Tuesday Morning News, Reads, Charts....
- Markets Don’t Trust Banks
- Oil Slips
- Small Cap Superstars
- India’s Bad Debt Looking Better
- Tesla’s Model X Misses Out
- Sluggish Summer Volume
- No Longer Know Rules of Game
- Bring Volatility?
- Five Things for Today
- Futures lower with data on tap
- Credit scores hit record high
- Goldman under fire for Venezuela deal
- Oil continues to slip; crude below $50
- Draghi comments weigh on the euro
- British Airways reeling from IT collapse
- Akzo wins court case against Elliott
- N.Korea warns of 'bigger gift package'
— Bloomberg Markets (@markets) May 30, 2017
Fed officials likely to raise rates in June, finalize plans to reduce portfolio https://t.co/tFyWbtpJqs
— Real Time Economics (@WSJecon) May 30, 2017
Although "Sell in May" fell short this year with solid gains in the U.S., traders are already looking ahead to see what June will bring for stocks and the markets. They'll get a head start this week with an economic data deluge ranging from the monthly jobs report to figures on trade, construction spending, manufacturing and the Fed's Beige Book. "If anything you might want to buy in May and sell in November," said Chris Zaccarelli, CIO at Cornerstone Financial Partners.
"My view still is that three rate hikes this year makes sense," San Francisco Fed President John Williams told the Symposium on Asian Banking and Finance. Regarding unwinding the Fed's $4.5T balance sheet: It will be "widely telegraphed, gradual, and - frankly - boring... The more public understanding there is, the lesser the risk of market disruption and volatility."
The euro is eyeing a fourth straight day of declines as comments from Mario Draghi kept the currency under pressure. The ECB president signaled the central bank is not yet ready to unwind its fiscal stimulus, despite better economic growth across the eurozone, and is "firmly convinced" the bank should stick with its support measures, including €60B of monthly bond purchases.
"No deal is better than a bad deal," said Theresa May during a TV appearance last night, while Jeremy Corbyn insisted "there's going to be a deal." Meanwhile, Brexit Secretary David Davis said EU demands to protect its citizens' rights in the U.K. are "ridiculously high" and will be the first subject of negotiations to exit the bloc after next month's election.
Oil prices continue to slip... Markets are concerned that OPEC output cuts may not be enough to reduce a global oversupply after producers last week agreed to extend cuts, but kept them at current levels. Goldman Sachs has also lowered its 2017 price forecast for WTI to $52.39/bbl, pointing out that oil needs to stay around the $50 mark to discourage a ramp up in shale production.
"Just left the #G7Summit. Had great meetings on everything, especially on trade where we push for the removal of all trade-distorting practices....to foster a truly level playing field," President Trump tweeted over the weekend. He also backed a pledge to fight protectionism, but refused to endorse a global climate change agreement. "I will make my final decision on the Paris Accord next week!"
Europe "must really take our fate into our own hands," German Chancellor Angela Merkel said on Sunday, underlining her frustration following the G7 and NATO meetings. "Europe should act "of course in friendship with the U.S., Great Britain, as good neighbors wherever possible, also with Russia, also with other countries. But we must fight for our future ourselves."
A Greek government spokesperson has denied reports that the country is ready to opt out of its next bailout payment, if creditors fail to agree on debt relief. Athens hopes to reach a solution during a meeting of eurozone ministers next month, while finance minister Euclid Tsakalotos even called on lenders to "not procrastinate at the expense of the Greek economy."
South Africa's rand weakened yesterday after President Jacob Zuma defeated another call from inside the ruling party for him to step down. Zuma is facing mounting pressure amid allegations of corruption and following his move to axe respected finance minister Pravin Gordhan in March, which triggered several credit rating downgrades.
"North Korea has shown great disrespect for their neighbor, China, by shooting off yet another ballistic missile ... but China is trying hard!" President Trump wrote on Twitter. Kim Jong Un is said to have supervised the test of the new ballistic missile controlled by a precision guidance system and ordered a "bigger gift package to the Yankees" in retaliation for American military provocation.
A potential boon for lending and economic activity? The average credit score nationwide hit 700 in April - the highest level since 2005 - according to Fair Isaac, the creator of FICO credit scores. Meanwhile, the share of consumers deemed to be riskiest, with a score below 600, hit a new low of roughly 40M, or 20% of U.S. adults who have FICO scores.
Nearly $4B has been wiped off of the value of bitcoin in the last several days following a correction that has seen its price fall almost 19% from record highs. On May 24, bitcoin hit an all-time high of $2,791, but the digital currency is currently trading at $2,269, according to data from CoinDesk. Related tickers: COIN, OTCPK:BTCS
Following a strategic review process, Citi (NYSE:C) has announced the sale of its fixed income analytics and index businesses to the London Stock Exchange (OTCPK:LDNXF). The deal, which has a total cash consideration of $685M, comes after LSE said it would explore investments to drive growth following the collapse of its proposed merger with Deutsche Boerse (OTCPK:DBOEY).
A group representing Royal Bank of Scotland (NYSE:RBS) investors has accepted a £200M out-of-court deal to settle a lawsuit regarding a £12B cash call in 2008. More than 87% of investors already settled suits, but the holdouts included Wells Fargo (NYSE:WFC), Boeing (NYSE:BA), Bank of America (NYSE:BAC) and local British council pension funds.
The world's oldest bank is in exclusive talks with a domestic fund and a group of investors over the sale of its bad loan portfolio, which it needs to offload before it can be taken over by the state. Monte dei Paschi (OTCPK:BMDPY), which at the end of last year had €26B in gross defaulting debts, has set a June 28 deadline for the discussions.
The president of Venezuela's opposition-run Congress has accused Goldman Sachs (NYSE:GS) of "aiding and abetting the country's dictatorial regime" following a report that it had bought $2.8B in bonds from the cash-strapped country. The letter adds that Congress will open an investigation into the transaction and he will recommend "to any future democratic government of Venezuela not to recognize or pay these bonds."
Russia's first large airliner since the fall of the Soviet Union made its maiden flight on Sunday. The Irkut MC-21 successfully completed a 30-minute flight at a height of 1,000 meters, while traveling at 300 km an hour. It comes three weeks after China staged the maiden flight of its new C919 passenger jet, which is also designed to compete with the Boeing 737 (BA) and Airbus A320 (OTCPK:EADSY).
Homeland Security Secretary John Kelly may ban laptops from cabins on all international flights in and out of the U.S. to prevent terrorist attacks in the air. "That's the thing that they are obsessed with, the terrorists, the idea of knocking down an airplane in flight, particularly if it's a U.S. carrier, particularly if it's full of U.S. people," he told Fox News. Related tickers: AAL, DAL, UAL
British Airways will take steps to ensure there is no repeat of a computer system failure that stranded 75,000 passengers over a holiday weekend and turned into a public relations disaster. The carrier still doesn’t fully know why a power surge knocked its IT networks offline, but systems at 170 airports were affected. Shares in BA owner IAG (OTCPK:ICAGY) are down 4% in London.
BMW is set to extend production halts in Germany to China and South Africa as the luxury-car maker grapples with a shortage of steering parts caused by delivery problems from supplier Bosch (OTC:BSWQY). "The financial fallout is difficult to predict as the disruption is ongoing and it's unclear when normal output can be restored," said BMW (OTCPK:BMWYY) spokesman Michael Rebstock.
A Dutch court has ruled in Akzo Nobel's (OTCQX:AKZOY) favor, declaring the paint giant was within its rights to not enter takeover talks with PPG. The U.S. company must now decide by June 1 whether to officially submit bidding papers or stand down for six months. Elliott Advisors - which led the takeover push - said it was "surprised and disappointed" by the court's decision.
Backing away from an earlier demand for a majority stake, Western Digital (NYSE:WDC) may join a consortium of Japanese government money and KKR to bid for Toshiba's (OTCPK:TOSYY) chip division, Reuters reports. The concession could be a turning point in the hotly contested auction for the unit, which Toshiba has valued at at least ¥2T ($18B).
Democratic Republic of Congo's health ministry has approved the use of a new Ebola vaccine to counter an outbreak of the hemorrhagic fever in its northeast that has killed four people. The vaccine, known as rVSV-ZEBOV and developed by Merck (NYSE:MRK), is not yet licensed but was shown to be highly protective against Ebola in clinical trials published last December.
Exxon Mobil CEO Darren Woods is expected to attend the St. Petersburg International Economic Forum this week, where Vladimir Putin will deliver the keynote speech. A meeting between the two is possible, according to Reuters. Woods's predecessor, Rex Tillerson, appeared at last year's forum having stayed away for two years over Russia's intervention in Ukraine. XOM+0.7% premarket.
Nintendo has ordered a production increase of the Switch just weeks after it declared the console to be its fastest-selling gaming device. The success of the Switch, which was designed to bridge the gap between TV-based and portable gaming, has boosted investor confidence. Nintendo (OTCPK:NTDOY) shares hit their highest level since 2008 on Friday, giving it a market cap of nearly ¥5T ($45B).
Apple is developing a dedicated artificial intelligence chip, called the Apple Neural Engine, to offload mobile tasks like speech recognition and facial recognition. The move follows similar announcements from Qualcomm (NASDAQ:QCOM) and Google (GOOG, GOOGL). Apple may choose to discuss some of its latest advancements in AI at its annual developer's conference in June.
In Asia, Japan flat. Hong Kong closed. China closed. India +0.2%.
In Europe, at midday, London -0.4%. Paris -0.6%. Frankfurt -0.1%.
Futures at 6:20, Dow -0.1%. S&P -0.1%. Nasdaq flat. Crude -0.4% to $49.58. Gold -0.1% to $1266.60.
Ten-year Treasury Yield flat at 2.24%
Today's Economic Calendar
8:30 Personal Income and Outlays
9:00 S&P Corelogic Case-Shiller Home Price Index
10:00 Consumer Confidence
10:00 State Street Investor Confidence Index
10:30 Dallas Fed Manufacturing Survey