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[Markets] Dow Adds 139 Points on a Day Tesla Underwhelms The Dow Jones Industrial Average added 0.54% to close at 25,848.87. The S&P 500 rose 0.50% to end at 2822.43, and the Nasdaq Composite gained 0.76% to close at 7688.53. Published:3/15/2019 4:30:23 PM
[Markets] Dow ends up over 100 points as major indexes notch weekly gains Dow ends up over 100 points as major indexes notch weekly gains Published:3/15/2019 3:30:15 PM
[Markets] Treasuries Flash An "Ominous Sign" As Stocks Surge

With both the Dow, and the broader market saved - for now - from an embarrassing Quad Witch slump by news that Boeing is set to roll out a software upgrade for its 737 MAX airplanes (how a software update will fix what many now see as a hardware issue is unclear, nor is it clear how Boeing effectively admitting guilt for the death of hundreds of people which will unleash billions in lawsuits is bullish), bond yields will have none of it and as we showed earlier, the buying ramp across asset classes is the latest confirmation that equities are not trading on fundamentals (as bonds price in the continued deterioration in the US economy), but merely frontrunning QE4.

That trade got a boost today after industrial production for February disappointed consensus at 0.1% MoM vs. 0.4% survey and -0.4% in January. Meanwhile, manufacturing production contracted for the second straight month despite forecasts of slight expansion, declining -0.4% MoM. This brings capacity utilization back to its lowest level since last July, having declined three straight months (and four of the last five).

The data comes on the back of another miss in the form of Empire manufacturing for March, which disappointed at 3.7 vs. 10.0 survey and 8.8 prior, which to BMO portends "potential weakening more broadly in the manufacturing sector through Q1 despite the loosening of financial conditions that has occurred since December." All in all, as BMO's rate strategist Jon Hill noted "a variety of disappointing releases which will continue to push yields lower."

And speaking bizarre moves during "Freaky Friday", shortly after the data was released, and the resultant tumble in yield, 3- and 5-year yields inverted modestly vs. fed funds, which according to Hill, was "a self-evident ominous sign."

The last time 3s and 5s dipped below the Fed Funds was at the start of the year, when the VIX soared and equities tumbled. The big difference now is that not only is the VIX plunging, but the S&P is now rapidly approaching the all time highs hit last September.

Finally, and the latest divergence observed today between risk free assets and safe havens is that today's 10-year yields tumbled to the lowest levels since the beginning of the year, with the post-CPI intraday bottom now breached.

In short: just as another BMO strategist, the bank's chartiest Russ Visch noted on Wednesday, "the bond market certainly hasn't been buying into this week's strength in equity markets either. The divergence between the S&P 500 and the U.S. 2-year yield (which have traded in lockstep for many months now) is only getting worse."

His question, and perhaps the only question that matters "Who has it wrong here? Bonds or equities?"

The answer will determine what happens after today's quad witch is over.

Published:3/15/2019 12:00:35 PM
[Markets] Stocks Waver Amid Signs of Progress in U.S.-China Trade Talks, Boeing Falls Stocks are mixed Friday amid hopes the U.S. and China are making progress on a trade pact. Boeing remains a drag on the Dow Jones Industrial Average. Published:3/15/2019 10:30:00 AM
[Markets] Boeing Shares Spike On Software-Upgrade Headlines

Boeing shares have rebounded into the green this morning after AFP reports, citing sources, that Boeing is set to roll out software upgrade for 737 MAX stall prevention in 10 days.

But some context for the bounce is needed...

And as goes Boeing, so goes The Dow...

Published:3/15/2019 10:30:00 AM
[Markets] Dow Dumps Into Red As Quad-Witch-Bid Fades

The opening panic-bid in stocks is fading as various quad-witch expirations (and market maker pinning) losses its control.

Dow futures are down 200 points from their pre-open highs...

Nasdaq remains the outperformer...

All as bond yields plunge to 2019 lows...

Published:3/15/2019 9:30:47 AM
[Markets] Dow futures set sights on best weekly performance in a month Dow futures set sights on best weekly performance in a month Published:3/15/2019 7:28:42 AM
[Markets] BioScrip to merge with Option Care, owned by Walgreens and Madison Dearborn BioScrip Inc. announced Friday a deal to merge with privately held Option Care Enterprises Inc., a provider of home and alternate treatment site infusion therapy services owned by funds affiliated with Walgreens Boots Alliance Inc. and private-equity firm Madison Dearborn Partners LLC (MDP). BioScrip's stock is halted for news until 7:30 a.m. Eastern. Under terms of the agreement, BioScrip will issue new shares to Option Care's shareholder and Walgreens and MDP will own about 80% of the combined publicly traded company. BioScrip's market capitalization was about $446.9 million as of Thursday's close. "This is a compelling and complementary fit of two leading players in the U.S. infusion market," said BioScrip Chief Executive Daniel Greenleaf. "Together, we will be able to provide a diverse set of life-improving and cost-effective services to more patients across the United States." BioScrip's stock has rallied 31% over the past 12 months, while the SPDR Health Care Select Sector ETF has gained 6.9% and the Dow Jones Industrial Average has tacked on 3.4%. Published:3/15/2019 6:27:46 AM
[Markets] ETFs are compounding the divergence between the Dow and the Nasdaq-100 A divergence has recently taken place between the Dow Jones Industrial Average and the Nasdaq 100, and it was compounded by the popularity of market-based ETFs. Investors should be aware of, and prepare for, similar nuances related to ETFs in the future. The Dow is comprised of only 30 stocks, and that makes it vulnerable to big declines when one stock, like Boeing, moves down so much so quickly. Published:3/14/2019 8:26:01 PM
[Markets] The Dow Rises 7 Points Despite More Signs of a China Slowdown The Dow Jones Industrial Average added 0.03% to close at 25,709.94. The S&P 500 fell 0.09% to end at 2808.48, and the Nasdaq Composite slipped 0.16% to close at 7630.91. Published:3/14/2019 4:56:06 PM
[Markets] Stocks Start Slide Back To Bond Market Reality As Quad-Witch Looms

Seemed appropriate:

 

Dismal China data overnight did not help the fact that China's 'National Team' appears to have abandoned investors...

 

European markets extended gains on the day (except DAX was unchanged)...

 

US equity markets were broadly lower on the day with some last-hour rally monkeys rescuing The Dow briefly but a weak close sent everything lower( but a last second spurt of buying held The Dow green on the day)...

 

S&P futures show a series of lower lows and lower highs today...

 

It appears the short-squeeze ammo has run out ahead of tomorrow's quad witch...

 

 

And before we move on to bonds, here is the 'seasonality' of the March Quad Witch - next week looks set to be less-than-pretty...

 

It remains a long way for stocks to fall back to bond market reality...

 

The compression of VIX and Credit spreads has stalled...

 

Treasury yields were largely unchanged across the curve once again today, but we do note the long-end saw some notable underperformance...

 

With 30Y Yields bouncing off the 3.00% level...

 

The market is pricing in 14.5bps of rate-cuts in 2019 - the most dovish since the crash at the start of the year...

 

And finally in rate land, the probability of a rate cut in Jan 2020 is now at its highest level since Dec...

 

The Dollar rebounded higher today after 4 straight days lower...

 

Cable slid after the vote in "sell the news" style action...

 

Cryptos were very noisy today...

 

The dollar strength weighed on PMs today as Copper slid on weak China...

 

WTI managed more gains today, after an early dip, but traded in a very tight range around $58.50 for much of the afternoon...

 

And gold fell back below the $1300 level...

 

Finally, we wonder what happens next week as the momentum-chasing muppets of Quad-Witch evaporate...

Published:3/14/2019 3:23:55 PM
[Markets] Stock market ends mostly lower as Sino-American trade worries keeps Wall Street buying appetite in check U.S. stocks edged mostly lower Thursday as declines in communications services, materials and materials offset gains in financials and technology. The Dow Jones Industrial Average , however, managed to eke out a modest gain, rising by about 7 points, or less than 0.1%, to finish at 25,710, as a decline in Boeing Co. , weighed on the blue-chip index. Meanwhile, the S&P 500 index lost 0.1% to 2,808, but managed to hold on to a psychologically significant level at 2,800, despite the retreat. On Wednesday, the broad-market index closed at that level for the first time since March 1. The Nasdaq Composite Index closed down by about 0.2% at 7,630. All three benchmarks are no track for sharp weekly gains. Still, reports that raised some doubts about progress in Sino-American trade negotiations weighed on Wall Street, keeping the buying mood in check. Bloomberg News reported that a meeting on trade between President Donald Trump and Chinese President Xi Jinping was being pushed back to April rather than later this month. On top of that, sluggish Chinese economic data hurt sentiment to start the session, with official data from Beijing showing that industrial output slowed more than expected in January and February, adding to concerns that the world's second-biggest economy is slowing down. In corporate news, social-media giant Facebook Inc. saw its shares fall nearly 2%, after the New York Times reported that a grand jury was undertaking a criminal investigation into the social-media platform's data-sharing practices. Meanwhile, the U.K. Parliament voted to request an extension of the March 29 Brexit deadline, as expected. Boeing Co. shares fell 1% as the aviation and defense contractor continued to be buffeted by the worldwide grounding of its 737 Max jet fleet. Published:3/14/2019 3:23:55 PM
[Markets] Dow Hits a New Bull-Market Breadth Record as More Stocks Are on the Rise The market rally this year has been supported by record strong breadth—meaning a large share of stocks are moving in the same direction as the market does—leading the Dow Jones Industrial Average to a new breadth-related high today. The higher the line reaches, the longer and stronger the current market breadth is. Although (BA)’s (BA) decline in the aftermath of the Ethiopian Airlines crash has put a lid on the Dow’s price, the 29 other stocks in the index remain strong this week. Published:3/14/2019 11:23:14 AM
[Markets] Apple stock gains after Morgan Stanley sees signs of iPhone stabilization in China Shares of Apple Inc. rallied 0.7% in morning trade Thursday, bucking the broader weakness in the stock market, after Morgan Stanley analyst Katy Huberty's bullish call, citing early signs of iPhone stabilization in China. Huberty reiterted her overweight rating and $197 stock price target, saying she is now "positively biased" on Apple's fiscal second-quarter ending this month. She said first and most important, despite a Chinese smartphone market that remains weak, Apple gained share of the installed smartphone base in January and February after losing share in December. "Second, February was the first month in half a year that our Asia team didn't revise iPhone builds lower..., implying the most significant supply chain cuts are likely behind us," Huberty wrote in a note to clients. She also said data suggests near-term iPhone estimates have "overshot" on the downside and replacement cycles have converged with PCs and are expected to stabilize. The stock has climbed 10.6% over the past three months, while the Nasdaq Composite has advanced 10.5% and the Dow Jones Industrial Average has gained 6.6%. Published:3/14/2019 10:24:27 AM
[Markets] The Twenty Craziest Investing Facts Ever

Authored by Michael Batnick via TheIrrelevantInvestor.com,

1. Since 1916, the Dow has made new all-time highs less than 5% of all days, but over that time it’s up 25,568%.
95% of the time you’re underwater. The less you look the better off you’ll be.

2. The Dow has compounded at less than 3 basis points a day since 1970. Since then its up more than 3,000%.
Compounding really is magic.

3. The Dow has only been positive 52% of all days. The average daily return is 0.73% when it’s up and -0.76% when it’s down.
See above.

4. The Dow has spent more time 40% or more below the highs than within 2% of the highs (20.6% of days vs. 18.4% of days)
No pain no gain.

5. The Dow gained 38 points in the 1970s
See above.

6. Why am I using the Dow instead of the S&P 500? They’re effectively the same thing. The rolling one-year correlation since 1970 is .95.
Stop wasting your time on this.

7. At the low in 2009, U.S. stocks were back to where they were in 1996.
Stocks for the long-run. The very long-run. Usually. Sometimes.

8. At the low in 2009, Japanese stocks were back to where they were in 1980.
See above.

9. U.S. one-month treasury bills went 68 years with a negative real return.
What’s safe in the short-run can be risky in the long-run.

10. At the bottom in 2009, long-term U.S. government bonds outperformed the stock market over the previous 40 years
Stocks generally outperform bonds, but there are no guarantees.

11. Gold and the Dow were both 800 in 1980. Today Gold is $1,300/ounce, the Dow is near 26k.
Cash flows > commodities.

12. Over the last twenty years, Gold is up 340%. Stocks are up 208%, with dividends.
You can support any argument by changing the start and end dates.

13. Since 1980, Gold is up 153%. Inflation is up 230%.
See above.

14. CTAs gained 14% in 2008 when stocks lost 37%. Since 2009 they’re up 2.5%. Stocks are up 282%.
Non-correlation cuts both ways.

15. If you had invested from 1960-1980 and beaten the market by 5% each year, you would have made less money than if you had invested from 1980-2000 and underperformed the market by 5% a year (A Nicky Numbers Special)
When you were born > almost everything else.

16. The Dow lost 17% in 1929, 34% in 1930, 53% in 1931 and 23% in 1932.
Be grateful.

17. Warren Buffett is the greatest investor of all-time. In the 20 months leading up to the dotcom peak, Berkshire Hathaway lost 45% of its value. The NASDAQ 100 gained 225% over the same time.
No pain no premium.

18. 96% of U.S. stocks generated a life-time return that match one-month treasury bills.
The reason why so many mutual funds fail to beat the market is because so many stocks fail to beat the market.

19. Dow earnings were cut in half in 1908. The index gained 46%.
The stock market ? the economy.

20. In 1949 the stock market was trading at 6.8x earnings and had a 7.5% dividend yield. 50 years later it reached a high of 30x earnings and carried just a 1% dividend yield.
You can calculate everything yet still not know how investors are going to feel

Published:3/14/2019 8:54:49 AM
[Markets] Stock Futures Edge Up As Apple Jumps, J&J Takes A Hit Apple was out front alongside several fast-rising IPO stocks on Thursday, as stock futures traded held tight gains and Dow Jones stock Johnson & Johnson fell hard. Published:3/14/2019 7:53:47 AM
[Markets] S&P Futures Slide, Global Rally Pauses As Trade Deal Optimism Fizzles

Having risen to session highs on the back of fresh global optimism over trade, a delay in Brexit and fresh hopes for a "goldilocks" economy (while ignoring China's worst Industrial Production print on record), US equity futures slumped on Thursday as America and China were reportedly set to push back a key meeting on trade. European stocks trimmed an advance on the news, but remained higher while the pound fell as the Brexit saga rumbled on.

Following the meeting delay report, S&P futures tumbled from a loss to a gain while Treasuries pared a drop, the dollar gained and the yuan dropped.

Major European indices remained in positive territory, initially following the positive sentiment on Wall Street where the S&P 500 finished at a 5-month high and above the key 2800 level, although indices have since fallen off sharply from session highs following the previously noted report that the meeting between US President Trump and Chinese Premier Xi is delayed to at least April.  European miners fell with the Stoxx Europe 600 basic resources index sliding as much as 0.8%, as metals slide on the weak Chinese industrial data reported overnight, and after the U.S. and China were said to push back a key meeting on trade. Chinese economic data published this morning are “putting the brakes on the rise in metals prices,” Commerzbank analysts wrote: “China’s industrial production has lost momentum more significantly than expected. Although fixed-asset investments increased slightly, they remain at a low level.”

Earlier, Asian stocks were initially higher across the as the region took early impetus from the US, where sentiment was underpinned by favorable data and a pre-quad witching surge, although the risk tone was eventually clouded as participants digested another round of disappointing Chinese data.

As noted last night, this is how China's February's data dump looked like:

  • China Industrial Production YoY MISS +5.3% vs +5.6% exp and +6.2% prior
  • China Retail Sales YoY MEET +8.2% vs +8.2% exp and +9.0% prior
  • China Fixed Asset Investment YoY MEET +6.1% vs +6.1% exp and +5.9% prior
  • China Property Investment YoY BEAT +11.6% vs +9.5% prior
  • China Surveyed Jobless Rate WEAKER 5.3% vs 4.9% prior

This was the weakest Industrial Production growth since March 2009 and Retail Sales growth was hovering near its weakest since May 2003. But perhaps the most worrisome for Chinese officials is the surge in the surveyed jobless rate to 5.3%, the highest since Feb 2017. Elsewhere, the ASX 200 and Nikkei 225 was unchanged with energy the outperformer in Australia after oil prices hit their best levels since November, while SoftBank shares were among the top gainers in the Japanese benchmark after reports it is in discussions regarding a USD 1bln investment into Uber’s self-driving unit. Chinese markets instigated a turnaround but with the downside in the Hang Seng (+0.1%) limited by notable strength seen in China’s oil majors and as China Unicom rallied post-earnings, while Shanghai Comp. (-1.2%) underperformed and fell below the 3000 level following mixed data with Retail Sales inline with expectations and Industrial Production at a 17-year low.

Emerging-market currencies and shares edged lower.

Summarizing recent price action, Bloomberg notes that investors have a lot to grapple with just now. U.S. stocks have extended gains this week as economic data comes in neither too hot nor too cold, while traders in Europe on Thursday seemed to be shrugging off more warning signs from the region - perhaps because of hopes Brexit can be delayed or derailed. Figures suggesting China’s slowdown deepened in the first two months of the year added to reasons for caution following this quarter’s rebound in Asian shares.

In geopolitical news, the US announced plans to test-launch missiles later this year after President Trump recently pulled out of the Nuclear Force Treaty. Separately, the US Senate voted 54-46 to end US support for the Saudi-led war in Yemen.

In FX, the Bloomberg Dollar Spot Index snapped four days of declines as Treasury yields edged higher. The pound fell ahead of another vote in the U.K. House of Commons where lawmakers will decide on whether to delay Brexit.  The yen fell the most in two weeks and, falling against all G-10 peers, as traders positioned themselves ahead of the Bank of Japan’s policy decision on Friday, with some speculation that the central bank may turn slightly more dovish. Australian and New Zealand dollars slid after downbeat China data combined with falling short-end rates weighing on sentiment.

European sovereign debt was mixed as Germany said the economy likely to grow moderately in first quarter. 

Elsewhere, oil prices slipped after touching a four-month high following reports that a Trump-Xi summit may be delayed until April vs. prior expectations of an end-March summit. As such WTI and Brent futures fell back into their respective one-month long range of around USD 3.50/bbl. This summit push-back has however been touted for a while as USTR Lighthizer recently noted that sticking points remain in talks

Expected data include jobless claims and new home sales. Dollar General, Adobe, Broadcom and Oracle are among companies reporting earnings.

Market Snapshot

  • S&P 500 futures up 0.1% to 2,822.75
  • STOXX Europe 600 up 0.4% to 377.02
  • MXAP down 0.3% to 157.79
  • MXAPJ down 0.2% to 521.60
  • Nikkei down 0.02% to 21,287.02
  • Topix down 0.2% to 1,588.29
  • Hang Seng Index up 0.2% to 28,851.39
  • Shanghai Composite down 1.2% to 2,990.69
  • Sensex down 0.06% to 37,731.10
  • Australia S&P/ASX 200 up 0.3% to 6,179.59
  • Kospi up 0.3% to 2,155.68
  • German 10Y yield rose 2.3 bps to 0.088%
  • Euro up 0.01% to $1.1328
  • Italian 10Y yield rose 1.2 bps to 2.197%
  • Spanish 10Y yield fell 0.2 bps to 1.186%
  • Brent futures up 0.8% to $68.09/bbl
  • Gold spot down 0.5% to $1,302.26
  • U.S. Dollar Index up 0.1% to 96.65

Top Overnight News from Bloomberg

  • The pound climbed to its highest level since June after Parliament on Wednesday evening rejected leaving the EU after 46 years without an agreement in place to keep trade flowing. Legislators will now vote on a postponement to the current March 29 deadline
  • A gauge of trader positioning from Citigroup Inc. shows short bets on sterling at their highest levels since December and the bearish wagers are set to rise even further, according to market participants
  • China’s economic slowdown deepened in the first two months of the year as industrial output rose 5.3 percent from a year earlier, versus 5.6 percent forecast by economists
  • Gary Cohn, the former head of President Donald Trump’s National Economic Council, said the U.S. is “desperate right now” for a trade pact with China as negotiators from both countries seek to reach a deal
  • U.K. derivatives clearing houses would face tighter post-Brexit scrutiny from European Union regulators if they want to keep doing business in the bloc under an agreement announced by EU negotiators on Wednesday
  • Royal Institution of Chartered Surveyors said its headline price index fell for a fifth month in February, dropping to the lowest level since 2011, as uncertainty caused both buyers and sellers to hold off on property deals in the U.K.
  • Oil held its advance to the highest level this year as a decline in U.S. crude and fuel stockpiles added to evidence of a tightening market
  • A delay to Brexit this week may be better than the alternatives, but that’s cold comfort for the U.K. economy. While a vote Thursday is likely to buy time for an orderly divorce, that would hurt, too, by prolonging the uncertainty for businesses and consumers
  • Data showed that China’s economic slowdown deepened with industrial output having its worst start to a year since 2009 and retail sales expanding at the slowest pace since 2012; the unemployment rate jumped to 5.3% in February from 4.9% in December, the highest level in two years. On the upside, fixed-asset investment accelerated and property investment jumped

Asian stocks were initially higher across the as the region took early impetus from the US, where sentiment was underpinned by favourable data. This saw all US major indices finish positive with the S&P 500 at a 4-month high and in turn spurred the momentum in Asia, although the risk tone was eventually clouded as participants digested Chinese data. ASX 200 (+0.3%) and Nikkei 225 (U/C) both gained at the open with energy the outperformer in Australia after oil prices hit their best levels since November, while SoftBank shares were among the top gainers in the Japanese benchmark after reports it is in discussions regarding a USD 1bln investment into Uber’s self-driving unit. Chinese markets instigated a turnaround but with the downside in the Hang Seng (+0.1%) limited by notable strength seen in China’s oil majors and as China Unicom rallied post-earnings, while Shanghai Comp. (-1.2%) underperformed and fell below the 3000 level following mixed data with Retail Sales inline with expectations and Industrial Production at a 17-year low. Finally, 10yr JGBs were lacklustre amid upside in Tokyo stocks and as the BoJ began its 2-day policy meeting, although there was a different picture in the longer-end as both 20yr and 30yr JGB yields fell to November 2016 lows.

Top Asian News

  • China Insiders Are Selling Stakes After Mammoth Equity Rally
  • Hedge Fund Sees China’s Distressed Debt Generating Juicy Returns
  • UBS Said Fined About $48 Million Over Work on Hong Kong IPOs
  • StanChart Loses Two Top India Bankers Amid Turn-Around Efforts

Major European indices are in positive territory [Euro Stoxx 50 +0.2%] initially following the positive sentiment on Wall Street where the S&P 500 finished at a 5-month high and above the key 2800 level; although indices have fallen off sharply off of session highs following reports that the meeting between US President Trump and Chinese Premier Xi is delayed to at least April. While this has been seen as a potential outcome for a while markets were still taken by surprise hence the significant drop from session high. Sectors have strengthened throughout the session to all being firmly in the green, after a somewhat mixed start to the session for sectors; with IT names the initial notable laggard. Notable movers include K+S Group (+7.3%) at the top of the Stoxx 600 after their FY18 EBITDA beat on expectations, alongside the Co. presenting strong EBITDA guidance for 2019. At the bottom of the Stoxx 600 are Lufthansa (-5.3%) after the Co. cut its growth plans as higher fuel costs weighed on earnings. Elsewhere, RWE (+0.3%) shares have been volatile since opening lower by around 2% after the Co. posted earnings below expectations, the turnaround in shares may be due to the Co. stating that they are confident the timetable for a E.ON (-0.1%) deal can be adhered to, after highlighting a potential delay to it in the event of a hard Brexit.

Top European News

  • Keep Hedging for U.K. Downside Risks, UBS Wealth Says
  • Short Bets on Pound Jump to Most This Year on Brexit Chaos
  • Brexit Impasse Sees U.K. Property Price Index Drop to 7-Year Low
  • Ifo Institute Slashes Forecast for German 2019 Growth to 0.6%

In FX, there was some respite for the Dollar and index after Wednesday’s relatively sharp sell-off, as the steeper reversal from recent 97.000+ highs stopped at the 96.371 level that coincides with technical support on some charts. However, the rebound was at least partly if not mainly due to external factors with several major counterparts undermined bearish impulses or running out of bullish momentum in the case of Sterling. The DXY is just shy of a recovery high inches above 96.750, and the 30 DMA at 96.602 could be key in terms of a firmer rebound or fade before another leg down towards the next downside technical level ahead of 96.000, which comes in at 96.283.

  • AUD/NZD/GBP/JPY - It’s a 4-horse race to avoid being last G10 currency to Thursday’s (EU session) finishing post, as the Aussie is undermined by data again, albeit Chinese this time rather than domestic, and fresh reports about a delay to the eagerly awaited Trump-Xi Summit to sign off a trade pact. Aud/Usd has slipped back further from near 0.7100 at one stage to 0.7050 and the Kiwi in sympathy with Nzd/Usd now around 0.6817 vs 0.6865 at best. Meanwhile, the Pound has pulled back following another Brexit-related spurt that catapulted Cable to circa 1.3340 before a retreat through 1.3300 to 1.3250. Sterling got an extra boost from the 2nd UK Parliamentary vote this week that saw a no deal in any guise rejected by MPs, in principle at least. Attention now turns to an extension of the March 29 Article deadline, and the strong prospect of that being approved has prompted PM May to tentatively schedule a 3rd MV sometime before next week’s EU Summit. Elsewhere, Usd/Jpy has backed off from circa 111.73 overnight peaks on the aforementioned breaking US-China news, but the headline pair remains above a key chart level in the form of the 200 DMA (111.43) and could be prone to further upside if the BoJ is as dovish as expected tomorrow, or even more. Note, for a full preview of the impending policy meeting please refer to the Ransquawk Research Suite.
  • CHF/EUR/CAD - All holding up better against the Buck revival, as the Franc hovers close to the top of a 1.0050-30 range and perhaps finds some traction from firmer than forecast Swiss import/producer prices (albeit still deflationary in y/y terms). Meanwhile, the single currency is keeping its head above 1.1300, marginally, but shy of Fib resistance (1.1327 represents a 38.2% retracement of this year’s 1.1570-1.1177 move) after another hefty 2019 German GDP forecast downgrade (0.6% from 1.1% per Ifo) and the Loonie is back below 1.3300 vs its US rival against the backdrop of toppy oil prices and ahead of Canadian house price data then a speech from BoC’s Wilkins.

In commodities, WTI (-0.2%) and Brent (-0.1%) futures have slipped following reports that a Trump-Xi summit may be delayed until April vs. prior expectations of an end-March summit. As such WTI and Brent futures fell back into their respective one-month long range of around USD 3.50/bbl. This summit push-back has however been touted for a while as USTR Lighthizer recently noted that sticking points remain in talks. Elsewhere, Iraqi Energy Minister emerged on the wires stating that the nation will decrease crude exports to average 3.5mln BPD from USD 3.62mln BPD in order to comply with OPEC’s output curbs. The metals market is largely on the backfoot amid a pick-up in the USD wherein the yellow metal breached USD 1300/oz to the downside. Gold is now back below its 50 DMA at 1303/oz ahead of its 100 DMA at 1271/oz. Elsewhere, copper erased its three-day gains amidst a firmer Buck couple with a turnaround in risk sentiment after the Trump-Xi meeting. US is seeking to reduce Iran oil sales by about 20% to below 1mln bpd from May and is likely to renew sanctions waivers to Iranian oil buyers but could deny waivers to countries not using them, according to sources. CME lowered COMEX 5000 silver futures margins by 8.4% to USD 3300 per contract and lowered COMEX copper futures margins by 11.1% to USD 2400 per contract.

US Event Calendar

  • 8:30am: Import Price Index MoM, est. 0.3%, prior -0.5%;
  • 8:30am: Export Price Index MoM, est. 0.1%, prior -0.6%
  • 8:30am: Initial Jobless Claims, est. 225,000, prior 223,000, Continuing Claims, est. 1.76m, prior 1.76m
  • 9:45am: Bloomberg Consumer Comfort, prior 62.1
  • 10am: New Home Sales MoM, est. 0.16%, prior 3.7%; New Home Sales, est. 622,000, prior 621,000

DB's Jim Reid concludes the overnight wrap

Maybe the next piece should be “How to fix Brexit... and why it matters”. The first part might be more difficult to write then the second. Last night’s Parliament voted 321-278 to reject a no-deal Brexit under all circumstances. This was an amended motion that was stronger than the government wanted and hence they instructed MPs to vote against it. So in effect they lost again with the government’s authority is some disarray. I would note that this is the same government who are 10pp ahead in the latest opinion polls though. In response, Mrs. May has tabled a motion for today that effectively says that if Parliament can agree a deal by March 20th (next Wednesday and on the eve of the EU summit) she’ll ask for an extension to June 30th. If no deal is agreed she suggested an extension could be much longer as the EU will insist on it (assuming they allow one at all). So the stakes are raised and the likelihood of MV3 coming back next week is high. I’m not sure there is any time or consensus for an alternative plan to be ready by then but watch out for attempts and watch out for any amendments today that could complicate this timeline.

Sterling rallied ahead of, during, and after the vote, gaining +2.01% versus the dollar (-0.7% this morning but still up 3 cents from this week’s lows) to reach its highest level since last June. The chances appears to have increased materially for a more positive outcome. Either May’s deal or an even softer version will eventually pass, or Article 50 will be extended for a long period. The threat of the latter scenario, where Brexit might be deferred indefinitely, could be enough of a discouragement to entice the hard Brexit wing of the Conservative party to support May’s deal. However it’s fair to say that they are angry at the moment and their next steps are unpredictable.

In what feels like another planet, the rally for risk this week continues. Anyone that remembers the 1990s band Chumbawamba’s big hit will know of a good soundtrack to the recent resilience. The S&P 500 (+0.70%) rose for a third consecutive day yesterday and has now wiped out last week’s losses and is back above the 2,800 level for the first time since March 1st and to the highest close since 7 November. 2,800 has proven to be a level that the S&P has failed to hold above in recent months, but the index is back to within 4.5% of those September all-time highs now. The index did dip -0.36% off its intraday high late in the session however, after President Trump said that he is in no rush to complete a trade deal with China. Elsewhere even the DOW (+0.58%) climbed yesterday as Boeing shares finished slightly higher – notwithstanding a +/-4.83% intraday range after the US and Canada joined Europe in grounding the 737 Max plane – following two heavy day declines on Monday and Tuesday. The NASDAQ was +0.69% while in Europe the STOXX 600 ended +0.63% and is back above the levels seen before the ECB last week and just about level with its YTD high. European Banks also closed +1.59% (still below ECB meeting levels) with bond yields up 1-2bps in Europe and +0.7bps for Treasuries. Oil rose +1.50% after US data showed another larger-than-expected drawdown in crude inventories. Usually, inventories build during the winter and are reduced during the summer, but they fell by -3.86mn barrels last week.

In Asia this morning markets are trading lower with China’s bourses leading declines due to mixed economic data releases. The Shanghai Comp (-1.09%), CSI (-0.48%) and Shenzhen Comp (-2.39%) are all lower along with the Hang Seng (-0.14%) and Kospi (-0.28%) while the Nikkei (+0.24%) is up. Elsewhere, futures on the S&P 500 are down -0.12% and all G-10 currencies are trading weak (-0.1% to -0.7%) this morning. Overnight, we saw China’s February economic data dump which presented a mixed bag for the economy with YtD industrial output (at +5.3% yoy vs. +5.6% yoy expected) marking the slowest start to the year since 2009. The unemployment rate (at 5.3% vs. 4.9% in December) rose to the highest since February 2017 and YtD retail sales came in line with expectations at +8.2% yoy, marking the slowest pace of growth since 2003. On the other hand, China’s YtD fixed asset investment came in line with consensus at +6.1% yoy (vs. 5.9% in last month) and YtD property investment jumped to 11.6% (vs. 9.5% in last month).

So China data is taking a shine off things but US data seems to be bouncing back with more evidence yesterday. Most notably, the January durable and capital goods orders data beat and painted a reasonable picture for Q1 capex so far. Core capex orders were up a lot more than expected (+0.8% mom vs. +0.2% expected), as were shipments (+0.8% mom vs. -0.2% expected). We should note that the data tends to be a bit volatile however and subject to big swings so best to look across months. Also, the January construction spending print was up a better than expected +1.3% mom (vs. +0.5% expected).

In contrast, albeit helping the carry trade, the February PPI print disappointed coming in at +0.1% mom for the core (vs. +0.2% expected). That said the healthcare component printed at a solid +0.25% which therefore helps the healthcare component of the PCE, although it was somewhat offset by other components which feed into the PCE, such as a -3.5% drop in airfares. So a mixed report.

In the UK yesterday we had the Spring Statement. Unsurprisingly it played second fiddle to all things Brexit related with the highlights being a £3bn improvement in the public sector net borrowing for the 2018-19 fiscal year. Stronger revenues from corporate and income taxes have been the key driver so far, though lower interest rates have also reduced borrowing costs. In a vacuum, this would reduce gilt issuance forecasts and would be bullish, but of course the outlook and price action is going to be mostly swamped by Brexit dynamics.

To the day ahead now, where the non-Brexit events this morning include final February CPI revisions in Germany and France, followed this afternoon by the February import price index print, latest weekly initial jobless claims, January trade balance and January new home sales. The ECB’s Coeure is due to speak in Milan and EU ambassadors meet.

Published:3/14/2019 6:56:13 AM
[Markets] S&P 500 Rises to Hit Five-Month High The Dow Jones Industrial Average rose 148.23 points, or 0.58%, to close at 25,702.89. The S&P 500 gained 19.40 points, or 0.69%, to end at 2810.92, a closing level not seen since November, and the Nasdaq Composite added 52.37 points, or 0.69%, to 7643.41. Published:3/13/2019 4:48:24 PM
[Markets] The Global Economic Reset Begins With An Engineered Crash

Authored by Brandon Smith via Alt-Market.com,

For a few years now, since at least 2014, the phrase “global economic reset” has been circulating in the financial world. This phrase is used primarily by globalist institutions like the International Monetary Fund (IMF) to describe an event in which the current system as we know it will either die out or evolve into a new system where “multilateralism” will become the norm. The reset is often described in an ambiguous way. IMF banking elites will usually mention the end results of the shift, but they say little about the process to get there.

What we do know is that the intent of the globalists is to use this reset to create a more centralized monetary system and micro-managed global economy. At the core of this new structure would be the IMF along with perhaps the BIS and World Bank.  It is a plan that has been supported openly by both western and eastern governments, including Russia and China.

As noted, the details are few and far between, but the IMF describes the use of open borders and human migrations during the reset as a means to transfer capital from various parts of the world. It is a novel if not utterly insane way to transfer wealth that only makes sense if you understand that the globalist goal is to deliberately conjure a geopolitical catastrophe.

The IMF also asserts that blockchain technology will make capital transfer easier and more efficient in this future environment, which explains the enthusiastic globalist support for developments in blockchain technology and cryptocurrencies despite the notion in cryptocurrency circles that blockchain would somehow make the bankers “obsolete”.

The IMF also acknowledges that in the meantime a slowdown in capital flows has occurred, and that this slowdown is ongoing since the crash of 2008. What they do not explicitly admit is that the crash of 2008 never ended, and that the decline we are witnessing today is merely an extension of the recession/depression that started ten years ago.

Certain facts have become obvious to anyone with any sense over the past year. First, as the Federal Reserve began tightening stimulus policies by raising interest rates and cutting assets from their balance sheet, the global economy began to return to steep declines not seen since the credit crisis. I predicted this outcome in my article 'Party While You Can – Central Bank Ready To Pop The Everything Bubble', published in January of 2018. The plunge has started in almost every sector of the economy, from housing, to autos to credit markets to retail. Now, even jobs, numbers which are highly manipulated to the upside, are beginning to falter.

The assertion in the mainstream media is that this recessionary downturn is new. This is not the case. What began in 2008 was an epic implosion of multiple national economies, and what we are seeing in 2019 is the final culmination of that process - The end game.

It is not a coincidence that the downturn started right after the Fed began tightening stimulus measures in 2017. With only a minor increase in interest rates and moderate cuts to their balance sheet, all the conditions the economy suffered in 2008 are suddenly returning. What this tells us is that the US economy and parts of the global economy cannot survive without constant and ever expanding central bank stimulus.

The moment the stimulus goes away, the crash returns.

Does this mean that central banks will try to keep QE going forever? No, it does not. So far, the Fed has not capitulated at all from the path of tightening. In fact, the Fed nearly doubled its normal balance sheet cuts from January 30th to the end of February, dumping over $65 billion in a 30 day period. The Fed also has not changed its dot plot projections for two more interest rate hikes this year. This means all the talk the past two months of the Fed going “dovish” was nonsense. Setting aside their rhetoric and looking at their actions, the Fed has been as hawkish as ever.

The only people who might find this to be news are most stock market daytraders, who ignore all other failing indicators and seem content to base their economic projections on equities alone. Set aside the fact that stocks plunged in December into near bear market territory. The bounce in January and February has convinced them that the Fed is stepping in and will not allow the economy to tank.  But the "plunge protection team" is about to pull the rug out from under their feet after training them like Pavlovian dogs to salivate at the sound of the word "accommodation".

Their mindset is based on a host of incorrect assumptions.

To be clear, while the Fed paid lip service to “accommodation” in their public statements, it was not the central bank that stepped in monetarily to stall falling stocks. That was actually the Chinese central bank, pumping billions in stimulus into global markets at just the right moment.

Chinese stimulus coupled with pension fund buying at the start of this year saved stocks from losses beyond 20%, but markets have met resistance on the way up. Without renewed stimulus measures from the Fed, equities have topped out multiple times and refuse to move towards their previous highs. This suggests that the two month bounce is over, and that stocks will now fall back down to December lows and beyond. If the projections I made in January are correct, then the Dow will fall into the 17,000 - 18,000 point range from the end of March through April.

The facade is slowly but surely melting away, not just in economics, but everywhere. I predicted both the success of the Brexit vote as well as Trump's win in 2016 based on the theory that the globalists would allow or even help populists to gain a political foothold, only to crash the economic system on their heads and then blame them for the disaster. So far my theory is proving correct.

Trump's trade war continues unabated despite claims by many that it would be over quickly. Currently, there are no plans for a March summit between Trump and Xi, and the possibility of a summit anytime soon has come into question as Trump's negotiations with North Korea fell to shambles last month. The negotiations are a farce and are not meant to succeed. I continue to hold to my position that the trade war is a planned distraction and that Trump is playing a role in a globalist scripted drama.

The facade of Donald Trump as a “populist candidate” is quickly ending. His cabinet is loaded with think-tank ghouls and banking elites, so this should come as little surprise. But there are still some analysts out there that naively believe that Trump is playing “4D chess” and that he is not the pied piper he now appears to be. What I see is a president that claimed during his campaign that he would “drain the swamp” of elites, then stacked his cabinet with some of the worst elites in Washington D.C. What I see is a president who argued against Fed stimulus measures and the fake stock market during his campaign, and who now has attached himself to the stock market so completely that any crash will now be blamed on him no matter the facts. What I see is a willing scapegoat; a president that is going to fail on purpose.

In terms of the Brexit, I still predict that there will be a “no deal” event, and that this is by design. The Brexit deal with the EU is slated to be decided in the next few weeks. A “no deal” outcome would be a perfect excuse for a major financial crisis in Europe, which is why I think it will happen. While sovereignty movements in the US will get the blame for the crash through Trump, sovereignty movements in the UK will get the blame for a crash in Europe through Brexit.

It is important to remind the public that this narrative is entirely false.

The economy has been in a state of animated death since 2008. Central bank stimulus acted as a kind of fiscal formaldehyde, keeping the visible signs of the crash at bay for 10 years but also creating a bubble even larger and more destructive than the one before. The “Everything Bubble” has now been primed to explode with maximum damage in mind.

The Fed started the tightening process for a reason; the establishment is ready to start the “global economic reset”, and they have their populist scapegoats in place. The crash in fundamentals returned in mid-2018, and I believe that crash will finally be acknowledged publicly by the media in mid-2019.

The point of it all is described in the very IMF interviews and documents I linked to above – Total centralization of the global economic framework, managed by the IMF. They describe it as “multilateralism” or a “multipolar world order”; this is meant to fool us into believing that the reset is about “decentralization”. It isn't. They intend to move us from one unipolar economic structure to another unipolar economic structure that is even more centralized. That is all.

The crash itself is simply a means to an end. It is a tool to gain fiscal and psychological leverage against the public. The everything bubble was created for a reason. The Fed has tightened into economic weakness over the past year for a reason. The timing of Trump's trade war and summit failures have happened for a reason. The timing of the Brexit chaos is happening now for a reason. The globalists are pulling the plug on economic life support today; the crash is engineered, and sovereignty movements are supposed to take the blame.

The best option at this time is to continuously force the issue of central bank culpability.  Liberty activists have to keep the focus on them and their criminal participation in economic sabotage, and we cannot assume that any government or political leader will be friendly to our cause.  The globalists have started the crisis, and we must finish it by making sure they are held accountable.

*  *  *

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Published:3/13/2019 3:48:17 PM
[Markets] Dow notches triple-digit gain as S&P 500, Nasdaq end higher for third day Dow notches triple-digit gain as S&P 500, Nasdaq end higher for third day Published:3/13/2019 3:18:24 PM
[Markets] US STOCKS SNAPSHOT-Wall St rises on strength of healthcare shares; Boeing manages to gain U.S. stocks rose on Wednesday, led by gains in healthcare shares, and Boeing shares edged upward even as the United States grounded the company's 737 MAX jets after a fatal crash in Ethiopia. The Dow Jones ... Published:3/13/2019 3:18:23 PM
[Markets] Dow's rally brings it to within a week of forming a bullish 'golden cross' pattern The Dow Jones Industrial Average , which rallied 192 points in afternoon trade Wednesday, is now on track to produce a bullish "golden cross" chart pattern within a week. That pattern occurs when the 50-day moving average--a shorter-term trend tracker--crosses above the 200-day moving average (DMA)--a longer-term trend tracker. The 50-DMA currently extends to 24,966.52, and has been rising by an average of 54.3 points a day this month, while 200-DMA extends to 25,139.97 and has been rising by an average of 4.4 points. Based on those trajectories, the golden cross would occur on March 19, or 61 sessions since the 50-DMA crossed below the 200-DMA to form a "death cross." That would mark the shortest stint that the 50-DMA is below the 200-DMA since the 61-day streak ended Sept. 30, 2010. After falling 18.8% from the Oct. 3 record close of 26,828.39 to the Dec. 24 15-month low of 21,792.20, the Dow has since run up 18.1%. Published:3/13/2019 1:49:32 PM
[Markets] Dow Jones Trails Again As This India Bank Stock Flourishes; Watch These 4 Hot New IPOs The Nasdaq continues to outperform, but this time the Dow Jones Industrial Average is joining a solid rally in stocks. HDFC Bank is rising after a breakout. Published:3/13/2019 12:49:40 PM
[Markets] U.S. companies are pulling business travelers from Boeing 737 Max 8 jets: FT Some U.S. companies are avoiding booking their staff on Boeing 737 Max 8 jets, according to a report by the Financial Times (paywall), citing a booking agent for large corporations and people familiar. The report from FT comes after Sunday's Ethiopian Airlines crash of a 737 Max 8 jet, which resulted in the deaths of 157 people near Addis Ababa. That crash occurred just about four months after the same model was involved in a separate fatal crash in Indonesia, fueling broader concerns about the safety of those aircraft. However, the specific cause, or causes, of the crashes hadn't been determined. Recent actions to restrict or ban 737 Max 8 and its variants, come despite the U.S. Federal Aviation Administration's continued vouching for the safety of the aircraft as American authorities, Boeing and Ethiopian investigators probe the crash. Midday Wednesday, Canada became the most recent country to restrict those model planes from its airspace. Shares of Boeing are off 0.4%, and have lost 11.7% of its value over the past week. Those losses come even as the broader market has enjoyed healthy gains over the same period. The S&P 500 index has seen a weekly advance of 2.7%, while the Nasdaq Composite Index has climbed 3.4% over the week so far. The Dow Jones Industrial Average , where Boeing is a component, also has gained 1.1% for the week, but it has been weighed down by Boeing's punishing drop. Published:3/13/2019 11:17:42 AM
[Markets] Boeing plays leadership role as Dow industrials surge 100 points early Wednesday Boeing plays leadership role as Dow industrials surge 100 points early Wednesday Published:3/13/2019 9:17:06 AM
[Markets] JPMorgan's Chase plans to add up to 90 branches, hire up to 700 employees by year-end JPMorgan's retail bank Chase said Wednesday it is planning to open up to 90 new branches in 2019 in new markets and will hire up to 700 new employees by year-end. The bank said the first new retail brances will be opened in nine of the top U.S. markets, including Charlotte, North Carolina, Raleigh, North Carolina, Greenville, South Carolina, Kansas City, Kansas, Minneapolis, Minnesota, Nashville, Tennessee, Pittsburgh, Pennsylvania, Providence, Rhode Island and St. Louis, Missouri. The bank is also eyeing locations close to big universities, including Auburn University in Alabama and the University of Nebraska in Lincoln. The new branches will serve small businesses and individuals and will cardless ATMs that can perform more than 70% of teller transactions. JPMorgan shares were flat in premarket trade, but have fallen 10.5% in the last 12 months, while the Dow Jones Industrial Average has gained 2.2% and the S&P 500 has gained about 1%. Published:3/13/2019 7:20:59 AM
[Markets] Stock market poised for tepid rise, but Dow remains under pressure amid Boeing 737 8 woes Futures for the Dow were facing pressure for a third straight session amid Boeing’s 737 Max 8 problems, but S&P 500 and Nasdaq edged marginally higher, despite persistent global growth concerns tied to the U.K.’s exit from the European Union and proliferating signs of slowing global growth. Dow Jones Industrial Average futures (YMH9) were trading little changed at 25,584, while those for the S&P 500 index (ESH9) added 4.15 points, or 0.2%, to 2,796.25. Published:3/13/2019 6:47:35 AM
[Markets] The last time the Dow underperformed the S&P 500 by this great a margin was 2009 The stock market is enjoying a solid week so far, but investors might not know it by gauging the performance of the Dow Jones Industrial Average, which by a few measures if registering its widest divergence with its U.S. peers over a two-day stretch in years. Published:3/12/2019 6:43:40 PM
[Markets] Market Extra: The last time the Dow underperformed the S&P 500 by this great a margin was 2009 The stock market is enjoying a solid week so far, but investors might not know it by gauging the performance of the Dow Jones Industrial Average, which by a few measures if registering its widest divergence with its U.S. peers over a two-day stretch in years.
Published:3/12/2019 5:24:02 PM
[Markets] Dow Drops, S&P Gains Because Mixed Messages Rule the Day The S&P 500 and Nasdaq Composite closed in positive territory on Tuesday, while the Dow Jones Industrial Average was under pressure from falling (BA) (BA) stock after more countries grounded the company’s 737 MAX jet following the deadly crash last Sunday. U.S.-China trade talk continues, and the latest Brexit deal was rejected by British lawmakers yet again. ...and wonder how bad the next recession might be. Published:3/12/2019 4:42:58 PM
[Markets] Grantham: The Next 20 Years In The Stock Market Will "Break A Lot Of Hearts"

Authored by Mac Slavo via SHTFplan.com,

Jeremy Grantham, a market investor who is credited with predicting the 2000 and 2008 downturns, said that other investors should get used to more lackluster returns in the stock market in the next 20 years.  Grantham says that the poor returns will “break a lot of hearts.”

Grantham told CNBC that after a century of handsome gains investors should get inured to lackluster returns in the stock market for the next two decades, according to Market Watch. 

“In the last 100 years, we’re used to delivering perhaps 6%, but the United States’ market will be delivering real returns of about 2% or 3% on average over next 20 years,” the value investor and co-founder of Boston-based asset manager GMO told CNBC in a rare interview.

In spite of the stock market’s plunge in the latter portion of 2018, Grantham believes his prediction is correct because he views the market as still pricey.

“This is not incredibly painful, but it’s going to break a lot of hearts when we’re right,” Grantham was quoted as saying.

Grantham has been predicting a meltdown in stocks since last year. He has even said that not even the recent go-slow reversal by the Federal Reserve on rate increases and the European Central Bank’s decision to roll out a fresh batch of bank stimulus will push stocks significantly higher.

“You can’t get blood out of a stone,” he told the network.

Other economists have warned that when the economy finally collapses this next time,the central bankers and the government will be unable to save anyone.

This will be limping along; three steps down, two steps back. It’s not a typical experience,” Grantham, who is famous for calling the last two major bubbles in the market, told CNBC’s Wilfred Frost. 

“I was really hoping there would be a magnificent bubble ending to this, as there had been to the three great recent experiences,” he said. “It doesn’t look like it will and, therefore, you’re going to have a decline of a different nature.”

This is not great news for those who have a lot of faith in the current economy.

Over the past five years, the S&P 500 index has produced a compound annual growth rate of 8.1%, the Dow Jones Industrial Average has boasted a CAGR of 9.1%, while the Nasdaq Composite Index has registered a compound return of 11.4% over the same period, according to FactSet data. –Market Watch

Published:3/12/2019 3:43:00 PM
[Markets] Stocks close mostly higher on health care, utilities rise; Boeing weighs on the Dow U.S. stocks close mostly higher Tuesday on the back of health care and utilities sectors, with the exception of the Dow Jones Industrial Average which retreated as a fatal crash of a Boeing Co. aircraft over the weekend weighed on the blue-chip index. Published:3/12/2019 3:43:00 PM
[Markets] S&P 500 index, Nasdaq end higher; Boeing weighs on Dow industrials S&P 500 index, Nasdaq end higher; Boeing weighs on Dow industrials Published:3/12/2019 3:12:04 PM
[Markets] Dow Slumps, Nasdaq Pumps As Boeing & Bond Yields Dump

Here's the most important chart in the world this week...

Who is right? Bonds of course!!

*  * *

China had yet another National Team inspired buying-panic in the afternoon session to rescue stocks into the green...

 

FTSE outperformed ahead of the Brexit vote but EU markets were broadly lower today...

 

US markets were divergent once again with Dow (and Transports) lower but Nasdaq and S&P higher... (A weak close dragged small caps down to unch)...

 

Futures show the excitement once again at the cash open...

 

But Boeing's dead-cat-bounce from yesterday's cash session has well and truly died...(Boeing accounted for -160 points of the Dow's 100 point loss)

 

Once again a dramatic short-squeeze dragged stocks higher...

 

Credit and VIX compressed further...

 

Treasury Yields tumbled dramatically on the day - completely ignoring the equity market gains...

 

With 30Y Yields breaking back below 3.00% (and 10Y < 2.60% - see top chart)

 

The Dollar Index tumbled for the 3rd day back below the 97.00 level...

 

Of course, all eyes were on Cable as the "meaningful vote" on Brexit...

 

The weak dollar provided support for commodities broadly, but silver outperformed on the day...

 

Gold jumped back above $1300...

 

Finally, we reflect on the sudden panic bid that has occurred in Nasdaq stocks in recent days. With Nasdaq earnings plunging to their lowest since July 2018, we wonder what magic hockey-stick these so-called investors are seeing...

 

Published:3/12/2019 3:12:04 PM
[Markets] Stocks rise on health care, tech shares; Boeing weighs on the Dow U.S. stocks trade higher Tuesday on the back of health care and technology sectors, with the exception of the Dow Jones Industrial Average which remained under pressure as a fatal crash of a Boeing Co. aircraft over the weekend weighed on the blue-chip index. Published:3/12/2019 1:42:16 PM
[Markets] Nasdaq Leads Stock Market Up Despite Boeing Woes; These 2 Dow Jones Stocks Break Out The Nasdaq composite is getting bolstered by strength in megacap techs. Microsoft and Visa are breaking out. Boeing dragged on the Dow Jones again. Published:3/12/2019 1:15:38 PM
[Markets] Stock Indexes Build On Gains As Google, Chipotle Lead Stock indexes assumed a confident stance late Tuesday morning, apparently satisfied to build on the previous session's strong gains. Apple led the Dow Jones Industrial Average, but Boeing weighed on the index for a second straight day. Published:3/12/2019 11:12:52 AM
[Markets] Boeing's stock extends slide, on track to be a 60-point drag on the Dow Shares of Boeing Co. sank 2.2% in premarket trade Tuesday, to extend the previous session's 5.3% drop in the wake of a second deadly crash of a 737 Max 8 aircraft made by the aerospace giant. The implied price drop would shave about 60 points off the Dow Jones Industrial Average's price, while Dow futures were losing 81 points. On Monday, the stock's price decline of $22.53 acted as a 153-point drag on the Dow, but the Dow still ran up 175 points. Boeing's second-day selloff comes as the Federal Aviation Administration said it had no plans to ground 737 Max airliners. Boeing's stock, which is the most influential Dow component given that it is the highest priced, and the Dow is a price-weighted index, has still soared 22.4% over the past three months, while the Dow has gained 4.6%. Published:3/12/2019 7:09:49 AM
[Markets] Stock-market futures point to slight gains, as Boeing again weighs on the Dow Stock-market futures point to slight gains, as Boeing again weighs on the Dow Published:3/12/2019 6:40:01 AM
[Markets] Dow Futures Dip as Boeing Continues Slide STOCKSTOWATCHTODAY BLOG 6:52 a.m. TheDow Jones Industrial Average looks to open little changed as the market digests yesterday’s big gains. Dow futures have declined 33 points, or 0.1%, while S&P 500 futures are little changed, and Nasdaq Composite futures have advanced 0. Published:3/12/2019 6:40:00 AM
[Markets] Market Snapshot: Boeing’s stock keeps Dow futures under pressure, but broader market aims for slight gains Futures for the S&P 500 and the Nasdaq-100 edge higher on Tuesday but those for the Dow remain under pressure as a fatal plane crash of a Boeing Co. aircraft over the weekend weighs on the blue-chip index.
Published:3/12/2019 6:12:41 AM
[Markets] Boeing’s stock keeps Dow futures under pressure, but broader market aims for slight gains Futures for the S&P 500 and the Nasdaq-100 edge higher on Tuesday but those for the Dow remain under pressure as a fatal plane crash of a Boeing Co. aircraft over the weekend weighs on the blue-chip index. Published:3/12/2019 6:12:41 AM
[Markets] Dow erases triple-digit decline to close up 200 points Dow erases triple-digit decline to close up 200 points Published:3/11/2019 3:36:34 PM
[Markets] Plane Crash Sparks Stock Buying-Panic That Ends Transports Longest Losing Streak In 47 Years

Was the appearance of Powell, Yellen, and Bernanke the reason why the markets went panic-bid today? Seems like it should be the opposite signal?

After a brief dip on Friday, China went full bulltard once again - despite a dramatic slowdown in total social financing growth - with CHINEXT up a stunning 4.4%!!

 

European markets refused to follow China's lead BUT went bid after US cash markets opened...

 

US Markets are best visualized from the futures market as the divergence between The Dow (down on Boeing) and the S&P/Nasdaq was clear overnight until the cash open when everything went panic bid until the EU close...

 

Nasdaq was the day's big winner on the cash side... Trannies surged on the day - the first rally day in the last 12 days and breaking the longest losing streak since 1972...

 

Boeing's plunge (737 max crash) was offset somewhat by Apple's surge (BofA updgrade) to rescue the Dow (best gain of the day)...AAPL added 40 points to the Dow, BA cut 175pts.

 

Dow futures pushed around 450 points off its intraday lows!!!

 

S&P broke back above its 200DMA (but remains well below the 2800ish level) and Nasdaq also broke back above its 200DMA

 

FANG Stocks drove the surge in Nasdaq (and AAPL)...

 

Buyback-related stocks soared today - erasing Friday's losses...

 

And yet another short-squeeze...

 

There has been a lot of hand-wringing over the underperformance of transports and semis in the last few weeks. Today that was all dismissed as both industries soared (despite another Boeing crash and no semi-related catalysts)...

 

However, not all is awesome. As Bloomberg notes, if today's U.S. stock rebound -- after the worst week of 2019 -- is to continue, it has to overcome a roadblock of negative momentum, not to mention the wall of resistance from 2,800-2,815.

 

And just like that, VIX was crushed and credit spreads collapsed...

 

Stocks and bonds completely decoupled at the cash open...

 

Treasury yields rose very modestly...

 

30Y remains above 3.00% but is coiling...

 

The Dollar Index (DXY) faded for the second day in a row but held above the key 97.00 handle...

 

Cable rebounded - on no good news (lawmakers in the U.K. will vote Tuesday on PM May’s Brexit deal for a second time in two months before the Mar 29 deadline for exiting the EU) - after its worst losing streak since May...

 

While the dollar has dropped the last two days, yuan has been flat...

 

Cryptos slid from Saturday highs...

 

Despite dollar weakness, PMs were sold as copper and crude were bid...

 

WTI tagged $57.00 0twice and failed and Gold broke below $1300 early and never looked back...

 

Finally, spot the difference...

(hint: it's not the economic outlook or bonds!!)

The official narrative for today's gains is as follows: "U.S. stocks rebounded from the worst week of the year as chipmakers rallied on deal news and the latest retail-sales data boosted confidence that the economy isn’t headed for a downturn.."

To which we respond via David Rosenberg (and note that this was still the biggest 2mo drop in retail sales in a decade)...

 

Published:3/11/2019 3:06:10 PM
[Markets] Tech leads Wall Street higher, Boeing pares losses Boeing Co, the best performing Dow component this year by a wide margin, slumped 7.4 percent after many airlines grounded the company's new 737 MAX 8 passenger jet after a second deadly crash in just five months. Helping markets march higher was the heavyweight Dow component's shares bouncing off its session lows, while the industrial sector reversed early losses to rise 0.31 percent. "The initial shock about Boeing's problems caused its stock to really sell-off and they have extensive issues to fix, but in the long run it's probably not as bad for the business as the initial sell-off suggested," said Elliott Savage, portfolio manager of the YCG Enhanced fund in Austin, Texas. Published:3/11/2019 12:25:59 PM
[Markets] Boeing now lone Dow stock in negative territory; index up triple digits Boeing now lone Dow stock in negative territory; index up triple digits Published:3/11/2019 11:35:16 AM
[Markets] US stocks move broadly higher on tech strength; Boeing drops U.S. stocks moved broadly higher in midday trading on Wall Street Monday, led by a rally in technology shares. The gain for the Dow Jones Industrial Average was held back by a sharp decline in Boeing. Technology stocks powered the market's early gains. Published:3/11/2019 11:35:16 AM
[Markets] The Dow Bounces Back Because Stock Trading Isn’t Just About Boeing The Dow Jones Industrial Average moved into positive territory despite a loss for Boeing. The S&P 500 and Nasdaq Composite achieved larger gains. Published:3/11/2019 11:07:40 AM
[Markets] Dow rides 365-point intraday turnaround into positive territory Dow rides 365-point intraday turnaround into positive territory Published:3/11/2019 10:35:09 AM
[Markets] US STOCKS-Wall St lifted by tech shares, heavyweight Boeing pares losses U.S. stocks rose after five straight sessions of declines on Monday boosted by technology stocks, however a fall in the shares of the world's largest planemaker after a second deadly crash in just five months capped gains on the blue-chip Dow. Boeing Co, the best performing Dow component this year by a wide margin, dropped 6.7 percent after many airlines grounded the company's new 737 MAX 8 passenger jet. Helping markets gain ground was the heavyweight Dow component's stock bouncing off its session lows, while the Dow Jones Airlines index reversed course to trade 0.34 percent higher. Published:3/11/2019 10:35:08 AM
[Markets] Nasdaq and S&P 500 manage gains, but Boeing's 11% skid keeps Dow in red Nasdaq and S&P 500 manage gains, but Boeing's 11% skid keeps Dow in red Published:3/11/2019 9:05:46 AM
[Markets] Dow Falls As Boeing Slump Swings Index by 300 Points shares dragged the Dow Jones Industrial Average lower. Shares of Boeing slumped 12% after China and Indonesia grounded all of their Boeing 737 Max 8 aircraft following Sunday’s deadly crash of an Ethiopian Airlines jet of the same type. The move erased about 300 points from the Dow, meaning that if shares of the aerospace company were flat, the Dow would have actually started the day higher. Published:3/11/2019 9:05:45 AM
[Markets] Opening Buying-Panic Rescues Dow From Boeing Crash, Lifts S&P Above Key Technical

BTFBD!!

The massive divergence between the Dow (Boeing dragging) and the S&P and Nasdaq remains, but the buying-panic at the cash open is making things a lot more palatable for the talking heads...

Boeing is seeing a liftathon after its worst drop since 2001... Dow rescued by AAPL...

And the S&P is back above its 200DMA...

But bonds ain't buying it...

Published:3/11/2019 9:05:45 AM
[Markets] Nvidia Gains, Oracle Slumps and 3 More Monday Morning Movers SECTORFOCUS BLOG Glimmers of Hope. Stocks were starting the week on a tentatively positive note: Dow Jones Industrial Average futures were down 200 points as Boeing tumbled, while S&P 500 futures were edging up 0. Published:3/11/2019 8:35:47 AM
[Markets] Boeing's stock set to deliver 330-point headwind to Dow industrials as China grounds 737 planes Shares of Boeing Co. on Monday were poised to cut more than 300 points from the Dow Jones Industrial Average, following a fatal crash of a 737 plane in Ethiopia that has resulted in China grounding all of the airplanes of that model, according to reports. Boeing's stock, a component of the blue-chip Dow industrials index, was down 11.5% or $48.54, based on Friday's close, in premarket action, with that decline, if it holds, set to slash about 330 points from the Dow at the open. A $1 move of any of the Dow's 30 components equates to a decline of 6.8 points in the Dow , which is a price-weighted index rather than market-capitalization weighted like the S&P 500 index and the Nasdaq Composite Index . The premarket decline in Boeing's shares come less than 48 hours after a 737 MAX 8 Ethiopian Airlines jet crash, resulting in the death of 157 people, with that tragedy coming about six months after a separate crash involving another Boeing 737 MAX 8, according to reports. The Civil Aviation Administration of China cited the crash of an Indonesian Lion Air jet in October in its decision to ground all 96 of its Boeing 737s, reports say. Published:3/11/2019 8:04:50 AM
[Markets] Global Markets Rebound On China Stimulus Hopes

After a weekend with relatively few news besides another deadly crash involving Boeing's new 737 Max which prompted China to halt usage of the airplane and sent Boeing shares plunging and dragging Dow futures lower (Boeing is the biggest member of the Dow), all eyes were on China to see if Friday's rout when the Shanghai Composite plunged nearly 5% following a key downgrade by a state-owned brokerage, would persist. It did not, and instead the Shanghai and Shenzhen Composites both closed at their highs, up almost 2% for the day following talk of more stimulus from Beijing.

China’s main bourses made back almost half the 4% they lost in Friday’s mauling as the country’s central bank chief pledged more support. The blue-chip CSI300 index jumped 1.9% after Friday’s 4.0 percent fall, which followed poor trade data and a major local bank issuing a rare “sell” rating on a major insurer. China’s central bank on Sunday pledged to further support the slowing economy by spurring loans and lowering borrowing costs after data showed a sharp decline in lending data due to seasonal factors. Furthermore, PBoC Governor Yi Gang stated there is still some room for a RRR cut although the amount of room is less compared with a few years ago and there were also comments from PBoC Deputy Governor Pan that they will keep liquidity ample and set up counter cyclical adjustments, while a central bank official also noted that February money supply data is normal and inline with historical trends. The central bank pledge came as data showed new bank loans in China fell a far more than expected in February, while money supply growth also missed forecasts.

This helped set the mood across both Asia and Europe, where stocks climbed, while S&P futures advanced even as Dow futures tumbled on the previously noted plunge in Boeing shares, while the dollar nudged higher after Fed Chairman Jerome Powell reiterated patience on rates during his first "60 Minutes" appearance, while Treasuries fell.

China's rebound lifted bullish spirits across the region, with stocks in Japan and Hong Kong also higher, helping lift the MSCI Asia index 0.5%, as traders sought to put the worst week for global stocks of 2019 in the rearview mirror.

European banks helped push the Stoxx 600 Index to its first advance in four sessions, with Commerzbank AG among the biggest winners on reports it’s getting closer to a merger with Deutsche Bank. London’s FTSE made a more impressive 0.8% but that was partly the flip side of a near three-week low for the pound as the chances of Prime Minister Theresa securing support for her Brexit deal at home this week looked increasingly dim. Britain is due to leave the EU in 18 days.

Kallum Pickering, an economist at Berenberg, said a delay to Brexit would be modestly positive for sterling as it would cut the near-term risk of the UK leaving without a transition period in place to minimize economic disruption. “However, it would not completely eliminate the hard Brexit risk which could still come at the end of a delay or as a result of a second referendum,” he added.

In the US, Boeing’s shares were down more than 9% in pre-market trading as China grounded flights involving the model.

Boeing

With no fresh trade deal "optimism", the bulls hung on to the "patient Fed" narrative, and as Hans Goetti, founder of HG Research, told Bloomberg TV, “with the Fed taking an easier path rather than continuing to raise interest rates, the outlook for equities is relatively constructive" even if Powell didn't say anything new at all.

Meanwhile, as Bloomberg notes, a barrage of data releases this week will be watched for clues on growth and the impact of central bank policy in the U.S., European Union and China, with the Bank of Japan the next to meet. On the trade front, Beijing and Washington are in general agreement on many crucial issues and have held meaningful discussions on foreign exchange, People’s Bank of China Governor Yi Gang said.

In rates, Treasuries declined after initially rising as the 10-year Treasury hit a two-month low yield of 2.607%. It last stood at 2.6501% while European bonds traded mixed.

In Fx, the day’s European FX gainer was Norway’s crown, after strong inflation data there raised expectations among economists that its central bank will increase interest rates again soon. With markets trading in a period of low volatility, investors have rushed to buy currencies where central banks are still raising rates or economic data has exceeded expectations, indicating a brighter economic outlook.

“This makes (a) March rate hike from Norges Bank a complete done deal, which is a positive for the currency,” Nordea strategists said.

The optimism over Norway’s economic outlook was in contrast to the general caution over the broader European economy after the European Central Bank last week slashed its growth forecasts for 2019 and postponed its expectations of a first rate hike. Short euro bets, already near a 2-1/2 year high, according to latest futures positioning data for the week ending March 5, is likely to receive a further boost in the coming days, investors said. The single currency shuffled sideways at $1.1247 after falling 1.2 percent last week, its biggest weekly loss in more than six months. The Turkish lira held steady even as the country entered its first recession in a decade.

On Monday, President Trump will release the 2020 budget today (comes into effect in October) in which he is to request USD 8.6BN of funding for border wall and is to ask Congress to reduce non-defense spending by an average of 5% in fiscal 2020 budget. Furthermore, growth is exp. 3.2% in 2019, 3.1% in 2020, 3.0% in 2021 and a 10-year forecast of 3.0%, while the proposal will see a balanced budget in 2034 rather than the typical 10-year horizon that has been a goal for Republicans.

Late on Sunday, Fed Chair Powell said that downside risks to the economic outlook have increased and that more economies began to slow 6 months ago, while he added that US economic outlook is still favourable but that trade talks have added to the uncertainty. Fed Chair Powell also stated the economy is in a good place and rates are appropriate considering muted inflation, while he added the Fed does not feel any hurry to change interest rates again and will wait to observe how global conditions evolve before making any changes.

Elsewhere, oil prices climbed as Saudi Arabia extended deeper-than-agreed production cuts into a second month. West Texas Intermediate crude futures rose 0.5 percent to $56.35 per barrel. Brent futures went up 0.4 percent to $62.98 a barrel. Gold eased about 0.1 percent to $1,296.62 per ounce, after briefly breaching $1,300 for the first time since March 1 in the previous session.

On today's calendar, retail sales figures for January due at 830am EDT will be a key focus given December’s surprisingly weak reading.

Market Snapshot

  • S&P 500 futures little changed at 2,751.50
  • STOXX Europe 600 up 0.3% to 371.83
  • MXAP up 0.5% to 156.87
  • MXAPJ up 0.5% to 517.18
  • Nikkei up 0.5% to 21,125.09
  • Topix up 0.6% to 1,581.44
  • Hang Seng Index up 1% to 28,503.30
  • Shanghai Composite up 1.9% to 3,026.99
  • Sensex up 0.9% to 36,994.11
  • Australia S&P/ASX 200 down 0.4% to 6,180.19
  • Kospi up 0.03% to 2,138.10
  • German 10Y yield unchanged at 0.068%
  • Euro up 0.1% to $1.1247
  • Italian 10Y yield rose 3.4 bps to 2.15%
  • Spanish 10Y yield rose 11.6 bps to 1.167%
  • Brent futures up 1.2% to $66.51/bbl
  • Gold spot down 0.1% to $1,296.74
  • U.S. Dollar Index little changed at 97.35

Top Overnight News from Bloomberg

  • While People’s Bank of China Governor Yi Gang addressed this weekend U.S. concerns over China’s potential depreciation of the yuan in order to blunt the impact of tariffs imposed by the Trump administration, he evaded any mention of a one-sided pledge by Beijing to hold its currency stable. That issue has been a key sticking point in talks in recent weeks, as President Donald Trump pushes for a deal
  • Saudi Arabia will supply its clients with significantly less oil than they requested in April, extending deeper-than-agreed production cuts into a second month, a Saudi official familiar with the policy said
  • Citigroup Inc. is planning to join UBS with an electronic currency trading and pricing engine in Singapore, setting up systems to boost liquidity in Asia’s biggest foreign-exchange hub
  • The Bank of England is asking some U.K. banks to hold three times more liquid assets in the event of a market meltdown with a no-deal Brexit later this month, the Financial Times reported, citing people familiar with the situation

Asian equity markets traded somewhat indecisive as the region digested Friday’s mixed US jobs data in which NFPs severely missed expectations and although the declines across the major US indices were only mild, the S&P 500 still posted a 5th consecutive daily loss and its worst weekly performance YTD. ASX 200 (-0.4%) and Nikkei 225 (+0.4%) were mixed with Energy the underperformer in Australia which some attributed to news of Norway’s sovereign wealth fund exiting energy companies and with the Japanese benchmark reflecting a choppy currency. Elsewhere, Hang Seng (+0.9%) and Shanghai Comp. (+1.9%) eventually outperformed despite a steep drop in lending data over the weekend, as some attributed the sharp decline in New Yuan Loans and Aggregate Financing to seasonal factors, while the PBoC also reportedly pledged to further support the slowing economy by spurring loans and reducing the cost of borrowing. Finally, 10yr JGBs were subdued with price action contained by the indecisive risk tone and lack of BoJ presence in the market.

Top Asian News

  • Hong Kong Tightens Liquidity With $192 Million Peg Defense
  • China Pushes Against U.S. Trade Demands on Enforcement, Yuan
  • India Announces Poll Dates as Modi Fights to Retain Power
  • StanChart Is Said to Challenge Essar Steel Sale to ArcelorMittal

After opening with gains of around 0.5%, major European indices are largely unchanged [Eurostoxx 50 +0.1%] following an indecisive lead from Asia where Chinese stocks eventually outperformed. Goldman Sachs noted that China A shares could be set for large gains as “fear of missing out” takes hold. If retail optimism were to return to its peaks in 2015 and 2018, the CSI 300 would give approximately 50% and 15% potential upside respectively from current levels, Goldman says. Equities across Europe have somewhat waned off opening highs with the FTSE 100 (+0.8%) holding its composure amid a weak domestic currency ahead of a series of Parliamentary votes this week. Meanwhile, Spain’s IBEX (-0.1%) underperforms as heavyweight BBVA (Unch) swings between gains and losses amid reports the Co. is planning board changes in the coming months. Over in Germany, Wirecard (+5.6%) shares lift the benchmark as the Co. expects the final report on fraud allegations soon (Note: Shorting ban on Co shares are still ongoing). Deutsche Bank (+2.2%) also supports the German index amid pre-market reports that the Co. and Commerzbank (+4.6%) have begun tentative merger talks. Finally, Dow Jones Mar’19 futures dipped lower as Boeing shares dropped 10% in pre-market trade following the weekend Boeing 737 Max 8 crash on its way to Nairobi, marking the second disaster for the jet in five months. Several airlines have since grounded the Boeing jet, whilst Airbus shares (+0.4%) are little moved.

Top European News

  • Banca Ifis Plunges After Main Investor Ousts CEO Giovanni Bossi
  • Global Risks Threaten to Choke Off Europe’s Growth Engine
  • Telecom Italia Study on Governance Issues Inflames Investor Spat
  • Danske Laundering Contagion Feeds a New Fear in Borderless EU
  • Debenhams in Talks for More Financing as Ashley Circles

In FX, GBP – Sterling remains under pressure across the board, irrespective of latest bullish bank calls (this time via Eur/Gbp rather than Cable), as talks between UK and EU officials on changes to the back-stop continue to hit a brick wall, and the prospects of a breakthrough looks increasingly bleak before Tuesday’s meaningful vote. Indeed, given the ongoing impasse and indications that PM May’s deal will be roundly rejected again, rumours are now circulating about a provisional or conditional vote before going back to Parliament, and with the possibility of adding the Cox amendment to try and coerce more support. Cable briefly reclaimed 1.3000+ status amidst reports that the EU will not demand more money from Britain in exchange for an extension to the March 29 Article 50 deadline, in contrast to earlier suggestions, but is back below the round number and not far from circa 1.2950 lows hit when stops were said to have been tripped around the 1.2960 level (trend-line support). Meanwhile, Eur/Gbp is hugging the top of a 0.8675-40 range, leaving the aforementioned short strategy underwater at this stage, as the institution entered at 0.8630 with a 0.8760 stop and 0.8400 target.

  • NOK – The Norwegian Crown is also bucking an otherwise relatively muted and rangebound start to the week for G10 currencies/pairings, but outperforming in wake of significantly stronger than forecast CPI data, and especially the core inflation measure. Eur/Nok fell from 9.8250+ to just shy of 9.7600 in response, but is currently holding near 9.7700.
  • EUR/NZD/AUD/CAD/JPY/CHF –  All narrowly mixed vs the Greenback, with the single currency reclaiming some lost ground after its sharp post-ECB demise, but struggling to sustain recovery gains much beyond 1.1250 with resistance seen at 1.1270 (Fib level) and 1.1298, while hefty options may also keep Eur/Usd in check given 2.7 bn sitting between 1.1300-20 and not much on the downside until 1.7 bn at the 1.1200 strike. Meanwhile, the Kiwi is still performing better than the Aussie down under, partly due to post-NFP weakness in its US counterpart and switching via the Aud/Nzd cross that is pivoting 1.0350. Consequently, Nzd/Usd is hovering just above 0.6800, while Aud/Usd is capped circa 0.7050. Elsewhere, the Loonie continues to benefit from upbeat Canadian jobs data in contrast to the headline US tally, and firmer crude prices to an extent, as Usd/Cad eases back from recent 1.3460 highs. Turning to Usd/Jpy and Usd/Chf, both are nearer the apex of respective 111.30-110.90 and 1.0095-70 trading parameters, as the broad Dollar and DXY regain some composure – index meandering between 97.500-250.

In commodities, WTI and Brent futures are trading with firm gains of around USD 0.50/bbl each with recent upside exacerbated by comments from a Saudi Official which stated that the Kingdom plans to cut April crude exports below 7mln BPD. This follows comments from Saudi Energy Minister Al-Falih last week who noted that the Kingdom is currently exporting around 7-8mln BPD of crude. Furthermore, the Official stated that Saudi are to keep oil production in April well below 10mln BPD, compared with February’s output of 10.316mln BPD; according to Industry sources. In the metals complex, spot gold remains sub-1300/oz as the yellow metal is largely dictated by USD-action. RBC notes that gold may still be “well off its YTD highs” although they caveat this by stating “[they] remain of the view that macro headwinds have softened”. The bank also reiterated their 2019 annual average price forecast at USD 1338/oz, and launched a 2020 forecast at USD 1367/oz. Elsewhere, Dalian iron ore prices fell as much as 3.6%, hitting the lowest levels for this month so far as demand waned due to restrictions on steel productions.

Looking at today's calendar, the main data focus will be in the US where the January retail sales report is due to be released. Prior to that we'll see the January industrial production and trade balance prints in Germany, and February industrial sentiment reading in France. December business inventories in the US will also be out. Meanwhile, President Trump is expected to release his proposed fiscal 2020 budget, Euro Area finance ministers are due to meet in Brussels and the BoE's Haskel is due to speak.

US Event Calendar

  • 8:30am: Retail Sales Advance MoM, est. 0.0%, prior -1.2%; Retail Sales Ex Auto and Gas, est. 0.6%, prior -1.4%
    • Retail Sales Control Group, est. 0.6%, prior -1.7%
  • 10am: Business Inventories, est. 0.6%, prior -0.1%
  • 7pm: Powell Gives Welcome Remarks at Conference in Washington

DB's Jim Reid concludes the overnight wrap

Welcome to a new week. My category 5 man-flu has now been downgraded to a cat 3 cold. This has been a brutal 10 days with the miracle that it didn’t come from my family or hasn’t been passed onto them. The other good news is that it’s obliterated my hay fever symptoms but as I’m slowly getting better they are reminding me of their presence. All I know is that ahead of next winter I’ll be barging past old ladies and children to get to the front of the flu jab queue. I didn’t bother getting one last year and I won’t make that mistake again.

Markets have gone from relatively healthy to decidedly under the weather over the last 36-48 business hours although markets have bounced a little in Asia overnight. Sentiment completely changed after the ECB confused monetary policy meeting on Thursday. A little more doubts creeping in on an imminent trade deal plus a soft payrolls report (albeit with a bumper average hourly earnings print) also contributed. This helped reinforce what was generally the worst week of the year for equities (S&P 500 -2.16%, Stoxx 600 -0.98%, MSCI DM -2.16% , MSCI EM -2.04% and MSCI Global -2.14%) and best week for government bonds.

European banks led equity declines last week on the ECB, trading down -5.78% (-1.89% on Friday) and weighing on the broader STOXX 600 which fell -0.98% (-0.89% Friday). The euro weakened -1.14% (+0.38% Friday), touching its lowest level since mid-2017, and the dollar gained +0.87% (-0.31% Friday). US equities joined the selloff, with the S&P 500, DOW, and NASDAQ dropping -2.16%, -2.21%, and -2.46% (-0.21%, -0.09%, and -0.18% Friday) respectively. Small-caps underperformed sharply, with the Russell 2000 down -4.26% (-0.11%).

Global sovereign bond yields broadly rallied with Bund yields down -11.4bps (+0.2bps Friday) and Treasury yields -12.5bps (-1.1bps Friday). Yield curves flattened, with the US 2s10s curve down -3.7bps (-0.2bps Friday) but within its recent range at 16bps. The German yield curve hit its lowest level since 2016 at 60bps, having fallen -9.1bps (-1.0bps Friday). Peripheral spreads rallied as well, with BTP yields down -22.8bps (+3.5bps Friday). Somewhat surprisingly, despite the broad selloff in equities and the rally in rates, measures of implied volatility remained relatively low, with the VIX increasing +2.5pts (-0.5pts Friday) to 16.1 and the V2x up only +1.0pts (+0.5pts Friday) to 14.4.

The week in Asia has started on a positive note with markets largely heading higher with the Nikkei (+0.37%), Hang Seng (+0.65%), Shanghai Comp (+1.54%) and Kospi (+0.01%) all up. Elsewhere, futures on the S&P 500 are trading flat (-0.02%). Over the weekend we got China’s February credit stats with aggregate financing dipping sharply to CNY 703bn (vs. CNY 1300bn expected) and new loans standing at CNY 885.8bn (vs. 950.0bn expected). The February credit data should however be taken in the context of outsized gains in January (aggregate financing at CNY 4,635.3bn vs. 3,307bn expected). So we probably need another month or two to eat the whole picture. In the meantime, China’s February CPI came in line with consensus at +1.5% yoy while PPI stood at +0.1% yoy (vs. +0.2% yoy expected)

In other news, the PBOC Governor Yi Gang said that they still had some room to cut the amount of money banks must hold in reserve, but it’s much smaller than in previous years. Elsewhere, on trade the White House economic adviser said that the US is making “headway” in trade negotiations with China, brushing off reports suggesting diminishing prospects for a deal and push-back from China while adding that he remains “optimistic” that President Trump and China’s President Xi Jinping would meet to sign a trade pact at some point -- possibly in March or April.

Turning to yesterday’s interview by Feb Chair Powell now where he said that the Fed will pay close attention to today’s retail sales report after the surprise dip in December. He also said that the Fed didn’t stop hiking rates because of pressure from President Trump and added that the current rate setting is “roughly neutral”.

Moving on to this week now and with markets suddenly feeling a bit fragile again all eyes turn to Brexit this week in what could be a crucial few days. How many times have we said that about Brexit at the start of a week? Could this really be the one? A BoJ meeting (Friday) and US CPI (Tuesday), PPI (Wednesday) and retail sales data (today) are also highlights, while we'll get the important monthly data dump in China (Thursday). China's NPC also enters its second week while the European Parliament votes on a resolution about security threats linked to Chinese tech.

In terms of Brexit, on Tuesday the House of Commons is scheduled to hold a meaningful vote on the amended Withdrawal Agreement. In the meantime, the Telegraph reported over the weekend that if PM May is forced to extend Brexit this week then the EU is preparing to impose punitive conditions, including a multi-billion pound increase in the £39 bn divorce payment. If true this will go down like a lead ballon amongst leavers. The rest of the weekend news has been very quite in terms of progress on the backstop. Unless a legal rabbit is pulled out of the hat very soon tomorrow’s vote will likely result in another huge loss for Mrs May. So surely lots of news today on whether any progress has been made. If the vote is rejected tomorrow, lawmakers will then be asked on Wednesday if the UK should take a no-deal Brexit option off the table in its negotiations. If they do, then on Thursday Parliament will hold a vote on an extension to Article 50. Should the extension be accepted then this would likely result in it being signed off at the March 21/22 EU summit. It's worth noting that we also get the likely overshadowed Spring Statement from Chancellor Hammond on Wednesday. No policy announcements are expected however we will get an updated set of forecasts. See our UK economists' preview here .

As for the BoJ on Friday, no change in policy is expected and the meeting also doesn't include an outlook report so it's likely to be mostly a non-event. The most important data releases in the US this week include January retail sales today, February CPI on Tuesday and February PPI on Wednesday. We'll also get important preliminary January durable and capital goods orders data on Wednesday and February industrial production on Friday. For retail sales today, core sales are expected to have risen a solid +0.6% mom during the month following the very weak December stats which lead to a lot of head scratching. CPI is expected to have risen +0.2% mom at the core level (DB at +0.17%) which should still leave inflation running towards the upper end of what would be consistent with the Fed’s inflation target, with both the three- and six-month annualised rates expected at 2.38%. Meanwhile PPI is expected to also be up +0.2% mom at the core. Friday’s 0.4% mom AHE print shows that there is some inflation pressure out there. The 3.4% yoy rate was the highest since April 2009. Even just before the GFC we were only generally in the low to mid 3% range. If you want to get an up to date feel for what all relevant measures are telling you about the US economy, our economists have just started a new monthly dashboard which includes things like their momentum index, FCI, recession probability models, and their hawk-dove scorecard for Fed officials, among others. See here for more.

The highlights in Europe this week are January industrial production reports in Germany, UK and the Euro Area today, Tuesday and Wednesday respectively, January GDP in the UK on Tuesday, and final February CPI revisions for Germany and France on Thursday and the Euro Area on Friday. After the weekend data, China also see’s February’s retail sales, industrial production and fixed asset investment on Thursday. It’s also note worth noting in China is that the NPC will begin its second week from tomorrow. The Congress will conclude with Premier Li Keqiang's annual press conference on Friday.

Published:3/11/2019 7:04:05 AM
[Markets] Dow futures slump as Boeing’s stock drops premarket following plane crash Dow futures fall on Monday, dropping more than 100 points as Boeing shares fall sharply in premarket trading after the crash of a 737 Max 8 aircraft that killed 157 on board, the second accident in six months for its newest and popular plane. Published:3/11/2019 7:04:04 AM
[Markets] Need to Know: An ‘unwholesome appetite’ for stocks could spoil this fairytale, strategist warns Apparently, stocks can also fall in 2019. The S&P 500, Dow and Nasdaq proved that last week with all three in the red for five days in a row, which hasn’t happened since 2016. So much for that big bounce off December lows?
Published:3/11/2019 6:34:54 AM
[Markets] Dow under pressure | Boeing tanks | Powell: Trump can't fire me Dow futures were lower this morning, dragged lower by aircraft manufacturer Boeing (BA). Without Boeing, the Dow Jones Industrial Average and S&P 500 are looking at modest gains at the opening bell, as all three major averages try to break five-day losing streaks. Boeing (BA) was nearly 9 percent lower in premarket trading following the weekend crash of an Ethiopian Airlines Boeing 737 Max 8 , killing all 157 people on board. Published:3/11/2019 6:34:54 AM
[Markets] World shares mostly higher as China-US trade talks drag on Shares were mostly higher in Europe on Monday, tracking gains in Asia as investors awaited further developments in trade talks between the U.S. and China. Britain's FTSE 100 gained 1 percent in early trading to 7,175.46 as Prime Minister Theresa May battled to stave off a fresh defeat for her proposal on the divorce from the European Union. Wall Street looked set for a mixed start, with the future contract for the Dow Jones Industrial Average down 0.7 percent to 25,350.00. Published:3/11/2019 5:38:10 AM
[Markets] Boeing Shares Fall 10% As Hundreds Of 737s Grounded Following 2nd Deadly Crash

Boeing ADRs traded on Germany's Tradegate exchange in Stuttgart slumped more than 9% early Monday as Chinese and Ethiopian airlines grounded their fleets of Boeing 737 MAX 8s as experts question the plane's safety after an unprecedented series of crashes. Meanwhile, Boeing opened more than 10% lower in the US premarket, weighing heavily on Dow futures, which were off by triple digits.

While some airlines opted not to ground their fleets following Sunday's devastating crash, where an Ethiopian Airlines flight dropped out of the sky six minutes after takeoff, killing everyone on board - including nearly 160 passengers and crew (including 8 Americans) - the fact that the Ethiopian Air crash happened so soon after a similar crash involving a 737 operated by Indonesia's Lion Air has raised questions about the model's safety.

On Monday (local time, late Sunday in New York), China's Civil Aviation Administration of China said all Chinese airlines must suspend their use of the 737 MAX 8 by 10 am London Time.

Boeing

The CAAC said flights would not resume until Boeing had proven that no design flaw contributed to the crashes. China's regulator said it would notify airlines as to when flights could resume, after it has heard back from Boeing and the FAA.

"Given that two accidents both involved newly delivered Boeing 737-8 planes and happened during take-off phase, they have some degree of similarity," the CAAC said. It added that it has a "zero tolerance" policy for safety risks.

Chinese airlines have a total of 96 737 MAX 8 jets in service, the state company regulator said on Weibo, including Air China, China Eastern Airlines, China Southern Airlines and Hainan Airlines.

Meanwhile, after initially insisting that its fleet of 737s would remain in the air, Ethiopian Airlines backtracked on Monday and grounded its 737s until further notice as an “extra safety precaution." The investigation into Sunday's crash is just getting started, while the probe into the Lion Air crash has yet to produce a conclusive finding.

Cayman Airlines, the British overseas carrier, said it would ground its 737s, though most of the major airlines around the world have not grounded their planes.

Flight ET302, the Ethiopian Airlines flight that crashed on Sunday, was the second 737 MAX 8 to suddenly crash, killing everybody on board, within five months. In late October, the crew of a Lion Air flight reported technical problems with the plane before it suddenly dropped into the Java Sea off the coast of Indonesia. The two crashes were eerily similar, in that both occurred just minutes after taking off.

The 737 line is Boeing's cash cow, and the aerospace company has roughly 5,000 737s on back order - so making material redesigns for safety purposes could be hugely problematic for the company's production, and possibly lead to a flurry of cancelled orders. Already, 350 of the planes are in service around the world.

Published:3/11/2019 5:03:40 AM
[Markets] Dow futures down nearly 200 points as Boeing drops in premarket after deadly Ethiopia plane crash Dow futures tumble on Monday, dropping over 100 points as Boeing shares fall sharply in premarket trading after the crash of a 737 Max 8 aircraft that killed 157 on board, the second accident in six months for its newest and popular plane. Published:3/11/2019 4:33:15 AM
[Markets] Market Snapshot: Dow futures tumble 160 points as Boeing drops in premarket after deadly Ethiopia plane crash Dow futures tumble on Monday, dropping over 100 points as Boeing shares fall sharply in premarket trading after the crash of a 737 Max 8 aircraft that killed 157 on board, the second accident in six months for its newest and popular plane.
Published:3/11/2019 4:04:02 AM
[Markets] Boeing's $55 Billion Rally Put to the Test After Ethiopia Crash Futures contracts on the Dow Jones Industrial Average Index -- where Boeing has the largest weighting -- fell Monday during Asian hours, sliding as much as 0.6 percent after Flight ET302 plunged to the ground minutes after leaving Addis Ababa en route to Nairobi, Kenya, killing all 157 people on board. This is Boeing’s second 737 Max crash in five months. To make matters worse, China asked domestic airlines to temporarily ground those jets by 6 p.m. local time, and Ethiopian Airlines said it would ground them until further notice. Published:3/11/2019 2:33:22 AM
[Markets] It Begins: China Orders Carriers To Ground Boeing 737s After Ethiopian Airlines Crash

China has ordered all domestic carriers to ground their Boeing 737 MAX 8s after one of the jets seemingly dropped from the sky southeast of Addis Ababa just six minutes after taking off on Sunday. That accident - which killed all 157 people on board - was the second involving one of the jets in five months, and has led to speculation that Boeing might order all of the jets to be grounded pending further inspection.

Chinese media outlet Caijing was the first to report the decision, citing sources within China's domestic airline industry. Thee 737 MAX, the fourth generation of Boeing's narrow-body 737 line, was first flown in 2016, making the string of crashes - two in five months - unprecedented and, according to some analysts, extremely suspect.

The first crash occurred in late October when a 737 MAX operated by Lion Air crashed into the Java Sea, killing the nearly 200 people on board. Before the crash, the crew had reported unusual activity in the jet, including the nose of the plane unexpectedly tipping lower, which was blamed on a faulty data system. That crash is still under investigation.

Though its possible the two accidents could be a coincidence, the fact that they both involved brand new planes is particularly concerning. Yet, airlines have been reluctant to ground flights without a cue from Boeing, or some more evidence unearthed by investigators that the crashes could have been the result of some wider flaw in the plane's design. Ethiopian Airlines, which operated the ill-fated flight ET302 destined for Nairobi, has the best safety record of any carrier in Africa, and its CEO said at a Sunday press conference that its 737 MAXs would remain airborn.

As aviation analyst Alex Macheras pointed out during a series of appearances on cable news shows, the fact that two Boeing 737s have crashed in such a short period is truly unprecedented, and it is surprising that Boeing hasn't already ordered all of the planes to be grounded pending a review.

As airlines slowly wake up to the fact that the lives of hundreds of passengers may be at risk, they might opt to ground the planes on their own,.

Already, futures have dipped on the news out of China. If the groundings become a trend, Dow component Boeing could drag down the broader market on Monday.

Dow

Published:3/10/2019 7:02:59 PM
[Markets] Wall Street's Bull Market Celebrates Its 10th Anniversary Tin seems too cheap a metal for this anniversary, but here we are: Wall Street's bull market turns a record 10 years old this weekend. U.S. stocks have been been rising for 10 straight years since the S&P 500 and the Dow Jones Industrial Average both bottomed out on March 9, 2009, during the 2008-09 global market meltdown. The Dow Jones Industrial Average closed at a cycle-low 6,547.05 on Monday, March 9, 2009, while the S&P 500 finished at 676.53. Published:3/10/2019 1:03:24 PM
[Markets] Dow Stages Late-Day Rally Because Jobs Data Weren’t as Bad as They Looked ...and examine women’s influence on the future economy in honor of International Women’s Day. The Dow Jones Industrial Average fell 22.99 points, or 0.1%, to 25450.24, while the S&P 500 was down 5.86 points, or 0.2%, to 2743.07, and the Nasdaq Composite lost 13.32 points, or 0.2%, to 7408.14. Published:3/8/2019 4:50:04 PM
[Markets] NewsWatch: This 135-year-old stock index just logged its longest skid in about 50 years The Dow Jones Transportation Average on Friday produces its lengthiest series of losses since 1972, highlighting a recent slump that has taken hold of the broader stock market.
Published:3/8/2019 4:19:21 PM
[Markets] Dow logs longest losing streak since June on disappointing jobs report, China trade data U.S. stocks finish lower Friday for a fifth session in a row, with the Dow notching its longest losing streak since June, after a disappointing jobs report and a slump in Chinese exports added to concerns about slowing global growth. Published:3/8/2019 3:48:16 PM
[Markets] Trannies Tumble To Worst Losing Streak Since Nixon As Yields Hit 2019 Lows

Biggest US payrolls miss since 2008 and biggest collapse in China exports in years (after the biggest credit injection ever)...

Take your pick from China - tech-heavy small-cap dominated CHINEXT surged over 5% while megacap-heavy China 50 tumbled almost 5%...(SHCOMP ended the week marginally lower with the worst day since October and first losing week of the year)...

 

By the end of the week, only UK's FTSE managed to hold on to gains as weakness rippled through global markets in the latte half of the week...

Dow, S&P, Nasdaq and Small Caps are down 5 days in a row but The Dow Transports is now down 11 days in a row - the longest losing streak since Nixon in 1972...

 

This week was the first down week for US stocks since 2018... Small Caps were the biggest laggards

 

The machines went wild as always, desperate to get stocks green on the day...

 

Everything green from the shitty payrolls print...

 

Stocks tried twice to accelerate and ignite momentum for a green push but China trade headlines in the last hour spoiled the party briefly before the panic bid ensued, pushing the market above the pre-payrolls levels...

 

"Most Shorted" Stocks are down 7 days in a row (first down week of the year)

 

Buyback-related stocks are also down 8 of the last 9 days...

 

The S&P and Nasdaq both broke back below their 200DMA this week...

 

FANG Stocks suffered their biggest loss of 2019 this week...notably breaking back below its 200DMA

 

Semis were slaughtered - worst week of the year...

About two-thirds of its members are down, led by Marvell Tech after disappointing earnings. There was also a Nikkei report that the global semiconductor market contracted in January for the first time in 30 months. Momentum on the SOX is negative, as measured by the MACD. Falling below the 200-DMA could be an excuse for a broader selloff in stocks, I pointed out yesterday.

Credit spreads have widened 5 days in a row (and VIX is up 5 days in a row), blowing out by the most since Dec 21st...

 

The VIX term structure has re-inverted...

 

Treasury yields tumbled all week, with the belly outperforming...

 

The long-end dropped back to a 3.01 handle - erasing last week's losses...

 

And the belly reached down to its lowest since the first day of the year...

 

In fact the belly is the richest it has been in years (5Y lowest relative to the 2s10s curve) as bond traders are no longer so concerned about a policy error, but still seem to be pricing in a major growth slowdown in the next few years.

 

And before we leave bond land, we note that 10Y CAD yields are now less than 2bps above the BOC policy rate!!!

 

After rising for 7 days straight, the dollar index tumbled today but remains above the key 97.00 level...

 

Yuan weakened - as you'd expect with USD gains - but closed at the lows of the week after Xi headlines...

 

After yesterday's bloodbath to a new record low, Argentina's Peso rebounded notably as BCRA raised its benchmark rate by 500bps to 56.76%!!

 

Litecoin had a big week but the rest of Crypto was practically flat...

 

Despite the dollar surge on the week, PMs and oil gained on the week - rallying after the dismal jobs data...

 

WTI dropped off $57 and bounce back off $55...

 

Today's dismal jobs data sparked a revival in gold - bouncing off unchanged for 2019...

And Gold rebounded notably against the Yuan...

 

Finally, deja vu all over again?

Because the gap to reality is wide...

Published:3/8/2019 3:19:47 PM
[Markets] This 135-year-old stock index just logged its longest skid in about 50 years The Dow Jones Transportation Average on Friday produces its lengthiest series of losses since 1972, highlighting a recent slump that has taken hold of the broader stock market. Published:3/8/2019 3:19:47 PM
[Markets] Market Extra: This 135-year-old stock index is poised to log its longest skid in about 50 years The Dow Jones Transportation Average is on the verge of producing its longest series of losses since 1972, highlighting a recent slump that has taken hold of the broader stock market.
Published:3/8/2019 2:19:45 PM
[Markets] How to Trade Apple Ahead of a Sellable 'Key Reversal' This negative signal indicates risk to my semiannual pivot at $168.72. Apple closed Thursday at $172.50, up 9.4% so far in 2019 and in bull market territory 21.5% above its Jan. 3 low of $142.00. Apple has been one of the 2019 leaders of the Dow Jones Industrial Average after being a drag in 2018. Published:3/8/2019 12:17:15 PM
[Markets] Dow Down but Off Lows Following Meager U.S. Jobs Growth The Dow Jones Industrial Average fell Friday for a fifth straight day Friday after the U.S. economy added far fewer jobs than expected in February. posted stronger-than-expected second-quarter earnings but missed Wall Street's revenue estimates. issued an earnings forecast for its fiscal first quarter below Wall Street estimates. Published:3/8/2019 10:16:49 AM
[Markets] Dow Set to Tumble Because the U.S. Jobs Report Was a Big Disappointment 9:08 a.m. Futures contract on the Dow Jones Industrial Average tumbled further after the U.S. payrolls report showed just 20,000 new jobs were created in February. S&P 500 futures have declined 0.7%, and Nasdaq Composite futures slumped 0.9%. “February’s anemic 20,000 new jobs will inevitably exacerbate widespread fears of slowing economic growth, making it harder to be optimistic about corporate earnings,” writes Alec Young, managing director of global markets research at FTSE Russell. Published:3/8/2019 8:24:26 AM
[Markets] The Dow is on the verge of a bullish golden cross, but stock-market analysts aren’t exactly cheering It should be time for celebration on Wall Street. A bullish golden cross is on the verge of materializing in the 122-year-old Dow Jones Industrial Average, coming after an anxiety-provoking dip more than two months ago. But some analysts are worried. Here’s why. Published:3/8/2019 6:16:21 AM
[Markets] Chinese Shares Suffer Worst Day in Five Months as Exports Slump U.S. stock futures were lower, putting the S&P 500, Dow Jones Industrial Average and Nasdaq Composite on course for a fifth consecutive day of declines. S&P 500 and Dow Industrials futures fell 0.5%, while Nasdaq-100 futures slipped 0.6%. Stocks exposed to China and global trade were likely to fall when Wall Street opens. Published:3/8/2019 5:15:52 AM
[Markets] U.S. stock futures drop ahead of jobs data as gloomy China trade report adds to global growth fears Dow futures drop over 100 points as global gloom that has hung over the market all week looks set to continue on Friday. Nervousness ahead of a big U.S. jobs report later, a gloomy set of trade numbers and extremely weak Chinese export numbers add to worries about global growth. Published:3/8/2019 2:48:27 AM
[Markets] Market Snapshot: U.S. stock futures drop as gloomy China trade report adds to global growth fears Dow futures drop over 100 points as global gloom that has hung over the market all week looks set to continue on Friday. Nervousness ahead of a big U.S. jobs report later, a gloomy set of trade numbers and extremely weak Chinese export numbers add to worries about global growth.
Published:3/8/2019 2:48:27 AM
[Markets] NewsWatch: The Dow is on the verge of a bullish golden cross, but stock-market analysts aren’t exactly cheering It should be time for celebration on Wall Street. A bullish golden cross is on the verge of materializing in the 122-year-old Dow Jones Industrial Average, coming after an anxiety-provoking dip more than two months ago. But some analysts are worried. Here’s why.
Published:3/7/2019 4:13:43 PM
[Markets] These 4 Growth Stocks Buck The Drop In Dow Jones, Nasdaq As FANG Stock Builds A Base The Dow Jones Industrial Average fared a bit better than the Nasdaq amid a broad decline. Some leaders in the IBD 50 kept a bullish tone. Published:3/7/2019 3:42:56 PM
[Markets] Dollar Jumps, Stocks & Bond Yields Dump As Not-Dovish-Enough Draghi Disappoints

Can you remember the last time the stock market dropped on the day a central bank went full dovetard?

 

China is unstoppable - an early dip was bid, but some very last minute weakness was evident leaving all but SHCOMP red on the day...

European markets were a big focus today as Draghi reversed back into full dove mode...but as is clear the kneejerk gains were quickly dismissed as EU banks tumbled...

Germany's yield curve flattened notably (as 10Y yields tumbled to its flattest since Oct 2016)...

And the Euro tumbled, eventually running stops thru 1.12...

...to its lowest since June 2017...

 

US markets were not mixed at all - they were down... again... with Small Caps the big laggards...

 

The S&P 500 broke below, bounced, then retested its 200DMA...

 

Dow Transports are now down 10 days in a row - that is the equal longest losing streak since 1972

 

Notably, breadth is starting to roll over, with the number of overbought stocks tumbling...

 

Kroger was krushed after big misses and slashing its outlook (and not helped by AMZN)...

 

The big banks had another ugly session...

 

Credit markets continued the week's carnage (to one-month wides) and VIX also bounced up towards 18 (one-month highs)...

 

Treasury yields tumbled once again today - erasing most of last week's weakness - with the belly of the curve down over 6bps

 

5Y Yields plunged to their lowest in a month after tagging the pre-FOMC levels...

 

ECB and Fed rate expectations remain notably negative for 2019, both legging down today after Draghi signaled lower for longer...

 

The Euro weakness sparked a confirmed break above 97.00 for the DXY...

Today was the biggest jump in the DXY since Aug 2018...

To the highest since June 2017...

Emerging Market FX was hammered once again today... (biggest two-day drop since Nov 2018)

 

The Argentine Peso plunged to a new record low...

Yuan also tumbled...

 

And before we leave FX land - HKD touched the lower band of its peg...

 

Litecoin extended the week's gains in cryptos...

 

WTI managed gains - thanks to a European session rally - as PMs and copper slipped lower as the dollar surged...

 

WTI continues to trade in a range...

Notably, amid all the turmoil in currencies - Yuan in gold terms (or vice versa) was extremely stable...

 

Finally, it can't be this easy, right?

Published:3/7/2019 3:12:55 PM
[Markets] Dow industrials down over 200 points, extending losing streak to fourth day Dow industrials down over 200 points, extending losing streak to fourth day Published:3/7/2019 3:12:55 PM
[World] Market Extra: The Dow is the verge of a bullish golden cross, but stock-market analysts aren’t exactly cheering It should be time for celebration on Wall Street. A bullish golden cross is on the verge of materializing in the 122-year-old Dow Jones Industrial Average, coming after an anxiety-provoking dip more than two months ago. But some analysts are worried. Here’s why.
Published:3/7/2019 2:41:50 PM
[Markets] GE stock options suggest investors are 'overly optimistic' about March 14 guidance call The next potentially big catalyst for General Electric Co.'s stock is the GE Outlook scheduled for March 14, which J.P. Morgan derivative strategist Shawn Quigg said will likely be a "high-impact event." Quigg said in a note distributed to clients earlier Thursday that the option market is currently pricing in a post-GE Outlook move of about 9.2% in either direction. Quigg said options pricing had put a 30% probability of a rally above the $10 mark--6.5% above current levels--which he believes is "overly optimistic." Conversely, he said the market placed an 18% probability of the stock falling back towards its lows below $7.50--20% below current levels--a level Quigg believes is too conservative. "We believe shares of GE are unlikely to breach $10 in the near-term, owing to the company's recent commentary and fears of what may still lie ahead at the company's upcoming Guidance Update," Quigg wrote in a note to clients. "Meanwhile, the probability of the stock tracking back towards its December low appears to be rising." The stock, which rose 3.0% in afternoon trade, has run up 29% year to date while the Dow Jones Industrial Average has climbed 9.2% Published:3/7/2019 1:42:00 PM
[Markets] Walgreens stock on track to lead Dow losers for 3rd straight day Shares of Walgreens Boots Alliance Inc. fell 1.5% in midday trade Thursday, enough to pace the 24 of 30 Dow Jones Industrial Average's components that were losing ground. If Walgreens stock closes at the Dow's leading loser, it would mark the third-straight session, and fourth time in five sessions, that it did so. The one time it didn't lead, it fell 2.8% on Monday, but UnitedHealth Group Inc. shares led the way with a 4.1% tumble. During the past 5 sessions, Walgreens price decline of $10.99 has shaved about 75 points off the Dow's price, accounting for about one-fifth of the Dow's 379-point drop over the same time. Published:3/7/2019 12:12:33 PM
[Markets] Dow Jones Down 200 As Stock Market Continues Normal Pullback The stock market continued to ease as the Dow Jones industrials and S&P 500 headed toward their seventh loss in eight sessions. Growth stocks outperformed. Published:3/7/2019 11:18:05 AM
[Markets] Stocks Sink, Dow Trades Lower for a Fourth Straight Session The Dow Jones Industrial Average fell Thursday for a fourth straight session even after the European Central Bank said it would keep interest rates at near-record lows until at least the end of the year, effectively insuring the Federal Reserve won't tighten anytime soon. posted weaker-than-expected fourth-quarter earnings Thursday and 2019 guidance disappointed investors, sending shares sharply lower. posted fourth-quarter adjusted earnings of $2.83 a share, beating Wall Street forecasts of $2.77, but same-store sales came in below estimates. Published:3/7/2019 10:41:56 AM
[Markets] S&P 500 slips below 200-day moving average, Dow holds above it The S&P 500 has slipped below the 200-day moving average (DMA) in morning trade Thursday for the first time in three weeks, which could put a bearish spin on the stock market's outlook for some chart watchers. The 200-DMA, which currently extends to 2,750.81 according to FactSet, is viewed by many technicians as a line separating longer-term uptrends from downtrends. The last time the S&P 500 traded below the 200-DMA on an intraday basis was Feb. 14, while the last close below it was Feb. 11. Meanwhile, the Nasdaq Composite was currently below its 200-DMA, which extended to 7,479.96, while the Dow Jones Industrial Average was still above its 200-DMA, which was currently at 25,125.54. Published:3/7/2019 10:13:32 AM
[Markets] Just two Dow stocks in positive territory as blue-chip gauge falls 250 points Just two Dow stocks in positive territory as blue-chip gauge falls 250 points Published:3/7/2019 9:41:22 AM
[Markets] The Dow Lost 133 Points Because Investors Are Impatient for a Trade Deal The Dow Jones Industrial Average lost 0.52% to close at 25,673.46. The S&P 500 fell 0.65% to 2771.45, and the Nasdaq Composite dropped 0.93% to close at 7505.92 Published:3/6/2019 4:37:22 PM
[Markets] Dow Falls as Investors Eye Details From Trade Talks, Oil Prices Tumble The Dow Jones Industrial Average fell Wednesday as Wall Street awaited new details on trade talks between the U.S. and China. extended declines Wednesday, falling 8.3%, after CEO Larry Culp warned that free cash flow from the conglomerate's industrial division is likely to remain negative this year. jumped 23.4% after the apparel retailer reported strong holiday-quarter earnings and sales that topped Wall Street expectations. Published:3/6/2019 12:35:46 PM
[Markets] Boeing Slips After Qatar Airways CEO Says No Interest in Planned Mid-Sized Jet Qatar Airways CEO Akbar al-Baker told reporters in Berlin that his airline would phase out the 10-year old A-380 from 2023, adding he was "not interested" in Boeing's planned mid-market aircraft, which the Chicago, Illinois-based planemaker plans to launch the following year. Boeing shares were marked 1.77% lower by mid-day trading and changing hands at $422.51 each, a move that has taken around 50 points from the Dow Jones Industrial Average, which was pegged 130 point lower on the session. Airbus said last month it would formally scrap it struggling A380 jumbo jet program, adding the last of the last of the two-deck, 544-seat jumbo aircraft designed to challenge Boeing's 787 Dreamliner, will be delivered in 2021. Published:3/6/2019 11:35:47 AM
[Markets] Dow falls more than 150 points in late-morning trade as losses pick up steam The U.S. stock market late-morning Wednesday was trading near sessions lows as investors fought for a reason to buy stocks, and as investors awaited key data on employment. Most recently, the Dow was down 156 points, or 0.6%, at 25,650, while S&P 500 index fell 0.6% at 2,773, while the Nasdaq Composite Index retreated 0.8% at 7,518. Declines have come as there has been no fresh progress on negotiations between the U.S. and China on trade. Declines are setting up the worst weekly drop for stocks in 2019. Moreover, a report Wednesday showed the U.S. posted its widest monthly trade gap since 2008 in December and a record annual deficit in goods as economic growth underpinned higher spending by consumers and businesses. On top of that, private-sector labor from ADP showed that the U.S. added 183,000 jobs in February, a smaller level than expected. The report comes ahead of the more closely followed nonfarm-payroll report due to be released Friday. Investors also are awaiting the latest policy update from the European Central Bank on Thursday, as global growth in the region slows. Published:3/6/2019 11:05:13 AM
[Markets] GE's stock tumbles again after downbeat cash flow outlook and analyst call Shares of General Electric Co. tumbled 6.8% in premarket trade Wednesday, to extend the previous session's 4.7% selloff following a downbeat cash flow outlook for the year. The stock is on track to erase all of the gains, and then some, on the back of the announcement last week that it was selling its biopharma business to Danaher Corp. for $21.4 billion in cash. "We disagree with the view that it's 'not that bad,' and while 'cutting numbers, reiterating buy' is fairly common from the sell side, we reject this approach of cut and push to next year," which has been going on for a very long time for some, wrote analyst Stephen Tusa at J.P. Morgan. "As long as this sentiment prevails, we don't think the stock can bottom." He reiterated his neutral rating and stock price target of $6, which is 39% below Tuesday's closing price, but Tusa said is starting to look "generous." CFRA analyst Jim Corridore said while he's not surprised by the negative cash flow outlook for this year, given the troubles at GE's power division, he's keeping his rating at buy as he believes the company is moving in the right direction. The stock has plunged 29.7% over the past 12 months, while the Dow Jones Industrial Average has gained 3.7%. Published:3/6/2019 8:34:19 AM
[Markets] Disney streaming service could amass 160 million subscribers, J.P. Morgan says J.P. Morgan analyst Alexia Quadrani penned an upbeat note on Walt Disney Co.'s prospects in streaming on Wednesday, writing that she estimates the forthcoming Disney+ service will ultimately be able to attract 45 million subscribers domestically and 160 million subscribers in total. "According to the U.S. government census, there are 34.5 million family households in the U.S. with children under 18, and we believe 75% of these households will eventually sign up for Disney+ due to the service's popular appeal, exclusive content, and brand recognition," she wrote. In addition, Quadrani expects that 30% of U.S. families without children will sign up for the service due to the presence of Marvel and Star Wars content. Internationally, Quadrani predicts that 115 million subscribers will ultimately sign up, though she warns that the growth trajectory will depend on when Disney gets some of its content rights reverted back. She wrote that Disney's ESPN+ streaming service has "surpassed expectations" with 2 million subscribers as of an announcement in early February. "We view streaming services as a positive addition to Disney's ecosystem," Quadrani said. Disney shares are down 0.3% over the past three months, while the Dow Jones Industrial Average is up 3.4%. Published:3/6/2019 8:05:31 AM
[Markets] The Dow Jones Industrial Average Is Still Waiting For a Trade Deal Dow futures are ticking lower after the OECD lowered its global growth forecast, and investors continue to wait for detail on a trade deal between the U.S. and China. Published:3/6/2019 6:34:44 AM
[Markets] US Futures Slide On Lack Of New "Trade Deal Optimism"; Dollar Ramps Higher

The historic, post-Christmas rally struggled for a second day, with the S&P still unable to decisively cross the critical 2800 resistance level and sliding in a quiet overnight session, while European shares also faded after a mixed Asian session as investors await fresh catalysts on trade and monetary policy. Meanwhile, the dollar advanced for a sixth day as Treasuries edged higher.

Carmakers fell and miners rose, leaving the Stoxx Europe 600 Index little changed with the DAX underperforming peers as auto names weigh alongside banks and insurance names with markets shrugging off a downbeat global economic assessment from the OECD. European banks were again hit by the ever-widening money-laundering scandal which seems to add more names with every passing day. On Wednesday, RBS said it was looking into allegations of money laundering through certain Dutch banks and reports this may concern an ABN Amro business line acquired by RBS. Investors can now add regulatory penalties to the list of bank sector worries after bank were the second-worst Stoxx 600 performer in 2018, hit by political uncertainty, a flattening yield curve and low rates. That relative peformance has continued to send the price ratio vs the Stoxx 600 lower this year, with the earnings season disappointing and consensus 12-month forward EPS estimates falling almost 4%.

Unable to rise above 2,800 for two weeks in a row, S&P 500 futures had no other choice but to decline. Eminis have now been trading in a tight, 20 point range sine mid-February.

Earlier in Asia, a familiar pattern emerged as Chinese shares once again outperformed as the local stock bubble is rapidly scrambling to recreate its 2015 majesty while Japanese equities dropped. The Shanghai Composite surged another 1.6%, rising above 3,100 after a last hour ramp perhaps the result of China's National Team attempts to herd even more mom and pop investors into the rising momentum. Volumes were again massive, with over 1 trillion yuan trading on Wednesday.

Elsewhere in Asia, RBA Governor Lowe reiterated his neutral stance nothing that the RBA has flexibility to adjust monetary policy in either direction, probabilities of a rate hike or cut are evenly balanced. He also stated it is hard to imagine a rate hike this year, and it is unlikely inflation will be a problem anytime soon. Lowe added that he is confident inflation will get back to the middle of 2-3% target range, Q3 and Q4 GDP likely to be significantly below trend. The AUD was hit hard when the Australian Real GDP for Q4 printed at 0.2% vs. Exp. 0.3% (YY Q4 2.3% vs. Exp. 2.5%).

Investors remain jittery, looking for hints on what Trump will do next on negotiations with China as trade remains high on the agenda. Meanwhile, the bond market signals more caution and Morgan Stanley is now predicting Treasury yields will drop as low as 2.35% by the end of the year. Traders will also get a jolt from the ECB's policy decision today when Mario Draghi may announce the long overdue TLTRO.

In rates, traders saw a pop higher in German Bund futures, with 10y and 30y yields initially -3bps as the curve bull flattened, before gains were pared dragging USTs off the highs, while peripheral bonds tightened modestly to core. Gilt yields were ~2bps lower across the curve as Brexit anxiety remains elevated. The Bloomberg dollar index traded in the middle of its overnight range, stronger for the sixth day and defying Trump's latest dollar bashing.

The pound weakened on speculation U.K. Prime Minister Theresa May could be in for another bruising vote in Parliament on Brexit, and the Australian dollar sank after weak GDP data on the economy spurred bets on interest-rate cuts. Emerging-market stocks gained for a fourth day and currencies were steady.

In Central bank news, BoJ Board Member Harada (Dissenter) opposed the BoJ's new forward guidance due to the view that guidance must be data-dependent and not calendar-dependent. In his view, forward guidance must have a commitment to keep rate low until inflation beats expectations. He also said underlying inflation weakness could weigh on inflation expectations and delay the acceleration of inflation, and despite the rising household income.

In geopolitical news, North Korea was reportedly taken aback by the sudden end to the Trump-Kim summit; and it will take North Korea some time to review what happened; according to Korean press citing the South Korean government. US National Security Adviser Bolton said US will increase sanctions on North Korea if it does not move towards denuclearisation.

In the latest Brexit news, EU and UK Brexit talks ended with no agreement but are to continue on Wednesday; according to sources. Furthermore, an EU official said the talks did not go well. A senior UK minister, who is directly involved in Brexit planning, said: "It's inevitable there would have to be a technical extension” and added that a month is unlikely to be enough, two months would be needed to get the legislation through, and this is accepted in government. If UK MPs reject PM May's deal a second time next week, parliament would take control and force a softer Brexit; according to Chief Whip Smith.

Elsewhere, commodities were led lower by oil after API showed a massive buildup in U.S. crude stockpiles.  Brent (-0.2%) and WTI (-0.9%) prices are in the red following the larger than expected build in API Crude Inventories yesterday of 7.4mln vs. Exp. 1.2mln. If the API build is confirmed by EIA data later on today this would be a large contrast to the prior draw. That said, UBS highlighted that a build of this size would not mean a major deviation from the seasonal average within the context of the prior two months data, as such should not result in a lasting impact on oil prices. Elsewhere, China have cancelled Canadian Co. Richardson Internationals registration to ship canola to China; following this, China’s foreign ministry state that harmful pests have been discovered in samples taken from Canadian Canola oil and a serious problem has been highlighted in one Co’s shipments. Although, it is currently not clear which company this refers to. Gold (-0.1%) is approaching the bottom of its narrow USD 4/oz range, but is largely unchanged on the day. Elsewhere, the World Platinum Investment Council stated that the global platinum market will this year experience the largest surplus since around 2013.

Besides the ECB, data on ADP private payrolls, mortgage applications, and the trade balance are due. Earnings include Dollar Tree and Brown-Forman.

Market Snapshot

  • S&P 500 futures down 0.2% to 2,786.50
  • STOXX Europe 600 unchanged at 375.63
  • MXAP down 0.04% to 159.45
  • MXAPJ up 0.1% to 526.46
  • Nikkei down 0.6% to 21,596.81
  • Topix down 0.3% to 1,615.25
  • Hang Seng Index up 0.3% to 29,037.60
  • Shanghai Composite up 1.6% to 3,102.10
  • Sensex up 0.6% to 36,646.46
  • Australia S&P/ASX 200 up 0.8% to 6,245.62
  • Kospi down 0.2% to 2,175.60
  • German 10Y yield fell 1.5 bps to 0.153%
  • Euro down 0.04% to $1.1303
  • Brent Futures down 0.6% to $65.46/bbl
  • Italian 10Y yield fell 3.1 bps to 2.349%
  • Spanish 10Y yield fell 1.7 bps to 1.137%
  • Brent Futures down 0.6% to $65.46/bbl
  • Gold spot down 0.1% to $1,286.42
  • U.S. Dollar Index up 0.05% to 96.92

Top Overnight News by Bloomberg

  • President Donald Trump is pressuring U.S. trade negotiators to cut a deal with China soon in hope of fueling a market rally, as he grows increasingly concerned that the lack of an agreement could drag down stocks, according to people familiar with the matter
  • Wall Street could face fresh restrictions on bonus payments as regulators appointed by President Trump consider dusting off post-crisis rules that have long been on the back burner, according to two people familiar with the matter
  • The global economy is suffering more than expected from trade tensions and political uncertainty which are clouding prospects particularly in Europe, according to a gloomy report from the OECD
  • Japan’s economy is at risk of sliding into a recession after a demand-sapping sales tax hike planned later this year, despite a raft of government measures to limit its impact, according to Bank of Japan board member Yutaka Harada
  • China’s yuan has been the hottest carry trade in Asia this year, thanks to its rapid advance and muted price swings
  • When Qatar sells debt, it sells big. The gas-rich nation is planning a three-part issuance less than a year after raising $12 billion in one of the largest offerings in emerging markets. It’s joining a host of borrowers across developing nations that raised $336 billion in 2019, a record on a year-to-date basis, according to data compiled by Bloomberg

Asian stocks were mixed following a muted lead from Wall Street in which the Dow, S&P and Nasdaq all closed just below breakeven. ASX 200 (+0.7%) shrugged off poor economic data and advanced as the material and mining sectors lead the gains, while Nikkei 225 (-0.6%) underperformed as the index is weighed on by a marginally firmer domestic currency alongside China-exposed sectors after China’s announcement of tax cuts yesterday. Elsewhere, Shanghai Comp. (+1.6%) and Hang Seng (+0.2%) gained momentum following yesterday’s NPC announcement alongside effects from the MSCI upgrade last week. RBA Governor Lowe reiterated his neutral stance; RBA has flexibility to adjust monetary policy in either direction, probabilities of a rate hike or cut are evenly balanced. He also stated it is hard to imagine a rate hike this year, and it is unlikely inflation will be a problem anytime soon. Lowe added that he is confident inflation will get back to the middle of 2-3% target range, Q3 and Q4 GDP likely to be significantly below trend. Australian Real GDP QQ SA Q4 0.2% vs. Exp. 0.3% (Prev. 0.3%) Australian Real GDP YY SA Q4 2.3% vs. Exp. 2.5% (Prev. 2.8%).

Top Asian News

  • Trump Is Said to Push for China Deal With Market Gains in Mind
  • U.S., China Trade Deal Leaves Currencies as Fighting Ground
  • Midea Is the Latest China Stock to Near Foreign Holding Limit

Major European indices are moving towards being unchanged [Euro Stoxx 50 -0.1%] after opening lower and subsequently extending losses; in spite of largely stronger performance overnight. The FTSE 100 (+0.1%) is marginally outperforming its peers boosted by strong performance in DS Smith (+4.1%) after the Co. announced they are selling their plastics division for GBP 585mln. Additional support for the index stems from heavyweights British American Tobacco (+3.8%) and Imperial Brands (+1.3%) in the green following FDA Chief Gottlieb resigning, as his tenure was highlighted by a high-profile push to lower youth smoking including e-cigarettes; this may have also result in some upside for US tobacco names such as Phillip Morris. Other notable movers include Schaeffler (-8.4%) at the bottom of the Stoxx 600 following the announcement of a restructuring program and issuing a warning about a challenging and demanding auto market ahead. Separately, Subsea 7 (+3.7%) are higher after they were awarded 3 contracts by Woodside, describe as major contracts, which may exceed USD 750mln in value.

Top European News

  • Not Enough Votes Yet as Brussels Talks Continue: Brexit Bulletin
  • Greek Stocks Party Like It’s 1999 as No-Growth Era Seen Over
  • L&G Tumbles as Cash Boost From Retirement Business Disappoints
  • Biggest Fortune in EU’s East Gets Caught Up in Huawei Scandal

In FX, the DXY hovers just shy of the 97.000 handle and Fib resistance a whisker above (97.004 vs Tuesday’s 97.017 peak). Usd/Jpy is back below 112.00 after what appears to have been a false break-out to circa 112.12 yesterday (and also a fleeting Fib breach), but the pull-back could be shallow given 1.2 bn option expiries running off from 111.80-112.00 at the NY cut. The Franc is holding just off 1.0055 lows and pivoting 1.1350 vs the single currency, while Eur/Usd remains anchored around 1.1300 with 1.1305 eyed as a key chart point on a closing basis and expiries also in the mix as 1 bn resides at the 1.1300 strike.

  • AUD/NZD – No respite for the Aussie as a disappointing Q4 growth update extends the run of mainly sub-forecast data releases and adds more justification for the RBA’s shift to neutral policy mode. In fact, comments from Governor Lowe in the run up to the GDP update could be construed as more dovish on balance given that he effectively ruled out any prospect of tightening this year, while reiterating equal odds of a hike or cut in terms of the next rate move, and the market certainly took heed as Aud/Usd collapsed from just under 0.7100 to circa 0.7024 amidst a cascade of calls for 2 OCR eases of 25 bp by the end of 2019 in line with Westpac’s pre-emptive downgraded forecasts in February. Predictably, the Kiwi saw some contagion to a low not far from 0.6750 at one stage, but Nzd/Usd has rebounded relatively firmly to 0.6780+ on favourable cross-winds as Aud/Nzd extends losses through 1.0400 to 1.0360. Note, however, Aud/Usd may yet derive some traction and get a reprieve to stave off a more concerted test of 0.7000 via decent option expiry interest between 0.7045-50 (1 bn).
  • GBP/CAD – The Pound continues to be buffeted by fluctuating Brexit sentiment after a brief boost courtesy of hawkish-leaning remarks from BoE Governor Carney late yesterday, with Cable back down near 1.3100 and a recent double-base a few pips short of the big figure, while Eur/Gbp has rebounded to the 0.8600 area again. Back to Brexit, and the bottom line remains no further progress after latest high level talks between UK and EU officials and apparently quite terse negotiations in Brussels as the baton passes to less senior personnel today. Turning to the Loonie, another downturn in crude prices and ongoing angst between Canada and China has culminated in Usd/Cad creeping up further towards the 1.3400 level, as offers said to be layered from 1.3375 to the next round number are soaked up, but the looming BoC policy meeting will likely provide more impetus. On that note, options pricing suggest a break-even of 67 pips for the impending event.

In commodities, Brent (-0.2%) and WTI (-0.9%) prices are in the red following the larger than expected build in API Crude Inventories yesterday of 7.4mln vs. Exp. 1.2mln. If the API build is confirmed by EIA data later on today this would be a large contrast to the prior draw. UBS highlight that a build of this size would not mean a major deviation from the seasonal average within the context of the prior two months data, as such should not result in a lasting impact on oil prices. Elsewhere, China have cancelled Canadian Co. Richardson Internationals registration to ship canola to China; following this, China’s foreign ministry state that harmful pests have been discovered in samples taken from Canadian Canola oil and a serious problem has been highlighted in one Co’s shipments. Although, it is currently not clear which company this refers to. Separately, US National Security Advisor Bolton says he is looking at fresh sanctions against Venezuela to increase the pressure on President Maduro. Gold (-0.1%) is approaching the bottom of its narrow USD 4/oz range, but is largely unchanged on the day. Elsewhere, the World Platinum Investment Council stated that the global platinum market will this year experience the largest surplus since around 2013.

US Event Calendar

  • 7am: MBA Mortgage Applications, prior 5.3%
  • 8:15am: ADP Employment Change, est. 190,000, prior 213,000
  • 8:30am: Trade Balance, est. $57.9b deficit, prior $49.3b deficit
  • 2pm: U.S. Federal Reserve Releases Beige Book

Central Banks

  • 12pm: Fed’s Williams Speaks to Economic Club of New York
  • 12pm: Fed’s Mester Participates in Moderated Discussion
  • 2pm: U.S. Federal Reserve Releases Beige Book

DB's Jim Reid concludes the overnight wrap

The “March Flu” lives on with some power but I’m returning to functioning adult duties but yesterday was another day to reflect on getting older and being more out of touch. To set the scene as a music geek there was a time between around 1980 and maybe the early 2000s when I could have probably recited every number one single over the period in the UK in chronological order. However at some point in the last 10-15 years I lost touch with the charts even if I still try to discover new music when I can. Anyway at the beginning of the year I heard this great new song on a random Spotify (venue of some great DB podcasts) playlist and have played it to death on my headphones since. It was my little discovery/secret and made me feel cool that I still had an ear for music. Anyway on randomly flicking through the newspaper yesterday I stumbled across the U.K. singles chart and to my confusion discovered that the song I thought was my little secret is actually number 1 in the charts. Nice to be so out of touch that you’re secretly in touch. The song is called “Someone You Loved” by Lewis Capaldi. To be honest there are a lot of similarities to “Someone Like You” by Adele. So if that song is your bag then please hunt out. If it’s not you probably should avoid. But then again if you’re under 30-35 you probably know all this already.

After the trade euphoria that kick started the week, markets have quickly become stuck in a soggy patch with no real catalysts to push them one way or the other with any conviction. The good news is that we’ve got an ECB meeting and a payrolls Friday to look forward to in the last two days of this week so hopefully that will inject a bit of energy back into markets again. In the meantime, equity markets were a little directionless yesterday before the S&P 500 ended -0.11%. That is now five down days in the last six however the cumulative loss during that run is only -0.23% so it’s hardly been a material move. Elsewhere, the NASDAQ (-0.02%) and DOW (-0.05%) also just about closed in the red while the STOXX 600 (+0.15%) managed to finish onside having clawed back earlier losses. Part of the underperformance in the US might have been due to Secretary of State Pompeo talking about Trump being ready to walk away from a trade agreement with China unless he secures a “perfect deal” however the reality is that Pompeo has been less directly involved in talks between the two sides so the comment was taken with a bit of a pinch of salt.

Corporate headlines also impacted markets, the biggest impact coming from comments from GE's CEO Larry Culp. He said at a conference that he expects free cash flow from the firm's industrial business to be negative this year, after a healthy positive cash flow of $4.5bn last year. GE stock fell -4.72% and its 2035 bonds traded +10bps. Weakness in GE had weighed on corporate credit last year, but indexes of US IG and HY cash credit closed near flat yesterday. In broader equities, the industrials sector led declines in the S&P 500, dropping -0.64%. On the other hand, a bright spot was the US retail sector, which advanced +0.26% after Target (+4.60%) and Kohl's (+7.33%) both announced profit projections for this year that topped consensus expectations.

As for government bond markets, well Bunds traded as high as 0.1838% intraday yesterday post the more palatable PMIs (more on the below) but ultimately yields faded as sentiment turned with Bunds eventually finishing just +1.0bps higher at 0.168%. BTPs (-3.1bps) actually outperformed after Italy’s Q4 GDP reading was revised up to a slightly smaller contraction (-0.1% qoq from -0.2%) – albeit one that still left Italy in a technical recession at the end of last year.

Meanwhile, Treasuries also retraced an early selloff of +2.5bps to close the day flat at 2.72% (-1.4bps this morning). A fairly decent ISM non-manufacturing (see below) was offset somewhat by dovish comments from the Fed’s Rosengren. This was a little bit of a surprise given that he was one of the more hawkish officials who had worried about overheating risks in the past. Instead, Rosengren said that “it may be several meetings before the Fed has a clear read on whether economic risks are becoming reality”. So that puts Rosengren more in the patience camp for now.

This morning in Asia markets are trading mixed with the Nikkei (-0.69%) and Kospi (-0.32%) down while the Hang Seng (+0.31%) and Shanghai Comp (+0.94%) are up. Elsewhere, futures on the S&P 500 (-0.28%) are heading lower and the Australian dollar is weak (-0.71%) this morning as Australia’s Q4 GDP came in one tenth lower than expected at +0.2% qoq leading to traders increasing their probability of a rate cut. In other news, the BoJ has increased the buying of bonds in the 5y-10y maturity bucket by JPY 50bn at today’s regular operation (JPY 480bn today vs. JPY 430bn in last week). However, the increase was expected after the BOJ last week tweaked its monthly bond-purchase plan and reduced the number of days it would buy 5-10yr bonds to four in March, from five in February.

Overnight, BoJ board member Yutaka Harada has said that Japan’s economy might slide into a recession after a planned sales tax hike later this year, despite a raft of government measures to limit its impact. He cited the example of the 2014 sales tax hike which hit consumption hard and as a result the BoJ ramped up its stimulus 6 months into the hike. Harada is definitely at the dovish end of the committee.

Staying in the region, with China’s NPC into its second day, yesterday our China Chief Economist Zhiwei Zhang outlined his summary of the government’s 2019 work plan which you can find here . Zhiwei believes that the speech sent more signals of policy easing – both fiscal and monetary – and as such he now expects two cuts to the benchmark lending rate of 25bps each in Q2 and Q3.

Back to the PMIs, upward revisions to the core and better than expected non-core readings meant we saw the services reading for the Euro Area revised up half a point to 52.8 and therefore the highest since November. That left the composite at 51.9 which means it finally snapped a run of five consecutive monthly declines. So finally some signs of improving momentum in Europe, or at least in the services sector. Germany’s services reading was revised up from 55.1 to 55.3, France to 50.2 from 49.8 while there were beats for Italy (50.4 vs. 49.5 expected) and Spain (54.5 vs. 54.3 expected). All eyes turn to the ECB tomorrow however one has to expect that the data plays into the wait-and-see message that we’ve been getting from officials of late.

We should also note that the services reading for the UK also surprised to the upside yesterday at 51.3 (vs. 49.9 expected) – up 1.2pts from January. That being said the underlying details were weaker including the employment component. Sterling closed flat, with downside pressure from Brexit headlines offset by positive monetary policy signals. First, Bloomberg headlines popped up just after lunch suggesting that no breakthrough was expected at the Brexit talks yesterday in Brussels. A further story suggested that no agreement was likely on the backstop before the end of this week and that talks could potentially stretch into the weekend (how many times have we said that on both pure EU issues and with Brexit). On the other hand, the pound got some support via comments from Bank of England Governor Carney, who said that "the path of interest rates is not quite high enough," suggesting that current pricing for the next rate hike for Q4 this year may not be in-line with his own expectations. Staying in the U.K., Bloomberg reported (citing sources) yesterday that the UK PM May’s chief whip Julian Smith is not confident that he has the numbers for March 12th Brexit vote and has predicted that in the votes that follow, a no-deal Brexit would be taken off the table, and the government would be instructed to seek an extension to talks. He also said that he expected lawmakers to put down further amendments that would pass and put the UK on course to staying in the customs union. Sterling is trading weak (-0.32%) this morning as Reuters overnight confirmed the above Bloomberg story that the Brexit talks yesterday didn’t yield any progress and cited an EU official as saying they didn’t go well!

Back to yesterday’s data and as well as the PMIs, we also got the February ISM non-manufacturing reading in the US which looked particularly impressive at a headline level (59.7 vs. 57.4 expected) after jumping 1.7pts and to the highest since November last year. The new orders component also rose 7.5pts to 65.2 and the highest since 2005 however the one small negative was a slight drop in the employment component to 55.2 from 57.8 last month. That said, today’s ADP (190k expected) is likely to be more important for setting payrolls expectations this Friday.

As for the other US data yesterday, new home sales for December printed at 621,000, better than expected but along with a downward revision to the prior month, leaving the overall outlook roughly unchanged. The Treasury's monthly budget statement showed a surplus of $8.7bn for January, marginally smaller than expected. These statement will become more interesting when we get deeper into tax season over the next few months, to help us better gauge the impact of last year's tax cuts. Finally, the final Markit composite PMI for February was revised lower by 0.3pts to 55.5, still its highest level since last July.

Finally, in terms of the day ahead, we’ve got no data releases scheduled in Europe this morning while in the US the focus should be on the February ADP employment change reading, and the December trade balance. Later this evening we’ll also get the Fed’s Beige Book while the Fed’s Williams and Mester are due to speak this evening in New York and Ohio, respectively. The BoE’s Cunliffe and Saunders are also slated to speak while the OECD’s interim economic outlook is also due to be released.

Published:3/6/2019 6:34:44 AM
[Markets] The Dow Slips 13 Points Because the Bull Market Wants a Trade Deal for Its 10th Birthday The Dow Jones Industrial Average fell 0.05% to close at 25,806.63. The S&P 500 lost 0.11% to end at 2789.65, and the Nasdaq Composite slipped 0.02% to close at 7576.36. Published:3/5/2019 5:00:58 PM
[Markets] Dow transports on the brink of longest losing streak in about 10 years The Dow Jones Transportation Average on Tuesday book its longest stretch of consecutive losses since 2011, and another decline would represent its longest skid in about a decade, according to FactSet data. Published:3/5/2019 4:33:37 PM
[Markets] Dow transports just booked their longest losing streak in 9 years The Dow Jones Transportation Average notches its longest stretch of consecutive losses since 2011, according to FactSet data. Published:3/5/2019 4:00:12 PM
[World] Market Extra: Dow transports just booked their longest losing streak in 9 years The Dow Jones Transportation Average notches its longest stretch of consecutive losses since 2011, according to FactSet data.
Published:3/5/2019 4:00:11 PM
[Markets] Walgreens price target cut to $67 from $77 at Morgan Stanley Analysts at Morgan Stanley cut their price target on shares of Walgreens Boots Alliance Inc. to $67 from $77 on Tuesday, citing a "combo of decelerating generic purchasing benefit, lower brand inflation and vertical deals closing" that could make it difficult for management to meet earnings expectations. Shares of Walgreens fell 1.3% on Tuesday morning. The drugstore chain recently acknowledged that it is facing reimbursement headwinds as well as pressure from deflation of generics. Morgan Stanley analysts led by Ricky Goldwasser said generic manufacturers have scaled back channel discounts to large purchasing groups, including Walgreens, and that the company is seeing higher reimbursement pressure given the lack of offsetting subsidies from other businesses. Goldwasser maintained his equal-weight rating on Walgreens stock. Shares of Walgreens have fallen 9.4% in the past 12 months, while the Dow Jones Industrial Average has gained 3.8%. The S&P 500 has gained 2.6%. Published:3/5/2019 1:01:08 PM
[Markets] Dow Moves Higher as Wall Street Monitors Trade Developments The Dow Jones Industrial Average turned higher Tuesday, after slumping during the previous session and closing at a two-week low. posted stronger-than-expected fourth-quarter earnings after a solid holiday shopping season that saw increased foot traffic and higher same-stores sales. Stocks moved higher on Tuesday, March 5, following a slump for equities in the previous session as Wall Street lost momentum after a report said China and the U.S. were in the final stages of completing a trade deal. Published:3/5/2019 12:29:47 PM
[Markets] US STOCKS-Wall Street dips as investor monitor progress on trade talks U.S. Secretary of State Mike Pompeo said in a media interview that President Donald Trump will reject any trade deal that is not perfect, but added that the United States will still keep working on an agreement. The S&P 500, which closed last week above the significant 2,800-point mark for the first time since Nov.8, failed to hold on to that level on Monday despite a solid start on the back of a report that a trade deal could happen as early as March end. The Dow Jones Industrial Average and the S&P 500 posted their biggest drop in nearly a month in the previous session. Published:3/5/2019 9:32:49 AM
[Markets] Wall Street opens flat, investors focus on trade talks (Reuters) - U.S. stocks opened little changed on Monday, as investors awaited fresh developments in the U.S.-China trade talks. The Dow Jones Industrial Average rose 9.42 points, or 0.04 percent, at the ... Published:3/5/2019 8:59:40 AM
[Markets] US STOCKS-Wall Street set for muted open, progress on trade talks in focus Wall Street was set to open slightly higher on Tuesday, a day after the Dow Jones Industrial Average and the S&P 500 posted their biggest drop in nearly a month, as investors awaited fresh developments on the U.S.-China trade talks. U.S. Secretary of State Mike Pompeo said in a media interview that President Donald Trump will reject any trade deal that is not perfect, but added that the United States will still keep working on an agreement. Published:3/5/2019 8:00:33 AM
[Markets] Global Rally Fizzles, S&P Futures Capped At 2,800

European stocks and US futures were higher on Tuesday following a mixed session in Asia, although traders faded earlier euphoria and the Stoxx 600 was little changed, erasing a gain of as much as 0.3% as traders awaited more details on a potential US-China trade deal, after earlier in the day China pledged more stimulus to stabilize slowing growth when it predicted its 2019 GDP would shrink to "6-6.5%."

Europe's Stoxx 600 Index inched fractionally higher, led by gains in telecommunications shares, pushing the broader index deeper into overbought territory...

... with traders pleasantly surprised for once by stronger European Services PMIs across the board, suggesting Europe's economic slowdown may have found the reverse gear:

  • EU Markit Services Final PMI (Feb) 52.8 vs. Exp. 52.3 (Prev. 52.3)
  • Italian Markit/IHS Services PMI (Feb) 50.4 vs. Exp. 49.4 (Prev. 49.7)
  • French Markit Services PMI (Feb) 50.2 vs. Exp. 49.8 (Prev. 49.8)
  • UK Markit/CIPS Services PMI (Feb) 51.3 vs. Exp. 49.9 (Prev. 50.1)

Tobacco, healthcare, consumer staples, and other safe havens led the gains amid broader gloom about the global economy. British American Tobacco, Anheuser Busch and Unilever were up between 1.2% and 2.1%. Among individual movers, Evonik shares were close to four-month highs after the German chemicals group reported a slight rise in profits thanks to its coating additives and engineering plastics division. Vodafone added 2.3 percent after announcing plans to issue 4 billion euros ($4.5 billion) worth of convertible bonds to help finance its takeover of some Liberty assets. Elsewhere in the UK, British product testing company Intertek was the biggest faller in London, with a dealer attributing the drop to profit taking after largely in line full-year results. Luxury goods companies Richemont and Moncler were each down more than 3 percent after downgrades.

Meanwhile, in the US. S&P index futures traded higher following a lackluster start, although off their highs as the critical resistance at 2,800 is once again proving a solid barrier for the bulls.

Futures rebounded after yesterday's surprising selloff, which took place despite the latest bout of "trade talk optimism", and after stocks in Europe and Asia were buoyed on Monday by news that the world’s two-largest economies were close to a trade deal, investors are now hungry for concrete details before they push a global equities rally further. Meanwhile, trade and slowing growth are on the agenda as China’s most powerful officials gather in Beijing, while investors will get the latest read on the U.S. economy with the monthly jobs report Friday.

Earlier, during the Asian session shares declined in Japan, Korea and Australia and posted modest gains; the Shanghai Comp. nursed some opening losses following the release of the NPC work report which pledged to expand infrastructure investments and cut manufacturing VAT to 13% from 16%, whilst transport and construction VAT is to be reduced to 9% from 10%. Although the release of a dismal Caixin services PMI briefly dented the index, Chinese stocks closed at session highs,  up 0.8%.  The unchanged Hang Seng conformed to the overall risk-averse tone with its heavy-weight financial sector as the marked underperformer.

As part of the annual work report to the National People’s Congress, China lowered its 2019 GDP growth target to the range of 6.0-6.5% from “around 6.5%” and maintained CPI target at 3.0%, both as expected. Budget deficit for 2019 was set at 2.8% vs. 2.6% in 2018. China stated that fiscal policy to be proactive and monetary policy to be prudent will not resort to flood-like stimulus, whilst also saying it will keep the Yuan basically stable at reasonable equilibrium and is to increase the flexibility of the Yuan exchange rate while keeping liquidity reasonably ample. China will expand infrastructure investments in 2019 and plans to cut manufacturing VAT to 13% from 16%, as touted, VAT for transport and construction sectors to be reduced to 9% from prior 10%. China will make economic policy for forward-looking, targeted and effective whilst maintaining pace and strength in risk prevention, and higher budget deficit ration will leave more policy room for resolving potential risks. China will also step up targeted RRR cuts for smaller and medium-sized banks to support private and smaller firms. Growth in M2 Money Supply and social financial to be in-line with nominal GDP growth and basically the same as in 2018. China is to implement consensus reached between US and Chinese leaders in Argentina, but said it needs to brace for a tough economic battle.

While China's GDP cut underlined the strain that has slowed growth and roiled global markets, stimulus steps reassured investors that Beijing was serious about steadying the economy. “I think we all saw it coming. The growth trend was going to be cut and they’re saying the right things about stimulus. They have plenty of policy levers to pull if needed,” said Peel Hunt economics and strategy research analyst Ian Williams.

Still, European autos and suppliers, which rely on Chinese demand, were under pressure, with Continental and Daimler among the biggest fallers in Frankfurt.

In FX, the Bloomberg Dollar Spot Index headed for a fifth day of gains, with the greenback trading stronger versus most G-10 peers. China cutting its growth target kept high-beta currencies under pressure, while the euro failed to gain momentum after PMI data from the currency bloc beat expectations. Loonie drops to its lowest since Jan. 25 amid a deepening crisis in Justin Trudeau’s government. The yen dipped while the Australian dollar recovered somewhat after falling earlier to a three-week low, after the central bank left its benchmark interest rate unchanged.

In other overnight news, President Trump plans to terminate India and Turkey as Generalised System of Preferences beneficiaries. The move comes as India has not assured the US that it will provide "equitable and reasonable" market access and Turkey is now “sufficiently economically developed”; according to US Trade officials. Indian Trade Ministry Official, in response, said US and India were able to work out an extensive and reasonable package which covered almost all US concerns, although the advantages under the US GSP are "minimal and moderate".

In the latest Brexit tragicomedy news, UK PM May has been warned that she must whip her MPs to keep a no-deal Brexit on the table, whilst Senior Eurosceptics are convinced PM May will lose the vote on her Brexit deal and they do not expect Attorney General Cox to win concessions on the Northern Irish backstop. May is also reportedly considering a parliamentary vote on the UK's future relationship with the EU, as per demands from Labour MPs. A source close to a cabinet minister also stated that there seemed to be “no chance” that her deal would pass next week. Meanwhile, the FT reported that UK Trade Secretary Fox’s department has cancelled its regular meetings with business after the details of a prior meeting were leaked to the media.

In other news, Treasury Secretary Mnuchin has urged Congress to lift the debt limit as soon as possible and added that the new debt issuance suspension will be from March 4th to June 5th, although the Treasury can easily extend debt suspension measures into September and perhaps October

Elsewhere, West Texas Intermediate crude oil ticked lower though remained above the $56 a barrel level. Brent (+0.2%) and WTI (+0.1%) prices are firmer although they were initially weighed on by the deteriorating risk tone, and Chinese Caixin Services PMI coming in below expectations at 51.1 vs. Exp. 53.5; with the complex also affected by dollar strength. Elsewhere, the El Sharara oil field has reopened at a current output of 30k BPD, far below the field’s capacity of around 300k BPD; although NOC has stated that a return to regular output is expected in the next few days. Looking ahead we have API Weekly release later in the session, which last week saw crude stocks fall by -4.2mln.

Gold (-0.1%) is relatively unchanged with the metal affected by both the stronger dollar and the deterioration in the risk tone seen overnight; Gold futures slid for a seventh straight session, the longest slump since March 2017.

Market Snapshot

  • S&P 500 futures up 0.2% to 2,796.50
  • STOXX Europe 600 up 0.2% to 375.70
  • MXAP down 0.3% to 159.41
  • MXAPJ down 0.06% to 525.58
  • Nikkei down 0.4% to 21,726.28
  • Topix down 0.5% to 1,619.23
  • Hang Seng Index up 0.01% to 28,961.60
  • Shanghai Composite up 0.9% to 3,054.25
  • Sensex up 1% to 36,410.29
  • Australia S&P/ASX 200 down 0.3% to 6,199.29
  • Kospi down 0.5% to 2,179.23
  • German 10Y yield rose 2.0 bps to 0.178%
  • Euro down 0.1% to $1.1329
  • Brent Futures down 0.6% to $65.30/bbl
  • Italian 10Y yield rose 0.5 bps to 2.38%
  • Spanish 10Y yield fell 0.3 bps to 1.169%
  • Brent Futures down 0.6% to $65.30/bbl
  • Gold spot down 0.2% to $1,284.73
  • U.S. Dollar Index up 0.04% to 96.72

Top Overnight News

  • China’s GDP growth target in Premier Li Keqiang’s annual work report to the National People’s Congress was set at a range of 6-6.5% for 2019, compared with last year’s “about” 6.5% goal
  • Services expanded across the 19-nation euro area, bolstered by gains in Germany, Ireland and Spain, according to IHS Markit. That pushed a composite Purchasing Managers’ Index to 51.9, the highest in three months. An initial reading was for an increase to 51.4
  • The BOE is launching a new liquidity facility in euros in the final few weeks before the scheduled date for Britain to leave the European Union
  • Bank of Japan board members are likely to discuss a possible downgrade of their assessments of industrial production, exports and overseas economies when they meet to set policy next week, according to people familiar with the matter
  • The U.S. is giving American exporters a sizable tax break on the goods and services they sell overseas. But the benefit might not be enough to convince Corporate America to expand its U.S. operations beyond what it was already planning
  • Australia is no stranger to heated debate about the direction of its housing market. This week, that spread to mortgage debt too. Suncorp Group Ltd. said Monday that arrears on one parcel of securities are creeping past the level that triggers a change in how principal repayments are carved up

Asian stocks traded lacklustre following a disappointing lead from Wall Street after the Dow slipped 0.8%, weighed on by Boeing and Goldman Sachs shares, whilst the S&P shed 0.4% amid underperformance in healthcare names. Both indices marked their worst turnaround since early February. ASX 200 (-0.3%) extended losses from the open amid underperformance in the Consumer Discretionary and Material sectors, whilst Nikkei 225 (-0.4%) was weighed on by commodity exposed stocks. Elsewhere, Shanghai Comp. (+0.8%) nursed some opening losses following the release of the NPC work report which pledged to expand infrastructure investments and cut manufacturing VAT to 13% from 16%, whilst transport and construction VAT is to be reduced to 9% from 10%, although the release of dismal Caixin services PMI briefly dented the index. Finally, Hang Seng (U/C) conformed to the overall risk-averse tone with its heavy-weight financial sector as the marked underperformer.

Top Asian News

  • BOJ Is Said to Discuss Downgrading Its Views of Output, Exports
  • What Analysts Are Saying About New Philippine Central Bank Head
  • Mandiri Said to Eye Deal for $2 Billion StanChart- Backed Rival
  • Tencent Jumps to 6-Month High on Optimism Over Key Game

Major European indices are moving towards negative territory, after starting the session somewhat firmer [Euro Stoxx 50 U/C] moving more in-line with the relatively poor performance seen overnight in Asia which was dictated largely by a disappointing lead from Wall Street. Sectors are mixed, with some slight underperformance in consumer discretionaries; the sector is weighed on by poor performance in Daimler (-0.8%), which represents around 7% of the sectors weighting, who are in the red after executives at the Co. stated they may have to lift prices to pass on potential US tariffs. Other notable movers include, Evonik (+3.8%) who are at the top of the Stoxx 600 after earnings where they beat on Q4 revenue. At the other end of the Stoxx 600, and weighed on by broker moves, are Altice (-9.1%) as are Richemont (-3.2%), who were both downgraded at Barclays and BOFA Merrill Lynch respectively. Elsewhere, Vodafone (+1.9%) are higher after after the Co. state they intend to raise around EUR 4bln through sterling denominated MCBS and there is the potential for a share buyback as part of this. Separately, British American Tobacco (+1.0%) are higher as the Co. state there will be no impact from the Quebec charge to their ratio of adj. net debt to adj. EBITDA.

Top European News

  • Euro Area’s Resilient Services Sector Puts Mild Gloss on Economy
  • BOE Starts Euro Lending Facility to Cushion Brexit Risks
  • Italy’s State Lender May Back Elliott at Tel Italia Vote: Stampa

In FX, the DXY is off best levels, but the index continues to edge higher and just surpassed another chart resistance level (96.784) ahead of the next big figure on its way to a 96.815 high. The Greenback is still benefiting from weakness in rival currencies to an extent if not large part, or by default as a combination of negative/bearish factors inflict damage elsewhere (ranging from weaker macro fundamentals relative to the US, geopolitical instability/uncertainty and Central Bank policies aligning to Fed patience or even turning more dovish in certain cases, to name just a few). The DXY is now holding around 96.750 and well above Monday’s 96.331 low.

  • NZD/CAD - The 2 biggest G10 losers, with the Kiwi slipping below 0.6800 amidst a broader fall-out in risk currencies following a considerably weaker than forecast Chinese Caixin services PMI and confirmation that the NPC has downgraded its GDP sights to 6-6.5% from 6.5% previously. Meanwhile, the Loonie has extended recent losses to fresh multi-month lows circa 1.3350 vs its US counterpart with the added weight of heightened strains between Canada and China, plus another downturn in crude prices.
  • EUR/AUD/JPY/CHF - Also weaker vs Usd, as the single currency fails to derive much/any real support from surprise beats and upward tweaks to the Eurozone services PMIs, including the Italian headline that rebounded over 50.0 and was supplemented by an unexpected Q4 GDP revision to -0.1% q/q from -0.2%. Eur/Usd is hovering just above yesterday’s 1.1309 base and Fib support at 1.1305, but looks technically weak after breaching 1.1350 and key chart levels not far above. Similarly, the Aussie is struggling to mount a concerted recovery from recent lows towards 0.7100 after a dovish RBA policy statement on balance and yet more poor data overnight (Q4 net exports), and Aud/Usd could become increasingly drawn to a hefty option expiry down at 0.7050 as a result (1.6 bn). Meanwhile, the Yen and Franc continue to trade defensively on constructive US-China trade deal vibes, with Usd/Jpy edging back up to 112.00 and Usd/Chf straddling parity. Note also, decent option expiries in Usd/Jpy may impact into the NY cut, with 1 bn running off between 111.80-90 and 1.9 bn at the 112.00 strike.
  • GBP/SEK - Relative outperformers on better than expected UK and Swedish services PMIs vs other more downbeat economic indicators. However, Cable remains capped ahead of 1.3200 and the 100 WMA (1.3207), with the 10 DMA (1.3161) and a Fib (1.3130) now flanking the pair as it pivots 1.3150 awaiting any further Brexit developments. Eur/Sek has retreated through 10.6000 again and retesting bids around 10.5500.
  • EM - More angst for the Try and Inr after the US pulled the GSP plug from both nations, with the Lira attempting to pare losses and stay above 5.4000, but the Rupee staging a firmer recovery from almost 71.0000 at one stage as India’s Trade Ministry downplayed the impact of the trade pact being terminated.

In commodities, Brent (+0.2%) and WTI (+0.1%) prices are firmer although they were initially weighed on by the deteriorating risk tone, and Chinese Caixin Services PMI coming in below expectations at 51.1 vs. Exp. 53.5; with the complex also affected by dollar strength. Elsewhere, the El Sharara oil field has reopened at a current output of 30k BPD, far below the field’s capacity of around 300k BPD; although NOC has stated that a return to regular output is expected in the next few days. Looking ahead we have API Weekly release later in the session, which last week saw crude stocks fall by -4.2mln. Gold (-0.1%) is relatively unchanged with the metal affected by both the stronger dollar and the deterioration in the risk tone seen overnight. Elsewhere, metals were weighed on by China lowering its GDP growth target to 6.0-6.5% from the prior of around 6.5%. Separately, the amount of copper available in LME system, fell to the lowest level since 2005 of 21.6k tonnes.

Looking at the day ahead, we’ll get the final PMIs as well as the February ISM non-manufacturing (+0.6pts to 57.3 expected) and December new home sales (-8.7% mom expected). Away from that we’re due to hear from Italy’s finance minister Tria this morning, before the BoE’s Carney speaks this afternoon before the House of Lord’s Economic Affairs Committee. The Fed’s Rosengren is also set to speak today.

US Event Calendar

  • 9:45am: Markit US Services PMI, est. 56.2, prior 56.2; Markit US Composite PMI, prior 55.8
  • 10am: ISM Non-Manufacturing Index, est. 57.4, prior 56.7
  • 10am: New Home Sales, est. 600,000, prior 657,000; New Home Sales MoM, est. -8.68%, prior 16.9%
  • 2pm: Monthly Budget Statement, est. $12.0b, prior $13.5b deficit

Central Banks

  • 8am: Fed’s Rosengren Speaks on Current Economic Outlook
  • 9:30am: Fed’s Kashkari Testifies Before Minnesota Senate Finance Panel
  • 11:30am: Fed’s Barkin Speaks at the Rural Economy

DB's Jim Reid concludes the overnight wrap

The flu-inspired daze continues. I can’t remember a four day period where I’ve slept as much as this one, albeit punctuated at regular intervals with choking coughing fits. If I make it into the city today please give me a wide berth for the sake of you and your family.

Markets seemed like they were suddenly struck down by a nasty ailment yesterday as the early optimism sparked by Asia this time yesterday reversed spectacularly by US lunchtime. Despite opening +0.47% higher, the S&P 500 ended up closing -0.39% lower, albeit well off the intraday lows of -1.29%. The DOW (-0.79%) and NASDAQ (-0.23%) had similar trajectories. There was not a clear macro catalyst, but it seemed like political tensions played a prominent role in the selloff, as headlines (per Bloomberg) surfaced about House Democrats deepening and broadening their investigations of the President. The House Judiciary Committee sent requests for documents to 81 entities, including the President's son, his former CFO, and his lawyer. The VIX index mirrored the move in cash equities, rising as much as +3.1pts and on track for its sharpest rise since Christmas Eve before moderating in the afternoon to end end +1.06pts higher at 14.63.

Further weighing on sentiment was negative news in the healthcare sector, with the S&P 500 healthcare index dropping -1.34%. Despite making up only 14% of the S&P 500 by market cap, it drove over half of yesterday's declines. Drugmaker Eli Lilly (-1.07%) announced that it would offer its insulin product at half price, possibly in response to political pressure over high pharmaceutical prices. The managed care sector (-4.41%) had its worst day since 2015, partially on worries over political risks and partially due to a positioning unwind. Data showed that the largest US-traded healthcare ETF saw outflows of -$855million last week, its most since 2015 as well.

This morning the focus has quickly turned to China’s National People’s Congress where the early headlines (per Bloomberg) are suggesting that China will resort to moderate fiscal stimuli to support slowing growth as China announced a fiscal deficit target of 2.8% of GDP in 2019 versus 2.6% in 2018 while pledging a “noticeable decrease” in the tax burdens for major industries. Premier Li Keqiang’s annual work report announced total tax and social security fees cuts of CNY 2tn ($ 298bn). China is now targeting GDP growth in the range of 6%-6.5% in 2019 (vs. last year's goal of c. 6.5%), marking a shift from previous practice of using a point figure. The work report also indicated that further cuts to the required reserves ratio for smaller banks are planned. At first glance much of the above has been expected so no major surprises here. Chinese equity markets are seeing small gains this morning though with the Shanghai Comp (+0.11%) and Shenzhen Comp (+0.75%) both up following the news on tax breaks and also on the story yesterday that China is planning a three percentage point cut to the top VAT bracket – news that was also anticipated. We should note that we’ve had the remaining February Caixin PMIs in China too this morning with the composite reading at 50.7 (vs. 50.9 last month) and services PMI decelerating to 51.1 (vs. 53.5 expected). So a bit disappointing.

Sentiment is not as rosy across the remainder of Asia with markets largely following Wall Street's lead from yesterday. The Nikkei (-0.46%), Hang Seng (-0.03%) and Kospi (-0.55%) are all down. Not helping sentiment overnight was news from China's Commerce Minister Zhong Shan that it will take more efforts by China and the US to reach an agreement on trade. He suggested talks were difficult due to differences in culture and stages of development and that both sides need to meet each other half way to get a deal. So a slightly more cautious view than that seen of late. Elsewhere, futures on the S&P 500 are largely trading flat (-0.03%) while all G-10 currencies are trading weak (down in the range of -0.1% to -0.4%) this morning. In terms of other data releases, Japan's February composite PMI came at 50.7 (vs. 50.9 last month) with the services PMI reading at 52.3 (vs. 51.6 last month).

Back to markets yesterday and early weakness for the Greenback post the Trump comments over the weekend quickly reversed after Europe walked in and then later once the US session kicked off. The Dollar index eventually ended +0.09% while EM FX was flat. Meanwhile the one laggard in the rates’ market yesterday was Greek bonds where 10y yields rose +3.0bps to 3.65% after the news that Greece had mandated six banks for a new 10y bond. The nation did do a 10y deal in 2017 albeit as part of a bond exchange. However prior to that the last syndicated deal was in 2010. It’s amazing that just 3 years ago Greek 10y bonds were trading around 10%.

Italian yields also underperformed a touch, with 10-year BTP yields up +0.5bps while bunds rallied -2.6bps. Attention focused on Bank of Italy Governor Visco's comments ahead of this Thursday's ECB meeting, in which he said that the "ECB’s money cannot be used to buy government bonds." This suggests that any new TLTRO facilities could come with additional strings attached, to discourage banks from using cheap lending to finance carry trades, and to instead encourage lending to the corporate sector. Italian bank stocks ended the session flat.

In other central banks speak, Bank of Japan Governor Kuroda said that it will be difficult to reach the 2% inflation target in the current outlook period, but that factors slowing an acceleration in inflation will fade moving forward. This was interpreted as a signal that additional easing is not imminent, despite a deterioration in economic data, and Japanese government yields rose above 0.0% for the first time since January. This helped the yen appreciate +0.13% versus the dollar.

As for Brexit, there wasn’t a great deal of new news to report yesterday. Reuters did report that the Irish Prime Minister was supposedly willing to offer clarifications and reassurances to get a deal over the line. Today the UK’s Cox and Barclay are due to travel to Brussels so we may well get further headlines as the day progresses. While we’re on the UK it’s worth flagging a report from our UK economists yesterday on the domestic housing market. The headline conclusion is that underlying fundamentals remain strong, but Brexit, tighter macro prudential policy and tax changes have weighed on prices lately. That being said, they expect the housing market to start to recover from later this year – assuming ratification of a Brexit deal – so it’s not all doom and gloom. More in their report here .

On the data front, US construction spending fell -0.6% mom in December versus expectations for a 0.1% improvement and down from a 0.8% expansion previously. Our economists viewed the data as distorted by California wildfires, and they still expect a rebound in housing sector activity over the next few months as lower interest rates feed through to mortgage activity. An index of US homebuilder stocks rallied +2.43% yesterday. In the UK, the construction PMI printed at 49.5 from 50.6, dipping into contractionary territory for the first time in a year as the Brexit uncertainty weighs on activity.

Looking at the day ahead, this morning it’s all eyes on the remaining February services and composite PMIs in Europe including a first look at the data for the non-core and UK. We’ll also get the final Q4 GDP revisions for Italy where, as a reminder, the advanced reading (-0.2% qoq) confirmed a technical recession, and January retail sales data for the Euro Area. In the US we’ll also get the final PMIs as well as the February ISM non-manufacturing (+0.6pts to 57.3 expected) and December new home sales (-8.7% mom expected). Away from that we’re due to hear from Italy’s finance minister Tria this morning, before the BoE’s Carney speaks this afternoon before the House of Lord’s Economic Affairs Committee. The Fed’s Rosengren is also set to speak today.

 

Published:3/5/2019 6:32:38 AM
[Markets] Stocks in Asia set to slip following Wall Street declines Overnight on Wall Street, the Dow Jones Industrial Average and S&P 500 experienced their worst day in nearly a month. Stocks in Asia were poised to see declines in Tuesday morning trade after an overnight slip on Wall Street which saw the Dow Jones Industrial Average and S&P 500 experience their worst day in nearly a month. Published:3/4/2019 5:54:50 PM
[Markets] The Dow Slides 207 Points Because Everyone’s Waiting for a Trade Deal The Dow Jones Industrial Average fell 0.79% to close at 25,819.65. The S&P 500 slipped 0.39% to end at 2792.81, and the Nasdaq Composite dropped 0.23% to close at 7577.57. Published:3/4/2019 4:55:20 PM
[Markets] Stocks Skid, Bonds Bid As "Sell The News" Strikes At Critical Resistance

"off the lows" ... or "off the highs" - it appears sell-the-news was the order of the day as yet another headline proclaiming a US-China trade deal is close sparked overnight gains, but met a wall of selling at the cash open...

China was up once again overnight - with SHCOMP back above 3,000 - but the afternoon session was notable selling...

 

European markets opened gap higher but faded into the close with Span and Germany ended unch...

 

US Futures show the day's actions best as stocks gapped open overnight after the WSJ trade headlines and then dumped at the cash open, not helped by construction spending and McConnell headlines...

Today was the worst day for the Dow since Jan 3rd before the panic bid lifted everything back...

Trannies are down 7 days in a row (longest losing streak since Nov 2017)

 

TICK showed the biggest selling pressure since Jan 28th hit around 1215ET, before stocks bounced on a series of buy programs...

 

S&P 2,800 confirmed the Quadruple Top...

 

The algos BTFD in a desperate attempt to get us back to 2800...

 

Nasdaq futures tested the 200DMA...

 

Tesla stocks hit a 5-mo low and caught down to bonds...

 

VIX topped 17 intraday, but compressed back as stocks bounced...

 

We note VIX broke above its 200DMA before pulling back...

 

Bonds and stocks decoupled as the latter rebounded...

 

Treasury yields fell on the day - after 3 big up days - with the long-end outperforming...

 

30Y yields fell around 4bps...

 

The Dollar refused to be impacted by the weakness in stocks and continued to trend higher in a tight range...so much for Trump's weak dollar call...

 

However, overnight strength in the yuan on the WSJ trade headlines, were erased...

 

Cryptos had another ugly day...

 

Despite dollar gains, WTI managed to rally as PMs and copper slipped lower...

 

Gold extended its losses against the Yuan...

 

Coincidence?

What happens next?

Published:3/4/2019 3:30:50 PM
[Markets] Dow ends down over 200 points as investors search for clarity on U.S-China trade Dow ends down over 200 points as investors search for clarity on U.S-China trade Published:3/4/2019 3:30:50 PM
[Markets] Indexes Reverse Sharply But Move Off Lows In Stock Market Today The key market indexes moved off their session lows heading into the last hour of regular trade. The Dow led the downside as health care names weighed. Published:3/4/2019 2:23:42 PM
[Markets] Dow sinks more than 400 points, with blue-chip gauge on the brink of worst day in 2 months The Dow Jones Industrial Average was trading near its low midday Monday, with investors shaking off early optimism around a possible U.S.-China trade agreement being forged soon. The Dow was most recently off 404 points, or 1.6%, at 25,623. A drop for the Dow of greater than 302 points would represent the steepest decline since a 660-point slide on Jan. 3, according to FactSet data. Meanwhile, the S&P 500 index was down 1.2% at 2,770, while the Nasdaq Composite Index retreated 1.1% at 7,514. Markets had opened solidly higher after the Wall Street Journal reported Sunday that Beijing and Washington were in the final stages of completing a trade deal after yearlong disagreement. At Monday's peak, the Dow gained as many as 130 points, the S&P was up 13 points, and the Nasdaq had climbed 48 points. Published:3/4/2019 12:24:25 PM
[Markets] Just two stocks among the 30 Dow components have averted losses Monday Just two stocks among the 30 Dow components have averted losses Monday Published:3/4/2019 11:53:53 AM
[Markets] Dow down 275 points; United Health, Boeing, McDonald's sharpest decliners Dow down 275 points; United Health, Boeing, McDonald's sharpest decliners Published:3/4/2019 11:22:44 AM
[Markets] Dow Tumbles as Rally Spurred by Trade Deal Hopes Fades The Dow Jones Industrial Average moved lower Monday after initially rising on a report that said the U.S. and China were close to finalizing a trade deal. The Nasdaq has finished higher for 10 straight weeks. CEO Elon Musk said the electric carmaker will unveil the Model Y sport utility vehicle on March 14. Published:3/4/2019 10:54:51 AM
[Markets] Dow Moves Lower as U.S. and China Said to Be Finalizing Trade Deal The Dow Jones Industrial Average moves lower Monday after initially rising on a report that said the U.S. and China were close to finalizing a trade deal. The Dow ended 0.1% lower last week, ending a winning streak of nine weeks. The Nasdaq has finished higher for 10 straight weeks. Published:3/4/2019 10:23:13 AM
[Markets] Dow Edges Higher as U.S. and China Said to Be Finalizing Trade Deal The Dow Jones Industrial Average was higher Monday on a report that said the U.S. and China were close to finalizing a trade deal. The Dow ended 0.1% lower last week, ending a winning streak of nine weeks. The Nasdaq has finished higher for 10 straight weeks. Published:3/4/2019 9:52:25 AM
[Markets] "Sell The News" - Dow Dumps Into Red, Erasing China Trade Hope Hype

No real catalyst for the sudden drop in stocks - weak construction spending hit after the drop had begun - but the surge open in futures overnight has been erased since the cash open this morning...

Nasdaq remains in the green as The Dow dips red...

"sell the news"?

Published:3/4/2019 9:26:01 AM
[Markets] Dow Rises as U.S. and China Said to Be Finalizing Trade Deal The Dow Jones Industrial Average was higher Monday on a report that said the U.S. and China were close to finalizing a trade deal. The Dow ended 0.1% lower last week, ending a winning streak of nine weeks. The Nasdaq has finished higher for 10 straight weeks. Published:3/4/2019 8:53:55 AM
[Markets] Boeing could bring the Dow industrials to a hard landing Aerospace giant is arguably the U.S. market’s most dangerous stock, and puts the Dow Jones Industrial Average at risk, writes Sven Henrich.
Published:3/4/2019 8:26:21 AM
[Markets] Boeing could bring the Dow industrials to a hard landing Aerospace giant is arguably the U.S. market’s most dangerous stock, and puts the Dow Jones Industrial Average at risk, writes Sven Henrich. Published:3/4/2019 7:51:26 AM
[Markets] Groundhog Day As Markets Rise On "Trade Talk Optimism"; Dollar Jumps Despite Trump Threat

It's groundhog day again as global markets and US equity futures are once again higher on the same regurgitated "news", this time  courtesy of the WSJ, that the US and China are "In the final stages of completing a trade deal." If Phil Connors had the distinct displeasure of covering geopolitics for the past 3 months, his report today would be that presidents Trump and Xi Jinping "might" seal a formal trade deal around March 27, as the two countries appear close to a deal that would roll back U.S. tariffs on at least $200 billion worth of Chinese goods. The proposed trade deal would require Beijing to follow through on pledges ranging from better protecting intellectual-property rights to buying a significant amount of American products, including 50 million liters of Jack Daniels whiskey.

And Phil would be suicidal to see the same old market reaction as global stocks rose on the news, with European markets following their Asian counterparts higher. Asia's MSCI ex Japan index was up 0.2%, Europe's STOXX 600 index was up 0.4%, while the E-Mini was 0.3% higher...

... however much of the early burst higher faded with Eminis losing half of the initial euphoria ...

... as even the algos appear to be growing bored with the now daily ruse, and the key outstanding question is whether all of the upcoming "trade deal" has now been priced in.

Actually, according to Lukman Otunuga, research analyst at FXTM, there was another question: "The key question is - will all tariffs will be removed instantly, or will they be gradually dialled back?” wrote “While the renewed risk appetite is seen boosting European and U.S. stocks, investors should consider how much upside is left, given that markets have been actively pricing in the possible resolution to the trade saga."

Questions or not, the news was enough to reverse any lingering doubts about ongoing trade talk progress and MSCI’s All Country World Index was up 0.1% on the day, as the S&P500 is rapidly approaching its all time highs again.

In Asia, Chinese shares were the biggest gainers, with the blue-chip index up as much as 3 percent, before however losing much of the overnight gains. The CSI300 index rallied last week after index provider MSCI quadrupled its weighting for mainland shares in its global benchmarks.

Elsewhere, Australian shares rose 0.4 percent and Hong Kong’s Hang Seng index added 0.7 percent. That left MSCI’s index of Asia-Pac shares ex Japan higher 0.2% on the day, and up almost 10% so far this year. Japan’s Nikkei strengthened more than 1 percent.

In Europe, gains in miners and media companies led the Stoxx Europe 600 Index to five-month high.

One possible reason for the fizzling euphoria is that the dollar jumped higher overnight even after U.S. President Donald Trump warned against it becoming too strong.

Despite the market's enthusiasm, not everyone was fooled: “while we have all these great headlines about what could be achieved under a U.S.-China trade agreement, we’re still a little way away,” said Kerry Craig, JP Morgan’s global market strategist. “There could be a chance for a disappointment. It could be phased in over a number of years. There’s still questions about how and what China will actually buy to try and reduce their deficit.”

Sure, but for now, as for the past 10 consecutive weeks of upside, the algos are buying first and aksing questions later, if at all.

Meanwhile, in addition to the daily trade talk, the market will keep focused on several other key developments as well: China’s annual National People’s Congress may yield policy clues when it kicks off on Tuesday and investors will get the latest read on the U.S. economy with the monthly jobs report on Friday.

“While it will take time for economic data to stabilise from the current slowdown, policy shifts by central banks and governments, especially in the U.S. and China, should help support investor confidence for now,” said Tai Hui, Asia-Pacific chief market strategist at JPMorgan Asset Management.

In FX, the dollar recovered from an earlier slump that was fueled by President Donald Trump’s renewed criticism of Fed Chairman Jerome Powell and complaint about the greenback’s strength. The dollar reached a session high in early London trading while Treasury yields were little changed after reversing an earlier climb; the euro reversed gains on cross selling versus the yen and the pound. Earlier, turozone Sentix investor confidence rose to -2.2 in March, vs -3.1 estimate and -3.7 in February.

The pound led gains among major currencies after the Sunday Times reported that Pro- Brexit hardliners in May’s Conservative party have outlined conditions for supporting her plan; the sterling trimmed gains after construction PMI fell to 49.5 vs 50.6 in January and estimated 50.5. Meanwhile, the Aussie and kiwi retreated from early highs; poor economic Australian data over company profits and inventories sparked concern over growth data due later in the week; both currencies earlier advanced on hopes of a potential U.S.-China trade deal.

Greece’s benchmark 10-year government bond yields dropped to their lowest since 2006 on Monday after Moody’s raised its rating late last week, bolstering investor optimism towards the euro zone’s most indebted country. Moody’s on Friday lifted Greece’s issuer ratings to B1 from B3, citing the effectiveness of the country’s reform programme.

Looking ahead, March is expected to be a crucial month for global markets. Britain’s parliament will vote on an agreement to leave the European Union, the U.S. Federal Reserve will hold a policy meeting that could yield clues on its plans for interest rates and balance sheet reduction, and the European Central Bank will hold its scheduled policy meeting this week.

Elsewhere, oil prices gained on Monday with Brent (+0.7%) and WTI (+0.9%) benefitting from the positive trade sentiment following reports that US and China are in the final stages of completing a trade deal, alongside China’s spokesperson Zhang stating that substantial progress has been made. Adding to the upside is Friday’s Baker Hughes rig count where US oil rigs fell by 10 to 843, the lowest level since May 2018. Elsewhere, Russian oil output was 11.34mln BPD in February, 75k barrels below the October baseline level; according to Energy Ministry Data. Separately, Barclays have maintained their Brent price forecast, stating that prices have moved in-line with their view however Barclays does note that downside risks remain.

Gold (-0.4%) prices are weaker weighed on by the positive risk sentiment, with the yellow metal trading towards the bottom of a USD 10/oz range. Elsewhere, Vale have, on a temporary basis, removed its Chief Executive Schvartsman, along side 3 other executives following recommendations by both state and federal prosecutors. Elsewhere, nickel futures, which is used to make stainless steel, have climbed to around a 5-month peak, as the price of stainless steel continues to rise with Chinese steel mills actively replenishing their stocks in-spite of the rising prices; although some mills have been delaying purchases due to the price increase.

It's a quiet day otherwise, with only construction spending data due, while Salesforce.com is scheduled to report earnings

Market Snapshot

  • S&P 500 futures up 0.3% to 2,814.00
  • MXAP up 0.4% to 159.69
  • MXAPJ up 0.2% to 525.32
  • Nikkei up 1% to 21,822.04
  • Topix up 0.7% to 1,627.59
  • Hang Seng Index up 0.5% to 28,959.59
  • Shanghai Composite up 1.1% to 3,027.58
  • Sensex up 0.6% to 36,063.81
  • Australia S&P/ASX 200 up 0.4% to 6,217.41
  • Kospi down 0.2% to 2,190.66
  • STOXX Europe 600 up 0.4% to 375.83
  • German 10Y yield unchanged at 0.183%
  • Euro down 0.2% to $1.1345
  • Brent Futures up 1% to $65.70/bbl
  • Italian 10Y yield fell 1.8 bps to 2.375%
  • Spanish 10Y yield rose 1.1 bps to 1.208%
  • Brent Futures up 1% to $65.70/bbl
  • Gold spot down 0.5% to $1,287.03
  • U.S. Dollar Index unchanged at 96.53

Top Overnight News

  • The U.S. and China are close to a trade deal that could lift most or all U.S. tariffs as long as Beijing follows through on pledges ranging from better protecting intellectual-property rights to buying a significant amount of American products, two people familiar with the talks said
  • Substantial progress was made in the U.S. trade talks, China National People’s Congress spokesman Zhang Yesui says before legislative meetings
  • Prime Minister May received a boost over the weekend as she prepares to return her Brexit deal to Parliament. Pro-Brexit hardliners in her Conservative Party outlined conditions for supporting her plan, the Sunday Times said. Theresa May is promising a 1.6b pound boost for poorer areas of the U.K. as she steps up efforts to get her Brexit deal over the line. The Stronger Towns Fund was immediately attacked as an attempt by the prime minister to “buy” the support of opposition politicians
  • China’s political leaders gather this week to detail policy priorities for the year, with deliberations under added pressure from the trade standoff with the U.S. and a domestic economic slowdown.
  • Hedge funds increased wagers on rising Brent crude prices for an eighth week, the longest streak since 2012, according to ICE Futures Europe data
  • The House Judiciary Committee plans to issue document requests to more than 60 people on Monday as investigations begin into obstruction of justice, corruption and abuse of power related to President Trump, Chairman Jerrold Nadler said
  • China is planning to cut the value-added tax rate that covers the manufacturing sector by 3 percentage points as part of measures to support the slowing economy, a person familiar with the matter said
  • President Donald Trump’s attempts to blame Federal Reserve Chairman Jerome Powell for any hiccups in the U.S. economy have made a comeback -- this time directed at his conservative base as he gears up for a tough 2020 re-election campaign
  • House Judiciary Chairman Jerrold Nadler said he’s aggressively investigating whether there’s evidence of wrongdoing by President Donald Trump, thrusting the veteran New York City lawmaker into center of a politically risky probe
  • The Swiss National Bank racked up a 14.9 billion- franc ($14.9 billion) loss for 2018 as the global stock market rout eroded the value of its foreign-currency holdings

Asian equities were higher across the board amid trade-optimism after WSJ noted that a US-Sino trade deal is reportedly being finalised and may be signed during a Trump-Xi Summit at the end of March. On Friday, US equities rose amid the overall risk appetite wherein the S&P closed above the 2800 level for the first time since November last year. The Dow closed above 26000 as Nike and Chevron led the gains, whilst Nasdaq advanced due to outperformance in heavyweight Amazon. ASX 200 (+0.4%) was led by the outperformance in the IT sector alongside a strong performance in material names, whilst Nikkei 225 (+1.0%) was lifted by its heavy China-exposed machinery sector and a marginally weaker domestic currency. Elsewhere, Shanghai Comp. (+1.2%) was the marked outperformer and breached the key 3000 level to the upside with all sectors firmly in the green ahead of the China National People’s Congress coupled with reports of optimistic trade developments. Meanwhile, Hang Seng (+0.5%) posted modest gains but initially failed to piggy-back on the same momentum as its mainland peers as the heavy-weight financial and energy names weighed on the index. Huawei are said to be preparing to sue the US government for banning federal agencies from using their products. Prior to this, Huawei CFO Meng Wanzhou has sued the Canadian government, police and border officials, claiming her legal rights were violated. Elsewhere, the UK could cap the use of Huawei equipment following the UK government’s review of the company; according to FT citing sources

Top Asian News

  • South Korea, U.S. Decide to End Biggest Joint Military Exercises
  • China, Malaysia Sign $891 Million of Palm Oil Purchase Deals
  • China Copper Premium Falls to 22-Month Low as Stockpiles Expand

Major European indices are off best levels [Euro Stoxx 50 +0.2%], continuing from a strong overnight session where Shanghai Comp breached 3000 to the upside. Although, there is some slight underperformance in the DAX (U/C) which is weighed on by Fresenius Medical Care (-2.3%) after US President Trump’s administration have stated they are looking at value based pricing to promote home dialysis and kidney transplants, designed to spur innovation and decrease in-clinic dialysis; with the market currently dominated by the Co. and US Company DaVita, who are down by around 2% in the pre-market. Sectors are similarly in positive territory; however, the healthcare sector is largely unchanged with sentiment capped by the aforementioned performance of Fresenius Medical Care, along with Novarits (-2.5%) who in spite of their positive update regarding psoriasis are in the red as they are trading ex-dividends today. Other notable movers include, British American Tobacco (+0.5%) who opened down by just under 2% following a class action lawsuit against the Co’s Canadian unit. Elsewhere, Casino (-1.6%) are in the red after being downgraded at Societe Generale. Towards the top of the Stoxx 600 are Daily Mail (+4.9%) after the Co. stated they are offloading their GBP 900mln stake in Euromoney, with funds to be returned to shareholders. Separately, Julius Baer (+0.9%) are up after the Co. increased their stake in NSC Asesores by 30% to 70% for an undisclosed amount.

Top European News

  • Ted Baker CEO Kelvin Resigns After Misconduct Allegations
  • VW Straddles Old and New With Electric Buggy, Passat Face-off
  • Bill Gross Sees ‘Much Less’ Alpha in Era of QE and Quant Trading
  • U.K. Construction Contracts as Brexit Delays Building Projects

In FX, The Dollar is somewhat mixed vs its major counterparts, but the DXY recovered from another US President Trump set-back to revisit 96.600 and marginally eclipse tech resistance (96.594 Fib) on the way. However, latest encouraging reports on US-China trade, suggesting a deal is in the offing have hampered the Greenback to an extent, especially vs more risk-sensitive and high beta currency peers.

  • GBP - The Pound has shrugged off an unexpected fall in UK construction PMI through the 50 growth/contraction threshold, and instead remains supported at the top of the G10 table on the more positive Brexit-related news in the form of growing support for PM May’s Withdrawal Agreement among the more ardent Tory leaver ranks, albeit with set conditions. Indeed, Cable remains close to 1.3250 and Eur/Gbp has retreated from highs around 0.8600, though the latter partly due to relative weakness in the single currency. Note, however, a hefty 1 bn option expiry at the 0.8500 strike looks too distant to come into play today as the cross hovers near 0.8560.
  • EUR - As noted above, an underperformer amidst broadly risk-on trade at the start of the new week, with stops noted vs the Usd on a break of 1.1350 once last Friday’s low was breached taking the headline pair down to 1.1335. Similarly, sell orders are said to have been triggered in Eur/Jpy, possibly through 127.00 and in Eur/Gbp, but the single currency has pared some lost ground in wake of a more upbeat than forecast Sentix index.
  • CHF/JPY - A bit of divergence between the traditional safe-havens, as the Franc remains below parity vs the Greenback on the aforementioned positive US-China paper talk, but the Jpy rebounds from worst levels circa 112.00, perhaps with the aid of those Eur cross sales, to sit just off 111.73 highs.
  • NZD/AUD/CAD - The Antipodean Dollars are off best levels achieved overnight when the WSJ trade deal between Beijing and Washington near to completion report broke, but still underpinned as the Kiwi keeps its head above 0.6800 and Aussie hovers just below 0.7100. However, Aud/Nzd has slipped back towards 1.0400 in wake of some disappointing pre-RBA data in the form of Gross Company Profits and the Loonie is still underperforming circa 1.3300 lows following last Friday’s sub-consensus Canadian GDP release in the run up to the BoC.
  • EM - The Lira and Peso are under pressure vs the Buck on bearish specific/independent impulses, as softer than expected Turkish CPI could prompt the CBRT to tweak its tight monetary stance on Wednesday, or even shift guidance in preparation for an ease ahead, while the Mxn is clearly feeling the adverse effects of S&P’s move to credit watch negative from stable. Note, Usd/Try is currently around 5.3850 vs almost 5.4000 at one stage and Usd/Mxn circa 19.3500 vs 19.3820 earlier, while in stark contrast the Thai Central Bank has been forced to curb excess Thb strength with a 31.75-85 range.

Brent (+0.7%) and WTI (+0.9%) are benefitting from the positive trade sentiment following reports that US and China are in the final stages of completing a trade deal, alongside China’s spokesperson Zhang stating that substantial progress has been made. Adding to the upside is Friday’s Baker Hughes rig count where US oil rigs fell by 10 to 843, the lowest level since May 2018. Elsewhere, Russian oil output was 11.34mln BPD in February, 75k barrels below the October baseline level; according to Energy Ministry Data. Separately, Barclays have maintained their Brent price forecast, stating that prices have moved in-line with their view however Barclays does note that downside risks remain. Gold (-0.4%) prices are weaker weighed on by the positive risk sentiment, with the yellow metal trading towards the bottom of a USD 10/oz range. Elsewhere, Vale have, on a temporary basis, removed its Chief Executive Schvartsman, along side 3 other executives following recommendations by both state and federal prosecutors. Elsewhere, nickel futures, which is used to make stainless steel, have climbed to around a 5-month peak, as the price of stainless steel continues to rise with Chinese steel mills actively replenishing their stocks in-spite of the rising prices; although some mills have been delaying purchases due to the price increase.

US Event Calendar

  • 10am: Construction Spending MoM, est. 0.2%, prior 0.8%

DB's Jim Reid concludes the overnight wrap

Happy Monday. I’m so dazed I hardly know what day of the week it is. I’ve had the most virulent strain of man-flu imaginable and spent a lot of the weekend in bed drained and with a hacking cough. I wasn’t very popular at home as you can imagine. Bronte the dog has been so worried that every time I go to sleep somewhere she curls up next to me. It’s fair to say that my wife hasn’t replicated this.

If I live to see it, the highlight this week is likely to be the ECB meeting on Thursday. We’ll also see the start of China's NPC (Tuesday - 15th March) and the latest employment report in the US (Friday). The final PMI revisions (Tuesday) are also likely to be closely watched and you never know when you’re going to get the next US/China trade headline.

Speaking of which, overnight the WSJ broke a story highlighting that the US and China are close to a trade deal that could lift most or all US tariffs as long as China follows through on its pledges ranging from better protecting intellectual-property rights to buying a significant amount of US products (increasing by $1.2tn over 6 years). Specifically, its being reported that China would buy $18bn in natural gas from Houston-based Cheniere Energy Inc. Elsewhere, the WSJ reported that the likely summit between President Trump and his Chinese counterpart Xi Jinping could happen around 27th March. The WSJ report added that China is offering to lower tariffs on US farm, chemical, auto and other products while pledging to speed up the timetable for removing foreign-ownership limitations on auto ventures, and to reduce tariffs on imported vehicles to below the current rate of 15%. China’s National People’s Congress spokesman Zhang Yesui also said that substantial progress has been made in trade talks before the start of legislative meetings. Meanwhile, after extending the deadline last week of a planned tariff increase on March 1, Trump has tweeted that “I have asked China to immediately remove all Tariffs on our agricultural products (including beef, pork, etc.) based on the fact that we are moving along nicely with Trade discussions....”

Sentiment has improved overnight on the positive trade headlines with China’s bourses leading the advance - the Shanghai Comp (+3.05%), CSI (+3.47%) and Shenzhen Comp (+3.95%) are all up. The Nikkei (+1.09%), Hang Seng (+1.22%), and Kospi (+0.09%) are also up. In the meantime, China’s onshore yuan is up +0.24%. Elsewhere, futures on the S&P 500 are +0.45% and in commodities, US futures on corn and soybeans are up +0.74% and +0.63%, respectively.

Also over the weekend, (per Bloomberg) Mr Trump commented on the Fed again saying that there is “a gentleman that likes raising interest rates in the Fed, we have a gentleman that loves quantitative tightening in the Fed, we have a gentleman that likes a very strong dollar in the Fed.” In response the dollar is (-0.11%) slightly weaker overnight and 10yr Treasuries are up +1.0bps. Sterling is also up +0.25% on incrementally more positive Brexit noises. See later for more details.

Now going back to the highlights of the week ahead. While no change in policy from the ECB is expected, we will get updated staff forecasts (which are likely to show downgraded growth forecasts) and perhaps further hints about TLTRO2. Recent ECB commentary and the accounts of the January ECB meeting clearly signal that addressing TLTRO2 maturity is on the agenda, although its not clear that a decision will come as soon as Thursday's meeting. Nevertheless, it's likely to be a topic of discussion. Our economists believe that at the very least, it is appropriate for the ECB to implement a TLTRO2 solution that allows net exposures to be rolled over. This would help the ECB to preserve its monetary policy stance and prevent a temporary economic slowdown from propagating through unnecessary deleveraging, especially in the periphery.

Also of significance for markets is China's National People's Congress which officially gets underway on Tuesday and runs through until March 15th. Premier Li will present the government's draft working plan on Tuesday and the details of the government's draft budget will come out on Wednesday. Throughout the 10 days we're also expecting the PBoC and ministries to hold press conferences which may send important policy messages. Our China economists expect the Chinese government to keep the policy stance flexible at this stage without committing to aggressive loosening measures. On growth, our colleagues expect the government to lower the GDP growth target for 2019 to "above 6%" or "between 6% and 6.5%", which would represent a downward revision from "around 6.5%". They expect the official fiscal deficit target to be around 2.8% to 3.0% of GDP, up from 2.6% in 2018, and also for the government to announce a total of RMB 1.2-1.5tn of tax cuts. On monetary policy, the team expect the government to reiterate the "prudent" monetary policy stance and no change in policy stance to the property sector.

Meanwhile, the big data highlight next week comes on Friday when we get the February employment report in the US. The consensus is for another solid round of data. Expectations for payrolls is 185k which as a reminder follows a much stronger than expected 304k print in January. Earnings are expected to have risen +0.3% mom which if true, would likely push the annual rate up one-tenth to +3.3% yoy and so matching the highs from the end of last year. The unemployment rate is expected to fall a tenth to 3.9% and hours hold at 34.5 hours.

Away from that, other data worth flagging in the US includes the final February PMIs and ISM non-manufacturing (+0.5pts to 57.2 expected) on Tuesday, the February ADP report on Wednesday, claims on Thursday and housing starts and building permits on Friday. In Europe, the highlight is the final February PMIs on Tuesday. We've already had the flash readings and as a reminder that the services and composite readings for the Euro Area were 52.3 and 51.4 respectively. Expect the main focus to be with Italy and France though where both services readings are hovering below 50. Other than that, we'll also get the final Q4 GDP reading for the Euro Area on Thursday prior to the ECB meeting. No change from the +0.2% qoq/+1.2% preliminary readings are expected. Finally in Asia we've got the February PMIs in Japan and China on Tuesday, and China trade data on Friday. The rest of the day by day week ahead is at the end.

Recapping last week now. On Friday, attention was dominated by trade negotiations and communications from central banks. Equities rallied with the S&P 500, DOW, and NASDAQ ending the week +0.62%, +0.57%, and +0.74% (+0.64%, +0.70%, and +0.91% on Friday), respectively. In Europe, the STOXX 600 gained +0.62% (+0.22% Friday), with the DAX outperforming, up +1.40% (+0.30% Friday). Commodities rallied as well, with Brent crude oil advancing +1.15% (-0.09% Friday) and copper posting its best week since last September to reach its highest level since last June, gaining +5.40% (+1.81% Friday). Basically markets exposed to China did well as the Shanghai Comp. climbed +6.77% on the week and 1.80% on Friday. The offshore yuan appreciated +0.91% on the week (+0.21% Friday) to reach its strongest level since last July.

One of the most important moves last week were the rising yields. 10 year Treasuries, Bunds, Gilts rose 9bp, 7.4bp and 12.3bps respectively on the week but rallied off the yield highs on Friday on disappointing US data led by the manufacturing PMI declining 2.4 points to 54.2 vs 55.8 expected. The reason Gilts rose as much as they did is that the threat of a no-deal Brexit on March 29th seems to have been reduced to close to zero. The chances of Mrs May’s deal being passed before that seem to be increasing as the weekend press disclosed the terms that the ERG would require to support the deal. It does seem that their demands suggest a desire to compromise but all depends on how legally tight any agreement between the U.K. and EU over the temporary nature of the backstop can be. Expect numerous headlines on this this week.

Quickly recapping Friday’s central bank speak. Banque de France Governor Villeroy mentioned that the ECB should “study pragmatically how to contain possible adverse effects on the bank transmission of our monetary policy”. That mirrored earlier comments from the BoJ Governor Kuroda, who said that any future easing would come via tools that have the “least side-effects”. These could be references to some alleviation of the harm from negative interest rates. In the US, many Fed speakers spoke at a conference in New York, including Vice Chair Clarida who said that yield curve control, where 10-year yields are pegged, is one potential option to fight a future recession. The Fed will conduct a thorough review of its policy framework later this year.

 

 

 

Published:3/4/2019 6:52:05 AM
[Markets] Boeing could bring the Dow to a hard landing Aerospace giant is arguably the U.S. market’s most dangerous stock, and puts the Dow at risk, writes Sven Henrich. Published:3/4/2019 4:51:06 AM
[Markets] The Dow Rose 110 Points Because a China Trade Pact May Still Happen The Dow Jones Industrial Average rose 0.43% to end at 26,026.32. The S&P 500 gained 0.69% to close at 2803.69, and the Nasdaq Composite rose 0.83% to end at 7595.35. Published:3/1/2019 5:07:38 PM
[Markets] Dow, S&P snap three-day losing streak as stocks end day higher Dow, S&P snap three-day losing streak as stocks end day higher Published:3/1/2019 3:06:26 PM
[Markets] Nasdaq Extends Longest Win Streak Since 1999 As Macro Data, Earnings Crash

Another week of global bond yields, earnings expectations, and macro-economic data signaling shit is hitting the fan as stocks push higher and higher on surging central bank balance sheets and global money supply...

At what point does Jay Powell look himself in the mirror and realize what a farce his entire life's work has become.

*  *  *

Chinese stocks saw the best week since 2015 (mainly thanks to Monday's utter farce)...

 

Mixed picture in Europe with FTSE 100 the big laggard on endless Brexit headlines and Italy up most just because nothing terrible happened this week...

 

Mixed bag in US markets this week no matter how many dead cat bounces hit. Nasdaq outperformed dramatically, Trannies worst, Dow clung to unchanged and S&P was all about 2800...

The Dow desperately tried to close above 26032 (but failed), ending itsweekly win streak at 9.

Nasdaq is up 10 weeks in a row... the longest win streak since 1999 (when it rose 11 weeks in a row to Dec 1999)...

 

Buyback-related stocks ended the week lower but "most shorted" are up 8 of the last 10 weeks (with only very marginally lower weeks in the odd 2)...

 

S&P tried again to break above and hodl 2800...

 

Tesla tumbled as Musk's mysterious announcement disappointed...

 

Grocers also got hit as AMZN announced plans to roll out its own foodseller...

 

Ugly day for mall operators as retailers in the last 48 hours announce plans to cull over 300 stores

 

Treasury yields soared this week...the worst week for 10Y Yields (up over 10bps) in 4 months (midterms)

 

With 10Y Yields well and truly breaking out of their descending triangle...extending the yields rise today despite terrible macro data.

 

With inflation breakevens soaring alongside WTI (until today)...

 

And all the while, markets remain priced for rate-cuts in 2019!!

 

It appears bond yields are playing catch up with equity Cyclicals relative to Defensives (but we saw how that ended last time)...

 

The Dollar had a solid week (continuing its week on, week off pattern this year)...soaring higher this afternoon despite terrible macro data today

 

The surging dollar spoiled the party in EM also

 

Cryptos were all lower on the week with Ether leading the drop...

 

The soaring dollar took the shine off commodities today with PMs suffering most...

 

Gold tumbled (worst day since June 2018) back below its 50DMA for the first time since Thanksgiving...

 

Silver plummeted to its key technical support... (worst week for silver since June 2017)

 

And gold relative to silver hit its highest since the start of the year back above the important 85x ratio...

 

Notably, Gold in yuan terms dropped to its weakest since before Xmas...

 

Finally, which one of these four charts makes you laugh the most?

Stocks decoupled from Earnings expectations...

Stocks decoupled from Macro data...

Global Stocks decoupled from global bonds...

Global Stocks perfectly coupled with Global Money Supply (and Global Central Bank balance sheets)...

At what point does Jay Powell look himself in the mirror and realize what a farce his entire life's work has become.

Published:3/1/2019 3:06:26 PM
[Markets] These 3 Growth Stocks Are Torching The Dow Jones Return In 2019 So Far An afternoon rally helped fortify gains in the major stock averages, including the Dow Jones Industrial Average, on the first trading day of March. But both individual growth stock leaders and ETFs showed serious outperformance vs. the 30-stock blue chip average. While the Dow Jones industrials gained around 0.4% with an hour to go on Wall Street, the Innovator IBD... Published:3/1/2019 2:34:58 PM
[Markets] Nike's stock runs up toward record high, on heels of Foot Locker's upbeat earnings report Shares of Nike Inc. ran up 1.9% in toward a record high in afternoon trade Friday, to pace the Dow Jones Industrial Average's gainers, on the heels of Foot Locker Inc.'s report of adjusted earnings and same-store sales growth that were well above expectations. Shares of Foot Locker, which buys a lot of Nike products, surged 5.8% Friday afternoon%. In the athletic shoe seller's 10-K filing for 2017--the 10-K for 2018 has not yet been filed--Foot Locker said about 67% of all merchandise purchased in 2017 was purchased from one supplier, Nike, and each operating division bought 44% to 73% of their merchandise from Nike during the year. Nike's stock has rallied 16% over the past three months and Foot Locker shares have climbed 12%, while the Dow has tacked on 1.8%. Published:3/1/2019 1:34:55 PM
[Markets] Walgreens' stock drop is keeping Dow from a triple-digit gain Walgreens Boost Alliance Inc.'s stock dropped 6.4% to be the biggest drag on the Dow Jones Industrial Average , and was single-handedly keeping the blue-chip barometer from a triple-digit gain. Walgreens' price decline of $4.57 is shaving about 31 points off the Dow's price, which was up 71 points, or 0.3%. In comparison, the S&P 500 rose 0.4% and the Nasdaq Composite tacked on 0.6%. Walgreens' stock sank Friday, after the drugstore chain indicated that it had less of an ability to mitigate reimbursement headwinds and generic deflation pressures on its earnings outlook. It was headed for the biggest one-day price and percentage decline since June 28, 2018, when it slumped $6.56, or 9.9%, after the company reported better-than-expected earnings and boosted its dividend and share buybacks, but after Amazon.com Inc. announced it was buying online pharmacy PillPack. Published:3/1/2019 12:35:29 PM
[Markets] Dow Rises but Pares Gains as Manufacturing Data Is Weak The Dow Jones Industrial Average traded higher on Friday after closing lower Thursday for the third consecutive session. launched its long-delayed $35,000 Model 3 but shares fell 8% after CEO Elon Musk said the company probably won't be profitable in the first quarter. will launch a strategic review of its business, with a focus on StubHub and its online classifieds business, following pressure from activist investors. Published:3/1/2019 12:06:38 PM
[Markets] Walgreens is Dow's biggest loser as stock indexes' early gains shrink Walgreens is Dow's biggest loser as stock indexes' early gains shrink Published:3/1/2019 10:36:54 AM
[Markets] Dow Rises as Chances of U.S. and China Trade Deal Move Forward The Dow Jones Industrial Average traded higher on Friday after closing lower Thursday for the third consecutive session. launched its long-delayed $35,000 Model 3 but shares fell 8.2% after CEO Elon Musk said the company probably won't be profitable in the first quarter. will launch a strategic review of its business, with a focus on StubHub and its online classifieds business, following pressure from activist investors. Published:3/1/2019 9:33:54 AM
[Markets] These two charts suggest the rally could go from good to bad to worse December's major sell-off pushed the Dow to the very edge of a bear market, characterized as a drop of more than 20 percent off 52-week highs. The S&P 500 is less than a 1 percent increase from the lower-end of that range. Published:3/1/2019 7:33:52 AM
[Markets] Global Stocks Surge On Rebound In Chinese Data, MSCI Inclusion

Just as the official Chinese manufacturing PMI's disappointing Thursday print (3 year low) pressured stocks on the last day of February, and sent both the MSCI World Index and the Dow Jones to three consecutive days of declines, the longest such stretch of 2019 yet, overnight's Caixin PMI which unexpectedly posted a sharp rebound in February, rising to 49.9 from 48.3 in January, offered some reassurance to investors concerned about the global growth outlook that the global economic drop may have troughed while "optimism" for a trade deal returned; Treasuries extended their recent decline and the dollar pushed higher for a third day before easing back. The result is a sea of green in global stocks with the S&P trading back over the critical 2,800 level.

Bullish sentiment stormed back led by China, where shares outperformed with the Shanghai Composite closing 1.8% higher following confirmation that MSCI Inc. will quadruple the weight of Chinese stocks in its global benchmarks from 5% to 20%, while in contrast to the small decline in NBS manufacturing PMI reported just one day earlier, the Caixin manufacturing PMI bounced back in February from the dip in January. It rose by 1.6pp to 49.9, although January-February combined, Caixin manufacturing PMI averaged at 49.1, lower than 49.7 in December last year. Most sub-indexes of the survey rebounded in February vs January. The fact that the index remained just barely in contraction territory was offset by a sharp increase in the forward-looking new orders index component.

According to Goldman, the Caixin manufacturing PMI showed "some early signs of better growth momentum in the manufacturing sector in February. However, the floating holiday and continued weakness shown in other indicators such as NBS manufacturing PMI added uncertainties to the above view, and for the period of January to February on average, growth momentum still likely softened from late last year. We continue to expect more policy easing to support the economy, and Jan-Feb industrial production data to be released in two weeks' time will shed more light on the underlying growth trend early this year."

As a result, China’s blue-chip CSI300 index surged 2.2% to land its best week since November 2015 after the MSCI announcement. It could potentially draw up to $80 billion of fresh foreign inflows to the world’s second-biggest economy.

“The news surrounding China and the Chinese economy has been better than news we’ve seen elsewhere,” Andrew Cole, head of multi asset at Pictet Asset Management Ltd., told Bloomberg TV in Hong Kong. “Clearly the central bank and the authorities are providing both fiscal and monetary stimulus.”

Elsewhere in Asia, Australia's ASX 200 (+0.4%) extended on opening gains as IT and healthcare names led the advances, whilst heavy-exporter Nikkei 225 (+1.0%) outperformed after the yen dropped to a 10-week low against the greenback.

Later in the session, European shares opened notably higher, with the Stoxx Europe 600 Index rising to the highest in almost five months, as 18 of 19 industry sectors were in the green and car makers leading the charge, even after PMI data showed that euro-area manufacturing contracted last month, offset by the fastest rise in German retail sales since Oct 2016.

“We are seeing a fairly decent uptick in European markets,” said CMC Markets analyst David Madden, citing the combination of U.S. and China data as well as encouraging comments from the United States on China trade talks.

To be sure, the bad data in Europe continued and Spain’s manufacturing sector contracted for the first time for more than five years in February data from Madrid showed while in eastern Europe Czech manufacturing sentiment fell at its fastest rate in six years.

However, market reaction showed that “bad news can be good news” because it could well encourage the European Central Bank to hand out cheap TLTRO loans to euro zone banks in the coming months. Boosted by strong Chinese data and weak European data, futures on the S&P 500, Dow Jones and Nasdaq gained, with the EMini back over the critical 2,800 "quad top" resistance level. Emerging-market stocks snapped a three-day losing streak.

Traders will be relieved to see a strong close to the week after a 16% surge from Christmas through the start of this week, MSCI’s gauge of global equities has tread water as investors await progress in U.S.-China trade negotiations. American officials are preparing a final deal that Donald Trump and China President Xi Jinping could sign in weeks, even as a debate continues in Washington over whether to push Beijing for more concessions. Meanwhile, as Bloomberg notes, geopolitical concerns remain in the background, amid tensions between India and Pakistan and the failure of a summit between Kim Jong Un and Trump to achieve an agreement between the U.S. and North Korea on denuclearization.

U.S. President Donald Trump on Thursday fueled concerns over U.S.-China trade talks, warning that he could walk away from a trade deal with China if it were not good enough. But in subsequent comments Thursday, White House economic adviser Larry Kudlow called progress in the negotiations “fantastic” and said the countries were “heading towards a remarkable, historic deal.”

Mixed messages on trade combined with the collapse of the summit between Trump and North Korean leader Kim Jong Un on denuclearization, and data from China showing slowing factory activity to pressure U.S. stocks as Reuters notes. “News that President Trump walked out of the meeting with Supreme Leader Kim, because the two sides couldn’t reach an agreement over North Korea’s nuclear disarmament, dashed hopes for an easing in geopolitical tensions,” analysts at ANZ said in a morning note.Overnight, president Trump said he believes a good deal with North Korea will happen and added that North Korea did not want to fully denuclearise. Meanwhile, North Korea Foreign Minister said if US lifts sanctions, North Korea will denuclearise, whilst adding that Pyongyang will not change its stance even if the US seeks further talks. US Secretary of State Pompeo said that North Korea basically asked for all sanctions to be lifted.

In the latest Brexit news, UK's Labour Party is reportedly moving towards a compromise plan which would allow PM May’s Brexit deal to pass but makes it clear that Parliament “withholds support” until the deal has been put to a public vote; according to multiple party sources.

Following a stronger than expected Q4 GDP print, Dallas Federal Reserve Bank President Robert Kaplan said on Thursday that it will take time to see how much the U.S. economy is slowing, supporting views of the Fed’s rate-hike holiday at least through to June.

In rates, long-dated government bond yields in Germany, the euro zone’s benchmark issuer, were set on Friday for their biggest weekly increase in more than year, reflecting easing concern about the global growth outlook and hopes that a no-deal Brexit will be avoided, and ignoring today's equity euphoria. 10Y TSY yields meanwhile continued to rise, and were trading at 2.73% today after trading 10bps lower earlier in the week.

In FX, the Bloomberg Dollar Spot Index rose a third day, tracking a rise in Treasury yields; the dollar index which tracks the greenback against major rivals, was up 0.2 percent at 96.302, though it remained fractionally lower for the week overall. The yen led losses among G-10 currencies after better-than-expected China data sapped haven demand. The euro edged lower as PMIs out of the euro-zone confirmed a contraction in the manufacturing sector amid a slump in orders, while core CPI for the region slowed to 1.0% y/y, falling short of a 1.1% estimate. Britain’s pound has been the star of the week, jumping more than 1.5 percent after another set of twists in Brexit saga has cut the chances of the UK crashing out the EU at the end of the month with a transition deal. It was down a fraction on the day at $1.3250.

Elsewhere, iron ore extended its rally, stoking a gain in the Bloomberg Industrial Metals Subindex to the highest since early October. West Texas oil futures nudged toward $58 a barrel as strengthening economic trends in the U.S. signaled tightening supplies, and gold’s third successive drop set it up for the worst week since November.

 

 

 

Market Snapshot

  • S&P 500 futures up 0.6% to 2,802.00
  • STOXX Europe 600 up 0.8% to 375.62
  • MXAP up 0.2% to 159.00
  • MXAPJ up 0.4% to 524.20
  • Nikkei up 1% to 21,602.69
  • Topix up 0.5% to 1,615.72
  • Hang Seng Index up 0.6% to 28,812.17
  • Shanghai Composite up 1.8% to 2,994.01
  • Sensex up 0.7% to 36,108.55
  • Australia S&P/ASX 200 up 0.4% to 6,192.73
  • Kospi down 1.8% to 2,195.44
  • German 10Y yield rose 0.4 bps to 0.187%
  • Euro down 0.1% to $1.1360
  • Italian 10Y yield fell 3.2 bps to 2.393%
  • Spanish 10Y yield rose 0.3 bps to 1.176%
  • Brent futures up 0.3% to $66.51/bbl
  • Gold spot down 0.5% to $1,306.59
  • U.S. Dollar Index up 0.2% to 96.34

 

Top Overnight News from Bloomberg

  • U.S. officials are preparing a final trade deal that President Donald Trump and his Chinese counterpart Xi Jinping could sign in weeks, people familiar with the matter said. The U.S. is eyeing a summit between the two presidents as soon as mid-March, said one of the people, who spoke on condition of anonymity because the preparations are confidential
  • Federal Reserve Chairman Jerome Powell repeated the central bank’s recent mantra of pledging patience in the face of conflicting economic signals and subdued inflation. signals and subdued inflation. “The Federal Open Market Committee will be patient as we determine what future adjustments to the target range for the federal funds rate may be appropriate to support our dual-mandate objectives,” Powell said in the text of a speech Thursday evening in New York
  • Federal Reserve Bank of Dallas President Robert Kaplan says “global growth is decelerating” and due to potential spillovers from this headwind and other sources of uncertainty, he has been advocating that “we should pause and be patient” on monetary policy.
  • MSCI Inc. will expand the weighting of China-listed shares in benchmark indexes tracked by global investors, a decision that could see billions of dollars flow into one of the world’s most volatile major stock markets
  • Oil was poised to eke out a third weekly gain after Saudi Arabia defied U.S. President Donald Trump’s call for lower prices, and a drop in American crude inventories signaled supplies are tightening.
  • North Korean leader Kim Jong Un vowed to meet again with President Donald Trump to continue nuclear negotiations after a two-day summit between the leaders collapsed Thursday amid discord over sanctions and conflicting accounts of Pyongyang’s demands
  • Bank of England Governor Mark Carney says the drop in business investment due to Brexit uncertainty will hamper the U.K. economy
  • U.S. officials are preparing a final trade deal that President Donald Trump and his Chinese counterpart Xi Jinping could sign in weeks, people familiar with the matter said, even as a debate continues in Washington over whether to push Beijing for more concessions
  • Underlying price pressures in the euro area remain weak, according to the latest inflation figures for the region, giving European Central Bank policy makers more to digest ahead of their crucial meeting next week

Asian equities started the first trading day of the month on an optimistic note, despite a relatively downbeat session on Wall Street where the three main indices closed lower by around three-tenths of a percent. The Dow was weighed on by UnitedHealth shares which trimmed around 50 points off the index, meanwhile Nasdaq was pressured as heavyweights Facebook, Apple and Netflix all fell over 0.5%. In terms of February performance, Dow rose 3.7%, S&P gained 3.0% and Nasdaq advanced 3.4% in the month. ASX 200 (+0.4%) extended on opening gains as IT and healthcare names led the advances, whilst heavy-exporter Nikkei 225 (+1.0%) outperformed on the back of a weaker domestic currency. Elsewhere, Shanghai Comp (+1.8%) was choppy as the third straight month of contraction in China’s manufacturing sector capped upside in the index, despite MSCI quadrupling China A-share weightings in global benchmarks to 20%. Goldman Sachs estimates that the MSCI move would lead to a potential USD 70bln net buying in A-shares, skewed towards the healthcare and consumer sectors. Finally, Hang Seng (+0.6%) edged higher during the session as the index felt support from its heavy-weight financial and energy sectors.

Top Asian News

  • Hong Kong Dollar Near Weak End of Band Raises Tightening Risk
  • New Philippines Central Bank Chief Eyed by Dominguez This Month
  • Carlyle Buys Stake in Indian Life Insurer From BNP Paribas

Major European equities are in the green [Euro Stoxx 50 +0.7%], as markets follow from the positive risk sentiment seen overnight in Asia. Dax (+1.0%) is the outperforming index with all components in the green on the positive risk sentiment following concerns over China’s economy being somewhat alleviated after Chinese Caixin manufacturing PMI came in stronger than expected; as such the Auto sector is outperforming its peers. Other notable movers include Rheinmetall (+7.3%) leading the Stoxx 600 after the Co’s FY18 revenue was in-line with expectations. WPP (+8.2%) are also firmly in the green in-spite of the Co’s outlook for 2019 being rather downbeat, particularly regarding the first half, as they reported results that marginally beat on expectations. Elsewhere, Man Group (-4.2%) are towards the bottom of the Stoxx 600 after stating that their funds under management fell in 2018.

Top European News

  • Italy’s Di Maio Trusts Salvini to Stand by Him for Long Term
  • Deficit Conquered, Germany Is Finally Boosting Public Spending
  • WPP Dodges Another Results Shock After Year of Client Losses
  • Jupiter Rises Most in Five Years as Payout Beats Expectations

In FX, although the Dollar has pared some of its post-GDP and Chicago PMI gains vs certain major counterparts, the index has rebounded further from sub-96.000 lows towards 96.400, largely at the expense of safe-haven currencies, and especially the Jpy.

  • JPY - No respite for the Yen after yesterday’s slide through 111.00 and accelerated losses below the 200 DMA as US Treasury yields continue to rally and the 10 year benchmark clears 2.70% in wake of the aforementioned stronger than forecast data and survey news. Usd/Jpy is now just a whisker away from the next big figure where more offers are touted, and with key Fib resistance residing not far above at 112.08.
  • CHF/GBP - Also victims of the broad Greenback revival, but the former unwinding more of its safe-haven premium as well, with the Franc back under parity vs the Buck and below 1.1350 against the Euro. Meanwhile, Cable’s pull-back from recent Brexit no deal highs has extended to 100+ pips and not far from Fib support around 1.3215, with little reaction or independent direction gleaned from a bang in line with consensus UK manufacturing PMI.
  • EUR - The single currency has pulled back further from best levels too (1.1400+), but holding up relatively well amidst mixed Eurozone data and perhaps with the aid of hefty option expiry interest at the 1.1350 level for today’s NY cut (2 bn) plus M&A news that has lifted Eur/Jpy very close to a key Fib. On that note, the 30 DMA in Eur/Usd at 1.1363 could also be influential on a closing basis along with 0.8593 in Eur/Gbp.
  • CAD/NZD/AUD - All on a firmer footing vs their US peer, and particularly the Loonie that has rebounded strongly from sub-1.3200 lows on Thursday ahead of Canadian GDP data and gleaning some traction from steadier oil prices. Usd/Cad is currently near the bottom of a 1.3132-77 range, and a big option expiry between 1.3140-50 may also have a bearing on trade given 1.4 bn rolling off later today. Meanwhile, the Kiwi and Aussie have both managed to regain composure and round number status after falling below 0.6800 and 0.7100, with some comfort drawn from the overnight Caixin Chinese manufacturing PMI that was sub-50 again, but not as weak as the official version.

In commodities, Brent (U/C) and WTI (+0.1%) prices are essentially flat, in-spite of trading positively overnight and initially during the European session, although they are once again trading within a fairly narrow range of less than USD 2/barrel. Elsewhere, since the imposition of US sanctions on the 28th January on Venezuelan oil, Venezuela’s oil exports have dropped by 40% for the month to around 920k BPD. Separately, Lukoil have agreed to reach the OPEC+ targets in April, and Rosneft’s VP state that they fully comply with the pact. Gold (-0.3%) is weaker as the USD moves higher recouping recent losses, with the yellow metal hitting a two-week low and currently trading around USD 1306/oz; however, analysts do highlight that the metal has strong support at the USD 1300/oz level. Elsewhere, copper weakened following China printing a 3rd month of contraction in their Caixin Manufacturing PMI, although the metal did recover as the figure was above expectations and risk sentiment remained positive. Separately, Goldman Sachs trade ideas include Long Dec’19 copper vs. Dec’19 zinc, Long jun’19 and short June’20 aluminium.

Looking at the day ahead, the big highlight in the US today meanwhile is the December PCE report which is expected to show a +0.2% mom core reading (+1.9% yoy and unchanged versus November). We’ll also get the December personal income and spending reports, January manufacturing PMI and February ISM manufacturing – the latter of which is expected to fall just under 1pt to 55.7. The final revisions to the February University of Michigan consumer sentiment survey round out the data. Away from all that, it’s the turn of the Fed’s Bostic to speak this evening.

US Event Calendar

  • 8:30am: Personal Income, est. 0.3%; Personal Spending, est. -0.3%, prior 0.4%
  • 8:30am: Real Personal Spending, est. -0.3%, prior 0.3%
  • 8:30am: PCE Deflator MoM, est. 0.0%, prior 0.1%; PCE Deflator YoY, est. 1.7%, prior 1.8%
  • 8:30am: PCE Core MoM, est. 0.2%, prior 0.1%; PCE Core YoY, est. 1.9%, prior 1.9%
  • 9:45am: Markit US Manufacturing PMI, est. 53.7, prior 53.7
  • 10am: ISM Manufacturing, est. 55.8, prior 56.6
  • 10am: U. of Mich. Sentiment, est. 95.9, prior 95.5; Current Conditions, prior 110; Expectations, prior 86.2

DB's Jim Reid concludes the overnight wrap

With it being the first day of March, this morning Craig was up in the middle of the night publishing the February performance review as a standalone document which you should see in your inbox an hour or so before this one. You’ll find the usual charts and tables in that document too which will help show that it’s actually been one of the better starts to a year on record.

Overnight we’ve already seen China’s Caixin February manufacturing PMI. It came in at 49.9 (vs. 48.5 expected), marking the third consecutive month below 50 but obviously showing some signs of improving. Sub-index level details were more mixed with new orders returning above 50 (at 50.2) after 2 months below while new export orders slipped back ( at 49.4 vs. 50.4 last month). The accompanying statement from Markit with the release stated that the domestic manufacturing demand improved significantly in February while foreign demand was not deteriorating as quickly as last year. However, we need to be cautious on over interpreting domestic demand in February as the significant improvement could be on the back of higher spending on account of Lunar New Year holidays. Nevertheless some signs of green shots. Elsewhere, Japan’s final February manufacturing PMI came +0.4pts above the preliminary read at 48.9 (vs. 50.3 last month). In other news, MSCI has said that it will expand the weighting of China-listed shares in its benchmark indexes which is helping sentiment there.

Geo-political tensions are also showing signs of de-escalation as the week closes with Pakistan’s PM Imran Khan saying yesterday that he will return the captured Indian pilot back to India today while overnight, North Korea’s Kim Jong Un said that he will meet again with President Donald Trump to continue nuclear negotiations after a two-day summit between the leaders collapsed yesterday and expressed appreciation for Trump’s “active efforts toward results” and called the summit talks “productive.”

The better than expected China’s PMI, China’s MSCI news and de-escalation of geo-political risks has helped sentiment overnight with markets in Asia trading largely up with the Nikkei (+1.13%), Hang Seng (+0.31%) and Shanghai Comp (+0.21%) advancing while the Kospi (-1.76%) is down after the disappointing end to the summit yesterday. Elsewhere, futures on the S&P 500 are up +0.40% and the Japanese yen is weak (-0.30%) this morning.

As we start a new month, markets will do well to match the heady gains of the last two months however the last day of February proved to be a bit of a damp squib for risk assets. That being said, it’s bond markets that continue to remain (relatively speaking) lively with yields finally deciding to move against zero’s gravitational pull in the last 48 hours. Better than expected Q4 GDP and Chicago PMI readings in the US – more on those below – was as good an excuse as any yesterday and it helped Bunds (+3.5bps) climb to 0.183% and the highest since 30 January. Treasuries were also up as much as +7.2bps from the intraday lows at one stage and ultimately finished +3.6bps on the day at 2.719%. Amazingly, despite all the excitement of the last two days, on an intra-day basis the range for Treasuries in February was just 11.6bps and we’d completed that by February 5th. If we look at the period since then, the range is just 9.3bps. So it wasn’t exactly the most exciting month for Treasuries despite the mini tantrum in the last couple of days.

By contrast, there was some divergence across risk assets yesterday. The various geopolitical noise hasn't helped sentiment this week, including talks between Trump and Kim Jong Un being cut short in Hanoi. This was offset to some degree by the more upbeat trade comments from Kudlow and Mnuchin. The S&P 500 ended -0.28%, and traded in an intraday range of just 40bps, its tightest range since last September. The STOXX 600 finished +0.06%, while there were outsized gains for the IBEX (+0.72%) and FTSE MIB (+0.78%). Banks appeared to play a role in that, with European Banks as a sector up +2.01% reflecting the bond move and Spanish and Italian Banks up +1.86% and +2.12%. Meanwhile, HY credit spreads were -4bps and -3bps tighter in the US and Europe. The euro traded close to flat versus the dollar at 1.1374, capping its narrowest three month stretch ever, with a range of just 2.9% over that period.

Back to that data yesterday, Q4 GDP in the US printed at a better-than-expected +2.6% qoq saar (vs. +2.2% expected). The breakdown was equally supportive with private domestic demand up +3.1% and consumer spending reasonable following concerns post the odd December retail sales report. Trade also subtracted less than expected from the overall headline number. Core PCE prices rose at an annualized pace of 1.7% on the quarter, a touch above expectations, which presents some upside risks to today’s December print. As for the Chicago PMI, the February reading jumped a whopping 8pts to 64.7 and far exceeded expectations for a more moderate 57.5. That is the highest reading since December 2017 and like the GDP report, the details also made for pleasant reading with new orders up over 15pts and production over 8pts higher. As you’ll see in the day ahead at the end, we’ve got the ISM manufacturing reading today which is expected to fall slightly from 56.6 to 55.8 however recent regional surveys perhaps indicate some upside risk to the headline reading now, since the Chicago, Dallas, Empire, and Richmond prints all moved higher this month, leaving the weak Philly print as an outlier.

The other data of note in the US yesterday was the latest weekly initial jobless claims print, which rose 8k and a bit more than expected to 225k. That said, the four-week average has dropped for two consecutive weeks now to 229k. As for the data in Europe, it was a busy day for inflation releases. In a nutshell, Germany (+0.5% mom vs. +0.6% expected) and France (+0.1% mom vs. +0.3% expected) missed, Spain (+0.2% mom vs. +0.1% expected) beat and Italy (-0.2% mom) was in line. Today we’ve got the broader Euro Area reading with the consensus pegged at an unchanged +1.1% yoy for the core reading. Our economists had expected it to also come in at a weak +1.1% yoy however yesterday’s country level data likely puts the risk at that coming in below market.

Turning to Fedspeak, where the most interesting comments were from Vice Chair Clarida, who noted that “market-based measures of inflation compensation have moved lower, on net, since last summer, though they have increased some recently.” This suggests that Clarida wants to see higher inflation pricing before endorsing another rate hike, which is the rationale behind one of our rates strategists’ favorite trades of being long US breakevens. The rest of Clarida’s comments conformed to recent FOMC rhetoric emphasizing patience and data dependence as a response to financial market volatility and slower global growth. Elsewhere, Philadelphia Fed President Harker reiterated his preference for one hike each this year and next. That was likely also his view as of December, so his stasis suggests reduced scope for the dots to fall at the March FOMC meeting.

Finally to the day ahead, which kicks off this morning with January retail sales data in Germany before all eyes turn to the final revisions of the February manufacturing PMIs. For what it’s worth, no change in the Euro Area reading of 49.2 is expected, while the same applies for Germany and France at 47.6 and 51.4, respectively. Italy and Spain are expected to fall slightly to 47.2 and 51.7, respectively. Away from that this morning we also get February employment data in Germany and January money and credit aggregates data in the UK, as well as the advanced February CPI reading for the Euro Area as mentioned above. The big highlight in the US today meanwhile is the December PCE report which is expected to show a +0.2% mom core reading (+1.9% yoy and unchanged versus November). We’ll also get the December personal income and spending reports, January manufacturing PMI and February ISM manufacturing – the latter of which is expected to fall just under 1pt to 55.7. The final revisions to the February University of Michigan consumer sentiment survey round out the data. Away from all that, it’s the turn of the Fed’s Bostic to speak this evening.

Published:3/1/2019 6:33:08 AM
[Markets] GE's stock sinks to pace industrial sector's losers; set to snap 4-day win streak General Electric Co.'s stock sank 4.2% in midday trade Thursday, enough to pace the decliners in the SPDR Industrial Select Sector ETF , after running up 13% the past four sessions. UBS analyst Peter Lennox-King reiterated his buy rating and $13 stock price target, which is 23% above current levels. He said his initial impressions from GE's 10-K filing were than there didn't appear to be any "red flags," as the company provided more clarity into GE's operations and financials, but he acknowledged that "mortality/morbidity remain risks." GE's stock had gotten a big boost earlier this week by the deal to sell its biopharma business to Danaher Corp. for $21.4 billion. The stock's Wednesday closing price of $10.88 was fractionally below the 200-day moving average of $10.8838, according to FactSet, to extend the longest streak below that widely watched technical threshold--529 sessions--in at least 40 years. The stock has still run up 43% year to date, while the industrial ETF has rallied 19% and the Dow Jones Industrial Average has gained 11%. Published:2/28/2019 11:59:56 AM
[Markets] Dow Moves Higher as U.S. Growth Is Better Than Expected The Dow Jones Industrial Average turns higher after U.S. economic growth slowed in the fourth quarter but still topped economists' forecasts. posted stronger-than-expected fourth-quarter earnings and said it expects to be free-cash-flow positive in the coming year. Stocks turned mixed on Thursday, Feb. 28, after Donald Trump said he was unable to reach a denuclearization deal with North Korea and U.S. economic growth slowed in the fourth quarter but still topped economists' forecasts. Published:2/28/2019 8:57:46 AM
[Markets] Box and HP Fall, and 3 More Thursday Morning Movers STOCKSTOWATCHTODAY BLOG Red Morning. Stocks looked set to open lower on Thursday: Dow Jones Industrial Average futures were off less than 0.1% at recent check, while the S&P 500 and Nasdaq Composite were drifting around 0. Published:2/28/2019 8:28:21 AM
[Markets] Dow Set for a Drop After North Korea Talks Go Nowhere Dow futures have declined 54 points, or 0.2%, while S&P 500 futures have fallen 0.3%, and Nasdaq Composite futures have dropped 0.4%. Negotiations ended after North Korea demanded that the U.S. lift sanctions. Markets Now is a quick take on what’s happening with the Dow Jones Industrial Average and other major market indexes. Published:2/28/2019 6:26:54 AM
[Markets] Wall Street extends losses after comments from U.S. trade rep Earlier in the day, markets were also pressured by technology stocks, as the second U.S.-North Korean nuclear summit kicked off and tensions flared up between nuclear-armed neighbors India and Pakistan. At 10:17 a.m. ET the Dow Jones Industrial Average was down 134.03 points, or 0.51 percent, at 25,923.95, the S&P 500 was down 13.67 points, or 0.49 percent, at 2,780.23 and the Nasdaq Composite was down 51.20 points, or 0.68 percent, at 7,498.09. Published:2/27/2019 10:22:37 AM
[Markets] Dow Falls as Trade Rep Lighthizer Says More to Be Done Before China Trade Deal The Dow Jones Industrial Average fell Wednesday for a second day as U.S. Trade Representative Robert Lighthizer told the House Ways and Means committee that "much remains to be done" before a trade deal is reached with China. posted stronger-than-expected fourth-quarter earnings but noted weakness in Canada's housing market would continue over the near term. Published:2/27/2019 9:54:22 AM
[Markets] Dow Falls for a Second Day as Powell Again Set to Testify The Dow Jones Industrial Average fell Wednesday for a second day after investors sifted through dovish testimony from Federal Reserve Chairman Jerome Powell and monitored geopolitical developments. posted stronger-than-expected fourth-quarter earnings but noted weakness in Canada's housing market would continue over the near term. earnings were stronger than expected and the electronics retailer forecast solid full-year profit as softer mobile phone sales were offset by gains in wearables, appliances and gaming. Published:2/27/2019 8:52:00 AM
[Markets] Stocks Slide On India-Pakistan Hostilities As Traders Brace For Day Of Fireworks

After two days of surprising weakness in US cash stocks in the last hour of trading, and following an overnight session in which S&P futures were offline for two hours following a "glitch" at the CME Globex exchange, world markets are a sea of red as stocks fell in Europe alongside US equity futures pressured by disappointing corporate earnings and a dramatic escalation in India-Pakistan hostilities after Pakistan reportedly shot down two Indian fighter jets even as traders brace for a barrage of news including the latest Trump-Kim summit, the Congressional testimony by Trump's former lawyer Michael Cohen, and the second day of Powell's testimony on the hill this time before Maxine Waters and AOC. Treasuries yields dropped, as did the dollar.

The European Stoxx 600 index was down about 0.5%, with all the main regional indexes were in the red as Air France-KLM dropped the most ever and Nivea hand-cream maker Beiersdorf cut guidance, sparking a selloff in consumer stocks.

Earlier, all eyes were on the latest Asian geopolitical conflict: S&P futures fell, Japan equities came off their highs, Hong Kong faded an advance after Pakistan said it had downed two Indian jets, sending Indian and Pakistan bonds and currencies lower and MSCI’s index of Asia-Pacific shares ex-Japan sliding 0.1% as the threat of conflict between the nuclear-armed neighbors grew. Australia's ASX 200 (+0.4%) gains were led by energy names following the rebound in the complex after sources stated that OPEC are to stick to their output curb agreement coupled with bullish API inventory data, while Nikkei 225 (+0.5%) benefitted from the strength in the healthcare sector. Elsewhere, Shanghai Comp (+0.4%) benefited from gains in IT names whilst the latter profited from the strong performance in heavyweight energy and financial names.

Meanwhile, just as 2800 has emerged as an uncrossable resistance line for the S&P, China is having the same issue with the 3000 level on the Shanghai Composite as Chinese stocks erased a gain in the afternoon, with the Composite again failing to cross the 3,000-point level after climbing into bull market earlier in week. The Shanghai benchmark climbed as much as 1.9% earlier in day before seeing much of its gains fade and close up just 0.4%.

"It was purely a liquidity-driven rebound without the support of fundamentals, so nobody expected the market to embark on another bull run to hit 5,000 points," said Yin Ming, vice president of Shanghai- based investment firm Baptized Capital. "When the index nears the technically important 3,000-point level, investors will choose to exit first and wait for bargains after the correction. With gains in recent sessions, shareholders of firms are finally able to close out their share-pledge positions to repay loans."

India’s rupee reversed gains and Pakistan’s benchmark stock index plunged more than 3 percent in Karachi before recovering after the latest escalation in tensions. The Pakistani action came a day after India’s Air Force jets bombed what it said was a terrorist training camp inside Pakistan.

"This adds another layer of risks for investors”, said Charles St-Arnaud, a strategist at Lombard Odier, although he noted the market moves remained limited for now.

US Secretary of State Pompeo spoke to the Indian and Pakistani Foreign Minister separately according to the US State Department. The Secretary of State urged Pakistan to avoid military action against India following the previously reported Indian air strike on a terrorist camp on Pakistan. Furthermore, at least three Pakistan fighter jets have entered the Indian side of Kashmir, Indian Air Forces intercepted the Pakistani planes; according to an Indian Official. It was later reported that an Indian Air Force jet has crashed in Jammu & Kashmir, according to PTI. Pakistan Foreign Ministry confirms they have shot down two Indian planes and arrested a pilot, states that we have no intention of escalation, but are prepared to do so if forced into that situation.

As Bloomberg notes, investors have added the India-Pakistan conflict to a host of other uncertainties from China trade talks to Brexit, that could rein in a recovery in global equities from December lows. U.S. President Donald Trump is in Hanoi for a second summit with North Korean leader Kim Jong Un, with the outcome uncertain. Powell’s testimony on Tuesday helped steady the ship, though, as he gave no indication that the Fed is ready to alter policy any time soon.

S&P500 futures were down 0.2%, after earlier a Globex malfunction around 740pm ET halted trading in ES, Treasury and commodity futures, prompting trader anguish for nearly two hours before the "glitch" was eventually resolved.

Markets are also watching the U.S.-North Korean summit, which began shortly after 6am ET in Hanoi. President Trump is meeting North Korean leader Kim Jong Un for their second summit, with the United States pushing North Korea to dismantle its nuclear weapons program.

The heightened geopolitical risks helped assets considered safer than stocks, such as the Japanese yen, which gained against the dollar. Paradoxically, while news of the worst escalation between the two nations since the 1971 war moved the yen higher and India’s rupee lower, volatility across currencies continued on its downward trend as traders continue to sell vol in droves.


In political news, overnight the US House voted to block President Trump's national emergency declaration regarding a Mexican border wall, as expected. The bill will now be passed onto Senate before eventually being vetoed by the president.

Of note, also today Trumps's former lawyer Michael Cohen will testify publicly that Trump is a racist, conman & cheat, and that Trump knew ahead of time that Wikeleaks were to release Democratic Committee emails hurting Hilary Clinton's election campaign; draft statement.

In the latest Brexit news, UK PM May said she is close to winning concessions from the EU that could persuade Eurosceptic MPs to back her deal. More notably, Brexiteer Jacob Rees-Mogg has softened his stance on PM May's Brexit deal; he is no longer insisting the Irish backstop be scrapped and he is prepared to consider other legal fixes to make sure it does not become permanent. Cabinet Ministers warned PM May that Brexit could be delayed by up to two years after she announced a series of votes on her deal, no deal and a Brexit delay to be held in a fortnight. Meanwhile, the newly-formed Independent Group has tabled an amendment demanding the government to commence preparations for a second EU referendum. The amendment reportedly has support from the SNP, LibDems, and Plaid Cymru and is said to be aimed at provoking a fresh split in the Labour party by tempting MPs who are seeking a new vote.

In FX, the dollar hovered around a three-week low after Federal Reserve Chairman Jerome Powell reiterated on Tuesday the Fed had shifted to a more “patient” policy approach regarding changes to interest rates. “We didn’t learn much new,” St-Arnaud said. The new dovish stance of U.S. monetary policy had not weakened the dollar much, notably against the euro.

Elsewhere, the British pound continued to rise after Prime Minister Theresa May offered lawmakers a chance to vote on delaying Brexit. The pound approached $1.3300 as leveraged accounts bought the currency as it dipped earlier in the day, while gilts declined. The euro recovered from a loss as the dollar erased an Asian session advance; the pound was up a fourth day, its longest winning streak since September amid continued Brexit optimism after Prime Minister Theresa May bought herself more time to secure a Brexit agreement. Scandinavian currencies led the advance after better- than-forecast data; unemployment unexpectedly fell in Norway and retail sales beat estimates, while a Swedish economic tendency survey rose. Australia’s dollar surrendered early gains on disappointing building data.

In rates, bunds were little changed, Treasuries were steady after earlier whipsawing and U.S. equity futures drifted lower; the previously noted technical error at CME Group Inc. disrupted trading of contracts tied to Treasuries and commodities.

Today's Data include factory orders, pending home sales and mortgage applications. Lowe’s, Square and American Tower are due to report earnings

Market Snapshot

  • S&P 500 futures down 0.3% to 2,782.50
  • STOXX Europe 600 down 0.5% to 371.76
  • MXAP up 0.1% to 160.43
  • MXAPJ down 0.1% to 526.18
  • Nikkei up 0.5% to 21,556.51
  • Topix up 0.2% to 1,620.42
  • Hang Seng Index down 0.05% to 28,757.44
  • Shanghai Composite up 0.4% to 2,953.82
  • Sensex down 0.1% to 35,927.20
  • Australia S&P/ASX 200 up 0.4% to 6,150.27
  • Kospi up 0.4% to 2,234.79
  • German 10Y yield rose 0.4 bps to 0.122%
  • Euro up 0.02% to $1.1391
  • Brent Futures up 0.8% to $65.70/bbl
  • Italian 10Y yield fell 6.8 bps to 2.346%
  • Spanish 10Y yield rose 0.5 bps to 1.143%
  • Brent Futures up 0.8% to $65.70/bbl
  • Gold spot down 0.2% to $1,326.29
  • U.S. Dollar Index down 0.01% to 96.00

Top Overnight News from Bloomberg

  • U.S. President Donald Trump plans to hold a one-on-one meeting with North Korean leader Kim Jong Un on Wednesday before the two leaders dine together with aides as they kick off their second summit aimed at a deal for Pyongyang to surrender its nuclear arsenal
  • Donald Trump’s administration regularly denounces Nicolas Maduro as an autocratic Cuban puppet and may hit the Caribbean island with new sanctions over its support for the Venezuelan leader
  • Leading Brexit purist Jacob Rees-Mogg, who has opposed Theresa May’s exit deal, appears to be softening his stance, making it more likely that the divorce agreement could win Parliamentary approval next month
  • The European Union is unlikely to offer concessions to the U.K. on its Brexit deal until just before the British Parliament votes on it, triggering a frantic two-week period that culminates in a critical summit of leaders
  • U.K. financial firms were dealt a blow after EU policy makers agreed to tighten the rules governing the City of London’s access to the bloc after Brexit
  • Bank of Japan board member Goushi Kataoka says the central bank should try to widen the gap between supply and demand by ramping up its easing measures in pursuit of 2% inflation. BOJ may resort to more QE if yen jumps, according to Takahide Kiuchi, a former policy board member
  • A Bloomberg Economics gauge indicates that China’s economy is showing the first signs of recovery after months of slowdown, as stock and commodity rallies lift confidence
  • A technical error at CME Group Inc. prompted a lengthy trading halt at the world’s largest exchange operator, preventing the buying and selling of contracts tied to U.S. Treasuries, stock-futures and commodities
  • The House voted to block President Donald Trump’s declaration of a national emergency on the U.S.-Mexico border, sending the measure to the Senate where the GOP majority will be forced to take a stand on whether to defy their president
  • Greece’s foot-dragging on some key economic reforms is raising creditor concern, putting at risk a planned debt relief measure next month and a rebound in its stock and bond markets
  • Italian business and economic confidence fell, signaling a possible continuation of the recession that started late last year

Asian equities were higher across the board following a subdued lead from Wall Street where the Dow dipped into the red following disappointing earnings from Home Depot and the S&P retreated further below the 2800 level. ASX 200 (+0.4%) gains were led by energy names following the rebound in the complex after sources stated that OPEC are to stick to their output curb agreement coupled with bullish API inventory data, while Nikkei 225 (+0.5%) benefitted from the strength in the healthcare sector. Elsewhere, Shanghai Comp (+0.4%) and Hang Seng (U/C) extended on gains from the open with the former supported by IT names whilst the latter profited from the strong performance in heavyweight energy and financial names. Furthermore, Morgan Stanley raised its targets for Chinese equities, citing policy stimulus alongside positive trade developments. BoJ Governor Kuroda said the chance of Japanese inflation to hit the 2% target during FY 2020 is low and any exit from the BoJ's ultra-easy policy will be very gradual. BoJ Board Member Kataoka disagrees with the BoJ's view of persistently easing policy to reach price goal and added that longer monetary easing will bring more side effects. Kataoka also added that the BoJ is still far from ending its ultra-easy policy. He expects any sales-tax hike driven pickup in Japan's economy to be moderate and said Japan's inflation expectations remain weak whilst also acknowledging that global growth has slowed compared to the prior year.

Top Asian News

  • China Is Studying Plan to Restructure Vaccine Sector: CSJ
  • H.K. Govt ‘Gravely Concerned’ Over Claims Against H.K. Airlines
  • Here’s What You Need to Know About Asia’s Stock Markets Today

Major European equities are in the red [Euro Stoxx 50 -0.5%], following a subdued lead from Wall Street and modest gains in Asia overnight, as traders are mindful of growing tensions between India and Pakistan. There is some mild underperformance in the Dax (-0.7%) where only 3 companies are in the green; although losses are limited by strong performance in Bayer (+4.5%) after the Co. posted a beat on their Q4 sales. Sectors are similarly broadly in the red, with underperformance seen in consumer staples. Other notable movers include, Marks & Spencer (-9.5%) who are at the bottom of the Stoxx 600 after the Co. are considering a rights offering to fund their joint venture with Ocado (+4.7%). Air France (-11.7%) are down as the Dutch government has taken a 12.7% shareholding in the Co. in an attempt to protect their interests; which may lead to tensions with France who hold a 14.3% stake in the Co. Rio Tinto (+0.4%) are in the green after posting a significant increase in FY net earnings of USD 13.64bln vs. Prev. USD 8.76bln alongside the announcement of a special dividend.

Top European News

  • Air France-KLM Tumbles After Dutch State Builds Surprise Stake
  • Britain’s Winter Heat Wave Means Wildfires and Chronic Pollution
  • Ted Baker Plunges After Profit Warning Adds to Clothier’s Woes
  • Brexiteer Rees-Mogg Softens Stance on May’s Deal: Brexit Update

In FX, the Dollar continues to sag in wake of Fed chair Powell’s reinforcement of the new patient policy stance and on portfolio rebalancing for the turn of the month. The DXY has retreated below 96.000 as a result, and with additional downside pressure coming from the escalation in tensions between India and Pakistan that has prompted greater demand for safer currency havens relative to the Greenback.

  • CHF/GBP The Franc and Pound are vying for pole position within the G10 ranks, as the former benefits from defensive positioning amidst the aforementioned rise in Indian-Pakistani hostilities, with Usd/Chf reversing more definitively from par-plus levels to around 0.9970. Meanwhile, Sterling has extended gains on the back of Tuesday’s marked turnaround on Brexit from UK PM May that raises the prospect of a delay to Article 50 and odds on a no deal or cliff edge conclusion to the already protracted withdrawal process. Cable is now probing 1.3300 after eclipsing resistance just shy of the big figure (1.3298 high from September 2018), while Eur/Gbp is hovering around 0.8570 and eyeing chart support a few pips below, like a Fib at 0.8548.
  • CAD/JPY The next best majors, with the Loonie drawing comfort/support from a rebound in crude prices and the more pronounced downturn in the Usd, to rebound firmly over 1.3200 again and pivot 1.3150, while Usd/Jpy has now breached its 100 DMA more convincingly to trade under 110.40. Note, 110.00 should be well supported given the 30 DMA at 110.02, and with hefty expiries looming at the strike on Thursday (2 bn), and next up for the CAD top-tier Canadian CPI data and avg. earnings.
  • AUD/NZD/NOK/SEK Contrasting fortunes for the more high-beta and risk sensitive Antipodean Dollars and Scandi Crowns, as the Aussie and Kiwi underperform in wake of disappointing data overnight (Q4 construction and January trade respectively), but the Nok and Sek glean protection from the overall risk averse environment with the aid of upbeat macro releases (retail sales, manufacturing and overall industry sentiment, plus trade). Aud/Usd is currently near the bottom of a 0.7198-65 range, Nzd/Usd close to 0.6874 vs 0.6901 at one stage, while Eur/Nok is under 9.7200 and Eur/Sek around 10.5500.
  • EUR The single currency is also gaining at the expense of the Greenback, with one prominent bank flagging strongest month end Usd sell signals against the Eur. However, technical obstacles around 1.1400 are proving tough to overcome and the decline in Eur/Gbp noted above is also hampering the single currency to a degree

In commodities, Brent (+1.3%) and WTI (+1.6%) prices are higher and trading towards the top of the sessions range, after yesterday’s unexpected -4.2mln draw in API Weekly Crude Inventories compared with the expectations for a +2.8mln build. Recent newsflow has seen comments from Saudi Energy Minister Al Falih saying that he sees a likelihood of an output cuts extension in H2 and are aiming for March oil exports of 7mln BPD. Separately, the Russian Energy ministry is reportedly planning to meet with Russian oil companies on March 1st in order to discuss the OPEC+ deal. Elsewhere, Nigerian President Buhari has won the re-election, which is to be contested in court and oil prices were little affected by the CME group’s technical issues which resulted in WTI live prices being unavailable for a time. Gold is flat as it follows the dollar after the first testimony by Fed’s Chair Powell yesterday to the Senate and ahead of his testimony to the house today at GMT 15:00. Elsewhere, Freeport’s CEO has instructed his employees to immediately report any safety concerns regarding dams the Co. operate; following January’s Vale mine disaster. Separately, Copper has slipped slightly from it’s 7-month high which was spurred by falling supply and dollar weakness.

In terms of the day ahead, we’re due to get the December advance goods trade balance, and final revisions to December wholesale inventories, durable goods and capital goods orders. Away from that, Powell will speak again, this time testifying to the House Financial Services Committee Panel, while the ECB’s Coeure and Weidmann are due to speak. In the UK the House of Commons will be voting today however it’s unlikely to be significant in light of yesterday’s developments, The other potentially important event to watch is US Trade Representative Lighthizer testifying to the House Ways and Mean Committee’s hearing on the US-China trade talks.

US Event Calendar

  • 8:30am: Advance Goods Trade Balance, est. $73.9b deficit, prior $70.5b deficit
  • 8:30am: Retail Inventories MoM, est. 0.2%, prior -0.4%; Wholesale Inventories MoM, est. 0.4%, prior 1.1%
  • 10am: Pending Home Sales MoM, est. 1.0%, prior -2.2%; Pending Home Sales NSA YoY, est. -4.55%, prior -9.5%
  • 10am: Factory Orders, est. 0.6%, prior -0.6%; Factory Orders Ex Trans, prior -1.3%
  • 10am: Durable Goods Orders, prior 1.2%; Durables Ex Transportation, prior 0.1%
  • 10am: Cap Goods Orders Nondef Ex Air, prior -0.7%; Cap Goods Ship Nondef Ex Air, prior 0.5%

DB's Jim Reid concludes the overnight wrap

If you’re looking for the next box set to binge on and are happy to suspend any semblance of belief then I can give a wholehearted recommendation to watch Ozark (Netflix). It’s in the mould of Breaking Bad for the uninitiated. Over the last month we have watched the two available series back to back and are now at a loss as to what to do with our evenings again. More time for stressing about kitchens, bathrooms, carpets, new windows, boilers, guttering and the like.

After watching last night’s tense finale, markets seem positively mundane at the moment. Mr Powell might have ignited the flame for positive sentiment at the start of the year but 8 weeks on markets weren’t particularly fussed by the first of his semi-annual testimonies yesterday in front of the Senate. We’ll touch on what he said shortly however 10y Treasuries traded in a range of just a few of basis points as Powell spoke, before ending the day down -2.5bps at 2.638%. We went back and looked at the range since Powell spoke in early January and found that on a closing basis, the range has been just 15.5bps which is the smallest since June last year, and the second smallest since October 2017. The MOVE index (implied vol of 1-month treasury options) is back down slightly above the all time lows (data back to 1988) so central banks have killed vol again for now. As for the response in equites yesterday, reaction to the testimony was mixed as US stocks oscillated between losses and gains with the S&P 500 and NASDAQ indexes retreating -0.08% and -0.09%, respectively, at the close. They do remain +14.13% and +16.80% off their Jan 3 levels before Powell’s initial policy U-turn sparked a rebound in markets. US HY spreads are -122bps tighter over the same period, having tightened -3bps yesterday.

So the change in message has worked for markets in 2019 but there wasn't much more to give yesterday as it was mostly a repeat of the recent mantra in favour of patience before any further rate hikes are seen. Powell repeated that “our policy decisions will continue to be data dependent” and that “we’re in no rush to make a judgment about changes in policy.” So the Fed continues to be on the sidelines for now. Powell justified his position by citing “muted” inflation pressures and the fact that “growth has slowed in some major foreign economies, particularly China and Europe.” Finally, he also noted that “uncertainty is elevated around several unresolved government policy issues, including Brexit and ongoing trade negotiations.”

Before that, European markets had closed mostly higher, with the STOXX 600 gaining +0.39%, and indexes across the continent advancing as well. The main exception was the FTSE 100, which retreated -0.45% amid a large rally in the pound on positive Brexit developments (details below). Bund yields rose +0.8bps, while peripheral spreads tightened with Italian BTPs yields -6.9bps lower. European HY credit spreads tightened -4.9bps to their tightest level since November.

The other main piece of news yesterday surrounded Brexit with a few more dates for your diaries. PM May confirmed that should her deal be rejected by March 12, then the PM will put forward the choice to MPs of a no-deal Brexit vote on March 13 and should that be rejected, then a vote on extending Article 50 will be put forward on March 14. We know that May would ask for a short and one-off extension (not beyond June) but we don’t know what the EU will agree to and we won’t know for sure until the EU engage on the issue. Bloomberg has previously reported some EU officials as saying they would back an extension of as much as 21 months but the truth is we won’t really know until closer to the above dates. GBP/USD rallied throughout the session yesterday, ending +1.21% stronger, its best performance since last November. We’re reading at $1.3248 overnight which is the highest since last July. EUR/GBP is now at 0.857 and the strongest since May 2017. We should add that our FX strategists yesterday reinstated their Sterling long trade in light of recent developments and target 0.84 in EUR/GBP. More in their note here . Overnight the FT has carried interesting quotes from the de facto leader of the eurosceptic Tory wing Jacob Rees-Mogg. He is suggesting that he is no longer looking to scrap the Irish backstop and will instead consider other legal fixes to it. So the mood music continues to move in favour of Mrs May’s deal albeit without yet having the necessary legal concessions from the EU.

Overnight markets are heading higher with the Nikkei (+0.49%), Hang Seng (+0.60%), Shanghai Comp (+0.79%) and Kospi (+0.24%) all up. Elsewhere, futures on the S&P 500 are trading flat (-0.02%). President Trump and North Korea leader Kim Jong Un are meeting today and tomorrow, with President Trump set to meet North Korea’s Kim at 11:40am GMT. In the meantime, S&P has said that even if the US and North Korea make a formal declaration of an end to the Korean War, it is unlikely to impact South Korea’s rating as the security posed by North Korea will continue to weigh on South Korea’s ratings for the foreseeable future.

In other news, after Italy’s ruling coalition partner M5S lost c. 75% of its vote share in Sardinia (11.18% in 2019 down from 42.5% previously), it’s leader Luigi Di Maio is facing fresh dissent from party members with majority of them calling on him to return the party to its roots and give more power back to the rank-and-file members. M5S trails its other coalition partner League by more than 10% in the most recent polls as the two leaders gear up for May’s European parliamentary elections. In the meantime, Di Maio appeared to recognise the internal dissent yesterday by signaling that he is ready to give some concessions to the party dissenters but added that “we need to have better structure, but my political leadership will only be up for discussion four years from now" (per Bloomberg). This could lead to renewed turbulence in Italian politics but Italian PM Conte and both the ruling coalition leaders have played down the risk of regional and European parliament elections impacting the sustainability of the Italian government by saying that Italy’s current coalition government will govern for its complete term. 91 governments in around the last 117 years might suggest otherwise. One to continue to watch.

Also interesting yesterday was the US data. The most headline grabbing were the February surveys where the Richmond Fed manufacturing index rose 18pts to +16 (vs. +5 expected) – and included a big jump in new orders – and the Conference Board consumer confidence reading jumped 9.7pts to 131.4 (vs. 124.9 expected) and the highest since November last year. Both the expectations and present situations components ticked up and it was noticeable again that the chart highlighting the gap between the two (expectations minus present situations) did the rounds again yesterday- albeit with the gap narrowing slightly to -70 from -82. A negative numbers has been billed as a leading indicator of recessions in the past and the only time it’s been more negative than now was in 2001 when it hit -96 just before the recession. Given that the thought was the government shutdown may have impacted the data the fact that there hasn’t been a huge change in the latest reading is certainly noteworthy.

As for the other data, December housing starts surprisingly fell -200k to 1.08m, versus expectations for 1.26m, reaching their lowest level since September 2016. That figure may have been affected by wildfires in the western US, as new permits were strong at 1.33m, close to flat on the month but beating consensus expectations. Overall, the print suggests that the US housing market may indeed be turning a corner after a tepid 2018. The -45bps drop in mortgage rates over the last four months should help too. The FHFA house price index rose 0.3% mom for December and the S&P CoreLogic 20-city house price index rose +0.19% mom, both a touch softer than expected.

In terms of the day ahead, this morning it’s quiet with the January M3 money supply print due for the Euro Area followed by February confidence indicators. In the US we’re due to get the December advance goods trade balance, and final revisions to December wholesale inventories, durable goods and capital goods orders. Away from that, Powell will speak again, this time testifying to the House Financial Services Committee Panel, while the ECB’s Coeure and Weidmann are due to speak. In the UK the House of Commons will be voting today however it’s unlikely to be significant in light of yesterday’s developments, The other potentially important event to watch is US Trade Representative Lighthizer testifying to the House Ways and Mean Committee’s hearing on the US-China trade talks.

Published:2/27/2019 6:51:13 AM
[Markets] Dow futures point to lower open ahead of Trump-Kim summit At around 03:45 a.m. ET, Dow Jones Industrial Average futures were 60 points lower, indicating a negative open of more than 73 points. Futures on the S&P 500 and Nasdaq Composite were both seen relatively downbeat. President Donald Trump is scheduled to meet with North Korean leader Kim Jong Un in Hanoi, Vietnam on Wednesday. Published:2/27/2019 3:20:19 AM
[Markets] The Dow Dipped Tuesday Because Resistance Wasn’t Futile The Dow Jones Industrial Average finished down just over 30 points Tuesday as investors took in testimony from Fed Chair Jerome Powell and wondered what was up with a possible trade deal. Published:2/26/2019 4:48:15 PM
[Markets] US STOCKS-Tech stocks help S&P inch higher, Home Depot weighs on Dow The S&P 500 eked out gains on Tuesday, boosted by technology sector, but losses in consumer discretionary shares including Home Depot and Discovery kept the Dow Industrials and the Nasdaq in check. Rising risks and recent soft data should not prevent solid growth for the economy this year, but the Federal Reserve will remain "patient" in deciding on further interest rate hikes, Chairman Jerome Powell said in prepared testimony ahead of a hearing before the U.S. Senate Banking Committee. Published:2/26/2019 11:47:15 AM
[Markets] US STOCKS SNAPSHOT-S&P, Nasdaq cut all losses after Feb consumer confidence data The benchmark S&P 500 index and the Nasdaq cut all losses on Tuesday to eke out slight gains, after a report from the Conference Board showed a higher-than-expected rise in the consumer confidence index in February. At 10:04 a.m. ET the Dow Jones Industrial Average was down 26.33 points, or 0.10 percent, at 26,065.62, the S&P 500 was up 1.35 points, or 0.05 percent, at 2,797.46 and the Nasdaq Composite was up 0.92 points, or 0.01 percent, at 7,555.38. Published:2/26/2019 9:21:14 AM
[Markets] Caterpillar and Home Depot are big decliners as Dow falls 100 points at open Caterpillar and Home Depot are big decliners as Dow falls 100 points at open Published:2/26/2019 8:45:45 AM
[Markets] Home Depot responsible for nearly half of Dow's premarket decline Home Depot responsible for nearly half of Dow's premarket decline Published:2/26/2019 8:17:22 AM
[Markets] Caterpillar's stock sinks to weigh on Dow after UBS swings to bearish from bullish Shares of Caterpillar Inc. sank 3.8% in premarket trade Tuesday, after UBS swung to bearish from bullish on the maker of construction and mining equipment, citing concerns that macroeconomic pressures and and expected earnings decline have yet to be priced in. The implied price decline would shave about 36 points off the Dow Jones Industrial Average's price. Analyst Steven Fisher cut his rating by two notches to sell, after being at buy since September 2017. He slashed his stock price target to $125, which is 12% below Monday's closing price of $141.41, from $154. Fisher said he believes about 55% of Caterpillar's end markets will peak this year, which will pressure revenue and margins in 2020 as demand declines. He expects 2020 earnings per share to fell 8% from 2019--the FactSet consensus calls for 6.8% growth--as continued growth in mining and share repurchases isn't expected to be enough to offset headwinds in Caterpillar's construction and oil and gas businesses. "We expect downward earnings revisions to pressure the stock over the next 12 months," Fisher wrote in a note to clients. The stock has run up 13.3% over the past three months through Monday, while the Dow has gained 5.9%. Published:2/26/2019 8:17:22 AM
[Markets] Home Depot's stock drop to blame for nearly half of Dow's decline Shares of Home Depot Inc. sank 3.3% in premarket trade after disappointing fiscal fourth-quarter results, enough to be blamed for nearly half of the Dow Jones Industrial Average's selloff ahead of the open. The home improvement retail giant reported earlier earnings and sales that missed expectations. The implied price decline in the premarket would shave about 42 points off the Dow's price, while Dow futures dropped 99 points. Published:2/26/2019 7:45:32 AM
[Markets] Home Depot's stock falls nearly 3% premarket after weaker-than-expected results Shares of Home Depot Inc. fell 2.8% in premarket action Tuesday, after the home-improvement retailer reported fiscal fourth-quarter earnings and revenue that were weaker than expected. Net income for the quarter ended Feb. 3 were $2.3 billion, or $2.09 a share, from $1.8 billion, or $1.52 a diluted share, in the same period a year ago. The FactSet consensus for earnings per share was $2.16. Revenue rose 10.9% to $26.5 billion, below the FactSet consensus of $26.578 billion, as U.S. same-store sales rose 3.7%, which was below expectations of 4.3% growth. The company said fourth-quarter results were hurt by a pre-tax charge of approximately $247 million, or $184 million after tax, equating to 16 per share a diluted share. Separately, the company increased its dividend 32% to $1.36 a share, and announced a $15 billion share buyback. Home Depot shares are up 10.6% year to date, compared against a gain of about 10.6% in for the S&P 500 index and 11.9% for the Dow Jones Industrial Average , over the same period. Published:2/26/2019 5:46:10 AM
[Markets] Dow futures point to lower open amid caution over US-China trade At around 02:30 a.m. ET, Dow Jones Industrial Average futures were 71 points lower, indicating a negative open of more than 55 points. Futures on the S&P and Nasdaq were both seen relatively downbeat. Market focus is largely attuned to global trade developments, after President Donald Trump said on Sunday he would delay a tariff hike of $200 billion of Chinese imports. Published:2/26/2019 1:47:50 AM
[Markets] "Sell The News"At 2800? Is It Really This Easy?

But, but, but.. a deal was so close...

Chinese markets went to '11' overnight after positive tweets and headlines from both parties in the US-China trade talks (which were also talked back numerous other times). SHCOMP exploded 5.6%...

The biggest jump in 5 years as margin balances surge once again...

 

All major European markets extended gains on the back of China's exuberance, led by Italy, but UK's FTSE slipped to almost unch by the close...

 

US Futures opened excitedly amid trade hope but faded all daya long despite the best efforts of Trump et al. to jawbone stocks higher...

Trannies and Small Caps tumbled into the red in the last few minutes as the early-day gains evaporated across the market...

 

2800 was the level to watch for the S&P 500 and Trump did his best to tweet and keep the market above it...but it failed and close at LoD..

 

Is it really that easy?

 

Another huge short-squeeze day all hit at the open...

 

Aided by another massive surge in buybacks at the open...

 

And then there was GE...

 

VIX was higher on the day alongside a higher stock market

 

Treasury yields were higher on the day by 1-2bps - but were unable to erase Friday's gains...

 

 

The Dollar ended the day lower after chopping around overnight...

 

Cryptos have been wild since Friday...

 

 

Commodities trod water basically on the day but oil plunged on Trump's tweet...

 

Trump tweeted a shot across the bow at OPEC production cuts and that sent oil prices lower...

“You needed that spark and that spark was his tweet this morning slamming OPEC more or less,'' said Bob Yawger, director of the futures division at Mizuho Securities USA.

Finally, we give Gluskin Sheff's David Rosenberg the last word once again:

And then there is this silliness...

Published:2/25/2019 3:11:12 PM
[Markets] Dow Rises Solidly After Trump Extends China Tariff Deadline The Dow Jones Industrial Average, coming off its ninth straight week of gains, rose Monday after Donald Trump said he would delay increasing tariffs on China-made goods. GE shares jumped 8.9%. reached a deal to buy biotech Spark Therapeutics Inc. Published:2/25/2019 12:40:56 PM
[Markets] Lack of Investor Exuberance Is a Positive for Stocks While bulk of the major equity index charts remain in near-term uptrends the data has become a bit more mixed in its message. All of the equity indices, except the Dow Jones Transports, closed higher Friday with positive market breadth. The cumulative advance/decline lines for the All Exchange, NYSE and NASDAQ also remain in uptrends. Published:2/25/2019 10:13:06 AM
[Markets] Apple's approach to video 'will likely remain uninspiring,' says KeyBanc KeyBanc Capital Markets analyst Andy Hargreaves isn't particularly upbeat about the streaming-video service that many expect Apple Inc. to unveil in the coming weeks. "While this will likely usher in an era of Apple originals, the overall effort appears likely to be sub-scale, years behind key competitors, and lacking in meaningful differentiation," he wrote. "We see little in the effort that appears likely to drive material profits or that could attract a significant number of incremental users to the Apple ecosystem." He said the company's efforts in video "will likely remain uninspiring" and doesn't see an easy way for Apple to catch up with rivals that are more experienced in the space. He rates the stock at sector weight. Apple shares are up 0.7% in premarket trading Monday, and they've gained 0.4% over the past three months. The Dow Jones Industrial Average has climbed 32% in that time. Published:2/25/2019 8:10:18 AM
[Markets] Chinese Stocks Soar Into Bull Market On Massive Volume After Tariff Deadline Delay

For the past two months, stocks were buying the rumor that a trade deal would happen, and since Sunday night they have been also buying the news, after Donald Trump announced he would postpone the date for boosting tariffs on Chinese imports, taken as a sign of progress in the trade talks. While bonds fell and the dollar retreated, it was the S&P that finally broke above the key 2,800 resistance level that had proven too much for market for the past four months...

... while global markets were a sea of green.

But no market was as excited to surge on the late Sunday news as China, where the recent $1 trillion rally pushed two more indexes into bull markets overnight on an explosion of volume: China's CSI 300 Index surged 6% Monday and the Shanghai Composite Index climbed 5.6%, its biggest daily, gain in nearly 4 years and extending their gains from a Jan. 3 low to more than 20%, entering a bull market.

The ChiNext Index of small caps and technology stocks, which entered a bull market Friday, rose a further 5.5 percent. Turnover on Chinese exchanges rose beyond 1 trillion yuan to the most since 2015.

A big driver for this surge in Chinese stocks where the government now appears ok with reflating yet another stock bubble, is the recent increase in margin debt, which has exploded higher over the past two weeks at the fastest pace since 2015.

“Even if stocks retreat in the short term, there’s still room for further gains as leverage is still way below the peak despite the increase,” said Shen Zhengyang, a Shanghai-based strategist with Northeast Securities Co. “Investors also have to bear in mind that economic fundamentals are still bad, so in order to avoid getting burned in a likely more volatile market, it’s key to always remain wary.”

Meanwhile, suggesting that Beijing is indeed greenlighting another stock bubble, Chinese brokerage stocks were especially hot, after President Xi said in a Politburo meeting that China will deepen reform in the finance sector and further open the industry. Huatai Securities Co. was among the brokerages to climb by the 10 percent daily limit in Shanghai, closing at its highest since June 2015. Actually as Bloomberg notes, all 30 Shanghai and Shenzhen-listed stocks with the word "securities" in their names rose by the 10% daily limit. The market is reacting quite positively as it’s rare to see the capital market and financial industry the main focus of that top policy meeting, says XuFunds partner Wang Chen.

It wasn't just China as MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.8%, touching its highest since September, and is now up 10% so far this year. The Japanese Nikkei also gained, closing half a percent up at its highest since December.

The euphoric investor sentiment also boosted the yuan, which is the best performer among major currencies since Feb. 1, strengthening 0.8 percent against the dollar. The currency was up 0.34 percent at 6.6928 as of 3:14 p.m. in Shanghai.

The fresh trade deal optimism quickly spread across the globe and boosted European carmakers and miners, sparking a rally in the Stoxx Europe 600 Index, and by mid-morning, MSCI’s world equity index was up 0.2 percent at its highest since October. There was some mild underperformance in the SMI (U/C) as index heavyweight Roche (-0.6%) is down as the Co. are to purchase Spark Therapeutics in a deal valued at USD 4.8bln, which is at a 122% premium to Spark’s Friday close and at a 19% premium to their 52-week intraday high. Sectors were mixed, with some slight outperformance in Financial names. Other notable movers include PostNL (+9.1%) who are at the top of the Stoxx 600 following their earnings. UK housebuilders are underperforming after Persimmon (-5.7%) are reportedly facing removal of their right to participate in the government’s Help to Buy scheme, following reports of poor standards and hidden charges; as such, Taylor Wimpey (-2.3%) and Barratt Developments (-1.8%) are down in sympathy.

Italy’s bonds rallied after Fitch Ratings kept the country’s credit rating unchanged, easing fears that it will be downgraded to junk anytime soon

Emerging-market currencies and shares advanced despite China’s state-run Xinhua news agency later publishing a commentary saying talks will be harder at the final stage. Treasuries and core European bonds slipped, while Italy’s securities advanced and the euro strengthened. Following Trump's tweet, developing-nation equities headed for the longest rally in nine months. South Africa’s rand led currency gains, with its biggest advance this month, and Russia’s ruble was set to post its longest winning streak since April 2015. “Given this string of positive news, it is hard to see an inflection in the positive EM momentum today,” Guillaume Tresca, a Paris-based strategist at Credit Agricole SA, wrote in a report. “This could help to support EM sentiment, which has been fragile,” with emerging-market portfolio inflows decelerating in the past two weeks.

The official delay from the U.S. may give fresh impetus to extend a global rally in equities that was being tested amid an uncertain future on global trade and forecasts for global economic growth to ebb. Meanwhile, it is unlikely that the market euphoria will fizzle any time soon: Fed Chairman Jerome Powell, whose dovish capitulation has also helped to boost markets, will testify on U.S. monetary policy on Tuesday and Wednesday.

“Expect him to emphasize patience, stating that any more hikes this year would likely require some pickup in inflation,” wrote analysts at TD Securities in a note. Participants in currency markets shared that sentiment. “We expect more of the same..., with Powell generally supportive of risky assets,” said Adam Cole, chief currency strategist at RBC Market. “We think the mood of optimism and better bid for risk is probably something we live with for the week.”

The trade news was largely priced in to currency markets, with the risk-on mood nudging the dollar down 0.1 percent against a basket of currencies to 96.518. The pound gained after U.K. Prime Minister Theresa May pushed back the deadline for a so- called meaningful vote in Parliament on her Brexit deal as she tries to give herself more time to renegotiate the agreement with the EU. Aussie and Kiwi rose to a fresh day’s high versus the U.S. dollar in early London trading after whipsawing in Asian session amid conflicting headlines around the progress of U.S.- China trade talks; China’s official Xinhua News Agency echoed Trump’s tweet, citing "substantial" progress, but a commentary published later cautioned that the talks may face "new uncertainties," noting that bilateral trade frictions are "long term, complicated and arduous." The euro ticked up 0.1 percent against the greenback, trading around $1.1350 and staying within the $1.1213/1.1570 range that has held since mid-October.

In commodities, oil prices edged up toward 2019 highs on the trade news, and as sanctions and political uncertainty tightened supply in several producer countries. However, oil quickly reversed and tumbled to session lows after Trump tweeted just before 7am EDT that "Oil prices getting too high. OPEC, please relax and take it easy. World cannot take a price hike - fragile!"

Economic data include wholesale inventories. Earnings due from Oneok, Mosaic

Market Snapshot

  • S&P 500 futures up 0.4% to 2,801.75
  • STOXX Europe 600 up 0.4% to 372.70
  • MXAP up 0.7% to 160.73
  • MXAPJ up 0.7% to 528.35
  • Nikkei up 0.5% to 21,528.23
  • Topix up 0.7% to 1,620.87
  • Hang Seng Index up 0.5% to 28,959.30
  • Shanghai Composite up 5.6% to 2,961.28
  • Sensex up 0.9% to 36,189.95
  • Australia S&P/ASX 200 up 0.3% to 6,186.32
  • Kospi up 0.09% to 2,232.56
  • German 10Y yield rose 2.0 bps to 0.116%
  • Euro up 0.1% to $1.1350
  • Brent Futures up 0.07% to $67.17/bbl
  • Italian 10Y yield rose 1.4 bps to 2.487%
  • Spanish 10Y yield fell 0.7 bps to 1.168%
  • Brent Futures up 0.07% to $67.17/bbl
  • Gold spot down 0.06% to $1,328.55
  • U.S. Dollar Index down 0.1% to 96.42

Top Overnight News

  • There could be “new uncertainties” in the final stage of the China-U.S. trade negotiations and Beijing should do its best while preparing for the worst, Xinhua said in a commentary
  • U.S. President Donald Trump said he’ll extend a deadline to raise tariffs on Chinese goods beyond this week, citing “substantial progress” in the latest round of trade talks
  • The U.S. and China haven’t yet agreed on the critical issue of enforcement in a proposed currency deal that would ensure Beijing lives up to its promise to not depreciate the yuan, four people familiar with the matter said
  • Theresa May once again postponed a final vote on her Brexit divorce agreement, setting a new deadline of March 12 for Parliament to vote on the accord she’s still trying to renegotiate. EU officials may tell the U.K. that if it wants to delay its departure date, the country must stay in the bloc until 2021
  • New York Fed President John Williams voiced concerns that inflation expectations may have slipped downward after years in which price rises have failed to reach the central bank’s 2% target
  • A Chinese state-backed borrower’s failure to make good on a payment on a dollar bond on Friday threatens to overturn assumptions that officials would step in to avert defaults by companies closely linked to local authorities
  • JPMorgan Chase & Co. gained some of the biggest shares in both fixed-income and equities trading last year, solidifying its leadership in one and nearing the top in the other. Deutsche Bank AG lost ground in both markets while trying to restructure its business
  • The U.K. and U.S. sought to allay fears of disruption in the multitrillion-dollar derivatives market, vowing to put in place emergency policies to ensure trading continues uninterrupted in the event of a no-deal Brexit

Asian stocks kick-started the week with modest gains following a strong lead from Wall Street where the DJIA notched a 9-week winning streak and reclaimed the 26,000 level to the upside amid optimism surrounding US-China trade talks. ASX 200 (+0.3%) opened marginally firmer but gains in the material sector were offset by underperformance in the utility and telecom names, whilst Nikkei 225 (+0.5%) advances were led by the IT and material sectors. Elsewhere, Shanghai Comp (+5.6%) outperformed as investors cheered US President Trump’s announcement of an extension to the China tariff deadline, citing good progress on key issues whilst also noting plans for a Summit with Chinese President Xi. Meanwhile the CSI 300 (+5.9%), formed of major companies listed in Shanghai and Shenzhen, surged into bull market territory, marking a 23% gain from cycle lows. Finally, Hang Seng (+0.5%) failed to grasp onto the same momentum as its mainland peers, as the index was weighed on by the utilities sector after China Resources Power fell over 5% amid reports of delisting.

Top Asian News

  • Ping An Is Said to Plan IPO of Fintech Unit at $8 Billion Value
  • China’s Stock Surge Puts World-Beating Bond Rally in Shade
  • Failed Hijacker Was on Bangladesh’s Anti-Terror Agency Watchlist
  • Fortis Asks Indian Regulator to Arrest Founders Accused of Fraud

Major European equities are in the green [Euro Stoxx 50 +0.4%] continuing the gains seen in Asia which were spurred by strong US markets. There is some mild underperformance in the SMI (U/C) as index heavyweight Roche (-0.4%) is down as the Co. are to purchase Spark Therapeutics in a deal valued at USD 4.8bln, which is at a 122% premium to Spark’s Friday close and at a 19% premium to their 52-week intraday high. Sectors are mixed, with some slight outperformance in Financial names. Other notable movers include PostNL (+9.9%) who are at the top of the Stoxx 600 following their earnings. UK housebuilders are underperforming after Persimmon (-4.4%) are reportedly facing removal of their right to participate in the government’s Help to Buy scheme, following reports of poor standards and hidden charges; as such, Taylor Wimpey (-2.5%) and Barratt Developments (-1.5%) are down in sympathy.

Top European News

  • Twinings Owner Warns of Food Shortages After a No-Deal Brexit
  • Huawei Frightens Europe’s Data Protectors. America Does, Too
  • Italian Bonds Surge After Fitch Calms Fears of Rating Downgrades
  • PKO Says Poland’s Stimulus Should Keep Economic Growth Above 4%

In FX, AUD/NZD/SEK/NOK The Aussie and Kiwi are just eclipsing the Swedish Crown at the helm of the G10 pack, partly on latest US-China trade news that has lifted broad risk sentiment, and for the Nzd also much stronger than expected data in the form of Q4 retail sales overnight. Aud/Usd has rebounded further from recent sub-0.7100 lows through the 50 DMA (0.7134) and just above  the 0.7161 (100 DMA) to a high of 0.7174 with last Thursday’s high (0.7207) next on the rader for bulls. Nzd/Usd is hovering just below the top of a 0.6883-27 range as the cross pivots 1.0400 again. Similarly, the Sek and Nok are benefiting from the general appetite for risk assets, with Eur/Sek extending its post-Riksbank minutes retreat to just under 10.5600 at best, while Eur/Nok has been down through 9.7400.

  • GBP/EUR  The next best majors, but mainly at the expense of a softer Usd with the DXY slipping back below 96.500 on the aforementioned US-Sino tariff truce, as Cable maintains 1.3000+ status and the single currency keeps its head above 1.1300. However, the Pound has been choppy again amidst ongoing Brexit uncertainty and a barrage of contrasting headlines, and the Eur is still encountering chart hurdles above 1.1350, like the 30 DMA around 1.1365.
  • CAD/CHF/JPY All narrowly mixed vs the Greenback, but the Loonie is consolidating closer to highs vs its US counterpart alongside crude prices and eyeing 1.3100 within a 1.3150-22 range and the Franc appears more settled above parity, while the Jpy has pared some overnight losses from 110.85 towards 110.50.
  • EM Understandably, the Yuans have greeted ‘substantial’ or ‘concrete’ progress between the US and China on the trade issue with delight/huge relief, and from another softer PBoC Usd/Cny reference point have rallied further to test 6.6900+ levels. However, other regional currencies are also getting a boost on the prospect of a deal and wider repercussions for the global economy, with Usd/Zar down sharply from 13.9930 to 13.8480 at one stage, Usd/Rub under 65.2500 and Eur/Huf probing below 318.00 (Forint also appreciating Fitch’s Hungarian upgrade to BBB/stable outlook).

In commodities, WTI futures gave up opening gains despite the overall trade-driven optimism, although it is worth noting that Nigerian election polls have now closed with reports of dozens killed in election violence, however, there has been no reports of disrupted oil flow from the OPEC producer. Oil tumbled after president Trump tweeted a warning to OPEC that oil prices were getting too high. Also, in spite of the Baker Hughes rig count showing a drop of four active rigs, US production reached a record high last week at 12mln BPD according to EIA data. Elsewhere, spot gold benefitted from the easing buck and hovered near Friday’s highs, while copper traded choppy as initial trade-induced upside waned after Xinhua noted that US-China trade talks are said to become more difficult at the final stage. Iranian Supreme National Security Council Secretary said Iran has designed and put into practice initiatives to neutralise the US sanctions against Iranian oil exports. He also noted that Iran has options to stop oil flow if threatened, other than closing Strait of Hormuz.

US Event Calendar

  • 8:30am: Chicago Fed Nat Activity Index, est. 0.2, prior 0.3
  • 10am: Wholesale Inventories MoM, est. 0.3%, prior 0.3%
  • 10am: Wholesale Trade Sales MoM, est. -0.3%, prior -0.6%
  • 10:30am: Dallas Fed Manf. Activity, est. 4.9, prior 1

DB's Jim Reid concludes the overnight wrap

Can you believe at the end of this week it will be March? Where does time go? The weather was unseasonably unbelievable across most of Europe over the weekend and I’ve caught the sun a little and have spent the entire weekend rubbing my eyes and sneezing non-stop. I now look forward to a week in polluted London to calm me down from countryside pollen. We move into our new house in around 8 weeks but as a measure of the banality of my life at the moment over the weekend we were told that the carpets we ordered throughout the house can only be laid on time if we have various joins between pieces. If we want one without joins anywhere it will be 10 weeks, more expensive and will delay the move date. My vote is for the joins and to get in the house on time but my wife is insistent that she’d rather wait. This debate has to be concluded one way or another tonight over dinner. When I woke this morning to watch clips of the Oscars I was desperately hoping I’d see subtle joins all down the red carpet so I could show my wife that if it’s good enough for Hollywood it’s good enough for us. Sadly I couldn’t see any.

From red carpets to colourful politics this week. Indeed if you’ve had enough of politics I suggest you go on holiday for a few days as this topic should dominate proceedings. We have continued US-China trade discussions but with the March 1st tariff deadline pushed back overnight, a second summit between Trump and Kim Jong Un (Weds/Thurs), another Brexit parliament vote (Weds), Michael Cohen (Mr Trump’s ex-lawyer) giving two days of congressional testimony, including an open session on Wednesday, and the Mueller Russia investigation may be completed even if the results aren’t expected this week. Away from that we’ve got Powell’s semi-annual testimonies to Congress (Tues/Weds), US Q4 GDP (Thurs) and PCE data (Fri), European inflation data (Thurs/Fri) and final PMIs (Friday), and PMIs due out in China (Thurs).

Touching on the highlights of these, Friday was the original deadline that the US and China set to negotiate an agreement before US tariffs on $200bn of Chinese imports rise from 10% to 25%. However Trump has tweeted overnight that “I will be delaying the U.S. increase in tariffs now scheduled for March 1,” citing productive talks with China while adding, “the U.S. has made substantial progress in our trade talks with China on important structural issues including intellectual property protection, technology transfer, agriculture, services, currency, and many other issues.” He also said that if both sides make further headway in negotiations then he will meet China’s Xi Jinping at his Mar-a-Lago resort in Florida to conclude an agreement, though he didn’t offer any details on the timing of the meeting or how long he expects the tariff extension to last. However, Mnuchin had said last week that the meeting between Trump and Xi is being tentatively planned for late March. Elsewhere, China’s state-run Xinhua news agency published a commentary on trade talks overnight saying that talks will be harder at the final stage. We should note that Lighthizer is due to testify to the House Ways and Means Committee on Wednesday which should shed some light on where things stand although the media are picking up on disagreements between Trump and Lighthizer. So lots of moving parts.

This morning in Asia risk has gained on the tariff delay tweet with Chinese bourses leading the advance – the CSI (+3.55%), Shanghai Comp (+3.32%) and Shenzhen Comp (+4.08%) are all up. The Nikkei (+0.53%) and Hang Seng (+0.39%) are also up while the Kospi (+0.00%) is trading flat. China’s onshore yuan (+0.39%) is also up – trading at the highest level since July while most EM FX is strong against the greenback this morning. Elsewhere, futures on the S&P 500 are up +0.28% erasing some of the gains after the more cautious news from the Xinhua news agency trickled in. In commodities, US corn and soybean futures are up +0.52% and +0.70% respectively.

Here in the UK the latest Brexit Parliament vote is scheduled for Wednesday with UK PM May updating the House of Commons the day prior. However yesterday Mrs May said that there will be no meaningful vote this week but promised one by March 12th. At this stage it’s not clear whether that will help stave off a Letwin/Cooper revolt which would effectively force the government to extend Article 50. Earlier, on Saturday, three cabinet ministers - Amber Rudd, David Gauke and Greg Clark - wrote a joint article warning that they cannot allow the UK to leave without a deal and suggested that they will vote to stop it on Wednesday, partly indicating that they might vote for a Letwin/Cooper amendment. Expect a delicate few days of negotiations and rumours ahead before MPs go into that vote. Bloomberg reported yesterday that many in the EU are leaning towards a 21-month extension to article 50, partly in an attempt to scare Brexiteers into voting for the existing deal as 21-months is a very long time and anything could happen to Brexit in that period. Sterling is trading (+0.13%) up this morning.

As an aside it’s been interesting to watch the opinion polls (like Survation, YouGov and Deltapoll) in the U.K. Since the new centrist Independence movement started a week ago, the initial polling has suggested that support for the opposition Labour Party is declining most with at least three polls (two over the weekend) suggesting the Tories have at least an 8 point lead. It’s possible this poor showing and threats of more departures could finally prompt Labour to endorse a second referendum so watch this space. It’s also remarkable that the Tories support remains rock solid at or just below 40% considering the perception of how they’ve handled Brexit. It could be argued though that if you voted to leave and still feel that way, then the only viable option is to vote Tory. However the party have a huge dilemma. Keep pursing Brexit (including leaving no-deal on the table) but risk multiple resignations/defections from pro-EU Tory MPs, or alternatively soften their stance and risk voter support and splits on the right wing of the party. The papers (like Guardian, Sky News) at the weekend suggested lots of moderate Tories are close to rebelling so the disunity that Labour is currently suffering from could easily spread to the Government this week. If Labour switch to a second referendum policy it might swing the momentum back towards them. Interesting and fluid times.

Politics also mixes with central bankers this week as we have Fed Chair Powell’s testimonies to the Senate Banking Committee on Tuesday and House Financial Services Committee on Wednesday where he will deliver the Fed’s semi-annual monetary policy report. Expect the focus to be on the balance sheet, the current thinking on inflation and also how Powell now views the economic outlook, particularly as it relates to the various crosscurrents that Powell has previously referred to.

Ahead of this many Fed speakers spoke at a conference in New York on Friday, including Vice Chair Clarida who said that yield curve control, where 10-year yields are pegged, is one potential option to fight a future recession. The Fed will conduct a thorough review of its policy framework later this year. NY Fed President Williams also spoke about potential changes to the framework, citing the risk of unanchored inflation expectations as a reason to reassess the current ‘inflation-targeting’ regime. While he said he takes the Phillips curve seriously and remains attentive to upside risks to inflation given the tight labour market, he noted that downside risks to inflation are elevated as well. San Francisco Fed President Daly spoke about targeting an average inflation rate of 2%, which could be interpreted dovishly as it would imply appetite to let inflation run higher in the near term to compensate for recent downside misses. Clarida also spoke about a higher inflation target, though he noted some of the negative effects of such a policy. Overall, it appears that there are many options on the table for the Fed to consider, and this story will remain in focus through the June conference where they will begin the office policy review which is likely to result in a final assessment next year.

In terms of data this week, the main highlights are at the back end with a first look at US Q4 GDP on Thursday and then the December PCE reading due on Friday. Expectations for Q4 GDP are for a +2.5% qoq annualized reading which would be down from +3.4% in Q3, while core PCE is expected to rise +0.2% mom which would be enough to hold the annual rate at +1.9% yoy and therefore more or less in line with the Fed’s target. Other data worth highlighting in the US next week include December housing starts, building permits and consumer confidence on Tuesday, the December advance goods trade balance on Wednesday, and February ISM manufacturing on Friday.

In Europe the main highlights this week are the preliminary February CPI readings in France and Germany on Thursday and the Euro Area on Friday, as well as the final February manufacturing PMIs, including a first look at the non-core. China’s February PMIs on Thursday is likely to be the main highlight in Asia. We should also note that China’s NPC Standing Committee is due to meet for two days from Tuesday ahead of the annual NPC which begins the week after.

The rest of the day by day week ahead guide is at the end. Before that let’s look at recap of Friday and last week.

On Friday, attention was focused on trade negotiations and communications from central banks. Equities rallied broadly on Friday taking the week into positive territory, with the S&P 500, DOW, and NASDAQ ending the week +0.62%, +0.57%, and +0.74% (+0.64%, +0.70%, and +0.91% on Friday), respectively. In Europe, the STOXX 600 gained +0.62% (+0.22% Friday), with the DAX outperforming, up +1.40% (+0.30% Friday). Commodities rallied as well, with Brent crude oil advancing +1.15% (-0.09% Friday) and copper posting its best week since last September to reach its highest level since last June, gaining +5.40% (+1.81% Friday).

On the trade front, President Trump met with Vice Premier Liu He, and both sides described the discussions as productive. Trump specifically mentioned a potential extension of the March 1 deadline, and top trade negotiator Lighthizer, who is one of the more hawkish members of the administration, said the sides had “made a lot of progress.” That said, he did say that some great hurdles remain, but markets seemed to focus more on the broader optimism, including Treasury Secretary Mnuchin’s announcement that the two sides reached an agreement in principle on currency-related matters. The offshore yuan appreciated +0.91% on the week (+0.21% Friday) to reach its strongest level since last July.

Quickly recapping Friday’s central bank speak. Banque de France Governor Villeroy mentioned that the ECB should “study pragmatically how to contain possible adverse effects on the bank transmission of our monetary policy”. That mirrored earlier comments from the BoJ Governor Kuroda, who said that any future easing would come via tools that have the “least side-effects”. These could be references to some alleviation of the harm from negative interest rates.

It is a quiet day for data with the releases focused in the US where we get the January Chicago Fed national activity index, December wholesale inventories and trade sales and February Dallas Fed manufacturing activity index. Away from that, the BoE's Carney and Fed's Clarida are due to speak.

Published:2/25/2019 7:09:20 AM
[Markets] [$$] Resurgence in Cyclical Stocks Pushes Dow Industrials Toward New High Cyclical stocks typically tied to the health of the U.S. economy have driven the Dow Jones Industrial Average near a new all-time high, illustrating renewed investor confidence in the nearly 10-year expansion. Industrial, financial and energy stocks, including Boeing Co., Goldman Sachs Group Inc. and Exxon Mobil Corp., have powered the blue-chip stock index higher for nine consecutive weeks—the longest such winning streak since 1995. Some investors are now wagering the slow but sturdy economic expansion will also continue into the second half of this year and exceed the record from the 1990s. Published:2/24/2019 6:36:45 PM
[Markets] These two charts suggest a pullback before Dow smashes new records, 'Godfather' Ralph Acampora says The Dow Jones Industrial Average is on its best winning streak since 1995. The market's win streak put an end to an ugly Christmas sell-off. After hitting a 52-week low on Dec. 26, the Dow has roared nearly 20 percent higher, and is now less than 4 percent from its record set in October. Published:2/24/2019 5:06:50 PM
[Markets] NewsWatch: It’s the best start for the stock market in 32 years by one measure — so why is Wall Street so uneasy? The nine-week win streak for the 122-year-old Dow industrials has produced equal parts wonderment and dread.
Published:2/24/2019 4:06:52 PM
[Markets] It’s the best start for the stock market in 32 years, by one measure — so, why is Wall Street so uneasy? U.S. markets are on an unmitigated tear, by several measures, but the recent span of buoyancy for equity benchmarks, including a nine-week win streak for the 122-year-old Dow industrials, has produced equal parts wonderment and dread. Published:2/23/2019 9:29:15 AM
[World] Market Snapshot: It’s the best start for the stock market in 32 years, by one measure — so, why is Wall Street so uneasy? U.S. markets are on an unmitigated tear, by several measures, but the recent span of buoyancy for equity benchmarks, including a nine-week win streak for the 122-year-old Dow industrials, has produced equal parts wonderment and dread.
Published:2/23/2019 8:58:10 AM
[Markets] [$$] History Shows Rebound May Have More Legs as Dow Extends Rally U.S. stocks extended their winning streak to nine consecutive weeks and are on track for their biggest early-year advance in three decades, a dramatic turnaround that has given investors renewed faith in the nearly 10-year bull market. A more flexible approach to monetary policy from the Federal Reserve, easing U.S.-China trade tensions and a better-than-feared corporate earnings season have encouraged investors to ease back into the stock market, following the fourth quarter’s bruising selloff. The Dow Jones Industrial Average and technology-heavy Nasdaq Composite, along with the small-cap Russell 2000, notched their ninth straight weekly gain, while the S&P 500 rose for the fourth consecutive week. Published:2/22/2019 7:55:03 PM
[Markets] Market Snapshot: Dow logs longest weekly win streak since 1995 on optimism over trade talks Stocks close higher Friday, with the Dow logging its longest weekly winning streak in over two decades, thanks to optimism over U.S.-China trade talks.
Published:2/22/2019 3:53:44 PM
[Markets] Dow Rallies To Best Start In 55 Years As Earnings, Economic Data Collapse

The Dow is up 9 weeks in a row (longest win streak since 1995) and is up 8 straight weeks to start a year for the first time since 1964.

The S&P 500 is having its best start to a year since 1987

 

Both of which are odd given that earnings are collapsing...

And macro data is crashing...

All of which reminds us of...

China had another huge week...

 

But Europe was mixed with the FTSE lower and Dax higher...

 

Another (holiday-shortened) week of gains for US equities led by Small Caps...

 

Buybacks dominated the week once again...

 

But today saw a huge short-squeeze...

 

 

Seems like RP strategies are back in control as Stocks and Bonds are bought and sold together...

 

Treasury yields were mixed this week with the long-end higher (30Y +2bps) and the rest of the curve lower in yield...

 

The dollar weakened on the week

 

Strong week for Yuan again...

 

Huge week for cryptos with Ether up over 20%, Bitcoin up over 10%...best week for Bitcoin since Mid-Dec 2018.

 

Copper gained the most on the week - amid China optimism - but all the major commodities gained on the week...

Copper is at its highest since July 2018...

But Baltic Dry is collapsing...

 

Gold gained in USD terms but was weaker in Yuan terms...

 

 

We give the last word to The Onion, who seemed to sum things up perfectly:

Attributing the gains this morning to them being “just kinda in the mood,” top Wall Street investors confirmed the U.S. stock market soared in early trading Friday after they decided it would be a fun thing to make happen.

“Often, you’ll see the S&P 500 rise because of a jobs report or international trade news, but other times it happens just because making the market go way up is what we felt like doing that day,” said veteran fund manager Jack Malcolm, who, like hundreds of his colleagues nationwide, reportedly woke up “feeling sorta blah” and chose to send all major U.S. indices climbing as a “nice little pick-me-up.”

“To be sure, the catalysts for strong market performance can be complex, and it’s not always easy to put your finger on the factors pushing growth. But this morning we made the Dow rise, like, hundreds of points for no particular reason beyond wanting to see a big spike go way up to the top of the chart. And it did! It looked pretty awesome.”

At press time, sources confirmed the entire global economy had entered a major recession after investors thought it would be cool to do that for a while.

As Gluskin Sheff's David Rosenberg notes, the Citi Global Economic Surprise index, at -21.6, is nearly the same as it was at the Dec 24th market low. It's now 227 days below zero -- only exceeded by the Great Recession of 2008-09.

"Markets are totally devoid of economic realities."

Published:2/22/2019 3:23:58 PM
[Markets] Dow retakes 26,000 level, notches 9th consecutive winning week Dow retakes 26,000 level, notches 9th consecutive winning week Published:2/22/2019 3:23:58 PM
[Markets] US STOCKS-Wall St trims gains as U.S., China struggle over gaps in trade issues U.S. stocks were higher in afternoon trading on Friday but pared gains after U.S. officials said the United States and China still have issues to resolve in their ongoing trade talks. Signs of progress in the ongoing trade talks between the two countries supported the market for much of the session, leaving the Dow and Nasdaq on course to post a ninth straight week of gains. Hopes of a trade deal as well as dovish signals from the Federal Reserve largely have driven recent gains in stocks, with the S&P 500 now up nearly 19 percent from its late-December low. Published:2/22/2019 2:24:04 PM
[Markets] Dow retakes perch above 26,000 for first time in about three months as stock market extends rally The Dow Jones Industrial Average rallied Friday morning, along with the other main benchmarks, as investor held out hopes for a trade deal between the U.S. and China before a March deadline.The Dow rose 180 points, or 0.7%, to 26,032 and hit an intraday high at 26,047. A trade above 26,00 would mark the benchmark's first since Nov. 8, according to FactSet data. Markets have been rebounding off the lows from December, and hope for a resolution of tariffs and a Federal Reserve that has said it would be patient with normalizing monetary policy have helped to support buying. Both the Dow and S&P 500 are up more than 19% from their Dec. 24th nadirs, while the Nasdaq Composite Index has advanced more than 20%, thus far in the year, at last check. Published:2/22/2019 11:23:55 AM
[Markets] Dow retakes 26,000 level for first time in 3 months as Friday rally accelerates Dow retakes 26,000 level for first time in 3 months as Friday rally accelerates Published:2/22/2019 11:23:55 AM
[Markets] Wall Street opens slightly higher, Kraft Heinz weighs on consumer staples (Reuters) - U.S. stocks opened slightly higher on Friday on hopes of a trade deal between the United States and China, but a 26 percent plunge in Kraft Heinz Co hit the consumer staples sector. The Dow ... Published:2/22/2019 8:54:11 AM
[Markets] Dropbox Dives, Intuit Gains, and 3 More Morning Movers STOCKSTOWATCHTODAY BLOG Friday Feeling. Stocks are poised to end the week on a high note, with futures on the Dow Jones Industrial Average and Nasdaq Composite both 0.4% higher, while the S&P 500 was 0. Published:2/22/2019 8:22:51 AM
[Markets] Stock market worst skid in 2 weeks amid weak economic results; Nasdaq snaps 8-session win streak The S&P 500 on Thursday marked its worst decline since early February and the Nasdaq snapped an eight-session win streak, as a batch of disappointing manufacturing and housing data unsettled investors. However, the market remains in an uptrend, for now as talks between the U.S. and China progress and the Federal Reserve appears to be in a wait-and-see posture. The Dow Jones Industrial Average fell 104 points, or 0.4%, to reach 25,851, the S&P 500 index fell 0.4% to 2,774, while the Nasdaq Composite Index gave up 0.4% to end at 7,459, ending a string of wins for the technology-heavy index at eight. The day's losses were the worst for the S&P 500 and the Nasdaq since Feb. 7, according to FactSet data. Poor data underpinned much of the dour sentiment on the Street. Durable-goods orders rose by 1.2% in December, below the 1.4% expected by economists, according to a MarketWatch poll. Outside of orders for airplanes and automobiles, orders rose just 0.1%. Meanwhile, a key measure of business investment, known as core orders, slipped 0.7% in December. Manufacturing activity declined in the Philadelphia area, constituting Pennsylvania, Delaware and New Jersey in February, for the first time since May of 2016, according to the Philly Fed manufacturing index. The index fell to a seasonally adjusted reading of -4.1 from 17 in January. Meanwhile, a reading for existing home sales fell 1.2% in January to a seasonally adjusted annual rate of 4.94 million homes, the National Association of Realtors. It marks the third straight month of declines. Published:2/21/2019 3:17:44 PM
[Markets] Coca-Cola raises dividend, sets new stock buyback program Coca-Cola Co. said Thursday it will raise its dividend by 2.6% and has set a new program to repurchase up to 150 million shares. The new quarterly dividend of 40 cents a share, up from 39 cents, will be payable April 1 to shareholders of record on March 15. The beverage giant's stock rose 0.8% in morning trade. At current prices, the new annual dividend rate implies a dividend yield of 3.52%, compared with the yield for the SPDR Consumer Staples Select Sector ETF of 2.83% and the implied yield for the Dow Jones Industrial Average of 2.09%, according to FactSet. Coke said the new buyback program will go into effect when the current program for 500 million shares, announced in October 2012, is completed. The new program would represent about 3.5% of the shares outstanding. Coke's stock has lost 6.7% over the past three months, while the consumer staples ETF has slipped 0.1% and the Dow has gained 5.7%. Published:2/21/2019 10:46:43 AM
[Markets] Johnson & Johnson's stock falls to lead Dow losers after being subpoenaed by DOJ, SEC Shares of Johnson & Johnson fell 1.4% in morning trade Thursday, enough to lead the Dow Jones Industrial Average's losers, after the consumer products and drug maker disclosed it received federal inquiries related to the safety of its baby powder. The company said in its 10-K filing with the Securities and Exchange Commission that it received subpoenas from the Senate Committee on Health, Education, Labor and Pensions, the Department of Justice and the SEC to produce documents regarding liability suits. The stock's price decline was shaving about 13 points off the Dow's price, which was down 82 points with 22 of 30 components losing ground. Published:2/21/2019 9:16:47 AM
[Markets] Stock market stumbles out the gate as Philly Fed index post first negative reading in 3 years U.S. stock benchmarks opened lower Thursday as investors awaited the start of a fresh round of talks on trade between the U.S. and China and as a mixed bag of data, with a focus on the first negative reading of Philadelphia-area manufacturing activity since 2016, caused a pause in buying. The Dow Jones Industrial Average edged 52 points, or 0.2%, at 25,885, while the S&P 500 index edged 0.3% lower at 2,776, and the Nasdaq Composite Index fell 0.3% at 7,469. Drawing the most attention in the morning was apparent weakness in manufacturing, with a reading of Philadelphia-area performance, known as the Philly Fed index, in February dropping sharply in to negative territory. The index fell to a seasonally adjusted reading of -4.1 from 17 in the prior month, marking the first negative read since May of 2016 and falling below expectations for 14, based on a survey of economists polled by Econoday. Minutes from the Federal Reserve on Wednesday also appeared to signal a central bank in pause mode, but some signs of a split in how members of the Fed viewed the outlook for the economy may be stoking some anxiety. Meanwhile, current U.S.-China trade negotiations remained in focus after President Donald Trump signaled he would be flexible on the March 1 deadline for an agreement. Midlevel U.S. and Chinese negotiators having been holding meetings this week. Published:2/21/2019 8:46:27 AM
[Markets] Stocks Set to Open Lower, With Trade Talks and Fed in Mind SECTORFOCUS BLOG Slipping. Stocks looked set to open lower on Thursday, with Dow Jones Industrial Average futures off 0.2% and the S&P 500 and Nasdaq Composite were 0.3% lower ahead of the open. Although the White House signaled that it would be flexible about the looming March 1 tariff deadline, investors are weighing U. Published:2/21/2019 8:16:59 AM
[Markets] Global Stocks Pause After Recent Climb U.S. stocks were set to make cautious gains Thursday, despite downbeat sessions elsewhere, as investors awaited fresh economic data and the latest round of U.S.-China trade talks. Futures put the Dow Jones Industrial Average and S&P 500 both up 0.2% and Nasdaq-100 futures 0.3% higher. Bunge, Kraft Heinz, Caesars Entertainment and Baidu will also be in focus with the companies due to report earnings. Published:2/21/2019 7:20:07 AM
[Markets] Norwegian Cruise's stock surges after earnings beat, upbeat outlook Shares of Norwegian Cruise Line Holdings Ltd. ran up 5.2% in premarket trade Thursday, after the cruise ship operator beat fourth-quarter profit expectations and provided an upbeat outlook. Net income rose to $154.6 million, or 70 cents a share, from $98.8 million, or 43 cents a share, a year ago. Excluding non-recurring items, adjusted EPS increased to 85 cents from 68 cents, above the FactSet consensus of 79 cents. Revenue rose 10.5% to $1.38 billion, just shy of the FactSet consensus of $1.39 billion, as passenger ticket revenue grew 15% to $958.4 million to beat expectations of $931.3 million while onboard and other revenue increased 1.6% to $422.8 million to miss expectations of $463.7 million. Net yield on a reported basis rose 4.2%, above the FactSet consensus of 3.9%. Norwegian expects 2019 adjusted EPS of $5.20 to $5.30, above the FactSet consensus of $5.15. The stock has rallied 7.1% over the past three months while the Dow Jones Industrial Average has gained 6.1%. Published:2/21/2019 6:45:21 AM
[Markets] Market Rally Fizzles As New Front Breaks Out In Global Trade War

Another strong overnight market rally, built on the back of - what else - trade deal optimism, fizzled with US futures paring gains, European stocks edging lower and Asian shares rising as initial optimism was dented following more revelations that for all pompous talk, and now multiple MoUs, the trade war is actually escalating behind the scenes.

Europe's Stoxx 600 Index drifted lower, weighed down by bank shares as individual companies including Centrica and shipping giant Maersk also underperformed after disappointing earnings. Over in the US, futures on all three main indexes levitated higher following Fed minutes that merely added to dovish sentiment, after a late Wednesday report that negotiators are working on multiple memorandums of understanding that would form the basis of a final trade deal; however the latest trade deal optimism - which has now become a daily joke as the market now prices in a successful outcome to the trade war every single day - faded, Chinese stocks dropped the yuan pared an advance and the Aussie plunged after a report that China’s Dalian port banned coal imports from Australia while Westpac, called for two RBA rate cuts this year.

The Aussie was last trading at $0.7105, down 0.8 percent on the day but it was not the only one struggling. The Kiwi dollar got  bundled down 0.5 percent and the euro had given back its early gains to stand at $1.1320. The slide in the Aussie dollar had helped its share market close at a six-month high. Japan’s Nikkei had ended 0.1% stronger too and though Chinese shares sagged, the “offshore” yuan firmed to its strongest level since July on the trade hopes.

MSCI’s main Asia-Pacific index rose to a 4-1/2 month high, lifted by the initial, more optimistic trade reports, while generally ignoring the new trade war between Australia and China.

As noted earlier, the reported banning of Australian coal imports at the Chinese port of Dalian is seen as a sign that Beijing is flexing its economic muscles and warning nations not to bar its next-generation, 5G wireless technology or Huawei for that matter. The indefinite coal restrictions started this month and are part of an overall plan to cap imports into the customs region this year, Reuters reported, citing an unna