Wednesday December 7 Daily Market Primer

US stocks rose yesterday, with another strong move in the NASDAQ, up ½ a percent.  Financial stocks continued to advance and telecom stocks also had a good day. Oil dropped slightly after four days of gains, and is down a little more this morning.  Stocks moved up in Asia and are trading up in Europe.  US futures are fairly flat before the market open.  Believe me.

  

	LAST	CHANGE	% CHANGE
DJIA	19,251.78	35.54	0.18%
Nasdaq	5,333.00	24.11	0.45%
S&P 500	2,212.23	7.52	0.34%
Russell 2000	1,352.67	14.88	1.11%
Global Dow	2,488.55	13.97	0.56%
Stoxx Europe 600	346.45	1.88	1.33%
Nikkei 225	18,496.69	136.15	1.33%
UK: FTSE 100	6,869.68	89.84	1.33%
CBOE Volatility	11.74	-0.05	-0.42%
Australia: S&P/ASX 200	5,478.10	49.40	0.91%
China: Shanghai Composite	3,222.24	22.59	0.71%
Hong Kong: Hang Seng	22,800.92	125.77	0.55%
Europe Dow	1,537.33	16.28	0.61%
India: S&P BSE Sensex	26,236.87	-155.89	1.07%
France: CAC 40	4,660.82	28.88	0.62%
Germany: DAX	10,917.22	141.90	1.32%
Italy: FTSE MIB	17,994.98	237.18	1.34%
Spain: IBEX 35	8,923.70	30.40	0.34%
U.S. 3 Month	0.505	0/32
U.S. 2 Year	1.104	1/32
U.S. 5 Year	1.818	3/32
U.S. 10 Year	2.371	5/32
U.S. 30 Year	3.059	10/32
Germany 2 Year	-0.68	-1/32
Germany 10 Year	0.356	6/32
Crude Oil	50.32	-0.61	-1.20%
Brent Crude	53.29	-0.64	-1.19%
Natural Gas	3.73	0.095	2.61%
S&P GSCI	385.29	-1.83	-0.47%
E-mini S&P 500	2207.25	-2.75	-0.12%

Mr. Trump’s Twitter industrial policy continued yesterday, as he threatened to cancel the Boeing contract for a new Air Force One and touted a US investment plan by Japan’s Softbank.  Some of the big banks are back in the news as JPM, HSBC, and Credit Agricole were fined $521 million for rigging Euribor (Euro version of Libor).  Another day, another half a billion dollar fine.  Moody’s published a negative outlook for money managers for 2107 http://bit.ly/MoodysMoneyMgrs.  No Christmas card for Moody’s.  In the “I thought this already happened” PIMCO’s famous Total Return Fund, once the world biggest bond fund by with $300 billion, was passed by TCW’s MetWest Total Return Bond Fund, after years of mediocre returns and losses triggered by the very public departure of former bond king Bill Gross two years ago.

I read “The Innovation Paradox” (below) yesterday, which discusses the dearth of big, productivity boosting ideas, and its definitely worth a read if you can make the time.  And, today is Pearl Harbor Day.

Here’s the news:

Managing the economy

President-elect Donald Trump continued show the power of his fully operational Twitter feed yesterday as one tweet brought an offer of talks from Boeing Co. on the cost of a plane order, while another saw shares in SoftBank Group Corp. rally to their highest level since August 2015. While there is disagreement over whether Trump's tactics will prove effective over the long term, and even if the investments he flags are possible, this Twitter feed seems likely to continue to be one of the most important in markets.

Bank fines

JPMorgan Chase & Co., HSBC Holdings Plc and Credit Agricole SA were fined a total of 485.5 million euros ($521 million) by European Union antitrust regulators for their part in rigging the Euribor benchmark interest rate. Elsewhere in European banking, Credit Suisse Group AG lowered profit targets and pledged another 1 billion francs ($1 billion) in cost cuts as a slump in some business sectors force Chief Executive Officer Tidjane Thiam to adjust his turnaround plan.

U.K. data miss, and misstated

U.K. manufacturing output unexpectedly fell 0.9 percent in October, well below expectations for a 0.2 percent rise. The pound dropped after the data was released to trade 0.7 percent lower at $1.2592 at 5:15 a.m. ET. There was one piece of good news for U.K. data watchers as the Office of National Statistics issued a press release correcting balance-of-payments data back to January 2015. The effect of the correction is to reduce the balance of payments deficit from 5.9 percent of GDP to 5.4 percent for the second quarter of 2016, with the ONS blaming an error in the 'erratics' category, which, as the name suggests, are a volatile component of the data.  Elsewhere, German Industrial Production fell short of expectations in October and Australia had its worst quarter for GDP in 8 years.

Markets rise

Overnight, the MSCI Asia Pacific Index climbed 0.6 percent, while Japan's Topix index added 0.9 percent to climb to the highest level since January as the yen weakened for the third-straight day. In Europe, the Stoxx 600 Index was 0.8 percent higher at 5:20 a.m. ET as optimism that the European Central Bank will extend its stimulus program at tomorrow's meeting continued to lift equities. S&P 500 futures were 0.1 percent higher.

India holds, China fx reserves fall

In a surprise move, the Reserve Bank of India kept interest rates unchanged, with Governor Urjit Patel awaiting clarity on the impact of Prime Minister Narendra Modi’s clampdown on cash. In China, the PBOC said that foreign-exchange reserves had decreased the most since January as the slump in the yuan continue to pressure holdings. China Fx reserves hit their lowest level since 2011. China's foreign exchange reserves fell by $69.06 billion in November to $3.052 trillion, according to data released by the People's Bank of China. Australia GDP turns negative. The Australian economy contracted by 0.5% in the third quarter, its largest quarterly decline since the financial crisis. Australia's economy is in the midst of a streak of 25 years without a recession (two consecutive quarters with negative GDP). The Australian dollar is lower by 0.2% at .7448 against the dollar. The Reserve Bank of India holds. India's central bank unexpectedly held its key interest rate at 6.25%, suggesting its assessment of the economy was "clouded" by the government's decision to remove 86% of the rupees in circulation in an effort to crackdown on corruption. The Indian rupee down 0.4% at 67.6350 per dollar. UK industrial output tumbled. Industrial output fell by 1.3% in October as mining and quarrying weighed, the Office for National Statistics said in the report. The British pound is weaker by 0.6% at 1.2604 against the dollar. Citi is being investigated for its role in the pound's "flash crash." Citi's Japanese trading operation is being investigated by the Bank of England for exacerbating the pound's October flash crash by placing a large number of sell orders after the initial fall began, people with knowledge of the investigation told the Financial Times. Credit Suisse is cutting more costs. The Swiss investment bank is looking to slim down costs by an additional 1 billion Swiss francs ($1 billion) after already cutting 6,050 jobs this year, according to Bloomberg. A major supplier to Apple is looking to grow its presence in the US. Foxconn, the world's largest electronics manufacturer, is in preliminary discussions to expand its operations in the United States, Reuters reports. Stock markets around the world are higher. Japan's Nikkei (+0.7%) outperformed overnight and Italy's MIB (+4.2%) leads the charge in Europe. The S&P 500 is set to open little changed near 2,212. Earnings reporting remains light. Lululemon Athletica and Costco Wholesale will release their quarterly results after markets close. US economic data trickles out. JOLTs Job Openings will be reported at 10 a.m. ET. The US 10-year yield is down 2 basis points at 2.37%. Trump Target President-elect Donald Trump, escalating his carrot-and-stick approach to the nation’s manufacturing sector on Tuesday, called for the cancellation of Boeing’s work on a new version of Air Force One, asserting that the company was trying to rip off taxpayers. Using Twitter, Mr. Trump said the cost for new planes for future presidents was “more than $4 billion.” While the White House and others pushed back on the estimate used by Mr. Trump, defense experts said it was too early to identify the final tally until the Pentagon, the White House and the Secret Service had decided what equipment to install. Mr. Trump’s broadside was the latest example of his unusually aggressive style and personal intervention in corporate decision-making that has caught the attention of numerous executives around the country looking for clues about how he will govern. The Insider The Supreme Court handed the government a significant win Tuesday in its pursuit of insider trading, ruling that prosecutors in such cases don’t always have to show that something valuable changed hands to prove a crime was committed. The unanimous opinion restores some of the power the government lost in a 2014 federal court case. That two-year-old decision had cast doubt on just what constituted insider trading and forced law-enforcement officials to drop a number of high-profile cases, including several against associates of hedge-fund billionaire Steven A. Cohen. Tuesday’s decision, that proving a tipster and trader are related is enough to bring a case, gives prosecutors more ammunition to file charges and could open the door to more cases moving forward. The Innovation Paradox By all appearances, we’re in a golden age of innovation. Every month sees new advances in artificial intelligence, gene therapy, robotics and software apps. Research and development as a share of gross domestic product is near an all-time high. But none of this has translated into meaningful advances in Americans’ standard of living. Our “Innovation Paradox” series explores the forces at play, from increased regulatory hurdles to greater risk-aversion. We examine why Silicon Valley giants often stumble in the world beyond software and how Big Pharma has had to re-engineer how it finds treatments. We also report that businesses and governments alike are turning the search for innovative ideas into prize-worthy puzzles. Beijing, meanwhile, is spending billions on moonshot projects. View the complete series and our interviews with pioneers in science, medicine and technology here. Remembering Pearl Harbor We look back at the surprise attack by the Japanese on Pearl Harbor on Dec. 7, 1941. More than 100 Pearl Harbor survivors have converged on Hawaii to attend the 75th anniversary commemoration this week, including one veteran making the trek from Maine to return for the first time since 1941. Definition of accredited investor could broaden soon A 391-2 House vote in favor of legislation to relax the definition of an accredited investor to let more people invest in unregistered securities means the bill could become law by year-end. The Senate could accelerate approval through unanimous consent, which requires only a voice vote. InvestmentNews (06 Dec.)  Cazeneuve becomes France's prime minister Cazeneuve (Thomas Samson/AFP/Getty Images) French Interior Minister Bernard Cazeneuve was named prime minister by President Francois Hollande. Cazeneuve replaces Manuel Valls, who stepped down to run for president. Market News International (06 Dec.),

Fed research paper addresses fintech A Federal Reserve research paper says the long-term effect of financial technology remains unclear and needs more study. The paper indicates how the central bank plans to monitor blockchain and other financial innovation. The Wall Street Journal (tiered subscription model) SHE ETF affirms socially conscious investors State Street's SPDR Gender Diversity ETF, which tracks companies with a greater percentage of women in senior leadership, has come in second on the list of 2016's biggest exchange-traded funds launched, competing with a long list of smart-beta funds. "This is not just a marketing gimmick," said David Mazza, head of ETF and mutual fund research at State Street, citing an MSCI study that says companies with female leaders exhibit a 36.4% higher return on equity. Bloomberg (06 Dec.)  MetWest is world's biggest actively managed bond fund The Metropolitan West Total Return Bond Fund has become the world's largest actively managed bond fund, replacing Pacific Investment Management's Total Return Fund, which has experienced four years of net outflow, according to Morningstar. At the end of November, the Metropolitan West fund had $79.4 billion in assets under management, slightly ahead of the PIMCO fund's $78.5 billion.  Pensions & Investments (free access for SmartBrief readers) Survey: Millennials more open to hiring advisers Though most millennials don't believe they will have enough money to retire, they are more interested in hiring financial advisers than any other age group. A survey from Merrill Edge found that 31% of 18- to 34-year-olds intend to hire an adviser in the next five years. Bankrate (06 Dec.)  The 'lucky country' gets an economic wake-up call.

Trump scraps plans for one of his walls.

These two charts show how global growth looks poised to shoot up.

SocGen's 'most worrying chart' shows markets still shrugging off political risk.

Saudi Arabia's post oil era starts in human resources.

Iron ore prices are weird.

Economic growth in the United States: A tale of two countries. Rex Tillerson, a Candidate for Secretary of State, Has Ties to Vladimir Putin Donald Trump Faces Pressure on How to Handle Young Immigrants Europe’s Left Loses Further Ground With Matteo Renzi’s Resignation Germany’s Merkel Pushes to Ban Full Facial Veil EU Fines J.P. Morgan, HSBC and Crédit Agricole $520 Million for Collusion MetWest Surpasses Pimco as Largest Active Bond Fund Manager

As you've read above, there's a few ugly data points out there today. German industrial production for October came in worse than expected. British manufacturing output fell by the most in 8 months in October. And Australia's economy just had its worst quarter in 8 years. Now a few isolated data points are nothing to get worked up about, but they are noteworthy given the context right now. As the chart below shows, basically the entire globe has been seeing data come in better than expectations. The Citi Economic Surprise Indexes for the U.S., UK, euro area, Japan, China, and emerging markets overall are all in positive territory. This is something that hardly ever happens, as you can see. The positive economic surprises come within a general pickup on world trade. So much of the conversation about the recent rise in interest rates has to do with politics and the expectations of fiscal stimulus, but perhaps more attention should be paid to the solid economic data around the world. And if the data is due for some mean reversion, then you should pay attention to that as well.

Source: Bloomberg, BI, WSJ, CFAI Fin. Newsbrief, Market News International, P&I