Market Overview (05.18.2017)
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Market Today
S&P500 (-1.8% at 2,357) Dow Jones (-1.8% at 20,607) NASDAQ (-2.6% at 6,011) U.S. stocks plunged Wednesday, as the latest political unrest in Washington triggered a fresh bout of risk aversion in the financial markets. A barometer of investor fear known as the CBOE VIX spiked more than 46%, as investors untangled an escalating political crisis in Washington. President Donald Trump is facing the biggest crisis of his presidency after a memo written by James Comey surfaced Tuesday. In that memo, the former FBI director alleged that Trump asked him to end an investigation of former National Security Adviser Michael Flynn.
US Dollar Index (DXY): The dollar's modest bounce back Thursday was aided by upbeat U.S. data as political turmoil continues to overhang the White House. and the manufacturing index came in above expectations. The heat remained on Trump as U.S. Justice Department named a special counsel to probe alleged Russian interference in the U.S. presidential election. Trump allegedly asked the FBI to drop a probe into former national security adviser Michael Flynn's ties with Russia. (DXY: 0.20% at 97.52)
EUR/USD: is lower in today’s trading, currently holding near 1.1137, a loss of 0.19% from Wednesday’s North American close. The pair appears to be merely consolidating near the recent highs after the sharp run to the upside which took place following the establishment of the May 11th corrective bottom. From that intraday low through today’s intraday high at 1.1172, EUR/USD has run up just over 3%. (EUR/USD: -0.35% at 1.112)
British Pound: The pound rose above the $1.30 level for the first time since September on Thursday after data showing that notched up their biggest gain since January 2016 last month. Retail sales surged in April the Office for National Statistics said, handily beating forecasts for a 1% increase and rebounding from a sharp 1.4% drop in March. (GBP/USD: 0.38% at 1.302)
Japan Yen: The yen has benefited in recent sessions, as a risk-off sentiment has dominated the financial markets, and the yen is considered a safe-haven in times of turmoil. The safe-have mindset has been sparked by controversy surrounding the Donald Trump Administration. Last week, Trump fired FBI director James Comey and, since then, additional negative news has hit the wires, causing the dollar to tank and the yen to rally. (USD/JPY: 0.23% at 111.07)
CommoditiesGold eased on Thursday as a bounce in the dollar prompted some buyers to cash in gains after its biggest one-day rally in nearly a year, though uncertainty over the outlook for the Trump presidency underpinned the metal near two-week highs. (Gold Prices: -0.57% at $1,250.28)
Oil prices fell on Thursday on signs that the market remained well supplied with crude despite efforts by OPEC and other big exporters to curb production and support prices. (Brent Crude Futures: -0.17% at $52.12a barrel. West Texas Intermediate Futures: -0.33% at $48.91 a barrel
Steel futures rose for a third straight day on Thursday, supported by hopes that demand in top consumer China would remain healthy and as Beijing eases up on a deleveraging drive. (Shanghai Steel Rebar Futures: +2.5% at 3,144yuan per tonne. Iron Ore Contract on the Dalian Commodity Exchange: +0.5% at 468.5 yuan a tonne.)
Econ & Policy
Americas
US Initial jobless claims declined to 232,000 in the week ending May 13th from 236,000 previously while consensus forecasts were for a small increase to around 240,000 for the week. The four-week moving average declined to 240,750 from 243,500 previously.
The US Philadelphia Fed Manufacturing index increased to 38.8 for May from 22.0 previously and compared with consensus forecasts of a slight increase to around 22.0. The index has been in positive territory for the past 10 months and the latest reading was the second highest in the past 30 months. New orders maintained a robust tone at 25.4 from 27.4 previously while unfilled orders increased to 9.0 from 6.6.
Europe
UK retail sales volumes rose 2.3% for April compared with expectations of an increase of around 1.0%. The year-on-year increase of 4.0% was also higher than the expected increase of 2.1% with the March monthly decline revised to 1.4% from 1.8%. On a 3-month basis, sales rose 0.3% after the contraction seen for the March data.
Asia and Pacific
Foreign direct investment into China fell 0.1 percent to 286.41 billion yuan ($41.6 billion) in the first four months of 2017 from the same period a year earlier, the Ministry of Commerce said on Thursday. Foreign investment into China slowed in April, falling 4.3 percent from a year earlier to 59.91 billion yuan, compared to 6.7 percent growth in March. In the first three months of the year, foreign investment rose 1 percent.
Home prices in China rose 0.7 percent in April, barely faster than the 0.6 percent increase in March, following tougher curbs aimed at driving speculators out of what had been a red hot market. Compared with a year ago, new home prices in China's 70 major cities rose 10.7 percent in April, moderating from 11.3 percent in March, according to Reuters calculations based on data issued by the National Bureau of Statistics (NBS) on Thursday.
Japan Gross domestic product (GDP) expanded 0.5% in the first quarter and 2.2% annually, the Cabinet Office said in a preliminary estimate on Thursday. That follows a 0.3% expansion in the fourth quarter that was revised up from an earlier reading of 0.2%.
Australian employers increased 37,400 workers following a gain of 60,000 in March, reflecting a broad recovery in the nation’s labor market. Economists in a median estimate forecast an increase of 5,000 from March; Australian unemployment rate 5.7% vs. 5.9% forecast from 5.9% in the preceding month.
Americas
Push to repeal net neutrality: Net neutrality is in focus as the FCC gears up for a vote today that will likely roll back one of the signature Internet policies from the Obama-era. Chairman Ajit Pai maintains that current rules went too far in imposing stifling regulatory burdens on broadband providers, while consumer advocates and tech firms feel they protect Internet users and website owners.
Political concerns hit stocks again: Following Wall Street's worst day of 2017... Global equities took another hit overnight after Reuters reported at least 18 calls between Russian officials and advisers to the Trump campaign (including Michael Flynn) during the last seven months of the presidential election. The DOJ has meanwhile appointed former FBI Director Robert Mueller as special counsel to oversee the Russia investigation, adding pressure on President Trump and turmoil to Capitol Hill.
Trump meets FBI director candidates: Looking to calm some of the storm, President Trump on Wednesday met with four candidates to lead the FBI, including Acting Director Andrew McCabe, former Sen. Joe Lieberman, former Oklahoma Gov. Frank Keating and ex-FBI official Richard McFeely. Trump has promised a "fast decision" for a new director, telling reporters on Saturday that he thinks "the process is going to move quickly."
Brazil back in political crisis: A fresh political crisis is hitting Brazil, reminiscent of last year's impeachment saga, following reports that President Temer was secretly recorded discussing hush money pay-offs to a jailed associate. According to O Globo, the tapes were presented to prosecutors as part of a plea bargain by Joesley and Wesley Batista, brothers who run the country's biggest meat-packing firm JBS (OTCQX:JBSAY).
Europe
Macron pledges EU overhaul: "I believe profoundly in the overhaul of the Europe," French President Emmanuel Macron told reporters last night, before meeting with the European Council President and stating he was "counting" on him for the revamp. "Europe needs your energy, imagination and courage," Donald Tusk responded. "Hope for a Europe that protects, wins and looks to the future."
Asia and Pacific
Pakistan a hub in new 'Silk Road': Details on China's "One Belt, One Road" initiative remain scarce, but Pakistani newspaper Dawn has given a look into how comprehensive it really is. Beijing is set to invest more than $55B in its neighbor, building power plants, roads and railways that connect China to the Arabian Sea. The projects could account for 20% of the country's GDP over the next five years and boost growth by about 3 percentage points.
Middle East and Africa
Is the Iran deal still intact? The Trump administration has taken a step to adhere to the nuclear agreement by signing a sanctions waiver for Tehran, as stipulated in the pact. At the same time it's ratcheting up other sanctions related to human rights abuses and the country's ballistic missile program a day ahead of elections across the Islamic Republic.
Business News
The U.S. Commerce Department will launch an investigation today into Boeing's (NYSE:BA) unfair trade claims against Bombardier (OTCQX:BDRAF). It's a two-track action that could lead to duties on the Canadian firm's new CSeries plane and pits Boeing against Bombardier customer Delta Air Lines (NYSE:DAL). Boeing alleges the jetliners are being dumped below cost in the U.S. market.
the U.S. government met European officials in Brussels yesterday to discuss expanding a ban on laptops in airplane cabins, despite strong opposition from the airline industry. It comes amid fears a bomb could be concealed in electronic devices. While a decision is not expected this week, the two sides will meet again in Washington next week for more talks about risks to air travel. Related tickers: AAL, DAL, UAL
ConsumersFox News (FOX, FOXA), plagued by inappropriate behavior and a troubling culture,, has been making big changes to its upper management, and now it's overhauling its physical newsroom. The network said the redesign will enhance communication and creativity among its programming, news and digital teams and create a much more open space than what currently exists at its Midtown headquarters.
Legal action against Fiat Chrysler is bubbling over. FCAU shares are down 4.2% premarket after reports emerged that the U.S. Justice Department will sue the automaker over excess diesel emissions. The company maintains that software in its cars wasn't designed to cheat emissions tests, but investigators say Fiat still hasn't fully explained its purpose.
General Motors (NYSE:GM) has been retreating from several major and unprofitable markets under CEO Mary Barra. The latest moves? GM will stop selling vehicles in India, but will continue to manufacture and export cars from the country, and sell its operations in South Africa.
Information TechnologyApple is tapping the debt market again, issuing a dual-tranche euro denominated bond, even as it maintains a cash pile of over $250B. Pricing for the 8- and 12-year note is expected to be finalized today, while order books for the bonds are said to have surpassed €5B. "We intend to use such net proceeds for general corporate purposes," Apple (NASDAQ:AAPL) said in an SEC filing.
The European Commission has slapped Facebook (NASDAQ:FB), calling it a "proportionate and deterrent fine,", with a €110M penalty for providing "misleading information" about its purchase of WhatsApp in 2014. Facebook had said it could not automatically match user accounts on its namesake platform and WhatsApp but two years later launched a service that did exactly that.
Today also marks the five-year anniversary of Facebook's (FB) IPO. In case you don't remember, it didn't go smoothly. Shares began trading late and investors complained their orders weren't confirmed, leading to lawsuits and big banks cutting estimates. While many analysts at the time thought shares were overvalued, Facebook has returned over 256% since its IPO and now has a market cap of nearly $420B.
Intel has stated that it's licensing graphics chip technology from Advanced Micro Devices (NASDAQ:AMD). After AMD failed to disclose any such deal yesterday - during its annual analyst meeting - its stock plunged over 12%. AMD is continuing its downward spiral before the open, falling almost 3%, while Intel (NASDAQ:INTC) is unchanged.
Highlights from Google's I/O developer conference: Mobile phone apps took center stage, as well as new features for Google Home (GOOG, GOOGL), a job search tool and even new virtual reality headsets. Google Assistant, which will now be available on iPhone, will soon be able to complete transactions and supply information about objects captured via camera. Android O will come out later this summer.
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