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News & Views: Wednesday, October 8

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What you need to know for today's trading day.

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This article was originally posted on the Buzz & Banter where subscribers can follow over 30 professional traders as they share their ideas in real time.

OECD sees stable growth for major economies, weaker in euro zone (Reuters)

Wal-Mart to End Health Insurance for Some Part-Time Employees (WSJ)

China's First Bond Defaulter Gets Guarantee From Bad Bank (Bloomberg)

Won Falls to Six-Month Low as Growth Outlook Curbs Risk Appetite (Bloomberg)

GPIF Asset Review May Be Delayed Until December, Ito Says (Bloomberg)

Views
The currency war rhetoric is still very loud in the Western Hemisphere.

Overnight, the South Korean Won (KRW) had the largest negative risk-adjusted return across all assets and weakened significantly against the Japanese Yen. Finance Minister Choi said in a speech that the government would announce new measures to improve the stock market this month and provide financial support for exporters with large exposure to the Japanese market. The government had said last month that the weakness in the Yen would be a drag on economic performance for the country - especially Samsung. In a meeting at the South Korean Parliament, Bank of Korea (BoK) Governor Lee said that the central bank is closely watching the weak Yen's impact on the country's economy and cautioned against using further rate cuts to combat the relative strength in the currency. This may mean we'll get another central bank actively selling its currency to combat weakness, in this case they would most likely be buying Yen, however.

The Japanese Nikkei was down 1.19% last night and the second worst performing equity index on a risk-adjusted basis. However, the USD-denominated futures were up about 0.5% from the US close, so relatively speaking this market outperformed. Additionally, the Japanese MOTHERS index, which is local small caps only, finished positive in tandem with a weakening in the Yen. So ultimately this is a mild positive for US risk today. Unless the category 5 super typhoon Vongfong that is headed for Japan causes any large problems.

Also in Japan, PM Shinzo Abe's chief adviser Kozo Yamamato said that it's a matter of course that the yen will fall further with the monetary easing from the BoJ and the Fed winding down its stimulus - a matter of interest rate differentials. This mimics what BoJ Governor Kuroda said yesterday that the strength in the USDJPY FX cross is natural. Additionally, Japanese Chief Cabinet Secretary Suga said that there is no disagreement between PM Abe and the BoJ on the level in the Yen, indicating that even though there has been a substantial amount of public pushback against the continued weakening, they are not going to get in its way.

Taiwan's stock market was the weakest performing equity index overnight due to substantially worse than expected exports, marking the third day of declines there. The Indian Sensex was also weak for the third day and it crossed below its 50dma yesterday.

China's HSBC services PMI for September showed the same moderation seen in the related manufacturing indices earlier this month. New orders moderated slightly to 52.3 from 52.4 in the month prior.

Overnight Data:
- China HSBC services PMI (Sep) down to 53.5, prior 54.1
- Switzerland unemployment rate unchanged at 3.0% vs 3.0% expected, prior 3.0%

US Economics (Time Zone: EST)

07:00 MBA Mortgage Apps
2:00 FOMC Minutes
1:00 Treasury selling $21b in 10-year notes

Earnings

Before:
Costco (COST)
Monstanto (MON)

After:
Alcoa (AA)

Twitter: @MichaelSedacca

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No positions in stocks mentioned.

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