Monday March 6 Daily Market Primer

•         Stocks flat Friday
•         Yellen preps March hike
•         Probability of a March hike = 97%
•         North Korea launches (again)

Stocks barely budged on Friday amid the Fed speeches by Janet Yellen and Stan Fischer, but did finish just slightly in the green.  Dr. Yellen said that the Fed is not behind the curve and reiterated that a rate hike is “likely” in March.  The dollar dropped and the 10 year treasury yield stayed close to 2.5%.

“I currently see no evidence that the Federal Reserve has fallen behind the curve, and I therefore continue to have confidence in our judgment that a gradual removal of accommodation is likely to be appropriate”  Janet Yellen at the Executives’ Club of Chicago on Friday. 

The market implied probability of a March hike is 97%, so it would be a major surprise to the market if the Fed doesn’t move.  The March Fed meeting is on March 15 and 16.  This Friday, we will get the February nonfarm payrolls number, which will be the most important piece of economic data between now and then.   The ECB also meets on Thursday. On Monday, Asian stocks are up and Europe is down, oil is down slightly, the VIX has moved back down below 12, and S&P futures are down.

	LAST	CHANGE	% CHANGE
DJIA	21,005.71	2.74	0.01%
Nasdaq	5,870.75	9.53	0.16%
S&P 500	2,383.12	1.20	0.05%
Russell 2000	1,394.13	-1.54	-0.11%
Global Dow	2,682.62	-0.59	-0.02%
Stoxx Europe 600	373.71	-1.52	-0.41%
Nikkei 225	19,379.14	-90.03	-0.46%
UK: FTSE 100	7,349.99	-24.27	-0.33%
CBOE Volatility	11.25	-0.56	-4.74%
Australia: S&P/ASX 200	5,746.50	16.90	0.29%
China: Shanghai Composite	3,233.87	15.55	0.48%
Hong Kong: Hang Seng	23,596.28	43.56	0.18%
Europe Dow	1,617.99	6.14	0.75%
India: S&P BSE Sensex	29,048.19	215.74	0.38%
France: CAC 40	4,972.95	-22.18	-0.44%
Germany: DAX	11,978.03	-49.33	-0.41%
Italy: FTSE MIB	19,582.91	-81.54	-0.41%
Spain: IBEX 35	9,821.50	23.00	0.23%
U.S. 3 Month	0.703	0/32
U.S. 2 Year	1.305	0/32
U.S. 5 Year	2.007	0/32
U.S. 10 Year	2.475	1/32
U.S. 30 Year	3.061	6/32
Germany 2 Year	-0.837	1/32
Germany 10 Year	0.328	7/32
Crude Oil	52.95	-0.38	-0.71%
Brent Crude	55.49	-0.41	-0.73%
Natural Gas	2.933	0.106	3.75%
S&P GSCI	397.52	-1.04	-0.26%
E-mini S&P 500	2376	-5.25	-0.22%

North Korea fired four missiles Monday, three of which landed within 200 miles of Japan, as the US and South Korea are conducting military exercises.   The accelerated pace of North Korean missile development and testing could present the Trump administration with their first foreign policy crisis.  Deutsche Bank is raising $8.5 billion in capital, highlighting the continuing problems of the European banks, which were much slower to recapitalize and move problem assets off the balance sheet than their US counterparts.   UK investment companies Standard Life Investments and Aberdeen Asset Management are merging, creating the biggest UK money manager.  I don’t know if you have been following the debate about automation, robots, and displacement of jobs, but I caught this pretty interesting piece by Larry Summers in the FT this weekend, where he argues against Bill Gates position that robots should be taxed http://bit.ly/DontTaxRobots.   And, if you want make sure you’re not really an internet troll, read “The Everyday Troll”, below.

Here’s the news:

Cryan's about-turn

Deutsche Bank AG's management approved plans yesterday that include raising about $8.5 billion in an equity sale. The measures, which amount to an abandonment of Chief Executive Officer John Cryan's own turnaround plan, also mean that Germany's largest lender will put its investment banking and trading units back together. Shares in the bank were down 6.1 percent at 5:10 a.m. Eastern Time. In other European financial corporate news, Standard Life Plc agreed to buy Aberdeen Asset Management Plc in an all-share deal that will create an $811 billion money manager. Both companies gained more than 5 percent in trading this morning.

March looks like a lock

Comments from Federal Reserve Chair Janet Yellen on Friday pushed the market-implied odds of a rate hike at the FOMC meeting this month close to 100 percent. With Fed speakers now in a blackout period until their March 14-15 meeting, traders will pay attention to economic data — particularly Friday's jobs report — to discern changes to the outlook.

China growth

Premier Li Keqiang said at Sunday's National People's Congress in Beijing that China's 2017 growth target is "around 6.5 percent," close to the 2016 target of 6.5 - 7 percent. He warned of profound changes in the international political and economic landscape, citing rising protectionism and the undoing of globalization as key challenges for policy makers. Credit growth is expected to continue this year, with the country predicted to add an amount equivalent to Germany's GDP to the stock of total social financing this year.

Markets slip

Overnight, the MSCI Asia Pacific Index rose 0.4 percent, while Japan's Topix index slipped 0.2 percent as the yen strengthened against the dollar and after North Korea fired four ballistic missiles into nearby waters. In Europe, the Stoxx 600 Index was 0.5 percent lower at 5:36 a.m. as Deutsche Bank and miners dropped. U.S. market futures were also losing ground.

Huge week

While the key economic event this week is Friday's U.S. jobs report, there is a lot to watch ahead of that. On Wednesday, the U.K. Chancellor of the Exchequer Philip Hammond will present his budget as he seeks to cushion the fallout from the Brexit vote. On Thursday, the European Central Bank will hold its policy meeting as rising inflation is likely to put pressure on Mario Draghi's asset-purchase plan. At 10:00 a.m. today U.S. factory orders data is released, with expectations for 1 percent growth. GM is selling Opel. General Motors has agreed to sell its European division to Peugeot for $2.3 billion. "For GM, this represents another major step in the ongoing work that is driving our improved performance and accelerating our momentum," GM CEO Mary Barra said in a statement. Deutsche Bank is raising cash. Shares of the German investment bank are down by more than 6% after the company announced it would tap the markets for €8 billion ($8.5 billion) and overhaul its structure as part of a strategy reset. "The new three-pillar structure of our operating business should position us for significant growth, both in revenues and earnings," CEO John Cryan said in a release. Standard Life and Aberdeen Asset Management are merging. The deal to combine the two investment firms values the combined entity at about $13.4 billion. Wells Fargo execs may face criminal charges. The US Department of Justice is investigating whether Wells Fargo executives hid details of the company's recent scandal from the company's board and regulators, Reuters reports. Snap Interactive isn't planning to change its name. Shares of Snap Interactive, which trades under the ticker STVI, soared 164% in the four days after Snapchat's parent company, Snap Inc. (SNAP), filed its initial public offering, as some investors may have confused the two companies. Snap Interactive's chairman, Jason Katz, told Business Insider the company had no plans to change its name because, "We're the ones who have had the name for 10 years." Saudi Aramco is worth a lot of money. A survey conducted by the regional investment bank EFG Hermes released Monday showed fund managers and investors thought Saudi Arabia's oil behemoth could be worth $1 trillion to $1.5 trillion, Reuters reports. But that's less than the $2 trillion or more that Deputy Crown Prince Mohammed bin Salman expects. Greece's economy suffers a setback. Greece's economy shrank by 1.2% in the fourth quarter of 2016, according to the latest data from the country's statistical service Elstat. That was worse than the previous estimate of a 0.4% contraction. Tapped Out The FBI has asked the Justice Department to rebut publicly President Trump’s accusation that he was wiretapped by his predecessor, raising the specter of a clash within the administration over probes into the Trump campaign and Russia. The FBI’s unusual request came as the White House on Sunday sought to back Mr. Trump’s suggestions, made in earlier tweets and without evidence, that former President Barack Obama had tapped his phones at Trump Tower, where Mr. Trump lived and worked during last year’s presidential campaign. A president can’t legally order a wiretap, and Mr. Obama’s office flatly denied the allegation. Congressional Republicans were mostly hesitant to back the president’s assertions, with some expressing skepticism. And the back-and-forth means Republicans are heading into a potentially pivotal week facing another distraction. GOP leaders plan to tackle the repeal of the Affordable Care Act, the White House intends to issue a revised executive order on visas and refugees and two Justice Department nominees face confirmation hearings. The Rewards of Charity Charities are becoming a lot more generous with pay at the top. The tax-exempt organizations, which include many hospitals and colleges as well as traditional charities, provided seven-figure compensation to roughly 2,700 employees in 2014, our analysis of newly available data shows. The total is higher by a third than in 2011. While many of the big earners ran large enterprises, others were leaders of small charities, such as a couple who run an online ministry. Researchers who study pay at charities say it has been increasing for decades as organizations have grown more professional and adopted pay strategies from the corporate world, where executive compensation has also been on the rise. High pay at charities has drawn scrutiny from some lawmakers because the organizations receive substantial tax breaks for committing to public service. The Everyday Troll Admit it: At one point or another, you have probably said something unpleasant online that you later regretted—and that you wouldn’t have said in person. New research by computer scientists from Stanford and Cornell universities suggests this sort of thing—a generally reasonable person writing a post or leaving a comment that includes an attack or even outright harassment—happens all the time. Trolling is so ingrained in the internet that, without even noticing, we’ve let it shape our most important communication systems. But if the systems we use are encouraging us to be nasty, how far can developers go to reverse the trend? By focusing on the most egregious repeat offenders, internet companies have missed the forest for the trees, writes our Keywords columnist Christopher Mims. Stock markets around the world are mostly lower. Japan's Nikkei (-0.5%) trailed in Asia, and Germany's DAX (-0.4%) lags in Europe. The S&P 500 is set to open down 0.3% near 2,376. Earnings reporting slows down. Casey's and Thor Industries are among the names reporting after markets close. US economic data flows. Factory orders and durable-goods orders will be released at 10 a.m. ET. The US 10-year yield is down 1 basis point at 2.47%.

Clapper denies Trump wiretapped as White House demands probe.

Geopolitical risk visited South Korean markets today.

China is finally falling in love with dairy.

Stock market rally is helping the art market bounce back.

Bird flu found in Tennessee, near top U.S. chicken states.

The topsy turvy world of political science in Trump's America.

EPA Nears Reversing Prior Decision Finalizing Car Emissions Targets

In Transition Year, Politics Drives China’s Economic Agenda

Iraqis Tell of Islamic State Brutality in Mosul

How California Utilities Are Managing Excess Solar Power

GE, Siemens Vie to Reinvent Manufacturing by Harnessing the Cloud

Millennials Grab Snap Shares

Bullish Commodity Bets Hit Record Highs, as Investors Seize on Signs of Growth

Today's paragraph is a plea. As Washington DC prepares to debate taxes and spending in the weeks and months ahead, let's banish the question: "How are you going to pay for this?" You hear it all the time. A politician proposes something -- be it a wall, a tax cut or a new subsidy for education -- and immediately they're asked how that thing is going to be paid for. But money is a social construct, and potentially infinite. By contrast, real resources -- like labor, equipment, and raw materials -- are scarce. That means the question that should be asked is: "Where will the real resources come from to facilitate this endeavor?" Take President Trump's trillion dollar infrastructure goals, as an example. As Conor Sen at Bloomberg View notes, the challenge in building the wall isn't money, it's that the government would need to find 500,000 more construction workers to hire every year -- far above what's plausible. Here's a useful analogy. If an airline announced it was giving all of its loyal customers three-times as many miles, would anyone say "where are you getting the frequent flyer miles from?" Of course not. That'd be silly. Instead the airline would be asked "do you really have the seats and the planes and the pilots to accommodate all these free flights? Asking how a policy will be paid for might seem innocent and unbiased, but it's not. Within the question is embedded an ideology about money -- that it's scarce or that deficits are per se bad. It's much better to get right to the guts of the matter and ask where the raw material is coming from.

Source: Bloomberg, BI, WSJ