Thursday April 20 Daily Market Primer

•         Stocks (mostly) fell
•          Oil down, then up, OPEC jawbones
•          Beige Book says good growth, weak spending

US stocks were mixed yesterday, with the Dow and S&P down, while the NASDAQ rose slightly, crude oil gave up recent gains by falling below $50, and the 10 year yield slid below 2.2%.   Oil is moving back up this morning after OPEC announce that they sort of probably have another set of production cuts in place. Maybe. There were some big moves in individual stocks, with IBM down 5% on an earnings miss, and Netflix was down again after reporting slowing subscriber growth on Monday.

DJIA	20,404.49	-118.79	-0.58%
Nasdaq	5,863.03	13.56	0.23%
S&P 500	2,338.17	-4.02	-0.17%
Russell 2000	1,367.13	5.24	0.38%
Global Dow	2,653.20	6.20	0.23%
Stoxx Europe 600	377.59	0.35	0.09%
Nikkei 225	18,430.49	-1.71	-0.01%
UK: FTSE 100	7,107.75	-6.61	-0.09%
CBOE Volatility	14.37	-0.56	-3.75%
Australia: S&P/ASX 200	5,821.40	17.40	0.30%
China: Shanghai Composite	3,172.10	1.41	0.04%
Hong Kong: Hang Seng	24,056.98	231.10	0.97%
Europe Dow	1,637.97	10.60	0.29%
India: S&P BSE Sensex	29,422.39	85.82	0.65%
France: CAC 40	5,046.14	42.41	0.85%
Germany: DAX	12,019.55	3.10	0.03%
Italy: FTSE MIB	19,842.78	18.17	0.09%
Spain: IBEX 35	10,394.50	24.20	0.23%
U.S. 3 Month	0.8	-0/32
U.S. 2 Year	1.197	-1/32
U.S. 5 Year	1.756	-2/32
U.S. 10 Year	2.23	-3/32
U.S. 30 Year	2.887	-9/32
Germany 2 Year	-0.786	-1/32
Germany 10 Year	0.244	-12/32
Crude Oil	50.37	-0.07	-0.14%
Brent Crude	52.85	-0.08	-0.15%
Natural Gas	3.279	0.003	0.09%
S&P GSCI	389.13	0.3	0.08%
E-mini S&P 500	2340.5	6.75	0.29%

I hope your were able to find some news yesterday since the Daily Market Primer took the day off J.  The Fed Beige Book economic report was out yesterday, and showed moderate economic growth in line with recent trends and our own pro-growth thesis, but consumer spending was on the weak side.  Fed Vice Chair Stan Fischer discussed the broadening of the global growth at a speech in Washington, very much in line with our own IPC discussions last week.  US initial jobless claims came in at 244K, 10K higher than the prior week and 4K higher than expected.  And, according to “Hearing Scheduled”, below, the House Financial Services Committee is considering a bill to replace Dodd-Frank.

Yesterday's Beige Book continues the debate about hard and soft data, with surveys showing strong spending intentions, while actual consumer spending has been week. Historically these two come into line eventually, but this has not happened lately.  We have seen a decline in inflation expectations, and in the market implied probability of Fed rate hikes, with the chance of a June hike down to 56%.  The Fed may want to make progress on balance sheet reduction before rising rates again.  After a very long drop in oil prices, the Saudi’s are feeling too much pain in budget revenue to continue to support low prices, so OPEC engineered the supply cuts last year to get the price back up, which brought oil prices back over $50, and also invited US producers back into the market.

Here’s the news:

Oil deal

After falling almost $2 yesterday, the price of a barrel of West Texas Intermediate for May delivery had risen 43 cents to $50.87 by 5:15 a.m. Eastern Time. The recovery comes as momentum gathers behind an extension of the production-cut deal, which is currently due to end in June. Saudi Arabia said this morning that Gulf-based oil producers have reached an agreement on prolonging the curbs. 

Brexit reality check

Yesterday the U.K. Parliament overwhelmingly supported Prime Minister Theresa May's plan for a June 8 election, with only 13 of the 535 votes cast opposing the idea. With her Conservative Party holding a 20-point lead in the polls, a huge parliamentary majority seems certain for the prime minister. For anti-Brexit campaigners, such a victory would dash any lingering hopes that the decision to leave the EU could be undone, as the Conservatives seem set to campaign on a hard-Brexit platform. 

China shares

The Shanghai Composite Index, which has gained a reputation for wild swings over the past two years, is now standing out for another reason -- it has not fallen more than 1 percent in 84 trading sessions, the longest stretch of its kind since 1992. Investors are interpreting the trend as owing to state-directed funds putting a floor under daily market swings. Guan Tao, former director of the international payments department at China’s State Administration of Foreign Exchange, sees a different solution when it comes to the yuan, which he thinks should be allowed to trade in a wider band, as capital controls are eased. 

Markets rise

Overnight, the MSCI Asia Pacific Index gained 0.3 percent, while Japan's Topix Index added 0.1 percent, as data showed the country's exports surged in March. In Europe, the Stoxx 600 Index was 0.2 percent higher at 5:50 a.m., with Unilever gaining 1.3 percent after announcing that sales beat estimates. U.S. stock futures also rose. 

Central bankers ready tightening

European Central Bank officials are getting closer to the point where they'll start preparing the end of their monetary stimulus. Federal Reserve Vice Chairman Stanley Fischer said foreign economies are now better able to handle Fed hikes. Markets are starting to ponder what effect the unwind of this historic stimulus is going to have. 

The White House is reportedly taking another stab Trumpcare. The Trump administration is trying to make progress in its attempt to repeal and replace Obamacare before Trump's 100th day in office, which happens next week, CNN reports. 
China is reportedly relaxing measures that restrict money from leaving the country. The People's Bank of China is reportedly relaxing measures that restrict capital outflows as a pullback in the US dollar has lessened pressure on its currency, the yuan, Reuters says, citing unnamed sources.
UK Parliament backs an early election. Members of Parliament voted 522 to 13 to back prime minister Theresa May's call for a general election. The British pound is stronger by 0.4% at 1.2822 against the dollar. 
Oil is rebounding. West Texas Intermediate crude oil fell 4% on Wednesday as oil inventories fell less than expected and gasoline supplies jumped for the first time in several months. On Thursday, WTI trades up 0.7% at $50.80 a barrel. 
Short bets against Wingstop are piling up. Short interest in the stock is at its highest level since the wing chain went public back in June 2015, data from financial analytics firm S3 Partners shows. 
Qualcomm beats. The chipmaker earned an adjusted $1.34 per share, well ahead of the $1.19 that analysts were anticipating, helping to ease concerns over its patent-licensing business. 
American Express beats as card member spending jumps. The company earned $1.34 per share on revenue of $7.89 billion as card member spending grew 8% on a currency adjusted basis. 
Stock markets around the world are higher. Hong Kong's Hang Seng (+1%) led in Asia and France's CAC (+0.9%) sees solid gains in Europe. The S&P 500 is set to open up 0.2% near 2,344.
Earnings reporting picks up. Blackstone, DR Horton, and Verizon will report ahead of the opening bell while Visa is set to release its quarterly results after markets close.   

US economic data flows. Initial jobless claims and the Philly Fed will both be released at 8:30 a.m. ET. The US 10-year yield is up 1 basis point at 2.23%.  

Exxon Mobil has applied to the Treasury Department for a waiver from U.S. sanctions on Russia in a bid to resume its joint venture with state oil giant Rosneft. We report that Exxon has been seeking U.S. permission to drill with Rosneft in several areas banned by sanctions and renewed a push for approval in March, shortly after its most recent chief executive, Rex Tillerson, became secretary of state. The waiver request is likely to be closely scrutinized by members of Congress who are seeking to intensify sanctions on Russia in response to what the U.S. said was its use of cyberattacks to interfere with elections last year. The State Department is among the U.S. government agencies that have a say on Exxon’s waiver application, but Mr. Tillerson is recusing himself from any matters involving Exxon for two years, a State Department spokesman said.

Poison Pen
The letter that cost Klaus Kleinfeld his job as chief executive of aerospace-parts maker Arconic on Monday contained a vague threat toward the billionaire whose hedge fund had been campaigning for Mr. Kleinfeld’s ouster. The letter, sent last week to Elliott Management, referenced the alleged partying of Elliott’s president, Paul Singer, at the 2006 World Cup in Germany, Mr. Kleinfeld’s home country. We report that Mr. Kleinfeld wrote, in sometimes imperfect English, that while the two had never met, he had heard stories from friends in Germany about what the letter called Mr. Singer’s “legendary” conduct during and after several soccer matches. The letter alludes to the Wall Street magnate singing “Singing in the Rain” in a fountain. Elliott said Monday that the letter was “based on completely false insinuations.” Meanwhile, the race is heating up for Arconic’s next leader.

Hollywood Goes Virtual
In show business, virtual reality is the new ingénue. The 360-degree immersive technology started emerging at film festivals about five years ago, often in projects that were more snazzy demos than stirring narratives. Since then, movie executives have used VR to promote existing franchises and provide interactive extras for anticipated blockbusters. Now, the entertainment industry is dedicating new levels of talent, money and time to VR projects, with a premium on original stories, award-worthy performances, Hollywood production values and a pinch of celebrity. At the Tribeca Film Festival, which opens this week, the VR lineup includes projects connected to director Kathryn Bigelow, musicians John Legend and Pharrell Williams, producer Megan Ellison and others. VR is a creative niche that has yet to be fully identified or understood.

Asset managers face consolidation, Fidelity says

The move to passively managed investments, including exchange-traded funds, is driving down profit margins among asset managers, making a wave of consolidations inevitable, Fidelity Investments' Charles Morrison says.  Financial Times (tiered subscription model) (19 Apr.) 

Hearing scheduled for House bill to replace Dodd-Frank

Hensarling (Zach Gibson/Getty Images)

The US House Financial Services Committee will hold a hearing Wednesday to review the Financial CHOICE Act, which is designed to replace the Dodd-Frank Act, said Chairman Jeb Hensarling. "Republicans are eager to work with the president to end and replace the Dodd-Frank mistake," he said. Reuters (19 Apr.) 

   

·         The nightmare scenario for Florida’s coastal homeowners.

·         Digging miles underground for mere specks of gold.

·         Erdogan's new powers do little to address Turkey's old problems. 

·         Another Middle Eastern oil producer plans an IPO.

·         Silicon valley’s $400 juicer may be feeling the squeeze.

·         The making of Marine Le Pen.

·         Ten years on: fixing the fault lines of the global financial crisis.

Is Trump Turning Globalist? Not So Fast

Democrats Reload for Georgia Runoff, But Party Divisions Remain

Mainstream European Leaders Try New Election Tactic: Full-Throated Defense of the EU

White House Says It Didn’t Mislead Allies About Timing of Carrier’s Korea Heading

Cybersecurity Startup Tanium Exposed California Hospital’s Network in Demos Without Permission

For U.K. Multinationals, Brexit Bounce May Be Over

Former Harvard Money Whiz Jack Meyer Tries to Regain His Edge

Bond Markets Send Jitters, But Is Anyone Listening?

One way to think about long-term investing is that you're pre-purchasing a retirement income. Sure you have to think about fundamentals of the market and all that, but, to some extent, you have to put a certain amount of money in if you hope to take a certain amount of money out later on in life. But what happens when people actually start retiring and mostly they're just taking money out? That's a question of increasing importance as the boomer generation begins to retire. Yesterday on What'd You Miss on BloombergTV we spoke with Sam Gruen, a founder and portfolio manager at Lightfield Capital, who's done work on the demographics of de-savings. Gruen recons that starting this year, we'll be seeing $350 billion or more annually coming out of the equity markets due to disbursement of assets and rotation into less-volatile asset classes (like bonds). Anyway, the whole discussion is interesting and worth thinking about more. Of course one flipside is that there are always new workers and savers growing up and putting money to work. Later in the same show we talked to Tim Hockey, the CEO of TD Ameritrade, who mentioned all the millennials who opened up stock trading accounts in the first quarter to trade shares of Snap... so maybe they'll save us.

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