Morning Preview: July 01, 2019

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Early Look

Monday, July 1, 2019

Futures

Up/Down

%

Last

DJ Industrials

281.00

1.06%

26,874

S&P 500

33.50

1.15%

2,978

Nasdaq

136.50

1.77%

7,829

 

 

Stock futures are starting the week with strong gains following positive and surprise developments this weekend at the G20 meeting in Osaka Japan. In Asian markets, The Nikkei Index jumped 454 points to 21,729, the Shanghai Index spiked 66 points (2.22%) to settle at 3,044 and the Hang Seng Index was closed. In Europe, the German DAX is up about 160 points to 12,550, while the FTSE 100 is higher by about 80 points to move above 7,500. This weekend’s G20 meeting of world leaders produced several market moving stories, with the two biggest being 1) President Donald Trump and China’s Xi Jinping agreeing to a cease-fire Saturday amid the ongoing trade war between the two power house countries, averting an escalation feared by financial markets. Trump said existing U.S. tariffs would remain in place against Chinese imports while negotiations continue, but that additional tariffs he’s threatened to slap on billions worth of other Chinese goods will not be triggered for the “time being.” Trump also said he would allow US companies to sell equipment to Huawei Technologies (a boost for several US tech companies) and that China would start buying large amounts of American farm products in return. 2) President Donald Trump became the first sitting U.S. president to set foot in North Korea when he met its leader, Kim Jong Un, in the Demilitarized Zone between the two Koreas and agreed to resume stalled nuclear talks. Kim added that he was “surprised” when Trump issued an unorthodox meeting invitation by tweet on Saturday. On a sour note overnight, PMI manufacturing data points in Europe and Asia dropped sharply, renewing concerns about slowing global growth, with data showing declines back into contraction territory for China and Japan (see more below). In the oil space, prices jumped on reports Saudi, Russia support for supply cuts at upcoming meeting in Vienna the next two days. Meanwhile, gold was on track for its biggest sell-off in more than a year as relatively positive results from the G20 summit in Japan triggered a retreat from defensive assets.

 

Market Closing Prices Yesterday

·     The S&P 500 Index climbed 16.84 points, or 0.58%, to 2,941.76

·     The Dow Jones Industrial Average rose 73.38 points, or 0.28%, to 26,599.96

·     The Nasdaq Composite gained 38.49 points, or 0.48%, to 8,006.24

·     The Russell 2000 Index advanced 20.02 points, or 1.29% to 1,566.57

 

Events Calendar for Today

·     9:45 AM EST      Markit US Manufacturing PMI, Jun-F…est. 50.1

·     10:00 AM EST    ISM Manufacturing for June…est. 51.0

·     10:00 AM EST    Construction Spending, for May…est. 0.0%

 

 

Macro

Up/Down

Last

WTI Crude

1.52

59.99

Brent

1.61

66.35

Gold

-20.10

1,389.40

EUR/USD

-0.0045

1.1328

JPY/USD

0.46

108.31

10-Year Note

+0.013

2.019%

 

 

World News

·     China June Caixin Manufacturing PMI reported at 49.4 vs. est. 50.1 (back into contraction territory), while Taiwan’s PMI fell to 45.5, its lowest levels since 2011

·     Japanese manufacturing activity contracted in June to hit a three-month low, as the Japan Manufacturing Purchasing Managers’ Index (PMI) dropped to a seasonally adjusted 49.3 from 49.8 in May, and also down from a preliminary reading of 49.5

·     Japan’s large manufacturers deteriorated to the weakest level in nearly three years in the three months to June amid growing trade tensions as the main index measuring large manufacturers’ sentiment was at plus 7 in the April-June period, compared with plus 12 in the previous March survey, according to the Bank of Japan’s quarterly tankan survey

·     IHS Markit said its UK Purchasing Managers Index for the manufacturing sector fell to 48.0 in June from 49.4 in May, hitting its lowest level since February 2013

·     Hong Kong’s leader pledged Monday to be more responsive to public sentiment, as police faced off with protesters outside a ceremony marking the 22nd anniversary of the former British colony’s return to China

 

Sector News Breakdown

Consumer

·     Performance Food Group Co. has agreed to acquire privately held rival Reinhart Foodservice for $2 billion in a bid to build scale and tackle rising costs. https://on.mktw.net/2FLMDPH

·     Carnival (CCL) mentioned positively in Barron’s saying after having dropped recently on reduced 2019 financial guidance, the shares now look like a bargain, and given the earnings disappointments, Carnival could be ripe for an activist investor

·     Six Flags Entertainment (SIX) was upgraded to overweight from sector weight at KeyBanc

·     KB Home (KBH) upgraded to Neutral from Sell at BTIG

 

Energy, Industrials & Materials

·     Russia and Saudi Arabia have agreed to extend the OPEC oil production cuts deal by another six to nine months, Russian President Vladimir Putin said at the G-20 leaders’ summit in Japan. OPEC and non-members meet on July 1-2 to renegotiate the pact which expires June 30. The current deal called for production cuts of 1.2 million barrels a day.

·     Investment firm Brookfield Asset Management Inc has agreed to acquire U.S. freight railroad owner and operator Genesee & Wyoming Inc (GWR) for close to $9 billion, including debt, people familiar with the matter said on Sunday. https://yhoo.it/2RMcEmO

·     PG&E Corp. (PCG) is lobbying for legislation that would allow the bankrupt California utility giant to securitize some of its profits to pay for past wildfire liabilities, Bloomberg reported

·     Halliburton Co. (HAL) and state-owned Kuwait Oil Co. signed a 181.4 million-dinar ($597 million) contract to explore for oil off the coast of Kuwait,

 

Healthcare

·     AbbVie (ABBV) mentioned in Barron’s noting its purchase of Allergan (AGN) might not help fix the stock price as sales of Humira account for more than half of AbbVie’s (ABBV) annual revenue and with the drug losing U.S. patent protection in 2023, the company has been running short on time to figure out how to fill that gap

 

Technology, Media & Telecom

·     Applied Materials Inc. (AMAT) said that it is buying Kokusai Electric Corp. for $2.2 billion in cash from global investment firm KKR & Co. (KKR)

·     Pareteum (TEUM) reports preliminary Q2 revenue will exceed $26.2M, in-line with consensus of $26.18M while reports preliminary Q2 adjusted EBITDA will exceed $4.1M

·     WPP (WPP) has agreed to sell its stake in Chime, the communications group, to majority shareholder Providence

·     Roku’s (ROKU) mentioned in Barron’s noting that shares have more than tripled in 2019 but while the company has not announced big financial news since it last reported quarterly results in May and did not have its rating slashed by any Wall Street analysts

·     The Number 1 film this weekend was once again “Toy Story 4,” which added $57.9 million from domestic theaters, down 52% from its debut last weekend. Globally the film has already netted $496.5 million. Of the top grossing films of 2019, Disney (DIS) now occupies the top four spots with “Avengers: Endgame,” ‘’Captain Marvel,” ‘’Aladdin” and “Toy Story 4.”

·     Zoom Media (ZM) downgraded to sell from neutral at Goldman Sachs

·     Facebook Inc (FB) will ban ads that discourage people from voting ahead of the 2020 U.S. presidential election, according to its second annual Civil Rights Audit published on Sunday

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Market commentary provided by Hammerstone Markets, a division The Hammerstone Group, a firm separate from and not affiliated with Regal Securities L.P. Regal Securities L.P. has not participated in the creation of the content, and does not explicitly or implicitly endorse the content.

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