Asian Shares Rise Despite Weaker China Data

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Asian stocks rose on Wednesday as investors digested a raft of economic data, corporate earnings results and weaker-than-expected Chinese manufacturing data.

China's Shanghai Composite index rallied 1.35 percent to close at 2,602.78, a day after the country's securities regulator promised measures to improve market liquidity, encourage share buybacks and mergers and acquisitions. Hong Kong's Hang Seng index jumped 1.60 percent to 24,979.69.

Traders ignored the latest PMI numbers confirming a broad-based decline in Chinese economic activity.

China's official manufacturing PMI fell to 50.2 in October, the lowest since July 2016 and down from 50.8 in September, in a sign of further loss of momentum in the world's second-largest economy.

The services PMI dropped from 54.9 to 53.9, marking the weakest pace of expansion since August 2017.

On the heels of the disappointing data, the People's Bank of China weakened the yuan fix to the lowest in more than a decade.

Japanese shares hit a one-week high and the yen edged lower against the dollar after the Bank of Japan left interest rates steady, cut its inflation forecasts and signaled it was a long way off from exiting its massive stimulus program.

Investors shrugged off weak data showing that industrial production in the country fell 1.1 percent in September from the previous month, missing expectations for a decline of 0.3 percent.

The Nikkei average jumped 463.17 points or 2.16 percent to 21,920.46, the highest closing level since Oct. 24. The broader Topix index closed 2.15 percent higher at 1,646.12.

Chip-related stocks followed their U.S. peers higher, with Tokyo Electron rallying 3.6 percent and TDK Corp climbing 6.1 percent. Advantest shares soared 13 percent. Sony jumped 4.7 percent and Honda Motor added 6.5 percent after raising their annual profit forecasts.

Australian markets ended modestly higher, led by banks and energy companies. The benchmark S&P/ASX200 index inched up 0.43 percent to 5830.30, but ended the month down over 6 percent, marking its worst monthly fall since August 2015. The broader All Ordinaries index also closed up 0.43 percent at 5,913.30.

The Australian dollar fell slightly after a government report showed the inflation rate rose 0.4 percent sequentially in the third quarter of 2018, below market expectations for a 0.5 percent gain.

ANZ rose over 1 percent after reporting a 5 percent drop in full-year cash profit, hit by remediation costs in the aftermath of the royal commission.

Commonwealth Bank advanced 1.6 percent after it agreed to sell its Colonial First State asset management business for A$4.13 billion to Japanese bank Mitsubishi UFJ Trust and Banking Corp.

QBE Insurance rallied 2.4 percent after it announced a streamlining of its operations.

Oil stocks also closed broadly higher as oil prices rose for the first time in three sessions. Woodside Petroleum climbed 2.3 percent, Origin Energy added 1.7 percent and Oil Search gained 0.8 percent.

Mining heavyweights BHP Billiton and Rio Tinto ended marginally lower while gold miner Evolution lost 3 percent and Newcrest shed around 1 percent after gold prices settled at a more than one-week low overnight.

South Korea's Kospi average finished 0.74 percent higher at 2,029.69 despite weak data. The country's industrial output fell a seasonally adjusted 2.5 percent sequentially in September, Statistics Korea said.

That follows the downwardly revised 1.3 percent gain in August (originally 1.4 percent). On a yearly basis, industrial production tumbled 8.4 percent following the downwardly revised 2.5 percent increase in the previous month.

New Zealand shares rallied as dual-listed ANZ kicked off the reporting season for the big Australian banks. The benchmark S&P/NZX index jumped 103.93 points or 1.20 percent to 8,752.31.

Kathmandu Holdings led the market higher to end higher by 4.3 percent after First NZ Capital increased its stake in the outdoor retailer. Growth stocks rebounded, with A2 Milk rising 2.5 percent and Synlait Milk climbing as much as 3.8 percent.

The total number of building consents issued in New Zealand fell a seasonally adjusted 1.5 percent on month in September, Statistics New Zealand said - following a 6.8 percent rise in August and a 9.7 percent drop in July.

Overnight, U.S. stocks ended sharply higher despite a spate of mixed earnings results and economic reports. The Dow rallied 1.8 percent, while the Nasdaq Composite and the S&P 500 gained around 1.6 percent.

German Retail Sales Rise Less Than Expected


Germany's retail sales monthly growth in September was less than what economists expected, preliminary data from the Federal Statistical Office showed on Wednesday.

Retail sales in real terms edged up a calendar and seasonally adjusted 0.1 percent from August, when sales fell 0.3 percent, revised from 0.1 percent. Economists had forecast a 0.5 percent increase. Sales grew for the first time in three months.

On a year-on-year basis, retail sales fell 2.6 percent from a year ago, while economists were looking for a 1 percent gain. The growth in August was revised to 1.5 percent from 1.6 percent. The latest fall was the first in four months.

10 things in tech you need to know today

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This is the tech news you need to know this Wednesday.

Facebook's US users stalled — but didn't fall — in a scandal-filled Q3 and investors are breathing a sigh of relief.Facebook's Q3 revenue grew 33% year-over-year, but came in slightly below Wall Street targets.

Apple announced a brand-new MacBook Air with retina display and fingerprint sensor. Apple announced the new model on Tuesday during its event in Brooklyn, New York.
An executive with Google's parent company resigned with no severance after sexual misconduct allegations come to light. Richard DeVaul, who cofounded Alphabet's Project Loon, has left the company.

Facebook is banning far-right militia The Proud Boys after a violent attack in New York. Earlier in October, five members of the Proud Boys were arrested after a violent incident with protesters in New York City.

Apple's new iPad Pro features a new design that ditches the home button for Face ID. The new iPad Pro is also equipped with a USB-C charging port instead of Apple's traditional Lightning port, which makes it much more compatible with external accessories and hardware.

Facebook approved 100 fake ad disclosures that were allegedly 'paid for' by every United States senator. Earlier this year, Facebook started displaying the name of the politician or entity sponsoring political ads, in a move meant to increase transparency.

Uber is challenging a UK court ruling that its drivers qualify for better employment rights such as a living wage and holiday pay. The company argued that its model of relying on independent contractors is typical of the minicab industry.

Electronic Arts is getting in on the next big thing in video games with 'Project Atlas,' a cloud gaming service to take on Google and Microsoft. EA's Chief Technology Officer Ken Moss announced the new platform, Project Atlas, in a blog post on Medium.

The DOJ is accusing Chinese intelligence officers of stealing sensitive information from American aviation companies.The DOJ says over a dozen US and European aviation companies were hacked over a period of more than five years in an effort to obtain intellectual property and other confidential information.

The latest blockbuster from the game studio behind "Grand Theft Auto" is fast approaching $1 billion in sales after just three days. "Red Dead Redemption 2" grossed $725 million in its first three days.

UK Shop Prices Return To Deflation

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UK shop prices declined in October following two months of mild inflation, data from the British Retail Consortium showed.

The BRC - Nielsen shop price index decreased 0.2 percent year-on-year versus a 0.2 percent rise in September.

Non-food deflation deepened to 1.1 percent in October from 0.9 percent a month ago. At the same time, food inflation slowed to 1.3 percent from 1.9 percent in both September and August.

"The inflationary cost pressures in the supply chains are being managed by the industry which tempered the recent upward pressure of shop price inflation in October," Mike Watkins, head of retailer and business insight, Nielsen, said.

"Consumers remain uncertain about when and where to spend and with Christmas promotions now kicking in, competition for share of wallet will intensify in both food and non-food retailing," Watkins added.

European Shares Seen Up As Investors Shrug Off Chinese Data

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European stocks may open higher on Wednesday, tracking a rise in U.S. stock futures after Facebook delivered mixed earnings results for the third quarter and eBay's quarterly profit topped forecasts.

Asian stock markets pulled away from 20-month lows despite the latest PMI numbers from China confirming a broad-based decline in economic activity.

China's official manufacturing PMI fell to 50.2 in October, the lowest since July 2016 and down from 50.8 in September, in a sign of further loss of momentum in the world's second-largest economy.

The services PMI dropped from 54.9 to 53.9, marking the weakest pace of expansion since August 2017.

On the heels of the disappointing data, the People's Bank of China weakened the yuan fix to the lowest in more than a decade.

The yen traded in the lower 113 zone against the dollar after the Bank of Japan left interest rates steady and cut its inflation forecasts.

Oil rose for the first time in three days but remained on track to post its biggest monthly decline since 2016 on worries about global oversupply.

The Bank of England's monetary policy decision is due on Thursday while Friday's U.S. jobs report before the November midterm elections may show improved hiring.

Payroll processor ADP is scheduled to release its report on U.S. private sector employment for October later in the day.

Overnight, U.S. stocks ended sharply higher despite a spate of mixed earnings results and economic reports. The Dow rallied 1.8 percent, while the Nasdaq Composite and the S&P 500 gained around 1.6 percent.

European markets ended Tuesday's session mixed amid heightened trade tensions between the U.S. and China.

The pan-European Stoxx Europe 600 index ended little changed with a positive bias. The German DAX shed 0.4 percent and France's CAC 40 index slipped 0.2 percent while the U.K.'s FTSE 100 inched up 0.1 percent.

European Economics Preview

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European Economics Preview: Eurozone Inflation, Unemployment Data Due

Flash inflation and unemployment from euro area and retail sales from Germany are due on Wednesday, headlining a busy day for the European economic news.

At 3.00 am ET, Destatis is scheduled to issue Germany's retail sales for September. Economists forecast sales to climb 0.5 percent on month, following a 0.3 percent drop in August.

At 3.45 am ET, France's flash consumer price data is due. Inflation is forecast to rise slightly to 2.3 percent in October from 2.2 percent in September.

At 4.00 am ET, GDP from Spain and producer prices from Hungary are due. Spain's GDP is forecast to grow 0.6 percent in the third quarter.

At 5.00 am ET, Italy's Istat publishes unemployment data. The jobless rate is forecast to rise to 9.9 percent in September from 9.7 percent in August. In the meantime, consumer price data from Poland is due.

At 6.00 am ET, Eurostat releases euro area flash inflation and unemployment figures. Economists forecast inflation to rise slightly to 2.2 percent in October from 2.1 percent in September. The jobless rate is seen unchanged at 8.1 percent in September. In the meantime, Italy's flash consumer price data is due. Inflation is forecast to rise to 1.8 percent in October from 1.5 percent in September.

Currency Zone

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Wednesday, October 31, 2018     

  Daily technical strategies 



EUR/USD Intraday: capped by a negative trend line.

Pivot: 1.1365

Our preference: short positions below 1.1365 with targets at 1.1335 & 1.1300 in extension.

Alternative scenario: above 1.1365 look for further upside with 1.1385 & 1.1415 as targets.

Comment: a break below 1.1335 would trigger a drop towards 1.1300.

USD/JPY Intraday: supported by a rising trend line.

Pivot: 112.90

Our preference: long positions above 112.90 with targets at 113.40 & 113.70 in extension.

Alternative scenario: below 112.90 look for further downside with 112.65 & 112.40 as targets.

Comment: the RSI is bullish and calls for further advance.

GBP/USD Intraday: under pressure.

Pivot: 1.2755

Our preference: short positions below 1.2755 with targets at 1.2690 & 1.2660 in extension.

Alternative scenario: above 1.2755 look for further upside with 1.2790 & 1.2810 as targets.

Comment: as long as the resistance at 1.2755 is not surpassed, the risk of the break below 1.2690 remains high. 

EUR/GBP Intraday: the bias remains bullish.

Pivot: 0.8910

Our preference: long positions above 0.8910 with targets at 0.8940 & 0.8955 in extension.

Alternative scenario: below 0.8910 look for further downside with 0.8895 & 0.8880 as targets.

Comment: the RSI is mixed to bullish.

USD/ZAR intraday: the upside prevails as long as 14.5640 is support

Our pivot point stands at 14.5640.

Our preference: the upside prevails as long as 14.5640 is support.

Alternative scenario: the downside breakout of 14.5640 would call for 14.4730 and 14.4190.

Comment: the RSI is above its neutrality area at 50. The MACD is above its signal line and positive. The configuration is positive. Moreover, the pair is above its 20 and 50 MAs (respectively at 14.6275 and 14.6341).

Eurozone growth slows as US powers to new high

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The eurozone economy expanded at its slowest pace in more than four years as the rate of growth in the third quarter halved from the pace of the first half of the year to just 0.2pc, dragged down by near-stagnation in Italy and likely a weaker performance in Germany.

According to data released yesterday, the euro area grew 1.7pc from a year earlier, far slower than expected.

It posted growth of 2.7pc for the whole of 2017, its fastest expansion in the decade since the financial crisis, which had sparked hopes Europe was set for a sustained upturn.

The weak growth numbers released highlighted the stark difference between Europe's slow recovery from the 2007 financial crisis and that of the United States, where the latest data showed the world's largest economy grew 3.5pc in the third quarter in what looks to be a record-setting expansion in terms of length.

Europe's poor performance also cast doubt over whether the European Central Bank would manage to raise interest rates at all before the next downturn. That's in contrast to the Federal Reserve, which has raised interest rates eight times in the past three years and will have more room to stimulate the economy with cuts should a downturn occur.

"The divergence in economic performance within the euro area is also increasing, limiting the ECB's options," said Shweta Singh, MD of Global Macroeconomics at advisory firm TS Lombard in London.

"The central bank will likely downgrade its growth assessment in December and adopt a more dovish end to its quantitative-easing programme than previously expected."

The euro area's overall performance was hit by growth of just 0.02pc in Italy in the quarter. Italy has gone head to head with Brussels over its budget plans and will face further scrutiny after the latest growth numbers. These look set to prompt more questions over its forecasts as it needs growth of 0.5pc each quarter versus the prior quarter to hit its budget targets.

While the ongoing Italian and Brexit dramas dominate headlines and markets, a greater risk comes from a slowdown in the pace of growth in the Chinese economy.

A key export market for the bloc - especially for Germany, Europe's largest economy - it is much more exposed to a global economic slowdown than the United States as it accounts for 15.8pc of world exports, higher than the 11.5pc of the US.

China's continued growth through the economic crisis while others fell into recession kept the world economy afloat.

It represented more than 40pc of the rise in world gross domestic product over the period.

Volkswagen, for example, sells almost one in three of the cars it makes in China.

Adding to Europe's woes, a key measure of economic sentiment among managers and consumers dropped for the 10th consecutive month in October, indicating that the slowdown may gather pace.