Monday February 13 Daily Market Primer
- Stocks rose
- · Abe gets Trump treatment, Trudeau up next
- Mnuchin hires Wall Street
- · Flynn is in trouble
US
stocks rose Friday on a second day of optimism regarding tax reform,
and reasonably strong corporate earnings. The S&P gained
.4%. Stock markets around the world are following suit on
Monday, and US equity futures are pointing up. Oil is down a bit
this morning after rallying late last week, but copper and iron ore continue to
rally. Any tensions between the US and Japan eased Friday as
Prime Minister Shinzo Abe made an extended visit with President Trump that
included official meetings and golf. Even so, Japan is a big seller of US
debt (U.S. Debt, below). Today,
it’s Canadian
Prime Minister Justin Trudeau’s turn to meet with Mr. Trump. Janet
Yellen addresses congress this week in the so called “Humphrey-Hawkins”
testimony, and she will be careful to stay on message.
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LAST
|
CHANGE
|
% CHANGE
|
|
|
20,269.37
|
96.97
|
0.48%
|
|
|
5,734.13
|
18.95
|
0.33%
|
|
|
2,316.10
|
8.23
|
0.36%
|
|
|
1,388.84
|
10.32
|
0.75%
|
|
|
2,633.57
|
11.04
|
0.42%
|
|
|
369.69
|
2.30
|
0.63%
|
|
|
Nikkei
225
|
19,459.15
|
80.22
|
0.41%
|
|
UK:
FTSE 100
|
7,266.31
|
7.56
|
0.10%
|
|
CBOE
Volatility
|
11.31
|
0.43
|
3.95%
|
|
Australia:
S&P/ASX 200
|
5,760.70
|
40.10
|
0.70%
|
|
3,216.84
|
20.14
|
0.63%
|
|
|
23,710.98
|
136.00
|
0.58%
|
|
|
Europe
Dow
|
1,601.13
|
8.26
|
0.06%
|
|
India:
S&P BSE Sensex
|
28,351.62
|
17.37
|
0.52%
|
|
France:
CAC 40
|
4,884.46
|
56.14
|
1.16%
|
|
Germany:
DAX
|
11,774.70
|
107.73
|
0.92%
|
|
Italy:
FTSE MIB
|
19,070.20
|
208.09
|
1.10%
|
|
Spain:
IBEX 35
|
9,454.10
|
76.00
|
0.81%
|
|
0.541
|
0/32
|
||
|
1.214
|
-1/32
|
||
|
1.911
|
-4/32
|
||
|
2.438
|
-8/32
|
||
|
3.036
|
-18/32
|
||
|
-0.783
|
-1/32
|
||
|
0.34
|
-6/32
|
||
|
53.67
|
-0.19
|
-0.35%
|
|
|
56.45
|
-0.25
|
-0.44%
|
|
|
2.961
|
-0.073
|
-2.41%
|
|
|
402.05
|
-1.35
|
-0.33%
|
|
|
2317
|
4.25
|
0.18%
|
It’s
no surprise that Treasury Secretary nominee Steve Mnuchin, assuming he
is confirmed by the senate, will stack the treasury with Wall Street executives
http://bit.ly/MnuchinAppts.
National Security Advisor Michael Flynn is in trouble over
unauthorized conversations with Russian Ambassador Sergey Kislyak that he may
have mislead the administration about. The EU forecasted 2017 Eurozone
growth at 1.6% with inflation at 1.7%, and highlighted risks including Brexit
and US policy uncertainty. Healthcare M&A rolls on as Dublin
based Botox maker Allergan is buying Zeltiq Aesthetics (maker of fat freezing
technology) for $2.5 billion. And, there is plenty of skepticism about
the upcoming Snap IPO (Snap Judgement, below).
Here’s
the news:
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Japan, the largest holder of Treasuries, cut back on the debt by the most in
almost four years in December, according to data from the Ministry of
Finance. This attenuates a global trend in Treasury ownership,
as investors seem increasingly wary of stepping into the $13.9
trillion market amid uncertainty over the new administration's policies and
the prospect of higher U.S. interest rates. The benchmark 10-year was
yielding 2.431 percent at 5:20 a.m. ET.
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The European Commission reduced its forecast for euro-area growth to 1.6
percent and raised its inflation prediction to 1.7 percent for 2017. The
Brussels-based commission said that the euro area's economic recovery is
"assailed by risks," citing uncertainty over the U.K.'s route to leaving the union, and a
lack of policy clarity from the new U.S. administration. The report also said
the hit to the U.K. economy from Brexit in 2017 will be lower than previously expected.
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Copper has been on a tear lately thanks to supply disruptions at the world's largest
mine caused by a strike, plus strong demand from China. Rio Tinto Group
said that iron ore prices, which have surged to the highest level since August 2014, are not
going to fall off a cliff. In soft commodities, sugar traders are bracing for
a wild ride, with global stockpiles set
to fall to their lowest levels since 2011-12, meaning the outlook for prices
is almost completely dependent on the weather in the coming year. In the
shorter-term, there is good news for Valentine's Day as chocolates should
be cheaper on the back of a boom in cocoa supplies.
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Overnight, the MSCI Asia Pacific Index rose 0.4 percent, while Japan's Topix
Index added 0.5 percent in the aftermath of Prime Minister Abe's meeting with
President Trump. In Europe, the Stoxx 600 Index was 0.4 percent higher as of
5:49 a.m. ET in a broad-based rally. U.S. stock futures
pointed to a gain at the open.
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Federal Reserve Chair Janet Yellen is not expected to give any
clear hints as to the timing of the next rate hike in her semi-annual testimony to lawmakers in Washington this
week. That will leave investors looking for clues in Wednesday's inflation data, which is expected to show
a headline CPI number of 2.4 percent for January, a figure which
would likely increase calls for tightening from the central bank.
Trump to
meet Trudeau. Canadian Prime Minister Justin Trudeau will be in Washington
on Monday to meet with President Donald Trump to discuss a variety of topics
including jobs, trade, and immigration.The head of the IMF says Trump is good for the US economy for now. Speaking at the annual World Government Summit in Dubai, International Monetary Fund head Christine Lagarde said, "We have reasons to be optimistic about growth in the United States." Lagarde, however, thinks Trump's policies will eventually cause a "tightening that is going to be difficult on the global economy." Japan GDP missed. The Japanese economy grew at a 0.2% clip in the fourth quarter, missing economists' expectations of 0.3% growth, as growth slowed for the third consecutive quarter. The yen is weaker by 0.5% at 113.72 per dollar. RBS is reportedly readying a $1 billion cost-cutting plan. A Financial Times report says the bulk of the staff cuts will occur at RBS' offices in London and Edinburgh, Scotland, as the company prepares to report a ninth straight year of losses. Nordstrom's sales of Ivanka Trump's clothing line crashed in 2016. Sales collapsed by 32% versus a year ago to $14.3 million, The Wall Street Journal reports. Oracle has filed an appeal in its case against Google. In May, Oracle lost a court case against Google and Android regarding bits of code copied from Java — but now it's arguing that the jury didn't have all the information it needed to reach a verdict. Samsung's boss is being questioned again on suspicion of bribery. A special prosecutor says it will once again investigate Samsung's chairman, Jay Y. Lee on suspicion of bribery as it continues to look into the political corruption scandal that has led to the impeachment of President Park Geun-hye, Reuters says. Stock markets around the world are higher. Australia's ASX (+0.7%) paced the overnight advance, and France's CAC (+0.8%) is out front in Europe. The S&P 500 is on track to open up 0.2% near 2,320. Earnings reports continue to flow. Teva Pharmaceuticals and Restaurant Brands will report ahead of the opening bell.
US economic data is light. Consumer-price-index
revisions will be announced. The US 10-year yield is higher by 2 basis points
at 2.43%.
Out Like Flynn
The White House is reviewing whether to retain National Security Adviser Mike Flynn amid an intensifying controversy over his contacts with Russian officials before President Trump took office. Mr. Flynn has apologized to White House colleagues over the episode, which has created a rift with Vice President Mike Pence, who publicly vouched for Mr. Flynn, a White House official said. Mr. Trump’s views toward the matter aren’t clear. In recent days, he has privately told people the controversy surrounding Mr. Flynn is unwelcome but also has said he has confidence in the retired general. Mr. Flynn initially said that in a conversation Dec. 29 with the Russian ambassador, Sergey Kislyak, he didn’t discuss sanctions imposed that day by the outgoing Obama administration, which were levied in retaliation for alleged Russian interference in the 2016 presidential election. Mr. Flynn now concedes that he did, administration officials said. Meanwhile, Mr. Trump faces another test following North Korea’s weekend launch of a ballistic missile, the first major challenge to the Trump administration by a foreign leader.
Snap Judgment
Snap, parent of the hot disappearing-message app Snapchat, has a lofty valuation, hordes of coveted young users and social cachet. It also has a lot of Wall Street investors who aren’t buying the hype. Ahead of the company’s pitch for its initial public offering, which could value it at $25 billion, investors are taking a sober look at the numbers. Among their concerns: a slowdown in daily user growth, competitors such as Facebook and the implications of near-total control that Snap’s founders will have post-IPO. On Snap’s side is scarcity—2016 was the slowest year for U.S.-listed tech companies since 2009 in terms of number of deals and dollar volume. That factor alone could help support the shares in their debut. Snap’s roadshow could start as soon as Friday.
Change of Data Plan
Verizon will start selling unlimited data plans today, the first time it has offered such a service since 2011 and a sign that intense competition is forcing the nation’s largest carrier to respond. Sprint and T-Mobile have been chipping away at Verizon’s customer growth, thanks in part to those carriers’ aggressive pricing for unlimited data. Last year, AT&T started offering unlimited data plans to customers who also sign up for its DirecTV satellite service. The new plan is a stark change in strategy for Verizon, which has spent years trying to get customers to pay for data based on usage and recently raised prices on certain fees. Last month, Verizon’s finance chief, Matthew Ellis, said on a conference call with analysts that unlimited data plans were “not something we feel the need to do.” The company recently cautioned that profit and sales growth this year will be flat from 2016.
Hello, It’s Me
British megastar Adele swept the 59th annual Grammy Awards yesterday evening, winning three of the top prizes with album of the year for “25” and song and record of the year for hit single “Hello.” Organized by the Recording Academy and emceed by “Late, Late Show” host James Corden, the show opened fittingly with the 28-year old chanteuse singing “Hello.” Adele’s rival in the top three categories, R&B queen Beyoncé, flaunted her pregnant belly in a sheer, sparkling gold gown and a halo-like headdress as she performed an ode to motherhood. It was Chance the Rapper’s win as best new artist that may have the most impact on the music industry. His mixtape “Coloring Book,” which was also awarded best rap album, was first released only on Apple’s streaming service Apple Music and still isn’t for sale as a CD or even a download in Apple’s iTunes Store.
Lawyers for Navinder Singh Sarao
-- a UK trader charged with multiple counts of fraud and thought to have
contributed to the "flash crash" in 2010 -- say that he may have
been conned out of $50 million. Lawyers and investigators are still combing
through his complex financial arrangements in search of the missing money
while Sarao awaits sentencing.
Daniel Tarullo, a Federal Reserve
governor who played a key rule in the overhaul of bank regulation after the
global financial crisis, said he will step down "on or around April
5." Bloomberg (10 Feb.),
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The People's Bank of China has begun
issuing reverse repurchase agreements after suspending them for six trading
days. In a move to ease funding conditions, the bank has offered reverse repo
loans to commercial banks valued at 100 billion yuan, ranging from seven to 28
days. MarketWatch (12 Feb.)
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Dombrovskis (Frederick Florin/AFP/Getty
Images)
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Valdis Dombrovskis, vice president
of the European Commission, warned the US over its stated intention to overhaul
the Dodd-Frank Act, which was brought in to regulate financial activities after
the global financial crisis. Stressing that internationally applied regulations
are vital to stability, Dombrovskis said US institutions may be barred from
trade in Europe if they disregard them. Reuters (10 Feb
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At least 188,000
were ordered to evacuate near a California dam.
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Fed's Fischer defends post-crisis banking reforms Trump wants to
undo.
These countries will be
Trump's next trade-war targets.
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Forget about the Bank of
England cutting rates any time soon.
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Swiss must draw a new
plan for corporate tax after voters reject referendum.
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The next big blue-collar job
is coding.
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Between now and May 7, the French election is going to loom
very large for markets. Everyone's wondering whether Marine Le Pen can win. Given her ideology and
her plans to take France out of the euro area and redonominate its debt into
francs, the stakes are high. So two things on France: First, get ready to see
the attached chart a lot over the next couple of months. It shows the spread
between yields on French 10-year government bonds and German 10-year bonds (a
measure of France's perceived credit risk), alongside Le Pen's odds of
winning in the betting market. As Le Pen rises and falls, expect the
French-German spread to do the same. Secondly, the polls show her having
virtually no chance of winning. In the final matchup, she's consistently down
by over 20 percent, far more than the "leave" vote during Brexit or
even Donald Trump's odds during the presidential race. So why are her chances
of winning so substantial? Matthew Shaddick, the head of political odds at
Ladbrokes, has a few theories, including the
possibility that some gamblers are still confused over French election law.
Ultimately though, when it comes to Wall Street, nobody wants to be the
person to definitively state "Le Pen is going to lose" because then
if she wins, that person will look like the ultimate idiot. After so many
people got burned on Trump and Brexit, nobody wants to be the fool who got it
wrong three times. Far safer to just say "the odds are against her, but
she has a 30 percent chance of winning" because at least then if she does
succeed, most people can conceptualize that a 30 percent chance is not that
far of a longshot. This then is the dynamic: A massive event on the horizon
and people have all kinds of ulterior career reasons to not risk looking
stupid.
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Source:
Bloomberg, BI, WSJ, CFAI Fin. Newsbrief, Reuters, Politico
posted by Rich Barnett @ 7:14 AM
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