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(ZH) China 'Banking Stress Indicator' Spikes To Record High

China 'Banking Stress Indicator' Spikes To Record High

China’s credit-to-gross domestic product "gap" has reached 30.1%, the highest for the nation in data stretching back to 1995, according to the Basel-based Bank for International Settlements. As Bloomberg points out, the warning indicator for banking stress rose to a record in China in the first quarter, underscoring risks to the nation and the world from a rapid build-up of Chinese corporate debt.

The gap is the difference between the credit-to-GDP ratio and its long-term trend. As BIS explains:

The build-up of excessive credit features prominently in discussions about financial crises.

While it is difficult to quantify “excessive credit” precisely, the credit-to-GDP gap captures this notion in a simple way.

Importantly from a policy perspective, large gaps have been found to be a reliable early warning indicator (EWI) of banking crises or severe distress.

Readings above 10 percent signal elevated risks of banking strains. A blow-out in the number can signal that credit growth is excessive and a financial bust may be looming.

While the BIS says that credit-to-GDP gaps have exceeded 10 percent in
the three years preceding most financial crises, China has remained
above that threshold for most of the period since mid-2009, with no
crisis so far.

But, according to BIS data, in the first quarter, China’s gap exceeded the levels of 41 other nations and the euro area.

This feeds into the debate earlier that China "needs a recession."

>>> What to look at today - 19th of September 2016

Asian equity markets and US futures are modestly higher despite the down day on Wall St on Friday and bomb explosions in NYC and suburbs over the weekend. Japan was closed for holiday and Australia trading session was curbed by technical glitches, but China returned from two days of holidays to stage a rally led by property developers and financials. In commodities, Oil was up nearly 2% from the close of pit trading on Friday, even though OPEC Sec Gen said this month's meeting in Algeria is for consultation only, diminishing any prospects of a framework toward a production freeze. Instead, there's some focus on Lybia and the halt of its Ras Lanuf oil terminal exports due to clashes with militants. Recall last week, the terminal was taken over by troops loyal to Gen Khalifa Haftar who declared war on the Islamist govt some 2 years ago. China August property prices have continued to rebound, though there's increasing concern of a bubble in the top-tier cities.

Nikkei +0.70% Hang Seng +1.04% CSI +0.68% Shanghai +0.60%

Eur$ 1.1170 CNH 6.6662 CNY 6.6693 JPY 102.04 GBP 1.3048 CHF 0.9788 RUB 64.8845 WTI$ 44.36 +1.70%

S&P +0.34% EuroStoxx +0.93% Dax +0.86% SMI +0.58%

Macro :

- Weidmann Says Banking Supervision Should Be Split From ECB: SZ

- McDonald’s May Face $500m Luxembourg Back Tax Bill: FT

- Stiglitz Says Monetary Policy Now No Longer Enough

- IMF’s Lagarde Says Globalization Downsides Need to Be Addressed

Keep an eye on :

- ABBN VX : ABB Not to Sell Its Power Unit Despite Activist Pressure: Paper

- AIR FP : Airbus Said to Introduce Restructuring Plan in October: FT

- ALO FP : Alstom Should Have Discussed Restructuring Plan, Minister Says

- AAPL US : Apple Asks Foxconn to Get Ready for More IPhone 7: Econ. Daily

- ASML NA : Samsung Says It Sold Stakes in ASML, Seagate, Rambus and Sharp

- ATL IM : Macquarie to Use EU4b Infrastructure Fund in Italy: CEO to Sole

- BAYN GY : Bayer-Monsanto Deal ‘Patently Anti-Competitive’: CLSA

- BT/A LN : U.K. Could Fine Mobile Operators Over Coverage: Telegraph

- DBK GY : Germany Expects U.S. to Cut Deutsche Bank Claim: Handelsblatt

- DGE LN : Diageo Reviewing Staffing Levels at London HQ, Sunday Times Says

- EDF FP : Joint Polish Bid for EDF Assets Is Outside Procedure: Rp.pl

- FCA IM : Fiat Chrysler turns down EUR 1bn private equity offer for unit Magneti Marelli - http://bit.ly/2cUkhnH

- LHN VX : LafargeHolcim May Pull Out of Some Countries, Chairman Tells SZ

- NG/ LN : Fosun, China Gas Considering Joint Bid for National Grid: Times

- NOVN VX : Novartis: BAF312 Significantly Reduced MS Disability Progression

- RR/ LN : Rolls-Royce to Cut Another 200 Management Positions: Spokesman

- RDSA NA : Argentine Shell CEO Says Co. May Be Sold After Review: La Nacion

- SAN FP : Sanofi Sues Merck to Block Rival of Lantus Diabetes Drug

- SFR FP : SFR Minority Shareholders Protest Altice Buyout Plan: Les Echos

- TALK LN : U.K. Could Fine Mobile Operators Over Coverage: Telegraph

- TEF SM : U.K. Could Fine Mobile Operators Over Coverage: Telegraph

- TFI FP : TF1 Wants to Be Paid by Distributing Companies, Echos Says

- HO FP : Thales, Airbus Agree Not to Hire Each Other’s Employees: Echos

- FP FP : Oil Giant Total’s Stock Could Rise 20% - Barron's

- VIV FP : Canal+ to Use Orange, Free as Distributors, Les Echos Says

- VOD LN : U.K. Could Fine Mobile Operators Over Coverage: Telegraph

- VOW3 GY : Audi’s Knirsch to Be Put on Leave in Diesel Scandal: BamS

- WPP LN : WPP’s CEO Sees ‘Rocky’ Dollar on Trump Win; Slower U.K. Growth

>>> Europe : Brokers Upgrades & Downgrades - 19th of September 2016

>>> Up

*FERRAGAMO RAISED TO BUY VS NEUTRAL AT BOFAML

*GLENCORE RAISED TO OUTPERFORM VS NEUTRAL AT CREDIT SUISSE

*SKY RAISED TO OVERWEIGHT VS EQUALWEIGHT AT MORGAN STANLEY

*SODEXO RAISED TO OUTPERFORM VS UNDERPERFORM AT RAYMOND JAMES

*XING RAISED TO BUY VS HOLD AT BERENBERG

*WEIR GROUP RAISED TO OVERWEIGHT VS UNDERWEIGHT AT JPMORGAN

>>> Down

*BRUNELLO CUCINELLI CUT TO NEUTRAL AT BOFAML

*DEUTSCHE BANK CUT TO SELL VS REDUCE AT ALPHAVALUE

*HENKEL CUT TO NEUTRAL VS BUY AT GOLDMAN

*ONTEX GROUP CUT TO HOLD VS BUY AT KEPLER CHEUVREUX

>>> PT Change

>>> Initiation

*ACCOR RATED NEW HOLD AT HSBC, PT EU38

*BANCA CARIGE RATED NEW NEUTRAL AT UBS; PT EU0.35

*BAYER RESUMED AT NEUTRAL AT BOFAML; PT EU105

*CREDEM RATED NEW NEUTRAL AT UBS; PT EU5.55

*CREVAL RATED NEW BUY AT UBS; PT EU0.55

*INTERCONTINENTAL HOTELS RATED NEW REDUCE AT HSBC

*PETROFAC RATED NEW OUTPERFORM AT CREDIT SUISSE; PT 1,100P

*POP. EMILIA RATED NEW BUY AT UBS; PT EU4.85

*SCHOELLER-BLECKMANN RATED NEW OUTPERFORM AT CREDIT SUISSE

*WHITBREAD RATED NEW BUY AT HSBC, PT GBP48

*WOOD GROUP RATED NEW OUTPERFORM AT CREDIT SUISSE; PT 850P

>>> Call

>>> Asian Update

Asia Mid-Session Market Update: China property prices continue to rise; Arrests reportedly made related to NYC bombing on Saturday; Oil rallies on geopolitical / supply concerns

***Economic Data***

- (NZ) NEW ZEALAND AUG PERFORMANCE OF SERVICES INDEX: 57.9 V 54.5 PRIOR; highest since Dec 2015

- (NZ) NEW ZEALAND Q3 WESTPAC CONSUMER CONFIDENCE: 108.0 V 106.0 PRIOR

- (UK) UK SEPT RIGHTMOVE HOUSE PRICES M/M: +0.7% (3-month high) V -1.2% PRIOR; Y/Y: 4.0% (16-month low) V 4.1% PRIOR

***Index Snapshot (as of 04:30 GMT)***

- Nikkei225 closed, S&P/ASX flat, Kospi +0.6%, Shanghai Composite +0.6%, Hang Seng +0.8%, Dec S&P500 +0.3% at 2,139

***Commodities/Fixed Income***

- Dec gold +0.6% at $1,318/oz, Nov crude oil +1.8% at $44.42/brl, Dec copper -0.6% at $2.15/lb

- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.6786 V 6.6895 PRIOR

- (CN) PBOC to inject CNY180B in 7-day reverse repos and CNY70B in 28-day reverse repos; suspends 14-day reverse repos until Sept 23rd due to National Day holiday

- (AU) Australia MoF (AOFM) sells A$400M in 3.25% 2029 Bonds; avg yield: 2.3558%; bid-to-cover: 3.89x

***Market Focal Points/FX***

- Asian equity markets and US futures are modestly higher despite the down day on Wall St on Friday and bomb explosions in NYC and suburbs over the weekend. Japan was closed for holiday and Australia trading session was curbed by technical glitches, but China returned from two days of holidays to stage a rally led by property developers and financials. In commodities, Oil was up nearly 2% from the close of pit trading on Friday, even though OPEC Sec Gen said this month's meeting in Algeria is for consultation only, diminishing any prospects of a framework toward a production freeze. Instead, there's some focus on Lybia and the halt of its Ras Lanuf oil terminal exports due to clashes with militants. Recall last week, the terminal was taken over by troops loyal to Gen Khalifa Haftar who declared war on the Islamist govt some 2 years ago. Among USD majors, the greenback was under pressure across the board as traders begin to position for a most likely hold by the FOMC this week. USD/JPY slid about 40pips to 102, AUD/USD rose about 60pips to 0.7540, and NZD/USD was up over 60pips to trade above the 0.73 handle.

- China August property prices have continued to rebound, though there's increasing concern of a bubble in the top-tier cities. M/M new home prices across the 70 top cities were up 2.3% v 1.3% prior and y/y rose 16.6% v 14.6% prior. New home prices also rose in 64 cities out of 70 v 51 prior m/m, and existing home price rose m/m in 57 cities v 51 prior. Coincidentally, a PBoC quarterly survey found that 53.7% of respondents believe China property prices are "too high to accept". Property and corporate credit bubble concerns were also on the forefront, with BIS report out this weekend that China's credit to GDP gap reached 30.1% in Q1 - highest on record dating to 1995.

- Explosions in New York City's Chelsea area injuring 29 people, another explosion in a New Jersey suburb, and a stabbing of 9 people at a Minnesota mall by a Somali man have lifted terror concerns. Note that while the New York bombs were not formally connected to an international terror motive, late on Sunday the FBI made some arrests near the Verrazano Bridge in Brooklyn. New York is also headed for its UN summit this week. Fed's Rosengren commentary was largely in line with prior sentiment, calling for some consideration of gradual removal of accommodation to reflect "two-sided" risks to economic forecast.

- In Europe, Russian Parliament elections saw a strong showing for Putin's United Russia party, as it took just over 50% of the vote next to about 16 for 2nd place ultranationalist Liberal Democratic Party. German Chancellor Merkel's Christian Democrats had another poor showing in regional Berlin elections, losing to center-left opposition and allowing euro-skeptic AfD to take more seats. Ahead of next month's referendum in Italy, PM Renzi was disdainful toward other European leaders and their broken promises with Europe, stating: "The size of Spain's deficit is twice ours and France does not even respect the Maastricht Treaty."

***Equities***

US equities / ADRs:

- GM: Leader of Canadian union Unifor: Thousands of factory workers will strike at 2 GM plants if the two sides do not reach agreement by Monday night deadline; Will not extend strike deadline - financial press

- AAPL: Reportedly iPhone 7 is emitting a faint hissing sound when running many applications that appears to be coming from its CPU - tech blogs

Notable movers by sector:

- Consumer discretionary: Pacific Textiles Holdings 1382.HK -7.2% (profit warning); Kumho Tire Co 073240.KR +3.7% (creditors to announce stake sale)

- Consumer staples: Mengniu Dairy 2319.HK -2.3% (new CEO)

- Financials: Sunac China Holdings 1918.HK +5.7%, Legend Holdings Corporation 3396.HK +3.3% (acquisition); Macquarie Group MQG.AU -1.1% (guidance)

- Industrials: Cardno CDD.AU -0.6% (guidance)

- Technology: Samsung Electronics 005930.KR +2.2% (sold equity stakes); Hon Hai Precision Industries 2317.TW +3.5% (Apple said to increase iPhone7 production); Nan Ya Plastics 1303.TW +2.2% (investment plan)

- Materials: Apac Resources 1104.HK +0.9% (profit warning); Fortescue Metals Group FMG.AU +2.0% (Credit Suisse raised to Neutral); Iluka Resources ILU.AU -1.2% (Credit Suisse raised to Neutral)

- Energy: China Gas Holdings 384.HK +2.2% (bid for UK business); Santos STO.AU +2.6% (Goldman Sachs raised to Neutral)

- Healthcare: Estia Health EHE.AU +0.2% (considers potential sale)

WSJ : The Market Gets Caught in a Squeeze Play

The Market Gets Caught in a Squeeze Play

Rising interest rates overseas and new money-market regulations could put bond investors in difficult straits

By Justin Lahart

Sept. 18, 2016 3:33 p.m. ET

Eight years after the demise of Lehman Brothers, a long-delayed crisis-era regulation could roil markets at a time when volatility is already rising.

Recent market action has been centered on a selloff in long-term government-bonds in the world’s major economies. The selling, which began in Europe and Japan, hit the U.S. bond market, sending yields on Treasurys higher.

The major force behind that selling is worries that both the Bank of Japan and European Central Bank will shift their asset purchases away from long-term bonds. But a rise in the cost of hedging currencies for overseas investors looking to pick up extra yield in the U.S. also has been a factor. And it looks likely to grow more pronounced in the weeks ahead.

The higher costs of the hedges comes not from decisions by central banks but from long-delayed rules stemming from the financial crisis. After Lehman collapsed, one of the biggest shocks to the system was the collapse of a money-market mutual fund that had invested in Lehman debt. So to prevent that from happening again, starting Oct. 14 so-called prime money-market funds, which invest in corporate paper and other short-term debt, will be able to impose redemption fees, or halt redemptions altogether, during times of stress.

But that makes money in prime funds seem less safe for investors who previously treated them like bank accounts. So investors have been pulling out, and prime funds have been shifting more of their holdings into highly liquid assets like cash and short-term Treasurys. As result, demand for other types of short-term debt has fallen, pushing rates higher. The London interbank offered rate, for example, has risen sharply. And the borrowing costs associated with currency hedges have risen.

Some industry observers think the squeeze could get more intense as the rule change approaches. So foreigners, facing high hedging costs, could be less enamored with U.S. Treasurys. That could push yields higher, and roil the stock market.

With both the Federal Reserve and the Bank of Japan meeting this week, the timing couldn’t be worse.

The Fed isn’t likely to move on rates, but if it sends a strong signal that it expects to raise rates later this year, it could add pressure to markets. The main event will be Japan, where the BOJ has said the meeting will entail a “comprehensive assessment” of its stimulus measures.

One move the BOJ might make is to redirect more of its purchases toward shorter-term government bonds while reducing longer-term bond purchases. The idea is that the stimulative effects of lower short-term rates are more pronounced, and that higher bond yields at the long end would help out struggling pension funds and other income-driven investors. That would also diminish their appetite for higher-yielding long-term Treasurys.

Looking ahead, the ECB, which helped kick off the Treasury selloff earlier this month when it didn’t give the stimulus signal investors were looking for, may also adopt measures that would allow it to refocus its purchases on shorter-term bonds.

The collision of the new money market rules with the rising risks to long-term rates from overseas could make for a classic case of unintended consequences and bad timing for regulations. If markets get wrongfooted by a rise in long-term Treasury yields that has little to do with what’s going on with the U.S. economy, you can imagine all kinds of adverse feedback loops.

At the least, investors should be ready for what could be a rocky few weeks.

WSJ : Samsung Unloads Tech Shares as Galaxy Note 7 Recall Starts to Burn

Samsung Unloads Tech Shares as Galaxy Note 7 Recall Starts to Burn

Cash from sale of stakes will help cover ballooning costs from smartphone industry’s biggest recall to date

As it grapples with a massive global smartphone recall that is estimated to cost more than $1 billion, Samsung Electronics Co. is moving swiftly to sell stakes in other technology companies to raise cash.

The world’s biggest smartphone maker said Sunday it has sold shares in computer-drive maker Seagate Technology PLC, chip maker Rambus Inc., Dutch semiconductor-equipment maker ASML Holding NV and Japanese electronics maker Sharp Corp.

The divestments come as Samsung said this month it would recall 2.5 million Galaxy Note 7 smartphones globally after reports of the phones catching fire. While Samsung didn’t disclose how much it would raise from the share sales, any cash generated from the sale would help it pay down ballooning costs from the smartphone industry’s biggest recall to date.

Under the guiding hand of heir apparent Lee Jae-yong, Samsung has been moving to shed noncore assets to raise cash as the company seeks to expand into other areas including biopharmaceuticals.

Over the past decade, Samsung has used its massive manufacturing scale to expand into smartphones, televisions and components such as displays and semiconductors. But top executives believe that those markets are no longer able to generate the huge growth returns Samsung has seen in the past. In the smartphone market, Samsung is currently facing Chinese and Indian upstarts that are offering high-spec phones at cheaper prices. Meanwhile, Apple Inc. on Friday launched its newest iPhone, matching Samsung’s waterproof and advanced camera phones.

In a statement Sunday, the South Korea-based tech giant said it sold off its entire 4.2% stake in Seagate Technology and its whole 4.5% stake in Rambus, both based in California. Samsung also confirmed the previously reported sales of half of its 2.9% stake in ASML Holding and its full 0.7% stake in Sharp.

A person familiar with the stake sale told The Wall Street Journal last week Samsung was selling about half of its stake in ASML for €606 million ($676 million). Samsung’s stakes in Rambus, Seagate and Sharp were valued at more than $500 million combined, based on Friday’s closing prices.

The latest divestment aims to “focus on core business” sectors by streamlining its investment assets, Samsung said in the statement. It noted Samsung’s business cooperation with those firms would remain intact, despite the share disposals.

The deals came as Samsung contends with the massive recall of its Galaxy Note 7 smartphones after reports of overheating and exploding batteries in the new top-of-the-line phone. The U.S. Consumer Product Safety Commission on Thursday announced a formal recall of the mobile handset. Analysts predict the recall could cost Samsung as much as $1 billion.

Despite its swift announcement on Sept. 2 to voluntarily recall more than 2.5 million phones, Samsung has still been under pressure to act more aggressively to address the issue.

Samsung recently saw investors dump its shares in the wake of the recall crisis, wiping more than $10 billion off the company’s market value on Friday, Sept. 9, and another $15.9 billion off the following Monday.

Meanwhile, as its shares were suffering, Samsung moved to step up the workload for Lee Jae-yong, the son of Chairman Lee Kun-hee, who remains incapacitated since he was hospitalized following a heart attack more than two years ago.

The company said Monday it had nominated to its board of directors the younger Mr. Lee, who has served as the company’s vice chairman since 2012, without sitting on the board. His addition to the board will be put to a shareholder vote on Oct. 27.

FT : Airbus prepares to launch restructuring and cost cuts

Airbus prepares to launch restructuring and cost cuts.

Tom Enders, chief executive of Airbus Group, is preparing to launch a new restructuring and cost-cutting plan next month to offset expensive delays to aircraft programmes and minimise losses on the A380 superjumbo.

The restructuring will tighten Mr Enders’ grip on the civil aerospace division which accounts for 70 per cent of the European company’s revenues. He aims to eliminate duplication of certain functions between the aircraft subsidiary and its parent, as well as with other business units.

The plan has not yet been finalised but could include job cuts across the group. Talks with unions are expected to begin soon. The plans are a closely guarded secret but some managers have been warned that the restructuring is coming. “The writing is on the wall,” said one.

Another said that the restructuring was creating uncertainty. “We don’t know how things are going to work,” he said.

The pressure is on to make significant cost savings after the aircraft maker announced €1.4bn in charges at the interim stage to cover engine problems on its A400M military transport aircraft and supplier delays that threaten to hold back deliveries of the new A350 wide-body civil jet. Further charges are expected on the A400M programme once negotiations with government customers over a new delivery schedule are agreed.

The company has also been forced to slash production of its A380 superjumbo, which has struggled to win new orders. Having just managed to reach break even at gross operating level on the production of each aircraft, the reduction in output from 27 last year to 12 by 2018 will result in new losses. Mr Enders has promised that this will not be allowed to continue for very long, but Sandy Morris, aerospace analyst at Jefferies, estimates the programme as a whole will have generated losses of €350m by 2020.

Finally, the helicopter market continues to be weak, and one of Airbus’ most popular models was grounded after a crash in April.

Mr Enders said at the group’s interim results in July that he would be seeking savings. “We will also look into the structural set-up of the group to overlap synergies — further cost reductions, particularly between group [at] a corporate level and the divisional level,” he said in a briefing with analysts.

The pressures were exacerbated this weekend when Pratt & Whitney, the engine supplier, revealed that supplier problems would force it to cut deliveries of its new geared turbofan engine, which powers Airbus’s most popular jet, the single-aisle A320neo.

Teething issues with this first in a new generation of geared engines have left Airbus with several so-called “gliders” waiting in the hangars for P&W engines. Now the US engine maker appears to have lost control of its supply chain, as it ramps up production.

Qatar Airways has already cancelled two of its A320 deliveries in the wake of the technical problems, and is threatening to shift its $6bn A320neo order to Boeing’s rival single-aisle, the 737Max.

Airbus said on Sunday that it was sticking by its target of 650 aircraft deliveries, which would be met by delivering more of the current generation of A320 and postponing delivery of the jets powered by the new Pratt & Whitney turbine. The technical problems were “largely behind us” Airbus said, while the company was in discussions with its customers and Pratt & Whitney about the latest delays.

FT : Wren Investment Office seeks out London’s super-rich families

Wren Investment Office seeks out London’s super-rich families

Wren Investment Office has launched into an increasingly crowded market serving the super-rich, offering wealthy clients the chance to tap into a network of multifamily offices around the world with approximately $10bn under management.

Backed by US company WE Family Offices and MDF Family Partners, based in Spain, the core team at Wren comprises former members of Lord North Street Private Investment Office, which merged with SandAire in March 2014.

Wren will open the office in London’s Westminster at it attempts to tap into the capital’s status as a centre for global wealth.

Clients who access multifamily office services typically are worth more than $50m, with the average net worth pegged at about $200m. They differ from the estimated 10,000 single family offices, which only manage the affairs of one family or individual.

Services provided by both MFOs and SFOs range from wealth management to succession planning.

Wealth-X, the data provider that tracks the super-rich, estimates that the wealthy will pass on more than $16tn of assets over the next 30 years. A recent survey by UBS and Campden Wealth Research of 242 family offices revealed they held almost $184bn in assets.

However, questions have been raised recently about the number of different companies chasing the same super-rich clients, with private banks, wealth managers, multifamily offices — and even High Street banks — all attempting to lure wealthy customers.

“It’s becoming harder on the client side to know the trees from the woods, as there are so many different firms offering the same things but under the guises of different selling labels,” said Matthew Norman, deputy chairman of the Family Office Council.

Consolidation among the smaller companies was likely, he added. “Multi-family offices need to build assets under management in order to be viable under all the regulations, so consolidation is the name of the game.”

Private equity firms keen to get into the market have also recently been circling smaller wealth managers.

Michael Parsons, Wren’s chief executive, said consolidation had provided an opportunity, as there were now fewer MFOs in London than a few years ago. Key to Wren, he added, was to look at clients’ assets as “a wealth enterprise”.

“It’s not just about managing their investments, but it’s about defining a clear strategy for the overall wealth, which encompasses investments as well as property, their art collection and the company they still run and own,” he said. “It’s about understanding the overall purpose.”

The investment committees of WE, Wren and MDF will be integrated, with the alliance also sharing investment research as well as back-office systems and reporting.

“While the team in London will manage the organisation, we are going to be on the board,” said Mel Lagomasino, chief executive of WE. “We are going to be responsible at the strategy level and at a fiduciary level.”

Ms Lagomasino said the average client assets overseen at WE was just under $100m. “That’s around the target we are looking for in Wren,” she added.

>>> What to look at this Week End - 17th & 18th of September 201

Weekly Update

Dow +0.21% S&P +0.53% Nasdaq +2.31% Russell +0.46% EuroStoxx -3.86% FTSE -0.98% CAC -3.54% DAx -2.81% Ibex -4.34% MIB -5.62% SMI -1.62% Nikkei -2.63% Hang Seng -2.44% CSI -3.06% Shanghai -2.88%

Volatility continued this week as the markets pondered the timing of the next Fed rate hike. The week started off with Fed Governor Brainard making the dovish case for Fed policy, which helped reverse the risk off sentiment that built up last week amid a barrage of hawkish commentary from Brainard's colleagues. A big miss on US Advanced Retail Sales data on Thursday lent support to the dovish view that the Fed will be on hold next week. But a hotter than expected US CPI reading on Friday caused markets to once again reassess expectations for Fed policy as progress toward the inflation target could bring the next hike sooner. Meanwhile, the BOE kept its policy unchanged this week, as expected, but said it could cut rates again if the baseline forecast set in August is realized. The renewed contrast between US policy tightening and European easing led to the dollar strengthening substantially on Friday, particularly against the pound sterling. WTI crude futures slid throughout the week, dropping three bucks to around $43/bbl. Two major M&A deals in the agriculture sector, an earnings miss by Oracle and increased guidance from Intel provided the buzz in the corporate sector. The tech sector was also bolstered by a surge in Apple shares driven by strong pre-orders for iPhone 7 at Sprint and T-Mobile. Equities were volatile but ended little changed: for the week the DJIA gained 0.2%, the S&P500 added 0.5%, and the Nasdaq was jumped 2.3%.

Macro :

- Weidmann Says Banking Supervision Should Be Split From ECB: SZ

- McDonald’s May Face $500m Luxembourg Back Tax Bill: FT

Keep an eye on :