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Markets Commentary

With the Fed decision just one day away, followed the very next day by the –increasingly more irrationalBOJ, stocks had no desire to make significant moves and overnight’s boring session was the result, as European stocks and U.S. index futures rose modestly but mostly hugged the flatline while Asian declined 0.2% for a third day as raw-material shares declined and Tokyo equities slumped before central bank meetings in the U.S. and Japan this week. China’s stocks rose the most in almost two weeks, up 0.6% but failed to rise above 3000 on the Shanghai Composite, in thin trading.

The reason why no breakout is possible in any direction is because confusion reigns about the most basic issue: earnings. Take these two quotes for example:

“While policies are supportive of equities, valuations look expensive,” Hans Goetti, the Dubai- based chief strategist for the Middle East and Asia for Banque Internationale à Luxembourg told Bloomberg. “First-half earnings don’t really look great. Unless you have very good earnings coming through in the second half, I think valuations could be on the high side.”

And then this: “Earnings are doing pretty well,” Michael Woischneck, a fund manager who oversees the equivalent of $190 million at Lampe Asset Management in Dusseldorf, Germany told Bloomberg. “But that’s something that could change with just one word from a Fed governor. Although no changes are expected, wording at this week’s meeting is key.”

Markets Now

  • S&P 500 futures up 0.2% to 2087
  • Stoxx 600 up 0.2% to 347
  • FTSE 100 up 0.3% to 6279
  • DAX up less than 0.1% to 10295
  • German 10Yr yield up 1bp to 0.28%
  • Italian 10Yr yield up 1bp to 1.54%
  • Spanish 10Yr yield up 1bp to 1.65%
  • S&P GSCI Index up 0.2% to 346
  • MSCI Asia Pacific down 0.2% to 133
  • Nikkei 225 down 0.5% to 17353
  • Hang Seng up 0.5% to 21407
  • Shanghai Composite up 0.6% to 2965
  • S&P/ASX 200 down 0.3% to 5221
  • US 10-yr yield down 1bp to 1.9%
  • Dollar Index down 0.3% to 94.56
  • WTI Crude futures up 0.7% to $42.94
  • Brent Futures up 0.7% to $44.80
  • Gold spot down 0.3% to $1,235
  • Silver spot up less than 0.1% to $17.01

Global Top News

  • DuPont Boosts Outlook as First-Quarter Sales Top Estimates: Boosts yr oper. EPS forecast to $3.05-$3.20, had seen $2.95- $3.10; 1Q oper. EPS $1.26 vs est. $1.04; says on track for $730m cost reductions
  • BP Reports Surprise Profit on Strength in Refining, Trading: Profit adjusted for one-time items and inventory changes was $532m vs analyst ests. for loss of $244.9m; co. says it can balance books w/ oil at ~$50-$55/bbl
  • Sarepta Fails to Win FDA Panel Backing for Muscle Disease Drug: Panel votes 7-3 that drug wasn’t shown to be effective
  • U.S. to Require Large Banks to Have Year Worth of Liquidity: WSJ; Details of rule crafted by Federal Reserve, FDIC, Office of the Comptroller of the Currency to be released Tuesday at FDIC board meeting
  • Toyota Cedes Global Sales Lead to VW as Shutdowns Trump Scandal: Toyota sales fell 2.3% in 1Q to 2.46m in Jan.- March, Volkswagen deliveries rose 0.8 percent to 2.5m
  • Fed to Keep Options Open for June Rate Hike: Decision-Day Guide: Officials to debate whether to reinstate risk assessment
  • Toshiba Books $6.2 Billion Loss After Westinghouse Writedown: Yr prelim Oper. loss 690b yen; had forecast 430b yen loss; nuclear business results in 260b yen impairment
  • Oil’s Recovery Inches Higher as Fracklog Awaits Price Trigger: Drilled, uncompleted wells could return 500,000 b/d to market
  • New Valeant CEO Papa Trades Challenge at Perrigo for Fresh One
  • Verisk to Sell Health-Care Services Ops to Veritas for $820m: Sale prices includes $720m cash, $100m L-T promissory note with interest paid in kind, other contingent consideration
  • Perella Weinberg Said In Merger Talks With Tudor Pickering: Considering a tie-up with Tudor Pickering in a push into the energy sector
  • Alere Said to Get Default Notice From Creditors on Filing Delay: Received notice of default from group of bondholders after company delayed filing 2015 financial statement
  • McDonald’s Said to Market Euro Bonds After ECB Expands Stimulus: Offering the securities in 3 parts, with notes maturing in January 2021, November 2023 and May 2028, according to person familiar with matter
  • Earnings Blowups Send Tech Traders to Options Market for Hedges: Ratio of Nasdaq VIX to S&P 500 gauge near highest since August
  • Landry’s, Jefferies CEOs Plan IPO for New SPAC: Reuters: Landry’s CEO Tilman Fertitta, Jefferies/Leucadia CEO Richard Handler to start special purpose acquisition co. through their cos. called Landcadia, plans to raise as much as $300m in IPO
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