November 17, 2019
Equities fluctuated throughout the past week driven by mixed headlines on the trade front, disappointing Chinese and Japanese numbers, further deterioration in the Hong Kong protests and the end of the Q3 earnings season. Investors remained optimistic regarding the outcome of the U.S.-China negotiations, expecting U.S. and China to sign the “phase one” by the end of the year and December tariffs to be delayed or removed. Investors also continue to expect permanent Huawei waivers to be granted very shortly and the EU auto tariffs to be delayed, while they can be “hopeful” for a removal of the (already implemented) U.S.-China Sep tariffs. In Asia, Chinese activity data for October came out weaker and below expectations; Industrial production rose 4.7% from a year earlier, (est: 5.4%), retail sales expanded 7.2% (est: 7.8%) and, FAI slowed to 5.2% in the first ten months (est: 5.4%). That was the lowest reading in comparable data back to 1998. Japan’s economy slowed sharply and more than expected in Q3 (0.2%aa; est: 0.9%) while Germany remained weak while avoiding a recession (Q3 GDP 0.1%q/q; est: -0.1%q/q).U.S. and European stock markets extended their recent gains last week, both finishing higher for the sixth straight week, registering gains of less than half of one percent gain in North America and Europe. Asia Pacific stock markets struggled; Japan slipped 0.4%, while mainland Chinese equity indices slid 2.5% and the Hong Kong Hang Seng slumped 5%! Your BSD global Tech Hedge Fund retreated 0.5%, while carrying a 50% short equity indice overlay.
The economic calendar is normal, but competing with political news. There is one last blast of retailers earnings, and there are just a few economic releases in the week ahead, as well as the minutes from the Fed’s last meeting. Investors will look to the retail sector next week, with Target, Home Depot and Lowe’s due to report earnings along with some mall chains. The retail sector has lagged the overall 75% batting average of the S&P 500 Index companies in topping estimates this earnings season. On the economic front, reports on housing starts, existing home sales and consumer sentiment will draw notice, while Fed watchers will get their hands on FOMC minutes to dissect just how done the central bank is with policy changes. Another interesting event to watch is the planned trip by President Trump to Austin, Texas to tour an Apple facility in Texas where Mac Pro products are manufactured.