Thursday Morning Market Prepper

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Thursday Morning Market Prepper

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In a single day, President Trump appeared to reverse his positions on no fewer than four key pledges that arguably led to his election victory. Trump told WSJ yesterday that China is no longer a currency manipulator, he respects Janet Yellen and perhaps could nominate her to another term leading the Fed, he would support the Ex-Im bank after previously saying he would shut it down (good news for the likes of GE and Boeing), and NATO was no longer obsolete since it is fighting terrorism. In the same interview, Trump said he believed the dollar was “getting too strong,” sending the dollar lower and gold higher.

Economy

China's 2017 export outlook brightened after the government reported better than expected trade growth for March and as U.S. President Trump suddenly declared China is not a currency manipulator. China's exports rose at the fastest pace in more than two years in March, up 16.4% Y/Y, while import growth remained strong at 20.2%; the country's crude oil imports hit a record high of nearly 9.2M bbl/day. Analysts said the stronger trade data reinforces the growing view that economic activity in China has remained resilient and that global manufacturing is improving.

The yuan climbed to its biggest one-day advance vs. the dollar in nearly three months after President Trump abandoned his earlier pledge to name China a currency manipulator and said the dollar was too strong. China equities are higher, also enjoying a boost from news of stronger than expected growth in exports. But Japan’s Nikkei average lost as much as 1.3% to its lowest level since December, as the yen hit five-month highs against the dollar. European bourses also are lower in the early going as the euro strengthens vs. the dollar.

The International Energy Agency lowered its forecast for 2017 global oil demand growth to 1.3M bbl/day in its latest monthly market report, with growth expected to slow in 2017 for second year in a row. OPEC’s oil production fell by 365K bbl/day in March, bringing the cartel’s compliance to its supply commitments to 99% and likely smoothing talks as members begin to consider the prospect of extending production cuts. Meanwhile, the IEA says production in the U.S. rose to 9M bbl/day in March from a trough of 8.6M bbl/day last September.

Stocks

Warren Buffett has long been a supporter of Wells Fargo (NYSE:WFC), even during the bank’s scandal last fall involving shady sales tactics, but Berkshire Hathaway (BRK.A, BRK.B) has withdrawn its application to the Fed to raise its ownership stake, and in fact plans to sell 9M shares of the bank to keep its holdings below 10%. Also, Dow Jones reports Berkshire is likely to vote in support of Wells’s directors in a potentially contentious shareholder meeting later this month. Berkshire owned ~504M WFC shares worth more than $27B before the sales, making it the bank’s largest shareholder; Buffett personally owned another 2M shares.

Iron ore miners are among the worst performers on the Australian Stock Exchange today, as iron ore futures continue lower and have now shed 25% from their late February high. Iron ore prices plunged more than 6% yesterday to their lowest level since November, as Chinese inventories have climbed by more than a third from H1 of last year to 134M metric tons. Fortescue (OTCQX:FSUMF) is the weakest in the group after announcing its FQ3 iron ore shipments fell 6.1% Q/Q and 5.7% Y/Y. Other relevant tickers include BHP, RIO, OTCPK:AAUKF, OTCPK:AAUKY, OTCPK:GLCNF, OTCPK:GLNCY.

Shares in optical networking firms rose in after-hours trading after Applied Optoelectronics (NASDAQ:AAOI) announced preliminary Q1 earnings and revenue that easily beat analyst consensus estimates and the company’s own guidance. The fiber-optic parts maker sees Q1 EPS of $1.00-$1.02 vs. prior guidance of $0.80-$0.88 and Wall Street consensus of $0.83, and revenues of ~$96.2M vs. prior guidance of $87M-$91M and $89.7M consensus. AAOI surged +20% AH, lifting peers including LITE +4.5%, OCLR +3.9%, NPTN +2.3%, FNSR +2.1%, VIAV +1.6%, CIEN +1.4%.

Akzo Nobel shareholder Elliott Management says it would take legal action if Akzo (OTCQX:AKZOF, OTCQX:AKZOY) did not give its upcoming shareholders meeting the chance to vote to dismiss Chairman Antony Burgmans, who rebuffed a $24B takeover bid by rival PPG Industries (NYSE:PPG). Elliott claims it and other investors have the 10% support needed under Dutch law to call an extraordinary shareholders' meeting to vote on Burgmans' dismissal. Elliott and other investors have pushed Akzo to hold talks with PPG after the Dutch company rejected a sweetened €22.4B ($24B) cash-and-stock proposal from PPG last month.

Samsung's mobile chief says pre-orders for the Galaxy S8 smartphone have surpassed those of its predecessor S7, suggesting that consumers are willing to look past last year's problems with the Galaxy Note 7. "Initial response to the pre-orders that have begun at various places across the world have been better than expected," mobile chief Koh Dong-jin told an S8 media briefing; the new phone becomes available in the U.S. and South Korea next Friday. Analysts say strong S8 sales should lift Samsung (OTC:SSNLF) to its best-ever quarterly profit.

Venezuelan state-owned oil company PdVSA paid $2.23B in bond principal and interest due Wednesday, beating back a threatened default as the country’s oil revenue dwindles. Last year, PdVSA pledged 50% of its U.S. downstream subsidiary Citgo as collateral for a debt restructuring, and deployed the other half as collateral to obtain a $1.5B credit from Russian oil firm Rosneft (OTC:RNFTF). Last month, PdVSA offered Rosneft a 10% stake in its 120K bbl/day Petropiar heavy crude project, but existing minority partner Chevron (NYSE:CVX) has a right of first refusal for the stake; there is no indication that any part of the transaction has been executed.

United Continental says it will compensate all 70 passengers for the cost of the flight in which a man was dragged off the plane by security officers after refusing to give up his seat; it is unclear if the payments will be in cash, frequent-flier miles or other forms. CEO Oscar Munoz says he plans a thorough review of UAL’s policies for incentivizing passengers to give up seats when flights are overbooked, and blames a “system failure” for the incident, which has hurt UAL’s stock price and led to calls to boycott the airline. The U.S. Transportation Department is reviewing the company’s overbooking policy amid lawmaker calls for changes across the industry.

Today's Markets
In Asia, Japan -0.7%. Hong Kong -0.2%. China -0.3%. India -0.6%.
In Europe, at midday, London -0.5%. Paris -0.5%. Frankfurt -0.3%.
Futures at 6:20, Dow -0.2%. S&P -0.2%. Nasdaq -0.2%. Crude +0.02% to $53.12. Gold +0.9% to $1289.30.
Ten-year Treasury Yield -1 bps to 2.22%

Today's Economic Calendar
8:30 Initial Jobless Claims
8:30 Producer Price Index
9:45 Bloomberg Consumer Comfort Index
10:00 Consumer Sentiment
10:30 EIA Natural Gas Inventory
1:00 PM Baker-Hughes Rig Count
4:30 PM Money Supply
4:30 PM Fed Balance Sheet

Known to most as Uranium Pinto Beans, Jason has more than 15 years under his belt of trading stocks, options and currencies. His expertise primarily lies in chart analysis, and he has a strong eye for undervalued stock. Because he’s got the ability to identify great risk/reward trades he usually enjoys taking the path less traveled and reaping the benefits from the adventure.

He is a co-founder of Option Millionaires, and he is best known for his weekly webinars with Scott, as well as his high level training webinars and charts found in the forums.

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