TradeTheNews.com Weekly
Market Update: UN Meetings Ramp Korea Tensions; Fed Confirms Balance Sheet Run
Off Plan
Fri, 22 Sep 2017 16:04 PM EST
Stock markets continued to press up against fresh all-time highs headlined by
the S&P500 gaining a foothold above 2500 early this week, pushing the VIX
volatility index back below 10. A weaker US dollar persisted, likely aiding US
equity valuations. On Wednesday, the Fed confirmed that quantitative tightening
is firmly on track to start in October, with rates to continue rising gradually
despite still being perplexed about what has kept the pressure on inflation
readings. Short rates moved up following the FOMC statement but long rates held
relatively stable. By Thursday the spread between the US 5-year and 30-year
treasury yield narrowed to levels not seen since 2007. The Greenback saw a
brief bout of buying before sellers sent the Dollar index back towards 2.5 year
lows. Cable continued to test post-Brexit highs into PM May’s highly
anticipated Brexit speech on Friday. Robust European PMI numbers underscored
the building momentum in many European economies and helped hold the Euro up
near the 1.20 mark despite the perceived hawkishness by the FOMC. The Dow broke
a 9-day winning streak on Thursday and shares trickled lower on Friday after
new sanctions announced at the UN general assembly prompted North Korean to
threaten an above ground nuclear test. For the week, the DJIA gained 0.4%, the
S&P added 0.1%, and the Nasdaq fell 0.3%.
The week’s corporate news was bookended by two significant transactions. Monday
Northrup Grumman confirmed an all-cash deal to acquire Orbital ATK at a $9.2B
valuation including debt. Investors voiced support sending NOC shares up 6% on
the week. After the close of trading in Japan on Friday, Calgon Carbon Corp
announced an agreement to be acquired at a 60% premium by Japan’s Kuraray.
FedEx reported results on Wednesday that were short of expectations and lowered
the full year outlook. Nevertheless shares moved up helped by an announcement
intend to raise shipping rates by ~5% on Jan 1st. Apple shares traded off 4%
this week as a glitch emerged in its new untethered Apple Watch and analysts
predicted iPhone 8 sales may be lackluster as consumers wait for the iPhone X
release in November. The healthcare sector, HMOs and hospitals in particular,
experienced bouts out selling over several sessions when it started to look
like momentum was building for the Republican’s last digit effort to repeal
Obamacare. But on Friday Sen. McCain (R-AZ) indicated he will once again be
break with his party, likely killing the bill’s path forward. The headlines
induced a reversal in some of the healthcare names.
MON 9/18
*(EU) EURO ZONE AUG FINAL CPI Y/Y: 1.5% V 1.5%E; CPI CORE Y/Y: 1.2% V 1.2%E
*(US) SEPT NAHB HOUSING MARKET INDEX: 64 V 67E
*(US) JULY TOTAL NET TIC FLOWS: -$7.3B V +$5.9B PRIOR; NET LONG-TERM TIC FLOWS:
$1.3B V $34.4B PRIOR
TUES 9/19
(IR) Iraq Oil Min Al-Luaibi: Current oil production cuts are going fine; prices
and global markets are improving
*(DE) GERMANY SEPT ZEW CURRENT SITUATION SURVEY: 87.9 V 86.2BE; EXPECTATION
SURVEY: 17.0 V 12.0E
*(HU) HUNGARY CENTRAL BANK (NBH) LEAVES BASE RATE UNCHANGED AT 0.90%; AS
EXPECTED
(HU) Hungary Central Bank (NBH) cuts Deposit Rate further into negative
territory by 10bps
*(US) AUG HOUSING STARTS: 1.180M V 1.174ME; BUILDING PERMITS: 1.30M V 1.22ME
*(US) AUG IMPORT PRICE INDEX M/M: 0.6% V 0.4%E; Y/Y: 2.1% V 2.2%E
(US) Trump admin reportedly plans to ease rules on overseas sales of guns,
including assault rifles – press
FDX Reports Q1 $2.51 v $3.17e, Rev $15.3B v $15.4Be
BBBY Reports Q2 $0.78 (ex-items) v $0.95e, Rev $2.90B v $3.01Be; Cuts
FY17 EPS ~$3.00 v $4.02e
WED 9/20
TKA.DE Agree to European Steel 50/50 JV with Tata Steel, sees synergies
of €400-600M
DGE.UK Trading Update: Affirms FY16-19 of mid-single digit top line
growth and 175bps of organic operating margin improvement; expect our organic
operating margin expansion will be weighted towards H2
*(UK) AUG RETAIL SALES (EX AUTO/FUEL) M/M: 1.0% V 0.1%E; Y/Y: 2.8% V 1.4%E
(UK) BOE Agents Summary: Impact of Sterling drop on goods inflation may have
peaked
(EU) OECD Economic Outlook; Maintains 2017 Global GDP forecasts at 3.5% Raises
2018 Global GDP forecasts from 3.6% to 3.7%
*(US) AUG EXISTING HOME SALES: 5.35M V 5.45ME
AAPL Rosenblatt analyst: preorders for iPhone 8 are much lower than they
were for iPhone 6 and 7
*(US) FOMC HOLDS TARGET RATE RANGE AT 1.00-1.25%, AS EXPECTED; confirms start
of balance sheet reduction in Oct; hurricanes could temporarily boost inflation
(as expected)
*(US) FOMC UPDATED ECONOMIC FORECAST FOR SEPT MEETING: Cuts Median forecast for
Long Run rate to 2.75%
(US) 2-year Treasury yield rises above 1.43% for the first time since late 2008
post FOMC statement
(US) Fed Chair Yellen: hurricanes may have a substantial impact on Sept
payrolls data - FOMC press conf
*(JP) BANK OF JAPAN (BOJ) LEAVES INTEREST RATE ON EXCESS RESERVES (IOER)
UNCHANGED AT -0.10%; AS EXPECTED
THRS 9/21
CCC To be acquired by Japan's Kuraray for $21.50/shr cash valued at $1.11B
(63% prem)
*(NO) NORWAY CENTRAL BANK (NORGES) LEAVES DEPOSIT RATES UNCHANGED AT 0.50% (AS
EXPECTED)
*(PH) PHILIPPINES CENTRAL BANK (BSP) LEAVES OVERNIGHT BORROWING RATE UNCHANGED
AT 3.00% (AS EXPECTED)
(CN) S&P cuts China to A+ from AA-; Outlook stable; Rating now inline
w/Fitch & Moody's
*(TW) TAIWAN CENTRAL BANK (CBC) LEAVES BENCHMARK INTEREST RATE UNCHANGED AT
1.375%; AS EXPECTED
*(US) SEPT PHILADELPHIA FED BUSINESS OUTLOOK: 23.8 V 17.1E
*(ZA) SOUTH AFRICA CENTRAL BANK (SARB) KEEPS INTEREST RATE ON HOLD AT 6.75%
(NOT EXPECTED)
*(US) AUGUST LEADING INDEX: 0.4% V 0.3%E
*(EU) EURO ZONE SEPT ADVANCE CONSUMER CONFIDENCE: -1.2 V -1.5E
(US) Fed reports Q2 Financial Accounts: Household Change in Net Worth: $1.698T
v $2.327T prior
(KR) President Trump: confirms expanded sanctions surrounding North Korea
(KR) North Korea countermeasure may mean H-bomb test in Pacific - South Korean
Press
FRI 9/22
*(FR) FRANCE Q2 FINAL GDP Q/Q: 0.5% V 0.5%E; Y/Y 1.8% V 1.7%E
*(FR) FRANCE SEPT PRELIMINARY MANUFACTURING PMI: 56.0 V 55.5E (11TH MONTH OF
EXPANSION)
*(DE) GERMANY SEPT PRELIMINARY MANUFACTURING PMI: 60.6 V 59.0E (34TH MONTH OF
EXPANSION)
*(EU) EURO ZONE SEPT PRELIMINARY MANUFACTURING PMI: 58.2 V 57.2E (50TH MONTH OF
EXPANSION)
*(UK) SEPT CBI INDUSTRIAL TRENDS TOTAL ORDERS: 7 V 13E
(US) Weekly Baker Hughes US Rig Count: 935 v 936 w/w (-0.1%)
