“Don’t try to buy at the bottom and sell at the top. It can’t be done except by liars.” — Bernard Baruch
–> Apology for the late post as we enjoyed a long weekend <--- 1. China Currency Yuan Poised to Join IMF Currency Basket — IMF representatives are set to give the all-clear for China’s yuan to be included in the lender’s Special Drawing Rights basket, laying the groundwork for a favorable decision by policymakers. Meanwhile, China took another step toward liberalizing its financial system, after the PBOC removed the cap on deposit rates. That move was paired with another cut to interest rates and banks’ reserve requirements.
2. White House, Congress Reach Tentative Budget Deal — the White House and Congressional leaders have reached a tentative deal on a two-year budget plan that would suspend the debt limit through mid-March 2017 and boost spending by $80B through September 2017. Those increases would be offset by cuts in spending on Medicare and Social Security disability benefits, and savings and revenue from other programs.
3. Walgreens Boots (WBA) to buy Rite Aid (RAD) –Walgreens Boots Alliance Inc.(WBA), said it would buy Rite Aid Corp. for $17.2 billion in an all-cash deal. The tie-up with Rite Aid(RAD), uniting two of the country’s three biggest drugstore owners, would create a drugstore giant as companies across the U.S. health-care industry look for ways to bulk up. CVS is the overall leader. Drug distributor AmerisourceBergen (ABC) is seen as a benefactor, which as a deal with Walgreens while McKesson (MCK) supplies Rite Aid (RAD).
4. Third-quarter GDP Growth Just 1.5% — Gross domestic product (GDP) the value of everything a nation produces — rose at a 1.5% annual pace from July through September, the government reported. The U.S. had grown at a crisp 3.9% rate in the second quarter. In the third quarter as companies cut back production to prevent a worrisome buildup in inventories, particularly of goods destined for foreign markets. However, consumer spending, the single largest determinant of U.S economic growth, rose at a 3.2% annual pace following an even larger gain in the second quarter.
5. FOMC Stands Pat, Drops Hints — the Central Bank left rates alone, but cut its reference to the global market turmoil that kept it on hold in Sept. The question is whether it will hike in Dec., rather than when, if ever, a rate rise will be appropriate, policymakers reported. Fed funds futures raised the odds of a year end hike.

The week ahead — Economic data from Econoday.com:

“Don’t worry about the world ending today. It’s already tomorrow in Australia.” — Charles Schultz

1. European Central Bank: 25 banks fail stress tests — MarketWatch, the European Central Bank and the European Banking Authority on Sunday unveiled the results of a nearly yearlong effort to assess the finances of 150 banks, identifying 12 that still need to come up with a total of EUR9.5 billion ($12.04 billion) in extra capital. Four lenders need to come up with €3.31B in new capital, with Banca Monte dei Paschi di Siena – the world’s oldest bank – needing €2.11B. Overall, 25 out of around 150 lenders technically failed the tests, but 13 have already taken the required remedial steps.
2. Smart Money (Commercial Hedgers & Large Speculators ) Decreases Crude Oil Shorts By Record Amount — the chart below shows “dumb money” versus “smart money” and how the two sides are playing oil prices. Hedgers have already cut their net short position by a record 205,000 contracts. Historically, there have been just 5 other occasions in which hedgers have gotten “net longer” by at least 150,000 contracts. Those dates were in December 1997, September 2003, November 2008, October 2011 and June 2012. The last four of those such occasions led to intermediate-term rallies in crude oil of roughly 105%, 150%, 50% and 30%, respectively. Only the 1997 instance did not lead to a rally.

3. Newly Re-Elected Rousseff says Brazil will recover, avoid credit downgrade — Reuters, newly re-elected President Dilma Roussef has promised that Brazil(EWJ) will avoid a downgrade in her second term, and that the country’s economy will recover. Brazil currently stands two notches into investment-grade zone for Moody’s and Fitch, although Standard & Poor’s previously cut the government’s debt to near-junk level.
4. Fed Ends Historic Bond Buys — the Central Bank said it sees enough progress in employment and the economy to finish its 3rd round of stimulus since. 2008. Policy makers said again interest rates will stay low for “a considerable time” but gave no additional guidance.

5. U.S. economy grows 3.5% in third quarter — the U.S. economy grew by a 3.5% annual rate in the third quarter, fueled by a surge in exports and the biggest jump in federal spending in five years. Consumers spent at a moderate 1.8% pace, businesses invested at a steady clip and government is no longer a major drag on the economy.
6. Japan Surprises With Stimulus Boost as Japan Struggles — japan raise the BOJ’s annual target for enlarging the monetary base to 80 trillion yen ($724 billion), up from 60 to 70 trillion yen, the central bank said. The BOJ also cut its forecasts for inflation and growth in Japan, the world’s third-biggest economy. Facing projections for failure to reach the BOJ’s 2 percent inflation target in about two years, and with the pressure from a higher sales tax, enlarging the stimulus at some point had been anticipated by analysts for months.

The week ahead — Economic data from Econoday.com: