1. Powell testimony
Powell is set to testify on the economic outlook before the Congressional Joint Economic Committee in a hearing starting at 11:00 AM ET (16:00 GMT). He is expected to reiterate that monetary policy is on pause for the remainder of 2019, following three consecutive rate cuts this year aimed at offsetting the effects of the global growth slowdown brought on by the U.S.-China trade war.
Powell’s testimony comes a day after Trump said a trade deal with China was “close” but threatened to "substantially" increase tariffs if no deal was reached. He also took a swipe at European Union trade policies, rattling investors who were expecting some breakthrough, or even some new signal, on trade.
Trump also repeated his criticism of the Fed, blaming it for the slowdown in the economy and for failing to cut interest rates deeply enough.
2. Public hearings in Trump impeachment inquiry get underway
Ahead of Powell’s testimony, the House of Representatives will convene the first public hearings in Trump's impeachment inquiry at 10:00 AM ET (15:00 GMT). They will be the first impeachment hearings to be held in public in 20 years.
The probe centers on whether Trump pressured Ukraine to investigate Democratic presidential contender Joe Biden and his son, Hunter Biden and any reaction by the president could be significant.
3. U.S. futures indicate lower open; Cisco earnings due
U.S. stock market futures pointed to a lower open, with Dow futures shedding more than 100 points, while S&P 500 futures and Nasdaq 100 futures were also down amid trade war jitters.
European shares retreated from four-year highs earlier, while concerns that intensifying unrest in Hong Kong could prompt a Chinese crackdown pushed Hong Kong shares 2% lower overnight and weighed on markets across Asia.
Cisco Systems (NASDAQ:CSCO) reports fiscal first-quarter results after the closing bell Wednesday against a challenging backdrop that includes concerns that weakness in the global economy and softening cloud demand may weigh on performance. Other reports on Wednesday include Hewlett Packard Enterprise (NYSE:HPE) and Foxconn (TW:2354).
4. U.S. inflation data due
U.S. inflation data for October is due at 8:30 AM ET (13:30 GMT), with economists expecting the consumer price index to rise 0.3%, up from 0.1% in September, while the core CPI , which excludes volatile food and energy prices, is forecast to rise 0.2% from 0.1% a month earlier.
Year-over-year CPI growth is seen staying at 1.7% with core CPI edging up to 2.4%.
In the U.K., data earlier showed that inflation fell to its lowest level in nearly three years last month amid a cap on energy prices. At 1.5%, inflation has now moved further below the Bank of England’s 2% target, which could increase the likelihood of interest rate cuts.
In the Eurozone, data showed that industrial production increased by 0.1% in September. It was the second consecutive month of expansion, indicating that a downturn in the bloc may be moderating.
5. Global oil demand expected to slow from 2025 IEA says
Global oil demand growth is expected to slow from 2025 as fuel efficiency improves and the use of electrified vehicles increases but is unlikely to peak in the next two decades, the International Energy Agency (IEA) said on Wednesday.
The Paris-based IEA, which advises Western governments on energy policy, said in its annual World Energy Outlook for the period to 2040 that demand growth would continue to increase even though there would be a marked slowdown in the 2030s.
The American Petroleum Institute was to release its weekly report on oil inventories later Wednesday, a day later than usual because of Monday's Veterans Day holiday.
--Reuters contributed to this report
1. Trump to address Economic Club of New York
President Donald Trump will speak at 12 PM ET (1700 GMT) at the Economic Club of New York, against a backdrop of expectations for a trade truce with China that have risen substantially in recent weeks, despite his efforts on Friday and Saturday to play them down. Reports last week suggested the mooted ‘phase-1’ trade deal with China may not be finalized until December.
Trump is expected by many to comment not just on how much can be agreed with China as regards de-escalating the world’s most damaging trade dispute, but also on whether he will press ahead with tariffs on European goods, notably auto imports, as threatened earlier this year. EU Commission President Jean-Claude Juncker had said last week he didn’t expect Trump to follow through with the threat.
With hopes for détente firmly baked into asset prices, any repetition of a hard line against either China or Europe is capable of generating a backlash.
2 Signs of life in Germany?
The first big confidence survey of the month in Europe showed a bigger-than-expected improvement in expectations for the German economy, strengthening hopes that the region’s largest economy could be bottoming out.
The ZEW economic sentiment index improved to -2.1, its highest level in six months and well ahead of an uptick to -13.2 from -22.8 in October. The improvement is all the more conspicuous for the fact that ZEW has a reputation for being a more accurate indicator of turning points than for absolute levels of activity.
The news comes on the heels of the German government’s council of economic advisors revising down their forecasts for growth both this year and next year. The more positive outlook was also echoed in some corporate earnings reports, notably from Geman chipmakers Infineon (DE:IFXGn) and Dialog (DE:DLGS).
3. Stocks to open mixed; Tyson, Rockwell earnings due
U.S. stock markets are set to open fractionally higher, although trading is likely to stay muted until Trump’s speech later in the day.
By 6:25 AM ET, Dow Futures were up 17 points, less than 0.1%, while S&P 500 Futures were up 0.1% and Nasdaq 100 Futures were up a fraction more.
Today’s earnings roster is headed by meat giant Tyson Foods, which is expected to report per-share net income of $1.29 per for the quarter and $5.52 for the full year, down 14% from the year-ago on an annual basis. Also of interest will be its outlook for pork prices against the backdrop of a devastating epidemic that has wiped out almost 200 million pigs in China, over 40% of that country’s herd.
Other reports scheduled Tuesday include Rockwell Automation, DR Horton, CBS, recently-listed Datadog and Advance Auto Parts. Japanese auto giant Nissan Motor (T:7201) earlier slashed its full-year sales and profit forecasts after a 70% slump in profits for the three months to September.
4. Hong Kong hit again
Hong Kong’s financial district was paralyzed for a second day running by protests that also closed many of the city’s schools and shops.
The South China Morning Post reported that police fired tear gas in at least 12 different locations, only hours after embattled legislature head Carrie Lam vowed that escalating violence would not cause her government to back down. Lam also called the protesters “the enemy of the people”.
The escalation has led U.S. senators to renew calls for a vote on the Hong Kong Human Rights and Democracy Act, which would fast-track U.S. sanctions on those deemed responsible for violating rights enshrined in the Sino-British declaration of 20 years ago. The bill has already cleared the House of Representatives but has been put on ice by the Senate, which fears upsetting the administration’s trade negotiations with it.
5. Disney to launch streaming service
Walt Disney (NYSE:DIS) is due to launch its Disney+ streaming service later, with a price that undercuts both Netflix (NASDAQ:NFLX) and Amazon’s Prime service at $6.99 a month.
Disney is entering an increasingly crowded space, with Apple (NASDAQ:AAPL), AT&T (NYSE:T) and Comcast (NASDAQ:CMCSA) all vying with the two disruptors for a finite audience.
A Harris poll for the Wall Street Journal found that Americans are willing to pay $44 a month on streaming services, suggesting that there’s plenty of room for all of the above to grow in the near term, given a current average spend of $14 a month. In the medium term, however, competition is likely to get much more intense, analysts say.
1. Hong Kong markets tumble on escalating conflict
Hong Kong’s main stock exchange, the Hang Seng, fell 2.6%, its biggest one-day fall since August, after another escalation in the clashes between police and protesters.
Police shot and critically injured a man involved in protests aimed at disrupting commuters’ journeys to work on Monday morning. Elsewhere, protesters reportedly set a man on fire.
Disruptions to the business day continued for hours, with local banks reportedly sending staff home due to prolonged exposure to tear gas in their respective neighborhoods. The disturbances followed another weekend of widespread road blockages and vandalizing of shopping malls.
2. Navarro rams home the 'no tariff rollback' point
White House trade advisor Peter Navarro at the weekend echoed a warning Friday from President Donald Trump, underlining the resistance to a mutul roll-back of import tariffs as part of a “phase-1” trade truce with China.
“There's no rollback at all,” Navarro said. “So we need the tariffs there, but the tariffs are really our best insurance policy as well to make sure that the Chinese are negotiating in good faith.”
On Friday, Trump had said told reporters that he hasn’t “agreed to anything”, disputing earlier Chinese claims that the two were about to announce the cancellation of recent tariffs.
Trump’s comments had ensured that markets ended the week on a downbeat note, after hitting new record highs earlier in the week on the back of China’s claims.
3. Stocks set to open lower as earnings season winds down
U.S. stock markets were poised to open clearly lower in the wake of the comments on trade and the heightened violence in Hong Kong. Both President Trump and Commerce Secretary Wilbur Ross have said in the past that their attitude on trade talks would be conditioned, among other things, by how China responds to the ongoing crisis there.
By 6:15 AM ET (1115 GMT), Dow futures were down 116 points or 0.4%, while the S&P 500 futures contract and Nasdaq 100 futures contracts were down in parallel.
European markets had also opened lower, with the resource-heavy FTSE 100 losing most on the abrupt revision to the outlook for Chinese commodity demand.
Earnings season is now winding down, with 89% of the S&P 500 having reported by the end of last week. Factset calculates that the blended decline in earnings across the index has been 2.4%, with energy, materials and real estate companies posting the highest incidence of shortfalls vis-à-vis consensus.
4. Brexit paralyses U.K. economy
The U.K. economy grew at its slowest annual rate in nearly a decade in the third quarter, as the global slowdown and concerns about Brexit worries hit business investment and manufacturing.
Solid consumer spending meant the economy grew 0.3% from the second quarter, leaving GDP up 1.0% from a year earlier. That was marginally worse than a forecast of 1.1% and down clearly from 1.3% in the second quarter. Analysts at ING said the dynamic would most likely stay weak next year as business investment is likely to still be depressed by uncertainty, even if the election on Dec. 12 produces a majority Conservative government.
5. Fill in the blanks, says Aramco
Saudi Aramco published the prospectus for its initial public offering, with two conspicuous omissions. It left out how many shares it wants to sell and the price range within which it expects to sell them.
The omissions – which Bloomberg said would be filled in at the end of the week – underlined the high degree of uncertainty over the ongoing sale, with buyers and sellers still reportedly far apart in their valuation of the company.
According to the prospectus, Aramco’s third-quarter profit fell to $21.2 billion in the third quarter from $30.3 billion a year ago, due to lower world prices, and to exceptional costs arising from the attacks on its infrastructure in September, which caused it to buy crude from elsewhere in order to cover its short-term obligations to customers.
1. China's exports bottom out
The reason for China’s increasing assertiveness in trade discussions with the U.S. became arguably a little clearer, after both exports and imports performed better than expected in September.
Exports showed signs of bottoming out with a drop of only 0.9% year-on-year, better than the 3.5% drop expected, while the decline in imports eased to only 6.9% from 8.5% in August. Imports were still down year-on-year for the sixth month in a row, however.
And it’s not like the Chinese economy is all roses: data out earlier showed car sales continued their freefall in October, falling 6% on the year. That’s the 16th month out of 17 that they’ve fallen in year-on-year terms.
The yuan held below 7 to the dollar, despite Thursday’s setback as Washington pushed back on China’s claims about an imminent trade truce.
2. Brighter news from Europe
There was also better news from Europe overnight as German exports posted their biggest increase in six months in September, something that analysts said may just have saved the region’s largest economy from recession in the third quarter.
Data from west of the Rhine also showed that French industrial production continued to expand, reflecting a lesser degree of exposure to China than its bigger neighbor, while figures also showed that job creation accelerated in the third quarter as the labor reforms of President Emmanuel Macron bore fruit.
Elsewhere, outgoing European Commission President Jean-Claude Juncker predicted in an interview with the Sueddeutsche Zeitung that he didn’t expect the U.S to impose tariffs on European automakers next week as President Donald Trump had previously threatened.
3. Stocks set to open flat to lower; bond yields hit three-month highs
U.S. stock markets are set to open a touch lower, extending the pullback that started after source reports pushing back against China’s upbeat version of trade discussions with the U.S.
By 6:30 AM ET (1130 GMT), Dow futures were unchanged, while S&P 500 Futures and the Nasdaq 100 contract were both down less than 0.1%.
The 10-year Treasury yield meanwhile hit 1.96% overnight, its highest since the start of August, before pulling back to trade at 1.91%. Other haven assets continued to labor, with gold futures languishing at $1,466.35 a troy ounce.
With earnings season starting to wind down, the day’s roster is headed by Duke Energy and Canadian pipeline company Enbridge. First Data, Ameren, Madison Square (NYSE:SQ) Gardens and aircraft leasing company AerCap are all also scheduled to report.
4. Disney shines
Walt Disney’s profit more than halved in the three months to September due to the costs of launching a streaming service to rival Netflix (NASDAQ:NFLX). Disney is cranking up output not just for its Disney+ service, but also for Hulu (which it now controls) and ESPN.
But prodigious takings from The Lion King and Toy Story 4 helped it to beat expectations. Box office revenue rose 52% and operating income rose 79% on the year in the quarter.
The shares rose 5.3% in after-hours trading while Netflix’s slipped 0.2%.
5. Alibaba's plans for a mega-listing in Hong Kong
Alibaba (NYSE:BABA) is preparing to sell up to $15 billion worth of shares on the Hong Kong stock exchange in a secondary offering planned for later this month, various reports said.
China’s most valuable company is planning to launch the sale after its Nov. 11 ‘Singles Day’ event, the Chinese equivalent of Black Friday. The deal would be the largest share sale of the year to date - although it's likely to be upstaged almost immediately by Saudi Aramco.
The move, which early reports suggested was an insurance policy against possible measures restricting Chinese companies’ access to U.S. capital markets, comes on the heels of founder Jack Ma’s stepping down as chief executive.
1. China upbeat on tariff rollback
China’s Ministry of Commerce said it has agreed in principle with the U.S. to cut import tariffs on each other’s products as part of a “phase-1” deal to de-escalate the trade dispute.
“If China, U.S. reach a phase-one deal, both sides should roll back existing additional tariffs in the same proportion simultaneously based on the content of the agreement, which is an important condition for reaching the agreement,” Bloomberg quoted spokesman Gao Feng as saying.
The comments are the clearest sign yet that the most economically damaging aspect of the trade dispute could be mitigated in the near term, albeit the U.S. still hasn’t confirmed the Chinese version of the situation. The yuan strengthened further below 7 to the dollar.
Elsewhere Thursday, China also publicly sentenced nine people to jail for illegally selling the drug Fentanyl to U.S. buyers, in a nod to one of Washington’s other big concerns.
2. Qualcomm's earnings surprise
Chipmaker Qualcomm (NASDAQ:QCOM) said the trade dispute didn’t hit its performance in the most recent quarter quite as badly as feared, publishing stronger-than-expected earnings and revenue numbers after the closing bell on Wednesday that sent the company’s shares up 3% in after-hours trading.
Revenue fell to $4.8 billion in the three months through September, down $1 billion from a year earlier but still $100 million ahead of forecasts, while pro forma earnings per share fell by 12% to 78 cents. Qualcomm (NASDAQ:QCOM) was and still aspires to be a major supplier to Huawei. The U.S. government has promised that it will “very shortly” issue licenses to some of the 260 companies that have applied for exemptions to the ban on sales to the telecoms giant
3. Stocks set for higher open
U.S. stock futures are all indicated higher in the wake of the news out of China overnight, shrugging off signs of ongoing global weakness visible in European data and company reports.
By 6:25 AM T (1125 GMT), Dow futures were up 149 points, or 0.5%, while S&P 500 Futures and Nasdaq 100 futures were both up 0.5%
Today’s earnings highlight is Walt Disney (NYSE:DIS), which reports after the closing bell. Analysts are forecasting earnings per share of 95c on $19.29 billion in revenue.
Also reporting are Booking, Air Products (NYSE:APD), Activision Blizzard, Worldpay, Keurig Dr. Pepper, Monster Beverage and Dish Network, among others.
4. Europe stuck in a growth rut
The European Union Commission cut its forecasts for growth and inflation, warning that the worst may still be ahead for the euro zone economy.
The Commission said growth will stay sluggish through 2021, at a forecast 1.2%, while it expects inflation to stay around 1.3%, well below the European Central Bank’s target of just under 2%.
It also implied it expects no major fiscal stimulus from Germany and the Netherlands, the two major eurozone countries with the strongest sovereign balance sheets.
Elsewhere in Europe Thursday, Germany's industrial production fell by more than expected in September, while industrial bellwether Siemens (DE:SIEGn) issued a gloomy forecast for the coming fiscal year; shares in ArcelorMittal (AS:MT), the world’s biggest steelmaker, fell after missing forecasts and cutting its estimates for global steel demand next year.
5. BoE to update on Brexit, election risks to economy
The Bank of England’s monetary policy committee is due to announce the results of its latest meeting at 7 AM ET (1200 GMT).
While the committee is expected to leave interest rates unchanged again, there are expectations for clearer guidance towards lowering them in view of the global economic slowdown and the sustained deterioration in domestic conditions due to the endless uncertainty over Brexit.
That uncertainty has been compounded by the announcement of snap elections for Dec. 12. Opinion polls suggest Boris Johnson’s Conservatives will be the biggest party in the new parliament, but their ability to form a majority will depend on the vagaries of the first-past-the-post electoral system. Parties opposing Brexit earlier Thursday announced a formal electoral pact aimed at maximizing the chances of anti-Brexit candidates.
1. Regrets, I’ve had a few…
SoftBank Corp (T:9434) swung to a loss of $6.4 billion in the three months to September, as it was forced to write down its stake in WeWork and, indirectly, Uber (NYSE:UBER) after heavy losses.
“My own investment judgment was really bad. I regret it in many ways,” SoftBank founder Masayoshi Son told a press conference. He added that he had shut his eyes to the weaknesses of WeWork founder Adam Neumann, who was ousted as CEO last month with a payout totalling $1.7 billion.
As of Sept. 30 (ie. Before October’s bailout), Softbank had invested $10.3 billion in WeWork, of which $4.3 billion was through its Saudi-backed Vision Fund. The Vision Fund also registered a big operating loss in the quarter, due both to WeWork and to Uber (NYSE:UBER), whose value has fallen sharply since it listed in New York earlier this year.
2. Xerox's $27 billion idea for HP
Xerox (NYSE:XRX) wants to make a cash-and-stock offer for printer-maker HP Inc (NYSE:HPQ), according to The Wall Street Journal’s sources.
The deal would be a major consolidation of an industry in long-term decline. The WSJ said HP’s board discussed the possibility Tuesday.
The move is noteworthy for the fact that Xerox’s market value is less than one third of HP’s $27 billion. Xerox (NYSE:XRX) will, however, be able to deploy some $2.3 billion that it expects to get from the sale of stakes in joint ventures with Japan’s Fujifilm.
3. Stocks on hold
U.S. stock markets are set to open flat after a wild few days of record-setting as China and the U.S. inch closer to a truce in their trade war. There’s been little in the way of fresh trade news overnight.
By 6:15 AM ET (1115 GMT), all three major benchmark indices were almost completely flat from Tuesday’s close. Dow 30 futures were up 15 points,S&P 500 Futures were up 1 point, while Nasdaq 100 futures were up 3 points.
Dating site owner Match Group (NASDAQ:MTCH) looks set for a rough opening after weak guidance for the fourth quarter led to it falling 16% in after-hours trading Tuesday.
Today’s earnings roster is led by chipmaker Qualcomm, CVS, Humana, Baidu, Barrick Gold, payments company Square, Fox, Expedia and smart TV maker Roku.
4. Saudi leans on OPEC members; EIA data due
Crude oil prices came off six-week highs after data from the American Petroleum Institute showed a surprisingly strong increase in U.S. oil stocks last week.
The API said crude stocks had risen 4.26 million barrels last week, compared to forecasts for an increase of only 1.5 million barrels. The official government data are due at 10:30 AM ET.
Elsewhere, The Wall Street Journal reported that Saudi Arabia is leaning heavily on other OPEC members such as Nigeria to comply better with the output ceilings agreed in the so-called OPEC+ deal. However, there was still no sign that the cartel’s biggest producer will call for deeper cuts in output when the OPEC+ group reviews its current deal in the first week of December. The kingdom has created a powerful incentive for itself to keep oil prices supported around that time, given that it will still be marketing the IPO of Saudi Aramco.
5. Germany bottoms out, but no big rebound in sight
German factory orders rose for the first time in three months and purchasing manager indices for the services sector strengthened hopes that the euro zone economy may be bottoming out.
Orders to Europe’s biggest manufacturing sector rose 1.3% in September but were still down 5.4% year-on-year, keeping any sense of optimism in check. The German government’s council of economic advisers cut its growth forecast for this year to 0.5% and said 2020 will only see a modest rebound to 0.9% in 2020.
The U.S. data calendar is virtually empty today, although there will be speeches from Fed officials Charles Evans (8 AM ET), John Williams (9:30 AM) and Patrick Harker (3:15 PM).
1. U.S. to give ground on tariffs?
The U.S. may roll back some of the tariffs it imposed on Chinese imports in the course of the last 18 months in order to secure a temporary truce in its trade war with China, according to reports in the Financial Times and Wall Street Journal.
The newspapers both reported that Washington may annul the 15% tariff on goods including apparel, flatscreen monitors and other electrical appliances in September, in return for ‘beefed up commitments’ on respecting intellectual property rights and purchases of U.S. agricultural products.
Overnight, Chinese markets leaped as the central bank cut its one-year interest rate for the first time in three years to relieve a worsening liquidity situation in the local bond market. At the same time, President Xi Jinping promised that China would open its doors “ever wider” to global trade, but said nothing specific about the proposed deal with the U.S. The yuan responded by rising through 7 to the dollar for the first time since August.
2. Stocks to open higher
U.S. stock markets are set to extend their recent gains at the opening, on the back of Xi’s comments and the reports about the U.S.’s willingness to roll back tariffs.
By 6:30 AM ET (1100 GMT), Dow futures were up 61 points or 0.2%, while S&P 500 Futures and Nasdaq 100 futures were both up in line.
The trade détente is coming just at the right time: As of November 1, the blended earnings decline for the third quarter for the S&P 500 stood at -2.7%, according to FactSet. If that’s still the case at the end of the season, it will mark the first time the index has reported three straight quarters of year-over-year declines in earnings since the middle of 2016. It will also mark the largest year-over-year decline in earnings since Q2 2016, when earnings were down 3.2%.
The day’s earnings roster is headed by medical device maker Becton Dickinson, Allergan, gold miner Newmont Goldcorp, Tinder owner Match Group, Regeneron Pharma and aluminium products group Arconic.
3. Uber's still bleeding
Uber (NYSE:UBER) reported another thumping loss at the basic operating level, again raising questions over its path to profitability. The company lost $1.2 billion before interest, taxes, depreciation and amortization. That’s scarcely any improvement from the $1.3 billion it lost in the second quarter (excluding $3.9 billion in non-cash costs from its IPO).
CEO Dara Khoshroshahi said the company expects to be profitable on an EBITDA level in 2021, but investors were unconvinced and pushed the shares down 5.5% in after-hours trading. A 60% increase in EBITDA losses at Uber (NYSE:UBER) Eats, in line with its revenue growth, looked uncomfortably similar to WeWork’s failure to grow its way out of operating losses, and comes against the background of dire outlooks for the food delivery business from Grubhub.
4. Trade balance, JOLTS and services surveys due
It’s a relatively busy day for economic data, with various surveys of the non-manufacturing sector’s health leading the way. Figures for the U.S. trade balance in September come out at 8:30 AM ET (1330 GMT), and will be followed by the Fed’s Redbook survey of large retailers at 8:55 AM.
They’ll be followed by IHS Markit’s service sector and composite purchasing managers indices for October at 9:45 AM, and then the Institute of Supply Management’s non-manufacturing survey 15 minutes later.
There’ll also be speeches from Richmond Fed President Thomas Barkin at 8 AM ET and Dallas Fed President Robert Kaplan at 12:40 PM ET.
5. OPEC lowers long-term oil demand forecasts
OPEC has lowered its forecasts for long-term growth in oil demand to 104.8 million barrels a day by 2024, and 110.6 million b/d by 2040.
Demand will slow to around 500,000 b/d toward the end of the 2020s, it said in its annual World Oil Outlook. That’s barely one-third of last year’s 1.4 million b/d growth.
The cartel also indicated its own hold on the market would weaken over the next five years, as its output of crude and other liquids falls to some 32.8 million b/d by 2024 from 35 million b/d today.
U.S. crude oil futures rose 0.8% to a six-week high on the report. The market’s next test comes at 4:30 PM with the American Petroleum Institute’s weekly report on U.S. oil supplies.
1. Saudi Arabia starts Aramco IPO; details still unclear
Saudi Arabia finally started marketing the much-delayed initial public offering Saudi Aramco, the world’s most profitable company – albeit one whose vulnerabilities have been exposed in recent months by attacks on key infrastructure installations.
The kingdom is hoping to raise as much as $60 billion, at a valuation of $2 trillion. Bankers on the deal have routinely been cited saying that a valuation of between $1.2 and $1.5 trillion is more realistic. It isn’t clear yet whether the sellers will accept a lower price in order to raise more money, or whether they will prune the IPO size to defend their valuation.
For comparison, the $60 billion being sought is only a whisker less than the $62.8 billion in net inflows to U.S. stock funds in the whole of 2018 (figures from Morningstar), so it’s a fair bet that asset managers will be liquidating plenty of other positions to free up cash for Aramco, even though the listing will initially be confined to the local Tadawul index.
2. Ross Ignites Asian, European markets with trade talk
European and Asian markets flew higher in overnight trading after U.S. Commerce Secretary Wilbur Ross raised hopes that Washington will drop its threats of import tariffs on foreign cars.
In an interview with Bloomberg TV, Ross, who has previously taken a hard line in reducing the U.S.’s deficit in autos, referred to “very good conversations with our European friends, our Japanese friends, our Korean friends, and those are the major auto-producing sectors.”
"Our hope is that the negotiations we've been having ... will bear enough fruit that it may not be necessary to put the 232 [Section 232 of a 1962 trade law] fully into effect, may not even be necessary to put it partly in effect,” Ross added.
The comments drove Nikkei futures 1.2% higher (the cash market was closed for a national holiday), while Korea’s KOSPI rose 1.4%, with Europe’s Stoxx 600 and Germany’s auto-heavy DAX both hitting 22-month highs.
3. McDonalds punishes Easterbrook for side dish
McDonald’s (NYSE:MCD) said its board had voted to fire chief executive Steve Easterbrook over an affair – which it described as consensual – with an employee.
McDonald’s (NYSE:MCD) shares have fallen over 10% in the last couple of weeks since the company reported stagnant sales and a drop in profits that reflected heavy investments aimed at keeping pace with changes in the restaurant sector, as customers increasingly opt for healthier items, and for delivery. Some of Easterbrook’s changes have been unpopular with franchisees, and the company has steadily lost market share in recent years to rivals such as Chipotle Mexican Grill (NYSE:CMG).
Even after the last two weeks' performance, the shares have doubled since Easterbrook took over in March 2015, outperforming other stalwarts of the sector such as Yum! Brands (NYSE:YUM) and Restaurant Brands International (NYSE:QSR).
4. Stocks set to open at new record highs
U.S. stocks are set to post new record highs at the opening, as Commerce Secretary Ross’s comments add to the recent positive-sounding news on trade.
By 6: AM ET, Dow futures were up 129 points or 0.5%, while S&P 500 Futures were up 0.5% and Nasdaq 100 futures were up 0.6%
Heading today’s earnings roster is Uber, which reports after the closing bell. It’s expected to report a loss of 70 cents per shares on $3.63 billion in revenue, at a time when there’s a harsh spotlight on high-profile market debutants in the wake of the WeWork IPO fiasco and the sharp drop in Beyond Meat (NASDAQ:BYND) and Pinterest (NYSE:PINS) last week after investor lockups expired.
Also reporting are Marriott International, Ferrari, Occidental Petroleum, Sprint and Under Armour, the last of which was reported over the weekend to be the subject of federal investigations into its accounting practices.
5. Lagarde makes her ECB debut - in Berlin
Christine Lagarde will make her debut speech as president of the European Central Bank at 2:30 PM ET (1930 GMT).
The location and event are particularly piquant: she’ll be speaking in Berlin at an event to honor Wolfgang Schaeuble, the former German finance minister whose hard line in the repeated bailout crises of the euro zone earlier in the decade exposed the euro zone's most dangerous structural shortcomings.
As managing director of the International Monetary Fund, Lagarde repeatedly argued both for a more integrated fiscal policy at eurozone level, and for Germany in particular to stimulate growth with its own fiscal policy. Those calls fell on deaf ears for most of the time, but have gathered more support as the eurozone economy has stalled this year, not least due to a likely recession in Germany.
1 - Fedspeak and U.S. data
A host of Fed policymakers will have the chance to discuss their take on the monetary policy outlook this week, including New York Fed President John Williams, Philadelphia Fed chief Patrick Harker, Chicago Fed head Charles Evans and Dallas’s Robert Kaplan.
Markets now expect interest rates to remain on hold until at least April, according to Investing.com’s Fed Rate Monitor Tool following last week’s cut, the third in as many meeting. The move was accompanied with new language indicating that the current "mid-cycle" round of rate cuts was at an end.
It’s a light week on the U.S. economic calendar, but investors will get an update on factory orders on Monday, with economists expecting a decline of 0.5% MoM. Meanwhile, Thursday’s trade data will be scrutinized for signs of fallout from the Sino-U.S. trade war.
2 - New ECB boss Lagarde to set out vision
The ECB’s new President, Christine Lagarde is expected to outline her vision for the Eurozone economy and monetary policy in a speech in Berlin on Monday. Lagarde, who assumed her role on Nov. 1, has already echoed her predecessor Mario Draghi by criticizing Germany and the Netherlands for not investing their budget surpluses to support growth.
Lagarde will get an update on the health of the bloc’s economy on Wednesday and Thursday when Germany releases data on factory orders and industrial production, amid fears that the euro area’s largest economy is slipping into a recession.
The European Commission is also set to publish its economic forecasts for the region on Thursday.
3 - Brexit, election and the BOE
The Bank of England will be launching its rebranded Inflation Report as the Monetary Policy Report on Thursday. The new report will focus on forecasts and ad-hoc analysis rather than merely reviewing the previous quarter.
Interest rates are expected to remain on hold at 0.75% given the Dec. 12 snap election and a new Jan. 31 Brexit deadline.
But the BOE has been edging away from long-term guidance that rates are on an upward path, noting in September that this hinged on Brexit and the global economy picking up. Policymaker Michael Saunders has said since then the BOE cannot wait indefinitely for Brexit uncertainty to lift, and that economic slowdown strengthens the case for easing policy.
Some policymakers doubt a rate cut would do much good. Deputy Governor Dave Ramsden fears the slowdown is damaging the economy's productive capacity so lower interest rates are more likely to boost inflation than lift growth.
4 - Earnings
It's a close call but for the S&P 500, the third 2019 quarter could bring the first quarterly year-over-year earnings decline since 2016.
Despite earnings beats from tech heavyweights Apple (NASDAQ:AAPL) and Facebook (NASDAQ:FB), earnings are expected to have declined 0.8%, according to IBES Refinitiv. That's better than earlier forecasts - a month ago, a 2.2% decline was predicted.
Q1 and Q2 estimates also started negative yet ended positive. So upcoming reports by names such Occidental Petroleum (NYSE:OXY), CVS Health (NYSE:CVS), Qualcomm (NASDAQ:QCOM) and Walt Disney (NYSE:DIS) may well move the needle across the line.
No such hope for Europe. The STOXX index is seeing the worst quarterly earnings in more than three years, according to Refinitiv. It expects Q3 earnings to drop 8.4%, the biggest quarterly fall since mid-2016.
Also, of European companies to report so far, 59.3% exceeded analyst estimates. The U.S. figure is 75%.
5 - Trade developments
U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin made progress on a variety of issues during a telephone call on Friday with China’s Vice Premier Liu He about an interim trade agreement, USTR said in a statement on Friday.
Meanwhile, U.S. President Donald Trump on Friday suggested he could sign a long-awaited trade agreement in Iowa.
Trump said on Friday evening that negotiations about a "phase one" agreement were going well and he hoped to sign the deal with Chinese President Xi Jinping at a U.S. location when work on the agreement was completed.
Trump and Xi had been expected to ink the agreement at the Asia Pacific Economic Cooperation summit in Santiago, Chile from Nov. 16-17, but those plans were thrown into disarray on Wednesday when Chile withdrew as host of the meeting.
It was not immediately clear whether China would agree to sign the trade deal in the U.S.
1. China casts doubt on trade deal, reportedly
The chance of a lasting resolution to the U.S.-China trade dispute remains as slim as ever. Bloomberg reported that Chinese officials are losing confidence in the ability of President Donald Trump to commit even to the limited deal that the two were planning to sign at the upcoming APEC summit (a plan that was already a dead letter after the host nation Chile said Wednesday it couldn’t hold the event due to ongoing civil unrest).
Bloomberg said China remains reluctant to move on issues such as structural reform that would address U.S. concerns about a level playing field in trade. That resistance is nothing new – it was already one of the reasons why the two sides focused on a less controversial “phase-1” deal in the short term. Even so, it reinforces the impression that China is reluctant to commit to any long-term deal with Trump given his ongoing problems with the impeachment inquiry and the possibility of him not being re-elected next year.
2. Stocks set for lower open after Fed signal; tobacco and pharma earnings due
U.S. stocks are poised to open lower, as the latest news out of China reintroduces a heightened degree of uncertainty about the trade picture and, ultimately, the outlook for the U.S. and world economy.
By 6:30 AM ET (1030 GMT), Dow Futures were down 93 points or 0.3%, while S&P 500 Futures were down 0.4% and Nasdaq 100 Futures were down 0.2%.
Today’s earnings roster is headed by Altria, Bristol-Myers Squibb, Celgene, Cigna and ICE.
Overnight, Asian stocks had eked out only modest gains as they digested the Federal Reserve’s signal that there will be no more monetary policy easing in the near term. Yesterday’s 25 basis point cut was already fully priced in. European stocks also fell, lacking much support from a rush of quarterly earnings. Fiat Chrysler bucked the trend, soaring 9.0% after the terms of its proposed merger with Peugeot were published. The deal would create the world’s fourth-largest auto group, with annual sales of $190 billion (if European politicians don’t sabotage it with demands about job preservation).
3. Apple's looking to break its falling revenue streak
Apple’s fiscal fourth-quarter earnings and revenue came in ahead of forecasts, thanks to strong sales of wearables and services that compensated for a continued drop in iPhone sales. The shares rose 2% in after-hours trading.
Even so, the group remains in a transitional phase at the end of a year in which profit has fallen in each of the last four quarters. iPhones still account for well over 60% of group revenue, and the company is having to work harder to improve them (operating costs were up 9% on the year).
The company predicted a strong holiday season, thanks to products such as its new Air Pods. Sales guidance of between $85.5 billion and $89.5 billion would represent an improvement from the $84.31 billion it posted in Q4 2018.
4. Facebook's bandwagon rolls on under defiant Zuckerberg
Facebook (NASDAQ:FB) shares are on course for a higher opening after popping 4.5% after hours on the back of stronger-than-expected revenue and profit in the quarter.
Mark Zuckerberg’s company said active daily users of its platform rose 9% from a year earlier to 1.62 billion, with most new users coming outside the U.S., Canada and Europe. Average revenue per user rose to $7.26, up 19% from $6.09 a year earlier.
Zuckerberg again defended the company’s position of running misleading political ads on its social network, only hours after Twitter CEO Jack Dorsey said his platform would no longer run political ads. Zuckerberg said he expected the coming year to be “tough” but said his position was best for the company and its “community”.
5. Euro zone stuck in a rut as Lagarde rages
A day after the U.S. reported economic growth a little above expectations, the euro zone reported figures that were by and large as gloomy as had been telegraphed. Gross domestic product grew by 0.2% in the three months to September, and by 1.1% from a year earlier.
The numbers came a day after Christine Lagarde geared up for taking over at the European Central Bank by lambasting Germany and other well-off northern European countries for not doing enough to support growth by running a looser fiscal policy.
Meanwhile, national inflation data showed that Lagarde will be under immediate pressure to do something to bring it back up to target. France’s annual inflation rate fell to 0.7% in October, while Italy’s remained stuck at 0.3%
1. The Fed decides, the Fed guides
The Federal Reserve is expected to cut the target range for federal funds to between 1.50% and 1.75%, the third such cut this year, in an effort to sustain an economy buffeted by the trade dispute with China and no longer supported to the same degree by President Trump’s 2017 tax cut.
The decision will come hard on the heels of the first reading for U.S. gross domestic product growth in the third quarter at 8:30 AM ET (1230 GMT). Analysts expect growth to have slowed to an annualized 1.6%, the lowest rate since the first quarter of 2017, from 2.0% in the second quarter.
The Fed will announce its decisions as usual at 2 PM ET, and Chairman Jerome Powell’s press conference will follow half an hour later. With a rate cut taken for granted, market attention will be on the guidance for the future path of monetary policy.
2. Silicon Valley giants to report earnings
Apple and Facebook will keep things busy after the Fed, when they report quarterly earnings after the closing bell.
Facebook (NASDAQ:FB) is expected to show slowing growth but sustained good profitability in the face of rising regulatory challenges. Facebook is expected to report earnings of $1.90 a share on revenue of $17.36 billion. Earnings would be up 7.95% from a year ago. Revenue would be up 26.4%. Monthly active users are expected to rise to 2.45 billion for the quarter, up about 8% from the year-ago period's 2.27 billion.
Apple’s results are likely to be less exciting, given that it’s the upcoming holiday quarter that really makes or breaks its year. Even so, it will shed important light on market dynamics in China against the backdrop of the ongoing trade war. Analyst estimates compiled by Investing.com project earnings of $2.83 a share, down slightly from a year ago. Revenue is estimated at $62.9 billion, up 2.4%.
3. Stocks set to open flat
U.S. stock markets have retreated, as usual, into a holding pattern ahead of the Fed’s decision and press conference later in the day.
By 6:30 AM (1130 GMT), Dow 30 Futures were down 10 points, effectively unchanged, while the S&P 500 Futures and Nasdaq 100 Futures contract were also flat.
Asian and European markets had weakened overnight, hit by some conspicuously poor earnings. Deutsche Bank (DE:DBKGn) fell 5.4% to a two-week low after swinging to a worse-than-expected loss, dragging down other European banks. Fiat Chrysler (NYSE:FCAU) and Peugeot SA (PA:PEUP) both surged after confirming merger talks while Volkswagen (DE:VOWG_p) upheld its full-year forecasts despite sounding gloomier about world auto markets.
In addition to Facebook (NASDAQ:FB) and Apple (NASDAQ:AAPL), today’s earnings roster includes updates from General Electric, Starbucks, Yum! Brands, CME Group, ADP, Simon Property, Brookfield, Equinix, Moodys, MetLife, Williams, Motorola, Mckesson, Hess, Apache and Southern.
4. Faux meat's warning to IPO investors
Shares in Beyond Meat Inc (NASDAQ:BYND) are stabilizing after Tuesday’s 22% drop as early investors, who were prohibited from unloading their stocks for six months after the company’s IPO, cashed out in style.
Given the company’s performance since listing, they were still able to make a handsome profit. But the drop sent a strong warning signal to investors in other big IPOs from the first half of this year. The lockups for Uber (NYSE:UBER), Pinterest (NYSE:PINS) and Zoom Video (NASDAQ:ZM) are also approaching their end (Uber’s comes next week).
5. Oil inventories due
The U.S. government will publish its weekly update on domestic oil supplies at 10:30 AT ET (1430 GMT), a day after the American Petroleum Institute estimated crude inventories rose by a modest 592,000 barrels last week.
The Energy Information Administration’s report last week showed a startling drop in both crude and refined products and has kept crude prices relatively well supported in the week since then.
By 6:30 AM ET, U.S. crude futures were down some 0.3% within relatively narrow ranges at $55.47 a barrel, with traders content to wait for the Fed decision before making any significant new bets.
1. The Saudi Aramco IPO is here (probably)
Saudi Aramco, the world’s most profitable company, is finally set to being marketing its initial public offering on Sunday, Saudi state TV reported.
The news triggered selling in European stock markets Tuesday, as portfolio managers made room in their portfolios for what is expected to be a large block of shares by paring existing holdings.
Questions still remain about the company’s valuation. While the country’s de facto ruler Crown Prince Mohammed bin Salman had sought a valuation of $2 trillion, reports suggest bankers have guided for somewhere between $1 trillion and $1.5 trillion. If the deal does go ahead, it will represent a substantial payday for Wall Street banks involved in it.
The Al-Arabiya channel said the company intends to start trading on the local Tadawul market on Dec. 4.
2. Oil prices slip on Russian comments; API data due
Crude oil prices fell to their lowest in nearly a week after Russian deputy energy minister Pavel Sorokin said it was still too early to commit to additional measures to stabilize a market haunted by the threat of oversupply.
Sorokin said in an interview with Tass that the existing output restraint agreement, which has held 1.2 million barrels a day of crude back from world markets, has been effective so far. It’s consistent with previous official Russian comments suggesting that they expect this year’s slide in prices to stop any further loss of market share to U.S. shale producers.
Oil traders didn’t lose any time remarking that the planned Dec. 4 stock market debut of Aramco is just one day before Russia, OPEC and other major exporters meet in Vienna to review the output restraint deal, which is scheduled to run through the end of March.
Later Tuesday, the American Petroleum Institute will release its weekly data for U.S. crude oil inventories. Analysts expect the official government data to show a build of 729,000 barrels.
3. Stocks set for lower open as Fed meets
U.S. stock markets are set to open lower, with the start of the Federal Reserve's two-day policy meeting deterring bets on new record highs.
By 6:30 AM ET, Dow futures were down 55 points or 0.2%, while S&P 500 Futures were down 0.1% and Nasdaq 100 Futures were flat.
Tuesday’s earnings parade is a cast of thousands, with the following companies all set to report: Mastercard, Merck, Pfizer, Amgen, Stryker, Mondelez, ConocoPhillips(NYSE:COP), S&P Global Inc (NYSE:SPGI), Marsh McLennan, AMD, Shopify, Allstate, Electronic Arts, Corning, Edison, Kellogg, KKR, Martin Marietta, Mattel and FireEye.
In Europe, BP (LON:BP) kicked off earnings season for Big Oil with a 41% drop in underlying net profit that kept its debt levels slightly above its targeted range.
4. Alphabet's rising cost problem
Alphabet (NASDAQ:GOOGL), the parent company of Google, said revenue grew 20% to $40.5 billion in the third quarter but profits still disappointed due to rising costs, not least the cost of bulking up its cloud-computing business, where it has much ground to make up on rivals Amazon (NASDAQ:AMZN) and Microsoft (NASDAQ:MSFT). The shares fell 2% in after-hours trading.
Overall profit of $7.1 billion was down 23% from a year earlier and some 15% below analysts’ expectations.
Together with disappointing results from Amazon (NASDAQ:AMZN), the numbers suggest that Big Tech is starting to suffer from cost inflation, even if it’s still churning out healthy amounts of cash. The company’s payroll expanded by some 6% in the quarter to over 114,000.
Elsewhere after Monday’s closing bell, Beyond Meat (NASDAQ:BYND) fell 10% despite posting its first quarterly profit and raising its revenue outlook. The post-IPO lockup on investors expires today.
5. Boeing's Muilenburg due before Congress
Boeing (NYSE:BA) chief executive Dennis Muilenburg is due to start two days of testimony before Congress regarding the 737 MAX scandal.
In prepared statements for his Senate testimony later today, Muilenburg will admit “mistakes” and repeat promises that the company will never let similar mistakes happen again.
How convincing Muilenburg’s testimony is could have a big influence on the regulatory backlash coming its way. Peter DeFazio, the chairman of the House of Representatives transport committee, told reporters on Monday said he would propose a new law overhauling the regulatory system, which lets the Federal Aviation Administration pass on responsibility for approving design changes to aircraft manufacturers such as Boeing (NYSE:BA).
1. Stocks to open near all-time highs
U.S. stock markets are set to open with a fresh run at all-time highs on Monday after China’s Ministry of Commerce said at the weekend that technical consultations on some parts of the interim trade deal being hammered out with the U.S. were “basically completed.”
By 6 AM ET, Dow futures were up 74 points or 0.3%, while the S&P 500 Futures contract was up 0.2% and the Nasdaq 100 futures contract was up 0.3%.
The news comes at the start of a big week for global markets, which have been dragged lower for most of the year by the economic slowdown caused by the U.S.-China trade dispute. The dispute has caused an economic slowdown that has forced most of the world’s central banks to ease monetary policy substantially. Both sides have claimed in the last few days that technical agreements on an interim trade are basically completed.
The Federal Reserve’s policy-making committee is due to decide on Wednesday whether or not to cut interest rates for a third time this year (Investing.com’s Fed Rate Monitor Tool says there’s a 93% chance). That will follow the first reading for U.S. GDP in the third quarter. The Bank of Japan will hold its own policy-making meeting on Thursday, while the euro zone will release 3Q GDP on the same day.
2. Microsoft's JEDI victory over Bezos
The U.S. government awarded a multi-billion dollar contract for cloud computing services to Microsoft (NASDAQ:MSFT), dealing a blow to Amazon.com (NASDAQ:AMZN), the biggest player in the sector.
The Joint Enterprise Defense Infrastructure contract, or JEDI as it’s inevitably known, could be worth as much as $10 billion, according to reports.
The award is the clearest illustration yet of the growing threat to Amazon Web Services’ dominance of the cloud-hosting business. That’s important because AWS has been by far the biggest profit generator for Amazon (NASDAQ:AMZN) in recent years. Earnings released last week showed that AWS’s quarterly sales growth slowed to 35%, while Microsoft’s Azure unit grew by 59%.
Others investing heavily in rivalling Amazon include Google (NASDAQ:GOOGL), Alibaba (NYSE:BABA) and Oracle (NYSE:ORCL).
3. Alphabet's earnings due; LVMH bids for Tiffany
Alphabet heads the list of companies reporting quarterly earnings Monday. It’s expected to report earnings per share of $12.28 on $40.3 billion of revenue after the closing bell.
Also reporting after the bell will be Beyond Meat, T-Mobile US and chipmaker NXP.
To get the ball rolling before the opening, there’ll also be updates from Walgreens Boots Allianceand AT&T, which will be scrutinized for the pace of debt reduction and the company’s plans for HBO in the ongoing streaming wars.
Earlier in Europe, Spotify (NYSE:SPOT) reported earnings a little ahead of expectations, while Europe’s largest bank HSBC (NYSE:HSBC) signalled a major restructuring ahead after reporting a 24% drop in profit in the third quarter. Meanwhile, LVMH (PA:LVMH) confirmed an approach for Tiffany & Co (NYSE:TIF), reported to be in the region of $14.5 billion.
4. EU approves Brexit extension
The European Union formally agreed to a three-month extension of the deadline for Brexit until the end of January 2020, according to a tweet from EU Council President Donald Tusk.
The exact terms, which will be formalized in writing later, are expected to include the possibility of an earlier exit if the U.K. parliament can ratify the withdrawal agreement struck 10 days ago by the EU and Prime Minister Boris Johnson.
The House of Commons is scheduled to vote later Monday not on the withdrawal agreement, but on whether to hold a general election in December in the hope of breaking the deadlock on Brexit. The chance of the House passing legislation enacting the withdrawal agreement before the proposed election date is slim.
The pound posted modest gains to stand at $1.2848, while the euro inched higher against the dollar to $1.1093
5. Peronists sweep back to power in Argentina
The left-wing populist candidate Alberto Fernandez won Argentina’s presidential election, posing fresh questions about the stability of the G20 country, which is struggling to meet the terms of its $56 billion bailout from the International Monetary Fund.
Argentina’s central bank immediately tightened existing capital controls, cutting the amount of dollars it would allow people to buy to $200 a month from the previous limit of $10,000.
The result shows spreading discontent in South America, caused not least by the Fed’s tightening of U.S. interest rates last year and the drop in commodity prices as a result of China’s economic slowdown. In the last month alone, there have been fatal civil disturbances in Chile and Ecuador, the latter of which is also struggling under an IMF program.
1. Prime delivery roll-out hurts Amazon's profits
Investing.com -- Amazon's earnings fall for the first time in two years, while Indonesia formally blames Boeing for the 737 MAX Lion Air crash and Anheuser-Busch Inbev struggles with a drop in Chinese demand for beer. Here's what you need to know in financial markets on Friday, 25th October.
Amazon.com's (NASDAQ:AMZN) earnings fell 26% on the year in the three months to September, the first annual decline in two years and the second quarter in a row that it’s missed analysts’ expectations. Revenue rose 24% to $70 billion, which beat analysts’ forecasts, but the shares are set to open sharply lower, after falling over 7% in after-hours trading on Thursday.
The figures reflected another heavy increase in investment, this time to pay for the roll-out of same-day delivery for its Prime subscription service. Global shipping costs were up 46% on the year. Revenue and profit growth at its cloud hosting unit AWS, which has been the company's cash cow in recent years, also came in below expectations.
Amazon said it expected its fourth-quarter operating profit to fall to between $1.2 and $2.9 billion, well short of the $4.2 billion expected previously by analysts.
2. Stocks set to open mixed
Wall Street is set to open mixed, with the Amazon news offset by better-than-expected results after the bell last night from both Visa (NYSE:V) and Intel (NASDAQ:INTC).
By 6:15 AM ET, Dow futures were unchanged, while S&P 500 Futures were up 0.1% and the Nasdaq 100 Futures contract was up 0.2%.
Today’s earnings roster is led by Verizon (NYSE:VZ), which is due to report before the opening along with Charter Communications (NASDAQ:CHTR), Illinois Tool Works (NYSE:ITW), refiner Phillips 66 (NYSE:PSX) and Aon (NYSE:AON).
It's a light day on the data front, with only the University of Michigan's final figures for consumer sentiment in October due. In Europe, there were further signs that Germany, the region's largest economy, may be bottoming out. The closely-watched Ifo business climate index stayed unchanged at 94.6.
3. Pound stumbles as Johnson gambles
The British pound and U.K. FTSE 100 both fell after Prime Minister Boris Johnson called for a general election to break the deadlock over his Brexit bill.
Johnson’s last move reflected a lack of confidence that the bill would pass as planned, after rising signs of concern amid lawmakers that it doesn’t banish the likelihood of a disorderly no-deal Brexit either this year or at the end of the supposed transitional period at the end of 2020.
Johnson was forced by parliament at the weekend to ask the EU for another extension to the Oct. 31 deadline, and while the EU has been sympathetic to the request, Reuters reported Friday that it will not take a decision on how long an extension to grant until parliament votes on Johnson’s request for an election on Monday. The opposition has signalled that it won’t support an election before the risk of No Deal is completely removed.
4. Trouble brewing for Bud
Shares in Anheuser Busch Inbev (NYSE:BUD), the world’s largest brewer, tumbled by over 9% in Europe after the company reported weak sales in China in the third quarter and slashed its profit forecast for the year.
The brewer now sees only a ‘moderate’ increase in underlying earnings instead of the ‘strong’ increase it expected earlier, noting that it expects the headwinds to continue through the end of the year.
There was better news from the luxury sector, where both Gucci owner Kering (PA:PRTP) and Italy's Moncler (MI:MONC) both reported robust increases in Asian sales, shrugging off the troubles that hit their boutiques in Hong Kong over the summer.
5. Boeing blamed for Lion Air crash
Indonesia rounded off a miserable week for Boeing (NYSE:BA) by formally blaming it for the Lion Air 737 MAX crash earlier this year in the final report of officials investigating the disaster
It said the design and certification of the MCAS flight control system were “not adequate” and said the airplane maker had relied on false assumptions. It also faulted Boeing for giving airlines inadequate guidance on how to respond to problems with MCAS.
Boeing promised again to fix the problems as soon as possible.
1. Arriverderci, Mario
Mario Draghi presides over his last meeting at the European Central Bank before handing over to Christine Lagarde, who has run the International Monetary Fund for the last eight years. His press conference starts at 8:30 AM ET (1230 GMT).
No policy steps are expected after September’s multi-faceted easing program. Instead, the focus is likely to be on the split Draghi created within the bank’s governing council in forcing through a resumption of quantitative easing over the objections of the French, German and Dutch central banks.
The decision to cut the ECB’s deposit rate further into negative territory will also be under scrutiny. Sweden’s Riksbank said earlier Thursday that it expects to end its experiment with negative rates in December, by raising its repo rate back to 0% from -0.25%. That bucks a global trend of monetary easing which is still largely intact: Indonesia cut its key rate again earlier in the day.
2. Tesla's return to profit shines in a misfiring auto sector
Tesla (NASDAQ:TSLA) posted a surprise return to profit in the third quarter, and CEO Elon Musk said the group’s Model Y crossover SUV will be available sooner than the company had predicted. The shares rose 20% in after-hours trading on Wednesday and are poised to open at an eight-month high.
That was a sharp contrast with Ford Motor (NYSE:F), whose shares fell 2.6% after the bell in response to another cut to its forecasts. Analysts noted that the third-quarter results weren’t actually that bad though.
It’s still a rough year for the global auto sector: Korea’s Hyundai Motor (OTC:HYMLY) missed expectations for its quarterly sales and profits on weak sales in China and higher legal costs.
There was better news from Daimler (DE:DAIGn), the maker of Mercedes-Benz, where revenue rose 8%, while Sweden’s Volvo more than doubled its net profit and reported a 2-percentage point increase in its operating margin.
3. Stocks set for lift from Silicon Valley earnings; Amazon's (NASDAQ:AMZN) 3Q follows after the closing bell
U.S. stock markets are set to open fractionally higher, as reaction to this quarter’s set of earnings continues to tend to the positive, despite high-profile misses on Wednesday from Caterpillar (NYSE:CAT) and Boeing (NYSE:BA).
By 6:15 AM ET, Dow futures were up 28 points, or 0.1%, while S&P 500 futures were also up 0.1% and Nasdaq 100 futures were up 0.4%.
Tech-heavy indexes are due for some support after heavyweight Microsoft (NASDAQ:MSFT) beat expectations for its fiscal first-quarter earnings after the closing bell on Wednesday. Earnings per share rose to $1.38, well ahead of the $1.24 forecast, as the company raised its guidance for cloud bookings in the current quarter.
Amazon.com heads the roster of companies reporting Thursday, with analysts maybe looking more closely than usual at Amazon (NASDAQ:AMZN) Web Services after Microsoft reported slowing growth for its rival service Azure.
4. Global manufacturing is still struggling
The world’s manufacturing sector is still in a funk, according to ‘flash’ purchasing managers indexes from around the world. Japan’s PMI fell the most in three years, and for the fifth month in a row, while Australia’s hit an all-time low of just over 50.
The euro zone, meanwhile, remained stuck near stagnation level, with France’s PMI falling and Germany’s ticking up only modestly from last month’s 10-year low.
The PMI for the U.S. is due out at 9:45 AM ET. Before that, at 8:30, there will be durable goods orders for September and initial jobless claims for last week, while the Kansas City Fed’s regional business survey is due at 11 AM ET. New home sales data are due at 10 AM ET.
Oil holds gains after surprise stock draw
Crude oil prices have held on to most of their gains overnight after a surprise drop in U.S. inventories sparked a vicious short squeeze on Wednesday that drove prices up over 2%.
By 6:15 AM ET, U.S. crude futures were down only 0.6% on the day at $55.66, while international benchmark Brent was down 0.4% at $60.91.
The data snapped a five-week streak of stock builds that had fed fears of a fresh glut on global markets. Speculation is still swirling that the OPEC+ group of producers will announce further cuts to their output when they review their current deal in December. However, comments out of Russia this week suggest they will resist such a move, in the expectation that lower prices will stop the growth in U.S. shale output instead.
1. Libra in the balance
Facebook (NASDAQ:FB) founder and chief executive Mark Zuckerberg is due in front of the House Financial Services Committee, the sole witness in a hearing about its plans for the digital currency Libra.
Pressure from Democratic Senators had led a quarter of the initial backers of Libra, including all of its significant partners in the payments industry, to pull out of the project earlier in the month.
At the weekend, the Facebook executive tasked with rolling out Libra, David Marcus, suggested the company could retreat from its ambition to make a global currency and instead produce a string of stablecoins backed by individual national currencies. His comments came two days after a damning G7 report that enumerated a long laundry list of regulatory concerns.
According to prepared remarks, Zuckerberg will say that if regulators block Libra, they risk giving control of the global financial system to China, which is working on similar projects.
2. Boeing’s head of commercial aircraft to leave
The 737 MAX scandal claimed its most senior victim yet at Boeing (NYSE:BA), as commercial aircraft head Kevin McAllister was forced out with immediate effect. He’ll be replaced by services chief Stan Deal.
The news comes just days after explosive revelations that Boeing’s test pilots were aware of problems with the MCAS flight control system as long ago as 2016. Problems with MCAS were responsible for two fatal 737 MAX crashes over the last 18 months.
The Wall Street Journal cited sources as saying that the company is eyeing further personnel changes. There was no hint that Dennis Muilenburg, who was stripped of his duties as chairman earlier this month, may also be forced to vacate the CEO’s chair.
Boeing reports its quarterly earnings before the opening.
3. Stocks set to open flat
U.S. stock markets are set to open flat after disappointing earnings from Texas Instruments (NASDAQ:TXN) after the bell on Tuesday cast a pall over the semiconductor sector, while Softbank's deal to take control of WeWork provoked some serious thinking about loss-making startups.
Texas, which sells to a broad range of sectors, fell 9.8% in after-hours trading after trimming its fourth-quarter revenue guidance to around 10% below the street’s forecast. It said “most markets had weakened.”
By 6:15 AM ET, Dow futures were down 12.5 points, or 0.1%, while S&P 500 Futures were unchanged and Nasdaq 100 futures were up less than 0.1%.
Another stock in focus this morning is Snap Inc (NYSE:SNAP), which fell 3.4% after the bell despite reporting an improvement in user growth and revenue. Lyft (NASDAQ:LYFT), by contrast, is set to open higher after executives told the WSJ that the company will be profitable a year earlier than originally thought.
Today’s earnings roster is headed by Microsoft, which reports after the bell along with Ford Motor, Equifax, Paypal, eBay and ServiceNow. Early reporters include Anthem, which beat expectations marginally, as well as Caterpillar, Thermo Fisher, Eli Lilly and General Dynamics.
4. Oil tumbles on Russian comments; inventories due
Russia’s Energy Minister Alexander Novak sent crude oil futures lower after ddownplaying suggestions that the so-called OPEC+ group of oil exporters could agree to deeper output cuts when it reviews its current arrangements in December.
The current deal, due to run through March 2020, is now widely seen as not enough to keep the global market in balance, given that the slowing global economy doesn’t need as much oil as though earlier.
Novak said there had been no official proposal to change the deal, but added that it could always be tweaked. The CEO of private oil company Lukoil said there would be no need to adjust the deal until April.
Crude was in bearish mood in any case after signs of another big build in U.S. inventories last week. The American Petroleum Institute reported a 4.5 million-barrel rise in crude stocks, more than twice the amount expected to be confirmed by official government figures due at 10:30 AM ET (1430 GMT).
5. EU to consult on Brexit delay
EU leaders will consult on how to respond to the U.K. government’s request for another extension to the deadline for Brexit, after lawmakers made it impossible for last week’s deal to be enacted before the Oct. 31 deadline.
The EU needs to approve any extension unanimously. There are no signs yet that it will refuse, and the EU parliament said earlier Wednesday it should be approved. There are questions, however, over the length of any extension. The government requested a new deadline of Jan. 31. Some have suggested the bloc set a shorter deadline, in order to raise the pressure on the U.K. to get Brexit done. Those who want to keep Britain in the EU have played for time, in the hope that more scrutiny of Prime Minister Boris Johnson’s deal will ultimately expose decisive weaknesses.
The pound was sharply lower against both the dollar and euro by midday in Europe.