>>> Weekly Update

Weekly Market Update: North Korea and Mother Nature Menace Market Sentiment


Many investors returned from summer breaks to find a host of issues weighing upon the market. The holiday-shortened week began with traders aggressively paring back risk in light of the escalating tensions in North Korea surrounding its latest nuclear test. With the post-hurricane recovery in Texas still just getting underway, the potentially catastrophic hurricane Irma barreled towards Florida. Economists began to downgrade Q3 growth forecasts, believing near term business activity and productivity will surely be depressed by these two historic storms, though the Fed's Dudley noted that hurricane effects are transitory and likely to reverse by early 2018 as reconstruction gets underway.



Treasury markets surged, pushing yields to the lowest levels of the year, while the US Dollar slumped to the lowest levels since early 2015. Stock prices recovered from Monday’s lows on surprise word that President Trump cut a deal with the Democrats to keep the government open, fund hurricane recovery efforts, and raise the debt ceiling. The Euro moved to a new high above 1.2070 after the ECB left rates and QE unchanged on Thursday. ECB President Draghi did not alter expectations, indicating the central bank would likely unveil its plans on exiting the asset purchase program in October. The Chinese Yuan surged to the highs of the year, testing the 200-week moving average, sparking speculation officials in Beijing were stepping in and attempting to stabilize the currency at these levels. By Friday, investors' jitteriness was only exacerbated by disclosure of an enormous data breach at credit giant Equifax, and solidifying forecasts for a direct hit in South Florida with a path that will take Irma straight up the spine of the entire state. Gold prices drifted higher, ending the week at levels not seen since right after the November election. Oil prices recovered some of last week’s losses related to Harvey, while gasoline prices retreated. For the week, the DJIA lost 0.9%, the S&P500 dipped 0.6%, and the Nasdaq fell 1.2%.



In corporate news this week, insurance stocks, notably Aspen Insurance Holdings and Everest Re, were hit as the clean-up in Texas from Hurricane Harvey continued and Irma ravaged the Caribbean, threatening a weekend landing in south Florida. A swath of regulators and politicians announced plans to probe the causes of and reaction to Equifax’s massive data breach that may have affected up to 143 million American consumers. And United Technologies announced plans to acquire manufacturer Rockwell Collins for $140/share in a $30B cash and stock deal, one of the biggest mergers in aerospace industry history.



MONDAY 9/4

(UK) PM May set to approve a politically explosive Brexit bill of up to £50B after the Conservative Party conference in October - financial press

*(EU) EURO ZONE SEPT SENTIX INVESTOR CONFIDENCE: 28.2 V 27.0E



TUESDAY 9/5

*(AU) RESERVE BANK OF AUSTRALIA (RBA) LEAVES CASH RATE TARGET UNCHANGED AT 1.50%; AS EXPECTED

*(UK) AUG SERVICES PMI: 53.2 V 53.5E (13th month of expansion)



WEDNESDAY 9/6

(PL) POLAND CENTRAL BANK (NBP) LEAVES BASE RATE UNCHANGED AT 1.50%; AS EXPECTED

*(US) JULY TRADE BALANCE: -$43.7B V -$44.7BE

(US) AUG FINAL MARKIT SERVICES PMI: 56.0 V 56.9E

(US) Fed Vice Chair Fischer to step down on or around Oct 13th, cites personal reasons - letter to President Trump

(US) Democrats say President Trump and Congressional leaders have agreed to pass Harvey aid along with a short term debt limit and govt funding bill - press

(US) Reportedly Pres Trump is unlikely to nominate Gary Cohn as next Fed Chairman - financial press

(BR) BRAZIL CENTRAL BANK (BCB) CUTS SELIC TARGET RATE BY 100BPS TO 8.25%; AS EXPECTED

USD/CNY *(CN) PBOC SETS YUAN REFERENCE RATE AT: 6.5269 V 6.5311 PRIOR (9th consecutive stronger setting, longest run since 2011)

(AU) AUSTRALIA JULY TRADE BALANCE (A$): 460M V 1.0BE



THURSDAY 9/7

*(SE) SWEDEN CENTRAL BANK (RIKSBANK) LEAVES REPO RATE UNCHANGED AT -0.50%; maintains Repo Rate Path (as expected)

*(CN) CHINA AUG FOREIGN RESERVES: $3.0915 V $3.095TE (7th month of increase)

(EU) EURO ZONE Q2 FINAL GDP Q/Q: 0.6% V 0.6%E; Y/Y: 2.3% V 2.2%E&NBSP

FAST Reports Aug Net Rev $411.5M +12.8% y/y

(EU) ECB LEAVES MAIN 7-DAY REFINANCE RATE UNCHANGED AT 0.00%; AS EXPECTED

*(US) Q2 FINAL NONFARM PRODUCTIVITY: 1.5% V 1.3%E; UNIT LABOR COSTS: 0.2% V 0.3%E

(EU) ECB Chief Draghi: Reiterates that interest rates to remain present level well past end of QE; medium term outlook broadly for both growth and inflation

(EU) ECB Chief Draghi: Meeting did discuss growth, inflation and exchange rate - Q&A

AAPL New iPhone reportedly experienced some production problems earlier this summer; could affect supply chain and may delay shipping - press

EFX Announces cybersecurity incident involving consumer information; potentially impacts 143M US consumers; credit card numbers for 209K consumers were accessed

(JP) JAPAN Q2 FINAL GDP SA Q/Q: 0.6% V 0.7%E; ANNUALIZED: 2.5% V 2.9%E

(CN) CHINA AUG TRADE BALANCE (CNY): 286.5B V 335.7BE

(CN) CHINA AUG TRADE BALANCE: $42.0B V $48.5BE



FRIDAY 9/8

(FR) FRANCE JULY INDUSTRIAL PRODUCTION M/M: 0.5% V 0.5%E; Y/Y: 3.7% V 3.6%E

*(UK) JULY INDUSTRIAL PRODUCTION M/M: 0.2% V 0.2%E; Y/Y: 0.4% V 0.4%E

(CA) CANADA AUG NET CHANGE IN EMPLOYMENT: +22.2K V +15.0KE; UNEMPLOYMENT RATE: 6.2% V 6.3%E

(US) Fed's Dudley (dove, FOMC voter): hurricanes push down economic activity, but those effects are transitory; longer term effect is actually an economic positive on the rebuilding activity

(US) New York Fed Nowcast: cuts Q3 GDP forecast to 2.1% from 2.2% on 9/1; sees Q4 GDP forecast at 2.6%

TGT Lowering prices on thousands of items - corporate blog

(US) Atlanta Fed raises Q3 GDP to 3.0% from 2.9% on 9/6

(US) Weekly Baker Hughes US Rig Count: 944 v 943 w/w (+0.1%)

>>> US Close Dow +0.06% S&P -0.15% Nasdaq -0.59% Russell +0.05%

Closing Market Summary: Another Mixed Finish Ahead of Hurricane Irma's Arrival

The major U.S. indices closed out the abbreviated week on a mixed note as investors looked ahead to the weekend, which could see Hurricane Irma's arrival in Florida and another North Korean missile test in celebration of the country's 69th anniversary. The Dow ticked up 0.1% while the S&P 500 and the Nasdaq settled with losses of 0.2% and 0.6%, respectively. For the week, the S&P 500 lost 0.6%.

Property and casualty insurers bounced back on Friday after spending recent weeks on the decline in response to hurricane-related concerns. Travelers (TRV 119.76, +4.58) was the strongest component within the Dow and among the strongest names within the heavily-weighted financial sector, which settled at the top of the sector standings. TRV shares climbed 4.0%.

In total, four sectors finished Friday's session in the green--financials (+0.8%), industrials (+0.3%), health care (+0.4%), and utilities (+0.4%)--while seven groups ended the day in the red--consumer discretionary (-0.4%), energy (-1.1%), materials (unch), technology (-0.9%), consumer staples (-0.7%), telecom services (-0.1%), and real estate (unch).

Chipmakers weighed heavily on the technology sector, evidenced by the PHLX Semiconductor Index, which dropped 1.3%. Qualcomm (QCOM 49.64, -0.74) lost 1.5% after a federal judged denied the company's bid to dismiss a patent-royalty lawsuit, allowing Apple (AAPL 158.63, -2.63) manufacturers to continue withholding royalty payments as the case continues.

Elsewhere, retailers struggled after Target (TGT 57.27, -1.15) announced that it is cutting prices on thousands of items and Kroger (KR 21.06, -1.71) said that it will stop providing long-term earnings guidance due to the "dynamic operating environment." The companies' shares moved lower by 2.0% and 7.5%, respectively.

Equifax (EFX 123.23, -19.49) plunged 13.7% after announcing that around 143 million of its U.S. customers had their personal information stolen in a data hack. Reports indicate that the company first discovered the compromise in late July and three senior executives sold about $1.7 million in stock soon thereafter. 

In Washington, the House passed President Trump's Wednesday agreement with Democratic lawmakers, which packages Hurricane Harvey relief funding with a three-month extension of both government funding and the debt ceiling. The bill, which passed the Senate on Thursday, now just needs President Trump's signature.

U.S. Treasuries settled Friday mostly flat with the benchmark 10-yr yield closing at its unchanged mark (2.06%). Meanwhile, the 2-yr yield moved two basis points lower, finishing at 1.25%.

Reviewing Friday's economic data, which included July Wholesale Inventories and July Consumer Credit:

  • July Wholesale Inventories increased 0.6% ( consensus +0.4%). The prior month's reading was revised to +0.6% from +0.7%.
  • The Consumer Credit report for July showed an increase of $18.5 billion while the consensus expected growth of $15.0 billion. The prior month's credit growth was revised to $11.9 billion from $12.4 billion.
    • Provided consumers weren't making greater use of revolving credit lines to cover basic needs due to a shortfall in income, this report can ostensibly be looked upon as a good sign for the economy since the expansion of credit is an integral contributor to economic growth. It is hard to say, though, because there isn't enough detail in the report and it is often subject to large revisions, which is why the market rarely shows much reaction to it.

Investors will not receive any economic data on Monday.

  • Nasdaq Composite +18.2% YTD
  • Dow Jones Industrial Average +10.3% YTD
  • S&P 500 +9.9% YTD
  • Russell 2000 +3.1% YTD

>>> China market: Graphic card shipments in 4Q17 to decline on ICO crackdown

China market: Graphic card shipments in 4Q17 to decline on ICO crackdown
Monica Chen, Taipei; Willis Ke, DIGITIMES [Friday 8 September 2017]
China authorities have recently issued a ban on initial coin offerings (ICOs) on grounds that it is a form of unapproved fundraising, requesting all the China ICO platforms immediately cease their illegal financing operations and return funds to investors. The move has significantly dampened the fever for mining virtual currencies among people in the country, which, in turn, is expected to affect the shipments of graphic cards to the China market in the fourth quarter of 2017, according to industry sources.
Prior to this, the values of virtual currencies such as Bitcoin, Ethereum and Litecoin, had galloped since April this year amid global investment craze and the sprouting of ICO platforms, with the crytocurrency mining fever drastically pushing up demand for graphic cards through mid-Agust.
This helped to reverse the traditionally flat shipment performance of graphics card suppliers in the second quarter this year. Gigabyte Technology, for instance, saw its graphics card shipment volume hit a new quarterly high of one million units in the April-June period, with revenues surging 4.8% sequentially and 16.2% on year to reach NT$13.96 billion (US$464.7 million) for the quarter. Micro-Star International (MSI) also scored record shipments and profits for graphics cards in the quarter.
Most suppliers of graphic cards witnessed their shipments hit new monthly highs in July before declining gradually in August and September due to China's crackdown on ICOs. Nevertheless, they are still expected to maintain robust shipment records for the third quarter. Gigabyte Technology, for instance, shipped 550,000 graphics cards in July and 500,000 units in August, with shipments estimated at 450,000 units in September. Accordingly, combined shipments of graphics cards for the first three quarters this year would reach the same level as registered for the entire year in 2016. This is also the case with MSI.
For graphics card suppliers, the largest factor affecting their shipment performance is not the memory supply shortage or rising memory cost, but the difficulty in predicting the movement trend of virtual currencies. As the mining fever has started to ease since mid-August, the high quotes for graphics cards have also gradually declined to normal levels. Accordingly, industry insiders expect graphics card shipments for the fourth quarter to fall to the same quarterly levels as seen in the past years.

>>> US Gapping down

Gapping down
In reaction to disappointing earnings/guidance:
  • TNTR -21.9%, AOBC -17.2%, CHKE -16.1%, TNTR -13.9%, KR -6.2%, SAIC-5.9%, PAY -5%, PAY -5%, FIZZ -1.8%, SIGM -1.6%, TLRD -1.2%
Other news:
  • EFX -13.1% (announced cybersecurity incident potentially impacting approximately 143 million U.S. consumers; no evidence of unauthorized access to core consumer or commercial credit reporting databases)
  • LAND -4% (commences common stock offering; size not disclosed)
  • INCY -2.5% (proposes public offering of 4,945,000 shares of common stock)
  • NOK -2.1% (Euronext announces annual review results on the CAC family indices -- to include STMicroelectronics in the CAC 40, exclude Nokia (NOK))
  • TRTN -1.4% (to offer 5.35 mln common shares to be sold by the Company at a price of $32.75/share)
  • KTOS -0.6% (prices 14 mln shares of common stock at $12.25 per share)
  • AYX -0.5% (prices follow-on offering of 8 mln shares of common stock by selling shareholders at $21.25 per share)
Analyst comments:
  • CMG -2.1% (downgraded to Underperform from Market Perform at Cowen)
  • CTLT -1.3% (downgraded to Sector Weight from Overweight at KeyBanc Capital Mkts)
  • HDS -1% (downgraded to Neutral from Outperform at Credit Suisse)
  • PEP -0.5% (downgraded to Neutral from Outperform at Credit Suisse)

>>> US Gapping up

Gapping up
In reaction to strong earnings/guidance:
  • ZUMZ +14.8%, (reports earnings and Aug comparable sales increased 7.4%),AGX +11.8%, BV +8.4%, CLDR +3.7%, RDFN +3.3%, OKTA +3.2%, REVG +2.4%
Select Cyber security names related names showing strength:
  • SYMC +2.5%, FEYE +2%, CHKP +1.5%, CYBR +1%, HACK +0.6%, PANW +0.5%
Other news:
  • KURA +26.3% (announces its Phase 2 trial for tipifarnib in patients with HRAS mutant relapsed or refractory squamous cell carcinomas of the head and neck met its primary endpoint)
  • OPGN +8.3% (presents results on the Acuitas AMR Gene Panel u5.47 at the 2017 ASM/ESCMID Conference)
  • AVEO +6% (continued strength)
  • CLVS +4% (ARIEL3 study successfully achieved its primary endpoint)
  • IDRA +2% (reports pre-clinical data from its ongoing intratumoral IMO-2125 development program)
  • STM +1.7% (Euronext announces annual review results on the CAC family indices -- to include STMicroelectronics in the CAC 40, exclude Nokia (NOK))
  • SNY +0.5% (Sanofi and Regeneron (REGN) receive FDA Breakthrough Therapy Designation for Cemiplimab)
Analyst comments:
  • TTWO +1% (initiated with a Buy at Goldman)
  • EA +0.8% (initiated on the Conviction Buy List at Goldman)

>>> Prada reports interim results for the 6 months ended July 31, net sales of E

Prada reports interim results for the 6 months ended July 31, net sales of EUR 1.4 bln, -5.7% y/y (no estimates)
  • Net sales were Euro 1,442.6 million, -5.7% y/y.
  • Royalties were Euro 26.1 million, +4.7% y/y.
  • EBIT was Euro 166.8 million, or 11.4% on net revenues.
  • Group's net income was Euro 115.7 million, or 7.9% on net revenues.
  • Net financial position is standing negative at Euro 223.4 million as at July 31, 2017 after the payment of dividends to the shareholders of PRADA spa for Euro 307.1 million.
  • With respect to business initiatives, an important e-commerce plan was introduced for all the Group's brands that include an omnichannel growth strategy focusing on gradual expansion of the online sales channel in terms of merchandising and territorial coverage, plus new versions of the websites. Digital initiatives also involved advertising and communications, with the creation of special content and the acquisition of online space and media tools intended to create synergy among the three distribution channels.

>>> US Early pre-market gappers

Early pre-market gappers
Gapping up:
  • KURA +24.1%, ZUMZ +14%, BV +8.4%, CLVS +5.1%, AGX +4.1%, RDFN +3.7%,CLDR +3.7%, OKTA +3.5%, AVEO +3.3%, GPRO +2.5%, REVG +2.4%, FEYE+2.1%, TRVG +1.7%, CHKP +1.5%, ACAD +1.4%, LITE +1%, SYMC +0.9%, EA+0.9%, CYBR +0.8%, HACK +0.6%, ACIA +0.5%
Gapping down:
  • TNTR -24.4%, AOBC -17.2%, CHKE -16.1%, EFX -14.2%, TNTR -13.9%, SAIC-5.9%, PAY -5%, PAY -5%, LAND -3.8%, INCY -1.8%, FIZZ -1.8%, SIGM -1.6%,SPWR -1.4%, TLRD -1.2%, AAOI -1%, CALA -0.6%