01Feb2017 Pre-Market Commentary: Wall Street To Open Higher Buoyed By Apples Strong Earnings, Fed Meeting In Focus, US Added 246,000 Jobs In January

Here is the current market situation from CNN Money

European markets are broadly higher today with shares in France leading the region. The CAC 40 is up 1.45% while Germany’s DAX is up 1.26% and London’s FTSE 100 is up 0.64%.

Futures rise on Apple rally; Fed meeting in focus

(Reuters) – U.S. stock index futures rose on Wednesday, in an upbeat start to February, buoyed by strong earnings from Apple, while investors awaited the Federal Reserve’s decision on interest rates.

Fed’s message on portfolio trimming: prepare, don’t fret

SAN FRANCISCO/NEW YORK (Reuters) – Federal Reserve policymakers are putting markets on notice that the central bank’s $4.5 trillion balance sheet is back on the agenda in an apparent effort to give investors time to prepare for changes rather than to signal any action is imminent.

U.S. private sector adds 246,000 jobs in January, topping estimates: ADP

(Reuters) – U.S. private employers added 246,000 jobs in January, above economists’ expectations, a report by a payrolls processor showed on Wednesday.

VW, Robert Bosch agree to pay $1.55 billion to settle U.S. diesel claims

WASHINGTON (Reuters) – Volkswagen AG has agreed to pay at least $1.22 billion to fix or buy back nearly 80,000 polluting U.S. 3.0 liter diesel-engine vehicles to settle claims it fitted illegal emissions-cheating software to the cars, court documents showed.

Warren Buffett: I bought $12 billion of stock after Trump won

(Reuters) – The failure of Warren Buffett’s favored candidate to capture the White House has not dimmed the billionaire’s appetite for stocks.

U.S. small business borrowing rose slightly in December

(Reuters) – Small U.S. firms borrowed slightly more in December than in the prior month, data released on Wednesday showed, but more were repaying existing loans late, suggesting that default rates may rise this year.

Exclusive: Japan secures extra cost cuts on U.S. F-35 fighter jet package – sources

TOKYO (Reuters) – Tokyo has secured cost cuts on support equipment for its next batch of six U.S. F-35 stealth fighter aircraft of around $100 million, according to sources and Japanese budget papers, on top of savings being finalised for all buyers of the high-tech jets.

Health insurer Anthem’s profit, revenue beat estimates

(Reuters) – Anthem Inc , which is waiting for a ruling on the U.S. government’s lawsuit to block its deal to buy Cigna Corp , reported better-than-expected quarterly profit and revenue on Wednesday, helped by strength in its government business.

BMW says will stick to investment plans despite Trump threats

BOCHUM, Germany (Reuters) – Germany’s BMW will stick to its investment plans for Mexico and the United States despite warnings from President Donald Trump to impose border taxes on cars imported into the United States, the luxury carmaker’s CEO said.

US Added A Blistering 246K Private Sector Jobs In January, Most Since June

Just as the hard indicators in the US economy were starting to roll over, with whisper expectations that the Fed’s 3 projected rate hikes in 2017 would gradually be reduced to 2 (in line with market expectations) moments ago ADP reported a blistering 246K jobs were added in January, far above the 168K expected and certainly well above the Fed’s “guidance” of what would be normal monthly job growth in the 80-120K area. This was the highest monthly jobs addition since June, following a modest downward revision to December jobs from 153K to 151K, and even the construction and manufacturing sectors saw job additions of 25,000 and 15,000, respectively

Most jobs were added by small and medium firms as follows:

Small firms (1-49) added 62k jobs in Jan.

Medium firms (50-499) added 102k jobs in Jan.

Firms with over 500 employees added 83k jobs

And with both the Fed due out later today, and the official payrolls report out on Friday, the potential for an upside surprise to both is suddenly in play, which explains why the dollar has spiked on the news to session highs. That said, beware with outlier prints in this series: ADP is notorious for having a dreadful predictive track record.

The breakdown by job category:

European Bond Bloodbath – Worst January On Record Exposes Political Panic Across EU

With general elections scheduled in France, Germany and the Netherlands this year amid an increase in support for anti-euro rhetoric, European bonds from Germany to Greece saw yields surge in January. In fact, as Bloomberg notes, euro-region bonds handed investors the worst start to a year on record.

Worst. January. Ever. for European bonds…

Amid heightened political risk across the currency bloc and speculation the European Central Bank may bring its asset-purchase program to an abrupt halt in 2018, yields on French and Italian bonds climbed this week to their highest level relative to benchmark German debt since 2014. As Bloomberg reports, rising populism in the region’s biggest economies and speculation that the ECB’s stimulus plan may be nearing its endgame have clouded the horizon for bond investors, who have grown used to the central bank insulating euro-area securities from political tension. That’s seen yield spreads expand to levels unseen since quantitative easing began in 2015, and left analysts forecasting more pain if electoral risks materialize, particularly in light of the extreme market reactions seen in the wake of Donald Trump’s victory in the US.

The market’s move suggests Draghi’s insistence last year that polic …

Japan Denies It Is Devaluing The Yen, Accuses Trump Of Causing “Uncertainty”

In a shot across the trade war bow with both Japan and Germany, on Tuesday Trump and members of his administration took aim at both Japan and Germany, in addition to China, to accuse them of devaluing their respective currencies, an unexpected move which sent the dollar sliding to multi-month lows. Specifically, on Tuesday morning Trump said: “You look at what China’s doing, you look at what Japan has done over the years. They play the money market, they play the devaluation market and we sit there like a bunch of dummies,” according to a transcript in Congressional Quarterly.

Prior to Trump’s statement, Trump’s top trade advisor, Peter Navarro spoke to the FT, taking aim at Germany, saying it was gaming foreign-exchange markets. His comment sent the EUR surging and precipitated a sharp drop in the dollar. Chancellor Angela Merkel rejected the accusation. At the same time, Donald Tusk, the EU’s president, placed the U.S. alongside Russia, China and terrorism as a source of instability. “The change in Washington puts the European Union in a difficult situation, with the new administration seeming to put into question the last 70 years of American foreign policy,” Tusk said in a letter to European leaders on Tuesday ahead of an EU summit on Feb. 3.

Overnight, it was Japan’s turn, after Prime Minister Shinzo Abe, his main cabinet advisor, Suga, and Japan’s top foreign exchange official on Wednesday all pushed back against Trump’s assertion that Japan is keeping its currency devalued.

“Japan’s monetary policy is for the domestic purpose of beating deflation, and isn’t done with FX in mind, so I think that those remarks are a little bit wide of the mark,” said Masatsugu Asakawa, the Finance Ministry’s foreign exchange policy chief.

Frontrunning: February 1

Fed Unlikely to Make Its Next Rate Move Wednesday (WSJ)

Conservative Gorsuch nominated to top court (Reuters)

Gorsuch Is Critic of Legal Doctrine That Bolsters Executive Authority (WSJ)

The 4 Rules That Will Explain Neil Gorsuch’s Confirmation Fight (Politico)

Trump’s Yen Comments ‘Wide of the Mark,’ Says Japan FX Chief (Reuters)

A barb at Germany puts Trump administration on collision course with EU (Reuters)

Investors Pulled $4.4 Billion From Brevan Howard (WSJ)

Specter of Global Trade War Rises as Trump Puts ‘America First’ (BBG)

Trump’s Backers Want Action on Jobs, Taxes, Immigration (WSJ)

Tesla’s Model S Falls Short of Top Safety Rating Awarded to 42 Other Cars (BBG)

Apple Breaks Losing Streak, as Sales of i …

Apple: Betting on Tomorrow’s iPhone Today

Hopes for the next ‘supercycle’ pose risks, but Apple’s low valuation limits its downside.

Trump’s Immigration Stance Stings India’s Most Important Industry

India may not export much, but the Trump administration is taking on one of the few things it does: IT services.

Surviving a Trump Meeting Doesn’t Mean All Clear for Drug Industry

A relatively calm meeting with President Trump doesn’t eliminate drug-pricing risks.

January 2017 ADP Job Growth Is 246,000 – Greatly Above Expectations

Written by Steven Hansen

ADP reported non-farm private jobs growth at 246,000. This was a particularily strong report.

Market Extra: Time to buy the beaten-down pound? Bank of America spots a sterling bottom

Any pound selloff after Article 50 is triggered may be the last chance to buy sterling before it shakes off Brexit jitters.

Howard Gold’s No-Nonsense Investing: This, not Donald Trump, is the true revolution upending stock-market investing

Three big trends have led to a sea change in how we invest

Caroline Baum: Trump’s many walls divide us — from the world, from reality, from ourselves

The wall on the Mexican border isn’t the only wall Donald Trump is building to divide America from the rest of the world and from ourselves, writes Caroline Baum.