News & Views: Monday, September 15
What you need to know for today's trading day.
OECD Cuts Economic Growth Forecasts (WSJ)
Paris Airports Quiet as Air France Pilots Strike (NYTimes)
Alibaba Asia Roadshow Begins; Jack Ma Says Company to Expand Aggressively in U.S.(WSJ)
Hong Kong Plans Yuan Repos to Meet Demand for Shanghai's Stocks (Bloomberg)
Options trading heats up on big bets U.S. rates are going up (Reuters)
US equity futures opened lower last night in sympathy to weak Asian stocks that were down due to some poor economic data out of China. S&P 500 futures (ESZ4) traded down about seven points for most of the night, but have rallied since the London session kicked off. Chinese industrial output for the year ending August dropped to a 6.9% annual rate from 9.0% the month before. However, the YTD YoY figure only slowed to 8.5% from 8.8%, which makes me think there is an odd comp in the pure YoY figure. The output weakness was broad, but a significant source of the slowdown came from iron ore and other metal (copper, zinc) smelting services. Copper is down 60bps this morning, but iron ore futures managed to close positive. The AUD was similarly under pressure. Keep an eye on Brazillian stocks today as they are most exposed to the raw material weakness. I started seeing more than one washout signal in EWZ on Friday.
More anxiety was present for Russia with the USDRUB making another new record high (or the Russian ruble weakening), the worst performer on a risk-adjusted basis overnight. The Indian rupee (INR) and Brazillian real (BRL) were close seconds. Brazil weakened due to some cautionary comments from the central bank of banks - the BIS - on the continued sensitivty for emerging market economies to foreign fund flows. The USDINR and USDIDR crosses were down 1.6 sigmas last night.
Alibaba (BABA) is said to be raising the top end of its IPO range to above $70 from the previous range of $60-$66 due to "strong investor demand." The amount going on sale will now be $22.4bln, making it the largest global IPO ever. Two things to keep in mind. At this size, it is more of a liquidity exercise because this will be a new core holding for many portfolios. Secondly, other stocks in the tech sector will need to be sold to make way for BABA, if they haven't already been done so. Separately, BABA said that it chose the NYSE over the Nasdaq because it feared that the latter could not handle an IPO of its size after botching the Facebook (FB) offering two years ago. Ouch.
More polls came out over the weekend on the Scottish independence vote that point towards a still small lead of "No." Additionally, Goldman polled its FX clients and 90% said they did not think that Scotland would vote to secede from the UK, which tells you where the financial world is leaning. The actual referendum vote is slated for Thursday.
- China industrial production YoY (Aug) down to 6.9% vs 8.8% expected, prior 9.0%
- China retail sales YoY down to 11.9% vs 12.1% exp, prior 12.2%
- China fixed asset investment YTD YoY down to 16.5% vs 16.9% exp, prior 17.0%
- Eurozone trade balance (Jul) narrows to EU12.2B vs 15.5B exp, prior 13.8B
- UK Rightmove home prices MoM (Sep) up 0.9%, prior -2.9%
- Indian wholesale prices YoY (Aug) down to 3.74% vs 4.33% exp, prior 5.19%
US Economics (Time Zone: EDT)
08:30 Empire Manufacturing (Sep) - 27.54, expected 16.00, prior 14.69
09:15 Industrial Production (Aug) - -0.1%, exp 0.3%, prior 0.4%
09:15 Capacity Utilization - 78.8%, exp 79.3%, prior 79.2%
11:00 Fed buying $950M-$1.15b Treasuries in 25 to 30-year range
11:30 Treasury to sell $24b 3-month bills, $23b 6-month bills
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