"Morning Memo" begins below this "NOTE for NEWCOMERS" to "Morning Memo"...... Each
morning, we post a short bullet-point list of noteworthy events,
data, etc that find their way into the assessment of global markets.
It's far from complete and is not meant to be an exhaustive
reconciliation of all things that could possibly impact stocks, bonds,
currencies and commodities! Rather, it's best viewed as a cryptic memo
of "highlights", noteworthy items that took place in Asia, European and
US hours.....and color-coded 'Red' for seemingly negative impact on equity markets, 'Green' for positive.
This
will also serve as a useful review mechanism, as scrolling through the
series of "Morning Memo" posts over time ought to summarily highlight
what generally drove price action.
We hope you find this useful and informative....and as always, that you'll share feedback!!
5:30am, ET....
- Asia markets...mixed after Wednesday's post Fed Minutes sell-off in the US which took the Dow down over 100 points. Good PMI data in China helped offset some of the Fed tapering pressures.
- China..HSBC/Markit prelim PMI data stronger than expected @ 50.1 (a four month high) vs 48 exp. PMI reading rebounds from July's 11-mth low of 47.7.
- Aussie Dollar, after suffering on Wed re Fed tapering fears, rebounded off the day's lows on China data. The USD had been generally strong on Wed due to Fed tapering talk in the Fed Minutes.
- Asian currencies...downside pressure continues. Indonesia's Rupiah drops hard in early hours though recovered a bit off the lows. India's Rupee and Thailand's Bhat too under pressure.
- Philippines...after a being closed for a three day holiday, the equity market opens down over 6%.
- Europe..trading higher on stronger than expected Markit Prelim Composite PMI data, hitting 51.7 in August, a 26-month high. The Manufacturing component also hit a 26-month high. Strength in Germany leads the pack.
- Bonds...yields generally higher in Europe on the heels of yesterday's post Fed Minutes sell-off in US Tsys which pushed 10yr Trsys closer to 3%, currently 2.92%
- US..Jobless Claims...higher than expected @ 336k vs 329 exp, BUT 4-week moving average lowest since '07!! (chart from CalculatedRiskBlog.com)
- more later...
Please continue to visit Soos Global Market Musings for updates.
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(Please note:
This article is solely meant to be thought provoking and is not in any
way meant to be personal investment advice. Each investor is obligated
to opine and decide for themselves as to the appropriateness of anything
said in this article to their unique financial profile, risk tolerances
and portfolio goals).
Disclaimer: Please read and consider important information related to all communication made by Soos Global on this site by clicking here.
Additional Disclaimer:
currently long many stocks/ETFs. Positions may change at any time without notice.
"Morning Memo" begins below this "NOTE for NEWCOMERS" to "Morning Memo"...... Each
morning, we post a short bullet-point list of noteworthy events,
data, etc that find their way into the assessment of global markets.
It's far from complete and is not meant to be an exhaustive
reconciliation of all things that could possibly impact stocks, bonds,
currencies and commodities! Rather, it's best viewed as a cryptic memo
of "highlights", noteworthy items that took place in Asia, European and
US hours.....and color-coded 'Red' for seemingly negative impact on equity markets, 'Green' for positive.
This
will also serve as a useful review mechanism, as scrolling through the
series of "Morning Memo" posts over time ought to summarily highlight
what generally drove price action.
We hope you find this useful and informative....and as always, that you'll share feedback!!
5:30am, ET....
- Asia markets mixed ahead of this afternoon's (2pm ET) release of minutes from the last Fed meeting. Nervousness over imminent tapering has hammered many currencies in the region along with their stock markets in recent days. Indonesia's equities, after massive loses in the past few days, rebounded 1.6% on stronger than expected consumer confidence data. Nikkei and Shanghai up slightly, others lower. Action overall muted ahead of the Fed.
- Japan's nuclear regulatory agency is reported to be considering raising the Fukushima plant leak status to 'serious' level 3, from level 1 (8 point scale). (Editorial comment: Notable clearly for Tepco shares, but also for the ongoing concern this creates over nuclear power in Japan and elsewhere).
- India's markets rebounded on a move by the Reserve Bank of India to inject liquidity into the system w/open market operations. Recent moves to tighten rates in defense of the falling Rupee have hit holders of long bonds with big mark-to-market losses (especially banks). To relieve some pressure on banks, the RBI will buy some securities in the open market and has made some other bank related relief moves. Markets responded positively.
- Thailand..kept rates unched @ 2.5% despite data earlier this week showing the economy formally in recession. The Bank of Thailand said they're concerned about rising levels of household debt (editorial note: private credit growth throughout Asia is something to keep an eye on). They've also experienced weakness in the Bhat and strong loan growth.
- Europe markets opened mixed but mostly lower in muted mode ahead of the Fed.
- Mexico...yesterday reported Q2 growth contracted, first time in four years, largely due to slowing exports to the US and lower government spending.
- US Existing Home Sales better than expected but lower than prev month.
-
- Fed Minutes released: minutes show broad agreement with the Bernanke plan of contingent tapering, likely to begin with improving economic growth as we approach yearend, but no new wording on imminent moves. Equities initial response was to sell off. Summary of minutes on MarketWatch and on CalculatedRiskBlog.
- more later...
Please continue to visit Soos Global Market Musings for updates.
(Sign up to "Follow by Email"! And share with others!)
(Please note:
This article is solely meant to be thought provoking and is not in any
way meant to be personal investment advice. Each investor is obligated
to opine and decide for themselves as to the appropriateness of anything
said in this article to their unique financial profile, risk tolerances
and portfolio goals).
Disclaimer: Please read and consider important information related to all communication made by Soos Global on this site by clicking here.
Additional Disclaimer:
currently long many stocks/ETFs. Positions may change at any time without notice.
ICYMI....yesterday we posted a piece on Q2 earnings called: "Q2 Earnings: Factoids & Takeaways". Please take a look and share thoughts! Thanks!!
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
"Morning Memo" begins below this "NOTE for NEWCOMERS" to "Morning Memo"...... Each
morning, we post a short bullet-point list of noteworthy events,
data, etc that find their way into the assessment of global markets.
It's far from complete and is not meant to be an exhaustive
reconciliation of all things that could possibly impact stocks, bonds,
currencies and commodities! Rather, it's best viewed as a cryptic memo
of "highlights", noteworthy items that took place in Asia, European and
US hours.....and color-coded 'Red' for seemingly negative impact on equity markets, 'Green' for positive.
This
will also serve as a useful review mechanism, as scrolling through the
series of "Morning Memo" posts over time ought to summarily highlight
what generally drove price action.
We hope you find this useful and informative....and as always, that you'll share feedback!!
5:30am, ET....
- Bad night for Asian stocks and currencies! Equity markets meaningfully lower: Nikkei down 2.6%, Heng Seng down 2.2%, and Indonesia down another 4% after Monday's 5+% drop.
- Asian currencies continue to melt down on fears of Fed tapering which is causing capital to 'fly' from EM countries in search of higher yields in rising interest rate environments in the US and other developed markets.
- Indonesia's worse than expected Current Account deficit pummeled the currency, down almost 2% today, hitting levels not seen since '09.
- India's Rupee continues its fall!
- European markets catch the downward spiral contagion! Markets open lower across the board. Fed tapering is the term de jour (yet again).
- US..late yesterday, Dept of Justice announces another probe into JPMorgan, this time involving energy trading. Earlier yesterday, JPMorgan was under the spotlight for allegations that they hired children of influential Chinese leaders as a way to garner business in China.
- US...Fed urges banks to raise more capital for times of stress.
- (Editorial note: as an aside, I wrote a piece a long time ago describing the US banks as experiencing a version of the arcade game called "Whack-a-Mole"! Every time they pick up their heads in search of light and fresh air, they get hammered for something new. That said, I'm not condoning, in any way, activity that is untoward, but the constant barrage of assaults on banks from all directions is notable).
- more later....
Please continue to visit Soos Global Market Musings for updates.
(Sign up to "Follow by Email"! And share with others!)
(Please note:
This article is solely meant to be thought provoking and is not in any
way meant to be personal investment advice. Each investor is obligated
to opine and decide for themselves as to the appropriateness of anything
said in this article to their unique financial profile, risk tolerances
and portfolio goals).
Disclaimer: Please read and consider important information related to all communication made by Soos Global on this site by clicking here.
Additional Disclaimer:
currently long many stocks/ETFs. Positions may change at any time without notice.
With Q2 earnings season almost complete, it's worth looking at some of the results and considering market implications. The tweet below from FactSet is chock full of charts that slice and dice the earnings, revenue and guidance data.
In addition, this link to S&Ps "Lookout Report" has their version of the earnings analysis. (Note that they appear to use different methodologies in calculating the data. Sometimes that's due to a focus on different levels of the earnings reports such as 'operating' vs 'net', and sometimes it's due to the year-over-year comparison of companies in the S&P, some being there today but not a year ago, and vice versa. There might also be some other accounting details that differ, but in general, many themes resonate from both reports).
Below are a mixture of factoids and personal takeaways regarding the S&P 500 companies who have reported so far, in no particular order:
- Roughly 70% have beat earnings estimates.
- Roughly 50% have beat revenue estimates.
- Cynics might say (me included) that 'estimates' had already been lowered so much that the bar to beat was already quite low, so 'beating' is not such a great feat.
- Non-cynics would have to admit that despite the 'beats', the picture seems clear that revenue growth is underwhelming and according to S&P with regard to revenue growth rate, it is
"currently still in negative territory at -0.56%, which would be the first negative revenue growth rate we've seen since third quarter 2009"
- Earnings, therefore, seem to be benefiting from continued cost-cutting and increasingly lean & mean operating leverage.
- How about the forecast for Q3? Good question. FactSet's data shows roughly 80% of the companies that have proffered forward guidance were negative, 20% positive. S&P's take is somewhat different: they have roughly 60% negative, 20% positive, the rest in line. Either way, it appears that there's agreement on the fact that more companies have reported negative guidance for Q3 by a wide margin over those who've reported positive guidance.
- Interestingly, S&P notes that the ratio of negative to positive is lower than it's been for some time, which they view as good news for Q3 earnings! To quote S&P:
This produces a negative-to-positive ratio of 2.3, meaning that for every two or so companies that have issued negative guidance, one has issued positive guidance. This is below the historical average of 2.4, and much lower than the trailing four-quarter average of 3.6, a positive sign for future earnings performance. The last time the warning ratio was this low was in first quarter 2012.
- My takeaway, however, is not as sanguine. While the second half of 2013 is seen by many companies and analysts as being better than the first half, it's still apparent that earnings outlooks suggest significant headwinds to earnings growth! Despite this, however, keep in mind, that until recent days of stock market sell-offs, which btw were largely led by 'tapering' fears of less central bank stimulus and in turn, higher rates, most stock market averages in the US were hitting new record highs!
- Finally, forward EPS and P/E estimates appear to be at higher levels than such estimates have been historically. This would suggest that analysts are still quite optimistic about the second half of the year. The FactSet charts (on page 16 of their report) show them to be only slightly above longer term averages, not a levels that are even close to historical high points! Furthermore, the FactSet charts on page 17 show that trailing 12-month P/Es are actually in line with 10-yr average levels (roughly 15.7) and not at levels in the higher teens that existed just before prior stock market selloffs. So based on these stats, many are arguing that stocks still have room to the upside. This kind of thinking was articulated in the following piece by John Authers of The Financial Times along w/the follow-on commentary in which its noted that most indicators of equity valuations still show stocks to be fairly to cheaply priced with the exception of Shiller's cyclically adjusted P/E ratios.
- Bottom line on earnings? The overall message is far from euphoric. Plenty of headwinds are lined up to challenge future earnings growth, yet optimism seems to abound for accelerating growth in the second half of 2013. Is the tug of war between those dynamics playing out in recent market malaise? Or has recent equity market weakness not yet factored in potential earnings woes later in the year?
- As I've indicated in several recent posts and in our last Newsletter, I believe that markets are seemingly myopically focused on 'tapering', concluding that a lessening of the Fed's stimulus means immediate trouble for stocks. That might be true over the longer term if we were to have a protracted period of much higher interest rates, but the Fed has remained steadfast in its message that tapering will only start to occur once the economy is revving and running on its own power, without the need for all of the Fed's tail-winds. A more convincing argument, in my mind, for being negative on stocks at this time would be to focus more on the relative gloom that has been expressed by a number of S&P 500 companies in their forward guidance. Add to that the issues of Washington's upcoming negotiations on the debt ceiling, sequestration impacts, Middle East "Arab Winter", China's de-bubbling efforts, and Emerging Market countries forced into policy dilemmas as to whether to defend their currencies and fight inflation or to stimulate their economies, and you have a potential formula for a currently overly optimistic earnings valuation in equities. Admittedly, recent equity market selloffs have re-priced some companies to levels that seems to be more realistic valuations, but on the whole, defensive portfolio positioning would still seem worthy of consideration.
Stay tuned for more....
"Morning Memo" begins below this "NOTE for NEWCOMERS" to "Morning Memo"...... Each
morning, we post a short bullet-point list of noteworthy events,
data, etc that find their way into the assessment of global markets.
It's far from complete and is not meant to be an exhaustive
reconciliation of all things that could possibly impact stocks, bonds,
currencies and commodities! Rather, it's best viewed as a cryptic memo
of "highlights", noteworthy items that took place in Asia, European and
US hours.....and color-coded 'Red' for seemingly negative impact on equity markets, 'Green' for positive.
This
will also serve as a useful review mechanism, as scrolling through the
series of "Morning Memo" posts over time ought to summarily highlight
what generally drove price action.
We hope you find this useful and informative....and as always, that you'll share feedback!!
5:30am, ET....
- Asia markets mixed, but generally lower. Japan and China slightly higher, but others lower on fears of Fed tapering (Fed minutes from last meeting coming out this week), higher bond yields and disappointing local economic news.
- Indonesia...market tanks close to 5% on news of widening current account deficit.
- India...drops over 2% on continuing concerns that gov't policies on capital controls and rates are not working. Rupee remains weak raising concerns about inflation due to higher import prices.
- Thailand...disappointing GDP, contracting in Q2 by 0.3% q/q, following Q1's contraction of 1.3%q/q, (technically, two quarter contraction = a 'recession') hit stocks, down 2.6%.
- China..last Friday's 'flash spike' in the Shanghai was attributed to a 'fat finger' error putting in an out-sized trade. Separately, weekend data on house prices were positive, rising in 62 of 70 cities.
- Japan...trade deficit widens despite stronger exports, as the imports outpaced.
- Europe..opens lower on all of the above in Asia, and following last week's general concerns about higher bond yields, tapering, and ahead of this Wednesday's release of Fed minutes.
- One more thought on Asia: currency depreciation since May's tapering talk has been notable, and as cited here many times, putting countries like India, Indonesia and others in a position to choose between various policy responses to multiple problems. This chart from the Financial Times' fastFT taken from Capital Economics is worth considering:
-
- more later....
Please continue to visit Soos Global Market Musings for updates.
(Sign up to "Follow by Email"! And share with others!)
(Please note:
This article is solely meant to be thought provoking and is not in any
way meant to be personal investment advice. Each investor is obligated
to opine and decide for themselves as to the appropriateness of anything
said in this article to their unique financial profile, risk tolerances
and portfolio goals).
Disclaimer: Please read and consider important information related to all communication made by Soos Global on this site by clicking here.
Additional Disclaimer:
currently long many stocks/ETFs. Positions may change at any time without notice.
"Morning Memo" begins below this "NOTE for NEWCOMERS" to "Morning Memo"...... Each
morning, we post a short bullet-point list of noteworthy events,
data, etc that find their way into the assessment of global markets.
It's far from complete and is not meant to be an exhaustive
reconciliation of all things that could possibly impact stocks, bonds,
currencies and commodities! Rather, it's best viewed as a cryptic memo
of "highlights", noteworthy items that took place in Asia, European and
US hours.....and color-coded 'Red' for seemingly negative impact on equity markets, 'Green' for positive.
This
will also serve as a useful review mechanism, as scrolling through the
series of "Morning Memo" posts over time ought to summarily highlight
what generally drove price action.
We hope you find this useful and informative....and as always, that you'll share feedback!!
5:30am, ET....
- Yesterday's 225 pt sell off in the US Dow, carried through to Asia. Asian markets ended generally lower, though off the worst levels of the day, and after some drama in China's Shanghai Index where they experienced the opposite of a 'flash crash' where the market went from down 1% to up 5.8% in moments! The market reverted and closed down 0.6% on the day. Rumors cited a large trade error.
- Asian markets were generally up on the week despite the end-of-week gloom around the world: Shanghai up 0.8%, Heng Seng up 3.3%, Australia 1.2% and Nikkei 0.3%.
- New Zealand market was temporarily closed on word of a powerful earthquake.
- India...Rupee hits new lows. Stocks took a beating. Market was reacting negatively to new measures aimed at limiting capital outflows.
- Eurozone...inflation was in line @ 1.6%, well below the ECB's 2% target.
- Eurozone..trade surplus widened on strong exports out of Germany. Chart from The Financial Times' fastFT:
- Egypt...major protests expected after today's prayer services, after major bloodshed this week and after Obama's cancellation of military exercises w/Egypt
- US..Housing Starts and Permits essentially in line w/expectations; Charts from CalculatedRiskBlog.com :
- Michigan Consumer Confidence..worse than expected!
Please continue to visit Soos Global Market Musings for updates.
(Sign up to "Follow by Email"! And share with others!)
(Please note:
This article is solely meant to be thought provoking and is not in any
way meant to be personal investment advice. Each investor is obligated
to opine and decide for themselves as to the appropriateness of anything
said in this article to their unique financial profile, risk tolerances
and portfolio goals).
Disclaimer: Please read and consider important information related to all communication made by Soos Global on this site by clicking here.
Additional Disclaimer:
currently long many stocks/ETFs. Positions may change at any time without notice.
"Morning Memo" begins below this "NOTE for NEWCOMERS" to "Morning Memo"...... Each
morning, we post a short bullet-point list of noteworthy events,
data, etc that find their way into the assessment of global markets.
It's far from complete and is not meant to be an exhaustive
reconciliation of all things that could possibly impact stocks, bonds,
currencies and commodities! Rather, it's best viewed as a cryptic memo
of "highlights", noteworthy items that took place in Asia, European and
US hours.....and color-coded 'Red' for seemingly negative impact on equity markets, 'Green' for positive.
This
will also serve as a useful review mechanism, as scrolling through the
series of "Morning Memo" posts over time ought to summarily highlight
what generally drove price action.
We hope you find this useful and informative....and as always, that you'll share feedback!!
5:30am, ET....
- Asia lower, led by Nikkei, off over 2%, on comments by the Finance Minister that PM Abe was in fact NOT considering a corporate tax rate cut, as had been rumored in recent days and that rallied the Nikkei 4%. The Yen strengthened on the comments and markets headed lower.
- Japan..gov't upgraded economic outlook, citing an end to deflation is approaching.
- Weak US market yesterday weighed on markets in Asia, hurt further by Cisco's earnings announcement that fell short and came along w/big layoffs (4,000 jobs) and a picture of the global economy that is "challenging and inconsistent".
- Egypt unrest, violence and deaths have raised market angst, pushing oil prices higher.
- Indonesia...central bank leaves rates unched @ 6.5%, despite recent signs of upticks in inflation and weak Rupiah. Most expectations were for another rate hike following June's hike. GDP @ 5.8% is lowest since '09. (editorial note: prime example of EM country facing policy dilemma: slow growth, weakening currency, raising inflation. Policy response in June was to attack inflation and weak fx. Today's non-move, may be evidence of focus on growth. Dilemma persists here and elsewhere in EM).
- European markets down at the open.
- Bond yields have risen in recent days w/10yr Bunds piercing the 1.80% level, and US 10s @ 2.7%. These were earlier levels. Post US data, yields climbed further, rising close to 10bps to 2.80%!!
- UK Retail Sales much stronger than expected in July. Sterling rallies.
- US..Jobless Claims fall 15k to 320k a bigger drop than expected, CPI in line @ 0.2% and ex-food & energy also @ 0.2%, and NY Empire State mftg index drops to 8.2 fr 9.4, though expectations were for 6.0. Collectively the data shows still benign inflation environment with leveling off factory activity and improving job situation, keeping alive the notion that Fed "tapering" will begin in September or not long after that. Stock futures responded negatively to the data.
- more later....
Please continue to visit Soos Global Market Musings for updates.
(Sign up to "Follow by Email"! And share with others!)
(Please note:
This article is solely meant to be thought provoking and is not in any
way meant to be personal investment advice. Each investor is obligated
to opine and decide for themselves as to the appropriateness of anything
said in this article to their unique financial profile, risk tolerances
and portfolio goals).
Disclaimer: Please read and consider important information related to all communication made by Soos Global on this site by clicking here.
Additional Disclaimer:
currently long many stocks/ETFs. Positions may change at any time without notice.
