It Ain't Over 'til the Fed Lady Sings
>>> Asset Class Flows
- Equities: modest $0.6bn outflows (note $13.7bn ETF inflows vs $14.3bn outflows from mutual funds)
- Bonds: $1.2bn outflows (6 straight weeks = longest streak in 14 months)
- Precious metals: $1.7bn outflows (4 straight weeks)
>>> Equity Flows
- EM: $1.8bn outflows (outflows in 5 of past 6 weeks)
- US: 5 straight weeks of inflows ($1.3bn)
- Europe: $1.0bn outflows
- Japan: $0.8bn inflows
- By sector: 11 straight weeks of financials inflows ($1.2bn); 5 straight weeks of REITs outflows ($0.4bn); largest energy inflows ($1.2bn) in 12 months
>>> Fixed Income Flows
- 6 straight weeks of outflows from muni bond funds ($2.0bn)
- 5 straight weeks of outflows from EM debt funds ($2.4bn)
- 5 straight weeks of outflows from IG bond funds (albeit tiny $46mn)
- 2 straight weeks of TIPS outflows ($0.1bn)
- Largest inflows to bank loans in 3 years ($1.7bn) (inflows in 21 of past 23 weeks)
- Second straight week of inflows to HY bond funds ($1.8bn)
- First inflows in 4 weeks to govt bond funds ($0.8bn)
Dow +0.33% S&P +0.22% Nasdaq +0.44% Russell +1.60%
US Stock closed higher. Equity indices spent the early action near their flat lines as participants digested the latest policy statement from the European Central Bank, The news of an extension overshadowed the revelation that the pace of purchases will slow to EUR60 billion from EUR80 billion, starting in March. Eur$ moved down to 1.06. Eight out of eleven sectors still ended the day with gains. Growth-sensitive sectors like energy (+0.5%) and materials (+0.7%) outperformed throughout the day, but the energy sector could not catch up to crude oil, which spiked 2.0% to $50.85/bbl despite dollar strength. Volume were just above average at 960mil shares. FNSR +7%, AVGO +4% following earnings/guidance... XTLY -22%, RH -19%, DLTH -15%, NCS -11% following earnings/guidance. Nikkei225 leads Asian equities higher as USD/JPY tops 104.50, rising about 50pips on higher US Treasury yields; Other USD majors in narrow ranges. Oil rises above $51/brl despite reports of Saudi Aramco and Iraq plans to supply full contractual value to clients in Asia next month. China CPI hits a 7-month high of 2.3% while PPI jumps a full point to a 5-year high of 3.3%. Casino stocks pare their losses as China's UnionPay denies HK press reports that it will reduce daily withdrawal limits to CNY5K from CNY10K.
Nikkei +1.23% Hang Seng -0.76% CSI +0.68% Shanghai +0.54%
Eur$ 1.0628 CNH 6.9204 CNY 6.8994 JPY 144.40 GBP 1.2567 CHF 1.0158 RUB 63.2912 WTI $51.23 +0.77%
S&P -0.09% EuroStoxx -0.03% Dax -0.09% FTSE +0.07% SMI +0.03%
Macro :
- EU Reaches Deal to Give Shareholders Greater Say on Pay: FT
- U.K. Banks Want to Stay Subject to EU Law 5Y Post-Brexit: Rtrs
Keep an eye on :
- AIXA GY : Aixtron Could Sell Units, Reduce Size: CEO to Handelsblatt
- ATC NA : Altice Said to Target IPO of U.S. Business in Second Quarter
* ATC NA : Altice Explores Possible IPO of Minority Stake in U.S. Unit
- AZN LN : AstraZeneca, Lilly to Develop MEDI1814 Treatment for Alzheimer’s
- BAYN GY : Monsanto Contaminated Washington Waterways, State Official Says
- CNA LN : Centrica to Invest GBP180m in Energy Storage, Power Generation
- DB1 GY : Deutsche Boerse CEO Says LSE Merger ’Not a Done Deal’
- DP WGY : Deutsche Post Said to Extend Contract of CEO Frank Appel: RP
- ELUXB SS : Electrolux: Signs of Softer Demand in Some European Markets
- RI FP : Pernod Ricard Said to Near Deal to Buy Old Scout Bourbon Maker
- PAH3 GY : Porsche Rejects Allegations in German Emissions Cheating Probe
- PHTM LN : Photo-Me 1H Sales Up 19%; Sees Profits to Exceed Expectations
- RNO FP : Renault-Nissan Plant in India Said to Shut Shift, Cut Jobs: TOI
- TFII FP : TF1 Won’t Be Compensated for End of Analogue Broadcasting: BFM
- TTI GY : Tom Tailor Starts Cash Capital Increase of Up to 2.6m Shrs
- VIV FP : Orange Interested in Buying Canal Plus, CEO Says: Les Echos
>>> Up
*AstraZeneca Raised to Outperform at Leerink, PT $34
*CaixaBank Raised to Outperform at RBC, PT EU3.40
*Derwent London Raised to Outperform at Credit Suisse, PT 2770p
*Essilor Raised to Overweight at Morgan Stanley, PT EU113
*Fingerprint Cards Raised to Hold at Nordea Securities, PT SEK71
*GEA Group Raised to Overweight at JPMorgan, PT EU40.90
*Glencore Raised to Add at AlphaValue
*Novozymes Raised to Overweight at JPMorgan, PT DKK240
*Paddy Power Raised to Hold at Berenberg, PT 8300p
*Smith & Nephew Raised to Overweight at Morgan Stanley, PT 1301p
*Straumann Raised to Overweight at Morgan Stanley, PT CHF439
>>> Down
*ABN Amro Cut to Sector Perform at RBC, PT EU21.50
*Atlas Copco Cut to Neutral at JPMorgan, PT SEK290
*Barclays Cut to Underperform at BofAML, PT 220p
*Capita Cut to Hold at Stifel, PT 500p
*Getinge Cut to Underweight at Morgan Stanley, PT SEK132
*Sandvik Cut to Underweight at JPMorgan, PT SEK99
*Senvion Cut to Neutral at JPMorgan, PT EU14.40
*Shaftesbury Cut to Underperform at Credit Suisse, PT 895p
*Talgo Cut to Neutral at JPMorgan, PT EU5.20
*Technotrans Cut to Hold at HSBC, PT EU27
*Weir Cut to Neutral at JPMorgan, PT 1775p
*William Demant Cut to Equal-Weight at Morgan Stanley, PT DKK128
>>> PT Change
>>> Initiation
*Austrian Post Rated New Hold at HSBC, PT EU30.40
*Bpost Rated New Buy at HSBC, PT EU23.70
*Deutsche Post Rated New Buy at HSBC, PT EU35.50
*Hapag-Lloyd Rated New Buy at Hauck & Aufhaeuser, PT EU30
*PostNL Rated New Hold at HSBC, PT EU4.10
*Royal Mail Rated New Hold at HSBC, PT GBP5.13
>>> Call
>> Sector
*EUROPEAN AUTOS RAISED TO BENCHMARK AT DEUTSCHE BANK
*EUROPE CONSTR. MATERIALS CUT TO UNDERWEIGHT AT DEUTSCHE BANK
*EUROPE FOOD & BEVERAGE RAISED TO BENCHMARK AT DEUTSCHE BANK
After Hours Summary: FNSR +7%, AVGO +4% following earnings/guidance... XTLY -22%, RH -19%, DLTH -15%, NCS -11% following earnings/guidanceAfter Hours Gainers:
Companies trading higher in after hours in reaction to earnings/guidance: FNSR +6.7%, AVGO +4.2%
Companies trading higher in after hours in reaction to news: IDXG +36.6% (continued strength), OPHT +4.8% (ticking higher, Point72 Asset Management discloses 5% passive stake), ESRX +1.8% (following Citron's Andrew Left appearance on CNBC after the close)
After Hours Losers:
Companies trading lower in after hours in reaction to earnings/guidance: XTLY -21.6%, RH -19.1%, DLTH -15%, NCS -11.2%, FRED -3.1%, LAYN -2%, COO -1.5%
Companies trading lower in after hours in reaction to news: MVIS -10.5% (announces proposed public offering of common stock), USAC -6.4% (commences 4.5 mln offering of common units representing lp interests in the Partnership), ROSG -4.9% (Rosetta Genomics files for 15.47 mln ordinary share offering by selling stockholders), FRO -4.9% (mandates Arctic Securities to assist in a contemplated offering for issue of 13,422,819 new shares for gross proceeds of $100 mln), VLY -2.3% (commences a registered public offering of its common stock of 8.4 mln shares), WSM -1.3% (RH sympathy), EBS -1.3% (signs follow-on contract with CDC valued at up to $911 mln to supply to the SNS approx 29.4 mln doses of BioThrax through September 2021; re-establishes 2016 financial guidance)
Asia Mid-Session Market Update: China inflation retains upward trend as wholesale prices jump to 5-year high; Unionpay denies daily withdrawal limit cut
***US Session Highlights***
- ECB leaves rates unchanged (as expected), extends QE from April thru Dec 2017 and cuts purchases by 25%
- (US) INITIAL JOBLESS CLAIMS: 258K V 257KE; CONTINUING CLAIMS: 2.01M V 2.05ME
- (MX) MEXICO NOV CPI M/M: 0.8% V 0.8%E; Y/Y: 3.3% V 3.3%E; CPI CORE M/M: 0.2% V 0.3%E
- (US) ISM Dec Semiannual Economic Forecast: US economic growth to continue in 2017
***US markets on close: Dow +0.3%, S&P500 +0.2%, Nasdaq +0.4%***
- Best Sector in S&P500: Financials
- Worst Sector in S&P500: Industrials
- Biggest gainers: EW +6.7%, UA +6.6%, QRVO +4.8%, TSN +4.7%, MYL +4.5%
- Biggest losers: WYNN -11.1%, ESRX -6.7%, NOC -3.8%, MNST -3.2%, NLSN -3.2%
- At the close: VIX 12.2 (+0.4pts); Treasuries: 2-yr 1.10% (-2bps), 10-yr 2.35% (-5bps), 30-yr 3.03% (-5bps)
***US movers afterhours***
- FNSR: Reports Q2 $0.58 v $0.46e, R$369.9M v $365Me- Guides Q3 $0.58-0.64 v $0.47e, R$378-398M v $377Me; +6.2% afterhours
- AVGO: Reports Q4 $3.47 v $3.37e, R$4.14B v $4.12Be; doubles dividend to $1.02 from $0.51 (indicated yield 2.39%); +3.9% afterhours
- NCS: Reports Q4 $0.28 v $0.33e, R$480.3M v $486Me (1 est); -10.6% afterhours
- DLTH: Reports Q3 $0.01 v -$0.00e, R$67.0M v $69.0Me; cuts FY16 GAAP EPS $0.52-0.60, net sales $360-370M, Adj EBITDA $34-38M; -13.6% afterhours
- RH: Reports Q3 $0.20 v $0.16e, R$549.3M v $533Me- Guides Q4 $0.60-0.70 v $1.08e, R$562-592M v $639Me- CUTS FY16 EPS $1.19-1.29 v $1.6; -18.7% afterhours
***Politics***
- (KR) South Korea public support for presidential impeachment rate at 81%; Impeachment vote taking place today - Korean press
- (US) House passes govt stopgap funding bill, as expected; to fund govt through April 28, 2017 - press
- (US) President-elect Trump reportedly to remain exec producer on NBC's 'Celebrity Apprentice' - Variety
***Asia Session Notable Observations, Speakers and Press***
- Nikkei225 leads Asian equities higher as USD/JPY tops 104.50, rising about 50pips on higher US Treasury yields; Other USD majors in narrow ranges.
- Oil rises above $51/brl despite reports of Saudi Aramco and Iraq plans to supply full contractual value to clients in Asia next month.
- China CPI hits a 7-month high of 2.3% while PPI jumps a full point to a 5-year high of 3.3%. CPI still driven mostly by rising food prices - up 4% v 3.7% prior - while non-food inflation edged up to 1.8% v 1.7% prior. Chief ANZ China economist believes the new inflationary cycle in China has arrived as a result of rising commodity markets, and the next PBoC move should be a tightening.
- Casino stocks pare their losses as China's UnionPay denies HK press reports that it will reduce daily withdrawal limits to CNY5K from CNY10K. Speculation, which weighed heavily on US gaming stocks on Thursday, comes in the wake of accelerated FX outflows from China in the data out this week due to expectations of continued CNY weakness.
- Japan BSI survey for Q4 improves from Q3, but CAPEX outlook for FY16/17 was reduced to +2.5% from +4.9% prior forecast; Japan Fin Min Aso announces 3rd supplemental budget for FY16/17 to feature family tax relief.
Energy:
- (US) Pres-elect Trump's transition team said to develop plans to reshape Energy Dept programs; Looking at ways to keep nuclear power alive - press
- (SA) Saudi Aramco said to supply a full term contract value to at least one refiner in Asia despite the OPEC deal on production cuts; Iraq also reportedly to supply full contractual volume of Basra crude to at least 3 buyers in Asia in Jan - press
China:
- (CN) China Unionpay International: no change to overseas withdrawal limits; Daily limit remains at CNY10K
- (CN) ANZ chief China economist: China has entered a new inflationary cycle; Next PBoC move should be a hike rather than a cut
- (CN) China regulators said to have "quietly encouraged" increase in IPO activity; Total equity raised this year is up 29% y/y to CNY1.54T - financial press
- (CN) China banking regulator CBRC said to improve checks on property loans - Chinese press
Japan:
- (JP) Japan FY17 main budget may be around ¥97T - financial press
- (JP) Japan PM Abe: Govt debt is steadily falling as propotion of GDP - press
- (JP) Japan Fin Min Aso: Japan Cabinet to approve 3rd supplemental budget for FY16/17 on Dec 22nd - financial press
Australia
- (AU) Fitch downgrades Australia banking sector to Negative
- WBC.AU: Asset quality to remain sound in year ahead; Outlook for Australia and New Zealand remains positive
***Asia Key economic data:***
- (CN) CHINA NOV CPI M/M: 0.1% V 0.7% PRIOR; Y/Y: 2.3% (7-month high) V 2.2%E
- (CN) CHINA NOV PPI Y/Y: 3.3% V 2.3%E (3rd straight y/y positive print; 5-year high)
- (JP) JAPAN Q4 BUSINESS SURVEY INDEX (BSI) LARGE ALL INDUSTRY Q/Q: 3.0 V 1.9 PRIOR; BSI LARGE MANUFACTURING Q/Q: 7.5 V 2.9 PRIOR
- (JP) JAPAN NOV M2 MONEY STOCK Y/Y: 4.0% V 3.7%E; M3 MONEY STOCK Y/Y: 3.4% V 3.2%E
- (AU) AUSTRALIA OCT HOME LOANS M/M: -0.8% V -1.0%E
- (NZ) NEW ZEALAND NOV CARD SPENDING M/M: -0.1% V 0.4%E; TOTAL M/M: -0.3% V 0.6% PRIOR
***Asian Equity Indices/Futures (23:30ET)***
- Nikkei +1.2%, Hang Seng -0.3%, Shanghai Composite +0.7%, ASX200 +0.4%, Kospi -0.4%
- Equity Futures: S&P e-mini flat, Dax flat, FTSE100 -0.1%
***FX ranges/Commodities/Fixed Income (23:30ET):***
- EUR 1.0590-1.0620; JPY 114.00-114.55; AUD 0.7440-0.7460; NZD 0.7160-0.7180
- Feb Gold -0.3% at 1,169/oz; Jan Crude Oil +0.1% at $50.91/brl; Mar Copper +1.0% at $2.65/lb
- GLD: SPDR Gold Trust ETF daily holdings fall 3.0 tonnes to 860.7 tonnes; 16th straight decline; lowest since May 19th
- SLV: iShares Silver Trust ETF daily holdings fall to 10,664 tonnes from 10,761 tonnes prior; 8th straight decline; lowest since July 11th
- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.8972 V 6.8731 PRIOR; weakest Yuan setting since Nov 28th; biggest margin of weakness since Oct 23rd
- (CN) China MoF sells 3-month bills at 2.4%
- (JP) BOJ offers to buy ¥400B in 1-3yr JGBs, ¥420B in 3-5yr JGBs, ¥190B in 10-25yr JGBs and ¥110B in JGBs with maturity over 25-yr and ¥1.25T in T-bills
- (AU) Australia Finance Ministry (AOFM) sells A$900M in 2.75% 2027 bonds; avg yield 2.867%; bid-to-cover 3.04x
***Asia equities / Notables / movers by sector***
- Consumer discretionary: Sands China 1928.HK -4.9%, Galaxy Entertainment 27.HK -4.3%, SJM 880.HK -5.3%; Crown Resorts CWN.AU -5.2% (China govt may restrict ATM withdrawals); Recruit Holdings Co 6098.JP -1.0% (takes some curated content offline); Insurance Australia IAG.AU +0.6% (JPMorgan raises to overweight)
- Financials: QBE Insurance Group QBE.AU +1.0% (Shaw & Partners raises to buy); Westpac Banking Corp WBC.AU +0.5% (outlook); Ping An Insurance 2318.HK +1.6% (guidance)
- Industrials: Sinosteel Engineering & Technology Co 000928.CN +0.4% (group debt restructuring)
- Materials: Resolute Mining RSG.AU +4.2%, Saracen Mineral Holdings SAR.AU +0.8% (gold rises)
- Healthcare: Sirtex Medical SRX.AU -37.0% (guidance); Eisai Co 4523.JP +8.7%
Closing Market Summary: Unperturbed by ECB, Stocks Climb Once AgainThe stock market secured its fifth consecutive advance with the S&P 500 rising 0.2% to extend this week's advance to 2.5%. True to this week's form, small caps outperformed, sending the Russell 2000 higher by 1.6%. The domestically-oriented index will enter Friday with a 5.5% gain for the week.
Equity indices spent the early action near their flat lines as participants digested the latest policy statement from the European Central Bank. The ECB made no changes to its interest rate corridor, but announced that its asset purchase program will be extended until December. The news of an extension overshadowed the revelation that the pace of purchases will slow to EUR60 billion from EUR80 billion, starting in March.
The euro jumped against the dollar immediately after the announcement, but reversed off its high (1.0875), sliding nearly 300 pips to a new session low (1.0603). The decline was accelerated by comments from ECB President Mario Draghi, who said that the central bank will buy assets that have a lower yield than the current deposit rate. The weakness in the euro lifted the U.S. Dollar Index (101.08, +0.85) into the neighborhood of this year's high.
A modest wave of selling developed during the last two hours of action, but eight out of eleven sectors still ended the day with gains.
A handful of cyclical sectors struggled at the start, but the notable resilience that has been observed as of late made its appearance known once again. Top-weighted sectors like technology (+0.4%) and financials (+0.9%) climbed into the afternoon, which helped push the S&P 500 to a fresh intraday record high.
The financial sector (+0.9%) continued its torrid stretch, extending this week's gain to 4.7%, which puts the group well ahead of its peers. Today's advance took place on the back of steepening in the yield curve, which pushed up the 2s10s spread to 130 basis points—just one basis point below this year's high.
Growth-sensitive sectors like energy (+0.5%) and materials (+0.7%) outperformed throughout the day, but the energy sector could not catch up to crude oil, which spiked 2.0% to $50.85/bbl despite dollar strength.
The consumer discretionary space (+0.1%) spent the day behind the broader market as losses in select retailers and casino names offset strength on the apparel side. TailoredBrands (TLRD 26.44, +7.51) and Lululemon (LULU 68.84, +9.00) were among the standouts thanks to above-consensus earnings and upbeat guidance. The two soared 39.7% and 15.0%, respectively.
Also on the earnings front, Costco (COST 157.59, +3.74) jumped 2.4% after its quarterly report showed an increase in membership fees. However, the broader consumer staples sector (-0.5%) underperformed throughout the day.
The remaining countercyclical sectors flashed losses at the start, but health care (+0.2%), utilities (+0.3%), and real estate (+0.5%) recovered by the close.
Longer-dated Treasuries retreated while the front of the curve held unchanged, leaving the 2-yr yield at 1.10% while the 10-yr yield rose five basis points to 2.40%.
Today's participation was just above average as more than 960 million shares changed hands at the NYSE floor.
Economic data was limited to weekly initial claims, which decreased by 10,000 to 258,000 (consensus 255,000), marking the 92nd straight week they have been below 300,000. Continuing claims for the week ending November 26 dropped by 79,000 to 2.005 million.
Tomorrow's economic data will be limited to the 10:00 ET release of the preliminary reading of Michigan Sentiment Index for December (consensus 94.3) and October Wholesale Inventories (consensus -0.4%).
- Russell 2000 +22.6% YTD
- Dow Jones Industrial Average +12.6% YTD
- S&P 500 +9.9% YTD
- Nasdaq Composite +8.2% YTD