Thursday March 23 Daily Market Primer

• Stocks, oil rebounded
• All eyes on the vote
• NK accused of cybertheft

US stocks rebounded yesterday after Tuesday’s 1% drop, Treasuries rallied and the dollar fell further.  Financial shares didn’t fall more after Tuesday’s big drop.  All eyes are on the health care vote today, and the thinking is that if it fails it could delay other policy items that are important to investors – namely tax reform and spending.   The British pound was little changed, showing no reaction to the London terror attack yesterday.  Oil is rebounding, with WTI back up above $48 this morning.  Overseas markets rebounded Thursday, and the S&P Mini futures are up 5 points. 

	LAST	CHANGE	% CHANGE
DJIA	20,661.30	-6.71	-0.03%
Nasdaq	5,821.64	27.82	0.48%
S&P 500	2,348.45	4.43	0.19%
Russell 2000	1,345.60	-0.95	-0.07%
Global Dow	2,682.02	2.65	0.10%
Stoxx Europe 600	373.11	-2.56	-0.68
Nikkei 225	19,085.31	43.93	0.23%
UK: FTSE 100	7,326.55	1.83	0.02%
CBOE Volatility	12.63	0.16	1.28%
Australia: S&P/ASX 200	5,708.00	23.50	0.41%
China: Shanghai Composite	3,248.55	3.33	0.10%
Hong Kong: Hang Seng	24,327.70	7.29	0.03%
Europe Dow	1,654.60	-5.89	0.56%
India: S&P BSE Sensex	29,332.16	164.48	-0.35%
France: CAC 40	5,005.54	10.84	0.22%
Germany: DAX	11,947.67	43.55	0.37%
Italy: FTSE MIB	20,085.89	132.45	0.66%
Spain: IBEX 35	10,284.30	55.00	0.54%
U.S. 3 Month	0.77	0/32
U.S. 2 Year	1.268	-1/32
U.S. 5 Year	1.945	-1/32
U.S. 10 Year	2.415	-2/32
U.S. 30 Year	3.027	-3/32
Germany 2 Year	-0.759	-2/32
Germany 10 Year	0.412	-2/32
Crude Oil	48.27	0.23	0.48%
Brent Crude	50.88	0.24	0.47%
Natural Gas	3.1	0.027	0.88%
S&P GSCI	379.31	1.09	0.29%
E-mini S&P 500	2347.5	5	0.21%

Initial unemployment claims rose to 258K, up 15K from the prior week and a seven week high, and higher than the Bloomberg consensus of 240K  The ECB issued an new long term borrowing program, called LTRO, supposedly for the last time.   Google is continuing to suffer ad defections after recent incidents of big brands being advertised on ISIS and other hate speech websites, forcing them to rethink there traditional resistance to censorship.  And, reports are coming out that North Korea may be responsible for the theft of $81 million from Bangladesh in a NY Fed cybertheft.

Here’s the news:

The White House and House conservatives are in talks about last-minute changes to the health-care bill, with the chair of the House Freedom Caucus saying it was too early to tell if a deal could be reached today. The move to "repeal and replace" Obamacare, which is opposed by all Democrats in Congress, still faces opposition from some Republicans who feel it does not go far enough.

Open for business

Parliament in the U.K. will return to work after Wednesday's terror attack which left four dead and 29 injured. Prime Minister Theresa May said the attack, which came a year to the day after the deadly bombings in Brussels, was "sick and depraved." Police, who have made seven arrests, said the attacker acted alone and was inspired by international terrorism.

Last TLTRO

This morning, the European Central Bank offers its last Targeted Longer-Term Refinancing Operation, which gives banks four-year loans at zero percent interest. Economist estimates for the size of the uptake by banks vary hugely, from 30 billion euros ($32 billion) to as high as 750 billion euros, with the amount due to be published after 6:30 a.m. Eastern Time. The size of the update will be viewed as a gauge of lenders' thinking as pressure mounts on the central bank to reduce its accommodative monetary stance. Overnight, the MSCI Asia Pacific Index gained 0.1 percent, while Japan's Topix index closed broadly unchanged. In Europe, the Stoxx 600 Index was 0.1 percent higher at 5:26 a.m. ET as increases in miners were offset by losses in food and beverage companies. U.S. stock market futures pointed to a gain at the open. North Korea U.S. relations with North Korea, which had already been under pressure, may be about to take another turn for the worse. Investigators looking into the theft of $81 million from the Bangladesh central bank account at the New York Fed are checking for links to North Korea as the hack used to access the funds was similar to one used previously by the isolated state. Richard Ledgett, deputy director of the National Security Agency, said it is "a big deal" if nation states are robbing bans.

The House is set to vote on Trumpcare. President Donald Trump and House Republican leaders are making a last-minute push to secure the votes needed to move the GOP's bid to overhaul the US healthcare system onto the Senate; 218 votes will be needed for the bill pass.
Yellen speaks. Federal Reserve Chair Janet Yellen will speak at the Community Development Conference in Washington, DC, starting at 8:45 a.m. ET.
New Zealand's central bank keeps policy on hold. The Reserve Bank of New Zealand held its key interest rate at 1.75%, as expected, and said, "Monetary policy will remain accommodative for a considerable period."
UK retail sales shake off Brexit fears. Retail sales climbed 1.4% month-over-month in February and 3.7% year-over-year, data released by the Office for National Statistics showed on Thursday. "The underlying trend suggests that rising petrol prices in particular have had a negative effect on the overall quantity of goods bought over the last three months," Kate Davies, a senior statistician at the Office for National Statistics, said.
Global steel production remains firm. Data released by the World Steel Association on Thursday showed 126.6 million tonnes of crude steel were produced in February, up 4.1% versus a year ago. About 48% of that, or 61.2 million tonnes, was produced in China.
Apple buys an app it once called 'most innovative.' Apple confirmed with Business Insider that it had purchased the automation app Workflow. Terms of the deal were not disclosed.
AT&T and Verizon pull ads from Google. The two companies pulled their ads from YouTube and other Google sites after it was discovered that some of their ads had appeared next to extremist videos.
Stock markets around the world are little changed. Japan's Nikkei (+0.2%) eked out a gain in Asia, and Germany's DAX (+0.1%) edges up in Europe. The S&P 500 is set to open unchanged at 2,349.
Earnings reports trickle out. GameStop, KB Home, and Micron will report after markets close.

US economic data is light. Initial jobless claims will be released at 8:30 a.m. ET, and new-home sales will cross the wires at 10 a.m. ET. The US 10-year yield is unchanged at 2.41%.

Terror in London
British police arrested eight people overnight in connection with Wednesday’s attack by a suspected Islamist terrorist that killed four people. The suspect mowed down scores of pedestrians on a crowded bridge in London before crashing his car near the gates of Parliament and stabbing a policeman. The attacker was shot to death, authorities said, and 40 people were injured in the most serious act of terror in the U.K. since 2005. There was no immediate claim of responsibility for the assault, though the U.K.’s top counterterror police official said “we think we know who the attacker is.” He said the attacker was “inspired by international terrorism.” Tobias Ellwood, a New York-born U.K. lawmaker and British army veteran, is being hailed as a hero for administering first aid to Keith Palmer, the mortally wounded police officer.

To Catch a Cyberthief

U.S. federal prosecutors are building cases that would accuse North Korea of directing one of the biggest bank robberies of modern times, the February 2016 cybertheft of $81 million from Bangladesh’s account at the Federal Reserve Bank of New York. We report that the charges, if filed, would target alleged Chinese middlemen who prosecutors believe helped North Korea orchestrate the theft. The cases being pursued might not include charges against North Koreans, but would likely implicate the country. In the weekend heist, cyberthieves used the Swift access codes of Bangladesh’s central bank in one February 2016 weekend to transfer $81 million from its account at the New York Fed to four bank accounts in the Philippines. Some private security researchers believe the heist was linked to the hacking in 2014 of Sony Pictures Entertainment, which the FBI blamed on North Korea.

Spy Probe
The Republican chairman of the House Intelligence Committee ignited a new battle on Wednesday over President Trump’s claims that he was spied on by the Obama administration, saying that U.S. intelligence agencies intercepted information about people involved in the Trump transition team. Rep. Devin Nunes, who is leading a congressional investigation into alleged Russian interference in U.S. elections, said the surveillance of the team appeared to be due to what is called “incidental” collection, meaning that Trump transition officials whose information was intercepted weren’t the intended targets. Meanwhile, we report that the GOP plan to replace the Affordable Care Act remained in jeopardy Wednesday after a day of intense negotiations among Republicans, but there were prospects for a last-minute deal that had the potential to win support from holdouts.

Why nobody trusts the world's best currency.

The cost of currency interventions: 67.1 billion francs for the Swiss in 2016.

Big oil replaces rigs with wind turbines.

The white working-class death rate is going to be elevated for a generation.

The white working-class death rate is going to be elevated for a generation.

No need for a wall: Latin demographics to shrink inflation.

Where De Beers hid its $5 billion diamond stash.

The Senate prepares to send internet privacy down a black hole.

A Senator’s Plan to Reduce the Flow of Legal Migrants

Democrats Seize on Disability Ruling to Bolster Their Case Against Gorsuch

U.S. Weighs ‘Zones of Stability’ as Part of Anti-Islamic State Effort

Elliott Threatens to Force Akzo Nobel to Engage With PPG

Auto Makers Target China as New U.S. Trade Rules Loom

Meet the CFO-Banker Who May Be Next to Run Deutsche Bank

For China’s Central Bank, an Increasingly Difficult Balancing Act

Looking for something to read this weekend? Check out this new 81-page report on populism from the hedge fund Bridgewater Associates. The firm did a deep dive through numerous populist episodes throughout history, taking in the eras of Andrew Jackson, Hugo Chavez, Juan Peron, Vladimir Lenin and William Jennings Bryan, as well as 1930s Japan. They examined the conditions that cause populists to rise, and what the consequences are for the economy and financial markets. Ray Dalio says he believes that "populism’s role in shaping economic conditions will probably be more powerful than classic monetary and fiscal policies." There are tons of great charts in the report, including several on the inflationary impact of populist regimes (hint: inflation tends to go up). But my favorite one has to be the attached chart showing Russian stocks and the impact of the communist revolution. Communism, it appears, is not great for holders of equity. As always, let me know what you're thinking about and watching these days! Send me an email at jweisenthal@bloomberg.net.

Source: Bloomberg, BI, WSJ, CFAI Fin. Newsbrief