News & Views: Tuesday, October 28
What you need to know for today's trading day.
China's Stocks Rise Most in Three Months on Trade-Zone Expansion (Bloomberg)
Riksbank Rejects Calls for Unconventional Steps After Record Cut (Bloomberg)
Alibaba Eyes Payments Tie-Up With Apple (WSJ)
Report Reveals Wider Tracking of Mail in U.S. (NYTimes)
China Fake Invoice Evidence Mounts as HK Figures Diverge (Bloomberg)
The Swedish Riksbank joined the rest of the central banking world in lowering its policy rate to zero last night. That was the call from the investment community recently, because they felt that the central bank was not doing enough to stave off the threat of deflation. The Riksbank cut due to excessive debt at the household level - it had nothing to do with unemployment, those forecasts were unchanged - which is an extremely important delineation because it is only a matter of time until the US Fed travels down a similar path. The Riksbank also pushed out its first rate hike by six months to the middle of 2016. The Swedish Krona (SEK) weakened for a second day - the worst performing currency on a risk-adjusted basis - and is now at its lowest level in four years versus the US dollar.
There was chatter overnight in China that the PBoC had asked banks to lower their lending rates as a precondition to obtain more cheap financing from the central bank. The chatter originated from ANZ Bank economists who cited an unidentified local media report. The interest rate market had already expected this, 1yr swap rates were at levels consistent with prior easing measures. Additionally, Reuters reported that at the Fourth Plenum the Chinese State Council may approve three new free-trade zones in the provinces of Guangdong, Fujian, and the city of Tianjin by the end of the year. The Shanghai Composite (SHCOMP) and Hang Seng (HSI) are collectively showing the largest positive risk-adjusted returns across all assets overnight.
European equities are recovering their losses from yesterday, led by the German DAX, and the Eurostoxx Bank Index (SX7E) and has collectively erased much of its losses from yesterday. Additionally, European bank credit is showing the largest positive risk-adjusted return in fixed income, while Bunds are showing the worst.
A Bloomberg report last night stated that the Bank of Japan (BoJ) is considering lowering its inflation view because of the impact from lower oil prices. It would scrap the forecast that core CPI is likely to follow a rising trend again from the second half of this fiscal year (which ends in April 2015). Additionally, Nikkei newswire (the source of many central bank leaks) said that the BoJ is expected to lower its real GDP forecast to 0.6% from 1.0% for this fiscal year. This is an important event because thus far central banks and governments have been hesitant to adjust policy forecasts for the lower oil prices, which may be viewed as a temporary phenomenom, unless deterioration continues. The BoJ has a new rate decision on this Thursday's evening.
- China industrial profits YoY (Sep) up 0.4%, prior -0.6%
- Japan retail sales MoM (Sep) up 2.7% vs 0.9% exp, prior 1.9%
- Japan small business confidence down to 47.4 vs 48.5 exp, prior 47.6
US Economics (Time Zone: EST)
08:30 Durable Goods Orders (Sep) - expected 0.5%, prior -18.2%
08:30 Durable Goods ex Transports - exp 0.5%, prior 0.7%
08:30 Cap Goods Shipments Nondef Ex Air - prior 0.1%
08:30 Cap Goods Orders Nondef Ex Air - exp 0.5%, prior 0.6%
09:00 S&P/Case Shiller 20 City MoM (Aug) - exp 0.13%, prior -0.5%
09:00 S&P/CS YoY - exp 5.70%, prior 6.75%
10:00 Consumer Confidence Index (Oct) - exp 87.0, prior 86.0
10:00 Richmond Fed - exp 10, prior 14
11:30 Treasury to sell 4-week bills
1:00 Treasury selling $29b 2-year notes
Noble Energy (NE)
Arch Coal (ACI)
Spirit Airlines (SAVE)
CIT Group (CIT)
HCA Holdings (HCA)
Sirius XM (SIRI)
Gilead Sciences (GILD)
Marriott International (MAR)
Anadarko Petroleum (APC)
US Steel (X)
Western Digitial Corp (WDC)
Panera Bread (PNRA)
Electronic Arts (EA)
Express Scripts (EXPR)
Vertex Pharma (VRTX)
Newfield Exploration (NFX)
Eagle Materials (EXP)
Wynn Resorts (WYNN)
TD Ameritrade (AMTD)
Burger King Worldwide (BKW)
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