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Dividend adjustment 22 Oct - 29 Oct

Expected index adjustments  Please see the expected dividend adjustment figures for a number of our major indices for the week commencing 22 Oct 2018. If you have any queries or questions on this please let us know in the comments section below. For further information regarding dividend adjustments, and how they affect  your positions, please take a look at the video.      NB: All dividend adjustments are forecasts and therefore speculative. A dividend adjustment is a 
cash neutral adjustment on your account. Special Divs are highlighted in orange.   No special dividends this week You can see the special dividends listed below. Unfortunately we do not have granular insight on the effect on the index for the index in question, however the below maybe helpful for some. Please note the dates below are the stock adjustments in the underlying individual instrument, whilst the index div adjustments are taken out the day before on the IG platform at the cash close. Index Bloomberg Code Effective Date Summary Dividend Amount AS51 APO AU 19/10/2018 Special Div 42.8571 How do dividend adjustments work?  As you know, constituent stocks of an index will periodically pay dividends to shareholders. When they do, the overall value of the index is affected, causing it to drop by a certain amount. Each week, we receive the forecast for the number of points any index is due to drop by, and we publish this for you. As dividends are scheduled, public events, it is important to remember that leveraged index traders can neither profit nor lose from such price movements.   This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.  

MaxIG

MaxIG

Market sentiment - APAC brief 22 Oct

Market sentiment: Markets put in a mixed day on Friday. The results for global equities were generally poor, but absent were any violent swings in market activity. Individual regions traded -off apparently their own idiosyncratic drivers, characteristic of the diverse web of risks plaguing investors. Chinese indices were the stand-out, climbing more than 2.5 per cent, collectively, while European shares were generally lower, and US stocks were mixed. The mood is still edgy and dour for equities overall, with the weight of an extending list of risks stifling appetitive for riskier assets. There is a growing sense now that the many and considerable challenges facing market participants are here to stay; the matter hence becomes what level of willingness do market participants possess to stomach these and push equity markets higher. Risks-elevated: Uncertainty and instability isn't something novel for traders -- it's reigned for the last decade, as is well known. Yet it's proven now that there doesn't necessarily exist the confidence that, with the world's most powerful central banks turning off the liquidity taps, markets have the strength to sustain themselves. To be perfectly fair, 12 months ago, an all-out trade-war, the seeds for huge US twin deficits, a new Italian fiscal crisis, a Chinese economic slowdown, and major regional instability in the Middle East wasn't seriously expected. Without such interferences, perhaps the global economy would have been on stronger footing. It's pointless to speculate, however one can safely assume at this stage of the economic cycle, fundamentals should be presenting as much firmer. Economic fundamentals: The way in which this dynamic of higher risk and lower confidence plays out in Australian markets will be curious, as the final stages of the calendar year unfold. The US economy is booming and that will anchor the global growth story until the Fed's interest rate hikes begin to lean on the US economy. For us down under though, it's of lesser relevance than what transpired in the Chinese economy. The massive data dump delivered on Friday out of China was on balance underwhelming: headline growth was lower, while the other tier-2 data releases didn't salvage much. The Australian economy is ticking along relatively nicely it must be said, but our economic fortunes will stay wedded to China's almost undoubtedly, with the effectiveness of Chinese policymakers attempts to stimulate their economy the key variable. China: As far as markets go, equity indices seemed to benefit from the latest salvo by some of China's top economic officials about tackling any economic slowdown. In effect, policymakers came-out on Friday and implored market participants that they would ensure that a floor was placed under the recent sell-off across Chinese shares, in the interest of capital safety and financial stability. According to the slew of top-regulators who delivered the message, the massive tumble (30 per cent year-to-date) in Chinese stocks isn't reflective of the nation’s fundamentals, so support, it is argued, can justifiably be provided to align financial markets to the economy. Europe: Although this story did underline a late rally in Chinese shares on Friday, the benefits diminished, if not disappeared, in the grand scheme of things, by the time the European session got underway. Fizzled Brexit negotiations were parsed, but weren't a significant sticking point for European traders, who were apparently more relieved about a modest easing of tensions between European bureaucrats and the Italian government about that countries fiscal problems – even despite a rating cut to Italian debt. The EUR and Pound ticked slightly higher and JPY dipped as anxiety around European political stability and China's growth moderated slightly, while US Treasuries declined throughout the day leading into the North American open, losing its haven bid, edging the yield on the 10 Year note to 3.19 per cent. Wall Street: US stocks delivered little in the way of upside, slowed by activity in tech stocks again. Earnings season hasn't delivered the lift so far to US equities as hoped, stifled instead by the effects higher discount rates are having on stretched valuations in growth/momentum stocks. The Dow Jones did close 0.26 per cent higher –  led by strong trade in consumer staples stocks and other defensives, along with financials, which gained on higher bond yields – however the more comprehensive S&P500 was flat. Worries that earnings growth leading into 2019 will be dampened drove the mood in US markets, with the key litmus test for this hypothesis possibly coming this week, as traders prepare for earnings reports from the likes of Alphabet, Microsoft and Amazon. ASX: SPI futures are indicating a 12-point drop for the ASX200 against this backdrop, ahead of a day which should be of interest given the possible impacts of a hung parliament in Canberra. In the recent past, when confronted with leadership challenges and the like, it’s proven a drag on the A-Dollar and the ASX200. The banks have borne the greatest brunt, probably due to the regulatory crack down and the perceived unfriendly stance towards property and share investors by the Labor opposition – though it must be said but this risk has already been priced in by investors. Friday’s trade saw the bank witness a continued pop higher from its oversold levels, keeping the ASX200 trading flat for the sustained. Slightly higher commodity prices may aid the Australian share market in the day ahead, however with little real impetus for rally today, perhaps a grind more-or-less sideways can be expected to start the week.

MaxIG

MaxIG

US-China empire building, Eurozone stability, Brexit - DFX Key Themes

The United States and China Jostling for Economic Supremacy The world’s largest economies are starting to update on the status of their health. And, though it may not seem to be the case in these speculatively charged markets, financial performance relies heavily on a healthy global expansion. This past Friday, China reported its third quarter GDP reading. The 6.5 percent clip would be an enviable pace for most of the developed world, but for this debt laden country, this is slowing to a pace that is more likely approaching ‘stall speed’. In historical context, the reading represented the slowest clip of expansion for the country in 9 years – a period that was plagued by a global recession that had in turn prompted the government to plow funding towards infrastructure spending to buy it more time. Time is crucial for the world’s second largest economy. It needs to be balance its relatively rapid pace of growth with financial stability long enough that it can solidify its position as one of the dominant economic superpowers.  For decades, the country has relied on the rapid growth that is borne from trade, financing, speculative appetite and practices that emerging market countries often utilize that are considered unacceptable among their developed counterparts. That said, it is odd that the second largest economy is still classified as an ‘emerging’ market and one of the roots of contention from the United States and others. Over the past three to four years, China’s intent and timeline have become more clear. Having avoided a the Great Recession, they had seen their standing in the global economy move up to a more stable plateau. To ensure they secured their position, the government has attempted to turn towards a more accepted growth plan and to reduce capital borders in order to become a full-fledged member of the globalized community. Without interruption, that initiative would have succeeded. Unfortunately for the Politburo, the Trump Administration has exerted enormous pressure on the country and threatens to undermine growth and/or tip the financial stability balance to create a permanent hurdle.  The question of how successful this effort to stymie the economic engineering effort will be is only one facet of the equation, there is also the question of how much fallout the US itself will suffer along the way. The United States’ effort to bring trade pressure against its largest economic peer will come with an economic cost to the instigator, which they are attempting to offset by fostering investment and business growth through tax cuts and fiscal spending – a combination that breaks norms of its own (deficit control). In the week ahead, we are due the United States’ 3Q GDP update. This is the period through which the trade war truly ramped up, and it will be used as an evaluation of whether the polices are boon or burden at home. Should this and other more timely economic readings head lower, buoyant sentiment readings over the past year will start to flag and make a self-fulfilling prophecy of financial concern.  The Euro’s Fundamental Path is Growing More Complicated  For the most part, the Euro has spent the past 18 months either in a fundamentally enviable position or simply a neutral bearing that could take advantage of weaker counterparts. Economic activity has been slow but steady with members bearing extraordinary austerity following the Eurozone sovereign debt crisis finally turning a corner. Further, the initial threat of the region having to pursue the same costly economic war against the United States was averted when EU President Juncker agreed with US President Trump to avoid further tariffs so long as both sides continued to negotiate. Meanwhile, the mere anticipation of a rate hike from the European Central Bank leveraged the kind of speculative front-running appeal for the Euro through much of the past year that so closely mirrored the Dollar’s own charge in 2014 and 2015. That passive state of speculative appeal is starting to falter however. While growth readings still seem to be following a stable path, the commitment to slower growth to achieve fiscal improvement through austerity is starting to break down. Populism is spreading across the continent.  Chief concern in the evaluation of Euro-area conviction is Italy. The country’s government has applied pressure and backed off in regular tide of ebb and flow; but through these phases, ever increasing the tension. It seems we have reached the point of no return where rhetoric will no longer be enough to satisfy markets. Heading into this past week’s EU Summit, the leadership of the Italian government made clear that it intended to rebuff budget restrictions to support growth and fulfil campaign promises. There was no mistaking the Union’s perspective on Italy’s intended path: they said the spending and deficit projections in their plans were unacceptable. This standoff remains unresolved, but the financial markets are starting to pull back to curb their exposure to the risk. The FTSE MIB is suffering more acutely than its large counterparts and Italian sovereign bond yields are climbing rapidly. A 10-year yield spread of over 400 basis points over the Germany bund equivalent is considered a level akin to serious financial pressure.  We were just above 300 basis points to close out this past week, but that was before the news after the close that Moody’s had downgraded the country’s credit rating a step to Baa3. That will have an inevitable impact on funds that have to abide credit quality when dictating their exposure. In the week ahead, we have another assessment of Italy’s financial condition coming from Standard & Poor’s. This fundamental impact on the Euro is not the only theme competing for influence. Monetary policy is another fundamental strut that could buckle or hold the currency strong through the growing pressure. There is no change expected from the gathering Thursday, but there is growing concern over the internal and external risks for the Eurozone. If they cool expectations for the first hike coming mid-2019, there is still premium for the Euro to give up. A further complication to consider: if the Euro drops materially, expect the Trump Administration to raise its pressure on the regional economy.  Brexit Risk Jumps after EU Summit, Rumor of Border Breakthrough, Protests and New Credit Ratings  The Brexit countdown is taking on a Edgar Allen Poe-level resonance. The European Union summit this past session was specifically targeting discussion between the UK and 27 leadership to see if they could make a high-level breakthrough on the divorce proceedings. The primary hold up at the end of the gathering remained the border issue and the complications that it invites. It may seem that there is plenty of time to negotiate with a little more than five months until the official split, but there is considerable work to do in passing the proposal through so many different governments and working out the technical aspects thereafter. So long as this situation is unable to pass the critical step of an acceptable draft agreement between both sides, the Sterling is likely to see steady retreat as capital funnels out of the country to avoid the uncertainty facing London’s financial center specifically. With the risks growing, the attention on progress will intensify.  With that said, there seemed a possible breakthrough in the closing hours Friday when it was reported that Prime Minister May was prepared to drop their Brexit demands on the Irish border issue in order to earn a breakthrough. Such a move would likely earn the ire of Brexiteers who would balk at likely permanent participation in the EU’s customs union. It remains to be seen if the UK’s government would back such a appeasement, but it doesn’t seem enough for many Brits. Over the weekend, a protest in London calling for a second EU referendum drew reportedly between 600,000 and 700,000 participants – one of the largest in the capital’s history. It is unlikely however that the government will return to the polls on the issue unless there are a number of political turns that force the issue. Ahead, we will have to keep a very close eye on the headlines to see what transpires in the political environment in England as well as between the UK and EU. That doesn’t mean though that there aren’t any meaningful milestones on the docket to mark on our calendars.  At the very end of the coming week – after the close Friday – we are due two credit rating updates on the United Kingdom from Standard & Poor’s and Fitch. These groups have generally maintained a wait-and-see perspective until it became clear that there would be a compromise scenario or a crash out. However, time is a factor that they can no longer ignore in this equation. With each week that passes without a breakthrough, the economic and financial ramifications deepen. More stark warnings are likely if there is not a confirmation of the border issue and a downgrade is not impossible.  

JohnDFX

JohnDFX

China Growth Falls Below Expectations - EMEA Brief 19 Oct

China recorded its slowest growth in a quarter for almost a decade. GDP growth year-on-year came in at 6.5% down from estimates of 6.6%, largely down to the continued trade war with the U.S. and high debt levels. MSCI Asia Pacific Index recorded its worst three week decline since the start of January 2016 with volatility approaching similar levels seen in 2012, mainly due to China's performance and the recent equities' fallout. US indices further declined on Thursday as market volatility continues. The S&P 500 fell by 1.4 percent followed by the Nasdaq which declined by 2.2%, fueled by worries about rising interest rates and on-going trade tensions. Oil prices traded at nearly its lowest level in almost a month despite concerns surrounding Saudi Arabia and Jamal Khashoggi's disappearance as U.S. increases crude stockpiles. Yen depreciates 0.17% against the U.S. dollar after climbing 0.4% on Thursday. Euro remained steady at $1.1454 after hitting lowest intra-day levels since October 9th after concerns regarding the Italian budget deficit . Asian overnight: A wildly volatile session overnight saw Chinese stocks fall over 1% only to recover and close out over 2% higher after the heads of three government bodies (including the PBoC) came out to say that whilst growth was slowing, new measures will be introduced to help the markets. This came after a drop in Chinese GDP, falling to 6.5% from 6.7%. This was released alongside a host of other datapoints, with industrial production the only other disappointment after retail sales, unemployment and fixed asset investment all improved. Other notable gains came from Hong Kong, while Japanese and Australian markets traded in the red. The U.S. has declined to explicitly label China as a currency manipulator, however, its clear that the current U.S. administration will be keeping a watchful eye over Beijing's currency policies. People's Bank of China Governor Yi Gang pledge to "continue to let the market play a decisive role in the formation of the RMB exchange rate" during the IMF conference last weekend helped to defuse doubts surrounding currency manipulation, as expectations grow for the Chinese yuan to depreciate towards its psychological 7 level against the dollar. UK, US and Europe: Tensions with Saudi Arabia continue as Goldman CEO announces that executive Dina Powell will not be attending the Saudi investment conference 'Davos of the Desert'. The mass cancellations taints the Saudi's attempt of economic reform as Donald Trump says it appears Khashoggi is dead, warning that the repercussions could be 'severe'. Regarding oil prices, Saudi's strained relationship with the U.S. could counteract the increasing supply of crude oil in the U.S. Looking ahead, there are precious few major releases to keep an eye out for, with UK public sector net borrowing alongside Canadian retail sales and inflation providing the only things worth keeping an eye out for. With the EU seemingly rebuffing the Italian budget, and a growing risk that further evidence is presented in the Khashoggi case, there are still plenty of reasons to expect volatility today. In Puerto Rico the U.S. has already spent $3 billion to put an end to the longest blackout in its history. The effort to restore the power grids in Puerto Rico come amongst concerns on hurricane season in the U.S. This follows on from our piece on Tuesday about the economic impact of hurricane season. Economic calendar - key events and forecast (times in BST) Source: Daily FX Economic Calendar 9:30am - UK Government borrowing figures out later today. 1.30pm – Canada CPI, retail sales (September): CPI to be -0.1% MoM, in line with August, and 2.6% YoY from 2.8%, and core CPI to be 1.6% YoY from 1.7%. Market to watch: CAD crosses 3pm – US existing home sales (September): forecast to drop 0.3% MoM. Market to watch: USD crosses
  Corporate News, Upgrades and Downgrades Provident Financial has seen weaker performance in its home credit unit, which has seen activity 10% below historic levels. The Vanquis bank division saw ‘good growth’ in the third quarter.  Pendragon has issued a profit warning, saying underlying pre-tax profit for the year is expected to be £50 million lower than the £60.4 million of a year earlier.  London Stock Exchange said that Q3 revenue was up 5% to £522 million, while total income rose 8%, and that it has acquired a further 15.1% in clearing house group LCH.  Uber announce plans to launch a short-term staffing business 'Uber Works', to build on its current offering ahead of the IPO planned for next year. Interesting to see market sentiment on upcoming IPOs considering the initial pricing failures we have seen recently from IBs when it came to Aston Martin and the Funding Circle floating on the stock exchange. Lookout for Intu today as the shopping centre owner has announced the company has received a takeover offer from a consortium offering 205p per share. Byggmax upgraded to buy at SEB Equities
EDP upgraded to outperform at Macquarie
Galp upgraded to outperform at RBC
Leifheit upgraded to hold at Berenberg Beiersdorf downgraded to hold at Bankhaus Lampe
Casino downgraded to hold at HSBC
Danske Bank cut to equal-weight at Barclays
EasyJet downgraded to underperform at MainFirst IGTV featured video    Information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.  

GeorgeIG

GeorgeIG

Risk-off (again) - APAC brief 19 Oct

Risk-off (again): Just when it looked like it was safe to jump back into financial markets, it was risk-off again overnight, as market participants dwelled once more on the myriad of risks facing them. There’s nothing entirely new in what has developed during the European and North American session: the same confluence of factors that has weighed on sentiment in markets have simply reared their head again. It’s probably what makes this situation all the graver, if not at the very least, highly gnawing. The anxiety riddling markets regarding the impacts of trade-protectionism, and the beginning of the end of the easy money era, can’t seem to be rationalized, inflating the magnitude of that issue – apparently inexorably. Fear is feeding on fear, making markets more attuned to the roar of the bears. Haven buying: As has been the case throughout the turbulent journey markets have traversed in the last week, it pays not to catastrophize; but the longer the weak sentiment lasts the more difficult it will probably prove to shake. As a trader, no matter the weather, opportunities abound for those willing to tackle them. It was havens again that attracted a bid higher last night, with gold (as old-reliable) catching the upswing. Carry trades were broadly unwound and kicked-down the likes of the AUD/USD to the 0.7100 handle, a dynamic causing the Japanese Yen to tick higher. 10 Year US Treasury yields maintained the line at 3.17 per cent, amid opposing pressure of haven buying and the carry-through of higher rate expectations, bringing the USD back into haven-vogue. Europe: European economics and geo-politics threw up some more major worries overnight, drawn out from the EU economic summit in Brussels. Markets over the extent of the week have priced-out an imminent Brexit resolution, pushing the Pound further into 1.30 handle and the Euro into the 1.14 handle. The greatest risk being priced in by markets however is renewed concern regarding Italy’s fiscal position – and Rome’s perceived belligerence towards Brussels’ bureaucrats. The EU slapped down Rome’s budgetary position, effectively labelling it untenable for both that country and the Union. European sovereign bond spreads widened more so in the last 24 hours, the greatest impact naturally being found in the spread between German Bunds and Italian BTPS, which expanded to almost 330 basis points – the widest margin since 2013. Global equities: The day on Wall Street, backing that up of Europe’s, has been a difficult one for investors, unaided by a session (of what’s being judged) of soft earnings reports. Two days of lukewarm company reports shouldn’t shift the dial of equity markets, but the hope that strong corporate profits would be the saviour from otherwise dour sentiment hasn’t yet eventuated. It’s forced market-bulls to doubt their conviction and fed the bears greater fodder to sell stocks. Consistent with recent themes, US big-tech and the NASDAQ (down 2.08 per cent) have generally led the sell-off on Wall Street over reluctance to go long growth companies, punctuating the shaky European session where the likes of the FTSE100 dipped 0.39 per cent, and the DAX shed 0.97 per cent – the latter in part due to a poor earnings report from market giant SAP.

  ASX yesterday: The lead garnered last night augurs poorly for the ASX200, reflected in an expected 66-point drop for the index according to SPI futures. The shame is that some semblance (or as close as can be found in these circumstances) of equilibrium appeared to return the Australian market yesterday. The tone throughout Asia trade, notwithstanding the struggles of Chinese markets, improved throughout the session, supported perhaps by the reported drop in the domestic unemployment rate, pushing the tepid Wall Street lead aside and allowing the index to recover early losses to close trade effectively flat for the day. Volume thinned as the session wore on to be sure, but breadth recovered to just shy of 50 per cent, revealing a willingness in market participants to acquire and spread some exposure across Aussie equities.
ASX today: For all the contentment that yesterday engendered, in means little in the face of another day of likely heavy losses. The call in these instances is to assume the ASX200's (modestly sized) tech space, along with the health care sector, will lead losses. In saying that, the selling today risks being rather broad based, with a sell-off in oil prices and a wider dip in commodity prices a potential drag on the energy and materials sectors. The risks abound at this stage, but the major flashpoint will probably come mid-day when a massive data dump, containing GDP data, Fixed Asset Investment numbers and more, is released out of China. It provides a potential queue for investors to form a judgement on the Chinese growth story, and may prove to exacerbate or soothe investors’ fears regarding global growth.   China: The bearishness in China is possibly the severest predicament of all – one that can only become worse today given the sweeping of bearishness through global equity markets. Depending on the index, Chinese equities have tumbled now by 30 per cent off this year’s highs, further entrenching a technical bear market. China’s equities overall look very oversold, with average PE ratios on the blue-chip heavy CSI300 circa 10:1, and presenting on the technicals just above an absolutely oversold reading. Simply, China’s equities can’t find a buyer, fundamentally due to potential fall-out of the US-China trade war. Undoubtedly, there are more complex and murky issues going on under the bonnet of the Chinese economic vehicle – the seemingly controlled devaluation of the Yuan by the PBOC apparently one – but a sell-off like this in spite of not that bad fundamentals suggests that investors can’t move passed the unknown whipped up the unfolding US-China trade war.

MaxIG

MaxIG

Legalisation results in Cannabis Stock Slip - EMEA Brief 18 Oct

Following Brussels summit Theresa May hints the UK may consider longer transition period resulting in the UK remaining tied to the Euro bloc's rules for a period of 21 months after the exit day Trump escalates economic confrontation with Beijing by announcing his intention to withdraw the US from China Shipping Treaty Cannabis stocks slipped after Canada’s legalisation. Aurora Cannabis Inc posting a 15% slide shortly after market opened yesterday. Popular ETFs  ETFMG Alternative Harvest and Horizons Medical Marijuana Life Sciences also saw decreases Netflix shares rose by 10% after releasing quarterly results Dow volatility continues, dropping 260 points yesterday Bitcoin futures daily volumes went up by 41% in quarter 3 compared to quater 2 but rally stalled yesterday trading at $6492.68 down 0.5% from the previous day Asian overnight:  The Asian recovery has proved somewhat short-lived, with stocks throughout China, Hong Kong, and Japan all shifting back into the red. The onshore Chinese Yuan hits lowest since 2017 trading at 6.935 against the dollar this morning. Stocks in Asia also saw a decline, Japan’s Topix fell 0.4% and  the Korean Kospi fell 0.8%. Similarly, the Shanghai composite dropping by 1.53% and the the Nikki 225 lowering 0.37%. Australian stocks were the one outlier, with the ASX 200 trading moderately in the green following a jobs report which saw a sharp decline in unemployment (5.0% from 5.3%). This also helped drive the Australian dollar higher, with AUD providing one of the only gainers against the greenback. Much of that dollar strength came from yesterday’s Fed minutes, which pointed towards broad agreement amongst members that rates should rise further. Following the Khashoggi disappearance and several companies calling for a boycott of the Saudi Arabia business conference next week senior executive firms including Goldman Sachs, Pepsi, Thales EDF are all still expected to attend. UK, US and Europe: The UK remains in focus once more today, with the retail sales data being released in the wake of the inflation and jobs data over the past two days. Today sees that EU summit draw to a close. Yesterday saw Theresa May hint at a possible extension to the transition period to allow for more trade talks, although her inability to come up with another solution to the Irish Border issue seemed to forego the opportunity to provide a breakthrough in negotiations. In the US, watch out for the latest Philly Fed manufacturing index, while Canadians will look to the ADP payrolls numbers. Oil stockpiling by the US causes largest decline in oil prices in two months. Futures contracts for November West Texas Intermediate crude declined by 3% to settle at §69.75 a barrel and December Brent crude fell by 1.7% to $80.05. Meanwhile November natural gas rose by 2.5%. Economic calendar - key events and forecast (times in BST)   9:30am  - UK retail sales figure Year on year, expected to remain at 3.3%

24:30pm  -  Japan's National consumer price index Year on Year, expected to remain at 1.3% Source: Daily FX Economic Calendar Corporate News, Upgrades and Downgrades Domino’s Pizza expects full-year underlying pre-tax profit to be in the middle of market expectations, while in Q3 sales rose 5.9% to £303.3 million. A £25 million buyback programme will be launched Unilever reported a 3.8% rise in underlying sales for Q3, with good growth across all divisions GVC said that online net gaming revenue rose 28% in Q3, helped by the football world cup. Falling UK revenues were offset by a rise in European sales Asos shares climb after reporting revenue of £2.4billion for the year with profits jumping to a better than expected 28% Elon Musk announces his intention to buy $20 million of Tesla Stock during the next open trading window IBM slid by as much a 7% yesterday after announcement of revenue decline Constellation Brands’ stock fell by 2.7% following announcement that Rob Sands will step down as CEO of on March 1st Hello and Mathewson Analytics, MoviePass’ company stock declined by 4% after opening of investigation into possibility of company misleading investors Facebook backed proposal to remove CEO Mark Zuckerberg as chairman due to mishandling of several high-profile scandals Entertainment One +4.9%
Drax Group +4.6%
Sophos +3.9%
Bank of Georgia +3.5%

Mediclinic -17%
Inchcape -13%
Softcat -11.5%
Crest Nicholson -8.2% IGTV featured video   Information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary. 

MichaelaIG

MichaelaIG

Fed minutes - APAC Brief 18 Oct

Fed minutes: The week’s blockbuster event dropped over night: the release of the FOMC’s Monetary Policy Minutes. Equity markets have staged a tentative turnaround globally this week, but it has all been occurring in the shadows of what could be gleaned from last night’s Fed minutes release. When all is weighed up, the document reaffirmed the Fed’s hawkishness, revealing in-depth discussions ranging from cutting the word “accommodative” from the central bank’s language, to debating the possible need to hike rates above the “neutral rate”. A spike in volatility in financial markets wasn’t forthcoming on the back of the release, most likely because traders have been analysing it in a far different context to the one in which it was written: the meeting precipitated the recent equity market rout, and therefore appreciate circumstances have duly changed. US markets: However, the detail in last night’s minutes establishes the new environment within which future Fed policy discussion will take place – both for the Fed itself and amongst market participants. Reaction’s to the Fed minutes were relatively dull overnight, seemingly due to a reluctance from traders to jump-the-gun. Benchmark US 10 Year Treasury yields climbed modestly to 3.17 per cent and the US Dollar has taken advantage of a weaker bid on the Pound and Euro to climb slightly. Wall Street has suffered somewhat, erasing earlier gains on earning’s optimism to trade more-or-less flat-to-down for the day. The trade dynamic gives a curious impression for equity indices, a struggle between an apparent binary: a battle of forces, if you will, between optimism regarding solid earnings growth and pessimism regarding the impact of higher global rates. ASX yesterday: SPI futures have absorbed the lead on Wall Street and translated it (currently) to a 13-point drop at the open for the ASX200. No cause for alarm naturally, following a day where the Australian share market put-in a broad-based rally, to bust back within the upward trend channel it abandoned during last week’s equity sell-off. The ASX200 was registering an oversold reading on the RSI leading into yesterday, and a basic breadth reading of 74 per cent yesterday across the index recognized the sell-off was a tad overdone. The growth stock heavy health care sector ran with the lead of US big tech, to top the markets winners; while the only sectoral laggard for the day was the materials space – though that can somewhat be discounted by the unlucky timing of news from BHP regarding that company’s production downgrades. ASX day ahead: The day ahead will probably be a grind for the ASX200 given a weak Wall Street lead, but a hold within its trend channel, the bottom of which is around 5890, should be considered a win for the bulls. As always, the core strength in the market was underpinned by a bounce in the banks yesterday, a theme that may well continue today given the boost in global bond yields, but will likely fizzle in the weeks and months ahead. Activity around the Asian region was also settled, with Chinese equities for one catching a small bid on rumours that a further cut to China’s banks reserve-ratio-requirement may be imminent. The general relief-rally provided the fuel for a pop in the MSCI All-Asia Index, pulling that index away from its near-18-month lows. Aussie employment: The major event risk for Aussie markets today will be domestic employment data, out of which the ABS is forecast to print a steady unemployment rate of 5.3 per cent and an employment change figure of 15.2k. Only the most extreme outcome to this release will shift the dial in financial markets, especially that of interest rate markets, which continue to price in no-move from the RBA until early-2020. A sprinkle of volatility could be seen in the AUD/USD, as that pair hugs support just above 0.7100, but as always, will probably take a stronger lead from activity in the greenback. The spread between US 2 Year Treasuries and 2 Year Australian Government Bonds has narrowed of late, supporting the AUD/USD – however a repricing of interest rate expectations for the US Fed could widen this spread once again, potentially pushing Aussie Dollar back towards previous lows at 0.7040.
  Europe: Taking a glance at other risks entering the end of the week, European markets continue to remain a source of uncertainty. European bureaucrats have gathered for a multi-day summit in Brussels, to discuss the many seemingly intractable issues facing the continent. A Brexit deal this week is becoming a diminishing prospect and is showing up in pricing across the region’s financial markets. Adding to the tension is a slight spike in anxiety relating to the Italian fiscal situation, stoking fears of greater animosity between Europe’s leaders and a general instability the European Union’s political structure. Credit spreads have widened in sovereign bond markets as a result, weighing on the Euro and Pound (which also receded on the back of weaker CPI figures overnight), sapping strength from the major European equity indices consequently. Oil: Oil markets deserve a mention, given the human-tragedy that is defining much of the volatility found in the price of the black-stuff now. Fundamentals first: US Crude Oil Inventories surprised to the upside overnight, sending the price of Brent Crude to the $US80.00 per barrel mark. The real developments in all markets this week centre, however, on the alleged murder of journalist Jamal Khashoggi by the Saudi Arabian regime. Putting aside (the far more important) humanitarian implications of this situation, speculation has increased that the Saudi’s will exploit the leverage they possess in the form of their massive oil reserves to suffocate scrutiny on the subject by members of the global community. The details of the matter are far too nuanced to do justice to here, but the approach taken by global leaders to the Saudis and the subsequent Saudi response could prove one of the major determinants of oil price volatility moving forward.

MaxIG

MaxIG

Brexit EU Summit - EMEA Brief 17 Oct

Trump announces that the Fed is his biggest threat as they are increasing rates ‘too quickly’ Theresa May is to visit Brussels for an EU summit today to agree on the terms of the UK-EU agreement, in order for a final decision to be made in November Netflix quarterly results show yet another rise in new subscribers, signing up 6.96 million customers in this quarter, totaling a global amount of 137.1 million Canada becomes the second country to legalise the use of Cannabis and Marijuana Spot Gold market trend starts to incline, breaking out of its previous month’s bearish position above $1210 to $1219. IMF had arranged to attend a conference in the Middle East for October 23rd to 25th, however has now postponed the trip with no further explanation given China’s holdings of US Treasury securities declined yet again for a third month, plummeting its holdings by around $6billion to $1.165trillion in comparison to last years at $1.2trillion US stocks rise rapidly as some of the largest US companies announced strong quarterly results, helping regain the downward fall shown last week. This includes the Dow Jones, which surged around 550 points/2.2% and the S&P increasing by over 1.9% Asian overnight: Asia Pacific markets managed to follow the US and European lead overnight, with Japanese and Australian markets in particular leading the way higher. Interestingly, Chinese and Hong Kong markets were relatively muted, highlighting the continued fears surrounding growth in the region after Trump threatened yet another round of tariffs on Sunday. The level of debt to GDP in China has hit ‘alarming levels’, as a great difference is seen between reported investments and actual off-balance sheet debt. It is reported at estimates of highs of 30 trillion to 40 trillion Yuan ($4.34trillion to $5.78 trillion). According to analysts, this is mainly caused due to local Chinese governments investing deeply in infrastructure and funding in order to encourage economic growth UK, US and Europe: The UK is back in focus today, with inflation data likely to build upon yesterday’s jobs numbers to build a picture of the pressures on the BoE. With average earnings on the rise, the predicted fall in inflation could actually provide a positive differential between wages and the cost of living, thus raising real wages. UK wages grow at their quickest pace in nearly 10 years. The level of pay rose by 3.1% from the three months prior to August and a fall of 47,000 to 1.36million in unemployment levels.The EU summit will shift the market mindset back to Brexit, with the EU having allowed Theresa May the opportunity to find a solution to break the deadlock.

In the US, keep an eye out for housing data, with building permits and housing starts being released. However, the big release comes later on, with the Fed due to release their latest monetary policy minutes. Crude traders will also be keeping a keen eye on the Crude inventories data following substantial build-ups over the past two weeks. Results from further investigation, in regards to the Saudi journalist Jamal Khashoggi, may show greater strain on how the US and Saudi Arabian relationship will be effected. This has caused three large banks including HSBC, Credit Suisse and Standard Chartered to pull out of Saudi’s Future Investment Initiative event in Riyadh. Among these, Google’s cloud division, Mastercard, JP Morgan and many others have also decided that they are not attending the event. South Africa: Upbeat US corporate earnings is seeing the tech sector leading gains in the worlds largest economy (the US). The dollar has however firmed up a bit, putting some pressure on commodity prices and the rand. BHP Billiton is down 0.7% in Australia, suggestive of a softer start for local diversified resource counters. Naspers, which has roughly a 20% weighting in the Top40 Index, is expected to open higher this morning in lieu of the improved sentiment surrounding tech sector stocks. Our local market will look to Retail Sales data at 1pm today for for guidance as to the health of South Africa's retail sector.  Economic calendar - key events and forecast (times in BST) Source: Daily FX Economic Calendar 9.30am - UK CPI (September): CPI to rise 2.4% YoY and 0.5% MoM, from 2.7% and 0.7%, while core CPI rises 1.8% YoY and 2.1%. Market to watch: GBP crosses

10am – eurozone CPI (September): forecast to rise 0.2% MoM. Market to watch: EUR crosses

1.30pm – US housing starts & building permits (September): starts expected to fall by 3.5% YoY, and permits to rise 1.2%. Market to watch: USD crosses

3.30pm – US EIA crude inventories (w/e 12 October): forecast to see a 1 million barrel rise in inventories. Markets to watch: Brent, WTI

7pm – US FOMC minutes: the committee’s decision to raise rates will be revealed in more detail, providing volatility for the US dollar and equities. Markets to watch: US indices, USD crosses Corporate News, Upgrades and Downgrades Afrimat expects earnings per share and headline earnings per share, for the interim period to be between 92 cents and 97 cents per share (2017: EPS of 102.4 cents per share and HEPS of 102.2 cents per share), reflecting a decrease of between 5% and 11% on the previous period. Pearson said revenue was flat for the first nine months of the year, and the firm has reiterated its annual profit guidance.  Barratt Developments has made a strong start to the year, with a 12.4% rise in forward sales, to £3.15 billion compared to £2.8 billion a year earlier.  Mediclinic said that first-half revenue fell 1% to £1.4 billion, while adjusted EBITDA was down 8% to £21 million.  Lyft has hired JP Morgan to lead its IPO for 2019, potentially increasing its value to over $15billion BlackRock’s stock falls by over 5% due to their third-quarter revenue results falling below expected results, totalling at $3.576billion in comparison to $3.648billion. Nevertheless, BlackRock published earnings per share at $7.52, in comparison to an expectation of $6.84 Audi to be fined £700million/$800million as an investigation occurred in relation to a diesel emission scandal Morgan Stanley increased more than 5% after the announcement of improved results in earnings. This led to earnings per share at $1.17 rather than the forecasted results of $1.01 Goldman Sachs had reached a higher level than estimates in profitability levels, resulting in $8.65billion of revenue from an estimated $8.4billion. This results in levels of $6.28 per share in earnings, from its estimates of $5.38. Volvo shares decline by 5% due to an announcement explaining potential emissions failure, with vehicles emitting illegal levels of nitrogen oxide Dollar Tree’s stock increased to highs of 7.1% after investor Carl Icahn had taken a stake in the company Uber targeting $120billion valuation for next year, as Wall Street banks advise that its worth more than three times the automaker Ford IBM revenue decline to $18.8billion in the third quarter, falling by 2.1% against expected results Shares of Tencent faces an extreme decline of 40% from January, eliminating more than $230billion in market value BillerudKorsnas upgraded to buy at SEB Equities
Coca-Cola HBC raised to hold at Wood & Company
Hellenic Petroleum raised to overweight at Pantelakis
KPN upgraded to overweight at Barclays ConvaTec cut to underperform at Credit Suisse
Handelsbanken downgraded to sell at DNB Markets
Michelin downgraded to neutral at Goldman
Safran downgraded to underperform at Jefferies
  IGTV featured video Information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary. 

KatherineIG

KatherineIG

Signs of life - APAC brief 17 Oct

Wall Street: It's still early days, but investors appear to have regained their nerve overnight. The Asian session was tepid, to be sure, however a rally in European and US equities reveal a market that has found its appetite for equities again. As the existing narrative would imply, much of this was underpinned by a fresh appetite for rate-sensitive US big tech stocks, which according to the NASDAQ, rallied almost 3 per cent overnight, leading both the Dow Jones and S&P in the realms of 2 per cent higher. Implied volatility fell, but remains relatively high at around 18, so of course it would be foolish to claim the recent sell-off is authoritatively through. In stating this, commentary has shifted away somewhat from risks from rates and tariffs, to anticipating the fruits of what is expected to be a bumper reporting season – particularly after the likes of Goldman Sachs and Morgan Stanley posted impressive results early this morning. Europe: Likely owing to being largely oversold to begin with, the strong activity in European equities come despite a mixed-news day for the region. Like much of the global-share-market following last week’s equity rout, valuations and dividend yields within European indices have become more attractive this week, apparently enough to attract buyers into European share markets, even against doubts regarding the strength of the region’s upcoming reporting season. UK data provided some impetus for the bulls last night, after labour market figures showed that the unemployment rate held at 4.0 per cent and average earning climbed by an above forecast 2.7 per cent. The GBP/USD pushed-up just below the 1.32 handle on the news, however rate markets were more-or-less steady, as traders ostensibly tie their BOE rate-hike bets to the outcome of souring Brexit negotiations.   Macro-backdrop: The boost to investor sentiment has infused equity traders with glimmers of confidence, though the greater appetite for risk hasn’t necessarily flowed through to other asset classes. Yields on US Treasuries were flat the last 24 hours, and despite climbing back above the 112-handle against the Yen, the US Dollar has failed to catch a major bid. Risk proxies like the AUD and NZD are a skerrick higher, with the Aussie Dollar floating about 0.7140, but gold is still finding haven buying, holding above a support line at $US1224. Moreover, proving that last night’s rally isn’t on the firm basis of greater confidence in global growth prospects, the Bloomberg Commodity Index edged 0.1 per cent lower, even considering a sustained increase in oil prices amid fears of lower supply because of a potential rift between the US and Saudi Arabia. ASX: The strong overnight lead has SPI futures pointing a 28-point jump for the ASX200 at this morning's open, following a day in which the Australian share market popped modestly higher from its oversold levels. The pop was reflected primarily in the activity in bank stocks, which rallied-off its own oversold reading, to collectively climb 0.55 per cent for the session. It was the materials space though that led the index higher, courtesy of a 1.4 per cent rally, despite the limited price gains in commodity prices yesterday. The day's trade establishes an interesting dynamic for the ASX200 today: the index fought unsuccessfully throughout trade to re-enter last week's broken trend channel. Futures markets has this transpiring at the open - a positive sign for the Aussie market.   Regional data: Despite leading to limited price action across the region, Asia was littered with fundamental data yesterday. It was kicked-off early morning our time, upon the release of key New Zealand CPI data, which revealed stronger than expected consumer price growth of 1.9 per cent annualized for that economy. The algo-traders seemed to kick-in post the event, pushing the NZD/USD to the significant 0.6600 handle, before human rationality took over the pair lower, primarily on the knowledge that the data wouldn’t change materially the RBNZ’s interest rate views. Chinese CPI data was also printed yesterday, revealing an-expectation figure of 2.5 per cent – up from the previous 2.3 per cent. Once again however, although inflation is proving to be running a little hotter in China, trader’s judged that the news wouldn’t shift the dial for policymakers and promptly moved on. RBA’s Minutes: Of domestic significance, the RBA released the minutes from their recent meeting, with very little novel information to glean: “members continued to agree that the next move in the cash rate was more likely to be an increase than a decrease. However, since progress on unemployment and inflation was likely to be gradual, they also agreed there was no strong case for a near-term adjustment in monetary policy”. The reaction in market was one of the more muted from an RBA release, registering barely a reaction across financial markets. There were some interesting points discussed from a purely academic perspective in the document – some substance for the economics-nerds – especially relating to hot global asset prices, but nothing in the way of potential policy approaches from the central bank. FOMC Minutes and Reporting Season: Approaching the half-way mark for the trading-week, investors prepare for its pointier end. The major event will transpire tomorrow morning local time, in the form of the FOMC Minutes from the US Federal Reserve’s last monetary policy meeting. Of course, most of panic and volatility in global markets has come because of the Fed’s hawkishness in recent times, so market participants will peruse the details of tomorrow’s minutes for insights that confirm or deny fears about higher global rates. The broader market will also engross itself further in US reporting season, with Netflix (for one) posting what is being considered currently a better than forecast set of numbers, by way of virtue of a smashing of subscription growth estimates.

MaxIG

MaxIG

Hurricane season in the US - Where to look for trading opportunities

Hurricane Michael is already regarded as one of the strongest hurricanes ever to hit US. The worst hit areas of Florida’s northwest coast saw significant damage to residential property, along with President Trump authorizing FEMA to step in and coordinate disaster efforts.  Even though the worst might have already passed, the 2018 North Atlantic hurricane season is likely to have sizable effect for the next seven weeks. The effect on the markets can be notable around this time, with the following sectors likely to see an increase in volatility. The energy sector is likely to be heavily impacted. Since oil in the US is mostly extracted in northern regions and refined in the areas around the Gulf of Mexico, oil’s supply chain could be disrupted. If refineries were to be impacted, the demand for crude could crumble, putting downward pressure on prices. Furthermore, any disturbance on the US oil export levels could positively impact petroleum-derived commodities’ prices as seen most notably with Hurricane Harvey in 2017 which saw Nymex RBOB contracts rise over 9% in three days. When we look at the local oil climate, it should probably be noted that the U.S. Energy Information Administration (EIA) reported rises in both crude oil and gasoline inventories. When it comes to soft commodities, cotton could be a major concern until the end of November. Carolina and Georgia produce around 20% of US cotton and only about 10% has been harvested. To add to the global landscape, India’s production of cotton could fall as much as 45% due to weather and income issues. Whilst the cotton markets are roughly flat from where they were at the start of the year, could bullish news and a lack of supply cause upside mobility for this market? Orange juice could experience even more volatility due to supply concerns in Florida. West in Mississippi delta, sugar fell 20% off mostly due to higher Real, but has been recovering since the 28th of September. Moreover, the sustainability of the bullish trend could begin to arise. You can find all this under the soft commodity section on the IG trading platform. On the stock markets, the Insurance and Reinsurance sectors are to be closely watched. As of mid-September, $36.6 billion in catastrophe bonds (CAT Bonds) were outstanding, $11.9 billion of which was issued this year, according to data collected by Artemis. The bonds, issued by insurance companies to mitigate their exposure to natural disasters such as hurricanes or earthquakes, pay a coupon to investors as long as a trigger event does not occur. Nevertheless, analysts at Keefe, Bruyette & Woods said that while hurricane Michael could have only modestly pressured the share prices of exposed Property & Casualty insurers and reinsurers, which was seen on Wednesday as equity indices tracking the sector and Bermudian reinsurance firm share prices fell, it won’t be a particularly major event for the market. Furthermore, wind and storm surge related insurance industry loss from hurricane Michael is estimated to be between $2 billion and $4.5 billion by Corelogic. Insurance-Linked Securities (ILS) funds, who provide financial instruments whose values are driven by insurance loss events, are also to be monitored. Such funds compete with traditional Insurance businesses and are therefore impacted by the very same external events. Last year, Atlanta-based Cox Automotive Inc. estimated that up to 500,000 vehicles were damaged by Hurricane Harvey and the floodwater that devastated Houston. Similar figures this year could prop up car sales in the region by relevant amounts. 
 

IG-Andi

IG-Andi

UK Data to forecast stability going into Brexit talks? - EMEA Brief 16 Oct

U.K. monthly average earnings and monthly unemployment release today at 9:30 BST. Earnings forecast to be stable at 2.6% whilst the unemployment rate is forecast to be 4%. The releases could be an important signal to the current economic health of the UK. The US federal budget deficit rose 17% to $779 billion in the 2018 fiscal year due to a surge in government spending. EM currencies rallied to a 2-month high as the Turkish Lira leads the way, climbing as much as 2.1%. The Brazilian Real and the SA Rand were also up, bolstered by the weaker Dollar caused by lower than expected US retail figures. China confirms a CPI (YoY) of 2.5% recovering two figures from the previous 2.3%. Oil prices could surge to all-time highs and ricochet across the global markets if the US imposes economic sanctions on Saudi Arabia amid heightened tensions over the disappearance of journalist Jamal Khashoggi. Bitcoin, Ether and Ripple jump in price as investors shift confidence from the dollar-pegged Tether. Asian overnight: A mixed session has seen Japanese and Australian markets gain ground despite losses throughout the Chinese and Hong Kong indices. Continued US trade war concerns are causing the market sentiment to remain weighed down. The Nikkei was the one standout performer, gaining over 1% amid a JPY sell-off overnight. Data-wise, the Chinese CPI reading saw a notable rise to 2.5% as expected, causing gains in the AUD. Although these have been largely erased as  the RBA minutes pointed towards continued low interest rates. The AUD unemployment rate change due on Thursday is important to consider and could see volatility around the AUD/USD. The expected figure is 5.3%. UK, US and Europe: The European session will be of particular interest today, with UK jobs in focus. Keep an eye out for the average earning figure. Yesterday’s schedule for the Italian coalition to put forward their new budget to the EU has been pushed, and as such we should see this come into play today. With the Italians expected to stand resolute for now, there is a good chance of 10Y yields rising further. With the US and Saudi Arabian relationship potentially turning sour, keep an eye out for oil prices which could spike in the event that Trump decides punitive action is necessary. Going forward, Germany is set to release the Import Price Index and the ZEW survey about economic sentiment. The data is forecast to be -9.1 vs the previous -7.2 in Europe. Volatility surrounds Italy as they await EU’s verdict with the Italian cabinet raising next year’s target budget deficit from 1.8% to a sharp 2.4% of GDP. A key thing to watch out for is the spread between the Italian BTP and the Bund as it is currently well above 300 - an increasing spread is indicative of rising volatility and uncertainty, especially for the banking sector. The EU leader summit this week is also likely to affect the markets as Prime Minister Giuseppe Conte is set to give a speech, whilst EU negotiator Michel Barnier will present a form of Brexit conclusion. In preparation for Brexit, Coinbase has planned to move to Dublin as part of their expansion in the EU and to retain the benefits of passporting for EU companies.  Economic calendar - key events and forecast (times in BST) Source: Daily FX Economic Calendar 9.30am – UK employment data: August unemployment rate to hold at 4%, and average earnings including bonus to rise 2.4% in August from 2.6%. September claimant count to rise to 10,000 from 8700. Market to watch: GBP crosses

10am – German ZEW (October): economic sentiment to fall to -14 from -10.6. Market to watch: EUR crosses Corporate News, Upgrades and Downgrades Meggitt has upgraded revenue guidance, with organic revenue growth expected to rise 7-8%, from a previous 4-6%. Stronger-than-expected Q3, up 6%, drove the improvement.  Merlin Entertainments reported a rise in revenue, but warned that the cost environment was ‘challenging’. Tighter labour markets across the globe have put pressure on wage costs.  British American Tobacco has revised down its full-year revenue target for next-generation products, due to a flat market in Japan and a product recall in the US. US retail giant Sears files for bankruptcy after failure to meet a $134m repayment. Cepsa, the Spanish oil and gas company, pulls its IPO plans amid market turmoil. This follows on from our piece yesterday on the correlation between IPOs and volatility. Admiral upgraded to buy at Goldman
Aggreko upgraded to outperform at RBC
Antofagasta upgraded to outperform at Macquarie
Homeserve upgraded to buy at Citi ConvaTec downgraded to neutral at JPMorgan
Intu downgraded to neutral at Citi
Superdry downgraded to hold at Stifel
Smith & Nephew downgraded to hold at HSBC IGTV featured video   Information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary. 

JoeIG

JoeIG

Dead cat bounce in Asia? - APAC brief 16 Oct

Dead cat bounce in Asia? The ASX200 really couldn’t catch a bid yesterday. Most concerningly, it happened within a back drop of slightly higher volumes, showing that the sellers truly washed out the bulls throughout the day’s trade. The Asian region kicked-off the week sluggishly in general, unable and unwilling to run with the lead provided by Wall Street on Friday evening. The action in Asia prompted calls of a dead-cat bounce across global equities, something that has since been proven premature, based on the mixed day witnesses overnight in the European and US session. There just appears such a general reluctance for investors to search for value in the Asian region, despite the cold-hard numbers implying that pockets of it exists. Of course, P/E ratios and yields never tell the full story, and often lag actual changes in earning’s forecasts. Yet still, it does feel surprising, if not concerning, that the pockets of value that exist aren’t being seized by investors. Where are the buyers? It’s none-truer than on the ASX200, ahead of a day in which SPI futures are implying a 1-point jump at the open. The Australian share-market is presenting as a trifle oversold, with the daily-RSI stuck at multi-year lows, but downside momentum slowing-down only gradually. An absence of growth investors has stripped the Aussie shares of much of their bid, in-line with investor behaviour across most equity markets in the face of rising global rates, but again, the curious point – one that sets the ASX200 somewhat apart at present – is the missing search for underling value. In principle, it shouldn’t be too difficult to find: the sell-off across the local market has pushed yields just-shy of 4.50 per cent, while the project 1-year P/E ratio for the overall index is just above 14:1. It could be that a VIX above 20 is too higher to attract buyers at this stage – it will be an important litmus test for the market as to whether the ASX200 catches a bid when this unwinds. ASX Downside: To be fair, there are some considerable headwinds for Australian investors that may preclude them from behaving in the same fashion as their US or even European counterparts. The banks look ugly now – less so the hard numbers, but more from the superficial perspective that their brands have been (justifiably) diminished by the effects of the Financial Services Royal Commission. The best-yielders on the Australian share market are comprised in a big-way by the banks, so a lack of yield chasers in the market could come based on a sizeable reluctance to buy banks, even at apparently cheap prices. Following a day for the ASX200 that only saw the energy space catch-a-lift, entirely due to a since faded bounce in oil prices, buying impetus could be difficult to come by in the day ahead for the index, as support around 5800 returns to trader’s sights. RBA Minutes: It won’t change much the trading dynamic for Australian shares, but some useful insights regarding the Aussie-macro backdrop will be handed to us in the form of RBA Monetary Policy Minutes today. The interest generally will be directed towards any idea into the confluence of factors stifling the Australian households: financial stability will be one, a lack of wage growth another, so will high levels of private debt amid falling property prices, along with increasing retail interest rates, and (to a lesser extent) how global risks will affect the local economy. Despite the abundance of information, for traders, the dial probably won’t shift in rates market expectations that an RBA hike won’t come until 2020; nor in the AUD/USD, which will probably find support at 0.7100 even in the event of the most dovish tone to the minutes. China: Zooming out the microscopic lens for a moment: Australian financial markets are being served no favours by what is transpiring in Chinese markets. It was another rough day for China-bulls, who were legged by a fresh bout of selling after news broke that US President Trump – while riffing in an interview with CBS – may consider a fresh round of tariffs on the Middle Kingdom’s economy. Counter-arguments based on fundamentals aside, there seems to few willing to bet on a strong Chinese growth story at presetn. The comprehensive Shanghai Composite hit lows not registered since November 2014, while the narrower, blue-chip laden CSI300 languished around 2015 lows. This week will be illuminating for investors regarding whether the growth-outlook is indeed this poor for China, with CPI data day (for one) kicking-off a slew of Chinese fundamental data releases.
Chinese growth, global growth: Perhaps it is so that the actions of Chinese policy makers are raising concerns about the country’s dubious growth prospects. Markets seem to interpret any policy intervention from the government or PBOC as a minor concession that things in the economy aren’t so great. The logic makes sense: there is the view that China’s economy is a touch opaque, and that Chinese data is prone to some level of manipulation. The offshore Yuan is manifesting signs of this scepticism, as the PBOC apparently conforms to the markets desire to devalue the Yuan, to potentially the key psychological barrier of 7.00. How far Chinese, and broader Asian indices, may fall before bottoming out is becoming an increasingly interesting question, as sentiment overrides the highly attractive valuations to keep the bears in control. Overnight: The underwhelming display in the Asian session translated into mixed European and US trade overnight. There was little depth of fundamental data, and though Brexit negotiations and fears of deteriorating ties between the global community and Saudi Arabia persisted, it wasn’t enough to incite panic in market participants. US Retail Sales disappointed slightly, but trade was defined more by a general lack of confidence in US investors: US Treasuries ticked higher and the USD dropped –benefitting gold again, driving its price temporarily above $US1230. A rotation away from growth stocks – that is, the tech-giants – continued by way of virtue of fears surround trade-wars and higher global rates, driving the NASDAQ lower, and  the Dow Jones and S&P500 weren’t able to catch and hold onto their early-bid, selling-off in late trade as investors struggled to grasp whether generally higher growth-risks will manifest in the upcoming earnings season.

MaxIG

MaxIG

Does volatility affect IPOs?

The music entertainment arm of Tencent, which has 800 million users across a variety of platforms in China, had originally planned to go public in the United States imminently. The IPO was initially set to launch as soon as this week but has now reportedly been delayed because of the recent global sell-off. It is not the first company to pull out or postpone an IPO in the recent weeks, and whilst Tencent have declined to comment on the decision, it’s likely to be on the back of volatility seen in the equity markets. Companies prefer stable market conditions to launch their IPOs because they are more likely to be able to correctly predict their valuation and generate the required funds. They usually have a set figure they are trying to raise and offer shares accordingly. If market conditions are stable, companies are more likely to be able to predict if their target value is likely to be raised. In volatile markets, like the one experienced last week, market perceptions on financial stability and future economic conditions start to show. If the most important stock indices suddenly drop, there is a consensus that future economic stability might be in jeopardy. Company’s futures are questioned and therefore the perception of such are hindered. If investors have doubts about the future of a company’s operations and earnings capacity, they are less likely to devote a part of their capital to such company. Volvo (owned by the Chinese multinational automotive company Geely) have also recently backed out of an IPO, stating that the ongoing trade wars are to blame. Volvo exports vehicles from China to the US and is therefore at the centre of the tariffs to be imposed by the US government on Chinese goods. The reasoning is clear, tariffs on their car exports are going to affect the company’s ability to generate earnings. Therefore, investor’s sentiment towards Volvo will have worsened, meaning that if the company launches an IPO, the value they will place on the shares will be lower. So why did Aston Martin decide to go forward with its IPO earlier this month? Well, the primary reason is the fact that they are a UK based company, meaning that they are not at the centre of the trade wars currently taking place between the US and China. This does not mean that they are free from turmoil, as worries over Brexit and US tariffs on EU cars are still concerning to investors. What also helps is the diversification seen on their order book. Whilst the UK remains their biggest market seeing 30% of sales, mainland EU sees 25%, with APAC and the US seeing 24 and 20% respectively. Geographically diverse revenue streams should have helped dampen these worries, resulting in Aston Martin making its market debut on the 3rd of October. We didn’t see that on IPO day, with investors less than willing to match the valuation. The share price has been moving down from its initial opening price of £19, shedding over 20% in the first couple of weeks trading. Not a great result. When we look at volatility vs the number of IPOs over a 15 year period we can see a correlation between the two. Of course you’ll have outliers, and whilst a company can benefit from launching in a volatile market, generally the lack of uncertainty and an increase in volatility reduces that. Souce: Renaissance Capital When we look at the specific case surrounding Tencent Music, we can see that Tencent Holdings dropped with the rest of the market on Thursday, from around 286 to 268. On a longer time frame Tencent have come off nearly 18% in October alone, and whilst some of that price action has recovered it does beg the question: is it really a good idea to launch your IPO when your market value has dropped so suddenly? What if the opposite happened, would it be more favourable to launch an IPO if your share price has suddenly risen?   Source: IG Dealing Platform Put simply there is still volatility in this situation, and there is a lot of movement going on in the market. Predictions on how to accurately value a company, irrespective of buy side or sell side volatility, are far harder, making an IPO far less likely. There are a number of IPO guides out there which can make for interesting reading, and a very good blog post from an ex-president of NYSE Group, Tom Farley. Whilst he does lay out obvious requirements such as having the right executive team on board, a good business case for going public, and good audit processes, a number of other factors come down to accuracy and forward looking speculation. A clear strategic roadmap, a realistic valuation, and an accurate financial forecast performance all rely on a calm landscape. All of these things become exceptionally harder during times of high volatility. With the recent spikes in the VIX there’s an argument that says companies should hold off on their IPO. With that said each new proposed listing should be viewed on a case by case basis. You can register your interest for upcoming IPOs with IG to make sure you’re kept in the loop here. https://www.ig.com/uk/investments/share-dealing/ipos Any questions, please feel free to add them below. 

DanielaIG

DanielaIG

How will the next Brexit talks affect the pound and UK economy?

This week sees Brexit negotiations between the UK and EU come to the forefront once more. IG's own Sara Walker will be joined by Nick Cawley from Daily FX and Simon French, Chief Economist to UK merchant bank Panmure Gordon, to discuss how the meetings outcome could affect the FX market.  The second #IGForexChat You can join us on Thursday 18 October at 6.30pm (BST) live on IGTV to get involved with the conversation. Submit your questions directly to the panel by adding your questions below, or by replying live in real time using the #IGForexChat hashtag on a number of social media platforms.  Topics to cover can be defined by you and other IG clients, so make sure you get your questions in now.  Overview of how the pound (EURGBP/GBPUSD) has been affected together with other indicators such as FTSE 100 What the possible outcomes of the next Brexit talks look like? Is Brexit also affecting other currencies such as the Euro/Dollar? Trading tips depending on final deals The speakers Simon French: Chief Economist at the UK merchant bank, Panmure Gordon & Company. He is a Top-5 ranked economist in the City’s Extel rankings and has a monthly column for The Times newspaper. Prior to joining Panmure Gordon he was a Senior Civil Servant, latterly at the Cabinet Office as Chief of Staff to the UK Government’s Chief Operating Officer.  He holds an Undergraduate and Postgraduate degree in Economics & Finance from Durham University and is a member of the Government Economic Service and the Society of Professional Economists. Nick Cawley: more than 30 years of experience covering a wide range of financial markets and instruments. After nearly two decades of trading and broking a variety of fixed-income products, Nick turned his hand to reporting and analysing macro and micro events in the fixed income and foreign exchange sectors. Submit your questions now Get involved with the #IGForexChat and put your questions to Simon and Nick. Submit your questions below. 

JamesIG

JamesIG

Turbulent IMF talks impact Asian Equities - EMEA Brief 15 Oct

IMF Managing Director Christine Lagarde commented that U.S. stock valuations have been “extremely high”, possibly implying a correction. On a similar line, U.S. Treasury Secretary Steven Mnuchin insisted that the stock sell-off wasn’t “surprising”, while insisting that U.S. fundamentals remain strong. Lagarde also advised to be ready for more market volatility During IMF U.S.-China trade tension was cited as a major reason for cutting its outlook for global growth. Intense Brexit talks this weekend ended in a deadlock. Even after an unscheduled meeting between Raab and Barnier, the UK and the EU could miss this week’s key landmark as there will be no further attempt to resolve the issue before EU leaders gather in Brussels on Wednesday. Report suggests that there is a number of key Tory officials ready to quit May’s cabinet, should UK not leave the customs union. Equities in Asia did not follow up on the Friday traction. The drop which was led by China comes after warnings about global fragility at the annual IMF gathering. Chinese stocks were hovering around 4 years low, whilst indices in Japan, Australia and HK were also down. Gold is pushing higher. The SPDR Gold Shares ETF had a positive weekly chart with “reversion to the mean” at $117.66. The equities uncertainty, the ongoing trade war, the upcoming mid-term elections in the US and the potential for an additional rate hike in December, all account for the gains in the safe haven. WTI Crude rose 1.1% to $72.15 a barrel. Despite long-term worries for demand, geopolitical tensions over disappearance of Saudi journalist stoked worries about supply The Pound weakened overnight against the dollar. Brexit gridlock could be the main reason Amidst trade tensions and turbulent IMF talks, the CNY/USD rose 0.2%. However, China unlikely to let the currency weaken past the psychological level of 7 per dollar. In fact, the People’s Bank of China announced last week a cut to the RRR for the fourth time this year. The Long Dollar ETF is positive with the ETF above its "reversion to the mean" at $24.96 Asian overnight: Another day, another sea of red across Asia Pacific markets, with Japanese indices leading the declines. A strong end to the week for US markets did little to encourage traders overnight, with gains in the Yen dragging the Nikkei and Topix. During IMF talks, BOJ governor Kuroda comments that when the Bank of Japan is ready to signal the start of an exit from monetary stimulus, the shift will be seen in interest rates. Meanwhile, inflation in the country remains at 1%. China central bank governor Yi Gang sees plenty of room for adjustment in interest rates and Reserve Requirement Ratio (RRR). UK, US and Europe: Last week saw the hardest shakeout since February’s correction with around $2.6 trillion of investor wealth loss and no clear firing gun, apart from the trade tensions between US and China. The MSCI World Index continues to nosedive below its 200-day moving average. The big question remains: is a major correction on its way, or that this is just a great “buy the dip” opportunity? Political uncertainty glooms in Europe. Merkel’s Bavarian allies lost absolute majority in a regional election. Meanwhile the Alternative for Germany (AfD) party reached 11% and won its first seats in the state parliament. In Scandinavia, Sweden enters its second month of political turbulence following September’s inconclusive election. The four-party opposition Alliance abandoned his attempt to form a government, while yesterday the “Nordic nation and moderate Party” leader Ulf Kristersson informed that he saw no viable way to form a working coalition with his center-right opposition colleagues and the Social Democrats. Italy is expected to generate even more uncertainty ahead of the presentation of the budget plan in parliament next Saturday. During IMF talks in Bali, ECB Governing Council member Francois Villeroy de Galhau commented that the ECB’s policy path “does not depend on the fiscal uncertainties that can appear in member states”. US treasuries rose amid cautious tone at the IMF talks. On the other hand, as the US mid-term elections on November 6 draw nearer, the steeping in the yield curve may provoke more fury from Mr. Trump about interest rates. US Treasury Bonds and Notes can be found on the IG trading platform. Economic calendar - key events and forecast (times in BST) Source: Daily FX Economic Calendar 1.30pm - Retail Sales ex Autos: forecasts for  0.3%, in line with the previous release  1.30pm -  Retail Sales control group (total industry sales): consensus at 0.4%, up from previous release of 0.1% 10.45pm - New Zealand CPI : forecasts at 0.7%, up from previous release of 0.4% Corporate News, Upgrades and Downgrades Superdry said that warm weather in the summer and autumn, plus greater foreign exchange costs, would hurt full-year performance. Overall mid-single digit global revenue growth is expected.  ConvaTec has cut full-year earnings guidance, due to a cut in requirements from its biggest customer. Adjusted earnings are expected to be 23-45% over the year, compared to a previous 24-25% guidance.  Greencore will sell its US business to Hearthside Food for £817 million in cash.   GN upgraded to buy at HSBC
Lundin Petroleum upgraded to neutral at Citi
Siemens Healthineers upgraded to buy at HSBC
Thule upgraded to hold at SEB Equities

RWE downgraded to add at AlphaValue IGTV featured video Information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary. 

IG-Andi

IG-Andi

Dividend Adjustment 15 Oct - 22 Oct

Expected index adjustments  Please see the expected dividend adjustment figures for a number of our major indices for the week commencing 15 Oct 2018. If you have any queries or questions on this please let us know in the comments section below. For further information regarding dividend adjustments, and how they affect  your positions, please take a look at the video.  NB: All dividend adjustments are forecasts and therefore speculative. A dividend adjustment is a 
cash neutral adjustment on your account. Special Divs are highlighted in orange. Special dividends  You can see the special dividends listed below. Unfortunately we do not have granular insight on the effect on the index for the index in question, however the below maybe helpful for some. Please note the dates below are the stock adjustments in the underlying individual instrument, whilst the index div adjustments are taken out the day before on the IG platform at the cash close. Index Bloomberg Code Effective Date Summary Dividend Amount AS51 APO AU 19/10/2018 Special Div 42.8571 How do dividend adjustments work? As you know, constituent stocks of an index will periodically pay dividends to shareholders. When they do, the overall value of the index is affected, causing it to drop by a certain amount. Each week, we receive the forecast for the number of points any index is due to drop by, and we publish this for you. As dividends are scheduled, public events, it is important to remember that leveraged index traders can neither profit nor lose from such price movements. This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

JasmineC

JasmineC

Is the sell off over? - APAC brief 15 Oct

Rout over? There are tentative signs that the global equity rout witnessed last week has subsided, at least for now. The tone shifted during Asian trade on Friday, and despite a weak day for European markets, Wall Street ended the week on a positive note, led by a bounce in the major tech stocks. It’s not to say that there isn’t the risk that this sell-off may not continue at some stage this week: in fact, futures markets are indicating a sluggish start for Asia today. More to the point, the fundamentals haven’t changed and the concerns that precipitated the tumble in share markets are still there. True, bond yields are now 10 points down off their highs and some positive news about the trade war and Chinese growth boosted sentiment on Friday. But neither of these issues have disappeared and will almost certainly rear their head again. Fundamentals haven’t changed: The crux of the matter is that, as has been repeated ad nauseum, interest rates in the US are going higher and that seems very unlikely to change. The growth story in the US is so strong that the Fed feels compelled to keep telling us so, as it apparently prepares markets for the inevitable end of the easy money era. If this is the case, then maybe the kind of wild bursts of volatility above 20-25% (if assessed against the VIX) sporadically is the new norm. Markets have seen two bouts of it this year already, largely due to the same structural factors, though it must be said that provided we’ve arrived at the end of this sell-off, the impacts were much smaller than February’s. Nevertheless, assuming continued strength in the fundamentals, a more turbulent journey on this bull-run could become the status quo.

A sell-off, not a correction (yet): Once again: this assessment is entirely predicated on the belief that this pull-back has come to an end, which with a high-impact week ahead of market participants, is less than guaranteed. There may be an element of being at a cross-road now, though it’s almost always impossible to tell whilst moment whether this is so. Despite the opacity of the current market conditions, defining what’s so far been seen is appropriate, especially to provide perspective regarding the panic some have felt toward the notion of a “correction” in the market. Different geographies and individual indices must be judged differently, but if Australian and US markets are the yardsticks, neither are at a technical correction phase yet. A true correction is a sell-off of over 10 per cent from highs, something the major US indices nor the ASX has experienced yet. ASX: SPI futures are pointing to a soft start for the week for the ASX. The last price on that contract is indicating a 51-point drop at the open, furthering last week’s rather heavy losses. First glance suggests that the drop-in financials stocks on Wall Street, which fell by way of virtue of the pullback in US Treasury yields, and despite strong earnings updates from JP Morgan Chase & Co. and Citigroup Inc, will follow through to the Australian share market today. The boost to US tech stocks may bode well for the pockets of growth stocks in information technology and healthcare within our market, as too may the slight lift in industrial metals prices and oil over the weekend. However, even considering these modestly improved fundamentals and a solid lead from Wall Street, perhaps the break of a technical medium-term uptrend on Friday has tipped the balance of activity in favour of the sellers.

China and greater Asia: Being a Monday, the Asian region is at risk of witnessing a lack of volume on the markets today, on the back of a US session Friday that experienced a 30 per cent lift in its average volume. That could make markets sputter a little, however several events and a general positioning for the week could turn that around. An impetus will need to come out of China to see noteworthy shift in sentiment, be that bullish or bearish, as traders attempt reform their views on the Chinese growth story. That narrative received a much-needed boost during last week’s final trading session, after the release of much better than expected Chinese Trade Balance data assayed some concerns relating to the impact the trade war is having on Chinese growth – a belief that will be tested throughout the week by a slew of Chinese fundamental data releases. Fundamental economic data: Fundamental data will be abundant in the week ahead for market participants, both domestically and abroad. Interest rate traders will be treated to insights from the RBA in tomorrow’s RBA Monetary Policy Minutes on Tuesday, FOMC Minutes on Thursday morning (AEDT), along with several speeches from central bankers throughout the week. Volatility in currency, money and credit markets was nowhere near the levels registered on share markets last week, although a safe-haven plays into US Treasuries, the Yen and Gold has emerged. Given the primary cause of Thursday’s major sell-off can be tied back to interest rate expectations and activity in US Treasuries, the FOMC’s minutes will probably be the most watched event. The yield on the benchmark US 10 Year Treasury note is down to 3.16 per cent currently, 10 points below the highs that ignited the stock market sell-off: an overly hawkish tone in the Fed’s minutes a risk of bringing a return to this dynamic. Political economy: Geopolitical risk will lurk in the background to the week’s trade, threatening to dull risk appetite above and beyond the uncertain fundamental outlook for markets. A Brexit deal could eventuate this week, in what could amount to the final round of talks between the UK Government and European bureaucrats. An eye on China and particularly its handling of the Yuan could be a hot-point, after the US Treasury department opted not to label the Chinese policymakers as currency manipulators, catalysing a rally in the Yuan, before the PBOC intervened and enacted another controlled devaluation on Friday. Finally, fears of disruption in the middle-east and therefore oil markets could flare-up, as relations deteriorate between Saudi Arabia and the global community on the increasing possibility that the Saudi’s brutally murdered a anti-establishment journalist within the Saudi Arabian embassy in Istanbul.

Information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

JasmineC

JasmineC

Have risk trends turned? Are trade wars improving? Beware European risks - DailyFX Key Themes

Risk Trends Trembles, Is it the ‘Crazy’ Fed’s Fault Market’s suffered a painful correction this past week. From peak-to-trough, the benchmark I like to refer to as a measure of hold-out enthusiasm, the S&P 500, dropped nearly 8 percent. That is still a ways from the technical ‘bear market’ designation which is a 20 percent correction from peak highs, but that scale of loss from a seemingly indefatigable climber rattles confidence. To be clear, the slump in sentiment was not isolated to the US equity market. That was just among the more remarkable victims of the speculative swoon owing to its typical outperformance. Looking across the other capital markets with a risk bearing, there were meaningful losses registered from foreign shares, carry trade, emerging market assets and more. The intensity of these other assets however was notably less severe than what was registered from the lies of the S&P 500. Some would take this as an indication of source from and thereby restriction to US-based trouble. I, however, think this is just a retreat that is commensurate to how much premium there is to unwind. The US indices have continued there climb these past months while other related risk-profile assets have spun their tires either leveling out or falling into retreat. So, while the implosion by the Nasdaq 100 (dropping over 10 percent from peek) and its direct peers was violent, other sentiment forerunners like the EEM Emerging Market ETF registered smaller percentage declines to fresh multi-month or multi-year lows. The risk aversion was deeply rooted and carried wide influence. The question is whether the inexorable momentum behind a sentiment collapse is already underway. Much of that depends on motivation. We still have event risk that has set off few alarms recently as well as themes like trade wars which cued few explosions beyond their already-troubling contributions. US President Donald Trump took a jab at the Federal Reserve who labeled the group ‘crazy’ for tightening the reins on policy and seemingly laid the blame at their feet. I don’t think they are really to blame for this move, but they certainly contribute to the environment that has necessitated it. Years of expansive monetary policy that stretched far beyond the need insinuated by the economic and financial recovery encouraged/forced speculative build up to unsustainable levels. When the inevitable withdrawal has to begin, the monetary policy authorities of the world are held hostage by a predicament that sentiment has been founded on these groups’ shoulders. Through the end of this past week’s plunge, there was a remarkable bounce through Friday – with the largest opening gap for the Dow since 2000 – which will tempt the Pavlovian response from dip buyers. However, the reversion to complacency will not hold forever. The gap between major market corrections is diminishing as recognition of the major fundamental risks grows. Remain flexible and have plans for bound or utter unwind.  Light at the End of a Trade War Tunnel? We have seen some of the more prominent fronts on the on-going trade war find some measure of resolution lately. The holdout in negotiations between Canada and US was resolved and the three members are heading to a resolution that will bring about the USMCA (US Mexico and Canada Agreement). Whether the new program is more fruitful than the old one for the US or any other member is up for debate, but the fact that the threat of serious financial fallout from uncertainty in no resolution is not. Could his give some clue as to how the US plans to conduct negotiations to their conclusion with other countries in its line of sight? It certainly could stand as a template for the likes of Japan and the European Union (EU). These two major economies have not fallen into outright economic conflict with the United States. The willingness to appease in order to avoid the repercussions of lost business, investor and consumer sentiment in the face of verbal threats may show through. However, that is not likely the case with China. The US has found comfort in going after a country many have decried for unfair trade practices in the past and they have already applied aggressive tariffs. That said, the US Treasury is due to release its assessment on China, including whether to label the country a currency manipulator or not. According to sources, they did not find the country met the designation, but that is up to Treasury Secretary Steve Mnuchin who will have the President’s words in his ear. The US is unlikely to back out of its engagement without some further concessions, while China has pushed back such that its cost to meet this high bar requirement may pose more significant damage to its effort of maintaining a balance of landing steady growth and holding financial stability. Even if the situation was to be fully resolved as of tomorrow, it may have already pushed sentiment beyond a crucial threshold where recognition of more serious, systemic problems put us on an inevitable course. To add to this complexity, not all of the diplomatic scuffles are purely kept to decorous tariffs. The sanctions the US is returning to Iran are unlikely to be walked back, and that is creating greater tension with key trade partners (like the EU) which have economic and financial ramifications. Such economic/financial wars can escalate and get out of control faster than those who pursue them intend.  A European Threat Rising and Another Cooling Europe’s fundamental health will take on particular importance over the coming week. Having ground on for over a year-and-a-half – and earning near-constant coverage in the meantime – the Brexit negotiations will hit another crescendo. The EU summit on Wednesday and Thursday is another one of the key last-minute turnoff points for the two sides to find common ground on the divorce before hitting a point of no return. We still have over five months before the official separation is due to take place, but there are still many political steps that need to be taken in order for a solution to be agreed upon and put into action before the cut-off date. This past week, there was yet another clearing in the ominous cloud cover when the EU’s chief Brexit negotiator, Michel Barnier, offered uncharacteristically optimistic remarks regarding the status of discussions between the two sides. He noted the progress made recently and suggested a deal could be struck as soon as this coming Wednesday – when he has more consistently warned that they were heading down a path of the UK crashing out of the relationship. Yet, despite his enthusiasm, there are still key sticking points (like the Irish border); and reports over the weekend indicate progress stalled before important breakthroughs were made. It has been suggested they will not hold technical discussions again until Wednesday – which would insinuate this will have to be a top-level call. Tuesday, Prime Minister Theresa May is reportedly going to gather her Cabinet in order to cement a common front in the discussions over the days following. If there is a breakthrough by Thursday, expect the Sterling to have a considerable rally ahead of it. Should they again fail to find common ground, the mood will darken significantly as the clock winds dangerously short. Unfortunately for EU leaders, the two-day meeting will not be a one-topic event. Besides Brexit, global trade strains and diplomatic troubles (between the US and Iran); the heads of state will have to address Italy. The third largest economy in the Euro-area, Italy has made clear its intent to bolster spending beyond the EU’s acceptable targets. The only scenario for which they will fall in line is based on an improbable forecast (a 1.6 percent or better GDP clip next year). This tests the tolerance of the collective versus the conviction of a member who has seen anti-EU sentiment grow out of economic struggle. Remarks by Italian leadership that the ECB could be a backstop if things grow too problematic for Italy in the market, only draw clear attention to the situation by global investors. The ECB’s reported rejoinder that such help would only come after a bailout only raises the specter of a return of the Eurozone debt crisis of six years ago. While official EU remarks surrounding this situation will be key, there are numerous other events that should be watched carefully to stay abreast of this situation. The Italian Prime Minister is due to speak the day before the EU meeting’s first day, the Finance Minister is set to speak, the Deputy Premier is on the docket for multiple appearances, but it is perhaps his visit to Moscow Wednesday that will draw some of the greatest scrutiny. Keep tabs on Europe.

JohnDFX

JohnDFX

DOW dropped further, banks to report Q3 earnings - EMEA Brief 12 Oct

The Dow Jones continues its tumble, losing more than 1,300 in two days, as worries over interest rates and trade barriers continue.  The S&P dropped 2%, bringing its October losses to 6% The sell off in the US also saw sell offs in Europe, with FTSE down 1.9%, DAX 1.3%, CAC 1.8% and EU STOXX 1.95%. The VIX rose almost 9%, reaching it’s highest levels since February this year Despite rising interest rates and a booming economy, bank stocks are trading lower, reaching bear market, ahead of earnings reports.  XRP and Etherum lead the cryptocurrency downfall which has lost $6 billion in a day. Gold hits its highest price in two months on Thursday after a rough 6 months. As a typical safe haven asset, people have turned to gold in the last few days as world stocks tanked. Despite the ongoing trade wars with the US, China has reported a trade surplus of $34.13 billion in September, which economists believe is due to increase orders before the tariffs are enforced, which is likely to have an impact on the months to come.  Asian overnight: A degree of recovery has been seen in Asian markets, with a general rebound in risk appetite. US markets were more mixed, but futures have begun ticking higher ahead of bank earnings later today. Oil prices also recovered, after suffering sharp losses earlier in the week. Regarding the downfall in cryptocurrencies, although the direct cause is unknown, the recent negative sentiment towards cryptocurrencies from important financial institutions could have led to the downfall. Alternatively, it could be a market triggered sell-off, where people are looking to move cash into safer assets. Meanwhile, BitFinex has suspended fiat deposits and stopped accepting bank transfers despite initial denials. The suspension raises fundemental questions about its operations. UK, US and Europe: Dow dropped a further 545 points on Thursday, bringing its 2 day loss to 1300. The S&P dropped 2%, bringing its October losses to 6%. Tech sector is worst performer, losing 4.5%, while financial sector is 2nd worse. Global equity markets are today rebounding from the selloff we have seen this week, rebounding to around 25500 from the market low of around 25000 at the close yesterday. With the underlying global risk catalysts remaining in play, markets will be assessing whether todays move is one which is sustainable or not. Metal prices are modestly lower this morning after staging a rebound yesterday which gained significant traction into the afternoon. The dollar is softer, while the Euro and British Pound are the better performers amongst the majors today as  Brexit discussions show signs of progression. Bank Earnings season kicks off today with three big players standing out: JPMorgan, Wells Fargo and Citigroup. Analysts are forecasting that banks will post their highest profits since the financial crisis as they are said to enter a “golden age”, fuelled by rising interest rates.  According to the FT, "JP Morgan is expected to post a 30 per cent increase in third-quarter profits year-on-year, according to analysts polled by Bloomberg". Across the broad sector, earning are expected to rise 17.7% and revenue increasing by over 7%. When interest rates increase, banks should have more room to increase the rates they charge on loans, relative to the rates they pay out on deposits; this would allow banks to increase their interest margins. But if the increase in rates is deterring customers and businesses from borrowing, then that would hinder bank profits. This means that, despite the general positive outlook regarding the US economy, there are some investors that are becoming sceptical about how long this continued earnings growth can be sustained. They believed that the reason why banks’ profits have been strong throughout the year has more to do with corporate tax cuts than with rising profitability. One of the biggest worries is a weak loan growth, being led mostly by mortgages. South Africa: The rand has continued to claw back strength. Tencent Holdings is up nearly 7% this morning suggestive of a strong start for major holding company Naspers. BHP Billiton is up 1.3% in Australia, suggestive of a positive start for local diversified resource counters. Economic calendar - key events and forecast (times in BST) Source: Daily FX Economic Calendar 3pm – US Michigan consumer sentiment (October, preliminary): expected to fall to 98.5 from 100.1. Market to watch: USD crosses Corporate News, Upgrades and Downgrades Man Group reported a small rise in assets under management for Q3, to $114.1 billion from $113.7 billion. The firm will establish a new holding company in Jersey in order to help deal with growth in the US. Ashmore saw a 3% rise in assets under management for the three months to 30 September, to $76.4 billion, as clients responded to increased volatility across emerging markets Tiger Brands:  the Ekurhuleni Department of Health issued a Certificate of Acceptability to the Company for the Germiston processing facility. This endorses the factory’s standards and operating procedures for the safe production of food products. Production of ready-to-cook products, comprising bacon and frozen sausages, is expected to commence on 12 October 2018. Salami production will also commence on this date.   Kvaerner Upgraded to Buy at SEB Equities
Siltronic Upgraded to Hold at Berenberg
Covivio Upgraded to Add at AlphaValue
Paddy Power Upgraded to Hold at Berenberg Magnolia Bostad Downgraded to Sell at SEB Equities IGTV featured video Information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary. 

DanielaIG

DanielaIG

Trend reversals and new lows - APAC brief 12 Oct

What happened? The sell-off continues, and despite a brief pause during Wall Street trade that opened hopes of an end to this rout, it was quickly dashed as investors went back to dumping stocks. The chaos that has ensued in the last 24 hours raised myriad of questions. But the first one is inevitably this: why did that happen? In short: there’s not a clear answer. That isn’t to say that there isn’t reasoning behind the sell-off; on the contrary, there’s plenty to explain it. Rather, it’s a matter of “why now?” – an explanation that has proven elusive for market participants. From some sort of academic perspective, it’s a matter that begs to be resolved, but for those with skin in the game and money on the line, it’s secondary to the fact that this is happening, and a rapid-response has been required.     Higher rates: This being so, it warrants an examination on the state of play. US equities – the shining beacon atop the dimming global financial landscape – became hobbled about a fortnight ago after a slew of US Federal Reserve speakers came-out to implore that growth was so “extra-ordinary” that interest rates may not yet be near the “neutral rate”. Not only that, the US economy could run so hot that a move in rates above the “neutral rate” may be required, to lean on a booming US economy. Bond markets responded violently to the new information – as is well known – with traders demanding higher yields on US Treasuries, sending the US Dollar higher, stretching US stock valuations in certain segments of the markets to unattractive levels, and generally denting risk appetite.   Slower growth? Though such structural challenges reared their head, the initial reactions from investors were on-balance positive: the Fed needs to raise rates because the US economy is just that strong. This is a positive thing, it was rationalized: fundamentals are good, so the bull-market should continue. This idea became challenge this week for US investors, as dark clouds started to brew on the eastern horizon: China looks as though it could be slowing, and the trade war could make this worse. A world of slower Chinese growth is a world without a strong economy; and that means, for the many US corporates exposed to the slings and arrows of China’s outrageous economic fortunes, lower profits and lower returns for their shareholders.    Panic-stations: With this as the very simple fundamentals, momentum in the US equity market slowed-down, probably as flow-chasers exited the market, robbing equities of their bid and beginning the cascade in prices that we’ve witnessed the last 48 hours. Frenzy has of course ensued, as investors bank profits where they can and take advantage of the gains the mighty bull-run on Wall Street has delivered. The panic has naturally spread to equity markets throughout Asia and to Europe, sparking calls that the divergence in US markets and the rest of world – that has characterized months of trade – is coming to an end: the last bastion of strength in the post-GFC, easy-money-era bull run is falling.   Trend reversals and new lows: Trend lines and support levels are being broken everywhere you look. The global recovery (good since March) following February’s massive correction has ended. Chinese and Hong Kong markets have hit new lows, on some indices ones not seen since 2014, even despite very attractive valuations. Japan’s Nikkei has tumbled from 27-year highs to wallow back around the low-22,000-mark. European shares are on the precipice of breaking-levels that would open downside to near-12-month lows. And the ASX is hugging an upward trendline resistance level established in early-2016, when the global growth story was barely a twinkle in the global economy’s eye. Here, the bears have begun to circle, waiting to profit from a massive, long term trend reversal that vindicates the widely held view that markets can’t possibly prosper without central bank support.     Market psychology: Here, it’s time for a moment of pause. The whirlwind of panic-selling and confusion that has stripped market participants of their rational faculties has laid the fertile soil for the described narrative to flourish. It’s not that individual traders aren’t aware of this either – the hysteria is easy to see, and more importantly see through. But when your money is on the line, and precious profits are being eroded, why hold your position when you can’t be sure that everyone else isn’t crazy? Or even more appropriately: why hold your position when you can’t be sure that everyone else isn’t thinking that you are crazy, and that they aren’t about to dump their positions in anticipation of you dumping yours in some hysterical haste? Either way, as a rational, self-interest investor, it’s best not to risk it – sell now and take profit before the herd wipes it all away.   Waiting for calm: So now markets get stuck in a death spiral, and though plenty of contrarians try to pick a bottom, most generally get swept aside by the wave of selling. The weekend couldn’t come sooner for markets now because a break from the madness is needed to regain some equanimity. A focus on the fundamentals is required, to assess where true value lies in the current market milieu. Price action on Wall Street last night indicated signs that perhaps this is beginning to manifest: the session saw another close in the realms of 1-2 per cent lower, but the extent of losses vacillated throughout the day. US tech, which with its high concentration of rate-sensitive stocks, demonstrated that investors still have appetite for growth stocks, with the NASDAQ registering the smallest losses of the major US indices.   Day ahead: Risk appetite won’t be whetted by what happened on Wall Street (or Europe too, after credit spreads blew out again courtesy of new animosity between Rome and Brussels) overnight. Futures markets are pointing to another ugly Asian session, characterized by some rather aggressive selling. Buying into equities anyway (no-less in riskier Asian markets) at this time would be considered especially imprudent. Safe-havens will be in vogue today: the growth-versus-risk proxy, the AUD/JPY, remains wedded to the 79.00 handled, US Treasuries have climbed, with the yield on bench mark 10 Year note falling to 3.13 per cent (perhaps supported by last night’s soft US CPI print), while the US Dollar is being punished, driving funds into gold, which has torn above the $US1220 price.   Australia: SPI futures point to a 47-point drop at the open for the ASX200, with IG pricing suggesting the market should land just above support at 5810. If this proves to be so, and a close below 5860 is registered, a 2-and-a-half-year trend will come to an end. Health care stocks may see some staunching of their falls, if the activity in US tech is anything to go by; but the energy sector and materials space will likely struggle, given the drop-in oil prices to $US80.00 last night, coupled with the general dip in commodity prices. The Australian Dollar is experiencing strength, but only because of a weaker USD, with the strength of our currency possibly hinging on how well the contained slide in the Yuan can be managed by the PBOC. All in all, the day shapes up as another challenging one, as Australian investors enter the final trading session of a week, that for many, couldn’t end sooner.     Information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.  

JasmineC

JasmineC

Tech Sell-off Leads Global Decline - EMEA Brief 11 Oct

US sees largest market fall in 8 months with the Dow Jones losing over 800 points  in the main session. Asian markets followed suit with both Tokyo and Hong Kong down over 3%. The Taiwanese index was down 6% with the MSCI Asia Pacific average coming in at an average loss of  3.5% for the region The tech sector saw the biggest losses yesterday with FANG companies losing between 4-9%  Oil saw its biggest 2 day loss since July as supply concerns continue. The US are set to announce their inventory levels later today Hurricane Michael has continued to batter the South-East coast of the country and is reportedly the largest hurricane to hit the area since 1992 but has now been downgraded to a tropical storm The Cryptocurrency market lost over $12 billion of market value after a period of relatively low volatility, something the asset class isn’t particularly known for. Bitcoin now stands 68% lower that it’s all time high. This comes amidst reports that theft of the digital currency has hit 1 billion in the last 9 months. Going into Thursday, volatility may continue with US CPI numbers being released. Bulls will be hoping to beat forecasts of 2.4% to help recover yesterday’s movements. Gold is likely move if there is a divergence from forecasts. The VIX pushed past 20 after yesterdays volatility. The dollar declined against all G-10 peers following the sell-off. Asian overnight: Chinese espionage tensions continue as the US accuses a Chinese operative of spying on US aerospace companies. Meanwhile, Trump has also lashed out at South Korea for not paying for the deployment of a missile defense system on the peninsula. The effects of the trade war are creating some interesting trade options, especially in the EM arena where price action is dictated by USD and CNH price action, industrial manufacturing and economic growth, and export deficits throughout the East. Notably the 25% tariffs imposed on the US has caused the price of Soyabeans (used for oils and meal) to skyrocket in Brazil, pushing suppliers to offload significant quantities of reserves pushing stockpiles dangerously low. Going forwards we could see buy side pressure from Brazil taking up the surplus now seen in the US. You can trade USDCNH, Soyabeans, EM currencies such as the Brazilian real, EM ETF’s and diversified trackers (linked to manufacturing, industrial production or soft commodities) all through IG. UK, US and Europe: The markets began their large decline around 12pm BST yesterday showing investors bearish attitude as the Dow remains near its all time high. Mortgage application rates falling for the second week in a row following the Feds interest rate hike gave the bears the ammunition then needed to begin the sell off. However mortgage providers fared fairly well compared to other sectors in the US. Tech took the brunt of the hit with some shares losing up to 10% , possibly suggesting that the trade war is likely to hit tech. Going into Thursday, the futures market implies the bearish attitude is likely to continue. Donald Trump has also blamed the fed interest rate for yesterday’s sharp fall. When asked if it could have been due to trade war tensions he stated there was no reason to raise interest rates and that the fed were acting ‘loco’.  US Treasuries also saw a fall yesterday as investors began to sell causing yields to rise which can further influence consumer interest rates. This is particularly concerning to investors as bonds are seen as a safe haven during turbulent equity market movements. South Africa: Gold has struggled to find safe haven demand in the current equity market selloff and trades marginally lower this morning. Brent crude is under pressure despite hurricane Michael threatening the Gulf of Mexico and shutting down a lot of production within the area. Tencent Holdings is down 7% in Asia suggestive of substantial weakness to follow for major holding company Naspers (which has a 20% weighting in the Jse Top40 Index). BHP Billiton is down 3.8% in Australia suggesting a soft start for local resource counters. Economic calendar - key events and forecast (times in BST) Source: Daily FX Economic Calendar 1.30pm – US CPI (September): prices forecast to grow 2.8% YoY and 0.2% MoM, from 2.7% and 0.2% respectively. Core CPI to be 2.3% YoY from 2.2% and 0.2% from 0.1% MoM. Market to watch: USD crosses

4pm – US EIA crude oil inventories (w/e 5 October): stockpiles to fall to 5.08 million barrels. Markets to watch: Brent, WTI Corporate News, Upgrades and Downgrades WH Smith saw an overall rise of 2% in revenue for the year, to £1.26 billion, although the like-for-like figure was flat. Group profit from trading operations was up 3% to £163 million. The group has announced a restructuring of its high street division, closing some initiatives and shutting around six stores.  Johnson Press is putting itself up for sale, following a strategic review of the business.  Hargreaves Lansdown reported a 3% in assets for Q1, to £94.1 billion. 29,000 net new clients were added during the period. Jupiter reported a drop in assets under management to £47.7 billion for Q3, from £48.2 billion in the previous quarter. The fixed income division saw the bulk of the outflows.   Tesla are looking to appoint a new chairman following controversy with Elon Musk and the SEC. Natixis confirms it is examining deal with French payment processing company Ingenico TechnipFMC Upgraded to Buy at SocGen
Norsk Hydro Upgraded to Buy at Arctic Securities
ElringKlinger Upgraded to Hold at DZ Bank Ferrari Downgraded to Hold at Jefferies
Capgemini Downgraded to Neutral at Oddo BHF IGTV featured video Information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary. 

IGAaronC

IGAaronC

Volatility - APAC brief 11 Oct

Volatility is up, and risk appetite has been dulled. The VIX traded towards the 22 figure overnight, while currency safe havens such as the Yen were sought amid a somewhat remarkable sell-off across global equities during the European and North American sessions. It’s a matter of markets continuing to adjust to a world of higher interest rates and US Treasury yields – coupled with the expected panic when prices recalibrate to evolving fundamentals. A strong enough argument can be made that we are witness the beginning of the end for the US bull-market: there’s no shortage of voices out there suggesting so. It stands to reason that perhaps riskier plays into growth stocks should be replaced by more conservative investment strategies – say, by rotating into defensive, higher yield stocks. The idea holds merit, but a few days of selling on the back of a less than assured spike in global bond yields isn’t a cogent enough argument to abandon all risk-taking.     North America: Wall Street has demonstrated a broad-based sell-off. Once more: investors are adjusting to changing fundamentals in the face of higher global rates. Sectors with what may be dubbed stretched valuations are struggling, unaided by the kick-up in discount rates and unattractive yields. The tech-sector, embodied by the NASDAQ, has delivered the most significant losses for the US session, down in the realm of 4 percent; but the Dow Jones and S&P isn’t far behind, down about 3.1 per cent and 2.6 per cent (give-or-take) themselves. The sectoral map across all three of these indices is painted a rich red today:  traders are apparently grabbing cash here, liquidating what they can before they get lost in the herd.   The end of a cycle? When markets experience the sorts of structural shifts being witnessed in the last fortnight-or-so, falling back on conventional wisdom can be illuminating. Not to say it provides the answers, but more so that historical knowledge can be drawn upon to show nuance and contrast in the haze of the present moment. What of the economic cycle here? The rationale behind traders’ behaviour might be described as a response to the ever-beating mechanics of the macro-economic process. The Fed is raising rates and growth is apparently reaching a peak, meaning that upside for capital growth may be diminishing. Turning these gains into cash and distributing profit could be the smart-money driver of equity markets, in the expectation that little more can be reaped from what has been sowed.   Upside exists: While compelling, markets function at the influence of far too many distortions to rest on the belief that we are end of cycle. The Fed’s unwinding balance sheet and progressive interest rate normalization is an act without precedent: cycles have been bent and interfered with, making prices a less reliable indicator of financial market phenomena. It’s in part why a sell-off such as the one witnessed in Europe and North America overnight elicits such nervousness. Markets can’t be sure what was once true still applies. In digesting the US experience and how it relates to Fed policy, it must be counter-balanced with notion that global monetary policy is still very accommodative. Granted, this is less so than 4 or 5 years ago, but in the grand scheme of things, with Europe and Japan still in negative interest rates, not to mention a Chinese government with a stimulus bias, reason to believe markets remain well supported are ample.   Bears abound: It’s intermingled with other concerns, for sure, so a bearish sentiment permeating markets is easy to understand. Mystery still reigns regarding the health of China’s economy, and the European Union and the economic zone it presides over looks inherently unsound. European markets participated in the equity market dumping, sucked into that black-hole by widespread panic selling, driving the DAX and FTSE down 2.2 per cent and 1.3 per cent respectively. Rates and bond markets de-risked slightly, however, boosted by the news that key Brexit negotiator Michel Barnier believes a Brexit deal could arrive as soon as next week. The pound has flown toward 1.32 while the EUR is sustaining itself at 1.1520, supported by a diversifying of risk across G4 currencies in response to the night’s equity rout.   Asian equities: The Chinese growth story may be the biggest determinant of the Australian share-market’s fortunes, however: slow growth in China means slow growth in Australia, so the ASX200’s sell-off this month can be explained-away easily when also factoring the raucous activity in global bond markets. The technicals become interesting for the ASX200 here, especially given that SPI futures are pointing to a dumping this morning, with weekly trend-line resistance at ~5860 in risk of being breached. For investors with a preference for the Asian region, attractive valuations abound, explaining the little jump in the Hang Seng yesterday, with investors lured into an appealing P/E ratio across that index below 10:1. Similar valuations exist in Chinese shares, offering a high-risk-high-reward dynamic for investors: a strong will is a requirement before jumping into Asian markets however, because volatility will stay the norm.     The Middle Kingdom: China will struggle for as long as the trade-war rages, but on balance policy markets appear well equipped to tackle the matter. Overnight it was announced that the Chinese government would include a greater number of financial institutions “systemically important” (read: too big to fail), to offset the weekend’s credit-boosting endeavour of cutting the Reserve Ratio Requirement. The slip of the off-shore Yuan to around 6.93 last night also suggests the PBOC will calmly and gradually let the currency ease to support China’s growth. Although lost in the bloodbath last night, commodities prices, down on aggregate apparently due to the tumble in oil, are displaying signs of some green shoots: industrial metals are broadly of off their lows, suggesting some signs of optimism toward Chinese growth and the region’s markets.

Information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.  

JasmineC

JasmineC

Hurricane Michael hits the US - EMEA Brief 10 Oct

MSCI All-Country Index, which tracks shares in 47 countries, hit the lowest level since August '16 overnight Crude hovers above $74 a barrel on concerns Hurricane Michael in the US may affect supply USD down as it does not keep pace with SGD. Trump comments that FED is moving rates too quickly Iron Ore Benchmark breaks back into $70s amid speculation over further stimulus from Chinese policymakers Trump accepted the resignation of Nikki Haley as US ambassador to UN. Commented his daughter Ivanka could do a "fine job" Bill Ackman’s fund builds $900m stake in Starbucks. The American coffee company rose 5.6% on Tuesday after disclosure that Ackman's Pershing Square's had bought $15.2 million Indian stocks rebound from 6-month low. The second quarter earnings season is slated to kick off today with Zee Entertainment Enterprises Ltd. reporting Longer-dated Japanese government bond prices firmed on Wednesday, tracking gains in U.S. Treasuries with U.S. yields coming off multi-year highs Asian overnight: Asian markets are finally showing some signs of life, with Chinese stocks the only ones to be down on an otherwise bullish session. US Treasuries were relatively stable overnight, despite global growth concerns driven by a reduced GDP forecast from the IMF due to trade concerns. Data-wise, Japanese machine orders fell less than expected (6.8% from 11%). China has turned half a trillion dollars of central bank money into bricks and mortar as part of effort to support slowing economy. The government said it is speeding up construction of 15 million new homes to replace substandard houses nationwide. The program has so far pumped $463 billion into the economy. Looking ahead, China is about to sell $3 billion dollar bonds on Thursday. It is the second time in a decade, the first time being last year. UK, US and Europe:  US threatens to block UK from 46-nations procurement agreement. It could deny UK companies from accessing a $2 trillion dollar marketplace after Brexit. The UK will apply to rejoin the Government Procurement Agreement, a  trade accord that governs global appropriation rules, after Brexit in March. U.S. negotiators have told their British counterparts that their application is outdated and needs to be revised, said the officials, who asked not to be identified because talks are ongoing. Negotiators in Brussels will be discussing a solution over Irish border over the next few days with just a week before a crucial summit of EU leaders.  Hurricane Michael intensified from category 3 storm to category 4 early Wednesday. As it turns towards Florida, it could shutdown nearly 40% of US Gulf of Mexico crude output as early as Monday. When it comes to soft commodities, orange juice and orange juice futures could be affected. You can find this under the soft commodity section on the IG trading platform. Evidence that Super Micro Computer Inc. was hacked has been found in US. It shows that China continues to sabotage critical technology components for US. Such finding adds up to the securities issues over US hardware companies. Looking ahead, UK data is at the forefront of investors mindsets, with the monthly GDP reading released alongside manufacturing production, industrial production, and trade balance. Also keep an eye out for the NIESR GDP estimate later in the day. In the US, watch out for the PPI inflation reading alongside the currency report from the Treasury.  South Africa: Global equity markets are trading flat to marginally higher this morning suggestive of a similar start for the Jse Allshare Index. Late afternoon news yesterday was that the South African finance minister, Nhlanhla Nene,  had stepped down from his post and that former Reserve Bank Governor, Tito Mboweni had been appointed in the position. The rand reacted favourable to the news with significant strength being realised against a broad basket of currencies, both emerging and developed. BHP Billiton is up 0.25% in Australia suggestive of a slightly positive start for local resource counters. Economic calendar - key events and forecast (times in BST) Source: Daily FX Economic Calendar 9:30am: (UK) Aug. Manufacturing Production YoY, est. 1.1%, prior 1.1% 9:30am: (UK) Aug. Trade Balance, est. GBP1,200 deficit, prior GBP111 deficit 13:30: US PPI. 2.8% expected year on year Corporate News, Upgrades and Downgrades Standard Chartered Seeking Resolution With U.S. Over Iran. This is relating to transactions not compliant with sanctions: WSJ Trading in Patisserie Valerie suspended after the cafe chain discovered "significant, potentially fraudulent, accounting irregularities" PageGroup said that annual profit is likely to be marginally ahead of expectations, after a good performance in offshore markets offset weaker UK growth. Gross profit for Q3 was up 17.2%, or 19.7% on a constant currency basis Gresham Technologies remains confident of delivering its full-year outlook, after strong sales growth in the nine months through September  HSBC finalises $765 million settlement over securities sales Dixons Carphone raised to buy at HSBC
Ocado upgraded to equal-weight at Barclays
Rightmove upgraded to buy at Liberum
Soco upgraded to outperform at RBC Hella downgraded to hold at Berenberg
Hunting downgraded to equal-weight at Barclays
IPCO SS cut to underweight at Barclays
Leroy downgraded to hold at Kepler Cheuvreu IGTV featured video Information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary. 

IG-Andi

IG-Andi

Growth v. Risk - APAC brief 10 Oct

The growth-versus-risk paradigm shifted further in favour of the latter in the last 24 hours, as a multitude of stories compounded the bearish sentiment mounting in global markets. Though Chinese markets were more stable yesterday, an IMF report downgrading global growth forecasts for the first time since 2016 reinforced the possible growth-sapping impacts of the unfolding US-China trade war. Risks in Europe piqued again, following renewed inflammation of tensions between the Italian government and European bureaucrats, weakening the EUR/USD and pushing European bond spreads wider. While the trade war story also dented the growth story, after news broke that the US Treasury Department may be poised to officially label China a currency manipulator.   ASX200: SPI futures are indicating a 4-point drop for the ASX200, following another belting of Australian shares yesterday. Futures markets have unwound the projected falls at the open for the ASX200 throughout the North American session, courtesy of an overall lukewarm but stable night’s trading on global markets. Support levels were brushed aside in local trade yesterday, with 6100 and 6060 offering little inertia, squashing the index into its eventual closing price at 6040. Downside momentum has really taken hold of the ASX now, shaping the perception that a short-term downtrend is emerging for the market. The daily-RSI reading suggests the sell-off is somewhat overcooked, but the prospect of a complete and immediate recovery of this week’s losses appears remote.     Risk factors: Tuesday’s trading provided much of the necessary insight, however, into what cascading set of influences is driving the Australian share market. There are more than enough risk factors percolating through markets now to fuel bearishness on the ASX, but as always, the interest is in determining what weight each variable carries for the success and failure of the index. The global growth story is one of those, tied into fears of a Chinese economic slow-down and the effects of the trade war on financial markets. Another is the numerous risks to local and international financial stability, taking the form of underperformance from bank stocks, possible fiscal crises in Europe, and a possible blow up in emerging markets. All those stories play their part to a build-up in downside risk, but market-activity yesterday suggests that the biggest issue plaguing the market is this: the global sell-off in equities in the face of higher global interest rates.   Local market drivers: The sectoral map for the ASX200 yesterday handed the clearest insight into this dynamic. For one, the bank’s stock prices pulled back after their modest recovery last week, no longer exhibiting signs of upside from higher global long-term bond yields; and the materials and energy sector also faulted, even despite a modest tick-up in oil and metal prices, and the easing of selling-pressures in Chinese equity markets. Though the truth in the ASX’s fortunes will often lie within activity in any one of these three sectors, the lion’s share of market action yesterday was generated by the heavy 4.11 per cent loss of the health care sector, catalysed by a 4.5 per cent and 5.2 per cent dumping of market darlings CSL and Cochlear, respectively.   Heath care stocks: The rout in health care stocks ties back into a theme manifesting the world over: that growth stocks are coming out of vogue as global discount rates increase. Much alike the tech giants in the US, Australia’s major healthcare stocks – again, the likes of CSL and Cochlear – have carried the Australian share market this year, collectively generating a YTD return of over 21 per cent. These companies, better defined as bio-tech firms, have traded with increasingly stretched valuations, and with naturally lower yields. The spike in global rates over the past week has put pressure on valuations, as well driven investors to chase returns in safer, higher yielding assets. It’s a phenomenon playing out at a fundamental level the world-over, causing drag across equity markets and consequently an overall bearish sentiment within them. Although no reason for alarm yet, with opportunities still ample ahead of projected strong earnings growth, the combination may portend bearishness for ASX200 traders moving forward into the back end of 2018 and start of 2019.        Risk-off: The parameters dictating market sentiment presently is tipping markets away from riskier assets and into safe havens. The already described activity in equity markets evidences this, but less structural and more transient and nebulous concerns are materializing in other asset classes. The Japanese Yen, for one, has attracted flows this week, falling back below the 1.13 handle last night. The stronger currency and risk-off dynamic has quashed the Nikkei’s bullishness, pulling that index down from its recent 27-year highs. Paradoxically, the AUD/USD has climbed within this context, bouncing off the bottom of the pair’s trend channel back above the 0.7100; however, after the multiyear lows registered last week, this is probably reflective of some opportunistic profit taking from short-sellers, with the more accurate growth-versus-risk currency pair, the AUD/JPY, falling below the significant 80.00 handle last night.   North America: The rotation out of growth stocks is afflicting Wall Street indices, however the thrust behind this process did ease last night. The reasoning for this was the settling in US Treasury yields, which fell throughout the day, after the benchmark US 10 Year Treasury clocked new 7 highs at 3.26 per cent during the early stages of the session. The NASDAQ was subsequently allowed to arrest its 3-day tumble, closing effectively flat, while the comprehensive S&P500 dipped 0.1 per cent. The far narrower Dow Jones lost 0.2 per cent for the day and demonstrated best the unfolding rotation into defensive strategies by investors: putting aside the jump in oil prices that led the rally in the energy sector, once more the conservative consumer staples, communication and health care stocks proved the leaders of the day’s trade.     Information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.  

JasmineC

JasmineC

Asian Markets Decline - EMEA Brief 09 Oct

Asia stocks at 17-month low as China lets yuan slip. China’s central bank fixed its yuan at 6.9019 per dollar on Tuesday. Dow: After 3-day downtrend and a drop of 200 points the Dow rises for the first time. Sovereign debt markets were calmer overnight whilst the 10 yr US Treasury maintained its 7 and a half year high. Oil prices are steady but up 0.6% after a late boost on Monday. Supply side shortages from Iranian sanctions claims the move. Google bug caused Shares of Google parent Alphabet to fall more than 2 percent immediately after the report before paring some losses. The stock was last seen roughly 1 percent down. The IMF cuts its global growth forecasts due to trade tensions, global economy now expected to grow at 3.7 percent this year and next year — down 0.2 percentage points from an earlier forecast.   Asian overnight: Japanese markets have led the declines, with the likes of the Nikkei and Topix playing catch up following yesterday’s bank holiday. The Hang Seng is the one outlier, with the market trading marginally higher despite declines in Japan, China, and Australia. A wider bearish trend remains in place with fears over a Chinese slowdown coupled with Italian fiscal uncertainty. China’s stimulus package announced on Sunday may have a positive effect for EM’s by helping to counteract a strengthening dollar and high interest rates. For many it could mean a continuation of imports and commodity prices - miners and commodity exporters should be very happy. There’s also a chance for some EM’s that government led fiscal stimulus may be initiated to counteract some of the effects seen from the US-Sino trade war. Brazil, a major source of imports for China, is one of the key emerging markets to keep an eye on. This is especially important as monday saw Brazilian stocks soar the most since 2017 after far-right candidate won the first election round. Far-right candidate Jair Bolsonaro garnered 46.7 percent of the votes in Sunday's first round. The Brazilian real rallied more than 2 percent against the U.S. dollar.    Despite China’s best efforts to not devalue the renminbi, the currency took a hit on Monday sliding around 0.9%. Here lies the most prominent risk which could all but negate any benefit discussed above: a weak RMB. Increased relative costs, bad sentiment, and a fear of money leaving China could have some serious teeth, so anyone thinking about an EM index or localised commodity exporter trade should keep an eye on a potentially devaluing RMB as it tries to push to the psychologically important 7RMB to the dollar. UK, US and Europe: Data-wise, there are few economic releases to watch out for, with the German trade balance already released earlier this morning. Interestingly, we have seen the German trade figure come in significantly higher, yet this remains below the figure two-months ago. With a distinct lack of any significant economic releases today, watch out for the ongoing themes of bond yields and trade wars as key drivers. South Africa:  Global equity markets are trading flat to lower this morning, suggestive of a flat to lower start for the Jse AllShare index. Commodity prices are off their worst levels although they remain under pressure. The rand has started to renew some strength following yesterdays Finance Minister induced weakness, although remains at depressed levels in the short term. Tencent Holdings is down 1.4% in Asia, suggestive of a soft start for major holding company Naspers. BHP Billiton is up 0.3% in Australia suggestive of a marginally positive start for local resource counters.   Crude oil futures up during mid-morning trade in Asia Tuesday. At 10:48 am Singapore time (0248 GMT), the December ICE Brent crude futures was up 31 cents/b (0.37%) from Monday's settle at $84.22/b, while the NYMEX November light sweet crude contract was up 31 cents/b (0.42%) at $74.60/b. This is despite expected mild build in US crude inventories due to ongoing concerns about supply pushing prices higher. Economic calendar - key events and forecast (times in BST)   Source: Daily FX Economic Calendar Corporate News, Upgrades and Downgrades Airbus deal to save Emirates has reached impasse amid drawn-out talks involving 36 A380 superjumbo’s engines. Further Airbus have appointed Guillaume Faury as next CEO WPP said that Ford had appointed a competitor as its lead creative agency, but that WPP would still be responsible for the Ford brand in key regions and channels. Wood Group reported it had won contracts worth a combined $250 million from the US energy sector so far this year.  Aviva CEO Mark Wilson will step down, although he will remain with the group until April 2019. It added that the firm continued to perform in line with forecasts, and remains on track to hit operating earnings per share growth of 5% in 2018.  Unite Group said that full-year rental growth from its portfolio was in line with its 3-3.5% target. It added that its portfolio for the 2018/19 academic year was 98% let.  Commerzbank upgraded to overweight at JPMorgan
Kuehne + Nagel upgraded to outperform at RBC
Schroders upgraded to buy at Berenberg
Telecom Plus upgraded to buy at Peel Hunt
Atlas Copco cut to underweight at Morgan Stanley
RWE downgraded to hold at HSBC
Royal Mail downgraded to hold at HSBC
Sage downgraded to underweight at Barclays IGTV featured video Information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary. 

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MichaelaIG

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