Wednesday November 16 Daily Market Primer

The Dow closed at an all time high for the fourth consecutive time yesterday, as the Trump Trade continues but maybe be slowing down.  Financial stocks gained only .1%.  Gold moved up slightly after dropping for six sessions in a row.  Tech stocks rebounded, up 1.1%.  Oil jumped almost 6% yesterday as OPEC threatened to get their act together and cut supply.

	LAST	CHANGE	% CHANGE
DJIA	18,923.06	54.37	0.29%
Nasdaq	5,275.62	57.23	1.10%
S&P 500	2,180.39	16.19	0.75%
Russell 2000	1,302.14	3.55	0.27%
Stoxx Europe 600	338.56	-0.60	-0.18%
Nikkei 225	17,862.21	194.06	1.10%
UK: FTSE 100	6,739.25	-53.49	-0.79%
CBOE Volatility	13.86	-0.62	-4.28%
Australia: S&P/ASX 200	5,327.70	1.50	0.03%
China: Shanghai Composite	3,083.88	42.71	1.40%
India: S&P BSE Sensex	26,298.69	-5.94	-0.02%
France: CAC 40	4,509.90	-26.63	-0.59%
Germany: DAX	10,682.64	-52.50	-0.49%
Italy: FTSE MIB	16,569.71	-112.66	-0.68%
Spain: IBEX 35	8,632.30	-54.80	-0.63%
U.S. 3 Month	0.495	0.495
U.S. 2 Year	1.034	1.034
U.S. 5 Year	1.726	1.726
U.S. 10 Year	2.283	2.283
U.S. 30 Year	2.998	2.998
Germany 2 Year	-0.624	-0.624
Germany 10 Year	0.335	0.335
Crude Oil	45.22	-0.59	-1.29%
Brent Crude	46.46	-0.49	-1.04%
Natural Gas	2.865	-0.02	-0.69%
S&P GSCI	356.98	3.45	0.98%
E-mini S&P 500	2171.75	-7.5	-0.34%

There are lots of reports of infighting and purges in the Trump transition team, but the markets seem to be taking it in stride.  President Obama is on his last international trip to Europe and South America, to reassure world leaders about a Trump presidency and discuss the rise of populism.  Meanwhile, President Elect Trump is asking his casino owner friends to help out with his inauguration party. Snap (aka Snapchat) is filing for their long awaited and truly massive IPO next year, which could value the company at between $20 and $25 billion.  Hopefully the IPO money won’t disappear as soon as they get it J.  Finally, the last Bloomberg story looks at some of the potential negatives for  banks in a new Trump administration. Here’s the news: Oil surge

A barrel of West Texas Intermediate for December delivery was trading at $45.47 at 5:04 a.m. ET after surging 5.8 percent in trading yesterday. The rise comes on the back of an increased push from OPEC members to finalize an oil production cut deal in time for a meeting due in Vienna at the end of the month. Meanwhile, the International Energy Agency said that U.S. oil production will grow more than previously thought this decade as shale drillers adapt to low prices, while suppliers elsewhere will be hit harder by OPEC's fight for market share.

Transition team

Power struggles inside President-elect Donald Trump's transition team are slowing efforts to form a new government, with former House Intelligence Committee Chairman Mike Rogers abruptly departing yesterday. According to a person familiar with the matter, Trump is considering nominating Texas Senator Ted Cruz to serve as U.S. attorney general.

Fed bets

One place the Trump victory does seem to have produced some certainty is market expectations of December's interest rate decision from the Federal Reserve. Market-implied odds of a rate hike are approaching 100 percent. Federal Reserve Bank of St. Louis President James Bullard said that Trump's policies could lead to a medium-term boost to the U.S. economy, adding that a single rate increase "possibly in December" would be sufficient to move policy to a neutral setting.

Markets mixed

Overnight, the MSCI Asia Pacific Index climbed 0.5 percent, while Japan's Topix index closed 1.3 percent higher, within 15 points of entering a bull market. In Europe, the Stoxx 600 Index pared earlier gains to stand 0.1 percent higher at 5:16 a.m. ET as energy producers rose. S&P 500 futures were 0.1 percent lower.

Brexit confusion

Italy's Economic Development Minister Carlo Calenda said that the British government's Brexit strategy is chaotic, while comments from Foreign Secretary Boris Johnson in which he described the idea that freedom of labor movement is a fundamental right in Europe as a "myth," led to an admonishment from one of the EU's chief Brexit negotiators. There was some good news for the U.K. government this morning, as the unemployment rate unexpectedly fell to 4.8 percent, but even that was tempered by signs that the labor market may be cooling. In Transition Another round of staff changes buffeted President-elect Donald Trump’s transition team Tuesday. Vice President-elect Mike Pence formally signed documents that put him in charge of the team, and officials insisted the 10-week effort to build an administration is on schedule. But former Michigan Rep. Mike Rogers, once considered a candidate to lead the CIA, was ousted, while Matthew Freedman, who was leading the group’s planning for the White House National Security Council, also departed. Mr. Rogers was told he was being replaced because everyone who was brought in by New Jersey Gov. Chris Christie, the team’s original chairman, was being pushed out. Meanwhile, the transition faced an early test as former New York City Mayor Rudy Giuliani, a leading candidate to lead the State Department, was targeted by Kentucky Sen. Rand Paul, a Senate Foreign Relations Committee member, who said he might oppose the nomination. In other political news, we report that House Minority Leader Nancy Pelosi delayed leadership elections scheduled for Thursday, giving a faction of unhappy Democrats until Nov. 30 to potentially build support for an opposition candidate. House Republicans, meanwhile, unanimously renominated House Speaker Paul Ryan. Between You and Me Snap has confidentially filed paperwork for an initial public offering that may value the popular messaging platform at as much as $25 billion, a major step toward what would be one of the highest-profile stock debuts in recent years. The company, formerly known as Snapchat, made the filing with the SEC in recent weeks. An IPO, expected as early as March, could value Snap at between $20 billion and $25 billion, which would make it the largest U.S.-listed technology offering since Chinese e-commerce company Alibaba Group made its debut at a $168 billion valuation in 2014. Bankers and investors are optimistic that a successful debut for Snap would convince other bellwether tech companies to tap the IPO market, which has had a dismal year. Boots on the Ground Chinese President Xi Jinping’s quest to make his nation a military player on the world stage is provoking soul-searching as the country absorbs its first combat casualties in decades. We report on the deaths of China’s first combat troops killed in action since border clashes following its last war, with Vietnam in 1979, after which it espoused nonintervention in affairs abroad. When state television broadcast images of Chinese infantry under fire in Juba, South Sudan, struggling to save bleeding comrades, many viewers at home were stunned. There have been no public protests, and most Chinese still fiercely support the military. Still, on social media, in policy-making circles and in private conversations, Beijing is encountering the kind of doubts that have bedeviled other nations during military operations overseas.

Hedge funds led last week's charge into U.S. stocks.

Mark Carney is growing tired of the central bank blame game.

China's premier says the nation is sure to meet its full-year economic target...

... As the country's push for an Asia-wide trade pact gains traction in the wake of Trump's win.

French pollsters spooked by Trump still don't see a Le Pen win.

Germany threatens to abandon Basel talks if demands aren't met. Trouble Brewing in Commercial Real Estate A Radical New Thought: Banks Are Growth Stocks

Yesterday in this space we were talking about financial stocks in the Trump era. Investors have piled into them, ostensibly due to a combination of a steeper yield curve - which is good for banks' profit margins - and a potential rollback of regulations. One risk that investors may not be thinking about, however, is what happens to the business of banking in a de-globalized world, with fewer cross-border deals and a diminished need to hedge. Of course, that's just one risk to big banks under Trump. Check out this transcript, posted by Buzzfeed, of a 2014 speech given by Steve Bannon, who has been tapped as Trump's Chief Strategist. In the speech he slams the fact that no bank bosses faced criminal charges and that nobody had their bonuses or equity taken away. Elsewhere he says that he considers the "Ayn Rand" school of capitalism to be disturbing. It's certainly possible that this will have no relevance on the Trump administration. However as Charles Robertson, the global chief economist of Renaissance Capital, said on TV yesterday (around the 27 minute mark), "we're trading on very light news" and there may be more "surprises" still to come. In other words, it may behoove everyone to have a little less conviction in their narrative right now.

Source: Bloomberg, WSJ