Friday April 21 Daily Market Primer
·
Stocks
climbed
·
Mnuchin
talks taxes
·
Kuroda
reassures
·
AI
is the new BTC
Happy
Friday. US stocks rose .8% as tax reform talk made a strong comeback, once again
demonstrating the power of optimism on the market. US treasury
secretary Steve Mnuchin said plans for tax reform are moving ahead, and
said that the tax cut would be essentially self funded by higher economic
growth. Bank of Japan Governor Haruhiko Kuroda said the BOJ will
remain accommodative on monetary policy. Stock markets are almost
all up outside of the US and S&P futures are slightly in the green.
Oil had a bad week, down over 4% in spite of OPECs heroic efforts to
talk up the price, and the US 10 year is finishing at about 2.2%, up slightly
from the low of 2.16% on Tuesday but much lower than the 2.6% just five
weeks ago. According to a note by Evercore ISI this morning, this
reflects “a combination of a policy failure, heightened geopolitical risk, and
deteriorating economic data” combined with some weather effects.
LAST
|
CHANGE
|
% CHANGE
|
|
20,578.71
|
174.22
|
0.85%
|
|
5,916.78
|
53.74
|
0.92%
|
|
2,355.84
|
17.67
|
0.76%
|
|
1,384.15
|
17.02
|
1.24%
|
|
2,668.95
|
3.53
|
0.13%
|
|
378.79
|
0.73
|
0.19%
|
|
Nikkei
225
|
18,620.75
|
190.26
|
1.03%
|
UK:
FTSE 100
|
7,126.74
|
8.20
|
0.12%
|
CBOE
Volatility
|
14.05
|
-0.88
|
-5.89%
|
Australia:
S&P/ASX 200
|
5,854.10
|
32.70
|
0.56%
|
3,172.10
|
1.41
|
0.04%
|
|
24,056.98
|
231.10
|
0.97%
|
|
Europe
Dow
|
1,640.62
|
13.25
|
-0.19%
|
India:
S&P BSE Sensex
|
29,365.30
|
-57.09
|
0.81%
|
France:
CAC 40
|
5,069.06
|
-8.85
|
-0.17%
|
Germany:
DAX
|
12,065.34
|
38.02
|
0.32%
|
Italy:
FTSE MIB
|
19,868.76
|
19.32
|
0.10%
|
Spain:
IBEX 35
|
10,413.90
|
41.40
|
0.40%
|
0.79
|
-0/32
|
||
1.184
|
0/32
|
||
1.76
|
0/32
|
||
2.236
|
-1/32
|
||
2.888
|
-3/32
|
||
-0.802
|
1/32
|
||
0.238
|
2/32
|
||
50.26
|
-0.18
|
-0.36%
|
|
52.92
|
-0.07
|
-0.13%
|
|
3.253
|
0.003
|
0.09%
|
|
387.28
|
-0.42
|
-0.11%
|
|
2354.5
|
2.5
|
0.11%
|
The
French election is this weekend with centrist Emmanuel Marcon and far right
Marine Le Pen in the lead in a four way close race with socialist Manuel Valls
and conservative Francois Fillon. Campaigning was suspended early after the
terrorist attack yesterday. You might assume that after mortgage backed
securities and CDOs marketing problems starting around 2011, resulting in a
$7.2 billion settlement this January (marked down from the original $14 billion
demand), violating sanctions against Iran in 2013, rigging LIBOR and the
California energy market in 2013, and involvement in Russian money laundering
resulting in a $425 million fine this year, that European banking giant Deutsche
Bank might just take a break. That would be a bad assumption, since DB
is in trouble again for violation of the Volker rule and Forex trading,
resulting in a $156.6 million penalty from the Fed http://bit.ly/DBPays.
And, AI may be the new
Bitcoin, since it seems like everyone is talking about Artificial
Intelligence in investing. I’m not sure I’m buying the AI = Alpha
story, but you can judge for yourself, since I’ve attached links to two recent (and
short) papers on AI in investing, because I know you have time to read them this
weekend.
Here’s
the news:
Mnuchin (Michele Tantussi/Getty Images)
|
The Trump administration is
confident an overhaul of US tax law will be finished by year-end, Treasury
Secretary Steven Mnuchin says. "Whether health care gets done or doesn't
get done, we're going to get tax reform done," he said. Bloomberg (20 Apr.), The Washington Post (tiered subscription model) (20 Apr.)
French election
Campaigning for
Sunday's first round vote in the French election was suspended after
yesterday's deadly attack in Paris,
which left a policeman dead. At midnight tonight local time the campaign
officially ends, with no more polls or
public statements from candidates permitted. Emmanuel Macron and Marine Le
Pen of the National Front are still ahead in the four-way race, with Republican
Francois Fillon and Communist-backed Jean-Luc Melenchon close behind. The top
two candidates in Sunday's vote move forward to the May 7 runoff.
PMI day
A Purchasing
Managers’ Index for manufacturing and services in the euro area rose 56.7 in
April, the highest level in six years.
The increase was led by figures from France, where the composite PMI unexpectedly surged to 57.4.
There was less good news for the U.K. where retail sales slowed more than
forecast, posting their biggest quarterly drop since 2010.
While the pound came under some pressure after
the release, the currency was still trading more than 2 percent higher for the
week. Markit PMI data for the U.S. are due at 9:45 a.m. Eastern Time.
Oil's bad week
Despite reports
of a deal to extend production cuts,
a barrel of West Texas Intermediate for June delivery was trading at $50.71 by 5:30 a.m.,
down over 4.5 percent for the week. High inventories and
U.S production increases continue to outweigh the effect of OPEC production
curbs. Goldman Sachs Group Inc. says that the selloff has been driven by technical factors,
and that fundamental forces that support a rise in prices remain in
place.
Markets mixed
Overnight,
the MSCI Asia Pacific Index rose 0.7 percent,
while Japan's Topix index closed 1.1 percent higher after Bank of Japan
Governor Haruhiko Kuroda said he will retain an accommodative policy stance. In
Europe, the Stoxx 600 Index was 0.1 percent lower at
5:42 a.m. with France's CAC 40 dropping 0.6 percent ahead of Sunday's vote.
S&P 500 futures pointed to a higher open.
Trump tax target
President Donald
Trump will sign an executive order later today targeting tax rules introduced
under the Obama administration. Trump said he wants Congress to pass both
legislation scaling back Obamacare,
and a spending bill to keep the U.S. government running next
week. Meanwhile, the fallout from the president's frozen travel ban
continues as travelers under the Global Entry program and other
"trusted" categories are finding their enrollments revoked.
The
French election is coming. France will go to the polls Sunday for the first round of its
presidential election. Four candidates are within percentage points of one
another in the polls, but only two will advance.Europe's economic renaissance shows no signs of slowing down. "By country, faster business activity growth in France — the strongest seen since May 2011 — was offset by a moderation in Germany, albeit with the pace of German expansion still running at one of the fastest seen over the past six years," a release from Markit announcing the data said.
UK retail sales whiff. Retail sales fell by 1.4% in the first quarter, making for "the third consecutive decrease for the underlying 3 month on 3 month pattern," according to the Office for National Statistics.
China is fighting back against fake economic data. The Chinese government has created an economic task force aimed at improving the quality of economic data, Bloomberg says, citing the National Bureau of Statistics.
The Borussia Dortmund bus attack may have been an attempt to manipulate the markets. Prosecutors say the man accused of planting explosive devices on the Borussia Dortmund team bus that injured Spanish defender Marc Bartra bought 15,000 put options on Borussia Dortmund's stock before the bombing.
Deutsche Bank breaks the Volker Rule. The German investment bank was fined about $157 million for allowing traders to make risky bets and for allowing currency traders to chat online with competitors, Bloomberg says.
Visa's total payments spike. The world's largest payments operator earned $0.86 a share as operating revenue jumped 23.5% to $4.48 billion. Visa says total payments volume spiked 37.2% versus a year ago.
Stock markets around the world trade mixed. Japan's Nikkei (+1%) led the gains in Asia, and France's CAC (-0.6%) trails in Europe. The S&P 500 is set to open little changed near 2,356.
Earnings reports flow. General Electric, Honeywell, Schlumberger, and SunTrust are among the names reporting before the opening bell.
US economic data is moderate. Markit
manufacturing PMI and Markit services PMI will be released at 9:45 a.m. ET
before existing-home sales cross the wires at 10 a.m. ET. The US 10-year yield
is unchanged at 2.23%.
Steel Trap
The Trump administration has opened a wide-ranging probe into whether to curb steel imports in the name of national security, ramping up its campaign to give a more nationalist tinge to American trade policy. The administration is launching the study under a trade law that was regularly invoked in the 1970s and 1980s to justify curbs on imports. But the law has rarely been invoked since the 1995 creation of the World Trade Organization, which was designed to discourage countries from claiming such wide latitude to restrict imports. President Trump’s strategy involves significant risks of retaliation and is fighting strong currents: domestic steel prices are among the world’s highest and a buoyant dollar is pushing down the cost of imports. Meanwhile, the White House has thrust a new set of proposals into talks to avoid a shutdown of the government next week.
The Trump administration has opened a wide-ranging probe into whether to curb steel imports in the name of national security, ramping up its campaign to give a more nationalist tinge to American trade policy. The administration is launching the study under a trade law that was regularly invoked in the 1970s and 1980s to justify curbs on imports. But the law has rarely been invoked since the 1995 creation of the World Trade Organization, which was designed to discourage countries from claiming such wide latitude to restrict imports. President Trump’s strategy involves significant risks of retaliation and is fighting strong currents: domestic steel prices are among the world’s highest and a buoyant dollar is pushing down the cost of imports. Meanwhile, the White House has thrust a new set of proposals into talks to avoid a shutdown of the government next week.
Can You Hear Me Now?
Verizon is having to slash prices and offer more data to stem an unprecedented wave of customer losses, a maneuver that benefits consumers but hurts its bottom line. During the first three months of the year, the company posted its first-ever quarterly net loss of wireless subscribers, showing the extent of the damage resurgent rivals T-Mobile and Sprint have inflicted on the nation’s largest carrier by subscribers. To stanch the bleeding, Verizon unexpectedly brought back unlimited data plans in February, seeking to blunt the appeal of similar offers from T-Mobile and Sprint. That offer hit financials: Total revenue has now declined four quarters in a row. The results will put pressure on Verizon’s management to either find a way to turn things around or make moves that will diversify the company away from the wireless business.
Verizon is having to slash prices and offer more data to stem an unprecedented wave of customer losses, a maneuver that benefits consumers but hurts its bottom line. During the first three months of the year, the company posted its first-ever quarterly net loss of wireless subscribers, showing the extent of the damage resurgent rivals T-Mobile and Sprint have inflicted on the nation’s largest carrier by subscribers. To stanch the bleeding, Verizon unexpectedly brought back unlimited data plans in February, seeking to blunt the appeal of similar offers from T-Mobile and Sprint. That offer hit financials: Total revenue has now declined four quarters in a row. The results will put pressure on Verizon’s management to either find a way to turn things around or make moves that will diversify the company away from the wireless business.
Falling Back
Markets are flashing red on growth as investors begin to return to pre-election bets on the “new normal”—a persistently weak economic expansion. The shift back is far from complete and the assessment is muddied by geopolitics. But there are signs that the sugar rush of Mr. Trump’s victory and global-growth hopes have faded, raising doubts among some investors about whether stocks can stay high. The sharp drop in government-bond yields is the most obvious signal that something is amiss, and it is backed up by ominous signs from raw-materials markets. There are two big question marks around the market portents: Are they right? If so, do they spell doom for shares? Our Streetwise columnist James Mackintosh answers both. Rising rates and weak growth are a terrible combination, he writes, so investors should take the warnings seriously.
Markets are flashing red on growth as investors begin to return to pre-election bets on the “new normal”—a persistently weak economic expansion. The shift back is far from complete and the assessment is muddied by geopolitics. But there are signs that the sugar rush of Mr. Trump’s victory and global-growth hopes have faded, raising doubts among some investors about whether stocks can stay high. The sharp drop in government-bond yields is the most obvious signal that something is amiss, and it is backed up by ominous signs from raw-materials markets. There are two big question marks around the market portents: Are they right? If so, do they spell doom for shares? Our Streetwise columnist James Mackintosh answers both. Rising rates and weak growth are a terrible combination, he writes, so investors should take the warnings seriously.
Room to Grow
Taking a cue from lavish walk-in closets off the master bedroom, builders and designers are increasingly creating luxury closets for their pint-size clients. More kids are getting boutique-style shoe racks, designer wallpaper and velvet-lined jewelry drawers, as well as practical accessories such as baskets for superhero storage and rods to hang clothes for playing dress-up. Costs can range from $5,000 to $15,000 to create a smaller, more playful version of a high-end closet inside a child’s bedroom. One designer looks at shoe sizes and children’s heights to devise shelving systems that can be adjusted with age by taking out dividers. Carefully placed slide-out hampers encourage even the messiest children to find time to throw in their dirty clothes.
Taking a cue from lavish walk-in closets off the master bedroom, builders and designers are increasingly creating luxury closets for their pint-size clients. More kids are getting boutique-style shoe racks, designer wallpaper and velvet-lined jewelry drawers, as well as practical accessories such as baskets for superhero storage and rods to hang clothes for playing dress-up. Costs can range from $5,000 to $15,000 to create a smaller, more playful version of a high-end closet inside a child’s bedroom. One designer looks at shoe sizes and children’s heights to devise shelving systems that can be adjusted with age by taking out dividers. Carefully placed slide-out hampers encourage even the messiest children to find time to throw in their dirty clothes.
Virtu Financial's $1.4 billion
acquisition of KCG Holdings, set to close in the third quarter, will create a
technology platform that combines Virtu's execution business and KCG's
algorithms and proprietary analytical tools, Virtu CEO Doug Cifu says. Cifu
will remain CEO after the merger.
Reuters (20 Apr.),
The global market for blockchain
technology is expected to grow to $5.43 billion by 2023, up from $228 million
in 2016, with North America generating the most revenue from this technology,
according to an Allied Market Research report. "Blockchain-based solutions
are projected to be adopted earlier in some industries such as financial
services and the supply chain industry as compared to many other
industries," the report notes.
Traders magazine online (20 Apr.)
US Treasury Secretary Steven Mnuchin
is working with the Financial Stability Oversight Council's member agencies to
clarify the Volcker rule to give banks' market-making desks more leeway. While
he said proprietary trading has no place in a regulated entity, "if you
are acting within the context of a customer business, there is clarity that the
bank can commit capital," Mnuchin said.
Risk.net (subscription required) (20 Apr.)
Deutsche Bank has agreed to settle
alleged violations of proprietary-trading rules and of foreign exchange rules
that bank traders used chat rooms to communicate with competitors. The biggest
part of the $156.6 million fine -- $136.9 million -- was for the alleged FX
violations. Bloomberg (21 Apr.),
·
Dortmund bus attacker hoped to profit from share slump.
·
·
U.S. stocks should "terrify" Janet
Yellen, Paul Tudor Jones says.
·
·
Traders are losing faith in European banks as
earnings loom.
·
·
Deutsche Bank is first bank busted for
breaking Volcker rules.
·
·
The bond market prefers dictators to democracies in
emerging markets.
·
·
U.S. prosecutors weighing charges against
Wikileaks.
·
·
Pale blue dot, and
how to look after it.
Arkansas Executes Inmate After Court Rulings Clear
Obstacles
Utah Prepares Special Election as Rep. Chaffetz Says He May Step Down Early
Utah Prepares Special Election as Rep. Chaffetz Says He May Step Down Early
Pakistan Supreme Court Orders Corruption Probe of Prime
Minister Sharif
Trump Joins Criticism of Iran; Questions U.S. Role in Libya
Trump Joins Criticism of Iran; Questions U.S. Role in Libya
GM Ceases Operation in Venezuela as Plant Is Seized
Wal-Mart Brings Price War to Groceries, Boosting Pressure on Big Food Retailers
Wal-Mart Brings Price War to Groceries, Boosting Pressure on Big Food Retailers
China’s Oil Refiners Are Coming for Your Market Share
After Tax in Vancouver, Home Price Boom Migrates to Toronto
After Tax in Vancouver, Home Price Boom Migrates to Toronto
The U.K. consumer may have finally
succumbed to economic gravity. Retail sales posted their largest decline in
seven years in the first quarter, today's data show, as inflation crimped
purchasing power.
Bearish prognostications for the
U.K. economy had largely failed to materialize hitherto,
thanks to the resilience in business investment, employment and retail spending
following the Brexit vote -- forcing economists to eat humble pie. But it's not
hard to see that household-driven expansion staging a gradual reversal in the
coming years amid weak savings, higher inflation, and dwindling consumer
confidence as Brexit beckons. And spenders don't have much of a buffer: the
U.K.'s household savings ratio is historically low while debt remains high.
With spending in recent months outpacing income growth, boosted by unsecured
borrowing, a broad-based slowdown in household expenditure -- which accounts
for about 60 percent of gross domestic product -- may be nigh. The general
election could center on the battle for real-income growth, as much as Brexit.
posted by Rich Barnett @ 6:50 AM
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