www.zerohedge.com
For the first day in three S&P futures have pulled back modestly
from record levels as some investors cautioned that gains had gone too
far, too fast, European shares are mixed while Asian equities extended
their longest rising streak in almost two months as continued gains in
Japan and India offset the losses in Hong Kong. The dollar ended a
two-day advance as TSY yields dropped in what has become a close
correlation trade (see below) while oil and gold rose, perhaps in
response to the ongoing plunge in bitcoin.
Following yesterday's main, and largely disappointing events - the
unveiling of the new iPhone(s) - European shares have faltered as a
global equity rally showed signs of flagging, with Apple suppliers
struggling after the new iPhone release disappointed with a later than
expected shipping date. Chipmakers supplying to Apple were among the
worst performers, with AMS down 3.9 percent, while Dialog Semiconductor
slipped 1.7 percent and STMicro fell 1.1 percent.
Traders said their shares were under
pressure due to Apple’s new $999 iPhone X shipping later than expected,
on November 3. The price tag could also dent demand for the device in
markets such as China. “With the iPhone coming in around $1,000 it will
be interesting to see how healthy demand is,” said Mike Bell, global
market strategist at JP Morgan Asset Management. “If it’s relatively
healthy I think it shows that there is still quite a lot of pricing
power for U.S. companies and that consumers have confidence.”
Bloomberg writes this morning that
record stock prices are provoking concern in some corners of the
market, with the number of investors seeking protection from a possible
plunge jumping. Leon Cooperman, the billionaire founder of hedge fund Omega Advisors, says a correction could start “very soon.” The
imminent reduction of bond purchases by central banks in coming months
will put pressure on riskier assets including high-yield bonds and
equities, according to Citigroup Inc. According to the latest BofA FMS
report, the last month saw the largest jump in market participants
"taking out protection" in 14 months.
“Central banks will tread carefully and the direct impact of global
tapering on the real economy will likely be modest,” Citigroup
economists led by Ebrahim Rahbari wrote in a report. “But there is a material risk in our view that major asset price corrections could be triggered by this global tapering,”
with U.S. high-yield corporate debt, euro-region periphery sovereign
bonds, euro-area corporate bonds, global equities and emerging-market
assets most at risk, they wrote.
Furthermore, geopolitical concerns also remain after North
Korea said it will accelerate its plans to acquire a nuclear weapon that
can strike the U.S. homeland in its first response to fresh United
Nations sanctions. Earlier, Treasury Secretary Steven Mnuchin
warned the U.S. may impose additional sanctions on China -- potentially
cutting off access to the American financial system -- if it doesn’t
follow through on the new UN restrictions
With all that, Europe's Stoxx 600 index headed for the first drop in
six days after U.S. benchmarks and the MSCI All-Country World Index
closed at all-time highs a day earlier.
Miners led the decline as the
price of industrial metals including copper and nickel retreated.
The MSCI Asia Pacific Index advanced 0.1% with basic materials and
consumer discretionary shares rising the most among industry groups.
Hong Kong’s Hang Seng Index fell 0.3 percent, while the Shanghai
Composite Index fluctuated before adding 0.1 percent. The Topix index
rose 0.6 percent at the close in Tokyo. Australia’s S&P/ASX 200
Index was little changed and the Kospi index in Seoul finished the
session 0.2 percent lower. Among Apple suppliers, Hon Hai Precision
Industry Co. and Pegatron fell, weighing on the Taiex index, which was
down 0.7 percent. AAC Technologies Holdings Inc. in Hong Kong also
declined. Apple slid along with some of its biggest suppliers on
Tuesday. Japan’s Topix climbed for a third day as investors focused on
the local currency’s decline. India’s benchmark S&P BSE Sensex rose
to a five-week high, led by the country’s most-valued company Reliance
Industries Ltd. Hong Kong’s Hang Seng Index declined after nearing the
key resistance level of 28,000. “Positive overnight leads support Asian
markets to seek continued upside in the day, though we may witness more
caution within the region,” Jingyi Pan, a market strategist at IG Asia
Pte Ltd, wrote in an note.
In FX, the overnight session was dominated by a sharp reversal in the
pound, with U.K. wages coming in weaker than expected underscored the
dilemma facing Bank of England policy makers meeting on Thursday to
review interest rates. Meanwhile the theme of inflation uptrend is
intact across Europe, with CPI prints in Germany and Spain matching
estimates; dollar bulls turn cautious, take some money off the table as
market attention turns to U.S. CPI data on Thursday, while Canadian
dollar advances as WTI crude rises for a third day; Treasuries and core
euro-area bonds trade steady, with brief pressure on bund futures
heading into auction supply window.
In rates, the yield on 10-year Treasuries fell one basis point to
2.16 percent. Germany’s 10-year yield decreased one basis point to 0.39
percent. Britain’s 10-year yield dipped two basis points to 1.087
percent.
West Texas Intermediate crude extended an advance after the
International Energy Agency said global oil demand will climb this year
by the most since 2015. Gold climbed 0.1 percent to $1,332.60 an ounce.
Copper declined 1.6 percent to $2.99 a pound, the lowest in more than
three weeks. The Bloomberg Commodity Index fell less than 0.05 percent
to 84.79.
Economic data include MBA mortgage applications, PPI and oil
inventories. Cracker Barrel and United Natural are reporting earnings
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