China’s state planner says it is acceptable for the economy to grow a little slower, or faster

What is it the kids say? “It’s all good!”

Seems to be the message from the National Development and Reform Commission of the People’s Republic of China (NDRC) … i.e. the ‘state planner’
I guess the takeaway from this is to expect a lowering of the GDP target ahead. For this year its set at 6 to 6.5% …. an it looks like it’ll come in down the bottom of that range.
For next year, its reasonable to expect the target to be lower again. Not because because the NDRC tells us, but as the eco0nomy gets bigger the rate of growth will slow.
Anyway, arguments abound about how accurate the Chinese data is. Those won’t stop any time soon.

Fitch affirms UK credit rating but retains ratings watch for downgrade

Brexit still hangs in the balance

  • UK affirmed at AA
  • See 1.1% GDP this year with upside risks
  • Lower 2020 growth forecast to 1.2% from 1.5% on Brexit uncertainty and slower global growth
  • Full report
Fitch is warning about more spending even if Brexit is resolved. They say that austerity fatigue and Brexit preparations are set to reverse the path of expenditure restraint seen since 2010.
They also warn that a positive Brexit resolution is still uncertain but overall there is a more-positive spin in the report:
Recent data revisions suggest the UK economy has been more resilient to post-referendum Brexit uncertainty than previously thought. Sizeable revisions to business investment indicate firms started to reduce investment from mid-2017 rather than in 2015 as the previous vintage suggested. The overall level of business investment is 3.3% above end-2015 according to the new data. The household saving ratio was also revised up to 6.2% in 1Q19 from 4.4% under the previous vintage. Households appear to have been more cautious than previously believed. This suggests that the household sector is in a somewhat stronger position to withstand the impact of a potential economic shock.

CFTC Commitments of Traders: Pound shorts haven’t been squeezed…yet

Forex futures positioning data from the CFTC for the week ending October 15, 2019:

Forex futures positioning data from the CFTC for the week ending October 15, 2019:
  • EUR short 75K vs 75K short last week. Unchanged
  • GBP short 73K vs 73K short last week. Unchanged
  • JPY short 7K vs 11K long last week. Longs switch to shorts in an 18K drop
  • CHF short 13k vs 11k short last week. Shorts trimmed by 1K
  • AUD short 48k vs 46k short last week. Shorts increased by 2K
  • NZD short 40K vs 38K short last week. Shorts increased by 2K
  • CAD long 13K vs 5K long last week.  Longs trimmed by 1K
  • Prior week

The big moves in sterling came last week and I’m surprised there wasn’t any covering through Tuesday. That’s good news if you’re long GBP because it leaves lots of juice to squeeze.

A few big names weighed and tech struggled

On the day:
  • S&P 500 down 12 points to 2986 (-0.4%)
  • DJIA -0.9%
  • Nasdaq -0.8%
On the week:
  • S&P 500 +0.5%
  • DJIA -0.2%
  • Nasdaq +0.4%
A report saying that there are text messages showing Boeing executives worked to hide safety problems from the FAA sent shares of the industrial giant down 6.38% in the biggest slide since Feb 2016. Shares of J&J were also soft on a lawsuit.
The S&P 500 is consolidating ahead of the all-time high of 3027.
A few big names weighed and tech struggled

Today is the last chance for the Fed to manage expectations

The Federal Reserve blackout starts tomorrow

The Federal Reserve blackout starts tomorrow
The data calendar is is modest today but there are three Fed speakers on the agenda. The first two are predictable. Kaplan is a dove and we’re head from him already this week when he said he backed the two prior rate cuts but I’m more agnostic on next move. He speaks at 1300 GMT (9 am ET).
Then it’s onto George at 1405 GMT but she’s a reliable hawk so we’re unlikely to get anything market moving.
The big one comes at 1530 GMT (10:30 am ET) when Fed vice chair Clarida speaks in Boston. He’s speaking on the outlook and monetary policy; there will be released text and Q&A.
If the Fed wants to lower the current 81% chance of a cut priced into Fed funds, this is the last chance.

Top economic advisers reportedly warned Trump over tariffs before China trade truce

WSJ reports on the matter

Trump

The report says that Trump’s top economic advisers warned him that continued escalation of trade tensions could imperil the economy and hurt his chances of reelection, according to people familiar with the meeting that took place.

The meeting was said to have happened two days before trade talks between senior US and Chinese officials in Washington. Adding that it isn’t known what influence the meeting had on Trump’s thinking ahead of negotiations with China.
It is said that Trump even called in trade hawk Peter Navarro when he was briefed about tariffs and the economic situation mid-way through the meeting:

“Where’s Peter?” Mr. Trump said, according to two people familiar with the meeting. “Get Navarro in here.”

He also reportedly continued to pile the blame on the Fed and said that the central bank should be doing more to stimulate growth.
The full report can be found here (may be gated).
I don’t think the story here as any material implications to the trade truce right now but it could see Trump be more accommodative towards China’s request on tariffs if the US economy continues to suffer more of a setback over the coming months.

Is there still a possibility of a no-deal Brexit at this stage?

What if I told you that a no-deal Brexit now hinges on Boris Johnson winning the parliamentary vote tomorrow?

Boris Johnson
Before we get into the thick of things, let us set out what exactly is at stake tomorrow. Clearly, Boris Johnson’s Brexit deal motion is the main event but what does it mean really?

If lawmakers do vote to pass the motion, it means that they have technically voted in favour of a Brexit deal but there is still the issue of ratification and getting Johnson’s deal through the necessary legislative hoops – that includes voting on the withdrawal agreement.
The issue with all of this is related to the Benn Act. Now, the Benn Act requires Johnson to request an extension if Johnson cannot get parliament to agree on a Brexit deal. Hence, if the deal is rejected tomorrow, then there is no issue.
However, if the deal is approved, this is where things may yet get a little tricky.
In such an event, Johnson isn’t compelled to seek an extension and if there are hurdles he cannot overcome in getting his deal to be ratified and implemented, he could just let things run its course and we get towards a no-deal Brexit after 31 October.
Logically, you would think that he would seek a technical extension to get a deal through but possibly and certainly are two different words with very distinct connotations.
He could possibly seek an extension to work out any potential legislative issues and buy enough time to get his deal over the line legally but it doesn’t mean that he will certainly do so.

Is there any way to avoid this altogether?

This is where the vote on the Letwin amendment tomorrow may be rather consequential.
The Letwin amendment sets out that the government is to request an extension of the Brexit deadline, if a deal is passed, up until all the necessary legislative hurdles are overcome to officially put such a deal into place.
In essence, it is an added insurance in case Johnson has other plans up his sleeve.
This means that even if Johnson’s vote passes tomorrow but fails to get through any potential legislative complications by 31 October, he will still be compelled to request for an extension to the Brexit deadline.
While the drama involved in all of this is certainly captivating, it must be said that if we do see Johnson’s deal being passed tomorrow, it is pretty much a given that it should make it through all the significant legislative hurdles and be ratified in due time.
The timeline may now say it should be done by 31 October (two weeks) and that certainly could be plausible if lawmakers decide to work overtime.
That said, even if that isn’t enough time, a technical extension just to get the deal implemented is almost surely the most likely outcome – barring any unforeseen circumstances.

Aramco says that timing of IPO will depend on market conditions

I feel like I have been reading this same headline for years now

Just in case you missed out, Aramco has delayed its planned IPO launch again earlier today. They are out with a statement now to say that they will engage with shareholders on the matter and that the IPO timing will depend on market conditions.

If and when this ever does happen, it will be the world’s largest stock market listing.