Tuesday April 5 Daily Market Primer
The
NCAA championship is a tough act to follow, I should just take the morning
off. The Wisconsin primary is today, and the press in in a frenzy of
speculation that Trump’s candidacy may be rolling over. In case you
are wondering how so much data was spirited out of the “Panama Papers” law firm
Mossack Fonseca, this was a whistleblower case rather than an outside hack,
according to this article in Wired http://bit.ly/BigLeak.
Stock
markets are falling and bonds are rallying around the world after an unremarkable
slightly down day in the US yesterday. I’m not seeing a much of an
explanation except that the Panama Papers incident may put continued
pressure on already stressed European banks (5th story) and continuing
momentum for the Grexit, excuse me, I meant the Brexit movement.
And have I gone for a few days without mentioning oil prices? Excuse me,
during the break oil has dropped about $5 per barrel from $40 to around $35, as
doubts about a production cut or celling deal among major producers have
entered the market. That’s a 10% drop in a few days, which previously
would have been considered a very big move, but now we take it in stride in the
highly volatile oil markets.
US
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Asia
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Japan
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Europe
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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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S&P
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Dow
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Nasdaq
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Shanghai
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ASX200
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Nikki225
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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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-0.3%
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-.3%
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-.5%
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Closed
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-1.4%
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-1.30%
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-2.0%
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-1.4%
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-2.5%
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-2.3%
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Futures
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-0.8%
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The
US government came out strong against tax inversions, trying to legislate
away the problem rather than working on corporate tax reform, putting pressure
on the pending Pfizer – Allergan plc mega-inversion deal. This is a
significant problem for the US. Keep in mind that before Allergan became
an Irish company through a previous inversion deal, it was headquartered in
Irvine, California. Last April Allergan laid off 600 workers in Irvine.
Here’s
the news:
Risk off
Equity markets across the globe are selling off this morning.
The MSCI Asia Pacific Index slid 1.6 percent with
Japanese shares leading the losses
as the yen rallied near its highest level against the dollar in 18 months. In
Europe, the Stoxx 600 was trading 1.6 percent lower
at 10:19 a.m. London in a broad-based selloff. S&P 500 futures are 0.8 percent lower.
As stocks are falling, bonds are rallying, with the yield on German 10-year
bonds falling below 0.1 percent
for the first time in almost a year while U.S. Treasuries are also advancing.
Gold is higher.
New mediocre
IMF Managing Director Christine Lagarde warned of the growing
risks facing the global economy in a speech delivered in Frankfurt this
morning, saying the outlook for growth has
dimmed in recent months. In an interview afterwards with
Bloomberg TV she christened it the "new mediocre."
PMI day
Growth in the euro area remains "sluggish" according
to Markit Economics, which published its Purchasing Managers Index for the
shared-currency zone this morning. The composite index rose to 53.1 in March,
above the 50 level that indicates growth, but below the initial reading of 53.7
published on March 22. In the U.K., the composite number rose to 53.4, with
Markit warning that both global uncertainty and the upcoming referendum on EU
membership were weighing on sentiment.
Markit composite PMI for the U.S. is due to be published at 9:45 a.m. EDT, with
ISM non-manufacturing at 10:00 a.m.
India cuts rates, Australia holds
India’s central bank lowered its key interest
rate 25 basis points to 6.5 percent, a move predicted by the
vast majority of economists surveyed by Bloomberg. Governor Raghuram Rajan
said the policy stance would remain accommodative, but investors are
concerned that his room for maneuver will be limited by the weather. A third
straight year of below-average rainfall would put pressure on food prices,
limiting the central bank's scope for
easing. In Australia, Reserve Bank Governor Glenn Stevens held rates unchanged
and fell short of calling for a weaker currency as some analysts had expected.
The Australian dollar weakened over 1 percent against the greenback after
strengthening immediately after the release.
Hard times for investment banks
Pressure remains on global investment banks even as they continue to shed workers.
Analysts have cut profit estimates for Goldman Sachs Group Inc. by 94 cents per share
in the last four weeks. The timing of the Panama Papers, and the extra
reputational damage they may cause to major institutions could not be worse.
Credit Suisse Group AG Chief Executive Officer Tidjane Thiam is seeking to put
his bank's recent problems behind him by looking for expansion opportunities in
Asia.
European
PMIs disappointed. The eurozone's composite PMI reading for March came in at 53.1,
down from its flash reading of 53.7. Looking under the hood, services PMIs
across the region missed estimates, except in Spain, where the reading improved
to 55.3 from its flash reading of 54.1. Weakness in France is apparent as a
services print of 49.9 means the sector is once again below the 50.0 cutoff for
expansion. Germany's services reading fell to 55.1, the second-lowest number
since November. The euro is weaker by 0.3% at 1.1357.The favorite to be Disney's next CEO is out. Disney COO Thomas Staggs, the man who was expected to take over as CEO once Bob Iger's contract expires in 2018, is leaving the company. He will remain on the staff as a special adviser to Iger through the current fiscal year. Staggs has been at Disney for 26 years.
Tesla's deliveries missed estimates. After Monday's closing bell, Tesla announced it had delivered 14,820 vehicles in the first quarter of 2016, missing the 16,000 it had expected. The automaker reaffirmed its full-year guidance, saying, "Q1 deliveries were almost 50% more than Q1 last year and Tesla remains on track to deliver 80,000 to 90,000 new vehicles in 2016." Tesla remains well below that pace and will need to deliver 35,000 cars in the fourth quarter unless it can pick up the pace in the middle of the year. Shares of Tesla are down more than 3% in early trade.
Valeant's creditors aren't happy about its plan to delay its annual report. Back on March 15, Valeant fell into technical default after it failed to file its 10-K. Now the company wants to push back its filing even further, according to Bloomberg. The company is offering its creditors a fee and a higher interest rate in exchange for new terms. At least half of Valeant's creditors must approve the amendment by Wednesday for it to go into effect.
Credit Suisse wants to build up its business in China. Speaking at the Credit Suisse Asian Investment Conference in Hong Kong, CEO Tidjane Thiam said his firm was "underweight" China and he wanted to build up its wealth-management operations in the country, Reuters reports. Credit Suisse would reportedly like to double its net income from the Asia-Pacific region to 2.1 billion Swiss francs ($2.19 billion) within the next two years. "We have a good customer base," Thiam said. "Today we are offshore, but ultimately we will be onshore."
The Badger Speaks
Trailing in Wisconsin polls, Mr. Trump faces an increasingly difficult delegate fight if he loses the state’s primary today. The GOP front-runner needs to capture two-thirds of the remaining bound delegates to reach the 1,237 needed to win the nomination on the convention’s first ballot. His path is made steeper by his campaign’s weakness in states that allow delegates to remain uncommitted to a specific candidate. A Wisconsin win would be a signature victory for Sen. Ted Cruz, who hasn’t won a primary state since March 1 victories in Texas and Oklahoma. Meanwhile, in final pleas to Wisconsin Democrats, Hillary Clinton and Sen. Bernie Sanders sparred over who would be stronger in the general election. Our Washington bureau chief Gerald F. Seib notes one of the broader realities of Campaign 2016 revealed in both parties: There has been a sharp decline in the traditional American spirit of optimism.
Trailing in Wisconsin polls, Mr. Trump faces an increasingly difficult delegate fight if he loses the state’s primary today. The GOP front-runner needs to capture two-thirds of the remaining bound delegates to reach the 1,237 needed to win the nomination on the convention’s first ballot. His path is made steeper by his campaign’s weakness in states that allow delegates to remain uncommitted to a specific candidate. A Wisconsin win would be a signature victory for Sen. Ted Cruz, who hasn’t won a primary state since March 1 victories in Texas and Oklahoma. Meanwhile, in final pleas to Wisconsin Democrats, Hillary Clinton and Sen. Bernie Sanders sparred over who would be stronger in the general election. Our Washington bureau chief Gerald F. Seib notes one of the broader realities of Campaign 2016 revealed in both parties: There has been a sharp decline in the traditional American spirit of optimism.
Tax Penalty
The Treasury Department imposed tough new curbs on corporate inversions yesterday, alarming Wall Street and throwing into doubt the $150 billion merger between Pfizer and Allergan, which was on track to be the biggest deal of its kind. The Treasury move, which was more aggressive than anticipated, could stall a trend in corporate deal-making that has seen companies searching for ways to escape the U.S. tax net. “They’re pretty much taking all of the juice out of inversions,” said one tax analyst. The new rules will make it harder for companies to move their tax addresses out of the U.S. and then shift profits to low-tax countries using a maneuver known as earnings stripping. Several deal makers said the rules seemed squarely aimed at the Pfizer-Allergan transaction, which has drawn fire from politicians in an election year.
The Treasury Department imposed tough new curbs on corporate inversions yesterday, alarming Wall Street and throwing into doubt the $150 billion merger between Pfizer and Allergan, which was on track to be the biggest deal of its kind. The Treasury move, which was more aggressive than anticipated, could stall a trend in corporate deal-making that has seen companies searching for ways to escape the U.S. tax net. “They’re pretty much taking all of the juice out of inversions,” said one tax analyst. The new rules will make it harder for companies to move their tax addresses out of the U.S. and then shift profits to low-tax countries using a maneuver known as earnings stripping. Several deal makers said the rules seemed squarely aimed at the Pfizer-Allergan transaction, which has drawn fire from politicians in an election year.
Not So Magic Kingdom
Succession planning at the world’s largest media company fell into disarray yesterday as Tom Staggs, Walt Disney’s chief operating officer and the heir apparent to Chief Executive Robert Iger, unexpectedly said he would step down. Mr. Staggs made the decision after learning recently that both Mr. Iger, who is also Disney’s chairman, and the rest of the company’s board had decided to broaden the search for Mr. Iger’s successor to include more candidates. Mr. Staggs’s announcement that he would leave effective May 6 shocked employees throughout the Disney empire, where the executive was known as a longtime personal friend of Mr. Iger. Some close to the company believe his departure means Mr. Iger could stay on past his announced retirement date, but the CEO has given no indication he plans to do so.
Succession planning at the world’s largest media company fell into disarray yesterday as Tom Staggs, Walt Disney’s chief operating officer and the heir apparent to Chief Executive Robert Iger, unexpectedly said he would step down. Mr. Staggs made the decision after learning recently that both Mr. Iger, who is also Disney’s chairman, and the rest of the company’s board had decided to broaden the search for Mr. Iger’s successor to include more candidates. Mr. Staggs’s announcement that he would leave effective May 6 shocked employees throughout the Disney empire, where the executive was known as a longtime personal friend of Mr. Iger. Some close to the company believe his departure means Mr. Iger could stay on past his announced retirement date, but the CEO has given no indication he plans to do so.
Mightier Than the Laptop
The keyboard clatter of note-taking is now the soundtrack of higher education, but compared with those who type their notes, people who write them out in longhand appear to learn better, retain information longer, and more readily grasp new ideas. Handwriting appears to focus classroom attention and boost learning in a way that typing notes on a keyboard doesn't. Researchers found that students who took handwritten notes generally outperformed students who typed their notes via computer. Generally, people who take class notes on a laptop do take more notes and can more easily keep up with the pace of a lecture, but researchers found those who took notes by hand could remember the lecture material longer and had a better grip on concepts presented in class, even a week later.
The keyboard clatter of note-taking is now the soundtrack of higher education, but compared with those who type their notes, people who write them out in longhand appear to learn better, retain information longer, and more readily grasp new ideas. Handwriting appears to focus classroom attention and boost learning in a way that typing notes on a keyboard doesn't. Researchers found that students who took handwritten notes generally outperformed students who typed their notes via computer. Generally, people who take class notes on a laptop do take more notes and can more easily keep up with the pace of a lecture, but researchers found those who took notes by hand could remember the lecture material longer and had a better grip on concepts presented in class, even a week later.
Baltic Dry surges 62 percent in two months, and that's bad news for shipping.
The European Central Bank sells some bonds...
While investors trying to get ahead of the ECB turn to derivatives.
It was a stock picker's market in the first quarter. Too bad
about the stocks picked.
Saudis want to double their equity market in a post-oil economy.
Earnings reporting is light. Darden Restaurants and Walgreens Boot Alliance will report ahead of the opening bell.
US economic data flows. The trade balance will be
released at 8:30 a.m. ET before ISM services and JOLTs job openings cross the
wires at 10 a.m. ET. The US 10-year yield is down 4 basis points at 1.72%.
Despite yesterday's modest selloff, the S&P 500 remains
in the green for 2016, a remarkable fact given the horrendous start to the
year. But other markets around the world are flashing some warning signs.
The Japanese yen (the ultimate safe-haven currency) is on a tear, surging to
its strongest level since Oct. 30, 2014. German bunds, also a safe haven,
have seen yields tumble again, with the yield on the 10-year at its lowest
level in a year. Meanwhile, as noted by Societe Generale's Kit Juckes this
morning, there's been a decoupling between U.S. equities and Federal Reserve
policy expectations, as expectations for rate hikes have been pushed out
while stocks have been rising. Also for what it's worth, we've seen oil
tumble again in recent days. So while U.S. equities have made an impressive
move, they're increasingly surrounded by some cautionary signs.
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Source: Bloomberg, BI, WSJ, Wired
Labels: DailyMarketPrimer, Investments, Markets, News, Oil
posted by Rich Barnett @ 6:45 AM
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