Tuesday 22nd October 2019

US

  • Stocks closed higher on Monday, boosted by optimism around US-China trade talks, as well as the corporate earnings season.
  • The S&P 500 rose 0.7% to 3,006, notching its first close above 3,000 since 18th Sept.
  • The Nasdaq Composite climbed 0.9% to 8,162.
  • The Dow Jones Industrial Average advanced 57 points (0.2%) to 26,827.
  • The S&P 500 is now just 0.7% away from its all-time high set on 26th July earlier this year, when it hit 3,027.
  • Apple shares led the Dow higher, rising more than 1.5% to a record high, after an analyst at Raymond James hiked his price target on the tech giant to $280 per share from $250. Those gains offset a 3.8% drop in Boeing’s stock.
  • Chinese Vice Premier Liu He said over the weekend that Beijing would work with the US to address one another’s trade concerns. He also said both sides have made “substantial progress” on trade. China’s chief negotiator in the trade talks also said that stopping the trade war would be good for both countries — as well as the global economy.
  • His comments came after President Donald Trump said on 11th Oct that China and the US had reached a phase one of a bilateral trade agreement. Trump has also said he hopes a trade deal between the US and China will be signed by the time the Asia-Pacific Economic Cooperation meeting takes place in Chile in mid-November.
  • Investors were also focused on the corporate earnings season, with more than 120 S&P 500 companies on deck to report this week. McDonald’s, Ford Motor, Boeing and Caterpillar are among the companies set to release their results.
  • The earnings season has got off to a decent start as companies such as JPMorgan, Bank of America, Netflix and Citigroup all posted better-than-expected results, although estimates have been revised lower in recent weeks. Analysts polled by FactSet expect overall S&P 500 earnings for Q3 to fall by 4.7%.

Europe

  • European stocks closed higher on Monday, despite fresh uncertainty as UK leader Boris Johnson was denied a parliamentary vote on his Brexit deal.
  • The pan-European Stoxx 600 was up 0.7% at the closing bell, with basic resources and banks surging 2% while food and beverages stocks slipped 0.3%.
  • In the UK’s Parliament on Monday, Prime Minister Boris Johnson was prevented from holding a key vote on the Brexit withdrawal deal he recently agreed with Brussels. The motion for a vote was rejected by House Speaker John Bercow, who said it was not a parliamentary convention to ask politicians to debate the same questions repeatedly.
  • It came after Johnson was begrudgingly forced to request an extension to the current 31st October Brexit deadline on Saturday, after a cross-party group of lawmakers passed an amendment forcing a delay to a “meaningful” vote on his newly-negotiated divorce deal.
  • It remains to be seen whether the EU will accept the request contained in Johnson’s unsigned letter, which would push the Brexit deadline to 31st January and open the door for a new UK general election. Some European leaders have voiced reluctance to give Britain more time, though an orderly exit is widely accepted as being the least damaging scenario for both the UK and the EU.
  • Swedish engineering company Atlas Copco saw its shares gain 9.4% following a strong earnings report, sending the firm to the top of the Stoxx 600.
  • Also on the back of strong Q3 results, Norwegian recycling technology firm Tomra Systems saw its shares jump 8%.
  • Germany’s Wirecard climbed 6% after commissioning an independent audit following a recent Financial Times report alleging “questionable accounting practices”.
  • Micro Focus shares slid 7% yesterday, after Open Text confirmed it was not considering an acquisition of the British software company.
  • Smith & Nephew shares tumbled 9% to a three-month low, sending the company to the bottom of the European blue chip index after the artificial joint manufacturer announced the departure of CEO Namal Nawana.

Asia

  • Asian markets rose overnight, likely fueled by an improvement in investor sentiment around ongoing negotiations between the United States and China.
  • Japanese markets were closed for a public holiday overnight.
  • Chinese mainland shares mostly advanced: The Shanghai composite traded near flat, the Shenzhen composite was up 0.4% and the Shenzhen component gained 0.4%.
  • In South Korea, the Kospi index rose 0.9% as major chipmakers gained. Samsung shares were up 1.6% and SK Hynix added 1.8%. Hong Kong’s Hang Seng Index was up 0.2%.
  • Australia’s benchmark ASX 200 was up 0.3%.

Bonds

  • 10yr and 30yr US treasuries are currently trading at 1.78% and 2.27% respectively.
  • 10yr UK gilts trade with a yield of 0.73%.
  • German 10yr bund yields trade at -0.36%.
  • 10yr Italian and Spanish bond yields trade at 0.96% and 0.27% respectively.

Commodities

  • The WTI crude oil price is $53.23.
  • Brent crude is $58.82.
  • The gold price is $1,486.40.
  • The silver price is $17.59.
  • The COMEX copper price is $2.64.

Currency

  • The US dollar is trading at 108.58 against the Yen.
  • The pound is trading at 1.30 against the US dollar.
  • The pound is trading at 1.16 against the Euro.

Kind Regards,
The Psigma Investment Team