Market Overview (05.19.2017)
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Economic Calendar
Market Today
S&P 500 (+0.4% at 2,366) Dow Jones (+0.3% at 20,663) NASDAQ (+0.7% at 6,055) U.S. stocks rebounded Thursday from the worst selloff in eight months, as upbeat economic data reinforced optimism in the domestic economy. Stock market volatility, as conveyed through the CBOE VIX, declined on Thursday. Wall Street’s fear barometer closed down 6%. It skyrocketed 46% on Wednesday as political discord in Washington triggered a flight to safe havens.
ForexUS Dollar Index (DXY): The dollar dropped to fresh six-month lows against other major currencies on Friday, as U.S. political turmoil continued to weigh on the greenback and as no fresh U.S. data was expected throughout the day.The greenback briefly strengthened after the release on Thursday of upbeat data on and . (DXY: -0.59% at 97.19)
EUR/USD: eased back from the recent highs during Thursday’s session, as the pair declined to within reach of trendline support shown on the daily chart. However, the move back to this level enticed buyers and EUR/USD is now moving higher and currently testing the rally high at 1.1172 established during the Asian session on Thursday. (EUR/USD: 0.80% at 1.119)
British Pound: is advancing in today’s session following a rather volatile trading day on Thursday. The pair is currently at 1.3005, a gain of 0.49% over Thursday’s North American close. GBP/USD advanced on Thursday, reaching is highest level since late September 2016, following the release of . (GBP/USD: 0.61% at 1.302)
Japan Yen: The gained on some safe-haven buying as Brazilian assets plunged overnight on a political scandal.
Brazilian President Michel Temer was caught up in a graft probe but denied the allegations. The dollar's attempted recovery overnight was aided by some upbeat U.S. data. (USD/JPY: 0.08% at 111.57)
Gold rose on Friday and was on track for its best week in five as the dollar softened on political turbulence in the United States, boosting bullion's safe-haven appeal. (Gold Prices: -0.06% at $1,251.31)
Oil prices were heading for a second week of gains on growing expectations that big crude exporters will extend output cuts to curb a persistent glut in inventories. (Brent Crude Futures: +1.71% at $53.41a barrel. West Texas Intermediate Futures: +1.7% at $50.19 a barrel)
Steel: Shanghai rebar steel futures climbed to a six-week peak on Friday and were on track for their biggest weekly increase since January, supported by worries over tighter supply as China sustains a crackdown against polluting producers. (Shanghai Steel Rebar Futures: +3% at 3,223yuan per tonne. Iron Ore Contract on the Dalian Commodity Exchange: +0.6% at 477 yuan a tonne.)
Econ & Policy
Americas
Fed’s Bullard: Fed May Be Moving Too Fast On Rates. In comments on Friday, St Louis President Bullard stated that the economic data had been weak since the last FOMC meeting in March with lower than expected inflation and a slowdown in jobs growth. He added that the decline in long-term yields and inflation expectations seen after the March rate increase suggests that the Fed may be moving too fast in raising interest rates.
Canadian retail sales rose 0.7% in March compared with an expected increase of 0.4% while there was an increase of 6.9% over the year as the February decline was revised to 0.4% from 0.6%. On a volume basis, sales increased 1.2% on the month with a 5.3% annual advance.
Canadian consumer prices rose 0.4% in April compared with consensus expectations of a 0.5% gain for the month. The year-on-year rate was unchanged at 1.6% compared with an expected figure of 1.7%. The core year-on-year rate declined to 1.1% from 1.3% and compared with an expected increase to 1.4% as prices were unchanged on the month.
Europe
Euro zone consumer confidence rose less than expected in May. The Commission said consumer confidence in the 19 countries sharing the euro rose 0.3 points to -3.3 in May against April. Economists polled by Reuters had expected a rise of 0.6 points to -3.0. In the wider European Union of 28 countries, consumer confidence rose 0.1 point to -3.3.
PolicyAmericas
Trump makes first trip abroad: Oil is over $50/bbl and global equities are flashing green as President Trump embarks on his first overseas trip since taking office, visiting Saudi Arabia, Israel and the Vatican. Major deals are expected to be signed during his visit, as the Saudis look to seal contracts with General Electric (NYSE:GE), Schlumberger (NYSE:SLB), Halliburton (NYSE:HAL), National Oilwell Varco (NYSE:NOV), Nabors Industries (NYSE:NBR) and Rowan Companies (NYSE:RDC).
Time to renegotiate NAFTA? In a letter to congressional leaders, Robert Lighthizer said the Trump administration would begin talks on the trade agreement with Canada and Mexico by Aug. 16. The 90-day consultation period will give Congress, industries and the American public time to discuss better terms for U.S. workers and manufacturers.
Mnuchin: No breaking up banks: "We do not support a separation of banks from investment banks. We think that would be a very significant problem for financial markets and the economy," Treasury Secretary Steven Mnuchin told the Senate Banking Committee. "There are aspects of it [Glass-Steagall Act] that we think may make sense. We never said before we support a full separation of banks and investment banking."
U.S. sanctions Venezuela Supreme Court: As street protests continue in Venezuela, President Trump called the situation there a "disgrace to humanity" and said the political crisis was possibly the worst of its kind in decades. Shortly thereafter, the U.S. Treasury slapped sanctions on eight members of Venezuela's Supreme Court, charging them with undermining the country's democratic legislature in support of a corrupt government.
Brazil's Temer: I will not step down; Bovespa off nearly 9%: It was a chaotic day for Brazil's markets on Thursday as stocks and bonds tumbled, and the real posted its biggest slide since 1999. President Temer declared he won't step down, saying a full investigation would reveal his innocence on allegations of a cover-up. The forces aligned against the president may result in the second impeachment in Latin America's biggest country in just over a year.
Europe
Greece adopts more austerity measures: Greece's parliament has approved a raft of fresh austerity measures, including pension cuts and tax hikes sought by the nation's foreign creditors. The step paves the way for eurozone finance ministers to clear the next disbursement of funds to Athens when they meet on Monday to discuss ways to lighten the country's debt burden.
Asia and Pacific
TPP may be revived this weekend: Japan and other remaining members of the Trans-Pacific Partnership will this weekend decide how to revive the trade agreement ditched by President Trump. Their trade ministers will talk on the sidelines of an Asia-Pacific Economic Cooperation meeting in Vietnam, where newly appointed U.S. Trade Representative Robert Lighthizer is due to give more detail of Washington's trade plans.
Middle East and Africa
Iranians are heading to the polls in a high-stakes presidential election that pits a moderate incumbent who has sought closer ties with the West against a hard-liner suspicious of that agenda. Hassan Rouhani is seeking a second four-year term against challenger Ebrahim Raisi, a cleric who emerged only recently as a serious contender and is close to Supreme Leader Ayatollah Ali Khamenei.
Business News
In an escalating war with Apple Music (AAPL), streaming music market leader Spotify (Private:MUSIC) has announced the acquisition of Niland, its fourth big purchase of the year. The startup offers a product focused on providing accurate search and recommendation options for music, signaling Spotify's strategy of incorporating more AI into its system.
Videogame sales grew for the second straight month - the first time that's happened since November 2015. Overall sales increased 10%, to $636M, the second straight increase after nine straight Y/Y declines, according to NPD Group. Hardware sales again led the way, up 37% to $195M, thanks to the Nintendo Switch (OTCPK:NTDOY). Related tickers: EA, ATVI, GME, GLUU, KING, ZNGA, TTWO
Volkswagen (OTCPK:VLKAY) will likely pick a new chief executive officer from within the carmaker's own ranks, CEO Matthias Mueller told Handelsblatt, saying he's "already in talks with the supervisory board." Mueller's contract is not due to expire until mid 2020, but the process of picking a new VW leader needs to be initiated with plenty of advance notice.
Shares in Takata closed up 20% in Tokyo after four global automakers said they would pay $553M to settle with vehicle owners for losses linked to the recall of the company's products. In January, Takata (OTCPK:TKTDY) agreed to $1B in criminal penalties, including $975M in restitution paid to carmakers who bought their airbags and consumers who were injured by them.
Jared Kushner personally asked the CEO of Lockheed Martin (NYSE:LMT) to lower the price of a radar system so Saudi Arabia could afford to include it in an arms deal, according to a report by the NYT. It's part of a $110B weapons sale the Trump administration hopes to seal with Saudi Arabia this weekend, which would include U.S.-built planes, ships and precision-guided bombs.
FinancialsBitcoin is now just $100 away from doubling its price in 2017 as the cryptocurrency gets within striking distance of $2000. One of the reasons for the move is "buying as a hedge against political chaos," said Brian Kelly, CEO of BKCM, which runs a digital assets strategy. Other factors driving the price higher include increased demand from Japan and South Korea. Related tickers: COIN, OTCPK:BTCS
BofA (NYSE:BAC): "Our goal - going back to regulatory reform - is should you move the down payment requirement from 20% to 10%? It wouldn't introduce that much risk but would actually help a lot of mortgages get done," Brian Moynihan told CNBC. BofA was as the top U.S. mortgage lender ahead of the 2008 mortgage crisis, causing it to face greater losses, both from defaults and litigation, than any other bank.
Information TechnologyTim Cook has been spotted at the Apple (NASDAQ:AAPL) campus test-driving a device that tracks blood sugar and was connected to his Apple Watch. It follows a report from CNBC last month, which said the company has a team in Palo Alto working on the "holy grail" for diabetes: Non-invasive and continuous glucose monitoring. Current trackers rely on tiny sensors that penetrate the skin.
Facebook (NASDAQ:FB): Another notch in Facebook's video belt comes as the company seals a deal to broadcast a live Major League Baseball game each Friday, while Twitter's (NYSE:TWTR) feed will be bumped to Tuesdays. That's a 20-game package; the agreement starts this week, with Colorado at Cincinnati. Facebook will also partner with e-Sports league ESL to broadcast content.
Uber has threatened to fire the man at the center of its legal battle with Alphabet (GOOG, GOOGL), telling its top driverless technology engineer to either deny taking files from his former employer or turn them over. Anthony Levandowski is accused of downloaded 14,000 confidential files before he left the company to launch his own self-driving startup, Otto, that was acquired by UBER for $680M.
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