07Jun2018 Pre-Market Commentary: Wall Street Points To A Positive Opening, DOW Futures Up 60 Points, WTI Crude Climbs Into The 65 Handle

Here is the current market situation from CNN Money

European markets are higher today with shares in London leading the region. The FTSE 100 is up 0.18% while France’s CAC 40 is up 0.10% and Germany’s DAX is up 0.01%.

U.S. reaches deal with China’s ZTE: Commerce Secretary

(Reuters) – U.S. Commerce Secretary Wilbur Ross said on Thursday Washington had reached a deal with ZTE Corp that would lift a ban on buying from U.S. suppliers, allowing China’s No. 2 telecommunications equipment maker to get back into business.

Euro and bond yields extend rally on ECB while risk appetite grows

LONDON (Reuters) – The euro and bond yields rose on Thursday as investors priced in an early wind-down of European Central Bank stimulus, while renewed risk appetite drove world stocks to a 3-1/2 week high.

Billions in U.S. solar projects shelved after Trump panel tariff

(Reuters) – President Donald Trump’s tariff on imported solar panels has led U.S. renewable energy companies to cancel or freeze investments of more than $2.5 billion in large installation projects, along with thousands of jobs, the developers told Reuters.

Buffett, Dimon say quarterly profit forecasts harming economy: WSJ

(Reuters) – Billionaire investor Warren Buffett and JPMorgan Chase Chief Executive Jamie Dimon voiced concerns that the financial markets’ focus on short-term goals is hurting the economy and urged companies to move away from providing quarterly earnings guidance, according to the Wall Street Journal.

Fed clambers back to positive real rates, now debate is when to stop

WASHINGTON (Reuters) – The Federal Reserve will likely raise its target interest rate to above the rate of inflation for the first time in a decade next week, igniting a new debate: when to stop.

Fujifilm could walk away from Xerox deal if no progress for six months

TOKYO (Reuters) – Japan’s Fujifilm Holdings Corp said on Thursday it may have no choice but to abandon a $6.1 billion merger with Xerox Corp if there is no progress in talks with the U.S. firm’s new board for about half a year.

Ford plans to close Bordeaux plant if no buyer found

PARIS (Reuters) – Ford plans to close its Blanquefort gearbox plant in southwestern France if no buyer can be found for the site, which employs 900 workers, the U.S. carmaker said on Thursday.

IKEA to use only renewable and recycled materials by 2030

ALMHULT, Sweden (Reuters) – IKEA, the world’s biggest furniture retailer, plans to use only renewable and recycled materials in its products by 2030, in the latest commitment by a global store group to reducing its impact on the environment.

College pay-off seems elusive for many U.S. young people

CHICAGO (Reuters) – When Scott Petracco graduated from the University of Illinois at Chicago with a bachelor’s degree in biology eight years ago, he thought he would quickly get a job in a laboratory and pay off $30,000 in student loans.

“EM FX Never Lies” – BofA Warns As Brazilian Real Is Routed

Mohamed El-Erian warned overnight that Brazilian policy makers are “in quite a tricky position — and there’s little room for error,” and judging buy this morning’s rout in the real, he is dead right.

Crippling nationwide trucker strikes, which prompted the resignation of Petrobras CEO, and forced Brazil and Argentina to roll back their planned fuel-price increases have, according to Bloomberg’s Davison Santana, undermined their already fragile currencies and deter investors eager for signs authorities are serious about putting fiscal accounts in order.

Brazil’s projected budget deficit as a percentage of gross domestic product stands at 7.4 percent, the highest among major emerging-market peers.

The gap, as El-Erian explained succinctly, leave government with a stark choice: keep borrowing or cut spending.

As Santana notes, borrowing more isn’t a healthy option. Higher deficits make currencies less attractive, leading to rising interest rates that reduce growth and erode governmen …

US Has Struck A “Definitive” Deal With ZTE: Ross

After weeks of haggling over trade, Commerce Secretary Wilbur Ross announced on CNBC Thursday morning that the US had reached a “definitive” deal with Chinese telecom giant ZTE to allow it to resume purchases from American suppliers, preventing a collapse of the massive Chinese corporation which was facing near certain death otherwise, and which, according to many, was a critical gating factor for China to greenlight the US-North Korea summit on June 12.

“At about 6 a.m. this morning, we executed a definitive agreement with ZTE. And that brings to a conclusion this phase of the development with them,” Ross said on CNBC.

ZTE had been crippled by the White House’s decision to ban US firms from selling parts to ZTE after it had been found in violation of a settlement stemming from illegal sales to Iranian companies, although rumors of a deal began circulating in recent weeks and culminated yesterday.

While it is not yet clear what the terms of the deal are, some claim that compromising with the Chinese company which has been a repeat violator of U.S. sanctions against Iran and North Korea, and has been identified as a national security threat, could set a dangerous precedent for trade negotiations with China.

Buffett, Dimon Write Op-Ed Railing Against Earnings Guidance; Fail To Mention Stock Buybacks

Prompting some to question “why now”, late on Wednesday the two “titans of financial industry”, Warren Buffett and Jamie Dimon doubled down on their appeal to corporations to stop providing quarterly earnings guidance (at a time when virtually every intellectually honest bank admits the economy is very, very late in the cycle).

The Berkshire and JPMorgan CEOs said in a joint WSJ editorial that they are encouraging all public companies to consider moving away the practice, arguing that it can stifle long-term investments.

“Quarterly earnings guidance often leads to an unhealthy focus on short-term profits at the expense of long-term strategy, growth and sustainability.”

A 2017 report by FCLTGlobal similarly found that guidance can lead management teams to under-invest in the future and can crimp earnings growth.

Their plea is not new, as both have in the past urged management teams to halt providing guidance as the practice of telling Wall Street what to expect from earnings distorts management’s priorities.

In their latest appeal, the duo said companies often hesitate to spend on technology, hiring, and research and development to meet quarterly earnings forecasts that can be affected by seasonal factors beyond their control. Dimon and Buffett also said the pressure to meet short-term earnings estimates has contributed to a drop in the number of public companies in the U.S. in the past two decades.

“Short-term-oriented capital markets have discouraged companies with a longer-term view from going public at all, depriving the economy of innovation and opportunity.”

Earnings forecasts “can often put a co …

‘Better Hope This Is A Blip’ – Spending & Credit Search-Trends Are Tumbling

In a Bloomberg column on May 4th, Jim Bianco and Ben Breitholtz of Bianco Research argued convincingly that economic surveys no longer work as a predictor of future economic activity, because surveys (the so-called soft data) suffer from a circular reference due to groupthink, herd mentality, and political preferences.

Not only that, Bianco and Breitholtz show not only that the surveys are biased, they have a poor track record – but don’t tell the Fed, they think surveys are the holy grail of economic forecasting.

Therefore Bianco Research’s team has been arguing that google searches are better than the surveys and should be used in their place (and as they show below, offer some very different ‘real’ insights than the herd mentality of surveys).

* * *

Originally posted to Bianco Research clients,

Consumer searches (Google) indicate low anxiety, but deteriorating spending, credit, and business formation. Our now …

China Inc. Arms Up in Tech With Latest SoftBank Deal

The sale of chip designer Arm Holdings’ China unit to a Chinese-led consortium illustrates the challenge the U.S. faces in pushing back against Beijing’s appetite for intellectual property.

Allergan Needs a New Wrinkle

Activist hedge funds are making a strong case to change Allergan’s corporate governance.

How Food Companies Can Buy Their Way to Growth

The best advice for food company CEOs looking for growth: Buy what you know, don’t lean too much on cost-cutting and watch out for quickly changing consumer tastes.

02 June 2018 Initial Unemployment Claims Rolling Average Again Worsens

Hurricanes continue to impact claims taking procedures in the Virgin Islands and Puerto Rico. The market expectations for weekly initial unemployment claims (from Bloomberg / Econoday) were 220 K to 225 K (consensus 225,000), and the Department of Labor reported 222,000 new claims. The more important (because of the volatility in the weekly reported claims and seasonality errors in adjusting the data) 4 week moving average moved from 222,750 (reported last week as 222,250) to 225,500. The rolling averages generally have been equal to or under 300,000 since August 2014.

Sam Zell on the real estate cycle, interest rates, and immigration

Legendary real estate investor Sam Zell addressed a real-estate investment trust conference in a freewheeling conversation that’s been cleaned up for public consumption here.

Economic Report: Jobless claims edge lower to 222,000 in early June

Initial jobless claims fell slightly in early June, keeping the rate of layoffs in the U.S. near a 50-year low.

Need to Know: Why the return of King Dollar could create a feeding frenzy for U.S. stocks

Our call of the day says brace for the dollar storm that will global chaos and drive investors into the arms of U.S. stocks, sending them to new highs.