Market Overview (11.06.2017)
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Market Today
S&P 500 (+0.3%) Dow Jones (+0.1%) NASDAQ (+0.7%) Apple Inc. carried the Dow Jones Industrial Average to new records on Friday, Nov. 3, for a second day in a row, while giving a lift to broader markets as well.
Apple led the Dow after better-than-expected fiscal fourth-quarter earnings and upbeat guidance for the coming quarter. A solid forecast tamed any fears that the company might see underwhelming iPhone sales. Apple shares rose 2.6%.
Gun stocks on watch after latest mass shooting: Gun stocks will be on watch this morning as Democrats renew their calls for reform following the deadliest church shooting in American history. Dressed in black tactical gear and armed with an assault rifle, Devin Patrick Kelley shot dead 26 people and wounded about 20 others at the First Baptist Church of Sutherland Springs, TX on Sunday. The suspect was then killed during a high speed car chase. Related tickers: AOBC, RGR, CAB, SPWH, VSTO, OLN
ForexUS Dollar Index (DXYThe dollar steadied on Monday after rising to its highest level in eight months against the yen earlier as investors remained cautious amid concerns over U.S. tax reform plans. The dollar was boosted by the divergent monetary policy outlooks between the Federal Reserve and the Bank of Japan. (DXY: 0.11% at 94.93)
EUR/USD: The latest ECB data show that growth in the Euroland is booming at a y/y rate of 2.5%, although a downtick in annual inflation to 1.6% from 1.8% means growth is not feeding through to higher prices as quickly as the ECB would like. (EUR/USD: -0.16% at 1.1586)
British Pound: GBP/USD one-week implied volatility has dropped off aggressively since last week’s BoE meeting, where it stood at over 9% for a few days leading up to the event. At 6.70%, it is quite low for cable and the differential between one-week and one-month implied volatility is -0.34%, suggesting we are in for lower levels of volatility over the next week. (GBP/USD: 0.18% at 1.31)
Japan Yen: BoJ Governor Haruhiko Kuroda said on Monday that it will continue with its monetary easing policy, but added that the bank was closely watching the economic effects of prolonged stimulus. (USD/JPY: 0.04% at 114.12)
CommoditiesGold and silver prices are marginally higher in early morning trading Monday. There has been just a bit of uncertainty injected into the marketplace early this week, and that is benefitting the precious metals markets. (Gold Prices: +0.45% at $1,272.18)
Oil: The oil price has hit its highest level since July 2015 after Saudi Arabia’s crown prince increased his power in the kingdom by launching an anti-corruption purge. (Brent Crude Futures: +0.74% at $62.53 a barrel. WTI Futures: +0.43% at $55.88 a barrel)
Steel: Chinese iron ore futures surged more than 6 percent to their strongest level in two weeks on Monday, tracking firmer steel prices after China’s top steel producing province surpassed its capacity reduction targets for the year. (Shanghai Steel Rebar Futures: +2.5% at 3,769 yuan per tonne. Iron Ore Contract: +6.1% at 468 yuan tonne.)
Econ & Policy
Europe
The euro zone's economy is on track for a strong finish to 2017 and firms are passing on more of their costs to consumers as pricing power increased, a survey showed on Monday. IHS Markit's final composite Purchasing Managers' Index for the euro zone fell to 56.0 in October last month from September's 56.7, pipping an earlier flash estimate of 55.9 and comfortably above the 50 mark that separates growth from contraction.
Most EU firms plan retreat from UK suppliers: CIPS. Sixty-three percent of non-British European companies expect to move some of their supply chain out of Britain, up from 44 percent in May, the Chartered Institute of Procurement and Supply (CIPS) said. With only 17 months left until Britain is due to exit the European Union, the lack of clear progress in the negotiations has raised fears among executives of an abrupt departure with no transition.
Asia and Pacific
China Oct data to show economy resilient even as momentum fades slightly. That strategy was amplified at the recently-concluded Communist Party Congress by Chinese President Xi Jinping, who set the tone for policy by emphasizing quality over quantity in boosting economic growth and pledging to win the war on pollution. While the government splurged on infrastructure projects, keeping fiscal policy fairly loose and stoking surprisingly strong growth through the year, authorities have also ramped up efforts to reduce China's years-long addiction to debt.
PolicyAmericas
CNBC: Early retirement for Fed's Dudley: One of the Fed's most influential policymakers, New York President William Dudley, is preparing to retire next year, about six months earlier than planned, CNBC reports. President Trump already has three other seats to fill on the Fed's Board of Governors, and a fourth if Yellen departs when her term as chair ends, giving the White House an unusually wide window to reshape the central bank.
Europe
Catalan leaders surrender to police: Ousted Catalonia leader Carles Puigdemont and four associates have turned themselves in to Belgian police following Spain's issuing of an arrest warrant for rebellion and sedition. Two polls were also released Sunday suggesting pro-Catalonia independence parties will together win December's regional election but they may fall just short of a majority of seats in parliament needed to revive the secession campaign.
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Asia and Pacific
PBOC chief warns of financial risks: China's financial system is becoming significantly more vulnerable due to high leverage, according to central bank governor Zhou Xiaochuan, who has made a series of blunt debt level warnings in recent weeks. Latent risks are accumulating, including some that are "hidden, complex, sudden, contagious and hazardous," even as the overall health of the financial system remains okay, he wrote in an article published on the PBOC website.
Trump, Abe discuss trade and N.Korea: President Trump's tour of Asia has begun in Japan. During a summit with Shinzo Abe, he declared that the "era of strategic patience" was over and that the two countries were working to counter the "dangerous aggressions" of North Korea. Trump also vowed to push for a free and balanced trade partnership with Tokyo following decades of "massive trade deficits," but said relations were "better than we have ever had."
Middle East and Africa
Saudis close Yemen borders, warn Iran: Saudi Prince Mansour bin Muqrin and a number of government officials were killed on Sunday in a helicopter crash near Yemen, a day after the nation intercepted a ballistic missile that was said to have originated from its war-torn neighbor. The kingdom blamed the launch on Iran and warned it could be considered "an act of war." The Saudi Tadawul fell as much as 1.5% overnight on the latest news.
Business News
United considers buying new Boeing 767 passenger jets: United Continental (NYSE:UAL) is considering replacing widebody planes with new 767 passenger jets, WSJ reports. Boeing (NYSE:BA) stopped making the passenger model three years ago but is now looking at ways to restart production of the plane to meet emerging demand from carriers seeking to replace aging airliners in the next several years.
Qatar Airways buys into Cathay Pacific: Rebuffed by American Airlines (NASDAQ:AAL), Qatar Airways has broadened its global reach by purchasing a 9.61% stake in Cathay Pacific (OTCPK:CPCAY). For the state-owned carrier, its first major stake in an Asian airline will allow it to boost its global influence and potentially increase traffic through its Doha hub, amid the worst political crisis in years among Gulf Arab states.
ConsumersAmazon to undercut Australian business: Competition laws will permit Amazon (NASDAQ:AMZN) to undercut local businesses with loss-making prices when it opens for business in Australia, which is expected to happen later this month. "If you open a store in a new town and you set a common price point, you are going to lose money initially if you don’t have scale," said ACCC Chairman Rod Sims. "Eventually, if you get your business plan right, you will make that price point, that is in no way illegal."
JC Penney adjusting to retail trends: J.C. Penney (NYSE:JCP) will no longer have a chief merchandising officer, once one of the most powerful jobs in retail, as John Tighe leaves the company and won't be replaced. It comes after J.C. Penney saw its shares drop to an all-time low last month after slashing its forecasts for 2017. The firm has also watched its shares drop 88% over the past five years.
Netflix cuts ties with Kevin Spacey: Halting production work on House of Cards earlier last week, Netflix (NASDAQ:NFLX) has now moved to sever all ties with Kevin Spacey following claims of sexual misconduct against one of its biggest stars. Spacey is among several big names in the entertainment business to be accused of sexual harassment by people coming forward in the wake of allegations against movie producer Harvey Weinstein.
Ford hopes to bring Chariot to London: Ford is gearing up to launch a Chariot bus network in London, gatecrashing the capital's crowded transport market and establishing a new rival to UBER. The move, which still has to gain approval from TfL, comes just weeks after Ford's (NYSE:F) San Francisco service was briefly suspended by California regulators for inspection failures. Chariot also operates in three other cities: New York, Austin and Seattle.
Healthcare$3B lifeline for Teva Pharmaceutical? Billionaire businessman Len Blavatnik is looking to buy an up-to-$3B stake in Teva (NYSE:TEVA), whose stock price hit a 17-year low last week after the drugmaker cut its annual profit forecast. The company has a $12.3B market cap. According to Israeli media reports, the investment could either be done through a private stock listing, which would help Teva deal with its nearly $35B debt burden, or the shares could be bought from Allergan (NYSE:AGN).
FinancialsHSBC pledges $100B to fight climate change: HSBC has pledged to provide $100B in financing and investment by 2025 to help combat climate change, facilitating financial flows to help boost support for clean energy and lower carbon technologies. "This will involve direct lending, bonds and project finance, alongside new products in asset management," said an HSBC spokesman.
Blockchain-based energy trading platform: A consortium including BP, Royal Dutch Shell (RDS.A, RDS.B) and Statoil (NYSE:STO) is developing a blockchain-based digital platform for energy commodities trading that's expected to take off by the end of 2018. "Ideally, it would help to eliminate any confusion over ownership of a cargo and potentially help to make managing risk more exact if there are accurate timestamps to each part of the trade," said Edward Bell, commodities analyst at Emirates NBD.
Goldman faces large Venezuelan loss: Goldman Sachs's asset management division is likely nursing a multimillion-dollar paper loss on a controversial Venezuelan bond purchase it made this summer, FT reports. With the country now seeking to restructure all its foreign debt, the PDVSA bond is now trading at $0.25 on the dollar, down from $0.29 at the start of last week, and $0.31 from the time of Goldman's (NYSE:GS) purchase.
Trump pitches NYSE for Aramco listing: "Would very much appreciate Saudi Arabia doing their IPO of Aramco with the New York Stock Exchange. Important to the United States!" President Trump tweeted on Saturday. According to the WSJ, when Crown Prince Mohammed bin Salman announced plans last year for a stock offering of Aramco (Private:ARMCO), he said he wanted it listed on the NYSE (NYSE:ICE), but since then outside advisers have warned the move could open up the company to shareholder lawsuits.
Information TechnologyApple's Irish data center in doubt: A planned $1B Apple data center is facing uncertainty after Irish Prime Minister Leo Varadkar said CEO Tim Cook would no longer commit to it, adding that Dublin would do whatever necessary to get it built. The country relies on foreign multinational companies like Apple (NASDAQ:AAPL) for the creation of one in every 10 jobs across the economy and sees major investments as a means of securing their presence in Ireland.
Telecommunication ServicesSprint slumps after ending T-Mobile talks: Following months of talks, Sprint (NYSE:S) -7.1% premarket after the company ended merger discussions with T-Mobile (NASDAQ:TMUS), stating it couldn't reach an agreement on pricing and governance terms. SoftBank (OTCPK:SFTBY) is now looking to increase its stake in Sprint, but won't cross the 85% threshold that would make its U.S. carrier a candidate for delisting. Sprint has also set a deal with Altice USA (NYSE:ATUS) to combine on a mobile virtual network operator.
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12:30 PM TD Ameritrade IMX
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