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News & Views: Thursday, September 11

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

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IEA Cuts Demand Estimate as Saudi Exports Drop to 2011 Low (Bloomberg)

Scottish independence: RBS confirms London HQ move if Scotland votes 'Yes' (BBC)

Obama orders U.S. airstrikes in Syria against Islamic State (Reuters)

Alibaba's record IPO covered after first few roadshow meetings: sources (Reuters)

Twitter Seeks Up to $1.5 Billion in Debt Offering (Bloomberg)

Views
Most Asian stock indices were lower overnight, following the weakness in crude oil that derived from the significantly worse-than-expected China CPI. Prices only rose 2.0% YoY in August, down from 2.3% in the month prior and worse than the 2.2% expected. Food inflation spiked, rising 0.7% MoM, while the other categories all dropped. This was the key culprit behind the drop in commodity prices. Precious metals including silver and copper are also hard hit overnight with large sell orders in futures overnight (8.5mln oz sweep order in silver CME futures). Producer prices were also weak. Overnight in China iron ore futures traded lower, but are flat as of this writing, which should cause the weakness in Brazil to ease up today.

The Reserve Bank of New Zealand (RBNZ) kept rates on hold last night as expected, but moreover it said that it would be prudent to consider keeping rates on hold before considering more rate increases. This caused many forecasters to push back their assumed first rate hike by three months - from the end of this year to the spring of next year. The RBNZ also noted that the level of the "Kiwi" was unjustified and unsustainable, saying that it had yet to adjust materially to lower commodity prices and it expected a further significant drop in the currency. The fact of the matter is that the RBNZ will likely have to go into the market to prove that point - the AUDNZD has given back all of its initial gains. Lastly, the bank noted that inflation pressures have been less than they expected, which is highlighted by the recent spate of weaker milk auctions in the country.

The EU plans to enact another new package of Russian sanctions tomorrow that would cut off financing to natural gas and defense operations. However, some are worried that this provocation will cause Russia to send its troops back into Ukraine and breach the already fragile ceasefire. Russia had reportedly moved out more than 70% of its troops - that weren't even "there" to begin with - following its proposed ceasefire last week. As a hedge, the EU would also submit terms that would allow the sanctions to be suspended.

On the positive side of things, the Japanese third quarter business survey showed a strong rebound in large companies plans to hire and increase capital expenditures for the third quarter. Following the drop in the second quarter due to the sales tax increase, the economy is showing a full rebounding according to this survey. This should pave the way for another tax increase when the time comes.

The question over whether or not the Fed will drop the "considerable time" phrase from its statement on keeping rates low continues to draw a lot of attention. Jon Hilsenrath at the WSJ chimed in this morning with the headline "Can The Fed Drop 'Considerable Time' Without Spooking Markets?" The argument here is that they can drop the considerable time language to make the central bank truly data dependent in its approach and not date dependent. The real question is, what will the shape of the 2017 Dot Plot show? Surely I jest.

Overnight Data:
- China CPI YoY (Aug) down to 2.0% vs 2.2% expected, prior 2.3%
- China PPI YoY down to -1.2% vs -1.1% exp, prior -0.9%
- Japan BSI Large corp all industry QoQ (3Q) up to 11.1, prior -14.6
- Australia employment change (Aug) up 121K vs 15K exp, prior -4.1K
-- Unemployment rate down to 6.1% vs 6.3% exp, prior 6.4%
-- Part time change up 106.7K, prior -19.5K
-- Full time change up 14.3K, prior 15.4K
- German CPI (Aug final) YoY unchanged at 0.8% vs 0.8% exp

US Economics (Time Zone: EDT)
 
08:30 Initial Jobless Claims - 315K, expected 300K, prior 302K
08:30 Continuing Claims - 2487K, exp 2490K, prior 2464K
2:00 Treasury Budget (Aug) - exp -$135B
11:00 Fed to purchase $2b-$2.5b Treasuries in 6 to 7-year range
1:00 Treasury to sell $13b 30-year bonds (reopening)

Earnings

After:
Ulta Salon (ULTA)
Kroger (KR)

Twitter: @MichaelSedacca

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No positions in stocks mentioned.

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