TradeTheNews.com Weekly
Market Update: Treasury rates forge higher curbing risk appetite
Fri, 05 Oct 2018 16:14 PM EST
Investor sentiment held strong to open the week buoyed by a long awaited
trilateral trade deal reached with Canada intended to replace NAFTA. Eventually
though, strong US economic data provided the impetus to push rates higher and
ultimately weighed on stock prices. On Tuesday Fed Chairman Powell outlined his
belief that rates may still be a long way from neutral and repeated that they
might have to go above that level before this tightening cycle ends.
Subsequently US Treasury yields finally broke above the May highs to levels not
seen for the better part of a decade and the curve steepened considerably. WTI
Crude prices topped $75 mid-week for the first time since 2014 spurred by the
continued belief producers will not be able to make up for lost Iranian supply.
Wednesday’s ISM Services reading reached historic levels and was bookended by
another robust September employment report. Friday’s headline payrolls gain was
in the lower half of its recent range, but that was more than offset by upward
revisions to prior months. Moreover, the unemployment rate fell to a new low
reaching a level not seen since 1969 while wage gains held close to recent
trends. Investors’ risk appetite may have been further hindered by an eye
opening report that China used a tiny chip to hack into US business icons
including Apple and Amazon. Outside of the significant geopolitical
implications, the news was seen as likely to only harden the Trump
administration line in the ongoing trade war. The VIX popped more than 35% over
the final two trading sessions and while both the S&P and NASDAQ tested
their 50-day moving averages. The Russel 2000 approached the 200-day moving
average for the first time since February as investors favored large cap
multinationals over small cap US-centric firms in the wake of the USMCA trade
agreement. For the week the S&P500 dropped 1%, the DJIA slipped
fractionally, the Nasdaq fell 3.2%, and the Russell 2000 tumbled 3.7%.
In corporate news this week, Amazon put renewed pressure on other retailers by
announcing it would raise its minimum wage to $15 for all US hourly employees.
GM got a boost for its autonomous vehicle program, announcing a multi-billion
dollar technology partnership with Honda, on top of Consumer Reports declaring
GM’s Super Cruise self-driving technology as superior to Tesla’s Autopilot.
Meanwhile Tesla shares rebounded early this week on a settlement agreement with
the SEC but they quickly sagged again after an ill-conceived tweet from Elon
Musk mocked the “Shortseller Enrichment Commission” (ahead of a judge’s
approval of the settlement agreement that will include corporate supervision of
Musk’s public communications). Costco shares dropped 5% as the company
disclosed “material weakness in internal control” in an otherwise solid
earnings report. And shares of Super Micro Computer collapsed as much as
55% on reports that Chinese agents infiltrated the company’s subcontractors and
seeded motherboards with tiny spy chips to create a backdoor into servers
deployed by several tech giants.
SUN SEPT 30
09/30 TSLA On Saturday, the SEC settled fraud charges with CEO Musk; under the
agreement Musk to relinquish the Chairman role - US financial press
09/30 (US) US and Canada Joint Statement: Reached new trilateral trade deal
with Mexico which will be called the United States-Mexico-Canada Agreement
(USMCA)
MON OCT 1
(US) Atlanta Fed raises Q3 GDP forecast to 4.1% from 3.6% prior
*(US) SEPT FINAL MARKIT MANUFACTURING PMI: 55.6 V 55.6E (highest since May)
(UK) UK said to plan compromise on Irish border; to accept some checks in Irish
Sea to get Brexit deal - press
GE H. Lawrence Culp, Jr named Chairman & CEO effective immediately; To fall
short of FCF, EPS guidance for 2018
*(EU) EURO ZONE AUG UNEMPLOYMENT RATE: 8.1% V 8.1%E
(SA) US President Trump spoke with Saudi Arabia King Salman about efforts to
maintain supplies to ensure the stability of the oil market and growth of the
global economy (update)
(DE) GERMANY RETAIL SALES M/M: -0.1% V +0.5%E; Y/Y: 1.6% V 1.6%E
TUES OCT 2
*(AU) RESERVE BANK OF AUSTRALIA (RBA) LEAVES RATES UNCHANGED AT 1.50% (AS
EXPECTED)
AMZN Raises Minimum Wage to $15 for All U.S. Employees, Including Full-Time,
Part-Time, Temporary, and Seasonal
TSLA Reports Q3 deliveries 83.5K vehicles (55.8K Model 3, 14.5K Model S, and
13.2K Model X)
(UK) Brexit Minister Raab: if Chequers is off the table from EU point of view
then lots we are offering is off the table too
Senate Majority Whip Cornyn (R-TX): Senate may lack the votes to approve USMCA;
passage is not a foregone conclusion
(US) Fed Chair Powell: inflation and unemployment forecasts are not too good to
be true; Fed stands ready to act with authority if inflation expectations drift
from target
(IT) Italy said to seek to cut deficit/GDP ratio to 2.0% in 2021 - Corriere
WED OCT 3
TSCO.UK Reports H1 Adj PBT £564M v £553M y/y, Op £933M v £992.0Me, Rev £28.3B v
£25.2B y/y; Raises interim dividend 67% to 1.67p/shr
*(UK) SEPT SERVICES PMI: 53.9 V 54.0E (26th month of expansion)
LEN Reports Q3 $1.61 v $1.20e, Rev $5.70B v $5.67Be
(GR) Greek banks said to pledge cuts equal to 60% of NPES by 2012 - financial
press
*(US) SEPT ADP EMPLOYMENT CHANGE: +230K V +184KE
GM Honda joins with Cruise and General Motors to build new Autonomous Vehicle;
Honda to invest $2B over 12 years in initiatives making total commitment $2.75B
*(US) SEPT ISM NON-MANUFACTURING INDEX: 61.6 V 58.0 (highest since 1997)
(US) Conference Board Sept Total online job ads 4.75M v 4.61M m/m v 4.51M y/y;
New ads 1.88M v 1.74M m/m v 1.94M y/y
*(US) DOE CRUDE: +8.0M V +1.5ME; GASOLINE: -0.5M V +1ME; DISTILLATE: -1.8M V
-1.5ME (biggest rise in crude stocks since March 2017)
(US) 10-year Treasury yield tests through May high to 3.12%
(US) Association of American Railroads weekly rail traffic report for week
ending Sep 29th: 571.9K, +3.7% y/y
BKS Announces strategic alternatives process; has observed rapid material
accumulations of its stock by a party or parties that cannot be identified
(IT) Italy govt reportedly agrees to deficit/GDP target of 2.4% in 2019, 2.1%
in 2020, and 1.8% in 2021 - Italian press
- HDP Cloudera and Hortonworks announce merger valued at $5.2B
THURS OCT 4
SMCI (CN) China reportedly used a tiny chip in hack that infiltrated US
companies - press
COST Reports Q4 $2.36 v $2.34e, Rev $44B v $44.4Be; expects to report material
weakness in internal control in FY18 Form 10-K
TSLA CEO Musk tweets: "Just want to that the Shortseller Enrichment
Commission [SEC] is doing incredible work. And the name change is so on
point!"
005930.KR Reports prelim Q3 (KRW) Op 17.5T (record) v 17.2Te, Rev 65.0T
v 65.0Te
FRI OCT 5
066570.KR Reports prelim Q3 (KRW): Op 745.5B v 776Be, Rev 15.4T v 15.9Te
(UK) EU Brexit negotiators said to believe that an agreement with Britain was
'very close' - financial press
(IN) INDIA CENTRAL BANK (RBI) LEAVES REPURCHASE RATE UNCHANGED AT 6.50%; NOT
EXPECTED
(DE) German Govt reportedly will lower its 2018 and 2019 GDP growth forecasts -
press
(CA) CANADA SEPT NET CHANGE IN EMPLOYMENT: +63.3K V +25.0KE; UNEMPLOYMENT RATE:
5.9% V 5.9%E
(US) SEPT UNEMPLOYMENT RATE: 3.7% V 3.8%E (lowest since 1969)
(US) SEPT CHANGE IN NONFARM PAYROLLS: +134K V +185KE
(US) SEPT AVERAGE HOURLY EARNINGS M/M: 0.3% V 0.3%E; Y/Y: 2.8 % V 2.8%E
(UK) EU said to offer UK a more extensive free trade agreement that would
incorporate 30-40% of the UK proposal, but still offers no resolution of Irish
border issue – press
(SA) Saudi Prince: Aramco IPO will go forward by early 2021, still believe
Aramco is worth $2T
(US) AUG CONSUMER CREDIT: $20.1B V $15.0BE
(US) Sen Collins (R-ME): confirms she will vote "yes" on Kavanaugh
nomination to the Supreme Court, assuring he will be confirmed
