San Francisco voters reject measure F which would have limited rentals - financial press
- Measure would have limited annual rentals to 75-nights
- Would have required hosts to file quarterly reports with the city's planning department
Asian Mid-session Update: China Services and Hong Kong PMIs rebound; Australia trade deficit narrows
***Economic Data***
- (CN) CHINA OCT CAIXIN PMI SERVICES: 52.0 V 50.5 PRIOR; 3-month high
- (HK) HONG KONG OCT PMI: 46.6 v 45.7 PRIOR; 8th month of contraction
- (AU) AUSTRALIA SEPT TRADE BALANCE (A$): -2.32B V -2.90BE; smallest deficit in 6 months
- (AU) AUSTRALIA SEPT RETAIL SALES M/M: 0.4% V 0.4%E
- (AU) AUSTRALIA OCT AIG PERF OF SERVICES INDEX: 48.9 V 52.3 PRIOR; 1st contraction in 5 months
- (NZ) NEW ZEALAND Q3 EMPLOYMENT CHANGE Q/Q: -0.4% (first decline since Q2 of 2013) V +0.4%E; Y/Y: 1.5% V 2.5%E; Participation rate 68.6% v 69.3%e (2-year low)
- (NZ) NEW ZEALAND Q3 UNEMPLOYMENT RATE: 6.0% V 6.0%E; Avg hourly earnings 0.9% v 1.1%e
- (JP) JAPAN OCT NIKKEI SERVICES PMI: 52.2 V 51.4 PRIOR; COMPOSITE PMI: 52.3 V 51.2 PRIOR
- (JP) JAPAN OCT MONETARY BASE Y/Y: 32.5% v 35.1% PRIOR; MONETARY BASE END OF PERIOD: ¥344.4T v ¥338.4T PRIOR
- (JP) JAPAN OCT CONSUMER CONFIDENCE: 41.5 V 40.8E
- (IN) INDIA OCT PMI SERVICES: 53.2 V 51.3 PRIOR (4th straight month of expansion and highest since Feb)
- (UK) SEPT BRC SHOP PRICE INDEX Y/Y: -1.8% V -1.9% PRIOR; 30th month of decline
***Index Snapshot (as of 02:30 GMT)***
- Nikkei225 +2.2%, S&P/ASX +0.1%, Kospi +0.1%, Shanghai Composite +2.6%, Hang Seng +3.1%, Dec S&P500 +0.2% at 2,106
***Commodities/Fixed Income***
- Dec gold +0.6% at $1,120/oz, Dec crude oil -0.3% at $47.74/brl, Dec copper +0.2% at $2.33/lb
- GLD: SPDR Gold Trust ETF daily holdings fall 3.0 tonnes to 686.3 tonnes; lowest since Sept 29th
- (US) API Petroleum Inventories: Crude: +2.8M v +2.5Me; 4th straight build
- (JP) BOJ offers to buy ¥400B in 1-3yr JGBs, ¥400B in 3-5yr JGBs, ¥240B in 10-25yr JGBs and ¥140B in JGBs with maturity over 25-yr
- (CN) China MOF sells 10-yr bonds, avg yield 3.092%
- (AU) Australia MoF (AOFM) sells A$900M in 2.75% 2024 Bonds; avg yield: 2.6348%; bid-to-cover: 2.89x
***Market Focal Points/FX***
- Asian markets are broadly higher, tracking another session of strong gains on Wall St, with Shanghai Composite and the Hang Seng leading the way. China Services PMI registered a notable bounce higher, in contrast with continued weakness in the manufacturing space. Caixin economists said the data show that previous stimulus policies have begun to take effect, while the economic structure steadily improved. Hong Kong PMI was in contraction for 8th month but also rose for the 2nd straight month. Resident economist did not that economy will likely contract, as "sharper reduction in selling prices was not sufficient enough to attract new clients." Relative strength in the Hang Seng index was also attributed to reports of PBoC Gov Zhou announcing plans to complete Shenzhen-Hong Kong stock link before the end of the year. However, reports late in the day indicated those remarks were made over 5 months ago, and the Hang Seng came off its highs in afternoon trade.
- Australia trade and retail data for September were surprisingly benign. Retail spending was in line with estimates, while trade deficit was the smallest in 6 months as Exports and Imports component growth saw 3-month highs. Exports to China were especially notable, rising to A$7.49B v A$6.95B prior, a 16-month high. AUD/USD rose some 40pips above $0.7220 in the wake of the data. In contrast, NZD/USD fell some 60pips below $0.6640 after disappointing quarterly employment data, adding to the losses earlier following another decline in GDT auction dairy prices. Economist with ASB said the latest New Zealand employment data reinforces the view that RBNZ should cut rates again in December.
***Equities***
US equities / ADRs:
- DPLO: Reports Q3 $0.26 v $0.16e, R$947M v $931Me; +11.9% afterhours
- TSLA: Reports Q3 -$0.58 v -$0.53e, R$1.24B v $1.21Be; +9.0% afterhours
- PBPB: Reports Q3 $0.05 v $0.09e, R$96M v $95.8Me; +5.8% afterhours
- TMH: Reports Q3 $0.68 v $0.71e, R$899.2M v $892Me; +3.2% afterhours
- CBS: Reports Q3 $0.88 v $0.81e, R$3.26B v $3.27Be; +3.1% afterhours
- HLF: Reports Q3 $1.28 v $1.07e, R$1.10B v $1.15Be; -2.7% afterhours
- PAA: Reports Q3 $0.28 v $0.27e, R$5.55B v $5.98Be; -4.5% afterhours
- ETSY: Reports Q3 -$0.06 v -$0.03e, R$65.7M v $68.5Me; -6.9% afterhours
- MTZ: Reports Q3 $0.26 v $0.33e, R$1.11B v $1.14Be; -7.1% afterhours
- CERN: Reports Q3 $0.54 v $0.55e, R$1.13B v $1.17Be; -9.7% afterhours
- DSW: Announces CEO Transition; guides lower; raises buyback by $200M (10% of market cap); -11.5% afterhours
- QUAD: Reports Q3 $0.14 adj v $0.51 y/y, R$1.16B v $1.24B y/y; -13.0% afterhours
- ENPH: Reports Q3 $0.01 v $0.01e, R$102.9M v $104Me; -19.9% afterhours
- X: Reports Q3 -$0.70 adj v -$0.28e, R$2.83B v $2.95Be; -11.9% afterhours
- GRPN: Reports Q3 $0.05 v $0.01e, R$713M v $730Me; names Rich Williams as new CEO, effective immediately; -25.6% afterhours
Notable movers by sector:
- Consumer discretionary: SJM Holdings 880.HK -0.9% (Q3 result)
- Financials: China Vanke 000002.CN +2.0% (Oct result); Guotai Junan 601211.CN +6.5%, Citic Securities 6030.HK +9.0%, Haitong Securities 600837.CN +4.8% (attribution to PBoC Gov's comment on stock connect); Scentre Group SCG.AU +1.5% (Q3 result)
- Industrials: Geely Automobile Holdings 175.HK +3.1% (Oct sales); Ssangyong Motor Co 003620.KR +0.5% (Q3 result); Hyundai Motor Co 005380.KR +2.8% (Oct US sales); CSR Ltd CSR.AU +5.3% (H1 result); Takata Corp 7312.JP -14.1% (signs consent order and penalty payment)
- Technology: NCsoft Corp 036570.KR +9.8% (Q3 result); Pegatron Corp 4938.TW +0.5% (frozen hiring in Shanghai)
- Materials: Yodogawa Steel Works 5451.JP +7.8% (H1 result)
- Energy: Santos STO.AU -2.9% (rights placement); JX Holdings 5020.JP +3.7% (H1 result); CNOOC 883.HK +6.4%, PetroChina 601857.CN +1.5% (NDRC raises fuel prices)
- Healthcare: NIB Holdings NHF.AU +3.9% (guidance)
- Telecom: SK Telecom 017670.KR +0.7% (speculation to split up company); KDDI Corp 9433.JP +2.7% (H1 result speculation)
After Hours Summary: FIVN +18.3%, DPLO +11.9%, TSLA +9.2%, GRPN -26.1%, ENPH -20.7%, FARO -16.3% following earnings/guidance
After Hours Gainers:
Companies trading higher in after hours in reaction to earnings: FIVN +18.3%, DPLO +11.9%, TSLA +9.2%, ZEN +8.7%, MXL +7.4%, CHUY +6.6%, PBPB +5.8%, OKE +5.7%, CPIX +5.3%, PGH +4.6%, PAYC +4.1%, FLTX +3.9%, TMH +3.2%, DVN +2.8%, LDL +2.6%, TRUP +2.4%, CBS +2.2%, PAGP +2.1%, OCLR +1.6%, OESX +1.5%, AMSG +1.4%, TSLX +1.3%, BW +1%, XXIA +0.9%, SLW +0.9%, OAS +0.8%, DVA +0.6%, AFG +0.5%, ZNGA +0.4%, ACHC +0.3%,
Companies trading higher in after hours in reaction to news: TSLA +9.2% (named Jason Wheeler, formerly VP of Finance at Google, as CFO; Jon McNeill named President of Global Sales and Service; co also reported earnings), FLTX +3.95 (acquired SAAS fleet mgmt solutions firm Visirun S.p.A.; terms not disclosed), XOMA +2.7% (regained compliance with Nasdaq's minimum bid price requirement; Jim Neal named Chief Operating Officer), SLW +0.9% (acquired silver stream from Glencore's Antamina mine; co also reported earnings),
After Hours Losers:
Companies trading lower in after hours in reaction to earnings: GRPN -26.1%, ENPH -20.7%, FARO -16.3%, QUAD -14.1%, DSW -12.2%, X -11.5%, CERN -9.2%, ZG -8%, PZZA -7.3%, ETSY -6.8%, UNTD -4.4%, KRNT -4.3%, RTRX -3.3%, HLF -3.1%, VNOM -2.5%, KFRC -2.4%, HCI -1.7%, FOLD -1.7%, IAG -1.1%, XOXO -1.1%, AIV -0.6%, FOGO -0.5%, FANG -0.3%, ZAGG -0.3%, CIM -0.3%, CVC -0.2%, USNA -0.1%
Companies trading lower in after hours in reaction to news: HCHC -7.9% (announced a proposed offering of $50 mln in common stock), CKP -7.55 (co discovered financial statement errors attributable to the accounting for its quarterly income tax provision, says various previous financial statement should no longer be relied upon), BIOD -4.5% (entered into a restructuring plan), UNTD -4.4% (President and CEO Francis Lobo to resign effective November 18), BAH -1.6% (announced secondary offering of 13 mln shares of Class A common stock by an affiliate of The Carlyle Group)
Under Armour discloses CEO/Chairman Kevin Plank entered into a pre-arranged stock trading plan to sell shares of the Company’s Common Stock
* The trading plan provides for the sale of shares of a combination of the Class B Common Stock and, if and when issued, the Class C Common Stock. The trading plan provides for the sale prior to the end of 2015 of up to 1,125,000 shares of the Company's Class B Common Stock held by Mr. Plank personally and up to 125,000 shares of the Company's Class B Common Stock held by his charitable foundation.
* The trading plan further provides for the sale of up to 1,350,000 shares of the Company's Class C Common Stock held by him personally and up to 150,000 shares of the Company's Class C Common Stock held by his charitable foundation. Any sales of Class C Common Stock under the trading plan will begin only following the initial distribution of one share the Class C Common Stock for each outstanding share of Class A and Class B Common Stock (the "Initial Class C Issuance") and the listing of the Class C Common Stock on the New York Stock Exchange. Sales of the Class C Common Stock may extend through August 2016. The sales under the trading plan sales are being done for asset diversification, tax and estate planning and charitable giving purposes.
ECB’s Draghi Defends Its Readiness to Fight Low Inflation
Central bank head underscores its willingness to do more
FRANKFURT—European Central Bank President Mario Draghi defended the central bank’s readiness to take more accommodative action to fight the risks of low inflation in the currency bloc.
Speaking in an ornate room in Frankfurt’s grand Alte Oper concert hall on Tuesday, the ECB head took specific aim at German critics, rejecting criticism that the ECB’s policies punish savers and create unwarranted risks.
“History shows that deflation can be just as damaging to the prosperity and stability of our economies as high inflation,” Mr. Draghi said.
The ECB head said its asset-purchase program was proceeding smoothly, but underscored the central bank’s willingness to do more.
“The Governing Council is willing and able to act by using all the instruments available within its mandate if warranted in order to maintain an appropriate degree of monetary accommodation,” he said.
The comments come as inflation in the eurozone is flat and isn’t expected to approach the central bank’s medium-term target of just below 2% for quite some time. Mr. Draghi signaled at his news conference last month that the central bank may expand its large-scale bond-purchase program and could also lower the rate on overnight deposits further into negative territory, meaning that banks would have to pay more to store surplus funds with the central bank.
In March, the ECB launched a €60 billion ($66.1 million) a month bond-buying program that it intends to run until at least September of next year. The ECB’s deposit rate is currently -0.2%.
Mr. Draghi said, however, in a weekend interview in the Italian newspaper, Il Sole 24 Ore, that it remained an “open question” whether more stimulus would be needed at its next meeting in December. This comment and others from hawkish members of the Governing Council have led some analysts to suggest that the outcome for December isn’t quite as clear as was once assumed.
Though still expecting some action from the ECB in December, J.P. Morgan’s Greg Fuzesi said in a recent note that “it does feel as if the outcome in December could turn out closer than seemed likely a couple of weeks ago.”
How Low Can Gold Go?
Higher U.S. rates, weak Chinese demand and India’s moves to curb gold imports has some analysts forecasting further downside.
Diwali, or the festival of lights, usually brings a gold rush to India as households splurge on jewelry and artifacts crafted from the precious metal. But, this year, gold hasn’t sparkled ahead of next week’s five-day holiday. The SPDR Gold Shares ETF (ticker: GLD ) is down more than 4% over the past five trading days.
The yellow metal has been hurt by shifting expectations for the first hike in U.S. interest rates in a decade. The more hawkish than expected tone following last week’s meeting of the Federal Open Market Committee suggested a December tightening of monetary policy may be on the cards. Higher interest rates loom as bad news for the non-yielding metal as they make cash and fixed income investments look more appealing than gold. The gold price also tends to move in the opposite direction as the U.S. dollar, which would strength on higher interest rates.
The sharp downturn in the gold price, coupled with a stronger Australian dollar, has snapped a rally in Australian gold miners Northern Star Resources ( NST.AU ) and Evolution Mining ( EVN.AU ). Northern Star has tumbled 18% since the beginning of last week, while Evolution is down 14%. And there could be more pain ahead for the gold miners if analyst forecasts for the precious metal prove true.
Nomura analyst Yen Voo expects the gold price to weaken from current levels around $1,140 an ounce to $1,115 an ounce in the first half of 2016 before recovering to above $1,200 an ounce in the second half. Besides the pressures of the looming Fed interest rate hike, Voo struggles to see fundamental support for the yellow metal. “Chinese gold demand and inflation are absent for a more sustained gold rally,” notes the analyst.
A return to $1,115 an ounce may be bad news for Northern Star and Evolution. When gold was fetching that price in mid-September, Northern Star shares had been trading at around 21% below its current level of AUD2.56 a share, while Evolution had been at 14% below its current AUD1.39 a share. The 80% rally in Northern Star shares since the start of the year to the end of September enticed BlackRock to lighten its position in early October, with the U.S. fund manager cutting its stake to 10.8% from 12.4%. However, both miners continue to record strong production growth, underpinned by a string of acquisitions, and are enjoying healthy margins as the Australian dollar and oil prices remain weak.
But there’s the possibility that gold could get beaten down to lower levels, and at a faster pace. Nomura’s Voo is skeptical the Fed will hike rates in December and sees a raise in March as more likely. That’s a view shared by ReOrient strategist Uwe Parpart, who argues that “the FOMC suggested at its October meeting that it will tighten in December, only to be smacked with a new round of data indicating that the Fed’s belief in an improving US economy is (once again) delusional.” However, the market now sees a 50% chance of a December hike, up from 35% a week ago. And in the event that the U.S. central bank does hike in December then the negative sentiment likely to envelop financial markets, on top of gold’s not-so-good fundamentals, could drag the yellow metal to below $1,100 an ounce, notes Voo.
The demand side of the gold equation does not look bright. India, the world’s largest gold consumer, is set to launch two schemes to reduce the country’s reliance on gold imports: a sovereign bond scheme will allow Indians to invest their gold into bonds yielding between 2% and 3%, while a gold monetization scheme will allow gold owners to convert their holdings into credit in a bank account. Meanwhile, rural income growth has been hurt by weak monsoon rains this year, which could weigh on gold spending and makes a repeat of the surge in demand during last year’s Diwali festival less likely.
Source: FactSet
India’s northern neighbor China, the world’s second largest gold consumer, is suffering from an economic slowdown that’s expected to weaken demand for the yellow metal. Beijing last week lowered its GDP growth target for the 13th Five Year Plan to 6.5%, down from the current 7%. Nomura is forecasting even slower growth of 5.8% in 2016. Besides the economic drag, jewelers in China have increased retail mark-ups on gold products, which may weigh on sales volumes and hurt gold producers. A weaker Chinese yuan also suppresses consumer appetite for gold by making it more expensive in local currency terms. Nomura’s Voo estimates that a 5% fall in the value of the yuan against the greenback would reduce China’s gold demand by 4% in 2016.
The supply side of the gold equation looks a little more promising. The volume of mined gold is expected to decrease at a 3% year-on-year pace as the quality of global reserves falls. Weak gold prices have also crimped gold recycling activity. However, inventory volumes remain excessive in Asia, as indicated by the discount to spot gold prices in the region, and the problem looks especially pronounced in India, which appears to have front-loaded gold imports in August. Also hurting prices is the risk that Venezuela sells 25%, or around 80 tonnes, of its gold reserves to cover maturing debt, warns Nomura’s Voo.
Gold could regain some of its luster over the longer term, with prices expected to eventually return to $1,300 an ounce at the end of 2017. There’s support from the shrinking of newly mined supply and the decline in reserve grades. Greater clarity about the trajectory of U.S. rate hikes could also help, while demand from China is expected to improve on rising investments in gold as wealth shifts from yuan deposits to the precious metal as a store of value against declining interest rates and a weaker currency.
Notable after hours earnings movers: DPLO +12.8%, ZEN +9.2%, PBPB +7.5%, ENPH -24.7%, QUAD -16%, DSW -12.1%
* Companies trading higher after hours following earnings/guidance:
DPLO +12.8%, ZEN +9.2%, PBPB +7.5%, TSLA +7.3%, CHUY +6.6%, SSNI +5.6%, CPIX +5.3%, GMED +4.9%, MXL +4.7%, FLTX +3.8%, ZG +3.6%
* Companies trading lower after hours following earnings/guidance:
ENPH -24.7%, QUAD -16%, DSW -12.1%, CERN -9.5%, ETSY -8%, VNOM -2.5%, CBS -2.2%, HLF -1.5%, KFRC -0.8%, HF -0.7%, AIV -0.6%
Closing Market Summary: Stocks Climb Amid Continued Strength in Energy
The stock market registered its second consecutive gain on Tuesday with the S&P 500 climbing 0.3%. The benchmark index settled a bit behind the Nasdaq Composite (+0.4%) and the Dow Jones Industrial Average (+0.5%) with cyclical sectors pacing the advance.
Equity indices saw modest losses at the start of the trading day, but the market was able to overcome the early weakness thanks to continued leadership from the energy sector as the growth-sensitive group charged higher by 2.5% to extend this week's gain to 5.0%. Today's rally was powered by a 3.8% spike in crude oil, which settled at $47.90/bbl, while top-weighted components like Chevron (CVX 98.14, +3.18) and Exxon Mobil (XOM 86.83, +1.55) posted respective gains of 3.4% and 1.8%.
Similar to energy, most of the remaining cyclical sectors ended the day in positive territory with the influential technology (+0.6%) space showing relative strength. The top-weighted tech sector was underpinned by some of its largest members with Apple (AAPL 122.57, +1.39), IBM (IBM 141.88, +1.51), and Microsoft (MSFT 54.15, +0.91) gaining between 1.1% and 1.7% while Visa (V 77.87, +2.65) surged 3.5% to erase the entirety of yesterday's earnings-driven drop.
Elsewhere among cyclical sectors, the industrial space settled on its flat line as transport stocks lagged. The Dow Jones Transportation Average lost 0.4% with freight carriers struggling. On the earnings front, Expeditors International (EXPD 49.75, -1.05) surrendered 2.1% after reporting a two-cent beat on below-consensus revenue.
Over on the countercyclical side, the utilities sector (+0.3%) settled in-line with the market while health care (-0.3%), telecom services (-0.4%), and consumer staples (-0.5%) lagged throughout the session. The health care sector struggled despite a modest uptick among biotech names, evidenced by a 0.3% gain in iShares Nasdaq Biotechnology ETF (IBB 339.08, +1.02).
That leaves the consumer staples sector (-0.5%), which finished behind the remaining nine groups with Archer-Daniels Midland (ADM 43.15, -3.13) falling 6.8% in reaction to disappointing results.
Today's quiet advance in stocks occurred alongside a modest slide in the bond market with the 10-yr yield rising five basis points to 2.22%.
Investor participation was ahead of average with more than 900 million shares changing hands at the NYSE floor.
Economic data was limited to the Factory Orders report for September, which showed a decrease of 1.0% while the consensus expected a decrease of 0.9%.
The report showed new orders for durable goods declined 1.2%, which was in-line with the advance release in the prior week's Durable Orders report. Excluding transportation, durable goods orders declined 0.6%, which was weaker than the 0.4% decline reported in the advance release.
Tomorrow, the weekly MBA Mortgage Index will be reported at 7:00 ET while October ADP Employment Change (consensus 180,000) and September Trade Balance (consensus -$43.00 billion) will be reported at 8:15 ET and 8:30 ET, respectively. The day's data will be topped off with the 10:00 ET release of the ISM Services report for October (expected 56.6).
- Nasdaq Composite +8.6% YTD
- S&P 500 +2.5% YTD
- Dow Jones Industrial Average +0.5% YTD
- Russell 2000 -1.1% YTD