Monday August 8 Daily Market Primer
Happy
Monday. This may be the summer doldrums, but US stocks still rallied
on Friday in the wake of the very good July jobs number, with the Dow up
191.5, or 1%, just 54 points below its all time high, the S&P up 18.6, or
.9%, and the NASDAQ up 54.9, or 1.1%. Both the S&P and NASDAQ are
at all time highs. I missed Friday’s close on the returns table but
here are the values as of this morning. US markets are down just slightly
in the first half hour of trading. Global markets followed through
on equity rally on Monday, with Japan’s Nikki 225 up 2.5%.
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Delta
Airlines grounded flights this morning due to a computer glitch, OPEC is
meeting to discuss oil prices, and both Donald Trump and Hillary Clinton are
giving important speeches on the economy this week. As mentioned last
week, Wal-Mart will buy e-commerce start up Jet.com for about $3 billion, not
a bad price for just one year in business. This weekend Barron’s
profiled Fidelity’s new robo advisor offering, which is geared to younger
investors and uses Fidelity index funds and iShares http://bit.ly/FidelityRobo.
Here’s
the news:
OPEC meeting as oil slump continues
Oil prices have become a one-way gamble for hedge funds as
they increase bets on declining crude to a
record, building a short position in West Texas Intermediate to 218,623
futures and options combined during the week ended Aug. 2. The
Organization of Petroleum Exporting Countries will hold an informal meeting in Algiers next month, the
group's president said this morning, after the commodity fell into a bear
market last week. Oil is gaining today, however, with a barrel of WTI for
September delivery trading at $42.37 as of 5:57 a.m. ET.
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For offshore buyers, at least. The cost of dollar hedging means
that for investors in Japan and Europe, the yield on 10-year U.S. Treasuries
has fallen to less than zero. The cost of funding dollars,
reflected in the three-month Libor rate, has disconnected
from the Federal Reserve's policy rate in recent weeks, with worries increasing
that there is a big crunch brewing as U.S. money market fund reforms are due to
come into effect in October.
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Delta Air Lines Inc. grounded all takeoffs worldwide this morning
due to a computer systems failure. Shares in the carrier are falling in
premarket trading due to the ongoing disruption. At the manufacturing end of
the business, Airbus Group SE said that the U.K.'s Serious Fraud
Office has opened a criminal investigation into allegations
of fraud, bribery and corruption relating to some of the company's
third-party consultants. Shares in the plane-maker fell to their lowest since
July 11 in Paris trading this morning.
Markets rise
The MSCI Asia Pacific Index climbed 1.4 percent overnight, as shares
reached their highest level in a year. In Japan, the Topix index closed 2 percent higher as the yen weakened
following stronger than expected U.S. jobs data on Friday. In Europe, the Stoxx
600 Index had gained 0.2 percent by 6:10 a.m. ET, with
miners among the strongest gainers as commodity prices climbed. Futures for the
S&P 500 added 0.1 percent as investors start to
question current lofty valuations.
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| Republican
presidential nominee Donald Trump will propose a moratorium on new financial regulations in
a speech later today, in an effort to move the race to the White House back
to policy issues after a difficult couple of weeks. Democratic
presidential nominee Hillary Clinton is set to deliver her own speech on the economy on Thursday, her
campaign said. |
US stocks are at record highs. Friday's dynamite jobs reported propelled both the S&P 500 and the Nasdaq to record-high closes. The 0.8% gain in the S&P 500, however, extended the average's streak without a move of 1.0% to a 17th straight session.
Walmart is buying Jet.com. The deal will be worth about $3 billion, according to Recode's Jason Del Rey, citing anonymous sources. Walmart hopes the acquisition will help jump-start its struggling online business, which is just a fraction of the size of Amazon's. Walmart generates about $14 billion in annual e-commerce sales, compared with about $99 billion from Amazon.
Berkshire Hathaway earnings miss. The Warren Buffett-led conglomerate reported operating earnings per share of $2,803 ($2,911 expected, according to Bloomberg) and a 25% year-over-year jump in net income to $5 billion.
Delta Air Lines flights are grounded nationwide. A nationwide system failure has caused grounded Delta Airlines flights across the US. "Our systems are down everywhere. Hopefully it won't be much longer," the airline's Twitter account tweeted in response to passenger inquiries, Reuters reports.
Airbnb is now worth $30 billion. Bloomberg reports that the home-sharing company has raised another $850 million, bringing its fund-raising total to $3.2 billion. Airbnb is the second-most-valuable startup behind only Uber (~$68 billion).
The bitcoin exchange that was hacked says all its customers will lose some of their funds. Bitfinex, the Hong Kong-based bitcoin exchange that was hacked for $65 million, says all of its customers will lose 36% of their funds. The company says customers will be given digital "tokens” that record their losses, which may one day be redeemed or exchanged for shares of iFinex, the company that operates Bitfinex.
OPEC will meet in September. OPEC members will reportedly hold an informal meeting on a possible production freeze along side the International Energy Forum in Algeria on September 26-28, Reuters reports. "OPEC continues to monitor developments closely and is in constant deliberations with all member states on ways and means to help restore stability and order to the oil market," Mohammad bin Saleh al-Sada, Qatar's minister of energy and industry, said in a statement. West Texas Intermediate crude oil is up 1.6% at $42.48 a barrel.
China trade data. Trade data released by the General Administration of Customs showed that China's trade surplus grew to $52.31 billion in July. Exports fell 4.4% in dollar terms, and imports sank 12.5%, leading to the largest surplus since January.
Turning the Page
Donald Trump is trying to quickly reset his presidential campaign to address worsening poll numbers and growing isolation from influential members of the Republican Party. After endorsing a trio of Capitol Hill Republicans following delays—House Speaker Paul Ryan, New Hampshire Sen. Kelly Ayotte and Arizona Sen. John McCain—he will head on Monday to Detroit to deliver an economic policy address. Meanwhile, we report that Mr. Trump says he will release his tax returns when an IRS audit concludes, but he and his attorneys have substantial knowledge about when the audit will end and some ability to slow the process. Also over the weekend, Hillary Clinton’s running mate Sen. Tim Kaine made a bid to quell the controversy surrounding her use of a personal email server, though he split with her on U.S. legal authority to carry out airstrikes in Libya.
Debt Diet
Plunging global interest rates have made borrowing cheaper than ever for cities and states and Wall Street is urging governments to invest in big-ticket infrastructure projects, but they’re reluctant to do it. New government-bond issues have dropped to levels not seen in the past 20 years. Seven years after the recession ended, voters and government officials remain scarred by the deep budget cuts they endured and the sluggish revenue growth that has constrained spending since then. Many struggling legislatures and city halls are focusing on underfunded employee pensions and rising Medicaid costs instead of infrastructure repairs. Meanwhile, we report that catastrophe bonds are upending the insurance business. The oddball securities have exploded in popularity and injected a new source of volatility into the otherwise staid insurance world, since money flows are driven by broader forces in the bond market.
Knife’s Edge
Belgian authorities have opened a terrorism probe following a weekend machete attack on two police officers in the city of Charleroi, the latest assault in what has become a relentless, summerlong barrage. The assailant, who was fatally shot during the attack, was identified Sunday by the authorities as a 33-year-old Algerian man who had been living in Belgium illegally since 2012. Islamic State’s news agency claimed the attack was carried out by one of the group’s “soldiers.” Meanwhile, Islamic State and the Taliban, after more than a year of fierce combat, have forged a patchwork cease-fire across much of eastern Afghanistan that has helped both insurgencies regroup and counter U.S.-backed efforts to dislodge them. And in other news, we report that Iran has executed a nuclear scientist it convicted of divulging state secrets to the U.S.
Franchise Players
NBCUniversal is betting big on “Harry Potter” and “Fantastic Beasts.” In a wide-ranging seven-year deal with Time Warner’s Warner Bros. that takes effect in 2018, the Comcast-owned media company will obtain commercial television rights to the eight “Harry Potter” movies, as well as rights to the coming “Fantastic Beasts” franchise and the right to use “Harry Potter” and “Fantastic Beasts” source material at several of its Universal theme parks in conjunction with its hugely popular “Wizarding World of Harry Potter” attraction. Terms of the deal weren’t disclosed, but people familiar with the agreement said it could be valued as high as $250 million. Meanwhile, NBC failed to score gold with the Olympics opening ceremony, with a 35% decline from the record-setting audience for London’s opener in 2012. See our latest Olympics coverage here.
Stock markets around the world are higher. Japan's Nikkei (+2.4%) paced the advance in Asia, and Germany's DAX (+0.9%) leads the way up in Europe. S&P 500 futures higher by 4.00 points at 2,180.75.
Earnings reports continue to flow. Allergan,
Dean Foods, Sotheby's, and Tyson Foods are among the names reporting ahead of
the opening bell while Hertz Global, Lending Club, News Corp., and Twilio
highlight the companies releasing their quarterly results after markets close.
A hedge fund betting on the yuan's collapse for seven years is not about
to give up...
... and neither is
sterling's biggest bull.
Draghi jumps Brexit hurdle to find oil is damping the price outlook.
Japan's Emperor indicates he is ready to step down.
Researchers or allies of business? Think tanks blur
the line.
China's great river of steel returns.
U.S. equity markets surged to record highs on Friday following
a very strong July Non-Farm Payrolls report that was as close to bulletproof
as they come. Normally, even with great jobs reports, people find some reason
to be skeptical but in this case, there was clearly good news all around.
There were even strong gains made by demographics which have not done as well in this recovery,
such as people without a degree. Meanwhile, Friday's market action following
the report didn't fit any of the trendy narratives we've grown used to.
Equities rallied despite a jump in interest rates across the curve with the
odds of a U.S. rate hike in 2016 rising from 37.3 percent before the report
to 46.7 percent after. So the notion that stocks are only doing well on
expectations of the Federal Reserve standing pat was put to the test. And of
course the narrative that the economy is stumbling or only benefiting a
narrow slice of the population was also tested. Bottom line: The U.S.
recovery appears to be durable, and at least on Friday, stocks were able to
rally despite expectations of tighter monetary policy to come.
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Source:
Bloomberg, BI, WSJ, Barron’s
posted by Rich Barnett @ 8:47 AM
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