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Manufacturing Activity In China Disappoints Markets Again

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biotech

During the opening of the first week of the month, Asian markets showed mixed trading directions with Shanghai SE Composite and Hang Seng in red while Nikkei 225 and TSEC 50 Index finishing the day on a positive note.

Asian hours

The major development impacting the Asian trade came from China, where the manufacturing purchasing managers’ index (PMI) slipped further to 49.4 in January from 49.7 in December. The reading came below the estimates of 49.6, reconfirming fears that the world’s second-largest economy is under more than expected pressure.

Services PMI too fell to 53.5 for the month, brushing off expectations that consumption would become the driving factor of the economy. Meanwhile, another private survey, Caixin/Markit China Manufacturing PMI noted that the factory activity contracted for the 11th month in a row. The report triggered a fall in Shanghai SE Composite Index by 1.80% to 2,688.85. Hang Seng also shed 87.61 points or 0.45% to 19,595.50. However, both Nikkei 225 and TSEC 50 rose by 2% and 0.14% respectively today. Mumbai Sensex was marginally down ahead of the Reserve Bank of India’s monetary policy meet tomorrow.

Oil tanks again

On the other hand, European markets were choppy as they pared early day gains following the release of China’s PMI. The downward movement of oil prices also added to the concerns in the European markets. FTSE 100 was trading 0.64% or 38.68 lower at 6,045.11 while Dax shed 59.26 points or 0.60% to 9,738.85. France CAC 40 and Euronext 100 too were down by 0.37% and o.33% respectively. Only Switzerland’s Swiss Market Index gained marginally by 0.16% and was seen trading around 8,333.

The Bank of Japan’s surprise interest cut kept last week left the U.S. markets rejoicing. However, concerns about the economic growth hovered after GDP growth in the fourth quarter was reported at 0.7% versus the forecast of 0.8%. Both Dow Jones Industrial Average and S&P 500 Index closed the last trading session nearly 2.50% higher at 16,466.30 and 1,940.24 respectively.

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OPEC’s Reluctance to Cut Production Hurts Oil

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Oil prices have shed most last week’s gains after weak Chinese Purchasing Managers’ Index (PMI) data fell for another month, adding to fears that the region as a whole slowing down. At the same time, lack of any clear indication about holding an emergency meeting to contain the oil price decline by OPEC has been weighing on the market.

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More Chinese weakness

China’s manufacturing activity dipped at its fastest pace in January since 2012. The preponderance of evidence pointing the contractions of the world’s second-largest economy has added to bearishness around crude oil. Brent crude, a global benchmark, is now trading at $35.90. U.S. West Texas International Crude is down over 3.5% to 32.39. The current trading level is critical to set a tone for the upcoming days as it can either sink back into sub-$30 level or march ahead from here.

No emergency meeting

Last week was full of developments that hinted at a near-term oil rally. Reports in Russia added to the speculative fever that OPEC’s key member Saudi Arabia had called for cooperation from Russia over the oil glut and that Russia had responded affirmatively. However, these speculations were put to an end by a statement from a senior OPEC representative, who ruled out any possibility of emergency talks in the near future. Beyond this, Iran has refused to cooperate in an output cut.

All these reversals have frustrated the global oil market, which is now flooded with close to $1 million barrels per day in excess supply. BMI Research has trimmed its oil price target to $40 per barrel from $42.5 per barrel for 2016. The research firm has outlined weakness in the Chinese Yuan, an oversupply of oil and continuing concerns over global economic growth as factors that will weigh over oil throughout 2016.

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U.S. Stock Futures Drop Ahead Of The Opening

By
Andy Parker
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Insiders

Judging from the direction of the U.S. stock futures, Wall Street could be set for a lower opening today. Moreover, U.S. market is likely to mirror the sentiment that gripped its mixed or rather weak European and Asian counterparts.

Stock Futures Hint to lower opening

Ahead of the opening, S&P 500 Futures were down by 0.34% or 6.50 points to 1,923.75 while Nasdaq Futures slipped 0.34% or 14.50 points to 4,248.75. The U.S. markets had closed the last session of the previous month steeply higher after the Bank of Japan had announced a negative interest rate cut.

The sentiment around the globe was hit by the weak Chinese factory activity and slide in oil prices. The official data in China showed that its manufacturing activity declined to a record low of 49.4 in January compared to 49.7 in December. This led Britain’s FTSE to shed nearly 0.40% to 6,060.49 while both France and Germany’s CAC 40 and DAX too have lost close to 0.55% respectively. Shanghai SE Composite Index dropped by 1.78% to 2,688.85 following the release of the data.

Oil And Alphabet

Apart from this, a statement from OPEC has nearly erased hopes of any near-term action on oil glut, sending the oil prices back into negative territory. Later in the day, the market participants will be looking forward to Manufacturing Activity report for January to be published by the U.S. Institute of Supply Management. As per the market estimates, the numbers could drop by 0.2 points to 48 in January, reflecting the lowest levels since July 2009. Also, U.S. inflation numbers alongside the Federal Reserve Speech will be among key updates to release today.

Additionally, Alphabet Inc (NASDAQ:GOOGL)’s fourth-quarter earnings to be reported as Alphabet for the first time will come after the closing bell and will be a major development for the markets today.

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U.S. Dollar Strong Against Global Currencies After BoJ’s Negative Rate Cut

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US-Dollar pro Packung

The Japanese Yen is trading slightly lower against the U.S. Dollar by 0.04% to 121.26 this morning. Yen weakness came after the Bank of Japan unveiled negative interest rates on Friday, which could further push the European Central Bank to expand its own monetary easing policy.

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The yen traded broadly weaker against major currencies after the Bank of Japan’s statement to slash rates to a negative 0.1% took the markets by surprise. The BoJ’s move is seen as a part of its efforts to curb deflationary pressure and prompt commercial lenders to extend more loans, essentially penalizing them for not loaning out excess funds.

On the other hand, the U.S. dollar remains buoyant against major currencies, supported by a slew of data. The much-awaited update on the U.S. economy showed that growth in the fourth quarter was at 0.7%, slightly below the estimates of 0.8% growth.

The Commerce Department reported that the U.S. economy rose 2.4% in 2015. The BoJ’s unexpected move alongside monetary easing measures undertaken by the European Central Bank shows the diverging monetary policy stance between the U.S. and the rest of the world. Manufacturing activity reported from the Institute of Supply Management in the U.S. will be a significant update to watch for later in the day.

China PMI dipped

The Chinese Yuan fell against the greenback and other currencies after the Chinese manufacturing purchasing managers’ index fell below a level of 50 to 49.4 from a reading of 49.7 in December. The PMI highlights that growth in China is still contracting, even by official government estimates. Apart from this, another report indicated that China’s Caixin factory PMI inched up marginally to 48.4 from 48.2, pointing that the region began 2016 on a weak note. USD/CNY was seen trading up by 0.05% at 6.5791.

The British Pound was strong against the U.S. Dollar, up by 0.31% to 1.4287. A reading on U.K. manufacturing activity is due to be released today.

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Here are Two Companies with Upcoming Catalysts in Biotech

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GALT
GALT

January was a volatile month in the biotech space, with a host of data releases and FDA decisions dominating sentiment. Things aren’t about to slow down, however. We’ve got plenty of potential catalysts to loo forward to during February – here are two dates to keep an eye on, and why.

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Telesta Therapeutics Inc. (OTCMKTS:BNHLF)

Telesta shareholders have had a rough time as late. The company has developed a treatment for non-muscle invasive bladder cancer (NMIBC) called MCNA. It’s a space that desperately needs updating – no new therapies have been approved since the late 80s – and the current SOC (for patients that are not responsive to first line) is an invasive, painful surgery that removes the bladder.

The drug is a nucleic acid complex formed by breaking down a type of bacteria called Mycobacterium phlei. When broken down, and introduced to the bloodstream, it stimulates the immune system into forming a resistance to bladder cancer cells, both in terms of destroying the already present cells and – concurrently – inhibiting proliferation (at least, Telesta hypothesizes).

The company submitted a Biologics License Application (BLA) back in June last year, and the FDA subsequently approved the BLA for a six-month priority review, giving a PDUFA date of February 27, 2016.

Things aren’t straightforward, however. In the trial on which the BLA is based the drug achieved overall disease-free survival (DFS) rate at 1 year and 2 years of 25% and 19%, respectively – not a great response. To compound this, the FDA set up an advisory panel, and the panel slammed MCNA in its report. Only six of the 24 members of the panel voted for approval, and all the others voted against it (no abstainees), when asked:

Does MCNA have an overall favorable benefit-risk profile for the treatment of non-muscle invasive bladder cancer at high risk of recurrence or progression in adult patients who failed prior BCG immunotherapy, e.g., in patients who are BCG-refractory or BCG-relapsing?

Of course, the FDA doesn’t have to take the same stance as the panel, but it doesn’t bode well for Telesta. Chances of approval look slim, and if the FDA doesn’t outright decline the drug, it will likely at best require further trials, which will add cost to an already inflated development bill. The company had a little over $40 million cash and equivalents at last count (September 30, 2015) on its balance sheet, so near term it should be able to bear these costs, but it may need a capital raise going forward to fund further development.

For the speculative, risk tolerant trader, a short position in Telesta could be a nice short term allocation.

MediWound Ltd. (NASDAQ:MDWD)

At the end of January, MediWound announced its intentions to report data from its ongoing phase II in its lead development program – EscharEx. The treatment is targeting the removal of what’s called eschar in burn victims. Eschar is the dead skin that farms and flakes at the site of a burn in humans. It’s already approved in Europe, and, is currently in a host of trials across the US for a range of indications – burns, insect bites, hard to heal wounds etc. This latter indication has just wrapped up a phase II, and MediWound has promised us the topline data from the trial in – and to quote the company’s CEO – very early February.

We take this to mean sometime over the next few days, and with the treatment already approved in Europe, chances are we will get a positive release. Nothing is confirmed, of course, but it’s as close to a sure thing as we get in the biotech space. That said, it’s still a risky allocation. The company generated very little revenues from its current approvals (circa $200,000 a quarter) and last quarter netted a loss of $7.8 million. There’s not a huge market for its product, it will likely have to expand into other areas if it is to operate profitably going forward. This isn’t unusual in biotech – expanded indications can quickly double or triple a treatments potential – but it’s something to keep in mind if considering an exposure.

So there we go. Two small caps with upcoming catalysts on the opposite ends of the prospect-scale. Keep an eye on the filings page at the SEDAR for Telesta here and MediWound at the SEC here to stay updated.

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Alphabet Inc (NASDAQ: GOOGL)’s Chrome Challenged By Samsung Electronics With A New Version Of Their Android Browser

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Samsung Electronics Co Ltd (KRX:005930) has initiated the roll out of Android-powered Samsung web browser version 4. This version has been based on Samsung desire to create a browser, which offers ease of use, functionality and compatibility. This web browser can be found in latest Galaxy smartphones with Android Lollipop and phablets.

The release of version 4 is aimed at changing the mentality of users toward considering Alphabet Inc (NASDAQ:GOOGL)’s Google Chrome as the most appropriate web browser. In most instances regardless of how capable, well featured and easy-to-use a browser is, most people are always oriented to disregard it and use Google Chrome. Samsung version 4 has been developed such that when users first use it, they get hooked and stick around.

Version 4 presents polished codes and the ability of the web browser to integrate with extra sensors in a user’s phone e.g. biometrics. It also has an increased level of accuracy for rendering and has received an extensive workout in virtual reality, development and privacy. Privacy has included support for content and an ad blocking plugin.

Samsung always tries to make privacy one of the essential features in their phones. It offers two approaches to privacy. It has introduced Ad blocking plugins, which will work with the browser. Since Samsung does not have its own plugins, their browser will have similar technologies to other browsers. The private feature allows users to browse without having their cookies, passwords or other information saved.

Samsung is working with web standards with the aim of ensuring a capable and highly compatible browser that will be termed as the best breed by the developers. It outscores current mobile browsers on the HTML5 compatibility test from World Wide Web Consortium. It also has a full implementation of the Service Worker API, which allows a better experience when browsing in poor connectivity alongside providing access to the back-end of an operating system for tools

Samsung is working on its own Gear Virtual Reality. This will use version 4.0 of Samsung Browser and provide immersive internet experience, seamless connectivity and also sharing of users information

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Phillips 66 (NYSE:PSX) Delivers Better Than Expected Profit for 4Q

By
Carol Harper
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Phillips 66 (NYSE:PSX)

Phillips 66 (NYSE:PSX) reported better than expected earnings for the fourth quarter though it dipped YOY driven by margin expansion in gasoline on weak crude oil price. The company’s earnings were also hurt by its midstream, as well as, chemical businesses. Its top line plummeted 38.1% and fell shy of the analysts’ expectations.

Drop In Profit

Phillips 66 (NYSE:PSX) reported that its profit plunged 58.5% to $650 million from $1.58 billion in the third quarter of the calendar year 2015. Excluding special items of $60 million, its earnings would have been $710 million or $1.31 a share. Street analysts were expecting the company to report earnings of $1.25 a share. Its refining achieved 94% utilization while recording 85% clean product yield in the fourth quarter.

The oil and gas firm’s sales and other income dropped 38.1% to $22.03 billion from $35.61 billion in the previous year quarter. This was lower than the Street analysts’ expectations of $22.75 billion. Its CEO, Greg Garland said that the company achieved a key milestone when Sweeny Fractionator One and Clemens Caverns came online. He said that perfect execution helped to generate cash from operations of $1.5 billion in the fourth quarter. As a result, it was able to return $700 million by way of dividends, as well as, share buyback to its shareholders.

Key Metrics

Phillips 66 (NYSE:PSX) CEO said that its results demonstrated resilience of its wide portfolio during the tough time of weak commodity prices. He said that the company was creating value through operational efficiencies, delivering midstream, as well as, chemicals growth programs and improving its refining margins. The company would continue to focus on its core priorities in the current year also through a disciplined approach to the allocation of capital as the balance sheet was strong.

Phillips 66 (NYSE:PSX) boosted its quarterly dividend to 56 cents a share representing 12% growth. The company’s refining generated earnings of $2.6 billion while chemicals delivered earnings of $962 million for the year 2015. The company returned $2.7 billion to its shareholders in 2015 through share repurchase program and dividend payments.

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Rising Delivery Cost Dents Amazon.com, Inc. (NASDAQ:AMZN)’s Profit And Analysts Are Unhappy

By
Carol Harper
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Amazon will outperform this year

Amazon.com, Inc. (NASDAQ:AMZN)’s earnings for the fourth quarter fell shy of the analysts’ expectations  increasing costs of delivery of goods. The online marketplace firm spent $4.5 billion in the fourth quarter representing 24.4% YOY growth thus affecting the bottom line numbers.

Worries Increase

Analysts were worried about Amazon.com, Inc. (NASDAQ:AMZN)’s investments in lease of jets, and trucks. On top of that, they were also concerned that the company would not mind spending to take on the likes of United Parcel Service, Inc. (NYSE:UPS) or FedEx Corporation (NYSE:FDX). However, its executives discounted any such move. The company opened more warehouses to handle increased orders, as well as, speed up the delivery. It was also establishing its own delivery system.

According to Wedbush Securities MD, Michael Pachter, the earnings miss was partly due to marketing and partly due to fulfillment centers. The company has been pushing its Prime membership promising free two-day deliveries for online orders. He said that the growing popularity also resulted in increased shipping costs, which might remain a big concern in the coming months too.

Adding To Logistics

Amazon.com, Inc. (NASDAQ:AMZN)’s CFO, Brian Olsavsky, said that the company was left with no alternatives but to add to its logistics so that it would supplement its partners. That does not mean that it would replace them. He was referring to the speculations about analysts expressing their opinion that the online retailers might become a major logistics player one day. The concern was that such an ambitious move would increase costs.

Currently, both FedEx Corporation (NYSE:FDX) and United Parcel Service, Inc. (NYSE:UPS) were handling the bulk of the deliveries of Amazon.com, Inc. (NASDAQ:AMZN). However, the online retailer wants to have direct control ever since the last-minute surge in online orders resulted in delayed deliveries in 2013. The CFO said that the carriers were unable to handle the capacity that the company required during the peak of the season.

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Federal Reserve to return interest rates to a normal level

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A gradual return of the interest rates to normalcy is expected in the next couple of years says top Federal Reserve officials. According to him, the Federal Reserve is already on the way to ensure that the interest rates are maintained in between 3 and 3.5%.

John Williams, the Federal Reserve Bank President, San Francisco said that the improvement in the labor market caused an increase in the rates on December 15. He further added that it would be sensible if the rates increased gradually although the hike in economic data will determine the rates.

Williams said that although the domestic demand is solid, it is the weakness in exports and manufacturing division that is causing the imbalance in interest rates. The US has a weak export base abroad, particularly in China that has affected its interest rates.

Berkshire Hathaway Inc (N:BRKa) to start buying Phillips 66 (NYSE:PSX) stock

The Warren Buffet conglomerate’s enterprise Berkshire Hathaway Inc (N:BRKa) started buying Phillips 66 (NYSE:PSX) stock and invested around $832 million in January for boosting its stake. However, the profit margins of the oil refining company continued to be marginal. In its first purchase of the Phillips 66 shares after January 14, Berkshire made a payment of around $198 million.

In total, Berkshire bought 10.81 shares, which made it the owner of roughly 13.7 % stake in the Phillips 66 company. At present, the Houston-based company is the sixth-largest stock holder of Berkshire according to regulatory filings.

Things to look out for this week.

The oil prices hiked to 3-week highs as Russia declared its intention to cooperate in the reduction of production so that the largest oversupply problem in decades can be tackled. The Federal Reserve’s statement of increasing interest rates was considered a bit dovish as trade analysts were concerned whether the Fed can continue raising interest rates when the market is unstable.

The U.S markets are expected to open higher this week.

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Wal-Mart’s (NYSE:WMT) Closure of 150 Stores Provides Golden Opportunity to Resellers

By
Carol Harper
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Wal-Mart Stores, Inc. (NYSE:WMT)

As competition from online retailers increases and minimum wage pressures bite, Wal-Mart Stores, Inc. (NYSE:WMT) resorted to shutting down 150 stores in January. As a result, the biggest retailer is providing a good opportunity for resellers to make a killing.

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The methodology is called retail arbitrage as a number of resellers clean the store shelves with the objective of scoring quick profits. Such purchases would be placed for sale through an online platform.

System Of Operation

The closure Wal-Mart stores in some regions have attracted shoppers. For instance, a shopper told the press that he was buying $12,000 of merchandise in Hartland, Michigan. The objective is to resell the discounted items through Amazon.com, Inc. (NASDAQ:AMZN) for a profit. Smartphone growth has allowed buyers to depend on mobile apps for calculating profits. Some have entire staffs that look for store closures for reselling online.

Other retailers such as Macy’s, Inc. (NYSE:M) and Gap Inc (NYSE:GPS) are also retrenching and closing down some of their stores, making this an ideal time for resellers.

Prices Slashed 50%

Wal-Mart has slashed prices by 50% earlier this month to clear the shelves of smaller Express and Supercenter stores. Later, the company increased the discount to 75%.

It appears that there was no alternative for Wal-Mart to close these stores as they announced 10,000 job cuts to reduce expenses. Retail sales also witnessed slower growth in 2015 at 2.1%. Even during the holiday season, retail sales were lower than expected by the National Retail Federation. In 2014, retail sales saw 3.9% growth. Last year’s retail sales showed the weakest growth since 2009.

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