Wednesday June 22 Daily Market Primer
US
stocks rose modestly yesterday as the countdown to Brexit continues. Both campaigns
went into high gear, with divergence between the polls, which show a fairly
narrow lead for remain, and the markets, which are making a strong bet for
remain http://bit.ly/MktsVsPolls.
Equity markets continued to rally in Asia and Europe
overnight, and the US market is opening up slightly.
17829.73
|
24.86
|
0.14%
|
|
4843.76
|
6.55
|
0.14%
|
|
2088.9
|
5.65
|
0.27%
|
|
1153.87
|
-3.83
|
-0.33%
|
|
2356.22
|
6.86
|
0.29%
|
|
16065.72
|
-103.39
|
-0.64%
|
|
341.28
|
1.24
|
0.36%
|
|
6267.15
|
40.6
|
0.65%
|
|
18.42
|
-0.06
|
-0.32%
|
|
|
|
|
|
5270.9
|
-3.5
|
-0.07%
|
|
2905.55
|
26.99
|
0.94%
|
|
20795.12
|
126.68
|
0.61%
|
|
26765.65
|
-47.13
|
-0.18%
|
|
|
|
|
|
4391.59
|
24.35
|
0.56%
|
|
10109.97
|
94.43
|
0.94%
|
|
17441.24
|
10.07
|
0.06%
|
|
8713.7
|
46.4
|
0.54%
|
|
0.287
|
0/32
|
||
0.762
|
0/32
|
||
1.212
|
-1
8/32
|
||
1.699
|
3/32
|
||
2.513
|
2/32
|
||
50.11
|
0.26
|
0.52%
|
|
51.54
|
0.28
|
0.55%
|
|
2.796
|
-0.017
|
-0.60%
|
|
193.418
|
0.342
|
0.18%
|
|
381.72
|
1.56
|
0.41%
|
|
2082.75
|
2.25
|
0.11%
|
Janet
Yellen was cautious
and tried not to say anything inconsistent yesterday in her congressional
testimony, and she goes back for another round today. Elon Musk
wants to combine the two public companies that he controls by having Tesla buy
SolarCity. SolarCity is the largest US installer of home solar
panels and Tesla is, well, Tesla. Wall Street is not thrilled with the
deal, and this looks like a bailout for Solar City, which has been struggling
with its business model and financing, and has seen its stock drop 55% this year.
Tesla has already been supporting Solar City by buying its bonds, and Musk has
personally bought SolarCity stock when it was low. Both companies have
been burning cash and the combined company would have 30,000
employees. In a nod to corporate governance considerations, Musk, who is
the largest shareholder in both companies, will not vote his shares.
In
spite of the dramatic buildup to tomorrow’s Brexit vote, it’s a fairly slow
news day, so here’s the news:
Yellen resumes testimony
Federal Reserve Chair Janet Yellen resumes her testimony in
Washington at 10 a.m. ET today. In the session with the Senate yesterday
she offered a change to the inflation and job-market outlook, promising to
proceed "cautiously" when it comes to raising
interest rates. Economists now view that the Fed is likely to hold rates for the next couple of meetings.
Market-implied odds put the chances of a hike at the July meeting at just 10
percent, with those odds not climbing above 50 percent until January of
2017.
Tesla offer for SolarCity
Tesla Motors Inc. has made an offer to buy SolarCity Corp.
in an all-stock deal that has investors scratching
their heads as to whether it really is the "no-brainer" Elon Musk described it as.
While the combination of the two companies would offer green-energy enthusiasts
a one-stop shop for their home and transport
power needs, investors are concerned about the cash burn of both
companies. Tesla shares were 10.2 percent lower and SolarCity shares were 16.1
percent higher in premarket trading this morning.
Calm before the vote
Global markets are again very calm this morning ahead of
tomorrow's U.K. vote on membership of the European Union. The MSCI Asia
Pacific Excluding Japan Index rose 0.5 percent overnight with Japan's
Topix index closing 0.7 percent higher. In Europe, the Stoxx 600 Index was 0.1 percent higher at 6:05 a.m. ET while
European sovereign debt was virtually unchanged. London's FTSE 100 index
was 0.4 percent lower. S&P 500 futures were 0.1 percent higher.
Brexit hedges, volatility
The British pound, which has seen a huge rally in recent days,
is holding onto those levels, with sterling at $1.4681 as of 6:05 a.m. ET on a
morning that has seen a very tight trading range. The currency is likely to be
hit quickly as results come in overnight on Thursday as it will
remain trading throughout that time. One 'leave' supporter predicts it will fall to $1.32 on a vote in favor of Brexit.
Visium
Asset Management is having a rough year. Visium Asset Management's
flagship fund, the healthcare-focused Visium Balanced Fund, was down 10.18%
year-to-date through June 17, according to performance estimates viewed by
Business Insider. That's worse than the 9.3% loss it had suffered through May. The
firm's global fund, which it sold to AllianceBernstein last week, is off 3.82%
for the year, according to the estimates. Sanjay Valvani, a star trader at
Visium, was found dead Monday evening in what appeared to be a suicide. Valvani
was recently charged with insider trading, and he had pleaded not guilty.Oil is back above $50. West Texas Intermediate crude oil has reclaimed the $50-a-barrel mark after Tuesday's American Petroleum Institute data showed a draw that was larger than expected. According to the API, inventories fell by 5.2 million barrels, much larger than the 1.7-million-barrel drawdown that was expected. WTI trades up 0.8% at $50.29.
Foreign companies might soon be able to list in China. The People's Bank of China is considering allowing foreign companies to list their shares on the mainland as part of its effort to open up China's economy. Beijing will also allow mainlanders to invest in overseas capital markets, the South China Morning Post says, citing the PBOC's 2015 annual report. No timetables have been announced.
The Bank of Thailand kept policy on hold. Thailand's central bank held its benchmark interest rate at 1.50%, as expected. According to the BOT, "The committee saw merit in preserving policy space given that the Thai economy would still be facing risks going forward, such as the fragile global economic recovery, monetary policy divergence among major advanced economies, the result of the EU referendum in the U.K. ('Brexit') and financial stability concerns in China." The Thai baht ended Wednesday's session little changed at 35.24 per dollar.
Low and Slow
Federal Reserve Chairwoman Janet Yellen underscored the
uncertainty around the central bank’s decision-making when she said
the chances of recession this year are “quite low,” despite mounting worries
that the U.S. could be heading toward a downturn after seven years of tepid
economic expansion. “The U.S. economy is doing well,” she said, kicking off two days of testimony to Congress. Still,
output growth, hiring, business investment and corporate profits have stumbled
or slowed in recent months, leaving the Fed unsure when it will raise
short-term interest rates again. Ms. Yellen gave no indication that she expects
to lift rates at the Fed’s next meeting on July 26-27. If the economy does
falter, she said the Fed would rely on tools it developed after the financial
crisis to promote growth. She said she had no intention of following Japan and
Europe by adopting policies of negative interest rates.
Continental Drift
Whatever the outcome, Britain’s EU referendum, whatever the outcome on
Thursday, will bring change to Europe, calling into question the
march toward closer ties and “total integration.” A decision to leave would
deepen the crisis facing a continent already struggling with economic weakness,
debt problems, large-scale migration and growing geopolitical instability to
its south and east. Even if the U.K. stays, the bloc may never be the same, in
part due to Prime Minister David Cameron’s attempts to
claw back power from Brussels. A big unknown is how many other countries would
attempt to follow suit if the U.K. leaves. As campaigners on both sides begin a final dash
to win supporters, European businesses are weighing the good and bad of a
“Brexit.” Opinion polls continue to show a close outcome.
Stock
markets around the world are mixed. Germany's DAX (+0.5%) leads the gains in
Europe after Japan's Nikkei (-0.6%) trailed in Asia. S&P 500 futures are up
2.00 points at 2,082.50.Earnings reporting is light. Barnes & Noble, Bed Bath & Beyond, and Red Hat are among the companies reporting after markets close.
US economic data picks up. The FHFA
Housing Price Index will be released at 9 a.m. ET, and existing-home sales will
cross the wires at 10 a.m. ET. US crude-oil inventories will be announced at
10:30 a.m. ET. The US 10-year yield is down one basis point at 1.69%.
A $541 million loss haunts Deutsche Bank and
former trader.
The lonely aftermath of China's one child policy.
Space race heats up as India sends 20 satellites
in one rocket.
Blackberry diehards are not going down without a fight.
Moody's is taking Donald Trump's economic plan
seriously.
There's wide agreement that the world is overly dependent on
central banks and that it would be better for everyone if fiscal policy
played a larger role in boosting economic growth. However, despite
extraordinary demand for government debt around the world, policymakers have
been reluctant to accelerate spending. So what will break the impasse? Naufal
Sanaullah, an investor who writes the blog Macrobeat, says to watch Japan. After several years
of just so-so results from Bank of Japan-led Abenomics, he foresees the
country leaning much more on the fiscal side, with Shinzo Abe's potential
willingness to build up Japan's military being one possible avenue to open up government
coffers. The fact that Abe's party is also polling strongly these days also might
give the government more leeway to get aggressive on this front. Abe's
government has already delayed a planned sales tax (a move which is fiscally
stimulative) and it will be worth watching whether more is done on this front
and if it can accomplish something that the central bank alone has so far
been unable to.
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Source:
Bloomberg, BI, WSJ, CFAI Fin. Newsbrief
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