TradeTheNews.com Weekly
Market Update: Spooked Markets Still Assessing Trade, Elections, and Earnings
Fri, 02 Nov 2018 16:11 PM EST
Investors headed towards Halloween clearly spooked by the barrage selling that
took hold of equity markets in the month of October. Monday saw the Dow finally
breech correction territory, briefly touching 10% off the recent highs before a
late session upside reversal took hold. Buying momentum ensued into the next
session and talk of a potential base resulted in a significant mid-week
rebound. October turned to November riding the first multiple days rally for
the S&P in more than a month. Sentiment was further aided by a Thursday
phone call between President Trump and President Xi when both indicated they
looked forward to meeting and G20 at the end of the month. The comments fueled
some optimism and speculation about a trade deal, but were also seen with an
ample amount of skepticism given the lack of progress to date and in light of
next week’s mid-term elections.
A disappointing reaction to Apple’s Q3 results and outlook weighed on equity
trading Friday. Rates rose and indices slipped lower after the October jobs
report was particularly robust while simultaneously members of the
Administration tempered expectations for the Trump-Xi meeting. Payrolls snapped
back sharply from last month’s disappointment, the unemployment rate held near
five-decade lows, and wage growth topped 3% on a y/y basis for the first time
since 2009. Despite the whipsawing in stocks and general uneasiness in the
broader markets, US Treasury yields finished at recent highs. The US 30-year
yield now stands at the highest level since the fall of 2014. The Dollar index
broke above 97 for the first time since 2017 as overseas economic data
continued to come in short of expectations. WTI crude broke through some
technical support, dropping back towards the lows of mid-June, as the US
indicated it will issue eight exemptions to the Iran oil sanctions that are set
to take effect on Monday. For the week, the DJIA and S&P500 each rose 2.4%,
and the Nasdaq gained 2.7% for its best week since May.
In corporate news this week, GM reported an earnings beat, pointing to higher
prices and demand in China, and the automaker also foresaw a strong Q4. Both
Clorox and Kellogg shares slumped after their managements cited headwinds, and
Kraft Heinz said its profit was squeezed by higher costs. In the first quarter
under its new CEO, GE fell short on both its top and bottom line and slashed
its dividend to one penny per share. Apple shares fell post earnings on
conservative guidance and some cautious emerging market commentary, and the
tech giant also announced it would no longer break out unit sales in its
quarterly reports, to the dismay of many analysts. Facebook pushed higher on
stronger than expected profit and improved monetization of its user base. On
the M&A front, IBM acquired Red Hat for $190.00/share in order to expand
further into the cloud and open source software space. And reports indicated
some PE firms are contending to acquire the embattled pizza-maker Papa Johns.
SUN 10/28
*(BR) Brazil Presidential Candidate Bolsonaro declared winner of the election
RHT To be acquired by IBM for $190.00/shr cash for enterprise value of $34B;
IBM intends to suspend its share repurchase program in 2020 and 2021
MON 10/29
HSBA.UK Reports Q3 Net $3.9B v $2.9B y/y; adj Pretax $6.19B v $5.73Be; Rev
$13.8B v $13.7Be
(MX) Mexico public consultation on Mexico City Airport prefers cancellation of
the $13.3B project - US financial press
(DE) German Chancellor Merkel may not run for re-election as the head of the
CDU party head but wants to remain as Chancellor - financial press
3988.HK Reports Q3 (CNY) Net 44.2B v 41.8B y/y; to issue up to CNY120B of
shares to boost up capital
*(US) OCT DALLAS FED MANUFACTURING ACTIVITY INDEX: 29.4 V 28.1E
(US) Atlanta Fed forecasts initial Q4 GDP growth at 2.6%
(CN) US said to implement next round of China tariffs if Trump talks with Xi
fail (expected to meet at G20 on Nov 30th) - press
TUES 10/30
(FR) FRANCE Q3 ADVANCE GDP Q/Q: 0.4% V 0.5%E; Y/Y: 1.5% V 1.5%E
BP.UK Reports Q3 Adj Net $3.84B v $2.79Be, Total Rev $80.8B v $60B y/y; Raises
Dividend to 10.25c/shr; Now sees BHP acquisition all funded from cash
(DE) GERMANY OCT CPI SAXONY M/M: 0.2% V 0.4% PRIOR; Y/Y: 2.5% V 2.3% PRIOR
(DE) GERMANY OCT NET UNEMPLOYMENT CHANGE: -11K V -12KE; UNEMPLOYMENT CLAIMS
RATE: 5.1% V 5.1%E
(EU) EURO ZONE BUSINESS CLIMATE INDICATOR: 1.01 V 1.16E; CONSUMER CONFIDENCE:
-2.7 V -2.7E
(EU) EURO ZONE Q3 ADVANCE GDP Q/Q: 0.2% V 0.4%E; Y/Y: 1.7% V 1.8%E
(IT) ITALY DEBT AGENCY (TESORO) SELLS TOTAL €4.5B VS. €3.5-4.5B INDICATED RANGE
IN 5-YEAR AND 10-YEAR BTP BONDS
GE Reports Q3 $0.14 v $0.21e, Rev $29.6B v $29.9Be; Cuts dividend; To
reorganize Power unit
(DE) GERMANY OCT PRELIMINARY CPI M/M: 0.2% V 0.1%E; Y/Y: 2.5% V 2.4%E
(US) Nevada reports Sept casino gaming Rev $991M, +1.3% y/y; Las Vegas strip
Rev $546M, -3.7% y/y
*(US) OCT CONSUMER CONFIDENCE: 137.9 V 135.9E (18 year high)
(US) Dollar index trades above 97 for first time since June 2017
PZZA Bain and CVC reportedly among potential suitors contending to buy Papa
Johns - press
FB Reports Q3 $1.76 v $1.46e, Rev $13.7B v $13.8Be
BIDU Reports Q3 $2.77 v $2.57e, Rev $4.11B v $4.12Be
(JP) BOJ LEAVES INTEREST RATE ON EXCESS RESERVES (IOER) UNCHANGED AT -0.10%; AS
EXPECTED; Vote 7:2 on yield curve control (YCC) setting (Harada and Kataoka
again dissent)
WEDS 10/31
SAN.FR Reports Q3 Net €2.3B v €2.2Be, Rev €9.4B v €9.3Be
AIR.FR Reports Q3 Net €957M v €307M y/y, Adj EBIT €1.6B v €1.4Be, Rev €15.5B v
€12.8B y/y
(EU) EURO ZONE OCT ADVANCE CPI ESTIMATE Y/Y: 2.2% V 2.2%E; CPI CORE Y/Y: 1.1% V
1.1%E
GM Reports Q3 $1.87 v $1.26e, Rev $35.8B v $34.2Be
*(US) OCT ADP EMPLOYMENT CHANGE: +227K V +187KE
(US) Treasury to sell $37B 2-year, $27B 10-year notes and $19B 30-year bond
during week of Nov 5th
(US) Conference Board Oct Total online job ads 4.48M v 4.75M m/m v 4.56M y/y;
New ads 1.72M v 1.88M m/m v 1.82M y/y
(US) Fed formally proposes loosening rules for large US banks; most banks under
$250B would face reduced requirements (as expected)
*(US) DOE CRUDE: +3.2M V +3ME; GASOLINE: -3.2M V -1.5ME; DISTILLATE: -4.1M V
-2ME
(UK) Brexit Min Raab: Expects Brexit deal by November 21st
(US) Association of American Railroads weekly rail traffic report for week
ending Oct 27th: 562.8K, +4.4% y/y
THURS 11/1
CARLB.DK Reports Q3 (DKK) Rev 17.6B v 17.1Be
MT.NL Reports Q3 Net $0.9B v $1.4Be, EBITDA $2.73B v $2.7Be, Rev $18.5B v
$19.8Be; completes transaction to acquire Ilva S.p.A. and launches
ArcelorMittal Italia
CSGN.CH Reports Q3 (CHF) Net 424M v 479Me, adj Pretax 856M v 862Me, Rev 4.89B v
5.05Be
RDSA.NL Reports Q3 Basic CCS EPS $0.68 v $0.70e, adj CCS Net $5.62B v $5.73Be,
Rev $100.2B v $75.8B y/y; launches second buyback tranche of $2.5B
(UK) BANK OF ENGLAND BANK (BOE) QUARTERLY INFLATION REPORT (QIR)
(CZ) CZECH CENTRAL BANK (CNB) RAISES 2-WEEK REPURCHASE RATE BY 25BPS TO 1.75%;
AS EXPECTED
(UK) BANK OF ENGLAND BANK (BOE) LEAVES INTEREST RATES UNCHANGED AT 0.75%; AS
EXPECTED
*(US) Q3 PRELIMINARY NONFARM PRODUCTIVITY: 2.2% V 2.1%E; UNIT LABOR COSTS: 1.2%
V 1.0%E
NYT Reports Q3 $0.15 v $0.12 y/y, Rev $417.3M v $385.6M y/y
(US) OCT FINAL MARKIT MANUFACTURING PMI: 55.7 V 55.8E
(CN) China Pres Xi: Pres Trump and I want to expand China-US trade cooperation;
US-China economic teams should strength their contacts - Chinese press
(US) Atlanta Fed raises Q4 GDP forecast to 3.0% from 2.6% prior
PACB To be acquired by Illumina at $8/shr for ~$1.2B in all cash transaction
FRI 11/2
(CN) US President Trump has reportedly asked cabinet to draft possible China
trade deal - press
CNBC: told that report President directing cabinet to draft China trade deal is
not true; two sides remain far apart
*(US) OCT CHANGE IN NONFARM PAYROLLS: +250K V +200KE
(US) OCT UNEMPLOYMENT RATE: 3.7% V 3.7%E (matches lowest since 1969)
(US) OCT AVERAGE HOURLY EARNINGS M/M: 0.2% V 0.2%E; Y/Y: 3.1% V 3.1%E; AVERAGE
WEEKLY HOURS: 34.5 V 34.5E
(US) New York Fed Nowcast: raises Q4 forecast to 2.6% from 2.5% prior
(EU) ECB said to be mulling a new TLTRO series in the event of a fresh economic
slowdown - press
(EU) European Banking Authority: All 25 banks pass 5.5% fully loaded capital
threshold in adverse scenario in EU-wide stress tests – press
(CN) White House Econ Adviser Kudlow: confirms no massive movement between US
and China on trade; Have not seen any new proposals out of China; yesterday's
phone call between Xi and Trump was "good" but it was "just a
phone call" - CNBC interview
