2 min Market Summary: 16 Oct 2018

  • U.S. Core Retail Sales m/m at -0.1% vs expected 0.4%. Retail Sales m/m at 0.1% vs expected 0.7%. The 2-yr note yield ticked one basis point higher to 2.85%, and the 10-yr note yield rose two basis points to 3.16%. Risk-aversion sentiment returns on Monday with markets starting the week soft, USDJPY down -0.38%, $111.78. Euro up 0.28%, $1.1583.
  • In Brexit, May told the House of Commons on Monday that neither Brussels nor London could allow the disagreement to “derail the prospects of a good deal and leave us with a ‘no-deal’ outcome that no one wants”. She insisted she believed a deal was still “achievable” and that the UK and EU were “not far apart”. Sterling up 0.40%, $1.3155.
  • BOC survey showed strong investment intentions and a tight labor market. WTI crude prices were relatively subdued on Monday, settling 0.6% higher at $71.83/bbl. USDCAD down -0.28%, $1.2987.
  • S&P 500 down -0.59%, 2,750.79. Nasdaq down -1.24%, 7,068.67. Nikkei down -1.87%, 22,271.30.
  • Financial sector was unable to impress after an underwhelming response to Bank of America’s (BAC 27.92, -0.54, -1.9%) better-than expected earnings report. Charles Schwab (SCHW 47.64, -1.37, -2.8%) also fell after reporting earnings that were in-line with top and bottom estimates. United States-Saudi Arabia tensions brewed over the weekend following the disappearance and alleged murder of Washington Post columnist Jamal Khashoggi. In response, Trump threatened to impose sanctions on the world’s largest oil producer if it was found to be guilty; however, Trump said today that Saudi King Salman strongly denied to him any involvement in Khashoggi’s disappearance.
  • In other corporate news, L3 Technologies (LLL 220.91, +25.13) rose 12.8% after announcing an all-stock merger of equals with Harris Corp. (HRS 173.25, +18.38, +11.9%). The combined company, L3 Harris Technologies, will be the 6th largest defense company in the U.S. and a top 10 defense company globally. Separately, retailer Sears Holding (SHLD 0.31, -0.10, -23.8%) filed for Chapter 11 bankruptcy.  That was not a surprise to the market, as it had been widely speculated, yet the news itself generated a sentimental story line given the retailer’s storied operating history.

2 min Market Summary: 12 Oct 2018

  • U.S. CPI m/m at 0.1% vs expected 0.2%. Core CPI m/m at 0.1% vs expected 0.2%. The helped temper concerns about rising inflation for the time being, yet with total CPI and core CPI running above the Fed’s longer-run inflation target of 2.0%, it still left little reason to think the Fed is going to back away from a rate hike in December. Risk-off sentiment in markets continue to keep safe-haven Yen bid. Dollar was broadly weaker on Thursday. USDJPY down -0.17%, $112.09.
  • In ECB Minutes, policymakers ultimately concluded that the domestic economy was showing enough resilience to consider risks broadly balanced, even if some argued that the factors behind the recent slowdown may not be temporary as earlier thought, the ECB said in the accounts of the Sept 13 meeting. Policymakers also concluded last month that domestic cost pressures continued to build and broaden, indicating that inflation would rise, moving back toward the bank’s target of almost 2% after undershooting it for over five years. Euro up 0.61%, $1.1590. Sterling up 0.29%, $1.3234. USDCAD down -0.28%, $1.3032.
  • S&P 500 down -2.06%, 2,728.37. Nasdaq down -1.44%, 6,964.03. Nikkei down -3.96%, 22,587.50.
  • At session lows, the S&P 500 was down -2.7%. Stocks were able to reclaim some losses in the final hour of trading following a Washington Post report that Trump and Chinese leader Xi Jinping have agreed to meet at next month’s G-20 summit in Argentina with hopes of resolving their trade conflict.
  • Yields on longer-dated issues fell quite a bit more than yields on shorter-dated issues, leading to a flattening of the yield curve; the yield on the 2-yr Treasury note slipped one basis point to 2.85%, while the benchmark 10-yr yield fell nine basis points to 3.13%. That yield curve flattening weighed on lenders, which depend on the interest-rate differential between what they pay for deposits and what they make on loans. The S&P 500’s financial sector lost -2.9% and Trump blamed the recent selling on the Fed, which he says has “gone crazy” with its rate hikes. When asked if he is considering firing Jerome Powell, who he appointed, the president said he wouldn’t, adding that he’s “just disappointed.”

2 min Market Summary: 11 Oct 2018

  • U.S. PPI m/m inline at 0.2%. Core PPI m/m inline at 0.2%. Japanese Core Machinery Orders m/m at 6.8% vs expected -3.9%. Risk aversion fears escalated on Wednesday as markets plunged, Yen remained strongly bid against the Dollar. USDJPY down -0.76%, $112.09.
  • Euro up 0.37%, $1.1533. U.K. GDP m/m at 0.0% vs expected 0.1%. Manufacturing Production m/m at -0.2% vs expected 0.1%. In Brexit, Barnier claimed that near the 85% of the Brexit deal has been agreed, although adding that they still need to agree on the Irish border issue. Furthermore, he said that the EU found many points of convergence with UK PM May’s Chequers plan. Sterling up 0.46%, $1.3205. Hurricane Michael made landfall in the Florida Panhandle as a Category 4 storm. The storm has disrupted crude production in the Gulf of Mexico, but oil prices fell notably on Wednesday nonetheless, retreating from the four-year high hit earlier this month. WTI crude dropped 2.5% to $73.09/bbl. USDCAD up 0.82%, $1.3053.
  • S&P 500 down -3.29%, 2,785.68. Nasdaq down -4.44%, 7,044.50. Nikkei down -3.24%, 22,757.00.
  • Stocks tumbled on Wednesday as bond yields held steady at multi-year highs and amid continued concerns about economic and earnings growth prospects. FANG names, which have been key leadership stocks for this bull market, got pummelled on Wednesday; Netflix (NFLX 325.89, -29.82) lost -8.4%, Amazon (AMZN 1755.25, -115.07) lost -6.2%, Facebook (FB 151.38, -6.52) lost -4.1%, Apple (AAPL 216.36, -10.51) lost -4.6%, and Alphabet (GOOG 1081.22, -57.60) lost -5.1%.
  • Interestingly, the equity sell off did not lead to higher demand for “risk-free” U.S. Treasuries. In fact, bonds declined with stocks on Wednesday, with investors presumably opting to go to cash instead. The benchmark 10-yr yield, which moves inversely to the price of the 10-yr Treasury note, advanced two basis points to 3.23%, closing near a seven-year high

2 min Market Summary: 10 Oct 2018

  • There were no notable U.S. prints on Tuesday. An overnight spike in U.S. Treasury yields spooked investors in early U.S. trading, as the benchmark 10-yr yield rose as high as 3.26%. However, renewed buying interest drove prices up and yields down, which eased some of the early angst. The 10-yr note yield settled Tuesday’s session at 3.21%, down three basis points from Friday. Risk-Aversion overhang lingers as markets continue to be soft. USDJPY down -0.19%, $113.02.
  • German Trade Balance at 18.3B vs expected 15.9B. Deputy PM Salvini was again crossing the wires through the European morning, saying that the government won’t backtrack on the budget even if local yields keep soaring. He also said that the country is not planning to leave the EU, but would like to see a change in Union rules. Euro up 0.12%, $1.1506. In Brexit, according to diplomats familiar with the matter, both economies have narrowed the gap on the Ireland border issue, but some differences remain. Also, that an agreement on the future trade relationship could be done by November, while the divorce terms could be out next Monday. Sterling up 0.51%, $1.3157. WTI crude climbed 0.8% to $74.86/bbl, as some oil production has been shut down in the Gulf of Mexico in anticipation of Hurricane Michael. USDCAD down -0.21%, $1.2939. Aussie up 0.51%, $0.7114.
  • S&P 500 down -0.14%, 2,880.34. Nasdaq up 0.26%, 7,371.62. Nikkei down -1.34%, 23,502.00.
  • Stocks were confused on Tuesday amid concerns about growth, rising interest rates, and the impending arrival of Hurricane Michael in Florida’s panhandle. The broader market seemed reluctant to make a decisive move in any direction, as the S&P 500 index crossed back and forth across the unchanged line numerous times during the trading session. Markets looked to have gotten caught up on economic and earnings growth concerns that were fostered by the the International Monetary Fund (IMF) cutting its 2018 and 2019 global growth outlook to 3.7% from 3.9% and a third quarter earnings warning from specialty chemicals company PPG Industries (PPG 98.56, -11.02, -10.1%), which pinned some disappointing guidance on currency pressures, cost inflation, softer demand in China, and a lower end-user demand in Europe and the U.S. PPG’s warning rattled the materials sector, which plunged -3.4%.  Several sector components finished trading at their 52-week lows.

2 min Market Summary (9 Oct 2018)

  • There were no U.S. prints on Monday. Japanese and Canadian banks were closed. Chinese banks are open again after their “golden week” holiday. Note, the bond market was closed in observance of Columbus Day. Yen continues to remain bid against the Dollar due to continued risk-aversion, fuelled by trade war rhetoric and Italian government politics. USDJPY down -0.52%, $113.12.
  • German Industrial Production m/m came in at -0.3% vs expected 0.4%. Italian government bond yields surged to over 4-year highs, with Italian Salvini pointing a finger on Brussels for the bond sell-off and Deputy PM Di Maio claiming that anti-austerity views will grow stronger across the continent. Euro down -0.26%, $1.1494. The optimism about the EU offering a “super-charged” free-trade deal faded on comments from UK PM May’s spokesman, who said that there is a big difference between optimistic talks and a done deal and that there can’t be no withdrawal agreement without a price future framework. Additionally, it was reported that US Brexit Secretary Raab won’t be heading to Brussels this week. Sterling down -0.26%, $1.3093.
  • S&P 500 down -0.04%, 2,884.43. Nasdaq down -0.62%, 7,352.82. Nikkei down -0.48%, 23,553.0.
  • Concerning headlines overseas weighed on U.S. markets early. In China, Secretary of State Mike Pompeo traded jabs with China’s foreign minister, Wang Yi, regarding trade disputes. Yi accused the United States of meddling with domestic affairs, and Pompeo retorted that the two simply had a “fundamental disagreement.” In Italy, the government continued its feud with the European Union over its budget deficit plan, with Italy’s Deputy Minister Matteo Salvini referring to two EU leaders as “enemies of Europe.”
  • In corporate news, Google’s parent company Alphabet (GOOG 1148.97, -8.38) announced that account information of 500,000 of its users was exposed due to a bug, and General Electric (GE 13.61, +0.43) was upgraded to ‘Overweight’ from ‘Equal Weight’ at Barclays. Alphabet shares lost -0.7%, while GE shares climbed 3.3%.

2 min Market Summary (8 Oct 2018)

  • U.S. Average Hourly Earnings m/m inline at 0.3%. Non-Farm Employment Change at 134K vs expected 185K. Unemployment Rate at 3.7% vs expected 3.8%. Japanese Average Cash Earnings y/y at 0.9% vs expected 1.3%. U.S. Treasuries extended their weekly losses following the release of the jobs report, pushing yields higher across the curve. The 2-yr yield advanced one basis point to 2.88%, and the benchmark 10-yr yield jumped three basis points to 3.23%, extending its weekly gain to 16 basis points and marking its highest close since 2011. JPY remained bid against the Dollar on the back of continued risk-aversion in U.S. equity markets. USDJPY down -0.18%, $113.72.
  • German PPI m/m at 0.3% vs expected 0.2%. Euro up 0.08%, $1.1524. Headlines indicated that the EU is willing to offer the UK a “super-charged” free-trade deal. According to the report which cited EU officials, Brussels’ proposal will be presented to the UK news Wednesday. Not much detail was known, except that it covers between 30 to 40% of UK PM May’s demands. Seems unlikely that UK authorities will give up to most of the Chequers’ plan to agree with this upcoming idea, but in the meantime, market players believe that both parts will work hard to avoid a no-deal. Sterling up 0.79%, $1.3123.
  • Canadian Employment Change at 63.3K vs expected 25.0K. Unemployment Rate inline at 5.9%. USDCAD up 0.09%, $1.2937.
  • S&P 500 down -0.55%, 2,885.57. Nasdaq down -1.21%, 7,399.01. Nikkei down -0.58%, 23,821.50.
  • In corporate news, Costco (COST 218.82, -12.86) lost -5.6% despite reporting above-consensus earnings, and Tesla (TSLA 261.95, -19.88) dropped -7.1% after Elon Musk seemingly mocked the SEC in a late Thursday tweet, just days after agreeing to a settlement with the agency over securities fraud allegations stemming from his failed bid to take the company private.