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Input 11.10.2018

Good morning

Despite sunny and colourful conditions outside the financial markets are most volatile & challenging, especially since we have to deal with daily market valuations.

After last nights correction «everybody» becomes an expert; it is true that the impact of China is substantial to everything that happens in the western world, but that all should happen and change within a day is just «too much», and I doubt, that Mr Trump has the capacity, nor the cristall ball to judge market moves.

Year to date it last market move destroyed what was created since JUNE 2018:

MIDTERM markets still follow the uptrend:

Outlook for corporate earnings in general is solid, and latest industrial production statistics shows an ongoing positive trend.

Global interest rates are low, dividend yields above bond yields. Inflation is an important topic.

 Interest Rates 6mBond YieldsDividend YieldsGDP GroethInflation
      
USA2.6%3.1%2.1%2.9%2.5%
Europe-0.3%0.5%3.7%2.1%1.7%
Switzerland-0.7%0.1%3.3%2.2%0.8%
Japan0.0%0.1%1.8%1.1%0.9%

Global GDP Growth is solid:

What we read in today’s market wrap is facta of course, but we suggest not to panic. Tom Essayes comment in the addendum below, marked in green is valid:

«Those of us who have been in the markets for a couple of decades now, you see the Dow down 1,000 points, you think ‘my God, the Dow’s down 1,000 points,’ but we saw this at the beginning of the year, and this is the new market that we have.

It’s algo-driven. There are very few real people involved in these types of moves. As such we just have to get used to more volatility on these types of days».

As longterm oriented investors It does not make any sense to SELL out on these market levels, especially considering the fact that we keep focus to invest into solid companies, mainly in Europe and USA . We were avoiding Latin America, but do keep a strong opinion on economies of India and Vietnam.

We shall follow the developments closely and keep you updated. Kind regards

Björn

Addendum

(BN) Stock Rout Rolls Through Asia; Dollar Slides: Markets Wrap Stock Rout Rolls Through Asia; Dollar Slides: Markets Wrap 2018-10-11 05:02:38.341 GMT

By Adam Haigh and Andreea Papuc (Bloomberg) – The biggest stock sell-off since February rolled from the

U.S. through Asia on Thursday, with benchmarks from Tokyo to Hong Kong seeing declines in excess of 3 percent. The dollar weakened against all major peers while the yen pushed higher and some emerging-mar- ket currencies came under pressure. Treasuries, which helped trigger the stock decline when 10 year yields hit the highest since 2011, extended gains posted Wednesday. China’s Shanghai Composite gauge tumbled more than 4 percent, set to close at a four-year low. Taiwan’s technology heavy TWSE Index plummeted 6 percent in the region’s worst performance.

U.S. futures extended losses from Wednesday when the Nasdaq 100 Index tumbled more than 4 percent for its worst day in seven years. Behind the rout: fresh news of damage to corporate earnings from the trade war, along with intensifying pressure from the global shift away from monetary stimulus. Industrial

and construction supplies distributor Fastenal Co. added to angst that the trade conflict with China is raising materials costs that will crimp profit margins, while French luxury goods maker LVMH confirmed China is enforcing customs rules more strictly.

Ten-year Treasury yields slipped to 3.16 percent, down from the seven-year high of 3.26 percent reached on Tuesday. Yields have been climbing under the influence of a shrinking Federal Reserve bond portfolio and expectations for further interestrate hikes. President Donald Trump, who has claimed credit for record U.S. stock levels, said after the U.S. market closed that the Fed is making a «mistake» and «has gone crazy.»

«The sharp rise in U.S. 10-year yields has caused investors to suddenly reprice the impact of moving from post-crisis low yields to a rising rate environment,» Eleanor Creagh, an Australian market strategist at Saxo Capital Markets in Sydney, said by email. «We have the global growth engines, price of energy rising, price of money rising and quantity of money falling combined with the ongoing trend of deglobalization which has started to impact markets and the cracks are showing.» Just a day before the start of America’s

third-quarter earnings season, signs are mounting that companies might not be able to deliver the runaway growth that’s bolstered equities so far in 2018. Investors have long fretted that the trade war would crimp profits, and now a group of companies is warning that is happening at the same time that rising bond yields lift the cost of borrowing.

Read more on the $900 billion rout in global technology stocks.

«Earnings are really important because that was part of the concern that sparked the sell-off,» Darrell Cronk, president and chief investment officer at Wells Fargo Investment Institute, told Bloomberg TV in New York. «The concern heading into the third quarter earnings season is about how much trade and tariffs will dent earnings.» Trump also said the stocks decline was «a correction that we’ve been waiting for for a long time,» after being briefed on the market turmoil. Treasury Secretary Steve Mnuchin said he’s not surprised the market is having «somewhat of a correction.» Gauges of equity volatility in Japan and Australia rose more than 40 percent after Wall Street’s «fear gauge,» as the Cboe Volatility Index, or VIX, is known, soared the most since February.

«This is the new paradigm for all of us to get used to,» Tom Essaye, founder of The Sevens Report, said on Bloomberg Radio. «Those of us who have been in the markets for a couple of decades now, you see the Dow down 1,000 points, you think ‘my God, the Dow’s down 1,000 points,’ but we saw this at the beginning of the year, and this is the new market that we have. It’s algo-driven. There are very few real people invol- ved in these types of moves. As such we just have to get used to more volatility on these types of days.» Elsewhere, American crude fell back below $73 a barrel as Hurricane Michael threatened to slash fuel demand across the U.S. Southeast. Terminal users can read more in our Markets Live blog.

Here are some key events coming up:

  • The U.S. Treasury is in the midst of $230 billion worth of debt auctions this week.
  • The IMF and World Bank will hold meetings in Bali from Friday, where finance chiefs from around the world will gather.
  • A closely watched gauge of U.S. consumer prices probably remained elevated in September and rose 2.3 percent from a year earlier, according to forecasts ahead of Thursday’s release.
  • JPMorgan Chase&Co., Citigroup Inc. and Wells Fargo&Co. kick off earnings season for U.S. banks on Friday.

These are the main moves in markets:

Stocks

  • Japan’s Topix index tumbled 3.5 percent as of 1:50 p.m. in Tokyo.
  • Hong Kong’s Hang Seng slid 3.8 percent.
  • The Shanghai Composite Index dropped 4.3 percent.
  • South Korea’s Kospi index slumped 3.5 percent.
  • Australia’s S&P/ASX 200 Index declined 2.6 percent.
  • S&P 500 futures dropped 0.9 percent. The S&P 500 Index declined 3.3 percent. The Nasdaq 100 lost

4.4 percent to the lowest since July 3.

  • The MSCI Asia Pacific Index tumbled 3.5 percent, on track for its lowest close since May last year. Currencies
  • The yen gained 0.1 percent to 112.20 per dollar after gaining 0.6 percent.
  • The offshore yuan fell 0.3 percent to 6.9417 per dollar.
  • The euro bought $1.1563, up 0.4 percent.
  • The Bloomberg Dollar Spot Index dropped 0.2 percent. Bonds
  • The yield on 10-year Treasuries fell one basis point to 3.15 percent
  • Australia’s 10-year bond yield dropped three basis points to 2.72 percent. Commodities
  • West Texas Intermediate crude slid 1.7 percent to $71.93 a barrel.
  • Gold fell 0.1 percent to $1.193.50 an ounce.
  • LME copper dropped 1.6 percent to $6.139 a metric ton.

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