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[Markets] Dow Posts Solid Gains as Vaccine Optimism Boosts Wall Street Stocks rose Monday as investors welcomed further progress on the development of a coronavirus vaccine but remained cautious amid rising infection rates and worries that curbs on businesses to stem the spread of the virus could hamper an economic recovery. The Dow Jones Industrial Average rose 210 points, or 0.72%, to 29,474, the S&P 500 gained 0.39% and the Nasdaq was up 0.11%. The Covid-19 vaccine candidate being developed by AstraZeneca and the University of Oxford was found in a large trial to have prevented a majority of people from getting the disease. Published:11/23/2020 10:16:32 AM
[Markets] 10 Best Stocks in the Dow This Past Week: Boeing Rises The top 10 best-performing stocks in the Dow Jones Industrial Average over the past week included Boeing, Nike and Disney among others. Published:11/20/2020 4:46:26 PM
[Markets] GLOBAL MARKETS-Stocks, bonds fall, dollar flat as Fed fears subside Stock prices and bond yields fell in relatively light trading on Friday as investors reacted to dwindling aid for the U.S. economy and rising coronavirus infection rates. The Dow Jones Industrial Average fell 219.75 points, or 0.75%, to 29,263.48, the S&P 500 lost 24.33 points, or 0.68%, to 3,557.54 and the Nasdaq Composite dropped 49.74 points, or 0.42%, to 11,854.97. The S&P 500 and the Dow posted marginal losses for the week, while the tech-laden Nasdaq settled a bit higher from last Friday's close. Published:11/20/2020 4:20:37 PM
[Markets] U.S. Index Futures Fall as Mnuchin Seeks Unused Funds From Fed (Bloomberg) -- U.S. stock index futures fell after Treasury Secretary Steven Mnuchin and the Federal Reserve publicly disagreed Thursday over whether to extend the central bank’s emergency pandemic lending programs.December contracts on the S&P 500 dropped 0.5% at 2:49 p.m. in Tokyo. Futures declined 0.7% on the Dow Jones Industrial Average and were little changed on the Nasdaq 100 Index. Mnuchin sought a 90-day extension for four of the central bank’s emergency lending programs, but requested other programs expire on schedule on Dec. 31 and the Fed return $455 billion to the Treasury so Congress can spend the money elsewhere. But the central bank pushed back and said the programs served a vital role.“I think traders are concerned that the Fed backstop is being compromised by a Treasury secretary who’ll be out of a job in a few months,” said Max Gokhman, Pacific Life Fund Advisors’ head of asset allocation. “It’s very hard to make decisive day-to-day calls in a market like this where there are so many sources of volatility.”On Thursday, tech shares led U.S. equity indexes higher, with the stay-at-home trade gaining appeal as investors weighed the impact of tougher virus restrictions on economic growth along with the outlook for widespread vaccine distribution within months. The S&P 500 Index ended the day up 0.4%.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P. Published:11/20/2020 12:11:00 AM
[Markets] Hundreds Of Companies That Got PPP Loans Have Gone Bankrupt Hundreds Of Companies That Got PPP Loans Have Gone Bankrupt Tyler Durden Thu, 11/19/2020 - 08:50

Authored by Mike Shedlock via MishTalk,

Recipients of PPP loans have filed for bankruptcy after the money ran out.

At least a Half Billion in PPP Loans Won't Be Repaid 

Hundreds of companies employing 23,400 people went Bankrupt after PPP Funds Ran Out.

The total number of companies that failed despite getting PPP loans is likely far higher. The Journal only analyzed the big borrowers from the program, which accounted for about half of the overall loans though only about 13.5% of the total participants. And many small businesses simply liquidate when they run out of cash rather than file for bankruptcy.

The SBA has only released data on the largest borrowers, which the Journal linked to bankruptcy filings.

About $525 billion in loans were distributed to over 5 million companies between April 3 and Aug. 8.

At least 285 medium-sized companies went under. Undoubtedly thousands of smaller companies did as well.

PPP Program Fatally Flawed

I never understood giving money to corporations so they could pay workers. 

The workers were covered by state unemployment insurance, plus pandemic assistance. 

Many people made more money being unemployed than than they did working thanks to $600 in weekly pandemic assistance checks.

Moreover, the program was fertile grounds for fraud. Many companies opened businesses to take advantage of the guarantees. 

Evidence of PPP Fraud Mounts

Please consider Evidence of PPP Fraud Mounts, Officials Say

The Small Business Administration’s inspector general, an arm of the agency that administers the PPP, said last month there were “strong indicators of widespread potential abuse and fraud in the PPP.”

The watchdog counted tens of thousands of companies that received PPP loans for which they appear to have been ineligible, such as corporations created after the pandemic began, businesses that exceeded workforce size limits (generally 500 employees or fewer) or those listed in a federal “Do Not Pay” database because they already owe money to taxpayers.

Several hundred PPP-related investigations have been opened, involving nearly 500 suspects and hundreds of millions of dollars of loans, according to the Federal Bureau of Investigation.

Some Democratic lawmakers and others have voiced concerns that the SBA’s refusal to release the names of all borrowers would make detecting fraud more difficult.

That issue might have been resolved last week, however, when a federal judge sided with news organizations including Dow Jones & Co., publisher of The Wall Street Journal, that argued the SBA was legally required to disclose the borrowers.

More Shutdowns Means More Bankruptcies

  1. Ohio Gov. Restricts Weddings, Threatens to Close Businesses

  2. 24 States Reach Their Highest Level of Covid Hospitalizations

  3. Utah Governor Mandates Masks and Restricts Gatherings

  4. El Paso Shut Down as 10 Mobile Morgues Fill Up

Also note 83% of Passengers Will Not Return to Old Travel Habits

States are increasing lockdowns again except this time there is no program in place to deal with the mess.

Bankruptcy counts will soar. What a disaster.

Published:11/19/2020 8:00:56 AM
[Markets] Quant Carnage Hammers Iconic Hedge Funds Renaissance, Two Sigma Quant Carnage Hammers Iconic Hedge Funds Renaissance, Two Sigma Tyler Durden Tue, 11/17/2020 - 15:17

Last Monday, when momentum stocks suffered a spectacular collapse as the Dow Jones Market Neutral Momentum index plunged the most on record...

... a move which Nomura's Charlie McElligott quantified as a 15 sigma drawdown, or one which normally would take place every several billions years...

... we said that "what was already a dismal year for quant funds is about to get absolutely catastrophic."

We were right, because as Bloomberg reports today the carnage spread as far as some of the most iconic quant powerhouses: Jim Simons' Renaissance Technologies and its peer, Two Sigma Advisors.

According to Bloomberg, the two quant investing giants, both of which rely heavily on factor investing, have seen losses across several of their funds in 2020, "a sign of how unprecedented market volatility caused by the Covid-19 pandemic hurt even the most sophisticated traders."

The reason: not only did momentum stocks, which virtually all quants had been riding since the March lows as a result of the chronic underperformance of the value factor, tumbled...

... but the VIX exploded higher, and has averaged 33 since the end of February, 14 points higher than the average over the prior 30 years. That has upended performance from firms that in recent years have been among the best on Wall Street, and normally thrive during periods of heightened volatility.

But the real reason for the quant carnage is that backtests and historical trade relationships which quants rely on to formulate investment strategist, have failed miserable in 2020: "Quants rely on data from time periods that have no reflection of today’s environment," said Adam Taback, CIO at Wells Fargo Private Wealth Management. "When you have volatility in markets, it makes it extremely difficult for them to catch anything because they get whipsawed back and forth."

As a result, Renaissance saw a decline of about 20% through October in its long-biased fund, with the $75 billion firm’s market-neutral fund tumbling 27% and its global-equities fund losing about 25%. Amusingly, the firm "explained" its dismal performance to investors claiming that its losses are due to being under-hedged during March’s collapse and then over-hedged in the rebound from April through June. That happened because models that had "overcompensated" for the original trouble.

One would think such excuses are moot when one's fund has a "hedge" adjective behind it, but apparently not.

"It is not surprising that our funds, which depend on models that are trained on historical data, should perform abnormally (either for the better or for the worse) in a year that is anything but normal by historical standards," Renaissance told clients in a September letter. According to Bloomberg, the firm said it has redirected additional personnel to work on the funds, and that its leadership "made it clear to the research staff that understanding and addressing the situation with these funds is our company’s highest priority."

Yeah, well, in a world in which central bankers have no idea what they are doing, we wish the "research staff" all the best as they go back to the drawing board with their investing models.

Another legendary quant firm, the $58 billion Two Sigma, saw its risk-premia strategy lose 11.5% this year through last month, Bloomberg reported. The firm’s absolute-return fund declined 2.7%, while its absolute-return macro fund slumped 23%.

While we have yet to hear of more pronounced casualties, it's only a matter of time before far greater losses are unearthed. The reason is that for quant funds which specialize in factor-investing - picking securities based on traits such as recent performance or volatility - November may have added to the bruising, according to Neuberger Berman Group’s Ian Haas who oversees quantitative and directional strategy research.

"This could be a very bad month" for firms that had been betting on so-called momentum stocks, said Haas based on preliminary performance data from some of those hedge funds on Nov. 9. That’s when Pfizer Inc. announced the results of its vaccine trial, which spurred an unprecedented rotation out of growth, tech and momentum companies that had been benefiting from the pandemic and the lowflation environment into value stocks.

Ironically, even quants such as Cliff Asness' AQR Capital Management, which have a pro-value tilt in many of its portfolios, the pullback from momentum exposure was simply too big. In fact, the overall hit was so big that the AQR Equity Market Neutral Fund added to its losses without barely a rebound, and is down 19% this year through Monday, just off the worst levels of the year.

To be sure, not every quant has had a miserable year: D.E. Shaw’s main hedge fund, The Composite Fund, made 0.4% in October, bringing gains for the first 10 months to about 15%, Bloomberg reported, adding that its macro-oriented Oculus Fund jumped 2% in October, extending 2020 gains to 23%.

Published:11/17/2020 2:30:25 PM
[Markets] Market Snapshot: Stock futures slip after record-breaking session for Dow, S&P 500 Stock-index futures pull back Tuesday, indicating a lower start for equities a day after the S&P 500 and Dow Jones Industrial Average closed at records in a rally fueled by progress toward a COVID-19 vaccine.
Published:11/17/2020 6:20:45 AM
[Markets] RPT-GLOBAL MARKETS-Asia stocks gain after vaccine hopes push Wall Street to record highs Asian stocks opened firmer on Tuesday after the S&P 500 and Dow Jones indexes hit record highs on news of another promising coronavirus vaccine, which supported hopes of a quicker economic recovery. Investor sentiment shot up after Moderna Inc said its experimental COVID-19 vaccine was 94.5% effective in preventing infection based on interim late-state data. The Cambridge, Massachusetts-based firm became the second drugmaker, after Pfizer Inc, to announce promising trial data in the development of a vaccine to defeat the pandemic. Published:11/16/2020 7:12:47 PM
[Markets] Asian Stocks Drift After Vaccine News; Dollar Dips: Markets Wrap (Bloomberg) -- Asian stocks drifted at the open Tuesday as a rally that propelled them to record highs on optimism about a vaccine eased. The dollar extended a decline.Shares were little changed in Japan, Australia and South Korea, compared to the U.S. where the S&P 500 closed at an all-time high after Moderna Inc.’s vaccine was shown to be 94.5% effective in a preliminary analysis of a large late-stage clinical trial. S&P 500 futures fluctuated. Stocks poised to benefit from a reopening, such as cruise lines and air carriers, were among the day’s best performers on Wall Street. Benchmark Treasury yields ticked back above 0.90%. Oil held gains.Elsewhere, Tesla Inc. shares jumped more than 10% in after-hours trading after an announcement that Elon Musk’s upstart carmaker will join the S&P 500 Index on Dec. 21.The vaccine news adds yet another driver to a global stocks rotation into value and cyclical sectors that have been hardest hit by the pandemic, and out of more defensive industries like technology. Investors are betting that vaccines will allow economies to reopen next year.“We might be transitioning from a defensive bull market to a more cyclically offensive one but more clarity is required in terms of when social mobility will normalise,” Chris Iggo, chief investment officer of AXA Investment Managers Core Investments, said in a note. “That isn’t clear yet. The euphoria created by the presidential election result and the vaccine announcement will give way to a more sober analysis of how long and smooth the road to recovery will be.”Concerns about a sustainable economic recovery persist amid a flare-up in virus cases around the world. The pandemic continues to escalate in Europe and the U.S. The seven-day average of new cases in the U.S. was climbing in every state on Sunday.Here are some events to watch out for this week:Brexit talks look set to continue as the U.K. and EU approach the latest deadline.Bloomberg New Economy Forum virtually convenes global leaders to discuss trade, growing political populism, climate change, and the pandemic. Through Nov. 19.OPEC+ Joint Ministerial Monitoring Committee meets Tuesday.U.S. retail sales due Tuesday.Bank Indonesia rate decision Thursday.These are the main moves in markets:StocksS&P 500 futures were flat as of 9:16 a.m. in Tokyo. The S&P 500 Index climbed 1.2%. The Dow Jones Industrial Average advanced 1.6%.Topix index rose 0.1%.The S&P/ASX 200 Index rose 0.4%.Kospi index was little changed.Hong Kong’s Hang Seng Index contracts gained 0.3% earlier.CurrenciesThe yen rose 0.1% to 104.50 per dollar.The offshore yuan was at 6.5654 per dollar, up 0.1%.The Bloomberg Dollar Spot Index decreased 0.1%.The euro traded at $1.1861, up 0.1%.The British pound rose 0.2% to $1.3219.BondsThe yield on 10-year Treasuries was at 0.90%.Australia’s 10-year bond yield rose four basis points to 0.93%.CommoditiesWest Texas Intermediate crude rose 0.2% to $41.40 a barrel.Gold was steady at $1,890.84 an ounce.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P. Published:11/16/2020 6:42:26 PM
[Markets] GLOBAL MARKETS-Asia stocks gain after vaccine hopes push Wall Street to record highs Asian stocks opened firmer on Tuesday after the S&P 500 and Dow Jones indexes hit record highs on news of another promising coronavirus vaccine, which supported hopes of a quicker economic recovery. Investor sentiment shot up after Moderna Inc said its experimental COVID-19 vaccine was 94.5% effective in preventing infection based on interim late-state data. The Cambridge, Massachusetts-based firm became the second drugmaker, after Pfizer Inc, to announce promising trial data in the development of a vaccine to defeat the pandemic. Published:11/16/2020 6:17:06 PM
[Markets] : Tesla to join S&P 500, stock jumps more than 9% Tesla Inc. stock rallied after hours Monday after S&P Dow Jones Indices said it will add the electric-car maker to the S&P 500 at the start of trading on Dec. 21.
Published:11/16/2020 5:06:08 PM
[Markets] NewsWatch: The Dow just clinched its fastest bear-market recovery in 30 years The Dow Jones Industrial Average on Monday notches its first all-time high since February, ending a relative fallow period for the blue-chip benchmark, which was hit hard by the COVID-19 pandemic relative to its peers.
Published:11/16/2020 4:07:52 PM
[Markets] Market Extra: The Dow just clinched its fastest bear-market recovery in 30 years The Dow Jones Industrial Average on Monday notches its first all-time high since February, ending a relative fallow period for the blue-chip benchmark, which was hit hard by the COVID-19 pandemic relative to its peers.
Published:11/16/2020 3:05:38 PM
[Markets] US STOCKS-Wall St headed for record closing high as Moderna reignites vaccine hopes Wall Street stocks advanced on Monday, setting the S&P 500 and the Dow on course for all-time closing highs as news of another promising coronavirus vaccine bolstered hopes of eradicating the disease, while spiking infections and new shutdowns threaten to hobble a recovery from the pandemic recession. The blue-chip Dow Jones industrial average hit an intraday high and flirted with the 30,000 mark while the Russell 2000 was also on track for record close. Moderna Inc said its experimental COVID-19 vaccine was 94.5% effective in preventing infection based on interim late-state data. Published:11/16/2020 1:37:01 PM
[Markets] Dow Jones Soars on Moderna Vaccine News; Home Depot, IBM, and Cisco Announce Acquisitions More positive vaccine news lit a fire under the stock market on Monday, with the Dow Jones Industrial Average (DJINDICES: ^DJI) up about 1.4% at noon EST. Moderna announced that an independent data-safety monitoring board found that its coronavirus vaccine candidate had an efficacy rate of 94.5% in a large phase 3 trial. The company expects to have 20 million doses ready to ship in the U.S. by the end of 2020, and it's on track to manufacture as many as 1 billion doses globally next year. Published:11/16/2020 12:10:55 PM
[Markets] Stocks Rebound and Close Higher; Dow Up 400, Led by Cisco Wall Street rebounds and Cisco powers the Dow Jones Industrial Average nearly 400 points, or 1.37%, higher. Published:11/13/2020 3:56:29 PM
[Markets] Dow Jones Up 400 Points as Cisco and Disney Stocks Surge on Earnings Beats The stock market was rallying on Friday despite a rapidly worsening pandemic in the United States. The Dow Jones Industrial Average (DJINDICES: ^DJI) was up about 1.2% at 3:25 p.m. EST, outperforming the other major indexes. Cisco reported a steep revenue decline but provided an optimistic outlook, and Disney leaned on its streaming business to beat analyst expectations. Published:11/13/2020 3:25:45 PM
[Markets] Why the Stock Market Can't Make Up Its Mind The stock market was mixed on Tuesday, with very strong moves in both directions from different market benchmarks. The Dow Jones Industrial Average (DJINDICES: ^DJI) again posted sizable gains as it once again challenged its all-time closing high. When you look beyond the large-cap stock indexes, you can see even more variation in returns, as the Russell 2000 Index of small-cap stocks was up more than 2%. Published:11/10/2020 3:42:08 PM
[Markets] Market Snapshot: Stocks put in mixed performance as vaccine progress sparks rotation U.S. stocks open mixed Tuesday, with the Dow Jones Industrial Average adding to gains, while the Nasdaq suffers as investors rotate out of pandemic winners as investors cheer vaccine progress.
Published:11/10/2020 8:40:22 AM
[Markets] Dow Trades Higher Ahead of Election Day, Tech Edges Lower Stocks were mostly higher Monday as investors prepared for a week filled not only with the presidential election but also with a Federal Reserve policy meeting and the U.S. jobs report. The Dow Jones Industrial Average rose 405 points, or 1.53%, to 26,907, the S&P 500 rose 1.02% and the Nasdaq fell 0.03% as the tech sector struggled. An expansion in U.S. manufacturing in October fueled the stock market's sharp gains earlier in the session. Published:11/2/2020 2:09:11 PM
[Markets] Dow Charges 500 Points Higher on Eve of Election Day Stocks rose Monday as Wall Street rebounded from its worst month since March as investors prepared for a week filled not only with the presidential election but also with a Federal Reserve policy meeting and the U.S. jobs report. The Dow Jones Industrial Average jumped 496 points, or 1.87%, to 26,998, the S&P 500 rose 1.71% and the Nasdaq gained 1.41%. An expansion in U.S. manufacturing in October also was fueling stock market gains. Published:11/2/2020 9:41:55 AM
[Markets] 3 Things to Watch in the Stock Market This Week Stocks fell significantly last week, as both the Dow Jones Industrial Average (DJINDICES: ^DJI) and the S&P 500 (SNPINDEX: ^GSPC) shed over 5% as COVID-19 outbreaks continued and several large tech companies fell following earnings reports. The Dow is down 7% so far in 2020 while the S&P is up slightly. A few stocks will announce operating results over the next few trading days, including Wayfair (NYSE: W), Hershey (NYSE: HSY), and Electronic Arts (NASDAQ: EA). Published:11/2/2020 6:37:36 AM
[Markets] Nasdaq Hits Correction Mode, Dow Touches 200-Day Moving Average In Volatile Friday Trade If there were any doubts left about whether the market would be "risk-on" or "risk-off" going into the election, Friday's selloff pretty much iced it. The toggle has switched to the off position.The late-week meltdown ignited after earnings from four of the five FAANGs that were mostly positive, but perhaps lacking in the guidance department (see more below). Combine that with the resurgence of COVID-19, the Senate adjourning with no more progress on a stimulus package, and the culmination of a long and contentious election season, and it's no wonder investors seem ready for a break. Even before FAANG earnings officially put things on ice, many investors showed signs of risk aversion ahead of the election. That made itself pretty clear with selloffs on Monday and Wednesday. Major indices suffered their worst week since March, and now people are openly making comparisons between this pre-election skid and the one we saw heading into the 2016 election.As noted this morning, keep an eye on futures Sunday night into Monday, and especially on Tuesday night as returns come in. Election night 2016 was a wild one for the futures market, featuring a steep plunge when it initially looked like results might be contested, followed by a meteoric rally when it became clear there'd be a victor without much fuss or muss.A wild ride could play out this time if things look testy by late Tuesday night. Or, if it looks relatively smooth, stocks could get a lift. It's arguably not so much who wins, but whether there's a chance of a long, drawn-out chaotic fight for a winner.Late Rally Back; A New Policy From The Fed A fierce recovery effort at the very end of Friday's session might put Monday's open into more solid territory. A late-breaking news item from the Fed about 40 minutes before the close also potentially contributed to the late rally. The Fed said it's reducing minimum loan sizes for smaller businesses that want to use the Fed's lending program. It's also easing restrictions on debt for companies already using the program. The Fed called these moves "two important ways to better target support to smaller businesses that employ millions of workers and are facing continued revenue shortfalls due to the pandemic."Basically, the Fed is trying to inject more money into the economy--something Congress and the White House haven't done with a stimulus since spring--which would possibly drive up economic growth expectations. The idea could be that this might help small businesses bridge the gap between now and any fiscal stimulus.Strong Data Raise Hopes For New Week There are other signs things might improve once the election excitement fades. Economic data have been solid lately. Gross domestic product (GDP) for Q3 came in above estimates yesterday, and initial jobless claims have finally started to ease a bit. New home sales for September were a bit subdued, but that's the only data all week that looked below average.The problem is that the good news is hitting a wall of worry centered on the election, COVID-19, and lack of a stimulus. Until we get those behind us (and it could be a while), risk premium in the market might continue unravelling as we saw this week. Technically, a lot of damage got done on the charts this week. The Dow Jones Industrial Average ($DJI) retested its 200-day moving average (before settling above it--see chart below) and the SPX took out its 50-day and 100-day moving averages. There appears to be potential technical support near the SPX 200-day moving average at around 3130, but that's still a long way down, so perhaps look for bulls to defend the psychological 3200 handle if things fall further.But if you're following corrections, the Nasdaq (COMP) has fallen 10% from its all-time high. The SPX is down 8.7% from its peak, so it's close but not all the way into correction territory.CHART OF THE AFTERNOON: MUSCLE MEMORY? The Dow Jones Industrial Average ($DJI-candlestick) retested its 200-day moving average (blue line) and closed above it. This is a level the index visited back in June and August (yellow circles), so it could be a pivotal level to watch, going forward. Data source: S&P Dow Jones Indices. Chart source: The thinkorswim® platform from TD Ameritrade. For illustrative purposes only. Past performance does not guarantee future results. Roadmap Left At Home As Guidance Lacking One thing besides the virus and election that some thought could potentially "catalyze"(is that a word?) Wall Street from its doldrums is earnings season, which is about half over. As usual, media headlines have zeroed in on the number of companies "beating" Wall Street's expectations. That stands at about 85% so far, but might not be the best way to judge. That's because analyst projections were so conservative this quarter that beating them is like your kid receiving a participation trophy. Investors are getting wise to this, too, as you can see this week from some companies like Microsoft Corporation (NASDAQ: MSFT) reporting a beat but getting punished because of weak guidance.Many companies, including Apple Inc. (NASDAQ: AAPL), are still holding out and declining to provide guidance. Some cite "uncertainty," though it's arguable that no quarter was ever "certain," even before COVID-19 came along. It's quite possible that this lack of guidance could be one factor keeping stocks from getting as much of a lift from earnings as normal.Among the major companies besides AAPL reporting recently but not sharing guidance are General Electric Company (NYSE: GE), Caterpillar Inc. (NYSE: CAT), 3M Co (NYSE: MMM), Xerox Holdings Corp (NYSE: XRX), Raytheon (RTN), and United Parcel Service, Inc. (NYSE: UPS). Knowing what happened last quarter but not getting forecasts for this quarter leaves investors hanging without a road map.One More Glance At FAANGs Earnings from the four reporting FAANGs looked good from a bottom and top-line standpoint, with no major misses. However, it appears that for all but one of the companies, Alphabet Inc (NASDAQ: GOOGL), the pre-earnings exuberance got carried away a bit.That's because it came down not to the top and bottom lines as much as to the stuff under the surface. With Facebook, Inc. (NASDAQ: FB), investors honed in on higher than expected spending levels in Q3. With AAPL, there was disappointment that iPhone sales missed Street expectations It's hard to find anything really unlikable about Amazon.com, Inc.'s (NASDAQ: AMZN) results, but that stock could be suffering a little profit-taking.The iPhone softness in AAPL's quarter as customers waited for the new 5G product might actually end up being a tailwind for AAPL going into its December and March quarters. That's because some of the people who'd previously waited to replace their phones might start doing that in the current quarter. So instead of pulling forward demand, as many Tech companies did early in the pandemic, AAPL kind of "pushed back" demand. Almost every S&P sector lost ground Friday as this disappointing week came to a close, but none got punished harder than Tech. It fell 2.1% on Friday and is down 2% over the last month. Investors might not be used to Tech being on the defensive this way, but considering the high value of that sector going into election season it's not all that surprising to see premiums coming out of there more than other sectors. One asset group that went against the grain Friday was the bond market. Pressure on Treasuries sent the 10-year yield to a new four-month high above 0.87%. Q3 GDP data might have given yields a lift, but it also could reflect the same sort of position-evening we saw in stocks today. People had been trending to the long side of the bond market this week, but didn't want to go into the weekend with that exposure.There was also a pretty muted reaction in the Cboe Volatility Index (VIX) today, as it didn't rise above the psychological 40 level. Maybe there's not as much concern around the election as people originally thought, or it could also reflect people exiting positions ahead of the weekend.Quick Look Ahead Next week features a heavy data calendar, with construction spending, October auto sales, factory orders, and--last but probably first in investors' hearts--the October payrolls report on Friday.From an earnings perspective, a lot of the fireworks are over, but there's no holiday next week. Reporting companies in coming days are expected to include PayPal Holdings Inc (NASDAQ: PYPL), Allstate Corp (NYSE: ALL), General Motors Company (NYSE: GM), Kohl's Corporation (NYSE: KSS), CVS Health Corp (NYSE: CVS), Marriott International Inc (NASDAQ: MAR), and Norwegian Cruise Line Holdings Ltd (NYSE: NCLH). Those last two could be important to watch for updates on travel demand as the U.S. and Europe fend with this new wave of virus cases.TD Ameritrade® commentary for educational purposes only. Member SIPC.Photo by Luca Bravo on UnsplashSee more from Benzinga * Click here for options trades from Benzinga * Apple Falls 4% As iPhone Sales Disappoint, But Most FAANG Results, Including Amazon's, Look Firm * FAANG Fans, On Your Marks: Apple, Amazon, Alphabet And Facebook Earnings Awaited After Close(C) 2020 Benzinga.com. Benzinga does not provide investment advice. All rights reserved. Published:10/30/2020 9:15:20 PM
[Markets] The Most Shocking Winners in Friday's Stock Market Rout The stock market finished October on a terrible note, with big losses that reflected investor discomfort with all the unresolved issues in the markets right now. With declines of between 0.5% and 3% on Friday, the Dow Jones Industrial Average (DJINDICES: ^DJI), S&P 500 (SNPINDEX: ^GSPC), and Nasdaq Composite (NASDAQINDEX: ^IXIC) all finished down for the month, with the Dow leading the markets to the downside with a nearly 5% fall in October. It'd therefore be reasonable to think that cruise ship stocks would continue to be on the defensive in a down market worried about the coronavirus. Published:10/30/2020 4:43:44 PM
[Markets] 5 Biggest Losers in the Dow This Past Week: Boeing Sinks The five worst-performing stocks in the Dow Jones over the past week included Boeing, Walgreens, American Express, UnitedHealth and Visa. Published:10/30/2020 4:24:42 PM
[Markets] Dow Rises 300 Points Ahead of Earnings From U.S. Tech Giants Stocks were higher Thursday following the S&P 500's 3.5% drop in the previous session, the biggest lost since June 11, as economic growth in the U.S. was higher than estimates and jobless claims declined. The Dow Jones Industrial Average rose 302 points, or 1.14%, to 26,822, the S&P 500 rose 1.74% and the tech-heavy Nasdaq was up 2.07% ahead of earnings from Amazon.com , Apple , Alphabet and Facebook . Published:10/29/2020 1:27:39 PM
[Markets] Stocks Rise Ahead of Earnings From U.S. Tech Giants Stocks were higher Thursday following the S&P 500's 3.5% drop in the previous session, the biggest lost since June 11, as economic growth in the U.S. was higher than estimates and jobless claims declined. Gains were held back, however, by a worrying rise in coronavirus cases in the U.S. and Europe and concerns that measures to mitigate the spread of the virus could derail an economic recovery. The Dow Jones Industrial Average rose 154 points, or 0.58%, to 26,674, the S&P 500 rose 1.24% and the tech-heavy Nasdaq was up 1.79% ahead of earnings from Amazon.com , Apple , Alphabet and Facebook . Published:10/29/2020 1:05:45 PM
[Markets] Dow Up on Record U.S. Growth but Virus Rise Makes Outlook Murky Stocks were higher Thursday following the S&P 500's 3.5% drop in the previous session, the biggest lost since June 11, as economic growth in the U.S. was higher than estimates and jobless claims declined. Gains were capped, however, by a worrying rise in coronavirus cases in the U.S. and Europe and concerns that measures to mitigate the spread of the virus could derail an economic recovery. The Dow Jones Industrial Average rose 118 points, or 0.45%, to 26,638, the S&P 500 rose 0.89% and the Nasdaq was up 1.11%. Published:10/29/2020 10:22:43 AM
[Markets] U.S. Stock Futures Rebound After Worst Selloff in Four Months (Bloomberg) -- U.S. stock futures climbed as investors looked for positive catalysts after concern over coronavirus infections and tougher lockdowns Wednesday spurred the market’s worst decline in more than four months.S&P 500 futures contracts expiring in December were up 1% as of 10:41 a.m. in Tokyo. Contracts on the Nasdaq 100 rose 0.8% while those on the Dow Jones Industrial Average gained 1%.The S&P 500 Index fell 3.5% Wednesday, the biggest drop since June 11, amid a surge in Covid-19 hospitalizations, especially in the Midwest. European stocks also tumbled, as France imposed a new nationwide lockdown and Germany moved to implement one-month partial restrictions.Asian stocks emerged less scathed as trading opened Thursday, with the MSCI Asia Pacific Index falling 0.6% as U.S. futures turned higher.With news about Europe’s stricter virus measures “digested,” the market “will switch back to the election,” said Ben Emons, head of global macro strategy at Medley Global Advisors. “The blue wave remains priced in, which means the market will refocus on stimulus.”House Speaker Nancy Pelosi said she hopes the current selloff in U.S. stocks will prompt President Donald Trump to agree to Democratic demands in stalled stimulus talks and end a three-month stalemate that has added to tension ahead of the Nov. 3 vote. Polls predict Trump will be defeated by Joe Biden, whose Democratic Party is also expected to win control of Congress.Positive news from Regeneron Pharmaceuticals Inc.’s late-stage trial of an antibody cocktail therapy for Covid-19 and possible measures from the European Central Bank should add “positive momentum” heading into the U.S. equity market open Thursday, according to Medley’s Emons. Investors will also be looking toward earnings reports due after the close from major tech companies including Apple Inc., Amazon.com Inc. and Facebook Inc.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P. Published:10/28/2020 10:16:36 PM
[Markets] Did the New Bear Market Just Begin? The stock market finally remembered it was October and gave investors an early Halloween scare on Monday. Declines were steepest for the Dow Jones Industrials (DJINDICES: ^DJI), but the S&P 500 (SNPINDEX: ^GSPC) and Nasdaq Composite were still down between 1.5% and 2%. The Dow had been down more than 900 points at times during Monday's trading session. Published:10/26/2020 5:56:17 PM
[Markets] GLOBAL MARKETS-Investors left hanging as stimulus talks drag on U.S. House Speaker Nancy Pelosi said it still was possible to get another round of COVID-19 aid before the election, but that it was up to President Donald Trump to act, including talking to reluctant Senate Republicans, if he wants it. The Dow Jones Industrial Average was down 148.98 points, or 0.53%, at 28,214.68, the S&P 500 was down 6.23 points, or 0.18%, at 3,447.26. U.S. President Donald Trump trails former vice president Joe Biden in national polls, but the contest is much tighter in some battleground states where the election will likely be decided. Published:10/23/2020 2:21:48 PM
[Markets] Market Dashboard: Eye on Chart Support, Investor Psychology All the major equity indices closed higher Thursday with positive internals. While no violations of resistance or trend were registered, the S&P 500 (see below), DJIA, Nasdaq Composite and Nasdaq 100 all saw successful tests of their near-term support levels and closed near their intraday highs. All the indices remain in near-term neutral trends except for the Dow Jones Transports and Value Line Arithmetic Index, which remain bullish. Published:10/23/2020 8:50:19 AM
[Markets] Global Markets Rise Despite Fading Odds Of Stimulus Deal Global Markets Rise Despite Fading Odds Of Stimulus Deal Tyler Durden Fri, 10/23/2020 - 08:14

S&P futures and European stocks rose on positive corporate earnings and German PMI data, while Treasurys reversed an earlier loss, even though the rapidly approaching election means the chance of a fiscal deal getting passed by Congress ahead of Nov. 3 now seems increasingly distant.

In pre-market trading, Intel tumbled 9% after a surprise drop in data-center sales. Gilead Sciences jumped after its antiviral therapy becoming the first drug formally cleared to treat Covid-19.

The final debate between Trump and Biden on Thursday presented few surprises for election watchers and if anything, merely reinforced investor caution heading into the Nov. 3 election.  While Biden blamed Donald Trump for the deaths of more than 220,000 Americans in the coronavirus pandemic in the debate late Thursday, and Trump accused Biden of corruption in China and Ukraine, their exchanges didn’t move markets much.

While S&P 500 futures dipped slightly after the debate, they were mostly flat by late Asian trade. The underlying index had gained about 0.5% in the previous day on hopes that the U.S. Congress and the White House could soon strike a deal on another round of COVID-19 stimulus, with bank stocks leading gains on the back of a sharp jump in yields.

"The sense I get looking at US futures is that the market, after this debate, does not appear very convinced that Mr Trump was able to increase his odds of winning the elections,” said Chetan Seth, Equity strategist at Nomura in Singapore.

European stocks are expected to claw back some of this week’s losses, with the Stoxx 600 up 0.8% on Friday, headed for its first increase this week. Barclays jumped after reporting improved stocks trading, lifting U.K. banking shares. Carmakers climbed after Daimler AG raised its profit forecast and Renault SA topped revenue estimates, the latest signs the global auto industry is emerging from its worst slump in decades. The euro strengthened as regional manufacturing data also exceeded estimates, even as services PMIs continued to sink: the Markit composite monthly measure of business activity in the euro zone fell to a four-month low of 49.4 in October from 50.4 in September. Within the report is a clear, divergent trend of manufacturing strength being offset by damage to services from the second wave of the pandemic

  • EU Markit Services Flash PMI 46.2 vs. Exp. 47.0
  • EU Markit Manufacturing Flash PMI 54.4 vs. Exp. 53.1
  • EU Markit Comp Flash PMI 49.4 vs. Exp. 49.3

Earlier in the session, shares in Asia hardly moved, with MSCI’s index of Asia-Pacific shares ex-Japan flat while Japan’s Nikkei ticked up 0.2%. Most markets in the region were up, with Hong Kong's Hang Seng Index advancing 0.5% and India's S&P BSE Sensex Index rising 0.4%, while China's Shanghai Composite slid 1%. The Topix added 0.3%, with Nexon and Bridgestone contributing the most to the move. The Shanghai Composite Index retreated 1%, driven by China Life and Kweichow Moutai.

Despite Friday's stock strength, it now appears a fiscal deal is virtually impossible due to the rapidly approaching election and the lack of deal. Adding to the problem is the increasing resistance from Senate Republicans to voting on the multi-trillion dollar package, with there being a real possibility they would not vote in favor of a package even after the election. House Democrats are starting to say that they would be unwilling to come back to Washington to pass a bill if Senate support isn't in place.

"The focus is shifting toward de-risking,” said Eleanor Creagh, a market strategist at Saxo Capital Markets, on Bloomberg TV. "There’s a range of outcomes from the elections that could have a huge capacity to change market sentiment and dynamics very quickly."

Ahead of last night's debate, investors had fully priced in a Blue Sweep, where Democrats win both chambers of Congress alongside a Biden presidency. While Democrats plan to raise taxes on corporate profits and capital gains could hit share prices, their pledge on large stimulus is seen as offsetting those blows.

"A lot of people are now talking about K-shaped recovery in the economy. My sense is that the money will move around within the stock market, rather than flowing outside under the ‘triple blue’ scenario,” a senior manager of trading at a major Japanese bank told Reuters.

The clean energy sector is seen as a potential winner at the expense of traditional energy firms under a Biden presidency. The Dow Jones oil and gas index is down nearly 49% this year. Biden reiterated his campaign pledge of net-zero-emissions by 2050. Meanwhile, the Nasdaq, which had led the market’s rally, has underperformed lately, having lost 1.4% so far this week also on concerns Democrats could take a harder stance on big tech firms. Investors could also take profits on them before any increase in capital gains tax.

“A blue wave may lead to concerns about the impact on the tech sector, while a Biden win and a split Congress may imply another four years of limited policy changes and politicking,” said Mary Nicola, senior economist at Pinebridge Investments in Singapore.

Expectations of bigger government stimulus have also boosted U.S. treasury yields. The 10-year U.S. Treasuries yield rose to 4 1/2-month high of 0.870% on Thursday and last stood at 0.8615%. Yields were cheaper by less than 1bp across the curve, 10-year yields ~0.86%, testing 200-DMA with curve spreads little changed. In Europe, gilts lagged Treasuries while bunds traded broadly in line; Italian bonds outperform by 4bp after large buying in screens and a 5,120 10-year BTP futures block trade.

In FX, the Bloomberg Dollar Spot Index fell for a fourth day this week, erasing yesterday’s modest rebound, as risk sentiment improved; the euro rose to a session high after a strong manufacturing PMI report out of Germany. Risk-sensitive currencies, such as the Australian dollar and the Norwegian krone, led gains among Group-of-10 peers after rebounding from losses during the Asia session. The pound edged up and was on track for its biggest weekly gain since early October amid optimism Britain and the European Union are edging closer to a Brexit trade deal. U.K. retail sales rose more than expected last month as demand for home improvement products and food contributed to the biggest quarterly jump on record. The volume of goods sold in stores and online gained 1.5% from August. The yen also climbed, adding to an earlier advance, and was on track for a second week of gains

Elsewhere, China’s yuan climbed after an official with the country’s foreign exchange watchdog said Friday the currency’s appreciation has been “relatively moderate.” The Chinese currency traded 6.6767 per dollar in offshore trade, off 27-month high of 6.6278 touched on Wednesday.

In commodities, oil prices eased slightly, giving up part of the previous day’s gains. Brent futures dropped 0.6% to $42.19 per barrel while U.S. crude futures shed 0.7% to $40.35 per barrel. Gold was modestly higher.

Economic data include Markit PMI readings. Scheduled earnings include American Express. Intel slumps in premarket trading after disappointing results, Gilead gains on FDA approval for its coronavirus treatment

Market Snapshots

  • S&P 500 futures up 0.2% to 3,455.75
  • STOXX Europe 600 up 0.6% to 362.53
  • MXAP up 0.2% to 176.31
  • MXAPJ up 0.07% to 585.43
  • Nikkei up 0.2% to 23,516.59
  • Topix up 0.3% to 1,625.32
  • Hang Seng Index up 0.5% to 24,918.78
  • Shanghai Composite down 1% to 3,278.00
  • Sensex up 0.4% to 40,705.02
  • Australia S&P/ASX 200 down 0.1% to 6,167.05
  • Kospi up 0.2% to 2,360.81
  • Brent Futures down 0.09% to $42.42/bbl
  • Gold spot up 0.4% to $1,911.18
  • U.S. Dollar Index down 0.2% to 92.77
  • German 10Y yield fell 0.6 bps to -0.572%
  • Euro up 0.2% to $1.1842
  • Brent Futures down 0.09% to $42.42/bbl
  • Italian 10Y yield rose 2.1 bps to 0.6%
  • Spanish 10Y yield fell 1.8 bps to 0.205%

Top Overnight News from Bloomberg

  • President Donald Trump and Democratic presidential candidate Joe Biden traded charges of secretly taking money from foreign interests, after the former vice president addressed head-on Trump’s efforts to portray him as corrupt
  • European governments began to deploy curfews more widely, as the coronavirus pandemic gained momentum across the continent and France reported more than 40,000 new cases for the first time
  • The U.K. signed a trade deal with Japan on Friday, its first with a major economy since Brexit, as the clock runs down on British efforts to reach an agreement with the EU by the end of the year
  • The Riksbank governor, Stefan Ingves, fears the economic outlook is deteriorating amid signs the coronavirus pandemic is tightening its grip across Europe, and ensnaring Sweden again too
  • The resistance among Senate Republicans to the near-$2 trillion stimulus package under negotiation between House Speaker Nancy Pelosi and the White House has spurred some House Democrats to oppose the idea of a pre-election vote on any bill
  • Governments around Europe began to deploy curfews more widely, as the coronavirus pandemic gained momentum across the continent, with France reporting more than 40,000 new cases for the first time
  • China mulls further easing limits on cross-border investment by domestic institutions and individuals, with QDII as one of the approaches, State Administration of Foreign Exchange Spokeswoman Wang Chunying says at a briefing
  • The U.K. signed a trade deal with Japan on Friday, its first with a major economy since Brexit, as the clock runs down on British efforts to reach an agreement with the EU by the end of the year
  • The U.K. is set to sign a trade deal with Japan in Tokyo on Friday, its first with a major economy since Brexit, as the clock runs down on British efforts to reach an agreement with the EU by the end of the year
  • Oil headed for a modest weekly decline as fresh optimism that a U.S. stimulus deal is imminent was overshadowed by the threat a resurgent coronavirus poses to energy demand in Europe and the U.S.

A quick look at global markets courtesy of NewsSquawk

Asia-Pac equities traded mostly higher after a lukewarm handover from Wall Street whereby all three majors closed in the green but the Nasdaq narrowly underperformed amid losses across the tech sector, whilst Intel shares slumped almost 10% after-hours post-earnings amid new weakness in its data center business. US equity futures reopened with mild gains before drifting modestly lower during the Presidential Debate, albeit with no explicit comment driving price action at the time as the two candidates stuck to their respective scripts. Thereafter, following the more sanguine debate, ES, NQ and YM nursed losses to trade higher by 0.1-0.2%. ASX 200 (-0.1%) remained the laggard as the index was subdued by its mining sector. Nikkei 225 (+0.2%) extended on gains despite the firmer Yen, with outperformance in the industrial names, whilst Mitsubishi Heavy Industries stood as the outperformer amid source reports the group is closer to a final decision on freezing regional Spacejet program. KOSPI (+0.2%) traded between gains and losses before gaining a firmer footing in positive territory. Hang Seng (+0.5%) and Shanghai Comp (-1.0%) eked mild amid gains initially another PBoC liquidity operation, whilst comments from Chinese President Xi did little to sway the indices; though this did wane for the Shanghai index as the session came to a close. Finally, 10yr JGB futures continued to track the broader fixed income futures complex.

Top Asian News

  • Goldman Admits Role in Record $1.6 Billion 1MDB Bribe Spree
  • Japan Maintains Severe Assessment of Economy in October
  • Walmart Unit Invests $204 Million in Birla’s Retail Business
  • Japanese Stocks Gain on U.S. Recovery Signal Amid Calm Debate

European equities (Eurostoxx 50 +0.9%) trade higher across the board after a pick-up in sentiment shortly after the cash open. It’s been a busy morning of data for the region with French PMIs, highlighting the diverging fortunes of the services and manufacturing sectors with the former extending its advances into negative territory, leaving the composite reading for France at 47.3 vs. prev. 48.5. Thereafter, Germany posted a strong showing for its crucial manufacturing sector (58.0 vs. prev. 56.4) , which helped extend the upside in the DAX (+0.7%), albeit declines in the services sector acted as a weight on the still-positive composite reading (54.5 vs. prev. 54.7). The Eurozone-wide release conformed to the overall viewpoint that despite the manufacturing industry holding up in the early stages of Q4, the services sector is clearly falling victim to the resurgence of the virus. IHS Markit have cautioned that “the eurozone is at increased risk of falling into a double-dip downturn”. Asides from this morning’s macro data releases, there have been a raft of corporate updates with solid earnings from Barclays (+7.3%) prompting outperformance of the banking sector after the Co. reported Q3 profit-before-tax of GBP 1.1bln vs. Exp. GBP 0.5bln amid a notable decline in bad loan provisions and strong performance in its consumer business. Elsewhere, energy names are also firmer in a continuation of yesterday’s advances despite crude prices being relatively unchanged on the session. Earnings from Daimler (+2.0%) and Renault (+1.6%) have supported the autos sector, whilst 9M results from Michelin (+2.6%) have also served as a source of encouragement from the broader industry. In a busy morning of earnings for the CAC 40 (+1.0%), Accor (+4.5%) are a clear outperformer despite results highlighting that impact on activity from the COVID crisis, to the downside in France, Kering (-2.6%) lags amid weak performance in its Gucci division. Elsewhere, notable laggards post-earnings include ABB (-2.8%) and Electrolux (-2.0%) with the former acting as a weight on the underperforming SMI (U/C).

Top European News

  • U.K. Regulator Investigating 14 Firms, 6 People in Cum-Ex Cases
  • U.K. Recovery Looks Past it Peak as Virus Curbs Erode Growth
  • Nordea Soars After Trouncing Estimates and Pledging Dividend

In FX, it remains to be seen whether the Greenback can withstand renewed downside pressure after overcoming several wobbles late yesterday and extending recovery gains overnight, but for now the signs are looking ominous as certain G10 rivals rebound on a combination of fundamental and technical factors. Indeed, the index is beating a relatively hasty retreat from a 93.129 peak to 92.724, thus far, ahead of Markit’s US flash PMIs that may or may not help the Dollar regroup.

  • AUD – The Aussie is back in the ascendency and outperforming with some assistance from encouraging PMIs and the fact that it survived a test of support ahead of 0.7100 vs its US counterpart in the form of the 100 DMA (0.7106) and 1.0650 or so against the Kiwi. However, 0.7150 and 1.0700 may cap further upside barring another pronounced upturn in broad risk sentiment.
  • CHF/JPY/GBP/EUR/NZD – All firmer vs the Buck, either by default or in their own right, as the Franc revisits 0.9050 from lows not far off 0.9100, Yen approaches 104.50 compared to sub-104.90 and Pound bounces from circa 1.3050 to just over 1.3100 at one stage. Note, Japanese CPI was slightly less deflationary than expected and UK retail sales much stronger than forecast in contrast to rather mixed preliminary PMIs, but none of these macro releases seemed to impact, though Cable may be drawn to unusually large option expiry interest from 1.3090 to 1.3100 in just over 1 bn. Conversely, the Euro appeared to derive some from the Eurozone surveys revealing faster than anticipated activity in Germany’s manufacturing sector that boosted the composite and pan prints to partly offset misses in services vs consensus. Eur/Usd has subsequently accelerated through the 50 DMA (1.1795), 1.1800, a Fib retracement level aligning with the 100 HMA (at 1.1806) to just shy of 1.1850, but could be hampered by circa 1.4 bn expiries between 1.1840-50. Back down under, the Kiwi is inching closer to 0.6700 even though NZ CPI was weaker expected in Q3.

In commodities, WTI and Brent futures have been somewhat choppy throughout the session but largely following the directional performance of the equity complex, albeit with magnitudes more contained and the benchmarks only modestly positive at present. Fundamental drivers explicitly for the complex remain sparse aside from the ever-present COVID-19 demand concerns and OPEC+ related supply issues. Instead, geopolitical reports could draw attention in the sessions ahead with  reports today indicating that the conflict in Libya has been resolved with all sides agreeing to a permanent ceasefire – a factor of note given the frequent force majeures for some of the nations most significant facilities. Additionally, tensions are seemingly rising regarding Iranian oil sanctions as WSJ reports indicate that US Officials are frustrated that allies are not taking enough aggressive action to enforce the sanctions; amid reports that Persian Gulf waters are being utilised as a waypoint for smugglers out of Iran. Looking ahead, the session’s only crude event of note is the weekly Baker Hughes rig count which last week saw a 12-rig increase for oil facilities. Action for spot gold has once again been dictated by the USD with the precious metal gleaning support from the DXY’s gradual demise throughout the session. At present, the metal is firmer by around USD 6/oz and in proximity to session highs above the relatively contained levels seen in APAC hours.

US Event Calendar

  • 9:45am: Markit US Manufacturing PMI, est. 53.5, prior 53.2
  • 9:45am: Markit US Services PMI, est. 54.6, prior 54.6
  • 9:45am: Markit US Composite PMI, prior 54.3

DB's Jim Reid concludes the overnight wrap

Global equity markets fluctuated and sovereign bonds sold off yesterday as investors weighed up further positive reports on the likelihood of US stimulus against a further deterioration in the coronavirus situation. By the close, yields on 10yr Treasuries had gained +3.4bps to hit a 4-month high of 0.856%, as Speaker Pelosi said that herself and Secretary Mnuchin were “just about there” when it came to reaching a stimulus deal. By the end of the day yesterday, the Speaker noted three sticking points: aid to state and local governments, school funding and a liability shield for employers. However, there remain questions as to whether the Republican-controlled Senate would pass such a deal, even if it happened after Election Day on November 3. A few senior ranking Senate Republicans are still wary, with Senate Appropriations Chairman Shelby noting that he had not seen any detail yet and that “it’s about two minutes to midnight, and we’re not going to pass anything until we see the particulars.” With all members of the House up for re-election, Speaker Pelosi noted that some are of the party’s lawmakers have said they may not leave the campaign trail prior to November 3 if the Senate does not commit to acting.

US equities rallied later in the session, and the S&P 500 posted a gain of +0.52% as cyclicals led the index higher, with the NASDAQ seeing a slightly smaller advance of +0.19%. As bets on the likelihood of further stimulus gathered pace, there was another bear-steepening in US Treasuries, with 10yr yields up as mentioned (though down -0.8bps this morning) while the 2s10s curve steepened +3.0bps to reach its steepest level in over 2 years, and the 5s30s reached its steepest in 3 years. In Europe, there was a similar cyclical outperformance with Autos (+0.65) and Banks (+0.55%) leading the way but the STOXX 600 finished down -0.14% for its 4th consecutive decline. In fixed income, yields on 10yr bunds (+2.1bps), OATs (+2.4bps) and BTPs (+2.1bps) all moved higher.

Staying on the US, overnight the second and final US Presidential Debate took place and was far a more orderly one than the first. While the question of foreign interference and contacts was once again raised, the majority of the debate focused on the pandemic, the economy, race relations and climate change. Early indications are that both candidates more or less held their own, which would be good news for Joe Biden who came into the night leading by high single digits in national polling averages.

For those interested in more election content, our US economists here at DB put out a note yesterday (link here) looking at the economic implications of the different potential outcomes. Their view is that a blue sweep where Biden wins the presidency and the Democrats take the Senate would provide the most fiscal stimulus to the economy in 2021, whereas the second most likely outcome (a Biden presidency along with a Republican Senate) would be the most negative for growth next year. Though we’ll obviously have to wait and see if last night’s debate has any impact on the polls, the FiveThirtyEight and RealClearPolitics averages currently show a Biden lead of 9.9pts and 7.9pts respectively.

Overnight, equity markets are trading higher in Asia, with the Nikkei (+0.44%), Hang Seng (+0.61%), Shanghai Comp (+0.13%) and Kospi (+0.44%) all up, though S&P 500 futures are broadly flat. Looking at the flash PMIs that are out so far, Australia has seen an uptick in its composite reading to 53.6 (vs. 51.1 previously), while Japan has seen a smaller rise to 46.7 (vs. 46.6 previously). Attention will remain on the European and US releases today, as they represent one of the initial data points we have on economic activity into October, particularly in Europe where fewer high frequency indicators like jobless claims are available. For the Euro Area, there has been a weakening in the mobility indicators since late September, so the question will be whether this translates into reduced economic activity as well. The consensus expectation on Bloomberg for the Euro Area composite PMI is that it’ll fall back to 49.2, which would mark the first time since June that the composite PMI has been below the 50-mark that separates expansion from contraction.

In terms of the pandemic, yet further rises in coronavirus cases continued to dampen investor sentiment, with the number of new cases continuing to escalate in Europe in particular. In the last 24 hours, the continent saw a record number of daily cases reported in numerous countries, including France, Italy, Poland, the Netherlands, Romania, Slovenia, and Denmark. Unsurprisingly, there’ve been more moves to impose restrictions, and yesterday France (which reported a record of more than 40,000 cases) announced an extension of its curfew to cover an additional 38 departments, while in the UK, Chancellor Sunak announced that the government would increase its levels of financial support to those affected economically by the pandemic. In the US, cases rose by over 68,000 with daily records in Illinois and Ohio. According to the mayor, Chicago will put a night-time curfew for non-essential businesses in place starting Friday for at least two weeks.

In terms of yesterday’s other data, the weekly initial jobless claims from the US came in at a lower-than-expected 787k in the week through October 17, which itself was a decline from the previous week’s downwardly revised 842k reading, as well as being the lowest number since the start of the pandemic. The continuing claims number for the week through October 10 also fell to a post-pandemic low 8.373m (vs. 9.625m expected), though with both the initial and continuing claims, it’s worth bearing in mind that both are still above their peak levels following the global financial crisis, so there’s still some way back to anything like normality in the labour market. Otherwise, the European Commission’s advance consumer confidence indicator for the Euro Area fell back in October to -15.5, which was its worst reading since May.

To the day ahead now, and the release of the aforementioned flash PMIs from around the world are likely to be the main highlight. Otherwise, the Russian central bank will be deciding on rates, BoE Deputy Governor Ramsden will speak, and American Express will be releasing earnings.

Published:10/23/2020 7:20:24 AM
[Markets] How Long Can The Fed Keep This Time Bomb From Exploding? How Long Can The Fed Keep This Time Bomb From Exploding? Tyler Durden Wed, 10/21/2020 - 17:00

Authored by Pavel Mordasov via The Mises Institute,

Since the outbreak of the coronavirus, the United States has experienced one of the most unprecedented economic interventions in all of its history. Since March and April both the Federal Reserve and the US federal government have injected trillions into the economy in hopes of stabilizing it and reducing unemployment. At the expense of the public, both institutions have handicapped themselves for the future, and it will be extremely difficult to ever return to a “normalized” policy situation without triggering a larger economic crisis.

On February 11, 2020, Federal Reserve chairman Jerome Powell delivered a semiannual report wherein he laid out the present risks that both the Fed and the federal government face. Some of the risks addressed were low interest rates spurred by the Fed and burdensome debt from the federal government that would limit the ability of both institutions to provide the necessary stability when an economy goes into a downturn. By the next day, the Dow Jones had reached an all-time high of 29,551.42. The rise in equity prices sparked confidence in the market and, for the most part, overlooked the risks that the coronavirus had in store for both the nation and the world.

By March, as concerns over the covid-19 virus spread, many investors began to question the sustainability of profits for businesses as mass lockdowns became a policy implemented throughout the world. On March 11, the World Health Organization (WHO) declared the coronavirus a pandemic, as the world had over 118,000 cases, and on that same day, the United States entered into a bear market as the Dow fell 20 percent from its peak. 

Immediately following, the Federal Reserve on March 13 began to inject $1.5 trillion in liquidity through repurchase operations (short-term loans) through incremental portions of $500 billion over the next three months. In addition, the Fed two days later cut the federal funds rate an entire percent, to 0–0.25 percent, and injected an additional $700 billion in liquidity into the markets. The intervention by the Fed was not well accepted, as the Dow Jones declined another 12.3 percent, reaching what Wall Street viewed as a low of 18,591.93 on March 23.

While panic brewed in the markets, state governments across the United States began to impose stay-at-home orders during the month of March that would last up until the end of May in most areas. The stay-at-home orders ordered any “nonessential” business to be closed, whether it was movie theaters, gyms, or sporting events. In response, Congress formulated a stimulus plan known as the CARES Act (Coronavirus Aid, Relief, and Economic Security Act) that would provide $2.2 trillion of liquidity to businesses in the forms of loans and grants and checks of up to $1,200 to individuals depending on their income. After days of debate, it was passed by Congress and finally signed by President Trump on March 27. The stay-at-home orders, which closed or partially closed many businesses, were in effect, resulted in the unemployment rate rising to 4.4 percent, with 701,000 jobs lost by the end of March.

More stimulus followed in April as the Fed decided to embark on providing an additional $2.3 trillion in liquidity that would provide funding for different-sized corporations and target asset prices to keep them from falling. Within the CARES Act, the Paycheck Protection Program (PPP), which was used to distribute low-cost loans to businesses, immediately ran out of money. As a result, Congress, with the approval of President Trump, created a new stimulus package on April 24 to provide an additional $484 billion in funding to small businesses. Unemployment surged in April to an alarming 14.7 percent, with over 23.1 million Americans losing their jobs.

The fever for cheap money did not stop. The US Treasury announced on May 4 that they would borrow a record $2.99 trillion from April to June, when at the time the federal debt stood at an astronomical $24.974 trillion. Furthermore, on May 12, US representative for New York Nita Lowley proposed the HEROES Act (Health and Economic Recovery Omnibus Emergency Solutions Act), an additional $3 trillion stimulus package which would provide additional relief to both households and businesses. Although there was controversy, the bill managed to pass the House on May 15 by a vote of 208 to 199. As the number of coronavirus cases throughout the world began to slowly decrease, the unemployment numbers continued to skyrocket, with unemployment claims rising to a high of 42.879 million by the end of May.

Figure 1.1: Federal Reserve Total Assets, January 1 to September 30, 2020

Source: FRED ("Assets: Total Assets: Total Assets (Less Eliminations from Consolidation): Wednesday Level (WALCL)," accessed Sept. 30, 2020), https://fred.stlouisfed.org/series/WALCL.

As we near the next election, there have been over 3.8 million jobs permanently lost following the lockdowns in the United States.

Since the start of 2020, the Federal Reserve has pursued an aggressive expansion of monetary policy amid the coronavirus, injecting trillions into the economy. As seen in figure 1.1, at the start of the year, the Federal Reserve’s balance sheet rose astronomically, by 69.95 percent from $4.17 trillion to $7.09 trillion by September 30. While the Fed’s balance sheet increased, the M1 money supply followed suit, which includes physical paper money, checking accounts, demand deposits, and other highly liquid assets, rising 41.31 percent from $3.95 trillion at the beginning of 2020 to $5.58 trillion by October 1. When the covid-19 panic began, the Fed had $4.12 trillion in liabilities and only $39 billion in capital at hand. As of October 1, the situation has worsened, with Fed now having $7.02 trillion in liabilities and $39.2 billion in capital.

With interest rates being artificially manipulated by the Federal Reserve and kept at historically low levels of 0–0.25 percent, the federal government can get away with borrowing more money than ever before. This has enabled to the Treasury to increase its debt by 16.5 percent from $23.17 trillion at the beginning of the year to $27 trillion by October 1. It is important to note that last year the federal government paid $574.59 billion in interest on $23.201 trillion in debt, which is an average interest rate of 2.48 percent on the debt. With last year’s picture in mind, the question that we must ask ourselves is how much more expensive our debt will become by the end of this year, as the Treasury has already paid out $484 billion in interest as it nears the final quarter. In addition, how much more expensive will the debt become when the Fed determines it appropriate to allow interest rates to rise again? Can the Fed afford to ever let this happen?

Even though the equity market looks as though it has corrected itself, the Fed is in a precarious position that calls into question its ability to mitigate another disaster if one presents itself before it can wind down on its balance sheet. The Fed’s situation would not be as concerning if the federal government itself were more fiscally run, which would give it more room to provide liquidity. However, with complete abandonment of fiscal responsibility by our policymakers, running deficits since 2001 and working to pass another stimulus package of $2.2 trillion on top of that should leave the American public asking how much longer fanatically driven stimulus of phony money will go on.

The answer may be longer than usual, as Federal Reserve chairman Jerome Powell after the September Federal Open Market Committee meeting stated that they intend on keeping rates low for several years and at least until 2023 to keep the economy afloat. It is no surprise that the Treasury danced to the same song as the Fed, with Secretary of the Treasury Steven Mnuchin stressing that he is prepared to request additional fiscal stimulus from Congress to help spur the economy as he deems fit.

As politicians and economists in Washington deem what is appropriate for the American people, it will be the very individual for whom these policies were intended who will have to eventually pay for these policies, whether through inflation or taxation. Unfortunately for the American citizen, when the plans of Washington are successful, it is the politicians and their special interests who reap the rewards. At the same time, any mistakes incurred are deferred upon the citizen. The reader must ask themselves again, How much longer will this go on?

Unfortunately, the policies of intervening within the market may go on for much longer than we hope, for the addiction to cheap money only increases the appetite of a hungry government. As the prominent Austrian economist, Henry Hazlitt said,

The only way government bureaucrats know of keeping prosperity going is to inflate some more—to increase the deficit or to pump more money into the system.

Published:10/21/2020 4:01:26 PM
[Markets] Where's the Market Headed Now? What the Charts and Data Reveal All the indices, in our opinion, are in near-term neutral trends with the exceptions of the Dow Jones Transports and Value Line Arithmetic Index staying positive. While breadth was positive, it was not sufficient to alter the current negative trends for the cumulative advance/decline lines on the All Exchange, NYSE and Nasdaq. The Dow Transports did create a bearish stochastic crossover signal that now leaves only the S&P MidCap 400 and Value Line failing to do so over the past week. Published:10/21/2020 8:26:01 AM
[Markets] GLOBAL-MARKETS-U.S. stocks gain, dollar falls as stimulus hopes grow House of Representatives Speaker Nancy Pelosi and Treasury Secretary Steve Mnuchin will talk again on Tuesday, after a 53-minute telephone conversation on Monday "continued to narrow their differences" about the coronavirus aid package, a Pelosi spokesman said on Twitter. Pelosi has set the end of Tuesday as a self-imposed deadline for reaching a deal on a package. The Dow Jones Industrial Average rose 50.43 points, or 0.18%, at the open to 28,245.85. Published:10/20/2020 9:20:28 AM
[Markets] Futures Rebound On Stimulus Optimism Ahead Of "Do Or Die" Deadline Futures Rebound On Stimulus Optimism Ahead Of "Do Or Die" Deadline Tyler Durden Tue, 10/20/2020 - 08:09

If futures are higher, it's due to stimulus optimism; if futures are lower, then stimulus fears dominate etc, you know the drill by now... so by that logic with Eminis trading 0.7% higher this morning, optimism is apparently on the rise again after yesterday's rout, even as we approach today's deal ultimatum, or "do-or-die" moment as Bloomberg called it, for Nancy Pelosi and Steven Mnuchin to clinch a pre-election virus relief deal. Late on Monday, the two were said to narrow their differences after a 53-minute telephone conversation on Monday where they "continued to narrow their differences" about the coronavirus aid package, and will talk again today but still remain at odds over the scope of aid. In any case, the good news is that after today the farce may finally be over at least until after the election. Treasury yields rose and the dollar slipped, while oil and gold fluctuated. The Aussie slid after an RBA official suggested short-term rates may fall below zero.

Sure enough, as Reuters puts it, "stock index futures rose on Tuesday on expectations that Washington lawmakers would be able to settle their differences for an economic stimulus bill to pass before the Nov. 3 presidential elections." And as Reuters also adds "Uncertainty over the fiscal stimulus weighed on Wall Street's main indexes on Monday, with analysts expecting market turbulence to increase with only two weeks left until Election Day." So simple, a 99 cent algo could write this market narrative.

Elsewhere, Goldman is in focus after a Bloomberg report it reached a long-awaited settlement with the DOJ to pay more than $2 billion for the bank’s role in Malaysia’s 1MDB scandal, to avoid criminal charges. Procter & Gamble shares rose in the pre-market on the best organic sales growth since 2005. Netflix Inc added 0.9% in premarket trading as investors awaited the the streaming giant's membership additions in the third quarter. International Business Machines Corp tumbled - again - after cloud growth slowed and total revenue hit a new 21st century low: its shares were down 2.9% last after the company stayed away from issuing a current-quarter forecast, citing economic uncertainty related to the COVID-19 pandemic.

European stocks recovered from early losses on Friday, following a bearish Asian session where investors adjusted their risk exposure before the U.S. elections two weeks away. Record COVID-19 cases in Europe also weighed on sentiment. MSCI's European Index was up 0.4% while the STOXX 600 was up 0.2, after initially falling as fears about the economic impact of lockdown restrictions outweighed some strong earnings. UBS gained the Swiss banking giant's credit, FX and rates traders performed better than almost all of their rivals in New York as they took advantage of a virus-fueled trading bonanza. Total revenue rose 41%, beating JPMorgan and Citi but falling short of Goldman. UBS also beat on profit and said it lined up $1.5 billion for share buybacks.

New, tougher restrictions to limit the spread of coronavirus in Europe weighed on sentiment. Ireland announced some of Europe’s strictest constraints on Monday, telling people not to travel more than five kilometers from home. New restrictions were also approved in the Lombardy region of Italy. France reported a massive increase in the number of people hospitalised.

Earlier in the session, Asian stocks fell, led by the energy and finance sectors, after climbing in the last session. Markets in the region were mixed, with South Korea's Kospi and China's Shanghai Composite gaining, while Japan's Topix and Australia's S&P/ASX 200 slid. The Topix lost 0.7%, with SoftBank and Nintendo contributing the most to the move. The Shanghai Composite Index rose 0.5%, driven by Kweichow Moutai and Foshan Haitian.

With just two weeks until the U.S. presidential elections on Nov. 3, analysts said that investors were reining in their riskier bets. Meanwhile attention is on the outcome of today's stimulus negotiations.

"The likelihood of a deal taking place appears no more likely now than it was a week ago,” said Michael Hewson, chief market analyst at CMC Markets. The lack of action is particularly concerning in light of rising COVID-19 cases in the United States, he said. "While equity markets appear to be struggling in the short term, the lack of a fiscal stimulus deal in the next two weeks is probably neither here nor there. Most investors expect to see some sort of fiscal stimulus in the next six months, whoever gets in, with the only unknown being around the size and scale, and the timing. The problem for stock markets is that they want to see it now."

In FX, the dollar was again lower with the Bloomberg Dollar Index sliding as the greenback fell against most of its Group-of-10 peers; the euro advanced, topping 1.18 per dollar as European equities reversed an early decline. Australia’s dollar weakened after RBA Assistant Governor Kent said the Board is considering the case for further easing, there is some room to cut the Cash Rate further, one option is to purchase longer-dated bonds - bond purchases would be regular and aimed to bring down yield. Kent also said expansion of balance sheet is adding monetary stimulus, need policy support to be provided for some time given. Kent remarked that the Bank Bill Swap Rate (BBSW) could move into negative territory in the case of further RBA easing. He also reiterated that the central bank will not increase Cash Rate until actual inflation is sustainably in the target range. RBA has not done a formal policy framework review.

RBA Minutes noted the Board discussed the case for additional monetary easing to support jobs and the overall economy. As in previous meetings, members discussed the options of reducing the targets for the cash rate and the 3-year yield towards zero, without going negative, and buying government bonds further along the yield curve. While members noted that the Australian dollar exchange rate was broadly consistent with its fundamental determinants, a lower exchange rate would provide more stimulus to the Australian economy in the recovery phase.

New Zealand’s currency also declined on speculation the central bank may act to lower borrowing costs. In minutes of its October meeeting, Australia’s central bank said further policy easing is likely to “gain more traction” as restrictions are lifted across the economy and agreed the governor would flag the shift to targeting actual over forecast inflation. The pound swung between gains and losses after the U.K. rebuffed the European Union’s effort to restart deadlocked trade negotiations and as investors waited for evidence that the two sides are reconciling their differences.

In rates, Treasuries were lower again with the curve steeper in early U.S. trading as front-end yields remain anchored while long-end yields were cheaper by ~2bp, 10-year by 1.5bp at 0.784% after breaching Monday’s high. Risk appetite stirred during Asia session and European morning, lifting S&P 500 futures, as investors eyed potential for agreement in stimulus talks today.  Euro zone government bond yields rose, with the benchmark 10-year German yield holding near recent seven-month lows at -0.623%.

Gold edged down while oil prices were little changed after three days of declines on fears that a resurgence of COVID-19 infections would stifle the recovery in fuel demand. Brent crude futures were trading down 2 cents, or 0.4%, at $42.44 a barrel recovering ground after falling as low as $42.19 earlier in the session.

Looking at the day ahead, we have earnings from Procter & Gamble, Netflix, Texas Instruments, Philip Morris International and Lockheed Martin. Central bank speakers include Fed Vice Chair Quarles, the Fed’s Bostic and Evans, the ECB’s Hernandez de Cos and the BoE’s Vlieghe. And data releases include US housing starts and building permits for September.

Market Snapshot

  • S&P 500 futures up 0.6% to 3,442.50
  • Brent futures down 0.6% to $42.38/bbl
  • Gold spot up 0.1% to $1,905.95
  • U.S. Dollar Index down 0.2% to 93.29
  • STOXX Europe 600 up 0.2% to 367.49
  • MXAP down 0.3% to 175.21
  • MXAPJ down 0.01% to 582.59
  • Nikkei down 0.4% to 23,567.04
  • Topix down 0.8% to 1,625.74
  • Hang Seng Index up 0.1% to 24,569.54
  • Shanghai Composite up 0.5% to 3,328.10
  • Sensex up 0.2% to 40,518.88
  • Australia S&P/ASX 200 down 0.7% to 6,184.58
  • Kospi up 0.5% to 2,358.41
  • German 10Y yield rose 0.4 bps to -0.624%
  • Euro up 0.07% to $1.1777
  • Italian 10Y yield rose 6.9 bps to 0.518%
  • Spanish 10Y yield rose 1.6 bps to 0.175%

Top Overnight News from Bloomberg

  • Ireland and Wales announced renewed lockdowns and Italy’s financial center sought a curfew, as Europe steps up efforts to regain control of the coronavirus pandemic
  • The European Union’s first offering of social bonds was said to receive orders of more than 233 billion euros ($275 billion), a record in the euro area
  • The ECB takes the crusade to revive faith in its inflation- fighting credentials to members of the public on Wednesday. They’ll get to share their views with President Christine Lagarde, who vowed at the start of her term just under a year ago to make the central bank better understood, and chief economist Philip Lane
  • Goldman Sachs Group Inc. has reached a long-awaited pact with the U.S. Department of Justice to pay more than $2 billion for the bank’s role in Malaysia’s 1MDB scandal, and the deal may be announced within days, according to people familiar with the matter
  • China’s hotels and restaurants, one of the hardest-hit sectors of the economy during the coronavirus pandemic, remained a significant drag on growth in the third quarter even as the recovery gained momentum

A quick look at global markets courtesy of NewsSquawk:

Major Asia-Pac indices traded with losses across the board after Wall Street suffered a broad decline following reports which suggested a State-side stimulus deal is not sounding imminent based on comments from the House Speaker and Committee Chairs. US equity futures opened electronic trade in modest positive territory, but have since came off highs and traded sideways throughout the night, with ES, NQ and YM still holding onto some gains heading into the European open. Back to APAC, ASX 200 (-0.7%) was pressured by its mining sector, albeit the index saw some fleeting upside in light of further the dovish RBA rhetoric, this time from Assistant Governor Kent. Nikkei 225 (-0.5%) failed to benefit from the JPY dynamics as the index felt the weight of losses across its industrial sector. KOSPI (+0.5) initially conformed to the losses in the region, with Hyundai and its affiliate Kia posting losses between 3-4% after the former warned that Q3 profits will be hit by charges related to engine problems. Meanwhile, SK Hynix traded in the red after the chipmaker confirmed that it is to purchase Intel’s NAND memory business. Elsewhere, the humdrum tone reverberated into China, with Hang Seng (U/C) and Shanghai Comp. (+0.4%) modestly softer for much of the session despite another PBoC liquidity injection and a non-event LPR setting as anticipated; however, the bourse did pick up somewhat in the tail-end of APAC trade.

Top Asian News

  • Orr Says RBNZ Prepared to Use All Tools to Counter Deflation
  • Thai Central Bank Chief Signals Support Amid Uneven Recovery
  • RBA Sees Monetary Policy Having More Traction as Economy Reopens
  • H.K.- Singapore Bubble May Have 1 Return Flight per Day Initially

European equities (Eurostoxx 50 +0.1%) trade mixed to flat in what has been a relatively indecisive session thus far with little in the way of incremental macro newsflow since yesterday’s close. Slightly outperformance has been observed in the CAC 40 (+0.3%) with Accor (+6.0%) top of the index after a broker upgrade from JP Morgan with the bank upbeat on the Co. “as it streamlines costs, simplifies its business, whilst its sound BS should support small/midscale M&A, allowing the company to emerge from the crisis stronger”. Sectors are mixed with not much in the way of breadth across the broader categories; oil & gas is the main outlier to the downside amid modest losses in the crude complex. Travel & leisure names have been granted some reprieve amid plans to open up international travel to the UK with Heathrow implemented a rapid COVID-19 testing operation for some destinations. As such, IAG (+6.3%), whose British Airways will be one of the first to offer testing, sit at the top of the Stoxx 600, gains are slightly less pronounced for some of the budget airlines such as easyJet (+4.0%) and Ryanair (+2.5%). Elsewhere, support has also been observed in the banking sector post-earnings from UBS (+2.2%) with the Co. far exceeding Q3 net income expectations in what was its “best Q3 earnings in a decade”. Additionally, the Co. announced it has set aside USD 1.5bln for potential share buybacks and currently has USD 1bln available to be paid out as a cash dividend in 2021. Reckitt Benckiser (+1.4%) are another gainer this morning after Q3 earnings were boosted by surging Dettol sales throughout the pandemic. To the downside, Tele2 (-1.5%) are the Stoxx 600 laggard post-earnings, albeit having pared back much of the initial downside, in a session that has featured several Scandi updates, including Stora Enso, Swedbank and Yara International.

Top European News

  • Lockdowns Return to Ireland and Wales in Europe’s Virus Response
  • Italian State Lender CDP Bids With Funds for 88% of Autostrade
  • Boohoo Falls on Report Audit Firms Decline to Work With Retailer
  • ECB Carves Out Its Own Path in the Mission to Revive Inflation

In FX, the race to the bottom is back on down under, and even though a 15 bp RBA rate cut looms larger than the next batch of RBNZ stimulus, the tables have turned to the detriment of the Kiwi. Indeed, Nzd/Usd has relinquished 0.6600+ status and breached the 100 DMA at 0.6586, as the Aud/Nzd cross rebounds from sub-1.0700 and Aud/Usd pivots 0.7050. To recap, minutes from the October policy meeting coupled with comments from RBA Deputy Governor Kent all but sealed an ease early next month, with the latter also noting that Bank Bill Swap rates may also fall below 0% if benchmark rates are reduced further, while RBNZ Governor Orr remarked that there is ample room to deliver more QE and an update on tools will be forthcoming in November.

  • USD – Antipodean underperformance aside, the Buck is mixed vs G10 rivals as broad risk sentiment recovers and the DXY hovers just above Monday’s base within a 93.204-512 range ahead of US housing data, a few Fed speakers and House Speaker Pelosi’s deadline for a pre-election fiscal stimulus deal that looks unrealistic or optimistic at this stage.
  • EUR/CHF/GBP/CAD/JPY – The Euro is maintaining momentum above 1.1750 vs the Greenback and seems well flanked by decent option expiry interest at 1.1745 (1.4 bn) and between 1.1790-1.1800 (1.3 bn) to the upside that also incorporates yesterday’s high and the 50 DMA (1.1795). Meanwhile, the Franc continues to straddle 0.9100 with little reaction to Swiss trade data showing a narrower surplus, but key watch exports declining at a similar pace to the previous month, and the Pound is holding around 1.2950 awaiting BoE commentary from Vlieghe and any further Brexit developments ahead of speeches by the European Commission President von der Leyen and her VP Sefcovic. However, Sterling looks a bit leggy against the single currency as Eur/Gbp probes 0.9100 amidst reports of RHS flows, though recent peaks circa 0.9120-25 may cap further upside irrespective of charts indicating a break of a descending channel. Elsewhere, the Loonie is hovering just above 1.3200 in advance of Canadian inflation on Wednesday and the Yen has slipped a fraction to trade either side of 105.50 following overnight source reports suggesting that the BoJ will downgrade GDP and CPI forecasts when it meets next week.
  • SCANDI/EM – Not a lot of movement or deviation in Eur/Sek around 10.2800 on the back of standard Riksbank rhetoric, but Usd/Cnh and Usd/Cny have fallen further to fresh 2+ year troughs near 6.6700 and 6.6800 respectively as the PBoC gradually lowers its daily midpoint setting for the onshore Yuan and maintained LPRs for the 6th consecutive month.

In commodities, a relatively slow session for the commodity space thus far in terms of fundamental updates as the dust settles following yesterday’s JMMC meeting, which ended up making no recommendation to change policy prior to 2021; the next gathering is November 17th ahead of the full OPEC+ event at the month’s end. Perhaps most notably from the meeting, reports highlight there was no indication of Russia putting forward a compensation plan for their 430k/bbl of overproduction; as such, attention will turn to whether the likes of Saudi put pressure on Russia to unveil a plan and whether some of the other over-complying members follow Russia’s lead on this matter in the months ahead. Price action throughout the session has been choppy but relatively contained compared with the action seen yesterday; currently, benchmarks remain in proximity to the unchanged mark but closer to the top-end of the day’s range. Crude explicitly, the sessions highlight will be the private inventory report which may well display another crude drawdown given a significant magnitude of production remained shut-in last week given the after-effects of Hurricane Delta. As a reminder, last week’s report printed a draw of 5.4mln which was followed by the EIA reading of a 3.818mln draw. Moving to metals, spot gold has been uneventful and in proximity to flat levels for the majority of the session following similar price action in the later-half of APAC trade. However, most recently the precious metal has gleaned some strength from further downside in the DXY as sentiment stateside remains cautiously firm as the Democrats stimulus deadline approaches. Separately, BHP updated that their copper operations in South America are still being affected by COVID-19 related measures but nonetheless copper production came in at 413k/T vs. Exp. 394k/T for Q1.

US Event Calendar

  • 8:30am: Housing Starts, est. 1.47m, prior 1.42m; MoM, est. 3.46%, prior -5.1%
  • 8:30am: Building Permits, est. 1.52m, prior 1.47m; MoM, est. 2.98%, prior -0.9%

DB's Jim Reid concludes the overnight wrap

US equity markets lost significant ground yesterday amidst ongoing stimulus discussions as investors awaited a raft of earnings releases which heat up from today. Over the weekend speaker Pelosi set the end of today as the deadline to make progress ahead of the election. So today could be interesting.

In terms of the latest, Treasury Secretary Mnuchin and Speaker Pelosi spoke late in the session yesterday, but the Speaker told fellow Democratic lawmakers afterwards that significant areas of disagreement continue to get in the way of a deal. The two sides remain talking ahead of today’s deadline. While the Republican-led Senate has been reluctant to pass a stimulus bill above the $500 billion level that Majority leader McConnell has supported, President Trump has indicated that he is willing to go up to the $2.2 trillion range that Democrats have demanded. Mr Trump said yesterday that if an agreement with Democrats is reached, he would “lean” on Republican Senators to “come along.”

Regardless, the confirmation that the two sides remain significantly apart saw the S&P 500 fall over 1.1% in the last 90 minutes of trading, though the index had been dripping lower throughout the day as risk sentiment soured after a healthy start. By the end of the session, the S&P 500 had lost -1.63%, while the VIX index rose +1.8pts in its 6thconsecutive move higher.

Overnight, S&P 500 futures (+0.34%) are trading back up a little on headlines that the House Speaker Pelosi and Treasury Secretary Mnuchin have “continued to narrow their differences” on a coronavirus relief package. So expect the dance to continue today.

The large losses yesterday saw every industry in the S&P lower on the day, with the Tech (-1.87%) and Energy (-2.10%) sectors leading the declines. In spite of the heavy tech losses, especially among the recent mega cap winners, the NASDAQ (-1.65%) fell largely in line with the S&P. The Dow Jones (-1.44%) also moved lower, while in Europe, the STOXX 600 lost just -0.18% – having closed prior to the US stimulus headlines roiling markets.

Asian markets are trading lower tracking Wall Street’s move from yesterday. The Nikkei (-0.55%), Hang Seng (-0.09%), Shanghai Comp (-0.13%), Kospi (-0.21%) and Asx (-0.63%) are all down.

On the coronavirus, there were further concerning developments from the US and Europe, as the number of confirmed global cases passed the 40m mark yesterday, and governments around the world moved to re-impose restrictions once again. Here in the UK, a further 18,830 cases were reported yesterday as Wales announced a 2-week ‘firebreak’ that would start on Friday evening. In practice, this means that people will be told to stay at home, apart from certain exceptions, with pubs, restaurants and non-essential shops all closing. Prime Minister Johnson has come under pressure to pursue a similar move in England, with opposition Labour leader Keir Starmer having already called for one to be imposed. Elsewhere in Europe, case numbers also remained at elevated levels as you’ll see in the table below. Monday reporting is always a little challenging to interpret though due to the weekend impact.

In terms of further restrictions, Ireland is moving closer towards a full lockdown as of Wednesday night. The new restrictions will close all retail, restaurants and pubs, while schools will remain open. Elsewhere Austria changed the limit on gatherings to 6 people indoors and 12 people outdoors, while Slovenia announced that a 9pm-6am curfew would come into force from today. So far most countries seem relatively keen to keep schools open as much as possible which is a huge economic swing factor given that it governs what parents can do.

Over in the US, weekly cases are set to rise above 400k per week for the first time since early August, with the majority of the outbreaks in regions that either had yet to experience significant caseloads or had relatively moderate first waves. Overnight, the US CDC has issued a “strong recommendation” for mask-wearing by both passengers and operators on planes, trains, buses and taxis. On a related note, Our chart of the day yesterday (link here) actually looked at the average age of deaths across a number of countries from Covid-19, and the US stood out in having a much lower average age of death than the other developed countries at 75.8 (vs. 80-82) in most of the others. Separately, one note of optimism from the US was that the Transport Security Administration said that they had over 1 million passengers go through a security checkpoint on Sunday for the first time since March, while the weekly volume from Oct 12-18 was also the highest since the start of the pandemic.

On the vaccine front, Moderna said overnight that the US government could authorise emergency use of its Covid-19 vaccine in December if it gets positive interim results in November from a large clinical trial. A reminder that even the UK is working to mobilise for a possible vaccine rollout by December. So a month to watch.

Over in fixed income, sovereign bonds lost ground for the most part yesterday, with yields on 10yr Treasuries up +2.3bps, as the 2s10s curve also steeped +1.9bps. Meanwhile in southern Europe, yields on 10yr Italian BTPs came off their all-time closing low on Friday, as they moved up +7.5bps, whilst Spanish (+4.1bps) and Greek (+4.1bps) bonds similarly lost ground. Bunds and gilts were the exception to this pattern however with 10yr bund yields down another -0.6bps to a fresh 7-month low of -0.63%, while those on gilts fell -1.3bps.

Onto Brexit, and in spite of Prime Minister Johnson’s Friday statement that the UK should get ready to leave the transition period without a trade agreement in place, the two sides’ chief negotiators spoke once again yesterday. In a tweet afterwards, the EU’s Michel Barnier said that “I confirmed that the EU remains available to intensify talks in London this week, on all subjects, and based on legal texts. We now wait for the UK’s reaction." Sterling strengthened by +0.26% against the US dollar yesterday, though this seemed to be more of a dollar-negative story as the dollar index lost -0.27%. Overnight, Bloomberg has reported that the UK is rebuffing the EU’s effort to restart their deadlocked trade negotiations, holding out for more concessions from the bloc before it is prepared to restart talks. The same report though quoted three unidentified EU officials as saying that they expect the negotiations to resume in London by the end of the week. A bit like the US fiscal stimulus, this is now a political dance. We hope no one stumbles!

Staying on politics, there weren’t a great deal of updates on the US election yesterday as the polls continued to show a solid lead for Joe Biden. His chances of victory in FiveThirtyEight’s model now stand at a campaign high of 88%, while the Democrats’ odds of controlling the Senate are at 74%. This week’s debate on Thursday will be the main highlight, but the unprecedented quantity of early voting in this election means that the ability to change the trajectory of the race is diminishing with each passing day. Overnight, the Commission on Presidential Debates has said that President Donald Trump and Democratic nominee Joe Biden will have their microphones turned off during parts of the final presidential debate while adding that each candidate will have an uninterrupted two minutes to speak at the beginning of each of the six 15-minute segments of the debate. Their mics will be turned on again for “a period of open discussion” in the segment’s remaining time. The change comes after the chaotic first debate in which both the candidates talked over the moderator and each other. The list of topic in this Thursday’s debate include Covid-19, American families, race in America, climate change, national security and leadership.

There also wasn’t much in the way of data yesterday, though the NAHB’s housing market index in the US for October rose to another record high of 85 (vs. 83 expected).

Published:10/20/2020 7:15:38 AM
[Markets] E-mini Dow Jones Industrial Average (YM) Futures Technical Analysis – Strong Over 28040, Weak Under 28025 The direction of the December E-mini Dow Jones Industrial Average futures contract on Tuesday is likely to be determined by trader reaction to 28040. Published:10/20/2020 6:14:38 AM
[Markets] Stock Markets' March Higher Resumes as Hertz Soars, Array Shines The stock market reversed course and pushed higher on Friday morning, with many investors hoping that the Dow Jones Industrial Average (DJINDICES: ^DJI) might finally be poised to climb into record territory before 2020 ends. Shortly before 11:30 a.m. EDT today, the Dow Jones Industrial Average (DJINDICES: ^DJI) was higher by 222 points to 28,716. Hertz Global Holdings (NYSE: HTZ) has been a favorite among short-term traders, and the latest news out of its bankruptcy proceeding led to a big jump in its stock price despite its dubious impact on Hertz's financial prospects. Published:10/16/2020 12:27:03 PM
[Markets] Futures Flat On Stalled Stimulus, Europe Elevated On Earnings Futures Flat On Stalled Stimulus, Europe Elevated On Earnings Tyler Durden Fri, 10/16/2020 - 07:45

US equity futures were modestly green in a quiet overnight session, as optimism about a fresh stimulus package collapsed, while investors assess the potential return of lockdowns in Europe as the region struggles to contain the virus spread. S&P 500 futures were little changed, while Nasdaq contracts rose 0.2%. Eminis were up 0.2% to 3,482 boosted by Boeing and Pfizer shares (see below) which helped push futures on the S&P 500 and Dow Jones Industrial Average into the green after they drifted most of the day. Treasuries held gains, while the dollar slipped with crude oil.

PFizer shares rose 1% in premarket trading after it said it would file for U.S. emergency approval of its COVID-19 vaccine candidate being developed along with Germany's BioNTech as soon as a safety milestone is achieved in the third week of November. BioNTech's U.S.-listed shares jumped 2.4%. There was also a revival of trade war concerns, after the European Union and the U.S. exchanged tariff threats this week regarding illegal state aid for Boeing. Separately, the planemaker’s stock was up in pre-market trading after the company’s 737 Max model was judged safe to fly by Europe’s aviation regulator.

On the stimulus front, Treasury Secretary Steven Mnuchin told House Speaker Nancy Pelosi Thursday that President Donald Trump would personally lobby to get reluctant Senate Republicans behind any stimulus deal they reach. However, Senate Majority Leader Mitch McConnell rejected that, saying he could not sell a much larger package to his members, and that the Senate would vote on a narrow stimulus plan worth about $500 billion next week. In short: no deal until after the election, precisely as we have been saying since August.

"It’s a tug-of-war between risks that are well flagged, the pandemic, the U.S. election, Brexit, and at the same time hope that these same risks can be resolved in matter of weeks or months", said Emmanuel Cau, head of European equity strategy at Barclays. “In the meantime, it’s hard for investors to take positions on the short term given all the uncertainties,” he said. “Looking forward to 2021, there’s a good probability these risks will be behind us.”

In Europe, the benchmark Stoxx 600 Index rose as much as 1% but was still set for a weekly loss after European stocks lost over 2% on Thursday as new social restrictions in Europe, including a curfew in major French cities and tighter restrictions in London, spooked investors. Positive corporate newsflow outweighed concerns over rising coronavirus cases and the state of progress in Brexit trade talks. Car sales surprised to the upside, while Daimler and LVMH both beat estimates, and Thyssenkrupp surged after Liberty Steel Group said it will make a multibillion-euro bid for the German company’s European steel unit.

Earlier in the session, the MSCI Asia Pacific Index slipped 0.2% led by the industrials and IT sectors. Markets in the region were mixed, with Thailand's SET and Japan's Topix falling, while Hong Kong's Hang Seng Index and India's S&P BSE Sensex Index increased. The Topix lost 0.9%, with Toyota and Sony contributing the most to the move. The Shanghai Composite Index rose 0.1%, driven by China Life and ICBC.

Brexit was in focus, with U.K. Prime Minister Boris Johnson saying the U.K. will now get ready to leave the European Union’s single market and customs union without a new free trade deal in place, blaming the bloc for refusing to offer good enough terms. He said he would always be willing to hear from the EU if the bloc’s leaders came back to the U.K. with “a fundamental change of approach.” Last month, the British leader set a deadline of Oct. 15 for an agreement to be struck -- or clearly within sight -- saying there would be no point continuing talks beyond this week without adequate progress. Sterling fluctuated on the news.

Elsewhere in FX, the euro also regained some ground, rising about 0.2% to $1.1731 as investors shifted from perceived safe havens such as the dollar and the yen to riskier currencies.

In rates, Treasuries extended advance in early U.S. session following bigger rally in gilts after U.K. Prime minister Boris Johnson said the country should prepare for Australian-style trade terms with the EU after Brexit negotiations failed to produce an alternative. Gilts spiked to session highs, lifting Treasuries. Treasury yields are richer by 0.5bp to 1.5bp across the curve in bull-flattening move; 10-year yields lower by 1bp at 0.722% with both gilts and bunds outperforming by ~1bp.  Germany’s 10-year bond yield was set for its biggest weekly drop since August as doubts grew about the economic recovery in the euro zone.

In commodities, oil prices continued to slide, dragged down by concerns that resurgent COVID-19 cases in Europe and the United States would curtail demand. Brent crude futures for December dropped 0.5% to $42.65 a barrel. WTI  crude futures for November delivery dipped 0.4%, to $40.81 a barrel. Spot gold prices were flat at $1,909.05 but looked set for their first weekly drop in three.

Macro-economic data to watch include retail sales, industrial production and University of Michigan Confidence, while Bank of New York Mellon, Citizens Financial, JB Hunt, Kansas City Southern, Schlumberger NV, State Street, VF Corp are among companies reporting earnings

Market Snapshot

  • S&P 500 futures up 0.1% to 3,479.50
  • STOXX Europe 600 up 0.7% to 365.50
  • MXAP down 0.3% to 174.47
  • MXAPJ unchanged at 579.29
  • Nikkei down 0.4% to 23,410.63
  • Topix down 0.9% to 1,617.69
  • Hang Seng Index up 0.9% to 24,386.79
  • Shanghai Composite up 0.1% to 3,336.36
  • Sensex up 0.8% to 40,038.80
  • Australia S&P/ASX 200 down 0.5% to 6,176.79
  • Kospi down 0.8% to 2,341.53
  • Brent futures down 0.6% to $42.92/bbl
  • Gold spot little changed at $1,909.72
  • U.S. Dollar Index down 0.2% to 93.69
  • German 10Y yield fell 1.2 bps to -0.622%
  • Euro up 0.05% to $1.1714
  • Italian 10Y yield rose 4.0 bps to 0.495%
  • Spanish 10Y yield unchanged at 0.148%

Top Overnight News from Bloomberg

  • Italy’s government is assessing its environmental funding needs, taking an initial step toward selling its first green bond, according to people familiar with the decision
  • Chinese police have launched an investigation linked to cryptocurrency exchange giant OKEx, forcing one of the world’s largest Bitcoin trading platforms to block users globally from withdrawing money
  • Treasury Secretary Steven Mnuchin told House Speaker Nancy Pelosi Thursday that President Donald Trump will personally lobby to get reluctant Senate Republicans behind any stimulus deal they reach
  • Covid-19 is hitting the most populous states in the U.S. Midwest, with cases surging in Illinois, Ohio and Michigan. Europe continued to report some of the highest numbers of cases since spring. Remdesivir has no definite effect on a hospitalized patient’s chances of survival, a clinical trial by the World Health Organization found
  • In dueling town halls, President Donald Trump embraced controversial conspiracy theories and sparred with the moderator, while Democrat Joe Biden offered policy-focused answers aimed at avoiding anything that could imperil his lead in the polls
  • Oil headed lower in Asian trading as the prospect of a resurgent virus forcing more stay-at-home measures in Europe and the U.S. outweighed a bigger-than-expected drop in American stockpiles
  • The U.S. will “strike much harder” if the European Union goes ahead with tariffs on $4 billion worth of American products, President Trump said
  • New Zealand Prime Minister Jacinda Ardern looks set for a resounding election victory on Saturday as voters applaud her masterful handling of the coronavirus pandemic

A look at global markets courtesy of NewsSquawk

Asia-Pac equities traded mostly lower following a string of lacklustre cash opens, and after another downbeat handover from Wall Street, where the major indices posted a third consecutive down-day as pre-election stimulus hopes fizzle out and with parts of Europe reimposing targeted COVID-19 restrictions amid the resurgence of the virus. European and US equity futures drifted higher throughout most of the night before erasing the bulk of their gains heading into the European open and with no specific news flow driving price action. ASX200 (-0.5%) was flat for a large part of the session as strength in financials were countered by a weak performance across travel and leisure names, whilst concerns mounted over Australia’s deteriorating relationship with China. Nikkei 225 (-0.4%) was caged in a tight band for most of the session and losses accelerated after a downside breach of the 23,500 level, but Fast Retailing shares rose some 4.5% at one point despite revenue and profits declining in the 12-months ending August, as same-store-sales rebounded over 20% in Q4 which drove expectations for a FY21 recovery. KOSPI (-0.8%) remained in negative territory with participants pinning the losses on virus woes. Shanghai Comp. (+0.1%) opened with modest gains as the PBoC underwent another liquidity injection via 7-day reverse repos at a maintained rate, but the index later erased gains with reports also resurfacing that China is set to pass a new law that would restrict sensitive exports vital to national security. Hang Seng (+0.5%) outperformed in a reversal from yesterday’s sub-par performance, and as SMIC shares opened higher by 6% after a guidance upgrade. Finally, 10yr JGB futures firmed overnight before waning off best levels as it tracked USTs.

Top Asian News

  • Singapore-Hong Kong Air Fares Jump 40% on Travel Bubble Plan
  • Billionaire Lucio Tan’s Bank Expects Bad-Loan Provisions to Drop
  • China Drug Stock Jumps After Doctor Endorses Treatment for Covid
  • Thai Leaders Have No Easy Options to End Anti-Monarchy Protests

European equities (Eurostoxx 50 +1.0%) trade on a firmer footing in what appears to be more a trimming of yesterday’s heavy losses rather than an outright pick-up in sentiment across the region as incremental macro newsflow remains light. The CAC 40 (+1.3%) has outperformed from the get-go following LVMH’s (+6.4%) Q3 update which saw the Co. exceed revenue expectations citing strong performance in the US and China; Kering (+3.8%), Burberry (+3.0%) and Christian Dior (+7.3%) trade higher in sympathy with the consumer discretionary sector the clear outperformer. Elsewhere, it’s been a session of solid gains thus far for the auto sector with Daimler (+3.4%) leading the charge after its prelim Q3 EBIT exceeded market expectations and the Co. stating that it has seen a faster than expected market recovery and a particularly strong September performance. Furthermore, Renault (+3.8%) have also been supported amid reports the Co. is intending to launch a range of electric vehicles targeting ‘middle class’ consumers, whilst its CEO said the Co. does not have a liquidity problem. Additionally, for the sector, some positivity was garnered from the latest EU27 car registrations which rose 3.1% in September (prev. -18.1%). In terms of stocks specifics, Thyssenkrupp (+15.0%) are a clear standout performer today after Liberty House announced a bid for the Co’s steel operations. Subsequently, the IG Metall Union in the German NRW state rejected Liberty Steel's bid, suggesting that such a takeover could lead to job losses, however, it is yet to be seen if their objections will be enough to derail the acquisition. To the downside, BT (-1.8%) have hampered the performance of the telecom sector today amid ongoing scepticism suggesting that PM Johnson’s pledge to connect the country to fast broadband by 2025 is considered to be unrealistic.

Top European News

  • LVMH Bounces Back on Demand for Louis Vuitton and Dior Bags
  • Thyssenkrupp Jumps as Gupta’s Liberty Said to Bid for Steel Unit
  • Europe Car Sales Rise 1.1% in Surprise First Gain of the Year
  • Daimler, Volvo Post Surprise Profits on Shaky Auto Reprieve

In FX, positive vibes from both sides of the UK-EU divide ahead of the final day of the Summit have given Sterling a lift as chances of clinching a trade deal are kept alive, with Cable back on the 1.2900 handle and Eur/Gbp backing off from the high 0.9000s after Foreign Minister Raab claimed that negotiators are close to agreement and the Irish PM said Barnier has been granted the flexibility to continue discussions. However, PM Johnson still has the final say and there is little sign of compromise on the well documented key issues that stand in the way of an accord so the bar remains high and Pound prone to further disappointment, while Moody’s ratings review after hours also poses a threat to sentiment.

  • USD – Brexit aside, the broad risk tone has settled down to dampen some demand for the Dollar and major pairs have reverted to more restrained ranges as a result, as the DXY retreats from highs just shy of Thursday’s 93.910 peak within a 93.883-665 range. The pullback may also be partly psychological and consolidative ahead of primary US data in the form of retail sales and ip before 2 Fed speakers (Williams and Bullard) and preliminary Michigan sentiment, while a firm rebound in the YUAN is also likely to be weighing on the Greenback more generally given the Cny and Cnh both reclaiming 6.7000+ status.
  • JPY/NZD – The Yen and Kiwi are benefiting from the waning Buck, with the former back above 105.50 and flanked by decent option expiry interest (3 bn between 105.00-05 and 1.2 bn from 105.35 to 105.40), and the latter pivoting 0.6600 in the run up to NZ elections and getting regional support from favourable Aud/Nzd crosswinds.
  • EUR/CAD/CHF/AUD – All narrowly mixed vs their US counterpart as the Euro keeps tabs on 1.1700, just, Loonie paring losses from sub-1.3260 towards 1.3200 in advance of Canadian manufacturing sales and less of a drag via crude prices. Elsewhere, the Franc is straddling 0.9150 again and Aussie underperforming below 0.7100 and the 100 DMA (0.7096) in wake of more worrying reports on the Chinese trade front as cotton exports are said to be added to the embargo list and could be subject to tariffs as big as 40%.
  • SCANDI/EM – Further divergence between the Sek and underperforming Nok even though oil is attempting to stabilise and Riksbank’s Ingves may cover exchange rate moves during a speech at the IMF, but the Zar appears content with Gold’s recovery to trade above Usd 1900/oz, albeit by only a few bucks. Conversely, the Brl could be vulnerable following the latest political antics and the resignation of Brazilian President Bolsonaro’s Deputy Senate leader who was caught by police concealing COVID aid funds in his underwear.

In commodities, WTI and Brent front month futures are modestly subdued this morning diverging somewhat from the modestly firmer performance seen in European bourses, with US futures relatively flat; focus for the complex has returned to the supply-side given updates in Libya. Crude production for the country is now said to have hit 500k BPD displaying a significant rise from the October 5th figure of 290k BPD; the increase comes alongside the El Sharara field getting back to around 110k BPD capacity but still someway from the 300k BPD capacity the field is targeting in the near-term. The production increase will likely draw the focus of OPEC’s JMMC gathering on October 19th, among other factors including compliance and plans for the OPEC+ demand schedule, particularly as while the Libyan supply has substantially increased it is still someway off Q4-2019’s figure of circa 1.2mln BPD. Elsewhere, the schedule for crude explicitly is light aside from the usual Baker Hughes rig count. Moving to metals, spot gold is essentially flat on the day residing within comparatively tight ranges of USD 10/oz; given the lack of fundamental newsflow the driver for the metal is once again the USD which is similarly exhibiting lacklustre and range-bound action. Regarding copper, ING highlight that discussions at the Candelaria mine in Chile are still unresolved, regarded as one of the largest copper reserves in the world, and the most recent updates indicate that strike action could still occur next week.

US Event Calendar

  • 8:30am: Retail Sales Advance MoM, est. 0.8%, prior 0.6%; Ex Auto MoM, est. 0.4%, prior 0.7%
  • 8:30am: Retail Sales Control Group, est. 0.3%, prior -0.1%
  • 9:15am: Industrial Production MoM, est. 0.5%, prior 0.4%; Capacity Utilization, est. 71.8%, prior 71.4%
  • 9:15am: Manufacturing (SIC) Production, est. 0.6%, prior 1.0%
  • 10am: Business Inventories, est. 0.4%, prior 0.1%
  • 10am: U. of Mich. Sentiment, est. 80.5, prior 80.4; Current Conditions, est. 88.5, prior 87.8; Expectations, est. 77, prior 75.6
  • 4pm: Net Long-term TIC Flows

DB's Jim Reid concludes the overnight wrap

It’s the last day of this half term today and the school are allowing the children to come as their favourite book character. As much as my wife has tried to persuade our 5 year old Maisie to go as her own book heroines Lizzy Bennet from Pride and Prejudice or Jane Eyre, Maisie will only go as one thing. Elsa from Frozen. I said to her that Frozen is not a book and she ran to the shelf and showed me a Frozen 2 sticker and colouring in book. So who am I to argue. Hopefully this will pass the school’s no superheroes policy. By the way I wanted her to go as Arya Stark.

Talking of the Starks, winter was coming for a large part of yesterday (virus numbers, weak data, lack of stimulus) before a bit of dragon breath warmed things up late in the session. European equities earlier saw major declines as governments across the continent moved to ramp up restrictions, with the STOXX 600 (-2.08%), the DAX (-2.49%) and the CAC 40 (-2.11%) all moving lower. The US however regained its footing and only closed -0.15% having recovered from being down as much as -1.37% in the early moments of trading yesterday and around -0.75% as Europe went home. Tech (-0.44%) and biotech (-1.69%) stocks were among the largest laggards on the day with the NASDAQ falling -0.47%, although it also rebounded from large early losses (-1.78%). Meanwhile the VIX index of volatility gained +0.57pts to its highest level in a week, having risen every day this week.

The main driver behind the declines was the pandemic, with yesterday seeing a number of further concerning developments for investors to digest. In terms of the numbers, Europe continued to move in the wrong direction, with Italy reporting another record of 8,803 cases, raising fears that the country is moving in a similar direction to France and the UK, while the Netherlands also reported a record 7,857 cases which given its population is just under 30% of Italy’s, is a big number. See the per 10k number in the table below. France saw over 30k new cases, a record that eclipses the previous high of nearly 27k this past Saturday. Germany also saw a record number of infections, with the 7,185 new cases surpassing the previous peak in late March (pre mass testing). This comes as reports indicate that Chancellor Merkel is concerned that the new restrictions agreed to by the regional leaders do not go far enough. In the UK, a further 18,996 cases were confirmed as the government raised the London alert level to high, meaning that residents can no longer mix with other households indoors from tomorrow. Over in Poland, further restrictions were also imposed, while at the summit of EU leaders in Brussels (more on which below), Commission President Ursula von der Leyen went into self-isolation (again) after she was informed that a member of her front office had tested positive that morning.

In better news overnight, Reuters has reported that Britain’s National Health Service is in talks with groups including the British Medical Association about mobilising for a potential rollout of a Covid-19 vaccine by December. The report added that there is c. a 50/50 chance that the vaccine can begin to be administered that month.

Over in the US, cases continue to rise throughout the Midwest with Illinois, Ohio and Michigan all approaching new case levels comparable with the height of their first waves – albeit at much higher testing levels. With Ohio, Michigan and Wisconsin all potential swing states the effects on next month’s election will be closely followed. The main Covid news came from the Biden campaign, where VP nominee Kamala Harris cancelled her travel plans until Monday after communications director along with a member of her flight crew tested positive. We’re told that Harris herself tested negative on Wednesday, but that travel was stopped “out of an abundance of caution”. Neither of the positive individuals were in contact with Biden however, and both he and President Trump went ahead with their separately planned town hall events last night in lieu of the debate that was otherwise supposed to have taken place.

Staying on US politics, President Trump said yesterday that he would be open to increasing the $1.8 trillion stimulus bill that he had pushed in the past. It was also reported that House Speaker Pelosi and Secretary Mnuchin continue to discuss potential deals though nothing remains likely to pass in the short term. This is especially true after Senate Majority leader McConnell said that his planned $500 billion bill is “appropriate” and rejected calls for higher levels of funding. Markets took this in its stride, but if Democrats do win the White House but are unable to take back the Senate it may call into question just how much stimulus could be passed in the next 6 months and beyond. Meanwhile, Treasury Secretary Mnuchin has told Pelosi overnight that President Trump will personally lobby to get reluctant Senate Republicans behind any stimulus deal they reach.

Asian markets are largely trading lower this morning outside of the Hang Seng (+0.78%) which is up. The Nikkei (-0.26%), Shanghai Comp (-0.28%), Kospi ( -0.85%) and Asx (-0.41%) are all down. Meanwhile, European futures are pointing to a positive open after the late US rally with those on the Stoxx 50 (+0.60%), FTSE 100 (+0.72%) and Dax (+0.59%) all up. Across the other side of Atlantic, S&P 500 futures are trading broadly flat while those on Nasdaq are down -0.16%. Elsewhere, crude oil prices are down c. -1%.

Brexit was back in the headlines yesterday, as EU leaders agreed at their summit to continue negotiations with the UK over the coming weeks, calling on the UK to “make the necessary moves to make an agreement possible.” The UK’s chief negotiator Frost said he was “surprised by suggestion that to get an agreement all future moves must come from U.K. It’s an unusual approach to conducting a negotiation.” The UK have said they’ll set out their next steps following the Council, so we await to see what’s said and whether they decide to continue negotiating or more likely on what terms. Prime Minister Johnson is planning a statement later today.

Over in sovereign bond markets, southern Europe saw a noticeable selloff yesterday, in line with the broader risk-off move elsewhere. Italian debt saw its remarkable rally come to an end, as 10yr yields came off their record low the previous day to close +4.0bps, while Greek (+5.5bps) and Spanish (+1.4bps) yields also rose. With risk assets rallying back towards flat in the US, core countries diverged with 10yr bund yields down -2.9bps at -0.61%, their lowest level since March, as US Treasuries saw a +0.7bps move to 0.732%. Other safe havens made gains yesterday, with the US dollar index up (+0.51%) for the third day this week, while gold prices were up +0.38% to finish over $1900/oz.

In the US, the latest weekly initial jobless claims for the week through October 10 showed an unexpected uptick to 898k (vs. 825k expected), which was its highest level in 7 weeks. The reading will only add to concerns that the labour market recovery is running out of steam, not least with the lack of further stimulus and fresh rises in the number of Covid cases. Otherwise, the Empire State manufacturing survey fell to 10.5 (vs. 14 expected), while the Philadelphia Fed’s business outlook survey rose to 32.3 (vs. 14.8 expected) - the highest since February.

To the day ahead now, and the data releases out from the US include September’s retail sales, industrial production and capacity utilisation, as well as the preliminary University of Michigan sentiment indicator for October. In the Euro Area, there’ll also be the trade balance for August and the final CPI reading for September. Otherwise, central bank speakers include the Fed’s Williams and Bullard, and earnings releases include Honeywell International and BNY Mellon. Finally, the European Council will conclude.

Published:10/16/2020 6:52:41 AM
[Markets] S&P Futures Fall, Naz Tumbles On Goldman Tech Downgrade, "Stimulus Pessimism" S&P Futures Fall, Naz Tumbles On Goldman Tech Downgrade, "Stimulus Pessimism" Tyler Durden Thu, 10/15/2020 - 07:47

Just as "stimulus (and covid vaccine) optimism" was the go to "explanation" for the market's ramp in the past few weeks, so "stimulus (and covid vaccine) pessimism" is being trotted out to "explain" when stocks unexpectedly don't melt-up overnight. And sure enough, one day after stocks sank when Steven Mnuchin told the Milken Institute Global Conference yesterday that "getting something done" on stimulus before the election "would be difficult", the selling accelerated overnight in S&P futures which dropped over 1%, as Europe’s biggest cities clamped down to curb the virus and hopes wilted for new stimulus from Washington.

Hopes for a U.S. package to boost the coronavirus-hit economy before the presidential election next month have also fizzled out after U.S. Treasury Secretary Steven Mnuchin said such a deal would be difficult.

Nasdaq futures suffered an even bigger drop, sliding 1.8% after Goldman Sachs cut its recommendation on technology stocks to neutral, saying a barrage of policy and economic shifts will temporarily put an end to the outperformance of the sector.

In single name action, Fastly plunged in late trading on Wednesday and again in pre-market trading on Thursday after saying that Chinese internet giant ByteDance, its No. 1 customer, spent less than predicted in the third quarter on cloud computing services as a result of rising U.S.-China trade tension. Other big losers in the pre-market included Tesla, Moderna and DocuSign. With S&P 500 contracts also well down, U.S. stocks are facing a third declining session unless earnings from Morgan Stanley and Charles Schwab later on Thursday somehow manage to spark optimism.

As Bloomberg notes, investors are coming to terms with virus flare-ups that are triggering tighter restrictions, just as stalled talks on U.S. stimulus and Britain’s messy exit from Europe weigh on risk appetite. U.S. jobless figures in several hours may only add to the gloom, according to strategists at Mizuho International Plc including Peter Chatwell.

"Data today is expected to confirm U.S. economic sentiment is deteriorating, U.S. fiscal stimulus remains some way off, and a hard Brexit" is possible, Chatwell wrote in a note.

In Europe, markets fell for a 3rd consecutive session with the Stoxx 600 Index tumbling as much as 2.2% amid earnings disappointments and clampdowns by some of the region’s largest cities to curb the coronavirus. Markets in London and Paris were lower 1.4%-1.7% and Frankfurt and Milan 2%-2.5% weaker. Shares of auto and energy companies led the drop. The U.K. government imposed tougher curbs on London in a bid to contain a spike in new cases, while France set a curfew in Paris as European nations from Germany to Italy to the Czech Republic reported record increases in new infections. Analysts said the rise in coronavirus infections across Europe and no sign of a vaccine anytime soon after two high profile propects experienced problems was hitting sentiment.

“In Europe you just have a long list of quite notable actions being taken, with Paris and other French cities going into curfew, and today reports that London is going to the next, high level phase of restrictions,” said MUFG research head Derek Halpenny. “It’s all pointing to a greater hit to fourth quarter activity and warrants a degree of adjustment in market pricing.”

“We have been trading in a range for quite some time and up until the beginning of this week, at the top end of it, and it’s a trend that is likely to continue,” said Michael Hewson, senior market analyst a CMC Markets.

Earlier in the session, Asian stocks fell, led by communications and health care, after ending flat in the last session. MSCI's index of Asia-Pacific shares ex-Japan lost 0.6% while Japan's Nikkei .N225 dropped 0.5%. Most markets in the region were down, with Hong Kong's Hang Seng Index dropping 2.1% and India's S&P BSE Sensex Index falling 1.6%, while Australia's S&P/ASX 200 gained 0.5%. The Topix declined 0.7%, with Transaction and JNS Holdings Inc falling the most. The Shanghai Composite Index retreated 0.3%, with Jiayou International Logistics and EGing Photovoltaic Technology posting the biggest slides.

In FX, all eyes were on a two-day summit of European Union leaders which starts on Thursday as the EU and Britain continue their efforts to overcome stumbling blocks, such as fishing rights and competition safeguards, to agreeing a trade deal before the UK’s Brexit transition arrangements end on Dec. 31. After this week’s summit in Brussels, U.K. Prime Minister Boris Johnson is expected to decide whether to pull out of talks and brace the country for a no-deal exit from the bloc.

"Today is unlikely to be 'doomsday' for the British pound, as talks are expected to go on between the UK and EU negotiators beyond the supposed 15 October deadline," UniCredit bank said in a note to clients. The pound barely budged whereas the euro was a touch lower against the dollar at $1.1726. Money markets are betting that the BOE will lower interest rates to 0% in August 2021 ahead of the start of a two-day EU summit with the Brexit trade deal on the agenda.

Investors will also tune into European Central Bank President Christine Lagarde, who takes part in a debate on the global economy at 1600 GMT as part of the IMF and World Bank’s annual meeting which is being held virtually.

Elsewhere, The Bloomberg Dollar Spot Index rose to a one-week high; the dollar advanced versus all of its Group-of-10 peers and neared 1.17 per euro, the greenback’s strongest level in nearly two weeks.  Scandinavian and Antipodean currencies were the worst G-10 performers, led by a decline in Norway’s krone. Australia’s dollar touched the weakest level versus the greenback this month and sovereign yields slid after Governor Philip Lowe said the central bank is assessing whether buying longer-dated bonds would help spur hiring.

In rates, Treasuries were higher as the curve flattened led by the long end, following bigger advance for bunds on haven demand as Covid-19 cases rise in Europe. Yields lower by 0.5bp to 4bp across the curve with 2s10s curve flatter by nearly 2bp, 5s30s by ~2.5bp; 10-year lower by 2.7bp at ~0.70% vs 4bp-5bp declines for U.K. and German 10-year yields. Gilts bull-steepen ahead of Prime Minister Boris Johnson’s decision on whether to continue working with European Union leaders on Brexit trade talks. In Europe, London and Paris face fresh Covid-19 related clampdowns amid record new coronavirus cases. Italian bonds declined on profit-taking, while German bunds rallied to leave their yields at their lowest level since the March spread of COVID-19 caused the global meltdown in stock markets and other riskier assets.

Oil prices also fell as the renewed surge in the virus in large parts of the world underpinned concerns about economic activity. Brent crude futures dropped 0.8% to $42.96 a barrel, WTI crude futures dropped back to $40.68 a barrel while gold and industrial metals like copper were broadly flat.

Today the DOL will report that Initial claims likely resumed their slow grind lower, as economists expect filings for new unemployment benefits to drop to 825,000 last week from 840,000, consensus shows, while continuing claims likely fell to 10.6 million from 11 million.

Looking at the day ahead, today's expected data include jobless claims and Empire State Manufacturing Survey. Morgan Stanley and Walgreens Boots are reporting earnings. From central banks, speakers include ECB President Lagarde, the Fed’s Quarles, Bostic, Kaplan and Kashkari, as well as the BoE’s Cunliffe.

Market Snapshot

  • S&P 500 futures down 0.9% to 3,448.25
  • STOXX Europe 600 down 2.1% to 362.68
  • MXAP down 1.1% to 175.06
  • MXAPJ down 1.2% to 579.85
  • Nikkei down 0.5% to 23,507.23
  • Topix down 0.7% to 1,631.79
  • Hang Seng Index down 2.1% to 24,158.54
  • Shanghai Composite down 0.3% to 3,332.18
  • Sensex down 1.8% to 40,053.86
  • Australia S&P/ASX 200 up 0.5% to 6,210.30
  • Kospi down 0.8% to 2,361.21
  • Brent futures down 1.1% to $42.83/bbl
  • Gold spot down 0.3% to $1,895.46
  • U.S. Dollar Index up 0.3% to 93.69
  • German 10Y yield fell 4.4 bps to -0.625%
  • Euro down 0.3% to $1.1710
  • Italian 10Y yield unchanged at 0.455%
  • Spanish 10Y yield fell 0.5 bps to 0.13%

Top Overnight News from Bloomberg

  • Democratic presidential nominee Joe Biden raised $383 million in September, breaking the monthly record his campaign set in August when it pulled in $364.5 million
  • Londoners will be banned from mixing with other households indoors and Paris is set for a curfew, as European leaders struggle to cope with record new coronavirus cases around the region
  • A combination of falling worldwide bond yields and rock-bottom currency hedging costs are bullish signals for U.S. Treasuries. The recent steepening of the U.S. yield curve has driven the yield pick up on 30-year Treasuries to 80 basis points over German bunds, for euro-hedged investors. Their yen-hedged equivalents get a yield of 1%, about the same on 10-year Italian debt where Japanese investors have recently made record purchases
  • Bond investors are pouring back into riskier debt in search of higher returns as they increasingly factor in years of low interest rates. China drew bumper demand for a bond sale this week even amid increasing tensions with the U.S. Turkey returned to international debt markets last week despite mounting geopolitical risks. And across emerging markets, dollar notes sold by the lowest-rated borrowers are returning more than top-rated peers

A quick look at the global markets courtesy of NewsSquawk

APAC equity markets traded mostly lower following a negative handover from Wall Street which saw major indices post a second straight day of declines amid the dwindling prospect of a pre-election relief bill, rising COVID-19 cases and as US earnings season gets underway. ASX 200 (+0.5%) bucked the trend following dovish remarks from RBA Governor Lowe who noted that it is reasonable to expect that further monetary easing would get more traction than was the case earlier, and it is possible to cut the Cash Rate to 10bps, but the Board has not yet made any decisions. Meanwhile, an overall better-than-expected Aussie jobs data further underpinned the index. Nikkei 225 (-0.5%) was subdued on yesterday’s JPY action, whilst Rakuten shares rested at the foot of the index as it lost out to Amazon on Prime Day deals. The KOSPI (-0.8%) also traded with losses despite Big Hit Entertainment shares rising over 150% at its IPO. Elsewhere, Hang Seng (-2.0%) and Shanghai Comp (-0.2%) were also lower, with the former pressured after US sanctioned Hong Kong’s Chief Executive Lam over her alleged undermining of Hong Kong’s autonomy, albeit the US Treasury stopped short of imposing sanctions on banks. Meanwhile, Alibaba shares fell over 2.5% as US state department reportedly submitted an application to the Trump Admin to put Alibaba’s unit Ant Group on a trade blacklist. Mainland China meanwhile opened with modest gains amid PBoC liquidity injections, but thereafter traded indecisively due to heightened geopolitical tensions after a US destroyer crossed the Taiwan Strait on Wednesday. Finally, JGBs saw modest gains as it tracks price broader price action across the fixed income futures complex.

Top Asian News

  • Hong Kong-Singapore Travel Bubble to Reopen Financial Hub Links
  • China Inflation Slows in September as Food Price Gains Moderate
  • BTS Band Members Make Millions as Big Hit Shares Jump in IPO

European equities (Eurostoxx 50 -2.5%) have endured heavy losses throughout the session as markets contemplate a disappointing Q4 growth landscape with lockdown measures tightened across the region once again. Various restrictions have been in place since for several weeks/months; however, the policy responses from various governments throughout the week have clearly placed an even tighter grip on the European economy, particularly in some of the core nations. Earlier today, Germany warned that the nation is facing a very broad second wave, whilst France recently imposed a curfew in the Paris region and London looks set to be designated tier 2 status in the recently announced “traffic-light” system. All of this has served to highlight that some of the expectations for growth this quarter will likely need to be revised lower, however, questions may begin to arise over what policy response such an outturn will be met with, particularly from a fiscal standpoint as negotiations over the EU recovery fund remain at an impasse. Losses can be seen across major European indices with the DAX (-3.0%) the marginal laggard after German Chancellor Merkel cautioned that even tougher lockdown measures might be required. From a sectoral standpoint, all sectors are lower on the session with notable softness seen in some of the more cyclical names such as autos, oil & gas and travel & leisure which have tended to bear the brunt of selling when COVID fears heighten. On travel & leisure, albeit not the worst performing company in the sector, Ryanair (-3%) earlier announced that it will cut its winter capacity to 40% from 60% and cautioned that FY2021 traffic will likely decrease to around 38 million guests. IAG (-4.0%) have also succumbed to the selling pressure despite reports suggesting that hedge fund heavyweight Marshall Wace has built a 3% stake in the Co. Elsewhere, Thyssenkrupp (-5.4%) are lower on the day after comments from the North Rhine-Westphalia premier who believes it would make more sense for the Co. to restructure and produce green steel than the Gov't take a stake. Earnings from swiss heavyweight Roche (-3.3%) have seen their shares lag amid softer than forecast revenues, whilst Schroders (-3.0%) shares are seen lower by an equal magnitude post-earnings. Looking ahead, the main highlight in the pre-market for US earnings comes via Morgan Stanley.

Top European News

  • Paris and London Face Clampdowns as Europe Posts Record Cases
  • Rolls-Royce Says Bond Success Removes Need for State-Backed Loan
  • Spain Pushes Back on German Concerns Over Handling of Outbreak
  • Dutch Home Prices Jump as the Market Overcomes Economic Weakness

In FX, a double hit for the Aussie as broad risk sentiment continues to deteriorate and RBA Governor Lowe upped the ante in terms of a potential 15 bp rate cut at the November policy meeting overnight, while the subsequent jobs report failed to provide much comfort even though headline payrolls and the unemployment rate were not quite as weak as forecast. Aud/Usd has extended its pull-back to sub-0.7100 and the Aud/Nzd cross is hovering just over 1.0700 to the relative benefit of the Kiwi that remains in-site of 0.6600, albeit losing traction from its recent 0.6650 axis ahead of NZ manufacturing PMI.

  • GBP - Some calm after the midweek session mayhem for Sterling, as Cable pivots 1.3000 within comparatively narrow confines and Eur/Gbp meanders between 0.9037-17 parameters. However, the Pound’s predicament and position remains very fluid and prone to Brexit developments going into Day 1 of the European Council Summit, as any change in stance over the main outstanding issues could heighten the chances of a breakthrough and in turn lower the probability of no deal before deadline day (whenever that might be). As things stand, fishing rights is the key sticking point and area that neither side has given ground on, but the level playing field and state aid are also preventing the 2 sides from penning a draft trade deal.
  • USD - After Wednesday’s whip-saw moves, in keeping with Sterling if not totally as a bi-product of the Gbp’s choppy price action, the Dollar is firmly back in safe haven demand as EU stocks cave under the weight of rising COVID-19 cases. Indeed, the DXY has rebounded from sub-93.500 lows to 97.763, thus far and eclipsing this week’s prior peak to expose 94.000 in advance of a busier US data schedule and more Fed speakers.
  • JPY/CHF/EUR/CAD - The Yen is faring better than others given its own allure as a refuge from risk, with Usd/Jpy sitting tight in the low 105.00 zone and well flanked by decent option expiries extending from 105.25 (2.2 bn) through 105.10-00 (1.7 bn) to 104.85 (1 bn). Meanwhile, the Franc has retreated to circa 0.9150, Euro towards 1.1700 where expiry interest may provide some support (1 bn from the round number to 1.1695) and Loonie further from 1.3100 to a test of 1.3200 awaiting comments from BoC’s Lane.

In commodities, WTI and Brent front month futures are unsurprisingly pressured this morning, exhibiting losses of circa USD 1.0/bbl, as sentiment in general takes a hit with the FX, Fixed & Equity space all exhibiting risk-off price action. Specifically for crude, updates have been sparse following last nights private inventories which printed a larger than expected draw (-5.4mln vs. Exp. -2.8mln) and as such focus is on the EIA report today, at the slightly later time of 16:00BST/11:00ET given Monday’s US holiday, for confirmation of this; for reference, the headline is expected at -2.835mln. Aside from this the OPEC+ JTC meeting is taking place today but focus is very much on the JMMC meeting for October 19th to get any insight/guidance from the committee as OPEC’s plans for their supply schedule given the changing supply & demand picture since it was agreed. As such, price action this morning is very much being driven by the broader market drivers this morning and particularly the resurgence in COVID-19 cases and additional lockdown measures being implemented this morning in London & Paris already and the associated impacts for the demand side of the equation; evidenced by the poor performance in travel names and similarly sensitive areas of the economy in European equity trade this morning. Moving to metals, spot gold is subdued and back below the USD 1900/oz mark in-spite of the broad risk move as the metal is weighed on by a dominant dollar. Price action which sees the DXY in proximity to ever increasing session highs and therefore the precious metal remains at lows with losses in excess of USD 10/oz.

US Event Calendar

  • 8:30am: Empire Manufacturing, est. 14, prior 17
  • 8:30am: Initial Jobless Claims, est. 825,000, prior 840,000; Continuing Claims, est. 10.6m, prior 11m
  • 8:30am: Import Price Index MoM, est. 0.25%, prior 0.9%; YoY, est. -1.2%, prior -1.4%
  • 8:30am: Export Price Index MoM, est. 0.25%, prior 0.5%; YoY, prior -2.8%
  • 8:30am: Philadelphia Fed Business Outlook, est. 14.8, prior 15

DB's Jim Reid concludes the overnight wrap

We finally got a negative Covid test result for one of the twins yesterday afternoon so we are back to restricted freedom rather than solitary confinement. I can’t remember seeing my wife so happy. Never has wearing a mask and not being able to go near people felt so good. We actually had a Zoom parents evening last night and scheduled all 3 sessions back to back leaving Bronte the dog to look after the children in the other room. By the time we got back Bronte had eaten Maisie’s dinner and planted the remains on the floor and Jamie was downing neat tomato ketchup straight out of the squeezy bottle. Neither of us could remember how much was there before we left but the fact that it was nearly empty by the time we got back worried us a little.

The bottle was a bit half empty yesterday as global equity markets fell back somewhat as they weighed up the seemingly never-ending US stimulus negotiations along with a number of earnings releases. By the close the S&P 500 had fallen back -0.66%, in spite of the buoyancy of energy stocks as WTI rose a further +2.09%. Furthermore the VIX index of volatility rose for a 3rd day running, albeit with a small +0.33pts increase. Elsewhere, the Dow Jones (-0.58%) and the NASDAQ (-0.80%) also fell, and in Europe the STOXX 600 shed -0.09%.

A large number of US banks reported again yesterday. Goldman Sachs (+0.13%) saw overall trading revenue up 29% for the quarter, primarily driven by fixed income. The beat saw EPS rise to record levels and nearly twice analysts’ estimates. Bank of America’s (-5.29%) trading operation did not do as well as peers during the last quarter, missing analysts’ expectations of $3.5bn by $160mn. Bank of America CEO Moynihan noted that more fiscal stimulus is needed to see the recovery continue, joining the chorus of bank executives calling for action. United Airlines (+0.24% aftermarket) posted worse losses than expected but has lowered its daily cash burn to $25million from $40 million in the previous quarter. The company highlighted its $19.4 billion of liquidity though but with specific airline-only stimulus stalling in Washington, airlines will likely have to continue shoring up reserves.

On the topic of stimulus, yesterday we got more negative short-term headlines. The big one was from Treasury Secretary Mnuchin, who now does not expect a relief package to make it to President Trump’s desk prior to the election. This comes after he and Speaker Pelosi spoke at length over the last few weeks. Speaking at a Milken Institute conference, the Treasury Secretary said “At this point getting something done before the election and executing on that would be difficult, just given where we are in the level of details.” Mnuchin went on to note that the difference in overall price tag was not the breaking point, but the policies within each side’s bill are seemingly not easily reconcilable. This is even before we get to the fact that Senate Majority leader McConnell has said that there are Republican Senators that are hesitant to pass a bill of the size that the White House and House Democrats have proposed.

Overnight in Asia markets are mostly trading lower following Wall Street’s lead. The Nikkei (-0.71%), Hang Seng (-1.28%) and Kospi (-0.98%) are all down while the Shanghai Comp (+0.14%) is up. The Asx is also up +0.65% on comments from the RBA Governor that the central bank is considering whether buying longer-dated bonds would spur hiring. Meanwhile, futures on the S&P 500 (-0.37%) are currently pointing to a weaker open. Elsewhere, China’s September CPI and PPI both came in softer than expectations at +1.7% yoy (vs. +1.9% yoy) and -2.1% yoy (vs. -1.8% yoy).

In other overnight news, Bloomberg is reporting that as part of a European tour last week, US Under Secretary Keith Krach met executives including Deutsche Telekom AG CEO Timotheus Hoettges and Meinrad Spenger, the head of Spanish telecom carrier MasMovil, to urge them to ditch Chinese vendors of cloud infrastructure on data-security concerns.

On the coronavirus, there was sadly yet another day of bad news out of Europe, with Italy reporting a record number of cases at 7,332 (albeit with much higher levels of testing now than back in March). The rise in numbers there are bringing it more into line with the recent increase we’ve seen in the UK and France in recent weeks, though Italy’s numbers still remain at lower levels by comparison. French President Macron announced that nine of the country’s largest cities, including Paris, will be subject to a curfew from 9pm to 6am starting on Saturday lasting at least 4 weeks. More restrictions were also seen in Switzerland. Meanwhile, Catalonia, Spain’s largest region by population, ordered that bars and restaurants can only serve take away for the next 15 days. Overnight various media reports are suggesting that London is likely to see an tightening of restrictions as soon as tomorrow.

The concern over rising cases comes as hospitalisations increase. For example, here in England, the number of people in hospital with Covid has risen above the 4k mark for the first time since June 9. On a similar note, French President Macron said yesterday while announcing the new restrictions that the situation in French hospitals is “unsustainable” and the goal is to bring new cases down to 3,000 to 4,000 a day. France reported 22,591 new cases yesterday. So an ambitious target.

Onto Brexit, sterling was the strongest performing G10 currency yesterday after a Bloomberg report came through suggesting that the UK wouldn’t walk away from EU trade talks today. Although this was increasingly expected, Prime Minister Johnson had previously set October 15 as a deadline to reach an agreement, ahead of the transition period’s conclusion at the end of the year. Last night on a call between Prime Minister Johnson, European Commission President Von der Leyen and European Council President Charles Michel, the Prime Minister said he was disappointed with the progress but that he will decide on continuing talks only after the European Council meeting today and tomorrow. Bloomberg reported that those privy to the negotiations now consider the end of October or first few days of November as the real deadline for getting a deal, though that has remained a moving target.

Moving to fixed income, it was yet another day of falling yields in sovereign bond markets, as yields in parts of southern Europe fell to fresh all-time lows. Although BTPs were broadly flat, yields fell further in Greece, where 10yr yields fell -1.3bps to 0.772%, though in Spain 10yr yields are still 10bps above their recent lows in August 2019. Core country sovereign bonds also performed strongly, with 10yr bund yields down -2.5bps to a 5-month low, and French yields down -1.6bps to a 7-month low. Treasuries also advanced, moving -0.2bps to 0.726%.

In a parallel universe, we would be writing about tonight’s second presidential debate, but with that cancelled this election is now set to be the first since 1996 without 3 presidential debates. Instead, both candidates will be facing separate town halls tonight, with President Trump in Miami and Joe Biden in Philadelphia. With Trump still facing a noticeable polling deficit (currently showing him down -10.4pp on average), our chart of the day yesterday (link here) looked at previous polling errors in US elections, and shows that if the polls remain steady over the final 3 weeks, it’d take the largest polling error since data began post WWII for President Trump to win the popular vote.

Wrapping up with yesterday’s data, and the Euro Area industrial production numbers for August showed a +0.7% increase (vs. +0.8% expected). That’s its 4th consecutive monthly gain, though the year-on-year reading actually fell a tenth to -7.2%. Over in the US, producer prices were up +0.4% month-on-month, while the year-on-year reading climbed into positive territory for the first time since March, at +0.4% as well. Both ahead of expectations.

To the day ahead now, and as mentioned EU leaders will gather in Brussels later today for the European Council summit. Elsewhere, earnings releases out include Morgan Stanley and the Walgreens Boots Alliance. Data releases include the weekly initial jobless claims from the US, along with the September Empire State manufacturing survey and Philadelphia Fed business outlook survey. From central banks, speakers include ECB President Lagarde, the Fed’s Quarles, Bostic, Kaplan and Kashkari, as well as the BoE’s Cunliffe.

Published:10/15/2020 7:06:57 AM
[Markets] Visualizing Every Company In And Out Of The Dow Jones Industrial Average Since 1928 Visualizing Every Company In And Out Of The Dow Jones Industrial Average Since 1928 Tyler Durden Mon, 10/12/2020 - 11:55

The Dow Jones Industrial Average (DJIA) is reported on daily by every major finance and media platform - a testament to its importance and relevance in global financial markets.

The market benchmark has a rich history embedded alongside America’s rise as a global superpower in the 20th century, and, as Visual Capitalis's Aran Ali details below, the inflows and outflows of companies on the 30 stock index coincide with broader secular trends. For example, the delisting of many industrial stocks over time encapsulates America’s transition towards a service-based economy. Meanwhile, the addition of tech companies in the last few decades paints a similar picture of change.

Today’s infographic looks at Dow data spanning over nine decades, all the way back to the tail end of the Roaring Twenties.

Crank Up The Volatility

An increasingly competitive and accelerating business landscape results in greater churn for stock market indices.

In fact, in the 92 years of activity visualized for the DJIA, there were 93 changes in its composition. This is not surprising, as the average duration of a company’s tenure on American indices has been trending down for decades—that said, 63% of Dow changes occurred in the second half of the 92 year sample period.

The current iteration of the DJIA includes some long-serving constituents, with the average length of companies in the index sitting at 20 years. General Electric was the last standing member of the original group from 1928, but in 2018, they were replaced by Walgreens.

2020 has also brought with it some fresh faces, including three changes so far. They include Salesforce for ExxonMobil, Amgen for Pfizer, and Honeywell International for United Technologies. Here’s a full list of the current companies in the index:

Although all the stocks in the DJIA are intended to be in line with broader economic trends, the similarities end there. For some DJIA stocks, 2020 has brought growth and opportunity—for others, quite the opposite.

YTD stock price performances range vastly from a high of 55% to a low of -49%. Perhaps it serves as no surprise that the best performing companies serve in the tech space like Apple, Microsoft, and Salesforce, while the worst performing are the likes of Boeing and Chevron.

A Sign of the Times

The three changes in 2020 can best be described as modernizing the Dow.

The delistings include businesses in industries such as Aerospace & Defense and Big Pharma. But the most monumental exit? ExxonMobil, which was once the biggest company by market capitalization in America.

Their fall from grace best symbolizes the state and direction the world is headed towards.

Published:10/12/2020 11:09:09 AM
[Markets] America Has An Epic Choice America Has An Epic Choice Tyler Durden Sat, 10/10/2020 - 17:00

Authored by MN Gordon via EconomicPrism.com,

“There is no means of avoiding the final collapse of a boom brought about by credit expansion.  The alternative is only whether the crisis should come sooner as the result of voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.” 

– Ludwig von Mises, Human Action [1949]

Crisis Now or Total Catastrophe Later?

On Tuesday, while still hopped up on anti-coronavirus goofballs, President Trump had a moment of clarity.  After 40 years of near uninterrupted credit expansion, it was finally time to cut it off.  And he was just the guy to do the cutting.

Trump took to Twitter to make his first snips.  He announced that stimulus bill negotiations were severed.  Minutes after, the Dow Jones Industrial Average hit a 400 point air pocket.  Several hours later, and perhaps following a little tutelage from Mnuchin and Kudlow, Trump reversed course.

We don’t know what Mnuchin and Kudlow said to Trump.  But we suppose they informed him that, at this point, the immediate health of the American economy is contingent on delivering printing press money to citizens and non-citizens alike…who cares if the long-term consequences are catastrophic?  Thus, Trump called on Congress to approve a second round of $1,200 stimulus checks.

This course of action eschews voluntary abandonment of further credit expansion.  This, no doubt, is the path of least resistance for politicians.  Unless Trump wants to lose the election, he can’t tell voters there’s no more free money.

The choice is real simple.  Voluntary abandonment of further credit expansion and a crisis now.  Or further credit expansion and the final and total catastrophe of the dollar system later.

For a politician this isn’t really a choice at all.  If you recall, Nero clipped coins in 64 A.D. and fiddled as Rome burned.  The decision every president makes is to avoid a crisis now and, with a little luck, leave total catastrophe for some other sucker.

We’ll have more on this in a moment.  But first, some perspective…

Between a Rock and a Hard Place

In the Spring of 2003, 27-year old Aron Ralston found himself between a rock and a hard place.  While solo canyoneering within the rock fissures and tapered caverns of Bluejohn Canyon, in eastern Utah, something heinous happened.

While negotiating a 10 foot drop in a 3 foot wide canyon, Ralston dislodged a boulder he thought was stable.  As he fell back, the boulder crashed down and crushed his right hand and lower arm.  What’s worse, the 800 pound rock pinned him in the canyon.  He was entombed.

Ralston was carrying a small rucksack with just one liter of water, two burritos and a few chunks of chocolate.  He also had his rock climbing ropes and a small multi-purpose knife.  He hadn’t bothered to tell anyone where he was going.  He knew he was invincible.

Over the next 127 hours (more than 5 days), Ralston rationed his water and fruitlessly chipped away at the massive boulder with a dull multi-tool knife.  He slowly slipped into a state of delirium.  As Ralston weakened and his supplies faded, he was faced with a grim question: Your hand or your life?

Ralston concluded his only way out was to tourniquet his arm with his climbing ropes, and cut off his hand.  But when he cut through the flesh with his dull knife he encountered another problem.  His bones!

By the fifth day, as Ralston later recounted, he had found “peace” in “the knowledge that I am going to die here, this is my grave.”  However, the following morning he had reservations.  His peace was gone.

What happened next?

With death staring him in the face, Ralston went into a rage…resulting in another stark revelation.  He could fling himself against the boulder to break his own bones.

The snap of his bones “like, pow!” was a horrifying sound “but to me it was euphoric,” recalled Ralston.  “The detachment had already happened in my mind – it’s rubbish, it’s going to kill you, get rid of it.”

After snapping his bones and severing his hand (it took about an hour to hack through his flesh), Ralston somehow managed to scale a 65 foot cliff to escape the canyon.  He then hiked out to his rescue – minus a hand.

America Has an Epic Choice

America has an epic choice.  And it has nothing to do with who will be the next president of the United States.  It has nothing to do with if the new stimulus bill is $1.6 trillion or $2.2 trillion.

To review, the choice is as follows: Voluntary abandonment of further credit expansion and a crisis now.  Or further credit expansion and the final and total catastrophe of the dollar system later.

The President, Joe Biden, Congress, the Secretary of Treasury, the Federal Reserve, economic advisors, the political class, lobbyists, government contractors, Wall Street, pensioners, CalPERS, transfer payment recipients, social security and Medicare beneficiaries, and so on and so forth, including…

Jamie Dimon, the U.S. Forest Service, the Bureau of Land Management, Arlington Virginia, bureaucrats at the Department of HUD, Anthony Fauci, mortgage brokers, Edward Jones, Lockheed Martin, the staff at the IRS, public private partnerships, teachers unions, and much, much more.

The whole lot – and then some – are firmly on the side of further credit expansion and the final and total catastrophe of the dollar system later.  Just this week, for example, Fed Chair Powell offered the following words of encouragement:

“The US federal budget is on an unsustainable path, [and] has been for some time.  [But] this is not the time to give priority to those concerns.”

In other words, avoid a crisis now in exchange for total catastrophe later.

The choice, by all measures, is heinous.  But sometimes, like Aron Ralston, one must cut off their hand if they want to live.  By this, voluntary abandonment of further credit expansion is the way out of the current financial predicament.  Stop the madness.  Bring on the crisis.

Published:10/10/2020 4:18:20 PM
[Markets] Luongo: "What's Coming Next Will Not Be Pretty" Luongo: "What's Coming Next Will Not Be Pretty" Tyler Durden Fri, 10/02/2020 - 16:21

Authored by Tom Luongo via Gold, Goats, 'n Guns blog,

While we were all distracted by the Kabuki Theater of the first ‘debate’ between Donald Trump and Joe Biden on Tuesday the bigger event was simply the turning of the calendar from September to October.

What is painful about so much market commentary is that it is focused on price. The Dow went up, huzzah! The dollar fell, huzzah?!

But prices are nothing without time. And most prices are meaningless. The only ones that truly matter are the ones we know definitively for any given period of time — Open, High, Low, Close.

Everything else is noise and errata.

So, the calendar shifting from September to October creates another opportunity to aggregate all the noise of two different time periods, one month and one quarter-year, and assess what people actually thought of the Dow or the dollar or Tesla or a micro-cap furniture company in Saigon.

Given the extreme political landscape, central bankers who have no answers and the obvious push for a remaking of society through the fear-mongering over COVID-19 this quarterly close may be one of the most important in the history of financial markets.

And the fight over important closing prices didn’t disappoint.

Last week I talked about what happens if the dollar really starts to rise, citing a massively bearish monthly chart pattern in the euro. To pull off one of the most bearish signals possible all the euro had to do was close below $1.1696 on Wednesday.

It didn’t. $1.1718 was the close. Bearish engulfing one-bar reversal avoided. Whew!

But for how long?

Germany slipped into deflation last quarter. The ECB can’t allow the euro to fall lest it begin putting upward pressure on rates as carry trades unwind. Right now the only thing keeping any of the markets afloat is insane levels of sovereign debt buying by central banks.

They are going through the motions that there are actual markets for these bonds and we are going through the motions that we actually want to own them.

If not for trillions in liquidity sloshing around looking for a home this whole system would collapse overnight. And yet there is no escape from it collapsing at some point anyway.

This is why the WEF’s Great Reset is happening. Those in power want to stay in power and remake the world in a different image. It’s becoming increasingly clear that COVID-19 is an excuse to introduce draconian lock downs to minimize the public’s outrage when they pull the plug on the current system.

Dividing the population into those that submit to this state of affairs and those who don’t was useful data for them. They now know how much push back they will get from the people and how many newly-minted brown shirts and Karens they will have to help them remake the world for the ‘common good.’

And whether anyone is aware of what is going on always shows up in the capital markets. The strong close by U.S. equity markets on Wednesday in the wake of Trump’s debate performance was your first clue.

As I noted in Wednesday’s post, “Elephants vote.”

Trump spoke to people’s elephants loudly and clearly amidst the calls from Chris Wallace and Joe Biden to, “Just shut up.” And those elephants realize that Trump is the only positive force in politics for the future of any vestige of capitalism.

Well, elephants also manage money.

And that’s why the subtle cues that happen in important markets after significant events are more important than 99% of all the price moves we see. It’s why obsessive ticker watching can easily lead you astray unless you are day-trading.

With the news that Donald Trump has COVID-19 and it’s not an asymptomatic post-hoc positive but rather a real diagnosis, the markets reacted badly to the news.

They want to believe there is a stimulus compromise coming from D.C. but as I’ve explained before, Pelosi and the Democrats work for the WEF and want the Great Reset to wipe us all out so they can remake the world and make it safe for their planned technocratic oligarchy.

But, the reality is that traders know this. That’s why the euro is weak today, stocks are closing the week with a whimper but U.S. markets look a helluva lot stronger than European ones.

Case in point. Here are the monthly charts for both the Dow Jones and the German DAX indexes.

The DAX is stuck below the 13,300 level and there is simply no appetite to take it higher. Look at the last four bars of the chart. It’s a strange pattern of higher highs and higher lows, which should be bullish but they are all, at the close, down bars — closing lower than the open.

That kind of non-committal action should be viewed as insider distribution rather than any kind of expression of strength. Powerful people trading the German markets are bailing on German stocks selling into the post-Coronapocalypse reaction rally high.

And they’ve been doing it for months.

Now, here’s the Dow Jones Industrials monthly chart. As Martin Armstrong routinely observes, the Dow is the best proxy for international capital movements into U.S. markets.

The Dow surged into the close on Wednesday (black arrow). It was the second-highest monthly close on record. That is remarkable given the state of the U.S. economy and the political desire to watch it burn.

Now I’m no fan of the larger bullhorn-like chart pattern stretching back four years and that signifies a potential crash in the future.

The differences between the DAX and the Dow Jones tell you that the smart people in Europe are moving their money out ahead of whatever is on the horizon.

But, right now, international equity markets are trading on the hope that Donald Trump wins re-election while the whole of the political class is expending every erg of capital they have to stop him and destroy the capital markets.

In spite of that, he is absolutely the odds-on favorite to win the election. Now whether or not he’ll be allowed to take office is a different story.

And the truth of it is all of what’s happening is their fault. They created this mess with moronic post-Keynesian economics, late-stage corporatist corruption and maleducating two generations into the believing Communism didn’t kill 200+ million people in the 20th century.

This is what undermined the structures built post-WWII as they’ve worked assiduously to weaken all social bonds, sow division and hide behind their minions in governments and the media.

Remember folks it’ll all be better when we embrace the Green New Deal Biden is confused about supporting and over throw everything good and decent in the world because there’s too much freedom in our first-world police states.

That’s the messaging of the Great Reset.

And if you don’t like what is planned well, they’ll be sending a bunch of UBI-sotted, fat-assed and tattooed BLM/Antifa thugs to your house to denounce you as racist while burning it down and taking your stuff while telling themselves their ‘fighting the power.’

What’s coming next will not be pretty regardless of Trump surviving COVID and getting re-elected. Deflation is here because it couldn’t be stopped. Now there is only oceans of money to print to throw into the abyss.

And that why there’s a plan in place and it will unfold because the people driving it have painted themselves into a corner if they want to retain power.

And they do at all costs.

*  *  *

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Published:10/2/2020 3:26:32 PM
[In The News] Stocks Drop After Trump Announces Positive COVID Test

By Jake Dima -

The U.S. stock market fell following President Donald Trump’s announcement that he and First Lady Melania Trump tested positive for coronavirus. NASDAQ Composite and S&P 500 declined 2% (234 points) and around 1.6% (55 points) respectively as of Friday morning, according to Fox Business. The Dow Jones Industrial Average also dropped 1.5% (412) points amid …

Stocks Drop After Trump Announces Positive COVID Test is original content from Conservative Daily News - Where Americans go for news, current events and commentary they can trust - Conservative News Website for U.S. News, Political Cartoons and more.

Published:10/2/2020 10:56:48 AM
[Earnings] American stocks drop in wake of President’s COVID-19 diagnosis American stocks are selling in the wake of President Trump, and members of his family and a key staff member, testing positive for COVID-19. The news, which came overnight, is weighing heavily on all major American indices, but heaviest on tech shares. As of the time of writing, here’s where the mess stands: Dow Jones […] Published:10/2/2020 7:54:28 AM
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