Author Archives: Lenore Hawkins & Chris Versace

About Lenore Hawkins & Chris Versace

Lenore Hawkins serves as the Chief Macro Strategist for Tematica Research. With over 20 years of experience in finance, strategic planning, risk management, asset valuation and operations optimization, her focus is primarily on macroeconomic influences and identification of those long-term themes that create investing headwinds or tailwinds. Chris Versace is Tematica's Chief Investment Officer and editor of Tematica Investing newsletter. All of that capitalizes on his near 20 years in the investment industry, nearly all of it breaking down industries and recommending stocks.
Daily Markets: Markets Feverish Again Over Contagion Fears

Daily Markets: Markets Feverish Again Over Contagion Fears

Yesterday US investors were surprised to see the market suddenly drop around midday, the Dow falling almost 400 points at one point, with no one clear, obvious catalyst. The suspected culprit was a report of new coronavirus cases at a Beijing hospital combined with other reports of the outbreak accelerating outside of China.

The coronavirus is once again front and center for investors today with stocks in Asia closing mostly in the red except for the major Chinese indices on word that the return to work is accelerating in the major foreign trade provides. The Shenzhen Composite gained 1.1% and the Shanghai Composite 0.3%. South Korea, on the other hand, saw its Kospi drop 1.5% after reporting the first confirmed death in the country from COVID-19 on top of having the highest number of people infected with the virus outside of mainland China.

The major European indices were all in the red…

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Daily Markets: Morgan Stanley (MS) to Buy E-Trade for $13 Billion

Daily Markets: Morgan Stanley (MS) to Buy E-Trade for $13 Billion

The main equity indices closed mostly in the green in Asia today after China cut its 1-year loan prime rate (LPR) by ten basis points and its 5-year by five basis points. This move comes after the People’s Bank of China had earlier cut the rate on $28.65 billion worth of 1-year medium-term lending facility loans to financial institutions from 3.25% to 3.15% on Monday. The rate cut was widely anticipated and is another layer in China’s efforts to limit the economic impact of the coronavirus.

As of yesterday, China’s National Health Commission had reported an additional 114 deaths from COVID-19, and 394 confirmed new cases for a total of 2,118 deaths and 74,576 cases. The number of new cases dropped dramatically, giving investors hope that we may have seen the worst of it, a hope that was furthered by the announcement from Foxconn today that it is cautiously restarting production at its primary plants in China. The Hubei province has asked that work not resume before March 11 – suspension for many firms was previously due to end February 21. South Korea reported 22 new confirmed cases with a potential first death from the virus that remains under investigation.

Shares in Europe were modestly in the red as of midday trading with US futures pointing to a slightly lower open after the Nasdaq Composite and S&P 500 closed at new highs yesterday.

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Daily Markets: Investors Aren’t Bugged By This Virus

Daily Markets: Investors Aren’t Bugged By This Virus

The major equity indices in Asia bounced back from their recent slides shrugging off a growing list of companies warning over the impact of the coronavirus as all but the Shanghai composite closed in the green today. By midday, the main European equity indices were also in the green and US equity futures point to a slight rise at the open after yesterday’s opening dip that reversed into a new record high for the Nasdaq Composite while the S&P 500, Dow and Russell 2000 closed down 0.3%, 0.6% and 0.2% respectively.

US Treasury yields are falling across the board…

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Daily Markets: Apple (AAPL) Reveals Coronavirus Will Affect Revenue Expectations

Daily Markets: Apple (AAPL) Reveals Coronavirus Will Affect Revenue Expectations

Last Friday we noted traders would likely take a cautious stance heading into the long weekend that saw US equity markets closed yesterday in observation of Presidents’ Day and we were correct in our thinking as stocks gave back most of their gains to finish the day little changed. That concern proved to be on the nose as Apple (AAPL) pre-announced that it would not meet its revenue expectations for the current quarter that it laid out on Jan. 28, which was wider than usual as the company looked to account for the impact of the coronavirus – see more in Stocks to Watch. 

As we’ve all come to realize in recent weeks, the scope of the virus’s impact has been far greater than many initially expected and even as China looks to get back to work, that resumption has been slower than expected. This morning we are seeing that play out in the latest ZEW Indicators for both the Eurozone and Germany, and as we point out in today’s Data Download China is a larger trading partner for the US than Germany, and likely means we will be hearing more reports like the one from Apple in the coming days. 

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Daily Markets: Cupid’s Arrow Missing Today’s Markets

Daily Markets: Cupid’s Arrow Missing Today’s Markets

Love may be the theme for today’s Valentine’s day, but the markets are mostly feeling, “I think I’ll just throw on my comfy sweats, grab a pint of ice cream and go for a Netflix marathon.” Or maybe that’s just us.

Yesterday investors continued to reassess risk concerning COVID-19, leaving the major US indices little changed. Today Asia closed mostly in the green, albeit just slightly, except for Japan’s Nikkei, which closed down just over 0.5%. Markets in Europe were mixed by mid-day trading, but little changed either way. US equity futures point to a slight increase at the open – another day with little direction.

Perhaps cupid and his arrows have investors distracted ahead of the long weekend in the US? Given Presidents’ Day in the US is Monday, markets will be closed so we wouldn’t be surprised to see traders taking a cautious stance into the weekend to avoid any COVID-19 surprises before markets re-open on Tuesday.

The tariff reductions agreed to as part of the phase one U.S-China trade deal…

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Daily Markets: Stocks Kick Into High-Gear Risk-On Mode

Daily Markets: Stocks Kick Into High-Gear Risk-On Mode

Stocks continued to shrug off concerns over the coronavirus and kicked into high-gear risk-on mode. The Nasdaq 100 and Nasdaq Composite both hit new all-time highs. The VIX dropped 10% yesterday alone and the yield on the US 10-year rose 7 basis points. Absent from the party were WTI crude, which fell another 1% to hit a new 52-week low, and Utilities, the only sector to finish the day lower.

That risk-on mode continued today in Asian equities, which moved higher including those in China despite the number of confirmed coronavirus cases in China exceeding 24,000 and the death count approaching 500. While the World Health Organization said this morning that there is still no known treatment at this time, there were reports that scientists are making breakthroughs with a vaccine for the coronavirus. Speculation continues to point to further stimulus moves by the People’s Bank of China as it looks to offset the impact of the coronavirus, including lowering its loan prime rate on Feb. 20, and cut banks’ reserve requirement ratios in the coming weeks.

We think we can safely place “don’t fight the PBoC” alongside the popular investor mantra that is “don’t fight the Fed.”

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Daily Markets: China Stimulates Markets, the Iowa Debacle and Trump’s State of the Union

Daily Markets: China Stimulates Markets, the Iowa Debacle and Trump’s State of the Union

Yesterday the major indices reversed a bit of the decline since fears over the coronavirus began. The Nasdaq 100 lead the major US indices, gaining 1.5%, the Nasdaq Composite 1.3%, the S&P 500 0.7% and the Dow 30 0.5% while the CBOE Volatility Index (VIX) lost 4.6%. The oil market continues to suffer with estimates that China’s oil consumption could decline by as much as 20%. 

Despite a second coronavirus death being reported outside of China and the number of confirmed coronavirus cases in China exceeding 20,000 with the death count surpassing 400, the speed of the virus’s international increase appears to have slowed compared to last week, This potential good news coupled with another round of stimulus from the People’s Bank of China — another $71.2 billion of liquidity via reverse repo agreements on top of the $143 billion injection on Monday — led Asian markets to end the day higher, including a rebound in the Shanghai Index today.  European equities have followed suit and are up across the board while US equity futures point to a vibrant market open. 

If you were expecting to read about the results of the Iowa Caucuses, we are sorry to inform you that an “election debacle” unfolded yesterday as the Democratic Party found “inconsistencies in the reporting.” According to Mandy McClure, the state party’s communications director, “The underlying data and paper trail is sound and will simply take time to further report the results.” Results could be released as soon as late today. 

While this could make for some interesting barbs as we get ready for tonight’s annual State of the Union Address…

Read more herehttps://www.nasdaq.com/articles/daily-markets%3A-china-stimulates-markets-the-iowa-debacle-and-trumps-state-of-the-union

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Daily Markets: Markets Grapple With GDP Impact Of Coronavirus

Daily Markets: Markets Grapple With GDP Impact Of Coronavirus

As we get ready to close the books on January, gains in equities earlier in the month have come under pressure as the coronavirus continues to expand. Earlier today China’s National Health Commission confirmed there have been 9,692 confirmed cases of the coronavirus, with 213 deaths, but reports suggest the virus has reached at least 18 counties. The U.K. confirmed its first two cases of coronavirus on Friday, while the U.S. and Japan advised citizens avoid traveling to China. We’d remind readers that yesterday the World Health Organization (WHO) labeled the virus a “global health emergency” and the US State Department elevated its China travel advisory to Level 4 –  “Do Not Travel.”

Investors and economists are now attempting to assess the impact of this moving target on the global economy and corporate earnings.

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Daily Markets: Coronavirus Beginning to Have Material Impact On Economy, Stocks

Daily Markets: Coronavirus Beginning to Have Material Impact On Economy, Stocks

In yesterday’s Daily Markets note, your authors shared that as equity markets looked to shrug off the mounting coronavirus news, our suspicion that we had yet to see the real fallout on economic growth and earnings expectations. It would seem we were correct in that thinking. Overnight economists updated their forecasts in an attempt to size up that potential economic impact, and it is weighing on global equities. With more than 7,700 people being infected by the virus and the World Health Organization saying the spread of the virus outside of China is a “grave concern,” one Chinese economist estimated the virus could hit China’s GDP by 1-5% while economists from Nomura shared the “outbreak could cause China’s real GDP growth to shrink to below 4% from the 6% pace.”  We suspect these are only the first few revisions to be had in the coming days.

Below in today’s note, we call out various companies who have announced changes to their operations as a result of the virus below, but we’d like to point out that the sheer magnitude of work that is being put on hold cannot help but have an impact on global supply lines as well. Add this to the impact of the ongoing trade war and you have some material headwinds to global growth.

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Daily Markets: The 737 Max Crisis Hits Boeing’s Earnings

Daily Markets: The 737 Max Crisis Hits Boeing’s Earnings

As your authors commented to each other when discussing yesterday’s market rebound following the coronavirus inspired sell-off on Monday – “that didn’t last long!”  The Nasdaq 100 lead the rebound, gaining 1.6% on the day with the Nasdaq Composite a close second, up 1.4%. The S&P 500 and Dow Jones Industrial Average rose 1.0% and 0.7% respectively and the CBOE S&P 500 Volatility Index (VIX) fell 10.7%. Helping fuel the rebound were a number of high-profile December quarter earnings reports that delivered better than expected results, but in some cases offered a cautiously optimistic outlook as managements continue to assess the impact to be had from the virus – see Stocks to Watch below.  

The number of confirmed coronavirus cases in China approached 6,000 with total deaths reaching more than 130, prompting the Hong Kong Hang Seng fell 2.8% to a seven-week low on the first day of trading after the Lunar New Year holiday. China’s financial markets will remain closed until next Monday after authorities extended the Lunar New Year break by three days as they grapple with the worsening virus that has now recorded more cases than SARS. The People’s Bank of China reiterated plans to use its tools to ensure liquidity once the interbank market reopens on Feb. 3. And as the number of reported coronavirus cases continues to grow, we can add the United Arab Emirates to that list as the first cases of the virus were reported earlier today. 

The Trump administration is reportedly considering a temporary ban on all flights from China to the U.S., and…

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