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News & Views: Wednesday, October 1


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

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.

JPMorgan to face U.S. class action in $10 billion MBS case (Reuters)

Greek Bonds Rise on Speculation ECB to Allow Bank-Loan Purchases (Bloomberg)

Ackman Fund Raises More Than $3 Billion in Amsterdam I.P.O. (NYTimes)

Korean Intervention Seen as Samsung Bemoans Won Jump: Currencies (Bloomberg)

China September factory activity steadies but economic outlook still weak (Reuters)

Hong Kong's stock market was closed for a national holiday today, but problems are still on the horizon for the small city-state. Today would mark the start of Golden Week, when many tourists from mainland China would travel to Hong Kong. The 48-hour deadline for intervention by military forces from the mainland should expire this morning, and protests are anticipated to intensify due to the holiday. This will be a hot button topic to try and trade around today. The protestors are pushing for the resignation of Hong Kong's Chief Executive of the Executive Council (equivalent of President) by no later than tomorrow.

The Bank of Korea released the minutes of its latest monetary policy meeting overnight. One member, Chung hae Bang, called for a rate cut. He had also called for a cut at the central bank's July meeting. Bang's argument is that consecutive rate cuts would be more effective than pre-emptive policy measures because the downside risks to growth have increased. The KRW is showing the largest negative-risk adjusted return overnight against the USD and JPY. Similarly, the South Korean Kospi is the worst performing equity index. As a reminder, Samsung, which makes up 15% of the Kospi, is also the largest holding in the MSCI emerging markets index (ETF: EEM). The MSCI Emerging Market December futures (MESZ4) are indicated down 0.47% as of this moment.

Additionally, note that while most Asian equity indices were weak overnight, most of the credit gauges in Europe are tightening this morning, led by the European Senior Financials CDX (SNRFIN). The Japanese MOTHERS index, almost solely traded by local Japanese retail investors, was the second worst performer overnight on a risk-adjusted basis.

China's official gauge of manufacturing PMI for September was more or less inline with expectations, released last night. The gauge was unchanged at 51.1 from the prior month versus an expected 51.0. Yesterday it was confirmed that the PBoC would ease the eligibility for first-time mortgages and will encourage banks to begin securitizing these loans into mortgage-backed securities. Presumably that would increase the amount of credit available for borrowers.

Commodities continue to be weak again today. Platinum is showing the largest negative risk-adjusted return overnight with the price dropping to a five year low. There is no readily attributable piece of news to the weakness - the German manufacturing PMI for September saw its final estimate revised lower and Japanese auto production continues to drop. The Japanese Tankan manufacturer survey also had a downward bias for the fourth quarter. Copper, on the other hand, is rallying strongly in the last hour after bouncing hard off the $300 level in the overnight session.

Lest you missed it yesterday afternoon, the first case of Ebola was diagnosed in the US. A man in Dallas, who had recently traveled to Liberia, is in isolation after testing positive. The CDC is on the case.

Overnight Data:
- German manufacturing PMI (Sep final) down to 49.9 vs 50.3 expected, initial 50.3
- Eurozone manufacturing PMI (Sep final) down to 50.3 vs 50.5 exp, initial 50.5
- China manufacturing PMI (Sep) unchanged at 51.1 vs 51.0 exp, prior 51.1
- UK manufacturing PMI down to 51.6 vs 52.7 exp, prior revised to 52.2
- Japan Tankan large manufacturer 4Q outlook down to 13 vs 13 exp, prior 15
- Japan Tankan large non-manufacturer 4Q outlook down to 14 vs 18 exp, prior 19
- Japan Tankan large industry capex (3Q) up to 8.6% vs 7.0% exp, prior 7.4%

Twitter: @MichaelSedacca

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No positions in stocks mentioned.

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