After Hours Summary: STX +12.5% and AA +3.7% on earnings/guidance... IMPV -9.7% after cutting guidance, TSLA -1.2% on potential SEC investigationAfter Hours Gainers:
Companies trading higher in after hours in reaction to earnings/guidance: NEPT +13.7% (thinly traded), STX +12.5%, AA +3.7%(also Cube Hydro Carolinas reaches agreement to acquire hydroelectric plants from Alcoa Power Generating)
Companies trading higher in after hours in reaction to news: JRJR +13.6% (compliance plan was accepted by NYSE MKT relating to failure to timely file its Quarterly Report on Form 10-Q), CASC +11.4% (Growth Equity Opportunities Fund discloses 8.3% active stake), BDSI +11.2% (secured preferred formulary status for BUNAVAIL on a 'significant' managed care plan), BAA +7% (reports Q2 operating results), RRD +6.9% and XRX +2.6% (reports of RR Donnelley & Sons potential merger with Xerox's Copy unit), MGT +5% (following late pullback -- released prelim proxy statement), WDC +4.4% and NTAP +0.2% (on STX guidance), CLDX +3.1% (initiates Phase 1/2 clinical trial of new product candidate CDX-014 in advanced renal cell carcinoma), RLYP +2.5% (discloses new patient starts, outpatient prescriptions and units sold to hospitals/other institutions for June), HUM +1.6% (following late decline amid continued merger concerns), REN +1.5% (following 60% move higher today; also John C. Goff increases active stake to 9.9%), NTIP +1.4% (discloses settlement of patent litigation with Alcatel-Lucent Entities and ALE), UAL +1.1% (reported June 2016 operational results; expects Q2 passenger unit revenue to decline 6.50% to 6.75% YoY, citing several headwinds)
After Hours Losers:
Companies trading lower in after hours in reaction to earnings/guidance: IMPV -9.7% (lowers Q2 guidance citing impacts by extended sales cycles across most geographies and verticals predominantly relating to larger deals)
Companies trading lower in after hours in reaction to news: CYTR -64.9% (announces results of an analysis of its Phase 3 clinical trial of aldoxorubicin compared to investigator's choice therapy in patients with relapsed or refractory soft tissue sarcomas; study did not show a significant difference between aldoxorubicin and investigator's choice therapy for PFS), BLFS -3% (following 50%+ move higher today), ALR -2.4% (Alere to initiate voluntary withdrawal of the Alere INRatio and INRatio 2 PT/INR monitoring system), CHRS -1.3% (after closing near highs -- up 25% on the day), TSLA -1.2% (WSJ reported potential SEC investigation)
Select IMPV peers tradng lower in sympathy: FTNT -1.7%, PANW -1.6%, SPLK -0.3%, FEYE -0.2
Asian Mid-session Market Update: Policy stimulus expectations continue to fan Japan gains; Alcoa kicks off US earnings season on a high note
***Economic Data***
- (AU) AUSTRALIA JUNE NAB BUSINESS CONFIDENCE: 6 (3-month high) V 3 PRIOR; CONDITIONS: 12 (3-month high) V 10 PRIOR
- (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 115.2 v 115.8 prior
- (JP) JAPAN JUNE PPI M/M: -0.1% V -0.1%E; Y/Y: -4.2% V -4.2%E
- (UK) JUNE BRC LFL SALES Y/Y: -0.5% V +0.5% PRIOR
***Index Snapshot (as of 03:30 GMT)***
- Nikkei225 +2.7%, S&P/ASX +0.9%, Kospi +0.1%, Shanghai Composite +0.1%, Hang Seng +0.6%, Sep S&P500 +0.1% at 2,132
***Commodities/Fixed Income***
- Aug gold flat at $1,357/oz, Aug crude oil +0.2% at $44.85/brl, Sep copper +0.3% at $2.15/lb
- USD/CNY: *(CN) PBOC SETS YUAN MID POINT AT 6.6950 V 6.6843 PRIOR; Weakest Yuan fix since Oct 2010
- (CN) PBOC to inject CNY30B in 7-day reverse repos
- JGB: (JP) Japan's MOF sells ¥728B in 0.3% 30-year bonds; Avg yield: 0.120% v 0.314% prior; Bid to cover: 2.64x v 3.42x prior
- (AU) Australia MoF (AOFM) sells A$150M in 1.25% 2035 Indexed bonds; avg yields 0.6155%; bid-to-cover 3.62x
***Market Focal Points/FX***
- Asian equity markets have extended their gains, tracking another strong session Wall St where S&P500 ended the day in record territory. There has been no letdown from the euphoria of a very strong non-farm payrolls on Friday, while political risks in UK, Japan, and Australia have also abated to give way to more clarity. The unofficial start of the US earnings season with Q2 results from Alcoa has also been impressive. AA beat on top and bottom lines, affirmed global aluminum demand growth expectations, and forecast improvement in H2 and 2017 on ramp-up of capacity. Tech got a welcome set of prelim numbers from Seagate, which raised its top line forecasts even though it also increased its layoff plans. Shares of AA and STX were up 3.6% and 13% afterhours respectively. S&P500 emini futures are pointing to a modestly higher open on Tuesday.
- After yesterday's 4% jump, Nikkei225 is at the forefront of the rally again with a near 3% gain. Weakness in JPY continues to provide a tailwind in Tokyo, as USD/JPY rose about 80pips from the lows above 103.20, though expectations of a liberal fiscal stimulus response to low inflation doldrums is also helping stoke sentiment. Overnight, PM Abe confirmed the stimulus would be over ¥10T, though today cabinet spokesman Suga said the govt does not yet know the actual size of the package. Fin Min Aso added the govt will consider the funding for the package once more details are determined, and Econ Min Ishihara noted the package has not been ordered yet. Earlier, a Nikkei report forecast govt cutting its FY16 GDP target to 0.9% from 1.7%.
- In notable economic data, Australia's NAB saw its Business confidence and conditions rise to 3-month highs. NAB economist said companies are "choosing to focus on the positives they see in their own business, at least for the time being" in spite of political uncertainty, though JPMorgan analysts focused on NAB's 13-point drop in retail business conditions and rising cost inflation weighing on margins. AUD/USD hit session highs after the release, rising about 50pips to $0.7590.
- In Europe, Italian Fin Min Padoan declared that speculation of a banking crisis in Italy is incorrect since the govt is working to resolve the non-performing loans issue. Shortly after those comments, IMF lowered its Italy 2016 GDP target to just under 1.0% from 1.1% and 2017 to about 1% v 1.25% prior forecast, warning that risks are tilted to the downside with resolution needed to address asset quality in the financial sector.
***Equities***
US equities / ADRs:
- STX: Reports prelim Q4 Rev $2.65B v $2.32Be; citing demand & well ahead of guidance; To cut additional 6.5K jobs; +13.0% afterhours
- RRD: Reportedly in merger discussions with Xerox - press; +6 .7% afterhours
- AA: Reports Q2 $0.15 v $0.09e, R$5.30B v $5.25Be; on track to separate in H2; +3.6% afterhours
- UAL: Reports June load factor 87.1% v 86.3% y/y; +1.1% afterhours
- TSLA: Said to be investigated for possible securities law breach by the SEC - financial press; -1.1% afterhours
- IMPV: Cuts Q2 -$0.22 to -$0.20 v -$0.04e, R$57.5-58.0M v $66.1Me (prior -$0.04 to -$0.02, $65.5-66.5M); -9.1% afterhours
Notable movers by sector:
- Consumer discretionary: China International Travel Service Co 601888.CN +0.5%, China Travel Intl 308.HK +6.1% (merger); Lawson 2651.JP -3.4% (Q1 result)
- Financials: Mirvac Group MGR.AU +1.0% (affirms guidance); China Galaxy Securities Co 6881.HK +0.7% (June result); Poly Property Group Co119.HK -0.5% (H1 result)
- Industrials: DIC Corp 4631.JP +4.7% (H1 result speculation)
- Technology: NEC Corp 6701.JP +6.7% (CitiGroup raises to Buy)
- Materials: Energy Resources of Australia ERA.AU +0.6% (Q2 result); Evolution Mining EVN.AU -2.3%, Newcrest -1.2% (gold prices lowers)
- Energy: China Coal Energy 1898.HK +5.0% (H1 guidance)
Closing Market Summary: S&P 500 Notches New High Ahead of EarningsThe major averages began the week on a higher note as the S&P 500 (+0.3%) settled above its previous all-time closing high at 2130.82. The broader market continued its recent rally as participants remained upbeat following a headline beat in Friday's Employment Situation Report for June. Additionally, positive developments overseas, a downturn in safe havens, and strong sector leadership from the heavyweight technology (+0.6%), financial (+0.6%), industrial (+0.6%), and consumer discretionary (+0.6%) sectors lifted the averages. The Nasdaq Composite (+0.6%) finished ahead of the Dow Jones Industrial Average (+0.4%) and the S&P 500 (+0.3%).
Today's session began on a higher note as investors eyed a continued rebound in overseas bourses. Global equity markets climbed overnight, boosted by a positive reading of the U.S. Employment Situation Report for June (287K; consensus 175K) and political developments out of Japan. The June employment report sparked risk appetite, indicating a rebound in labor markets without spurring concerns of a sooner-than-expected move from the Fed. In Japan, Prime Minister Shinzo Abe's LDP won a supermajority, paving the way to an easier approval process of potential future stimulus measures.
Equity indices climbed at the start of the session as the benchmark index surpassed its prior all-time intraday high within the first half-hour of trade. The S&P 500 briefly pulled back, finding support near the 2134 price level. The market climbed through the session, buoyed by leadership from heavily-weighted technology (+0.6%), financials (+0.6%), industrials (+0.6%), and consumer discretionary (+0.6%). The broader market finished off its best level of the day as eight sectors ended above their flat lines. In front of the pack, technology (+0.6%), financials (+0.6%), and industrials (+0.6%) outperformed. On the flipside, countercyclical health care (-0.2%), telecom services (-0.1%), and utilities (-0.1%) ended with the only losses.
The high-beta chipmakers demonstrated relative strength, evidenced by the 1.1% gain in the PHLX Semiconductor Index. In the index, NVIDIA (NVDA 52.02, +1.17) and Skyworks (SWKS 64.64, +1.73) outperformed, gaining 2.3% and 2.8%, respectively. In the broader technology sector (+0.6%), Alphabet (GOOG 715.09, +9.46) climbed 1.3% while Twitter (TWTR 17.71, -0.37) slipped 2.1%. Twitter struggled after SunTrust downgraded the stock from "Buy" to "Neutral."
In the economically-sensitive financial sector (+0.6%), money center banks outperformed ahead of their respective earnings reports. JPMorgan Chase (JPM 62.27, +0.44) is scheduled to report Thursday morning. Elsewhere, Capital One (COF 66.26, +1.55) led credit service names. The broader sector sports the slimmest monthly gain (month-to-date: +0.8%) and remains the only sector in negative territory for the year (year-to-date: -3.4%).
The Dow Jones Transportation Average (+0.4%) finished the day ahead of the broader market as airline names outperformed. In the group, Delta Air Lines (DAL 38.12, +0.75) and United Continental (UAL 42.41, +0.93) gained 2.1% apiece. Separately, C.H. Robinson (CHRW 71.86, -2.57) rounded out the index after being downgraded to "Sell" at UBS. In the broader industrial sector (+0.6%), Dow component Boeing (BA 132.04, +1.95) led after announcing a number of aircraft sales and raising its 20-year outlook. The company estimates that airplane demand will total 39,260 in the next two decades.
The U.S. Dollar Index (96.59, +0.29) ended modestly higher as the greenback gained against commodity currencies and the yen. The dollar/Canadian dollar pair finished higher by 0.6% (1.3126) amid a downturn in crude oil, which finished its day lower by 1.3% ($44.77/bbl; -$0.59). Separately, the dollar gained 2.2% against the safe-haven yen (102.82).
The Treasury complex settled at its low as equities extended their advance. The yield on the 10-yr note finished higher by seven basis points at 1.43%.
Today's participation was below the recent average as fewer than 789 million shares changed hands on the NYSE floor.
Investors did not receive any economic data today and Tuesday's data will be limited to Wholesale Inventories (consensus 0.2%) for May, which will be released at 10:00 ET.
- Russell 2000 +4.8% YTD
- Dow Jones +4.6% YTD
- S&P 500 +4.6% YTD
- Nasdaq Composite -0.4% YTD
Alcoa beats by $0.05, beats on revs
* Reports Q2 (Jun) earnings of $0.15 per share, $0.05 better than the Capital IQ Consensus of $0.10.
* The Company is forecasting improvement in the second half of 2016 as new platforms ramp up, and a strong 2017. Large commercial aircraft deliveries declined approximately 1 percent year-over-year in the first half of 2016, but are expected to rise 6 percent in the second half of 2016 compared to the first. As a result, Alcoa forecasts full-year 2016 deliveries to be flat to up 3 percent, followed by strong double-digit growth in 2017.
* In automotive, Alcoa continues to forecast global automotive production growth of 1 to 4 percent. This includes 1 to 4 percent growth in North America, where the United States continues to record strong sales, particularly in the light truck segment. The global outlook is driven by a variety of factors, including low fuel prices, sustained demand, stable consumer confidence and recovery of global economies.
* On June 29, 2016, Alcoa Upstream Corporation (to be renamed Alcoa Corporation prior to separation) filed an initial Registration Statement on Form 10 with the U.S. Securities and Exchange Commission. The Value-Add segments (other than the rolling mill operations in Warrick, IN and Saudi Arabia) will remain in the existing company, which will be named Arconic Inc. The separation is on track to be completed in the second half of 2016.
Fitch: Flatter yield curve to pressure bank margins in H2 of 2016, NIM expansion to decline in 2016
- US banks are preparing for lower, longer interest rate environment by extending balance sheet duration
- There could be idiosyncratic rating implications for rate risk, for the most part should be credit neutral for banks
--> The next steps to Downing Street for Theresa May
- Leaders of the rulemaking 1922 Committee of the Conservative party meets on Monday afternoon to formally confirm her election as party leader.
- Talks will then take place between Downing Street and May’s campaign team.
- Talks will also start between Buckingham Palace and the Cabinet Office to agree the timing for a meeting with the Queen to confirm her appointment as prime minister.
- Her move into No. 10 however will depend on how quickly David Cameron moves out.
Theresa May was on the brink of becoming of Britain’s prime minister on Monday after her rival Andrea Leadsom dramatically pulled out of the Conservative party leadership race.
Mrs Leadsom backed Mrs May to become leader in a statement to the press from Westminster just after midday.
“We need a new prime minister in place as soon as possible. Theresa May is ideally placed to implement Brexit on best possible terms for the UK,” Mrs Leadsom said.
The withdrawal meant only Mrs May was left in the race to become Conservative party leader after the field of candidates had been earlier reduced to two.
Graham Brady, chairman of the backbench 1922 committee which sets the rules on Tory leadership races, said Mrs May’s formal election could be confirmed “quite quickly”.
“There is no need to re-run the election. Our procedures are very clear, the rules are very clear and we will be in a position to move forward quite quickly,” he said.
Mrs Leadsom said she had been inspired to run for the leadership in the “best interests of the country” and felt the UK had a “bright future” outside the EU. But she added that she did not have sufficient support to lead a strong government.
“A nine-week leadership campaign is highly undesirable,” Mrs Leadsom said. “A strong and unified government must move quickly to set out what an independent UK framework for business looks like.”
Mrs May also won the public backing of Michael Gove, another former leadership rival.
“We should now move as quickly as possible to ensure Theresa May can take over as leader. She has my full support as our next prime minister,” said the justice secretary in a statement.
Boris Johnson, the former London mayor, said he had “no doubt Theresa [May] will make an excellent party leader and prime minister” and called for the handover of power to begin “immediately”.
Chris Grayling, the former justice secretary and head of Mrs May’s campaign, said she was “enormously honoured to be entrusted with this task by so many of her colleagues”.
The pound initially rallied on hopes of reduced uncertainty over the leadership of the UK. However, sterling later fell back to stand 0.2 per cent lower on the day.
The FTSE 250 stock index, the most UK-centric of the main London equities benchmarks, was 2.5 per cent up after the identity of the next PM became clear. The FTSE 100 was up 0.9 per cent to a day-high of 6,654.59, led by strong gains property-related stocks that have been hit hard since the vote for Brexit. Taylor Wimpey was the best single gainer, up 9.5 per cent.
Mrs Leadsom was said by friends to have spent the weekend in a state of emotional turmoil after she suggested in an interview that she would make a better prime minister than Mrs May because she was a mother.
The energy minister told the Daily Telegraph she felt “under attack” and had apologised to Mrs May. The home secretary said on Monday she had accepted the apology.
Mrs Leadsom, a former City minister who was one of the most prominent campaigners for Britain to leave the EU, insisted her views had been misrepresented by The Times. She later apologised, saying motherhood should not play any part in the election campaign and she deeply regretted “that anyone has got the impression that I think otherwise”.
Her withdrawal is the final indignity for the four most prominent faces of the Leave campaign, who succeeded in leading Britain out of the EU but then saw their own ambitions dashed.
Mr Johnson had appeared set to be prime minister but was betrayed by Mr Gove, whose own leadership chances were thwarted when he finished a poor third in the ballot of Tory MPs.
The former London mayor, who had offered his support to Mrs Leadsom, had been low-key in his backing in recent days.
Nigel Farage resigned as Ukip leader immediately after the Brexit referendum result and Mrs Leadsom’s departure means the pro-Remain Mrs May is left to pick up the pieces.
Mrs May formally launched her campaign to become prime minister in Birmingham on Monday with a promise to preside over a more responsible form of capitalism, tackle boardroom excess and predatory corporate takeovers.
Though a low-key supporter of Remain in the referendum, Mrs May said she would take Britain out of the EU: “Brexit means Brexit,” she said. “We’re going to make a success out of it.”
She made a series of criticisms of George Osborne’s tenure at the Treasury, saying he had neglected productivity problems and suggesting that government-backed project bonds could be used to boost infrastructure.
Mrs May also called for a “proper industrial strategy” and a plan to develop all of Britain’s great cities, implying Mr Osborne had concentrated on boosting “one or even two of our great regional cities” — a reference to his focus on Manchester.
There was a familiar call for the government to take more powers to block predatory takeovers of key companies — citing Pfizer’s failed bid for AstraZeneca — and another promise to tackle corporate tax evasion.
Her speech made it clear that she saw high executive pay, irresponsible corporate behaviour and a widening gap between London and the rest of the country as significant factors in the Leave vote.
“If you’re from an ordinary, working-class family, life is just much harder than many people in politics realise,” she said in a speech reminiscent of some former Labour leader Ed Miliband’s rhetoric before the 2015 election.
Mrs May believes the Tories are better placed than Labour to reform capitalism and her pitch for Number 10 is reminiscent of the blue-collar Tory values espoused by John Major.
Within hours of the announcement by Mrs Leadsom, the Tories were facing calls from both Labour and the Liberal Democrats for a snap general election for Ms May to seek a democratic endorsement.
Jon Trickett, a key ally of Jeremy Corbyn, Labour leader, said there would be a “coronoation” of an unelected prime minister.
“It is crucial, given the instability caused by the Brexit vote, that the country has a democratically elected prime minister,” he said. “I am now putting the whole of the party on a general election footing.”
Tim Farron, leader of the Liberal Democrats, said it was “inconceivable” that Mrs May should be crowned without winning an election in her own party – “let alone the country”.
“There must be an election. The Conservatives must not be allowed to ignore the electorate, their mandate is shattered and lies in ruins,” he said. “Britain deserves better than this Tory stitch up. May has not set out an agenda, and has no right to govern. She has not won an election and the public must have their say.”
Burberry has hired Marco Gobbetti from French luxury brand Céline to replace Christopher Bailey as chief executive, who will be shuffled into the role of ‘President’.
Mr Gobbetti will be “responsible for all commercial, operational and financial elements of the business,” the company said, duties that will be stripped from Mr Bailey as he is slotted into the President role.
Mr Bailey received a 75 per cent pay cut in June after a disappointing year during which its shares skidded 38 per cent and its pre-tax profits slipped 7 per cent.
Mr Bailey will retain the role of ‘Chief Creative’ as well as shuffling into the role of ‘President’ to make way for Mr Gobbetti.
Burberry says Mr Gobbetti is:
currently Chairman and CEO of French luxury brand, Céline. With more than 20 years’ experience in the luxury industry he has a proven track record for growing and developing brands including Givenchy, Moschino and Bottega Veneta. Most recently, at Céline, his retail and customer focused strategies have delivered exceptional growth for the brand over the last 8 years.
Christopher Bailey said:
I am very excited that Marco Gobbetti is joining us as Chief Executive Officer and as a partner to me. Marco brings incredible experience and skills in luxury and retail with him that will be invaluable to us. I am delighted to welcome Marco and I am looking forward to working closely with him alongside the rest of our highly talented teams. On a personal level, I know that we are going to enjoy a wonderfully collaborative partnership that makes me very excited for our future at Burberry.