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18Apr2017 Market Commentary: Wall Street Opens Fractionally Lower, Corporate Earnings Not So Good, Crude And The US Dollar Suffer, Global Markets Spooked

Written by Gary

U.S. stock markets opened lower this morning, as investors stayed cautious amid continued geopolitical tension concerning North Korea. U.S. homebuilding fell more than expected and the US dollar has fallen into the 99 handle.

Here is the current market situation from CNN Money

European markets are broadly lower today with shares in London off the most. The FTSE 100 is down 2.03% while France's CAC 40 is off 1.29% and Germany's DAX is lower by 0.79%.

What Is Moving the Markets

Here are the headlines moving the markets.

Goldman Sachs profit misses estimates on trading weakness

(Reuters) - Goldman Sachs Group Inc reported a lower-than-expected quarterly profit as gains in investment banking were offset by weak trading revenue.

U.S. housing starts tumble, but building permits increase

WASHINGTON (Reuters) - U.S. homebuilding fell more than expected in March as the construction of single-family homes in the Midwest recorded its biggest decline in three years, but an increase in building permits suggested the housing market recovery remained intact.

U.S. business group urges Washington to 'use every arrow' against China

BEIJING (Reuters) - The United States should "use every arrow" in its quiver to ensure a level commercial playing field in China, a U.S. business lobby said on Tuesday, warning that 2017 could be the toughest year in decades for American firms in the country.

BofA's profit boosted by surge in trading, investment banking

(Reuters) - Bank of America reported a higher-than-expected jump in quarterly profit as bond trading surged and the lender earned more from advising on debt and equity offerings and deals.

J&J misses sales estimates; lifts forecast to reflect Actelion buy

(Reuters) - Johnson & Johnson reported on Tuesday quarterly revenue that missed estimates due to slowing pharmaceutical sales, but the company, which is in the process of closing its $30 billion acquisition of Actelion, raised its 2017 forecast.

Insurer UnitedHealth posts strong results, boosts forecast

(Reuters) - UnitedHealth Group Inc , the largest U.S. health insurer, reported better-than-expected quarterly results, driven by strength across its businesses, and raised its profit and revenue forecast for the year.

Pence kicks off Japan talks, both sides seek 'near term' results

TOKYO (Reuters) - U.S. Vice President Mike Pence on Tuesday put Japan on notice that Washington wants results "in the near future" from talks it hopes will open markets to U.S. goods, adding that the dialogue could lead to negotiations on a two-way trade deal.

Automakers charge ahead with electrics in China, even as policy drive slows

SHANGHAI (Reuters) - China's auto industry is charging ahead with aggressive plans to electrify cars even as policymakers scale back subsidies aimed at building sales from relatively low levels and consider tapping the brakes on sales quotas for plug-in cars.

Oil Slides After Saudis Unexpectedly Cast Doubt On Production Cut Extension

One week after "unnamed sources" reported that Saudi Arabia had backed the proposed 6 month extension to oil production cuts, this morning oil is lower after the world's biggest oil producer appeared to backtrack on its trial balloon from last week, when Saudi Arabia's energy minister said it is "too early" to decide whether OPEC will extend its crude-production-cutting agreement for the rest of the year.

Quoted by the WSJ, Khalid al-Falih, told reporters in Riyadh Monday that "it is premature to talk about extending the cut." OPEC's 13 national ministers are scheduled to decide that question on May 25.

Falih's unexpectedly cautious tone "has taken some of the wind out of the bulls' sails," according JBC analysts.

It wasn't just the sudden Saudi retiscence: as the WSJ adds, Falih's comments were among a range of factors keeping pressure on oil prices, chief among them that U.S. drilling is now set to increase by 123,000 barrels a day in May, according to the U.S. Energy Information Administration, the steepest monthly rise since February 2015. The EIA figures are the latest sign that U.S. companies have been quick to increase production because of higher prices and has "added another bearish element to the market," said JBC analysts.

A surge in U.S. production is a major threat to OPEC's effort to reset the still-oversupplied global oil market. The U.S. oil rig count has been on the rise 13 weeks and now stands at its highest level in two year ...

Housing Starts Drop Most In 4 Months; Single-Family Starts Collapse In The Midwest

Another mixed picture from housing data following the roll-over in homebuilder sentiment last week. Housing Starts dropped 6.8% MoM in March to 1.215mm SAAR - the lowest since Nov 2016.

The biggest driver was a 16% plunge in starts in The West and Midwest (35% plunge in Midwest single-family starts).

Starts decline in both single- and multi-family-units...

Permits beat expectations (rising 3.6% MoM) led by an 18.3% sequential surge in multi-family units.

Frontrunning: April 18

Britain's May seeks snap election to boost Brexit hand (Reuters)

Trump to seek changes in visa program to encourage hiring Americans (Reuters)

Trump appointee Gorsuch energetic in first U.S. high court arguments (Reuters)

Pence Reaffirms U.S.-Japan Alliance Amid North Korea Provocations (WSJ)

Blackwater Founder Erik Prince Said to Have Advised Trump Team (BBG)

Young White America Is Haunted by a Crisis of Despair (BBG)

Oil Prices Fall on Saudi Minister's View of Output Deal (WSJ)

Facebook Gives Staff Green Light to Protest Trump on May 1 (BBG)

In Afghanistan, Battle With Islamic State Grinds On (WSJ)

Democrats aim to 'make Trump furious' in Georgia election (Reuters)

Opponents seek to annul Turkish vote as Erdogan's new powers become reality (Reuters)

Theranos ...

Goldman Misses As FICC Disappoints, Stock Slides As Average Banker Comp Hits $360K

Unlike the other big banks, Goldman's earnings release is a breeze: since the bank has virtually no balance sheet to use as a source of income (or loss), it is all about the income statement. And it was here that there was a big surprise, because despite expectations of a blowout result, with whisper numbers well above consensus estimates, Goldman unexpectedly disappointed, reporting Q1 revenues of $8.03BN, below the $8.53BN expected, translating to EPS of $5.15, fractionally below the $5.17 estimate, which nonetheless was 92% higher compared to EPS of $2.68 reported one year ago.

Unlike other banks Goldman did not benefit as much from a pick-up in trading activity during the period: net revenues from the institutional client services division were up 25% from a year earlier to $3.4bn, below the $3.62bn expected, of which FICC contributed $1.685 billion, which also missed expectations of a $2 billion number.

Despite the miss in FICC, Goldman reported beats in virtually every other revenue line time,

"The operating environment was mixed, with client activity challenged in certain market-making businesses and a more attractive backdrop for underwriting in our investment banking franchise," said Lloyd C. Blankfein, Chairman and Chief Executive Officer. "As the economy improves, we are wellpositioned to not only meet our clients' diverse needs, but also to generate operating leverage for our shareholders."

Broken down by key operating group, most segments reported numbers that beat expectations with the exception of FICC:

FICC sales & trading revenue was $1.695bn, missing estimates of $2.03bn

Overall sales and trading revenue $3.36 billion, missing estimates of $3.62 billion

Investment banking revenue of $1.7bn beating estimates of $1.56bn.

Investment and Lending, formerly known as prop, reported $1.48bn in revenue, virtually unchanged from a year ago.

The full breakdown ...

Allied Irish Bank: A Way to Play Ireland's Economic Renaissance

Ireland's second-biggest lender, Allied Irish Bank, is preparing for an IPO, substantially cleaned up since the financial crisis, and poised to benefit from the country's above-average growth rates.

Spoiler Alert for Netflix: Debt and Cash Flow Matter

Netflix told its investors not to focus on subscriber additions, but such nonstandard measures may be helping to sustain its multiple.

Elliott Wins an Early Round Against Arconic

The departure of Arconic's CEO won't end the bitter feud with Elliott Management.

March 2017 Residential Building Improves

Written by Steven Hansen

The headline residential building permits improved. Our analysis agrees.

Market Snapshot: U.S. stocks set for losses as Goldman earnings disappoint

Wall Street looked set for a downbeat open Tuesday, as a spate of weak earnings compounded concerns over this weekend's French election and U.S.-North Korea tensions, helping to keep a lid on stock futures.

Market Extra: Here's why the pound surged to 10-week high after May called snap U.K. election

The pound has been on a nervy roller-coaster ride most of Tuesday, tossed around by news U.K. Prime Minister Theresa May has called an early election for June 8.

NewsWatch: North Korea poses a clear and present danger — for the markets, at least

An amazing quarter of earnings could be ruined by some dark storms brewing on the global horizon, and investors aren't quite awake to that threat.

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