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For all the chatter, bulls remain in charge: we’ve just had another all-time high for the S&P 500, breaking the July 26th peak at 3,027.98 to trade as high as 3,042. The break higher above the previous record high may likely open up a new leg higher, although we will need to see where this closes tonight – though at present it’s looking odds-on to finish above the previous 3,025.86 closing peak. 

It’s a remarkable achievement against faltering corporate earnings, a festering (if not quite total) trade war, and softer macro data everywhere you look. Bulls had tried their hardest Friday but some really positive noises on trade nudged us over the line today. President Trump said the US and China are looking to be ahead of schedule on sign the ‘phase one’ trade deal at the APEC meeting in Chile in mid-Nov. The bar on a US-China trade deal had been set so low that the market seems content with this pretty puny agreement. At least the direction is positive.  

Although earnings are softer, we’ve seen a beat rate of about 75% of those S&P 500 stocks reporting so far. We’ve also got the Fed carrying out stealth QE in the shape of these overnight repo interventions, which it beefed up last week and increasingly don’t look very temporary. When you have unlimited liquidity and can bank on the Fed coming to the rescue, risk wins. It doesn’t look like the Fed will disappoint this week either, although it may choose to use this meeting to signal a pause to its rate-cut cycle. Also of course we have the ECB relaunching QE and even the BoJ might try to find some more pennies down the back of the sofa – quite what it can do beyond what’s already doing is hard to fathom, but that’s never stopped a central bank before. 

The market is starting the week very much risk-on, but there are a lot of risk events coming up this week, as we detailed in the week ahead. Gold has softened significantly today as risk finds bid, with the metal sinking to $1493.

European equities are looking in much better shape than they were this morning. The DAX firmed to 12,960, a gain of 0.5%.  The FTSE managed to rally into positive territory around lunch time having been down for much of the morning as it caught a lift from the US and the comments on trade. The prospect of an election doesn’t seem to frightening investors too much. Sterling steady around $1.2860 as it looks near certain that we’ll have a General Election in Dec.

A couple of interesting earnings reports are due out tonight. First Alphabet, expected to deliver approx. $40.3bn in revenues after the close tonight. Slowing growth in ad revenues in Q1 (+17%, or +19% on constant currency basis) spooked traders but this was put right by the improvement (+19%, or 22% on constant currency basis) in Q2. That’s probably the number one metric for investors in Q3. After Q2 we noted that we do still see a trend in declining revenue growth.

Q2 earnings per share rose to $14.21 against the c$11.30 expected. This was a significant beat to earnings and revenue forecasts and demonstrates that the wobble in Q1 may have been temporary.  Nevertheless, Alphabet will have to get used to more competition in the digital ad space from the likes of Amazon and Facebook. Investments were a big factor in the quarter’s strong performance, delivering earnings of $2.7bn on the $9.9bn in net income.  

Beyond Meat may be very volatile over the next couple of days with the company set to report third quarter earnings after the close tonight. The company might report a profit but the biggest danger to the stock is the volume of new shares that will be unloaded on the market tomorrow when the lock-up ends. Shares have been battered down from the all-time highs and it remains heavily shorted, but investors who got in before the IPO are still minimum x4 on the deal with the stock at $100 versus $25 on IPO. If the earnings beat, you could end up with a lot of volume and volatility as lock-up stock gets dumped. 

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