Month: September 2014

Following yesterday’s stagnant PPI, today’s CPI is a shocker. Core CPI rose a mere 0.01% MoM – its weakest gain since Jan 2010. The ‘weakness’ was driven by energy (-2.6%), airline fares (-4.7%), clothing (-0.2%), and used car prices (-0.3%) tumbling. The headline CPI dropped 0.2% MoM (against a 0.0% expectation) – its biggest drop since March 2013. The 1.7% YoY gain (missing expectations) is the weakest rise since March 2014.

 

Core CPI slowest since 2010…

 

Headline CPI dropped MoM..

via Zero Hedge http://ift.tt/Xh9yZI Tyler Durden

Yesterday’s exuberant equity market reaction has been largely defined by the mainstream media as driven by WSJ Hilsenrath’s ‘confirmation’ that Yellen will keep the uber-dovish phrase “considerable time” in the FOMC statement today. So, we wonder, why did the Fed-whisperer, after markets had closed last night, issue a quasi-retraction of his prediction explaining that instead of some prohetical “I just know” statement, it was a “best guess,” as he concluded, “will the Fed take these steps? Only the people in the room know that. The rest of us will see Wednesday afternoon.” It appears the sell-side disagrees with him on the language…

 

Via WSJ,

In a webcast Tuesday, I explained why I thought the Federal Reserve would stick with, but qualify, an important phrase in its policy statement Wednesday which assures near-zero interest rates for a “considerable time.” This was simply my best analysis of where I think the Fed is going based on what we have been reporting and what officials have said in the past.

 

…

 

Here’s my analysis: Janet Yellen is a methodical individual and the Fed, in normal times, is a slow-moving institution. It takes time for debates to play out. Ms. Yellen is seeking consensus, as we reported earlier this week. The considerable time debate doesn’t feel ripened or fully aired. When Ms. Yellen has used the phrase in recent months she has qualified it, but not suggested changing it. Meantime the Fed has other business on its plate. The exit plan has been in the works for months, as has the plan to end bond buying. Changing the “considerable time” guidance now, while also announcing an exit plan, could be viewed by market participants as a surprising move toward raising rates.

 

Fed officials haven’t forgotten last year’s “taper tantrum,” when long-term interest rates shot up as they commenced discussions about winding down the bond program.

 

We reported earlier this week that Ms. Yellen, as Fed chairwoman, hasn’t behaved as the easy-money policy “dove” that many market participants expected. That doesn’t mean she’s suddenly a hawk. It just means she’s not a dove.

 

Ms. Yellen’s most logical next step, to my mind, would be to stick for the time being to what she’s been saying, which is that rates will stay low for a “considerable time” with the strong qualification that this could change if the job market keeps improving quickly. Staying on message this month could entail signaling an end to the bond program and a more formal exit strategy. The Fed would then have time to air out a change in the “considerable time” formulation for a later date, giving Ms. Yellen time to get all of her colleagues on board.

*  *  *

He concludes: “Will the Fed take these steps? Only the people in the room know that. The rest of us will see Wednesday afternoon.”

*  *  *

Indeed Jon.

*  *  *

But here is what the sell-side thinks…

Fed expected to adopt more hawkish stance at Sept. 16-17
meeting, debate whether to drop “considerable time” language from
statement, based on published research.

Barclays

• Fed expected to take “modestly hawkish” tone at meeting, Barclays strategists led by Rajiv Setia wrote in report
• “Dovish dots” seen moving higher, press conference will have “subtle shifts” in tone
• Fed likely to retain “considerable time” language; if dropped,
  “front end should get hurt” and “10/30 curve should still flatten”

BofAML

• First rate increase now seen as occurring next June vs. Sept. 2015, economist Ethan Harris wrote in note
• Growth has been stronger than expected, while inflation is in line with Fed’s forecast
• Fed could drop reference to “considerable time”

Jefferies

• Fed statement to be “somewhat more hawkish” than in past, economists Ward McCarthy, Thomas Simons wrote in note
• FOMC meeting will fail to clarify ambiguity over timing of rate lift-off

JPM

• First rate increase is now expected next June vs 3Q 2015, economist Michael Feroli wrote in note
• Sees 25bps increase in Fed funds corridor to 25bps-50bps; subsequent
  moves in Sept. and Dec., bringing corridor to 75bps-100bps by end of
  2015

Market Securities

• Fed to modify “considerable time,” cut QE by another $10b, strategist Christophe Barraud wrote in note

Morgan Stanley

• Fed’s 2017 dots may prompt curve shifts, strategists led by Matthew Hornbach wrote in note
• “Stage is set for some disappointment” if Fed doesn’t change “considerable time” language

Renaissance Macro

• Fed’s more hawkish outcome may be priced into markets now, economist Neil Dutta wrote in note
• “We cannot be entirely sure” how hawkish FOMC meeting will be

SGH Advisors

• FOMC may change forward guidance language, CEO Sassan Ghahramani wrote
• Growing number of FOMC members appear to be pressing for change

Standard Chartered

• FOMC meeting to have “moderately hawkish tone,” economist Thomas Costerg wrote in note
• Fed members will note downward trend in unemployment rate, healthy payroll growth
• “Considerable time” expected to be removed

TD

• Fed to change “considerable time wording, take more hawkish tone,
  Eric Green, head of U.S. rates and economic research, wrote in note
• Fed policy is set to become more flexible, retain message that there will be slow path to normalization

via Zero Hedge http://ift.tt/1te7cYt Tyler Durden

Yesterday’s exuberant equity market reaction has been largely defined by the mainstream media as driven by WSJ Hilsenrath’s ‘confirmation’ that Yellen will keep the uber-dovish phrase “considerable time” in the FOMC statement today. So, we wonder, why did the Fed-whisperer, after markets had closed last night, issue a quasi-retraction of his prediction explaining that instead of some prohetical “I just know” statement, it was a “best guess,” as he concluded, “will the Fed take these steps? Only the people in the room know that. The rest of us will see Wednesday afternoon.” It appears the sell-side disagrees with him on the language…

 

Via WSJ,

In a webcast Tuesday, I explained why I thought the Federal Reserve would stick with, but qualify, an important phrase in its policy statement Wednesday which assures near-zero interest rates for a “considerable time.” This was simply my best analysis of where I think the Fed is going based on what we have been reporting and what officials have said in the past.

 

…

 

Here’s my analysis: Janet Yellen is a methodical individual and the Fed, in normal times, is a slow-moving institution. It takes time for debates to play out. Ms. Yellen is seeking consensus, as we reported earlier this week. The considerable time debate doesn’t feel ripened or fully aired. When Ms. Yellen has used the phrase in recent months she has qualified it, but not suggested changing it. Meantime the Fed has other business on its plate. The exit plan has been in the works for months, as has the plan to end bond buying. Changing the “considerable time” guidance now, while also announcing an exit plan, could be viewed by market participants as a surprising move toward raising rates.

 

Fed officials haven’t forgotten last year’s “taper tantrum,” when long-term interest rates shot up as they commenced discussions about winding down the bond program.

 

We reported earlier this week that Ms. Yellen, as Fed chairwoman, hasn’t behaved as the easy-money policy “dove” that many market participants expected. That doesn’t mean she’s suddenly a hawk. It just means she’s not a dove.

 

Ms. Yellen’s most logical next step, to my mind, would be to stick for the time being to what she’s been saying, which is that rates will stay low for a “considerable time” with the strong qualification that this could change if the job market keeps improving quickly. Staying on message this month could entail signaling an end to the bond program and a more formal exit strategy. The Fed would then have time to air out a change in the “considerable time” formulation for a later date, giving Ms. Yellen time to get all of her colleagues on board.

*  *  *

He concludes: “Will the Fed take these steps? Only the people in the room know that. The rest of us will see Wednesday afternoon.”

*  *  *

Indeed Jon.

*  *  *

But here is what the sell-side thinks…

Fed expected to adopt more hawkish stance at Sept. 16-17
meeting, debate whether to drop “considerable time” language from
statement, based on published research.

Barclays

• Fed expected to take “modestly hawkish” tone at meeting, Barclays strategists led by Rajiv Setia wrote in report
• “Dovish dots” seen moving higher, press conference will have “subtle shifts” in tone
• Fed likely to retain “considerable time” language; if dropped,
  “front end should get hurt” and “10/30 curve should still flatten”

BofAML

• First rate increase now seen as occurring next June vs. Sept. 2015, economist Ethan Harris wrote in note
• Growth has been stronger than expected, while inflation is in line with Fed’s forecast
• Fed could drop reference to “considerable time”

Jefferies

• Fed statement to be “somewhat more hawkish” than in past, economists Ward McCarthy, Thomas Simons wrote in note
• FOMC meeting will fail to clarify ambiguity over timing of rate lift-off

JPM

• First rate increase is now expected next June vs 3Q 2015, economist Michael Feroli wrote in note
• Sees 25bps increase in Fed funds corridor to 25bps-50bps; subsequent
  moves in Sept. and Dec., bringing corridor to 75bps-100bps by end of
  2015

Market Securities

• Fed to modify “considerable time,” cut QE by another $10b, strategist Christophe Barraud wrote in note

Morgan Stanley

• Fed’s 2017 dots may prompt curve shifts, strategists led by Matthew Hornbach wrote in note
• “Stage is set for some disappointment” if Fed doesn’t change “considerable time” language

Renaissance Macro

• Fed’s more hawkish outcome may be priced into markets now, economist Neil Dutta wrote in note
• “We cannot be entirely sure” how hawkish FOMC meeting will be

SGH Advisors

• FOMC may change forward guidance language, CEO Sassan Ghahramani wrote
• Growing number of FOMC members appear to be pressing for change

Standard Chartered

• FOMC meeting to have “moderately hawkish tone,” economist Thomas Costerg wrote in note
• Fed members will note downward trend in unemployment rate, healthy payroll growth
• “Considerable time” expected to be removed

TD

• Fed to change “considerable time wording, take more hawkish tone,
  Eric Green, head of U.S. rates and economic research, wrote in note
• Fed policy is set to become more flexible, retain message that there will be slow path to normalization

via Zero Hedge http://ift.tt/1te7cYt Tyler Durden

Moments ago FedEx reported first quarter earnings ended August 31, which blew expectations out of the water, because instead of the consensus EPS print of $1.96, EPS reported a whopping $2.10 for Q1, a massive 14 cent beat, and up 37% from last year’s $1.53 reported EPS.

Wow: it must be a great operating environment, with logistics and global trade humming for FDX to beat so impressively, right? Wrong.

Here’s how it happened, from the company’s own press release:

During the quarter, the company acquired 5.3 million shares of FedEx  common stock. As of August 31, 2014, no shares remained under the existing share repurchase authorizations. Share repurchases benefited earnings in the quarter by $0.15 per diluted share.

Oh well, time for another stock repurchase authorization: this time bigger, better and even more uncut. Charted:

 

In other words, had it not been for the stock buyback, FedEx would have missed EPS by 1 cent despite also beating revenues handily, with Q1 sales $11.7 billion on expectations of $11.47 billion.

Which brings us to why this troubling disconnect took place: rising costs… and FedEx’s prompt response:

As previously announced, FedEx Express, FedEx Ground and FedEx Freight  will increase shipping rates effective January 5, 2015.

 

FedEx Express will increase shipping rates by an average of 4.9% for U.S.  domestic, U.S. export and U.S. import services. 

 

FedEx Ground and FedEx Home Delivery will increase shipping rates by an  average of 4.9%. In addition, as announced in May, FedEx Ground will also  begin applying dimensional weight pricing to all shipments. 

 

FedEx Freight will increase shipping rates by an average of 4.9%. This rate  change applies to eligible FedEx Freight shipments within the U.S. (including  Alaska, Hawaii, Puerto Rico and the U.S. Virgin Islands), between the  contiguous U.S. and Canada, within Canada, between the contiguous U.S.  and Mexico, and within Mexico

Apparently they didn’t get the “deflation” memo.

Finally, how was CapEx in the quarter? Answer: $720 million, which is almost as much as the $791 million in stock repurchases in the quarter.

via Zero Hedge http://ift.tt/1u7fLlV Tyler Durden

• -0.07%: Germany Secures Record Low Funding Cost at Bond Auction (WSJ)
• Pentagon Sees Possible Role for U.S. Ground Forces Against Islamic State Militants (WSJ)
• China Joins ECB in Adding Stimulus as Fed Scales Back (BBG)
• Stealthy or Normal? Analysts Diverge on PBOC’s Action (BBG)
• Sony Forecasts Massive $2B Loss as Smartphones Lag (AP)
• Islamic State campaign tests Obama’s commitment to Mideast allies (Reuters)
• Brent Crude Rebounds as Libya’s Sharara Oilfield Shut (BBG)
• Market calm over Scottish vote at odds with disaster warnings (Reuters)
• Citigroup Embraces Derivatives as Deals Soar After Crisis (BBG)
• Russia’s MTS Sinks on Billionaire Owner’s Sudden Arrest  (BBG)
• European Shares Advance on Stimulus as Dollar Gains (BBG)
• New data shows Americans’ incomes still stagnant after recession (Reuters)
• GM Slashes Jobs and Output in Russia (WSJ)
• Goldman Trader Swaps Financial Services for Speedy Food Delivery (BBG)
• Credit Suisse Loans Draw Fed Scrutiny (WSJ)

 

Overnight Media Digest

WSJ

* America’s top military officer raised the prospect that limited U.S. ground forces would be needed to battle Islamic State militants if fighting in Iraq grows more difficult. That prospect could test President Barack Obama’s strict ban on deploying ground troops. (http://on.wsj.com/XzN1rx)

* Credit Suisse Group AG is under fire from U.S. regulators over concerns the bank isn’t heeding warnings to stop making loans regulators see as risky, according to a person familiar with the matter. (http://on.wsj.com/1qKXnBH)

* China’s central bank is injecting 500 billion yuan ($81.40 billion) into the country’s five major state-owned banks as it moves to counter slower-than-expected growth in the world’s No. 2 economy, according to a senior Chinese banking executive. (http://on.wsj.com/YQXUGM)

* National Aeronautics and Space Administration (NASA) has awarded Boeing Co a contract worth as much as $4.2 billion and rival Space Exploration Technologies Corp a separate pact valued at up to $2.6 billion to develop, test and fly space taxis to carry U.S. astronauts into orbit. (http://on.wsj.com/1qKXptm)

* General Motors Co is slashing production in Russia and appointing new management to oversee operations there in the latest sign that weakening sales in the country threaten GM’s European turnaround. (http://on.wsj.com/1u5sBRF)

* Airbus Group NV on Tuesday said it would sell defense assets as the company increasingly focuses on its commercial-airplane business. Airbus will get out of the secure-communications business and drop other lines including its holding in the Atlas Elektronik naval-technology joint venture with ThyssenKrupp AG, the company said in a statement. (http://on.wsj.com/YR0EE0)

 

FT

Airbus Group said on Tuesday it would sell its non-core businesses with revenues of more than 2 billion euros ($2.59 billion) to focus on its defence and space division on military aircraft, missiles and satellites.

Mobile operators EE and Vodafone Group Plc which withdrew their business with Phones 4u last few weeks are in talks individually with the administrator to acquire parts of Phones 4u’s business, including some of its stores, employees and shares across Britain.

The Frankfurt regional court reversed a countrywide ban on Uber’s ride-sharing service in Germany, saying the taxi drivers had waited too long before seeking an emergency injunction.

Hong Kong business tycoon Stephen Hung has made an order to purchase 30 Rolls-Royce motor vehicles for $20 million to ferry guests at his new Macau gaming complex.

A British public pension fund has criticised hedge fund fees as unjustifiable, adding to industry tensions a day after California-based public pension fund Calpers said it had terminated its hedge fund programme.

NYT

* Federal auto safety regulators came under scrutiny in a Senate hearing on Tuesday for their role in General Motors’ failure to promptly report and recall cars with defective parts. (http://nyti.ms/1DgiCzv)

* A Frankfurt judge granted a reprieve to Uber, the online transportation service, setting aside a temporary injunction issued two weeks ago restricting the company from operating a novel car-sharing service across Germany. (http://nyti.ms/1s5XZDf)

* A federal judge on Tuesday upheld the Obama administration’s effort to rein in the sort of overseas trading that imploded in the financial crisis, upending Wall Street’s plan to roll back the regulatory overhaul. The overseas trading case centers on the Commodity Futures Trading Commission’s so-called cross-border guidance, a July 2013 document that outlined how to apply United States regulations to foreign banks and American banks doing business abroad.(http://nyti.ms/1r7hwBe)

* David Tovar, the vice president for corporate communications at Walmart, was forced to resign after the retailer discovered that he had lied about receiving an art degree from the University of Delaware. (http://nyti.ms/1r7ieyt)

* The Massachusetts Gaming Commission on Tuesday chose Wynn Resorts as the winner of the sole license for a casino in the lucrative Boston area. Wynn’s proposal for a $1.6 billion glassy casino at a chemical landfill in the blue-collar town of Everett beat out a proposal by Mohegan Sun for a project in nearby Revere at the fading Suffolk Downs thoroughbred raceway. (http://nyti.ms/1BKZfg6)

* China became on Wednesday the latest country to embrace economic stimulus measures, as its central bank reportedly agreed to lend 100 billion yuan ($16.28 billion) apiece, to each of the country’s five main banks. (http://nyti.ms/1DhEbjb)

 

Canada

THE GLOBE AND MAIL

** United States Steel Corp could sell all or part of the assets of U.S. Steel Canada Inc as it restructures its Canadian unit, which was granted protection from creditors on Tuesday under the Companies’ Creditors Arrangement Act. (bit.ly/XAWsaf)

** British Columbia’s 40,000 public school teachers will vote on Thursday on a proposed contract that could see most schools reopen on Monday, ending a strike that spanned two school years and shuttered classrooms for five weeks. (bit.ly/1DipUCN)

** Crews are currently working to clear a Canadian Natio
nal train derailment just outside of Slave Lake, Alta. No injuries have been reported. The Transportation Safety Board says four engines and three cars came off the tracks on Tuesday about 10 kilometers east of Slave Lake, near Mitsue. (bit.ly/1oZQfvQ)

NATIONAL POST

** In the final weeks of Toronto’s mayoral race, John Tory has gathered a significant lead over candidates Olivia Chow and Doug Ford, according to a new poll. (bit.ly/1u0qkLg)

** In his first news conference as premier of Alberta, Jim Prentice said he’d reach out to Alberta aboriginals involved in oil production to help him make the case for greater market access to the West Coast. (bit.ly/1uG6Nyr)

** All eyes will be trained on Mount Sinai Hospital on Wednesday, as the city awaits an update on ailing Mayor Rob Ford, diagnosed with a tumour last week and having, according to his brother, “a tough go of it right now”. The mayor has been hospitalized since last Wednesday, when a CT scan discovered a tumour in his lower abdomen. (bit.ly/1BLy19k)

 

Hong Kong

SOUTH CHINA MORNING POST

— The mainland is speeding up liberalisation of its gold market, granting approval to the Hong Kong-based gold bourse to establish a HK$1 billion ($129 million) metals vault in Qianhai while moving forward the launch date of its Shanghai international gold market to tomorrow. (bit.ly/1uS35QH)

— Property speculators are back. The recent sales of new residential projects found up to 90 per cent of the buyers were investors. (bit.ly/XyVJX8)

— Inflated mainland export figures last year due to fake invoicing have led to slower growth rates in trade data this year, economists said, and that might cause Beijing to miss its full-year external trade growth target of 7.5 per cent. (bit.ly/1uGcRpD)

— Hoardings have been put up around the public passageway around HSBC headquarters in Central, a move an Occupy Central organiser says has narrowed the physical space for people to make themselves heard. (bit.ly/1ARyMeF)

THE STANDARD

— MTR Corp and the government have tempered the terms of the second tender for Tai Wai residential project, in an apparent bid to prevent another failure. The government slashed land premium for the plot by 19 percent to HK$10.3 billion, within surveyors’ estimates of between HK$9.5 billion to HK$10.8 billion. (bit.ly/1BKp8g7)

— About 57 percent of local female financial professionals believe gender discrimination exists in the industry, though the figure has fallen from 64 percent a year ago, the latest survey by efinancialcareers shows. (bit.ly/1wBhwfW)

APPLE DAILY

— Soy milk maker Vitasoy International Holdings Ltd said it would invest 500 million yuan ($81.4 million) to build a manufacturing facility in China’s Wuhan as it speed up development outside southern part of China.

 

Britain

The Times

TUI TRAVEL’S MERGER PLAN WILL ‘RELEASE TRAPPED VALUE’ The FTSE 100 travel group behind Thomson and First Choice has finalised the terms of a 6.5 billion euros ($8.42 billion) merger with its German parent company that will deliver 167.5 million euros of cost and synergy benefits. TUI Travel, which is 54 percent-owned by TUI AG, said the all-paper, nil-premium merger would create “the world’s No 1 integrated leisure tourism business” to the benefit of both companies. (http://thetim.es/1qZOqSG)

CONOCOPHILIPS SPARKS RUSH FOR CLAIR OILFIELD WITH SALE The ownership of one of Scotland’s most valuable oilfields is up for grabs after an American oil company put its stake up for sale. ConocoPhillips has appointed banks to find buyers for its 24 percent share in the Clair oilfield west of Shetland, which could fetch between 1.2 billion pounds ($1.95 billion) and 1.8 billion pounds.

The Guardian

THOMAS COOK EXPERIENCES SLOWDOWN IN GERMAN HOLIDAY BOOKINGS Thomas Cook Group Plc has been hit by weakening consumer confidence in Germany, as political uncertainty weighs on its crucial continental Europe business. The travel agent said German holiday bookings had slowed, “reflecting a less optimistic consumer climate due to geopolitical events, as well as a more subdued economic outlook as the EU considers adopting further sanctions against Russia”. (http://bit.ly/1ARwgF3)

The Telegraph

BP CAUGHT USING ‘COLLEGE’ TRICKS TO CHEAT PAGE COUNT A U.S. judge has reprimanded BP Plc for using tactics that would “not be appropriate for a college term paper” after the oil giant tried to sneak six extra pages into a court filing by manipulating line spacings. (http://bit.ly/1qVQD2T) WALK AWAY FROM DEBT AND LOSE POUND WITHIN A YEAR, SCOTS TOLD An independent Scotland would collapse within a year if it kept the pound and walked away from its share of the national debt, according to a respected think tank. The National Institute of Economic and Social Research said reneging on its debt obligations would simultaneously freeze Scotland out of the European Union and international markets, forcing it to return “to a fiscal surplus and therefore unprecedented austerity”, and ultimately its own currency within a year. (http://bit.ly/1t9qUEX)

Sky News

SANTANDER UK TO NAME BOSTOCK AS NEW CHIEF Former finance director of Royal Bank of Scotland Group Plc, Nathan Bostock, is poised to be named as the new chief of Santander UK Plc, Britain’s fifth-biggest lender. Bostock will replace Ana Botin, who was last week elevated to become group executive chairman of Banco Santander following the death of her father, Emilio Botin. (http://bit.ly/1ydWdmd)

The Independent

MODERATING INFLATION CUTS LIKELIHOOD OF BANK RATE RISE Another fall in inflation during August has pushed back the likelihood of the Bank of England raising interest rates, City analysts said on Tuesday. (http://ind.pn/1qVXpWg)

SCOTTISH INDEPENDENCE: BETFAIR PAYS OUT ‘NO’ BETS IN REFERENDUM- EVEN THOUGH VOTE IS DAYS AWAY Betfair Group Plc has started to pay out bets to punters who have staked their money on a “No” result in the Scottish independence referendum – even though the result of the vote is three days away. The online gaming firm said customers who placed bets with its bookmaking business, Betfair Sportsbook, will get their winnings now. (http://ind.pn/1qZN4Y6)

 

 

Fly On The Wall Pre-market Buzz

ECONOMIC REPORTS

Domestic economic reports scheduled for today include:
Consumer Price Index for August at 8:30–consensus flat
Current account balance of Q2 at 8:30–consensus ($114.0B)
NAHB housing market index for September at 10:00–consensus 56
FOMC rate decision and policy statement at 14:00

ANALYST RESEARCH

Upgrades

AB InBev (BUD) upgraded to Hold from Sell at Societe Generale
Bill Barrett (BBG) upgraded to Buy from Neutral at Mizuho
Extra Space Storage (EXR) upgraded to Buy from Hold at Jefferies
Mondelez (MDLZ) upgraded to Buy from Hold at Societe Generale
Radian Group (RDN) upgraded to Buy from Neutral at Compass Point
Skullcandy (SKUL) assumed with a Overweight from Neutral at Piper Jaffray
Under Armour (UA) assumed with an Overweight from Neutral at Piper Jaffray

Downgrades

BHP Billiton (BHP) downgraded to Underperform from Neutral at Exane BNP Paribas
DaVita (DVA) downgraded to Hold from Buy at KeyBanc
Eaton (ETN) downgraded to Hold from Buy at Stifel
Essent Group (ESNT) downgraded to Neutral from Buy at Compass Point
FactSet (FDS) downgraded to Neutral from Overweight at Piper Jaffray
General Mills (GIS) downgraded to Sell from Hold at Societe Generale
Hibbett Sports (HIBB) assumed with a Neutral from Overweight at Piper Jaffray
Kellogg (K) downgraded to Hold from Buy at Societe Generale
L Brands (LB) downgraded to Neutral from Overweight at Piper Jaffray
Mobile TeleSystems (MBT) downgraded to Neutral from Overweight at JPMorgan
Nestle (NSRGY) downgraded to Hold from Buy at Societe Generale

Initiations

3M Company (MMM) initiated with a Hold at Stifel
Ann Inc. (ANN) initiated with a Neutral at Wedbush
Barracuda Networks (CUDA) initiated with a Neutral at DA Davidson
Boston Properties (BXP) initiated with an Outperform at Wells Fargo
C&J Energy (CJES) initiated with a Buy at KeyBanc
CARBO Ceramics (CRR) initiated with a Hold at KeyBanc
Dresser-Rand (DRC) initiated with a Buy at KeyBanc
Emerson (EMR) initiated with a Buy at Stifel
Forum Energy (FET) initiated with a Buy at KeyBanc
Frank’s International (FI) initiated with a Buy at KeyBanc
General Electric (GE) initiated with a Buy at Stifel
Helmerich & Payne (HP) initiated with a Buy at KeyBanc
Ingersoll-Rand (IR) initiated with a Hold at Stifel
Medidata Solutions (MDSO) initiated with an Overweight at JPMorgan
Mellanox (MLNX) initiated with a Neutral at Sterne Agee
Nabors Industries (NBR) initiated with a Buy at KeyBanc
Norsk Hydro (NHYDY) initiated with an Underperform at Credit Suisse
Patterson-UTI Energy (PTEN) initiated with a Hold at KeyBanc
Radware (RDWR) initiated with a Buy at DA Davidson
Rockwell Automation (ROK) initiated with a Buy at Stifel
Ryerson (RYI) initiated with a Buy at Jefferies
Ryerson (RYI) initiated with an Outperform at Wells Fargo
Ryerson (RYI) initiated with an Overweight at JPMorgan
Superior Energy (SPN) initiated with a Hold at KeyBanc
Tesco (TESO) initiated with a Buy at KeyBanc
Tyco (TYC) initiated with a Hold at Stifel
U.S. Silica (SLCA) initiated with a Buy at KeyBanc
United Technologies (UTX) initiated with a Hold at Stifel

COMPANY NEWS

Endo (ENDP) delivered proposal to acquire Auxilium (AUXL) for $2.2B in cash, stock
Rackspace (RAX) said it will remain independent, and ended review of alternatives. The company also named Taylor Rhodes as CEO
Microsoft (MSFT) raised its dividend 11% to 31c per share, to add Kraft (KRFT) CFO Teri List-Stoll, Visa (V) CEO Charles Scharf to board
Trian Partners said DuPont’s (DD) structure ‘destroying shareholder value,’ wants DuPont to split into GrowthCo – Agriculture, Nutrition and Health, Indstrial Biosciences — and CyclicalCo/CashCo — Performance Materials, Safety and Protection, Electronics and Communications
NY Attorney General Schneiderman announced NYC bank identity-theft ring takedown. Five individuals were arrested for running an alleged identity-theft ring targeting customers of local banks; the tellers indicted worked for branches of Bank of America (BAC), JP Morgan Chase (JPM), HSBC (HSBC), TD Bank (TD) and Wachovia in the Bronx
Wal-Mart (WMT) to pay $66,000 to settle false advertising investigation with NY AG (KO)
NASA awarded Boeing (BA) $4.2B contract for commercial space flight to ISS
InspireMD (NSPR) announced ‘positive’ trial results for its CGuard EPS

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
Lennar (LEN), Apogee Enterprises (APOG), Adobe (ADBE)

Sony (SNE) lowers FY14 net loss estimate to 230B from 50B yen
U.S. Steel (X) sees Q3 ex-items EPS ‘significantly higher’ than current consensus
Phibro Animal Health (PAHC) sees FY15 adjusted EPS $1.46-$1.51, consensus $1.46
Phibro Animal Health (PAHC) reports Q4 adjusted EPS 22c vs. 29c prior year
YRC Worldwide (YRCW) sees Q3 operating income $22M-$27M

NEWSPAPERS/WEBSITES
Credit Suisse (CS) under fire from regulators over leveraged lending, WSJ reports
Microsoft (MSFT) planning new wave of layoffs for this week, ZDNet reports
Apple (AAPL) supplier Foxconn reportedly struggling to meet iPhone demand, WSJ reports
Perion Network (PERI) receives takeover offer of over $500M from IAC (IACI), Calcalist says
United Technologies (UTX) seeks big deals but says pipeline ‘not robust,’ Reuters reports
Time to buy Apple (AAPL), Barron’s says
PepsiCo (PEP), Molson Coors (TAP) still look inexpensive, Barron’s says

SYNDICATE
Aratana Therapeutics (PETX) files to sell common stock
Blueknight Energy 8.5M share Secondary priced at $7.61
Celsion (CLSN) files to sell 3.38M shares for holders
QAD Inc files $125M mixed securities shelf, 2M shares for holders
Sunoco Logistics (SXL) 7.7M share Spot Secondary re-offered at $48.46

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Indians Prepare To Buy Gold At Diwali 

The Death Of The Indian Gold Market Has Been Greatly Exaggerated

Trade statistics for the month of August have just been released in India, showing a huge surge in gold imports compared to August of 2013. The value of gold officially imported into India in August totalled $2.04 billion, which was nearly three times more than the August 2013 figure of $739 million. 

Although the Indian trade deficit fell to $10.84 billion in August from $12.2 billion in July on the back of a lower oil price and a drop in the value of oil imports from $14.3 billion to $12.8 billion, the deficit would have been lower were it not for the surge in the value of gold imports.

Official gold imports for the three months to June had fallen to $7 billion from $16.5 billion in the similar three month period last year. But Indian customs seizures have also risen suggesting the unofficial import trade is just circumventing the restrictions.

Import restrictions had curbed official imports but gold smuggling has intensified. Gold smugglers are very resourceful when it comes to importing gold into India, and smuggling is also set to intensify before the Diwali festival in October.

Recent gold premiums in India have been $4-$5 an ounce but are expected to increase to between $10-$12 an ounce as the festival and wedding seasons peak.

In India, gold demand rises during the festival season from a monthly average of 40-50 tonnes to over 60 tonnes a month. As usual, there is expected to be a pick-up in gold demand this year ahead of the five day festival centred around Diwali.

Diwali is on October 23 but the five day festival really begins with Dhanteras, the first day of Diwali on October 21 and ends with the last day called Bhai Dooj on October 25.

The wedding season is also approaching and this peaks in November and December. Gold is given as gifts and dowries during the wedding season and also acts as a source of demand for jewellery.

Over the last two years, there has been a concerted effort by the Indian government and the central bank, the Reserve Bank of India, to discourage gold imports. This has taken the form of continued hikes in gold import duties, the introduction of various gold import restrictions for banks and trading houses, while at the same time incentivising Indian banks to promote gold-backed products and gold deposit schemes so as to take Indian gold out of circulation and into the hands of the banks.

Without citing the Indian government’s orchestrated campaign to try to smash Indian gold imports, some anti-gold media have recently been calling the death of gold buying in India, pointing to the increased interest by the younger urban population in modern financial savings and investments. However, the fact that Indian gold imports remain strong and bounce back any time government restrictions are lowered proves that this anti-gold media sentiment is mistaken.

Shanghai Gold Exchange

Today the Chinese government backed Shanghai Gold Exchange (SGE) brought forward the launch date of its international gold trading platform which is hosted in the city’s free trade zone (FTZ). The gold trading platform will be known as the ‘international board’.

In a surprise announcement, the SGE said today that the international board will go-live this Thursday September 18, eleven days ahead of its original launch date of Monday September 29.

Forty members of the Exchange including global banks UBS, Goldman Sachs, HSBC and Standard Chartered, will participate in gold trading on the SGE’s international board, trading 11 yuan denominated physical gold contracts including the large 12.5 kg (400 oz) bar, the ever popular 1 kg  bar and a 100 gram contract.

The location of the SGE international board in the Shanghai free trade zone is symbolic in that this location has been earmarked by the Chinese government as part of financial sector internationalisation strategy.

The SGE is also opening a precious metals vaulting facility in the free trade zone with a  1,000 tonne capacity limit.

In a related development yesterday, the Hong Kong based precious metals trade organisation, the Chinese Gold and Silver Society (CGSE) announced that they have been given permission by the Chinese government to construct a precious metals storage vaulting facility in a special economic zone in Shenzhen in China. 

The CGSE is the the first non-mainland entity to be given such permission. The CGSE’s vaulting facility will have a 1,500 tonne capacity and will be completed by late 2016 or early 2017.  

Shanghai skyline

Developments in the Asian precious metals markets are continuing to advance at a rapid pace. The pace of developments changes daily as illustrated by the acceleration this week of the Shanghai Gold Exchange’s international board.

Indian buying has remained strong throughout the period of weakening prices and the period of artificial demand constraints imposed by the Indian financial authorities. 

In Asia gold demand remains an overall structural phenomenon, and is not purely cyclical.

MARKET UPDATE
Today’s AM fix was USD 1,238.75, EUR 956.93 and GBP 765.70 per ounce.
Yesterday’s AM fix was USD 1,234.75, EUR 955.62 and GBP 759.43 per ounce.

Gold climbed $3.20 or 0.26% to $1,233.90 per ounce and silver rose $0.03 or 0.16% to $18.68 per ounce yesterday.

Gold recovered overnight in Asian trading and reached $1,235.80 in Singapore before hitting $1,238.00 in London, up 0.45% from yesterday’s New York close. Silver was trading at $18.75, up 0.53% from New York close yesterday.

In the platinum group metals, palladium was 0.71% lower today at $839, while platinum edged lower by 0.15% at $1,369.

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It has been a story of central banks, as overnight Asian stocks reversed nearly two weeks of consecutive declines – the longest stretch since 2001 – and closed higher as the same catalysts that drove US equities higher buoyed the global tide: a combination of Chinese liquidity injection (for the paltry amount of just under $90 billion; “paltry” considering Chinese banks create over $1 trillion in inside money/loans every quarter) and Hilsenrath leaking that despite all the “recovery” rhetoric, the Fed will not be turning hawkish and there will be no change in the Fed language today (perhaps not on the redline but Yellen’s news conference at 2:30pm will certainly be interesting), pushed risk higher, if not benefiting US equities much which remains largely unchanged.

Overnight Goldman joined Hilsy in predicting “no change” to the language, when its strategists said the Fed won’t drop “considerable time” from statement today and the language will instead be watered down and dropped in months ahead. However, if past Yellen press conferences are any indication, watch for her to once again define just how many months “considerable time” implies, although if she says 6 months again, algos may be confused.

Other banks disagreed, with Deutsche Bank’s base case is that the phrase will be dropped this time round for two key reasons. First removing the language gives the Fed more flexibility to act sooner if the economy outperforms against expectations in the months ahead. Secondly, Committee participants on both the hawkish and dovish sides (as well as the center) have publically expressed that it is time to remove the language. So it is likely that the Yellen will agree to make this language change but only if she feels this can be achieved without causing the market to bring forward significantly its expectations about the timing of the first rate hike. All eyes will therefore be on the press conference where Yellen will likely emphasise that the change is not intended to signal a significant advance in the timing of the first hike but rather the timing will be based on recent and prospective economic performance of which the key labour market and inflation indicators are still much below desired levels.

As DB’s Jim Reid notes, given that the removal of this key phrase has probably been increasingly priced in over recent days, it didn’t take much for the Dollar to slip yesterday after the WSJ’s Jon Hilsenrath said that he thinks the Fed may keep the words ‚considerable time? in its policy statement but qualify them instead. The WSJ correspondent thinks that given the economic backdrop, the Fed wouldn’t want to send a signal right now that rate hikes are imminent. He also thinks that the Fed will focus on its QE exit strategy in this meeting and that they may think that by focusing on both the exit strategy and guidance changes at the same time, it will be too much for the market to handle. So for him the “considerable time” language stays. The recent minutes suggested that the Fed was indeed close to agreeing on updating their exit strategy on asset purchases when they met in July.

All that said, one would have to be truly naive to assume that the Fed will do anything to rock the boat ahead of the Alibaba IPO – the biggest and most overhyped perhaps in history – which prices in just over 24 hours. As such, it is safe to say that if there is any Yellen surprise, it will be to the dovish side.

European equities benefited from the open as fears of a hawkish FOMC statement dissipated. As such, both equities and core fixed income markets are trading stronger, with softer US yields also weighing on the USD. Euro-area CPI +0.4% y/y in Aug. vs 0.3% est. U.K. unemployment drops to lowest in 6 years. European car sales rise for 12th month. 18 out of 19 Stoxx 600 sectors rise; basic resources, travel & leisure outperform, food & beverage, retail underperform. 81% of Stoxx 600 members gain, 16.5% decline. Eurostoxx 50 +0.6%, FTSE 100 +0.3%, CAC 40 +0.7%, DAX +0.5%, IBEX +0.8%, FTSEMIB +1%, SMI +0.1%

The Hang Seng (+1.0%) snapped its 8-day losing streak after reports that the PBoC is to inject an extra CNY 500bln (USD 81bln) in liquidity to China’s 5 largest banks. Goldman Sachs noted that this equates to a 50bps RRR cut. The move from the Chinese central bank comes in the wake of a string of poor macro data from China, and ahead of the week-long Golden Week holiday in early October, as central bankers anticipate a squeeze on cash in the near future.  Asian stocks rise with the Hang Seng outperforming and the ASX underperforming. MSCI Asia Pacific up 0.2% to 144.5, Nikkei 225 down 0.1%, Hang Seng up 1%, Kospi up 1%, Shanghai Composite up 0.5%, ASX down 0.7%, Sensex up 0.5%. 7 out of 10 sectors rise with tech, energy outperforming and industrials, consumer underperforming

Looking at the key data highlights of today, we have the US CPI for the month of August and the NAHB Housing Market Index (Sept) in the US. In Europe, we expect the release of BoE’s previous meeting minutes, UK’s labour force data and trade balance updates from both Spain and Italy. But as mentioned upfront, the Fed and Yellen will take centre stage today when the FOMC statement is released at 2pm EST / 7pm UKT followed by the press conference 30mins later.

Market Wrap

Japanese 10yr bond yields fall; Irish yields decline. Commodities gain, with natural gas, corn underperforming and copper outperforming. U.S. mortgage applications, CPI, NAHB housing market index, Fed QE3 pace, FOMC rate decision, current account balance due later.

• S&P 500 futures up 0% to 1992.1
• Stoxx 600 up 0.6% to 344.8, for 1st session in 9
• US 10Yr yield down 2bps to 2.57%
• German 10Yr yield down 1bps to 1.05%
• MSCI Asia Pacific up 0.2% to 144.5
• Gold spot up 0.2% to $1238/oz

Bulletin Headline Summary

• FOMC expected to trim QE3 by another USD 10bln today – however, fears of a hawkish turn have dissipated after Fed watcher Hilsenrath suggested the Fed will keep the phrase “rates to remain low for a considerable period of time”
• Favourable central bank backdrop from both China and the US assists European bonds and equities higher
• Markets expected to look beyond today’s US CPI release at 1330BST/0730CDT as central bank risk events loom on the horizon
• Treasuries gain, 5/30 curve flattens before Fed issues decision on interest rates and QE at 2pm ET, followed by Yellen press conference. Scotland votes on independence tomorrow.
• Goldman says FOMC won’t drop “considerable time” from statement today; language will instead be watered down and dropped in months ahead
• The battle over Scotland’s future in the U.K. entered the final day of campaigning with the pro-independence side saying it had the momentum to win the ballot and the “no” camp urging voters not to use it as a protest
• China’s central bank injected 500b yuan into the nation’s largest banks, joining the ECB in boosting liquidity to address weakening growth and underscoring a divergence in direction among the world’s biggest economies as the U.S. reduces stimulus
• Euro area inflation was higher than initially forecast in August, easing pressure on the ECB after it took action to shield the region from the threat of a downward spiral in prices
• Germany sold 2Y notes at a record-low yield of -0.07%; compares to 0.0% at August 20 auction
• U.K. unemployment fell to the lowest in six years, indicating continued strength in the labor market that Bank of England Governor Mark Carney says will eventually boost earnings
• BOE policy makers split for a second month, with the majority citing increased risks from Europe and muted inflation pressures supporting the case for keeping the key rate at a record low, minutes of the Sept. 3-4 meeting show
• Business leaders in Western Japan warned central bank chie
  f Haruhiko Kuroda that the yen’s slide to a six-year low is boosting costs of imported raw materials and fuel and may spell trouble for the economy
• The cease-fire in Ukraine showed more signs of strain as rebels questioned further peace talks with the government, even after lawmakers in Kiev approved a special status for the country’s two easternmost regions
• Students returned to schools in parts of northern Iraq ruled by Islamic State militants to find lessons including history, geography and literature are off the timetable as the group bans most subjects except religious studies
• Obama urged aid groups and other nations to dramatically escalate their response to the Ebola outbreak in western Africa, warning that the epidemic is spiraling out of control
• Sovereign yields mostly lower. Asian, European stocks gain, U.S. equity-index futures mixed. WTI crude lower, copper little changed, gold higher

US Event Calendar

• 7:00am: MBA Mortgage Applications, Sept. 12 (prior -7.2%)
• 8:30am: CPI m/m, Aug., est. 0.0% (prior 0.1%)
  • CPI Ex Food and Energy m/m, Aug., est. 0.2% (prior 0.1%)
  • CPI y/y, Aug., est. 1.9% (prior 2%)
  • CPI Ex Food and Energy y/y, Aug., est. 1.9% (prior 1.9%)
  • CPI Core Index SA, Aug., est. 238.597 (prior 238.311)
  • CPI Index NSA, Aug., est. 238.262 (prior 238.250)
• 8:30am: Current Account Balance, 2Q, est. -$113.4b (prior – $111.2b)
• 10:00am: NAHB Housing Market Index, Sept., est. 56 (prior 55)
• 2:00pm: Fed seen maintaining overnight bank lending rate target between 0% and 0.25%, reducing QE purchases by $10b
• 2:30pm: Fed’s Yellen holds news conference on FOMC

ASIA

The Hang Seng (+1.0%) snapped its 8-day losing streak after reports that the PBoC is to inject an extra CNY 500bln (USD 81bln) in liquidity to China’s 5 largest banks. Goldman Sachs noted that this equates to a 50bps RRR cut. The move from the Chinese central bank comes in the wake of a string of poor macro data from China, and ahead of the week-long Golden Week holiday in early October, as central bankers anticipate a squeeze on cash in the near future.

FIXED INCOME

Bund futures opened flat and overcame early selling pressure (the result of a positive equity open) as traders eyed Hilsenrath’s article positing that the Fed will retain their “rates to remain low for a considerable period of time” phrase, easing fears that the FOMC were coming closer to lifting rates. The appetite for debt a negative yield showed up strongly at today’s German Schatz auction, as Germany sold 2yr debt at a record low yield of -0.07% to strong demand, with the Bundesbank only retaining 16.5% for secondary market operations.

EQUITIES

European equities benefited from the open as fears of a hawkish FOMC statement this evening dissipated after Fed watcher Hilsenrath suggested the Fed could retain their pledge to keep rates low for a “considerable period of time”. As such, both equities and core fixed income markets are trading stronger, with softer US yields also weighing on the USD. Chinese stocks traded strongly overnight (Hang Seng up 1.0%) after the PBoC injected CNY 500bln into the banking sector – as announced yesterday.

The Eurozone’s outperformer today is Adidas, who trade strongly on speculation that a hedge fund could take a large stake in the company and drive a turnaround in the business that has been hurt by Russian sanctions and a poor showing from their golf unit. Furthermore, late yesterday, Microsoft CEO Nadella unveiled a fresh board shake-up which analysts have already deemed as “positive” as well as lifting their dividend by 11% to USD 0.31/share vs. Exp. USD 0.30.

FX

GBP/USD traded at one-week highs, as yesterday’s polls showed unanimously that unionists hold a slim majority over the Yes camp in the Scottish Independence vote. GBP/USD was unshaken by the BoE minutes (inline with Exp. at 7-2 split) and stronger jobs data (6.2% jobless rate vs. Exp. 6.3%), however GBP slipped slightly on profit taking post-release, resulting in GBP/USD trading at 1.63 ahead of the US crossover.

COMMODITIES

Heading into the FOMC statement, gold trades flat and well above the Monday lows of USD 1,225.67, as the slightly softer USD keeps the price buoyant ahead of the COMEX open. Despite this, recent underperformance in gold has prompted Barclays to lower their Q4 gold forecast to USD 1,220/oz. The WTI-Brent spread trades slightly wider, as Libya’s Zawiya refinery remains knocked offline and the El Sharara Oilfield production has been fluctuating, threatening Libya’s targeted return to 1mln bpd output by the start of October. Looking ahead, the DoE crude inventories take focus, with the headline expected to show a draw of 1.5mln bbls. As a reminder, today sees the Oct’14 options expiring at the pit close.

* * *

DB’s Jim Reid concludes the event recap of the overnight news

The much anticipated FOMC meeting will dominate proceedings today followed by the Scotland vote tomorrow. We briefly summarised DB Peter Hooper’s overall expectations on the Fed in yesterday’s EMR but the central focus today will likely be on what happens to the calendar-based guidance (ie how the Fed deals with the ‘considerable time’ language in the statement) so we’ll take a closer look at this today. Given Yellen’s 6-month interpretation previously, the phrase could remain intact this time round (and even in October), if the initial lift-off is not expected until June. That said, Peter Hooper’s base case is that the phrase will be dropped this time round for two key reasons. First removing the language gives the Fed more flexibility to act sooner if the economy outperforms against expectations in the months ahead. Secondly, Committee participants on both the hawkish and dovish sides (as well as the center) have publically expressed that it is time to remove the language. So it is likely that the Yellen will agree to make this language change but only if she feels this can be achieved without causing the market to bring forward significantly its expectations about the timing of the first rate hike. All eyes will therefore be on the press conference where Yellen will likely emphasise that the change is not intended to signal a significant advance in the timing of the first hike but rather the timing will be based on recent and prospective economic performance of which the key labour market and inflation indicators are still much below desired levels.

Given that the removal of this key phrase has probably been increasingly priced in over recent days, it didn’t take much for the Dollar to slip yesterday after the WSJ’s Jon Hilsenrath said that he thinks the Fed may keep the words ‚considerable time? in its policy statement but qualify them instead. The WSJ correspondent thinks that given the economic backdrop, the Fed wouldn’t want to send a signal right now that rate hikes are imminent. He also thinks that the Fed will focus on its QE exit strategy in this meeting and that they may think that by focusing on both the exit strategy and guidance changes at the same time, it will be too much for the market to handle. So for him the “considerable time” language stays. The recent minutes suggested that the Fed was indeed close to agreeing on updating their exit strategy on asset purchases when they met in July. Peter expects these guidelines to be released today but in his eyes are likely to be very much in line with the structure described in the July minutes (ie to continue reinvesting maturing Treasury and MBS securities through the initial rate hiking process with the intention of controlling long-term rates so that financial market conditions do not adversely tighten when fed fund rate is increased). For what its worth I think whatever the outcome of the statement, Yellen will likely be more dovis
h than the statement in the Q&A so this is where the true message will likely come today.

Hilsenrath’s comments and stimulus talks from China seemed to help reverse some of the tightening fears that have driven risk assets lower in the past few days. On the China story, local media reported that the PBOC on Tuesday injected Rmb500bn to 5 biggest banks (Rmb100bn each) through Standing Lending Facilities (SLF) with a tenor of 3 months. Our Asia FX strategists have compared the scale of this 3month SLF to an equivalent of a 50bps RRR cut although the difference is the SLF is rather selective in providing access and can be rolled back in 3 months. Still the day proved to be a rather positive one for US equities with the S&P 500 and the NASDAQ both up three quarters of a percent. The S&P 500 rally was rather broad based but Health Care (+1.35%), Utilities (+1.23%) and Energy (+1.19%) did enjoy the best of the day’s gains. Some of the Energy gains were perhaps driven by a stronger day for Oil (perhaps on the back of weaker Dollar) after Brent (+1.2%) posted its best daily bounce in 9 days. Treasuries were little changed on the day but the July Fed Funds rate fell 1bps to 0.365%.

Taking a quick look at the other key hurdle for markets this week, three updated Scottish referendum polls yesterday showed that the ‘No’ campaign is still ahead although with a narrowing lead as we head into the official vote. The latest ICM poll for the Scotsman with a sample size of over 1000 showed that the ‘Yes’ and ‘No’ votes stood at 48% and 52% respectively although the ‘Yes’ votes had gained a 3pt lead since the same poll was conducted in August. Both the Opinium poll for the Daily Telegraph and the Survation Poll for the Scottish Daily Mail also showed similar results (ie ‘Yes’ and ‘No’ votes at 48% and 52% respectively) with the ‘Yes’ percentages up by 1 percentage point since their last survey. The polls showed that a range of 8-14% of voters were still undecided before polls open at 6am GMT (7am BST) tomorrow. So the ‘Nos’ are edging ahead but its fair to say that there is much uncertainty still at to how people will vote once they get to the ballot box. My reading of the situation is that the No campaign has been enhanced in the last week by increasing noises from big business that jobs and prices might be negatively impacted by a ‘Yes’. This harder hitting message might persuade some to vote with their wallet rather than with their heart. Anyway we’ll see over the next 48 hours was the result shows.

Away from China, bourses in Hong Kong and Korea are +1.0% and +0.7% higher on the day though. The 10-year Treasuries are holding steady at around 2.58%. Asia iTraxx is 2bps tighter with cash markets increasingly focused on a steady build up in new issues.

Looking at the key data highlights of today, we have the US CPI for the month of August and the NAHB Housing Market Index (Sept) in the US. In Europe, we expect the release of BoE’s previous meeting minutes, UK’s labour force data and trade balance updates from both Spain and Italy. But as mentioned upfront, the Fed and Yellen will take centre stage today when the FOMC statement is released at 2pm EST / 7pm UKT followed by the press conference 30mins later.

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