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NO DEAL for you! Trump says US "is not ready" to make a trade deal with China at this point

May 28, 2019

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Market data as of 7am EST

 

US Stocks Preview Ahead of the Open

  • US and UK markets return after holidays with no let up in global trade tensions, futures are lower with front-month Dow Jones minis are -0.05%, S&P 500 minis -0.16% and Nasdaq 100 minis -0.09%
  • While in Japan, President Trump said the US "is not ready" to make a trade deal with China
  • Trump added that tariffs "could go up very substantially, very quickly" as he commented he thinks China wishes it had closed a deal when the 2 countries were negotiating
  • China's state media published a commentary saying the US is "scapegoating" China for trade imbalances and even some domestic problems
  • The behavior of the S&P 500 and the VIX over the past few weeks suggests investors are definitely discounting the prospects for an all-out trade war between China and the US.  Specifically, the VIX has remained range bound despite the pull-back in the S&P 500 which points to a relatively muted fear of further shock coming ongoing trade discussions.
  • US 10-year Treasury yields touch the lowest levels since late 2017 with trade tensions not showing any sign of abating
  • Chinese authorities seized the first bank in over 2 decades, calling Baoshang Bank a "serious credit risk"
  • Emerging Markets ETFs saw a fourth week of outflows, with $1.17 billion exiting this past week
  • The VIX is little changed this morning and is currently at 16.31 after closing at 15.85 last week
  • iShares Core S&P 500 Index ETF (CAD-Hedged) (XSP) June 28 OTM Puts  SPDR S&P 500 ETF Trust (SPY) May 28 OTM Calls and iShares MSCI Emerging Markets ETF (EEM) July 19 OTM Calls are the most actively traded options in today's pre-market
  • US 10-Year Treasury Bonds are higher with yields down -3.51 basis points to 2.2851%
  • The US Treasury 2s-10s Spread has narrowed 1.42 basis points to 0.14%
  • WTI Crude is currently up 1.25% to USD$58.43/bbl with the Brent-WTI spread down USD$-0.76 to USD$11.92/bbl
  • Gold is currently little changed -0.11% to USD$1283.93/oz

Stocks Trending in the News

 

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Global Consumer Stocks Trending in the News

  • Amazon (AMZN) shares could be worth $3,000 according to a new report from Piper Jaffray.  Amazon could reach that level in two to three years, which would be a 65% rise from current levels, the report notes.  Amazon could reach this level without any acquisition and at that level, its market cap would approach $1.5 trillion.  Amazon is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Top Buy” in our US Consumer Discretionary Global Top Stock Ideas.  
  • Constellation Brands (STZ) was downgraded at Morgan Stanley today to equal weight from overweight.   Constellation Brands saw its price target cut to $220 from $230 at the same time.  The risk-reward for the stock has tilted away from its favor at this point and better options exist at this point.  Constellation Brands is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Consumer Staples Global Top Stock Ideas.  
  • Fiat Chrysler (BIT:FCA) is in talks with Renault (ENTXPA:RNO) to merge operations.  Both companies have struggled recently and combining the two would create the world’s third largest manufacturer of automobiles.  The proposed deal has generally been well received by the market, with most agreeing each needed to make a move to short up their respective positions.  Fiat Chrysler is not rated in our Global Top Stock Ideas.  Renault Group is rated “Unattractive” in our European Large-Cap Global Top Stock Ideas.

Global Information Technology Stocks Trending in the News

  • Apple (AAPL) is launching a $199 iPod touch this week.  The new iPod features better performance using its A10 fusion chip.  The improved performance allows for immersive augmented reality and group facetime.  Apple is rated “Attractive” in our US Large-Cap Global Top Stock Ideas and “Top Buy” in our US Information Technology Global Top Stock Ideas        
  • Global Payments (GPN) has agreed to acquired Total Systems Services (TSS) in a deal valued at $21.5 billion.  Total Systems holders will receive 0.8101 shares of Global Payments, with Global Payments holders holding 52% of the new company.  This is the third large merger in the payments industry this year.  The deal will combine the country’s largest merchant processor with the largest issuer processor.  Global Payments is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Information Technology Global Top Stock Ideas.  Total System Services is rated “Attractive” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Information Technology Global Top Stock Ideas        
  • Momo (MOMO) reported first quarter revenue and earnings that beat consensus.  Momo reported first quarter revenue of $554.7 million, beating consensus of $517.5 million.  First quarter adjusted EPS of 62 cents, beating 54 cents consensus.  Momo posted 114.4 million monthly active users.   Momo gave full year revenue guidance of 4 billion to 4.1 billion yuan.  Momo is rated “Attractive” in our China All-Cap Global Top Stock Ideas.
  • Roku (ROKU) was downgraded to equal-weight from overweight at Stephen inc.  Roku saw its price target cut to $84 at the same time.  Stephens sees 12% downside for Roku from its present level.  Roku’s average price target is $78.33.  Roku is rated “Top Short” in our US Large-Cap Global Top Stock Ideas.

Global Industrials Stocks Trending in the News

  • Lockheed Martin (LMT) got good news from both Japan and Poland as both want to buy F-35 fighter planes.  Japan wants to buy 105 F-35s, a move highlighted by President Trump while visiting Japan this weekend.  Poland also indicated a desire to acquire 32 F-35s to replace aging Soviet planes.  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 Power & Commodities Stocks Trending in the News

  • Vale’s (VALE) Brucutu mine will not open anytime soon, Brazilian prosecutors said.  Vale has not hired an external auditor yet to review safety concerns, prosecutors informed.  As such, the mine does not have any potential reopening data at this time.  Additionally, at its Gongo Seco mine, the tailings dam wall is moving much more than expected, and is likely to collapse soon.  Residents in the area have already been evacuated.  Vale has a total of 93 million tons of production out of service due to concerns over the safety of tailings dams.  Vale is rated “Attractive” in our Brazil All-Cap Global Top Stock Ideas.

Global Health Care Stocks Trending in the News

  • Centene (CNC) now has Third Point as a major shareholder.  Activist investor Third Point has a position worth $300 million, according to Bloomberg report.    The report adds that Third Point thinks that Centene should explore a sale of itself.  There are 2 other activist funds with positions in Centene that support the Third Point position.  Centene is rated “Top Buy” in our US Large-Cap Global Top Stock Ideas 
  • Pfizer (PFE) was initiated at Goldman Sachs with a buy rating.  Goldman writes that the convergence of large-cap pharma with the biotech sector is in its later stages.  Goldman expects Pfizer and other large-cap players do bolt-on deals and not mega-deals going forward.  Goldman is positive on the pharma sector overall.  Pfizer is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas
  • Teva Pharmaceuticals (TEVA) was downgraded to neutral from buy at UBS.  Teva saw its price target cut to $23 from $31 at the same time.  UBS sees heightened litigation risk with its price-fixing and opioid cases, saying to will likely take years for both to play out, weighing on the stock in the meantime.  Teva is not rated in our Global Top Stock Ideas.

 

 

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International Stock Markets Recaps

  • The Euro Stoxx 600 is currently down -0.31%, the FTSE 100 is down -0.04%, the DAX is down -0.31%, and the CAC 40 is down -0.41%
  • Technology (-0.41%), Insurance (-0.25%), and Basic Resources (+1.1%) stocks are the top performers in the Euro Stoxx 600 today
  • Telecommunications (-0.39%), Travel & Leisure (0%), and Health Care (-0.52%) 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 0.64x
  • 49 stocks in the Euro Stoxx 600 are at 4-week highs while 53 stocks are at 4-week lows
  • 16 stocks in the Euro Stoxx 600 are overbought while 26 stocks are oversold according to the 16-day RSI Measure
  • The Nikkei 225 finished up +0.37%, the Hang Seng ended up +0.38%, the Hang Seng China Enterprise up +0.13%, and the CSI 300 was +0.96%
  • Investor sentiment for Japanese stocks finished neutral with the advance/decline ratio for the Nikkei 225 closing at 1.12x
  • 14 stocks in the Nikkei 225 hit 4-week highs while 8 stocks reached 4-week lows
  • 6 stocks in the Nikkei 225 closed overbought while 46 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 1.27x
  • 1 stock in the Hang Seng hit 4-week highs while 19 stocks reached 4-week lows
  • 0 stocks in the Hang Seng closed overbought while 14 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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