Political clashes in D.C. and Rome strain markets as Fed tightens rate

TradeTheNews.com Weekly Market Update: Political clashes in D.C. and Rome strain markets as Fed tightens rate
Fri, 28 Sep 2018 16:04 PM EST

Major US stock indices stabilized just below last week’s new highs, partially capped by the latest leg up in rates and the increasing likelihood that the US/China trade spat will carry on for an extended period of time. Before Wednesday’s FOMC statement the US 10-year yield briefly tested above 3.11%, the May high for the year. Yields backed off after the Fed raised rates 25 bps, as expected, and also removed the term “accommodative” from the description of monetary policy. Brent crude prices remained on an upward trajectory and by Friday tested through this summer’s high to a level not seen since 2015, signaling traders have yet to believe reports that the Saudis will be able to bring additional barrels onto the market to offset Iranian supply lost to US tariffs.

An emotionally charged US Senate hearing on some of the allegations made against Supreme Court nominee Kavanaugh heightened political tensions in Washington with implications for the November election. Europe remained preoccupied with the looming Brexit deadline as well as Italian political wrangling over the 2019 budget. By Friday, word that an agreement was reached on a budget including a deficit at 2.4% of GDP was not received well by the markets. Italian rates ratcheted up and the FTSE MIB had its worst day since the Brexit vote in 2016. The Euro traded off late in the week in the wake of the Italian budget news as well as softer than expected core Eurozone CPI figures. Separately the firming Greenback resulted in softness in the Japanese Yen which helped propel the Nikkei to a 27-year high. For the week, the S&P500 fell 0.5%, the DJIA lost 1.1%, while the Nasdaq rose 0.7%.

In corporate news this week, the Fox-Comcast-Disney saga came to a close as Comcast beat out Fox in the auction for control of the UK’s Sky with a $39B bid and Fox sold the remainder of its ownership to Comcast for $15B. Amazon made its first move into the homebuilding sector as its Alexa Fund arm invested in prefabricated construction firm Plant Prefab. Sonic announced it would be acquired by Arby’s owner Inspire Brands for $43.50/share in cash, in a $2.3B transaction. Thyssenkrupp shares rose on the announcement it would split into two companies, separating its industrial and materials units, after pressure from investors. The SEC sued Tesla CEO Musk asserting he falsely claimed that he could take the company private at $420/share. Further reports indicated the SEC had offered a settlement to Musk that would have required he step down as chairman for two years, though he could remain as CEO, but Musk rejected the offer. Facebook disclosed that its engineering team found a security bug that affected 50M accounts which allowed potential hackers to take over people’s accounts. The company claimed they have patched the issue and have reached out to law enforcement to determine whether these accounts were misused or any information illicitly accessed.

MONDAY 9/24
*(CN) US TARIFFS ON $200B IN CHINA GOODS TAKE EFFECT: THE TARIFF RATE IS EXPECTED TO START AT 10% AND GO UP TO 25% AT THE END OF 2018
SKY.UK Confirms to be acquired by Comcast for £17.28/shr valued at £30.6B
(DE) GERMANY SEPT IFO BUSINESS CLIMATE: 103.7 V 103.2E; CURRENT ASSESSMENT: 106.4 V 106.0E
*(US) SEPT DALLAS FED MANUFACTURING ACTIVITY: 28.1 V 31.0E
(TR) Sec of State Pompeo: Pastor Brunson may be released in Turkey later this month
(EU) EU Foreign Policy Head Mogherini: EU will establish a legal entity to facilitate legitimate financial transactions with Iran to allow continued trade

TUESDAY 9/25
*(FR) FRANCE SEPT BUSINESS CONFIDENCE: 106 V 105E; MANUFACTURING CONFIDENCE:107 V 109E
*(SE) SWEDISH PARLIAMENT: OUST PM LOFVEN (204 of 349 voted against PM)
US 10-year Treasury yield tests May 2018 high above 3.11% (above 2018 high close)
SONC To be acquired by Inspire Brands for $43.50/shr in cash, in a $2.3B transaction
BMW.DE Cuts FY18 Automotive PBT to moderately decrease (prior on par y/y), Automotive Rev slightly lower y/y (prior slightly Higher) as a result of requirement of WLTP regulations
(AR) Argentina Central Bank governor Luis Caputo has tendered his resignation, citing personal reasons - press
AMZN Alexa Fund invests in prefabricated homebuilder Plant Prefab - CNBC
NKE Reports Q1 $0.67 v $0.62e, Rev $9.95B v $9.88Be
(UK) Prime Min May reportedly to lay out in speech tomorrow plans to cut UK corporate tax rates to lowest in the G20 - The Telegraph

WEDNESDAY 9/26
(CN) China to cut import tariffs for some goods from Nov 1st (in-line with earlier comments) - press
*(CZ) CZECH CENTRAL BANK (CNB) RAISES 2-WEEK REPURCHASE RATE BY 25BPS TO 1.50%; AS EXPECTED (third rate hike in a row)
(UK) PM May: Post-Brexit Britain will be pro-business; confirms plan for UK to lower taxes, post-Brexit UK should have the lowest corporate tax rate in the G20 - Global Business Forum
(US) Pres Trump: wants Venezuela to be 'straightened out'; every option is open; we're going to take care of people of Venezuela - Q&A at UN
*(US) AUG NEW HOME SALES: 629K V 630KE
(US) Association of American Railroads weekly rail traffic report for week ending Sep 22nd: 567.1K, +4.9% y/y
*(US) FOMC RAISES TARGET RATE RANGE 25BPS TO 2.00-2.25% (AS EXPECTED); FED STATEMENT REMOVES DESCRIPTION OF ACCOMMODATIVE
*(US) FOMC SUMMARY OF ECONOMIC PROJECTIONS (SEP) FOR SEPT MEETING (V. JUN)
(US) Fed Chair Powell: our economy is strong, inflation is stable - FOMC press conf
(US) Fed Chair Powell: more businesses are raising concerns about trade policy; don't expect much impact from tariffs unless they are in place long term - FOMC press conf Q&A
BBBY Reports Q2 $0.36 v $0.49e, Rev $2.94B v $2.95Be

THURSDAY 9/27
*(ID) INDONESIA CENTRAL BANK (BI) RAISES 7-DAY REVERSE REPO BY 25BPS TO 5.75%; AS EXPECTED
*(PH) PHILIPPINES CENTRAL BANK (BSP) RAISES OVERNIGHT BORROWING RATE BY 50BPS TO 4.50%, AS EXPECTED
(SA) Saudi Arabia said to plan boosting oil supply by 200-300Kbpd in next 2 months to compensate for lower Iran output - press
*(EU) EURO ZONE SEPT BUSINESS CLIMATE INDICATOR: 1.21 v 1.19e; CONSUMER CONFIDENCE(Final): -2.9 v -2.9e
*(DE) GERMANY SEPT PRELIMINARY CPI M/M: 0.4% V 0.1%E; Y/Y: 2.3% V 2.0%E
*(US) AUG PRELIMINARY DURABLE GOODS ORDERS: 4.5% V 2.0%E; DURABLES EX-TRANSPORTATION: 0.1% V 0.4%E
*(US) Q2 FINAL GDP ANNUALIZED Q/Q: 4.2% V 4.2%E; PERSONAL CONSUMPTION: 3.8% V 3.8%E
*(US) Q2 FINAL GDP PRICE INDEX: 3.0% V 3.0%E; CORE PCE Q/Q: 2.1% V 2.0%E
(US) Nevada reports Aug casino gaming Rev $913M, -7.7% y/y; Las Vegas strip Rev $477.9M, -12.4% y/y
*(US) AUG PENDING HOME SALES M/M: -1.8% V -0.5%E; Y/Y: -2.5% V -1.0%E
TKA.DE Confirms plans to split group into two independent, listed companies; to split into Materials AG and Industrials AG
(US) Atlanta Fed cuts Q3 GDP forecast to 3.8% from 4.4% prior
*(IT) Italy Interior Min Salvini: agreed on 2019 deficit at 2.4% of GDP; tax cuts and pension reforms are agreed upon; will not raise sales tax in budget plan
TSLA CEO Musk sued by the SEC, which will seek civil penalties - press

FRIDAY 9/28
*(DE) GERMANY SEPT UNEMPLOYMENT CHANGE: -23K V -9KE; UNEMPLOYMENT CLAIMS RATE: 5.1% V 5.2%E
*(EU) EURO ZONE SEPT ADVANCE CPI ESTIMATE Y/Y: 2.1% V 2.1%E; CPI CORE Y/Y: 0.9% V 1.1%E
*(CA) CANADA JUL GDP M/M: 0.2% V 0.1%E; Y/Y: 2.4% V 2.2%E
(US) Atlanta Fed cuts Q3 GDP forecast to 3.6% from 3.8% prior
FB Discloses engineering team found security issue affecting nearly 50M accounts; issue has been fixed and have informed law enforcement
(US) Senate Judiciary panel votes to advance the Kavanaugh nomination 11-10 along party lines; Sen Flake urges one week delay in full floor vote to allow FBI investigation