“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:

“One characteristic I’ve found among successful traders is that they function effectively when they’re not trading. When markets become very quiet and range bound, they occupy themselves with a variety of activities, from sharing ideas with peers to conducting research. Traders who do not tolerate inactivity well inevitably feel the need to trade, often when there is no objective edge present. For them, losing money is less onerous than experiencing boredom.” — unknown

1. China Markets Fall Sharply Despite Fresh Help From Beijing — Chinese shares plunged again last week as investors shrugged off a series of regulatory support measures. The panic in mainland markets also rippled across the border including Hong Kong.
2. FOMC June Meeting Minutes — minutes from the Fed’s June 16-17 meeting showed most policy makers continued to justify an interest rate hike later. However, they were worried about Greece & China, where conditions have since deteriorated. Fed officials also voiced concerns about US consumer caution, business investment and exports.
3. IBM Announced New kind of Ultra-Dense Chip — IBM has announced a new kind of ultra-dense chip, which squeezes in four times as much computing power as the best silicon currently available. The new chips will usher in the possibility of creating 7-nanometer transistors (a strand of DNA in comparison measures 2.5 nanometers in diameter). IBM (NYSE:IBM) made the research advance by using silicon-germanium instead of pure silicon, allowing transistors to switch faster and use less power by sitting more densely on a chip.
4. Europe Weighs Greek Proposal as Tsipras Seeks Lawmaker Support — the Greek PM submitted the packet of spending cuts, pension savings and tax increases to the European Commission. The government offered to meet most of the demands made by creditors in exchange for a third rescue to “fully cover” Greece’s financing needs through 2018. The bailout from the European Stability Mechanism may amount to 59 billion euros.
5. Investor Sentiment Rebounds Slightly — according the weekly sentiment survey from the American Association of Individual Investors (AAII), bullish sentiment increased from a depressed reading of 22.61% last week to 27.91% this week. Even at current levels, though, bullish sentiment remains low by historical standards. In fact, it has now been below its bull market average of 38.28% for 15 straight weeks, which is the longest streak since July 2012.

6. Greece Capitulates To Stay In The Eurozone — the eurozone and Greece have agreed in principle to a third bailout that will keep the beleaguered country in the currency area, for now, after almost total capitulation from Prime Minister Alexis Tsipras. Greece will have to put €50B of state assets in a trust fund so that they can be sold off and the proceeds used to repay debt. The government will also have to get further austerity measures through parliament, a tough ask given the “no” vote in the recent referendum.

The week ahead — Economic data from Econoday.com:

“Once we realize that imperfect understanding is the human condition there is no shame in being wrong, only in failing to correct our mistakes.” — George Soros

1. J.P. Morgan Faces New Probe on Energy Trades — the Department of Justice is reportedly investigating JPMorgan (JPM) over whether it manipulated U.S. energy markets. The speculation comes less than a month after the bank agreed to pay $410M to the Federal Energy Regulatory Commission to settle charges related to such manipulation. The latest probe adds to inquiries over the London Whale, metal warehouses and mortgage bonds problems.
2. Moody’s lifts outlook on U.S. states — WSJ, the ratings agency changed its collective outlook on U.S. states to stable from negative, where it has been for the past five years. Credit quality among the 50 states is generally high, Moody’s said, with 30 states rated at triple-A or Aa1, the two highest ratings. Moody stated the slowly recovering economy has helped states’ revenue and reserves.
3. China manufacturing sees surprise rebound — MarketWatch, the “flash” reading of the China manufacturing PMI, compiled by HSBC and Markit, rebounded to a four-month high of 50.1 from a final reading of 47.7 in July, an 11-month low.
A reading below 50 indicates contraction in sector activity, while one above 50 shows growth.
4. Eurozone business growth hits two-year highs — Eurozone flash manufacturing PMI has increased to a 26-month high of 51.3 in August from 50.3 in July and exceeded consensus of 50.8. Services also showed expansion, as did the composite figure.
5. Emerging markets selloff intensifies after Fed — Reuters, after the FOMC minutes released late last week, which caused the recent spike in U.S. debt yields has caused borrowing costs to increase globally, which, along with the rising dollar, has not been healthy for emerging markets with large current account deficits, such as India. The country’s rupee, along with Turkey’s lira, hit new record lows, while the currencies of Indonesia, Malaysia and Thailand dropped to multi-year troughs.
6. Deficit Budget Deal Talk Break-Down — NYTimes, budget talks between the White House and Senate Republicans have gone nowhere since Congress began its summer recess, increasing chances of a fiscal stalemate that could lead to a government shutdown in October or the threat of a government default later in the fall.
7. AAII Bullish Sentiment — from BIG, according to the weekly survey from American Association of Individual Investors (AAII), bullish sentiment dropping to its lowest levels since early 2012.

The week ahead — Economic data from Econoday.com: