Thursday, October 11, 2018

10/11/2018 - **Overnight Markets and News**

**Overnight Markets and News**

*Dec E-mini S&Ps (ESZ18 -0.70%) this morning are down -0.78% at a 3-month low and European stocks are down -1.35% at a 1-1/2 year low as Wednesday's stock rout continues into today.  The dollar and government bond yields fell to 1-week lows and commodity prices slid.  Dec COMEX copper (HGZ18 -1.47%) is down -1.33% at a 3-week low and Nov WTI crude oil (CLX18 -1.71%) is down -1.69% at a 2-week low.  Crude oil was also under pressure after API data late Wednesday showed U.S. crude inventories jumped +9.75 million bbl last week.  Losses in European markets accelerated after the German Economy ministry cut its German 2018 GDP forecast to 1.8% from an April estimate of 2.3% citing "protectionist tendencies" and "international trade conflicts."  Speaking at the IMF's annual meeting in Bali, Indonesia, U.S. Treasury Secretary Mnuchin downplayed the 2-day plunge in equity prices as he said, "the fact that there's somewhat of a correction given how much the market has gone up is not particularly surprising."  Also, Chicago Fed President Evans said he wasn't aware of "anything happening in the last couple of weeks that alter my basic take that financial stability conditions are reasonably moderate, and that we're in reasonable shape at the moment."  Asian stocks settled sharply lower: Japan -3.69%, Hong Kong -3.54%, China -5.22%, Taiwan -6.31%, Australia -2.74%, Singapore -2.69%, South Korea -4.41%, India -2.19%. China's Shanghai Composite plunged to a 3-3/4 year low and more than 1,000 stocks, or 1 in 4 of the stocks listed on the Shanghai, fell by their limits.  Japan's Nikkei Stock Index dropped to a 1-month low as exporters led the decline after USD/JPY tumbled to a 3-week low.

*The dollar index (DXY00 -0.38%) is down -0.35% at a 1-week low.  EUR/USD (^EURUSD +0.45%) is up +0.46% at a 1-week high.  USD/JPY (^USDJPY -0.03%) is down -0.03% at a 3-week low as the plunge in global equities spurs safe-having buying of the yen.

*Dec 10-year T-note prices (ZNZ18 +0-115) are up +13 ticks at a 1-week high.

*ECB Governing Council member Hansson said Eurozone wage growth is finally accelerating and a shortage of equipment is placing constraints on companies' production, and these trends "should spill over eventually into core inflation."

*Japan Sep PPI rose +0.3% m/m and +3.0% y/y, stronger than expectations of +0.2% m/m and +2.9% y/y.

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**U.S. Stock Preview**

*Key U.S. news today includes: (1) weekly initial unemployment claims (expected +2,000 to 209,000, previous -8,000 to 207,000) and continuing claims (expected +10,000 to 1.660 million, previous -13,000 to 1.650 million), (2) Sep CPI (expected +0.2% m/m and +2.4% y/y, Aug +0.2% m/m and +2.7% y/y) and Sep CPI ex food & energy (expected +0.2% m/m and +2.3% y/y, Aug +0.1% m/m and +2.2% y/y), (3) EIA weekly Petroleum Status Report, (4) Treasury auctions $15 billion of 30-year T-bonds, (5) Sep monthly budget statement (Aug -$214.1 billion), (6) 2-day meeting begins of G-20 finance ministers and central bank chiefs in Bali, Indonesia.

*Notable Russell 2000 earnings reports today include: Delta Airlines (consensus $1.74), Walgreens Boots Alliance (1.45), Commerce Bancshares (0.96).

*U.S. IPO's scheduled to price today: Eqillium (EQ), Anaplan (PLAN).

*Equity conferences during the remainder of this week: none.


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**Overnight U.S. Stock Movers**

*Square (SQ -10.12%) dropped more than 8% in after-hours trading after CFO Sarah Friar said she is leaving the company to become CEO of Nextdoor.

Lumentum Holdings (LITE -2.93%) was upgraded to 'Overweight' from 'Neutral' at JPMorgan Chase with a price target od $80.

Core Laboratories NV (CLB -5.50%) was reinstated with an 'Underperform' at Wolfe Research with a price target of $100.

Sage Therapeutics (SAGE -5.76%) was rated a new 'Outperform' at Oppenheimer with a price target of $170.

Fluor (FLR -4.24%) tumbled 12% in after-hours trading after it forecast Q3 revenue of $4.60 billion, weaker than consensus of $4.95 billion.

Helmerich & Payne (HP -5.06%) was reinstated with an 'Underperform' at Wolfe Research with a price target of $60.

CRISPR Therapeutics AG (CRSP -0.57%) jumped 13% in after-hours trading after it said the FDA lifted its clinical hold on the CTX001 drug, a treatment for sickle cell disease'

Imperva (IMPV +27.98%) was downgraded to 'Neutral' from 'Outperform' at Macquarie with a price target of $55.

Liberty Oilfield Services (LBRT -4.87%) was rated a new 'Outperform' at Wolfe Research with a price target of $29.

VOXX International (VOXX -5.90%) tumbled nearly 7% in after-hours trading after it reported Q2 sales fell -4.1% to $108.9 million, below consensus of $114 million.

Atomera (ATOM -2.81%) dropped more than 15% in after-hours trading after it announced that it will shares of its common stock in an underwritten public offering, although no size was given.

EMKOR (EMKR +3.45%) rose 2% in after-hours trading after Northern Right Capital boosted its stake in the company to 5.49%.
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**Market Comments**

*Dec S&P 500 E-minis (ESZ18 -0.70%) this morning are down -21.75 points (-0.78%) at a fresh 3-month low.  Wednesday's closes: S&P 500 -3.29%, Dow Jones -3.15%, Nasdaq 100 -4.44%.  The S&P 500 on Wednesday slumped to a 3-month low and closed sharply lower on continued concern about higher interest rates and on US/Chinese trade tensions as Fastenal dropped -7% after it said the trade war with China is raising its material costs and will crimp its profit margins.  Energy stocks fell as crude oil prices fell -2.39% to a 1-1/2 week low.

Dec 10-year T-notes (ZNZ18 +0-115) this morning are up +13 ticks at a 1-week high.  Wednesday's closes: TYZ8 -2.00, FVZ8 +2.00.  Dec 10-year T-notes on Wednesday closed lower on supply pressures as the Treasury auctions $74 billion of T-notes and T-bonds this week.  T-notes were also undercut by hawkish comments from New York Fed President Williams who said "further gradual increases in interest rates" are the best way to foster a sustained economic expansion.  T-notes saw some underlying support from increased safe-haven demand as stock prices plunged.

The dollar index (DXY00 -0.38%) this morning is down -0.335 (-0.35%) at a 1-week low, EUR/USD (^EURUSD +0.45%) is up +0.0053 (+0.46%) at a 1-week high, and USD/JPY (^USDJPY -0.03%) is down -0.03 (-0.03%) at a 3-week low.  Wednesday's closes: Dollar Index -0.160 (-0.17%), EUR/USD +0.0029 (+0.25%), USD/JPY -0.69 (-0.61%).  The dollar index on Wednesday closed lower on the sell-off in the S&P 500 to a 1-3/4 month low, which forced USD/JPY to a 2-week low on increased safe-haven demand for the yen.  There was also a rally in GBP/USD to a 2-week high on a report that Brexit negotiators believe the UK and EU could settle an exit agreement by Monday.

Metals prices this morning are mixed with Dec gold (GCZ18 +1.16%) +13.4 (+1.12%), Dec silver (SIZ18 +0.62%) +0.094 (+0.66%) and Dec copper (HGZ18 -1.47%) -0.037 (-1.33%) at a 3-week low.  Wednesday's closes: Dec gold +1.9 (+0.16%), Dec silver -0.074 (-0.51%), Dec copper -0.026 (-0.93%).  Metals on Wednesday settled mixed.  Metals prices were undercut by hawkish comments from New York Fed President Williams who said he favors "further gradual increases in interest rates."  Metals prices were also undercut by the slump in the S&P 500 to a 1-3/4 month low, which is negative for economic confidence and industrial metals demand.  Metals prices were supported by a weaker dollar and by the sell-off in stocks, which boosted the safe-haven demand for precious metals.

Nov WTI crude oil prices (CLX18 -1.71%) this morning are down -$1.24 a barrel (-1.69%) at a 2-week low and Nov gasoline (RBX18 -2.11%) is -4.09 (-2.02%).  Wednesday's closes: Nov crude oil -1.79 (-2.39%), Nov gasoline -5.70 (-2.74%).  Nov crude oil and gasoline on Wednesday closed lower with Nov crude at a 1-1/2 week low and Nov gasoline at a 2-week low.  Crude oil prices were undercut by concern that Hurricane Michael will curb fuel demand as Mizuho Securities predicts U.S. fuel demand may fall by 1 million bpd due to the hurricane.  Crude oil prices were also undercut by expectations that Thursday's weekly EIA data will show U.S. crude supplies rose +2.5 million bbl.




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