Thursday August 10 Daily Market Primer
- Stocks sideways
- Market handles geopolitical risk
- Initial claims = 244K
- Benign inflation
- Snap, retailers report
Its
Thursday, so that means Initial Unemployment Claims are out at 244K,
+3K from the prior week, and just slightly higher than the expected 242K.
The US Producer Price Index (PPI) fell .1% in July, vs the consensus number of
+.1%, another sign of benign inflation. The annualized PPI came in at 1.9% vs the Reuters poll number of 2.2%. SNAP,
considered a bellwether for unicorn IPO’s this year, reports earnings today,
as does Blue Apron, which also IPO’ed on June 28, and a batch of retailers,
including Kohl’s, Macy’s, and Nordstrom’s.
I
tried a new return table today, this one is lifted from Barron’s and I dropped
a few items, let me know if you like it better.
Here’s
the news:
Safety Dance
Tillerson
said the U.S. is engaged in a very
active diplomatic effort to halt Kim Jong Un’s pursuit of a
nuclear weapon that could strike the U.S. mainland. He said North Korea should
be looking for talks, adding too that “Americans should sleep well at
night, have no concerns about this particular rhetoric of the last few days.”
President Donald Trump tweeted that the U.S. atomic arsenal is
more powerful than ever, while Defense Secretary Jim Mattis said in a
statement that North Korea “should cease any consideration of actions that
would lead to the end of its regime and the destruction of its people.” Meanwhile,
the two nations most at risk when it comes to the hermit kingdom largely brushed off Trump’s
threat to unleash “fire and fury.” An unidentified official at South
Korea’s presidential office was cited as saying there’s no “imminent crisis,”
and a senior Japanese official said there’s no mobilization for a military
strike, with very few people in the government taking Trump’s comments
seriously.
Time to Shine
The
barbarous relic, gold, is glittering brightly during the geopolitical turmoil,
jumping more than 1 percent Wednesday for its steepest gain since May. The
Swiss franc was the currency of choice for safety seekers, with the yen only
advancing moderately as investors decided Japan’s proximity to the potential
action made it a dubious refuge. Emerging market stocks retreated along with
risk proxies including the Aussie and the rand. Treasuries pared their gains
and U.S. equities pulled back from steep declines following Tillerson’s
soothing efforts, though it was hard to find anything but red on stock-market screens.
Deflated Policy Makers
A
pair of Federal Reserve officials sounded a touch more fretful at the
inability of strong labor markets to deliver price gains of the magnitude the
central bank wants. St. Louis Fed President James Bullard warned that failure
to get inflation to the central bank's 2 percent goal undermines
the target’s credibility, echoing some colleagues. "The misses add up
over time,’’ he said. Separately, Chicago Fed chief Charles Evans stated it
would be reasonable to announce the start of balance-sheet reduction next
month, but cautioned disappointing inflation data may delay rate hikes.
Two More Years
The
Reserve Bank of New Zealand also sees no signs of strengthening price gains.
It held its benchmark interest rate at
a record low of 1.75 percent and said it expects to keep it there for two
years amid weak inflation. The central bank’s surprisingly
cautious tone in recent months has been justified by data since that
showed consumer-price gains weaker than forecast and economic growth
disappointing. RBNZ Governor Graeme Wheeler may also be reluctant to
flag future rate increases because that could boost the New Zealand dollar and
further damp inflation. Speaking of which, Thursday’s statement may not have
been gloomy enough, as the kiwi climbed straight after, consolidating the gains
of about 7 percent against the greenback since the RBNZ’s last set of
forecasts on May 11.
Warning Shots
Two
of the biggest money managers are telling investors it’s time to dial back on risk.
Pacific Investment Management Co. says U.S. stocks and high-yield
debt should be pared in favor of lower-risk assets, such as Treasuries and
mortgage-backed securities, according to an allocation report by the
company, which oversees more than $1.5 trillion. It deems
that “asset prices generally are fully valued.’’ T. Rowe Price Group Inc.
had a similar view, cutting the stock portion of its asset-allocation
portfolios to the lowest level since 2000. The Baltimore-based money manager
said it also reduced its holdings of high-yield and emerging market bonds.
Standing Firm
The Trump administration sought to keep pressure on North Korea to curb its nuclear ambitions, while also taking steps to leaven President Donald Trump’s tough talk from earlier this week. North Korea, in a second day of unusually direct threats aimed at the U.S., lashed out at Mr. Trump and warned its missiles could surround the U.S. territory of Guam in an “enveloping fire” in coming weeks. Mr. Trump touted the strength of the U.S.’s nuclear arsenal in a tweet but tempered his earlier rhetoric. He also took to Twitter to criticize Senate Majority Leader Mitch McConnell for failing to advance the health-care bill.
The Trump administration sought to keep pressure on North Korea to curb its nuclear ambitions, while also taking steps to leaven President Donald Trump’s tough talk from earlier this week. North Korea, in a second day of unusually direct threats aimed at the U.S., lashed out at Mr. Trump and warned its missiles could surround the U.S. territory of Guam in an “enveloping fire” in coming weeks. Mr. Trump touted the strength of the U.S.’s nuclear arsenal in a tweet but tempered his earlier rhetoric. He also took to Twitter to criticize Senate Majority Leader Mitch McConnell for failing to advance the health-care bill.
Imitation Game
Startups live by the rule that speed is paramount. Houseparty, creator of a hot video app, has an extra reason for urgency. Facebook is stalking the company, part of the social-media titan’s aggressive mimicking of smaller rivals. Facebook’s plan to launch an app similar to Houseparty’s highlights a Silicon Valley dilemma: While it’s as easy as ever to start a company, it is getting harder to grow large and fast enough to avoid being either acquired or squashed by one of the technology behemoths. Regulators, politicians and academics are taking note, increasingly questioning how industry majors use their considerable clout. While for app makers getting acquired can be “a very good win for the founders, that might be at the expense of a more competitive landscape,” says Scott Stern, management professor at Massachusetts Institute of Technology.
Startups live by the rule that speed is paramount. Houseparty, creator of a hot video app, has an extra reason for urgency. Facebook is stalking the company, part of the social-media titan’s aggressive mimicking of smaller rivals. Facebook’s plan to launch an app similar to Houseparty’s highlights a Silicon Valley dilemma: While it’s as easy as ever to start a company, it is getting harder to grow large and fast enough to avoid being either acquired or squashed by one of the technology behemoths. Regulators, politicians and academics are taking note, increasingly questioning how industry majors use their considerable clout. While for app makers getting acquired can be “a very good win for the founders, that might be at the expense of a more competitive landscape,” says Scott Stern, management professor at Massachusetts Institute of Technology.
Growth Limit
U.S. worker productivity rose modestly in the second quarter but showed little sign of breaking out of the sluggish trend that has prevailed for more than a decade, holding back economic growth and living standards. Sluggish productivity gains can slow economic growth and prevent wages from rising much. Nonfarm business productivity, which measures workers’ output for each hour worked, rose at a 0.9% seasonally adjusted annual rate. When compared with a year ago, which is how economists often look at the longer-term trend, productivity was up 1.2% Some forecasters say they think continued modest gains will contribute to keeping overall U.S. economic growth from exceeding its recent pace of roughly 2% a year. Mr. Trump has said he wants to push annual growth above 3%. “If we can’t get productivity up, it’s just not going to happen,” said Columbia Business School dean Glenn Hubbard, who served as chairman of the Council of Economic Advisers under former President George W. Bush.
U.S. worker productivity rose modestly in the second quarter but showed little sign of breaking out of the sluggish trend that has prevailed for more than a decade, holding back economic growth and living standards. Sluggish productivity gains can slow economic growth and prevent wages from rising much. Nonfarm business productivity, which measures workers’ output for each hour worked, rose at a 0.9% seasonally adjusted annual rate. When compared with a year ago, which is how economists often look at the longer-term trend, productivity was up 1.2% Some forecasters say they think continued modest gains will contribute to keeping overall U.S. economic growth from exceeding its recent pace of roughly 2% a year. Mr. Trump has said he wants to push annual growth above 3%. “If we can’t get productivity up, it’s just not going to happen,” said Columbia Business School dean Glenn Hubbard, who served as chairman of the Council of Economic Advisers under former President George W. Bush.
The
UK and Scotland fail to reach an agreement on Brexit. Talks between UK and
Scottish government officials were unable to produce an agreement on what
powers should be handed over to Scotland after Britain leaves the European
Union, the BBC reports.
Venezuela's
inflation explodes. Venezuela's inflation rate climbed by 26% in July to 248.6%,
Reuters says, citing data released by the opposition-led congress on Wednesday.
New
Zealand's central bank holds. The Reserve Bank of New Zealand held its key
interest rate at 1.75% and said policy would "remain accommodative for a
considerable period."
Trump
zeros in on his pick to head the FTC. Joseph Simons, a partner at
the law firm Paul, Weiss, Rifkind, Wharton and Garrison LLP who served as a top
official at the Federal Trade Commission under President George W. Bush, is
said to be Trump's top choice to lead the FTC.
New
York City landlords may start cutting back on freebies. "We're getting to the
point where tenants are reluctant to sign with heavy concessions because if the
concessions are removed, say a year from now on renewal, many will not be able
to afford the rent," Jonathan Miller, the CEO of the real-estate appraiser
Miller Samuel, told Business Insider.
Facebook
is officially launching its attack on TV. The social network's Watch,
a platform for original TV shows, will launch "soon," people familiar
with the matter told Business Insider.
Stock
markets around the world are lower. Hong Kong's Hang Seng (-1.13%) trailed in
Asia, and Britain's FTSE (-1.08%) lags in Europe. The S&P 500 is set to
open lower by 0.31% near 2,467.
Earnings
reports keep coming. Blue Apron, Canada Goose, and Macy's report ahead of the opening
bell, while Nordstrom, Nvidia, and Snap release their quarterly results after
markets close.
US
economic data is light. Initial claims and PPI will be
released at 8:30 a.m. ET. The US 10-year yield is down 1 basis point at 2.24%.
The US Labor Department has notified the Office of Management and
Budget that it is proposing to delay full applicability of the fiduciary rule
to July 1, 2019, and to change three exemptions in the rule. Labor Secretary R.
Alexander Acosta disclosed the action in a court document in connection with a
lawsuit brought against the department by Thrivent Financial for
Lutherans. Reuters (09 Aug.), The Wall Street Journal (tiered subscription model) (09
Aug.)
Clayton (Chip Somodevilla/Getty Images)
|
The Securities and Exchange Commission has delayed until further
notice action on its staff's recommendation to allow a group led by Chinese
investors to buy the Chicago Stock Exchange. SEC Chairman Jay Clayton said the
full commission will review the transaction, rather than allowing a staff
report backing the deal to take effect. Bloomberg (09 Aug.), Reuters (09 Aug.), The Wall Street Journal (tiered subscription model) (09
Aug.)
Syndicated debt issuance by supranational entities such as the
European Investment Bank and the EU have more than doubled over the past 10
years, with further rises expected. Financial Times (tiered subscription model) (09 Aug.)
SIX Swiss Exchange plans to tap Nasdaq and its distributed-ledger
technology partner Chain to provide blockchain architecture for SIX's
over-the-counter structured-product business. "Working together with
Nasdaq reinforces our commitment towards being an exchange at the technology
forefront," said SIX CEO Chris Landis.
Finance Magnates (09 Aug.)
The iShares JPMorgan USD Emerging Markets Bond exchange-traded
fund in July experienced its biggest flow reversal to date, as investors pulled
about $680 million. Traders worry rising yields in developed markets might
create chaos among emerging markets.
Bloomberg Professional Services (09 Aug.)
Shares of Wanda Hotel Development shot up more than 27% in Hong
Kong trading after the company announced a major acquisition. The company said
it will pay $1.05 billion for two businesses controlled by billionaire Wang
Jianlin and his family.
South China Morning Post (Hong Kong) (10 Aug.), Forbes (09 Aug.)
China’s
hedge fund industry greets global
managers with promise, peril
Noble’s
massive writedown is
proving Iceberg right
CEO
of Commonwealth Bank of Australia, the nation’s largest, gets grilled over
money-laundering case
Trump’s nuclear firepower is
the same as it was when he took over from Barack Obama
The
FBI searched a
home belonging to Trump’s former campaign chairman
Wall
Street investment bankers can expect hefty bonus gains this
year; traders may get little
Goldman
Sachs Group Inc. says it’s getting harder for institutional investors to
ignore cryptocurrencies
Sega
is embracing rogue fan programmers with a retro Sonic the Hedgehog game
sequel
North
Koreans are probably sifting through their diplomatic playbook trying to find
ways to deal with U.S. President Donald Trump. I doubt they’ll find anything
useful. Trump’s warning that Pyongyang could face “fire and fury like the world has
never seen” is unprecedented. World leaders are becoming
increasingly frustrated with the rogue regime. The UN Security Council just
slapped North Korea with its most severe sanctions yet but analysts question
their effectiveness.
To
gauge the impact of the sanctions we first have to understand the North’s
economy — and that's no simple task. An estimate from South Korea’s central
bank says the North’s GDP grew 3.9 percent in 2016, the fastest pace since
1999. But given the lack of North Korean sources, the BOK used raw data
compiled by organizations such as the country's intelligence agency, while
unknown data was replaced with South Korean estimates. The widespread black
market also adds to the challenge of assessing the North’s economy. A recent
study by the Center for Strategic and International Studies says that most
North Koreans earn about 75 percent of their income from
the black market.
So
the hope now is that Beijing, Pyongyang’s main ally, will play a bigger role. Chinese diplomats have expressed
confidence the new sanctions would help. We’ve already heard
from customs officials that China is buying less from North Korea. We’ll see if
this trend accelerates in the coming months and if it’s fast enough to make a
difference.
Source:
Bloomberg, BI, WSJ, CFAI Fin. Newsbrief, SCMP, FT, Finance Magnates, Reuters,
Barron’s
posted by Rich Barnett @ 7:51 AM
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