Market Overview (11.20.2017)

Contents 

Market Today  

 

•  Indices

• Currency

• Commodities  

Econ & Policy 

• Economic Indicators

• Policy

Business News 

• Energy

• Industrials 
  

• Consumers

• Health Care

• Financials

• Information Tech

• Telecommunication

Calendar  

• Economic Calendar

Market Today

Indices

S&P 500 (-0.2% at 2,579) Dow Jones (0.0% at 23,358) NASDAQ (-0.1% at 6,783) U.S. stocks fell on Friday as worries about tax reform lingered on Wall Street.

- Treasury Secretary Steven Mnuchin told CNBC's "Squawk Box" that he expects a Republican tax reform bill to be sent to President Trump by Christmas. "Tax reform is the big macro story that's driving everything," said Luke Bartholomew, investment manager at Aberdeen Standard Investments. There is "cautious optimism at the moment," about tax reform getting done this year.

Forex

US Dollar Index (DXY): The U.S. dollar edged higher against other currencies. The House of Representatives on Thursday passed a bill that would lower corporate taxes and cut individual taxes for most households in 2018, in a step towards the biggest U.S. tax code overhaul since the 1980s. But the legislation may face a tougher fight in the Senate amid resistance within Republican ranks. Senate lawmakers are expected to vote on their version of the bill after this week’s Thanksgiving holiday. (DXY: 0.26% at 93.85)

EUR/USD: The euro slipped lower against the dollar on Monday as fears over political instability in Germany weighed, while the dollar pushed higher against the Japanese yen. The euro remained on the back foot after German President Frank-Walter Steinmeier said the country faces an unprecedented situation following the collapse of talks aimed at forming a coalition government. (EUR/USD: -0.37% at 1.1747)

British Pound: The GBP/USD pair trimmed some of its strong gains and retreated around 50-pips from 2-1/2 week highs touched earlier. News that the UK is preparing to increase its offer for the so-called EU divorce bill helped limit early losses, led by German coalition break down, and lifted the pair into positive territory for the fifth consecutive session. (GBP/USD: 0.26% at 1.3249)

Japan Yen: On the first trading day of the week, the USD/JPY pair is having a difficult time determining its next short-term direction. Japanese trade data failed to meet market estimates. Following Friday's sharp sell-off, the pair is moving in a 30-pip range on Monday and was last seen trading at 112.15, where it was up only 5 pips on the day.  (USD/JPY: 0.23% at 112.35)

Econ & Policy

Economy

Americas

Goldman Sachs sees Fed raising rates four times in 2018. "The U.S. economy heads into 2018 with strong growth momentum and an unemployment rate already below levels that Fed officials view as sustainable," Goldman's economists wrote in note dated Friday.

Europe

Profits rise but smaller UK manufacturers lukewarm on investment. Plans among smaller British manufacturers for investment and hiring remain muted despite rising turnover and profits, an industry survey showed on Monday. Only 40 percent of small- and medium-sized manufacturers said they expect to increase staff numbers in the next six months, down from 42 percent in the previous quarter and the weakest reading since records started in 2013.

UK commits billions to 'industries of future' to ward off Brexit shocks. Prime Minister Theresa May on Monday announced 4 billion pounds ($5.28 billion) of spending on research and development and regional growth strategies, setting out plans to help the economy grow after Brexit. Amid stiff international competition, Britain is looking to carve out a new global role as a leader in "industries of the future" such as artificial intelligence and driverless cars after it exits the European Union in March 2019.

Asia and Pacific

China to offer financing help, subsidies to boost private investment in manufacturing. China issued guidelines on Monday aimed at boosting private investment in manufacturing, including stepping up fiscal support and "innovative financing" for private firms to gear towards greener development and move up the value chain. The government will support private firms' fundraising efforts through products such as corporate bonds and asset-backed securities, as well as through fiscal measures such as tax subsidies, according to a statement posted on the industry ministry's weibo account.

Japan's export growth signals economic recovery to continue in fourth quarter. Japan's export growth held steady in October, suggesting that brisk global demand for Japanese cars and electronics will likely carry its economic recovery into the current quarter. Ministry of Finance (MOF) data out on Monday showed that exports rose 14.0 percent year-on-year in October, led by shipments of cars to Australia and liquid-crystal device production equipment and raw materials for plastics to China.

Japan PM Abe: Govt and BOJ to work together to beat deflation. Japanese Prime Minister Shinzo Abe said on Monday that the government and the central bank would work closely together and take all necessary steps to defeat deflation. Speaking in parliament, Abe said he hoped the Bank of Japan would continue its bold monetary easing to hit a 2 percent inflation target, adding that he would leave specific monetary policy steps to the central bank.

Policy

Americas

NAFTA talks continue in Mexico City: The current round of NAFTA talks is "progressing with civility" and "without fireworks," according to participants, as the Office of the U.S. Trade Representative issued new objectives for renegotiating the pact. It wants to pry open Canada's protected dairy market and remove a process in which foreign firms can sue governments for discrimination or expropriation, as well as limit liability for U.S. Internet giants.

Europe

'Brexit bill' proposal coming soon: The U.K. will submit proposals on how to settle its Brexit divorce bill before an EU summit next month and is expected to negotiate hard, Chancellor of the Exchequer Philip Hammond declared Sunday. He was speaking three days before he sets out Britain's budget plan, where he will have to find room within tight fiscal constraints at the same time as negotiating the country's exit from the EU.

Euro falls as German coalition talks fail: The euro dropped as much as 0.7% to $1.1720 overnight after Germany's Angela Merkel failed to form a three-way coalition government, thrusting Europe's biggest economy into political uncertainty. The Free Democrats unexpectedly pulled out of more than four weeks of negotiations, citing irreconcilable differences related to immigration, climate change, Europe and taxation.

Asia and Pacific

China moves to rein in financial risk: Chinese equities have reversed losses that came after regulators unveiled fresh initiatives to curb risk in the asset management industry. The sweeping regulations, which will affect some $15T of financial products, will prohibit asset managers from promising investors a guaranteed rate of return and require them to set aside 10% of the management fees they collect for provisioning purposes.

Middle East and Africa

Arab League meets over Iranian influence: Saudi Arabia and the Arab League held an emergency meeting in Cairo on Sunday, where they discussed confronting Iran and classified Lebanese Shi'ite ally Hezbollah as a terrorist organization. While it condemned Tehran's interference in destabilizing the region, the Arab League won't declare war against Iran at the moment, said Secretary General Ahmed Aboul Gheit.

Zimbabwe's ruling party expels Mugabe: President Robert Mugabe has been dismissed as leader of Zimbabwe's ruling ZANU-PF party following a de facto military coup. He'll be replaced by the vice president he previously sacked, Emmerson Mnangagwa, who will focus on rebuilding ties with the outside world and stabilizing an economy in free fall. Mugabe's removal is also likely to send similar political shockwaves across Africa.

Business News 

Energy

Nebraska decides fate of Keystone XL: After nearly a decade, two presidential decisions, lawsuits and environmental protests, TransCanada (NYSE:TRP) will learn today whether it will receive the final state permit needed from Nebraska to build the Keystone XL pipeline. The proposed 1,179-mile, $8B project will link Canada's oil sands to U.S. refineries and comes days after TransCanada's existing Keystone system spilled 5,000 barrels in South Dakota.

Industrials

Chicago intends to sue U.S. Steel: Chicago plans to sue U.S. Steel (NYSE:X) for alleged violations of federal law after the company released more than the permitted daily amount of chromium into Lake Michigan in October and April. The move will follow an earlier notice of intent to sue U.S. Steel sent on Nov. 13 by the Surfrider Foundation, represented by the Abrams Environmental Law Clinic at the University of Chicago.

Half of GE board set to depart: A housecleaning at General Electric's board will remove many long-term associates of former CEO Jeff Immelt and create a group that is more aligned with John Flannery's strategy to streamline the industrial giant. According to WSJ, the unusual shakeout will claim half of GE's 18 directors and add three new ones to form a 12-member board.

Avolon firms up deal for 75 Boeing jets: Avolon has firmed up an order for 75 Boeing (NYSE:BA) airplanes and may order 20 more. The confirmed part of the agreement would be worth $8.7B at list values, though analysts say buyers typically get discounts of at least 50% for significant orders. Including the possible extra purchase of 20 jets, Avolon's (NYSE:AVOL) total deal would be worth $11B.

Consumers

AAA sees big Thanksgiving travel: Amid a strong economy and solid consumer confidence, AAA expects Americans to get on the road and trek through airports over the Thanksgiving holiday weekend in the largest numbers in 12 years. Auto travel is expected to jump by 3.2% and air travel by 5% over the five-day period. That's an overall increase of 3.3% compared to 2016.

Alibaba goes offline with grocer stake: Part of a wider push into offline retail, Alibaba (NYSE:BABA) will invest $2.9B for a major stake in China's top hypermart operator, Sun Art Retail Group (OTCPK:SURRY). "Physical stores serve an indispensable role during the consumer journey, and should be enhanced through data-driven technology and personalized services in the digital economy," Alibaba CEO Daniel Zhang said in the statement.

Disappointing opening for 'Justice League': Justice League opened to an estimated $96M in the U.S. and Canada this weekend, well below Time Warner's (NYSE:TWX) hopes and less than any DC superhero movie since the 2011 flop Green Lantern. Due to a combination of big ambitions and obstacles in production, the studio is reported to have spent nearly $300M to make the movie, which doesn't include marketing expenses.

Honda recalls almost 1M Odysseys: Honda is recalling 900,000 Odyssey minivans after receiving 46 injury reports related to a problem that causes second-row seats to tip forward. The recall, announced Saturday, includes vehicle models from 2011 to 2017. Of the affected Honda (NYSE:HMC) minivans, 800,000 were sold in the United States.

Healthcare

Cost of U.S. opioid epidemic tops $500B: In an analysis to be released today, the White House will say the true cost of the opioid drug epidemic in 2015 was $504B, more than six times larger than the most recent estimate. Most of that was attributed to healthcare and criminal justice spending, along with lost productivity. President Trump last month declared opioid abuse a national public health emergency.

Financials

Goldman sees bumper year in 2018: "2017 is shaping up to be the first year of the expansion in which growth surprises to the upside," Goldman Sachs said in a new research report. "We expect 2018 to deliver more of the same." The firm also sees the likelihood of four U.S. interest rate hikes next year, an 80% chance that tax reform gets done in early 2018 and raised it growth outlook for the U.S. economy to 2.5%.

Mutual funds firms may skip a tax change: The Senate Finance Committee has decided that a provision that would change tax rules on certain securities sales shouldn't apply to mutual fund companies, but would still apply to individual investors, WSJ reports. The clause would've prevented fund firms from minimizing taxes when they sell part of a position, insisting that they sell their oldest shares first.

Banks prepare to settle EU forex probe: The European Commission is poised to discuss financial settlements - likely to cost billions of euros combined - with UBS, RBS, HSBC, JPMorgan (NYSE:JPM), Citigroup (NYSE:C), Barclays (NYSE:BCS) and two other banks for allegedly rigging the forex market, FT reports. The four-year EU probe follows investigations by American, British and Swiss officials, which have fined global banks more than $10B for such offenses.

Bitcoin cruises through $8K: Last weekend's plunge to about $5,500K is very much old news, with bitcoin rising yesterday to more than $8,100 before pulling back a hair. At the time of writing, the cryptocurrency changed hands at $8,062. LedgerX has also announced the first-ever trade of bitcoin calls struck more than one year out, with a call struck at $10K and expiring on Dec. 28, 2018, trading at $2,250.25.

Information Technology

Step forward for Qualcomm-NXP deal: Qualcomm is set to win "imminent" Japanese antitrust clearance for its $38B bid for NXP Semiconductors (NASDAQ:NXPI) and gain Europe's approval by the end of the year with slight tweaks to its concessions, Reuters reports. Winning the green light would take Qualcomm (NASDAQ:QCOM) a major step forward to closing the deal and reinforce its fight against an unsolicited $103B takeover bid from Broadcom (NASDAQ:AVGO).

Marvell Technology set to buy Cavium in ~$6B deal: With activity in the semiconductor sector picking up, Marvell Technology (NASDAQ:MRVL) is near a deal to buy chipmaker Cavium (NASDAQ:CAVM) for about $6B in cash and stock, WSJ reports. The agreement, which will allow Marvell to diversify away from its traditional storage devices business following an agreement with Starboard Value last year, is likely to be announced today.

Telecommunication Services

Verizon closes in on NFL streaming deal: Verizon is close to a new deal with the NFL for digital streaming rights that would give it the ability to deliver game broadcasts to internet-connected TVs and tablets, Bloomberg reports. The deal expands on a previous contract, which limited the carrier to streaming on screens 7 inches or smaller, meaning Verizon (NYSE:VZ) now will be able to give subscribers access to games on all devices.

Calendar

Economic Calender

10:00 Leading Indicators

·END·

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