Friday April 8 Daily Market Primer

Happy Friday.  Stocks fell in the US yesterday, were down in Asia overnight, but are mostly up in Europe.  This was a little surprising since initial jobless claims actually dropped more than expected yesterday, to 267K compared to the estimate of 270K, and down from 270K last week.  I didn’t see any good explanations for the market drop yesterday, perhaps investors were nervous over the weak dollar.  Oil prices yo-yoed back up, with Brent crude back up to 41.19 and WTI at 39.20, a move of 4.5%.  US futures look good, up .8%.

US			Asia			Japan
			China		Australia
S&P	Dow	Nasdaq	Shanghai	HK	ASX200
-1.20%	-0.98%	-1.47%	-0.78%	0.51%	-0.53%	0.46%
	Futures	0.83%
Europe				Oil
Eurozone	UK	Germany	France	Brent	WTI
Stoxx 600	FTSE	DAX	CAC	4.95%	5.50%
0.99%	0.83%	1.21%	1.10%

I’m going to miss Yahoo.  As Yahoo sinks under the waves of corporate America on a bid from Verizon (2^nd story), lets take a minute to reflect on its storied place in the popularization of the internet.   For those you too young to remember, Yahoo started as a manual directory of web pages.  Yahoo staff would find interesting things on the Web and build page after page of links sorted by category.   I remember looking at all those pages, thinking, “this internet thing will be yuuge!”  It was also one of the first serious companies to have a very un-serious name, which was originally spelled Yahoo!.  As the web grew exponentially this primitive cataloging model couldn’t keep up and was quickly eclipsed by search engine technology.  If fact, Google (which was not the first search engine by the way), would probably not have been invented if its wasn’t for the limits of Yahoo’s model.  Yahoo grew into a giant by becoming the portal and email service for phone companies entering the internet space, and continued to build a the biggest portal for finance, sports, news, weather, photos, on and on and on.  Yahoo Finance is still one of the most popular finance sites on the web, although I prefer Google Finance (loads faster, no ads).  I still have an Yahoo based @sbcglobal email handle.  Somewhere.  I think.  Don’t feel too badly for CEO Marissa Mayer who will loose her job in the deal, the longtime tech exec lives in the San Francisco Four Seasons and is reportedly worth at least $380 million (Forbes, 2015).  During Marissa’s tenure she made some other techies very wealthy, especially David Karp, who’s Tumblr blog she bought for about $1 billion, and British teenager Nick D’Aloisio, who’s Summly app she bought for $30 million.  He’s now one of the richest kids at Oxford.  Summly is now called “news digest”, and it’s a very cool app.  The original Yahoo! directory was finally shut down in 2014. You can see what it looked like here: http://bit.ly/ByeYahoo. 

E/S/G Feature of the Week:

The science of Environmental Social and Governance measurement continues to evolve.  In March two of the largest global fund ratings services, Morningstar and MSCI, launched highly-publicized initiatives to provide investors tools with which to measure mutual funds' portfolio holdings across a broad set of environmental, social and governance (ESG) characteristics, and rank or screen such funds accordingly. Note: Northern is using a subscription from MSCI to run portfolio analysis re carbon footprint.

Morningstar's product, Morningstar Sustainability Rating for Funds, provides a ranking of how well the companies held by a fund are managing their ESG risks and opportunities when compared with similar funds.  Company-level ESG data is provided by Sustainalytics and all funds with at least 50% of their assets in firms that have been assigned Sustainalytics  ESG ratings receive a rating. According to Morningstar "…the rating evaluates funds based on the sustainability profile of their underlying holdings and is applied to all funds for which we have sufficient data not just those that have an explicit mandate to focus on sustainability. This means investors who care about sustainability can now can explore a much broader universe of funds (20,000 globally) when building and evaluating their portfolios.”

MSCI's offering, called MSCI ESG Fund Metrics, is an extension of their already robust ESG Research coverage, and includes approximately 21,000 mutual funds and ETFs. The service will, according to the firm,  "offer investors ways to screen and rank funds based on factors such as “sustainability impact, values alignment and ESG risks. With this score, investors can measure a company’s ability to manage medium- to long-term risks and opportunities.”

Related, in 2015, Deutsche Asset & Wealth Management and Hamburg University published a research study that examined the link between ESG metrics and corporate financial performance. The team conducted a meta-analysis of over 2,000 empirical studies since the 1970s, making it the most comprehensive review of academic research on this topic. They found that the majority of studies show positive findings between ESG and corporate financial performance (CFP). The results of the study show “…that the business case for ESG investing is empirically very well founded. Roughly 90% of studies find a nonnegative ESG–CFP relation. More important, the large majority of studies reports positive findings. We highlight that the positive ESG impact on CFP appears stable over time.” 

British PM David Cameron got caught up in the Panama Papers scandal and although there is a very small amount of money involved, he’s under a lot of pressure right now.  

Sorry, wrong image, I meant this one===>

There haven’t been any new epic hacks or government blocks of mega-mergers in the last few days, so here’s the news:

Stocks recover

Stocks are staging a small recovery on the last day of trading in a week that has seen selloffs across the world. The MSCI Asia Pacific Index rose 0.1 percent overnight, with Japan's Topix Index climbing 1.2 percent. China's Shanghai Composite Index fell 0.8 percent, for the index's longest losing streak since January. In Europe the Stoxx 600 Index was 0.6 percent higher at 10:21 a.m. London time with banks leading the recovery. S&P 500 futures are 0.5 percent higher. 

Yahoo bids

Verizon Communications Inc. plans to make a first-round bid for Yahoo Inc.’s Web business next week, according to people familiar with the matter. Shares in Yahoo Japan Corp. surged on the news that Verizon is also willing to buy Yahoo's stake in the Japanese web company. Google, the main division of Alphabet Inc. is also reported to be interested in Yahoo's core business, while Alibaba Group Holding Ltd. has not joined the bidding as the company concentrates on its Chinese media holdings. 

Yen rally stalls

Japan’s Finance Minister Taro Aso said that strong yen movements are undesirable, especially if they’re abrupt. After yesterday's very sudden strengthening of the Japanese currency - which saw it move below 108 to the U.S. dollar - the yen was trading at 108.75 at 10:45 a.m. London time. The big move in the yen helped push currency market volatility to its highest level since 2011 this week.

Cameron profited from trust revealed in Panama Papers

Cameron (Ben Pruchnie/Getty Images)

UK Prime Minister David Cameron says he once held shares in his late father's offshore trust, Blairmore Holdings, which is mentioned in the Panama Papers. Cameron says he paid taxes on dividends paid by the trust. A sale of the shares in 2010 before Cameron became prime minister resulted in a capital gain, but it was less than the standard allowance, Cameron says.

Reuters (07 Apr.) 

U.K. industrial production clouds growth outlook

U.K. industrial production unexpectedly declined 0.3 percent in February, with manufacturing production dropping 1.1 percent. With economic concerns already rising ahead of the 'Brexit' referendum in June, this morning's data will not be welcome by U.K. investors. The pound unwound much of its earlier session gains following the data release to trade 0.1 percent higher against the dollar at 11:05 a.m. London time.

Four chairs

Four Federal Reserve leaders of the past and present joined each other at an event yesterday in what was a relatively lighthearted discussion on the challenges the position of head of the U.S. central bank holds. Current Fed Chair Janet Yellen said that the U.S. economy is approaching full employment, while some slack remains. Former Chair Ben Bernanke suggested that there is too much reliance on central banks to solve the world's problems. Alan Greenspan and Paul Volcker were entertaining.

Janet Yellen says the US economy is on the right track. Thursday evening in New York, Fed Chair Janet Yellen and her three predecessors took part in an International House panel. Yellen suggested that the labor market was "close" to full strength and that the US wasn't experiencing a "bubble economy." For the most part, Yellen and her predecessors were in agreement, saying that "China's growing prominence posed more opportunity than threat, and that fiscal policymakers should step up more to support the Fed's economic stimulus," according to Reuters.
Verizon is reportedly prepping a bid for Yahoo. According to Bloomberg, Verizon is expected to make an offer for Yahoo next week, and Google is considering a bid as well. The report says Verizon is willing to buy both Yahoo's core internet business (which Yahoo values at least $8 billion) and its stake in Yahoo Japan. Verizon would replace Yahoo CEO Marissa Mayer with AOL CEO Tim Armstrong and Verizon's executive vice president, Marni Walden, according to the report. The deadline for bids to be submitted is Monday.
Gap announced horrible March sales. The retailer said same-store sales fell 6% in March, more than the 5% decline that was expected by the Bloomberg consensus. The month was especially grim for the company's Banana Republic label, which witnessed a 14% plunge in sales. “While March proved challenging, we remain focused on taking the necessary steps to improve results across the portfolio throughout the year," Gap CFO Sabrina Simmons said. The stock is down about 3% in premarket trade.
Pfizer's CEO is staying. Pfizer CEO Ian Read will stay with the firm after walking away from its $160 billion merger with Allergan, Reuters reports. Read decided not to move ahead with the merger after the US Treasury announced new measures that would block the tax benefits of the deal. For Read, it was the second major deal in two years to be blocked by a government. His attempt at buying the London-based drugmaker AstraZeneca for $118 billion was thwarted by British politicians in 2014. "Read shouldn't be the fall guy," Tony Scherrer, director of research at Smead Capital Management, told Reuters.
Stock ETFs saw a sixth straight week of inflows. Reuters reports that data from Lipper showed that stock ETFs saw $3.5 billion worth of inflows during the seven days that ended Wednesday. The main beneficiary was ETFs with US-based companies, as those products attracted $2.3 billion of investor capital while international funds added $888 million. "ETF investors have fueled the bull market since the end of February," Jeff Tjornehoj, Lipper's head of Americas research, said.
David Cameron will publish his tax returns. The UK's prime minister will make his tax returns public "in the coming weeks" after he admitted to profiting from his dad's offshore fund. Cameron told ITV political editor Robert Peston that he and his wife owned about £30,000 worth of shares in the trust and that he sold his stake before he became prime minister. Cameron's father's fund was revealed in the Panama Papers document leak.
UK manufacturing production was ugly. The latest data from the Office of National Statistics showed that UK manufacturing production fell 1.1% month-over-month in February, worse than the 0.2% drop that was anticipated. Production slid 1.8% year-over-year, which missed expectations of a 0.7% decline. Pantheon Macroeconomics says the surveys "point to a deepening of the slump in manufacturing ahead." The British pound is flat at 1.4060.
Greece is back in deflation. Consumer prices in Greece unexpectedly fell in March. Prices dropped 0.7% YoY, well shy of the 0.2% gain that economists had forecast. February's 0.1% uptick was the first period of price gains since late 2012. The euro is little changed at 1.1369.

Regulation Nation
The Obama administration is racing to make final a flurry of regulations affecting broad swaths of the economy, further riling U.S. businesses in an election season that has already been tough on corporate interests. Planned moves range from overtime pay for white-collar workers to requiring food makers to disclose added sugar in packaged foods and beverages. The expected burst of regulation follows an intense few weeks in which the administration has targeted corporate tax inversions, imposed new rules on brokers and advanced restrictions on company relations with union organizers. Although President Barack Obama has until his term ends in January to make regulations final, a deadline looms this spring. If Republicans win the White House and maintain control of Congress, any rule issued by Mr. Obama within 60 legislative days of the end of his term could be overturned.

A Scion’s Unraveling
Andrew W.W. Caspersen hailed from a wealthy, well-connected family and had years of experience working for top-tier financial institutions. In a few months, he allegedly gathered in tens of millions of dollars from investors, including money from college friends, his brother and even his mother, as well as a charity backed by billionaire Louis Bacon, the founder of hedge fund Moore Capital Management. Then, say authorities, the money vanished, lost into a black hole of bad stock-market bets. Mr. Caspersen was charged last month with using the money to bankroll a large fraud. Some people who know him well now say they believe he was feeding an addiction to market speculation. Our account details his self-destructive path, including his unsuccessful attempts to raise as much as $50 million from private-equity giant KKR.

Breaking on WSJ.com
Pope Francis urged bishops and priests to take a lenient approach to divorced Catholics, effectively encouraging clergy to grant some divorced people Holy Communion and opening a new phase in a long-running struggle with conservatives in the church.

Survey: Singapore is 3rd-largest financial hub

Singapore has overtaken Hong Kong to become the third-largest financial center, behind London and New York, according to a Z/Yen Group survey. Tokyo and Zurich rank fifth and sixth, respectively.

Bloomberg (07 Apr.) 

Labor's fiduciary rule a win, CFA Institute says

The US Department of Labor's fiduciary rule for retirement advice has gained support from CFA Institute. "The DOL's final rule appears to have addressed many industry and investor concerns by significantly revising some of its most contentious provisions while retaining its fundamental commitment to ensuring the integrity of the advice to retirement investors," according to CFA Institute. "In the end, we believe this is a balanced 'win' for investors and for advice providers, and one that will ultimately raise the level of market integrity."

ThinkAdvisor (06 Apr.),  Business Insider (07 Apr.) 

Stock markets around the world are mostly higher. Spain's IBEX (+1.4%) leads in Europe after Hong Kong's Hang Seng (+0.5%) paced the advance in Asia. China's Shanghai Composite (-0.8%) lagged. S&P 500 futures are higher by 11.00 points at 2,046.00.

US economic data remains light. Wholesale inventories will be released at 10 a.m. ET, and the Baker Hughes rig count will cross the wires at 1 p.m. ET. The US 10-year yield is higher by 3 basis points at 1.72%.

Maybe money really does make the world go round

Why the oil market is better off looking at U.S. production than OPEC

Blackstone to shut mutual fund after Fidelity pulls out

Bank of Russia spreads the blame for inflation

David Cameron accused of hypocrisy for stake in father's offshore fund

Yale made 93 percent a year on venture capital in past two years

India's thirst for oil is overtaking China's

War of Words Escalates in Democratic Race

Critical 1MDB Report Spares Malaysia’s Najib Razak

Cargill’s New Place in the Food Chain

Markets Flash Warning as Bonds Rise, Yen Strengthens

For Swiss Central Bankers, Mum’s the Word

It's never too soon to start looking ahead when it comes to the economic calendar. Next week there are two data points scheduled to be released that should prove particularly worth watching. On Wednesday we get March Retail Sales in the U.S. As Matt Boesler of Bloomberg News noted on TV yesterday, we should be on the lookout for any signs that consumer is spending is weakening given the most recent monthly auto sales number (which fell year-over-year for the first time since 2010). Next Thursday we'll get the latest CPI reading, which is obviously of critical importance given the firming inflation data that we saw yesterday. Core CPI - which excludes food and energy - is expected to rise 2.3 percent from last year, which would be the same pace of growth as in the previous month. Anxiety that the Federal Reserve might have to hike interest rates sooner than the market expects will likely rise if there's any sign of further pressure on this measure. Source: Bloomberg, BI, WSJ, CFAI Fin. Newsbrief, ThinkAdvisor