Morning Call: US and Chinese stocks are lower as US readies list of an additional $100 billion of Chinese products subject to tariff; BOJ leaves policy unchanged.
Barchart.com - Fri Jun 15, 6:53AM CDT
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Overnight Markets and News

June S&P 500 E-minis (ESU18 -0.29%) this morning are down -0.4% on a Reuters report that the Trump administration is close to finalizing the list of $100 billion worth of Chinese products that will be subject to a 25% tariff if China follows through with its threat to retaliate for the U.S. tariff on first $50 billion batch of products. President Trump reportedly signed off last night on the first $50 billion batch of products for a tariff, with an official announcement due today. The Euro Stoxx 50 index is down -0.2% this morning. The Chinese Shanghai Composite today fell by -0.7% on the imminent U.S. tariff announcement. Other Asian stocks closed mixed: Nikkei +0.5%, Hang Seng -0.4%, Taiwan +0.7%, Australia +1.3%, South Korea -0.8%, India +0.1%.

Sep 10-year T-notes(ZNU18 +0-035) this morning are up 5.5 ticks on increased safe-haven demand with the U.S. tariff reports. The dollar index (DXY00 +0.03%) this morning is slightly lower by -0.1%, while EUR/USD(^EURUSD +0.23%) is up +0.2% and USD/JPY(^USDJPY +0.08%) is unchanged. EUR/USD is seeing some short-covering after yesterday's sharp drop on the dovish outcome of yesterday's ECB meeting.

Commodity prices this morning are trading lower by an average of -0.8% on trade concerns. July crude oil prices this morning are down -0.18 (-0.27%), while July gasoline is down -0.0249 (-1.19%) and July heating oil is down -2.77 (-1.28%). Metals this morning are lower across the board with Aug gold down 5.9 (-0.45%), July silver down -0.037 (-0.21%), and July copper down -0.013 (-0.40%). Grains are lower this morning with July corn down -2.75 (-0.76), July beans down -15.75 (-1.70%), and July wheat down -6.25 (-1.25%). Softs are lower this morning with July sugar down -0.13 (-1.06%), July coffee down -0.95 (-0.82%), July cocoa down -30 (-1.22%), and July cotton down -1.69 (-1.18%).

President Trump has reportedly approved the final list of $50 billion worth of Chinese products that will be subject to a 25% tariff. The list of those products is due to be released today with implementation "shortly thereafter." In addition, Reuters is reporting that the Trump administration is close to completing the list of the additional $100 billion worth of Chinese products that will be subject to a 25% tariff if China retaliates for the tariff on the first $50 billion of Chinese products. The U.S. tariff on the additional $100 billion of Chinese products will need to go through the same 60-day comment period as the first batch, providing some time for more negotiations.

The Bank of Japan at its 2-day meeting that concluded on Friday left its policy unchanged, maintaining its 80 trillion per year QE program and its 10-year JGB yield target of zero. That outcome was in line with unanimous market expectations. BOJ Governor Kuroda reiterated his pledge for the BOJ to continue its QE program until inflation reaches the BOJ's 2.0% inflation target. The BOJ today downgraded its inflation assessment and now sees the CPI in the range of 0.5-1.0%. Japan's CPI ex-fresh food in April eased to only +0.7% y/y. The market consensus is that the BOJ will not make any moves towards policy normalization until 2019 or later.

The Russian central bank today left its key policy rate hike unchanged at 7.25% for the second straight meeting. That was a bit more hawkish than market expectations of about a 50% chance for a 25 bp rate hike.

U.S. Stock Preview

Key U.S. news today includes: (1) Jun Empire manufacturing survey general business conditions index (expected -1.1 to 19.0, May +4.3 to 20.1), (2) May industrial production (expected +0.2% m/m, Apr +0.7% m/m), (3) University of Michigan preliminary-June U.S. consumer sentiment index (expected +0.5 to 98.5, May -0.8 to 98.0), (4) Dallas Fed President Robert Kaplan (non-voter) speaks at an event at the Fort Worth Chamber of Commerce.

Notable Russell 1000 earnings reports today include: none.

U.S. IPO's scheduled to price today: none.

Equity conferences this week: none.

Market Comments

June S&P 500 E-minis this morning are down -0.4% on U.S.-Chinese trade tensions. Thursday's closes: S&P 500 +0.25%, Dow Jones -0.10%, Nasdaq +1.03%. The S&P 500 on Thursday closed higher on carry-over support from a rally in European stocks on the ECB's dovish pledge to keep interest rates unchanged until at least until summer-2019. There was also strength in technology stocks as the Nasdaq Composite rallied to another all-time high. Stocks were undercut by weaker-than-expected Chinese economic data that may lead to a slowdown in the global economy after China May industrial production and retail sales rose less than expected, which helped push the Shanghai Composite down to a 1-year low.

Sep 10-year T-notes this morning are up 5.5 ticks on increased safe-haven demand with the U.S. tariff reports. Thursday's closes: TYU8 +8.00, FVU8 +3.50. Sep 10-year T-notes on Thursday closed higher on carry-over support from a rally in German bunds after the ECB said it expects to keep interest rates unchanged until at least summer 2019.

The dollar index this morning is slightly lower by -0.1%, while EUR/USD is up +0.2% and USD/JPY is unchanged. Thursday's closes: Dollar Index +1.050 (+1.13%), EUR/USD -0.0223 (-1.89%), USD/JPY +0.29 (+0.26%). The dollar index on Thursday whipsawed from a 4-week low up to a 2-week high and closed higher. The dollar was boosted by a stronger-than-expected U.S. May retail sales report. There was also weakness in EUR/USD which tumbled to a 2-week low after the ECB pledged to keep interest rates unchanged until at least summer 2019, more dovish than expectations for ECB rate hikes to start in Q2 of 2019.

Metals this morning are lower across the board with Aug gold down 5.9 (-0.45%), July silver down -0.037 (-0.21%), and July copper down -0.013 (-0.40%). Thursday's closes: Aug gold +7.0 (+0.54%), Jul silver +0.271 (+1.59%), Jul copper -0.0320 (-0.98%). Metals on Thursday settled mixed with Aug gold at a 1-month high, Jul silver at a 1-3/4 month high and Jul copper at a 1-week low. Metals prices were boosted by the ECB's pledge to keep interest rates unchanged until at least summer 2019, which boosted demand for gold as an alternative asset. Copper prices were boosted by concern that labor unrest may lead to a strike by copper workers at Chile's Escondidia copper mine, the world's largest. Metals prices were undercut by a stronger dollar and by concern about Chinese copper demand after China May industrial production rose less than expected.

July crude oil prices this morning are down -0.18 (-0.27%), while July gasoline is down -0.0249 (-1.19%) and July heating oil is down -2.77 (-1.28%). Thursday's closes: Jul crude +0.25 (+0.38%), Jul gasoline -0.0342 (-1.61%). Jul crude oil and gasoline on Thursday settled mixed with Jul crude at a 1-1/2 week high. Crude oil prices were undercut by a rally in the dollar index to a 2-week high and by comments from Saudi Arabian Oil Minister Khalid Al-Falih who said it's "inevitable" that OPEC and its allies will agree to boost oil output gradually. Crude oil prices were supported by reduced crude supplies from Libya after armed conflict forced two of Libya's biggest crude export terminals to halt 240,000 bpd of crude shipments.

Overnight U.S. Stock Movers

Spire (SR +0.23%) was upgraded to 'Outperform' from 'Market Perform' at Wells Fargo Securities with a price target of $74.

Pros Holdings (PRO +0.91%) was rated a new 'Buy' at Nomura Instinet with a price target of $42.

Adobe Systems (ADBE +0.77%) fell more than 3% in after-hours trading after it reported Q2 operating margin of 40.0%, weaker than consensus of 40.4%.

Jabil (JBL +0.27%) rose more than 3% in after-hours trading after it reported Q3 net revenue of $5.44 billion, better than consensus of $4.90 billion, and then forecast Q4 revenue of $5.2 billion to $5.6 billion, the midpoint above consensus of $5.2 billion.

Schnitzer Steel (SCHN +1.07%) may open to the upside this morning after it reported preliminary Q3 adjusted earnings per share of $1.22 to $1.28, well above consensus of 98 cents.

Vince Holdings (VNCE +1.53%) gained more than 3% in after-hours trading after it reported Q1 comparable sales rose +12.3% and gross margin improved by 270 bp to 46.8%.

Clodera (CLDR +0.84%) may open to the downside this morning after it was rated a new 'Reduce' at Nomura Instinet with a price target of $12.

Genco Shipping & Trading (GNK -0.60%) slid more than 5% in after-hours trading after it announced that it had commenced a public offering of $100 million of its common stock.

Verastem (VSTM -1.41%) rose 6% in after-hours trading after it sold 7.17 million shares of common stock at $6 a share to funds managed by Consonance Capital in a registered sales that raised $43 million for Verastem Oncology.