Market Overview (05.17.2017)
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Market Today
S&P 500 (-0.1% at 2,401) Dow Jones (0.0% at 20,980) NASDAQ (+0.3% at 6,170) U.S. stocks struggled for direction Monday, as political turmoil in Washington raised doubts about President Trump’s ability to deliver on plans to boost the economy.
US Dollar Index (DXY): The dollar extended losses and hit a fresh six-month trough against other major currencies on Wednesday, as concerns over recent political developments in the U.S. continued to weigh heavily on the greenback. (DXY: -0.60% at 97.51)
EUR/USD: reached a new high for the current advance at 1.1122 during overnight trading, then pulled back to test the session low at 1.1079 established just after the North American close. However, the pair reacted positively to the release of Eurozone inflation data and has retraced more than 50% of the intraday decline that followed the establishment of the session high. At present, the pair is trading at 1.1109, a gain of 0.24% over Tuesday’s North American close. (EUR/USD: 0.55% at 1.146)
British Pound: The pound touched the day’s highs against the broadly weaker dollar on Wednesday after data showing that hit a 42-year low in the three months to March, but wages shrank. The unemployment rate in the UK unexpectedly ticked down to in the period from January to March, the Office for National Statistics said, which was its lowest in almost 42 years. Economists had expected it to remain unchanged at 4.7%. (GBP/USD: 0.57% at 1.2990)
Japan Yen: The Japanese yen is climbing. The currency is up by 0.7% at 112.37 per dollar as of 7:56 a.m. ET. Global markets are in risk-off mode, with the yen, gold, and US Treasury’s rallying. Betting on yen appreciation is popular during periods of heightened uncertainty. Treasury’s, considered the safest place investors can park their money, and gold, which is a traditional "end of the world" trade, are also often bought up aggressively by investors in times of stress. (USD/JPY: -1.48% at 111.47)
CommoditiesGold prices added to overnight gains in North American trade on Wednesday, touching the highest level in two weeks as markets become increasingly worried about political turmoil involving U.S. President Donald Trump. (Gold Prices: +1.75% at $1,256.63)
Oil prices traded modestly higher on Wednesday, bouncing back somewhat, as investors braced for a fresh report on U.S. production following data on Tuesday showing a build in crude stockpiles. (Brent Crude Futures: +0.72% at $52.02 a barrel. West Texas Intermediate Futures: +0.49% at $48.9 a barrel)
Steel ore futures in China jumped nearly 4 percent on Wednesday, tracking gains in steel prices, with declining steel inventories indicating firm demand as Beijing sustains a campaign to curb excess supply. (Shanghai Steel Rebar Futures: +3% at 3,072yuan per tonne. Iron Ore Contract on the Dalian Commodity Exchange: +3.9% at 474.5 yuan a tonne.)
Econ & Policy
Americas
The percentage of U.S. mortgages in the process of foreclosure at the end of the first quarter fell to its lowest level since the first quarter of 2007. The share of home loans in foreclosure was 1.39 percent in the first three months of 2017, down 14 basis points from the fourth quarter and 35 basis points lower than one year ago.
Canadian manufacturing sales rose 1.0% for March which was in line with consensus forecasts. The February data was revised to show a 0.6% decline compared with the 0.2% drop reported originally, although there was still an 8.2% annual increase in sales. In volume terms, sales rose 0.2% on the month to give a 3.6% annual gain.
Europe
U.K. unemployment rate unexpectedly drops to lowest level since 1975. the unexpectedly fell to 4.6% in March, beating expectations for it to remain stable at February’s reading of 4.7%.
UK increased by a seasonally adjusted 19,400 in April, compared to expectations for a gain of 7,500 people and following a rise of 33,500 a month earlier, whose figure was revised from a previously reported reduction of 25,500.
UK wage growth falls behind inflation even as jobless rate sinks to 42-year low. The , rose as expected by a seasonally adjusted 2.4% in the three months to March, compared to February’s gain of 2.3%. , wages rose by 2.1% in the three months to March, missing forecasts for it remain in line with February’s 2.2% advance.
The amount of empty office space in London has jumped over the past 15 months and is likely to rise again despite potential for a post-Brexit business exodus that could drive down rental values. A slowdown in the take-up of pre-used office space and longer periods to close rental deals bumped up availability by 36 percent last year and a further 19 percent in the first quarter of this year.
Asia and Pacific
Japan's March core machinery orders disappoint, underscore fragile recovery. Core orders, regarded as a leading indicator of capital spending in the coming six to nine months, rose 1.4 percent in March from the previous month. The outcome marked a second straight rising month but undershot the median market forecast for a 2.1 percent gain.
The Russian economy continued to expand modestly in the first quarter of 2017, growing 0.5 percent year on year, preliminary data from the Federal Statistics Service showed on Wednesday. It was unclear what drove economic growth in the January-March period as the statistics service, Rosstat, only reveals a breakdown of the data with a time lag.
Australian wages are rising at their slowest pace on record at a time when household debt has climbed to an all-time peak, putting a lid on spending and a drag on the course of inflation. The wage price index rose just 0.5 percent in Jan-March, matching forecasts and compared with a similar reading the previous quarter.
PolicyAmericas
Leaning toward trilateral NAFTA deal: "It sounds to me like it [NAFTA negotiations] is going to be trilateral unless there's problems that come up with that sort of machinery, then of course they would do it bilaterally," announced Republican Senator Charles Grassley. He made the comments after leaving a Senate Finance Committee meeting with Commerce Secretary Wilbur Ross and new U.S. Trade Representative Robert Lighthizer.
Europe
Eurozone inflation hits ECB target: Inflation in the eurozone rebounded to 1.9% in April, in line with the ECB's target of close to, but below, 2% inflation. Higher transport, package holiday and heating oil costs were the biggest drivers of the increase. The euro ticked higher against the dollar following the figures, with the currency climbing above $1.11, its highest level since Nov. 9.
Trump, Erdogan hail U.S.-Turkish ties: President Tayyip Erdogan touted "outstanding" American relations on Tuesday, but emphasized Turkey will not accept Syrian Kurdish fighters in the region, while stopping short of directly criticizing a U.S. decision to arm them. "We've had a great relationship and we will make it even better," President Trump said in a joint appearance, calling Erdogan a strong ally in the fight against terrorism.
Asia and Pacific
Australia's AAA credit rating is safe for now, as the last of the three major agencies reaffirmed the nation's top investment status following last week's release of the federal budget. S&P's decision had been hotly anticipated in financial markets, because it's the only one to have the rating on a negative watch, meaning it sees a possible downgrade over the next couple of years.
China-Hong Kong bond trading link: In another step to open up China's capital markets, Hong Kong and Chinese regulators have formally approved a long-awaited scheme to connect China's $9.5T bond market with overseas investors. The so-called Bond Connect program has been in the works since Beijing launched a similar scheme connecting Hong Kong and Shanghai stock markets in 2014.
South Korea: 'High possibility' of conflict: "The reality is that there is a high possibility of a military conflict at the NLL (Northern Limit Line) and military demarcation line," declared South Korea's newly-elected President Moon Jae-in. He also said Pyongyang's nuclear and missile capabilities seem to have advanced rapidly recently, but Seoul was ready and capable of striking back should the North attack.
Business News
"This airplane will change the face of the single-aisle market," said Boeing (NYSE:BA) Commercial Airplanes CEO Kevin McAllister, following the delivery of the first 737 Max to Lion Mentari Airlines. The hand-off in Seattle was only one day later than first scheduled, after the planemaker quickly recovered from a possible engine manufacturing defect, which had grounded the fledgling Max fleet last week.
BlackBerry (NASDAQ:BBRY), diving into auto security after losing its smartphone dominance,, is working with carmakers to remotely scan vehicles for computer viruses and tell drivers to pull over if they are in critical danger. The service, which would also be able to install security patches to an idle car, could launch as early as next year and generate about $10/month per vehicle for BlackBerry.
ConsumersAmazon (NASDAQ:AMZN) is hiring a business lead to figure out how the company can break into the multibillion-dollar pharmacy market, CNBC reports. For the last few years, Amazon has held at least one annual meeting to discuss whether it should enter the business, but with the rise of high-deductible plans and the trend towards consumers paying for healthcare, it's ready to get more serious. Related tickers: CVS, RAD, WBA, ESRX, UNH
Colgate-Palmolive CEO Ian Cook recently signaled he would be open to selling the company, which has grappled with sluggish demand for its toothpaste, deodorants and food products, for $100 a share. According to the NY Post, the $88B price tag surfaced at a meeting with institutional investors that took place in recent weeks. Among the possible suitors: UL, PG, JNJ and 3G Capital. CL +3.5% premarket.
Yum Brands' $130M investment in Pizza Hut (NYSE:YUM) couldn't have come at a better time for the struggling brand. For the last four years, Pizza Hut has been named the "best pizza chain brand of the year" by Harris Poll's EquiTrend study, which analyzes thee factors - familiarity, quality and purchase consideration. However, this year, the chain was usurped by rival Papa John's (NASDAQ:PZZA)
HealthcareFor the second time in a month, the DOJ has sued UnitedHealth (NYSE:UNH), accusing the nation's largest health insurer of obtaining over $1B from Medicare to which it was not entitled. The complaint points to "risk adjustment" payments (based on inaccurate data submissions) and follows a lawsuit brought by former UnitedHealth executive Benjamin Poehling, whose whistleblower case was filed under seal in 2011.
FinancialsThe New York Stock Exchange (NYSE:ICE) has gotten the green light to introduce a "speed bump" to all trades on NYSE MKT, one of the Big Board's smaller sisters. That will make it the second U.S. exchange to include an artificial delay. Rival IEX Group, made famous by Michael Lewis's 2014 book Flash Boys, pioneered the speed bump as a way to foil high-frequency traders.
SEC is putting a recent decision on hold to approve the first quadruple-leveraged ETF. The earlier approval - given by the SEC's staff, not the politically appointed commissioners - has been reconsidered and doesn't allow Intercontinental Exchange's (ICE) ForceShares Daily 4X US Market Futures Long Fund and Short Fund to begin trading.
Britain has sold its last remaining stake in Lloyds (NYSE:LYG), making the lender the first to exit state-ownership after the financial crisis of 2007-09. Lloyds said the government will make a profit of about £900M from the bailout, having spent more than £20B rescuing the bank. It's a symbolic step for the country's recovering banking sector.
Information TechnologyTwitter climbed 1.4% yesterday, but has given back the gains premarket, on word that co-founder Biz Stone is rejoining the company on a full-time basis. Stone created Twitter (NYSE:TWTR) along with Jack Dorsey, Evan Williams and Noah Glass. "There's something about the personality of a company that comes from the folks who start it," he said in a blog post. "Jack coming back was a big step forward. And now, it's my turn."
Get ready for Google I/O 2017! The annual developer conference starts today, with CEO Sundar Pichai taking the stage for a keynote address at 1 p.m. ET. It's not quite as predictable as Apple's (NASDAQ:AAPL), but it's getting there: There won't be a new phone, machine learning will get plenty of stage time, as well as the next version of Android (GOOG, GOOGL). Other topics could include Google Home and Assistant, and a new VR headset.
Apple will unveil new laptops during its annual developer conference, known as WWDC, next month, sources told Bloomberg. The MacBook Pro will get a new Kaby Lake processor from Intel (NASDAQ:INTC), while the 12-inch MacBook will feature faster Intel chips. Apple (AAPL) is also considering updating the 13-inch MacBook Air, but it isn't clear if the company plans to release it just yet.
Uber CEO Travis Kalanick rang up Tesla's (NASDAQ:TSLA) Elon Musk last summer to propose a partnership on self-driving cars, according to Wild Ride, a book by Fortune magazine's Adam Lashinsky scheduled for release next week. Musk reportedly refused to work with UBER, and a few days later unveiled his own effort to bring an autonomous car-sharing fleet to market in "Tesla MasterPlan Part 2."
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