Wednesday April 5 Daily Market Primer

•         Stocks barely budge, Oil moves up
•        Asian markets ignore missile
•          Lacker is out
•         AOL + Yahoo = what was that again?

Stocks barely moved on Tuesday as treasuries and the dollar fell, and oil rose to $51.  Oil was $47 just two weeks ago so this is a pretty big rebound.  US supply seems to be shrinking, and OPEC is probably going to extend cuts implemented last November.  Asian markets ignored another North Korean missile test, with China up 1.5% and Hong Kong up .6%.    There wasn’t much market moving news as the pols in Washington regroup after last week’s health care fail, the second health care deal is going nowhere, and as the market looks ahead to Friday’s jobs report.   Europe is up slightly, the VIX is back down below 12, and US equity futures are pointing up.

	LAST	CHANGE	% CHANGE
DJIA	20,689.24	39.03	0.19%
Nasdaq	5,898.61	3.93	0.07%
S&P 500	2,360.16	1.32	0.06%
Russell 2000	1,368.18	-1.49	-0.11%
Global Dow	2,691.46	3.24	0.12%
Stoxx Europe 600	381.75	0.61	0.16%
Nikkei 225	18,861.27	51.02	0.27%
UK: FTSE 100	7,330.84	9.02	0.12%
CBOE Volatility	11.89	-0.49	-3.96%
Australia: S&P/ASX 200	5,876.20	19.60	0.33%
China: Shanghai Composite	3,270.31	47.79	1.48%
Hong Kong: Hang Seng	24,400.80	139.32	0.57%
Europe Dow	1,659.51	11.43	0.21%
India: S&P BSE Sensex	29,974.24	64.02	0.69%
France: CAC 40	5,101.40	0.27	0.01%
Germany: DAX	12,224.67	-57.67	-0.47%
Italy: FTSE MIB	20,310.10	53.00	0.26%
Spain: IBEX 35	10,415.70	54.50	0.53%
U.S. 3 Month	0.795	0/32
U.S. 2 Year	1.258	0/32
U.S. 5 Year	1.882	1/32
U.S. 10 Year	2.362	0/32
U.S. 30 Year	2.999	1/32
Germany 2 Year	-0.779	-1/32
Germany 10 Year	0.271	-3/32
Crude Oil	50.53	0.29	0.58%
Brent Crude	53.5	0.38	0.72%
Natural Gas	3.149	0.021	0.67%
S&P GSCI	392.67	3.26	0.84%
E-mini S&P 500	2360.8	4.2	.18%

France had a presidential debate last night with 11 candidates, and Marine Le Pen lost her temper, and lesser known Jean-luc Melenchon won.  Richmond Fed President Jeffery Lacker unexpectedly resigned yesterday, after he admitted passing on confidential information to a Wall Street sell side analyst.   Apparently this deal was negotiated with the FBI in exchange for not pressing charges and allowed him to avoid possible jail time.   There’s rumors this morning that Apple may delay the iPhone 8 by a few months.

And, in a story I forgot to mention yesterday, Verizon is naming the combination of the old AOL which it bought a few years ago, and the just acquired Yahoo…Oath?  I think Verizon’s internet point man Tim Armstrong should take an oath not to name any more companies. 

Here’s the news:

Fed minutes, Lacker resigns

The minutes from the March Federal Open Market Committee meeting are due to be published at 2 p.m. Eastern Time today, with investors likely to focus on any discussion about the bank's plans to unwind its $4.5 trillion balance sheet. One person who will have no part in deciding that unwind is former Federal Reserve Bank of Richmond President Jeffrey Lacker. The non-voting Fed member resigned abruptly yesterday after disclosing his role in the leaking of confidential policy information in 2012.

Le Pen loses her cool

In last night's marathon French election debate, which saw all 11 candidates face off, National Front leader Marine Le Pen failed to keep her composure as she was labeled soft on the euro by a marginal rival who claimed to be the true anti-euro firebrand. A viewer poll showed that Communist-backed Jean-Luc Melenchon was the best performer, with front-runner Emmanuel Macron in second place. For Le Pen, a path for her to win the second round election is still not clear as even a record-low voter turnout may not be enough for victory.

Pound rally

The British pound climbed half a cent to $1.2481 by 5: 39 a.m. after U.K. services PMI data showed a rise to 55 in March from 53.5 the previous month. There was another warning on the U.K.'s approach to Brexit negotiations from the EU side today, with the union's chief Brexit negotiator Michel Barnier warning that Britain must settle the terms of its exit before seeking a trade deal, or risk having no deal at all.

Overnight, the MSCI Asia Pacific Index rose 0.3 percent, while Japan's Topix index was little changed as the yen rose less than 0.1 percent against the U.S. dollar. In Europe, the Stoxx 600 Index was 0.2 percent higher at 5:49 a.m. as gains in miners and oil companies were cancelled by drops in auto and retail sectors. U.S. stock market futures were flat.

U.S./China trade

Figures released yesterday show that American imports from China had their largest one-month fall on record -- some of which was due to the timing of the Lunar New Year -- and that eight U.S. states carry a trade surplus with the country. China has also become the top buyer of U.S. crude oil. Such data means we may hear a different tone at this week's meeting between Chinese leader Xi Jinping and Donald Trump than the one the U.S. president struck during the election campaign. Richmond Fed President Jeffrey Lacker resigns. Lacker resigned effective Tuesday after apparently admitting to leaking secret, market-sensitive information about key discussions on interest-rate policy within the central bank to the consulting firm Medley Global Advisors. Business Insider's Pedro Nicolaci da Costa gives his firsthand account of the matter. Obamacare is more popular than ever. A new Gallup poll found that 55% of respondents approved of Obamacare. That's the first time since Gallup began asking about Obamacare back in November 2012 that its approval rating had climbed above 50%. Zuma receives the backing of his party. South African President Jacob Zuma has received the backing of his African National Congress party, which has rejected calls for Zuma to step down, Reuters says. The South African rand is weaker by 1.5% at 13.8350 per dollar. Europe's economy had its best quarter in 6 years. The latest PMI surveys from IHS Markit showed March's composite reading of 56.4 was the best pace of expansion since the first quarter of 2011. Theresa May is trying to get Saudi Aramco to list in London. The UK prime minister brought the London Stock Exchange's chairman, Xavier Rolet, to a meeting with Saudi energy minister Khalid al-Falih, The Times says. ChemChina's $43 billion takeover of Syngenta receives EU approval. First, ChemChina must divest "a significant part" of its Adama unit's pesticide business, Bloomberg says. Snapchat's lead underwriter made an error analyzing the stock. Morgan Stanley published an equity research note on Snapchat and gave the stock a $28 target. A day later the bank issued a correction, changing important metrics in the model but not the $28 target. Stock markets around the world are up. China's Shanghai Composite (+1.5%) led in Asia, and Spain's IBEX (+0.4%) is out front in Europe. The S&P 500 is set to open little changed near 2,358. Earnings reports trickle out. Monsanto and Walgreens Boot Alliance report ahead of the opening bell, while Bed Bath & Beyond and Yum China release their quarterly results after markets close. US economic data is heavy. ADP Employment Change will be released at 8:15 a.m. ET before Markit PMIs and ISM nonmanufacturing cross the wires at 9:45 a.m. ET and 10 a.m. ET. The minutes from the March Federal Open Market Committee meeting are due out at 2 p.m. ET. The US 10-year yield is unchanged at 2.36%. Border Clampdown The Trump administration is considering far-reaching steps for “extreme vetting.” Visitors to the U.S. could be forced to provide cellphone contacts and social-media passwords and answer questions about their ideology. The changes could apply to visitors from America’s closest allies as well as other nations and include subjecting more visa applicants to intense security reviews. We report that administration officials conducting a review of vetting procedures say the changes are needed to guard against possible terror attacks. The full scope of changes has yet to be publicly discussed and would be sure to generate significant controversy, both at home and abroad, as other nations could impose retaliatory requirements on Americans seeking visas. Meanwhile, we offer a look at some of the proposals to build the U.S.-Mexico wall, from one-way visibility to a barrier doubling as a nuclear waste facility. Boiling Rice The House Intelligence Committee wants Susan Rice, who served as national security adviser under former President Obama, to testify in a probe of alleged Russian election interference, as the investigation widens to include allegations that Obama officials improperly used intelligence information involving President Trump or his associates. Two officials familiar with the matter said that Ms. Rice is on a list of witnesses drawn up by the committee as part of its probe. The White House and Rep. Devin Nunes, the House panel’s chairman, have accused the Obama administration of improperly using surveillance information, including “unmasking” the redacted names of Mr. Trump’s transition team members for political gain. A Republican official familiar with deliberations by GOP lawmakers on the committee said Ms. Rice requested the unmasking of at least one transition official—not her successor, Mike Flynn—who was part of multiple foreign conversations that weren’t related to Russia. On the Rebound U.S. companies are poised to report their strongest quarterly earnings in years, another sign that the stock-market rally could have further to run. Analysts expected earnings for S&P 500 companies to grow by 9.1% over all in the first quarter from a year earlier, as of March 31, which would mark the highest growth since the fourth quarter of 2011. Still, analysts have trimmed their profit expectations since the start of the year, and disappointing results could stoke concerns that stock-price gains have outpaced earnings growth. Reporting season heats up over the next few weeks, with banks including J.P. Morgan Chase, Citigroup and Wells Fargo expected to report results next week and giants like Johnson & Johnson, Verizon and GE scheduled for the week after. “Now is when we really start to be dependent on what the hard numbers show,” says one portfolio manager. US approves ChemChina's $43B Syngenta buyout The US Federal Trade Commission has granted antitrust approval for China National Chemical's $43 billion acquisition of Swiss pesticide company Syngenta. The FTC is requiring the companies to sell interests in three pesticides in the US. Bloomberg (05 Apr.)  EU trade talks may conclude after Brexit, May says May (Dan Kitwood/Getty Images) The UK cannot complete a trade deal with the EU until after the separation is complete in 2019, British Prime Minister Theresa May has indicated. Financial Times (tiered subscription model) (05 Apr.)

Pension dispute delays funds for Greece A standoff over pensions between the Greek government and its creditors is holding up the release of emergency loans under a bailout agreement. The government of Prime Minister Alexis Tsipras wants pension cuts phased in gradually after the 2019 national election, while the EU and the International Monetary Fund are calling for faster and steeper reductions. Bloomberg (04 Apr.)  Residential land sales soar in China's biggest cities During the first quarter, sales of land for residential development in China's first-tier cities nearly doubled, the China Index Academy said. Residential land sales reached 5.08 million square meters, 98% more than a year earlier. Xinhuanet.com (China) (04 Apr.)  Fiduciary-rule compliance postponed 60 days The US Labor Department has given final approval to a 60-day delay of its fiduciary rule. The rule, originally to take effect Monday, will become effective June 9. Reuters (04 Apr.)  Bitcoin a big hit with Japanese retailers Japan's retail chains are moving swiftly to accept bitcoin. About 4,500 stores let customers pay with bitcoin, but the figure could soon surge to 260,000.  Nikkei Asian Review (Japan) (tiered subscription model) (05 Apr.)  Clayton (Chip Somodevilla/Getty Images) The US Senate banking committee has voted 15-8 to support Jay Clayton, President Donald Trump's nominee to head the Securities and Exchange Commission. Committee Chairman Mike Crapo said he hopes the Senate will confirm the veteran Wall Street lawyer this month.  The Wall Street Journal (tiered subscription model) (04 Apr.)   Time running out for efforts to kill Obama-era rules Because of deadlines written into law, opportunities are narrowing to use the Congressional Review Act to repeal certain regulations passed under former President Barack Obama. The deadline for introducing such resolutions has passed, and for those introduced to take effect, Congress must approve them by mid-May.  Reuters (04 Apr.)  ETFs are the new bond kings.

Gundlach says bond rally to continue.

Dimon warns "something is wrong" with the U.S.

Deutsche bank loses senior executives after bonuses slashed.

Chinese stocks are becoming a world-beating dividend play.

General Motors is connecting 30,000 robots to the internet.

Global shipping fleet braces for chaos of $60 billion fuel shock. Schools Rack Their Brains as Bus Driver Jobs Go Begging Battle Over Neil Gorsuch Supreme Court Confirmation to Hit Senate Floor Trump and China: Ahead of Summit, Both Sides Try to Reset Volatile Relationship Staples Explores Sale After Failed Office Depot Deal BMW, Glaxo and Allstate Join Wave of Advertisers Withdrawing From Bill O’Reilly’s Show A Pimco Fund Just Became the Biggest Active Bond Fund, and It Wasn’t Bill Gross’s Economy Will Miss That New-Car Smell

Markets may have a somnolent vibe to them right now, but there are certainly some interesting pockets of action. One area that's been having a brutal time is the retailing sector, where the bad news just keeps piling up. Despite surging consumer confidence, actual spending so far in 2017 has been mediocre. And more importantly there's that gigantic sucking sound known as the internet (or Amazon) that's destroying the business model of so many physical retailers. Of course, there are all kinds of second-order effects from the retail implosion. The collapse of the mall business is well known, but the issues go beyond that. Manhattan landlords have been offering massive giveaways to keep their ground floor retail clients. If you live in New York City and you walk around, you'll probably notice lots of vacancies. Yesterday the news came out that Ralph Lauren will close its flagship Polo store on Fifth Avenue amid a broader move to cut costs. How it all plays out is anyone's guess, but it's probably worth considering some of the broader macro implications.

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