Morning Call: Stocks rally on a new U.S.-Mexico-Canadian trade deal; Dec E-mini S&Ps up +0.59% to a 1-week high; USD/JPY up +0.24% to a 10-3/4 month high. - Mon Oct 01, 6:41AM CDT
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 ESZ18 - S&P 500 E-Mini

Overnight Markets and News

Dec E-mini S&Ps (ESZ18 +0.59%) this morning are up +0.59% at a 1-week high and European stocks are up +0.50% on reduced global trade tensions after American and Canadian representatives announced a new trade deal to be known as the U.S.-Mexico-Canada Agreement or USMCA, which made modest revisions to the old Nafta framework. European stocks also received a boost after the Eurozone Aug unemployment rate fell -0.1 to a 9-3/4 year low of 8.1%. Asian stocks settled mixed: Japan +0.52%, Hong Kong and China closed for holidays, Taiwan +0.41%, Australia -0.57%, Singapore -0.05%, South Korea -0.11%, India +0.83%. Most Asian bourses declined on economic concerns after an earthquake and tsunami hit the island of Sulawesi in Indonesia and after a gauge of Chinese manufacturing activity fell to a 7-month low. Japan's Nikkei Stock Index bucked the negative trend and rallied to a 26-3/4 year high as strength in exporters led the overall market higher, buoyed by positive sentiment from the new trade deal between the U.S., Canada and Mexico, along with the rally in USD/JPY to a 10-3/4 month high. The yen was undercut after the Japan Q3 Tankan large manufacturing business conditions unexpectedly declined.

The dollar index (DXY00 -0.01%) is down -0.01%. EUR/USD (^EURUSD +0.03%) is up +0.08%. USD/JPY (^USDJPY +0.26%) is up +0.24% to a 10-3/4 month high.

Dec 10-year T-note prices (ZNZ18 -0-060) are down -6.5 ticks.

The Eurozone Aug unemployment rate fell -0.1 to a 9-3/4 year low of 8.1%, right on expectations.

The Eurozone Sep Markit manufacturing PMI was revised downward to 53.2 from the originally reported 53.3, the slowest pace of growth in 2 years.

German Aug retail sales unexpectedly fell -0.1% m/m, weaker than expectations of +0.5% m/m.

The UK Sep Markit manufacturing PMI unexpectedly rose +0.8 to 53.8, stronger than expectations of -0.3 to 52.5

The China Sep manufacturing PMI fell -0.5 to 50.8, weaker than expectations of -0.1 to 51.2 and the slowest pace of growth in 7 months. The Sep non-manufacturing PMI unexpectedly rose +0.7 to 54.9, stronger than expectations of -0.2 to 54.0.

The Japan Q3 Tankan large manufacturing business conditions unexpectedly fell -2 to 19, weaker than expectations of +0.1 to 22.

U.S. Stock Preview

Key U.S. news today includes: (1) Atlanta Fed President Raphael Bostic (voter) discusses economic development on a panel at the Inclusive Economic Development Council conference in Atlanta, (2) final-Sep Markit U.S. manufacturing PMI (expected unrevised at 55.6), (3) Aug construction spending (expected +0.4% m/m, Jul +0.1% m/m), (4) Sep ISM manufacturing index (expected -1.3 to 60.0, Aug +3.2 to 61.3), (5) Minneapolis Fed President Neel Kashkari (non-voter) speaks in a moderated townhall event in Minnetonka, MN, (6) Boston Fed President Eric Rosengren (non-voter) speaks on the economic outlook and monetary policy at a NABE meeting in Boston, (7) Sep total vehicle sales (expected 16.80 million, Aug 16.60 million).

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: Annual Nuclear Decommissioning & Used Fuel Strategy Summit on Mon, NANOG 74 conference on Mon, Cantor Global Health Care Conference on Mon-Tue, Deutsche Bank Leveraged Financial Conference on Tue, InsureTech Connect 2018 on Tue, In-Memory Computing Summit on Tue, Wolfe Research Utilities & Energy Conference on Tue-Thu, European Association for the Study of Diabetes Meeting on Thu.

Market Comments

Dec S&P 500 E-minis (ESZ18 +0.59%) this morning are up +17.25 points (+0.59%) at a 1-week high. Friday's closes: S&P 500 unch, Dow Jones +0.07%, Nasdaq 100 -0.03%. The S&P 500 on Friday closed little changed. Stocks were supported by the as-expected +0.3% increase in U.S. Aug personal spending and by benign inflation pressures after the Aug core PCE deflator rose +2.0% y/y, right on expectations. There was strength in energy stocks after crude oil prices rose +1.57% to a 2-1/2 month high. Stocks were undercut by the -0.7 point decline in the final-Sep University of Michigan U.S. consumer sentiment index to 100.1 (weaker than expectations of -0.2 to 100.6) and by the -3.2 point decline in the Sep Chicago PMI to a 5-month low of 60.4 (weaker than expectations of -1.6 to 62.0).

Dec 10-year T-notes (ZNZ18 -0-060) this morning are down -6.5 ticks. Friday's closes: TYZ8 +1.00, FVZ8 +1.75. Dec 10-year T-notes on Friday rose to a 1-week high and closed higher on the weaker-than-expected U.S. consumer sentiment and Chicago PMI reports and by the decline in the 10-year T-note breakeven inflation expectations rate to a 1-week low.

The dollar index (DXY00 -0.01%) this morning is down -0.014 (-0.01%), EUR/USD (^EURUSD +0.03%) is up +0.0009 (+0.08%), and USD/JPY (^USDJPY +0.26%) is up +0.25 (+0.24%) at a 10-3/4 month high. Friday's closes: Dollar Index +0.238 (+0.25%), EUR/USD -0.0037 (-0.32%), USD/JPY +0.32 (+0.28%). The dollar index on Friday rallied to a 2-1/2 week high and closed higher on weakness in the yen against the dollar on central bank divergence after USD/JPY surged to a 9-1/2 month high as the Fed is seen continuing its rate hike regime while the BOJ continues its QE easing program. There was weakness in EUR/USD which fell to a 2-week low after Eurozone Sep core CPI rose by a less than expected +0.9% y/y, which was dovish for ECB policy.

Metals prices this morning are weaker with Dec gold (GCZ18 -0.59%) -6.6 (-0.55%), Dec silver (SIZ18 -1.03%) -0.142 (-0.97%) and Dec copper (HGZ18 -1.48%) -0.038 (-1.34%). Friday's closes: Dec gold +8.8 (+0.74%), Dec silver +0.422 (+2.95%), Dec copper +2.20 (+0.79%). Metals on Friday closed higher with Dec silver at a 4-week high. Metals prices were boosted by increased political risks in Italy that boosted the safe-haven demand for precious metals after the Italian government agreed to set next year's budget deficit target at 2.4% of GDP, above expectations of +1.9%. Copper prices were boosted by signs of tighter supplies after LME copper inventories fell -7,500 MT to an 8-1/2 month low of 202,400 MT.

Nov WTI crude oil prices (CLX18 +0.19%) this morning are up +13 cents (+0.18%) and Nov gasoline (RBX18 +0.17%) is +0.42 (+0.20%). Friday's closes: Nov crude oil +1.13 (+1.57%), Nov gasoline +1.68 (+0.81%). Nov crude and gasoline on Friday moved higher with Nov crude at a 2-1/2 month high. Crude oil prices were boosted by global supply fears with the collapse of Venezuela's oil industry and concern about the extent to which Iranian crude exports will fall due to U.S. sanctions in November. Crude oil prices were also supported by the increase in the crack spread to a 2-week high, which boosts incentive for refiners to purchase crude to refine the crude into gasoline.

Overnight U.S. Stock Movers

Tesla (TSLA -13.90%) jumped 16% in pre-market trading after the company settled a lawsuit brought by the SEC where Tesla will pay a $20 million penalty and CEO Musk will be removed as CEO for at least three years after Musk tweeted that he had "funding secured" to take Tesla private at $420 a share.

M&T Bank (MTB -0.64%) was upgraded to 'Outperform' from ‘In-line' at Evercore ISI with a price target of $185.

United Parcel Service (UPS +0.02%) was upgraded to 'Outperform' from 'Market Perform' at BMO Capital Markets with a price target of $128.

Entegris (ENTG +0.87%) was upgraded to 'Buy' from 'Hold' at Deutsche Bank with a price target of $38.

Biogen (BIIB -0.64%) was rated a new 'Overweight' at Cantor Fitzgerald with a price target of $400.

Chevron (CVX -0.16%) was reinstated with an 'Outperform' at Wolfe Research with a price target of $146.

Vertex Pharmaceuticals (VRTX +1.58%) was rated a new 'Overweight' at Cantor Fitzgerald with a price target of $217.

Intel (INTC +3.07%) was downgraded to 'Underweight' from 'Equal-Weight' at Barclays with a price target of $38.

Chipotle Mexican Grill (CMG -2.34%) was downgraded to 'Underperform' from 'Market Perform' at Oppenheimer with a price target of $400.

Delph Technologies (DLPH -1.94%) was downgraded to 'Underperform' from 'Neutral' at Bank of America/Merrill Lynch.

Gilead Sciences (GILD +0.82%) was rated a new 'Overweight' at Cantor Fitzgerald with a price target of $87.

Tesaro (TSRO +1.56%) was rated a new 'Overweight' at Cantor Fitzgerald with a price target of $57.