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Pres. Trump is weighing exiting from WTOs $1.7 trillion procurement pact

  
Analysis, Politics
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Pres. Trump on WTO procurement pact

The WTO procurement pactregulates the procurement of goods and services by the public authorities of the parties to the agreement, based on the principles of openness, transparency and non-discrimination.

The aim of the Agreement is to mutually open government procurement markets among its parties, consistent with principles of reciprocity. There are 48 nations in the pact.
The government procurement agreement (GPA) parties opens procurement activities worth an estimated USD 1.7 trillion annually to international competition (i.e. to suppliers from GPA parties offering goods, services or construction services).

ADP employment report due out Today

  
  Analysis
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Trade data and ISM non manufacturing indices due out tomorrow

Tomorrow in the North American session will have the ADP employment report for the month of January will be released at 8:30 AM ET/1330 GMT.  The estimate is for 158K. That near the expectations for nonfarm payroll on Friday of 162K.
The ADP is supposed to track the NFP numbers, but there can be some divergences as well.
The largest disparities came in November 2019 when  nonfarm payroll was higher than ADP by 122K.
Back in February 2019 there was a larger disparity of 164K. However, in that month the ADP was higher than the nonfarm payroll.
The last 12 months has shown ADP vs NFP:
  • Dec 202K vs 145K
  • Nov 124K vs 256K
  • Oct 121K vs 156K
  • Sept 93K vs 180K
  • Aug. 157K vs 168K
  • July 142K vs 159K
  • June 112K vs 193K
  • May 41K vs 72K
  • April 271K vs 224K
  • March 151K vs 189K
  • Feb 197K vs 33K
  • Jan 300K vs 311K
The differences are:
  • Dec ADP +57
  • Nov NFP +122K
  • Oct NFP +35K
  • Sept NFP +87K
  • Aug NFP +11K
  • July NFP +17K
  • June NFP +81K
  • May NFP +31K
  • April ADP +47
  • March NFP +38K
  • Feb ADP +164K
  • Jan NFP +11K
The ADP average has been 159.25K
The NFP average has been 173.83K
So on average the ADP lags the NFP by about 14K.
Nine of the last 12 months had NFP higher.
There were only 3 months (including the last report), where the ADP was higher than NFP.
The releases tomorrow include:
  • MBA mortgage applications. Last week they rose by 7.2%
  • US trade balance for December will be released at 8:30 AM ET/1330 GMT with estimates of -48.2 billion versus -43.1 billion and November
  • Canada will also release their international merchandise trade for December at 8:30 AM/1330 GMT. The estimate is for C$-0.61 billion versus C$-1.09 billion last month
  • Markit US services PMI for January (F) is expected to come in at 53.2. That is unchanged from the preliminary reading. The composite index has no estimate but last month it was at 53.1
  • ISM nonmanufacturing index for January is expected to come in at 55.1 versus 54.9 in December
Tonight at 9 PM ET, Pres. Trump will present the State of the Union address. He is expected to focus on the economy.

NASDAQ index closes at a record today and up 2.10%

  
Analysis, US Market

S&P and NASDAQ also advance nicely

The NASDAQ composite index is closing at a record level today and rose by 2.10%.  Although the S&P and Dow lagged but still rose by about 1.5%.

The final numbers are showing:
  • S&P index up 48.66 points or 1.5% at 3297.59
  • Nasdaq rose 194.57 points or 2.10% at 9467.97
  • Dow rose 407.82 points or 1.44% at 28807.63
Big gainers for the day included:
  • Tesla, +13.55% however after reaching a high of $968.85, the stock did lose ground into the close and is ending at $886
  • Slack, +10.87%
  • United Airlines, +5.37%
  • First Solar, +4.84%
  • Alibaba, +4.57%
  • Beyond Meat, +4.19%
  • Tencent, +3.67%
  • Delta Air Lines, +3.35%
  • Apple, +3.29%
  • Microsoft, +3.29%
  • Micron, +3.2%
  • Charles Schwab, +3.15%
  • Netflix, +3.06%
  • Caterpillar +2.9%
Losers on the day included:
  • Chewy, -3.05%
  • Alphabet, -2.51%
  • General Mills, -0.83%
  • Northrop Grumman, -0.53%
  • McDonald’s, -0.21%

European shares and sharply higher on risk on flows

  
Analysis, Global Indices

German DAX, +1.76% is the biggest one-day gain since October 11

The European stock market was also invited to the “risk on” party today.  All the major indices are up sharply. The German DAX has enjoyed its biggest one-day gain since October 11.  Party on.

The provisional closes are showing:
  • German DAX, +1.76%
  • France’s CAC, +1.68%
  • UK’s FTSE 100, +1.53%.  That is the biggest one-day in 7 weeks
  • Spain’s Ibex, +1.64%
  • Italy’s FTSE MIB, +1.64%
In the European debt market, the 10 year benchmark yields are also mostly higher (the exception is in Italy) as risk fears abate.
German DAX, +1.76% is the biggest one-day gain since October 11In other markets, risk on flows are pervasive:
  • spot gold is now down $24.28 or -1.54% at $1552.43
  • WTI crude oil futures are higher by $0.50 or 1.0% at $50.61, but they are still off the sessions high $51.55. The low today at $49.66 was the lowest level since January 2018.
In the US stock market, the NASDAQ index is up nearly 2% on the day (amazing). The snapshot currently shows:
  • S&P index up 55.34 points or 1.7% at 3304.27
  • NASDAQ index is up 184.55 points or 1.99% at 9458
  • DOw is up 490 points or 1.73% at 28890.34
In the US debt market yields are also higher with the 5 year up 7.5 basis points and the 10 year up 7.2 basis points:

Michael Bloomberg climbs into 2nd place on PredictIt for Democratic nominee

  
Analysis, Politics
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Michael Bloomberg is going to get a chance to make his case

Michael Bloomberg is going to get a chance to make his case
We’re still waiting for results from the Iowa caucus but it’s expected to be a win for Bernie or Pete Buttigieg. The story in betting markets, however, is the poor performance from Joe Biden. The market is coming around to the idea that he can’t win and that establishment voters may turn elsewhere.
That leaves Klobuchar, who remains distantly behind, and Bloomberg, who is having his moment.
The billionaire has risen to 20% on PredictIt and passed Joe Biden. I think he lacks the charisma and ability to connect with people to sustain any real momentum, but he certainly has the deep pockets to sustain a run.
If he loses to Bernie, he’s ruled out a 3rd party run but I’m sure he will be dogged by those questions.

Eurostoxx futures +0.5% in early European trading

  
Analysis, Global Indices

The more positive tone reverberates to Europe in early trades

  • German DAX futures +0.6%
  • French CAC 40 futures +0.5%
  • UK FTSE futures +0.7%
This largely mirrors the more positive mood seen in US futures, which are up by ~0.7% currently. The market continues to view that fears of the coronavirus outbreak are receding and that is also helping to push bond yields and yen pairs higher so far today.

Chinese stocks fall offer phoenix entry

  
  Analysis

Low enough for you?, via Bloomberg

____Low enough for you?, via Bloomberg 
The Chinese open was always going to be bad with all the stored up coronavirus fears released in one go after the extended lunar New Year holiday. The open was as bad as feared, if not slightly worse, with the Shanghai Comp opening down more than -8.0% at the start of the week and the CSI300 down more than -9.1%. This was the worst opening in nearly 13 years.
This price drop was a 3+ standard deviation and took valuations back to 12 months lows. Statisticians put this kind of event in the ‘outlier’ section. The attraction of a day like yesterday is that for investors who are bullish on China’s outlooks this does offer a tempting entry point. The Shanghai Composite was trading yesterday at 9.7 times prejected full year earning which is just over half the ration for the S&P 500.
The PBOC is actively supporting the Chinese economy and a number of large, longer term investors will be drawn off the sidelines to these bargain prices. Of course whether it is a bargain or not turns on the further outbreak/containment on the coronavirus.

CSI 300

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