Friday March 24 Daily Market Primer

·         Stocks meander

·         All eyes on the vote…again

·         Juncker warns Trump

·         Putin meets Le Pen

Happy Friday, I hope your bracket isn’t busted.  US stocks moved sideways yesterday, with the healthcare bill being debated in Congress and being viewed as the first key test of Trump’s ability to execute on major policies.  The market was up most of the day but went negative after the announcement of the vote delay, and then bounced back again late in the day.  Treasuries fell slightly. Asian markets were up Friday and Europe is down this morning.  S&P future are just barely up.

	LAST	CHANGE	% CHANGE
DJIA	20,656.58	-4.72	-0.02%
Nasdaq	5,817.69	-3.95	-0.07%
S&P 500	2,345.96	-2.49	-0.11%
Russell 2000	1,353.43	7.83	0.58%
Global Dow	2,683.64	0.51	0.02%
Stoxx Europe 600	375.70	-1.50	-0.40%
Nikkei 225	19,262.53	177.22	0.93%
UK: FTSE 100	7,331.09	-9.62	-0.13%
CBOE Volatility	12.90	0.09	0.70%
Australia: S&P/ASX 200	5,753.50	45.50	0.80%
China: Shanghai Composite	3,269.45	20.90	0.64%
Hong Kong: Hang Seng	24,358.27	30.57	0.13%
Europe Dow	1,658.48	6.92	0.30%
India: S&P BSE Sensex	29,421.40	89.24	0.42%
France: CAC 40	5,007.70	-25.06	-0.50%
Germany: DAX	12,018.00	-21.68	-0.18%
Italy: FTSE MIB	20,133.85	-33.64	-0.17%
Spain: IBEX 35	10,290.60	-34.30	-0.33%
U.S. 3 Month	0.772	0/32
U.S. 2 Year	1.257	0/32
U.S. 5 Year	1.953	0/32
U.S. 10 Year	2.42	1/32
U.S. 30 Year	3.027	6/32
Germany 2 Year	-0.737	0/32
Germany 10 Year	0.414	6/32
Crude Oil	48.03	0.33	0.69%
Brent Crude	50.85	0.29	0.57%
Natural Gas	3.112	-0.019	-0.61%
S&P GSCI	378.64	1.2	0.32%
E-mini S&P 500	2343	3	0.13%

The health care vote is on for today, after President Trump reportedly cut off further negotiations and threatened to leave the ACA in place and move on to tax reform if it doesn’t pass.  Euro area PMI’s came out strong, in line with an improving trend for economic activity that we have seen lately.   European Commission President Jean-Claude Juncker warned President Trump that encouraging more countries to leave the EU could trigger a breakup and cause a war in the Balkans http://bit.ly/JunckerWarns.  He recalled the 1991 breakup of Yugoslavia in an interview with the FT.   Russian President Putin met with French Presidential Candidate Marine Le Pen at the Kremlin on Friday, and promised not to interfere in the election http://bit.ly/Putin-LePen.    That’s reassuring. And, Russia’s central bank is getting on board with easing, lowering its benchmark rate…to 9.75%.

Here’s the news:

House to vote

The GOP's embattled health-care bill is set to be voted on later today, with Republican leaders uncertain they have the numbers for it to pass. Investors are watching the progress closely as the bill is being viewed as a test of President Donald Trump's ability to push through promised pro-growth policies. The S&P 500 finished 0.1 percent lower yesterday after it became clear the vote would be delayed.

Strong euro-area PMIs

IHS Markit's Purchasing Managers’ Index for the euro area rose to 56.7 in March, the highest level in almost six years, and well ahead of economist expectations for 55.8. Hiring picked up in both manufacturing and services, while inflationary pressures increased. In Germany, the composite PMI rose to 57 for the month, while there was also good news for the French economy where a similar gauge jumped to 57.6. The data provider publishes PMI numbers for the U.S. at 9:45 a.m. Eastern Time.

Oil's bad month

Crude is set for its third weekly drop this month ahead of a meeting in Kuwait this weekend, at which OPEC and its production-cutting allies will assess the effectiveness of their actions to date. A barrel of West Texas Intermediate for May delivery was up 34 cents at $48.04 by 5:32 a.m. One place the oil drop hasn't shown up lately is in the value of the ruble, which is normally very closely correlated with the price of crude.

Markets mixed

Overnight, the MSCI Asia Pacific Index rose 0.3 percent, while Japan's Topix index gained 0.9 percent. Shares in China Huishan Dairy Holdings Co., a target of short-seller Muddy Waters Capital LLC, plunged 85 percent — wiping out $4.1 billion in market value. In Europe, the Stoxx 600 Index was 0.3 percent lower at 5:42 a.m., while U.S. stock futures were climbing.

Iron ore slump

The rally in iron-ore prices in China has been turned on its head, with the most active futures contract in Dalian dropping 19 percent this week — the most on record — and rebar prices slumping in Shanghai. Fresh property curbs in China are helping drive the losses. One Hong Kong-based strategist has warned that the country's rising stockpile of commodities means the economy is due a cyclical downturn that would have negative repercussions for bond yields across the world. Trump gives a healthcare ultimatum. President Donald Trump told House Republicans either pass the American Health Care Act on Friday, or Obamacare stays. House GOP leadership is expected to bring the bill to a vote Friday after Thursday's vote was postponed. European PMIs beat again. Markit eurozone PMI hit 56.7 in March, its best reading in almost six years, according to IHS Markit data released Friday. Russia cuts rates. The Central Bank of Russia unexpectedly lowered its key interest rate by 25 basis points to 9.75% as "inflation declines [were] ahead of forecast." Saudi Arabia is in 'serious discussions' with the NYSE for what could be the biggest IPO ever. "Our objective is to try to complete the IPO sometime in 2018," Saudi Foreign Minister Adel al-Jubeir told Fox News. "There are serious discussions with the New York Stock Exchange about having the NYSE be one of the exchanges for the Aramco IPO and I believe the decision will be made on the financial merits." A Chinese dairy stock suddenly crashed 85%. Shares of Huishan Dairy crashed 85% in a matter of minutes Friday in Hong Kong, wiping away $4.1 billion in market value. Deutsche Bank is planning a new London headquarters. The German investment bank isn't letting Brexit deter it from taking steps toward securing a 25-year lease for a new London headquarters. Its rivals Goldman Sachs and Morgan Stanley have already announced plans to begin moving jobs out of the city. GameStop is shutting down stores. The video game retailer reported that comparable sales slumped 16.3% year-over-year in the fourth quarter and said it expected to close 2% to 3% of stores worldwide later this year. Shares were down by as much as 8% in Thursday's after-hours session. Stock markets around the world are mixed. Japan's Nikkei (+0.9%) was out front in Asia, and France's CAC (-0.5%) lags in Europe. The S&P 500 is set to open little changed near 2,345. Earnings reports trickle out. Finish Line reports ahead of the opening bell. US economic data picks up a bit. Durable-goods orders will be released at 8:30 a.m. ET before Markit US manufacturing and services PMIs cross the wires at 9:45 a.m. ET. The Baker Hughes rig count is due out at 1 p.m. ET. Health Risk At President Trump’s urging, Republicans are expected to take a high-stakes gamble today, bringing to the House floor a GOP bill to replace the Affordable Care Act without knowing whether the vote will produce a victory or an embarrassing defeat. House GOP leaders had postponed a planned vote Thursday as defections accumulated both among the most conservative lawmakers and Republican centrists, even after a day of intense lobbying by Mr. Trump. With the party divided on how to proceed on one of its top priorities, White House budget director Mick Mulvaney delivered an ultimatum from the GOP president to a meeting of House Republicans on Thursday night: Mr. Trump was done negotiating. If the bill failed on Friday, he said, Mr. Trump would leave the 2010 health law in place and move on. Known Attacker Police confirmed that the suspected Islamist terrorist who carried out the deadly rampage outside Parliament in London on Wednesday was Khalid Masood, a 52-year-old British-born man whose birth name was Adrian Russell Ajao and who had previous convictions but wasn’t the subject of any current investigations. They also said the attack had claimed another life, a 75-year-old man who died from injuries sustained in the assault. Police said that overnight they had made two “significant” arrests in connection with the attack and have detained 10 people in relation to the attack. One of them, a woman, has since been released on bail. Born southeast of London, Masood had been living most recently in the Birmingham area, which quickly became a focus of the investigation. While U.K. authorities had no prior intelligence about Masood’s intent to mount a terrorist attack, he was known to police and had been convicted on a range of offenses unrelated to terror, police said, most recently in 2003 for possession of a knife.

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It's not clear that investors and traders really care that much about the outcome of the health care debate except insomuch as it affects future policy issues, like taxes and infrastructure. While the idea of tax cuts is exciting to investors, infrastructure spending is what's gotten people enthused about the prospect of meaningfully higher inflation. On this point, Canada may have something to teach the U.S. As Bloomberg's Luke Kawa reported earlier this month, the country's much-vaunted infrastructure stimulus has been really slow going. Seventeen months into the Trudeau government, just 8 out of 1274 infrastructure projects have been completed. Meanwhile, in the new Canadian budget which came out this week, there's no new ramp-up of infrastructure spending. The new budget also confirmed that spending already allocated has been slow getting out the door. So as people look ahead to the next big policy fights, it's important to remember that -- at least on infrastructure -- there are challenges even if new plans get passed.

Source: Bloomberg, BI, WSJ, Reuters, FT