Markets are set to open up for the 4th consecutive day, it is a market of hopes.
- Hope of a trade-deal. US and China will meet on Thursday, the latest headlines are not so positive, Chinese declared they will never change their laws to protect intellectual property. The US Commerce Department placed eight Chinese tech firms to its entity list, which bars companies from buying parts and components from US companies without US government approval.
- Hope of Fed intervention with further cuts and possibly QE. Powell last night delivered a speech empathizing the Fed independence from dangers of control from politics.
- Hope of a Brexit deal within the deadline of the 31st of October.
- Hope of Q3 earnings to be exceeding analyst expectations.
The S&P has already recovered 62% of the downturn move we had since the beginning of the month while the Eurostoxx has recovered 40%. While the downturn has happened with very heavy volumes, the bounce has been accompanied with super-light activity.
Yesterday, the best performing sector in Europe was Oil/Energy (+1.3%) with Crude prices up 1.7% on the news that Saudi officials have conceded it may be months before oil output returns to normal following drone attacks on its facilities in September.
US and Japan signed a limited trade deal, already based on previous talks. If approved by the Japanese parliament, the deal will likely come into effect January 1, mainly focusing on agricultural goods as Japan reduces or eliminates tariffs. This morning Japanese Auto pretty strong as the ghosts of US tariffs are fading away.
Turkish assets were under pressure yesterday as soon as the press released that US will not intervene when Turkey invades Northern Syria. This is a major turnaround in US politics. Basically, Trump is giving up his historical alliance with Kurdish forces in order to favor Turkey. It is no surprise that Erdogan wants to invade the Kurdish territory. A reminder that the Kurds were hailed as the heroes of humanity just 6 months ago after defeating ISIS and freeing innumerable slaves and captives. Worth also noting that the US is not being “forced out under fire” it is simply surrendering land and people to the Turkish military and Putin allies. Indeed surrendering people that are still officially US allies and have died in large numbers for this coalition with the US. However, later on, Trump threatened to destroy or obliterate Turkey’s economy in a series of crazy tweets, if Turkey goes off limits in Syria. A military Turkish operation is expected in a short-run.
On Brexit, Johnson is currently persuading EU politicians to accept his deal by the end of October. So far, he was not that lucky as Brussels seemed reluctant to accept his deal. In addition, yesterday, a Scottish court ruled that there is no need for coercive orders against the UK government as Johnson will abide by the law and require an extension to EU if no deal is in place by October 19. This is an important victory for Johnson; he is gaining more trust from the law and more power in front of Brussels. UK Parliament will be suspended for the next six days as the PM outlines his new legislative agenda
Macro-wise, yesterday the October Euro-Area investor confidence fell to -18.8 vs -13 consensus/ -11.1 prior, the lowest level since 2013. Again strong confirmation of the weak region Macro patch, with Germany almost in a technical recession. While there has been a good news today as Germany released its Industrial Production for August, at 0.3% vs 0% consensus vs -0.6% prior, which brings the total at -4% vs -4.3% consensus. A glimpse of hope in a very weak soft patch.
On Q3 numbers, Samsung forecast Q3 earnings that beat analysts’ estimates, but operating income still a profit decline of more than 50% year-on-year mainly due to global slowdown, trade war, and memory chips prices dropping along with low demand. No net income or division breakdown until Samsung will release the official data later this month. Stock up 1% in Korea. Meanwhile Wirecard, internet payment and processing services, raised its 2025 Revenue, EBITDA guidance citing strong, accelerating organic growth drivers and partnership with Softbank.
Finally it is interesting to note that Chinese banks are running out of cash in HKD and USD. The maximum withdrawal limit drop from 1300 Usd to just 38 Usd, this is creating some panic as locals are queuing to withdraw money. No answer from the Government so far and very little on global news.