Global stocks advancing in early trading on news that US-China trade talks continue to progress
Mar 15, 2019
US Stocks Preview Ahead of the Open
- US Treasury Secretary Steven Mnuchin, US Trade Representative Robert Lighthizer and Chinese Vice Premier Liu Hu allegedly had a very positive phone call last night, with both sides making substantive progress on trade talks.
- Chinese Premier Li Keqiang highlighted the different accounting measures he plans to use to fund a record tax cut. Li is hoping to jumpstart the decelerating Chinese economy using fiscal stimulus
- The UK Parliament voted overwhelmingly to delay Britain’s exit from the European Union. This should give UK Prime Minister Theresa May some time to get her new BREXIT plan passed.
- February Industrial Production is set to be released at 9:15am. Consensus expects industrial production to have grown +0.4% M/M and contracting 0.6% M/M in January.
- The preliminary University of Michigan Sentiment reading for March will be released at 10am today. Market forecasts are for a reading of 95.7 vs. 93.8 in February.
- Ritholtz Wealth Management makes the argument that the Dow Jones and the S&P 500 are essentially the same. According to their analysis, going back to 1970, the daily correlation between the two indices is 0.95. Month-end correlation is even higher, sitting at 0.97.
- According to analysis by Bloomberg, industrials companies have been the “smartest” when buying back stocks. Notably, management teams at railroads companies have been the most adept at buying back their stock at low prices.
- The rally in European stocks faces challenges going forward. While the Stoxx Europe 600 is +11.3% YTD, future gains will be capped unless without a pick-up in German macroeconomic data and/or an acceleration in European corporate profit growth.
- The VIX is little changed this morning and is currently at 13.6 after closing at 13.5 yesterday
- iShares MSCI Emerging Markets ETF (EEM) December 2019 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 -0.18 basis points to 2.6285%
- The US Treasury 2s-10s Spread has narrowed 0.36 basis points to 0.17%
- WTI Crude is currently up 0.6% to USD$58.61/bbl with the Brent-WTI spread down USD$-0.9 to USD$7.93/bbl
- Gold is currently up 0.52% to USD$1302.87/oz
- Global oil prices are on pace for a +4.4% gain this week, the second weekly gain for crude oil. Wednesday’s report that US crude inventories dropped more than expected has pushed oil prices to a 4-month high with further market tightening driving bullish sentiment among commodity traders.
Stocks Trending in the News
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Global Consumer Stocks Trending in the News
- BMW AG (DB:BMW) Oracle reported a 7.9% drop in ebit to 9.12 billion euros. BMW declared a full year dividend of 3.50 euros per shares, below the 3.86 consensus. BMW’s CEO said the coming year is full of significant challenges for BMW, the company will shrink its lineup to deal with these challenges. BMW sees a slight rise in deliveries in 2019. BMW AG is rated “Unattractive” in our European Large-Cap Global Top Stock Ideas.
- Tesla (TSLA) unveiled its newest vehicle, the Model Y. The Model Y is set to be cheaper than its larger SUV brother and higher-end versions should ship to customers late 2020 with basic models, priced at USD$39,000, to ship mid-2021. Tesla CEO Elon Musk presented the new model in a rather subdued manner, noticeably different than his charismatic self. 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.
- Ulta Beauty (ULTA) reported fourth quarter EPS of USD$3.61 beating consensus of USD$3.56. Ulta Beauty reported fourth quarter revenue of USD$2.12 billion in line with consensus of USD$2.11 billion. Ulta saw same store sales growth of +9.4%, well above 7.9% consensus. Ulta Beauty gave 2019 EPS guidance of around USD$12.65-12.85. Ulta Beauty is rated “Attractive” in our US Large-Cap Global Top Stock Ideas and “Top Buy” in our US Consumer Discretionary Global Top Stock Ideas.
Global Information Technology & Communication Services Stocks Trending in the News
- Adobe (ADBE) Oracle reported fiscal first quarter 2019 EPS of USD$1.71 beating consensus of USD$1.62. Oracle reported fiscal first quarter 2019 revenue of USD$2.60 billion beating consensus of USD$2.55 billion. Adobe gave second quarter EPS guidance of around USD$1.77. Adobe is rated “Attractive” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Information Technology Global Top Stock Ideas.
- Facebook (FB) saw the exit of some key executives this week. Chris Cox, Facebook’s Chief Product Officer, left after 13 years at the company. Cox was key to the development of Facebook’s newsfeed that has been central to the Facebook experience for so long. With Facebook shifting away from the newsfeed, it was not a surprise he is leaving. Facebook is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Information Technology Global Top Stock Ideas.
- Micron (MU) was downgraded at Cross Research to hold from buy. Merill Lynch maintains its buy rating and USD$50 price target but warns of falling selling prices in the second quarter of 2019. This is expected to be temporary with a turnaround coming by the fourth quarter. Micron is rated “Unattractive” in our US Large-Cap and “Neutral” in our US Information Technology Global Top Stock Ideas.
- Oracle (ORCL) reported fiscal third quarter 2019 EPS of 87 cents beating consensus of 84 cents. Oracle reported fiscal third quarter 2019 revenue of USD$9.62 billion in line with consensus of USD$9.59 billion. Oracle increased its quarterly dividend to 24 cents per share from 19 cents. Oracle is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Information Technology Global Top Stock Ideas.
- Snap Inc. (SNAP) shares surged to their highest levels since September 2018 after BTIG announced a Street-high price target of USD$15/share. In a note to clients, BTIG analyst Rich Greenfield wrote, “Virtually everything that could go wrong for Snapchat over the past couple years since going public has gone wrong.” Greenfield believes that overseas advertisers will take advantage of Snap Inc.’s relatively low bid prices for ad inventory in the US, driving a stronger FY2019 than the previous year. Snap Inc. is rated “Top Short” in our US Large-Cap Global Top Stock Ideas and “Unattractive” in our US Information Technology Global Top Stock Ideas.
- Spotify’s (SPOT) CEO commented today his company has suffered greatly from the restrictions Spotify alleges Apple (AAPL) has placed on it. These alleged restrictions are the reason Spotify complained to the EU, demanding an investigation of Apple’s business practices. He added that one of the biggest complaints from customers is their inability to get Spotify to work on Apple’s products. The EU antitrust regulator said it would take the complaint seriously. Spotify is not rated in our 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.
Global Industrials Stocks Trending in the News
- Air Canada (TSX:A C) has suspended financial guidance for the coming quarter and full year given the grounding of the 737 Max jets. Air Canada said it is devising a contingency plan for the loss of the jets but does not have anything to announce yet. Macquarie is recommending clients use the weakness in the stock as a buying opportunity. Air Canada is rated “Attractive” in our Canada All-Cap Global Top Stock Ideas.
- Equifax (EFX) was initiated at Exane BNP Paribas with a neutral. Equifax saw its price target set at USD$106. The average price target in the market is USD$117.64 presently. S&P downgraded Equifax’s credit rating to BBB- with a negative outlook saying its revenues will continue to be pressured by one-time costs and investment spending. Equifax is rated “Neutral” in our US Large-Cap and “Unattractive” in our US Industrials Global Top Stock Ideas.
Global Commodities & Power Stocks Trending in the News
- ExxonMobil (XOM) said today it intends to lower the cost of pumping oil in the Permian Basin to USD$15 per barrel. For comparison, that is a low cost that can only be found in the huge fields of the Middle East. The Permian Basin total production is close to 4 million barrels per day, equal to all the production in Iraq today. ExxonMobil is deploying 55 rigs there by 2024 and total production there is expected to double by that time. ExxonMobil is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas.
Global Healthcare Stocks Trending in the News
- BioScrip (BIOS) and Option Care Enterprises have agreed to merge in an all stock transaction. Upon completion, the resulting company will be 80% owned by investment funds that are affiliated with Madison Dearborn Partners and Walgreens Boots Alliance (WBA). The company will remain listed in Nasdaq. Bioscrip is rated “Attractive” in our US SMID-Cap Global Top Stock Ideas. Walgreens Boots Alliance is rated “Attractive” in our US Large-Cap and “Neutral” in our US Consumer Staples Global Top Stock Ideas.
International Stocks Recap
- The Euro Stoxx 600 is currently up +0.32%, the FTSE 100 is higher by +0.45%, the DAX has risen +0.52%, and the CAC 40 is up +0.54%
- Personal & Household Goods (+0.4%), Media (+0.04%), and Insurance (+0.48%) stocks are the top performers in the Euro Stoxx 600 today
- Basic Resources (+0.21%), Chemicals (+0.79%), and Automobiles & Parts (+0.89%) 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 2.73x
- 147 stocks in the Euro Stoxx 600 are at 4-week highs while 17 stocks are at 4-week lows
- 78 stocks in the Euro Stoxx 600 are overbought while 8 stocks are oversold according to the 16-day RSI Measure
- The Nikkei 225 finished up +0.77%, the Hang Seng ended up +0.56%, the Hang Seng China Enterprise up +0.53%, and the CSI 300 was +1.26%
- Investor sentiment for Japanese stocks finished positive with the advance/decline ratio for the Nikkei 225 closing at 4.23x
- 27 stocks in the Nikkei 225 hit 4-week highs while 26 stocks reached 4-week lows
- 7 stocks in the Nikkei 225 closed overbought while 7 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 2.85x
- 5 stocks in the Hang Seng hit 4-week highs while 3 stocks reached 4-week lows
- 2 stocks in the Hang Seng closed overbought while 0 stocks closed oversold according to the 16-day RSI Measure