2018Feb

FC: EUROPEAN CLOSING REPORT: THURSDAY – 1ST – MARCH – 2018 March 01, 2018 at 04:35PM

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European cash equity markets are broadly lower at the closing bell having added to earlier declines this afternoon (FTSE -0.9%, DAX -2.2%, CAC -1.2%). US bourses have been more resilient however and are little changed as we write, supported by outsized gains in steel stocks in anticipation of import tariffs from the Trump administration. Fed Chair Powell was back before Congress this afternoon, testifying to the Senate Banking Committee where he said they have not seen strong evidence of a decisive move up in wages, nor is there any evidence the economy is overheating. His comments have been viewed as less hawkish than seen on Tuesday and we did see the US Dollar weaken slightly in response. US 10-year yields did touch a fresh two-week low earlier this afternoon but found some support after ISM manufacturing rose at its fastest pace since May 2004. Initial jobless claims also slowed to their lowest level since 1969 although there were softer readings for manufacturing PMI and construction spending while core PCE was in line. Elsewhere, Sterling has been choppy as UK PM May meets with EU Council President Tusk in the wake of the EU draft agreement released yesterday. A spokesman for May said talks were constructive, and they discussed plans for an ambitious economic partnership. He also said good progress has been made in reaching an agreement on the implementation period. In energy space, oil prices are offside two-percent at the lows before recovering while gold is off around $10.

 

Key Headlines/Data:

US Corporate News:

  • L-Brands (Q4 17): Q4 EPS $2.11 versus $2.05 expected | Q4 Revenue $4.82 Bln versus $4.72 Bln expected | Sees FY18 EPS $2.95-3.25 versus $3.50 expected
  • Mylan (Q4 17): Q4 EPS $1.43 versus $1.41 expected | Q4 Revenue $3.2 Bln versus $3.3 Bln expected | Sees FY18 EPS $5.20-5.60 versus $5.39 expected
  • SalesForce.com (Q4 17): Q4 EPS $0.35 versus $0.34 expected | Q4 Revenue $2.85 Bln versus $2.81 Bln expected | Sees FY18 EPS $2.02-2.04 versus $1.74 expected
  • Monster Beverage (Q4 17): Q4 EPS $0.35 versus $0.37 expected |Q4 Revenue $0.81 Bln versus $0.84 Bln expected
  • Best Buy (Q1 18): Q1 EPS $2.42 versus $2.03 expected | Q1 Revenue $15.36 Bln versus $14.49 Bln expected | Sees FY19 EPS $4.80-5.00 versus $4.75 expected
  • Kohl’s (Q4 17): Q4 EPS $1.99 versus $1.75 expected | Q4 Revenue $6.78 Bln versus $6.74 Bln expected
  • Kroger (%): To ban gun sale through its Fred Meyer locations to under 21’s
  • Ford (%): February auto-sales -6.8% versus -6.0% expected
  • General Motors (%):February auto-sales -6.9% versus -4.5% expected
  • Fiat Chrysler (%): February auto-sales -1.4% versus -11.0% expected
  • US Steel (%): Steel stocks rallied on rumours of an announcement on tariffs today – has since been denied by the White House. Trump will meet with steel and aluminium executives at the White House today.

*  @realDonaldTrump – Our Steel and Aluminum industries (and many others) have been decimated by decades of unfair trade and bad policy with countries from around the world. We must not let our country, companies and workers be taken advantage of any longer. We want free, fair and SMART TRADE!

*  IMF Managing Director Lagarde said she sees US growth and trade befits from the tax overhaul, adding that tax reform should boost US GDP by around 1.2% annually until 2020. She did also warn that tax cuts may have an overheating effect on the US economy, adding to inflation, rate hikes and capital outflows from emerging markets

*  A spokesman for UK PM May said she briefed her cabinet on tomorrow’s Brexit speech and they agreed it represents a step forward in the Brexit negotiations. He added that negotiations with the EU on a transition period are progressing well

*  Spokesman for May said her meeting with EU Council President Tusk was constructive, talked about plans for an ambitious economic partnership. They also said good progress has been made in reaching an agreement on the implementation period.

*  EU Brexit Minister Barnier said if the UK has a better idea to avoid a hard border and keep the single market, they will look in a constructive way. He said the UK could stay in the customs union but would need to accept more responsibilities while even in the customs union, the UK would face border checks with the EU. Barnier also warned the UK is closing the door on itself one by one and the only possible model which remains is that of the free trade agreement, as we did recently with Canada, Japan or Korea.

US PCE Inflation Data (Feb):

  • PCE M/M +0.4% versus +0.4% expected, previous +0.1%
  • PCE Y/Y +1.7% versus –% expected, previous +1.7%
  • Core PCE M/M +0.3% versus +0.3% expected, previous +0.2%
  • Core PCE Y/Y +1.5% versus +1.5% expected, previous +1.5%

US Personal Income/Spending Data (Jan):

  • Personal Income M/M +0.4% versus +0.3% expected, previous +0.4%
  • Personal Spending M/M +0.2% versus +0.2 expected, previous +0.4%
  • Real Personal Spending M/M -0.1%, previous +0.3% revised to +0.2%

US Jobless Claims Data:

  • US Initial Jobless Claims (Feb 17) 210K versus 226K expected, previous 222K revised to 220K – Lowest since 1969
  • Continuing Claims (Feb 10) 1.931 Mln versus 1.930 Mln expected, previous 1.875 Mln revised to 1.874 Mln

*  Canadian Current Account Balance (Q4) -C$16.4 Bln, previous -C$19.4 Bln revised to -C$18.6 Bln

*  Canadian Manufacturing PMI (Feb) 55.6, previous 55.9

US Manufacturing PMI (Feb F) 55.3 versus 55.9 flash/expected, previous 55.9:

  • Growth in new business accelerates
  • Output expands at softer pace
  • Inflationary pressures intensify

US ISM Manufacturing (Feb) 60.8 versus 59.0 expected, previous 59.1 (Fastest pace since May 2004):

  • Prices Paid 74.2versus 70.5 expected, previous 72.7 – Highest since May 2011
  • Employment 57.7 versus 57.0, previous 54.2
  • New Orders 64.2, previous 65.4

US Construction Spending M/M (Jan) 0.0% versus +0.3% expected, previous +0.7% revised to +0.8%

*  Fed Chair Powell answers questions at the Senate Banking Committee:

  • Powell says they have not seen strong evidence of a decisive move up in wages
  • Says gains can occur in the labour market without causing inflation
  • Says there is no evidence the economy is overheating
  • We do not want to cause a recession by getting behind the curve and having to raise rates quickly

*  EIA Natural Gas Storage Change (Feb 23) -78 Bcf versus-77 Bcf expected, previous -124 Bcf

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