Tuesday August 30 Daily Market Primer
US
stock rose Monday,
led by a rally in financials (J),
as the higher probability of rate hikes was digested by the market.
Overall, things were quiet, with the lowest trading volume of the year. Overnight,
stocks followed the US lead and rallied almost everywhere, and US futures
are pointing to a flat opening.
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LAST
|
CHANGE
|
% CHG
|
|
|
18502.99
|
107.59
|
0.58%
|
|
|
5232.33
|
13.41
|
0.26%
|
|
|
2180.38
|
11.34
|
0.52%
|
|
|
1244.94
|
6.91
|
0.56%
|
|
|
2454.99
|
5.33
|
0.22%
|
|
|
16725.36
|
-12.13
|
-0.07%
|
|
|
345.24
|
2.04
|
0.59%
|
|
|
6845.35
|
7.3
|
0.11%
|
|
|
12.97
|
0.03
|
0.23%
|
|
|
5478.3
|
9.1
|
0.17%
|
|
|
3074.68
|
4.65
|
0.15%
|
|
|
23016.11
|
194.77
|
0.85%
|
|
|
28343.01
|
440.35
|
1.58%
|
|
|
16725.36
|
-12.13
|
-0.07%
|
|
|
2828.39
|
-1.04
|
-0.04%
|
|
|
4462.6
|
38.35
|
0.87%
|
|
|
10651.23
|
106.79
|
1.01%
|
|
|
16883.49
|
228.27
|
1.37%
|
|
|
8690.8
|
74.4
|
0.86%
|
|
|
0.34
|
0/32
|
||
|
0.813
|
0/32
|
||
|
1.191
|
-3/32
|
||
|
1.579
|
-5/32
|
||
|
2.231
|
-10/32
|
||
|
-0.618
|
0/32
|
||
|
-0.086
|
14/32
|
||
|
47.38
|
0.4
|
0.85%
|
|
|
49.56
|
0.3
|
0.61%
|
|
|
2.919
|
0.023
|
0.79%
|
|
|
360.66
|
1.52
|
0.42%
|
|
|
2178.75
|
-0.5
|
-0.02%
|
Apple’s big tax case with the European Commission resulted a
worst case scenario, hitting
the company with a whopping 13 billion euros ($14.5 billion) in back taxes
due what it says is a sweetheart deal with Ireland. That’s a lot
of money, even for Apple. Ireland and Apple of course have said they will
fight the ruling. The US treasury has been supportive on this issue,
putting out a warning last week that the EC is overstepping its authority and
retroactively changing the rules. Not surprisingly, not everyone looks at
it the same way, and here’s a quote from London’s Financial Times this
morning: “The US is meanwhile sabre rattling over perceived
discrimination against its multinationals. Never mind that these have stashed
billions offshore to avoid US tax. Complaints about supposed EU
extra-territoriality look disingenuous, meanwhile, given the long reach of the
Department of Justice and New York financial regulator beyond US
borders.” Could they be talking about the enforcement action
against international soccer agency FIFA last year? This case has
ramifications for other large US multinationals, including Facebook and
Alphabet (aka Google). Due to its size and visibility, this case may be
come a catalyst for at least some rationalization of international tax rates
and treaties. Lets hope so. Apple is down only about 1% now in
pre-market trading.
Food giant Mondelez International dropped its bid for
Hershey on opposition
from the trust that controls the company. It’s not the first time a
takeover has been thwarted by the Hershey Trust. Here’s the news:
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The European Commission has ruled that Ireland granted Apple
Inc. illegal tax benefits worth up to $14.5 billion. The ruling requires that
Ireland now recoup that amount, plus interest, from the company. Ireland has
previously promised to fight any adverse decision by the EU on
its tax deals with the company. Apple shares were 2 percent lower in
premarket trading after the decision was announced. |
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The U.S. dollar climbed to a three-week high this morning as investors
assess the likelihood of a rate rise at the Federal Reserve's September
meeting. Morgan Stanley says to forget a rate hike next month, adding that
Janet Yellen's Jackson Hole speech contained nothing new.
There are also warnings about Friday's payrolls data, with currency traders
positioned on only one side of the trade. |
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Explorers found about a tenth of the average annual level
since 1960 in 2015 and are on course to find even less this year, spurring worries
about the ability to meet future demand. Iran, meanwhile, announced a tender for contracts from international
oil companies to develop its resources after years of sanctions. In the
market this morning, a barrel of West Texas Intermediate for October delivery
traded at $47.34 at 6:12 a.m. ET. |
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Overnight, the MSCI Asia Pacific Index climbed 0.2 percent, with Hong Kong's Hang
Seng Index headed towards its second straight month of gains exceeding 5
percent. In Europe, the Stoxx 600 Index was 0.5 percent higher at 6:12 a.m. ET, with
almost all industry groups rising. The U.K.'s FTSE 100 Index, trading for the
first time this week, was 0.1 percent higher as commodity prices
weighed. S&P 500 futures were flat. |
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Equity investors are bullish on the global economy, as shown by
the relative outperformance of the FTSE All World Cyclical Index
relative to the FTSE All World Defensive Index over the past couple of
months. With payrolls data on Friday likely to set the tone in the short
term, investors are betting that the run of good economic data continues. |
Japan's unemployment rate is at a 21-year low. Data from the Ministry of Internal Affairs and Communications showed Japan's unemployment rate slid to a seasonally adjusted 3.0% in July, its lowest since 1995. The Japanese yen is weaker by 0.5% at 102.40.
Brexit is having a big impact on the UK mortgage market. The number of new mortgages given out in the UK in July was 60,912, making for the lowest total in 18 months as uncertainty took hold following the June 23 vote for a British exit from the European Union. The British pound is lower by 0.2% at 1.3085.
Saudi Arabia is bleeding reserves. The kingdom's foreign-exchange reserves fell by $6 billion in July and are at their lowest level since February 2012, Reuters reports.
Gold is doing something it's only done twice in the past decade. The price of the precious metal has historically moved in tandem with the rate of central bank balance-sheet expansions, but it is not keeping up right now. Gold is down 0.3% near $1,319.50 an ounce.
Mondelez says it won't pursue Hershey anymore. Mondelez says it does not see a path forward for its $23 billion takeover attempt of the chocolate giant because of "recent shareholder developments at Hershey."
Europe hit Apple with a 13-billion-euro ($14.5 billion) fine. The European Commission has ordered Ireland to claw back the money after concluding it had granted the company illegal tax benefits. Apple is down about 2% ahead of the opening bell.
Cyberattacks on bitcoin exchanges are common news items, but a
Reuters examination reveals the scale of the problem, with one-third of these
cyber trading platforms the target of hacking over the past six years and
nearly 50% closing. Observers believe the problem may be insoluble due to the nature
of the digital world.
Reuters (29 Aug.)
High-frequency trading firms are teaming up to explore a
Chicago-to-Japan link that would use microwave towers and undersea cables to
quicken trans-Pacific trading, sources say. The link would cut infrastructure
costs of firms involved, which reportedly include Citadel, Virtu Financial and
Jump Trading.
Bloomberg (29 Aug.)
Not Sweet Enough
Oreo cookie maker Mondelez has ended its pursuit of Hershey after the famed chocolatier rebuffed its latest acquisition offer, putting an end to a lengthy takeover campaign that would have created the world’s largest candy company. Hershey last week rejected a new bid by Mondelez, the second one since June, and indicated it would be difficult to strike a deal before next year because of the shifting dynamics at its controlling shareholder, the Hershey Trust. Mondelez’s failure to pull off the takeover, which would probably have been valued at upward of $25 billion, will likely reinforce the notion among analysts and investors that Hershey is unattainable as an acquisition target in light of its majority ownership by a trust that for years has been reluctant to sell.
Oreo cookie maker Mondelez has ended its pursuit of Hershey after the famed chocolatier rebuffed its latest acquisition offer, putting an end to a lengthy takeover campaign that would have created the world’s largest candy company. Hershey last week rejected a new bid by Mondelez, the second one since June, and indicated it would be difficult to strike a deal before next year because of the shifting dynamics at its controlling shareholder, the Hershey Trust. Mondelez’s failure to pull off the takeover, which would probably have been valued at upward of $25 billion, will likely reinforce the notion among analysts and investors that Hershey is unattainable as an acquisition target in light of its majority ownership by a trust that for years has been reluctant to sell.
Shaky Alliance
When Turkish ground forces delivered a lightning strike on Islamic State fighters in Syria last week, the Pentagon hailed what it described as close U.S.-Turkish coordination. But we report that behind the scenes, cooperation between the NATO partners broke down at senior levels. While the White House was preparing to consider a secret plan to have American special forces join the Turks, Ankara pulled the trigger on the mission unilaterally without giving officials in Washington advance warning. When clashes started between Turkish and Syrian Kurdish fighters—who are directly backed by U.S. Special Forces—the Pentagon issued unusually blunt calls for both to stand down. The breakdown in coordination created a prickly, new challenge for the U.S. as two of its most important partners in the campaign fight each other instead of Islamic State. President Barack Obama will meet with Turkish President Recep Tayyip Erdogan next week for the first time since the attempted coup in Turkey in July.
When Turkish ground forces delivered a lightning strike on Islamic State fighters in Syria last week, the Pentagon hailed what it described as close U.S.-Turkish coordination. But we report that behind the scenes, cooperation between the NATO partners broke down at senior levels. While the White House was preparing to consider a secret plan to have American special forces join the Turks, Ankara pulled the trigger on the mission unilaterally without giving officials in Washington advance warning. When clashes started between Turkish and Syrian Kurdish fighters—who are directly backed by U.S. Special Forces—the Pentagon issued unusually blunt calls for both to stand down. The breakdown in coordination created a prickly, new challenge for the U.S. as two of its most important partners in the campaign fight each other instead of Islamic State. President Barack Obama will meet with Turkish President Recep Tayyip Erdogan next week for the first time since the attempted coup in Turkey in July.
Cheap Eats
The U.S. is on track this year to post the longest stretch of falling food prices in more than 50 years. Fueled by excess supply and less demand from China and elsewhere due to the strong dollar, the trend is cheering shoppers at the checkout line while putting a financial strain on farmers and grocery stores. Economists and food analysts say the supermarket price declines could last at least through the end of the year. Farmers and ranchers are getting less money for raw milk, cheese and cattle, forcing them to slash spending, and the glut is so severe in some places that dairy farmers have been dumping millions of pounds of excess milk onto fields. At least six national food retailers and four of the five largest publicly traded food distributors reported that their margins suffered in the last quarter.
The U.S. is on track this year to post the longest stretch of falling food prices in more than 50 years. Fueled by excess supply and less demand from China and elsewhere due to the strong dollar, the trend is cheering shoppers at the checkout line while putting a financial strain on farmers and grocery stores. Economists and food analysts say the supermarket price declines could last at least through the end of the year. Farmers and ranchers are getting less money for raw milk, cheese and cattle, forcing them to slash spending, and the glut is so severe in some places that dairy farmers have been dumping millions of pounds of excess milk onto fields. At least six national food retailers and four of the five largest publicly traded food distributors reported that their margins suffered in the last quarter.
Back to (Football) School
In an age when top college football coaches increasingly resemble CEOs, a growing number are deciding to dust off their playbooks and reacquaint themselves with X’s and O’s. As big-time football programs have morphed into billion-dollar enterprises, many head coaches say that the biggest challenge of leading a college program is coming to terms with the scope of the role. The job is so time-consuming that it takes coaches away from the area of expertise they were hired for in the first place. We report that this year a number of coaches, including Mark Richt at the University of Miami, North Carolina’s Larry Fedora and Auburn’s Gus Malzahn, have woken up to that dilemma and have decided to become more involved in playcalling. We also explain why wide receivers are dominating the top four rounds of fantasy football drafts this year like never before.
In an age when top college football coaches increasingly resemble CEOs, a growing number are deciding to dust off their playbooks and reacquaint themselves with X’s and O’s. As big-time football programs have morphed into billion-dollar enterprises, many head coaches say that the biggest challenge of leading a college program is coming to terms with the scope of the role. The job is so time-consuming that it takes coaches away from the area of expertise they were hired for in the first place. We report that this year a number of coaches, including Mark Richt at the University of Miami, North Carolina’s Larry Fedora and Auburn’s Gus Malzahn, have woken up to that dilemma and have decided to become more involved in playcalling. We also explain why wide receivers are dominating the top four rounds of fantasy football drafts this year like never before.
Stock markets around the world are mostly higher. Hong Kong's Hang Seng (+0.9%) led the advance in Asia, and Germany's DAX (+1.0%) paces the charge in Europe. S&P 500 futures are down 1.75 points at 2,177.50.
Earnings reporting is light. Abercrombie & Fitch and G-III Apparel report ahead of the opening bell while H&R Block releases its quarterly results after markets close.
US economic data trickles out. Consumer
confidence will cross the wires at 10 a.m. ET. The US 10-year yield is higher by
2 basis points at 1.58%.
Brexit blows up currency derivatives sold to U.K.
businesses.
Brexit blows up currency derivatives sold to U.K.
businesses.
Biggest African economies stall on politics, commodity
slump.
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Virtually no
investors are happy with activist
hedge funds right now.
Much-anticipated August payrolls have a history of misses.
Saudi Arabia's attempts to boost bank liquidity aren't working.
For
example, Friday's data show that durable goods stockpiles rose 0.3 percent
month-on-month in July, the first gain in seven months. But stepping back,
the U.S. wholesale inventory figure overall is flat for July, compared with
expectations of a 0.1 percent gain, suggesting it's far from a safe bet that
wholesalers will ramp up production and investment this quarter. A weak
inventory cycle will place further pressure on the U.S. consumer to do the
heavy GDP lifting.
Source:
Bloomberg, BI, WSJ, CFAI Fin. Newsbrief, Reuters
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posted by Rich Barnett @ 7:19 AM
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