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Daily Markets Update, 11 October

 

 

 

  • S&P Futures Flat, Spain Rebounds, Nikkei Closes At 21 Year High.
  • Spain PM Rajoy  Begins Process that may Suspend Catalan Autonomy.
  • World stock markets hit record highs as Catalonia independence crisis eases.
  • European stocks drop after Japan’s Nikkei hits 21-year high.

 

Spanish stock market has opened strongly, on relief that the Catalan President Puigdemont stepped back from the UID unilateral declaration of indepence.

The IBEX jumping over 1% in early trading, with traders welcoming President Carles Puigdemont speech last night in which he pledged to negotiate with Spanish government, and “suspend” the independence move.

The answer by Spanish PM Rajoy was also of stopping short of suspending Catalan home rule, awaiting a clearer answer from Mr. Puigdemont on weather it was indeed a declaration of independence.  The ball goes from one camp to another. For now things have eased . Puigdemont’s pullback and Rajoy’s response averted an immediate confrontation, though it means the uncertainty will linger.Tomorrow will be another day.

The Spanish relief rally failed to lift stocks elsewhere on the continent, however, with the Stoxx Europe 600 gauge flat as a drop in industrial metals led miners lower. Oil rose above $51 a barrel as OPEC predicted robust demand next year.

Risk spread easing for Cat vs Spain

Asian shares then climbed to their highest in a decade as Japan’s Nikkei reached its strongest since 1996, despite more losses for scandal-hit Kobe Steel . South Korean stocks .KOPSI reached a new record top.

Dallas Federal Reserve Bank President Robert Kaplan, who votes this year on Fed policy, had also said overnight that he wants to see more signs of upward inflation before raising interest rates again.

The weaker dollar helped commodities and emerging markets, which borrow heavily in the U.S. currency.

Emerging market stocks sailed to six-year highs. U.S. crude rose 42 cents to $51.34 per barrel and Brent  added 25 cents to $56.86, on signs of tighter supply.

Gold prices hovered around their highest in two weeks, with spot gold XAU= at $1,289.06 an ounce. Industrial bellwether metal copper was just below a one-month high.

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Markets action:

Stocks

  • The Stoxx Europe 600 Index declined 0.2 percent as of 7:52 a.m. New York time, the lowest in more than a week.
  • The U.K.’s FTSE 100 Index decreased 0.2 percent, the largest dip in almost four weeks.
  • Germany’s DAX Index decreased 0.1 percent to the lowest in more than a week.
  • Spain’s IBEX Index rose 1.2 percent to the highest in more than a week.
  • The MSCI Emerging Market Index jumped 0.4 percent to the highest in more than six years.
  • Futures on the S&P 500 Index dipped 0.1 percent.

Currencies

  • The Bloomberg Dollar Spot Index decreased 0.1 percent to the lowest in a week.
  • The euro gained 0.1 percent to $1.1825, the strongest in more than two weeks.
  • The British pound dipped 0.1 percent to $1.3186.
  • The Japanese yen rose 0.2 percent to 112.23 per dollar, the strongest in more than two weeks.

Bonds

  • The yield on 10-year Treasuries declined one basis point to 2.35 percent.
  • Germany’s 10-year yield increased two basis points to 0.46 percent.
  • Britain’s 10-year yield gained two basis points to 1.363 percent.
  • Spain’s 10-year yield fell three basis points to 1.661 percent, the lowest in more than a week.

Commodities

  • West Texas Intermediate crude increased 0.1 percent to $50.97 a barrel.
  • Gold gained 0.2 percent to $1,290.60 an ounce.

 

News on Economy:

Economy

Catalan President Carles Puigdemont defused at least a little bit of tension with Madrid, declaring independence but then stopping the separation process to instead propose talks with the Spanish government. Puigdemont and his team remain in danger of arrest for sedition, and Spanish President Mariano Rajoy had previously rejected any talks until secession plans are abandoned. A Rajoy spokesman said following Puigdemont’s speech: “He has made a deferred declaration of independence … [Puigdemont] has taken his irresponsibility to the absolute extreme by ignoring the laws, citizens.” Spanish stocks are rallying, up 1.25% vs. flat action in the rest of Europe.

China is closing in on its first dollar-denominated debt sale in 13 years, a move that could serve to help set reference borrowing rates. With a $2B sale of five-year and 10-year bonds, if China can draw low rates (and the bonds are expected to go a half-point above comparable Treasurys), it could indicate confidence despite S&P’s sovereign downgrade.

A longtime $56B deal to swap currencies between China and South Korea was allowed to expire, with tensions higher over Seoul’s determination to host a U.S. missile defense system. But Communist Party Congress preparations may play a role, and South Korea says the sides are still talking.

The Nikkei gained a modest 0.3% overnight to close at 20,881, its highest level since late 1996. Before getting too excited, some will remember the Nikkei as breaking above the 20K level a number of times over those 20-plus years, only to pull back. It’s never come anywhere close to its record of nearly 39K hit on the last trading session of 1989. Bulls, however, will note corporate profits as up 23% Y/Y in Q2 and corporations actually making shareholder-friendly moves like bringing in independent directors and buying back stock. Federated Investors portfolio manager Dariusz Czoch: “It was difficult for us to invest in Japan because of lack of transparency and corporate governance issues, and also the country itself for the last two decades was quite difficult … We are changing our mindset.”

Stocks News

Working to preserve profit at its longstanding brands, Time Inc. (NYSE:TIME) is cutting back on its print – both in circulation and in frequency of key magazine titles – as it intends to cut circulation of the weekly Time magazine by a third to 2M copies. In part this will be done by cutting back on promotional copies and focusing more on an ad-friendly core audience.  A revenue hit is expected, as the company will likely lower ad rates to make up for reduced circulation, but the bet is that expense savings will be bigger.

Driver’s license data for roughly 10.9M Americans were compromised during the cyberattack on Equifax (NYSE:EFX), according to the WSJ. This, of course, is in addition to the personal information of more than 140M Americans, not all of whom would have had DL information with Equifax.

Looking to reduce the theft of unattended packages sitting on porches or stoops, Amazon (NASDAQ:AMZN) is exploring creative ways to get packages to consumers by delivering to car trunks or the inside of houses, reported CNBC. Amazon is talking to smart license plate company Phrame, which makes a small key storage box that fits around a car’s license plate.

A forecast for 3% or more sales growth and a new $20B buyback plan helped send Wal-Mart (WMT) shares surging by 4.5% yesterday. Holding its annual investment company meeting, management also said it expected 40% growth at its U.S. eCommerce unit. Perhaps most interesting were company plans to add 1K online grocery locations in the U.S., but fewer than 15 Supercenters in 2019.

Influential proxy advisers ISS and Glass Lewis are determined to challenge the results at Toshiba (OTCPK:TOSYY), which they note can’t get an unqualified auditor endorsement. The firms are also against putting President Satoshi Tsunakawa on the board. Shares were significantly lower in Tokyo until the TSE took the stock off its delisting watchlist, propelling shares into the green.

With an eye to building even more film properties out of its popular toy franchises, Hasbro (NASDAQ:HAS) has hired an ex-Paramount executive to head up a film division it hopes can grow into a studio to rival Disney’s (NYSE:DIS) Marvel. Greg Mooradian, taking over Hasbro’s Allspark Pictures in January, has relevant experience working on the Teenage Mutant Ninja Turtles, G.I. Joe and Transformers films.

The biggest-ever San Francisco office lease now belongs to privately held Dropbox (Private:DROPB), which is taking all 736,000 square feet in a new complex in Mission Bay. The project is the last prime headquarters site in that area, and it will become home to about 1,500 Dropbox employees (and perhaps 102 more to come from current job listings).

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