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Morning Brief

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Stocks advancing on news that the US and China are nearing a trade deal

Mar 04, 2019

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Market data as of 7am EST

 

US Stocks Preview

  • US and Chinese trade officials are nearing a comprehensive agreement on the trade dispute between the world’s two largest economies.   There are rumors that US trade officials are prepared to lift tariffs on USD$200 billion on Chinese goods if Chinese trade officials commit to better address intellectual-property rights for American products. 
  • US stocks index futures are rallying on the US-China trade rumors in pre-market trading with front-month Dow Jones minis +0.32%, S&P 500 minis +0.29%, and Nasdaq 100 minis +0.49% 
  • According to strategists at Citigroup, the idea that US companies have been focusing only on stock buybacks is a false narrative.  Their research suggests cash flow dedicated to capital expenditures in CY2018 broke a record set in CY2014. 
  • The current rally in tech stocks is one of the hottest in years.  The rally in the Nasdaq 100 over the past 2 ½ months is the longest in nearly 7 years.  According to strategists at Credit Suisse, the “E” in the P/E is growing so fast, valuations can’t keep up.  That may point to a further rally in tech stocks in CY2019. 
  • JP Morgan is reiterating that clients buy US stocks.  This recommendation is in contrast with the rising skepticism among the bank’s clients who are becoming alarmed by the current rally in US stocks.  JP Morgan argues that a dovish US Federal Reserve and momentum in global economic indicators suggests that the current bounce back in US stocks can continue.   
  • The VIX is little changed this morning and is currently at 14.4 after closing at 13.57 last week
  • Eli Lilly (LLY) Match 15 OTM Calls & Puts, Bristol-Myers Squib (BMY) March Calls & Puts, and Elanco Animal Health (ELAN) March 15 OTM Calls & Puts are some of the most heavily traded options in the US pre-market this morning.
  • US 10-Year Treasury Bonds are higher with yields down -0.91 basis points to 2.744%
  • The US Treasury 2s-5s Spread has narrowed 0.85 basis points to 0%
  • The US Treasury 2s-10s Spread has narrowed 0.92 basis points to 0.19%
  • WTI Crude is currently down -2.48% to USD$55.8/bbl with the Brent-WTI spread up USD$3.04 to USD$8.85/bbl
  • Gold is currently down -0.48% to USD$1287.25/oz

Stocks Trending in the News

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Global Consumer Stocks Trending in the News

  • Alibaba (BABA) announced it is pairing with Office Depot (ODP) in its first partnership with a US company.  Alibaba is creating a new destination for US businesses to come and access Alibaba’s business-to-business platform of suppliers.  Alibaba will gain access to 10 million customers and 1800 sales agents at Office Depot.  Alibaba is rated “Top Buy” in our China All-Cap Global Top Stock Ideas.   Office Depot is rated “Attractive” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Consumer Discretionary Global Top Stock Ideas.
  • Amazon (AMZN) is reported to be planning to open dozens of grocery stores around the US, according to a report in the Wall Street Journal.  Amazon will open the first of the additional grocery stores in Los Angeles.  Amazon is in discussions about locations in most of the major US cities, the report highlights.  Amazon is looking to build on its Whole Foods acquisition with stores at a lower price point.  Amazon is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Consumer Discretionary Global Top Stock Ideas

Global Information Technology & Communication Services Stocks Trending in the News

  • 58.com (WUBA) was downgraded to neutral from outperform at Macquarie.  Macquarie also cut the price target to USD$73 from USD$91.  The downgrade comes in the wake of results that came in line as Macquaries raises concerns about growth in the coming year.  58.com is rated “Top Buy” in our China All-Cap Global Top Stock Ideas. 
  • China Tower (SEHK:788) reported a 36% jump in annual profit, matching consensus.  China Tower delivered net income of 2.65 billion yuan (USD$396 million) in 2018, this compared to 2.66 billion yuan a year earlier in 2017.  China Tower expects continued strength anticipating strong spending on the coming 5G rollout from which it will benefit.  China Tower is rated “Unattractive” in our China All-Cap Global Top Stock Ideas.
  • Versum (VSM) was downgraded today by Jefferies to hold from buy.  Jefferies raised the price target for Versum to USD$47 from USD$44.  The downgrade comes after Versum declined Merck’s USD$48-per-share offer.  After rejecting the offer, Jefferies sees an unattractive risk/reward scenario.  Versum is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Information Technology Global Top Stock Ideas.  Merck is rated “Attractive” in our US Large-Cap Global Top Stock Ideas.
  • Xilinx (XLNX) saw its rating lowered at BMO to market perform from outperform.  BMO has been bullish on Xilinx for 3 years with this being the first downgrade of Xilinx during that time.  BMO increased Xilinx’s price target to USD$125 from USD$100 while cutting its rating.  Xilinx is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Information Technology Global Top Stock Ideas. 

Global Industrials Stocks Trending in the News

  • Lockheed Martin (LMT) will see a reduced order for F-35 jets in 2020.  The Pentagon will request 78 jets be built in 2020, down from the initially expected 84.  The report appeared in Bloomberg and has yet to be confirmed by the Pentagon.  Lockheed Martin is rated “Attractive” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Industrials Global Top Stock Ideas.

Global Financials Stocks Trending in the News

  • Aviva (LSE:AV) announced Maurice Tulloch will be appointed CEO effective today.  Aviva has spent 5 months searching for a new CEO.  Tulloch is a veteran if the company, having joined in 1992.  He is presently head of the international insurance business and was appointed to the board 2 years ago.  Aviva is rated “Neutral” in our United Kingdom All-Cap Global Top Stock Ideas. 
  • Nordea Bank (OM:NDA SE) is falling today after a report that it is being implicated in the larger money laundering investigation going on in the country.  Sweden’s largest broadcaster reported today that Nordea in involved in the money laundering scandal as investigators expand the existing investigation. Nordea Bank is rated  “Top Short” in our European Large-Cap Global Top Stock Ideas.

Global Commodities & Power Stocks Trending in the News

  • Newmont Mining (NEM) has rejected the unsolicited USD$17.4 billion offer from Barrick Gold (ABX).  The deal would have created the world’s largest gold company.  Newmont’s board unanimously rejected the offer and submitted a proposal to create a JV encompassing both companies’ Nevada operations.  Newmont Mining is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas.  Barrick Gold “Neutral” in our Canada All-Cap Global Top Stock Ideas.
  • Vale (VALE) saw most of its senior executives leave over the weekend.  Regulators in Brazil recommended the removal of the CEO and most other senior executives in the wake of the dam disaster.  The interim CEO is a 10-year veteran of the company as a search for a new CEO begins.  Vale is rated “Neutral” in our Brazil All-Cap Global Top Stock Ideas.

Global Health Care Stocks Trending in the News

  • Biogen (BIIB) is acquiring Nightstar Therapeutics (NITE) for USD$25.50 per share.  Biogen is looking to establish a clinical pipeline in ophthalmology.  Biogen is paying a 70% premium over its last closing price.  Biogen is rated “Neutral” in our US Large-Cap Global Top Stock Ideas.  Nightstar is not rated in our Global Top Stock Ideas.
     

 

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International Markets Recap

  • The Euro Stoxx 600 closed up +0.35%, the FTSE 100 advanced +0.63%, the DAX rose +0.17%, and the CAC 40 finished up +0.55%
  • Investor sentiment for European stocks finished trading positive with the advance/decline ratio for the Euro Stoxx 600 currently at 2.59x
  • Food & Beverage (+0.39%), Automobiles & Parts (+0.44%), and Retail (-0.15%) stocks were the top performers in the Euro Stoxx 600 today
  • Media (+1%), Banks (+0.26%), and Real Estate (+0.25%) stocks were the worst performers in the Euro Stoxx 600 today
  • 220 stocks in the Euro Stoxx 600 hit 4-week highs while 23 stocks closed at 4-week lows
  • 88 stocks in the Euro Stoxx 600 finished the trading session overbought while 4 stocks closed oversold according to the 16-day RSI Measure
  • VSTOXX, the European stocks equivalent of the VIX, closed little changed -0.07 points today to 13.3 after closing at 13.37 yesterday
  • The Nikkei 225 finished up +1.02%, the Hang Seng ended up +0.51%, the Hang Seng China Enterprise up +0.6%, and the CSI 300 was +1.18%
  • Investor sentiment for Japanese stocks finished positive with the advance/decline ratio for the Nikkei 225 closing at 2.52x
  • 34 stocks in the Nikkei 225 hit 4-week highs while 8 stocks reached 4-week lows
  • 12 stocks in the Nikkei 225 closed overbought while 0 stocks closed oversold according to the 16-day RSI Measure
  • Investor sentiment for Hong Kong stocks finished positive with the advance/decline ratio for the Hang Seng closing at 1.78x
  • 4 stocks in the Hang Seng hit 4-week highs while 3 stocks reached 4-week lows
  • 7 stocks in the Hang Seng closed overbought while 0 stocks closed oversold according to the 16-day RSI Measure

 

*Data in Price Return and Updated Real-Time (with a delay), Source: StockDio

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