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Daily Markets Update, 4 May

 

 

  • US Stocks Surge Led by Apple
  • Dollar Gains After US Jobs Report
  • Emerging Markets: Argentina pushes interest rates to 40%.
  • European Shares Close Higher

 

 

U.S. stocks recovered from early-session losses after testing a key technical level, as investors weighed an April U.S. jobs report that showed an 18-year low in the unemployment rate. Treasuries pared gains as the market also assessed the impact of America’s trade talks with China. The dollar resumed its climb.

The S&P 500 Index moved higher, led by technology and consumer shares, after bouncing off its 200-day moving average.

The job report’s potential implications on monetary policy will be eyed after the Federal Reserve kept rates on hold earlier this week, saying inflation is near its target without suggesting any need to accelerate its gradual hiking path.

In Europe, Industrial and technology companies led gains in the Stoxx Europe 600 index as the euro slipped amid mounting concern about the region’s economic outlook.

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Argentina’s official borrowing rate has jumped from 27.25 per cent to 40 per cent, as the central bank sought to bolster the peso, having already spent $5bn of foreign exchange reserves.

Argentina is in the vanguard of a number of EM currencies experiencing acute selling pressure and capital flight from higher US interest rates and a resurgent dollar. The country’s 100-year bond fell in price towards 85 cents on the dollar before bouncing to 87 after markets opened. The bond began the year at a price around 100.

Argentina Hikes Rates To 40% To Stall Currency, Bond Market Collapse

As The FT reports, appetite for Argentine assets has been waning in recent months as concerns grow over the country’s painfully high level of inflation and large trade and fiscal deficits. A severe drought is also complicating President Mauricio Macri’s efforts to revive Latin America’s third-largest economy. Agricultural exports are one of Argentina’s main sources of hard currency, but the worst drought in decades is expected to hit this year’s soybean and corn harvests. The country’s famed cattle industry is also predicted to rack up millions in losses.

 

Main moves in markets:

Stocks

  • The S&P 500 Index gained 0.7 percent as of 10:42 a.m. New York time
  • The Stoxx Europe 600 Index advanced 0.5 percent.
  • The U.K.’s FTSE 100 Index advanced 0.8 percent.
  • Germany’s DAX Index jumped 0.8 percent.
  • The MSCI Emerging Market Index fell 0.3 percent to its lowest in almost 19 weeks.
  • European stock markets closed in the green, buoyed by a rally on Wall Street and despite a disappointing US jobs report.

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Currencies

  • The Bloomberg Dollar Spot Index gained 0.1 percent.
  • The euro dipped 0.3 percent to $1.1948.
  • The British pound decreased 0.4 percent to $1.352.
  • The Japanese yen gained 0.1 percent to 109.13 per dollar.

Bonds

  • The yield on 10-year Treasuries sank less than one basis point to 2.94 percent, the lowest in almost two weeks.
  • Germany’s 10-year yield advanced less than one basis point to 0.55 percent.
  • Britain’s 10-year yield gained less than one basis point to 1.391.

Commodities

  • West Texas Intermediate crude increased 0.4 percent to $68.73 a barrel.
  • Gold gained 0.1 percent to $1,313.42 an ounce.
  • LME copper rose 0.2 percent to $6,840.50 a metric ton.

 

Thursday’s Key Earnings

Activision (NASDAQ:ATVI-1.6% AH with an incorrect earnings release.
CBS (NYSE:CBS+2.2% AH on broad subscriber growth.
DowDuPont (NYSE:DWDP) flat on beat, big drop in ag sales.
EOG Resources (NYSE:EOG-1.7% AH despite a Q1 beat.
GoPro (NASDAQ:GPRO-1.4% AH after an earlier stock jump.
Pandora (NYSE:P+8.5% AH with a strong quarter in advertising.
Regeneron (NASDAQ:REGN-1.3% on in-line revenues.
Shake Shack (NYSE:SHAK+10.6% AH amid strong comparable sales.
Teva Pharma (NYSE:TEVA-4.4% following weaker profits.

 

Economy News

Trade talks between the U.S. and China ended after a second day as reports surfaced on American demands in the negotiations. The U.S. requested China reduce the bilateral trade deficit by at least $200B by the end of 2020, as well as halting all government support for advanced technologies. Chinese officials believed the proposal was “unfair,” according to sources at the WSJ.

Theresa May’s Conservative Party has avoided widespread losses in 150 local council elections across England. Some key seats were ceded, however, presenting a mixed picture for the British leader since losing her party’s parliamentary majority last year. May has also been struggling to reach a consensus within her government over the shape of the U.K.’s future relationship with the EU bloc.

Venezuela is taking over the country’s leading private bank Banesco for 90 days and announced the arrest of 11 top executives for “attacks” against the rapidly depreciating bolivar. The nation’s inflation rate spiked from 4,966% to nearly 18,000% through March and April, a result President Maduro has attributed to an “economic war.”

“Iran will not renegotiate what was agreed years ago and has been implemented,” Foreign Minister Mohammad Javad Zarif said in a video message on YouTube. It comes as President Trump warns that unless European allies rectify the 2015 nuclear deal’s “terrible flaws” by May 12, he will refuse to extend U.S. sanctions relief for the oil-producing Islamic Republic.

 

Stocks News

Berkshire Hathaway bought 75M additional Apple (NASDAQ:AAPL) shares in Q1, with Warren Buffett outlining that the company “earns almost twice as much as the second most profitable company in the U.S.” The announcement, which comes ahead of Berkshire’s (BRK.A, BRK.B) annual shareholder meeting on Saturday, brings its total stake in the tech giant to 240.3M shares worth $42.5B. AAPL +1.2% premarket.

Seeing regulatory risk in a deal with Amazon (NASDAQ:AMZN), India’s Flipkart (FPKT) has approved a 75% equity stake sale in the company to a group led by Walmart (NYSE:WMT), Bloomberg reports. Closing of the approximately $15B deal is expected within 10 days. SoftBank (OTCPK:SFTBY) will sell its 20%+ stake as part of the transaction, while Alphabet (GOOG, GOOGL) is likely to participate in the investment.

European bank earnings: HSBC -4% premarket after profit missed estimates, although the bank unveiled a new $2B buyback. Highlighting “lackluster” trading activity in Europe, BNP Paribas (OTCPK:BNPZY) reported a 17% drop in net income during Q1, while Societe Generale (OTCPK:SCGLY) beat expectations, shaking up its leadership team following the resignation of deputy CEO Didier Valet over a Libor rate rigging scandal.

JPMorgan is doubling down on AI. The bank has hired Manuela Veloso, Carnegie Mellon University’s head of machine learning, as JPMorgan’s (NYSE:JPM) first head of artificial intelligence research. Finance is focusing on the technology, which could eventually be used for services ranging from fraud detection and loan approval to streamlining processes and cost management.

Amid an escalation in U.S.-China trade tensions, China’s antitrust authority has approved Qualcomm’s (NASDAQ:QCOM) joint venture with a unit of state-owned Datang Telecom Technology aimed at designing smartphone chipsets, WSJ reports. Qualcomm is still waiting for the regulator to approve its planned $44B purchase of NXP Semiconductors (NASDAQ:NXPI) – a deal widely seen as critical to the U.S. chipmaker’s future.

Twitter fell 1.6% in after-hours trading after the company found a bug tied to password storage, but said an investigation showed no indication of a breach. Twitter (NYSE:TWTR) uses a common technology that masks passwords so no one within the organization can view them, but a glitch was discovered in the system. The company is now urging all users to change their logins.

An indictment against former Volkswagen (OTCPK:VLKAY) CEO Martin Winterkorn has been unsealed in federal court in Detroit. The executive left the automaker shortly after the diesel emissions cheating scandal was first uncovered in 2015. “If you try to deceive the United States, then you will pay a heavy price,” declared U.S. Attorney General Jeff Sessions.

Xerox’s current board and management team, which includes CEO Jeff Jacobson, will stay in place after a settlement agreement it had reached with dissenting shareholders to oust them expired. Meanwhile, the New York Supreme Court held a hearing on Thursday on an objection to the Xerox (NYSE:XRX)-Fujifilm (OTCPK:FUJIY) merger, but held off on a decision and did not schedule a follow-up hearing.

AT&T told a federal judge late Thursday it should reject any request by the DOJ forcing it to divest DirecTV or Turner for approval of its Time Warner (NYSE:TWX) deal, stating it “would destroy the very consumer value this merger is designed to unlock.” The DOJ has demanded divestitures, arguing that AT&T (NYSE:T) would have the ability to raise prices on Time Warner content for pay TV rivals.

Making a statement… Allianz (OTCPK:AZSEY), Europe’s biggest insurance company, has pledged to stop selling policies to coal companies in an effort to cut back on the use of fossil fuels. Tobacco firm Altria (NYSE:MO) and scope maker Nikon (OTCPK:NINOY) are also staying away from the NRA’s annual meeting in Dallas this weekend, which is expected to draw 80,000 visitors.

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