CapMarketComment: Thursday May 11 Daily Market Primer

Market quiet this week
BOE talks rate hike, EU upgrades growth
Moody’s cuts Canadian banks

The Daily Market Primer is back after a break this week, since I know how hard it is to find financial news on the Internet J. US markets were quiet, stocks barely budged and treasury yields rose by a few basis points.

S&P 500 this week:

Yesterday, stocks were mixed as the Dow dropped slightly while the S&P and NASDAQ, both hovering at record highs, rose slightly. On the political front, fallout continues from President Trump’s firing of FBI director Comey earlier this week, but so far it hasn’t had much effect on the markets. Markets are mixed overseas and US futures are pointing to a down open.

	LAST	CHANGE	% CHANGE
DJIA	20,943.11	-32.67	-0.16%
Nasdaq	6,129.14	8.56	0.14%
S&P 500	2,399.63	2.71	0.11%
Russell 2000	1,399.59	7.73	0.56%
Global Dow	2,743.11	-4.00	-0.15%
Stoxx Europe 600	394.66	-1.79	-0.45%
Nikkei 225	19,961.55	61.46	0.31%
UK: FTSE 100	7,380.65	-4.59	-0.06%
CBOE Volatility	10.54	0.58	5.82%
Australia: S&P/ASX 200	5,878.30	2.90	0.05%
China: Shanghai Composite	3,061.50	8.72	0.29%
Hong Kong: Hang Seng	25,125.55	110.13	0.44%
Europe Dow	1,728.06	-13.36	0.01%
India: S&P BSE Sensex	30,250.98	2.81	-0.77%
France: CAC 40	5,378.33	-22.13	-0.41%
Germany: DAX	12,724.52	-32.94	-0.26%
Italy: FTSE MIB	21,461.79	-91.02	-0.42%
Spain: IBEX 35	10,868.40	-166.40	-1.51%
U.S. 3 Month	0.899	0/32
U.S. 2 Year	1.351	0/32
U.S. 5 Year	1.925	2/32
U.S. 10 Year	2.398	7/32
U.S. 30 Year	3.038	2/32
Germany 2 Year	-0.664	0/32
Germany 10 Year	0.435	-4/32
Crude Oil	47.92	0.59	1.25%
Brent Crude	50.81	0.59	1.17%
Natural Gas	3.408	0.028	0.83%
S&P GSCI	377.69	3.13	0.83%
E-mini S&P 500	2388.75	-6.5	-0.27%

The Bank of England met today and announced that it may need to raise interest rages before late 2019, which is Brexit is scheduled to happen, and which is sooner than has been expected, and forecasted an inflation rate of 2.8% this year. UK industrial production fell by .5%, dropping for the third month in a row in March, indicating that Brexit may be starting to drag down the economy. Nevertheless, the BOE is trying to be optimistic, saying that its forecast assumes “that the adjustment to the United Kingdom’s new relationship with the European Union is smooth”. Meanwhile, the European Commission said euro area growth this year will be slightly stronger than previously forecast, at 1.7%.

Moody’s downgraded the debt of six big Canadian banks by one level, citing increasing consumer debt and high housing prices as the reason for the change.

SNAP got crushed yesterday on disappointing daily user metrics, which grew (only) 36% year over year, down from 52% last year.. The stock dropped about 25%. Steamroller Facebook is coming after them by copying nearly every feature of Snapchat in Instagram, WhatsApp, and Messenger http://bit.ly/FBCopies.

Here’s the news:

Super Thursday

At 7:00 a.m. Eastern Time the Bank of England will publish it latest monetary policy decision and update its inflation forecast. The announcement will be followed by a press conference with Governor Mark Carney. While no economist surveyed by Bloomberg expects a change in rates today, there is disagreement among investors on the inflation outlook, with Mike Riddell, a U.K. fixed-income portfolio manager at Allianz Global Investors, saying the bank could surprise markets by lowering its forecast.

Euro-growth

The European Commission said that growth in the euro area will be stronger than previously forecast, adding that some risks to the outlook have eased. The EU also raised its growth forecast for the United Kingdom, but warned of the fallout from Brexit uncertainty and faster inflation. Figures published in the U.K. this morning showing the deficit in goods and services jumped to 10.5 billion pounds ($14 billion) in the first three months of the year, suggest that trade contributed to the country's sharp slowdown in the first quarter of the year.

Oh, Canada

Six of Canada's largest banks had their credit ratings downgraded by Moody's Investors Service as concerns over the housing market and consumer indebtedness have left lenders vulnerable. The troubles at Home Capital Group Inc. have increased investor focus on the housing market north of the border, with the S&P/TSX Bank Composite Index down more than 7.5 percent from its March peak.

Markets still quiet

Overnight the MSCI Asia Pacific Index rose 0.3 percent, while Japan's Topix index added 0.1 percent. In Europe, the Stoxx 600 Index was 0.2 percent lower at 5:55 a.m., with positive results from UniCredit SpA failing to lift the wider market. S&P 500 futures slipped 0.1 percent. SpA

failing to lift the wider market. S&P 500 futures slipped 0.1 percent.

Comey fallout

Reaction to the shock firing of FBI director James Comey continues on Thursday, with analysts viewing the drama as an unwelcome distraction from the implementation of the president's agenda. The investigation into Michael Flynn's connections to Russia took an unusual turn yesterday when the Senate Intelligence Committee issued a subpoena for documents relating to their probe. There have been calls for Congress to do more to hold the president accountable in the wake of recent events.

The Bank of England meets. The central bank is expected to keep policy on hold at Wednesday's meeting, with economists on the lookout for any changes to the BOE's inflation forecast. The decision will cross the wires at 7 a.m. ET.
The Reserve Bank of New Zealand holds. New Zealand's central bank held its key interest rate at a record-low 1.75% and reduced its inflation outlook for 2018. The New Zealand dollar is down by 1.3% at 0.6847 against the dollar.
Snap craters after its first earnings report. Shares of the social-media company tumbled by as much as 25% following its first quarterly report as a publicly traded company. Snap lost $0.20 a share on revenue of $149.6 million. Both numbers missed Wall Street estimates.
Tesla is accepting orders for its new solar roof. The roof will be available in four different shingles and cost $21.85 a square foot.
A short seller accuses Apple supplier AAC of "dubious accounting." AAC's stock tumbled by as much as 14% in Hong Kong after the short seller Gotham City accused the company of practicing "dubious accounting" methods, Reuters says. "The Board vigorously denies the allegations in the report and considers the information contained therein to be inaccurate and misleading," AAC's chairman, Koh Boon Hwee, said in a filing.
Aetna ditches Obamacare. "We will not offer on- or off-exchange individual plans in Delaware or Nebraska for 2018, and at this time have completely exited the exchanges," Aetna representative TJ Crawford said in a statement on Wednesday.
Barclays CEO apologizes. Speaking at his bank's annual meeting in London, Barclays CEO Jes Staley said he was sorry for trying to unmask a whistle-blower, DealBook reports.
Stock markets around the world are mixed. Hong Kong's Hang Seng (+0.4%) led in Asia, and Germany's DAX (+0.1%) clings to gains in Europe. The S&P 500 is set to open down 0.2% near 2,395.
Earnings reporting slows down. Kohl's and Macy's report ahead of the opening bell, while Nordstrom releases its quarterly results after markets close.

US economic data is light. PPI and initial jobless claims will be released at 8:30 a.m. ET. The US 10-year yield is down by 2 basis points at 2.39%.

The Comey Files
President Trump weighed in publicly for the first time on his firing of James Comey, saying Wednesday that the FBI director “wasn’t doing a good job.” The White House sought to elaborate on the reason for Mr. Comey’s dismissal, which had prompted the president’s critics to accuse him of seeking to interfere in a probe Mr. Comey was leading into possible collusion between Russia and the Trump campaign. We report that Mr. Comey last week sought more resources for the investigation, requesting additional personnel from Rod Rosenstein, recently installed as deputy attorney general. Democrats on Wednesday called for a special prosecutor, and in protest sought to slow the workings of Congress, while some senior Republicans also expressed unease with the timing of Mr. Comey’s ouster. As Capitol Hill absorbed the news, Mr. Trump stoked Democratic protests by meeting with Russian Foreign Minister Sergei Lavrov and Russian diplomat Sergei Kislyak at the White House. And a congressional investigation into possible Russian meddling in the 2016 election picked up steam as the Senate Intelligence Committee subpoenaed documents from the president’s former national security adviser, Mike Flynn.

Cold Snap
In its first quarterly report as a public company, Snap showed it struggled to maintain strong user growth for its Snapchat disappearing-message app. The results, which sent shares tumbling, sparked worries about the company’s ability to challenge social-media titan Facebook. Snap, whose core business relies on selling advertising on Snapchat, reported 166 million daily users in the past quarter, up 8 million from the previous period and up 44 million from a year earlier—its slowest year-over-year growth rate in at least two years. Last month, Facebook’s Instagram, a major Snap competitor, reported it had 200 million daily users of Instagram Stories, a feature of the photo-sharing app that mimics Snapchat’s popular function. Snap’s shares plunged 23% in after-hours trading, hovering just above the $17 price at which it went public in March.

Organic Change
Whole Foods Market is dramatically reshaping its board in an effort to show it is open to change after an activist investor last month publicly urged the organic-grocery chain to explore a sale and accelerate its turnaround efforts. The Austin-based company Wednesday named a new board chairman and said five directors would step down immediately, replaced by nominees with a broad range of retail and financial experience at companies such as Panera Bread and Foot Locker. The shake-up, which comes during one of the rockiest periods in Whole Foods’ nearly 40-year history, wasn’t enough to appease its second-largest shareholder, activist hedge fund Jana Partners, which Wednesday raised the possibility of seeking a shareholder vote on more board changes as soon as this summer.

Trans-Atlantic Deals
Many of the biggest bargains for U.S. travelers this summer will require a passport. While domestic airfares are rising for the coming months, international ticket prices are dropping. The average price of air tickets sold so far for summer travel to Europe is down 15% from a year earlier. Discount European airlines are having a big impact on prices, as established competitors cut fares to compete, as is reduced demand from Europe for tickets to the U.S. Also, global events and politics are affecting travel significantly this year. The State Department issued a Europe travel alert earlier this month urging caution because of a continuing terror threat that could target large tourist crowds this summer. However, with the dollar remaining strong and airlines adding lots of seats, many travelers are taking advantage of bargains: The number of tickets sold in the U.S. for trips to Europe is up 26%. Our Middle Seat columnist Scott McCartney shares what you need to know.

Fed's Rosengren favors three more 2017 hikes to foil overheating.

· Bond market volatility plunges to lowest since August 2014...

· ... And if you're looking for volatility, try the commodity where producers are attempting to control prices.

· This is what can kill the emerging market rally.

· Student loans just got more expensive.

· Mobius says low market volatility is tied to social media.

· "The Belt connects the land, the Road moves on the sea."

· Robots Aren’t Destroying Enough Jobs

· Six-Figure Payouts for Sick Leave Spur Outrage, Calls for Overhaul

· U.S. to Expand Intelligence Cooperation With Turkey

· U.S. to Boost Surveillance for Russian Exercise

· Power Company Calpine Explores Sale