Monday, May 1, 2017

Monday, May 1, Morning Global Market Roundup: Asian Equities Steady As Japan Outperforms

By Shinichi Saoshiro 
Reuters
May 1, 2017

Asian stocks shook off a sluggish start and steadied on Monday, with Japan outperforming on upbeat earnings, while the dollar regained traction as the U.S. government looked likely to avoid a shutdown.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was largely flat. Japan's Nikkei .N225 added 0.4 percent, with high-tech blue chips gaining on strong earnings. [.T]

Many markets in Asia and Europe are closed for Labour Day.

Asian shares initially took their cue from Wall Street, which dipped on Friday after data showed the U.S. economy grew at its weakest pace in three years in the first quarter.

The mood brightened slightly, however, on news that U.S. congressional negotiators hammered out a bipartisan agreement on a spending package to keep the federal government funded through Sept. 30, thus averting a government shutdown.

Pointing to a higher open for the main market later in the day, S&P mini futures gained 0.1 percent ESc1 while the safe-haven U.S. 10-year Treasury yield US10YT=RR rose after three successive days of declines.

While U.S. consumer spending has almost stalled, a surge in business investment and wage growth suggested activity would regain momentum as the year progresses, limiting Wall Street losses. Moreover, strong earnings have kept the U.S. equity market at or near record levels.

"The main focus of the broader markets this week will be on the United States, with the Fed's May 2-3 policy meeting and the jobs report on Friday," said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management in Tokyo.

"While many of the indicators in the first quarter were weak, the jobs data could confirm that labor market conditions continue to improve and lift the dollar and U.S. yields."

Asian markets were little fazed by China's official manufacturing survey on Sunday which showed growth in the country's factories slowed more than expected in April to a six-month low.

As trading resumed on Monday the safe-haven yen initially rose against the dollar in response to Saturday's missile test by North Korea.

But the dollar gradually regained traction after the knee-jerk reaction to the missile test faded.

The greenback was up 0.1 percent at 111.670 yen JPY=, edging back towards a four-week peak of 111.780 scaled last week when Emmanuel Macron's victory against anti-euro nationalist Marine Le Pen in the first round of France's presidential elections reduced demand for the safe-haven currency. The runoff vote is on May 7.

The euro handed back earlier modest gains and was flat at $1.0894 EUR=.

The common currency had been lifted on Friday after euro zone inflation data rose more than expected and returned to the European Central Bank's target.

The euro was still in range of the 5-1/2-month high of $1.0951 struck early last week on relief over the first round of the French presidential elections.

The pound was 0.3 percent lower at $1.2908 GBP=D4 after climbing to a seven-month high of $1.2957 on Friday, when traders were seen to have closed off bets against the pound ahead of Britain's long bank holiday weekend. [GBP/]

The dollar index against a basket of major currencies rose 0.1 percent to 99.128 .DXY.

The Australian and New Zealand dollars were little changed at $0.7484 AUD=D4 and $0.6860 NZD=D4, respectively.

In commodities, crude oil prices slipped amid lingering concerns that an OPEC-led production cut has failed to significantly tighten an oversupplied market. [O/R]

U.S. crude CLc1 shed 9 cents to $49.22 a barrel, heading back towards a one-month low of $48.20 plumbed late last week and Brent LCOc1 was down 18 cents at $51.87 per barrel.

Spot gold XAU= gave back Friday's gains as the dollar bounced and slipped 0.4 percent to $1,264.16 an ounce.


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Oil Prices Inch Down On High Stocks, Weak China Factories Survey

By Aaron Sheldrick
Reuters
May 1, 2017

Oil prices edged lower on Monday, undermined by a weak manufacturers survey out of China, and despite talk that OPEC-led crude oil output cuts could be extended when oil producers meet later this month.

NYMEX crude for June delivery was down 10 cents at $49.23 a barrel.

London Brent crude for new front-month delivery in July was down 13 cents at $51.92.

Also weighing on prices was a faster than expected slowdown of growth in China's manufacturing sector in April. An official survey showed on Sunday that producer price inflation cooled and policymakers' efforts to curtain financial risks in the economy weighed on demand.

"The moderation in the China PMI could see commodity prices come under some modest pressure," ANZ said in a note.

It was the third consecutive week that the oil price has started lower. Inventories remain high, and the market remains stuck in the rut that it fell in to 2014 when a global glut fully emerged.

Iran's oil minister said on Saturday that OPEC and non-OPEC countries had given positive signals for an extension of output cuts, which Tehran would also back.

The Organization of the Petroleum Exporting Countries (OPEC)meets this month to discuss oil supply policy.

If OPEC agrees to extend the cuts, then bloated global inventories could drain by the end of the year, a Reuters poll of economists and analysts showed.

Saudi Arabia's Energy Minister Khalid al-Falih said on Saturday there was consensus with Central Asia over oil markets and production levels.

Money managers cut their net long U.S. crude futures and options positions for the first time in four weeks in the week to April 25, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday.

U.S. President Donald Trump on Sunday stepped up contacts with allies in Asia to secure their cooperation to pressure North Korea over its nuclear and missile programs.

Trump's calls to the two Asian leaders came after North Korea test-launched another missile that Washington and Seoul said was unsuccessful but which drew widespread international condemnation.


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Surging Chevron, Exxon Profits Signal Oil Industry Turnaround

By Ernest Scheyder
Reuters
May 1, 2017

Rising crude prices helped Chevron Corp and Exxon Mobil Corp easily beat analysts' quarterly profit expectations on Friday, setting an upbeat tone as the two companies press ahead with shale oil expansions.

While cost cuts and asset sales provided a boost to both companies, the results highlighted the slowly improving dynamics for the energy industry as oil prices have climbed more than 50 percent since early 2016.

First-quarter results were especially robust at Exxon, with quarterly profit more than doubling to $4.01 billion, even as production fell 4 percent.

Chevron swung to a $2.68 billion quarterly profit and turned cash flow positive, earning more than it spent, a milestone Wall Street analysts had long sought. Cash flow should continue to rise further, Chief Financial Officer Pat Yarrington told investors on a Friday conference call.

Chevron's results were helped by $2.1 billion in asset sales. The company has sold more than $5 billion in assets since last year and is seeking buyers for its Canadian oil sands business, sources have told Reuters.

If Chevron sells the business, "we'd want to make sure we got full value for it," Yarrington said.

Shares of both Exxon and Chevron rose less than 1 percent in afternoon trading as U.S. oil prices traded flat near $49 per barrel.

Their energy peers, BP Plc and Royal Dutch Shell Plc, are set to report quarterly results next week.

Looming over the large international oil companies, though, is uncertainty over whether the Organization of the Petroleum Exporting Countries will extend a production cut past June when it meets next month in Vienna. Should the cut not be continued, oil prices would likely drop, pushing the sector back into recession.

'Need To Be Cautious'


Jeff Woodbury, Exxon's head of investor relations, said while the company believes underlying global oil demand remains strong, high inventories and new supplies coming into the market "indicates a need to be cautious."

Chevron and Exxon expanded production in their American shale portfolios during the quarter, with both deciding the low-cost fields offered an easy opportunity to boost profit. They have laid out plans to increase drilling in those fields this year.

Chevron, the second largest leaseholder in the Permian Basin, which is the largest American oilfield, has devoted much of its 2017 capital budget to shale projects. Chief Executive Officer John Watson told Reuters earlier this month the Permian was vital to Chevron's growth.

Exxon doubled its acreage holdings in the Permian Basin of West Texas earlier this year in a deal worth up to $6.6 billion. It was the U.S. oil industry's largest deal in the first quarter, and Exxon said it plans to drill its first well on the acreage soon.

"We see unique value that we're going to bring to that Permian acreage," Woodbury said on a conference call with investors on Friday.

In Asia, both companies expanded liquefied natural gas operations. Chevron brought a third processing facility online at its Gorgon LNG project in Australia, and Exxon bought InterOil in a $2.5 billion deal to expand in Papua New Guinea.

Chevron still expects the Wheatstone LNG project in Australia to come online by the middle of the year, executives said.

Exxon also bought a 25 percent stake in a Mozambique gas field last month in a deal worth up to $2.8 billion.


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Trump Could Target 'Carried Interest' Tax Loophole

By Jason Lange
Reuters
May 1, 2017

The Trump administration's push to overhaul tax laws might soon target a loophole used by some financial managers to lower their tax rates, White House Chief of Staff Reince Priebus said on Sunday.

President Donald Trump campaigned before the Nov. 8 election to eliminate the so-called "carried interest" loophole, which is used by many financial managers to lower tax obligations. But a rough outline for a major tax overhaul released last week failed to mention the loophole.

Priebus, however, hinted that carried-interest could be on the chopping block and warned against analysts taking the view that financial managers would keep on benefiting from it.

"That balloon is going to get popped pretty quick," Priebus told ABC's "This Week."

"Carried interest is on the table," he said. "The president wants to get rid of carried interest so that balloon is not going to stay inflated very long, I assure you of that."

The carried interest rule allows financial managers at private equity, hedge fund and other firms to pay a capital gains tax rate on their income instead of the higher income tax rate.

Trump's tax overhaul plan would slash rates for businesses. Vice President Mike Pence told NBC "Meet the Press" on Sunday the plan might widen budget deficits "in the short term," but faster economic growth would eventually lead to higher revenue.


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Twitter Partners With Bloomberg For Streaming TV News

By Shalini Nagarajan
Reuters
May 1, 2017

Twitter Inc is partnering with Bloomberg Media for a round-the-clock streaming television news service on the social networking platform, the Wall Street Journal reported on Sunday.

The channel, which is yet to be named and is expected to begin operations this fall, would be announced Monday, WSJ said. on.wsj.com/2oNTp10

Twitter's user growth has stalled in the past few quarters and the company has been trying to convince advertisers that it will strengthen its user base.

As part of its efforts, it has updated its product offerings including live video broadcasts from its app and launched new features to attract users.

Twitter CEO Jack Dorsey said in an internal memo last October one of the company's missions was defined as being the "people's news network".

Twitter has made a push into news and sports on mobile devices last year and this foray could pique the interest of a media company as an acquirer, analysts have said.


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