Month: April 2016

Every several years, a CEO is forced to “resign” after an “inappropriate personal relationship” with a coworker is uncovered (usually at the behest of the coworker). Three years ago it cost the job of Lockheed Martin’s income CEO. Moments ago it took down Darren Huston, the CEO of Priceline who has resigned from the Company, effective immediately.

This was the reason for the resignation, according to the press release:

Mr. Huston resigned following an investigation overseen by independent members of the Board of Directors of the facts and circumstances surrounding a personal relationship that Mr. Huston had with an employee of the Company who was not under his direct supervision.  The investigation determined that Mr. Huston had acted contrary to the Company’s Code of Conduct and had engaged in activities inconsistent with the Board’s expectations for executive conduct, which Mr. Huston acknowledged and for which he expressed regret.

This traditionally is the press release equivalent of being accused of and caught cheating.

The Company also announced that current Booking.com President and Chief Operating Officer Gillian Tans has been named Chief Executive Officer of Booking.com, a Priceline Group subsidiary, replacing Mr. Huston who also served as CEO of this business unit.  Ms. Tans has been a leader at the company since 2002, most recently serving as Booking.com’s President since January 2015 and Chief Operating Officer since September 2011, responsible for leading the development and execution of Booking.com’s business strategy and directly overseeing all aspects of the brand’s operations.

What else:

the Company has appointed former CEO and current Chairman Jeffery H. Boyd as Interim Chief Executive Officer and President of The Priceline Group while the Board conducts a search to name a successor. Mr. Boyd is a 16-year veteran of The Priceline Group, previously serving as President and Chief Executive Officer from 2002 to 2013, during which time he led the Company through a period of significant global expansion and growth in stockholder value.

 

James M. Guyette, Lead Independent Director, said, “I am satisfied with the Board’s thorough review of this issue.  The performance of the business under Darren has been strong, and the Company is very well-positioned to continue executing on its strategy for growth.  Jeff is deeply familiar with the Company’s strategy and leadership team, which consists of highly accomplished entrepreneurs and seasoned professional executives with long-tenure in the business.  We are confident the Company is in strong hands while we conduct a search for a new CEO.”

Which is sad: a far more appropriate replacement CEO would have been the following.

via http://ift.tt/1NWqJ7r Tyler Durden

It’s official: as of today the bull market that has been mocked as fake, doomed and history’s most-hated just earned a new title: the second-longest ever. And it only took $14 trillion in central bank liquidity, a global, coordinated central bank “put”, central banks purchases of Treasuries, MBS, ETFs and corporate bonds,  and nearly 700 rate cuts in the past 7 years to achieve it.

The stock market advance that started seven weeks after Barack Obama’s first inauguration, and specifically with Obama’s historic March 3, 2009 remark in which he said that “what you’re now seeing is, profit and earning ratios are starting to get to the point where buying stocks is a potentially good deal if you’ve got a long term perspective on it,” has now lasted 2,607 days. 

Since then it has dodged and waved through three 10% drops in the last 19 months while avoiding the 20% decline that denotes a bear market. That matches a rally from 1949 to 1956 which straddled the presidencies of Harry Truman and Dwight D. Eisenhower. Only the dot-com bubble of the 1990s lasted longer at 3,452 days.

That means if central banks wish to inject another $14 trillion or so in liquidity to extend the duration of this “most fate, most hated” bull “market”, they will need to last another 845 days, or roughly another two and a half years, to make the current rally the longest ever without a bear market.

AS Bloomberg writes it may be an uphill battle: “the rally is showing signs of fatigue: for the first time its rolling 12-month return is negative, and companies in the Standard & Poor’s 500 Index are reporting their worst profits in six years. At the same time, economists are steadily downgrading their growth forecasts, the international outlook is much worse and investors are pulling money from equities at an unprecedented rate.”

However, as Bloomberg also writes: “The Federal Reserve and other central banks have shown time and again that they stand ready to inject more cash into the financial system at the first sign of market turbulence.“

Just in case anyone wonders why it is the “most-hated rally” (which it isn’t as participation, if only from companies buying back their stock, is at an all time high).

Some are puzzled by the general reluctance to embrace central planning: “I don’t remember another post-war bull market that was this fearful, chronically and persistently,” said Jim Paulsen, the Minneapolis-based chief investment strategist at Wells Capital Management Inc., which oversees $337 billion. Investors are “forever prepared for the end of the world, but reluctantly being dragged back into to equities.”

Perhaps Paulsen should thank Yellen et al. company for disconnecting the world’s once upon a time most forward looking, most efficient discounting mechanism from all fundamentals.  And yes, that’s a fact: the New Yorker writer John Brooks’ chronicle of the 1950s bull market is called “The Seven Fat Years,” a title few people would apply to America since the financial crisis. In truth, the signature characteristic of the Obama bull market has been its ability to soar above an economy going nowhere, returning 3.7 percent a quarter on average since March 2009, compared with a 0.9 percent gain in gross domestic product. That gap is the widest ever.

Meanwhile, despite relentless central bank intervention, the rally may be topping out. Stocks are stuck in their longest period of stasis since the rally began, going 11 months without posting a 52-week high. Fallow periods lasting longer than 12 months are poison to chart analysts, who view them as an indication of waning momentum over the long term. In the past, deep losses have not only signaled the end of bull markets but also foretold recessions.

As Bloomberg writes, a study by Leuthold Weeden Capital Management LLC showed that since World War II, the S&P 500’s rolling 12-month returns adjusted for inflation have averaged minus 9 percent at the economy’s peak. The measure reached minus 9.6 percent in February.

Another curious characteristic of the “bull market” – it’s been driven by… selling?

Americans have been sellers of equities since 2007, slashing stock holdings by $2 trillion, data compiled by Fundstrat Global Advisors LLC show. While the pace of the liquidation is unprecedented since 1956, that represents a huge pool of potential demand, according to Tom Lee, the firm’s managing partner. Investors’ exodus during the decade that started in 1979, the year when BusinessWeek featured a cover story titled “The Death of Equities,” preceded a 400 percent rally in the 1990s.

 

* * *

So what happens next? Well, at the end of the day just two things matter: interest rates and corporate profits. While central banks are firmly determined to push rates as low as possible to expand multiples to record levels, they are having trouble with profits. Indeed, Bloomberg concludes that it may all boil down to earnings. More importantly, corporate earnings are in the midst of the fourth consecutive quarter of declines as weakness from energy spread to all but three industries. The trajectory of profits will determine the path of stocks going forward, according to David Joy, the Boston-based chief market strategist at Ameriprise Financial. “A lot of reasons to hate this expansion and bull market, and yet it keeps on going,” said Joy. “Certainly most of the money has been made. Certainly we’re closer to the end than the beginning. There is probably some chance that we see higher prices down the road, but all depends on earnings.”

Golf clap central bankers.

* * *

Finally, here are some thoughts on what happens next and can the second longest bull market become the longest ever, courtesy of BofA’s Michael Hartnett.

The Path from No. 2 to No. 1

• First, the last years of the longest ever equity bull market (i.e. the late-90s) were marked by cross-asset volatility and a bubble; that remains a plausible risk scenario.

• Second, this bull market is trading more like the mid-50s bull market which slowly exhausted itself and then reversed for a year or two as the investment cycle moved to “overheating” in 1956-57 and then brief “recession” in 1956-57. Note how asset markets have struggled to produce upside since the era of excess liquidity came to an end and/or illustrates how low expected returns of bills, bonds, equities, and indeed all risk assets have become thanks to “financial repression”. The total return from a portfolio of equities, bonds, commodities, cash split percentage-wise 50/35/10/5 from the secular lows of 2009 to the end of QE3 in October 2014 of an investment of $100 would have grown to $198. Since the end of QE3 the same portfolio would have fallen 3.4% to a value of $192. Note this also shows a diminishing “wealth effect” for the economy, another reason to be long Main Street, short Wall Street.

• Third, another factor behind the fatigue is earnings, which as the following chart shows, have also faded in recent quarters (even excluding the energy sector). Our shift in recent years from “raging bull” to “sitting bull” to “volatility bull” reflects low probability of the Higher EPS & Lower Rates in coming quarters.

via http://ift.tt/1pJvfjq Tyler Durden

• Markets Get the Worst Kind of Kuroda Surprise as BOJ Stands Pat (BBG)
• Bank of Japan brushes aside calls for more easing despite price falls (WSJ)
• Ford Profit Surges to Record as Sales of SUVs, F-150 Gain Speed (BBG)
• Valeant Pharmaceuticals to Make Sweeping Changes to Board (WSJ)
• Trump breaks taboos, attacks Clinton on gender issue (Reuters)
• Donald Trump Mocks Cruz: ‘What’s He Doing Picking Vice Presidents? (WSJ)
• Wealthy, educated voters fuel Trump’s East Coast sweep (Reuters)
• Dow Chemical Beats Profit Estimates as Margins Widen on Cuts (BBG)
• ECB should raise rates ‘the second inflation rises again’: BuBa (Reuters)
• ECB’s Nowotny can’t say exactly when inflation will pick up (Reuters)
• Puerto Rico Risks Historic Default as Congress Chooses Inaction (BBG)
• Protesters Have a Long History of Crashing Buffett’s Annual Party (BBG)
• SpaceX breaks Boeing-Lockheed monopoly on military space launches (Reuters)
• Venezuela Needs Oil’s Rally More Than Anyone as Economy Teeters (BBG)
• Ex-Im Bank Faces New Hurdle in Congress Over Board Nominees (WSJ)
• Currency Trading’s 20% Drop Raises Specter of Flash-Crash Future (BBG)
• Sanofi Makes $9.3 Billion Bid for Medivation (WSJ)
• Elon Musk Supports His Business Empire With Unusual Financial Moves (WSJ)
• This CEO’s $148 Million in Pay May Rank Him No. 1 for 2015 (BBG)

 

Bulletin Headline Summary

FT

German utilities will be asked to pay 23.3 billion euros ($26.38 billion) into a state fund to cover the costs of nuclear waste storage, members of a nuclear commission tasked with securing funds for the country’s nuclear exit said on Wednesday.

Billionaire financier Andre Esteves, who was ousted as head of Brazil’s Grupo BTG Pactual SA in November after his arrest in a spiraling corruption probe, has returned to Latin America’s largest independent investment bank in a senior advisory role.

Qatar Airways has raised its stake in British Airways owner International Airlines Group to under 12 percent from 9.99 percent, Chief Executive Akbar al-Baker said on Wednesday, without specifying the exact size of Qatar Airways’ holding or when it increased it.

 

Britain

The Times

Dominic Chappell, the twice-bankrupt former racing driver who owned retailer BHS for only a year before it collapsed into administration, is trying to buy it back with the help of American investors. (http://bit.ly/1SLcLtg)

Naz Shah, a Labour MP from Bradford West, who backed calls to transport all Israelis to America, has been suspended by Jeremy Corbyn after a revolt from within his party. (http://bit.ly/1NBiq6c)

The Guardian

Mounting urgency has returned to Greece with the country’s financial predicament igniting fears of a re-run of last summer’s nail-biting drama. Rejecting a Greek request for an extraordinary EU summit to discuss its troubled bailout programme, European Council President Donald Tusk instead urged euro zone finance ministers to resume talks that would avert further turmoil. (http://bit.ly/1NBiFOr)

UK factories produced 443,581 cars in the first three months of the year, up 10.3 percent from the same quarter last year, according to the Society of Motor Manufacturers and Traders. It was the strongest first-quarter performance since 2004. (http://bit.ly/1NBiO4G)

The Telegraph

Rolls-Royce Holdings Plc bosses are seeking to eke out even bigger savings from the embattled engineering business, according to a secret internal report. Consultants from Bain & Company are understood to have delivered a study to top executives at the FTSE 100 group, saying it could boost profits by 1 billion pounds ($1.45 billion).

International investment into UK commercial property has stalled as widespread market uncertainty ahead of the Brexit vote takes hold, new research has warned, with more than a third of those surveyed blaming the referendum. (http://bit.ly/1NBjFlV)

Sky News

MPs probing the collapse of retailer BHS will summon the entrepreneurs who bought BHS for 1 pound. The Business, Innovation and Skills Select Committee will announce on Thursday that it wants to examine the level of due diligence that Retail Acquisitions Limited was legally required to undertake before buying BHS from Philip Green just over a year ago, Sky News has learnt. (http://bit.ly/1SLchn8)

UK growth slowed in the first quarter, according to official figures, as a leading economic think-tank warned of the potential impact of Brexit. (http://bit.ly/1SLctTo)

The Independent

Standards of living in Britain lag behind the European average, according to a Glassdoor study. UK ranks 10th in an analysis of 18 European countries, behind Switzerland, Denmark and Germany, according to the study. (http://ind.pn/1NBkvPl)

 

via http://ift.tt/26wKaz6 Tyler Durden

As China’s credit fueled craziness rages on, individual “investors” have been tripping over themselves trying to get in on a piece of the action, opening up enough brokerage accounts for every man, woman, and child in LA and pouring hard earned money into “investment” opportunities such as P2P funds.

This has of course lead people to game the system, recall Ezubao’s $7.6 billion P2P ponzi scheme that led to the arrest of 21 people earlier this year, and more recently the shuttering of Zhongjin Capital Management, which also led to 21 arrests on charges of suspicion of illegal fundraising.

It now appears that we’ve reached the point in the game where instead of waiting around to be arrested, those running shady ponzi schemes are now pulling the ripcord, clearing out as many bank accounts as possible, and just disappearing.

In the latest development in the crumbling shadow banking sector, police in the Chinese city of Hangzhou are searching for the chairman of the Wangzhou Group who allegedly disappeared with $154 million according to Reuters.

The Wangzhou Group is the parent of asset management firm Wangzhou Fortune, has more than 20,000 investors.

 

Investors had reported “problems with the company’s cash flow” since last Monday, Xinhua said.

 

To repay investors, Wangzhou Group plans to retrieve about 1 billion yuan in principal and interest payments on loans it has made and cover the additional 1.2 billion yuan shortfall by selling property, Xinhua quoted a company statement as saying.

We expect this won’t be the last time we hear of such a thing taking place, because after all as the credit bubble starts to burst, China authorities will try to root out more fraudulent firms in order to try and get ahead of the situation.

An effort that will inevitably be too little, too late.

via http://ift.tt/1N2lFDM Tyler Durden

The great megadeal M&A drought of 2016 just came to an end when moments ago Abbott announced it would acquire St. Jude Medical for $25 billion, roughlya 30% premium to the price. According to the press release, under the agreement, St. Jude Medical shareholders will receive $46.75 in cash and 0.8708 shares of Abbott common stock, representing total consideration of approximately $85 per share. At an Abbott stock price of $43.93(2), this represents a total transaction equity value of $25 billion.

“The combined company will have an industry-leading pipeline expected to deliver a steady stream of new medical device products across cardiovascular, diabetes, vision and neuromodulation patient care.”

This is how Abbott justified the transaction:

St. Jude Medical’s strong positions in heart failure devices, atrial fibrillation and cardiac rhythm management complement Abbott’s leading positions in coronary intervention and transcatheter mitral repair. Together, the company will compete in nearly every area of the cardiovascular market and hold the No. 1 or 2 positions across large and high-growth cardiovascular device markets. This best-in-class combined portfolio will have the depth, breadth and innovation to help patients restore their health, reduce costs for payors and deliver greater value to customers.

 

“Bringing together these two great companies will create a premier medical device business and immediately advance Abbott’s strategic and competitive position,” said Miles D. White, chairman and chief executive officer, Abbott. “The combined business will have a powerful pipeline ready to deliver next-generation medical technologies and offer improved efficiencies for health care systems around the world.”

 

“Today’s announcement is an exciting next chapter for St. Jude Medical, bringing together two industry leaders with a shared passion for innovation, culture and patients,” said Michael T. Rousseau, St. Jude Medical president and chief executive officer. “Our combined scale will expand the global reach, competitiveness and impact of our medical device innovation for physicians and hospitals. This transaction provides our shareholders with immediate value and the opportunity to participate in the significant upside potential of the combined organization. I’d like to thank our 18,000 employees whose hard work and commitment help us deliver leading medical technologies to patients around the world.”

Regarding the financial impact of the transaction, “the acquisition of St. Jude Medical is expected to be accretive to Abbott’s adjusted earnings per share in the first full year after closing and increasing thereafter, with approximately 21 cents of accretion in 2017 and 29 cents in 2018.(1) The combination is anticipated to result in annual pre-tax synergies of $500 million by 2020, including both sales and operational benefits. One-time deal-related costs and integration costs will be provided at a future date.”

Translation: St. Jude 18,000 employees are about to be “synergized” by a few more thousand jobs lower.

St. Jude Medical’s net debt of approximately $5.7 billion will be assumed or refinanced by Abbott. Abbott intends to fund the cash portion of this transaction with medium- and long-term debt.

Perhaps most surprising about the deal is the absence of Goldman anywhere among the advisors: Evercore is serving as the lead financial advisor for Abbott with Wachtell, Lipton, Rosen & Katz serving as legal counsel. BofA Merrill Lynch will be providing financing and also is serving as a financial advisor to Abbott. Guggenheim Securities is acting as financial advisor and Gibson, Dunn & Crutcher LLP is serving as legal counsel to St. Jude Medical.

via http://ift.tt/1SMm3oO Tyler Durden

It is very fitting that on today’s April 28th anniversary of the bull market, the day that officially makes this the second-longest “bull market” in history, the market got a stark reminder of just how it got there: through constant and relentless central bank intervention, which has been “beneficial” to stocks for the most part, however last night was anything but.

Less than one week after the BOJ floated a trial balloon using Bloomberg, that it would reduce the rate it charged some banks which set off the biggest USDJPY rally since October 2014, we are back where we started following last night’s “completely unexpected” (for everyone else: we wrote “What If The BOJ Disappoints Tonight: How To Trade It” hours before said “shock”) shocking announcement out of the BOJ which did absolutely… nothing.

“It’s a total shock,” Nader Naeimi, Sydney- based head of dynamic markets at AMP Capital Investors told Bloomberg. “From currencies to equities to everything — you can see the reaction in the markets. I can’t believe this. It’s very disappointing.“

As we reported last night, the yen surged the most in 8 months, or since August’s market meltdown and Japanese equities plunged after the Bank of Japan refrained from adding to its monetary stimulus. Bonds jumped around the world and gold rallied as the Federal Reserve signaled no hurry to raise interest rates. The staggering move as seemingly everyone was caught wrong-footed is shown in the chart below.

 

As we warned readers in advance of the BOJ announcement, it all started with Goldman which one week before the BOJ announcement changed its “base case” for BOJ easing from June to April, expecting a doubling in ETF purchases, and immediately all the other sellside lemmings followed, assuing everyone would be flatfooted when the BOJ “disappointed.” As Bloomberg puts it, “the BOJ’s decision was a surprise because a majority of economists surveyed by Bloomberg had predicted some action to counter a strengthening yen that had cast a shadow over the outlook for wage gains and investment spending. That the market’s reaction was so violent shows the weight financial markets are attaching to shifts in monetary policy.”

The move confounded economists, a slight majority of whom had expected extra easing, and investors, who’d pushed the Topix index higher and the yen toward a one-month low in the hours before the decision.

The resulting screams of anger as the BOJ refuse to coddle spoiled “traders”, pardon central bank frontrunners, was absolutely hilarious: “I’m very disappointed. I wanted the BOJ to do something and the BOJ should have done something,” said Masaru Hamasaki, head of the investment information department at Amundi Japan Ltd. “Kuroda has created mostly positive surprises so far, but this time it’s negative. The BOJ hasn’t been on the same wavelength as markets this year.”

There was more: “Todays market reaction is all about the BOJ,” said Ralf Zimmermann, a strategist at Bankhaus Lampe in Dusseldorf, Germany. “‘Investor expectations that had been built ahead of the meeting have now been scaled back. Earnings in a nutshell look OK, but as earnings estimates further down the road are still too high, there will be a negative trend in earnings revisions.”

But wait, it gets even better: “Quite a few people have been wrong-footed by this,” said Andrew Clarke, Hong Kong-based director of trading at Mirabaud Asia Ltd. “Guessing what governments do next at this moment in time is not a good way to play these markets. Hoping that there will be more stimulus will lead to disappointment, because hope isn’t a very good strategy.”

Yes, hope is not a very good strategy, especially when you are betting it all on what an irrational central planner may or may not do.

Of course, Kuroda’s inaction doesn’t just matter to investors. Japan’s economy is struggling to break out of a funk, with consumer prices dropping in March by the most since 2013 and company profits getting hurt by the stronger yen. In refraining from adding to stimulus, officials are betting that their success in bringing down borrowing costs since unveiling a negative-rate policy in January will generate an acceleration in lending. Perhaps this is just Kuroda’s way of saying Abenomics (and the BOJ’s policies) have failed and it’s time to pack it up?

And while Japan’s troubling future just got even more nebulous, stocks around the world tumbled, with European and Asian stocks, and U.S. index futures all falling after the BOJ “shock.” The drop is so big that not even last night’s blowout earnings by Facebook appear to be able to make much of a dent.

The MSCI All-Country World Index dropped 0.2 percent. The Stoxx Europe 600 Index lost 1.3 percent, heading for its biggest decline since April 5 as almost all of its industry groups declined.  Among the notable movers, we say Banco Bilbao Vizcaya Argentaria SA plunge 7.9 percent and Lloyds Banking Group Plc falling 2.4 percent after they reported earnings declines. Deutsche Bank AG was the exception, rising 3.8 percent, as it posted a surprise profit. Electrolux AB jumped 9.5 percent after Europe’s biggest maker of home appliances announced earnings that beat analysts’ estimates and raised its forecast for U.S. growth.

Futures on the Standard & Poor’s 500 Index slid 0.8 percent after the gauge rose for a second day, closing near its highest level of the year. In the premarket, Facebook Inc. climbed 8.4 percent after reporting sales and profit that topped projections. Medivation Inc. added 2.3 percent after Sanofi offered to buy it. The U.S. will release details of its first-quarter economic growth on Thursday.

Market Wrap

• S&P 500 futures down 0.8% to 2074
• Stoxx 600 down 1.2% to 344
• FTSE 100 down 1.1% to 6248
• DAX down 1.3% to 10165
• German 10Yr yield down 6bps to 0.23%
• Italian 10Yr yield down 5bps to 1.47%
• Spanish 10Yr yield down 3bps to 1.6%
• S&P GSCI Index up 0.2% to 356.7
• MSCI Asia Pacific down 0.3% to 131
• Nikkei 225 down 3.6% to 16666
• Hang Seng up 0.1% to 21388
• Shanghai Composite down 0.3% to 2946
• S&P/ASX 200 up 0.7% to 5225
• US 10-yr yield down 3bps to 1.82%
• Dollar Index down 0.67% to 93.75
• WTI Crude futures down less than 0.1% to $45.32
• Brent Futures up less than 0.1% to $47.22
• Gold spot up 1% to $1,258
• Silver spot up 0.8% to $17.38

Top Global News

• Facebook’s Zuckerberg Wants Right to Be Bold After Revenue Beat: Proposed new share class to give CEO more freedom for big bets; 1Q adj. EPS 77c vs est. 63c; 1Q rev. $5.38b vs est. $5.27b; Zuckerberg Borrows Google Tactic in Splitting Stock for Control
• Sanofi Pursues Medivation for $9.3 Billion After Being Spurned: Offers $52.50 per share in cash, a premium of >50% to the 2-month volume-weighted avg. price prior to takeover rumors
• BOJ Holds Off More Stimulus to Gauge Impact of Negative Rate: Keeps three key tools unchanged; majority forecast some action
• Deutsche Bank Profit Beats Estimates as Legal Costs Drop: 1Q net attributable EU214m vs EU544m y/y; est. loss EU484.3m; debt trading revenue falls less than analysts had expected; Cryan, Fitschen call financial markets outlook “uncertain”
• Texas Instruments Forecast Shows Rising Auto-Industry Demand: Sees 2Q rev. $3.07b-$3.33b, est. $3.17b; sees 2Q EPS 67c-77c, GAAP est. 71c; 1Q GAAP EPS 65c, est. 62c
• First Cash Said to Be in Advanced Merger Talks With Cash America: Discussing an all-stock merger of equals and an agreement could be announced as soon as this week
• Valeant’s ‘Mistakes’ Raised Profit, Destroyed Value, Ackman Says: Drugmaker’s price strategy reassessed at Washington hearing
• PayPal Goes Mobile to Lure Customers, Fend Off Competitors: 1Q net rev. $2.54b vs est. $2.50b, adj. pro forma EPS 37c, est. 35c
• Hanesbrands Offers $835 Million for Aussie Underwear Firm: Agreed to buy Australia’s Pacific Brands Ltd. for A$1.15 per share in cash, 22% more than the target’s closing price on Wed., gaining iconic underwear labels including Bonds and Jockey
• Marriott 1Q Adj. EPS, Rev. Beat; Starwood Deal ‘On Track’: 1Q adj. EPS 87c, est. 84c, 1Q rev. $3.77b, est. $3.71b
• VW’s Biggest Brand Stumbles to Loss on Emissions Crisis: VW brand posted a loss of EU127m in the final three months of 2015, compared with a profit of EU780m a yr earlier
• House Panel Approves $610.5B Defense Policy Bill For FY 2017: House Armed Services Committee approves the $610.5b defense authorization bill by a vote of 60-2
• Qlik Tech Said to Draw Bids From Thoma Bravo, Bain, Permira: First-round offers said submitted by Tuesday deadline
• Puerto Rico Risks Historic Default as Congress Chooses Inaction: Island may impose moratorium if GDB payment isn’t delayed
• Suncor Takes Majority Syncrude Stake After Murphy Oil Deal: Additionanal Syncrude stake will provide 17,500 barrels
• Monsanto Says New Technology to Help GMOs Fight Pest Resistance: Technique may allow GMO plants to beat weed, insect resistance
• DreamWorks Said to Explore Sale Advised by Centerview: Reuters

Looking at regional markets, Asian stocks trade mixed following a mild positive lead from Wall St. where an unsurprising FOMC and strength in oil provided early support, while Nikkei 225 slumped after the BoJ disappointed markets and kept monetary policy on hold. This saw a firm break below 17000 in the Nikkei 225 (-3.6%) with the index wiping out Industrial Production inspired gains. ASX 200 (+0.6%) benefited from the uptick in energy after WTI broke above USD 45/bbl to post another YTD high, while the Shanghai Comp (-0.3%) weakened amid ongoing poor earnings with state-owned CNPC the latest addition after its profits dropped over 50%. 10yr JGBs are relatively flat despite the slump in Japanese stocks as the BoJ’s inaction kept fixed-income demand subdued.

Top Asian News

• China’s $1 Trillion Bond Leverage Unwinds as Pimco Senses Panic: Investors get squeezed as bond prices fall, repo rates rise
• Daiwa Securities Quarterly Profit Falls 45% on Trading Slump: Brokerage commissions and underwriting fees also drop
• Docomo Forecasts Jump in Profit as Phone Subsidy Ban Cuts Costs: To buy back up to 193b yen of shares from May 2 to Dec. 31
• Sony Reports Quarterly Loss, Holds Forecast to Assess Earthquake: 4Q net loss 88.3b yen vs 106.8b yen loss y/y
• ICBC Joins Bank of China in Breaching Bad-Loan Coverage Rule: Industrial & Commercial Bank of China breached a regulatory requirement for bad-loan coverage as it reported a 0.6% gain in 1Q profit
• Samsung Gets S7 Boost, Still Leaves Question of What’s Next: Latest smartphone model fuels gains in net income, sales; shares decline as analysts see few new hits on horizon; co. to uy back 2.03 trillion won worth of common and preferred shares
• Cnooc 1st Quarter Revenue Drops 31% After Crude Hits 12-Year Low: 1Q oil, gas revenue falls 30.7% y/y to 24.6b yuan
• India’s Tata Starts Tech Transformation With Yoga Wearables: Tata hopes to place technology at the heart of group strategy
• China Said to Mull Starting Trading of Credit-Default Swaps: NAFMII sought views on CDS and credit-linked notes, people say

European equities are broadly lower this morning as hopes of further stimulus had been shattered by the BoJ, after the central bank kept rates unchanged while also refraining from increasing the size of its asset purchase program. Alongside this, another bout of earnings have guided price action in Europe with IBEX the notable underperformer following a poor figures from BBVA. While the DAX saw a technical break below yesterday’s low amid VW’s annual conference, while weak regional German CPI’s point towards a poor national reading, subsequently adding to the dampened tone. Bunds have been bolstered by the negative tone across the region, with yields across the curve falling after the BoJ’s lack of action, coupled with signals from the FOMC that they are in no rush to tighten monetary policy. As such, CME FFR futures are now pricing in as much as 17% of a hike in June.

Top European News

• Lloyds Falls After Posting Decline in First-Quarter Revenue: Rev. fell 1% to GBP4.4b, lender cut operating costs 2% to offset revenue drop
• Anglo to Sell Niobium, Phosphate Business for $1.5 Billion: China Molybdenum agreed to buy the division and the transaction is expected to be completed in the second half of this year
• Euro-Area Economic Confidence Rebounded in April From 1-Year Low: Indicator rises to 103.9 in April from 103.0 in March, economists had forecast a gain to 103.4
• German Unemployment Extends Drop in Sign Economy Still Robust: Number of jobless fell for seventh straight month in April, unemployment rate remains at record low level of 6.2%
• Airbus Profit Falls on Delivery Delays as A400M Issues Brew: Earnings slump 23% after setbacks to A320Neo, A350 programs, said fresh problems with the troubled A400M transport plane could hurt future earnings.
• BBVA, CaixaBank Drop as First-Quarter Profit Miss Estimates: BBVA said net income fell 54% to EU709m, earnings were hit by lower trading revenue and currency fluctuations
• Telecom Italia Said to Target $1.1 Billion Cost Cuts by 2018: New CEO Cattaneo wants to double company’s prior savings goal
• WPP Sales Rise as U.S. Clients Spend More on Advertising: Forecast further increase this year, helped by the Summer Olympics in Rio and the U.S. presidential election
• Hermes Sales Buoyed by Bags After Boosting Leather Output: Sales of leather goods, saddles surges 15%, beating estimates
• TUI Agrees to $1.3 Billion Hotelbeds Sale to PE, Pension Funds: Price about 1.2 times 2015 rev. for online booking unit

In FX, In the wake of the FOMC statement last night, we see the market continue to pressure the USD, and focus is firmly on USD/JPY this morning after the heavy overnight losses based on the BoJ’s on-hold call. Heavy spec positioning on hints of a move saw the lead spot rate hit by 3 JPY, but early London has only managed a modest dip under 108.00 since. EUR/USD has been pressed higher as a result, with EUR/JPY showing the familiar resilience at the lows, but only after suffering a near 4 JPY drop. Similar losses seen in the rest of the major cross rates, but AUD, CAD and NZD all still higher against the USD, as is GBP which is back testing recent highs through 1.4600. German regional inflation all generally softer, but widely expected, with the unemployment rate unchanged at 6.2%. EU sentiment indices on the soft side also, but industrial above expectations — all to minimal effect on the EUR. Oil still pushing higher as Jun WTI eyeing $45.50+. CAD well bid but pre 1.2500 orders contain for now. US Q1 GDP the main event this afternoon, with USD sales fading in the last hour or so as a result.

In commodities, WTI and Brent have benefited from the decline in the USD index as the Fed look to be in no rush to hike rates, WTI currently trading near the USD 45.00/bbl level with the next major resistance at the psychological level of USD 46.00/bbl level. Gold has also been rising off the back of safe haven flows into the asset following the central banks decisions and comments. Silver has also been rallying reaching the USD 17.35/oz level eyeing the recent highs of USD 17.67/oz. In base metals copper prices were subdued amid the dampened tone in China and on the hourly chart price is currently at the 38.2 fib support level and could look to move higher after rejecting it for a second time.

On the US calendar today the big focus is on the Q1 GDP report, while the core PCE reading will be released alongside (expected at +1.9% qoq). Initial jobless claims data and the Kansas City Fed’s manufacturing survey rounds off the data. It’s another busy day for earnings too with 63 S&P 500 companies set to report including Amazon, UPS and Ford Motor. In Europe the corporate reporting calendar is highlighted by the banks today.

Bulletin Headline Summary from RanSquawk and Bloomberg

• Global equities slump amid the surprising lack of action by the BoJ, alongside a slew of rather soft earnings updates from large European names.
• JPY benefits from the BoJ’s action, coupled with the broad risk off tone in the region.
• Looking ahead, highlights include US Advance GDP, Unemployment Claims, German national Inflation figures alongside ECB’s Linde and Costa.
• Treasuries rise during overnight trading with European and Asia sovereign bonds after the BOJ held off on more stimulus to take more time to assess the impact of negative rates, and the Fed showed no sign of June rate increase.
• Haruhiko Kuroda hasn’t lost his power to jolt markets: but now he’s moving them by doing nothing as the yen soared the most in eight months and stocks sank in Tokyo
• New Zealand’s central bank said it may need to cut interest rates further after holding them steady Thursday, as slowing global economic growth and a strong currency prolong a period of low inflation
• Sweden’s krona is moving in the wrong direction with the threat of a major appreciation putting economic growth forecasts at risk, according to Riksbank Deputy Governor Per Jansson
• Currency trading via CME Group Inc., ICAP Plc and Thomson Reuters Corp. fell to $538 billion per day last month, from more than $669 billion in September 2014, according to data compiled by Bloomberg, which shows the extent of the slump in a market that this month saw some banks report less client activity
• PetroChina Co. posted its first-ever quarterly loss as falling prices for global crude and domestic gas wiped out earnings; China’s biggest oil and gas producer reported a 13.8 billion yuan ($2.1 billion) loss in the three months ended March 31 from a 6.15 billion yuan profit a year ago; Cnooc Ltd., China’s biggest offshore oil and gas explorer, reported a 31 percent decline in revenue and an increase in output amid a crash in crude prices
• China is considering starting trading of credit-default swaps as the number of corporate nonpayments surges, according to people familiar with the matter
• Brexit campaigners sought to seize back the initiative in the referendum battle as eight high-profile economists declared Britain would do better outside the European Union.
• Daiwa Securities Group Inc. said it has almost completed a round of job cuts overseas as a trading slump contributed to a 45 percent decline in fourth-quarter profit
• Sovereign 10Y bond yields lower; European, Asian markets lower; U.S. equity-index futures fall. WTI crude oil lower, metals higher

US Event Calendar

• 8:30am: Initial Jobless Claims, April 23, est. 259k (prior 247k)
• 8:30am: GDP Annualized q/q, 1Q A, est. 0.6% (prior 1.4%)
• 9:45am: Bloomberg Consumer Comfort, April 24 (prior 42.9)
• 10am: Freddie Mac mortgage rates
• 10:30am: EIA natural-gas storage change
• 11:00am: Kansas City Fed Mfg Activity, April (prior -6)

DB’s Jim Reid concludes the overnight wrap

It’s straight to Japan for us this morning where all eyes have been on the BoJ. Expectations had been growing in recent weeks that we might see some sort of further easing, a view also shared by a narrow majority of economists, however the big news is that BoJ has stayed put on all measures. That means annual asset purchases are unchanged at ¥80tn, the policy rate is to stay at -0.1% and the rate of ETF purchases is also unchanged. At the same time the BoJ has also pushed backed on its 2% inflation target, the fourth time in a year they have done so.

Pressure had only mounted leading into the meeting this morning after the BoJ reported lower than expected inflation data. Headline CPI was reported as dipping into negative territory at -0.1% yoy last month (vs. 0.0% expected), a fall of four-tenths. That’s the first deflation reading since 2013. Core inflation also slipped into negative territory at -0.3% yoy (vs. -0.2% expected), a drop of three tenths. The core core print (ex food and energy) was one-tenth lower at +0.7% yoy.

The most immediate impact to the BoJ decision was a huge rally in the Yen. Having hovered around 111.5 prior to the release, the currency surged over two big figures and broke through 109.0 (touching 108.77). It’s currently hovering around 109.3 which is a 2% rally on the day. Meanwhile Japanese equity markets have sharply reversed course. The Nikkei was up +1.41% prior to the decision, but sharply reversed to the tune of nearly 4.5% to trade at -2.96% as we go to print. It’s a similar story for the Topix which is currently -2.62%. Bourses elsewhere in Asia have given up earlier gains. The Shanghai Comp (-0.68%) and Kospi (-0.67%) are in the red post the news, while the Hang Seng (+0.50%) is up but has given up bigger gains from earlier in the session. 10y JGB yields are down 3bps.

The big focus now will be on Governor Kuroda who is scheduled to speak to the press shortly after this hits your emails at 7.30am BST. Given the massive adverse reaction from markets, this has arguably suddenly become the main event of the week where there will be huge attention placed on his every word.
Needless to say yesterday was all about the other big central bank meeting of this week with the conclusion of the FOMC meeting. All-in-all the tone of the statement didn’t offer a whole lot of new information, with the Fed still very much in a wait and see mode. Those banging the tightening drum for June will probably be a little disappointed and while that door is still being left open, the lack of any real reaction in futures markets – with the probability hovering around 21% this morning – indicates that investors were little swayed by the outcome yesterday.

The main focus of the statement was on the reference to global risks. After previously saying that global economic and financial developments pose risks to their outlook, they replaced that with the line that the Fed ‘continues to monitor inflation indicators and global economic and financial developments’.

With regards to economic developments, Fed officials appeared more downbeat saying specifically that growth of economic activity ‘appears to have slowed’ which has coincided with a moderation in household spending. On the flip side the committee also made mention to households’ real income rising at a ‘solid rate’ and consumer sentiment also remaining high. Business fixed investment and net exports were acknowledged as being soft, while the usual positive rhetoric around the labour market was referenced with ‘a range of recent indicators, including strong job gains, points to additional strengthening of the labour market’. On the inflation front market-based measures of inflation compensation were reported as remaining low, while survey measures are little changed. For the third time in a row, the balance of risks statement was omitted.

So it feels like its back to the data-watch train to determine the path ahead for the Fed. On that note, today’s advance Q1 GDP figures released this afternoon will be of huge interest. The current consensus forecast is for +0.6% qoq, which is also the latest forecast of the Atlanta Fed. That consensus forecast has actually been trimmed from as high as +2.5% back in January. Our US economists are a little lower than the market at +0.5%. We’ll know the exact outcome at 1.30pm BST.

In terms of what happened in markets yesterday, prior to the FOMC the bulk of risk assets in the US had been trading in the red, led by weakness in the tech sector from the weak Apple led results hangover. As the session dragged on however and post-FOMC, markets bounced back into the close albeit finishing with still fairly modest gains. The S&P 500 ended up with a +0.16% gain despite Apple closing some 6% lower, while the Dow (+0.28%) closed up slightly more. The Nasdaq (-0.51%) did however fail to recover from the early leg lower. Some better than expected results out of Facebook late last night however (shares traded up as much as 7% in extended trading) did see US equity index futures and particularly the tech-heavy Nasdaq trade higher this morning, but those moves have been wiped out post the BoJ decision.

Supporting the rebound also was another impressive performance for the Oil complex. WTI closed above $45/bbl after rallying close to 3% to mark a fresh 2016 high. That was actually after what was a fairly volatile session which saw Oil drop some 3% off its early highs in the afternoon following a surprise jump in US crude stockpiles levels, before then climbing back into the close late in the session post FOMC. The US Dollar continued its theme of declining each day this week with the Dollar index ending -0.20%, while some of the bigger moves were reserved for the Treasury market. Having risen for seven consecutive sessions, 2y yields ended 4.4bps lower yesterday at 0.819%, while 10y yields finished close to 8bps lower at 1.852%, albeit still back to where they were mid-way through last week.

Yesterday’s main economic data of note was the March advance goods trade balance reading for the US. The data showed an unexpected shrinking of the deficit to $57bn from $63bn reflecting a sharp slowdown in imports, after expectations had been for little change. Meanwhile the latest housing market data was reserved for the March pending home sales numbers which were reported as rising +1.4% mom last month (vs. +0.5% expected).

Meanwhile closer to home yesterday there was a similar bounce off the early lows for risk assets in Europe yesterday with the Stoxx 600 and DAX ending with a +0.29% and +0.39% gain respectively. The main focus data wise was on the ECB’s money and credit aggregates numbers for March. The data was fairly unspectacular with M3 money supply growth up one-tenth to +5.0% yoy as expected, while the credit impulse shrank. Meanwhile we also got wind of a number of regional consumer confidence surveys, with Germany reporting a rise in confidence, while France was little changed and Italy reported a decrease. Finally the advance Q1 GDP reading for the UK printed as expected at +0.4% qoq.

Looking at the day ahead, the early focus this morning is on the UK where the April house price data is due. Shortly after that we’ll get the latest unemployment reading out of Germany, while later this afternoon the April CPI print in Germany will be closely watched. We’ll also get confidence indicators for the Euro area today. Over in the US this afternoon the big focus is on the aforementioned Q1 GDP report, while the core PCE reading will be released alongside (expected at +1.9% qoq). Initial jobless claims data and the Kansas City Fed’s manufacturing survey rounds off the data. It’s another busy day for earnings too with 63 S&P 500 companies set to report including Amazon, UPS and Ford Motor. In Europe the corporate reporting calendar is highlighted by the banks today.

via http://ift.tt/1qX8FVu Tyler Durden