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Global Stocks Selling Off as Turkey Gets Closer to an Economic Crisis

Aug 10, 2018

US Stocks                                                                                                                                                                           Start Your Free Trial Today

  • Global stocks are declining this AM with worries about an economic crisis in Turkey weighing on sentiment 
  • Turkish President Recep Tayyip Erdogan, who just won reelection this past June, is pressuring the Turkish Central Bank to keep rates unchanged arguing that higher interest rates lead to higher inflation - this contrasts with conventional economic theory which argues the opposite 
  • The Turkish Lira is down 7.19% against the USD$ to TRY5.9498; for the week, the Lira has weakened 17.69%
  • US stocks index futures are pointing to a negative open in NY with the Dow Jones minis -0.38%, S&P500 minis -0.42% and Nasdaq 100 minis -0.52%
  • Altbaba (AABA) August 17 OTM Calls and Puts, Apple (AAPL) August 10 OTM Calls, EEM September 21 OTM Calls, and SPY August 10 OTM Calls are the most heavily traded options contracts in the US pre-market
  • US 10-Year Treasury Bonds are higher with yields down 3.27 basis points to 2.8931%
  • The US Treasury 2s-10s Spread has narrowed 2.04 basis points to 0.26%
  • WTI Crude is currently little changed at USD$66.81/bbl with the Brent-WTI spread up USD$0.58 to USD$4.49/bbl
  • Gold is currently little changed at USD$1210.67/oz

International Stocks

  • European stocks are dropping the most in a month this AM with concerns about Turkey’s economic problems (caused by nationalistic populism) spreading to the Eurozone, especially the banking sector 
  • The Euro Stoxx 600 is currently down -0.8%, the FTSE 100 is down -0.57%, the DAX is down -1.55%, and the CAC 40 is down -1.09%
  • Oil & Gas (-0.81%), Automobiles & Parts (-1.55%), and Telecommunications (-1.03%) stocks are the top performers in the Euro Stoxx 600 today
  • Investor sentiment for European stocks is negative with the advance/decline ratio for the Euro Stoxx 600 currently at 0.15x
  • 87 stocks in the Euro Stoxx 600 are at 4-week highs while 41 stocks are at 4-week lows
  • 54 stocks in the Euro Stoxx 600 are overbought while 13 stocks are oversold according to the 16-day RSI Measure
  • EUR€ is currently down -0.521% against the USD$ to 1.1467
  • GBP£ is currently down -0.444% against the USD$ to 1.2767
  • CHF is currently little changed against the USD$ at 1.0058
  • German 10-Year Bunds are higher with yields down -3.5 basis points to 0.34%
  • UK 10-Year GILTs are higher with yields down -3.8 basis points to 1.258%
  • Asian stocks closed their trading sessions negative to finish the week in the red with major tech stocks leading the sell-off across different Asia stock exchanges as investors worried about a contagion effect from Turkey’s economic problems
  • The Nikkei 225 finished down --1.33%, the Hang Seng ended down -0.84%, the Hang Seng China Enterprise declined -0.7%, and the CSI 300 was +0.22%
  • Investor sentiment for Japanese stocks finished negative with the advance/decline ratio for the Nikkei 225 closing at 0.18x
  • 18 stocks in the Nikkei 225 hit 4-week highs while 32 stocks reached 4-week lows
  • 11 stocks in the Nikkei 225 closed overbought while 11 stocks closed oversold according to the 16-day RSI Measure
  • The Hang Seng closed down 0.84%, Hang Seng China Enterprise declined 0.7%, and the CSI 300 rose 0.22%
  • Investor sentiment for Hong Kong stocks finished negative with the advance/decline ratio for the Hang Seng closing at 0.19x
  • 5 stocks in the Hang Seng hit 4-week highs while 4 stocks reached 4-week lows
  • 0 stocks in the Hang Seng closed overbought while 0 stocks closed oversold according to the 16-day RSI Measure
  • Japan 10-Year Government Bonds are higher with yields down -1.4 basis points to 0.101%
  • JGBs 2s-10s Spread has narrowed 1 basis points to 0.21%
  • JPY¥ is currently down 0.153% against the USD$ to 110.91
     

Cryptos

  • The Commonwealth Bank of Australia is partnering with the World Bank to issue a bond on a blockchain platform.  The bond, called bond-I, is based on the internal technology research by the Commonwealth Bank of Australia which is experimenting with having investors and banks interacting through nodes on the blockchain to help capital for the bonds to be raised, transacted and paid back more efficiently.
  • The lighting network is now making it easier for Bitcoin to become the P2P payment system that many early Bitcoin adopters believed.  Apps are built on layer-two technology and permits users to send small amounts of money P2P.  Unlike other payment systems like PayPal where the fees could eat up a large portion of tiny transactions, the fee on the lightning network is only 10 satoshis or a fraction of $0.01.  
  • While investors continue to focus on the SEC’s recent rejection of the Winklevoss Twins’ Bitcoin ETF application and the delay in the decision-making process for the VanEck-SolidX Bitcoin ETF, there are 9 additional applications for Bitcoin ETFs in the SEC queue.
  • Tencent is testing a new blockchain feature on its WeChat messaging app in an effort to speed up payments made on the platform.  In China, at the moment, merchants are required to use different payment systems for individuals and firms.  When merchants pay employees, they are required to manually type in the taxpayer number on the receipt.  The new blockchain feature would help speed up that payment process and may also help the government crackdown on tax evasion.  Tencent is trialing the new technology in the province of Shenzen with several local businesses owned by Tencent.

*Data in Total Return; Source: S&P Capital IQ

S&P 500 Sector Performance

Light green is month to date, dark green is year to date

Data in Price Return as of Previous Day's EOD, Source: S&P Capital IQ

Russell 1000 Factor Performance

Light green is month to date, dark green is year to date

Data in Price Return as of Previous Day's EOD, Source: S&P Capital IQ

Stocks Trending in the News

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  • With European banks down for a third day, a report in the Financial Times today states that the ECB's Single Supervisory Mechanism is particularly concerned with 3 banks that have high exposure to Turkey, the three banks cited were BBVA (BBVA SA), Unicredit (UCG IM)  and BNP Paribas (BNP FP)
  • Catepillar (CAT) presented a bullish outlook for its business as a conference today, stating they see room for growth with most of their end users, saying miners have not even begun full-scale vehicle replacement.  The company is focused on growing and will return cash "proper time"
  • Dropbox (DBX) announced its COO is stepping down, a figure who was key in its IPO earlier this year.  The news came with results that included 27% revenue growth to US$339mn.  The stock lost 8% post-market trading yesterday on the news.
  • Ericsson (ERICB SS) announced it will start producing network gear in US in 4Q18 and Jabil will initially take care of production.  Ericsson will decide in the coming quarters whether to build their own factory.  In the meantime they will hire 400 engineers in the US for product development in anticipation of the 5G  wireless rollout.
  • Google (GOOGL) is entering the outdoor ad business in Germany.  Google will use user data to post ads on digital screens in places like railway stations and shopping centers according to a report in the local press
  • Mercari (4385 JP), the Japanese online marketplace whose IPO launched this past quarter, posted a 3.5bn yen loss in its first reporting as a public company.  Its recent IPO was a 135bn yen offering, the largest for a Japanese tech company in over 2 years.
  • Morgan Stanley (MS) issued a research report warning that Asian semiconductor stocks at this point have risks that far outweigh any rewards given several cyclical risks.  Chip companies across Japan, South Korea and Taiwan traded lower on the news.
  • News Corp (NWSA) beat 4Q revenue estimates posting US$2.69bn versus US$2.65bn consensus, adjusted EPS of 8 cents beat 6 cents expected.
  • Qualcomm (QCOM) has reached a settlement with Taiwan’s anti-trust regulators.  As part of the settlement the US$773mn fine will be reduced by 88% and Qualcomm agreed to invest US$700mn in Taiwan over the next 5 years on R&D.
  • Ryanair (IAG LN) is suffering through its first ever strike, with unions demanding higher pay and benefits that its CEO is not willing to accept.  Today at least 400 flights will be cancelled as little progress has been made in talks.
  • Samsung (005930 KS) introduced its new Galaxy Note 9 to a generally lukewarm reception.  Its main update was the addition of the S Pen and its top model tops out at $1,250.  Analysts have commented this unit is just a placeholder until a totally redesigned unit is launched next year
  • Sanofi (SAN FP) was upgraded to buy at Citi today with a price target of 93 euros (last trade ~74 euros).  Sanofi recently reported results that beat estimates for 2Q but with 3Q guidance well below consensus.
  • State Bank of India (SBIN IN) posted a 2Q loss of 48.8bn rupees, its third quarterly loss in a row.  An increase in bad loan provisions caused the loss after the CEO has assured of improved results last quarter.
     

Cryptocurrencies Today

*Source: Stockdio

Stock Movers

Top Buy Winners and Losers
WINNERS TICKER SECTOR INDUSTRY 1 DAY RETURN 5 DAY RETURN YTD
EXPRESS SCRIPTS HOLDING CO ESRX Health Care Health Care Providers & Services 3.66% 4.81% 8.4%
KAR AUCTION SERVICES INC KAR Industrials Commercial Services & Supplies 2.18% 5.2% 21.16%
FORTINET INC FTNT Information Technology Software 2.03% 1.07% 51.94%
DOMINO'S PIZZA INC DPZ Consumer Discretionary Hotels, Restaurants & Leisure 1.57% 5.18% 44.85%
OGE ENERGY CORP OGE Utilities Electric Utilities 1.56% 2.08% 15.14%
LOSERS TICKER SECTOR INDUSTRY 1 DAY RETURN 5 DAY RETURN YTD
WEX INC WEX Information Technology IT Services -1.8% -2.96% 25.57%
BROADCOM INC AVGO Information Technology Semiconductors & Semiconductor Equipment -1.32% 0.11% -19.56%
WESTERN UNION CO WU Information Technology IT Services -1.21% -8.46% 1.01%
NORTHROP GRUMMAN CORP NOC Industrials Aerospace & Defense -1.2% -2.46% -3.95%
SEI INVESTMENTS CO SEIC Financials Capital Markets -1.15% 0.49% -18.2%

On Mobile/Tablet scroll to the right.  Source: S&P Capital IQ

Top Short Winners and Losers
WINNERS TICKER SECTOR INDUSTRY 1 DAY RETURN 5 DAY RETURN YTD
MURPHY OIL CORP MUR Energy Oil, Gas & Consumable Fuels -7.5% -8.48% -4.63%
GREENSKY INC GSKY Information Technology IT Services -7.43% -5.99% -38.47%
APACHE CORP APA Energy Oil, Gas & Consumable Fuels -6.35% -2.55% -0.6%
REGENXBIO INC RGNX Health Care Biotechnology -5.61% -6.32% 65.2%
PORTOLA PHARMACEUTICALS INC PTLA Health Care Biotechnology -20.24% -17.08% -45.91%
LOSERS TICKER SECTOR INDUSTRY 1 DAY RETURN 5 DAY RETURN YTD
ROKU INC ROKU Consumer Discretionary Household Durables 19.32% 21.01% 9.61%
SANGAMO THERAPEUTICS INC SGMO Health Care Biotechnology 10.32% 10.68% -13.72%
SAREPTA THERAPEUTICS INC SRPT Health Care Biotechnology 9.41% 6.82% 82.53%
CARVANA CO CVNA Consumer Discretionary Specialty Retail 8.26% 16.31% 102.65%
AVALARA INC AVLR Information Technology Software 7.82% 21.36% 4.13%

On Mobile/Tablet scroll to the right.  Source: S&P Capital IQ