Happy
Tax Day. Stocks were flat in the US yesterday and were/are mixed
in Asia and Europe today. US futures are pointing to more of the
same today. Banks earnings calls continue with a pattern of mildly
disappointing revenues and profits, higher capital and compliance casts,
and cost cutting. Bank of America announced a 7% drop in revenues and a
13% drop in Q1 earnings but mollified investors with expense controls http://bit.ly/BofAEarn. Goldman is announcing
layoffs and cuts in tech operations, travel and even printing costs http://bit.ly/GSexpcuts. In spite of uninspiring top and bottom lines, things are generally better than feared for banks and bank
stocks are on a tear over the last few days.
The
IMF cut global growth forecasts again this week, and is urging caution
against rising nationalism http://bit.ly/IMFcut.
China came out with an official GDP number of 6.7%, and a sigh of
relief could be heard around the investing world (first story). And as
the last story points out, don’t kick back this weekend, as Brazilian
President Rousseff’s impeachment is up for a vote and the much anticipated OPEC + Russia meeting is
taking place in Doha.
Thursday
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Friday
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US
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Asia
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Japan
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Europe
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Oil
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China
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Australia
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Eurozone
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UK
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Germany
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France
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WTI
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Brent
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S&P
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Dow
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Nasdaq
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Shanghai
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HK
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ASX200
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Stoxx 600
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FTSE
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DAX
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CAC
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$
40.44
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$
42.68
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0.36%
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0.10%
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-0.03%
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-0.14%
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-0.10%
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0.76%
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-0.37%
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-0.07%
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-0.51%
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-0.53%
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-0.54%
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-2.5%
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-2.6%
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VIX:
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Futures:
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-0.01%
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-13.2%
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US 10 Yr:
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1.775%
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Here’s
the news:
China GDP
China's gross domestic product rose 6.7 percent in the first quarter from a
year earlier, in line with the median expectation of economists surveyed by
Bloomberg. The People's Bank of China also released data on credit growth in
the economy in March with an expansion of aggregate financing to 2.34
trillion yuan ($360.7 billion) far exceeding expectations. The credit
expansion saw a surge in real estate investment in March, with the value
of homes sold jumping 71 percent, the biggest year-on-year
increase since at least 2015.
Markets
Chinese data failed to lift stocks there overnight, with
the Shanghai Composite Index closing 0.1 percent lower, trimming its
weekly advance to 3.1 percent. The broader MSCI Asia Pacific Index lost 0.2 percent, retreating from its
highest level in four months, with Japanese shares dropping after a deadly earthquake in the Kumamoto prefecture.
In Europe, the Stoxx 600 Index was 0.2 percent lower at 10:46 a.m. London time,
with Volkswagen AG slipping 1.7 percent after data showed the automaker's share
of the European market fell to a five-year low. S&P 500 futures
were 0.2 percent lower.
Doha meeting
On Sunday members of OPEC and Russia will meet in Doha to discuss the freezing of oil
production at January levels in an effort to stabilize prices. With the
attendees of the meeting representing 60 percent of global production, the
outcome of the meeting will closely watched by oil analysts, even though some
of them believe it will have little supply impact, no matter what is
agreed. It seems the oil futures market agrees with that sentiment, as the
commodity is falling for a third day this morning, with a barrel of West Texas
Intermediate down 51 cents to $40.97 at 11:02 a.m. London
time.
Brazil
The other big event for investors to watch this weekend will
be political developments in Brazil, where a last minute attempt to block an impeachment vote
against President Dilma Rousseff in the Supreme Court has failed. The vote
will now go ahead on Sunday, with markets viewing the removal of Rousseff as a
positive development for the country and the global economy. The vote, due at 2 p.m. local time, is so important in
Brazil that soccer matches are being rescheduled and huge outdoor screens to
broadcast proceedings have been set up.
Brazil's president failed to block an impeachment vote. Embattled Brazilian President Dilma Rousseff failed to block an impeachment vote in the lower house of Congress. According to the Associated Press, Brazil's Supreme Court voted 8-to-2 in favor of striking down a motion that attempted to block the vote, saying it wasn't appropriate to get involved at this point. The impeachment vote will take place on Sunday.
The IMF says tax avoidance is a global risk. The Financial Times reports, IMF head Christine Lagarde thinks more needs to be done on an international level to prevent tax avoidance. Lagarde said the issue is no longer "a local matter associated with sovereignty" and that "international co-operation has to be significantly improved."
Bats is going public. The stock exchange operator has priced its initial public offering at $19 per share. Friday's IPO will raise about $253 million, making it the largest IPO of 2016. This is the exchange's second attempt at an IPO. It previously tried to go public in 2012, but a computer malfunction kept shares from trading. Bats will trade on its own exchange under the ticker 'BATS.'
Citigroup reports. The bank is expected to earn $1.03 per share on revenue of $17.50 billion. So far, bank earnings have topped estimates, but profits and revenues have been significantly lower across the board. Earnings from the big banks continue to flow next week with Morgan Stanley reporting on Monday and Goldman Sachs reporting on Tuesday.
Accentuate
the Negative
Central bankers are pushing deeper into once-unthinkable negative interest rates, and the benefits and pitfalls are rippling around the world. Japan’s two-month experiment with negative monetary policy is producing some unexpected results: trading has withered in money markets, the yen has been on a tear and demand for Japanese government bonds has surged. And while one small Swiss lender has learned to stop worrying and lean in, German life insurers are caught in a pinch that could eventually threaten their survival. Meanwhile, homeowners in Denmark are still getting accustomed to earning interest on their mortgages, and we ask whether subzero rates could ever work in the U.S. There are three serious worries about negative rates shared even by those who are implementing them, writes our columnist James Mackintosh: They might have perverse effects, they might work too well, or they might not work at all.
Central bankers are pushing deeper into once-unthinkable negative interest rates, and the benefits and pitfalls are rippling around the world. Japan’s two-month experiment with negative monetary policy is producing some unexpected results: trading has withered in money markets, the yen has been on a tear and demand for Japanese government bonds has surged. And while one small Swiss lender has learned to stop worrying and lean in, German life insurers are caught in a pinch that could eventually threaten their survival. Meanwhile, homeowners in Denmark are still getting accustomed to earning interest on their mortgages, and we ask whether subzero rates could ever work in the U.S. There are three serious worries about negative rates shared even by those who are implementing them, writes our columnist James Mackintosh: They might have perverse effects, they might work too well, or they might not work at all.
Sun Down
Only ten months after its chief executive predicted it would be worth $350 billion in 2020, SunEdison is working with advisers on a possible bankruptcy filing. We report on the energy darling’s swift rise and calamitous fall, which shows what can happen when executive overreach meets fizzy markets. Born out of financial engineering that supercharged its growth, SunEdison took advantage of low interest rates and a flood of hedge-fund cash to fuel an ambitious expansion into solar and wind power. Mesmerized by the promise of high yields and fast growth, investors turned a blind eye to warning signs that ultimately left the company vulnerable to a rise in interest rates. The Justice Department and the SEC are now investigating whether management misled the public by giving investors a more positive picture of SunEdison’s finances than was circulated internally.
Only ten months after its chief executive predicted it would be worth $350 billion in 2020, SunEdison is working with advisers on a possible bankruptcy filing. We report on the energy darling’s swift rise and calamitous fall, which shows what can happen when executive overreach meets fizzy markets. Born out of financial engineering that supercharged its growth, SunEdison took advantage of low interest rates and a flood of hedge-fund cash to fuel an ambitious expansion into solar and wind power. Mesmerized by the promise of high yields and fast growth, investors turned a blind eye to warning signs that ultimately left the company vulnerable to a rise in interest rates. The Justice Department and the SEC are now investigating whether management misled the public by giving investors a more positive picture of SunEdison’s finances than was circulated internally.
The US still has five banks that are
too big and too unprepared to fail, according to joint assessments by the
Federal Reserve and the Federal Deposit Insurance Corp. The determination
begins a prolonged regulatory process that could lead to the breakup of
JPMorgan Chase, Wells Fargo, Bank of America, State Street and Bank of New York
Mellon.
Chinese direct investment in the US
exceeded $15 billion in 2015, and it is expected to set a record this year,
according to the National Committee on US-China Relations and Rhodium Group.
However, the US political climate could affect the flow of investment, a
committee report said.
China Daily (Beijing) (14 Apr.)
Fixed income investors have 99 ways to trade (and one big problem).
Bank of England notes warning signs ahead of Brexit referendum.
Pain in Europe's steel industry is just starting.
Panama papers claim another political scalp, this time in
Spain.
Microsoft, Apple dig in for long data-privacy fight with the U.S.
Earnings
reports trickle out. Infosys and Regions Financial release their quarterly results
ahead of the opening bell.Stock markets around the world are lower. Japan's Nikkei (-0.4%) led the losses in Asia and Germany's DAX (-0.7%) paces the decline in Europe. S&P 500 futures are down 3.50 points at 2073.25.
US economic data is heavy. Empire
Manufacturing is released at 8:30 a.m. ET before industrial production and
capacity utilization cross the wires at 9:15 a.m. ET. Then, at 10 a.m. ET,
University of Michigan consumer sentiment is due out. Data concludes for the
week with the announcement of net long-term TIC flows at 4 p.m. ET. The US
10-year yield is lower by 3 basis points at 1.76%.
Some weekends you can just take it easy. This weekend won't
be one of them. There are two events you should pay attention to that
could have major ramifications for world markets. One is the scheduled
Brazil impeachment vote that is due to take place on Sunday. Bloomberg has a full guide to what you can expect
leading up to the vote. Bear in mind that this is just the vote in the lower
house, so even if the pro-impeachment side gets two thirds of the 513 seat
body, the saga isn't over. And on Sunday, a number of major oil
producing countries, representing 60 percent of global oil production, are
meeting in Doha, Qatar to discuss a planned output freeze. Views are mixed on
whether anything will be achieved. A key stumbling block is that Saudi Arabia
has said it only makes sense as a plan if Iran participates, and Iran has
dismissed the whole notion. Nonetheless, just the idea of countries getting
together to moderate output has helped give oil a significant lift in recent
weeks. Sunday will be interesting for sure!
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Source:
Bloomberg, BI, WSJ, CFAI Fin. NewsBrief, China Daily, MarketWatch
Labels: DailyMarketPrimer, Fed, Investments, Markets, News, Oil
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