Wednesday June 8 Daily Market Primer

US stocks climbed again yesterday, with the S&P 500 very close to all time highs, and as widely reported, is up 15% from the February lows. You asked for it, you got it: Oil above $50.  Oil  rallied above $51 per barrel this morning, with traders citing supply disruptions in Nigeria and stronger Chinese demand as the cause.  Markets were mixed in Asia and Europe overnight.

California didn’t feel the Bern, and Hillary Clinton finally took her victory lap last night, as she won the California primary and the Democratic nomination, just as Donald Trump was in the middle of his worst week in the election. 

DJIA	17938.28	17.95	0.10%
Nasdaq	4961.75	-6.96	-0.14%
S&P 500	2112.13	2.72	0.13%
Global Dow	2384.59	7.19	0.30
DJ Global Total Stock Market	3253.96	6.57	0.20
DJ Global exUS TSM	2165.51	8.95	0.42
DJ Asia-Pacific TSM	1399.95	9.49	0.68
Australia: S&P/ASX*	5370	-1	-0.02
China: Shanghai Composite*	2927.16	-8.89	-0.30
Hong Kong: Hang Seng*	21297.88	-30.36	-0.14
India: S&P BSE Sensex*	27020.66	10.99	0.04
Japan: Nikkei 225*	16830.92	155.47	0.93
Taiwan: TAIEX*	8715.48	35.58	0.41
Stoxx Europe 600	344.95	-1.31	-0.38
Belgium: Bel-20	3536.72	-10.09	-0.28
France: CAC 40	4460.32	-15.54	-0.35
Germany: DAX	10236.96	-50.72	-0.49
Italy: FTSE MIB	17968.16	-7.33	-0.04
Sweden: OMX Stockholm	486.68	-0.62	-0.13
UK: FTSE 100	6295.47	10.94	0.17
DJ Americas TSM	5103.69	5.55	0.11
Argentina: MerVal*	13269.05	416.76	3.24
Brazil: Bovespa*	50487.86	56.06	0.11
Canada: S&P/TSX*	14365.61	89.45	0.63
2-Year Note	0.783	0/32
3-Year Note	0.936	1/32
5-Year Note	1.232	1/32
7-Year Note	1.505	2/32
10-Year Note	1.708	3/32
30-Year Bond	2.523	5/32
Crude Oil	51.06	0.7	1.39%
Brent Crude	52.25	0.81	1.57%
Natural Gas	2.486	0.012	0.49%
Gasoline	1.6037	0.0166	1.05%

The ECB is buying corporate bonds in Europe, driving down interest rates even lower, and the German 10 year bund (government bond) is about to go negative.  No wonder demand for the US 10 Year is so high (see story).

Here’s the news:

Clinton v. Trump (Bloomberg)

Hillary Clinton has won the California primary, cementing her position as the Democratic nominee for president. In her victory speech last night, given before the results of the California vote were known, she celebrated that she is the first woman to achieve a major-party nomination. Meanwhile, her campaign made it clear she is prepared to win ugly against Donald Trump. The Republican nominee has not had a good week following his comments about a judge's Mexican ancestry. Yesterday, GOP Senator Mark Kirk said he could no longer support Trump following the remarks.

Hillary Makes History (WSJ)
Hillary Clinton declared victory Tuesday night in the Democratic presidential primary race, emerging from a bruising battle as the first woman within striking distance of the Oval Office. Though Sen. Bernie Sanders vowed at a late night rally in Santa Monica, Calif., to battle on to the Democratic National Convention in July, Mrs. Clinton’s victory was cemented with wins in New Jersey and New Mexico even before the polls closed in California, a state she also won. We report how Mrs. Clinton’s tough primary challenge has pushed her well to the left, while her candidacy represents the establishment in a year of outsiders, notes our Washington bureau chief Gerald F. Seib. Meanwhile, after House Speaker Paul Ryan called his comments racist, Donald Trump said his attacks on the federal judge handling his Trump University lawsuit have been “misconstrued.” The presumptive Republican nominee is getting a late start to fundraising and faces an uphill battle against Mrs. Clinton’s robust finance operation. California’s primaries for the Senate race in November also threw up another first, sending two Democrats—both minority women—into the runoff and denying a ballot spot to a Republican.

ECB buys corporate debt

The European Central Bank's corporate-bond buying program kicked off this morning with the bank buying debt issued by companies including Anheuser-Busch InBev NV, Telefonica SA, Siemens AG, and Renault SA, according to people familiar with the matter. Borrowing costs in Europe had already fallen to unprecedented levels with the average yield on investment-grade company notes in euros dropping to 1 percent this week. In the sovereign debt space, where the ECB also continues to be a buyer, the yield on Germany's 10-year bund is within a hair of turning negative, falling to (yet another) record low of 0.033 percent this morning.

Some good news for the U.K. economy

Concerns over the Brexit vote have dominated every discussion on the U.K. economy lately, so today's industrial output data must come as a welcome relief. According to the Office for National Statistics output rose 2 percent in April, far ahead of economist expectations for no change. The pound, which rallied following the data, was back to unchanged at $1.4550 at 6:00 a.m. ET, as the currency's volatile week continues.

Mixed markets

The MSCI Asia Pacific Index rose 0.5 percent overnight, with Japan's Topix Index rising 0.8 percent following a revision higher of GDP. In Europe, the Stoxx 600 index dropped 0.5 percent by 6:10 a.m. ET, with banks leading the losses. European stocks continue to trail their U.S. peers, with outflows of $36 billion so far this year thanks to elevated risk perception from the looming Brexit referendum. Futures for the S&P 500, which reached a level 0.5 percent below an all-time high in yesterday's session, were flat.

Oil recovery continues

Crude is trading near 10-month highs, with a barrel of West Texas Intermediate for July delivery at $50.80 at 6:18 a.m. ET. Expected record-high summer gasoline demand and continuing supply problems due to the security situation in Nigeria means the glut in global production is likely to ease further.

The World Bank slashed its global growth forecast. The World Bank cut its global growth forecast for 2016 to 2.4% from 2.9% as a result of "sluggish growth in advanced economies, stubbornly low commodity prices, weak global trade, and diminishing capital flows." The bank sees "mounting risks" and expects a "further slowdown in major emerging markets." Specifically, China's growth is forecast to slow to 6.7% from 6.9% and both Russia and Brazil are expected to see "deeper recessions" than initially forecast. India's growth is expected to hold at 7.6%.
The European Central Bank has started buying corporate bonds. The ECB has begun its corporate-sector-purchase programme, or CSPP, which will buy corporate bonds of companies with a high credit rating on a weekly basis. AFP says the hope of the program is companies will "use the money to invest, thereby stimulating growth, creating jobs and helping push up prices." It is estimated that 500 billion to 700 billion euros worth of debt is eligible for the program. The euro is up 0.1% at 1.1370.
China's trade surplus grew. Exports fell 4.1% year-over-year, missing the 3.6% decline that was forecast. On the other side of the ledger, imports slipped 0.4%, which was better than the 6% drop that was expected. The data showed China's trade surplus widened to $49.98 billion, but that was below the $58 billion that economists had anticipated. Interestingly, the dollar value of imports from Hong Kong exploded by a record 243% YoY, which many speculate is a result of fake invoicing in order to get money out of mainland China.
Japan's GDP beat. Japan's economy grew at a 0.5% clip during the first quarter, according to data released by the government. The Q1 print was slightly ahead of the 0.4% gain that economists had forecast. On an annual basis, the economy grew at a seasonally adjusted rate of 1.9%, making for the fastest growth in a year. The Japanese yen is stronger by 0.3% at 107.07 a dollar.
Oil is at its best level in almost 11 months. Brent crude oil and West Texas Intermediate crude oil hold comfortably above the $50 a barrel mark, and are extending to their best levels since late July. Both Brent and WTI are higher by 1.5%, trading at $52.22 and $51.10, respectively.
Yahoo's patents are up for sale. Yahoo is planning to sell about 3,000 patents, including for its proprietary search technology, according to The Wall Street Journal. Black Stone has been hired to handle the sale of the patents, which could bring in about $1 billion. Yahoo will accept bids until late June, a source told The Journal.
Amazon is investing in India. Amazon CEO Jeff Bezos says the company will invest $3 billion in India, AFP reports. The investment is on top of the $2 billion Amazon committed to the country in 2014. "We have already created some 45,000 jobs in India and continue to see huge potential in the Indian economy," Bezos said at the US-India Business Council meeting, according to a statement released by the group.
How Low Can They Go
Yields on the 10-year government debt of Germany and the U.K. fell to all-time lows Tuesday, a stark demonstration of the modern era of scant inflation, weak growth and outsize monetary policy. The decline in British yields is remarkable, since the Bank of England hasn’t moved interest rates since 2009 nor changed its bond-buying program since 2012. Tumbling German bond yields this year have a more straightforward cause: the ECB’s move to progressively deeper negative rates and its continued buying of government bonds. Some analysts say that tepid labor-market data for the U.S. in May has driven investors to believe economic growth across the developed world will be weaker than previously expected, leading central banks to keep interest rates lower for longer. The amount of global sovereign debt with negative yields surpassed $10 trillion for the first time in May.
Thermostat Wars
Never mind messy desks, noisy colleagues and smelly office kitchens. No workplace dispute is as divisive as where to set the office thermostat. Many workers take up guerrilla tactics during summer to get the temperature they want, taping cardboard over air vents or trying to tamper with locked thermostats. Others pepper bosses or facilities managers with complaints. To placate chronic complainers, some facility managers install dummy thermostats, equipped with buttons or dials to give occupants an illusion of control. Research shows office workers perform best when they have influence over their physical environment. Meanwhile, some companies are taking the high-tech approach, turning to apps to manage thermostat disputes.
Stock markets around the world trade mixed. Japan's Nikkei (+0.9%) outperformed in Asia and Spain's IBEX (-0.6%) lags in Europe. S&P 500 futures are higher by 3.25 points at 2113.50.
Earnings reports trickle out. Lululemon Athletica will report ahead of the opening bell and Restoration Hardware will release its quarterly results after markets close.

US economic data is light. JOLTs job openings will cross the wires at 10 a.m. ET and crude-oil inventories will be released at 10:30 a.m. ET. The US 10-year yield is unchanged at 1.71%.

We've hit peak human and an algorithm wants your job. Now what?

Brexit contagion is spreading across the EU, Pew study finds.

Dark days at the Folly as Nomura traders join Europe's jobless.

U.S. 10-year Treasury demand highest in 50 years before auction. 

Zimbabwe's black market, where the dollar trades against itself.

Chinese investors flood into Hollywood.

Weak Productivity, Rising Wages Putting Pressure on U.S. Companies

U.S. Firm to Build Six Nuclear Reactors in India

U.S.-China Talks Limited by Disagreements

The Epicenter of America’s Oil Bust Is Drawing Buyers

Villain or Victim? The Problem With Assigning Blame for the Financial Crisis

One of the hottest ideas in economic policy right now is the 'Basic Income Guarantee,' or the idea of basically sending everyone a check every month to ensure a minimum level of sustenance. The concept has been around for a long time, and it has fans across multiple ideologies, who support it for multiple reasons. Those reasons include the basic premise of fighting poverty, simplifying the welfare state, and protecting against massive job loss due to technological-induced change. Of course the idea also has critics. Yesterday I talked to Bard College professor Pavlina Tcherneva, who argues instead for a 'Job Guarantee' Here the government would make sure that everyone who wants a job has one as opposed to providing a minimum income. As she argues, this would be a more countercyclical policy, and it would increase production, not just demand. There would also be social benefits, as she sees them, to making work available. She's written a lot on this and the problems with a basic income. Here's a great place to start.

Source: Bloomberg, BI, WSJ