Monday, May 22, 2017 - Dow Jones

[Pages:4]Monday, May 22, 2017

On Tap

8:30 a.m. Apr Chicago Fed National Activity Index NAI (previous 0.08), NAI, 3mo Moving Avg (previous 0.03)

10:00 a.m. ISM Semiannual Report On Business & Economic Forecast

10:05 a.m. Patrick Harker speaks at Jefferson College Commencement Ceremony

N/A Trump's full FY'18 Budget proposal released this week, following 'skinny budget' in March

N/A Trump continues Saudi Arabia / Israel / Palestinian Authority / Vatican City / Italy / Belgium trip

Recent Analyst Ratings Actions

None as of 6 a.m. ET.

OPENING CALL

U.S. futures and European stocks were steady Monday as market focus shifted from the White House to a meeting of major oil producers later this week.

Stock futures point to a flat opening for the S&P 500, after U.S. bourses recovered from a midweek drop with their best day in nearly a month on Friday.

The Stoxx Europe 600 swung between small gains and losses in morning trading and was last up 0.2%, following advances in Hong Kong and Japan.

A climb in oil prices and Chinese iron-ore futures boosted commodity-linked stocks on Monday, supporting shares of energy companies and miners.

Stock investors have been watching the oil price this year, but it hasn't had the same close ties to wider stock markets it had in early 2016, when it fell below $30 a barrel and briefly moved in lockstep with the S&P 500.

Many investors this week will be watching for minutes from the Federal Reserve's May policy meeting, due on Wednesday, for any hints at when it might start to reduce its $4.5 trillion balance sheet and how that could affect the course of interest rates. Investors currently see a 78.5% chance of a rate rise in June, according to fed-fund futures tracked by CME Group.

Hong Kong's Hang Seng Index rose 0.9%, on track for a 22-month closing high, while South Korea's Kospi gained 0.7%, above the closing record set earlier this month. Investors largely shrugged off further missile tests by North Korea over the weekend.

EQUITIES

Huntsman and Switzerland's Clariant have reached an agreement to merge in an all-stock deal that would create a chemicals giant worth about $14 billion, as companies in the industry seek ways to cut costs and boost revenue.

The deal, which was announced Monday, will see Clariant shareholders owning about 52% of the new entity, and Huntsman investors will own the rest-based on their current values. Huntsman Chief Executive Peter Huntsman is to hold that title at the new company with Clariant CEO Hariolf Kottmann taking the chairman role. The new group, with board representation evenly split, is to be called HuntsmanClariant.

The deal would create a trans-Atlantic company valued at about $20 billion including debt.

Ford will replace Chief Executive Mark Fields with Jim Hackett, the former head of office-furniture maker Steelcase who joined the auto maker in 2016, according to people familiar with the matter.

The move comes amid a significant decline in share-price value during Mr. Fields ` three-year tenure, and recent pressure on profits and market share. The Wall Street Journal reported on the board's deliberations on a management shake-up Sunday evening.

Monday, May 22, 2017

FOREX

In currencies, the WSJ Dollar Index edged up 0.1% Monday following its worst week since July 2016. Currency Strategist Ilya Spivak said the focus will be on speeches of Fed officials scheduled this week. "An upbeat tone suggesting officials are looking through recent U.S. political jitters and intend to press on with a program of interest rate hikes may offer a boost to the U.S. Dollar," he said. James Bullard, president of the St. Louis Federal Reserve, has said that he might not oppose another rate increase. This week investors will also keep an eye on the release of the minutes of the last meeting of the Federal Open Market Committee.

BONDS

10-year U.S. Treasury yields inched higher to 2.252% compared with 2.243% on Monday. One fallout from last week's political turbulence was some wavering in investors' confidence that the Federal Reserve will raise interest rates next month. The Fed has sometimes been hesitant to raise interest rates during periods of volatility. Yet there were signs by Friday of calm returning to the markets, with stocks rising along with bond yields for the second consecutive session. Yields on 10-year Spanish debt rose to 1.583% from 1.555% Friday after Spain's Socialists re-elected a former party leader who had taken a hard line against conservative Prime Minister Mariano Rajoy, raising the chance of new parliamentary elections within the next year. German bund yields edged down to 0.363% from 0.364%.

COMMODITIES

Oil prices continued to climb on Monday, pushing futures to their highest levels in more than a month, ahead of Thursday's meeting of OPEC. Brent crude rose 0.8% to $54.02 a barrel on London's ICE Futures exchange. Nymex was trading up 0.8% at $50.71 a barrel. Major oil producers will join OPEC members in Vienna to discuss extending their 6month agreement to cut production by 1.8 million barrels a day set to expire in June. There's near-unanimity among watchers that the deal will be extended. Sentiment regarding a new deal has helped oil rebound 10% over the past two weeks. "Crude is increasingly pricing in expectations that production cuts will be rolled over into 2018," said consultancy JBC Energy, adding that maintaining the cuts beyond the original six-month period is critical to keeping WTI above $50.

Monday, May 22, 2017

Gordon Kwan, head of regional energy research at Nomura, said deeper production cuts of more than 2 million barrels a day may be on the card as Saudi Arabia is showing signs of impatience with the pace of rebalancing, which is happening slowly as U.S. producers have stepped up output this year. The investment bank estimates OPEC has been 90%-compliant with the promised cuts so far, but the rebalancing of supply and demand could still be as far as 18 months away, after the build-up of stocks over the past three years. The risk of a long extension to the cuts is that it could further encourage U.S. shale output, said Capital Economics. But even with higher U.S. supplies, the oil market under OPEC-led production caps would eventually move towards a "significant deficit." U.S. shale oil producers have been steadily ramping up production with the EIA forecasting U.S. output to hit an all-time record of nearly 10 million barrels a day in 2018. The U.S. oil rig count, an indicator of activity in the sector, rose by 8 to 720, according to weekly data published by oil-field services company Baker Hughes on Friday.

Other Top Stories Of The Day

White House to Roll Out Trump's First Budget Proposal With Little Fanfare

President Donald Trump's first complete budget will be submitted to Congress this week with little fanfare and while Mr. Trump is overseas, an unusual move for the nation's chief executive.

U.S., Europe Face Divisions Over Iran Policy

The landslide re-election of Iranian President Hassan Rouhani threatens to put the Trump administration on a collision course with Europe over future policy toward Tehran.

Trump's Visit Cements Saudi Support, Avoids Thorny Regional Issues

The president's decision to visit Saudi Arabia and Israel before other countries-and his warm rhetoric for their leadership-signals a shift away from former President Barack Obama's policy in the region.

Monday, May 22, 2017

NATO to Take Action on Trump Spending Call

The North Atlantic Treaty Organization, under pressure from the Trump administration, is planning a new spending initiative that will use additional money to fill armament gaps, according to a draft of the proposal.

Today In Canada

Canadian Financial Markets are closed today due to Victory Day.

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