(CS) Global Equity Strat. Spain add to Overweight

Why are we overweight Spanish equities? 
1. Valuation: Spanish equities look unusually cheap on 12m forward P/E relatives as well as on normalised earnings. 
2. Price momentum: Spanish equities are oversold relative to Continental European equities. 
3. Brazil exposure: Spanish Brazilian exposure has significantly underperformed the EURBRL exchange rate; 20% of Spanish sales come from LatAm with a majority of these coming from Brazil. 
4. Banks: Spain is a play on European banks and we are overweight European banks (especially retail banks). We like Spanish banks in particular for the following reasons: 
i) Spain has a fast recovering economy; 
ii) Spanish banks are mainly retail banks (for 6 years we have been overweight retail banks relative to other banks); 
iii) Spain is the only country apart from Ireland where the front book is above back book for mortgage NIMs; 
iv) Spanish banks are unusually sensitive to rising rates; and 
v) Spanish banks are not expensive relative to their peers. 
5. Growth: Spanish PMIs are consistent with c3-3.5% GDP, driven by employment growth which is near an 8-year high. GDP is only 2.5% above its previous peak compared to 11% and 15% in Germany and the US, respectively. 
6. Housing: Spanish housing and construction activity is recovering strongly. 
7. FX: Spain tends to outperform if the euro strengthens (we are long term euro bulls). 8. The political risk is overstated, we think: In our opinion, the crisis is unlikely to escalate further and will result in a compromise (e.g. more autonomy for Catalonia, which will remain a part of Spain). Furthermore, we believe markets almost always overreact to political events. 

How to play it? 
* The following stocks are Outperformed rated by CS analysts: Bankia, Cellnex, Applus, Merlin, Neinor, IAG. Of these, Bankia is cheap on HOLT® and has positive earnings revisions. 
* The following stocks have underperformed their European peers and the Spanish market since the flare up of the Catalonian crisis, have positive earnings momentum and are not Underperform rated by CS analysts: Aena, BBVA, Bankia and Caixabank

FT : Auto registration momentum cooling in some key EU markets, industry group s

Auto registration momentum cooling in some key EU markets, industry group say


Passenger car registrations fell last month in both the UK and Germany, two important EU auto markets, pressuring the pace across the bloc, an industry group said on Tuesday.

The European Automobile Manufacturers Association said that passenger vehicle registrations across the EU declined in September by 2 per cent to 1.43m from a record month in the previous year. It was the first fall since April.

Registrations took a particularly large hit in the UK, dropping 9.3 per cent. The figure also dipped 3.3 per cent in Germany. However, the falls were partially offset by gains of 8.1 per cent in Italy and 4.6 per cent in Spain.

Auto sales have been rising strongly since the end of the 2008-09 financial crisis. In fact, the August 2017 passenger car registration reading marked the strongest performance in that month in a decade, according to the European Automobile Manufacturers Association data.

Industry observers have noted, therefore, that a slowdown is neither entirely unexpected, nor necessarily negative given the strong levels of growth. A similar trend is on display in the US, where the auto market has been showing some red flags after a record run in 2016.

>>> What to look at today - 17th of October 2017

Dow+0.37% S&P +0.18% Nasdaq +0.28% Russell +0.00%
US Market closed higher, Financial stocks within the S&P 500 climbed 0.6% on Monday, bouncing back from last Thursday's modest post-earnings decline. GS is reporting today. Telecoms also retraced a portion of last week's losses in the first session of the week--albeit a relatively small portion. health care sector started the week on the back foot, dropping 0.4%. Retailers underperformed on Monday, evidenced by the 0.7% decline in the SPDR S&P Retail ETF. West Texas Intermediate crude futures rose 0.8% to $51.86 per barrel amid a conflict between Iraqi and Kurdish forces in the oil-rich city of Kirkuk. Afternoon reports indicated that the Iraqi army has taken full control of the city. The energy sector, which typically moves in tandem with the price of crude oil, finished higher by 0.2%. ASIAN EQUITIES – MOSTLY HIGHER following overnight US gains. GREATER CHINA is moderately firmer after a narrowly mixed open. THE YEN is trading firmer, rebounding from overnight declines with euro softer. Crude oil partially retraced yesterday's strength, with gold also weaker. Quiet session with news flow light. Global focus remains on Fed chair succession as John Taylor reportedly made a favorable impression on President Trump during his interview last week. PBoC injected net liquidity for the first time since 19-Sep, while keeping yuan midpoint fixing in narrow range. VIX – SHORTS HIT NEW RECORD HIGH. At the start of 2017, the most optimistic strategist forecast the S&P 500 at 2,500 by year-end. In the last few weeks, the market has not only surpassed that most-exuberant guess, but it has melted up from there with investors entirely unafraid as traders extend their VIX shorts to a new record high.

Nikkei +0.38% HAng Seng +0.02% CSI -0.06% Shanghai -0.21% Shenzen -0.04%

Eur$ 1.1757 CNH 6.6107 CNY 6.6152 JPY 112.25 GBP 1.3253 CHF 0.9788 RUB 57.3699 WTI$ 51.69 -0.35%

S&P -0.03% EuroStoxx +0.03% FTSE -0.10% Dax -0.10% SMI +0.21%

Macro :
- All New Cars to Be at Least Partly Electric by 2050: BofAML (Report Attached)

Keep an eye on :
- ANA SM : KKR Prepares to Sell Stake in Acciona Energia: El Economista
- ACS SM : ACS Wins Support of JPMorgan for Abertis Bid: Expansion
- AIR FP : Boeing Says Airbus-Bombardier Pact Looks Like Questionable Deal, Airbus to Buy Majority Stake in C Series Aircraft Partnership
- AREVA FP : New Areva Wins Nuclear-Reactor Dismantling Contract in Germany
- ASC LN :  Asos Full Year Revenue Misses Estimates, Asos Sees Sales Growth Continuing as FY Profit Meets Estimates
- ASY FP : Assystem to Offer to Buy Back Up to 6M Shares at EU37.50 Each
- CO FP : Casino 3Q Sales of EU9.22b Exceed Estimates Casino Sales Beat Estimates on Online, Latam Business: Natixis
- CBK GY : Commerzbank Sees EU176m Exceptional Rev in 3Q From BNP JV End
- CSGN VX : Hedge Fund RBR Is Said to Have Bought Credit Suisse Stake: FuW
- DAI GY : Daimler Recall Covers 495,000 Vehicles in the U.S.: Reuters
- BN FP : Danone 3Q LFL Sales Rise 4.7% vs Est. 3%; Sees >12% EPS Growth
- EDEN FP : Edenred Buys Vasa Slovensko to Become Slovakia Market Leader
- GET FP : Eurostar Q3 Sales Rise 15% on 4% Passenger Growth Driven by U.S.
- HAV FP : Havas Buys 49% Stake in Algeria-Based Agencies Ganfood, HVS
- MONY LN : Moneysupermarket.com Qtr Rev. Rises 6%
- PSON LN : Pearson Narrows FY Profit Guidance to Upper Half of Range
- RCO FP : Remy Cointreau 2Q Sales EU304.1m; Est. EU302.4m Remy Cointreau 2Q Sales Beat Driven by Strong Cognac: Natixis
- REP SM : Repsol 3Q Spain Refining Margin $7/Bbl
- CFR VX : Richemont 6-Month Profit to Rise About 80%, Op. Profit Up 45%
- SRT3 GY : Sartorius Stedim 9-Month Prel. Rev About EU806m, Sartorius Lowers Full-Year Sales, Margin Forecast
- SMIN LN : Smiths Group Appoints John Shipsey as CFO Designate
- TEL NO : Telenor’s Digi 3Q Revenue, Ebitda Fall; Keeps 2017 Outlook
- TEVA IT : New Teva CEO Schultz to Begin Work by End of Month: Calcalist
- TIT IM : Telecom Italia Says Golden Power Applies to Tim, Sparkle, Telsy

>>> Europe Pre MArket

Ml
PEARSON-Better.Guidance tightened towards top end.US Higher Ed strong(652.58)+5%
C.SUISSE - FT rpts RBR Capital Advisors to launch activist campaign (15.92)..+3%
AIRBUS -Buys majority stake in Bombardier’s C-series program.Positive.(78.61)+2%
RIO - Production solid ex-copper.Iron ore regains momentum.Solid in OZ(3792).+2%
DANONE-3Q LFL 4.7%, Sales €6.4bn.Driven by Nutritution.Raise guidance.(71.43)+2%
RICHEMONT-EBIT +45% YoY, cons is on 33% growth YoY. 4.5% cons upgrades(90.32)+2%
ASOS -FY Rev £1.92b, PTP £80m,sees growth continuing.EBIT margin stable(5814)+2%
CASINO - Q3 sales €9,216m, +1.9% YoY. Org growth +3.4%.France strong.(49.33).+1%
REMY - Strong sales +7.0%,cons +6.3%.Cognac key driver.Guidance unch.(108.58)+1%
BELLWAY - 2% ahead of guidance.Revs +1%, op margins increased.Run well.......U/C
MONDI - Hosts CMD today, nothing new in release.No financials provided.......U/C
HAVAS - buys 49% of Algeria-based agencies Ganfood and HVS. No details......U/C
SMIN - New CFO announced to start Jan 2018. Ex Dyson CFO (12yrs) (1589p).....U/C
ENAGAS - In line.NI €376m +0.6% vs cons, EBITDA €794m -0.4% vs cons..........U/C
CONVATEC - DOWNGRADE to NTRL, PO 220p (350p.)Cut FY17-19E EPS 13-15%.(202.95)-1%
SARTORIUS – Cuts 2017 forecasts as performance of Bioprocess weaker(75.80)...-7%

CSFB
Adecco UNCH CS increase target price to SFr70 from SFr63
Airbus +1-2% Plans to buy a majority stake in Bombardier C jet program
ASOS +1-2% Revs small light 1.92b cons 1.94b, EBIT margin inline
Bellway +2-3% FY17 EBIT 2% ahead, EBIT margin inline
Casino +1% Revs 9.2b vs bberg cons 9.1b, online strength
Com Hem +0.5-1% Q3 Revenues slightly light, TV and broadband adds ahead
Danone +2-3% Q3 Sales EU 6.45bln est EU 6.46bln, LFL 4.7% Est 3%
Ent One +0.5% Merlin Ent and Entertainment One enter a partnership
Merlin Ent -3-4% EBITDA 3% below cons, each division softer
Miners +0.5% Copper -0.30%, Brent +0.20%, Iron Ore -0.95%, China +0.16%
Moneysuper +1% Group Revenues 1% ahead of cons, Homes Services ahead
Pearson +2-3% Narrows profit guidance
Pernod +0.5% Positive read from Remy numbers
Randstad +1% CS increase target price to €53 from €48
Remy +1-2% Q2 Sales E304.1m est E302.4m, Q2 Org sales up 6.2% est 5.8%
Repsol +0.5% Upstream production slightly better
Rio +0.5% Production, Iron ore inline, guidance inline
Richemont +2% Pre-releases H1 profit, 6m sales +10% on reported basis
Shire -1% Allergan to appeal court ruling
Sonova M/P Investor day - nothing material in the release
Swatch +1% Positive read from Richemont numbers
VAT -2-3% Q3 order intake CHF178.5m vs CS ests 185m, confirm guidance
Virgin Money M/P NIM consistent with FY 2017 guidance
Volvo -2% Koping factory remains overloaded, local press

Macq UK Indications:

* Asos ASC- Figs broadly inline, Sales £1.924bn vs Macq est £1.935bn. Increasing Sales Growth guidance of 25-30% in FY18. +1%
* Bellway BWY-Rev’s up 14.2%, PBT up 12.6%. Outlook remains positive and group expects at least 5% volume growth. Margin 22.3%. +2%
* Mediclinic MDC- H1 rev +9.5%, EBITDA +5%, some comments about margins being lower; -1%
* Merlin Ent MERL- YTD rev +0.3%, short term market challenges, re-allocating £100m CAPEX to accommodation roll out programme; -1% as already weak into the numbers.
* Mondi MNDI- CMD, targeting growth organically & through acquisitions; +1%
* Moneysupermarket MONY- Figs inline, Remains confident of meeting FY Views. +1%
* Pearson PSON- FY Profit Guidance Upper end of range. +2-3%
* Smiths Grp SMIN- John Shipsey CFO. Unch
* Virgin Money VM/- All inline with expectations, CET1 Ratio of 13.5%; FY Guidance reaffirmed. +1%
* Wood Grp WG/- $12m Feed contract with Honghua. Unch

MainFirst Pre Mkt Indications

*CS-Activist RBR buys 5m shs and targets breakup(None starter)......+0.5% *AIRBUS-To buy majority stake in C Series aircraft partnership......+0.5% *CBK-Sees €176m exceptional Rev in Q3 from BNP JV End...............+0.5% *VOLVO-Factory struggles to meet demand in Q3 - Dagens Inds.........+0.5%
*SARTORIUS-Q3 Sales 335.9m(386),Ebitda 83.42m(92),Lowers FY.........-7%
*CASINO-Q3 Rev 9.2b(9.103),Short Int 9.3%,12.4 days to cover........+1%
*DANONE-Q3 Sales 6.45b(6.46),FY Recurring EPS Grth exceeding 12%....+2%
*RICHEMONT-H1 OP +45%,Sees 6m Sales +12% constant FX,Pft +80%.......+2% *INGENICO-Buys Iecisa electronic payments system-direct 2 retail....+0.5% *LHA/EASYJET-All in the bidding for Alitalia(6 bidders in total)....+0.25%
*REMY-Q2 Sales 304.1m(302.4),Organic +13.2%(10.5),Confirms FY..

>>> Europe : Brokers Upgrades & Downgrades - 17th of October 201

>>> Up
* Aeroports de Paris Raised to Strong Buy at Raymond James
* Atrium Ljungberg Raised to Buy at Carnegie
* Castellum Raised to Buy at Carnegie
* Fabege Raised to Hold at Carnegie
* Grafton Raised to Buy at Stifel, PT 900p
* Hufvudstaden Raised to Hold at Carnegie
* Jyske Raised to Buy at SEB Equities
* Orion Raised to Buy at Carnegie
* Symrise Raised to Outperform at Evercore ISI, PT EU71
* Telenor Raised to Neutral at JPMorgan, PT NOK166
* Umicore Raised to Buy at Kepler Cheuvreux, PT EU44

>>> Down
* Byggmax Cut to Hold at SEB Equities
* Clariant Cut to Inline at Evercore ISI, PT CHF24.40
* ConvaTec Cut to Hold at Peel Hunt
* ConvaTec Cut to Hold at HSBC, PT GBP2.40
* ConvaTec Cut to Neutral at JPMorgan, PT 240p
* Deutsche Boerse Cut to Neutral at JPMorgan, PT EU100
* Euskatel Cut to Neutral at JPMorgan, PT EU9.60
* Howden Joinery Cut to Sell at Stifel, PT 385p
* Jyske Raised to Buy at SEB Equities
* Kingspan Cut to Neutral at UBS
* Kuehne + Nagel Cut to Sector Perform at RBC, PT CHF185
* Victoria Park Cut to Hold at Carnegie

>>> Initiation
* Aumann New Buy at Bankhaus Lampe, PT EU110
* Cap-XX New Buy at Cantor, PT 18p
* NH Hotel New Underperform at BBVA, PT EU5.50
* Norwegian Air New Buy at Kepler Cheuvreux, PT NOK330
* Sydbank New Hold at Carnegie, PT DKK260

>>> Call

>>> Asian Update

Asia Mid-Session Update: Nikkei on track for 11th day of gains; NZ inflation comes in hotter than expected

***Asia Summary***
-Asian equity markets have opened generally higher, tracking the gains seen during the US session. These opening gains had put the Nikkei 225 on track for its 11th straight gain, while the Topix index was heading towards its 7th straight advance.
-Markets in Japan have since pared gains. Shares of Softbank have underperformed and mixed trading in the Japanese banking sector.
-At the same time, shares of Kobe Steel have traded higher, after the over 40% losses seen during the prior week amid the company’s data falsification issue. The company is said to have told analysts that it is not having any current funding issues and that it plans to release its corporate earnings, as scheduled, on Oct 30th, according to a Japanese Press report. Coupled with in the gains in Kobe Steel, the sector is moving broadly higher (Nippon Steel +1.5%, JFE +1.4%).
-Australian energy companies are generally higher (Woodside Petroleum +0.7%, Santos +1%), following Mondays gain in oil prices. Rio Tinto’s shares have traded higher after its Q3 iron ore shipments beat estimates and it affirmed its full year shipment guidance. Fellow iron-ore miner, BHP, is due to release its quarterly production report on Oct 18th.
-In South Korea, video game companies are moving higher. A Chinese official is said to have noted that the government will do its best to lift restrictions related to various types of Korean media.
-In China, the small-cap ChiNext index has extended losses after the over 2% decline seen on Monday’s session, with the Oct 18th start of the Communist Party Congress in focus.
-Thus far China’s 10-year bond yield has risen again on today’s session, after rising over 2bps on Monday’s session. An economist from the China State Information Center (think tank) said the government should tighten monetary policy, as the room for policy loosening is seen as limited in 2018.
-There has been little initial reaction in the bond market following the release of the Reserve Bank of Australia’s Oct policy meeting minutes. Of note the October policy meeting was held on Oct 3rd, which was ahead of the weaker than expected Aug retail sales data which was released on Oct 5th (AUSTRALIA AUG RETAIL SALES M/M: -0.6% V +0.3%E). Looking ahead, the Australia Sept employment change data is due to be released on Thursday Oct 19th.
-In New Zealand, the Kiwi initially gained following the above forecast Q3 CPI data. However, the currency has since pared gains. Inflation is still within the RBNZ’s 1-3% target range and a rate hike is not fully priced in until Nov of 2018. Besides this, the government formation talks in New Zealand continue to linger.
-Looking ahead to the US session, corporate earnings are starting to pick up with results expected out of companies including Goldman Sachs, Morgan Stanley, Harley Davidson and J&J. UnitedHealth earlier reported better than expected Q3 earnings and in line revenues. Additionally, the company raised its FY17 EPS forecast.

***Key economic data***
- (NZ) NEW ZEALAND Q3 CPI Q/Q: 0.5% V 0.4%E; Y/Y: 1.9% V 1.8%E
- (SG) SINGAPORE SEPT NON-OIL DOMESTIC EXPORTS M/M: -11.0% V -2.2%E; Y/Y: -1.1% V 12.7%E;ELECTRONIC EXPORTS Y/Y: -7.9% V 15.0%E
- (AU) Australia Sept New Motor Vehicle Sales m/m: -0.5% v 0.0% prior; y/y: -0.8% v 1.7% prior
- (NZ) New Zealand RBNZ Q3 Sectoral Factor Model Inflation Index y/y: 1.4% v 1.4% prior

***Speakers and Press***
Japan
- (JP) Japan and US reach agreement to boost cooperation on infrastructure development, financing, maintenance and transport technology - press
- (JP) Japan Government Official: No discussion of FX at meetings between US and Japan officials

Korea
- (KR) US North Korean envoy Joseph Yun reportedly to travel to Seoul this week – Axios
- (KR) North Korea govt reportedly rejects any diplomacy with United States at this point - CNN

China
- (CN) State Information Center Economist Zhu Baoliang: China should tighten monetary policy and strengthen property controls - Chinese press
- (CN) S&P Comments: China is running unconventional monetary policy

Australia/New Zealand
- (AU) RESERVE BANK OF AUSTRALIA (RBA) MEETING MINUTES OCT 3RD: Any rate changes would be dependent on domestic economy; Appreciation in A$ expected to contribute to subdued pricing pressures
- (AU) RBA Assistant Gov Ellis (economic): Starting to see spillover effect from public infrastructure spending on non-mining private sector

***Asian Equity Indices/Futures (00:00ET)***
- Nikkei +0.2%, Hang Seng +0.1%; Shanghai Composite +0.1%; ASX200 +0.8%, Kospi +0.2%
- Equity Futures: S&P500 -0.0%; Nasdaq100 +0.0%, Dax +0.1%; FTSE100 -0.0%

***FX ranges/Commodities/Fixed Income (00:00ET)***
- EUR 1.1797-1.1775; JPY 112.31-112.04; AUD 0.7857-0.7835;NZD 0.7198-0.7163
- Dec Gold -0.6% at $1,295/oz; Nov Crude Oil -0.1% at $51.80/brl; Dec Copper -0.3% at $3.23/lb
- (CN) China PBOC injects CNY190B in combined 7-day and 14-day reverse repos v CNY20B in 7-day prior
- USD/CNY (CN) PBOC SETS YUAN REFERENCE RATE AT 6.5883 V 6.5839 PRIOR
- (JP) Japan MoF sells ¥800.1B in 0.6% (prior 0.6%) 2-yr JGBs; avg yield 0.5900% v 0.5600% prior; bid-to-cover 4.05x v 4.15x prior
- (AU) Australia MoF sells A$2.1B in 3% 2047 bonds, yield 3.565%

***Equities notable movers***
Australia/New Zealand
- RIO.AU Reports Q3 Pilbara iron ore production 85.0Mt (100% basis), 83.2Mt y/y; shipments 85.8Mt (100% basis) v 85.2Mte v 80.9Mt y/y; +1.4%
- ANZ.AU IOOF to acquire One path pension business for A$975M cash; IOOF has also entered into a 20 year Strategic Alliance Agreement with ANZ
- OSH.AU Reports Q3 Rev $380.8M v $332.5M q/q; production 7.91 MMBOE (record high) v 7.2 q/q; +0.8%
- CIA.AU Completes series of previously announced financing arrangements raising C$300M; +15%

Japan
- 5406.JP Told investors that it is not having funding issues at the current time - Japanese Press; +6%

US/Canada
- BBD.B.CA Airbus to acquire majority stake in the C Series Aircraft Limited Partnership; +1.3% after hours
- UNH Reports Q3 $2.66 adj v $2.58e, Rev $50.3B v $50.3Be, Raises FY17 $10.00 adj v $9.88e (prior $9.75-9.90); +0.7%

FT : Credit Suisse targeted for break-up by activist hedge fund

Credit Suisse targeted for break-up by activist hedge fund
A Swiss hedge fund is poised to launch an activist campaign to break up Credit Suisse, tapping into investor impatience with the progress of the bank’s turnround under chief executive Tidjane Thiam.

RBR Capital Advisors, supported by Gaël de Boissard, a former Credit Suisse investment bank co-head, is set to unveil the plan later this week at the JPMorgan Robin Hood investor conference in New York, according to people briefed on it.

>>> US Close Dow+0.37% S&P +0.18% Nasdaq +0.28% Russell +0.00%

Closing Market Summary: Kicking Off the Week on a Positive Note

The U.S. equity market started the week on a positive note as all three major indices--the S&P 500 (+0.2%), the Nasdaq (+0.3%), and the Dow (+0.4%)--finished Monday's session at new record highs. Half way through the month of October, the S&P 500 holds a month-to-date gain of 1.5%.

Financial stocks within the S&P 500 climbed 0.6% on Monday, bouncing back from last Thursday's modest post-earnings decline. JPMorgan Chase (JPM 97.84, +1.98) and Bank of America (BAC 26.24, +0.41) were among the strongest financial components, climbing 2.1% and 1.6%, respectively, followed closely by Goldman Sachs (GS 242.41, +3.88), which will report earnings on Tuesday morning.

Telecoms also retraced a portion of last week's losses in the first session of the week--albeit a relatively small portion. The S&P 500's lightest sector by weight added 0.8% on Monday, but that advance barely dented the group's October loss, which currently sits at 5.0%. AT&T (T 36.17, +0.47) had a good session, climbing 1.3%.

On the flip side, the influential health care sector started the week on the back foot, dropping 0.4%. The group opened in positive territory, but eventually slid into the red after President Trump reiterated his belief that drug prices are "out of control." Allergan (AGN 198.41, -7.11) showed particular weakness, losing 3.5%, after a U.S. judge invalidated patents on the company's dry-eye medication Restasis.

Like health care, transportation stocks also tumbled, sending the Dow Jones Transportation Average lower by 0.8%. Railroad giant CSX (CSX 52.84, +0.01) finished flat, however, ahead of its Tuesday morning earnings release. The S&P 500's industrial sector, which houses transports, added 0.2%.

Retailers underperformed on Monday, evidenced by the 0.7% decline in the SPDR S&P Retail ETF (XRT 39.73, -0.27). High-end department store retailer Nordstrom (JWN 40.40, -2.25) was hit particularly hard after the Nordstrom family announced that it is suspending efforts to take the company private until after the holiday season. JWN shares lost 5.3%.

West Texas Intermediate crude futures rose 0.8% to $51.86 per barrel amid a conflict between Iraqi and Kurdish forces in the oil-rich city of Kirkuk. Afternoon reports indicated that the Iraqi army has taken full control of the city. The energy sector, which typically moves in tandem with the price of crude oil, finished higher by 0.2%.

U.S. Treasuries were weak from the start of the session and extended their losses in the afternoon after Bloomberg reported President Trump was impressed with John Taylor's interview for the potential Fed Chair vacancy. Mr. Taylor is an economist at Stanford University and is thought to be more hawkish than some of the other candidates in the running.

The yield on the benchmark 10-yr Treasury note climbed three basis points to 2.31% while the 2-year yield jumped four basis points to 1.54%.

Reviewing Monday's economic data, which was limited to the October Empire State Manufacturing Survey:

  • The Empire Manufacturing Survey for October rose to 30.2 from the prior month's reading of 24.4. The consensus estimate was pegged at 21.0.

On Tuesday, investors will receive several economic reports, including September Import/Export Prices at 8:30 ET, September Industrial Production (consensus 0.2%) and Capacity Utilization (consensus 76.1%) at 9:15 ET, and the October NAHB Housing Market Index (consensus 64) at 10:00 ET.

Also, a host of notable companies in addition to Goldman Sachs and CSX will report their quarterly results on Tuesday morning, including UnitedHealth (UNH 192.20, +0.68), Johnson & Johnson (JNJ 136.12, -0.31), and Morgan Stanley (MS 48.94, +0.64), among several others.

  • Nasdaq Composite +23.1% YTD
  • Dow Jones Industrial Average +16.2% YTD
  • S&P 500 +14.2% YTD
  • Russell 2000 +10.7% YTD

>>> Netflix misses by $0.03 (GAAP), reports revs in-line with higher than expect

Netflix misses by $0.03 (GAAP), reports revs in-line with higher than expected subs; guides Q4 above consensus (202.68 +3.19)
  • Reports Q3 (Sep) earnings of $0.29 per share* (GAAP), $0.03 worse than the Capital IQ Consensus of $0.32; revenues rose 30.3% year/year to $2.98 bln vs the $2.97 bln Capital IQ Consensus.
    • *including a pre-tax $51 mln non-cash loss from F/X remeasurement on a Euro bond (or $39 mln after tax based on a 24% tax rate). Higher than expected excess tax benefit from stock based compensation benefited our tax rate by $5 million vs. the forecast.
  • Global streaming revenue in Q3 rose 33% year over year, driven by a 24% increase in average paid memberships and 7% growth in ASP
  • Operating income nearly doubled year-over-year to $209 million with the Q3 global operating margin of 7.0%, putting co right on track to achieve full year target of 7%.
  • We added a Q3-record 5.3 million memberships globally (up 49% year-over-year)
  • Domestic streaming net adds 850K vs. 750K forecast; Intl streaming 4.5 mln vs. 3.65 mln forecast
  • Co issues upside guidance for Q4, sees EPS of $0.41 vs. $0.34 Capital IQ Consensus Estimate; sees Q4 revs of $3.274 bln vs. $3.15 bln Capital IQ Consensus Estimate.
  • For Q4, we forecast global net adds of 6.30m (1.25m in the US and 5.05m internationally) vs. 7.05m in the year ago quarter (which was our all-time high for quarterly net adds).
  • We anticipate our Q4'17 US contribution margin will be 34.4% (a decline both year-on-year and sequentially) as we boost our marketing investment against a growing content slate. Reaffirms FY17 FCF $2.0-2.5 bln.
  • "As we move into 2018, we aim to achieve steady improvement in international profitability and a growing operating margin as our success in many large markets helps fund investments throughout Asia and the rest of the world... We'll spend $7-8 billion on content (on a P&L basis) in 2018."