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Has the market's "melt-up" levitation finally ended? Of course, it could be much worse: as Bloomberg's Paul Jarvis recalls, thirty years ago on this day traders around the globe were staring at their screens in disbelief as stock markets turned to a sea of red: the Dow, S&P 500, FTSE, DAX and CAC fell -23%, -20%, -10%, -9% and -10% respectively.
Fast forward to 2017 and the day known as Black Monday appears as little more than a blip in U.S. and European stock markets’ relentless progress. Having closed above the 23,000 mark for the first time on Wednesday, the Dow Jones Industrial Average has led markets back from the abyss, rising more than 13-fold since falling 23% in a single trading session on Oct. 19, 1987.
Then again, "all" it took was central banks collectively buying a little over 30% of global GDP in debt over the past 3 decades, and especially in the past 8 years, to create the world's most artificial "bull market" and "recovery" in history, and one day there will be hell to pay, but not just yet. Instead, on "Not Green Thursday", traders wake up today to a modern day version of mini Black Monday, in which a sudden "risk-off" equity selloff has swept across global markets during early European trading, before gradually running out of steam, following a day in which the Dow Jones closed at one of its most overbought levels in the past 100 years.
US equity futures lead the move, with the VIX surging more than 1 vol to 11.550 (up 14%) the highest in five weeks, with Nasdaq futures heavily underperforming on reports of orders being cut for Apple iPhone 8. Losses compounded by poor earnings from major European names including SAP (-2.2%), Unilever (-4.8%) and Nestle (-0.6%); additionally, Hang Seng sold off into the close to end the day down 1.9%. As stocks sell off, USTs rally sharply in response, with the short end of the curve flattening again as the USD/JPY spikes lower, as do crude futures.
Here are the key overnight events that are having the biggest impact on this morning's trading:
Apple: supplier orders for iPhone 8 and Plus are reduced by ~50% for Nov. and Dec. with shipments seen at 5-6m units per month: EDN
Catalonia: Spain to invoke Art. 155 and suspend Catalan autonomy after regional president refused to drop independence claims
ECB’s Nowotny: ECB cannot stop QE purchases abruptly; policy can be normalized before inflation reaches 1.9%, would be a mistake to wait too long on changing QE
China 3Q GDP 6.8% down from 6.9%; Retail Sales 10.3% vs 10.2% est; Industrial Output 6.6% vs 6.5% est; Fixed Assets 7.5% vs 7.7% est.
New Zealand: new coalition govt formed between Labour and First parties; National Party ousted
U.K. Sept. Retail Sales m/m: -0.8% vs -0.1% est.
As Nanex' Eric Hunsader shows, today's trading session is shaping up - at least for now - as the biggest post-midnight selloff in the S&P in 2017.
Meanwhile, as noted earlier, Spanish bonds marginally underperform due to auction concession and confirmation that govt will suspend Catalan autonomy. NZD weakest in G-10 after new coalition govt is formed, with the potential for RBNZ mandate to therefore be expanded beyond inflation. Gold and VIX rally given the risk-off sentiment
The Stoxx Europe 600 Index headed for the biggest drop in almost two months, with all industry sectors in the red, after Spain said it would move ahead with suspending Catalonia’s autonomy. Spanish shares lagged the benchmark and bond yields for peripheral Europe fluctuated. Underwhelming earnings from companies including Unilever and SAP SE further frayed investors’ nerves, already on edge amid concerns about the escalating Catalan stand-off, the lack of progress in Brexit negotiations and the search for a new Federal Reserve chief.
“European markets have started the day firmly on the back foot as a raft of company report earnings missed expectations, while investors await the next steps with respect to the constitutional crisis in Spain and today’s EU summit in Brussels,” said Michael Hewson, chief market analyst at CMC Markets U.K. “We look set for a lower U.S. open today. All eyes are likely to be on today’s meeting with current Fed chief Janet Yellen and U.S. President Trump with some Republicans calling for her to be allowed to leave.”
Meanwhile in safe havens, bunds gained as European stocks slumped from the open. Spanish bonds softened as Spain moves ahead with suspending Catalonia’s autonomy, though bounced after solid auctions.
The late day selloff in stocks in Hong Kong stood out in a mixed Asian session, as the Hang Seng crashed as much as 600 points, or 2.4%, in the last minutes of trading, coming even as China reported its economy expanded 6.8 percent last quarter, as traders focused on comments about household debt and asset bubble risk by PBOC governor Zhou.
The dollar rebounded after losses earlier in the week while the pound weakened as data showed U.K. retail sales dropped more than forecast in September, making third-quarter growth in the sector the weakest in four years. The euro briefly dropped before recovering. Haven currencies led G-10 gains amid risk-off mood as weak earnings dragged stocks lower. Elsewhere, the kiwi dollar plummeted 1.3% after New Zealand’s Labour Party got the backing of the nationalist New Zealand First Party to form a government, as reported earlier. China’s currency retreated even after data from the central bank suggested that the country is now seeing capital inflows. Iron ore fell the most since September.
Treasuries pared weekly losses and the greenback snapped a three-day winning streak. The euro felt the heat from latest Catalonia headlines, yet was supported by demand for upside ECB exposure, while sterling dropped the most in two weeks as soft U.K. data coincided with start of EU summit.
In commodities, West Texas Intermediate crude fell 1.3 percent to $51.34 a barrel, the lowest in a week. Gold increased 0.3 percent to $1,284.68 an ounce. Copper declined 0.8 percent to $3.15 a pound.
In rates, the yield on 10-year Treasuries decreased two basis points to 2.32 percent. Germany’s 10-year yield dipped less than one basis point to 0.39 percent. Britain’s 10-year yield decreased three basis points to 1.288 percent. Japan’s 10-year yield declined one basis point to 0.067 percent.
Data include jobless claims and Philadelphia Fed Business Outlook. Philip Morris, Paypal, BNY Mellon, Danaher and Blackstone are among companies reporting earnings
S&P 500 futures down 0.4% to 2,550
STOXX Europe 600 down 0.6% to 389.27
MSCI Asia down 0.2% to 167.03
MSCI Asia ex Japan down 0.7% to 549.02
Nikkei up 0.4% to 21,448.52
Topix up 0.3% to 1,730.04
Hang Seng Index down 1.9% to 28,159.09
Shanghai Composite down 0.3% to 3,370.17
Sensex down 0.08% to 32,584.35
Australia S&P/ASX 200 up 0.1% to 5,896.13
Kospi down 0.4% to 2,473.06
German 10Y yield fell 1.4 bps to 0.382%
Euro down 0.02% to $1.1785
Italian 10Y yield rose 4.1 bps to 1.773%
Spanish 10Y yield rose 3.7 bps to 1.656%
Brent futures down 1% to $57.56/bbl
Gold spot up 0.2% to $1,283.83
U.S. Dollar Index up 0.1% to 93.49
Top Overnight News
Spain will move forward with the process of suspending the powers of the Catalan government after Regional President Carles Puigdemont refused to drop his claim to independence. “The government will continue with the procedures set out in Article 155 of the Constitution to restore the legality of self-rule in Catalonia,” the government said in a statement on Thursday morning
Robust factory output and consumer spending kept China’s economy humming in the third quarter, giving President Xi Jinping a firm footing to rein in excess capacity and shift to a more sustainable growth path
Yuan trading band expansion is a signal for opening up, but not a current focus, PBOC Governor Zhou Xiaochuan says at group discussion at the 19th Party Congress
Japan August all activity index rose 0.1% m/m, vs est. +0.2%
U.K. PM May wants negotiations to move on to the future relationship and hopes to discuss how to make quicker progress during the meal at a Brussels summit on Thursday, according to a senior U.K. government official
Euro briefly dipped and Spanish bonds fell on Madrid’s move to proceed with suspension of Catalan autonomy; Bloomberg dollar index steady
Soft earnings weighed on European stocks and S&P futures, supporting Treasuries and core European bonds
Cable dropped to one-week low after U.K. retail sales fell more than expected, while yen recovered from a two-week low on risk-off demand
Kiwi hit four-month low vs USD and the lowest in more than a year vs AUD as New Zealand First Party’s to back opposition Labour Party to form government; Aussie rose on jobs data beating estimates before paring gain after China’s 6.8% 3Q growth met estimates, while remarks by PBOC’s Zhou earlier had raised some expectations for a possible positive surprise
Asia equity markets traded mixed despite a mostly positive close on Wall Street. where all 3 majors posted fresh intraday records and the DJIA extended above 23K powered by IBM’s best performance in 8 years, as the region also digested a slew of tier 1 Chinese data including Q3 GDP which slightly slowed. ASX 200 (+0.1%) and Nikkei 225 (+0.7%) were positive in which the latter outperformed as it coat-tailed on USD/JPY’s brief reclaim of the 113.00 handle. Conversely, Hang Seng (-0.2%) and Shanghai Comp. (-0.4%) were less enthusiastic as participants mulled over the latest Chinese data in which GDP met expectations but still slowed from prior and although Industrial Production and Retails Sales mildly topped estimates, Fixed Asset Investments grew at its slowest pace in nearly 18yrs. Finally, 10yr JGBs were flat for most the session with demand subdued amid the positive risk tone in Japan, although mild support was seen following a 5yr JGB auction in which the b/c rose from prior. Bank of Korea kept the 7-day Repo Rate unchanged at 1.25% as expected. BoK Governor Lee said that there was one board member who dissented at today's rate decision, while the Governor added that monetary policy is to remain accommodative and that conditions are getting ripe to adjust monetary easing
Overnight key Chinese data came in generally in line to stronger than expected:
Chinese GDP (Q3) Q/Q 1.7% vs. Exp. 1.7% (Prev. 1.7%, Rev. 1.8%). (Newswires)
Chinese GDP (Q3) Y/Y 6.8% vs. Exp. 6.8% (Prev. 6.9%)
Chinese Industrial Production (Sep) Y/Y 6.6% vs. Exp. 6.5% (Prev. 6.0%)
Chinese Retail Sales (Sep) Y/Y 10.3% vs. Exp. 10.2% (Prev. 10.1%)
Chinese Fixed Assets Investment Ex-Rural YTD (Sep) Y/Y 7.5% vs. Exp. 7.7% (Prev. 7.8%); lowest since December 1999.
PBoC Governor Zhou stated the trading band is not too important and that expanding the band is not currently in focus, while PBoC’s Yi stated that China will continue to expand macroprudential measures for the property sector.
Top Asian News
Taiwan Apple Suppliers Fall After Report of IPhone 8 Order Cuts
Toto Indonesia Distributor Is Said to Plan $150 Million IPO
How One Hedge Fund Ignored the China Bears and Made a 65% Gain
China’s Growth Momentum Gives Xi Platform to Deliver on Pledges
China’s Big Ball of Money May Be Headed Back to Stock Market
Billionaire Lau’s Chinese Estates Can’t Get Enough of Evergrande
In Europe, a broad risk off tone being seen in EU equities, alongside US equity futures this morning, with the move attributed to US equity futures tripping tech stops. Elsewhere, the IBEX is taking a hit amid the standoff between Spain and Catalan, as reports note that Spain’s Cabinet are to proceed with Article 155 on Saturday. Gilts and Short Sterling futures were already on the rebound prior to the dire UK data (and back month downgrades), but have extended gains, understandably – 10 year debt future just shy of 125.00 (some 1400 lots said to have been blocked at 124.97, buyer touted), and 3 month strip 0.5-4 ticks above parity. Some might contend that a leak prompted the pre-release recovery, but in truth all core bonds and STIRs were on the advance as cash bourses and US stock futures collapsed. The catalysts and rationale range from a tech-led rout, Catalonia on the brink of Article 155, a mere correction and for those prone to superstition an ominous repeat of 1987. All things considered, Spanish supply was taken down comfortably, and we suspect similar appetite for French OATs. Bunds have continued their recovery to 162.56, and thus surpassing the nearest upside technical target of 162.45, with Wednesday’s highs next in sight. US Treasuries also regaining composure after another squeeze in yields yesterday.
Top European News
U.K. Retail-Sales Growth Slumps to Weakest in Four Years
European Stocks Slide With Spain as Catalan Deadline Passes
IWG Falls Most Ever; Says Profit to ‘Materially’ Miss Estimates
In FX, : New Zealand's First Party announced their decision to form a government with the Labour party, meaning that the Labour party will govern the nation for the first time in 9-yrs. In turn, NZD fell on the news, reflecting increased uncertainty, with the currency moving towards the October low of 0.7060, printing a low of 0.7040 after tripping stops through 0.7050. This slip in NZD led to AUD/NZD reaching its highest level in 18-months after breaking through the 1.10 and 1.11 handles. AUD/NZD looks to have met resistance at the 78.6% Fib retracement (1.1176) of the 2015 high to the 2016 low. AUD had also been supported by solid Australian jobs data with the employment change printing ahead of analyst estimates, while the unemployment rate took a surprise fall. Throughout the Asian session the JPY continued to weaken past 113 against the greenback as persistent record milestones on Wall Street saw USD/JPY benefit from carry trade flows. However, during the European morning, broad based declines in global equities amid US equity futures tripping tech stops led to a leap in the JPY with USD/JPY moving back to the mid-112. GBP dipped back to the mid 1.31 from just below of 1.32 amid annual retail sales growth slowing to weakest level since 2013 in Q3 after Septembers retail sales figure printed a surprise fall. Consequently, indicating that consumer demand remains uncertain ahead the BoE rate decision next month. Since the comments from the BoE’s new recruits (Ramsden and Tenreyro) as well as uninspiring data has seen market pricing of a hike next month dip from over 80% to 69%.
In commodities, similarly with the global risk off sentiment, WTI and Brent crude futures are hovering around their lows of the day, while the FTQ flow supported the precious metals complex with Gold and Silver prices edging higher. OPEC sec gen Barkindo says we are satisfied that Nigeria and Libya are making a recovery on their output, further saying Sceptics of oil deal were totally mistaken.
Looking at the day ahead, the most notable release in Europe will be UK retail sales data while in the US the most significant releases include the latest weekly initial jobless claims numbers, October Philly Fed business outlook and September leading index. Verizon results headline the corporate earnings releases due out.
US Event Calendar
8:30am: Initial Jobless Claims, est. 240,000, prior 243,000; Continuing Claims, est. 1.89m, prior 1.89m
8:30am: Philadelphia Fed Business Outlook, est. 22, prior 23.8
Today marks the 30th anniversary of Black Monday where the Dow, S&P 500, FTSE, DAX and CAC fell -23%, -20%, -10%, -9% and -10% respectively. The FTSE fell a further 12% the day after perhaps reflecting the difficulties in fully reopening the market after the great storm a few days before.
Overnight, China printed an in line 3Q GDP reading of 6.8% yoy, but both the September retail sales (10.3% yoy vs. 10.2% expected) and IP (6.6% yoy vs. 6.5% expected) slightly beat expectations. This morning in Asia, markets are trading a bit mixed. The Nikkei (+0.66%), ASX 200 (+0.15%) and Kospi (+0.06%) are slightly up, but the Hang Seng (-0.14%) and Chinese bourses (-c0.5%) are down as we type.
Now onto the US budget resolution bill, which is a crucial step before the Republicans formally work towards a tax reform package by the end the year. Currently, the GOP control 52 seats in the Chamber and with Mississippi’s
Cochran off due to sickness, there is a slimmer margin of error to pass this resolution which seeks to authorise a deficit increase of cUS$1.5trn over the next 10 years. That said, with the late backing of Senator Collins from Maine, the bill is expected to pass before the weekend and ahead of it going on to the next (tougher) phase, which includes drafting the tax bill and getting it through the committee and the full Senate.
Perhaps conveniently timed, Treasury Secretary Mnuchin has told the Politico that stock markets have tax reforms “baked into it, (with) reasonably high expectations” for a substantial corporate tax cut. Conversely, if tax reforms do not eventuate “there is no question in my mind that…you’re going to see a reversal of a significant amount of these gains”. Notably, US central bankers have a slightly different view, the Fed’s Dudley also spoke on taxes yesterday, but said “we are a long way from tax reforms at this point”, and he has not incorporated the impact of fiscal reform in his economic forecast. This echoed Ms Yellen’s comments on fiscal policy changes over the weekend where she said “it’s a source of uncertainty”, we have taken “a kind of wait and see attitude”. Elsewhere, Mnuchin has now conceded that it’s very hard not to give tax cuts to the wealthy with tax cuts also given to the middle class, in part as “the top 10% of the people pay 81% of the taxes”.
Moving onto bonds, after a relatively big rally after Friday’s soft US CPI print, yesterday saw 10 year USTs retrace all that rally with the closing level now back to 2.347%, broadly steady to last Wednesday’s close. We hit a post CPI low of 2.274% at Friday close. It seems the news that (the relatively hawkish) John Taylor interviewed well for the Fed Chair role from earlier in the week is still percolating through markets. There was also some mildly hawkish central bank speak and bullishness from the US administration over the tax reform bill.
Staying with bonds, core European 10y bonds yields rose c3bp yesterday (Bunds + 3.2bp; Gilts +4.1bp; OATs +3bp) while Spanish yields jumped 7.4bp ahead of today’s deadline (10am local time) for Catalan President Puigdemont to formally respond again on whether independence was declared or not. Note that the El Mundo also reported yesterday that Justice Minister Catala said the central government is ready to apply all legal instruments to restore order (at Catalonia).
Now turning to the mildly hawkish ECB central bankers commentaries where they confirmed the need for tapering. Firstly, ECB’s Lautenschlaeger said “I think it is time next year to gradually but completely roll back net purchases of bonds”. Then ECB’s Bank of France Governor Villeroy de Galhau also noted that “we have to achieve an adequate (QE) reduction because we have progressed towards our inflation target”, but did reiterate that ECB is following a path of “an adequate and very gradual (rate) normalisation”. Finally, ECB’s Hansson reminded that “the economy is in much better shape than some time ago” with people now more optimistic on the economy and that “I personally would like to see that we reduce the purchases, since we are on the right track”, but noted that “no decision has been made yet regarding timing and manner”. Elsewhere, Mr Draghi spoke on reforms, noting “with monetary policy being accommodative, we now have a window of opportunity to take these measures”.
Over in the US, the Fed's Dudley was also a bit hawkish, noting “we went into 2017 showing a median of three rate hikes, and so far, we’re on path….for that to actually bear out”, which echoed the Fed’s Harker’s earlier comments where he thinks one more rate hike is appropriate this year, but warned his view was dependent on the inflation readings. Elsewhere, the Fed’s Kaplan also spoke at the panel, noting that“whatever we say about the neutral rate, I personally do not intend to raise the fed funds rate so that it’s nudging up against the 10-year Treasury rate”.
Moving onto equity market performance for yesterday. US equities continue to power ahead, with the Dow up 0.70% to a new all-time high (23,158 - the 6th time the index passed a 1,000 increment in last 12 months), helped by stronger sales forecasts fromIBM where its shares rose 8.86%. Elsewhere, the Nasdaq (+0.01%) and S&P (+0.07%) was also up marginally, with modest gains in the financials (+0.56%) and IT sectors largely offset by losses from energy (-0.70%) and telco names. The VIX fell slightly (-0.2pts) to 10.07.
European markets were broadly higher, with the Stoxx 600 up 0.29%, driven by gains in real estate and financials, while energy and material stocks were the only two sectors mildly in the red. Across the region, the DAX (+0.37%), FTSE (+0.36%), CAC (+0.42%) and Spain’s IBEX (+0.55%) all rose modestly.
Key currencies were little changed yesterday, with the US dollar index down 0.07%, while Euro and Sterling edged 0.18% and 0.11% higher respectively. In commodities, WTI oil was up 0.31% following API reports of lower US crude inventories last week. Elsewhere, precious metals dipped slightly (Gold -0.31%; Silver -0.22%) while other base metals were mixed but little changed (Copper -0.51%; Aluminium -1.51%; Zinc +0.89%).
Away from the markets and onto Brexit, EU President Tusk said “I don’t expect a breakthrough tomorrow (at the EU summit)”, although added that “it is still possible” that talks move onto trade in December. Earlier, UK PM May’s office released a letter to EU citizens living in UK, noting “as I travel to Brussels today… many people will be looking at us (the leaders of the 28 nations in EU) - to demonstrate we are putting people first”. We wait and see whether the gesture of goodwill will translate into some tangible breakthrough in today and tomorrow’s EU Summit talks.
Over in Germany, the Federal Constitutional Court has rejected bids to limit the Bundesbank’s cooperation with the ECB on the QE program. The plaintiffs had argued that ECB's Public Sector Purchase Program (PSPP) might violate the prohibition of monetary financing in EU law that the ECB might have exceeded its monetary policy mandate. For now, the Court noted the plaintiffs must wait till the end of proceedings when judges could still ban the Bundesbank’s participation, although a final verdict into 2018 is likely to coincide with the expected run down of QE already. Elsewhere, PM Merkel has started talks with potential coalition partners in order to form a new government.
Before we take a look at today’s calendar, we wrap up with other data releases from yesterday. In the US, the September housing data was slightly weaker than consensus, with housing starts at 1.13m (vs. 1.18m expected) and building permits at 1.22m (vs. 1.245m expected). This was likely partly impacted by the recent Hurricane activity. Elsewhere, MBA applications rebounded to 3.6% this week (vs. -2.1% previous).
The Fed's latest beige book reported that "economic activity increased in September through early October, with the pace of growth split between modest and moderate”, despite major disruptions from Hurricane Harvey and Irma in some areas. On prices, "pressures remained modest since the previous report", despite labour markets that were "widely described as tight". Notably, "the majority of Districts reported only modest to moderate wage pressures".
In the UK, the August unemployment rate was in line and steady from July at 4.3% (42 year record low), while the average weekly earnings grew slightly higher than expected at 2.2% yoy (vs. 2.1%). Elsewhere, the September claimant count rate was in line at 2.3%, while the jobless claims change was higher than last month at 1.7k (vs. -0.2k previous).
Looking at the day ahead, the most notable release in Europe will be UK retail sales data while in the US the most significant releases include the latest weekly initial jobless claims numbers, October Philly Fed business outlook and September leading index. Verizon results headline the corporate earnings releases due out.
Paul Craig Roberts - Markets Fall When Dollar Falls Greg Hunter
Published on Oct 17, 2017
The biggest danger to Dr. Roberts, who has a PhD in economics, is the U.S. dollar. Dr. Roberts contends, “It seems to me that the only thing that would cause the Federal Reserve to stop the liquidity would be if the U.S. dollar fell under attack. If for some reason people said, hey, we don’t want the dollar anymore, and they started moving out of dollars into other currencies or into something else, if they cease to hold assets in dollars, if that happened, the Fed would have to try to raise interest rates to support the dollar. Then you could see that everything could come apart. If the interest rates would go up, there would be all kinds of derivatives that would not be sustainable. The stock market would collapse. It would be a mess. It would be an utter mess. That’s what the IMF is worried about. It’s a messy situation. How do you get out of it?”
How does Dr. Roberts say people should protect themselves? Dr. Roberts says, “I would not be in debt.”
Join Greg Hunter as he goes One-on-One with financial expert and award winning journalist Dr. Paul Craig Roberts.
Gold Seeker Closing Report: Gold and Silver Gain Roughly 1% By: Chris Mullen, Gold Seeker Report
Gold fell $4.10 to $1276.80 in Asia, but it then climbed to as high as $1290.00 in late morning New York trade and ended with a gain of 0.55%. Silver rose to as high as $17.258 and ended with a gain of 1.35%.
Global stocks hit new all time highs overnight, with US stock-index futures, Asian and European stocks all rising overnight after the Senate adopted a fiscal 2018 budget resolution, paving the way for Trump's $1.5 trillion in tax cuts, while news that "dove" Jay Powell may be the next Fed chair added to the risk-on sentiment.
Among key macro trades, the USD rallied on optimism Trump tax cuts are a step closer, with USD/JPY close to 113.50 and USD/CHF back above 200DMA. USTs push through overnight lows dragging bunds and gilts lower; short Sterling strip initially bid higher after dovish Cunliffe comments before unwinding due to steepening in Eurodollars. European equity markets opened higher but ground back towards flat, as mining stocks and banks outperform. The euro slipped as investors awaited the next move in Spain’s Catalan crisis, and the yen fell ahead of Japan’s election. Gold dropped along with European bonds as safe havens lost favor. WTI crude fell as Iraq sought to restore flows from fields in a disputed region. Spanish banks Sabadell and Caixabank weigh on IBEX after Catalan separatists target them for deposit withdrawals; not reflected in Spanish bonds, however, which actually outperform. ZAR weakest in EMFX due to speculation Deputy PM could be fired; crude futures pressured by the strong USD.
In the top overnight event, the Senate voted to adopt budget resolution through 51-49 vote, which paves the way for a tax overhaul and shields a future tax reform bill from a Democrat filibuster. To be sure, this is only the first step in a process that only now becomes fraught with disagreement among republicans. Sure enough, “the budget still has to pass the House, but near-term, it should be supportive for the dollar,” said Shinichiro Kadota, a senior foreign-exchange strategist at Barclays Securities Japan Ltd. in Tokyo. “Senate passage of the budget was a step required for budget reconciliation to advance tax reform.”
There were also reports that US President Trump is leaning towards Powell for Fed Chair. However, it was later reported that US President Trump advisers are said to be leaning towards Taylor or Powell as the next Fed Chair and added that the Fed chair role was down to the aforementioned 2 candidates, although according to online betting site Predicit the contest is now over.
Investors continue to eye political developments in Spain, the decision on a Federal Reserve chair that may sway the path of U.S. interest rates, and Brexit negotiations, suggesting caution as markets head into the weekend. But Thursday’s bout of volatility dissipated quickly as tax-cut optimism took hold. The CBOE Volatility Index, which surged as much as 17 percent on Thursday, actually ended the day in the red and fell further on Friday. Spain’s IBEX was unchanged after falling -0.2% even as the Stoxx 600 gained as officials in Madrid are finalizing plans for taking control of Catalonia. CaixaBank down 0.4%, Banco Sabadell were down 1.6%; separatist campaign group Catalan National Assembly called on supporters to pull cash from the two banks to protest at their decision to shift their legal domiciles out of the region.
Material and tech stocks are supporting European equities this morning after a resolutely weaker day yesterday, and earnings are the main focus with Volvo shares hitting a record high after its earnings beat estimates. Swedish firms are among the best performers with Ericsson also gaining 4.8% after its earnings. Meanwhile the IBEX is lagging peers as investors exercise caution ahead of a potential triggering of Article 155 this weekend.
Japan’s Nikkei 225 Stock Average rose for a 14th day, matching the longest winning streak on record ahead of Sunday’s general election when the Abe administration’s popularity will be put to test. The last time the index saw a similar rally was back in 1961. The Nikkei 225 has gained on every trading day in October, rising 5.4 percent, while the Topix index extended its rally to a tenth session. Shares reversed an early decline as the yen weakened after the U.S. Senate adopted a fiscal 2018 budget resolution that boosted the odds for U.S. President Donald Trump’s tax cut plans. Stocks in Tokyo have been boosted on the outlook for strong corporate earnings, foreign buying and bets that Prime Minister Shinzo Abe’s coalition would retain power with a two-thirds majority in parliament. There’s “more stealth” in this Japan market rally, said Andrew Clarke, director of trading at Mirabaud Asia Ltd. in Hong Kong. Abe’s ruling coalition is projected to lose its two-thirds majority in the election, the latest Nikkei poll showed. The most likely scenario is the Liberal Democratic Party-Komeito bloc picking up 297 seats, shy of the 310 needed for a so-called super-majority. “If the Abe victory is not priced in or is even better than expected there are going to be a lot of people chasing their tails,” Mirabaud’s Clarke said.
Elsewhere in Asia, the MSCI Asia Pacific Index was little changed at 166.91. New Zealand retirement-village operator Ryman Healthcare Ltd. fell 4.1 percent, amid concerns incoming Prime Minister Jacinda Ardern’s policies will lead to lower property prices. Kiwi stocks fluctuated and the local dollar fell. “While political dust is settling in New Zealand with the formation of a coalition government to be headed by Jacinda Ardern, the climate is heating up in Japan ahead of general elections on Sunday, said Rob Carnell, head of research and chief economist at ING Bank in Singapore. In Hong Kong, the Hang Seng Index gained 1.2 percent, rebounding from its biggest lost in two months Thursday. India is closed for a holiday after a ceremonial shortened trading session to mark Diwali on Thursday. Shares in New Zealand .NZ50 notched their 14th straight rising session and fifth winning week to close at a record after the nationalist New Zealand First Party agreed to form a new government with the centre-left Labour Party following weeks of political negotiations, ending the centre-right National Party's decade in power. But the New Zealand dollar wallowed at five month lows after a 1.7 percent fall on Thursday, its largest daily fall since June 2016, on concerns the new Labour coalition will take a tougher stance on immigration and foreign investment.
In commodities, West Texas Intermediate crude dipped 1 percent to $50.76 a barrel. Gold fell 0.7 percent to $1,281.22 an ounce. Copper climbed 0.7 percent to $3.19 a pound.
In rates, The yield on 10-year Treasuries increased four basis points to 2.36 percent, the highest in more than a week. Germany’s 10-year yield increased four basis points to 0.43 percent. Britain’s 10-year yield advanced three basis points to 1.276 percent.
Economic data include existing home sales. P&G, General Motors, Honeywell and Baker Hughes are among companies reporting earnings
Bulletin Headline Summary from RanSquawk
US equity futures notably higher after the senate voted to adopt budget resolution, paving way for tax overhaul
President Trump is said to be leaning towards Powell for the next Fed Chair.
Looking ahead, highlights include Canadian CPI, US Existing Home Sales.
S&P 500 futures up 0.2% to record 2,564.75
STOXX Europe 600 up 0.1% to 389.57
MSCI Asia down 0.07% to 166.90
MSCI Asia ex Japan up 0.4% to 550.70
Nikkei up 0.04% to 21,457.64
Topix up 0.03% to 1,730.64
Hang Seng Index up 1.2% to 28,487.24
Shanghai Composite up 0.3% to 3,378.65
Sensex down 0.6% to 32,389.96
Australia S&P/ASX 200 up 0.2% to 5,906.99
Kospi up 0.7% to 2,489.54
German 10Y yield rose 4.1 bps to 0.436%
Euro down 0.4% to $1.1804
Italian 10Y yield fell 1.2 bps to 1.761%
Spanish 10Y yield rose 1.9 bps to 1.654%
Brent futures down 1% to $56.68/bbl
Gold spot down 0.8% to $1,280.33
U.S. Dollar Index up 0.3% to 93.53
Top Overnight News
U.S. Senate adopted a fiscal 2018 budget resolution Thursday which House GOP leaders agreed to accept. The show of unity is aimed at speeding consideration of President Trump’s plan to enact tax cuts
Several people familiar with the process said President Donald Trump’s
closest advisers are steering him toward choosing either Stanford
economist John Taylor or Federal Reserve Board Governor Jerome Powell to
be the next Fed chief
The Catalan National Assembly called on independence supporters to pull cash from CaixaBank, Banco Sabadell and other major lenders to protest their shifting out of the region. The banks said business was normal
German Chancellor Angela Merkel upended U.K. skeptics, offering Prime Minister Theresa May the political cover she has been asking to take further steps in Brexit talks. Merkel said there is zero indication that Brexit talks won’t succeed and that she truly wants an agreement
U.S. Secretary of State Rex Tillerson signalled impatience with China on issues from North Korea to trade, and vowed to remain on the job as long as Donald Trump will have him
Sprint, T-Mobile Deal Announcement Is Said to Likely Be Delayed
Barclays Sued by Fund for $850 Million in Metal Market Abuse
Daimler Profit Falls as Mercedes Stumbles on Diesel Costs
Trading Firms Fear Mutiny on MiFID Rule Demanding Passport Data
Madrid Doubles Down as Catalans Prepare to Declare New State
Existing home sales for September will be announced Friday
Asia equity markets traded with a modest tone amid a very light calendar and mixed US lead, although risk appetite was spurred in US equity futures after the senate voted to adopt the budget resolution which paves the way for a tax overhaul. ASX 200 (+0.2%) pared initial losses amid a recovery in the largest weighted financials sector, while Nikkei 225 (Unch.) failed to benefit from JPY weakness with underperformance seen in Toshiba amid financial-related probes and Nissan after reports it halted some domestic output and that unqualified inspections occurred for the past 2 decades. Elsewhere, Hang Seng (+1.0%) rebounded from its worst performance in 2 months, while Shanghai Comp. (+0.1%) was uninspired despite the PBoC’s largest weekly net injection since January. Finally, 10yr JGBs tracked the downside seen in T-notes as risk appetite was underpinned by the developments in Washington, although losses were stemmed amid the presence of the BoJ in the market for a respectable JPY 990bln in government debt of 1yr-10yr maturities. PBoC injected CNY 50bln via 7-day reverse repos and CNY 30bln via 14-day reverse repos for a weekly net injection of CNY 560bln vs. last week's net drain of CNY 240bln.
Top Asian News
Dymon Asia Hedge Fund to Raise $600 Million in Equity Expansion
Noble Group Faces 11th Hour Oil-Unit Sale as Stock Is Halted
Abe’s Coalition Seen Losing Two-Thirds Majority in Nikkei Poll
Foreigners Return to Add Momentum as Nikkei Surges 14th Day
Swiss $3 Billion Fund Bets Himalayan Nuts Will Crank Returns
European stocks are supported by material and tech stocks this morning after a resolutely weaker day yesterday, and earnings are the main focus with Volvo shares hitting a record high after its earnings beat estimates. Swedish firms are among the best performers with Ericsson also gaining 4.8% after its earnings. Meanwhile the IBEX is lagging peers as investors exercise caution ahead of a potential triggering of Article 155 this weekend. A bit more downside for debt futures in wake of the latest public sector deficit figures, despite some smaller than expected shortfalls. An 80% of GDP ex-banks/BoE headline is eye-catching and of course the Government’s financing position is just as contingent on the Brexit outcome in the longer run as the economy overall. Gilts remain on the backfoot within a 124.75-50 range, but in truth more in line with the general tone following a downturn in US Treasuries after Thursday’s European close. Indeed, Bunds are just a few ticks off a marginal new 161.54 Eurex session low, and 10 year US T-notes are just above their 124- 29+ nadir at 125-00. To recap, the catalysts for softer bonds – Washington passing the 2018 budget resolution and Fed chair favourites said to be Powell and Taylor. Spanish 10 year Bono yield back up around 1.65% ahead of the anticipated Article 155 activation against Catalonia over the weekend.
Top European News
CaixaBank, Sabadell Say Business Normal After Calls to Pull Cash
Pearson Is Said in Advanced Talks to Sell Unit to Chinese Group
U.K. Budget Gap Narrows More Than Forecast on Solid Tax Growth
Austria’s Schelling Says ECB Should Slow Down Asset Purchases
Glencore Stake Swap Cements Ties With Russia’s Aluminum King
Telecom Italia Said to Be Open to Spinoff of Landline Grid
Betsson Drops Most in Year After a ‘Weak’ Third Quarter
Ericsson Gains on Improving Sentiment Amid High Short Interest
In currencies, the dollar index saw a recovery ahead of the 93.00 level, finding a bid following the US Senate’s decision to pass the budget blueprint, which is key to President Trump’s tax effort. EUR/USD failed to test October’s high, with the daily candle ‘head and shoulders’ formation, now evident, bears will look for a break through 1.1671 to indicate a change in direction in the pair, with eyes on the ECB next week. EUR/USD sees around 3bln worth of expires today between 1.1800 – 1.1850. USD/JPY has followed the vast majority of USD crosses in finding some greenback buying, however, has run into some resistance, with touted offers between 113.30/50. In cable, subdued data, and economical concerning commentary from BoE members Ramsden, Teneryo and Cunliffe this week has seen the percentage of a November hike from the BoE fall from 80% to around 70%. Cable has seen a bearish week, coming back to trade in the post Brexit range, a long term support trendline continues to act as a support, with bears likely to look for a break through 1.3. Brexit talk continues, with May, Davis and Merkel all weighing in yesterday; with Davis telling officials to step up planning for a potential no-deal in Brexit discussions. The Loonie will be in focus today, with inflation and retail sales due at 13.30. Excluding Canada’s latest employment report, where the focus was on part-time employment moving to full-time employment, data has been a concern for the BoC following their unexpected hike, as likelihood of another move in 2017 lessens. USD/CAD trades in consolidation of late, stuck in this October 1.2450 – 1.2600 range, with many awaiting for the aforementioned data to possibly give the pair some monthly direction.
In commodities, WTI and Brent crude futures hovering at the lows amid the upside seen in the greenback, with WTI pushing through yesterday lows. Similarly selling pressure has been observed in the precious metal complex due to the strength in the aforementioned USD. Gold fell 0.7 percent to $1,281.22 an ounce. Copper climbed 0.7 percent to $3.19 a pound.
Looking at the day ahead, today will be a big day for Brexit talks with EU leaders set to meet and discuss at the European Council meeting in Brussels in the morning. Away from that, the day ends with the Fed’s Yellen speaking in the evening. Datawise we get US existing home sales data for September. General Electric and Proctor & Gamble results will be due.
US Event Calendar
10am: Existing Home Sales, est. 5.3m, prior 5.35m; MoM est. -0.93%, prior -1.7%
2pm: Fed’s Mester Speaks on Global Regulatory Structure
7:30pm: Yellen Gives Lecture on Monetary Policy Since Financial Crisis
DB's Jim Reid concludes the overnight wrap
Stateside the S&P 500 looked at the early weakness and decided that it wasn’t going to let it ruin its recent run and turned round a 0.5% intra-day loss at the lows into a small (+0.03%) gain into the close, in part as Politico reported that Fed Governor Powell is the “leading candidate” for the Fed Chair after President Trump has now concluded interviews with the five potential candidates.
The report has also caused a small rally in US treasuries to close 2.9bp lower yesterday. Later on, Bloomberg reported that VP Pence and Treasury Secretary Mnuchin are advocating Taylor or Powell to President Trump.
Overnight, the most important news is that the senate has voted 51-49 to adopt the FY18 budget resolution which clears one obstacle and enables the Republicans to move onto the next stage of delivering tax reforms. This morning, UST10y have reversed yesterday’s move at are trading at 2.355% as we type, after being below 2.30% at the lows yesterday as risk markets were having a mini wobble. It does feel Treasuries have been all over the place this past week with CPI, the Fed Chair headlines, the risk off from yesterday and then the senate vote giving ammunition to both sides.
Yesterday’s early losses originally stemmed from Asia as after going to print yesterday, the Hang Seng fell from near flat deep into the afternoon session to then close -1.92% (worst since mid-August). This was on the back of sharp property sector falls as 3 month bank rates rose by the most this year. It couldn't have helped the subsequent risk-off environment to hear the Chinese Central
Bank governor Zhou warning of a possible 'Minsky moment' for the economy where “if we’re too optimistic when things go smoothly, tensions build up, which could lead to a sharp correction”. He didn’t specify which asset class he was referring to, but broadly noted that corporate borrowing in China is “very high” partly due to inadequate direct financing and inefficient capital allocation by companies. This morning in Asia, markets are trading modestly higher though, with the Hang Seng rebounding +0.98%, while Kospi (+0.54%), ASX 200 (+0.17%) and Nikkei (-0.07%) are slightly up as we type.
Elsewhere the world's biggest company - namely Apple - fell (-2.37%) yesterday as reports from the Chinese Economic Daily news suggested that orders for the iPhone 8 had been disappointing. Obviously next month's launch of the iPhone X was always going to overshadow the '8' so we'll see if that makes up for any disappointments. Given it makes up c4% of the S&P 500 and c12% of the Nasdaq then even us macro guys have to be aware of it. Suppliers of Apple also had a weak day in sympathy. Weaker earnings in Europe (e.g. Unilever, Nestle, Thales and Roche) also didn't help sentiment and neither did the signs that the Spanish
situation remains tense (more below).
Turning to Spain, where Catalan President Puidgemont has refused to denounce the claim to independence, noting that “if the Spanish government persists in blocking dialogue…the Catalan Parliament may proceed…to approve a formal declaration of independence”. In response, Spain’s government has issued a statement invoking Article 155 of the Constitution which starts the
process of potentially taking direct control of Catalonia. The Spanish cabinet will meet this Saturday to approve specific measures before seeking approval from the Senate, which could take weeks. Later on, sources told Bloomberg that senior lawmakers from the main pro-independence parties will meet next Monday in Catalan Parliament to discuss next steps. Spanish markets modestly
underperformed yesterday, with the IBEX -0.74% and 10y yields up 1.7bp while core European bond yields fell slightly (Bunds -0.1bp; OATs -1.3bp; Gilts -3.6bp).
Onto Brexit talks which remains at a stalemate over at the EU Summit, with one of the main sticking point being UK’s potential financial obligation to the EU. The Dutch PM noted that PM “May has to come up with more clarity on what is meant by other commitments in her Florence speech”. That said, rhetoric continues to offer a glimpse of hope as Germany Merkel’s noted that “at this point, it’s not sufficient to begin the second phase, but it’s encouraging enough to continue working (on preparatory work) in order to reach the beginning of the second phase (ie: talks on trade) in December” and that there is “zero indication” that Brexit talks won’t succeed. Back in the UK, First Secretary of State Green noted that it’s “hugely desirable” and likely that a Brexit deal will be reached, while Foreign Secretary Johnson said “that we’ll get….a great deal but with any negotiation, you’ve got to be prepared to walk away”.
Staying with politics, this Sunday, we will see the Japanese election where polls
suggests PM Abe should win a two thirds majority in parliament and secure his
third term. According to a survey by Sankei newspaper on Tuesday, it forecasts
PM Abe’s coalition side could win 300-335 seats out of a total of 465 seats (Abe’s
LDP takes c300, coalition partner takes c35), which is slightly higher than earlier
polls. A win by PM Abe could lead to a continuation of accommodative monetary
policy along with potential changes towards higher sales tax and the approval of
Now quickly recapping other markets performance from yesterday. The
Nasdaq fell 0.29% while Dow was broadly flat. Within the S&P, modest gains from
the utilities and health care sectors were broadly offset by losses from consumer
staples and tech stocks, while United Continental dropped the most in eight
years (-12.08%) after a disappointing profit forecast. European bourses broadly
weakened, with peripherals such as Italy (-0.99%) and Spain (-0.74%) slightly
underperforming the core indices (Stoxx 600 -0.63%, FTSE -0.26%). The VIX touched an intra-day high of 11.78 (highest since early September) but closed at
10.05 (-0.02pts) for the day.
Onto currencies, the US dollar index dipped 0.1% while the Euro gained 0.55%
and Sterling weakened 0.35%, partly impacted by the lower than expected retail
sales readings. In commodities, WTI oil fell 1.44% while Russia and OPEC are
reportedly speaking to other members behind the scenes to ensure an extension
of oil supply cuts at next month’s OPEC meeting. Precious metals rebounded
slightly after three consecutive days of losses (Gold +0.71%; Silver +1.50%)
while other base metals were mixed but little changed (Copper -0.60%; Zinc
+0.08%; Aluminium +0.87%).
Away from markets and onto central banker commentaries. The ECB’s Nowotny
noted that the ECB must decide in October on how QE will continue and that
“there are good arguments for a slow reduction of purchases”, while also
noting that “we don’t have to wait until inflation reaches 1.9%, we can normalise
policy earlier”. Elsewhere, BOE’s policy maker Cunliffe sounded a bit dovish
where he is “very clear” that a slow and gradual rate hike is warranted, but “when
that process starts is a more open question”, with his decision “based in large
part on whether I see domestic inflation pressure and what I see happening to
pay in the economy”.
Finally, arguably the most consequential surprise across markets this year has
been the slowdown in inflation. The slowdown began in March even as growth
strengthened and the labour market tightened. Large cross asset impacts have
understandably led to an acute market focus on inflation, its drivers and debate
as to its prospects, but it has also led to a large number of myths about inflation.
DB’s multi asset strategists discuss 6 of them in their note and suggests that if
inflation was judged by historical standards to be completely normal, then a Fed
behaving in line with its past behaviour would have policy rates at 350bp instead
of being at 113bp.
Before we take a look at today’s calendar, we wrap up with other data releases
from yesterday. The US macro data was a bit mixed. The October Philly Fed
business outlook index was materially above expectations at 27.9 (vs. 22
expected) and now slightly above the June reading, while the weekly initial
jobless claims reached a 44 year record low at 222k (vs. 240k expected).
Elsewhere, the continuing claims was broadly in line at 1,888k (vs. 1,890k
expected), while the Conference board leading index was down 0.2% mom
(vs. 0.1% expected). In the UK, the core September retail sales fell more than
expected, at -0.7% mom (vs. -0.2%) and 1.6% yoy (vs. 2.2% expected)
Over in China, as we noted yesterday, its 3Q GDP reading was in line at 6.8% yoy,
but both the September retail sales (10.3% yoy vs. 10.2% expected) and IP (6.6%
yoy vs. 6.5% expected) slightly beat expectations. Our China economists have
revised up their 4Q GDP growth forecast to 6.6% (+0.1ppt) and 2017 full year
forecast to 6.8% (+0.1ppt), as growth momentum has been stronger than they
expected, particularly in the service sector. This is likely supported by the wealth
effect from the property market boom in the tier 3 cities. In their view, growth
will likely slow in 2018 but the pace depends on the growth target to be set
by the new group of leaders in the Central Economic Working Conference in
December . On balance, our China team expect a flexible growth target for 2018 and for growth to slow to 6.3%. However, the risk to this forecast is to the upside,
if the leaders decide to keep the target at 6.5%.
Looking at the day ahead, today will be a big day for Brexit talks with EU leaders
set to meet and discuss at the European Council meeting in Brussels in the
morning. Away from that, the day ends with the Fed’s Mester speaking in the
evening. Datawise UK public sector net borrowing data for September and US
existing home sales data for September are the only releases of note. General
Electric and Proctor & Gamble results will be due.
New GE Chief Slashes Forecasts, Plans to Exit $20 Billion in Businesses (WSJ)
Uruguay’s President, Who Won a Fight With Big Tobacco, Is Now Targeting Alcohol (BBG)
Austrian coalition talks set to begin, far right likely partner (Reuters)
Wall Street’s Robots Still Have a Lot to Learn About Being a Human Trader (Bloomberg)
Tillerson Balances Trump’s Objectives With His Own (WSJ)
Lawyers Begin Sketching Strategy to Challenge Possible Nafta Withdrawal (WSJ)
Celgene abandons Crohn's drug trials, shares drop (Reuters)
Overnight Media Digest
- U.S. Senate Republicans adopted a budget for the next fiscal year, clearing a critical hurdle in the GOP push to overhaul the tax code. on.wsj.com/2gpoOQM
- U.S. Secretary of State Rex Tillerson described how he seeks to manage an often-fraught relationship with President Donald Trump, saying he tries to deliver short-term victories to an impatient commander-in-chief while focusing on a longer horizon himself. on.wsj.com/2gn2XcB
- The Federal Bureau of Investigation has joined the investigation into how a group of militants thought to be Islamists killed four American soldiers in Niger two weeks ago, a move that comes as U.S. officials face criticism over their struggle to answer questions about the incident. on.wsj.com/2goQ3uI
- Wal-Mart Stores Inc. is near a deal to add Lord & Taylor to its website, part of a broader effort by the retail giant to build an online shopping destination that can compete with Amazon.com Inc. on.wsj.com/2gpp6ak
- A federal judge sentenced Thomas C. Davis, the former chairman of Dean Foods Co, to two years in prison for engaging in a long-running insider trading scheme with legendary Las Vegas gambler William "Billy" Walters. on.wsj.com/2gp0Chv
- Personal-shopping service Stitch Fix has filed for an initial public offering, revealing that the six-year-old startup's annual sales have zoomed to nearly $1 billion at a time when traditional clothing retailers are struggling. on.wsj.com/2gnXlie
Goldman Sachs Chief Executive Lloyd Blankfein is planning to spend a lot more time in Frankfurt, he said on Thursday, as the Wall Street bank pushes ahead with plans to make the German city a major base after Britain leaves the European Union.
British lawmaker Nicky Morgan, chair of parliament’s Treasury Committee, voiced concern about a lack of gender and ethnic diversity at the top levels of the Bank of England, which currently has only two women serving across its three major policy committees.
Lyft Inc has raised $1 billion in fresh financing, the ride-services company said on Thursday, in a round led by one of Alphabet Inc’s investment funds, further complicating the convoluted world of ride-hailing alliances and dealing a blow to rival Uber Technologies Inc.
- Lyft has begun to explore going public in 2018 and is trying to strengthen its position by raising more capital, including $1 billion in new financing led by CapitalG, an investment arm of Google's parent company Alphabet Inc . nyti.ms/2gpvI8E
- Sean Penn and Netflix Inc are fighting over a documentary series "The Day I Met El Chapo: The Kate del Castillo Story" that will become available early Friday, with a lawyer for Penn saying in a letter to the streaming service that it is "hereby on notice that blood will be on their hands if this film causes bodily harm." nyti.ms/2gn0ChC
- U.S. President Trump has picked Joseph Simons to lead the Federal Trade Commission, the White House said Thursday. nyti.ms/2gp954d
- Senator John McCain and two Democratic senators moved on Thursday to force Facebook Inc, Google and other internet companies to disclose who is purchasing online political advertising, after revelations that Russian-linked operatives bought deceptive ads in the run-up to the 2016 election with no disclosure required. nyti.ms/2gnaZlE
THE GLOBE AND MAIL
Two of the biggest stars of the Canadian entertainment industry Gilbert Rozon and Eric Salvail have resigned from running their empires amid accusations they sexually harassed or assaulted people under their professional sway. tgam.ca/2goS8GR
Former Ontario premier Dalton McGuinty's chief of staff got instructions on how to double delete e-mails in the summer of 2012, a period when the government was under mounting pressure to release documents related to the controversial cancellation of two gas-fired power plants, court documents show. bit.ly/2gnW22E
A number of buyers have emerged to snap up assets from Cenovus Energy Inc as it divested oil and gas properties to pay down debt after announcing a C$1.3 billion ($1.04 billion) deal to sell its Palliser oil and gas properties. bit.ly/2gozW03
Ontario man William Whyte, owner and CEO of an armoured vehicle company Armet Armored Vehicles in Virginia, has been convicted for his role in a scheme to provide the U.S. with shoddy equipment for use in Iraq. bit.ly/2goaYxX
It’s no mystery how freight gets moved from point A to B every day. It takes a shipper, a carrier, and often times several intermediaries in between. But what about a future where those intermediaries – or middlemen – might become irrelevant and disappear?
Enter blockchain technology.
Blockchain is a type of distributed, decentralized ledger database used to record digital transactions that are shared in a technologically secure way. According to a blog by Blockgeeks, blockchain technology is like the internet in that it stores blocks of information across its network. It allows digital information to be distributed, but not copied. It was originally designed for Bitcoin, a digital currency that was invented in 2008.
In trucking, blockchain technology is said to expedite and better secure freight movement transactions for shippers and carriers. According to Sandeep Kar, chief strategy officer at Fleet Complete, numerous groups are actively considering this technology.
“That’s because various aspects of trucking could be impacted by blockchains,” Kar explained during TU-Automotive’s most recent Connected Fleets Conference in Atlanta.
Fleet Complete recently joined the newly created Blockchain in Trucking Alliance (BiTA), which is leading a global initiative to bring blockchain into the trucking industry to enhance the efficiency of freight movement.
Sandeep Kar discusses blockchain technology during Connected Fleets 2017. (Photo: Cristina Commendatore / Fleet Owner)
From a fleet perspective, Kar noted, blockchain technology will ensure better asset utilization and help the industry as a whole more accurately forecast and predict volumes. He added it will also enable better driver monitoring and whether the vehicle was operating under the right regulatory framework.
After the entire freight transaction is finished, the blockchain would provide an audit of the process to show fleets how they could have done better, Kar added.
“These are some of the benefits of the blockchain system,” he explained. “These are the kind of benefits that we wanted to drive to our customers.”
According to Kar, other benefits of blockchain include:
Transparency of price, ownership, and the entire process of the freight movement
Reduction in the cost of regulation compliance
Improved traceability and track ability
Expedited claims settlements
But when it comes to the middlemen who essentially claim a lot of revenues just by being intermediaries, Kar said there is a bit of threat for them. Once blockchain is adopted, it could end up completely eliminating the middlemen and shorten the supply chain, he emphasized.
“We have gotten so used to using our current infrastructures and systems that we’ve kind of become blind to the inefficiencies and the deficiencies of the current system,” Kar explained. “And that’s what blockchain is trying to do. It’s trying to open our eyes to the inefficiencies in the system.”
Some of the ongoing challenges tied blockchain include:
Not many people know about it
Concerns about cryptocurrencies and the volatility in these currencies
Confronting the existing infrastructure and system
“Right now we have trillions of dollars’ worth of monetary movement between parties that act as intermediaries, but you can’t just wake up one day and make them irrelevant,” Kar stressed. “So there is that resistance that is there.”
Craig Fuller, CEO of TransRisk and co-founder of the alliance, announced during the Connected Fleets Conference that BiTA, formed on Sept. 2, has 150 companies that signed up in that first month. He hopes the alliance will develop blockchain standards by and for the trucking industry.
Fuller referred to blockchain as a 'trustless network,' which means trust is not required to prove the validity of transactions.
“The power of blockchain is really about counterparties and working with other parties,” Fuller explained. “The important thing to know about us is that we’re bringing these disparate, sometimes and in many ways competitive, parties together to create a common framework to solve problems.”
Craig Fuller discusses formation of the Blockchain in Trucking Alliance during Connected Fleets 2017. (Photo: Cristina Commendatore / Fleet Owner)
Quoting a tweet from Deloitte, Fuller added that 10% of the global gross domestic product will be stored on blockchain by 2025. So if you’re not paying attention to blockchain, you should be, Fuller said, noting “it has the power to transform almost every element of this industry.”
Fuller highlighted some additional opportunities blockchain could lend to trucking. For instance, it could help fleets detect vehicle maintenance and quality assurance elements of trucks and other equipment.
“What’s the vehicle maintenance history and how do I ensure the quality of that truck was maintained?” Fuller asked. “In a blockchain environment you can actually have a trustless record. You actually have the ability to have all the information and everything that happens from that vehicle from the moment it rolled off the assembly line to the moment you get rid of it. All that information is recorded in the blockchain.”
Fuller added that blockchain also has the potential to create an environment similar to an “Airbnb of trailers,” which will be owned by a third-party entity and shared collectively with fleets. The blockchain will allow companies to know who has access to that equipment as well as who to charge for that equipment.
However, Fuller noted the most powerful part of blockchain is eliminating fraud and the bloat.
“Every single day there is $140 billion tied up in disputes for payments,” he explained. “The shippers end up saying, ‘You didn’t send me a proper bill.’ And the shipper sits and doesn’t pay it until that price is exact. It’s a dispute. It ties up cash flow and creates a real strain on the environment.”
So, how far away is the industry from a true implementation of blockchain? Kar said because carriers have a lot on their plates right now and he doesn’t believe they are ready for it yet, it could be another two to five years out. Yet, Fuller emphasized that blockchain will be ubiquitous in commercial applications well before autonomous vehicles.
David Morgan warns the stock market is overvalued and could sell off. “Panic is something that’s a very strong emotion humanly, and once that takes place it’s pretty hard to undo it with quick press of a button.”
David Morgan tells Silver Doctors he is not currently bullish in the short term for gold and silver.
Gold could go sideways or slightly down, Morgan says.
Mining stocks are holding their own pretty well, Morgan says.
Morgan says equity markets are extremely overvalued. And things could turn around rapidly given the right circumstances. If there’s a reason to sell, watch out. “Panic is something that’s a very strong emotion humanly, and once that takes place it’s pretty hard to undo it with a quick press of a button.”
Lastly, Morgan discusses the confirmed information about China’s plans to role out a yuan-denominated oil futures contract. While it has been falsely reported this contract will be gold-backed, Morgan explains it still bypasses the U.S. dollar and is a threat to the petrodollar. This is a “game changer,” he says.
Asian Metals Market Update: October-24-2017 By: Chintan Karnani, Insignia Consultants
Moves in the currency markets are dictating gold and silver. Technically gold and silver are in a neutral to bullish zone. There is not much news at the moment. Prices moves in gold, silver and currency markets reflect investor short sightedness. Fears that geopolitical risk can rise anytime is preventing investors not to take a medium term stance.
European shares are modestly lower as investors monitor tense events in Spain and as focus turns to Thursday’s ECB meeting; US equity futures have rebounded from yesterday's sharp but shallow selloff and are in the green amid rising odds of U.S. tax reform and the imminent unveiling of the next Fed chair while Asian shares rise and Japan extends its winning streak to a record 16 days. The euro edged higher after data showed Europe’s economy is maintaining momentum, while the USDJPY managed to recover all of yesterday's sharp losses.
The MSCI’s 47-country world share index stayed near all-time highs after a drop in General Electric shares on Wall Street had seen the ViX volatility index spike up, however that move has been largely faded since.
Overnight currency moves were mostly contained, but the greenback strengthened against most peers and U.S. equity futures edged higher amid continued speculation over who will lead the Federal Reserve, and as optimism over tax reform proved resilient. "There is some support building for Donald Trump’s tax reforms,” Ipek Ozkardeskaya, an analyst at London Capital Group, told Bloomberg by email. News reports suggest “that fiscal hawks may be willing to disregard deficit spending to allow Trump to go ahead with his tax cut plans to boost growth. If approved, the fiscal reforms will cost an arm to the government, but on the other hand, it is important for the congress to achieve some progress before the end of the year in order to restore confidence."
The USD rallied across G-10 for bulk of the session, with the DXY back to top of recent range between 50- and 100-DMAs. The New Zealand’s dollar stumbled to a five-month low as the incoming Labour coalition’s policies unsettled investors. Prime Minister-designate Jacinda Ardern’s tough stance on foreign investment in housing and on immigration could prove negative for the currency, given the country runs a current account deficit. In addition, Ardern said on Tuesday her government plans to review and reform the Central Bank Act to possibly include employment, alongside inflation, as a dual target. “Everything happening so far is something that is creating uncertainty when it comes to central bank independence,” said Manuel Oliveri, currency strategist at Credit Agricole. “But you also have to keep in mind Labour did point in that direction during the election so it’s not a huge surprise that they want such changes.”
As Bloomberg notes, given that the timing of an announcement on the next Fed chair isn’t certain and that tax reform is a lengthy process, investors’ more immediate focus looks set to be Thursday’s European Central Bank meeting. The ECB is expected to offer more insight into its plans for tapering the QE program that is currently planned to continue until the end of 2017. Expectations are for a €30 billion QE extension for at least 9 months, with some more dovish variants possible. Officials have acknowledged that stimulus is still required to nurture inflation and that interest rates will remain “at or below” current levels for the foreseeable future.
Ahead of the ECB, the consensus trade is to go short the 10Y Bund which however has so far failed to move the benchmark paper substantially as any asset volatility now appears a thing of the past.
Overnight, the euro was a little stronger after strong PMI data showed Europe’s economy maintaining momentum, but the region’s stocks drifted downward as investors kept one eye on events in Spain and the all-important ECB gathering; Bunds sold off from the open with further momentum driven by PMIs and related inflation commentary; USTs and gilts dragged lower in tandem, UST curve steepens. German banks rallied after takeover speculation on Commerzbank (+3.9%); energy stocks rally as crude futures react positively to further reports of output cut extension.
Japanese stocks rose again, with the Nikkei 225 Stock Average extending its record-breaking rally to a 16th day to a fresh 21 year high, as investors shifted their focus to corporate earnings from Sunday’s general election helped by the weaker yen which failed to maintain its gains during the US session. The Topix erased an early decline, completing a 12-day gain, the longest since November, with banks and telecommunications companies providing the biggest boost. Japan’s earnings season kicked off in earnest this week, with Canon Inc. and Nidec Corp. releasing results today, followed by Fanuc Corp., Fujitsu Ltd. and NTT Docomo Inc. later this week. “There’s still more room for Japanese stocks to advance, given the firm prospects for companies’ earnings,” said Kyouko Amemiya, a senior market advisor with SBI Securities Co. in Tokyo. “The economy as well as corporate performance are on firm footing globally. Japanese stocks still look cheap in relative to U.S. equities.” While Sunday’s general election result has already been priced in to a degree, stocks still have some “upside”,
Elsewhere in Asia, equity markets traded with modest gains in what was a quiet and rangebound trading session amid a lack of drivers. Regional bourses shrugged off the weak performance by their US counterparts which pulled back from record levels, with ASX 200 (Unch.) indecisive and Hang Seng (Unch.) and Shanghai Comp. (+0.1%) just about kept afloat as another substantial liquidity operation by the PBoC (140BN net on the session and a whopping 840BN in the past week) only provided minimal support heading to the close of the National Congress. Finally, 10yr JGBs were flat with demand subdued by a modest risk tone and after an uneventful enhanced liquidity auction for super-long JGBs.
Europe’s key stock benchmark was little changed, as most European stocks dipped and bond yields drifted higher on Tuesday, as data from the euro zone’s top economies bolstered the case for the European Central Bank to signal a sizeable cut this week to its stimulus measures. Individual equities dominate moves amid earnings reports, while strong manufacturing data provided support to risk. The Stoxx Europe 600 Index fell less than 0.1%, ahead of an ECB meeting later this week. Apple supplier AMS saw a spectacular 15 percent jump after it pointed to strong demand ahead of the iPhone X release while Boliden drops 9.9% on worse-than-expected profit. France’s CAC 40 up 0.3% on earnings and after October manufacturing data beat estimates. Commerzbank outperformed following the company drafting in financial advisers, preparing for potential bids from European rivals. Europe’s earnings season has begun gaining some traction, notably, Essilor, affirming guidance and leading the CAC.
Also overnight as reported earlier President Xi Jinping of China consolidated his power before the Communist Party’s unveiling of its top leaders on the Politburo and supreme Standing Committee on Wednesday. The composition may determine the pace of Xi’s reform plans, from deleveraging to modernizing the military. Stocks in Shanghai gained, while those in Hong Kong dropped.
In commodities, gold dipped 0.3 percent to $1,278.29 an ounce, the weakest in more than two weeks. West Texas Intermediate crude climbed 0.1 percent to $51.94 a barrel. LME zinc gained 1.2 percent to $3,167.50 per metric ton. LME copper advanced 1.3 percent to $7,092.50 per metric ton.
Interest rates were generally higher, with the yield on 10-year Treasuries increased three basis points to 2.39 percent, the highest in more than five months. Germany’s 10-year yield gained four basis points to 0.47 percent, the highest in almost four weeks. Britain’s 10-year yield climbed three basis points to 1.339 percent, the highest in more than a week.
AT&T, Eli Lilly, Lockheed, GM and McDonald’s among companies due to report earnings. Economic data include Markit manufacturing PMI readings.
Bulletin Headline Summary from RanSquawk
Bunds drag global bonds lower
In FX, NZD underperformed amid potential reforms at the RBNZ. Trump claims to be close on Fed Chair decision
Looking ahead, highlights include US Manufacturing and weekly APIs
S&P 500 futures up 0.1% to 2,566.00
VIX Index falls -0.29 (2.62%) to 10.78
STOXX Europe 600 down 0.1% to 390.36
MSCI Asia up 0.1% to 167.20
MSCI Asia ex Japan down 0.2% to 547.90
Nikkei up 0.5% to 21,805.17
Topix up 0.7% to 1,756.92
Hang Seng Index down 0.5% to 28,154.97
Shanghai Composite up 0.2% to 3,388.25
Sensex up 0.2% to 32,559.34
Australia S&P/ASX 200 up 0.06% to 5,897.61
Kospi up 0.02% to 2,490.49
WTI crude futures down 0.5%
Brent Futures down 0.3% to $57.21/bbl
Gold spot down 0.3% to $1,278.46
U.S. Dollar Index down 0.1% to 93.82
Bloomberg spot dollar index advances 0.1%
German 10Y yield rose 3.3 bps to 0.465%
Euro up 0.1% to $1.1762
Brent Futures down 0.3% to $57.21/bbl
Italian 10Y yield fell 3.7 bps to 1.737%
Spanish 10Y yield rose 0.6 bps to 1.633%
Top Overnight News
BOJ: considering a small cut to its inflation forecast for FY2017;
doesn’t see the need to expand stimulus as improving output gap and
tightening labor market will continue to push inflation higher according
to people familiar with the central bank’s discussions
As OPEC negotiates the extension of its oil production cuts until the end of 2018, it’s also quietly started working on a tapering-style exit strategy
The euro-area economy maintained its strong momentum at the start of the final quarter of this year, with rising workloads encouraging companies to take on new staff at the sharpest pace in more than a decade, PMIs showed
U.K. PM May’s cabinet will meet Tuesday as pressure mounts for it to agree the kind of trade pact Britain wants from the EU -- a day after she damped expectations of a swift Brexit transition deal
The EU is also preparing for a “no deal” with the British says Michel Barnier, the EU’s lead Brexit negotiator in an interview to L’Echo newspaper; EU President Donald Tusk revived the notion that the U.K. will stay in the bloc after all
Flow Traders NV reported a 35 percent plunge in net trading income in the third quarter as Europe’s largest trader of ETFs continued to suffer from reduced trading activity
On Wednesday, China will finally get an answer to the big question looming over the Communist Party’s biggest political event: Will President Xi Jinping clearly signal a designated successor? On Tuesday Xi’s name was enshrined in the party’s charter under its guiding principles -- an honor that eluded his two immediate predecessors
U.S. Govt: House Republicans aiming to release prelim tax reform legislation as soon as next week; plans to be released about seven days after Thursday’s vote on budget resolution, meaning bill text would be published on or before Nov. 3
Treasury Secretary Steven Mnuchin got a swift rebuttal after he went on
national television to claim a hypothetical Indiana family would save
$1,000 under President Donald Trump’s tax plan. At virtually the same
time on another network, White House Budget Director Mick Mulvaney
dismissed as flawed any attempt to predict the impact of the plan
European Oct. prelim composite PMIs: France 57.5 vs 57.0 est; Germany 56.9 vs 57.5 est; euro area 55.9 vs 56.5 est; manufacturing above consensus for all three regions; selling prices rose at the sharpest rate since June 2011
Global bonds: Sumitomo and Nippon Life both plan to buy unhedged foreign bonds in 2H FY2017
China’s ruling Communist Party approved a revised charter that enshrined President Xi Jinping’s name under its guiding principles, elevating him to a status that eluded his two immediate predecessors
White House’s Muddled Tax Message Clouds Pitch for Trump Plan
U.S. Lumber Companies Plan to Combine in $1.16 Billion Deal
U.S. Will Curb ‘Sneak-and-Peek’ Searches Microsoft Sued Over
Taylor’s Walk on Supply Side May Leave Him More Dove Than Yellen
Facebook Privacy Can Be Regulated in Germany, EU Court Aide Says
NZ PM-elect Ardern says will review, reform Reserve Bank Act
Tesla Calls on U.S. to Drop Perry’s Plan to Rescue Nukes, Coal
China Cuts Offshore Yuan Bond Sale on H.K. Market Correction: MOF
Novartis Plans to Give Ailing Alcon More Time for Turnaround
Rise in Texas Earthquakes Near Oilfields Prompts New Monitoring
Canon Boosts Op. Profit View Above Est., Plans Special Dividend
Boeing Is Said to Have Walked Away From C Series Deal: Globe
Asia equity markets traded with modest gains in what was a quiet and rangebound trading session amid a lack of drivers. Nonetheless, the regional bourses have shrugged off the weak performance by their US counterparts which pulled back from record levels, with ASX 200 (Unch.) indecisive and Nikkei 225 (+0.2%) mildly positive after the index recovered from early weakness triggered by a firmer JPY to print fresh 21-year highs. Hang Seng (Unch.) and Shanghai Comp. (+0.1%) just about kept afloat as another substantial liquidity operation by the PBoC only provided minimal support heading to the close of the National Congress. Finally, 10yr JGBs were flat with demand subdued by a modest risk tone and after an uneventful enhanced liquidity auction for super-long JGBs. PBoC injected CNY 130bln via 7-day reverse repos and CNY 120bln via 14-day reverse repos. PBoC set CNY mid-point at 6.6268 (Prev. 6.6205)
Top Asian News
Noble Group’s Next Battle Will Be Over $3 Billion Debt Pile
Bank of Japan Is Said to Consider Lowering Inflation Outlook
China Signals Steady Economic Policy as Liu Keeps Party Role
Sony Is Said to Plan Nov. Event for New Robot Roll-Out: WSJ
HK Stock Gains Evaporate as Caution Reigns Pre-Earnings
India Bonds Keep Gains as Jaitley to Make ‘Major Announcement’
Sumitomo Life Plans to Boost Foreign Bond Holdings in Fiscal 2H
European bourses trade subdued, as 9 out of 10 European sectors trade in the marginal red, supported by energy trading up around 0.30%. Despite the lack of direction in the index markets, stock specific news has resulted in volatility, as Commerzbank outperforms in the Dax, following the company drafting in financial advisers, preparing for potential bids from European rivals. Europe’s earnings season has begun gaining some traction, notably, Essilor, affirming guidance and leading the CAC. Early upside faded and reversed as trade turns defensive ahead of major risk events. Firmer than anticipated flash EZ PMIs probably gave sellers some fundamental/macro momentum, but in truth bears had already gained the upper hand in Bunds when the 10 year German bond topped out ahead of near term chart resistance again. Intraday longs are said to have thrown in the towel from the 161.46-40 area, with hefty stops triggered on a break of the lower level down to 161.28 and Bunds subsequently hitting 161.19. Next downside tech support 161.07, 10 year cash yield 0.47% with 0.5% and obvious target. UK Gilts also on the backfoot and down to 124.22, USTs likewise awaiting news on the next Fed chair.
Top European News
Deutsche Boerse Trading Probe Extended in Blow to Kengeter
Commerzbank Is Said to Hire Goldman, Rothschild as Advisers: FT
UniCredit Third-Quarter Net Rises on Gain From Pioneer Sale
Swedbank Falls as Investors Focus on Smaller Capital Buffers
Euro-Area Companies Expand Workforce as Order Growth Picks Up
Hawkish ECB Tapering Surprise to Give Bigger Jolt to Euro, Bunds
EU Still Floating Idea That Brexit Can Be Reversed Before 2019
In FX, a fresh setback for the NZD which print fresh 5-month lows at 0.6927. This came as NZ PM-elect Ardern unveiled government plans to review and reform the RBNZ’s Central Bank Act to possibly include employment, alongside inflation as a dual mandate. As it stands, unemployment is near decade lows, while jobs growth however, is at a 2-year low (figures for Q3 released at 2245BST). Although, given that the central bank does not exclude labour market data, its arguable whether a dual mandate will significantly alter the monetary policy skew. What has been brought into question however, is the autonomy of the RBNZ. AUDNZD further supported by the soft NZD, with the cross moving to its highest level since Apr’16. Near term resistance resides at 1.13, which could curb gains a see the cross top out, while the 2016 high is situated 1.1333. JPY: The bid in USD/JPY has been revived by the 16 consecutive days of gains for the Nikkei. Although, the upside could potentially top out just north of 114, with the highs seen in May and July at 114.38-49 within sight. Additionally, the price action may well be dictated by US yields as the 10yr approaches the key 2.4% yet again (currently 2.38%).
In commodities, oil commentary has once again leaked into the news, with Russia’s Energy Minister Novak stating that he plans to discuss an extension of oil cuts with Saudi’s Falih. Oil markets are fairly unfazed, dampened by the latest update of crude oil flows via the Iraqi Kurdistan pipeline to Turkey have modestly risen to around 300,000BPD, possibly indicating the restart of Iraqi/Kurdistan pipeline functionality. Copper continues to impress in metal markets, once again looking towards last week’s highs, aided by the stop hunt through USD 3.20. Elsewhere, gold has come off highs around 1300.00, looking at the key October 6th, 1261.30 low. OPEC is to work on exit strategy alongside cuts extension, according to sources.
Looking at the day ahead, the big highlight datawise are the October flash PMIs due in France (Mfg 56.7, exp. 56.0, Services 57.4, Exp. 56.9), Germany (Mfg 60.5, Exp. 60.2, Services 55.2, Exp. 55.6), the Euro area (Mfg. 58.6. exp. 57.8, Services 54.9, exp. 55.6) and the US. French confidence indicators for October and the Richmond Fed PMI in the US for October are also due. Onto other events, the ECB Bank Lending Survey will also be worth watching while in the UK Chancellor Hammond is scheduled to face questions in the House of Commons. The Bundestag convenes for its inaugural session following the election while in China the CPC wraps up with the appointment of the Central Committee. AT&T, General Motors, Novartis and McDonalds all report earnings.
US Event Calendar
9:45am: Markit US Manufacturing PMI, est. 53.5, prior 53.1
Markit US Services PMI, est. 55.2, prior 55.3
Markit US Composite PMI, prior 54.8
10am: Richmond Fed Manufact. Index, est. 16.5, prior 19
DB's Jim Reid concludes the overnight wrap
The dull start to the important ECB week should get a little impetus today with the release of the various flash PMIs which are currently at around multiyear highs in many countries. For example the Eurozone and both Germany and France’s manufacturing PMI are at 10 and 6 year highs respectively. For today consensus is expecting a small pullback in October, with manufacturing PMI in the Eurozone expected to be 57.8 (vs. 58.1 previous), Germany at 60 (vs. 60.6 previous) and France at 56 (vs. 56.1 previous). This morning, the Nikkei Japan manufacturing PMI was slightly lower at 52.5 (vs. 52.9 previous).
The quiet start to the week so far is partly due to market participants waiting for 'Super Thursday' when the ECB will announce their long awaited updated tapering decision. As we'll see later it's also the day the Catalan parliament meet to respond to Madrid's threat of direct rule and possibly declare independence. There was also a story from thehill.com and Politico yesterday that Thursday may see the US House vote on passing the Senate version of the budget that was approved last week. If so, and successful, this would accelerate the possibility of tax cuts as the weeks of reconciling the two budgets would be sidestepped. So all in all potentially a big day on Thursday.
Ahead of all that, tensions around Catalonia continue to bubble along as we build to a potential crescendo towards the end of the week. Overnight, Bloomberg reported that Catalan activists are considering mobilising human shields near government buildings to deter the Spanish government from taking control of the region. The leader of the main separatist group (Lluis Corominas) said “we’re calling for a peaceful and democratic defence of the
institutions”. Looking ahead, the full Catalan Parliament will meet this Thursday (9am local time), with prior Bloomberg reports suggesting Catalan President Puidgement may consider formally declaring independence. On the other side, the Spanish Senate will debate the Article 155 measures proposed by PM Rajoy on Thursday afternoon with final votes on Friday morning (9:30am local time). If the measures are passed, Rajoy’s new constitutional powers would take effect from next Monday. Elsewhere, El Confidential reported the Spanish Senate would approve intervention of Catalan government even if President Puigdemont calls for early regional election.
Staying with the trend, over in Italy, two of its wealthiest Northern regions have also voted on Sunday in referendums for more autonomy from the central government. The Lombardy region (includes Milan) had a 38% eligible voter turnout and of that, 95% voted for in favour of higher autonomy, while the Veneto region (includes Venice) had 57% voter turnout with 98% voting in favour. The two regions account of c25% of Italy’s population and c30% of economic output. Note the votes are non-binding and unlikely to lead to referendum for independence, in part as Milan and Venice had relatively lower voter turnout, at 31% and 45% respectively. However, it does partly highlight the recent shifts in European politics and perhaps lends greater support to the Northern League Party ahead of next year’s Italian election.
Staying with politics, it seems that a swift Brexit transition deal is increasingly less likely and may instead be part of a wider agreement that will be finalised later on. The PM’s spokesman James Slack said “everybody has always been clear that we’re looking to wrap all this up in one single go….everything will be agreed at the same time”. When asked later on, PM May avoided directly answering the question, but alluded that transitions is about “practical arrangements to reach the future partnership”, but you don’t know those arrangements “until you know what the future partnership is”. Her parliament address was relatively upbeat, signalling progress has been made on Brexit talk, in particular on EU citizen rights and the northern Irish border, but conceded that “we’re preparing for every eventuality to ensure that we leave in a smooth and orderly way”.
Elsewhere, the EC President Junker noted “nothing is true” in reference to a German newspaper article (Frankfurter Allgemeine) which noted the UK PM May “begged for help” from him during their working dinner last week and appeared disheartened and discouraged. Earlier on, Juncker reiterated that the UK must agree on a financial settlement with the EU before parallel talks can begin on the country’s future trade ties with the bloc.
Turning to the US and its search for the next Fed Chair. President Trump told reporters on Monday that he is “very very close” to finalising the winning candidate, but did not provide further details. DB’s Peter Hooper takes an updated look at the three candidates and believes if Ms Yellen do not get re-elected, then a Powell-led Fed makes more sense, in part as i) he would provide the highest degree of continuity to current policy, ii) he has had c5 years of experience working inside the Fed with a reputation as a consensus builder, and iii) while not a PHD trained economist, he has learned the trade well, as evidenced by his speeches and Q&A performance. For more details, refer to link.
This morning in Asia, markets have dismissed the negative lead from US last night and are trading marginally higher. The Nikkei (+0.17%), Hang Seng (+0.15%), Kospi (+0.08%) and Shanghai Comp. (+0.07%) all slightly up as wetype. Before this US bourses softened yesterday ahead of a bumper week for corporate results, with the S&P (-0.40%), Dow (-0.23%) and Nasdaq (-0.64%) all slightly lower. Within the S&P, most sectors excluding utilities (+0.05%) were in the red, with modest losses led by telcos (-0.96%) and industrial stocks. Seagate Technology bucked the trend to rise 12.62% after reporting higher profits and sales. The VIX reversed its three consecutive days of decline and jumped 11.0% to 11.07.
European equities were slightly higher, with the Stoxx 600 up 0.16%, driven by gains in tech and utilities stocks. Across the region, the DAX (+0.09%) and FTSE (+0.02%) were little changed while Spain’s IBEX fell 0.60% following continued tensions at Catalonia.
Over in government bonds, markets were slightly firmer to partly recover the larger losses back on Friday. Core 10y bond yields fell c2bp (UST -1.8bp; Bunds: -2.1bp, Gilts -2bp) while peripherals outperformed with Spanish and Italian yields down c4bp. At the 2y part of the curve, yields were also lower, with UST (-1.2bp), Bunds (-1.1bp) and Gilts (-0.4bp) all down slightly. Turning to currencies, the US dollar index edged higher (+0.16%) while the Euro fell 0.30%. Sterling bucked the trend to be marginally up (+0.06%), partly supported by UK PM May’s more positive address on progress with Brexit talks. In commodities, WTI oil was little changed (+0.12%) and precious metals increased following the risk off bias (Gold +0.14%; Silver +0.33%). Elsewhere, other base metals have also increased slightly (Copper +0.68%; Zinc +1.52%; Aluminium +0.18%).
Away from markets and back to US tax reforms where there has been a bit more clarity on its timing before its expected delivery by the end of the year. The House Ways and Means Chairman Kevin Brady said the timing for the bill “is very shortly”. The House Freedom Caucus Chairman Meadows noted that he has been promised by the House Ways and Means committee that they will release the tax plans on or before 3 November. Following on, he also noted that “I fully expect us voting on this by the middle to third week” of November. Elsewhere, Trump has weighed into the tax reform debate and tweeted “there will be NO change to your 401(k)” as this has “always been a great and popular middle class tax break that works and it stays”.
Over in Germany, the FT reported that according to an internal CDU party paper it obtained, the government has €30bn to spend over the next four years, yet the wish list from CDU and the other coalition partners (FDP & Greens) for tax cuts, social benefits and other spend has already totalled €100bn, which if true is a meaningful departure from Germany’s fiscal discipline. So will this election result force the purse strings to open a little in Germany? Elsewhere, Germany’s long serving finance minister Schäuble is expected to take up the role as the speaker of the Parliament when the Bundestag reconvenes today.
Before we take a look at today’s calendar, we wrap up with other data releases from yesterday, which saw a relatively quiet start to the week. In the US, the September Chicago Fed’s national activity index was higher than consensus at 0.17 (vs. -0.13 expected), with any reading above zero consistent with above trend growth. In Europe, the October flash consumer confidence improved slightly mom to -1 (vs. -1.1 expected), marking a fresh 16 year high. In the UK, the October CBI industrial trends survey was lower than expected, with the orders index falling to an 11-month low of -2 (vs. 9 expected), but the pricing indicator was steady at similar level as the past two months at 18. In Japan, the BoJ’s 3Q senior loan officer Survey reported similar results to the last quarter, with a small net balance of banks reporting household and corporate loan demand have increased slightly and a small net balance reporting that credit conditions had eased slightly.
Looking at the day ahead, the big highlight datawise will be the October flash PMIs due in France, Germany, the Euro area and the US. French confidence indicators for October and the Richmond Fed PMI in the US for October are also due. Onto other events, the ECB Bank Lending Survey will also be worth watching while in the UK Chancellor Hammond is scheduled to face questions in the House of Commons. The Bundestag convenes for its inaugural session following the election while in China the CPC wraps up with the appointment of the Central Committee. AT&T, General Motors, Novartis and McDonalds all report earnings.
GM Blunts Impact of Production Plunge With SUV Shift, Cost Cuts (BBG)
Italy ready to discuss calls for great autonomy: Gentiloni (Reuters)
Germany's Schaeuble elected Bundestag speaker to tackle far-right (Reuters)
Apple iPhone X Shipments to Be Half of Forecast, Nikkei Reports (BBG)
The FANG Stocks Are on Their Longest Losing Streak Since the Election (BBG)
Even a Nafta Collapse Won’t Keep Companies From Moving to Mexico (BBG)
Auto industry tells Trump 'We're winning with NAFTA' (Reuters)
Nike’s $50 Billion Bluster Looks Dead Just Two Years Later (BBG)
How I Accidentally Stiffed My Poor Venezuelan Waiter (BBG)
RIP Combustion Engines: Japan Shows Off Cars of the Future (BBG)
Overnight Media Digest
- Amazon.com Inc's open competition for its second headquarters triggered an extraordinary response, with the tech giant saying 238 cities and regions had bid for the project it expects to cost $5 billion over nearly 20 years. on.wsj.com/2yKARk0
- A murder trial started Monday for a Mexican man named Jose Ines Garcia Zarate who set off a national immigration debate after he shot and killed a woman two years ago on a popular San Francisco pier. on.wsj.com/2yHk1lP
- New York Attorney General Eric Schneiderman has opened an investigation into the Weinstein Company to determine whether its handling of allegations of sexual misconduct against company co-founder Harvey Weinstein violated state or city laws. on.wsj.com/2yJzu4O
- U.S. President Donald Trump pledged Monday to protect a popular retirement-savings program, promising to leave it untouched in the forthcoming GOP plan to overhaul taxes. on.wsj.com/2yJd6Zr
- Iowa is withdrawing its application for an ambitious program to reshape the Affordable Care Act after federal officials laid out tough conditions for its approval, a decision that signals limits to states' efforts to alter parts of the health law. on.wsj.com/2yKBlGQ
UK’s Financial Conduct Authority is considering further action against Royal Bank of Scotland Group Plc as it published a review into the bank’s alleged mistreatment of business customers after weeks of political pressure for disclosure.
Prime Minister Theresa May said in the House of Commons on Monday that she is waiting for the European Union’s decision on the future of the relationship it wants with the UK, following reports that May is trying to postpone a cabinet showdown over the shape of any post-Brexit trade deal until next year.
Inflation in the UK is likely to stay above target with a squeeze on living standards for years to come following sterling’s sharp depreciation since the Brexit vote, according to research by blog by Bank of England staff published ahead of next week’s monetary policy meeting.
Yorkshire Water, one of Britain’s biggest water companies, is reviewing the Jersey registration of its holding company, and will close three subsidiary companies in the Cayman Islands, after conceding that the industry faces a crisis of public trust.
- The U.S. Department of Justice will limit its use of secrecy orders that prevent internet providers from telling people when the government has obtained a warrant to read their email during an investigation, according to a department memo issued last week. nyti.ms/2zzcmFD
- Amazon.com Inc said on Monday it got a total of 238 proposals from cities and regions across North America that want to be the home of its proposed second headquarters. nyti.ms/2z3ysUq
- Starting on Monday, drivers in London whose cars do not meet European Union emissions standards had to pay an additional daily penalty. nyti.ms/2i1vkxh
- U.S. President Donald Trump said he would oppose a cap on contributions to the popular tax-deferred retirement plans, effectively killing one GOP plan to help pay for a $1.5 trillion tax cut. nyti.ms/2yLFE6O
- A report by the Government Accountability Office, Congress' auditing arm, urges the Trump administration to take climate change risks seriously and begin formulating a response. nyti.ms/2lbqrH2
THE GLOBE AND MAIL
** Bombardier Inc and Boeing Co were closing in on a deal this summer, brokered by Canadian government officials, before the American plane maker abruptly pulled the plug and walked away, people familiar with the matter say. tgam.ca/2z4bTPC
** The Ontario Securities Commission has, for the first time ever, given the green light to an "initial token offering," as regulators around the world grapple with the emerging online fundraising method. tgam.ca/2z3DgJh
** Federal government auditors are scrutinizing 2,800 preconstruction condo flips in the Toronto area as part of a crackdown on tax evasion in the real estate industry. tgam.ca/2z3MXYr
** The Finance Department and the Bank of Canada are set to reveal their latest economic assessments and forecasts, one day after the other. bit.ly/2z4ntKn
** Hudson's Bay Co CEO Gerald Storch's announcement late Friday made him the fourth high-profile executive to leave HBC in the past six months, and happens as the veteran retailer heads into the sector's busiest period of the year. bit.ly/2z4vQFY
- Hector Sants, former head of the financial regulator, will give evidence behind closed doors at the High Court in a 600 million pounds ($792.12 million) lawsuit brought by shareholders against Lloyds Banking Group Plc over its acquisition of HBOS in 2008. bit.ly/2z3ynjx
- Aluminium and hydroelectricity producer En+ Group will have a market capitalization of up to $10 billion after it floats on the London Stock Exchange next month. bit.ly/2z2LWjh
- Phones 4U billionaire John Caudwell has accused his former business partner and protege of being an "amazing liar" who presided over a "reign of terror" at the wealth management firm Signia Wealth. bit.ly/2z34G2b
- President of the European Commission Jean-Claude Juncker has rushed to salvage relations with UK at a dangerous point in the Brexit negotiations by denying claims that the Prime Minister Theresa May had begged for help at a recent private dinner, instead insisting she had been in "good shape" and "fighting". bit.ly/2z3xWFV
- Private hospitals group Spire Healthcare on Monday said it has rejected a takeover by rival Mediclinic that valued the firm at around 1.2 billion pounds ($1.58 billion). bit.ly/2z2hS7q
- Britain's TV and radio company Arqiva has signalled plans for a stock market debut to raise 1.5 billion pounds and pay off some of its heavy debt pile. bit.ly/2z1dVje
- UK's Labour MP Jared O'Mara has resigned from Parliament's women and equalities select committee after historical comments he posted online re-surfaced. bit.ly/2z3xgjR
- UK Financial Conduct Authority (FCA) is assessing whether it can take "further action" over Royal Bank of Scotland Group Plc's controversial treatment of small businesses, after an independent review. bit.ly/2z2lne1
- Mark Johnson, former HSBC Holdings Plc banker, has been found guilty by a U.S. jury of defrauding UK-headquartered Cairn Energy Plc in a $3.5 billion currency trade. ind.pn/2z3a0m6
Ending a business relationship that dates back more than 100 years, Sears announced this morning it would no longer sell Whirlpool appliances. As first reported by the WSJ, in a note sent to its stores last week, Sears said that Whirlpool was making demands that would have made it difficult to sell its appliances at a competitive price, although some have speculated that the true reason for the end in the century-old colaboration is Whirlpool's concern about Sears viability.
"Whirlpool has sought to use its dominant position in the marketplace to make demands that would have prohibited us from offering Whirlpool products to our members at a reasonable price," Sears wrote to its employees. The department store chain added that it will provide "tools and instructions" to its employees regarding how to deal with "excess inventory," and how to move into its Kenmore or other appliance brands.
Earlier this year, Sears CEO Eddie Lampert took aim at the retailer's vendors, saying: "We will not simply roll over and be taken advantage of — we will do what's right to protect the interests of our company and the millions of stakeholders we serve." Sears went on to sue two of its Craftsman vendors in contract disputes. The lawsuits have been resolved.
The end to the partnership is effective immediately and includes the larger appliances and small kitchen appliances of Whirlpool subsidiaries Maytag, KitchenAid and Jenn-Air.
In recent years, Sears has been ravaged by new competition for years from stores such as Home Depot and also from Amazon.com and other online retailers, and has seen its business obliterated even as vendors have tightened receivables pressuring Sears' liquidity and sending its default probability surging.
Sears said it would sell off the remainder of its Whirlpool inventory. Its stores will now only sell its Kenmore products and other brands including LG, Samsung, GE, Frigidaire, Electrolux and Bosch. The department store chain added that it will provide "tools and instructions" to its employees regarding how to deal with "excess inventory," and how to move into its Kenmore or other appliance brands. Moving forward, Sears said it will push its other top brands for appliances, which include LG, Samsung, GE, Frigidaire, Electrolux and Bosch.
The Upton Machine Company, which eventually became Whirlpool, sold its first washing machines to Sears in 1916. Sears later took a stake in the appliance company in 1921 according to CNBC.
On its earnings call on Tuesday morning, Whirlpool said that it informed Sears in May that it would no longer supply Sears with Whirlpool brand products as companies couldn’t reach terms that were acceptable to both parties. However, Whirlpool would continue to supply Kenmore branded appliances.
To comfort concerned investors, WHR said Sears represents only 3% of total sales with branded portion only a small fraction of total sales. The Company plans to fully recover raw material cost increases over 2 years with price increase that were announced.
Still, WHR was down 10% premarket after the Michigan-based appliance manufacturer on Monday reported worse-than-expected third-quarter earnings, and trimmed its financial outlook. Whirlpool said it expected to earn $11.10 to $11.40 per share for 2017, down from a prior forecast of $12.40 to $12.90 a share. Whirlpool Chief Executive Marc Bitzer has cited rising raw material costs and "unfavorable price/mix" as weighing on the company's margins. Whirlpool will hold its quarterly earnings conference call Tuesday morning.
As for sears, its shares have tumbled nearly 30% in 2017 with more to come.
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Is China's Bitcoin Ban On The Verge Of Being Lifted? - Gordon Chang Kitco NEWS
Published on Oct 24, 2017
Bitcoin has cooled off after nearing in on a record high of more than $6,000 this week, but many investors are hopeful that if China lifts its ban on the cryptocurrency, it could add fuel to its run-up. But Gordon Chang, author of Nuclear Showdown, is not so certain liberalization is in the currency’s future. “There has been optimism that after the Communist Party’s 19th National Congress there is going to be liberalization in many areas of the economy -- that is possible. But cryptocurrencies are something of a special case,” Chang said on Monday. In September, China banned mainland residents from trading in cryptocurrencies on exchanges.
Corporations ‘throwing a hissy fit’ over NAFTA changes – analyst RT America
Published on Oct 23, 2017
New NAFTA rules seek to eliminate incentives to outsourcing jobs and freeing member-countries to set their own policies on trade. Canada’s chief NAFTA negotiator told the US not to push too hard in renegotiating the agreement, likening Canada to “the girl next door” and easily taken for granted. Lori Wallach, director of Public Citizen’s Global Trade Watch, joins “News with Ed” to offer her insight.
Kotlikoff: America in Worse Financial Shape than Russia or China
-- Published: Tuesday, 24 October 2017
By Peter Diekmeyer
America’s 2017 fiscal gap will come in near $6 trillion, nine times higher than the $666 billion deficit announced by the US Department of the Treasury week, says Laurence Kotlikoff, an economics professor at Boston University.
“Our country is broke,” says Kotlikoff, who estimates total US government debts at more than $200 trillion, when unfunded liabilities are included. “We are in worse shape than Russia, China or any developed nation.”
Worse, says Kotlikoff, who has testified before Congress, government officials are well-aware that many of America’s debts and accruing liabilities are being written off the books.
However, for the most part, they are keeping their mouths shut.
A two-tier reporting system
The upshot is a de facto “two-tier” financial reporting system, in which politicians and insiders have access to key data buried in footnotes about unfunded liabilities, which indicate that there are huge problems in the economy.
The public, on the other hand, in slews of Presidential and Congressional Speeches and publications, is led to believe that while things are tough, overall everything is OK.
According to Kotlikoff, a long-time activist for fiscal rectitude, the problem stems in large part from the fact that the US government has been spending almost all of Americans’ approximately $795 billion in social security payroll taxes to pay current bills, rather than investing them to fund retirees’ benefits.
The upshot is that on a net basis, the US government has no money to pay all the benefits that have been promised. Politicians know that defaults will occur, they just haven’t figured out how to finesse this.
Fiscal gap accounting: telling Americans how much government has borrowed
Kotlikoff, unlike most, has a solution. He believes that the US government should adopt what he calls “fiscal gap accounting”, which involves putting all future receipts and expenditures on its books.
The idea is that if Americans knew about all the money that their politicians were borrowing and spending, they would be able to make better decisions as to the usefulness of those policies.
They would also be able to better protect themselves.
If the US government produced a financial statement that listed the $200 trillion in unfunded liabilities that Kotlikoff says it owes, workers might make different decisions about how much they will save for retirement.
Sadly, current de facto US government practice - inspired by Keynesian thinkers such as Paul Krugman - is for governments to spend, tax, borrow and print as much money as possible, in an effort to keep the economy perpetually running at full steam.
The idea is to leave future generations to deal with the problems.
The Clinton coverup
Kotlikoff and many others have been trying to change this.
More than 1200 of the country’s top economists have endorsed a bipartisan bill that requires the Congressional Budget Office to do both fiscal gap and generational accounting on an ongoing basis.
David Howden, a professor of economics and academic vice-president of the Ludwig von Mises Institute of Canada, describes economic theory as crystal clear as to how to measure government liabilities, namely using the infinite-horizon fiscal gap. He says that Kotlikoff’s reasoning is “pretty sound.”
In fact, the methodology has been tried before, by George Bush the Elder, who included fiscal gap accounting in some of his budgeting.
However, the Clinton Administration killed the practice and scored huge political points in the process.
Even today, decades later, few people realized that the only reason that the Clintons were able to balance their budgets was by not recording all of the US government’s debts.
Republicans weren’t stupid, though.
When they saw that there was no political penalty to be paid for cooking the books, they jumped on the bandwagon, a policy that the Trump Administration continues to this day.
Information asymmetry: keeping Americans uninformed
There are few pleasant takeaways from all this. True, some alternate fiscal gap accounting calculations suggest that things may not be as bad as Kotlikoff says.
Others says that the problem does exist, but by eliminating the pensions of those who earn above a certain level, or by postponing retirement dates, the system could be set straight again.
However even in the best of cases, Kotlikoff is correct on one crucial point: America is unable to meet its obligations as they become due. That is the definition of bankruptcy.
In a sense, it should hardly come as a surprise that politicians are hiding this fact.
Because if America is indeed in worse economic shape than Russia or China, voters might think twice about who they want to lead them.
Peter Diekmeyer is a business writer/editor with Sprott Money News, the National Post and Canadian Defence Review. He has studied in MBA, CA and Law programs and filed reports from more than two dozen countries.
The views and opinions expressed in this material are those of the author as of the publication date, are subject to change and may not necessarily reflect the opinions of Sprott Money Ltd. Sprott Money does not guarantee the accuracy, completeness, timeliness and reliability of the information or any results from its use.
Freight activity index launched by U.S. Bank
Purports to measures quantitative changes in shipment and freight spend activity across the country. Fleet Owner Staff | Oct 22, 2017
During a press conference here at the 2017 American Trucking Associations (ATA) Management Conference & Exhibition (MC&E), the banking giant showed off its new U.S. Bank Freight Payment Index (to be published quarterly) that will use data from transactions processed through U.S. Bank Freight Payment from clients across a range of industries – including automotive, manufacturing, food and retail – to break down regional and national shipping patterns.
Bob Costello, ATA’s chief economist, will offer commentary on freight trends as part of the index's quarterly reports.
The company highlighted index analysis from the third quarter include as part of its press event:
An 8.3% jump in the U.S. Bank National Spend Index, the largest quarterly gain since the final quarter in 2014, reflects a tighter truck market, in part from increased vehicle demand in the aftermath of Hurricanes Harvey and Irma, U.S. Bank said.
The U.S. Bank National Shipment Index increased 3.3%; slower than the 5.8% surge in the second quarter but still solid, considering the impacts from the aforementioned hurricanes.
The acceleration in factory output as the U.S. dollar retreats from high levels, as businesses began reinvesting in capital equipment.
One of the features touted for this new index is that it breaks down data into five U.S. regions – West, Southwest, Midwest, Southeast and Northeast – based on the state of origin for a shipment.
“Freight shipments are generally not uniform across the country,” noted ATA’s Costello in a statement. “That’s what makes the U.S. Bank Freight Payment Index so useful. It is regional and gives a good snapshot into the differences in economic climate from one end of the country to the other.”
Regional highlights and analysis for the third quarter include:
The Northeast region saw the biggest shipment index gain, at 10%. The gain was helped along by better manufacturing activity and slightly higher housing starts compared to the second quarter.
Shipments in the Southeast inched up 0.1%, as Hurricane Irma disrupted the supply chain. At the same time, spend volume jumped nearly 5% as truck capacity tightened.
The Midwest led the pack in overall spend, jumping 13.3%, assisted by a rebound in general manufacturing activity.
Though this index is new, U.S. Bank said its aggregated data goes back to 2010, to help provide “a sense of trend lines” over time.
Daimler’s Nielsen: Truck production will finish 2017 strong
Company also rolls out new improvements to Cascadia model, alongside new mobile application offerings. Sean Kilcarr | Oct 23, 2017
ORLANDO. Truck production is expected to “finish strong” this year, with “no pause at all” in commercial vehicle orders, according to Roger Nielsen, president and CEO of Daimler Trucks North America (DTNA).
In a round-table interview with reporters here at the 2017 American Trucking Associations (ATA) Management Conference & Exhibition (MC&E), Nielsen added that there are “no plans” at the moment to increase sticker prices on DTNA’s models, though he explained that there is “definitely pressure” as the rising costs of raw materials “is an area of discussion.”
“Our plan is to remain focused on fuel efficiency and safety; that’s everything in trucking,” Nielsen said.
Roger Nielsen, president and CEO of Daimler Trucks North America.
While he didn’t provide specific numbers, he added that year-to-date (YTD) truck sales are up for DTNA versus the same point in 2016. Freightliner Business Class medium-duty model and severe-duty model sales are up 9% and 16% versus last year, while Western Star sales are up 30%. Meanwhile, sales of Freightliner Custom Chassis Corp.
(FCCC) and Thomas Built Buses (TBB) among other specialty” models are up 9% as a group.Though sales of “premium” linehaul tractors are off 1% versus last year, overall, DTNA’s total YTD truck sales for the NAFTA region is up 6% versus 2016.
Nielsen commented on a wide range of issues during his meeting with reporters, touching on everything from truck platooning to autonomous driving and electrification:
• He views the company’s Detroit Connect Virtual Technician remote diagnostic system as “more and more of an advantage” in the trucking market in terms of reducing downtime for repairs. “It is all about uptime in this market now,” Nielsen noted.
• He said everything DTNA is doing in terms of developing platooning and autonomous technology is “aimed at safety; that’s what we are putting our money on – everything we can do to make the driver’s life safer and help them complete their mission,” in part because “we don’t believe trucks will be completely driverless in the future.”
• In terms of truck platooning research “there is technically no limit” as to how many tractor-trailers one can “synch together.” However, “we are still searching or applications that make sense for two-truck platoons; we’ve not seen anyone yet asking for five-truck platooning applications.”
• Nielsen noted that DTNA now refers to itself as “a mobile device company that happens to build trucks and buses” because today’s trucks and buses are becoming like iPhones; the technological “base” for different applications.
• “It doesn’t make sense for a customer to have 18 different [communication] contracts for cameras, braking systems, telematics, and other technologies,” he explained. “Our capacity, our ‘box,’ can provide a single electronics and communication platform. Apple for example does not write every software application for its iPhone; it acts as a host for them.”
• While DTNA is watching fuel economy and greenhouse gas (GHG) regulation rollback discussions closely, “regardless of what happens, we’ve moved on with our business plans,” Nielsen said.
• A major concern with autonomous vehicle technology is the “shifting of liability” when it comes to crashes and managing traffic congestion, he said; issues still being debated.
• Are electric trucks viable? Nielsen noted that DTNA plans a “full launch” of the eCanter all-electric medium-duty truck built by its Mitsubishi Fuso division in Japan, the U.S., and European Union nations in 2019 with four models, followed by “more models in multiple classes” in 2020 and beyond.
• “We believe we still need more power density from the batteries and lower total cost of operation (TCO),” he said. “We’re working with fleets right now to define different use cases.”
DTNA also made several product announcements during the annual ATA MC&E.
First the company is offering a series of upgrades to the Freightliner Cascadia family of heavy-trucks, including:
• Keyless entry that that not only offers buttons for locking and unlocking the doors but that also rolls down windows and tests the bulbs on the truck’s exterior lights prior to driving the vehicle. Each truck purchase includes two keyless entry transmitters that are paired at the plant, with one transmitter capable of being paired to multiple trucks.
• A new built-in power supply for medical devices, powered by an absorbent glass mat (AGM) battery mounted under the bunk and vented externally that offers eight to 10 hours of power for equipment such as a Continuous Positive Airway Pressure (CPAP) device for drivers with sleep apnea.
DTNA is also making its new Detroit Connect mobile application available for download for Freightliner and Western Star customers who have an active Detroit Connect subscription, which allows them to access information about their vehicles’ performance without needing to be at a desk or on a computer.
The new app, available for iOS or Android-enabled mobile devices, is available for free in Apple’s App Store or Google Play, DTNA said, with access to the new Detroit Connect portal and mobile app included with any active Detroit Connect subscription at no charge.
Finally, the OEM noted that its Detroit Connect Virtual Technician remote diagnostic system can now deliver remote fault event diagnostics for Detroit DT12 automated manual transmissions (AMT) – monitoring up to 150 distinct faults for that gearbox.
The Virtual Technician diagnostic process for the DT12 is similar to the process for Detroit engine and after-treatment systems, DTNA said, with fault events “categorized” based on how severe vehicle drivability is affected.
“Since we launched Virtual Technician in 2011, we have been improving it by integrating additional Detroit components,” said Kary Schaefer, general manager, marketing and strategy, Daimler Trucks North America. “We pride ourselves on helping customers understand their truck’s health and maximizing the uptime.”