Friday July 7 Daily Market Primer
- Stocks, bonds down
- NFP=222K
- U=4.4%, wages +.2%
- G20 talks trade, climate, and NK
- TSLA tanks
- Drillers drill
Happy
jobs Friday. Stocks dropped yesterday as investors focused on Central Bank
minutes which may signal that tapering is on the way, and Asian market
followed the US to lower stock and bond prices, as the ECB minutes triggered an
echo of last weeks bond selloff. Yields rose, with US 10 year at
2.37%, and DoubleLine’s Jeff Gundlach added fuel to the fire by saying the
selling has just started. US Nonfarm payrolls for June showed 222K jobs
created, which is much better than the expected 176K, and the unemployment
rate edged up .1% to 4.4%. European markets are also trading down on Friday,
and US equity futures were flat but turned positive on the jobs number.
LAST
|
CHANGE
|
% CHANGE
|
|
21,320.04
|
-158.13
|
-0.74%
|
|
6,089.46
|
-61.39
|
-1.00%
|
|
2,409.75
|
-22.79
|
-0.94%
|
|
1,400.81
|
-19.33
|
-1.36%
|
|
2,765.03
|
-18.07
|
-0.65%
|
|
Nikkei
225
|
19,929.09
|
-64.97
|
-0.32%
|
UK:
FTSE 100
|
7,341.57
|
4.29
|
0.06%
|
CBOE
Volatility
|
12.40
|
1.33
|
12.01%
|
Australia:
S&P/ASX 200
|
5,703.60
|
-55.20
|
-0.96%
|
3,217.96
|
5.51
|
0.17%
|
|
25,340.85
|
-124.37
|
-0.49%
|
|
Europe
Dow
|
1,778.23
|
0.79
|
-0.03%
|
India:
S&P BSE Sensex
|
31,360.63
|
-8.71
|
0.04%
|
France:
CAC 40
|
5,132.88
|
-19.52
|
-0.38%
|
Germany:
DAX
|
12,349.55
|
-31.70
|
-0.26%
|
Italy:
FTSE MIB
|
20,939.19
|
-145.00
|
-0.69%
|
1.037
|
0/32
|
||
1.419
|
-1/32
|
||
1.95
|
-2/32
|
||
2.382
|
-4/32
|
||
2.91
|
-4/32
|
||
-0.582
|
4/32
|
||
0.58
|
-4/32
|
||
44.28
|
-1.24
|
-2.72%
|
|
46.87
|
-1.24
|
-2.58%
|
|
2.927
|
0.039
|
1.35%
|
|
365.73
|
-5.59
|
-1.50%
|
|
2408.5
|
0
|
0.00%
|
June wage growth continued to disappoint, with average hourly
earnings up just .2% (vs .3% expected) http://bit.ly/WagePuzzle.
Berkshire
Hathaway is in the market again, this time buying Texas electric
transmission company Oncor from Texas utility Energy Future Holdings for $9 billion in
cash and assume another $9 billion in debt. For those of you not
familiar, Energy Future is currently BK and is the result of one of the
worst private equity mega-deals in recent memory involving KKR, TPG, and
Goldman. Berkshire will combine Oncor with their MidAmerican energy
subsidiary. Warren Buffet previously lost almost $900 million on Energy Future
high yield bonds in a rare misstep.
Tesla
stock is down about 20% this week after announcing disappointing quarterly
sales.
Tesla haters are going crazy on Twitter. Meanwhile, Volvo announced
plans to go all electric by 2019, and France is talking about outlawing
gasoline engines in new cars by 2040., and Bloomberg’s energy
consulting arm published a very positive report on electric cars
yesterday http://bit.ly/ECarRev. TSLA also
announced a deal to build the worlds largest utility scale battery installation
in South Australia, at 100 megawatts, which Elon Musk pitched on Twitter
earlier this year. The deal contains an unusual condition that they must finish
it by year end or it’s….free.
Yesterday
I said that North Korea would dominate the agenda at the G20 summit, but that’s
not really correct since the G20 is really about trade and international
cooperation. Expect other nations to pressure President Trump on
climate change, and President’s Trump and Putin will meet in person today
for the first time. Microsoft confirmed rumors of layoffs of several
thousand people in sales, as they look to reorient the business toward
cloud computing. And, in case you are wondering why US oil producers
continue to pump so much oil in a weak, oversupplied market, it may be due to
the very low cost of capital http://bit.ly/WallStreetOil.
Here’s
the news:
|
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Payrolls data for June is
set to be published at 8:30 a.m. Eastern Time -- expectations are for an
increase of 178,000 positions,
with the unemployment rate estimated to have held at 4.3 percent. Yesterday's
ADP data showed fewer workers were added
to U.S. payrolls in the month than in May with an increase of 158,000. With
employment creation remaining a bright spot for the U.S. economy, a positive
report should provide some comfort
for a Federal Reserve still inclined to raise rates and reduce the size of
its balance sheet, according to Mohamed A. El-Erian, chief economic
adviser at Allianz SE.
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Global leaders are
meeting in Hamburg, Germany as divisions over topics including trade, climate change
and North Korea mean
a collegiate atmosphere
is unlikely. As usual with these meetings, the gathering is accompanied by
large scale anti-capitalist protests,
with police using water cannon and pepper spray to break up crowds
yesterday. Follow continuing full coverage of
the event on Bloomberg.
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After yesterday's global bond market rout that saw
German 10-year yields rise about 0.5 percent and
similar-maturity Treasury bond yields climb to 2.37 percent,
government debt is much calmer this
morning. The Bank of Japan may deserve some credit for helping cool the
market after it offered to buy benchmark 10-year notes at 0.11 percent
in its first fixed-rate purchase
operation since February. No bids were tendered for the
operation, with yields on the instrument dropping from 0.105 percent to 0.085
percent after the announcement.
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Overnight, the MSCI
AC Asia Pacific Index lost 0.7 percent,
with Japan's Topix index dropping 0.5 percent
as lenders were hit following the Bank of Japan's bond offer. In
Europe, the Stoxx 600 Index was 0.4 percent lower
at 5:40 a.m. with energy shares sliding to their lowest level since November
as the gauge heads for a fifth week without gains. U.S. equity index futures
are broadly unchanged
as investors await jobs data.
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Industrial
production dropped 0.1 percent in the U.K. in May, and building
output shrank 1.2 percent, surprising economists who had been expecting both
figures to rise. The pound dropped to as low as $1.2913 after the data was
released. There were also more signs that the country's housing market is
cooling, with prices rising at the slowest pace in
four years. British business leaders are meeting the government today to give
advice on how May's administration should navigate Brexit.
It's
jobs day in America. The US economy is expected to have to added 178,000 jobs in
June as the unemployment rate held at 4.3%, according to economists surveyed
by Bloomberg. The report will cross the wires at 8:30 a.m. ET.
Trump
meets Putin. The meeting will take place at 9:45 a.m. ET on the sidelines
of the G-20 summit in Hamburg, Germany.
The
yen got hit as the Bank of Japan went on another buying spree. The currency fell by as
much as 0.6% against the dollar after Japan's central bank said it would buy
an unlimited number of Japanese 10-year notes at a yield of 0.11% while also
increasing the number of 5- to 10-year notes that it would purchase.
Qatar
rejects the Saudi bloc's demands. A statement from Saudi Arabia, the United
Arab Emirates, Bahrain, and Egypt said: "The Qatari government has
thwarted all efforts and diplomatic good offices to resolve the crisis,
reflecting its intention to continue its policy aimed at destabilizing
security of the region."
Silver
flash-crashes. The precious metal crashed to $14.86 from $16 in less than a
minute before recouping the bulk of its losses.
Warren
Buffett is buying an electric-utility giant. Buffett's Berkshire
Hathaway has agreed to pay $9 billion for Energy Future Holdings, a deal that
will eventually hand it the electric-utility giant Oncor.
Qualcomm
is trying to stop Apple from selling some iPhones and iPads in the US. Qualcomm thinks Apple
violated six of its patents and will ask the US International Trade
Commission to stop Apple from selling some iPhones and iPads, Reuters says.
Tesla
loses its crown as the biggest US automaker. The electric-car maker
tumbled into bear-market territory on Thursday and fell below General Motors
in terms of market capitalization.
Samsung
will most likely blow past estimates. The electronics giant
said its operating profit most likely jumped by 72% versus a year ago to 14
trillion won, or $12.11 billion, Reuters reports.
Stock
markets around the world are mostly lower. Hong
Kong's Hang Seng (-0.49%) led the losses in Asia, and France's CAC (-0.32%)
trails in Europe. The S&P 500 is set to open little changed near 2,414.
Clash
of Civilizations
President Trump made a bid Thursday to broaden the nationalist vision he has long embraced, describing the West as locked in a struggle it could lose unless it can “summon the courage” to see it through. Speaking at the site of a memorial to a 1944 Polish uprising against the Nazis, Mr. Trump exhorted the West to recognize the existential peril embodied by terrorists who have struck repeatedly at centers of Western arts and culture. He also sought to provide an intellectual grounding for some of the controversial policies he has pushed since taking office: the travel ban, building a border wall and aggressive actions against illegal immigrants. Thursday’s address had a loftier ring than the president’s address in Saudi Arabia in May, when he said America’s global role should be guided by what he called “principled realism.” Today Mr. Trump will meet for the first time with Russian President Vladimir Putin.
Power
Bill
Warren Buffett’s Berkshire Hathaway is buying one of the country’s biggest power-transmission companies, Texas-based Oncor, cementing electricity as one of the conglomerate’s largest businesses. Berkshire said it will buy Oncor’s bankrupt owner, Energy Future Holdings Corp., for $9 billion in cash. As part of Berkshire, Oncor would expand the portfolio of Greg Abel, the 55-year-old chief executive of Berkshire Hathaway Energy. Mr. Abel is considered a leading candidate to succeed Mr. Buffett as CEO of Berkshire. Oncor is owned by Energy Future, which filed for bankruptcy protection in 2014. Mr. Buffett has dealt with Energy Future before, but his experience with the company wasn’t a success.
Food
Fight
Big Food is in big trouble. For over a century, brands such as Kellogg’s cereal, Campbell’s soup and Aunt Jemima pancake mix filled pantries of American households that wanted safe, affordable and convenient food and provided companies with reliable revenue growth. Today, these giants are struggling with competition that is corroding business from both ends. High-end consumers are shifting toward fresher items with fewer processed ingredients while cost-conscious shoppers are buying inexpensive store brands. The pressure has set off soul searching in the industry as well as some dramatic restructuring. From Kraft Heinz to Nestlé, we explain how the plight of the packaged-goods companies is a classic business tale.
Leaders of the International Monetary Fund, World Bank and World
Trade Organization called upon officials at the Group of 20 summit in Germany
to back policies that would stimulate trade and boost incomes. They said the
economic well-being of billions of people depends on trade. Reuters (06 Jul.),
European Central Bank policymakers are leaning toward moving
very slowly in reducing stimulus to avoid triggering turmoil in financial
markets, according to minutes of the ECB's most recent meeting. Policymakers
said the ECB must exercise "continued caution in communication"
because perception of a move away from stimulus could lead to market
volatility. Reuters (06 Jul.),
Federal Reserve Governor Jerome Powell says US housing finance
reforms must be addressed now, with the ownership of major lenders Freddie
Mac and Fannie Mae still unresolved. While "the status quo may feel
comfortable today ... it is also unsustainable," he says. Reuters (06 Jul.),
Bithumb, South Korea's largest trading venue for bitcoin and
Ethereum, said hackers stole personal data for 30,000 users and significant but
undisclosed amounts of cryptocurrency. The breach is likely to prompt calls
for increased regulation of the sector, of which South Korea is the world's
largest participant. Finance Magnates (06 Jul.)
The dramatic expansion of e-commerce has created hundreds of
thousands of jobs, but that doesn't come close to making up for the jobs lost
at small shops, department stores, grocery stores and warehouse clubs. The
growth of online sales does little to boost job creation because e-commerce
retailers require far fewer employees than traditional retailers. The New York Times (free-article access for SmartBrief
readers) (06 Jul.)
France's government has proposed a ban on the sale of new cars
powered by gasoline and diesel engines by 2040 as part of an effort to depend
less on fossil fuels. France's major automakers, Renault and Peugeot-Citroen,
applauded the proposal. Deutsche Welle (Germany)/Agence France-Presse/Deutsche
Presse-Agentur/The Associated Press (07 Jul.)
Smart-beta funds are making a comeback. Of the 108 ETFs brought
to market so far this year, 53% employ smart-beta strategies in their
selection of investments, compared with 50% a year earlier. ETF (06 Jul.)
France's government has proposed a ban on the sale of new cars
powered by gasoline and diesel engines by 2040 as part of an effort to depend
less on fossil fuels. France's major automakers, Renault and Peugeot-Citroen,
applauded the proposal.
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Source:
Bloomberg, BI, WSJ, CFAI Fin. Newsbrief, Financial Magnates, Reuters, Deutsche
Welle, NYT
posted by Rich Barnett @ 7:13 AM
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