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T3`s Take 3: Cat Scratch Fever and a Citron Bomb


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.

Since we announced the event on July 8, we've added some very big names to the agenda, including:

-David Kotok, Founder and Chief Investment Officer of Cumberland Advisors
-David Rosenberg, Chief Economist of Gluskin Sheff
-Ivan Zinn, Chief Investment Officer of Atalaya Capital Management

Read about our expanded lineup here.

Diesel Emissions Scandal Expands

Earlier this week, Volkswagen (VW) admitted to installing malicious software on its vehicles in order to cheat emission tests. Following its admission, the company's CEO stepped down and shares dove nearly 20%.

While Volkswagen may be getting its fair share of just desserts, investors are starting to fear that other automakers are using similar tactics to cheat emissions tests. Shares of BMW came under fire after German auto magazine Autobild ran an article saying that the company's diesel fueled X3 SUV was found to be emitting more than 11 times the amount of pollution acceptable in Europe. BMW has claimed that it did not cheat on any emissions tests, but that didn't stop shares from falling nearly 9.7%. 

Japanese automakers also slumped on the news. Shares for Mazda, Mitsubishi, and Suzuki fell 7%, 5% and 4%, respectively. Unlike what happened with BMW, there were no reports making accusations of Japanese car makers cheating on emissions tests.

World Equity Markets

Asian shares finished mixed once again today.

Japan's Nikkei fell on its first day of trading after a 3-day holiday. A stronger yen and lower-than expected manufacturing activity weighed down Japanese equities. Auto stocks were the largest hit due to fallout from the Volkswagen scandal.

The Shanghai Composite rallied 0.9%. The Hong Kong Hang Seng dropped 0.97%. The Korean Kopsi added 0.1%, with strength coming from numerous companies announcing buybacks. 

European markets fell today. The German DAX closed down 1.92%, while the French CAC dropped 0.83%. Auto stocks weighed down major indices. European bond yields rose slightly despite the drop in equities. 

US equities opened lower and fell throughout the morning before making a comeback, helped by a rally in oil.

Industrials were in focus Caterpillar (CAT) announced a cut in its revenue outlook and a major restructuring including the elimination of up to 10,000 job cuts  The drop in CAT weighed down industrial names, and the market saw additional weakness in real estate, transportation, and biotechnology stocks.

Investors decided to move towards safer assets, sending the US 10-year yield down 2.4 bps to 2.12%.

The S&P 500 was down sharply this morning, but rallied into the close to finish at 1932.24, down just 0.3%.

Citron Burns Mobileye... Again

Two week`s ago, Citron Research released a note on high-profile momentum name Mobileye (MBLY) calling the stock ridiculously overpriced.

Citron released additional research today, lowering its target price to $20. Citron believes the auto industry will not allow Mobileye to maintain its 60% EBITDA margins since other tech suppliers to the auto industry struggle to maintain 10% margin. Furthermore, competitors may be able to invest and close Mobileye's technology lead.

Citron also questioned the integrity of Morgan Stanley, which has an Overweight rating and $80 target price on Mobileye.

Mobileye shares closed down 1.3% at $46.51.

Friday's Financial Outlook

US economic data for tomorrow will include annualized GDP reports, personal consumption, Markit composite & services PMI, and the University of Michigan reports. 

Overseas there are no major economic data points scheduled to be released for tomorrow. 

Blackberry (BBRY), and Finish Line (FINL) will release their earnings report before the open tomorrow.
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