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Global markets look for direction in wake of dovish pivot by Federal Reserve

Mar 21, 2019

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Market data as of 7am EST

US Stocks Preview Ahead of the Open

  • US stocks index futures are lower this morning, with front-month Dow Jones minis -0.35%, S&P 500 minis -0.26% and Nasdaq 100 minis -0.24% 
  • The Fed won't raise rates due to the slowing economy, with Fed President Jerome Powell saying "patient means no need to rush to judgment" on rates
  • The Fed will end the drawdown of its bond holdings by September of this year, this was generally expected 
  • President Trump said tariffs will stay on Chinese goods until the two come to a trade agreement, in his attempts to get China to finalize a trade deal
  • The dovish pivot by the Fed has left many investors wondering if the growth outlook is worth than expected
  • Levi Strauss is going public today on the NYSE at USD$17 per share, raising USD$1.7 billion, it will trade under the symbol LEVI
  • UK PM Theresa May will request a 3 month Brexit delay when she pitches the idea to EU leaders later today
  • The VIX is moving up this morning and is currently at 14.22 after closing at 13.91 yesterday
  •  Vanguard Real Estate ETF (VNQ) April 18 OTM Puts, SPY April 18 & 29 OTM Puts and Apple (AAPL) March 22 OTM Puts are the most actively traded options contracts in US pre-market trading this morning.
  • US 10-Year Treasury Bonds are higher with yields down -0.72 basis points to 2.5191%
  • The US Treasury 2s-10s Spread has narrowed 0.5 basis points to 0.13%
  • WTI Crude is currently up 1.36% to USD$59.83/bbl with the Brent-WTI spread down USD$-1.4 to USD$8.19/bbl
  • Gold is currently little changed 0.19% to USD$1315.07/oz
  • Precious metals are set to be the primary beneficiaries of the Fed’s shift to a more dovish stance.  A weaker US dollar will support higher price moves for Gold, Silver and the PGMs.  We still like Silver here.   

Stocks Trending in the News

 

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Global Consumer Stocks Trending in the News

  • Avon (AVP) are rising after the Wall Street Journals reports that Brazil’s Natura (NATU3) is in talks to acquire the company.  Natura is discussing acquiring both the North American private-equity owed business as well as the London-based publicly traded business.  Natura previously acquired the Body Shoppe.  Avon announced a 10% cut in its workforce in January so a deal with Natura would not surprise the market.  Avon is not rated in our Global Top Stock Ideas.  Natura is rated “Top Buy” in our Brazil All-Cap Global Top Stock Ideas.
  • Conagra (CAG) reported fiscal third quarter 2019 EPS from continuing operations of 51 cents, beating the 49 cents consensus.  Conagra reported fiscal third quarter 2019 revenue of USD$2.71 billion in line with USD$2.75 billion.  Conagra CEO said the integration of Pinnacle if going well, after initial indication, a couple of months ago, were less positive.  Conagra is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Consumer Staples Global Top Stock Ideas.
  • Levi Strauss & Co (LEVI) is returning to the public markets today pricing shares at USD$17 and raising USD$623 million.  Levi Strauss was founded over 145 years ago and was taken private in 1985.  The IPO values the company at USD$6.6 billion.  Levi pitched investors on its opportunity in China, today it only gets 3% of its revenue from China.  Levi Strauss is not yet rated in our Global Top Stock Ideas.
  • Ford (F) announced plans to build an electric vehicle just outside Detroit, a year and a half after moving electric vehicle production to Mexico.  Ford will spend USD$850 million to build a factory in Flint, Michigan to build vehicles with plans to add a second shift by 2023.  Ford will also spend USD$50 million to establish a facility to add autonomous software to self-driving vehicles produced there.  Ford plans to hire 900 workers.  Ford is rated “Top Short” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Consumer Discretionary Global Top Stock Ideas.
  • Nike (NKE) reported fiscal third quarter 2019 results that were generally in line.  Nike fiscal third quarter EPS of 68 cents came above 65 cents consensus.  Third quarter revenue of USD$9.61 billion trailed consensus of USD$9.65 billion.   Nike’s CEO commented, “Our business momentum is being accelerated by our ability to scale innovation at a faster pace and expand new digital experiences around the world.”  Nike is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Top Buy” in our US Consumer Discretionary Global Top Stock Ideas.
  • Ted Baker (LSE:TED) issued another profit warning, saying it sees “very difficult trading conditions.”  Ted Baker said it is facing heavy discounting from other retailers.  “Trading continues to be impacted by ongoing consumer uncertainty,” the company added.  Ted Baker sees a bright spot in e-commerce where it is seeing a 20% rise in sales.  Ted Baker is not rated in our Global Top Stock Ideas.
  • Tesla (TSLA) is alleging that one of its Chinese engineers stole confidential information on its autopilot system and then left to join Chinese rival Xpeng Motors.  Xpeng Motors in not being accused of any wrongdoing, with its CEO saying the company “plays by the rules.”  He added a flow of talent between companies is normal given that both companies are innovators.  Telsa is rated “Top Short” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Consumer Discretionary Global Top Stock Ideas.

Global Information Technology & Communication Services Stocks Trending in the News

  • Alphabet’s (GOOGL) Google was fined 1.49 billion euros by the European Union for thwarting advertising from its rivals.  Google has been fined a total of 8.2 billion euros for its action by the EU.  The fine involved its role as ad broker and exclusivity agreement it had signed.   Google said it has made changes to avoid further fines as this is expected to be the last fine from the EU, for now.  Alphabet is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Information Technology Global Top Stock Ideas.
  • AT&T’s (T) CEO said today the company’s single focus at this point in paying down debt.  He said AT&T has no plans for any M&A activity right now, with debt pay-down the priority.  In discussing its wireless business, he reminded investors that mobile phone service is taxed like alcohol and cigarettes  He added that executives like him have to spend too much time in Washington, DC.  AT&T is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas and “Top Buy” in our US Information Technology Global Top Stock Ideas.
  • Global Payments (GPN) saw its rating cut to neutral from overweight at Atlantic Equities.  Global Payments also had its price target cut to USD$144 from USD$144.  A more challenging near-term scenario was cited as a primary reason for the downgrade.  Global Payments is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Information Technology Global Top Stock Ideas.
  • Micron (MU) reported fiscal second quarter 2019 EPS of USD$1.71 versus consensus of USD$1.65.  Micron reported fiscal second quarter 2019 net sales of USD$5.84 billion in line with USD$5.83 billion consensus.  Micron reported an adjusted gross margin of 50.2%.  Micron is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Information Technology Global Top Stock Ideas.
  • Tencent (TCEHY, SEHK:700) reported fourth quarter net income of 14.2 billion yuan, a 32% fall and well below consensus of 17.55 billion yuan.   Tencent fourth quarter revenue of 84.9 billion yuan came above 83 billion yuan.  Tencent saw 8 new video games approved in the quarter but noted there is a “sizable backlog” of games to be approved.  Analysts comments are generally that the surprise came in the growth of costs being above expectation on the quarter.  Tencent is rated “Neutral” in our China All-Cap Global Top Stock Ideas.

Global Industrial Stocks Trending in the News

  • Boeing (BA) saw the first cancellations of orders for its grounded 737 Max-8 jet.  Garuda Indonesia, the flag carrier of Indonesia is looking to cancel its order of 49 737 Max jets, saying passengers have lost confidence in the jet in the wake of the crashes.  Garuda informed Boeing of its desire on March 14th.  Boeing is rated “Attractive” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Industrials Global Top Stock Ideas.
  • Union Pacific Railroad (UNP) said it is working around the clock to clear trees in the wake of Midwest flooding.  Union Pacific still has tracks underwater in areas between Kansas City and Council Bluffs, Iowa.  There have been numerous levees that have been breached in southwest Iowa and Union Pacific cannot say when it expects service to return to normal.  Union Pacific is rated “Top Buy” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Industrials Global Top Stock Ideas.
  • United Rentals (URI) told investors today at a conference that the first quarter has seen significant adverse weather in the midwest that could weigh on results.  He added it is “nothing that changes our outlook for the year.”  The comments at the Bank of America conference weighed on the stock despite not changing the full year view.  United Rentals is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Industrials Global Top Stock Ideas.

Global Financials Stocks Trending in the News

  • BlackRock (BLK) is set to acquire French analytics firm eFront for about USD$1.3 billion, according to a report from Bloomberg.  BlackRock will make the acquisition to expand private equity and real estate analytics for its clients, the report notes.  BlackRock is looking to add eFront to its suite of analytic offerings for its institutional clients.  BlackRock is rated “Attractive” in our US Large-Cap Global Top Stock Ideas

Global Commodities & Energy Stocks Trending in the News

  • Murphy Oil (MUR) in exiting Malaysia, selling its assets there to PTT (PTTEP) of Thailand for USD$2.13 billion.  Murphy Oil is exiting Malaysia to focus on opportunities in the United States.  Murphy said it will use USD$750 million of the proceeds to fund expansion of its activities in the US.  Murphy Oil is rated “Top Short” in our US Large-Cap Global Top Stock Ideas.

 

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International Stock Markets Recap

  • The Euro Stoxx 600 is currently down -0.12%, the FTSE 100 is higher by +0.55%, the DAX is down -0.25%, and the CAC 40 is up +0.08%
  • Basic Resources (+1.05%), Oil & Gas (+0.62%), and Telecommunications (+0.5%) stocks are the top performers in the Euro Stoxx 600 today
  • Travel & Leisure (-1.3%), Banks (-0.97%), and Financial Services (-0.94%) stocks are the worst performers in the Euro Stoxx 600 today
  • Investor sentiment for European stocks is negative with the advance/decline ratio for the Euro Stoxx 600 currently at 0.82x
  • 123 stocks in the Euro Stoxx 600 are at 4-week highs while 20 stocks are at 4-week lows
  • 66 stocks in the Euro Stoxx 600 are overbought while 2 stocks are oversold according to the 16-day RSI Measure
  • Japan is closed today for the Vernal Equinox holiday
  • The Hang Seng ended down -0.85% the Hang Seng China Enterprise declined -0.7%, and the CSI 300 was +0.04%
  • Investor sentiment for Hong Kong stocks finished negative with the advance/decline ratio for the Hang Seng closing at 0.52x
  • 12 stocks in the Hang Seng hit 4-week highs while 2 stocks reached 4-week lows
  • 4 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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