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Morning Brief

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US markets quiet to start the week as German government gives approval to merger of Deutsche Bank and Commerzbank

Mar 18, 2019

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Market data as of 7am EST

 

US Stocks Preview Ahead of the Open 

  • US stocks index futures are little changed to start the week with front month Dow Jones minis –0.16%, S&P 500 minis +0.10% and Nasdaq 100 minis +0.12% 
  • The German government has given its approval to a merger of Deutsche Bank and Commerzbank following news that German Finance Minister Olaf Scholz will not oppose the jobs cuts at both banks.  The reduction in jobs is required to support the merger of the two German banks. 
  • Japan industrial production m/m growth for came in at –3.4%, surpassing market consensus forecasts of –3.7%
  • The outperformance of Growth stocks (vs. Value stocks) is most pronounced for smaller companies.  The ratio of the growth-to-value for Russell 2000 stocks has moved above 0.8 as of Friday, the highest level since February 2001. 
  • The number of bearish bets is decreasing according to data from the CFTC.  Net shorts on S&P 500 e-minis dropped 35% as of the week ending March 12th.  Previously, net shorts had reached their highest levels in over a year in February as worries about slowing economic growth drove demand for bearish bets. 
  • Goldman Sachs argues that Snap-on (SNA), Weatherford International (WFT) and National Oilwell Varco (NOV) are three stocks that have high pricing power and will outperform if the US Fed is successful in boosting inflation. 
  • The VIX is little changed this morning and is currently at 13.11 after closing at 12.88 last week
  • While investors obsess over price levels for the VIX, the Bank of American Merrill Lynch SKEW indicator has dropped to the lowest level since January 2018.  The SKEW index is a more direct measure of demand for out of the money puts than the VIX which is a measure of the overall curvature.  The low levels for SKEW suggest investors are “comfortable” with the current environment for stocks.   
  • iShares iBoxx High Yield Corporate Bond ETF (HYG) June 2019 OTM Puts and iShares China Large-Cap ETF (FXI) April 12 OTM Calls are the most actively traded options contracts in US pre-market trading this morning. 
  • US 10-Year Treasury Bonds are lower with yields up 0.72 basis points to 2.5943%
  • The US Treasury 2s-10s Spread has widened 0.94 basis points to 0.16%
  • WTI Crude is currently little changed -0.15% to USD$58.52/bbl with the Brent-WTI spread up USD$0.35 to USD$8.11/bbl
  • Gold is currently little changed 0.25% to USD$1305.65/oz

Stocks Trending in the News

Click name for Q-Factor breakdown, latest price details, more financial info and sentiment data.

Global Consumer Stocks Trending in the News

  • Lumber Liquidators (LL) reported fourth quarter adjusted EPS of USD$0.17 beating consensus of USD$0.14.  Lumber Liquidators reported fourth quarter revenue of USD$268.9 million a touch below consensus of USD$272.3 million.  Lumber Liquidators saw same store sales growth of +9.4%, well above 7.9% consensus.  Lumber Liquidators gave same store growth guidance of negative low single digits.  Lumber Liquidators is rated “Attractive” in our US SMID-Cap Global Top Stock Ideas and “Top Short” in our US Consumer Discretionary Global Top Stock Ideas.
  • Marriott International (MAR) outlined its 3-year guidance which includes the return of up to USD$11 billion to shareholders.  Marriott intends to add between 275k and 295k rooms by 2021.  Marriott sees EPS of USD$7.65-8.50 by 2021 with a compound growth rate of 11-15% over 2018 adjusted results.  Marriott sees dividends payouts of ISD$1.9-2 billion with share repurchases of USD$7.6-9 billion.  Marriott International 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

  • Disney (DIS) has rehired director James Gunn to direct the third “Guardians of the Galaxy” film after firing him eight months ago.  He was fired then after offensive tweets of his from years ago were published.  In a surprise move, Disney announced he is set to return after a backlash from fans demanding his return.  Disney is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Top Buy” in our US Consumer Discretionary Global Top Stock Ideas.
  • Facebook (FB) was downgraded to hold from buy at Needham in a note highlighting concern over its recent pivot toward privacy and encrypted messages.  Facebook saw its price target cut to USD$187 from USD$205.  Needham also noted the growing risk of government regulations and its likely negative effects on Facebook.  Facebook has seen some key executives depart recently, further adding to the concerns for Needham.  Facebook is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Information Technology Global Top Stock Ideas.
  • Fidelity National Information Services (FIS) agreed to acquire Worldpay Inc (WP) for close to USD$34 billion in cash and stock.  FIS will also assume Worldpay’s debt load, which brings the enterprise value of the deal to about USD$43 billion.  Upon closure of the deal, FIS shareholders will hold 53% of the new company with Worldpay holders owning 47%.  Worldpay shareholders will receive USD$11 per share cash and 0.93 shares of FIS.  Fidelity National Information Services is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Information Technology Global Top Stock Ideas.  Worldpay is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Information Technology Global Top Stock Ideas.
  • Qualcomm (QCOM) won its first patent infringement case against Apple (AAPL) in the United States.  Qualcomm was awarded USD$31.6 million in damages in a San Diego court, giving the company the full amount it asked for.   Qualcomm contends its portfolio of technology patents provides significant value to smartphones.  Qualcomm is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Information Technology Global Top Stock Ideas.  Apple is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Information Technology Global Top Stock Ideas.
  • Synaptics (SYNA) was downgraded to neutral from buy at Mizunho Securities.  Synaptics saw its price target cut to USD$39 from USD$48 as well.  Mizunho highlights Synaptics’ loss of market share in multiple product lines as well as the recent announcement that its CEO is leaving.  Synaptics is rated “Neutral” in our US SMID-Cap Global Top Stock Ideas and “Neutral” in our US Information Technology Global Top Stock Ideas.

Global Financials Stocks Trending in the News

  • Allianz (DB:ALV) shares are rising on speculation it could combine its assets with DWS (DB:DWS), the asset management arm of Deutsche Bank.  With news of Deutsche Bank (DB:DBK) discussing a possible merger many are speculating it may shed assets with DWS being described as a prime target.  DWS has one of the largest offerings of ETFs and real estate business among European asset managers.  Deutsche Bank is rated “Unattractive” in our European Large-Cap Global Top Stock Ideas.  DWS is rated “Unattractive” in our European SMID-Cap Global Top Stock Ideas.  Allianz is rated “Neutral” in our European Large-Cap Global Top Stock Ideas.
  • Commerzbank’s (DB:CBK) potential merger with Deutsche Bank (DB:DBK) finally got the green light to start formal merger talks.  Germany’s Finance Minister has said he will not oppose the massive jobs cuts that will be needed to make a merger of the two banks work.  Last week labor leaders at Deutsche Bank expressed the same opposition to any merger with Commerzbank.   Commerzbank is rated “Unattractive” in our European Large-Cap Global Top Stock Ideas.  Deutsche Bank is rated “Unattractive” in our European Large-Cap Global Top Stock Ideas.

Global Industrials Stocks Trending in the News

  • Alstom (ENXTPA:ALO) was upgraded to buy from hold at Kepler Cheuvreux.  Alstom’s price target was raised to 43.50 euros from 38.50 euros.   Alstom has a healthy backlog with potential for winning further business in 2019.  Alstom is rated “Attractive” in our European Large-Cap Global Top Stock Ideas.
  • Boeing’s (BA) crisis deepens as preliminary evidence from the 737 Max crash indicates the plane was set to dive, similar to the situation found in the first crash, according to a report in Bloomberg.  Investigators have downloaded all the information from both the flight-data recorder and cockpit voice recorder.  Press reports indicate very similar circumstances preceding this crash as the first crash.  Boeing is rated “Attractive” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Industrials Global Top Stock Ideas.

Global Commodities & Power Stocks Trending in the News

  • ArcLight Capital Partners has agreed to acquire the rest of American Midstream Partners (AMID) that it does not already own.   A price of USD$5.25 was agreed upon and the deal is expected to close by the end of the second quarter.  ArcLight cut its bid price to USD$4.50 from USD$6.10 in January after American Midstream said it would not pay its first quarter dividend.  A revised price was agreed up since then.  American Midstream Partners is rated “Neutral” in our US SMID-Cap Global Top Stock Ideas.

 

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International Stocks Recap

  • The Euro Stoxx 600 is currently up +0.14%, the FTSE 100 is higher by +0.6%, the DAX is down -0.15%, and the CAC 40 is up +0.09%
  • Basic Resources (+1.38%), Banks (+1.2%), and Telecommunications (+0.44%) stocks are the top performers in the Euro Stoxx 600 today
  • Technology (-0.58%), Travel & Leisure (-0.5%), and Health Care (-0.3%) stocks are the worst performers in the Euro Stoxx 600 today
  • Investor sentiment for European stocks is positive with the advance/decline ratio for the Euro Stoxx 600 currently at 1.37x
  • 194 stocks in the Euro Stoxx 600 are at 4-week highs while 15 stocks are at 4-week lows
  • 90 stocks in the Euro Stoxx 600 are overbought while 3 stocks are oversold according to the 16-day RSI Measure
  • The Nikkei 225 finished up +0.62%, the Hang Seng ended up +1.37%, the Hang Seng China Enterprise up +1.45%, and the CSI 300 was +2.85%
  • Investor sentiment for Japanese stocks finished positive with the advance/decline ratio for the Nikkei 225 closing at 3.09x
  • 30 stocks in the Nikkei 225 hit 4-week highs while 17 stocks reached 4-week lows
  • 11 stocks in the Nikkei 225 closed overbought while 4 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 15.67x
  • 9 stocks in the Hang Seng hit 4-week highs while 4 stocks reached 4-week lows
  • 1 stock 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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