Market Brief: If in doubt, fade the rips

There’s been lots of euphoria this week. Also lashings of doubt

Stock market snapshot as of [8/11/2019 1:57 PM]

  • If in doubt, leave it out. There’s been lots of euphoria this week. But even with a clutch of new record highs, there was lashings of doubt. There still is. European shares have faded earlier gains
  • There is still no phase-one trade deal. The White House was “very optimistic” that a deal will be reached soon. Yet Reuters reported “fierce internal opposition” to the notion of a tariff rollback. And WH trade advisor Peter Navarro noted that there was “no agreement at this time to remove any of the existing tariffs as a condition of the phase one deal” 
  • Earlier, China’s exports and imports fell; quite hard. (But they were better than expected, underpinning risk appetite, initially)
  • German trade data looked better. A 1.5% rise compared with +0.4% expected was the best in about two years. The picture might well have changed materially since the snapshot was taken, in September. German manufacturers signalled a continuing recession in this week’s October PMI. September trade data just allow the possibility that a full-blown recession has been avoided, for now
  • The DAX was down 0.1% by mid-session. Trade-sensitive stock sectors retreated across Europe. DXY ticked up; haven characteristics haven’t strayed far. (Gold also perked up). SPX was flat, NDX down 0.2%. Bunds were fairly rangebound. Treasurys too, though 2-5-year yields were up 2bps each. Brent crude futures stayed down about 1.5%

Stocks/sectors on the move

  • Europe’s energy and banking sectors fell the hardest at latest check. That makes some sense looking at oil and given that financials’ short-term beta also appeared to be relatively high, of late, with markets’ sensitivity to trade headlines enhanced. ‘Safer’ utilities rose most
  • An unusually large block (10 million) of Inditex (ITX) shares—60% of the 20-day average—helped skew Europe’s retail/consumer discretionary gauges. This follows a similar-sized ITX oddity on Thursday, amid little news. ITX was last down 2.3%; up 27% in 2019
  • Richemont was a heavier ‘discretionary’ drag, down 5.6%. H1 results missed, with some pressure from the cost of higher online volumes. News that it won’t counter LVMH’s Tiffany bidding is also taken badly. Credit Agricole fell 2% with French retail banking a particularly soft spot. Allianz added financials weight, down 2.5%. Its key insurance unit combined ratio weakened a bit amid “headwinds”; Q3 operating profit was in-line, though guidance was lifted
  • Among U.S. earnings, Duke Energy hiked its outlook after a strong EPS beat but shares point lower despite a ‘minimally’ dilutive capital raising. Disney rose 6% ahead of full trade on theme park and ‘Lion King’-boosted earnings. Dropbox was up 2.5% on a beat from rising subscriptions. Gap slumped 9% as its CEO exits amid reduced guidance


FX snapshot as of [8/11/2019 2:01 PM]

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FX markets

  • Currencies in most active retreat vs. greenback included INR after Moody’s outlook downgrade; ZAR remains the weakest EMFX play after its near-Moody’s miss this week
  • ‘Commodity dollars’ AUD, CAD slip as does NOK, with oil, and as LME copper backed off $6,000 on news that imports to China fell 3% in October. NZD leads declines as implied volatility surges ahead of next week’s RBNZ decision
  • The Loon is also weighed to a three-week low after a surprise loss of 1,800 jobs last month
  • The Aussie also falls because the RBA clarified recent preparedness to cut

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