Weekly Recap: Incredible Volatility shakes the Markets 4th Week of September

What an incredible 4th
week of September!  Markets were up, then down, then
back up, and we made profit every step of the way!

If you missed the action… here’s
your opportunity to catch up!

September has once again proved
its reputation for volatility, as global equity indices swung sharply from big
gains to big losses this week.

After pushing out to new all-time
highs last Friday, the S&P500 was unable to hold above 2000 and sharp and
punishing declines slammed the index below its 50-day moving average. Besides
technical levels, there was no obvious catalyst for the move lower. Rumors
circulated about the liquidation of a big institutional position or a hedge
fund blowing up, but there was never any reporting to confirm such events.
Others attributed the moves to anticipation of the Fed’s rate lift off next
year and to Russia threatening more counter-sanctions that might tip Europe
into recession.

For the week the DJIA lost 1%,
the S&P500 dropped 1.4% and the Nasdaq dipped 1.5%.

The final revisions to second quarter US GDP were in line with expectations, at
+4.6% versus the +4.2% preliminary reading, matching the fourth quarter of 2011
as the fastest quarterly growth rate since 2006. Analysts caution the data
needs to be viewed in the context of the -2.1% first quarter GDP, which would
put the average growth rate for the first half of the year at an unimpressive
+1.2%. Early indications are that the third quarter growth estimate will be 3%
or more. One point is clear, businesses are starting to invest for growth: in the
final revision, business investment rose 9.7%, up from the +8.4% preliminary
figure.

August new home sales (504K v
430Ke) rose to a six-year high, while existing home sales (5.05M v 5.20Me) fell
for the first time in four months. Analysts noted the strong regional
variations in the new home sales data, with sales up big in the south and west
but down slightly in the northeast. Sales were flat in the Midwest. Regarding
the existing homes sales data, the NAR noted that there was a marked decline in
all-cash sales to investors.

The continuing rise of the dollar
despite the equity selloff was a central theme this week. EUR/USD pushed out to
22-month lows on of Friday, around 1.2680. Good US economic data, highlighted
by the second quarter GDP, contrasted sharply with another round of dismal
European numbers, including the September German IFO survey at 18-month lows
and September PMI manufacturing right at the flat-line. USD/JPY was at a
six-year high, around 109.50. The dollar Index made its 11th-consecutive weekly
gain, just shy of 86. Note that WTI crude move up off lows in the $91 handle on
Monday, to close out the week around $93.50.

Apple said that its first weekend
of iPhone 6/6+ sales were above 10M units, compared to estimates ranging from
6.5 million to 10.0 million units (first weekend iPhone 5 sales topped 9.0
million devices, including China). The iPhone 6/6+ numbers did not include
China, where the model was still waiting for approvals from regulators. There
were reports that China sales would begin around October 10th; analysts expect
about 2.75 million units in initial sales in China.

BlackBerry launched its new
PassPort smartphone, perhaps its final chance to regain a foothold in the
mobile device market. The aggressively square touchscreen device features a
physical QWERTY “touch-enabled” keyboard, comprising its main selling
point over Android and iOS devices. In second quarter results out this week,
BlackBerry managed to get very close to non-gaap profitability even as revenue
missed expectations. Unit sales are also picking up: in the second quarter,
BlackBerry recognized hardware revenue on 2.1M smartphone units versus 1.3M in
the prior quarter.

Just a week after the Alibaba IPO,
activist investors have begun their attack on Yahoo’s board to “unlock
value.” Yahoo sold $6 billion worth of Alibaba shares in the IPO and its
remaining 15% stake is valued around $36 billion. Starboard Value announced
that it had bought a “substantial” stake in Yahoo and wrote an open
letter to CEO Marissa Mayer saying she should buy AOL and unlock the value in
its Alibaba and Yahoo stakes.

With Congress unlikely to act on
tax reform anytime soon, the Treasury has changed the way it interprets tax law
in an attempt to unilaterally make inversion deals “substantially less
appealing.” The package includes small steps, including moves to change
the way foreign ownership is gauged (companies can invert if foreign
stockholders own more than 20%) and to make it harder for parents to extract
profits from subsidiaries.

In the latest pharma consolidation
deal, Germany-based Merck KGaA agreed to acquire US firm Sigma-Aldrich for $17
billion in cash to boost its lab supplies business. Two global fertilizer
giants, CF Industries and Yara International of Norway, are discussing a 50/50
merger deal. The combined market value of the companies would be about $27.4
billion, making it worth about as much as Canada’s Potash Corp, the world’s
largest fertilizer producer.

The surprise announcement on
Friday that bond king Bill Gross would take his talents to Janus Capital sent a
ripple through asset management industry as speculation circulated about Pimco
clients leaving with Mr. Gross or moving their holdings to other firms. Janus
shares rocketed up 40%, and Pimco parent Allianz lost 5%. Gross reportedly
jumped ship after it became apparent he would be fired imminently because of
frequent confrontations with co-workers who described his behavior as
“increasingly erratic.”

The Shanghai Composite gained 0.8%
this week, supported by slightly improved economic data and more relief for the
property sector. The September HSBC flash manufacturing PMI dodged speculation
of a slide into a contractionary territory, turning in a 50.5 print, its fourth
consecutive month of expansion. In housing, several top tier cities eased their
criteria for “first mortgage” home purchase classification to attract
more buyers into the market. The decision follows a particularly soft set of
housing price numbers in August and a warning by Moody’s that China’s nationwide
residential property market will decline 5-10% this year. China will release
its Industrial Profits data over the weekend, while investors will also watch
for any evidence supporting press speculation that PBoC Governor Zhou may be
replaced.

In Japan, core CPI measures
released late in the week revealed another downtick in inflation, potentially
paving the way for more Bank of Japan easing if Q3 data points disappoint.
National core CPI of 3.1% was a 5-month low, while ex-sales tax estimated 1.1% price
gauge is still well below the 2% BOJ target. USD/JPY hit new 6-year highs above
¥109.50 on Friday after Japan’s health minister downplayed earlier expectations
that pension fund reform – a boon to riskier assets and a negative for the Yen
– would be delayed.

Source:  www.Tradethenews.com