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Top 5 Things to Know in the Market on Tuesday

Published 01/10/2019, 11:02
Updated 01/10/2019, 11:32
© Reuters. -- China throws a party with ICBMs and stealth drones, while Hong Kong burns. Meanwhile, Europe's economy looks ever grimmer and Credit Suisse (SIX:CSGN) clears its CEO of wrongdoing in a spy drama. Here's what you need to know in financial markets on Tuesday, 1st October.

1. Happy Birthday, Red China

China celebrated 70 years of Communist Party rule with a massive military parade that showcased intercontinental ballistic missiles and stealth drones, while President Xi Jinping said in a keynote speech that “no force can stop the advance of the Chinese people and the Chinese nation.”

In Hong Kong meanwhile, the local government ordered the evacuation of the Legislative Council complex after fresh protests turned violent, leading to the shooting of one protester with a live round by police, according to The New York Times.

Chinese markets are closed for the national holiday.

2. The dollar - cleanest shirt in the laundry basket

The dollar surged overnight after the Reserve Bank of Australia cut its key interest rate to a new all-time low, and Japan’s Tankan survey came out weaker than expected.

The greenback also broke through parity against the Swiss franc after Switzerland – alongside many other European countries – saw its manufacturing sector contract more sharply in September.

PMIs from across Europe indicated that there’s still no stabilization in sight for the European economy. Even though the U.S. economy too is slowing, the dollar is still widely seen as “the cleanest shirt in the dirty laundry basket.”

The ISM manufacturing PMI for the U.S. is due at 10 AM ET (1400 GMT), along with a monthly update on U.S. construction spending. Interventions from Federal Reserve officials Richard Clarida, James Bullard and Michelle Bowman will punctuate the day. There'll also be speeches from outgoing ECB President Mario Draghi and German central bank chief Jens Weidmann.

3. Stocks set to open 4Q higher

Wall Street is set to open the fourth quarter in positive mood, shrugging off signs of concerns about the upcoming third-quarter earnings season and increasing political jeopardy for President Donald Trump from the impeachment proceedings against him (reports late on Monday indicated that Secretary of State Mike Pompeo was also listening in on the notorious call where Trump asked Ukraine's President Zelensky for help in investigating Joe Biden's son Hunter).

At 6 AM ET, Dow futures were indicated up 60 points, or 0.2%, while S&P 500 Futures were up 6 ponts or 0.2% and Nasdaq 100 futures were up 22 points or 0.3%.

The 30-year Treasury yield, meanwhile, touched 2.20% for the first time in five days in overnight trading.

4. Johnson's Brexit plans look dead on arrival

U.K. Prime Minister Boris Johnson is due to send his detailed plans for solving the post-Brexit Irish border problem to the EU. He’s hoping that the plans will allow him to craft some kind of deal at a summit in two weeks’ time that is effectively the last chance for the U.K. to ensure an orderly departure from the EU on Oct. 31.

According to The Daily Telegraph, the plans involve a string of customs clearing centers a few miles back from the actual border. That effectively breaches the Good Friday Agreement’s provisions on keeping physical border infrastructure off the island or Ireland. As both the U.K. and EU have agreed to uphold the Good Friday Agreement, the chances of the EU agreeing to Johnson’s proposals seem minimal.

The U.K. PMI released earlier indicated that British firms have again started stockpiling ahead of the Oct. 31 deadline, although not by enough to stop the manufacturing sector contracting again in September.

5. Credit Suisse (SIX:CSGN) CEO escapes unscathed from spy drama

The board of Credit Suisse (SIX:CSGN) exonerated Chief Executive Tidjane Thiam from wrongdoing in a review of how the bank came to spy on former wealth management head Iqbal Khan as he prepared to start work for rival UBS.

Chief operating officer Patrick Bouee, a long-time confidante of Thiam who also worked with him at Prudential (LON:PRU) PLC, took the rap and resigned. Meanwhile, the contractor who hired investigators to tail Khan on behalf of Credit Suisse (SIX:CSGN) committed suicide, ensuring that an embarrassing and noxious episode for Credit Suisse's reputation ended on the grimmest possible note.

Khan, meanwhile, starts work at UBS today.

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