Friday August 5 Daily Market Primer

US stocks were pretty flat yesterday ahead of today’s July jobs report.   Stocks were mostly up in Asia and Europe, with the Hang Seng up 1.4%.  Yesterday, the pound sterling fell 1.6% and UK bond yields hit record lows in the aftermath of the BOE rate cut http://bit.ly/Pounded/.  The VIX fell 5% yesterday.  

The first Friday of every month can cause some anxiety for portfolio managers, but today’s July jobs number was a very strong 255K new jobs, much better than the expected 180K.   So I’m taking the rest of the day off J.  Average hourly earnings rose eight cents and the unemployment rate held at 4.9%.  US futures ticked up on the jobs release and the market has opened up .6%.

	LAST	CHANGE	% CHG
DJIA	18352.05	-2.95	-0.02%
Nasdaq	5166.25	6.51	0.13%
S&P 500	2164.25	0.46	0.02%
Russell 2000	1213.76	1.03	0.09%
Global Dow	2398.27	3.67	0.15%
Japan: Nikkei 225	16290.4	35.51	0.22%
Stoxx Europe 600	337.84	2.26	0.67%
UK: FTSE 100	6740.16	105.76	1.59%
CBOE Volatility	11.71	-0.71	-5.72%
DJ Asia-Pacific TSM	1432.07	2.32	0.16%
Australia: S&P/ASX 200	5497.4	21.6	0.39%
China: Shanghai Composite	2976.7	-5.73	-0.19%
Hong Kong: Hang Seng	22146.09	313.86	1.44%
India: S&P BSE Sensex	28078.35	363.98	1.31%
Singapore: Straits Times	2828.17	-3.79	-0.13%
U.S. 3 Month	0.274	0/32
U.S. 2 Year	0.702	-3/32
U.S. 5 Year	1.091	-10/32
U.S. 10 Year	1.542	-11/32
U.S. 30 Year	2.276	-15/32
Germany 2 Year	-0.611	0/32
Germany 10 Year	-0.069	-0.25
Crude Oil	41.87	-0.06	-0.14%
Brent Crude	44.28	-0.01	-0.02%
S&P GSCI	341.21	0.54	0.16%

We often hear from clients that they are reluctant to invest in equities or other risk assets when we have recession risk, or an unpredictable election, or because of Brexit, or they don’t want emerging markets which have a whole host of problems.  However capital markets are unpredictable and can move very differently from economic and political events, at least in the short term, as the Brazil stock market’s 60% and bond markets 24% 2016 return shows http://bit.ly/BrazilRuns.   When does a stock crush earnings estimates and the stock price barley moves?  When the company has already been bought, as happened yesterday with LinkedIn, which is being acquired by Microsoft for $26 billion.  As we move in to the first weekend in August, global equity markets have rallied strongly in the post-Brexit environment, global interest rates on the floor, the US presidential race is heating up, and the summer Olympics are kicking off in Rio.

Here’s the news:

RBS, Allianz results disappoint

Royal Bank of Scotland Group Plc warned that it will probably take longer than expected to reach profitability targets as the company posted a second quarter net loss of 1.08 billion pounds ($1.4 billion), more than four times what analysts had estimated. Share in the bank were trading 5.3 percent lower at 5:51 a.m. ET. Allianz SE also disappointed the market, reporting net income of 1.1 billion euros ($1.2 billion) for the second quarter, well below average analyst estimates of 1.55 billion euros. Pacific Investment Management Co., part of Allianz's asset-management unit saw third-party outflows of 18 billion euros in the quarter. Shares in Allianz were 4.3 percent lower at 5:55 a.m. ET.

Oil slips, copper warning

After rising as much as 6.1 percent in the past two days, oil is paring some of those gains this morning ahead of the jobs number and U.S. rig count data later. A barrel of West Texas Intermediate for September traded at $41.49 at 6:05 a.m. ET. Former Federal Reserve Chair, Alan Greenspan, has said that he expects current levels to be the bottom in the oil price. Goldman Sachs Group Inc. has a warning for copper bulls, saying that they see a "supply storm" coming in the industrial metal and predict the commodity will drop 17 percent over the next 12 months.

Markets waiting for jobs data

Global markets are treading water ahead of payrolls data. Overnight the MSCI Asia Pacific Index climbed 0.7 percent with Japan's Topix index closing 0.2 percent lower. In Europe, the Stoxx 600 Index was 0.3 percent higher at 6:08 a.m. ET, reducing its loss for the week to 0.9 percent. S&P 500 futures were up 0.2 percent.

Trump polling

A raft of new polls show the Republican presidential nominee Donald Trump slipping well behind Hillary Clinton. One national poll showed the Democratic party nominee with a 15-point lead over Trump. Bloomberg Politics sent two reporters on a 3,000 mile bus trip across the country to gauge the national mood.

Support for Angela Merkel is cratering. German Chancellor Angela Merkel is plunging in the polls in the wake of the recent terrorist attacks in Germany. Reuters reports that a survey conducted by the public broadcaster ARD shows that support for Merkel has fallen 12 points since July to 47%. This is the second-lowest reading since Merkel's reelection in 2013.

Goldman Sachs might have to make some changes in the UK. According to a US regulatory filing, the investment bank says the Brexit could "adversely affect" certain parts of its business, and it might be forced to restructure some of its business. The filing comes a little more than a month after Richard Gnodde, the cohead of the Investment Banking Division of Goldman Sachs, suggested the company could move workers out of the UK and into other countries within the European Union because of the vote for a British exit from the EU.

Apple is changing its approach to TV. The tech giant is building a TV guide that will allow it to connect to services like Netflix, HBO, and ESPN, a source told Recode's Peter Kafka.

Amazon is leasing airplanes. Amazon One, a converted Boeing 767 that is operated by Atlas Air and that is the first plane to bear the company's name, was unveiled Thursday. The company says it is leasing 40 planes, 11 of which are dedicated to bringing packages around the world.

Jeff Bezos is selling Amazon stock. Amazon CEO Jeff Bezos sold a million shares of stock this week, bringing in more than $755 million. Just last month, he moved ahead of Warren Buffett as the third-richest person in the world. Bezos is an investor in Business Insider.

LinkedIn crushes estimates. The business networking site earned $1.13 a share as revenue spiked 31% to $712 million. "We achieved record levels of operating cash flow, while continuing to invest heavily across our core member and customer value propositions," CFO Steve Sordello said. Back in July, Microsoft agreed to acquire LinkedIn for about $26 billion.

Trump’s Trials
While Donald Trump showed signs that he is trying to get his campaign back on track amid a series of recent missteps, a new Wall Street Journal/NBC News poll found Hillary Clinton opening a 9-point lead nationally over the New York businessman. Mrs. Clinton’s lead, at 47% to 38%, grew from 5 percentage points before the conventions in July. Mr. Trump has solidified support among working-class, white voters, but he has been losing support among college-educated and suburban voters. The poll also found that Mrs. Clinton retained a 9-point lead when third-party candidates are included on the ballot. Meanwhile, we report that the Clinton camp is seeking to win over Republicans, while Republican vice presidential nominee Mike Pence said he stands by Mr. Trump despite “differences in style.”

Subsidized Jihad
Belgian financial investigators looking into recent terror plots have discovered a disturbing trend: Some of the suspects were collecting welfare benefits until shortly before they carried out their attacks. At least five of the alleged plotters in the Paris and Brussels terror attacks partly financed themselves with payments from Belgium’s generous social-welfare system. The main surviving Paris suspect collected unemployment benefits until three weeks before the November attacks, though he was employed and should have been ineligible. The revelations raise a difficult conundrum for Europe. On one hand, the modern welfare state is a primary tool for combating poverty as well as integrating immigrants. On the other, officials are working to stem terrorist financing. All of the Paris and Brussels terror suspects known to have received welfare were EU citizens.

Low Expectations
The all-important question of whether a company beat estimates may be more about theatrics than reality. We report that quarter after quarter, about 75% of companies in the S&P 500 index meet or exceed analysts’ earnings forecasts, a statistic that has held up in good times and bad. One reason for such consistently impressive results is that some companies quietly nudge analysts’ numbers, almost always lower. A federal rule bars companies from selectively disclosing material nonpublic information but doesn’t prohibit private conversations in which companies can gently push analysts in helpful directions, giving them and their investing clients a potentially unfair advantage. Our analysis of daily changes in analysts’ estimates at S&P 500 companies found that earnings estimates often decline steadily after the end of a quarter. That can turn what might have

Let the Games Begin
The Olympic motto is faster, higher, stronger. This year’s Games will also be clearer, bigger and closer. For the first time, viewers at home can go live with no more than a smartphone to every single event in every single sport—4,500 hours of Olympic drama. We present our complete guide for watching this year’s Games, including which athletes to follow on social media. Viewers may be in for some surprises when the first South American city ever to host the Olympics lights the torch at the opening ceremony Friday, before a VIP-studded crowd of 70,000. Expect a four-hour, multimedia spectacle displaying Brazil’s sweeping history and diversity. And to get a taste of what it takes to medal, check out our minigames designed to test your ability at core Olympic skills.

When China sneezes, these countries will be the first to catch a cold.

Ratings agencies do matter — if you're Turkey.

Mexico's richest man wants a three-day workweek.

New York’s condo slowdown is ending developer rush for land.

Wealth inequality may not work the way Piketty thinks

Business Groups Sue U.S. Government Over Tax-Inversion Rules

Home Prices in the Bay Area Push Builders, Buyers to More Distant Suburbs

U.S. Not Persuaded to Extradite Imam Over Turkey Coup

A Chastened Brazil Welcomes Its Summer Games

U.S. Tech Firms Dominate Cloud Services in Western Europe

Cash Flies Commercial and Other Secrets of Moving Money

Sterling Falls, Bonds Rise on BOE Rate Cut

Stock markets around the world are higher. Hong Kong's Hang Seng (+1.4%) led the gains in Asia, and Spain's IBEX (+0.8%) paces the advance in Europe. S&P 500 futures are up 4.75 points at 2,164.00.
Earnings reporting is light. Liberty Media and Virgin America will report ahead of the opening bell, while Berkshire Hathaway releases its quarterly results after markets close.

US economic data flows. Aside from the jobs report, the trade balance will be released at 8:30 a.m. ET and consumer credit will cross the wires at 3 p.m. ET. The Baker Hughes rig count is due out at 1 p.m. ET. The US 10-year yield is down 1 basis point at 1.49%.

The greatest trick central banks ever pulled...

Between the presidential election, the Olympics and the lack of market volatility, there's probably less excitement about today's Non-Farm Payrolls report than usual. Nonetheless, the jobs report is always important and there are still good reasons to get excited. If there's one thing to pay particularly close attention, to it's the wages number. Economists in the Bloomberg survey expected average hourly earnings to rise 2.6 percent from a year ago, which would be the same pace of growth as July. Other wage data has been accelerating, including the Atlanta Fed's wage growth tracker, which is up to 3.6 percent. The key thing here is that there's a lot of inflation and wage data that's going in the Fed's preferred direction (up), and if it keeps going something will have to give. In a note to clients earlier this week, Citi's Global Head of G10 FX Strategy Steven Englander suggested that a positive surprise on wages was on the cards, and that markets may be too complacent about the odds of a September rate hike. As of this moment, the market is pricing in just an 18 percent chance of a September hike. Let's see where this stands in a couple hours.

Source: Bloomberg, BI, WSJ,