GLOBAL MARKETS Friday, September 28, 2018 Markets in brief Japanese yen fell as Asian stocks gained and quarter-end portfolio rebalancing weighed on the currency. The currency was already under pressure from easing trade concerns with the U.S. along with ongoing policy divergence. USD/JPY hit earlier today 113.64 yen, its highest since December 12 (almost 10-month high). Euro traded flat on the day but remained under pressure from Italy’s budget plan concerns. Traders will be paying attention for Eurozone inflation data at 12:00 LT. British pound was also little changed after falling 0.67% in previous session. Swiss franc was near a 1-month low of 0.9782 per dollar hit yesterday, when it tumbled more than 1%. Gold prices steadied but a strong dollar could keep it under pressure. Spot gold hit yesterday, $1181.96, a 6-week low. Oil prices continued to trade firm as investors prepare for potential supply impact from looming Iran sanctions. U.S. stocks recovered yesterday as the markets refocused on Fed’s confidence in the economy. Asian shares rose today tracking Wall Street’s optimism. Nikkei index hit its highest level since November 1991 (27-year high). Most Gulf stock markets posted marginal gains yesterday. Dubai index surged helped by a jump in its biggest bank’s shares. Italy defying the European Union Italy agreed on a 2019 deficit of 2.4% of GDP, a blow to efforts by Finance Minister Giovanni Tria and President Sergio Mattarella to moderate the more extreme instincts of the populist government. A stunned EU official said the figure should have been around 1.6%, and 2.4% puts Italy in breach of its obligations. The nation has to present a draft budget to the bloc by mid-October. Eurozone’s inflation data Headline inflation in the euro area probably accelerated to 2.1% in September from 2%, although Germany's beat yesterday brings an upside risk to the consensus forecast. Economists expect the core figure to have advanced by the same extent to 1.1%. That's not the "vigorous pick-up" mentioned by Mario Draghi this week and means rate hikes remain unlikely until September 2019, Bloomberg Economics said. Tesla without Musk? The SEC sued Elon Musk, accusing him of misleading investors when he tweeted he was "virtually certain" he could take Tesla private. It also alleged he arrived at the price by assuming a 20% premium over Tesla's share price, then rounding it up to $420 "because of the significance of the number in marijuana culture," and tweeting it to impress his girlfriend, the musician Grimes. The agency acted after Musk refused to settle, the WSJ reported. Tesla shares fell 12% post-market. Copyright: Bank of Beirut 2018 - Research Department - Global Markets Division Friday, September 28, 2018 FX & COMMODITIES The U.S. dollar stood tall against its peers on Friday, hovering near a nine-month high versus the yen, after data reinforced upbeat views about the U.S. economy and backed the Fed’s signal for a steady course of rate increases over the next year. U.S. GDP grew at a 4.2% clip in Q2, the fastest in nearly four years, according to government data on Thursday. Another report showed durable goods rose 4.5% in August, rebounding from a revised 1.2% drop the month before. The dollar traded at 113.395 yen after gaining roughly 0.6% overnight to 113.47, its highest since December 2017. The decline in U.S. Treasury yields slowed in the wake of the upbeat data, underpinning the dollar. Yields had declined sharply after the Fed tightened monetary policy on Wednesday and stuck to its intention of hiking interest rates at a steady pace. The Japanese yen is now under pressure from easing trade concerns with the U.S., along with policy divergence between central banks. Trump and Abe agreed on Wednesday to start trade talks in an arrangement that, for now, protects Japanese automakers from further tariffs, seen as a major threat to the export- dependent economy. The euro was hit by concerns around heavily-indebted Italy’s handling of its budget. Italy on Thursday set its budget deficit target at 2.4% of gross domestic product for the next three years, defying Brussels and marking a victory for party chiefs over economy minister Giovanni Tria, who had pushed for a deficit below 2%. The euro has lost more than 0.9% this week, having pulled back from a 3-1/2-month high of $1.1815 scaled on Monday after ECB chief Mario Draghi said he sees a vigorous pickup in euro zone inflation. Markets will now turn to euro zone preliminary inflation In focus today data due later in the day to see if they can support Draghi’s views on prices. TIME (LT) EVENT FCAST PRIOR CHF 10:00 KOF Economic Barometer 100.1 100.3 Oil prices inched up, with investors trying to gauge the EUR 10:55 German Unemployment Change -9k -8k potential impact on supply from looming U.S. sanctions on GBP 11:30 UK Current Account -19.4B -17.7B Iran's crude exports. The sanctions kick in on Nov. 4, with GBP 11:30 UK Final GDP QoQ 0.40% 0.40% Washington asking buyers of Iranian oil to cut imports to zero to EUR 12:00 Eurozone Flash CPI YoY 2.10% 2.00% force Tehran to negotiate a new nuclear agreement and to curb its EUR 12:00 Eurozone Core Flash CPI YoY 1.10% 1.00% influence in the Middle East. Saudi Arabia is expected to quietly add CAD 15:30 Canada GDP MoM 0.10% 0.00% extra oil to the market over the next couple of months to offset the USD 17:00 US Revised Consumer Sentiment 100.5 100.8 drop in Iranian production, but is worried it might need to limit output next year to balance global supply and demand as the United States pumps more crude. Next Week: German Retail Sales, Manufacturing & Services PMI for major countries, AU RBA Policy Decision, US ADP Nonfarm Employment, AU Trade Balance, AU Retail Sales, Canada Jobs Report, US Jobs Report Copyright: Bank of Beirut 2018 - Research Department - Global Markets Division Friday, September 28, 2018 STOCKS & BONDS Europe's share markets took a tumble on Thursday as reports that Italy's long-awaited budget was facing a delay. Italy's main Milan bourse slumped as much as 2% with the country's big banks down even more as the country's borrowing costs also surged. U.S. stocks climbed on Thursday, helped by gains in Apple, Alphabet and Facebook, as well as the U.S. Federal Reserve’s confidence in the strength of the economy after it raised rates for the third time this year. Eight out of 11 sectors rose, with the S&P 500 communication services index, recently renamed and reconstituted with Facebook, Google-parent Alphabet and other internet and media stocks, jumping 0.80%. Alphabet rose 1.20% and Facebook climbed 1.13%, both helping lift the S&P 500. Apple rose 2.05% after JPMorgan started coverage of the stock with an “overweight” rating, citing the iPhone maker’s quicker-than-expected move to a services business. Adding to feel-good sentiment was data showing economic growth accelerated in Q2 at its fastest pace in nearly four years as previously estimated. Amazon.com gained 1.93% after upbeat comments from brokerage Stifel about the company’s retail, cloud, and advertising businesses. The online retailer opened a brick-and-mortar store in New York City on Thursday. Starting on Monday, the telecommunications sector was renamed “communication services” and reconstituted with major internet and media companies alongside AT&T and other telecoms. So far this week, the S&P 500 communication services index has gained 1.5%, more than any other sector index. The S&P 500 materials index dipped 0.97%, while the utilities index added 0.96%, more than any other. Accenture fell 1.69% after the consulting and outsourcing services company’s full-year profit fell short of analysts’ estimates. Cruise operator Carnival Corp tumbled 4.84% after its Major Company News fourth-quarter forecast missed estimates. Conagra Brands slumped 8.54% after the packaged food company posted quarterly revenue Boeing Co was selected to build the U.S. Air Force's next training jet in a contract worth up to $9.2 billion over the life of the program, the Air that missed analysts’ estimates. Force said on Thursday. Asian shares inched higher on Friday, following gains on Wall A U.S. judge on Thursday ordered Goldman Sachs Group Inc, JPMorgan Chase & Co and four other large banks to face an antitrust Street. MSCI’s broadest index of Asia-Pacific shares outside Japan lawsuit by investors who said they conspired to stifle competition in the was up 0.02% in early trade in Asia. Australian shares were 0.75% nearly $2 trillion stock lending market. higher, while Seoul’s Kospi was down 0.54% after hitting 3-month Volkswagen AG, BMW AG and Daimler AG-owned Mercedes-Benz highs on Thursday. Japan’s Nikkei share average rose 2% to its have halted sales of some of their plug-in hybrid cars in Europe in the wake of new emissions regulations, Automotive News reported on highest levels since Nov 1991. The Nikkei rose to as high as 24,286 Thursday. points, jumping above its January peak of 24,129, with all of the British engine maker Rolls-Royce said on Thursday it was managing a Tokyo Stock Ex’s 33 industry sub-indexes in positive territory.