Daily Briefing – Tuesday, October 17, 2017
Yesterday’s biggest news in Europe was the announcement that Daimler may split off its Mercedes Benz brand. Shares dropped half a point on the announcement but are regaining the loss this morning. This morning sees all major indexes in the zero range, after the EU yesterday reported a seasonally adjusted increase in its August trade balance to a better-than-expected $21.6 bn. Exports rose 2.5% in August and imports by 0.4%. Continental benchmarks are being dragged down by the Catalonia referendum, after Spain’s Deputy PM gave Carlos Puigdemont until Thursday to back away from independence rhetoric. The pound sterling yesterday tumbled as the UK hinted at the imminent breakdown of Brexit talks, and the FTSE ended the session in the red – buoyed only by mining shares. This morning, better news bodes well, as May and EC Pres Juncker indicated optimism and progress.
As the 4th round of NAFTA talks heat up over auto trade, US benchmarks are once again breaking records thanks primarily to financial equities, with the S&P up 0l.18%, the DJ +0.37% and the Nasdaq +0.28%. The USD rose alongside and is up 0.2% this morning, after the NY Fed reported a huge 8-point increase in October’s manufacturing index to 30.2 (from 24.4 the month before) – a 3-year high. Pres Trump again yesterday reiterated his tax reform expectations, which also helped the currency, as did news that he was interested in interviewing Janet Yellen for a 2nd term as Fed head. Meanwhile, in Canada, Airbus has agreed to purchase a majority stake in Bombardier, providing the airplane manufacturer with much-needed vigor in its struggle against Boeing and the US trade tariffs plan.
Ahead of China’s Communist Party Congress, Asian indexes were relatively subdued overnight. Chinese composites hovered near the zero point, the Nikkei rose on a plunge in the yen, after reports conflicted over chances of a North Korean willingness to negotiate non-proliferation; and only the S&P/ASX added a dramatic 0.73% thanks to mining shares and RBA minutes overnight that indicated lessened risk thanks to a strengthening global economy. In China itself, the People’s Bank reports that it has designed a prototype to regulate digital fiat currency. Meanwhile, Russia too has approved the development of a “cryptoruble”.
Oil hit a 3-week high yesterday as tensions over supply increased when Iraqi forces took over the Kurdish oil fields in Kirkuk. WTI touched 52.30 before settling towards 51.70 this morning, and Brent topped at 58.50
After Netflix shares surged 2% immediately following its quarterly earnings report, today it’s IBM and Goldman Sachs’ turn to wow investors. Of all the US banks, GS may report a decline in earnings to $7.54 bn, bringing EPS down from $4.88 for last year’s Q3 to $4.17 this year. IBM is hinting at a 1 cent drop in EPS to $3.29 as revenues are expected to once again miss expectations of n$18.61 bn. Shares this morning are down 12%, as the company’s foray into software flounders. On Thursday, expectations are for double-digit growth when PayPal reports an expected 46 cent EPS on $3.18 bn revenues – up from last year’s Q3 of $2.677 bn.
|8:30 AM GMT||UK: PPIs, CPIs, Retail Prices & House Prices|
|9 AM GMT||Germany: ZEW Sentiment Indexes, followed at 9:30 with its numbers for the EU, and EU CPIs at 10.|
|12:30 PM GMT||US: Import & Export prices, followed by Industrial Production at 1:15. Housing at 2 and Monthly Budget Statement at 6.|
|8:30 PM GMT||API: Weekly Crude Oil Inventories|