by Eli Wright
Directionless markets continue to their sideways chop as traders await results on a variety of political fronts including the next court ruling on President Trump's proposed immigration and travel ban; upcoming deliberations in the UK's House of Lords after the Article 50 bill was resoundingly passed by parliament's lower chamber, moving Brexit forward; looming French and German elections; and the most recent coming apart of Greece's EU bailout, rekindling talk of the possibility of Grexit.
A decision from the three-judge panel of the Ninth Circuit Court of Appeals in San Francisco which heard oral arguments Tuesday evening for and against the ban, could come before the end of this week. Whatever the verdict, it's likely that the US's Supreme Court will see this case next.
In the UK yesterday the House of Commons voted 494 to 122 in favor of giving Prime Minister Theresa May the authority to trigger Article 50 by the end of March. The House of Lords will begin deliberations on February 20th.
The IMF and Germany are split on whether increasing Greek austerity measures will finally assuage Greek debt and save the Eurozone. An IMF report reviewing the results of the 2012 and 2015 Greek bailouts suggests that unless and until the Greek electorate and the country's politicians take the matter in hand rather than relying on EU funds. Without additional debt relief, Greece will face a tough road ahead.
The USD moved higher today in Asian trade, but was sold off in the European morning.
Safe-haven commodities are higher today and equity markets are mixed. Oil and gasoline are up after yesterday’s US inventory reports.
Overnight in Asia, the Shanghai Composite closed up 0.53% at 3,183 while the Hang Seng inched 0.07% higher to 23,502. The Nikkei fell 0.53%, to 18,907.67.
In Europe, the FTSE has ticked up 0.32% to 7,212.05; the DAX is up 0.74% at 11,628.50; and the Stoxx 50 is 0.88% higher, at 3,266.50.
On Wall Street yesterday, the Dow lost 0.18% to close at 20,054.34. The S&P 500 was relatively flat, gaining just 0.07% to close at 2,294.67.The NASDAQ notched a new record high, closing up 0.15% at 5,682.45.
All three major US indices are slightly higher in pre-market trading: the Dow is up 0.04%; the S&P is up 0.07%; and the NASDAQ is up 0.08%.
The US 2-year Treasury yield has slipped to 1.153%, but 10- and 30-year yields are both up, to 2.357% and 2.982% respectively. Based on the differential between the current yield on the US 10-Y note versus the UK's 10-year gilt yield, currently at 1.242, it appears that bond markets are currently signaling greater stress about the economic fallout from Brexit compared to any worries traders may have about the future affect of Trumponomics.
Forex
The Dollar Index is down 0.03% this morning, at 100.26.
The euro is down 0.21% to 1.0675, pressured by political concerns as well as. The euro is also being weighed down by this morning's disappointing December exports and trade balance releases out of Germany.
Sterling is currently up 0.14%, to 1.2559. Comments by Bank of England Governor Mark Carney later today could shed light on the outlook for Britain’s monetary policy. The cable could head higher, to 1.265, on optimistic guidance; a negative outlook could push the pound lower, to 1.24.
The Japanese yen, which has been moving in a narrow range around 112 during the course of the week, is 0.37% higher today, at 112.35, ahead of Trump’s meeting with Japanese Prime Minister Shinzo Abe in Washington D.C. tomorrow, followed by a weekend visit to Trump's private Mar-a-Lago resort in Florida.
Bitcoin is up 0.85% to $1,063. The Chinese central bank met with additional Bitcoin exchanges yesterday, warning them to refrain from activities such as margin lending or enabling money laundering. After a similar meeting with the country’s three biggest Bitcoin exchanges last month, all three exchanges endorsed trading fees. If the smaller exchanges censured yesterday follow suit, Bitcoin trading volume and volatility could decrease significantly.
Commodities
Crude oil is up 0.76%, to $52.74 while Brent is up 0.71%, to $55.51. Despite yesterday’s EIA report showing US stockpiles increasing by 13.83M—11 million more than expected—it appears markets may have already priced in the "surprise" after Tuesday’s API report showed a similar surge.
Though some analysts remain bullish oil, even with OPEC's current strong production cut compliance, others see a number of factors that could still result in a price correction. No matter the sentiment, it’s impossible to ignore rising US stockpiles, which are now 57% higher than their 10-year average for this time of year.
Source: Bespoke Investment Group
Gasoline prices are up 0.8%, to $1.566, after yesterday’s inventory report—which had anticipated an increase of 1.07M—showed a decline of 869,000. Much like oil, however, gasoline stockpiles are at historically high levels – approximately 15% higher than the average since 1990.
Source: Bespoke Investment Group
Precious metals have moved to three-month highs. Gold is up 0.3%, to $1,243.25, while silver is up 0.38%, to $17.773.
Copper is down 0.13%, to $2.663. The red metal could fall to $2.60. However, significant upside exists since workers at BHP Billiton's (NYSE:BHP) Escondida mine in Chile are digging in for what they say could be a “long and hard strike.” Escondida is the world’s largest copper mine, responsible for five percent of global copper output, and a work disruption could hurt global supplies. Resistance could get tested at $2.99, a point last reached in November, 2014.
Shares of BHP Billiton slipped 1.23% yesterday and are down a further 0.9% in pre-market trading.
Stocks
More than 200 companies report quarterly earnings today, including:
- Coca-Cola (NYSE:KO) is expected to report Q4 2016 earnings per share of $0.36 on revenue of $9.24 billion
- CVS (NYSE:CVS), which provides integrated pharmacy health care services, is scheduled to report Q4 2016 earnings of $1.67 per share on revenue of $46.65 billion
- NVIDIA (NASDAQ:NVDA), the best-performing stock of 2016, is expected to report Q4 2016 EPS of $0.83 on $2.11 billion in revenue
- TransCanada (NYSE:TRP), an energy infrastructure company, and one of the beneficiaries of the revived Keystone XL Pipeline project, is slated to report Q4 2016 earnings of $0.55 per share on revenue of $3.4 billion
- Kellogg's (NYSE:K),the breakfast cereals and snack manufacturer, is expected to report Q4 2016 earnings per share of $0.85 on $3.11 billion in revenue
- Expedia (NASDAQ:EXPE), an online travel company which also operates Travelocity, Orbitz, and Hotwire, is expected to report Q4 2016 earnings per share of $1.37 on revenue of $2.08 billion
- Western Union (NYSE:WU), which provides money transfer services, is slated to report Q4 2016 EPS of $0.43 on $1.37 billion in revenue
- Viacom (NASDAQ:VIA), the world’s sixth-largest broadcasting and cable company in terms of revenue, is expected to report Q1 2017 earnings of $0.84 on revenue of $3.27 billion
- Twitter (NYSE:TWTR), the social media company whose service is much favored by Mr. Trump, is slated to report Q4 2016 EPS of $0.11 on $739 million in revenue