Friday May 20 Daily Market Primer
Happy
Friday. I’m headed for the airport so I don’t have time for comments or the
returns table, but here’s a ESG investing feature of the week and a quick news
fix. Have a great weekend.
ESG
Friday Feature:
No
longer can analysts use the excuse there is inadequate data for incorporating
ESG into investment decisions.
The
Sustainability Accounting Standards Board (SASB), a not-for-profit chaired by
Michael Bloomberg with Mary Schapiro as vice chair, was formed to set market
standards for disclosure of material sustainability information to investors.
With “material” defined as likely to affect financial performance.The organization – founded by Jean Rogers and made financially viable through donors including Bloomberg Philanthropies; foundations such as Ford, Rockefeller, PwC and Deloitte – is predicated on a belief that ESG factors can impact company financial performance and drive long-term value.
Bloomberg has put its money where its mouth is and was the first
company to use the voluntary SASB standards;
and a number of investors, including CalSTRS are behind the initiative, with
chief executive Jack Ehnes on the board. Whole article : http://www.top1000funds.com/analysis/2016/05/13/sasb-the-missing-link-in-esg-integration/
Here’s
the news:
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The MSCI Asia Pacific Index added 0.3 percent overnight, with Japanese
shares climbing due to the yen weakening on the U.S. rate outlook. In
Europe the Stoxx 600 was 0.9 percent higher at 5:35 a.m. ET as
commodities recovered some of the week's losses, boosting miners. In the
U.K., Ladbrokes Plc jumped as much as 12 percent after the
Competition and Markets Authority said it won't stop the company's
merger with Coral Group. S&P 500 futures were 0.3 percent higher.
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Finance chiefs from the Group of Seven advanced economies who are
meeting in Japan are already showing signs of disagreement over how to boost
global growth. On one side, German Finance Minister Wolfgang Schaeuble
is claiming "German fiscal policy is rather successful" while on
the other is Japan's Taro Aso who is expected to ignore the German
financial frugality model and push for more fiscal stimulus. That argument
aside, the risk of Britain leaving the European Union, and the effect that
would have on international markets will be a key concern at the meeting.
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G7 aside, polling data and betting-company odds are
increasingly showing that the chances of the U.K. voting to leave the EU are
falling. Yet unfortunately for the British economy, two Bank of England
officials this morning said that the slowdown may not all be related to the uncertainty surrounding the referendum.
The pound, which rallied yesterday, has fallen back into a funk this morning
as the abating Brexit risk is outweighed by the sluggish economic
outlook from the BoE officials. There is one silver lining in all this - the
U.K.'s Royal Mail Plc says it expects a short-term surge in sales as both sides in
the campaign post material to voters.
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The last time the Treasury term premium - the extra
compensation investors demand for owning long-term debt - was as low as it is
now was 1962. Globally, the search for yield has meant some countries have
been able to get away very long term debt recently, and that
trend is being reflected in the Treasury market as investors seem to put
far less emphasis than usual in the maturity date of the debt they are
buying. In the current circumstances it seems to make a lot of sense for the
U.S. to join the ultra-long party.
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This morning oil is holding onto this week's gains, with a
barrel of West Texas Intermediate trading at $48.33 at 6:10 a.m. ET. Gold,
meanwhile is suffering a reversal, with the precious metal set for its third weekly loss in a row as traders
reprice the chances of a Fed rate hike which would bolster the dollar. It is
a different story for industrial metals as aluminum rose the most in a month
while copper, nickel and zinc also advanced.
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Tesla raised fresh capital. The electric-car maker raised $1.46 billion through the sale of 6.8 million new shares of common stock, Reuters reports, citing IFR. The capital raise comes as Tesla looks to ramp up production of its mass-market Model 3 vehicle, which saw far greater demand than was anticipated. IFR says Morgan Stanley, Goldman Sachs, Deutsche Bank, Citigroup, and Bank of America Merrill Lynch were all involved in the offering.
Gap is closing a bunch of stores, and layoffs could be coming. The company earned an adjusted $0.32 on revenue of $3.44 billion, matching forecasts. Same-store sales sank 5%, but that was better than the 7% slide that was anticipated. Gap announced that it would close up to 75 stores, mostly outside the US, and that layoffs could be coming soon. Shares were up as much as 3% in after-hours action.
Ross Stores missed tough comparables. The discount retailer announced earnings of $0.73 a share, matching estimates. Revenue rose 5.1% to $3.09 billion, just missing the $3.12 billion Bloomberg consensus. Additionally, comparable-store sales grew 2% versus projections of 2.4%. "Even though we faced our strongest prior-year comparisons, sales performed at the high end of guidance, while earnings per share were slightly above our targeted range," CEO Barbara Rentler said in the earnings release. Shares of Ross Stores were down as much as 10% in after-hours trade.
Saudi Arabia is about to launch an international bond. Saudi Arabia is about to tap the sovereign debt market for the first time as it reels from the oil crash, according to a report from the Financial Times. The need for cash comes as Saudi Arabia has seen a 23% drop in oil revenue, which is creating huge problems as the energy component accounts for 77% of Saudi Arabia's revenue. The size of the offering has not yet been disclosed.
We could see a repeat of the 1994 bond-market massacre. Deutsche Bank's chief international economist, Torsten Sløk, thinks the longer the market ignores the Federal Reserve, the higher the chances "we could see a move in bond markets similar to what we saw in 1994." Sløk points to the fact the US economy is reaching full employment and also to the fact there's a "broad-based uptrend in wages and inflation" as evidence the market might be underestimating the Fed. During the first nine months of 1994, the 30-year yield spiked about 200 basis points as the Fed hiked much more aggressively than the market was anticipating.
Markets don't think there will be a Brexit. A new report from Deutsche Bank strategist Jack Di-Lizia suggests that the Remain vote is gaining a sizable lead. With five weeks to go until the vote on whether Britain will leave the European Union, the market has "shown signs of increasingly pricing out the likelihood of a Brexit across a range of financial market variables," Di-Lizia says. Those signs include a strengthening of the British pound and a "more hawkish" pricing at the front end of the yield curve. The referendum is set to take place on June 23.
Triple
Bogey
Thomas C. Davis, the former Dean Foods chairman, pleaded guilty on Monday to securities fraud, perjury and obstructing justice and is cooperating against legendary sports bettor William “Billy” Walters, a longtime friend. Retired from banking and deep in debt from gambling and federal taxes, Mr. Davis allegedly leaked inside information to Mr. Walters, who then allegedly passed on a lucrative tip to another debt-burdened gambler, golf star Phil Mickelson. Mr. Mickelson, who wasn’t charged with wrongdoing, agreed to pay the SEC more than $1 million, based on profits he made from trading on a Dean Foods tip from Mr. Walters, plus interest. Mr. Walters was arrested in Las Vegas on Wednesday and faces 10 criminal charges, including several counts of wire fraud and securities fraud. He is accused of earning illicit profits and avoiding losses of more than $40 million over six years. |
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We Don’t
Love EU
In an echo of Donald Trump’s rise in the U.S., an increasing number of Europeans are voting for populist parties opposed to the very principles and institutions of the European Union. These voters want things few mainstream parties offer: a tougher line on immigrants, weaker or no ties to the EU and, often, closer links with Russia. After the migrant crisis erupted last summer, a throng of European voters from Denmark to France have delivered a series of electoral successes to populist parties. Euroskeptic language is in some places creeping into major parties, too, as they seek to stop voters from moving away. One factor contributing to the change, political scientists say, is a changing view of history. A receding memory of the Nazi era and Communist past in some countries is blunting the electorate’s knee-jerk rejection to xenophobic or nationalist rhetoric and taking some of the shine off Western-style democracy. |
Earnings reports trickle out. Campbell Soup, Deere, and Foot Locker are among the names reporting ahead of the opening bell.
US economic data is light. Data
concludes for the week with the 10 a.m. ET release of existing-home sales. The
US 10-year yield is up one basis point at 1.86%.
Source:
Bloomberg, BI, WSJ
Labels: DailyMarketPrimer, Markets, Oil, Yahoo
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