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Nov 5, 2018

Stalling S&P Sales Growth Threatens The Bull Market I Investopedia Market


Mark Kolakowski

Revenue growth among S&P 500 Index (SPX) companies is experiencing a marked slowdown, and this has negative implications for the future trend of profits and stock prices, given that these companies also are under increasing pressure from rising costs. With 75% of the S&P 500 companies having reported 3Q 2018 earnings thus far, the latest U.S. Weekly Kickstart report from Goldman Sachs observes: "sales results have been disappointing, as only 29% of firms beat expectations, below the long-term average of 35%. The scarcity of sales beats has been reflected in stock returns." Given that U.S. GDP grew at a still-brisk annualized rate of 3.5% in 3Q 2018, the reduction in positive surprises, as detailed in the table below, is especially worrisome.
Sales Are Drastically Lagging
Time Period % S&P Beating Sales Estimates % S&P Beating EPS Estimates
3Q 2018 29% 56%
Long-term average 35% 47%
Source: Goldman Sachs
Data in the table above is as of Nov. 2. By that time, 376, or 75%, of the S&P 500 firms had reported 3Q 2018 results. Goldman also notes that 18% of the S&P 500 companies reporting so far have registered negative sales surprises for 3Q 2018, up significantly from a range of 8% to 11% during the previous 3 quarters.

Significance For Investors

Companies reporting 3Q results so far have delivered, on average, a positive revenue surprise of 1%, equal to the figure for 2Q 2018, but half the 2% average surprise in 1Q 2018 and 4Q 2017, per Goldman. As the table below illustrates, year-over-year (YOY) sales growth for the S&P 500 as a whole is projected to decline by 40% from 2018 to 2019, with 5 industry sectors expected to endure even more dramatic decreases in their own sales growth rates that range from 50% to 100%.
2019 Sales Will Slow Sharply
Sector 2018 Sales Growth 2019 Sales Growth
Energy 27% 10%
Health Care 16% 8%
Information Technology 11% 5%
Industrials 10% 5%
Materials 9% 0%
Total S&P 500 10% 6%
Source: Goldman Sachs; based on consensus estimates.
"Tariffs, wage inflation, and rising interest rates pose three key risks to all-time high S&P 500 profit margins," the report leads off. On tariffs, Goldman says: "the actual impact of tariffs on 3Q results was minimal because implementation of the 10% levy on $200 billion of imports from China only started on Sept. 24. However, the tariff rate is slated to jump to 25% starting in January 2019 and an additional $267 billion of imports may be subjected to a 25% tariff."
Many businesses indicate that they are maintaining profit margins by passing along the cost of tariffs through price increases, Goldman says. Others are adjusting their supply chains, moving production away from China or switching to vendors in other countries. However, price increases inevitably will reduce demand, limiting the prospects for future sales growth.
Rising interest rates not only are adding to the funding costs of non-financial businesses, but also are dampening demand in key sectors, such as housing. As detailed in another Investopedia article, rising rates are dampening housing starts and new home sales, causing homebuilding and related stocks to plunge. The projected stalling of sales growth in the materials sector, as indicated in the table above, is partly the result of these negative developments in the housing market.
Rising wages represent a double-edged sword for business: they put pressure on profit margins, but they also raise demand, as long as wages are rising at a faster pace than consumer prices. However, as Goldman notes, an inevitable result of a tight labor market and rapidly rising wages is that companies are looking to boost productivity and possibly reduce headcount through measures such as increased automation.

Looking Ahead

Given that sales revenues are a prime mover of profits and stock prices, the deceleration in sales growth has large negative implications. In this environment, generating earnings growth will depend increasingly on cost control, if not outright cost reduction, a considerably more difficult task for many businesses.
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Labor pulls further in front of Coalition as Morrison's disapproval rating rises: Australian Politics I The Guardian


Katharine Murphy


Labor has pulled further in front of the Coalition in the national political contest, and voter disapproval of Scott Morrison has jumped by nine points in a month, according to the latest Guardian Essential poll.
The latest survey of 1,028 voters puts Labor ahead of the Coalition 54% to 46% on the two-party-preferred measure, compared with 53% to 47% a fortnight ago – a result that would give Bill Shorten an easy election win.
More voters (41%) approve of Morrison’s performance as prime minister than disapprove (37%), but disapproval has risen from 28% in October, a shift outside the poll’s margin of error which is plus or minus 3%.
Morrison’s net approval rating has been in positive territory since he took the Liberal leadership in bitterly contested circumstances, suggesting voters have been willing to indulge his opening pitch, but the result this fortnight means the prime minister’s rating has slipped from +15 to +4.
The Labor leader, Bill Shorten, has recorded a five-point increase in his approval rating over the month (33% to 38%) and his disapproval is down one point to 44%. Shorten’s net approval rating remains in negative territory, but there has been an improvement from -12 to -6.
Morrison remains ahead of Shorten as preferred prime minister 41% to 29%, a similar result to a month ago, where Morrison was ahead 42% to 27%.
The bad portents in the new poll follow several scrappy weeks for Morrison and the government. A series of leaks, stumbles and controversies culminated in the loss of Malcolm Turnbull’s former seat of Wentworth in late October – a development that has cost the government its majority in the House of Representatives and emboldened the cross bench.
The Australian Electoral Commission on Monday declared the high-profile independent Kerryn Phelps the winner of the Wentworth contest with a margin of 1,851 votes or 1.2% in two-party-preferred terms after a record 19% swing against the Liberal party.
Ahead of the resumption of parliament for the final sitting weeks before the summer break, Morrison has hit the road, embarking on a campaign dry run in Queensland this week, swinging through several marginal seats critical to the outcome of the next federal election.
The government is hopeful about its electoral prospects in Queensland, a state where Turnbull was considered unpopular, and Morrison is spending a lot of time projecting what his strategists consider to be a relatable persona, with frequent social media posts heavy on vernacular.

Scott Morrison (@ScottMorrisonMP)
My thank you message to @Mick_Fanning's mum. pic.twitter.com/zpWa5CAYhy
November 5, 2018
But Shorten and Labor have already done considerable groundwork in Queensland during this term in opposition. The Labor leader has visited Queensland 47 times since the last federal election, concentrating on regional seats.
Labor is already distributing new campaign materials in Queensland highlighting Morrison’s record as treasurer, and emphasising the leadership instability in the Liberal party.
As he attempts to win over Queensland voters, Morrison, who clashed with Turnbull last week, will also have to deal with the first major television interview from his predecessor since the conservative-led leadership coup in August. Turnbull is due to appear solo on the ABC’s Q&A program on Thursday evening.
Voters in the Guardian Essential sample this fortnight were asked about coal-fired power, support for the royal family and a republic in the wake of the recent tour by the Duke and Duchess of Sussex, and about horse racing, with the Melbourne Cup on Tuesday.
Voters were split about whether the government should provide support to new coal-fired power stations, including indemnifying them against the risk of a future carbon price, an idea floated by the energy minister, Angus Taylor – 39% approved of the idea and 35% disapproved.
A majority of Coalition voters approved (58%) while 65% of Greens voters disapproved. Labor voters were split, with 33% approving and 40% disapproving.
More voters want a republic than oppose that change (44% to 32%), with young people more supportive than voters over 55. There has been a 4% drop in support for a republic since the question was last put in May.
Perceptions of Queen Elizabeth, Prince William and Prince Harry are highly favourable, with 70% having a positive opinion of Prince Harry, 68% of Prince William and 61% of Queen Elizabeth. Prince Charles – the heir to the throne – is less popular, with only 33% having a favourable view.
On horse racing, 8% profess high interest in the sport and 20% have a moderate interest, with 70% say they have low or no interest. Despite only 19% of the sample reporting they regularly bet on horse races, 38% said they would be watching the Melbourne Cup on Tuesday and placing a bet, and 33% say they would be watching the event but not placing a bet.
One in three said they had never been interested in the Melbourne Cup, with 26% saying they had become less interested because of concerns about problem gambling and 29% reporting they had become less interested because of concerns about animal welfare.

US Defense Stocks Could Rally Into Year End I Investopedia Chart


Alan Farley


Short sellers targeted U.S. defense stocks in October, driving the iShares Dow Jones US Aerospace and Defense Index ETF (ITA) to a 10-month low. Few components have been spared in the volatile downdraft, which has also affected mega caps The Boeing Company (BA) and Lockheed Martin Corporation (LMT). A strong bounce into November has raised bottoming calls, but new lows are possible in the coming weeks.
Even so, the sell-off will likely yield a major buying opportunity ahead of new highs. It's hard to envision these issues entering bear markets in a presidential administration committed to confrontation and higher defense spending. A divided Congress is unlikely to alter this equation, even if peace breaks out in the world's hot spots. Given this tailwind, it makes sense to watch for signs that sellers have completed their work, allowing these issues to recover points at a rapid pace.
The iShares Dow Jones US Aerospace and Defense Index ETF — an exchange-traded fund that seeks to track the investment results of an index composed of U.S. equities in the aerospace and defense sector — ended a two-year advance in February 2018, doubling in price before stalling just above $200. That level marked resistance into an August breakout that posted an all-time high at $208.83 on Oct. 3. Price action into November has unfolded through a failed breakout that is carving a potential Elliott five-wave decline, with a fourth wave bounce nearing completion. If so, the fund could hit a new low, perhaps in reaction to Democratic electoral gains.
The weekly stochastics oscillator has turned higher at the oversold level but not crossed into a buy cycle. This positioning could presage a small or aborted fifth wave, briefly undercutting the prior low in a selling climax. A bounce above the October low at $182.35 would then issue a buying signal, raising the odds that the correction has come to an end. Dip buyers could prosper with this turnaround, taking exposure ahead of a strong bounce into new resistance above $200.
Aerospace giant Boeing relinquished its longstanding reputation as a market leader in February 2018, topping out above $370 after a 245-point, 18-month uptrend. The subsequent downturn found support near $310, yielding a bounce that stalled at range resistance in June. The stock broke out in September, posted an all-time high at $387 three days later and sold off to the 200-day exponential moving average (EMA) last week. The aircraft makers shares are the largest holding in the ITA ETF portfolio, at 12.23% weight, according to fund sponsor iShares.
A bounce into Friday's close reached 50-day EMA resistance, raising the odds for a fresh downturn that could test the corrective low. This stock has held up better than its rivals, which have broken their 200-day EMAs, and could bounce more forcefully when the correction comes to an end. However, all bets are off if sellers break 2018 range support because that bearish event is likely to coincide with a test at the psychological $300 level.
Lockheed Martin, the world's largest defense contractor, rose more than four-fold between 2013 and 2018 before topping out at $363 in February 2018. It tested that level in April and turned sharply lower, carving a series of lower lows that reached a 15-month low at $283 last week. The stock bounced back to $300 on Friday, but sellers could retake control in the coming sessions because the stock is now trading well below the 200-day EMA.
The monthly stochastics oscillator remains in a long-term buy cycle, while the weekly indicator has just reached the oversold level. This relative positioning raises the odds for a strong recovery, but exact reversal timing won't be easy to predict. Given strong downward momentum, it makes sense to stand aside right here and let the fast-fingered crowd build a more predictive price pattern, perhaps centered just below the $300 level. LMT shares are the ITA fund's third-largest holding, at 7.28% of the portfolio.

The Bottom Line

U.S. defense stocks should bounce strongly into year end, but it isn't wise to catch these falling knives until they complete intermediate bottoming patterns.

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Malta's Pilatus Bank has European licence withdrawn: Economics I Banking I The Guardian



Hilary Osborne

Bank had been accused by murdered journalist Daphne Caruana Galizia of processing corrupt payments

Pilatus Bank’s registered office in the small Maltese town of Ta’ Xbiex.




Pilatus Bank’s registered office in the small Maltese town of Ta’ Xbiex. Photograph: Darrin Zammit Lupi/Reuters
A Maltese bank at the heart of a money-laundering investigation has had its licence withdrawn by the European Central Bank.
Pilatus Bank, which opened four years ago, was officially closed down several months after its Iranian chairman and owner, Ali Sadr Hasheminejad, was charged in the US in connection with money-laundering and fraud.
The bank had also been accused of processing corrupt payments to Maltese officials by the investigative journalist Daphne Caruana Galizia, who was killed last year by a car bomb.
The Malta Financial Services Authority (MFSA), which regulates the country’s banking industry and granted Pilatus a licence in 2014, said the ECB had acted on its request to close the bank.
In a statement on Monday the MFSA said: “Further to the authority’s proposal to the ECB to withdraw the authorisation of Pilatus Bank as a credit institution, the ECB’s governing council has decided to withdraw the authorisation of Pilatus Bank with effect from today.”
The EU began an investigation into Malta’s regulation of the bank last year, following Caruana Galizia’s death, with the European Banking Authority (EBA) undertaking the inquiries.
Then in March, Sadr was arrested in the US on charges that he had violated the country’s sanctions and anti-money-laundering rules.
According to the indictment, filed in New York, Sadr participated in a scheme to illegally funnel $115m (£88m) in payments for a Venezuelan construction project to Iranian individuals and companies. He has pleaded not guilty to the charges.
Straight after his arrest the MFSA took control of Pilatus, freezing all transactions for customers, and banning executives and shareholders from withdrawing any funds from the bank.
In June, it filed a recommendation with the ECB for the withdrawal of Pilatus’s licence, on the grounds of Ali Sadr’s arrest and concerns that it had persistently breached liquidity rules since he was charged.
Reuters has reported that the European commission was considering actions against Maltese authorities over their handling of the case.

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At the time of her death Caruana Galizia was being sued in a US court by Pilatus and Sadr in a lawsuit that accused her of malice, defamation and causing damage to the bank’s “reputation and actual and prospective economic relationships”.
She had reported on the Panama Papers, which alleged links between the prime minister of Malta’s wife and shell companies that held accounts with Pilatus.
Pilatus had been set to open an office in London’s Mayfair in April 2017. The Maltese regulator had granted it a passport to operate in in the UK but it was never given permission to offer accounts to UK residents.
The bank, which reported €308m (£270m) of assets in 2016, was known to have held accounts for a senior official in the government of the Maltese prime minister, Joseph Muscat, and members of Azerbaijan’s ruling family.
The ECB did not comment on the decision to withdraw its licence.

Mixed reviews for the media I Opinion | The Washington Post


By Jennifer Rubin



President Trump stops to talk to reporters and members of the media at the White House on Oct. 26 in Washington. (Jabin Botsford/The Washington Post)


Jennifer Rubin
Opinion writer reporting from a center-right perspective
When I see a headline like this one from the New York Times — “Brian Kemp’s Office, Without Citing Evidence, Investigates Georgia Democrats Over Alleged ‘Hack’ ” — it’s obvious that a key lesson from the 2016 presidential race has not been learned: Don’t simply repeat charges with the presumption of validity. Not every outlet got it right, right away. The Atlanta Journal-Constitution’s reporter initially reported Kemp’s claim as if it were plausible, earning rebukes on social media. Monday, however, the paper reported:
Kemp is now facing renewed scrutiny after his office announced Sunday — without providing evidence and doing so just hours before Election Day — that it is investigating the Georgia Democratic Party for an alleged hack of the state’s voter registration system.
The move to publicly disclose the probe appeared to break with tradition in the office, which oversees voting integrity, as it differed from how Kemp’s team handled an earlier cyber breach at Kennesaw State University.
When I see media criticism rain down on Axios for its hyped reported about President Trump’s “plan” to abolish birthright citizenship, failing to note the inaccuracies in Trump’s false assertion that only the United States has birthright citizenship or to point out that it’s impossible to change the 14th Amendment by executive order, we can see that some, but not all, outlets have learned to fact-check before leaping. (Still, a lack of explanation, let alone a mea culpa, from Axios suggests less willingness to adhere to the journalistic standards of its competitors.)
When I see that CNN President Jeff Zucker, according to a Politico report, has decided that he is “not interested in hiring former [Trump administration] officials he perceives as complicit in spreading falsehoods or spurious talking points, according to four people familiar with the conversation,” I can see journalistic discernment. But why then is someone such as Marc Short, formerly in charge of the White House’s legislative affairs, still on air making a false equivalence between Trump’s incendiary language and former president Barack Obama (who merely relates facts, such as the number of Trump cronies indicted)?
When I see that CNN and MSNBC (disclosure: I am an MSNBC contributor) now refuse to show Trump’s rallies — filled with lies and anti-immigrant fear-mongering — live, it’s clear they’ve learned that giving Trump hours upon hours of free air time without context, fact-checking or equal time for opponents is journalistic malpractice. However, days of front-page and lead TV news stories about the caravan — a thousand miles off — amounted to free, misleading ads for Trump’s xenophobic campaign.
And why, unlike CNN, did NBC, barely a week after the slaughter in Pittsburgh by an anti-Semite convinced that Jews were bringing in “invaders,” air Trump’s closing immigration ad, which is demonstrably false and blatantly racist? Granted, as the New York Times noted, the most glaring untruth — the false claim that Democrats were responsible for letting a cop killer into the United States — was not included in the ad, “but it still drew a direct connection from immigrants to crime, a tactic the president has repeatedly used. (Many studies have shown immigrants do not drive an increase in crime.)” (NBC on Monday said it would stop airing the ad.)
Finally, when you see more caveats from analysts interpreting polls, you can see they’ve internalized some of the lessons of 2016 (i.e. “margin of error” has real meaning). And yet I see near-uniform predictions that Republicans will keep the Senate, which “feels” accurate but seems excessively confident. Moreover, given the enormous turnout, analysts and pollsters probably should concede they have far less insight than normal into what the electorate will look like.
In sum, while Fox continues its descent into journalistic self-destruction (Sean Hannity attending Trump’s final midterm rally, for example, seems horridly perfect), the “media” or “the mainstream media” cannot be given a uniform rating. There are more conscientious and less conscientious outlets, TV outlets more willing regularly to invite inveterate prevaricators like Kellyanne Conway on the air and others more insistent that they not be used as Trump’s mouthpiece.
We’ve seen in the past two weeks that Trump’s lies and racism can have deadly consequences. If for no other reason, news outlets need to remain vigilant about reflexively transmitting Trump’s false, toxic rhetoric. We’ve all been reminded how much words — and images — matter.

EU - FX I Currencies: Dollar ends winning streak before elections; euro struggles I CNBC


CNBC


U.S. dollar, British pound and euro notes.
Matt Cardy | Getty Images
U.S. dollar, British pound and euro notes.
The dollar dipped on Monday after three consecutive weeks of gains as investors took profits before U.S. midterm elections this week that may fuel a new bout of volatility for global markets.
Notwithstanding a dollar selloff in the second half of last week, hedge funds added to their dollar holdings taking net long positions to its biggest levels since Dec. 2016 as latest data have encouraged more bullish bets.
The dollar index was down 0.23 percent at 96.32. It hit a June 2017 high of 97.20 last week.
"Some positions squaring is seen on the dollar before the elections this week though the euro is also soft on the latest news from Europe," said Manuel Oliveri, an FX strategist at Credit Agricole in London.
Investors head into Tuesday's U.S. congressional election with the Democratic Party facing a strong chance of winning control of the U.S. House of Representatives, with Republicans likely to keep the Senate.
Speculators added to their net long U.S. dollar bets, taking the value of the net long dollar position to $26.74 billion in the week ended Oct. 30, nearing its highest level since Dec. 2016, according to latest futures data.
Friday's data showed that U.S. jobs growth rebounded sharply in October and wages recorded their largest annual gain in 9-1/2 years, pushing U.S. Treasury yields on ten-year maturities to 3.201 percent on Monday.
The strong U.S. data also brought into prominence the diverging trends between a robust U.S. economy and its struggling European counterpart with a Citibank economic monitor showing the European index near 2018 lows.
Recent dovish comments from senior policymakers such as Finnish central bank chief Olli Rehn have raised some hopes that the European Central Bank could extend a new set of long-term loans to the bank sector.
Though ECB policymakers said last week that new targeted long-term refinancing operations are an option that may be considered in due time, sources have told Reuters that a new round of loans is not imminent.
The single currency has risen 0.22 percent to $1.141.
"The latest news heightens the downside risk to the euro from weaker economic data for a while," said John Marley at FX risk management specialist, Smart Currency Business.
Sterling held near the day's highs, up 0.56 percent at $1.3043 on a Sunday Times report that an all-UK customs deal will be written into the agreement governing Britain's withdrawal from the EU. Prime Minister Theresa May's office has dismissed the report as "speculation".

Bonds & Fixed Income Report: US Treasury yields fall as traders look ahead to midterms, economic data I CNBC


Thomas Franck, Ryan Browne


U.S. government debt prices rose on Monday as investors switched focus to the upcoming midterm elections.
The yield on the benchmark 10-year Treasury note was lower at 3.195 percent, while the yield on the 30-year Treasury bond dipped slightly to 3.43 percent. Bond yields move inversely to prices.
In the previous session, strong jobs data sent the yield on the two-year Treasury note to 2.92 percent — its highest level since 2008. Nonfarm payrolls, released Friday, increased by a seasonally adjusted 250,000 in October, well ahead of an expected rise of 190,000. However, on Monday, the two-year yield was seen retreating, trading lower at 2.899 percent.
Traders will likely be shifting focus to Tuesday's midterm vote, with a recent opinion poll showing the Democrats leading with a seven percent advantage over the Republicans. President Donald Trump will be holding campaign rallies in Ohio, Indiana and Missouri.

Oil Price at Close Report: US crude dips 4 cents, settling at $63.10, as Trump restores sanctions on Iran I CNBC


CNBC


Oil prices were little changed on Monday after a steep five-day slump, as the United States formally imposed punitive sanctions on Iran but granted eight countries temporary waivers allowing them to keep buying oil from the Islamic Republic.
The sanctions are part of U.S. President Donald Trump's effort to curb Iran's missile and nuclear programs and diminish its influence in the Middle East.
Oil markets have been anticipating the sanctions for months. Prices have been under pressure as major producers including Saudi Arabia and Russia have ramped up output to near-record levels, while weak economic figures in China have cast doubt on the demand outlook.
News of waivers on the sanctions limited price gains, and recent weakness in equities markets have fed concerns about global oil demand, said Bob Yawger, director of futures at Mizuho in New York.
"We're not getting the price rally that many participants thought they were going to get out of the Iran sanctions situation," Yawger said.
Brent crude oil was up 34 cents, or half a percent, at $73.17 a barrel by 2:30 p.m ET. U.S. light crude ended Monday's session 4 cents lower at $63.10 a barrel.
Both oil benchmarks have slid more than $13 a barrel since hitting four-year highs in early October. Hedge funds have cut bullish bets on crude to a one-year low.
The United States has granted exemptions to eight countries — China, India, Greece, Italy, Taiwan, Japan, Turkey and South Korea — allowing them to temporarily continue buying Iranian oil, Secretary of State Mike Pompeo said on Monday. Some of these are OPEC member Iran's top customers.
U.S. officials have said the aim of the sanctions is eventually to stop all Iran's oil exports.
Pompeo said more than 20 countries have already cut oil imports from Iran, reducing purchases by more than 1 million barrels per day.
Iran said on Monday it would break with the sanctions and continue to sell oil abroad.
China's foreign ministry expressed regret at the U.S. move.
Combined output from Russia, the United States and Saudi Arabia rose above 33 million bpd for the first time in October, up 10 million bpd since 2010, with all three pumping at or near record volumes.
The Abu Dhabi National Oil Company plans to boost oil production capacity to 4 million bpd by the end of 2020 and to 5 million bpd by 2030, it said on Sunday, from output of just over 3 million bpd.
Data from analysis firm Kayrros showed Iranian crude production was broadly unchanged in October from September, with barrels still hitting the market alongside additional production from Saudi Arabia and Russia.
— CNBC's Tom DiChristopher contributed to this report.

Asia I Europe I and US Stock Markets at Close Report I CNBC

                                                                            ASIA


Saheli Roy Choudhury




Asia Pacific markets traded mostly lower on Monday as investors remained cautious over global growth prospects while Chinese President Xi Jinping tried to position China as a globalization champion in a major speech.
Xi's opening speech kicked off the week-long China International Import Expo that seeks to promote the world's second largest economy as a major consumer of global goods. The event, announced more than a year ago, will stand in contrast to the ongoing trade fight between Beijing and Washington.
During the speech, Xi repeated his rhetoric against protectionism and promoted his country as an advocate for international openness and cooperation. He discussed at length about the benefits of an open international economy and said that China is pursuing "a new round of high-standard opening up" to broaden market access to the rest of the world.
The United States has levied tariffs on an extensive list of Chinese products. Beijing, for its part, unsuccessfully tried to negotiate on tariffs by offering to buy more U.S. goods, but ultimately responded with duties on products from the U.S.
The impact of the ongoing trade war is being felt as companies report higher production costs and trim outlook. On Friday, Chinese tech giant Alibaba lowered its full-year sales forecast, citing concerns about the economic impact of the trade war.
Xi's speech at the expo comes a day before Americans head to the polls for midterm elections.

Asia Pacific markets

In Japan, the Nikkei 225 fell 344.67 points, or 1.55 percent, to 21,898.99 while the Topix index declined 18.37 points, or 1.11 percent, to 1,640.39. South Korea's Kospi was down 19.08 points, or 0.91 percent, at 2,076.92.
Chinese shares traded lower. The Shanghai composite declined 11.04 points, or 0.41 percent, to 2,665.43 while the Shenzhen composite closed fractionally lower at 1,351. In Hong Kong, the Hang Seng index fell 2.08 percent in afternoon trade.
The on-shore yuan traded at 6.9203 to the dollar Monday afternoon while the off-shore yuan fetched 6.9161. China's central bank set the yuan mid-point at 6.8976 against the greenback — the People's Bank of China allows the exchange rate for the on-shore yuan to rise or fall 2 percent from the official midpoint rate set every morning.
Australia's ASX 200 struggled for gains, finishing down 31.10 points, or 0.53 percent, at 5,818.10 as most sectors declined. The energy sector fell 1.31 percent as oil stocks mostly sold off. Shares of Santos fell 1.55 percent, Oil Search was down 1.31 percent and Woodside Petroleum declined 2.28 percent.

Iran sanctions and central banks

Oil prices will be closely watched as U.S. on Monday reimposed oil and financial sanctions on Iran, ratcheting up the pressure on Tehran to curb its nuclear, missile and regional activities.
Iran said it plans to defy the newly reimposed U.S. sanctions and continue selling its oil in the international market.
Last week, reports said that President Donald Trump's administration will grant eight jurisdictions special exceptions to continue importing oil from Tehran, with the idea that they will gradually reduce their purchases over time. Oil prices fell last Friday on the back of that news as investors remained concerned about oversupply in the market.
U.S. crude traded down 0.52 percent at $62.81 a barrel Monday afternoon while global benchmark Brent was down 0.3 percent at $72.61.
Central banks in the United States, Australia and New Zealand are set to meet this week.
"There is not expected to be any change in policy from either central bank. But we continue to expect the Fed to lift interest rates 25 bpts in December to 2.50 (percent)," Richard Grace, chief currency strategist and head of international economics at the Commonwealth Bank, wrote in a morning note.
Slowing global growth remains a concern for investors — last month, the International Monetary Fund cut global growth forecast, citing trade tensions between the U.S. and its trading partners.
There have been other indications of a slowdown in growth momentum, including a decline in Purchasing Managers Indexes, an indicator of economic health in the manufacturing and services sectors, across much of Asia, according to Felicity Emmett from ANZ Research.
"In an environment of cooling growth and declining liquidity, market volatility seems unlikely to decline to the soporific days of old any time soon," Emmett said in a morning note.

Currency markets

In the currency market, the dollar index, which measures the U.S. currency against a basket of its peers, traded at 96.431, retreating from an earlier high of 96.519.
The British pound traded at $1.3004, up from levels around $1.2800 in the previous week. The gains followed a local newspaper report that suggested Prime Minister Theresa May has secured a Brexit deal with Brussels that will allow Britain to stay in a customs union and avoid a hard border in Northern Ireland.
But Reuters reported that May's office has dismissed the report as "speculation."
The Japanese yen traded at 113.19 to the dollar while the Australian dollar traded at $0.7189.
— CNBC's Evelyn Cheng contributed to this report.

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Europe markets close mixed after early gains; oil and gas stocks jump; Vopak up 4.7%

David Reid, Silvia Amaro










European stocks lacked an overall direction in late Monday trading, closing mixed as investors digested different political events.
FTSE FTSE 100 7113.07 18.95 0.27% 358819771
DAX DAX 11500.43 -18.56 -0.16% 50101979
CAC CAC 5103.61 1.48 0.03% 44540074
The pan-European Stoxx 600 closed down 0.09 percent provisionally, with the various sectors taking different directions. Technology was down by about 1.5 percent, whereas oil and gas stocks jumped by about the same amount.
Looking at individual stocks, Vopak rose 4.7 percent after reporting higher-than-expected results. Siemens health care also jumped 2.7 percent on its latest earnings release.
European banks were under particular scrutiny after the latest results of European stress tests on Friday. Barclays and Lloyds had the lowest capital ratios in the adverse scenario. According to KPMG, this was due to new accounting rules and high levels of unsecured debt — examples of which may include credit card loans. Both stocks traded flat on Monday.
"The U.K. banks fared the worst in the test due to macro risks associated with Brexit, but the results do not inform their capital requirements with the BOE (Bank of England) publishing its stress test results on Dec 5," Jefferies said in a research note on Monday.
On the other hand, Italian banks were under pressure. Although they eased past the tests' adverse scenario requirements, analysts believe the macro assumptions for Italy were a little too optimistic. Banco BPM and Intesa Sanpaolo dropped about 2 and 1.6 percent, respectively.
Meanwhile, euro zone finance ministers gathered in Brussels for another meeting. The Italian budget plan for 2019 is set to be a talking point among the ministers. Luigi di Maio, Italy's deputy prime minister said the country's spending plans will become "a recipe" for reviving European growth.
The Trump administration also reinstated all sanctions removed under the 2015 nuclear deal, targeting both Iran and states that trade with it. Oil prices have risen in the session. By around 3 p.m. London time, WTI was higher by nearly half a percent while Brent Crude had risen almost one percent.

                                                                       US


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Dow rises 200 points as Berkshire and bank shares climb, Nasdaq falls

Fred Imbert








Stocks mostly rose on Monday as Berkshire Hathaway boosted the broader financials sector, but a sharp decline in Apple dented tech shares.
The Dow Jones Industrial Average rose 200 points, while the S&P 500 gained 0.6 percent.
Berkshire Hathaway's Class B shares climbed 4.6 percent after the company reported over the weekend better-than-expected earnings. Financials rose 1.6 percent while Citigroup and Bank of America gained 2 percent and 0.9 percent, respectively. J.P. Morgan Chase advanced 0.7 percent.
The Dow also climbed as Chevron shares jumped nearly 4 percent to lead the energy sector higher. Chevron rose after Credit Suisse upgraded it to outperform from neutral, noting the company has a compelling free cash flow and valuation.
But the Nasdaq Composite fell 0.4 percent as Apple and Amazon both fell more than 2 percent.
Apple shares fell after Rosenblatt Securities downgraded Apple amid expectations of lower iPhone sales. Shares of chipmaker Qorvo, a key Apple supplier, fell 6.8 percent. Amazon's stock pulled back after President Donald Trump said the administration was looking into antitrust violations committed by the e-commerce giant.
Wall Street also looked ahead to the U.S. midterm elections scheduled for Tuesday, which could send ripples throughout capital markets.
Democrats are expected to regain control of the House while Republicans hold on to a slim majority in the Senate. This outcome is largely seen as positive for markets since, historically, U.S. stocks have posted solid gains during government gridlock.
If the GOP maintains a majority in both chambers, it could give stocks a short-term boost as it increases the likelihood of further tax cuts. Meanwhile, a so-called Democratic sweep could pressure stocks as it could lead to a reversal of some of the policies passed by the GOP to boost the economy in the near term.
President Donald Trump delivers remarks at a campaign rally in Estero, Florida, October 31, 2018. 
Carlos Barria | Reuters
President Donald Trump delivers remarks at a campaign rally in Estero, Florida, October 31, 2018.
The Democrats were leading with a 7 point advantage ahead of the contest, according to an NBC News/Wall Street Journal poll released Sunday.
"There's a lot of headlines that investors are going to have to sift through this week ," said Ryan Nauman, market strategist at Informa Financial Intelligence. "With everything going on, I expect more volatility" as we get closer to the election.
However, Nauman thinks the volatility should subside after the election. "After the last five midterms, markets have done pretty well after the elections."
Investors are also grappling with uncertainty on the trade front. Stocks were hit with a wild bout of volatility during Friday's trading session amid conflicting comments and reports on global trade. President Donald Trump's economic advisor Larry Kudlow told CNBC there was "no massive movement to deal with China," contradicting an earlier report that Trump had asked officials to prepare a draft for a U.S.-China trade deal.
On Monday, Chinese President Xi Jinping reiterated his rhetoric against protectionism and commitment to free trade in a speech. Xi said his country was pursuing "a new round of high-standard opening up" to broaden market access to the rest of the world.
Investors have been jittery since the start of the fourth quarter as worries about rising interest rates, slowing earnings growth and lingering trade fears have dented sentiment. The Cboe Volatility index, widely considered the best gauge of fear in the market, is up more than 65 percent this quarter.
"The stock market currently faces many challenges," said Jim Paulsen, chief investment strategist at The Leuthold Group, in a note to clients. "But could it also lose its earnings story? … Indeed, if sales only rise 5% next year (more in line with nominal global GDP growth), even a very mild contraction in profit mar­gins could shockingly cause earnings to fall."
"Saying farewell to a trusted friend and guardian (solid profitability) is never easy, and if the numerous challenges listed above remain while earnings disappoint, the stock market may yet have further to fall," Paulsen said.
—CNBC's Ryan Browne contributed to this report.