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“Only fools, pure theorists, or apprentices fail to take public opinion into account.” – Jacques Necker
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Just as you would expect for the last day of what has historically been the worst month of the year, equity futures are modestly lower this morning ahead of a busy slate of economic data. Treasury yields are slightly lower, and crude oil prices are higher even after reports that oil flows through the Strait of Hormuz are nearing pre-war levels. Gold prices are up over 1%, while Bitcoin is fractionally higher at 83,700.
Asian stocks had a mixed showing overnight. Japan experienced the largest gains, with the Nikkei rallying over 2% as shares of SoftBank spiked over 6%. Chinese stocks also rallied but by much more modest amounts as the Shanghai Composite rallied 0.3%. The Chinese government announced several new stimulus measures to help boost domestic demand and support the property market. These include mortgage interest subsidies and an easing of monetary policy and came just as PMI readings for the manufacturing and service sectors moved into expansion territory in September.
While Japan and China traded higher, South Korea traded lower, with the KOSPI falling 0.5% as August Industrial Production declined 4.8% m/m versus forecasts for an increase of 0.5%. Retail Sales also fell 1.8%.
European stocks are mostly little changed this morning, with the STOXX down 0.1%. France is leading the losses with a decline of 0.5%, followed by Italy, which is down 0.3%. UK stocks are bucking the trend with a modest gain. UK GDP was slightly better than expected, coming in at 0.5% q/q versus forecasts for an increase of 0.4%, while German Retail Sales rose less than expected (1.3% vs 1.6%), and French CPI fell less than expected (-0.3% vs -0.5%).
As mentioned above, it’s a busy economic calendar today. It started with the ADP Private Payrolls report, which came in at 90K versus forecasts of 74K. At 8:30, there was a deluge, with Personal Income coming in weaker than expected, while Personal Spending was in line with forecasts (0.9%). PCE was in line with forecasts, but July was revised lower, and Core PCE was lower than expected. GDP was revised higher, while the GDP Price Index came in weaker than expected at 6.1% versus 6.4%. The market loved the data, and futures have moved firmly into positive territory.
China’s stimulus measures announced overnight come at a time when Chinese stocks were just starting to show signs of a new leg lower, at least from the perspective of a US investor. The China Large Cap ETF from KraneShares (FXI) has been stuck in a downtrend for months now and just yesterday broke below its lows from last week.
Japanese stocks have fared much better in recent weeks. The uptrend in the MSCI Japan ETF (EWJ) remains intact even as it has repeatedly run into resistance in the high $90s range.
The chart of South Korea (EWY) looks nearly identical to the chart of the Roundhill Memory ETF (DRAM). They even have very similar fees as well (59 bps for EWY and 65 bps for DRAM)! After selling off sharply from its June high, the ETF has recovered even as it has yet to clear through resistance at the $193 level.
Moving over to Europe, the Vanguard FTSE Europe ETF (VGK) has been under pressure all month, breaking through its 50-day moving average early in the month and looking for support at its 200-day moving average for the last week.
Moving closer to home, Latin American stocks are trading back below their 50 and 200-DMAs again after bouncing from these levels in August.
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