Wednesday, January 18, 2017

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1 On Tap 7:00 a.m. 01/13 MBA Weekly Mortgage Applications Survey Composite Idx (previous 379.2), W/W% (previous +5.8%), Purchase Idx-SA (previous 241.9), W/W% (previous +6.1%), Refinance Idx (previous ), W/W% (previous +4.4%) 7:45 a.m. 01/14 The Retail Economist/Goldman Sachs Weekly Chain Store Sales Index Chain Store Sales, W/W% (previous +2.2%), Chain Store Sales, M/M% (previous +1.1%) 8:30 a.m. Dec Real Earnings 8:30 a.m. Dec CPI, M/M% (expected +0.3%), Core CPI, M/M% (expected +0.2%), Energy Idx, M/M% (previous +1.2%), Food Idx, M/M% (previous +0.0%), Real Avg Wkly Pay- Infla Adj, M/M% (previous -0.3%), CPI, Y/Y% (previous +1.7%), Core Annual, Y/Y% (previous +2.1%) 8:55 a.m. 01/14 Johnson Redbook Retail Sales Index Ret Sales Mo-to-Date, M/M% (previous -3.1%), Ret Sales Mo-to-Date, Y/Y% (previous +0.9%), Latest Wk, Y/Y% (previous +0.9%) 9:15 a.m. Dec Industrial Production & Capacity Utilization Industrial Production, M/M% (expected +0.6%), Capacity Utilization % (expected 75.4%), Net Chg (Pts) (previous -0.4) 10:00 a.m. Jan NAHB Housing Market Index Housing Mkt Idx (expected 69) 2:00 p.m. U.S. Federal Reserve Beige Book SNAPSHOT U.S. stock futures flat; dollar recovers; 10-year Treasury yield 2.346%; Nymex $51.67; gold $ Watch for: CPI data; Fed Beige Book released; industrial production numbers; Fed s Yellen, Kaplan and Kashkari speak; earnings from Citigroup, Goldman Sachs and Netflix OPENING CALL Global markets were broadly flat Wednesday, a further sign of the caution that permeates financial markets ahead of President-elect Donald Trump s inauguration later this week. The Stoxx Europe 600 remained mostly unchanged during the first minutes of European trade, with the technology sector as the biggest riser and media companies as the key losers. The FTSE 100 was flat, while futures pointed to a small opening rise for the S&P 500. Asian shares were mixed, but the main developed index, the Japanese Nikkei, closed higher. Financial markets have struck a prudent tone ahead of Mr. Trump taking office, with investors appearing to have some second thoughts about the risk-driven trades that have dominated since the U.S. election on Nov. 8. While Mr. Trump s antitrade rhetoric has long scared many analysts, markets initially decided to focus on his plans to slash taxes and regulations and boost infrastructure spending. Investors are now waiting for further clarity on such policies, as well as corporate earnings, to decide whether growth and inflation will come through or, rather, markets got ahead of themselves after the election. EQUITIES Bayer has pledged to add U.S. jobs and investment after meeting with Presidentelect Donald Trump, the latest in a string of public displays from companies looking to head off criticism from the incoming administration about job losses. The German chemical conglomerate, which is seeking regulatory approval for its planned $57 billion purchase of biotech seed maker Monsanto, said Tuesday it would step up research investments and create several thousand new high-tech positions in the U.S. after completing the deal targeted to close by the end of the year. The pledge came hours after General Motors separately confirmed a plan to invest a further $1 billion in its U.S. manufacturing operations, and Hyundai Motor outlined a new $3.1 billion investment in existing U.S. manufacturing plants. Theranos failed a second major U.S. regulatory inspection of its laboratory facilities, people familiar with the situation said, a setback the Silicon Valley blood-testing firm hasn t disclosed to investors or patients.

2 3:00 p.m. Federal Reserve Chair Janet Yellen speaks at a Commonwealth Club of California event 4:00 p.m. Nov Treasury International Capital Data 4:30 p.m. 01/13 API Weekly Statistical Bulletin Crude Stocks, Net Chg (Bbls) (previous +1.5M), Gasoline Stocks, Net Chg (Bbls) (previous +1.7M), Distillate Stocks, Net Chg (Bbls) (previous +5.5M), Refinery Runs Recent Analyst Ratings Actions Entravision Cut to Neutral From Outperform by Wedbush Noble Energy Raised to Neutral From Sell by Seaport Global The failed regulatory inspection-at its one active lab at the time-has put the company at risk of a new round of sanctions, these people said. Bain Capital has teamed up with a Chinese investor to acquire global retail-services firm Daymon Worldwide, for $413 million including debt, tapping the strong growth in Asia s retail market, according to announcements Tuesday from the consortium. Bain Capital and Shanghai-listed supermarket operator Yonghui Superstores will have a 60%-40% split in Delaware-based Daymon Worldwide, Yonghui said in a stock-exchange filing. Hewlett Packard Enterprise said Tuesday it would acquire data-storage startup SimpliVity for $650 million in cash, a steep discount to the startup s most recent $1 billion valuation. SimpliVity, founded in 2009, combines storage, computing and networking in the same box, essentially a server. This category of hardware, known as hyperconverged systems, is a fast-growing segment of an otherwise declining world-wide server market. FOREX In currencies, markets corrected the previous day s moves. The pound fell 0.7% against the U.S. dollar, after its impressive 3% surge Tuesday, the biggest daily rise in eight years. Sterling was bolstered by U.K. Prime Minister Theresa May pledging to subject the final Brexit deal to a parliamentary vote. The dollar rose 0.3% higher during early European trading hours, recovering from falls after Donald Trump s comments in the Wall Street Journal Tuesday sent the dollar to its biggest fall since June. Donald Trump s election win is making the dollar more volatile, according to Lee Hardman, currency analyst at Bank of Tokyo-Mitsubishi. The recent shift in the market s focus on to President elect Trump s more protectionist trade policies is challenging the initial favourable view that the U.S. dollar will strengthen on the back of looser fiscal policy and tighter monetary policy in the year ahead, he wrote. The comments highlight the risk that the Trump administration could adopt a weak U.S. dollar policy and attempt to talk down the currency to support the U.S. manufacturing sector, he added. At 5.50am ET, USD/JPY was at , EUR/USD was at $ and GBP/USD was at $ BONDS Bond yields in the U.S. and Europe rose to reflect investors belief that monetary policy is unlikely to become much looser in the future. After falling to 2.327% the previous day, the lowest closing since late November, yields on 10-year Treasurys recovered to 2.347%.

3 The moves came ahead of speeches by several Fed officials later Wednesday and follows a speech by San Francisco Fed President John Williams, who said he expects a small boost to growth over the second half of this year or next year from Donald Trump administration fiscal policies. Traders will closely monitor Wednesday evening s speech by Fed Chairwoman Janet Yellen in order to gauge whether interest rates are likely to rise at a faster or slower pace than they are currently expecting. Further signs of tighter-than-expected policy in the U.S. could depress Treasurys again, boosting the dollar. COMMODITIES On the New York Mercantile Exchange, light, sweet crude futures for delivery in February traded at $51.67 a barrel, down $0.81 in the Globex electronic session. March Brent crude on London s ICE Futures exchange fell $0.79 to $54.68 a barrel. Seen as the marginal producer, U.S. production is the key in narrowing the gap between supply and demand in oil, said Vivek Dhar, commodities strategist at Commonwealth Bank of Australia. So what will happen in the second half of the year when OPEC and others ramp up production again and the U.S. s production keeps growing? he said, forecasting oil to likely revert to the low $50 range after crawling up to the $55-60 range in the first half. In the near term, market watchers will also be following the fluctuation of the U.S. greenback, which has fallen around 2.5% since the beginning of the year. A depreciating dollar bodes well with foreign oil traders as the oil business is done in dollars. Political uncertainty continues to weigh on the markets, although strong fundamentals should keep prices trending higher, said ANZ Research. Gold fell to $1, in London. Other Top Stories Of The Day Deutsche Bank Completes $7.2 Billion Mortgage Security Settlement With U.S. Deutsche Bank completed a $7.2 billion deal to resolve U.S. claims that it misled investors on mortgage securities it sold before the 2008 financial crisis, authorities said.

4 Gradual Rise in Rates Will Sustain Economic Expansion, Fed s Williams Says San Francisco Fed President John Williams said he is taking the expected impact of fiscal policy into account in his economic forecasts, even though that impact remains uncertain. Trump Least Popular New President in at Least a Generation, Poll Finds As Donald Trump prepares to take the oath of office, a growing share of Americans disapprove of how he has handled his transition to the White House. Some 48% view Mr. Trump in a negative light, to 38% in a favorable one, a new Wall Street Journal/NBC News poll finds. Trump s Commerce Department Pick Wilbur Ross to Sever Ties to His Firm to Avoid Financial Conflicts President-elect Donald Trump s pick to run the Commerce Department promised to cut most-but not quite all-of his ties to the private-equity firm that made his name to avoid illegal financial conflicts in the cabinet role. Trump, Boeing CEO Discuss Air Force One Requirements Boeing Chief Executive Dennis Muilenburg said after a meeting with President-elect Donald Trump that they discussed simplifying the requirements for the new planes that would serve as Air Force One. Today In Canada Earnings scheduled Canadian Pacific Railway, Q results (after the close) Economic Indicators (all times ET) none

5 Stocks to watch Goldcorp gained 64 cents or 3.3% while Iamgold rose 2.2% in Tuesday trade, although the TSX was weighed down by industrial and bank stocks, with Air Canada losing 1.8% or 25 cents. Calendar items (all times ET) Bank of Canada interest rate announcement at 10am Employment insurance data at 8:30am

Energy MLP Strategy. PORTFOLIO MANAGER COMMENTARY Fourth Quarter Key Takeaways

Energy MLP Strategy. PORTFOLIO MANAGER COMMENTARY Fourth Quarter Key Takeaways Fourth Quarter 2017 Energy MLP Strategy Key Takeaways Michael Clarfeld, CFA Managing Director, Portfolio Manager Global crude oil demand growth is outstripping global supply growth driving inventory reductions