Stocks dip to start the week; TRY and Deutsche Bank tumble

Summary:

• US stocks pull back

• Apple falls on broker downgrade

• Lira drops as Erdogan wields the axe

• Early rally fizzles out for DB as major overhaul unveiled

US equities ended Friday at their highest ever weekly closing level after a fairly volatile session around the NFP release. S&P500 futures had already eked out a fresh all-time high above the 3000 handle before the jobs data hit, but the market reacted negatively to an all round solid release by selling off by more than 30 points from the highs. Despite a subsequent recovery before the closing bell, the weakness has reappeared this afternoon with the major benchmarks in the red on the Euorpean close. 

Looking at company news and Apple is attracting unwanted attention, with the stock beginning lower by over 1% after a downgrade from Rosenblatt Securities to “sell” from “neutral”. The broker stated that while it did not think the stock was a short, they do “believe Apple will face fundamental deterioration over the next 6 to 12 months” maintaining a 12-month price target of $150. “Adding to our ‘sell’ thesis, we believe new iPhone sales will be disappointing, iPad sales growth will slow in the second half of 2019, other product sales growth, such as the HomePod, AirPod, and iWatch, may not be meaningful to support total revenue growth,” they said. The market has just dipped below the 200 handle to trade down by over 2% at the time of writing. 

 The biggest mover in the FX space at the start of the week is the Turkish Lira as the currency has come back under pressure after President Recep Erdogan took the decision to dismiss Murat Cetinkaya, the country’s central bank governor over the weekend. The depreciation is not too surprising given that the reasoning behind the decision appears to be that the governor failed to cut rates and once more it seems that Erdogan is attempting to assert his influence on monetary policy. A decline of around 3% was seen in the Lira when trading resumed yesterday evening, and it seems that Erdogan remains steadfast in his unorthodox view that lower rates are necessary despite inflation running at around 15%.

An initial move higher in the stock of Deutsche Bank after the lender revealed plans for a large scale overhaul has failed to last long, with the share price ending lower by more than 5% after earlier trading up by over 2%. The firm announced over the weekend yet another major strategic shift with the considerable downsizing of the investment division which is forecast to include 18,000 job cuts as well as creating a “bad bank” and judging by the market reaction any joy at this has proved short lived. The bank has wasted little time in pressing ahead with these changes as whole teams of equity traders in Tokyo and other Asian locations were fired this morning and while a regional breakdown of the cuts has not been made public, the London and New York offices will likely take a fair chunk of the hit due to a significant amount of the roles there being linked to trading operations.