Thursday December 1 Daily Market Primer
Happy
December.
US stocks were down slightly yesterday, though the DOW managed to eek out a 1
basis point return. Treasury and German government bond yields continued
to climb, with the US 10 year at over 2.4% this morning. The Dow was up
5.4% for the month, and bonds sank, as the sell bonds buy stocks reflation
trade” continued. Market commentators are jumping on the bandwagon with
overwhelmingly positive quotes in the press. It’s no surprise that
crude oil soared on the OPEC deal, hitting almost $50 yesterday and climbing
even higher overnight. The deal was for a cut of 1.2 million barrels
per day from OPEC members and 300,000 barrels from Russia. I can’t wait
for gas prices to go up. Asian stock markets reacted positively
to the deal, but stocks are down in Europe this morning. US futures
are basically flat.
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LAST
|
CHANGE
|
% CHANGE
|
|
|
19,123.58
|
1.98
|
0.01%
|
|
|
5,323.68
|
-56.24
|
-1.05%
|
|
|
2,198.81
|
-5.85
|
-0.27%
|
|
|
1,322.34
|
-5.88
|
-0.44%
|
|
|
Global
Dow
|
2,460.99
|
4.58
|
0.19%
|
|
Stoxx
Europe 600
|
340.12
|
-1.87
|
-1.15%
|
|
Nikkei
225
|
18,513.12
|
204.64
|
1.12%
|
|
UK:
FTSE 100
|
6,705.77
|
-78.02
|
-1.15%
|
|
CBOE
Volatility
|
13.39
|
0.49
|
3.80%
|
|
Australia:
S&P/ASX 200
|
5,500.20
|
59.70
|
1.10%
|
|
3,273.31
|
23.27
|
0.72%
|
|
|
22,878.23
|
88.46
|
0.39%
|
|
|
Europe
Dow
|
1,471.11
|
6.09
|
-0.35%
|
|
India:
S&P BSE Sensex
|
26,559.92
|
-92.89
|
0.42%
|
|
France:
CAC 40
|
4,550.37
|
-27.97
|
-0.61%
|
|
Germany:
DAX
|
10,540.82
|
-99.48
|
-0.93%
|
|
Italy:
FTSE MIB
|
16,944.68
|
14.27
|
0.08%
|
|
Spain:
IBEX 35
|
8,645.70
|
-42.50
|
-0.49%
|
|
0.485
|
0/32
|
||
|
1.135
|
-1/32
|
||
|
1.872
|
-4/32
|
||
|
2.405
|
-5/32
|
||
|
3.064
|
-15/32
|
||
|
-0.728
|
0/32
|
||
|
0.304
|
-8/32
|
||
|
50.41
|
0.97
|
1.96%
|
|
|
52.86
|
1.02
|
1.97%
|
|
|
3.408
|
0.056
|
1.67%
|
|
|
381.9
|
4.68
|
1.24%
|
|
|
2197.5
|
-1.25
|
-0.06%
|
The
latest GDP estimate came in at 3.2% yesterday, with improvements in sales and consumer
spending. Eurozone manufacturing PMI came in at a strong 54.7%.
Incoming Treasury Secretary Steven Mnuchin mentioned looking at
issuing very long maturity government bonds yesterday to take advantage of
low rates. a The
market consensus is for a “no” on the referendum, and one of the biggest issues
facing Europe is bank reform, especially the ailing Italian banks.
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Here’s
the news:
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The Bloomberg Barclays Global Aggregate Total Return Index had
its worst month since its 1990 inception
in November, as the rout saw $1.7 trillion wiped off the index's value during
the month. The outlook isn't great for fixed income either, with European
sovereign debt looking vulnerable, Chinese rates continuing to rise, and Treasuries under
pressure from the administration change.
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|
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The first thing that happened yesterday, after details of the
first OPEC deal to cut production in eight years were made
public, was an 8 percent rally in oil. While a barrel of
West Texas Intermediate for January delivery was trading at $49.85 at 5:14 a.m. ET, questions are
already being asked about how sustainable any rally will be through 2017,
as increasing shale output and investments in Asia and the North Sea are
likely to keep a lid on crude. Goldman Sachs Group Inc. is more bullish,
saying oil could break through $60 a barrel in the first half of next
year, if the deal is fully implemented.
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China’s official factory gauge climbed to 51.7 in November, matching the
highest level since 2012, while non-manufacturing PMI climbed to 54.7.
Chinese shares trading in Hong Kong rose to a two-month high after those positive
economic data were released. There are still concerns about the
sustainability of growth there, as regulatory changes continue to drive hot-money flows from
sector to sector.
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Overnight, the MSCI Asia Pacific Index rose 0.6 percent, while Japan's Topix
index added 0.9 percent as the OPEC deal lifted energy stocks and the weak
yen boosted exporters. In Europe, the Stoxx 600 Index was 0.3 percent lower at 5:30 a.m. ET as
investors await this weekend's Italian referendum. S&P 500 futures slipped 0.1 percent.
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Unemployment in the euro zone dropped to 9.8 percent, the lowest level
since July 2009, while U.K. manufacturing expanded less than forecast as
inflationary pressures continue to build. Ahead of tomorrow's big jobs number, there is a raft of U.S.
data to look forward to. At 8:30 a.m. ET weekly jobless claims numbers are
released, with Markit manufacturing PMI due at 9:45 and ISM manufacturing at
10:00. Today, we will also get U.S. auto-sales numbers for November, with
analysts expecting 17.7 million total.
Bonds
had a terrible November. Global bonds lost $1.7 trillion of value in November as they
suffered through their worst month since at least 1990, Bloomberg reports.
The sell-off is continuing on the first day of December, with the US 10-year
yield up another 3 basis points at 2.41%, its highest since July 2015.
Oil is extending its OPEC gains. Brent crude oil, the
international benchmark, is higher by 1.5% at $52.60 a barrel after OPEC
agreed to its first production cut in eight years at Wednesday's meeting. The
energy component is up by almost 14% since Tuesday's close.
European
manufacturing hit its best level since January 2014. Final Eurozone
Manufacturing PMI printed 53.7 in November thanks to strong readings from the
Netherlands and Austria, data from IHS Markit showed. The euro is stronger by
0.3% at 1.0625 against the dollar.
Goldman
Sachs is trading at its best level since the financial crisis. Shares of the investment
bank ended Wednesday at $219.29, their highest level since the end of 2007.
Goldman has gained about 36% since August 31.
CME
Group had a record-setting month. Volatility in response to the election
produced three of the 10 busiest days in exchange history, with average daily
volume of about 20 million contracts up 45% from a year ago, Reuters says.
FitBit
is nearing a deal for Pebble. The deal is expected to be worth $34 million
to $40 million, according to VentureBeat. That's far less than the $58
million investors have poured into the company over the years.
Steve
Cohen settled an old insider-trading case. Billionaire Steve Cohen
has agreed to pay $135 million to settle a lawsuit filed by shareholders of
Elan Corp., who said they lost money as a result of his insider trading in
the company's stock during his hedge fund days at SAC Capital, Reuters
reports.
Stock
markets around the world trade mixed. Japan's Nikkei (+1.1%)
outperformed in Asia, and Britain's FTSE (-1.2%) lags in Europe. The S&P
500 is set to open little changed near 2,197.
Crude Awakening
OPEC representatives reached a landmark deal Wednesday to reduce oil output by 1.2 million barrels a day, propelling crude prices more than 8% after months of wrangling and market uncertainty about the ability of the once-mighty group to strike an agreement. The OPEC cuts were deeper than many analysts had expected, amounting to about 1% of global production. The 14-member group hopes the cuts will help shrink a supply glut that has been fed in part by the U.S. shale boom, and has depressed oil prices for more than two years. At the same time, the pact benefits the shale producers, giving them an incentive to ramp up production—a move that could potentially bring a halt to any oil-market rally. Oil prices surged and shares of more than 50 U.S. exploration-and-production companies climbed more than 10% following the agreement.
Taxing Times
High-income households won’t receive an “absolute tax cut” under a Trump tax plan, the president-elect’s new pick for Treasury secretary, Steven Mnuchin, said on Wednesday. The promise is at odds with tax proposals from Donald Trump and House Republicans. Mr. Mnuchin said that “Any reductions we have in upper-income taxes will be offset by less deductions, so that there will be no absolute tax cut for the upper class.” Aside from moving ahead on a large tax rewrite next year, Mr. Mnuchin also said he would roll back parts of the landmark 2010 Dodd-Frank financial overhaul enacted by the Obama administration and congressional Democrats in the wake of the financial crisis. Meanwhile, we examine how Mr. Mnuchin made millions in personal profit by buying failed lender IndyMac during the financial crisis, the defining moment in his career.
Flawed Forgiveness
The federal government is on track to forgive at least $108 billion in student debt in coming years, as more borrowers seek help in paying down their loans, leading to lower revenues for the nation’s program to finance higher education. The Government Accountability Office disclosed the sum in a report to Congress which for the first time projected the full costs of programs that set borrowers’ monthly payments as a share of their earnings and eventually forgive portions of their debt. The GAO report also sharply criticized the government’s accounting methods for its $1.26 trillion student-loan portfolio, pointing to flaws that have led it to alter projected revenues significantly over the years. The government says it still expects the program to generate a profit over the long term, but it has repeatedly trimmed expectations for revenues.
All Bundled Up
Want to cut cable? Prepare to replace it with something that looks a lot like cable. The world’s largest pay-TV company, AT&T, is getting into the cable-cutting business with an app called DirecTV Now. For as little as $35 a month, you can turn on your big-screen TV or your phone and stream a lineup of live channels that comes close to basic cable. But the service lacks features we’ve come to expect, and may not have every channel you want. In 2016, cable cutting looks a lot less like salvation, and more like a few new heavily compromised TV bundles. Our Personal Technology columnist Geoffrey A. Fowler compares DirecTV Now and its cablelike streaming rivals, Sony’s PlayStation Vue and Dish Network’s Sling TV, and explains how to cut cable on your terms.
A quarter of affluent older
investors turn to a mix of online advice and paid human advisers to help them
with financial matters, a study from Hearts & Wallets found.
"Blending behavior spikes for emotionally charged, high-impact decisions
like optimizing Social Security when no one source provides confidence,"
said CEO Laura Varas.
InvestmentNews (30 Nov.)
Capital investment by nonfinancial
companies in Japan posted a 1.3% year-on-year decline in the third quarter,
the benchmark's first fall in 14 quarters, the Ministry of Finance said. The
drop was a sharp reversal from Q2's 3.1% gain.
Market News International (30 Nov.)
US Commodity Funds has filed with
the Securities and Exchange Commission for a leveraged exchange-traded fund
investing in oil. The United States 3x Oil Fund would be structured as a
commodity pool.
ETF.com (30 Nov.),
Earnings reports trickle out. Dollar General and Kroger
report ahead of the opening bell, while Smith & Wesson releases its
quarterly results after markets close.
US economic data flows. Initial jobless claims
will cross the wires at 8:30 a.m. ET before Markit US Manufacturing PMI and
ISM Manufacturing are released at 9:45 a.m. ET and 10 a.m. ET.
Wall Street wins again as Trump picks billionaires,
bankers.
Norway's wealth fund wants to add $129 billion in stocks.
Carney and Draghi agree — Brexit bashes everyone.
Glencore's reversal of fortune marked by return to dividends.
Bank of England working on making new £5 notes meat free.
The man who stands between Earth and asteroid armageddon.
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Source:
Bloomberg, BI, WSJ, CFAI Fin. Newsbrief, Market News International,
InvestmentNews, ETF.com
posted by Rich Barnett @ 7:02 AM
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