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News & Views: Monday, November 10


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.

Predictors of '29 Crash See 65% Chance of 2015 Recession (Bloomberg)

Macro Funds That Lamented Boring Market Lose in October (Bloomberg)

China deal sends shares to one-month high, ruble surges (Reuters)

Russian Ruble Recovers on Central Bank Move (WSJ)

If You Like Shanghai Stocks You're Going to Love Shenzhen (Bloomberg)

Chinese equities are the top performing asset overnight on a risk-adjusted basis. Cihina's securities regulator announced last night that the long anticipated Shanghai-HK Connect program will go into effect starting next Monday. To quickly recap what that means; if you are a foreign-based investor, so long as you have a HK-based account you can trade in the country's local A-share market, which has previously been untapped. The ratio between the Shanghai Composite (SHCOMP) - the main index that foreigners will trade in - and the Hong Kong Hang Seng Index (HSI) remainst at a two-year wide.

Russia's central bank continues to fight back against the evil speculators. The USDRUB cross is showing the largest negative risk-adjusted return across all assets by a large margin. In order to help domestic lenders it offered its first FX repo financing line today and is letting the Ruble float freely as of this morning. It will no longer intervene regularly in the market and keep a band for the currency, which will allow the price to be determined by market-driven forces. Lastly, it will make temporary FX interventions to target speculative moves. The shocker is that it now sees $128bln in capital outflows and its "base case" scenario is that restrictive sanctions will remain in place until the end of 2017.

The NOKSEK FX cross is showing the largest positive risk-adjusted return in currencies due to strength in the Norwegian Krona (NOK). Norway's core CPI (only excludes energy) for October rose by 0.2% from the previous month to a 2.5% annual rate, both of which were ahead of forecasts. That will dampen some of the optimism for further rate cuts.

China's trade balance that was released on last Friday showed a slightly confusing picture. Bloomberg economist Tom Orlik wrote in a note over the weekend that the lower import growth likely overstates any weakness in the local economy is due to a drop in raw material prices such as iron ore and petroleum products. The larger export growth could be do to fake invoicing (to funnel foreign capital into China) that is still ongoing even though the regulators have begun to crack down on it in the past 18 months. Twenty four percent of total exports is still to Hong Kong, which is the main location for such invoicing.

Note that every global fixed income instrument is positive today.

- China trade balance (Oct) grows to $45.41B vs $42B expected, prior $30.96B
-- exports YoY up to 11.6% vs 10.6% exp, prior 15.3%
-- imports YoY down to 4.6% vs 5.0% exp, prior 7.0%
- China PPI YoY (Oct) down to -2.2% vs -2.0% exp, prior -1.8%
- China CPI YoY unchanged at 1.6% vs 1.6% exp, prior 1.6%
- Australian home loans MoM (Sep) down -0.7% vs -0.4% exp, prior -0.9%
- Norway CPI YoY (Oct) down to 2.0% vs 2.0% exp, prior 2.1%
- Norway core CPI YoY up to 2.5% vs 2.3% exp, prior 2.4%
- Eurozone Sentix investor confidence (Nov) up to -11.9 vs -13.8 exp, prior -13.7
- Italy industrial production MoM (Sep) down -0.9% vs -0.2% exp, prior 0.2%

Twitter: @MichaelSedacca

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No positions in stocks mentioned.

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