Markets digest rate cuts and new volleys in the trade war

TradeTheNews.com Weekly Market Update: Markets digest rate cuts and new volleys in the trade war
Fri, 02 Aug 2019 16:08 PM EST

Investors were inundated by headlines this week streaming in from both the macro and corporate levels. Ultimately US stocks pushed away from the recent all-time highs amid growing concerns surrounding global central bank policies and resurgent trade tensions. Despite earnings season kicking into high gear, the focus was clearly on key central meetings as the BOJ, BOE and Fed all met. Expectations were already high amidst continued disappointing data overseas, and cracks in US manufacturing numbers came alongside benign inflation readings. Wednesday’s FOMC meeting ultimately seemed a bit underwhelming when the Fed decided to cut rates for the first time in 11-years. Two dissenting votes undercut expectations for more accommodation, and Chairman Powell went on characterize the 25 bps cut as a ‘mid-cycle policy adjustment’ rather than a lengthy cutting cycle, disappointing some Fed watchers including President Trump. In the wake of the Fed rate cut, the US dollar index shot up to fresh 2-year highs and the Treasury curve flattened further, while stock markets turned decidedly lower.

On Thursday, markets were further roiled by Trump announcing his intension to put a 10% tariff on the remaining $300B in Chinese goods that have not yet been taxed. The President tweeted the announcement after receiving a disappointing briefing on last week’s trade discussions in Shanghai. The dollar weakened on the tariff news, with the notable exception of Yuan, which moved back to within a few cents of last falls all time high 6.98 in the USD/CNY exchange rate. The oil market was pummeled on concerns about slower trade and global interest rates made fresh legs lower. The US 10-year yield dropped to levels not seen since President Trump was elected and the German Bund yield tested -50 bps for the first time. Futures markets recouped lost expectations for future Fed rate hikes from Wednesday’s FOMC announcement: By Friday, a September rate cut was almost entirely priced in by traders and December futures signaled a better than 50% chance of a third cut by year end.

Friday’s jobs report was mixed but broadly consistent with market expectations. July payrolls were in line with expectations, but June payrolls were revised lower. The U6 dropped while the participation rate moved up, and wages ticked higher, but that came alongside a decline in weekly hours. Rates continued to track lower following the report and stocks stayed heavy. Also this week, the Pound fell to a two-year low as PM Johnson remained adamant that any eventual Brexit deal with the EU will have to exclude the Irish backstop. Investors also kept a wary eye on Hong Kong as reports surfaced that the Chinese army was building up troop levels on the border in preparation for a potential severe crackdown on demonstrators. The trade and political tensions sent gold prices back towards the highs of the year and copper futures approached two year lows. The VIX volatility index surged more than 50% over the course of the week as the S&P fell 3.1%, the DJIA lost 2.6%, and the Nasdaq tumbled 3.9% to notch its worst decline since December.

In corporate news this week, a slew of earnings reports dominated headlines. Apple delivered a better than anticipated top and bottom line, as its drop in iPhone revenue was somewhat offset by strong wearables and services growth. General Motors shares lifted after topping EPS expectations, as the automaker noted that healthy pickup truck and crossover sales offset a sag in income from China. AMD shares fell post-report after blaming a gap in console offerings for its cautious Q4 outlook. P&G rallied after topping earnings expectations and forecasting a strong FY20. Pinterest surged after posting a big revenue beat and raising guidance amid strong ad spending. Square’s earnings miss sent its shares sharply lower, as investors saw its merchant acquisition growth decelerating quicker than expected. Mylan announced it would combine with Pfizer's off-patent unit Upjohn in an all-stock deal to create a generic drug behemoth.


MON 7/29
HEIA.NL Reports H1 Net €1.05B v €1.08B y/y Op €1.78B v €1.9Be, Rev €11.45B v €11.5Be
SAN.FR Reports Q2 Business EPS €1.31 v €1.25e, Business Net €1.64B +4.9% y/y, Rev €8.63B v €8.4Be
*(US) JULY DALLAS FED MANUFACTURING ACTIVITY INDEX: -6.3 V -6.0E
*(JP) BOJ LEAVES INTEREST RATE ON EXCESS RESERVES (IOER) UNCHANGED AT -0.10%; AS EXPECTED; reaffirms forward guidance

TUES 7/30
BAYN.DE Reports Q2 Net €404M v €794M y/y, Adj EBITDA €2.93B v €3.25Be, Rev €11.5B v €11.68Be: Affirms outlook, yet increasingly ambitious
BP.UK Reports Q2 Adj Net $2.81B v $2.82B y/y, Rev $73.8B v $76.9B y/y
066570.KR Reports final Q2 (KRW) Net 106B v 326.5B y/y; Op 652B v 652.2B prelim; Rev 15.6T v 15.6T prelim
*(EU) EURO ZONE JULY BUSINESS CLIMATE INDICATOR: -0.12 V +0.08E
PG Reports Q4 $1.10 v $1.06e, Rev $17.1B v $16.9Be
*(DE) GERMANY JULY PRELIMINARY CPI M/M: 0.5% V 0.3%E; Y/Y: 1.7% V 1.5%E
*(US) JUN PCE DEFLATOR M/M: 0.1% V 0.1%E; Y/Y: 1.4% V 1.5%E
*(US) JUN PERSONAL INCOME: 0.4% V 0.4%E; PERSONAL SPENDING: 0.3% V 0.3%E
*(US) JULY CONSUMER CONFIDENCE: 135.7 V 125.0E (highest since Nov 2018)
(US) Atlanta Fed forecasts initial Q3 GDP growth at 2.0%
*(CN) CHINA JULY OFFICIAL MANUFACTURING PMI: 49.7 V 49.6E (3rd consecutive contraction or reading below 50, lowest level since Nov)

WEDS 7/31
AIR.FR Reports H1 Net €1.2B v €496M y/y, adj EBIT €2.53B v €1.16B y/y; Rev €30.9B v €25.0B y/y
CSGN.CH Reports Q2 (CHF) Net 937M v 647M y/y, Rev 5.58B v 5.34Be; expect usual seasonal Rev slowdown in Q3
BA.UK Reports H1 Underlying EPS 25.0p v 14.8p y/y, EBITA £999M v £874M y/y, Rev £9.42B v £8.82B y/y
*(DE) GERMANY JULY UNEMPLOYMENT CHANGE: +1.0K V +2.0KE; UNEMPLOYMENT CLAIMS RATE: 5.0% V 5.0%E
*(IT) ITALY Q2 PRELIMINARY GDP Q/Q: 0.0% V -0.1%E; Y/Y: 0.0% V -0.1%E
GE Reports Q2 $0.17 adj v +$0.12e, Rev $28.8B v $28.9Be
*(US) JULY CHICAGO PURCHASING MANAGER INDEX (PMI): 44.4 V 51.0E (lowest since Dec 2015)
(US) FOMC CUTS TARGET RANGE BY 25BPS TO 2.00-2.25% (AS EXPECTED); REITERATES FED WILL ACT AS APPROPRIATE TO SUSTAIN EXPANSION; TWO MEMBERS DISSENT
(US) Fed Chair Powell: outlook for US economy remains favorable; want to support faster return to 2% inflation objective - post rate decision press conference
(US) Fed Chair Powell: Sees 25bps rate cut as a 'midcycle policy adjustment' - Q&A
(JP) Japan Investors Net Buying of Foreign Bonds: -¥162.2T v ¥1.03T prior week; Foreign Net Buying of Japan Stocks: +¥37.5B v -¥109.9B prior week

THURS 8/1
SIE.DE Reports Q3 Net €1.14B v €1.18Be, Industrial Business EBITDA €1.94B v €2.19Be, Rev €21.3B v €21.2Be
MT.NL Reports Q2 -$0.44 v $1.84 y/y, EBITDA $1.56B v $1.61Be, Rev $19.3B v $19.0Be
RDSA.NL Reports Q2 CCS EPS $0.43 v $0.60e, Adj CCS Net $3.46B v $4.69B y/y, Rev $90.5B v $91.6Be; announces next tranche of share buyback programme
RIO.AU Reports H1 Underlying Net $4.93B v $4.86Be; underlying EBITDA $10.3B v $10.1Be; Rev $20.7B (+9% y/y); announces special dividend of $1.0B
*(ES) SPAIN JULY MANUFACTURING PMI: 48.2 V 48.0E (2nd straight contraction)
*(UK) JULY MANUFACTURING PMI: 48.0 V 47.6E (3rd straight contraction and lowest since July 2012)
VZ Reports Q2 $1.20 v $1.20e, Rev $32B v $32.4Be
*(UK) BANK OF ENGLAND (BOE) JULY MINUTES: VOTED 9-0 TO KEEP INTEREST RATE UNCHANGED AT 0.75%; maintains forward guidance assuming a smooth Brexit scenario
GM Reports Q2 $1.64 adj v $1.43e, Rev $36.1B v $35.6Be
*(US) JULY ISM MANUFACTURING: 51.2 V 52.0E; PRICES PAID: 45.1 V 49.0E (Manufacturing reading lowest since Aug 2016)
*(US) JUN CONSTRUCTION SPENDING M/M: -1.3% V 0.3%E
(US) Atlanta Fed raises Q3 GDP growth to 2.2% from 2.0% prior
(US) Pres Trump says U.S. will put a "small" additional tariff of 10% on the remaining $300B of goods and products coming from China on Sept 1st
(US) Pres Trump: not concerned about drop in the Dow stocks; we'll be 'taxing' China until US can reach a trade deal with them
*(US) President Trump: New China 10% tariffs can be raised BEYOND 25% is progress remains stalled
FLR Reports Q2 -$3.96 v $0.52e, Rev $4.1B v $4.56Be; withdraws guidance; commenced comprehensive operational and strategic review
(VE) Pres Trump: considering a quarantine or blockade of Venezuela

FRI 8/2
7203.JP Reports Q1 Net ¥683.0B v ¥657.3B y/y; Op ¥741.95B v ¥682.69B y/y; Rev ¥7.65T v ¥7.36T y/y
ACA.FR Reports Q2 Net €1.22B v €1.22Be, Rev €5.15B v €5.10Be
(US) Fox's Edward Lawrence: China is not backing down or adding back any of the concession language in the agreement. The Chinese told the US Trade Rep the US will have to just trust them that China will enforce intellectual property protections.
RBS.UK Reports H1 Net £1.33B v £707M y/y, adj Op £1.7B v £1.0B y/y, Rev £4.08B v £3.6Be; announces special dividend of 12p/shr
ARNC Reports Q2 $0.58 v $0.50e, Rev $3.69B v $3.64Be
*(US) JULY CHANGE IN NONFARM PAYROLLS: +164K V +165KE
*(US) JULY FINAL UNIVERSITY OF MICHIGAN CONFIDENCE: 98.4 V 98.5E
(US) Atlanta Fed cuts Q3 GDP growth to 1.9% from 2.2% prior

Barrons weekend summary

Barrons weekend summary: cover story long term positive on PCG; cautious on select software names; cautious on electric vehicle market 

Cover story: The bankruptcy of California utility PCG “is an extreme example of the potential consequences that climate change may create for the utility industry”; Getting through it “will require a balancing act among many players: company officials, politicians, consumer advocates, and investors. At the same time, it offers an opportunity for savvy individual investors with a strong stomach”—who could eventually see an upside of 20% or more in the stock price. 

Features: 1) Cautious on WDAY, NOW, OKTA, ZS: Shares of software companies are up, but investors are overlooking a lack of earnings based on standard accounting to focus on high revenue growth and a large market opportunity—meaning a bubble could be in the making; 2) Barron’s third-annual ranking of robo advisors—topped by Fidelity Co., WiseBanyan, and Wealthfront—finds the sector’s assets have risen to at least $44B, driven by new services, including access to live advisors, sustainable-investing products, and higher-yielding cash accounts; 3) Cautious on F, TSLA: Electric vehicles are the future, and not just because they cut carbon or save on gas—they have more power, but until they’re common, so-called mild hybrids that are cheaper to build and still save on gas and emissions may become popular. 

Tech Trader: Positive on T, Comcast, DISH, VZ, CHTR, ATUS: Companies’ cable divisions are losing customers—but for now, investors don’t mind: fewer video subscribers actually boosts profitability, since video has lower profit margins than broadband, which continues to thrive, boosting average revenue per user, a key metric. 

Trader: Banks, which have been showing signs of technical strength, are one group that might outperform regardless of whether there is a hiccup in inflation or interest rates; A number of data points indicate the potential for a recession on the horizon, but just because these economic indicators look bad now doesn’t mean they have to stay that way, and there are already signs of improvement; Softbank’s second Vision Fund, were it to have a similar formula and comparable returns to the first one, could generate billions of dollars for the company in the years ahead. 

Interview: James Montier, a strategist at Boston-based GMO, talks about a range of topics, including why modern monetary theory is a good model for governments’ interactions with the market and why he’s still waiting for a decline in the U.S. stock market. 

Profile: Don Wordell, manager of the $3.1B Virtus Ceredex Mid-Cap Value Equity fund, explains why dividends, valuation, and fundamentals have to come together for him to consider a stock, and why if any are violated, the stock is sold (top 10 holdings: HUM, ZBH, MPC, ENR, PEG, K, HIG, PNFP, AMP, ABC). 

Follow-Up: Investors are concerned about the government’s plan to investigate Big Tech, but they should ignore the regulatory noise and focus on fundamentals instead. 

European Trader: Positive on Ocadio Group: British firm that licenses artificial intelligence and robotic systems to help supermarkets deliver food ordered online has been called the AMZN of the grocery market and the MSFT of retail—and with new deals in the works, shares could keep rising. 

Emerging Markets: If China’s Science and Technology Innovation Board—known as the STAR market—takes off, it could be a very big deal financially and geopolitically, given that China is home to 94 of the world’s 326 unicorns. 

Commodities: “Commodity investors should consider pigging out on lean hogs: A record-breaking drop in global pork production will mean a massive shortfall of meat, which could spark a rally in hog prices of at least 20% by year end.” 

Streetwise: Things are getting weird for bonds in Europe—even some junk-rated debt there pays less than nothing, and if yields are indeed near bottom, expect central bankers to turn to more-creative means for stimulus during the next downturn.

Mixed data keeps central banks dovish, stocks plow higher in anticipation of more stimulus

TradeTheNews.com Weekly Market Update: Mixed data keeps central banks dovish, stocks plow higher in anticipation of more stimulus
Fri, 26 Jul 2019 16:38 PM EST

US stock markets had another strong week as Fed rate cut expectations held constant. A deluge of Q2 earnings reports revealed some firms were able to handily top already tempered expectations, but many executives still cited general uncertainty surrounding trade and growth as a lingering headwind. The US economic data, outside of housing, remained stronger both at the margin and relative to expectations. Overseas figures, on the other hand, were squishy, underscored by weakening PMI figures in Europe. That dichotomy allowed the dollar to move higher and UST yields to diverge further from other government bond rates. The signs of economic strength did little though to shake expectations that the Fed will cut rates next week. Thursday’s ECB meeting clearly opened the door to rate cuts and other potential unconventional measures in September. Draghi’s shift further into dovish territory, along with a soft US PCE reading and revision on Friday all but confirmed the Fed will offer up an ‘insurance’ rate cut next week. The US yield curve flattened while gold and crude oil prices consolidated. The S&P500 hit record highs this week, gaining 1.7%, while the DJIA edged up 0.1% and the Nasdaq rose 2.3%.

In corporate news, Google reported a surprise beat on the top and bottom line, helped by its growing cloud business. Amazon opened lower after an earnings miss, pointing to rising delivery costs as the tech giant shifts to one-day shipping. Starbucks was a standout for the week as it raised its outlook and saw much stronger than anticipated SSS growth. Caterpillar reported weaker-than-expected earnings and cut guidance amid higher material costs and further headwinds in China. Facebook had a better than expected quarter, despite regulatory clouds forming on the horizon. Tesla earnings came in well below consensus estimates, though the EV manufacturer did affirm its full-year delivery guidance. Apple signed a deal to acquire the majority of Intel’s smartphone modem business for $1billion. T-Mobile's acquisition of Sprint finally received Justice Department approval, conditioned upon the sale of some assets to DISH, although certain state attorneys general intend to have a say as to whether the deal is ultimately finalized.


MONDAY 7/22
(KR) South Korea official: preparing plans for a semiconductor test bed
CON.DE Cuts FY19 Rev €44-45B, adj EBIT margin 7-7.5% (prior Rev €45-47B, Adj EBIT margin 8-9%) due to decline in global light vehicle production
WHR Reports Q2 $4.01 v $3.80e, Rev $5.20B v $4.90Be
MAXR Chosen by NASA to integrate pollution monitoring payload on an upcoming commercial satellite; slated for launch by 2022

TUESDAY 7/23
UBSG.CH Reports Q2 Net $1.39B v $960Me, Adj Pretax $1.79B v $1.82B y/y, Rev $7.53B v $7.30Be
KO Reports Q2 $0.63 v $0.62e, Rev $10.0B v $9.79Be
*(UK) RESULTS OF CONSERVATIVE PARTY LEADERSHIP VOTE: Boris Johnson elected as party leader (as expected); to become Prime Minister after May steps down on Wed, July 24th
*IMF UPDATES ITS WORLD ECONOMIC OUTLOOK (WEO): cuts 2019 GLOBAL GDP GROWTH FORECAST FROM 3.3% TO 3.2%
*(US) JULY RICHMOND FED MANUFACTURING INDEX: -12 V +5E (lowest since Jan 2013)
*(CN) US NEGOTIATING TEAM REPORTEDLY TO HEAD TO CHINA ON MONDAY FOR FACE-TO-FACE TRADE TALKS - PRESS
TXN Reports Q2 $1.36 v $1.21e, Rev $3.67B v $3.60Be
V Reports Q3 $1.37 v $1.33e, Rev $5.80B v $5.70Be
SNAP Reports Q2 -$0.06 v -$0.10e, Rev $388M v $356Me

WEDNESDAY 7/24
DBK.DE Reports Q2 adj Net €231M v €401M y/y, adj Pretax* €441M v €711M y/y, Rev €6.20B v €6.20Be
*(FR) FRANCE JULY PRELIMINARY PMI MANUFACTURING: 50.0 V 51.6E (4th straight expansion)
*(DE) GERMANY JULY PRELIMINARY PMI MANUFACTURING: 43.1 V 45.2E (7th month of contraction and lowest reading since July 2012)
*(EU) EURO ZONE JULY PRELIMINARY PMI MANUFACTURING: 46.4 V 47.7E (6th straight contraction and lowest since Dec 2012)
UPS Reports Q2 $1.96 v $1.93e, Rev $18.0B v $17.90Be
BA Reports Q2 -$5.82* v -$0.56e, Rev $15.8B v $18.0Be
CAT Reports Q2 $2.83 v $3.12e, Rev $14.4B v $14.5Be
*(US) Robert Mueller testimony: stressed to his staff that the probe needed to be conducted fairly; Report did not exonerate Pres Trump
*(US) JULY PRELIMINARY MARKIT MANUFACTURING PMI: 50.0 V 51.0E (lowest since Sept 2009)
*(US) JUN NEW HOME SALES: 646K V 658KE
DB1.DE Reports Q2 adj €1.58 v €1.55e, adj EBITDA €465.5M v €464.0Me, Rev €724.8M v €725Me
FB Reports Q2 $1.99 adj v $1.90e, Rev $16.9B v $16.4Be
TSLA Reports Q2 -$1.12 v -$0.54e, Rev $6.35B v $6.38Be
*(KR) SOUTH KOREA Q2 PRELIMINARY GDP Q/Q: 1.1% V 0.9%E; Y/Y: 2.1% V 1.9%E
(JP) Japan Investors Net Buying of Foreign Bonds: ¥1.03T v ¥949.6B prior week; Foreign Net Buying of Japan Stocks: -¥110.0B v- ¥93.1B prior week

THURSDAY 7/25
NOKIA.FI Reports Q2 non-IFRS Net €258M v €139M, Rev €5.69B v €5.44Be
ROG.CH Reports H1 (CHF) Net 8.90B v 7.52B y/y, Op 12.36B v 12.2Be, Rev 30.47B v 30.5Be
ABI.BE Reports Q2 Net $2.47B v $2.4Be, adj EBITDA $5.86B v $5.69Be, Rev $13.96B v $13.9Be
BAS.DE Reports Q2 adj Net €6.46B v €6.40Be, Adj EBIT €1.05B v €966Me, Rev €15.16B v €15.1Be
AZN.UK Reports Q2 Core EPS $0.73 v $0.60e, Rev $5.82B v $5.6Be
UNA.NL Reports H1 Net €3.21B v €3.23B y/y, Rev €26.1B v €26.1Be
DGE.UK Reports FY19 EPS 130.8p v 118.6p y/y, adj EBITDA £4.80B v £4.50B y/y, Rev £12.87B v £12.16B y/y; Organic growth +6%
(CN) China Commerce Ministry (MOFCOM) spokesperson Gao: urges US to implement Huawei commitment; reiterates China, US negotiators to meet Jul 30-31st
*(DE) GERMANY JULY IFO BUSINESS CLIMATE: 95.7 (lowest since Feb 2010) V 97.2E; CURRENT ASSESSMENT: 99.4 V 100.4E
MMM Reports Q2 $2.20* v $2.04e, Rev $8.20B v $8.02Be
*(EU) ECB LEAVES MAIN 7-DAY REFINANCING RATE UNCHANGED AT 0.00%; AS EXPECTED; maintains guidance
*(US) JUN PRELIMINARY DURABLE GOODS ORDERS: 2.0% V 0.7%E; DURABLES (EX-TRANSPORTATION): 1.2% V 0.2%E
(EU) ECB's Draghi: Reitereates guidance that interest rates seen at present or lower level at least though H1 2020; seens need for accommodative policy stance for a prolong period of time - Prepared Remarks
(EU) ECB's Draghi: Had broad agreement on assessment on economic outlook; manufacturing outlook is worsening and needs to be taken into account - Q&A
INTC Apple to acquire majority of Intel’s smartphone modem business for $1B, as speculated
AMZN Reports Q2 $5.22 v $5.29e, Rev $63.4B v $62.6Be
GOOGL Reports Q2 $14.21 v $11.50e, Rev $31.7B (ex $7.23B of TAC) v $30.9Be

FRIDAY 7/26
VOD.UK Reports Q1 Rev £10.7B v £10.9B y/y; Service Organic Rev -0.2% v -0.7% q/q
CARBX U.N. Weather agency exec: recent European heatwave now heading for Greenland, may take Greenland ice sheet to record low
*(US) Q2 ADVANCE GDP PRICE INDEX: 2.4% V 2.0%E; CORE PCE 1.8% V 2.0%E
*(US) Q2 ADVANCE GDP ANNUALIZED Q/Q: 2.1% V 1.8%E; PERSONAL CONSUMPTION: 4.3% V 4.0%E
AAPL Pres Trump tweets: "Apple will not be given Tariff wavers, or relief, for Mac Pro parts that are made in China. Make them in the USA, no Tariffs!"

Barron’s weekend summary

Barron’s weekend summary: positive features on FDX, TGT, and select banks 

Cover story: Investing in Softbank Group “offers a radically discounted bet on the future,” with cheap shares that are arguably priced 30-50% below the value of their underlying assets; Understanding the company and the vision of its leader, Masayoshi Son, takes effort, but could lead to a big payoff for investors. 

Features: 1) Positive on FDX: Investors have sent shares down over concerns about AMZN’s move into logistics, but as e-commerce volume grows, capital spending declines, and better execution results in higher profits, shares could rally to $220, which with a dividend yield of 1.6% could deliver a 33% total return; 2) Positive on TGT: Retailer has managed to withstand pressure from AMZN and the growth of online shopping, while benefiting from the closure of rivals’ stores—and with improved Web operations and low prices, the stock has yet to reach its potential highs; 3) Story looks at what people need to look out for when buying annuities—income generating annuities can be effective tools for those concerned about outliving their money, but investors need to be cautious and inquisitive; 4) Barron’s annual list of the top 100 annuities now includes categories that represent more products and better reflect investors’ buying habits, as well as variable and fixed-index annuities with the highest potential average income based on probability analyses; 5) Positive on KEY, SBNY, USB: Many banks are sensitive to falling interest rates, but investors expect these three to be better positioned for a Federal Reserve interest rate cut, thanks in part to a lower percentage of variable-rate loans versus some peers. 

Tech Trader: Cautious on NFLX: The streaming giant’s strengths—including scale, value, and a vast library—may not be enough to make up for shortfalls in show quality, and its aura of invincibility may be wearing off after its recent report of lower-than-expected subscriber growth. Trader: One hundred and thirty three companies in the S&P 500 are set to report earnings this week, but “the lack of broader market action might end up just being the calm before the storm”; Look for that second-quarter consumer strength to boost earnings at the likes V, CMG, AAL, and AMZN when they report this coming week—the contrast between the economy’s consumer and industrial segments remains stark; Fintech companies continue to outpace traditional banks, which have underperformed the broad market over the past year, but the shares may be overpriced, and the best way to play the sector remains V, MA, and PYPL. 

Profile: Michael Cirami and Eric Stein, co-directors of Eaton Vance, believe that staying out of troubled assets is critical to boosting returns and reducing volatility (top 10 countries for debt holdings in the Eaton Vance Emerging Markets Debt Opportunities fund: Egypt, Nigeria, Ukraine, Serbia, Peru, Bahrain, Sri Lanka, Argentina, Indonesia, Thailand). 

Interview: Ziad Bakri—who manages $16.3B across T. Rowe Price’s health-sciences strategy, including the $13.2B Health Sciences fund—talks about picking biotech stocks and the Medicare for All debate (picks: SAGE, BDX, TMO, Roche Holding, UNH, ANTM, CI, NVCR).

Follow-Up: In a cover story last September, Barron’s argued that gold looked appealing, as did depressed gold stocks; the metal tends to do well when inflation-adjusted interest rates are low, which is the case now. European 

Trader: Germany, an export-oriented economy, has been hit hard by turmoil in global trade, and if a current slump continues, the government of chancellor Angela Merkel may have to temper its longstanding aversion to deficits and debt. 

Emerging Markets: Mexico’s economic outlook is going from bad to worse eight months into President Obrador’s administration, with the resignation of respected finance minister Carlos Urzua and major problems at state oil company Pemex—though the country’s assets are priced for risk. 

Commodities: “Natural gas finally has broken out of the tight trading range it’s been stuck in for the past six months, though it’s done it the hard way, by falling to a more than three-year low. However, there could be good news in the bad news.”

Streetwise: Online ordering, delivery, and a new loyalty program have given CMG more ways to serve and learn about its customers, but those are effectively table stakes in today’s restaurant business, and the company hopes to rollout more key initiatives as part of its comeback.

Fed teases rate cuts; Iran tensions mount

TradeTheNews.com Weekly Market Update: Fed teases rate cuts; Iran tensions mount 
Fri, 19 Jul 2019 16:07 PM EST

Stock markets weakened in the middle part of the week as focus shifted from rate cut expectations toward corporate earnings reports. Markets pulled back further amid reports that US/China trade talks may be stalling, and as President Trump taunted China over its slowing GDP data and suggested he could still impose more tariffs at any moment. Trump also had some more choice words for the Federal Reserve, continuing to pressure the Fed to cut rates as more foreign central banks cut their own rates this week. Interestingly, the lingering trade tensions appear to be a major motivating factor for Fed officials who appear increasingly motivated to cut rates, to the extent that this dovish thinking completely overshadowed the economic data, which for the second straight week came in substantially stronger than consensus estimates. By Thursday, futures markets were pricing in better than a 50% chance the Fed would cut by 50 bps at the end July, but the Fed tried to walk back these more aggressive expectations on Friday. Early in the week, the Greenback retraced higher prodded by robust US manufacturing and retail sales figures. Gold prices popped back to the highs of the year helped by declining interest rate forecasts and a continued escalation of Iran tensions, while crude oil futures tumbled more than 6% this week despite reports of Iran waylaying at least two oil tankers in the Strait of Hormuz. For the week, the S&P lost 1.2%, the DJIA dipped 0.6%, and the Nasdaq fell 1.2%.

In corporate news this week, as earnings season kicked off, Microsoft profits powered higher, led by strong Azure growth again, while gross margins improved and LinkedIn engagement continued to rise. Netflix shares tanked after reporting a domestic subs decline q/q and a big miss on global subs estimates. As big bank earnings rolled in, JP Morgan, Citi, and Goldman registered top and bottom line beats, and Bank of America and Comerica cut their net interest income outlook amid falling rates. eBay shares rallied after an earnings beat and reports that the company was preparing to move ‘aggressively’ forward with the sale of its StubHub division. Boeing announced it would take a nearly $5B charge as a result of the 737 MAX groundings and said it assumed planes would fly in Q4, giving investors some potential clarity to the extent of the damage from the crisis.


SUNDAY 7/14
*(CN) CHINA JUN INDUSTRIAL PRODUCTION Y/Y: 6.3% V 5.2%E
*(CN) CHINA JUN RETAIL SALES Y/Y: 9.8% V 8.5%E; YTD Y/Y: 8.4% V 8.2%E
*(CN) CHINA Q2 GDP Q/Q: 1.6% V 1.5%E; Y/Y: 6.2% V 6.2%E (slowest annual growth since 1992)

MONDAY 7/15
C Reports Q2 $1.83 adj v $1.78e, Rev $18.8B v $18.3Be
*(US) JULY EMPIRE MANUFACTURING: 4.3 V 2.0E
RIO.AU Reports Q2 Pilbara iron ore shipments 85.4Mt v 83.4Mte v 88.5Mt y/y; Pilbara iron ore production: 79.7Mt v 81.5Mte v 85.5Mt y/y

TUESDAY 7/16
(GR) Greece Debt Agency (PDMA) opens book to sell 7-year bond via syndicate; yield guidance seen 2.10%
*(UK) MAY AVERAGE WEEKLY EARNINGS 3M/Y: 3.4% V 3.1%E; WEEKLY EARNINGS (EX-BONUS) 3M/Y: 3.6% V 3.5%E
*(UK) JUN JOBLESS CLAIMS CHANGE: +38.0K V +24.5K PRIOR; CLAIMANT COUNT RATE: 3.2% V 3.1% PRIOR
*(DE) GERMANY JULY ZEW S CURRENT SITUATION SURVEY: -1.1 V 5.0E; EXPECTATIONS SURVEY: -24.5 V -22.0E
JPM Reports Q2 $2.59 adj* v $2.50e, Managed Rev $29.6B v $28.4Be
GS Reports Q2 $5.81 v $4.82e, Rev $9.46B v $8.66Be; Confirms raised Quarterly dividend 47.1% to $1.25 from $0.85 (indicated yield 2.36%)
*(US) JUN ADVANCE RETAIL SALES M/M: 0.4% V 0.2%E; RETAIL SALES (EX-AUTO) M/M: 0.4% V 0.1%E
CP Reports Q2 C$4.30 adj v C$4.13e, Rev C$1.98B v C$1.96Be
*(US) JUN INDUSTRIAL PRODUCTION M/M: 0.0% V 0.1%E; CAPACITY UTILIZATION: 77.9% V 78.1%E
(US) Sec of State Pompeo: Iran has said it's prepared to negotiate about its missile program

WEDNESDAY 7/17
BAC Reports Q2 $0.74 v $0.70e, Rev $23.1B v $23.0Be
*(US) JUN HOUSING STARTS: 1.253M V 1.260ME; BUILDING PERMITS: 1.220M V 1.300ME
EBAY Reportedly moving 'aggressively' forward with potential sale of StubHub - CNBC's Faber
(US) FEDERAL RESERVE BEIGE BOOK: ECONOMIC ACTIVITY EXPANDED AT MODEST PACE FROM MID-MAY TO EARLY JULY
AA Reports Q2 -$0.01 v -$0.34e, Rev $2.71B v $2.79Be
IBM Reports Q2 $3.17 v $3.06e, Rev $19.2B v $19.1Be
*(KR) BANK OF KOREA (BOK) CUTS 7-DAY REPO RATE BY 25BPS TO 1.50%; NOT EXPECTED; To maintain accommodative policy stance
(AU) AUSTRALIA JUN EMPLOYMENT CHANGE: +0.5K V +9.0KE (9th straight month of job gorwth); UNEMPLOYMENT RATE: 5.2% V 5.2%E

THURSDAY 7/18
SAP.DE Reports Q2 Non-IFRS EPS €1.09 v €1.20e, Op €1.82B v €1.84Be, Rev €6.66B v €6.71Be
TSM Reports Q2 (NT$) Net 66.8B v 65.9Be; Op 73.3B v 77.4Be; Rev 241.0B v 233.3B y/y
(UK) EU Brexit negotiator Barnier: No easy solution to the Irish border issue; ready to work on alternative arrangements
*(UK) JUN RETAIL SALES (EX-AUTO/FUEL) M/M: +0.9% V -0.2%E; Y/Y: 3.6% V 2.6%E
(EU) ECB staff said to study a revamping of inflation target; The current view of ‘below, but close to, 2%’ definition of mandate being questioned - financial press
(UK) UK Parliament votes 315-274 to accept Benn amendment, which seeks to prevent suspension of Parliament and impede a 'no-deal' Brexit
MSFT Reports Q4 $1.37 v $1.21e, Rev $33.7B v $32.7Be
BA To recognize $4.9B charge ($8.74/shr) and increased costs in Q2 due to 737 MAX grounding; to result in a $5.6B reduction of revenue and pre-tax earnings in the quarter
*(CL) CHILE CENTRAL BANK (BCCH) LEAVES OVERNIGHT RATE TARGET UNCHANGED AT 2.50%; AS EXPECTED
(JP) Japan Investors Net Buying of Foreign Bonds: ¥950.0B v ¥297.0B prior week; Foreign Net Buying of Japan Stocks: -¥93.1B v ¥192.2B prior week

FRIDAY 7/19
STT Reports Q2 $1.42 v $1.40e, Rev $2.87B v $2.85Be
*(US) JULY PRELIMINARY UNIVERSITY OF MICHIGAN CONFIDENCE: 98.4 V 98.8E
(IR) Iran Revolutionary Guard says they have seized a UK-flagged oil tanker in the Strait of Hormuz; stopped the tanker for failure to follow international regulations - Iranian press
(IR) US official: A second tanker, MV Mesdar, was also seized by Iran today - CNN (IR) Iranian
(IR) Foreign Min Zarif reportedly met Thurs with Sen Paul (R-KY) to discuss prospects for potential Iran-US talks - Al-Monitor

July-August 2019 Outlook: Summer Run Down

July-August 2019 Outlook: Summer Run Down
Tue, 09 Jul 2019 15:49 PM EST

As we progress through the back half of the year many uncertainties continue to hang over the markets. In the months ahead, uncertainty will ebb and flow around hopes for trade deals with China and other partners, as well as other unplanned events such as a possible direct confrontation with Iran.
The key issue for the next couple of months will be the give-and-take between the performance of the economy, domestically and internationally, and the Fed’s decisions on monetary policy. Market expectations are still set on at least 50 basis points of Fed easing through year end, with some minor disagreement about the timing. But if the data on employment remains favorable and inflation picks up just a bit the Fed could extend its pause indefinitely rather than waste its limited resources for easing that could be better used during a future economic downturn.
Without further ado, here’s a list of some significant dates and events to watch for this summer:

July 10: Fed Chair Powell testifies before Congress
The Fed has been under pressure from market participants and President Trump to start cutting rates amid continued weak inflation and uncertainties over trade issues and growth. Trump went as far as to call the Fed “our most difficult problem.” Under this level of scrutiny, Chair Powell will have to tread cautiously as he explains the Fed’s dovish turn despite a strong stock market and a solid rebound in the June employment report. Powell may decide to stress global concerns during his testimony, which would signal the Fed is on track for a July rate cut. Should he push back against the notion of a July rate cut, it could lead to an equity sell off.

July 11: US CPI data
The White House and many on Wall Street have argued that the Fed should focus on price indicators rather than employment. CPI data has remained persistently below the 2% Fed target, despite a healthy jobs market and the central bank’s willingness to tolerate “symmetric” above-target inflation. This month’s inflation data is expected to remain tame, but an upside surprise could curtail hopes for Fed rate cuts this year.

July 16: Earnings season begins
Tuesday, July 16 is the unofficial kick off of the Q2 earnings season, as the first big Wall Street banks report their results along with blue chip names like JNJ. The bank stocks have struggled amid a decade of low rates and now face the prospects of interest rates contracting again, an environment that doesn’t give much hope for financial stocks to take a leadership role. Notably, the embattled Deutsche Bank will report its results on July 24 as it continues to attempt restructuring its way back to health. The US consumer still appears to be healthy but there are some signs of a slowdown in committing capital at the corporate level as executives contend with a high level of uncertainty related to geopolitics and trade issues, so there is some expectation that corporate earnings won’t show much growth.

July 17: Robert Mueller testifies before Congress
Mueller has said he will not provide any testimony that goes beyond the bounds of his report, but for much of the general public this may be the first time they hear the former special counsel describe the potential incidents of obstruction of justice that were enumerated in his report. The testimony will also include questions about the supporting materials that the report is based on, which could lead to some more embarrassing details that could distract President Trump from other matters (Trump has a campaign rally scheduled the same day as Mueller’s testimony). If nothing really new comes to light, however, this could be the last gasp for the impeachment movement among left-wing Democrats as the 2020 election becomes the central focus of US politics.

July 22: UK Conservatives announce result of leadership vote
The election of Boris Johnson appears to be a foregone conclusion, as he is polling well ahead of his rival, Jeremy Hunt, despite an embarrassing domestic incident at Johnson’s flat last month that raised some character questions. The new PM will have his work cut out for him as he plans to somehow wrangle new concessions out of the EU before the Brexit extension expires in October. EU leaders have repeatedly said they won’t budge on the agreement made with PM May, though there may still be some wiggle room in the implementation phase and as new trade arrangements are established with the independent UK. The greater threat is that PM Johnson, faced with no new concessions from Europe, will opt for a ‘no deal’ Brexit, certainly the most disruptive outcome for global markets.

July 26: US Q2 Advance GDP
The first reading on US Q2 GDP will be another key data point in calibrating Fed policy. The Atlanta Fed’s Q2 GDPNow forecast has dwindled to just 1.3% after recent disappointing readings on personal income and international trade. In Q1, the Advance GDP number surprised to the upside – at 3.2% it was five-tenths higher than the final GDPNow – adding some doubt to the predictive value of the Atlanta Fed forecast.

July 31: FOMC rate decision
Fed funds futures are now overwhelmingly pricing in a 25 basis point cut at the end of July. Fed rhetoric to this point has priced out the notion of a one-time 50 basis point ‘insurance’ cut to preempt a recessionary turn in the economy. Even Bullard, the dissenter at the May meeting, has downplayed the notion of moving more than a quarter point at a time given the generally strong economy. The Fed is also loath to prematurely use up the ammunition it has built up over the last two years, so the focus will move to whether the Fed has an appetite to provide more cuts in September and December as the futures markets are predicting. During his post-decision press conference, Chair Powell will likely be cautious about promising more rate cuts until he sees the incoming data and developments to the outlook.

August 2: US employment report
Apart from a US/China trade deal, more strong jobs data is the event that could likely ease pressure on the Fed to cut rates this autumn. The solid non-farm payrolls rebound in the June data took some of the wind out of the sails from pundits who were banking on a series of rate cuts this year. If the next few payrolls reports confirm continued labor market strength, the Fed will be at liberty to dial back its dovishness, especially if there are some signs of wage inflation accompanying the jobs data. In the alternate case, should payroll growth start to ebb – as many economists predict when the labor market is at ‘full employment’ – the Fed could have more justification for additional rate cuts.

August 3: Congressional recess begins
The US Congress is out of session for all of August and the first week of September, which means legislators have only a few weeks left to pass bills this summer. The most pressing issues are related to spending, particularly raising the debt ceiling. Technically the debt ceiling was already blown through several months ago and the government is now relying on the Treasury Department’s special measures to avoid default. A recent estimate from the Bipartisan Policy Center said that the Treasury could breach the borrowing limit in early September because the government has brought in less tax revenue this year than was projected. The implication is that this divided Congress needs to pass a debt ceiling bill before the summer break or find itself with only a matter of days in September to act, a situation that could send a chill through economic markets.

August 9: UK Q2 GDP
More signs of weakness in the UK economy because of Brexit uncertainty could put pressure on the new PM to avoid a messy separation and perhaps ask the EU for another extension, despite his campaign pledge that the separation must occur by October 31 without further delay. Meanwhile unions are pushing the Labour Party to seek a second referendum on approving the PM’s strategy of either a new deal or no deal, and for Labour to openly campaign for scrapping Brexit altogether.

August 21: FOMC Minutes; Fed Jackson Hole Symposium
The Fed will have another chance to massage market expectations for policy late in August as it releases the minutes from the July meeting and as many senior global central bank figures meet at Jackson Hole. If the data and sentiment have deteriorated by late August, Fed speakers could start signaling a willingness to provide more accommodation in the months ahead.

Early September: Iran threatens to further reduce nuclear compliance
After announcing it would increase enrichment of uranium past the 3.7% cap required under the JCPOA nuclear accord it was reported that Iran plans to incrementally scale back commitments to the 2015 nuclear deal every two months to keep up pressure on European leaders. The enrichment level is still well below the 20% threshold needed for a nuclear bomb, but makes it clear Tehran is willing to chip away at the JCPOA as it faces continued economic pressure from American sanctions. With tensions already mounting from tanker attacks reportedly carried out by Iranian proxies and the downing of a US surveillance drone, it seems like it may only be a matter of time before Iran crosses a red line that provokes a military response from the US.

Later 2019: US/China Trade Deal?
US/China trade discussions may go into a quiet period with no significant pressure to reach any conclusions perhaps until Trump and Xi are expected to see each other again at the mid-November APEC leaders’ summit in Chile. Both leaders still want to forge a trade agreement of some kind, and the sides were reportedly agreed on 90% of the details before talks fell apart earlier this year. That would seem to indicate that a breakthrough could come at any time, as long as the leaders are willing. Mr. Trump’s resolve to get an optimal deal is stiffened by the strength of the stock market, his primary metric for his own Presidency, but he would probably like to get a resolution to the China trade dispute to bolster his credentials for re-election as the businessman President. Mr. Xi is feeling some economic and political pressure back at home but remains firmly in control and could still conceivably try to ‘run out the clock’ on the Trump Administration and take his chances with a potential Democratic White House in 2021. Beijing may be seen as backsliding if it escalates restrictions on US companies with manufacturing operations in China or steps up rhetoric related to Taiwan and the South China Sea. Any signs that the two sides are actually getting close to sealing a deal will boost the animal spirits of the markets, though it should be noted that President Trump seems eager to open up new fronts in the trade war with India, Vietnam and the EU (he has described the latter two as “even worse” than China on trade).

CALENDAR
JULY
8:
9: Fed Chair Powell and Fed dissenter Bullard speak; China CPI
10: UK May GDP; UK Manufacturing Production; Fed Chair Powell Congressional testimony; FOMC Minutes
11: BOE Financial Stability Report; ECB minutes; US CPI; China Trade Balance
12: US PPI

14: China Industrial Production
15:
16: UK Unemployment Rate; German ZEW Economic Sentiment; US Retail Sales; China Q2 GDP
17: UK CPI; US Housing Starts & Building Permits; Robert Mueller testifies before Congress
18: UK Retail Sales; Philadelphia Fed Manufacturing Index
19: Preliminary University of Michigan Consumer Sentiment

22: EU Flash Manufacturing & Services PMIs; German Ifo Business Climate; UK Conservatives announce result of leadership election
23:
24:
25: ECB Monetary Policy Decision; US Durable Goods Orders
26: US Q2 Advance GDP

29: BOJ Monetary Policy Decision
30: German Preliminary CPI; US Personal Income & PCE Price Index; US Consumer Confidence; China Manufacturing &Non-manufacturing Indices
31: EU CPI Flash Estimate; Chicago PMI; FOMC Monetary Policy Decision; China Caixin Manufacturing PMI
AUGUST
1: UK Manufacturing PMI; BOE Inflation Report; BOE Monetary Policy Decision; US ISM Manufacturing PMI
2: US Payrolls & Unemployment
3: Congressional recess begins

5: UK Services PMI; US ISM Manufacturing PMI
6:
7:
8: China CPI
9: UK June & Q2 GDP; UK Manufacturing Production; US PPI

12: China Trade Balance
13: UK Unemployment Rate; US CPI; China Industrial Production
14: German Preliminary Q2 GDP; UK CPI
15: US Retail Sales; Philadelphia Fed Manufacturing Index
16: US Housing Starts & Building Permits; Preliminary University of Michigan Consumer Sentiment

19:
20: German ZEW Economic Sentiment
21: FOMC Minutes; Fed Jackson Hole Symposium (21-23)
22: ECB Minutes
23: EU Flash Manufacturing & Services PMIs; German Ifo Business Climate; US Manufacturing PMI

26: US Durable Goods Orders
27: US Consumer Confidence
28:
29: German Preliminary CPI; US Preliminary Q2 GDP
30: EU CPI Flash Estimate; US Personal Spending & PCE Price Index; Chicago PMI; China Manufacturing & Non-manufacturing PMIs

June Jobs Report Tempers Case for July Rate Cut

TradeTheNews.com Weekly Market Update: June Jobs Report Tempers Case for July Rate Cut
Fri, 05 Jul 2019 16:04 PM EST

It was a tale of two tapes this July 4th shortened trading week. Ahead of the break, stock markets continued to chug higher, and in many cases notching fresh all time highs, helped predominantly by lower interest rates. Global economic data remained largely soft, fanning expectations for supportive central bank policies. Those expectations likely got a boost from the news IMF’s Lagarde was being put forward to replace Draghi to head up the ECB, rather than the Bundesbank's Weidmann. The President and his advisors continued to call on the Fed to cut rates while confirming that the US and China trade talks were continuing. Government bond yields plumbed to fresh cycle lows and the S&P futures were knocking on the door of 3K by the time trading was closed early on Wednesday. Gold moved back towards the highs of the year and the dollar stayed soft.

Friday’s employment report probably didn’t take a July rate hike off the table, but certainly seems to make it more questionable. Payrolls snapped back from the poor May reading in a big way, easily surpassing expectations. The unemployment rate ticked higher along with the participation rate, suggesting the US labor market is continuing to absorb some slack. Some market participants noted that if there are additional positive surprises in either the inflation data next week or the regional factory surveys over the remainder of the month, a quarter-point cut could be in doubt. Rates moved up quite aggressively following the report, stocks sold off while gold prices dropped more than 2% and the dollar appreciated globally. The VIX jumped 14% and stocks sold off broadly as rate cut expectations were dented. For the week, the Dow rose 1.2%, S&P added 1.7% and the NASDAQ finished up 1.9%.

In corporate news, Tesla shares rose after reporting record Q2 production and delivery numbers, placating some investors who have seen the stock fall 30% year to date. Broadcom was said to be in advanced deal discussions to acquire Symantec for over $15B, a strategy shift after its failed attempt to acquire Qualcomm last year. Delta boosted its guidance, citing strong passenger demand, raising Q2 expectations for the overall airline sector. Genesee & Wyoming announced it would be acquired by Brookfield at $112/shr in a ~$8.4B go-private deal.

SUNDAY 6/30
(JP) JAPAN Q2 TANKAN LARGE MANUFACTURING INDEX: 7 V 9E (near 3-year low) ; OUTLOOK SURVEY: 7 V 6E; LARGE ALL INDUSTRY CAPEX: 7.4% V 8.1%E

MONDAY 7/1
*(ES) SPAIN JUN MANUFACTURING PMI: 47.9 V 49.5E (confirms move back into contraction and lowest reading since Apr 2013)
(DE) GERMANY JUN UNEMPLOYMENT CHANGE: -1.0K V 0.0KE; UNEMPLOYMENT CLAIMS RATE: 5.0% V 5.0%E
(IR) Iran said to suspend its nuclear commitments from July 7th - financial press
(UK) JUN PMI MANUFACTURING: 48.0 V 49.5E (2nd straight contraction and lowest since Feb 2013)
(US) JUN ISM MANUFACTURING: 51.7 V 51.0E; PRICES PAID: 47.9 V 53.0E (lowest manufacturing since Sept 2016)
*(US) MAY CONSTRUCTION SPENDING M/M: -0.8% V 0.0%E

TUESDAY 7/2
*(AU) RESERVE BANK OF AUSTRALIA (RBA) CUTS CASH RATE TARGET BY 25BPS TO 1.00%; AS EXPECTED (2nd consecutive cut)
(EU) ECB policy makers said not to be in any rush into a July rate cut and preferring instead to wait for more data on the economy - press
GM Reports Q2 deliveries 746.7K, -1.5% y/y
EU reaches deal on new leaders: Christine Lagarde nominated for ECB presidency; Belgium's Charles Michel proposed as EU Council president; Germany's Ursula Von Der Leyen proposed as EU Commission head
TSLA Reports Q2 total deliveries 95.2K v 84Ke (guided 90-100K)
(US) President Trump: To nominate current Executive Vice President of Saint Loius Fed Christopher Waller to be member of Fed; Also intends to nominate economic advisor Judy Shelton to serve on Fed board
(JP) Japan said to consider additional export restrictions on South Korea - Japanese Press

WEDNESDAY 7/3
*(SE) SWEDEN CENTRAL BANK (RIKSBANK) LEAVES REPO RATE UNCHANGED AT -0.25%; AS EXPECTED; maintains rate path outlook and forward guidance
*(DE) GERMANY JUN FINAL SERVICES PMI: 55.8 V 55.6E (confirms 72nd month of expansion)
*(EU) EURO ZONE JUN FINAL SERVICES PMI: 53.6 V 53.4E (confirms 72nd month of expansion)
*(UK) JUN SERVICES PMI: 50.2 V 51.0E (3rd straight expansion)
*(US) JUN ADP EMPLOYMENT CHANGE: +102K V +140KE
(IT) European Commission: Decided not to open disciplinary action against Italy (as speculated); to explain conclusion to Euro Group ministers next week on Italy
*(US) JUN ISM NON-MANUFACTURING INDEX: 55.1 V 56.0E (lowest since July 2017)
(US) Association of American Railroads weekly rail traffic report for week ending June 29th: 533.2K, -5.5% y/y (has fallen for 20 consecutive weeks)

THURSDAY 7/4
3382.JP Reports Q1 Net ¥52.1B v ¥42.9B y/y; Op ¥90.3B v ¥86.4B y/y; Rev ¥1.6T v ¥1.6T y/y
(US) Magnitude 6.5 earthquake reported earlier today in central/southern California (said to be the largest quake in over 20 years), followed by several smaller ones
005930.KR Reports Prelim Q2 (KRW) Op 6.5T v 6.0Te (-56.3% y/y), Rev 56.0T v 54.5Te (-4.2% y/y)
(CN) China wants clarity on Huawei situation before making agricultural purchases from US - SCMP

FRIDAY 7/5
066570.KR Reports prelim Q2 (KRW) Op 652.2B v 774.4Be, Rev 15.6T v 15.7Te
(CN) Reportedly China and the U.S. could reach a preliminary trade agreement as soon as this September - pres
*(US) JUN CHANGE IN NONFARM PAYROLLS: +224K V +160KE

Barron’s weekend summary

Barron’s weekend summary: positive feature on CCL; cautious on ABBV 

Cover story: Today’s IPO market in no way resembles the dot-com boom of the 1990s, which saw companies such as Pets.com crash; “The resurgence of IPOs is no flash in the pan, no signal of a bubble reinflated—instead, it reflects a shift in the way that investors and entrepreneurs approach company creation, the rich supply of mature companies that have yet to come public, and investors’ insatiable hunger for growth stories,” even if some recent IPOs aren’t profitable yet. 

Features: 1) Cautious on ABBV: With AbbVie’s acquisition of AGN at a 45% premium over the latter’s share price, it gets a company whose problems resemble its own, and if shareholders had been given a chance to vote on the deal they should have rejected it; 2) Positive on CCL: Shares plummeted following reduced 2019 financial guidance, but they now appear to be a bargain—they carry a 4.4% dividend and the cruise-line operator has the best balance sheet among the industry’s three big players; 3) IPOs can encourage risk-taking, which tends to drive up valuation multiples across the board—even for older stocks, thus benefiting investors who aren’t interested in taking risks with new issues such as BYND, ZM, or WORK, whose high valuations make the rest of the software sector look like a bargain; 4) Price targets may not always be useful for forecasts—many professional money managers say targets aren’t anything more than a marketing tool for the brokerage industry to generate interest in a stock, and for investors the assumptions behind them may not be obvious; 5) Proposed legislation would make it easier for employers to offer annuities in 401(k) retirement plans that provide retirees fixed payments for as long as they live, but such a move won’t necessarily solve the retirement crisis. 

Tech Trader: JPM and Bernstein recently asked hundreds of corporate executives for their 2019 purchasing plans, hinting at likely winners and losers in technology; Among the winners in both surveys are MSFT and AMZN, with the former topping the list of companies deemed indispensable, while the growing cloud business is likely to take mind share away from IBM and ORCL. 

Trader: Donald Trump and Xi Jinping may reach a trade deal, and the Fed may deliver what the market wants at its June meeting, but the economy continues to slow, and the yield curve remains inverted, a reliable indicator of a recession; Cautious on ROKU: A recent share-price drop could stem from concern about AMZN’s ability to use pricing power to take on Roku’s smart TV platform share, but investors could also simply be worried about the stock’s rapid gain; Positive on WMT, PG, PEP, COST, KO: The so-called WPPCK consumer staple stocks may become more appealing as economic conditions get tougher and the market outlook becomes clouded by trade wars and other crises that could ding the FAANGs. 

Profile: David King of the Columbia Flexible Capital Income fund developed a flexible income strategy that doesn’t employ a high-level allocation strategy like most, but drills down to the security level to find better opportunities (top 10 holdings: JNJ, LMT, GIS, PFE, JPM, AVTRA, MRK, AEP-B, BP, BDX-A). 

Interview: Barry Bannister, head of institutional equity strategy at Stifel, believes the decade-long bull market has left investors too accustomed to unsustainable high returns, and he predicts smaller gains in the coming years, as well as move favorable conditions for active investing. 

European Trader: The UK is deeply divided over consequences of leaving the European Union—Remainers believe a no-deal Brexit will leave the country in ruins, while Leavers say Brexit will eventually fuel growth and produce a thriving U.K.

Emerging Markets: “U.S. markets jumped to near-record highs when the Federal Reserve reiterated its loosening bias in mid-June. Central banks around the world are positioned to follow the Fed’s lead, spelling opportunity particularly in bonds that thrive on falling interest rates.”

Commodities: Commodities have done well in the first half of 2019, with iron ore leading the majors, along with reformulated gasoline, U.S. benchmark crude, and gold, while steel and natural gas have taken hits.

Streetwise: Columnist Jack Hough discusses the “Fed put,” noting that “Futures markets are now pricing in a near certainty of a July rate cut. If investors don’t get one, they are likely to huff and sell stocks. If they do get one, it is unlikely to help and might even hurt, setting off a tantrum just the same.”

Markets await signals from G20 and OPEC meetings

TradeTheNews.com Weekly Market Update: Markets await signals from G20 and OPEC meetings
Fri, 28 Jun 2019 16:05 PM EST

US equity markets largely consolidated the June gains signaling continued optimism into the Xi/Trump sit down at the G20 meeting this weekend. President Trump suggested his team remains hopeful trade negotiations could get back on track as market speculation about some sort of truce or reset gathers momentum. US manufacturing data lost momentum suggesting the recent Fed pivot towards cutting rates will likely have legs. Fed speakers, including Chairman Powell, continued to indicate they are open to cuts but are not panicking and want to see more data. Inflation figures globally showed some improvement but remained significantly below central bank targets. Oil prices saw modest gains, helped by the largest drawdown in US crude inventories in more than a year, and amid growing expectations that OPEC+ will roll over production cuts when they meet next week. The dollar index found support at the 96 which appears to be a key level in the wake of last week’s FOMC meeting. The US 10-year yield remained pinned at 2%, suggesting lingering uncertainty surrounding the outcome of trade talks. For the week, the S&P fell 0.3%, the DJIA lost 0.5%, and the Nasdaq slipped 0.3%.

In corporate news this week, AbbVie reached a deal to acquire Botox maker Allergan for $63B in the second-biggest pharma takeover this year. Eldorado Resorts agreed to buy Caesars in a cash-and-stock deal worth $17B, including assumption of debt. Micron lifted the semis space after an earnings beat amid signs of recovery, highlighting the ability of the memory giant to resist US-China trade dispute effects. Lennar beat estimates on its top and bottom line, helped by a Q2 recovery in the housing market. Boeing’s trouble continued as reports indicated that a new flaw had been discovered in the MAX 737 computer system which would likely further delay the aircraft’s full return to the skies.


MONDAY JUNE 24
*(DE) GERMANY JUN IFO BUSINESS CLIMATE: 97.4 V 97.4E; CURRENT ASSESSMENT: 100.8 V 100.3E
(US) Jun Dallas Fed Manufacturing Activity: -12.1 v -2.0e (lowest since Jun 2016)
(IR) Pres Trump confirms signing executive order on further Iran sanctions; calls them 'strong' sanctions to target Supreme Leader Ayatollah Khamenei and those in his office
*(US) Fed's Kaplan (dove, non-voter): concerned a rate cut now could fuel imbalances; wise to take time to consider if we need to change rates

TUESDAY JUNE 25
LEN Reports Q2 $1.30 v $1.13e, Rev $5.56B v $5.11Be
AGN Confirms to be acquired by Abbvie for 0.8660 shares and $120.30 in cash per share, in deal valued at $63B
(US) JUN RICHMOND FED MANUFACTURING INDEX: 3 V 2E
*(US) JUN CONSUMER CONFIDENCE: 121.5 V 131.0E (lowest since Sept 2017)
*(US) MAY NEW HOME SALES: 626K V 684KE
(US) Fed's Bullard (dove, voter, dissenter): a 50bps cut in July would be overdone; 50bps cut is not called for right now
(US) Fed Chair Powell: Monetary policy shouldn't overreact to short-term swings in sentiment; doing so would risk adding even more uncertainty to the outlook
(US) Senior Trump Administration official: no broad trade deal is expected to be made at the G20 meeting between Trump and Xi; US is not willing to come to the Trump-Xi meeting with concessions on trade
FDX Reports Q4 $5.01 v $4.89e, Rev $17.8B v $18.0Be
*(NZ) NEW ZEALAND CENTRAL BANK (RBNZ) LEAVES OFFICIAL CASH RATE (OCR) UNCHANGED AT 1.50%; AS EXPECTED; MEMBERS DISCUSSED A RATE CUT AT THIS MEETING
(US) Philadelphia Energy Solutions (PES) expected to close oil refinery indefinitely after recent fire (335K bpd capacity, largest refinery on east coast) - press

WEDNESDAY JUNE 26
FB Pres Trump: perhaps US will sue Google and Facebook; Twitter makes it hard for people to follow me; these execs are all Democrats - Fox News interview
(US) Association of American Railroads weekly rail traffic report for week ending June 22nd: 525K, -5.8% y/y (has fallen for 19 consecutive weeks)
BA Confirms and agrees with the FAA's decision and request, and is working on the required software to address the FAA's request - 8K filing
MU Reports Q3 $1.05 v $0.80e, Rev $4.79B v $4.72Be

THURSDAY JUNE 27
*(EU) EURO ZONE JUN BUSINESS CLIMATE INDICATOR: 0.17 V 0.29E
(CN) China's President Xi said to present US President Trump with terms for settling trade fight including precondition of lifting Huawei ban - U.S. financial press
WBA Reports Q3 $1.47 v $1.43e, Rev $34.6B v $34.5Be
*(DE) GERMANY JUN PRELIMINARY CPI M/M: 0.3% V 0.2%E; Y/Y: 1.6% V 1.4%E
*(US) Q1 FINAL GDP PRICE INDEX: 0.9% V 0.8%E; CORE PCE Q/Q: 1.2% V 1.0%E
*(US) Q1 FINAL GDP ANNUALIZED Q/Q: 3.1% V 3.2%E; PERSONAL CONSUMPTION: 0.9% V 1.3%E
(CH) Switzerland enacts stock exchange countermeasures against European Union, to take effect July 1st - press
BA CNBC's LeBeau: Boeing exec source says they're looking to have 737 MAX fix done in Sept
AAPL Chief Design Officer Jony Ive to depart and form independent design company with Apple as a client; effective later this year

FRIDAY JUNE 28TH
(US) MAY PERSONAL INCOME: 0.5% V 0.3%E; PERSONAL SPENDING: 0.4% V 0.5%E
(US) May PCE CORE M/M: 0.2% V 0.2%E; Y/Y: 1.6% V 1.5%E
(US) JUN CHICAGO PURCHASING MANAGERS (PMI): 49.7 V 53.5E (lowest reading since Feb 2016)
(US) JUN FINAL UNIVERSITY OF MICHIGAN CONFIDENCE: 98.2 V 97.9E; inflation expectations tick up
(US) USDA Q2 Grain Stocks Report (bu): Corn 5.20B v 5.33Be; Soybean 1.79B v 1.86Be; Wheat 1.07B v 1.10Be
(EU) EU and Mercosur trade bloc reach agreement on a draft Free-Trade Agreement - press
(IR) EU statement: new special EU vehicle that allows trade with Iran and circumvents US sanctions is now operational

Barrons weekend summary

Barrons weekend summary: positive features on HUM and MAR 

Cover story: Investors accustomed to an environment of high interest rates must readjust, by leaning into growth stocks again, scouring Asia for opportunities, or earning income from investments that won’t succumb to the low-rate trend; Boosting growth during a recovery brings risks—it can lead to asset bubbles, and easing now leaves little policy room to respond when an economic crisis demands it. 

Features: 1) The idea that the European Central Bank “is running out of ammunition to counteract a slump is one that its own officials have repeatedly tried to shoot down,” and head Mario Draghi in recent weeks has pressed that point with ever more force; 2) Positive on HUM: Managed care company is well-positioned to ride out volatility in the healthcare sector, and for the long-term investor looking toward 2021 and beyond, there are tantalizing scenarios under a Democratic administration that could allow Humana to win big; 3) Positive on MAR: The world’s largest hotel company could see its stock continue to climb as earnings rise, bolstered by the firm’s expansion in fast-growing regions and new travel businesses—on top of which it is extremely well managed; 4) Story on ESG investing looks at what investors should keep in mind as they construct a values-based portfolio, including sector tilt, unwanted risk, and surprise holdings; 5) Positive on BP, Shell, D, COP, XOM: Momentum is building to put a market-based price on carbon, and it’s coming from an unlikely source—corporations, some of which are calling for a carbon tax paired with a carbon dividend so that the money is returned to taxpayers; 5) The muni market is now smaller than it was a decade ago, according to the Securities Industry and Financial Markets Association—there were $3.6T of munis outstanding at the end of the first quarter, down from nearly $4T in 2009.

Tech Trader: The California Consumer Privacy Act will force almost all companies, even of modest size, to change the way the collect, handle, and share data on state residents, and the effects will spread, making California the dominant player in U.S. privacy law. 

Trader: The trade war has had an impact on manufacturing activity but far less of an impact on consumers, but another round of tariffs could cause them to finally throw in the towel; Positive on BA: The company has a long way to go to restore confidence in its 737 Max jets, but the structure of the industry and the way planes are purchased gives it time to make appropriate fixes and for the stock to recover. 

Interview: 1) Mario Cibelli, founder of Marathon Partners Equity Management, talks about his activist campaign and the firm’s appreciation for growth and transformative companies; 2) Andrew Lee, UBS Wealth Management Americas’ top strategist for sustainable and impact investing, says ESG is here to stay, though confusing terminology and unclear expectations remain problems. 

Profile: Randy Gwirtzman and Laird Bieger, co-managers of the $512M Baron Discovery fund, see the greatest opportunities in the more inefficiently priced small-cap space because of the comparative lack of sell-side analyst coverage and winners’ ability to grow into a large market over several years

Advisor Center Investing: 1) Pimco has moved into sustainable investing by implementing this kind of research throughout the firm, becoming one of the first and largest asset managers to regard investing with an eye toward long-term sustainability as a critical key to success; 2) Kevin O’Leary of the reality venture-capital show Shark Tank uses a “gender lens” subset of ESG that aims to boost returns by investing in companies with female leadership, or that are dedicated to improving women’s lives; 3) Kristin Hull, chief executive of Nia Impact Capital, completed another 12 months of market-beating performance for her gender-lens portfolio, and if things go according to plan, a mutual fund version could be available soon; 4) The SEC shows no sign of moving to require sustainability disclosures, even though the industry routinely asks it to do so—BLK chief Larry Fink says ESG factors “can provide essential insights into management effectiveness and thus a company’s long-term prospects.” 

European Trader: Cautious on Merlin Entertainments: Company owns some of the world’s major attractions, including the London Eye and Madam Tussauds, but with shares down, activist investor ValueAct says the company should go private because of the challenge for public market investors to appropriately value its business.

Emerging Markets: The question for Brazil, the fifth-largest emerging market, has been whether president Jair Bolsonaro could shepherd fiscally critical pension reforms through an unwieldy Congress that includes 30 political parties—and it increasingly looks like he can. 

Commodities: “The meeting of OPEC and its allies in early July is coming at a particularly important and volatile time for oil—prices have been supported by major producers’ output cuts, growing tensions in the Middle East, but also pressured by forecasts of a slowdown in global demand.”

Streetwise: If fitness company Peloton succeeds in fending off rivals, current comparisons to NFLX might turn to AAPL ones, as users pay high tabs for devices to stick with the ecosystem.

Fed promises easing, Trump and Xi confirm G20 sit down, Iran tensions rise

TradeTheNews.com Weekly Market Update: Fed promises easing, Trump and Xi confirm G20 sit down, Iran tensions rise
Fri, 21 Jun 2019 16:04 PM EST

Coming into the week expectations were already riding exceedingly high heading into the FOMC meeting. Rates remained under pressure and US stock markets were within a few percent of all-time highs. US manufacturing data was soft suggesting deceleration and an environment conducive to a rate cut. Those expectations were only further strengthened by the ECB’s Draghi who said that if the outlook does not improve then additional stimulus will be needed in the Euro Zone. Draghi’s comments prompted President Trump to complain that Fed policy isn’t providing the US with a “level playing field”, keeping the pressure on Chainman Powell ahead of the rate decision. Global stocks and bonds continued to rally and the move was turbocharged by news President Trump and Chinese President Xi had spoken by phone confirming both sides were preparing to meet at the G20 meeting next week.

Wednesday’s FOMC statement appeared to satisfy the markets, setting the table for a rate cut in July. After dropping the word “patient” from the monetary policy statement Chairman Powell acknowledged that many committee members, perhaps even himself, saw a stronger case for stimulus amid the risks presented by trade disputes, weak global growth and stubbornly low inflation. On Thursday, stock indices opened at all-time highs despite a 5% pop in WTI crude after Iran tensions were ratcheted significantly by the downing of a US surveillance drone near the Straight of Hormuz. Rates trended lower, pressuring the US 10-year back below 2% for the first time since before the 2016 election. Gold prices broke above the $1,400 mark for the first time since 2013 and the Greenback rolled over. Friday saw equities consolidate at or just below record highs on very robust volumes due to options expiration. Bond yields lifted helped by marginal improvement on some key European manufacturing PMI readings. Also, trade sentiment was further buoyed by a report VP Pence would be postponing a key China policy address indefinitely amid "positive signs" of progress ahead of Trump/Xi meeting. For the week, the S&P hit new highs up 2.2%, the DJIA gained 2.4%, and the Nasdaq added 3%.

In corporate news this week, Pfizer announced it would acquire Array BioPharma for $48/share in a cash deal valued at $11.4B as part of an effort to expand its colorectal cancer drug portfolio. Auction house Sotheby’s sold itself to collector and Altice founder Patrick Drahi for $57/share in cash. American steel makers described an industry slowdown: Steel Dynamics said it saw lower Q2 earnings due to weaker prices; Nucor tempered its Q2 expectations citing decreasing performance in its steel mill business; and US Steel said it would idle some capacity to better align global production. After a slow start at the Paris Air Show, Boeing announced its first order from the event on Tuesday, as IAG signed a letter of intent for 200 Boeing 737 MAX aircraft to join its fleet. Oracle posted an earnings beat for Q4 and said it expected a strong Q1. Carnival Corp cut its FY outlook, noting US-Cuba policy changes and other global headwinds.

MONDAY 6/17
ARRY To be acquried by Pfizer for $48/shr in cash valued at $11.4B
*(US) JUN EMPIRE MANUFACTURING: -8.6 V +11.0E (lowest since 2016)
BID To be acquired by Patrick Drahi (BidFair USA) for $57.00/shr in cash valued at $3.7B
STLD Guides Q2 $0.86-0.90 v $0.98e, primarily related to lower profitability from long product steel operations

TUESDAY 6/18
*(DE) GERMANY JUN ZEW CURRENT SITUATION: 7.8 V 6.1E; EXPECTATIONS SURVEY: -21.1 V -5.8E
*(US) MAY HOUSING STARTS: 1.27M V 1.239ME; BUILDING PERMITS: 1.29M V 1.29ME
(CN) China state media confirms Pres Xi held call with Pres Trump; confirms Pres Xi plan to talk with Trump during G20 meeting - press
(US) Atlanta Fed cuts Q2 GDP forecast to 2.0% from 2.1% prior
BA IAG signs letter of intent with for 200 Boeing 737 MAX aircraft to join its fleet
(US) Reportedly White House looked into legality of demoting Fed Chairman Powell - press
(EU) ECB POLICYMAKERS SAID TO BE DIVIDED ON NEXT STEP; RATE CUT, GUIDANCE CHANGE AND FURTHER QE ALL POSSIBILITIES - PRESS
X (US Steel) Guides Q2 $0.40 v $0.48e; idling two blast furnaces in the US and one blast furnace in Europe to better align global production with order book

WEDNESDAY 6/19
(US) Association of American Railroads weekly rail traffic report for week ending June 15th: 528K, -5.4% y/y (has fallen for 18 consecutive weeks)
(US) FOMC LEAVES TARGET RANGE UNCHANGED BETWEEN 2.25-2.50%; AS EXPECTED; DROPS 'PATIENT' LANGUAGE ON FUTURE POLICY ADJUSTMENTS, SAYS 'WILL ACT AS APPROPRIATE' TO SUSTAIN EXPANSION
(US) Fed Chair Powell: Many FOMC participants see stronger case for rate cuts; changes made to today's statement were "significant" - post rate decision press conference
ORCL Reports Q4 $1.16 v $1.07e, Rev $11.1B v $11.0Be
*(JP) BOJ LEAVES INTEREST RATE ON EXCESS RESERVES (IOER) UNCHANGED AT -0.10%; AS EXPECTED

THURSDAY 6/20
(UK) MAY RETAIL SALES (EX-AUTO/FUEL) M/M: -0.3% V -0.4%E; Y/Y: 2.2% V 2.5%E
*(UK) BOE JUN MINUTES: VOTED 9-0 TO LEAVE INTEREST RATES UNCHANGED
KR Reports Q1 $0.72 v $0.72e, Rev $37.3B v $36.8Be
WORK *OPENS FOR TRADE ON NYSE $38.50

FRIDAY 6/21
*(DE) GERMANY JUN PRELIMINARY PMI MANUFACTURING: 45.4 V 44.6E ( 6th straight contraction)
(FR) FRANCE JUN PRELIMINARY PMI MANUFACTURING: 52.0 V 50.8E (3rd straight expansion and highest since Sept)
(EU) EURO ZONE JUN PRELIMINARY PMI MANUFACTURING: 47.8 V 48.0E (5th straight contraction)
*(US) JUN MARKIT PRELIMINARY PMI MANUFACTURING: 50.1 V 50.5E (lowest reading since Sep 2009)
(US) VP Pence said to postpone China policy address indefinitely amid "positive signs" of progress ahead of Trump/Xi meeting - press

Barron’s weekend summary

Barron’s weekend summary: positive feature on drug distributors (MCK CAH ABC) and on upcoming IPO Slack 

Cover story: Barron’s list of the World’s Best CEOs contains 30 names selected after screening the S&P 500 index and a roster of large non-U.S. companies for standout results in recent years on growth in revenue, earnings, and shareholder returns; the names are not ranked, but separated into three groups: visionary founders, growth leaders, and change agents; New to the list this year are Mary Dillon of ULTA, Steve Easterbrook of MCD, Henry Fernandez of MSCI, Marilyn Hewson of LMT, Craig Jelinek of COST, David Lewis of Tesco, Brian Moynihan of BAC, Francois-Henri Pinault of Kering, James Robo of NEE, Stephen Schwartzman of BX, and Lisa Su of AMD. 

Features: 1) Positive on MCK, CAH, ABC: Shares of drug distributors have taken a hit amid declining prices for generic drugs, lawsuits accusing the companies of liability in the opioid crisis, and regulatory proposals that could upset their business models, but for long-term investors who can stomach risk, the shares present an opportunity; 2) Positive on WORK: There are ample reasons to be bullish about the long-term opportunity for Slack and the performance of its stock, and whether to buy or sell will come down to its valuation on day one of its direct listing, which doesn’t come with any capital raise. 

Best CEO profiles: 1) Change agent Lisa Su joined AMD in 2014 and quickly refocused it on its core high-performance computing business, establishing an ironclad policy of meeting commitments to customers, and made bold bets on chip-manufacturing technologies; 2) Growth leader Brian Moynihan of BAC follows a mantra of responsible growth, which means treating customers and borrowers fairly, controlling risk, acting to limit global warming, and creating a strong corporate culture; 3) Visionary founder Stephen Schwarzman of BX leads a firm that puts money to work for investors willing to lock up cash for years in investments that may be more attractive than stocks and bonds, such as private equity, real estate, credit strategies, and hedge funds, and alternatives. 

Tech Trader: Over the past few days, there has been an out-of-left-field revival for the IPO market following the poor performance of UBER and LYFT; The market “went gaga” for CHWY, CRWD, FVRR, likely because of “megacap fatigue” with AMZN, AAPL, FB, and GOOGL, which face intense government scrutiny. 

Trader: The small-cap Russell 2000 index has dropped 7.2% during the past 12 months, even as the S&P 500 has gained 6.2%, just the fifth time in the past 20 years that small has underperformed large by 10 percentage points or more based on monthly prices; Since the start of June, the materials sector has trounced the rest of the market, rising more than 10% in the past two weeks, but “two weeks does not a trend reversal make”; Positive on GRUB: Company stands to benefit from AMZN’s decision to shutter Amazon Restaurants and exit the meal-delivery sector to focus on groceries. 

Interview: Louis-Vincent Gave of GaveKal Research says that by weaponizing the dollar, the Trump administration has opened the door to a reversal in the global power structure that will create a new world order in which China comes out on top. 

Profile: Elisa Mazen, co-manager of the ClearBridge International Growth fund, scrutinizes whether a company can keep growing for years, and just how large that growth can be, which sometimes means taking a more conservative approach than peers (top 10 holdings: Nestle, Shiseido, SAP, DEO, London Stock Exchange Group, Rentokil Initial, LVMH Moet Hennessy, NVS, CP, ICLR). 

European Trader: Cautious on Renault: Some investors wonder if the French government can hurt the automaker’s shareholders more than it already has following a series of blunders that led FCAU to end talks for a “merger of equals.” 

Emerging Markets: Vietnam is an ascendant nation—economic growth is 6% to 7% annually, powered by a strong export sector, but making money on Vietnamese stocks isn’t so simple, and the country has yet to be recognized as an official emerging market by MSCI. 

Commodities: “U.S. farmers are millions of acres behind their usual pace of corn planting this spring because of flooding, which may lead to a supply shortage that lifts prices by year end to their highest in five years.”

Streetwise: “Autonomous driving will eventually solve for the least-scalable part of food delivery—people,” says columnist Jack Hough. “Costs will plunge. Companies that survive the thin-margin years between now and then could enjoy powerful network effects, and rich profits.”