Dow -0.10% S&P -0.05% Nasdaq +0.00% Russell +0.59%
Investors played a wait-and-see strategy ahead of the 'unveiling' of President Trump's tax reform plan on Tuesday afternoon, but then engaged in a little profit taking after the announcement provided little new information. The major averages settled just a tick below their unchanged marks. Treasury Secretary Steven Mnuchin and NEC Director Gary Cohn presented the core principles of President Trump's tax plan on Tuesday afternoon. The general framework, which revolves around making business rates more competitive, bringing back overseas profits to create jobs, simplifying the tax system, and lowering tax rates, is certainly encouraging for the stock market. However, the plan still lacks many details, most notable of which is how the GOP plans to pay for it. Only four sectors--consumer discretionary (+0.5%), health care (+0.5%), telecom services (+1.2%), and financials (unch)--finished in positive territory. However, outside of the real estate and consumer discretionary groups, the laggards finished with losses of no more than 0.4%. US After Hours TER +11%, UCTT +10%, MKSI +7.5%, INTU +7%, PYPL +6%, NOW / XLNX +5% higher on earnings/guidance, WTW +6% on CEO news... MLNX -11%, FFIV -8%, AMGN -3%, ORLY -2% lower following earnings/guidance. Asian equity markets are mixed as investors digest the news out of Washington, as Trump administration has clearly shifted into a higher gear on policy.FX market activity was more volatile on the US policy developments. USD/JPY was little changed in the wake of more upbeat BOJ policy announcement, trading around 111.20. BOJ maintained its yield curve control at 0.0% on the 10-yr JGB yield and -0.1% rate on IOER, but raised its forward GDP estimates for the current year from 1.5% to 1.6% and next year from 1.1% to 1.3%. BOJ also expressed some concerns over slow progress on inflation front, cutting FY17 CPI view from 1.5% to 1.4%.
Nikkei -0.20% Hang Seng +0.23% CSI -0.27% Shanghai +0.03%
Eur$ 1.0903 CNH 6.9023 CNY 6.8970 JPY 111.24 GBP 1.2869 CHF 0.9936 RUB 56.8786
S&P +0.06% EuroStoxx -0.34$ Dax -0.31% FTSE -0.46% SMI -0.42%
Macro :
- Trump Close to Notifying on Intent to Leave NAFTA: Wash Post
- Aluminum Stocks Higher on Report of U.S. Probe on Imports
Keep an eye on :
- AIR FP : Airbus Rejects Accusations in Austria Probe Involving CEO Enders
- AIR FP : Airbus 1Q Rev. EU13.0b
- AKZA NA : BASF Said to Prefer Crop Chemical Deals Over Akzo Nobel Unit Bid
- AZA IM : Alitalia May Get Lufthansa Interest After Bankruptcy: Corriere
- ALT FP : ALTRAN 1Q Rev. EU591m
- ATE FP : Alten 1Q Revenue Rises 18%; Co. Repeats Outlook for FY Growth
- BAS GY : BASF 1Q Sales Beat Highest Estimate
- BAS GY : BASF Said to Prefer Crop Chemical Deals Over Akzo Nobel Unit Bid
- BAYN GY : Bayer FY Rev. View Tops Est., Bayer Raises Outlook for 2017, Driven by Covestro
- BAYN GY : Bayer Supervisory Board Extends CFO Dietsch Contract to 2018
- BBVA SM : BBVA 1Q Net Income Beats Est.
- BME SM : BME 1Q Net Income Misses Est.
- CLN VX : Clariant 1Q Profit Beats Estimates, Confirms Mid-Term Targets
- CPFA FP : Coface Profit Drops; Co. Repeats Outlook for FY Net Loss Ratio
- COMH SS : Kinnevik: Kinnevik acquires 18.5% in Com Hem, Kinnevik cash consideration SK110/shr for Com Hem shares
- DBK GY : Deutsche Bank 1Q Pretax Beats Est.
- DB1 GY : Deutsche Boerse Board Plans Share Buyback of Abt EU200 Million
- EDP PL : EDP Renovaveis: EDP Bid Is Adequate, Might Not Reflect Potential
- FDR FP : Fonciere des Regions 1Q Rental Inc. Rises 4%; Outlook Confirmed
- FUM1V FH : Fortum expected to continue acquisitions even after Hafslund deal
- GFC FP : Gecina 1Q Like-for-like Rental +1%
- G IM : Generali Faces 90% Loss on EU300m Alitalia Bond Bet From 2015
- HAV FP : Havas 1Q Revenue EU519m; Sees FY17 Organic Growth 2%-3%
- RMS FP : Birinyi Says Hermes Is Stock-Buying Opportunity; Sold Kering
- HUH1V FH : Huhtamaki 1Q Sales Beat Ests. as Co. Prepares Investment Spree
- ING FP : Ingenico Posts 1Q Revenue of EU594M
- KER FP : Birinyi Says Hermes Is Stock-Buying Opportunity; Sold Kering
- KGX GY : Kion Sees FY Rev. EU7.5b-EU7.95b
- KRN GY : Krones 1Q Rev. EU899.4m
- KU2 GY : Kuka Expects High Demand in 2017 FY on Strong Robot Demand
- LI FP : Klepierre 1Q Rev. EU321m
- LHA GY : Lufthansa Posts EU25m 1Q Adjusted Ebit Versus Loss of EU53m
- LUPE SS : Lundin Mining 1Q Rev. Misses Est.
- NOKIA FH : Nokia 1Q Sales, Profit Beat Estimates; CEO Sees Better Momentum
- NYR BB : Nyrstar Adds EU100m to Commodity Trade Finance Facility’s Limit
- ORA FP : Orange 1Q Adj. Ebitda EU2.6B, Up 2%; Revenue Rises 0.8%
- ORA FP : Orange Can Consider New Commercial Partnerships With Canal+: CFO
- ROG VX : Roche 1Q Sales Beat Est.; Leaves Outlook Unchanged
- SGO FP : Saint-Gobain Reiterates Targets Amid Gradual France Improvement
- WAF GY : Siltronic Sees FY Rev. EU1.06b
- STM FP : STMicroelectronics 1Q Rev. Misses Est.
- SUN SW : Sulzer 1Q Orders Increase 2% Organically; Confirms FY Guidance
- SY1 GY : Symrise Cut to Hold at Bankhaus Lampe, PT EU68
- TNET BB : Telenet 1Q Adj. Ebitda Beats Est.
- TEN IM : Tenaris 1Q EPS Beats Highest Est.
- FTI FP : TechnipFMC 1Q Adj. EPS Cont. Ops. Beats Highest Est.
- FR FP : Valeo 1Q Sales Jump 22%; Co. Confirms FY 2017 Targets --> Valeo Clear Beat, Upgrades Likely, Says Exane
- VK FP : Vallourec First-Quarter Revenue EU783M; Est. EU804M
- VIE FP : Veolia Raided in Favoritism Probe Over Marseille Water Contract
- VIV FP : Orange Can Consider New Commercial Partnerships With Canal+: CFO
- VOW3 GY : VW Said to Consider Selling Ducati Brand in Wake of Asset Review, Could Fetch EU1.5b in Sale: Reuters
- VOS GY : Vossloh 1Q Rev. EU224.3m
- WCH GY : Wacker Chemie 1Q Sales Rise 8% to EU1.22b; Revises FY View
- YAR NO : Agrium/Potash Third Party Said to Plan Complaint: DealReporter
>>> Up
*Alfa Laval Raised to Reduce at AlphaValue
*Atlas Copco Raised to Hold at Liberum, PT SEK345
*Bauer Raised to Buy at Bankhaus Lampe, PT EU22
*Deutz Raised to Buy at DZ Bank, PT EU7.50
*Fresenius SE Raised to Add at AlphaValue
*Henkel Raised to Outperform at RBC, PT EU132
*UMC Raised to Buy at HSBC
*Swatch Raised to Outperform at Macquarie, PT CHF455
*Volvo Raised to Equal-weight at Barclays, PT SEK133
*Volvo Raised to Reduce at AlphaValue
>>> Down
*Air Liquide Cut to Hold at HSBC, PT EU114
*Assa Abloy Cut to Hold at SEB Equities, PT SEK195
*BIC Cut to Neutral at Natixis
*Dassault Systemes Cut to Hold at HSBC, PT EU85
*Engie Cut to Equal-weight at Morgan Stanley, PT EU14
*Leonardo Cut to Neutral at Goldman, PT EU16.20
>>> Initiation
*Aixtron Reinstated Buy at Deutsche Bank, PT EU8
*Aviva New Outperform at Credit Suisse
*Just Retirement Holdings New Neutral at Credit Suisse
*Legal & General New Underperform at Credit Suisse
*Marine Harvest New Outperform at Exane, PT NOK165
*Prudential New Outperform at Credit Suisse (Full note attached)
*St James's Place New Outperform at Credit Suisse
* Telco investment in content is one of several factors telco investors consider as risk to a sector turn-around
* European Telco investments in content have up to now lost money
* European telcos continue to consider investments in content / TV
* AT&T – Time Warner believe the potential synergies between Telco and TV are growing
− e.g. from targeted advertising – which CS US media team sees as a significant opportunity
* The synergies may be smaller in Europe – due to regulation and less scale (market more fragmented)
− And can be achieved without vertical integration
− Whilst European telco ownership of TV assets could also destroy value (culture clash)
Our conclusion:
− European telcos are likely to continue to debate investing in content/TV, despite losing money to date
− The synergy argument plus competitive pressures may tempt more telcos to invest
− However – we will remain sceptical of the actual returns from such an approach
− Telcos that focus on being the best pipe would outperform those that focus instead on telco/media convergence
Asia Mid-Session Market Update: BOJ on hold as expected; Trump nixes bailing on NAFTA; Samsung Electronics shares rise on outlook
***US Session Highlights***
-Stocks remained mostly unchanged on the day after giving up small gains made during the first half of today's session. Investors digested Trump's relatively broad tax reform plan as it was presented. Fixed income become the asset of choice again, as the 10-year yield dropped 3bps on the day. Volume continued to show strength, on NYSE at 3:30pm was 18% above its 3-month average.
-Trump proposed an overhaul of the tax system with large reductions in corporate rates and amount of income brackets, though many precise details remain to be fleshed out. In the plan presented today, the corporate tax would be cut from 35% to 15% and the number of income brackets would be reduced from 7 to 3. The top income tax rate would be 35% and the lower brackets would be set to 25% and 10%. The proposal would also look at repealing the inheritance tax and limiting tax deductions.
***US markets on close: Dow -0.1%, S&P500 flat, Nasdaq flat***
- Best Sector in S&P500: Telecommunications
- Worst Sector in S&P500: Real Estate
- Biggest gainers: EW +10.5%; WYN +9.0%; PRGO +7.7%
- Biggest losers: STC -16.8%; CHRW -6.3%; DPS -5.5%
- At the close: VIX 10.85 (bps); Treasuries: 2-yr 1.28% (bps), 10-yr 2.32% (bps), 30-yr 2.97% (bps)
***US movers afterhours***
-TER Reports Q1 $0.44 v $0.38e, R$457M v $439Me; Guides Q2 $0.81-0.90 v $0.60e, R$660-700M v $564Me; +11.1% afterhours
-UCTT Reports Q1 $0.47 v $0.42e, R$204.6M v $192Me; Guides Q2 adj $0.49-0.55 v $0.33e, R$210-220M v $181Me; +10.4% afterhours
-INTU Reports season to date total Turbo Tax units were up 2% y/y; +7.3% afterhours
-ALSN Reports Q1 $0.52 v $0.35e, R$499M v $463Me; +6.8% afterhours
-WTW Names Mindy Grossman President and CEO, effective in July; +6.0% afterhours
-SAM Reports Q1 $0.45 v $0.26e, R$161.7M v $170Me; Affirms FY17 $4.20-6.20 v $5.46e; -0.3% afterhours
-ETH Reports Q3 $0.23 v $0.27e, R$180.5M v $184Me; -4.0% afterhours
-CTXS Reports Q1 $0.97 v $0.94e, R$663M v $661Me; Guides Q2 $0.97-1.00 v $1.08e, R$685-695M v $693Me; -5.5% afterhours
-FFIV Reports Q2 $1.95 v $1.97e, R$518M v $523Me; Guides Q3 $2.01-2.04 v $2.08e, R$520-530M v $537Me; -7.9% afterhours
-AMSC; AMSC Guides Q4 rev $15-16M v $24.6Me; -35.7% afterhours
***Key economic data***
- (JP) BOJ LEAVES INTEREST RATE ON EXCESS RESERVES (IOER) UNCHANGED AT -0.10% AND 10-YEAR JGB YIELD TARGET AT AROUND 0.0%; AS EXPECTED
- (CN) CHINA MAR INDUSTRIAL PROFITS Y/Y: 23.8% V 2.3% PRIOR
- (AU) AUSTRALIA Q1 IMPORT PRICE INDEX Q/Q: 1.2% V -0.5%E; EXPORT PRICE INDEX Q/Q: 9.4% V 8.0%E
- (KR) SOUTH KOREA PRELIM Q1 GDP Q/Q: 0.9% V 0.8%E; Y/Y: 2.7% V 2.6%E
- (JP) Japan investors net sold ¥1.82T in foreign bonds v sold ¥796B in prior week; Foreign investors net bought ¥258B in Japan stocks v bought ¥315.2B in prior week
***Asia Session Notable Observations, Speakers and Press***
- Asian equity markets are mixed as investors digest the news out of Washington, as Trump administration has clearly shifted into a higher gear on policy. After unveiling the broad outlines to a massive corporate tax cut reduction, White House officials have taken on the trade agenda, as Commerce Min confirmed "investigation into whether aluminum imports compromise national security". This has been perceived as a shot across the bow by Beijing, calling for direct dialogue on handling trading of the metal. In similar vein, White House announced that after speaking with leaders of Canada and Mexico, Pres Trump decided not to terminate NAFTA at this time, as all leaders agreed to "enable renegotiaton of NAFTA deal" at later date.
- FX market activity was more volatile on the US policy developments. USD/MXN and USD/CAD fell 1% and 0.5% respectively on NAFTA announcement, while AUD/USD saw session lows on protectionist fears from aluminum action. USD/JPY was little changed in the wake of more upbeat BOJ policy announcement, trading around 111.20. BOJ maintained its yield curve control at 0.0% on the 10-yr JGB yield and -0.1% rate on IOER, but raised its forward GDP estimates for the current year from 1.5% to 1.6% and next year from 1.1% to 1.3%. BOJ also expressed some concerns over slow progress on inflation front, cutting FY17 CPI view from 1.5% to 1.4%. In terms of its assessment, BOJ said Japan's economy has been turning towards a moderate expansion (prior was continues to recover moderately), while also boosting its view of Exports and Industrial Output to "increasing trend" from "picked up".
- Among key corporates, Samsung Electronics final Q1 results was below consensus at KRW) Net 7.49T v 8.8Te on Rev of 50.6T v 56.5Te, but the company forecast Net profit to turn higher this year, Capex to increase, and smartphone sales to bounce. SE also announced its first ever dividend and a KRW2.3T buyback, earning praise from activist Elliott Management which had in the past called for a split into a holding vehicle even though the company did not commit to that structure. After initial downside, shares moved higher by about 2%.
China
- (US) Commerce Dept confirms opening investigation into whether aluminum imports compromise national security
- (CN) China Commerce Ministry: US Commerce Dept mishandled China plywood companies in subsidies probe; Urging US to abide by WTO rules in plywood probe; need a dialogue with Us to address aluminum - press
- (CN) China MOFCOM reports Q1 exports to Belt and Road nations +26.2% y/y (28.2% of total exports)
- (CN) China Iron and Steel Association (CISA): memorandum signed by President Trump encouraging an investigation of US steel imports is contrary to fair trade and sends a signal of protectionism
Australia
- (AU) Australia PM Turnbull expected to impose a Domestic Gas Security Mechanism from July 1 this year and that it would not require legislation in Parliament as it can be imposed as a customs regulation
Korea
- (KR) South Korea Trade Ministry raises 2017 export growth outlook to 6-7% v 2.9% prior
- (KR) White House administration signs communique directed at North Korea following briefing with US lawmakers
***Asian Equity Indices/Futures (00:00ET)***
- Nikkei -0.2%, Hang Seng flat, Shanghai Composite -0.4%, ASX200 +0.2%, Kospi -0.2%
- Equity Futures: S&P500 +0.1%; Nasdaq +0.1%, Dax +0.2%, FTSE100 +0.1%
***FX ranges/Commodities/Fixed Income (00:00ET)***
- EUR 1.0900-1.0920; JPY 111.00-111.40; AUD 0.7470-0.7490; NZD 0.6890-0.6920
- June Gold +0.3% at 1,268/oz; June Crude Oil -0.5% at $49.37/brl; July Copper -0.4% at $2.59/lb
- SLV iShares Silver Trust ETF daily holdings rise to 10,273 tonnes from 10,178 tonnes prior
- (CN) PBOC SETS YUAN MID POINT AT 6.8896 V 6.8845 PRIOR; 3rd straight weaker setting; weakest setting since Apr 12th
- (CN) PBOC to inject combined CNY50B v CNY80B prior in 7-day, 14-day and 28-day reverse repos, 8th straight injection
- (NZ) New Zealand MoF sells NZ$150M in 2037 bonds
***Asia equities / Notables / movers by sector***
- Samsung Electrocnis, 005930.KR +1.9%, final Q1 results
- AIA, 1299.HK, +4.4%, Q1 results
- Sands China, 1928.HK, -3.3%, Q1 results
- Tokuyama, 4043.JP, +5.8%, sells Malaysia business
- Canon, 7751.JP, +3.9%, Q1 results
- Yahoo Japan, 4689.JP, -9.9% FY16/17 results
- China Minsheng Bank, 1988.HK, +1.3%, Q1 results
- China Shipbuilding Industry, 601989.CN, -3.7%, Q1 results
- BHP, BHP.AU, -1.0%, weaker on Australia Govt gas export limitation plan
- Clean TeQ Holdings, CLQ.AU, +14.8%, results
- Ten Networks, TEN.AU, -15.2%; H1 results, going concerns on fuding
After Hours Summary: TER +11%, UCTT +10%, MKSI +7.5%, INTU +7%, PYPL +6%, NOW / XLNX +5% higher on earnings/guidance, WTW +6% on CEO news... MLNX -11%, FFIV -8%, AMGN -3%, ORLY -2% lower following earnings/guidanceAfter Hours Gainers:
Companies trading higher in after hours in reaction to earnings/guidance: CLWT +37.3% (very thinly traded), SHOR +11.6% (also expanded partnership with ScanSource), TER +11%, UCTT +10.4%, MKSI +7.5%, INTU +7.3%, CRY +6.9% (light volume), ALSN +6.8%, AXTI +6.5%, GGG +5.7%, PYPL +5.6%, DRE +5.5%, NOW +4.7%, IVTY +4.7% (ticking higher), XLNX +4.5% (also raises dividend), SSW +4.3%, CRHM +3.8% (light volume), WPG +3.6%, MMLP +2.3%, CAVM +2.2%, STNG +2.2%, WLL +1.9%, TSCO +1.8%, GG +1.8%, ROG +1.7%, KIM +1.5%, EXR +1.2%
Companies trading higher in after hours in reaction to news: PIP +15.1% (PharmAthene and Altimmune merger was approved for listing on the Nasdaq pending stockholders vote on May 4; expected to commence trading on May 5), WTW +6.2% (Weight Watchers appoints former HSNI CEO Mindy Grossman as its President and CEO effective July 2017), HRB +2.8% (H & R Block filed 19.4 mln returns in the U.S. for fiscal year 2017 through April 19, with Assisted returns -2.5% to 11.8 million, and DIY online returns +6.8% to 5.0 million), IPXL +0.7% (Impax Labs has received final FDA approval for a generic version of Merck's Vytorin tablets), FDX +0.7% (awarded a five-year $2,351,165,436 government contract),
After Hours Losers:
Companies trading lower in after hours in reaction to earnings/guidance: AMSC -35.7%, PACB -15.3%, MLNX -10.9%, JMP -8.4% (thinly traded), OPGN -8.3%, FFIV -8%, CMPR -7.2% (also Board authorizes the repurchase of up to 6.3 mln issued and outstanding ordinary shares on the open market through May 15, 2018), NTGR -6.5% (also authorizes 3 mln share repurchase program), CTXS -5.5%, BRKL -4.7% (also commences common stock offering; size not disclosed), AMGN -3.2%, ORLY -2.2%, BWLD -1.9%, EQIX -1.6%, SAM -1.3%, LVS -1.1%
Companies trading lower in after hours in reaction to news: SFST -5% (commences public offering of 700k shares of its common stock), TRU -0.7% (to offer for sale in an underwritten secondary offering 15,000,000 shares of common stock and purchase of 1,500,000 shares of common stock)
Closing Market Summary: Stocks Finish Wednesday FlatInvestors played a wait-and-see strategy ahead of the 'unveiling' of President Trump's tax reform plan on Tuesday afternoon, but then engaged in a little profit taking after the announcement provided little new information. The major averages settled just a tick below their unchanged marks with the S&P 500 (-0.1%) closing between the Dow (-0.1%) and the Nasdaq (unch). Meanwhile, the domestically-oriented Russell 2000 (+0.6%) outperformed.
Treasury Secretary Steven Mnuchin and NEC Director Gary Cohn presented the core principles of President Trump's tax plan on Tuesday afternoon. The general framework, which revolves around making business rates more competitive, bringing back overseas profits to create jobs, simplifying the tax system, and lowering tax rates, is certainly encouraging for the stock market.
However, the plan still lacks many details, most notable of which is how the GOP plans to pay for it. Mr. Mnuchin believes the tax cuts will pay for themselves with increased economic growth, the reduction in allowable tax deductions, and the closing of tax loopholes. Still, assuming that logic checks out, the tax cuts would definitely balloon the national debt in the short term, which will be a tough pill for some conservative lawmakers to swallow.
Retailers received a nice bump today, evidenced by the 1.0% increase in the SPDR S&P 500 Retail ETF (XRT 43.53, +0.42), after Mr. Trump's tax plan made no mention of a border-adjustment tax. The retailers' outperformance helped the consumer discretionary sector (+0.5%) close ahead of the broader market.
The health care sector (+0.5%) also put together a positive performance. Reports that the House Freedom Caucus supports the GOP's new health care bill didn't really phase the sector with investors choosing to focus their attention on the earnings front. Thermo Fisher (TMO 168.01, +9.20) helped fuel the health care space's solid performance, adding 5.8% on better than expected earnings/revenues and upbeat guidance.
Elsewhere on the earnings front, three Dow components--Procter & Gamble (PG 87.74, -2.26), United Technologies (UTX 118.20, +1.33), and Boeing (BA 181.71, -1.80)--reported their quarterly results on Tuesday morning. United Technologies finished higher by 1.1% after beating top and bottom line estimates. However, Boeing and Procter & Gamble slipped 1.0% and 2.5%, respectively, after coming up short on revenues; BA missed top-line estimates while PG issued slightly disappointing revenue guidance. PG's negative performance doomed the consumer staples sector (-0.8%) to the bottom of the day's leaderboard with only the real estate group (-0.9%) posting a larger loss.
In the end, only four sectors--consumer discretionary (+0.5%), health care (+0.5%), telecom services (+1.2%), and financials (unch)--finished in positive territory. However, outside of the real estate and consumer discretionary groups, the laggards finished with losses of no more than 0.4%.
U.S. Treasuries settled slightly higher across the board, leaving the benchmark 10-yr yield two basis points lower at 2.31%.
Wednesday's economic data was limited to the weekly MBA Mortgage Applications Index:
- The weekly MBA Mortgage Applications Index increased 2.7% to follow last week's 1.8% decrease.
Tomorrow, investors will receive a slew of economic reports, including March Durable Orders (consensus 1.2%), Initial Claims (consensus 242,000), and Advance International Trade in Goods (consensus -$65.0 billion) at 8:30 ET and March Pending Home Sales at 10:00 ET.
- Nasdaq Composite +11.9% YTD
- S&P 500 +6.6% YTD
- Dow Jones Industrial Average +6.1% YTD
- Russell 2000 +4.6% YTD
