Thursday, August 23, 2018

08/23/2018 - **Overnight Markets and News**

**Overnight Markets and News**

*Sep E-mini S&Ps (ESU18 -0.03%) this morning are unchanged and European stocks are up +0.05% at a 1-week high.  U.S. stocks were under pressure on escalation of trade tensions as the U.S. and China imposed fresh $16 billion of tariffs on each other that began at midnight.  Trading activity was muted as the markets were watching for any headlines to come out of ongoing trade talks in Washington between China and the U.S., and as the markets await the Fed's annual 3-day conference in Jackson Hole, WY, that begins tonight and may provide clues as to the future course of monetary policy.  Gains in European stocks were limited, and Sep COMEX copper (HGU18 -1.53%) fell -1.37% after the Eurozone Aug Markit manufacturing PMI unexpectedly fell to its slowest pace in 1-3/4 years.  Asian stocks settled mixed: Japan +0.22%, Hong Kong -0.49%, China +0.37%, Taiwan +0.55%, Australia -0.34%, Singapore +1.56%, South Korea +0.44%, India +0.13%.  Japan's Nikkei Stock Index eked out a 1-1/2 week high as exporter stocks rallied after USD/JPY climbed to a 4-session high, which bolsters exporters' earnings prospects.

*The dollar index (DXY00 +0.08%) is up +0.08%.  EUR/USD (^EURUSD -0.13%) is down -0.15%.  USD/JPY (^USDJPY +0.20%)is up +0.18%. 

*Sep 10-year T-note prices (ZNU18 -0-015) are down -2 ticks.

*The Eurozone Aug Markit manufacturing PMI unexpectedly fell -0.5 to 54.6, weaker than expectations of +0.1 to 55.2 and the slowest pace of expansion in 1-3/4 years.  The Aug Markit composite PMI rose +0.1 to 54.4, weaker than expectations of +0.2 to 54.5.

*ECB Governing Council member and Bundesbank President Weidmann said that with inflation heading toward the ECB's goal, "it's time to begin exiting the very expansionary monetary policy and the non-standard measures, especially considering their possible side effects."

*The German Aug Markit/BME manufacturing PMI fell -0.8 to 56.1, weaker than expectations of -0.4 to 56.5.  The Aug Markit services PMI rose +1.1 to a 6-month high of 55.2, stronger than expectations of +0.2 to 54.3.

*UK Aug CBI retailing reported sales unexpectedly rose +9 to 29, stronger than expectations of -7 to 13.



**U.S. Stock Preview**

*Key U.S. news today includes: (1) weekly initial unemployment claims (expected +3,000 to 215,000, previous -2,000 to 212,000) and continuing claims (expected +14,000 to 1.735 million, previous -39,000 to 1.721 million), (2) USDA weekly Export Sales, (3) Jun FHFA house price index (expected +0.3% m/m, May +0.2% m/m), (4) Aug Markit manufacturing PMI (expected -0.3 to 55.0, Jul -0.1 to 55.3) and Aug Markit services PMI (expected -0.2 to 55.8, Jul -0.5 to 56.0), (5) Jul new home sales (expected +2.2% to 645,000, Jun -5.3% to 631,000), (6) Aug Kansas City Fed manufacturing activity (expected -1 to 22, Jul -5 to 23), (7) Treasury auctions $14 billion of 5-year TIPS, (8) Kansas City Fed hosts 3-day economic symposium at Jackson Hole, WY, on “Changing Market Structure and Implications for Monetary Policy.”

*Notable Russell 2000 earnings reports today include: HP (consensus $0.51), Hormel Foods (0.39), Toro (0.66), VMware (1.49), Intuit (0.23), Ross Stores (1.01), Autodesk (0.16), Gap (0.72).

*U.S. IPO's scheduled to price today: none.

*Equity conferences during the remainder of this week: Mobile Payments Conference 2018 on Wed-Thu, ACI US Base Oils and Lubricants Summit on Thu, SEB Industrial & Technology Seminar on Thu, UBS Kohler Utility Mini-Conference on Thu, NGAUS Conference on Fri.




**Overnight U.S. Stock Movers**

*Aetna (AET -0.29%) was downgraded to 'Neutral' from 'Overweight' at Cantor Fitzgerald.

*Darden Restaurants (DRI -0.21%) reported that a cyberattack incident involving its restaurants in 23 states may have exposed 567,000 payment card numbers.

*Neurocrine Biosciences (NBIX +1.91%) was rated a new 'Overweight' at Cantor Fitzgerald with a price target of $150.

*Reata Pharmaceuticals (RETA +4.39%) was rated a new 'Overweight' at Cantor Fitzgerald with a price target of $90.

*Synopsys (SNPS +0.80%) rose more than 4% in after-hours trading after it reported Q3 adjusted EPS of 95 cents, better than consensus of 92 cents, and then forecast full-year adjusted EPS of $3.89 to $3.93, stronger than consensus of $3.81.

*Target (TGT +3.21%) was upgraded to 'Outperform' from 'Market Perform' at Telsey Advisory Group with a price target of $100.

*Nordstrom (JWN -1.27%) gained 3% in after-hours trading after its board authorized a $1.5 billion share buyback program.

*Zayo Group Holdings (ZAYO -1.06%) climbed nearly 3% in after-hours trading after it reported Q4 EPS of 18 cents, double expectations of 9 cents.

*Williams-Sonoma (WSM +3.90%) jumped 10% in after-hours trading after it reported Q2 adjusted EPS of 77 cents, better than consensus of 68 cents.

*L Brands (LB -0.06%) slid more than 4% in after-hours trading after it forecast Q3 EPS of 0 to 5 cents, well below consensus of 16 cents.

*Halozyme Therapeutics (HALO +2.50%) was rated a new 'Overweight' at Cantor Fitzgerald with a price target of $27.

*Stein Mart (SMRT +1.33%) dropped 6% in after-hours trading after it forecast a Q3 operating loss of -$10 million.



**Market Comments**

*Sep S&P 500 E-minis (ESU18 -0.03%) this morning are unch.   Wednesday's closes: S&P 500 -0.04%, Dow Jones -0.34%, Nasdaq 100 +0.37%.  The S&P 500 on Wednesday closed slightly lower on increased U.S. political risks after President Trump's former lawyer on Tuesday plead guilty to illegal campaign finance charges.  Stocks were also undercut by concern about the housing sector after U.S. Jul existing home sales unexpectedly fell -0.7% to a 2-1/3 year low of 5.34 million, weaker than expectations of +0.4% to 5.40 million.  Stocks were supported by strength technology stocks and also by a rally in energy stocks as crude oil prices jumped +3.07% to a 1-week high.

*Sep 10-year T-notes (ZNU18 -0-015) this morning are down -2 ticks.  Wednesday's closes: TYU8 +5.50, FVU8 +3.00.  Sep 10-year T-notes on Wednesday rallied to a 2-1/2 month high and closed higher on increased safe-haven demand for T-notes after President Trump's former lawyer pleaded guilty to campaign finance violations.  T-note prices were also supported by the unexpected decline in U.S. Jul existing home sales to a 2-1/3 year low.  T-notes fell back from their best levels after stocks rebounded from overnight losses and moved higher.

*The dollar index (DXY00 +0.08%) this morning is up +0.077 (+0.08%).  EUR/USD (^EURUSD -0.13%) is down -0.0017 (-0.15%).  USD/JPY (^USDJPY +0.20%) is up +0.20 (+0.18%).  Wednesday's closes: Dollar Index -0.110 (-0.12%), EUR/USD +0.0026 (+0.22%), USD/JPY +0.25 (+0.23%).  The dollar index on Wednesday sold off to a 2-1/2 week low and closed lower on increased U.S. political risks after President Trump's former lawyer pleaded guilty to illegal campaign finance charges.  The dollar was also undercut by the unexpected drop in U.S. Jul existing home sales to a 2-1/3 year low and by the fall in the 10-year T-note yield to a 1-1/2 month low, which undercuts the dollar's interest rate differentials.

*Metals this morning are weaker with Dec gold (GCZ18 -0.52%) -6.1 (-0.51%), Sep silver (SIU18 -1.15%) -0.165 (-1.12%) and Sep copper (HGU18 -1.53%) -0.037 (-1.37%).  Wednesday's closes: Dec gold +3.3 (+0.28%), Sep silver -0.016 (-0.11%), Sep copper -0.0220 (-0.82%).  Metals on Wednesday settled mixed with Dec gold at a 1-week high.  Metals prices were undercut by the unexpected decline in U.S. Jul existing home sales to a 2-1/3 year low and by increased copper supplies after LME copper inventories rose +1,600 MT to a 1-1/4 month high of 262,850 MT.  A bullish factor was the decline in the dollar index to a 2-1/2 week low.

*Oct WTI crude oil (CLV18 -0.06%) this morning is up +8 cents (+0.12%).  Oct gasoline (RBV18 -0.19%) is -0.12 (-0.06%).  Wednesday's closes: Oct crude oil +2.02 (+3.07%), Oct gasoline +4.96 (+2.60%).  Oct crude oil and gasoline on Wednesday closed higher with Oct crude at a 1-week high and Oct gasoline at a 2-week high.  Crude oil prices were boosted by the fall in the dollar index to a 2-1/2 week low and by the sharp -5.84 million bbl decline in EIA crude inventories (vs expectations of -2.0 million bbl).  Gasoline prices were undercut by the unexpected rise in EIA gasoline supplies by +1.2 million bbl, more than expectations of -1.0 million bbl.




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