Tuesday March 28 Daily Market Primer
- Markets recover
- Trump team moves on
- Gross settles
- Tencent buys TSLA
It
looked like it could a down day for US markets yesterday, as Europe and Asia
fell in reaction to the health care bill failure on Friday, and the US opened down
about 1%. However, the broad market mostly recovered as the day went on,
with the S&P closing just barely down. Hospital companies gained on
the health care status quo, banks recovered, and the dollar strengthened as
doubts about the Trump Trade eased. Treasury buying continues, with
the US 10 year yield down to 2.36%. Overseas markets mostly recovered on
Tuesday, but S&P futures are slightly in the red at the moment.
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LAST
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CHANGE
|
% CHANGE
|
|
|
20,550.98
|
-45.74
|
-0.22%
|
|
|
5,840.37
|
11.64
|
0.20%
|
|
|
2,341.59
|
-2.39
|
-0.10%
|
|
|
1,357.32
|
2.68
|
0.20%
|
|
|
2,684.41
|
4.09
|
0.15%
|
|
|
375.70
|
-1.50
|
-0.40%
|
|
|
Nikkei
225
|
19,202.87
|
217.28
|
1.14%
|
|
UK:
FTSE 100
|
7,292.53
|
-0.97
|
-0.01%
|
|
CBOE
Volatility
|
12.61
|
0.11
|
0.88%
|
|
Australia:
S&P/ASX 200
|
5,821.20
|
74.50
|
1.30%
|
|
3,252.95
|
-14.01
|
-0.43%
|
|
|
24,345.87
|
152.17
|
0.63%
|
|
|
Europe
Dow
|
1,665.41
|
-1.36
|
0.59%
|
|
India:
S&P BSE Sensex
|
29,409.52
|
172.37
|
-0.08%
|
|
France:
CAC 40
|
5,009.92
|
-7.51
|
-0.15%
|
|
Germany:
DAX
|
12,053.06
|
56.99
|
0.48%
|
|
Italy:
FTSE MIB
|
20,171.46
|
47.27
|
0.23%
|
|
Spain:
IBEX 35
|
10,320.40
|
17.50
|
0.17%
|
|
0.782
|
0/32
|
||
|
1.254
|
1/32
|
||
|
1.907
|
2/32
|
||
|
2.362
|
4/32
|
||
|
2.971
|
9/32
|
||
|
-0.7
|
-1/32
|
||
|
0.385
|
5/32
|
||
|
48.22
|
0.49
|
1.03%
|
|
|
51.28
|
0.53
|
1.04%
|
|
|
3.111
|
-0.02
|
-0.64%
|
|
|
379.16
|
2.45
|
0.65%
|
|
|
2335
|
-3.5
|
-0.15%
|
As
promised on Friday, the Trump administration moved on, to dismantling Obama
era environmental rules, and to talking about tax reform. The
executive order will roll back the Clean Power Plan, which requires states to
cut carbon emissions, resend the ban on coal leasing on federal lands, and
reverse methane emissions rules from oil and gas production. This move
basically invalidates the US response to the Paris Agreement on climate change
of 2015. Former bond king Bill Gross settled his lawsuit with PIMCO
for $81 million. He sued for non-payment of this 2013 bonus of $290
million. Surprisingly J,
the SNAP IPO underwriters came out with positive recommendations on
the stock yesterday, with 7 out of 11 of the underwriting banks issuing
buys. The stock rose 4.6%.
Chinese internet giant
Tencent, best known for message app WeChat, announced that it owns 5% of Tesla, which it acquired for
$1.8 billion in the March equity offering and on the open market. TSLA
rose 3% in the premarket on the news, bringing the YTD gain to about 26%.
Here’s
the news:
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President Donald Trump is expected to sign an executive order
today that will start the process of unwinding a raft of directives to combat climate change. The White
House will rescind Obama's order to federal agencies to plan
for climate change and another to have the military prepare for the
national security implications. Investor attention remains on Trump's
plans to cut taxes, but following the health-care bill misfire, optimism on
their effectiveness seems to be waning.
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South African President Jacob Zuma told leaders of the
country's Communist Party, and ANC ally, that he plans to fire Finance Minister Pravin Gordhan,
according to people with knowledge of the matter. The news comes after the
president ordered Gordhan to return home from an investor roadshow
yesterday. The rand was trading at 12.962 to the dollar by 5:30 a.m. Eastern
Time, down more than 4 percent so far this week.
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Overnight, the MSCI Asia Pacific Index rose 0.7 percent while Japan's Topix index
added 1.3 percent as the dollar regained ground against the yen. In Europe,
the Stoxx 600 Index was 0.3 percent higher by 5:39 a.m. with
miners leading the gains. U.S. futures point to a gain at the open as the
dollar and Treasuries were little changed.
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Tomorrow U.K. Prime Minster will start the two-year process to
negotiate the British exit from the European Union. Brexit Secretary
David Davis said the country will have to pay "nothing like" the 50
billion-pound ($62 billion) sum floated by European Commission President
Jean-Claude Juncker. Worries are emerging about the capability of the British
civil service to successfully negotiate the exit agreement with head-count
there at its lowest level since the 1940s.
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For Fed-watchers, the big event today is Janet
Yellen's speech at 12:50 p.m. on workforce development. Her colleagues at the
central bank -- Esther George, Robert Kaplan and Jerome Powell -- are
all also due to speak later. In economic data, February U.S. wholesale
inventories numbers are due at 8:30 a.m., with March U.S. consumer confidence
and Richmond Fed manufacturing both due at 10:00 a.m.
The
Dow's losing streak continues. The Dow Jones industrial average fell for an
eighth straight day Monday, something it hadn't done since the European debt
crisis in August 2011. Since 1990, the Dow has had a losing streak of this
magnitude on just two other occasions, September 2001 and October 2008.Scotland is voting on another referendum. Members of Scottish Parliament will vote Tuesday on whether to hold a second referendum on independence from the UK. The vote will come just hours before UK Prime Minister Theresa May is set to trigger Article 50, the mechanism that begins the two-year process of the UK's exit from the European Union. South Africa's finance minister could be out. South African President Jacob Zuma reportedly told political allies that he planned to fire the country's finance minister, Pravin Gordhan, Bloomberg says. The South African rand is down 0.9% at 12.8591 per dollar. Amazon buys a Middle Eastern online retailer. Amazon has agreed to buy Souq.com, the largest online platform in the Arab world, Reuters says, citing CNBC. Terms of the deal were not disclosed. American Airlines is taking a stake in China Southern Airlines. An American Airlines subsidy is buying 1.55 billion Hong Kong dollars ($199.6 million) worth of shares in China's largest airline, Reuters says, citing a China Southern statement. The second big tech IPO of the year prices. Okta, the cloud service that helps companies manage their employees' passwords, priced its initial public offering at $13 to $15 a share on Monday. An IPO at that price would give Okta a valuation of about $2 billion. Credit Suisse is thinking about raising cash. CEO Tidjane Thiam said a decision would be made "as soon as possible," according to Reuters. The bank reported a net loss of 2.71 billion Swiss francs ($2.75 billion) for its most recent fiscal year. Stock markets around the world are up. Japan's Nikkei (+1.1%) led in Asia, and Germany's DAX (+0.7%) is out front in Europe. The S&P 500 is set to open higher by 0.2% near 2,345. Earnings reporting remains light. Carnival reports ahead of the opening bell, while Dave & Busters and RH release their quarterly results after markets close.
US economic data trickles out. Consumer confidence will
be released at 10 a.m. ET. The US 10-year yield is unchanged at 2.38%.
Spending Showdown
The next battle in Washington looks likely to be a fight over spending. Following the failure of the Republican health-care bill, President Trump and GOP leaders face stubborn opposition in both parties over the federal budget. Republicans worry they will need more Democratic support than previously expected to pass necessary legislation to avert a partial government shutdown by the end of April, when current funding expires. For Democrats, success in sticking together against the health bill has reduced the incentive to compromise with Republicans. Lawmakers have only 12 legislative workdays before the April 28 deadline to pass a spending bill or trigger the shutdown.
Persia Beckons
After years staying out of Iran, Western businesses are bursting through the country’s doors—but U.S. companies are noticeably absent. Dozens of deals have been hammered out since Iran’s nuclear accord with world powers in 2015 lifted a range of sanctions. Among them, France’s Peugeot and Renault are building cars and major oil companies have signed provisional agreements to develop energy resources. But while Chicago-based Boeing last year got the go-ahead to sell 80 aircraft valued at $16.6 billion to Iran, deals involving U.S. businesses are few and far between. They risk losing out in a promising market of 80 million people, where European and Asian companies are skirmishing to gain an edge on more-cautious U.S. competitors—though as latecomers, U.S. companies likely won’t face a learning curve in dealing with Iran’s political risks and bureaucratic difficulties.
Touch-and-Go
Amazon is facing a setback in its brick-and-mortar effort as technical glitches delay its first cashierless convenience store, Amazon Go. Launched in beta mode to employees in December, it was due to open to the public by the end of this month, but the opening date is now unclear as the company works out kinks in the technology. It is meant to charge customers automatically when they leave, but it has trouble tracking more than about 20 people unless they move slowly, and keeping tabs on items if they’re moved from a specific spot on the shelf. The delay highlights new challenges faced by the retail giant, which has limited experience anticipating and managing the flow of customers and products in a physical space.
Germany has toughed its position
on Brexit as the UK launches withdrawal negotiations this week. "We have
no interest in punishing the UK, but we also have no interest in putting
European integration in danger over the UK," said German Finance Minister
Wolfgang Schaeuble.
Reuters (27 Mar.), Financial Times (tiered subscription model) (27 Mar.)
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London's and New York City's
dominance as a financial center remains, but challenges are causing the
cities to lose ground to Hong Kong and Singapore.
Financial Times (tiered subscription model) (26 Mar.), Politico Pro (subscription required) (27 Mar.)
Hedge funds are said to be
developing and testing trade-capable computers with neural networks that
operate on principles similar to those of the human brain, although they are
not overclaiming ability. Numerous ventures in this field have proved
unsuccessful, but deep learning, which is used by companies such as Google,
Tesla and Amazon, is attracting interest and experimentation.
Bloomberg (27 Mar.)
PIMCO co-founder Bill Gross has
accepted an $81 million settlement after a dispute with the firm from which
he was ousted in 2014. His lawsuit against PIMCO, which had assets under
management of $1.5 trillion at the end of 2016, appears to have ended amicably,
and the firm has promised to open a Founders Room at its office to honor
Gross and other founders.
Bloomberg (27 Mar.)
Growing skepticism that the Trump
administration can bring about promised economic growth has sparked a rally
in the relatively safe haven of US government bonds. After the
administration's health care bill failed, yield on the benchmark 10-year
Treasury note dropped to 2.373% Monday, which denotes a rise in bond prices.
Saudi Arabia lowered the tax rate
for its oil industry, including government-run oil company Saudi Arabian Oil,
ahead of the firm's initial public offering, which is expected to value
Aramco at $2 trillion or more. On Monday, a royal decree cut Aramco's basic
tax rate to 50% from 85%, retroactive to the start of the year.
Reuters (28 Mar.), OilPrice.com (U.K.) (27 Mar.), Arab News (Saudi Arabia) (28 Mar.), The Wall Street Journal (tiered subscription model) (27
Mar.)
The biggest risk from the dollar drop may not be
what you think.
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The pound is becoming a drag on the biggest U.K.
stocks.
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Erdogan races against the dollar in campaign for
unrivaled power.
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Inside Alexei Navalny's
long-shot bid to beat Putin.
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Elon Musk's billion
dollar crusade to stop the A.I. apocalypse.
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Meet the Bloomberg Brexit barometer.
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Twenty-four hours ago it looked like we might be getting a new
narrative. The administration was ineffective! The AHCA flop meant tax
reform was in turmoil! Finally, the markets were getting nervous about what
President Donald Trump could deliver. But after opening sharply lower
yesterday, markets ended flat. And this morning futures are slightly in the
green. Yesterday's narrative is already busted. My only thought on the whole
thing is: Ha!
Anyway, let me know what you're thinking
about today. Shoot me an email at jweisenthal@bloomberg.net.
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Source:
Bloomberg, BI, WSJ, CFAI Fin. Newsbrief
posted by Rich Barnett @ 7:56 AM
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