Thursday December 8 Daily Market Primer

US stocks made a Trump Jump yesterday, as S&P moved up 1.3%, the Dow up 1.5%, and the NASDAQ up 1.1%, all hitting new highs.  Investors are continuing to evaluate the impact of tax cuts, regulatory easing, and fiscal stimulus on the economy and markets.  The market turned up sharply in the afternoon, and I could find a specific trigger. Markets around the world followed the US up on Thursday.  US futures are pointing to another up day.

	LAST	CHANGE	% CHANGE
DJIA	19,549.62	297.84	1.55%
Nasdaq	5,393.76	60.76	1.14%
S&P 500	2,241.35	29.12	1.32%
Russell 2000	1,364.51	11.84	0.88%
Global Dow	2,488.55	13.97	0.56%
Stoxx Europe 600	349.79	2.09	0.23%
Nikkei 225	18,765.47	268.78	0.23%
UK: FTSE 100	6,918.06	15.83	0.23%
CBOE Volatility	11.99	-0.23	-1.88%
Australia: S&P/ASX 200	5,543.60	65.50	1.20%
China: Shanghai Composite	3,215.37	-6.88	-0.21%
Hong Kong: Hang Seng	22,861.84	60.92	0.27%
Europe Dow	1,554.79	6.21	1.74%
India: S&P BSE Sensex	26,694.28	457.41	0.40%
France: CAC 40	4,721.53	26.81	0.57%
Germany: DAX	11,071.31	84.62	0.77%
Italy: FTSE MIB	18,423.33	292.67	1.61%
Spain: IBEX 35	9,099.10	138.70	1.55%
U.S. 3 Month	0.5	0/32
U.S. 2 Year	1.124	-1/32
U.S. 5 Year	1.841	-7/32
U.S. 10 Year	2.395	-15/32
U.S. 30 Year	3.09	-1 8/32
Germany 2 Year	-0.734	4/32
Germany 10 Year	0.428	-22/32
Crude Oil	50.12	0.35	0.70%
Brent Crude	53.41	0.41	0.77%
Natural Gas	3.644	0.04	1.11%
S&P GSCI	384.16	1.47	0.38%
E-mini S&P 500	2238.25	1.5	0.46%

ECB President “Super Mario” Draghi is giving a press conference right now following the ECB’s decision to extend the QE program to all of next year, which was previously scheduled to end in March of 2017.   Bond purchases will be cut to $60 billion euro from $80 billion euro a month.  The cut is probably not that meaningful since they are having trouble finding enough  bonds to buy anyway.  The ECB also expanded the range of bonds they would buy to include more negative yielding bonds.  The Euro and European bond yields rose on the announcement but quickly settled back down. The US election wasn’t rigged, but four big banks are in trouble this morning as Deutsche Bank, HSBC, UBS, and Bank of Nova Scotia are accused of rigging the silver market.  This is the second day in a row for a market rigging scandal playing out, as yesterday JPM, HSBC, and Credit Agricole were in the news for rigging Euribor.  Hopefully we can get through Friday with a rigged market.  World on the street is that a $15 billon dollar rescue of  Banca Monte dei Paschi is in the works with a European credit facility. Here’s the news: Markets rise

Overnight, the MSCI Asia Pacific Index gained 0.8 percent and Japan's Topix index climbed 1.1 percent as markets took their lead from U.S. benchmarks which climbed to new record closing highs. In Europe, the Stoxx 600 Index was 0.2 percent higher at 5:24 a.m. ET as investors await the ECB decision. S&P 500 futures were broadly unchanged.

ECB day

The European Central Bank will announce its latest monetary policy decision at 7:45 a.m. ET, with President Mario Draghi holding a press conference at 8:30 a.m. in which he's expected to outline the plans for the bank's asset-purchase program, currently due to end in March 2017 at the earliest. The ECB will also publish updated growth and inflation forecasts, including a first look at 2019. Not a single economist in the Bloomberg survey forecasts a rate change today, but expectations for an extension to the QE program has helped lift stocks and bonds in recent sessions.

Silver rigging

Plaintiffs say documents relating to a lawsuit that claim Deutsche Bank AG manipulated gold and silver prices, which it settled, provide “smoking gun” proof that UBS Group AG, HSBC Holdings Plc, Bank of Nova Scotia and others rigged the silver market. The documents show communication between traders in different banks discussing ways to affect the market. Separately, an audit commissioned by German regulators suggest that Deutsche Bank employees may have manipulated internal indexes as part of a scheme to help Banca Monte dei Paschi di Siena SpA conceal losses. Shares in Deutsche Bank were 1.4 percent higher at €17.59 at 5:26 a.m. ET, approaching a 16 percent gain this week.

Russian oil sale

Commodity trader Glencore Plc and Qatar’s sovereign wealth fund have agreed to buy a 19.5 percent stake in Rosneft PJSC, Russia's largest oil producer, for 10.2-billion euro ($11 billion). For Glencore, the deal will increase the amount of oil it has to trade by 220,000 barrels a day. In Russia, the cash from the sale will go into a holding company nominally owned by the government, rather than directly to the finance ministry. Shares in Glencore were 1 percent higher at 5:19 a.m. ET, bringing the company's 2016 rally to 240 percent.

China exports

The cheaper yuan helped spur a surprise 0.1 percent gain in China's exports, ending a seven-month losing streak. While exports are expected to continue to rise in 2017, there is a risk from U.S. trade policy, which is "the big unknown" according to Tom Orlik, chief Asia economist at Bloomberg Intelligence in Beijing. Elsewhere in Asia, Japan unexpectedly cut its reading of third-quarter economic growth to an annualized 1.3 percent, from a preliminary estimate of 2.2 percent expansion, blaming a drop in business spending and private inventories. US stocks are at all-time highs. On Wednesday, the major US averages put in their 12th record high since Donald Trump was elected president on November 8. Notable was the performance of the Dow Transports, which closed at an all-time high for the first time in two years. The S&P 500 is set to open little changed near 2,239. The ECB meets on Thursday. The European Central Bank is widely expected to leave its key interest rate unchanged at 0%, but could extend its quantitative easing program that is scheduled to end in March 2017. The euro is up 0.3% at 1.0787 against the dollar ahead of the decision, which will be released at 7:45 a.m. ET. China's economy is bouncing back. Trade data showed exports ticked up 0.1% in November as imports rose by 6.7%, causing China's trade surplus to narrow to $44.61 billion from $49.06 billion in October. The reading marked the first time since October 2014 that both exports and imports gained in the same month. Japan's Final Q3 GDP was revised sharply lower. Data released by the Japanese government showed the economy grew at a 1.3% clip in the third quarter, well below the initial reading of 2.4% growth. The Japanese yen is stronger by 0.4% at 113.35 per dollar. Major banks allegedly rigged the silver market. "Smoking gun" evidence allegedly shows major banks including HSBC, UBS, and Barclays worked together to manipulate the spot silver market, Bloomberg reports. Banks are moving to Paris. Benoit de Juvigny, secretary general of the AMF, France's markets regulator, told the BBC that some international banks are in the process of opening subsidiaries in Paris as a result of Brexit. Lululemon beats and raises its guidance. The yoga clothing maker earned an adjusted $0.47 per share on revenue of $544.4 million, both ahead of estimates. Lululemon expects to earn $0.96 to $1.01 per share during the fourth quarter on revenue of $765 million to $785 million. Shares of Lululemon were up as much as 12% in after-hours trade. Michael Jordan won a landmark case against a Chinese copycat. China's highest court ruled that Qiaodan Sports, a local sportswear company, can't use the Chinese characters used to spell Jordan's name, Reuters reports. Earnings reporting is light. Sears reports ahead of the opening bell while Broadcom and Restoration Hardware release their quarterly results after markets close. US economic data trickles out. Initial jobless claims will be released at 8:30 a.m. ET. The US 10-year yield is up 3 basis points at 2.37%. High Hopes U.S. stocks posted their biggest rally since the election Wednesday, sending major indexes to fresh records as investors increasingly conclude President-elect Donald Trump will be good for business and the economy. Investors are embracing the prospect of tax cuts, regulatory rollbacks and fiscal stimulus under Republican leadership in Washington. These bets have lifted shares of banks and industrial companies and sent government bonds tumbling and their yields surging. The Dow Jones Industrial Average rose nearly 300 points to a record Wednesday and the S&P 500 also hit a new high. Some investors have been wary of the postelection rally, citing mixed signals around Mr. Trump’s policy agenda, but many now expect the gains to continue in 2017. Corporate earnings are on the mend, the rate of U.S. economic growth has accelerated and the labor market has continued to strengthen. A Changed Climate In the latest transition news, Mr. Trump chose Oklahoma Attorney General Scott Pruitt to lead the EPA, turning to a climate-change skeptic and sharp critic of the agency to take its helm. Mr. Pruitt, a Republican, has led legal fights against some of U.S. President Barack Obama’s most significant environmental rules, and one of his major roles as EPA administrator would likely be to try to roll back those regulations. Meanwhile, Mr. Trump has selected Iowa Gov. Terry Branstad to be the next U.S. ambassador to China. Mr. Branstad has a long relationship with Chinese President Xi Jinping, who first visited Iowa as part of a sister-state exchange program in 1985. We report that Mr. Trump is using a freewheeling approach to vetting potential candidates for top jobs, while his choice of generals for his cabinet, including retired Marine Gen. John Kelly to lead the Department of Homeland Security, has raised concerns in some quarters. Art of the Deal The CEOs of AT&T and Time Warner on Wednesday defended their proposed $85 billion merger to lawmakers, trying to navigate a tricky political landscape in which Mr. Trump has expressed hostility to the deal. At a hearing on Capitol Hill, the companies portrayed the union as a bulwark against the dominance of Silicon Valley giants such as Google and Facebook. Senators from both parties voiced wide-ranging concerns about the blockbuster deal, but lawmakers focused their inquiries more on the complex policy questions involved in the media business than the fraught politics. Republican Senators shied away from Mr. Trump’s hard-hitting populist tone and his willingness to take aim at specific businesses. Antitrust enforcers in the Trump administration will ultimately decide whether to approve the deal or try to block it. Into Thin Air Stop focusing on legroom. It’s the headroom that is shrinking on flights, and making us feel really uncomfortable. Seat density has increased significantly the last couple of years. One passenger’s nose may be 3 inches closer to the back of the head in front of her. The skinny seats installed recently largely preserve knee and legroom, but in rows that are compressed, while installing skinny bathrooms and minimizing galleys have let airlines pack more rows in, too. Psychologists say the eye-level squeeze is a big reason travelers are feeling more anxious on densely packed planes. And it’s only going to get tighter in there. Lack of Scale Means European Banks Should Look To Merge With U.S., Chinese Rivals, Activist Says Dec 7 2016 | 11:35pm ET Activist hedge fund manager Knight Vinke believes large European investment banks will have no choice but to merge with U.S. or Chinese rivals because they lack scale in wholesale trading and lack deep domestic markets to subsidize their activities. Italian bank reportedly seeks rescue-deadline extension Italy's Banca Monte dei Paschi di Siena has requested a five-week extension from the European Central Bank to raise €5 billion in equity, sources say. The bank seeks to avoid a precautionary recapitalization, which would involve a state bailout that would subordinate debtholders' assets. Reuters (07 Dec.),  Brexit, US election boost Citi Q4 trading Citigroup expects an almost 20% increase in trading this quarter year over year, Chief Financial Officer John Gerspach said. Client activity has been buoyed by the UK vote to leave the EU and the US presidential election, he said. The Wall Street Journal (tiered subscription model)

The best books of 2016.

Good U.K. data looks likely to break bad in 2017. Ultra low rates in Europe are going nowhere, Danish CB head says.

What to watch for in next week's Fed meeting.

Trump prompts a $2 trillion rotation to stocks from debt.

Price-level targeting was discussed at the Fed in 2010.

Nomura has 10 'grey swans' risks that could roil markets next year. When Presidents Defy Economic Gravity, Gravity Usually Wins Trump Victory Spurs Israeli Talk of West Bank Annexation Strong Dollar Has Companies Counting the Cost—And Opportunities Shell Signs Preliminary Iran Oil Deal Despite Uncertainty Over Trump It’s Just No Fun Being a Swiss Banker Anymore

Did you experience a rush of deja vu yesterday? If you were active in the market you might have, because most securities had a real summer 2016 vibe to them. Remember, this summer was characterized by what might be called "the everything rally." Safe-haven government bonds rallied. Emerging markets rallied. Gold rallied. Equities rallied. It all went up. More recently this picture's started to deteriorate, and since the U.S. election a number of major investing themes have come unstuck. Stocks have performed strongly while safe-haven assets tumbled, and risk parity, low volatility, safety stocks, and big tech have all done badly since November 8. But yesterday was an exception. Everything was green. Not only did stocks and bonds both go up together, but certain equity sub-categories like low volatility and consumer staples had their best day since the election. Keep an eye on this to see if it was a one-day blip, or if markets will start to move in lockstep once again.