Thursday August 4 Daily Market Primer
US
stocks rose on Wednesday, breaking a seven session loosing streak, as oil rallied
off a recent bottom to over $40 and the S&P energy sector rose
1.8%. On Thursday, the global stock market rally got back to business
as the Bank of England cut the base rate by 25 basis points to a record low
.25%. Treasury bonds rallied on the BOE move. Initial
jobless claims rose to 269K last week, slightly higher than the expected
265K. Claims have now been below 300K, a benchmark for a strong labor
market, for 74 weeks, the longest streak since 1973. Futures
pointed up before the open but the market is down slightly this morning.
|
LAST
|
CHANGE
|
% CHG
|
|
|
18355
|
41.23
|
0.23%
|
|
|
5159.74
|
22.01
|
0.43%
|
|
|
2163.79
|
6.76
|
0.31%
|
|
|
1212.73
|
10.38
|
0.86%
|
|
|
2386.5
|
2.08
|
0.09%
|
|
|
16077.31
|
-5.8
|
-0.04%
|
|
|
335.58
|
0.11
|
0.03%
|
|
|
6742.6
|
108.91
|
1.64%
|
|
|
12.69
|
-0.17
|
-1.32%
|
|
|
1429.56
|
10.02
|
0.71%
|
|
|
5475.8
|
10.1
|
0.18%
|
|
|
2982.43
|
3.97
|
0.13%
|
|
|
21832.23
|
93.11
|
0.43%
|
|
|
27714.37
|
16.86
|
0.06%
|
|
|
16254.89
|
171.78
|
1.07%
|
|
|
2831.96
|
4.38
|
0.15%
|
|
|
1531.2
|
8.94
|
0.59%
|
|
|
4334.26
|
13.18
|
0.31%
|
|
|
10217.83
|
47.62
|
0.47%
|
|
|
16192.01
|
62.17
|
0.39%
|
|
|
8375.9
|
112.4
|
1.36%
|
|
|
0.259
|
-1/32
|
||
|
0.655
|
1/32
|
||
|
1.036
|
5/32
|
||
|
1.504
|
12/32
|
||
|
2.254
|
31/32
|
||
|
-0.604
|
0/32
|
||
|
-0.074
|
12//32
|
||
|
40.59
|
-0.24
|
-0.59%
|
|
|
42.7
|
-0.4
|
-0.93%
|
|
|
2.845
|
0.006
|
0.21%
|
|
|
2158.25
|
1.25
|
0.06%
|
|
|
334.99
|
-1.81
|
-0.54%
|
Tesla
had another tough quarter, with higher revenues but a bigger loss, and disappointing
vehicle deliveries, a key metric. This company reminds me of Amazon in
the early days. Insurer AIG had a stock gain worthy of the mega-techs
Apple and Facebook we saw last week, as its share price rose 7% on
an earnings surprise. The world’s largest exchange operator, Atlanta
based Intercontinental Exchange (aka ICE), was also up 5% on record earnings.
After just one year in operation, E-commerce upstart Jet.com, a would be
challenger to Amazon, may sell itself to Wal-Mart. So much for
that. Hillary Clinton is pulling ahead in the poles amid rumors of
disarray in the Trump campaign http://bit.ly/TrumpBadWeek.
Here’s
the news:
Bank of England rate decision
The Bank of England decided to cut rates to 0.25 percent, expand QE by £60
billion and include corporate bond purchases in its easing plan in its decision
announced at 7:00 a.m. ET. The British pound dropped to $1.3221 in the immediate aftermath of the
announcement. The decision will be followed by a press conference at 7:30
a.m. ET. Businesses in the U.K. are looking beyond the Bank of England and are
calling on Chancellor of the Exchequer Philip Hammond to deliver a
“bumper” fiscal stimulus.
Oil holds
After its biggest gain in three weeks yesterday, oil is holding
above $40 this morning, with a barrel of West Texas Intermediate for
September delivery trading at $40.62 at 5:35 a.m. ET. Prices of
the commodity were boosted by data showing that U.S. gasoline supplies fell
more than expected. Domestic production in the U.S. remains under pressure, down 1 million barrels a day in July from a year
earlier, while crude imports surged to the highest level since 2012. The
bounce in oil prices is lifting emerging market assets, with Malaysia's
ringgit among the biggest winners.
Berkshire draws fed scrutiny
Warren Buffett’s Berkshire Hathaway Inc. is being examined by
U.S. regulators to see whether its stake in Wells Fargo & Co. violates rules
for how much credit banks can extend to corporate insiders, according to two
people familiar with the review. Berkshire's 16 percent investment
in American Express Co., which does substantial business with Wells Fargo,
is of particular concern. Elsewhere in investment news, Goldman
Sachs Group Inc.’s retirement plan is pulling its cash from a fund run by former
employee Daniel Och, planning to reduce its holding to zero the end of the
month. And Steven Cohen, fined a record $1.8 billion after pleading guilty to
securities fraud in 2013, is looking to hit the ground running when he is allowed
once again to manage outside money in January 2018.
The MSCI Asia Pacific Index rose 0.7 percent overnight as shares in Asia
rebounded from their worst decline in five weeks. Japan's Topix index added 0.9 percent as earnings lifted shares
and pressure on the yen eased. In Europe, the Stoxx 600 Index was 0.5 percent higher at 6:06 a.m. ET as banks
recovered some of this week's losses and energy shares tracked oil prices
higher. S&P 500 futures were flat.
The US is importing more oil than it's producing. A large OPEC supply has caused the US to import more oil than it has produced for the first time since January 2014. According to Vivek Dhar, a mining and energy commodities analyst at Commonwealth Bank, "the increase in US oil imports reflects OPEC's strategy to target market share instead of price." West Texas Intermediate crude oil is down 0.8% at $40.49.
Brazil's impeachment committee votes. A Brazilian Senate committee will vote Thursday whether to recommend that President Dilma Rousseff be removed from office. According to AFP, the vote isn't binding and is expected to overwhelmingly favor Rousseff's ousting.
Revenue from tech deals is at its highest level since the dot-com bubble. Tech mergers and acquisitions have brought in $1.9 billion this year, according to Dealogic. That's up 11.8% from the same period last year and trails only the same period in 2000 ($2.2 billion) for the highest total.
There's one market where electronic trading doesn't work so well. Craig Donohue, the executive chairman at The Options Clearing Corporation who was previously the CEO of the Chicago Mercantile Exchange, says electronic trading doesn't work as well for options. "I've been away from it for a few years, but at least during my time I think we certainly saw that electronic trading in our more complicated options markets were, I think, significantly more difficult to achieve than in the futures markets, where you just had fewer instruments, concentrated liquidity in," Donohue told Business Insider.
Tesla missed on earnings. The electric-car maker lost an adjusted $1.06 a share on adjusted revenue of $1.56 billion. Tesla says it's on track for 50,000 deliveries in the second half of the year, which would put it at the low end of its 2016 guidance of 80,000 to 90,000 deliveries.
Toyota slashed its forecast. The world's largest automaker says full-year operating profit will come in at 1.6 trillion yen ($15.76 billion), down from its previous forecast of 1.7 trillion yen. That would represent a 44% drop in profit, caused mostly by the strength of the Japanese yen.
Cash Clash
Senior Justice Department officials objected to sending a plane loaded with cash to Tehran at the same time that Iran released four imprisoned Americans, but their objections were overruled by the State Department. After announcing the release of the Americans in January, President Barack Obama also said the U.S. would pay $1.7 billion to Iran to settle a failed arms deal dating back to 1979. What wasn’t disclosed at the time was that the first payment would be $400 million in cash, flown in at the same time, as we reported Tuesday. The concerns of Justice Department officials show that even within the Obama administration there were worries that the pallets of cash could send the wrong signal about U.S. policy when it came to hostages. Meanwhile, the disclosures have reignited a political furor over the Iran nuclear deal in Washington.
Crossed Signals
Republican vice presidential nominee Mike Pence on Wednesday endorsed Paul Ryan in his primary race, a day after Donald Trump withheld support from the House speaker. The conflicting messaging came as the Trump campaign sought to keep Republicans from abandoning their party’s nominee after a week of miscues and sliding poll numbers. A Fox News survey released Wednesday found Hillary Clinton 10 percentage points ahead of Mr. Trump, 49% to 39%. Mr. Pence’s attempt to bridge the gap between Mr. Trump and Mr. Ryan marked the third time in two weeks that the low-key vice presidential nominee has had to step into such a breach. But in a bit of good news for Mr. Trump, we report that he marked another substantial escalation in his fundraising in July, drawing him far closer to Mrs. Clinton.
Big Order
Wal-Mart is in talks to buy online discount retailer Jet.com, a deal that could give the retail giant’s e-commerce efforts a much-needed jolt as it seeks to grow beyond its brick-and-mortar storefronts with speedy home delivery. It isn’t clear how much Wal-Mart would pay for the unprofitable startup, but Jet could be valued at up to $3 billion, a sign that Wal-Mart executives are willing to spend big to catch up with Amazon. Barely a year old, Jet has sought to underprice Amazon with a vast marketplace that would require billions of dollars in funding and a plan to rely more on suppliers than warehouse inventory. A sale to Wal-Mart at a premium to Jet’s last valuation of $1.35 billion would give investors a handsome return, but also signal that Jet couldn’t live up to its grand ambitions.
An unpublished paper drafted by the
joint Pension Finance Task Force of the American Academy of Actuaries and the
Society of Actuaries runs counter to practices that actuaries follow in the US
when they establish the value of a public pension fund's liabilities,
task-force member Edward Bartholomew said. The two actuarial groups shut down
the task force Monday, and questions remain over whether the paper will be
published by other means.
New orders received by
services-sector businesses in the US surged to a nine-month high in July,
according to an industry benchmark. The Institute for Supply Management's
new-orders index for nonmanufacturing industries rose to 60.3, its highest
reading since October.
MarketWatch (03 Aug.),
A 3% leverage ratio provides an
adequate backstop, offsetting lenders' core capital ratio without affecting
credit availability, the European Banking Authority said Wednesday. The
regulator's findings are in keeping with those of the Basel Committee on
Banking Supervision and many banks are already making up the estimated €6.4
billion capital shortfall.
Earnings reporting remains heavy. Chesapeake Energy, Fannie Mae, Kellogg, and MGM Resorts are among the names reporting ahead of the opening bell, while Kraft Heinz, LinkedIn, and Priceline highlight the names releasing their quarterly results after markets close.
US economic data flows. Initial jobless claims will
cross the wires at 8:30 a.m. ET, and factory orders are due out at 10 a.m. ET.
Then, at 10:30 a.m. ET, natural-gas inventories will be released. The US
10-year yield is little changed at 1.54%.
This quiet market has traders on edge.
The Greenspan put's gone wild as critics see markets hamstringing
Fed.
This obscure corner of London finance is suddenly
a key battleground.
Nike gives up on golf equipment.
Most Russians don't know what a central bank is.
Quick, what share of corporate directors are women?
Republicans are stuck with Trump despite fears he'll destroy them.
The Bank of England is likely to steal all the headlines today
as the world waits to see how policy makers opt to fight the effects of the
Brexit referendum. But keep an eye out on Japan - which is solidifying its
reputation a microcosm of the big-picture questions currently being asked in
markets: How low can bond yields go before investors revolt? How much firepower do central banks have left?
What's the political will for fiscal stimulus? Moreover, the Bank of Japan's
unconventional monetary policies are rippling across markets with everything
from dollar swap rates to U.S. corporate bonds seemingly affected. Perhaps
the most salient example of this is this week's call by Nomura Holdings Inc.'s
chief credit strategist, Toshihiro Uomoto. He says the flood of money coming
out of negative-yielding Japanese government bonds will push the yield on the
30-year U.S. Treasury to an unprecedented zero percent within the next two
years. It's a crazy market right now and Japan is currently its
standard-bearer.
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posted by Rich Barnett @ 7:32 AM
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