Tuesday December 6 Daily Market Primer
US
stocks rose yesterday as market Trumpification continued, with the S&P up
.6% and the NASDAQ up over 1%, indicating some catch up for tech stocks, which
have been out of favor on the healthcare-finance-industrial dominated
rally. Italian government bonds yields rose yesterday after the
referendum down-vote, and the lack of interest in reform is putting more
pressure on the Italian banking sector, already among the weakest in the
industrialized world. Monte dei Paschi, famous for being the world’s
oldest bank, fell 4%, Popolare di Milano was down 8%, and UniCredit, Italy’s
largest, was down 3.4%. Italy’s banks badly need recapitalization and
there is talk of nationalizing Monte die Paschi. The Euro
recovered from it’s post-referendum drop yesterday, jumping 1.5% Monday, as
market shook off the status-quo in Italy. Asia and Europe are mostly
following the US lead in trading around the world on Tuesday, and S&P
futures are pointing slightly up this morning.
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LAST
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CHANGE
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% CHANGE
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|
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19,216.24
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45.82
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0.24%
|
|
|
5,308.89
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53.24
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1.01%
|
|
|
2,204.71
|
12.76
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0.58%
|
|
|
1,337.79
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23.53
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1.79%
|
|
|
2,488.55
|
13.97
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0.56%
|
|
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Stoxx
Europe 600
|
342.93
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1.66
|
0.22%
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Nikkei
225
|
18,360.54
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85.55
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0.22%
|
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UK:
FTSE 100
|
6,761.38
|
14.55
|
0.22%
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CBOE
Volatility
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11.72
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-0.42
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-3.46%
|
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Australia:
S&P/ASX 200
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5,428.70
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28.30
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0.52%
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3,199.65
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-5.06
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-0.16%
|
|
|
22,675.15
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169.60
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0.75%
|
|
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Europe
Dow
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1,510.34
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16.50
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0.17%
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India:
S&P BSE Sensex
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26,392.76
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43.66
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1.10%
|
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France:
CAC 40
|
4,594.78
|
20.46
|
0.45%
|
|
Germany:
DAX
|
10,710.69
|
25.86
|
0.24%
|
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Italy:
FTSE MIB
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17,320.50
|
270.29
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1.59%
|
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Spain:
IBEX 35
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8,794.90
|
130.20
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1.50%
|
|
0.513
|
1/32
|
||
|
1.128
|
-0/32
|
||
|
1.844
|
1/32
|
||
|
2.39
|
2/32
|
||
|
3.069
|
-2/32
|
||
|
-0.704
|
0/32
|
||
|
0.353
|
-5/32
|
||
|
50.91
|
-0.88
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-1.70%
|
|
|
54.22
|
-0.72
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-1.31%
|
|
|
3.689
|
0.035
|
0.96%
|
|
|
386.94
|
-3.23
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-0.83%
|
|
|
2207.25
|
3
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0.14%
|
German
factory orders came in at a stronger than expected 4.6%, a good sign for
Europe’s largest economy. There was Republican leadership pushback to
President-elect Trump’s threat to slap a 35% tariff on imports from US
based companies moving jobs offshore, and there is quite a bit of negative
commentary in the financial media about trade wars and higher consumer
prices. Outgoing VP Joe Biden spoke out against rolling back Dodd
Frank. There was discussion that Mr. Trump’s call to with the
President Tsai Ing-wen of Taiwan was carefully planned and designed to send
a message to China and not and off-the-cuff event. Chicago Fed
President Charles Evans signaled the Fed’s intention for a rate hike next week
(as if we needed it) during a speech in Chicago. And, it may not be a great
day for Boeing, since Mr. Trump just Tweeted this:
Here’s
the news:
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Reaching a deal to cut production is one thing; getting an
actual reduction in global output is another. Crude production from OPEC
members is likely to have risen to a record 34.16 million barrels a
day in November, with African members leading the gains,
according to a Bloomberg survey of analysts. The organisation has invited 14
other crude producers, who together account for about a fifth of global production, to a meeting
in Vienna this week aimed at securing wider production cuts. A barrel
of West Texas Intermediate for January delivery was 20 cents lower at $51.59 by 5:17 a.m.
ET.
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Surprisingly strong factory data from Germany showed orders surged 4.9 percent in October, far ahead
of analysts expectations for a 0.6 percent gain, with the growth led by a
jump in demand for investment goods. Also in Germany this morning, energy
utilities RWE AG and EON SE saw strong gains after the
country's top court ruled that the companies are entitled to
compensation from the nation's decision to exit nuclear energy for power
generation.
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European Union governments are preparing to increase the pressure on U.K. Prime
Minister Theresa May to secure a post-Brexit trade deal with the EU, or risk
losing out on the transitional phase businesses want, according to officials
familiar with the matter. It is proving a difficult week for May, with her lawyers
having a difficult first day yesterday at the Supreme Court appeal over the
triggering of Article 50, while she faces a possible rebellion by some of her
party members in a debate in parliament tomorrow demanding her government
publishes a plan for Brexit before starting exit negotiations. Bank of
England Governor Mark Carney, meanwhile, has warned about the risks of
pulling back from globalization, saying the world faces its first lost decade since the 1860s.
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Overnight, the MSCI Asia Pacific Index climbed 0.9 percent while Japan's Topix
index added 1.1 percent as shares there caught up with yesterday's rally and
were helped by weak yen. In Europe, the Stoxx 600 Index added 0.2 percent by 5:24 a.m. ET with
banks and utilities leading the gains. S&P 500 futures were broadly unchanged.
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President-elect Donald Trump's protectionist trade policies,
in which he has threatened to use taxes as 'retribution'
against U.S. companies that move jobs overseas, are prompting resistance from some Republican
leaders. Barclays Plc, meanwhile, has calculated that Warren
Buffett’s Berkshire Hathaway Inc. could get a boost of $29 billion to its book value should the
PEOTUS follow through on the domestic corporate tax cuts he promises.
A
top Republican says he won't back Trump's plan for huge tariffs. House Majority Leader
Kevin McCarthy says he won't support President-elect Donald Trump's plan to
impose a 35% tariff on imports from companies that leave the US.
There's
an unintended consequence of the Trump-Carrier jobs deal. Greg Hayes, the CEO of
United Technologies, Carrier's parent company, says the deal that has been
hailed as a win for President-elect Trump will lead to automation and fewer
jobs.
Eurozone
GDP was in line. Data released by Eurostat showed the region's economy grew
0.3% in the third quarter, matching the two preliminary readings. The euro is
flat at 1.0765 against the dollar.
The
Reserve Bank of Australia warned on growth. Australia's central bank
held its key interest rate at 1.50% and said "some slowing in the
year-ended growth rate is likely, before it picks up again." The
Australian dollar is down 0.4% at .7441 versus the dollar.
Britain
is in a "lost decade." Mark Carney, the Bank of England governor,
said in a speech in Liverpool on Monday that stagnant wage and productivity
growth meant that Brits were no better off than they were before the 2008
financial crisis.
AOL's
Tim Armstrong thinks the Yahoo deal will close. Speaking at Business
Insider's IGNITION conference, AOL's CEO said that he was "cautiously
optimistic" the deal would go through and that by the first quarter of
next year there would be a better understanding of the company's
"viewpoint."
Apple
Watch sales are on pace to be the best ever. "Our data shows that
Apple Watch is doing great and looks to be one of the most popular holiday
gifts this year," Tim Cook wrote in an email to Reuters. Cook's comment
pushes back against an IDC report released Tuesday that suggested Apple Watch
sales were down 71% from a year ago.
Stock
markets around the world are mostly higher. Hong Kong's Hang Seng
(+0.8%) paced the advance in Asia, and Spain's IBEX (+0.7%) leads in Europe.
The S&P 500 is set to open little changed near 2,205.
Earnings reporting remains light. AutoZone and Bank of
Montreal report ahead of the opening bell, while Dave and Busters releases
its quarterly results after markets close.
US economic data flows. The trade balance is due
out at 8:30 a.m. ET before both factory orders and durable goods orders are
announced at 10 a.m. ET. The US 10-year yield is unchanged at 2.39%.
A Battered Europe
The euro rallied from yesterday’s early losses
following Italian voters’ rejection of government-backed constitutional
changes, but the day’s trading volatility raises concerns about the currency
in an era of populist politicians and diverging economies. The referendum
result creates a political vacuum in Italy that could be treacherous for the country’s banks. A plan
to rescue the weakest, Monte dei Paschi di Siena, is likely scuttled, and the
bank may need to be nationalized. If other banks stumble, and if concerns
rise for eurozone financial institutions outside of Italy, the currency could
be stressed further. Italian bank shares fell on Monday but European stocks generally were higher,
suggesting that investors believe the referendum outcome on its own doesn’t challenge the
eurozone. But next year will present many more tests, with elections
in Germany, France and the Netherlands. For Europe’s unity, 2017 likely will be a year of reckoning.
European stocks were steady Tuesday as Italian banks
recovered some lost ground.
Storm Clouds in the East
The verbal confrontation between President-elect Donald Trump and the Chinese government escalated on Monday, as China responded harshly to attacks by Mr. Trump on its economic and security positions. The exchange signaled a new and potentially more adversarial relationship between the world’s two largest economies, as Mr. Trump moves to follow through on his campaign-trail promises to challenge China’s trade and currency policies. Chinese officials earlier played down Mr. Trump’s precedent-breaking phone call with Taiwan President Tsai Ing-wen, which a transition official said had been arranged by Bob Dole, the former Republican senator and presidential nominee. But they signaled their displeasure about a series of tweets in which Mr. Trump criticized China’s currency policies and military presence in the South China Sea. |
State Control
Two of the world’s most important stock markets have a big new investor: the state. About 30% of all the companies in Japan’s three main equity indexes now count the country’s central bank as one of their top 10 shareholders. And in China, two major state-owned investment funds that are part of the so-called national team have become top 10 shareholders in 39% of listed companies over the past year. The data are a stunning benchmark for the role governments now play in markets after nearly a decade of heavy intervention. Public pension funds and sovereign-wealth funds have long been big holders of stocks. But the new wave of state buying is unique in that it is aimed primarily at propping up markets and economies. Traders say the buying distorts stock values as investors build strategies around government actions rather than company fundamentals.
Two of the world’s most important stock markets have a big new investor: the state. About 30% of all the companies in Japan’s three main equity indexes now count the country’s central bank as one of their top 10 shareholders. And in China, two major state-owned investment funds that are part of the so-called national team have become top 10 shareholders in 39% of listed companies over the past year. The data are a stunning benchmark for the role governments now play in markets after nearly a decade of heavy intervention. Public pension funds and sovereign-wealth funds have long been big holders of stocks. But the new wave of state buying is unique in that it is aimed primarily at propping up markets and economies. Traders say the buying distorts stock values as investors build strategies around government actions rather than company fundamentals.
Phone call doesn’t reflect US policy shift: Tsai
Taiwanese President Tsai Ing-wen said on Tuesday her phone call
with US president-elect Donald Trump should not be interpreted a significant
shift in American policy, and stressed that both sides saw the value of
maintaining regional stability.
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Carney (Kirsty Wigglesworth/Getty Images)
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Governments must encourage growth and help those left behind amid
globalization and technological development, Bank of England Governor Mark
Carney says. "Now may be the time of the famous or fortunate, but what of
the frustrated and frightened?" he said.
Reuters (05 Dec.)
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Biden
(Alex Wong/Getty Images)
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Vice President Joe Biden warns that dismantling the Dodd-Frank Act
would set the financial industry back to pre-crisis policies that "caused
this god-awful recession." "We can't be lulled into a sense of
collective amnesia," Biden said.
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Greece gets some debt relief.
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Pimco's Total Return Fund loses its crown.
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A cheat sheet on the deglobalization of the financial world.
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Amazon to open a store
that will eliminate checkout — and lines.
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Americans dream of a
Christmas that doesn't put them in debt.
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Indian Prime Minister Narendra Modi's demonetization scheme
continues to be a source of fascination. As a reminder, on November 8, the government
declared that all high-denomination rupee bills would soon be invalidated.
The idea was to flush out people holding high amounts of cash, so as to crack
down on tax avoidance and black market activity. But what if there's less
black market activity than the government thought? Bloomberg's Siddhartha
Singh reports that more cash has been turned in
than expected. As of December 3, 12.6 trillion rupees out of 15.3 trillion
floating out there had already been turned in to bank accounts, suggesting
that the amount of "black money" was less than the government
believed. Of course, this doesn't mean there's no illegal use of cash. Airplanes are being loaded up with soon-to-be nullified
500 and 1000 rupee notes, and getting flown to areas of the
country where the rules are less strict. Other businesses are popping up to
help people wash their cash at a price of up to 50 percent of face value in
some cases. Meanwhile, the economic data really is starting to sting. The
latest Indian PMI data was ugly, as businesses cited the cash clampdown for
crimping activity. Check out the sequential change in the India Services PMI
to see just how much things fell of a cliff in November. Of course, things will
presumably bounce back once the whole episode is over. But if the gains from
the whole demonetization scheme were less than thought, then it's unclear
what exactly has been gained from the pain.
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Source:
Bloomberg, BI, WSJ, CFAI Fin. Newsbrief, Reuters, SCMP
posted by Rich Barnett @ 6:47 AM
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