GLOBAL NEWS MONDAY, OCTOBER 27, 2014 Market Focus -- The markets this week will focus on (1) the outcome of the Tue-Wed FOMC meeting and whether the FOMC ends QE3 as expected and whether the FOMC changes its interest rate guidance from the current “consid¬erable time” language, (2) this week’s earnings peak with 160 of the S&P 500 companies scheduled to report, (3) whether there are additional cases of Ebola this week, (4) geopolitical worries with last week’s ISIS-inspired terror¬ist attacks in Ottawa and New York, (5) Fed Chair Yellen’s welcoming comments on Thursday to the Federal Reserve Board’s National Summit on Diversity in the Economic Profession, (6) this week’s Treasury sale of $108 billion of T-notes, and (7) this week’s fairly busy U.S. economic schedule which is headlined by Thursday’s Q3 GDP report (expected +3.0%). In overseas news this week, the markets will react first to the weekend news that 25 banks in the Eurozone failed the ECB’s bank stress tests and that 105 banks passed the tests, which was slightly better than expected. Banks that failed the tests will be required to raise new capital if they haven’t already. China tonight will report Sep industrial profits (Aug was -0.6% y/y). China’s PMI reports will be released this coming Friday and Sunday nights. The market is ex-pecting Friday’s China Oct manufacturing PMI index from the National Bureau of Statistics to be unchanged at 51.1 for the third consecutive month. Sunday night brings the Chinese Oct non-manufacturing PMI from the National Bureau of Statistics (Sep was -0.4 to 54.0) and the final-Oct manufacturing PMI from HSBC (prelim-Oct was +0.2 to 50.4). Bloomberg Economic Surprise Index hovers near 5-month low -- The recent U.S. economic data has been roughly in line with market expectations, accounting for the drop in the Bloomberg Economic Surprise index on Oct 15 to a 5-month low of 0.119 standard deviations. The index last week moved sideways above that level and closed the week at 0.149 standard deviations. This week’s U.S. economic data is headlined by Thursday’s Q3 GDP report, which is expected to stabilize at +3.0% af¬ter the see-saw action seen in the first half when GDP fell by -2.1% in Q1 due to bad winter weather but then recovered by +4.6% in Q2. The market consensus is that U.S. GDP will stabilize at +3.0% in the second half of 2014 and in the Q1-2015, and then dip slightly to +2.9% in the last three quarters of 2015. The expected steady-state growth rate of +2.9-3.0% is better than the post-recession average of +2.2% but below the post-war average of +3.3%. Q3 earnings hits peak week with positive results thus far -- This will be the peak week for Q3 earnings with 160 of the S&P 500 companies reporting. Notable reports in¬clude Amgen and Merck on Monday; Facebook on Tuesday; Visa, MetLife and AllState on Wednesday; MasterCard, Starbucks, CME Group, Kellogg, Marathon Petroleum on Thursday; and Berkshire Hathaway, Chevron, Exxon, and First Solar on Friday. Market Recap • U.S. Sep new home sales rose +0.2% to a 6-year high of 467,000. Expectations were for a -6.8% decline to 470,000, but Aug was revised lower to +15.3% to 466,000 from the originally reported +18.0% to 504,000. • China Sep new home prices fell in 69 of 70 cities tracked by the govern¬ment, the most since Jan 2011 and a sign that the downturn in China’s property market continues. • The German Nov GfK consumer confidence unexpectedly rose +0.1 to 8.5, better than expectations of -0.3 to 8.0. • UK Q3 GDP rose +0.7% q/q and +3.0% y/y, right on expectations and down from the Q2 increase of +0.9% q/q and +3.2% y/y. • Market closes • Stock Market -- The S&P 500 index on Friday rallied to a 2-week high and closed higher: S&P 500 +0.71%, Dow Jones +0.76%, Nasdaq +0.74%. Bullish factors included (1) strong Q3 stock earnings results with 70% of reporting S&P 500 companies beating estimates, and (2) an unexpected +0.2% increase in Sep new home sales to a 6-year high of 467,000 after Aug was revised lower to 466,000 from 504,000. Gains in stocks were limited on concern that the spread of the Ebola virus may slow the global economy after the first case of the virus was reported in New York City. • Interest Rates -- Closes: TYZ4 +0.50, FVZ4 +0.75. • Forex -- The dollar index on Friday closed lower. Closes: Dollar index -0.111 (-0.13%), EUR/USD +0.00232 (+0.18%), USD/JPY -0.125 (-0.12%). • Metals -- Closes: GCZ4 +2.7 (+0.22%), SIZ4 +0.024 (+0.14%), HGZ4 +0.0010 (+0.03%). • Energy -- Closes: CLZ4 -1.08 (-1.32%), RBZ4 -0.0238 (-1.10%).
Posted on: Mon, 27 Oct 2014 07:57:11 +0000
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