Traders Market Weekly: Central Banks, Debt, Jobs and Apple

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    Standard & Poor’s warned that China’s growth might slow to 2.9% if the property crisis worsens.
    A CDS panel was asked to determine if Country Garden’s failure to meet a debt payment constitutes a default.


    South Korea’s September PPI 0.4% m/m (last 0.9%); 1.3% yr/yr (last 1.0%)


    Major European indices trade on a mostly higher note while Spain’s IBEX 35 (-0.2%) lags.

    Barclays lowered its net interest margin guidance for the year.

    —Equity Markets—

    STOXX Europe 600: +0.2%
    Germany’s DAX: +0.2%
    U.K.’s FTSE 100: UNCH
    France’s CAC 40: +0.6%
    Italy’s FTSE MIB: +0.2%
    Spain’s IBEX 35: -0.2%


    Flash October Manufacturing and Services PMI readings from France, Germany, and the U.K. remained in contractionary territory, reflecting continuation of weak activity in the region.

    Eurozone’s flash October Manufacturing PMI 43.0 (expected 43.7; last 43.4) and flash Services PMI 47.8 (expected 48.7; last 48.7)
    Germany’s Flash October Manufacturing PMI 40.7 (expected 40.0; last 39.6) and flash Services PMI 48.0 (expected 50.0; last 50.3)
    U.K.’s Flash October Manufacturing PMI 45.2 (expected 44.7; last 44.3) and flash Services PMI 49.2 (expected 49.3; last 49.3)
    France’s flash October Manufacturing PMI 42.6 (expected 44.4; last 44.2) and flash Services PMI 46.1 (expected 44.6; last 44.4)


    Germany’s November GfK Consumer Climate -28.1 (expected -26.6; last -26.7).


    U.K.’s August three-month employment change -82,000 (expected -198,000; last -207,000) and August Unemployment Rate 4.2% (expected 4.3%; last 4.3%).
    Q2 Labor Productivity 0.3% (expected 0.7%; last -0.3%). October CBI Industrial Trends Orders -26 (expected -16; last -18).


    The 10-yr note yield is up two basis points to 4.86% and the 2-yr note yield is up two basis points to 5.08%.
    There will be a $51 billion 2-yr note auction today. Results will be released at 1:00 p.m. ET.


    Dow 33,141.38 204.97 0.62%
    S&P 500 4,247.68 30.64 0.73%
    Nasdaq 13,139.87 121.55 0.93%
    VIX 19.09 -1.28 -6.28%
    Gold 1,984.10 -3.70 -0.19%
    Oil 83.75 -1.74 -2.04%
    BITCOIN 31,735


    Credit Markets Haven’t Broken Yet, But They’re Budging

    The critical signs coming from small caps are too big to ignore. Plus, the real lesson from Bill Gross that investors need to take on board.

    When the Credit Breaks

    If something needs to break before the Federal Reserve relents and bond yields start to fall, what is it going to be? Back in March, it looked as though the backup in bond yields had broken something really important: the regional banking system. Several banks proved to have taken on too much interest-rate risk. Rescues, fire sales, and a Fed program to lend money to keep them liquid ensued.

    Credit has continued to flow since then, however, and the corporate credit markets haven’t snapped yet. If that changes, it makes a recession far harder to avoid, and also sharply increases the risk of a major bankruptcy or failure of an institution to trigger a financial crisis. Credit matters. And it does look as though it’s beginning to budge.

    The critical sign of something amiss comes from small caps. They are far more exposed to rising interest rates than larger companies, and the gulf in their performance has now grown quite dramatic. The Russell 2000 index of smaller companies has just dropped back below its level from the eve of the pandemic, essentially giving up all its gains since the dawn of the decade. Russell’s index of the top 50 stocks is still up almost 50% over that period:


    Equity indices in the Asia-Pacific region ended the midweek session on a mostly higher note.

    China’s President Xi visited the People’s Bank of China for the first time since taking office.
    China’s National Development Reform Commission said that crude oil processing capacity will be limited to one billion metric tons by 2025.
    There was more speculation about another cut to the reserve requirement ratio.

    —Equity Markets—

    Japan’s Nikkei: +0.7%
    Hong Kong’s Hang Seng: +0.6%
    China’s Shanghai Composite: +0.4%
    India’s Sensex: -0.8%
    South Korea’s Kospi: -0.9%
    Australia’s ASX All Ordinaries: UNCH


    Reserve Bank of Australia Governor Bullock said that inflation could prove more stubborn than expected, prompting more rate hikes from the central bank.
    ANZ and Commonwealth Bank of Australia now expect that the RBA will hike rates again in November.

    Australia’s Q3 CPI 1.2% qtr/qtr (expected 1.1%; last 0.8%); 5.4% yr/yr (expected 5.3%; last 6.0%).
    September Monthly CPI Indicator 5.6% yr/yr (expected 5.4%; last 5.2%)


    Japan’s August Leading Index 109.2 (expected 109.5; last 108.2) and Coincident Indicator 0.4% m/m (last 0.1%)

    South Korea’s October Consumer Confidence 98.1 (last 99.7)


    Alphabet (GOOG 131.72, -8.38, -6.0%): beats by $0.09, reports revs in-line, total Google advertising revenue increased 9.4%, Google Cloud revenue up 21.7%; Committed to reengineering cost base to create capacity for AI investments

    Microsoft (MSFT 342.75, +12.22, +3.7%): beats by $0.34, beats on revs; Azure +28% CC vs +25-26% CC prior guidance; provides color on segments for DecQ

    Snapchat (SNAP 9.95, +0.24, +2.5%): beats by $0.26, beats on revs; guides Q4 revs in-line; COO retiring

    Texas Instruments (TXN 138.00, -8.92, -6.1%): misses by $0.02, misses on revs; guides Q4 EPS below consensus, revs below consensus; Continues to operate in a weak environment as weakness in Industrial end market has broadened


    Major European indices trade in the red.

    Deutsche Bank beat quarterly expectations and revealed plans to return more capital to shareholders.

    —Equity Markets—

    STOXX Europe 600: UNCH
    Germany’s DAX: -0.1%
    U.K.’s FTSE 100: +0.1%
    France’s CAC 40: -0.1%
    Italy’s FTSE MIB: -0.8%
    Spain’s IBEX 35: -0.1%


    Economists from Germany’s ifo Institute noted that the services sector is stabilizing and could grow slightly in Q4 and that the European Central Bank could cut rates in the second half of 2024.

    Germany’s October ifo Business Climate 86.9 (expected 85.9; last 85.8). October Current Assessment 89.2 (expected 88.5; last 88.7) and Business Expectations 84.7 (expected 83.3; last 83.1)

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