Thursday June 2 Daily Market Primer

US stocks bounced around but ended flat yesterday as the market is waiting for the outcome of the OPEC meeting in Vienna and the Friday jobs number.  Oil slipped from $50 as signals emerged that OPEC can’t cut a production deal.  As expected, the European Central Bank did not change interest rates today but did adjust up it forecasts for both growth and inflation.  Markets mostly rose in Asia but fell in Japan overnight.  The US market has opened down about .5%, led by Apple and lower oil prices.

		LAST	CHANGE	% CHG
DJIA		17789.67	2.47	0.01%
Nasdaq		4952.25	4.2	0.08%
S&P 500		2099.33	2.37	0.11%
Russell 2000		1163.04	8.25	0.71%
Global Dow		2331.05	-4.8	-0.21%
Japan: Nikkei 225		16562.55	-393.18	-2.32%
Stoxx Europe 600		343.5	-0.62	-0.18%
UK: FTSE 100		6177.25	-14.68	-0.24%
CBOE Volatility		14.66	0.46	3.24%
Australia: S&P/ASX 200		5278.9	-44.3	-0.83%
China: Shanghai Composite		2925.23	11.72	0.40%
Hong Kong: Hang Seng		20859.22	98.24	0.47%
India: S&P BSE Sensex		26843.14	129.21	0.48%
Japan: Nikkei 225		16562.55	-393.18	-2.32%
Singapore: Straits Times		2795.09	4.55	0.16%
France: CAC 40		4456.08	-19.31	-0.43%
Germany: DAX		10184.13	-20.31	-0.20%
Italy: FTSE MIB		17828.92	18.07	0.10%
Spain: IBEX 35		9004.8	87.9	0.99%
U.S. 2 Year		0.895	1/32
U.S. 5 Year		1.364	2/32
U.S. 10 Year		1.821	5/32
U.S. 30 Year		2.602	11/32
Crude Oil		48.18	-0.83	-1.69%
Brent Crude		49.1	-0.62	-1.25%
Natural Gas		2.388	0.007	0.29%
E-mini S&P 500		2091.75	-6.25	-0.30%

Saudi Arabia is diversifying away from oil and into Uber, as the Saudi sovereign fund invested $3.5 billion in the ride sharing firm, bringing Uber’s valuation to a reported $68 billion, and giving the company a bigger war chest to expand and challenge state and local governments, taxis, and rental car companies around the globe.   I was surprised to read yesterday that PayPal holds enough in customer funds to place it in the top 20 banks by (non-interest baring) deposits http://bit.ly/BankPal.  Mary Meeker, who earned her reputation as the Queen of the Internet at Morgan Stanley and is now with Kleiner Perkins, published her widely read internet trends report yesterday, which basically said that the halcyon days are over http://bit.ly/ITsOver.

Here’s the news:

OPEC meeting

Also meeting in Vienna today is the Organization of Petroleum Exporting Countries, with fractures within the organisation already starting to reappear following Saudi Arabia's signal yesterday that it was ready to consider to surprise deal in order to mend divisions that appeared following the failed Doha meeting. If there was to be a deal from this meeting, it would be a shock to analysts, with only one of 27 surveyed last month saying they expected an output target from the Vienna round. West Texas Intermediate for July delivery was at $49.16 a barrel at 5:48 a.m. ET.

Markets await Draghi

Overnight the MSCI Asia Pacific Index dropped 0.8 percent, with Japan's Topix index falling 2.2 percent, the most in a month, as the yen continued to strengthen following yesterday's postponement of a sales tax increase and Prime Minister Shinzo Abe failure to outline further fiscal measures to stimulate the economy. In Europe, the Stoxx 600 was 0.3 percent higher at 5:55 a.m. ET as investors await the ECB decision. In the U.S. S&P 500 futures were 0.1 percent lower.

Metals sink

Iron ore is at risk of losing all of its year-to-date gains, with a ton of 62-percent ore dropping to $48.40 after posting its biggest monthly loss in about five years in May. There is one bright spot in the industrial metals world—zinc— which is seeing a demand rebound just as supply for miners is dropping. Zinc for delivery in three months climbed above $2,000 a ton for the first time in more than 10 months on Thursday, with the metal gaining as much as 25 percent this year. Gold, which has also had a difficult May is higher today, but the cost of rolling futures into longer-dated contracts has risen to the highest in about six years as bullishness on the metal wanes.

Coming up...

While by far the biggest item of interest this week is tomorrow's payrolls data, today we get a jobs market appetizer with ADP Employment Change data for May due at 8:15 a.m. ET and weekly Initial Jobless Claims due at 8:30 a.m., with expectations there for 270,000 new claimants, in line with last week's number.

The ECB kept policy on hold. The central bank held its key interest rate at 0.00%, as expected, and said its corporate bond purchases will begin on June 8. During Mario Draghi's press conference, which is scheduled for 8:30 a.m. ET, traders will be focused on any new economic projections and comments regarding the UK referendum. Thursday's meeting is being held in Vienna. The euro is little changed near 1.1190.
South Korea GDP slows. South Korea's economy expanded by 0.5% quarter-over-quarter, beating the 0.4% gain that economists had forecast. Growth has slowed in two consecutive quarters, however, down from Q3's 1.2% and Q4's 0.7%. On a year-over-year basis, GDP was measured at 2.8%. The South Korean won ended stronger by 0.5% at 1,186.60 per dollar.
Global manufacturing has stalled. The latest JPMorgan-Markit global manufacturing purchasing managers’ index came in at 50.0 for May, down from 50.1 in April. The reading of 50.0 means global manufacturing neither expanded nor contracted during the month. "Indices for output, new orders and the headline PMI were all at, or barely above, the stagnation mark," said David Hensley, director of global economic coordination at JPMorgan. "The move up in the finished goods inventory index suggests manufacturers are still working to realign stocks with demand."
Saudi Arabia invests in Uber. Saudi Arabia's Public Investment Fund, the main investment fund of the kingdom, has invested $3.5 billion in the ride-hailing service. Saudi Arabia's investment comes following the recent announcement of its Saudi Vision 2030 plan, which aims to diversify the kingdom away from its dependence on oil. The investment swells Uber's cash and convertible debt on Uber's balance sheet to more than $11 billion, and it gives the company a $62.5 billion valuation.
McDonald's is considering a move to Chicago. The fast-food giant is reportedly considering a move from its campus in Oakbrook, Illinois, to downtown Chicago, according to Crain's Chicago Business. The location up for consideration is home to Harpo Studios, the former set of "The Oprah Winfrey Show." McDonald's most likely won't move in until 2018, as the Harpo buildings need to be demolished and replaced with a new structure, Crain's says.
Alibaba bought back stock from Softbank. On Tuesday, Softbank said it would sell at least $7.9 billion worth of its Alibaba holdings. On Thursday, Alibaba announced it would spend about $2 billion to buy back 27 million shares at $74 a share, Reuters reports. Once completed, Softbank's sale will trim its Alibaba stake to 28% from 32.2%.
Feeling the California Bern
For the first time in living memory, the Golden State seems set to play an important role in the presidential primary season. Next Tuesday’s democratic primary in California is shaping up as a showdown between Hillary Clinton and Sen. Bernie Sanders. The Vermont senator has a chance to prevent Mrs. Clinton from a strong finish to the long primary season that would make it easier for her to unify the party ahead of the general election. A new Wall Street Journal/NBC News/Marist poll found the former secretary of state and Mr. Sanders deadlocked in California with Mrs. Clinton leading by just 2 percentage points, 49% to 47%, well within the survey’s margin of error. While Mrs. Clinton essentially has the nomination locked up, a win by Mr. Sanders in California would give him confidence to carry his campaign into the party’s Philadelphia convention next month. Meanwhile, labor leaders are nervous about Donald Trump’s appeal to unions’ many white, working-class members, and are working to head off partisan defections.
Uber Rich
Uber has raised $3.5 billion from the investment arm of Saudi Arabia, part of an arms race over the future of transportation that is attracting the world’s largest technology companies and auto makers. The investment from Saudi Arabia’s Public Investment Fund extends a fundraising that totals $5 billion, the largest single investment for a venture-backed company. Including the latest contribution, Uber is valued at close to $68 billion, around $20 billion more than GM, the nation’s largest auto maker. U.S. auto sales slumped in May as GM, Toyota and Ford all posted declines. Meanwhile, a proposed $100 million settlement between Uber and its drivers in Massachusetts and California is facing resistance from some of the workers it was meant to help.
Stock markets around the world trade mixed. Japan's Nikkei (-2.3%) was hit hard overnight, and Britain's FTSE (+0.4%) leads the gains in Europe. S&P 500 futures are down a point at 2,097.00.
Earnings reporting remains slow. Hovnanian and Joy Global will report ahead of the opening bell, while Broadcom will release its quarterly results after markets close.

US economic data flows. ADP Employment Change will be released at 8:15 a.m. ET before initial and continuing claims cross the wires at 8:30 a.m. ET. Because it's a holiday-shortened week, natural-gas inventories and crude-oil inventories will be announced at 10:30 a.m. ET and 11 a.m. ET. The US 10-year yield is unchanged at 1.83%.

Elon Musk’s future: Robot cars, people on Mars and AI run amok.

Pound trader keeps his head when all around him are losing theirs.

Internet boom times are over, says Mary Meeker's influential report.

Japan's debt burden is quietly falling the most in the world.

Game on for China, U.S. ahead of South China Sea ruling.

The PGA Tour moves 2017 World Golf Championship from Trump course to Mexico.

Rebel Forces Hit Islamic State in Northern Syria

Yesterday, venture capitalist and influential analyst Mary Meeker released her annual Internet Trends report. Every year she releases this as a huge slide deck, and the main gist in this year's presentation was that overall internet and smartphone usage is slowing, which obviously has huge implications for tech's big players. The most striking thing about the presentation, however, might have been the prominent discussion of global macro trends. Starting on page 16 of a 213-page report, she points out that the global economy is slowing, that commodity prices are plunging, that interest rates are at historically low levels, and that debt has been surging over the last two decades at a pace faster than GDP growth. Her bottom line: the easy days of growth are over. The report isn't all gloom, however. Meeker sees business opportunities in the changing nature of global growth. But the fact that this is so prominent in her report says a lot. For one thing, it means that tech has gotten so big and mature that there's no immunity from economic trends. It also speaks to the anxiety of the world's tech and business elite that things like ultra-low interest rates are so top of mind. If you want to spend a few minutes grazing on a gigantic set of charts, check out the whole thing here.

Source: Bloomberg, BI, WSJ, CFAI Fin. Newsbrief