Emerging Markets Equity Strategy – JPM

 

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Key Trades and Risks 2019 Year Ahead – Emerging Markets Equity Strategy

 

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1. CHINA’S DRAG ON THE GLOBAL ECONOMY INTENSIFIES

The Caixin Composite PMI dropped a full -1.6pts in OCT to 50.5, which represents the lowest reading since the global deflationary lows of mid-2016.

China’s OCT Headline PPI data (↓ -30bps to 3.3% YoY; breaking down from a TRENDING perspective) further underscores the disinflationary impulse upon the global economy stemming from our #ChinaSlowing theme.

The CNY is down -9% vs. the USD over the trailing six months and will be down -8% YoY in 1H19E assuming no change to the current quarterly average exchange rate, which means the inflationary impulse to import prices stemming from a full implementation to 25% tariffs on the $541.6B in goods the U.S. projected to import from China in 2018E will be more than offset by annualized dollar strength during that interval.

Chinese policymakers are officially panicking with respect to the growth outlook (e.g. strict lending quotas for private firms), but we continue to believe they remain fairly constrained on the monetary policy front until we see a dovish pivot out of the Federal Reserve – likely a mid-to-late Q1 event.

 

 

ChinaDollarDebtExposureHedgeye_Structural_Economic_Headwinds_Within_the_Chinese_Economy_9-14-18

Beijing%20Is%2china0Going%20To%20Need%20A%20Bigger%20Boat%20To%20Rescue%20#OldChina.png

#ShortEM (introduced 1/4/18 under the title, “#UnderweightEM”):

  • Beijing Remains Handcuffed (10/18): With respect to Chinese monetary policy, we obviously track a deluge daily/weekly/monthly data – e.g. OMO, MTLF, RRR, BPR, 7DRR, SHIBOR, etc. – but for those of you who want to boil it all down to what it actually means for economic growth on the mainland, there’s one number you need to track on a monthly basis – i.e. the annual growth rate of bank loans.

ChinaBankLoansOutstandingYoYChinaCruiseShipvs.CanoeAnalysisChinaPolicyMonitor

 


-R.W.N II, yours in 322.

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est-ce que les coqs?

(Bloomberg) — U.S. index futures point to a slightly lower open on midterm election day. Asian stocks traded higher, while European markets are falling. A flurry of earnings are expected, including from Lilly and Ralph Lauren.

U.S. MARKETS: 

  • S&P 500 futures down 0.2% to 2,735.50
  • Brent Futures down 0.3% to $72.93/bbl
  • Gold spot up 0.3% to $1,234.90
  • U.S. Dollar Index up 0.01% to 96.29

WHAT TO WATCH: 

  • TOP OVERNIGHT NEWS:
    • What You Need to Know About the U.S. Midterm Election: QuickTake
    • Trump’s Domination of Debate Makes the Midterms All About Him
    • Wage Gains of 3% Taking Hold as U.S. Employers ‘Need to Pay Up’
    • Following the Midterm Elections Across Time Zones: Viewing Guide
    • Facebook Says Blocks Some Accounts Ahead of U.S. Elections
    • Carnival Signs $4.5B Order at CIIE; 12 More Company Deals Signed
    • Aegean Marine Petroleum Network Files for Chapter 11 in New York
    • United Airlines CEO Munoz Says China Is a Good, Strong Market
    • BlackRock Discloses Holdings in Nippon Steel, Broccoli: Filings
    • Westinghouse, China’s SPIC Sign MOU on Strategic Cooperation
    • FedEx CEO: Trade Issues A Lot More Complex Than People Think
    • Cheniere’s Corpus Christi LNG Plant Plans Startup Emissions
    • Line Halts Quick Games for a Month on Apple Store Issue: Nikkei
    • Apple’s Asian Suppliers Fall on Growing iPhone Output Concerns
    • Amazon Nears Deal For One HQ2 Site to Be Long Island City: NYT
    • Symantec Gains After Cramer Says Buy on Starboard Involvement
    • EU Plan to Tax Facebook, Amazon Heads for Brussels Showdown
    • A Penn State Engineer’s Quest to Become the World’s Gas King
    • Regus Owner IWG Would Get Little Out of Selling Real Estate
    • Electing Women Is the First Step. Reelecting Them Matters More
    • Silicon Valley and the Feds on Alert: Election Integrity Update
  • M&A, ECM SCHEDULED EVENTS:
    • N.A. M&A Weekly Agenda: Acia Healthcare, Athenahealth, CA, Fox
    • AMERICAS ECM AGENDA: HUYA Lockup Expiry, Allogene Initiations
  • ANALYST ACTIONS
    • (ADEN SW): Adecco Leads Staffing Company Gains as Brunel Rises on Upgrade
    • (AMAG): Amag Pharma Downgraded to Underweight at JPMorgan; PT $18
    • (ATI): Allegheny Technologies Upgraded to Buy at Longbow; PT Set to $34
    • (AVDL): Avadel ADRs Downgraded to Market Perform at JMP
    • (BMI): Badger Meter Rated New Buy at Maxim; PT $65
    • (CVI): CVR Energy Downgraded to Neutral at Goldman; PT $45
    • (DUFN SW): Dufry Upgraded at Citigroup on Valuation, 9-Month Results
    • (ED): Con Edison Upgraded to Neutral at Goldman; PT $73
    • (EFSC): Enterprise Financial Upgraded to Outperform at KBW; PT $60
    • (ENB CN): Enbridge Inc Upgraded to Outperform at Wells Fargo; PT C$55
    • (EQ): Equillium Rated New Buy at Jefferies; PT $19
    • (EQ): Equillium Rated New Buy at Stifel; PT $22
    • (IMPV): Imperva Downgraded to Sector Perform at RBC; Price Target $56
    • (KOS): Kosmos Energy Upgraded to Buy at Goldman; PT $9
    • (NYT): New York Times Downgraded to Underweight at Barclays; PT $18
    • (PBFX): PBF Logistics Cut to Market Perform at Wells Fargo; PT $24
    • (PLAN): Anaplan Rated New Sector Weight at KeyBanc
    • (PLAN): Anaplan Rated New Market Outperform at JMP; PT $29
    • (PLAN): Anaplan Rated New Overweight at Barclays; PT $30
    • (PLAN): Anaplan Rated New Neutral at Goldman; PT $25
    • (PLAN): Anaplan Rated New Equal-weight at Morgan Stanley; PT $23
    • (PLAN): Anaplan Rated New Overweight at Piper Jaffray; PT $28
    • (SHAK): Shake Shack Upgraded to Buy at Longbow; PT Set to $60
    • (SHLX): Shell Midstream Partners Cut to Sector Perform at RBC; PT $22
    • (WRD): WildHorse Downgraded to Outperform at Raymond James; PT $30
    • (WU): Western Union Cut to Market Perform at Wells Fargo; PT $20

EARNINGS: (All ests. EPS. All times ET) Previews here 

  • PRE-MKT
    • AES (AES US) 6am 30c
    • Air Products (APD US) 6am $1.99
    • American Finance Trust (AFIN US) 6am
    • AmerisourceBergen (ABC US) 6:30am $1.44
    • ANI Pharma (ANIP US) 8:30am$1.18
    • Antares Pharma (ATRS US) 7am(2c)
    • Archer-Daniels-Midland (ADM US) 7am 83c
    • Avanos Medical (AVNS US) 7am26c
    • Balchem (BCPC US) 7am 61c
    • Bausch Health (BHC CN) 7am 86c
    • Becton Dickinson (BDX US) 6am$2.93
    • BioCryst (BCRX US) 6am (28c)
    • Boise Cascade (BCC US) 5:45am75c
    • Broadridge (BR US) 7am 68c
    • Catalent (CTLT US) 7:30am 28c
    • Clearway Energy (CWEN/A US) 6:33am 30c
    • Colony Credit Real Estate (CLNC US) 8am 35c
    • Core-Mark (CORE US) 8:30am44c
    • CorePoint Lodging (CPLG US) 6:11am (4c)
    • CVS (CVS US) 6:55am $1.71
    • Dream Industrial REIT (DIR-U CN) 
    • Elanco Animal Health (ELAN US) 25c
    • Lilly (LLY US) 6:25am $1.35
    • Emerson Electric (EMR US) 6:55am 90c
    • Entercom Comms (ETM US) 8am28c
    • Expeditors (EXPD US) 8:30am79c
    • Federal Signal (FSS US) 8am 33c
    • First Majestic (FR CN) (4c)
    • Frank’s International (FI US) (10c)
    • Garrett Motion (GTX US) 93c
    • GCP Applied (GCP US) 6am 32c
    • Gray Television (GTN US) 6:45am63c
    • GreenSky (GSKY US) 7am 20c
    • Haemonetics (HAE US) 6am 55c
    • Hamilton Lane (HLNE US) 7am47c
    • Henry Schein (HSIC US) 6am$1.01
    • Heska (HSKA US) 7am 35c
    • Hospitality Properties (HPT US) 7am 8c
    • Ionis Pharma (IONS US) 7am(16c)
    • Ironwood (IRWD US) 7:55am(31c)
    • Jeld-Wen (JELD US) 6am 51c
    • Jones Lang (JLL US) 7:30am$2.32
    • Lexington Realty (LXP US) 6am13c
    • LGI Homes (LGIH US) 7am $1.48
    • Louisiana-Pacific (LPX US) 6:55am 67c
    • Malibu Boats (MBUU US) 7am 54c
    • Mallinckrodt (MNK US) 6am $1.79
    • Martin Marietta (MLM US) 6:36am$2.82
    • MFA Financial (MFA US) 8:30am17c
    • Multi-Color (LABL US) 8:30am$1.14
    • Myers Industries (MYE US) 7:30am 15c
    • National Health Investors (NHI US) 6am 96c
    • NIO Inc. (NIO US) (CNY2.36)
    • NorthStar Realty Europe (NRE US) 7am
    • Northwest Natural Holding (NWN US) 6am (37c)
    • Novanta (NOVT US) 7am 52c
    • Ormat (ORA US) 9:04am 42c
    • Glatfelter (GLT US) 6:45am 37c
    • PNM Resources (PNM US) 6:30am $1.04
    • PQ Group Holdings (PQG US) 6:15am 25c
    • Premier (PINC US) 6:55am 60c
    • Primoris Services (PRIM US) 6am59c
    • Ralph Lauren (RL US) 8am $2.15
    • Regeneron (REGN US) 6:30am$5.11
    • Ryman Hospitality (RHP US) 8:30am 44c
    • Sage Therapeutics (SAGE US) 6:30am ($2.43)
    • SendGrid (SEND US) 3c
    • Senior Housing Properties (SNH US) 7am 11c
    • ServiceMaster (SERV US) 7am77c
    • Shenandoah Telecom (SHEN US) 7am 11c
    • Southwest Gas (SWX US) 17c
    • Spark Therapeutics (ONCE US) 7:30am (91c)
    • Steris (STE US) $1.09
    • Summit Materials (SUM US) 6:15am 70c
    • Syneos Health (SYNH US) 6:09am 68c
    • Tabula Rasa (TRHC US) 25c
    • Thomson Reuters (TRI CN) 6:30am 3c
    • TopBuild (BLD US) 7am $1.22
    • TransDigm (TDG US) 7:15am$4.29
    • Unit Corp (UNT US) 8am 24c
    • Univar (UNVR US) 6am 42c
    • US Foods Holding (USFD US) 6:45am 50c
    • USA Compression Partners (USAC US) 6am (3c)
    • Vereit (VER US) 6am 1c
    • Veritiv (VRTV US) 8am $1.11
    • Westlake (WLK US) 6:30am $2.09
    • Westlake Chemical Partners (WLKP US) 6:30am 41c
  • POST-MKT
    • Acadia Pharma (ACAD US) 4:05pm (58c)
    • Accelerate Diagnostics (AXDX US) 4:01pm (41c)
    • Aerie (AERI US) 4:01pm ($1.38)
    • Alliant Energy (LNT US) 5pm 84c
    • American Public Education (APEI US) 4:01pm 31c
    • Ashland Global (ASH US) 5pm97c
    • Assurant (AIZ US) 4:15pm $1.07
    • Audentes Therapeutics (BOLD US) 4:01pm (86c)
    • Axon (AAXN US) 4:01pm 12c
    • B2Gold (BTO CN) 7:47pm 5c
    • Belmond (BEL US) 5pm 28c
    • BWX Technologies (BWXT US) 4:30pm 62c
    • Callon Petroleum (CPE US) 4:15pm 20c
    • Camping World (CWH US) 4:05pm 61c
    • Canadian Apartment (CAR-U CN) 5pm
    • Cara Therapeutics (CARA US) 4:01pm (49c)
    • CCL Industries (CCL/B CN) 5:30pm C$0.70
    • Century Communities (CCS US) 4:05pm 84c
    • Cimarex (XEC US) 4:05pm $1.60
    • Coherent (COHR US) 4:01pm$2.96
    • Community Healthcare Trust (CHCT US) 5pm
    • CrossAmerica Partners (CAPL US) 4:05pm 7c
    • Cymabay Therapeutics (CBAY US) 4:01pm (29c)
    • CytomX (CTMX US) 4:04pm (43c)
    • Darling Ingredients (DAR US) 4:05pm 9c
    • Delek Logistics Partners (DKL US) 5:15pm 96c
    • Delek US Holdings (DK US) 4:53pm $2.00
    • Devon (DVN US) 4:05pm 42c
    • DexCom (DXCM US) 4:01pm (9c)
    • Diamondback (FANG US) 4:01pm$1.60
    • Diodes (DIOD US) 4:05pm 63c
    • Diplomat Pharmacy (DPLO US) 4:15pm 22c
    • DXC Technology (DXC US) 4:15pm $1.94
    • Energen (EGN US) 91c
    • EnLink Midstream LLC (ENLC US) 5:03pm 11c
    • EnLink Midstream Partners (ENLK US) 5:03pm 11c
    • Enphase Energy (ENPH US) 4:05pm 3c
    • Etsy (ETSY US) 4:05pm 13c
    • Evolent (EVH US) 4:24pm (5c)
    • Five9 (FIVN US) 4:05pm 10c
    • Genomic Health (GHDX US) 4:05pm 7c
    • Genpact (G US) 4:01pm 45c
    • Geopark (GPRK US) 4:30pm 49c
    • Gibson Energy (GEI CN) 4:01pmC$0.23
    • Glu Mobile (GLUU US) 4:05pm 7c
    • GoDaddy (GDDY US) 4:05pm 19c
    • Granite REIT (GRT-U CN) 6:52pm
    • Hackett Group (HCKT US) 4:05pm27c
    • Halozyme (HALO US) 4:05pm(23c)
    • Iamgold (IMG CN) 5:05pm (1c)
    • Infinera (INFN US) 4:05pm (4c)
    • Innospec (IOSP US) 4:45pm $1.06
    • Inogen (INGN US) 4:05pm 52c
    • Inspire Medical Systems (INSP US) 4:04pm (35c)
    • Intact Financial (IFC CN) 5pmC$1.61
    • Iovance Biotherapeutics (IOVA US) 4:01pm (33c)
    • Jack Henry (JKHY US) 4:01pm93c
    • Jamieson Wellness (JWEL CN) 4pm C$0.25
    • Jazz Pharma (JAZZ US) 4:05pm$3.30
    • KAR Auction (KAR US) 4:15pm70c
    • Keyera (KEY CN) 4:01pm C$0.39
    • Kratos (KTOS US) 4pm 3c
    • LendingClub (LC US) 4:01pm 2c
    • Masonite (DOOR US) 4:15pm$1.08
    • Match Group (MTCH US) 4:30pm35c
    • MBIA (MBI US) 4:15pm (28c)
    • Medifast (MED US) 4:05pm $1.14
    • Mindbody (MB US) 4:05pm (7c)
    • Morneau Shepell (MSI CN) 4pmC$0.14
    • Myriad Genetics (MYGN US) 4:05pm 31c
    • Neenah (NP US) 4:35pm $1.10
    • New Relic (NEWR US) 4:05pm12c
    • NFI Group Inc (NFI CN) 5:22pm59c
    • Northland Power (NPI CN) 5:56pmC$0.20
    • Northview Apartment REIT (NVU-U CN) 5pm
    • Osisko Gold Royalties (OR CN) 5:28pm C$0.02
    • Pan American Silver (PAAS CN) 5:10pm 5c
    • Papa John’s (PZZA US) 4:15pm22c
    • Par Pacific (PARR US) 4:15pm19c
    • Parex Resources (PXT CN) 5:21pm
    • Phibro Animal (PAHC US) 4:15pm42c
    • Pioneer Natural (PXD US) 4:03pm$1.66
    • Plains All American (PAA US) 4:05pm 37c
    • Plains GP (PAGP US) 4:05pm 33c
    • Planet Fitness (PLNT US) 4:05pm24c
    • Plantronics (PLT US) 4:01pm 72c
    • Playa Hotels (PLYA US) 4:02pm(5c)
    • Primerica (PRI US) 4:15pm $1.86
    • Primo Water (PRMW US) 4:05pm22c
    • ProAssurance (PRA US) 5pm 41c
    • ProPetro Holding (PUMP US) 4:15pm 54c
    • Prospect Capital (PSEC US) 4:04pm 21c
    • Q2 Holdings (QTWO US) 4:30pm1c
    • Quidel (QDEL US) 4:10pm 48c
    • Rapid7 (RPD US) 4:05pm (13c)
    • Renewable Energy (REGI US) 4:05pm 52c
    • RLJ Lodging (RLJ US) 4:30pm21c
    • ScanSource (SCSC US) 4pm 86c
    • Select Energy Services (WTTR US) 4:30pm 27c
    • Semafo (SMF CN) 5pm break-even
    • ShawCor (SCL CN) 4:40pmC$0.10
    • Sientra (SIEN US) 4:01pm (67c)
    • Spin Master (TOY CN) 5pm $1.14
    • Summit Industrial (SMU-U CN) 5:01pm
    • Supernus (SUPN US) 5pm 43c
    • Tableau (DATA US) 4:01pm (11c)
    • Tahoe Resources (THO CN) 4:05pm (7c)
    • TCG BDC (CGBD US) 4:04pm40c
    • Theravance Bio (TBPH US) 4:02pm ($1.15)
    • Third Point Re (TPRE US) 4:03pm(25c)
    • TPG Specialty Lending (TSLX US) 4:03pm 49c
    • TrueCar (TRUE US) 4:03pm 5c
    • Twilio (TWLO US) 4:15pm 2c
    • Two Harbors (TWO US) 4:15pm47c
    • Versum Materials (VSM US) 57c
    • Victory Capital Holdings (VCTR US) 42c
    • Vivint Solar (VSLR US) 4:01pm(24c)
    • Wendy’s (WEN US) 4:05pm 15c
    • WPT Industrial REIT (WIR/U CN) 5:19pm

GOVERNMENT: 

  • Government Agenda

ECONOMIC DATA (All times ET): 

  • Nov. 6-Nov. 9: Mortgage Delinquencies, prior 4.36%
  • Nov. 6-Nov. 9: MBA Mortgage Foreclosures, prior 1.05%
  • 10am: JOLTS Job Openings, est. 7,085, prior 7,136

CENTRAL BANKS (All times ET): 

  • Nothing major scheduled

CORPORATE EVENTS: 

  • Annual meetings: ADP US, ATGE US, COTY US, LRCX US, NWSA US, SAIL US, STRA US
  • Extraordinary Shareholders Meeting: ENF CN
  • Other Events: BLKB US, FHN US, KRC US, MRCY US, NAVG US, NOV US
  • Sales Results: FAST US

OTHER EUROPEAN NEWS SINCE THE U.S. CLOSE: 

  • German Factory Orders Unexpectedly Rise as Domestic Demand Gains
  • Rosneft Uses Record Cash Flow to Pay Off Debt in Volatile Market
  • Tria Says Italy Still Has Disagreements With the Commission
  • Brexit Endgame Lifts Pound’s Volatility as Euro Stays Subdued
  • France Flexible on Date of Digital Tax Implementation: Le Maire
  • Pandora Falls Anew as Bracelet Maker’s CEO Suite Remains Vacant
  • Euro-Area Companies Feeling Bleak on Trade and Political Tension

EUROPEAN ECO DATA (All times ET): 

  • 2am: (GE) Sept. Factory Orders WDA YoY, actual -2.2%, est. -2.8%, prior -2.1%, revised -1.8%
  • 2am: (GE) Sept. Factory Orders MoM, actual 0.3%, est. -0.5%, prior 2.0%, revised 2.5%
  • 3:15am: (SP) Oct. Markit Spain Services PMI, actual 54, est. 51.8, prior 52.5
  • 3:15am: (SP) Oct. Markit Spain Composite PMI, actual 53.7, est. 52.2, prior 52.5
  • 3:45am: (IT) Oct. Markit/ADACI Italy Services PMI, actual 49.2, est. 52, prior 53.3
  • 3:45am: (IT) Oct. Markit/ADACI Italy Composite PMI, actual 49.3, est. 51, prior 52.4
  • 3:50am: (FR) Oct. Markit France Services PMI, actual 55.3, est. 55.6, prior 55.6
  • 3:50am: (FR) Oct. Markit France Composite PMI, actual 54.1, est. 54.3, prior 54.3
  • 3:55am: (GE) Oct. Markit Germany Services PMI, actual 54.7, est. 53.6, prior 53.6
  • 3:55am: (GE) Oct. Markit/BME Germany Composite PMI, actual 53.4, est. 52.7, prior 52.7
  • 4am: (EC) Oct. Markit Eurozone Services PMI, actual 53.7, est. 53.3, prior 53.3
  • 4am: (EC) Oct. Markit Eurozone Composite PMI, actual 53.1, est. 52.7, prior 52.7

WHAT HAPPENED IN EUROPEAN MARKETS: 

  • STOXX Europe 600 down 0.1% to 363.10
  • German 10Y yield fell 0.2 bps to 0.424%
  • Euro up 0.07% to $1.1415
  • Brent Futures down 0.3% to $72.93/bbl
  • Italian 10Y yield rose 0.5 bps to 2.956%
  • Spanish 10Y yield rose 1.2 bps to 1.578%

OTHER ASIA NEWS SINCE THE U.S. CLOSE: 

  • PBOC Adviser: Capital Outflow Pressure Smaller Than 2 Years Ago
  • Goldman Names Binnion, Wang as Asia ex-Japan ECM Co-heads: Memo
  • Camera Maker Mulls Taking a Note From Taylor Swift on Trade War
  • Malaysia Probes More Deals by Ex-Goldman Partner Leissner
  • Ayala CEO Says Philippines Emerging as Refuge From Trade War

ASIAN ECO DATA (All times ET): 

  • Nothing major scheduled

WHAT HAPPENED IN ASIAN MARKETS: 

  • MXAP up 0.8% to 152.88
  • MXAPJ up 0.5% to 487.96
  • Nikkei up 1.1% to 22,147.75
  • Topix up 1.2% to 1,659.35
  • Hang Seng Index up 0.7% to 26,120.96
  • Shanghai Composite down 0.2% to 2,659.36
  • Sensex up 0.2% to 35,025.03
  • Australia S&P/ASX 200 up 1% to 5,875.18
  • Kospi up 0.6% to 2,089.62
(Bloomberg) — Nickel and zinc advance after a senior Chinese official flagged Beijing’s readiness to discuss a trade solution with the U.S. Goldman Sachs Group Inc. says metals may move higher on positive news about the dispute.
Chinese Vice President Wang Qishan tells Bloomberg New Economy Forum in Singapore that the government is ready to have discussions to find a solution for the trade spat. U.S. congressional elections take place Tuesday, with the result likely interpreted as a referendum on President Donald Trump’s policies.
Drivers
Vice President Wang also warned that China wouldn’t again be “bullied and oppressed by imperialist powers,” underscoring fears by business and political leaders on hand that rising nationalism in both countries would be harder to manage.
In the U.S. midterms , Democrats are expected to take control of the House of Representatives but fall short in the Senate.
Goldman says aluminum market is “ too relaxed ” about supply risks and, while demand has been weaker than expected, the market is clearly in deficit.
Bloomberg Dollar Spot Index flat after -0.1% Monday; yuan holds Monday’s decline
Prices
LME zinc steady at 8:35am in London after earlier +1.3%; nickel +0.6%
Copper -0.3%, aluminum little changed
Market commentary
Metals prices will be driven higher if further positive news on trade dispute improves market sentiment, Goldman says in note. Mood in Chinese metals markets is improving “on the margin” in light of latest easing measures from China; economists expect more infrastructure investment in 2019 to offset weakness in consumption and exports
-R.W.N II, yours in 322.

Más vale pájaro en mano que cien volando.

 

(Bloomberg) — An overnight rally that began in Asian equities failed to hold ahead of a spate of key earnings reports this week.

Investors beginning to view China’s draft plan for sweeping personal tax cuts, together with a recent rise in the tax threshold as an act of desperation for a flagging economy rather than a big positive for growth. China’s growth slowed further than expected in 3Q even as trade appears yet to have a decided impact.

China Issues Draft Plan to Further Cut Household Tax Burden

by Bloomberg News

China released a detailed draft plan for personal income tax cuts on Saturday, as the nation’s economic growth slowed to the weakest pace since the aftermath of the global financial crisis in 2009.

The dollar rose to the highest level in two months while GBP dropped the most in a month amid Tory infighting.

Treasuries traded sideways amid a week of large government issuance including four bill auctions and a combined $108 billion in 2-, 5- and 7-year notes.

Treasuries held to a narrow U.S. trading range, with 10-year yields plying less than 0.5bp since 11am ET; lack of price catalyst after the close in London was met with subdued futures volumes.

In the front end, early options activity was met with plays that faded last week’s aggressive selloff, targeting a Fed IOER tweak at December FOMC.
Yields were mixed, but within a basis point of Friday’s close shortly after cash settlement; 30-year yields were marginally cheaper, steepening 5s30s by 0.4bp on the day. 

Late TY block (6,867 at 118-01+) had little market impact.

Early flows included real money selling in front end of the curve and in 30s.

Futures volumes in 10-year note were around 70% of 10-day avg up to 3pm ET;

…early activity included 8,500 FVZ8 block trade, which stemmed early gains.
Across the front end, sporadic activity included 50k screen lifts in EDZ8 and EDH9 as last week’s selloff faded; white pack outperformed with EDZ8 higher by 2.5bp

In eurodollar options, flows included further buying of Morgan Stanley-recommended trade of long EDZ8 97.25/97.375/97.50 call fly, targeting potential IOER cut at December FOMC.

Elsewhere, aggressive selling of EDZ8 97.25/97.125 1×2 put spreads also seen, which appeared consistent with close-out of trade initiated last week IG issuance slate was quiet with just three names led by $2.15b Constellation Brands; total of $15b-$20b in new supply is expected for the week

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Precious metals fell even as risks remain from the continuing U.S.-China trade showdown and tension surrounding the killing of a Saudi journalist to Italian budget fears.


Key Headlines:

  • KDDI to raise up to 90B yen in bond sales: Nikkei
  • Argentina sets Presidential election for Oct. 27, 2019: Nacion
  • Bundesbank says German economic growth may have stalled in 3Q
  • September Chicago Fed national index 0.17 vs est. 0.22

 



-R.W.N II, yours in 322.

cropped-SkullinDisplayCase.jpg

Banyan Capital Management, LLC (“BCM”) is a publisher, not a registered investment advisor, and nothing in BCM’s newsletter is intended, and it should not be construed, to be investment advice. BCM’s newsletter is for informational use only. Any mention in BCM’s newsletter of a particular security, index, derivative, or other instrument is neither a recommendation by BCM to buy, sell, or hold that security, index, derivative, or other instrument, nor does it constitute an opinion of BCM (or of any of its officers, employees, agents or representatives) as to the suitability of that security, index, derivative or other instrument for any particular purpose. BCM is not in the business of giving investment advice or advice regarding the suitability for any purpose of any security, index, derivative, other instrument or trading strategy and nothing in BCM’s newsletter should be so used or relied upon. BCM is not acting as your financial advisor nor in a fiduciary capacity, with regard to any securities, index, derivative or other instrument referred to in BCM’s newsletter. Also, no representation is made concerning the tax implications in any applicable jurisdiction regarding any securities, index, derivative or other instrument and BCM is not advising you in respect of the tax implications. All opinions and estimates in the newsletters are given as of the date of their publication on the BCM’s website and are subject to change and BCM does not assume any obligation to update the newsletters or to reference any such changes. BCM hereby expressly disclaims any and all representations and warranties that: (a) the content of its newsletters is correct, accurate, complete, reliable or a guaranty of future performance; (b) any of its newsletters will be available at any particular time or place, or in any particular medium; and (c) that any omission or error in any of its newsletters will be corrected. BCM shall not be liable for any errors or omissions made in its newsletters or for any inaccuracies in its assumptions. BCM specifically disclaims liability for any losses or damages (incidental, consequential or otherwise) that may arise from the newsletters and that are either used or relied upon by anyone for any reason, including without limitation, the use of the newsletters in the preparation of any financial books and records. Although from time to time BCM’s newsletter may link to or promote others’ websites or services, BCM is not responsible for and does not control those websites or services. BCM’s newsletter is published and distributed in accordance with applicable United States and foreign copyright and other laws. Without the prior written consent of BCM, no person or entity, directly or indirectly, may copy, reproduce, recompile, decompile, disassemble, reverse engineer, distribute, publish, display, perform, modify, upload to create derivative works from, transmit, or in any way exploit all or any part of BCM’s website, its newsletter, or any other material belonging to BCM.Without the prior written consent of BCM, no person or entity, directly or indirectly, may offer all or any part of BCM’s website, its newsletter, or any other material belonging to BCM for sale, nor may any person or entity, directly or indirectly, distribute all or any part of BCM’s website, its newsletter, or any other material belonging to BCM over or by means of any medium.Without the prior written consent of BCM, no person or entity, directly or indirectly, may make all or any part of BCM’s website, its newsletter, or any other material belonging to BCM, available as part of or in connection with another website, whether by hyperlink, framing on the Internet or otherwise. At any given time BCM’s principals may or may not have a financial interest in any or all of the securities and instruments discussed herein. At any given time BCM’s principals may or may not have a financial interest in any or all of the securities and instruments discussed herein.

Morning Market Tidbits

 

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Image result for today in history

  • 1633 Battle of Liaoluo Bay: Dutch East India Company defeated by Chinese Ming naval forces in southern Fujian sea

 

Centrally planned up day for the Chinese Communists > China bourses pledge supportive measures – SCMP

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As the Chinese economy continues to slow > China President Xi pledges unwavering support for private enterprise – Xinhua

 

for the “first time”? It’s been slowing since JAN! > Global growth outlook for 2019 dims for first time – Reuters

 

JAPAN: stocks (Nikkei) only bounce +0.37% on central market planning day in China

CHINA: stocks up +4.1% as the government stepped in for a central market planning day *Chinese stock market is still -25.4% since JAN

ASIA: rest of Asian Equity markets yawned at the Communist market move – Australia was down -0.6%, Malaysia down -0.5%, Thailand down -0.2%

LONDON: yawns with the FTSE opening up +0.2%

Screen Shot 2018-10-22 at 5.07.05 AM.png

 

OIL: WTI bounces +0.4% after correcting -3.1% last week

GOLD: corrects -0.3% after bouncing +0.6% last week

Italy’s 10yr yield -6bps to 3.42%; UST 10yr yield +1bp to 3.20%

FX: Dollar extends gains vs. Pound and Yen and remains Bullish TREND

 


-R.W.N II, yours in 322.

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Banyan Capital Management, LLC (“BCM”) is a publisher, not a registered investment advisor, and nothing in BCM’s newsletter is intended, and it should not be construed, to be investment advice. BCM’s newsletter is for informational use only. Any mention in BCM’s newsletter of a particular security, index, derivative, or other instrument is neither a recommendation by BCM to buy, sell, or hold that security, index, derivative, or other instrument, nor does it constitute an opinion of BCM (or of any of its officers, employees, agents or representatives) as to the suitability of that security, index, derivative or other instrument for any particular purpose. BCM is not in the business of giving investment advice or advice regarding the suitability for any purpose of any security, index, derivative, other instrument or trading strategy and nothing in BCM’s newsletter should be so used or relied upon. BCM is not acting as your financial advisor nor in a fiduciary capacity, with regard to any securities, index, derivative or other instrument referred to in BCM’s newsletter. Also, no representation is made concerning the tax implications in any applicable jurisdiction regarding any securities, index, derivative or other instrument and BCM is not advising you in respect of the tax implications. All opinions and estimates in the newsletters are given as of the date of their publication on the BCM’s website and are subject to change and BCM does not assume any obligation to update the newsletters or to reference any such changes. BCM hereby expressly disclaims any and all representations and warranties that: (a) the content of its newsletters is correct, accurate, complete, reliable or a guaranty of future performance; (b) any of its newsletters will be available at any particular time or place, or in any particular medium; and (c) that any omission or error in any of its newsletters will be corrected. BCM shall not be liable for any errors or omissions made in its newsletters or for any inaccuracies in its assumptions. BCM specifically disclaims liability for any losses or damages (incidental, consequential or otherwise) that may arise from the newsletters and that are either used or relied upon by anyone for any reason, including without limitation, the use of the newsletters in the preparation of any financial books and records. Although from time to time BCM’s newsletter may link to or promote others’ websites or services, BCM is not responsible for and does not control those websites or services. BCM’s newsletter is published and distributed in accordance with applicable United States and foreign copyright and other laws. Without the prior written consent of BCM, no person or entity, directly or indirectly, may copy, reproduce, recompile, decompile, disassemble, reverse engineer, distribute, publish, display, perform, modify, upload to create derivative works from, transmit, or in any way exploit all or any part of BCM’s website, its newsletter, or any other material belonging to BCM.Without the prior written consent of BCM, no person or entity, directly or indirectly, may offer all or any part of BCM’s website, its newsletter, or any other material belonging to BCM for sale, nor may any person or entity, directly or indirectly, distribute all or any part of BCM’s website, its newsletter, or any other material belonging to BCM over or by means of any medium.Without the prior written consent of BCM, no person or entity, directly or indirectly, may make all or any part of BCM’s website, its newsletter, or any other material belonging to BCM, available as part of or in connection with another website, whether by hyperlink, framing on the Internet or otherwise. At any given time BCM’s principals may or may not have a financial interest in any or all of the securities and instruments discussed herein. At any given time BCM’s principals may or may not have a financial interest in any or all of the securities and instruments discussed herein.

 

Conclusión Macroeconómica

 

 

(Bloomberg) — U.S. stocks turned down from session highs as geopolitical tensions continue to weigh into the weekend; the main indexes are flirting with multiple DMAs.

Mexico’s peso faded after Pompeo reinforced Trump’s comments, saying the U.S. is fast approaching a “moment of crisis” due to the migrant situation.

The 10-year Treasury yield pushed above 3.20%.

The dollar fell while cable gained after Prime Minister Theresa May was said to ditch one of her key Brexit demands in order to resolve the Irish border.

The EUR rallied to a new high for the day after EU commissioner Moscovici commented the bloc won’t interfere in Italian economic policies; the comments drove BTP/Bund spreads to around 300 bps from 340.

Elsewhere, WTI rose back above $69 a barrel and Brent above $80.


Credit Markets 

High-grade supply fell short of estimates this week as corporate borrowers worked through earnings blackouts and volatility in rates and equities.

  • The market tone weakened somewhat
    • Credit spreads widened throughout the week as Lipper reported weekly outflows in IG bond funds. While modest, it marked just the fifth week of outflows seen this year
    • Issuers that did come forward paid heightened concessions. Book over-subscription rates were muted aside from Conagra’s M&A-related transaction and deals tightened modestly through the pricing process *T Week YTD NIC 6.4bps 4.3bps Books Covered 3.4x 2.9x IPT -> Launch (Delta) 13.5bps 15.4bps *T

 

  • Conagra priced just over $7b on Monday, the week’s largest deal, to fund its acquisition of Pinnacle Foods. The issuer ended calls last Wednesday, but likely held off until this week given last week’s equities rout
    • The deal saw the most demand of any this week, with a total book size north of $30b and 4.4x subscription rate, however the issuer paid elevated concessions

 

  • Big banks’ no-show contributed to the light supply this week. Issuance was expected as several of them reported earnings beginning last Friday, yet only JPM and Wells Fargo priced relatively small deals post-earnings
    • Their absence from the primary market may be a result of new rules on total loss- absorbing capacity eligible bonds that go into effect next year
    • Banks may have pre-funded to come into compliance

 

  • Self- imposed corporate earnings blackout periods may have also contributed to the light primary volume this week. Third quarter earnings are running through and companies may come forward in the next few weeks as the season winds down
    • Supply this week was $17.825b, short of projections of $25b-$30b

 

  • Foreign USD issuers, however, came forward in large numbers. Yankee issuance accounted for $4.45b, or 25%, of the week’s issuance while EM and SSA issuers put forward a whopping $10.97b of supply. All together, non-domestic USD supply was $15.42b
    • While many factors could explain the uptick in EM and SSA issuance, it is possible that many of these issuers were sitting on the sidelines last week as equity markets tumbled and macro markets were volatile, choosing to take advantage of this week’s slightly more stable tone
    • Not all foreign issuers executed their deals with ease. On Thursday, Empresa Electrica Cochrane decided to not proceed with their bond sale
    • Across the pond, issuers pulled several EU and GBP deals, citing market conditions

 

WEEK AHEAD

  • Estimates call for $15-$20b next week
  • This week regional banks could issue new bonds as they begin to exit earnings blackouts
  • More on the IG Pipeline
  • October projections ~$110b

ISSUANCE STATS

  • Weekly volume $17.825b vs $7.400b last week
  • MTD volume $69.700b
  • September volume $122.900b
  • YTD volume $965.584b

DAILY BREAKDOWN *T Day Volume Monday $9.975b Tuesday $5.250b Wednesday $2.050b Thursday $550m Friday None *T THIS WEEK’S IG ANALYSES

  • Concessions Elevated as Issuers Return to Market
  • Domestic Supply Slows Despite Market Rally
  • Primary Volume Slows, Deal Outcomes Mixed
  • EM and SSA Issuers Outpace Domestic Supply

 


Key Headlines:

  • U.K. banks can deal with Brexit, trade war at the same time: Carney
  • Mexico dealing with challenge of migrants, Videgaray says
  • U.S. existing-home sales at 5.15m, vs est. of 5.29m

 


Key Economic Data: 

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Canada Watch Inflation still points to hikes


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China Economic Watch GDP growth weakened in 3Q with mixed activity data in September


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Japan Economic Watch Weakness in external demand to continue


Image result for uk

Screen Shot 2018-10-19 at 2.36.47 PMScreen Shot 2018-10-19 at 2.37.14 PM

UK Macro Viewpoint Brexit – deal, no deal, referendum or election?


Image result for space earth nasa

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BofAML_ Global Economic Weekly Currency – a new front in the trade war

 


-R.W.N II, yours in 322.

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Banyan Capital Management, LLC (“BCM”) is a publisher, not a registered investment advisor, and nothing in BCM’s newsletter is intended, and it should not be construed, to be investment advice. BCM’s newsletter is for informational use only. Any mention in BCM’s newsletter of a particular security, index, derivative, or other instrument is neither a recommendation by BCM to buy, sell, or hold that security, index, derivative, or other instrument, nor does it constitute an opinion of BCM (or of any of its officers, employees, agents or representatives) as to the suitability of that security, index, derivative or other instrument for any particular purpose. BCM is not in the business of giving investment advice or advice regarding the suitability for any purpose of any security, index, derivative, other instrument or trading strategy and nothing in BCM’s newsletter should be so used or relied upon. BCM is not acting as your financial advisor nor in a fiduciary capacity, with regard to any securities, index, derivative or other instrument referred to in BCM’s newsletter. Also, no representation is made concerning the tax implications in any applicable jurisdiction regarding any securities, index, derivative or other instrument and BCM is not advising you in respect of the tax implications. All opinions and estimates in the newsletters are given as of the date of their publication on the BCM’s website and are subject to change and BCM does not assume any obligation to update the newsletters or to reference any such changes. BCM hereby expressly disclaims any and all representations and warranties that: (a) the content of its newsletters is correct, accurate, complete, reliable or a guaranty of future performance; (b) any of its newsletters will be available at any particular time or place, or in any particular medium; and (c) that any omission or error in any of its newsletters will be corrected. BCM shall not be liable for any errors or omissions made in its newsletters or for any inaccuracies in its assumptions. BCM specifically disclaims liability for any losses or damages (incidental, consequential or otherwise) that may arise from the newsletters and that are either used or relied upon by anyone for any reason, including without limitation, the use of the newsletters in the preparation of any financial books and records. Although from time to time BCM’s newsletter may link to or promote others’ websites or services, BCM is not responsible for and does not control those websites or services. BCM’s newsletter is published and distributed in accordance with applicable United States and foreign copyright and other laws. Without the prior written consent of BCM, no person or entity, directly or indirectly, may copy, reproduce, recompile, decompile, disassemble, reverse engineer, distribute, publish, display, perform, modify, upload to create derivative works from, transmit, or in any way exploit all or any part of BCM’s website, its newsletter, or any other material belonging to BCM.Without the prior written consent of BCM, no person or entity, directly or indirectly, may offer all or any part of BCM’s website, its newsletter, or any other material belonging to BCM for sale, nor may any person or entity, directly or indirectly, distribute all or any part of BCM’s website, its newsletter, or any other material belonging to BCM over or by means of any medium.Without the prior written consent of BCM, no person or entity, directly or indirectly, may make all or any part of BCM’s website, its newsletter, or any other material belonging to BCM, available as part of or in connection with another website, whether by hyperlink, framing on the Internet or otherwise. At any given time BCM’s principals may or may not have a financial interest in any or all of the securities and instruments discussed herein. At any given time BCM’s principals may or may not have a financial interest in any or all of the securities and instruments discussed herein.