TradeTheNews.com Weekly
Market Update: Market correction continues while central banks stay the course
and midterm election approaches
Fri, 26 Oct 2018 16:07 PM EST
Investors continued to pull money away from global stock markets this week and
by Friday the S&P 500 followed the Russel 2000, Transports and the NASDAQ
by officially touching correction territory. The VIX popped back above 25 and
gold futures caught a bid back towards the highs of the summer after stock
indices broke through Oct 11th lows bringing the April and February nadirs back
into play. Markets gyrated with several dead cat bounces and volumes staying
elevated, fueled by a deluge of Q3 earnings reports. Investors continued to
punish corporations for missing or even merely meeting Q3 expectations, while
often looking past overly robust reports and instead focusing on the headwinds
building for 2019 performance. The looming midterm election lingered in back of
many investors’ minds and probably curtailed their will to step in and buy the
dip. Risk-off flows pressured the 10-year yield resulting in it filling the
post Powell “far from neutral” gap going back to October 3rd. Crude oil prices
remained heavy, hovering right around the 200-day moving average. For the week,
the S&P500 lost 4%, the DJIA fell 3%, and the Nasdaq shed 3.8%.
A host of Fed speakers stuck to their rhetorical guns despite signs of softness
in US housing data and corporate commentary about the macro environment that
was viewed by many as substantially less rosy than current Fed projections. The
ECB met and left rates and purchase targets unchanged as expected. Draghi did
acknowledge recent weakness in EU data, but noted there was not enough evidence
yet to adjust the ECB forecast. Italy and the EU continued to butt heads over
the 2019 budget and that along with little to no progress on the Brexit front
remained a major source of uncertainty for markets. Friday saw the Yuan fixing
at its lowest level since 2017 despite Chinese officials coming out in force to
state they would not engage in competitive devaluation. The Yuan weakness and
officials’ comments came in the wake of a fresh report indicating the Trump
administration has no intention of restarting trade talks until China makes
concrete proposals to address forced technology transfers and other economic
concerns.
In corporate news this week, industrials were weighed upon by 3M missing
estimates and cutting its outlook, and by Caterpillar using a tax benefit to
prop up its guidance, as well as ongoing tariff-related headwinds dampening
enthusiasm for the sector. McDonald’s shares rose after it reported Q3
same-store sales topped expectations, and though the guest count dropped in the
US, it grew in most top international markets. Tesla stock got a jump start
after the automaker moved up its earnings report and then surprisingly turned
its first quarterly profit and forecast improving production rates ahead. In a
difficult stock market environment, Microsoft shares held steady after another
strong earnings report highlighted by double-digit growth from many of its core
offerings, such as Office, LinkedIn and its gaming unit. Amazon slid after
missing top-line estimates and sandbagging Q4 guidance, while Google also fell
on a slight revenue miss.
MON 10/22
941.HK Reports 9M (CNY) Net 95B v 92.1B y/y, EBITDA 214.1B v 211.3B y/y, Rev
567.7B v 569.5B y/y
BAYN.DE San Francisco judge in 'Roundup' case Ramos Bolanos ruled the $250M in
punitive damages awarded by jury must be cut to match the ~$39.3M in
compensatory damages - US financial press
TUES 10/23
TXN Reports Q3 $1.58 v $1.53e, Rev $4.26B v $4.30Be; Guides Q4 $1.14-1.34 (adj)
v $1.38e, Rev $3.6-3.9B v $4.0Be
(US) Fed's Bostic (dove, voter): unless data surprises to the downside, Fed
should maintain gradual rate increases at least a few more times; Fed still a
few rate hikes away from neutral
*(US) OCT RICHMOND FED MANUFACTURING INDEX: 15 V 24E
(IT) EU Commission gives its formal response to Italy's 2019 fiscal plan:
Country needs to resubmit its budget
MCD Reports Q3 $2.10 v $1.98e, Rev $5.37B v $5.25Be
(UK) EU may offer PM May a UK-wide Customs Union arrangement to break the
Brexit deadlock over the Irish border but would require a separate treaty -
Irish Press
CAT Reports Q3 $2.86 v $2.83e, Rev $13.5B v $13.2Be; Affirms FY18
$11.00-12.00**(now includes $0.35 tax benefit) v $11.65e
MMM Reports Q3 $2.58 v $2.70e, Rev $8.15B v $8.42Be
(UK) Reportedly the 48 Letter threshold has not been reached yet to trigger UK
Conservative leadership contest - press
*(ID) INDONESIA CENTRAL BANK (BI) LEAVES 7-DAY REVERSE REPO RATE AT 5.75%; AS
EXPECTED
WEDS 10/24
DBK.DE Reports Q3 Net €229M v €647M y/y, Pretax €506M v €933M y/y, Rev €6.2B v
€6.3Be
HEIA.NL Reports Q3 Organic Beer volume +4.6% v +4.3%e
*(FR) FRANCE OCT BUSINESS CONFIDENCE: 104 V 106E
*(FR) FRANCE OCT PRELIMINARY MANUFACTURING PMI: 51.2 V 52.4E (25th month of
expansion but lowest since Sept 2016)
*(DE) GERMANY OCT PRELIMINARY MANUFACTURING PMI: 52.3 V 53.4E (46th month of
expansion and lowest since May 2015)
*(SE) SWEDEN CENTRAL BANK (RIKSBANK) LEAVES REPO RATE UNCHANGED AT -0.50%; AS
EXPECTE; maintains guidance on rates
*(EU) EURO ZONE OCT PRELIMINARY MANUFACTURING PMI: 52.1 V 53.0E (63rd month of
expansion)
UPS Reports Q3 $1.82 v $1.82e, Rev $17.4B v $17.4Be
BA Reports Q3 $3.58 v $3.45e, Rev $25.1B v $23.7Be; Raises FY18 EPS
$14.90-15.10 v $14.58e, Rev $98-100B v $98.7Be
(US) OCT PRELIMINARY MARKIT MANUFACTURING PMI: 55.9 V 55.3E (5-month high)
(CA) BANK OF CANADA (BOC) RAISES INTEREST RATE BY 25BPS TO 1.75%; AS EXPECTED;
removes gradual language
(US) SEPT NEW HOME SALES: 553K V 625KE
*(US) DOE CRUDE: +6.3M V +2.5ME; GASOLINE: -4.8M V -1.5ME; DISTILLATE: -2.3M V
-1.5ME
(US) Association of American Railroads weekly rail traffic report for week
ending Oct 20th: 555.1K, +0.5% y/y
*(US) FEDERAL RESERVE BEIGE BOOK: WAGE GROWTH MOSTLY CHARACTERIZED AS MODEST OR
MODERATE
MSFT Reports Q1 $1.14 v $0.96e, Rev $29.1B v $27.7Be
V Reports Q4 $1.21 v $1.20e, Rev $5.40B v $5.44Be
TSLA Reports Q3 +$2.90 v -$0.53e, Rev $6.82B v $5.67Be
F Reports Q3 $0.29 v $0.29e, Rev $34.7B v $32.1Be
(CN) Bank in multiple China cities including Beijing, Guangzhou, Hangzhou, and
Foshan have all cut mortgage lending rates, the first coordinated move since
2017 - Chinese press
THURS 10/25
UBSG.CH Reports Q3 (CHF) Net 1.25B v 962.3Me, Pretax 1.73B v 1.53Be, Rev 7.28B
v 7.15B y/y
NOKIA.FI Reports Q3 -€0.02 v +€0.05e, adj Op €487M v €515.8Me, Rev €5.46B v
€5.43Be
ABI.BE Reports Q3 $0.82 v $0.86e, Rev $13.3B v $13.7Be
066570.KR Reports Final Q3 (KRW) Net 497.1B v 377.1Be, Op Profit 748.8B v
746Be, Rev 15.4T v 15.4Te
(NO) NORWAY CENTRAL BANK (NORGES) LEAVES DEPOSIT RATES UNCHANGED AT 0.75%; AS
EXPECTED
(DE) GERMANY OCT IFO BUSINESS CLIMATE: 102.8 V 103.2E; CURRENT ASSESSMENT:
105.9 V 106.0E
MRK Reports Q3 $1.19 v $1.16e, Rev $10.8B v $10.9Be; Raises Quarterly dividend
14.6% to $0.55 from $0.48 (indicated yield 3.12%); Authorizes additional $10B
share repurchase
*(TR) TURKEY CENTRAL BANK (CBRT) LEAVES ONE-WEEK REPO RATE UNCHANGED AT 24.00%;
AS EXPECTED
*(EU) ECB LEAVES 7-DAY MAIN REFINANCING RATE UNCHANGED AT 0.00%; AS EXPECTED;
affirms policy guidance
*(US) SEPT PRELIMINARY DURABLE GOODS ORDERS: +0.8% V -1.5%E; DURABLES EX
TRANSPORTATION: 0.1% V 0.4%E
(EU) ECB's Draghi: reiterates forward guidance; to have reinvestments for a
prolonged period after APP ends - Prepared remarks
(EU) ECB's Draghi: General Council discussed the balance of risks; weaker
momentum (not a downturn) was acknowledged - Q&A
*(US) SEPT PENDING HOME SALES M/M: 0.5% V 0.0%E; Y/Y: -3.4% V -2.6%E
(US) Fed Vice Chair Clarida: Some further rate hikes are warranted; Possible
trend growth has shifted higher and structural unemployment moved lower;
Signals on inflation 'Not flashing red' (first comments since joining the Fed
in Sept)
(US) HHS releases International Pricing Index (IPI) drug payment model; under
plan, some drugs would shift to levels closer to prices in other countries
AMZN Reports Q3 $5.75 v $3.29e, Rev $57B v $57.1Be; Guides Q4 Rev $66.5-72.5B v
$73.9Be
GOOGL Reports Q3 $13.06 v $10.54e, Rev $27.1B (ex $6.6B TAC) v $27.3Be
USD/CNY *(CN) CHINA PBOC SET YUAN REFERENCE RATE: 6.9510 V 6.9409 PRIOR (first
fix above 6.95 since Jan 4 2017)
FRI 10/26
BAS.DE Reports Q3 Adj Net €1.20B v €1.16Be, Adj EBIT €1.47B v €1.55Be, Rev
€15.6B v €15.0Be
RBS.UK Reports Q3 Net £563M v £606M y/y, adj Op £961M v £871M y/y, Rev £3.64B v
£3.3Be
*(RU) RUSSIA CENTRAL BANK (CBR) LEAVES KEY 1-WEEK AUCTION RATE UNCHANGED AT
7.50%
*(US) Q3 ADVANCE GDP ANNUALIZED Q/Q: 3.5% V 3.3%E; PERSONAL CONSUMPTION: 4.0% V
3.3%E
*(US) Q3 ADVANCE GDP PRICE INDEX: 1.7% V 2.1%E; CORE PCE Q/Q: 1.6% V 1.8%E
*(US) OCT FINAL UNIVERSITY OF MICHIGAN CONFIDENCE: 98.6 V 99.0E
(US) Authorities reportedly have arrested a man in Florida in connection to the
explosive packages case - CNN
(US) New York Fed Nowcast: Raises Q3 GDP forecast to 2.2% from 2.1% prior;
raises Q4 forecast to 2.5% from 2.4% prior
