This week’s trade opened amid lingering doubt surrounding the US/China trade truce. China reportedly wanted more talks before signing “phase 1” of any trade agreement. Those concerns receded after officials on both sides indicated they remain hopeful as they work towards formally documenting the deal ahead of next month’s expected Xi/Trump meeting in South America. As the week progressed, focus moved onto intensified Brexit negotiations and Q3 earnings season. By early Thursday UK PM Johnson and EU officials confirmed an agreement that could potentially allow for the UK to leave the EU with a deal by the end of this month. But sentiment was far from exuberant as it remained unclear if this version of a deal can get the nod from the UK Parliament at its “super Saturday” sitting. As the Brexit deal came together the pound sterling strengthened against the dollar throughout the week, reaching 5-month highs by Friday as one press report suggested PM Johnson will get the proposal passed by a razor thin margin.
As expected, the IMF and Germany formally lowered growth projections this week while the Fed’s Beige book described slightly lowered growth indicators across most regions. Weaker US economic readings -- namely retails sales and building starts -- affirmed market expectations of another rate cut at the October 30th FOMC meeting. Fed officials’ commentary seemed to leave the door wide open for an October cut as well. But a narrative also developed that a pause on any further easing was gaining traction, especially in light of the recent positive developments regarding Brexit and US/China trade. For the week, the US yield held at steeper levels as solidifying Fed rate cut expectations juxtaposed a continued backup on longer rates in Europe. The DJIA lost 0.2% as two key components took hits on Friday, while the S&P rose 0.5%, and the Nasdaq added 0.4%.
In corporate news this week, banks kicked off earnings season on a largely positive note. JPMorgan outperformed profit expectations, as did Bank of America, which cited robust consumer spending growth as a tailwind. Morgan Stanley reported a profit beat as all three of its businesses showed strength. Goldman’s profits, however, missed forecasts, while Citi’s net interest margin declined more than anticipated. IBM shares fell despite reporting a positive first quarter for its Red Hat unit as investors noted concerns within its legacy software business. Workday’s investor day disappointed analysts, as executives pointed to slower growth in its human capital management software division, and the news weighed overall on the SaaS sector. Boeing slipped lower on Friday after previously undisclosed intra-company instant messages showed certain employees back in 2016 had concerns about the 737 MAX MCAS software and may have subsequently misled regulators. GM negotiators struck a tentative deal with UAW leadership, though the month-long strike will continue until UAW members vote to ratify the agreement. Johnson & Johnson recalled a lot of talc baby powder in the US after a test indicated the presence of sub-trace levels of chrysotile asbestos contamination. Oracle co-CEO Hurd passed away at the age of 62 after taking a leave of medical absence five weeks ago.
SUN 10/13
*(SG) SINGAPORE CENTRAL BANK (MAS) SEMI-ANNUAL MONETARY POLICY STATEMENT: WILL REDUCE SLIGHTLY THE RATE OF APPRECIATION OF THE S$NEER POLICY BAND (moves into easing)
MON 10/14
(CN) China said to want more talks before signing US Pres Trump 'Phase I' deal - press
TUES 10/15
(KR) BANK OF KOREA (BOK) CUTS 7-DAY REPO RATE BY 25BPS TO 1.25%; AS EXPECTED
WDAY Targets long-term non-GAAP operating margin 25%+ - investor day slides
IMF chief economist Gopinath: If global growth were to deteriorate more, internationally coordinated fiscal response is needed
*IMF UPDATES ITS WORLD ECONOMIC OUTLOOK (WEO): Cuts both 2019 and 2020 growth outlook (as expected)
C Reports Q3 $1.97 v $1.96e, Rev $18.6B v $18.6Be
JPM Reports Q3 $2.68 v $2.44e, Managed Rev $30.1B v $28.4Be
*(DE) GERMANY OCT ZEW CURRENT SITUATION SURVEY: -25.3 V -23.6E (Lowest since May 2010); EXPECTATIONS SURVEY: -22.8 V -26.4E
*(UK) SEPT JOBLESS CLAIMS CHANGE: +21.1K V +16.3K PRIOR; CLAIMANT COUNT RATE: 3.3% V 3.3% PRIOR
WEDS 10/16
ROG.CH Reports Q3 (CHF) Rev 15.6B v 15.1Be
BAC Reports Q3 $0.75 adj (ex JV impairment) v $0.50e, Rev $22.8B v $22.2Be
*(US) SEPT ADVANCE RETAIL SALES M/M: -0.3% V +0.3%E; RETAIL SALES (EX-AUTO) M/M: -0.1% V +0.2%E
*(US) FEDERAL RESERVE BEIGE BOOK: ECONOMY EXPANDED AT SLIGHT TO MODEST PACE (prior: "modest pace")
IBM Reports Q3 $2.68 v $2.64e, Rev $18.0B v $18.2Be
AA Reports Q3 -$0.44 v -$0.35e, Rev $2.57B v $2.54Be
BHP.AU Reports Q1 Waio iron ore production 69Mt v 69Mt y/y; attributable iron ore production 61.0Mt v 60.5Mte v 61.0Mt y/y
*(AU) AUSTRALIA SEPT EMPLOYMENT CHANGE: +14.7K V +15.0KE; UNEMPLOYMENT RATE: 5.2% V 5.3%E
THURS 10/17
UNA.NL Issues Q3 Trading update: Rev €13.3B v €12.5B y/y
(UK) SEPT RETAIL SALES (EX-AUTO/FUEL) M/M: +0.2% V -0.1%E; Y/Y: 3.0% V 2.9%E
*(EU) EU'S JUNCKER: WE HAVE A 'FAIR AND BALANCED' BREXIT DEAL
*(UK) PM BORIS JOHNSON CONFIRMS A BREXIT DEAL; says now Parliament should get Brexit done on Saturday, Oct 19th
*(US) SEPT HOUSING STARTS: 1.256M V 1.320ME; BUILDING PERMITS: 1.387M V 1.350ME
*(US) OCT PHILADELPHIA FED BUSINESS OUTLOOK: 5.6 V 7.6E
*(US) SEPT INDUSTRIAL PRODUCTION M/M: -0.4% V -0.2%E; CAPACITY UTILIZATION: 77.5% V 77.7%E
*(TR) VP PENCE: WE REACHED A DEAL WITH TURKEY FOR A CEASEFIRE IN NORTHERN SYRIA
(JP) Japan Investors Net Buying of Foreign Bonds: +¥1.06T v -¥428.3B prior week; Foreign Net Buying of Japan Stocks: +¥508.1B v +¥1.07T prior week
*(CN) CHINA Q3 GDP Q/Q: 1.5% V 1.5%E; Y/Y: 6.0% V 6.1%E (lowest annual reading since 1992)
(CN) CHINA SEPT INDUSTRIAL PRODUCTION Y/Y: 5.8% V 4.9%E; YTD Y/Y: 5.6% V 5.5%E
*(CN) CHINA SEPT RETAIL SALES Y/Y: 7.8% V 7.8%E; YTD Y/Y: 8.2% V 8.1%E
FRI 10/18
KO Reports Q3 $0.56 v $0.56e, Rev $9.5B v $9.48Be
STT Reports Q3 $1.51 adj v $1.40e, Rev $2.90B v $2.86Be
ORCL Co-CEO Mark Hurd reportedly passes away – press
(UK) Financial Times reporter: "By our numbers, Boris Johnson has a majority of two for his deal tomorrow"
BA Discloses intra-company instant messages written in 2016 that reportedly suggest employees misled the FAA about an important safety system on the 737 MAX - press
