Friday September 2 Daily Market Primer

Happy August non-farm payrolls Labor Day Weekend Friday.  August non-farm payrolls are out and the number is 151K, below expectations of 180K (Reuters and Bloomberg surveys).  July was revised up to 275K.  The unemployment rate was unchanged at 4.9% and the participation rate was also flat at 62.8%.  Initial unemployment claims came in yesterday at 263K, 2K higher than the week before.

Well you don’t see a daily return of zero on the S&P 500 very often, but that’s what happened yesterday, as the most popular index of US stocks was completely flat for the day.  Some of the air let out of the financial stocks balloon which blew up for the last few days on higher rate expectations, and energy shares dropped as US crude oil (aka WTI) slid to $43.  Markets are mostly up around the world and US futures are pointing to a .3% up opening on the jobs report.

	LAST	CHANGE	% CHG
DJIA	18419.3	18.42	0.10%
Nasdaq	5227.21	13.99	0.27%
S&P 500	2170.86	-0.09	0.00%
Russell 2000	1239.8	-0.1	-0.01%
Global Dow	2456.79	8.82	0.36%
Japan: Nikkei 225	16925.68	-1.16	-0.01%
Stoxx Europe 600	346.29	2.63	0.77%
UK: FTSE 100	6830.06	84.09	1.25%
CBOE Volatility	13.16	-0.32	-2.37%
Australia: S&P/ASX 200	5372.8	-42.8	-0.79%
China: Shanghai Composite	3067.35	4.05	0.13%
Hong Kong: Hang Seng	23266.7	104.36	0.45%
India: S&P BSE Sensex	28532.11	108.63	0.38%
Japan: Nikkei 225	16925.68	-1.16	-0.01%
Singapore: Straits Times	2803.92	-12.55	-0.45%
France: CAC 40	4482.44	42.77	0.96%
Germany: DAX	10575.2	40.89	0.39%
Italy: FTSE MIB	16932.11	8.83	0.05%
Spain: IBEX 35	8802.2	39.4	0.45%
U.S. 3 Month	0.325	0/32
U.S. 2 Year	0.77	1/32
U.S. 5 Year	1.172	Jan-32
U.S. 10 Year	1.573	-1/32
U.S. 30 Year	2.254	-0.46875
Germany 2 Year	-0.627	1/32
Germany 10 Year	-0.06	-3/32
Crude Oil	43.93	0.77	1.78%
Brent Crude	46.41	0.96	2.11%
Natural Gas	2.815	0.023	0.82
S&P GSCI	346.64	4.77	1.40%
E-mini S&P 500	2173.75	6.5	0.30%

Elon Musk had a bad Thursday as the cash squeeze at Tesla and Solar City broke into the news, Tesla stock dropped about 10%, and a SpaceX Falcon 9 blew up on the launch pad with its Israeli communications satellite payload onboard (Terrible, Awful, and No Lift-Off, below).  Samsung Galaxy Note 7s are also blowing up, and Samsung has issued a worldwide recall after several of them have exploded.   IMF chief Christine Lagarde is calling for G20 strong economic reforms, and Japan is doing a huge energy deal with Russia.  And, who knew that one of the world’s largest shipping firms, South Korea’s Hanjin, declared bankruptcy this week?  Not me, until I read about it last night, and its causing havoc at US ports and could effect retail sales during the critical Christmas shopping season http://bit.ly/HanjinBK.

Here’s the news:

Putin plans

Oil halted four days of declines as Vladimir Putin said he would like Russia and OPEC to clinch a deal to freeze supply, during a wide-ranging interview with Bloomberg News. A barrel of West Texas Intermediate crude for October delivery traded up 0.79 percent to $43.50 at 6:26 a.m. ET. The Russian president said he would likely give his backing to a plan to crimp production at the Group of 20 summit in China next week, ahead of OPEC talks in Algiers at the end of September. In the interview with Bloomberg News Editor-In-Chief John Micklethwait, Putin also said Russia is poised to sell a 19.5 percent stake in Rosneft PJSC, the country’s largest listed oil producer, possibly as early as this year. He also struck a conciliatory tone ahead of talks with Japanese Prime Minister Shinzo Abe at the two-day Eastern Economic Forum in Vladivostok, as the two nations seek to resolve a territorial dispute over the Kuril Islands.

Markets swing ahead U.S. jobs data

Overnight in Asia stocks traded in a narrow range, with MSCI Asia-Pacific Index closing up 0.5 percent. Europe's Stoxx 600 Index added 0.67 percent as of 06:44 a.m. in New York, while the dollar advanced, and 10-Year U.S. Treasury yields rose 1.31 percent as of 7:00 a.m., ahead of the key U.S. payrolls data. 

Euro area prices

Producer prices in the euro area rose 0.1 percent in July — the lowest monthly reading since April — marking a year-on-year fall of 2.8 percent, after a 0.8 percent rise June, according to Eurostat. The output data underscore the ECB's battle to generate inflationary pressures in the single-currency bloc, after disappointing headline consumer inflation data for August.

EU meeting

European Union ministers begin a two-day meeting in Bratislava, Slovakia, with the fallout from Brexit likely to be high on the agenda. Global banks are calling for an interim agreement that would preserve their access to the single-market, beyond the end of the two years of official negotiations.

Data out of the UK continues to show a post-Brexit improvement. Construction PMI came in at 49.2, substantially above July's 45.9 print. And while the sector remains in contraction, the reading showed the data to be stabilizing after the UK's vote to leave the European Union. The British pound is little changed near 1.3270 versus the dollar.
The majority of Scots want to remain in the UK. A YouGov poll for the Times newspaper showed that two years after the Scottish independence vote 54% of Scots say they want to remain in the United Kingdom.
South Korea's second-quarter GDP beat. The South Korean economy expanded at a 0.8% quarter-over-quarter clip (versus 0.7% expected), but a finance-ministry official said full-year growth was probably going to be closer to 2.8%, Reuters reports.
The US dollar continues to dominate foreign-exchange trading. Triannual data released by the Bank for International Settlements showed the US dollar "was on one side of 88% of all trades in April 2016, up slightly from 87% in April 2013."
Smith & Wesson sees a ton of gun sales in the future. The gunmaker crushed analyst estimates on the top and bottom lines, and it raised its full-year earnings-per-share guidance to a range of $2.38 to $2.48, up from a range of $1.83 to $2.03.
Lululemon's same-store sales missed. The athletic-apparel retailer posted in-line earnings and revenue, but same-store sales including direct-to-consumer but excluding FX adjustments were light, coming in at up 5.0% versus expectations for a 5.9% increase. Lululemon shares lost 8.5% in after-hours trade.
Japan might invest in Russian oil giant. Japanese Prime Minister Shinzo Abe will meet with Russian President Vladimir Putin for two days of talks in Vladivostok. The two leaders are expected to discuss a $10 billion Japanese investment, or about a 10% stake, in the Russian oil firm Rosneft, Nikkei reports.
The Mexico Gambit
This week brought exceptional twists and turns on the trade and immigration issues that have become signatures of the Trump campaign. We report that Donald Trump’s high-stakes visit to Mexico City and his follow-up speech in Phoenix had been discussed internally for weeks. But Mr. Trump originally omitted from his speech the usual line that Mexico would have to pay for his proposed wall along the U.S. southern border. He added the line back after Mexican President Enrique Peña Nieto tweeted that he had told Mr. Trump that Mexico would refuse to pay for the wall. Meanwhile, our examination finds that Mr. Trump’s past real-estate work brought him into regular contact with people who had ties to organized crime, though some say this was unavoidable in the industry at the time. We also report that a new batch of Hillary Clinton’s emails shows blurred lines with her Clinton Foundation contacts during her tenure as secretary of state.
No Lift-Off
An explosion that destroyed a SpaceX rocket and a satellite on the ground Thursday casts a pall over the pioneering space-transportation company run by entrepreneur Elon Musk. In addition to worsening a backlog of delayed commercial launches, the explosion is likely to complicate the company’s pursuit of additional manned and unmanned government contracts. It could take several months to determine the accident’s cause and take remedial action. The incident occurred during preparations for a routine test firing at about 9 a.m. at Cape Canaveral Air Force Station in Florida. The destroyed Falcon 9 rocket had been slated to send Israel’s Space-Communications’s Amos-6 satellite into orbit this weekend and was part of an effort to provide internet access to people throughout large parts of sub-Saharan Africa by Facebook in collaboration with French satellite operator Eutelsat Communications.

IMF's Lagarde urges G-20 economic reform

Lagarde (Peter Nicholls/Getty Images)

International Monetary Fund Managing Director Christine Lagarde has appealed to Group of 20 leaders preparing for a meeting in China to support forceful economic reform or risk a "low-growth trap" with falling productivity, weakening incentives for investment, faltering demand and high debt. "The political pendulum threatens to swing against economic openness, and without forceful policy actions, the world could suffer from disappointing growth for a long time," she said.  Reuters (01 Sep.) 

Rosneft might get $10B investment from Japan

The Japanese government is close to proposing a broad energy agreement with Russia that could include a nearly $10 billion investment in Russia's oil company, the newspaper Nikkei reported. The deal would give Japan a 10% equity stake in Rosneft, Nikkei said.

BIS: Yuan's share in global trading has surged

Over the three years that ended in April, the share of China's yuan in currency trading has doubled, according to the Bank for International Settlements.

Bloomberg

Reuters (02 Sep.),  Stock markets around the world are bid. Hong Kong's Hang Seng (+0.5%) led the advance in Asia, and France's CAC (+1.0%) paces the gains in Europe. S&P 500 futures are up 0.50 points at 2,160.75.

US economic data is heavy. Aside from the jobs report, the trade balance will be released at 8:30 a.m. ET. Then, at 10 a.m. ET, factory orders and durable goods orders will be released. Finally, the Baker Hughes rig count is due out at 1 p.m. ET. The US 10-year yield is higher by 2 basis points at 1.59%.

Elon Musk had a bad, terrible, awful, dreadful $779 million day. 

Putin wades into the U.S. election.

M&A with Chinese characteristics. 

The Cold War powers of the United States and the USSR have more in common with modern-day asset managers than you think.

An economist sizes up the likely impact of the deadly earthquake on Italy's economy.

Florida Braces for First Hurricane Strike in Over a Decade

Apple Squeezes Parts Suppliers to Protect Margins

Kurdish Militia Says Remains of Americans Killed Fighting Islamic State in Syria Await Return

Militias Corner Islamic State in Libyan City

Security Debate Draws Attention to U.S. Border With Canada

Today is, in some sense, the last day of summer and this moment feels like the perfect microcosm of the whole season. Markets are going roughly nowhere as everyone waits for the upcoming jobs report. As many have noted, today's report is particularly big since it could result in a Fed rate hike later this month, or at least greatly improve the odds of that happening. That being said, the theme of this summer has been major news that didn't matter to markets. We've seen all kinds of surprising events (like the Brexit vote), but none has been able to generate sustained volatility. We'll see if the events of September are any different. Over the last couple of days we've been reminded how quickly narratives can change. We got a slew of mediocre economic data (ISM, construction spending, auto sales) and some positive polling for Donald Trump. None of it seems like a big deal so far, but it's important to realize how fast things can shift.

Source: Bloomberg, BI, WSJ, CFAI Fin. Newsbrief