THE DAILY EDGE: 20 FEBRUARY 2019

Walmart Posts Strong Holiday Sales Gains in U.S.

In the U.S., the company’s comparable sales, which exclude gas but include e-commerce sales, rose 4.2% in the January-ended quarter, one of the behemoth’s biggest quarterly gains in a decade. (…)

Walmart is the first major U.S. retailer to report full fourth-quarter results. In January, some chains including Target Corp. and Costco Wholesale Corp. said they had the strongest holiday sales in years, but others, includingMacy’s Inc. and Kohl’s Corp. , reported sluggish growth.

Meanwhile, Amazon reported a record quarterly profit and said revenue rose 20% to $72.38 billion, the smallest quarterly jump since 2015. (…)

More signs suggesting to discount last week’s retail sales data.

U.S. Home Builder Index Continues To Rise

The Composite Housing Market Index from the National Association of Home Builders-Wells Fargo improved to 62 during February after increasing to 58 in January. Nevertheless, the figure remained below the expansion high of 74 in December of 2017.  (…) The index of present sales conditions rose to 67 in February after rising to 64 during January. The level of the index remained down from its peak of 80 in December 2017. The index of expected conditions in the next six months increased to 68 from 63. The recent peak in this index was 80 in February of last year.

The index of traffic of prospective buyers increased to 48 from 44. The index peaked at 58 in December 2017. (…)

Interesting (from CalculatedRisk):

Trump Eases Off Hard Deadline for China Tariffs President Trump gave his firmest indication yet that the U.S. may not increase tariffs on Chinese goods on March 1, despite statements by his top trade official that the U.S. should stick to a firm deadline.

(…) Mr. Trump and his advisers have said they are considering a meeting with President Xi sometime in the coming weeks. Under that scenario, the Trump-Xi meeting would effectively act as the deadline for a deal. American officials want that session to take place in the U.S. (…)

Markets Warm to the Prospect of an ECB Funding Boost for Banks Market participants are growing confident that the European Central Bank will soon try to boost the eurozone’s ailing economy by rebooting its program of ultracheap long-term loans to the banking system.

(…) “I can see that there is a big discussion in the market of having a new, as we call it, TLTRO,” Mr. Cœuré said in New York. “It is possible. We are discussing it, but we want to be sure that it serves a monetary purpose.” Some ECB watchers say the bank could announce a renewal on March 7, though others expect it to wait until its meeting in April.

(…) banks still owe most of the previous round of ECB loans, which mature between June 2020 and March 2021. If banks aren’t able to roll over this debt at attractive ECB rates, they could have to borrow at higher rates in the bond market. That could feed into higher borrowing costs for firms and households, adding another hurdle for the eurozone economy, while straining finances at weaker lenders.

The monetary sums are huge. The TLTROs hit a total €762.4 billion, excluding loans that were replaced by new ones, of which banks have paid back just €30.6 billion. An additional €9.4 billion matured last September, leaving lenders on the hook for €722.4 billion more. Italian banks, a weak link in the eurozone chain, are particularly exposed. They borrowed the largest share of the second phase of TLTROs with 33%, ahead of Spanish banks at 23%, according to Haver Analytics. (…)

The “experiment” continues. Learning on the go. Turning into a real thriller, isn’t it? Wait, there’s even more to the plot. This was last fall but it’s still part of a possible scenario:

• Italy could still leave EU, senior government adviser says

The European Union has not learnt the lessons of Brexit and could force Italy to reconsider its membership of the bloc, a senior government adviser has told The Telegraph. (…)

• Italy’s budget crisis is a bigger threat to the EU than Brexit

• Italexit looming? Majority of Italians would vote to leave EU as immigration tops agenda

According to an opinion poll commissioned by Brussels’ Eurobarometer, only 44 percent of Italians would vote to remain in the EU, compared to the member states’ average of 66 percent. (…)

EARNINGS WATCH

In the last stretch. We now have 403 reports in and a lowish 69% beat rate for a +3.1% surprise factor leading to a 16.3% earnings growth for the fourth quarter. Q1’19 estimates keep slipping and are now –0.6% (0.0% ex-Energy). Full year 2019 estimates are +4.1%.

Trailing EPS are now $162.73, still above the full year estimate of $162.05.

Canadian equities joined the U.S. going through its now rising 200dma: