Finance Update – Fundamentals Improving

Asia – BoJ: Investigate stagnation

With the UN yesterday foregrounding China’s fragile economic rebound amidst the world’s 7-9% drop in global GDP, Chinese equities are down this morning led by the Shenzhen Composite’s 1.12% loss.

The Hang Seng is up 0.6% and the Nikkei 0.39%, as Bank of Japan board member Makoto Sakurai calls for an investigation into the country’s continued stagnation.

The ASX is up 0.12%, and the AUD 0.23% after the Australian Bureau of Statistics revealed a 1.5% decline in retail sales – up from August’s -4%. And the NZD also gained a 1/3 per cent after recording a better-than-expected 9.9% decline in September credit card spending – 2% better than the previous month, but a disappointing drop in the dairy trade’s price index to 0.4%.

Europe – US-UK deal on the way

European indices were mixed again yesterday with the DAX losing nearly a full per cent and Spain’s IBEX35 gaining it.

The FTSE clawed in a 0.08% gain as Reuters reports progress in US-UK trade deal talks. And BoE policymaker Gertjan Vlieghe yesterday told an audience the central bank was open to negative rates. This morning shows flat consumer inflationThe rise in prices for goods and services, resulting in the deterioration of a currency’s purchasi... at 0.4% in September, a pleasing 1.1% MoM increase in producer inflation and missed expectations in retail prices, up 1.1% YoY both of the latter being double August’s rate. A Reuters poll published on Tuesday shows high expectations of added QE next month.

German producer inflation in September rose by 0.4% MoM in September, and the Eurozone’s current accounts in August are shoring a seasonally adjusted €19.94 bn positive flow.

Americas – Pelosi optimistic

US indices are up between 1/3 and 1/2 per cent after House Speaker Nancy Pelosi told Bloomberg last night that she was “optimistic” about a COVID relief bill.

Chicago Fed head Charles Evans yesterday said he expects unemployment to returnThe benefit one receives on an investment. to 5.5% by the end of 2021.

The USD is down 0.19% to a 1-month low after a MoM improvement in building permits – up to 1.55 mn in September, but a drop in housing starts to 1.4mn.

Commodities – Shale consolidates

Continuing the zigzag, the API yesterday entered a 0.584 mB increase in inventories, creating a flag that has prices down a tad to $41.5 per barrel of WTI this morning. Reuters reports that “Consolidation in the US shale industry is accelerating,” as Pioneer Natural Resources (-4%) purchased Parsley Energy (+5.5%).

Gold is up 0.39%, and Bitcoin overnight shot past the 12K resistanceThe price level that traders believe represents the highest value an asset will reach before reversi... level as equities reacted favourably to relief bill optimism.

Corporate – Hummer going electric

Intel is down 2.11% after the US government approved the $9bn sale of its memory chip unit. And Volkswagen is down 0.86% after announcing it was seeking to sell its Ducati motorcycle brand.

Google was up 1% yesterday and another per cent after hours despite the US Justice Department’s launch of an anti-trust lawsuit claiming the company had used its marketA location or entity where people and entities can negotiate and trade assets of value. size to quash rivals. If successful, the suit could lead to the company’s breaking up – a step not taken since the breaking up of the Bell System in 1974.

Netflix (-1%) shares lost 6% after hours following its weakest subscriber gain in 4 years – 2.2 mn new clients – at its earnings report yesterday. EPS came in at $1.74 – 40c less than expected, but revenues grew 22.7% to $6.44 bn. Snap, on the other hand, soared by 25% after beating both revenue and client growth expectations. 257 active users (250 expected) pushed revenue up 52% to $679, with loss-per-share improving from last year’s quarterly 16c to 14c this Q3.

IBM plunged 6.5% after showing a 2.6% decline YoY in revenues to $17.6 bn and a 1% increase in EPS to $1.89. Lockheed lost 3% after delivering an 8.5% increase in revenues to $16.5 bn and a 6.9% improvement in EPS to $6.05. Procter Gamble was up a ½% thanks to a 9% increase in sales and a 20% increase in EPS, and Philip Morris was down 5.8% after delivering a 3% drop in revenues to $7.45 bn and a 1% drop in earnings-per-share.

In Europe, Lufthansa shares skyrocketed 7% thanks to positive preliminary results, and Ericsson closed up 1.17% after better than expected earnings of 9 bn Crowns.

And finally, GM is up 6.75% after announcing the launch of its first Hummer electric.

Today, earnings will be in from Verizon, Iberdrola, Abbot Labs, Chipotle, CSX, Nextera, Northern Trust, Kinder Morgan, Sempra Energy, Telenor, Tesla and Whirlpool. Cisco and Telenor will be paying dividends, and Standard Life will hold a shareholders meeting.

Events