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Newsletter: In the Markets – Week-Ending October 28
Crystal Brook Advisors
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United States: After surging in September, consumer confidence fell 4.9 points in October. Despite the pullback, confidence remains at levels consistent with consumer spending continuing at a decent clip in the fourth quarter. (1) Interest rates have remained accommodative through 2016. Household liabilities are up 2.8 over the past year, the fastest pace of this expansion. That said, this would mark the slowest year-ago pace in the 1950-2007 period, suggesting households remain cautious about overleveraging after their housing boom. In addition, low rates have kept the service ratio, or the ratio of total required household debt disposable income, near record lows. (1)

Europe: The Belgian government has reached a deal to back the free trade pact between the European Union and Canada, reviving hope for a precarious agreement that was supposed to be officially signed today with Canadian Prime Minister Justin Trudeau. (3) Poland’s state-owned oil and gas company PGNiG has said it is ready to sue the European Commission for breaching EU treaties if it fails to impose fines on Russia’s Gazprom, which the Polish company has accused of abusing its monopolistic position as a gas supplier to Europe. (4)

Asia: Korea’s economy grew 0.7% in the third quarter. Although that is a bit slower than the 0.8% growth reported in Q2, the outturn was a bit stronger than expected. (1) Asian equity markets were broadly lower on Thursday, with traders focused on oil-price declines overnight and disappointing data out of China. (2) China’s central bank continued to weaken the yuan, fixing it 0.05% weaker against the U.S. dollar on Thursday. However, unlike previous yuan depreciation pushes, traders seemed to be taking this weakening cycle in stride. (2) In Australia, the National Australia Bank said its full-year net profit tumbled to 352 million Australian dollars (US $269 million) in the year through September from $6.34 billion a year earlier, as it booked losses on the sale of its U.K. banking business and control of its life insurance operations. (2)

Latin America: Citi announced that it has reached a definitive agreement to sell its consumer banking business in Argentina to Banco Santander Rio. (5) The foreign ministers and heads of delegations from the countries that make up the European Union (EU) and the Community of Latin American and Caribbean States (CELAC) have begun arriving in Santo Domingo for their meeting this Tuesday and Wednesday. (6) In an update on operations through the end of September, MEO Australia, one of the few Western companies working in Cuba, said it identified oil plays in so-called Block 9 that combine for an estimated 8.2 billion barrels of oil in place. The company’s best estimate is that it could recover about 395 million of those barrels. (7)

Monday 10/24

• Blue chips Caterpillar Inc. and 3M Co. dropped after cutting their estimates, outweighing optimism with United Technologies Corp. and Procter & Gamble Co.’s earnings. Apple Inc. fell in after-hours trading as it reported sliding prices for its smartphones and forecast lower-than-expected profitability over the holiday period. (8)

Tuesday 10/25

• International equity outflows in japan are at a very high record as investors are losing faith in Abenomics. (9)
• The Dow Jones industrial average rose 139.40 points at session highs before closing approximately 75 points higher, with UnitedHealth contributing the most gains to the tune of 59 points. That said, IBM shaved off about 26 points on the Dow. (1)

Wednesday 10/26

• Chipotle shares are also dipping in extended trading after the burrito chain reported sales at existing restaurants are down 22% from a year ago. (9)
• Southwest Airlines stock plunges on lower fares. (9)

Thursday 10/27

• General Electric is in talks with Baker Hughes, the oilfield services group, about potential partnerships, but is not discussing a takeover, the company said on Thursday evening. (4)
• US stocks fell on Thursday as investors turned cautious in the face of mixed earnings results, as well as a sell-off in top tier government bonds and a rally in the US dollar. (4)
• Amazon shares dropped more than 6% in late trading on Thursday after the e-commerce company disclosed a smaller rise in its quarterly profits than Wall Street anticipated. (4)

Friday 10/28

• Bond prices were steady. The yield on the 10-year Treasury note remained at 1.85%. (11)
• The dollar rose to 105.44 yen from 105.29 yen. The euro rose to $1.0928 from $1.0898. (11)
• Germany’s DAX edged down 0.3 percent while France’s CAC 40 held steady. Britain’s FTSE 100 fell 0.2%. Japan’s benchmark Nikkei 225 gained 0.6% and South Korea’s Kospi fell 0.2%. In Hong Kong the Hang Seng lost 0.8%. (11)

Market Close

U.S. stocks were little changed on Friday, as a strong read on economic growth was overshadowed by a mixed batch of corporate earnings, which muddied the issue of whether stock valuations were justified. (10) The DJIA, NASDAQ and the S&P 500 closed negatively (12), as a reaction to political friction in the U.S., as there are reports of new Clinton-email investigations by the FBI. (13)

Contributor: Matthew Scheivert

Sources:
Wells Fargo Economics Group: (1), Market Watch (2), Financial Post (3), The Financial Times (4), Businesswire (5), Latin America Herald Tribune (6),United Press International (7), Bloomberg (8), CNN Money (9), Morningstar (10), Newser.com (11), The Wall Street Journal (12), Reuters (13)