Monday October 31 Daily Market Primer
Happy
Monday. Stocks fell slightly on Friday, but held up well overall, considering
the latest chapter in the Clinton email saga broke while the market was still
open. The NASDAQ fell .5% as tech stocks continued to give up some
recent gains. US consumer spending, which accounts for about 70% of
GDP, rose .5% in September, after falling .1% in August. The Fed’s
favorite inflation measure, core PCE, increased .1% in September, and is
running at 1.7% for the trailing 12 months. This is slightly below
the Fed’s target inflation rate of 2%. Oil prices are sinking
again after several members of OPEC ask for exemptions from production caps
at talks in Vienna. It seems like limiting production is a great idea –
for everyone else. Markets overseas were mostly down and US futures are
just barely in the green.
LAST
|
CHANGE
|
% CHG
|
|
18,161.19
|
-8.49
|
-0.05%
|
|
5,190.10
|
-25.87
|
-0.50%
|
|
2,126.41
|
-6.63
|
-0.31%
|
|
1,187.61
|
-2.33
|
-0.20%
|
|
Stoxx
Europe 600
|
339.53
|
-1.27
|
-0.37%
|
UK:
FTSE 100
|
6,965.22
|
-31.04
|
-0.44%
|
CBOE
Volatility
|
16.31
|
0.12
|
0.74%
|
Australia:
S&P/ASX 200
|
5,317.70
|
33.90
|
0.64%
|
China:
Shanghai Composite
|
3,083.88
|
42.71
|
1.40%
|
India:
S&P BSE Sensex
|
27,930.21
|
-11.30
|
-0.04%
|
France:
CAC 40
|
4,521.76
|
-26.82
|
-0.59%
|
Germany:
DAX
|
10,669.18
|
-27.01
|
-0.25%
|
Italy:
FTSE MIB
|
17,187.82
|
-136.41
|
-0.79%
|
Spain:
IBEX 35
|
9,155.50
|
-45.80
|
-0.50%
|
0.289
|
-0/32
|
||
0.853
|
0/32
|
||
1.313
|
2/32
|
||
1.831
|
5/32
|
||
2.595
|
14/32
|
||
-0.624
|
0/32
|
||
0.156
|
4/32
|
||
48.17
|
-0.53
|
-1.09%
|
|
48.97
|
-0.74
|
-1.49%
|
|
3.305
|
0.042
|
1.29%
|
|
367.58
|
-2.44
|
-0.66%
|
|
2127.25
|
3.5
|
0.16%
|
I
don’t have to tell you what happened Friday with the FBI reopening the Hillary
email investigation, unless you’ve been off-planet this weekend. The
main significance of this from a capital markets perspective is that it
increases uncertainty about the election outcome as the polls have tightened
again in the wake of the new revelations.
There
was speculation all weekend on the fate of BOE governor Mark Carney, who was very
popular before the Brexit vote but is less so now. We should find out
this week whether he leaves in 2018 or stays to 2021.
GE
and Baker Hughes announced a deal which combines GE’s energy assets with Baker, but falls short of a
merger. GE will own two thirds of a new public company. Both stocks are
up in the premarket. Elon Musk, the Steve Jobs of his generation,
unveiled a solar roof and more powerful batteries Friday in an attempt to
influence investors ahead of the Tesla – Solar City merger which will be voted
on November 17. The reveal was on the old set of Desperate Housewives on
the Universal lot in Hollywood.
Here’s
the news:
|
|
Hillary Clinton's once commanding lead in the polls is in
jeopardy after the FBI announced on Friday that it would revive its
probe into her e-mail practices, citing a fresh trove of correspondence said
to be relevant to the case. With FBI Director James Comey Comey also coming under fire, an ABC/Washington Post poll finds Trump has
gained ground, with Clinton ahead by just one point, compared with a 12-point
gap a week earlier. With the FBI obtaining a warrant to search through
the emails, Citigroup Inc. says the odds of a Clinton victory have
fallen from 81 percent to 75 percent, adding that 'Black Swan' events
have the potential to roil global markets. U.S. stock-index futures rose 0.01
percent, bucking losses in Europe.
|
|
|
Bank of England chief Mark Carney faces a torrent of speculation about his future after weekend
reports that the governor looks poised to leave his position in 2018 —
sticking to his original five-year commitment. However, the Financial Times reports that the Governor will serve
a full term through 2021, citing friends close to the matter, pushing back
against fervent Brexit supporters who have called for his resignation. Carney could put an end to
speculation about his future as early as Thursday when the central bank holds a press conference to
detail its latest policy decision. The pound barely budged in morning trading
at $1.22.
|
|
|
Oil fell after talks among producing nations in Vienna stalled over how to implement a deal
to cut supply, with Iran and Iraq blamed for the deadlock. Talks will resume
again in late November, with Oman and Russia stating they will only abide by
a supply cut once OPEC has secured an agreement. Oil futures in New York fell
as much as 1.1 percent after tumbling 2.1 percent at the end of last week,
with Brent crude for December settlement trading at $49.57 a barrel.
|
|
|
Energy shares and the Russian ruble tumbled after the OPEC
news, with a gauge of energy stocks on the MSCI All-Country World Index
slipping to one-month lows. In Europe, the Stoxx 600 Index was also
dragged down by energy stocks, dropping 0.45 percent lower, The South African rand
strengthened after fraud charges against Finance Minister Pravin Gordhan
were dropped. The yield on 10-year U.S. Treasuries barely budged at
1.84 percent, after kissing a five-month high of 1.88 percent on Friday, amid
a global bond rout. U.S. futures are modestly higher.
|
|
|
Over the weekend, Spanish Prime Minister Mariano Rajoy secured
a second-round confidence vote in parliament, paving the way to form a
minority government after a 10-month political impasse. Rajoy faces a delicate balancing act in his second term
as he battles to address Spain's budget deficit and high unemployment rate
amid a fractious parliament.
GE
is merging its oil and gas business with Baker Hughes. General Electric will own
62.5% of the combined company, and Baker Hughes shareholders will receive a
one-time special dividend of $17.50 a share when the deal closes, Reuters
reports.
Tesla
unveiled a solar roof. CEO Elon Musk unveiled the new product at Universal Studios in
Los Angeles on Friday night, calling it a "fundamental part of achieving
differentiated product strategy."
Sony
slashed its profit outlook. The electronics giant expects an operating
profit of 270 billion yen ($2.6 billion) for the year ending in March after
previously forecasting a 300 billion yen profit, Reuters reports. The reduced
outlook comes as a result of impairment losses related to the sale of its
battery business.
One
of the hedge fund industry's biggest names is shrinking. Brevan Howard has
received redemption requests for about $2 billion, according to people
familiar with the matter. The redemptions will take assets under management
down to approximately $11.7 billion, or nearly half the size of a year ago.
Charges
are being dropped against South Africa's finance minister. The National Prosecuting
Authority says it is dropping fraud charges against finance minister Pravin
Gordhan because he "did not have the requisite intention to act
unlawfully," Bloomberg reports. The South
African rand is stronger by 1.4% at 13.6300 per dollar.
Eurozone
inflation is up. Consumer prices in the eurozone rose 0.5% year-over-year in
October, up from the 0.4% YoY reading in September. The euro
is lower by 0.4% at 1.0958.
Oil
is clawing back its early losses. West
Texas Intermediate crude oil opened up to a loss of 1.0% after non-OPEC
members failed to commit to a production cut. The energy component, however,
has trimmed its early losses and now trades down at 0.5% at $48.38 a barrel.
Stock
markets around the world are lower. China's Shanghai
Composite (-0.1%) slipped in Asia, and France's CAC (-0.7%) lags in Europe.
The S&P 500 is looking to open high by about 0.1% near 2,128.
Earnings reporting remains heavy. Cardinal Health, Loews,
and Lumber Liquidators are among the names reporting ahead of the opening
bell, while General Growth Properties and Tenent Healthcare highlight the
companies releasing their quarterly results after markets close.
US economic data flows. Personal income and
spending will be released at 8:30 a.m. ET before Chicago PMI and Dallas Fed
manufacturing cross the wires at 9:45 a.m. ET and 10:30 a.m. ET. The US
10-year yield is little changed at 1.85%.
The Feds at War
The surprise disclosure that agents from the FBI are taking a new look at Hillary Clinton’s email use lays bare, just days before the election, tensions inside the bureau and the Justice Department over how to investigate the Democratic presidential nominee. Investigators found 650,000 emails on a laptop that they believe was used by former Rep. Anthony Weiner and his estranged wife Huma Abedin, a close Clinton aide, and underlying metadata suggests thousands of those messages could have been sent to or from the private server that Mrs. Clinton used while she was secretary of state. The new investigative effort shows a bureau at times in sharp internal disagreement over matters related to the Clintons, and how to handle those matters fairly and carefully in the middle of a national election campaign. Mrs. Clinton’s team worked Sunday to play down the news and to undermine the credibility of FBI Director James Comey, while Senate Democratic leader Harry Reid sent a letter to Mr. Comey, accusing him of unlawful interference in the presidential race. Meanwhile, the late-breaking drama has even some Democrats wondering if Mrs. Clinton might be forced to rethink Ms. Abedin’s role if she is elected president.
Bundle of Energy
General Electric has reached a deal to combine its oil-and-gas business with Baker Hughes, creating an energy powerhouse that would give GE a cost-effective way to play any recovery in the industry. GE will contribute its oil-and-gas business and some cash to the new entity, which would have publicly traded shares and be controlled by GE. The combination creates a company with more than $32 billion in revenue that could cut costs to better compete with rivals such as Schlumberger to provide equipment and services to oil rigs and wells. It would enable GE to benefit from an expected recovery in the industry without having to splash out for a full acquisition of Baker Hughes.
When Bots Attack
The recent cyberattack that rendered more than 1,200 websites unreachable was a warning. Experts say a similar, or larger, attack could be launched tomorrow, and we’d be powerless to prevent it. No one seems to know who was behind the attack, launched by a “botnet” of thousands of internet-connected devices. That sounds reassuring, but is scary, writes our
Keywords columnist Christopher Mims. It doesn’t take a government
or even a skillful hacker to make much of the internet inaccessible to
millions. Anyone can buy similar capability for less than $1,000. Meanwhile,
U.S. domestic law-enforcement agencies are on the cusp of gaining broader
authority to hack into computers suspected of involvement in a cyberattack or
other crime. In the end, all the proposals for a better-defended internet
feel inadequate, but we may have no choice.
The 1.2% drop in Treasurys this month, the biggest loss in
nearly two years, is a sign that the economy is recovering, says Bob Doll of
Nuveen Asset Management. "I like the fact that interest rates are moving
up a little bit. It means the overall environment is healing," he says. Bloomberg (31 Oct.)
The British pound's sharp drop in value threatens its global
reserve currency status, S&P Global Ratings said. The country lost its
top rating after the Brexit vote.
Ackman's Pershing Square Revamps Fee Structure as
Losses Persist
Oct 28 2016 | 6:15pm ET Bill Ackman's Pershing Square Capital Management has become the latest large hedge fund manager to offer its clients new fee arrangements in the face of poor performance, according to an investor letter seen by Reuters.
Reuters Survey: Global Managers Sell Bonds, Raise Cash
to 16-Month Highs
Oct 28 2016 | 9:14pm ET Global investors raised their cash levels to 16-month highs in October by selling off bonds, according to a new Reuters poll, amid fears that the multi-decade bull market in bonds is actually nearing an end |
|
Banks are hoarding $2.4 trillion of bonds.
|
|
|
The surging dollar might slam the brakes on a
Fed rate-hike.
|
|
|
China's factories may export inflation around the world.
|
|
|
Europe's banks still have
a $1.3 trillion bad-loan pile.
|
|
|
South Korea's president
is in big trouble.
|
|
|
Clinton's strategy
to question the legitimacy of a revived FBI probe brings risks.
|
|
The shock news on Friday
that the FBI has more Clinton emails to review had an immediate
impact on financial markets. The Mexican peso instantly weakened, rising
above 19 to the dollar, and the S&P 500 slid about 20 points. Yields on 10-year U.S.
Treasuries also fell — although not too dramatically. It's not particularly
surprising that equity markets reacted negatively to the news. Markets, as
they say, hate uncertainty. And a Trump presidency would be a sharp break
from the status quo — a status quo that has been very good for stocks for the
last several years. What Treasuries would do under a Trump presidency is
perhaps a more interesting question. Friday's move showed an immediate bout
of Treasury buying when the news hit. But some have argued that Trump would
be bearish
for U.S. government debt due to his tax cuts and fiscal stimulus plans.
It's unclear if the market has internalized that view. Nevertheless, it seems
safe to say that the next week of trading will be dominated by the election.
There's no other story that's going to break through until at least the
middle of next week and perhaps longer. So keep an eye on Treasuries to see
how they react to the final furious set of headlines and poll numbers that
we're about to come out.
|
|
|
Source:
Bloomberg, BI, WSJ, CFAI Fin. Newsbrief, FINalternatives
0 Comments:
Post a Comment
<< Home