Daily Briefing – Thursday, November 2, 2017
FED Gov. Jerome Powell will be the next chairman of the Federal Reserve, according to the Wall Street Journal. Powell is a hawk, backing interest rate hikes, shrinking the bank’s assets portfolio, and not relying on formulas to determine policy. He favors easing Dodd-Frank and bank stress tests, and would like to see Fannie May and Freddie Mac privatized. A multi-millionaire, Powell is the richest former investment banker to guide the institution. Meanwhile, in its statement last night, the FOMC left policy unchanged by upgraded growth expectations from solid to moderate – increasing chances drastically of a December rate hike. The Atlanta Fed projects Q4 GDP at 4.5%, following a rise in Markit’s Manufacturing PMI yesterday (+0.1 to 54.6) and a less-than expected drop in ISM’s Prices paid (68.5). The institute’s PMI, however, dropped 2 points to 58.7. In Canada, manufacturing also fell a point to 54.3 in October.
After 55 years of steadily increasing prices, Australia’s real estate bull market may finally be over, thanks – among others – to restrictions on foreign investments in major cities. Building permits rose 1.5% MoM in September but contracted on the yearly scale, and the nation’s trade surplus doubled from August’s $873mn to $1.745mn – a 4-month high. Elsewhere in Asia, indexes ended in the red, except in Japan, where the Nikkei closed at a 0.53% gain, driven by Honda and Sony earnings. And China is expected to raise the value of the Yen ahead of Trump’s visit next week, to head off criticism over devaluation aimed at promoting cheaper exports. Chinese indexes weakened overnight over potential liquidity tightening.
As markets await today’s expected rate hike from the Bank of England, the first in a decade, traders were pleased to see UK manufacturing rise half a point to 56.3 in October, as housing prices rose to 2.5%. On the mainland, markets are expected to open in the green, continuing to respond to Tuesday’s positive data and lacking major input yesterday and today – save Germany’s unemployment this morning and manufacturing PMIs today from Germany and the Eurozone.
CoinDesk reports that Amazon has registered 3 cryptocurrency web domains – a signal that it may be the first major retailer to adopt Bitcoin as a payment form. The commodity this week surged above $6600. Strong Winter demand in oil produced a less-than-expected 2.43 mB withdrawal in the EIA report, leaving WTI prices nearly flat at $54.36, below Tusday’s peak at above 55.
Tesla yesterday disappointed investors, reporting that its revenue was only $50mn above expectations. Spending is currently $1.4bn, M3 deliveries are a fraction of the anticipated, and shares fell 5% on the announcement. Facebook, on the other hand, delivered $10,3bn revenues – 1½ times expectations with an EPS of $159, over the 1$1.28 expected. Shares peaked, then returned to the 150 zone. Today, Starbucks reports after the closing bell as wages grow and the company invests in technology. EPS is expected to come in 55 cents (down from last year), on revenues of $5.81bn (up 100mn YoY). Apple expectations are mixed, although the company is expected – as usual – to beat expectations of $1.86 EPS on $51.17 bn earnings – an 11% increase YoY. iPhone sales representing 65% of total revenues, a lot hinges on the success of the iPhone-X release tomorrow – this after a relatively limp reception afforded the iPhone-8 last month.
|8:55 AM GMT||Germany: Unemployment & Markit Manufacturing PMI, followed at 9 by the EU’s index.|
|12 Noon GMT||UK: BoE Interest Rates & Monetary Policy|
|12:30 PM GMT||US: Jobless Claims & Productivity|