TradeTheNews.com Weekly
Market Update: Post-Election Reflation Trade Continues
Fri, 18 Nov 2016 16:04 PM EST
The post US election money flows largely extended into a second week, but
moderation was seen across various sectors and asset classes. The Trump
reflation trade continued to push interest rates higher and was aided by
economic data and Federal Reserve commentary that essentially clinched a rate
hike is coming at next month's monetary policy meeting. Outside of the chatter
surrounding the President-elect's rumored cabinet picks, the question markets
shifted most of their focus onto was just how many more hikes could follow in
2017. Against that backdrop the US benchmark 10-year yield rose above 2.3% for
the first time since ealry 2015. The spread over the comparable German 10-year
yield widened to levels not seen since the late 1980's. The US Dollar continued
to surge, particularly against emerging market currencies, including another 1%
move against the Chinese Yuan this week. Currency traders prepared for seasonal
FX liquidity to ebb which could allow for further aggressive moves. The Euro is
within striking distance of the post financial crisis low of 1.0460 and after
that potentially parity. Japan's Nikkei touched a fresh 10-month high powered
by the USD/JPY which rose to a level not seen since June. WTI crude futures
bounced 6% off a Monday low to surpass $46 as producers met in Doha on Friday
and by most accounts remained adamant an output deal will be reached by the
November 30th meeting.
The Dow Jones Industrial average largely traded sideways, consolidating the
outsized move into banks and financials since the election. Transports have
traded up 15 of the last 18 sessions, emboldening bullishness by Dow theorists.
The rotation into small caps continued, exhibited by the Russell 2000 which
bumped up against lifetime highs at 1313. The NASDAQ saw money slosh back to
many of the large cap tech names that so severely underperformed in the wake of
the Trump victory and thus the overall index played a bit of catch up. The
S&P encountered some resistance just below new all-time highs as traders
try to handicap just how much and how fast Trump's pro-growth agenda can be
enacted. Corporate bond issuance picked up to the most active levels in a
couple weeks spurred by the move up in rates along with the calendar. For the
week, the DJIA gained 0.1%, the S&P500 rose 0.8%, and the Nasdaq added
1.6%.
The last of the major quarterly earnings reports continued to paint a mixed
picture. Cisco Systems reported solid results but shares dropped 5% after
guiding next quarter down on lower spending by service provider customers.
Shares of Home Depot and Lowe's fell after their earnings reports and Lowe's
cuts its guidance for the year. Discount retailer TJX beat expectations and
raised guidance, sending shares to their best level in two months. On the
M&A front, Samsung jumped into the automotive technology segment with the
$8 billion acquisition of Harman International.
SUNDAY 11/13
(JP) JAPAN Q3 PRELIMINARY GDP Q/Q: 0.5% (matches 6-quarter high) V 0.2%E;
ANNUALIZED GDP Q/Q: 2.2% (6-quarter high) V 0.8%E
MONDAY 11/14
HAR: To be acquired by Samsung Electronics for $112/shr cash; deal valued at
$8.0B
(RU) Kremlin spokesperson: Russia President Putin and President-elect Trump
agree on phone call that Russia-US relations are unsatisfactory, aim to
normalize relationship - Russia press
TUESDAY 11/15
(UK) Govt said to have no common Brexit strategy due to divisions within
Cabinet - financial press (DE) GERMANY Q3 PRELIMINARY GDP Q/Q: 0.2% V 0.3%E;
Y/Y: 1.7% V 1.8%E; GDP NSA Y/Y: 1.5% V 1.6%E
VOD.UK: Reports H1 EBITDA €7.91B v €8.04B y/y, Rev €27.1B v €28.2B y/y, Organic
Service Revenue Growth: +2.4% y/y
(UK) OCT PPI INPUT M/M: 4.6% V 2.0%E; Y/Y: 12.2% V 9.3%E
(EU) EURO ZONE Q3 PRELIMINARY GDP Q/Q: 0.3% V 0.3%E; Y/Y: 1.6% V 1.6%E (2nd
reading of data)
(DE) GERMANY NOV ZEW CURRENT SITUATION SURVEY: 58.8 V 61.6E; EXPECTATIONS
SURVEY: 13.8 V 8.1E
HD: Reports Q3 $1.60 v $1.58e, R$23.2B v $23.0Be
(US) OCT IMPORT PRICE INDEX M/M: 0.5% V 0.4%E; Y/Y: -0.2% V -0.3%E
(US) OCT ADVANCE RETAIL SALES M/M: 0.8% V 0.6%E ; RETAIL SALES EX AUTO M/M:
0.8% V 0.5%E
TJX: Reports Q3 $0.91 v $0.87e, R$8.29B v $8.27Be
(US) Atlanta Fed GDPNow: raises Q4 GDP forecast to 3.3% from 3.1% on Nov 9th
WEDNESDAY 11/16
700.HK: Reports Q3 Net CNY10.6B v CNY10.7Be, Rev CNY40.4B v CNY26.6B y/y
(UK) SEPT ILO UNEMPLOYMENT RATE 3M/3M: 4.8% V 4.9%E
(UK) OCT JOBLESS CLAIMS CHANGE: 9.8K V +2.0KE; CLAIMANT COUNT RATE: 2.3% V
2.3%E
(US) OCT PPI FINAL DEMAND M/M: 0.0% V 0.3%E; Y/Y: 0.8% V 1.2%E
(US) OCT INDUSTRIAL PRODUCTION M/M: 0.0% V 0.2%E; CAPACITY UTILIZATION: 75.3% V
75.5%E
(US) NOV NAHB HOUSING MARKET INDEX: 63 V 63E
(US) Association of American Railroads weekly rail traffic report for week
ending Nov 12th: 541.1K carloads and intermodal units, -0.5% y/y
CSCO: Reports Q1 $0.61 v $0.59e, R$12.4B v $12.3Be
(JP) BOJ CONDUCTS FIXED-RATE JGB PURCHASE OPERATION (1st time under new policy
framework) FOR JGBs WITH 1-5 YEAR MATURITIES
THURSDAY 11/17
(ID) INDONESIA CENTRAL BANK (BI) LEAVES 7-DAY REVERSE REPO UNCHANGED AT 4.75%,
AS EXPECTED
(UK) OCT RETAIL SALES EX AUTO FUEL M/M: 2.0% V 0.4%E; Y/Y: 7.6% V 5.4%E
(UK) OCT RETAIL SALES INC AUTO FUEL M/M: 1.9% V 0.5%E; Y/Y: 7.4% V 5.3%E
(highest annual pace since 2002)
(EU) EURO ZONE OCT CPI M/M: 0.2% V 0.3%E; Y/Y (FINAL): 0.5% V 0.5%E; CPI CORE
Y/Y (FINAL): 0.8% V 0.8%E
BBY: Reports Q3 $0.62 v $0.47e, R$8.95B v $8.84Be
(US) OCT CPI M/M: 0.4% V 0.4%E; CPI EX FOOD AND ENERGY M/M: 0.1% V 0.2%E; CPI
NSA INDEX: 241.729 V 241.785E
(US) INITIAL JOBLESS CLAIMS: 235K (lowest since 1973) V 257KE; CONTINUING
CLAIMS: 1.98M V 2.03ME (lowest since 2000)
(US) OCT HOUSING STARTS: 1.323M V 1.156ME; BUILDING PERMITS: 1.229M V 1.193ME
(US) NOV PHILADELPHIA FED BUSINESS OUTLOOK: 7.6 V 7.8E
(US) Atlanta Fed GDPNow: raises Q4 GDP forecast to 3.6% from 3.3% on Nov 15th
(MX) MEXICO CENTRAL BANK (BANXICO) RAISES OVERNIGHT RATE BY 50BPS TO 5.25%; AS
EXPECTED
(CL) CHILE CENTRAL BANK (BCCH) LEAVES OVERNIGHT RATE TARGET UNCHANGED AT 3.50%;
AS EXPECTED
AMAT: Reports Q4 $0.66 v $0.66e, R$3.30B v $3.31Be
CRM: Reports Q3 $0.24 v $0.21e, R$2.14B v $2.12Be
GPS: Reports Q3 $0.60 v $0.59e, R$3.80B v $3.77Be
(CN) CHINA OCT PROPERTY PRICES M/M: RISE IN 62 OUT OF 70 CITIES VS 63 PRIOR;
Y/Y: RISE IN 65 OUT OF 70 CITIES V 64 PRIOR
FRIDAY 11/18
(IR) Iran OPEC Gov Kazempour: Remains optimistic for an OPEC deal after talks
with Russia
(IQ) Iraq Oil Min Luaibi: optimistic OPEC will clinch output deal; differences
are narrowing over OPEC output data - press
(US) New York Fed Nowcast: raises Q4 GDP forecast to 2.4% from 1.6% on 11/4
Friday, November 18, 2016
Monday, November 14, 2016
November-December 2016 Outlook: Trumping All Expectations
November-December
2016 Outlook: Trumping All Expectations
Mon, 14 Nov 2016 13:22 PM EST
After the shocking Brexit vote result this summer markets were a little better hedged for the surprise Trump victory, but it was still astonishing to see the pollsters get it so wrong again. Instead of four more years of the same government gridlock in Washington, the prospect of a united US government initially raised hopes that a pro-business agenda could emerge. For the time being, markets have ignored the "temperament" issue and the question of whether a President Trump will remain a maverick or go along with the Republican Congress that shunned him during the entire campaign.
In the immediate aftermath of the surprise Trump victory, interest rates rose and stocks moved back toward record highs on optimism that the US will have functional government that that President Trump will keep an an even keel. In the days since the election, Mr. Trump has been more subdued than he was on the campaign trail and has so far kept his famous outbursts in check. Between now and his inauguration in January, every move he makes will be closely scrutinized, and other major world events will have to be viewed through a prism of how the new Administration might react to it. Uncertainty will persist for months to come until the Trump White House starts to fall into a clear pattern. Until then it won't be clear as to whether Trump will flout the Washington establishment (after all, Trump's mandate was to dismantle the old order in Washington and he ran against the establishment of BOTH parties) or if he will quickly fall in line with Republican orthodoxy in order to get a pro-growth, anti-regulation agenda passed quickly.
Early indications will come from Trump's choices to fill top posts. The first big tell may be the selection for Chief of Staff which is coming down to Republican National Committee Chairman Reince Priebus or Steve Bannon, the Trump campaign CEO and executive chairman of the "alt-right" Breitbart News. Choosing Priebus to be his closest White House advisor would give Republicans some assurance that the new President wants to work with them, while naming Bannon to the position would be another shot across the bow of the establishment [Update: press reports now say Priebus will be chief of staff, but Bannon will be kept on call as "chief strategist"] . Another question is whether Trump will push his own legislative agenda or if he will allow Congress to set the tone. If Trump is content with just being a figurehead for the "Make American Great Again" movement, the Congress may run roughshod over the White House.
Trump has stated his early focus will be on three top priorities: health care, border control, and jobs. Congress seems likely to support a long-overdue spending on infrastructure and jobs growth, and Republicans will help pass legislation on immigration, healthcare, and tax reform, including a tax holiday for repatriation of corporate earnings from overseas. Republicans will also welcome the Trump Administration rolling back numerous executive orders that President Obama used to implement environmental regulations and other policies that could not be squeezed through the obstructionist Congress.
Trump may come into conflict with the GOP establishment when it comes to trade policy, where the Administration has a lot of authority that is independent of Congress. His election mandate was largely built on vague promises to renegotiate trade deals including NAFTA which could put the new Administration in direct conflict with a Republican Party establishment that overwhelmingly supports free trade. The President-elect's pledge to name China a currency manipulator "on day one" could also draw focus away from the domestic agenda. In response to the Trump victory, China's vice finance minister Shi calculating stated that it remains to be seen if Trump will implement his campaign rhetoric and that the president-elect should be aware of the benefits of economic cooperation with China. If Trump delivers on his protectionist rhetoric, markets could shudder at the prospect of a trade war damaging the global economy. He could also make waves for individual companies that move production jobs overseas by imposing tariffs on goods that they produce outside of the US. Fiscal conservatives may also cringe at efforts by the Trump Administration to finance big spending projects.
Populism Trumps Polls
The early days of the Trump Administration will coincide with the next phase of the UK's Brexit drama. The Bank of England has just diminished uncertainty about its policy future, but that was offset by new uncertainties about the Brexit process. Shortly before the November policy meeting, BOE Governor Carney turned aside speculation that he might resign early and instead announced that he would stay on through 2019 to guide the central bank through the entire Brexit process. Then at the meeting, the policy committee essentially stated that it had taken the prospect of another rate hike off the table.
The same day, the mechanics of the Brexit were thrown into question as a UK court ruled that the Parliament should have a say in the government's plans for disentangling itself from the EU, raising the prospects for a "soft Brexit" which would retain certain agreements with the EU including adherence to free movement of people rules. Specifically the court said the government must get Parliamentary approval to invoke Article 50 which triggers the two-year process of leaving the EU.
Members of the May government have increasingly hinted that they'll push for a "hard Brexit" that would allow the UK to control immigration from the European Union, even if that means giving up membership of the European common market. The government is in the process of appealing ruling on Parliamentary oversight to the nation's highest judicial body and a decision is anticipated before the year end. If that timeframe stays true, the government has said it will remain on track to invoke Article 50 by the end of March.
Some political observers are concerned that starting the Brexit process in March will play into the hands of populists across Europe, whose fortunes appear to be on the rise after the votes on Brexit and the US Presidency. France and Germany will hold national elections in 2017 - France in the spring and Germany probably in late September. In France, Marine Le Pen and her National Front (FN) are running competitively with the candidates of the two traditional leading parties, positioning the anti-immigrant populist to be one of the two choices in the run- off election for President in May. Meanwhile in Germany, the right wing populist and euroskeptic Alternative for Germany (AfD) is poised to gain seats in Bundestag for the first time after running strong in several state elections this year.
OPEC Self-Interest Trumps Cooperation
Outside of rise of populist politics, probably the biggest uncertainty in the weeks ahead is the fate of the "oil freeze" deal that was tentatively agreed upon in Algiers a month ago. That preliminary agreement helped oil prices get back above $50/bbl for a time, but the price has eroded again as OPEC members continue to bicker over who should participate in a freeze or cut, and as non-OPEC producers have also wavered. With just a few weeks to go before the November 30th semi-annual OPEC meeting that was to usher in the finalized production deal, market watchers are starting to lay odds against a final accord being enacted.
As the case has been since the oil freeze idea was conceived, the main tension has been between Saudi Arabia's block of Gulf producers and Iran, which wants to recoup all of the market share it lost due to anti-nuclear sanctions. Technical level meetings over the last few weeks have not achieved a breakthrough, though more meetings are scheduled. It's clear the frustration level is high, exemplified by a press leak that suggested the Gulf nations threatened to INCREASE production if Iran didn't get on board with plan (that threat was later walked back to a suggestion that the Gulf producers would shift capacity to "meet market demand"). For its part, Iran's oil minister just recently commented that it does not see November 30th as a hard deadline for reaching an accord, calling into doubt whether producers can come to an agreement at all this year.
Given these circumstances, there is a good chance the freeze deal will not come to pass, or at least get delayed. In that case WTI crude could easily sink back to the low $30s, dragging down the energy sector with it and taking some more air out of equities. It could also give headaches to central banks that had been elated to see the downward inflation pressure exerted by low oil prices finally abating over the spring and summer.
Fed Tightening Finally Trumps Accommodation
The US Fed is hoping that inflation will continue to rise enough to justify another rate hike. The December 14 FOMC meeting will be a crucial moment for Fed credibility. When the Fed raised rates last December the dot plot projections suggested there could be FOUR rate hikes during the course of 2016. Since then, the Fed has found excuses to keep rates on hold, ranging from stagnant growth in Q1, to the Brexit uncertainty over the summer. By intimating for the last year that the next rate hike is coming soon, the Fed has lost a lot of the benefits of keeping rate policy unchanged for the last 10 months, and it would be a major blow to the Fed's reputation if it holds off on a rate hike yet again in December.
Additionally, the voting membership will change after the December meeting - in 2017 all three of the recent hawkish dissenters will rotate out and will be replaced by a decidedly more moderate group of Fed presidents. Chair Yellen has already indicated a willingness to let the economy "run hot," so as long as there is no sign of runaway inflation, the Fed may be even more reluctant to raise rates next year.
The November statement edged the Fed closer to a December rate hike, announcing that the case for a hike "continued" to strengthen. But until the FOMC actually pulls the trigger on another 25 basis point move, markets are right to be skeptical of hawkish signals. Though some Fed watchers may be worried that the 'era of cheap money' is over, the promise of a "gradual pace" of rate hikes may well mean that the market opinion starts coalescing around the one-and-done rate hike view of St Louis Fed President Bullard. So far, markets have been unperturbed by the prospect of a December rate hike, and may even take it as positive development if the Fed framed the hike as a vote of confidence in the economy.
The Trump Administration will also exert some influence on the Fed. Trump has been broadly critical of the Fed and said earlier this year that he wants to replace Chair Yellen because she is political and "not a Republican," though he also declared that both she and he are "low rates" people. Unless the Chair chooses to tender her resignation and triggers an earlier succession, the new President will have the option to name a replacement at the end of Yellen's term in early 2018. In the meantime, two vacancies on the seven-member board of governors will allow Trump to put his imprint on the Fed immediately.
The Republican controlled Congress may also try to persuade Trump to support legislation to reform the central bank. Last year the House passed a bill that would require the Fed to set a policy rule, and the 2016 GOP party platform called for an annual audit of interest rate decisions. The central bank has argued that the 'audit the Fed' legislation would put undue political pressure on monetary policy decisions, but that may just be the new reality in the era of America's first modern populist president.
CALENDAR
NOVEBMER
1: UK Manufacturing PMI; US ISM Manufacturing PMI
2: UK Construction PMI; FOMC policy statement; China Caixin Services PMI
3: UK Services PMI; BOE policy statement; US ISM Manufacturing; US Factory Orders
4: US Payrolls & Unemployment
7: German Factory Orders; China Trade Balance (tentative)
8: Japan Current Account; China CPI & PPI; US ELECTION DAY
9: UK Manufacturing Production; US JOLTS Jobs Openings
10:
11: US Prelim University of Michigan Sentiment
13: China Industrial Production; Japan Prelim Q3 GDP
14:
15: UK CPI & PPI; Euro Zone Prelim Q3 GDP; German ZEW Economic Sentiment; US Retail Sales
16: UK Claimant Count & Unemployment; US PPI; US Industrial Production & Capacity Utilization
17: UK Retail Sales; Euro Zone Final CPI; ECB Minutes; US Housing Starts & Building Permits; US CPI; Philadelphia Fed Manufacturing Index
18:
21: Various Euro Zone Manufacturing & Services PMIs
22: US Existing Home Sales
23: US Durable Goods Orders; US New Home Sales; FOMC Minutes
24: German Ifo Business Climate; Tokyo Core CPI; US THANKSGIVING HOLIDAY
25: UK Q3 GDP Second Estimate
28: Japan Household Spending
29: German Unemployment; BOE Financial Stability Report; US Prelim Q3 GDP; US Consumer Confidence
30: OPEC Semi-Annual Meeting; German Retail Sales; Euro Zone Prelim CPI Estimate; US Personal Income & Spending; Chicago PMI; China Manufacturing & Non-Manufacturing PMIs; China Caixin Manufacturing PMI
DECEMBER
1: UK Bank Stress Test Results; UK Manufacturing PMI; US ISM Manufacturing PMI
2: UK Construction PMI; US Payrolls & Unemployment
4: Italy Referendum on Constitutional Reform; China Caixin Services PMI
5: UK Services PMI; US ISM Non-Manufacturing
6: German Factory Orders; US Trade Balance; US Factory Orders
7: UK Manufacturing Production; Japan Final Q3 GDP; China Trade Balance (tentative)
8: ECB Policy Statement & Press Conf; US JOLT Job Openings; China CPI & PPI
9: Prelim University of Michigan Sentiment
12: China Industrial Production
13: UK CPI & PPI; German ZEW Economic Sentiment; Japan Tankan Manufacturing & Non-Manufacturing Indices
14: UK Claimant Count & Unemployment; US Retail Sales; US PPI; US Industrial Production & Capacity Utilization; FOMC Policy Statement & Updated Economic Projections; FOMC press conference
15: UK Retail Sales; BOE Policy Statement; US CPI; Philadelphia Fed Manufacturing Index
16: Euro Zone Final CPI; US Housing Starts & Building Permits
18: BOJ Policy Statement (tentative)
19: German Ifo Business Climate
20:
21: Various Euro Zone Prelim Manufacturing & Services PMIs; US Existing Home Sales
22: US Final Q3 GDP; US Personal Spending
23: US Durable Goods Orders; US New Home Sales
26: Japan Household Spending; Tokyo Core CPI
27: UK Current Account; UK Final Q3 GDP; US Consumer Confidence
28:
29:
30: Chicago PMI
31: China Manufacturing & Non-Manufacturing PMIs
Mon, 14 Nov 2016 13:22 PM EST
After the shocking Brexit vote result this summer markets were a little better hedged for the surprise Trump victory, but it was still astonishing to see the pollsters get it so wrong again. Instead of four more years of the same government gridlock in Washington, the prospect of a united US government initially raised hopes that a pro-business agenda could emerge. For the time being, markets have ignored the "temperament" issue and the question of whether a President Trump will remain a maverick or go along with the Republican Congress that shunned him during the entire campaign.
In the immediate aftermath of the surprise Trump victory, interest rates rose and stocks moved back toward record highs on optimism that the US will have functional government that that President Trump will keep an an even keel. In the days since the election, Mr. Trump has been more subdued than he was on the campaign trail and has so far kept his famous outbursts in check. Between now and his inauguration in January, every move he makes will be closely scrutinized, and other major world events will have to be viewed through a prism of how the new Administration might react to it. Uncertainty will persist for months to come until the Trump White House starts to fall into a clear pattern. Until then it won't be clear as to whether Trump will flout the Washington establishment (after all, Trump's mandate was to dismantle the old order in Washington and he ran against the establishment of BOTH parties) or if he will quickly fall in line with Republican orthodoxy in order to get a pro-growth, anti-regulation agenda passed quickly.
Early indications will come from Trump's choices to fill top posts. The first big tell may be the selection for Chief of Staff which is coming down to Republican National Committee Chairman Reince Priebus or Steve Bannon, the Trump campaign CEO and executive chairman of the "alt-right" Breitbart News. Choosing Priebus to be his closest White House advisor would give Republicans some assurance that the new President wants to work with them, while naming Bannon to the position would be another shot across the bow of the establishment [Update: press reports now say Priebus will be chief of staff, but Bannon will be kept on call as "chief strategist"] . Another question is whether Trump will push his own legislative agenda or if he will allow Congress to set the tone. If Trump is content with just being a figurehead for the "Make American Great Again" movement, the Congress may run roughshod over the White House.
Trump has stated his early focus will be on three top priorities: health care, border control, and jobs. Congress seems likely to support a long-overdue spending on infrastructure and jobs growth, and Republicans will help pass legislation on immigration, healthcare, and tax reform, including a tax holiday for repatriation of corporate earnings from overseas. Republicans will also welcome the Trump Administration rolling back numerous executive orders that President Obama used to implement environmental regulations and other policies that could not be squeezed through the obstructionist Congress.
Trump may come into conflict with the GOP establishment when it comes to trade policy, where the Administration has a lot of authority that is independent of Congress. His election mandate was largely built on vague promises to renegotiate trade deals including NAFTA which could put the new Administration in direct conflict with a Republican Party establishment that overwhelmingly supports free trade. The President-elect's pledge to name China a currency manipulator "on day one" could also draw focus away from the domestic agenda. In response to the Trump victory, China's vice finance minister Shi calculating stated that it remains to be seen if Trump will implement his campaign rhetoric and that the president-elect should be aware of the benefits of economic cooperation with China. If Trump delivers on his protectionist rhetoric, markets could shudder at the prospect of a trade war damaging the global economy. He could also make waves for individual companies that move production jobs overseas by imposing tariffs on goods that they produce outside of the US. Fiscal conservatives may also cringe at efforts by the Trump Administration to finance big spending projects.
Populism Trumps Polls
The early days of the Trump Administration will coincide with the next phase of the UK's Brexit drama. The Bank of England has just diminished uncertainty about its policy future, but that was offset by new uncertainties about the Brexit process. Shortly before the November policy meeting, BOE Governor Carney turned aside speculation that he might resign early and instead announced that he would stay on through 2019 to guide the central bank through the entire Brexit process. Then at the meeting, the policy committee essentially stated that it had taken the prospect of another rate hike off the table.
The same day, the mechanics of the Brexit were thrown into question as a UK court ruled that the Parliament should have a say in the government's plans for disentangling itself from the EU, raising the prospects for a "soft Brexit" which would retain certain agreements with the EU including adherence to free movement of people rules. Specifically the court said the government must get Parliamentary approval to invoke Article 50 which triggers the two-year process of leaving the EU.
Members of the May government have increasingly hinted that they'll push for a "hard Brexit" that would allow the UK to control immigration from the European Union, even if that means giving up membership of the European common market. The government is in the process of appealing ruling on Parliamentary oversight to the nation's highest judicial body and a decision is anticipated before the year end. If that timeframe stays true, the government has said it will remain on track to invoke Article 50 by the end of March.
Some political observers are concerned that starting the Brexit process in March will play into the hands of populists across Europe, whose fortunes appear to be on the rise after the votes on Brexit and the US Presidency. France and Germany will hold national elections in 2017 - France in the spring and Germany probably in late September. In France, Marine Le Pen and her National Front (FN) are running competitively with the candidates of the two traditional leading parties, positioning the anti-immigrant populist to be one of the two choices in the run- off election for President in May. Meanwhile in Germany, the right wing populist and euroskeptic Alternative for Germany (AfD) is poised to gain seats in Bundestag for the first time after running strong in several state elections this year.
OPEC Self-Interest Trumps Cooperation
Outside of rise of populist politics, probably the biggest uncertainty in the weeks ahead is the fate of the "oil freeze" deal that was tentatively agreed upon in Algiers a month ago. That preliminary agreement helped oil prices get back above $50/bbl for a time, but the price has eroded again as OPEC members continue to bicker over who should participate in a freeze or cut, and as non-OPEC producers have also wavered. With just a few weeks to go before the November 30th semi-annual OPEC meeting that was to usher in the finalized production deal, market watchers are starting to lay odds against a final accord being enacted.
As the case has been since the oil freeze idea was conceived, the main tension has been between Saudi Arabia's block of Gulf producers and Iran, which wants to recoup all of the market share it lost due to anti-nuclear sanctions. Technical level meetings over the last few weeks have not achieved a breakthrough, though more meetings are scheduled. It's clear the frustration level is high, exemplified by a press leak that suggested the Gulf nations threatened to INCREASE production if Iran didn't get on board with plan (that threat was later walked back to a suggestion that the Gulf producers would shift capacity to "meet market demand"). For its part, Iran's oil minister just recently commented that it does not see November 30th as a hard deadline for reaching an accord, calling into doubt whether producers can come to an agreement at all this year.
Given these circumstances, there is a good chance the freeze deal will not come to pass, or at least get delayed. In that case WTI crude could easily sink back to the low $30s, dragging down the energy sector with it and taking some more air out of equities. It could also give headaches to central banks that had been elated to see the downward inflation pressure exerted by low oil prices finally abating over the spring and summer.
Fed Tightening Finally Trumps Accommodation
The US Fed is hoping that inflation will continue to rise enough to justify another rate hike. The December 14 FOMC meeting will be a crucial moment for Fed credibility. When the Fed raised rates last December the dot plot projections suggested there could be FOUR rate hikes during the course of 2016. Since then, the Fed has found excuses to keep rates on hold, ranging from stagnant growth in Q1, to the Brexit uncertainty over the summer. By intimating for the last year that the next rate hike is coming soon, the Fed has lost a lot of the benefits of keeping rate policy unchanged for the last 10 months, and it would be a major blow to the Fed's reputation if it holds off on a rate hike yet again in December.
Additionally, the voting membership will change after the December meeting - in 2017 all three of the recent hawkish dissenters will rotate out and will be replaced by a decidedly more moderate group of Fed presidents. Chair Yellen has already indicated a willingness to let the economy "run hot," so as long as there is no sign of runaway inflation, the Fed may be even more reluctant to raise rates next year.
The November statement edged the Fed closer to a December rate hike, announcing that the case for a hike "continued" to strengthen. But until the FOMC actually pulls the trigger on another 25 basis point move, markets are right to be skeptical of hawkish signals. Though some Fed watchers may be worried that the 'era of cheap money' is over, the promise of a "gradual pace" of rate hikes may well mean that the market opinion starts coalescing around the one-and-done rate hike view of St Louis Fed President Bullard. So far, markets have been unperturbed by the prospect of a December rate hike, and may even take it as positive development if the Fed framed the hike as a vote of confidence in the economy.
The Trump Administration will also exert some influence on the Fed. Trump has been broadly critical of the Fed and said earlier this year that he wants to replace Chair Yellen because she is political and "not a Republican," though he also declared that both she and he are "low rates" people. Unless the Chair chooses to tender her resignation and triggers an earlier succession, the new President will have the option to name a replacement at the end of Yellen's term in early 2018. In the meantime, two vacancies on the seven-member board of governors will allow Trump to put his imprint on the Fed immediately.
The Republican controlled Congress may also try to persuade Trump to support legislation to reform the central bank. Last year the House passed a bill that would require the Fed to set a policy rule, and the 2016 GOP party platform called for an annual audit of interest rate decisions. The central bank has argued that the 'audit the Fed' legislation would put undue political pressure on monetary policy decisions, but that may just be the new reality in the era of America's first modern populist president.
CALENDAR
NOVEBMER
1: UK Manufacturing PMI; US ISM Manufacturing PMI
2: UK Construction PMI; FOMC policy statement; China Caixin Services PMI
3: UK Services PMI; BOE policy statement; US ISM Manufacturing; US Factory Orders
4: US Payrolls & Unemployment
7: German Factory Orders; China Trade Balance (tentative)
8: Japan Current Account; China CPI & PPI; US ELECTION DAY
9: UK Manufacturing Production; US JOLTS Jobs Openings
10:
11: US Prelim University of Michigan Sentiment
13: China Industrial Production; Japan Prelim Q3 GDP
14:
15: UK CPI & PPI; Euro Zone Prelim Q3 GDP; German ZEW Economic Sentiment; US Retail Sales
16: UK Claimant Count & Unemployment; US PPI; US Industrial Production & Capacity Utilization
17: UK Retail Sales; Euro Zone Final CPI; ECB Minutes; US Housing Starts & Building Permits; US CPI; Philadelphia Fed Manufacturing Index
18:
21: Various Euro Zone Manufacturing & Services PMIs
22: US Existing Home Sales
23: US Durable Goods Orders; US New Home Sales; FOMC Minutes
24: German Ifo Business Climate; Tokyo Core CPI; US THANKSGIVING HOLIDAY
25: UK Q3 GDP Second Estimate
28: Japan Household Spending
29: German Unemployment; BOE Financial Stability Report; US Prelim Q3 GDP; US Consumer Confidence
30: OPEC Semi-Annual Meeting; German Retail Sales; Euro Zone Prelim CPI Estimate; US Personal Income & Spending; Chicago PMI; China Manufacturing & Non-Manufacturing PMIs; China Caixin Manufacturing PMI
DECEMBER
1: UK Bank Stress Test Results; UK Manufacturing PMI; US ISM Manufacturing PMI
2: UK Construction PMI; US Payrolls & Unemployment
4: Italy Referendum on Constitutional Reform; China Caixin Services PMI
5: UK Services PMI; US ISM Non-Manufacturing
6: German Factory Orders; US Trade Balance; US Factory Orders
7: UK Manufacturing Production; Japan Final Q3 GDP; China Trade Balance (tentative)
8: ECB Policy Statement & Press Conf; US JOLT Job Openings; China CPI & PPI
9: Prelim University of Michigan Sentiment
12: China Industrial Production
13: UK CPI & PPI; German ZEW Economic Sentiment; Japan Tankan Manufacturing & Non-Manufacturing Indices
14: UK Claimant Count & Unemployment; US Retail Sales; US PPI; US Industrial Production & Capacity Utilization; FOMC Policy Statement & Updated Economic Projections; FOMC press conference
15: UK Retail Sales; BOE Policy Statement; US CPI; Philadelphia Fed Manufacturing Index
16: Euro Zone Final CPI; US Housing Starts & Building Permits
18: BOJ Policy Statement (tentative)
19: German Ifo Business Climate
20:
21: Various Euro Zone Prelim Manufacturing & Services PMIs; US Existing Home Sales
22: US Final Q3 GDP; US Personal Spending
23: US Durable Goods Orders; US New Home Sales
26: Japan Household Spending; Tokyo Core CPI
27: UK Current Account; UK Final Q3 GDP; US Consumer Confidence
28:
29:
30: Chicago PMI
31: China Manufacturing & Non-Manufacturing PMIs
Sunday, November 13, 2016
Barrons weekend update
Barrons weekend update: Positive on certain steel, financials, and pharma names following election of Trump
Cover story: Donald Trumps agenda as president could promote economic growth, but the big question for investors is whether his pro-growth, tax-reform, and fiscal-stimulus policies will outweigh his protectionist views; On trade, he may end up speaking loudly but carrying a small stick.
Tech Trader: Nobody in the tech sector knows what to expect from a Trump presidency because he has issued conflicting statements on topics such as the H-1B visa program; The biggest payoff for tech giants could be a repatriation of their enormous cash piles stashed overseas.
Trader: Market gains after Donald Trumps election victor werent spread evenly across sectors, and the biggest surprise was that basic price trends remained unchanged for some parts of the stock market; Infrastructure stocks are up on the prospects of more action in that sector under the Trump administration (Positive on VMC, MLM, URI); Large pharmaceutical companies could benefit from Donald Trumps proposals to let companies bring home money trapped overseas.
Profile: Vince Montemaggiore, manager of the Fidelity Overseas fund, retooled the fund from its lower-quality cyclical bent to one focused on high-quality companies with high returns on capital (top 10 holdings: SAP, TOT, BUD, SNY, Nordea Bank, AIA Group, Henkel, Fresenius, Novo Nordisk).
Interview: Howard Penney, managing director at independent research firm Hedgeye Risk Management, talks about what restaurant stocks might benefit under a Trump administration (picks: PNRA, WFM; pans: CMG, PLAY, KR).
Features:
1) Jeffrey Gundlach of DoubleLine Capital, who predicted a Trump victory in January, predicts a rise in bond yields that could lift the yield on the 10-year Treasury note to 6% in the next four or five years;
2) A look at companies likely to be winners and losers under a Trump administration (Positive on X, NUE, MLM, VMC, JPM, BEN, PFE, BMY, CVI, VLO; Mixed on HCA, THC, DUK, VZ);
3) Positive on LOPE, DV, CPLA: Among for-profit colleges that could profit with Donald Trump in the White House, based on hopes federal oversight will ease;
4) Positive on TMO: Shares of the top seller of laboratory gear could benefit from a smoother budget process under a unified government and consolidation in the industry; shares could see 30% upside;
5) Positive on DFS: Even amid growth in subprime lending, the company has shown discipline, and if it can grow its loan book faster, shares could offer a 12% return during the next 12 months.
Small Caps: Positive on AVD: Shares are down in a slow agricultural sector, but the company is launching new products and stands to benefit from acquisitions, which should translate into higher earnings.
Follow-Up: Negative on CVS: Company lacks the tax-dodging opportunities of multinationals, and the growth that originally attracted investors to shares is no longer steadymaking it time to sell; Positive on LVLT, CTL: The companies merger is good for investors, because it should give Level 3 shares 25% upside, while Century has a 9.1% yield.
European Trader: With Donald Trumps presidential victory, the outlook for Europes banks has improved, because he isnt expected to be tough on regulationthough many of his ideas make investors uneasy.
Asian Trader: Asian markets have been unexpectedly tolerant of Donald Trump, and his win probably will extend the value-oriented theme that has prevailed since Brexit.
Emerging Markets: The reordering of markets is happening, absent clarity from Donald Trump on his cabinet, strategy, and foreign policy. But the strengthening dollar is already a sign of tough times ahead for foreign currencies.
Commodities: The price of nickel hit a peak for the year last week, and could rise further on expectations of stronger demand from China and the U.S.
Streetwise: A shift in investor focus from assets that benefit from globalization to those boosted by domestic consumption could portend a Main Street recovery under a Trump administration.
Cover story: Donald Trumps agenda as president could promote economic growth, but the big question for investors is whether his pro-growth, tax-reform, and fiscal-stimulus policies will outweigh his protectionist views; On trade, he may end up speaking loudly but carrying a small stick.
Tech Trader: Nobody in the tech sector knows what to expect from a Trump presidency because he has issued conflicting statements on topics such as the H-1B visa program; The biggest payoff for tech giants could be a repatriation of their enormous cash piles stashed overseas.
Trader: Market gains after Donald Trumps election victor werent spread evenly across sectors, and the biggest surprise was that basic price trends remained unchanged for some parts of the stock market; Infrastructure stocks are up on the prospects of more action in that sector under the Trump administration (Positive on VMC, MLM, URI); Large pharmaceutical companies could benefit from Donald Trumps proposals to let companies bring home money trapped overseas.
Profile: Vince Montemaggiore, manager of the Fidelity Overseas fund, retooled the fund from its lower-quality cyclical bent to one focused on high-quality companies with high returns on capital (top 10 holdings: SAP, TOT, BUD, SNY, Nordea Bank, AIA Group, Henkel, Fresenius, Novo Nordisk).
Interview: Howard Penney, managing director at independent research firm Hedgeye Risk Management, talks about what restaurant stocks might benefit under a Trump administration (picks: PNRA, WFM; pans: CMG, PLAY, KR).
Features:
1) Jeffrey Gundlach of DoubleLine Capital, who predicted a Trump victory in January, predicts a rise in bond yields that could lift the yield on the 10-year Treasury note to 6% in the next four or five years;
2) A look at companies likely to be winners and losers under a Trump administration (Positive on X, NUE, MLM, VMC, JPM, BEN, PFE, BMY, CVI, VLO; Mixed on HCA, THC, DUK, VZ);
3) Positive on LOPE, DV, CPLA: Among for-profit colleges that could profit with Donald Trump in the White House, based on hopes federal oversight will ease;
4) Positive on TMO: Shares of the top seller of laboratory gear could benefit from a smoother budget process under a unified government and consolidation in the industry; shares could see 30% upside;
5) Positive on DFS: Even amid growth in subprime lending, the company has shown discipline, and if it can grow its loan book faster, shares could offer a 12% return during the next 12 months.
Small Caps: Positive on AVD: Shares are down in a slow agricultural sector, but the company is launching new products and stands to benefit from acquisitions, which should translate into higher earnings.
Follow-Up: Negative on CVS: Company lacks the tax-dodging opportunities of multinationals, and the growth that originally attracted investors to shares is no longer steadymaking it time to sell; Positive on LVLT, CTL: The companies merger is good for investors, because it should give Level 3 shares 25% upside, while Century has a 9.1% yield.
European Trader: With Donald Trumps presidential victory, the outlook for Europes banks has improved, because he isnt expected to be tough on regulationthough many of his ideas make investors uneasy.
Asian Trader: Asian markets have been unexpectedly tolerant of Donald Trump, and his win probably will extend the value-oriented theme that has prevailed since Brexit.
Emerging Markets: The reordering of markets is happening, absent clarity from Donald Trump on his cabinet, strategy, and foreign policy. But the strengthening dollar is already a sign of tough times ahead for foreign currencies.
Commodities: The price of nickel hit a peak for the year last week, and could rise further on expectations of stronger demand from China and the U.S.
Streetwise: A shift in investor focus from assets that benefit from globalization to those boosted by domestic consumption could portend a Main Street recovery under a Trump administration.
Friday, November 11, 2016
TradeTheNews.com Weekly
Market Update: The Trump Bump
Fri, 11 Nov 2016 16:06 PM EST
Global markets opened the week trading in what best could be described as a cautiously optimistic state. The run up in the VIX last week suggested to many that investors had already aggressively put on protection heading into Tuesday's election, and the modest rebound in stocks on Monday and Tuesday had most attributing the stabilization in risk sentiment to the polls that still predicted a Hillary Clinton Administration/Washington gridlock outcome. By late Tuesday evening stock futures were plummeting as it became clear that all the polls were wrong and Donald Trump would be the next President of the United States. Dow futures dropped 800 points, the Mexican Peso and Asian stock markets cratered, and the Yen surged along with gold into early Wednesday morning on a wave of uncertainty.
As European markets opened on early Wednesday Trump offered up a victory speech that struck and generally healing and inclusive tone and stressed the importance his administration would place of fiscal stimulus in the form of infrastructure spending out of the gate. The markets took note and, along with the Republican sweep in both Houses of Congress, sentiment turned in a fashion almost as stunning as the election outcome itself. Equity futures turned up and Treasury prices plunged as a barrage of reflation trades took hold. By Wednesday's NYSE opening bell equity futures had recouped most of the overnight losses and the Dow futures finished the session up nearly 1000 points from the lows.
The narrative quickly snowballed; lower taxes, aggressive fiscal stimulus and a much friendlier regulatory environment will goose growth and along with it inflation. Rates continued to back up aggressively and the yield curve steepened to levels not seen in almost a year. Banks and financials surged along with all deep cyclical groups leveraged to infrastructure outlays. Pharmaceutical and biotech names jumped in classic relief rally. Hospitals sank on prospect of repealed and replaced Obamacare. Dividend focused bond proxy groups lagged as rates moved up. Large cap technology also notably underperformed, mainly on concerns around immigration and trade, and the notion that the aforementioned out-of-favor sectors are better places to invest following the change in leadership. By Thursday, the DJIA closed at a new record high above 18,873, and for the week the DJIA gained 5.4%, the S&P500 rose 3.8%, and the Nasdaq jumped 3.8%. Energy futures did not participate in the risk-on surge -- crude futures slid as Iran's oil minister showed no urgency for reaching a production accord, saying the November 30th OPEC meeting is not a deadline for any deal.
Earnings seasons wound down with a few more notable names reporting. Retailers Macy's and Nordstrom announced solid quarterly results and selectively raised guidance. Hertz shares collapsed after a disastrous earnings report, but paired losses sharply as Carl Icahn announced he had doubled his stake in the car rental firm.
SUN 11/6
(US) FBI Director Comey: Review of Hillary Clinton's emails has NOT changed the original conclusion that she should not face criminal charges - press
HSBA.UK: Reports Q3 Adj pretax $5.59B v $5.29Be; Rev $9.5B v $15.1B y/y; Adj Rev $12.8B v $12.5B y/y
MON 11/7
(CN) CHINA OCT FOREIGN RESERVES: $3.121T V $3.133TE (lowest level since Dec 2011, 4th straight decline, and largest decline since Jan)
(EU) EURO ZONE NOV SENTIX INVESTOR CONFIDENCE: 13.1 V 8.6E
(US) Oct Labor Market Conditions Index Change: +0.7 v -2.2 prior
HTZ: Reports Q3 $1.58 v $2.81e, R$2.54B v $2.57Be
(CN) CHINA OCT TRADE BALANCE (USD): $49.1B V $52.3BE
TUES 11/8
ACA.FR: Reports Q3 Net €1.86B v €1.81Be; Rev €3.74B v €3.95Be
DPW.DE: Reports Q3 Net €618M v €49M y/y, EBIT €755M v €746Me, Rev €13.9B v €14.0Be
TM: Reports H1 Net ¥946B v ¥1.26T y/y, Op Profit ¥1.12T v ¥1.58T y/y, Rev ¥13.1T v ¥14.1T y/y; to buy back 1.3% shares for ¥200B
MT.NL: Reports Q3 Net profit $680M v loss $711M y/y, EBITDA $1.90B v $1.95Be, Rev $14.5B v $15.0Be
(IR) Iran Oil Min Zanganeh: Not pessimistic about the OPEC deal; Nov 30th is not a deadline for a deal
(UK) SEPT MANUFACTURING PRODUCTION M/M: 0.6% V 0.4%E; Y/Y: +0.2% V -0.1%E
(UK) SEPT INDUSTRIAL PRODUCTION M/M: -0.4% V 0.0%E; Y/Y: 0.3% V 0.8%E
VRX: Reports Q3 $1.55 v $1.78e, R$2.48B v $2.49Be
CVS: Reports Q3 $1.64 v $1.57e, R$44.6B v $45.3Be
(CN) CHINA OCT CPI M/M: 0.7% V 0.7% PRIOR; Y/Y: 2.1% V 2.1%E
(CN) CHINA OCT PPI Y/Y: 1.2% V 1.0%E; 2nd straight increase; highest since Dec 2011
WEDS 11/9
CARLB.DK: Reports Q3 Rev DKK17.5B v DKK18.0Be
BRBY.UK: Reports H1 Adj pretax £146M v £145Me, Pretax £102M v £155M y/y, Rev £1.16B v £1.18B prelim
(US) DONALD TRUMP PROJECTED TO BE THE WINNER OF US PRESIDENTIAL RACE; serve as the 45th President
Risk aversion off its worst level as President-elect Trump take a conciliatory tone in victory speech
(US) Atlanta Fed GDPNow: maintains Q4 GDP forecast at 3.1%, unchanged from Nov 4th
(NZ) NEW ZEALAND CENTRAL BANK (RBNZ) CUTS OFFICIAL CASH RATE BY 25BPS TO 1.75% (record low)); AS EXPECTED
THURS 11/10
SIE.DE: Reports Q4 Net profit €1.18B v €1.00B y/y, Industrial Business profit €2.45B v €2.41Be, Rev €22.0B v €22.4Be; Plans public listing of Health care business;
DTE.DE: Reports Q3 Adj Net €1.04B v €1.11Be; Adj EBITDA €5.54B v €5.56Be, Rev €18.1B v €18.1Be
AZN.UK: Reports Q3 Core EPS $1.32 v $0.98e, Rev $5.70B v $5.95Be; Affirms FY16
(FR) FRANCE SEPT INDUSTRIAL PRODUCTION M/M: -1.1% V -0.3%E; Y/Y: -1.1% V +0.4%E
(FR) FRANCE SEPT MANUFACTURING PRODUCTION M/M: -1.1% V -0.1%E; Y/Y: -0.9% V +0.4%E
(PH) PHILIPPINES CENTRAL BANK (BSP) LEAVES OVERNIGHT BORROWING RATE UNCHANGED AT 3.00%, AS EXPECTED
M: Reports Q3 $0.17 v $0.40e, R$5.63B v $5.63Be
(US) INITIAL JOBLESS CLAIMS: 254K V 260KE; CONTINUING CLAIMS: 2.04M V 2.03ME
JWN: Reports Q3 $0.84 adj v $0.52e, R$3.54B v $3.49Be
DIS: Reports Q4 $1.10 v $1.15e, R$13.1B v $13.5Be
(PE) PERU CENTRAL BANK (BCRP) LEAVES REFERENCE RATE UNCHANGED AT 4.25%; AS EXPECTED
(KR) BANK OF KOREA (BOK) LEAVES INTEREST RATE UNCHANGED AT 1.25%; AS EXPECTED
FRI 11/11
(US) NOV PRELIMINARY MICHIGAN CONFIDENCE: 91.6 V 87.9E (highest since June)
Fri, 11 Nov 2016 16:06 PM EST
Global markets opened the week trading in what best could be described as a cautiously optimistic state. The run up in the VIX last week suggested to many that investors had already aggressively put on protection heading into Tuesday's election, and the modest rebound in stocks on Monday and Tuesday had most attributing the stabilization in risk sentiment to the polls that still predicted a Hillary Clinton Administration/Washington gridlock outcome. By late Tuesday evening stock futures were plummeting as it became clear that all the polls were wrong and Donald Trump would be the next President of the United States. Dow futures dropped 800 points, the Mexican Peso and Asian stock markets cratered, and the Yen surged along with gold into early Wednesday morning on a wave of uncertainty.
As European markets opened on early Wednesday Trump offered up a victory speech that struck and generally healing and inclusive tone and stressed the importance his administration would place of fiscal stimulus in the form of infrastructure spending out of the gate. The markets took note and, along with the Republican sweep in both Houses of Congress, sentiment turned in a fashion almost as stunning as the election outcome itself. Equity futures turned up and Treasury prices plunged as a barrage of reflation trades took hold. By Wednesday's NYSE opening bell equity futures had recouped most of the overnight losses and the Dow futures finished the session up nearly 1000 points from the lows.
The narrative quickly snowballed; lower taxes, aggressive fiscal stimulus and a much friendlier regulatory environment will goose growth and along with it inflation. Rates continued to back up aggressively and the yield curve steepened to levels not seen in almost a year. Banks and financials surged along with all deep cyclical groups leveraged to infrastructure outlays. Pharmaceutical and biotech names jumped in classic relief rally. Hospitals sank on prospect of repealed and replaced Obamacare. Dividend focused bond proxy groups lagged as rates moved up. Large cap technology also notably underperformed, mainly on concerns around immigration and trade, and the notion that the aforementioned out-of-favor sectors are better places to invest following the change in leadership. By Thursday, the DJIA closed at a new record high above 18,873, and for the week the DJIA gained 5.4%, the S&P500 rose 3.8%, and the Nasdaq jumped 3.8%. Energy futures did not participate in the risk-on surge -- crude futures slid as Iran's oil minister showed no urgency for reaching a production accord, saying the November 30th OPEC meeting is not a deadline for any deal.
Earnings seasons wound down with a few more notable names reporting. Retailers Macy's and Nordstrom announced solid quarterly results and selectively raised guidance. Hertz shares collapsed after a disastrous earnings report, but paired losses sharply as Carl Icahn announced he had doubled his stake in the car rental firm.
SUN 11/6
(US) FBI Director Comey: Review of Hillary Clinton's emails has NOT changed the original conclusion that she should not face criminal charges - press
HSBA.UK: Reports Q3 Adj pretax $5.59B v $5.29Be; Rev $9.5B v $15.1B y/y; Adj Rev $12.8B v $12.5B y/y
MON 11/7
(CN) CHINA OCT FOREIGN RESERVES: $3.121T V $3.133TE (lowest level since Dec 2011, 4th straight decline, and largest decline since Jan)
(EU) EURO ZONE NOV SENTIX INVESTOR CONFIDENCE: 13.1 V 8.6E
(US) Oct Labor Market Conditions Index Change: +0.7 v -2.2 prior
HTZ: Reports Q3 $1.58 v $2.81e, R$2.54B v $2.57Be
(CN) CHINA OCT TRADE BALANCE (USD): $49.1B V $52.3BE
TUES 11/8
ACA.FR: Reports Q3 Net €1.86B v €1.81Be; Rev €3.74B v €3.95Be
DPW.DE: Reports Q3 Net €618M v €49M y/y, EBIT €755M v €746Me, Rev €13.9B v €14.0Be
TM: Reports H1 Net ¥946B v ¥1.26T y/y, Op Profit ¥1.12T v ¥1.58T y/y, Rev ¥13.1T v ¥14.1T y/y; to buy back 1.3% shares for ¥200B
MT.NL: Reports Q3 Net profit $680M v loss $711M y/y, EBITDA $1.90B v $1.95Be, Rev $14.5B v $15.0Be
(IR) Iran Oil Min Zanganeh: Not pessimistic about the OPEC deal; Nov 30th is not a deadline for a deal
(UK) SEPT MANUFACTURING PRODUCTION M/M: 0.6% V 0.4%E; Y/Y: +0.2% V -0.1%E
(UK) SEPT INDUSTRIAL PRODUCTION M/M: -0.4% V 0.0%E; Y/Y: 0.3% V 0.8%E
VRX: Reports Q3 $1.55 v $1.78e, R$2.48B v $2.49Be
CVS: Reports Q3 $1.64 v $1.57e, R$44.6B v $45.3Be
(CN) CHINA OCT CPI M/M: 0.7% V 0.7% PRIOR; Y/Y: 2.1% V 2.1%E
(CN) CHINA OCT PPI Y/Y: 1.2% V 1.0%E; 2nd straight increase; highest since Dec 2011
WEDS 11/9
CARLB.DK: Reports Q3 Rev DKK17.5B v DKK18.0Be
BRBY.UK: Reports H1 Adj pretax £146M v £145Me, Pretax £102M v £155M y/y, Rev £1.16B v £1.18B prelim
(US) DONALD TRUMP PROJECTED TO BE THE WINNER OF US PRESIDENTIAL RACE; serve as the 45th President
Risk aversion off its worst level as President-elect Trump take a conciliatory tone in victory speech
(US) Atlanta Fed GDPNow: maintains Q4 GDP forecast at 3.1%, unchanged from Nov 4th
(NZ) NEW ZEALAND CENTRAL BANK (RBNZ) CUTS OFFICIAL CASH RATE BY 25BPS TO 1.75% (record low)); AS EXPECTED
THURS 11/10
SIE.DE: Reports Q4 Net profit €1.18B v €1.00B y/y, Industrial Business profit €2.45B v €2.41Be, Rev €22.0B v €22.4Be; Plans public listing of Health care business;
DTE.DE: Reports Q3 Adj Net €1.04B v €1.11Be; Adj EBITDA €5.54B v €5.56Be, Rev €18.1B v €18.1Be
AZN.UK: Reports Q3 Core EPS $1.32 v $0.98e, Rev $5.70B v $5.95Be; Affirms FY16
(FR) FRANCE SEPT INDUSTRIAL PRODUCTION M/M: -1.1% V -0.3%E; Y/Y: -1.1% V +0.4%E
(FR) FRANCE SEPT MANUFACTURING PRODUCTION M/M: -1.1% V -0.1%E; Y/Y: -0.9% V +0.4%E
(PH) PHILIPPINES CENTRAL BANK (BSP) LEAVES OVERNIGHT BORROWING RATE UNCHANGED AT 3.00%, AS EXPECTED
M: Reports Q3 $0.17 v $0.40e, R$5.63B v $5.63Be
(US) INITIAL JOBLESS CLAIMS: 254K V 260KE; CONTINUING CLAIMS: 2.04M V 2.03ME
JWN: Reports Q3 $0.84 adj v $0.52e, R$3.54B v $3.49Be
DIS: Reports Q4 $1.10 v $1.15e, R$13.1B v $13.5Be
(PE) PERU CENTRAL BANK (BCRP) LEAVES REFERENCE RATE UNCHANGED AT 4.25%; AS EXPECTED
(KR) BANK OF KOREA (BOK) LEAVES INTEREST RATE UNCHANGED AT 1.25%; AS EXPECTED
FRI 11/11
(US) NOV PRELIMINARY MICHIGAN CONFIDENCE: 91.6 V 87.9E (highest since June)
Saturday, November 5, 2016
Barrons weekend update
Barrons weekend update: Positive on MJN, Cautious on NKE, NFLX
Cover story: Though passive investing has grown in popularity and delivered strong returns, active management is back, and a rise in interest rates should begin to lift the smaller companies that stock pickers prefer, while increased volatility will give these investors more opportunities.
Tech Trader: Cautious on Comcast, NFLX: Despite being at odds on a number of issues, companies are launching a joint beta test that allows Netflix to flow into Comcast cable boxes, a move meant to counter the growing strength of AMZN, Hulu, TWX, and other content providers.
Trader: The market wants a Clinton win in the presidential race with Republicans holding onto Congress to rein in spending, but a problem will arise if the race is extremely close and sentiment is unanimous that the market will be in trouble if Trump wins; Cautious on NKE: Growing short interest is a sign some investors think things may get worse before they get better, and the company needs a game-changing product to return to form; Positive on MJN: The stocks low valuation seems to discount most of the headwinds its faces, and shares could see a 25% total return over the next two to three years.
Profile: Scott St. John and Michael Reckmeyer, co-managers of the Hartford Balanced Income fund, hold 46% of assets in stocks, 50% in bonds, and the rest in cashand only stray from the strategy if the markets hit extremes (top 10 equity holdings: MSFT, JPM, WFC, JNJ, CSCO, PFE, MRK, PM, GE, VZ).
Features:
1) Picks from the four panelists at Barrons Emerging Market Roundtable, including Michael Kass of Baron Emerging Markets (Haitong Securities, Bid Corp., Amara Raja Batteries, Zee Entertainment Enterprises, Mr Price Group, PVR, Bank Mandiri, Bank Negara Indonesia; Andrew Foster of Seafarer Overseas Growth & Income (Sanlam, INFY); Arjun Divecha of GMO Emerging Markets (CX, Yes Bank, Sberbank of Russia); and Matthew Benkendorf of Virtus Emerging Markets Opportunities (ABEV, FMX HDB, BABA, Tencent Holdings, Matahara Department Store);
2) Positive on EQR, MAC, SPG, PSA: Shares of these notable REITs are at or near 52-week lows, part of an overall pullback in the sector thats created an attractive opportunity for investors;
3) China has relied on mindless monetary stimulus since 2008 to muscle its way to continued output growth, leading debt levels to surge and creating a borrowing spree that could have global repercussions.
Small Caps: Positive on ALSN: Worlds largest maker of fully automatic transmissions for medium and heavy commercial trucks and defensive vehicles has dedicated customers, few competitors, and pricing power.
Follow-Up: If Donald Trump wins the election, investors expect a swift selloff in stocks, though sectors such as energy and steel could be winners based on Trumps campaign proposals.
European Trader: The reaction in the U.K. to a high court ruling that Parliament must approve a move to start the Brexit is indicative of what would happen if Britain doesnt leave the EU: sterling could retrace its losses, and the U.K. stock market could fall.
Asian Trader: Cautious on Samsung Biologic: Biopharmaceutical arm of SamsungGroup raised $2B in an IPO last week, but though it has an interesting strategy, the stocks pricing is too aggressive.
Emerging Markets: The Russian ruble is stronger by 13% this year against the dollar, reflecting the central banks market-friendly policies, while the economy is stronger and shares are up 24% this year (Positive on Magnit, Yandex, VanEck Vectors Russia).
Commodities: As zinc mines close, supply has fallen, pushing prices up, but the rally will likely run out of steam before long.
Streetwise: Should the proposed BATS-RAI deal go through, its likely MO and PM would recombine to create a global tobacco giant with more stable cash flows and would make it easier to launch the IQOS smokeless cigarette.
Cover story: Though passive investing has grown in popularity and delivered strong returns, active management is back, and a rise in interest rates should begin to lift the smaller companies that stock pickers prefer, while increased volatility will give these investors more opportunities.
Tech Trader: Cautious on Comcast, NFLX: Despite being at odds on a number of issues, companies are launching a joint beta test that allows Netflix to flow into Comcast cable boxes, a move meant to counter the growing strength of AMZN, Hulu, TWX, and other content providers.
Trader: The market wants a Clinton win in the presidential race with Republicans holding onto Congress to rein in spending, but a problem will arise if the race is extremely close and sentiment is unanimous that the market will be in trouble if Trump wins; Cautious on NKE: Growing short interest is a sign some investors think things may get worse before they get better, and the company needs a game-changing product to return to form; Positive on MJN: The stocks low valuation seems to discount most of the headwinds its faces, and shares could see a 25% total return over the next two to three years.
Profile: Scott St. John and Michael Reckmeyer, co-managers of the Hartford Balanced Income fund, hold 46% of assets in stocks, 50% in bonds, and the rest in cashand only stray from the strategy if the markets hit extremes (top 10 equity holdings: MSFT, JPM, WFC, JNJ, CSCO, PFE, MRK, PM, GE, VZ).
Features:
1) Picks from the four panelists at Barrons Emerging Market Roundtable, including Michael Kass of Baron Emerging Markets (Haitong Securities, Bid Corp., Amara Raja Batteries, Zee Entertainment Enterprises, Mr Price Group, PVR, Bank Mandiri, Bank Negara Indonesia; Andrew Foster of Seafarer Overseas Growth & Income (Sanlam, INFY); Arjun Divecha of GMO Emerging Markets (CX, Yes Bank, Sberbank of Russia); and Matthew Benkendorf of Virtus Emerging Markets Opportunities (ABEV, FMX HDB, BABA, Tencent Holdings, Matahara Department Store);
2) Positive on EQR, MAC, SPG, PSA: Shares of these notable REITs are at or near 52-week lows, part of an overall pullback in the sector thats created an attractive opportunity for investors;
3) China has relied on mindless monetary stimulus since 2008 to muscle its way to continued output growth, leading debt levels to surge and creating a borrowing spree that could have global repercussions.
Small Caps: Positive on ALSN: Worlds largest maker of fully automatic transmissions for medium and heavy commercial trucks and defensive vehicles has dedicated customers, few competitors, and pricing power.
Follow-Up: If Donald Trump wins the election, investors expect a swift selloff in stocks, though sectors such as energy and steel could be winners based on Trumps campaign proposals.
European Trader: The reaction in the U.K. to a high court ruling that Parliament must approve a move to start the Brexit is indicative of what would happen if Britain doesnt leave the EU: sterling could retrace its losses, and the U.K. stock market could fall.
Asian Trader: Cautious on Samsung Biologic: Biopharmaceutical arm of SamsungGroup raised $2B in an IPO last week, but though it has an interesting strategy, the stocks pricing is too aggressive.
Emerging Markets: The Russian ruble is stronger by 13% this year against the dollar, reflecting the central banks market-friendly policies, while the economy is stronger and shares are up 24% this year (Positive on Magnit, Yandex, VanEck Vectors Russia).
Commodities: As zinc mines close, supply has fallen, pushing prices up, but the rally will likely run out of steam before long.
Streetwise: Should the proposed BATS-RAI deal go through, its likely MO and PM would recombine to create a global tobacco giant with more stable cash flows and would make it easier to launch the IQOS smokeless cigarette.
Friday, November 4, 2016
Election Jitters Overshadow More Confident Fed
TradeTheNews.com Weekly
Market Update: Election Jitters Overshadow More Confident Fed
Fri, 04 Nov 2016 16:07 PM EST
Global equity markets entered into some rough waters this week as anxiety over next week's US Presidential election ramped up. Polls narrowed considerably in the wake of the FBI reopening the investigation surrounding Hillary Clintons' email scandal. The VIX shot back above 20 to trade at levels not seen since the June Brexit vote and gold found buyers. The S&P dipped back below 2100 and got within a point its 200-day moving average for the first time since July. Investors appeared to look for protection in the event a Trump surprise victory or a severely hampered Clinton Administration. Declining oil prices may have also weighed on investor sentiment when prices fell back towards the September lows. US crude inventories continued to swell and OPEC has yet to reach agreement on member output levels with less than a month until the November meeting. Sovereign bond yields drifted lower, but remained within recently elevated levels. Generally solid economic data points complimented rate announcements from the US Fed and BOE that suggested officials are becoming more confident in their ability to move toward slowly withdrawing stimulus. The S&P extended its longest losing streak since 1980 with its ninth consecutive decline on Friday. For the week the S&P500 lost 1.9%, the DJIA gave up 1.5%, and the Nasdaq fell 2.8%.
Earnings season reached its crescendo with a majority of the S&P 500's components reporting by week's end. Healthcare stocks remained under substantial pressure, in large part due to political concerns, including the report this week of a DOJ probe of price fixing in the generics market, that were seen factoring into some managements' outlooks. Facebook shares slumped on Thursday after its CFO warned the street to take down ad growth projections and prepare for increased capital spend next year. Deals continued to get consummated but not quite at the same degree. Brocade confirmed a $5.9B deal to be bought by Broadcom. Lattice Semi and Metaldyne Performance each found suitors willing to pay more than $1B while there was a slew of smaller transactions, many of which were in the US oil patch.
SUNDAY 10/30
OPEC talks in Vienna yielded NO DEAL to limit oil output; Iraq and Iran remain in dispute about production cuts, not ready to freeze output - press
MONDAY 10/31
(EU) EURO ZONE OCT ADVANCE CPI ESTIMATE Y/Y: 0.5% V 0.5%E; CPI CORE Y/Y: 0.8% V 0.8%E
(EU) EURO ZONE Q3 ADVANCE GDP Q/Q: 0.3% V 0.3%E; Y/Y: 1.6% V 1.6%E
LVLT: To be acquired by Centurylink for $66.50/shr in cash and stock deal valued at $34B
(US) SEPT PERSONAL INCOME: 0.3% V 0.4%E; PERSONAL SPENDING: 0.5% V 0.4%E
(US) SEPT PCE CORE M/M: 0.1% V 0.1%E; Y/Y: 1.7% V 1.7%E
(US) SEPT PCE DEFLATOR M/M: 0.2% V 0.2%E; Y/Y: 1.4% V 1.2%E
(US) OCT CHICAGO PURCHASING MANAGER: 50.6 V 54.0E (lowest since May)
(CN) CHINA OCT MANUFACTURING PMI (GOVT OFFICIAL): 51.2 V 50.3E; 3rd straight expansion; 2-year high
(CN) CHINA OCT CAIXIN PMI MANUFACTURING: 51.2 V 50.1E; 4th consecutive expansion; highest since July 2014
(JP) BANK OF JAPAN (BOJ) LEAVES INTEREST RATE ON EXCESS RESERVES (IOER) UNCHANGED AT -0.10% (as expected); AGAIN PUSHES BACK TIME FRAME TO ACHIEVE 2% INFLATION TARGET BY ONE YEAR UNTIL IN/AFTER FY18/19
(AU) RESERVE BANK OF AUSTRALIA (RBA) LEAVES CASH RATE TARGET AT 1.50%; AS EXPECTED
TUESDAY 11/1
(HK) Macau Oct casino revenue 21.8B Patacas v 18.4B m/m, y/y: +8.8% (3rd straight increase after 26 months of decline) v 7.4% prior
RDSA.NL: Reports Q3 Basic CCS EPS $0.70 v $0.54e, CCS earnings (ex items) $2.79B v $1.79Be, Rev $61.9B v $68.0Be
BP.UK: Reports Q3 Net $933M v $719Me, Underlying replacement cost profit $1.66B v $1.35Be, Total Rev $48.0B v $46.0Be
STAN.UK: Reports Q3 Pre tax profit $458M v $520Me, Op Income $3.47B v $3.68B y/y
(UK) OCT PMI MANUFACTURING: 54.3 V 54.5E (3rd month of expansion)
EMR: Reports Q4 $0.96 v $0.89e, R$5.50B v $5.51Be
(US) OCT FINAL MARKIT MANUFACTURING PMI: 53.4 V 53.2E (highest reading since Oct 2015)
(US) OCT ISM MANUFACTURING: 51.9 V 51.7E; PRICES PAID: 54.5 V 54.3E
X: Reports Q3 $0.40 v $0.88e, R$2.69B v $2.84Be
(NZ) NEW ZEALAND Q3 UNEMPLOYMENT RATE: 4.9% (8-year low) V 5.1%E; EMPLOYMENT CHANGE Q/Q: 1.4% V 0.5%E; Y/Y: 6.1% V 5.4%E
WEDNESDAY 11/2
LHA.DE: Reports 9-month Net €1.85B v €1.75B y/y, adj EBIT €1.68B v €1.69B y/y, Rev €23.9B v €24.3B y/y
MAERSKB.DK: Reports Q3 adj Net $426M v $490Me, EBIT $805M v $870Me, Rev $9.18B v $9.38Be
(US) OCT ADP EMPLOYMENT CHANGE: +147K V +165KE; Discloses revisions to model to better predict NFP
NYT: Reports Q3 $0.06 v $0.05e, R$363.5M v $365Me
DAL: Reports Oct Load factor 85.1%, -1.8% y/y
(US) DOE CRUDE: +14.4M V +1ME; GASOLINE: -2.2M V -1ME; DISTILLATE: -1.8M V -1.5ME (largest crude build on record)
(US) Association of American Railroads weekly rail traffic report for week ending Oct 29th: 545K carloads and intermodal units, -0.8% y/y
(US) FOMC HOLDS TARGET RATE RANGE AT 0.25-0.50%: CASE FOR RATE HIKE HAS CONTINUED TO STRENGTHEN
FB: Reports Q3 $1.09 (adj) v $0.98e, R$7.01B v $6.92Be
FB: CFO: expect to see ad revenue growth rates come down meaningfully - earnings call comments
2202.HK: Reports Oct contracted sales CNY49.0B v CNY25.4B m/m
(CN) CHINA OCT CAIXIN CHINA SERVICES PMI: 52.4 V 52.0 PRIOR; 4-month high
THURSDAY 11/3
GLE.FR: Reports Q3 Net €1.1B v €790Me, Op €1.58B v €1.82B y/y, Rev €6.01B v €5.9Be
CSGN.CH: Reports Q3 Net profit CHF41M v loss CHF150Me; Pretax profit CHF222M, +12% y/y; Rev CHF5.40B v CHF5.1Be
RMS.FR: Reports Q3 Rev €1.26B v €1.23Be
GLEN.UK: Reports Q3 own-sourced copper production 1.06Mt v kte
992.HK: Reports Q2 Net $157M v $87.6Me, Rev $11.2B v $12.2B y/y
(EU) EURO ZONE SEPT UNEMPLOYMENT RATE: 10.0% V 10.0%E (matches lowest level since Sept 2011)
(UK) BANK OF ENGLAND (BOE) LEAVES INTEREST RATES UNCHANGED AT 0.25%; AS EXPECTED
(UK) BANK OF ENGLAND (BOE) NOV MINUTES: VOTED UNANIMOUS (9-0) TO LEAVE INTEREST RATES UNCHANGED
(UK) BANK OF ENGLAND (BOE) QUARTERLY INFLATION REPORT (QIR)
(US) INITIAL JOBLESS CLAIMS: 265K V 256KE; CONTINUING CLAIMS: 2.03M V 2.04ME
(US) Q3 PRELIMINARY NONFARM PRODUCTIVITY: 3.1% V 2.1%E; UNIT LABOR COSTS: 0.3% V 1.2%E
(UK) BOE Gov Carney: There are limits to tolerance for CPI overshoot; BOE monitoring inflation expectations - post rate decision press conference
(US) OCT FINAL MARKIT SERVICES PMI: 54.8 V 54.8E
(US) OCT ISM NON-MANUFACTURING COMPOSITE: 54.8 V 56.0E
(US) SEPT FINAL DURABLE GOODS ORDERS: -0.3% V -0.1%E; DURABLES EX TRANSPORTATION: 0.1% V 0.1%E
FRIDAY 11/4
BMW.DE: Reports Q3 Net €1.82B v €1.58B y/y, EBIT €2.38B v €2.37Be, Rev €23.4B v €23.2Be
HUM: Reports Q3 $3.18 v $2.99e, R$13.7B v $13.4Be
(CA) CANADA OCT NET CHANGE IN EMPLOYMENT: 43.9K V -15.0KE; UNEMPLOYMENT RATE: 7.0% V 7.0%E
(US) OCT UNEMPLOYMENT RATE: 4.9% V 4.9%E
(US) OCT AVERAGE HOURLY EARNINGS M/M: 0.4% V 0.3%E; Y/Y: 2.8% V 2.6%E; AVERAGE WEEKLY HOURS: 34.4 V 34.4E
(US) OCT CHANGE IN NONFARM PAYROLLS: +161K V +173KE
(US) Atlanta Fed GDPNow: raises Q4 GDP forecast to 3.1% from 2.3% Nov 1st
Fri, 04 Nov 2016 16:07 PM EST
Global equity markets entered into some rough waters this week as anxiety over next week's US Presidential election ramped up. Polls narrowed considerably in the wake of the FBI reopening the investigation surrounding Hillary Clintons' email scandal. The VIX shot back above 20 to trade at levels not seen since the June Brexit vote and gold found buyers. The S&P dipped back below 2100 and got within a point its 200-day moving average for the first time since July. Investors appeared to look for protection in the event a Trump surprise victory or a severely hampered Clinton Administration. Declining oil prices may have also weighed on investor sentiment when prices fell back towards the September lows. US crude inventories continued to swell and OPEC has yet to reach agreement on member output levels with less than a month until the November meeting. Sovereign bond yields drifted lower, but remained within recently elevated levels. Generally solid economic data points complimented rate announcements from the US Fed and BOE that suggested officials are becoming more confident in their ability to move toward slowly withdrawing stimulus. The S&P extended its longest losing streak since 1980 with its ninth consecutive decline on Friday. For the week the S&P500 lost 1.9%, the DJIA gave up 1.5%, and the Nasdaq fell 2.8%.
Earnings season reached its crescendo with a majority of the S&P 500's components reporting by week's end. Healthcare stocks remained under substantial pressure, in large part due to political concerns, including the report this week of a DOJ probe of price fixing in the generics market, that were seen factoring into some managements' outlooks. Facebook shares slumped on Thursday after its CFO warned the street to take down ad growth projections and prepare for increased capital spend next year. Deals continued to get consummated but not quite at the same degree. Brocade confirmed a $5.9B deal to be bought by Broadcom. Lattice Semi and Metaldyne Performance each found suitors willing to pay more than $1B while there was a slew of smaller transactions, many of which were in the US oil patch.
SUNDAY 10/30
OPEC talks in Vienna yielded NO DEAL to limit oil output; Iraq and Iran remain in dispute about production cuts, not ready to freeze output - press
MONDAY 10/31
(EU) EURO ZONE OCT ADVANCE CPI ESTIMATE Y/Y: 0.5% V 0.5%E; CPI CORE Y/Y: 0.8% V 0.8%E
(EU) EURO ZONE Q3 ADVANCE GDP Q/Q: 0.3% V 0.3%E; Y/Y: 1.6% V 1.6%E
LVLT: To be acquired by Centurylink for $66.50/shr in cash and stock deal valued at $34B
(US) SEPT PERSONAL INCOME: 0.3% V 0.4%E; PERSONAL SPENDING: 0.5% V 0.4%E
(US) SEPT PCE CORE M/M: 0.1% V 0.1%E; Y/Y: 1.7% V 1.7%E
(US) SEPT PCE DEFLATOR M/M: 0.2% V 0.2%E; Y/Y: 1.4% V 1.2%E
(US) OCT CHICAGO PURCHASING MANAGER: 50.6 V 54.0E (lowest since May)
(CN) CHINA OCT MANUFACTURING PMI (GOVT OFFICIAL): 51.2 V 50.3E; 3rd straight expansion; 2-year high
(CN) CHINA OCT CAIXIN PMI MANUFACTURING: 51.2 V 50.1E; 4th consecutive expansion; highest since July 2014
(JP) BANK OF JAPAN (BOJ) LEAVES INTEREST RATE ON EXCESS RESERVES (IOER) UNCHANGED AT -0.10% (as expected); AGAIN PUSHES BACK TIME FRAME TO ACHIEVE 2% INFLATION TARGET BY ONE YEAR UNTIL IN/AFTER FY18/19
(AU) RESERVE BANK OF AUSTRALIA (RBA) LEAVES CASH RATE TARGET AT 1.50%; AS EXPECTED
TUESDAY 11/1
(HK) Macau Oct casino revenue 21.8B Patacas v 18.4B m/m, y/y: +8.8% (3rd straight increase after 26 months of decline) v 7.4% prior
RDSA.NL: Reports Q3 Basic CCS EPS $0.70 v $0.54e, CCS earnings (ex items) $2.79B v $1.79Be, Rev $61.9B v $68.0Be
BP.UK: Reports Q3 Net $933M v $719Me, Underlying replacement cost profit $1.66B v $1.35Be, Total Rev $48.0B v $46.0Be
STAN.UK: Reports Q3 Pre tax profit $458M v $520Me, Op Income $3.47B v $3.68B y/y
(UK) OCT PMI MANUFACTURING: 54.3 V 54.5E (3rd month of expansion)
EMR: Reports Q4 $0.96 v $0.89e, R$5.50B v $5.51Be
(US) OCT FINAL MARKIT MANUFACTURING PMI: 53.4 V 53.2E (highest reading since Oct 2015)
(US) OCT ISM MANUFACTURING: 51.9 V 51.7E; PRICES PAID: 54.5 V 54.3E
X: Reports Q3 $0.40 v $0.88e, R$2.69B v $2.84Be
(NZ) NEW ZEALAND Q3 UNEMPLOYMENT RATE: 4.9% (8-year low) V 5.1%E; EMPLOYMENT CHANGE Q/Q: 1.4% V 0.5%E; Y/Y: 6.1% V 5.4%E
WEDNESDAY 11/2
LHA.DE: Reports 9-month Net €1.85B v €1.75B y/y, adj EBIT €1.68B v €1.69B y/y, Rev €23.9B v €24.3B y/y
MAERSKB.DK: Reports Q3 adj Net $426M v $490Me, EBIT $805M v $870Me, Rev $9.18B v $9.38Be
(US) OCT ADP EMPLOYMENT CHANGE: +147K V +165KE; Discloses revisions to model to better predict NFP
NYT: Reports Q3 $0.06 v $0.05e, R$363.5M v $365Me
DAL: Reports Oct Load factor 85.1%, -1.8% y/y
(US) DOE CRUDE: +14.4M V +1ME; GASOLINE: -2.2M V -1ME; DISTILLATE: -1.8M V -1.5ME (largest crude build on record)
(US) Association of American Railroads weekly rail traffic report for week ending Oct 29th: 545K carloads and intermodal units, -0.8% y/y
(US) FOMC HOLDS TARGET RATE RANGE AT 0.25-0.50%: CASE FOR RATE HIKE HAS CONTINUED TO STRENGTHEN
FB: Reports Q3 $1.09 (adj) v $0.98e, R$7.01B v $6.92Be
FB: CFO: expect to see ad revenue growth rates come down meaningfully - earnings call comments
2202.HK: Reports Oct contracted sales CNY49.0B v CNY25.4B m/m
(CN) CHINA OCT CAIXIN CHINA SERVICES PMI: 52.4 V 52.0 PRIOR; 4-month high
THURSDAY 11/3
GLE.FR: Reports Q3 Net €1.1B v €790Me, Op €1.58B v €1.82B y/y, Rev €6.01B v €5.9Be
CSGN.CH: Reports Q3 Net profit CHF41M v loss CHF150Me; Pretax profit CHF222M, +12% y/y; Rev CHF5.40B v CHF5.1Be
RMS.FR: Reports Q3 Rev €1.26B v €1.23Be
GLEN.UK: Reports Q3 own-sourced copper production 1.06Mt v kte
992.HK: Reports Q2 Net $157M v $87.6Me, Rev $11.2B v $12.2B y/y
(EU) EURO ZONE SEPT UNEMPLOYMENT RATE: 10.0% V 10.0%E (matches lowest level since Sept 2011)
(UK) BANK OF ENGLAND (BOE) LEAVES INTEREST RATES UNCHANGED AT 0.25%; AS EXPECTED
(UK) BANK OF ENGLAND (BOE) NOV MINUTES: VOTED UNANIMOUS (9-0) TO LEAVE INTEREST RATES UNCHANGED
(UK) BANK OF ENGLAND (BOE) QUARTERLY INFLATION REPORT (QIR)
(US) INITIAL JOBLESS CLAIMS: 265K V 256KE; CONTINUING CLAIMS: 2.03M V 2.04ME
(US) Q3 PRELIMINARY NONFARM PRODUCTIVITY: 3.1% V 2.1%E; UNIT LABOR COSTS: 0.3% V 1.2%E
(UK) BOE Gov Carney: There are limits to tolerance for CPI overshoot; BOE monitoring inflation expectations - post rate decision press conference
(US) OCT FINAL MARKIT SERVICES PMI: 54.8 V 54.8E
(US) OCT ISM NON-MANUFACTURING COMPOSITE: 54.8 V 56.0E
(US) SEPT FINAL DURABLE GOODS ORDERS: -0.3% V -0.1%E; DURABLES EX TRANSPORTATION: 0.1% V 0.1%E
FRIDAY 11/4
BMW.DE: Reports Q3 Net €1.82B v €1.58B y/y, EBIT €2.38B v €2.37Be, Rev €23.4B v €23.2Be
HUM: Reports Q3 $3.18 v $2.99e, R$13.7B v $13.4Be
(CA) CANADA OCT NET CHANGE IN EMPLOYMENT: 43.9K V -15.0KE; UNEMPLOYMENT RATE: 7.0% V 7.0%E
(US) OCT UNEMPLOYMENT RATE: 4.9% V 4.9%E
(US) OCT AVERAGE HOURLY EARNINGS M/M: 0.4% V 0.3%E; Y/Y: 2.8% V 2.6%E; AVERAGE WEEKLY HOURS: 34.4 V 34.4E
(US) OCT CHANGE IN NONFARM PAYROLLS: +161K V +173KE
(US) Atlanta Fed GDPNow: raises Q4 GDP forecast to 3.1% from 2.3% Nov 1st
Sunday, October 30, 2016
Barrons weekend summary
Barrons weekend summary: positive on HLT, ITT; cautious on BAD.CA
Cover story: Many investors say T's bid for TWX is an admission that its lucrative wireless phone business is under pressure from TMUS and its acquisition of DirecTV hasn't yielded the expected benefits; Tie-ups between DIS/NFLX and Comcast/TMUS are possible, but unlikely anytime soon; The media deal most likely to succeed in the current landscape would be a CBS/VIAB merger.
Features:
1) Positive on HLT: In contrast to other hotel chains, Hilton's cheap shares look like an opportunity, since the company is opening hotels in profitable overseas markets and plans to split into three operations;
2) Positive on ITT: Conglomerate sells more pumps and valves to chemical and industrial companies than rival FLS, giving it lower exposure to the oil-and-gas industry, and its brake pad business is strong;
3) Hillary Clinton is widely expected to win the White House, but even if Democrats take the Senate, Republicans will control the House-a divided government scenario that should benefit investors;
4) Cautious on Badger Daylighting: Canadian company's revenue and truck fleet have grown during the past 15 years, but the oil slowdown, growing competition, and concerns about accounting practices should give investors pause.
Tech Trader: While AAPL still dominates the smartphone market, some investors wonder whether its dominance in the tech sector is eroding, while rivals such as AMZN and GOOGL expand into areas such as cars and artificial-intelligence devices.
Trader: Edward Crotty of Davidson Investment Advisors says sector rotation induced by higher rates should to continue as investors move into financials and some cyclical stocks; Positive on LAZ: The small investment bank's "top-tier brand allows it to punch above its weight class"; it faces little risk from proprietary trading while getting about half its profits from asset management; David Trainer of New Constructs says companies with a lot of money overseas, construction firms and their suppliers, and transportation outfits should benefit if Hillary Clinton becomes president.
Interview: Jon Pollock of Elliott Management talks about the firm's activist investing strategies, which have targeted a range of underperforming companies (picks: DVMT, CTXS, ECA, HES, AGN, Samsung Electronics; pans: Long-term bonds in the U.S., Japan, and Europe).
Small Caps: Positive on KRNY: Bank's shares have gained 40% since its so-called thrift conversion, and could rise over the next two years as it expands its commercial operations in real estate and business lending.
Follow-Up: Positive on KEY: The firm's credit quality has improved and it's making progress cutting $400M in yearly costs from the merger with Niagara Financial Group; shares are likely to see more gains.
European Trader: Positive on Compagnie Financiere Richemont: Luxury conglomerate should soon recover from problems including sluggish demand in Asia, volatile currencies, and weakening tourism in Europe-and shares are likely to rise.
Asian Trader: Positive on Great Wall Motor: Investors who have piled into Geely Automobile Holdings should reverse the trade, since Great Wall shares have more room to rise amid strong demand and sales in China.
Emerging Markets: A Donald Trump defeat in the presidential race is probably already priced into Mexican assets, which have gyrated inversely to his perceived election prospects.
Commodities: Supply-side reforms in China may have led to an excessive cut in coal production there, setting off an unexpected rally this year, but prices are unlikely sustain gains.
Streetwise: MS strategist Adam Parker screened for stocks that rank in the top half of the market in terms of quality metrics, trade below 15 times 12-month earnings forecasts, and should see positive growth next year; the list includes JPM, UTX, ETN, CSCO, HON, and JCI.
Cover story: Many investors say T's bid for TWX is an admission that its lucrative wireless phone business is under pressure from TMUS and its acquisition of DirecTV hasn't yielded the expected benefits; Tie-ups between DIS/NFLX and Comcast/TMUS are possible, but unlikely anytime soon; The media deal most likely to succeed in the current landscape would be a CBS/VIAB merger.
Features:
1) Positive on HLT: In contrast to other hotel chains, Hilton's cheap shares look like an opportunity, since the company is opening hotels in profitable overseas markets and plans to split into three operations;
2) Positive on ITT: Conglomerate sells more pumps and valves to chemical and industrial companies than rival FLS, giving it lower exposure to the oil-and-gas industry, and its brake pad business is strong;
3) Hillary Clinton is widely expected to win the White House, but even if Democrats take the Senate, Republicans will control the House-a divided government scenario that should benefit investors;
4) Cautious on Badger Daylighting: Canadian company's revenue and truck fleet have grown during the past 15 years, but the oil slowdown, growing competition, and concerns about accounting practices should give investors pause.
Tech Trader: While AAPL still dominates the smartphone market, some investors wonder whether its dominance in the tech sector is eroding, while rivals such as AMZN and GOOGL expand into areas such as cars and artificial-intelligence devices.
Trader: Edward Crotty of Davidson Investment Advisors says sector rotation induced by higher rates should to continue as investors move into financials and some cyclical stocks; Positive on LAZ: The small investment bank's "top-tier brand allows it to punch above its weight class"; it faces little risk from proprietary trading while getting about half its profits from asset management; David Trainer of New Constructs says companies with a lot of money overseas, construction firms and their suppliers, and transportation outfits should benefit if Hillary Clinton becomes president.
Interview: Jon Pollock of Elliott Management talks about the firm's activist investing strategies, which have targeted a range of underperforming companies (picks: DVMT, CTXS, ECA, HES, AGN, Samsung Electronics; pans: Long-term bonds in the U.S., Japan, and Europe).
Small Caps: Positive on KRNY: Bank's shares have gained 40% since its so-called thrift conversion, and could rise over the next two years as it expands its commercial operations in real estate and business lending.
Follow-Up: Positive on KEY: The firm's credit quality has improved and it's making progress cutting $400M in yearly costs from the merger with Niagara Financial Group; shares are likely to see more gains.
European Trader: Positive on Compagnie Financiere Richemont: Luxury conglomerate should soon recover from problems including sluggish demand in Asia, volatile currencies, and weakening tourism in Europe-and shares are likely to rise.
Asian Trader: Positive on Great Wall Motor: Investors who have piled into Geely Automobile Holdings should reverse the trade, since Great Wall shares have more room to rise amid strong demand and sales in China.
Emerging Markets: A Donald Trump defeat in the presidential race is probably already priced into Mexican assets, which have gyrated inversely to his perceived election prospects.
Commodities: Supply-side reforms in China may have led to an excessive cut in coal production there, setting off an unexpected rally this year, but prices are unlikely sustain gains.
Streetwise: MS strategist Adam Parker screened for stocks that rank in the top half of the market in terms of quality metrics, trade below 15 times 12-month earnings forecasts, and should see positive growth next year; the list includes JPM, UTX, ETN, CSCO, HON, and JCI.
Friday, October 28, 2016
Mixed Earnings Give Way to "October Surprise"
TradeTheNews.com Weekly
Market Update: Mixed Earnings Give Way to "October Surprise"
Fri, 28 Oct 2016 16:04 PM EST
Equity markets drifted lower in the latter half of the week as quarterly earnings showed no strong overall trend. Then on an otherwise quiet Friday afternoon, FBI director Comey announced investigators had uncovered new emails that may be related to the Hillary Clinton private email server probe. Though the FBI did not give any specifics on the substance of the new investigation, markets immediately went into risk-off mode, repricing the odds of the election outcome. By the close on Friday, gold futures rose to the week's high at $1285/oz, and stocks had touched their lows of the week. For the week, the S&P500 fell 0.7%, the DJIA edged up 0.1%, and the Nasdaq dropped 1.3%. Treasuries did not react much to the FBI story, with the 10-year yield remaining near the weekly high around 1.85% on Friday.
Economic data was mostly upbeat. The German Ifo Business Climate index reached its highest level in a year and a half, and the Euro Zone reported its 40th straight month of manufacturing expansion. The UK announced Q3 advance GDP at 2.3% y/y, two-tenths higher than expectations. The advance reading on US Q3 GDP also came in at a hotter than expected 2.9%, beating expectations by three-tenths of a percent, solidifying expectations of a Fed rate hike in December. Elsewhere, OPEC technical discussions on an oil production deal appeared to make little progress, as Iran and Iraq reportedly refused to support a production cut or freeze with the semi-annual OPEC meeting just one month away. WTI crude futures ended the week at lows below $49/bbl.
A slew of earnings and M&A came down the pike in a busy corporate news week. On Sunday, rumors of an AT&T acquisition of Time Warner were confirmed when AT&T disclosed it entered into agreement to acquire Time Warner in a $107.50/share cash and stock deal, though some media names lagged the broader consumer discretionary sector on Monday as regulatory hurdles ahead dampened enthusiasm for the merger. Rockwell Collins announced it had agreed to acquire B/E Aerospace in a $6.4B cash and stock deal, which sent Boeing and other industrials up to start the week. On Tuesday, Materials and industrials led the indices lower, as Caterpillar reported mixed results and cut its full-year outlook, while 3M lowered the top end of its full-year expectations. Consumer discretionary also lagged after Sherwin Williams, Whirlpool and Under Armour disappointed and cut their outlooks. On Wednesday, investors analyzed another gusher of earnings reports which generally saw tech and deep cyclical names continue to outperform companies leveraged to the US consumer. Key tech giants reported Thursday afternoon, and while Google beat on top and bottom line, Amazon worried investors by coming up short on profits. On Friday, AB Inbev led losses in the Eurostoxx after releasing Q3 results which highlighted challenges in the Brazil market.
SUNDAY 10/23
TWX: AT&T confirms to acquire Time Warner in a stock-and-cash transaction valued at $107.50/shr; total transaction value $108.7B
MONDAY 10/24
PHIA.NL: Reports Q3 Net €383M v €324M y/y, adj EBITA €649M v €570M y/y; Rev €5.9B v €5.95Be
(DE) GERMANY OCT PRELIMINARY MANUFACTURING PMI: 55.1 V 54.4E (23rd month of expansion)
(EU) EURO ZONE OCT PRELIMINARY MANUFACTURING PMI: 53.3 V 52.7E (40th month of expansion)
(UK) OCT CBI TRENDS TOTAL ORDERS: -17 V -5E
(US) OCT PRELIMINARY MARKIT MANUFACTURING PMI: 53.2 V 51.5E (highest since Oct 2015)
V: Reports Q4 $0.78 v $0.73e, R$4.26B v $4.24Be
000660.KR: Reports Q3 net KRW597M v KRW498Be; Op KRW726B v KRW660Be; Rev KRW4.24T v KRW4.17Te
TUESDAY 10/25
NOVN.CH: Reports Q3 $1.23 v $1.18e, Core Op profit $3.38B v $3.49B y/y, R$12.1B v $12.3Be
ORA.FR: Reports Q3 Restated EBITDA €3.60B v €3.59Be, Rev €10.3B v €10.2Be
(DE) GERMANY OCT IFO BUSINESS CLIMATE: 110.5 (highest since Apr 2014) V 109.6E; CURRENT ASSESSMENT: 115.0 V 114.9E
MRK: Reports Q3 $1.07 v $0.98e, R$10.5B v $10.2Be
LMT: Reports Q3 $3.61 v $2.86e, R$11.6B v $11.4Be
GM: Reports Q3 $1.72 v $1.44e, R$42.8B v $40.1Be
S: Reports Q2 -$0.04 v -$0.07e, R$8.25B v $7.99Be
FCX: Reports Q3 $0.13 v $0.19e, R$3.88B v $3.86Be
(US) OCT RICHMOND FED MANUFACTURING INDEX: -4 V -4E
(US) OCT CONSUMER CONFIDENCE: 98.6 V 101.5E
AAPL: Reports Q4 $1.67 v $1.66e, R$46.9B v $46.8Be
TWTR: Disney rumored to have rekindled takeover interest; Closing in on deal after both companies agreed on takeover price "in high $20s/shr" last week - Betaville
(AU) AUSTRALIA Q3 CONSUMER PRICES (CPI) Q/Q: 0.7% (matches 5-quarter high) V 0.5%E; Y/Y: 1.3% V 1.1%E; TRIMMED MEAN Q/Q: 0.4% V 0.4%E ; Y/Y: 1.7% V 1.7%E
WEDNESDAY 10/26
AIR.FR: Reports 9-month Net €1.81B v €1.90B y/y, Adj EBIT €2.41B v €2.80B y/y, Rev €42.7B v €43.0B y/y
SAN.ES: Reports Q3 Net €1.7B v €1.54Be, Rev €11.1B v €10.9B q/q
BAYN.DE: Reports Q3 Net profit €1.19B v €1.10Be; adj EBITDA €2.68B v €2.52Be, Rev €11.6B v €11.27Be
(DE) GERMANY NOV GFK CONSUMER CONFIDENCE: 9.7 V 10.0E
LLOY.UK: Reports Q3 PBT £1.91B v £2.0Be, Rev £4.28B v £4.24B y/y
HEIA.NL: Reports Q3 Organic beer volume +2% v +1.4%e
(UK) SEPT BBA LOANS FOR HOUSE PURCHASE: 38.3K V 37.4KE
LUV: CEO: Sees increased competition in many more markets; Q4 rev trends unch - post earning comments
3988.HK: Reports Q3 Net CNY41.8B v CNY40.8B y/y
(US) OCT PRELIMINARY MARKIT SERVICES PMI: 54.8 V 52.5E (highest since Nov 2015)
(US) SEPT NEW HOME SALES: 593K V 600KE
TSLA: Reports Q3 $0.71 v $0.14e, R$2.30B v $2.13Be
TXN: Reports Q3 $0.94 v $0.86e, R$3.68B v $3.48Be; Raises dividend 32% to $0.50 (implied yield 2.8%)
(NZ) NEW ZEALAND SEPT TRADE BALANCE (NZ$): -1.44B V -1.15BE; 3rd straight and RECORD deficit
005930.KR: Reports Q3 final Net KRW4.41T, Op profit KRW5.2T v KRW5.2T prelim, Rev KRW47.82T v KRW47.0T prelim
THURSDAY 10/27
BAS.DE: Reports final Q3 Net €888M v €1.2B y/y, EBIT €1.5B v €1.50B prelim, Rev €14.0B v €14B prelim; affirms outlook
NOK1V.FI: Reports Q3 adj Op €556M v €492Me, Rev €6.0B v €5.85Be; Names Kristian Pullola CFO effective Jan 1st
DBK.DE: Reports Q3 Net profit €256M v loss €394Me, Pretax profit €619M v loss €379Me, Rev €7.49B v €7.19Be
SU.FR: Reports Q3 Rev €6.06B v €6.21B y/y; Lays out its Growth, Execution & Digital plans at its Investor Day
BARC.UK: Reports Q3 adj Net £509M v £486M y/y, PBT £837M v £619M y/y, Net Rev £5.45B v £5.48B y/y
066570.KR: Reports Q3 Net loss KRW62.0 v KRW83.7B y/y, op profit KRW283.2B v KRW283Be; Rev KRW13.22Tv KRW13.7Te
(SE) SWEDEN CENTRAL BANK (RIKSBANK) LEAVES REPO RATE UNCHANGED AT -0.50%; AS EXPECTED
(NO) NORWAY CENTRAL BANK (NORGES) LEAVES DEPOSIT RATES UNCHANGED AT 0.50%; AS EXPECTED
(EU) EURO ZONE SEPT M3 MONEY SUPPLY Y/Y: 5.0% V 5.1%E
(UK) Q3 ADVANCE GDP Q/Q: 0.5% V 0.3%E; Y/Y: 2.3% V 2.1%E
000002.CN: Reports Q3 Net CNY2.91B v CNY2.01B y/y, Rev CNY42.3B v CNY29.3B y/y
POT: Reports Q3 $0.10 v $0.09e, R$1.14B v $1.00Be
NXPI: Confirms to be acquired by Qualcomm for $110.00/shr in cash valued at ~$47B
DOW: Reports Q3 $0.91 v $0.80e, R$12.5B v $12.1Be; Sees steady growth in North America and Europe continuing
F: Reports Q3 $0.26 v $0.21e, R$35.9B v $32.0Be
TWTR: Reports Q3 $0.13 v $0.09e, R$616.0M v $611Me; Confirms to cut up to 9% of jobs
MO: Reports Q3 $0.82 v $0.81e, R$5.19B (ex-excise tax) v $5.12Be (update)
COP: Reports Q3 -$0.66 v -$0.69e, R$6.52B v $6.54Be (update)
UPS: Reports Q3 $1.44 v $1.43e, R$14.9B v $14.7Be
(US) INITIAL JOBLESS CLAIMS: 258K V 255KE; CONTINUING CLAIMS: 2.04M V 2.05ME
(US) SEPT PRELIMINARY DURABLE GOODS ORDERS: -0.1% V 0.0%E; DURABLES EX TRANSPORTATION: 0.2% V 0.2%E
F: Exec: confirms plan to cut production during Q4, cutting output of Focus, Fusion, and Escape models - earnings call comments
(US) SEPT PENDING HOME SALES M/M: 1.5% V 1.0%E; Y/Y: 2.0% V 4.0%E
ZTO: IPO opens for trade at $18.40
AMZN: Reports Q3 $0.52 v $0.85e, R$32.7B v $32.6Be
GOOGL: Reports Q3 $9.06 v $8.58e, R$22.5B (includes $ TAC) v $22.1Be; Approves $7B buyback of Class C shares (1.3% of market cap)
BIDU: Reports Q3 $1.28 v $0.87e (unclear if comp), R$2.74B v $2.59Be
BHI: GE said to be talks to buy Baker Hughes; BHI has market cap of $23B, GE may pay over $30B - financial press
FRIDAY 10/28
BNP.FR: Reports Q3 Net €1.89B v €1.69Be, Rev €10.6B v €10.3Be
ABI.BE: Reports Q3 $0.83 v $1.02e, Adj EBITDA $4.03B v $4.43Be, Rev $11.1B v $11.4Be
(FR) FRANCE Q3 ADVANCE GDP Q/Q: 0.2% V 0.3%E; Y/Y: 1.1% V 1.2%E
SAN.FR: Reports Q3 Net €2.30B v €2.0Be; Business Op €3.10B v €2.75Be; Rev €9.65B v €9.58Be; to buy back €3.5B in shares (3.9% of market cap)
RBS.UK: Reports Q3 Net loss £469M v loss £1.08B y/y, underlying pretax £1.33B v £776Me, Rev £3.31B v £3.18B y/y
ELUXB.SE: Reports Q3 Op SEK1.83B v SEK1.72Be, Rev SEK30.9B v SEK31.4Be
3328.HK: Reports Q3 Net CNY14.9B v CNY14.7B y/y, Net interest income CNY100.8B v CNY108.0B y/y
601398.CN: Reports Q3 Net CNY72.6B v CNY72.7B y/y, Op Income CNY155.0B v CNY167.1B y/y, Net Interest Income CNY117.1B v CNY127.9B y/y
(EU) EURO ZONE OCT BUSINESS CLIMATE INDICATOR: 0.55 V 0.46E; CONSUMER CONFIDENCE (FINAL): -8.0 V -8.0E
(IT) ITALY DEBT AGENCY (TESORO) SELLS TOTAL €5.25B VS. €4.25-5.25B INDICATED RANGE IN 5-YEAR AND 10-YEAR BTP BONDS
(RU) RUSSIA CENTRAL BANK (CBR) LEAVES 1-WEEK AUCTION RATE UNCHANGED AT 10.00%; AS EXPECTED
(DE) GERMANY OCT PRELIMINARY CPI M/M: 0.2% V 0.2%E; Y/Y: 0.8% V 0.8%E
(US) Q3 ADVANCE GDP PRICE INDEX: 1.5% V 1.4%E; CORE PCE Q/Q: 1.7% V 1.6%E
(US) Q3 ADVANCE GDP ANNUALIZED Q/Q: 2.9% V 2.6%E; PERSONAL CONSUMPTION: 2.1% V 2.6%E
(US) Q3 EMPLOYMENT COST INDEX (ECI): 0.6% V 0.6%E
(US) OCT FINAL MICHIGAN CONFIDENCE: 87.2 V 88.2E (lowest level since October 2014)
Fri, 28 Oct 2016 16:04 PM EST
Equity markets drifted lower in the latter half of the week as quarterly earnings showed no strong overall trend. Then on an otherwise quiet Friday afternoon, FBI director Comey announced investigators had uncovered new emails that may be related to the Hillary Clinton private email server probe. Though the FBI did not give any specifics on the substance of the new investigation, markets immediately went into risk-off mode, repricing the odds of the election outcome. By the close on Friday, gold futures rose to the week's high at $1285/oz, and stocks had touched their lows of the week. For the week, the S&P500 fell 0.7%, the DJIA edged up 0.1%, and the Nasdaq dropped 1.3%. Treasuries did not react much to the FBI story, with the 10-year yield remaining near the weekly high around 1.85% on Friday.
Economic data was mostly upbeat. The German Ifo Business Climate index reached its highest level in a year and a half, and the Euro Zone reported its 40th straight month of manufacturing expansion. The UK announced Q3 advance GDP at 2.3% y/y, two-tenths higher than expectations. The advance reading on US Q3 GDP also came in at a hotter than expected 2.9%, beating expectations by three-tenths of a percent, solidifying expectations of a Fed rate hike in December. Elsewhere, OPEC technical discussions on an oil production deal appeared to make little progress, as Iran and Iraq reportedly refused to support a production cut or freeze with the semi-annual OPEC meeting just one month away. WTI crude futures ended the week at lows below $49/bbl.
A slew of earnings and M&A came down the pike in a busy corporate news week. On Sunday, rumors of an AT&T acquisition of Time Warner were confirmed when AT&T disclosed it entered into agreement to acquire Time Warner in a $107.50/share cash and stock deal, though some media names lagged the broader consumer discretionary sector on Monday as regulatory hurdles ahead dampened enthusiasm for the merger. Rockwell Collins announced it had agreed to acquire B/E Aerospace in a $6.4B cash and stock deal, which sent Boeing and other industrials up to start the week. On Tuesday, Materials and industrials led the indices lower, as Caterpillar reported mixed results and cut its full-year outlook, while 3M lowered the top end of its full-year expectations. Consumer discretionary also lagged after Sherwin Williams, Whirlpool and Under Armour disappointed and cut their outlooks. On Wednesday, investors analyzed another gusher of earnings reports which generally saw tech and deep cyclical names continue to outperform companies leveraged to the US consumer. Key tech giants reported Thursday afternoon, and while Google beat on top and bottom line, Amazon worried investors by coming up short on profits. On Friday, AB Inbev led losses in the Eurostoxx after releasing Q3 results which highlighted challenges in the Brazil market.
SUNDAY 10/23
TWX: AT&T confirms to acquire Time Warner in a stock-and-cash transaction valued at $107.50/shr; total transaction value $108.7B
MONDAY 10/24
PHIA.NL: Reports Q3 Net €383M v €324M y/y, adj EBITA €649M v €570M y/y; Rev €5.9B v €5.95Be
(DE) GERMANY OCT PRELIMINARY MANUFACTURING PMI: 55.1 V 54.4E (23rd month of expansion)
(EU) EURO ZONE OCT PRELIMINARY MANUFACTURING PMI: 53.3 V 52.7E (40th month of expansion)
(UK) OCT CBI TRENDS TOTAL ORDERS: -17 V -5E
(US) OCT PRELIMINARY MARKIT MANUFACTURING PMI: 53.2 V 51.5E (highest since Oct 2015)
V: Reports Q4 $0.78 v $0.73e, R$4.26B v $4.24Be
000660.KR: Reports Q3 net KRW597M v KRW498Be; Op KRW726B v KRW660Be; Rev KRW4.24T v KRW4.17Te
TUESDAY 10/25
NOVN.CH: Reports Q3 $1.23 v $1.18e, Core Op profit $3.38B v $3.49B y/y, R$12.1B v $12.3Be
ORA.FR: Reports Q3 Restated EBITDA €3.60B v €3.59Be, Rev €10.3B v €10.2Be
(DE) GERMANY OCT IFO BUSINESS CLIMATE: 110.5 (highest since Apr 2014) V 109.6E; CURRENT ASSESSMENT: 115.0 V 114.9E
MRK: Reports Q3 $1.07 v $0.98e, R$10.5B v $10.2Be
LMT: Reports Q3 $3.61 v $2.86e, R$11.6B v $11.4Be
GM: Reports Q3 $1.72 v $1.44e, R$42.8B v $40.1Be
S: Reports Q2 -$0.04 v -$0.07e, R$8.25B v $7.99Be
FCX: Reports Q3 $0.13 v $0.19e, R$3.88B v $3.86Be
(US) OCT RICHMOND FED MANUFACTURING INDEX: -4 V -4E
(US) OCT CONSUMER CONFIDENCE: 98.6 V 101.5E
AAPL: Reports Q4 $1.67 v $1.66e, R$46.9B v $46.8Be
TWTR: Disney rumored to have rekindled takeover interest; Closing in on deal after both companies agreed on takeover price "in high $20s/shr" last week - Betaville
(AU) AUSTRALIA Q3 CONSUMER PRICES (CPI) Q/Q: 0.7% (matches 5-quarter high) V 0.5%E; Y/Y: 1.3% V 1.1%E; TRIMMED MEAN Q/Q: 0.4% V 0.4%E ; Y/Y: 1.7% V 1.7%E
WEDNESDAY 10/26
AIR.FR: Reports 9-month Net €1.81B v €1.90B y/y, Adj EBIT €2.41B v €2.80B y/y, Rev €42.7B v €43.0B y/y
SAN.ES: Reports Q3 Net €1.7B v €1.54Be, Rev €11.1B v €10.9B q/q
BAYN.DE: Reports Q3 Net profit €1.19B v €1.10Be; adj EBITDA €2.68B v €2.52Be, Rev €11.6B v €11.27Be
(DE) GERMANY NOV GFK CONSUMER CONFIDENCE: 9.7 V 10.0E
LLOY.UK: Reports Q3 PBT £1.91B v £2.0Be, Rev £4.28B v £4.24B y/y
HEIA.NL: Reports Q3 Organic beer volume +2% v +1.4%e
(UK) SEPT BBA LOANS FOR HOUSE PURCHASE: 38.3K V 37.4KE
LUV: CEO: Sees increased competition in many more markets; Q4 rev trends unch - post earning comments
3988.HK: Reports Q3 Net CNY41.8B v CNY40.8B y/y
(US) OCT PRELIMINARY MARKIT SERVICES PMI: 54.8 V 52.5E (highest since Nov 2015)
(US) SEPT NEW HOME SALES: 593K V 600KE
TSLA: Reports Q3 $0.71 v $0.14e, R$2.30B v $2.13Be
TXN: Reports Q3 $0.94 v $0.86e, R$3.68B v $3.48Be; Raises dividend 32% to $0.50 (implied yield 2.8%)
(NZ) NEW ZEALAND SEPT TRADE BALANCE (NZ$): -1.44B V -1.15BE; 3rd straight and RECORD deficit
005930.KR: Reports Q3 final Net KRW4.41T, Op profit KRW5.2T v KRW5.2T prelim, Rev KRW47.82T v KRW47.0T prelim
THURSDAY 10/27
BAS.DE: Reports final Q3 Net €888M v €1.2B y/y, EBIT €1.5B v €1.50B prelim, Rev €14.0B v €14B prelim; affirms outlook
NOK1V.FI: Reports Q3 adj Op €556M v €492Me, Rev €6.0B v €5.85Be; Names Kristian Pullola CFO effective Jan 1st
DBK.DE: Reports Q3 Net profit €256M v loss €394Me, Pretax profit €619M v loss €379Me, Rev €7.49B v €7.19Be
SU.FR: Reports Q3 Rev €6.06B v €6.21B y/y; Lays out its Growth, Execution & Digital plans at its Investor Day
BARC.UK: Reports Q3 adj Net £509M v £486M y/y, PBT £837M v £619M y/y, Net Rev £5.45B v £5.48B y/y
066570.KR: Reports Q3 Net loss KRW62.0 v KRW83.7B y/y, op profit KRW283.2B v KRW283Be; Rev KRW13.22Tv KRW13.7Te
(SE) SWEDEN CENTRAL BANK (RIKSBANK) LEAVES REPO RATE UNCHANGED AT -0.50%; AS EXPECTED
(NO) NORWAY CENTRAL BANK (NORGES) LEAVES DEPOSIT RATES UNCHANGED AT 0.50%; AS EXPECTED
(EU) EURO ZONE SEPT M3 MONEY SUPPLY Y/Y: 5.0% V 5.1%E
(UK) Q3 ADVANCE GDP Q/Q: 0.5% V 0.3%E; Y/Y: 2.3% V 2.1%E
000002.CN: Reports Q3 Net CNY2.91B v CNY2.01B y/y, Rev CNY42.3B v CNY29.3B y/y
POT: Reports Q3 $0.10 v $0.09e, R$1.14B v $1.00Be
NXPI: Confirms to be acquired by Qualcomm for $110.00/shr in cash valued at ~$47B
DOW: Reports Q3 $0.91 v $0.80e, R$12.5B v $12.1Be; Sees steady growth in North America and Europe continuing
F: Reports Q3 $0.26 v $0.21e, R$35.9B v $32.0Be
TWTR: Reports Q3 $0.13 v $0.09e, R$616.0M v $611Me; Confirms to cut up to 9% of jobs
MO: Reports Q3 $0.82 v $0.81e, R$5.19B (ex-excise tax) v $5.12Be (update)
COP: Reports Q3 -$0.66 v -$0.69e, R$6.52B v $6.54Be (update)
UPS: Reports Q3 $1.44 v $1.43e, R$14.9B v $14.7Be
(US) INITIAL JOBLESS CLAIMS: 258K V 255KE; CONTINUING CLAIMS: 2.04M V 2.05ME
(US) SEPT PRELIMINARY DURABLE GOODS ORDERS: -0.1% V 0.0%E; DURABLES EX TRANSPORTATION: 0.2% V 0.2%E
F: Exec: confirms plan to cut production during Q4, cutting output of Focus, Fusion, and Escape models - earnings call comments
(US) SEPT PENDING HOME SALES M/M: 1.5% V 1.0%E; Y/Y: 2.0% V 4.0%E
ZTO: IPO opens for trade at $18.40
AMZN: Reports Q3 $0.52 v $0.85e, R$32.7B v $32.6Be
GOOGL: Reports Q3 $9.06 v $8.58e, R$22.5B (includes $ TAC) v $22.1Be; Approves $7B buyback of Class C shares (1.3% of market cap)
BIDU: Reports Q3 $1.28 v $0.87e (unclear if comp), R$2.74B v $2.59Be
BHI: GE said to be talks to buy Baker Hughes; BHI has market cap of $23B, GE may pay over $30B - financial press
FRIDAY 10/28
BNP.FR: Reports Q3 Net €1.89B v €1.69Be, Rev €10.6B v €10.3Be
ABI.BE: Reports Q3 $0.83 v $1.02e, Adj EBITDA $4.03B v $4.43Be, Rev $11.1B v $11.4Be
(FR) FRANCE Q3 ADVANCE GDP Q/Q: 0.2% V 0.3%E; Y/Y: 1.1% V 1.2%E
SAN.FR: Reports Q3 Net €2.30B v €2.0Be; Business Op €3.10B v €2.75Be; Rev €9.65B v €9.58Be; to buy back €3.5B in shares (3.9% of market cap)
RBS.UK: Reports Q3 Net loss £469M v loss £1.08B y/y, underlying pretax £1.33B v £776Me, Rev £3.31B v £3.18B y/y
ELUXB.SE: Reports Q3 Op SEK1.83B v SEK1.72Be, Rev SEK30.9B v SEK31.4Be
3328.HK: Reports Q3 Net CNY14.9B v CNY14.7B y/y, Net interest income CNY100.8B v CNY108.0B y/y
601398.CN: Reports Q3 Net CNY72.6B v CNY72.7B y/y, Op Income CNY155.0B v CNY167.1B y/y, Net Interest Income CNY117.1B v CNY127.9B y/y
(EU) EURO ZONE OCT BUSINESS CLIMATE INDICATOR: 0.55 V 0.46E; CONSUMER CONFIDENCE (FINAL): -8.0 V -8.0E
(IT) ITALY DEBT AGENCY (TESORO) SELLS TOTAL €5.25B VS. €4.25-5.25B INDICATED RANGE IN 5-YEAR AND 10-YEAR BTP BONDS
(RU) RUSSIA CENTRAL BANK (CBR) LEAVES 1-WEEK AUCTION RATE UNCHANGED AT 10.00%; AS EXPECTED
(DE) GERMANY OCT PRELIMINARY CPI M/M: 0.2% V 0.2%E; Y/Y: 0.8% V 0.8%E
(US) Q3 ADVANCE GDP PRICE INDEX: 1.5% V 1.4%E; CORE PCE Q/Q: 1.7% V 1.6%E
(US) Q3 ADVANCE GDP ANNUALIZED Q/Q: 2.9% V 2.6%E; PERSONAL CONSUMPTION: 2.1% V 2.6%E
(US) Q3 EMPLOYMENT COST INDEX (ECI): 0.6% V 0.6%E
(US) OCT FINAL MICHIGAN CONFIDENCE: 87.2 V 88.2E (lowest level since October 2014)
Saturday, October 22, 2016
Barrons weekend update
Barrons weekend update: positive on UHAL
Cover story: The growing combination of semiconductors and miniature engines stands to transform tasks as basic as charging a smartphone or cooking an egg, or as complex as scanning for colon cancer or powering flying drones on long journeys; Companies that stand to benefit from the trend include AMAT, WATT, IDTI, and NXPI.
Features:
1) Positive on UHAL: Company's chief executive pays no attention to Wall Street, doesn't manage earnings, rarely meets with investors, and gets paid modestly, part of a thrifty corporate culture that has helped U-Haul dominate the industry;
2) Picks from the Barron's Art of Successful Investing conference participants include CCL, SHPG, CLS, LIOX (Scott Black); MSFT, GOOGL, PIC, V (William Priest); SNE, HRI, HRS, MSG (Mario Gabelli); NOMD, EVTC, COMM, ANIP (Oscar Schafer); WHR, LNC, MSCC, GT (Andrew Wellington); and WFC (Jerome Dodson);
3) Cautious on TWX: Shares are up on a possible T merger, but while not overpriced they don't have much upside, and could slide if the deal falls through or is priced below what investors expect.
Trader: The "Dogs of the Dow" strategy-in which investors put equal dollar amounts in the 10 highest-yielding Dow stocks at year-end and hold them for 12 months-has returned an average of 10.6% annually over the past 10 years; Positive on AGN: The market's concerns about the maker of Botox are more related to industry issues than company problems, and shares could have 20-30% upside over the next year or two.
Profile: Scott DiMaggio and Doug Peebles, co-managers of AB Global Bond fund, use fundamental and quantitative analysis teams to form distinct views, after which investment decisions are made.
Small Caps: Positive on Lanxess: German chemical company's acquisition of Philadelphia-based CHMT will make it a less-cyclical and higher-margin company, and shares currently look cheap.
Follow-Up: Positive on CAT: New chief Jim Umpleby, a company veteran, will probably cut costs as he tries to get the company back on track, and investors should hold shares until next year to see if he sparks a rebound.
European Trader: Positive on Danone: The company's new focus on sustainable, profitable growth could translate into double-digit earnings growth in 2017 through 2019.
Asian Trader: A study from MS found that investors in Asia are increasingly looking for companies that score high on socially and environmentally responsible metrics, such as Astra International, SM Investments, City Development, and Unilever Indonesia.
Emerging Markets: Investors should expect more bond issues from Saudi Arabia, where a war with Yemen is putting pressure on a budget that is already supporting major economic reforms.
Commodities: Gold, which rose by 29% during the first seven months of 2016, making it one of the year's best performers, is losing its glitter amid concerns about a Fed interest rate hike.
Streetwise: Gluskin Sheff's David Rosenberg says the ability to borrow money at lower interest rates has added five percentage points annually to profit growth, though that doesn't mean the S&P 500 is destined to lose nearly 20% of its value with a rate hike.
Cover story: The growing combination of semiconductors and miniature engines stands to transform tasks as basic as charging a smartphone or cooking an egg, or as complex as scanning for colon cancer or powering flying drones on long journeys; Companies that stand to benefit from the trend include AMAT, WATT, IDTI, and NXPI.
Features:
1) Positive on UHAL: Company's chief executive pays no attention to Wall Street, doesn't manage earnings, rarely meets with investors, and gets paid modestly, part of a thrifty corporate culture that has helped U-Haul dominate the industry;
2) Picks from the Barron's Art of Successful Investing conference participants include CCL, SHPG, CLS, LIOX (Scott Black); MSFT, GOOGL, PIC, V (William Priest); SNE, HRI, HRS, MSG (Mario Gabelli); NOMD, EVTC, COMM, ANIP (Oscar Schafer); WHR, LNC, MSCC, GT (Andrew Wellington); and WFC (Jerome Dodson);
3) Cautious on TWX: Shares are up on a possible T merger, but while not overpriced they don't have much upside, and could slide if the deal falls through or is priced below what investors expect.
Trader: The "Dogs of the Dow" strategy-in which investors put equal dollar amounts in the 10 highest-yielding Dow stocks at year-end and hold them for 12 months-has returned an average of 10.6% annually over the past 10 years; Positive on AGN: The market's concerns about the maker of Botox are more related to industry issues than company problems, and shares could have 20-30% upside over the next year or two.
Profile: Scott DiMaggio and Doug Peebles, co-managers of AB Global Bond fund, use fundamental and quantitative analysis teams to form distinct views, after which investment decisions are made.
Small Caps: Positive on Lanxess: German chemical company's acquisition of Philadelphia-based CHMT will make it a less-cyclical and higher-margin company, and shares currently look cheap.
Follow-Up: Positive on CAT: New chief Jim Umpleby, a company veteran, will probably cut costs as he tries to get the company back on track, and investors should hold shares until next year to see if he sparks a rebound.
European Trader: Positive on Danone: The company's new focus on sustainable, profitable growth could translate into double-digit earnings growth in 2017 through 2019.
Asian Trader: A study from MS found that investors in Asia are increasingly looking for companies that score high on socially and environmentally responsible metrics, such as Astra International, SM Investments, City Development, and Unilever Indonesia.
Emerging Markets: Investors should expect more bond issues from Saudi Arabia, where a war with Yemen is putting pressure on a budget that is already supporting major economic reforms.
Commodities: Gold, which rose by 29% during the first seven months of 2016, making it one of the year's best performers, is losing its glitter amid concerns about a Fed interest rate hike.
Streetwise: Gluskin Sheff's David Rosenberg says the ability to borrow money at lower interest rates has added five percentage points annually to profit growth, though that doesn't mean the S&P 500 is destined to lose nearly 20% of its value with a rate hike.
Friday, October 21, 2016
ECB Punts; Earnings Reports Mixed
TradeTheNews.com Weekly
Market Update: ECB Punts; Earnings Reports Mixed
Fri, 21 Oct 2016 16:07 PM EST
With Q3 earnings releases ratcheting up and a plethora of M&A stories hitting the tape, investors poured over a steady flow of corporate news throughout the week. Banks and financial companies continued to report generally strong quarterly results, highlighted by Bank of America and American Express. Generally, managements struck a cautiously-optimistic tone on their conference calls pointing to a December rate hike as a likely catalyst. Major industrial names were much more subdued in their commentary as sluggish global growth and a resurgent US dollar remain impediments. General Electric and Illinois Tool Works saw share price declines as investors were underwhelmed with their guidance. Early season technology reports painted a divergent picture for several industry bellwethers. Netflix, PayPal, and Microsoft surged on growth prospects for the cloud and digital media consumption, while old line names like IBM and Intel continued to see their share prices lag behind. Finally, by Friday talk of major industry consolidation was rampant as reports circulated that AT&T was closing in on a deal to acquire Time Warner. The news came amidst a flurry of M&A announcements and speculation across a variety of industries including consumer staples, retail, pharmaceuticals, and of course technology.
The US dollar spent the better part of the week pushing to multi-month highs. The Euro touched its lowest level since March after the ECB left rates and QE unchanged, and kicked the decision on extending QE down the road to the December meeting. The British Pound continues to be hounded by Brexit implementation concerns: Cable remained under pressure, ending the week around 1.22. The Chinese Yuan has stayed near 6-year lows following a week economic data that suggested not much has changed for the trajectory of the world's second largest economy. US economic data was generally in line to slightly better than expectations while the final Presidential debate appeared to do little to change the calculus for next month's election. Treasury prices moved up modestly but the benchmark US 10-year yield has stayed pegged around 1.75%, pre Brexit levels. Crude prices moved up mid-week on more bullish inventory statistics but fell back towards the end of the week to finish little changed. Stocks went sideways, and for the week the S&P500 added 0.4%, the DJIA was flat, and the Nasdaq gained 0.8%.
MONDAY 10/17
(EU) EURO ZONE SEPT FINAL CPI M/M: 0.4% V 0.4%E; Y/Y: 0.4% V 0.4%E; CPI CORE Y/Y: 0.8% V 0.8%E
BAC: Reports Q3 $0.41 v $0.34e, R$21.6B v $20.8Be
(US) SEPT INDUSTRIAL PRODUCTION M/M: 0.1% V 0.2%E; CAPACITY UTILIZATION: 75.4% V 75.6%E
IBM: Reports Q3 $3.29 v $3.21e, R$19.2B v $19.0Be
F: Plans shutdown at four plants in next weeks to align production with demand and inventory goals - press
TUESDAY 10/18
BN.FR: Reports Q3 Rev €5.54B v €5.55Be
BRBY.UK: Reports H1 Rev £1.16B v £1.17Be
(CN) CHINA SEPT NEW YUAN LOANS (CNY): 1.22T (3-month high) V 1.00TE
(UK) SEPT PPI INPUT M/M: 0.0% V 0.4%E; Y/Y: 7.2% V 7.4%E
(UK) Govt attorney Eadie: New Brexit treaty likely to be voted on by both Houses
GS: Reports Q3 $4.88 v $3.86e, R$8.17B v $7.56Be
S: Reports prelim Q2 Net loss $142M v loss $585M y/y, R$8.25B v $7.97Be
(US) SEPT CPI M/M: 0.3% V 0.3%E; CPI EX FOOD AND ENERGY M/M: 0.1% V 0.2%E; CPI NSA INDEX: 241.428 V 241.498E
(US) OCT NAHB HOUSING MARKET INDEX: 63 V 63E
(US) AUG TOTAL NET TIC FLOWS: $73.8B V $140.6B PRIOR; NET LONG-TERM TIC FLOWS: $48.3B V $103.9B PRIOR
INTC: Reports Q3 $0.80 (adj) v $0.73e, R$15.8B v $15.6Be
(CL) CHILE CENTRAL BANK (BCCH) LEAVES OVERNIGHT RATE TARGET UNCHANGED AT 3.50%; AS EXPECTED
BHP.AU: Reports Q1 iron ore production 57.6Mt v 56.3e, flat y/y
(CN) CHINA Q3 GDP Q/Q: 1.8% V 1.8%E; Y/Y: 6.7% V 6.7%E
(CN) CHINA SEPT INDUSTRIAL PRODUCTION Y/Y: 6.1% V 6.4%E; YTD Y/Y: 6.0% V 6.1%E
(CN) CHINA SEPT RETAIL SALES Y/Y: 10.7% (8-month high) V 10.7%E; YTD Y/Y: 10.4% V 10.3%E
WEDNESDAY 10/19
ASML.NL: Reports Q3 Net €396M v €407Me, Rev €1.81B v €1.73Be
CA.FR: Reports Q3 Rev €21.8B v €21.7Be
(UK) AUG AVERAGE WEEKLY EARNINGS 3M/Y: 2.3% V 2.3%E; WEEKLY EARNINGS 3M/Y (EX BONUS): 2.3% V 2.1%E
(UK) SEPT JOBLESS CLAIMS CHANGE: +0.7K V +3.2KE; CLAIMANT COUNT RATE: 2.3% V 2.2%E
(UK) AUG ILO UNEMPLOYMENT RATE 3M/3M: 4.9% V 4.9%E
(US) SEPT HOUSING STARTS: 1.047M V 1.18ME; BUILDING PERMITS: 1.225M V 1.17ME
(CA) BANK OF CANADA (BOC) LEAVES INTEREST RATES UNCHANGED AT 0.50%; AS EXPECTED
LHA.DE: Reports 9-month adj EBIT €1.68B v €1.69B y/y, Rev €23.9B v €24.3B y/y
GOOGL: Reportedly in advanced talks with Fox and Disney for web TV service; has already signed up CBS for the service - CNBC
(BR) BRAZIL CENTRAL BANK (BCB) CUTS SELIC RATE BY 25BPS TO 14.00%; AS EXPECTED
RIO.AU: Reports Q3 Pilbara iron ore production 68.5Mt (attributable) v 70.6Mte; 83.2Mt (100% basis), +2% y/y; shipments 80.9Mt (100% basis), -5% y/y
(AU) AUSTRALIA SEPT EMPLOYMENT CHANGE: -9.8K (2nd straight decline, biggest decline since Apr 2015) V +15.0KE; UNEMPLOYMENT RATE: 5.6% (3-year low) V 5.7%E
THURSDAY 10/20
ROG.CH: Reports 9M Rev CHF37.5B v CHF37.7Be
NESN.CH: Reports 9M Rev CHF65.5B v CHF66.0Be
(UK) SEPT RETAIL SALES (EX AUTO FUEL) M/M: 0.0% V 0.2%E; Y/Y: 4.0% V 4.4%E
(UK) SEPT RETAIL SALES (INC AUTO FUEL) M/M: 0.0% V 0.3%E; Y/Y: 4.1% V 4.7%E
(ID) INDONESIA CENTRAL BANK (BI) CUTS 7-DAY REVERSE REPO BY 25BPS TO 4.75%; NOT EXPECTED
941.HK: Reports 9M Net CNY88.1B v CNY85.4B y/y, EBITDA CNY200.4B v CNY192B y/y, Op Rev CNY542.7B v CNY513B y/y
(EU) ECB LEAVES MAIN REFINANCING RATE UNCHANGED AT 0.00%; AS EXPECTED; reiterates view on rate guidance and QE program
(US) INITIAL JOBLESS CLAIMS: 260K V 250KE; CONTINUING CLAIMS: 2.06M V 2.05ME
(US) OCT PHILADELPHIA FED BUSINESS OUTLOOK: 9.7 V 5.0E
(EU) ECB chief Draghi: Reiterates ECB interest rates to remain at present or lower levels for an extended period of time; monthly asset purchases of €80B are intended to run until the end of March 2017, or beyond - Prepared remarks
(EU) ECB chief Draghi: ECB will announce what its plans for future months are at its Dec meeting after considering council technical work Q&A
(US) SEPT EXISTING HOME SALES: 5.47M V 5.35ME
BAC: CEO: consumers spending 5% more YTD y/y; we feel good about the US - TV interview
MSFT: Reports Q1 $0.76 adj v $0.68e, R$22.3B v $21.5Be
SLB: Reports Q3 $0.25 v $0.22e, R$7.02B v $7.13Be
(US) NORTH AMERICA Sept SEMI BOOK/BILL RATIO: 1.05 V 1.03 prior (above parity for 10th straight month)
FRIDAY 10/21
SAP.DE: Reports Q3 Net €725M v €895M y/y, Op profit €1.64B v €1.66Be, Rev €5.38B v €5.30Be
DAI.DE: Reports Q3 Net €2.73B v €2.42B y/y, EBIT €4.01B v €3.77Be, Rev €38.6B v €38.4Be
(UK) SEPT PUBLIC FINANCES (PSNCR): £13.3B V £0.7B PRIOR; PUBLIC SECTOR NET BORROWING: £10.1B V £8.2BE
CNBC's Faber: sources say NXPI and Qualcomm in handshake deal for $110/shr; some details remain to be worked out
TWX: AT&T reportedly in "advanced" talks to acquire Time Warner - financial press
(US) Weekly Baker Hughes US Rig Count: 553 v 539 w/w (+2.6%) (5th straight weekly increase)
Fri, 21 Oct 2016 16:07 PM EST
With Q3 earnings releases ratcheting up and a plethora of M&A stories hitting the tape, investors poured over a steady flow of corporate news throughout the week. Banks and financial companies continued to report generally strong quarterly results, highlighted by Bank of America and American Express. Generally, managements struck a cautiously-optimistic tone on their conference calls pointing to a December rate hike as a likely catalyst. Major industrial names were much more subdued in their commentary as sluggish global growth and a resurgent US dollar remain impediments. General Electric and Illinois Tool Works saw share price declines as investors were underwhelmed with their guidance. Early season technology reports painted a divergent picture for several industry bellwethers. Netflix, PayPal, and Microsoft surged on growth prospects for the cloud and digital media consumption, while old line names like IBM and Intel continued to see their share prices lag behind. Finally, by Friday talk of major industry consolidation was rampant as reports circulated that AT&T was closing in on a deal to acquire Time Warner. The news came amidst a flurry of M&A announcements and speculation across a variety of industries including consumer staples, retail, pharmaceuticals, and of course technology.
The US dollar spent the better part of the week pushing to multi-month highs. The Euro touched its lowest level since March after the ECB left rates and QE unchanged, and kicked the decision on extending QE down the road to the December meeting. The British Pound continues to be hounded by Brexit implementation concerns: Cable remained under pressure, ending the week around 1.22. The Chinese Yuan has stayed near 6-year lows following a week economic data that suggested not much has changed for the trajectory of the world's second largest economy. US economic data was generally in line to slightly better than expectations while the final Presidential debate appeared to do little to change the calculus for next month's election. Treasury prices moved up modestly but the benchmark US 10-year yield has stayed pegged around 1.75%, pre Brexit levels. Crude prices moved up mid-week on more bullish inventory statistics but fell back towards the end of the week to finish little changed. Stocks went sideways, and for the week the S&P500 added 0.4%, the DJIA was flat, and the Nasdaq gained 0.8%.
MONDAY 10/17
(EU) EURO ZONE SEPT FINAL CPI M/M: 0.4% V 0.4%E; Y/Y: 0.4% V 0.4%E; CPI CORE Y/Y: 0.8% V 0.8%E
BAC: Reports Q3 $0.41 v $0.34e, R$21.6B v $20.8Be
(US) SEPT INDUSTRIAL PRODUCTION M/M: 0.1% V 0.2%E; CAPACITY UTILIZATION: 75.4% V 75.6%E
IBM: Reports Q3 $3.29 v $3.21e, R$19.2B v $19.0Be
F: Plans shutdown at four plants in next weeks to align production with demand and inventory goals - press
TUESDAY 10/18
BN.FR: Reports Q3 Rev €5.54B v €5.55Be
BRBY.UK: Reports H1 Rev £1.16B v £1.17Be
(CN) CHINA SEPT NEW YUAN LOANS (CNY): 1.22T (3-month high) V 1.00TE
(UK) SEPT PPI INPUT M/M: 0.0% V 0.4%E; Y/Y: 7.2% V 7.4%E
(UK) Govt attorney Eadie: New Brexit treaty likely to be voted on by both Houses
GS: Reports Q3 $4.88 v $3.86e, R$8.17B v $7.56Be
S: Reports prelim Q2 Net loss $142M v loss $585M y/y, R$8.25B v $7.97Be
(US) SEPT CPI M/M: 0.3% V 0.3%E; CPI EX FOOD AND ENERGY M/M: 0.1% V 0.2%E; CPI NSA INDEX: 241.428 V 241.498E
(US) OCT NAHB HOUSING MARKET INDEX: 63 V 63E
(US) AUG TOTAL NET TIC FLOWS: $73.8B V $140.6B PRIOR; NET LONG-TERM TIC FLOWS: $48.3B V $103.9B PRIOR
INTC: Reports Q3 $0.80 (adj) v $0.73e, R$15.8B v $15.6Be
(CL) CHILE CENTRAL BANK (BCCH) LEAVES OVERNIGHT RATE TARGET UNCHANGED AT 3.50%; AS EXPECTED
BHP.AU: Reports Q1 iron ore production 57.6Mt v 56.3e, flat y/y
(CN) CHINA Q3 GDP Q/Q: 1.8% V 1.8%E; Y/Y: 6.7% V 6.7%E
(CN) CHINA SEPT INDUSTRIAL PRODUCTION Y/Y: 6.1% V 6.4%E; YTD Y/Y: 6.0% V 6.1%E
(CN) CHINA SEPT RETAIL SALES Y/Y: 10.7% (8-month high) V 10.7%E; YTD Y/Y: 10.4% V 10.3%E
WEDNESDAY 10/19
ASML.NL: Reports Q3 Net €396M v €407Me, Rev €1.81B v €1.73Be
CA.FR: Reports Q3 Rev €21.8B v €21.7Be
(UK) AUG AVERAGE WEEKLY EARNINGS 3M/Y: 2.3% V 2.3%E; WEEKLY EARNINGS 3M/Y (EX BONUS): 2.3% V 2.1%E
(UK) SEPT JOBLESS CLAIMS CHANGE: +0.7K V +3.2KE; CLAIMANT COUNT RATE: 2.3% V 2.2%E
(UK) AUG ILO UNEMPLOYMENT RATE 3M/3M: 4.9% V 4.9%E
(US) SEPT HOUSING STARTS: 1.047M V 1.18ME; BUILDING PERMITS: 1.225M V 1.17ME
(CA) BANK OF CANADA (BOC) LEAVES INTEREST RATES UNCHANGED AT 0.50%; AS EXPECTED
LHA.DE: Reports 9-month adj EBIT €1.68B v €1.69B y/y, Rev €23.9B v €24.3B y/y
GOOGL: Reportedly in advanced talks with Fox and Disney for web TV service; has already signed up CBS for the service - CNBC
(BR) BRAZIL CENTRAL BANK (BCB) CUTS SELIC RATE BY 25BPS TO 14.00%; AS EXPECTED
RIO.AU: Reports Q3 Pilbara iron ore production 68.5Mt (attributable) v 70.6Mte; 83.2Mt (100% basis), +2% y/y; shipments 80.9Mt (100% basis), -5% y/y
(AU) AUSTRALIA SEPT EMPLOYMENT CHANGE: -9.8K (2nd straight decline, biggest decline since Apr 2015) V +15.0KE; UNEMPLOYMENT RATE: 5.6% (3-year low) V 5.7%E
THURSDAY 10/20
ROG.CH: Reports 9M Rev CHF37.5B v CHF37.7Be
NESN.CH: Reports 9M Rev CHF65.5B v CHF66.0Be
(UK) SEPT RETAIL SALES (EX AUTO FUEL) M/M: 0.0% V 0.2%E; Y/Y: 4.0% V 4.4%E
(UK) SEPT RETAIL SALES (INC AUTO FUEL) M/M: 0.0% V 0.3%E; Y/Y: 4.1% V 4.7%E
(ID) INDONESIA CENTRAL BANK (BI) CUTS 7-DAY REVERSE REPO BY 25BPS TO 4.75%; NOT EXPECTED
941.HK: Reports 9M Net CNY88.1B v CNY85.4B y/y, EBITDA CNY200.4B v CNY192B y/y, Op Rev CNY542.7B v CNY513B y/y
(EU) ECB LEAVES MAIN REFINANCING RATE UNCHANGED AT 0.00%; AS EXPECTED; reiterates view on rate guidance and QE program
(US) INITIAL JOBLESS CLAIMS: 260K V 250KE; CONTINUING CLAIMS: 2.06M V 2.05ME
(US) OCT PHILADELPHIA FED BUSINESS OUTLOOK: 9.7 V 5.0E
(EU) ECB chief Draghi: Reiterates ECB interest rates to remain at present or lower levels for an extended period of time; monthly asset purchases of €80B are intended to run until the end of March 2017, or beyond - Prepared remarks
(EU) ECB chief Draghi: ECB will announce what its plans for future months are at its Dec meeting after considering council technical work Q&A
(US) SEPT EXISTING HOME SALES: 5.47M V 5.35ME
BAC: CEO: consumers spending 5% more YTD y/y; we feel good about the US - TV interview
MSFT: Reports Q1 $0.76 adj v $0.68e, R$22.3B v $21.5Be
SLB: Reports Q3 $0.25 v $0.22e, R$7.02B v $7.13Be
(US) NORTH AMERICA Sept SEMI BOOK/BILL RATIO: 1.05 V 1.03 prior (above parity for 10th straight month)
FRIDAY 10/21
SAP.DE: Reports Q3 Net €725M v €895M y/y, Op profit €1.64B v €1.66Be, Rev €5.38B v €5.30Be
DAI.DE: Reports Q3 Net €2.73B v €2.42B y/y, EBIT €4.01B v €3.77Be, Rev €38.6B v €38.4Be
(UK) SEPT PUBLIC FINANCES (PSNCR): £13.3B V £0.7B PRIOR; PUBLIC SECTOR NET BORROWING: £10.1B V £8.2BE
CNBC's Faber: sources say NXPI and Qualcomm in handshake deal for $110/shr; some details remain to be worked out
TWX: AT&T reportedly in "advanced" talks to acquire Time Warner - financial press
(US) Weekly Baker Hughes US Rig Count: 553 v 539 w/w (+2.6%) (5th straight weekly increase)
Sunday, October 16, 2016
Barron's weekend update
Barron's weekend update: positive on PVH and X
Cover story: In Barron's latest Big Money Poll, 45% of respondents were bullish or very bullish about the market's outlook through the middle of 2017, up from the spring poll's record-low 38%; "A modest quickening of global economic activity and a related uptick in commodities prices seem to have quelled some money managers' doubts."
Features:
1) Positive on X: Shares of steel giant could rise 50% in a year if it successfully beats back challenges from Chinese rivals and higher costs, but the shares may still be a gamble because of price volatility in the sector;
2) Positive on PVH: Company's Calvin Klein and Tommy Hilfiger brands are seeing increased sales, with much of the growth coming from department stores such as M.
Tech Trader: In the tech sector, winning stocks don't always reflect underlying business reality, as the once-hot 3-D printing sector or the uneven semiconductor market show; "Not for the faint of heart is the occasional bet on a beaten-down stock still expensive in a fashionable market," such as NOW and WDAY.
Trader: Until the presidential election is over, the market will likely focus on quarterly reports, says Michael Purves of Weeden, and poor results will lead to skittishness; Positive on AMZN: Retailer's strong fundamentals could lead shares to spike further, fueled not just by bulls looking to get back in but by short-sellers covering their positions; Jeff Bahl of Bahl & Gaynor Investment Counsel likes BAC's 7.25% Preferred Series L and WFC's 7.50% Convertible Preferred Series L securities; Cautious on HAIN: Despite some insider buying lately, things could get worse before they get better at the food and beverage company.
Profile: Hitesh Patel, manager of PNC Multi-Factor Small Core fund, says the lack of information about small companies gives him more room to be active in the space (top 10 holdings: UFPI, AEPI, CHDN, SSB, IPHS, MSCC, CMN, FLML, ICLR, EVTC).
Interview: Joel Greenblatt, professor at Columbia University and co-founder of Gotham Asset Management, likes AAPL, CVS, and QCOM and is short on CRM, COST, and CAT.
Small Caps: Positive on FMC: Shares have plenty of room for upside-as much as 50%-when prices in the agricultural sector start heading up, and the company should benefit from the introduction of several new products.
Follow-Up:
1) Positive on Samsung: Company's "move to discontinue sales of its Galaxy Note 7 is a blow to its sizable cellphone business, but it doesn't destroy the bull case for its cheaply valued shares";
2) A look at the five nonprofits rated highest by Charity Watch for their efforts to help Haiti manage the aftermath of Hurricane Matthew.
European Trader: Positive on A.P. Moller-Maersk: Danish shipping conglomerate's decision to split into two companies should unlock value for shareholders.
Asian Trader: Following the death of Thailand's King Bhumibol Adulyadej, the military government will need to boost infrastructure spending to offset weak domestic spending, benefiting construction companies (Positive on CH Karnchang, Sino Thai Engineering).
Emerging Markets: Positive on YUM: Shares of company's spin-off, Yum China Holdings, should pay off for patient investors if it can boost store count and same-store sales.
Commodities: Investors who buy natural gas before the winter could reap rewards if nature cooperates, since prices are not far above historic lows and demand could surge in winter.
Streetwise: Companies such as MSFT, GE, and AAPL, among the approximately 50 companies that account for $1.7 of the $2.9T of profits held offshore, could benefit if the government gets a tax deal done next year.
Cover story: In Barron's latest Big Money Poll, 45% of respondents were bullish or very bullish about the market's outlook through the middle of 2017, up from the spring poll's record-low 38%; "A modest quickening of global economic activity and a related uptick in commodities prices seem to have quelled some money managers' doubts."
Features:
1) Positive on X: Shares of steel giant could rise 50% in a year if it successfully beats back challenges from Chinese rivals and higher costs, but the shares may still be a gamble because of price volatility in the sector;
2) Positive on PVH: Company's Calvin Klein and Tommy Hilfiger brands are seeing increased sales, with much of the growth coming from department stores such as M.
Tech Trader: In the tech sector, winning stocks don't always reflect underlying business reality, as the once-hot 3-D printing sector or the uneven semiconductor market show; "Not for the faint of heart is the occasional bet on a beaten-down stock still expensive in a fashionable market," such as NOW and WDAY.
Trader: Until the presidential election is over, the market will likely focus on quarterly reports, says Michael Purves of Weeden, and poor results will lead to skittishness; Positive on AMZN: Retailer's strong fundamentals could lead shares to spike further, fueled not just by bulls looking to get back in but by short-sellers covering their positions; Jeff Bahl of Bahl & Gaynor Investment Counsel likes BAC's 7.25% Preferred Series L and WFC's 7.50% Convertible Preferred Series L securities; Cautious on HAIN: Despite some insider buying lately, things could get worse before they get better at the food and beverage company.
Profile: Hitesh Patel, manager of PNC Multi-Factor Small Core fund, says the lack of information about small companies gives him more room to be active in the space (top 10 holdings: UFPI, AEPI, CHDN, SSB, IPHS, MSCC, CMN, FLML, ICLR, EVTC).
Interview: Joel Greenblatt, professor at Columbia University and co-founder of Gotham Asset Management, likes AAPL, CVS, and QCOM and is short on CRM, COST, and CAT.
Small Caps: Positive on FMC: Shares have plenty of room for upside-as much as 50%-when prices in the agricultural sector start heading up, and the company should benefit from the introduction of several new products.
Follow-Up:
1) Positive on Samsung: Company's "move to discontinue sales of its Galaxy Note 7 is a blow to its sizable cellphone business, but it doesn't destroy the bull case for its cheaply valued shares";
2) A look at the five nonprofits rated highest by Charity Watch for their efforts to help Haiti manage the aftermath of Hurricane Matthew.
European Trader: Positive on A.P. Moller-Maersk: Danish shipping conglomerate's decision to split into two companies should unlock value for shareholders.
Asian Trader: Following the death of Thailand's King Bhumibol Adulyadej, the military government will need to boost infrastructure spending to offset weak domestic spending, benefiting construction companies (Positive on CH Karnchang, Sino Thai Engineering).
Emerging Markets: Positive on YUM: Shares of company's spin-off, Yum China Holdings, should pay off for patient investors if it can boost store count and same-store sales.
Commodities: Investors who buy natural gas before the winter could reap rewards if nature cooperates, since prices are not far above historic lows and demand could surge in winter.
Streetwise: Companies such as MSFT, GE, and AAPL, among the approximately 50 companies that account for $1.7 of the $2.9T of profits held offshore, could benefit if the government gets a tax deal done next year.
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