Morning Call: Higher interest rates pressure stocks; Dec E-mini S&Ps down -0.39%; 10-year T-note yield climbs to a fresh 7-1/3 year high of 3.259%.
Related Stocks
 ESZ18 - S&P 500 E-Mini
SymLastChgPct
ESZ182,667.75-28.50-1.06%
CLX1869.17s+0.05+0.07%
DXY0096.494+0.301+0.31%
ZNZ18119-080-0-015-0.04%
GCZ181,223.9-1.4-0.11%
SIZ1814.300-0.103-0.72%
HGZ182.7910-0.0080-0.29%
RBX181.7680s-0.0379-2.10%
AAPL180.61-5.25-2.82%
MHK127.40+3.04+2.44%
PYPL78.88-1.25-1.56%
TSLA347.98-5.49-1.55%
MRK75.76-0.59-0.77%
TWLO77.66+0.76+0.99%
PPG106.15-1.55-1.44%
BLKB69.07+0.92+1.35%
RCUS11.29-0.15-1.31%
YEXT16.00-0.09-0.56%
CISN12.76+0.04+0.31%
AFMD4.36-0.03-0.68%

Overnight Markets and News

Dec E-mini S&Ps (ESZ18 -0.59%) this morning are down -0.39% and European stocks are down -0.38% at a 4-week low on a gloomier economic outlook. The IMF cut its global 2018 GDP forecast to 3.7% from 3.9% and ECB Governing Council member Vasiliauskas warned that the "risk of a sudden tightening of international financial conditions is becoming increasingly plausible" due to normalization of U.S. monetary policy. The 10-year T-note yield rose to a fresh 7-1/3 year high of 3.259% and the yield on Italy's 10-year bond jumped to a 4-1/2 year high of 3.71% after Italian Deputy Prime Minister Salvini harshened his rhetoric with the EU calling the bureaucrats in Brussels the "enemies of Europe." Nov WTI crude oil (CLX18 +0.61%) is up +0.75% as Hurricane Michael speeds north through the Gulf of Mexico and has shuttered 19% of crude production in the Gulf as oil platforms closed ahead of the approaching storm. Asian stocks settled mixed: Japan -1.32%, Hong Kong -0.11%, China +0.17%, Taiwan +0.10%, Australia -0.97%, Singapore -0.47%, South Korea closed for holiday, India -0.51%. Japan's Nikkei Stock Index tumbled to a 3-week low on trade concerns and after USD/JPY fell to a 1-week low Monday, which undercut exporter stocks. China's Shanghai Composite closed higher as the yuan rose against the dollar after Chinese Foreign Ministry spokesman Lu Kang said China has no intention to stimulate exports via competitive currency devaluation.

The dollar index (DXY00 +0.34%) is up +0.31%. EUR/USD (^EURUSD -0.43%) is down -0.40% at a 1-1/2 month low after German Aug exports unexpectedly declined. USD/JPY (^USDJPY -0.03%) is down -0.03%.

Dec 10-year T-note prices (ZNZ18 -0-040) are down -4.5 ticks.

ECB Governing Council member Vasiliauskas said the global "economic outlook is becoming gloomier, especially in terms of international trade," and the "risk of a sudden tightening of international financial conditions is becoming increasingly plausible" due to normalization of U.S. monetary policy.

The IMF cut its 2018 global GDP estimate to 3.7% from a 3.9% projection in July, citing escalating trade tensions and stresses in emerging markets.

The German Aug trade balance unexpectedly widened to a surplus of +17.2 bln euros, wider than expectations of +16.2 bln euros. Aug exports fell -0.1% m/m, weaker than expectations of +0.4% m/m. Aug imports fell -2.7% m/m, weaker than expectations of -0.1% m/m and the biggest decline in 14 months.

UK Sep BRC sales like-for-lie unexpectedly fell -0.2% y/y, weaker than expectations of +0.1% y/y and the biggest decline in 5 months.

U.S. Stock Preview

Key U.S. news today includes: (1) Dallas Fed President Robert Kaplan (non-voter) speak at the Economic Club of New York, (2) Philadelphia Fed President Patrick Harker (non-voter) speaks at an event in Philadelphia on the importance of education the economy, (3) New York Fed President John Williams (voter) discusses recent developments in U.S. monetary policy at a New York Fed-Bank Indonesia Central Banking Forum in Bali, Indonesia.

Notable Russell 2000 earnings reports today include: none.

U.S. IPO's scheduled to price today: none.

Equity conferences during the remainder of this week: IQPC CX Exchange for BFSI on Tue, EXCHANGE Conference on Tue, Bioanalytical & Formulation Summit 2018 on Tue, Capital Link New York Maritime Forum on Tue, Global Gaming Expo on Tue.


Market Comments

Dec S&P 500 E-minis (ESZ18 -0.59%) this morning are down -11.25 points (-0.39%). Monday's closes: S&P 500 -0.04%, Dow Jones +0.15%, Nasdaq 100 -0.62%. The S&P 500 on Monday slumped to a 1-1/2 month low and closed lower on negative carry-over from a plunge in Chinese stocks on concern about escalation of the U.S.-China trade rift. There was also negative carry-over from a slump in European stocks as Italy's political risks escalated after the Italy's 10-year government bond yield jumped to a 4-1/2 year high of 3.63% when the EU said the 2019 budget proposed by the Italian government violated EU rules.

Dec 10-year T-notes (ZNZ18 -0-040) this morning are down -4.5 ticks. Monday's closes: TYZ8 +1.00, FVZ8 +2.25. Dec 10-year T-notes on Monday recovered from a 4-1/2 year nearest-futures low and settled slightly higher. T-notes were boosted by increased safe-haven demand with the slump in stocks and by positive carry-over from a rally in German bunds that rose on escalation of Italy's political crisis.

The dollar index (DXY00 +0.34%) this morning is up +0.297 (+0.31%), EUR/USD (^EURUSD -0.43%) is down -0.0046 (-0.40%) at a 1-1/2 month low, and USD/JPY (^USDJPY -0.03%) is down -0.03 (-0.03%). Monday's closes: Dollar Index +0.137 (+0.14%), EUR/USD -0.0032 (-0.28%), USD/JPY -0.49 (-0.43%). The dollar index on Monday closed higher on weakness in the Chinese yuan which fell to a 1-3/4 month low against the dollar after the PBOC cut the reserve-requirement ratio for banks by 100 bp to 14.50% from 15.50%. There was also weakness in EUR/USD which fell to a 7-week low after German Aug industrial production unexpectedly declined and after EU officials signaled that the Italian government's 2019 budget that calls for a 2.4% deficit of GDP will put them in breach of EU rules.

Metals prices this morning are higher with Dec gold (GCZ18 +0.09%) +1.3 (+0.11%), Dec silver (SIZ18 -0.03%) +0.011 (+0.08%) and Dec copper (HGZ18 +0.67%) +0.024 (+0.85%). Monday's closes: Dec gold -17.0 (-1.41%), Dec silver -0.320 (-2.18%), Dec copper +0.004 (+0.14%). Metals on Monday settled mixed with Dec gold and silver at 1-week lows. Metals prices were undercut by a stronger dollar and by continued fund-selling of gold as long gold positions in ETFs fell to a 13-month low on Friday. Dec copper recovered from a 2-week low and closed higher on signs of tight supplies after LME copper inventories fell -4,825 MT to a 2-1/3 year low of 181,975 MT.

Nov WTI crude oil prices (CLX18 +0.61%) this morning are up +56 cents (+0.75%) and Nov gasoline (RBX18 -0.15%) is +0.07 (+0.03%). Monday's closes: Nov crude oil -0.05 (-0.07%), Nov gasoline +0.76 (+0.36%). Nov crude oil and gasoline on Monday settled mixed. Crude oil prices were undercut by a rally in the dollar and by comments from Saudi Arabian Crown Prince Mohammed Bin Salman who said Saudi Arabia can add a further 1.2 million bpd of crude output from its spare capacity "if the market needs that." Gasoline rallied after the Irving Oil refinery in New Brunswick, which can process nearly 300,000 bpd of crude, was closed after a fire and explosion at the refinery.

Overnight U.S. Stock Movers

Apple (AAPL -0.23%) was rated a new 'Sell' at Vertical Group with a price target of $175.

Mohawk Industries (MHK +0.75%) was downgraded to 'Underweight' from 'Neutral' at JPMorgan Chase with a price target of $160.

PayPal Holdings (PYPL -3.16%) was upgraded to 'Buy' from 'Hold' at DZ Bank AG with a price target of $90.

Tesla (TSLA -4.35%) was rated a new 'Outperform' at Macquarie with a price target of $430.

Merk & Co (MRK +0.61%) was rated a new 'Buy' at Guggenheim Securities with a price target of $84.

Twilio (TWLO -3.30%) was rated a new 'Buy' at Deutsche Bank with a price target of $88.

PPG Industries (PPG +1.44%) fell more than 10% in after-hours trading after it reported preliminary Q3 adjusted EPS from continuing operations would be $1.41-$1.45, weaker than consensus of $1.59.

Blackbaud (BLKB -3.76%) tumbled 13% in after-hours trading after it cut its full-year adjusted EPS estimate to $2.46-$$2.52 from a previous estimate of $2.75-$2.88, well below consensus of $2.78.

Arcus Biosciences (RCUS -6.94%) was rated a new 'Outperform' at Wedbush with a price target of $22.

Yext (YEXT -3.33%) was rated new 'Buy' at D.A. Davidson with a price target of $28.

Cision Ltd (CISN -1.36%) lost 2% in after-hours trading after it was downgraded to 'Hold' from 'Buy' at Deutsche Bank.

Affimed NV (AFMD +10.77%) plunged 23% in after-hours trading after a Phase 1 program to evaluate its AFM11 drug for treatment of patients with relapsed or refractory CD19 positive B-cell non-Hodgkin lymphoma and acute lymphoblastic leukemia was put on hold after serious adverse events happened in three patients who were in the trial.