Tuesday, January 24, 2017

Tuesday, January 24, Morning Global Market Roundup: Futures Point To A Lower Open On Wall Street; Earnings Eyed

By Sam Meredith
CNBC
January 24, 2017

U.S. stock index futures pointed to a lower open on Tuesday morning as traders focused on a slew of earnings reports.

On the data front, Tuesday will see Purchasing Managers Index (PMI) released at 9.45 a.m ET with existing home sales and Richmond Fed survey data due at 10 a.m ET.

On the earnings front major companies set to report before the bell includes; 3M, Alibaba, DuPont, Johnson & Johnson, Travelers and Verizon. Texas Instruments, Alcoa, Capital One, Discover Financial, Intuitive Surgical, Seagate Technology and Stryker are all due to report after the market close.

In Europe, the pan-European Stoxx-600 index was around 0.16 percent higher on Tuesday morning. In Asia, the Shanghai Composite in China closed 0.2 percent higher, while the Nikkei in Japan closed 0.55 percent lower.

In oil markets, Brent crude traded at around $55.63 a barrel on Tuesday morning, up 0.78 percent, while U.S. crude was around $53.16 a barrel, up 0.78 percent.

Oil prices moved higher on Tuesday after evidence that OPEC and other oil exporters would commit to reducing production however an increase in drilling in the U.S. could cap further gains.


Article Link To CNBC:

Trump’s Obamacare Order Throws ‘Curveball’ Into Enrollment Push

Consumers and insurers express alarm over order encouraging agencies to dismantle health law.


By Victoria Colliver
Politico
January 24, 2017

Tens of thousands of consumers are inundating Obamacare call centers nationwide with questions about whether they can still sign up for insurance, or if their coverage will continue under President Donald Trump.

With only eight days left to sign up for 2017 plans, many consumers — not to mention, insurers and brokers — were stunned and confused by Trump’s order Friday night encouraging federal agencies to dismantle parts of the law even before Congress repeals it. By authorizing agencies to roll back some provisions of the law — but not requiring them to do so — the order added to the uncertainty of already jittery consumers and insurers.

“In a normal year, you would see really strong demand Monday and Tuesday,” said Michael Stahl, senior vice president for HealthMarkets, an insurer that operates in all 50 states. “But we’ve got a new administration that has thrown a curveball in all this.”

“I think we’ll have a bump; I just think the magnitude might be less,” he said. “From what I see from our customers … there is a general nervousness. Despite my advice to play by the rules as they are today, sometimes … people kind of freeze and do nothing.”

Whether angst-ridden consumers will react to Trump’s first official action by rushing out to get coverage before it disappears, or hold off on decisions to sign up, may not be clear until the Jan. 31 enrollment deadline. People who sign up by next Tuesday’s deadline will receive coverage starting March 1.

Steve Cody, a 59-year-old Miami businessman with diabetes, is in the former category, trying to hold onto his coverage for as long as possible. “My experience with Obamacare has not been perfect,” he said, “but I didn’t die or lose my foot, and I can afford the medications that are keeping me healthy.”

None of that is guaranteed now, he said, although Trump and a Republican-controlled Congress have promised a replacement plan. “I’m anxious that Obamacare may not even be around in three months, let alone a year from now,” Cody said.

Advocates, meanwhile, are pushing to bolster enrollment for what may be the final year of Obamacare. Their reasoning: the more people who get coverage, the harder it will be for politicians to kill it.

“We actively are encouraging people to sign up for coverage, and fight like hell to keep that coverage,” said Anthony Wright, head of Health Access in California, a consumer advocacy group that supports the law.

That effort has been helped by the fact that the Obama administration paid in advance for advertising through the enrollment deadline. Similarly, the government’s healthcare.gov account has continued tweeting enrollment information since Trump’s inauguration and the website for Health and Human Services still offers sign-up advice.

As of Dec. 24, federal health officials pegged this year’s pace of enrollment slightly ahead of last year -- to more than 11.5 million, or about 286,000 more.

Still, Trump’s actions could slow sign-ups in the final week in ways that could undermine already shaky markets.

“Friday's executive order certainly isn't going to help, and has the potential to do great harm,” said Joshua Peck, former chief marketing officer at HealthCare.gov, which serves 39 states that don’t run their own exchanges.

Several insurers said they were spooked by the administration’s suggestion it might stop requiring most Americans to have insurance even before Obamacare is repealed. Such a move might lead younger and healthier people to drop out of the markets and send premiums skyrocketing for those trying to stay covered.

“That’s literally the straw that could break the camel’s back,” said Martin Hickey, CEO of New Mexico Health Connections. “If you were to eliminate the individual mandate, it would be people in those age brackets that would leave.”

Dr. J. Mario Molina, chief executive of Molina Healthcare, believes that “for the most part, I think the marketplace will stay intact through 2017.”

Next year could be a different story, though. “People keep asking me, ‘Are you going to stay in?’” Molina said. “I don’t know. It’s kind of like asking whether you’re going to buy a car in 2018. I’m not going to commit to something when I don’t know what the product looks like.”

Brokers around the country say they’re continuing to urge people to sign up for coverage before next week’s deadline to avoid being hit with a penalty — and that seems to be having an effect.

Ehealth, the nation’s largest online brokerage, saw at least a 25-percent increase in call volume on Monday, compared to the same time last year, said Nate Purpura, vice president of consumer affairs for the company.

“The calls we’re getting are, ‘is there something going to be available?’ and ‘is my plan going away?’” he said, adding that some are also inquiring about less expensive options should the law’s tax penalty no longer be enforced.

Consumers, for their part, seem more focused on getting coverage than how the politics will play out.

In Clifton N.J., Oscar Carmona, 37, a construction worker, sounded relieved he was able to sign up for his first-ever health insurance plan Monday, although he realizes Obamacare’s future is unsure. For now, he said, “I got my insurance so I’m happy.”

In northern California, Laura Newbold, who’s been uninsured since she moved from Massachusetts several months ago, was grateful to get coverage through the state’s expanded Medicaid program.

“I hope it will take about a year for anything to happen,” said Newbold, 60, a fitness instructor and painter who lives in an artists’ community east of San Francisco.

But some with chronic health problems are already despairing about how they will be able to afford treatment in a post-Obamacare world.

Jimmy Cruz, 51, who works in a convalescent home in California’s Central Valley, said he doesn’t make enough to pay for his diabetes medications without subsidized coverage. “Where am I going to be if Obamacare gets taken away?” he asked Democratic lawmakers at a hearing last week in Bakersfield. “I’m scared.”

Many brokers said that a lot of what they’re doing lately is trying to calm nerves.

Joel Thompson, who serves people in his home state of West Virginia, as well as in Kentucky and Ohio -- “about as Trump country as you can get” -- said he tries to assure clients that their plans are locked in through the end of this year.

But he also refuses to make predictions about the future.

“It’s white-water country here,” Thompson said, referring to the region’s rafting industry. “We know how tough it is to negotiate the rapids, and those rapids are coming.”


Article Link To Politico:

How To Bet On Stock Market Momentum

When pace is slow and steady, volatility can win the race.


By Mark Hulbert
MarketWatch
January 24, 2017

Momentum strategies can hold their own, even in a volatile year like 2016. That’s good news, because last year was easily one of the most challenging for momentum strategies. Just recall how many reversals there were during 2016, which whipsawed many momentum traders into doing just the opposite of what they should have done.

For example, the first six weeks of 2016 were one of the worst calendar-year starts for the stock market in U.S. history. Yet, far from continuing its downtrend, the stock market reversed course and shot upwards. The same was true of U.S. stocks in the wake of the U.K.’s Brexit vote and before and after the U.S. election.

The best-performing momentum strategy over the long term, among the couple of hundred strategies I have tracked over the last three decades, is recommended by NoLoad Fund*X, an advisory service edited by Janet Brown. The key to making momentum work, my analysis of this service’s returns suggests, is measuring momentum over just the right length of time.

When momentum is measured over too short a period, followers get whipsawed too many times. And when it’s measured over too long a period, it takes too long to get on board with the market’s new trends.

This sweet spot appears to be the one that NoLoad Fund X has been employing for several decades: Momentum is measured as an average of performance over the trailing one-, three-, six- and 12-month periods.

Needless to say, this strategy doesn’t beat the market every year — and 2016 was no exception. But it has beaten the market over the longer term. Since March 2000, for example, which is when my tracking of Brown’s “Monthly Grader Portfolio” commenced, I calculate that it has beaten the S&P 500 SPX, -0.27% by a margin of 5.6% to 5.1%, annualized. (Both these returns adjusted for dividends.)

Furthermore, this portfolio sidestepped the losses that some momentum strategies suffered last year. It gained 7.8% in 2016, which, while lagging the S&P 500’s 12.0% total return, is still far ahead of the 0.4% loss incurred by what ETFdb.com says is the largest ETF that pursues a momentum strategy — the First Trust Dorsey Wright Focus 5 ETF FV, -0.42% .

To be sure, Brown’s approach has had a more difficult time since 2000 than it did in the 1980s and 1990s. My performance tracking showed that her advice in those decades beat a buy-and-hold by an annualized average of three percentage points, in contrast to the portfolio’s 0.5 percentage point margin since 2000. This result is consistent with that of many momentum traders on Wall Street, who in recent years have declared momentum to be “dead.”

But that is premature, according to research conducted by Ken Daniel, a finance professor at Columbia University, and Toby Moskowitz, a finance professor at Yale University. In a study published in November’s issue of the Journal of Financial Economics, they reported that what’s different about the last two decades is the market’s extraordinary volatility, which is and always has been anathema to momentum strategies. Upon ignoring the most volatile months, they found that momentum has been just as successful in recent years as it was in the past.

Momentum strategies would therefore be genuinely “dead” only if the markets have permanently become more volatile. And, though we may feel as though the future is particularly uncertain right now, uncertainty is and always has been inherent to the markets. There’s no compelling reason to believe that the future will be characterized by more or less permanently high volatility, Professors Daniel and Moskowitz told me in interviews.

Furthermore, it appears possible to hedge your bets again the inevitable periodic bursts of higher volatility. The researchers found that momentum strategies do their best when the market’s volatility over the trailing six months is significantly below average. The suggestion is that you should reduce your investment in momentum strategies whenever volatility spikes, and then increase it again when relative calm returns.

Professor Daniel added that now appears to be a time of sufficient calm to justify making a bet on momentum. The CBOE Volatility Index VIX, -1.10% is trading around 12, after topping 22 last November.


Article Link To MarketWatch:

There’s A Perfect Storm Coming For The Dollar

By Gemma Acton
CNBC
January 24, 2017

There is a fundamental case for the dollar to fall further from here, Unicredit's chief currency strategist told CNBC's Squawk Box on Tuesday.

The U.S. currency is hovering around a six-week low after comments leaked on Monday from U.S. Treasury Secretary nominee Steve Mnuchin regarding potential short-term hits to the country's economy from an "excessively strong dollar."

These remarks are just one factor to suggest the dollar is set to lose further ground in coming months, according to Vasileios Gkionakis, head of global FX strategy at Unicredit.

"I think it is quite overvalued relative to where real rate differentials were suggesting it would go," Gkionakis said, adding that the dollar's 30 percent appreciation between the summer of 2014 to the end of 2016 demonstrated that there is already a lot of optimism priced in.

The markets have also misinterpreted the likely effect of stimulus, Gkionakis continued, saying, "I'm not entirely sure the first reaction of the market to the announcement of the Trump policies was entirely sensible and I say this because we have heard about a large infrastructure spending which is likely to put upside pressure on inflation but not necessarily increase productivity."

Given that the U.S. is currently operating near full capacity and full employment, a large yet short-term fiscal stimulus boost which does not address structural issues, will affect nominal rather than real rates, the strategist said.

"Inflation over the medium term is really a negative for the exchange rate and now you have the new administration trying to talk the exchange rate down so you seem to be getting something like a perfect storm for the dollar over the next year or so," he explained.

Gkionakis sees more investment potential in the yen which he believes could be a beneficiary of increased political uncertainty and consequent volatility.

He also sounded a bullish note on commodity currencies, namely the Australian and Canadian dollars, but warned of trade policy risk for the latter given the U.S.'s northern neighbor has many trade relationships with it.

The dollar index peaked in early January but has been trending down in recent weeks with some traders suggesting technical factors indicate it may have reached a market top for now.

"I think 2017 is going to be a year where we see a weaker dollar across the board," Gkionakis concluded.


Article Link To CNBC:

Oil Prices Rise As OPEC Output Cuts Drain Stocks

By Christopher Johnson
Reuters
January 24, 2017

Oil prices rose on Tuesday on evidence the global market was tightening as lower production by OPEC and other exporters drained stocks, but an increase in drilling in the United States could keep a lid on prices.

Benchmark Brent crude LCOc1 was up 40 cents at $55.63 a barrel. U.S. light crude CLc1 was 40 cents higher at to $53.15.

Ministers from the Organization of the Petroleum Exporting Countries and big producers outside the group said on Sunday that, of the almost 1.8 million barrels per day (bpd) they had agreed to remove from the market starting on Jan. 1, 1.5 million bpd had already been cut.

The supply balance already appears to be tightening.

Bernstein Energy said global oil inventories declined by 24 million barrels to 5.7 billion barrels in the fourth quarter of last year from the previous quarter. Still, this amounts to about 60 days of world oil consumption.

"This is the biggest quarterly decline since the fourth quarter of 2013, confirming that inventory builds are now reversing as the market shifts from oversupply to undersupply," Bernstein analysts said in a note to clients.

So far OPEC members appear to be sticking to the deal.

Iraq's oil minister said on Monday most oil majors working on its territory were participating in oil output reductions agreed as part of the deal.

But the reduction in supply by oil majors is being offset by an increase in U.S. production as prices rise.

U.S. drillers added the most rigs in nearly four years, data from energy services company Baker Hughes showed on Friday, extending an eight-month drilling recovery.

The country's oil production has risen by more than 6 percent since mid-2016, though it remains 7 percent below the 2015 peak. It is back to levels seen in late 2014, when strong U.S. crude output contributed to a crash in oil prices.

Fawad Razaqzada, an analyst for Forex.com, said it could take a while before the impact of higher U.S. production is felt in the market.

"The trend therefore remains bullish for oil," he said.


Article Link To Reuters:

Robots Are Taking Over Oil Rigs

Automation means wells need only five workers, down from 20; During boom, headcounts soared as “we got fat and bloated.”


By David Wethe
Bloomberg
January 24, 2017

The robot on an oil drillship in the Gulf of Mexico made it easier for Mark Rodgers to do his job stringing together heavy, dirty pipes. It could also be a reason he’s not working there today.

The Iron Roughneck, made by National Oilwell Varco Inc., automates the repetitive and dangerous task of connecting hundreds of segments of drill pipe as they’re shoved through miles of ocean water and oil-bearing rock. The machine has also cut to two from three the need for roustabouts, estimates Rodgers, who took a job repairing appliances after being laid off from Transocean Ltd.



“I’d love to go back offshore,” he says. The odds are against him. As the global oil industry begins to climb out of a collapse that took 440,000 jobs, anywhere from a third to half may never come back. A combination of more efficient drilling rigs and increased automation is reducing the need for field hands. And therein lies a warning to U.S. President Donald Trump, who has predicted a flood of new energy-sector jobs under his watch.

Automation, of course, has revolutionized many industries, from auto manufacturing to food and clothing makers. Energy companies, which rely on large, complex equipment for drilling and maintaining oil wells, are particularly well-positioned to benefit, says Dennis Yang, chief executive officer of Udemy, a company in San Francisco that trains workers whose careers were derailed by advanced machinery.

“It used to be you had a toolbox full of wrenches and tubing benders,” says Donald McLain, chairman of the industrial-programs department at Victoria College in south Texas. “Now your main tool is a laptop.” McLain, who worked as a rig hand for 25 years, is helping to retrain laid-off oil workers for more technical jobs.

Dangerous Talk


During the boom, companies were too busy pumping oil and gas to worry about head count, says James West, an analyst at investment bank Evercore ISI: “We got fat and bloated.” He says the two-and-a-half-year downturn gave executives time to rethink the mix of human labor and automated machinery in the oil fields.

Still, in the current political climate, they’re proceeding cautiously. More robotic drilling ultimately means lower labor costs and fewer workers near some of the most dangerous tasks. But oil companies probably will frame their cost-cutting technologies simply as a way to be more competitive around the world, says West.

“They’ll more likely brag about the automation rather than these head counts,” West says. “It’s kind of dangerous to talk about jobs in the Trump administration.”

Yet Trump is seen as the great hope for more shale-job creation than ever before, says Jay Colquitt, founder of OilfieldTrash.com, an online news portal catering to oilfield workers. As more federal lands open up for drilling, the jobs will follow, he adds.

“Even though modern technology is great, you can’t eliminate the person,” says Rodgers. “To make sure it never fails, you’ve got to have somebody there watching it, to verify it.”

The industry is acutely aware of the heavy reliance on manpower, after the world’s four largest oil-service companies spent $3.12 billion in severance costs during the past two years, says Art Soucy, president of global products and technology for Baker Hughes.



Rigs have gotten so much more efficient that the shale industry can use about half as many as it did at the height of the boom in 2014 to suck the same amount of oil out of the ground, says Angie Sedita, an analyst at UBS Corp. Nabors Industries, the world’s largest onshore driller, says it expects to cut the number of workers at each well site eventually to about five from 20 by deploying more automated drilling rigs.

The impact of technology extends well beyond the wellhead. Automation-related jobs for software specialists and data technicians are in demand as the oil industry recovers, said Janette Marx, chief operating officer of Airswift, an oilfield recruiter. She sees explorers and service companies being much more methodical and selective in their hiring this time around.

“To me, it’s not just about automating the rig, it’s about automating everything upstream of the rig,” says Ahmed Hashmi, head of upstream technology for BP PLC. “The biggest thing will be the systems.”

That means an engineer can design an oil well at his desk. With the press of a button, an automated system would identify the equipment needed from a supplier, create a 3D model and send instructions for building it out into the field, Hashmi says. “That is automation.”


Article Link To Bloomberg:

The Real Long-Term Threat To American Jobs Is Tech, Not Trade Deals

Will President Trump be able to get ahead of the coming wave of low-skilled job losses?


By John F. Delaney
MarketWatch
January 24, 2017

Donald Trump’s successful road to the White House was fueled by heated rhetoric against free trade deals and U.S. companies engaged in offshore outsourcing. Underpinning his slogan “Make America Great Again” was a premise that millions of jobs lost to other countries should and could return to the United States.

The president’s ambitious goals include the creation of 25 million new jobs over 10 years. Central to the plan is adjusting trade policies — either scrapping them altogether or negotiating new ones more beneficial to American workers. So, too, it would seem, are policies aimed at discouraging companies from outsourcing operations abroad where labor is cheaper.

During the campaign, Trump called out some of America’s best-known companies for their reliance on foreign labor. He has kept up the rhetoric since being elected. In December, when he touted his success in persuading air conditioner maker Carrier Corp. to keep 800 jobs in Indiana, Trump signaled a policy of retribution to prevent further outsourcing: “Companies are not going to leave the United States any more without consequences,” he said.

Many economists view Trump’s plans with skepticism. They note, for instance, that trade deals generally have little overall impact on jobs. Additionally, his threats to companies engaged in outsourcing would face practical obstacles, Levying punitive taxes on individual companies, for example, would probably require congressional approval. Even if such a policy were put into place, it likely wouldn’t improve American competitiveness. After all, the U.S. cannot prevent non-U.S. companies from using low-cost labor to make less expensive goods.

The bigger problem is that Trump’s focus on trade and outsourcing appears to be misplaced. The real long-term threat to American jobs isn’t foreign labor; it’s the accelerating pace of technological disruption eliminating jobs altogether.

We’re on the cusp of seeing entire job categories disappear — not move offshore, but vanish.


We’re on the cusp of seeing entire job categories disappear — not move offshore, but vanish — because of rapid advances in artificial intelligence, robotics, automation, cloud computing, and other emerging technologies. A recent World Economic Forum survey of executives at large companies estimated that five million jobs in the world’s leading economies could disappear over the next five years. It doesn’t require a vivid imagination to foresee some of the potential destruction.

As just one example, consider the four million Americans who make their living behind the wheel. With rapid advances in self-driving vehicle technology, their future is under a dark cloud. Some suggest the 1.7 million truck drivers are especially vulnerable, given that they spend most of their time on the highway where human intervention is needed least. Then there is the tremendous financial incentive: In the $700 billion trucking industry, an estimated third of costs go to compensating drivers. The temptation among trucking companies to cut those costs — and gain a competitive advantage — will be great.

Similarly, the potential widespread adoption of block chain technology could lay waste to millions of jobs in the financial services industry. The technology is now used to record and store Bitcoin payments, but startups and large banks are exploring ways to use it to improve a variety of other services and compliance tasks, which could save billions.

Automating tasks — a core function of many of these new technologies — is nothing new. But the pace of automation’s march into areas beyond the assembly line is hard to overstate. Consider the now-ubiquitous ATM or the airport kiosk. The march won’t stop. This year, Amazon is expected to open a new grocery store without cashiers, and a new restaurant with a machine capable of making a gourmet hamburger in 10 seconds is set to open in San Francisco.

Of course, not all automating technologies will lead to the elimination of jobs. But if the president is committed to massive and sustained job growth, he will need to confront the inevitable, relentless advance of disruptive new technologies.

Andrew McAfee and Erik Brynjolfsson of the MIT Initiative on the Digital Economy have blamed new technologies on the “great decoupling” of productivity and job growth rates. After World War II, the two rates rose in near lockstep for decades, but beginning in 2000 job growth slowed considerably compared with productivity. Trump’s promise to reduce bureaucracy and roll back regulation may well fuel the growth of these new technologies, leading to more rapid displacement of workers than might have otherwise occurred.

History has shown new technologies create new jobs even as they kill off old ones. After talkie movies were introduced in the late 1920, for example, movie theaters no longer needed piano players to provide accompaniment to movies. But new job opportunities opened in Hollywood for audio engineers. The more recent innovation of online banking has surely limited the need for traditional bank tellers, but it has created new jobs for programmers.

So yes, technology creates jobs, but mostly for the skilled worker capable of exploiting the new opportunities. The truck driver, and other low-skilled workers facing disruptive technologies that threaten their livelihood, are in a much more precarious position. For many truck drivers, becoming a software programmer for self-driving vehicles, or a drone-repair person, isn’t possible absent extensive training.

Moreover, the pace of technology-driven disruption is accelerating as new technologies combine and mutate in often unexpected ways. Autonomous vehicles using block chain technology for payment transactions will mean job losses for taxi drivers and bank employees. Commercial drones combined with big data analytics relying on cloud storage will mean less need for delivery personnel and supply chain managers.

Along with most elected officials, Trump has been silent on this key issue. He ignores it at his own political peril. To make good on his campaign promises, his administration will want to focus on training displaced workers for these new emerging jobs, many of which will require programming, engineering, or similar skills.

Trump clearly knows a thing or two about disruption — his upset victory in November is proof of that. But will he be able to get out ahead of the coming wave of low-skilled job losses arising from disruptive technologies? Doing so would help him address what threatens to be a growing source of economic anxiety among American workers.


Article Link To MarketWatch:

U.S. Fund Managers Betting Trump Fails To Rewrite Obamacare

By David Randall 
Reuters
January 24, 2017

Some prominent U.S. fund managers are betting that former President Barack Obama's signature healthcare law will not undergo the widespread changes that President Donald Trump promised on the campaign trail.

Portfolio managers from Fidelity, Gamco, Thornburg and other large firms say they see the broad outlines of the Affordable Care Act - commonly known as Obamacare - remaining intact despite Trump's signing of an executive order on Friday, his first day in office, that sought to weaken it.

As a result, these fund managers say they are buying shares of hospitals, health insurance companies and biotech firms they see as unfairly hit by political uncertainty.

"They may do enough to try to rebrand it as Trumpcare, but I just don't think it will be that dramatically different from what we have today," said Jeff Jonas, a portfolio manager at Gamco Investors in Rye, New York, who said he has been adding to his position in hospital and nursing center company Kindred Healthcare Inc and large health insurance companies.

"The executive order itself was very vague, and it's a little hard to say at this point what actual effect it will have," he said.

Trump's order directs government departments to "waive, defer, grant exemptions from, or delay the implementation" of provisions of the law that imposed fiscal burdens on states, companies or individuals, but provides no details.

Hospital Stocks Gaining 


Investors overall still look hesitant to buy healthcare stocks, with fund flows to the iShares US Healthcare ETF, a widely held exchange traded fund that tracks the healthcare industry, falling 4.8 percent in the week ending Jan. 11, according to Lipper data.

Healthcare stocks fell swiftly after Trump was elected on Nov. 8, and have underperformed since. The S&P 500 healthcare sector has gained 2 percent since Election Day, compared with a 6.3 percent rise in the S&P 500 over the same time.

But hospital stocks such as HCA Holdings Inc have outperformed since the start of January on signs that Republicans plan to replace the Affordable Care Act at the same time they repeal it. Shares of HCA are up 7.9 percent since the start of the year, compared with a 1.2 percent gain in the S&P 500, and are trading slightly higher than they were on Election Day.

Although repealing the law requires only a majority in the Senate, replacing it would require at least 60 votes in the Senate, meaning that Republicans would have to win some Democratic support. As a result, fund managers said they expect only incremental changes.

A repeal without a replacement could put pressure on hospitals by rescinding the Medicaid expansion and individual subsidies, prompting more individuals to go without insurance and be unable to pay their hospital bills.

Representative Tom Price, Trump's nominee for health secretary, said in a hearing Wednesday that the administration will initially focus on individual health plans sold on exchanges and is not interested in "pulling the rug out on anybody," though he said it would also focus on Medicaid.

Some Republicans in Congress have been pushing for an outright repeal in order to give states more control of their healthcare programs. The House and Senate passed resolutions to have draft legislation that would repeal the law ready by Jan. 27. Other Republican senators have proposed that states have the option remain in the Obamacare insurance program.

Not "A Whole Lot Of Disruption"


Eddie Yoon, portfolio manager of the $6.1 billion Fidelity Select Heath Care fund in Boston, has not changed his holdings since the election because he does not see large changes coming.

He said he remains bullish on the medical device and biotech industries because both do not look like they would be significantly affected by any of the Republican healthcare proposals. He expects the moratorium on a tax on medical device sales, due to expire at the end of 2017, will be extended, and that controls on drug prices floated by Trump are unlikely to be enacted.

"I don't think the new administration wants to get bogged down in healthcare and they want to move on to immigration and tax reform and bigger policy items," said Yoon. "I don't anticipate that there will be a whole lot of disruption."

Biotech may also benefit if Congress passes legislation that cuts the taxes companies pay on profits earned overseas, leaving pharmaceutical companies flush and ushering in a wave of mergers and acquisitions, he said.

The Nasdaq Biotechnlogy Index is up 3.8 percent since the beginning of the year after falling more than 20 percent last year.

Connor Browne, a portfolio manager with the $889 million Thornburg Value fund in Santa Fe, New Mexico, said he added a position in biotech company Seattle Genetics Inc in late December. He also has been adding to his position in medical device makers in anticipation that little will be done to change the law, meaning that millions of Americans will still have insurance that will help pay for devices.

"While it hasn't so far paid to underestimate Donald Trump, it sure seems like we might be seeing indications that he doesn't understand how hard it will be to get legislation done," Browne said.


Article Link To Reuters:

UK Supreme Court Says PM May Must Get Parliament Approval To Trigger Brexit

By Michael Holden and Estelle Shirbon
Reuters
January 24, 2017

The UK Supreme Court ruled on Tuesday that Prime Minister Theresa May must get parliament's approval before she begins Britain's formal exit from the European Union.

The UK's highest judicial body dismissed the government's argument that May could simply use executive powers known as "royal prerogative" to invoke Article 50 of the EU's Lisbon Treaty and begin two years of divorce talks.

However, the court rejected arguments that the UK's devolved assemblies in Northern Ireland, Scotland and Wales should give their assent before Article 50 is invoked.

"The referendum is of great political significance, but the Act of Parliament which established it did not say what should happen as a result," said David Neuberger, President of the Supreme Court which ruled by 8-3 against the government.

"So any change in the law to give effect to the referendum must be made in the only way permitted by the UK constitution, namely by an Act of Parliament."

May has repeatedly said she would trigger Article 50 before the end of March but she will now have to seek the consent of lawmakers first, potentially meaning her plans could be amended or delayed, although the main opposition Labour Party has said it would not slow her timetable.

Last week May set out her stall for negotiations, promising a clean break with the world's largest trading block as part of a 12-point plan to focus on global free trade deals, setting out a course for a so-called "hard Brexit".

Sterling initially rose on the news that the government had lost its appeal, but it then fell over half a cent to hit day's lows against the dollar and euro after the court ruled that Britain's devolved assemblies did not need to give their assent to triggering Article 50. Sterling last traded down 0.6 percent on the day at $1.2463.


Article Link To Reuters:

UK Supreme Court Says PM May Must Get Parliament Approval To Trigger Brexit

Abandoning Trade Will Make the Poor Poorer

By Michael Schuman
The Bloomberg View
January 24, 2017

Without question, the most exciting economic story of the past half century has been the dramatic, and probably unprecedented, decline in global poverty. In a recent study, the World Bank estimated that in 2015, just over 700 million people remained trapped in desperate poverty, or 9.6 percent of the world’s population. Those sound like big numbers until you compare them to 1990, when nearly two billion people languished in poverty -- a staggering 37 percent of the global populace. Such progress has raised the real possibility that extreme poverty can be eradicated in the not-too-distant future.

That prospect could now be in jeopardy. After the Brexit vote and election of Donald Trump, a more virulent economic nationalism has begun to spread through several Western capitals; as one of his first acts, Trump formally withdrew U.S. support for the Trans-Pacific Partnership trade pact. If taken to its logical extreme, this vision could give rise to policies that set back the world's war on poverty, with potentially dire consequences for rich and poor alike.

Any serious rollback of global trade would threaten precisely the same economic forces that have created great gains in wealth in the emerging world. Economic history since World War II has proven that the best way for countries to move from poverty to prosperity is to join the global trading system. Poor countries simply don’t possess the capital and spending power to develop industry and boost welfare on their own. Only by tapping into demand in the U.S. and other wealthy nations can these countries foster the jobs and growth necessary to increase incomes.

That’s why exports lifted China, South Korea and other fast-growing Asian Tigers out of poverty. Now more countries, from India to Ethiopia, are striving to replicate their success by linking themselves more tightly to flows of international trade and investment.

Their hopes depend on the survival of free trade. Ultimately, the U.S. and other advanced economies deserve much of the credit for the recent gains in global welfare. By opening their markets to imports from poor nations, the world’s richest nations created jobs in the world’s poorest -- jobs that saved millions from lives of misery. Wider trade liberalization would further aid efforts to rescue the millions who remain impoverished. A 2015 study by the World Trade Organization and the World Bank concluded that “a sustained effort to deepen economic integration and further lower trade costs is essential for ending poverty.”

Ironically, however, the very success we’ve had eliminating poverty has put further progress at risk. By drawing the world’s poorest countries into the global supply chain for smartphones, blue jeans and other goods, international trade stiffened competition between the low-wage workers of the developing world and the high-cost workers of the developed world for the same jobs. It is a contest that some in the U.S., Europe and Japan have lost, as assembly lines shifted to cheaper emerging economies. The result is widespread anger in many rich countries towards free trade. All those jobs that lifted poor Chinese and Mexicans from poverty, their citizens believe, have been “stolen” from them by “unfair” trade.

Trump successfully appealed to this anger during the campaign, railing against free trade, claiming pacts like TPP and the North American Free Trade Agreement are disasters for American workers and vowing to protect them from the evils of foreign competition. We don't yet know what more he’ll try to do, or how high he may or may not raise protectionist barriers. The business community continues to press Trump to keep vital trade flowing.

But he has already threatened to slap a 45 percent tariff on Chinese imports, and warned companies like Carrier and Toyota he’d impose a hefty border tax on anything they manufacture in Mexican factories for sale in the U.S. Such steps could quickly degenerate into a global trade war. Officials in both China and Mexico have said they’d retaliate if Trump imposed barriers to their exports.

Such policies would cut off the world’s poorest people from the jobs they need to escape poverty. And a trade war between major economies would also dampen overall global growth, dealing another blow to the needy. International Monetary Fund Managing Director Christine Lagarde warned last year that sluggish growth in the emerging world was already taking a toll on the poor. Incomes in the developing world are converging with those in advanced countries at less than two-thirds the pace the IMF had forecast a decade ago.

Some readers are probably thinking: Too bad. In a dog-eat-dog world, the U.S. has to worry about its own, not some destitute families in Bangladesh or Nigeria. That thinking is short-sighted. Alleviating poverty is not just a moral imperative but an economic one. With societies across the developed world aging and many, from Japan to Italy, struggling to grow at all, U.S. companies and the Americans they employ will be able to sell more airplanes, cars and insurance policies only if more poor in the emerging world join the global middle class.

And even if you could care less about other countries’ poor, what about your own? A study by the National Foundation for American Policy figured that the types of tariffs Trump has threatened to impose on goods from China and Mexico would cost the poorest 10 percent of U.S. households as much as 18 percent of their after-tax income, or some $4,670 over five years. That’s an extra burden none of us can afford.


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Reopening NAFTA Could Revive Debate Over What Makes A Car 'American'

By Bernie Woodall
Reuters
January 24, 2017

Some of the most popular and profitable vehicles sold in the United States by Detroit's automakers are imported from Mexico, a reality that highlights the risks for the auto industry as the Trump administration pushes to overhaul trade policy.

President Donald Trump has scheduled a breakfast on Tuesday with the chief executives of Detroit automakers General Motors Co (GM.N), Ford Motor Co (F.N) and Fiat Chrysler Automobiles NV (FCAU.N) (FCHA.MI) to talk about bringing more manufacturing jobs to the United States, the White House said on Monday.

Trump campaigned on a pledge to renegotiate the North American Free Trade Agreement and said on Monday he would meet leaders of NAFTA partners Mexico and Canada at an "appropriate time" to get the process started.

Auto industry officials expect Trump to urge Canada and Mexico to agree to new tougher "rules of origin" that would require a higher percentage of North American content to be considered tariff free.

Under NAFTA, at least 62.5 percent of a passenger car or light truck’s net cost must originate in North America - defined as the United States, Canada or Mexico - to avoid tariffs.

Separately, the U.S. government since 1994 tracked the percentage of a vehicle's content that is made in the United States and Canada, and required automakers to disclose those percentages on labels put on vehicles sold in the United States. The Chevrolet Traverse and the Honda Accord made in Ohio had 80 percent U.S. and Canadian content in 2016, for example. The Ram pickup had 59 percent U.S. and Canadian content, according to government data compiled in the 2016 American Automobile Labeling Act report.

Trump has not made specific proposals for reworking NAFTA, but he has called for manufacturers to buy and build more products in the United States.

Automakers have a lot at stake in preserving the status quo.

GM, the biggest U.S. automaker, imported about 315,000 of its full-size Chevrolet Silverado and GMC Sierra pickup trucks from Mexico last year. That represents about 40 percent of the 2016 U.S. sales of the highly profitable models. Overall, GM builds 14 percent of the vehicles it sells in the United States in Mexico, according to data from LMC Automotive, a consulting firm. Fiat Chrysler makes nearly half of its Ram full-size pickups, its most popular model, in Mexico, according to data from IHS Markit obtained by Reuters. Ford earlier this month won praise from Trump for cancelling plans to build a $1.6 billion factory in Mexico. But Ford still plans to build one of its top-selling cars, the Fusion sedan, in Mexico, as well as the future generation of its Focus small car.

Overall, nearly 2 million vehicles were shipped to the United States from Mexico in 2016 by all automakers, and that volume is expected to rise by 14.5 percent this year, according to an IHS Markit forecast.

IHS Markit would not comment on the data Reuters obtained from a third party.

Trump has threatened to slap a 35 percent tariff on vehicles imported from Mexico. But the Center for Automotive Research, an auto industry think tank in Ann Arbor, Michigan, said in a study released this month the tariff could cut U.S. auto sales by 450,000 vehicles per year and cost 6,700 vehicle assembly jobs across North America.

A separate study by LMC Automotive also concluded that U.S. car and light truck sales could suffer if the administration takes a "highly protectionist and isolationist stance." However, if the administration cuts taxes and enacts an infrastructure spending plan, auto sales could rise by 300,000 to 500,000 vehicles a year, LMC forecast.


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After U.S. Exit, Asian Nations Try To Save TPP Trade Deal

By Charlotte Greenfield and Stanley White 
Reuters
January 24, 2017

Australia and New Zealand said on Tuesday they hope to salvage the Trans-Pacific Partnership (TPP) by encouraging China and other Asian nations to join the trade pact after U.S. President Donald Trump kept his promise to pull out of the accord.

The TPP, which the United States had signed but not ratified, was a pillar of former U.S. President Barack Obama's policy to pivot to Asia.

Japanese Prime Minister Shinzo Abe has touted it as an engine of economic reform, as well as a counter-weight to a rising China, which is not a TPP member.

Fulfilling a campaign pledge, Trump signed an executive order in the Oval Office on Monday pulling the United States out of the 2015 TPP agreement and distancing the United States from its Asian allies.

Australian Prime Minister Malcolm Turnbull said he had held discussions with Abe, New Zealand Prime Minister Bill English and Singaporean Prime Minister Lee Hsien Loong overnight about the possibility of proceeding with the TPP without the United States.

"Losing the United States from the TPP is a big loss, there is no question about that," Turnbull told reporters in Canberra on Tuesday. "But we are not about to walk away ... certainly there is potential for China to join the TPP."

Obama had framed TPP without China in an effort to write Asia's trade rules before Beijing could, establishing U.S. economic leadership in the region as part of his "pivot to Asia".

China has proposed a counter pact, the Free Trade Area of the Asia Pacific (FTAAP) and has championed the Southeast Asian-backed Regional Comprehensive Economic Partnership (RCEP).

Meetings Planned

New Zealand's English said the United States was ceding influence to China and the region's focus could switch to alternative trade deals.

"We've got this RCEP agreement with Southeast Asia, which up until now has been on a bit of a slow burn, but we might find the political will for that to pick up if TPP isn't going to proceed," English said.

Malaysia's trade minister said negotiators from the remaining TPP countries would be in "constant communication" to decide the best way forward.

"Notwithstanding the current position of the new U.S. Administration on (TPP), we will continue to engage with our American colleagues to strengthen our bilateral trade and economic relations, given the U.S.’s importance as our third-largest trading partner and a major source of investment," Mustapa Mohamed said in a statement.

The TTP, which has been five years in the making, requires ratification by at least six countries accounting for 85 percent of the combined GDP of the member nations.

Australia held open the possibility of China, the world's top exporter, joining a revised deal.

"The original architecture was to enable other countries to join," Australian Trade Minister Steven Ciobo told the Australian Broadcasting Corporation on Tuesday.

"Certainly I know that Indonesia has expressed interest and there would be scope for China if we are able to reformulate it."

Japan has led the push for the partnership, which also includes Brunei, Canada, Chile, Malaysia, Mexico, Peru and Vietnam.

"There is no change to our view that free trade is the source of economic growth," Japanese Economy Minister Nobuteru Ishihara told reporters.

When asked whether Japan would be open to negotiating a bilateral trade pact with the United States, Ishihara said it was still uncertain whether U.S. trade officials would start such negotiations.

Japanese Deputy Chief Cabinet Secretary Koichi Hagiuda said separately that Japan was not considering moves with other TPP members based on a lack of U.S. involvement.

"As Prime Minister Abe has made clear, TPP without the United States is meaningless and the balance of interests would crumble," he told a news conference, adding Tokyo would keep explaining the benefits of the pact for America.

Abe had made TPP a core of his economic growth policies and along with the Obama administration, viewed TPP as strategically vital in the face of a rising China

Trump took office on Friday and pledged to end what he called an "American carnage" of rusted factories and crime. He vowed to bring jobs back by renegotiating what he called bad multilateral trade deals in favor of bilateral ones.

New Zealand Trade Minister Todd McClay said he had talked with a number of TPP-member ministers at the World Economic Forum in Davos last week and he expected they would meet over the coming months.

"The agreement still has value as a FTA (Free Trade Agreement) with the other countries involved," McClay said in an emailed statement to Reuters.


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