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  • US 10-year Treasuries yield hit a 7-year high of 3.224% last week. The spike in rates came on the heels of a much better-than-expected ADP employment report. That was a week-long climb of 17.1 basis points, or 0.171 percentage point. U.S. equity markets were pressured by this spike in bond yields even after the Dow Jones Industrial Average rose to a new high of 28828.39 on Wednesday.
  • Asian tech stocks were hit by a Bloomberg story that over 30 of the US’s top tech companies were infiltrated by Chinese spies by way of tiny, rice-sized microchips placed in their servers. Those chips allegedly allowed the Chinese government to gain access into some of the US’s tech infrastructures. But two of the companies named - Amazon and Apple, denied the validity of any of the allegations. Expect further revelations / denials this week!

Five day returns to 8 October 2018

  Local currency AUD currency
S&P -0.97% +1.34%
NASDAQ -3.21% +0.94%
Europe -1.58% +0.02%
Nikkei -1.39% +0.82%
Hong Kong -4.12% -1.97%
China Markets closed for Golden Week holiday
 ASX -0.36% -0.36%
WTI Oil 74.34 (+1.5%) N/A
AUD/USD 70.60 (-2.2%) N/A
Treasury (10 year) 3.22% N/A

Notable economic stats this week

ISM Services report SEP 2018

September was the first time in the history of the ISM Services report that not a single sub-component declined on a month-on-month basis. U.S. economy firing on all cylinders.

Vue movers

General Motors (NYSE: GM)

Honda (NYSE: HMC) to invest US$2.75B in General Motors subsidiary Cruise Holdings; gives Honda a 5.7% stake in GM's self-driving subsidiary, and gives Cruise a valuation of US$14.6 Bn. GM’s Cruise acquisition (they paid just a little over 1 Bn) is clearly paying as is its emphasis on autonomous vehicles.

General Motors is held in our “Car of the Future” Vue.

Chart of the day

The Leading Economic Index (LEI)

  • The Leading Economic Index (LEI) turned negative YoY ahead of all seven recessions going back to the early 1970s.
  • It came in a 6.4% recently, suggesting the economy continues to be on firm footing with very little chance of recession over the next 12-18 months.

The week ahead

  • For 3Q 2018 analysts are projecting +21.5% YoY growth for S&P 500 EPS following 25% growth in both Q1 and Q2. Investors need to watch for higher input costs (labor, raw materials), stronger dollar and trade tensions. Unlikely that any of these are likely to put much of a dent in overall results though. Analysts will particularly focus on revenue growth and the impact of tariffs, tax cuts.
  • The third-quarter earnings season kicks off this week with LVMH releasing results on Tuesday and on Friday, JPMorgan Chase, Wells Fargo, and Citigroup Inc report.

U.S. economic calendar

Most important are the September Producer Price Index (PPI) and Consumer Price Index (CPI) readings which come out on our Thursday and Friday mornings. Expect little change from prior readings. (See below)

September Producer Price Index (PPI)

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This content may contain opinions, conclusions, estimates and other forward-looking statements which are subject to various risks and uncertainties. Actual events or results may differ materially, positively or negatively, from those reflected or contemplated in such forward-looking statements.

Past performance is not a reliable indicator of previous performance.

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