Quartz Daily Brief—Hong Kong’s eerie quiet, #Euro #inflation, #China clears #iPhone, curry brain food

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Good morning, Quartz readers!

What to watch for today

Greece remains on the hook. The country will meet with international creditors to discuss the terms of its public debt. Greece bond yields are on the rise after the government suggested that it may stop taking aid from the International Monetary Fund and avoid painful financial reforms.

Euro zone inflation numbers are due. The European Central Bank target rate is about 2% but analysts expect only 0.3%, which means that ECB president Mario Draghi may have to take even more drastic measures to spur growth.

Afghanistan lets the Americans stay just a little bit longer. Newly sworn president Ashraf Ghani will sign a deal allowing about 10,000 US troops to remain into 2015. On this, at least, Ghani and his bitter rival Abdullah Abdullah agree.

Out with the new Windows, in with the old. Microsoft unveils a new version of its operating system, codenamed Threshold. It rolls back many of the disliked changes of the previous version, which the world largely rejected, and aims to be more enterprise-friendly.

Will Walgreens bounce back in the fourth quarter? The US pharmacy giant missed earnings expectations in the third quarter after Obamacare and other external factors weighed on its profit margins. Investors will be looking to see if those problems have been dealt with.

While you were sleeping

Apple finally got the nod to sell its iPhone 6 in China. Regulators approved the new smartphones for sale after mysteriously withholding a crucial license for several weeks. But if the price of gray-market iPhones is anything to go by, demand is not exactly sky-high.

Hong Kong’s streets are eerily quiet. Pro-democracy protests have turned the center of the city into a car-free zone, without any significant confrontations between demonstrators and police overnight. The size of the crowd is smaller this morning, but is expected to swell again in the evening, ahead of tomorrow’s National Day holiday celebrating the founding of China. Follow the action here.

Turkey deployed tanks to counter the Islamic State. Shells fired by the extremist group landed inside Turkey, killing two soldiers and wounding five others. President Recep Tayyip Erdogan has acknowledged that Turkey “can’t stay out” of the US-led campaign against IS.

Manufacturing in China stagnated. The HSBC / Markit purchasing managers’ index, which measures small- and medium-sized businesses, was flat at 50.2 in September, just barely above the the 50 point that divides expansion from contraction. The government has made various attempts, largely unsuccessfully, to jump-start the economy.

The SoftBank-DreamWorks Animation deal might not happen after all. Talks between the Japanese mobile carrier and Hollywood studio have “cooled,” according to The Wall Street Journal (paywall), sending the latter’s stock down as much 8% in after-hours trading. Rumors of the deal only began swirling on Saturday.

Argentina got slapped down again. The US judge who ruled against the country in its dispute with foreign bondholders declared it in contempt of court (paywall) for trying to circumvent his ruling. He hasn’t set a punishment yet, though it will probably be small compared with the country’s outstanding debts.

Quartz obsession interlude

Gwynn Guilford on why China should leave Hong Kong alone. “Since Hong Kong is the global center for yuan trading, it is also a portal through which huge sums of liquidity flow, through both real and fake trade financing. China’s leaders don’t seem to actually understand how dependent their country’s financial system is on these ever-rising tides of liquidity coming in via Hong Kong. And they may not realize how easily a liquidity crisis could occur if, God forbid, they do decide to call in the tanks.” Read more here.

Matters of debate

The US needs marijuana bars. They would offer public gathering spaces without the social dangers associated with drinking alcohol.

Farm-t0-table dining is broken. Consumers aren’t asking enough of small growers, says one of the movement’s most respected voices.

Chinese tourists are the best. They love to buy expensive gifts, and it’s expected that 166 million of them will spend $155 billion outside the mainland this year.

It’s Reagan’s fault that the NSA is spying on everyone. He let the government snoop on any US company that has “some relationship” with foreigners.

Hamas = Islamic State = Iran = the Nazis. The world according to Israeli prime minister Binyamin Netanyahu.

Surprising discoveries

The White House has had some shocking security breaches. Like the time a soldier landed a stolen helicopter on the lawn.

Kurdish troops are building tanks out of spare parts. They look like something straight out of Mad Max.

There’s a new world record for the marathon. Kenyan Dennis Kimetto’s time of 2:02:57 broke the previous mark by 26 seconds.

Curry might be good for your brain. A chemical in turmeric helped rats produce restorative neural stem cells.

It costs $2 billion a year to send drinking water to the International Space Station. And you thought Evian was expensive.

Click here for more surprising discoveries on Quartz.

Our best wishes for a productive day. Please send any news, comments, artisanal armored vehicles, and favorite curry recipes to hi@qz.com. You can follow us on Twitter here for updates throughout the day.

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Market movers today 22/08/2014

Quotes from Danske Bank:

-Focus will be on Janet Yellen’s speech in Jackson Hole at 16:00 CET. Yellen speaks on the subject of the labour market – the key component to the timing of the first rate hike. However, Yellen has spoken extensively on this subject before and it is hard to imagine she can come up with much new given how much time the Fed has spent on analysing this area.

-Yellen’s view is clear – that there is still significant slack in the labour market, which is backed up by very moderate wage increases. According to the minutes of the latest Fed meeting, many members expressed that the Fed might soon change the description of the underutilisation of labour.

-If Yellen comments on policy at all, she is likely to repeat the phrase from the semi-annual testimony that if the labour market continues to improve faster than expected, the risk is that the first rate hike could come sooner than currently projected.

-ECB-president Mario Draghi will speak at 20:30 CET in Jackson Hole after market close in Europe. It is unclear to what degree he will stick to the labour market theme that at the moment is less decisive for monetary policy in the euro area. Fitch is expected to confirm its current triple-A rating of Denmark.

Source: FxWire Pro

Markets See Global Risk Rally on Negative ECB Rates

The event the market had been waiting for finally arrived: the ECB’s rate decision, and it was one for the history books. The central bank lowered its deposit rate by 10bps to -0.1%, main refinancing rate to 0.15%, and marginal lending rate by 30bps to 0.4%. In addition, the ECB announced that it would cease sterilizing its existing Securities Market Programme (SMP) bond holdings, make targeted very long-term loans to banks, and lay the groundwork for future purchases of asset-backed securities. The last point was viewed by market participants as the preliminary step before the central bank would begin broader asset purchases. The move by the ECB to negative deposit rates is unprecedented for a developed market central bank.

Effectively, Mario Draghi pushed a big portion of his chips into the middle of the table to combat deflationary forces in the eurozone by increasing the supply of available credit.

Risk assets responded accordingly, although the euro / US dollar cross recovered all of its losses and finished positive by the time US equity markets closed. Italian equities, as represented by the FTSEMIB, was the best performing group in Europe today, followed by France and Spain. European sovereign bonds also performed very strongly. The Italian 5-year bond yield fell by 12.4 basis points to 1.59%, below similar maturity US Treasuries.

US equities weren’t left out from the global risk rally. The S&P 500 (SPX) got off to a slow start, but ended up higher by 0.65%.  All 10 basic sectors of the S&P 500 gained on the day, led by industrials and financials. In the KBW Bank Index (BKX), all 24 of its components increased. On a beta-adjusted basis, the small-cap Russell 2000 (RUT) outperformed by 0.8%, and tech stocks saw similar gains.

There is another significant event for global markets this week: the US May nonfarm payrolls, which will be reported tomorrow morning at 8:30 a.m. EDT. Economists expect a net increase of 215,000 payrolls after an increase of 288,000 last month. Due to the severe drop in the participation rate, they expect unemployment to increase to 6.4% from 6.3% in April. Although this past Wednesday’s private payrolls report showed disappointing labor activity in May, market participants expect the government figure tomorrow to exceed expectations.

Outside of the US, Germany will report its April trade balance and industrial production. Also, Canada will report its May employment report at the same time as the US.

There are no major earnings reports scheduled.

 

Minyanville Daily Recap 14/05/2014

One of the morning’s big stories focused on comments from ECB Chief Economist Peter Praet, considered the de facto spokesman for President Mario Draghi. Praet stated that the central bank was prepared to lower its main lending rate, offer funding loans to banks, or set a negative deposit rate. Large-scale asset purchases would only be utilized if growth and inflation did not live up to the ECB’s projections. In addition, an unnamed source told Reuters that a rate cut was a near certainty for the June 5 meeting.

US Treasuries rallied strongly today after comments from Bank of England Governor Mark Carney indicated that the central bank would likely hold rates low until mid-2015, about a quarter longer than had been expected. This caused the gilt market to reprice toward that later date, and the 5-year gilt yield fell 11.1 basis points. Treasuries were dragged along on this rally, pushing the 10-year yield down as much as eight basis points and out of a trading range it has been stuck in all year. The yield of 2.53% was its lowest level this year.

The major US stock indices opened the day marginally lower and trended down for the remainder of the session. Selling intensified during the last hour, and the S&P 500 (SPX) closed down 0.47%, which left it back near the level it opened on Monday. Small-cap stocks noticeably underperformed while most emerging market equities gained. Consumer discretionary, industrials, financials, and consumer staples were all notable laggards in today’s session.

The producer price index of final demand for April rose 2.1% from a year ago, well above the 1.7% expected by economists and faster than the 1.4% rate last month. The increase was linked to a sizable jump in food prices and trade services. However, the market’s takeaway was that companies wouldn’t be able to pass on these recent input price increases and it was actually a negative. Tomorrow’s consumer price index will decide whether or not that concern is correct.

Tomorrow morning, the April consumer price index will be released, which will complete the other half of the inflation picture. Prices are expected to rise 2.0% from a year ago after increasing 1.5% in March. Because the producer price index showed such a dramatic increase in April, market participants will be watching closely to see if companies were able to pass along those price increases to consumers. Also scheduled to be released is the May New York regional manufacturing survey, the first of its kind for the month of May. The last two reports scheduled for tomorrow are March long-term capital (TIC) flows and weekly jobless claims.

The main catalyst for risk assets overnight is the preliminary release of Japan’s first-quarter GDP. Its result should have a significant effect on the USDJPY currency pair and, by extension, US equities. Also scheduled to be released are preliminary first-quarter GDPs from the eurozone, France, and Germany. The last piece of data is the final April eurozone consumer price index.

Tomorrow is the busiest day of the week for earnings, with 12 companies reporting. Notable reports include Wal-Mart (WMT), Kohl’s (KSS), J.C. Penney (JCP), Autodesk (ADSK), Nordstrom (JWN), and Applied Materials (AMAT).

Minyanville Daily Recap 08/05/2014

The main event early today was the ECB rate decision. The central bank left its benchmark interest rates unchanged, as was expected by the majority of economists. In his usual press conference, President Mario Draghi made the same comments as he did last month about the ECB’s monetary policy stance. However, in response to a question about when he might act, Draghi stated that the ECB was prepared to begin an asset purchase program as early as next month, when its staff would update its economic projections. (See: “Todd Harrison: The ECB Loads the Bazooka.”)

Energy was a very notable underperformer today. The EIA released its weekly natural gas inventories, which recorded a 74-billion-cubic-feet build versus expectations of 70 bcf. Natural gas was lower, which dragged down the stocks of a number of exploration and production companies. Gulfport Energy (GPOR) was also a major culprit for the sell-off today after reporting earnings in the pre-market and missing by a wide margin. The stock fell 19% amid a number of analyst downgrades.

The broader indices experienced another roller-coaster day. The S&P 500 opened up 0.55%, only to fall a full percent intraday, only to recover some of those losses by the close of the session. Small caps notably underperformed again after yesterday’s strong intraday turnaround.

High-beta tech stocks were generally weak today, with Tesla Motors (TSLA) leading the charge lower. Tesla fell 11.3% after reporting first-quarter earnings that were roughly in line with expectations, and thus not strong enough to satisfy bulls in the shaky market environment.

Internet security play FireEye (FEYE) traded higher in the early going, but it couldn’t hold its gains and finished down 4.19%. At $27.45, it’s now more than 70% off its $97.35 March high.

One tech name that bucked the larger trend was Twitter (TWTR), which rose 4.17% to $31.94 after Morgan Stanley (MS) upgraded the stock to equal-weight.

Two economic reports are scheduled for tomorrow, the March JOLTS Job Openings and Wholesale Inventories. The March report of inventories will be the last officially reported figure for the next round of first-quarter GDP revisions. Inventories are expected to grow 0.5% month-on-month after rising a similar amount in the month prior. The Job Openings report is judged by economists to be the “truest” gauge of labor market activity because it measures job leavers in addition to new hires.

Another set of important Chinese data is due out overnight: April consumer and producer price indexes. Consumer prices are expected to rise 2.1% year-on-year after rising 2.4% in the month prior. Also scheduled to be reported is Canada’s employment change, Germany and UK’s trade balances, UK manufacturing and industrial production, and the April GDP estimate for the UK.

Being Friday, it will be a light day for earnings. The only notable reports scheduled are Ralph Lauren (RL) and Hilton Worldwide (HLT).

Minyanville Daily Recap 14/04/2014

 

US markets attempted to bounce back today following stronger earnings from Citigroup (C) and a pickup in retail sales growth in March. Citigroup’s EPS of $1.30 beat the highest estimate of $1.20, which pushed the stock up 4.62% in today’s session. Retail sales in March rose 1.1% from the prior month, and February’s monthly growth was revised up to 0.7% from the earlier estimate of 0.3%. Although the strong auto sales in the month were a significant driver in the monthly gains, the “core” groups of food and beverage, merchandise, and building materials all showed solid growth.

The S&P 500 rose as much as 18.50 points by noon today, which was a gain of 24.75 points from the overnight futures low. However, all of the rally was erased late in the afternoon as selling intensified in small-cap stocks, only to see a sharp bounce in the last 30 minutes of the session erase the earlier selling. The S&P 500 finished the day up 0.82%, led by energy and materials stocks. Biotech, which has been under particular pressure recently, failed to close the session in the green, though it did hold important technical support near 213.

European indices started the day lower as investors remained cautious over new developments between Russia and the West over Ukraine. The Italian FTSEMIB was the strongest performer, which has typically been the most closely correlated to investors’ thoughts on potential easing from the ECB. Over the weekend, ECB President Mario Draghi said at a press conference in Washington that the increase in the EURUSD exchange rate posed a risk to price stability in the eurozone, which may require unconventional measures in response.

Earnings should be the dominant force in tomorrow’s trading as household names such as Coca-Cola (KO), Johnson & Johnson (JNJ), and the first large-cap tech companies such as Intel (INTC) and Yahoo (YHOO) report. There are two reports due out tomorrow that will be the first preliminary pieces of economic data for the month of April: New York’s regional manufacturing index and the NAHB survey of real-estate brokers and builders. Investors will be looking for more signs that the pent-up demand from the winter months continues in April.

The other economic report of significance is March’s consumer price index.

The Atlanta Fed will be holding a conference tomorrow in Stone Mountain, Georgia. Chairwoman Janet Yellen is scheduled to give the opening remarks via video at 8:45 a.m. EDT.

The UK will release its consumer and producer price index early tomorrow morning. Also, the German ZEW survey of market professionals’ thoughts on the current economic situation and expectations will be reported.

Minyanville Daily Recap 03/04/2014

The S&P 500 touched a new all-time high of 1893.8 this morning before profit-taking set in ahead of Friday’s big NFP report.

We saw very bearish action in high-beta stocks, with weakness in key leadership sectors like biotech, and by day’s end, the S&P was down 0.1%.

Biotech, which is largely viewed as a key indicator of investors’ willingness to embrace risk, sell 2.7%, as measured by the Nasdaq Biotechnology Index. With this decline, the group is now down 14.5% from the February 25 high.

Small caps also took it on the chin, with the Russell 2000 trading down 1.0%, and there was a nasty pullback in emerging markets. The stock markets of countries like Russia, Brazil, and China have been very hot as of late despite mixed global economic data trends, but all three sold off today.

Nonetheless, the action wasn’t all bad. US housing and financial stocks did slightly better than the major averages, and energy stocks finished nicely in the green as crude oil crossed the $100 mark.

On the economics front, as expected, the European Central Bank kept its benchmark interest rate at 0.25%. However, ECB President Mario Draghi emphasized that the Bank will maintain an accommodative monetary policy to battle the prospect of inflation.

Here in the US, the ISM Non-Manufacturing PMI rose to 53.1, which was slightly below the consensus reading of 53.5. obless claims were also a modest disappointment at 326,000, which was above expectations of 319,000.

US markets still feel like they’re working off some excess following 2013′s 30% pop, though that hasn’t yet translated to the major averages as the selling is happening in riskier stocks. One good illustration of the action is the big move up in utility stocks.

That group is up 8.6% year-to-date, and has continued going higher just as the aforementioned biotech and social media names have cratered. We’ve also seen nice, slow and steady upward moves in Big Pharma names like Pfizer (PFE) and Merck (MRK).

All eyes are on tomorrow’s March nonfarm payrolls report.

Current expectations call for a headline number of 200,000 with an unemployment rate of 6.6%.

Investors are looking for a rebound following the extended spell of bad weather that contributed to three straight weak reports. And given that the S&P is sitting near an all-time high, it’s fair to say expectations are a bit elevated.