|12:30||Canada||Wholesale Sales, m/m||August||1.7%||0.3%|
|13:00||U.S.||Housing Price Index, m/m||August||0.4%|
|14:30||U.S.||Crude Oil Inventories||October||9.281|
Major US stock indices fell slightly, as investors evaluated the mixed quarterly reporting unit of the corporate segment.
Procter & Gamble (PG) released solid reports showing earnings of $ 1.37 per share, compared with an average analyst forecast of $ 1.24 per share. The revenue of the consumer goods producer also turned out to be higher than the market forecast, which was facilitated by the high demand for its premium cosmetic brands. The price of PG shares jumped 2.54%.
United Technologies (UTX) reported earnings of $ 2.21 per share, which was $ 0.18 higher than analysts' average forecast. The revenue of the industrial conglomerate was also higher than analysts' estimates, and United Technologies raised its forecasts for the whole of 2019. UTX shares rose 2.33%.
In contrast, a McDonald's (MCD) report revealed that the company earned only $ 2.11 per share, while analysts were expecting $ 2.21 per share. The company's quarterly revenue was also slightly below the average market forecast. MCD shares fell 4.83%.
Travelers' quarterly profit (TRV) was also a disappointment for the market: its EPS was $ 1.43 against an average analyst forecast of $ 2.35. At the same time, the revenue of the insurer company exceeded Wall Street forecasts. TRV shares fell 7.95%.
The market was also supported by Biogen shares (BIIB), which soared 26% after the company announced an unexpected plan to apply for approval of an Alzheimer's drug by the US regulator.
Market participants also analyzed data from the National Association of Realtors (NAR), which showed a more significant than expected drop in sales in the secondary housing market in September. According to data, home sales in the secondary market fell 2.2% in September, to 5.38 million, after rising 1.5%, to 5.50 million in August. Economists had expected sales in the secondary housing market to fall 0.7% to 5.45 million from the 5.49 million originally reported in the previous month.
Most DOW components completed trading in positive territory (17 out of 30). The biggest gainers were The Procter & Gamble Company (PG, + 2.54%). Outsider were the shares of The Travelers Companies (TRV; -7.95%).
Most S&P sectors recorded an increase. The raw materials sector grew the most (+ 0.8%). The largest decline was shown by the technology sector (-1.0%).
At the time of closing:
Dow 26,788.10 -39.54 -0.15%
S&P 500 2,995.99 -10.73 -0.36%
Nasdaq 100 8,104.30 -58.69 -0.72%
|12:30||Canada||Wholesale Sales, m/m||August||1.7%||0.3%|
|13:00||U.S.||Housing Price Index, m/m||August||0.4%|
|14:30||U.S.||Crude Oil Inventories||October||9.281|
Richard Franulovich, the head of FX strategy at Westpac, suggests that a few key markets have been trending in a more constructive direction lately, signaling less concern about growth risks with the U.S. bond curve has been steepening, Eurozone financials have been outperforming and the USD has eased.
BoC released its autumn Business Outlook Survey, which indicates that business sentiment improved slightly, but regional differences are more pronounced.
U.S. existing-home sales decrease more than forecast in September
The National Association of Realtors (NAR) announced on Tuesday that the U.S. existing home sales fell 2.2 percent m-o-m to a seasonally adjusted rate of 5.38 million in September from a revised 5.50 million in August (originally 5.49 million).
Economists had forecast home resales decreasing to a 5.45 million-unit pace last month.
In y-o-y terms, existing-home sales rose 3.9 percent in September.
According to the report, single-family home sales stood at a seasonally adjusted annual rate of 4.78 million in September, down from 4.91 million in August, but up 3.9 percent from a year ago. The median existing single-family home price was $275,100 in September, up 6.1 percent from September 2018. Meanwhile, existing condominium and co-op sales were recorded at a seasonally adjusted annual rate of 600,000 units in September, 1.7 percent above the previous month and 3.4 percent higher than a year ago. The median existing condo price was $248,600 in September, up 4.5 percent from a year ago.
The NAR’s chief economist Lawrence Yun noted that despite historically low mortgage rates, sales have not commensurately increased, in part due to a low level of new housing options. “We must continue to beat the drum for more inventory,” said Yun, who has called for additional home construction for over a year. “Home prices are rising too rapidly because of the housing shortage, and this lack of inventory is preventing home sales growth potential.”
Rabobank analysts suggest that a standing repo facility from the U.S. Fed would be an effective tool that could cut off spikes in repo rates, provide information on the appropriate level of reserves to prevent spikes in repo rates, and reduce the demand for reserves.
Sean Callow, an analyst at Westpac, believes that the RBNZ’s shock 50bp rate cut on 7 August ignited a steep AUD/NZD rally, from the 1.03 handle to 10-month highs above 1.08 in late September.
Before the bell: S&P futures +0.12%, NASDAQ futures +0.30%
U.S. stock-index futures rose moderately on Tuesday as investors assessed a slew of earnings reports from companies.
Today's Change, points
Today's Change, %
(company / ticker / price / change ($/%) / volume)
ALTRIA GROUP INC.
Amazon.com Inc., NASDAQ
American Express Co
AMERICAN INTERNATIONAL GROUP
Cisco Systems Inc
Citigroup Inc., NYSE
Exxon Mobil Corp
FedEx Corporation, NYSE
Ford Motor Co.
General Electric Co
General Motors Company, NYSE
HONEYWELL INTERNATIONAL INC.
International Business Machines Co...
Johnson & Johnson
JPMorgan Chase and Co
Merck & Co Inc
Procter & Gamble Co
Starbucks Corporation, NASDAQ
Tesla Motors, Inc., NASDAQ
The Coca-Cola Co
Travelers Companies Inc
Twitter, Inc., NYSE
United Technologies Corp
Verizon Communications Inc
Wal-Mart Stores Inc
Walt Disney Co
Yandex N.V., NASDAQ
Bank of America (BAC) upgraded to Overweight from Neutral at Atlantic Equities
Canada reported on Tuesday that the Canadian retail sales edged down 0.1
percent m-o-m at CAD51.54 billion in August, following a revised 0.5 percent
m-o-m climb in July (originally a 0.4 percent m-o-m advance).
The result was below economists’ forecast, suggesting a 0.4 percent m-o-m gain for August.
According to the report, sales reduced in 6 of 11 subsectors, representing 51 percent of retail trade.
The August m-o-m decrease was mainly due to lower sales at food and beverage stores (-0.8 percent m-o-m), gasoline stations (-0.4 percent m-o-m) and building material and garden equipment and supplies dealers (-0.5 percent m-o-m). Meanwhile, sales at both general merchandise stores (+0.8 percent m-o-m) and motor vehicle and parts dealers (+0.1 percent m-o-m) were up in August.
Excluding motor vehicle and parts dealers, retail sales fell 0.2 percent m-o-m in August compared to an unrevised 0.1 percent m-o-m decline in July and economists’ forecast of 0.1 percent m-o-m advance. Excluding motor vehicle and parts dealers and gasoline stations, retail sales dropped 0.1 percent m-o-m in August.
In y-o-y terms, Canadian retail sales jumped 1.1 percent in August, decelerating from 1.2 percent in July.
McDonald's (MCD) reported Q3 FY 2019 earnings of $2.11 per share (versus $2.10 in Q3 FY 2018), beating analysts’ consensus estimate of $2.21.
The company’s quarterly revenues amounted to $5.431 bln (+1.1% y/y), generally in line with analysts’ consensus estimate of $5.473 bln.
MCD fell to $202.75 (-3.38%) in pre-market trading.
Travelers (TRV) reported Q3 FY 2019 earnings of $1.43 per share (versus $2.54 in Q3 FY 2018), missing analysts’ consensus estimate of $2.35.
The company’s quarterly revenues amounted to 7.569 bln (+7.2% y/y), beating analysts’ consensus estimate of $7.169 bln.
TRV fell to $138.75 (-2.23%) in pre-market trading.
Rabobank's analysts say the U.S. existing home sales will be scrutinized for any warning signals that perhaps buyers have turned more cautious.
United Tech (UTX) reported Q3 FY 2019 earnings of $2.21 per share (versus $1.93 in Q3 FY 2018), beating analysts’ consensus estimate of $2.03.
The company’s quarterly revenues amounted to $19.496 bln (+18.1% y/y), generally in line with analysts’ consensus estimate of $19.305 bln.
The company also issued mixed guidance for FY1 209, increasing EPS of $8.05-8.15 from $7.90-8.05 (versus analysts’ consensus estimate of $8.03) and projecting revenue of $76.0-$76.5 bln from $75.5-77.0 bln (versus analysts’ consensus estimate of $76.97 bln).
UTX rose to $141.74 (+2.45%) in pre-market trading.
Procter & Gamble (PG) reported Q1 FY 2020 earnings of $1.37 per share (versus $1.12 in Q1 FY 2019), beating analysts’ consensus estimate of $1.24.
The company’s quarterly revenues amounted to $17.798 bln (+6.6% y/y), beating analysts’ consensus estimate of $17.429 bln.
The company raised FY 2020 revenue guidance to +3-5% y/y to ~$69.71-71.07 bln from +3-4% y/y versus analysts’ consensus estimate of $70.05 bln. It also raised its FY 2020 guidance for core earnings per share growth to +5-10% y/y from +4-9% y/y.
PG rose to $124.59 (+4.63%) in pre-market trading.
Analysts at ANZ are forecasting the Australia’s headline inflation to print 0.5% QoQ in Q3, with the annual rate remaining at 1.6%.
Analysts at TD Securities are expecting Canada’s retail sales to rise by 0.6% in August (market: 0.5%) on further strength in motor vehicle sales, which were also the primary driver behind a 0.4% increase last month.
Bert Colijn, a senior Eurozone economist at ING, notes that Eurozone's bank lending standards eased again slightly in the third quarter.
survey by the Confederation of British Industry (CBI) showed on Tuesday the UK
manufacturers’ order books fell in October to the lowest level since March
According to the report, the CBI's monthly factory order book balance decreased to -37 in October from -28 in the previous month. Economists had expected the reading to stay at -28.
According to the report, export order book gauge dropped to -41 from -32 in September, while the index of stocks of finished goods declined to +11 from +28 and the measure of the manufacturers’ output expectations in the next three months remained subdued at -16 compared to -19 in September.
The survey also revealed that the share of manufacturers citing political/economic conditions abroad as a factor to limit export orders in the next three months was at a survey record high (66%).
Analysts at TD Securities say that the market is expecting the Richmond manufacturing index of the U.S. to improve marginally in October to -7 following the sharp 10pt decline to -9 in September (10 am ET).
China will take steps to safeguard its interests, but won't close its door to foreign investment and the global industry despite trade frictions with the United States, a Chinese official said on Tuesday.
Earlier this month, before key Sino-U.S. trade talks, Washington decided to widen its so-called "entities list" to include some top Chinese artificial intelligence startups such as Megvii Technology and SenseTime Group.
Firms on the U.S. "entity list" are barred from buying U.S. parts and components without U.S. government approval due to national security concerns.
"We will look at the trade friction between China and the United States with an open mind and a big heart," said Huang Libin, a spokesman for the Ministry of Industry and Information Technology (MIIT), although China will also closely monitor the U.S. entities list.
China will further open sectors including telecommunications, internet and autos to foreign investment, but at the same time, the United States should respect trade rules and act with caution, Huang said.
"We will not blindly emphasise 'self-developed and controllable', and will not decouple from the development of international industries," Huang told reporters at a briefing.
Germany's seasonally adjusted budget surplus was 1.7% of the country's GDP in the second quarter, down from 2.0% in the previous three months, data from the European Union's statistics office Eurostat showed.
Germany has been running large budget surpluses for years and is now under pressure from other euro zone countries, the European Central Bank and the International Monetary Fund to spend more on long-overdue investment to help prevent an economic slowdown in the euro zone's biggest economy.
Unadjusted for seasonal swings, the budget surplus was even higher at 3.2% of GDP, in the second quarter, up from 2.2% in the first three months.
Karen Jones, analyst at Commerzbank, suggests that USD/JPY continues to consolidate below the 200 day ma at 109.06 and they would allow for this to hold the initial test.
“The up move has lost some steam and further consolidation is likely. Beyond this the market remains well placed to try the topside once more. Above the market lie the 55 and 200 week moving averages at 109.75/110.12 and the 2015-2019 downtrend at 110.98. Dips will find initial support at the 20 day ma at 107.96 ahead of the 106.48 October low. Failure at 106.47 will target 106.00, then 105.32/78.6% retracement which is the last defence for the 104.46 August low.”
Justin Smirk, analyst at Westpac, suggests that Australia’s September quarter CPI is likely to rise 0.6%, lifting the annual pace to 1.8%yr from 1.6%yr.
“The September quarter tends to be a seasonally strong quarter with the ABS projecting a seasonal factor of –0.1ppt. The seasonally adjusted CPI is forecast to rise 0.5%. The trimmed mean is forecast to rise 0.32%qtr/1.5%yr and the weighted median is forecast to rise 0.27%qtr/1.2%yr. The average of the core inflation measures is forecast to print 0.29%qtr with the annual pace easing back to 1.3%yr from 1.4%yr. Boosting the CPI in the September quarter is food (drought offsetting normal seasonal softness), alcohol & tobacco (mostly the annual re-indexing of the tobacco excise) and holiday travel & accommodation (with domestic lifting 6% and international rising 3% in the quarter). Core inflation remains well below the bottom of the RBA target band as moderating housing costs offset modest inflationary pressure elsewhere. Competitive disinflationary pressure in consumer goods is limiting the pass through of the weaker AUD though it is having some impact. Given this we find it hard to envisage core inflation breaking higher any time soon let alone returning to the mid-point of the 2%yr to 3%yr target band.”
According to the report from Office for National Statistics, borrowing (public sector net borrowing excluding public sector banks) in September 2019 was £9.4 billion, £0.6 billion more than in September 2018; this is the first September year-on-year borrowing increase for five years.
Borrowing in the current financial year-to-date (April 2019 to September 2019) was £40.3 billion, £7.2 billion more than in the same period last year; this is the first April-to-September borrowing increase for five years.
Debt (public sector net debt excluding public sector banks) at the end of September 2019 was £1,790.9 billion (or 80.3% of gross domestic product (GDP)), an increase of £27.3 billion, or a decrease of 1.2 percentage points, on September 2018.
Debt at the end of September 2019 excluding the Bank of England (mainly quantitative easing) was £1,611.1 billion or 72.2% of GDP; this is an increase of £38.6 billion, or a decrease of 0.5 percentage points on September 2018.
Analysts at Standard Chartered note that China’s economic growth is on a downward trend, having slowed steadily to 6.6% in 2018 from a peak of 14.2% in 2007.
“While the slowdown is a nationwide phenomenon, growth in the south has outpaced that in the north in recent years; and within the southern region, new engines of growth are emerging and surpassing the country’s traditional growth-driving regions. The growth potential of the south-central region remains large, in our view. In 2018, its per-capita GDP was the lowest in the country and its urbanisation rate was 4.8ppt below the nationwide level. Its growth has surpassed the national rate since 2001 and the rest of the southern region since 2008, averaging 10.8% over the past decade. Meanwhile, increasing numbers of industrial companies may have relocated to the region in recent years to take advantage of lower wages and housing prices. The central government has adopted a coordinated regional development strategy to boost infrastructure investment and improve the business environment in less developed areas.”
The yuan will continue trading above 7-per-dollar even if the United States and China manage to ink a partial deal, expert say.
The Chinese currency, also known as the renminbi, has eased in recent months as trade tensions between Washington and Beijing intensified.
“The yuan will be stuck in a narrow range until we know for certain that Phase 1 of the trade deal is signed,” Stuart Oakley, global head of flow foreign exchange at Nomura, told CNBC.
“I’d estimate that range to be 0.50% either side of 7.0750 up until 16th Nov — with a slight bias to the downside,” he said, referring to next month’s Asia-Pacific Economic Cooperation meeting which will be attended by U.S. President Donald Trump and Chinese President Xi Jinping. The currency pair will likely head toward 7.00 if the two sides are able to sign an agreement in Chile, he added.
For the Chinese currency to strengthen to a level below 7-yuan-per-dollar again, the market will need to see signs that “the elimination of existing tariffs is being seriously discussed,” according to Oakley.
ANZ analysts explain that in what’s been a broad-based slowdown for the New Zealand economy, the pace of headline GDP growth has almost halved from around 4% y/y in 2016 to 2.1% in June 2019.
“The leading indicators are all suggesting there’s more slowing to come in the near term. We expect annual GDP growth will feature a 1-handle in the first half of 2020, but are hopeful that accommodative monetary conditions, still-elevated (but easing) net migration inflows, and a buoyant household sector will put a floor under things. However, sub-par growth is inconsistent with intensifying inflation pressures over the medium term, which – alongside inflation expectations threatening to slip – will see the RBNZ cut the OCR further. We’re expecting a 25bp cut in November, and two follow-up cuts in February and May next year to take the OCR to just 0.25%. But the RBNZ won’t be the only central bank cutting interest rates over the year ahead. Growth among our trading partners has also been slipping. And with domestic and global risks skewed to the downside at a time when monetary policy running into conventional limits, there are increasing calls for the Government to up the fiscal-stimulus ante.”
Jamie Dimon, chief executive officer of U.S. banking giant J.P. Morgan Chase, told CNBC that lowering interest rates is not a game-changer in driving up borrowing and lifting economic growth.
“I think when they did it earlier on, there was a notion that we are saving the European Union, the monetary union, which is one thing. I think as a permanent part of policy, it is a really bad idea. It has adverse consequences which we do not fully understand,” he said on Monday.
Dimon joins the ranks of an increasing number of business executives and economists speaking up against adopting such a policy for long, as central banks around the world try to boost growth by continuing to slash interest rates, some into negative territory.
“If you want to have growth you better really think through with the policies, not just on negative rates but capital allocation et cetera,” he added. “So, I hope it doesn’t happen in United States.”
The European Central Bank last month pushed rates deeper into negative territory, while the Bank of Japan appeared to be laying the groundwork for a similar move.
Dimon, however, said the level of interest rates is not what he’s most worried about now. Instead, plummeting business confidence - caused by the U.S.-China trade war and other geopolitical events - appears to be a bigger risk, he added.
Danske Bank analysts suggest that it is a very quiet day on the data release front and the Brexit will continue to catch the limelight with the Boris Johnson government trying to push through his Brexit law in the House of Commons in only three days.
“The big moment is around 18:00 GMT when the MPs vote on the general principle of the bill followed by a vote on the timetable for the rest of the bill. The bill is expected to survive the former but may lose the latter, which would make it very difficult for Johnson to leave the EU by 31 October. We still need to monitor whether there may be support for tweaking the bill in such a way that there is no longer support for passing the overall bill. In particular focus is on (1) a confirmatory referendum and (2) a permanent customs union.”
The Bank of England should be given more power to steer lending in Britain’s economy and influence government spending during a downturn, a think tank said.
After more than a decade of low interest rates since the global financial crisis, central bankers across advanced economies are concerned that they’re less able to boost the economy when the next recession comes.
Positive Money, a think tank whose work has been endorsed by the opposition Labour Party and others in recent years, said closer coordination was needed between the BoE and the government, with the efficacy of quantitative-easing in doubt.
Last week, Gertjan Vlieghe, a member of the bank’s Monetary Policy Committee, cast doubt on the effectiveness of government bond purchases in future, and suggested the BoE could buy private-sector assets that were under stress.
Positive Money said the BoE and government should create a new credit policy unit so the BoE can influence lending, and the central bank should also be able to outline its expectations for the government’s fiscal policy.
FX Strategists at UOB Group remain constructive on EUR/USD, although some consolidation is likely in the next sessions.
24-hour view: “We highlighted yesterday “the rally is deep in overbought territory and further sustained gain is not likely”. We added, “EUR is more likely to consolidate and trade sideways within a 1.1130/1.1180 range”. EUR subsequently traded between 1.1135 and 1.1179, relatively close to our expected sideway-trading range. The current movement is still viewed as part of a consolidation phase even though the slightly weakened underlying tone suggests a lower trading range of 1.1120/1.1170”.
Next 1-3 weeks: “We maintain our positive outlook for EUR and highlighted last Friday (18 Oct, spot at 1.1120) that “the focus is firmly at the 1.1165 resistance now”. EUR subsequently rose to 1.1172 before ending the day (and the week) on a strong note (NY close of 1.1169, +0.42%). The current EUR rally still appears ‘healthy’ and a move above 1.1200 would not be surprising but 1.1250 is a much stronger resistance and may not yield as easily. On the downside, only a break of 1.1070 (‘strong support’ level slightly higher than 1.1050 previously) would indicate that the current positive phase in EUR that started more than a week ago (see annotations in chart below) has run its course”.
China and the United States have achieved some progress in their trade talks, Vice Foreign Minister Le Yucheng said on Tuesday, and any problem could be resolved as long as both sides respected each other.
No country can prosper without working with other nations, Le said at the Xiangshan Forum in Beijing.
The world wants China and the United States to end their trade war, he said. That required openness rather than a "de-coupling" of countries or a new Cold War.
"As long as we respect each other and seek equal cooperation, there are no disagreements that cannot be resolved between China and the United States," Le said.
"What China wants is to deliver a better life for the Chinese people. We don’t want to take anything from anyone else. There's no such thing as China replacing anyone or threatening anyone," he said.
China and the United States have accomplished much through cooperation over the years, Le said. "Why would we toss away the achievements of such cooperation?"
However, Le also warned that China would never trade away its core interests or allow other countries to undermine its security.
Resistance levels (open interest**, contracts)
Price at time of writing this review: $1.1155
Support levels (open interest**, contracts):
- Overall open interest on the CALL options and PUT options with the expiration date November, 8 is 72524 contracts (according to data from October, 21) with the maximum number of contracts with strike price $1,0900 (3979);
Resistance levels (open interest**, contracts)
Price at time of writing this review: $1.2985
Support levels (open interest**, contracts):
- Overall open interest on the CALL options with the expiration date November, 8 is 33708 contracts, with the maximum number of contracts with strike price $1,3200 (3714);
- Overall open interest on the PUT options with the expiration date November, 8 is 27019 contracts, with the maximum number of contracts with strike price $1,2100 (3178);
- The ratio of PUT/CALL was 0.80 versus 0.80 from the previous trading day according to data from October, 21
* - The Chicago Mercantile Exchange bulletin (CME) is used for the calculation.
** - Open interest takes into account the total number of option contracts that are open at the moment.
|Raw materials||Closed||Change, %|
|Index||Change, points||Closed||Change, %|
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