Today’s Big Picture

You know those days when you wake up, start reading the news and think, “They’ve all lost their marbles?” Today is one of those days.

US equity futures shifted from being slightly negative early morning to pointing to a positive jump at the open on rumors that China is ready to discuss a partial trade deal this week as long as no further tariffs are imposed. Fingers crossed for a de-escalation. 

Stocks in Asia were mixed on Wednesday amid the ongoing US-China tensions but European equities managed to turn positive, likely thanks in part to Fed Chair Powell’s assurances yesterday the Fed will act “as appropriate” and separately Chicago Fed President Evans assured that further cuts could help combat economic headwinds and boost inflation.

Today’s focus for the markets is on US-China hot and cold relations, Brexit talk breakdown and for those paying attention, the “idiosyncratic” overnight repo liquidity issues that are now an ongoing problem. Yesterday Fed Chair Powell announced that the Fed is now offering two-week repo loans, but only for a short time, limited offer, not to be repeated… uh-huh. Do we call them idiosyncratic loans?

We don’t think it would be overly presumptuous to posit that we’ve gone from a trade war between the US and China to an all-out economic war. Monday the US placed 28 Chinese companies on a blacklist for alleged involvement in surveillance and detention of Muslim minority groups in the Xinjiang region and Tuesday visa restrictions were put on Chinese officials believed involved in those abuses. Capital controls are again being discussed that would limit investments in Chinese companies by U.S. government pension investments and index providers. One minute it looks as if we are about as likely to get a meaningful trade deal as we are to see the President take a social media holiday. The next minute the game is back on. We live in interesting times.

Over in Europe any progress on Brexit is looking about as likely as an NBA playoff game in Hong Kong next year. There is an awful lot of not-getting-along going around. UK Prime Minister Boris Johnson is facing rising pressure from within his party over concerns that there really will be a no-deal Brexit. Everyone involved officially agrees that everyone wants a deal but it looks like what Brussels is willing to offer, Parliament won’t accept nor will Parliament accept a no-deal Brexit so, welcome to the geopolitical null set.

Data Download

Machine Tool Orders in Japan fell hard again in September, down -35.5% year-over-year after August’s -37.0%plunge. Mexico’s inflation rate for September rose 3% year over, in line with expectations as did the 0.3% month over month increase for the country’s core inflation rate.

The latest weekly rail traffic report from the Association of American Railroads (AAR) showed a 5.5% drop in carloads during 3Q19, marking one of the most significant drops in the last three years. Another data point confirming the deceleration in the US manufacturing economy. 

While the talking heads continue to cheer the markets on, insider selling of US stocks hit a 10-year-high of $14.2 billion in September and was the sixth month in 2019 for which insiders sold over $10 billion of their holdings. Probably nothing worth factoring into one’s thinking.

Later today we’ll get one of Hawkins’ favorite reports (yes, she does, in fact, need to get out more) the Job Openings and Labor Turnover Survey which has seen Job Openings remain a multiple of those looking for work – we’ll be looking for any weakness in openings as well as hirings versus firings. The weekly mortgage application numbers will be released, as will the Department of Energy oil, distillate, and gasoline inventories and implied demand figures. 

We’ll also get a look at Wholesale Inventories and hear from Federal Reserve Chicago President Evans (FOMC Voter) and again from Chair Powell (FOMC Voter) today. This afternoon the minutes from the September 18th FOMC meeting will be released and investors will be dissecting them, looking for additional clues on what the Fed is likely to do at its next monetary policy meeting later this month. 

Stocks to Watch

Semiconductor stocks ranging from Intel (INTC)Qualcomm (QCOM), and Broadcom (AVGO) to Nvidia (NVDA)and Analog Devices (ADI) will be under the microscope following September revenue results this morning from chip foundries Taiwan Semiconductor (TSM) and United Microelectronics (UMCas well as  chip packaging, assembly and testing companies ChipMOS Technologies (IMOS) and ASE Technology (ASX):

  • Taiwan Semiconductor: September revenue rose 7.6% year over year
  • United Microelectronics: September revenue fell 8.7% year over year
  • ChipMOS Technologies: September revenue fell 8.5% year over year
  • ASE Technology: September net revenue rose 3.2% year over year

Shares of clinical-stage biopharmaceutical company DBV Technologies (DBVT) are trading off in pre-market trading following the news the company priced a global offering of $125 million consisting of 7.9 million ordinary shares and a private placement of 1.6 shares.

Comments from Saudi Aramco (ARMCO) CEO Amin Nasser this morning that Saudi Arabia will recover its full oil production by the end of November will likely reverberate through oil stocks ranging from Exxon Mobile (XOMto Occidental Petroleum (OXYand Chevron Corp (CVX) to Royal Dutch Shell (RDS.A)

Now in its fourth week, the strike at 15 North American General Motors (GM) assembly plants is estimated to have cost the auto company 165,000 cars and trucks. The longer the strike continues, the longer it is expected to take the company to fire back up its production lines should it come to terms with the UAW.

Engineering and services company Ducommun (DCO) has acquired Nobles Worldwide, a leading company in the design and manufacture of high-performance ammunition handling systems for military aircraft, helicopters, ground vehicles, and shipboard systems.

Equinix (EQIX) has formed a $1.0 billion joint venture with GIC, Singapore’s sovereign wealth fund, to develop and operate xScale data centers in Europe.

After the close, medical device and implant company Lemaitre Vascular (LMATwill release its most recent quarterly earnings results. Expectations are for EPS of $0.21 on sales of $28.2 million and investors will focus on margin improvement prospects as Lemaitre continues to integrate recently acquired businesses. Of the company’s 12 prior earnings releases, it has been on EPS 75% of the time, sales 58% and raised guidance 25% of the time.

On the Horizon

Upcoming IPOs this week:

  • BioNTech (BNTX), a German biotech company developing individualized immunotherapies for cancer with a pipeline of more than 20 candidates targeting tumors and infectious disease, is expected to begin trading on Nasdaq on Thursday. The company is expected to issue 13.2 million shares between $18 and $20 representing 5.8% of outstanding shares.
  • HBT Financial (HBT), the holding company for Heartland Bank and Trust Company and State Bank of Lincoln that has 64 branches in central and northeastern Illinois, is expected to begin on Nasdaq on Friday. The company is expected to issue more than 8.3 million shares between $17 and $19 representing 31.5% of outstanding shares.
  • Vir Biotechnology (VIR), a Phase 2 biotech developing immunologic therapies for infectious diseases such as hepatitis B, HIV, influenza, and tuberculosis is expected to begin trading on Nasdaq on Friday. The company is expected to issue more than 17.4 million shares between $20 and $22 representing 6.5% of outstanding shares.

Dates to mark:

  • October 10-11: US-China trade talks
  • October 15: Next US Democratic Presidential debate
  • October 15: Tariffs set to increase on Chinese goods barring progress in the trade talks.
  • October 16: US Retail Sales – given slowing growth in consumer credit and rising auto loan delinquencies, this will be particularly important
  • October 27 – Saudi Arabian oil company Aramco (ARMCO) is expected to publish its IPO prospectus, in what could be one of the largest offerings of the year.   
  • October 29-30: Federal Reserve monetary policy meeting
  • October 31: Brexit?

Thought for the Day

“Leadership is the art of getting someone else to do something you want done because he wants to do it.” – Dwight D. Eisenhower

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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