Wednesday November 23 Daily Market Primer

I’m not sure how many more Trump puns I can come up with, but for now, US stocks had another good day in Trumpland, as all four indices rose from .2% (S&P) to .9% (R2000), and the Dow closed above 19,000.  The Dow, which is a much narrower index than the S&P 500 (30 stocks vs. approximately 500), has benefited more from the rally in industrial shares which dominate the index.   I’m not sure what is happening with OPEC, as every other headline seems to indicate “deal or no deal”.  I think we will have to wait and see.  Crude prices are down a little this morning. Overseas markets are not going along, and are mostly down on Wednesday, and the stock market has opened slightly down as I send this.

	LAST	CHANGE	% CHANGE
DJIA	19,023.87	67.18	0.35%
Nasdaq	5,386.35	17.49	0.33%
S&P 500	2,202.94	4.76	0.22%
Russell 2000	1,334.34	12.11	0.92%
Stoxx Europe 600	339.83	-1.19	-0.49%
Nikkei 225	18,162.94	56.92	-0.49%
UK: FTSE 100	6,786.57	-33.15	-0.49%
CBOE Volatility	12.43	0.02	0.16%
Australia: S&P/ASX 200	5,484.40	71.10	1.31%
China: Shanghai Composite	3,241.14	-7.22	-0.22%
Hong Kong: Hang Seng	22,676.69	-1.38	-0.01%
India: S&P BSE Sensex	26,051.81	91.03	0.35%
France: CAC 40	4,527.83	-20.52	-0.45%
Germany: DAX	10,653.62	-60.23	-0.56%
Italy: FTSE MIB	16,292.68	-227.21	-1.38%
Spain: IBEX 35	8,634.40	-17.10	-0.20%
U.S. 3 Month	0.5	0/32
U.S. 2 Year	1.134	-2/32
U.S. 5 Year	1.84	2 2/32
U.S. 10 Year	2.382	-19/32
U.S. 30 Year	3.063	-1 6/32
Germany 2 Year	-0.676	-4/32
Germany 10 Year	0.307	-26/32
Crude Oil	47.49	-0.54	-1.12%
Brent Crude	48.63	-0.49	-1.00%
Natural Gas	3.094	-0.006	-0.19%
S&P GSCI	367.84	-3.15	-0.85%
E-mini S&P 500	2196	-4.25	-0.19%

Durable good orders for October came in strong at +4.8% vs the expected 1.7% this morning.   The core number, which backs out defense spending and aircraft orders, was a more modest .4%.    The Atlanta Fed “nowcast”, (a near-real time indicator of economic growth) for Q4 GDP is a +3.6%, up from 3.3% on November 15, according to the nowcast app on my phone (yes, really).  European economic growth is also better than expected, with Eurozone PMI rising to 54.1 in November.

There’s some bad news for health care companies, as Medtronic disappointed on sales and cut guidance yesterday, and the stock dropped 9%.  Even worse news for Eli Lilly and Alzheimer’s patients, as Lilly’s promising Alzheimer’s treatment failed to slow loss of cognitive ability in patients in a Phase III trial.  The company is taking a $150 million charge on the failed trial and the shares dropped 16% in the premarket.

There’s a good piece in the FT this morning about the rise of populism and nativism. After Brexit and the US election we may have even more in common with our cousins in the UK than before http://bit.ly/FTonNativism.  (This link should work if you are logged in to the FT with the company subscription.).  Donald Trump was just kidding about locking Hillary up, as he backed away from a frequent campaign chant yesterday (Don’t Lock Her Up, below). 

The Daily Market Primer will be taking Friday off.  Happy Thanksgiving everybody, here’s the news:

Deal or no deal

A barrel of West Texas Intermediate was trading near $48 this morning with optimism over an OPEC deal to curb production fading as the question of Iran and Iraq's participation in the plan remained unresolved. For Saudi Arabia, the world's largest crude producer, the resistance of Iran and Iraq to the deal shows its waning power in the group it once dominated.

PMI day

Euro-area economic growth accelerated to the fastest pace this year, with a Purchasing Managers’ Index for manufacturing and services rising to 54.1 in November, according to IHS Markit, the strongest level in 11 months. In France, a drop in manufacturing PMI was offset by a rise in services, while in Germany, composite PMI slipped slightly to 54.9, remaining well in expansion territory. Yields on German two-year bonds slid to a record low this morning.

Autumn statement

U.K. Chancellor of the Exchequer Philip Hammond is expected to outline a series of measures to help the less well-off when he makes his mini-budget Autumn Statement to parliament during the U.K. afternoon. One company getting hit in trading this morning is Foxtons Group Plc which has fallen the most in four months as Hammond is expected to confirm the scrapping of letting-agent fees. The chancellor is also expected the reveal the cost of the U.K. vote to leave the European Union, with an extra £110 billion of borrowing likely to be needed over the next four years. Currency traders predict a volatile session for the pound.

Market rally fading

Yesterday's record high close in U.S. stocks fed through to Asia overnight, where the MSCI Asia Pacific Excluding Japan Index rose 0.7 percent, with commodity producers leading the gains. Japanese markets were closed for a holiday. In Europe, the Stoxx 600 gave up earlier gains to trade 0.3 percent lower at 5:30 a.m. ET as financials slipped. S&P 500 futures slipped 0.1 percent.

Coming up...

There's a lot to look for in the U.S. today ahead of the Thanksgiving break. At 8:30 a.m. ET durable goods orders are due, with expectations for a jump to 1.7 percent for October. Weekly initial jobless claims data will be released at the same time. At 9:45 a.m. Markit manufacturing PMI is due, and then at 10:00 a.m. new-home sales and University of Michigan's sentiment gauge is published. Finally, at 2:00 p.m. the minutes of November's FOMC meeting are published.

An OPEC production cut is on shaky ground. Iraq and Iran are said to still have doubts about the cartel's plan to bring down production to 32.5 million to 33 million barrels a day, three sources told Reuters. West Texas Intermediate crude oil is higher by 0.4% at $48.21 a barrel. The November FOMC minutes are coming. Traders will get a glimpse into the thought process of the Federal Reserve and look for any clues as to whether the Federal Open Market Committee will raise interest rates at its December meeting. World Interest Rate Probability data compiled by Bloomberg shows a 100% chance for a 25-basis-point rate hike in December. The minutes will cross the wires at 2 p.m. ET. Europe's PMI beats. Markit's flash composite PMI figure for the eurozone printed at 54.1, suggesting the European economy is growing at its fastest pace of 2016. The euro is little changed near 1.0635 against the dollar. Britain's Autumn Statement is due out. Chancellor Philip Hammond will deliver the government's first major update on economic and fiscal policy since the Brexit referendum, and he is expected to announce a shift away from the austerity-based policies of his predecessor George Osborne. The statement will be released at 7:30 a.m. ET. GameStop expects a tough holiday season. The video game retailer expects same-store sales, or sales at established stores, to fall by 7% to 12% during the crucial holiday quarter as more gamers download games to their consoles. Hewlett Packard Enterprise misses on revenue. The commercial computer business that was spun off from HP last year earned an adjusted $0.61 a share on revenue of $12.5 billion. Wall Street was expecting adjusted earnings of $0.60 on revenue of $12.85 billion. Markets are closed on Thursday for Thanksgiving. They will reopen for a short session Friday, with the stock market and US Treasury market closing at 1 p.m. ET and 2 p.m. ET. Stock markets around the world trade mixed. Australia's ASX (+1.3%) led the overnight gains, while Germany's DAX (-0.6%) lags in Europe. Earnings reporting is light. John Deere reports ahead of the opening bell, and Ctrip.com releases its quarterly results after markets close. US economic data is heavy. Durable orders and initial jobless claims are due out at 8:30 a.m. ET before Markit US Manufacturing PMI crosses the wires at 9:45 a.m. ET and new-home sales and University of Michigan consumer confidence are announced at 10 a.m. ET. Additionally, Department of Energy oil inventories and the Baker Hughes rig count are will be released at 10:30 a.m. and 1 p.m. Don’t Lock Her Up President-elect Donald Trump said he doesn’t “feel very strongly” about further investigations of onetime rival Hillary Clinton, backing away from fiery campaign rhetoric in which he pledged to appoint a prosecutor to probe her email server and foundation work. “I don’t want to hurt the Clintons, I really don’t,” Mr. Trump said in an interview with the New York Times on Tuesday. When pushed to say whether he had ruled out prosecution of Mrs. Clinton, he said: “It’s just not something that I feel very strongly about.” Mr. Trump also said he disavowed the so-called alt-right movement, which has been tied to racism and anti-Semitism, and indicated he is unlikely to disentangle himself from his business empire as fully as he previously suggested, raising questions about potential conflicts of interest while president. Beijing’s Opening China is moving swiftly to capitalize in Asia on the apparent collapse of the U.S.-led Trans-Pacific Partnership, saying it hopes now to conclude its own Asia-wide trade pact in a step to broaden its influence as priorities shift under a new administration in Washington. Asian leaders are pressing ahead with talks on the 16-nation Regional Comprehensive Economic Partnership, which China has promoted as an alternative to the landmark Pacific trade agreement. The push to conclude the RCEP underscores the region’s embrace of free trade and pushback against growing skepticism in the U.S. and in Europe. Mr. Trump has vowed to withdraw from the TPP. Meanwhile, we report that a jump in Chinese imports made parts of the Midwest and Southeast more receptive to Mr. Trump’s anti-China, anti-free trade message. Discount Wars As department stores gear up for the holiday shopping frenzy that unofficially gets under way this week, behind the scenes they have been locked in a battle with some big-name suppliers over rampant discounting. More brands, including Michael Kors, Coach and Levi Strauss, want to be excluded from storewide promotions such as “Friends & Family” sales. Their goal is to gain control of their pricing, even if it means shrinking sales. Labels with strong sales and customer pull have more power to negotiate terms with retailers. Department stores say they want to curtail discounts, but worry about turning off deal-hungry shoppers. Now, the issue is upending the delicate relationship between brands and retailers. Investors have hit the pause button on a number of 'Trump trades.'

European stock volatility underprices rising political risk.

Goldman: Hedge funds are poised to get beaten for the eighth year straight.

How Apple lost China to two unknown local smartphone makers.

Big western companies are pumping cash into Russia.

Zara's recipe for success: more data, fewer bosses.

Washington won't have the last word on climate change. Mitt Romney Leads Donald Trump’s Picks for Secretary of State Fentanyl Billionaire Comes Under Fire as Death Toll Mounts From Prescription Opioids Barack Obama Warns Donald Trump on North Korea Threat To Fight Grievances, Russian Farmer Takes Road to Vladimir Putin’s Kremlin Credit Suisse’s Old Boss, Brady Dougan, Is Getting Back in the Game Wall Street Is Betting $2.1 Trillion That U.S. Rates Will Rise

The week is starting to slow to a crawl. Volatility is low and the news flow seems to be getting lighter (for the first time in ages) as the U.S. heads into Thanksgiving. Most people will probably be eager for an extra day or two to take their minds off markets and the news, given how hectic things have been. But just a quick warning to the wise: sometimes the Thanksgiving break can produce some big, pivotal market moves. Who can forget 2014 when West Texas Intermediate crude crashed over 10% to slide below $70. And of course there was the Dubai World default over Thanksgiving break in 2009 that sent markets tumbling and caused investors to focus on weak, peripheral sovereigns like Greece. So while you're cooking, watching football, cracking open a bottle of wine, and eating pumpkin pie, keep an eye on markets! Sometimes some really interesting stuff happens over the next two days.

Source: Bloomberg, BI, WSJ, FT