Tuesday November 29 Daily Market Primer
Stocks
backed off all time highs yesterday, which included reversals in small caps,
financials, and treasuries. Asian stocks fell, but European stocks are trading
up at the moment. The drama continues about OPECs oil deal, as Russia
said it will not attend the official meeting in Vienna that starts
tomorrow. If they can hammer out an agreement it will be the first
production cut in eight years. The latest headlines this morning seem to
indicate that the deal, if they every had one, is falling apart.
LAST
|
CHANGE
|
% CHANGE
|
|
19,097.90
|
-54.24
|
-0.28%
|
|
5,368.81
|
-30.11
|
-0.56%
|
|
2,201.72
|
-11.63
|
-0.53%
|
|
1,329.83
|
-17.37
|
-1.29%
|
|
Global
Dow
|
2,453.46
|
-2.88
|
-0.12%
|
Stoxx
Europe 600
|
340.71
|
0.88
|
-0.59%
|
Nikkei
225
|
18,307.04
|
-49.85
|
-0.59%
|
UK:
FTSE 100
|
6,759.17
|
-40.30
|
-0.59%
|
CBOE
Volatility
|
12.97
|
-0.18
|
-1.37%
|
Australia:
S&P/ASX 200
|
5,457.50
|
-6.90
|
-0.13%
|
3,282.92
|
5.92
|
0.18%
|
|
22,737.07
|
-93.50
|
-0.41%
|
|
Europe
Dow
|
1,457.92
|
1.09
|
0.17%
|
India:
S&P BSE Sensex
|
26,394.01
|
43.84
|
0.07%
|
France:
CAC 40
|
4,543.68
|
33.29
|
0.74%
|
Germany:
DAX
|
10,603.54
|
20.87
|
0.20%
|
Italy:
FTSE MIB
|
16,470.41
|
253.46
|
1.56%
|
Spain:
IBEX 35
|
8,644.70
|
25.40
|
0.29%
|
0.495
|
0/32
|
||
1.123
|
-1/32
|
||
1.822
|
-5/32
|
||
2.342
|
-8/32
|
||
2.995
|
-12/32
|
||
-0.74
|
-1/32
|
||
0.227
|
-6/32
|
||
45.66
|
-1.42
|
-3.02%
|
|
46.79
|
-1.47
|
-3.05%
|
|
3.286
|
-0.034
|
-1.02%
|
|
362.81
|
-7.6
|
-2.05%
|
|
2204
|
3.25
|
0.15%
|
European
leaders are speaking out against giving the UK a sweetheart open trade deal on
Brexit,
saying that terms must be inferior to EU members. The Chicago
Stock Exchange, a regional equities exchange not to be confused with that
other Chicago exchange, global powerhouse CME Group, is being bought by China’s
Chongqing Casin Enterprise Group. Both companies are going to great
lengths to explain that the acquirer is not controlled by the Chinese
government. That’s what they want you to think J. In the “you can’t make it up”
category, the President of South Korea, Park Gen-hye, is close to impeachment
or resignation after getting caught up in an influence peddling scandal
orchestrated by a friend and daughter of a cult leader who seems to have had
undue control over madam president for many years.
One
time venture capital unicorn and Silicon Valley darling Theranos continues to
melt down,
as a key investor has sued for fraud, which follows a recent lawsuit by
business partner Walgreens. According to the WSJ, Tyler Schultz,
the employee who blew the whistle on Theranos, was berated by his bosses for
“not understanding the science” when he originally complained to them about
quality problems. His grandfather is Theranos board member George
Schultz, who was Treasury and Labor Secretary in the Nixon
administration. Must have made for an awkward Thanksgiving.
Here’s
the news:
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Russia has said it will not attend tomorrow's crucial oil talks in
Vienna as the chances of a deal to cut production seem to be
fading. Goldman Sachs Group Inc. have warned that the price of a barrel
of crude may swing $6 on Wednesday, based
on options contracts' implied volatility, and have put the chances of a
cut agreement at 30 percent. A barrel of West Texas Intermediate for January
delivery was trading at $46.38 at 5:06 a.m. ET.
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U.K. Prime Minister Theresa May has always insisted that
Brexit means Brexit, without adding much in the way of detail. A photograph
of scribbled notes in the arms of a Conservative Party aide entering
Downing Street yesterday reveals something of the plan, showing the U.K. aim
is to “have your cake and eat it.” In testimony
to European Parliament lawmakers, ECB President Mario Draghi took a different
view, warning that Britain’s economy would be the first to suffer from a so-called 'hard
Brexit.'
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UBS Group AG’s $2 trillion wealth-management arm predict the
yen will strengthen to 98 to the dollar as expectations of a
Trump-led fiscal expansion have become overblown. The yen dropped as low as 114 to the dollar on Friday last, capping
a sell off that began with the results of the U.S. election.
Elsewhere, Bank of Canada Governor Stephen Poloz, warned of heightened uncertainty following the
Republican victory in an interview with Bloomberg TV. The
President-elect, meanwhile continues to add to his picks for government,
with U.S. Representative Tom Price selected as secretary of
the Department of Health and Human Services, according to a person familiar
with the matter, while Trump tweeted positively following his meeting
with retired General David Petraeus who is being
considered for the secretary of state role.
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Overnight, the MSCI Asia Pacific Index slid 0.1 percent, with Japan's Topix index
closing one point lower after a 12-day rally. In Europe, the Stoxx 600
Index was 0.1 percent lower at 5:26 a.m. ET in thin
trading as investors watch for news from OPEC and await this weekend's
Italian referendum. S&P 500 futures were broadly unchanged.
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This is a big week for U.S. economic data. Today at 8:30 a.m.
the second reading to third-quarter GDP is released, with S&P
CoreLogic home prices numbers coming at 9:00. There are two Fed speakers
today, with New York Fed's Bill Dudley speaking at 9:15 a.m. and
Governor Jerome Powell due at 12:40 p.m. With a December rate rise
practically a certainty, those speeches will be watched for hints as to
rate-path projections.
Doubts
are growing that OPEC can reach an agreement. Key members still cannot
agree on how much oil production should be cut ahead of Wednesday's meeting.
Brent crude oil, the international benchmark, trades down 2% at $47.43 a
barrel.
China
is trying to limit capital outflows. Regulators are requiring
transfers abroad worth $5 million or more to be reported to the State
Administration of Foreign Exchange, Reuters reports. Previously, transfers of
$50 million or more needed to be reported.
Korea's
president is willing to resign. Scandal-ridden Korean President Park
Geun-Hye said in a TV address to the nation, "Once lawmakers come up with
measures to transfer power in a way that minimizes any power vacuum and chaos
in governance, I will step down."
UnitedHealth
is optimistic on 2017. The health insurer preannounced guidance for 2017 saying it
expected to earn an adjusted $9.30 to $9.60 a share on revenue of $197
billion to $199 billion.
AT&T
unveils DirecTV Now. The streaming-TV service launches Wednesday and will give
subscribers 60 channels for $35 a month or 120 channels for $70 a month.
Theranos
and its founder got hit with another lawsuit. The blood-testing company
and its founder, Elizabeth Holmes, are being sued by investors who claim she
lied about the technology. Theranos is also facing lawsuits from a major investor,
patients, and Walgreens.
Uber
drivers are protesting nationwide. Drivers for the
ride-hailing service will protest across the US on Tuesday, joining the
"Fight for $15" minimum wage.
Stock
markets around the world are mixed. Overnight, China's
Shanghai Composite (+0.2%) eked out a gain. In Europe, Britain's FTSE (-0.6%)
lags. The S&P 500 is set to open up 0.2% near 2,205.
Filling the Roster
The real-estate company controlled by Jared Kushner, President-elect Donald Trump’s son-in-law, has hundreds of millions of dollars in loans outstanding from domestic and foreign financial institutions, and markets condominiums to wealthy U.S. and foreign buyers. The firm has also obtained development financing through a controversial U.S. program that sells green cards. We report that those and other business activities could raise conflicts of interest if Mr. Kushner is named to a staff position in the Trump administration. In other transition news, Mr. Trump has chosen House Budget Committee Chairman Tom Price (R., Ga.) as his nominee for secretary of the Health and Human Services Department, putting the six-term congressman in charge of the sprawling agency that will likely dismantle Democrats’ 2010 health-care overhaul. Today Mr. Trump will meet with Mitt Romney for a second time amid a messy—and unusually public—debate over who should get the nation’s top diplomatic post as secretary of state.
Blood Loss
Theranos, the blood-testing company that ran afoul of regulators after a spate of Wall Street Journal reports revealed highly questionable practices, received much of its funding from high-profile private investors. These were often individuals who aren’t part of the ecosystem that typically backs startups and could see their stakes wiped out by the blood-testing company’s regulatory and technological troubles. We report that several large investments from families and individuals helped infuse Theranos with $632 million in its latest funding round, which stretched from 2014 to 2015. Those investors include Rupert Murdoch—executive chairman of 21st Century Fox and News Corp, which is the parent of The Wall Street Journal—and family-controlled Cox Enterprises. They put about $100 million each into Theranos. Another prominent investor was Riley Bechtel, chairman of closely held construction giant Bechtel Group. Meanwhile, Robertson Stephens co-founder Robert Colman accused Theranos in a lawsuit filed Monday of making false and misleading claims about its operations and technology while soliciting money from investors.
Extra Credit
China’s newest tool for social control is a credit rating for everything. Beijing wants to give every citizen a score based on behavior such as spending habits, turnstile violations and filial piety, which can blacklist citizens from loans, jobs, air travel. Hangzhou’s local government is piloting the “social credit” system the Communist Party has said it wants to roll out nationwide by 2020, a digital reboot of the methods of social control the regime uses to avert threats to its legitimacy. More than three dozen local governments across China are beginning to compile digital records of social and financial behavior to rate creditworthiness. The endeavor reinforces President Xi Jinping’s campaign to tighten his grip on the country and dictate morality at a time of economic uncertainty that threatens to undermine the party.
US District Judge Daniel Crabtree has denied a preliminary
injunction to prevent the Labor Department from enforcing its fiduciary rule.
Market Synergy Group, which develops fixed-indexed annuities and other
insurance products, failed to show that the Labor Department had exceeded
authority or had treated fixed-indexed annuities capriciously, the judge
says.
InvestmentNews (28 Nov.)
The most serious risk confronting the eurozone's economy is the
possibility that its recovery will stall, European Central Bank President
Mario Draghi told a committee of the European Parliament. Despite forecasts
that the region's inflation will top 1% next year, when the central bank's
rate setters meet next week, they will look for ways to preserve "very
substantial" stimulus, he said.
Reuters (28 Nov.)
Earnings reporting is light. Tiffany & Co. reports
ahead of the opening bell.
US economic data flows. GDP will be released at
8:30 a.m. ET before S&P Case Shiller home prices and consumer confidence
cross the wires at 9 a.m. and 10 a.m. ET.
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Markets and the Federal
Reserve finally agree on something.
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What coal tells us about
China's one-size-fits-all approach to economic
reform.
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Russia's central bank wants you to believe.
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Supersonic is coming back. Will the airlines buy
it?
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The U.S. and China are fighting over Mars,
but Japan may win the space race.
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Leaning San Francisco tower seen sinking from space.
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Cash is so hot right now. Well to be more precise cash as a
topic of study is really hot right now. One of this year's must-read
books is The Curse of Cash. In it the Economist
Kenneth S. Rogoff argues for the phasing-out of high-denomination currency,
as a means of cracking down on crime. It's a controversial book that has
inspired a ton of criticism by those who equate physical money with freedom
and privacy, but you should read it nonetheless. Meanwhile we're getting some
live, real-time experiments in these theories. India is currently going
through a wrenching period of demonetizing its large denomination bills,
forcing people to bring their currency to the bank. A new set of high-rupee
notes will be issued later, but anyone who doesn't bring in their cash by the
end of the year will see those notes expire worthless. So it's not really
about eliminating cash, but more about flushing out those who have been
improperly hiding their money. The program, which was announced on the U.S. election
day (which may explain why it hasn't gotten more coverage) has had all kinds
of weird effects, like causing people to buy Rolexes like crazy,
instead of waiting in line to deposit their large bills. Another real-time
cash experiment is happening in Zimbabwe, where the government has
reintroduced its own currency for the first time in several years. Most
people know about Zimbabwe's incredible hyperinflation in 2008. To beat
hyperinflation, the economy has been using the U.S. dollar. Zimbabwe says
that its new money, called "bond notes," will be backed by the
dollar, but there's a deep amount of skepticism about whether
they will really hold their value. The best person to follow for all this
stuff is JP Koning, an expert on monetary economics
and the history of money. His blog, Moneyness, is essential reading right now.
Here's a post on why the Zimbabwean stock
market is booming with the introduction of the new currency (hint: It's not a
good sign). Here's a brilliant post on why the chaos
caused by the situation in India is a goal of the program, and not a sign of
failure. And here's his review of Ken Rogoff's book. Read 'em
all, and then get lost in the rest of his blog. It's a fascinating time to be
studying what money really is, and the future of the physical version of it.
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Source:
Bloomberg, BI, WSJ, CFAI Fin. Newsbrief, Investment News, Reuters
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