Monday August 1 Daily Market Primer
Stocks
were mixed in the US on Friday as the Dow fell slightly while the S&P and
NASDAQ rose by the same amount. Mixed results continued around the
world on Monday morning, with China down, Hong Kong and Japan up, and European
stocks are down about ½% at the moment. Last week, the S&P 500 declined 0.1% while the Dow fell 0.7% and the Nasdaq gained
1.2%.
|
LAST
|
CHANGE
|
% CHG
|
|
|
18432.24
|
-24.11
|
-0.13%
|
|
|
5162.13
|
7.15
|
0.14%
|
|
|
2173.6
|
3.54
|
0.16%
|
|
|
1219.94
|
2.62
|
0.21%
|
|
|
2408.23
|
-2.88
|
-0.12%
|
|
|
16635.77
|
66.5
|
0.40%
|
|
|
340.18
|
-1.71
|
-0.50%
|
|
|
6701.88
|
-22.55
|
-0.34%
|
|
|
12.34
|
0.47
|
3.96%
|
|
|
5587.4
|
25
|
0.45%
|
|
|
2953.39
|
-25.95
|
-0.87%
|
|
|
22129.14
|
237.77
|
1.09%
|
|
|
28003.12
|
-48.74
|
-0.17%
|
|
|
2892.52
|
23.83
|
0.83%
|
|
|
4412.17
|
-27.64
|
-0.62%
|
|
|
10319.18
|
-18.32
|
-0.18%
|
|
|
16703.64
|
-143.22
|
-0.85%
|
|
|
8533.7
|
-53.5
|
-0.62%
|
|
|
0.279
|
0/32
|
||
|
0.691
|
-2/32
|
||
|
1.061
|
-6/32
|
||
|
1.5
|
-14/32
|
||
|
2.237
|
-1
7/32
|
||
|
-0.614
|
-1/32
|
||
|
-0.088
|
-10/32
|
||
|
41.05
|
-0.55
|
-1.32%
|
|
|
42.93
|
-0.6
|
-1.38%
|
|
|
2.852
|
-0.024
|
-0.83%
|
|
|
2169.5
|
1.25
|
0.06%
|
Goldman
Sachs was subpoenaed
by the US Justice Department in relation to the Malaysian sovereign fund 1MDB
which as at the center of an international corruption scandal http://bit.ly/GS1MDB. UBER and
Chinese ride sharing giant Didi Chuxing called a
truce, with UBER selling its Chinese
operations to Didi in exchange for an equity interest in the company.
The two companies have spent billions battling each other in China. Apple
invested $1 billion in Didi in May. Tesla will buy SolarCity for
$2.6 billion, in a controversial deal to combine the Elon Musk controlled
largest home solar panel installer with the electric vehicle upstart. The
Markit US PMI data will be out this morning, and on Friday we will get the
July jobs number.
Here’s
the news:
After the deluge...
Last week ended with one of the most interesting days of the quarter in terms of
economic events and data releases. Traders are still trying to figure out the impact of the extra stimulus announced by the Bank of
Japan early Friday morning. Second-quarter U.S. GDP figures released later in
the day showed the economy expanded 1.2 percent - less than the 2.5
percent forecast - after a weaker start to the year than previously
estimated. And finally, the results of Europe's banking stress tests
showed Italy’s Banca Monte dei Paschi di Siena SpA was the only one of 51 lenders tested by the
European Banking Authority to have its capital wiped out in the exam's
toughest scenario.
And markets (barely) reacted
Despite the deluge, markets are entering the first day of August
true to form: quietly. The disappointing U.S. GDP figure pushed back
expectations for an interest rate hike from the Federal Reserve, causing the dollar to sink to a one-month
low. The market-implied odds of the next rate hike taking place in
September next year shot above 50 percent for the first time on
Friday. The weaker greenback is helping propel European and Asian
equities higher on Monday, while futures on the S&P 500 Index are
up 0.4 percent as of 3:31 a.m. ET. Markets may be treading water
ahead of events later this week as U.S. Nonfarm Payrolls due to be
released on Friday will give a key insight into the direction of the American
economy and future Fed hikes, with economists expecting a gain of about
175,000 jobs. The Bank of England is also widely expected to announce more easing to combat the effects
of Brexit at its meeting on Thursday.
The big oil short
July saw oil post its biggest monthly decline in a year, with
the price of a barrel of West Texas Intermediate falling 14 percent in the
period. On Monday, oil futures were range-bound after falling as much as 0.9
percent and rising as much as 0.7 percent. Meanwhile, investors have been
betting that the slide will continue, boosting their bets
against the price of crude by
the most ever in the week ending July 26. The impact of the oil
glut is reverberating around the world but is particularly felt in the Middle
East, where crude consumption in Saudi Arabia is
expanding at the slowest pace in at least six years as low energy prices hurt
economic growth. The drop in crude prices has also meant major pain for the second-quarter earnings of oil
majors such as Exxon Mobil Corp. and Royal Dutch Shell Plc.
It's like Uber, but in China
Uber Technologies Inc. will sell its China business to Didi
Chuxing, the dominant ride-hailing service in the country in a move that should
end a costly battle between the two companies for customers and
drivers. The valuation of the combined business will be $35 billion,
people familiar with the matter told Bloomberg, and investors in Uber China
will receive a 20 percent stake in Didi. In addition to Uber selling its
Chinese subsidiary, the complex deal involves Didi making a $1 billion
investment in Uber, the people said. Elsewhere in corporates, the earnings
recession continues with global earnings heading for a fifth straight quarter of
declines and companies slashing costs to help buoy profits.
I spy a multitude of PMIs
U.K. manufacturing shrank more than initially forecast in July,
suffering its biggest drop in more than three years following the Brexit
referendum. Markit Economics' PMI slumped to 48.2 - below a one-off
flash reading of 49.1 published last month. The index has only fallen below the
50 mark - which separates expansion from contraction - one other time since
early 2013. Manufacturing activity in the euro area also slowed in July on Brexit uncertainty with
the Markit PMI dropping to 52 from 52.8. In China, economy watchers
were left scratching their heads as to the state of
the nation’s manufacturing in July. An official factory gauge and a private
manufacturing measure headed in different directions, with the government’s reading
slipping and Caixin Media and Markit's PMI figure jumping to the
highest in more than a year.
Didi
Chuxing is buying Uber China. China's largest ride-hailing service is buying Uber China for
$35 billion, Bloomberg reports. The terms of the deal say Didi will invest $1
billion in Uber global at a valuation of $68 billion and Uber China's investors
will own 20% of the merged Chinese company.Tesla and SolarCity are getting ready to merge. A deal could be announced as soon as Monday, Reuters reports. The exact terms of the deal are unknown, but Tesla's previous offer was 0.122 to 0.131 of its shares for each SolarCity share.
Caesars is selling its online gaming unit. A consortium including the game developer Shanghai Giant Network Technology Co. Ltd and Jack Ma, the founder of the e-commerce company Alibaba Group Holding Ltd, is buying the unit for about $4.4 billion, according to Reuters. The sale will help Caesars Acquisition Co. and Caesars Entertainment Corp. raise cash ahead of their proposed merger.
Chances of a rate cut are being pushed out. Following Friday's disappointing GDP data, fed fund futures suggest there's a 35.7% probability that the next Federal Reserve interest-rate hike will happen in December. That's down from the 49.2% probability that markets were pricing in before Wednesday's Fed meeting.
European stress test results are out. Monte dei Paschi di Siena, Italy's third-largest lender and the world's oldest bank, was the only European lender with a key capital ratio in negative territory. The test also provided some insight into the relatively weak capital positions of Barclays and Deutsche Bank.
China's manufacturing slowed, but services improved. The latest manufacturing purchasing managers’ index, released by China's National Bureau of Statistics, came in at 49.9, just missing the 50.0 that economists were expecting. Richard Grace, the chief currency strategist at Commonwealth Bank, wrote that "floods disrupted economic activity across large parts of China during the month." Nonmanufacturing PMI climbed to 53.9, its highest level since December.
European manufacturing shrugged off Brexit. Final Markit manufacturing PMI for the eurozone printed 52.0 for July. German manufacturing (53.8) was the strongest, while France (48.6) showed notable weakness.
Wrath of Khan
Khizr Khan, the father of a Muslim U.S. Army captain killed in 2004, said he isn’t a proxy for Hillary Clinton’s campaign after taking swipes at Donald Trump in a Democratic convention speech that touched off a turbulent debate that spread with viral speed online and spurred a tense exchange with the GOP nominee. Responding to Mr. Khan’s contention in his speech that Mr. Trump had “sacrificed nothing and no one,” Mr. Trump, cited the “thousands and thousands of jobs” he created as examples of his sacrifice. Mr. Khan described himself as a political independent but made clear that, to him, Mr. Trump is an unacceptable choice for president. Meanwhile, we report that both presidential candidates have busy weeks of travel ahead, while Democrats are seeking to capitalize on recent controversy in the governors’ races in Indiana and North Carolina.
Paying Dividends
Technology stocks that predate the internet bubble of the late 1990s are hot again, thanks to a feature that many tech firms deliberately avoided in those days: hefty dividends. The sight of big-name technology companies paying large dividends is causing some double takes. Executives and analysts often contended during the technology boom of the 1990s that a company that paid a dividend was implicitly acknowledging limitations on its growth potential. The wave of cash now pouring into older tech stocks reflects investors’ willingness to pay up for investments that provide steady income. Meanwhile, in the slowest year for U.S. IPOs since 2009, we report that the downtrodden IPO market just can’t compete with buyers who are willing to pay big to take potential listings off the board. More companies, from Dollar Shave Club to oil company Centennial, are choosing a sale over a public listing.
Jihad Factory
The rise of Islamic State has caught Europe’s prison systems flat-footed. To keep militants off the streets, authorities are throwing many of them in jail, but that is injecting battle-hardened radicals into overcrowded prisons. Convicted terrorists sit atop the social pecking order in many of these facilities, using jail time to plot new attacks or groom petty criminals for jihad. We report that, in an attempt to disrupt the aura around radical inmates, governments across the continent have begun to experiment with special measures, such as segregating radicals from other prisoners. Meanwhile, France has widened the probe following an attack in Normandy last week in which two Islamist radicals, one of which had served time in a French prison, killed a priest. We also report that social-media companies are trying to level the playing field in the online propaganda war with Islamist radicals through online advertising.
Trouble in the Twitterverse
Whether you’re a Twitter pro or a complete novice, it’s possible that the best way to get the most out of Twitter is to avoid it as much as possible, writes our Keywords columnist Christopher Mims. Understanding why this is the case illustrates Twitter’s larger problem: the service reaches way more people than have accounts or regularly engage with it directly. Twitter is so bad at surfacing its most valuable content that, in a form of information arbitrage, a whole ecosystem of other players has arisen to do it, from apps and data-mining services to the news media itself. Twitter is a place where people create content, yet it is ceding to others the control over how people consume it. The future of the company may depend on its ability to capture more of its indirect audience.
The eurozone economy expanded 0.3%
in the second quarter compared with Q1, half the rate posted in Q1. France's
economy, the second-largest in Europe, didn't grow in Q2.
EuroNews.com (France) (29 Jul.), CNBC (29 Jul.)
Unemployment in the eurozone
remained at 10.1% in June, after the rate declined in May to the lowest level
in five years, according to Eurostat. Greece and Spain had the
highest unemployment in the bloc.
Market News International (29 Jul.)
Stock
markets around the world trade mixed. Overnight, Hong Kong's Hang Seng (+1.5%) led
and China's Shanghai Composite (-0.9%) lagged. In Europe, Germany's DAX (+0.2%)
outperforms. S&P 500 futures are up 1.75 points at 2,170.00.Earnings reporting is light. Loews and AMC Entertainment will report ahead of the opening bell, and Texas Roadhouse will release its quarterly results after markets close.
US economic data flows. Markit US manufacturing PMI
will be released at 9:45 a.m. ET before construction spending and ISM
manufacturing are announced at 10 a.m. ET. The US 10-year yield is higher by 3
basis points at 1.48%.
A $400 billion influx is squeezing one of the market's safest
assets.
The guy that invented yen-dollar swaps is now really into Moomins.
Vladimir Putin’s economy has been shrinking for 18 months.
Chinese capital outflows may still
be happening - in disguise.
Source:
Bloomberg, BI, WSJ, CFAI Fin. Newsbrief, Euronews, CNBC, Market News Int.
posted by Rich Barnett @ 6:46 AM
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