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News & Views: Wednesday, November 19

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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.

Euro-Area Bonds Decline as ECB Member Questions Sovereign QE (Bloomberg)

Dollar General may have to shut more than 4,000 stores: NY Post (Reuters)

Senate Defeats Bill on Keystone XL Pipeline in Narrow Vote (NYTimes)

Goldman Hits Motherlode on Deals (WSJ)

WhatsApp Encrypts User Messages Following Google, Apple (Bloomberg)

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Taiwan's stock market is showing the largest risk-adjusted gain in equities overnight. Taiwan Semiconductor, which makes up 13.74% of the TAIEX index and is the largest component, announced that it may get at least half of the orders for Apple's A9 processor, which will be in the next iteration of the iPhone. The immediate read through is that this is an incremental positive for the rest of the Apple foodchain, such as Qualcomm (QCOM), Applied Materials (AMAT), and Advanced Semiconductor (ASX).

The appetite for onshore shares via foreign investors has waned since its debut on Monday. Buying flows were halved again to $425mm from $785mm yesterday. It hit the maximum $2.9bln on Monday. The Hong Kong Hang Seng index is the worst performing equity index on a risk-adjusted basis for the second day in a row and has wiped out 3% of gains.

German Bunds are having the largest negative risk-adjusted return in fixed income overnight. Klass Knot, the head of the Dutch central bank and member of the ECB Governing Council, said in a testimony to his country's lawmakers that he is skeptical of quantitative easing because it adds liquidity into the market to create financials bubbles, and that doesn't have an impact on the real economy. He said that the measures could be meaningful so long as you can justify that QE helps to stimulate lending. This comes after a statement at the latest ECB meeting by President Mario Draghi that he had a unanimous backing by the Governing Council to pursue further nonstandard measures to stimulate lending and the European financial system.

The Australian dollar is having the largest negative risk-adjusted return in currencies overnight. Yesterday, Reserve Bank of Australia Governor Stevens said in a speech that the poor economy warrants low rates for years. The AUD and NZD are seeing follow through from those comments again today. Not only is the RBA committed to keeping rates low, but it has already hinted that it is prepared to intervene in its currency market if necessary. All of those are negative for the Aussie dollar.

The Bank of Japan did not alter its plan after doubling the size of its comprehensive easing program three weeks ago at its prior meeting. The Board of Governors was more unanimous in its vote, however. The monetary base expansion and asset purchase plan had an 8-1 vote in favor compared to only a 5-4 margin at the last meeting. The lone dissentor was Kiuchi, who said that the previous plan was appropriate, and wanted to make it an intensive step for two years. This has allowed the Yen to continue selling off as now there is now no dissension on the BoJ's board. Lastly, Governor Kuroda said in his post-meeting press conference that inflation could fall below 1%, which presumably might draw an even larger response from the central bank.

The Keystone XL pipeline was voted down in the Senate yesterday with the 59-41 vote falling short of the 60 necessary. Once the GOP takes control of the Senate next year it is much more likely the bill passes, which would then run into resistance from President Obama, who has publicly said he would veto it.

Data:
- Japan all industry activity index MoM (Sep) up 1.0% vs 1.0% expected, prior 0.0%

Twitter: @MichaelSedacca

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No positions in stocks mentioned.

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