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[Markets] Dow Jones Futures Rise After Pelosi Launches Trump Impeachment Inquiry; Nike Signals Breakout Dow Jones futures: The stock market rally reeled as Trump impeachment odds soared. Nike and Synnex signaled earnings breakouts. Broadcom stock moved on news. Published:9/24/2019 10:26:09 PM
[Markets] Dow Jones Futures Up After Pelosi Launches Trump Impeachment Inquiry; Nike, Broadcom Are Big Movers Late Dow Jones futures: The stock market rally reeled as Trump impeachment odds soared. Nike and Synnex signaled earnings breakouts. Broadcom stock moved on news. Published:9/24/2019 5:58:08 PM
[Markets] Did Trump Send the Dow Jones Down 140 Points Today? The Dow Jones dropped 140 points today. This drop was driven by several factors, including a potential impeachment inquiry of President Trump. Published:9/24/2019 5:00:13 PM
[Markets] US STOCKS-S&P 500 hits two-week low on Trump impeachment call, weak consumer data The S&P 500 and the Nasdaq were set for their worst drops in one month on Tuesday as calls for impeachment of U.S. President Donald Trump gained momentum, while weak consumer confidence data added to worries over the prolonged Sino-U.S. trade war. Losses in U.S. stocks accelerated, with the Dow Industrials set for its sharpest drop in three weeks after U.S. Representative John Lewis on Tuesday became one of the most senior Democrat leaders in calling for impeachment proceedings to begin against Trump. Published:9/24/2019 1:23:47 PM
[Markets] Dow skids to Tuesday low, Nasdaq slips 1.4% and heads for worst day in September, amid impeachment chatter U.S. stock markets midday Tuesday were trading near session lows, with the decline being powered by a drop in energy and information technology shares . The Dow Jones Industrial Average was down 180 points, or 0.7%, at 26,769, the S&P 500 index was trading 0.9% lower at 2,965, while the Nasdaq Composite Index was trading 1.4% lower at 7,996, with a decline of that magnitude, should it hold, representing the technology-laden index's steepest daily fall since a 3% stumble on Aug. 23, according to FactSet data. The move lower for stocks came amid a report that House Democrats are preparing to huddle Tuesday afternoon in a meeting that could help to determine whether an impeachment inquiry against President Donald Trump moves forward. Published:9/24/2019 11:54:49 AM
[Markets] Dow Jones Lets Early Gains Slip, But Ally Rallies; Is This Social Media Stock Near A Buy? Point? The Dow Jones Industrial Average and the Nasdaq failed to keep early decent gains. Snap and homebuilders are outperforming in the current stock market. Published:9/24/2019 11:23:17 AM
[Markets] Dow flat in spite of gains in shares of Walmart, Verizon Communications Inc. DOW UPDATE Shares of Walmart and Verizon Communications Inc. are posting positive gains Tuesday morning, propelling the Dow Jones Industrial Average into positive territory. Shares of Walmart (WMT) and Verizon Communications Inc. Published:9/24/2019 10:24:16 AM
[Markets] American Express's stock rises after dividend hike, new share repurchase program Shares of American Express Co. rose 1.1% in morning trading Tuesday, after the credit-card and travel-related services company said it will raise its dividend by 10% and set a new 120 million share repurchase program. The company said late Monday that its new quarterly dividend of 43 cents a share, up from 39 cents a share, will be payable Nov. 8 to shareholders of record on Oct. 4. At current share prices, the new annual dividend rate implies a dividend yield of 1.44%, compared with the yield for the SPDR Financial Select Sector ETF of 2.00% and the implied yield for the S&P 500 of 1.97%. The new 120 million share buyback program, which replaces 41 million shares that remain from the previous program, represents about 14.5% of the shares outstanding as of July 15. AmEx's stock has climbed 25.4% year to date, while the financial ETF has climbed 18.2% and the Dow Jones Industrial Average has gained 15.8%. Published:9/24/2019 9:24:17 AM
[Markets] Dow industrials edge higher as S&P 500, Nasdaq finish little changed Dow industrials edge higher as S&P 500, Nasdaq finish little changed Published:9/23/2019 9:52:27 PM
[Markets] Dow Jones Futures: Lockheed Martin, Facebook, Pinduoduo Move On News Dow Jones futures: Lockheed Martin neared a buy on a NASA contract. Pinduoduo fell on a debt offering. Facebook will buy brain-computing startup CTRL-labs. Published:9/23/2019 9:52:26 PM
[Markets] The Dow Is Down Because the Global Economy Might Not Be Out of the Woods Just Yet The Dow Jones Industrial Average looks set for a slightly lower open after German manufacturing data disappointed, calling into question a rebound in the global economy. Published:9/23/2019 7:31:33 AM
[Markets] Dow Jones Fell 0.6% Yesterday, Ends Week in Red The Dow Jones Industrial Average or DJIA fell 0.6% or 159.72 points on Friday, September 20, 2019. The S&P; 500 ETF fell 0.54% yesterday. Published:9/21/2019 4:07:10 PM
[Markets] Dow Jones: Index Falls 0.6% Yesterday The Dow Jones Industrial Average or DJIA fell 0.6% or 159.72 points on Friday, September 20, 2019. The S&P; 500 ETF fell 0.54% yesterday. Published:9/21/2019 3:38:03 PM
[Markets] Stock Market Reverses Course As China News Fuels Trade War Fears The Dow Jones Industrial Average and other major indexes turned sharply lower as China trade war fears again took center stage. Published:9/20/2019 2:30:16 PM
[Markets] Dow skids to Friday low after China's delegation cancels tariff-related visit to Montana U.S. stocks on Friday turned firmly lower in afternoon trade, knocked down after reports that a China trade delegate was cancelling a planned trip to Montana farms. A representative for the Montana Farm Bureau Federation confirmed that the Chinese delegation intended to visit Montana farmland as a part of continuing discussions with the U.S. on trade, but China changed travel plans and would be leaving without a stop in Montana. "This morning, we received word that they would no longer be visiting Montana but would instead, be returning to China sooner than originally planned," said Nicole Griffin Rolf, director of national affairs at the MFBF. The visit by the Chinese delegation had been viewed as reflecting a thaw in a yearlong Sino-American tariff dispute. The Dow Jones Industrial Average was down 0.4% at 26,991, the S&P 500 index declined 0.4% to 2,994, while the Nasdaq Composite Index was 0.9% lower at 8,112. The technology sector and consumer-discretionary shares were hit hardest in the fall. All three main stock indexes were trading near Friday lows on the reports. The visits and talks between lower-level delegates from Beijing and Washington were expected to be a prelude to higher-level negotiations in early October. --Robert Schroeder contributed to this article Published:9/20/2019 1:59:39 PM
[Markets] Dow falls 100 points on losses in shares of Microsoft, Boeing DOW UPDATE The Dow Jones Industrial Average is declining Friday afternoon with shares of Microsoft and Boeing seeing the biggest drops for the price-weighted average. The Dow (DJIA) was most recently trading 103 points (0. Published:9/20/2019 1:33:16 PM
[Markets] Dow skids to Friday low amid reports that China's delegation has canceled a tariff-related visit to Montana U.S. stocks on Friday turned firmly lower in afternoon trade, knocked down after reports that a China trade delegate was cancelling a planned trip to Montana farms. A representative for the Montana Farm Bureau confirmed that the Chinese delegation intended to visit Montana farmland as a part of continuing discussions between the U.S. but China changed travel plans and would be leaving without a stop in Montana. The visit by the Chinese delegation had been viewed as reflecting a thaw in a yearlong Sino-American tariff dispute. The Dow Jones Industrial Average was down 0.4% at 26,991, the S&P 500 index declined 0.4% to 2,994, while the Nasdaq Composite Index was 0.9% lower at 8,112. The technology sector and consumer-discretionary shares were hit hardest in the fall. All three main stock indexes were trading near Friday lows on the reports. The visits and talks between lower-level delegates from Beijing and Washington were expected to be a prelude to higher-level negotiations in early October. Published:9/20/2019 12:58:09 PM
[Markets] Market Snapshot: Stocks turn lower midday as investors focus on U.S.-China trade talks U.S. stocks gave up early gains early afternoon Friday, keeping the Dow and S&P 500 index shy of all-time highs as investors looked beyond a litany of central-bank decisions of the past week and focused on the state of China-U.S. trade talks.
Published:9/20/2019 12:58:09 PM
[Markets] Drug stocks pacing the Dow's gainers Senate GOP leaders dismiss Democrats' drug-pricing plan The health care sector was Friday's best performer, as drug stocks got a lift after reports that Senate Republican leaders said thedrug-pricing proposal unveiled by House Speaker Nancy Pelosi and other top Democrats would be dead on arrival. The SPDR Health Care Select Sector ETF rose 0.9% with 56 of 62 components gaining ground, to pace the gainers of the SPDR ETFs tracking the S&P 500's 11 key sectors. In addition, the top 3 gainers among the Dow Jones Industrial Average components were in the drug business, as shares of Walgreens Boots Alliance Inc. gained 2.2%, Merck & Co. Inc. tacked on 1.8% and Johnson & Johnson advanced 1.3%. Also in the Dow, shares of Pfizer Inc. rose 0.8% and UnitedHealth Group Inc. gained 0.5%. The Democrats's Lower Drug Costs Now Act would have the government negotiate prices for the 25 most expensive drugs each year, while Republicans criticized the proposal as a "socialist approach." Published:9/20/2019 12:03:33 PM
[Markets] Dow Jones Edges Higher As Money Flows Back Into This Big Sector The Dow Jones Industrial Average is holding on to a small gain as medical and health care stocks gained a little steam. Published:9/20/2019 11:33:45 AM
[Markets] The Dow Is Rising But a Record High Remains Elusive The Dow Jones Industrial Average was inching toward its all-time high after U.S. President Donald Trump exempted some products from tariffs on Chinese-made goods, while China cut interest rates. Published:9/20/2019 10:00:35 AM
[Markets] Dow Jones Reverses Early Gains, Falls 0.2% Today The Dow Jones Industrial Average fell 53.44 points (or 0.2%) today, possibly because the market gave a thumbs up to yesterday's 0.25% rate cut by the Fed. Published:9/19/2019 4:23:59 PM
[Markets] Disney and Apple weigh on Dow as stocks give up most gains at the close Thursday Disney and Apple weigh on Dow as stocks give up most gains at the close Thursday Published:9/19/2019 3:24:37 PM
[Markets] The Dow Is Up Because Sometimes the Fed Just Meeting Expectations Is Enough The Dow Jones Industrial Average, S&P 500, and Nasdaq Composite all rose the day after the Federal Reserve lowered interest rates again. Published:9/19/2019 11:55:57 AM
[Markets] Stock Market Rally Continues; Dow Jones Stock Microsoft Is Breaking Out Today The major stock indexes were modestly higher early Thursday. Dow Jones stock Microsoft is breaking out above a new buy point. Published:9/19/2019 9:24:20 AM
[Markets] Stocks open slightly higher, buoyed by tech rally Stocks opened slightly higher Thursday, with tech shares leading gains. The Dow Jones Industrial Average rose 73 points, or 0.2%, to 27,220, while the S&P 500 gained 8 points, or 0.3%, to 3,015. The Nasdaq Composite was up 32 points, or 0.4%, at 8,209. Shares of Microsoft Corp. rose 1.9% to lead Dow gainers and set the pace for the tech sector after announcing an 11% dividend hike and approving a $40 billion stock-repurchase program. Published:9/19/2019 8:59:54 AM
[Markets] Navistar to create 600 jobs as it builds truck manufacturing facility in San Antonio Navistar International Corp. said Thursday it will create 600 new jobs in San Antonio, as the commercial trucks and bus maker will make a $250 million investment to build a new manufacturing facility. The new facility will have the flexibility to build Class 6-8 vehicles, and builds on recently announced plans to invest $125 million in an engine plant in Huntsville, Ala. Navistar said the facility in San Antonio will be located along Interstate 35 to link the company's supply bases in the southern U.S. and Mexico, "allowing for significant logistic improvements, resulting in lower cost and enhanced profitability." Navistar's stock, which was still inactive in premarket trading, has tumbled 15.1% over the past three months while the Dow Jones Industrial Average has gained 2.4%. Published:9/19/2019 8:22:39 AM
[Markets] Dow Jones Futures: Stock Market Rally Steady, Apple In Buy Range After Fed Rate Cut; Microsoft Sets Big Buyback Dow Jones futures: The stock market rally held up after a Fed rate cut. Apple stock is a buy again. Microsoft stock rose late on a buyback. Will AT&T; sell DirecTV? Published:9/18/2019 5:18:59 PM
[Markets] Dow Jones Index Reverses Losses, Closes Up 0.13% The Dow Jones Industrial Average Index rose 36.28 points for a 0.13% increase today. The S&P; 500 Index gained 0.07% while tech ETFs mirrored that increase. Published:9/18/2019 4:49:20 PM
[Markets] Dow ends sightly higher as bank stocks take an unusual bounce higher after Fed cuts interest rates U.S. stock indexes on Wednesday finished mostly higher--even if only slightly so--after the Federal Reserve cut benchmark rates, as expected. The Dow Jones Industrial Average closed up 36 points, or 0.1%, to 27,147, but had been down by as many as 211.65 points at session lows. Meanwhile, the S&P 500 index added about a point, or less than 0.1%, to end at at 3,006.73. The Nasdaq Composite index edged 9 points, or 1%, lower to 8,177. The rate-setting Federal Open Market Committee cut rates by one quarter of a percentage point to a range of 1.75%-2%, in a 7-3 vote. Stocks initially took a leg lower but began to pare losses as Fed Chairman Jerome Powell explained the rate decision in a press conference at 2:30 p.m. Eastern, about a half-hour after the release of the central bank's policy statement. Voting against the action were St. Louis Fed President James Bullard, who preferred to lower the target range for the federal-funds rate to 1.50% to 1.75%. Kansas City Fed President Esther George and Boston Fed President Eric Rosengren both preferred to maintain the target range at 2% to 2.25%."Bottom line, there is now a likelihood that as of today, this might be the last rate cut of the year as the 'mid course adjustment' process continues but could be done. So call this a hawkish cut," wrote Peter Boockvar, chief investment officer at Bleakley Advisory Group, in a research note after the Fed decision. The 10-year Treasury yield climbed after the Fed decision, with the rate rising to 1.79%, helping to deliver a lift to the banking sector, which tends to benefit from higher yields, even though the Fed cut rates. The Financial Select Sector SPDR ETF finished the session with a 0.4%, and shares of Goldman Sachs Group Inc. and those for JPMorgan Chase & Co. led gains for the blue-chip Dow. Published:9/18/2019 3:18:24 PM
[Markets] Dow turns higher in last half-hour of session Dow turns higher in last half-hour of session Published:9/18/2019 2:50:21 PM
[Markets] Outsized selloff in Dow transports is virtually all the fault of FedEx's stock Outsized selloff in Dow transports is virtually all the fault of FedEx's stock Published:9/18/2019 11:19:14 AM
[Markets] Dow Jones Cools Ahead Of Fed Rate Cut Decision; Why CDW Stock Is A Higher-Risk Breakout The Dow Jones Industrial Average and other main indexes showed mild selling ahead of another pivotal Federal Reserve decision on rates. CDW broke out. Published:9/18/2019 11:19:14 AM
[Markets] Dow transports' outsized selloff is almost all FedEx's fault The 13.9% plunge in FedEx Corp.'s stock is the main reason the Dow Jones Transportation Average is tumbling 170 points, or 1.6%; that is much worse than the performance of its sister index the Dow Jones Industrial Average , which lost 56 points, or 0.2%. FedEx stock's price drop of $24.07, following disappointing quarterly results and a lowered full-year outlook, accounted for about 147 points of the Dow transports' price decline. Add the $2.52, or 2.1% decline in United Parcel Service Inc. shares in sympathy, and the FedEx-related selloff was shaving 162 points off the Dow transports. Published:9/18/2019 10:18:40 AM
[Markets] Stocks open slightly lower ahead of Fed decision U.S. stocks edged slightly lower at the opening bell Wednesday, as investors awaited the conclusion of a Federal Reserve policy meeting that's expected to deliver another quarter-point rate cut. The Dow Jones Industrial Average was down 88 points, or 0.3%, to 27,023, while the S&P 500 lost 9 points, or 0.3%, to trade at 2,997. The Nasdaq Composite declined 19 points, or 0.2%, to 8,167. While the Fed is expected to cut rates when it concludes its meeting, investors will be watching for signs the Fed is ready to deliver further easing in coming months. Shares of FedEx Corp. dropped 12% following a disappointing fiscal first-quarter earnings report and full-year outlook. Published:9/18/2019 8:49:54 AM
[Markets] FedEx's stock tumbles as Wall Street analysts cut ratings, targets after disappointing Q1 report Shares of FedEx Corp. tumbled 11% in premarket trading Wednesday, as a number of Wall Street analysts backed away from their bullish views in the wake of a disappointing fiscal first-quarter report and full-year outlook. Of the 27 analysts surveyed by FactSet, no less than four analysts downgraded FedEx and 10 analysts have cut their price targets. While the average rating remains overweight, the average price target was lowered to $171.23 from $180.52 as of the end of August. Analyst David Ross at Stifel Nicolaus downgraded the package delivery company to hold, after being at buy since March 2018, and cut his price target to $171 from $185. Ross said the expects the stock to continue to underperform over the next few quarters as the global economy is unlikely to rebound in 2020. KeyBanc Capital's Todd Fowler cut his rating to sector weight, after being at overweight for at least the past two years, citing a softer international outlook, a downbeat outlook on FedEx Ground margins and concerns over the need of increased near-term business investment. FedEx's stock has gained 7.4% year to date through Tuesday, while shares of rival United Parcel Service Inc. have climbed 25.5%, the Dow Jones Transportation Average has rallied 16.7% and the Dow Jones Industrial Average has advanced 16.2%. Published:9/18/2019 7:49:35 AM
[Markets] Dow Jones Futures: Stock Market Nears Record Highs Amid Fed Rate-Cut Mystery; Adobe, FedEx, Chewy Are Earnings Movers Dow Jones futures: The stock market rally neared highs even as Fed rate-cut odds fell to 50-50. Adobe, FedEx and Chewy fell on weak earnings or outlooks. Published:9/17/2019 4:47:39 PM
[Markets] Today's "Watershed" Repo-calypse Is "One Of The Worst Things That Can Happen" Today's "Watershed" Repo-calypse Is "One Of The Worst Things That Can Happen"

While it is being ignored by most (because the S&P didn't crash), the chaos in the Fed-controlled short-term liquidity markets should panic everyone as for the first time in a decade, NYFRB was forced to inject liquidity for o/n repo...

Source: Bloomberg

Repo rates kept rising despite the Fed's operation...

Source: Bloomberg

In context, this is quite a move...

Source: Bloomberg

As one veteran short-term rates trader explained...

Bottom line: here’s what the market thinks of the Fed’s temporary solution…

It’s a joke.

MORE COWBELL?

More cowbell indeed.

As Bloomberg reports, today’s surge in Treasury repo rates poses a threat to the market more broadly because traders won’t take new positions without confidence in their ability to obtain funding at consistent rates, said John Fath, managing partner at BTG Pactual Asset Management and a primary dealer trader from 1993 to 2008.

Today was a bit of a watershed event, though we’ve been seeing this brewing. When they set funds rate target at 2 to 2.25, ideally you would like to funding to be around 2.15. For weeks it’s been above that.
“Today was more dramatic. Funding opened at 4.5, quickly moved to a high of 10, then dropped back to 2.50, nothing close to 2.15. So you’ve lost control of where you want financing.

Overnight financing is the key to driving the economy, leverage. If you don’t have control over it, what’s the point of setting a funds rate? If they ease tomorrow and funding is at 4%, does it matter if they eased?

If the plumbing doesn’t work, then it’s going to dramatically affect secondary trading of Treasuries. Which is the last thing they need when there’s massive issuance going on.

This is without a doubt one of the worst things that can happen. In many respects it overshadows the Fed moving tomorrow, because if the plumbing doesn’t work everything starts to break down. Everything is predicated upon your getting a reasonable funding rate. Otherwise why would you buy this paper to begin with. If you’re funding your overnight position at 6 why would you buy a 10-year at 2?

Today’s funding market was more emblematic of what goes on in emerging markets rather than the largest developed debt market in the world. The bid-offer spread in repo should be a couple of basis points. At 7am it was 100bp. It was moving in increments of 50bp up and down. Dealers weren’t quoting pricing in terms of size. That alone is suggestive of a market that’s broken in the short term. The Fed would’ve been proactive by intervening at that point. By intervening at 10, it’s too late. Most people need funding by 8:30. They didn’t even get to the targeted amount, because it was just too late. The damage was done. If you’re a foreign investor seeing rates all over the map it doesn’t reinforce your viewpoint that things are working well.

“A number of people have called asking what it’s going to look like tomorrow. These shouldn’t be issues for the marketplace. Why would you initiate putting on new positions, trading in secondary market, if you were concerned about how consistent funding’s going to be going forward. It’s just a settlement date -- what’s year-end going to be like? These are questions people have asked me, in panicked way.

It’s a bigger deal than a rate cut by far. It’s meaningless if you put in a rate cut and overnight financing reflects nothing of that rate cut. Which is what’s happening right now. I’m surprised they let this get out of hand.”

How many more fleshwounds is this market going to withstand in the vain hope that Powell will keep delivering?

And before we move on to the rest of the markets, let's put today's repo chaos in context. As Monday Morning Macro notes, Here are a few “large” moves that markets have seen over the past few weeks. Notice anything that stands out?


Suffice to say, we’re not supposed to be talking about $ funding markets – the linchpin of the largest & most important (there, I said it) market in the world, US Treasuries – in the same breath as the wreckage wrought in Argentina only a month earlier. We’re definitely not supposed to be saying “the collapse in the Argentine Peso was barely 1/3 of what we just saw in the market that the Fed controls…”

Yet here we are.

*  *  *

Chinese stocks tumbled overnight...

Source: Bloomberg

European markets were mixed today with France and Germany best, Italy worst...

Source: Bloomberg

Nasdaq, Dow, and S&P limped along sideways today (until the late-day rampathon) as Small Caps and Trannies dipped and ripped...

NOTE - the ramp was all about getting the S&P and Nasdaq and Small Caps back to even on the week

Energy stocks erased a big chunk of yesterday's gains as oil prices slipped back lower...

Bank stocks rolled over after 8 straight days higher...

Source: Bloomberg

Defensives dominated today;s action but cyclicals rebounded from a weak open...

Source: Bloomberg

"Most Shorted" stocks tumbled at the open - no squeeze today - but bounced after Europe closed...

Source: Bloomberg

Factors were volatile again today with value weaker and momentum soaring early but fading late...

Source: Bloomberg

Bank stocks stalled at the usual spot...

Source: Bloomberg

 

Treasury yields extended their decline today with 30Y now down over 10bps since Friday's close

Source: Bloomberg

Meanwhile, WeWork bonds crashed...

Source: Bloomberg

Which makes WeWork a higher risk than Tesla...

Source: Bloomberg

Before we leave rates-land, we note that there is a 13.5% chance of a 50bps cut tomorrow and 86.5% odds of a 25bps cut...

Source: Bloomberg

And that rate-cut will come with full employment, surging inflation, record high stock prices, and near record low interest rates.

The Dollar Index puked pretty hard today, erasing all of yesterday's gains...

Source: Bloomberg

Lots of chatter today about President Trump's falling approval rating. However, seems to be holding up the dollar for now...

Source: Bloomberg

The Dollar dive was dominated by a surge in EUR and GBP...

Source: Bloomberg

Yuan tumbled back below the fix after dismal macro data...

Source: Bloomberg

Altcoins dominated crypto markets today with Ripple soaring most along with Ethereum...

Source: Bloomberg

As Bitcoin trod water, holding above $10,000 once again...

Source: Bloomberg

Silver outperformed, gold was flat (despite the dollar's drop), as crude tumbled on Saudi headlines and copper drifted lower...

Source: Bloomberg

Silver extended yesterday's gains, pushing above $18 once again...

Oil prices tumbled early on after Reuters headlines claimed that Saudi production would be back online within 2-3 weeks but then oil rebounded on Washington reports that missiles were fired from Iran to hit the refinery. However, the new Saudi energy minister spoke to press late on and sent the price back down again...

  • *SAUDI OIL MINISTER: WE HAVE CONTAINED THE DAMAGE

  • *ABQAIQ IS PROCESSING 2 MLN B/D OF OIL: ARAMCO CEO

  • *ARAMCO AIMS TO RESTORE ABQAIQ TO PRE-ATTACK LEVEL BY END-SEPT

Source: Bloomberg

Prepare yourself for higher pump prices...

Source: Bloomberg

And finally,

Tyler Durden Tue, 09/17/2019 - 16:00
Published:9/17/2019 3:12:37 PM
[Markets] Stocks end modestly higher ahead of Fed decision U.S. stocks finished with modest gains Tuesday, a day ahead of the outcome of a Federal Reserve policy meeting that's expected to deliver a rate cut. The Dow Jones Industrial Average rose around 31 points, or 0.1%, to end near 27,108, according to preliminary figures, while the S&P 500 gained around 8 points, or 0.3%, to close near 3,006. The Nasdaq Composite finished near 8,186, a gain of around 32 points, or 0.4%. Stocks bounced back from modest losses seen a day earlier when oil prices spiked in response to a weekend attack on oil-production facilities in Saudi Arabia. Oil fell sharply on Tuesday, however, extending a decline after the country's energy minister said supply would be restored by the end of the month. Published:9/17/2019 3:12:37 PM
[Markets] Chesapeake Energy's stock tumbles as oil prices pull back sharply Shares of Chesapeake Energy Corp. tumbled 13.8% in very active afternoon trading, weighed down by the pullback in crude oil prices following the previous session's rocket ride. Trading volume topped 74.6 million shares, compared with the full-day average of about 60.3 million shares, and enough to make the stock the most actively traded on the major U.S. exchanges, according to FactSet data. Chesapeake's stock had run up 15.7% on Monday, as the weekend attacks on Saudia Arabian oil facilities sent crude oil futures shooting up 15%, the biggest one-day gain since January 2009. On Tuesday, crude futures fell 5.6%, extending declines after Saudi's energy minister reportedly said oil production will be fully back online by the end of the month. On Tuesday, crude oil prices dropped 5.6%. Chesapeake's stock has lost 15.5% year to date, while the SPDR Energy Select Sector ETF has gained 8.4% and the Dow Jones Industrial Average has advanced 16.0%. Published:9/17/2019 1:45:18 PM
[Markets] Dow remains in red as S&P and Nasdaq clamber into positive territory Dow remains in red as S&P and Nasdaq clamber into positive territory Published:9/17/2019 10:41:58 AM
[Markets] Dow snaps 8-session win streak after attack on Saudi oil facilities sends crude soaring U.S. stock-indexes end lower on Monday, snapping an 8-sesssion win streak for the Dow, after a weekend attack against Saudi Arabia’s oil-production facilities unsettled global markets and sent crude prices rocketing higher. Published:9/16/2019 4:12:22 PM
[Markets] Dow snaps 8-session winning streak in aftermath of weekend Saudi oil attack Dow snaps 8-session winning streak in aftermath of weekend Saudi oil attack Published:9/16/2019 3:37:35 PM
[Markets] Dow Jones Sinks As Oil Soars; Can These 3 Growth Stocks Finish A New Base? A more than 12% jump in crude oil futures put a damper on the uptrend in stocks today. But the Dow Jones Industrial Average is showing a normal pullback. Published:9/16/2019 3:37:35 PM
[Markets] J.P. Morgan Chase's stock drops after Buckingham backs away from bullish call Shares of J.P. Morgan Chase & Co. fell 1.4% in premarket trading Monday, after the banking giant was downgraded by Buckingham Research analyst James Mitchell, who cited concerns over valuation. Mitchell said J.P. Morgan has produced "best-in-class" revenue growth and returns in recent years, and considering significant investment spend and management's record of successful execution, he sees no reason why these trends won't continue. However, he cut his rating to neutral from buy, saying that after "materially outpacing the peer group in recent years," the stock now trades at nearly a 30% premium, which leads him to believe "much of the fundamental outperformance is being priced in." The stock has gained 5.9% over the past 12 months through Friday, while the SPDR Financial Select Sector ETF has edged up 0.9% and the Dow Jones Industrial Average has tacked on 4.1%. Published:9/16/2019 8:06:34 AM
[Markets] The Dow Was About to Hit a New High. Then Saudi Arabia Was Attacked. The Dow was in spitting distance of a record high. Then Saudi Arabia was attacked. And now the market has another excuse not to set a record. Published:9/16/2019 7:34:34 AM
[Markets] Dow's eight-session win streak poised to end Monday in wake of Saudi oil attack Dow's eight-session win streak poised to end Monday in wake of Saudi oil attack Published:9/16/2019 7:08:25 AM
[World] Market Snapshot: Dow poised to snap 8-session win streak as oil market’s historic supply disruption rattles U.S. stock-indexes on Monday are set to pull back from record range and the Dow was set to halt a win streak at eight consecutive days as a weekend attack against Saudi Arabia’s oil-production facilities unsettled global markets and sent crude prices rocketing higher.
Published:9/16/2019 6:36:02 AM
[Markets] The Dow’s New High Was Delayed By the Attack on Saudi Arabia. That’s Concerning. The Dow was in spitting distance of a record high. Then Saudi Arabia was attacked. And now the market has another excuse not to set a record Published:9/16/2019 5:13:22 AM
[Markets] Dow Jones Futures: Crude Oil Prices Spike On Saudi Attack, UAW Calls GM Strike, Apple iPhone Preorders 'Look Good' Dow Jones futures: Crude oil prices leapt as a drone attack halved Saudi output. UAW called a GM strike. Apple iPhone preorders "look good" with Apple stock near a buy. Published:9/15/2019 5:26:59 PM
[Markets] Has The Narrative Been All Priced In? Has The Narrative Been All Priced In?

Authored by Lance Roberts via RealInvestmentAdvice.com,

The Bullish Narrative

This past week was built for the “bulls” as just about every item on their “wish list.” was fulfilled. From a “trade deal” to more “QE,” what more could you want?

Trade Deal Near?

Concerning the ongoing “trade war,” our prediction that Trump would begin to back peddle on negotiations to get a “deal done” before the election came to pass.

Trump has once again delayed tariffs to allow the Chinese more time to position. China, smartly, is using the opportunity to buy soy and pork products (which they desperately need due to a virus which wiped out 30% of their pig population) to restock before the next meeting.

This is a not so insignificant point.

China is out for “China’s” best interest and will not acquiesce to any deal which derails their long-term plans. In the short-term, they may “play the game” to get what they need as a country, but in the long-run, they will protect their own interests. As we noted previously:

“If China does indeed increase U.S. imports, the stronger dollar will increase the costs of imports into China from the U.S., which negatively impacts their economy. The relationship between the currency exchange rate and U.S. Treasuries is shown below.”

“China uses U.S. Treasury bonds to “sanitize” trading operations. When the currency exchange rate is not favorable, China can adjust treasuries holdings to restore balance.”

However, don’t mistake China’s move as “caving” into Trump. Such is hardly the case.

While Beijing will allow Chinese businesses to purchase a “certain amount of farm products such as soybeans and pork” from the US, China has also cut a deal for soy meal from Argentina.

“China will allow the import of soymeal livestock feed from Argentina for the first time under a deal announced by Buenos Aires on Tuesday, an agreement that will link the world’s top exporter of the feed with the top global consumer.”

Hmmm…that sounds very familiar:

Trade is a zero-sum game. There is only a finite amount of supply of products and services in the world. If the cost of U.S. products and services is too high, China sources demand out to other countries which drain the supply available for U.S. consumers. As imbalances shift, prices rise, increasing costs to U.S. consumers.” – Game Of Thrones 05-10-19

As Hua Changchun, an economist at Guotai Junan Securities, a brokerage in the PRC, said:

“Beijing’s latest ‘gesture’ has increased the prospects for a narrow trade deal with the US. But it’s a small deal. It means that there would be no escalation of tariffs as China has agreed to make more purchases. It could provide a certain level of comfort to US farmers and give Trump something to brag about.”

China knows how to play this game very well, and they know that Trump needs a way “out” of the mess he has gotten himself into.

Not surprisingly, as Trump said on Thursday, while he prefers a broad deal, he left open the possibility of a more limited deal to start, which is also code for:

“Let’s get a deal on the easy stuff, call it a win, and go home.”

Hmm, this is what we wrote earlier this year:

“Importantly, we have noted that Trump would eventually ‘cave’ into the pressure from the impact of the ‘trade war’ he started.”

For Trump, he can spin a limited deal as a “win” saying “China is caving to his tariffs” and that he “will continue working to get the rest of the deal done.” He will then quietly move on to another fight, which is the upcoming election, and never mention China again. His base will quickly forget the “trade war” ever existed.

Kind of like that “Denuclearization deal” with North Korea.

ECB Goes All In

If the potential for a “trade deal” wasn’t enough to spur equities, then surely the ECB throwing in the monetary policy stimulus towel would do the trick. Last week, the ECB went “all in” by:

  • Cutting already negative deposit rates for the first time since 2016 to stimulate the sagging European economy, by 10bps to -0.50%.

  • Restarted QE by €20 billion per month and it will be open-ended

  • The ECB dropped calendar-based forward guidance and replaced it with inflation-linked guidance, noting that key ECB interest rates will “remain at their present or lower levels until it has seen the inflation outlook robustly converge to a level sufficiently close to, but below, 2% within its projection horizon.”

  • The ECB eased TLTRO terms with banks whose eligible net lending exceeds a benchmark.

  • Additionally, the maturity of the operations will be extended from two to three years.

  • Finally, the ECB will introduce a two-tier system for reserve remuneration in which part of banks’ holdings of excess liquidity will be exempt from the negative deposit facility rate, in an attempt to mitigate the adverse impact to banks. 

(h/t Zerohedge)

We had previously stated the Central Banks are going to act to bail out systemically important banks which are on the brink of failure – namely, Deutsche Bank ($DB)

Not surprisingly, this was the same conclusion Bloomberg finally arrived at:

“Deutsche Bank AG will benefit the most by far from the European Central Bank’s new tiered deposit rate. Germany’s largest lender stands to save roughly 200 million euros ($222 million) in annual interest paymentsthanks to a new rule that exempts a big chunk of the money it holds at the ECB from the negative rate the central bank charges on deposits. That’s equivalent to 10% of the pretax profit the analysts expect the bank to report in 2020, compared with an average of just 2.5% for the EU banks included in the analysis.”

Duetsche Bank was heard singing:

“Thank you for the bailout,

On your way out,

Mr. Draghi.” 

But it isn’t just the ECB easy monetary policy to support global markets and economies. According to Charlie Bilello, everyone is doing it:

Importantly, QE and negative rates are destroying the banking system globally. These programs DO NOT stimulate economic growth or an incentive for productive investment. Rather, these programs only succeed in inflating asset prices, increasing demand for risky debt, and acting as a “wealth transfer” system from the middle-class to the wealthy.

The reality is that these interventions have been “required” just to hold the current construct up. As we will discuss in a moment, the Federal Reserve tried to normalize rates, but was only able to make minimal progress before the “wheels came off the cart.”  

The question is, what’s going to happen when a recession finally occurs?

That is a question for later.

The Economy Shows Signs Of Life

Adding fuel to the “bullish” case, the economy did show signs of improvement. 

Before you get all excited, all this indicator denotes is that economic data is “less bad” than it was previously. The chart below is our RIA Economic Output Composite Index which is a comprehensive measure of the U.S. economy from both the manufacturing and service side of the ledger. 

While the data may have surprised recently, the overall economy is not accelerating; it just isn’t declining as quickly. With the Citi index already much improved, the temporary run of “less bad” data will likely reverse in the next couple of months.

Then, there is the last “hold out.”

The Fed Is On Deck

All the bulls need now is the Fed to “cut” rates at the meeting next week. 

It is expected the Fed will cut rates by 0.25% at the next meeting. However, what will be important is how they couch their views going forward. 

The problem for the Fed is two fold.  

  1. If they come out too “dovish,” they will appear to be “caving” to Trump’s demands which would threaten their “independence.” 

  2. If they come out too “hawkish,” they run the risk of disappointing the markets, and already weaker consumer confidence. 

The Fed is in really a tough spot. Given they have already cut rates once this year, they have already depleted what little bit of “ammunition” they have to combat the next recessionary downturn in the economy. 

Furthermore, core CPI jumped over the past month, which will lead the Fed’s preferred measure of inflation which is the Personal Consumption Expenditure (PCE) index.

With PCE forecasted to rise over the next several months, this potentially puts the Fed in a box. Interestingly,  when Fed began “hiking rates” in 2015, over concerns of rising inflationary pressures, PCE is now higher than back then. This is going to make it difficult to support the case for “zero interest rates.” 

With markets hovering at all-time highs, the unemployment rate near record lows, and inflationary pressures near their target levels, there is little reason to be cutting rates now. 

For the bulls, the good news is, they will cut rates anyway.

Is It All Priced In?

With all the bullish news this past week, it is certainly not surprising that market rallied sharply.  

Oh, wait….it was only a 0.6% gain?

“But, it’s a lot higher for the month. “

Yes, the market has rallied 3.4% for the month so far, but since the May highs, the market has risen by only 1.9%. Given the volatility and angst of the summer months, bonds have provided a better return.

However, with all the “bullish” news one could hope for, it certainly seems like the markets would/should have responded better. 

Or, maybe its the fact that the markets have been front running this news ever since the December lows.  From December 24th to today, the market has already risen markedly. 

  • The Dow Jones Industrial Average has risen 5427 points

  • The S&P 500 has risen 656 points.

  • The Nasdaq Composite has surged 1983.79 points.

At the same time as markets were surging on hopes of a trade deal, Fed rate cuts, and more ECB QE, corporate profits have declined. (Note: Profits have fallen on a pre-tax basis and are barely stable at 2012 levels despite a full 5% decline in effective tax rate)

Earnings expectations have fallen.

Valuations have increased.

There is a decent argument to be made that whatever positive benefit may come from all these actions have already been priced into equities currently. 

As we noted last week, the “bulls” regained the narrative when the S&P 500 broke above 2945. Unfortunately, they just haven’t been able to do much with it so far. 

Currently, the risk/reward is not in the bulls favor short term. With the market back to very overbought conditions, the upside to the top of the bullish trend channel is about 1.9%. The downside risk is about 5.5%.

What about that bloodbath in bond yields?

Yes, we finally got the much-needed sell off in bonds. This is something we have been expecting now for several weeks as discussed with our RIAPRO subscribers:

  • Like GLD, Bond prices have surged on Trump ramping up the trade war.

  • The overbought condition is rather extreme, so be patient and wait for a correction back to the breakout level to add holdings.

  • Prices could pullback to the $135-137 range which would be a better entry point.

  • Long-Term Positioning: Bullish

That correction came last week with bonds taking it on the chin as shown in the chart below. 

However, let’s keep it in perspective for a moment. That little red square, if you can see it, is the rate jump this past week. 

I will note that previous overbought conditions (bonds are inverse from stocks) have led to decent reversals in rates, which have repeatedly been outstanding buying opportunities for bond investors. 

This is because higher rates negatively impact economic growth. It is also worth noting that collapsing bond prices tends to lead the S&P 500 as it suggests that something “just broke” in the market. 

While there are certainly many arguments supporting the “bullish case” for equities at the moment, the reality is that much of the “news” has already been priced in. 

More importantly, if that is indeed the case, then where will the next leg of support for the bull market going to come from?

It is hard to suggest there will be a aggressive reversal of economic growth, profit margins, and confidence considering the current length of the economic cycle. 

I will reiterate from last week:

“This is why, despite the bullish overtone, we continue to hold an overweight position in cash (see 8-Reasons), have taken steps to improve the credit-quality in our bond portfolios, and shifted our equity portfolios to more defensive positioning. 

We did modestly add to our equity holdings with the breakout on Thursday from a trading perspective. However, we still maintain an overall defensive bias which continues to allow us to navigate market uncertainty until a better risk/reward opportunity presents itself. “

That remains the case this week as well.

Tyler Durden Sun, 09/15/2019 - 11:30
Published:9/15/2019 10:55:32 AM
[Markets] Stock Bulls Betting on Rate Cuts Are a Long Way From Sure Thing (Bloomberg) -- Another rate cut from the Federal Reserve is all but certain. Its impact on the stock market, however, is the topic of frantic debate.In the bear camp are Bank of America Corp. and Morgan Stanley, whose strategists warned against relying too much on lower rates to boost stocks. In separate research, they reached the same conclusion after studying the historic relationship between Treasury yields and the S&P 500’s price-earnings ratios. That is, when rates go down too much, it hurts equity valuations.Ned Davis Research, on the other hand, offered a brighter assessment by focusing on a favorable market pattern following the second rate cut of a cycle, as is the case now.Getting it right has become an urgent matter for investors who have watched the S&P 500 rally 20% this year, with almost all the gains coming from an expansion in price multiples. Profits are barely growing, but stocks have rebounded from last year’s selloff after the Fed put a brake on rate hikes.Rate cuts can clearly bolster stocks in some circumstances. When they don’t is when the economy is in trouble -- and easy monetary policy almost always comes at times of trouble. When yields undercut a certain threshold, Morgan Stanley and BofA pointed out, equity multiples tend to shrink.“You can’t just depend on the Fed to lower interest rates to spur this bull market further,” Rich Weiss, chief investment officer of multi-asset strategies at American Century Investments in Mountain View, California, said by phone. “The fundamentals have to be there for additional highs on the stock market. They just aren’t there.”BofA and Morgan Stanley found different yield levels that historically switched from being good to bad for valuations. Savita Subramanian at BofA pointed to 10-year Treasury yields below 4%, compared with the current level around 1.9%. Mark Cabana, the firm’s rate strategist, said in a note earlier this month that the market expects the Fed to lower interest rates about five times by early 2021 and the likelihood for zero or negative interest rates is rising.“An ultra-low or negative rate environment is not necessarily supportive of stocks,” Subramanian wrote in a note last week. “The path to 0% would be accompanied by a significant deterioration in the growth outlook. That doesn’t bode well for P/E multiples.”Look at Germany, she suggested. Yields on the country’s 10-year bund have slipped to minus 0.7% from 4.9% since 2010. And price-earnings multiples for the stock market have been flat, hovering near 13.At Morgan Stanley, Mike Wilson examined real yields, the extra payment from 10-year Treasury above inflation. Currently, they sit in a range between minus 0.5% and zero, a place where further drops historically entail a decline in P/Es.“Falling rates are only a positive for equity valuations to a point,” said Wilson. “We’re passing the point.”Consider the last rate cut, he said. When the Fed lowered rates for the first time in a decade on July 31, the S&P 500 dropped 1.1% and then continued to decline the following month. At Friday’s close just above 3,000, the equity benchmark wasn’t far from the level seen the day before the rate move.But a second rate cut has tended to herald a more favorable reaction from stocks than the first, according to Ned Davis Research, which studied market performance and easing cycles in the past century.Perhaps it’s because doubts about the Fed’s commitment ease, or liquidity from the first one works through the system. Whatever the reason, the Dow Jones Industrial Average has jumped an average 9.7% three months after the second cut.“The good news for the bulls, from a historical perspective, is that a reduction next week would mean that a one-and-done cut is off the table,” Ed Clissold, chief U.S. strategist at Ned Davis, wrote in a note last week. “Two is better than one.”To Kevin Miller, chief investment office at E-Valuator Funds, the Fed’s influence on the U.S. market has weakened after Chairman Jerome Powell started considering global developments in policy making.“He doesn’t have to do something for the economy, but he does have to keep an eye on what’s happening globally and stay somewhere in line with where global rates are,” he said. “I don’t see a huge sell-off in the market if they lower by a quarter. Likewise, I don’t see a huge gain. It’s going to be more driven by what we’re hearing on a potential trade agreement” between the U.S. and China, he added.To contact the reporters on this story: Tatiana Darie in New York at tdarie1@bloomberg.net;Lu Wang in New York at lwang8@bloomberg.netTo contact the editors responsible for this story: Jeremy Herron at jherron8@bloomberg.net, Chris NagiFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P. Published:9/15/2019 7:24:18 AM
[Markets] The Tell: Why this overlooked ‘black swan’ poses a ‘monstrous’ risk to the stock market The market’s been looking fairly strong lately, with the Dow Jones Industrial Average rallying for the sixth session in a row. But with each uptick, there seems to be an increasing call for caution. TD Ameritrade’s Oliver Renick just joined the chorus.
Published:9/14/2019 7:49:17 AM
[Markets] Stocks Soar Near Record Highs Despite Bond Bloodbath, Momo Meltdown Stocks Soar Near Record Highs Despite Bond Bloodbath, Momo Meltdown

Quite a week...

The biggest quant quake since 2009 (and 2002)

Source: Bloomberg

...as Momentum collapsed...

Source: Bloomberg

The momo massacre went global...

And factor dispersion collapsed...

h/t Michael Krause

And the antithesis of the momo massacre, value had its best week on record...

Source: Bloomberg

And relative to one another, it was a bloodbath...

Source: Bloomberg

And linked to this destruction, 30Y yields (amid record issuance) soared a stunning 33bps this week - second biggest yield spike since 2009...

Source: Bloomberg

But apart from that - global stocks rallied.

China ended higher...

Source: Bloomberg

Europe soared...

Source: Bloomberg

And US equities surged led by Trannies and Small Caps, each of which was panic-bid at every day's open. The Dow is up 8 days in a row. Nasdaq underperformed on the week...

That is the best week for Small Caps since Dec 2016 (and best for Trannies since Dec 2017)

Very narrow range in Dow futs in the day session (having tried and failed to break to new highs numerous times)...

The driver of the Trannies/Small Caps surge was a huge short-squeeze...

Source: Bloomberg

The biggest weekly squeeze since Trump's election...

Source: Bloomberg

September has seen a massive shift into cyclical stocks...

Source: Bloomberg

Bank stocks soared this week (as rates rose and the curve steepened)...

Source: Bloomberg

...but note below they are merely back at a critical level of resistance...

Source: Bloomberg

The week was an utter bloodbath for bondholders (yields are up 8 days in a row)...

Source: Bloomberg

Just as the start of August sparked a panic-buying period for bonds, so September has seemingly sparked the exact opposite with a huge retracement so far...

Source: Bloomberg

The 10Y Yield is testing critical technical levels...

Source: Bloomberg

Some might argue the 10Y has a long way to go...

Source: Bloomberg

But don't listen to Jamie Dimon: In 2018, he predicts 10Y yields will hit 4%, 10Y yield drops to all time low. In 2019, he says JPM preparing for 0% rates on 10Y, 10Y yield soars most in years.

Meanwhile, elsewhere in bond land, that 100-year maturity Austrian bond (which was up 85% YTD, is now in a bear market, down 21% from the highs)...

Source: Bloomberg

The US yield curve (3m10Y) remains inverted but had the biggest weekly steepening since June 2013...

Source: Bloomberg

The Dollar slipped lower the second week in a row, testing one-month lows...

Source: Bloomberg

Cable soared this week - its best since May - as BoJo faced defeat and a no-deal brexit was believed to be less likely...

Source: Bloomberg

Offshore Yuan ended the week stronger than the Yuan fix

Source: Bloomberg

This is the strongest offshore yuan has been relative to the fix since Dec 2018...

Source: Bloomberg

Yuan appears to have caught up to Bitcoin's stability...

Source: Bloomberg

Cryptos were mixed with Bitcoin down on the week and Altcoins up led by Ethereum...

Source: Bloomberg

But Bitcoin held above $10,000 for now...

Source: Bloomberg

Oil had a volatile week as copper surged but PMs got pummeled today (most notably silver)...

Source: Bloomberg

Soft Commodities soared 5.2% this week, its best rally since May and snapping 10 straight losses in what was the longest losing streak since at least 1991.

Source: Bloomberg

With the surge in rates this week, the volume of global negative-yielding debt tumbled, and gold tracked it lower...

Source: Bloomberg

But it was silver that was monkeyhammered most...

Smashing Gold/Silver dramatically higher this week...

Source: Bloomberg

Finally, straight from the WTF world we live in, Greek 10Y Yields are now below US 10Y Yields for the first time since 2007...

Source: Bloomberg

And the market is starting to ease off its pressure on The Fed as it now prices in less than 2 rate-cuts by year-end (from more than 3 in July)...

Source: Bloomberg

Tyler Durden Fri, 09/13/2019 - 16:01
Published:9/13/2019 3:18:27 PM
[Markets] Dow ends higher for 8th straight session; S&P 500, Nasdaq edge lower Dow ends higher for 8th straight session; S&P 500, Nasdaq edge lower Published:9/13/2019 3:18:27 PM
[Markets] Stocks Mixed, But Can The Dow Extend Its Win Streak To Eight? Stocks were mixed heading into the last hour of trade as the Dow Jones Industrial Average attempts to extend its win streak to eight. Published:9/13/2019 2:14:13 PM
[Markets] US STOCKS-Wall Street mixed as trade hopes capped by Apple drop Wall Street was mixed on Friday, with the S&P 500 and the Dow hovering just below all-time highs as cautious optimism regarding easing U.S.-China trade tensions was held in check by a drop in Apple stock. Tariff-vulnerable industrials helped keep the blue chip Dow in positive territory, which was on track for its eighth straight daily advance, its longest winning streak since May 2018. Published:9/13/2019 1:45:11 PM
[Markets] The Dow Jones Rises for Eight Consecutive Days The Dow Jones Industrial Average has risen 51.5 points today—up for the eighth consecutive trading session. The DJIA is up 1,100 points since September 3. Published:9/13/2019 10:13:32 AM
[Markets] Dow and S&P 500 drift within reach of records after retail sales report U.S. stocks mostly extend an up trend that has put the Dow and S&P 500 close to carving out fresh all-time highs as Sino-American trade tensions ease and central banks support risk taking with easy money. Published:9/13/2019 9:46:19 AM
[Markets] The Dow Is on a Roll Because Trade Tension With China Is Easing STOCKSTOWATCHTODAY BLOG Make It Eight. Stocks looked to end the week on another high note, with Dow Jones Industrial Average futures rising 0.4%, while S&P 500 futures and Nasdaq Composite futures were up 0. Published:9/13/2019 8:12:53 AM
[Markets] Market Snapshot: Dow and S&P 500 on the brink of fresh all-time highs ahead of retail-sales, other data U.S. stock indexes on Friday look set to extend an uptrend playing out on Wall Street that has put the Dow and S&P 500 on the cusp of carving out fresh all-time highs as the backdrop of receding Sino-American trade tensions and easy-money central banks supports risk taking.
Published:9/13/2019 6:41:43 AM
[Markets] Dow Jones Futures Signal Move To Highs As Trump Open To Interim China Trade Deal; Apple Tests Buy Point Futures rose as the Dow and S&P; 500 near record highs. President Donald Trump said he'd consider an interim China trade deal. But Apple fell back to its buy point. Published:9/13/2019 6:41:43 AM
[Markets] Dow Jones Futures: Trump Open To Interim China Trade Deal; Apple Tests Buy Point Futures rose as the Dow and S&P; 500 near record highs. President Donald Trump said he'd consider an interim China trade deal. But Apple fell back to its buy point. Published:9/13/2019 5:42:25 AM
[Markets] Dow Jones Futures: Trump Says He'd Consider Interim China Trade Deal; Chip Giant Falls On Outlook Dow Jones futures. After a tepid stock market rally, President Donald Trump said he'd consider an interim China trade deal. Broadcom fell late on guidance. Published:9/12/2019 6:13:40 PM
[Markets] The Dow Rose 45 Points Because China and the U.S. Are Making Nice The Dow notched its seventh straight gain with Thursday’s close, and now sits only 216 points below its 52-week high. The U.S. and China are trying to de-escalate trade tensions ahead of the face-to-face meeting in October. Published:9/12/2019 5:07:51 PM
[Markets] Dow logs 7th gain in a row on renewed trade optimism, ECB stimulus The Dow marks its longest win streak in more than a year Thursday, after the European Central Bank’s announced fresh stimulus measures. Published:9/12/2019 4:07:11 PM
[Markets] Momo Meltdown Stalls As Stocks Jump On Draghi And Trump Momo Meltdown Stalls As Stocks Jump On Draghi And Trump

Global equity, FX, and bond markets are trading like penny stocks once again as central bank promises, leaks, and actions combine with US and China trade negotiators' promises, leaks, and actions spark panic-buying - and manic-selling - each and every day. Add to that the biggest quant quake in a decade and "things just went just a little bit slightly turbo" today...

For the first time in a month, offshore yuan traded above its fix

Source: Bloomberg

But intraday it was chaos...

Source: Bloomberg

Chinese stocks lifted on the tit-for-tat de-escalation in trade rhetoric...

Source: Bloomberg

European stocks were also chaotic as Draghi unveiled his grade finale bazooka...

Source: Bloomberg

US Futures show the fun and games best as Trump delayed tariffs soon after the close, China reciprocated on soybeans, Draghi disappointed, rumors of an interim trade deal were then quickly "absolutely" denied...

NOTE - futures tested the initial tariff delay spike 7 times (and failed)

On the cash side, the short-squeeze stalled early on, Trannies ended red as Small Caps played catch-up in the afternoon but tumbled back into the fed at the close...

NOTE - for a change, some weakness into the close

US equity markets are back within spitting distance of all-time record highs (S&P 3025.86 and Dow 27359 closing high)...

 

The meltdown in momentum stalled today - the best day for the momo factor since August 1st!

Source: Bloomberg

"Most Shorted" stocks trod water today as the squeezers appear to have run out of ammo...

Source: Bloomberg

No Smiles for Smile Direct Club as its ugly IPO flopped...

 

VIX traded with a 13 handle intraday...

 

Treasury yields ended higher across the curve (for the 7th day in a row) by around 5bps with massive intraday swings...

Source: Bloomberg

30Y Yields plunged 10bps before surging 14bps amid various headlines (note that 30Y ignored the denial of the interim trade deal)...

Source: Bloomberg

The yield curve continued to steepen, but 3m10Y remains notably inverted...

Source: Bloomberg

A chaotic day in FX land too as Draghi promises and White House denials pumped and dumped and pumped the euro and the dollar. The dollar ended the day lower...

Source: Bloomberg

Draghi dud...

Source: Bloomberg

Cryptos rallied on the day with Bitcoin getting back to even on the week...

Source: Bloomberg

Bitcoin tested $10k a few times and bounced today...

Source: Bloomberg

Oil tumbled overnight - despite all the exuberance over a potential trade deal, PMs pumped and dumped around Draghi...

Source: Bloomberg

WTI tested all the way down to $54.00 before bouncing...

 

Gold spiked up to $1530 before fading back, but still ended higher... (silver ended lower)

 

Meanwhile, the price of gold in Euros hit a record high...

Source: Bloomberg

Finally, we note that amid record high stocks, potential trade deal de-escalation, hotter than expected inflation, and soaring macro surprise data; the market is rapidly pricing out the most extreme view of Fed easing...

The last week has seen the market shift from pricing in 2.7 rate-cuts to just 2 now.

Source: Bloomberg

And then there's Draghi who just promised to more of what's not worked for a decade to fix everything...

Source: Bloomberg

Tyler Durden Thu, 09/12/2019 - 16:01
Published:9/12/2019 3:15:04 PM
[Markets] Dow extends winning streak to seventh session Dow extends winning streak to seventh session Published:9/12/2019 3:15:03 PM
[Markets] Stocks end slightly higher after tariff delay, ECB stimulus Stocks ended with small gains on Thursday, lifted after a further de-escalation of near-term U.S.-China trade tensions and a new round of stimulus measures by the European Central Bank. The Dow Jones Industrial Average ended around 45 points higher, up 0.2%, near 27,182, according to preliminary figures, while the S&P 500 gained around 9 points, or 0.3%, to settle near 3,010. The Nasdaq Composite closed near 8,194, up around 25 points, or 0.3%. President Donald Trump late Wednesday moved to delay an increase in tariffs on imports of Chinese goods by two weeks, while a report by Bloomberg News on Thursday said administration officials were weighing an interim deal with Beijing, though White House officials denied they were working on an agreement, according to other reports. Also Thursday, the ECB moved aggressively to shore up the eurozone's flagging economy and lift stubbornly low inflation back toward its target. The ECB cut its key rate further into negative territory and relaunched a program of monthly bond purchases, alongside other measures. Published:9/12/2019 3:15:03 PM
[Markets] Dow and S&P 500 are less than 0.2% from record highs as stock rally expands Dow and S&P 500 are less than 0.2% from record highs as stock rally expands Published:9/12/2019 12:37:20 PM
[Markets] The Dow Is Up 105 Points Even Though the Good Trade News Didn’t Last The Dow Jones Industrial Average and S&P 500 rose even though the White House denied reports of an interim trade deal. Published:9/12/2019 12:08:16 PM
[Markets] Visa, Travelers share gains contribute to Dow's 100-point jump DOW UPDATE Powered by strong returns for shares of Visa and Travelers, the Dow Jones Industrial Average is up Thursday afternoon. The Dow (DJIA) was most recently trading 105 points (0.4%) higher, as shares of Visa (V) and Travelers (TRV) have contributed to the index's intraday rally. Published:9/12/2019 11:38:11 AM
[Markets] Stocks erase most gains after Gundlach sees no trade deal with China before presidential election The Big 3 stock market indexes erased the bulk of their gains in morning trading Thursday, afterDoubleLine Chief Executive Jeffrey Gundlach said he didn't believe there will be a U.S.-China trade deal before the U.S. presidential election. The Dow Jones Industrial Average was recently up 26 points, after being up as much as 159 points earlier in the session. The S&P 500 pared earlier gains of as much as 0.6% to be up just 0.2%, and the Nasdaq Composite was up as much as 0.9% at its intraday high but was recently up just 0.4%. Published:9/12/2019 10:37:11 AM
[Markets] Early Dow advance sets index on path toward seventh straight gain Early Dow advance sets index on path toward seventh straight gain Published:9/12/2019 9:09:19 AM
[Markets] Dow set for 7th gain in a row after ECB kicks off new stimulus The Dow Jones Industrial Average heads modestly higher on Thursday, putting the blue-chip index on track to log its longest win streak in more than a year after the ECB cut interest rates and relaunched its bond buying progam. Published:9/12/2019 9:09:19 AM
[Markets] Market Snapshot: Dow set for 7th gain in a row after ECB kicks off new stimulus The Dow Jones Industrial Average heads modestly higher on Thursday, putting the blue-chip index on track to log its longest win streak in more than a year after the ECB cut interest rates and relaunched its bond buying progam.
Published:9/12/2019 9:09:19 AM
[Markets] GE offers to buy back up to $5 billion worth of debt General Electric Co. announced Thursday a tender offer to buy back up to $5 billion worth of its existing debt. The repurchase includes up to $2.5 billion for U.S. dollar-denominated debt and up to $2.5 billion of euro-denominated debt. The industrial conglomerate said it will continue to evaluate potential deleveraging actions, including pension funding and intercompany loan repayment from GE to GE Capital. The dollar-denominated debt subject to the tender offer include 2.700% notes due 2022, 3.375% notes due 2024, 4.125% notes due 2042 and 4.500% notes due 2044. GE's stock, which rose 0.6% in premarket trading, has lost 9.0% over the past three months but has gained 28.6% year to date, while the Dow Jones Industrial Average has tacked on 4.4% over the past three months and rallied 16.3% this year. Published:9/12/2019 8:38:13 AM
[Markets] 3 powerful reasons the stock market is heading even higher The S&P 500 index (SPX)  jumped to close just above 3,000 on Wednesday, its eighth gain in the last 10 sessions, and the Dow Jones Industrial Average (DJIA)  rose for the sixth straight session to end solidly above 27,000. The Nasdaq Composite index (COMP)  is less than 2% off its record peak, and the small-cap Russell 2000 index (RUT)  and the bellwether Dow Jones Transportation Average (DJT) , which lagged the other averages, have rallied sharply in recent weeks. This comes amid worries about yield curve inversions, recession (60% of Americans think one’s coming in the next 12 months, according to the latest ABC News/Washington Post poll), trade tensions, negative interest rates in Europe and Japan, and slumping global economies. Published:9/12/2019 5:08:55 AM
[Markets] Trump Delays China Tariff Hikes; Dow Jones Futures Rise On China Trade War 'Gesture' President Donald Trump delayed China tariff hikes by two weeks in a "good will" gesture. Dow Jones futures rallied on the China trade war news. Published:9/11/2019 7:34:13 PM
[Markets] Trump Delays Increase In China Tariffs Until October 15; Futures Surge Trump Delays Increase In China Tariffs Until October 15; Futures Surge

Just hours after China, as a gesture of goodwill, waived tariffs on 16 types of US goods in a clear attempt to sweeten trade talks, a move which clearly was not lost on the US president, moments ago Trump said he was delaying a 5% increase in tariffs on Chinese goods by two weeks, supposedly out of respect for the celebration of the 70th anniversary of the revolution that brought the communist government to power.

“At the request of the Vice Premier of China, Liu He, and due to the fact that the People’s Republic of China will be celebrating their 70th Anniversary on October 1st, we have agreed, as a gesture of good will, to move the increased Tariffs on 250 Billion Dollars worth of goods (25% to 30%), from October 1st to October 15th,” Trump tweeted at7;17pm.

While Trump claimed that the move was out of respect for the Chinese National Day holiday, it is far more likely an in kind response to China's announcement that a range of U.S. goods would be exempted from 25% extra tariffs put in place last year.

The delay comes into place just 11 days after a new round of tariffs kicked into place, and followed an escalation of the U.S.-China trade war in August when Trump announced an increase in the tariffs on $250 billion in Chinese goods to 30% from 25% starting Oct. 1.

The nations are scheduled to hold two rounds of face-to-face negotiations in Washington in coming weeks with the first this month and the second in early October with a visit from He.

The news sent S&P Emini futures surging by 0.6%, or up 17 points, to 3,020, just 7 points away from the July 26 all time high, and the Dow up over 140 points...

... sending the Dow back to where it was when Trump suffered his tariff tantrum at the end of July...

... with the Nasdaq...

... and the Yuan also sharply higher.

In the process roundtripping back to where the yuan was before China announced its retaliation to the latest round of US sanctions.

At this rate, the S&P will be at its all time highs by the open tomorrow, which means that next Thursday the Fed will cut rates by 25 bps with the US stock market at fresh all time highs.... unless of course, the Fed sees today's de-escalation as a key transition in the trade war and decides to delay rate cuts. Which, however, it won't as otherwise - with the ECB set to cut tomorrow and restart QE - Trump will show up at the Marriner Eccles building with a flamethrower and burn the whole place down.

Tyler Durden Wed, 09/11/2019 - 19:53
Published:9/11/2019 7:06:19 PM
[Markets] Why this overlooked ‘black swan’ poses a ‘monstrous’ risk to the stock market The market’s been looking fairly strong lately, with the Dow Jones Industrial Average rallying for the sixth session in a row. But with each uptick, there seems to be an increasing call for caution. TD Ameritrade’s Oliver Renick just joined the chorus. Published:9/11/2019 2:33:31 PM
[Markets] US STOCKS-Wall Street advances as China extends trade olive branch Wall Street was pushed higher on Wednesday by tariff-sensitive technology and industrial shares after China extended an olive branch ahead of next month's trade negotiations with the United States. Apple Inc led the charge, buoying all three major stock averages the day after it unveiled its latest iPhone upgrade and announced the launch date of its Apple TV+ streaming service. The blue-chip Dow was on course for its sixth straight daily advance. Published:9/11/2019 1:34:22 PM
[Markets] Winning streak on line as Dow industrials dip at opening bell Winning streak on line as Dow industrials dip at opening bell Published:9/11/2019 9:01:25 AM
[Markets] Dow's nearly 75-point jump highlighted by gains for Apple Inc., Walgreens Boots shares DOW UPDATE The Dow Jones Industrial Average is climbing Wednesday morning with shares of Apple Inc. and Walgreens Boots delivering strong returns for the index. The Dow (DJIA) was most recently trading 70 points higher (0. Published:9/11/2019 9:01:25 AM
[Markets] GameStop Stock Plunges, Mallinckrodt Soars on a Calm Morning for the Dow It looks like a calm start to the trading day. Global equity markets are mostly higher and U.S. stock-index futures aren’t doing very much. Futures on the Dow Jones Industrial Average, S&P 500, and the Nasdaq Composite futures were all up about 0.1%. Published:9/11/2019 7:32:02 AM
[Markets] Dow sets sights on sixth straight gain as U.S. stock futures edge upward Dow sets sights on sixth straight gain as U.S. stock futures edge upward Published:9/11/2019 7:32:02 AM
[Markets] US Futures Drift, Global Markets Rally As China Takes Steps To Ease Trade War US Futures Drift, Global Markets Rally As China Takes Steps To Ease Trade War

S&P500 futures were perfectly unchanged in an oddly quiet session, failing to be inspired by a ramp in European and Asian stocks, after China announced exemptions from the 25% extra tariffs put in place last year in some product categories such as pharmaceuticals and lubricant oil, in a move that is being viewed as a good will concession by China to restart the trade negotiation on good terms in October. While this has lifted sentiment in Asia and Europe, combined with a technical rebound generally in equities...

... it failed to inspire a move in US futures, while US 10Y rates appear to have peaked at 1.74% overnight and with rate locks on a record $100 billion in investment grade issuance now in the rearview mirror, expect 10Y yields to resume their slide in the coming days.

Much of Europe's gains came on the back of the tremendous momentum-to-value shift, which according to JPM's Marko Kolanovic has "only occurred on two days in history", with Europe's Stoxx 600 Index benefiting from the strong rotation into cyclical sectors that had lagged behind this year, such as automaker and banking shares.

Leading the rally in equities was once again Japanese equities with Nikkei futures up 1.1% erasing the losses from the intermediate peak in July. The lift was broad based with Asian stocks gaining, led by financial firms and material producers, as investors assessed signs that China will move to lessen the trade war’s impact and awaited the European Central Bank’s policy decision on Thursday.  Asian equities jumped in Japan and Hong Kong after the infamous twitter troll, Global Times editor Hu Xijin said in a Twitter post, that China will implement measures to ease the trade war’s impact on the world’s second-biggest economy. The moves planned by Beijing will benefit some companies from China and the U.S., Xijin said. 

As a result, most markets in the region were up, with Japan and Singapore pacing gains. The Topix advanced 1.7% to a two-month high, as Japanese banks continued to rally following a rebound in U.S. Treasury yields. A weaker yen helped buoy shares of Japanese exporters. The Shanghai Composite Index dropped 0.4%, with Kweichow Moutai and Jiangsu Hengrui Medicine among the biggest drags. Haitong Securities led brokerages higher after China scrapped foreign investment limits in stock and bond markets. South Korean infrastructure shares outperformed after the departure of President Donald Trump’s national security adviser, spurring speculation the U.S. may show conciliatory gestures toward China and North Korea.

As Saxo Bank highlighted recently, economic surprises have become less and less negative with Citi’s Economic Surprise Index G10 turning almost positive. If we are right that central banks will deliver enough monetary stimulus, with ECB starting tomorrow, and macro data begin to surprise positively then the rally could continue.

Equities have rebounded sharply in September on hopes for fresh monetary stimulus from the ECB on Thursday (as long as there is bank tiering included in the package) and the Fed next week, while market-supportive measures by China helped lift sentiment.

“We are primed for a little bit of disappointment,” Investec's Jeff Boswell told Bloomberg TV in Singapore. “On the QE front, whilst we’ve been expectant of something - certainly on the corporate bond-buying side that the market’s been expecting - it is unlikely to come tomorrow.”

In rates, treasury 10-year notes and similar German bunds drifted, after their yields earlier on Wednesday touched one-month highs. After hitting a session high of 1.74%, the 10Y Treasury dropped to session lows of 1.7057%, as rate locks on $100 billion of new investment grade issuance. Treasuries also halted a five-day decline as traders positioned before a pivotal eight-day period that includes meetings of the world’s three major central banks.

In FX, the yen fell for a third day after China announced measures to ease the negative impact of the trade war, reducing demand for haven assets. The pound rose, setting course for its third day of gains, as Prime Minister Boris Johnson was said to consider a fresh approach to the Irish border problem.

In commodities, oil futures climbed alongside gold.

The euro weakened, heading for its biggest drop in eight sessions.

 

Market Snapshot

  • S&P 500 futures little changed at 2,978.25
  • STOXX Europe 600 up 0.6% to 388.85
  • MXAP up 0.9% to 158.09
  • MXAPJ up 0.7% to 510.31
  • Nikkei up 1% to 21,597.76
  • Topix up 1.7% to 1,583.66
  • Hang Seng Index up 1.8% to 27,159.06
  • Shanghai Composite down 0.4% to 3,008.81
  • Sensex up 0.4% to 37,294.35
  • Australia S&P/ASX 200 up 0.4% to 6,638.04
  • Kospi up 0.8% to 2,049.20
  • Brent futures up 0.9% to $62.91/bbl
  • Gold spot up 0.4% to $1,490.99
  • U.S. Dollar Index up 0.2% to 98.52
  • German 10Y yield rose 1.0 bps to -0.537%
  • Euro down 0.2% to $1.1024
  • Italian 10Y yield rose 7.6 bps to 0.679%
  • Spanish 10Y yield rose 1.9 bps to 0.278%

Top Overnight News

  • China announced a range of U.S. goods to be exempted from 25% extra tariffs put in place last year, as the government seeks to ease the impact from the trade war without lifting charges on major agricultural items like soybeans and pork.
  • President Donald Trump said he fired his hawkish national security adviser, John Bolton, after disagreeing “strongly” with many of his positions, ending a tumultuous tenure marked by multiple setbacks in U.S. foreign policy.
  • Hong Kong Exchanges and Clearing Ltd. made a surprise $36.6 billion bid for London Stock Exchange Group Plc.
  • German Chancellor Angela Merkel said her government will work until the “last day” to ensure an orderly U.K. departure from the European Union but insisted Germany is ready for a no- deal Brexit.
  • The European Central Bank is about to turn the screws again on financial institutions by diving even deeper into negative interest rates. For holders of German and French government bonds, this week’s European Central Bank meeting is coming just in the nick of time.
  • President Donald Trump said he fired his hawkish national security adviser, John Bolton, after disagreeing “strongly” with many of his positions, ending a tumultuous tenure marked by multiple setbacks in U.S. foreign policy
  • Pound volatility is at emerging-market levels and U.K. assets are set for a substantial repricing once the Brexit outcome becomes known, according to Bank of England Governor Mark Carney
  • A cross-party group is seeking a way out of the Brexit “nightmare” by working together to find a deal that can secure a majority in Parliament, suggesting a Northern Ireland- only backstop may be one answer

Asian equity markets eventually traded mostly higher as the region shrugged-off the indecision from Wall St, which had been subdued by the continued global bond rout and tentativeness ahead of this week's ECB. ASX 200 (+0.3%) and Nikkei 225 (+1.0%) were higher but with gains in Australia capped as the outperformance in mining names was counterbalanced by weakness in tech, while Tokyo exporters continued to reap the benefits of recent currency weakness and after source reports suggested BoJ policymakers could be open to additional easing measures. Advances were also seen across the Apple supply chain in Japan and Taiwan following the tech giant’s launch event where it announced a new streaming service and health app, as well as new iWatch, iPhone and iPad models. Hang Seng (+1.7%) and Shanghai Comp. (-0.4%) were mixed after a tepid PBoC liquidity effort in which the mainland failed to take impetus from China’s fresh efforts to further open its financial markets by dropping QFII and RQFII quota limits. Sources noted China is ready to sweeten a deal by buying US goods, however, the report added that a purchase agreement is no certainty and would be in exchange for a delay on tariffs as well as an easing of restrictions on Huawei. China’s Global Times Editor also later suggested China will introduce important measures to ease the impact from the trade war which would benefit some companies from both China and the US which briefly fuelled appetite for risk. Finally, 10yr JGBs were lower amid a continuation of the global bond rout which was partly attributed to this week's supply and heavy corporate issuances, with weaker results across all metrics in today’s 5yr JGB auction adding to the pressure.

Top Asian News

  • Duterte Will Ignore South China Sea Ruling for China Oil Deal
  • BOJ’s Dilemma Spurs Speculation on Reverse ‘Operation Twist’
  • Hong Kong Stocks Climb to Six-Week High as Developers Jump
  • Asia Apple Suppliers Rise as MS Sees IPhone Price Driving Demand

Major European bourses are broadly in the green [Eurostoxx 50 +0.5%], following on from a similar APAC lead as sentiment is supported by China releasing a tariff exemption list for the US, effective from September 17th. Items on the list will not be subject to additional tariffs imposed by China on US goods as countermeasures to trade action taken by the US, however, the list does not include corn, soybean or pork. Spain’s IBEX (U/C) is the underperformer thus far amid disappointing earnings from heavyweight Inditex (-2.9%) whilst broad-based gains are seen across the region. Sectors are mixed with defensive sectors lagging, although the energy sector also feels some headwind from yesterday’s price decline in the oil complex. Turning to individual movers, LSE (+5.6%) shares spiked higher amid reports that Hong Kong Exchanges and Clearing have proposed a combination with LSE, terms of proposed deal would imply an enterprise value of GBP 31.6bln, and the transaction implies a value of GBP 83.61 for each LSE share. LSE said its board will consider the proposal. On the flip side, Suez (-1.3%) and Kone (-1.9%) opened lower amid downgrades, although the former saw some upside amid reports that the Co. won an approx. EUR 1bln treatment contract for the Dongying China chemical plant, contract is for 50 years.

Top European News

  • Merkel Answers IMF, Saying Lack of Money Not Germany’s Problem
  • British Airways Scraps Flights as Impact of Pilot Strike Lingers
  • Nordea’s Wholesale Banking Unit in Need of ‘Thorough Review’
  • Foreign Binge on European Bonds Is Ending Just in Time for ECB

In FX, the Euro is not quite the biggest G10 loser or underperformer, but the single currency has been a notable mover after topping out above 1.1050 against the Dollar and failing to close above key resistance just below yet again (1.1049 represents a 38.2% retracement of the decline from 1.1249 to 1.0926 ytd low). Eur/Gbp selling into the early 9 am fix may also have impacted, as the cross retests recent sub-0.8925 lows, but Eur/Usd is holding around the 10 DMA and bids said to be sitting just below (at 1.1022 and 1.1020 respectively) with one eye on Thursday’s ECB meeting and some form of easing/stimulus as German institutes continue to downgrade GDP estimates, while the other keeps tabs on higher global bond yields/spreads.

  • JPY/CHF - More safe-haven unwinding has nudged the Yen and Franc down to circa 107.85 and 0.9940 vs the Buck, and Usd/Jpy has breached a Fib, exporter offers plus a cloud top formation in the process, at 107.49, 107.50 and 107.71, with some fundamental/macro impetus stemming from another upturn in US Treasury yields and more curve steepening against the backdrop of positive-looking US-China trade headlines (such as Chinese tariff exemptions and buying US goods as a sweetener for upcoming talks).
  • GBP/AUD/NZD/CAD - All narrowly mixed vs the Greenback, with Cable forming multiple/lower peaks ahead of 1.2400 and reported stops at 1.2385+ and the Aussie fading into 0.6900 and the 100 DMA at 0.6907 following another downbeat sentiment survey overnight (Westpac consumer confidence turned negative). However, the Pound has not seen much angst in wake of an official ruling in Scotland against UK PM Johnson’s Parliament prorogation, while Aud/Usd is still outpacing Nzd/Usd as the latter remains heavy on the 0.6400 handle and the Kiwi struggles to stay above 1.0700 in cross terms ahead of NZ manufacturing PMI tomorrow and Westpac’s Q3 consumer survey on Friday. Elsewhere, the Loonie is maintaining its post-Canadian jobs momentum, but finding 1.3150 a tough hurdle to overcome convincingly.
  • NOK/SEK - Even though crude prices remain on a roll and the Norges Bank is still on course to take another step towards policy normalisation before the Riksbank (albeit not likely next week given yesterday’s soft inflation data), Eur/Nok is hovering around 9.8850 within a 9.9010-9.8765 range in contrast to Eur/Sek nearer the base of 10.6990-6595 parameters in wake of latest Riksbank comments reaffirming tightening guidance and dismissing weaker than expected Swedish CPI/CPIF metrics.
  • EM - The Rand’s bull run has been derailed around 14.6100 vs the Dollar and a deterioration in SA business confidence has hardly helped as Usd/Zar rebounds to 14.7000+, even though Moody’s indicated low risk of a ratings downgrade this year.

In commodities, WTI and Brent futures are holding onto most of its intra-day gains/consolidation following yesterday’s decline which was induced by the EIA cutting its 2019 and 2020 global oil demand forecasts by 100k BPD and 30k BPD, whilst downside was exacerbated after US President Trump fired the White House National Security Advisor/known policy-hawk Bolton. Prices have rebounded and remain on an upward trajectory thus far with WTI futures around the 58.00/bbl mark whilst its Brent counterpart trades just under 63.00/bbl (at time of writing). This morning also saw the release of the OPEC Monthly Oil Report in which its 2019 global oil demand growth forecast was revised lower by 80k BPD, in-fitting with the EIA STEO, next up IEA will release its report tomorrow at 0900BST. Ahead of tomorrow’s JMMC meeting, the Iraqi Oil Minister noted that the producers will have a discussion on whether or not there is the need for a deeper production cut with OPEC+, although this was rebuffed by the Russian Energy Minister who also expressed concern regarding global economy. Novak added that the slowing global demand for oil will also be discussed at the meeting tomorrow. Elsewhere, gold prices remain capped below the 1500/oz ahead of this week’s key risk events including US CPI and the ECB rate decision, whilst copper prices are little changed with little by way of immediate catalyst. Finally, Dalian iron ore prices rose for a third session amid a decline in shipments coupled with hopes of further Chinese stimulus.

US Event Calendar

  • 8:30am: PPI Final Demand MoM, est. 0.0%, prior 0.2%; PPI Final Demand YoY, est. 1.7%, prior 1.7%
  • 8:30am: PPI Ex Food and Energy MoM, est. 0.2%, prior -0.1%; PPI Ex Food and Energy YoY, est. 2.15%, prior 2.1%
  • 10am: Wholesale Inventories MoM, est. 0.2%, prior 0.2%; Wholesale Trade Sales MoM, est. 0.5%, prior -0.3%

DB's Jim Reid concludes the overnight wrap

Yesterday was the annual day in the diary when I wake up determined to take no notice of the new Apple product launch event and go to bed with a note in my diary to be the first in the online queue a few days later. It looks like I’ll be ordering a new phone due to the enhanced camera and a new watch due to the new fitness tracking improvements. I do believe they saw me coming.

To help me count down the hours until Friday’s pre-ordering, we have the small matter of tomorrow’s ECB meeting to look forward to. As we approach this main event, the relentless sell-off in global bond markets continues to show little sign of abating just yet. In fairness it took until the final couple of hours of the European session yesterday for yields to move notably higher on both sides of the Atlantic but the move carried on well into the US close with 10y UST yields finishing +9.1 bps at 1.735% - c.6bps occurred after Europe went home. That takes the 5-session move to 27.7bps, the steepest selloff since November 2016. The 2s10s curve didn’t do a lot though, holding steady at +5.1bps. Earlier 10y Bunds closed up +3.6bps. That now means that yields have closed higher in 4 out of the last 5 sessions with the move since the September 3rd intraday low now up to +19.5bps. The moves yesterday also meant 30y Bunds (+4.5bps) closed back in positive territory at 0.042% for the first time since August 2nd. Meanwhile BTPs sold off +7.8bps and Gilts +4.8bps.

There wasn’t actually a huge amount to report with regards to yields with the main talking point coming late in the European session with yet another pre-ECB MNI article, this time suggesting that we could see the ECB delay QE “possible contingent on further economic deterioration”. The headlines got the market excited but a closer read suggested that the base case from the main source in the article was that QE was still likely to be announced.

Equity markets have had an interesting couple of days where there’s been a big unwind in some popular trades. Several recent trends have reversed sharply, including momentum, growth versus value, and large versus small caps. Rising yields and steeper curves certainly contributed to the moves, but positioning had become stretched in recent months, as Binky highlighted in his report last week (link here ). To put the recent moves in context, the Bloomberg momentum index fell -1.26% to take its two-day loss to -2.51%, the worst since July 2008. Growth stocks have underperformed value by -4.09% over the last two days, the biggest shift since December 2016. Meanwhile, over the last seven sessions, growth stocks have underperformed -6.65%, the most since August 2009. Small caps have also underperformed versus large caps by 1.73% this week, the most in six weeks.

As for yesterday, the S&P 500, DOW and NASDAQ ended +0.03%, +0.28% and -0.04% respectively after a late rally but with tech names in particular struggling (-0.49%) again. Prior to this the STOXX 600 limped to a +0.10% gain thanks to a small bounce into the close although banks did rally another +1.83% owing to the rates move. This means that after bottoming out of August 15th, the rally off the intraday lows for European banks has been an impressive +14.52%. US banks are also up +11.89% over the same period. Elsewhere, in credit HY spreads were -8.7bps tighter in the US but +3.3bps wider in Europe. The talking point though has been primary and most notably for US IG where another 13 deals were announced yesterday. Amazingly we’ve seen deals from 80 borrowers since the Labour Day holiday.

Overnight in Asia markets are largely trading higher with the Nikkei (+0.88%), Hang Seng (+1.35%) and Kospi (+0.73%) all up. Chinese markets are trading lower after recovering from larger early losses – the Shanghai comp is trading flat while the CSI (-0.32%) and Shenzhen Comp (-0.25%) are trading down. 10y JGB yields are up +3.4bps this morning to -0.202% while US treasury yields are heading slightly lower across the curve after the recent run – 2y (-1.2bps), 5y (-1.3bps), 10y (-1.2bps) and 30y (-1.4bps). Elsewhere, futures on the S&P 500 are up +0.1% this morning while WTI is up +0.87% as a report from the American Petroleum Institute indicated that the US crude inventories fell by 7.23 mn barrels last week.

Sticking with Asia, China’s Global Times editor Hu Xijin said in a twitter post overnight that China will implement measures to ease the impact of the trade war while adding that the measures will benefit some companies from China and the US. Elsewhere South Korea’s trade minister said that the country will file a complaint today with the WTO against Japan’s export curbs on key materials used by the country’s chip and display makers.

Back to yesterday and in Germany Finance Minister Scholz confirmed that the budget proposed for next year (and up to 2023) is balanced. However Scholz also said that “it’s central that we’re in a position, with financial fundamentals we have, to respond with many, many billions, if indeed an economic crisis erupts”. It’s worth pointing out that the budget will likely not be passed until late November with the major political debate to take place around the ‘climate cabinet’ on the 20th of September. So there is still some chance that the budget adds new tax/spending measures to address the climate question.

As for the data, in the US the August NFIB small business optimism reading slid 1.6pts to 103.1 and a little worse than expectations for 103.5. For context though this index is still holding in relatively well compared to other surveys. Later on the JOLTS job data for July showed that job opening fell slightly for the second consecutive month, potentially signaling softer labour demand and reaching a five month low. Meanwhile, the report showed that hiring increased 0.1pp to 4.3%, which tends to be a strong leading indicator for wage inflation.

Here in the UK there was some decent wages data with basic earnings growth of +3.8% yoy (vs. +3.7% expected). The unemployment rate also edged down one-tenth to 3.8% after expectations were for no change. It’s worth noting that headline wages are now back in line with pre-crisis levels albeit boosted by historic revisions to the June data. Another puzzler for the BoE to square with the weaker demand data. Staying with the UK, Governor Carney sounded slightly hawkish yesterday, saying specifically that he doesn’t view negative rates as a tool in the UK. This backs up comments from Vlieghe on Monday.

To the day ahead now, which is another quiet one for data with little of note this morning while in the US the highlight is the August PPI report. Later on we’ll also get the final July wholesale inventories and trade sales prints. Away from that we get the Poland rate decision and OPEC monthly oil market report.

Tyler Durden Wed, 09/11/2019 - 07:54
Published:9/11/2019 7:03:17 AM
[Markets] Dow Jones Futures: From Apple To The Stock Market, Value Is Back; RH, Zscaler Are Big Movers Late Dow Jones futures: From low Apple TV+ pricing to Roku's sell-off and Ally Financial's breakout, value is in. Already-reeling Zscaler plunged on guidance. RH fell too. Published:9/10/2019 4:57:26 PM
[Markets] Dow extends winning streak to fifth session Dow extends winning streak to fifth session Published:9/10/2019 3:31:43 PM
[Markets] US STOCKS-Wall Street mixed as investors flee growth for value * China producer prices notch biggest drop in 3 years * Tech stocks weigh on S&P 500, Nasdaq * Ford falls as Moody's downgrades bonds to junk * Treasury yields hit four-week highs * Dow up 0.28%, S&P up 0.03%, Nasdaq off 0.04% (New throughout, updates prices, market activity and comments to market close) By Stephen Culp NEW YORK, Sept 10 (Reuters) - The S&P 500 ended little changed on Tuesday, with a rally in energy and industrial shares countering a drop in the technology and real estate sectors as investors favored value over growth. Industrials pulled the blue-chip Dow slightly higher and led the bellwether S&P 500's nominal advance, while the tech-heavy Nasdaq posted its third straight decline. Published:9/10/2019 3:31:42 PM
[Markets] Dow transports surges again, has now outperformed Dow industrial this year The Dow Jones Transportation Average shot higher for a second straight session, and has now passed its sister index, the Dow Jones Industrial Average , for year-to-date gains. The Dow Transports rallied 139 points, or 1.3%, while the Dow industrials fell 43 points, or 0.2%. On Monday, the Dow transports had run up 208 points, or 2.0%, while the Dow industrials had gained just 38 points, or 0.1%. The Dow transports performance this year has improved to 16.1% from 12.3% two days ago, while the Dow industrials year-to-date gain has stayed steady at 14.9%. Many Wall Street strategists have been talking about sector rotation this week, with many saying investors have been moving out of relatively high-valued and momentum sectors and stocks and into beaten-down, or relatively low-valued sectors and stocks. Published:9/10/2019 2:01:59 PM
[Markets] Visa, McDonald's share losses contribute to Dow's 50-point drop DOW UPDATE Behind losses for shares of Visa and McDonald's, the Dow Jones Industrial Average is falling Tuesday afternoon. Shares of Visa (V) and McDonald's (MCD) are contributing to the index's intraday decline, as the Dow (DJIA) was most recently trading 55 points lower (-0. Published:9/10/2019 1:34:03 PM
[Markets] Visa stock sinks again, as 'rotation' helps extend pullback from Friday's record Shares of Visa Inc. sank 3.6% in active afternoon trading, enough to pace the Dow Jones Industrial Average's decliners, as the credit card and payments company's stock extended its pullback from Friday's record close. Trading volume of 9.5 million shares was already above the full-day average of about 6.7 million shares. On Monday, the stock had slumped 2.3% to be the Dow's third-biggest decliner. It has now shed 5.7% since its $185.74 record close on Friday. Some Wall Street analysts have said that stock market is undergoing a "sector rotation," as investors rotate out of big winners and into the biggest underperformers ahead of year end. Nomura cross-asset analyst Charlie McElligott called Monday's action a "momentum massacre," as investors rotated out of momentum stocks, or those that have run up quickly to historically high valuations, and into value, or stocks trading at lower valuations. Prior to this week's selloff, Visa's stock had soared 41% year to date. Meanwhile, shares of Walgreens Boots Alliance Inc. had tumbled 23% year to date through Friday, but has soared 8.1% this week. Published:9/10/2019 12:55:15 PM
[Markets] Something Big Is Taking Place Below The Market's Surface Something Big Is Taking Place Below The Market's Surface

The shock of yesterday’s US Equities factor reversals will go down in infamy alongside the August 2007 “Quant Quake” and the Fed / March / April 2016 “Market-Neutral Unwind” as one of the more stunning trades in modern market history—and yet HILARIOUSLY, nobody watching financial TV or Joe Schmoe retail investor looking at just simple Index returns in isolation (or even a more sophisticated investor looking at the Vol complex yday) would have had ANY idea of the calamity occurring under the surface, as it was all about a blowout in sector- and thematic- dispersion which then acted to offset / “mask” the “top down” moves

- Nomura's Charlie McElligott

Submitted by Nicholas Colas of DataTrek Research

Monday’s action in US equities was much like a duck floating on a pond. Up top, nothing much seems to be going on. The Dow (up 14 basis points), the S&P 500 (down 1 basis point) and the NASDAQ (down 19 basis points) all behaved like coming to work was the proverbial waste of a clean shirt.

But, below the surface, there was a lot of action. We had several client emails on this after the close, calling dramatic out moves like:

  • The Russell 2000: up 1.3%. US small caps have been laggards all year, but Monday’s move closed the YTD performance gap by 20%.

  • Large cap Financials: up 1.5%. One of the more-troubled groups in the S&P 500 this year, but Monday’s performance cut their YTD lag by 44%.

  • US Momentum stocks (using the MTUM ETF as a proxy): down 1.7%. Monday’s move cut the YTD outperformance of this style versus the S&P 500 from 357 bp to 186 bp, a 48% decline.

  • US Min Vol stocks (using the USMV ETF): down 0.9%. Like Momentum, this has been a winning approach in 2019 but Monday’s drop sliced 20% off its YTD outperformance (448 bp Friday, 363 Monday).

Without making too much from one day’s performance, these moves are still important enough to dissect for what they say about potential shifting investment narratives. Three points on this:

#1: The world’s low/negative interest rate fever may finally be breaking. We’ve written about how Treasuries were overbought several times recently, so no need to belabor that point. But here’s how this is playing out now:

  • 10-year German bunds are off their record-low yields, at -0.58% Monday versus -0.70% at the start of the month. German 30-years are within sight of positive yields, at -0.03%.

  • 10-year Treasuries yield 1.65% Monday versus 1.50% at the start of September. 30-years are back over 2% (2.13% Monday) versus 1.96% on August 31st.

  • This move has breathed fresh lift into European bank stocks, up 6.7% this month and 2.7% just Monday. We talked about these last month as a canary-in-the-coalmine indicator, and sure enough they have led markets higher in September.

  • This helped US Financials Monday (as noted above)… And since US Small Caps have suffered from fears over a US economic downturn, they got a lift as well.

Bottom line: the rate pendulum swung very far in August, but September’s renewed confidence in a US-China trade deal has put recession fears on the back burner for now.

#2: “Style” doesn’t mean diversification.

  • Using MTUM – an $11 billion ETF - as a proxy for momentum investing shows how concentrated this style has become.

  • 39% of the fund is in the Tech sector, 77% greater than the S&P 500.

  • 5 Tech names – MasterCard, Visa, Microsoft, Cisco and PayPal – are 21% of the fund. All were down Monday, led by MA and V, each lower by over 2%.

Bottom line: Monday was a zero sum game, with money flowing out of Technology and into Financials. We’re long past the days where money managers had consistent fresh inflows of new investor capital to sprinkle around. Rebalancing portfolios means a dollar-for-dollar exchange of “out with the old, in with the new”.

#3: “Min Vol” is anchored in the past.

  • The proxy here, USMV, is an ETF with $34 billion in assets. It uses historical price volatility to create a diversified portfolio of roughly 200 lower-than-average vol names with sector concentrations inline with US equity markets.

  • In principle this is a solid strategy with academic work that shows lower volatility stocks tend to outperform, even if this approach runs counter to CAPM’s concept of beta.

  • In practice, however, “min vol” will always have idiosyncratic risk when there is outsized sector/style rotation.

Bottom line: Monday’s “min vol” underperformance is one more sign that investment narratives are changing and capital is shifting accordingly. What was a low-vol stock over the last 90 days was certainly not one Monday.

In the end, the only question that matters about Monday is “Does it change anything fundamentally about important investment narratives?” Over the short term (a week or two), the answer is likely “yes”. We doubt the sell off in bonds is over, for example. That will give some groups/asset classes, like Financials/Small Caps, the chance for a further bounce.

Over the long term, however, we think it’s too early to wave the all-clear and call for what would essentially be an early-cycle shift to Small Caps/Financials/Cyclical names generally. Monday was a nice start, but just a start, and we’ll need to see continued market confidence that a 2020 recession is really off the table. Even with Monday’s action, that seems a tall order.

Tyler Durden Tue, 09/10/2019 - 11:45
Published:9/10/2019 10:55:22 AM
[Markets] Dow flat despite gains for shares of Dow Inc., Chevron DOW UPDATE Shares of Dow Inc. and Chevron are trading higher Tuesday morning, sending the Dow Jones Industrial Average into positive territory. The Dow (DJIA) was most recently trading 13 points, or 0. Published:9/10/2019 10:55:22 AM
[Markets] McDonald's is sharpest decliner as Dow industrials fall by triple digits McDonald's is sharpest decliner as Dow industrials fall by triple digits Published:9/10/2019 10:10:37 AM
[Markets] US Futures Drift Higher On Chinese Invitation To Bagholders, Trade And Central Bank Optimism US Futures Drift Higher On Chinese Invitation To Bagholders, Trade And Central Bank Optimism

There wasn't the usual trade talk optimism overnight, nor central bank trial balloons that record low interest rates will be dragged even deeper into negative territory.

Instead, what helped send European equity markets and US equity futures back in the green after an overnight slump that pushed the Emini from 2,985 to 2,965, was news that China removed one more hurdle for foreign investment into its capital markets almost 20 years after it first allowed access, when Beijing scrapped quotas for approved foreign institutional investors in domestic bond and equity markets. This means that all those WeWork bagholders who may have lost a majority of their investments, can no go ahead and lose the other have by investing in China, where the auditors have a habit of "community adjusting" everything.

In any case, the news helped send the Emini back in the green from overnight session lows just after the European open..

... with global markets back to unchanged.

Meanwhile, what we said about no central bank trial balloons, well we were kidding, because just after 7am, Reuters leaked that the BOJ "may be open to debate additional easing", because apparently the existing easing has worked so well. According to the report, the BOJ is considering taking rates further into negative territory if it decides to ease, but other options - such as tiering - also remain on the table, Reuters reports, citing unidentified people familiar. The BOJ’s decision on whether and when to ease is expected to be a close call; conclusion may not be final until the last minute which will be just after the Fed's own rate cut announcement. Ultimately, the BOJ's thinking is driven by the bank's growing less confident about early pickup in global growth

Actually, it turns out that we were also kidding about the lack of trade optimism: according to Bloomberg, China’s Premier Li said that US and China should find a solution to the ongoing trade dispute, adding that he hopes (there's that word again) that trade talks make progress. In response there was an immediate "risk on" move as European equity indices spiked higher as a result of these headlines with the DAX Sep' 19 futures spiking higher to 12,265 from 12,235, while the crude complex and USD/JPY also saw positive ticks. That said, the sharp move higher in US equities was less pronounced and quickly faded.

The Stoxx Europe 600 Index dropped a second day, led by financial services and health-care shares, although it rebounded following the China Li and BOJ more easing news. The pound fluctuated as embattled British Prime Minister Boris Johnson insisted he won’t ask for another Brexit delay, while U.K. wage and unemployment data beat estimates. Most euro-zone sovereign bonds nudged lower as European Central Bank officials prepare to meet.

Earlier in the session, Asian stocks fluctuated, with energy producers advancing and health-care firms retreating. Markets in the region were mixed as investors assessed the global growth outlook and China-U.S. trade negotiations with South Korea up and Thailand down. The Topix climbed 0.4%, as Japanese banks contributed most to gains following a rebound in long-term U.S. Treasury yields, which in turn pushed JGB yields modestly higher as well. The Shanghai Composite Index edged down 0.1%, snapping a six-day rising streak, with Kweichow Moutai and Ping An Insurance Group among the biggest drags. The big news out of China, as noted above, is that global funds no longer need approvals to purchase quotas to buy Chinese stocks and bonds, the State Administration of Foreign Exchange said in a statement on Tuesday. It removed the $300 billion overall cap on overseas purchases of the assets, about two-thirds of which remain unused.

Also overnight, China reported that its headline CPI inflation was flat at 2.8% year-on-year in August, just above consensus expectations and close to the 3% policy target; in month-on-month terms, headline CPI inflation moderated to +2.9% in August from +3.5% in July. A bigger problem was the second consecutive print of negative year-over-year PPI inflation, which moderated further to -0.8% yoy in August, on both a high base (PPI up 3.6% mom s.a. ann in August 2018) and a sequential decline of 2.8% mom s.a. ann in August. Inflation in the ferrous metals sector slowed the most, followed by petroleum industry, suggesting corporate profits will be further depressed in coming months.

In emerging markets, a four-day rally in equities stalled and the risk premium on sovereign debt rose as investors marked time before the resumption of trade talks between China and the U.S. as well as central-bank meetings in coming days. Developing-nation stocks climbed almost 4% in the previous four days after China and the U.S. announced face-to-face negotiations aimed at ending the tariff war would be held in Washington next month. China, meantime, removed one more hurdle for foreign investment into its capital markets almost 20 years after it first allowed access, when it said Tuesday that global funds no longer need approvals to purchase quotas to buy Chinese stocks and bonds.

With the European Central Bank announcing its policy decision in Thursday and the Federal Reserve next up, investors are hoping on increased monetary stimulus to prop up markets. A gauge of emerging-market currencies gained for a fifth day, the longest streak since June, with South Africa’s rand leading the advance.

“Markets were oversold, rebounded and without any genuinely positive catalysts are faltering again,” said Julian Rimmer, a trader at Investec Bank in London. “Funds were clearly bearishly positioned over the summer with the salami slicing of global growth expectations, low volumes and the worldwide hunt for yield. Some of that negativity has diminished slightly so we had some short-covering and a bit more risk-on, but fundamentally nothing has changed and all those concerns are still apparent."

In rates, European bond markets inched lower while the region’s stocks declined for a second day ahead of Thursday’s ECB policy announcement. Bear steepening resumed in the German curve although the long-end claws back some initial weakness to trade back at 0%. Peripheral spreads widened to core, with the long-end of the Spanish curve underperforming. Gilts drifted lower after robust domestic employment and wages data, but as ever, Brexit keeps any hawkish repricing in check.

The recent pullback in the bond rally “is a correction to an outsized move in yields during August, not a turn in the trend,” Kit Juckes, chief global FX strategist at Societe Generale SA, wrote in his daily note. “Last Friday’s U.S. labor market data show, clearly enough for me, that the U.S. economy is slowing slowly but steadily as the global trade slowdown infects it."

In geopolitical news, North Korea launched 2 projectiles; a Japanese Defence Ministry official later commented that the latest North Korea missiles pose no immediate threat to Japan's national security. Pakistani Foreign Minister has told UN Human Rights council that India's "illegal Kashmir military occupation" raises spectre of "genocide". Additionally, Pakistan's Qureshi says that he sees 'no possibility of a bilateral engagement with India'.

In FX, the Bloomberg Dollar Spot Index halted a five-day slide Tuesday as the yield on 10-year U.S. Treasuries fell 2bps, its first decline in five days. The only G-10 currency to climb against the dollar was the Swiss franc but moves were limited; meanwhile, the largest losses were seen by the Swedish krona, as the currency weakened by almost 1% to the dollar and the euro after Swedish inflation unexpectedly slowed to its lowest in three years, in more bad news for the Riksbank which is keen to increase interest rates. Finally, the Norwegian krone tumbled alongside its Swedish peer after similarly disappointing inflation reading.

Elsewhere, oil extended gains to the highest level in almost six weeks as Saudi Arabia’s new energy minister signaled his commitment to production cuts ahead of an OPEC+ meeting later this week. Gold headed for its fourth day of declines, sinking to around $1,495 an ounce. Sweden’s krona tumbled after the country’s inflation unexpectedly slowed.

Expected data include NFIB Small Business Optimism. HD Supply and Zscaler are reporting earnings

Market Snapshot

  • S&P 500 futures down 0.1% to 2,973.75
  • STOXX Europe 600 down 0.5% to 383.96
  • MXAP down 0.01% to 156.79
  • MXAPJ down 0.2% to 507.06
  • Nikkei up 0.4% to 21,392.10
  • Topix up 0.4% to 1,557.99
  • Hang Seng Index up 0.01% to 26,683.68
  • Shanghai Composite down 0.1% to 3,021.20
  • Sensex up 0.4% to 37,145.45
  • Australia S&P/ASX 200 down 0.5% to 6,614.06
  • Kospi up 0.6% to 2,032.08
  • Brent futures up 0.2% to $62.74/bbl
  • Gold spot down 0.2% to $1,496.06
  • U.S. Dollar Index up 0.1% to 98.41
  • German 10Y yield rose 0.6 bps to -0.579%
  • Euro down 0.05% to $1.1043
  • Italian 10Y yield rose 6.6 bps to 0.603%
  • Spanish 10Y yield rose 1.5 bps to 0.233%

Top Overnight News from Bloomberg

  • After Parliament blocked his Brexit strategy, and then refused to give him the election he wanted, U.K. Prime Minister Boris Johnson is promising to work for a deal with the EU. Monday night saw him suffer his sixth consecutive defeat in a vote in the House of Commons, after his attempt to get approval for a snap poll was rejected for a second time
  • The U.K. economy continued to create jobs over the summer and wages jumped, despite the escalating turmoil over Brexit. The jobless rate fell to the lowest since the 1970s but jitters weighing on the wider economy were appearing. Employment growth was weaker than forecast; vacancies slipped to the lowest since 2017
  • Mario Draghi needs to go out with a bang if he’s to renew a surge in bond prices that sent yields to unprecedented lows. Markets have factored in the ECB slashing interest rates and restarting QE, so it will take a multi-faceted stimulus package in his penultimate meeting Thursday to impress investors
  • Germany’s worship of fiscal discipline is being challenged by a looming recession and tantalizingly cheap credit -- and a silent revolution is under way at the finance ministry to shed its economic dogma
  • Executives of WeWork and its largest investor, SoftBank, are discussing whether to shelve plans for an initial public offering of the money-losing co-working company, said people with knowledge of the talks
  • China removed one more hurdle for foreign investment into its capital markets almost 20 years after it first allowed access

Asian equity markets traded mixed as they followed suit to the indecisive tone seen on Wall St amid a sell-off in treasuries and as the region also digested ambiguous inflation figures from China. ASX 200 (-0.5%) was negative with gold miners frontrunning the declines in Australia after the precious metal slipped below the psychological key USD 1500/oz level but with further losses in the index stemmed by strength in the energy sector following the recent rally in oil prices, while Nikkei 225 (+0.4%) was kept afloat by favourable currency moves. Elsewhere, Hang Seng (Unch.) and Shanghai Comp. (-0.1%) gave back initial gains despite the liquidity efforts by the PBoC and firmer than expected Chinese inflation data, as the figures were largely influenced by a 10% increase in food prices amid the swine fever epidemic and also showed PPI at its sharpest contraction in 3 years. Finally, 10yr JGBs were lower following the bear-steepening seen in US and broad declines across global bonds, while the absence of the BoJ from the market today also added to the lacklustre demand.

Top Asian News

  • North Korea Tests More Weapons After Floating Fresh U.S. Talks
  • Hong Kong Leaders Grow More Frustrated by Leaderless Protesters
  • Hong Kong Dollar Peg Questions Seen Fading One Way or Another
  • Chinese Exporters Cut Currency Hedges in Sign of Yuan Pessimism

European equities are modestly softer [Eurostoxx 50 -0.3%] following on from a mixed Asia-Pac session as participants remain on standby ahead of Thursday’s ECB monetary policy decision. Sectors are mixed with underperformance in the IT sector, whilst energy names outperform as the oil complex holds onto its recent gains and banking names remain supported by yesterday’s surge in yields (RBS +4.4%, UBS +3.4%, Barclays +4.5%). In terms of stocks on the move, EDF (-7.5%) share fell from the open after the Co. noted deviations in technical standards governing the manufacture of nuclear-reactor components. On the flip side, Subsea 7 (+2.7%) shares opened higher after the Co. announced its current COO as the new CEO effective January 1st 2020, additionally the Co. were awarded an offshore contract in Saudi Arabia. Finally, JD Sports (+3%) shares are supported post earnings after H1 sales rose 47% Y/Y and the Co. forecasts FY results to be at the mid-point of their previously guided range.

Top European News

  • EDF Flags Issues in Reactor Parts in Blow to Nuclear Industry
  • Spanish Banks Risk Setback in Fight Over Unfair Mortgage Claims
  • Germany Doesn’t Need to Splurge to Address Slowdown, Scholz Says
  • Sweden Inflation Slows to 3-Year Low in Blow to Riksbank

In FX, the major underperformers in wake of softer than forecast Swedish and Norwegian inflation data that calls into question hawkish guidance from the Riksbank and Norges Bank. Eur/Sek has rebounded from sub-10.7000 levels through 10.7500 and breached several technical resistance points in the process, including 10 and 21 DMAs plus a Fib retracement, while Eur/Nok is back above 9.9000 from almost 9.8500 and also taking on board the latest Norges Bank regional network survey showing that contacts envisage slightly slower growth in the coming 6 months.

  • USD - The Dollar is mixed to marginally firmer awaiting this week’s top-tier US data for more input ahead of the September FOMC after last Friday’s rather inconclusive BLS report and broadly upbeat comments from Fed chair Powell, on balance. However, the DXY remains rangebound between 98.260-463 and well within near term chart support and resistance not to mention recent highs and lows for the index.
  • CHF/NZD/AUD - The Franc has pared some losses vs the Greenback and single currency as risk appetite wanes/falters and selling abates into key technical psychological markers, like 0.9950 in Usd/Chf and 1.1000 in Eur/Chf. Meanwhile, the Aussie and Kiwi have lost some momentum, with Aud/Usd drifting back towards 0.6850 in wake of a downturn in NAB business sentiment and dip in conditions overnight, and Nzd/Usd fading ahead of 0.6450 as Aud/Nzd meanders between 1.0645-85.
  • GBP/CAD/JPY/EUR - Sterling staged another attempt to hunt out stops around 1.2385 vs the Buck and briefly crossed the 100 DMA against the Euro (0.8930), but failed to sustain momentum again amidst the ongoing UK political and Brexit paralysis. However, the ensuing Pound pull-back was arrested by more encouraging data as earnings beat consensus on a headline basis and the jobless rate eased to 3.8% from 3.9%. Note also, 2 bn option expiries in Cable at the 1.2300 strike have provided a buffer. Elsewhere, trade has been considerably more rangebound with the Loonie straddling 1.3175, Yen holding within 107.19-49 parameters and Euro stuck in a 1.1037-59 band awaiting Thursday’s ECB policy pronouncements for more direction.
  • EM - Contrasting fortunes again for the Rand and Lira, as Usd/Zar continues its deep reversal from 15.0000+ towards 14.6900 regardless of more SA ratings warnings from Moody’s, but Usd/Try elevated above 5.7500 in the run up to this week’s CBRT rate verdict and heeding even more dovish calls (-500 bp touted in a Turkish paper) alongside the persistent threat of US sanctions.

In commodities, WTI and Brent futures are holding onto most of its recent gains with the two benchmarks around 58.00/bbl and 63/bbl respectively at the time of writing. News-flow for the complex has been light, although reports stated that Russia’s Energy Minister Novak will be meeting with newly appointed Saudi Energy Minister Abdulaziz in Jeddah later today to discuss the energy market alongside strengthening Saudi-Russia cooperation ahead of Thursday’s JMMC meeting. Meanwhile, Nigeria’s Finance Ministry notes of strong indications of an oil glut next year, and thus lowered its benchmark forecast to 55/bbl from 60/bbl. This evening will also see the release of EIA’s Short-Term Energy Outlook with focus on global demand growth forecasts. Looking further ahead, participants will also be eyeing the weekly API crude inventory data with markets expecting a headline drawdown of 2.5mln barrels. Elsewhere, gold prices are largely unchanged below the 1500/oz mark amid the undecisive risk tone in the market ahead of this week’s key events. Meanwhile, copper prices have seen a more pronounced downside compared to yesterday with the red-metal flirting with 2.60/lb to the downside at the time of writing. Finally, Dalian iron ore prices advanced as much as 4% amid expectations that China will ratify further economic stimulus that would boost steel demand.

US Event Calendar

  • 6am: NFIB Small Business Optimism, est. 103.5, prior 104.7
  • 10am: JOLTS Job Openings, est. 7,331, prior 7,348

DB's Jim Reid concludes the overnight wrap

Every year in early September the financial world takes in a new breed of graduates and to you all I say welcome and good luck in your career. If you’d have started as a newbe last Thursday then the whole of your career would have been in a big bond bear market. You’d be excused for wondering if bonds ever actually rally. Indeed yesterday saw another fixed income sell-off, as reports on the German fiscal stance and positive comments on the US-China trade war supported investor sentiment. 10yr Bund yields rose +5.3bps, reaching their highest level in nearly a month at -0.59%, while 30y bunds rose +7.8bps but after spending much of the day in positive territory closed at -0.003%. Nearly but not quite. Lending to the German government out to 2049 will still involve a small haircut. For context the long run return on US equities has been around 9% p.a. over the last couple of hundred years and by my calculations that would mean you would earn 13 times your original investment over an average 30 year period through history. Even at the lower long run return for German equities of c.8% you would earn over 10 times your original investment over the same period. I’m not wildly excited about current equity valuations but this is food for thought for all you new graduates as you invest for your retirement. It’s too late for us but you can save yourselves.

The bond sell-off was global with 10y Treasuries up +7.7bps, BTPs up +6.7bps, and Gilts +8.5bps. Yield curves also steepened, with US 2s10s up +3.2bps to 4.9bps and to its highest level in three weeks. In credit, spreads widened in Europe, with Euro IG spreads +2.0bps and at a 7-week high, while Euro HY spreads were flat. In the US it was a different story as IG and HY spreads tightened further, down -1.3bps and -9bps respectively. Safe havens sold off across the board however, with gold down -0.53%, while the Swis Franc was the worst performing G10 currency, down -0.48% against the dollar, followed by the Japanese Yen (-0.32%).

The sell-off came as Reuters reported that Germany is considering creating a “shadow budget”, which would allow the government to get round the country’s fiscal rules. This would be done by setting up independent bodies, which could take advantage of the country’s low borrowing costs and invest in “infrastructure and climate protection”, but this spending would not count under the debt brake. Meanwhile, the euro strengthened after a letter obtained by Bloomberg News showed Bettina Hagedorn, a deputy finance minister, wrote that the government could change its plans to run balanced budgets if the economic situation required. The reports come ahead of this morning’s debate on the 2020 budget, which will be taking place in the Bundestag. These stories have become more frequent in recent weeks and whilst the market always gets more excited by the headlines than is justified by hard evidence of any change in policy, it’s fair to conclude that market pressure and chatter on this story is building.

Other drivers behind the bond sell-off included data which showed German exports unexpectedly rising by +0.7% (vs. -0.5% expected) in July, while imports fell by -1.5% (vs. -0.3% expected), sending the current account balance for July up to 22.1bn (vs. 16.4bn expected). So good news on exports even if declining imports might be demand led. Meanwhile comments from Secretary Mnuchin further helped things, as he said “we’ve made a lot of progress” in the trade talks, ahead of the planned meeting between China and the US in Washington next month. Ahead of Thursday’s much-anticipated ECB meeting, these positive developments seem to have marginally reduced the implied odds that markets have given to a larger 20bps reduction in the deposit rate, which now stand at 44%, having been at 61% just a week ago.

In equity markets, US stock indices were mixed with relatively high divergence between sectors. The S&P 500 ended just about flat (-0.01%) while the DOW gained +0.14%. Relatively more of the DOW is made up of bank stocks, which performed well (+3.15%) amid the higher yields. Tech lagged, with the NASDAQ down -0.19%. In Europe, the picture was similarly mixed, with the STOXX 600 losing -0.28%. Much of the fall came from UK stocks, with the FTSE 100 -0.72% as it reacted to sterling’s appreciation, but the CAC 40 (-0.27%) also declined, while the DAX and the FTSE MIB only made modest gains. European banks mirrored their American cousins’ positive performance, with the STOXX Banks up +2.72% on rising yields, while energy stocks also saw gains as Brent Crude rose +1.85% to reach a one-month high.

Overnight in Asia, markets are trading mixed with the Nikkei (+0.36%) and Kospi (+0.37%) both up while the Hang Seng (+0.08%) is trading flattish and the Shanghai Comp (-0.36%) is trading down. In Fx, all G10 currencies are slightly weaker against the greenback this morning with the exception of the New Zealand dollar (+0.19%). The onshore Chinese yuan is trading up c. 0.1% at 7.1164. Sovereign bond yields have ticked up in Asia this morning following the global sell-off with 10y JGB yields up +2.9bps at -0.234%. Elsewhere, futures on the S&P 500 are trading flattish (-0.06%) while WTI crude oil is up +0.45% after Saudi Arabia’s new energy minister signaled his commitment to production cuts ahead of an OPEC+ meeting on Thursday in Abu Dhabi to discuss their production pact. In terms of overnight data releases, China’s August CPI and PPI both came in one tenth higher than consensus at +2.8% yoy and -0.8% yoy, respectively.

In other news, top North Korean diplomat Choe Son Hui issued a statement this morning that the country would be willing to hold nuclear talks with the US, “at the time and place to be agreed late in September.” However, shortly after the statement North Korea fired two “short-range projectiles” into its eastern seas. Meanwhile, President Trump was a bit cautious in his response over the North Korean statement, citing the regime’s continued freeze on nuclear weapons testing and added, “We’ll see what happens, but I always say having meetings is a good thing, not a bad thing.”

In the UK, MPs rejected the chance of having a mid-October general election for the second time in a week, as the motion failed to reach anything close to the required two-thirds majority once again (239 to 46; PM Johnson needed 434 to call an early election). Opposition parties mostly abstained as they want Mr Johnson to be forced to ask for an extension he has said he will never do. Parliament has now been prorogued, so it won’t sit again until October 14th, which is also the week of the next European Council Summit. The political chatter now points to a late November election but there will be an incredible amount of water flowing under the bridge between now and then. Mr Johnson seems to have pushed his energy into getting a deal now but that is as far away as it ever has been. I wonder whether he may have one go at passing a deal through Parliament before October 31st just to show the electorate that he did everything he could to deliver Brexit by that date and hope the leave vote feels emboldened to vote for him by Parliament’s likely rejection of it.

DB’s Oli Harvey published his latest Brexit update yesterday (link here ), where his base case is that the government fails to secure agreement with the EU27 at the October Council meeting, leaving Johnson with a choice between requesting an extension, resigning as Prime Minister, or ignoring or circumventing the legislation. Looking at his full probabilities, he maintains his view that the cumulative probability of a no-deal Brexit is 50%, be that either at the end of October or after a general election, and places just a 10% chance on Johnson completing his aim of a successful renegotiation and a ratified Withdrawal Agreement by the end of October.

Earlier in the day, sterling rallied as markets approved of the more conciliatory remarks from Prime Minister Johnson, who described a no-deal Brexit as “a failure of statecraft”, and said that “I would overwhelmingly prefer to find an agreement.” The currency strengthened +0.49% against the dollar to its highest level in over a month.

In terms of data yesterday, as well as the aforementioned German export numbers, UK GDP surprised to the upside, with the economy growing by +0.3% mom in July (vs. +0.1% expected). All sectors outperformed, with services +0.3% (vs. +0.1% expected) and manufacturing production +0.3% (vs. -0.3% expected). Looking at the whole 3 months to end-July the UK economy saw a flat 0.0% growth rate over the previous three months.

Meanwhile the Federal Reserve’s consumer credit numbers showed a $23.29 billion expansion in credit, the largest monthly increase since 2017. Revolving credit, which includes mostly credit card debt, drove the increase as it rose by $10 billion, also the highest since 2017. Separately, the NY Fed’s inflation expectations survey showed 1-year expectations falling to their lowest level on record at 2.4%, while 3-year expectations also fell, by 0.1pp to 2.5%.

Looking at the day ahead, data releases include France’s July industrial and manufacturing production, along with Italy’s July industrial production. In the UK, the monthly employment report, including the unemployment rate and average weekly wage growth will be released, while from the US, we have the NFIB small business optimism index and the JOLTS job openings release.

Tyler Durden Tue, 09/10/2019 - 07:49
Published:9/10/2019 6:53:41 AM
[Markets] Dow industrials finish higher; S&P 500, Nasdaq end slightly lower Dow industrials finish higher; S&P 500, Nasdaq end slightly lower Published:9/9/2019 3:21:20 PM
[Markets] Millennials' Trading Accounts Battered By Wrong-Way Bets On Uber, Pot Stocks Millennials' Trading Accounts Battered By Wrong-Way Bets On Uber, Pot Stocks

Those millennials who weren't scarred by the financial crisis and have subsequently been willing to risk their savings (what little they have) in the stock market haven't established the best track record. Apps like Robinhood, which allows retail traders to sacrifice data privacy in exchange for free small-lot equity trades, offered a free introduction to speculation.

Unfortunately, millennial traders have demonstrated a penchant to latch on to trends from bitcoin, to tech to pot stocks (like Canopy Growth). Like that old adage, often attributed to Warren Buffett, millennials have been encouraged to "invest in what you know."

Unfortunately, this advice hasn't served them as well as they might have hoped.

To wit, millennial retail investors largely trailed the broader market over the summer, even as US equities climbed to new all-time highs. They were particularly hard hit by the explosion of volatility during the second half of August, as Brian Sozzi reports, citing proprietary data from Yahoo Finance.

As Sozzi reports, some of the most popular stocks purchased by millennials last month were also among the market's worst performers, including Uber, Aurora Cannabis and Canopy Growth.

The top stocks bought by millennials in August were some of the worst performers in the market, according to new data from online brokerage house TD Ameritrade. Millennials were buyers of cannabis names Aurora Cannabis (ACB) and Canopy Growth (CGC) last month, which tanked 15% and 27%, respectively, per Yahoo Finance data.

They also snapped up ride-hailing outfit Uber (UBER), which saw 20% of its value go up in smoke as its CEO basically laughed at Wall Street on a conference call for demanding profits. Uber’s second quarter earnings release also broadly stunk, calling into question whether the company will ever turn a profit (especially amid fresh worries about new worker laws in California that have taken hold in September).

Fortunately, performance has started to turn around for millennials in September, as they snapped up shares of Disney, Microsoft and Amazon - all of which generally tracked the Dow and S&P 500.

Still, thanks to the poor performance of ride-share companies and pot stocks, millennials are entering the fall with a lot of red in their brokerage accounts.

More broadly speaking,as Sozzi reports, retail investors using TD Ameritrade's platform have been net buyers of Disney, Amazon, Microsoft, Beyond Meat and Uber.

TD Ameritrade's IMX index, which tracks retail investors' exposure to equities through July (the data is reported with a brief lag), retail investors have continued to pull back in terms of their exposure to stocks even as stocks have resumed their march toward new all-time highs. With the September Fed meeting looming in the not-too-distant future, the question on every investors' mind is whether stocks will return to all-time highs this month.

Judging by the data, it appears that the market chaos that broke out in Q4 of 2018 spooked retail investors, and they haven't been willing to dial up their exposure to levels seen during the relative calm from 2017.

Tyler Durden Mon, 09/09/2019 - 15:35
Published:9/9/2019 2:52:02 PM
[Markets] S&P 500, Nasdaq declines belie bullish broad-market breadth While the S&P 500 and Nasdaq Composite fall, and the Dow Jones Industrial Average inched up fractionally, market internals are painting a much more bullish picture of the day's action. The number of stocks gaining ground outnumbered decliners 1,695 to 1,159 on the NYSE and 1,738 to 1,163 on the Nasdaq exchange, while the volume in advancing stocks represented 67.2% of total volume on the Big Board and 56.1% of total volume on the Nasdaq. Meanwhile, the Dow was up 4 points, or less than 0.1%, while the S&P 500 was down 0.2% and the Nasdaq Composited was shedding 0.6%. Published:9/9/2019 1:50:17 PM
[Markets] Dow clings to vestige of Monday's gain after Nasdaq and S&P turn negative Dow clings to vestige of Monday's gain after Nasdaq and S&P turn negative Published:9/9/2019 12:24:59 PM
[Markets] Stock market loses traction in positive territory Monday afternoon as benchmarks skid to session lows U.S. stocks in midday Monday action skidded to their lows of the session, weighed by losses in health care and technology shares. The Dow Jones Industrial Average was down less than 0.1% at 26,792, the S&P 500 index fell 0.2%, while the Nasdaq Composite Index , known as an index laden with information technology names, was down 0.5% at 8,061. The Dow had hit a high at 26,900, the S&P 500 touched an intraday peak at 2,989, while the Nasdaq hit a Monday apex of 8,131, before losing momentum and turning negative. The S&P 500's health-care sector was down 1.1%, while the tech group was 0.9% lower, those losses were more than offsetting gains in energy , up 1.3%, and financials , rising 1.1%. To be sure, declines for the market were still relatively slight. Published:9/9/2019 11:52:16 AM
[Markets] Walgreens is biggest gainer as Dow sets sights on triple-digit rise early Monday Walgreens is biggest gainer as Dow sets sights on triple-digit rise early Monday Published:9/9/2019 10:24:07 AM
[Markets] US STOCKS-Stimulus hopes lift Wall Street, financial stocks lead gains Gains in shares of big lenders, including Goldman Sachs, boosted the benchmark S&P 500 and the Dow Jones Industrial Average, following a rise in U.S. Treasury yields. Advancing issues outnumbered decliners by a 1.63-to-1 ratio on the NYSE and by a 1.31-to-1 ratio on the Nasdaq. Published:9/9/2019 10:24:07 AM
[Markets] Dow jumps 69 points on gains for shares of Caterpillar, Walgreens Boots DOW UPDATE Shares of Caterpillar and Walgreens Boots are seeing positive growth Monday morning, lifting the Dow Jones Industrial Average into positive territory. Shares of Caterpillar (CAT) and Walgreens Boots (WBA) have contributed to the index's intraday rally, as the Dow (DJIA) was most recently trading 69 points higher (0. Published:9/9/2019 9:19:35 AM
[Markets] UPS to hire 100,000 seasonal employees, same as last year United Parcel Service Inc. said Monday it expects to hire 100,000 seasonal employees for the peak holiday shopping period, matching last year's plan. UPS said the it expects daily package deliveries during the peak season, which starts in November and extends through January, to be nearly double the average of 20 million packages delivered per day. UPS said over the last three years, about 35% of the seasonal package handler jobs were later hired in permanent positions. The stock, which ticked up 0.1% in premarket trading, has rallied 23.1% year to date through Friday, while the Dow Jones Transportation Average has gained 12.4% and the Dow Jones Industrial Average has advanced 14.9%. Published:9/9/2019 8:19:28 AM
[Markets] Futures Rise, Dow Jones Today Aims To Extend Rally; Early Leaders: InMode, RH Stock RH and InMode were early risers Monday. The S&P; 500 and Dow Jones today aimed to add a fourth day to their rallies, and the Nasdaq index looked for a rebound. Published:9/9/2019 7:48:23 AM
[Markets] AT&T Stock Takes Off as Activist Investor Weighs In. The Dow Is Rising, Too. In the U.K., still plagued by Brexit problems, the FTSE 100 Index was down 0.5%. U.S. stock futures were higher. Dow Jones Industrial Average futures rose 0.3%, and futures on both the S&P 500 and the Nasdaq Composite had risen 0.2%. Published:9/9/2019 7:18:36 AM
[Markets] WestRock to cut 260 jobs next year as it reconfigures a South Carolina paper mill WestRock Co. said Monday it expects cut 260 jobs as it shuts down one of three paper machines as part of a reconfiguration of its North Charleston, South Carolina paper mill. The job cuts are expected over a five-month period, starting in January 2020. The reconfiguration will eliminate about 288,000 tons of linerboard capacity, leaving production capacity of 605,000 tons a year. The move is part of the company's effort to improve the mill's operating efficiency and competitiveness over the long term, and is expected to increase annual earnings before interest, taxes, depreciation and amortization (EBITDA) by about $40 million. "Reducing the production of linerboard at this mill will help balance our supply with customer demand across our system," said Chief Executive Steve Voorhees. The stock, which was still inactive in premarket trading, has lost 7.0% year to date, while the Dow Jones Industrial Average has gained 14.9%. Published:9/9/2019 6:20:16 AM
[Markets] Saudi Shakedown 2.0: Kingdom "Asks" Country's Billionaires To Be Anchor Investors In Aramco IPO Saudi Shakedown 2.0: Kingdom "Asks" Country's Billionaires To Be Anchor Investors In Aramco IPO

On an otherwise silent Saturday night, Saudi Arabia shocked the energy world when it announced that the country's energy minister, Khalid al-Falih was suddenly and unceremoniously replaced by Abdulaziz bin Salman (or AbS), half-brother to Crown Prince Mohammed bin Salman (or MbS), and since the last time the Saudi energy minister was replaced marked the dramatic change in Saudi energy strategy (see here for our take on the last days of Ali al-Naimi), we were wondering just what major evert was hiding up Saudi Arabia's sleeve this time.

Abdulaziz bin Salman al Saud

We didn't have long to wait for the answer, because less than two years after the historic Saudi purge and arrest of the country's billionaires, most notably Prince Bin Talal, in an unprecedented shakedown meant to refill the kingdom's rapidly emptying coffers, moments ago Bloomberg reported that MbS was preparing for shakedown #2, as "Saudi Arabia held discussions with some of the kingdom’s wealthiest families about becoming anchor investors in Aramco’s mammoth stake sale." And by "discussions", they mean King Salman's administration made them an offer they simply couldn't refuse.

In retrospect, with Softbank in dire straits after the WeWork fiasco, and few oligarchs outside of Saudi Arabia willing to stake their wealth on higher oil prices at a time when the world is headed for recession, Chinese oil demand is slumping and shale is set to flood the world with excess oil, Riyadh had few other options. And so, as Bloomberg reports, Saudi officials made initial contact with some top business families on behalf of the oil giant.

Why the shakedown? According to the report, the kingdom is aiming to raise at least 1% to 2% of Aramco from these investors, and the amount each family invests will likely hinge on the company’s valuation, another person said.

At a time when money burning WeWork is aggressively slashing its idiotic "valuation", and according to Dow Jones is even contemplating pulling the IPO altogether, Saudi Arabia - which has been desperate to sell a portion of Aramco for years to raise much needed capital - has turned to its wealthiest families to ensure there’s enough demand for what could be the biggest initial public offering. Whether that demand is voluntary or comes at the barrel of a figurative gun apparently does not matter.

Hilarious, Bloomberg notes that "the kingdom’s economy is struggling to shake off the impact of lower oil prices and a 2017 purge that ensnared dozens of billionaires and officials" and reminds us that "the crackdown undermined business confidence and prompted many billionaires to consider shifting some of their fortune abroad."

In retrospect, those billionaires didn't shift their fortune abroad fast enough.

And the punchline: "some" (read most) of the families that have been approached had relatives briefly held in the Ritz-Carlton hotel in Riyadh as part of the purge, which the government called an anti-corruption crackdown, one of the Bloomberg sources said. They aren’t, however, being forced to invest, that person said.

Anchor investors usually commit to buying shares in a company before an IPO is opened up to other investors to control pricing and ensure that the sale is successful. The only difference is that most anchor investors do so voluntarily. There is nothing voluntary about what Saudi Arabia is doing.

In fact, in less polite circles it's called extortion.

Tyler Durden Mon, 09/09/2019 - 07:17
Published:9/9/2019 6:20:16 AM
[Markets] Dow Jones Futures: Apple Leads 5 Dow Stocks Near Buy Points As iPhone Event Looms Stock futures: Tuesday's iPhone event may be a snooze. But don't sleep on Apple stock. It's near a buy point, along with fellow Dow stocks Microsoft, Visa, Nike and Verizon. Published:9/8/2019 5:44:31 PM
[Markets] E-mini Dow Jones Industrial Average (YM) Futures Technical Analysis – Closed on Bullish Side of Fibonacci Level at 26494 Trading will begin on Monday with the Dow well above support and well below resistance. Therefore, we’re going to focus on the chart pattern. The session begins with the September E-mini Dow Jones Industrial Average up eight days from its last main bottom. This puts it in the window of time for a closing price reversal top. Published:9/8/2019 8:15:11 AM
[Markets] The S&P 500 Finally Busts Out — and Sets Itself Up for More Gains “Everything’s not awesome,” goes the theme to The Lego Movie2, “but that doesn’t mean it’s hopeless and bleak.” That’s the conclusion the market appears to have reached following a very volatile August. The Dow Jones Industrial Average advanced 394.18 points, or 1.5%, to 26,797.46 this past week, while the S&P 500 rose 1.8% to 2978.71, and the Nasdaq Composite climbed 1.8% to 8103.07. Published:9/6/2019 8:06:37 PM
[Markets] Dow Leads As Major Market Indexes Retake This Key Support Level Key indexes closed mixed Friday, after paring gains in the last hour of trade. The Dow Jones industrials stayed positive, thanks to Intel and Home Depot. Published:9/6/2019 4:02:20 PM
[Markets] US STOCKS-Wall St barely gains after mixed U.S. jobs data The S&P 500 and Dow industrials closed slightly higher on Friday as investors digested a mixed U.S. jobs report and bet on a Federal Reserve interest rate cut this month, while China's stimulus plan helped ease some concerns around global growth. Also on Friday, speaking at the University of Zurich, Fed Chair Jerome Powell said the labor market was strong and the central bank will continue to "act as appropriate" to sustain economic expansion. Published:9/6/2019 3:33:02 PM
[Markets] Dow transports falls to buck the broader stock market's rally The Dow Jones Transportation Average slumped 0.5% in afternoon trading, to buck the strength in the broader stock-market indexes, led by weakness in trucking and rail operators. Of the Dow tranports' 20 components, 14 traded lower, while the Dow Jones Industrial Average rallied 117 points, or 0.4%, with 23 of 30 components gaining ground. The S&P 500 rose 0.3% and the Nasdaq Composite tacked on 0.2%. With the Dow transports, the biggest drags on the index's price were the shares of Landstar System Inc. , which fell $1.70, or 1.5%; Union Pacific Corp. , which gave up $1.63, or 1.0%; and J.B. Hunt Transport Services Inc. , which shed $1.35, or 1.2%. The best performer was Matson Inc.'s stock , which rose 66 cents, or 1.8%. The Dow transports' divergence comes after it shot up 2.6% on Thursday, while the Dow industrials rose 373 points, or 1.4%. Published:9/6/2019 1:02:07 PM
[Markets] Dow Jones Stocks Hold Steady As Market Awaits Fed Remarks In the Dow Jones Industrial Average, gains were small. Not a single stock advanced 1%. Diversified manufacturer United Technologies led with a 0.8% gain. Published:9/6/2019 11:02:28 AM
[Markets] Dow up 50 points at open as investors handicap Fed odds after jobs report Dow up 50 points at open as investors handicap Fed odds after jobs report Published:9/6/2019 9:02:25 AM
[Politics] Trump Has a Favorite Number When He Makes Big Claims: 10,000 When President Donald Trump wants to convey that something is a big deal, he often reaches for the same big number: 10,000.He says it's the number of points the Dow Jones Industrial Average would be up had the Federal Reserve not raised interest rates Published:9/6/2019 8:30:25 AM
[Markets] Futures Drift Higher Ahead Of Payrolls And Powell, Boosted By China Stimulus

US equity futures and global stocks were drifting rangebound ahead of today's key payrolls data and Powell speech, when news of a targeted and broad RRR stimulus from China just after 5am ET helped cap a strong week for global markets while bond buyers and dollar dealers were patiently waiting for a major disappointment in today's economic data after their first significant selloffs in months.

S&P 500 futures rose, pushing the broad US equity index to within 2% of its all-time high, although they have found some resistance just around 2,980, while Europe's Stoxx 600 fluctuated, with automakers rising as energy shares fell on a drop in oil prices. Equities pared some gains after jumping briefly as China cut the amount of cash banks must hold as reserves, injecting liquidity into an economy facing headwinds to growth. The MSCI Asia Pacific Index headed for its biggest weekly advance since June.

After a roller-coaster week dominated by UK and Italian political drama, Washington and Beijing trade talk, global monetary stimulus and Argentina’s imposing capital controls, calm looked to have returned. Then Beijing cut in. Just as Chinese markets were closing, the country’s central bank said it was slashing the amount of cash that banks must hold as reserves for the third time this year and the first time since 2015 that Beijing announced a broad and targeted RRR cut. That released a total of 900 billion yuan ($126.35 billion) to shore up the slowing economy.

"It feels to me like the air is coming out of it a bit,” Societe Generale strategist Kit Juckes said, referring to the recent surge in volatility. “So we will see what we get from the payrolls.”

Light volumes and sluggish price action dominated the European morning’s wait ahead of payrolls and scheduled comments from Fed’s Powell. Europe’s pan-region Stoxx 600, London FTSE, Paris CAC 40 and DAX in Frankfurt were all higher, after rising to their highest in more than month on Thursday.

Asian equities followed Wall Street higher as trade war angst subsides; MSCI Asia-Pacific index ex Japan rose for a third day, adding 0.6% and giving it a 2.4% weekly gain, its best week since mid-June. The rise in Asian stocks was led by financial firms and energy producers, following a U.S. rally supported by strong jobs data. Almost all markets in the region were up, with India and Hong Kong among the top performers. The Topix advanced 0.2%, driven by automakers and electronics firms. Japanese households increased spending again in July despite poor weather, showing solid consumer confidence ahead of a sales-tax hike in October. The Shanghai Composite Index added 0.5%, with Ping An Insurance Group and CSC Financial among the biggest boosts. The gauge climbed for a fifth straight day to finish its best week since June. India’s Sensex rose 0.7%, buoyed by Reliance Industries and HDFC Bank. Automakers rallied as the government considered more measures including lower taxes to boost vehicle sales.

In rates, Treasuries fell, with 10-yr yield higher at 1.60% while JGB futures dipped. Euro zone bond yields steadied after their worst one-day selloff in more than a year. Bunds/USTs dipped after a choppy start, while peripheral spreads broadly tightened to core bonds. Italian short-end outperformed with 2y and 5y yields off 4.5bps, with Moody’s scheduled to review Italy later Friday. Long-end JGB yields rise ~7bps, digesting commentary from BOJ’s Kuroda who earlier in the session said yields on 20-, 30-year JGBs have "fallen a bit too far" noting that returns for life insurers and pension funds have fallen significantly, negatively impacting consumer sentiment.

In FX, the Yen was steady with the Bloomberg dollar index while the euro and pound saw weekly gains after the biggest drop for the dollar in a month. In Asia, the Aussie was 0.1% higher, while the CNY gained notably after the RRR Cut announcement.

In commodities, WTI crude steady near $56.37; while brent oil futures were little changed at $60.97 per barrel. Brent had climbed to a one-month peak of $62.40 per barrel on Thursday after data showed U.S. crude stockpiles decline and the news about U.S.-China trade talks. Gold retreated after reaching a 2019 high earlier in the week. Meanwhile, Hurricane Dorian threatens to hit cotton, tobacco, hemp and corn in the U.S. Southeast.

In other overnight news, Fitch downgraded Hong Kong’s rating to ‘AA’ from ‘AA+’ and kept the outlook negative due to protests related to the extradition bill. Fitch said in a statement that months of persistent conflict and violence are testing the perimeters and pliability of the "one country, two systems" framework that governs Hong Kong’s relationship with China.

With a barrage of news in the rearview mirror, the closely watched U.S. non-farm payrolls report due at 830 am is expected to show 160,000 jobs were added in August and the unemployment rate was unchanged at 3.7% (see our full preview here). Surveys on Thursday had suggested the U.S. may be in better shape than investors have been fearing. Services activity accelerated in August and private employers increased hiring more than expected. Despite the reassuring signs, bond markets still expect the Federal Reserve to cut U.S interest rates this month and a total of 55 basis points of cuts by the end of the year.

In terms to what the market wants from today’s payroll, DB's Jim Reid notes that it’s hard to know where the ‘risk-friendly’ number lies. With all the concerns about the economy in recent weeks, we’re probably still in a period where good is good for risk, even if it will price out the more extreme central bank action. This week we’ve already seen markets respond negatively to a weak ISM manufacturing and then positively to strong ISM non-manufacturing yesterday. So it appears that we’re treating data on its merit again. DB economists expect a below consensus NFP print of 140k, partly reflecting a one-tenth increase in average weekly hours. DB also notes that headline and private payrolls have missed the consensus forecast in four of the last five August numbers with the median miss being 38k. For wages, they expect average hourly earnings to have increased +0.3% mom, which is in-line with the market although the risk is that the annual rate rounds down to +3.0% yoy. The unemployment rate is expected to hold steady at 3.7%.

 

“The strong U.S. data are the main part of the latest turn in markets as they are key factors impacting equities and U.S. yields, therefore determining how long this ‘risk on’ phase will last,” said Junichi Ishikawa, senior FX strategist at IG Securities in Tokyo. The August payrolls report “will get more attention than usual as it could further fuel the risk-on phase, which in turn would boost the dollar,” Ishikawa said.

Also on deck today, Powell is slated to speak on the economic outlook at an event in Zurich at 12:30pm ET. "While this has been some positive economic data, it makes it a little more difficult for the Fed to cut rates," Kristina Hooper, chief global market strategist at Invesco, told Bloomberg TV. "I suspect what we will hear from Powell is a very tepid commentary on the Fed’s ability to provide monetary policy accommodation."

A reminder that the Fed's media blackout period kicks in at the weekend so it’s a last opportunity for the Fed and Powell to get a message across, if they want to. Consensus expects Powell’s comments to largely mirror his Jackson Hole speech which was broadly dovish in acknowledging the argument for future policy accommodation but not pre-committing to any specific policy actions.

Top Overnight News

  • Boris Johnson’s opponents are seeking ways to outmaneuver him on Brexit. Their latest idea is to hold a U.K. election in late October
  • The Bank of England will start topping up its 10 billion-pound ($12 billion) corporate-bond holdings next week, providing a test of its ability to support credit markets just weeks before a potential no-deal Brexit.
  • German industrial production unexpectedly declined further in July as trade tensions and waning business confidence continued to weigh on global demand.
  • Mario Draghi is expected to go big in a final stimulus push as European Central Bank president, overriding protests from among his ranks that tools such as bond purchases aren’t yet needed.
  • The EU still doesn’t know whether Boris Johnson is bluffing when he says he wants to leave the bloc with a deal, according to officials close to the Brexit negotiations
  • Mario Draghi is expected to go big in a final stimulus push as European Central Bank president, overriding protests from among his ranks that tools such as bond purchases aren’t yet needed.
  • After August’s historic drop, it was starting to seem like Treasury yields could only fall. And then came Thursday, when an enormous surge reminded bulls the world’s biggest bond market isn’t a one-way street
  • Fitch Ratings downgraded Hong Kong as an issuer of long-term, foreign currency debt for the first time since 1995, saying that recent political turmoil raises doubts about its governance
  • Oil is heading for the biggest weekly advance since mid-July as American crude stockpiles shrunk more than forecast, while U.S.-China trade talks look set to continue in Washington next month

Market Snapshot

  • S&P 500 futures up 0.2% to 2,978.50
  • STOXX Europe 600 down 0.04% to 385.78
  • MXAP up 0.5% to 156.04
  • MXAPJ up 0.6% to 506.49
  • Nikkei up 0.5% to 21,199.57
  • Topix up 0.2% to 1,537.10
  • Hang Seng Index up 0.7% to 26,690.76
  • Shanghai Composite up 0.5% to 2,999.60
  • Sensex up 0.8% to 36,937.75
  • Australia S&P/ASX 200 up 0.5% to 6,647.33
  • Kospi up 0.2% to 2,009.13
  • Brent Futures down 0.03% to $60.93/bbl
  • Gold spot down 0.7% to $1,507.92
  • U.S. Dollar Index down 0.02% to 98.39
  • German 10Y yield fell 0.2 bps to -0.596%
  • Euro up 0.06% to $1.1042
  • Brent Futures down 0.03% to $60.93/bbl
  • Italian 10Y yield rose 13.2 bps to 0.604%
  • Spanish 10Y yield fell 3.2 bps to 0.203%

Asian equity markets traded higher after sustaining the momentum from Wall St. where all major indices rallied and the S&P 500 notched a 1-month high amid US-China trade hopes, while better than expected ISM Non-Manufacturing and ADP jobs data ahead of today's NFP report added to the optimism. ASX 200 (+0.5%) and Nikkei 225 (+0.5%) were higher with the gains in Australia led by tech following similar outperformance of the trade-sensitive sector stateside and with the JPY-risk dynamic at play in Tokyo. Hang Seng (+0.7%) and Shanghai Comp. (+0.5%) conformed to the global optimism although gains in the region were somewhat capped ahead of the key US jobs data and after a mostly inactive PBoC this week resulted to a net weekly liquidity drain of CNY 100bln. Finally, 10yr JGBs were lower following the extended its slide below 155.00 after-hours yesterday as the heightened risk appetite triggered declines across global bonds. However, downside has since been stemmed on selling fatigue and with the BoJ present in the market for over JPY 1.2tln of JGBs heavily concentrated on 1yr-10yr maturities, while BoJ Governor Kuroda also reiterated that lowering rates further into negative territory is always an option and noted both 20yr and 30yr yields have declined a bit too far.

Top Asian News

  • Axiata, Telenor Call Off Talks on Forming Asian Mobile Giant
  • Bali Beaches, Thai Temples Go Quiet as Chinese Stay at Home
  • Bank Bonds Gain in India as Mergers Set to Boost Credit Profiles
  • Hong Kong ‘Will Be Done’ If China Deploys Troops, Jimmy Lai Says

Major European bourses are flat [Eurostoxx 50 +0.1%] after the region saw a tentative open ahead of today’s key risk events (US Jobs data, Fed Chair Powell to speak on economic outlook and monetary policy). Bourses experienced some short-lived upside upon the PBoC’s announcement of its 50bps RRR cut effective Sep 16th. Further RRR cuts will be implemented on some banks in two phases of 50bps each on October 15th and November 15th. The PBoC estimates a release of CNY 900bln in liquidity.  Sectors are mixed with marginal outperformance in consumer discretionary names whilst utilities lag. Looking at individual movers Telenor (-4.3%) are subdued after the Co. and Axiata agreed to end discussions regarding a non-cash combination of their telecom infrastructures. Meanwhile Sodexo (-3.7%) is just below on the Stoxx 600 on the back of a broker move. On the flip side, Thyssenkrupp (+2.2%) share continues its ascent amid constructive comments from Kone (+2.0%) regarding the former’s elevator unit, with indicative bids for this unit to be submitted by Wednesday.

Top European News

  • Markets Are Expecting Too Much From the ECB, Constancio Says
  • Aviva Chairman to Lead U.K. Finance Lobby’s Advisory Council

In FX, pre-NFP caution and consolidation has curtailed the Dollar’s recovery, with the index churning within a tight 98.309-463 range just shy of Thursday’s post-ADP and non-manufacturing ISM high (98.538). In terms of Friday’s fundamental drivers, the data spotlight falls on US jobs ahead of Fed chair Powell ahead of the September FOMC and pre-policy meeting purdah, but from a technical perspective the DXY is delicately placed between 10 and 20 DMAs at 98.480 and 98.210 respectively.

  • NZD/AUD/CAD - In keeping with this week’s evolving and improving risk tone, supplemented by 50-100 BP PBoC RRR cuts, high beta and more sensitive to overall sentiment G10 currencies have forged further gains, with Nzd/Usd managing to clamber back above 0.6400 and overtaking Aud/Usd in the process as the cross fades after several 1.0700+ forays. However, the Aussie has formed a firmer footing vs its US counterpart and nibbled through buy-stops between 0.6830-35 alongside a more pronounced bounce in the Yuan (Usd/Cnh eyeing 7.1100 compared to highs not far from 7.2000 recently). Meanwhile, Usd/Cad has slipped back to test 1.3200 after comments from BoC’s Schembri basically underscored Wednesday’s rates appropriate for now guidance, albeit adding more emphasis on weak commodity prices and not ruling out NIRP in extreme circumstances. Next up for the Loonie, Canadian labour data alongside US NFP, and then IVEY PMI after this week’s sub-50 Markit manufacturing print.
  • EUR - The single currency is holding rock steady against the Greenback between 1.1030-50 and may not venture much further ahead of the aforementioned US labour report, or after given hefty option expiry interest at 1.1045-55 (1.8 bn) and Fib resistance near the middle of that band (1.1049).
  • JPY/GBP/CHF - All on the back foot, with the Yen pivoting 107.00 and wary of decent expiries between the big figure and 107.05 (1.7 bn), but cushioned by bids reportedly layered from 107.10 to 107.20 ahead of corporate supply at 107.50. Elsewhere, Sterling has been more volatile amidst the ongoing UK political and Brexit uncertainty, with Cable waning ahead of 1.2350 and losing grip of the 1.2300 handle again before gleaning some traction on the High Court’s ruling that PM Johnson’s Parliament suspension is not unlawful. Conversely, the Franc is underperforming around 0.9900 and under 1.0900 vs the Euro after reiterations from SNB head Jordan that sub-zero Swiss interest rates are still required, and in advance of another scheduled appearance by the chief alongside his US peer.
  • EM - Try aside, regional currencies are revelling in the stronger appetite for risk, and the Rub is now exception even though the CBR is widely expected to lower rates by 25 bp shortly.

In commodities, WTI and Brent crude futures are lower on the day thus far, as is usually the case on US jobs report day, with participants also awaiting Fed Chair Powell’s speech on economic outlook and monetary policy. WTI futures reside under the 55.50/bbl mark after it failed to convincingly breach its 100 DMA to the upside yesterday whilst today breaching both its 50 and 200 DMAs to the downside (both at 56.15/bbl). Meanwhile, Brent futures trade below 60.00/bbl at time of writing. In terms of weekly performance, both energy benchmarks were swayed by the flip-flop in risk sentiment over the week, WTI futures fluctuated in-between its 50 WMA (57.63/bbl) and 200 WMA (53.25/bbl), whilst its Brent counterpart printed a weekly range of 57.26-60.90/bbl for now. Elsewhere, gold prices remain on the backfoot despite a weaker Buck as the recent bout of risk appetite (driven by US/China trade hopes and better-than-forecast ISM N-manufacturing) took the yellow metal closer to the 1500/oz mark (vs. weekly high at 1557/oz). Meanwhile, as it stands, copper is poised to end the week on a more positive note as prices remain above the 2.60/lb level (vs. sub-2.50/lb low). Finally, nickel ore prices saw a correction of around 3.0% amid supply glut concerns followings its recent rally with downside attributed to Indonesia stated that nickel miners can apply for new export quotas for the rest of the year in addition to their already approved quotas.

US Event Calendar

  • 8:30am: Change in Nonfarm Payrolls, est. 160,000, prior 164,000
    • Unemployment Rate, est. 3.7%, prior 3.7%
    • Average Hourly Earnings MoM, est. 0.3%, prior 0.3%
    • Average Hourly Earnings YoY, est. 3.0%, prior 3.2%
    • Average Weekly Hours All Employees, est. 34.4, prior 34.3
    • Labor Force Participation Rate, prior 63.0%
    • Underemployment Rate, prior 7.0%
  • 12:30pm: Powell Speaks in Zurich on Economic Outlook

DB's Jim Reid concludes the overnight wrap

15 years ago today, I met my current long-term partner after breaking up with my previous partner of 9 years - my first relationship. Having never been with anyone else, I didn’t really know what to expect. Was it love at first sight? I wouldn’t say so but love has subsequently blossomed. I’ve no idea if they’ve ever wanted to divorce me but probably best I don’t know. There have been rows, tensions and disagreements but over the years a great mutual respect has developed. Yes, on September 6th 2004 I joined DB and to a great bunch of people in research. The previous week, I’d climbed Kilimanjaro at the end of my gardening leave, so the last 15 years have been pretty straightforward relative to that.

After one of the biggest bond routs yesterday for years in some cases, it’s amusing to reflect that when I started at DB, 10yr yields in the US, Germany and the UK were all comfortably above 4%. Will I see such yields in my career again? Anyway, today’s payrolls report comes at a fascinating time given yesterday’s move. 10y and 2y Treasury yields rose +9.8bps (a further +1bps this morning) and +10.2bps (a further +0.5bps) – both the sharpest sell-offs since January 4. Europe saw similar moves. In fact, 30y Bunds (+14.2bps) had their sharpest sell-off in 4 years and even briefly turned positive again having touched a low of -0.311% as recently as August 16. In the end, 10y Bunds rose +8.1bps and back to the gravity-defying heights of -0.594% while BTPs were up +13.5bps. The bond moves helped US and European Banks to rally +2.46% and +3.35%, respectively.

Firmer data and the positive trade war news we mentioned yesterday appeared to cause the mini-shockwave through the bond market. As we’ve also been highlighting this week, it’s been a bumper few days for US IG supply with $74bn of issuance so far since Monday already eclipsing the previous weekly record of $66bn in September 2013. There was also some attention paid to a WSJ article from chief economic correspondent Nick Timiraos, who has developed a reputation for being well connected to the Fed. The article said that “the idea of an aggressive half-point cut to battle the slowdown hasn’t gained much support inside the central bank,”. This helped spark a sell-off in fed funds futures with implied odds of 12% for the larger 50bps cut this month, down from 30% on Wednesday. Through year-end, there are now 60bps of cuts priced, down -7.5bps yesterday.

In terms to what the market wants from today’s payroll, it’s hard to know where the ‘risk-friendly’ number lies. With all the concerns about the economy in recent weeks, we’re probably still in a period where good is good for risk, even if it will price out the more extreme central bank action. This week we’ve already seen markets respond negatively to a weak ISM manufacturing and then positively to strong ISM non-manufacturing yesterday. So it appears that we’re treating data on its merit again. The consensus expects a 160k reading, which is broadly in line with last month’s 164k reading. Our economists are, however, below consensus at 140k, partly reflecting a one-tenth increase in average weekly hours. Our colleagues also make the point that headline and private payrolls have missed the consensus forecast in four of the last five August numbers with the median miss being 38k. For wages, they expect average hourly earnings to have increased +0.3% mom, which is in-line with the market although the risk is that the annual rate rounds down to +3.0% yoy. The unemployment rate is expected to hold steady at 3.7%.

If the data fails to provide much direction, then there’s always Fed Chair Powell speaking at 5.30pm BST/12.30pm EST in Zurich at a SNB event. A reminder that the media blackout period kicks in at the weekend so it’s a last opportunity for the Fed and Powell to get a message across, if they want to. Our colleagues expect Powell’s comments to largely mirror his Jackson Hole speech which was broadly dovish in acknowledging the argument for future policy accommodation but not pre-committing to any specific policy actions.

Risk assets go into these two big events on the back of a decent two-day rally with a +1.30% return for the S&P 500 yesterday putting it back to within 1.65% of the all-time highs. That’s also now six positive days out of the last eight. The DOW (+1.41%) and NASDAQ (+1.75%) also had strong days while in credit US HY spreads finished -13bps tighter. The incrementally positive news about trade including the announcement from Chinese Vice Premier Liu He (from the Asian session yesterday) about agreeing to a visit in early October was a driver, as was the data.

The headline news though was the better-than-expected ISM non-manufacturing where the August reading bounced +2.7pts to 56.4 (vs. 54.0 expected). New orders (60.3 vs. 54.1) were a big driver; however, it didn’t go unnoticed that the employment component slid over 3pts to 53.1 and to the lowest level since December 2017. That was somewhat countered by a strong ADP reading where the August print of 195k bettered expectations for 148k even though revisions subtracted -14k from July’s figure. An interesting divergence also opened between the ISM manufacturing employment index and manufacturing hiring in ADP. Historically these two series have been fairly well correlated.

Asian markets are following Wall Street’s lead this morning with the Nikkei (+0.60%), Hang Seng (+0.64%), Shanghai Comp (+0.16%) and Kospi (+0.17%) all up. Futures on the S&P 500 are +0.22% higher while spot gold prices are down -0.30% to 1514.50/ troy ounce. 10y JGB yields have tracked up +2.1bps this morning to -0.253%. As for overnight data releases, Japan’s July household spending came in line with consensus at +0.8% yoy, marking the 8th straight increase and the longest streak on record in comparable data dating back to 2000, as consumer spending remains elevated ahead of the planned October sales tax hike. Real labour cash earnings surprised on the downside though with the reading at -0.9% yoy (vs. -0.7% yoy expected).

In other overnight news, Fitch have downgraded Hong Kong’s rating to ‘AA’ from ‘AA+’ and kept the outlook negative due to protests related to the extradition bill. Fitch said in a statement that months of persistent conflict and violence are testing the perimeters and pliability of the "one country, two systems" framework that governs Hong Kong’s relationship with China.

In terms of Brexit developments yesterday, there were none really. All eyes will be on Monday when Mr Johnson will try to get an election vote through and all depends on whether the Labour and/or SNP party support it. Overnight, Bloomberg and other news outlets have reported that Labour’s Corbyn is in talks with the SNP’s leadership over pushing for a delay with their preference being October 29th and thus trying to force Mr Johnson to go to Brussels, against his will, to ask for an extension. I’m sure they’ll be lots of rumours in the weekend papers.

As for the rest of the US data yesterday, jobless claims remained low at 217k and are still yet to show any signs of meaningful deterioration. The services PMI was revised down 0.2pts to 50.7 while nonfarm productivity and unit labour costs were revised up one-tenth and two-tenths, respectively, to 2.3% and 2.6% for Q2. Elsewhere, factory orders were reported as rising a slightly better-than-expected +1.4% mom in July while core capital goods orders were revised down two-tenths to +0.2% mom.

In Europe the only data of note was the volatile factory orders series in Germany, where orders were reported as falling -2.7% mom in July (vs. -1.4% expected). That didn’t stop the STOXX 600 from climbing +0.72%.

Onto the day ahead, where the obvious focus is the US employment report this afternoon. Prior to that we’ll get July industrial production and Q2 labour costs data in Germany this morning along with the July trade balance in France. Not long afternoon we’ll get the final Q2 GDP revisions for the Euro Area where the last estimate pegged growth at +0.2% qoq. The other potentially important event for markets is Powell’s speech tonight in Zurich.

Published:9/6/2019 7:00:02 AM
[Markets] Bayer Woes Deepen As Germany To Ban Glyphosate Weedkiller By 2023

Authored by Andrea Germanos via CommonDreams.org,

The German government announced Wednesday it had agreed on a plan to phase out the use of glyphosate — the key chemical in the weedkiller Roundup — with a total ban set to begin by the end of 2023.

"Way to go, Germany!" tweeted the U.S.-based advocacy group Organic Consumers Association. Chancellor Angela Merkel's cabinet agreed to the plan Wednesday. The proposal, reported Bloomberg, also says that the "government intends to oppose any request for the E.U. to renew the license to produce the weedkiller, according to a release by the environment ministry."

AFP file photo

The European Commission, the E.U.'s rules and regulations body, in 2017 renewed the license for glyphosate in the bloc through the end of 2022.

Germany's environment Minister, Svenja Schulze, framed the new move as necessary to protect biodiversity, and said that "a world without insects is not worth living in".

"What harms insects also harms people," Schulze said at a press conference. "What we need is more humming and buzzing."

Glyphosate is no longer exclusive to Monsanto's Roundup, as it "is now off-patent and marketed worldwide by dozens of other chemical groups including Dow Agrosciences and Germany's BASF," as Reuters noted

That's despite the World Health Organization's International Agency for Research on Cancer's 2015 designation of glyphosate as a "probable carcinogen," increasing concerns over its health effects, and mounting legal woes for Bayer, which acquiredMonsanto last year, as multiple juries have found Roundup to have been a factor in plaintiffs' cancers.

Protesters hold balloons on January 20, 2018 in Berlin during a demonstration under the slogan "We are fed up" against agricultural politics and the use of glyphosate, dumping exports and for sustainable agriculture. (Photo: Tobias Schwarz/AFP/Getty Images).

Such concerns prompted Austria to become the first E.U. country to ban glyphosate, a step it took in July.

Erwin Preiner, a member of the Austrian parliament who worked on the ban, said at the time, "We want to be a role model for other countries in the E.U. and the world."

Published:9/6/2019 1:32:56 AM
[Markets] Dow Jones Futures: After Big Stock Market Rally, Lululemon, CrowdStrike, Zoom Video, DocuSign, PagerDuty Are Earnings Movers Dow Jones futures: After a bullish stock market rally Thursday, Lululemon, CrowdStrike and Zoom Video topped views. Lululemon stock signaled a breakout. Published:9/5/2019 4:57:17 PM
[Markets] Dow closes up over 370 points on rising trade optimism Dow closes up over 370 points on rising trade optimism Published:9/5/2019 3:26:18 PM
[Markets] Dow Jones Charges 400 Points Higher As These 5 Key Stocks Build Bases Easing trade war concerns fueled powerful moves in the stock market today, sending the Dow Jones Industrial Average and Nasdaq up more than 1.5% each. Published:9/5/2019 2:25:59 PM
[Markets] Dow's 386-point rally led by gains in shares of Caterpillar, IBM The Dow Jones Industrial Average is rallying Thursday afternoon with shares of Caterpillar and IBM seeing positive momentum for the index. The Dow (DJIA) is trading 386 points, or 1.5%, higher, as shares of Caterpillar (CAT) and IBM (IBM) have contributed to the index's intraday rally. Caterpillar's shares have gained $4.00 (3.4%) while those of IBM have gained $4.56, or 3.4%, combining for an approximately 58-point bump for the Dow. Published:9/5/2019 1:26:10 PM
[Markets] Dow's 450-point rally highlighted by gains in Caterpillar, Intel shares DOW UPDATE Behind positive gains for shares of Caterpillar and Intel, the Dow Jones Industrial Average is rallying Thursday morning. The Dow (DJIA) was most recently trading 455 points, or 1.7%, higher, as shares of Caterpillar (CAT) and Intel (INTC) have contributed to the blue-chip gauge's intraday rally. Published:9/5/2019 9:59:32 AM
[Markets] Just one component in the red as Dow surges 300 points early Thursday Just one component in the red as Dow surges 300 points early Thursday Published:9/5/2019 8:57:14 AM
[Markets] Dow Jones Futures Jump On China Trade Talks; Stock Market Set To Clear Resistance Dow Jones futures rose as Beijing said new China trade talks will take place in early October. The stock market rally is set to clear its recent range. Published:9/4/2019 9:22:29 PM
[Markets] Futures Soar, Yields Jump After China, US Agree To Resume Trade Talks In October

S&P futures surged and 10Y yields jumped after China's CCTV reported that its top trade negotiators will travel to Washington in early October for talks with U.S. counterparts, to resume negotiations to resolve their trade war. The decision came following an early Thursday phone call Beijing time between Chinese Vice-Premier Liu He and the USTR Robert Lighthizer and Treasury Secretary Steven Mnuchin, according to a statement from China’s commerce ministry.

Other Chinese officials, including Commerce Minister Zhong Shan, central bank governor Yi Gang and Ning Jizhe, the deputy head of the National Development and Reform Commission, also joined the phone call, CCTV reported.

In the lead up to the talks, lower-level officials will have "serious" discussions this month to prepare for the talks, which incidentally were expected to begin in September.

However, for headline scanning algos, October appears to be more bullish than September as equity futures went vertical on the news, spike the Emini by 26 points to 2,965, just 2% away from all time highs, and the Dow was some 250 point higher.

Treasury yields spiked as well, with the 30Y US Treasury rising back over 2.00%

Meanwhile, the offshore Chinese yuan jumped as low as 7.12, its highest level since last week's sharp drop on the escalation in tariffs...

... while gold slumped even though the dollar barely budged on the news.

So is this just more posturing by both sides, when both Washington and Beijing know very well that a real deal is impossible? The answer is most likely yes, although the CCTV report said both sides agreed to make concrete efforts to create positive conditions to continue dialogue.

That said, prepare for more deja vu disappointment: after their previous phone call, Donald Trump said the two sides would meet in September. Instead, since then, both countries have increased tariffs on imports of each other’s products, and China has said it would not make concessions because of US pressure.

Published:9/4/2019 9:22:28 PM
[Markets] Dow Jones Futures Rise As Stock Market Nears Key Test; Big Software Moves On Earnings Dow Jones futures: A new stock market rally pushed the S&P; 500 to just below its 50-day. Slack plunged late on weak guidance, while Palo Alto Networks erased big after-hours losses. Published:9/4/2019 7:56:15 PM
[Markets] As China Settles In For A Long Trade War, Economic Pressure On Trump Continues To Grow

Authored by Michael Snyder via The Economic Collapse blog,

The trade war between the United States and China is increasingly weighing on the global economy, but unfortunately it does not appear that it will end any time soon.  Many pundits in the U.S. originally believed that the trade war would be short because the economic pain would be too much for the Chinese to handle.  But the truth is that the Chinese are not nearly as motivated by short-term concerns as we are.  They have always been long-term planners, and they are not afraid to set goals that may take multiple generations to achieve.  So they are not going to allow an angry American president that may be voted out of office by the end of next year to greatly alter their long-term economic strategies.

If an acceptable agreement could have been reached with Trump, the Chinese would have jumped at that opportunity.  But right now the two sides are so far apart that they are basically not even on the same playing field, and any additional “negotiations” are not going to change that.  However, the Chinese are likely to try to keep talks with the Trump administration alive in an attempt to prevent the trade war from escalating even more.  In essence, the Chinese are trying to minimize the damage while running out the clock on the Trump presidency.

So for China, this trade war has become an exercise in endurance, and this is something that a Fox Business article recently discussed…

Researchers from Deutsche Bank wrote a note over the weekend, explaining how they believe China appears to have shifted its strategy from a focus on “resolution to one of endurance.”

“We think China is neither aiming to quickly reach a trade deal, nor trying to hit back at the U.S. as hard as it can,” Deutsche Bank China Economist Yi Xiong wrote in a report. “Rather, China seems to have internalized the trade war as a given fact, and is trying to preserve China’s economic resilience under rising tariffs.”

Here in the U.S., we have become quite accustomed to sacrificing our long-term prosperity in order to avoid short-term pain, but the Chinese are simply not going to do that in this case.

Instead, they are going to work extremely hard to do what they can to bolster the Chinese economy internally while they wait for a more “reasonable” U.S. president to get elected.  The following comes from the South China Morning Post

China will “enhance countercyclical measures in macroeconomic policies … to ensure sufficient liquidity and reasonable growth in credit,” according to a statement by the government’s Financial Stability and Development Commission on Sunday. The wording marked a subtle change from previous policy statements that called only for “appropriate” fine-tuning of monetary policy.

The statement did not mention the trade war with the US, but included specific guidelines on what China should do to manage its economy in the coming months. It urged financial institutions to help sell local government special bonds, with proceeds to be used for government-backed investment projects, while it also told local authorities to “fully tap investment potential”.

Unlike Chinese officials, President Trump has an upcoming election that he must deal with, and the longer this trade war persists the worse his re-election chances are going to become.

As I detailed yesterday, signs of economic trouble are erupting all around us, and the pain from this trade war is only going to become more intense as each new month passes.

So Trump is going to become increasingly desperate to get China to come to an agreement, and that may lead to some very rash decisions.  For example, it is being reported that he “wanted to double tariff rates on Chinese goods” after the Chinese responded to recent U.S. tariffs by imposing some of their own…

President Donald Trump wanted to double tariff rates on Chinese goods last month after Beijing’s latest retaliation in a boiling trade war before settling on a smaller increase, three sources told CNBC.

The president was outraged after he learned Aug. 23 that China had formalized plans to slap duties on $75 billion in U.S. products in response to new tariffs from Washington on Sept. 1. His initial reaction, communicated to aides on a White House trade call held that day, was to suggest doubling existing tariffs, according to three people briefed on the matter.

Unfortunately for Trump, no amount of pressure is going to get the Chinese to budge.

Yes, the Chinese will “talk” to U.S. officials as a delaying tactic, but they have already decided that they will never accept the sort of deal that Trump wants.

Meanwhile, our economic numbers just continue to deteriorate.  On Tuesday, we learned that a key measure of U.S. manufacturing just fell to the lowest level in three years

A key U.S. factory gauge unexpectedly contracted for the first time since 2016, sending stocks and bond yields lower and boosting expectations for interest-rate cuts as global manufacturing woes deepen.

The Institute for Supply Management’s purchasing managers index fell to 49.1 in August, weaker than all forecasts in a Bloomberg survey of economists, data released Tuesday showed. Figures below 50 indicate the manufacturing economy is generally shrinking. The group’s gauge of new orders dropped to a more than seven-year low, while the production index hit the lowest since late 2015.

In response to that number and more troubling news about the trade war, U.S. stocks were sharply down

Stocks fell on Tuesday, the first trading day of a historically tough month, after the world’s two largest economies began imposing new tariffs on each other’s goods. Weak manufacturing data also dented investor sentiment.

The Dow Jones Industrial Average closed 285.26 points lower, or 1.1%, at 26,118.02. The S&P 500 lost 0.7% to end the day at 2,906.27 while the Nasdaq Composite pulled back 1.1% to 7,874.16.

We have reached an absolutely critical moment in modern American history.  The largest financial bubble in our entire history is on the verge of bursting, and many believe that we could be on the precipice of an economic downturn even worse than what we experienced in 2008 and 2009.

A trade deal with China would greatly help the short-term outlook, but the Chinese are not willing to give Trump what he desires.  So the only way one will happen is if President Trump completely caves in, but I don’t see that happening.

That means that a tremendous amount of pain is ahead, and the American people are completely unprepared for that.

Published:9/4/2019 6:21:29 PM
[Markets] Dow Jones Futures: Stock Market Rally Nears Key Test; Slack, Palo Alto Networks, MongoDB, Smartsheet, Cloudera Earnings Late Dow Jones futures: A new stock market rally pushed the S&P; 500 to just below its 50-day. Slack plunged late on weak guidance, while Palo Alto Networks erased big after-hours losses. Published:9/4/2019 4:50:18 PM
[Markets] Traders Buy Everything As Uber-Dovish FedSpeak Sparks Dollar Dump

While Lam's promises started the optimism, and China PMI improved marginally, and another BoJo defeat helped sentiment...

The market held the overnight gains as a procession of Fed Speakers all toed the narrative line that rate-cuts are coming and The Fed needs to watch the world when it decides on policy...

Williams (Dovish): "Ready to act as appropriate", July cut was right move, economy mixed (admitted consumer spending not a leading indicator), international news matters, low inflation biggest problem.

Kaplan (Dovish): "Monetary policy a potent force", worried about yield curve inversion, economy mixed (factories weak due to trade, consumer strong), watching for "psychological effects" on consumers, "if you wait for consumer weakness, it might be too late."

Kashkari (Dovish): Tariffs, "trade war are really concerning business", job market not overheating, slower global growth will impact US, most concerned about inverted yield curve. Fed's policy is "moderately contractionary."

Bullard/Bowman (Looked Dovish): Took part in "Fed Listens" conference but made no comment on policy but then again when has Jim Bullard ever not been dovish.

Beige Book (Mixed): Moderate expansion but trade fears are mounting, but optimism remains, despite what Kashkari says: "although concerns regarding tariffs and trade policy uncertainty continued, the majority of businesses remained optimistic about the near-term outlook"

Evans (Dovish): Trade policy increases uncertainty and immigration restrictions lower trend growth to 1.5%, Auto industry especially challenged

And the market is now pricing in a stunning 124bps of cuts through the end of 2020...

Source: Bloomberg

With an increasing number of traders betting on US rates going negative before the end of 2021...

Source: Bloomberg

China ramped in the afternoon session...

Source: Bloomberg

Hong Kong stocks exploded around 4% higher - best day since Nov 2018...

Source: Bloomberg

Europe opened exuberantly...and clung to those gains...

Source: Bloomberg

US equities were all higher on the day, with Nasdaq and S&P erasing yesterday's losses but Small Caps are the biggest laggards...

NOTE - Dow and Transports were desperately lifted again and again to try and get green on the week, but failed.

It is clear that US equities are only supported by The Fed now as a trade deal is almost entirely priced out...

Source: Bloomberg

Futures ramped overnight - filling the gap from Sunday night's open - then making lower highs for the rest of the day...

 

Most Shorted stocks massively squeezed at the open and ramped after Europe closed to get back to unch on the week...

Source: Bloomberg

 

As sextuple top for the S&P...

 

Treasury yields were mixed today with the long-end underperforming (30Y +2bps) and back higher on the week, while the short-end compressed around 2bps on the day...

Source: Bloomberg

30Y Yields tested 2.00% once again but, once again, quickly caught a bid (despite heavy rate-lock buying on the back of massive issuance)...

Source: Bloomberg

The yield curve remains dramatically inverted...

Source: Bloomberg

The dollar index plunged today - 2nd biggest drop in 2019...

Source: Bloomberg

Yuan surged for the second day, back up to last Friday's highs...

Source: Bloomberg

Cryptos faded overnight but were bid during the US day session...

Source: Bloomberg

 

Commodities were all higher on the day

Source: Bloomberg

 

Gold futures jumped back above $1565...

And Silver outperformed again, spiking back above $19.50...

 

Oil surged manically higher today to tag $56.50 (from $54) after U.S. announced plans to intensify sanctions on Iran and Russia said it would trim production in September.

But once the machines had tagged that $56.50 stop-run, oil started to tumble...

API reports inventories after the close tonight.

Gold in Yuan reversed early losses, bouncing off 10,000, despite the gains in yuan today...

Source: Bloomberg

Finally, some fun charts for your consideration.

CapEx is collapsing, Deutsche: “We are getting more and more worried about the impact of the trade war on capex spending”...

Global Manufacturing is a bloodbath...

And, as earnings expectations have collapsed this year, only global liquidity has saved stocks (but even that is diverging now)...

Source: Bloomberg

And doesn't look likely to improve anytime soon...

Published:9/4/2019 3:23:14 PM
[Markets] Dow ends up over 200 points as fears of conflict in Hong Kong recede Dow ends up over 200 points as fears of conflict in Hong Kong recede Published:9/4/2019 3:23:14 PM
[Markets] Trump Says Dow "Would Be 10,000 Points Higher" If He Caved On Trade

Just days after raising tariffs on some Chinese goods, President Trump insisted during a brief chat with a group of reporters in the Oval Office that the stock market would be trading at all-time highs well above any previous level - and that the Dow would be 10,000 points higher - if only he had not decided to press on with the trade war against China.

However, Trump insisted that "somebody had to do this" and there would be long term benefits to the economy from stopping China from taking advantage of the US on trade.

Here's what he said.

"Let me tell you, if I wanted to do nothing with China, my stock market, our stock market, would be 10,000 points higher than it is right now. But somebody had to do this. To me, this is much more important than the economy," Trump said. "It was out of control and they were out of control."

Though the conclusion of trade tensions would likely send the market higher, it has held up surprisingly well considering that odds for a swift resolution to the trade conflict have fallen off a cliff as of late.

Source: Bloomberg

It almost seems as if the market has moved on to caring about something else...perhaps the Fed?

Then again, if stocks were to price in the 100bp-plus of rate-cuts that money markets are pricing in...then the Dow really could be 10,000 points higher.

Source: Bloomberg

Perhaps that's why Trump keeps hammering at Powell?

Published:9/4/2019 2:19:37 PM
[Markets] Dow Jones Rallies 1,002 Points Off Aug. 15 Low; These 7 Growth Stocks Are Forming New Bases More top-rated stocks in terms of earnings power and relative strength are forming bases as the Dow Jones has a bullish up day. Published:9/4/2019 12:49:39 PM
[Markets] Dow up 200 points at open as Hong Kong tension eases and China signals stimulus Dow up 200 points at open as Hong Kong tension eases and China signals stimulus Published:9/4/2019 9:18:42 AM
[Markets] Union Pacific cuts volume guidance after soft Q3 Union Pacific Corp. cut its outlook for second-half volumes, after the railroad operator said third-quarter volumes were softer than anticipated. The stock gained 0.4% in morning trading Wednesday, after falling 1.6% on Tuesday. Chief Financial Officer Robert Knight said at the Cowen and Company Global Transportation Conference, according to a transcript provided by FactSet, that after weaker-than-expected third-quarter volumes, "our thinking is that volume for the second half will now be down mid-single digits versus 2018." In July, Knight had said that his "best thinking at this point" is that second-half volume will be down around 2% or so versus 2018. Knight said Wednesday, however, that he remained confident that "the dollars we yield from our pricing initiatives will again well exceed our rail inflation costs in 2019." As a result, with margins expected to improve in the second half of the year, Knight said previous guidance of a "sub-61% operating ratio" in 2019 remains intact. The stock has shed 6.1% over the past three months, while the Dow Jones Transportation Average is little changed and the Dow Jones Industrial Average has gained 3.9%. Published:9/4/2019 8:51:25 AM
[Markets] Dow's 200-point jump led by gains for Intel, United Technologies shares DOW UPDATE The Dow Jones Industrial Average is climbing Wednesday morning with shares of Intel and United Technologies seeing positive growth for the blue-chip average. Shares of Intel (INTC) and United Technologies (UTX) are contributing to the blue-chip gauge's intraday rally, as the Dow (DJIA) was most recently trading 204 points higher (0. Published:9/4/2019 8:51:25 AM
[Markets] Apple's stock paces premarket Dow advancers Apple's stock paces premarket Dow advancers Published:9/4/2019 8:18:33 AM
[Markets] Dow Jones Futures Signal Solid Stock Market Rally On Hong Kong News; Coupa Software Set To Break Out Dow Jones futures jumped Wednesday, signaling a stock market rally on Hong Kong and other news. Coupa Software stock soared to a buy zone. Published:9/4/2019 4:47:09 AM
[Markets] Dow finishes down over 280 points on weak manufacturing data Dow finishes down over 280 points on weak manufacturing data Published:9/3/2019 3:50:20 PM
[Markets] Stocks end lower as U.S.-China tariffs kick in, manufacturing data disappoints U.S. stocks kicked off September on a down note Tuesday as investors returned from a three-day weekend, with pressure attributed to the implementation of new tariffs by U.S. and China on each other as well as data that indicated the first contraction in manufacturing activity since 2016. The Dow Jones Industrial Average fell around 285 points, or 1.1%, to end near 26,118, according to preliminary figures, while the S&P 500 fell around 20 points, or 0.7%, to close near 2,906. The Nasdaq Composite ended near 7,874, off around 89 points, or 1.1%. Published:9/3/2019 3:14:13 PM
[Markets] Stocks Back Near Session Lows As Dow, Small Caps Drag Stock Market Lower Stocks were back near session lows in afternoon trading, as the Dow today struggled with losses from Boeing, Goldman Sachs, Caterpillar and Chevron. Published:9/3/2019 12:44:39 PM
[Markets] Dow off 400 points as Tuesday morning's stock-market decline steepens Dow off 400 points as Tuesday morning's stock-market decline steepens Published:9/3/2019 9:45:43 AM
[Markets] Boeing's stock falls to lead Dow's premarket losers after WSJ report of likely delay to 737 Max return Shares of Boeing Co. sank 2.4% in premarket trading Tuesday, to pace all of the Dow Jones Industrial Average's components in declines ahead of the open, after The Wall Street Journal reported over the weekend that friction between the aerospace giant and federal regulators could lengthen the grounding of Boeing's 737 Max fleet. The stock's implied price decline would shave about 58 points off the Dow's price, while Dow futures shed 198 points. The new delays reduce the likelihood that the 737 Max will return to service in time for the Christmas traveling season. Vertical Research Partners analyst Robert Stallard said sources in Europe aren't expecting a return to service until January "at the earliest." Boeing's stock has gained 12.9% year to date through Friday, while the Dow has advanced 13.2%. Published:9/3/2019 8:13:29 AM
[Markets] CNH Industrial's stock falls, after 'transformation' plan expected to lead to charges of up to $500 million Shares of CNH Industrial N.V. fell 2.7% in premarket trading Tuesday, after the maker of agricultural equipment and commercial vehicles announced a transformation plan that will lead to charges of between $450 million to $500 million through 2022. Of the total charges, the company expects $250 million to be in cash. The plan, aimed at reducing operating costs and increasing efficiencies, includes the separation of its "On-Highway" and "Off-Highway" businesses, which the company determined have "diverging regulatory and customer requirements" that are impacted differently by industry trends. CNH expects the spinoff of the "On-Highway" assets to maximize management focus and flexibility, while the "Off-Highway" company will be predominantly an agriculture company. The newly listed "On-Highway" company had 2018 pro forma industrial activities revenue of $13.1 billion, while the "Off-Highway" business had revenue of $15.6 billion. "Our clear assessment of the key megatrends, that are rapidly changing the business landscape, has led us to embrace this challenge and transform the company," said Chief Executive Hubertus Mühlhäuser. Separately, CNH said it is investing $250 million in Nikola Corp., which makes zero-emission heavy-duty trucks. CNH's stock has lost 14.4% over the past 12 months, while the Dow Jones Industrial Average has gained 1.7%. Published:9/3/2019 6:43:01 AM
[Markets] Dow Jones Futures Fall After Trump Tariffs Escalate China Trade War Dow Jones futures: New Trump tariffs escalated the China trade war, and the two sides can't agree on trade talks. Can the stock market rally? Can Apple, Microsoft, Starbucks clear bases? Published:9/2/2019 5:39:35 PM
[Markets] If The Debt Machine Was Turned Off, The US Would Immediately Plunge Into Horrifying Depression, New Study

Authored by Michael Snyder via The Economic Collapse blog,

A new study has discovered that we are far more dependent on America’s great debt creation machine than most of us would have ever dared to imagine.  Today, debt is involved in most of our major transactions.  In order to purchase a home, most of us go into debt.  The same thing is true when most of us buy a vehicle.  Total credit card debt is well over a trillion dollars, and total student loan debt is now over a trillion and a half dollars.  Corporate debt has more than doubled since the last financial crisis, state and local governments are absolutely drowning in debt and unfunded pension liabilities, and the federal government is more than 22 trillion dollars in debt.  The Federal Reserve and the “too big to fail” banks are at the core of this insidious debt-based system, and it has been systematically destroying the bright future that our children and our grandchildren were supposed to have.  But if we suddenly turned off America’s great debt creation machine at this point, our entire economic system would totally collapse because we have become so dependent on it. 

In fact, a study that was just conducted by Bloomberg discovered that “gross domestic product per capita would plunge into negative territory” if the ability to borrow was suddenly removed

The nation’s health as measured by gross domestic product per capita would plunge into negative territory without its dependence on borrowed money, according to data compiled by Bloomberg.

In fact, the U.S. would fall almost to the bottom of a ranking of 114 economies by GDP per capita. Only Italy, Greece and Japan would fare worse. That’s a seismic shift from America’s comfortable No. 5 spot on a list based on conventional measures.

Our massively inflated debt-fueled standard of living is completely and utterly dependent on the continual creation of more debt.

In essence, this study found that without debt we wouldn’t have much of an economy at all.  In fact, Bloomberg says that U.S. per capita income would collapse from $66,900 a year to “negative $4,857”

To get this somewhat dystopian measure, Bloomberg took each economy’s 2020 GDP as projected by the International Monetary Fund as a starting point. We then adjusted the number by removing the ability to borrow, while adding reserves to create an alternative wealth measure.

U.S. per capita income of $66,900 would be slashed to a negative $4,857 using this measure. That’s a total loss of almost $72,000 for every man, woman and child.

So the only thing keeping us from complete and total economic collapse is the fact that debt is flowing like wine.

But what would happen if some sort of major national crisis erupted someday and all of a sudden everyone was afraid to lend money?

That is something to think about, because such a scenario may be a whole lot closer than many people might think.

As it stands, we appear to be on the precipice of the worst economic downturn since the last financial crisis, and our trade war with China just went to an entirely new level as the month of September began

The biggest reason for last week’s torrid stock market rally was rekindled “optimism” that the escalating trade war between the US and China may be on the verge of another ceasefire following phone conversations, fake as they may have been, between the US and Chinese side. This translated into speculation that a new round of tariffs increases slated for this weekend may not take place or be delayed.

However, that did not happen, and with no trade deal in sight, at 12:00am on Sunday, the Trump administration slapped tariffs on $112 billion in Chinese imports, the latest escalation in a trade war that’s ground the global economy to a halt, sent Germany into a recession, and given the market an alibi to keep rising because, wait for it, “a trade deal is imminent.”

Only, it isn’t, and 1 minute later, at 12:01am EDT, China retaliated with higher tariffs being rolled out in stages on a total of about $75 billion of U.S. goods. The target list strikes at the heart of Trump’s political support – factories and farms across the Midwest and South at a time when the U.S. economy is showing signs of slowing down.

The Chinese knew that these tariffs were about to go into effect, and so they were ready and waiting to retaliate just one minute later.

Of course many U.S. companies will be hit extremely hard by these tariffs that the Trump administration just implemented.  The following comes from CNBC

That means that when an electronics company imports a TV, or a smart speaker, or a drone from China starting September 1, it will have to pay a 15% tax to the U.S. government.

Eventually, this will end up raising prices on gadgets and other products for people in the United States, said Bronwyn Flores, a spokeswoman for the Consumer Tech Association (CTA), a trade group that represents 2,000 different companies in the electronics industry, including brands like Apple and LG and retailers like Walmart and Best Buy.

Basically, people are not going to be able to buy as much stuff during the holiday shopping season, and overall economic activity will be slower than it otherwise would have been.

Meanwhile, President Trump continues to sound hopeful that trade talks with China will bear fruit

President Donald Trump said trade talks with Beijing are still planned for September after a new round of tariffs went into effect on Sunday.

“We are talking to China, the meetings in September, that hasn’t changed,” Trump told reporters Sunday on the White House South Lawn after returning from Camp David.

These sorts of comments helped stabilize the financial markets last week, but if there was any hope that a trade agreement was imminent we would not have seen both sides impose new tariffs on Sunday.

And now we are moving into the month that is traditionally the worst for Wall Street.  The following comes from Fox Business

Investors may breathe a sigh of relief that August, typically a volatile month for stocks, is over, but history shows that September could be even worse for Wall Street.

Since 1950, September has been the worst month for the S&P 500 Index, which has dropped, on average, 0.5% during the month, a phenomenon referred to as the September effect. According to Dow Jones market data, the average decline of the Dow Jones Industrial Average in September is 1%, while the Nasdaq Composite generally sees an average fall of 0.5%.

We shall see what this September brings.  Certainly things are really shaky on Wall Street right now, and any piece of really bad news is likely to set off another wave of panic.

Without a doubt, the market is more primed for a crash than it has been at any point since 2008, and it definitely will not take much to make this a “September to remember”...

Published:9/2/2019 4:08:19 PM
[Markets] These Were The Best And Worst Performing Assets In Rollercoaster August

For equity markets, August was the most violent month of 2019, with the S&P tumbling 2.6% or more on at least three occasions, the same as the number of instances when the Dow plunged almost 1000 points - the worst since Q4 of 2018 when the S&P briefly entered a bear market - only to rebound furiously after Mnuchin's infamous Christmas Eve phone call. Worse, in August the number of days when the S&P moved up or down by more than 1% was the highest since the February 2018 inverse VIX ETN implosion.

Which is why markets will be happy to see the back of August given how unpredictable the month has been on an almost day to day basis. Of course, as Deutsche Bank's Craig Nicol notes, trade war fatigue was a big factor as investors contended with noise versus signals. However economic data has continued to deteriorate in Germany and China in particular, while the inversion of the 2s10s Treasury curve heightened concerns about recession risk in the US.

One constant in August for markets however was the unstoppable rally for government bonds. Indeed last month saw the amount of negative yielding debt in the world touch a new all-time high above $17 trillion, as the majority of European countries saw their 10y yields hit new record lows with BTPs even closing below 1.00% for the first time ever.

Meanwhile 10y and 30y Treasury yields at one stage passed below 1.50% and 2.00% respectively, the latter for the first time ever. Unsurprisingly then its bonds which make up the majority of assets which delivered a positive total return in August. Indeed that was the case in local currency terms for Gilts (+3.8%), Treasuries (+3.6%), BTPs (+3.5%), EU Sovereigns (+2.5%), Bunds (+2.3%) and Spanish Bonds (+1.6%). The last time Bunds had a stronger month was June 2016 while for Treasuries you have to go all the way back to November 2008.

As Deutsche Bank further notes, the big rally in rates also helped investment grade credit to strong total returns last month. Indeed USD IG returned +3.3% while sub and senior financials returned +2.7% and +2.2% respectively. EUR IG on the other hand returned a more modest +0.7%. Wider spreads in HY limited returns with USD and EUR HY returning +0.4% and +0.6% respectively.

While credit and government bonds made up the bulk of the assets which delivered positive total returns last month, Silver (+13.0%) and Gold (+7.5%) actually occupied the top two spots on the returns leaderboard as precious metals benefited from the risk-off in equity markets. All-in-all, 18 out of 38 assets (excluding FX) in Deutsche Bank's asset scorecard that finished with a positive total return in local currency terms while 14 did so in dollar terms.

Unsurprisingly therefore it was equity markets which made up the bulk of those with negative returns. The Hang Seng (-7.1%) – roiled by the protests in Hong Kong – was bottom of the leaderboard while European Banks (-6.3%) struggled with the bond moves. All things considered, the decline for the S&P 500 (-1.6%) was fairly contained in the end especially considering it was down -4.5% just a few days into the month. The STOXX 600 returned -1.3% while EM equities were down a steeper -4.9%. It's worth noting that Italy's FTSE MIB (-0.4%) outperformed most other equity markets after political developments at month end in Italy helped to avoid snap elections.

In terms of where that leaves us year to date, there are still 36 out of 38 assets with a positive total return in both local currency and dollar terms. The two laggards are Copper (-3.7%) and now European Banks (-4.0%) following the move in August. Top of the leaderboard is the Greek Athex (+44.1%) which is a fair way ahead of the next equity market in Russia's MICEX (+22.0%). The S&P 500 and STOXX 600 have returned a solid +18.3% and +16.0% respectively.

Meanwhile, USD credit is up +10.5% to +15.3% with IG outperforming HY while EUR credit is up +6.4% to +10.2%. As for bonds, BTPs (+12.5%) lead the way while Treasuries and Bunds have returned +9.0% and +7.6% respectively. Finally in commodities, outside of the decline for Copper, Gold (+18.5%) and WTI Oil (+21.3%) have seen a big rally this year.

Published:9/2/2019 1:37:25 PM
[Markets] Dow Jones Futures Fall Sharply After Trump Tariffs Escalate China Trade War Dow Jones futures: New Trump tariffs escalated the China trade war, and the two sides can't agree on trade talks. Can the stock market rally? Can Apple, Microsoft, Starbucks clear bases? Published:9/2/2019 11:36:50 AM
[Markets] Dow Jones Futures Pare Losses; Beijing Vows To Support Growth After Trump Tariffs Escalate China Trade War Dow Jones futures: New Trump tariffs escalated the China trade war, but Beijing pledged to support growth. Can the stock market rally? Can Apple, Microsoft, Starbucks clear bases? Published:9/2/2019 8:35:57 AM
[Markets] U.S. stock futures weaken as tariffs go into effect U.S. stock futures weakened on a holiday Monday as tariffs on Chinese goods went into effect. With stock exchanges closed for Labor Day, futures on the S&P 500 (ES00) fell 6.6 points, or 0.2%, to 2918.20, while futures on the Dow Jones Industrial Average (YM00) dropped 114 points, or 0.4%, to 26292. Tariffs of 15% on $112 billion of Chinese goods went into effect on Sunday, as did retaliatory Chinese tariffs on U.S. products like crude-oil imports. Published:9/2/2019 4:35:16 AM
[Markets] Gold Spikes, Yuan & Futures Plunge As Asia Opens After Trade War Tit-For-Tat

Somehow, FX and equity futures traders are shocked that the tariffs that Trump had said would hit today, have actually gone into effect - and China has retaliated (just as it said it would)...

Offshore Yuan has erased all of Thursday's panic-buying relief idiocy...

Source: Bloomberg

Gold is spiking..

Source: Bloomberg
And Futures are getting hammered (Dow futs were down over 300 points before bouncing)...

So, all that short-squeezing, low-volume exuberance has gone (for now).

Of course the plunge-protectors are stepping in...

Can they hold it until Tuesday?

Published:9/1/2019 5:34:57 PM
[Markets] E-mini Dow Jones Industrial Average (YM) Futures Technical Analysis – Uptrend Resumes over 26559 with 27397 Next Major Target Based on Friday’s price action and the close at 26406, the direction of the September E-mini Dow Jones Industrial Average futures contract on Tuesday is likely to be determined by trader reaction to the short-term Fibonacci level at 26494. Published:8/31/2019 10:00:31 PM
[Markets] "This Is The Latest Thing That Is Keeping Us Up At Night": BMO

For equity markets, August was the most violent month of 2019, with the S&P tumbling 2.6% or more on at least three occasions, the same as the number of instances when the Dow plunged almost 1000 points - the worst since Q4 of 2018 when the S&P briefly entered a bear market - only to rebound furiously after Mnuchin's infamous Christmas Eve phone call. Worse, in August the number of days when the S&P moved up or down by more than 1% was the highest since the February 2018 inverse VIX ETN implosion.

Yet despite all the vomit-inducing day-to-day surges and drops, anyone who took a month-long vacation would hardly believe what had happened: from the first day of the month, to the last, shares had one of their smallest monthly moves of the year: down just 1.8% on the S&P 500, only July had a smaller monthly amplitude.

Additionally, there were twenty-two August trading days, of which 10 down, 12 up. And continuing the symmetry, the vol index that on certain days surged as much as 50% higher than where they started settled back to where they began.

Yet while the daily August gyrations were one rollercoaster too much for most of the human traders still trading this "market" for a living or hobby, September is shaping up even worse, not least of all because September is traditionally the most volatile month. There is also a barrage of newsflow and geopolitical events - not to mention another rate cut by the Fed (which is priced in with 100%+ probability by the market) that ensure non-stop daily drama and even more market volatility than experienced in August.

It all starts with the week ahead, when as BMO's Ian Lyngen writes, top tier data will once again be on offer for a market that, frankly, doesn’t seem compelled by such passé details. While the trade war has provided the bulk of the trading direction throughout August, in the coming week the emphasis will return to gauging exactly where the real domestic economy stands in terms of growth and inflation. As Lyngen previews, "between ISM, NFP, AHE, and UNR there will be plenty to decipher (or at least unabbreviate)."

Meanwhile, as the September FOMC meeting approaches, the conversation will again return to what may well be the most important question of all: how many additional quarter-point cuts will comprise this ‘fine tuning’ effort; one, two, or possibly more? Needless to say, yet BMO does so anyway, "the most significant Fed event-risk this autumn will be communications surrounding the most likely path of  policy rates."

Of course, among everything else, investors will be seeking clarity whether 2019 will mirror the 1990s (75 bp of aggregate rate cuts) as per the "mid-cycle adjustment", or if the fallout from the trade war has done more damage to the global economy and therefore warrants even greater accommodation, and is indeed just the start of an easing cycle (even as trade war is set to send prices of imported goods sharply higher, potentially unleashing stagflation).

According to BMO, it isn’t difficult to envision a scenario in which the Committee updates the economic projections and dot-plot to reflect 75 bp in total and a period of policy stability to assess how much benefit the effort delivers; relying on the classic lagged impact logic. In a world in which the greatest "uncertainty" wasn’t continuing to expand, we’d expect this to be the path of least resistance, Lynger writes. After all, "the US economy appears to be on solid footing and inflation, while still low, is heading in the correct direction". Alas, as the rates strategist admits, "we’re left in an environment of twitter and state-owned media dictating US rates."

Which brings us to the punchline, namely that the ever-expanding list of worries keeping BMO up at night "now includes an attempt by the Fed to moderate expectations for easing beyond 1.63% (i.e. two additional quarter-point cuts)."  Needless to say, the market - which is pricing in almost 5 rate cuts by Dec 2020, will not be happy by any unexpected Fed hawkishness.

As such, no matter what happens in September, the balance of the year will be an important litmus test for the market’s understanding of the Fed’s reaction function to developments impacting the global growth outlook rather than the domestic realities. In this context, BMO maintains that "the Fed has become the defacto central bank to the world, even if reluctantly."

However, that doesn’t necessarily imply Powell won’t at least attempt to push back and by crafting a ‘wait and see’ or ‘data dependent’ message into year-end the Fed would be putting the onus elsewhere to combat the risk of a global recession. Furthermore, Powell needs a market trigger to give the market the outcome it desires, namely 6 rate cuts by Dec 2021.

So what happens if Powell follows Dudley's suggestion, and balks at more rate cuts than what he telegraphed. Fire and brimstone come to mind.

In the event it’s 75 bp (total) and done, the BMO rates analysts claim that the reaction of the longer-end of the curve will be particularly telling as to investors’ perception of the risks of an actual US recession in 2020. A bearish resteepening will be a vote of confidence for Fed credibility and would be predicated on the domestic data continuing to reflect tight labor conditions and inflation that’s trending higher.

This isn’t as off-consensus as it might initially appear, despite the chorus of ‘race to zero’ calls which abound. Should this come to pass, 10-year yields with a 2-handle will be an intuitive target. To a large extent, this risk supports a focus on the interim data even as the market retains a pavlovian response to @realDonaldTrump.

By induction, the worst case scenario would be if the petulant market meets the Committee’s efforts at easing restraint by an even deeper inversion of the yield curve, presumably in a bullish outright move for 10s and 30s. This would be immediately read as another "policy error" reaction, and is the outcome which troubles BMO the most "insofar as it would effectively lock the Fed into even lower policy rates and exacerbate the global race to zero rates." This, as Lyngen concludes, is a very long way of saying that "Trump can only trump data so long."

Published:8/31/2019 8:29:39 PM
[Markets] Yuan Crashes Most In 25 Years As August Ends With Bonds & Bullion Bid

Well that was quite a month...

High(Low)lights...

  • China's Renminbi suffered its biggest monthly loss since 1994

  • EM FX tumbled to a record low, worst month in a year

  • US Treasury yields plunged in August by most since Sept 2011 (to record low yields at the long-end)

  • US Yield Curve flattened most in August since Jan 2016 (to its flattest since 2007)

  • Bund yields tumbled 26bps to record lows - the biggest monthly drop since June 2016 (Brexit vote)

  • Treasury 'VIX' spiked most in August since May 2009

  • Iron Ore Futures (Singapore) suffered their worst month ever...

  • Gold has the best August dollar gains since Feb 2016

  • Silver had best August percentage gain since June 2016 (Brexit vote)

 

Stocks

US and Chinese stocks are surprisingly aligned YTD (both up around 16/17%) with Europe lagging (+13%)...

Source: Bloomberg

But on the month, all major regions saw stocks lose a similar 1.5 to 2.0%...

Source: Bloomberg

 

US equities ended the month lower with Trannies and Small Caps worst, Dow and S&P the least worst...

Source: Bloomberg

 

Only The Dow Industrials and Transports are green from last week's Trump tantrum (S&P unch)...

NOTE - last minute panic-buying

 

Defensives dominated the month...

Source: Bloomberg

The Dow managed to get back above its 100DMA but faded into it at the close today...

 

Buybacks saved stocks numerous times this month...

Source: Bloomberg

And while short-squeezes were used to keep stocks afloat, their surges were weaker and weaker...

Source: Bloomberg

And... as @TaviCosta notes, another one bites the dust. This beauty was the #2 performer in the S&P 500 since March of ’09! Just broke down from multi-year support line as well.

Source: Bloomberg

 

Bonds

Treasury yields utterly collapsed in August (30Y was down over 60bps at its lowest)... The biggest monthly drop in the long-bond's yields since Sept 2011

Source: Bloomberg

30Y ended the week below 2.00% for the first time ever...

Source: Bloomberg

A bloodbath for bond bears...

Source: Bloomberg

And the yield curve collapsed (3m10Y) holding its inversion for

Source: Bloomberg

And 2s10s closed the week inverted (biggest 2-month flattening since Jan 2015)...

Source: Bloomberg

And before we leave bondland, we note that 30% of global IG corporate debt is now trading at a negative yield!!

Source: Bloomberg

FX

The Dollar rallied in August helped by Yuan weakness slightly offset by Yen strength...

Source: Bloomberg

The broad trade-weighted dollar is at an all-time record high...

Source: Bloomberg

EURUSD tumbled back below 1.10 for the first time since May 2017

Source: Bloomberg

Emerging Market FX tumbled to record lows...

Source: Bloomberg

Cryptos ended in the red for the month after yesterday's plunge (Litecoin the biggest loser)...

Source: Bloomberg

With Bitcoin back below $10k...

Source: Bloomberg

 

Commodities

Silver's best month since the Brexit vote (June 2016) and Gold rallied but crude and copper were clubbed like baby seals...

Source: Bloomberg

Cotton fell for a fifth straight month in August, the worst such run in more than 14 years, as slowing demand feeds expectations for a global surplus.

Iron Ore Futures (Singapore) suffered their worst month ever...

Source: Bloomberg

Silver led the precious metals but Platinum had a big month (up most since Jan 2017)

Source: Bloomberg

Gold ended the week unchanged but well up from Trump's tantrum...

 

But Silver dramatically outperformed (up for the 7th week of the last 8)...

Source: Bloomberg

With Silver at its highest since April 2017

Source: Bloomberg

Gold continues to track the surge in negative-yielding debt volumes almost perfectly...

Source: Bloomberg

 

Finally, bonds and stocks had a very different month, you decide which you trust more...

Source: Bloomberg

Will it be 1998 or 2013?

Source: Bloomberg

While August saw a flood into safe-havens like bond and bullion, volatilities are notably divergent in Treasuries and Gold relative to other asset classes...

Source: Bloomberg

Published:8/30/2019 3:22:01 PM
[Markets] Intel, Caterpillar share gains lead the way, but Dow flat DOW UPDATE The Dow Jones Industrial Average is climbing Friday morning with shares of Intel and Caterpillar delivering the strongest returns for the price-weighted average. Shares of Intel (INTC) and Caterpillar (CAT) are contributing to the blue-chip gauge's intraday rally, as the Dow (DJIA) was most recently trading 25 points, or 0. Published:8/30/2019 10:21:12 AM
[Markets] The Dow Is Rising as the Market Looks to Put a Painful August Behind It It’s been a painful August—the Dow and S&P 500 are both off 1.9% through Thursday’s close—though not as painful as it might have been thanks to the market’s performance during the last week of the month. Published:8/30/2019 8:18:06 AM
[Markets] Global Stocks Surge On Trade Optimism, Ending Turbulent August With A Sea Of Green

For the second day in a row, global markets and US equity futures are a sea of green with stocks pushing higher as trade headlines bathe algos in a sea of trade optimism ahead of month end, even as the dollar ascent continued offsetting the weaker Chinese yuan which was on track for its weakest month in 2-1/2 decades.

On Thursday, the mood lifted after President Donald Trump said some trade discussions were taking place with China on Thursday, with more talks scheduled, even though there has been no subsequent news that any discussions did in fact take place suggesting this was yet another "fake call" report meant to boost stocks. China’s commerce ministry also said a September round of meetings was being discussed by the two sides, but added it was important for Washington to cancel a tariff increase.

There was more of the same on Friday, with US equity futures red ahead of the European open, when China's Foreign Ministry spokesman Geng Shuang said that US and China "are maintaining effective communication,” during a regular briefing Friday in Beijing. He added that "we hope the U.S. can demonstrate good faith and take real action to work in concert with China and find solutions together on the basis of mutual respect."

That little snippet was enough for algos to ignite momentum and lift the US some 20 points higher...

... even ignoring hawkish commentary from the ECB's Executive Board member Sabine Lautenschlaeger who said in an interview with MNI that "I don’t see the need for a re-start of the asset purchase program", adding that QE "should only be used if you have a deflation risk and a deflation risk is nowhere to be seen now."

As a result, the MSCI All-Country World Index climbed 0.3% but is on track for a near 3% decline in August - only the second month the benchmark has spent in the red this year. It was set to be the weakest August for the index since 2015.

Taking their cue from US equity future optimism, European stocks on Friday extended the previous session’s gains, with the European STOXX 600 index up 0.3% to trade at a fresh one-month high. “The trade war seesaw has certainly moved back in favor of riskier assets for now, with Trump and China supposedly holding a call yesterday,” said Deutsche Bank strategist Jim Reid, although as noted above, there has yet to be confirmation of this. The DAX outperformed (+1%), with gains helped by a surge in German real estate firms which saw the country’s DAX index add 0.7%.

Earlier in the session, the picture was more mixed in Asia, where Chinese and Hong Kong stock markets dipped in and out of the red. Arrests or detentions of pro-democracy activists in Hong Kong added to investor jitters, with the Chinese-ruled territory facing its first recession in a decade. Most Asian stocks did advance, however, led by energy producers and technology firms, after Beijing took a softer tone on possible trade talks with Washington. Almost all markets in the region were up, with South Korea and Taiwan leading gains. The Topix added 1.5%, buoyed by SoftBank Group, Sony and Takeda Pharmaceutical. Japan’s industrial output rebounded in July following the worst decline in more than a year. The Shanghai Composite Index slipped 0.2%, dragged down by Shenzhen Goodix Technology and Industrial & Commercial Bank. China’s state-backed funds added positions in high-end manufacturing industries. India’s Sensex climbed 0.3%, with HDFC Bank and Housing Development Finance among the biggest boosts. Data due Friday is expected to show the nation’s gross domestic product growth slowed for a fifth straight quarter.

Also overnight, the global Times tweeted China is unswervingly tethered to its non-stop opening-up drive and reforming its economic system, even when the country is forced into a battle of tit-for-tat tariffs with the US on a massive, unprecedented magnitude.

Meanwhile, Hong Kong rejected the appeal against the protest ban on Saturday, while it was also reported that Hong Kong arrested prominent activists Joshua Wong, Andy Chan and Agnes Chow. Subsequent reports indicate that Wong and Chow have been released

Rates markets took a breather on Friday, at the end of a stellar month that has seen prices rally and borrowing costs push deeper and deeper into negative territory. U.S. Treasury yields nudged higher overnight, with the benchmark 10-year Treasury climbing to 1.5214% from a three-year low of 1.443% touched earlier this week. And despite the 2s10s curve briefly uninverted, the 10Y yield was once again below two-year yields at 1.538%.

Japanese yields popped higher early in the session, after the BOJ trimmed the amount of debt it would purchase in the 5-10 year bucket for the second time in 2 weeks, this time reducing the purchase amount from 450BN to 400BN.

Euro zone government bond yields were steady near record lows as data showed the bloc’s inflation remained low at 1.0% in August, well below the ECB's target and bolstering expectations for European Central Bank stimulus in September. Bunds reversed early losses to trade little changed below 179.00, brushing off hawkish commentary and preliminary Eurozone inflation data that remains stuck below ECB’s target. German and US curves are marginally steeper however overall activity is muted in European hours. Italy bucks the spread-widening trend in Europe to tighten ~1bp against German 10y.

In FX, the Bloomberg dollar index was initially stronger for a fifth straight day although gains fizzled and it has since dipped into the red; SEK lags G-10 peers; ZAR leads in EM FX. The pound struggled for direction as lawmakers lost a bid to block Prime Minister Boris Johnson’s plan to suspend parliament.  Elsewhere, the euro plunged to a one-month low against the dollar, as investors looked for aggressive easing by the European Central Bank and ignored doubts by some policymakers about the need for more stimulus.

Fresh trade optimism failed to inspire China’s yuan, which resumed its decline with spot yuan at 7.1462 against the dollar. The currency is on track for its weakest month since Beijing’s currency reform in 1994 after it broke through the key 7 to the dollar level earlier in August. Curiously, while both the yuan and US stocks got hit last Friday when Trump re-escalated the trade war, since then the CNH has remained deeply underwater, while the S&P has managed to recover all losses.

“The yuan move back to 7 and beyond has been a distinct possibility for months. It is clearly down due to the tariffs,” said Neil Mellor, senior FX strategist at BNY Mellon in London. “It does help them to some extent to absorb the tariff costs - it is one of the few options they have. The fiscal option is limited after years of excess, and the monetary stimulus has already been unprecedented this year.”

The Australian dollar, often seen as a proxy bet on the Chinese economy, slipped towards a 10-year trough.

In commodities, WTI slipped 57 cents to $56.14 a barrel while Brent fell 30 cents to $60.78 a barrel. Iron ore futures rally about 5% to conclude a torrid month, nickel rallies on supply concerns. Spot gold came off recent highs to trade at $1,526 an ounce. Silver was at $18.37 an ounce after hitting its highest level in more than two years.

Investors were focused on a string of economic releases due over the weekend including China’s official manufacturing survey, which would provide a good gauge of the real impact from the Sino-U.S. trade war.

Economic data include personal income and spending, MNI Chicago business barometer

Market Snapshot

  • S&P 500 futures up 0.6% to 2,942.50
  • STOXX Europe 600 up 0.7% to 379.37
  • MXAP up 1.2% to 152.79
  • MXAPJ up 1.1% to 493.71
  • Nikkei up 1.2% to 20,704.37
  • Topix up 1.5% to 1,511.86
  • Hang Seng Index up 0.08% to 25,724.73
  • Shanghai Composite down 0.2% to 2,886.24
  • Sensex up 0.4% to 37,208.51
  • Australia S&P/ASX 200 up 1.5% to 6,604.22
  • Kospi up 1.8% to 1,967.79
  • German 10Y yield fell 0.5 bps to -0.697%
  • Euro down 0.1% to $1.1042
  • Brent Futures down 0.5% to $60.78/bbl
  • Italian 10Y yield fell 6.0 bps to 0.642%
  • Spanish 10Y yield rose 0.9 bps to 0.112%
  • Brent Futures down 0.5% to $60.78/bbl
  • Gold spot down 0.2% to $1,524.85
  • U.S. Dollar Index up 0.05% to 98.55

Top Headline News from Bloomberg

  • European Central Bank policy makers wary of ever-more monetary stimulus have fired the first warning shots two weeks before they meet to discuss bolstering the economy
  • A Scottish judge refused to block Boris Johnson’s plan to suspend Parliament, dealing a blow to lawmakers who argued that there isn’t enough time to thwart a no-deal Brexit; Johnson’s Brexit team will meet with EU officials at least twice a week in September as he seeks to break the current impasse and ward off a rebellion in his own party
  • President Donald Trump said Thursday that the U.S. and China are scheduled to have a conversation about trade today without giving details. His comments followed signs from China that it wouldn’t immediately retaliate against the latest U.S. tariff increase
  • Hong Kong police arrested prominent opposition figures including Joshua Wong a day after banning a mass protest planned for this weekend as authorities seek to quell pro- democracy demonstrations that have raged for nearly three months; China rejected HK’s Chief Executive Carrie Lam’s plan to appease protesters, Reuters reported on Friday
  • Argentina’s bonds extended declines as S&P Global Ratings cut the South American nation’s foreign- and local-currency credit ratings to “selective default” after it said it would delay payments on as much as $101 billion of debt.

Asian equity markets headed into month-end higher across the board after the tumultuous US-China trade saga took a positive turn following comments from Mofcom spurred that hopes regarding talks in September and indicated that China doesn't plan to immediately retaliate against President Trump’s latest tariff hikes. ASX 200 (+1.5%) and Nikkei 225 (+1.2%) advanced from the open with notable strength seen in Australia’s trade-sensitive sectors and as earnings continued to trickle in, while Tokyo trade was buoyant with focus on a slew of mixed data in which Industrial Production significantly topped estimates and amid reports that Japan permitted the first exports of hydrogen fluoride to South Korea since curbs were enacted. Hang Seng (+0.1%) and Shanghai Comp. (-0.1%) were underpinned by the trade hopes after Mofcom stated that both sides are discussing the September talks and that the sides have been in touch, while it also suggested that China wants to settle the dispute calmly and avoid further escalation. Furthermore, earnings have also been a driving force with firm gains in China’s largest bank ICBC, as well as oil majors CNOOC and PetroChina following their results, although upside in the broader market was contained given the looming additional tariffs and after continued PBoC inaction resulted to a consecutive weekly net liquidity drain. Finally, 10yr JGBs were lower with safe-haven demand sapped by the positive risk tone and after the BoJ reduced its purchases in 5yr-10yr JGBs to JPY 400bln from JPY 450bln for today’s Rinban operation.

Top Asian News

  • China Had Rejected Lam Plan to Appease H.K. Protesters: Reuters
  • BOJ Paves Way to Buy Fewer Bonds in September as Yields Slide
  • China, U.S. Maintaining Effective Trade Communication: Geng
  • Samsung Heir’s Retrial Spotlights Moon’s Coddling of Korea Inc.

Major European indices are firmer this morning [Euro Stoxx 50 +0.8%] as markets look to round a volatile week and month off on a positive tone, ahead of next month’s Central Bank infused slate. European bourses positivity follows on from the relatively strong performance seen in the Asia-Pac session, as sentiment received a boost on US-China updates; although, trade newsflow has been light in European hours. In terms of sectors the STXX Housing Sector (+2.2%) is outperforming on the back of reports that the rent freeze in Berlin may not be as strict as was initially feared/reported. Reports which have led to Deutsche Wohnen (+12.9%) topping the Stoxx 600, with Vonovia (+5.8%) not far behind. Elsewhere, other notable movers include Daimler (+2.3%) after being upgraded to buy at Kepler Chevreux, which has helped the auto sector more broadly (+1.7%). Separately, Deutsche Bank (+0.1%) are lagging the DAX (+0.6%) after reports that the Co. are examining the closure of local branches and are likely to begin an equity derivatives book auction in September. More broadly, the Banking index (+0.7%) remains in positive territory but is towards the bottom of the index pile, which may be partially explained by S&P downgrading Argentina’s credit rating to ‘Selective Default’ from ‘B-‘ after the country stated it would be delaying debt payments.

Top European News

  • EU Concerned on U.K. Democracy After ‘Strange’ Parliament Move
  • Merkel Might Be in Real Trouble If German Populists Win Sunday
  • Equinor Signals Potential Early Start for Oil Giant Sverdrup

In FX, the Euro is edging closer to ytd lows vs the Dollar at 1.1027 following more dire German data (retail sales), and despite ECB’s Lautenschlaeger adding her hawkish views to those of Knot and Weidmann ahead of September’s policy meeting. Month end rebalancing flows are not providing traction/support this time as light Usd sales are touted against all G10s bar the Euro, while even the usual RHS flows/orders in Eur/Gbp seem to be conspicuously absent or relatively small given that the cross remains capped ahead of 0.9100 and the Pound is hardly firm in its own right. In terms of fundamentals, the ECB is still widely expected to deliver some form of stimulus next month even if not the big bazooka favoured by Rehn and other doves perhaps. However, hefty option expiry interest at 1.1050 (1.9 bn) could be cushioning Eur/Usd vs smaller size at the 1.1000 strike (1 bn), albeit amply backed up by barrier defences.

  • USD - Notwithstanding the mostly bearish portfolio models noted above, the Greenback is only really softer vs the Yen in major markets, and the DXY has probed above resistance ahead of the 2019 peak, though remains some way below at 98.609 vs 98.932. Looming US data/surveys could give the index further impetus, but direction looks more contingent on broader risk sentiment and US-China trade developments with repercussions for Treasury yields and the curve alongside the Euro’s ability to evade further weakness.
  • JPY - Bucking the overall trend, but marginally the Yen is holding a tight line around 106.50 vs the Buck following a raft of mixed Japanese data overnight and with plenty flanking the headline pair either side of the range. 1.4 bn expiries reside between 106.00-15 and the 21 DMA is only a fraction above at 106.17, while exporter supply is said to be layered from 106.70 right up to and through 107.00 at 107.10.
  • CHF - In contrast to its fellow safe-haven, the Franc has retreated towards 0.9900 vs the Dollar and below 1.0900 against the Euro even though Switzerland’s KOF index was better than expected, and it appears evident that latest SNB warnings about action to curb excessive Chf demand are being heeded.
  • GBP/CAD/NZD/AUD - All narrowly mixed against the Greenback, with Cable deriving some traction above 1.2150 and the 21 DMA (1.2154) to retest offers/resistance around 1.2200, while the Loonie continues to straddle 1.3300, but could finally break out of its shackles if Canadian GDP is outside consensus. Elsewhere, the Kiwi and Aussie are still top heavy on a mixture of dovish RBNZ/RBA and downbeat economic indicators not to mention negative input from RBA’s Debelle, with Aud/Usd only just hovering above 0.6700 and Nzd/Usd struggling to keep tabs on 0.6300.
  • SEK/NOK - The Scandi Crowns are mixed vs the Euro, but both looking technically weak as the crosses trade above 10.8000 and 10.0000 respectively. However, the Sek is underperforming ahead of next week’s Riksbank policy meeting that could culminate in a dovish tweak to forward guidance via the timing of the likely next rate hike and/or a flatter repo path.

In commodities, WTI and Brent are in negative in territory and failing to benefit from the strong performance in stocks thus far; with WTI retreating somewhat from yesterday’s weekly high of USD 56.86/bbl and Brent painting a similar picture. In terms of catalysts there have been no fundamental updates for the complex, though its worth nothing that today is Brent’s Oct’19 future expiry which, alongside month-end flows, may be playing a role in today’s price action. Turning to metals, where spot gold has slipped somewhat on the strength in stocks and the USD’s strength this morning; as such the yellow metal looks set to finish the week just a few dollars away from its Monday open at USD 1527/oz. Separately, UBS note that iron ore prices have had a very volatile H1, and the metal is now being afflicted by slower production and supply lifts which may push it below the USD 80.0/t mark.

US Event Calendar

  • 8:30am: Personal Income, est. 0.3%, prior 0.4%; Personal Spending, est. 0.5%, prior 0.3%
  • 8:30am: PCE Deflator MoM, est. 0.2%, prior 0.1%; PCE Deflator YoY, est. 1.4%, prior 1.4%; PCE Core Deflator YoY, est. 1.6%, prior 1.6%;
  • 9:45am: MNI Chicago PMI, est. 47.5, prior 44.4
  • 10am: U. of Mich. Sentiment, est. 92.3, prior 92.1; Current Conditions, prior 107.4; Expectations, prior 82.3

DB's Jim Reid concludes the overnight wrap

elcome to the last business day of August and with it the last of the meteorological Summer (or Winter depending on where you’re reading this). Since I’ve got back from holiday it’s been dark writing the EMR again which is a little depressing! Roll on next April. We’ll do our usual full performance review on Monday but August has been a trying month for markets. However the reality is that the full range for the S&P 500 was put in place in the first 5 days of the month and although we’ve got to the bottom of that range a couple of times since we haven’t broken through and markets have bounced back off the ropes three times this month now.

Indeed that’s what’s happened this week as we’ve now had three out of four strong days since Monday including a +1.27% gain yesterday meaning that the S&P 500 is back above last Friday’s closing level which is impressive given that all the talk over the weekend was about how bad Monday’s open would be after renewed trade escalations. The trade-war seesaw has certainly moved back in favour of riskier assets for now, with Trump and China supposedly holding a call yesterday, at least according to Trump earlier in the day. However, neither side had confirmed this as we go to print. Meanwhile, risk assets were already getting a boost from the news that China doesn’t intend to immediately retaliate on tariffs, following comments out of the Ministry of Commerce just as European markets were opening. The NASDAQ (+1.48%) and DOW (+1.25%) also closed higher along with the STOXX 600 (+1.04%) as cyclical sectors led the advance. After lagging earlier this week, large-cap tech stocks outperformed, with the NYFANG index +2.15% higher.

Similarly, high yield credit spreads were also -5.5bps tighter in Europe and -4.5bps tighter in the US. As for bonds, in Europe yields ebbed and flowed as we heard comments from the ECB (more on that shortly) before bonds eventually closed weaker. Bunds and OATs both ended +2.1bps higher, while BTPs rallied another -6.1bps which saw them close below 1% for the first time ever at 0.984% while the spread to Bunds compressed to 167.6bps. Across the pond 10-year Treasuries ended +1.2bps higher (up a further +2bps this morning), though 30-year yields fell -1.2bps (but are back up +1.4bps in Asia) after press reporting (Bloomberg) suggested that the Treasury Borrowing Advisory will argue against ultra-long bonds. The 2s10s yield curve flattened another -0.8bps to -3.5bps (at -2.1bps this morning) after nearly getting back to flat as Europe went home.

Just on those ECB comments, it’s significant that these were the first public comments from Lagarde on monetary policy since being given the ECB job, which she’ll take up in November. That was enough of a reason for the market to react (albeit modestly), however the actual substance was not particularly ground-breaking. Lagarde said that the ECB hasn’t hit the lower bound on interest rates and that the latest decisions of the ECB including forward guidance “are in my view correctly aimed at preserving the very accommodative financing conditions for firms and households”. The comments felt almost Draghi-esque and hinted at continuity more than anything else, rather than suggesting any preconceived conclusions. That said, it does seem like Lagarde is likely to be at least marginally more sensitive to the adverse side-effects of negative interest rates, saying "it is clear that low rates have implications for the banking sector."

Later in the day we also heard from the ECB’s Knot. The initial headline that popped up quoted Knot as saying that “there is no need to resume QE right now”. Knot also said that “market expectations are overdone” and that “I would be reluctant to back tiering for negative rates”. Yields and the euro spiked on the news however it’s worth noting that Knot is already one of the more hawkish council members but importantly not a member of the executive board, commentary from which will ultimately be more important. That being said recent comments from the ECB do suggest a wide range of views and an elevated level of uncertainty around what policy package will be unveiled next month.

This morning in Asia markets are following Wall Street’s lead with the Nikkei (+1.30%), Hang Seng (+0.69%), Shanghai Comp (+0.23%) and Kospi (+1.87%) all up. As for FX, all G-10 currencies are trading weak this morning (c. -0.1% - -0.2%) while, the onshore Chinese yuan is trading down -0.11% at 7.1521. The South Korean won is trading up +0.68% as the country’s central bank shied away from cutting rates at today’s monetary policy meeting. Elsewhere, Futures on the S&P 500 are up +0.20%. In terms of overnight data releases, we saw Japan’s July retail sales come in at -2.0% yoy (vs. -0.7% yoy expected) while preliminary July industrial production came in at +0.7% yoy (vs. -0.6% yoy expected). In other news, the BoJ reduced purchases of bonds in the key 5-10 year maturity zone for a second time this month as the country’s benchmark yield dropped to near record lows. The central bank offered to buy JPY 400bn of 5-10 year bonds today (vs. JPY 450bn at its previous regular operation). 10Y JGB yields rose after this and are currently up +1.4bps to -0.283%.

Meanwhile, here in the UK, Bloomberg reported overnight that PM Johnson’s envoy, David Frost, has asked the EU to intensify Brexit talks at a meeting with European Commission officials in Brussels on Wednesday. The report went on to add that David Frost will meet with EU officials at least twice a week in September to break the Brexit impasse.

In other news, the data in the US yesterday included the second revision to Q2 GDP however there were no great surprises with growth revised down a tenth as expected to +2.0% yoy. The details did show a significant upgrade to consumption of four-tenths to +4.7% however core PCE was revised down a tenth to +1.7%. It’s worth noting that we’ll get the July PCE data today where the consensus expects a +0.2% mom reading. All in all though, not much to change Fed expectations from the latest data. As a side point it’s worth also noting that corporate profits made a big jump in Q2 having dropped in Q1, with profits up +2.7% yoy. These have historically led the trend in GDP, so a modest positive.

As far as the rest of the data was concerned, the advance goods trade deficit in July narrowed to $72.3bn and a bit more than expected, while wholesale inventories climbed +0.2% mom as expected last month. Initial jobless claims printed at 215k and further indicate the resilience of the labour market, while pending home sales in July fell -2.5% mom.

In Europe the main talking point from the data was a soft German inflation print. Indeed CPI printed at -0.1% mom in August which lowered the annual rate to +1.0% yoy and the lowest since November 2016. The details showed that the core was weak which raises downside risks to the Euro Area core reading today. Elsewhere, in France Q2 GDP was revised up a tenth to +0.3% qoq.

To the day ahead now, where this morning the main focus will be on the August CPI reports for the Euro Area, France and Italy. We’ll also get the final revisions to Q2 GDP in Italy and July money and credit aggregates data in the UK. Inflation data should be the main focus in the US too with the July PCE report and personal income and spending numbers. We’ll also get the August Chicago PMI number and final August University of Michigan consumer sentiment survey revisions. Away from that, the ECB’s Rehn speaks in Finland this morning

 

 

 

 

 

 

Published:8/30/2019 6:49:15 AM
[Markets] Dow Jones Futures Signal Key Stock Market Test; A Big Earnings Breakout Late But Also This Meltdown Dow Jones futures signal the stock market rally will near a test of the 50-day line, a key resistance area. Apple stock and Microsoft stock led bullish action Thursday. Published:8/30/2019 5:51:04 AM
[Markets] Dow Jones Futures: Stock Market Rally Nears Key Test; Apple, Microsoft, Ulta Beauty, Workday, Ambarella In Focus Dow Jones futures: The stock market rally showed positive signs but neared key resistance. Apple and Microsoft stock showed bullish action. Published:8/29/2019 5:15:23 PM
[Markets] Dow Jones Racks Up 734 Point Gain For The Week So Far As These Stocks Rally The Dow Jones Industrial Average and other key indexes rallied Thursday, after China said it won't retaliate against President Trump's latest tariff hikes. Published:8/29/2019 3:44:14 PM
[Markets] Stocks Erase Trump-Trade-Tantrum Dump As Dollar Soars To New Record High

A Fed hint here, a Trump tweet there, and a well-timed China headline is all you need to bypass fun-durr-mentals and send stock-buying-algos into a frenzy on a low-liquidity week..."Never gonna let you down!!"

Another sideways day for Chinese stocks unable to bounce back from early weakness (closed before the China trade headlines sparked a buying panic)...

Source: Bloomberg

Big positive day for Europe helped by the China headlines overnight...

Source: Bloomberg

European markets did get a jolt of excitement in the afternoon as ECB's Knot suggested no need for more QE (but that didn't last long)...

Source: Bloomberg

US equities ripped higher again (on another trade headline overnight, this time from China saying nothing new at all), erasing all of Trump's trade tantrum losses from last Friday...

NOTE - Nasdaq and S&P unchanged from Thursday's close, Dow/Trans higher, Small Caps red.

 

Futures show the big spike overnight when the China headlines hit...

 

Stocks rallied all the way up to a critical Fib 61.8% retrace of the early August plunge (erasing all of last Friday's Trump trade-tantrum losses...

 

Another big short-squeeze started the day off well...

Source: Bloomberg

Financials outperformed the market once again, decoupling from the yield curve...

Source: Bloomberg

The timing of the China trade headlines was oddly perfectly-timed with the VIX opening, which punched lower, sparking panic-buying in the thin futures pre-market...

 

30Y Treasury yields are once again "more attractive" than stock dividend yields...

Source: Bloomberg

Bond yields and stocks entirely decoupled again this week (rebalancing?) as stocks shrugged off all of last week's worries but bonds did not...

Source: Bloomberg

 

A really ugly 7Y auction sparked some pain in Treasuries and we suspect more rebalancing, but in the end yields were only marginally higher (except the long bond ended unch)... A late-daye bid for bonds took them all lower for the week...

Source: Bloomberg

30Y Yields rose modestly, testing back above 2.00% intraday but each time a bid appeared...

Source: Bloomberg

And in case you wondered why the bids - look at positioning in the Ultras...

Source: Bloomberg

The yield curve steepened with 2s10s testing back toward 0 but quickly fell back in the afternoon...

Source: Bloomberg

Source: Bloomberg

Before we leave bond-land, we note that traders looking for a reason to bet against the epic run in Treasuries might want to consider that the rolling 30-day correlation between 10-year Treasury futures and the MOVE Index, a gauge of underlying volatility, rose to a record this week. As Bloomberg's Robert Fullem notes, market theorists say a surge in volatility may mark an end to a trend, suggesting it could be best to avoid Treasuries at these levels. The price-volatility correlation, which has generally been negative, rose above the prior peak seen in the run-up to the financial crisis of 2008.

 

The Dollar rallied once again...

Source: Bloomberg

The Broad trade-weighted dollar is at an all-time record high...

Source: Bloomberg

The Argentine Peso crashed to a new record low at the open (above 60/USD) but like yesterday was rescued by ARG auction bids...

Source: Bloomberg

But, as the currency was rescued, traders dumped ARG bonds like a syphillitic hooker...

Source: Bloomberg

Cryptos extended losses overnight from the late-day plunge but saw a bid in the US equity market session...

Source: Bloomberg

Bitcoin extended losses below $10k...

Source: Bloomberg

 

 

Gold slipped back into the red for the week but well off the lows from before Trump's tantrum...

 

While gold is the best-performing precious metal YTD, Platinum has exploded this week...

Source: Bloomberg

Big roundtrip in WTI over the last two weeks...

 

And finally, the big question is - Will 2019 be like 1998 or 2013?

Source: Bloomberg

 

 

 

 

 

Published:8/29/2019 3:13:04 PM
[Markets] Dow industrials up 325 points at midday Dow industrials up 325 points at midday Published:8/29/2019 11:14:30 AM
[Markets] Dow climbs 211 points on gains for Caterpillar, JPMorgan Chase stocks The Dow Jones Industrial Average is trading up Thursday morning with shares of Caterpillar and JPMorgan Chase seeing positive momentum for the price-weighted average. Shares of Caterpillar (CAT) and JPMorgan Chase (JPM) are contributing to the blue-chip gauge's intraday rally, as the Dow (DJIA) is trading 211 points (0.8%) higher. Caterpillar's shares have risen $2.45, or 2.1%, while those of JPMorgan Chase are up $2.25, or 2.1%, combining for an approximately 32-point boost for the Dow. Published:8/29/2019 10:14:15 AM
[Markets] Dow Jones Today: Stocks Surge As Tone Shifts Ahead Of China Tariffs; Dollar Stores, Chip Stocks Rally Intel led the Dow Jones today and Dollar General rallied on earnings as the tone of trade talks improved, just ahead of a new round of China tariffs. Published:8/29/2019 9:17:33 AM
[Markets] Dow Jones Futures Signal Strong Stock Market Rally On 'Calm' China Trade War Comments Dow futures signaled a strong stock market rally as Beijing hinted it may not retaliate to new Trump tariffs, offering "calm" to the China trade war. Published:8/29/2019 5:45:30 AM
[Markets] Stocks & Bonds Pop, Cryptos Drop, As Silver Surges Past Gold Year-To-Date

USTR confirmed that additional tariffs will be put on China next week... and The Dow roars 400 points off the lows as bond yields hit record lows...

 

Chinese stocks went nowhere overnight...

Source: Bloomberg

European stocks dipped and ripped as Italy headlines spurred risk-on after US opened...

Source: Bloomberg

Italian markets ripped higher (yields and spreads lower) as signs of political agreements emerged (ITA 10Y yields tumbled to a new record low below 1.00%)...

Source: Bloomberg

US equities opened weak, then exploded higher into the European close, after which they went sideways...

 

All thanks to another VIX monkeyhammering...

 

Big surge in cyclicals relative to growth today...

Source: Bloomberg

The momentum of small caps versus blue chips is at levels not seen since the financial crisis. The ratio between the Russell 2000 and the S&P 500 has fallen to the lowest since March 2009, with RTY declining almost twice as much as SPX this month.

Source: Bloomberg

Dow remains tightly rangebound between the 100- and 200-day moving averages...

 

Major short-squeeze today...

Source: Bloomberg

Bank stocks outperformed today, despite a flattening curve...

Source: Bloomberg

Notably, from the US open, it appeared pension rebalancing was impacting markets with stocks suddenly bid and bonds offered, but that stopped ahead of the EU close and bond yields and stock prices began to diverge...

Source: Bloomberg

Pension rebalancing and last-second buybacks ahead of blackouts likely prompted the decoupling of stocks from bond yields.

 

Treasury yields slipped lower once again today...

Source: Bloomberg

10Y (and 30Y) yields closed at record lows...

Source: Bloomberg

The yield curve remains inverted (2s10s steepened very modestly but below 0 as 3m10Y flattened to new cycle lows once again...

Source: Bloomberg

The dollar index rallied once again, perfectly erasing the plunge from Trump's tariff tantrum last Friday...

Source: Bloomberg

Cable crashed early on as BoJo pushed to suspend parliament but rebounded as various officials jawboned the tensions down...

Source: Bloomberg

 

Cryptos were a bloodbath today...

Source: Bloomberg

Pushing all cryptos red for the month (litecoin down a stunning 33% in August)...

Source: Bloomberg

As Bitcoin blew back below $10,000...

Source: Bloomberg

 

Gold was flat today as silver and crude rallied (silver leads the week)...

Source: Bloomberg

 

WTI spiked above $56.50 in early trading but despite a huge crude draw, oil prices slipped back intraday...

 

Gold was slammed once again from significant resistance...

Quite a different picture for silver over the same period...

 

Silver's recent surge has erased all gold's relative outperformance for 2019...

Source: Bloomberg

Silver in Yuan hit a new 3 year high...

Source: Bloomberg

 

And finally, the 30-year Treasury bond is yielding less than what the S&P 500 pays in dividends (on a trailing 12-month basis), something we've only seen in about three months over the past four decades.

Source: Bloomberg

It appears that Bitcoin has decoupled from the safe-haven from policymaker pandemonium trade...

Source: Bloomberg

Despite stocks rebounding and being only 4% from record highs, traders are piling into bets that The Fed will cut rates to negative before this is over...

Source: Bloomberg

Published:8/28/2019 3:06:53 PM
[Markets] Dow finishes up over 250 points as energy leads gains Dow finishes up over 250 points as energy leads gains Published:8/28/2019 3:06:53 PM
[Markets] Stock Market Higher Despite Recession Fears; Two Software Stocks Sell Off On Earnings The Dow Jones industrials reversed higher in today's stock market. Software stocks Autodesk and Veeva Systems sold off on earnings. Published:8/28/2019 10:06:51 AM
[Markets] "Hope Gives Way To Realism": Global Stocks Slump As Fears Return; 30Y Yield Crashes To All Time Low

Global markets and US equity futures slumped as traders turned their attention to rising odds of a no-deal Brexit and awaited new developments in the increasingly unpredictable Sino-American trade war, while a deepening inversion of the U.S. bond yield curve a day earlier reignited worries over the possibility of recession, sending investors towards safe-haven assets from the Japanese yen to gold, while the 30Y Treasury yield tumbled to a new all time low amid a burst of overnight Asian buying.

On Tuesday, the U.S. yield curve inverted to levels not seen since 2007, stoking a sell-off on Wall Street, as 2s10s inversion has historically been the best predictor of a U.S. recession.

“Hope gave way to pragmatic realism about the outlook for the China-U.S. trade dispute,” Greg McKenna, strategist at McKenna Macro, wrote in a note Wednesday. “The market is still trying to get a feel for where it’s at and what it thinks as we get closer to the deadline for the tariffs this week.”

MSCI's world equity index, fell 0.1%, dragged down by European shares. S&P500 futures traded in a range between 2865 and 2875 before sliding to session lows as US traders entered the office...

... while technology companies and insurers led a decline on the Stoxx Europe 600 index, which dropped as much as -0.9%, as bourses in Paris and Frankfurt underperformed.

“It’s become very difficult for investors to garner an idea of where we go to next,” said CMC Markets chief strategist Michael Hewson. "The weakness in bond yields and the strength in havens speaks to an investor that is becoming increasingly risk-averse."

UK stocks bucked the trend, with the FTSE gaining sharply as sterling dived 1% on Prime Minister Boris Johnson's move to restrict parliamentary time before Britain's planned departure from the European Union. Johnson will limit parliament’s ability to derail his Brexit plans by unveiling his new legislative agenda on Oct. 14, a government source told Reuters, stoking fears of an economically disruptive no-deal departure from the EU. The pound, already trading lower on the day, was last down 0.6% at $1.2210.

In Italy, the FTSE All Italia Bank Index gained as much as 1.3%, outperforming the broader market, amid news that UniCredit is said to be exploring taking direct control of its holding in Turkish lender Yapi Kredi. UniCredit rose as much as 2%, among the SX7P top performers today.

Meanwhile, on the political front, the center-right Democratic Party leader signaled support for a potential coalition with Five Star. As a result Italy’s bonds surged after Five Star Movement and Democratic Party back Giuseppe Conte - who just resigned days earlier as part of his feud with the League's Salvini - as Prime Minister, taking an important step toward forming a new government without a snap election.

Thanks to this political optimism, Italy's 10-year yield fell 12bps to 1.01%, a record low, while the BTP-bund spread narrowed 10bps to 173bps, the tightest since May 2018.

Earlier in the session, stocks nudged higher in Sydney and Seoul, were little changed in Tokyo, and slipped in Shanghai and Hong Kong. Material producers climbed and health care firms retreated, as China prepared for the worst in trade negotiations with the U.S. The Topix closed little changed as real estate firms rallied, countering declines in machinery makers. The Shanghai Composite Index dropped 0.3%, dragged by Kweichow Moutai and financial giants, even as China rolled out a series of guidelines to encourage consumption, easing car-purchase restrictions. India’s Sensex fell 0.8%, driven by HDFC Bank and Reliance Industries, after a gauge showed investment and consumption worsened in the country.

The 10-year Treasury yield stayed below 1.50%, near a three-year low, after falling on Tuesday to 6 basis points below the two-year yield, with the 10-year yield close to three-year low touched on Monday. Longer-dated bond yields also fell, with the 30-year Treasury yield dropping to a record low of 1.9039%, and was last down 6 basis points on the day.

Elsewhere, in rates, bunds rose and curves bull flattened as equities fall; 30-year swap spreads lead tightening, pointing to continued large receiving flows in euro swaps. The German 10y yield dropped -2bps to -0.72%; Sept. bund futures +30 ticks to 179.24; France 10y -3bps to -0.44%; Italy 10y -12bps to 1.02%. British Gilts rose, outperform bunds and Treasuries by 2bps and 3bps respectively as PM Johnson seeks to suspend Parliament in a move that hampers lawmakers’ attempts to prevent a no-deal Brexit.

In FX, sterling was the biggest mover as noted above, after U.K. Prime Minister Boris Johnson said he will ask the Queen to suspend parliament from mid-September to mid-October, increasing the risk of a no-deal Brexit. The safe haven yen traded at 105.78 per dollar. It held its gains from the previous day, when it advanced 0.35% to a 7-month peak amid rising trade fears. The dollar index gained 0.1% to 98.094, while the euro was flat.

Crude oil extended gains after API showed a bigger-than-expected drop in American crude inventories and as Iran all but ruled out a meeting with the U.S. Gold turned positive after starting the day in the red, and was last flat at $1,542.91. Silver gained 1.2%, putting it on course for its fourth straight day of gains.

Today's expected data include mortgage applications, which tumbled 6.2%. Elastic, Five Below, Okta, and PVH are among companies reporting earnings.

Market Snapshot

  • S&P 500 futures down 0.1% to 2,861.50
  • STOXX Europe 600 down 0.2% to 372.78
  • MXAP up 0.05% to 151.10
  • MXAPJ down 0.07% to 486.98
  • Nikkei up 0.1% to 20,479.42
  • Topix up 0.04% to 1,490.35
  • Hang Seng Index down 0.2% to 25,615.48
  • Shanghai Composite down 0.3% to 2,893.76
  • Sensex down 0.8% to 37,353.64
  • Australia S&P/ASX 200 up 0.5% to 6,500.64
  • Kospi up 0.9% to 1,941.09
  • German 10Y yield fell 0.8 bps to -0.701%
  • Euro down 0.05% to $1.1085
  • Italian 10Y yield fell 18.4 bps to 0.794%
  • Spanish 10Y yield rose 0.2 bps to 0.085%
  • Brent futures up 0.9% to $60.04/bbl
  • Gold spot down 0.2% to $1,539.84
  • U.S. Dollar Index up 0.2% to 98.16

Top Overnight News from Bloomberg

  • Italian President Sergio Mattarella meets with the country’s main political leaders on Wednesday in a last-ditch bid to carve out a viable majority in parliament and avert a snap election. Negotiations between the anti-establishment Five Star Movement and the Democratic Party have stalled repeatedly
  • President Trump’s credibility has become a key obstacle for China to reach a lasting deal with the U.S., according to Chinese officials familiar with the talks who asked not to be identified
  • Members of the U.S. House Foreign Affairs Committee are pressuring Trump to sanction Turkey for the purchase of the Russian-made S-400 anti-aircraft missile system
  • U.K. government sees an opportunity to restart Brexit negotiations with the EU after Prime Minister Boris Johnson’s meetings last week with German Chancellor Angela Merkel and French President Emmanuel Macron
  • Oil extended gains after a report showed a bigger-than-expected drop in American crude inventories and as Iran all but ruled out a meeting with the U.S.
  • Australia’s sovereign wealth fund has reiterated future returns won’t be as strong as recent years, joining a chorus of big investors concerned about the investment outlook
  • Wary of Trump, China is preparing for the worst case in trade talks. After a weekend of confusing signals, Trump’s credibility has become a key obstacle for China to reach a lasting deal with the U.S., according to Chinese officials familiar with the talks who asked not to be identified
  • Emerging market investors are piling back into safer asset classes as mounting trade tensions spell the end of this year’s clamor for yield. Fears of global slowdown -- the fallout of Trump’s trade war -- and the collapse of the Argentine market have dealt a blow to junk and local-currency bonds this month

Asian equity markets struggled for direction after the subdued performance on Wall St, where the major indices failed to sustain initial gains amid the recent mixed signals on US-China trade and as the US yield curve inversion deepened. ASX 200 (+0.4%) was led higher by strength in tech and miners although gains were capped by weakness amid telecoms as and with earnings in focus, while Nikkei 225 (+0.1%) also lacked firm direction amid an uneventful currency. Hang Seng (-0.2%) and Shanghai Comp. (-0.3%) traded tentatively and failed to benefit from the government’s recent announced measures to boost consumption with markets wary after the recent flip-flopping in the US-China trade saga, while a neutral PBoC liquidity operation and deluge of earnings ahead of the Big 4 bank results added to the cautious tone. Finally, 10yr JGBs were slightly higher as super-long yields declined to multi-year lows with both 30yr and 40yr JGB yields at the lowest since July 2016, while the moves also followed the bull flattening seen in their US counterparts where the 2s/10s inversion briefly widened past -5bps.

Top Asian News

  • Indonesia Sees Second Wave of Trade War Fallout as More Damaging
  • Hong Kong Tycoon Kadoorie Urges Effort to Ease Youth’s ‘Despair’

European equities are lower across the board [Eurostoxx 50 -0.6%] with the exception of the FTSE 100 (+0.3%) as exporters benefit from a weaker Sterling amid reports that UK PM Johnson is said to be moving to block attempts by pro-EU MPs from making a no-deal Brexit impossible. Sectors are mostly in the red with underperformance seen in the IT sectors, potentially amid reports that Permira is planning a Frankfurt listing for software company TeamViewer GmbH this year which could be the Germany’s largest IPO in almost 20 years. Meanwhile, the energy sector is the marked outperformer as oil prices are underpinned by a larger-than-forecast draw in API crude inventories. In terms of individual movers, H&M (+4.4%) shares are at the top of the Stoxx 600 amid an upgrade at RBC. Meanwhile, losses in UK homebuilders exacerbated amid the aforementioned move by UK PM Johnson. Elsewhere, AstraZeneca (+1.2%) trades higher after an FDA granted an orphan drug designation and after its Breztro Aerosphere Phase III trial met its primary endpoint.

Top European News

  • Banks Near Tipping Point as Negative Rates Draw Danish Warning

In FX, a week may be a long time in politics, but for Sterling 24 hours is all it has taken to turn from major outperformer to laggard as Brexit positivity evaporates and the prospect of a no confidence vote in the UK Government rises on the back of PM Johnson’s request to the Queen to suspend Parliament. In short, the move is being framed as a tactical decision to head off legislative attempts to stop a no deal Brexit by curtailing the amount of time between the now delayed Queen’s speech (October 14 from 7 originally) and October 31 Article 50 extension date. In response, Cable tumbled from just under 1.2300 to circa 1.2156 and not far from technical support around 1.2150 in the form of the 21 DMA at 1.2149, while Eur/Gbp rebounded almost a full point towards 0.9125 before the Pound pared some lost ground.

  • USD - The Dollar is obviously deriving indirect impetus from Sterling’s demise, but also firmer against all G10 counterparts bar the Euro that is holding close to 1.1100 on more progress towards a new Italian political partnership between the PD and 5-Star Movement. Hence, the DXY is consolidating above the 98.000 level, albeit within a confined 98.173-003 range ahead of a couple of Fed speakers and the latest Beige Book.
  • NZD/CAD/AUD/JPY/CHF - As noted above, all weaker vs the Greenback, albeit to varying degrees as the Kiwi slips back below 0.6350 and towards 1.0650 against the Aussie that is pivoting 0.6750 and only partially impeded by overnight data showing considerably weaker than forecast Q2 construction work. Meanwhile, the Loonie is still straddling 1.3300 as fragile/weak risk sentiment offsets firm crude prices, with the Yen and Franc regaining some safe-haven allure, but remaining off recent peaks, as Usd/Jpy hovers near 105.75 and Usd/Chf meanders between 0.9810-30. Note, several hefty option expiries could have a bearing on direction into Wednesday’s NY cut including 1.8 bn in Eur/Usd at the 1.1100 strike, 1 bn in Aud/Usd from 0.6700-10 and 1.1 bn in Usd/Jpy between 105.75-80.
  • EM - Broad weakness vs the Buck, but the Lira deriving comfort from another significant improvement in Turkish sentiment and this time on the consumer front. Indeed, Usd/Try is probing 5.8000 support even though Turkey and Russia are pressing ahead with more arms deal plans and the US House of Foreign Affairs Committee is urging President Trump to sanction Turkey. Conversely, the Rouble and Rand are not benefiting from the rebound in Brent and latest SA economic package respectively.

In commodities, WTI and Brent futures are higher as prices are underpinned by last night’s API crude inventory data which printed a significantly larger-than-forecast draw in API crude stocks (-11.1mln vs. Exp. -2.1mln). WTI futures reside north of 55.50/bbl ahead of its 200 and 50 DMAs at 560.7/bbl and 56.53/bbl respectively, whist its Brent counterpart remains just above 60/bbl. ING point out that the WTI/Brent Arb has narrowed further after initially feeling pressure from China’s 5% tariff on US oil. Elsewhere, gold prices remain flat just under the 1550/oz mark whilst copper are modestly firmer with the red metal back above the 2.55/lb mark. Finally, Dalian iron ore prices fell to the lowest in 2 ½ months as falling steel prices continue to raise concerns regarding iron ore demand. Morgan Stanley lowers oil demand growth forecasts: 2019 to 800k BPD (Prev. 1.0mln BPD), 2020 to 1.0mln BPD (Prev. 1.4mln BPD), Brent prices are now expected to fluctuate around USD 60/bbl (Prev. USD 65/bbl)

US Event Calendar

  • 7am: MBA Mortgage Applications, prior -0.9%
  • 12:20pm: Fed’s Barkin Speaks to West Virginia Chamber of Commerce
  • 5:30pm: Fed’s Daly Speaks at RBNZ/IMF Conference in New Zealand

DB's Jim Reid concludes the overnight wrap

Given the UK temperature before I went on holiday was at record levels and given the temperature since I’ve come back has returned to fresh late August records my daughter Maisie asked me last night whether holidays abroad were actually to cool down. She only seems to know hot English summers and miraculous England cricketing victories. I don’t know how to break the cruel realities of the world to her.

I might also have to tell her that bond yields can also go up as well as well as down as a peripheral led rally in Europe saw yields break lower again yesterday. Indeed 10y Bunds closed at -0.693% and -2.7bps on the day while OATs ended -4.2bps lower at -0.418%. It was BTPs which really stood out though, rallying -18.4bps to 1.133% and the most since July 3rd. That means BTPs are now within 10bps of the 2016 yield lows of 1.042% while the spread to Bunds is now down to 183bps and the tightest since May last year. Those moves seemed to bleed through to the Treasury market where 10y yields ended -6.4bps lower at 1.471%. We are now only just over 11bps from the all time low in summer 2016 and have actually only traded lower than current levels on 18 days in the whole of US history covering 11 days in mid-2016 and 7 days during the Euro sovereign crisis in 2012.

Meanwhile the 2s10s curve flattened -4.7bps to a new cycle low of -5.3bps (c -4bps in Asia). The inversion is in danger of being locked in. Whether the Fed wants to or whether it’s even merited, they may have to cut 50bps in September to encourage the yield curve back into positive territory. An interesting conundrum for them.

While the Fed probably wants to focus on their macro objectives, they received another broadside in the press yesterday, this time from former NY Fed President Dudley. In a Bloomberg opinion piece, he openly questioned if the Fed should ease policy to counteract the negative effects of the ongoing trade uncertainty. He said that “Trump’s reelection arguably presents a threat to the US and global economy, to the Fed’s independence and its ability to achieve its employment and inflation objectives. If the goal of monetary policy is to achieve the best long-term economic outcome, then Fed officials should consider how their decisions will affect the political outcome in 2020.” Truly unchartered waters for an ex-Fed official.

The driver of the moves in BTPs came as coalition talks between Five Star and the PD gained momentum, even if there was some posturing from Five Star and threats to end the talks unless there was a commitment from PD to publically commit to a new government led by Conte. This morning Italian daily Corriere della Sera is reporting that the PD has accepted Five Star’s demand to keep Conte as premier but is holding out for a larger number of ministries in exchange - possibly including finance - and also no Di Maio in government. More news likely on this story today.

Not to be outdone though, Greek 10y yields rallied -13.8bps yesterday following the announcement on Monday that the last of the capital controls were to be lifted from September 1st. Greek equities also closed higher, with the main stock market finishing +0.32%.

The rest of equity markets in Europe also ended slightly higher with the FTSE MIB (+1.52%) the obvious outperformer with an index of Italian Banks also up +1.08%. In the US the mood was a little more negative with the S&P 500 (-0.32%), DOW (-0.47%) and NASDAQ (-0.34%) fading to close lower. The only substantive news was the reiteration by China’s foreign ministry that they are unaware of any high-level phone calls between the two sides that moved negotiations forward. They were just reiterating their previous statement, but it still poured some cold water on any signs of progress as per Mr Trunp’s G7 remarks just before the European open on Monday. Cyclical sectors mostly underperformed in the US – financials in particular ending down -0.98%.

Overnight, Asian markets are trading mixed with the Nikkei (+0.15%) and Kospi (+0.59%) up while the Shanghai Comp (-0.33%) is down and the Hang Seng (+0.05%) is trading flattish. As for FX, all G10 currencies are trading weak (range c. -0.1% - -0.3%) this morning and the onshore Chinese yuan is trading flattish at 7.1575. Yields on 10y JGBs are trading down -0.7bps to -0.285% and are within touching distance of their September 2016 low of -0.295%. Elsewhere, futures on the S&P 500 are up +0.38% and WTI oil prices are +1.04% this morning on a report from the American Petroleum Institute highlighting that US crude stockpiles fell by 11.1mn barrels last week and as Iran all but ruled out a meeting with the US until sanctions are lifted.

In other news yesterday, the economic data in the US ended up surprising to the upside. That was particularly the case for the August consumer confidence report which saw consumer confidence print at 135.1 compared to expectations of 129.0. The present situations component jumped 6.7pts to 177.2 which shows some resilience to the recent trade noise, and in fact puts it at the highest level since 2000. The expectations component did nudge a little lower though. On the other hand another plus was the jobs-plentiful/jobs hard-to-get series which rose to the highest since 2000 too. Interestingly the data goes against that of the University of Michigan survey and in fact the gap between the two consumer confidence readings is the largest since 1969 and second largest on record.

Meanwhile, the Richmond Fed manufacturing index climbed yesterday, jumping 13pts to +1 in August (vs. -4 expected). So that further complicates the picture from the mixed PMIs and regional Fed surveys. The only other data came from the housing market where the S&P CoreLogic house price index rose +0.04% mom in June and a little less than expected.

As for the data that was released in Europe yesterday, in Germany we got confirmation that Q2 GDP contracted -0.1% qoq, unrevised from the preliminary estimate. In the eyes of our economists, this confirmed their “technical” but no “severe recession” situation in Germany with their expectation that the economy contracted by around 1/4% qoq in Q3. Meanwhile, in France the August confidence indicators were broadly on the positive side with beats for the business and manufacturing indicators, while consumer confidence printed in line.

Elsewhere, the ECB’s Guindos said yesterday that the ECB “has to act with determination” when asked about negative rates and also that the ECB will have to be much more data dependent and take market expectations “with a pinch of salt”. A reminder that the ECB meeting is just over 2 weeks away now on September 12th, kick-starting a period of 7 days in which we’ll have central bank meetings at the ECB, Fed, BoJ and BoE.

To the day ahead now, where the data this morning includes the July import price index reading in Germany and July M3 money supply reading for the Euro Area. There’s no data due in the US however we are due to hear from the Fed’s Barkin and Daly this evening at separate events.

Published:8/28/2019 7:05:05 AM
[Markets] As defensive sectors solidify leadership, tech stocks are worth keeping on hand, analysts say The major U.S. stock indexes, including the Dow Jones Industrial Average (DJIA) S&P 500 index (SPX) and the Nasdaq Composite index (COMP) have marched steadily lower during the past four weeks, with only three of 11 sectors within the S&P 500 posting gains month-to-date: utilities, real estate and consumer staples. “Tech is our core upside play in the market,” Matt Miskin, co-chief investment strategist at John Hancock Investment Management told MarketWatch. Published:8/27/2019 3:02:37 PM
[Markets] Dow forfeits triple-digit Tuesday-morning gain Dow forfeits triple-digit Tuesday-morning gain Published:8/27/2019 11:29:56 AM
[Markets] Johnson & Johnson, Verizon Communications Inc. share gains lead the way, but Dow flat DOW UPDATE Behind positive momentum for shares of Johnson & Johnson and Verizon Communications Inc., the Dow Jones Industrial Average is trading up Tuesday morning. The Dow (DJIA) was most recently trading 24 points (0. Published:8/27/2019 10:33:34 AM
[Markets] Market Risk Is Rising As Retail Sends Warning

Authored by Lance Roberts via RealInvestmentAdvice.com,

I noted in this past weekend’s newsletter the pick up in volatility over the last few weeks has made investing in the market difficult.

On Friday, the market plunged on new Trump was going to increase tariffs on China. Then on Monday, the markets rallied on comments from President Trump that China was ready to talk.

“China called last night our top trade people and said ‘let’s get back to the table’ so we will be getting back to the table and I think they want to do something. They have been hurt very badly but they understand this is the right thing to do and I have great respect for it. This is a very positive development for the world.” – President Trump, via CNBC

You simply can’t trade that kind of volatility. This was a point made to our RIAPRO subscribers last week:

When you are ‘unsure’ about the best course of action, the best course of action is to ‘do nothing.’”

As we discussed previously, the President has learned that his comments will move markets. Given the shellacking of the markets on Friday, and what was looking to be a dismal open Monday morning, Trump’s comments to boost the markets weren’t surprising.

What the market disregarded were the comments from China:

As I penned last week, the markets have now been “trained” by Trump.

“Ring the bell. Investors salivate with anticipation.”  

However, despite the rally yesterday, the markets are still well confined in a very tight consolidation range.

  • The “bulls” are hoping for a break to the upside which would logically lead to a retest of old highs.

  • The “bears” are concerned about a downside break which would likely lead to a retest of last December’s lows.

  • Which way will it break? Nobody really knows.

This is why we have been suggesting raising cash on rallies, and rebalancing risk until the path forward becomes clear.

“The reason we suggest selling any rally is because, until the pattern changes, the market is exhibiting all traits of a ‘topping process.’ As the saying goes, a market-top is not an event; it’s a process.”

Let me restate from this past weekend’s missive where we are positioned currently:

“Over the past few months, we have reiterated the importance of holding higher levels of cash, being long fixed income, and shifting risk exposures to more defensive positions. That strategy has continued to work well.”

  • We have remained devoid of small-cap, mid-cap, international and emerging market equities since early 2018 due to the impact of tariffs on these areas.

  • For the same reasons we have also reduced or eliminated exposures to industrials, materials, and energy

  • With the trade war ramping up, there is little reason to take on additional risk at the current time as our holdings in bonds, precious metals, utilities, staples, and real estate continue to do the heavy lifting.”

As I noted previously, if you are told you have to “buy and hold” a little of everything to be diversified, then what are you paying an advisor for? There are plenty of “robo-advisors” that will gladly clip a fee from you to do something you can easily do yourself.

However, be warned. There are currently high correlations between asset classes, which suggests that when the next bear market ensues there will be few places to hide. What goes up together, will come down together as well. Being “diversified,” in the traditional sense, isn’t going to help you.

Markets Send Warning Signals

While large-cap stock indexes (S&P 500, Dow Jones, and Nasdaq) have maintained a reasonably steady state over the past 18-months, such is not the case across the broader market. As I noted previously,share repurchases have provided much of the lift for large-capitalization stocks over the last couple of years. 

“Corporate share buybacks currently account for roughly all ‘net purchases’ of U.S. equities in recent years. To wit:

“It is likely that 2018/2019 will be the potential peak of corporate share buybacks, thereby reducing the demand for equities in the market. This ‘artificial buyer’ explains the high degree of complacency in the markets despite recent volatility. It also suggests that the ‘bullish outlook’ from a majority of mainstream analysts could also be a mistake. 

If the economy is weakening, as it appears to be, it won’t be long until corporations redirect the cash from ‘share repurchases’ to shoring up operations and protecting cash flows.”

With portfolio managers needing to chase performance, the easiest, and safest, place to allocate capital is in highly liquid, large capitalization companies which are being supported by share repurchases. Despite trade turmoil, Fed disappointment, and weaker economic, and earnings growth, stocks still remain elevated and confined within the longer-term bullish trend.

However, once you step outside the large-capitalization universe, a very different picture emerges.

Since small and mid-capitalization companies don’t engage in massive share repurchase programs, and are directly impacted by early changes to consumer spending and tariffs. As such, it is not surprising that performance has been lagging that of its large-cap brethren.

Small-Cap 600 Index

Mid-Cap 400 Index  

The same issue applies to international markets as well, where economic growth has been markedly weaker than in the U.S. 

MSCI All-World (Ex-US) Index

Given the consumer makes up about 2/3rds of the U.S. economy, low unemployment, and retail sales data is often cited as reasons to be “bullish” on equities. However, as shown in the chart below, the ratio between consumer “discretionary” and “staples” companies suggests there is an emerging weakness in the retail sector.

As Tomi Kilgore noted for MarketWatch, 

“One way to gauge the real strength of the consumer is to measure how much they spend on what they want (discretionary items) relative to what they need (staples). The consumer discretionary sector is highly sensitive to what the overall stock market is doing, and to worries about economic growth and contraction.

To see this relationship in real time is through comparing consumer discretionary stocks, by way of the SPDR Consumer Discretionary Select Sector exchange-traded fund (XLY), to the consumer staples sector, as tracked by the SPDR Consumer Staples Select Sector ETF (XLP).”

Historically, when the S&P 500 is on a monthly sell signal, with an inverted yield curve, and discretionary stocks are underperforming staples, it has been a leading indicator of a recessionary economy and bear market. 

As Tomi goes on to note:

“That by itself might lead one to believe that worries about the economy are overdone, until a chart of consumer confidence is placed side-by-side with a chart of retail stocks, as tracked by the SPDR S&P Retail ETF (XRT).”

As one might expect, those charts usually move in tandem. But sometimes they move in opposite directions for short periods of time, and when they do, it’s the stocks that have been the leading indicator.

And the retail sector should still matter to investors, because when the XRT has diverged from the broader market at key turning points, it has been the XRT that has led the way.

Slow At First, Then All Of A Sudden

What all of this suggests is that “risk” is building in the markets.

However, risk builds slowly. This is why the investment community often uses the analogy of “boiling a frog.” By turning up the heat slowly, frogs don’t realize they are being boiled until its too late. The same is true for investors who make a series of mistakes as “risk” builds up slowly. 

  • Investors are slow to react to new information (they anchor), which initially leads to under-reaction but eventually shifts to over-reaction during late-cycle stages.

  • Investors are ultimately driven by the “herding” effect. A rising market leads to “justifications” to explain over-valued holdings. In other words, buying begets more buying.

  • Lastly, as the markets turn, the “disposition” effect takes hold and winners are sold to protect gains, but losers are held in the hopes of better prices later. 

The end effect is not a pretty one.

When the buildup of “risk” is finally released, the explosion happens all at once leaving investors paralyzed trying to figure out what just happened. Unfortunately, by the time they realize they are the “frog,” it is too late to do anything about it.

With President Trump on a warpath with China, increasing tariffs (a tax on businesses), at a time when economic growth and corporate profits are weakening, raises our concern over the amount of equity exposure we are carrying in the markets. 

Given that markets still hovering within striking distance of all-time highs, there is no need to immediately take action. However, the continuing erosion of underlying fundamental and technical strength keeps the risk/reward ratio out of favor. As such, we suggest continuing to take actions to rebalance risk.

  1. Tighten up stop-loss levels to current support levels for each position.

  2. Hedge portfolios against major market declines.

  3. Take profits in positions that have been big winners

  4. Sell laggards and losers

  5. Raise cash and rebalance portfolios to target weightings.

We are closer to the end of this cycle than not, and the reversion process back to value has historically been a painful one. 

Published:8/27/2019 10:00:08 AM
[Markets] J&J stock up 4% after judge fines company less than some expected in landmark opioid case Shares of Johnson & Johnson rose 4% in after-hours trade Monday after a judge ordered the consumer-products giant to pay $572 million for contributing to the opioid crisis in Oklahoma. The amount was less than the $1 billion some analysts had expected the company to be fined. This was the first opioid case to go to trial and the verdict could help shape the results for around 1,500 similar opioid-related suits filed by state and local governments, now consolidated in federal court in Ohio. Shares of J&J have fallen 1% in the year to date, while the Dow Jones Industrial Average has gained 9.9%. The S&P 500 has gained 14.8%. Published:8/26/2019 3:58:32 PM
[Markets] These 3 Key Stocks Boost Dow, But Big Early Gains Fade Key indexes faded from big early gains sparked after President Donald Trump said China wants to resume trade talks. Apple, Disney and Nike led the Dow Jones. Published:8/26/2019 2:27:39 PM
[Markets] Dow's nearly 200-point jump led by gains in shares of Walt Disney, Apple Inc. DOW UPDATE The Dow Jones Industrial Average is up Monday afternoon with shares of Walt Disney and Apple Inc. delivering the strongest returns for the blue-chip average. Shares of Walt Disney (DIS) and Apple Inc. Published:8/26/2019 1:26:00 PM
[Markets] Dow sees triple-digit rebound after latest Trump assertion on China trade talks Dow sees triple-digit rebound after latest Trump assertion on China trade talks Published:8/26/2019 9:24:08 AM
[Markets] Trader Rages How Market Is "Haplessly Complicit In Allowing Itself To Be Manipulated"

Dow futures rose 700 points from overnight lows, shrugging off dismal German sentiment data in favor of some (denied) comments from Trump that talks continue with China...

But, since the market opened, doubts appear to have appeared...

As Europe opened, 'someone' suddenly decided to dump gold futures

And, as former fund manager and FX trader Richard Breslow rages this morning, "it’s beyond extraordinary how financial markets remain willing to be so haplessly complicit in allowing themselves to be so easily manipulated."

Via Bloomberg,

It comes from years of having central bankers telling investors at what price assets are desired to trade. No one has needed to believe anything. Merely follow the bouncing bubbly ball.

But with the realization that monetary policy is running out of room, while politicians still believe the prospect of ever lower interest rates masks all sins, the world is rediscovering geopolitics. And it doesn’t like what it sees. Nor should it. That’s the bad news. As it has been on conspicuous display, the chances of circumstances spiraling out of control are higher than was credited. Not all genies can be put back into the bottle. It’s why traders are willing to be buffeted by conflicting trade news, but are thoroughly shaken by the events in Hong Kong.

The good news, and also the growing risk -- if you judge the world through the prism of where the S&P 500 trades -- is that so does everyone in a position of authority. Which is why it has been completely understandable to fear for the global economy, despair over critically important supply chains, accept that companies are loath to make capital investments, worry just how long consumers will be willing to keep spending and, yet, look for dips to buy.

When that mentality changes we could very well get our “Katy bar the door!” moment. But, despite the sheer ugliness of Friday’s news and price action, it hasn’t happened yet. Not as long as risk parity rules the day and sovereign wealth funds stick to their buy-and-hold equity allocations. And central banks feel obliged to keep trying to cover for the mistakes and small-mindedness of others. You will know things have changed when the bounces are perceived as the opportunities to fade, rather than the opposite. It won’t come from chasing prices lower on panicked downdrafts, but a willingness to sell when everything looks rosy.

That’s a reason markets aren’t overly concerned with the prospect of unilateral intervention in the dollar. Countries and investors need them. And if things continue to get worse with the global economy, and emerging markets most particularly, cheapening the currency would just temporarily place it at more advantageous levels to buy. Like it or not, the dollar is the ultimate safe-haven. And it is highly unlikely Treasury would be in any position to convince investors, other than for the shortest of time frames, that they would be willing to muster the amounts required to fill in demand. It has to be believable to work. And that requires requisite size. Which is unlikely when the rest of the world would only participate under duress.

Bond markets seem broken yet it’s near impossible to come up with a good reason to be a contrarian. That’s a problem, but it is what it is. As bad as equities look, they still have good support below which, at least, puts a number around the risks. It probably isn’t a coincidence that August’s low for the S&P 500 future is an important technical level. Especially as we approach month end. Or that the cash index hasn’t yet tested it at all.

Published:8/26/2019 9:24:07 AM
[Markets] Apple Inc., Boeing share gains contribute to Dow's nearly 200-point jump The Dow Jones Industrial Average is up Monday morning with shares of Apple Inc. and Boeing delivering the strongest returns for the index. The Dow (DJIA) was most recently trading 197 points (0.8%) higher, as shares of Apple Inc. (AAPL) and Boeing (BA) have contributed around a quarter of the index's intraday rally. Apple Inc.'s shares have risen $3.71, or 1.8%, while those of Boeing have climbed $5.86, or 1.6%, combining for an approximately 65-point boost for the Dow. Published:8/26/2019 8:54:43 AM
[Markets] "Call Or No Call?" Mnuchin Explains What "Really" Happened

Dow futures plunged 200 points early this morning after China denied a call had taken place with Trump's team (a headline that had juiced US equity futures 700 Dow points off overnight lows).

Trump and Mnuchin quickly sprang into action to try to talk the market back up:

Reporter: "Did you mean to say that there was also a call last night [with China] or was there not actually a call?"

Steve Mnuchin: "There were discussions that went back and forth, and let's just leave it at that."

Trump [interrupting]: "Last night. And before last night."

But one glimpse at Mnuchin's face (the worst poker player ever) tells you all you need to know about what really happened...

But, the market bought it and the algos immediately kneejerked higher...

The issue at hand is 1) Mnuchin wants to shut down the discussion immediately rather than discuss any more details and 2) they appear to reference comments from Chinese vice premier Liu which were made to the Chinese press (confirming no desire to escalate a trade war) as opposed to an actual call overnight.

We give the last word to Jim Cramer, who waltzed onto CNBC's set this morning and proclaimed:

"You can claim that the president's a liar, but the futures are up, so I don't care..."

Indeed Jim, that is all that matters...

Published:8/26/2019 8:30:47 AM
[Markets] The Dow Is Rising on Better Trade News, but Tariffs Are Still Threatening Growth WEEKDAY TRADER Tariff watch continues. After a wild Friday—the Dow Jones Industrial Average dropped more than 620 points, or 2%—U.S. stock futures rebounded after President Donald Trump said Chinese officials had called Washington, saying they wanted to resume trade negotiations, and tweeted that trade talks “are continuing. Published:8/26/2019 7:58:11 AM
[Markets] Dazed Traders Wake Up To Stock Surge After Surreal Night

US traders went to bed last night with US equity futures down about 30 points from their Friday close. They woke up with the Emini as much as 40 points higher after what has been a surreal night full of apparent lies and panicked attempts to jawbone the market higher.

After a torrid start to the overnight session, which saw US futures tumble, the Chinese Yuan and 10Y Treasury yields all tumble, the safe haven Japanese yen soar and the Turkish lira briefly flash crash as Mrs Watanabe was again stopped out en masse...

... the futures plunge was halted after China’s top trade negotiator, Vice Premier Liu He, had used an appearance in China to call for a de-escalation in tensions: "We are willing to solve the problem through consultation and cooperation with a calm attitude,” Liu said at the opening ceremony of 2019 Smart China Expo in Chongqing, Caixin reported on Monday. “We firmly oppose the escalation of the trade war,” he said, adding that it “is not conducive to China, the U.S. and the interests of people all over the world."

Yet while Liu’s comments and a slightly stronger-than-anticipated yuan fixing suggested that traders don’t need to worry about an immediate retaliation from China after a tumultuous weekend - which included China's flagship People's Daily reporting that China would follow through with retaliatory measures against Trump's "barbaric" tariffs and fight the trade war to the end, after the U.S. failed to keep its promises - it was clear that Beijing had no intention of losing face by being the first to make a phone call to Trump in hopes of ending the escalation.

And yet that's precisely what happened when seconds before the European open, just before 3am ET, speaking at the G-7 Trump said that China wants “to make a deal,” referencing the Liu comments, and saying that Beijing is willing to resolve the ongoing trade war through “calm” negotiations with the United States. And just to make sure that he saves face, Trump also said that US officials received two “very productive” calls from the Chinese but declined to say whether he’d spoken directly to Xi. “They want to make a deal,” he said, adding that the U.S. would accept the Chinese invitation and return to the negotiations. “We’re going to start very shortly and negotiate and see what happens but I think we’re going to make a deal.”

The comment from Trump was enough to send futures surging over 30 points, rising above the Friday close and wiping out all the weekend angst...

... even though moments later, Geng Shuang, a spokesman for the Foreign Ministry in Beijing, said that he wasn’t aware of any weekend U.S.-China phone calls, instead repeating China’s position that the trade war should be settled through negotiation, adding that China resolutely opposes to new US tariffs, and noting that US tariffs violates the accord struck between leaders in Osaka.

Then, just before 6am, China's Global Times editor in chief Hu Xijin confirmed as much when he tweeted that "based on what he knows", there were no phone calls between the US and China in recent days, suggesting that Trump may have simply hallucinated the 2 phone calls, which only took place in his head in hopes of keeping stocks from plunging.

Then, in a subsequent tweet, CNBC's Eamon Javers said

Asked about the Chinese denials of new trade calls, despite President Trump’s statement, Trump implies the calls were with the vice premier of China. Sec. Mnuchin says: “There’s been communication going on.” President Trump chimes in: “at the highest level.” Pressed further about the calls with China that Trump said happened and the Chinese deny, Trump says he doesn’t want to talk about calls.

And the punchline: "Pressed further about the calls with China that Trump said happened and the Chinese deny, Trump says he doesn’t want to talk about calls."

Whather Trump is lying or he thinks he is telling the truth, the rapid reversal in sentiment was enough to send Europe's Stoxx 600 Index high enough to reverse an earlier loss. German blue chips including Henkel and Siemens have predicted weaker earnings, and the German government has signaled it’s open to fiscal stimulus if the current downturn turns into a severe recession.

Hoping to put lipstick on a pig, Jeferies strategists said that "the Dow lost over 623 points after President Trump’s Tweetstorm last Friday" adding that "by Sunday, President Trump had muddied the waters enough that the escalation may be dismissed as more noise. We also expect President Trump to jawbone the U.S. market higher in coming weeks with spillover effects for China. We continue to believe that all the drama is textbook ‘Art of the Deal’ negotiation style and that some sort of deal is more likely than not."

Not everyone was as complacent: "The past 72 hours have left financial markets and the global economy in a far more vulnerable position,” said Eleanor Creagh, a strategist in Sydney at Saxo Capital Markets. “As a synchronized global slowdown takes effect and commodity prices roll over there is no reason that bond yields should be heading higher."

In any case, Trump's jawboning however came too late to save Asian equities, which dropped, led by communications and technology firms, as investors dumped risk assets and almost all markets in the region were down, with Hong Kong, Taiwan and South Korea leading declines. Japan's Topix fell 1.8% to a seven-month low, as technology shares weighed heavily on the gauge, even though the U.S. and Japan agreed on a trade deal under which Tokyo would slash tariffs on American farm products, while delaying the threat of additional levies on Japanese auto exports. Over in China, the Shanghai Composite Index retreated 1.2%, driven by China Merchants Bank and Kweichow Moutai; sentiment improved somewhat as China Vice Premier Liu He said the country is willing to resolve the trade dispute with a calm attitude through dialogue, according to a Caixin report.

The yuan plunged to a fresh 11 year low: the offshore yuan weakened for an eighth straight session, dropping as much as 0.9% to the lowest intraday level since it was created in 2010.

With Britain’s market closed for a holiday, Treasuries reopened for trading in the U.S., paring their advance from Asia hours after the 10Y yield plunged to levels just shy of all time lows.

Meanwhile, the euro slumped continued, dropping after German business confidence extended its decline, falling to the weakest level in almost seven years, as a deepening manufacturing slump put Europe’s largest economy on the brink of recession. As a reminder, German GDP contracted in the second quarter and the Bundesbank warned it could shrink again in the third, sending the economy into its first technical recession in years.

Ifo’s business climate index fell to 94.3 in August, missing expectations of a 95.1 print, marking its fifth straight decline. It was weaker than the median estimate in a Bloomberg survey of economists, and gauges for expectations and current conditions also worsened.