Tag: news

For the second time in two weeks, President Trump has put on his wealth adviser hat and suggested to the world that he expectes “today will be a good day in the stock market,” adding for for good algo-driven excitement that “the China deal is moving forward ahead of schedule.”

And US equity futures jumped…

This surge will ensure that the S&P will open at a new all-time record high.

But, as a reminder, the last time Trump promised a good day in stocks, they tumbled…

Trade accordingly.

Thanks to a plunge in inventory stacking for non-durable goods (which sounds admittedly oxymoronic), wholesale inventories slumped 0.7% MoM in September – the biggest decline since

Source: Bloomberg

This reversal mimics the hangover after 2013/2014’s inventory-stacking surge…

Source: Bloomberg

Not exactly a good sign for Q3 GDP revisions (or Q4…)

Bitcoin soared almost 40% over the weekend, one of its biggest daily rises in history and a massive surge given the recent break of technical support levels.

Source: Bloomberg

While many had ideas on the catalysts for the move, it appears the biggest driver came from China’s President Xi Jinping confirmed Facebook CEO Mark Zuckerberg’s big warnings to Congress last week, calling for China to accelerate its adoption of blockchain technologies as a core for innovation.

As CoinTelegraph reports, Xi made the comments at a Politburo Committee session on blockchain technology trends on Oct. 24.

Blockchain adoption promotes innovation

Xi stressed that the implementation of integrated blockchain technologies is key in promoting technological innovation and transforming industries. He told the committee:

“We must take blockchain as an important breakthrough for independent innovation of core technologies, clarify the main directions, increase investment, focus on a number of key technologies, and accelerate the development of blockchain and industrial innovation.”

But, it’s Blockchain, not Bitcoin

Xi’s push for greater blockchain adoption comes against the backdrop of China’s long-standing aversion to – and a crackdown on — cryptocurrencies. Authorities in the country first banned ICOs in 2017, quickly followed by cryptocurrency exchanges.

image courtesy of CoinTelegraph

There have even been reports that at least one government agency is considering a ban on cryptocurrency mining.

Digital currency arms race

Unsurprisingly, the one cryptocurrency that the Chinese government doesn’t seem to have an issue with is its proposed central bank digital currency (CBDC). Despite reports throughout the summer that the launch of this was imminent, officials from China’s Central Bank last month said that there was no timetable for the launch of the CBDC.

Xi’s commitment sparked a surge in China tech stocks – the biggest jump since February…

Source: Bloomberg

“Most of these companies, especially those that are just beginning to state their connection with blockchain today, are trying to take advantage of the hype,” said Li Shiyu, fund manager at Guangdong Xiaoyu Investment Management Co.

“It shows how much excitement can be triggered by something stressed as a priority by the top man himself.”

Meanwhile, Facebook’s Mark Zuckerberg has been referencing the threat of Chinese superiority in the digital currency space in an attempt to sell U.S. lawmakers his plans for the Libra stablecoin.

“China is moving quickly to launch a similar idea in the coming months. We can’t sit here and assume that because America is today the leader that it will always get to be the leader if we don’t innovate,” he argued in an official statement. 

Blain’s morning porridge, submitted by Bill Blain

“They were just discussing what kind of shampoo they use on their beards.”

Great news re England in the World Cup Final, but a shame for Wales – that would have been a game indeed!  
Welcome to another week in the fascinating global markets.

I was going to write a cracking morning comment about how the major market risk is an economic surprise to the upside in the global economy – current economic signals suggest the feared global recession isn’t actually as bad as fear.  Wow.. Is that Blain being bullish? (Blain’s Market Mantra No 8 – “Things are never as bad as you think they are..”)  Well, not quite as good news as it sounds.  If the global economy isn’t as battered as the IMF and others have been scaring us, then central banks could put their easing plans aside, sending a shiver of fear through the bond markets, and it could trigger weakness across all markets. Markets would worry about the lack of further stimulus and lock up.

I was going to expand and explain how a correction would be a great time to pick up bargains, and pile into stock fundamental stories!  Reverse the index and disruptive Tech nonsense.  I’d spice it up with comments on how you should get as far away from credit/bond markets as possible. (Why you ask? Because in bonds there is truth.  Because credit markets are a huge bubble fuelled by easing expectations and on-going QE distortions, and when they snap, they will prove a chronic illiquidity trap.)

Then I was going to do an in-depth analysis of why slaying an ISIS leader like a “dog” does nothing to change the dismal scenarios Trump has painted in the Middle East – Nature abhors a vacuum. I was going to expand on Saudi instability vs a resurgent Iran (which faces its own mounting internal problems), and move on to a rash of stories about UAE weakness, giving me the opportunity to repeat my old joke about Dubai being a desert again within 50 years.

I would then have added a quick compare and contrast about current issues in China, where my sense is a new Tech Cold War is pretty much nailed on, with the Chinese prepared to go their own way as any kind of meaningful accommodation with the US is left hanging till Trump is gone. The question is can Xi keep the country generally stable for another 5 years without having to do something “outward bound” re Hong Kong or Taiwan in order to put his “patriot” card into play? That’s a close call – and has got to figure in tech investment decisions.

Next up this morning was going to be a critique of the Mario Draghi era at the ECB – top marks for getting keeping the patient alive through the crisis – anything it takes, but less good on the next 8 years in recovery. His legacy will an unresolved crisis of direction facing Christine Legarde when she takes over this week – clue: my insights were going to draw parallels between the current efforts of Boris Johnson to heard cats in the UK Parliament. Legarde faces a board split down national lines – she will need all her diplomatic skills to resolve it. She faces the problem of building a common European consensus – but the members represent state interests which are chronically opposed.

Next up would be HSBC’s dismal results. Quel Surprise! The biggest, and certainly the most complex bank on the planet, has stumbled badly. It’s largely a crisis of its own internal management structure – the bank’s leadership failed to evolve and lacks sufficiently diverse banking DNA to thrive in this modern age.  Every other business on the planet promotes on ability.  HSBC’s approach isn’t quite Buggin’s turn or skill at polishing the handle of the big brass door, but it’s not far from it, or remotely sensible. The previous CEO drowned in the detail and was sacked. I’m told by HSBC insiders his successor would probably make a very good job of running a branch network somewhere like Birmingham. Both were HSBC management lifers will little real world flair or experience. They shows clearly the dangers of internal overpromotion.

Current HSBC CEO Noel Quinn should be on a similar intellectual/thought-leadership level as a banker like JP Morgan’s Jamie Dimon. But I’m told he’s not. He’s apparently not even in same league as the perennial regulation zone Christian Sewing of Deutsche Bank – which is why the only response is to hack more jobs. HSBC faces massive risk/reputational exposures in Asia and particularly Hong Kong, and the lack of strategy should make is a classic business-risk case study.

But I am afraid I am not going to get round to writing anything like the brilliant, insightful porridge described above this morning: As always on a Monday morning, it’s the fault of South-West Rail.  Today, the train was on time – but 5 carriages instead of 10 meant lots of people traveling to London spent over an hour standing.  Its genius – the rail company is going to hit passengers with a 8% fare increase in January to reflect the heavy demand for the service!  They call that success.  Less service and minimal investment – and we get to pay more for it!
 
While the New Forest to London line hasn’t quite reached the Guy Fawkes masks, tear gas and full scale riots stage, but we’re not far from serious passenger insurrection. On a wider scale, there is an increasing sense life is ripping us off. Pitiful politicians, greedy businesses, evil bankers and declining services dominate the news. And when voters/consumers are getting increasingly discontented and frustrated – well, that’s when we get surprises..

And a surprise in the UK over the Brexit Bollchocks might just be on the cards. Cry havoc and unleash the hamsters of despair….

S&P futures rose to a new all time high, Asian stocks advanced, while European stocks were flat amid – what else – renewed trade deal optimism, even as the busiest week of earnings season is set to confirm that the S&P500 is in an earnings recession (despite stronger than expected reporting), while the Fed will cut rates later this week. Treasuries dropped, pushing the 10-year yield to a six-week high.

Boosting trade optimism, over the weekend China said parts of the text for the first phase of a trade deal with the U.S. are “basically completed” following consensus on subjects including standards used by agricultural regulators. That followed a similar statement Friday from the U.S. side, with Presidents Donald Trump and Xi aiming to sign a pact in Chile next month.

European shares initially fell to start the week as a glum profit outlook from the region’s largest lender HSBC offset gains in trade-sensitive sectors buoyed by positive developments on the U.S.-China trade front. However, as the session progressed, the Stoxx 600 Index trimmed losses to trade little changed, with car manufacturers climbing the most among sectors on the back of trade hopes, while banking shares lead decliners; the index advanced less than 0.1% as of 11:07am in London after falling as much as 0.2% earlier.

UK-based megabank HSBC slipped 4% to the bottom of the benchmark index after it dropped its 2020 profit target, and said it would undertake a costly restructuring as the bank struggled amidst a slowing global environment. Another disappointment among banks was Spain’s Bankia, down 3%, after the state-owned lender posted a 23% drop in third-quarter net profit as it struggles to increase margins from lending because of ultra-low interest rates. “HSBC did cite weakness, but that’s not massively unexpected given what’s going on the wider growth dynamics,” said Will James, senior investment director, European equities at Aberdeen Standard Investments.

Meanwhile, leading the stock advance was the Stoxx 600 Automobiles & Parts which rose 1.8% as optimism on a trade deal increased after China signaled progress in initial agreement text with the US. Luxury stocks also ramped higher after Louis Vuitton owner LVMH made a bid to buy U.S. jeweler Tiffany for $14.5 billion acquisition offer. Shares of the French luxury goods maker rose and boosted gains in peers Swatch, Pandora and Salvatore Ferragamo

Earlier in the session, Asian stocks advanced for a third day and the fifth increase in 6 sessions, led by tech, tracking a U.S. rally that buoyed the S&P 500 Index to within a whisker of its record close. Nearly all markets in the region were up, with Shanghai shares leading gains with blockchain-related stocks climbing after Chinese President Xi Jinping hailed the technology. Markets in India, Singapore, Malaysia and New Zealand are closed for holidays. The Topix closed little changed, as Tokyo Electron climbed and Shin-Etsu Chemical retreated. Most economists expect the Bank of Japan to stand pat this week amid continued signs of resilience in the economy and stability in markets. The Shanghai Composite Index rose 0.9%, with 360 Security Technology and Jiangsu Hengrui Medicine among the biggest boosts. Leaders of China’s Communist Party are expected to gather behind closed doors Monday for the party’s first Central Committee meeting since early 2018.

Investors began the week amid nearly unanimous expectations the Fed will trim rates by another 25bps Wednesday, and then “stop to reassess”, signaling it’s done with easing for now. Fed Chair Jerome Powell has previously said the wider U.S. economy is in a good place, yet citing slowing global growth and uncertainty around trade as risk factors.

It’s not just the Fed, of course: in addition to the FOMC meeting on Wednesday, we get a first look at Q3 GDP in the US (Wednesday) and the Euro-area (Thursday) are due and China (Thursday) and the RoW PMIs and US ISM (Friday) will be closely watched before US payrolls ends the week with a bang on Friday.

Earnings season will also continue apace as a number of major global companies report on both sides of the pond, with 164 S&P 500 companies scheduled to report. In terms of releases to watch out for, today we have Alphabet, AT&T and HSBC (the latter two reported mixed results). On Tuesday, there’s Mastercard, Nomura, BP and General Motors. Wednesday sees releases from Apple, Bayer, Facebook, Total, Sony, Volkswagen, Airbus, Santander, General Electric and Credit Suisse. On Thursday there’s Royal Dutch Shell and BNP Paribas, while on Friday there’s Exxon Mobil, Chevron, AIG and Alibaba.

In FX, growing optimism about a U.S.-China trade deal spurred a mild risk-on mood in currency markets and weighed on havens such as the yen and Swiss franc, while the dollar index held steady ahead of this week’s Federal Reserve Decision; the Bloomberg Dollar Spot Index was little changed after last week’s 0.3% gain. The greenback weakened against all but three of its G-10 peers with the pound seeing the biggest advance on the Brexit-delay news, followed by the euro. The pound steadied versus the euro after the European Union agreed to a Brexit deadline extension, easing the risk of the UK leaving the bloc without a deal on Oct. 31.

The October US jobs report on Friday, sees a +90k consensus following the previous month’s +136k increase. If realized, that would be the weakest pace of monthly jobs growth since May but the recent GM strike complicates the analysis with a 46k hit expected from this. There is also a government census employment issue so private payrolls will be perhaps more closely watched (+83k expected). Later that day, we’ll also get the ISM manufacturing report, which fell to 47.8 last month, the weakest since June 2009 and below all analysts’ estimates. So Friday’s going to be an important day as markets assess the outlook for the US moving into November with the added interest of the final ISMs from around the globe.

In rates, US 10Y Treasury yields rose 4bps to 1.835%, while European bonds edged lower, and gilts were steady. Italian bonds dropped after strong performance for opposition League party in regional elections, while S&P held off on boosting nation’s rating outlook. Rest of region’s sovereign bonds whipsaw, with gilts steady after EU agrees to a Brexit extension. Core European bonds were generally under pressure, with Treasury futures initially leading losses, before Brexit extension added to weakness. Citing traders in London, Bloomberg reported that there is focus on China’s plan to sell U.S. dollar and euro-denominated bonds in November, given potential hedging which may take place.

Elsewhere, Argentine bonds tumbled after opposition candidate Alberto Fernandez secured victory in Sunday’s presidential election, with business-friendly incumbent Mauricio Macri conceding. WTI crude oil slipped after the biggest weekly advance in more than a month. Bitcoin jumped as much as 16% from Friday.

In geopolitics, US President Trump said Islamic State leader Al-Baghdadi died in a US raid in Syria, while it was also reported that the French Interior Minister instructed police to be on high alert to prevent potential revenge attacks following the death of the IS leader.

Market Snapshot

• S&P 500 futures up 0.2% to 3,028.50
• STOXX Europe 600 down 0.1% to 397.61
• MXAP up 0.3% to 161.65
• MXAPJ up 0.5% to 519.72
• Nikkei up 0.3% to 22,867.27
• Topix unchanged at 1,648.43
• Hang Seng Index up 0.8% to 26,891.26
• Shanghai Composite up 0.9% to 2,980.05
• Sensex up 0.5% to 39,250.20
• Australia S&P/ASX 200 up 0.02% to 6,740.71
• Kospi up 0.3% to 2,093.60
• Brent Futures down 0.3% to $61.75/bbl
• Gold spot up 0.1% to $1,506.10
• U.S. Dollar Index down 0.07% to 97.77
• German 10Y yield rose 1.2 bps to -0.35%
• Euro up 0.1% to $1.1092
• Brent Futures down 0.3% to $61.81/bbl
• Italian 10Y yield rose 4.5 bps to 0.611%
• Spanish 10Y yield rose 0.5 bps to 0.279%

Top Overnight News from Bloomberg

• The EU agreed to grant the U.K. a three-month Brexit delay to Jan. 31, removing the risk of a damaging no-deal split on Thursday. British PM Boris Johnson is pushing a vote in the House of Commons Monday to trigger an early election
• HSBC Holdings Plc is embarking on its biggest overhaul in years after profit missed estimates, warning that it will take significant write-downs in the coming year as it pares back under-performing areas
• Argentine bonds tumbled in early trading Monday after opposition candidate Alberto Fernandez swept the nation’s presidential election, ousting pro-market incumbent Mauricio Macri and tilting the nation back toward left-wing populism at a time of economic crisis; The nation’s central bank tightened currency controls — it’s chief Guido Sandleris will give a press conference Monday morning at 8:30 a.m. in Buenos Aires
• President Donald Trump scored one of the biggest successes of his presidency with the killing of an Islamic State leader, yet the battlefield victory isn’t likely to blunt the momentum of Democrats moving closer to impeaching him

Asian equity markets began the week with a positive tone after trade hopes were spurred by the recent top-level call between US and China negotiators in which the sides were said to be close to finalising some sections of the phase one deal. This lifted all US majors on Friday and saw the S&P 500 approach to within less than half a point of its record high, fuelled by outperformance in the trade sensitive sectors, although the gains in the Asia-Pac region were mostly moderate amid calm before this week’s storm of risk events. ASX 200 (Unch.) and Nikkei 225 (+0.3%) marginally benefitted from the trade optimism and as commodity-related stocks kept the Australian index afloat, while the advances in Japan were limited by the recent mixed performance in its currency. Elsewhere, Chinese markets outperform amid encouraging earnings from some of China’s Big 4 banks including ICBC and with Hang Seng (+0.8%) also underpinned by the inclusion of dual class listed stocks in the Stock Connect and amid anticipation of another 25bps rate cut at this week’s FOMC which would force the HKMA to move in lock-step with the Fed. However, the index later retraced some of the gains after weaker results from HSBC and with the Shanghai Comp. (+0.8%) somewhat restricted after a PBoC liquidity drain and the steepest contraction to Chinese Industrial Profits since 2015. Finally, 10yr JGBs are lower on spillover selling from recent declines in T-notes and as stocks mildly benefitted from the trade optimism, but with downside stemmed amid BoJ presence in the market for JPY 1.1tln of JGBs in 1yr-10yr maturities.

Top Asian News

• Xi’s Blockchain Push Triggers Frenzy in China Technology Stocks
• China MOF Plans to Sell U.S. Dollar, Euro Bonds in November
• China Bond Rout Worsens as Yield Jumps Most in Six Months
• Emerging Markets Podcast: Argentina Vote, S. Africa Budget

A choppy start to the week for European equities [Eurostoxx 50 Unch] as the region failed to sustain the positivity seen during APAC hours in which Mainland China and Hong Kong outperformed on trade optimism. Major bourses are tentative as is usually the case ahead of a risk-packed week which sees the latest FOMC/BoJ policy meetings, German Prelim CPI, EZ flash CPI, US ISM Manufacturing, US labour market report and a slew large-cap earnings. Sectors are mixed with pressure seen in Financials as heavyweight HSBC (-4.1%) slumped post-earnings after missing on adj. pretax and revenue expectations, whilst stating that it no longer intends to achieve its ROTE target and notes of “significant” restructuring charges amid a deterioration in the global outlook.  On the flip side, consumer discretionary outperform as jewellery makers benefit from LVMH’s (+0.3%) unsolicited bid to acquire Tiffany (+20% pre-market), which is poised to be rejected according to sources cited by the FT. Thus, the likes of Pandora (+1.3%), Richemont (+2.1%) and Swatch (+1.4%) are lifted in tandem. Turning to individual stocks, Bankia (-3.0%) shares fell after the Co. reported this morning. In terms of bank analysis, JPM favour Euro-area stocks and note that international shares are set to outperform those in the US. JPM also maintains a bullish outlook on global equities but also expect rotation into cyclicals and value shares benefitting non-US equities more. Elsewhere, the analysts are overweight on Japan, neutral regarding the US, underweight on the UK and neutral for EM.

Top European News

• U.K.’s Big Four Increase Market Share, Accountancy Watchdog Says
• Italian Bonds Decline After League Victory, S&P Takes No Action

In FX, the Dollar is holding the bulk of last week’s late recovery gains, with the DXY firmly above 97.500 within a 97.731-896 range and eyeing a potentially pivotal week including the FOMC policy meeting, coupon settlement day, month end, NFP and the manufacturing ISM. In the interim, preliminary trade data will overshadow wholesale inventories today after reports that the US and China are close to finalising elements of the Phase 1 pact, while Tuesday’s highlights are likely to be consumer confidence and pending home sales.

• AUD/EUR/NZD/GBP – Although the Greenback remains underpinned overall, as noted above, the Aussie, Euro, Kiwi and Pound are all marginally firmer, with Aud/Usd maintaining 0.6800+ status, Eur/Usd inching towards 1.1100, Nzd/Usd pivoting 0.6350 and Cable hovering above 1.2800 between 1.2860-10 broad parameters. Note, Asia-Pacific trade was hampered somewhat by the NZ market holiday (Labour Day), but early EU activity boosted by some demand for Sterling that saw the Eur/Gbp cross test 10 DMA support at 0.8629 amidst expectations that the EU will respond favourably to the latest UK Brextension request, which has subsequently been confirmed by EC President Tusk and leaves the Pound prone to another showdown in Westminster as PM Johnson continues to push for a GE. Meanwhile, a decent expiry option may cap Eur/Usd given 1.3 bn rolling off at the 1.1100 strike.
• JPY/CAD/CHF – All fractionally softer vs the Buck, as the Yen straddles 108.70 ahead of the BoJ and remains wary about possible policy action or more dovish guidance, while the Loonie is looking at the BoC for more independent direction having strengthened recently to breach 1.3100 and test the next line of resistance at 1.3050 that also coincides with a 1.3051 Fib retracement. Elsewhere, no looming SNB meeting to consider for the Franc, but latest weekly Swiss sight deposits suggest the Bank has been back in action as Usd/Chf hovers around 0.9950 and Eur/Chf climbs towards 1.1050.
• EM – Yet more Rand and Lira outperformance, with the former encouraged by Eskom declaring no further load-shedding for Monday or this week at this stage, while the latter continues to welcome a thawing in Turkish-US/international relations over Syria. However, the Argentinian Peso is lamenting the weekend election result revealing a win for Fernandez that has prompted the authorities to implement capital controls.
• Argentina President Macri conceded defeat following the election and congratulated President-elect Fernandez, while the Argentina central bank later tightened restrictions on USD purchases with limits for individuals lowered to USD 200 per month from USD 10000 per month and the central bank president will hold a press conference 0830 local time (11:30 GMT) on Monday.

In commodities, WTI and Brent are softer this morning but not by any significant magnitude thus far on a lack of fundamental newsflow as markets begin another packed week in a tentative fashion. Crude specific newsflow include comments from the Russian Energy Ministry; who noted that it is too early to discuss deeper OPEC+ cuts, which dampens the source reports seen last week. Further, the Ministry noted that OPEC+ will consider the US’ oil output growth slowdown in their December decision, for reference OPEC+ are expected to revise policy when they convene on December 6th. Last Friday’s Baker Hughes print for oil rigs was the lowest reading since April 2017 and therefore the oil rig count has dropped by 189 this year. Elsewhere, UBS note that recent indicators of weakness including this year’s rig decreases and a employment slowdown in Texas indicate that prices above USD 56/bbl for WTI are necessary to justify the maintenance or expansion of current oil production levels. In terms of metals – spot gold is flat and remains within relatively narrow USD 5/oz ranges above the USD 1500/oz mark heading into key risk events this week. Elsewhere, copper prices are on the backfoot amid further deterioration in China’s industrial profits which was the steepest fall in four years.

US Event Calendar

• 8:30am: Chicago Fed Nat Activity Index, est. 0.1, prior 0.1
• 8:30am: Advance Goods Trade Balance, est. $73.5b deficit, prior $72.8b deficit
• 8:30am: Wholesale Inventories MoM, est. 0.25%, prior 0.2%; Retail Inventories MoM, est. 0.1%, prior 0.0%, revised -0.1%
• 10:30am: Dallas Fed Manf. Activity, est. 1, prior 1.5

DB’s Jim Reid concludes the overnight wrap

A bumper week lies ahead so its just as well that we’ve had an extra hour in bed this weekend here in Europe after the clocks went back. I spent yesterday pumpkin picking in the muddiest field I think I’ve ever been in. The twins got stuck a few times and had to be plucked out of the mud. I think I’ve got all the dirt off me now but you’ll have a chance to see for yourself as I have a long standing appointment to appear on Bloomberg TV at 9am London time this morning. I’ve been told over the weekend that they’ve moved it to an outside broadcast in front of the UK Houses of Parliament ahead of yet another big Brexit vote today (more later). It’s pretty cold this morning so I hope they let me wear my bright blue bobble hat.

Before we review the busy week ahead in more detail, let’s first lay out the main highlights. We have the aforementioned U.K. Parliamentary vote today on whether MPs want or can tolerate/risk an election, the FOMC meets on Wednesday where the Fed are expected to cut 25bps, a first look at Q3 GDP in the US (Wednesday) and the Euro-area (Thursday) are due and China (Thursday) and the RoW PMIs and US ISM (Friday) will be closely watched before US payrolls ends the week with a bang on Friday. Earnings season will also continue apace as a number of major global companies report on both sides of the pond.

Now for more detail on a few of these. Ahead of this Wednesday’s Fed meeting, a 25bps rate cut is just about fully priced now. Given the lack of pushback against that pricing by the recent parade of Fedspeak, it’s a relative safe prediction that they deliver another cut to take the fed funds target range to 1.50-1.75%. Looking forward though, the focus will be around the tone in the policy statement and in Chair Powell’s press conference. The statement could have some dovish-leaning edits, consistent with the deterioration in data since the September policy meeting. As for Powell, he’ll likely want to maintain his optionality moving forward, committing to neither another cut nor a halt to the cutting cycle. Our economists think that he will emphasise that another cut would require further deterioration in the data, which they expect will materialise over the next few months, as opposed to a flatlining in conditions. Their full note is available here .

The Bank of Canada is also meeting that same day, though no change in policy is expected by markets. The Bank of Japan will be meeting the following day and DB’s Kentaro Koyama writes in his preview of the meeting (link here ), that we believe the BoJ “will simply extend the period of its forward guidance and forego genuine easing action such as a deepening of its negative interest rate policy”. Staying with central banks, this Friday sees former IMF managing director Christine Lagarde succeed Mario Draghi as ECB President, with his 8-year term coming to a close the day before.

As for Brexit, this afternoon we are set to see a vote in Parliament on the Government’s motion (under the FTPA) for a general election on December 12th with added time until a potential dissolution of Parliament on November 6th to debate the Government’s Withdrawal Agreement Bill (WAB). Opposition parties have so far indicated they won’t vote for this and over the weekend the Lib Dems and the SNP have proposed a counter proposal to hold an election three days earlier as long as the Brexit extension to January 31st is legally cast iron. This would be the case if the EU announce that they will agree to the Benn Act request which a report in the FT last night effectively suggests they will (including French support now). The opposition Labour Party’s position on an election continues to confuse and they are now the only main party that doesn’t have an election act or bill to put in front of Parliament or indeed support one. We’ll see if that changes today. The Government’s plan requires a 2/3rds majority (very very unlikely if reports are to be believed) but the Lib Dem/SNP plan only a simple majority but is potentially subject to amendments so could be seen as a trap to the Government. According to No. 10 sources, if their plan fails the Government would “look at all options to get Brexit done, including ideas similar to that proposed by other opposition parties”. So they might still find a way to support it.

Elsewhere this week, the first look at Q3 GDP in the US sees expectations of 1.6%, which would be the slowest pace so far this year. Indeed, since President Trump’s election we’ve only seen one quarter of growth at a rate below 2%, and analysts will be looking out for what this might mean for the economy heading into next year’s election. Turning to Europe Q3 GDP, consensus expects just +0.1% growth, which would be the weakest quarterly growth since Q1 2013. The expectation is for the year-on-year pace to fall to +1.1%, which would also be the weakest since Q4 2013. So an interesting welcome to Lagarde on Friday.

The October US jobs report on Friday, sees a +90k consensus following the previous month’s +136k increase. If realised, that would be the weakest pace of monthly jobs growth since May but the recent GM strike complicates the analysis with a 46k hit expected from this. There is also a government census employment issue so private payrolls will be perhaps more closely watched (+83k expected). Later that day, we’ll also get the ISM manufacturing report, which fell to 47.8 last month, the weakest since June 2009 and below all analysts’ estimates. So Friday’s going to be an important day as markets assess the outlook for the US moving into November with the added interest of the final ISMs from around the globe.

It’s another big week for earnings this week, with 164 S&P 500 companies scheduled to report. See Binky Chadha’s latest piece on the season so far here .In terms of releases to watch out for, today we have Alphabet, AT&T and HSBC (just out and missing expectations). On Tuesday, there’s Mastercard, Nomura, BP and General Motors. Wednesday sees releases from Apple, Bayer, Facebook, Total, Sony, Volkswagen, Airbus, Santander, General Electric and Credit Suisse. On Thursday there’s Royal Dutch Shell and BNP Paribas, while on Friday there’s Exxon Mobil, Chevron, AIG and Alibaba.

Overnight, Asian markets are trading mostly higher with the Nikkei (+0.35%), Hang Seng (+0.96%), Shanghai Comp (+0.60%) and Kospi (+0.34%) all up. Information technology stocks are leading gains with China’s Shenzhen Comp up as much as +1.29% after investors bought blockchain-related stocks post Chinese President Xi Jinping saying that China will increase investment in blockchain technology after chairing a study session last week on developing the industry. Blockchain technology stocks like Zhejiang Huamei Holding Co Ltd. and Julong Co Ltd. are some of many stocks surging by China’s daily 10% onshore limit. Meanwhile the statement from China that parts of the text for the first phase of a trade deal with the US are “basically completed” following consensus on subjects including standards used by agricultural regulators, is also aiding sentiment. Elsewhere, futures on the S&P 500 are up +0.15% at 3024.50.

In other news, Chancellor Angela Merkel’s Christian Democrats’ support has fallen 11 percentage points from 2014 to 22.5% in an election for state assembly in the eastern state of Thuringia, according to an exit poll by ARD TV on Sunday while the populist right-wing AfD more than doubled its standing and was marginally ahead of the CDU at 24%, the poll showed. Support for the Social Democrats, Merkel’s junior coalition partner, also fell away, slipping roughly four percentage points to 8.5%. The poll if comes true will leave the incumbent Left party with insufficient support to govern Thuringia with its current alliance that also include the Greens. Elsewhere, opposition candidate Alberto Fernandez won Argentina’s presidential election on Sunday by ousting pro-market incumbent Mauricio Macri. Fernandez won 48% of the vote with 95% of ballots counted, enough to avoid a runoff next month while Macri secured 40%. Fernandez will take office on December 10. Following the win of Fernandez, the central bank of Argentina said that it will restrict dollar purchases by savers to buying just $200 per month compared with the $10,000 per month previously. Central bank chief Guido Sandleris will give a press conference Monday morning at 8:30 am in Buenos Aires.

Briefly reviewing last week now, equities advanced with the S&P 500 gaining +1.21% (+0.40% Friday) on positive earnings and continued trade momentum. It’s now just 0.11% away from its all-time high. Tech stocks and financials led the rally, with the NASDAQ up +1.90% (+0.70% Friday) and an index of bank stocks advancing +3.93% (+1.00% Friday). As for the earnings results so far, around 40% of S&P 500 companies have reported their third quarter results, and overall they have exceed expectations by +4.39% on the profit front, which is around 0.9pp better than the historical average. On the trade front, Treasury Secretary Mnuchin, USTR Lighthizer, and Chinese Vice Premier Liu reportedly spoke on the phone on Friday, and they are apparently closing in on a deal.

The tone was similarly positive in Europe, with the STOXX 600 and DAX rallying +1.57% and +2.07% (+0.16% and +0.17% Friday). The dollar gained +0.56% (+0.22% Friday), as the pound and euro weakened -1.23% and -0.78% (-0.21% and -0.22% Friday) respectively, as Brexit talks stalled. In fixed income, 10-year treasury yields rose +4.4bps (+3.2bps Friday), while the moves in Europe were somewhat smaller. Bund yields rose +2.0bps (+4.2 bps Friday) and gilts rallied -2.7bps (+5.7bps Friday). In credit, cash high yield spreads tightened by -5.5bps in the US (-5bps Friday) but widened +1bps in Europe (+1.5bps Friday).

Little over one month after US newspapers published reports about a new audio message and image of ISIS leader Abu Bakr al-Baghdadi, the semi-mythical terrorist kingpin, who has reportedly been killed several times in the past, allegedly detonated a suicide vest during a raid by American special forces. The explosion killed him, and several of his children, according to the official account of the confrontation, and a DNA test was promptly conducted on location to ascertain it was indeed Baghdadi who was killed, the perplexing narrative goes.

However it happened, the killing of Baghdadi was a major PR win for Trump (who has been touting the fact that ISIS has been “99%” eliminated for months).  But according to Bloomberg, it almost didn’t happen. Baghdadi had previously evaded several American attacks in the weeks prior to his death, and there were some doubts about whether this critical tip was still good.

The CIA first started receiving “surprising” information about Baghdadi’s general location over the summer. According to the tips, he was hiding in a village deep inside a part of northwestern Syria controlled by rival fundamentalist groups. Per the NYT, Syrian and Iraqi Kurds were tremendously helpful in providing this information. But the final tip that helped inspire the raid came after the arrest and interrogation of one of Baghdadi’s wives and a courier, the NYT reported.

According to a Syrian engineer who spoke with villagers living near the raid site, Baghdadi had sought shelter in the home of Abu Mohammed Salama, a commander of another extremist group, Hurras al-Din. Salama’s fate is not yet clear.

Courtesy of the LA Times

As US forces prepared for the raid, Trump arrived at the White House by motorcade at about 4 pm on Saturday and hurried into the Situation Room, accompanied by VP Mike Pence, National Security Adviser Robert O’Brien, Defense Secretary Mark Esper and other military leaders. They watched the entire two-hour operation as helicopters landed and US special forces began their assault on the compound, eventually chasing Baghdadi down a dead-end tunnel where he “died like a dog”, President Trump said.

Baghdadi’s compound after the raid…

Trump first approved the mission Saturday morning, after being presented with “actionable intelligence.” US forces traveled through some Russian held territory during the raid, and alerted Moscow ahead of time.

Once they arrived, US forces “blew holes into the side of the building” to avoid traps and began their assault. They rescued 11 children and killed an unknown number of adults during the mission.

The planning for the raid, according to the New York Times, began this past summer, when the CIA received a surprising tip about al-Baghdadi’s whereabouts that placed him in a village deep inside a part of northwestern Syria controlled by a rival group. The critical “tip” came from one of al-Baghdadi’s wives and a courier, who were captured by US forces and questioned by the CIA.

surprising information about Mr. al-Baghdadi’s general location in a village deep inside a part of northwestern Syria controlled by rival Qaeda groups. The information came after the arrest and interrogation of one of Mr. al-Baghdadi’s wives and a courier, two American officials said.

Of course, just like with the raid on bin Laden, there’s something about the official story that just doesn’t seem…100%. The NYT insists that the successful raid came “in spite of” not “because of” Trump’s decision to pull US forces out of Syria. And many are already speculating that Baghdadi was only “hiding” with Turkey’s blessing, and that it now appears he was used as a bargaining chip in the negotiations between Trump and Erdogan. The Russians, meanwhile, are insisting that Baghdadi isn’t really dead. In other words, the decision to pull out of Syria was the “quid”, and information about Baghdadi’s whereabouts was the “pro quo.”