Market Snapshot
Asia: Japan +0.8% at 19890. Hong Kong -0.8% at 27591. China -0.6% at 4283. India +1.3% at 27687.
Europe: London +0.2%. Paris -0.2%. Frankfurt +0.6%.
Futures: Dow -0.1%. S&P -0.2%. Nasdaq -0.3%. Crude +0.5% at $60.84. Gold +0.4% at $1230.50.
Ten-year Treasury Yield +3 bps at 2.17%.
Economic News
10:00 NAHB Housing Market Index
Key earnings before the open
JASO, WPC
Key earnings after the close
A, LF, MOMO, NOAH, OFIX, PLAB, TTWO, URBN
Markets
Stock futures suggest a slow start for Wall Street on Monday, as oil prices climbed and investors digested dovish comments from a Federal Reserve member who once again pushed for a rate-hike delay to 2016. But some analysts remained upbeat that the S&P 500 can continue to build on recent highs despite a relatively tepid start since the beginning of the year.
Fed Chicago President Charles Evans repeated his stance on Monday that the central bank should hold back from raising short-term interest rates this year. “It likely will not be appropriate to begin raising the fed funds rate until sometime in early 2016,” he said in a speech prepared for delivery in Stockholm. Investors will get a closer look at the central bank’s thoughts about interest rates and economic data when the minutes of the FOMC meeting from April 29 are released on Wednesday.
Global stocks were mixed overnight following weak U.S. industrial-production and consumer-confidence data on Friday, adding to fears that the economy is stuck in a bit of a rut. Still, that’s prompting speculation that the Fed will delay raising rates. “The size of the decline in consumer confidence is pushing back estimates for a U.S. interest-rate hike to December,” says equity strategist Shoji Hirakawa. “That’s beneficial for stock valuations.”
There are signs emerging that China’s weak housing market may be bottoming out. The average price of new homes in 70 Chinese cities dropped 0.12% on month in April, although that represented a slowdown from -0.16% in March. “We expect home sales to see year-on-year growth in the second half of the year, and home prices in third- and fourth-tier cities to also bottom out,” says Nomura economist Zhao Yang. However, Zhao doesn’t expect a quick rebound in property investment, so he’s forecasting that “China will miss its 7% target” for 2015 economic growth.
Stocks
Shell may be forced to divest BG Group’s (BRGXF) 29.25% stake in a lucrative natural-gas field in Kazakhstan called Karachaganak once Shell (RDS.A, RDS.B) completes its acquisition of BG. That’s because the government has the right to acquire the firm’s stake in Karachaganak if BG is sold, although the Kazakhs haven’t yet said what they plan to do. The field, described as a “cash-cow,” accounted for 15% of BG’s total production volume and 9% of its $19B in revenue in 2014, and analysts value the holding at $4.4B.
BHP Billiton shares were -4.7% premarket after the company’s South32 spin-off was valued at A$11.3B (US$9.1B), at the lower end of expectations, when it debuted on the Australian Securities Exchange today. The demerger leaves BHP (BHP) to focus on its most profitable assets of iron ore, copper, petroleum, coal and potash.
The retail sector jumps into the spotlight this week with heavyweights Target (TGT), Home Depot (HD), Lowe’s (LOW) and Wal-Mart (WMT) scheduled to report Q1 earnings. Retail sales in the U.S. have only recovered slightly in March and April after dropping off from December to February. Analysts are expected to focus on Wal-Mart’s new partnership with Alibaba (BABA) and free shipping service, Target’s grocery ambitions, Home Depot’s pro/contractor business and Lowe’s view on SG&A.
U.S. airlines expect to carry a record 222M passengers this summer, up 4.5% from last year, Airlines for America says. The companies are increasing seating 4.6% to cope with the demand, which the trade group says is being boosted by improved employment and consumer sentiment. In Q1, 10 listed U.S. passenger airlines grew net profit 1.1% to $3.1B, helped by a 3.1% increase in revenues as the number of travelers rose 3.9%.
The U.K.’s Financial Conduct Authority is expected to fine Barclays (BCS) at least £250M to settle allegations of forex manipulation. Overall, RBS (RBS), UBS (UBS), JPMorgan (JPM) and Citigroup (C), as well as Barclays, are bracing for total penalties over $4B that authorities on both sides of the Atlantic are expected to announce on Wednesday.
Gucci, Yves Saint Laurent and other luxury brands owned by France’s Kering (PPRUF) have sued Alibaba (BABA) in Manhattan, alleging that the Chinese e-commerce giant has knowingly allowed the sale of counterfeit goods by merchants using its marketplaces. The brands are seeking a court order that would block the sale of the products along with damages that could include $2 per counterfeit item.