Us closed negatively last night and Asia has followed the move overnight with Japan down 1.2%.

Nancy Pelosi, speaker US House of Representative and Democrats, expressed her concerns that efforts to suppress records related to President Donald Trump’s call with Ukraine’s president constitute a cover-up. Obviously, Democrats continue to attack Trump with the impeachment process in light of the next US 2020 elections.

Quite surprisingly Europe seems to be holding well for the 2nd consecutive day as futures are indicated up 0.2/0.3%.  Yesterday Europe has outperformed the US by 0.5/0.8% thanks to a weaker Eur (-1% in 2 day vs USD) and also helped by Defensive names.

All in all, the market has been relatively quiet over the last two days with some intraday spikes generated by positive noises on US-China trade war. There is just one day (Monday) before China will be closed for the Golden Week and this is going to reduce both the chances of a Trade-deal with US and to get a chance of some market stimulus ahead of the holiday.

Profit warnings. With blackout looming, several firms are speeding up to revise their guidance down. So far, it seems to us that Industrials and Chemicals, respectively Cyclicals and Value stocks, are the most exposed to the global slowdown. During the past few days, we saw a massive number of profit warnings flooding into the market. Along with Fedex (Transportation & Logistic), which slashed its full-year profit forecast one week ago (-17% since the announcement), British Airways (Airlines) cut its forecast and its capacity growth in a deteriorated environment (-4% yesterday). In the Steel industry, United States Steel and Salzgitter (-7.5% yesterday) adjusted their earnings forecast while, in the Industrial segment, Corning (Tech-Telecom equipment), Kuka (machine manufacturer), Wartsila (power plant solutions), Pfeiffer Vacum Tech (pump manufacturer) announced sharp profit warnings for this year (the latter closed -21% yesterday). In the Chemical industry, K+S (Agricultural) and H.B. Fuller slashed production numbers and revenues, (the former -20% in 2 weeks). Some interesting surprises in the Defensive Value space, after Imperial Brands (Tobacco) warned about missing revenues in the vapour category (-13% yesterday) and Pearson (Publishing) cut EBIT due to structural issues (-14% yesterday).

Considering the Macro deterioration, rising input-cost and margin erosion trends, we would be surprised not to see several other companies cutting final-year guidance (being smashed on announcement) as the Q3 earning season is set to kick off on the 16th of October. Will Q3 deliver the so much discussed earning recession?  

Last night Micron, semiconductor US blue chip, was the first semi of the sector to lower its guidance mainly due to global trade tension and global slowdown which could extend the memory-chip industry slump. Guidance sees earnings at $46 cents vs $49 consensus, with sales on course to decline by more than 20% YoY for a fourth consecutive quarter. Needless to say that the stock was down 7% in post market after the announcement. We expect more semis to revise down projections.

Peloton IPO and SmileDirectClub were the latest victim of the US Ipo names trading negatively already on the 1st day. Peloton was priced at 29$ raising 1.16bn$ at the top of the range price and the listing process was oversubscribed. Yesterday it has opened at 27$ and closed at 25.76 (-11%!) Bear in mind that 60% of all gym equipment sold in the US are Pelotons. SmileDirectClub lost 11% on the 1st trading last week and has since then lost a further 19%! Peloton is the eighth in the US this year to top $1 billion. The offering follows disappointing performances by several consumer-oriented companies positioning themselves as game-changing tech companies. Most notably, Uber Technologies shares have fallen 30% since May after its $8.1 billion IPO, the year’s biggest.

While still not as extreme as the dot-com bubble, the number of unprofitable company IPOs have surged to the highest levels in nearly 20 years!

Macro-wise, yesterday we saw a mixed set of numbers in US, with Q2 GDP revised down by 10bps (confirms the very weak patch of global growth) at 2% vs 2.1% prior estimate, but higher consumer spending at 4.7% vs 4.6% consensus, the biggest gain since 2014 (also the strongest driver of GDP), higher inflation (core PCE) at 1.9% vs 1.7% probably due to tariffs effect and oil price (hawkish effect on Equities) and still negative Kansas Fed Manufacturing at -2 vs -6 prior in September. Indeed, Japan’s August foreign tool orders came at -37% YoY, quite worrisome considering the global trade economy.

A final note on Bitcoin that has lost a further 6% in the last 2 days which makes a total loss of 24% in just a week, another “canary in gold mine”?