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T3's Take 3: China Rebounds on Intervention, US Markets Follow


Today's financial recap and tomorrow's financial outlook.

Today on T3 Live

T3 Live cordially invites you to our first annual Finance Festival, scheduled for November 6-8 in sunny Miami, Florida.

And we are proud to announce that derivatives trading guru and former hedge fund manager John Succo will join our panel on the Fed.

John, currently a professor at Indiana University, was one of the most popular contributors in Minyanville history, and is considered a legend for his sharp market analysis during the financial crisis.

John will be joined by a truly impressive team of Wall Street experts, including Barry Ritholz, Nicole Sherrod, Evan Lazarus, Doug Robertson, Josh Brown, JC Parets, and many more.

Read about our expanded lineup here.

World Equity Markets

Asian shares had a choppy day with the Shanghai Composite falling hard before risking to close down 0.4%. The index lost as much as 4.6% during trading, only to be lifted by aggressive buying in large-cap stocks.

The buyers are suspected to be supported by the government as China gears up for a long weekend celebration. A report by China Business News stated that securities regulators have told brokerage firms to clear up "grey market" margin lending. Also, nine Chinese brokerages have pledged to buy more than 30 billion yuan (about $4.7 billion.) The Hong Kong Hang Seng fell 1%. Meanwhile, Japan's Nikkei closed down 0.39%.

Europe followed the afternoon upswing, with nearly all major indices finishing up. The German DAX and French CAC both rallied about 0.3%. Bond yields fell slightly despite the rally, as investors take precautions while China heads into a long weekend.

While the US rode the Chinese up-swing, the economic data also helped.

The US dollar also experienced mixed performance, losing value against the Australian, New Zealand, and Hong Kong dollars, but gaining against the Canadian dollar, Swiss franc, Japanese yen, and euro.

The S&P 500 closed up 1.8% on an increase in non-farm productivity, as well as generally oversold conditions.

The Investor Intelligence survey of newsletter writers shows that just 27.8% are bullish, the lowest levels since the March 2009 bottom. That, along with other indicators like put-call ratios, has indicated that traders are extremely cautious, setting the market up for a bounce.

In a clear sign of easing tensions, the VIX fell 16.7%.

Economic Data and the Beige Book

Non-farm productivity showed its strongest increase in a year-and-a-half during Q2, growing by 3.3% vs. the expected 2.8%. ADP employment data came in below expectations at 190K vs. 200K, while last month's number was revised down to 177K from 185K

Factory orders, and unit labor costs came in below expectations as well.

The Fed's Beige Book was also released today. The report showed growth in most of the country, with energy lagging behind a bit. Most respondents said they expected growth to continue as its current pace. Manufacturing was positive except for in New York and Kansas.

Ambarella Slumps GoPro Down

The once mighty momentum leader Ambarella (AMBA) closed down 8.5%. The company released its Q2 earnings report after the close yesterday. Earnings were better-than-expected at $0.88 per share vs. the expected $0.81. Despite the beat, the company's gave Q3 guidance numbers were slightly below analysts' estimates, and the stock got trashed.

The slump also pulled down shares of its top customer GoPro (GPRO), which closed down 5.5% at $42.18. Piper Jaffray analyst Erinn Murphy cut his price target on Gopro from $72 to $54, citing the weakness in AMBA and a low likelihood of the HERO5 camera being introduced this year.

Thursday's Financial Outlook

US economic data for tomorrow will include Challenger job cuts, initial & continuing claims, trade balance, Markit US PMI, Bloomberg consumer comfort, and ISM non-manufacturing composite.

Overseas economic data will include British Markit PMI, the European Central Bank rate decision, and Japan labor cash earnings.

Campbell Soup (CPB), and Medtronic (MDT)  will report earnings before the open. UTI Worldwide (UTIW) will release its earnings report after the close.
No positions in stocks mentioned.
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