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  1. 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. ...any disturbance on the US oil export levels could positively impact petroleum-derived commodities. 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.
  2. 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). The big question remains: is a major correction on its way, or that this is just a great “buy the dip” opportunity? 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.
  3. 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. Looking ahead, UK data is at the forefront of investors mindsets, with the monthly GDP reading released alongside manufacturing production 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.
  4. The U.S. and Canada agreed to a trade deal that would preserve a three-way bloc with Mexico, setting the stage for their leaders to sign the accord by the end of November. The new deal will be called the U.S.-Mexico-Canada Agreement, or USMCA. Mexican peso and Canadian dollar gains as uncertainty is lifted and greater stability takes hold of the Americas. The euro was hit by worries about a rise in Italy's fiscal deficit after the Italian government agreed to set a higher than expected budget deficit target that could put Rome on a collision course with Brussels. In the UK this week the Conservative party is holding its annual conference. Brexit talks are bound to be high on the agenda and could cause some volatility as the narrative continues to play out. Hammond could also add flavour to this years budget which could hint at trading opportunities to come. Tuesday sees a speech by Jay Powel. After the Feds interest rate rise last week speculators will be looking at any hints they have on monetary policy. Asian overnight: A somewhat mixed session overnight has seen the Japanese markets push into the green, while the Australian ASX 200 provided the opposite move in the absence of Chinese and Hong Kong markets due to national holidays. Weekend data from China did little to raise confidence for Australian stocks, with the manufacturing PMI and Caixin manufacturing PMI both declining. The non-manufacturing PMI survey did rise, yet Australian concerns are certainly focused on the manufacturing sector as a lead to how their exports markets will fare going forward. Finally, the Japanese Yen declined on the news of weaker figures for the Tankan manufacturing index, non-manufacturing index, and manufacturing PMI. ...we have a host of economic PMI releases from Europe, although for the most part they are final readings. UK, US and Europe: The euro was hit by worries about a rise in Italy's fiscal deficit after the Italian government agreed to set a higher than expected budget deficit target that could put Rome on a collision course with Brussels. Italian Finance Minister Giovanni Tria is certain to face questions about the nation’s 2019 spending plan even though it’s not on Monday’s Eurogroup agenda in Luxembourg. Theresa May faces the battle of her political life to retain control of the governing Conservative Party as top Tory politicians undermined her leadership. After arch rival Boris Johnson went for the jugular, Chancellor Philip Hammond swept in to defend her in an increasingly chaotic political scene. Looking ahead, we have a host of economic PMI releases from Europe, although for the most part they are final readings. That being said, the UK manufacturing PMI is one of the few figures that represents the first release for the month, with markets looking for a marginal decline. That PMI theme carries into the US session, with manufacturing figures from both Canada and the US. Given the breakthrough in NAFTA negotiations, expect to see continued volatility for the Canadian dollar and Mexican Peso. South Africa: The Jse Allshare Index is expected to open firmer amidst today's positive global equity market sentiment. Commodity prices are trading marginally lower and the rand slightly weaker as the dollar finds some short term strength. BHP Billiton is down 0.1% in Australia, suggestive of a flat to slightly lower start for local diversified resource counters. Today's economic calendar is light in terms of scheduled data releases, with UK and US manufacturing data perhaps the most relevant catalysts to look out for today. Economic calendar - key events and forecast (times in BST) Source: Daily FX Economic Calendar 9.30am – UK mfg PMI (September): survey forecast to rise to 53.8 from 52.8. Market to watch: GBP crosses 3pm – US ISM mfg PMI (September): forecast to fall to 60.5 from 61.3. Markets to watch: US indices, USD crosses Corporate News, Upgrades and Downgrades Tesla likely to dominate headlines today as the SEC ruling that Elon Musk should stand down as chairman (but maintain his CEO position). Nielsen Interim CEO of Danske as Borgenfor relieved following money laundering scandal. Assura continued to grow during the first half of the year to 30 September 2018, completing the acquisition of 39 medical centres and two developments at a combined cost of £108.2 million. HNA Group Co. shrinks debt by $8.3 Billion. More needed to regain trust of investors. TMX Group earnings release above expectations. Barclays upgraded to buy at Berenberg Castings upgraded to buy at Peel Hunt Thomas Cook upgraded to hold at Berenberg Kaufman & Broad raised to hold at Kepler Cheuvreux AB InBev downgraded to hold at Jefferies EasyJet downgraded to underperform at Bernstein Sampo downgraded to neutral at JPMorgan Telecom Italia cut 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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