Good morning. Here’s what you need to know.
Markets down. S&P 500 futures point to a negative open for U.S. stocks and indices across Europe are in the red, with the German DAX retreating the most, down 1.2%. Russian stocks are down more than 3% and the ruble is down sharply against the dollar today following an outsized rally that has boosted the currency since mid-March. In Asia, the Japanese Nikkei closed down 1.7%, and the Hong Kong Hang Seng fell 0.6%. In the risk-off environment that is ushering in the trading week, U.S. Treasuries are getting a small lift.
Earnings season. Q1 earnings reporting season kicks off this week when aluminium giant Alcoa releases results on Tuesday after the closing bell. Bed Bath & Beyond and Family Dollar Stores report on Wednesday, and JPMorgan Chase and Wells Fargo report on Friday. “The Estimize community is forecasting $US1.44 EPS and $US24.701 billion [in revenue] this quarter, which would represent year over declines of 9.4% and 1.7% respectively,” says Leigh Drogen, founder and CEO of Estimize, a platform that crowdsources earnings estimates. “Throughout the quarter we have seen downward analyst revisions from both Wall Street and Estimize which can be a bearish indicator.”
Supply in focus. The U.S. Treasury will auction $US64 billion of 3-year, 10-year, and 30-year notes this week. “Providing a meaningful offset however will be $US50.4 billion of maturities; rollover demand should be strong and net new cash needed is just $US13.6 billion — less than $US5 billion when accounting for the Fed’s buybacks,” says David Ader, head of government bond strategy at CRT Capital. “The absence of any major economic data this week and the tone set in the wake of Friday’s NFP report leave the auction process as the most compelling series of tradable events. The one notable exception to the dearth of incoming new information will be Wednesday’s FOMC minutes.”
Record money in ETFs. $US11 billion of investor funds flowed into exchange-traded products in March, bringing global industry assets under management to a new all-time high of $US2.45 trillion, according to data from ETFGI. “In Q1 2014, ETFs/ETPs have gathered net inflows of $US33.0 billion, which is significantly below the $US73.1 billion at this time last year,” said the research firm in a press release. “Fixed income ETFs/ETPs gathered $US17.8 billion — the largest net inflows YTD — followed by equity ETFs/ETPs with $US8.4 billion, while commodity ETFs/ETPs experienced the largest net outflows YTD with $US207 million.”
Euro zone confidence. A measure of euro zone investor confidence produced by German research firm Sentix rose to 14.1 in April from March’s 13.9 reading, marking the highest level since 2011. However, confidence in the German economy fell. “The Sentix economic index (composite index) for Germany falls in April for the third time in a row,” said the firm in a press release. “While 6-month expectations have been dragging down the indicator over the past months, it is now also the assessment of the current situation which is not lending support to the composite index anymore. The German economy thus loses steam. The big question now is how the euro-zone economy will react to this. Still, it is looking robust: The composite index for the euro area increases, once more, slightly.”
German industrial production. Industrial output expanded at a faster-than-expected 0.4% monthly pace in February, but January’s 0.8% rise was revised down to 0.7%. The numbers were better than the consensus 0.3% advance expected by market economists. On a workday-adjusted basis, production was up 4.8% year over year, slowing from 4.9% in January.
Consumer credit. The only U.S. economic release on the calendar today is monthly consumer credit data, due out from the Federal Reserve at 3 PM ET. Economists predict total credit rose by $US14 billion in February after advancing $US13.7 billion in January.
Nigeria eclipses South Africa. Over the weekend, Nigeria’s statistics office released rebased GDP figures that propelled it to the top spot as Africa’s biggest economy, and the world’s 24th-largest. “The dramatic increase in GDP was largely due to services, which increased more than threefold in nominal terms,” says Yvonne Mhango, an economist at Renaissance Capital “Services’ share of GDP jumped to 53%, vs 29% previously. This is partly due to the surge in telecoms’ contribution, to 9% of GDP, vs 1% previously, and the emergence of a new sector, ‘Nollywood’ (1.2% of GDP). As we expected, agriculture’s share declined to 22% (vs 35%). The threefold increase in manufacturing/GDP, to 7% (vs 2%), was countered by the fall in oil and gas/GDP to 14% (vs 33%), which explains the decline of industry/GDP to 25% (vs 36%).”
Unemployment benefits in Congress. The Senate will likely vote to extend emergency unemployment benefits this afternoon, but Chris Krueger, a D.C.-based analyst at Guggenheim Securities, says the measure “has virtually no chance” of getting through the House of Representatives. “The ~$10 billion bill would retroactively restore for five months long-term unemployment benefits that expired on Dec. 28 (they would expire at the end of May). The program pays ~$300 per week to the long-term unemployed who had previously exhausted the 26 weeks of state-sponsored unemployment insurance. If passed into law, this bill would generate a retroactive payment of ~$4,000 to ~1.3 million Americans who lost their emergency unemployment benefits on December 28 and would then pay them the ~$300 per week until the end of May.”
Hedge funds not advertising yet. Research firm Preqin says the alternative asset management industry hasn’t yet taken advantage of new advertising rules. “Preqin’s recent survey of more than 150 private equity and hedge fund managers reveals that these firms have been slow to take advantage of the marketing opportunities presented by the JOBS Act, which allows them to advertise and perform general solicitations to showcase their funds to a larger number of potential investors,” said the firm in a press release. “Only 4% of hedge fund managers and 5% of private equity managers surveyed said they have registered to market under the JOBS Act.”
Later today, Business Insider will publish its quarterly chartbook, “The Most Important Charts In The World.” The book contains submissions from more than 100 of our favourite analysts, traders, and economists across the Street.
Below is a submission from former UBS chief economist George Magnus. Stay tuned for more.
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