports Q4 (CNY) Net 14.2B v 17.6Be, Adj EBITDA 29.7B v 29.6B y/y, Rev 84.9B v 83.4Be
*(NO) NORWAY CENTRAL BANK (NORGES) RAISES DEPOSIT RATES BY 25BPS TO 1.00%; AS EXPECTED
*(UK) FEB RETAIL SALES (EX AUTO/FUEL) M/M 0.2% V -0.4%E; Y/Y: 3.8% V 3.5%E
BIIB Biogen and Eisai to discontinue Phase 3 ENGAGE and EMERGE Trials of aducanumab in Alzheimer’s Disease; futility analysis suggests primary endpoint unlikely to be met, EVOLVE Phase 2 safety study and LT extension of PRIME Phase1b study of aducanumab also to be discontinued
*(UK) BOE LEAVES INTEREST RATES UNCHANGED AT 0.75%; AS EXPECTED
*(UK) BANK OF ENGLAND (BOE) MAR MINUTES: Voted 9-0 to leave rates unchanged
(BR) Former Brazil President Temer arrested as part of 'Carwash' probe - Brazil press
FB Reportedly stored hundreds of millions of user passwords in plain text for years - Krebs on Security
NKE Reports Q3 $0.68 v $0.63e, Rev $9.61B v $9.54Be
(EU) EU Tusk on Leader Summit draft conclusions: EU can agree on Brexit extension until May 22nd with extension conditional on Withdrawal Agreement approved by UK parliament during week of Mar 25th (next week)
FRIDAY 3/22
CSGN.CH Publishes FY18 Annual Report: Reports final FY18 (CHF) Net +2.02B v -983M y/y, Rev 21.6B v 21.8B y/y
(FR) FRANCE MAR PRELIMINARY MANUFACTURING PMI: 49.8 V 51.4E (back into contraction for 1st time in 3 months)
(DE) GERMANY MAR PRELIMINARY MANUFACTURING PMI: 44.7 V 48.0E; (3rd straight contraction)
*(EU) EUROZONE MAR PRELIMINARY MANUFACTURING PMI: 47.6 V 49.5E (2nd straight contraction and lowest since Apr 2013)
(DE) GERMAN 10-YEAR BUND YIELD MOVES INTO NEGATIVE TERRITORY
(CN) US President Trump: Reiterates deal with China coming along very well; will probably happen and getting very close - TV interview
(RU) RUSSIA CENTRAL BANK (CBR) LEAVES KEY 1-WEEK AUCTION RATE UNCHANGED AT 7.75%; AS EXPECTED
TIF Reports Q4 $1.60* adj v $1.60e, Rev $1.32B v $1.34Be
(US) MAR PRELIMINARY MARKIT MANUFACTURING PMI: 52.5 V 53.5E
*(US) FEB EXISTING HOME SALES: 5.51M V 5.10ME
Fri, 22 Mar 2019 16:20 PM EST
US stock markets managed to scale the proverbial wall of worry for much of this week, helped by another prod from the US Federal Reserve. CPI figures continued to miss expectations here in the US and elsewhere, while global economic data both here and abroad suggested deceleration. Brexit worries were dragged out as PM May went to Brussels and appears to have at least secured a short-term extension to this month’s deadline, but a resolution remains up in the air and it is contingent on yet another round of vital votes in Parliament next week. Friday saw key European manufacturing figures move further into contractionary territory, suggesting Brexit and trade uncertainty has further pressured economic growth there. Risk appetite dried up as investors looked to unload assets while buying up government bonds in the final session of the week. Stocks gave back all the post-FOMC meeting gains. Volatility picked up notably after the yield on the US 3-month T-bill inverted by going above that of the US 10-year yield for the first time since 2007.
The Fed came out Wednesday with what was essentially a dovish double-down to the pivot announced earlier this year. The FOMC dot plot went from a median of two expected rate hikes this year to zero, while also announcing quantitative tightening of the balance sheet would likely come to an end by September at a size of ~$3.5T. In his press conference, Chairman Powell emphasized that risk factors to growth, namely overseas, as well as inflation readings persistently backing off from the Fed's 2% target make it the right time to be patient. He further opined that patience means there is no need to rush to judgment, and it may be some time before the outlook calls for a policy change. Rates fell globally and the US Treasury yield curve flattened in the wake of the news. The short end of the US curve further inverted and by Friday the German 10-year bund yield dipped into negative territory for the first time since 2016. The Greenback initially saw selling pressure in the wake of the Fed, but buyers returned quickly, particularly against the Euro and emerging markets, most notably Turkey. Crude briefly topped $60 helped by drawdowns in US stockpiles before backing away from those 4-month highs on growth concerns. Gold moved to a fresh 1-month high helped by the Fed, and the VIX shot up almost 20% on Friday. For the week, the S&P dropped 0.8%, the Dow shed 1.3%, and the Nasdaq lost 0.6%.
In corporate news this week, Boeing slipped further as questions about its MAX 737 aircraft mounted, as did scrutiny from regulators and Congress. FedEx pressured the transports sector after releasing disappointing results and an outlook that raised global growth concerns. Nike released underwhelming results and noted it saw FX headwinds weighing on their growth in the near term. The biotech space took a hit after Biogen and Eisai announced they were discontinuing Phase 3 ENGAGE and EMERGE Trials of aducanumab in Alzheimer’s Disease. Banks and financials fell sharply after a more dovish than anticipated Fed announcement and as the spread between the 3-month Treasury bill yield and the 10-year note yield dropped to the narrowest level seen since 2007.
MONDAY 3/18
LYFT Files to sell 30.7M IPO shares between $62.00 and $68.00 on NASDAQ - filing
(UK) Northern Ireland's DUP party spokesperson: DUP leader Foster has no current plans to travel to London; Deputy Leader Dodds continues to lead talks with govt
(UK) Parliament Speaker Bercow: PM May must change Brexit deal to hold third 'meaningful vote'; May CANNOT put the same Brexit deal to a third vote
(UK) EU to formally agree on Brexit delay this week potentially until July 1st - Guardian
TUESDAY 3/19
*(UK) FEB JOBLESS CLAIMS CHANGE: +27.0K V +15.7K PRIOR CLAIMANT COUNT RATE: 2.9% V 2.8% PRIOR
(UK) JAN AVERAGE WEEKLY EARNINGS 3M/Y: 3.4% V 3.2%E; WEEKLY EARNINGS (EX-BONUS) 3M/Y: 3.4% V 3.4%E
*(DE) GERMANY MAR ZEW CURRENT SITUATION: 11.1 V 13.0E; EXPECTATIONS SURVEY: -3.6 V -11.0E
(CN) China said to be considering excluding 737 Max aircraft from US trade deal - press
*(US) JAN FINAL DURABLE GOODS ORDERS: 0.3% V 0.4%E; DURABLES (EX-TRANSPORTATION): -0.2% V -0.1% PRELIM
(CN) Some US officials reportedly see China walking back trade offers; some officials said to see China moves as normal part of the process - press
FDX Reports Q3 $3.03 v $3.10e, Rev $17.0B v $17.6Be
WEDNESDAY 3/20
WP Becomes first card acquirer to enable Amazon Pay
(US) Association of American Railroads weekly rail traffic report for week ending Mar 16th: 501K, -6.8% y/y (has fallen for 5 consecutive weeks)
(US) Pres Trump: We are talking about leaving tariffs on China for a long period of time to ensure China complies with the trade deal
*(US) FOMC LEAVES TARGET RANGE UNCHANGED BETWEEN 2.25-2.50%; SIGNALS NO HIKES THIS YEAR AND ONE RATE HIKE IN 2020
*(US) FED: Balance Sheet Normalization Plans: to slow reduction of holdings starting in May and conclude run off in Sept
(UK) PM May: UK will not leave EU on time on March 20th as previously expected; not ready to delay Brexit any further than June 30th
MU Reports Q2 $1.71 v $1.73e, Rev $5.84B v $5.92Be
THURSDAY 3/21
941.HK Reports FY18 (CNY) Net 117.8B v 114.3B y/y, EBITDA 275.5B v 270.4B y/y; Rev 736.8B v 741B y/y
*(CH) SNB LEAVES SIGHT DEPOSIT RATE UNCHANGED AT -0.75%; AS EXPECTED
700.HK Reports Q4 (CNY) Net 14.2B v 17.6Be, Adj EBITDA 29.7B v 29.6B y/y, Rev 84.9B v 83.4Be
*(NO) NORWAY CENTRAL BANK (NORGES) RAISES DEPOSIT RATES BY 25BPS TO 1.00%; AS EXPECTED
*(UK) FEB RETAIL SALES (EX AUTO/FUEL) M/M 0.2% V -0.4%E; Y/Y: 3.8% V 3.5%E
BIIB Biogen and Eisai to discontinue Phase 3 ENGAGE and EMERGE Trials of aducanumab in Alzheimer’s Disease; futility analysis suggests primary endpoint unlikely to be met, EVOLVE Phase 2 safety study and LT extension of PRIME Phase1b study of aducanumab also to be discontinued
*(UK) BOE LEAVES INTEREST RATES UNCHANGED AT 0.75%; AS EXPECTED
*(UK) BANK OF ENGLAND (BOE) MAR MINUTES: Voted 9-0 to leave rates unchanged
(BR) Former Brazil President Temer arrested as part of 'Carwash' probe - Brazil press
FB Reportedly stored hundreds of millions of user passwords in plain text for years - Krebs on Security
NKE Reports Q3 $0.68 v $0.63e, Rev $9.61B v $9.54Be
(EU) EU Tusk on Leader Summit draft conclusions: EU can agree on Brexit extension until May 22nd with extension conditional on Withdrawal Agreement approved by UK parliament during week of Mar 25th (next week)
FRIDAY 3/22
CSGN.CH Publishes FY18 Annual Report: Reports final FY18 (CHF) Net +2.02B v -983M y/y, Rev 21.6B v 21.8B y/y
(FR) FRANCE MAR PRELIMINARY MANUFACTURING PMI: 49.8 V 51.4E (back into contraction for 1st time in 3 months)
(DE) GERMANY MAR PRELIMINARY MANUFACTURING PMI: 44.7 V 48.0E; (3rd straight contraction)
*(EU) EUROZONE MAR PRELIMINARY MANUFACTURING PMI: 47.6 V 49.5E (2nd straight contraction and lowest since Apr 2013)
(DE) GERMAN 10-YEAR BUND YIELD MOVES INTO NEGATIVE TERRITORY
(CN) US President Trump: Reiterates deal with China coming along very well; will probably happen and getting very close - TV interview
(RU) RUSSIA CENTRAL BANK (CBR) LEAVES KEY 1-WEEK AUCTION RATE UNCHANGED AT 7.75%; AS EXPECTED
TIF Reports Q4 $1.60* adj v $1.60e, Rev $1.32B v $1.34Be
(US) MAR PRELIMINARY MARKIT MANUFACTURING PMI: 52.5 V 53.5E
*(US) FEB EXISTING HOME SALES: 5.51M V 5.10ME
Saturday, March 16, 2019
Barrons weekend summary
Barrons weekend summary: Positive feature on BA and on US steel industry
Cover story: Regardless of how U.S.-China trade talks play out, the global system of trade is being realigned as a decades-long drive toward free trade across borders begins to reverse and globalization increasingly becomes overwhelmed by populism, nationalism, and protectionism.
Features: 1) Positive on BA: Previous crashes involving the aerospace giant’s planes have sent shares down, only for the market to see them rise again, precedents today’s shareholders can look to as a reason not to panic about the recent Ethiopian Airlines Max jet crash—though they shouldn’t count on a quick recovery; 2) Positive on NUE, STLD, X, CMC: Shares of the four leading U.S. steel producers trade well below historical averages, and given the industry’s volatile history, investors should be cautious on the stocks—among potential catalysts is the fact the U.S. is short of steel production and needs imports to satisfy demand, making imports the price setters; 3) Members of Barron’s 2019 energy roundtable say certain integrated oil-and-gas companies are poised to benefit as projects long in the planning finally come on-line, and they don’t foresee a big surge this year in oil prices—though $60 crude shouldn’t hamper well-managed companies.
Tech Trader: Cautious on SQ: Company was among the first to see an opportunity helping small businesses accept credit-card payments, but its move into lending, cryptocurrencies, and software raises the question of whether it should leave its roots behind and become part software provider, part bank.
Trader: Though much of the recent economic data has been weaker than expected, Torsten Sløk of DB says he sees very early signs of a possible recovery in both the economy and corporate earnings; Solar demand is back on the upswing, and solar stocks have already responded—TAN is up 30% this year, nearly erasing all of its 2018 drop; There are several factors working in favor of small-cap stocks, which still look cheap relative to large-caps, says Lori Calvasina of RBC Capital Markets.
Profile: Natasha Sibley, co-manager of the $250M AlphaGen Castor Fund at JHG believes that European stock dividends are trading too cheaply and that a surer way to make money amid the political uncertainty is to capitalize on the discrepancy between the price of European stock dividends.
European Trader: Positive on Phoenix Group Holdings: Brexit-weary investors in European stocks might want to take refuge in the firm—which acquires closed lines of pensions and life insurance and winds down the books of business—whose shares have limited downside and the potential for lasting income.
Emerging Markets: After a strong January, emerging market stocks are once again underperforming their U.S. peers, but conditions remain ripe for a further rally in the sector as macro risks that have frightened investors appear to recede.
Commodities: Oil is among the biggest commodity gainers in 2019, with prices up by more than 20%—but cuts may run head-on into the effects of increased U.S. shale production and more output from other sources.
Streetwise: Columnist Jack Hough comments on the recent college-admission scandal, noting that anyone with a reasonable shot of completing a college degree should do so—but the fact that so many kids will lose money on a product that ought to be cheap is the real scandal about which people should be concerned.
Friday, March 15, 2019
Risk appetite not dampened by delays for Brexit and trade deals, or by Boeing crash
TradeTheNews.com Weekly
Market Update: Risk appetite not dampened by delays for Brexit and trade deals,
or by Boeing crash
Fri, 15 Mar 2019 16:15 PM EST
The bulls retook control this week sending stock markets to the highest levels of the year. The S&P finally found the legs to climb back above 2815 area, a level that has served as repeated resistance going back to the stock market's break last fall. It was hard to pinpoint the underlying factors for this week’s rally, as there really wasn’t much to get excited about on either the trade or Brexit fronts. Despite repeated assurances from the White House, reports suggested that a final trade deal with China is still weeks away, if at all. Meanwhile, PM May suffered a series of defeats on her EU separation proposal, but markets saw the silver lining as the Parliament voted to forbid a ‘no deal’ Brexit and to delay the Brexit date from March 29th until June 30th (though the EU27 still must unanimously approve the extension).
Economic data remained spotty with continued softness in Chinese figures garnering significant attention once again. US January new home sales decelerated and an early March US manufacturing reading touched the lowest level in two years. The soft data helped keep the pressure on Treasury yields. US rates moved back to the lowest levels of the year with the 10-year testing below 2.6% on Friday. Helping end the week on a positive note, the February Jolts jobs openings data hit a record high for the second month in a row. WTI crude broke out new highs for the year trading back to levels not seen since November alongside the renewed momentum in stocks.
Corporate headlines didn’t appear to provide much of a tailwind either. Boeing was mired in negative headlines after the troubling crash of an Ethiopian Airlines 737 MAX 8 last weekend. The crash was eerily similar to the Lion Air crash from late last year suggesting a software malfunction potentially resulted in another catastrophe for the company’s new workhorse aircraft. After pressure from civil authorities around the world the FAA followed suit and grounded all 737 MAX planes indefinitely. Boeing shares served a significant anchor for the Dow through much of the week. For the week, the DJIA gained 1.6%, the S&P jumped 2.9%, and the Nasdaq surged 3.8%.
In other corporate news this week, the board of Deutsche Bank reportedly agreed to explore a potential merger with Commerzbank, merely awaiting the nod from German Chancellor Merkel. Nvidia agreed to acquire Mellanox Technologies for $6.9B -- its biggest ever purchase -- in order to increase its capacity for chip production for data centers. In a bumpy week for Facebook, federal prosecutors were said to launch a criminal probe into the company’s data deals that it made with large tech companies, and long-time executive and Chief Product Officer Chris Cox departed over disagreements about product direction. Smith & Nephew announced it would buy Osiris Therapeutics for $660M in a bolt-on acquisition to enhance its strength in the regenerative medicine market. Steel producer Nucor cut its Q1 guidance due to a drop in steel mills profit and some shipment delays, but the company said it was encouraged by the impact of recent price increases.
SUNDAY 3/10
03/10 BA Ethiopian Airlines flying a new Boeing 737 Max, crashes shortly after takeoff, killing 157 people (2nd crash of the new 737 Max recently)
MONDAY 3/11
BA Exec: investigation is in its early stages; engaged customers and regulators on concerns they may have
(US) Atlanta Fed cuts Q1 GDP forecast to 0.2% from 0.5%
(EU) EU Juncker/ PM May joint statement: UK committed to finding an alternative arrangement to the backstop by the end of 2020
TUESDAY 3/12
*(UK) ATTORNEY GENERAL COX LEGAL ADVICE ON REVISED BACKSTOP: Believe the joint instrument has binding legal effect as a document; reduces risk of being trapped in backstop
*(US) FEB CPI M/M: 0.2% V 0.2%E; CPI (EX-FOOD/ENERGY) M/M: 0.1% V 0.2%E; CPI NSA: 252.776 V 252.812E
*(UK) PM MAY'S REVISED BREXIT DEAL REJECTED BY PARLIAMENT BY 391-242 VOTE
WEDNESDAY 3/13
*(US) FEB PPI FINAL DEMAND M/M: 0.1% V 0.2%E; Y/Y: 1.9% V 1.9%E
BA Pres Trump confirms US to ground 737 MAX 8 and MAX 9 aircraft effective immediately - press
*(CN) CHINA FEB INDUSTRIAL PRODUCTION YTD Y/Y: 5.3% V 5.6%E (slowest pace since early 2002)
*(UK) UK PARLIAMENT REJECTS NO-DEAL BREXIT IN ANY SCENARIO IN 312-308 VOTE, in a defeat for PM May
THURSDAY 3/14
*(DE) GERMANY FEB FINAL CPI M/M: 0.4% V 0.5%E; Y/Y: 1.5% V 1.6%E
(US) China-US trade meeting between Trump and Xi to sign an potential agreement to end their trade war not likely until April at the earliest - financial press
GE Guides initial FY19 Adj $0.50-0.60 v $0.65e, Industrial Segment Organic Rev to grow low to mid single digits, Adj Industrial FCF -$2.0B to $0B - Management Outlook Call
*(US) JAN NEW HOME SALES: 607K V 622KE
*(UK) PARLIAMENT PASSES GOVT MOTION TO EXTEND ARTICLE 50: delaying the Brexit date from March 29th until June 30th
ORCL Reports Q3 $0.87 v $0.84e, Rev $9.62B v $9.61Be; Raises dividend 26% to $0.24 from $0.19 (indicated yield 1.81%)
US President Trump: We'll have 'news' on China trade deal in the next 3-4 weeks
(CN) China Premier Li: China economy faces new downward pressure; won't let growth slide out of reasonable range; 6.6% growth [in 2018] was hard-won; To cut VAT April 1st
(NK) North Korea Dep Foreign Min: No intention to yield to US demands; North Korea said to mull suspending denuclearization talks with US, according to Russia Media
(NK) North Korea: Says Leader Kim Jong Un rethinking launching and test moratorium - Russian press
FRIDAY 3/15
UBSG.CH Publishes FY18 Annual Report: Adjusts final FY18 Net $4.52B v $4.90B prelim v $969M y/y, Op $5.99B v $6.37B prelim v $5.35B y/y, Op Income $30.2B v $29.6B y/y
*(US) MAR EMPIRE MANUFACTURING: 3.7 V 10.0E (lowest since May 2017)
*(US) FEB INDUSTRIAL PRODUCTION M/M: 0.1% V 0.4%E; CAPACITY UTILIZATION: 78.2% V 78.5%E
*(US) MAR PRELIMINARY UNIVERSITY OF MICHIGAN CONFIDENCE: 97.8 V 95.7E
*(US) JAN JOLTS JOB OPENINGS: 7.58M V 7.225ME (record high, second month in a row)
(US) New York Fed Nowcast: maintains Q1 forecast at 1.4%; maintains Q2 forecast at 1.5%
GOOGL State Attorneys General reportedly taking preliminary steps towards investigation into Google practices - press
Fri, 15 Mar 2019 16:15 PM EST
The bulls retook control this week sending stock markets to the highest levels of the year. The S&P finally found the legs to climb back above 2815 area, a level that has served as repeated resistance going back to the stock market's break last fall. It was hard to pinpoint the underlying factors for this week’s rally, as there really wasn’t much to get excited about on either the trade or Brexit fronts. Despite repeated assurances from the White House, reports suggested that a final trade deal with China is still weeks away, if at all. Meanwhile, PM May suffered a series of defeats on her EU separation proposal, but markets saw the silver lining as the Parliament voted to forbid a ‘no deal’ Brexit and to delay the Brexit date from March 29th until June 30th (though the EU27 still must unanimously approve the extension).
Economic data remained spotty with continued softness in Chinese figures garnering significant attention once again. US January new home sales decelerated and an early March US manufacturing reading touched the lowest level in two years. The soft data helped keep the pressure on Treasury yields. US rates moved back to the lowest levels of the year with the 10-year testing below 2.6% on Friday. Helping end the week on a positive note, the February Jolts jobs openings data hit a record high for the second month in a row. WTI crude broke out new highs for the year trading back to levels not seen since November alongside the renewed momentum in stocks.
Corporate headlines didn’t appear to provide much of a tailwind either. Boeing was mired in negative headlines after the troubling crash of an Ethiopian Airlines 737 MAX 8 last weekend. The crash was eerily similar to the Lion Air crash from late last year suggesting a software malfunction potentially resulted in another catastrophe for the company’s new workhorse aircraft. After pressure from civil authorities around the world the FAA followed suit and grounded all 737 MAX planes indefinitely. Boeing shares served a significant anchor for the Dow through much of the week. For the week, the DJIA gained 1.6%, the S&P jumped 2.9%, and the Nasdaq surged 3.8%.
In other corporate news this week, the board of Deutsche Bank reportedly agreed to explore a potential merger with Commerzbank, merely awaiting the nod from German Chancellor Merkel. Nvidia agreed to acquire Mellanox Technologies for $6.9B -- its biggest ever purchase -- in order to increase its capacity for chip production for data centers. In a bumpy week for Facebook, federal prosecutors were said to launch a criminal probe into the company’s data deals that it made with large tech companies, and long-time executive and Chief Product Officer Chris Cox departed over disagreements about product direction. Smith & Nephew announced it would buy Osiris Therapeutics for $660M in a bolt-on acquisition to enhance its strength in the regenerative medicine market. Steel producer Nucor cut its Q1 guidance due to a drop in steel mills profit and some shipment delays, but the company said it was encouraged by the impact of recent price increases.
SUNDAY 3/10
03/10 BA Ethiopian Airlines flying a new Boeing 737 Max, crashes shortly after takeoff, killing 157 people (2nd crash of the new 737 Max recently)
MONDAY 3/11
BA Exec: investigation is in its early stages; engaged customers and regulators on concerns they may have
(US) Atlanta Fed cuts Q1 GDP forecast to 0.2% from 0.5%
(EU) EU Juncker/ PM May joint statement: UK committed to finding an alternative arrangement to the backstop by the end of 2020
TUESDAY 3/12
*(UK) ATTORNEY GENERAL COX LEGAL ADVICE ON REVISED BACKSTOP: Believe the joint instrument has binding legal effect as a document; reduces risk of being trapped in backstop
*(US) FEB CPI M/M: 0.2% V 0.2%E; CPI (EX-FOOD/ENERGY) M/M: 0.1% V 0.2%E; CPI NSA: 252.776 V 252.812E
*(UK) PM MAY'S REVISED BREXIT DEAL REJECTED BY PARLIAMENT BY 391-242 VOTE
WEDNESDAY 3/13
*(US) FEB PPI FINAL DEMAND M/M: 0.1% V 0.2%E; Y/Y: 1.9% V 1.9%E
BA Pres Trump confirms US to ground 737 MAX 8 and MAX 9 aircraft effective immediately - press
*(CN) CHINA FEB INDUSTRIAL PRODUCTION YTD Y/Y: 5.3% V 5.6%E (slowest pace since early 2002)
*(UK) UK PARLIAMENT REJECTS NO-DEAL BREXIT IN ANY SCENARIO IN 312-308 VOTE, in a defeat for PM May
THURSDAY 3/14
*(DE) GERMANY FEB FINAL CPI M/M: 0.4% V 0.5%E; Y/Y: 1.5% V 1.6%E
(US) China-US trade meeting between Trump and Xi to sign an potential agreement to end their trade war not likely until April at the earliest - financial press
GE Guides initial FY19 Adj $0.50-0.60 v $0.65e, Industrial Segment Organic Rev to grow low to mid single digits, Adj Industrial FCF -$2.0B to $0B - Management Outlook Call
*(US) JAN NEW HOME SALES: 607K V 622KE
*(UK) PARLIAMENT PASSES GOVT MOTION TO EXTEND ARTICLE 50: delaying the Brexit date from March 29th until June 30th
ORCL Reports Q3 $0.87 v $0.84e, Rev $9.62B v $9.61Be; Raises dividend 26% to $0.24 from $0.19 (indicated yield 1.81%)
US President Trump: We'll have 'news' on China trade deal in the next 3-4 weeks
(CN) China Premier Li: China economy faces new downward pressure; won't let growth slide out of reasonable range; 6.6% growth [in 2018] was hard-won; To cut VAT April 1st
(NK) North Korea Dep Foreign Min: No intention to yield to US demands; North Korea said to mull suspending denuclearization talks with US, according to Russia Media
(NK) North Korea: Says Leader Kim Jong Un rethinking launching and test moratorium - Russian press
FRIDAY 3/15
UBSG.CH Publishes FY18 Annual Report: Adjusts final FY18 Net $4.52B v $4.90B prelim v $969M y/y, Op $5.99B v $6.37B prelim v $5.35B y/y, Op Income $30.2B v $29.6B y/y
*(US) MAR EMPIRE MANUFACTURING: 3.7 V 10.0E (lowest since May 2017)
*(US) FEB INDUSTRIAL PRODUCTION M/M: 0.1% V 0.4%E; CAPACITY UTILIZATION: 78.2% V 78.5%E
*(US) MAR PRELIMINARY UNIVERSITY OF MICHIGAN CONFIDENCE: 97.8 V 95.7E
*(US) JAN JOLTS JOB OPENINGS: 7.58M V 7.225ME (record high, second month in a row)
(US) New York Fed Nowcast: maintains Q1 forecast at 1.4%; maintains Q2 forecast at 1.5%
GOOGL State Attorneys General reportedly taking preliminary steps towards investigation into Google practices - press
Saturday, March 9, 2019
Barrons weekend summary
Barrons weekend summary: positive features on DAL and select offshore drilling names
Cover story: The top firms on Barron’s annual list of Best Fund Families “did what they were supposed to do—beat their benchmarks and outperform their respective Lipper peers”; Taking the top spot is American Funds, up from No. 36 in the previous ranking, followed by MainStay Funds and Eaton Vance.
Features: 1) Baron’s list of the Top 1,200 Financial Advisors, which “recognizes outstanding advisors from all 50 states, plus the District of Columbia. It’s our largest, most comprehensive listing, and it encompasses everyone from independents, who own and operate their own practices, to employees of the big Wall Street firms”; 2) Positive on DAL: Delta is the best-managed U.S. airline, and its stock trades cheaply—at about $50, shares fetch less than eight times projected 2019 earnings of $6.51 a share, and its dividend yield of 2.8% is the highest among its peers”; 3) Positive on RIG, ESV, DO, Borr Drilling: The offshore drilling business has suffered its deepest downturn in 30 years, as investment capital pours into land-based shale, but there are early signs of a return to the sea, and investors who dive in now could profit nicely; 4) Revitalization efforts in Detroit appear to be finally taking hold—ten years after it was hit by the financial crisis and the near-collapse of the auto industry, new investment has made the city home to thriving start-ups, hotels, and coffee shops.
Tech Trader: Positive on INTC: Chip maker’s stock hasn’t moved much despite impressive 2018 financials, primarily over concerns about a long-lasting CEO search and rising competition—but the risks appear overblown, and are already priced into the stock.
Trader: Economic volatility has been low since the financial crisis and growth has been slow and steady, preventing inflation from rising too quickly or corporate spending from getting overheated—making it difficult for the economy to slip into a recession; “The economy today isn’t in the same spot as it was back in 2000 and 2001, when the dot-com bust helped trigger a mild recession. But we might be at a tipping point for decelerating growth”; Cautious on DWDP: As the company prepares to break into three, investors must decide which parts to keep or sell—and the answer will depend on their investment goals and what they need for industry exposure.
Interview: Christopher Wood of CLSA Asia-Pacific Markets and author of the “Greed & Fear” newsletter makes a case for avoiding U.S. stocks and buying Asia instead.
Profile: David Eiswert, manager of the T. Rowe Price Global Stock Fund, has access to all of TROW’s 158 global equity analysts, and he looks anywhere in the world for opportunities (top 10 holdings: GOOGL, Essity, AMZN, Tencent Holding, BDX, SRE, BABA, ISRG, NEE, PYPL).
Follow-Up: Cautious on DLTR: Company’s announcement that it will move faster to fix its business and close a number of Family Dollar stores is a gift for investors—but while the sense of urgency has promise, the turnaround process remains a risky work in progress.
European Trader: Cautious on Aston Martin Lagonda: Automaker’s shares crashed after it went public, but the company is on a mission to prove doubters wrong, and all signs indicate it’s taking the right steps.
Emerging Markets: Rumors of a U.S.-China trade deal are boosting Chinese stocks, but Beijing has also helped by tilting away from deleveraging and towards economic stimulus.
Commodities: “Coffee has fallen below a dollar a pound to trade close to its lowest level in more than a decade, but a global glut that pushed prices down for the past two years may finally come to an end in 2019.”
Streetwise: Daniel Ives of Wedbush sees 25% upside for MSFT during the next year as it increasingly sheds its underdog status and better competes with AMZN and other rivals in areas such as cloud computing.
Weaker data and aggressive ECB response weighs on outlook
TradeTheNews.com Weekly
Market Update: Weaker data and aggressive ECB response weighs on outlook
Fri, 08 Mar 2019 16:07 PM EST
Stock markets rolled over this week as optimism on the China trade front waned to some degree, and worries about global growth resurfaced. Initial optimism over a weekend report that Beijing and Washington were nearing a final trade deal quickly melted away on concerns that the deal might not include enough structure changes in how China conducts business, and subsequent reports that China was getting cold feet. Risk assets in particular saw softening after the ECB surprised markets by acting aggressively in reviving stimulus. The ECB slashed forecasts, pushed back rate hike expectations and introduced and new TLTRO loan program. Just a day before, the Federal Reserve’s Beige book indicated marginal cooling in some districts. Friday saw February non-farm payrolls come in well below expectations but the details of the report suggested that the drop was likely due to transitory factors while affirming that strong underlying labor market trends remain intact. Overseas economic data remained particularly troublesome forcing investors to ponder just how much slowing outside of the US was beginning weigh on growth expectations here.
Interest rates fell notably on both sides of the Atlantic. The German 10-year bund yield slipped back towards 5 bps for the first time since 2016 while the US 10-year dropped back below 2.65%. The Greenback rallied, pushing the Dollar index back above 97 which has served as a significant resistance level. The pound weakened as Brexit negotiations continued without real progress and PM May reportedly rejected a new compromise proposal from the EU just days ahead of expected votes in the UK Parliament. Oil and other commodities tied to growth slipped late in the week as well. The S&P dipped back below its 200-day moving average for the first time in nearly a month. The DJ Transports declined for 11 straight sessions, the longest such streak since the early 1970s. The VIX volatility index rose to levels not seen in more than a month, briefly topping 18. For the week, the S&P and DJIA each lost 2.2%,while the Nasdaq fell 2.5%.
Some key retailer earnings highlighted this week in corporate news. Target shares surged after its holiday quarter beat analyst expectations on comps and the company saw its strongest traffic growth in over a decade. Kohl’s topped estimates on its earnings and same store sales, and also announced a new partnership with Planet Fitness to leverage space adjacent to select Kohl's stores for new gym locations. Kroger shares plummeted after its earnings fell short and margins contracted amid competition from Amazon and Walmart. Shares in Costco jumped after the wholesaler crushed earnings estimates, and the company announced another employee pay hike, its second wage increase in a year. Biogen bolstered its pipeline with an $800M acquisition of clinical-stage gene-therapy company Nightstar Therapeutics for $25.50/share. Eli Lilly said it would sell a half-price version of Humalog amid renewed scrutiny from Congress on rising insulin costs. Shares of cloud services firm Citrix tumbled on Friday after the revelation that it was the victim of a cyberattack, likely by an Iranian-affiliated hacker group.
SUNDAY 3/3
(CN) China said to have offered US to lower tariffs on US farm goods, autos and other goods; US considering removing most if not all of the sanctions imposed against Chinese products since last year; close to a final agreement on trade - US press
(CN) China Hainan planning to phase out petrol and diesel vehicles - press
MONDAY 3/4
*(EU) EURO ZONE MAR SENTIX INVESTOR CONFIDENCE: -2.2 V -3.1E
OPEC sources: Unlikely to make any output policy decision at its April meeting; more likely to do so in June - press
(US) Atlanta Fed maintains Q1 GDP forecast at 0.3%, unchanged from prior
CRM Reports Q4 $0.70 v $0.56e, Rev $3.60B v $3.56Be
LLY To introduce Lower-Priced Insulin
NITE To be acquired by Biogen for $25.50/shr in ~$800M all-cash deal
*(CN) CHINA NATIONAL PEOPLE'S CONGRESS (NPC): SETS 2019 GDP TARGET AT 6.0-6.5% v ~6.5% in 2018; CPI ~3.0% v ~3.0% in 2018 (both inline with expectations); Fiscal policy to be proactive, monetary policy to be prudent; cuts VAT for some sectors and top bracket
*(AU) RBA LEAVES CASH RATE TARGET UNCHANGED AT 1.50%; AS EXPECTED (27th straight pause in the current easing cycle)
TUESDAY 3/5
(GR) Greece Debt Agency (PDMA) opens book to sell 10-year bond via syndicate; yield guidance seen 4.125%
*(UK) FEB SERVICES PMI: 51.3 V 50.0E (31st month of expansion)
TGT Reports Q4 $1.53 v $1.53e, Rev $23.0B v $23.1Be
(UK) Govt said to be unlikely to publish no-deal tariffs before meaningful vote - financial press
KSS Reports Q4 $2.24 v $2.17e, Rev $6.30B v $6.79Be; Raises Quarterly dividend 9.8% to $0.67 from $0.61 (indicated yield 4.03%)
*(US) FEB ISM NON-MANUFACTURING INDEX: 59.7 V 57.4E
*(US) DEC NEW HOME SALES: 621K V 600KE
GE CEO: Sees free cash flow in negative territory this year - JP Morgan conf
NIO Reports Q4 (CNY) Adj EPS -3.20 v -71.47 y/y, Rev 3.44B v n/a y/y
WEDNESDAY 3/6
THO Reports Q2 -$0.10* v +$0.88e, Rev $1.29B v $1.48Be
XOM Targets Earnings to increase $4B, Cash flow to grow >$5B from 2019 to 2020 - investor presentation
(EU) ECB reportedly to hold discussions on design of new targeted loans (TLTRO); To cut inflation projections through 2021 - press
(US) Conference Board Experimental Help Wanted OnLine Index (HWOL) at 104.0 v 103.7 m/m
(US) Atlanta Fed raises Q1 GDP forecast to 0.5% from 0.3%
(US) Association of American Railroads weekly rail traffic report for week ending Mar 2nd: 528.2K, -3% y/y (has fallen for 3 consecutive weeks)
(US) Kansas City Fed economist's paper: Fed is starting to consider when to halt decline in reserves and grow the balance sheet
*(US) FEDERAL RESERVE BEIGE BOOK: ECONOMY CONTINUED TO GROW IN LATE JAN AND FEB; WITH 10 OF 12 DISTRICTS REPORTING SLIGHT TO MODERATE PACE OF EXPANSION AND 2 SAYING GROWTH WAS FLAT
(US) Centers for Medicare & Medicaid Services seeks recommendations that allow Americans to purchase health insurance across state lines
THURSDAY 3/7
DPW.DE Reports Q4 Net €813M v €837M y/y, EBIT €1.1B v €1.18Me, Rev €16.9B v €16.1B y/y
*(EU) EURO ZONE Q4 FINAL GDP Q/Q: 0.2% V 0.2%E; Y/Y: 1.1% V 1.2%E
SUP Reports Q4 $0.61 v -$0.50 y/y, Rev $378.8M v $361.8M y/y
*(EU) ECB LEAVES MAIN 7-DAY REFINANCING RATE UNCHANGED AT 0.00%; AS EXPECTED; announces new TLTRO, extends forward guidance
*(EU) ECB ANNOUNCES NEW TLTRO PROGRAM
*(US) Q4 NONFARM PRODUCTIVITY: 1.9% V 1.5%E; UNIT LABOR COSTS: 2.0% V 1.7%E
(EU) ECB’s Draghi: Took decisions to help lift inflation to target; ECB is ready to adjust all instruments - Prepared remarks
(EU) ECB’s Draghi: New ECB measures are adding accommodation; decisions taken following the revised Staff Projections to increase resilience of Euro Zone - Q&A
(US) Fed Reports Q4 Financial Accounts: Household Change in Net Worth: -$3.73T v $2.07T prior
(EU) Reportedly ECB opted for more radical easing measures today only after growth projections showed a bigger than feared economic slowdown - press
(CN) Chinese officials reportedly becoming wary of quick trade deal; persuading Pres Xi to attend Mar-a-Lago summit is 'no easy task' - NY Times
KR Reports Q4 $0.48 v $0.53e, Rev $28.1B v $28.0Be
(US) JAN CONSUMER CREDIT: $17.0B V $17.0BE
*(CN) CHINA FEB TRADE BALANCE (CNY): 34.5B V 250.0BE
*(CN) CHINA FEB TRADE BALANCE: $4.1B V $26.2BE (smallest trade balance since March 2018)
FRIDAY 3/8
(US) FEB AVERAGE HOURLY EARNINGS M/M: 0.4% V 0.3%E; Y/Y: 3.4% V 3.3%E (highest annual reading since 2009); AVERAGE WEEKLY HOURS: 34.4 V 34.5E
*(US) JAN HOUSING STARTS: 1.23M V 1.195ME; BUILDING PERMITS: 1.35M V 1.287ME
*(US) FEB CHANGE IN NONFARM PAYROLLS: +20K V +180KE
*(US) FEB UNEMPLOYMENT RATE: 3.8% V 3.9%E
(US) Atlanta Fed maintains Q1 GDP forecast at 0.5%, unchanged from prior
(UK) EU Brexit Negotiator Barnier: I briefed EU27 Ambassadors and EP today on the ongoing talks with UK; following the EU-UK statement of 20 Feb, the EU has proposed to the UK a legally binding interpretation of the Brexit Withdrawal Agreement
(UK) Reportedly the EU's latest Brexit offer has been rejected by the UK - pressCTXS Discloses investigating unauthorized access to internal network; it appears that the hackers may have accessed and downloaded business documents
Fri, 08 Mar 2019 16:07 PM EST
Stock markets rolled over this week as optimism on the China trade front waned to some degree, and worries about global growth resurfaced. Initial optimism over a weekend report that Beijing and Washington were nearing a final trade deal quickly melted away on concerns that the deal might not include enough structure changes in how China conducts business, and subsequent reports that China was getting cold feet. Risk assets in particular saw softening after the ECB surprised markets by acting aggressively in reviving stimulus. The ECB slashed forecasts, pushed back rate hike expectations and introduced and new TLTRO loan program. Just a day before, the Federal Reserve’s Beige book indicated marginal cooling in some districts. Friday saw February non-farm payrolls come in well below expectations but the details of the report suggested that the drop was likely due to transitory factors while affirming that strong underlying labor market trends remain intact. Overseas economic data remained particularly troublesome forcing investors to ponder just how much slowing outside of the US was beginning weigh on growth expectations here.
Interest rates fell notably on both sides of the Atlantic. The German 10-year bund yield slipped back towards 5 bps for the first time since 2016 while the US 10-year dropped back below 2.65%. The Greenback rallied, pushing the Dollar index back above 97 which has served as a significant resistance level. The pound weakened as Brexit negotiations continued without real progress and PM May reportedly rejected a new compromise proposal from the EU just days ahead of expected votes in the UK Parliament. Oil and other commodities tied to growth slipped late in the week as well. The S&P dipped back below its 200-day moving average for the first time in nearly a month. The DJ Transports declined for 11 straight sessions, the longest such streak since the early 1970s. The VIX volatility index rose to levels not seen in more than a month, briefly topping 18. For the week, the S&P and DJIA each lost 2.2%,while the Nasdaq fell 2.5%.
Some key retailer earnings highlighted this week in corporate news. Target shares surged after its holiday quarter beat analyst expectations on comps and the company saw its strongest traffic growth in over a decade. Kohl’s topped estimates on its earnings and same store sales, and also announced a new partnership with Planet Fitness to leverage space adjacent to select Kohl's stores for new gym locations. Kroger shares plummeted after its earnings fell short and margins contracted amid competition from Amazon and Walmart. Shares in Costco jumped after the wholesaler crushed earnings estimates, and the company announced another employee pay hike, its second wage increase in a year. Biogen bolstered its pipeline with an $800M acquisition of clinical-stage gene-therapy company Nightstar Therapeutics for $25.50/share. Eli Lilly said it would sell a half-price version of Humalog amid renewed scrutiny from Congress on rising insulin costs. Shares of cloud services firm Citrix tumbled on Friday after the revelation that it was the victim of a cyberattack, likely by an Iranian-affiliated hacker group.
SUNDAY 3/3
(CN) China said to have offered US to lower tariffs on US farm goods, autos and other goods; US considering removing most if not all of the sanctions imposed against Chinese products since last year; close to a final agreement on trade - US press
(CN) China Hainan planning to phase out petrol and diesel vehicles - press
MONDAY 3/4
*(EU) EURO ZONE MAR SENTIX INVESTOR CONFIDENCE: -2.2 V -3.1E
OPEC sources: Unlikely to make any output policy decision at its April meeting; more likely to do so in June - press
(US) Atlanta Fed maintains Q1 GDP forecast at 0.3%, unchanged from prior
CRM Reports Q4 $0.70 v $0.56e, Rev $3.60B v $3.56Be
LLY To introduce Lower-Priced Insulin
NITE To be acquired by Biogen for $25.50/shr in ~$800M all-cash deal
*(CN) CHINA NATIONAL PEOPLE'S CONGRESS (NPC): SETS 2019 GDP TARGET AT 6.0-6.5% v ~6.5% in 2018; CPI ~3.0% v ~3.0% in 2018 (both inline with expectations); Fiscal policy to be proactive, monetary policy to be prudent; cuts VAT for some sectors and top bracket
*(AU) RBA LEAVES CASH RATE TARGET UNCHANGED AT 1.50%; AS EXPECTED (27th straight pause in the current easing cycle)
TUESDAY 3/5
(GR) Greece Debt Agency (PDMA) opens book to sell 10-year bond via syndicate; yield guidance seen 4.125%
*(UK) FEB SERVICES PMI: 51.3 V 50.0E (31st month of expansion)
TGT Reports Q4 $1.53 v $1.53e, Rev $23.0B v $23.1Be
(UK) Govt said to be unlikely to publish no-deal tariffs before meaningful vote - financial press
KSS Reports Q4 $2.24 v $2.17e, Rev $6.30B v $6.79Be; Raises Quarterly dividend 9.8% to $0.67 from $0.61 (indicated yield 4.03%)
*(US) FEB ISM NON-MANUFACTURING INDEX: 59.7 V 57.4E
*(US) DEC NEW HOME SALES: 621K V 600KE
GE CEO: Sees free cash flow in negative territory this year - JP Morgan conf
NIO Reports Q4 (CNY) Adj EPS -3.20 v -71.47 y/y, Rev 3.44B v n/a y/y
WEDNESDAY 3/6
THO Reports Q2 -$0.10* v +$0.88e, Rev $1.29B v $1.48Be
XOM Targets Earnings to increase $4B, Cash flow to grow >$5B from 2019 to 2020 - investor presentation
(EU) ECB reportedly to hold discussions on design of new targeted loans (TLTRO); To cut inflation projections through 2021 - press
(US) Conference Board Experimental Help Wanted OnLine Index (HWOL) at 104.0 v 103.7 m/m
(US) Atlanta Fed raises Q1 GDP forecast to 0.5% from 0.3%
(US) Association of American Railroads weekly rail traffic report for week ending Mar 2nd: 528.2K, -3% y/y (has fallen for 3 consecutive weeks)
(US) Kansas City Fed economist's paper: Fed is starting to consider when to halt decline in reserves and grow the balance sheet
*(US) FEDERAL RESERVE BEIGE BOOK: ECONOMY CONTINUED TO GROW IN LATE JAN AND FEB; WITH 10 OF 12 DISTRICTS REPORTING SLIGHT TO MODERATE PACE OF EXPANSION AND 2 SAYING GROWTH WAS FLAT
(US) Centers for Medicare & Medicaid Services seeks recommendations that allow Americans to purchase health insurance across state lines
THURSDAY 3/7
DPW.DE Reports Q4 Net €813M v €837M y/y, EBIT €1.1B v €1.18Me, Rev €16.9B v €16.1B y/y
*(EU) EURO ZONE Q4 FINAL GDP Q/Q: 0.2% V 0.2%E; Y/Y: 1.1% V 1.2%E
SUP Reports Q4 $0.61 v -$0.50 y/y, Rev $378.8M v $361.8M y/y
*(EU) ECB LEAVES MAIN 7-DAY REFINANCING RATE UNCHANGED AT 0.00%; AS EXPECTED; announces new TLTRO, extends forward guidance
*(EU) ECB ANNOUNCES NEW TLTRO PROGRAM
*(US) Q4 NONFARM PRODUCTIVITY: 1.9% V 1.5%E; UNIT LABOR COSTS: 2.0% V 1.7%E
(EU) ECB’s Draghi: Took decisions to help lift inflation to target; ECB is ready to adjust all instruments - Prepared remarks
(EU) ECB’s Draghi: New ECB measures are adding accommodation; decisions taken following the revised Staff Projections to increase resilience of Euro Zone - Q&A
(US) Fed Reports Q4 Financial Accounts: Household Change in Net Worth: -$3.73T v $2.07T prior
(EU) Reportedly ECB opted for more radical easing measures today only after growth projections showed a bigger than feared economic slowdown - press
(CN) Chinese officials reportedly becoming wary of quick trade deal; persuading Pres Xi to attend Mar-a-Lago summit is 'no easy task' - NY Times
KR Reports Q4 $0.48 v $0.53e, Rev $28.1B v $28.0Be
(US) JAN CONSUMER CREDIT: $17.0B V $17.0BE
*(CN) CHINA FEB TRADE BALANCE (CNY): 34.5B V 250.0BE
*(CN) CHINA FEB TRADE BALANCE: $4.1B V $26.2BE (smallest trade balance since March 2018)
FRIDAY 3/8
(US) FEB AVERAGE HOURLY EARNINGS M/M: 0.4% V 0.3%E; Y/Y: 3.4% V 3.3%E (highest annual reading since 2009); AVERAGE WEEKLY HOURS: 34.4 V 34.5E
*(US) JAN HOUSING STARTS: 1.23M V 1.195ME; BUILDING PERMITS: 1.35M V 1.287ME
*(US) FEB CHANGE IN NONFARM PAYROLLS: +20K V +180KE
*(US) FEB UNEMPLOYMENT RATE: 3.8% V 3.9%E
(US) Atlanta Fed maintains Q1 GDP forecast at 0.5%, unchanged from prior
(UK) EU Brexit Negotiator Barnier: I briefed EU27 Ambassadors and EP today on the ongoing talks with UK; following the EU-UK statement of 20 Feb, the EU has proposed to the UK a legally binding interpretation of the Brexit Withdrawal Agreement
(UK) Reportedly the EU's latest Brexit offer has been rejected by the UK - pressCTXS Discloses investigating unauthorized access to internal network; it appears that the hackers may have accessed and downloaded business documents
Wednesday, March 6, 2019
March-April 2019 Outlook: Best Picture
TradeTheNews.com March-April
2019 Outlook: Best Picture
Tue, 05 Mar 2019 15:28 PM EST
The markets appear to have overcome late 2018 worries about a global recession and have resumed a narrative of cautious optimism that growth can continue and extend the aging bull market. The same macroeconomic stories that have projected uncertainty on to the markets for the past two years continue to linger, despite some hard deadlines that were supposed to offer resolution during the first quarter of 2019. By this point, market watchers are saying “haven’t we seen this already” and wondering when this storyline is going to end.
It now appears the Brexit will be pushed back from March 29, with no clear solution to the seemingly irreconcilable dispute over how to handle the Irish border issue. Meanwhile the Trump administration has postponed higher tariffs on China slated for March in light of trade talk progress. But even if a US/China accord is reached, more tough trade negotiations lie ahead with Japan and Europe, while the ‘new NAFTA’ has yet to be ratified.
Slowing growth remains a headwind, and persistent strength in the greenback is moderating gains for the US economy, which has been the star of the global recovery. Piecing together the outcomes of these disparate macro issues, we can form the best picture of which way the global economy will move over the months ahead.
Green Book
If the stock market is to be used as an indicator, then the early 2019 economy (especially in the US) is a blockbuster compared to recent years. The accumulated uncertainties that knocked the S&P500 into correction in December have eased, and Wall Street is seeing a lot of ‘green’ books after the breathtaking rally in stocks through February.
The extent to which this market rebound will continue may depend on the strength of the US consumer, who is facing some troubling indicators. December advance retail sales saw their biggest drop in almost ten years, and the National Retail Federation reported that holiday sales were substantially below initial rosy expectations. Early 2019 auto sales have also been mediocre, with February marking the lowest industry sales rate (SAAR) since August 2017, while auto loan delinquencies are at the highest level since they peaked in 2010, presenting a possible early warning sign. The same holds true for the housing market, as uncertainty over where mortgage rates are heading contributed to January existing home sales dropping below five million, to the slowest rate since November 2015. It remains to be seen if the weak December retail sales and other data were an anomaly driven by the government shutdown as the White House suggests. Clearly auto and home sales need to show improvement to evidence that consumers aren’t turning cautious, and the spring selling season may give a better read on how the housing market is doing amid the prospect of higher rates.
Though the rapid dovish evolution in Fed policy ignited the stock market rebound, the sustained rally is largely attributed to growing hopes for a US/China trade deal. The White House is said to be aiming for an agreement within weeks so that a signing ceremony can be held by late March, and the latest reports say that China is offering to lower tariffs on US farm goods and autos, and that the US may reciprocate as they close in on a final deal. Negotiations could still hit a snag (e.g. frictions over Huawei or an allegation of currency manipulation in the Treasury’s upcoming semiannual report), but market optimism that a deal will get done remains high.
The question is how much of this optimism is already built into the market and whether a China trade deal could be a “sell the news” moment. The answer will depend on the actual structure of the final China trade deal. Recent reports highlight offers for deficit reduction through China buying more US goods, but the key will be the extent of the structural changes that China agrees to in order to protect intellectual property, reduce subsidies for state owned enterprises (SOEs), and allow US monitoring and enforcement of compliance. That may only be answered by an analysis of what concessions are in the final document.
Assuming the China deal gets signed, there is still another looming round of trade talks that can impact market sentiment as the White House gets into bare knuckle negotiations with trading partners in Europe and Japan, largely focused on the automobile industry. The US Commerce Department has reportedly furnished the White House with a menu of options ranging from a 10% or 25% across the board levy to more targeted customs duties on specific automotive technologies. It may be a couple months before President Trump makes a final decision regarding auto tariffs.
For its part China is definitely feeling the impact of the US tariff regime on its economy, and has initiated a number of stimulus efforts to counteract the effects as the negotiations wear on. Beijing’s latest plan to help the economy is said to be a $90B cut in VAT for manufacturers. In addition, the annual meeting of the People’s Congress just affirmed that fiscal policy will be “proactive” and monetary policy will remain “prudent” this year, targeting GDP growth of 6.0-6.5% compared to about 6.5% last year. Given these numbers, if the terms of the US trade deal leaves the Chinese economic outlook in worse shape, it could amplify the global slowdown that is already troubling forecasters.
The Favourite
In the UK, economic malaise has persisted in the face of all the uncertainties around the Brexit. PM May is certainly no one’s favourite, but she continues to single-mindedly focus on implementing “the will of the people.” The odds are that the Brexit is still going to happen, though now it appears that the exit date will be pushed back, in what is being couched as a “short technical extension.”
In the weeks leading up to the March 29 deadline, the EU has made it clear it does not want to reopen Brexit negotiations over the UK Parliament’s objections to the Irish border backstop. The last month of discussions haven’t made any significant headway, as the EU has stood fast to its stance that it can only provide “assurances” in a political declaration on future UK/EU ties, but will not reopen negotiations on the exit agreement that the British parliament subsequently rejected. In the most recent overture to end the deadlock, EU negotiator Barnier suggested that he would be willing to give further assurances that the backstop is only temporary, potentially via a commitment to limit the backstop through an agreement on the future relationship between UK and EU (which is to be negotiated next). It’s unclear if this will be enough to win over Parliament.
Meanwhile PM May has toned down her implied threats that the UK is willing to crash out of the EU in a ‘no deal’ Brexit, helping to strengthen the pound sterling over the last few weeks. The PM has laid out a plan for a series of votes that appear likely to result in the Brexit date being pushed back a few months. By March 12, the Parliament will have its ‘meaningful vote’ on whether to support the negotiated Brexit agreement on the table. That failing, MPs would then hold votes on blocking a ‘no deal’ Brexit and ultimately on extending Article 50, which would push back the exit date.
This plan got a lukewarm reception from the EU, who welcomed PM May’s efforts to get her house in order, but also warned Britain not to kick-the-can just because the problem is difficult. The EU wants to see a realistic endgame from Britain.
Roma
Despite all of the focus on Brexit, it is not Europe’s only concern. Italy, after struggling last year with its budget plan and a banking system still thick with non-performing loans, recently reported its second contractionary quarter in a row, entering a technical recession. Italy’s lack of growth was emblematic of worse than expected data across much of Europe, and even the vaunted German economic engine showed zero quarter-over-quarter growth in the fourth quarter.
The coalition government in Rome continues to suffer from internal disputes over how to shore up the ailing domestic economy. This was exemplified by reports that the Northern League had drafted a proposal for a Constitutional change that would allow the government to sell gold reserves, an idea that was subsequently poo-pooed by the Italian central bank and then denied by party officials.
The ECB has its eye on Italy and says it’s not a threat at this time, but central bank officials have acknowledged that the economic slowdown across Europe has been sharper and broader than expected. Weakening growth in Europe has already prompted speculation that the ECB will have to reconsider its plans for policy normalization and instead launch fresh stimulus efforts to prevent recession from expanding beyond Italy. To that end, the ECB has already discussed the possibility of a new TLTRO program to bolster banks that are facing a funding cliff as the last round of cheap 4-year TLTRO loans doled out from 2014 to 2017 start maturing. However, the ECB will probably put off major policy changes for a while longer, leaving the big decisions to the yet-to-be-named new ECB President, who will be appointed later this year.
“Nothing Really Matters” (Bohemian Rhapsody)
When it comes to Federal Reserve monetary policy, ‘nothing’ really does matter as the central bank has decided to pause and assess at least through the first six months of the year. In the last couple months it seemed that Fed policy would go ‘anyway the wind blows’, as the rate forecast was cut back from three additional hikes in 2019. In one of the swiftest outlook changes in central bank history, Chair Powell appeared to take his cue from the bearish December stock market, lowering his estimation of the ‘neutral’ rate and suggesting that the Fed balance sheet reduction is not on auto-pilot and could finish within the year. That would cut short the Fed’s own prior estimate of balance sheet reductions by over $300 billion.
The wholesale changes made to the FOMC statement in January demonstrated that the Fed Chair’s new practice of holding a press conference at every meeting means that every meeting is ‘live’ for potential policy moves. The key change in January was to the forward guidance, taking it from “some further gradual increases” being warranted, to a “patient” stance. It also removed a reference to risks being “roughly balanced’, implying that global uncertainties are tilting to the downside.
The March 20 FOMC meeting will give the Fed another chance to revise its script as it releases the updated Summary of Economic Projections. With several Fed officials now specifying that they see only one or less rate hikes this year the ‘dot plot’ could be ratcheted down further towards what Fed funds futures are predicting. Market pundits are now debating whether the Fed will hold fast to forecasts for rate hikes to continue later this year, or as Fed fund futures indicate, keep rates on hold or even reverse course with a cut. Currently, Fed funds futures predict only a 10% chance of one rate hike by December, and many Wall Street forecasters are laying odds on a cut as growth slows this year.
The hawkish wing of the Fed could make a cautious comeback later this year if some macro concerns like China trade and global growth dissipate, but it appears more and more likely that US monetary policy could be on hold for most if not all of 2019. But even with that and the balance sheet reduction being cut short, some Wall Street wise men like Jim Grant have warned that monetary policy normalization will have consequences for an economy that has been capitalized for ultra-low interest rates.
Vice
Much has been made of President Trump’s unprecedented criticism of the Fed Chair that he appointed over tighter rates and the strong dollar. It exemplifies the “dysfunction” that has become Washington DC’s most obvious vice. Another prime example is the record-long government shutdown that has already put a cloud over first quarter GDP. The gamesmanship over the government shutdown may only be a prelude to a potentially more dangerous legislative battle over the debt ceiling.
The debt ceiling was suspended in 2017 by legislative decree, but was just reinstated on March 2 at the current $22 trillion level. The Treasury has already confirmed that it will utilize its ‘extraordinary measures’ which the CBO has estimated can prevent the government from hitting the debt ceiling until late in the current budget year, which ends on September 30.
During the Obama administration, conservative congressional Republicans used brinkmanship on the debt ceiling to extract certain budgetary concessions. Taking a cue from this, President Trump may see the debt ceiling as a new opportunity to leverage Congress to endorse his policy agenda. Unfortunately that would create new uncertainties for global markets which would have to factor in the risk of a US government default, however remote. Ratings agency Fitch has already warned that if the debt ceiling becomes a problem it will have to consider whether America’s ‘AAA’ sovereign debt rating is “consistent”.
Fractious politics are also threatening the USMCA treaty, Trump’s main achievement in trade so far. Among other changes, Democrats are demanding stronger labor standards as part of the agreement. The President already tried to apply pressure on Congress in early December when he pledged to formally withdraw from NAFTA, which would give lawmakers a six month window to ratify the new trade treaty or end up with no agreement at all, potentially wreaking havoc on North American supply chains. Some press reports suggest Trump could ultimately offer an infrastructure spending package as a sweetener for Democrats to get on board with the USMCA.
The drama of the Mueller report also continues to hang in the toxic atmosphere of Washington, distracting the President and causing some Democrats to unrealistically dream about impeachment (which, even if successful, would simply install Trump’s ‘Vice’ Mike Pence in the Oval office). If reports are true, the Special Counsel could submit his findings to the Justice Department within weeks, creating fodder for the news media for weeks, especially if the DOJ withholds the full report and it subsequently leaks out piecemeal. As recent House investigative hearings have shown, the Mueller report is also likely to inspire more probes into various aspects of the Russian interference case, continuing to nettle the Trump administration as the new Presidential election season gets underway.
BlackkGold
Political pressure has also been at play in the energy markets, with particular focus on Venezuela and Iran. Sanctions, on top of years of mismanagement of the domestic energy industry, have slowed Venezuelan exports to a trickle – oil sales are at a three decade low and production is at its lowest since the 1940’s. Under scrutiny from the international community, demands are growing for the Maduro government to hold free and fair elections, which appears to be driving Venezuela toward a regime change that could further disrupt its oil industry.
The Trump administration’s economic sanctions on Iran’s nuclear program also continue to crimp oil supplies. Although the US granted waivers to eight countries including China, India, Japan and South Korea, allowing them to wean themselves off of imports of Iranian oil, those waivers end in June. India is said to be in talks for an extension and others may be granted on an ad hoc basis, but Iranian supplies continue to get squeezed out of the market.
President Trump has also been jawboning the broader energy market, recently tweeting that oil prices are getting too high and calling on OPEC to “relax and take it easy.” Reportedly OPEC and their partners were not moved by his exhortations, and plan to urge members toward even greater compliance with the production cutting agreement, which has been effective in firming up energy prices. A rare extraordinary meeting of OPEC members on April 17-18 will review the progress made under the production cutting plan, but no decision on modifying the agreement is expected until the regular OPEC meeting in Vienna on June 25.
And the winner is…?
Given the aforementioned events what is the best picture we can form about the months ahead? Starting with monetary policy, the Fed, along with other global central banks pondering normalization, can stay on the sidelines until inflation or reinvigorated growth emerge, both of which don’t seem to be in the cards in the near term. Firming energy prices should keep a floor under inflation, but even greater compliance from OPEC+ isn’t likely to drive oil futures and the pass through to consumers much higher this year.
The pause in Fed policy should support a reasonable risk-on environment for the next few months, and a meaningful Sino-US trade deal would bolster positive sentiment. But other trade battle still loom ahead, and the Brexit process has no end in sight, which may be enough to fuel continued uncertainty in the macroeconomic picture. Europe can stave off recession, possibly with a little well timed assistance from the ECB, and assuming the UK doesn’t crash out of the EU.
Rising political tensions within the Washington beltway will also contribute to uncertainty, but the strife would have to reach unprecedented proportions to drive the US into a serious test of the debt limit. Ultimately there are a lot of paths to losing scenarios for the global economy, but it would take some serious missteps by the leading actors to completely derail a promising season for the markets.
MARCH
4:
5: UK Services PMI; US ISM Non-manufacturing PMI
6:
7: ECB policy decision & press conference; China Trade Balance (tentative)
8: US Payrolls & Unemployment; Preliminary Univ of Michigan Confidence
11:
12: UK Manufacturing Production; US CPI
13: US PPI; China Industrial Production
14: US Retail Sales; BOJ policy decision
15:
18:
19: UK Unemployment; German ZEW Economic Sentiment; US Housing Starts & Building Permits
20: UK CPI & PPI; FOMC policy decision & press conference
21: UK Retail Sales; BOE policy decision; US Philadelphia Fed Manufacturing Index
22: Various European Flash Manufacturing & Services PMIs; German Ifo Business Climate
25:
26: US Durable Goods Orders; US Consumer Confidence
27:
28: US Final Q4 GDP
29: UK Current Account; UK Final Q4 GDP; Euro Zone Flash CPI; Chicago PMI
30: China Manufacturing & Non-manufacturing PMIs
APRIL
1: UK Manufacturing PMI; US ISM Manufacturing PMI
2:
3: UK Services PMI; US ISM Non-manufacturing PMI
4: ECB Minutes
5: US Payrolls & Unemployment
8:
9:
10: UK Manufacturing Production; ECB policy decision & press conference; US CPI; FOMC Minutes
11: US PPI; OPEC extraordinary meetings
12: Preliminary University of Michigan Confidence
15: China Q1 GDP
16: UK Unemployment; German ZEW Economic Sentiment; US Retail Sales; China Industrial Production
17: UK CPI & PPI; US Housing Starts & Building Permits
18: UK Retail Sales; US Philadelphia Fed Manufacturing Index
19: GOOD FRIDAY HOLIDAY
22: German Ifo Business Climate
23:
24: Various EU Flash Manufacturing & Services PMIs; BOJ policy decision
25: US Durable Goods Orders
26: US Advance Q1 GDP
29: US Core PCE; US Personal Income & Spending; China Manufacturing & Non-manufacturing PMIs
30: Euro Zone Flash Q1 GDP; Chicago PMI; US Consumer Confidence
**US Treasury Currency Manipulator Report tentatively due in April
MAY
1: US ISM Manufacturing PMI; FOMC policy decision & press conference
2: UK Manufacturing PMI; BOE policy decision
3: UK Services PMI; Euro Zone CPI Flash Estimate; US Payrolls & Unemployment
Tue, 05 Mar 2019 15:28 PM EST
The markets appear to have overcome late 2018 worries about a global recession and have resumed a narrative of cautious optimism that growth can continue and extend the aging bull market. The same macroeconomic stories that have projected uncertainty on to the markets for the past two years continue to linger, despite some hard deadlines that were supposed to offer resolution during the first quarter of 2019. By this point, market watchers are saying “haven’t we seen this already” and wondering when this storyline is going to end.
It now appears the Brexit will be pushed back from March 29, with no clear solution to the seemingly irreconcilable dispute over how to handle the Irish border issue. Meanwhile the Trump administration has postponed higher tariffs on China slated for March in light of trade talk progress. But even if a US/China accord is reached, more tough trade negotiations lie ahead with Japan and Europe, while the ‘new NAFTA’ has yet to be ratified.
Slowing growth remains a headwind, and persistent strength in the greenback is moderating gains for the US economy, which has been the star of the global recovery. Piecing together the outcomes of these disparate macro issues, we can form the best picture of which way the global economy will move over the months ahead.
Green Book
If the stock market is to be used as an indicator, then the early 2019 economy (especially in the US) is a blockbuster compared to recent years. The accumulated uncertainties that knocked the S&P500 into correction in December have eased, and Wall Street is seeing a lot of ‘green’ books after the breathtaking rally in stocks through February.
The extent to which this market rebound will continue may depend on the strength of the US consumer, who is facing some troubling indicators. December advance retail sales saw their biggest drop in almost ten years, and the National Retail Federation reported that holiday sales were substantially below initial rosy expectations. Early 2019 auto sales have also been mediocre, with February marking the lowest industry sales rate (SAAR) since August 2017, while auto loan delinquencies are at the highest level since they peaked in 2010, presenting a possible early warning sign. The same holds true for the housing market, as uncertainty over where mortgage rates are heading contributed to January existing home sales dropping below five million, to the slowest rate since November 2015. It remains to be seen if the weak December retail sales and other data were an anomaly driven by the government shutdown as the White House suggests. Clearly auto and home sales need to show improvement to evidence that consumers aren’t turning cautious, and the spring selling season may give a better read on how the housing market is doing amid the prospect of higher rates.
Though the rapid dovish evolution in Fed policy ignited the stock market rebound, the sustained rally is largely attributed to growing hopes for a US/China trade deal. The White House is said to be aiming for an agreement within weeks so that a signing ceremony can be held by late March, and the latest reports say that China is offering to lower tariffs on US farm goods and autos, and that the US may reciprocate as they close in on a final deal. Negotiations could still hit a snag (e.g. frictions over Huawei or an allegation of currency manipulation in the Treasury’s upcoming semiannual report), but market optimism that a deal will get done remains high.
The question is how much of this optimism is already built into the market and whether a China trade deal could be a “sell the news” moment. The answer will depend on the actual structure of the final China trade deal. Recent reports highlight offers for deficit reduction through China buying more US goods, but the key will be the extent of the structural changes that China agrees to in order to protect intellectual property, reduce subsidies for state owned enterprises (SOEs), and allow US monitoring and enforcement of compliance. That may only be answered by an analysis of what concessions are in the final document.
Assuming the China deal gets signed, there is still another looming round of trade talks that can impact market sentiment as the White House gets into bare knuckle negotiations with trading partners in Europe and Japan, largely focused on the automobile industry. The US Commerce Department has reportedly furnished the White House with a menu of options ranging from a 10% or 25% across the board levy to more targeted customs duties on specific automotive technologies. It may be a couple months before President Trump makes a final decision regarding auto tariffs.
For its part China is definitely feeling the impact of the US tariff regime on its economy, and has initiated a number of stimulus efforts to counteract the effects as the negotiations wear on. Beijing’s latest plan to help the economy is said to be a $90B cut in VAT for manufacturers. In addition, the annual meeting of the People’s Congress just affirmed that fiscal policy will be “proactive” and monetary policy will remain “prudent” this year, targeting GDP growth of 6.0-6.5% compared to about 6.5% last year. Given these numbers, if the terms of the US trade deal leaves the Chinese economic outlook in worse shape, it could amplify the global slowdown that is already troubling forecasters.
The Favourite
In the UK, economic malaise has persisted in the face of all the uncertainties around the Brexit. PM May is certainly no one’s favourite, but she continues to single-mindedly focus on implementing “the will of the people.” The odds are that the Brexit is still going to happen, though now it appears that the exit date will be pushed back, in what is being couched as a “short technical extension.”
In the weeks leading up to the March 29 deadline, the EU has made it clear it does not want to reopen Brexit negotiations over the UK Parliament’s objections to the Irish border backstop. The last month of discussions haven’t made any significant headway, as the EU has stood fast to its stance that it can only provide “assurances” in a political declaration on future UK/EU ties, but will not reopen negotiations on the exit agreement that the British parliament subsequently rejected. In the most recent overture to end the deadlock, EU negotiator Barnier suggested that he would be willing to give further assurances that the backstop is only temporary, potentially via a commitment to limit the backstop through an agreement on the future relationship between UK and EU (which is to be negotiated next). It’s unclear if this will be enough to win over Parliament.
Meanwhile PM May has toned down her implied threats that the UK is willing to crash out of the EU in a ‘no deal’ Brexit, helping to strengthen the pound sterling over the last few weeks. The PM has laid out a plan for a series of votes that appear likely to result in the Brexit date being pushed back a few months. By March 12, the Parliament will have its ‘meaningful vote’ on whether to support the negotiated Brexit agreement on the table. That failing, MPs would then hold votes on blocking a ‘no deal’ Brexit and ultimately on extending Article 50, which would push back the exit date.
This plan got a lukewarm reception from the EU, who welcomed PM May’s efforts to get her house in order, but also warned Britain not to kick-the-can just because the problem is difficult. The EU wants to see a realistic endgame from Britain.
Roma
Despite all of the focus on Brexit, it is not Europe’s only concern. Italy, after struggling last year with its budget plan and a banking system still thick with non-performing loans, recently reported its second contractionary quarter in a row, entering a technical recession. Italy’s lack of growth was emblematic of worse than expected data across much of Europe, and even the vaunted German economic engine showed zero quarter-over-quarter growth in the fourth quarter.
The coalition government in Rome continues to suffer from internal disputes over how to shore up the ailing domestic economy. This was exemplified by reports that the Northern League had drafted a proposal for a Constitutional change that would allow the government to sell gold reserves, an idea that was subsequently poo-pooed by the Italian central bank and then denied by party officials.
The ECB has its eye on Italy and says it’s not a threat at this time, but central bank officials have acknowledged that the economic slowdown across Europe has been sharper and broader than expected. Weakening growth in Europe has already prompted speculation that the ECB will have to reconsider its plans for policy normalization and instead launch fresh stimulus efforts to prevent recession from expanding beyond Italy. To that end, the ECB has already discussed the possibility of a new TLTRO program to bolster banks that are facing a funding cliff as the last round of cheap 4-year TLTRO loans doled out from 2014 to 2017 start maturing. However, the ECB will probably put off major policy changes for a while longer, leaving the big decisions to the yet-to-be-named new ECB President, who will be appointed later this year.
“Nothing Really Matters” (Bohemian Rhapsody)
When it comes to Federal Reserve monetary policy, ‘nothing’ really does matter as the central bank has decided to pause and assess at least through the first six months of the year. In the last couple months it seemed that Fed policy would go ‘anyway the wind blows’, as the rate forecast was cut back from three additional hikes in 2019. In one of the swiftest outlook changes in central bank history, Chair Powell appeared to take his cue from the bearish December stock market, lowering his estimation of the ‘neutral’ rate and suggesting that the Fed balance sheet reduction is not on auto-pilot and could finish within the year. That would cut short the Fed’s own prior estimate of balance sheet reductions by over $300 billion.
The wholesale changes made to the FOMC statement in January demonstrated that the Fed Chair’s new practice of holding a press conference at every meeting means that every meeting is ‘live’ for potential policy moves. The key change in January was to the forward guidance, taking it from “some further gradual increases” being warranted, to a “patient” stance. It also removed a reference to risks being “roughly balanced’, implying that global uncertainties are tilting to the downside.
The March 20 FOMC meeting will give the Fed another chance to revise its script as it releases the updated Summary of Economic Projections. With several Fed officials now specifying that they see only one or less rate hikes this year the ‘dot plot’ could be ratcheted down further towards what Fed funds futures are predicting. Market pundits are now debating whether the Fed will hold fast to forecasts for rate hikes to continue later this year, or as Fed fund futures indicate, keep rates on hold or even reverse course with a cut. Currently, Fed funds futures predict only a 10% chance of one rate hike by December, and many Wall Street forecasters are laying odds on a cut as growth slows this year.
The hawkish wing of the Fed could make a cautious comeback later this year if some macro concerns like China trade and global growth dissipate, but it appears more and more likely that US monetary policy could be on hold for most if not all of 2019. But even with that and the balance sheet reduction being cut short, some Wall Street wise men like Jim Grant have warned that monetary policy normalization will have consequences for an economy that has been capitalized for ultra-low interest rates.
Vice
Much has been made of President Trump’s unprecedented criticism of the Fed Chair that he appointed over tighter rates and the strong dollar. It exemplifies the “dysfunction” that has become Washington DC’s most obvious vice. Another prime example is the record-long government shutdown that has already put a cloud over first quarter GDP. The gamesmanship over the government shutdown may only be a prelude to a potentially more dangerous legislative battle over the debt ceiling.
The debt ceiling was suspended in 2017 by legislative decree, but was just reinstated on March 2 at the current $22 trillion level. The Treasury has already confirmed that it will utilize its ‘extraordinary measures’ which the CBO has estimated can prevent the government from hitting the debt ceiling until late in the current budget year, which ends on September 30.
During the Obama administration, conservative congressional Republicans used brinkmanship on the debt ceiling to extract certain budgetary concessions. Taking a cue from this, President Trump may see the debt ceiling as a new opportunity to leverage Congress to endorse his policy agenda. Unfortunately that would create new uncertainties for global markets which would have to factor in the risk of a US government default, however remote. Ratings agency Fitch has already warned that if the debt ceiling becomes a problem it will have to consider whether America’s ‘AAA’ sovereign debt rating is “consistent”.
Fractious politics are also threatening the USMCA treaty, Trump’s main achievement in trade so far. Among other changes, Democrats are demanding stronger labor standards as part of the agreement. The President already tried to apply pressure on Congress in early December when he pledged to formally withdraw from NAFTA, which would give lawmakers a six month window to ratify the new trade treaty or end up with no agreement at all, potentially wreaking havoc on North American supply chains. Some press reports suggest Trump could ultimately offer an infrastructure spending package as a sweetener for Democrats to get on board with the USMCA.
The drama of the Mueller report also continues to hang in the toxic atmosphere of Washington, distracting the President and causing some Democrats to unrealistically dream about impeachment (which, even if successful, would simply install Trump’s ‘Vice’ Mike Pence in the Oval office). If reports are true, the Special Counsel could submit his findings to the Justice Department within weeks, creating fodder for the news media for weeks, especially if the DOJ withholds the full report and it subsequently leaks out piecemeal. As recent House investigative hearings have shown, the Mueller report is also likely to inspire more probes into various aspects of the Russian interference case, continuing to nettle the Trump administration as the new Presidential election season gets underway.
BlackkGold
Political pressure has also been at play in the energy markets, with particular focus on Venezuela and Iran. Sanctions, on top of years of mismanagement of the domestic energy industry, have slowed Venezuelan exports to a trickle – oil sales are at a three decade low and production is at its lowest since the 1940’s. Under scrutiny from the international community, demands are growing for the Maduro government to hold free and fair elections, which appears to be driving Venezuela toward a regime change that could further disrupt its oil industry.
The Trump administration’s economic sanctions on Iran’s nuclear program also continue to crimp oil supplies. Although the US granted waivers to eight countries including China, India, Japan and South Korea, allowing them to wean themselves off of imports of Iranian oil, those waivers end in June. India is said to be in talks for an extension and others may be granted on an ad hoc basis, but Iranian supplies continue to get squeezed out of the market.
President Trump has also been jawboning the broader energy market, recently tweeting that oil prices are getting too high and calling on OPEC to “relax and take it easy.” Reportedly OPEC and their partners were not moved by his exhortations, and plan to urge members toward even greater compliance with the production cutting agreement, which has been effective in firming up energy prices. A rare extraordinary meeting of OPEC members on April 17-18 will review the progress made under the production cutting plan, but no decision on modifying the agreement is expected until the regular OPEC meeting in Vienna on June 25.
And the winner is…?
Given the aforementioned events what is the best picture we can form about the months ahead? Starting with monetary policy, the Fed, along with other global central banks pondering normalization, can stay on the sidelines until inflation or reinvigorated growth emerge, both of which don’t seem to be in the cards in the near term. Firming energy prices should keep a floor under inflation, but even greater compliance from OPEC+ isn’t likely to drive oil futures and the pass through to consumers much higher this year.
The pause in Fed policy should support a reasonable risk-on environment for the next few months, and a meaningful Sino-US trade deal would bolster positive sentiment. But other trade battle still loom ahead, and the Brexit process has no end in sight, which may be enough to fuel continued uncertainty in the macroeconomic picture. Europe can stave off recession, possibly with a little well timed assistance from the ECB, and assuming the UK doesn’t crash out of the EU.
Rising political tensions within the Washington beltway will also contribute to uncertainty, but the strife would have to reach unprecedented proportions to drive the US into a serious test of the debt limit. Ultimately there are a lot of paths to losing scenarios for the global economy, but it would take some serious missteps by the leading actors to completely derail a promising season for the markets.
MARCH
4:
5: UK Services PMI; US ISM Non-manufacturing PMI
6:
7: ECB policy decision & press conference; China Trade Balance (tentative)
8: US Payrolls & Unemployment; Preliminary Univ of Michigan Confidence
11:
12: UK Manufacturing Production; US CPI
13: US PPI; China Industrial Production
14: US Retail Sales; BOJ policy decision
15:
18:
19: UK Unemployment; German ZEW Economic Sentiment; US Housing Starts & Building Permits
20: UK CPI & PPI; FOMC policy decision & press conference
21: UK Retail Sales; BOE policy decision; US Philadelphia Fed Manufacturing Index
22: Various European Flash Manufacturing & Services PMIs; German Ifo Business Climate
25:
26: US Durable Goods Orders; US Consumer Confidence
27:
28: US Final Q4 GDP
29: UK Current Account; UK Final Q4 GDP; Euro Zone Flash CPI; Chicago PMI
30: China Manufacturing & Non-manufacturing PMIs
APRIL
1: UK Manufacturing PMI; US ISM Manufacturing PMI
2:
3: UK Services PMI; US ISM Non-manufacturing PMI
4: ECB Minutes
5: US Payrolls & Unemployment
8:
9:
10: UK Manufacturing Production; ECB policy decision & press conference; US CPI; FOMC Minutes
11: US PPI; OPEC extraordinary meetings
12: Preliminary University of Michigan Confidence
15: China Q1 GDP
16: UK Unemployment; German ZEW Economic Sentiment; US Retail Sales; China Industrial Production
17: UK CPI & PPI; US Housing Starts & Building Permits
18: UK Retail Sales; US Philadelphia Fed Manufacturing Index
19: GOOD FRIDAY HOLIDAY
22: German Ifo Business Climate
23:
24: Various EU Flash Manufacturing & Services PMIs; BOJ policy decision
25: US Durable Goods Orders
26: US Advance Q1 GDP
29: US Core PCE; US Personal Income & Spending; China Manufacturing & Non-manufacturing PMIs
30: Euro Zone Flash Q1 GDP; Chicago PMI; US Consumer Confidence
**US Treasury Currency Manipulator Report tentatively due in April
MAY
1: US ISM Manufacturing PMI; FOMC policy decision & press conference
2: UK Manufacturing PMI; BOE policy decision
3: UK Services PMI; Euro Zone CPI Flash Estimate; US Payrolls & Unemployment
Friday, March 1, 2019
Markets pause as Brexit and China trade negotiations go into overtime
TradeTheNews.com Weekly
Market Update: Markets pause as Brexit and China trade negotiations go into
overtime
Fri, 01 Mar 2019 16:09 PM EST
Equity markets took a breather on fairly low volatility despite another heavy week of corporate earnings to be digested. Potential progress on some global issues hit snags as President Trump cut short his Hanoi summit without reaching any new agreement with North Korea, and as PM May reportedly conceded that the Brexit will have to be delayed from March 29 even if the Parliament supports her plan later this month. Washington was gripped by Congressional testimony from former Trump fixer Michael Cohen, as well as hearings with Fed Chair Powell and US Trade Rep Lighthizer who agreed that the economy looks healthy and would be helped by a resolution to trade tensions.
The dollar index dipped mid-week but basically ended flat, while the British pound was strong through most of the week as fears of a ‘no deal’ Brexit receded. WTI crude futures moved sideways until Friday when they dipped 2.5% following disappointing US manufacturing and consumer confidence indicators, and a tepid first look at Q1 GDP from Atlanta and New York Fed officials. The week was capped off with a risk-on rally sparked by some better than expected data out of China and Europe, and on reports that the White House is seeking to reach an endgame in China trade talks within weeks. For the week, the S&P gained 0.4% and closed above 2,800 for the first time since November 8, while the DJIA was flat, and the Nasdaq rose 0.9%.
In corporate news this week, some key earnings emerged from the retail space. JCPenney shares lifted after posting stronger than anticipated earnings and laying out a plan to shutter some stores. L Brands tumbled after missing on earnings and guiding a disappointing FY19 EPS number. Macy’s Q4 beat on the top and bottom line and the company announced it would trim 100 management positions and cut $100M in annual costs. Gap Inc. notched a profit beat and announced plans to spin off its Old Navy division to separate into two independent publicly traded companies. A spate of M&A deals hit the corporate news space this week. Roche boosted its gene therapy portfolio with its acquisition of Spark Therapeutics for $4.3B. GE sold off its life sciences business to Danaher for $21.4B. eBay initiated a strategic review of its asset portfolio amid pressure from investors. The grocery store sector slumped on Friday after a report that Amazon is reportedly launching a new line of grocery stores with a lower price point than its Whole Foods division. Shares of Tesla sold off sharply after the car company made good on its long-promised $35K price point for a pared down version of the Model 3 sedan.
SUNDAY, FEB 24
(UK) PM May said to be considering plan that would delay Brexit by 2-months; rules out meaningful vote on EU withdrawal in Commons this week - Telegraph
MONDAY, FEB 25
ONCE To be acquired by Roche for $114.50/share in cash valued at $4.8B
GE Danaher to acquire the biopharma business of General Electric Life Sciences for $21.4B
*(US) FEB DALLAS FED MANUFACTURING ACTIVITY INDEX: 13.1 V 4.7E
(US) Atlanta Fed raises Q4 GDP forecast to 1.9% from 1.4%
TSLA SEC said to ask judge to hold Musk in contempt for violating deal, cites Feb 19th Tweet by Musk regarding production - US financial press
TUESDAY, FEB 26
BAS.DE Reports Q4 adj Net €348M v €502Me, Adj EBIT €630M v €552Me, Rev €15.6B v €15.1Be; raises dividend
*(DE) GERMANY MAR GFK CONSUMER CONFIDENCE: 10.8 V 10.8 PRIOR
HD Reports Q4 $2.09 v $2.16e, Rev $26.5B v $26.6Be; Announces $15.0B share buyback; Raises Quarterly dividend 32% to $1.36 from $1.03 (indicated yield 2.86%)
M Reports Q4 $2.73 v $2.51e, Rev $8.46B v $8.46Be; launches restructuring program to fund reinvestment in the business; streamlines management structure
*(US) DEC HOUSING STARTS: 1.078M V 1.256ME (lowest since Sept 2016); BUILDING PERMITS: 1.326M V 1.290ME
*(US) FEB RICHMOND FED MANUFACTURING INDEX: 16 V 5E
*(US) FEB CONSUMER CONFIDENCE: 131.4 V 124.9E
WEDNESDAY, FEB 27
RIO.AU Reports FY18 underlying Net $8.81B v $8.63B y/y; EBITDA $18.1B v $18.6B y/y; Rev $40.5B v $41.9B y/y; declares $4.0B special dividend
TSLA CEO Elon Musk tweets: Thursday 2pm. California. Some Tesla news
*(EU) EURO ZONE FEB BUSINESS CLIMATE INDICATOR: 0.69 V 0.66E; CONSUMER CONFIDENCE (FINAL): -7.4 V -7.4E
LOW Reports Q4 $0.80 v $0.80e, Rev $15.6B v $15.7Be
(US) President Trump and North Korea leader Kim meet in Hanoi; Kim says have "overcome obstacles" since last meeting
BBY Reports Q4 $2.72 v $2.57e, Rev $14.8B v $14.7Be; Raises Quarterly dividend 11.1% to $0.50 from $0.45 (indicated yield 3.32%)
*(US) DEC FINAL DURABLE GOODS ORDERS: 1.2% V 1.2% PRELIM; DURABLES EX TRANSPORTATION: 0.1% V 0.1% PRELIM
(US) Association of American Railroads weekly rail traffic report for week ending Feb 23rd: 522.6K, -1.1% y/y
CELG Wellington Management does not support Bristol-Myers Squibb’s acquisition of Celgene
*(KR) BANK OF KOREA (BOK) LEAVES 7-DAY REPO RATE UNCHANGED AT 1.75%; AS EXPECTED
THURSDAY, FEB 28
ABI.BE Reports Q4 $0.80 v $0.90e, Rev $14.3B v $13.9Be
(KR) White House: Hanoi Summit ends, no agreement reached but talks constructive ; US and North Korea teams to meet in future
*(FR) FRANCE FEB PRELIMINARY CPI M/M: 0.0% V 0.4%E; Y/Y: 1.3% V 1.5%E
*(DE) GERMANY FEB CPI SAXONY M/M: +0.3% V -1.0% PRIOR; Y/Y: 1.4% V 1.4% PRIOR
(DE) GERMANY FEB PRELIMINARY CPI M/M: 0.5% V 0.4%E; Y/Y: 1.6% V 1.5%E
*(US) Q4 ADVANCE GDP PRICE INDEX : 1.8% V 1.7%E; CORE PCE Q/Q: 1.7% V 1.6%E
(US) Q4 ADVANCE GDP ANNUALIZED Q/Q: 2.6% V 2.2%E; PERSONAL CONSUMPTION: 2.8% V 3.0%E
(US) Nevada reports Jan casino gaming Rev $984.5M, -3% y/y; Las Vegas strip Rev $532.2M, -4% y/y
GPS Reports Q4 $0.72 v $0.68e, Rev $4.62B v $4.71Be; to spin off Old Navy; to close 230 stores over next 2 years
TLSA Confirms Model 3 with a 220 mile range will now price as low as $35K
FRIDAY, MARCH 1
(CN) US officials said to be preparing a final trade deal that President Trump and his Chinese counterpart Xi Jinping could sign in weeks - financial press
*(ES) SPAIN FEB MANUFACTURING PMI: 49.9 V 51.7E (first contraction in 64 months; lowest since Nov 2013)
*(DE) GERMANY FEB UNEMPLOYMENT CHANGE: -21K V -5KE; UNEMPLOYMENT CLAIMS RATE: 5.0% V 5.0%E
*(UK) FEB PMI MANUFACTURING: 52.0 V 52.0E (31st month of expansion)
*(EU) EURO ZONE JAN UNEMPLOYMENT RATE: 7.8% V 7.9%E (matches lowest level since Dec 2008)
*(EU) EURO ZONE FEB ADVANCE CPI ESTIMATE Y/Y: 1.5% V 1.5%E; CPI CORE Y/Y: 1.0% V 1.1%E
*(US) JAN PERSONAL INCOME: -0.1% V +0.3%E
*(US) FEB FINAL MARKIT MANUFACTURING PMI: 53.0 V 53.7E (lowest since Aug 2017)
*(UK) FEB PMI MANUFACTURING: 52.0 V 52.0E (31st month of expansion)
*(US) FEB ISM MANUFACTURING: 54.2 V 55.8E; PRICES PAID: 49.4 V 51.8E (lowest manufacturing PMI since Nov 2016)
(US) New York Fed Nowcast: cuts Q1 forecast to 0.9% from 1.2%
(US) Atlanta Fed forecasts initial Q1 GDP growth at 0.3%
AMZN Reportedly readying to launch new grocery store chain at a lower price point than Whole Foods - press
(UK) EU's Barnier: we are ready to give Britain further guarantees that Irish backstop is only temporary - German press
Fri, 01 Mar 2019 16:09 PM EST
Equity markets took a breather on fairly low volatility despite another heavy week of corporate earnings to be digested. Potential progress on some global issues hit snags as President Trump cut short his Hanoi summit without reaching any new agreement with North Korea, and as PM May reportedly conceded that the Brexit will have to be delayed from March 29 even if the Parliament supports her plan later this month. Washington was gripped by Congressional testimony from former Trump fixer Michael Cohen, as well as hearings with Fed Chair Powell and US Trade Rep Lighthizer who agreed that the economy looks healthy and would be helped by a resolution to trade tensions.
The dollar index dipped mid-week but basically ended flat, while the British pound was strong through most of the week as fears of a ‘no deal’ Brexit receded. WTI crude futures moved sideways until Friday when they dipped 2.5% following disappointing US manufacturing and consumer confidence indicators, and a tepid first look at Q1 GDP from Atlanta and New York Fed officials. The week was capped off with a risk-on rally sparked by some better than expected data out of China and Europe, and on reports that the White House is seeking to reach an endgame in China trade talks within weeks. For the week, the S&P gained 0.4% and closed above 2,800 for the first time since November 8, while the DJIA was flat, and the Nasdaq rose 0.9%.
In corporate news this week, some key earnings emerged from the retail space. JCPenney shares lifted after posting stronger than anticipated earnings and laying out a plan to shutter some stores. L Brands tumbled after missing on earnings and guiding a disappointing FY19 EPS number. Macy’s Q4 beat on the top and bottom line and the company announced it would trim 100 management positions and cut $100M in annual costs. Gap Inc. notched a profit beat and announced plans to spin off its Old Navy division to separate into two independent publicly traded companies. A spate of M&A deals hit the corporate news space this week. Roche boosted its gene therapy portfolio with its acquisition of Spark Therapeutics for $4.3B. GE sold off its life sciences business to Danaher for $21.4B. eBay initiated a strategic review of its asset portfolio amid pressure from investors. The grocery store sector slumped on Friday after a report that Amazon is reportedly launching a new line of grocery stores with a lower price point than its Whole Foods division. Shares of Tesla sold off sharply after the car company made good on its long-promised $35K price point for a pared down version of the Model 3 sedan.
SUNDAY, FEB 24
(UK) PM May said to be considering plan that would delay Brexit by 2-months; rules out meaningful vote on EU withdrawal in Commons this week - Telegraph
MONDAY, FEB 25
ONCE To be acquired by Roche for $114.50/share in cash valued at $4.8B
GE Danaher to acquire the biopharma business of General Electric Life Sciences for $21.4B
*(US) FEB DALLAS FED MANUFACTURING ACTIVITY INDEX: 13.1 V 4.7E
(US) Atlanta Fed raises Q4 GDP forecast to 1.9% from 1.4%
TSLA SEC said to ask judge to hold Musk in contempt for violating deal, cites Feb 19th Tweet by Musk regarding production - US financial press
TUESDAY, FEB 26
BAS.DE Reports Q4 adj Net €348M v €502Me, Adj EBIT €630M v €552Me, Rev €15.6B v €15.1Be; raises dividend
*(DE) GERMANY MAR GFK CONSUMER CONFIDENCE: 10.8 V 10.8 PRIOR
HD Reports Q4 $2.09 v $2.16e, Rev $26.5B v $26.6Be; Announces $15.0B share buyback; Raises Quarterly dividend 32% to $1.36 from $1.03 (indicated yield 2.86%)
M Reports Q4 $2.73 v $2.51e, Rev $8.46B v $8.46Be; launches restructuring program to fund reinvestment in the business; streamlines management structure
*(US) DEC HOUSING STARTS: 1.078M V 1.256ME (lowest since Sept 2016); BUILDING PERMITS: 1.326M V 1.290ME
*(US) FEB RICHMOND FED MANUFACTURING INDEX: 16 V 5E
*(US) FEB CONSUMER CONFIDENCE: 131.4 V 124.9E
WEDNESDAY, FEB 27
RIO.AU Reports FY18 underlying Net $8.81B v $8.63B y/y; EBITDA $18.1B v $18.6B y/y; Rev $40.5B v $41.9B y/y; declares $4.0B special dividend
TSLA CEO Elon Musk tweets: Thursday 2pm. California. Some Tesla news
*(EU) EURO ZONE FEB BUSINESS CLIMATE INDICATOR: 0.69 V 0.66E; CONSUMER CONFIDENCE (FINAL): -7.4 V -7.4E
LOW Reports Q4 $0.80 v $0.80e, Rev $15.6B v $15.7Be
(US) President Trump and North Korea leader Kim meet in Hanoi; Kim says have "overcome obstacles" since last meeting
BBY Reports Q4 $2.72 v $2.57e, Rev $14.8B v $14.7Be; Raises Quarterly dividend 11.1% to $0.50 from $0.45 (indicated yield 3.32%)
*(US) DEC FINAL DURABLE GOODS ORDERS: 1.2% V 1.2% PRELIM; DURABLES EX TRANSPORTATION: 0.1% V 0.1% PRELIM
(US) Association of American Railroads weekly rail traffic report for week ending Feb 23rd: 522.6K, -1.1% y/y
CELG Wellington Management does not support Bristol-Myers Squibb’s acquisition of Celgene
*(KR) BANK OF KOREA (BOK) LEAVES 7-DAY REPO RATE UNCHANGED AT 1.75%; AS EXPECTED
THURSDAY, FEB 28
ABI.BE Reports Q4 $0.80 v $0.90e, Rev $14.3B v $13.9Be
(KR) White House: Hanoi Summit ends, no agreement reached but talks constructive ; US and North Korea teams to meet in future
*(FR) FRANCE FEB PRELIMINARY CPI M/M: 0.0% V 0.4%E; Y/Y: 1.3% V 1.5%E
*(DE) GERMANY FEB CPI SAXONY M/M: +0.3% V -1.0% PRIOR; Y/Y: 1.4% V 1.4% PRIOR
(DE) GERMANY FEB PRELIMINARY CPI M/M: 0.5% V 0.4%E; Y/Y: 1.6% V 1.5%E
*(US) Q4 ADVANCE GDP PRICE INDEX : 1.8% V 1.7%E; CORE PCE Q/Q: 1.7% V 1.6%E
(US) Q4 ADVANCE GDP ANNUALIZED Q/Q: 2.6% V 2.2%E; PERSONAL CONSUMPTION: 2.8% V 3.0%E
(US) Nevada reports Jan casino gaming Rev $984.5M, -3% y/y; Las Vegas strip Rev $532.2M, -4% y/y
GPS Reports Q4 $0.72 v $0.68e, Rev $4.62B v $4.71Be; to spin off Old Navy; to close 230 stores over next 2 years
TLSA Confirms Model 3 with a 220 mile range will now price as low as $35K
FRIDAY, MARCH 1
(CN) US officials said to be preparing a final trade deal that President Trump and his Chinese counterpart Xi Jinping could sign in weeks - financial press
*(ES) SPAIN FEB MANUFACTURING PMI: 49.9 V 51.7E (first contraction in 64 months; lowest since Nov 2013)
*(DE) GERMANY FEB UNEMPLOYMENT CHANGE: -21K V -5KE; UNEMPLOYMENT CLAIMS RATE: 5.0% V 5.0%E
*(UK) FEB PMI MANUFACTURING: 52.0 V 52.0E (31st month of expansion)
*(EU) EURO ZONE JAN UNEMPLOYMENT RATE: 7.8% V 7.9%E (matches lowest level since Dec 2008)
*(EU) EURO ZONE FEB ADVANCE CPI ESTIMATE Y/Y: 1.5% V 1.5%E; CPI CORE Y/Y: 1.0% V 1.1%E
*(US) JAN PERSONAL INCOME: -0.1% V +0.3%E
*(US) FEB FINAL MARKIT MANUFACTURING PMI: 53.0 V 53.7E (lowest since Aug 2017)
*(UK) FEB PMI MANUFACTURING: 52.0 V 52.0E (31st month of expansion)
*(US) FEB ISM MANUFACTURING: 54.2 V 55.8E; PRICES PAID: 49.4 V 51.8E (lowest manufacturing PMI since Nov 2016)
(US) New York Fed Nowcast: cuts Q1 forecast to 0.9% from 1.2%
(US) Atlanta Fed forecasts initial Q1 GDP growth at 0.3%
AMZN Reportedly readying to launch new grocery store chain at a lower price point than Whole Foods - press
(UK) EU's Barnier: we are ready to give Britain further guarantees that Irish backstop is only temporary - German press
Friday, February 22, 2019
US/China trade talks push towards the finish line; Central Bank Hawks have reason to hibernate
TradeTheNews.com Weekly
Market Update: US/China trade talks push towards the finish line; Central Bank
Hawks have reason to hibernate
Fri, 22 Feb 2019 16:08 PM EST
Stocks spent much of the week on a continued upswing, largely on lingering hopes for a breakthrough in US-China trade talks. By week's end, reports had circulated that the two sides were drafting a six-point MOU related to key structural issues after reaching a consensus on main topics in principal. Some of those expectations were tempered by subsequent reports suggesting the two sides remained far apart on intellectual property and other important structural differences, but there was enough movement -- namely China’s commitment to purchase $1.2T in US goods -- to discuss the planning of a potential summit in late March. The Yuan moved up after Chinese officials reiterated that the currency would not be used as a pawn in the trade debate. Ultimately President Trump at an Oval Office meeting on Friday reiterated openness to extending the March 1 China tariff deadline should progress continue to be made after the Chinese Vice Premier Liu announced his delegation would be staying in DC for two additional days of trade talks.
Oil prices continued upward to levels not seen since November even though US domestic production reached 12M bpd for the first time. The Greenback edged lower, which coincided with a further breakout in gold prices. Apr gold futures crossed $1,340 for the first time since May 2018 before backing off late in the week. Global Treasury yields largely stayed suppressed, with the US 10-year ending back below 2.65% and the Bund staying below 10 bps. Wednesday’s FOMC minutes and a slew of Fed speakers that followed affirmed the 'patient' narrative has been adopted by a consensus and many view the balance sheet unwind coming to an end sometime this year. Central bankers had little reason to feel hawkish as continued sluggish economic readings were turned in by key European and Asian economies while the US data softened notably, as well. For the week the S&P rose 0.6%, the Dow added 0.6% and the NASDAQ gained 0.7%.
The focus was on more quarterly earnings in corporate news for this President’s Day-shortened week. Walmart’s holiday quarter came in ahead of expectations on both top and bottom line, as well as on same store sales, despite the poor Dec sales data released by the Commerce Dept last week. Avis Budget lifted on an earnings beat, helping Hertz shares, noting lower fleet costs and improved pricing. Domino’s dropped on disappointing same store sales and margins hit by inflationary pressures. Kraft Heinz fell precipitously after announcing a weak earnings report that included news of an SEC investigation and a dividend cut. Stamps.com market cap was nearly halved after it said it would discontinue its exclusive partnership with USPS.
SUN 2/17
(CN) China Jan Vehicle Sales Y/Y: -15.8% v -13.0% prior (7th straight decline) - Industry Association CAAM
TUES 2/19
*(UK) DEC AVERAGE WEEKLY EARNINGS 3M/Y: 3.4% V 3.5%E; WEEKLY EARNINGS (EX BONUS) 3M/Y: 3.4% V 3.4%E
*(UK) JAN JOBLESS CLAIMS CHANGE: +14.2K V +20.8K PRIOR; CLAIMANT COUNT RATE: 2.8% V 2.8% PRIOR
*(DE) GERMANY FEB ZEW CURRENT SITUATION SURVEY: 15.0 V 20.0E; EXPECTATIONS SURVEY:-13.4 % V -13.6E
(US) US Senator Bernie Sanders said he will run for President in 2020 - CNN
WMT Reports Q4 $1.41 adj v $1.33e, Rev $138.8B v $139.3Be; Raises Quarterly dividend 1.9% to $0.53 from $0.52 (indicated yield 2.12%)
(US) FEB NAHB HOUSING MARKET INDEX: 62 V 59E
(CN) US officials reportedly seeking a stable yuan pledge as part of China trade deal talks - press
WEDS 2/20
(CN) China Foreign Ministry Spokesperson Geng: Reiterates China does not engage in competitive devaluation of its yuan currency (CNY), hopes the US does not politicize currency issue
(US) Association of American Railroads weekly rail traffic report for week ending Feb 16th: 523.9K, -3% y/y
(US) Special Counsel Mueller report may be finalized next week - CNN
*(US) FOMC MINUTES FROM JAN 30TH MEETING: MEMBERS NOTED THAT FINANCIAL CONDITIONS HAD TIGHTENED SINCE SEPT AND GLOBAL GROWTH HAD MODERATED
(UK) PM May and EU's Juncker had a productive meeting; talks focused on potential guarantees around Irish backstop - joint statement
*(CN) CHINA PBOC OFFERS CNY71.9B THROUGH PSL (PLEDGED SUPPLEMENTARY LENDING) OPERATION V CNY60.5B PRIOR
THURS 2/21
DTE.DE Reports Q4 adj Net -€ 431M* v €1.3B y/y, Adj EBITDA €5.6B v €5.8Be, Rev €20.3B v €19.9Be
BA.UK Reports FY18 adj EPS 42.9p v 42.1p y/y, adj EBITDA £1.93 v £1.97B y/y, Rev £18.4B v £18.5B y/y
(FR) FRANCE FEB PRELIMINARY MANUFACTURING PMI: 51.4 V 51.0E (2nd straight expansion)
*(DE) GERMANY FEB PRELIMINARY MANUFACTURING PMI: 47.6 V 49.8E (2nd straight contraction and lowest since Dec 2012)
(EU) EURO ZONE FEB PRELIMINARY MANUFACTURING PMI: 49.2 V 50.3E (1st contraction in 68 months and lowest since Jun 2013)
(UK) Govt official: Long way from getting what is needed on Irish backstop; Brexit deal next week is unlikely (**Note: downplays recent optimism on talks)
*(US) FEB PHILADELPHIA FED BUSINESS OUTLOOK: -4.1 V +14.0E
*(US) FEB PRELIMINARY MARKIT MANUFACTURING PMI: 53.7 V 54.8E (lowest since Sep 2017)
*(US) JAN EXISTING HOME SALES: 4.94M V 5.00ME (lowest since Nov 2015)
F Ford is investigating US fuel economy and emissions compliance - press
BIDU Reports Q4 $1.92 v $1.69e, Rev $3.96B v $3.82Be
KHC Reports Q4 $0.84 v $0.93e, Rev $6.89B v $6.95Be; discloses SEC subpoena related, recorded $25M increase to costs of products sold as a result
KHC Cuts dividend 36% to $0.40 from $0.625 (3.32% indicated yield); plans to conduct additional divestitures to further deleveraging and reduce debt
STMP CEO: Have decided to discontinue our exclusive partnership with USPS as our strategy
FRI 2/22
(DE) GERMANY Q4 FINAL GDP Q/Q: 0.0% V 0.0%E; Y/Y: 0.6% V 0.6%E
Fri, 22 Feb 2019 16:08 PM EST
Stocks spent much of the week on a continued upswing, largely on lingering hopes for a breakthrough in US-China trade talks. By week's end, reports had circulated that the two sides were drafting a six-point MOU related to key structural issues after reaching a consensus on main topics in principal. Some of those expectations were tempered by subsequent reports suggesting the two sides remained far apart on intellectual property and other important structural differences, but there was enough movement -- namely China’s commitment to purchase $1.2T in US goods -- to discuss the planning of a potential summit in late March. The Yuan moved up after Chinese officials reiterated that the currency would not be used as a pawn in the trade debate. Ultimately President Trump at an Oval Office meeting on Friday reiterated openness to extending the March 1 China tariff deadline should progress continue to be made after the Chinese Vice Premier Liu announced his delegation would be staying in DC for two additional days of trade talks.
Oil prices continued upward to levels not seen since November even though US domestic production reached 12M bpd for the first time. The Greenback edged lower, which coincided with a further breakout in gold prices. Apr gold futures crossed $1,340 for the first time since May 2018 before backing off late in the week. Global Treasury yields largely stayed suppressed, with the US 10-year ending back below 2.65% and the Bund staying below 10 bps. Wednesday’s FOMC minutes and a slew of Fed speakers that followed affirmed the 'patient' narrative has been adopted by a consensus and many view the balance sheet unwind coming to an end sometime this year. Central bankers had little reason to feel hawkish as continued sluggish economic readings were turned in by key European and Asian economies while the US data softened notably, as well. For the week the S&P rose 0.6%, the Dow added 0.6% and the NASDAQ gained 0.7%.
The focus was on more quarterly earnings in corporate news for this President’s Day-shortened week. Walmart’s holiday quarter came in ahead of expectations on both top and bottom line, as well as on same store sales, despite the poor Dec sales data released by the Commerce Dept last week. Avis Budget lifted on an earnings beat, helping Hertz shares, noting lower fleet costs and improved pricing. Domino’s dropped on disappointing same store sales and margins hit by inflationary pressures. Kraft Heinz fell precipitously after announcing a weak earnings report that included news of an SEC investigation and a dividend cut. Stamps.com market cap was nearly halved after it said it would discontinue its exclusive partnership with USPS.
SUN 2/17
(CN) China Jan Vehicle Sales Y/Y: -15.8% v -13.0% prior (7th straight decline) - Industry Association CAAM
TUES 2/19
*(UK) DEC AVERAGE WEEKLY EARNINGS 3M/Y: 3.4% V 3.5%E; WEEKLY EARNINGS (EX BONUS) 3M/Y: 3.4% V 3.4%E
*(UK) JAN JOBLESS CLAIMS CHANGE: +14.2K V +20.8K PRIOR; CLAIMANT COUNT RATE: 2.8% V 2.8% PRIOR
*(DE) GERMANY FEB ZEW CURRENT SITUATION SURVEY: 15.0 V 20.0E; EXPECTATIONS SURVEY:-13.4 % V -13.6E
(US) US Senator Bernie Sanders said he will run for President in 2020 - CNN
WMT Reports Q4 $1.41 adj v $1.33e, Rev $138.8B v $139.3Be; Raises Quarterly dividend 1.9% to $0.53 from $0.52 (indicated yield 2.12%)
(US) FEB NAHB HOUSING MARKET INDEX: 62 V 59E
(CN) US officials reportedly seeking a stable yuan pledge as part of China trade deal talks - press
WEDS 2/20
(CN) China Foreign Ministry Spokesperson Geng: Reiterates China does not engage in competitive devaluation of its yuan currency (CNY), hopes the US does not politicize currency issue
(US) Association of American Railroads weekly rail traffic report for week ending Feb 16th: 523.9K, -3% y/y
(US) Special Counsel Mueller report may be finalized next week - CNN
*(US) FOMC MINUTES FROM JAN 30TH MEETING: MEMBERS NOTED THAT FINANCIAL CONDITIONS HAD TIGHTENED SINCE SEPT AND GLOBAL GROWTH HAD MODERATED
(UK) PM May and EU's Juncker had a productive meeting; talks focused on potential guarantees around Irish backstop - joint statement
*(CN) CHINA PBOC OFFERS CNY71.9B THROUGH PSL (PLEDGED SUPPLEMENTARY LENDING) OPERATION V CNY60.5B PRIOR
THURS 2/21
DTE.DE Reports Q4 adj Net -€ 431M* v €1.3B y/y, Adj EBITDA €5.6B v €5.8Be, Rev €20.3B v €19.9Be
BA.UK Reports FY18 adj EPS 42.9p v 42.1p y/y, adj EBITDA £1.93 v £1.97B y/y, Rev £18.4B v £18.5B y/y
(FR) FRANCE FEB PRELIMINARY MANUFACTURING PMI: 51.4 V 51.0E (2nd straight expansion)
*(DE) GERMANY FEB PRELIMINARY MANUFACTURING PMI: 47.6 V 49.8E (2nd straight contraction and lowest since Dec 2012)
(EU) EURO ZONE FEB PRELIMINARY MANUFACTURING PMI: 49.2 V 50.3E (1st contraction in 68 months and lowest since Jun 2013)
(UK) Govt official: Long way from getting what is needed on Irish backstop; Brexit deal next week is unlikely (**Note: downplays recent optimism on talks)
*(US) FEB PHILADELPHIA FED BUSINESS OUTLOOK: -4.1 V +14.0E
*(US) FEB PRELIMINARY MARKIT MANUFACTURING PMI: 53.7 V 54.8E (lowest since Sep 2017)
*(US) JAN EXISTING HOME SALES: 4.94M V 5.00ME (lowest since Nov 2015)
F Ford is investigating US fuel economy and emissions compliance - press
BIDU Reports Q4 $1.92 v $1.69e, Rev $3.96B v $3.82Be
KHC Reports Q4 $0.84 v $0.93e, Rev $6.89B v $6.95Be; discloses SEC subpoena related, recorded $25M increase to costs of products sold as a result
KHC Cuts dividend 36% to $0.40 from $0.625 (3.32% indicated yield); plans to conduct additional divestitures to further deleveraging and reduce debt
STMP CEO: Have decided to discontinue our exclusive partnership with USPS as our strategy
FRI 2/22
(DE) GERMANY Q4 FINAL GDP Q/Q: 0.0% V 0.0%E; Y/Y: 0.6% V 0.6%E
Sunday, February 17, 2019
Barrons weekend summary
Barrons weekend summary: cover story on cannabis stocks; positive feature on Loews (L)
Cover story: Investors interested in U.S. cannabis stocks face a number of challenges: Although marijuana is legal for recreational or medical use in many states, it remains illegal under federal law, so cannabis companies—with the exception of those that only sell in Canada such as CGC and TLRY—can’t list on American exchanges; Top contenders in the U.S. market include Acreage Holdings, Green Thumb Industries, MedMen Enterprises, Harvest Health & Recreation, Trulieve Cannabis, iAnthus Capital Holdings, which are pursuing varied strategies, with only Acreage and iAnthus profitable so far.
Features: 1) The patchwork of marijuana regulation in the U.S. makes it hard for cannabis companies to manage legal issues, but a broader federal reform would result from the States Act, proposed in June 2018, that would exempt cannabis from most federal drug laws in states that have legalized it; 2) Positive on EQIX, COR, IRM, INXN: Barron’s found four leading companies in the data-center sector whose shares look compelling after an industry slowdown that weighed on investor sentiment—the shares are staging a comeback and seem poised for further growth; 3) Positive on Fanuc, ABB, Yaskawa Electric, Kuka, TER: Major robot makers offer investors a good opportunity to gain exposure to a technology that is part of what manufacturing executives say will be the next industrial revolution—and of the five, Teradyne is particularly attractive; 4) Positive on L: The home-improvement company is a $15B conglomerate that “flies under Wall Street’s radar,” and is “a conservatively run, value-oriented company, with decent growth prospects, that trades at a nice discount from its net asset value.”
Tech Trader: An executive order from Donald Trump banning Huawei Technologies gear in the U.S. would be good for the company’s rivals—including NOK, ERIC, and Samsung Electronics—problematic for foreign telecom operators, and worrisome for U.S.-China trade relations.
Trader: “The market’s rally has forced investors to rebuild positions they may have sold off during December’s tumble—and they may not be finished just yet,” while hedge funds and risk-controlled portfolios still have little exposure to the market relative to history and retail investors haven’t put much money back in since the downturn; Positive on YETI: Maker of outdoor gear such as coolers, jugs, wine tumblers, and more has low brand recognition, but as more people learn about it, shares could rise by as much as 60%; Cautious on XPO, FDX, UPS, KR, FAST, GWW: As AMZN “eats the economy,” its influence continues to expand, and no sector—from shipping to groceries to industrial distribution—seems safe from its disruption, leaving investors the challenge of finding which industries could benefit from its growth.
Interview: Matt Diserio and his partners founded Water Asset Management in a bid to solve environmental problems while making good returns, but he doesn’t think all sustainable investments are winners, and he likes water more than renewable energy (picks: PRMW, AOS, RXN, Suez).
Profile: Vivian Wohl, one of eight co-portfolio managers at the $1.7B Federated Kaufmann Small Cap fund, focuses on medical devices and healthcare software and services, spends a lot of time on Facebook following patient groups to see what users are saying about new devices and services (top 10 holdings: VEEV, INSP, DXCM, TNDM, HZD, GKOS, PRAH, NEO, IRTC, XENT).
European Trader: Positive on AMS: Swiss company that produces 3-D sensors and laser technologies used in smartphones was one of several AAPL suppliers hit by slowing iPhone sales, but it is trying to diversify into other consumer areas and industrial applications, which should eventually boost sales.
Emerging Markets: Chinese companies are increasingly defaulting on their bonds, a good thing in the long term, but also in the short term for investors who know what they are doing—but they can’t navigate these assets from an armchair.
Commodities: “Volatile prices make gasoline a particularly risky investment, but the fuel’s importance to drivers hasn’t wavered” and most consumers consider it to be a more important household expenditure than expenses such as health care and savings.
Streetwise: For AMZN, the decision to pull out of a planned New York headquarters is a financial nonevent. But shareholders should remember that its surging profits could invite a backlash—and from devout capitalists, not just progressive protesters.
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