Hope you had great holidays, that you’re in great shape and eager to trade… The Dawn Patrol will come back next Monday and I’m thinking about changing it slightly…
If you’re not ready to read the Dawn Patrol, then you can spend 25 minutes watching this: http://vimeo.com/72377770
We’re hosting a lunch on the 24th of September in Paris with Tristan Abet our Strategist. He will tell you what the future will look like, let me know if you want to attend.
European Stocks are expected to drop again today on prospects of military action against Syria.
US equities finished substantially lower on Monday. Markets opened down and then continued to move lower throughout the day. Heightened geopolitical fears outweighed all other news today. Economic data releases from around the globe, although of secondary importance, were modestly positive. The possibility of a US strike against Syria remained the driving factor for markets. An updated timeframe of mid-October for the debt ceiling and related intransigence by both parties regarding negotiations did not help matters. Emerging markets are under pressure again and India remains the focal point. All sectors were lower with defensives outperforming. The VIX was +12.7% to 16.89. Treasuries, crude and gold were all higher.
Asia in the red as Syria tensions dominate. Volumes are light and consensus longs have clearly been the hardest hit. Japan is down over 2%, with industrials, shippers and trading companies all underperforming, although very few names are in the green. More of the same in ASEAN, the worst performing market again the Philippines which is off over 5%.
SX5E Index Futures: 2760.00y -60.00 Support at 2718 then 2701 Resistance 2751 then 2766/69
Today, we’ll watch headlines on Syria, EM FX, European M3 supply at 9:00 and US pending home sales at 16:00.
TUESDAY GEAR (on a Wednesday)
Don’t get the Jawbone Jambox whatever its size, get a Bose Speaker and if you’re into smaller things, the Bose Soundlink Mini is the one you should get (and I’m not a Bose fan for larger speakers or headsets).
Dutch Pension Funds, Insurers to Take Over Banks’ Mortgages: FD
Indian Rupee Weakens Past 68 to Record; Stocks, Bonds Fall as Rout Worsens
Hollande Revamps French Pensions With Longer Working Lives
Ex-JPMorgan Trader to Fight U.S. Extradition Over $6.2b Losses
Accor Profit Misses Analyst Estimates as Company Shifts Strategy (-2%)
Ackman Takes $500 Million Loss on J.C. Penney as Saga Ends
Air France–KLM Denies Plans to Scrap Employee Ticket Discounts
BNP Employees in London Protest End of Expat Status, Echos Says
Bouygues Cuts Full-Year Sales Target on Telecom Performance
Bureau Veritas 1H Revenue Rises, Confirms Targets to 2015
CEMEX to Buy Holcim’s Czech Ops, Sell W.German Assets to Holcim
Eurazeo 1H Net Income EU329m vs Pro Forma EU147m Loss
G4S Says Himanshu Raja to Join as CFO on Oct. 7
Novartis Share Price May Rise 21% on Restructuring, SocGen Says
Our heads of states still wait for new intel from the US on Assad’s regime use of chemical weapons in last week’s attack in Damascus. The US is not likely to seek a UN mandate for the strike given Russia’s ability to veto on the Security Council. Rhetoric from the UK and France as well as others continues to become stronger and more supportive of action against Assad’s regime. The Arab League released a communique blaming Assad’s regime for the attack, however, it should be noted that the Arab League has previously been supportive of the rebels. Here is an interesting article to read: http://bit.ly/1doVvbi
Are we on the verge of 1997 style financial crisis? No… S&P’s Asia-Pacific Chief Economist Paul Gruenwald says :” The external positions for the emerging Asian economies are much stronger. The central banks are also not defending their exchange rates. In addition, the increase in leverage over the past five years has been moderate in the economies with high external risks.” The most likely outcome they see is a weak policy response: “Left to their own devices, economies, exchange rates, and asset prices will eventually find a bottom. Growth will eventually slow enough so that it curbs imports and the current account corrects; and the currency will eventually fall far enough to spur exports while foreign investors seeing a bargain (including remittances and investments from overseas nationals) will come back in. But the cost to output, employment, and wealth is likely to be large along this path” (FT).
Summers to be next Fed chairman? A CNBC report, citing a “source from Team Obama,” suggests that Summers will be named chairman of the Federal Reserve in a few weeks. Although the report qualified the timing of the announcement by saying he is “still being vetted.”
Emerging markets have been among the biggest victims of bets that the U.S. Federal Reserve is getting ready to take away the monetary punch bowl. This has led to a lot of whining from people who ought to know better. Central bankers in the U.S. and elsewhere shouldn’t worry about the effects of their policies outside their borders. http://bloom.bg/12JON92
Stoxx 600 changes effective Sept.
• IN: Vestas Wind, CEZ, Komercni Banka, Ocado, Evonik, ICA Gruppen, Azimut, Genel Energy, Berendsen, BBA Aviation, Intrum Justitia, Kingspan
• OUT: BCA Popolare di Milano, Allreal, Tecnicas Reunidas, Salzgitter, Maurel et Prom, Oriflame Cosmetics, Verbund, Thrombogenics, Mobimo, Raiffeisen, Bank Int’l, Eurocommercial Properties, Acciona
GS (Brooks) Emerging Markets Daily
FOCUS: Reserve losses in Non-Japan Asia during the EM sell-off
Anxiety over potential tapering by the Fed in September continues to roil emerging markets (EM). We provide an up-to-date snapshot of official FX reserves in non-Japan Asia, taking into account also central banks’ forward books, where much of the variation in reserves tends to take place at times of market stress. Overall reserve losses have been most pronounced in Indonesia, where headline reserves fell $14 bn from April to July, with another $5 bn drop in the forward book. India’s drop in headline reserves of $11 bn over the same period looks to have been partly offset by an unwinding of USD longs in the forward book, though available data here only go through May. The pattern of reserve losses in both places is similar to the 2012 episode when fears over Greek PSI caused an EM sell-off, underscoring the underlying vulnerability that our research on “Indianesia” has highlighted. Beyond India and Indonesia, reserve losses are modest, with the exchange rate being allowed to bear the brunt of adjustment.
CFE PT CUT TO EU43 FROM EU48.75 AT ING
DELHAIZE RAISED TO BUY VS NEUTRAL AT CITI
EVRAZ CUT TO SELL VS NEUTRAL AT GOLDMAN
GDF SUEZ RAISED TO OUTPERFORM VS NEUTRAL AT CREDIT SUISSE
MINERA IRL CUT TO SECTOR PERFORM VS OUTPERFORM AT RBC
NOVOLIPETSK STEEL CUT TO SELL VS NEUTRAL AT GOLDMAN
PENNON RAISED TO OVERWEIGHT VS NEUTRAL AT JPMORGAN
QIWI RAISED TO OVERWEIGHT VS NEUTRAL AT JPMORGAN
ROSTELECOM CUT TO UNDERPERFORM VS NEUTRAL AT BOFAML
SM INVESTMENTS RAISED TO BUY VS NEUTRAL AT BOFAML
STATOIL RAISED TO BUY VS NEUTRAL AT BOFAML
SYNERGY HEALTH RATED NEW ADD AT NUMIS, PT 1,300P
TELENOR CUT TO NEUTRAL VS OUTPERFORM AT CREDIT SUISSE
TMK RAISED TO BUY VS NEUTRAL AT GOLDMAN
OVERNIGHT MARKETS: DOWN
Nikkei 225 down -256.38 (-1.89%) at 13,286
Topix down -27.28 (-2.41%) at 1,107
Hang Seng down -380.49 (-1.74%) at 21,494
S&P 500 down -26.30 (-1.59%) at 1,630
DJIA down -170.33 (-1.14%) at 14,776
Nasdaq down -79.05 (-2.16%) at 3,579
Eurofirst 300 down -21.16 (-1.73%) at 1,202
FTSE100 down -51.13 (-0.79%) at 6,441
CAC 40 down -98.40 (-2.42%) at 3,969
Dax down -192.59 (-2.28%) at 8,243
€/$ 1.34 (1.34)
$/¥ 97.02 (97.02)
£/$ 1.55 (1.55)
Brent Crude (ICE) up +2.62 at 116.98
Light Crude (Nymex) up +2.93 at 111.94
100 Oz Gold (Comex) down -3.10 at 1,418
Copper (Comex) unchanged 0.00 at 3.33
10-year government bond yields (%)
CDS (closing levels)
Markit iTraxx SovX Western Europe -0.75bps at 88.23bp
Markit iTraxx Europe +6.53bps at 107.16bp
Markit iTraxx Xover +25.17bps at 437.17bp
Markit CDX IG +1.12bps at 86.56bp
Sources: FT, Bloomberg, Markit