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Daily Markets Update, 18 October

 

 

 

 

  • DOW Futures above 23K.
  • Stocks in Euro Area hit 22 week High.
  • Spain Ibex dragged by Political Tension.
  • Euro slips, Dollar pushes Higher.

 

The euro headed for its longest period  decline in a year ( 5 days down or -0.93%) as the Stoxx Europe 600 rose amid political tensions over Catalonia´s deadline on independence nears.

Spanish stocks underperformed and trading was mixed in Asia.  China’s 19th Communist Party Congress opened while focus in Europe turned to speeches from top euro zone central bankers before next week’s key policy meeting, as well as Catalonia’s ultimatum due on Thursday.

Jinping said the market would be allowed to play a decisive role in allocating resources but also said the role of the state in the economy had to be strengthened.

“His speech offered nothing to move the markets in Asia,” ‎Bayern LB’s Aldinger also said.

Investors are keen for clear direction on economic and financial market reform over the next five years, but history suggests these events can be light on detail.

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 The dollar continues to strengthen, buoyed by speculation that the next Federal Reserve chair will be more hawkish, as volatility in major currencies fell to a three-month low, while Treasury yields rose.

Catalonia has until tomorrow Thursday to back down on its secessionist push as the last ultimatum given by the central Spanish government nears. The deadlock is evident as none of the parts close down on a compromise to resolve the  differences via dialogue.

Investors were reminded of the economic cost of the crisis when Spain, the euro-region’s fourth-biggest economy, cut its growth forecasts for next year. The Catalan standoff is one of several political risks facing investors in Europe. Germany coalition talks have to be resolved to know who´s parenting  Angela Merkel’s Christian Democrats to lead Europe´s biggest economy.

The UK Brexit talks being another risk factor as MarkCarney BoE governor says  Time running out for Brexit transition deal, Bank of England warns. Governor Mark Carney tells MPs without agreement banks will need to move staff and offices from UK from early next year.

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in Asia, Japan’s Nikkei rose for a 12th consecutive day, getting a lift from hopes that this weekend’s election will produce political stability and continuation of loose monetary policy even as technical indicators suggest the gauge is overheating.

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In the U.S.  Stocks mostly inched higher Wednesday, putting the Dow Jones Industrial Average back on course to close above the 23000 milestone for the first time.

Peter Cardillo, market economist at brokerage house First Standard Financial, warned: “We’re not seeing a market that’s galloping along here. The market from a technical perspective is tired.” Let’s hope it’s not time to hit the hay just yet.

Futures pointed to a 0.2% advance for the Dow industrials, which closed about three points shy of 23000 on Tuesday after briefly climbing above that level during the day.

Shares of International Business MachinesCorp.IBM -0.20% rose 4.5%, leading gains in pre-market trading, after it reported what analysts’ viewed as encouraging earnings late Tuesday.

Bullish sentiment, or expectations that stock prices will rise over the next six months, rose 4.2 percentage points last week, according to the American Association of Individual Investors’ survey.

 

The main moves in markets from Bloomberg:

Stocks

  • The Stoxx Europe 600 Index gained 0.4 percent as of 7:49 a.m. New York time, the highest in more than 19 weeks.
  • The U.K.’s FTSE 100 Index gained 0.3 percent.
  • Germany’s DAX Index advanced 0.5 percent to the highest on record.
  • Futures on the S&P 500 Index increased 0.1 percent to the highest on record.

Currencies

  • The Bloomberg Dollar Spot Index gained 0.2 percent to the highest in more than a week.
  • The euro decreased 0.1 percent to $1.175, its fifth consecutive decline.
  • The British pound fell 0.1 percent to $1.3175.
  • The Japanese yen decreased 0.5 percent to 112.77 per dollar.

Bonds

  • The yield on 10-year Treasuries climbed three basis points to 2.33 percent, the highest in a week.
  • Germany’s 10-year yield increased two basis points to 0.39 percent.
  • Britain’s 10-year yield increased three basis points to 1.276 percent.

Commodities

  • West Texas Intermediate crude climbed 0.3 percent to $52.02 a barrel, the highest in three weeks.
  • Gold dipped 0.4 percent to $1,280.24 an ounce.

 

Economy News

The world’s most powerful man :  Beijing is decked out in red as today kicks off the 19th congress of the Chinese Communist Party and the spotlight will be on head of party and state, Xi Jinping – a man who used the last five years to bridle the economy, military and media. He used his anti-corruption campaigns to weaken or get rid of detractors. “The Economist” just named Xi the world’s most powerful man – and rightly so. Unlike Trump, the Chinese leader not only has his party and the media under control, but himself as well.

“It took Ronald Reagan over two years on a bipartisan basis to get tax reform done… If we get it done this year, it will be extraordinary,” Treasury Secretary Steven Mnuchin said during an interview on Fox News’ Special Report with Bret Baier. “Our objective is to get it on the President’s desk by December to get him to sign it this year,” he added, but cautioned that there’s “no artificial deadline.”

President Trump has reiterated U.S. support for “responsible debt relief” for Greece after meeting with Prime Minister Alexis Tsipras at the White House. The country is still in a bailout program – its third in the last eight years – which is expected to end in August 2018. Trump also notified Congress of a potential deal to upgrade Greece’s Air Force F-16 aircraft (NYSE:LMT) worth some $2.4B.

The Canadian dollar and Mexican peso reversed losses and jumped against the dollar after trade officials said they were extending the negotiations towards a new NAFTA trade deal into next year. “People seemed to have been thinking NAFTA was going to get ripped to shreds, and this is going to be the end of it,” said Mark McCormick, North American head of forex strategy at TD Securities.

Besides the Dow hitting the 23,000 milestone on Tuesday, the healthcare sector was fired up after two U.S. senators reached a bipartisan agreement to shore up Obamacare for two years by reviving federal subsidies for health insurers. President Trump, during comments at the White House, suggested he could get behind the Alexander-Murray plan as a short-term solution.

U.S.-backed forces have captured Islamic State’s de facto capital of Raqqa, driving the group from a Syrian city that became synonymous with their reign of terror and was used as a center to stage attacks on the West. “Addressing the economic, political grievances of the Sunnis so that another ISIS doesn’t come about will be as important as the military fight,” said Bilal Saab, a senior fellow at the Middle East Institute.

Tech shares are leading again. Above is the FAANG basket of stocks.

 

The ‘end’ of in one chart! 

 

Stocks News

Saudi Arabia still plans to publicly list a portion of its state oil company in 2018 following reports that the effort may be abandoned. “We are on track,” Saudi Oil Minister Khalid al-Falih said at the Oil and Money energy conference in London. Prince Mohammad bin Salman announced the IPO of up to 5% of Aramco (Private:ARMCO) in January 2016 and estimated the company’s value at between $2T-$3T.

Iraqi Oil Minister Jabar al-Luaibi has asked BP “to quickly make plans to develop the Kirkuk oil fields” after government forces seized control of the region on Monday, testing the Kurdish drive for independence. Peshmerga fighters had occupied the area in 2014, in the course of the war on Islamic State. Kirkuk is estimated to have around 9B barrels of recoverable oil remaining.

Exxon Mobil is firing up a huge new Texas plant just two months after Hurricane Harvey hit the Gulf Coast. The new petrochemical facility in Mont Belvieu making polyethylene – the most common plastic used in manufacturing – will have a total output of 2.5M tons per year. That will make the Exxon (NYSE:XOM) factory one of the biggest polyethylene plants in the world.

The SEC has charged Rio Tinto (NYSE:RIO) and two of its former top executives with fraud, stating they inflated the value of coal assets in Mozambique and concealed critical information while tapping the market for billions of dollars. It comes after the U.K.’s Financial Conduct Authority reached a settlement with Rio under which the company would pay a fine of £27M to settle similar claims.

Bombardier’s CSeries jets could still be hit with high U.S. import duties, even if they are assembled in Alabama through an industry-changing deal with Airbus (OTCPK:EADSY). “Any duties finally levied against the CSeries (OTCQX:BDRAF, OTCQX:BDRBF)… will have to be paid on any imported CSeries airplane or part, or it will not be permitted into the country,” said Michael Luttig, Boeing’s (NYSE:BA) general counsel.

Officially in business! Starting today, 10 Kohl’s (NYSE:KSS) stores in Los Angeles and Chicago will sell Amazon’s (NASDAQ:AMZN) smart home products and accept the online retailer’s returns. The arrangement should help draw more shoppers to Kohl’s stores, and make it easier for Amazon’s customers to bring back unwanted items.

A year-old pact underpinning billions of dollars of transatlantic data transfers will get the green light from the EU today after the first review to ensure Washington protects Europeans’ data stored on U.S. servers. The conclusion will come as a relief to the over 2,400 companies signed up to the EU-U.S. Privacy Shield including Google (GOOG, GOOGL), Facebook (NASDAQ:FB) and Microsoft (NASDAQ:MSFT).

A U.K. parliamentary report has criticized Amazon (AMZN) and eBay (NASDAQ:EBAY) for not doing enough to prevent tax fraud on their online market places and proposed the government hold the giants accountable for tax lost to evaders. In April, the National Audit Office said Britain was losing up to £1B a year in VAT from China-based sellers on eBay and Amazon.

“We have a big focus on AI,” Microsoft’s (MSFT) Peggy Johnson announced at yesterday’s WSJ D.Live conference, stating that the company’s investments will remain focused on the space. The firm has made about 18 AI technology acquisitions over the past few years and has about 8,000 staff focused on that area following a reorganization in 2016.

A proposed regulatory experiment to test the effects of lowering stock exchange fees could end up making stocks harder to trade, the NYSE (NYSE:ICE), Bats (NASDAQ:CBOE) and Nasdaq (NASDAQ:NDAQ) wrote in a letter to the SEC. The exchange operators collectively pay around $2.5B a year in rebates, which they say compensate market makers for the risks of providing liquidity, but without the cash flow, investors, listed companies, and exchanges would “all suffer.”

Floodgates in Hollywood… Amazon Studios (AMZN) head Roy Price has resigned following details of a sexual harassment accusation that became public late last week. The studio’s COO, Albert Cheng, will oversee the operation while the company searches for his replacement. Meanwhile, Harvey Weinstein has resigned from the board of The Weinstein Company as it ratified its decision to fire him as CEO.

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