Global stocks lower as investors continue to digest the impact of higher interest rates

by QuantalyticsResearch

US Stocks

  • Global stocks are declining this morning as investors continue to digest the impact of higher interest rates on stocks
  • US stocks index futures are pointing to a drop in US stocks on the open in NY with the Dow Jones minis -0.35%, S&P500 minis -0.26% and Nasdaq 100 minis –0.37%
  • US Secretary of States had a “testy” start to a state visit to Beijing – the US Secretary of State claimed a “fundamental disagreement” with his Chinese counterpart, Foreign Minister Wang Yi, who accused the US of escalating trade disputes, interfering in Taiwan and meddling in domestic Chinese affairs
  • The VIX is moving up this morning and is currently at 16.39 after closing at 14.82 last week
  • Petrobras (PBR) October 19 OTM Calls, XLF October 19 OTM Calls, General Electric (GE) November 16 OTM Puts, QQQ October 12 & October 19 OTM Puts, and SPY October 19 & November 16 OTM Puts are the most heavily traded options contracts in the US pre-market
  • US 10-Year Treasury Bonds are flat with yields little changed to 3.2328%
  • The US Treasury 2s-10s Spread has little changed to 0.35%
  • WTI Crude is currently little changed 0.01% to USD$74.34/bbl with the Brent-WTI spread down USD$-1.51 to USD$8.6/bbl
  • Gold is currently down -0.8% to USD$1194.03/oz
  • Global oil prices are dropping to start the week following rumors the US government may soften its sanctions on exports of Iranian crude oil
  • Indian gold imports are estimated to have doubled Y/Y in September

Stocks Trending in the News

  • Airbus (AIR) will appoint Guillaume Faury as its new CEO today.  Airbus will combine the role of CEO and head of commercial aircraft, the position he holds today.  The change will happen in April when the present CEO will step down.  Airbus is trading 0.25% higher at 104.24 euros.  Airbus is rated ‘Neutral’ in our European Large-Cap Global Top Picks
  • Baker Hughes (BHGE) has agreed to acquire 5% Abnoc Drilling, which values the Abu Dhabi National Oil  Co at USD$11bn.  This is the first direct equity investment by a foreign firm in an Abu Dhabi oil services company.  The deal will help Abnoc Drilling expand drilling support by 40% by 2025.  Baker Hughes is rated ‘Top Short’ in our US Large-Cap Global Top Picks
  • Glencore (GLEN LN) could take itself private according to a report by Bernstein today.    Glencore was a private company for most of its history until going public in 2011.  Glencore management could take the company public and the idea as brought up given the weak share price.  Glencore share are trading 0.42% higher at 326.20 pence.  Glencore is rated ‘Unattractive’ in both our European Large-Cap and United Kingdom All-Large Cap Global Top Picks
  • Kimberly-Clark (KMB) was downgraded today at Goldman Sachs to neutral from buy.  Goldman Sachs said its call that the company’s organic sales momentum would sustain its rise did not pan out as expected and led to the Kimberly-Clark downgrade.  Kimberly-Clark is rated “Neutral’ in our US Large-Cap Global Top Picks and ‘Attractive’ in our US Consumer Staples Global Top Picks
  • Lloyds Bank (LLOY LN) and Schroders Asset Management (SDR LN) are in talks “with a view to working closely together in parts of the wealth sector”.   The ultimate goal is to win the investment mandate for the Lloyds owned Scottish Widows.  The moves are part of Lloyds efforts to expand its non-banking income.  Lloyds is trading 0.80% lower at 58.46 pence while Schroders is trading 0.40% higher at 3012 pence.  Lloyds Bank is rated ‘Neutral’ in our United Kingdom Global Top Picks and Schroders is rated ‘Neutral’ in our United Kingdom Global Top Picks
  • Tencent (700 HK) will invest USD$200mm in Brazilian bank Nu Bank.  This round of financing values the bank at USD$4bn and the market awaits further detail from Tencent.  Tencent closed 2% lower at HKD$299.  Tencent is rated ‘Attractive’ in our China All-Cap Global Top Picks
  • Wirecard (WDI GR) is trading 7.3% lower at 174.6 euros as the short position in the stock continues to grow.  There is a short position equal to 1.3% of all outstanding Wirecard shares presently.  Wirecard is rated “Top Buy’ in our European Large-Cap Global Top Picks

European Stocks

  • European stocks are dropping to start the week, with investor sentiment impaired by the jump in US treasury yields, the sell-off across Chinese & Hong Kong markets, slower German economic growth, and Italy’s defiant stand over its fiscal deficit.
  • The Italian coalition government’s contentious relationship with the EU remains in focus after Italian Deputy Prime Minister Matteo Salivini suggested Europe’s real enemy is EU President Jean-Claude Juncker and bureaucracy in Brussels that imposes budget restrictions and open boarders
  • The Euro Stoxx 600 is currently down -0.78%, the FTSE 100 has declined -0.58%, the DAX has fallen -0.75%, and the CAC 40 is lower by -0.82%
  • Investor sentiment for European stocks is negative with the advance/decline ratio for the Euro Stoxx 600 currently at 0.26x
  • Real Estate (+0.62%), Utilities (+0.18%), and Travel & Leisure (+0.16%) stocks are the top performers in the Euro Stoxx 600 today
  • Oil & Gas (-1.6%), Banks (-1.56%), and Automobiles & Parts (-1.26%) stocks are the worst performers in the Euro Stoxx 600 today
  • 22 stocks in the Euro Stoxx 600 are at 4-week highs while 197 stocks are at 4-week lows
  • 8 stocks in the Euro Stoxx 600 are overbought while 77 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 17.51 after closing at 16.68 yesterday
  • EUR€ is currently down -0.469% against the USD$ to 1.147
  • GBP£ is currently down -0.663% against the USD$ to 1.3033
  • CHF is currently little changed against the USD$ at 1.0067
  • German 10-Year Bunds are higher with yields down -4.4 basis points to 0.529%
  • UK 10-Year GILTs are higher with yields down -3.2 basis points to 1.69%

Asian Stocks

  • Asian stocks started the week in the red, with the MSCI Asia ex Japan index now at a 17-month low
  • The decline in Chinese stocks, the first trading session in a week, was the biggest drop since about 2 years
  • The Hang Seng ended down -1.39%, the Hang Seng China Enterprise declined -1.3%, and the CSI 300 was -4.3%
  • Japanese markets were closed for the Health-Sports Day holiday
  • The Hang Seng is back at early September lows, which were the lowest reading on the Hang Seng since June/July 2017
  • The People’s Bank of China (PBOC) cut its reserve ratio for banks to 1.0% — the cut in the reserve ratio is expected to make USD$175bn in capital available for investment thought almost ½ is exptedt ed to be used to repay maturing medium-term funding
  • Investor sentiment for Hong Kong stocks finished negative with the advance/decline ratio for the Hang Seng closing at 0.16x
  • 2 stocks in the Hang Seng hit 4-week highs while 12 stocks reached 4-week lows
  • 0 stocks in the Hang Seng closed overbought while 3 stocks closed oversold according to the 16-day RSI Measure

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