“The main purpose of the stock market is to make fools of as many men as possible.” ― Bernard M. Baruch

1. China GDP Grew 6.9%, Slowest Pace Since 2009 — China’s economy grew 6.9% in the third quarter from a year ago, beating forecasts for 6.8% growth, but decelerating to its slowest pace since the global financial crisis. The results add to doubts the country can meet its year-end GDP target of about 7%, and raises pressure on Beijing to roll out more stimulus measures following a summer stock market plunge and devaluation of the yuan.
2. ECB. Holds Interest Rates Steady — the European Central Bank (ECB) also left unchanged its economic stimulus program, but said it would review its impact on the eurozone economy in December. Grounds for extending QE would include deflation risks, slowing growth in China and stock market volatility.
3. Deadline for the “Debt-Ceiling” Must Be Raised By Nov. 3 — Treasury Secretary Jacob Lew is concerned that “last-minute brinkmanship” in Congress could lead to a legislative “accident” in which lawmakers would fail to raise the debt ceiling before a Nov. 3 deadline. The standoff is bubbling through financial markets as investors limit their exposure to Treasury bills that mature in November, pushing yields to levels last seen two years ago, when Congress went through a similar episode.
4. Hedge Fund Losses Swell Continue Into September — per Hedge Fund Research, hedge funds suffered their largest quarterly loss in assets since the financial crisis during the three months that ended in September. The third-quarter saw the average fund lose 3.9% driven by slowing growth in China, sliding commodities prices and a likely U.S. Fed rate hike that sent stocks tumbling. Well known Hedgefunds such as Bill Ackman’s Pershing Square (OTCPK:PSHZF) has now fallen 12.6% for the year, while David Einhorn’s Greenlight Capital (NASDAQ:GLRE) is down 17% YTD.
5. China’s Central Bank Cuts Rates for 6th Time Since Nov — the People’s Bank of China (PBOC) cut rates for the 6th time in less than a year and relaxed reserve requirements yet again. Growth has flagged in the world’s No. 2 economy. China has pursued its most aggressive policy easing cycle this year since the 2008/09 global financial crisis, as policymakers seek to invigorate an economy beset by weak demand and excessive industrial capacity.

The week ahead — Economic data from Econoday.com:

“Buy when others are despondently selling and sell when others are greedily buying” — Mark Mobius

1. China Trade Data Shows Further Weakness in — China’s trade slump has extended into September. Dollar-denominated imports plunged 20.4% Y/Y last month, while exports slipped 3.7%, translating into a trade surplus of $60.34B.
2. US Retail Sales Rose 0.1% in Sept Smaller than Expected — Retail sales excluding automobiles, gasoline, building materials and food services slipped 0.1 percent after a downwardly revised 0.2 percent gain in August. Cheaper gasoline weighed on service station receipts, but gains in purchases of automobiles and other goods pointed to solid domestic demand that could shield the economy from slowing global growth.
3. IPO Market Remains Under Pressure — following in the footsteps of Neiman Marcus (NMG), Albertsons (NYSE:ABS) has delayed its IPO due to Wal-Mart’s (NYSE:WMT) lower guidance weighed heavily on the U.S. market and pummeled retailers’ shares. Separately, payments processor First Data (NYSE:FDC) priced its initial public offering at $16/share, below its previously indicated range of $18-$20/share.
4. Square (SQ) (Mobile Card-Reader/Payment Service Provider) Files for IPO — Square has filed a public S-1. The mobile card-reader/payment service provider is listing on the NYSE under the symbol (SQ). Square generated $23.8B in gross payment volume in 2014 via 446M payments, and had over 2M sellers accepting five or more payments in the 12 months ending in June. 1H15 payment volume totaled $15.9B (+53%).
5. Fitch Downgrades Brazil to One Notch Above Junk — Fitch has cut Brazil’s credit rating to the brink of junk, warning the country could soon lose its coveted investment grade due to the “rising government debt burden, increased challenges to fiscal consolidation and a worsening economic growth backdrop.” The rating agency left a negative outlook on the new rating, suggesting it eventually could follow Standard & Poor’s recent downgrade to junk. Brazil’s economy is the 7th largest in the world at $2.4Tn – that’s above Italy, India, Russia, Canada, Australia and just under France ($2.8Tn) and the UK ($2.9Tn). S&P cuts Brazil credit rating dropped to BBB- by last month as well.
6. AAII Bullish Sentiment Dropped — According to the weekly sentiment survey from the American Association of Individual Investors (AAII), bullish sentiment dropped from 37.5% last week to 34.1%. This week also marks the 33rd straight week that bullish sentiment has been below 40%, which is also the longest streak on record. Oh well, maybe next week. Chart below via courtesy of BIG.

The week ahead — Economic data from Econoday.com:

“I made my money by selling too soon & never lost money by turning a profit” — Bernard Baruch

1. Trans-Pacific Partnership Agreed — after five years of talks, a dozen nations across the Pacific Basin clinched an agreement that would reduce tariffs in countries making up 40% of the global economy. Tough issues surrounding the Trans-Pacific Partnership, including auto trade, dairy exports and monopoly periods for next-generation drugs were agreed.
2. Facebook To Beam Internet From Space to Africa — Facebook (FB) plans to launch a satellite in partnership with France’s Eutelsat Communications (OTCPK:EUTLY) to bring connectivity to large parts of sub-Saharan Africa. The satellite, part of Facebook’s Internet.org platform, is under construction and will be launched in 2016.
3. German Exports Slowed The Most Since 2009 Recession — German exports slumped the most since the height of the 2009 recession in another sign Europe’s largest economy is losing momentum in Q3. Foreign sales slid 5.2% to €97.7B M/M and imports tumbled 3.1% to €78.2B, narrowing the trade surplus to €19.6B. The data follows sharp declines in industrial orders and output in August, suggesting waning demand from abroad may be leaving its mark on Germany.
4. VW America CEO Knew of Emissions Problem in 2014 — shock revelations over Volkswagen (OTCQX:VLKAY) emission scandal have already wiped more than 40% off Volkswagen’s market cap, but the direct and indirect costs are still being assessed as the company risks severe fines and possible damages from customers’ lawsuits. In testimony of his hearing with the House energy committee, U.S. head of Volkswagen (OTCQX:VLKAY) Michael Horn offered a “sincere apology” over the “deeply troubling” pollution scandal and admitted he was made aware of “a possible emissions non-compliance” as early as spring 2014. According to an estimate by Warburg Research, the automaker will ultimately face costs and lost revenue from its damaged image of more than €35B ($39B).
5. Fed Minutes Shows Fear of Weak China, Prices — from the Sept 16-17 meeting, Fed policy makers chose not to raise rates last month due to worries about China and other overseas economies possible impact on US exports and overall economy. The minutes also show how concerned members were about inflation remaining persistently low.

The week ahead — Economic data from Econoday.com: