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Economic Calendar - Top 5 Things to Watch This Week

2020-11-02 18:17:53

U.S. presidential election
The main event will be U.S. election day on Tuesday. It is set to be one of the most significant presidential elections in the history of the country. The election campaign has been particularly fraught due to coronavirus, and the focus on the immediate aftermath amid fears that a period with no clear picture on the outcome could roil markets.

President Donald Trump, who is trailing Democrat challenger Joe Biden in polls, has complained about a "rigged" voting system and refused to commit to a peaceful transition of power if he loses.

The president has played down the virus, as the country has recorded more than 9 million cases, with nearly 230,000 people dead.

A huge amount will also depend on the outcome of the vote for representatives in Congress. If polls are correct and Biden wins in a “blue sweep” with Democrats securing both congressional chambers it would bolster the outlook for rapid and large-scale fiscal stimulus.

Wall Street
Wall Street's three main indexes recorded their worst week since March last week dragged down by a slide in shares of tech heavyweights following their quarterly results, with a record rise in coronavirus cases and jitters over the presidential election adding to the downbeat mood.

The VIX volatility index, Wall Street's "fear gauge," ended the week near a more than 4-month closing high and market volatility looks likely to remain elevated in the coming week.

Meanwhile, third-quarter earnings season is past its halfway mark, and dozens more companies are due to report during the week including Clorox (NYSE:CLX), PayPal (NASDAQ:PYPL), Mondelez International (NASDAQ:MDLZ), Estee Lauder (NYSE:EL), Fox (NASDAQ:FOX), Bayer (OTC:BAYRY), Sysco (NYSE:SYY), Qualcomm (NASDAQ:QCOM), Expedia (NASDAQ:EXPE), Hilton Worldwide (NYSE:HLT), Bristol-Myers Squibb (NYSE:BMY) and AstraZeneca (NYSE:AZN).

Fed meeting
Fed policymakers will begin their latest meeting a day later than usual on Wednesday because of the election. They will deliver their policy decision on Thursday at 1400 ET, followed by Fed Chair Jerome Powell’s press conference 30 minutes later.

Officials are expected to hold off on announcing additional stimulus measures, but they may keep open the possibility of adjusting the bond purchasing program at a later date, possibly as early as December. Policymakers are also expected to reiterate that fiscal policy is a more effective tool right now, amid an uneven recovery from the coronavirus induced recession.

U.S. jobs report
Friday’s jobs report is expected to show another small decline in the unemployment rate and payroll gains are likely to show a further loss of momentum in private sector job creation, while the winding down of the Census is set to result in a drag from government employment.

Before that, Thursday’s initial jobless claims report will also be closely watched. Though claims have dropped from a record 6.867 million in March, they remain above their 665,000 peak seen during the 2007-09 Great Recession.

About 22.7 million Americans were receiving unemployment benefits in early October, though many have exhausted their eligibility for state aid.

Bank of England meeting
On Thursday, the BoE is widely expected to increase bond purchases by 100 billion pounds to support the economy through another wave of coronavirus and Brexit. It would bring the central bank’s asset-purchase target to 845 billion pounds, almost double the level at the start of the year.

Policymakers are also expected to downgrade growth forecasts for 2020 and 2021 and indicate that the recovery is likely to take longer than their previous forecasts had assumed.

The central bank will likely skirt questions on whether interest rates could be cut below zero, pending a review of the impact negative rates would have on banking sector profitability.

--Reuters contributed to this report

Economic Calendar - Top 5 Things to Watch This Week

2020-10-04 18:33:07

Trump’s Covid diagnosis fuels election uncertainty
Trump said Saturday that the next few days will be the "real test" of his treatment for Covid-19, after a series of contradictory messages from the White House left it unclear how ill he had become since he tested positive for the coronavirus.

Trump’s doctors said Saturday he had received the first two doses of a five-day course of Remdesivir, an intravenous antiviral drug sold by Gilead Sciences (NASDAQ:GILD). He is also taking an experimental treatment, Regeneron's (NASDAQ:REGN) REGN-COV2.

With barely a month to go until the presidential election on Nov. 3 Trump’s illness has thrown his campaign into turmoil and cast a spotlight on his handling of the pandemic. He is trailing Democratic rival Joe Biden in opinion polls.

The president has repeatedly played down the threat of the coronavirus pandemic, even as it has killed more than 208,000 Americans and ravaged the U.S. economy.

Spotlight on stimulus talks intensifies
Trump’s illness has intensified the spotlight on talks in Washington aimed at reaching a new fiscal relief package.

U.S. House Speaker Nancy Pelosi said on Friday that negotiations were continuing and asked airlines to halt furloughs and firings, indicating that the House could pass a standalone bill to send aid money to airlines.

But it remains to be seen whether Trump’s diagnosis or Friday’s weaker-than-expected September jobs report will make Congress any more likely to approve a new round of stimulus amid ongoing partisan wrangling.

The slowdown in the labor market recovery is the clearest indication yet that the economy is losing momentum heading into the fourth quarter. Growth had been boosted over the summer by fiscal stimulus.

"The virus is in the driver's seat in controlling the speed of the recovery and right now the economy is in the slow lane unless Congress and the White House can settle their differences and provide additional stimulus," said Chris Rupkey, chief economist at MUFG in New York.

Market volatility to remain elevated
Many investors are concerned that any deterioration in the president’s health this close to the election could roil U.S. stock markets, which recently recorded the worst monthly performance since a selloff in March.

"This injects further uncertainty into the outcome of the election," said Roberto Perli, head of global policy research at Cornerstone Macro in Washington. "My read is that markets have demonstrated an aversion of late especially to uncertainty, not so much to one or the other candidate winning."

"Markets are also paying attention to the likelihood that another stimulus package will pass soon," Perli added. "If that happens it could offset at least in part the uncertainty generated by the Covid news."

Should uncertainty persist, technology and momentum stocks that have led this year's rally may be particularly vulnerable to a selloff, some investors said. The tech-heavy Nasdaq fell more than 2% on Friday, double the S&P 500's decline.

Powell speech
Fed Chairman Jerome Powell is to make a speech to the National Association of Business Economists on Tuesday where he is expected to reiterate the need for additional fiscal stimulus to underpin the slowing economic recovery.

Besides Powell, several other Fed speakers are due to deliver remarks during the week, including Chicago Fed President Charles Evans, Atlanta Fed President Raphael Bostic, New York Fed President John Williams, Minneapolis Fed President Neel Kashkari and Boston Fed President Eric Rosengren.

The Fed is also due to publish the minutes to the September FOMC meeting on Wednesday, which are expected to underline the message that there is little prospect of an interest rate hike in the next couple of years.

Euro zone rescue fund squabbles
Euro zone finance ministers are to meet in Brussels on Monday to discuss implementation of a 750 billion-euro coronavirus recovery fund, widely hailed as game-changing when it was announced earlier this year. But disagreements over how the funds are to be distributed are threatening to sour the mood.

Germany is proposing that only countries who respect the rule of law could benefit from the funds amid growing alarm in the European Union about backsliding on the rule of law in Poland and Hungary. The proposal has prompted an outcry from those two countries.

Italy, Spain and Greece, whose economies are among the worst hit by the pandemic, stand to lose out from any delay in unlocking recovery funds.

--Reuters contributed to this report

Snag: 5 Things to Know Today in Markets

2020-09-22 13:18:40

1. Powell, Mnuchin to testify before Congress

U.S. Treasury Secretary Steven Mnuchin and Federal Reserve Chairman Jerome Powell begin two days of testimony before Congress on the state of the economy at 8:30 AM ET.

For once, it may be Mnuchin’s comments that get the most attention, since Powell’s stance is already known and was reiterated only last week.

By contrast, Mnuchin’s comments come at a time when faith in a fresh package of economic support measures has all but collapsed: Wall Street analysts were near-unanimous in interpreting the death of Supreme Court Justice Ruth Bader Ginsburg at the weekend as a serious setback, inasmuch as the task of filling her position will inflame tensions between the two major parties and make agreement on other issues, such as fiscal policy, impossible.

2. Elon's expectation management

Elon Musk engaged in some expectation management ahead of its hotly-awaited Battery Day event, which also coincides with the company’s annual shareholder meeting.

Musk warned via Twitter that the company still faces “significant shortages” of battery cells from 2022 “even with our cell suppliers going at maximum speed…unless we also take action ourselves.”

But he added that the process of scaling up its own manufacturing had problems of its own, meaning that whatever the company announces at the event is unlikely to enter mass production before 2022.

“The extreme difficulty of scaling production of new technology is not well understood,” Musk said via Twitter. “It’s 1000% to 10,000% harder than making a few prototypes. The machine that makes the machine is vastly harder than the machine itself.”

4. U.S. stocks set to open mostly higher

U.S. stocks are set for a mostly higher opening, with tech stocks outperforming again on the expectation that a credible long-term growth narrative will offer the best defense against any new bear market.

By 6:30 AM ET (1030 GMT), the Dow futures contract was down 16 points, or 0.1%, while S&P 500 futures were up 0.2% and the Nasdaq 100 futures contract was up 0.7%.

Global stocks staged a modest rebounded after their worst daily rout in three months. Asian markets, which had avoided Monday’s carnage, were dragged down, but Europe’s which had closed before the end-of-day bounce in the U.S., recouped around one-third of their losses.

The mood continued to be overshadowed by the UK, which effectively abandoned its campaign to get the country back into the office and formally advised people to carry on working from home if possible.

Aside from Tesla (NASDAQ:TSLA), stocks likely to be in focus later include Nike (NYSE:NKE), which reports quarterly earnings after the closing bell, and video games publishers of all stripes, after Microsoft’s $7.5 billion deal for Bethesda Softworks’ parent company illustrated where Satya Nadella expects the growth to be while the pandemic lasts.

4. TikTok Deal Hits Snag

Oracle's (NYSE:ORCL) and Walmart's (NYSE:WMT) efforts to secure a stake in TikTok’s U.S. operations look in jeopardy after negative comments from both President Donald Trump and the Chinese Global Times.

“If we find that they don't have total control, then we are not going to approve the deal,” Trump said on Monday.

That runs contrary to comments from ByteDance, TikTok’s owner, which stressed that it will not only retain an 80% stake in TikTok Global, the U.S.-based subsidiary it intends to create for the video-streaming service, but also that it has no plans to transfer ownership of the algorithms that power it.

5. Oil jittery ahead of API

Crude oil prices recovered the $40 level again but were jittery ahead of the release of U.S. inventory data from the American Petroleum Institute at 4:30 PM ET.

By 6:30 AM, U.S. crude futures were up 1.2% at $40.00 a barrel, while the international benchmark Brent was up 1.3% at $41.98 a barrel.

Oil had tumbled on Monday in a general rout for risk assets, but had largely front-run the weakness in equities two weeks ago. Prices were supported by doubts about the viability of a peace deal that could see Libya return 1 million barrels a day of crude to world markets.

Top 5 Things to Know in the Market on Monday, September 21st

2020-09-21 17:45:49

1. FinCEN Files send bank stocks tumbling

Leaked files from the U.S. Treasury’s Financial Crimes Enforcement Network showed that dozens of global banks had failed to monitor and prevent trillions of dollars of suspect payments passing through their systems over numerous years.

While much of the detail was largely historical, the dump nonetheless contained previously unpublished material that hit European bank stocks hard on Monday morning.

Barclays (LON:BARC), Deutsche Bank (DE:DBKGn) and ING (AS:INGA) were particularly hard hit, while HSBC not only figured prominently in the leaked files, but was also touted by the Chinese Global Times as being a likely candidate to be put on China’s official list of “unreliable entities”, which would expose it to the risk of damaging sanctions on its business in China.

2. Nikola chairman Milton steps down

Trevor Milton, the founder of electric truck-maker Nikola Corp (NASDAQ:NKLA), stepped down from his position as chairman, in the wake of fraud allegations that are now the subject of an investigation by the Securities and Exchanges Commission.

Milton will be replaced as chairman by Stephen Girsky, formerly vice-chairman of General Motors (NYSE:GM) and a current member of Nikola’s board. The news comes only two weeks after GM agreed to pay $2 billion for a 11% stake in Nikola and said it would partner with the company in making its Badger truck.

Nikola stock fell 28% in premarket trading while GM stock fell 3.9%.

3. WeChat ban halted; TikTok stays Chinese

A federal judge in California blocked President Donald Trump’s executive order that would have shut down the multi-app WeChat platform in the U.S. on first Amendment grounds. The move is a victory for its owner Tencent Holdings (OTC:TCEHY).

The Commerce Department meanwhile suspended the order that would have banned downloads of the video-streaming app TikTok, citing progress on hammering out a deal that would see Oracle (NYSE:ORCL) and Walmart (NYSE:WMT) become minority shareholders in its U.S. operations. Trump said on Saturday he approved such an arrangement.

ByteDance, TikTok’s Chinese owner, said it won’t transfer any technology to either company as part of the deal, undermining Trump’s claim that China would have “nothing to do” with TikTok in the U.S.

4. Stocks set to open sharply lower

U.S. stock markets are set to open sharply lower on Monday, weighed down by a cocktail of news, not least by suspicions that the death of Supreme Court justice Ruth Bader Ginsburg at the weekend will distract lawmakers from the urgent task of approving a new package of economic support measures.

Reports that the U.K. is about to impose new restrictions to bring a second wave of the Covid-19 virus under control (see below) were also a factor.

By 6:30 AM ET, Dow futures were down 534 points, or 1.9%, while the S&P 500 futures contract was down 1.6% and NASDAQ futures were down 1.3%.

While the Nikola news had no direct read-across for the rest of the market, it comes at a time when fears are spreading that tech stock valuations reaching unsustainable levels.

5. U.K. to announce new restrictions to tame virus

The U.K. government is reportedly set to announce new restrictions on public life to stem a sharp rise in Covid-19 cases.

The government’s chief scientific advisor Sir Patrick Vallance told a briefing that the U.K. faces 50,000 new cases a day by mid-October if new measures aren’t put in place now.

Chief medical advisor Andrew Whitty said meanwhile that the country was going “in the wrong direction.”

U.K. media reports suggest the government’s new measures will largely target the hospitality and transport sectors. They look set to frustrate the government’s other objectives of having more people to return to the workplace, and of phasing out the nationwide furlough scheme from October. Sterling fell 0.5% against the dollar in response.

Top 5 Things to Know in the Market on Friday, September 18th

2020-09-18 18:03:15

1. Dollar resumes decline; gold rises

The dollar resumed its downward trend amid concern over the outlook for the U.S. economy and the risk that a weakening stock market may feed through into lower global demand for U.S. financial assets.

By 6:40 AM ET (1040 GMT), the dollar index that tracks the greenback against a half dozen other currencies was down 0.1% at 92.90, on course to end the week around 0.5% lower. Gold Futures, often a mirror image of the dollar, rose 0.6% to $1,962.05 an ounce.

Sterling and the yen both continued their recent advances; the former lifted by better-than-expected retail sales data for August and by upbeat comments on the post-Brexit transition by European Commission President Ursula von der Leyen, and the latter by declining political uncertainty after the appointment of Yashihide Suga as Prime Minister of Japan.

The Chinese yuan also posted its highest weekly close against the dollar since May 2019.

2. Michigan Consumer Sentiment rounds off heavy data week

A heavy week for economic data in the U.S. ends with the University of Michigan’s survey of consumer sentiment, which also includes a survey of inflation expectations.

The figures round off a week that has seen a sharp slowdown in retail sales and industrial output growth in August, along with what is likely to have been a temporary, hurricane-related setback for the housing market.

Analysts expect the main consumer sentiment index to have risen to 75 from 74.1 a month earlier.

Overnight, in addition to U.K. retail sales numbers, German producer price inflation and Italian industrial production also turned out marginally more positive than expected.

3. Stocks set to open mixed; Unity supports tech stock confidence

U.S. stock markets are expected to open mixed, amid ongoing concerns about tech stock valuations despite pockets of considerable strength, especially in the primary market.

Sentiment will be helped by another strong IPO, this time from video games maker Unity, which priced its offering above a marketing range that had already been raised at short notice. That follows the blowout offering from Snowflake (NYSE:SNOW) earlier in the week.

By 6:40 AM ET, the Dow futures contract was down 36 points or 0.1%, while the S&P 500 Futures contract was up 0.1% and the Nasdaq 100 futures contract was up 0.4%.

Stocks likely to be in focus later include Apollo Global Management (NYSE:APO), which is reportedly eyeing an investment in German chemicals group Covestro (OTC:COVTY). The TikTok saga also rolls on, with its implications for Oracle (NYSE:ORCL) and Walmart (NYSE:WMT).

4. CaixaBank, LSE leads Europe M&A flurry

Two of Spain’s largest banks agreed to merge, in a deal that will create the country’s biggest lender.

Caixabank (OTC:CAIXY) and Bankia (OTC:BNKXF), both heavily domestic-focused institutions, will carry out an all-stock deal that should strengthen their joint balance sheet as Spain faces a new wave of bad loans as a result of the Covid-19 pandemic.

Elsewhere in Europe, London Stock Exchange Group (LON:LSE) moved closer to clinching antitrust approval for its planned acquisition of data provider Refinitiv by entering into exclusive talks with Euronext (PA:ENX) for the sale of Italian stock exchange operator Borsa Italiana.

5. Saudi Arabia talks up oil prices

Crude oil prices are ending the week on a high note after Saudi Arabia’s oil minister sent a strongly-worded warning to markets at Thursday’s meeting of ministers from the so-called OPEC+ bloc.

By 6:40, U.S. crude futures were up 0.5% at $41.15 a barrel, on course for a weekly gain of nearly 9%. Brent crude was up 0.7% at $43.59 a barrel.

Prince Abdulaziz bin Salman warned ‘speculators’ not to ‘test the resolve’ of the bloc by trying to push prices any lower. He also dished out strong criticism of countries within the bloc who had produced above their quotas.

The United Arab Emirates, which wasn’t named directly, has already said it will cut export volumes to key Asian markets for the next two months in an effort to placate the group’s most powerful member.

Top 5 Things to Know in the Market on Thursday, September 17th

2020-09-17 20:30:39

1. Dollar's post-Fed bounce fades

The dollar gave up most of the gains it made in response to the Federal Reserve’s inaction on Wednesday, as investors embraced the narrative of higher inflation tolerance being a long-term negative for the greenback.

The dollar had risen and risk assets had slipped after the Fed failed to give any hint of when it might increase its monthly bond purchases to give further support to the economy. That was despite signalling that U.S. interest rates are set to remain near zero through 2023.

By 6:30 AM ET (1030 GMT), the dollar index that tracks the buck against half a dozen developed-market currencies was back at 93.240, off 0.3% from its overnight high.

The move was helped by evidence that the global trend of easier monetary policy is on pause. Indonesia, Taiwan, Brazil and Japan all left their key interest rates and other tools unchanged in meetings over the last 24 hours, while the Bank of England is also expected to stay on hold when it makes its post-meeting statement at 7 AM ET (1100 GMT).

2. Trump leans on GOP Senators

President Donald Trump leaned on the Republican Party to approve more fiscal stimulus, in an effort to break a deadlock on Capitol Hill that is now visibly affecting the U.S. economy.

Trump urged Republican Senators to “go for the much bigger numbers” mooted by a bipartisan group of House lawmakers, who have proposed a compromise stimulus package worth around $1.5 trillion. So far, the Senate has only approved $650 billion of extra spending to support the economy through the fall, while the White House has suggested a package worth $1.1 trillion.

At his press conference on Wednesday, Fed Chairman Jerome Powell had again highlighted the need for fiscal policy to fill a gap in incomes created by government measures to contain the coronavirus pandemic.

3. Stocks set to extend losses on Fed disappointment

U.S. stock markets are poised to extend the losses that they made on Wednesday in outrage at the Fed’s failure to offer yet more stimulus candy. The disappointment hasn’t yet been mitigated by thoughts that Trump’s tweet could herald the approach of a much-delayed fiscal support package.

By 6:30 AM, Dow 30 futures were down 254 points or 0.9%, while S&P 500 Futures were down 1.1% and NASDAQ Futures were down 1.0%.

Stocks likely to be in focus on a day without major earnings updates include Snowflake Inc (NYSE:SNOW), which more than doubled on its first day of trading Wednesday in a reflection of how eager investors are to jump on any growth story. Also in the spotlight will be Oracle (NYSE:ORCL), whose deal to partner with TikTok in the U.S. reportedly doesn’t satisfy some of the U.S. officials reviewing the national security aspects.

4. Jobless claims, housing starts due

Weekly jobless claims data wlll be released at 8:30 AM ET, at the same time as August data for U.S. housing starts and building permits.

Initial jobless claims are expected to have continued their painfully slow decline with a drop of only 34,000 to 850,000 last week. Continuing jobless claims are expected to fall more clearly to a new post-pandemic low of 13.00 million, although it will - as always - be useful to cast an eye on the overall number of those claiming under all jobless-related programs. That had remained stuck at over 29 million in last week’s release.

High unemployment has fed through into a slowdown in retail sales growth, visible in August data released on Wednesday.

Figures from the housing market are, by contrast, expected to be a lot stronger: housing starts are expected to fall only marginally from last month’s 1.496 million, while building permits are expected to top 1.5 million for the first time since February.

5. Oil steady above $40 as 'OPEC+' ministers meet

Crude oil prices drifted, having reclaimed the $40 a barrel mark overnight on the back of a solid drop in U.S. inventories and signs of more production discipline from key exporters in the OPEC bloc.

By 6:40, U.S. crude futures were up 0.1% at $40.12 a barrel, while Brent futures were up 0.1% $42.27 a barrel.

The so-called OPEC+ bloc of producers will hold a ministerial meeting later to review the group’s plans to gradually raise production. The plans have had doubt cast on them this week by two gloomy forecasts for global demand from OPEC itself and from the International Energy Agency.

Top 5 Things to Know in the Market on Wednesday, September 16th

2020-09-16 20:31:42

1. Fed meeting concludes, with retail sales slowdown in focus

The Federal Reserve wraps up its regular two-day policy meeting, with the publication of its post-meeting statement at 2 PM ET (1800 GMT), and Chairman Jerome Powell’s press conference half an hour, as usual.

No policy changes are expected, but the Fed will update its economic forecasts, including a first forecast for 2023. Powell is also likely to be pressed on how he intends to sustain a recovery in inflation, against a backdrop of high unemployment and depressed consumer spending.

Before Powell’s press conference, the U.S. will release its August retail sales numbers, the first since the enhanced unemployment benefits scheme expired without replacement at the end of July. Sales growth is expected to slow to 1.0% on the month from 1.2% in July.

2. Yen hits two-month high as Suga takes over as PM

The yen rose to its highest since July as Yoshihide Suga was confirmed at the new Prime Minister of Japan.

By 6:30 AM ET, the dollar was down 0.4% at 105.05 yen.

Suga has promised economic reform, but as a 71 year-old who served for a long time under his predecessor Shinzo Abe, most analysts expect a continuation of most of Abe’s policies.

The yen’s strength is in part tied to the general recovery in the Asian-Pacific economy that is being driven by China. The yuan hit a new 16-month high overnight, while the Taiwanese dollar and Korean won have also strengthened. The yen’s rise is also due to the general weakness in the dollar since Fed Chairman Jerome Powell announced the Fed would adopt a higher tolerance of inflation in future, analysts say.

3. Stocks set to extend gains as Snowflake keeps the mood buoyant; double-whammy for Facebook

U.S. stock markets show no sign of letting the Fed meeting get in the way of a strong rebound after last week’s volatility. They’re set to open up for a third straight day, with all three major index futures advancing roughly in line, after a strong IPO pricing for cloud software company Snowflake.

By 6:30 AM, the Dow 30 futures contract was up 136 points, or 0.5%, while the S&P 500 Futures contract and NASDAQ Futures were up 0.6%.

That’s despite some notable single-stock losses: Facebook (NASDAQ:FB) stock was marked down 1.4% after a report that the Federal Trade Commission is preparing an antitrust investigation, which in turn followed news of a mass boycott of its Instagram platform by Kim Kardashian and other high-profile celebrities and influencers.

Boeing (NYSE:BA) stock was indicated down 0.1% after a damning House report into the 737 MAX sharply criticized it for cutting corners in getting the aircraft certified.

4. Europe tightens the screws on fossil fuels

The European Union’s top bureaucrat unveiled plans to cut carbon dioxide emissions further and faster than planned in a keynote ‘state of the union’ speech that laid out how Europe should recover from the pandemic.

The EU is now targeting a 55% reduction in CO2 emissions from the 1990 baseline by 2030, rather than the 40% cut previously targeted. That means a more aggressive timetable for phasing out fossil fuels from the electricity and transportation value chains, and, almost certainly, higher prices in Europe’s Carbon Emissions trading program.

Stricter environmental rules are also a likely precursor to attempts to impose a Carbon Border Tax on imports in the longer term, a way of tying market access for trade partners to their own environmental performance.

5. Oil prices rebound on U.S. inventory plunge

Oil prices rebounded sharply after a surprising and sharp drop in U.S. inventories, as reported by the American Petroleum Institute, caught the market wrong-footed.

By 6:40 AM ET, U.S. crude futures were up 2.2% at $39.13 a barrel, while the international benchmark Brent contract was up 2.0% at $41.34.

The API had estimated U.S. crude stockpiles fell by 9.5 million barrels last week, confounding expectations for a rise of 2.0 million barrels. If corroborated at 10:30 AM ET by the government’s data, that could banish some of the worst fears about a faltering rebound in global fuel demand.

Top 5 Things to Know in the Market on Tuesday, September 15th

2020-09-15 15:01:20

1. China roars back; yuan hits 16-month high

China’s economy continued its rebound from the coronavirus pandemic, with a round of key data for August all coming in above expectations.

Retail sales returned to growth in year-on-year terms for the first time since the pandemic erupted, rising 0.5% as movie theaters and other entertainment venues reopened. Industrial production growth accelerated to 5.6% on the year from 4.8% in July, while fixed asset investment, typically the engine of Chinese growth, improved to a decline of only 0.5% on the year.

The data sent the Chinese yuan to its highest level against the dollar in 16 months, while the CSI 300 stock index rose 0.8% and the ChiNext growth stock index rose 0.9%. Copper futures also stayed strong at around $3.07 a pound.

2. U.S. industrial output due as Fed starts meeting

The U.S. will also publish its industrial production numbers for August, at 9:15 AM ET (1315 GMT). Analysts expect a 1.0% increase on the month, while the year-on-year rate is expected to improve only modestly from an 8.2% drop through July.

In addition, there will be the Empire State Manufacturing index at 8:30 AM and the regular update from Redbook Research at 8:55 AM.

The numbers come as the Federal Reserve begins its regular two-day policy meeting. No change in key policy tools is expected, although there will be the usual scrutiny at chairman Jay Powell’s press conference for any change in its forward guidance language.

Economic data out of Europe overnight was also encouraging, with Germany’s ZEW sentiment index – the first of the big gauges of sentiment to be released – defying expectations for a fall, thanks to a sharp improvement in the assessment of current conditions.

3. Stocks set to open higher; earnings due from Fedex, Adobe (NASDAQ:ADBE)

U.S. stock markets are indicated to open higher, extending Monday’s sharp gains, supported by conviction that the growth narrative underpinning tech stocks is still intact, and that the market’s technicals are still healthy.

By 6:40 AM ET, the Dow 30 futures contract was up 169 points, or 0.6%, while the S&P 500 futures contract was up 0.6% and Nasdaq futures were up 0.9%

Stocks in focus later will likely include Oracle (NYSE:ORCL), whose mooted deal with TikTok will face a rigorous U.S. security review. In addition, there will be earnings updates after the bell from Adobe and Fedex.

4. Buzzy tech IPOs support mood

The confidence surrounding tech stocks is being illustrated by the course of two eagerly-expected IPOs.

Snowflake raised its IPO marketing range on Monday to $100-$110 a share, well above the initially touted $75-$85 and valuing the cloud data firm at north of $30 billion. Berkshire Hathaway (NYSE:BRKa) and Salesforce (NYSE:CRM) Ventures are reportedly set to invest large amounts in the company through the deal.

Software company JFrog also raised its marketing range to $39-$41 a share from $33-$37 previously. At the top end of its new range, JFrog would be valued at $3.8 billion.

Both deals are set to price later Tuesday and begin trading on Wednesday.

5 Oil rebounds on China data, shrugs off IEA report

Crude oil futures regained some momentum, as the Chinese economic data helped it to shrug off yet more gloom from the International Energy Agency’s monthly report. The IEA joined OPEC in trimming its forecast for oil consumption this year, by a further 300,000 barrels a day.

By 6:40 AM ET, U.S. crude futures were up 1.7% at $37.90 a barrel, while Brent futures were up 1.5% at $40.22.

Newswire reports suggested that Chinese refinery runs had stayed strong in August, but noted that they may be merely serving to replace crude stockpiles with stockpiles of refined products.

Elsewhere, the risk of fresh disruption to production in the Gulf of Mexico appeared to recede as the storm front Sally was downgraded to a Category 1 hurricane. It’s expected to make landfall between New Orleans and the Florida panhandle, well away from the Gulf’s refining complex.

Top 5 Things to Know in the Market on Monday, September 14th

2020-09-14 16:56:10

1. Oracle wins the race for TikTok

Oracle took the lead in the race to be the savior of video-streaming service TikTok’s U.S. operations, but it’s still not clear whether the deal will be acceptable to regulators in China and the U.S.

The Wall Street Journal reported that Oracle is set to be announced as TikTok’s “trusted tech partner”, and that the deal won’t be structured as an outright sale.

The deal will need the approval of both U.S. and Chinese authorities. Should they give it, it would signal the de-escalation of the two powers’ multi-faceted battle for economic supremacy. U.S. authorities will want absolute certainty that TikTok user data can’t find its way back to Beijing, while China will need to rule that the deal doesn’t contravene a recently-passed law banning the sale of certain artificial intelligence technology. The yuan rose to its highest since May on positive interpretations of the news.

2. Nvidia pays Softbank $40 billion for ARM

Nvidia (NASDAQ:NVDA) agreed to buy U.K.-based chip designer ARM for $40 billion from Softbank (T:9984). That’s around $8 billion more than Softbank paid for it five years ago.

The news propelled the Japanese venture capital company’s shares another 9.0% higher, in a fresh sign of confidence in founder Masayoshi Son’s stewardship. Confidence had been hit hard by high-profile investment losses in companies such as WeWork and Uber (NYSE:UBER).

Over half of purchase price will be paid in the form of Nvidia stock, giving Softbank continued exposure to the fast-growing high-performance chip sector. Only $12 billion will be paid in cash. The deal will need the approval of at least four regulators, in the U.S., U.K., EU and China.

3. Better news in Covid-19 vaccine hunt

Pfizer (NYSE:PFE) CEO Albert Bourla said at the weekend that the vaccine it’s developing together with Germany’s BioNTech (NASDAQ:BNTX) could be available for distribution in the U.S. by the end of the year. Bourla told CBS there was a “good chance” of the companies being able to send data from the crucial phase 3 trial of their drug to the Food and Drug Administration by the end of October.

Also over the weekend, AstraZeneca (NYSE:AZN) received approval from U.K. authorities to resume the phase 3 trial of its vaccine, being developed jointly with Oxford University.

However, the CEO of the Serum Initiative of India, the world’s biggest manufacturer of vaccines, warned that there isn’t enough production capacity to inoculate everyone who needs protection until 2024 at the earliest.

4. Stocks set to open higher; Gilead, Amazon seen in focus

U.S. stocks are set to open markedly higher on reassurances from the pharma sector about progress in the hunt for a vaccine to fight the Covid-19 virus.

By 6:30 AM ET (1030 GMT), the Dow Jones Futures contract was up 218 points, or 0.8%, while the S&P 500 Futures contract was up 1.1% and NASDAQ Futures were up 1.4%.

Stocks likely to be in focus this morning include Microsoft (NASDAQ:MSFT), which was Oracle’s chief rival for the TikTok partnership, and Amazon (NASDAQ:AMZN), which announced it’s hiring another 100,000 in the U.S. and Canada.

There’ll also be some scrutiny of Gilead Sciences (NASDAQ:GILD), which is set to pay $21 billion for Immunomedics (NASDAQ:IMMU), whose most valuable asset, an experimental drug to treat breast cancer, still hasn’t got FDA approval. Gilead is paying more than twice the market value for Immunomedics.

5. BP moves up forecast for peak oil demand

Crude oil prices drifted lower amid ongoing concerns about the supply-demand balance falling further out of kilter due to the slow recovery in parts of the global economy.

By 6:30 AM, U.S. crude futures were down 0.8% at $37.05 a barrel, while Brent futures were down 0.7% at $37.55.

The mood was further soured by the publication of BP’s new outlook for the energy industry, which predicted that global oil demand will plateau as early as the mid-2020s before going into long-term decline. Most forecasts at the beginning of the year had put ‘peak oil demand’ no earlier than 2040.

Ironically, the morning’s data were more supportive of the demand recovery: Japanese and eurozone industrial production data both came in comfortably above expectations for July.

Economic Calendar - Top 5 Things to Watch This Week

2020-09-13 16:43:14

Fed meeting
The Fed, which wraps up its two-day policy meeting on Wednesday, is expected to make some minor adjustments to the language in its rate statement after it adopted a new approach last month to meeting its 2% inflation target. The Fed’s decision to tolerate periods of higher inflation effectively means that interest rates will remain lower for longer.

The Fed will also update its projections for the economic and interest rate outlook, known as the dot plot, which will include forecasts for 2023 for the first time.

"I think the 2023 dots will be the ones everybody’s staring at,” said Jon Hill, an interest rate strategist at BMO Capital Markets.

Fed Chair Jerome Powell said earlier this month that while the central bank will keep its foot on the monetary policy gas, lawmakers also need to help with recovery relief, making the absence of a new fiscal policy package an increasingly worrying development for some investors.

Retail sales, jobless claims in focus
Ahead of the Fed announcement on Wednesday the U.S. is to release data on retail sales for August. The consensus forecast is for an increase of 1% month-over-month and the data will give an important insight into whether the expiration of enhanced unemployment benefits at the end of July hit consumer spending.

Market participants will also be watching Thursday’s data on initial jobless claims. The number of new claims for unemployment benefits hovered at elevated levels last week, suggesting the labor market recovery from the COVID-19 pandemic was stalling as government financial aid to businesses and the unemployed dries up.

Stock market volatility may continue
Some investors are worried that last week’s stock market volatility - which knocked the Nasdaq down as much as 10% from its highs and rocked other indexes - is the start of a larger sell-off that will throw the market off its course after a six-month rally.

But other investors view the recent slump as a healthy consolidation after a stunning five-month rally in the S&P 500 that was powered by a small group of heavyweight tech companies and massive amounts of fiscal and monetary stimulus.

Analysts at Bank of America Global Research have noted that September tends to be the weakest month of the year, with stocks notching gains less than half the time and the S&P 500’s average return at minus 1%.

The bank’s data also shows that markets tend to dip in the weeks ahead of an election, then rallying after.

Brexit fireworks
The British government is to begin debating the internal market bill on Monday and while Prime Minister Boris Johnson has an 80-seat majority, internal discontent over the bill could test his leadership.

The move to table a bill that would breach the existing withdrawal agreement, which London openly admits would contravene international law, could sink the chances of a post-Brexit trade agreement, and trigger legal action by the European Union.

Analysts at Morgan Stanley have increased the likelihood of Britain and the EU ending up trading on World Trade Organization terms to 40% from 25%.

"The risks are skewed to a harder outcome... bumping up the probability of our bear case of a WTO-style outcome to 40%. We still expect a delay in implementing the deal," the bank’s analysts said, in a note.

Sterling has already lost 4% this month and at $1.28, the full risk may still not be priced in.

Central banks
The Fed shift to tolerate higher inflation, effectively a pledge to keep policy loose, puts other central banks in tough spot. Unless they follow suit, the effects of the weaker dollar against their currencies could threaten their economic recovery and their inflation outlooks.

Last week the European Central Bank said the stronger euro is not yet a concern. But it, along with its peers in the UK and Japan, which meet this week, could eventually be forced down the Fed's looser-for-longer route.

No policy changes are expected from the Bank of Japan or the Bank of England. But the BoE may flag extending its bond-buying to help an economy battered by the effects of the pandemic and Brexit.

The BoJ meanwhile must contend with an incoming new prime minister, likely Yoshihide Suga, who recently called for the bank to work with the government, saying he didn't buy arguments about negative rates hitting bank profits.

--Reuters contributed to this report

Top 5 Things to Know in the Market on Friday, September 11th

2020-09-11 14:25:57

1. Trump puts the squeeze on TikTok

President Donald Trump ramped up the pressure on Bytedance, owner of the video-streaming service TikTok, threatening to shut the service down in the U.S. if there’s no deal to sell it by September 15th.

“We’ll either close up TikTok in this country for security reasons, or it will be sold,” Trump told reporters on Thursday. “There will be no extension of the TikTok deadline.”

In response, Bytedance let Reuters know that it plans to move its headquarters to Singapore and invest billions of dollars there over the next three years, in what looks like an effort to forestall the U.S. move.

2. ECB officials walk back Lagarde's optimism

The European Central Bank’s chief economist said again that the strength of the euro is an important factor in its thinking, a day after President Christine Lagarde’s first press conference of the autumn.

“It should be abundantly clear that there is no room for complacency,” Philip Lane wrote in a blog post on the ECB website. “Inflation remains far below the aim and there has been only partial progress in combating the negative impact of the pandemic on projected inflation dynamics.”

The euro dipped on the news before rising again by late morning in Europe.

Lagarde’s upbeat tone, and her refusal to accept invitations to talk the euro down, had surprised many analysts, but were consistent with a modest upward revision to the ECB’s growth forecast for this year. Lane’s intervention will raise further eyebrows over the ECB’s communication policy. Lagarde’s predecessor Mario Draghi rarely needed his chief economist to explain his comments a day after the bank’s most important set-piece events.

3. Stocks set to open higher; Tesla hints at China weakness

U.S. stocks are set to end a volatile week on a firm note, as investors find a way back to focusing on an economic recovery that appears to be still largely intact.

By 6:30 AM ET, Dow 30 futures were up 187 points or 0.7%, while the S&P 500 Futures contract and the NASDAQ Futures contract were both up 0.9%.

The market will be on the lookout for consumer inflation figures for August at 8:30, ready to pounce on anything that smacks of a pretext for further stimulus from the Federal Reserve (there’s none coming from Congress after the Republicans’ slimmed-down package of measures failed in the Senate on Thursday).

Stocks in the spotlight will include Tesla (NASDAQ:TSLA), which is reportedly planning to start exporting from its factory in Shanghai. Analysts saw the news as a sign that sales in the world’s largest electric vehicle market may be flagging. Also of note will be JPMorgan (NYSE:JPM), which has ordered its investment bankers back to the office.

4. Pound tumbles again after EU ultimatum

The pound tumbled further, especially against the euro, after the EU issued an ultimatum to London to withdraw proposed legislation that would breach the terms of the Brexit Withdrawal Agreement.

The U.K. rejected the ultimatum and will go ahead with its new Internal Markets Bill which it admits is a “limited and specific” breach of international law.

Sterling fell as low at 1.0762 against the euro before rebounding a bit to be at 1.0812, down 0.2% on the day. It’s fallen over 5% against the single currency this week as Prime Minister Boris Johnson has revived the threat of a disorderly end to the post-Brexit transition period at the end of the year.

The pound's mini-rebound came after the U.K. and Japan agreed the broad outlines of a deal to govern their trade relations when the transition period ends.

5. Oil struggles after U.S. stockpile rise

U.S. crude prices fell below $37 a barrel overnight before rebounding somewhat, after U.S. government data confirmed a rise in crude oil stockpiles last week.

Crude inventories rose by some 2 million barrels, snapping a streak of nearly two months of uninterrupted draws on stockpiles.

By 6:40, U.S. crude futures traded up 0.1% on the day at $37.35 a barrel, still on course for a hefty loss for the week. Brent futures were down 0.2% at $39.98 a barrel.

Baker Hughes’ rig count data round off the week later.

Top 5 Things to Know in the Market on Thursday, September 10th

2020-09-10 14:43:17

1. ECB to react to EUR strength

The European Central Bank meets for the first time since the Federal Reserve changed its monetary policy doctrine to essentially increase its inflation tolerance. The dollar has weakened since then, pushing the EUR/USD up to its highest in over two years, with many analysts forecasting a further run up to $1.25 in the coming months.

The Financial Times reported on Thursday that President Christine Lagarde will include a sentence on the exchange rate in the introductory statement at her press conference at 8:30 AM ET (1230 GMT), prompting speculation that she will try to talk the euro down.

Whether she succeeds in that may depend on how her words fit the ECB’s new forecasts for growth and inflation. The ECB already expects to undershoot its CPI target through 2022, and any downward revision to that forecast will be tantamount to admitting that more stimulus is necessary, even though the final Q2 GDP reading suggested the Eurozone economy shrank by less than first thought.

2. Jobless claims to show further drop

In the U.S., the weekly jobless claims data will be released at 8:30 AM ET. These have had a diminishing impact on financial markets in recent weeks, with little change evident in the narrative of a slowly recovering labor market.

Wednesday’s job openings survey from the Bureau of Labor Statistics pointed to a much bigger rise in vacancies than expected, which suggests there is room for a positive surprise. Consensus forecasts expect initial claims to have fallen to 848,000 from 881,000 last week, while continuing claims – which come with a one-week lag – are expected to have fallen to 12.925 million from 13.354 million.

As always, it will be important to look beyond those headlines to the total number of people claiming unemployment-related benefits, which stuck above 29 million in last week’s report.

3. Stocks set to open lower; Senate stimulus bill eyed

U.S. stocks are set to open lower, as the pace of selling picks up again in the wake of Wednesday’s bounce.

By 6:35 AM ET (1035 GMT), the Dow 30 futures contract was down 160 points or 0.6% and S&P 500 Futures were down by slightly less.

NASDAQ Futures, where volatility has been highest in recent sessions, were down 0.5%.

In addition to the jobless claims numbers, there will be producer price inflation data for August, along with earnings reports after the closing bell from Oracle (NYSE:ORCL), exercise bike maker Peloton (NASDAQ:PTON) and pet food group Chewy (NYSE:CHWY).

Participants will also keep one eye on the Senate’s vote on a slimmed-down stimulus package.

4. China’s regulator steps in to stop retail speculation

China’s tech stocks, which have also enjoyed a retail-investor-driven rally during the summer, continued to slide after the Securities Regulatory Commission moved to limit ‘speculative’ trading.

The Chinext index, where many of the country’s hottest startups are listed, fell another 1.6% and is now down 10% from the start of the month.

More than 300 start-ups dropped more than 10% on Thursday, including 50 companies hitting their downside trading limits, Reuters reported.

Korea’s KOSDAQ index, by contrast, surged another 1.7% to a fresh all-time high on perceptions that its companies will be among the biggest beneficiaries of U.S. moves to exclude Huawei from global telecoms infrastructure.

5. Oil slumps again after inventory data

Oil prices gave up Wednesday’s gains on nagging worries about global oversupply or, more accurately, a shortfall of demand as the world economy struggles to get back to pre-pandemic levels of activity.

The mood was soured by the American Petroleum Institute’s weekly report that showed U.S. crude inventories rose by nearly 3 million barrels last week, instead of falling as expected. The government’s data are due at 10:30 AM ET.

By 6:30 AM ET, U.S. crude futures were down 1.5% at $37.47 a barrel, while Brent futures were down 1.2% at $40.30 a barrel.

Top 5 Things to Know in the Market on Wednesday, September 9th

2020-09-09 19:06:34

1. Stocks set to bounce after tech rout

U.S. stock markets are set for a not-particularly-convincing bounce at the open after Tuesday’s tech-led rout, which put the Nasdaq Composite firmly in correction territory.

By 6:40 AM ET (1040 GMT), the NASDAQ Futures contract was up 198 points or 1.8%, while the S&P 500 Futures contract was up 0.7 % and the Dow Jones Futures was up 110 points, or 0.4%.

The Nasdaq Composite had fallen over 4.1% on Tuesday amid a rapid unwinding of speculative positions taken on Tesla (NASDAQ:TSLA) and the gigacap tech stocks over the summer. Tesla was indicated up 6.9% in premarket after a 21% drop – its worst ever one-day loss – on Tuesday. Apple (NASDAQ:AAPL) stock was on course to recoup about half of its losses, indicated 3.6% higher. Microsoft (NASDAQ:MSFT) stock was up 2.2%.

2. Asia falls, Europe outperforms

Global markets again went their separate ways, with the Japanese, Korean and Chinese markets all falling heavily while European ones rose.

Like the U.S., China has also witnessed a speculative, retail-driven bull market since March that now looks like it is starting to unwind: the CSI 300 fell 2.3%. The Japanese Nikkei also fell 1.1%, with Softbank (OTC:SFTBY) – whose heavy buying of options fuelled the U.S. summer rally – down another 2.9%, although it rebounded sharply from intraday lows.

European markets by contrast were all higher. Again, that was a function of having accompanied the U.S. lower in afternoon trading on Tuesday. The EUR/USD steadied slightly above $1.1750.

3. AstraZeneca pauses drug trial

AstraZeneca said it will pause the phase 3 clinical trial of the drug that it is developing to treat the Covid-19 virus, in what it described as a ‘routine’ step after an unexplained adverse reaction in a single patient.

The drug, which is being developed jointly with Oxford University, has been widely tipped to be one of the first available next year. It’s the first significant setback for any of the leading vaccine candidates and a reminder of how uncertain the process of drug authorization can be.

The news comes against the backdrop of a heated argument over possible politicization of the approval process in the U.S. AstraZeneca (LON:AZN) stock fell 1.4% in London while those of some of its rivals – such as Pfizer (NYSE:PFE), Biontech Se (NASDAQ:BNTX) and Johnson & Johnson (NYSE:JNJ), rose modestly.

4. Slack, Lululemon struggle despite strong earnings

One tech stock not bouncing in premarket is messaging app Slack (NYSE:WORK), which is marked down 16% after posting disappointing earnings after the close on Tuesday (the market had had the grace not to sell it during the regular session).

The company posted record sales and raised its guidance for the year, but the results still fell short of high expectations.

Another stock failing to make the bounce is Lululemon Athletica (NASDAQ:LULU), even though its quarterly report late on Tuesday beat analysts’ forecasts handily as it moved both sales of gear and yoga classes online more smoothly than expected.

5. Oil rebounds ahead of STEO, OPEC and API

Oil prices rebounded overnight as a degree of stability returned to risk assets. By 6:30 AM ET (1030 GMT), U.S. crude futures were up 2.3% at $37.61 a barrel, albeit that’s still clearly below the $40-$45 range that the market had gotten used to over the summer.

Brent futures were up 1.5% at $40.38, after trading below $40 late on Tuesday.

Later Wednesday, the U.S. government will publish its regular Short-Term Energy Outlook while the Organization of Petroleum Exporting Countries will release its monthly oil market report.

The American Petroleum Institute’s estimate of U.S. crude supplies is also due at 4:30 PM ET.

Top 5 Things to Know in the Market on Tuesday, September 8th

2020-09-08 11:48:11

1. Tech selling gathers pace

Tech stocks are set to extend their recent declines at the open, as the froth continues to come off a market skewed by heavy activity in single-stock options.

Nasdaq 100 futures were down 2.2% by 6:20 AM ET (1020 GMT), while Dow futures were flat and S&P 500 futures were down a relatively modest 0.7%.

Other megacaps were also beset by profit-taking: Apple (NASDAQ:AAPL) stock was down another 3.8%, while Facebook (NASDAQ:FB), Amazon (NASDAQ:AMZN) and Microsoft (NASDAQ:MSFT) stock were all down by over 3%.

2. Trump threatens 'massive tariffs' on China if re-elected

President Donald Trump launched a fresh broadside against China, promising a “decoupling” of the U.S. economy from the Chinese one if he is re-elected in November.

“We will…will end our reliance on China once and for all,” Trump said, in a reprise of his 2016 election campaign. He threatened to impose “massive tariffs” on imports from China and to block from federal contracts U.S. companies that outsource jobs to China.

Trump has held off from imposing fresh tariffs this year despite China’s clear failure to buy the volumes of U.S. goods it promised in January, apparently unwilling to risk making imports more expensive at a time when 29 million Americans are claiming jobless benefits.

3. Tesla slumps after stock sales, S&P spurning

The catalyst for the sell-off is, to a large degree, Tesla stock. It slumped 11% after saying it completed the sale of $5 billion in common stock on Friday.

The share price was also still under pressure from the announcement by Standard & Poor’s on Friday that it would not be admitted to the S&P 500 index for the present. The announcement disappointed hopes that the passively-managed money tracking the S&P 500 would be forced to buy it to comply with their investment mandates.

If Tesla opens at its current level, it would be some 25% below its all-time high from earlier in the month, but still around 30% above where it was when the wave of speculation on S&P 500 inclusion began.

4. Sterling falls on revived Brexit risks

The pound slumped to a one-month low against the dollar and a three-week low against the euro on the dawning realization that the U.K. government has put the prospect of a disorderly Brexit back on the agenda.

Prime Minister Boris Johnson signalled on Monday that he was unwilling to abide in future by the Withdrawal Agreement that his government signed last year. The agreement is the basis of an 11-month transition period in which the reality of leaving the EU’s Single Market was for all practical purposes suspended. That transition period ends on Dec. 31st.

U.K. stocks fell less than European ones, owing to the usual currency effects that increase the sterling value of foreign earnings for U.K.-listed companies. The FTSE 100 fell 0.3%.

5. Oil hits three-month low as driving season ends

Crude oil prices fell to their lowest in 10 weeks as the end of the peak driving season in the U.S. focused the market’s attention on a worsening supply/demand balance.

Prices had already weakened on Monday after Saudi Arabia cut official selling prices for all of its major export grades to Asian customers. That in turn came against a backdrop of data showing a sharp slowdown in crude buying by Chinese importers in August. Independent refiners in particular had taken advantage of the second-quarter collapse in prices to buy in huge volume in July.

By 6:30 AM ET (1030 GMT), U.S. crude futures were down 3.6% at $38.33, having earlier fallen as low as $38.18. Brent futures were down 1.6% at $41.33 a barrel, just off an intraday low of $41.21.

The American Petroleum Institute’s weekly report on U.S. oil stocks, which normally falls on a Tuesday, is delayed by a day due to the holiday weekend.