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Hurricane Michael hits the US - EMEA Brief 10 Oct

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  • 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 U.S. negotiators have told their British counterparts that their application is outdated and needs to be revised, said the officials, who asked not to be identified because talks are ongoing.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)

EconCal.PNG

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

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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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