Global Stocks advancing with news that China is considering a USD$1.2tn tax cut to jumpstart domestic economy

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by QuantalyticsResearch

US Stocks

  • Global stocks are advancing this morning following news that China is considering using fiscal policy to jumpstart economic growth
  • US stocks index futures are pointing to a modestly positive open in NY with the Dow Jones minis +0.37%, S&P500 minis +0.35 and Nasdaq 100 minis +0.70%
  • This is a busy week for the S&P 500 as 160 stocks in the US benchmark index are set to report earnings this week
  • Bloomberg reports that October to date is the worst start for the month of October since CY2008 as price pressures are eroding profit margins at US industrials stocks according to their C3Q earnings releases
  • Utilities stocks are the best performing stocks month to date, as we highlighted in our blog post, “What have been the top performing US ETFs in October?“, up 3.6% following several years of underperformance
  • The VIX is little changed this morning and is currently at 19.33 after closing at 19.89 yesterday
  • XLF November 16 OTM Puts, KRE November 16 OTM Puts, EEM November 16 Puts and FXI December 2018 OTM Calls are the most heavily traded options contracts in the US pre-market
  • US 10-Year Treasury Bonds are lower with yields up 0.19 basis points to 3.194%
  • The US Treasury 2s-10s Spread has widened 0.17 basis points to 0.29%
  • WTI Crude is currently up 0.68% to USD$69.12/bbl with the Brent-WTI spread down USD$-1.44 to USD$10.39/bbl
  • Gold is currently little changed -0.21% to USD$1223.95/oz
  • Global oil prices are trading range-bound following news at that officials in Saudi Arabia dismissed the notion it will use its oil production as a political tool

Stocks Trending in the News

  • CNOOC (883 HK) and Total (FP FP) have extended their LNG supply agreement.  CNOOC and Total increased the total amount of the contract to 1.5 million tons per annum, up from 1 million.  CNOOC  and Total extended the contract to 20 years.  CNOOC closed 3.3% higher at HKD$14.54, Total is trading flat at 52.76 euros.  CNOOC is rated ‘Top Buy’ in our China All-Cap Global Top Stock Ideas, Total is rated ‘Attractive’ in our European Large-Cap Global Top Stock Ideas.
  • Fiat Chrysler (FCAU) sold its car parts unit, Magnetti Marelli to Japan’s Calsonic Kansei, owned by KKR (KKR) in a USD$7.1 billion deal.  This is the first deal for Fiat Chrysler’s new CEO and will create a parts maker with USD$17 billion in sales.  Fiat Chrysler shares are trading 8% higher in pre-market trading at $16.26.  KKR is indicated flat in pre-market trading.  Fiat Chrysler is not rated in our Global Top Stock Ideas.  KKR is rated ‘Neutral’ in our US Large-Cap Global Top Stock Ideas.
  • Halliburton (HAL) reported 3Q results a touch above expectations.   Halliburton reported 3Q revenue of USD$6.17 billion with USD$6.11 expected.  Halliburton’s 3Q operating income came at USD$716mm while USD$696mm was expected.  Halliburton said while 3Q was decent, 2019 should be “better”.  Halliburton is rated ‘Neutral’ in our US Large-Cap Global Top Stock Ideas.
  • Hasbro (HAS) delivered 3Q results that missed even the lowest estimate.  Hasbro saw 3Q adjusted EPS come at USD$1.93 while consensus was for USD$2.24, non-adjusted EPS came at USD$2.06.  Hasbro revenue came well below at USD$1.57 billion, USD$1.7 billion was expected.  Hasbro saw franchise brands revenue fall 5% and partner brands fall 37%.  Hasbro is rated ‘Unattractive’ in our US Large-Cap Global Top Stock Ideas and ‘Neutral’ in our US Consumer Discretionary Global Top Stock Ideas.
  • Jacobs Engineering Group (JEC) has agreed to sell its chemicals and resource unit to WorleyParsons Ltd. (WOR AU) in a USD$3.3 billion deal.  Jacobs Engineering Group will receive USD$2.6 billion in cash and USD$700mn in shares valued at roughly 11% of WorleyParsons Ltd.  Jacobs Engineering Group is divesting the unit so it can focus on higher margin products.  WorleyParsons Ltd. Has seen its shares halted from trading given the news.  Jacobs Engineering Group is rated ‘Neutral’ in both our US Large-Cap Global Top Stock Ideas and US Industrials Global Top Stock Ideas.
  • Jet Airlines (JETIN IN) is reviewing its routes and planes used as part of its response to higher fuel prices.  Jet Airlines is replacing wide-body planes with five Boeing 737 Max planes.  Jet Airline is “right sizing’ ATR network to align capacity.   Jet Airlines expects 15% fuel savings with each new plane and it expects further network changes to come.  Jet Airlines fell 6.9% to close at 213.95 rupees.  Jet Airlines is not rated in our Global Top Stock Ideas
  • Philips NV (PHIA NA) is falling 6.1% to 32.60 euros after reporting weak 3Q results.  Philips NV said it will need to revamp its entire supply chain to limit the effects of a trade war and Brexit.  Philips NV will see 60 million euros shaved from earnings next year due to the trade war and Brexit.  Philips NV saw revenue grow 7% to 568 million euros while 584 million was expected.  Philips NV Hasbro is rated ‘Attractive’ in our European Large-Cap Global Top Stock Ideas.
  • Ryanair (RYA ID) shares are rising 3.9% to 11.96 euros after weak earnings were not worse than some had feared.  Ryanair did not issue any fresh profit warnings with the results and as AJ Bell wrote in a note “life does not seem to be getting worse…”  Ryanair delivered it first decline in first half earnings in 5 years.  Ryanair also suspended further buybacks until there is a clear Brexit resolution.   Ryanair is rated ‘Top Short’ in our US Large-Cap Global Top Stock Ideas.
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European Stocks

  • European stocks are edging up this morning but are off earlier AM highs following news that the Italian coalition government is willing to negotiate with the EU
  • The Stoxx Europe 600 continues to hover near oversold territory according to the 14-day RSI technical indicator
  • The Euro Stoxx 600 is currently up +0.38%, the FTSE 100 is higher by +0.68%, the DAX has advanced +0.6%, and the CAC 40 has risen +0.36%
  • As highlighted in this section last week, European auto stocks trading at 6-year lows
  • Investor sentiment for European stocks is positive with the advance/decline ratio for the Euro Stoxx 600 currently at 2.41x
  • Basic Resources (+1.14%), Insurance (+0.97%), and Automobiles & Parts (+0.86%) stocks are the top performers in the Euro Stoxx 600 today
  • Health Care (-0.35%), Real Estate (-0.2%), and Telecommunications (-0.18%) stocks are the worst performers in the Euro Stoxx 600 today
  • 21 stocks in the Euro Stoxx 600 are at 4-week highs while 193 stocks are at 4-week lows
  • 5 stocks in the Euro Stoxx 600 are overbought while 160 stocks are oversold according to the 16-day RSI Measure
  • VSTOXX, the European stocks equivalent of the VIX, is little changed this morning and is currently at 18.57 after closing at 18.78 yesterday
  • EUR€ is currently little changed against the USD$ at 1.1505
  • GBP£ is currently down -0.336% against the USD$ to 1.3032
  • CHF is currently little changed against the USD$ at 1.0026
  • German 10-Year Bunds are lower with yields up 0.5 basis points to 0.465%
  • UK 10-Year GILTs are higher with yields down -1.1 basis points to 1.565%
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Asian Stocks

  • Asian stocks begin the week on a positive note, closing in the black overnight after Chinese stocks close up over 4%, the biggest one-day move in 2 years
  • Officials in Beijing announced they are considering a potential tax cut which could be worth up to USD$1.2tn
  • The Nikkei 225 finished up +0.37%, the Hang Seng ended up +2.32%, the Hang Seng China Enterprise up +2.63%, and the CSI 300 was +4.32%
  • Investor sentiment for Japanese stocks finished positive with the advance/decline ratio for the Nikkei 225 closing at 1.65x
  • 0 stocks in the Nikkei 225 hit 4-week highs while 70 stocks reached 4-week lows
  • 0 stocks in the Nikkei 225 closed overbought while 11 stocks closed oversold according to the 16-day RSI Measure
  • Investor sentiment for Hong Kong stocks finished positive with the advance/decline ratio for the Hang Seng closing at 24x
  • 0 stocks in the Hang Seng hit 4-week highs while 13 stocks reached 4-week lows
  • 0 stocks in the Hang Seng closed overbought while 5 stocks closed oversold according to the 16-day RSI Measure
  • Japan 10-Year Government Bonds are lower with yields up 0.5 basis points to 0.154%
  • JGBs 2s-10s Spread has widened 0.3 basis points to 0.27%
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