Uncertainties ease as tentative deals are reached on Brexit and GM strike

TradeTheNews.com Weekly Market Update

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

Negotiations on China trade and Brexit reach crescendo

TradeTheNews.com  

Weekly Market Update: Negotiations on China trade and Brexit reach crescendo

Fri, 11 Oct 04:29 PM EST/09:29 PM GMT

Stock markets entered the week on a continued upswing. US China trade talks kicked off in Washington D.C. on Monday amid optimism that deputy level meetings could set the table for productive meetings at the principle level later in the week. Those hopes took a hit by mid-week after the Trump Administration surprised markets by announcing an expansion of the Chinese company black list and the introduction of visa bans tied to human rights violations by the Chinese government. By Thursday though, the pendulum began to swing back in favor expectations that some sort of positive development was still possible. A narrative begun to develop around a path towards a skinny deal in which the US will hold back on raising tariffs this month in exchange for some kind of currency agreement framework, guarantees on IP protections, and a continued step-up in Chinese agricultural purchases. Late Friday afternoon, President Trump met with China Vice Premier Liu and confirmed the tentative ‘phase one’ trade deal, which will be written up over the coming weeks and followed by phase two and perhaps phase three negotiations to cover other thornier issues.

September US PPI figures remained notably cool, but the reading was somewhat offset by CPI data that was closer to market expectations. The data did little to change the overall perception of the inflation landscape. Fed Chairman Powell underscored that the central bank will remain highly data dependent while also foreshadowing an eventual announcement on Friday that the Fed will resume organic balance sheet expansion, purchasing $60 billion in Treasuries per month. The FOMC minutes highlighted the wide array of views held by FOMC members suggesting that, though futures markets were once again pricing in a rate cut later this month, the debate at the upcoming FOMC meeting will likely be intense. Thursday saw the largest jump in the British pound in more than half a year as a meeting between the British and Irish PMs reportedly yielded new concessions from the UK that might lead to resolution of the backstop issue. Turkey launched an offensive against Kurdish fighters in Northeast Syria after President Trump decided to withdraw US forces from the region, a choice that drew the ire of many Republicans in Congress and prompted Trump to threaten new tariffs that could “destroy” Turkish economy. As the trade deal made progress, Treasury yields rose throughout the week, and equities rose modestly, with the S&P up 0.6%, the DJIA gaining 0.9%, and the Nasdaq adding 0.9%.

In corporate news this week, GM and UAW labor talks remained stuck in the mud, despite efforts from CEO Barra to push for an end to the strike. Nike shares saw some volatility midweek amid a spat between the NBA and China over league policy regarding support for Hong Kong protestors. Domino’s earnings disappointed investors and weighed on the pizza sector, but a buyback program announcement and CEO comments pointing to a promising long-term outlook turned shares around. Wendy’s caught a bid after disclosing at an investor day its best Q3 North America comps since 2015. US Steel slumped after announcing cost cuts and a CFO change. Bed Bath and Beyond jumped after landing former Target Inc CMO Mark Tritton as its new CEO, ending a lengthy search.

MON 10/7
(CN) Reportedly US Commerce Dept to place 28 Chinese govt and commercial organizations onto 'entity list' today - press
*(US) AUG CONSUMER CREDIT: $17.9B V $15.0BE
(EU) ECB: Current aggregate level of NPLs remain elevated by international comparison - 2019 supervisory bank stress test results
(TR) Pres Trump warns Turkey against taking actions that are "off limits" or he will "totally destroy and obliterate the Economy of Turkey (I’ve done before!)"
066570.KR Reports prelim Q3 (KRW) Op 781.1B v 748.8B y/y, Rev 15.7T v 15.5T y/y

TUES 10/8
(CN) China Embassy: US visa restrictions seriously violates the basic norms governing international relations, interferes in China’s internal affairs and undermines China’s interest
(CN) US imposes visa bans on Chinese persons linked to abuses against the Uighurs in Xinjiang province - press
(US) Fed Chair Powell: Fed will act as appropriate to support continued growth, a strong job market, and a return to 2% inflation; will carefully monitor incoming data; Fed will soon announce steps to add reserves over time - comments at NABE conf
*(US) SEPT PPI FINAL DEMAND M/M: -0.3% V +0.1%E; Y/Y: 1.4% V 1.8%E

WEDS 10/9
*(US) AUG JOLTS JOB OPENINGS: 7.051M V 7.250ME
*(US) FOMC MINUTES FROM SEPT 18 MEETING: TRADE UNCERTAINTY HAS INCREASED, GLOBAL GROWTH PROSPECTS WEAKENED, AND GEOPOLITICAL RISKS INTENSIFIED SINCE JULY
(JP) Japan Investors Net Buying of Foreign Bonds: -¥428.3B v +¥869.2B prior week; Foreign Net Buying of Japan Stocks: +¥1.07T v -¥221.2B prior week
(CN) US is said to be considering previously agreed currency agreement with China as part of trade deal, which could see next tariff increase cancelled under first part of trade deal with China - US financial press

THURS 10/10
3382.JP Reports H1 Net ¥110.65B v ¥101.36B y/y, Op ¥205.13B v ¥199.61B y/y, Rev ¥3.31T v ¥3.34T y/y; to close 1,000 unprofitable stores and cut 3K jobs
*(EU) ECB ACCOUNT OF SEPTEMBER POLICY MEETING (SEPT MINUTES): Clear majority supported the resumption of QE; some policy makers argued for 20bps rate cut and no QE
*(US) SEPT CPI M/M: 0.0% V 0.1%E; CPI (EX-FOOD/ENERGY) M/M: 0.1% V 0.2%E ; CPI NSA: 256.759 V 256.955E
(US) TREASURY $16B 30-YEAR BOND REOPENING DRAWS 2.170%; BID TO COVER 2.25 V 2.22 PRIOR AND 2.26 AVERAGE OVER LAST 8 (Record low yield)

FRI 10/11
FAST Reports Q3 $0.37 v $0.36e, Rev $1.38B v $1.37Be
(US) Pres Trump: "Good things are happening at China Trade Talk Meeting. Warmer feelings than in recent past, more like the Old Days. I will be meeting with the Vice Premier today. All would like to see something significant happen!"
*(US) OCT PRELIMINARY UNIVERSITY OF MICHIGAN CONFIDENCE: 96.0 V 92.0E (best since July)
*(CN) US AND CHINA HAVE REPORTEDLY REACHED A PARTIAL DEAL WHICH COULD SET UP A 'TRADE TRUCE' - PRESS
*(US) PRES TRUMP: WE'VE REACHED A PHASE ONE DEAL WITH CHINA; WILL TAKE UP TO FIVE WEEKS TO GET DEAL WRITTEN

China as a Seller’s Market

Modern China’s past success was based on exports. Its future must be based on imports.

China owes much of its current economic success to former ruler Deng Xiaoping, who famously opened up the economy to the rest of the world. His reforms transformed China into a manufacturing powerhouse, and in doing so, they turned the country’s biggest liability – a massive and impoverished population that upsets socio-economic harmony at home and constrains Chinese power abroad – into its greatest asset. China became the world’s factory because its workers could make things cheaper than workers in other countries could. The ratio of China’s exports of goods and services to its gross domestic product increased from 4.6 percent during the first year of Deng’s rule to a high of 36 percent in 2006 – long after Deng had passed away. During the same period, its GDP increased by a factor of 18.

The transformation into an export powerhouse reshaped the global economy. China made so many goods so proficiently that it drove prices down and gutted the manufacturing sectors of formerly competitive countries. China’s workforce simply undercut most everyone else. The economic roots of the current U.S.-China trade war, as well as of China’s massive current structural economic challenges, are born from these developments...

Continue reading: https://geopoliticalfutures.com/china-as-a-sellers-market 

Weak data and political follies dent markets until solid Friday jobs report eases concerns

TradeTheNews.com 

Weekly Market Update: Weak data and political follies dent markets until solid Friday jobs report eases concerns

Fri, 04 Oct 04:04 PM EST/09:04 PM GMT

Volatility returned this week as soft PMI readings in the US caused interest rates and stocks to decline. Tuesday’s ISM manufacturing reading registered the lowest since 2009 and was the second consecutive print in contraction territory. The S&P fell through the 50-day moving average for the first time in about a month on more robust volumes. Yields slipped, led by aggressive buying at the short end of the curve. Expectations for an October rate cut increased and the US curve steeped to levels not seen in more than two months. Thursdays ISM services figure was soft as well, suggesting to some the weakness seen in manufacturing may be leaking into the consumer side of the US economy. Friday’s September US unemployment rate fell to a 50-year low, but wage gains moderated noticeably. Markets seemed to view the jobs figures in a positive light while also keeping the door open for more easing by the Fed. Stock markets reversed and moved higher while Treasury yields largely held at the lower levels forged earlier in the week. The Dollar index touched fresh 2-year highs early on but backed off after the string of disappointing US data. The pound made modest gains as Boris Johnson submitted a new Brexit proposal that was constructive enough to ease fears about the UK ‘accidentally’ crashing out of the EU. For the week, the S&P fell 0.3% and the DJIA dropped 0.9%, while the Nasdaq gained 0.5%.

The discord in Washington remained at extremely intense levels throughout the week. Speaker Pelosi and other top Democrats said they saw a quid pro quo in the Ukraine call transcript, while President Trump doubled down on his corruption allegations and publically called for China to launch an investigation into Joe Biden, while also broadening his ‘witch hunt’ allegations to suggest big drug companies are in cahoots with Democrats and the news media. Separately the WTO issued a ruling granting the US the right to target $7.5B in EU imports with trade sanctions as a result of Airbus subsidies which the White House quickly jumped on, issuing a list of tariffs to be implemented later this month. Commentary remained somewhat constructive in the lead up to the next round of China trade talks in Washington next week.

In corporate news this week, US auto sales slumped after seeing encouraging early summer numbers, though GM deliveries rose while truck sales weighed down Ford, and Tesla came up short against its plan for September deliveries. Schwab, AmeriTrade, E-Trade, and Ally Bank followed Interactive Brokers’ lead and reduced their stock, ETF, and options commissions to zero. Lennar reported strong Q3 results and pointed to lower interest rates and slow price depreciation positively impacting sales. GoPro shares sank after the sport camera-maker cut guidance due to production delays with its latest Hero8 models. Costco shares fell after its earnings and comps disappointed the street, and Bed Bath & Beyond also missed revenue and SSS estimates. Apple reportedly asked its suppliers to boost production of the iPhone 11, citing stronger than expected demand, which gave a lift on Friday to shares of its manufacturing partners and the Nasdaq.


SUN 9/29
*(CN) CHINA SEPT NBS MANUFACTURING PMI: 49.8 V 49.6E (5th consecutive contraction)

MON 9/30
*(DE) GERMANY SEPT UNEMPLOYMENT CHANGE: -10.0K V +5.0KE; UNEMPLOYMENT CLAIMS RATE: 5.0% V 5.0%E
*(DE) GERMANY SEPT PRELIMINARY CPI M/M: 0.0% V 0.0%E; Y/Y: 1.2% V 1.3%E
*(US) SEPT CHICAGO PURCHASING MANAGER INDEX (PMI): 47.1 V 50.0E
*(US) SEPT DALLAS FED MANUFACTURING ACTIVITY: 1.5 V 1.0E
(US) USDA Q3 Grain Stocks Report (bu): Corn 2.11B v 2.42Be; Soybean 913M v 982Me; Wheat 2.39B v 2.32Be
*(JP) JAPAN Q3 TANKAN LARGE MANUFACTURING INDEX: 5 V 1E (3rd consecutive decline, lowest since 2013); OUTLOOK SURVEY: 2 V 0E; LARGE ALL INDUSTRY CAPEX: 6.6% V 7.0%E
JGB (JP) Japan MoF sells ¥2.1T v ¥2.1T indicated in 0.1% 10-year JGBs: avg yield: -0.158% v -0.265% prior, bid to cover 3.42x (lowest since 2016) v 3.60x prior

TUES 10/1
*(ES) SPAIN SEPT MANUFACTURING PMI: 47.7 V 48.2E (lowest reading since Apr 2013)
*(UK) SEPT PMI MANUFACTURING: 48.3 V 47.0E (5th straight month of contraction)
*(US) SEP FINAL MARKIT MANUFACTURING PMI: 51.1 V 51.0E (highest since April 2019)
*(US) AUG CONSTRUCTION SPENDING M/M: 0.1% V 0.5%E
*(US) SEPT ISM MANUFACTURING: 47.8 V 50.0E; PRICES PAID: 49.7 V 50.5E (lowest since June 2009)
(EU) EU reportedly prepared to consider a time limit on Irish backstop; could give Northern Ireland assembly a say on leaving the Brexit backstop - press
(UK) EU Commission spokesperson denies earlier report on potential time limit for Irish backstop; "The EU is not considering this option at all. We are waiting for the UK to come forward with a legally operational solution that meets all the objectives of the backstop” - Buzzfeed

WEDS 10/2
*(DE) GERMANY SELLS €2.323B VS. €3.0B INDICATED IN 0.0% OCT 2024 BOBL; AVG YIELD: -0.77% V -0.88% PRIOR; BID-TO-COVER: 2.5X V 1.9X PRIOR
LEN Reports Q3 $1.59 v $1.32e, Rev $5.86B v $5.52Be
(UK) UK PM Johnson: Northern Ireland to initially follow EU rules on agriculture and manufacturing, under no circumstances have checks at or near the border in Northern Ireland - Conservative party conf
*(US) SEPT ADP EMPLOYMENT CHANGE: 135K V 140KE
GM Reports Q3 deliveries 738.6K, +6% y/y
(US) Sen Sanders was hospitalized on Tues after experiencing chest pains at an event; two stents were surgically inserted; cancels all events until further notice
(US) USTR official: US will impose retaliatory tariffs of 10% on EU aircraft and 25% on EU agricultural and industrial goods; to take effect Oct 18th
BBBY Reports Q2 $0.34 v $0.26e, Rev $2.72B v $2.76Be; made substantial progress toward identifying a permanent CEO
TSLA Reports Q3 total production 96.2K v 87.0K q/q; deliveries 97.0K v 95.2K q/q
(JP) Japan Investors Net Buying of Foreign Bonds: +¥869.2B v -¥164.8B prior week; Foreign Net Buying of Japan Stocks: -¥221.2B v -¥1.18T prior week

THURS 10/3
(FR) France’s European Affairs Minister Montchalin: US tariffs decision is major political mistake
*(DE) GERMANY SEPT FINAL SERVICES PMI: 51.4 V 52.5E (lowest reading since Sept 2016)
*(EU) EURO ZONE SEPT FINAL SERVICES PMI: 51.6 V 52.0E (lowest reading since Jan 2019)
*(UK) SEPT PMI SERVICES: 49.5 V 50.3E (lowest reading since Mar 2019)
*(US) Sept ISM Non-Manufacturing Index: 52.6 v 55.0e (lowest since Aug 2016)
*(US) AUG FINAL DURABLE GOODS ORDERS: 0.2% V 0.2% PRELIM; DURABLES EX-TRANSPORTATION: 0.5% V 0.5% PRELIM
COST Reports Q4 $2.47** v $2.54e, Rev $47.5B v $47.1Be

FRI 10/4
*(IN) INDIA CENTRAL BANK (RBI) CUTS REPURCHASE RATE BY 25BPS TO 5.15%; AS EXPECTED; decision was not unanimous
(HK) Hong Kong Chief Executive Lam: Govt has invoked emergency powers (ERO); confirms to ban face masks in protests at public gatherings from Saturday, Oct 5th
(UK) BBC's Larna Gordon tweets: So to repeat government documents submitted to court of session say PM will send a letter asking the EU for an extension if no deal is in place by October 19th. But O'Neill says this is in direct contraction to what pm said earlier this week to Parliament.
*(US) SEPT AVERAGE HOURLY EARNINGS M/M: 0.0% V 0.2%E; Y/Y: 2.9% V 3.2%E; AVERAGE WEEKLY HOURS: 34.4 V 34.4E
*(US) SEPT CHANGE IN NONFARM PAYROLLS: +136K V +145KE
(EU) EU Parliament Pres reportedly has rejected UK Brexit proposal - German press
(US) New York Fed Nowcast: cuts Q3 forecast to 2.0% from 2.1%; cuts Q4 forecast to 1.3% from 1.8%

Drama at the UN and in Washington lead markets lower

TradeTheNews.com Weekly Market Update: Drama at the UN and in Washington lead markets lower

Stock markets moved modestly lower this week and trading remained choppy due to headline risk. As usual President Trump was at the epicenter of headlines that swung sentiment. In another brash speech at the UN Trump chastised China again, doubling down on many of his administration’s hawkish foreign policy stances. The speech and his appearances on the sidelines in New York came alongside a new whistleblower report raising new allegations against the President. By mid-week House speaker Pelosi formally called for an ‘impeachment inquiry’. The President spent much of the week defending his actions while dismissing the Democrats attempt at oversight as nothing more than another politically motivated witch hunt. Indices gyrated around the developing story despite a general market narrative that regardless of what is ultimately uncovered, Trump may be distracted but will not be removed from office by the Senate.

US/China trade talks stayed largely on a positive trajectory heading into next week’s communist party anniversary in China. President Trump had some tough talk for China during his UN speech on Tuesday and reports surfaced on Friday that the White House has begun preliminary consideration of a potential effort to limit portfolio flows into China, which might include delisting Chinese firms from US exchanges. Chinese rhetoric was less bellicose, and there were reports that China was stepping up purchases of US commodities.

Global interest rates went nowhere as weak global economic readings and Central banks continued willingness to cut rates kept a relatively tight lid on Treasury yields. The dollar firmed sending the Euro to a fresh two and half year low. Cable moved lower after the UK’s Supreme Court thwarted PM Johnson’s effort to suspend parliament. Oil prices dropped throughout the week giving back all the gains that followed the Saudi Aramco attack just two weeks ago. For the week, the S&P fell 1%, the DJIA lost 0.4%, and the Nasdaq declined 2.2%.

In corporate news this week, Nike reported a big quarterly earnings and revenue beat, boosted by strong digital sales and high demand for athletic products. Micron dinged the semiconductor stocks after reporting a disappointing forecast and weaker than anticipated margins. IBKR announced a new ‘Lite’ offering launching in October to provide commission-free, unlimited trades on US exchange-listed stocks and ETFs, which weighed on competitors E*trade and Ameritrade. A leaked memo from Tesla's CEO to employees said the company has a shot at a record 100K deliveries this quarter. Layoffs and furloughs at GM facilities continued as the two sides still remained at odds over a new contract agreement for a second week. Beyond Meat heated up again on the announcement of a new pilot program with McDonald’s. eBay CEO Devin Wenig departed his company abruptly, while the We Company’s CEO Adam Neumann stepped down amid the company’s ongoing IPO woes, though he will remain chairman.

US Military Options in Iran

By George Friedman - Sept 17, 2019

The United States has openly accused Iran of being behind the drone and cruise missile attacks on Saudi Arabia’s largest oil refinery. Now the question is what the United States will do in response.

The U.S. is in a difficult position. The attacks did not directly affect the U.S., save for the spike in oil prices, which actually helps the American oil industry. There is a temptation to let the attacks slip into history. But the United States has formed an anti-Iran alliance in which Saudi Arabia is a key (though weak) player. Saudi Arabia is under internal pressure from members of the royal family who oppose Crown Prince Mohammed bin Salman, and low oil prices have undermined the kingdom’s political cohesion. Doing nothing would call the U.S.-sponsored coalition into question. Saudi Arabia is an important player in the Sunni Arab world – and that world is the main threat to Iranian expansion. Failing to respond to an Iranian attack on a vital Saudi facility could help Iran increase its power throughout the region. During Donald Trump’s presidency, the United States’ inclination has been to avoid initiating direct military action in favor of applying economic pressure instead. He has maneuvered to minimize and halt active military engagement. Military action against Iran, therefore, would both endanger the alliance structure and cut against U.S. strategy.

An alternative option would be to introduce new sanctions, but there are two problems with this move. First, sanctions do not have the psychological impact military action does. The psychological impact would be on both Iran and the Sunni world, and the logic of the situation requires it. Second, the U.S. has already imposed painful sanctions on Iran’s economy. Any further sanctions would have limited effect and insufficient heft.

Please continue reading at https://geopoliticalfutures.com/us-military-options-in-iran/

Markets digest Saudi oil attack and Fed’s split decision

TradeTheNews.com  Weekly Market Update: Markets digest Saudi oil attack and Fed’s split decision

This week’s trade opened engulfed in a significant geopolitical scare after a largescale attack on Saudi Arabia’s oil infrastructure over the weekend. Oil prices jumped nearly 15% on Monday as Saudi and US officials were quick to point the finger at Iran. Crude prices retreated significantly by midweek as it became clearer that production losses would most likely be recovered much more quickly than initially thought, and President Trump indicated the US would remain measured regarding any kind of response. Oil prices ultimately gained 8% on the week and the US once again ratcheted up financial sanctions on the Iranian regime amid tense rhetoric from both sides.

The Saudi news didn’t dramatically spill over to other asset classes. Stocks opened lower but rebounded to stay within shouting distance of this summer’s all-time highs as focus shifted to a raft of central bank decisions. The US Fed followed through on Wednesday and cut rates 25 basis points, as expected, while coming up short of promising another cut before the end of the year. As usual, Powell left that door open at the press conference by acknowledging if things were to deteriorate faster than their models suggest future rate cuts and a potential return to balance sheet expansion would clearly be on the table. The views among FOMC members remained disparate with the number of dissenters rising from 2 to 3, with Bullard sounding a dovish dissent asking for a bigger cut. Fed officials were also forced to confront a spike in overnight lending rates on Monday and Tuesday leading to handwringing that lending markets were having trouble functioning efficiently. The NY Fed did a series of repo operations to bring the fed funds rate back in line with the targeted fed funds band and most market watchers viewed the spike in overnight rates largely due to technical reasons like quarter end tax payments amid high coupon issuance. The BOE and BOJ left both asset purchases and rates on hold as markets expected while Norway surprised markets by hiking rates to stem weakness in its currency. Friday saw additional monetary stimulus tweaks from the PBOC while India’s government cut corporate tax rates significantly resulting in a boon to the Indian stock market.

US economic data was generally firmer than expectations headlined by strong housing data. The Philly Fed reading also topped expectations but came with a notable jump in the prices paid component. US and Chinese officials met in Washington late in the week amid continued speculation that renewed Chinese purchases of US agriculture along with softening by the US administration towards Huawei could keep the two sides on a path towards higher level talks next month. On Friday a Chinese agricultural delegation left early canceling trips to key US farm belt states, walking back some optimism seen around this week’s talks. Also in Washington, the USMCA seemed to crawl towards consideration by Congress amid reports Democrats were becoming increasingly frustrated by their inability to have a say in the ongoing negotiations with the Trump administration on the trade pact. Brexit talks continued between UK and EU officials with some signs negotiators were finally broaching details on potential workarounds to the thorny Irish backstop issue, inducing continued buying in the British Pound. For the week, the S&P lost 0.5%, the DJIA slipped 1%, and the Nasdaq dropped 0.7%.

In corporate news this week, talks between General Motors and the UAW broke down, resulting in idled plants and furloughed employees across the US and Canada. Airline shares moved a leg lower early in the week after the attacks in Saudi Arabia caused a spike in oil prices. US Steel, Nucor, and Steel Dynamics all issued Q3 profitability guidance below consensus, citing softening prices. Corning cut its guidance for Display Technologies and Optical Communications segments for Q3 and FY19, forecasting lower than expected demand and capital spending from clients. FedEx missed on its top and bottom line for the quarter and also cut its earnings outlook, with management blaming the weakness on the trade war. Commerzbank announced plans to cut an additional 4,300 jobs and 200 bank branches as it launches a new strategic program. Microsoft shares caught a bid after the company boosted its dividend and authorized a $40B share buyback.


SUN 9/15
GM UAW union rejects offer from General Motors, to go on strike starting at midnight; Unifor supports strike action
*(CN) CHINA AUG RETAIL SALES Y/Y: 7.5% V 7.9%E; YTD Y/Y: 8.2% V 8.3%E
*(CN) CHINA AUG INDUSTRIAL PRODUCTION Y/Y: 4.4% V 5.2%E; YTD Y/Y: 5.6% V 5.8%E

MON 9/16
(SA) Saudi Aramco reportedly could go weeks without the majority of production at Abqaiq facility (world’s largest crude stabilization facility, which processes 7M bpd) - press
(SA) Saudi Arabia: Initial investigations have indicated that the weapons used in the attack on oil refineries were from Iran; investigation is still ongoing to determine the source of the attack; UN and international experts will be invited to observe
GLW Cuts guidance for Display Technologies and Optical Communications segments for Q3 and FY19; seeing lower than expected demand and capital spending from clients

TUES 9/17
(IR) Iran supreme leader Khamenei: If U.S. repents & returns to JCPOA it withdrew from, then it can join & talk with Iran among other members of the deal. Otherwise no negotiation will take place between Islamic Republic& U.S. officials at any level, whether in New York or anywhere else.
*(DE) GERMANY SEPT ZEW CURRENT SITUATION SURVEY: -19.9 V -15.0E (lowest since May 2010) ; EXPECTATIONS SURVEY: -22.5 V -38.0E
*(US) AUG INDUSTRIAL PRODUCTION M/M: 0.6% V 0.2%E; CAPACITY UTILIZATION: 77.9% V 77.6%E
(SA) Saudi Arabian oil output will return to normal levels sooner than initially believed, according to sources with knowledge of Saudi oil operations - press
*(SA) SAUDI ENERGY MIN: OIL EXPORT SUPPLY HAS RESUMED AS BEFORE; PRODUCTION CAPACITY WILL BE FULLY BACK ONLINE BY END OF SEPT AT 11M BPD - PRESS
(IL) Israel news organizations release election exit polls; election appears too close to call
FDX Reports Q1 $3.05 v $3.17e, Rev $17.0B v $17.1Be

WEDS 9/18
*(US) AUG HOUSING STARTS: 1.364M V 1.250ME; BUILDING PERMITS: 1.419M V 1.300ME
(US) President Trump tweet: I have just instructed the Secretary of the Treasury to substantially increase Sanctions on the country of Iran
*(US) FOMC CUTS TARGET RANGE BY 25BPS TO 1.75-2.00% (AS EXPECTED); SUSTAINED EXPANSION LIKELY, UNCERTAINTIES ABOUT ECONOMIC OUTLOOK REMAIN
X Guides Q3 -$0.35 v -$0.11e, adj EBITDA $115M (previously declined to guide); expects 2.5K headcount reduction at U.S. Steel Europe
T Reportedly exploring separating from DirecTV unit; could consider spinoff or combination with Dish - press
*(AU) AUSTRALIA AUG EMPLOYMENT CHANGE: +34.7K V +15.0KE; UNEMPLOYMENT RATE: +5.3% V 5.2%E
*(JP) BOJ LEAVES INTEREST RATE ON EXCESS RESERVES (IOER) UNCHANGED AT -0.10%; AS EXPECTED

THURS 9/19
DGE.UK Issues Q1 Trading update: affirms outlook - AGM statement
(JP) Bank of Japan (BOJ) Gov Kuroda: reiterates Japan's economy expanding moderately as trend - post rate decision conference
*(CH) SNB LEAVES SIGHT DEPOSIT RATE UNCHANGED AT -0.75%; AS EXPECTED
*(UK) AUG RETAIL SALES (EX-AUTO/FUEL) M/M: -0.3% V -0.3%E; Y/Y: 2.2% V 2.3%E
*(EU) ECB ALLOTS €3.396B IN TLTRO-3 Operation v €20-100Be
*(UK) BANK OF ENGLAND (BOE) SEPT MINUTES: VOTED 9-0 TO KEEP INTEREST RATE UNCHANGED AT 0.75%; could respond either way in case of no-deal Brexit
*(US) SEPT PHILADELPHIA FED BUSINESS OUTLOOK: 12.0 V 10.5E
(UK) EU's Juncker: Prepared to get rid of the so-called backstop from a withdrawal agreement, so long as "the objectives are met - all of them"- Sky News interview
(JP) Japan Investors Net Buying of Foreign Bonds: ¥476.0B v ¥727.2B prior week; Foreign Net Buying of Japan Stocks: -¥971.9B v -¥161.5B prior week

FRI 9/20
(DE) Germany agrees on emissions trading system in Climate Deal; To be financed without new debt - German press
CBK.DE Releases cornerstones of new strategic programme Commerzbank 5.0; to cut an additional 4,300 jobs and 200 bank branches
(US) New York Fed Nowcast: raises Q3 forecast to 2.2% from 1.6%; raises Q4 forecast to 2.0% from 1.1%
(US) Fed Reports Q2 Financial Accounts: Household Change in Net Worth: $1.830T v $4.691T prior
(CN) MONTANA FARM BUREAU: CHINA DELEGATION HAS CANCELED ITS FARM VISIT TO MONTANA; AG OFFICIALS TO RETURN TO CHINA SOONER THAN EXPECTED

Markets buoyed by renewed optimism that trade and Brexit deals can materialize

TradeTheNews.com Weekly Market Update: Markets buoyed by renewed optimism that trade and Brexit deals can materialize
Fri, 13 Sep 2019 16:11 PM EST

US stock indices continued to churn back up towards this summer’s highs after last week’s apparent bottoming in interest rates gathered momentum. The major impetus once again was perceived de-escalation in the US/China trade war. Lower level officials are set to meet next week after both sides offered concessions and the rhetoric took on a decidedly softer tone. Hotter than expect August US CPI data and better than expected retails sales figures also caused some rethinking about how easy it will be for Fed Chairman Powell to attain consensus to cut rates at the FOMC meeting next Wednesday. Meanwhile the ECB unveiled a series of stimulus measures including a relaunch of quantitative easing, but the news was largely expected and there appeared to be real dissension among some key Northern ECB officials which mitigated the market’s reception of Draghi’s dovish presser on Wednesday.

The pound moved up almost 400 pips this week on hopes the UK will find some way around the Irish backstop issue; this after Parliament was suspended but PM Johnson was unable to obtain enough MP votes for a new election. The Euro maintained an upward bias following the ECB decision and Draghi’s renewed call for fiscal authorities to take on more responsibility in supporting economic growth. The OPEC+ Joint Ministerial Monitoring Committee (JMMC) met and producers pledged even more stringent compliance, but did not discuss further production cuts which resulted in modest giveback in crude prices. By Friday government bond yields had risen the highest levels in roughly a month and the US curve had steepened significantly. The Dow was riding an eight day winning streak and the S&P cash market came within 10 handles of the July all-time high. The continued drift up in US indices was accompanied by intense rotational flows out of high-beta, higher-growth winners into deep value groups that have drastically underperformed. For the week, the S&P rose 1%, the DJIA added 1.6%, and the Nasdaq gained 0.9%.

In corporate news this week, some major financial firms, including Wells Fargo, Citi and JP Morgan, trimmed their net interest income outlook for the year as rates begin to fall. Oracle released some disappointing earnings a day earlier than scheduled due to Co-CEO Hurd’s announcement he would take a medical leave of absence. Alcoa disclosed plans to restructure amid global headwinds by implementing a new operating model and cutting executive positions. Moody’s cut Ford Motors’ unsecured rating to junk, pointing to weak future cash generation and a ‘lengthy and costly’ restructuring plan. Apple announced release dates for new iPhone 11 and Apple Watch Series 5 products and laid out pricing plans for its Apple Arcade and Apple TV+ services at an investor event. A report emerged that the FTC has opened a probe into Amazon’s marketplace over potential competition concerns. Wendy’s shares dropped after the fast food chain adjusted its outlook on plans for a national rollout of its breakfast menu. CSX management provided some cautious commentary to investors, noting more softness than expected in the coal sector and a ‘confusing’ outlook for intermodal demand. Restoration Hardware posted an earnings beat and outlook raise, despite the increase in tariffs and some foreboding macro trends.


SUN 9/8
(CN) China Aug Trade Balance: $34.8B v $44.3Be
*(JP) JAPAN FINAL Q2 GDP Q/Q: 0.3% V 0.3%E; ANNUALIZED Q/Q: 1.3% V 1.3%E

MON 9/9
AA Announces new operating model; to eliminate its business unit structure and consolidate sales, procurement and other commercial capabilities at an enterprise level; Expects to report Q3 charge
WRK To reconfigure North Charleston, SC, paper mill; to boost annual EBITDA by $40M
*(US) JULY CONSUMER CREDIT: $23.3B V $16.0BE
F Moody's cuts Ford's unsecured rating one notch to junk status; cuts to Ba1 from Baa3; outlook Stable
WEN Plans to launch breakfast across the U.S. system in 2020; Cuts outlook after $20M in breakfast investments; to hire 20K new crew members

TUES 9/10
2330.TW Reports Aug (NT$) Rev 106.1B v 91.1B y/y
*(UK) JULY AVERAGE WEEKLY EARNINGS 3M/Y: 4.0% V 3.7%E; WEEKLY EARNINGS (EX-BONUS) 3M/Y: 3.8% V 3.7%E (fastest pace since the 2008-09 global financial crisis)
*(UK) AUG JOBLESS CLAIMS CHANGE: +28.2K V +19.8K PRIOR; CLAIMANT COUNT RATE: 3.3% V 3.2% PRIOR
*(US) JULY JOLTS JOB OPENINGS: 7.217M V 7.331ME
*(US) PRES TRUMP FIRES NATIONAL SECURITY ADVISER JOHN BOLTON
09/10 AAPL CEO: Apple TV+ streaming service to be available Nov 1st, priced at $4.99/mo for family service; Arcade to be available on Sept 19th at $4.99/mo; Announces iPhone 11 featuring improved cameras; iPhone 11 Pro to feature 3 cameras on the back
(DE) Germany Chancellor Merkel: must continue to reduce debt-to-GDP ratio below 60%; govt stands by its goal for a balanced budget

WED 9/11
(US) California Senate passes employment bill on gig workers, as speculated (expected to impact app based jobs)
(CN) CHINA FINANCE MINISTRY UNVEILS 1ST LIST FOR TARIFF EXEMPTIONS FOR US GOODS; effective on Tuesday, Sept 17th
AMZN Reportedly FTC has opened an antitrust probe over Amazon's online marketplace - press
OPEC Sept Monthly Report: Cuts both 2019 and 2020 global oil demand growth forecasts again
*(US) AUG PPI FINAL DEMAND M/M: +0.1% V 0.0%E; Y/Y: 1.8% V 1.7%E
(US) Reportedly Pres Trump is again considering a capital gains tax cut - press
(US) California Gov Newsom: still seeks to reach deal with Uber and Lyft on 'gig' worker bill; best interest of the state is to remain at bargaining table
(EU) ECB sources: ECB to cut some growth projections; sees both 2019 and 2020 GDP expansion not much above 1%
ORCL Reports Q1 $0.81 v $0.81e, Rev $9.22B v $9.29Be; authorizes $15B buyback (8% of market cap); CEO Mark Hurd to take a leave of absence for health-related reasons
*(CN) US PRESIDENT TRUMP TO DELAY TARIFF INCREASE TO 30% (PRIOR 25%) ON $250B OF CHINA GOODS TO OCT 15TH (PRIOR OCT 1)
(JP) Japan Investors Net Buying of Foreign Bonds: ¥724.4B v +¥1.49T prior week; Foreign Net Buying of Japan Stocks: -¥161.3B v -¥89.5B prior week

THURS 9/12
OPEC-Non-OPEC Joint Ministerial Monitoring Committee (JMMC) statement: Important for all members to fulfill compliance of agreed upon production cuts
(EU) ECB CUTS DEPOSIT RATE BY 10BPS TO -0.50%; AS EXPECTED; restarts QE; revises forward guidance
*(EU) ECB ANNOUNCES STIMULATIVE MEASURES: Relaunching QE at €20B/month; revises forward guidance (both with no specific end date)
*(US) AUG CPI M/M: 0.1% V 0.1%E; CPI EX FOOD AND ENERGY M/M: 0.3% V 0.2%E; CPI NSA: 256.558 V 256.586E
KR Reports Q2 $0.44 v $0.41e, Rev $28.2B v $28.4Be
(EU) ECB's Draghi: Conducted a thorough assessment; reiterates stimulative statement on rates, QE and guidance- Prepared Remarks
(EU) ECB's Draghi: rationale for today's measures: protracted slowdown is more marked than expected; persistence of downside risks - Q&A
(CN) Trump advisers reportedly mulling an interim China trade agreement to postpone tariffs; discussions are preliminary and Pres Trump has yet to approve the offer - press
*(CN) SENIOR ADMIN OFFICIAL TELLS CNBC THAT THE WHITE HOUSE IS 'ABSOLUTELY NOT' CONSIDERING AN INTERIM CHINA DEAL
*(US) TREASURY $16B 30-YEAR BOND REOPENING DRAWS 2.270%; BID TO COVER 2.22 V 2.13 PRIOR AND 2.28 AVERAGE OVER LAST 8
*(US) AUG MONTHLY BUDGET STATEMENT: -$200.3B V -$200.0BE (Budget gap hits $1.07T in first 11 months of 2019)
AVGO Reports Q3 $5.16 v $5.11e, Rev $5.52B v $5.50Be; believes semiconductor solutions segment has bottomed out
(UK) Northern Ireland DUP Party reportedly could agree to Northern Ireland accepting some EU rules after Brexit as part of deal to replace backstop - UK's Times
(CN) Pres Trump: would rather get a 'whole deal' with China rather than an interim deal; I guess I'd consider an interim trade deal with China

FRI 9/13
(US) AUG ADVANCE RETAIL SALES M/M: 0.4% V 0.2%E; RETAIL SALES (EX-AUTO) M/M: 0.0% V 0.1%E
(US) SEPT PRELIMINARY UNIVERSITY OF MICHIGAN CONFIDENCE: 92.0 V 90.8E
(US) New York Fed Nowcast: raises Q3 forecast to 1.6% from 1.5%; affirms Q4 forecast at 1.1%

Barron's Weekend Summary

Barron's Weekend Summary: Cover story on how to fix the global retirement crisis; Feature positive on three cheap momentum stocks DHI, MCK, T 

Cover story: By 2050, one out of every six people—or 1.6 billion—will be over the age of 65, according to the UN’s latest estimates, creating a major problem for graying countries that must find fiscally sustainable ways to support longer life spans without bankrupting governments, overburdening the young, or abandoning those who need care; Japan is at the leading edge of the trend, forcing it to tackle the challenge head on, while China has more time. 

Tech Trader: Positive on ATVI: Company’s King division just released the 5,000th level for Candy Crush Saga, and well over half a billion unique users have played the game since its 2012 launch, making it the fifth-biggest revenue generator in mobile gaming. 

Trader: “While good low-volume performance used to be a leading indicator of economic and general stock market weakness, in more recent years it has become a ‘contrarian indicator’ like other measures of investor sentiment,” says Jim Paulsen of Leuthold Group—and that augurs well for stocks during the next six months; Pension expenses could rise because interest rates are falling, a small negative for corporate earnings, but the impact on each sector of the market will differ widely; BA investors have largely focused on when the troubled 737 MAX jet will return to service, but like with most issues related to the plane, the process may not be as simple as investors would hope. 

Profile: Bob Bergson, manager of the Northern Small Cap Core fund, uses a factor-based approach to give investors exposure to the broader small-cap universe—minus the worst of the worst (top 10 holdings: WWD, EXPO, HAE, MMS, FCFS, PRI, COUP, IDA, PLNT, FIVE). 

Interview: Jens Nordvig, a top-ranked currency strategist on Wall Street before he founded Exante Data, a macro research consulting firm, talks about the dollar, the trade war, and the euro. 

Features: 1) Positive on DHI, MCK, T: Barron’s searched for inexpensive stocks with some recent price momentum, looking for flawed companies that are showing signs of improvement but that aren’t perpetual turnaround candidates that never seem to do better; 2) Accepted accounting practices allow companies at times to present numbers that, while accurate, may not provide the clearest picture to investors—which means investors need to learn to ask the right kinds of questions and look in the right places in the financial statement; 3) “Eight years after a radical pension overhaul, Italy is still trying to find the right formula to satisfy its citizens’ retirement expectations while meeting European Union fiscal requirements.” 

European Trader: Positive on Balfour Beatty: London-based infrastructure company “could provide a solid foundation for investors looking to diversify internationally,” and shares seem to be overly discounting negative scenarios, such as the company’s U.S. housing business. 

Emerging Markets: The International Monetary Fund must soon decide whether to lend Argentina another $5.4B—and a decision to not open the coffers could turn an emergency into a catastrophe on the ground, and signal failure for the biggest bailout in the fund’s history. 

Commodities: “U.S. benchmark oil has outperformed the global benchmark this year, leading prices in recent weeks to the narrowest spread in more than a year—and analysts say the move isn’t about the trade war.”

Streetwise: Positive on LULU, NKE, VFC: Amid shifting consumer taste, the “athleisure” trend is here to stay and not a fad, says columnist Jack Hough, which is good for shareholders of the big players in the sector, and a problem for “office fashion” companies such as RL, HBI, and PVH.

Investors risk appetite returns as bond yields stabilize and trade talks to move forward

TradeTheNews.com Weekly Market Update: Investors risk appetite returns as bond yields stabilize and trade talks to move forward
Fri, 06 Sep 2019 16:10 PM EST

US stock markets returned to within just a few percentage points of all-time highs this week as Treasury yields appeared to have bottomed, at least for now. The news flow was decidedly positive as momentum gathered regarding several of the key narratives that held back investors' willingness to add risk in August. Italy was set to swear in a new government next week while UK MPs seem to have found a way to avoid a 'no deal' Brexit in Oct, to the chagrin of PM Boris Johnson. The US and China continued to talk with deputy-level meetings now confirmed by both sides for later this month in Washington which will hopefully result in principal-level meetings in Oct. Markets reacted extremely positively as both sides dialed back the rhetoric significantly, allowing for optimism heading into these next rounds of negotiations.

US manufacturing data continued to soften after the ISM reading followed overseas economies into contraction territory for the first time since 2016. Recession hand-wringing was held in check, though. Another solid US employment report, albeit below market expectations, and a modest bounce in overseas services data suggested to some the recent plunge in yields was likely an over-reaction to global recessionary fears. The Fed still appears destined to cut rates when they meet later this month but the most aggressive rate cut projections were tempered as risk appetite improved and Treasury yields moved up. Some ECB officials looked to lessen market expectations ahead of next week's expected stimulus announcement. Chairman Powell did little to change Federal Reserve expectations when he spoke in Switzerland on Friday, noting the Fed was not expecting a recession and opted not to provide anything new on his thinking on rates ahead of the Sep FOMC meeting. The US 10-year yield bounced some 13+ basis points from Tuesday’s post ISM low, helping the US 2/10-year spread finish the week in positive territory. Cable jumped to a one-month high and gold prices rolled over from recent highs. For the week the S&P gained 1.7%, the Dow rose 1.5% and NASDAQ added 1.8%

In corporate news, airlines released guidance for the rest of the year, with JetBlue cutting its revenue outlook, United and Delta affirming their forecasts, and Alaska raising its RASM expectations. Lululemon crushed quarterly estimates and raised its outlook yet again, noting a 15% growth to same-store sales powered by 35% growth in menswear revenue. American Eagle reported a miss on its quarterly SSS, citing underperformance in certain seasonal categories and a delayed start to back-to-school. Ciena jumped initially after announcing an earnings and rev beat, but then shares reversed when it gave a weaker FY20 gross margin outlook. Slack posted solid results but shares slumped on a slightly weaker earnings forecast as competition worries persist. Halliburton guided its Q3 to the low end of forecasts amid maturation of the US shale sector and cutbacks at oil and gas customers. Starbucks tempered 2020 EPS projections, pointing to one-time tax benefits that will be a headwind to earnings growth in the next year. Tyson cut its earnings outlook for a bevy of reasons, which weighed on the food processing space.

SUN 9/1
(CN) China Customs Tariff Commission of the State Council clarifies tariff increase on US goods; next round goes into effect on Sept 1st (today) on $75B in goods in 2 batches, second round to take effect on Dec 15th - Xinhua

MON 9/2
*(ES) SPAIN AUG MANUFACTURING PMI: 48.8 V 48.5E (3rd straight contraction)
*(UK) AUG PMI MANUFACTURING: 47.4 V 48.4E (4th straight contraction and lowest since July 2012)
416.HK Said to halt payouts on offshore preferred securities - US financial press

TUES 9/3
*(US) AUG FINAL MARKIT MANUFACTURING PMI: 50.3 V 50.0E (lowest since Sept 2009)
*(US) AUG ISM MANUFACTURING: 49.1 V 51.2E; PRICES PAID: 46.0 V 46.8E (lowest Manufacturing reading since Jan 2016)
*(US) JULY CONSTRUCTION SPENDING M/M: 0.1% V 0.3%E
(UK) UK Tory Party MP Phillip Lee defects to Liberal Democrats; Conservatives lose majority as a result
(IT) Italy's 5-Star Party membership votes to form a govt with Democratic Party (PD) - press
*(CL) CHILE CENTRAL BANK (BCCH) CUTS OVERNIGHT RATE TARGET BY 50BPS TO 2.00%; AS EXPECTED
(US) Fed's Bullard (dove, voter): calls for immediate 50bps cut; Fed policy rate is too high and would be better to get to right point now rather than in smaller steps

WEDS 9/4
(HK) Hong Kong Leader Lam to formally withdraw extradition bill - press
*(DE) GERMANY AUG FINAL PMI SERVICES: 54.8 V 54.4E (confirm 74th month of expansion)
(EU) EURO ZONE AUG FINAL PMI SERVICES: 53.5 V 53.4E (confirm 75th month of expansion)
*(UK) AUG PMI SERVICES: 50.6 V 51.0E (5th month of expansion)
*(DE) GERMANY SELLS €2.353B VS. €3.0B INDICATED IN 0.0% OCT 2024 BOBL; AVG YIELD: -0.88% (record low)V -0.79% PRIOR; BID-TO-COVER: 1.9X V 1.18X PRIOR
SBUX Cuts FY20 adj EPS outlook below 10% model (prior at least 13%); Affirms FY19 $2.80-2.82 v $2.83e; - GS conf
*(US) FEDERAL RESERVE BEIGE BOOK: ECONOMY EXPANDED AT A MODEST PACE; CONCERNS ABOUT TARIFFS AND TRADE POLICY CONTINUE
(UK) House of Commons passes the Brexit delay law; vote 327-299
(UK) PM Johnson proposes early general election on Oct 15th
(JP) Japan Investors Net Buying of Foreign Bonds: +¥1.5T v -¥910.3B prior week; Foreign Net Buying of Japan Stocks: -¥89.5B v +¥3.9B prior week
(CN) CHINA COMMERCE MINISTRY (MOFCOM): WILL HOLD TRADE TALKS WITH US IN EARLY OCT. IN WASHINGTON, DC [previously expected during Sept]

THURS 9/5
*(US) AUG ADP EMPLOYMENT CHANGE: +195K V +148KE (highest reading since April)
(US) Aug ISM Non-Manufacturing Index: 56.4 v 54.0e
*(US) JULY FINAL DURABLE GOODS ORDERS: 2.0% V 2.1%E; DURABLES EX-TRANSPORTATION: -0.4% V -0.4%E
(US) Treasury releases proposals for Fannie Mae and Freddie Mac: recommends end of conservatorship and preserving govt support in the housing market

FRI 9/6
*(EU) EURO ZONE Q2 FINAL GDP Q/Q: 0.2% V 0.2%E; Y/Y: 1.2% V 1.1%E
*(US) AUG AVERAGE HOURLY EARNINGS M/M: 0.4% V 0.3%E; Y/Y: 3.2% V 3.0%E; AVERAGE WEEKLY HOURS: 34.4 V 34.4E
(US) New York Fed Nowcast: cuts Q3 forecast to 1.5% from 1.8%; cuts Q4 forecast to 1.1% from 1.6%

September-October 2019 Market Outlook

September-October 2019 Outlook: Here We Go Again
Tue, 03 Sep 2019 12:30 PM EST

Perhaps its déjà vu, but the next few months could see significant new developments in global macro issues that were supposed to have been resolved months ago. The Brexit, now scheduled for October 31, was supposed to have occurred in March, and now may be delayed again. We were told a US/China trade deal was “90% completed” in June before Beijing backed off, and now nothing may come of it before the end of the year.

The issues are the same, but circumstances are different, at least as far as the economic environment. The trade tensions have built up uncertainties and slowed growth, enough to trigger a reversal by central banks that had been charting their paths to normalizing monetary policy but have now resumed easing. The yield curve is has begun to flash warning signs – many inversions have occurred already, and in recent weeks the critical 2-10 year yield curve inverted for the first time, solidifying the signal that recession may be on the horizon.

The central market thesis is that the US will amicably resolve its trade disputes with China, Europe and other trading partners and central banks will stay cautious and keep their monetary policy supportive. Some key events over the next two months will reveal how accurate those expectations are:

September 1: 15% tariffs go into effect on $112B of Chinese goods

Despite reports that Chinese negotiators asked for a delay, new tariffs went into effect on September 1 on a wide variety of products including consumer goods like clothing, kitchenware, and footwear amounting to over $110B. The larger portion of tariffs on consumer goods, over $160B worth, have been delayed to December over White House concerns that they might have soured spending during the upcoming holiday season. A late August report that Chinese negotiators claimed to have made progress on restricting exports of fentanyl did not appear to have been enough to sway President Trump to show any leniency on the September tariffs, which he proclaimed to be ‘still on.’

The uncertainty over the US/China trade talks is running so high that each time the parties merely say they are still in contact the market takes it as if it’s a breakthrough. If that low bar persists, the announcement of a concrete date for new face-to-face talks could be the next shot in the arm for markets. For weeks the White House has been insisting that a fresh round of high-level in-person negotiations will occur in Washington in early September and for their part the Chinese have not dismissed the idea. However a firm date has not been set for this highly anticipated meeting and the latest reports say the September tariffs have eroded trust, leaving in doubt when any announcement will be forthcoming. Locking in a meet date will likely raise hopes that the negotiators are getting back toward the “90% complete” threshold that they claimed to reach earlier this year, but markets could get nervous as the days tick off the calendar in September without an announcement.

September 10: North Carolina special election

A special election for a House seat will be resolved on September 10 and it could have implications for the 2020 election. North Carolina's 9th District, anchored by Charlotte's suburbs, shouldn't be a toss-up: in 2016, candidate Trump carried it 54% to 42%, more than triple his statewide margin of victory. Yet the race is too close to call between Marine Corps veteran Dan McCready, a Democrat, and his opponent Republican state Senator Dan Bishop. A Democratic victory in the historically conservative district would be a bad omen for Trump’s reelection hopes. It might also affirm that Republican politicians foresee strong headwinds in next year’s general election – a substantial number of Republican Congressmen have already announced they will not seek reelection next year and such retirements are often a signal that the party in power anticipates a defeat in the next general election. At some point, the markets will recalibrate to the prospect of a Democrat occupying the White House in 2021 which may lead to some risk off behavior.

September 12: Democratic debate

Just two days later (9/12) the Democratic presidential hopefuls will hold another debate. The candidates on stage have been whittled down to ten and, and though its still early, Joe Biden and Elizabeth Warren appear to be pulling away from the pack as the most likely winners of the nomination. Biden is seen as the ‘safe’ candidate, relying on “electability” and personal character even though it appears he may have lost a step in his dotage. Warren is definitely a more radical candidate, and if she should pull ahead in the Democratic polls it could spook markets at some point. She could also push China into the arms of President Trump – her platform on trade is even more protectionist than Trump’s, demanding compliance with high environmental and labor standards, and might incent China’s leaders to choose a deal with the current Administration as the lesser of two evils.

September 12: ECB policy decision

Central bankers are being counted on again to take the lead in reinvigorating global growth, despite mandates that don’t explicitly stretch beyond their own borders. In recent weeks the European Central Bank has sent strong signals that its record low interest rate could be heading even lower as early as September. Markets are also hoping the ECB will return to more unconventional policy with a new quantitative easing program in September.

But ‘not so fast,’ say some northern European members of the governing council. The Netherland’s Knot recently threw cold water on the idea of new extraordinary stimulus, saying the market expectations for the September ECB decision are “overdone.” Knot made the case that conventional rate policy should be enough for now, and that the central bank should keep its QE powder dry in case of a new shock.

The ECB doves want to see more government bond purchases, though even they are ruling out purchases of stocks or bank bonds at this point. As rates go lower there is also debate around how to lessen the adverse effects of negative interest rates on banks’ interest income, with so called ‘tiering’ (reducing the amount of excess liquidity subject to a negative interest rate) and modifications to the TLTRO being discussed as options.

The September meeting is the last for President Mario Draghi before he hands over the reins to Christine Lagarde. Markets often test new central bank leaders early in their terms, but Lagarde may have the advantage of being a well known quantity after her years heading the IMF. However, with Germany and the other euro zone nations experiencing weak data still unwilling to flex their fiscal policy muscle, it may fall on Lagarde to take ECB policy to new extremes of accommodation as her term starts.

September 17: German ZEW economic sentiment

Hopes that the export-oriented German and wider European economies would benefit from US trade war with China – by China substituting European imports for American ones – have not materialized. The general global trade malaise is dragging down German manufacturing, leading to new orders falling at the fastest pace in a decade. On the bright side, German consumer spending has held up, preventing the service sector from entering contraction.

The German ZEW index, which measures bullishness versus bearishness among analysts, has been negative for all but one of the last seventeen month, and last month it dove below the trend range to levels comparable to those seen during the 2008 financial crisis. That magnitude of bearishness is concerning and will be more troubling if it is confirmed in the September 17 reading.

Less than a week later, the German Flash Manufacturing PMI (9/23) will give another read on the situation in central Europe. The manufacturing PMI has been showing a state contraction for every month so far this year and yet another reading in the low 40’s would help confirm the dire straits German industrial firms have fallen into after experiencing a brief boom in 2017 and early 2018.

All this negative sentiment plays into the narrative that the German government may be considering new fiscal stimulus to fight off a more severe downturn. Germany is at risk of falling into a technical recession when it reports Q3 GDP (11/14), after posting a 0.1% decline in the Q2 reading. So far, however, Berlin has been reluctant to veer from its balanced budget goal. Despite European neighbors and economists urging Germany to go on a stimulative spending spree, the German government appears to be willing to take only modest measures. The stain of a recession later this year may be enough to prod the Germans to think bigger in the months ahead, perhaps dedicating some funding to much needed infrastructure spending, an area that has been largely neglected since the post-unification splurge in Germany. The cheers would be loud among economists if Berlin does decide to abandon the balance budget target and strategically spend its reserves.

September 18: FOMC rate decision

How the Fed navigates the rest of the year will be a delicate dance with market sentiment, as it attempts to provide some accommodation without giving up all of its ammunition, all while trying to avoid the perception that the central bank is underwriting the trade war. The dovish case that weak inflation and uncertainty over global trade and other macro issues has so far won out, leading the Fed to cut rates in July with another cut all but assured in September. However, two hawkish dissenters in July and Chair Powell describing the cut as a “mid-cycle adjustment” injected some doubt about the extent to which the central bank stands ready to act to sustain the current economic expansion.

As occurred in July, some market analysts are speculating again that the Fed could make a dramatic statement by cutting by 50 basis points in September. Such a move might backfire, however, as it might convey the Fed is deeply nervous about an impending recession. So a 25 basis point cut seems to be the safe bet: it would show market participants that the Fed is responding to their concerns, while leaving flexibility for the next step in monetary policy as more data comes in. At this point, Fed fund futures are anticipating another rate cut in October and possibly a fourth 25 basis point cut December, which seems quite aggressive and leaves the markets open to disappointment.

October 1: Japan consumption tax rises another 2%, to 10%

In October, Japan will raise its consumption tax to 10% from the current 8% level. Prime Minister Abe has already postponed the increase twice on concerns it could cause a slowdown, but his government is resolute that no further delays will be tolerated except in the event of a global financial crisis. Consumption tax hikes in 1997 and 2014 were followed by serious economic downturns, so the stakes are high given the current shaky global environment. The ultimate result may be that Japan needs to add fresh stimulus measures to offset the impact of the tax increase.

The tax increase comes at a particularly sensitive time as Japan finalizes its trade deal with the US. Negotiators have reached an ‘agreement in principle’ that is expected to be signed during ceremonies at the UN General Assembly in the second half of September. The agreement is said to reduce industrial tariffs, and address agriculture and digital trade issues. It does not, however, remove the 2.5% tariff on Japanese vehicles and auto parts that Abe sought, but it should eliminate the possibility that Trump will renew his threat to impose a 25% tariff on Japan auto exports to the US. Abe has stopped short of pledging to purchase hundreds of millions of dollars in US corn and other agricultural products as Trump has urged him to do, but the bilateral trade deal could still be a boon for the farm belt. The deal is also not comprehensive: as the Chamber of Commerce is quick to point out, the bilateral trade agreement does not tackle key regulatory barriers and IP protection, subjects that were covered in the Trans Pacific Partnership. As a result US exporters have been losing out on some sales to Japan that are going to TPP partner countries instead.

October 1: China tariffs rise another 5%; 70th anniversary of the founding of the People’s Republic

The US will raise tariffs by another 5% to a total of 30% on $250B of Chinese goods on the first of the month in what appears to be Trump’s strategy of slowing ratcheting up the pain as long as China doesn’t move toward a deal. Trump has played both the good cop and bad cop during these negotiations and may decide to delay or waive the additional 5% duty if he senses progress being made. Either way the markets will continue to watch his tweets with baited breath as the day to day uncertainty over the talks persists.

For his part, China’s President Xi will find it very difficult to give into any America demands that would cause him to lose face amid the pomp leading up to the 70th anniversary of the founding of the People’s Republic. The mid-November APEC meeting that will be attended by both Trump and Xi would seem like a logical target date to get a deal done if it’s going to happen this year. Meanwhile the clock will be ticking down to the next deadline on December 15, when tariffs will escalate again on over $160B in Chinese consumer goods, and China will institute its previously announced retaliatory duties.

If no deal coalesces in the next few months, the risks of further retaliations will grow. China has already showed a willingness to allow a freer float of its currency, which enabled it weaken past the key 7.00 level in early August, suddenly crystalizing concerns that the trade war could expand into a full blown currency war. Beijing could also escalate into areas such as increased audits on foreign operations within the country, challenging free navigation in Asian waters, or even reducing its US Treasury purchases. More quietly China may already be withholding its assistance on North Korea, which perhaps not coincidently has conducted a series of missile tests this summer after remaining dormant for over a year.

October 15: Q3 earnings season unofficially starts

Corporate earnings reports will begin to flow out during the third week of October, beginning with the major banks describing how they are coping with a fresh round of lower rates. Then industry, and finally retailers, will reveal how incrementally higher tariffs, and more importantly tariff-related uncertainty, is weighing on their business and planning efforts. Corporate earnings were solid in Q1 and Q2, allaying some fears that the trade war would drag down results. But more and more companies with links to China are warning that the next round of tariffs will crimp their business, and many may have to raise prices to consumers and end users. This could start showing up in inflation readings as soon as October. There could be some nasty downward revisions to Q4 forecasts from many corporations that have already squeezed their supply chains as much as possible to resist price increases. This may be the quarter during which firms see no way around raising prices on household goods, which could threaten the consumer spending that has been the pillar propping up the US economy. Also any strong uptick in inflation could make an already divided Federal Reserve even more reluctant to cut interest rates.

October 21: Canada Federal Elections

This fall’s election in Canada could see another G7 nation bring its conservative party back into power. Throughout the year Canada’s Conservative Party (CPC) has led in the polls, which could spell the end of Justin Trudeau’s government. The polls have tightened recently, despite the PM being involved in an ethics scandal, so the Liberals could still make it a contest. Trudeau’s favorability rating stands at just 31%, which seems dismal until compared to CPC leader Andrew Scheer at 38%. Still it will be an uphill batter for Trudeau as the latest Angus Reid polling found that more than a third of people who supported the Liberal Party in 2015 are planning to vote for another party at this point. If he does pull out the victory the Conservative leader has pledged his government will repeal Trudeau's carbon pricing policy and new standards requiring cleaner burning fuel, and balance the budget within two years, all while increasing health transfers and social transfers by at least 3% annually.

October 31: Brexit (?)

New PM Johnson is adamant that the UK withdrawal from the EU will happen without further delay, no matter the consequences. Johnson’s hope is that the threat of an unceremonious ‘no deal’ Brexit will be enough to coax the EU into granting him concessions over the key sticking point, namely the Irish border backstop. To this end Johnson roped the Queen into the political drama by getting her approval to suspend Parliament for a month ahead of the October 31 deadline in an effort to impede UK legislators from neutering his ‘no deal’ threat.

That maneuver has European officials stepping up commentary about making preparations for a potential ‘no deal’ Brexit with just weeks to go to the deadline. It has also rallied the ‘no deal’ opponents in Britain to quickly draft new legislation that would delay the Brexit date again, this time to January 31, 2020. Johnson’s government has only a one vote majority in Parliament, setting them up for a dramatic vote in the first few days of September. If Johnson sees any defections and this new bill passes, he has indicated his next move will be to call for a general election (likely on Oct 14). The stakes are high and Johnson’s government could be one of the shortest-lived in history.

Even if Johnson is victorious in quashing the Brexit delay, it now seems highly unlikely he will be able to extract a renegotiated Brexit deal by the mid-October European Council meeting in six week. In this scenario, Johnson’s ‘no deal’ threat would likely become a reality on October 31, and markets will be watching for any fallout in the UK…and in Europe. The UK may face significant challenges in the near term from switching over to WTO rules for trade in Europe. As the months go by, however, if Britain doesn’t suffer major economic damage from the Brexit, it may embolden other discontented EU members (such as Italy) to contemplate leaving the union.

CALENDAR
SEPTEMBER
1: New US tariffs on China go into effect
2: US Labor Day; UK Manufacturing PMI
3: US ISM Manufacturing; Fed’s Rosengren (dissenter) speaks; China Caixin Services
4: UK Services PMI
5: US ISM Non-Manufacturing PMI
6: US Payrolls & Unemployment; Fed Chair Powell speaks

9: UK GDP; UK Manufacturing Production; China CPI
10: Special Election in North Carolina; China New Loans
11: US PPI; China Trade Balance
12: OPEC+ monitoring meeting; ECB Policy decision; US CPI; Democratic Presidential Debate
13: US Retail Sales; Preliminary UofM Consumer Sentiment

15: China Industrial Production
16:
17: German ZEW Economic Sentiment; UN General Assembly (9/17-9/30)
18: UK CPI & PPI; US Housing Starts & Building Permits; FOMC Policy Decision & SEP update; BOJ Policy Decision
19: UK Retail Sales; BOE Policy Decision; Philadelphia Fed Manufacturing Index
20:

23: Euro Zone Flash Manufacturing & Services PMIs
24: German Ifo Business Climate; US Consumer Confidence
25:
26: US Final Q2 GDP
27: US Durable Goods Orders: US Personal Income & Spending

29: China Manufacturing & Non-manufacturing PMIs; China Caixin Manufacturing PMI
30: German CPI; UK Current Account; UK Final Q2 GDP; Chicago PMI
OCTOBER
1: Additional 5% tariffs on $250B of Chinese goods; 70th Anniversary of the founding of the PRC; UK Manufacturing PMI; US ISM Manufacturing PMI
2:
3: UK Services PMI; US ISM Non-manufacturing PMI
4: US Payrolls & Unemployment

7: China Trade Balance
8: US PPI
9: China New Loans; FOMC Minutes
10: UK Q3 GDP; UK Manufacturing Production; ECB Minutes; US CPI
11: Preliminary UofM Consumer Sentiment

14: China CPI
15: German ZEW Economic Sentiment; Q3 earnings season unofficially starts

16: UK CPI & PPI; US Retail Sales
17: UK Retail Sales; Philadelphia Fed Manufacturing Index; US Housing Starts & Building Permits; China Q3 GD; China Industrial Production
18: European Council meeting (10-17 and 10/18)

21: Canada Federal Elections
22: German Ifo Business Climate; UK Autumn forecast statement (tentative)
23:
24: Euro Zone Flash Manufacturing & Services PMIs; Euro Zone Policy Statement; US Durable Goods Orders
25:

28:
29: US Consumer Confidence
30: German CPI; US Advance Q3 GDP; FOMC Policy Statement; China Manufacturing and Non-manufacturing PMIs; BOJ Policy Statement
31: BREXIT deadline; Euro Zone CPI; US Personal Income & Spending; Chicago PMI; China Caixin Manufacturing PMI
NOVEMBER
1: UK Manufacturing PMI; US Payrolls & Unemployment; US ISM Manufacturing PMI

Barron's Weekend Summary

Barron's Weekend Summary: Cover story on biotechs researching mRNA; Features positive on MRNA, TBIO, AZN, MRK, TAK, GSK and TPRE, GLRE 

Cover story: In what could be the next frontier for treating disease, scientists are increasingly seeking to make drugs out of ribonucleic acid, or mRNA, the molecule that couriers blueprints from a cell’s DNA to its protein factories; Biotech companies, including TBIO and MRNA are leading the way, and big pharma companies such as MRK, SNY, AZN, and GSK are investing in the sector. 

Tech Trader: Positive on ATVI: Events over the past week have dramatically brightened the outlook for the videogame company, which just re-released the 15-year-old version of its popular World of Warcraft online role-playing game—under the new name World of Warcraft Classic—to overwhelmingly positive reviews from gamers. 

Trader: There’s a good reason that presidents usually don’t face recessions when running for re-election—they control many of the tools to prevent one, and the surest way for Donald Trump to do so now would be to end the trade war with China. 

Profile: Bryan Hinmon, manager of the MFAM Global Opportunities fund, says that investors who want to beat the market, and their competitors, must discover the unique qualitative advantages in companies that a quant screen or a factor-based fund can’t detect (top 10 holdings: AMZN, MA, MDT, TEAM, SBUX, SoftBank, PAYC, WSO, MELI, SBAC). 

Features: 1) + TPRE, GLRE: Daniel Loeb and David Einhorn, two prominent hedge fund investors who make a big bet on the reinsurance business are finding that their bets on Third Point Reinsurance and Greenlight Capital Re, are struggling -- shares trade below book value and their IPO prices; analysts see the stocks as low risk options with an "attractive turnaround potential"; 2) Any number of factors—trade tensions, confusing economic data, and uncertain monetary and fiscal policy—could push stocks in a bullish or bearish direction, and there’s no consensus among investment strategists Barron’s recently surveyed on the outlook for markets in the months ahead; 3) + MRNA, TBIO, AZN, MRK, TAK, GSK: For investors seeking to move into the mRNA sector, Moderna and Translate Bio are good plays, in part because they have received investment from major pharma companies, which offer a hedged way to bet on the sector; 4) The average American will change jobs a dozen times over the course of his or her career, raising the question of whether they should take their retirement money with them or leave it—and there are a host of common mistakes and pitfalls to be aware of. 

Follow-Up: +/- JNJ, AGN, ENDP: “The dominoes are starting to fall in the opioid litigation, and the latest developments shouldn’t make drugmakers feel good about their chances when the cases start going to trial.” 

European Trader: + Cineworld Group: UK-based movie theater operator “could offer blockbuster returns for investors as it looks to cash in on its monthly subscription service and a full slate of strong films.” 

Emerging Markets: Brazil’s economy, No. 8 in the world, refuses to rebound: Gross-domestic-product growth hasn’t hit even 2% since 2013—and fixing the problems will require major overhauls of the country’s complex tax system and regulatory apparatus. 

Commodities: “Commodities will end August with a second straight monthly loss, as uncertainty surrounding the U.S.-China trade war feeds expectations of a global economic slowdown—and demand for raw materials.” 

Streetwise: Humpty-Dumpty deals—in which a company breaks itself apart, then after a number of years decides to put itself back together through a merger—are rare, but they have become common in this late-cycle market with low bond yields and high share prices.-